G.R. No. L-48889 - Development Bank of the Philippines vs. Adil

Case Summary (G.R. No. L-48889)

Key Dates

February 10, 1940: Original promissory note for P2,000.00 executed between AIB and the Confesors, payable in ten yearly amortizations.
April 11, 1961: Second promissory note executed by Patricio Confesor, acknowledging the 1940 loan and promising payment on or before June 15, 1961, with agreement to foreclosure upon failure to pay.
September 11, 1970: DBP filed suit in the City Court of Iloilo City to collect the loan.
December 27, 1976: City Court rendered judgment in favor of DBP.
April 28, 1978: Court of First Instance of Iloilo reversed the City Court and dismissed DBP’s complaint.
August 10, 1978: Petition for reconsideration denied by the Court of First Instance.
May 11, 1988: Supreme Court decision reinstating the City Court judgment.

Applicable Law and Constitutional Basis

Governing constitution at time of decision: the 1973 Philippine Constitution (the decision date precedes the 1990 threshold specified by the user instruction). Governing statutory provisions and authorities invoked by the Court: Civil Code provisions on prescription and conjugal partnership administration (Article 1112 on renunciation of prescription; Articles 161(1), 165, and 166 on conjugal partnership and administration), and precedents on the effect of a new promise or acknowledgment on a prescribed debt (cases cited in the decision).

Factual Background

In 1940 the Confesors obtained a P2,000 agricultural loan from AIB, evidenced by a promissory note payable in ten annual installments. The obligation remained unpaid after the ten-year period, so prescription intervened as to remedies arising from the 1940 note. In 1961 Patricio Confesor, then a member of Congress, signed a second promissory note expressly acknowledging the prior loan and promising to pay the amount by June 15, 1961, and consenting to foreclosure upon default. The Confesors did not pay; DBP filed suit in 1970. The City Court entered judgment for DBP in 1976; the Court of First Instance reversed and dismissed DBP’s complaint in 1978. DBP sought review before the Supreme Court.

Issues Presented

Whether a promissory note executed in 1961, acknowledging and promising to pay a debt originally evidenced by a 1940 note that had become barred by prescription, is valid and enforceable.
Whether the 1961 promissory note signed by Patricio Confesor alone binds the conjugal partnership such that his wife, Jovita Villafuerte, and the conjugal partnership may be held liable.

Legal Analysis — Effect of Renunciation or Acknowledgment on Prescription

The Court applied Article 1112 of the Civil Code, which permits persons with capacity to alienate property to renounce prescription already obtained (but not the future right to prescribe). The Court reasoned that prescription had indeed run as to the 1940 promissory note; however, the 1961 promissory note constituted an express new promise to pay the pre-existing debt. Such an express promise operates to waive or renounce the benefit of prescription already obtained and constitutes a new cause of action because the pre-existing debt is a sufficient consideration for the new promise. The Court relied on established authority that while statutory prescription bars the remedy, it does not extinguish the underlying debt; therefore, a valid new promise or acknowledgment can revive enforceability. The decision cites prior jurisprudence and authorities to support that an express promise after prescription will take the case out of the operation of the statute of limitations and permit recovery on the original obligation.

Legal Analysis — Conjugal Partnership Liability and Authority of the Husband

The Court rejected the Court of First Instance’s conclusion that Patricio Confesor’s sole signature on the 1961 note could not bind his wife or the conjugal partnership. The Court invoked Article 165 of the Civil Code, which designates the husband as administrator of the conjugal partnership. As administrator, the husband’s debts and obligations contracted for the benefit of the conjugal partnership are chargeable to that partnership. Article 166, addressing alienation or encumbrance of conjugal real property, was not construed to prohibit th

Case Syllabus (G.R. No. L-48889)

Case Citation, Court and Date

Reported as 244 Phil. 318.
Decided by the Supreme Court, First Division, G.R. No. L-48889.
Decision date: May 11, 1988.
Ponente: Justice Gancayco.
Justices Narvasa and Cruz concurred.
Justice Grino-Aquino took no part, stating: "The Confessors are my relatives."

Parties

Petitioner: Development Bank of the Philippines (DBP), formerly Agricultural and Industrial Bank (AIB).
Respondents: The Honorable Midpanto L. Adil (judge of the second branch of the Court of First Instance of Iloilo) in the petition context, and spouses Patricio Confesor and Jovita Villafuerte (defendants in the underlying action).

Subject Matter and Central Legal Question

Central issue: The validity and enforceability of a promissory note executed in consideration of a prior promissory note whose enforcement had been barred by prescription.
Whether (a) prescription may be renounced or waived by the obligor; and (b) whether Patricio Confesor, by signing the second promissory note, bound the conjugal partnership and/or became personally liable.

Factual Background

On February 10, 1940, spouses Patricio Confesor and Jovita Villafuerte obtained an agricultural loan from the Agricultural and Industrial Bank (AIB), now DBP, in the sum of P2,000.00, Philippine Currency.
The loan was evidenced by a promissory note dated February 10, 1940, whereby they bound themselves jointly and severally to pay in ten (10) equal yearly amortizations.
After the ten-year period had lapsed, the obligation remained outstanding and unpaid; prescription had set in as to the first promissory note.
On April 11, 1961, Patricio Confesor, by then a member of the Congress of the Philippines, executed a second promissory note which expressly acknowledged the 1940 loan and promised payment on or before June 15, 1961.
The second promissory note, in full as quoted in the source, read:
- "I hereby promise to pay the amount covered by my promissory note on or before June 15, 1961. Upon my failure to do so, I hereby agree to the foreclosure of my mortgage. It is understood that if I can secure a certificate of indebtedness from the government of my back pay I will be allowed to pay the amount out of it."
The spouses did not pay on the specified date.
DBP filed a complaint dated September 11, 1970 in the City Court of Iloilo City for payment of the loan.

Trial Court Ruling (City Court of Iloilo City)

After trial on the merits, the City Court rendered judgment on December 27, 1976.
Dispositive part of the City Court's judgment ordered that defendants Patricio Confesor and Jovita Villafuerte Confesor pay DBP, jointly and severally:
- (a) The sum of P5,760.96 plus additional daily interest of P1.04 from September 17, 1970, the date the Complaint was filed, until paid;
- (b) The sum of P576.00 (ten percent of the total claim) by way of attorney's fees and incidental expenses plus interest at the legal rate as of September 17, 1970, until fully paid;
- (c) The costs of the suit.

Intermediate Appellate Court Ruling (Court of First Instance of Iloilo)

Defendants appealed to the Court of First Instance of Iloilo.
On April 28, 1978, the Court of First Instance reversed the appealed City Court decision and dismissed the complaint and counter-claim with costs against the plaintiff (DBP).
DBP filed a motion for reconsideration which the Court of First Instance denied in an order dated August 10, 1978.

Petition for Review on Certiorari to the Supreme Court: Grounds Advanced by Petitioner

DBP petitioned for review on certiorari, alleging that the decision of respondent judge (the Court of First Instance) was contrary to law and contrary to precedents of the Supreme Court, for the following reasons:
- (a) The court a quo refused to recognize that the right to prescription may be renounced or waived.
- (b) In signing the second promissory note, Patricio Confesor bound the conjugal partnership; alternatively, he became personally liable.

Supreme Court's Assessment of Prescription and Waiver

The Supreme Court held that the petition is meritorious.
The Court recognized that the ri
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