De la Paz Fabie vs. Court of Appeals

War, in the legal sense, terminates upon formal proclamation of peace by competent authority, not upon cessation of hostilities; hence a contractual redemption period running from “termination of the war” does not begin until such proclamation, absent proof that the parties intended mere cessation of hostilities.

Maria Josefa de la Paz Fabie and her husband Jose Carandang were the vendors in a written “Agreement of Sale with Right to Repurchase” over realty in Pasay, Rizal, transferred to Narciso Mordeno during the Japanese occupation. The contract tied the repurchase period to the “termination of the war at present raging,” making the legal meaning of war termination under Philippine jurisprudence central to the dispute. Prior decisions cited in the litigation, including General vs. Venecia, Raquiza vs. Bradford, Yamashita vs. Styer, and Untal vs. Chief of Staff, had addressed when war terminates in the legal sense.

During the Japanese occupation, Maria Josefa de la Paz Fabie delivered to Narciso Mordeno a piece of realty in Pasay, Rizal under a written contract entitled “Agreement of Sale with Right to Repurchase.” The contract reserved to the vendor the right to repurchase the property within “three months from and after the termination of the war at present raging.”

On April 8, 1946, Maria Josefa offered to repay the money she had received on account of the sale. Mordeno refused to accept, claiming that her time to repurchase had already passed. A complaint was thereafter filed on May 24, 1947 in the Court of First Instance of Rizal for the return of the premises upon payment of the amount received by Josefa. The plaintiffs, husband and wife, based their demand on two propositions: first, that the contract was a mortgage and they were ready to redeem; second, that even if it were a pacto de retro sale, she had exercised her option within the appointed time.

The Court of First Instance gave judgment for the plaintiffs, upholding their right to repurchase for the equivalent amount of P375.00, adjusted to the Ballantyne scale. Defendant Mordeno appealed to the Court of Appeals, which reversed. The Court of Appeals considered the compact a true pacto de retro and concluded that the redemption period had already expired when Josefa tendered payment in April 1946, because the war had terminated on February 27, 1945, when General McArthur turned over the Government of these Islands to President Osmena in Malacanan Palace, or at the latest on September 2, 1945, when the document of formal surrender was signed by Japanese representatives on board the U.S. battleship “Missouri” at Tokyo Bay. The Court of Appeals declined to apply General vs. Venecia and distinguished “termination of war” from “proclamation of peace.”

• Nature of Contract and Right to Redeem: Petitioners maintained that the contract was a mortgage and that they were ready to redeem; alternatively, even if it were a pacto de retro sale, Maria Josefa had exercised her option within the appointed time.
• Termination of War: Petitioners argued that the Court of Appeals refused to follow applicable decisions and that war in the legal sense had not terminated by April 1946 because no formal proclamation of peace had been issued; they invoked Raquiza vs. Bradford, Yamashita vs. Styer, and Untal vs. Chief of Staff, and quoted additional authorities in their brief.

• Expiration of Redemption Period: Respondent claimed that the time to repurchase had already passed when Maria Josefa offered to repay the money on April 8, 1946.

• Termination of War: Whether, under a contract granting a three-month repurchase period from “termination of the war at present raging,” the war had terminated in the legal sense by April 8, 1946, when the vendor offered to repurchase.
• Intent of Parties: Whether the parties intended the phrase “termination of the war” to mean mere cessation of hostilities, such that the redemption period had already expired by April 8, 1946.
• Timeliness of Repurchase: Whether Maria Josefa de la Paz Fabie timely exercised the right to repurchase when she offered to repay the amount received on April 8, 1946.

• Termination of War: No. In the legal sense, war continues until formal proclamation of peace by competent authority; in April 1946 no peace treaty had been signed and no formal declaration of peace had been published, so the redemption period had not yet expired.
• Intent of Parties: No. The exception for parties intending mere cessation of hostilities must be proven by adequate circumstances, facts, or declarations; none appeared, and the short three-month period indicated contemplation of complete normalcy.
• Timeliness of Repurchase: Yes. Because the war had not legally terminated by April 1946, the April 8, 1946 offer to repurchase was timely.

• Termination of War: The Court applied the rule from Raquiza vs. Bradford, reaffirmed in Yamashita vs. Styer and Untal vs. Chief of Staff, that war in the legal sense continues until formal proclamation of peace by competent authority. It distinguished General vs. Venecia, which involved a note payable “within six months after peace has been declared”; the Court said it was not clearly erroneous for the Court of Appeals to deny its application where the contract referred to “termination of war” without express reference to “peace,” but Raquiza, cited in General, clearly stated that on September 13, 1945 the war had not yet terminated. The Court also invoked Rule 123, section 58, requiring the language of a writing to be interpreted according to the legal meaning it bears in the place of execution. Since in April 1946 no peace treaty had been signed between the United States and Japan and no formal declaration of peace had been published—President Truman issuing his proclamation only in December 1946—the period for repurchase had not yet passed.
• Intent of Parties: The authorities cited by the Court of Appeals themselves qualified the general rule with “where the parties to a contract so intend” or by “determining the intent of the parties.” Thus, war terminates when peace is formally proclaimed, except where the parties intended otherwise and meant mere cessation of hostilities, in which case their intention must be given effect. The exception must be proven by adequate circumstances, facts, declarations, and none was described in the decision under scrutiny. The short three-month period indicated that both parties contemplated the return of complete normalcy, not merely the end of armed conflict, because the months and years after such ending are periods of reconstruction and economic hardship.
• Timeliness of Repurchase: Because the war had not terminated in the legal sense by April 1946, Maria Josefa’s offer to repurchase on April 8, 1946 fell within the three-month period from termination. The Court of Appeals therefore committed error on the major point, and the Court reversed its decision and affirmed the Court of First Instance. The Court noted that appellee Mordeno ascribed no other mistake to the inferior court, having filed no brief and not appeared at oral argument.

• Termination of War in the Legal Sense — War, in the legal sense, continues until and terminates at the time of some formal proclamation of peace by an authority competent to proclaim it; it does not end merely upon cessation of hostilities. The Court applied this to hold that the redemption period had not begun to run by April 1946 because no peace treaty or formal proclamation had yet been issued.
• Contractual Intent Exception — Where a private contract ties a term to the duration or termination of war, the general rule is that war terminates upon formal proclamation of peace, except where the parties intended otherwise and meant mere cessation of hostilities. The exception must be proven by adequate circumstances, facts, or declarations. The Court found no such proof; the short three-month redemption period indicated the parties contemplated complete normalcy.
• Interpretation of Writings According to Legal Meaning — Under Rule 123, section 58, the language of a writing is to be interpreted according to the legal meaning it bears in the place of its execution. The Court applied this to construe “termination of the war at present raging” in accordance with the legal meaning of war termination.
• Pacto de Retro Redemption Period — The redemption period in a pacto de retro sale tied to the termination of war is computed from the legal termination of war, not from the cessation of hostilities, absent contrary intent. The Court thus found the April 8, 1946 tender timely.

• "because war, in the legal sense continues until, and terminates at the time of, some formal proclamation of peace by an authority competent to proclaim it." — States the controlling rule on when war terminates in the legal sense, the ratio decidendi for rejecting the Court of Appeals’ cessation-of-hostilities theory.
• "war terminates when peace is formally proclaimed, except where the parties have intended otherwise and meant mere cessation of hostilitiesin which case their intention must be given effect." — Articulates the general rule and its contractual-intent exception, which the Court applied to the pacto de retro redemption period.
• "the short period of three months indicates both parties contemplated the return of complete normalcy, not merely the end of armed conflict, for everybody knows that the months and years after such ending, are periods of reconstruction and economic hardship." — Explains why the Court found no proof that the parties intended mere cessation of hostilities.
• "Undoubtedly in April 1946 (when the offer to repurchase was made) no peace treaty had been signed between the United States and Japan, and no formal declaration of peace had been published (President Truman issued his proclamation in December 1946). Therefore, in that month (April 1946) plaintiffs' period for repurchase had not yet passed." — Applies the legal-termination rule to the facts and resolves the timeliness of the April 8, 1946 offer.

• Raquiza vs. Bradford, 75 Phil. 50 — Cited as clearly stating that on September 13, 1945 the war had not yet terminated because war in the legal sense continues until formal proclamation of peace; the Court relied on it to reject the Court of Appeals’ cessation-of-hostilities theory.
• Yamashita vs. Styer, 75 Phil. 563 — Reaffirmed the view in Raquiza that war had not terminated by September 13, 1945 and that legal termination requires formal proclamation of peace.
• Untal vs. Chief of Staff, 47 Off. Gaz. 1147 — Also reaffirmed the rule that war in the legal sense continues until formal proclamation of peace.
• General vs. Venecia, 178 Phil. 780, 44 Off. Gaz. 4912 — Distinguished or limited: it involved a promissory note payable “within six months after peace has been declared”; the Court said it was not clearly erroneous to deny its application where the contract referred to “termination of war” without express reference to “peace,” though Raquiza cited in it supported the legal-termination rule.

• Rule 123, section 58 — Provides that the language of a writing is to be interpreted according to the legal meaning it bears in the place of its execution. The Court applied this to construe “termination of the war at present raging” as legal termination upon formal proclamation of peace, not mere cessation of hostilities.

Pablo, Reyes, Jugo, Bautista Angelo, Labrador Concepcion, and Reyes, J.B,L., JJ., concur.