G.R. No. L-49494. May 31, 1979.
NELIA G. PONCE and VICENTE C. PONCE, petitioners, vs. THE HONORABLE COURT OF APPEALS, and JESUSA B. AFABLE, respondents.

FACTS

Petitioners filed a complaint for collection of a sum of money based on a promissory note executed by private respondent Jesusa B. Afable and two others in favor of petitioner Nelia G. Ponce. The note stipulated payment of P814,868.42 in Philippine currency on or before July 31, 1969, with 12% interest per annum if unpaid, plus attorney’s fees. The debtors failed to pay. The trial court rendered judgment in favor of the petitioners, ordering the debtors to pay jointly and severally. Respondent Afable appealed to the Court of Appeals, which initially affirmed the trial court’s decision.
However, upon a second motion for reconsideration, the Court of Appeals reversed itself. It concluded that the true intent of the parties was for the obligation to be payable in US dollars, not Philippine pesos. Applying Republic Act No. 529, which prohibits stipulations for payment in currency other than Philippine legal tender, the appellate court declared the transaction illegal. It then applied the in pari delicto doctrine, holding that both parties being equally at fault for an illegal contract, neither could recover, and thus dismissed the complaint.

ISSUE

Whether the Court of Appeals erred in: (1) concluding that the promissory note was payable in US dollars, thereby violating RA 529; and (2) applying the in pari delicto doctrine to bar recovery.

RULING

Yes, the Court of Appeals erred. The Supreme Court reinstated the trial court’s decision. The legal logic is clear. First, the promissory note on its face expressly stipulates payment in Philippine pesos (“P814,868.42, Philippine Currency”). The Court emphasized that where the terms of a contract are clear and literal, they govern the agreement. The appellate court’s finding of a dollar intent was an impermissible alteration of the written instrument’s clear terms without a showing that it failed to express the true agreement.
Second, even assuming the original understanding involved dollars, RA 529 does not render the entire obligation void but only nullifies the stipulation for payment in foreign currency. The law aims to prevent the compulsion of payment in a specific foreign currency. The remedy is to order payment in Philippine currency based on the current rate of exchange at the time of payment, not to void the entire contract and apply in pari delicto. The creditor cannot compel dollar payment, but the underlying obligation to pay the value of the loan remains enforceable in pesos. Therefore, the petitioners were entitled to recover the peso equivalent of the loan as stipulated in the note, which they precisely sought. The in pari delicto doctrine was misapplied, as the enforcement of the peso obligation was not against public policy.