G.R. No. L-15645 – 10 SCRA 79 – Mercantile Law – Negotiable Instruments Law – Negotiable Instruments in General – Sum Certain in Money – Currency – Republic Act 529
Paz Arrieta is a rice dealer/importer. In May 1952, she participated in a public bidding held by the National Rice and Corn Corporation (NARIC). NARIC was looking for someone to supply 20,000 metric tons of Burmese Rice. Arrieta was the lowest bidder at $203.00 per metric ton hence she won the bidding. So a contract was made whereby Arrieta is to deliver the rice supply and NARIC is to pay for the imported rice “”by means of an irrevocable, confirmed and assignable letter of credit in U.S. currency in favor of the Arrieta and/or supplier in Burma, immediately.”” Arrieta then proceeded to contact her supplier in Burma (Thiri Setkya) and arranged the sale of the 20k metric ton of Burmese Rice, Arrieta promised Setkya that he will be paid by NARIC on August 4, 1952. Arrieta also made a 5% deposit (P200k) as advance payment to Setkya.
Meanwhile, NARIC tried to open a letter of credit ion the amount of $3,614,000.00 with the Philippine National Bank. PNB agreed to open the letter of credit but only on the condition that NARIC deposits 50% of the said amount. NARIC failed to do this and the letter of credit was not opened when the obligation to pay Setkya became due. Because of this, Arrieta lost the opportunity to profit from the sale as the agreement was eventually forfeited. Her 5% deposit was likewise forfeited pursuant to Burma laws.
ISSUE: Whether or not Arrieta is entitled to damages.
HELD: Yes. It is clear upon the records that the sole and principal reason for the cancellation of the allocation contracted by Arrieta in Rangoon, Burma, was the failure of the letter of credit to be opened with the contemplated period. The letter of credit is in US currency. Normally, parties can stipulate as to which currency shall be used in paying off an obligation provided that the exchange rate prevailing at the time of judgment shall prevail over the rate of exchange at the time of the breach. This rule however is of no application in the case at bar due to the passage of Republic Act 529 which expressly declares such stipulations as contrary to public policy, void and of no effect. If there is any agreement to pay an obligation in a currency other than Philippine legal tender, the same is null and void as contrary to public policy (Republic Act 529), and the most that could be demanded is to pay said obligation in Philippine currency “”to be measured in the prevailing rate of exchange at the time the obligation was incurred.
NOTE: This is a 1964 case. RA 529 has already been repealed by Republic Act 8183 which provides that every monetary obligation must be paid in Philippine currency which is legal tender in the Philippines. However, the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment. (The Philippine Negotiable Instruments Law, De Leon and De Leon Jr., p. 29)
