GR L 2734; (March, 1949) (Digest)
G.R. No. L-2734. March 17, 1949.
PHILIPPINE TRUST COMPANY, petitioner, vs. LUIS MA. ARANETA, ET AL., respondents.
FACTS
Before the Japanese occupation, respondent Luis Ma. Araneta was indebted to petitioner Philippine Trust Company in the amount of P4,000, secured by a pledge of certificates of stock. On May 2, 1944, during the occupation, Araneta paid the balance of P3,683.60 using Japanese military notes. The petitioner accepted the payment but refused to return the pledged certificates, arguing the payment was invalid as it was made under duress due to Japanese military proclamations compelling the use of their currency. Araneta filed an action to recover the certificates. Both the Court of First Instance of Manila and the Court of Appeals ruled in favor of Araneta, upholding the validity of the payment.
ISSUE
Whether the payment of a pre-war debt using Japanese military notes during the occupation, made in compliance with Japanese military proclamations, is invalid due to collective and general duress.
RULING
No. The Supreme Court dismissed the petition for certiorari and affirmed the lower courts’ decisions. The Court held that the Japanese military occupant had the authority, under international law, to issue orders such as making its currency legal tender and requiring banks to reopen. Compliance with such lawful orders from a de facto government does not constitute duress that would invalidate a payment. The payment was made and accepted pursuant to these valid orders and was therefore voluntary and effective in extinguishing the obligation. The Court cited its prior rulings in Laurel vs. Misa and Haw Pia vs. China Banking Corporation to support this conclusion.
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