G.R. No. L-3561 May 23, 1951
CESAR REYES, petitioner-appellant, vs. AGRIPINO ZABALLERO, ET AL., respondents-appellees.

FACTS

During the Japanese occupation, on October 1, 1942, petitioner-appellant Cesar Reyes (creditor) lent P6,500 to respondents-appellees the Zaballeros (debtors). The debt was secured by a mortgage and was payable in ten annual installments in “Philippine money or its equivalent in U.S. currency, at the option of the creditor.” The debtors paid the installments due for 1942 and 1943 in Japanese military notes, which the creditor unreservedly accepted. On November 30, 1944, the debtors offered to pay the third installment and its interest, but the creditor refused to accept payment in Japanese military notes, citing their devaluation and his contractual option to choose the currency. The debtors then announced they would tender the entire remaining balance the next day. On December 1, 1944, the debtors tendered the full balance. Acting on his attorney’s advice, the creditor accepted the Japanese military notes, executed a notarial deed releasing the mortgage, and had it registered. On the same day, but without the debtors’ knowledge, the creditor secretly executed an affidavit before a notary public stating he had accepted the payment “obligado por las circunstancias actuales” (compelled by the present circumstances) and under protest. He then deposited the full amount in a special bank account as a trustee, where it remained untouched. After liberation, the creditor sued to recover the debt, arguing his acceptance of the Japanese military notes was invalid due to duress.

ISSUE

1. Whether the creditor’s acceptance of the Japanese military notes in full payment of the debt was invalidated by duress.
2. Whether the payment in Japanese military notes validly discharged the pre-war obligation, which gave the creditor an option to demand payment in Philippine or U.S. currency.

RULING

1. No, the acceptance was not invalidated by duress. The Court of Appeals found no sufficient proof of duress, a factual finding binding on the Supreme Court. The creditor’s testimony that the debtors reminded him the Japanese disliked refusal of their money was discredited. His secret affidavit stating he was “compelled by the present circumstances” was self-serving, indefinite, and could refer merely to the general circumstance that Japanese notes were the depreciated currency of the time. The Court held that the creditor accepted the money reluctantly but voluntarily, upon his attorney’s advice and with the expectation of later nullifying the payment, not because of any irresistible pressure or threat from the debtors. Mere reluctance does not equate to lack of voluntariness in law. The subsequent secret protest and deposit were done without the debtors’ knowledge and could not negate the legal effect of his prior voluntary acceptance and execution of the release.
2. Yes, the payment validly discharged the obligation. The creditor’s voluntary acceptance of the Japanese military notes constituted a waiver of his contractual option to select Philippine or U.S. currency. Furthermore, under the ruling in Tambunting de Legarda vs. Desbarats Miailhe, the tender and acceptance of Japanese military notes during the occupation operated as a valid discharge of the debt. The Court also noted that if the creditor had outright refused, the debtors could have made a valid consignation. The creditor could not, through a secret protest, indirectly achieve what he could not do directly. An equitable consideration was that the money, if rejected, could have been used by the debtors, but instead was kept by the creditor and became valueless.
The appealed decision of the Court of Appeals was affirmed.