A.M. No. RTJ-05-1960 - Kilat vs. Macias

The estate of the deceased Valeriana Velayo incurred a debt when the deceased obtained a loan in the amount of P12,000.
The loan bore an annual interest rate of 10 percent.
To secure the said loan, two deeds of mortgage were executed on September 15, 1942, and December 29, 1942.

Amanda de Guzman, acting as the administratrix, acknowledged the debt by agreeing to pay the principal amount of P12,000.
The administratrix, however, refused to pay the accrued interest, invoking the protective measure provided by the moratorium law.
An arrangement was made to sell the mortgaged properties with the understanding that:

The proceeds would first be applied towards paying the principal.
The remaining balance would be deposited in court pending resolution on the payment of interests.

Both parties submitted memoranda supporting their respective arguments regarding the payment of interests under the moratorium law.
On June 20, 1950, the lower court issued an order holding that while the moratorium law suspended the payment of interests, it did not condone or forgive them.
Based on this principle, the court ordered the administratrix to pay the interest due as stipulated in the deeds of mortgage.

Executive Order No. 25, as amended by Executive Order No. 32, suspended the enforcement of payment of all debts and monetary obligations within the Philippines pending further governmental action.
The lower court clarified that the moratorium law merely suspends the collection and payment processes without negating the underlying debts or interest obligations.
Reference was made to a related decision in Araneta vs. Marta Cui Vda. de Sanson, Off. Gaz., 2849; 85 Phil. 142, which supported this interpretation.

Republic Act No. 401, approved on June 18, 1949, provided for the condonation of all unpaid interests accrued from January 1, 1942, to December 31, 1945, on debts outstanding as of December 8, 1941, but exclusively for debts owed to the Government or government-owned or controlled corporations.
The Act’s declaration of policy emphasized the state’s intention to rehabilitate debtors affected by the ravages of war, indicating that the condonation of interest was a deliberate legislative measure rather than an automatic consequence of the moratorium law.

Does the moratorium law act to condone the payment of interest due on a monetary obligation, or does it merely suspend its collection and payment?
Given that interest is an accessory to the principal obligation, should the suspension principle apply equally to both the principal and the interest?

How does the explicit legislative intervention in Republic Act No. 401 regarding government debts inform the interpretation of the moratorium law with respect to non-governmental obligations?
Is there room for interpreting the moratorium law as a means of condoning debts, or must it be strictly applied as a temporary suspension pending governmental action?