Arevalo v. Barreto
REITERATIONFacts
The Antecedents: On January 10, 1945, Tomasa Arevalo sold her property to Roberto Barreto for P60,000 Japanese war notes, with the sale document stating the price as P12,000 Philippine Currency. Simultaneously, a lease contract was executed where Arevalo became the lessee, with monthly rentals of P420 commencing January 1, 1947, and prior rents condoned. The contract also granted Arevalo the right to repurchase the property for P42,000 Philippine Currency, commencing January 10, 1948. A condition was set that if Arevalo discharged a prior encumbrance of P30,000 before exercising the repurchase option, the repurchase price would be P12,000 Philippine Currency. On January 16, 1945, Arevalo executed a promissory note for P40,000 Philippine Currency in favor of Barreto, payable between October 31 and December 31, 1946, with a condition that this loan must be paid before she could exercise her right to repurchase. On July 26, 1946, Arevalo discharged the mortgage indebtedness on the property. Procedural History: On April 11, 1947, Arevalo filed an action seeking to declare the transaction a loan secured by a mortgage, not a sale with pacto de retro, and praying for payment in Philippine currency at a specific exchange rate. Barreto, in his answer, admitted some facts and denied others, asserting the transaction was a sale with pacto de retro. The trial court, after the defendant's counsel failed to appear, rendered judgment declaring the transaction a sale with pacto de retro and ordered Arevalo to pay P516.70 for the repurchase price and promissory note, after which Barreto was to execute a deed of resale. The Petition: Roberto A. Barreto appealed the decision of the Court of First Instance of Manila.
Issue(s)
Whether the lower court erred in denying the defendant's motion for reopening of the case. Whether the lower court erred in evaluating the repurchase price and the value of the promissory note. Whether the lower court erred in not ordering the plaintiff to pay rentals.
Ruling
The decision of the lower court is reversed. The plaintiff-appellee is sentenced to pay the defendant-appellant the sum of P16,000 in Philippine currency if she wishes to repurchase the property. The decision is affirmed in other respects, without costs.
Ratio Decidendi
On the issue of reopening the case: The Court found it unnecessary to discuss this assignment of error in view of the conclusion reached on the second assignment of error. On the evaluation of the repurchase price and promissory note: The Supreme Court held that the lower court erred in evaluating the repurchase price and the promissory note at P516.70 Philippine currency. The parties had stipulated that the repurchase right for P12,000 Philippine currency would commence from January 1, 1947, and end on January 10, 1948. Similarly, the promissory note for P4,000 Philippine currency was payable on or after October 31, 1946. As these amounts were to become due after liberation, they were to be paid in Philippine currency at par value, according to established jurisprudence. The Court emphasized that the agreement was not only for payment after liberation but also stipulated specific amounts in Philippine currency for both the repurchase and the loan, originating from sums initially paid in Japanese military notes. Therefore, the sum of P12,000 for repurchase and P4,000 for the promissory note, totaling P16,000, should be paid in Philippine currency at par value. On the issue of rentals: The Court could not consider the question of rentals because no counterclaim was set up in the lower court to recover rents. Consequently, such a question could not be raised on appeal.
Main Doctrine
The Court held that amounts due after liberation, whether for repurchase price or promissory notes, should be paid in Philippine currency at par value, based on the parties' stipulation that payment was to be made after liberation. The lower court erred in evaluating the repurchase price and promissory note at P516.70 Philippine currency.