G.R. No. L-3742 December 23, 1952
LAUREANO SIA, petitioner, vs. COURT OF APPEALS and NUMERIANO VALENCIA, respondents.

FACTS

On May 22, 1940, petitioner Laureano Sia executed a promissory note in favor of respondent Numeriano Valencia for P753.63, payable within five years. On September 4, 1944, Atty. Ernesto Valencia, the respondent’s son, offered to pay the debt in Japanese military notes, which the petitioner refused, alleging the notes were valueless and demanding Philippine currency. The following day, September 5, 1944, Atty. Valencia deposited P753.63 in Japanese military notes with the Clerk of the Court of First Instance of Masbate and filed a sworn pleading for consignation, notifying the petitioner. The petitioner never withdrew the money. Due to bombings between September and December 1944, the court records and the deposited money were lost or destroyed. After the note matured on May 22, 1945, the petitioner demanded payment. The respondent refused, claiming the debt was paid via consignation. The petitioner filed a complaint for recovery of the debt with foreclosure of mortgage. The Court of First Instance of Masbate dismissed the complaint, ruling the debt was paid, a decision affirmed by the Court of Appeals.

ISSUE

1. Whether the petitioner was justified in refusing the tendered payment on September 4, 1944.
2. Whether there was a valid consignation.
3. Who should bear the loss of the consigned amount.
4. Whether the Japanese military notes deposited should be valued at par with the Philippine peso.

RULING

1. The petitioner was not justified in refusing the tendered payment. The Court of Appeals correctly held the promissory note allowed payment at any time within five years from May 22, 1940, making the September 4, 1944, offer valid. The petitioner’s refusal was based on the alleged valuelessness of the Japanese military notes, not on the debt’s maturity. Japanese war notes were legal tender during the occupation.
2. The Court of Appeals found all requisites for a valid consignation were complied with: proper offer of payment, creditor’s refusal, deposit of the thing due with judicial authority, and notification to the creditor.
3. The loss of the consigned amount, without the debtor’s fault, is to be borne by the creditor. Citing Haw Pia vs. Jose, once a valid consignation is made, the debtor is freed from responsibility for subsequent risks to the consigned thing.
4. The Japanese military notes were legal tender at the time of consignation and constituted the “thing due.” The court did not entertain a revaluation of the notes, as the consignation was deemed valid and effective to extinguish the obligation.
The decision of the Court of Appeals was affirmed.