G.R. No. L-15125; April 29, 1960
FRANCISCA ROMASANTA, plaintiff-appellee, vs. FELIX SANCHEZ, defendant-appellant.

FACTS

On December 29, 1944, during the Japanese occupation, defendant-appellant Felix Sanchez received a loan of P35,000.00 from plaintiff-appellee Francisca Romasanta in Japanese war notes. To secure the loan, Sanchez executed a real estate mortgage. A key condition of the mortgage stipulated that the loan would not earn interest and the mortgagor (Sanchez) could not redeem the property during the war. The redemption or payment period was set at one year, to be counted from the date of the termination of the war, when peace was actually restored and a new civil government was established. The loan was to be paid “with Philippine Currency of the new civil government established in the Philippines.” Romasanta filed an action to recover the loan amount plus attorney’s fees and to foreclose the mortgage. Sanchez, in his defense, contended that if the obligation was incurred, he should pay no more than P1,500.00 in Philippine currency, applying the Ballantyne scale of values (which equated Japanese currency to Philippine pesos at a rate of 70 to 1 as of December 1944).

ISSUE

Whether, considering the time and circumstances under which the loan was contracted, the defendant-appellant may settle the obligation by paying its equivalent value according to the Ballantyne schedule, instead of the face amount in the currency stipulated.

RULING

No. The decision of the trial court ordering Sanchez to pay P35,000.00 in Philippine currency is affirmed. The Supreme Court ruled that the clear and express terms of the mortgage contract govern. The agreement was a speculative transaction where the parties expressly stipulated that payment would be made only after the war, in the currency of the new civil government. This stipulation is lawful and binding. The Court cited its precedent in Berg vs. Theus, which held that when a contract clearly contemplates payment in genuine Philippine currency after a specified event like the declaration of peace, the debtor must live up to that compact. The Court further reinforced this by referencing Roño vs. Gomez and Gomez vs. Tabia, which held that similar agreements where payment is deferred until after liberation and made in the currency then prevailing are permitted by law, as the parties gambled on the date of the war’s termination. Therefore, Sanchez must pay the loan’s face value of P35,000.00 in Philippine currency, as agreed, and cannot reduce it via the Ballantyne schedule.