October 2010 - Philippine Supreme Court Decisions/Resolutions
[G. R. No. 3316-Paras : October 26, 2010]
JOSE PNCE DE LEON, PLAINTIFF AND APPELLANT, VS. SANTIAGO SYJUCO, INC., DEFENDANT AND APPELLANT, PHILIPPINE NATIONAL BANK, DEFENDANT AND APPELLEE.
D E C I S I O N
The plaintiff obtained from, defendant Syjuco on May 5, 1944, a loan of P200,000 and on July 31, 1944, another loan of P16,000, payable "within one year from May 5, 1948." On November 15, 1944, the plaintiff offered to pay the entire indebtedness plus all the interest up to the date of maturity. Upon Syjuco's refusal to accept the tendered payment, the plaintiff deposited the amount with the clerk of the Court of First Instance of Manila and instituted the present action .to compel Syjuco to accept payment. The records of the case were destroyed during the war, but they were duly reconstituted after the liberation. The trial court sentenced the plaintiff to pay to Syjuco the total sum of P23,130, representing the whole indebtedness plus interest from August 6, 1944, to May 5, 1949, computed according bo the Ballantyne scale of values. From this judgment Syjuco has appealed, claiming the right to be paid the sum of P216,000, actual Philippine currency, plus P200,000 as penalty agreed upon in the contract. The majority of this Court sustains Syjuco1s claim for P216,000.
As the same questions have been resolved in Ilusorio vs. Busuego, G. R. No. L-822, September 30, 1949, Roño vs. Gomez, May 31, 1949, 46 O. G., Supp. to No. 11, p. 339, and Gomez vs. Tabia, August 5, 1949, 47 O. G. 644, in which I dissented, I have to disagree with the majority in the case at bar.
On the question whether a debtor can pay an indebtedness before the date of maturity provided corresponding interest is paid, I said the following in Ilusorio vs. Busuego .
"In other words, I hold that the mortgagor has the right to pay the indebtedness at any time within three years provided that, as in this case, he pays the interest for the whole term of the mortgage. In the ordinary course of things, a loan is granted in consideration of interest, and if by the early payment of the obligation, the creditor would not lose any part of the stipulated interest, both paragraphs 3 and 4 would practically be enforced. It cannot be alleged that the creditor herein, in addition to interest, wanted to have his money in the safekeeping of the debtor, because the contract is one 6f loan and not of deposit. It is to be remembered, moreover, that the debt was being paid in the same currency loaned (Japanese money). The effect of inflation is one.of the risks naturally incident to the money-lending business, and the lender should protect himself against it by plain covenants."
On the matter of requiring a loan obtained in Japanese war notes to be paid after the liberation in equivalent Philippine currency, I am hereinbelow reproducing at length what I stated in Bofio vs. Gomez which should have greater application and force, because while in the Bono case the amount of the loan is only 54,000, in the case at bar.the debtor is being ordered to pay the large sum of P216,000:
"The principal defense set up by Bono is that the note is contrary to law, morals or public order. This defense was flatly overruled in the court of origin,seconded by the Court of Appeals. The judgment of the latter court is now before us upon appeal by certiorari of Cristobal Bono.
"The situation is one in which a borrower of. P4,000.00 in Japanese war notes is made to pay the same amount in currency of the present Philippine Republic. In other words, the borrower of P4,000 during the latter part of the Japanese military occupation whichf in ordinary practical terms, could hardly purchase a cavan of riffie, is now compelled no pay &4,000.00 in actual Philippine currency which, In the same ordinary practical terms, may be held equivalent to at least 100 cavanes of riee. Said borrower is compelled to do so, merely because in his promissory note he agreed to pay after one year in pesos of the Philippine currency, and expressly waived any postwar arrangement devaluating the amount borrowed in October, 1944.
"The Court of Appeals held that the commitment of Cristobal RoSo to settle his indebtedness in the legal tender at the time of payment is not against the law, morals or public order. We readily acquiesce in the proposition that the contract is not contrary to law or public order, for we are aware of no statute or public policy which prohibits a person from bringing about or causing his own financial reverses. But we are of the opinion that, if enforced to the letter, it is against morals. If the contract was entered into in times of peace, its obligations should have i»he force of law between the parties and must be performed in accordance with their stipulations (Art. 1091, Civil Code). But when as in the case.at bar, the borrower had to obtain a loan during war time, when living conditions were abnormal and oppressive, everything was uncertain, and everybody was fighting for his survival, our conscience and common sense demand that his acts be judged by.compatible standards.
"The Court of Appeals found that everybody was aware of the developments of the war outside of official propaganda and that, in so far as knowledge of war events is concerned, Roño was more or less on an equal footing with Gomez. This means that all knew the bombings by the American air forces of various parts of the Islands in September, 1944, and of the decisive defeats of the Axis powers in Europe, and that the mighty forces of the Allies would soon, as in fact they did, concentrate on and crush Japan, with the result that the Japanese war notes would accordingly become worthless. It m»y of course . be supposed that Roño knowingly bound himself to his pact. But this is true merely in theory. Although, as found also by the Court of Appeals, Roño was not entirely an ignorant man because he is a mechanic and knows English, the fact nevertheless remains that the lender, Jose L. Gomez, was a lawyer, and the exaggerated way the promissory note is worded plainly shows that the latter must have thoroughly studied the transaction with Roño and imposed the conditions evidenced therein to his one-sided advantage. It is'needless to say that borrowers are always at the mercy of unscrupulous money lenders. 'Neeessitous men are not, truly speafcing, free'men; but, to answer a'present emergency, will submit to any terms that the crafty may impose upon them.' (Marquez et al. vs. Valencia, 44 O. G. p. 895, 897[*], quoting Villa vs. Santiago, 38 Phil. 157, 164). We cannot believe, as intimated in the testimony of Sinforosa A. de Gomez (wife of Jose L. Gomez), that Roño informed them that he would use the money to purchase a jitney, for the simple reason that, in view of the inflated value of the Japanese war notes in October, 1944, the amount of P4,000 could not possibly purchase a jitney. At any rate, even accepting the conjecture that said amount was invested by Roño in his business, the circumstance still makes him a necessitous man that had to submit to the terms of his lender. That a contract like the one in question is shocking to the conscience and therefore immoral becoxaes patent When we resort to the example of a borrower of P2,000.00 just before the liberation, when a kilo of sugar already cost 1P2,000.00, being compelled! to pay the same in Philippine currency now when a kilo of sugar hardly costs P0.50. Yfhere is the conscience of anyone who will collect P2,000,00 for a loan of virtually fifty centavos?
"The Court of Appeals argued that the parties took equal risks, since it was impossible to predict the exact time at which the Philippines would be liberated and that, supposing that the liberation had been delayed for more than one year, Gomez might have been the loser and Roño the winner, for the Japanese currency might have further diminished in value. To this we would answer that Gomez would then be paid in the same currency that was borrowed and during the same war time when the loan was extended. This would not be unusual, as the parties are still under the very environment's that surrounded the execution of the contract."
I may add the following observations contained in my dissenting opinion in Gomez vs. Tabia:
"The majority also hold that the contract here in question is aleatory. This is open to doubt. Aleatory contracts, or those depending on chance, are covered by Title HI, Book IV, of the Civil Code. It is to be noted that, under article 1790, an aleatory contract involves the occurrence of an event which is uncertain or will happen at an indeterminate time. Moreover, the contracts contemplated'by the Code as being aleatory, are grouped under insurance, contracts, gambling and betting, and life annuities. It follows that the contract now under consideration, which is one of loan, does not fall under any of those groups of aleatory contracts. At any rate, the contract of loan herein involved is clearly not dependent upon any uncertain event. The loan was granted on a definite date and has to be paid on a definite date. Both dates are certain. The payment of the loan has to be effected regardless of the result of the war.
"As the contract in question contemplated that the payment is to be made in the same currency that was loaned, and the parties are presumed never to have intended that said payment would be made in what has become valueless money, justice demands that the indebtedness be paid in actual Philippine currency at an equivalent amount determined in the Ballantyne schedule, in the absence of evidence as to such value. The exceptions mentioned in the Ballantyne schedule refer to contracts in which the obligation is payable by something other than legal tender. Indeed, the majority in Hilado vs. De la Costa et al.,[*] G. R. No. L-150, decided on April 30, 1949, held that 'what the debtor should pay is the value of the Japanese war notes in relation to the peso of Philippine currency obtaining on the date when and at the place where the obligation was incurred, unless the parties had agreed otherwise.' This underscored clause undoubtedly contemplates an agreement to pay in a consideration other than legal tender of the Philippine, such as gold doilars, pounds sterling, Spanish pesetas, or the like. It cannot be otherwise, since if the intention is merely to pay in legal tender, no express stipulation is necessary, because under section 1612 of the Revised Administrative Code, the Philippine currency is the legal tender for all debts.
"In reiteration of my stand in the case of Roño vs. Gomez, supra, I wish to emphazise that to require the herein respondent to pay the sum of P5,000.00, actual Philippine currency, in return for an indebtedness obtained in Japanese military notes equivalent in actual Philippine currency according to the Ballantyne schedule, to only P790.26 as found by the Court of Appeals, is unconscionable."
In my considered opinion, the appealed judgment snould at most be affirmed.
 84 Phil., 630.
 83 Phil., 890.
 84 Phil., 269. .
[*] 77 Phil., 782.
[*] 83 Phil., 471.