Extinguishment Payment (1995)
Extinguishment Payment (1995)
RIVETT-STROM made payments on both loans which if based on the rate of exchange in 1983
would have fully settled the loans.
PHILCREDIT contends that the payments on both loans should be based on the rate of
exchange existing at the time of payment, which rate of exchange has been consistently
increasing, and for which reason there would still be a considerable balance on each loan.
Is the contention of PHILCREDIT correct? Discuss fully.
SUGGESTED ANSWER:
As regards the loan consisting of dollars, the contention of PHILCREDIT is correct. It has to be
paid in Philippine currency computed on the basis of the exchange rate at the TIME OF
PAYMENT of each installment, as held in Kalalo v. Luz, 34 SCRA 337.As regards the P5
Million loan in Philippine pesos, PHILCREDIT is wrong. The payment thereof cannot be
measured by the peso-dollar exchange rate. That will be violative of the Uniform Currency Act
(RA, 529] which prohibits the payment of an obligation which, although to be paid in Philippine
currency, is measured by a foreign currency. (Palanca v. CA,238 SCRA 593).