Fong v. Javier
REITERATIONFacts
The Antecedents: During the Japanese occupation, Emilio M. Javier (defendant-appellant) received a loan from Adrian Fong (plaintiff-appellee) in the amount of P12,000.00 (or P13,200.00 according to plaintiff). Javier signed a promissory note obligating himself to pay Fong P12,000.00 in legal currency within six months from the formal declaration of peace between Japan and the United States. Procedural History: By December 1953, the note had become due. Javier had paid a total of P5,850.00 on account of the loan. Fong filed a complaint for the unpaid portion. The Court of Appeals ordered Javier to pay Fong the sum of P6,150.00, representing the unpaid balance, with 6% interest from December 16, 1953. The Petition: Javier appealed the decision, contending that since the loan was given in Japanese notes, he should only be required to pay the equivalent value according to the Ballantyne schedule, which he claimed amounted to only P600.00 in genuine Philippine currency. He also argued that the suit was filed with the evil purpose of subjecting him to harassment and humiliation, seeking moral damages.
Issue(s)
Whether the debt contracted during the Japanese occupation, payable in legal currency, should be paid peso for peso or according to the Ballantyne schedule. Whether moral damages should be awarded to the defendant-appellant.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals, ordering the defendant-appellant to pay the plaintiff-appellee the unpaid balance of the loan with interest. The Court denied the claim for moral damages.
Ratio Decidendi
On the payment of the debt: The Court held that the appellate court was fully justified in refusing to apply the Ballantyne schedule. The promissory note explicitly stated that the payment was to be made in "legal currency" within six months from the formal declaration of peace. This stipulation, whether express or implied, binds the parties. The Court reiterated its ruling in Roño vs. Gomez and subsequent decisions, which consistently held that debts contracted during the Japanese occupation, when the debtors promised payment in Philippine currency, are payable peso for peso. The Court emphasized that parties to a contract of loan are free to stipulate the terms of payment, and such stipulations are binding. The fact that the original loan might have been in Japanese military notes does not alter the obligation to pay in Philippine legal tender as stipulated in the promissory note. On moral damages: The Court found no basis for awarding moral damages to the defendant-appellant. The Court of Appeals declined to award such damages, considering that the plaintiff's demand for payment was well-founded. Since the promissory note was due and unpaid, the creditor cannot be blamed for initiating a suit for collection. While the Court acknowledged that a creditor should not abuse their rights, it deferred to the appellate court's factual finding that the plaintiff had committed no acts legally reprehensible in pursuing the collection of the debt. The embarrassment suffered by the debtor due to a legitimate collection suit does not automatically entitle them to moral damages.
Main Doctrine
Debts contracted during the Japanese occupation, if evidenced by a promissory note promising payment in legal currency, are payable peso for peso in Philippine currency, regardless of the currency used for the loan itself, based on the express or implied agreement of the parties.