G. R. No. L-8679. July 26, 1957

The plaintiff-appellant sold a parcel of land  situated  in the  District of Malate,  City of Manila, to the  defendants-appellees’ for  the  sum  of P150,000,  and the  transaction was evidenced  by  a  deed of  sale with mortgage executed on December 18, 1943, providing, among other conditions. as follows:

“That  it is hereby agreed that of the purchase price of one hundred AND  FIFTY  THOUSAND  PESOS  (P150,000.00),  the  sum of ONE hundred  thousand pesos  (P100,000.00) shall be paid  by the PARTY OF THE SECOND PART TO THE PARTY OF THE FIRST PART upon the signing of this deed,  the  receipt “whereof is hereby acknowledge  by the PARTY OP THE FIRST PART, and the balance of FIFTY THOUSAND PESOS (P50,000.(IO)  shall be paid in the manner specified below:

“That  to secure the payment  of  the  said amount  of  fifty thou- SA.ND PESOS  (50,000,00),  the  PARTY  OF  THE  SECOND  PART has transferred and  conveyed, and by these presents does  hereby transfer  and  convey  by way  oi  first  mortgage, in  favor  of  THE PARTY OF THE FIRST PART, his heirs, executors, administrators,  assigns, and succesors in interests, the parcel of land above described, free from  all  liens, charges  and encumbrances,  subject  to  the following terms  and conditions:

“That  no  payment on  the balance of fifty thousand  pesos (P50,000.00)  shall be made and  no interest shall  accrue thereon until after one year  counted from the  date of ratification  of  the Treaty of  Peace  concluding the present  Greater East  Asia  War; and  that thereafter, interest at the rate of eight  per cent  (8%) per annum shall  be paid monthly, payment  to  be made within the first five (5) days of the month to which the interest corresponds.

“That  the  whole amount  of FIFTY thousand  pesos  (P50.000.00) shall be  fully paid within a period of three  (3) years  counted from the date  of the expiration of one year after the ratification of the Treaty of  Peace  concluding1 the present  Greater East Asia War, during which period payments on the principal may  be  made  by the party of the second part,  together with  the interest that  may have become due  and payable.”

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“That the conditions of this mortgage are such that if the party op the second part, her  heirs, executors, administrators,  assigns, and successors in interest shall well and truly perform the  full obligation as stated in this deed according to the terms  thereof,  then this obligation shall be null and void;  otherwise,  it  shall remain in full force and effect and shall be subject to foreclosure,  whether judicially or extra-judicially at the option of the PARTY OF THE FIRST PART.”

It is noteworthy that no payment  on the  balance of P50,000.00 was to be made  and no interest was to  accrue thereon until after one year from the date of the ratification of the Treaty of Peace concluding the Greater East Asia War; that  thereafter  interest at eight  per cent  per annum,  should be paid monthly within the first five days of the corresponding month; and that the whole  amount of P50,000.00 should be paid  within three years counted from the expiration  of one year after the ratification of the Treaty of Peace concluding  the Greater  East Asia War.

Contending that the parties  had  in mind the  factual termination of the Greater East Asia War which occurred on September 2,  1945 when the treaty of surrender of the Japanese  Imperial Forces to the Allied Forces  was  signed at Tokyo Bay, and in  view of appellees’ failure  to  pay the balance of P50,000.00  with stipulated  interest thereon, notwithstanding the  expiration  of  more  than four years after September  2, 1945, the appellant  instituted on December 12,  1953,  in the Court  of First Instance of Manila  the present action against the appellees, for  the collection of said  balance and  interest, plus  agreed  attorney’s fees, and for the foreclosure of the mortgage.

After the  court had  denied a  motion to  dismiss  filed by the  appellees, the  latter filed  an  answer  setting up the principal defenses  that they  were not  as yet under obligation to pay either the balance of P50,000.00  or  any interest thereon, because the Treaty of Peace concluding the Greater East Asia  War has not been ratified  by  the Philippines;  and  that  in  any event  the appellees  should be made to pay in  accordance with the Ballantyne Table of Conversion of the Japanese military notes to  Philippine  currency.

After trial the court rendered  a decision holding that the action was  premature and accordingly dismissing the complaint without pronouncement  as to costs.  The plaintiffs  have appealed.

The only question that arises in whether,  by the terms “after the ratification of the  Treaty of Peace concluding the present  Greater  East Asia War,”  the parties contemplated the factual termination of  the  Greater  Bast Asia War on September  2, 1945 upon  the formal signing of the treaty of surrender of the Japanese. Imperial Forces to  the Allied  Forces at  Tokyo Bay  (as contended  by the appellant),  or the  actual ratification  by the Philippines of the Treaty of Peace concluding the Greater East Asia War, which has not yet taken place (as contended by the appellees).

We agree  to  appellees’  observation  that  the mortgage contract expressly  mentions “ratification”  of the Treaty of Peace concluding the Greater East  Asia  War; but we cannot accept the further view that the required ratification should be by the Philippines.   It  is significant that the contract  used  the term   “ratification”  in a  general sense, without reference to any specific  country.   Upon the other hand,  as the Treaty  of Peace was expressly described  as “concluding  the present Greater East Asia War,” not a war between the  Philippines and Japan, said ratification should be only by  a majority of the signatory powers.   Indeed, Article 23(a)  of the Treaty  of Peace provides  that “the  present Treaty  shall be ratified by the states which sign it, including Japan, and will come into force for  all  the States  which have  then  ratified it, when instruments  of  ratification have been deposited by a  majority, including the United States of America as the principal  occupying Power, of the following States, namely,  Australia, Canada, Ceylon, New Zealand,  Pakistan, the Republic  of the Philippines, the United Kingdom of  Great Britain  and Northern Ireland, and the United States of  America.”

The participating countries,  namely,  Japan, Australia, Canada, Cession,  France,  New  Zealand, Pakistan, United Kingdom of Great Britain and  Northern Ireland, and the United States of  America,  constituting the majority and all  concerned with the Greater East Asia War, had already ratified the Treaty of Peace.  The United States of America, (which together with Ceylon, last ratified the Treaty) deposited its instrument of ratification on April 28,  1952 when, in accordance with the aforesaid article 23(a), the Treaty came into force.  Said date should, in our opinion, be the starting point of the period stipulated in the mort- gage  contract.  As already pointed out in  Mercado vs. Punsalan,  G. R. No. L-8366, April  27, 1956, the Greater East  Asia War meant “the general war between Japan and the Allied  Powers, not the hostilities  between the Philippines and Japan in particular, for at the time the mortgage in question was signed, the Philippines was yet under American  sovereignty and  was  involved in the war only  because it was  a dependency of the United States.”

Accordingly, the obligation of the appellees to pay the balance  of  P50,000.00 matured  on  April 29,  1956, and their  obligation to pay the  stipulated interest commenced on April 29, 1.953.  Although on December 12, 1953, when the present action was filed,  the  period  within which the balance of P50,000.00 should be  paid had not expired, the appellees were already  in default in the payment of interest.   It must be remembered that in  the  letter  of February 5, 1953  (Exhibit 2)  the appellant reminded the appellee, Macaria Tinio  de Domingo, that “the time is about  due for you to make a decision  with  regard  to this matter and to let me  know about it,  so that I can make the  necessary plan  accordingly.”  Even  the  trial court  considered said letter  as a demand not “honored by the  vendees” and which  prompted the appellant to institute “present action for the collection of P50,000.00 and damages to foreclose the mortgage on that sum.” Appellees’ default as to the stipulated interest of course authorized the  foreclosure of the  mortgage on the entire obligation, because the agreement was that if the appellees “shall well and truly perform the full obligation as stated in this deed according  to the terms thereof, then this obligation  shall be null and void; otherwise,  it shall remain in full force and  effect and shall be subject to  foreclosure.”  At  any rate, appellees’ principal obligation  has also now matured.

Appellees’ defense that they should  pay the balance of P50,000.00 in accordance with  the  Ballantyne Conversion Table  is  without merit,  since the  obligation, under the mortgage  contract,  was not payable during the  Japanese occupation.

Wherefore,  the appealed decision is reversed and the defendants-appellees are hereby sentenced to pay to the appellant  the sum of P50,000, with  interest at the rate of eight percent  per annum from  April  29, 1953,  plus  ten per  cent  of the  total amount  thus due and payable,  as attorney’s  fees, expenses and costs; it being understood that, upon failure of the appellees to pay within ninety days after notice of this decision, the mortgaged property shall be sold at public  auction and the proceeds disposed of in pursuance of  section  4 of Rule 70 of  the  Rules of Court.

Paras, C. J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Reyes, J. B. L., Endencia and Felix, JJ., concur.