BOARD OF LIQUIDATORS, TRUSTEE OF THE LAND SETTLEMENT & DEVELOP­MENT CORPORATION, PLAINTIFF-APPELLEE, VS. RICMA TRADING CORPO­RATION AND RICARDO M. MAIPID, DEFENDANTS, RICMA TRAD…

Board of Liquidators versus Ricma Trading Corporation

The Case

This is an appeal by Ricma Trading Corporation from a judgment of the Court of First Instance of Manila ordering it to pay the Board of Liquidators, as trustee of the defunct Land Settlement and Development Corporation, the unpaid balance of the purchase price of certain personal properties. The action is a simple collection suit, but it reaches the Supreme Court because it raises three procedural and substantive questions: the timeliness of an appeal from a municipal court, the interruption of prescription by a written acknowledgment of debt, and the jurisdiction of the Court of First Instance over an appealed case that the inferior court had disposed of on a question of law. It matters to a reviewee because it ties together the rules on amended orders, the computation of the appeal period, and the effect of a surety bond renewal as a written acknowledgment that stops the running of prescription.

Procedural History

The Board of Liquidators filed a complaint in the Municipal Court of Manila to recover the unpaid balance of 2,800 pesos. The defendants moved to dismiss on the grounds of prescription and failure to state a cause of action against Ricardo Maipid. The Municipal Court dismissed the action. The plaintiff moved for reconsideration and asked for leave to file an amended complaint. The Municipal Court issued an order denying the motion, but its dispositive portion mistakenly said that what was denied was the motion to dismiss. On the same day that the plaintiff received that order, the Municipal Court issued an amended decision correcting the error and stating that the motion for reconsideration and the motion to admit the amended complaint were denied. The plaintiff appealed to the Court of First Instance of Manila within six days from receipt of the amended decision.

In the Court of First Instance, the defendants moved to dismiss the appeal, arguing that the original order had become final. The court denied the motion, and later denied the motion for reconsideration. The defendants then moved to dismiss the case on the same grounds of prescription and lack of cause of action against Maipid, but the court denied this too, holding that the motion raised questions of fact requiring a trial. The defendants went to the Court of Appeals on a petition for certiorari, prohibition, and mandamus, but the Court of Appeals dismissed the petition as premature. The defendants then moved in the Court of First Instance to remand the case to the Municipal Court, but that motion was denied. They filed their answer, and the parties entered into a stipulation of facts, submitting the case on the questions of law raised in the pleadings. The Court of First Instance rendered judgment ordering Ricma Trading Corporation to pay the 2,800 pesos with legal interest and costs, and dismissing the complaint against Ricardo Maipid. Ricma Trading Corporation appealed to the Supreme Court.

Facts

The Board of Liquidators, as trustee of the defunct Land Settlement and Development Corporation, offered for bidding certain personal properties consisting of equipment, tools, engine blocks, spare parts, supplies, and other junks at its bodega in Sta. Mesa, Manila. Ricma Trading Corporation, through its President and General Manager Ricardo Maipid, submitted a bid on September 7, 1955, but the bid was not acceptable. The defendant corporation then negotiated with the plaintiff, and the properties were awarded to it for 10,800 pesos by Resolution Number 7173 dated October 14, 1955. The defendant corporation received the properties on October 15, 1955.

The defendant corporation paid 5,000 pesos on October 15, 1955, and 3,000 pesos on October 24, 1955, leaving an unpaid balance of 2,800 pesos. To secure payment of this balance, the defendant corporation posted a surety bond executed by the Manila Underwriters Insurance Company on December 28, 1956. Upon demands by the plaintiff, the defendant corporation renewed the bond for another year expiring on December 28, 1957, and again renewed it on November 20, 1957. In a letter dated January 2, 1957, the defendant corporation, through Maipid, wrote to the Manager of the Board of Liquidators, saying, in connection with the bond that was expiring on December 28, 1956, and in compliance with the request for renewal, it was enclosing the renewal policy for another year.

The balance of 2,800 pesos remained outstanding, and the plaintiff sent a letter demanding payment on May 25, 1962. The plaintiff filed its complaint in the Municipal Court of Manila on August 15, 1962. The transaction was not evidenced by any written contract of purchase and sale; it was verbal.

Issues

• Whether or not the appeal taken by the plaintiff from the orders of the Municipal Court had been perfected within the reglementary period provided by the Rules of Court.
• Whether or not the plaintiff's action had already prescribed under the statute of limitations.
• Whether or not, under Section 10 of Rule 40, the Court of First Instance had jurisdiction to try and decide the case on the merits despite the fact that the action had been brought to it on appeal from the inferior court, which had disposed of the case only upon a question of law without any valid trial on the merits.

Applicable Provisions

Article 1145 of the Civil Code, as discussed in the decision, provides the period for actions based on oral contracts:

Any action based upon an oral contract must be commenced within six years.

This provision bears on the case because the defendants argued that the action, being based on an oral contract, should have been filed within six years from the last partial payment on October 24, 1955.

Article 1155 of the Civil Code provides for the interruption of prescription:

The prescription of action is interrupted when there is any written acknowledgment of the debt by the debtor.

This provision is decisive because the Court held that the renewal of the surety bond and the accompanying letter constituted a written acknowledgment of the debt, which interrupted the running of the prescriptive period.

Ruling

On the first issue, the Court held that the appeal was filed on time. The plaintiff was appealing only from the orders of October 19, 1962, and December 4, 1962; it could not have meant to appeal from the order of November 23, 1962, because its dispositive part was favorable to it. On the very date the plaintiff was notified of the erroneously worded order of November 23, 1962, the Municipal Court issued the amended decision. Since the amended order was issued within the period for appeal and appeared on its face to have been intended to correct the original order, it took the place of the original order and could not bind the parties until they were notified of it. Thus, the period to appeal resumed only from the date of that notice. The Court cited the rule that where a judgment is amended, the date of the amendment is considered the date of the decision for computing the period to perfect an appeal. The Court also held that when the dispositive part of a final order is definite, clear, and unequivocal and can be wholly given effect without need of interpretation, it is considered the judgment of the court, to the exclusion of anything said in the body thereof.

On the second issue, the Court held that the action had not prescribed. The trial court found that the letter of January 2, 1957, was a manifest acknowledgment on the part of the defendant corporation to pay the balance of 2,800 pesos, because it was difficult to understand why the defendants should renew the bond precisely to secure payment of that balance if they were not willing to recognize it as a legitimate obligation. When the defendant renewed the bond upon the request of the plaintiff, it expressly acknowledged that it was still indebted to the plaintiff in the sum of 2,800 pesos. Under Article 1155 of the Civil Code, the prescription of action is interrupted when there is any written acknowledgment of the debt by the debtor. Consequently, the contention that the cause of action had expired was devoid of legal merit.

On the third issue, the Court upheld the jurisdiction of the Court of First Instance to try and decide the case on the merits, as will be seen from the disposition of the appeal.

Doctrine

A written acknowledgment of a debt by the debtor interrupts the running of the prescriptive period under Article 1155 of the Civil Code. The renewal of a surety bond securing the payment of a balance, upon the request of the creditor, amounts to such a written acknowledgment, because it manifests the debtor's recognition of the obligation as legitimate and subsisting.

Where a judgment or order is amended, the date of the amendment is considered the date of the decision for the purpose of computing the period to perfect an appeal. The amended order takes the place of the original and does not bind the parties until they are notified of it.

When the dispositive part of a final order or decision is definite, clear, and unequivocal and can be wholly given effect without need of interpretation or construction, it is considered the judgment of the court, to the exclusion of anything said in the body thereof.

Disposition

The Supreme Court affirmed the judgment of the Court of First Instance, ordering Ricma Trading Corporation to pay the Board of Liquidators the sum of 2,800 pesos with legal interest from the filing of the complaint until fully paid, plus costs, and dismissing the complaint against Ricardo Maipid.

Remember This

The single line worth memorizing is that a written acknowledgment of the debt by the debtor interrupts prescription, and the renewal of a surety bond to secure the balance is such an acknowledgment. Examiners like to use this case to test the computation of the appeal period when a judgment is amended, and the effect of a surety bond renewal on the statute of limitations.