G.R. No. L-24695, October 26, 1968
B. J. SERVER, petitioner, vs. RICARDO SIKAT, respondent.

FACTS

On January 16, 1945, respondent Ricardo Sikat obtained a loan of P120,000.00 in Japanese military notes from petitioner B. J. Server. To secure payment, Sikat mortgaged two parcels of land and, together with Jose de Luna Gonzales, executed a promissory note promising to pay Server “Six Thousand Pesos (P6,000.00) … in the legal Philippine Currency circulating in the Philippines at the time of payment, within two (2) years counted from and after the termination of the hostilities in the Philippines between the United States of America and the Empire of Japan.” Server filed an action for collection and foreclosure of mortgage in the Court of First Instance of Manila after Sikat allegedly refused to pay. Sikat disputed the execution of the documents, claimed the loan was only P60,000.00 in Japanese notes, and asserted that the parties had orally agreed the loan could be paid during the Japanese occupation, subject to adjustment. He also alleged the loan was usurious. The trial court ruled in favor of Server, enforcing the written terms and ordering payment of P6,000.00 with interest. The Court of Appeals reversed, finding the oral agreement proven and ordering payment of P1,000.00 (the Ballantyne schedule value of P120,000.00 Japanese notes in January 1945) with interest. Server petitioned for review.

ISSUE

Whether the Court of Appeals erred in finding that there was sufficient proof of a contemporaneous oral agreement allowing payment of the loan during the Japanese occupation, thereby justifying the revaluation of the debt according to the Ballantyne schedule.

RULING

The Supreme Court affirmed the decision of the Court of Appeals. The Court held that the issue was essentially factual and found no reversible error in the appellate court’s conclusion. The Court of Appeals properly interpreted petitioner Server’s ambiguous stenographic testimony—where he stated, in context, that if the debtor wanted to pay during the occupation, he would be forced to accept—to support the existence of the oral agreement. Even without such oral agreement, the promissory note’s term “within two (2) years … after the termination of hostilities” meant the debtor could repay at any time from January 16, 1945, until the end of that period, including during the occupation. Since the debtor had the right to pay in Japanese military notes (the legal currency at that time) during the occupation, the debt must be revalued based on the relative value of Japanese notes to Philippine currency at the time it was payable, following the Ballantyne schedule, as established in prior jurisprudence. Thus, the loan of P120,000.00 in Japanese notes was correctly valued at P1,000.00 in Philippine currency. The usury claim was not sustained. Costs were imposed on petitioner Server.