Legarda v. Miailhe
REITERATIONFacts
The Antecedents: Plaintiffs filed a complaint against the original defendant, William J. B. Burke, alleging his unjustified refusal to accept payment for a mortgage indebtedness. Plaintiff Clara Tambunting de Legarda deposited P75,920.83 with the clerk of court on June 3, 1944, in Japanese military notes, seeking a deed of release and damages. The defendant claimed an agreement was made on May 26, 1944, where he condoned interests due until the war's termination in exchange for the plaintiff's undertaking to pay the obligation upon its conclusion. Procedural History: The Court of First Instance initially ordered the defendant to accept the deposit, execute a release, and pay costs. The defendant moved for reconsideration, but before it could be acted upon, liberation occurred. A supplemental answer was later filed, alleging the payment in Japanese military notes was null and void and seeking foreclosure of the mortgage. This supplemental answer was initially denied admission but later allowed by the Supreme Court on appeal, directing a new trial. After substitution of the defendant due to death, an amended supplemental answer was filed, seeking payment in pounds sterling. The Court of First Instance rendered judgment for the defendant, ordering the plaintiff to pay P70,000 with interest, and ordering the sale of the mortgaged property in case of non-payment. Plaintiffs appealed. The Petition: The plaintiffs appealed the judgment of the Court of First Instance, primarily questioning the validity of the consignation made in court and its effect on their obligation.
Issue(s)
Whether the consignation of P75,920.83 in Japanese military notes via certified check with the clerk of court had the legal effect of extinguishing the mortgage indebtedness. Whether the agreement during the Japanese occupation, wherein the defendant allegedly condoned interests due until the termination of the war in exchange for the plaintiff's undertaking to pay the obligation upon the war's end, was valid and binding.
Ruling
The Supreme Court affirmed the decision of the Court of First Instance in toto. The Court ruled that the consignation made by the plaintiffs was invalid and did not produce any legal effect because it was made via a certified check, which is not considered legal tender in the Philippines. Consequently, the plaintiffs' obligation was not extinguished, and they remained liable to the defendant.
Ratio Decidendi
On the validity of the consignation: The Court held that the consignation made by the plaintiffs, consisting of a certified check representing Japanese military notes, was unavailing and did not produce any legal effect. Article 1170 of the Civil Code mandates that payment of debts of money shall be made in the specie stipulated, or in silver or gold coin legally current if the specie is not deliverable. A check, even a certified one, does not constitute legal tender. The creditor is not bound to accept a check in satisfaction of a debt, as it does not meet the requirements of legal tender. Therefore, the consignation, not being in legal tender and not having been accepted by the creditor, could not be considered payment and did not extinguish the plaintiff's obligation. The Court cited Belisario vs. Natividad and Villanueva vs. Santos to support the principle that a check is not legal tender. On the alleged agreement for condonation of interest: While the Court acknowledged the conflicting testimonies and findings of the lower courts, it ultimately gave more weight to the testimony of the defendant's witnesses, Antonio Carrascoso and William J. B. Burke. The Court found their account more consonant with fairness and the history of the transaction, noting the prolonged period of indebtedness, the gradual reduction of interest rates, and the defendant's consistent liberality towards the plaintiff. The Court found it credible that an agreement was reached wherein the plaintiff would pay the obligation upon the termination of the war, with all interests condoned, especially in light of a corroborating letter from Burke. This finding, however, became secondary to the ruling on the invalidity of the consignation.
Main Doctrine
A consignation made by means of a certified check, which is not legal tender, does not have the effect of extinguishing an obligation, even if the check was made in the currency permissible at the time, as it does not meet the requirements of a legal tender unless accepted by the creditor.