G.R. No. L-22519 March 27, 1971
VICENTE GOTAMCO HERMANOS, petitioner, vs. IRMA ROHDE SHOTWELL, assisted by her husband, ANSELMO M. SHOTWELL, respondents.

FACTS

The case involves a pre-war mortgage loan granted in 1926 by William J. Rohde to the partnership Vicente Gotamco Hermanos. The original loan was P85,000. The debtor made various payments during and after the Japanese occupation. Critical payments totaling P30,000 were made in 1944 using Japanese war notes. The creditor’s heirs, represented by Irma Rohde Shotwell, accepted these payments but contended they were accepted subject to revaluation after the war, to be applied first to interest and then to principal. Gotamco argued the payments were applied at par to the principal and that any right to revaluation was conditional upon a specific law being enacted, which never occurred.
After the war, further payments were made in Philippine currency, culminating in a “Release of Mortgage” deed executed in 1946. Gotamco contended this document, along with the receipts, constituted full satisfaction of the obligation without reservation. The creditor, however, sued for the final liquidation and payment of the unpaid balance, claiming the 1944 payments must be revalued and that substantial interest remained unpaid. The trial court ruled for the plaintiff, a decision modified by the Court of Appeals, which ordered Gotamco to pay a revalued sum.

ISSUE

The primary issue is whether the creditor is entitled to the revaluation of the P30,000 in Japanese war notes paid in 1944 and to collect unpaid interest, despite the execution of a Release of Mortgage, and whether such revaluation was contingent upon the enactment of a specific law.

RULING

The Supreme Court affirmed the decision of the Court of Appeals. The legal logic centered on interpreting the intent of the parties as evidenced by the receipts and the surrounding circumstances. The Court held that the agreement for revaluation was not made conditional upon the future enactment of any particular law. The receipts for the 1944 payments, as well as the post-liberation receipts and the Release of Mortgage deed itself, were qualified. They indicated the payments were accepted subject to final recomputation and liquidation, leaving the account open for adjustment.
The Court found no error in the appellate court’s application of the Ballantyne Scale to revalue the Japanese war note payments, a practice consistently upheld by jurisprudence to achieve equity, even absent a specific agreement on the rate. Furthermore, the defense based on Article 1110 of the old Civil Code—which presumes payment if a receipt is given without reservation—was correctly rejected. This legal provision applies only when the amount receipted for is intended to extinguish the entire obligation, which was not the case here, as the documents contemplated further settlement. Consequently, the claim for attorney’s fees was also denied.