[ G.R. No. 239177, July 10, 2019 ] http://elibrary.judiciary.gov.ph/dtSearch/dtisapi6.dll?cmd=getdoc&DocI...

HEIRS OF MA. LOURDES ONG, AS REPRESENTED BY JOSE T. ONG BUN

VS. FIRST METRO INVESTMENT CORPORATION, A SUBSIDIARY OF
METROBANK AND TRUST COMPANY

Sirs/Mesdames:

Please take notice that the Court, Third Division, issued a Resolution dated July 10, 2019,
which reads as follows:

"G.R. No. 239177 (Heirs of Ma. Lourdes Ong, as represented by Jose T. Ong Bun
vs. First Metro Investment Corporation, a subsidiary of Metrobank and Trust
Company). — This is a petition for review on certiorari[1] filed under Rule 45 of the Rules
of Court, seeking to reverse and set aside the Decision[2] dated December 8, 2017 and
Resolution[3] dated April 2, 2018 of the Court of Appeals (CA) in CA-G.R. Sp No. 09284. In
these issuances, the CA affirmed the decision of the Regional Trial Court (RTC) of Iloilo
City, and dismissed the subject complaint for collection of a sum of money and damages.

Factual Antecedents

On August 13, 1991, Wilson Sy (Wilson) invested P200,000.00 in a money market

placement with respondent First Metro Investment Corporation (FMIC). As evidence of the
transaction, Wilson was issued Promissory Note (PN) No. 221584, maturing on October 1
1991. The payee indicated in the note was "Bearer W. Sy ITF Lourdes Ong," arid
prescribed the following terms and conditions:[4]

1. Amount due on this clean promissory note shall be paid on the specified maturity
date upon surrender of this note at the issuing First Metro principal or branch office.

2. In accordance with Central Bank regulations, this promissory note shall not be
honored or paid by First Metro before the maturity date indicated on the face hereof.

3. This note shall not be automatically renewed at maturity.

4. In case of default, First Metro shall pay, in addition to stipulated interest, liquidated
damages, equivalent to two per cent (2%) of the outstanding amount due, plus a
reasonable amount for attorney's fee and cost of collection in case of suit.

5. In case of litigation arising from this note, venue shall be in the Municipality of
Makati, Metro Manila.[5]

On December 22, 2002, Lourdes Ong (Lourdes) died of Cardio Pulmonary Arrest.[6] A year

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after, or sometime in 2003, her husband, Jose T. Ong Bun (Jose), allegedly discovered the
PN in the vault where Lourdes kept her important documents.[7] Through a letter dated
August 12, 2003, copy furnished to the Bangko Sentral ng Pilipinas (BSP), Jose asked
FMIC to verify the status of the note.[8]

FMIC replied to Jose in a letter dated May 14, 2004, informing him that the subject PN did
not appear in FMIC's list of outstanding money market placements. As such, the note was
settled prior to or on its maturity date. FMIC further noted that in the past, several clients
were paid even without the presentation of the original PN to the servicing branch.
However, FMIC was unable to provide supporting documents because the five-year period
for storing the original documents of settled transactions had already lapsed.[9]

Jose insisted that the note could not have been settled because its original copy remained
in the custody of his deceased wife.[10] FMIC, on the other hand, maintained its position
that the obligation represented by the PN was already settled. FMIC also explained that
there were instances in the past when clients requested for the release of the proceeds of
their money market placements by presenting either an affidavit of loss, or a lette. of
undertaking to surrender the original note at a later date. FMIC relayed this explanation to
the BSP which, in turn, informed Jose through a letter dated January 26, 2005.[11]

Unsatisfied with the explanation of FMIC, the Heirs of Ma. Lourdes Ong, as represented by
Jose (Heirs of Lourdes), filed a complaint before the Municipal Trial Court in Cities (MTCC)
in Iloilo City, for the recovery of the proceeds of the subject note.[12] In its Answer, FMIC
alleged that venue was improperly laid because the PN expressly fixed the venue in Makati
City. Furthermore, FMIC raised the defense of prescription. Since the PN matured on
October 1, 1991, the cause of action accrued from that date and expired after the lapse
often (10) years, pursuant to Article 1144 of the Civil Code.[13]

During pre-trial, the parties agreed to stipulate on several matters, which include, but are
not limited to, the following:

(a) the PN that matured on October 1, 1991 was not automatically

renewable;

(b) Lourdes did not demand the payment of the PN from the time of its
issuance on August 13, 1991 until Lourdes's death;

(c) Jose discovered the PN sometime in 2003, or a year after

Lourdes's death;

(d) during the lifetime of Lourdes, she did not inform Jose of any receivable
from FMIC, which covered the PN;

(e) Wilson is the brother of Lourdes; and

(f) Jose is the father of Lourdes's children.[14]

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In its Decision[15] dated March 5, 2014, the MTCC ruled in favor of the Heirs of Lourdes:

WHEREFORE, this Court enters judgment in favor of the herein plaintiff/s and
the defendant is hereby ordered to pay the former under the following tenor, to
wit:

1. To pay plaintiff the the (sic) principal obligation [in] the sum of TWO
HUNDRED THOUSAND PESOS (Php 200,000.00) with the interest rate of Fifteen
per cent interest per annum computed from the time of the maturity of the
note,

2. Exemplary damage of TWENTY THOUSAND PESOS (Php 20,000.00) due to

defendant's willful refusal and cavalier acts of not timely acknowledging the
plea of plaintiff to pay the note which caused considerable inconvenience to
him;

3. Attorney's fees in the amount of TWENTY THOUSAND PESOS (Php

20,000.00); and

4. to pay the Cost.

SO ORDERED.[16]

The MTCC ruled that prescription did not run until such time that the PN was discovered.
There being no evidence shown to establish the payment of the subject note, the MTCC
resolved the complaint in favor of the Heirs of Lourdes.[17]

The adverse ruling of the MTCC constrained the FMIC to appeal to the RTC. The trial court,
in its Decision[18] dated March 9, 2015, reversed and set aside the MTCC's judgment:

WHEREFORE, premises considered, the Decision dated March 5, 2014 of the

[MTCC], Branch 7, Iloilo City is hereby ordered SET ASIDE. The case filed
against [FMIC] is hereby ordered DISMISSED.

The counterclaim of defendant-appellant is likewise ordered DISMISSED.

Without costs.

SO ORDERED.[19]

The RTC disagreed with the MTCC and agreed with FMIC as regards the reckoning point of
the prescriptive period. According to the trial court, the cause of action from the PN
accrued on the date of its maturity, or on October 1, 1991. The ten (10)-year prescriptive
period, therefore, began to run from that date and lapsed in 2001. As a necessary
consequence, the demand of Jose, on behalf of the Heirs of Lourdes, was belatedly
initiated. The trial court also rejected the argument that as an express trust, the
petitioners' right to claim from the subject note does not prescribe.[20]

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Aggrieved, the Heirs of Lourdes filed a petition for review with the CA.

In its Decision[21] dated December 8, 2017, the CA affirmed the RTC's decision. According
to the CA, the money market placement was in the nature of a loan, which is evidenced by
a written debt instrument. As such, the prescriptive period often (10) years applies to the
present case. Since the subject note matured on October 1, 1991, the complaint for the
collection of a sum of money instituted after more than fourteen (14) years from said duce
was already barred by prescription.

The Heirs of Lourdes moved for the reconsideration of the CA's judgment, which was
denied in the Resolution[22] dated April 2, 2018 of the CA. This constrained the Heirs of
Lourdes to file an appeal with this Court via a petition for review on certiorari under Rule
45 of the Rules of Court.

According to the Heirs of Lourdes, the complaint for the collection of a sum of money was
not yet barred by prescription. For the Heirs of Lourdes, prescription did not begin to run
from the subject note's date of maturity. There should be prior demand on their part, and
a subsequent refusal on the part of FMIC to comply with the obligation before prescription
begins to set in.[23]

In essence, the Court is tasked to resolve whether the Heirs of Lourdes' complaint for the
collection of a sum of money was already barred by prescription or laches.

Ruling of the Court

The Court finds the petition without merit.

It is well-settled that the nature of a money market placement is a simple loan or

mutuum. As the Court held in Allied Banking Corporation v. Lim Sio Wan, et al. :[24]

More succinctly, in Citibank, N.A. (Formerly First National City Bank) v.

Sabeniano, this Court ruled that a money market placement is a simple loan or
mutuum. Further, we defined a money market in Cebu International Finance
Corporation v. Court of Appeals, as follows:

[A] money market is a market dealing h standardized

short-term credit instruments (involving larg amounts) where
lenders and borrowers do not deal directly with each other but
through a middle man or dealer in open market. In a money market
transaction, the investor is lender who loans his money to a
borrower through middleman or dealer.[25] (Citations omitted)

Thus, the money market placement is clearly an obligation involving a sum of money, with
Wilson as the creditor of FMIC. In accordance with the terms and conditions of the subject
PN, he is entitled to payment upon the maturity of the placement.[26]

Aside from payment, FMIC may also be released from its obligation, when the claim of the

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creditor becomes barred by prescription. In this regard, the pertinent provisions of the
Civil Code of the Philippines state:

Article 1144. The following actions must be brought within ten years from
the time the right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

xxxx

Article 1150. The time for prescription for all kinds of actions, when there is
no special provision which ordains otherwise, shall be counted from the day
they may be brought.

xxxx

Article 1155. The prescription of actions is interrupted when they are filed
before the court, when there is a written extrajudicial demand by the creditors,
and when there is any written acknowledgment of the debt by the debtor.
(Emphasis Ours)

It is undisputed in this case that the subject PN matured on October 1, 1991, and that
there is no automatic renewal of the note after maturity. It is also apparent from the note
that FMIC undertook to pay liquidated damages, in the form of interest, upon failure to pay
on the specified maturity date. Clearly, the parties agreed that the loan obligation becomes
due on that date, after which, default commences and the stipulation to pay interest
begins.[27] Hence, the loan became due and demandable from October 1, 1991, and a
right to collect accrued in favor of Wilson as the depositor of the money market placement.

Since the records show that there was no demand for payment after the loan obligation
matured on October 1, 1991, the claim for payment has already prescribed. This holds
true especially since during pre-trial, the parties stipulated that Lourdes did not demand
payment until she died on December 22, 2002.[28] It was only on February 28, 2006, or
after more than fourteen (14) years, that demand was actually made, this time by the
Heirs oiLor^des.[29]

In any case, the extrajudicial demand of the Heirs of Lourdes on February 28, 2006 for the
payment of the note only serves to interrupt the prescriptive period.[30] But since this
demand was made after the lapse of ten (10) years, the period of prescription to collect
the loan obligation already lapsed. In this light, the obligation of FMIC under the PN was
extinguished. As a necessary consequence, the action for the collection of the PN that was
belatedly filed on October 27, 2008, or seventeen (17) years after the loan matured, is
barred by prescription.[31]

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WHEREFORE, premises considered, the petition for review on certiorari is DENIED. The
Decision dated December 8, 2017 and Resolution dated April 2, 2018 of the Court of
Appeals in CA-G.R. SP No. 09284 are AFFIRMED in toto.

No costs.

SO ORDERED."

Very truly yours,

(Sgd.) WILFREDO V. LAPITAN

Division Clerk of Court

[1] Rollo, pp. 19-35.

[2]Penned by Associate Justice Pamela Ann Abella Maxino, with Associate Justices
Germano Francisco D. Legaspi and Louis P. Acosta concurring; id. at 37-48,

[3] Id. at 69-75.

[4] Id. at 101.

[5] Id.

[6] Id. at 102.

[7] Id. at 87.

[8] Id. at 103.

[9] Id. at 104.

[10] Id. at 105.

[11] Id. at 106.

[12] Id. at 86-90.

[13] Id. at 111-112.

[14] Id. at 64-65.

[15] Rendered by Judge Rene B. Gonzales; id. at 122-140.

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[16] Id. at 139-140.

[17] Id. at 138.

[18] Rendered by Judge Loida J. Diestro-Maputol; id. at 141-153.

[19] Id. at 152-153

[20] Id. at 149-150

[21] Id. at 37-43.

[22] Id. at 70-78.

[23] Id. at 26-28.

[24] 573 Phil. 89 (2008).

[25] Id. at 102.

[26] Rollo,p. 101.

[27] Rivera v. Sps. Chua, 750 Phil. 663, 681 (2015).

[28] Rollo,pp. 64-65, 102.

[29] Id. at 108-109.

[30]
See Permanent Savings and Loan Bank v. Velarde, 543 Phil. 148 (2007); see also Phil.
Bank of Communications v. Diamond Seafoods Corp., 542 Phil. 180 (2007).

[31] Nuñez v. GSIS Family Bank, 511 Phil. 735, 749 (2005).

(URES)

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