Commercial Law

Octavio Kalalo vs Alfredo Luz

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G.R. No. L-27782 – 34 SCRA 337 – Mercantile Law – Negotiable Instruments Law – Negotiable Instruments in General – Sum Certain in Money – Currency To Be Used

Octavio Kalalo is an engineer whose services were contracted by Alfredo Luz, an architect, in 1961. Luz contracted Kalalo to work on ten projects across the country, one of which was in the International Rice Research Institute (IRRI) Research Center in Los Ba├▒os, Laguna. Luz was to be paid $140,000.00 for the entire project. For Kalalo’s work, Luz agreed to pay him 20% of what IRRI is going to pay or equivalent to $28,000.00.

ISSUE: Whether or not Kalalo should be paid in US currency.

HELD: No. The agreement was forged in 1961, years before the passage of Republic Act 529 in 1950. The said law requires that payment in a particular kind of coin or currency other than the Philippine currency shall be discharged in Philippine currency measured at the prevailing rate of exchange at the time the obligation was incurred. Nothing in the law however provides which rate of exchange shall be used hence it is but logical to use the rate of exchange at the time of payment.

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NOTE: RA 529 has already been repealed by Republic Act 8183 which provides that every monetary obligation must be paid in Philippine currency which is legal tender in the Philippines.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)

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