Garcia v. De Los Santos
REITERATIONFacts
The Antecedents: On September 9, 1944, defendants executed a promissory note for P10,000, payable four years after date, with 10% annual interest. They also executed a mortgage on a piece of land as security. The note stipulated that payment of interest and the principal obligation shall be made in full in whatever legal tender and currency was prevailing and in use at the time such interest or obligation became due and payable. Defendants paid P500 in 1946, but failed to pay the balance when it fell due. Procedural History: Plaintiff initiated an action for foreclosure of the mortgage. The trial court rendered a judgment in favor of the plaintiff for the sum due, plus P600 for attorney's fees and costs. The Petition: Defendants appealed the trial court's decision, raising several errors. However, issues related to moratorium were rendered moot by the decision in Rutter vs. Esteban. The remaining issue was whether the debt should be paid peso for peso in present-day currency or its equivalent according to the Ballantyne scale of values.
Issue(s)
Whether the debt should be paid peso for peso in present-day currency or its equivalent according to the Ballantyne scale of values. Whether the promissory note could be construed as permitting payment at any time within four years after its date, allowing discharge by payment of its equivalent in Philippine currency at the Ballantyne rate.
Ruling
The judgment appealed from is affirmed, with costs against the appellants.
Ratio Decidendi
On the issue of payment in present-day currency versus Ballantyne scale: The Court held that the debt must be paid in present-day currency peso for peso. This issue was already decided in Cristobal Roño vs. Jose L. Gomez, et al., where the Court ruled that a promissor must pay the face value of the note in Philippine currency and may not discharge the debt by paying only the equivalent of the Japanese currency received. The promissory note in the present case, like in Roño, was made payable at a fixed period after date, with payment to be in the currency prevailing at its maturity. The stipulation regarding currency prevailing at the time of payment is controlling. On the interpretation of the promissory note's payment period: The Court rejected the appellants' claim that the promissory note should be construed as permitting payment at any time within four years after its date. The clear and express language of the instrument enjoins payment "four years after date." This period is presumed to be established for the benefit of both creditor and debtor, and it cannot be shortened at the debtor's will without the creditor's consent, absent a showing that it was established solely for the debtor's benefit. The provision in the mortgage regarding its duration does not alter the maturity date of the promissory note. Cases cited by appellants, such as De Asis vs. Agdamag, et al. and Colmenar vs. Cosca, were distinguished as they involved different payment terms or repurchase rights ('on or before' or repurchase rights that would be rendered meaningless if not exercised before the period's end).
Main Doctrine
A debt payable in a fixed period after date, with a stipulation for payment in the currency prevailing at maturity, must be paid in the currency prevailing at the time of maturity, and not its equivalent based on the Ballantyne scale of values, unless the period was established solely for the debtor's benefit and with creditor consent.