PHILIPPINE NATIONAL BANK, PLAINTIFF AND APPELLANT, VS. FRANCISCO BUENASEDA, DEFENDANT AND APPELLEE.

Philippine National Bank versus Buenaseda

The Case

This is a civil action for the collection of a sum of money, brought by the Philippine National Bank against Francisco Buenaseda. The bank sues not on its own original dealing but as a judgment creditor of the Philippine Lumber Distributing Agency, Incorporated, and it steps into that corporation's shoes to collect an unpaid balance for lumber sold and delivered to Buenaseda. The defense is not denial of the debt but the statute of limitations. The whole case therefore turns on a single, sharply legal question: were these transactions contracts in writing, which prescribe in ten years, or oral contracts, which prescribe in six? The decision matters because it teaches, with painstaking precision, what kind of writing starts the longer prescriptive period running.

Procedural History

The bank filed its complaint in the Court of First Instance of Manila. The parties submitted a stipulation of facts and narrowed the dispute to two questions: whether the transactions were oral or written, and whether the action had prescribed. The trial court held that the sales orders and delivery receipts were not in themselves written contracts, and that the complaint, filed on May 7, 1957, came beyond the six-year period allowed for actions on oral contracts. The bank appealed to the Court of Appeals, which elevated the case to the Supreme Court because the issues raised were purely legal. The Supreme Court affirmed the trial court.

Facts

In 1947, Francisco Buenaseda purchased lumber materials from the Philippine Lumber Distributing Agency, Incorporated, in various independent transactions. The purchases were made through twenty-one sales orders, some printed and some handwritten, and others by verbal orders. Upon these orders, sixty-nine delivery receipts were issued to him representing the lumber he received. The total value of the purchases was 15,594 pesos, and Buenaseda paid 11,568 pesos and 35 centavos in all, the last payment being made on July 13, 1949. This left an unpaid balance of 4,025 pesos and 85 centavos in favor of the corporation.

The bank had earlier obtained a judgment for a sum of money against the Philippine Lumber Distributing Agency, Incorporated, in a separate case, and that judgment remained unsatisfied. The court in that case authorized the bank to institute this action against Buenaseda. Buenaseda admitted the existence and validity of the obligation; what he contested was whether the bank could still enforce it.

The bank filed its complaint on May 7, 1957, more than seven years after the last payment. The trial court examined the exhibits one by one and found that the sales orders and delivery receipts did not contain any agreement of the parties, did not obligate Buenaseda to pay a sum certain, and in most cases did not even state specific amounts. On these facts the court held the action barred.

Issues

• Whether or not the transactions between Buenaseda and the Philippine Lumber Distributing Agency, Incorporated, evidenced by the verbal orders, sales orders, and delivery receipts, partake of the nature of oral or written contracts.
• Whether or not the action of the bank, based on those verbal orders, sales orders, and delivery receipts, has prescribed.

Applicable Provisions

Section 43, first paragraph, of Act Number 190, now Article 1144 of the New Civil Code, fixes the period for actions on a written contract:

An action upon a written contract prescribes in ten years.

This is the longer period the bank invokes, and it applies only if the documents sued upon are themselves written contracts.

Section 43, second paragraph, of Act Number 190, now Article 1145 of the New Civil Code, fixes the period for actions on a contract not in writing:

An action upon a contract not in writing prescribes in six years.

This is the shorter period the trial court applied, and it governs unless the writing itself contains the promise to pay.

Ruling

On the first issue, the Court held that the sales orders and delivery receipts were not written contracts within the meaning of the ten-year statute. It laid down the test: a writing for the payment of money is one which contains either an express promise to pay or language from which a promise to pay arises by fair implication. It is not necessary that the promise be express, but the writing must on its face contain words or language which would fairly imply such a promise. If the promise arises only upon proof of extrinsic facts, or upon evidence aliunde, the writing is not within the purview of the statute. Where the agreement is partly oral and partly written, the writing does not qualify.

Applying this test, the Court examined the exhibits one by one. Five delivery receipts contained no prices and no terms; they merely named the recipient, the date, and the quantity and kind of lumber. Sixty-three others stated prices but no term of payment and no promise by the receiver to pay at any time. Seventeen printed sales orders were without prices, although the space for terms bore the word credit. Two handwritten orders asked that the goods be charged to the buyer's account as usual, but stated no prices or values. The Court found that in all these the amount to be paid and the manner of payment did not appear in the writing but had to be supplied by oral proof.

The Court conceded that one transaction, evidenced by a delivery receipt for lumber worth 446 pesos and 45 centavos, a sales order, and a handwritten order to charge the same to his account, came nearest to a written agreement. Even so, the terms of payment did not appear in any or all of the three exhibits combined, so the agreement was incomplete and an indispensable aspect had to be supplied by evidence aliunde. The phrase charge to my account as usual made the obligation indefinite and uncertain, open to discounts, conditions, or other contingencies. The agreement was therefore partly oral and partly written.

On the second issue, since the transactions were not evidenced by written contracts, the six-year period for actions on oral contracts governed. The complaint was filed on May 7, 1957, more than seven years after the last payment in 1949, and was therefore barred.

Doctrine

A writing for the payment of money, within the meaning of the ten-year statute of limitations, is one which contains either an express promise to pay or language from which a promise to pay arises by fair implication. It is enough that the words import a promise or agreement, or that this can be inferred from the terms employed; an express promise is not required. But the promise must appear on the face of the writing itself. If the promise arises only upon proof of extrinsic facts, or upon evidence aliunde, the writing is not within the purview of the statute. Where the agreement is partly oral and partly written, the writing does not qualify, and the six-year period for oral contracts applies. Sales orders and delivery receipts that state no price, no term of payment, and no promise to pay do not constitute written contracts, even when read together.

Disposition

The Supreme Court affirmed the decision of the trial court, with costs against the Philippine National Bank, and the bank's action was held barred by the statute of limitations.

Remember This

The one line to memorize: a writing starts the ten-year period only if the promise to pay appears on its face, and if the promise must be supplied by evidence aliunde, the agreement is partly oral and prescribes in six years. Examiners use this case to test the distinction between written and oral contracts under the statute of limitations, and to probe whether sales orders and delivery receipts, singly or combined, amount to a complete written agreement.