G.R. No. L-8679; July 26, 1957.
JUAN M. ARELLANO, plaintiff-appellant, vs. MACARIA TINIO DE DOMINGO, assisted by her husband, FRANCISCO O. DOMINGO, defendants-appellees.

FACTS

The plaintiff-appellant, Juan M. Arellano, sold a parcel of land in Malate, Manila, to the defendants-appellees, Macaria Tinio de Domingo and her husband, for P150,000. The transaction was evidenced by a deed of sale with mortgage dated December 18, 1943. The terms stipulated that P100,000 was paid upon signing, and the balance of P50,000 was secured by a mortgage on the property. The contract provided that no payment on the balance and no interest would accrue until after one year from the date of ratification of the Treaty of Peace concluding the Greater East Asia War. Thereafter, interest at 8% per annum would be paid monthly, and the entire principal balance was to be fully paid within three years counted from the expiration of that one-year period. The appellant contended that the war factually ended on September 2, 1945 (the date of Japan’s surrender), and as the appellees failed to pay the balance and interest after more than four years from that date, he filed an action on December 12, 1953, for collection and foreclosure. The appellees defended that their obligation had not yet arisen because the Treaty of Peace had not been ratified by the Philippines, and alternatively, that any payment should be made according to the Ballantyne Table of Conversion for Japanese military notes. The trial court dismissed the complaint as premature.

ISSUE

Whether, under the terms “after the ratification of the Treaty of Peace concluding the present Greater East Asia War,” the parties contemplated the factual termination of the war on September 2, 1945, or the actual ratification of the Treaty of Peace, and if the latter, what specific act of ratification controls the commencement of the obligation periods.

RULING

The Supreme Court reversed the trial court’s decision. It held that the stipulated “ratification” referred to the ratification by a majority of the signatory powers to the Treaty of Peace, as specified in Article 23(a) of the Treaty itself, and not ratification by the Philippines alone or the factual end of the war. The Treaty came into force on April 28, 1952, when the United States (the last required nation) deposited its instrument of ratification, constituting the necessary majority. Therefore, the one-year period before interest would accrue began on April 28, 1952, making the appellees’ obligation to pay interest commence on April 29, 1953. The three-year period for payment of the principal balance ended on April 29, 1956. Consequently, when the action was filed on December 12, 1953, the appellees were already in default for failing to pay the stipulated interest that had become due, which default authorized the foreclosure of the mortgage for the entire obligation. The Court rejected the appellees’ alternative defense regarding the Ballantyne Table, as the obligation was not payable during the Japanese occupation. The appellees were ordered to pay the P50,000 balance with 8% interest from April 29, 1953, plus attorney’s fees, with the property subject to foreclosure if payment was not made within 90 days.