Nicolas v. Matias
REITERATIONFacts
The Antecedents: On June 29, 1944, Vicenta Matias and Amado Cornejo, Jr. mortgaged four parcels of land to Dominador Nicolas and Olimpia Matias to secure a P30,000 loan in Japanese military notes. The loan was payable one year after five years from the date of the instrument, with 6% annual interest. On July 15, 1944, the mortgagors offered to pay the principal plus five years' interest, but the mortgagees rejected the offer. In August 1944, the mortgagors judicially deposited P39,000 (principal plus five years' interest) and filed a case to compel acceptance and discharge of the mortgage. Procedural History: The Court of First Instance (CFI) declared the consignation invalid for lack of prior notice but ordered the mortgagors to pay P2,000 (equivalent of P30,000 Japanese military notes per Ballantyne schedule) with legal interest. The Court of Appeals (CA) reversed the CFI, holding the consignation valid and the obligation discharged. This Court, on review (G.R. No. L-1743), held that the mortgagors could not accelerate the maturity date without the mortgagees' consent, rendering the consignation invalid except for the interest for one year. Subsequently, the mortgagees filed the present foreclosure action. The lower court ruled that the P30,000 loan in Japanese military notes should be paid peso for peso in Philippine currency, with interest, based on the Ballantyne schedule. The mortgagees appealed this ruling. The Petition: The mortgagees appealed the lower court's decision, which ordered payment based on the Ballantyne schedule, arguing that the obligation should be paid peso for peso in Philippine currency.
Issue(s)
Whether the obligation incurred in Japanese military notes, payable after liberation, should be settled in Philippine currency peso for peso or according to the Ballantyne schedule. Whether the mortgagees are entitled to foreclose the mortgage.
Ruling
The Court ruled that the obligation must be satisfied, peso for peso, in Philippine currency. The defendants-appellees are sentenced to pay P30,000 in Philippine currency, with 6% annual interest from June 29, 1945. In default of payment, the mortgage shall be foreclosed.
Ratio Decidendi
On the currency for settlement of the obligation: The Court reiterated the established doctrine that obligations contracted during the Japanese occupation, if stipulated to be payable after liberation, are deemed intended by the parties to be paid in the currency that is legal tender at the time of maturity. This is because the parties are free to stipulate the currency for settlement, and the stipulation for payment after liberation implies an expectation of the prevailing currency at that future time. The mortgage in this case stipulated payment one year after five years from June 29, 1944, meaning the obligation was not due until June 29, 1949. This Court's prior decision in G.R. No. L-1743 had already established that the mortgagors could not unilaterally accelerate the maturity date and that the consignation was invalid except for the interest due. Therefore, the obligation must be paid in Philippine currency, peso for peso, as it became due after liberation. On the foreclosure of the mortgage: The Court found that the mortgagors failed to pay the principal amount of P30,000 in Philippine currency within ninety (90) days from the finality of the decision. Consequently, as per the dispositive portion of the judgment, the mortgage in question must be foreclosed in the manner provided by law and the rules of court. This action is a necessary consequence of the failure to comply with the payment ordered by the Court.
Main Doctrine
Obligations contracted during the Japanese occupation, if payable after liberation, shall be settled in Philippine currency at par value, not according to the Ballantyne schedule, unless the parties expressly stipulate otherwise.