Kare v. Imperial
REITERATIONFacts
The Antecedents: On June 12, 1944, Jose F. Imperial Samson executed an 'Escritura de Venta con Pacto de Retro' conveying a lot with a building to Buensoselita Morales for P25,000 in Japanese military notes. The period for redemption was stipulated as one year from the expiration of six months after the termination of the Greater East Asia War. The repurchase price was to be P25,000 in legal tender, plus expenses. Two-thirds of the purchase price was advanced by Enrique Kare and Honesto K. Bausa, to whom Morales assigned a corresponding interest with the stipulation that the repurchase price would be shared. On March 26, 1946, Imperial Samson offered to redeem the property in Philippine currency at a rate of 1 to 150, which was rejected. Subsequent offers were also rejected. Procedural History: Samson filed an action to declare the deed null and void, claiming it was a mortgage and seeking to pay the loan equivalent in Philippine currency. Kare and Bausa intervened, claiming ownership due to Samson's failure to repurchase within the stipulated period. The trial court ruled that the contract was a sale with right of repurchase, that the parties intended the ordinary meaning of war termination (September 2, 1945), and that Samson failed to exercise his right within the 18-month period, thus dismissing the complaint. The Court of Appeals initially agreed it was a sale with pacto de retro but held the war had not yet ended, so the repurchase period had not commenced. Later, in a resolution, it declared the pacto de retro agreement void for exceeding ten years under Article 1508 of the Civil Code and ordered Morales and the intervenors to allow Samson to repurchase for P25,000 Philippine currency plus expenses. The Petition: The judicial executor of Imperial Samson's estate and the intervenors sought review of the Court of Appeals' modified decision.
Issue(s)
Whether the action filed by the plaintiff can be considered an enforcement of his right to repurchase. Whether the contract between Imperial Samson and Morales was a sale with right of repurchase or an equitable mortgage. Whether the period of redemption had expired. What is the proper repurchase price and currency to be used.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals as modified, reversing the trial court's decision. It ordered the defendant Morales and intervenors Kare and Bausa to allow the plaintiff to repurchase the lot with its improvements upon payment of P25,000 Philippine currency and the expenses specified in the contract.
Ratio Decidendi
On whether the action filed can be considered an enforcement of the plaintiff's right to repurchase: The Court agreed with the Court of Appeals that the plaintiff's action, instituted on March 12, 1947, could be regarded as one to enforce his right to repurchase. The plaintiff's testimony indicated repeated attempts to repurchase the property, with Morales evading a definitive answer and requesting time, even weeping. The plaintiff stated he had no other remedy but to file the action to safeguard his right of repurchase. Furthermore, the issue of redemption was extensively discussed by the parties and the trial court, indicating that the enforcement of this right was central to the proceedings. On whether the contract was a sale with pacto de retro or an equitable mortgage: The Court affirmed the findings of both the trial court and the Court of Appeals that the contract was a sale with right of repurchase ('pacto de retro') and not an equitable mortgage. This conclusion was based on the express terms of the 'Escritura de Venta con Pacto de Retro' executed by the parties. The language used clearly indicated a conveyance of ownership with a reserved right to repurchase, rather than a mere security for a loan. On whether the period of redemption had expired: The Court held that the period of redemption had not expired. It clarified that the termination of the Greater East Asia War, for legal purposes, is determined by official proclamation. Citing Navarre vs. Barredo, the Court stated that the war formally ended in the Philippines on December 31, 1946, upon President Truman's proclamation of peace. Since the action was filed on March 12, 1947, only about three months after the legal termination of the war, the offer to repurchase was made well within the stipulated period of eighteen months from the war's termination. On the repurchase price and currency: The Court reiterated its long-standing ruling that monetary obligations contracted during the Japanese occupation, to be discharged after the war, must be paid in Philippine currency. This is because parties stipulating post-war payment intended to settle the obligation in the national currency, not in depreciated Japanese war notes. The 'Escritura' itself stipulated the repurchase price of P25,000 in 'legal tender' ('en moneda legal y corriente'), which, in the context of post-war obligations, refers to Philippine currency.
Main Doctrine
The termination of the Greater East Asia War, for legal purposes concerning contracts stipulating redemption periods based on its end, is determined by official proclamation, not by the cessation of hostilities. Payments for obligations incurred during the Japanese occupation, to be settled post-war, must be in Philippine currency as legal tender.