B. J. SERVER, PLAINTIFF-APPELLEE, VS. EPIPANIA CAR, DEFENDANT-APPELLANT.

“Two years from and after the
cessation of hostilities of the Greater East Asia War in the Philippines, for
value received, I promise to pay B. JOSEPH SERVER, or order, in the City of
Manila, the sum of TWO THOUSAND FIVE HUNDRED PESOS (P2,500.00), Philippine
Currency, subject to the following conditions:

“1. That I shall not be obliged
to make payment and B. JOSEPH SERVER shall not be obliged to receive payment
except until after the termination of hostilities of the Greater East Asia War
in the Philippines;

“2. That
I shall pay an interest on the principal at the rate of SIX (6%) PER CENT per
annum from and after the termination of hostilities of the Greater East Asia War
in the Philippines;

“3. That in case of failure on my
part to pay on time that is, within two years from and after the termination of
hostilities of the Greater East Asia War in the Philippines, I shall pay an
additional sum equivalent to twenty (20%) per cent on the principal, owing as
penalty for attorney’s fees and costs of collection whether incurred or
not.

“(SGD) EFIPANIA
CAR”

As the parties stipulated in this
case, the hostilities of the afore-stated war terminated on September 8, 1951
(Stip. of Facts, par. 1, R.A., p. 35; Amended Complaint, par. 2, R.A. p. 22),
which is the date when the formal treaty of peace was signed in San Francisco,
California, U.S.A. (Quiogue v. Bautista, G.R. No. L-13159, February 28,
1962).

As security for the payment of
the obligation, the debtor mortgaged a parcel of land situated in Barrio Ogob,
Municipality of Malinao,
Province of Albay. Since then, no payment has been
made. And Server did not reply to Epifania Car’s offer sometime in 1953 to pay
according to the Ballantyne Scale of Values.

Server filed his amended
complaint on December 8,
1955
before the Court of First Instance of Albay for the recovery of P2,500.00 with 6% interest per annum from February 5,
1945,
with further 20% of the indebtedness as attorney’s fees and in case of
non-payment, for the fore closure of the mortgage. Epifania Car filed an amended
answer with counterclaim denying having breached the contract and setting up
good faith in offering to pay according to the Ballantyne Scale of Values
considering that she received merely Japanese money.

On November 8,
1963, the
Court of First Instance of Albay declared that by the terms of the promissory
note, and in line with the decisions of the Supreme Court, payment should be in
Philippine currency on a peso-to-peso basis.

Defendant was ordered to pay
Server P,500.00 with 6% interest from September 8,
1951 plus
20% of the indebtedness due as attorney’s fees, and the court further ordered,
in case of failure of payment, the foreclosure sale of the mortgaged land.
Defendant thereupon appealed to Us, submitting a
question purely of law, bearing upon the determination of the mode of payment of
the monetary obligation.

The point in controversy has been
settled by Us in several previous rulings. And in
Aguilar v. Miranda,^[1] We consolidated the rule
regarding payment of monetary obligations incurred during the Japanese
occupation. For convenience it is here delineated as
follows:

First.-
“if a monetary obligation was contracted during the Japanese occupation and is
payable within a specified period which covers partly said occupation and partly
after liberation such that its payment may be made at any time before the
termination of the war, the repayment should be made in Philippine currency
convertible under the Ballantyne Scale of Values and not entirely at the time of
payment.”

Second.-
“If the indebtedness was expressly agreed upon to be paid within a period the
maturity of which falls after the war or after the liberation, unless there is a
clear agreement to the contrary, the repayment can not be made under the
Ballantyne schedule but should be made in accordance with the currency then
prevailing at the time of payment.”

This second part of the rule was
applied in Vda. de Generosa v. Court of Appeals, G.R.
No. L-19563, December 24,
1964, and
in Quiogue v. Bautista, G.R. No. L-13159, February 28,
1962.

There in the Quiogue case We said
that “it is a well-settled rule in this jurisdiction that where the obligation
incurred during the Japanese occupation was made payable after a fixed period,
the maturity falling after liberation, the promissor must pay in Philippine
currency the same amount stated in the obligation, that is, the obligation must
be settled peso-for-peso in Philippine currency.”

It is expressly provided in the
promissory note signed by the defendant that payment be “after the termination
of hostilities of the Greater East Asia War in the
Philippines,” obviously referring to the
hostilities between the United
States and
Japan. The payment of 6% interest per
annum and the 20% of the indebtedness as attorney’s fees and costs of collection
in case of non-payment is also provided in the promissory note. And these
provisions are referred to in the mortgage deed as binding. Rightly, therefore,
did the court a quo follow the above-stated stipulations of the contract, which
are valid, and rule that the obligation should be paid peso-for-peso in present
Philippine currency.

Appellant, invoking the principle
that, no one should be enriched at the expense of another, advances the theory
that since she received Japanese currency, payment in present Philippine
currency would be unfair and against morals and public policy. Such contention
is not tenable. For as We said in Dizon v. Arrastia,
L-15383, November 29,
1961:

“Contracting parties are free to
stipulate on the currency in which their respective obligations shall be settled
and whenever, pursuant to the terms of an agreement, an obligation assumed
during the Japanese occupation is not payable until liberation of the
Philippines, the parties to the agreement are deemed to have intended that the
amount stated in the contract be paid in such currency as may be legal tender at
the time when the obligation becomes due.”

WHEREFORE, the judgment appealed from is
hereby affirmed, with costs against appellant.

SO
ORDERED.

Concepcion, C.J., Reyes, J. B.
L., Barrera, Dizon, Regala, Makalintal, Zaldivar, Sanchez and Ruiz Castro, JJ.,
concur.

^[1] G.R. No. L-16510,
November 29,
1961.