G.R. No. L-3435 April 28, 1951
Clara Tambunting de Legarda, et al., plaintiffs-appellants, vs. Victoria Desbarats Miailhe, substituting William J. B. Burke, defendant-appellee.

FACTS

On June 3, 1944, during the Japanese occupation, plaintiffs filed a complaint against William J. B. Burke alleging his unjustified refusal to accept payment of a mortgage indebtedness. Plaintiff Clara Tambunting de Legarda deposited P75,920.83 with the clerk of court and prayed that Burke be ordered to accept it, execute a deed of release, and pay damages. Burke’s original answer claimed that on May 26, 1944, an agreement was reached where he condoned the interest until the war’s end in consideration of Legarda’s undertaking to pay her obligation upon the war’s termination, which had not yet occurred. The trial court (Judge Jose Gutierrez David) initially ordered Burke to accept the deposit. After liberation, Burke filed a supplemental answer (October 23, 1945) alleging the payment/consignation in Japanese military notes was null and void and did not discharge the obligation, and that he had not pleaded these facts earlier for fear of Japanese military police. He sought foreclosure through a counterclaim. The trial court denied admission of this supplemental answer, but the Supreme Court on appeal directed that it be allowed and a new trial be held. The case was returned, and Victoria Desbarats Miailhe was substituted as defendant upon Burke’s death. The lower court (Judge Conrado Sanchez) ultimately rendered judgment on August 5, 1949, dismissing the complaint and ordering plaintiff Clara Tambunting de Legarda to pay the defendant P70,000 with 3.5% interest from January 1, 1942, plus costs and attorney’s fees, and ordering the sale of the mortgaged property if payment was not made within 120 days. Plaintiffs appealed.

ISSUE

The principal issue of fact was the nature of the agreement between the parties during the Japanese occupation: whether it was merely a reduction of the annual interest rate to 3.5% (as claimed by plaintiffs) or a condonation of interest until the war’s end with an agreement to pay the obligation upon termination of the war (as claimed by defendant). A related legal issue was whether the consignation made by means of a certified check had legal effect.

RULING

The Supreme Court affirmed the lower court’s decision in toto. On the factual issue, after examining the evidence, the Court found the preponderance of evidence in favor of the defendant’s version, giving more weight and credence to the testimony of witnesses for the defendant (Antonio Carrascoso and William J. B. Burke) over that of plaintiff Vicente Legarda. The Court found the defendant’s account more consonant with fairness and the history of the transaction. On the legal issue, the Court ruled that the consignation made by Clara Tambunting de Legarda by depositing a manager’s (certified) check for P75,920.83 did not have legal effect because a check, even if certified, is not legal tender. Since the consignation was not made in legal tender, it did not relieve her from her obligation. The Court cited precedents holding that a check is not a valid tender if objected to on that ground. Therefore, the consignation was ineffective, and the lower court’s judgment for the defendant was correct.