DBP vs Confesor (Civil Law)

DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner, 

vs.
HON. ADIL, Judge CFI of Iloilo and SPOUSES PATRICIO CONFESOR and JOVITA VILLAFUERTE, respondents.

G.R. No. L-48889 May 11, 1989

---- Prescription bars the remedy but does not discharge the debt. A new contract acknowledging a previous prescribed debt is valid and enforceable.

GANCAYCO, J.:

FACTS:

On Feb. 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an agricultural loan from the Agricultural and Industrial Bank (AIB), now the Development of the Philippines (DBP), in the sum of P2k, as evidenced by a promissory note whereby they bound themselves jointly and severally to pay the account in 10 equal yearly amortizations. As the obligation remained unpaid even after the lapse of the 10-year period, Confesor executed a 2nd promissory note on April 11, 1961 expressly acknowledging said loan and promising to pay the same on or before June 15, 1961. The new promissory note reads as follows —

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.

Spouses Confesor again failed to pay, thus DBP filed a complaint on Sept. 17, 1970 in the City Court of Iloilo City against the spouses for the payment of the loan.

On Dec. 27, 1960 the court ruled in favor of DBP ordering the spouses to pay:

(a) the sum of P5,760.96 plus additional daily interest of P l.04 from September 17, 1970, the date Complaint was filed, until said amount is paid; (b) the sum of P576.00 equivalent to ten (10%) 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; and (c) the costs of the suit.

Spouses Confesor appealed to the RTC Iloilo which court reversed the Iloilo City Court decision and dismissed the complaint and counterclaim. DBP’s subsequent MR was denied. Hence, this petition wherein petitioner alleges that the decision of respondent judge is contrary to law and runs counter to decisions of this Court when respondent judge

(a) refused to recognize the law that the right to prescription may be renounced or waived; and

(b) that in signing the second promissory note respondent Patricio Confesor can bind the conjugal partnership; or otherwise said respondent became liable in his personal capacity.

ISSUE:

WON the right to prescription may be renounced

WON Confesor’s act of executing the 2^nd promissory note gave rise to a new obligation

HELD: YES to both.

The right to prescription may be waived or renounced. Article 1112 of Civil Code provides:

Art. 1112. Persons with capacity to alienate property may renounce prescription already obtained, but not the right to prescribe in the future.

Prescription is deemed to have been tacitly renounced when the renunciation results from acts which imply the abandonment of the right acquired.

There is no doubt that prescription has set in as to the 1st promissory note. However, when respondent Confesor executed the 2nd promissory note on 1961, he thereby effectively and expressly renounced and waived his right to the prescription of the action covering the 1^st promissory note.

This Court had ruled in a similar case that –

... when a debt is already barred by prescription, it cannot be enforced by the creditor. But a new contract recognizing and assuming the prescribed debt would be valid and enforceable ... (Villaroel vs. Estrada, 71 Phil. 140)

This is not a mere case of acknowledgment of a debt that has prescribed but a new promise to pay the debt. The consideration of the new promissory note is the pre-existing obligation under the first promissory note. The statutory limitation bars the remedy but does not discharge the debt.

A new express promise to pay a debt barred ... will take the case from the operation of the statute of limitations as this proceeds upon the ground that as a statutory limitation merely bars the remedy and does not discharge the debt, there is something more than a mere moral obligation to support a promise, to wit a – pre-existing debt which is a sufficient consideration for the new the new promise; upon this sufficient consideration constitutes, in fact, a new cause of action. (Johnsons vs. Evasions, 50 Am. Dec. 669)

... It is this new promise, either made in express terms or deduced from an acknowledgement as a legal implication, which is to be regarded as reanimating the old promise, or as imparting vitality to the remedy (which by lapse of time had become extinct) and thus enabling the creditor to recover upon his original contract. (Mattingly vs. Boy)

Judgment reversed. Decision of the Iloilo City Court reinstated.