Introduction

In the Philippine legal system, the concept of prescription serves as a fundamental principle in civil law, ensuring that rights and obligations do not remain enforceable indefinitely. Prescription refers to the extinction of a right or the acquisition of ownership through the passage of time under conditions prescribed by law. For creditors seeking to collect on old written loans, understanding the prescription period is crucial, as it determines the timeframe within which legal action must be initiated to enforce repayment. Failure to act within this period results in the loss of the right to judicially compel payment, although the moral obligation may persist.

This article comprehensively explores the prescription period applicable to written loans under Philippine law, drawing from the provisions of the Civil Code of the Philippines (Republic Act No. 386) and relevant jurisprudence. It covers the legal basis, computation of the period, starting point, interruptions, exceptions, and practical implications for lenders and borrowers.

Legal Basis: The Civil Code Provisions

The primary statutory framework governing prescription periods for obligations, including loans, is found in Title V, Chapter 3 of the Civil Code, specifically Articles 1139 to 1155.

Article 1144: This is the key provision for written loans. It states: "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."

A written loan, such as one evidenced by a promissory note, deed of loan, or any formalized agreement in writing, falls under the category of a "written contract." Thus, the prescriptive period for enforcing collection through court action is ten (10) years. This period applies regardless of whether the loan is simple (without interest) or with interest, as long as it is documented in writing.
Contrast with Oral Loans: For comparison, Article 1145 provides a shorter period of six (6) years for actions upon an oral contract or quasi-contract. This distinction underscores the law's preference for written agreements, granting them a longer enforcement window due to their evidentiary reliability.
Other Related Provisions:
- Article 1150: The time for prescription of actions with no special period (not applicable here, as written loans have a specified term).
- Article 1149: Five (5) years for actions based on injury to rights not arising from contract, which might intersect in cases of fraud but not directly for loan collection.
- Article 1155: Prescription does not run between spouses, parents and children during minority/incapacity, or guardians and wards during guardianship—potentially relevant in familial loan disputes.

These provisions ensure that the prescription period for written loans aligns with the general policy of promoting diligence in asserting rights while preventing perpetual litigation.

When Does the Prescription Period Begin?

The ten-year period does not commence from the date the loan was executed but "from the time the right of action accrues" (Article 1150). For written loans:

Maturity Date: If the loan specifies a due date, prescription starts from that date if the borrower defaults. For instance, if a promissory note is payable on December 31, 2015, and no payment is made, the creditor has until December 31, 2025, to file a collection suit.
Demand Loans: If the loan is payable on demand (no fixed maturity), the period begins when the creditor makes a formal demand for payment. Without such demand, the obligation is not yet due, and prescription does not run. However, jurisprudence (e.g., Consolidated Bank and Trust Corp. v. Court of Appeals, G.R. No. 114286, 1997) clarifies that undue delay in demanding payment may lead to laches, a related but distinct equitable defense.
Installment Loans: For loans payable in installments, prescription runs separately for each installment from its due date (Article 1153). Thus, unpaid early installments may prescribe while later ones remain enforceable.
Interest and Accessories: The prescription for interest payments follows the principal obligation, but if interest is stipulated separately, it may be subject to independent computation.

The Supreme Court has consistently held that the accrual is when the obligation becomes due and demandable, and the creditor can institute an action (e.g., Philippine National Bank v. Court of Appeals, G.R. No. 107569, 1994).

Interruptions and Suspensions of Prescription

Prescription is not absolute; it can be interrupted, resetting the clock. Article 1155 enumerates the modes:

Written Acknowledgment: A written admission of the debt by the debtor interrupts prescription (e.g., a letter promising payment or a new promissory note). This must be express and unequivocal.
Partial Payment: Any payment on the principal or interest interrupts the period, as it implies acknowledgment (e.g., Republic v. Ret, G.R. No. L-13754, 1962).
Filing of Action: Instituting a judicial or extrajudicial demand stops the running of prescription. However, if the case is dismissed without prejudice, the interruption is only for the duration of the pendency.
Extrajudicial Demand: A written demand letter can interrupt, but it must be received by the debtor.

Suspensions occur in specific circumstances:

Force Majeure or Fortuitous Events: Under Article 1154, prescription does not run during periods when it is impossible to institute action due to events beyond control (e.g., war, natural disasters), though this is narrowly interpreted.
Incapacity: As noted earlier, it does not run against minors, insane persons, or those under guardianship until the disability is removed.

Importantly, once interrupted, the full ten-year period restarts from the date of interruption, not merely extending the remaining time.

Effects of Prescription

When the prescription period lapses:

Extinguishment of Right: The creditor loses the right to enforce collection through courts. The debt becomes a "natural obligation" (Article 1423), enforceable only morally, not legally. Voluntary payment by the debtor is valid and cannot be recovered.
Defense in Court: Prescription is not automatic; it must be pleaded as an affirmative defense in a collection suit. If not raised, the court may still enforce the obligation.
No Revival Without New Agreement: A prescribed debt cannot be revived except by a new contract or acknowledgment, which must comply with formalities for validity.

In secured loans, such as those with a chattel or real estate mortgage:

The personal action on the loan prescribes in ten years, but the mortgage action (foreclosure) also follows the same period under Article 1142 for mortgages.
If the mortgage prescribes, the creditor may still pursue the unsecured personal action if it has not prescribed separately.

Exceptions and Special Cases

While the ten-year rule is general, certain nuances apply:

Government Loans: Loans from government entities (e.g., SSS or GSIS loans) may have different periods or be exempt from prescription under specific laws, but generally follow Civil Code rules unless otherwise provided.
Bank Loans: Regulated by the New Central Bank Act (R.A. 7653), but prescription remains ten years for written obligations.
Usurious Loans: If interest is usurious (violating the Usury Law, though suspended), the principal remains enforceable within ten years, but excess interest may be void.
Pandemic-Related Tolling: During the COVID-19 period, Bayanihan Acts and Supreme Court issuances temporarily suspended prescription periods for certain obligations, but these were time-bound and no longer in effect as of 2023.
International Loans: If involving foreign elements, the Conflicts of Laws rules (Article 16) may apply, but for purely domestic written loans, Philippine law governs.

Jurisprudence provides further clarity:

In Development Bank of the Philippines v. Court of Appeals (G.R. No. 110203, 1998), the Court ruled that prescription starts from default, not execution.
PNB v. Remata (G.R. No. 147230, 2004) emphasized that email or informal acknowledgments may not suffice unless clearly written and signed.

Practical Implications for Creditors and Borrowers

For creditors:

Maintain records of demands and acknowledgments to prevent or interrupt prescription.
File suits promptly upon default to avoid barred claims.
Consider renewal agreements before expiration to extend enforceability.

For borrowers:

Raise prescription as a defense if sued beyond the period.
Note that prescription does not erase the debt from credit records or moral considerations.

In practice, many old loans go uncollected due to prescription, highlighting the importance of timely action. Legal consultation is advisable to assess specific circumstances, as factual nuances can alter application.

Conclusion

The prescription period for collecting old written loans in the Philippines is firmly anchored in the ten-year rule under Article 1144 of the Civil Code, promoting legal certainty and diligence. By understanding accrual, interruptions, and effects, parties can navigate these obligations effectively. While the law extinguishes judicial remedies after this period, it preserves the ethical dimension of repayment, reflecting a balanced approach to civil justice.