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VOL. 15, DECEMBER 31, 1965

Rep blic

681

. G ijaldo

No. L-20240. December 31, 1965

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
JOSE GRIJALDO, defendant-appellant.

Obliga ion and con ac ; C op loan ob ained f om he Bank

of Tai an, L d.; Righ of Philippine Go e nmen o collec he
loan . In 1943, appellant obtained crop loans from the Bank of
Taiwan, Ltd., Bacolod City Branch, evidenced by promissory notes.
To secure payment of the loans, appellant executed a chattel
mortgage over the standing crops on his land. After the war, the
Republic of the Philippines brought the present action to collect from
appellant the unpaid account. Held: It is true that the Bank of
Taiwan, Ltd. was the original creditor and the transaction between
the appellant and the Bank of Taiwan was a private contract of
loans. However, pursuant to the Trading with the Enemy Act, as
amended, and Executive Order No. 9095 of the United States; and
under Vesting Order No. P-4, dated January 21, 1946, the
properties of the Bank of Taiwan, Ltd., were vested in the United
States Government. Pursuant, further, to the Philippine Property
Act of 1946 and Transfer Agreements dated July 20, 1954 and June
15, 1957, between the United States Government and the Republic
of the Philippines, the assets of the Bank of Taiwan, Ltd. were
transferred to and vested in the Republic of the Philippines. The
successive transfers of the rights over the loans in question from the
Bank of Taiwan, Ltd. to the United States Government, and from
the United States Government to the government of the Republic of
the Philippines, made the
6 2

682

SUPREME COURT REPORTS ANNOTATED

Rep blic

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. G ijaldo
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Republic of the Philippines the successor of the rights, title and

interests in said loans, thereby creating a privity of contract
between the appellee and the appellant.
Same; Same; Same; Destruction of crop through enemy action;
Effect on the obligation. Appellant maintains, in support of his
contention that the appellee has no cause of action, that because the
loans were secured by a chattel mortgage on the standing crops on
the land owned by him and those crops were lost or destroyed
through enemy action his obligation to pay the loans was thereby
extinguished. Held: This argu ment is untenable. The obligation of
the appellant under the promissory notes was not to deliver a
determinate thing. namely, the crops to be harvested from his land,
but to pay a generic thing the amount of money representing the
total sum of his loans, with interest. The chattel mortgage on the
crops simply stood as a security for the fulfillment of appellant's
obligation covered by the, promissory notes, and the loss of the crops
did not 'extinguish his obligation to pay, because the ac count could
still be paid from other sources aside from the mortgaged crops.
Same; Same; Same; Prescription of actions; Prescription does
not run against the government.
The complaint in the present
case was brought by the Republic of the Philippines not as a
nominal party but in the exercise of its sovereign functions, to
protect the interests of the State ever a public property. This Court
has held that the statute of limitations does not run against the
right of action of the Government of the Philippines (Government of
the Philippine Islands vs. Monte de Piedad, etc., 35 Phil. 738-751).
Same;
Same;
Same;
Same;
Effect
of
moratorium
laws. Moreover, the running of the period of prescription . of the
action to collect the loan from the appellant was interrupted by the
moratorium laws (Executive Orders Nos. 25, dated November 18.
1944; Executive Order No. 32, dated March 10, 1945; and Republic
Act No. 432, approved on July 26, 1948). Computed accordingly, the
prescriptive period was suspended for 8 years and 6 months. Hence,
appellee's action had not yet prescribed.
Same; Same; Same; Payment in Japanese war notes;
Application of Ballantyne scale of values. Contracts stipulating for
payments presumably in Japanese war notes may be enforced after
the liberation to the extent of the just obligation of the contracting
parties and, as said notes have become worthless, in order that
justice may be done and the party entitled to be paid can recover
their actual value in Philippine Currency, what the debtor or
defendant bank should return or pay is the value of the Japanese
military notes in relation to the peso in Philippine Currency
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6 3

VOL. 15, DECEMBER 31, 1965

Rep blic

. (H
46 O . G

683

. G ijaldo

.D

L-150 A

30. 1049,

. 5472.)

APPEAL
N
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I abelo P. Sam on

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ZALDIVAR, J.:
I

1943

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1, 1943, P600.00;
18, 1943. P22.86;
A
1943, P200.00,

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3, 1948, P159.11;
9, 1943, P300.00;
A
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N . 1494
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B
1946,

N . P-4,

21,
T

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A ,
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1946
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he
e ie ha e e aced
de
he B a d f Li ida
c ea ed de
372, da ed N e be 24, 1950, a d
Re b ic Ac N . 8 a d 477 a d he

he ad i i a i
f
E ec i e O de N .
i acc da ce i h
e i e
a .
6 4

684

SUPREME COURT REPORTS ANNOTATED

Rep blic s. Grijaldo

O Se e be 29, 1954 he a e ee, Re b ic f he

Phi i i e , e e e ed b he Chai a
f he B a d f
Li ida
, ade a i e e aj dicia de a d
he
a e a f
he a e
f he acc
i
e i . The
ec d h
ha he a e a had ac a
ecei ed he
i e de a d f
a e , b he fai ed
a ..
The agg ega e a
d ea
i ci a f he fi e a
i
e i ,c
ed
de he Ba a
e ca e f a e
a f he i e ha he a
e e i c ed i 1943, a
P889.64; a d he i e e d e he e a he a e f 6% e
a
c
ded a e , c
ed a f Dece be 31,
1959. a P 1,457.39;
ha he
a acc
a
f
Dece be 31, 1959 a P2,377.23.
O Ja a 17, 1961 he a e ee fi ed a c
ai i he
J ice f he Peace C
f Hi iga a , Neg
Occide a ,
c ec f
he a e a
he
aid acc
i
e i .
The J ice f he Peace f Hi iga a , af e hea i g,
di i ed he ca e
he g
d ha he ac i
had
e c ibed. The a e ee a ea ed
he C
f Fi
I a ce f Neg
Occide a a d
Ma ch 26, 1982 he
c
a q o e de ed a deci i
de i g he a e a
a he a e ee he
f P2,377.23 a f Dece be 31,
1959,
i e e a he a e f 6% e a
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a e
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he da e f he fi i g f he c
ai
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a e
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ade. The a e a
a a
de ed
a
he
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10% f he a
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The a e a a ea ed di ec
hi C
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e de c
f hi a ea he a e a
J e G ija d died.
U
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he S ici
Ge e a hi C
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f Ma 13, 1963, e i ed Ma e Lag a
,
Jaci
Lag a
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a d A i a L. Ag i a ,
h a e he ega hei
f J e G ija d ,
a ea a d be
b i ed a a e a
i acc da ce i h Sec i 17 f
R e 3 f he R e f C
.
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: (1)
; (2)
,
;

(3)
P2,377.23.
6 5

VOL. 15, DECEMBER 31, 1965

685

Rep blic s. Grijaldo

I

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short, he who by succession is placed in the position of one of those

who contracted the judicial relation and executed the private
document and appears to be substituting him in the personal rights
and obligation is a privy" (Alpuerto vs. Perez, 38 Phil. 785, 790).

The United States of America acting as a belligerent

sovereign power seized the assets of the Bank of Taiwan,
Ltd, which belonged to an enemy country, The confisca6 6

686

SUPREME COURT REPORTS ANNOTATED

Rep blic s. Grijaldo

tion of the assets of the Bank of Taiwan, Ltd being an

involuntary act of war, and sanctioned by international law,
the United States succeeded to the rights and interests of
said Bank of Taiwan, Ltd, over the assets of said bank. As
successor in interest in, and transferee of, the property
rights of the United States of America over the loans in
question, the Republic of the Philippines had thereby
become a privy to the original contracts of loan between the
Bank of Taiwan, Ltd. and the appellant. It follows, therefore,
that the Republic of the Philippines has a legal right to
bring the present action against the appellant Jose Grijaldo.
The appellant likewise maintains, in support 01 his
contention that the appellee has no cause of action, that
because the loans were secured by a chattel mortgage on the
standing crops 011 a land owned by him and these crops
were lost or destroyed through enemy action his obligation
to pay the loans was thereby extinguished. This argument is
untenable. The terms of the promissory notes and the
chattel mortgage that the appellant executed in favor of the
Bank of Taiwan, Ltd. do not support the claim of appellant.
The obligation of the appellant under the five promissory
notes was not to deliver a determinate thing namely, the
crops to be harvested from his land, or the value of the crops
that would be harvested from his land, Rather, his
obligation was to pay a generic thing the amount of money
representing the total sum of the five loans, with interest.
The transaction between the appellant and the Bank of
Taiwan, Ltd. was a series of five contracts of simple loan of
sums of money. "By a contract of (simple) loan, one of the
parties delivers to another x x x money or other consumable
thing upon the condition that the same amount of the same
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kind and quality shall be paid," (Article 1933, CiviI Code)

The obligation of the appellant under the five promissory
notes evidencing the loans in questions is to pay the value
thereof; that is, to deliver a sum of money a clear case of an
obligation to deliver a generic thing. Article 1263 of the
Civil Code provides:

VOL. 15, DECEMBER 31, 1965

687

Rep blic s. Grijaldo

"In an obligation to deliver a generic thing, the loss or destruction of
anything of the same kind does not extinguish the obligation,"

The chattel mortgage 011 the crops growing on appellant's

land simply stood as a security for the f ulfillment of
appellant's obligation covered by the five promissory notes,
and the loss of the crops did not extinguish his obligation to
pay, because the account could still be paid from other
sources aside from the mortgaged crops.
In his second point of contention, the appellant maintains
that the action of the appellee had prescribed. The appellant
points out that the loans became due on June 1, 1944; and
when the complaint was filed on January 17, 1961 a period
of more than 16 years had already elapsed far beyond the
period of ten years when an action based on a written
contract should be brought to court.
This contention of the appellant has no merit. Firstly, it
should be considered that the complaint in the present case
was brought by the Republic of the Philippines not as a
nominal party but in the exercise of its sovereign functions,
to protect the interests of the State over a public property.
Under paragraph 4 of Article 1108 of the Civil Code
prescription, both acquisitive and extinctive, does not run
against the State. This Court has held that the statute of
limitations does not run against the right of action of the
Government of the Philippines (Government of the
Philippine Islands vs. Monte de Piedad, etc., 35 Phil. 738751). Secondly, the running of the period of prescription of
the action to collect the loan from the appellant was
interrupted by the moratorium laws (Executive Orders No.
25, dated November 18, 1944; Executive Order No. 32, dated
March 10, 1945; and Republic Act No. 342, approved on
July 26, 1948). The loan in question, as evidenced by the
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fi e
i
e , e e i c ed i he ea 1943,
d i g he e i d f Ja a e e cc a i
f he Phi i i e ,
Thi ca e i
a e c e ed b E ec i e O de N . 25,
hich beca e effec i e
N e be 18, 1944,
idi g f
he
e i
f a e
f deb
i c ed af e
Dece be 31, 1941. The e i d f
e c i i
a ,
he ef e,
e ded begi i g N e be 18, 1944. Thi
C
, i he ca e f R e
. E eba
6

688

SUPREME COURT REPORTS ANNOTATED

Rep blic s. Grijaldo

(L-3708, Ma 18, 1953, 93 Phi . 68), dec a ed

Ma 18,
1953 ha
he M a i
La , R.A. N . 342 a d
E ec i e O de N , 25 a d 32, a e
c
i i a;b
i ha ca e hi C
ed ha he
a i
a had
e ded he e c i i e e i d
i Ma 18, 1953. Thi
i g a ca eg ica
ei e a ed i he deci i
i he
ca e f Ma i a M
. F e , L-9396, A g
16, 1956.
I f
, he ef e, ha he e c i i e e i d i he ca e
bef e U
a
e ded f
N e be 18, 1944,
he E ec i e O de N . 25
effec ,
i Ma 18, 1953
he R.A. 342 a g i h E ec i e O de N . 25 a d 32
e e dec a ed
c
i i a b
hi C
. C
ed
acc di g , he
e c i i e e i d a
e ded f 8
ea a d 6
h , B he a e a '
ad i i , he
ca e f ac i
011 he fi e
i
e i
e i
a e
J e 1, 1944. The c
ai i he e e ca e
a fi ed
Ja a 17, 1961,
af e a e i d f 16 ea ,
6
h a d 16 da
he he ca e f ac i a e. If he
e c i i e e i d a
i e
ed b he
a i
a , he ac i
d ha e e c ibed a ead ; b , a We
ha e a ed, he e c i i e e i d a
e ded b he
a i
a f a e i d f 8 ea a d 6
h . If e
ded c he e i d f
e i (8 ea a d 6
h )f
he e i d ha e a ed f
he i e he ca e f ac i
a e
he i e he he c
ai
a fi ed (16 ea , 6
h a d 16 da ) he e e ai a e i d f 8 ea a d
16 da , I
he
d , he e c i i e e i d a f
8 ea a d 16 da , The e i e ai ed a e i d f
e
ea , 11
h a d 14 da
f he e c i i e e i d he
he c
ai
a fi ed.
I hi hi d i
fc e i
he a e a
ai ai
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P2,377.23. I
011
S
J
1943

S
J

J
,
,

1944. T
.
6

VOL. 15, DECEMBER 31, 1965

689

Republic vs. Grijaldo

T
P2,377.23
6%

31, 1959,
.T

L .
P1 ,281.97
B
S
P1 ,281.97 J
P889.64
P889.64

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P889.64
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, what the debtor or defendant bank should
return or pa is the value the Japanese militar notes in relation
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to the peso in Philippine Currenc obtaining on the date when and

at the place. where the obligation was incurred unless the parties
had agreed otherwise.
." (italics supplied)

IN VIEW OF THE FOREGOING, the decision appealed

from is affirmed, ith costs against the appellant Inasmuch
as the appellant Jose Grijaldo died during the pendenc of
this appeal, his estate must ans er in the e ecution of the
judgment in the present case.
6 0

690

SUPREME COURT REPORTS ANNOTATED

Manaloto vs. Santos

Beng on, C.J., Concepcion, Barrera, Regala, Bautista

Angelo, Re es, J.B.L., Di on, Makalintal and Beng on. J.P.,
JJ., concur.
Decision affirmed.
________________

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