De Abraham vs. Intestate Estate of Ysmael

A claim on a promissory note executed during the Japanese occupation is not barred by prescription where the wartime moratorium suspended the statute of limitations from November 18, 1944 to May 18, 1953; neither is it barred by laches absent injury or prejudice to the estate, and the dead man’s statute is waived when counsel for the estate extensively cross-examines the claimant on matters occurring before the decedent’s death.

Alfonso Abraham, Sr. was the creditor of Juan C. Ysmael under a promissory note executed during the Japanese occupation; Florencia Q. Abraham, Alfonso’s wife, witnessed the instrument, and Alfonso and Jesus Abraham are her sons. The note became the subject of a claim against Ysmael’s intestate estate, administered by Priscilla Recto-Kasten. The governing backdrop includes the wartime moratorium on debts contracted during the Japanese occupation, Section 26(c), Rule 123 of the Rules of Court (the dead man’s statute), and Article 1144 of the New Civil Code on the ten-year prescriptive period for written contracts.

On September 3, 1943, Juan C. Ysmael obtained a loan from Alfonso Abraham, Sr. in the amount of P12,500.00 in Japanese currency notes, and executed a promissory note in favor of the latter promising to pay the loan within 90 days with interest at the rate of 10% per annum. The note was executed in the presence of Florencia Q. Abraham, the creditor’s wife, who affixed her signature at the bottom thereof as a witness thereto.

Upon maturity of the note, a demand was made for its payment, but the debtor failed to pay. Alfonso Abraham, Sr. died on February 9, 1945. Juan C. Ysmael died intestate on April 23, 1952, leaving the note still unpaid.

On November 13, 1954, in Special Proceedings No. Q-285 for the settlement of the intestate estate of Juan Ysmael, pending before the Court of First Instance of Quezon City, Florencia Q. Vda. de Abraham, together with her sons Alfonso and Jesus, all surnamed Abraham, filed a pleading entitled "Reclamation" demanding payment of the amount represented by the note. Because no regular administrator of the estate had yet been appointed by the court, the "Reclamation" was not acted upon. As soon as Priscilla Recto-Kasten was appointed administratrix, the claimants reproduced their "Reclamation" before the lower court, and the same was finally set for hearing. As agreed upon by the parties, the reception of evidence was delegated to a commissioner.

During the hearing before the commissioner, counsel for the administratrix interposed a general and continuing objection to the testimony of Florencia Vda. de Abraham, invoking Section 26(c), Rule 123 of the Rules of Court. After the claimant had testified, however, he lengthily cross-examined her on the very matters against which he interposed a general objection. The trial judge eventually overruled the counsel’s previous general and continuing objection and admitted the testimony of the witness.

The record showed that petitioners established the due execution and genuineness of the promissory note and that respondents failed to present any evidence to destroy the same. The lower court observed that the promissory note executed by the deceased was produced before the Court and marked as Exhibit B-1, and the circumstances under which it was executed were extensively described by Florencia Q. de Abraham during the hearing, who was one of the witnesses to the instrument; her description was given more vividly on cross-examination by counsel for the administratrix, who attempted to destroy the due execution and genuineness of the document. Counsel for the administratrix did not present evidence to destroy the alleged genuineness of the promissory note despite insinuating that he might secure an expert to determine the genuineness of the signature of the late Juan C. Ysmael, and although he manifested that if Exhibit B-1 was genuine it had been fully paid, he presented no proof to support that contention.

• Moratorium Lifted by Republic Act No. 342: Respondents contended that Republic Act No. 342, which took effect on July 26, 1948, lifted the moratorium on debts contracted during the Japanese occupation.
• Dead Man’s Statute: Counsel for the administratrix interposed a general and continuing objection to the testimony of Florencia Vda. de Abraham under Section 26(c), Rule 123 of the Rules of Court, on the ground that she could not testify as to matters of fact occurring before the death of Juan C. Ysmael.

• Validity of Claim: Whether petitioners established a just and valid claim against the intestate estate of Juan C. Ysmael based on the promissory note.
• Dead Man’s Statute: Whether the testimony of Florencia Vda. de Abraham was admissible notwithstanding Section 26(c), Rule 123 of the Rules of Court.
• Prescription: Whether the claim was already barred by prescription.
• Laches: Whether the claim was already barred by laches.

• Validity of Claim: Yes. The due execution and genuineness of the promissory note were established, and respondents presented no evidence to destroy it.
• Dead Man’s Statute: No. The prohibition was waived when counsel for the administratrix extensively cross-examined the witness on the very matters subject of the prohibition.
• Prescription: No. The action upon a written contract prescribes in ten years under Article 1144, paragraph 1, of the New Civil Code, but the moratorium suspended the statute of limitations from November 18, 1944 to May 18, 1953; after deducting eight years and six months, the claim filed on November 13, 1954 had not prescribed.
• Laches: No. The elements of laches were not all present; assuming the first three, there was no injury or prejudice to respondent from allowing the claim, and mere lapse of time without detrimental change in conditions is insufficient.

• Validity of Claim: The record showed that petitioners established the due execution and genuineness of the promissory note and that respondents failed to present any evidence to destroy the same. The lower court noted that the note was produced and marked as Exhibit B-1; Florencia Q. de Abraham, one of the witnesses, extensively described the circumstances of its execution, more vividly on cross-examination; and counsel for the administratrix neither presented evidence to destroy its genuineness despite insinuating that an expert might be secured nor proved payment despite manifesting that the note had been fully paid if genuine. The claim was therefore just and valid.
• Dead Man’s Statute: Section 26(c), Rule 123 of the Rules of Court prohibits parties or assignors of parties, or persons in whose behalf a case is prosecuted, against an executor, administrator, or other representative of a deceased person, from testifying as to any matter of fact occurring before the death of the deceased. The prohibition, however, was waived when counsel for the administratrix extensively cross-examined Florencia on the very matters subject of the prohibition. Wright vs. Tinio, Tongco vs. Vianzon, and Macfarlane vs. Green were cited for this waiver. The rationale is that a litigant cannot be permitted to speculate as to what his examination of a witness may bring forth; having selected one of two courses, he cannot change his position after discovering that the course selected is not to his advantage. The trial judge thus correctly overruled the general and continuing objection and admitted the testimony.
• Prescription: Under Article 1144, paragraph 1, of the New Civil Code, an action upon a written contract must be brought within ten years from the time the right of action accrues. The cause of action accrued on December 3, 1943, when the note became due and demandable, and the reclamation was filed only on November 13, 1954, so more than ten years had apparently elapsed. However, the moratorium provisions suspended the statute of limitations from November 18, 1944, when Executive Order No. 25 was issued, to May 18, 1953, the date of promulgation of Rutter vs. Esteban, which held such provisions no longer applicable. From December 3, 1943 to November 13, 1954, eleven years, eleven months, and ten days elapsed; deducting eight years and six months of suspension, the claim had not yet prescribed when filed. The contention that Republic Act No. 342 lifted the moratorium on debts contracted during the Japanese occupation was untenable; Uy vs. Kalaw Katigbak held that Republic Act No. 342 did not lift the moratorium on debts contracted during the war but modified Executive Order No. 32 as to pre-war debts, making the protection available only to debtors who had war damage claims.
• Laches: The elements of laches are: (1) conduct on the part of the defendant, or one under whom he claims, giving rise to the situation complained of; (2) delay in asserting complainant’s right after knowledge or notice of defendant’s conduct and an opportunity to sue; (3) lack of knowledge or notice on the part of the defendant that complainant would assert the right on which he bases suit; and (4) injury or prejudice to defendant in the event relief is accorded. Assuming the first three elements were present, the last was absent because neither injury nor prejudice to respondent could occur by the allowance of the claim. Mere lapse of time during which there was neglect to enforce the right is not the sole basis of laches; there must also be changes of conditions detrimental to the defendant. When there are no such changes, the defense of laches may not prosper.

• Dead Man’s Statute (Section 26(c), Rule 123) — Parties or assignors of parties to a case, or persons in whose behalf a case is prosecuted, against an executor, administrator, or other representative of a deceased person cannot testify as to any matter of fact occurring before the death of the deceased. The prohibition is waivable: extensive cross-examination by the estate’s counsel on the very matters covered by the objection constitutes waiver. In this case, the administratrix’s counsel interposed a general and continuing objection but then lengthily cross-examined Florencia on the prohibited matters, so her testimony was properly admitted.
• Prescription of Written Contracts and Wartime Moratorium — An action upon a written contract must be brought within ten years from the time the right of action accrues under Article 1144, paragraph 1, of the New Civil Code. The wartime moratorium suspended the statute of limitations from November 18, 1944, when Executive Order No. 25 was issued, to May 18, 1953, when Rutter vs. Esteban held the moratorium provisions no longer applicable. Republic Act No. 342 did not lift the moratorium on debts contracted during the Japanese occupation; it modified Executive Order No. 32 as to pre-war debts, making protection available only to debtors with war damage claims. The claim here was not prescribed after deducting the suspension period.
• Laches — Laches requires: (1) conduct by the defendant or one under whom he claims giving rise to the situation complained of; (2) delay in asserting complainant’s right after knowledge or notice of defendant’s conduct and an opportunity to sue; (3) lack of knowledge or notice on the part of the defendant that complainant would assert the right on which he bases suit; and (4) injury or prejudice to defendant if relief is accorded. Mere lapse of time is not enough; there must be changes of conditions detrimental to the defendant. Here, no injury or prejudice to the estate was shown, so laches did not bar the claim.

• "However, there was a waiver of the prohibition when the counsel for the administratrix extensively cross-examined the witness on the very matters subject of the prohibition." — States the ratio for admitting Florencia’s testimony despite the dead man’s statute.
• "Thus, from December 3, 1943 to November 13, 1954, eleven years, eleven months and ten days have elapsed. Deducting from this period eight years and six months, the time during which the statute of limitations was suspended, it is clear that petitioners' claim has not yet prescribed when it was filed on November 13, 1954." — Sets out the prescription computation and the effect of the moratorium.
• "When there are no changes of conditions detrimental to the defendant, the defense of laches may not prosper." — States the requirement of prejudice for laches.
• "In order that the defense of laches may prosper, the following elements must be present: (1) conduct on the part of defendant, or one under whom he claims, giving rise to the situation complained of, (2) delay in asserting complainant's right after knowledge or notice of defendant's conduct and an opportunity to sue, (3) lack of knowledge or notice on the part of the defendant that complainant would assert the right on which he bases suit, and (4) injury or prejudice to defendant in the event relief is accorded." — Canonical formulation of the elements of laches applied in this case.

• Wright vs. Tinio, G.R. No. L-4004, May 29, 1952 — Cited for the rule that the dead man’s statute is waived by extensive cross-examination on prohibited matters.
• Tongco vs. Vianzon, 50 Phil. 698 — Cited, with Wright vs. Tinio, for waiver of the dead man’s statute.
• Macfarlane vs. Green, 54 Phil. 551 — Cited for the same waiver principle.
• Rutter vs. Esteban, G.R. No. L-3708 — Promulgated on May 18, 1953; held the moratorium provisions no longer applicable, fixing the end of the suspension period.
• Rio y Compania vs. Sandoval, G.R. No. L-9391, November 28, 1956 — Cited for the suspension of the statute of limitations by the moratorium.
• Compania Maritima vs. Court of Appeals, G.R. No. L-14949, May 30, 1960 — Cited for the same suspension rule.
• Uy vs. Kalaw Katigbak, G.R. No. L-1830, December 31, 1949 — Held that Republic Act No. 342 did not lift the moratorium on debts contracted during the war.
• Sison vs. Mirason, G.R. No. L-4711, October 31, 1952 — Held that Republic Act No. 342 modified Executive Order No. 32 as to pre-war debts, making protection available only to debtors with war damage claims.
• Villoria vs. Secretary of Agriculture and Natural Resources, G.R. No. L-11754, April 29, 1960 — Cited for the elements of laches.
• Comstock's Adm'r vs. Jacob, 89 VT. 133, 94 A. 497, Ann. Cas. 1918A, 465 — Cited in IV Francisco, Rules of Court, for the rationale that a litigant cannot speculate on cross-examination and then change course after discovering disadvantage.

• Section 26(c), Rule 123, Rules of Court — Prohibits parties or assignors, or persons in whose behalf a case is prosecuted, from testifying against an executor, administrator, or other representative of a deceased person as to any matter of fact occurring before the deceased’s death. Applied here, the prohibition was waived by the administratrix’s extensive cross-examination on the prohibited matters.
• Article 1144, paragraph 1, New Civil Code — Requires an action upon a written contract to be brought within ten years from the time the right of action accrues. Applied to the promissory note, but the period was suspended by the moratorium.
• Executive Order No. 25 — Issued on November 18, 1944; its moratorium provisions suspended the statute of limitations. Applied as the start of the suspension period.
• Republic Act No. 342 — Effective July 26, 1948; respondents claimed it lifted the moratorium on debts contracted during the Japanese occupation. The Court held it did not lift that moratorium but modified Executive Order No. 32 as to pre-war debts, making protection available only to debtors with war damage claims.
• Executive Order No. 32 — Mentioned as modified by Republic Act No. 342 with respect to pre-war debts; it did not remove the moratorium on war-contracted debts.

Bengzon, C.J., Padilla, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, and Dizon, JJ., concurred. Bautista Angelo, J., took no part.