Payment of Monetary Obligation

Outline
I. Rule in Monetary Obligation
a) Effect of Rep. Acts 529 and 4100
b) Payment with Japanese military notes
c) Payment with emergency notes
d) Payment with negotiable Paper
II. Conversion rates
 Payment of debts in money shall be made
in the currency stipulated, and if it is not
possible to deliver such currency, then in the
currency which is legal tender in the Philippines
The delivery of promissory notes payable
to order, or bills of exchange or other mercantile
documents shall produce the effect of payment
only when they have been cashed, or when
through the fault o the creditor they have been
impaired.
In the meantime, the action derived from
the original obligation shall be held in abeyance.
Article 249, New Civil Code
 Legal Tender
• Refer to such currency which may be used for
the payment of all debts, whether public or
private
• It is that which a debtor may compel a
creditor to accept in payment of the debt.
 Rules in Monetary Obligations
The first paragraph of Article 1249 says:
1. Currency stipulated
2. If not possible - legal tender of the
Philippines.
3. If no stipulation - legal tender of the
Philippines
Effect of Rep. Acts Nos. 529 and
4100
 RA No. 529
• Facts:
– “An Act To Assure the Uniform Value of Philippine
Coins and Currency”
– Effective on June 16, 1949
• Effect:
– Abrogated the rule in the Civil Code that payment
of debts in money shall be made in the currency
stipulated
 RA No. 529, cont’d
• Sec 1 of RA No. 529 provides:
“Every provision contained in, or made with respect
to, any obligation which purports to give the
obligee the right to require payment in gold or in a
particular kind of coin or currency other than
Philippine currency or in an amount of money of
the Philippines measured thereby, be as it is hereby
declared against public policy, and null, void and
no effect. xxx Every obligation heretofore or
hereafter incurred xxx shall be discharge upon
payment in any coin or currency which at the time
of payment is legal tender for public and private
debts:
 RA No. 529, cont’d
• Sec 1 of RA No. 529 provides:
…Provided, That, if the obligation was incurred
prior to the enactment of this Act and required
payment in a particular coin or currency, it shall
be discharge in Philippine currency measured
at the prevailing rates of exchange at the time
of the obligation was incurred except in case of
a loan made in a foreign currency stipulated to
be payable in the same currency in which case
the rate of exchange prevailing at the time of
the stipulated date of payment shall prevail”
 RA No. 4100
• Purpose: to encourage foreign investments
and to cope with requirement of international
trade and banking transactions.
• Effect: amended RA No. 529, which as a result
gives exemption to the rule that payment in
currency other than Philippine currency shall
be void.
a) Transactions where funds involved are the proceeds
of loans and investments made directly or indirectly,
through bona fide intermediaries or agents, by
foreign governments, their agencies and
instrumentalities, and international financial and
banking institutions so long as the funds are
identifiable, as having emanated from the sources
enumerated above;
b) Transactions affecting high-priority economic projects
for agricultural industrial and power development as
may be determined by the National Economic Council
which are financed by r through foreign funds;
c) Foreign exchange transactions entered into between
banks or between banks and individuals or juridical
persons; and
d) Import-export and international banking, financial
investment and industrial transactions
 Zagala v. Jimenez
• Judgment awarding an amount in U.S
dollar may be paid with its
equivalent amount in local currency
in the conversion rate prevailing at
the time of the payment.
Payment with Japanese military notes
• If pre-war obligation contains a stipulation to
the effect that payment shall be made in a
certain currency – must be made in the
currency stipulated. So if English currency,
Japanese is invalid
• If contains a stipulation that payment shall be
made in the currency which is the legal tender
in the Philippines or if it silent – payment in
Japanese notes is valid
 Haw Pia v. China Banking Corp
“… payment made by a debtor and accepted y the
creditor during the enemy occupation in
compliance with the orders of the military
authorities to reopen banks and accept the military
notes as legal tender in payment of debts, issued in
the exercise of their authority as military occupants,
cannot be considered as made under a collective
and general duress, because an act done pursuant
to the laws or orders of competent authorities can
never be regarded as executed involuntarily, or
under duress, or illegitimate constraint, or
compulsion that invalidates the act.”
 Payment with emergency notes
• Issued by the Commonwealth government
during the invasion or by recognized guerilla
governments during the occupation
• Legal tender only in those places which were
under the control
 Payment with negotiable Paper
• General Rule: not legal tender.
– Hence, delivery of such papers or documents by
the debtor to the creditor shall not produce effect
of payment.
– Hence, the tender shall not produce the effect of
payment
– Applicable still even if the refusal of the creditor is
followed by consignation whether the check is an
ordinary checks or a manager’s check
Payment with negotiable Paper, cont’d

• When the document has been

cashed
• When it had been impaired through
the fault of the creditor.
 Conversion Rates
• Background: payment of obligations incurred
during the Japanese occupation.
• Question: with respect to the amount that
had to be paid by the obligor or debtor
considering the fact that Japanese military
notes were no longer legal tender after the
liberation and consequently, payment shall be
made in genuine or ordinary Philippine
currency
 Doctrines for Transactions during
Japanese Occupation
• Payment of debts made and due during the
Japanese occupation was valid
• But if the debt was not due and payable
during the Japanese occupation, payment is
void
 Ballantyne Scale
• Facts: Dr. D.L. Ballantyne, economic adviser
– It contain recommendation of adoption of measure
which were greatly needed to solve the problems
• When should it be applied:
1. Obligation shall have been contracted during the
Japanese occupation
2. It could have been paid during the Japanese
occupation
3. It could have been paid with Japanese military
notes.
 Specific Application
• When the debt was contracted during the
occupation and was payable on demand, but
not yet paid when liberation came
• If the debt was contracted during the
Japanese occupation and was payable during
the occupation
• If the debt was contracted during the
Japanese occupation and was payable either
during the occupation or after liberation