Art. 1249 – Payment of debts in money shall be made in currency.
Facts:
·
Petitioner
Union Bank of the Philippines (Union Bank) and respondent spouses Rodolfo T.
Tiu and Victoria N. Tiu (the spouses Tiu) entered into a Credit Line Agreement
(CLA), whereby Union Bank agreed to make available to the spouses Tiu credit
facilities in such amounts as may be approved.
·
Within 6
months, the spouses Tiu took out various loans pursuant to this CLA in total of
US$3,632,000.00 received in equivalent Philippine pesos at the prevailing
exchange rate of US$1=₱26.
·
Union Bank
advised the spouses Tiu that, in view of the existing currency risks, the loans
shall be redenominated to their equivalent Philippine peso.
·
Union Bank and
the spouses Tiu entered into a Restructuring Agreement to redenominate the
loans at the rate of US$1=₱41.40 with interest of 19% for one year, with an
additional loan of 5M which was applied as interest payments.
·
Under said agreement, the parties declared that the loan obligation to be restructured and
executed Deeds of Dation in Payment over Labangon properties and Mandaue
property.
·
The spouses
Tiu executed also a Real Estate Mortgage in favor of Union Bank over their
residential property inclusive of lot and improvements.
·
Asserting that
the spouses Tiu failed to comply with the payment schemes set up in the
Restructuring Agreement, Union Bank initiated extrajudicial foreclosure
proceedings on their residential property.
·
The CA
rendered the assailed Joint Decision: 1. dismissed the Petition for Prohibition;
and 2. ruled in favor of the spouses Tiu, invalidating the RA on account of its
being a failed novation of the original loan agreements, and 5M charge of
interest therein, and enjoining Union Bank from foreclosing the mortgaged
properties.
Issue:
WoN
receiving the peso equivalent of dollar loan
proves the intention of the parties that such loans should be paid in pesos.
Held:
No, the Court disagrees with the CA ruling and holds that
the parties intended the amount of the
loans in US dollars and not in any other currency as stipulated in the
promissory notes.
Art.
1249. The 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.
In the instant case, the promissory notes indicated that the spouses Tiu borrowed
amounts in US dollars although they received peso equivalents. Hence, they were
bound to pay Union Bank in dollars and not in any other currency.
Thus, the Petition is PARTIALLY GRANTED.
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