G.R. No. L-1743 May 29, 1951
DOMINADOR NICOLAS and OLIMPIA MATIAS, petitioners, vs. VICENTA MATIAS and AMADO CORNEJO Jr., respondents.

FACTS

On June 29, 1944, respondents Vicenta Matias and Amado Cornejo Jr. executed a promissory note in favor of petitioners Dominador Nicolas and Olimpia Matias for P30,000, payable “within the sixth year” from that date with 6% interest due annually in advance. The loan was made in Japanese military notes and secured by a mortgage on four parcels of land. On July 15, 1944, the debtors offered to pay the principal plus interest for five years (totaling P39,000), but the creditors refused to accept. Consequently, in August 1944, the debtors deposited the P39,000 in court and filed an action to compel the creditors to accept the payment and discharge the mortgage. The creditors’ primary defense was that the loan could not be repaid until the sixth year from the date of the mortgage.

ISSUE

Whether the debtors could validly compel the creditors to accept payment of the loan, including interest for the full five-year term, before the stipulated maturity date.

RULING

No. The Supreme Court reversed the decision of the Court of Appeals. The offer and consignation were not valid, except for the satisfaction of the interest for the year 1944 which was then due. The Court held that the stipulated term was for the benefit of both parties, and the debtor has no right, without the creditor’s consent, to anticipate payment of a debt payable at a future day and bearing interest. The creditors stipulated for a five-year term partly because they wanted to derive advantage from an anticipated change in currency (from Japanese military notes). Furthermore, even if interest was the only benefit, acceleration of payment could not be compelled because the Usury Law prohibits the charging or receipt of interest in advance for more than one year; thus, the creditors could not legally accept interest for the full five years in advance. The Court cited the precedent in Ilusorio vs. Busuego. The Court declined to render a judgment for the mortgage amount plus interest at that time because the debt was not yet payable when the case was instituted and due to the existence of a moratorium law. The creditors were left at liberty to collect the mortgage plus interest when the moratorium is lifted in a foreclosure proceeding.