Belarmino v. Mesa
REITERATIONFacts
The Antecedents: Plaintiffs-appellants executed a mortgage contract in favor of defendant-appellee on November 18, 1940, for P7,500, payable within five years from the execution of the instrument. Procedural History: Plaintiffs-appellants tendered payment in January 1944, using Japanese military notes, which the appellee refused to accept. The appellants deposited the amount with the clerk of court and filed a complaint to compel acceptance and cancellation of the mortgage. The lower court dismissed the action, ruling that payment should be in genuine Philippine money and not Japanese military notes, citing the stipulation for payment in Philippine currency. The Petition: The plaintiffs-appellants appealed the dismissal of their action.
Issue(s)
Whether the mortgage loan, stipulated to be paid in "Philippine currency," could be validly paid using Japanese military notes during the Japanese occupation. Whether the refusal of the defendant-appellee to accept payment in Japanese military notes was justified.
Ruling
The Supreme Court reversed the decision of the lower court, ordering the defendant-appellee to execute a release of the mortgage in favor of the plaintiffs-appellants. The Court held that the deposit of P7,500 in Japanese military notes was valid and that the defendant-appellee was bound to accept it in payment of the mortgage loan.
Ratio Decidendi
On the issue of payment in Japanese military notes: The Court held that the phrase "Philippine currency" in the mortgage contract was intended to describe the amount of the loan, not to designate a specific currency for payment. In the absence of a stipulation to the contrary, a debt incurred in Philippine Commonwealth currency could be paid in any currency that was lawful money and legal tender in the Philippines at the time of payment. The Court cited precedents establishing that debts incurred in gold coin could be paid in Philippine silver pesos, and debts incurred when only gold and silver were legal tender could be paid in paper money. Furthermore, it was a settled rule in the Philippines that Japanese military notes issued during the occupation were legal tender and could be validly used for payment of mature debts during that period, citing Haw Pia v. China Banking Corporation. Therefore, the deposit in court of P7,500 in military notes was valid. On the justification for the defendant-appellee's refusal: The Court found that the defendant-appellee was not justified in refusing the payment. Given that Japanese military notes were considered legal tender during the occupation and the debt was due, the creditor was bound to accept such payment. The stipulation for payment in "Philippine currency" did not preclude payment in the then-legal tender, which included Japanese military notes. The refusal to accept the tendered payment, which was subsequently validly deposited with the clerk of court, meant that the appellee could not legally refuse to cancel the mortgage.
Main Doctrine
A debt incurred in Philippine currency, absent a stipulation to the contrary, may be paid in any currency that is lawful money and legal tender in the Philippines at the time of payment, including Japanese military notes during the Japanese occupation, provided they were legal tender at that time.