G.R. No. L-14996; May 31, 1961
XERXES C. GARCIA, plaintiff-appellant, vs. PHILIPPINE NATIONAL BANK, defendant-appellee.

FACTS

On January 5, 1945, during the Japanese occupation, Xerxes C. Garcia purchased a PNB cashier’s check (Check No. 371999) for P20,000 from the bank’s agency in San Fernando, Pampanga. The check, payable to Garcia, was acquired using Japanese military war notes, the circulating currency at that time. Garcia did not present this check for payment until November 15, 1954, long after the liberation of the Philippines.
The Philippine National Bank refused to honor the check upon presentment. The bank’s defense relied on Executive Order No. 49, issued by the President on June 6, 1945, which declared all deposits and deposit liabilities incurred with banking institutions during the enemy occupation null and void. The bank argued it was consequently released from its obligation. Garcia filed an action in the Court of First Instance of Manila to recover the face value of the check. The trial court dismissed his complaint, upholding the bank’s position based on the executive order.

ISSUE

Whether the defendant Philippine National Bank is still obligated to pay the value of the cashier’s check issued in January 1945 but presented for payment in 1954, after Japanese military notes had been invalidated.

RULING

The Supreme Court reversed the trial court’s decision. It held that while Executive Order No. 49 declared certain wartime financial transactions void, the check in question represented a direct and unconditional obligation of the bank itself (a cashier’s check), not merely a deposit liability. The obligation matured on the date of its issue, January 5, 1945, when Japanese war notes were still legal tender. However, the Court ruled that the obligation could not be enforced at its full face value in post-liberation currency, as this would confer an unconscionable windfall to the holder given the vastly different values of the currencies involved.
The legal logic applied is the doctrine of revalorization. Since the obligation matured during the occupation but was demanded after liberation, payment must be made according to the Ballantyne schedule of values, which established the conversion rate between Japanese war notes and genuine Philippine currency. Applying this schedule, P20,000 in Japanese war notes from January 1945 was equivalent to P166.67 in Philippine currency. Therefore, the bank was ordered to pay Garcia the converted sum of P166.67, with lawful interest from the date of the filing of the judicial complaint, May 22, 1958. The Court balanced the bank’s liability to pay a just debt against the principle that repayment should reflect the actual value given at the time the obligation was constituted.