G.R. No.

L-1927 May 31, 1949

CRISTOBAL ROO, petitioner,
vs.
JOSE L. GOMEZ, ET AL., respondents.
Alfonso Farcon for petitioner.
Capistrano & Azores for respondents.
BENGZON, J.:
This petition to review a decision of the Court of Appeals was admitted mainly because it involves one
phase of the vital contemporary question: the repayment of loans given in Japanese fat currency during
the last war of the acifc.
!n !ctober ", #$%%, Cristobal &o'o received as a loan four thousand pesos in Japanese fat money from
Jose (. )ome*. +e informed the later that he would use the money to purchase a ,itney- and he agreed to
pay that debt one year after date in the currency then prevailing. +e signed a promissory note of the
following tenor:
.or value received, / promise to pay one year after date the sum of four thousand pesos 0%,1112 to
Jose (. )ome*. /t is agreed that this will not earn any interest and the payment /t is agreed that this
will not earn any interest and the payment prevailing by the end of the stipulated period of one
year.
/n consideration of this generous loan, / renounce any right that may come to me by reason of any
postwar arrangement, of privilege that may come to me by legislation wherein this sum may be
devalued. / renounce 3atly and absolutely any condition, term right or privilege which in any way
will pre,udice the right engendered by this agreement wherein Atty. Jose (. )ome* will receive by
right his money in the amount of %,111. / a4rm the legal tender, currency or any medium of
e5change, or money in this sum of %,111 will be paid by me to Jose (. )ome* one year after this
date, !ctober ", #$%%.
!n !ctober #", #$%", i.e., after the liberation, &o'o was sued for payment in the (aguna Court of .irst
/nstance. +is main defense was his liability should not e5ceed the equivalent of %,111 pesos 6mic7ey
mouse6 money 8 and could not be %,111 pesos hilippine currency, because the contract would be void as
contrary to law, public order and good morals.
After the corresponding hearing, the +onorable .eli5 9autista Angelo, Judge, ordered the defendant &o'o
to pay four thousand pesos in hilippine currency with legal interest from the presentation of the complaint
plus costs.
!n appeal the Court of Appeals in a decision written by :r. Justice Jugo, a4rmed the ,udgment with costs.
/t declared being a mechanic who 7new ;nglish was not deceived into signing the promissory note, and
that the contents of the same had not been misrepresented to him. /t pronounced the contract valid and
enforceable according to its terms and conditions.
!ne basic principle of the law on contracts of the Civil Code is that 6the contracting parties may establish
any pacts, clauses and conditions they may deem advisable, provided they are not contrary to law, morals
or public order.6 0Article #<"".2 Another principle is that 6obligations arising from contracts shall have the
force of law between the contracting parties and must be performed in accordance with their stipulations6
0Article #1$#2.
/nvo7ing the above proviso, &o'o asserts this contract is contrary to the =sury law, because on the basis of
calculations by )overnment e5perts he only received the equivalent of one hundred hilippine pesos and
now he is required to disgorge four thousand pesos or interest greatly in e5cess of the lawful rates.
9ut he is not paying interest. recisely the contract says that the money received 6will not earn any
interest.6 .urthermore, he received four thousand pesos- and he is required to pay four thousand pesos
exactly. The increased intrinsic value and purchasing power of the current money is consequence of an
event 0change of currency2 which at the time of the contract neither party 7new would certainly happen
within the period of one year. They both elected to sub,ect their rights and obligations to that contingency.
/f within one year another 7ind of currency became legal tender, )ome* would probably get more for his
money. /f the same Japanese currency continued, he would get less, the value of Japanese money being
then on the downgrade.
!ur legislation has a word for these contracts: aleatory. The Civil Code recogni*es their validity 0see art.
#>$1 and :anresa?s comment thereon2 on a par with insurance policies and life annuities.
The eventual gain of )ome* in this transaction is not interest within the meaning of =sury (aws. /nterest is
some additional money to be paid in any event, which is not the case herein, because )ome* might have
gotten less if the Japanese occupation had e5tended to the end of #$%" or if the liberation forces had
chosen to permit the circulation of the Japanese notes.
:oreover, &o'o argues, the deal was immoral because ta7ing advantage of his superior 7nowledge of war
developments )ome* imposed on him this onerous obligation. /n the frst place, the Court of Appeals found
that he voluntary agreed to sign and signed the document without having been misled as to its contents
and 6in so far as 7nowledge of war events was concerned6 both parties were on 6equal footing6. /n the
second place although on !ctober ", #$%% it was possible to surmise the impending American invasion,
the date of victory or liberation was anybody?s guess. /n the third place there was the possibility that upon@
re@occupation the hilippine )overnment would not invalidate the Japanese currency, which after all had
been forced upon the people in e5change for valuable goods and property. The odds were about even
when &o'o and )ome* played their bargaining game. There was no overreaching, nor unfair advantage.
Again &o'o alleges it is immoral and against public order for a man to obtain four thousand pesos in return
for an investment of forty pesos 0his estimate of the value of the Japanese money he borrowed2. According
to his line of reasoning it would be immoral for the homeowner to recover ten thousand pesos 0#1,111,
when his house is burned, because he invested only about one hundred pesos for the insurance policy. And
when the holder of a sweepsta7es tic7et who paid only four pesos luc7ily obtains the frst pri*e of one
hundred thousand pesos or over, the whole business is immoral or against public order.
/n this connection we should e5plain that this decision does not cover situations where borrowers of
Japanese fat currency promised to repay 6the same amount6 or promised to return the same number of
pesos 6in hilippines currency6 or 6in the currency prevailing after the war.6 There may be room for
argument when those litigations come up for ad,udication. All we say here and now is that the contract in
question is legal and obligatory.
A minor point concerns the personality of the plaintiA, the wife of Jose (. )ome*. Be opine with the Court
of Appeals that the matter involve a defect in procedure which does not amount to pre,udicial error.
Bherefore, the appealed ,udgment will be a4rmed with costs. Co ordered.
Moran, C.J., Ozaeta, Tuason, Montemayor and eyes, JJ., concur.
Sea!a"e O#$#o$%
&ERIA, J., concurring:
/ concur in the decision of the ma,ority, with the additional reason that in the case of !ilado vs. "e la
Costa, ).&. Do. (@#"1,
#
decided on April E1, #$%$, we have already held the following in support of the decision in this case:
;ven if we consider ar#uendo the deposits under consideration as a loan from the plaintiA to the
defendant ban7, the deposit liability of the latter to the former after liberation for the credit balance
of #",1<E.1# as of Fecember <G, #$%%, would be less than <11 in hilippine currency, and
therefore could not ma7e up the diAerence between the lowers minimum balance of ">H.E> and
the sum of E,G>H.<> in which, according to the lower court, the defendant ban7 is indebted to the
plaintiA. Contracts stipulating for payments presumably in Japanese war notes may be enforced in
our courts after the liberation to the e5tent of the ,ust obligation of the contracting parties, and, as
said notes have become worthless, in order that ,ustice may be done and the party entitled to be
paid can recover their actual value in hilippine currency, what the debtor or defendant ban7
should return or pay is the value of the Japanese :ilitary notes in relation to the peso in hilippine
currency obtaining on the date when and at the place where the obligation was incurred, unless the
parties had agreed otherwise. /n the absence of evidence of the value of the Japanese war notes in
terms of hilippine currency, and for the purpose of this decision, we may adopt the 9allantine scale
of values for the Commonwealth 0now &epublic2 peso in terms of the peso in Japanese war notes
during the occupation, . . . .
The writer of the dissenting opinion quotes the abovequoted decision in support of his conclusion 8 that
payment of obligations contracted in Japanese war notes during the Japanese occupation must be paid
after the liberation at its value in hilippine currency, 6and in the absence of evidence of the value of the
Japanese war notes in terms of hilippine currency we may adopt the 9allantine scale of values.6 The
dissenter overloo7ed that in said +ilado case we have ruled, as can be seen from the above quoted e5cerpt
of our decision, that 6what the debtor should pay is the value of the Japanese war notes in relations to the
peso of hilippine currency obtaining on the date when and at the place where the obligation was
incurred, unless the parties had a#reed other$ise.6 /n the present case there is an agreement to the
contrary between the parties to the eAect that 6the payment will be made in currency that will be
prevailing at the end of the stipulated period of one year-6 and the currency prevailing at the end of the
stipulated period was hilippine currency.
9esides, in the same communications which was submitted to the resident of the Commonwealth, :r.
9allantine says the following:
/n determining the present liability of the debts in Commonweath peso with respect to debts
incurred during the occupation and still outstanding in whole or part, the unpaid portion of the debt
might be revalued on a basis of the ratio that the Japanese war note here to the Commonwealth
peso on the date the debt was originally incurred. /t is not believed, however, that debts incurred
during the occupation which specifcally provide for payment in a consideration other than
currency, should be aAected by the provisions of any legislative enactment.
'ER&ECTO, J., concurring:
Be are of opinion that there is nothing immoral or against the law or public order in the promissory note in
question. /n view of the uncertainly of life during those days, the lender too7 the chance of not being able
to collect any part of the loan, either because he or all the members of his family might have been
liquidated or the debtor might have been 7illed.
/n writing this brief concurring opinion, our main purpose is to ta7e e5ception to the pronouncement in the
ma,ority decision defending the morality of sweepsta7es. Be have already publicly condemned in more
than one occasion the sweepsta7es underta7en by the government as highly immoral as Jai@alai, horse
racing, coc7@fghting, pri*e fghting, and the other forms of gambling that are e5pressly prohibited and
punished by law. There is no reason why we are to change now this point of view. Cweepsta7es are not only
immoral but highly demorali*ing to the people, and the government policy of trying to raise revenue
through such form of gambling is absolutely defenseless.
'ARAS, J., dissenting:
!n !ctober ", #$%%, Cristobal &o'o obtained a loan of %,111 0in Japanese war notes2 from Jose (. )ome*,
as evidence of which &o'o e5ecuted the following promissory note:
.or value received, / promise to pay one year after date the sum of four thousand pesos 0%,1112 to
Jose (. )ome*. /t is agreed that this will not earn any interest and the payment will be made in
currency that will be prevailing by the end of the stipulated period of one year.
/n consideration of this generous loan, / renounce any right that may come to me by reason of any
postwar arrangement, or privilege that may come time by legislation wherein this sum may be
devalued. / renounce 3atly and absolutely any condition, term, right or privilege which in any way
will pre,udice the right engendered by this agreement wherein Atty. Jose (. )ome* will receive by
right his money in the amount of %,111. / a4rm that the legal tender, currency or any medium of
e5change, or money in this sum of %,111 will be paid by me to Jose (. )ome* one year after this
date, !ctober ", #$%%.
The loan was payable one year after !ctober ", #$%%. =pon default of Cristobal &o'o, an action was fled
against him by Jose (. )ome* and his wife, Cinforosa A. de )ome*, on !ctober #",#$%", in the Court of
.irst /nstance of (aguna to enforce the collection of the sum of %,111 in hilippine currency. Judgment
was rendered against Cristobal &o'o who, however, appealed to the court of appeals. The latter court of
.irst /nstance of (aguna.
The principal defense set up by &o'o is that the notes is contrary to law, morals or public order. This
defense was 3atly overruled in the court of origin, seconded by the Court of Appeals. The ,udgement of the
latter court is now before us upon appeal by certiorari of Cristobal &o'o.
The situation is one which a borrower of %,111 in Japanese war notes is made to pay the same amount in
currency of the present hilippine &epublic. /n otherwords, the borrower of %,111 during the latter part of
the Japanese military occupation which, in ordinary practical terms, could hardly purchase a cavan of rice,
is now compelled to pay %,111 in actual hilippine currency which, in the same ordinary practical terms,
may be held equivalent to at least #11 cavanes of rice. Caid borrower is compelled to do so, merely
because in his promissory note he agreed to pay after one year in pesos of the hilippine currency, and
e5pressly waived any postwar arrangement devaluating the amount borrowed in !ctober, #$%%.
The Court of Appeals held that the commitment of Cristobal &o'o to settle his indebtedness in the legal
tender at the time of payment is not against the law, morals or public order. Be 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 fnancial reverses. 9ut we are of the
opinion that, if enforced to the letter, it is against morals. /f the contract was entered into in times of
peace, its obligations should have the force of law between the parties and must be performed in
accordance with their stipulations 0art. #1$#, Civil Code2. 9ut when as in the case at bar, the borrower had
to obtain a loan during war time, when living conditions were abnormal and oppressive, everything was
uncertain, and everybody was fghting for his survival, our conscience and common sense demand that his
acts be ,udged by compatible standards.
The Court of Appeals found that everybody was aware of the developments of the war outside of o4cial
propaganda and that, in so far as 7nowledge of war events is concerned, &o'o was more or less on an
equal footing with )ome*. This means that all 7new the bombings by the American air forces of various
parts of the /slands in Ceptember, #$%%, and of the decisive defeats of the A5is powers in ;urope, 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. /t may of course be supposed that
&o'o 7nowingly bound himself to his pact. 9ut this is true merely in theory. Although, as found also by the
Court of Appeals, &o'o was not entirely an ignorant man because he is a mechanic and 7nows ;nglish, the
fact nevertheless remains that the lender, Jose (. )ome*, was a lawyer, and the e5aggerated way the
promissory note is worded plainly shows that the latter must have thoroughly studied the transaction with
&o'o and imposed the conditions evidenced therein to his one@sided advantage. /t is needless to say that
borrowers are always at the mercy of unscrupulous money lenders. 6Decessitous men are not, truly
spea7ing, free men- but, to answer a present emergency, will submit to any terms that the crafty may
impose upon them.6 0:arque* vs. Ialencia, >> hil., >H<, quoting Iilla vs. Cantiago, EH hil., #">, #G%.2 Be
cannot believe, as intimated in the testimony of Cinforosa A. de )ome* 0wife of Jose (. )ome*2, that &o'o
informed them that he would use the money to purchase a ,itney, for the simple reason that, in view of the
in3ated value of the Japanese war notes in !ctober, #$%%, the amount of %,111 could not possibly
purchase a ,itney. At any rate, even accepting the con,ecture that said amount was invested by &o'o in his
business, the circumstance still ma7es him a necessitous man that had to submit to the terms of his
lender. That a contract li7e the one in question is shoc7ing to the conscience and therefore immoral
becomes patent when we resort to the e5ample of a borrower of <,111 ,ust before the liberation, when a
7ilo of sugar already cost <,111, being compelled to pay the same in hilippine currency now when a 7ilo
of sugar hardly costs 1."1. Bhere is the conscience of anyone who will collect <,111 for a loan of
virtually ffty centavosJ
The Court of Appeals argued that the parties too7 equal ris7s, since it was impossible to predict the e5act
time at which the hilippines would be liberated and that, supposing that the liberation had been delayed
for more than one year, )ome* might have been the loser and &o'o the winner, for the Japanese currency
might have further diminished in value. To this we would answer that )ome* would then be paid in the
same currency that was borrowed and during the same war time when the loan was e5tended. This would
not be unusual, as the parties are still under the very environments that surrounded the e5ecution of the
contract.
/n another case now submitted to us for decision 0).&. Do. (@#H<G2. Jose (. )ome* is also featured as
having granted loans to one :iguela Tabia during the Japanese occupation, which goes to demonstrate
that )ome* was more or less a professional money lender who would ta7e advantage of other?s pressing
needs, it appearing that in said case the contract had to be in the nature of a sale with right of repurchase,
providing that the redemption was to be made at the same price 0sa #anito din# hala#a2 of the purchase.
(uc7ily, however, for the borrower :iguela Tabia, the Court of Appeals 0through another division2 only
sentenced 8 and we thin7 correctly 8 Tabia to pay an amount in hilippine currency equivalent to the
obligation in accordance with the 9allantine table.
Be are sure that at the present time )ome*, or anybody for that matter, will not dare lend %,111 to one
belonging to the class of &o'o without interest and security. The record does not reveal any special
relationship between )ome* and &o'o that can ,ustify the apparent 6generosity6 of the former. The point
that we want to underscore is that the transaction in question was made possible, undoubtedly because
%,111 in !ctober, #$%%, represented so little an actual value that &o'o 0or any of his 7ind2 did not
hesitate to borrow some such amount, which )ome* 0or any of his 7ind2 did not in turn lose time to give in
the desire of converting what would soon be valueless into good hilippine money.
&o'o should not altogether be released from his obligation under the promissory note, for that would also
be unconscionable- but he should be freed from the burden of returning the full %,111 in actual hilippine
currency. /n other words, &o'o?s contract should be considered merely as one for a payment presumably in
Japanese war notes which may be enforced in our courts after the liberation to the e5tent of his ,ust
obligation, at its actual value in hilippine currency and, in the absence of evidence of the value of the
Japanese war notes in terms of hilippine currency, we may adopt the 9allantine scale of values
0+ilado vs. Fe la Costa, HE hil., %>#2, under which %,111 in !ctober, #$%%, are equivalent to #11,
hilippine currency.
The appealed decision should, therefore, be reversed and Cristobal &o'o sentenced to pay to Jose (.
)ome* and his wife only the sum of #11, with legal interest from the date of the fling of the complaint,
plus the costs.
%a&lo, M., Concurro con esta opinion.