Victoria Vda. De Gaston vs Republic of the Philippines

written by Howard

G.R. No. L-20320 – 19 SCRA 685 – Mercantile Law – Negotiable Instruments Law – Payable on Demand – Meaning of “Reasonable Time” 

In the months of April, May, June, July, and December 1943, German Gaston took out 5 loans from the Bank of Taiwan totaling to P4,. He executed 5 promissory notes (PNs) corresponding to the 5 loans he took each month. The loan was promised to be used for the plowing, cultivating, etc. of the hacienda that Gaston was leasing. Later, the Republic of the Philippines was subrogated to the rights of the Bank of Taiwan.

In February 1962, the Republic filed its claim against the estate of Gaston (obviously German’s already dead at that time) on the strength of the 5 promissory notes. In its defense, the estate invokes the statute of limitations as it avers that more than ten years have already lapsed since the accrual of the obligation to pay (so first PN has prescribed in April 1953, so on).

ISSUE: Whether or not the contention of the estate is correct.

HELD: No. There was a moratorium law in force from November 1944 to May 1953. During that period, the running of the prescriptive period in all loan obligations was suspended. That’s a period of 8 years and 6 months.

[From 1943 to 1962 (when the government claim was filed), at least 19 years had already lapsed. But if we deduct the suspended period of 8 years and 6 months, there’s still 10 years and six months remaining which is still more than the prescriptive period of ten years.]

The Supreme Court, however ruled that there being no maturity date on the PNs, the PNs are deemed to be payable within a reasonable time (not payable on demand, as the estate claims). The SC considered the nature of the transaction involved. The PNs were approved in relation to an agricultural undertaking wherein Gaston must use the money for no other purposes than agricultural purposes, otherwise they will be payable immediately. It appears that Gaston used the money for agricultural purposes hence the PNs are payable only after the agricultural year (for how can he pay if there’s no yield yet from his crops). The end of the agricultural year is December 1944, and that will be the reckoning point as to when the PNs become payable and that’s the time when the period of prescription must be counted.

From December 1944 to February 1962, 17 years ten months had lapsed. Subtract therefrom the suspended period of 8 years 6 months and that would leave 9 years and four months – therefore, the filing of the claim by the Republic of the Philippines is still well within the period of prescription.

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