G.R. No. L-10691; January 31, 1958
ERLINDA STERNBERG and LUIZ STERNBERG, the latter represented by her Guardian Ad-Litem ANTONIO STERNBERG, plaintiffs-appellees, vs. GONZALO SOLOMON, defendant-appellant.

FACTS

On August 7, 1944, during the Japanese occupation, defendant Gonzalo Solomon executed a real estate mortgage in favor of plaintiffs Erlinda and Luz Sternberg to guarantee the payment of a total sum of P6,000.00 in Philippine currency. The obligation was payable one year from said date (August 7, 1945), extendible for another year, with 6% annual interest. The mortgage deed expressly stipulated that “strict compliance is the essence and nature of this agreement” and that the mortgage “shall be paid one year from date hereof as provided above and expressly agreed not sooner.” Plaintiffs filed a complaint for foreclosure after defendant failed to pay the debt despite demands. In his answer, defendant admitted the indebtedness and mortgage but alleged non-payment was due to plaintiffs demanding settlement in Philippine currency on a peso-to-peso basis. He contended the principal was received in Japanese military notes and he was only bound to pay its equivalent in Philippine currency pursuant to the Ballantyne Schedule of Values. Plaintiffs moved for judgment on the pleadings, which was granted by the Court of First Instance of Manila, sentencing defendant to pay P6,000.00 in Philippine currency without interest. Defendant appealed.

ISSUE

Whether the defendant’s wartime obligation, payable after liberation, should be paid in Philippine currency on a peso-to-peso basis or its equivalent value in Japanese military notes according to the Ballantyne Scale of Values.

RULING

The Supreme Court, en banc, affirmed the lower court’s decision. The Court held that obligations contracted during the Japanese occupation but payable only after liberation become due and payable in Philippine currency on a peso-to-peso basis. The deed expressly prohibited payment before August 7, 1945. Since Manila was liberated in February 1945, several months before the stipulated due date, payment could only be made after liberation. Consistent with prior jurisprudence (e.g., Wilson vs. Berkenkotter), plaintiffs were entitled to demand payment on a peso-to-peso basis. The decision was affirmed with costs against the defendant-appellant.
DISSENTING OPINION:
Justice Padilla, with whom Chief Justice Paras concurred, dissented for the reasons stated in his opinions in a series of cited cases, including Del Rosario vs. Sandico and La Orden de PP. Benedictinos vs. Philippine Trust Co.