G.R. No. L-8093 October 29, 1955
DOMINADOR NICOLAS and OLIMPIA MATIAS, plaintiffs-appellants, vs. VICENTA MATIAS, AMADO CORNEJO, JR., JOSE POLICARPIO, and MATILDE MANUEL, defendants-appellees.

FACTS

On June 29, 1944, defendants Vicenta Matias Vda. de Cornejo and Amado Cornejo, Jr. mortgaged four parcels of land to plaintiffs Dominador Nicolas and Olimpia Matias to secure a loan of P30,000 in Japanese military notes. The deed stipulated payment “one year after the expiration of five years from the date of this instrument,” with 6% annual interest. On July 15, 1944, the mortgagors offered to pay the debt with five years’ interest, but the mortgagees refused. In August 1944, the mortgagors judicially consigned P39,000 and filed a case to compel acceptance and discharge of the mortgage. The Court of First Instance declared the consignation invalid for lack of prior notice and ordered the mortgagors to pay P2,000 (the Ballantyne schedule equivalent of P30,000 in Japanese notes) with legal interest from June 29, 1944. The Court of Appeals held the consignation valid and the obligation discharged. On certiorari, the Supreme Court (G.R. No. L-1743, May 29, 1951) ruled that the mortgagors could not unilaterally accelerate the maturity date (payable after five years from June 29, 1944) and that the consignation was invalid except for one year’s interest. The Court declined to render judgment for the mortgage debt then due to the moratorium law but allowed the mortgagees to collect when the moratorium was lifted. On August 22, 1951, the mortgagees filed the present foreclosure action. The sole issue in the lower court was whether the P30,000 loan in Japanese war notes should be repaid peso for peso in Philippine currency or according to the Ballantyne schedule. The lower court applied the Ballantyne schedule and ordered payment of P2,000 with 6% interest from June 29, 1945. The mortgagees appealed.

ISSUE

Whether the obligation secured by the mortgage, contracted in Japanese military notes during the occupation but payable after liberation (specifically, one year after five years from June 29, 1944), should be paid in Philippine currency at par (peso for peso) or according to the Ballantyne schedule.

RULING

The Supreme Court reversed the lower court’s decision. The obligation must be paid in Philippine currency, peso for peso. The Court reiterated the settled doctrine that when parties stipulate an obligation during the Japanese occupation to be payable after liberation, they are deemed to have intended payment in the currency legal tender at the time of maturity. Citing Cruz vs. Del Rosario, Arevalo vs. Barreto, Wilson vs. Berkenkotter, and other consistent precedents, the Court held that the Ballantyne schedule applies only to obligations payable on demand or during the occupation, not those payable after the war at a specified future date, which indicates the parties were speculating on the war’s outcome. Here, the mortgage deed explicitly set the maturity date as one year after five years from June 29, 1944 (i.e., June 29, 1949), well after liberation. The Court’s prior decision in G.R. No. L-1743 had already implicitly affirmed this maturity date by invalidating the premature consignation. Therefore, the defendants-appellees are ordered to pay the plaintiffs-appellants the sum of P30,000 in Philippine currency, with 6% annual interest from June 29, 1945, within 90 days from the finality of this decision, failing which the mortgage shall be foreclosed. Costs against the defendants-appellees.