MODESTO VALERO, PLAINTIFF AND APPELLANT, VS. FRANCISCO SYCIP, DEFENDANT AND APPELLEE.

REYES, J.B.L., J.:

On August 1, 1944, defendant-appellee Francisco
Sycip received from Dr. D. Sanciangco the sun of P250,000 in Japanese
military notes, and as evidence of the loan, the former signed and
delivered to the latter the following promissory note:

“Value received, I promise to pay in
or about the 1st day of August, Nineteen hundred and forty-five (1945),
Dr. D. Sanciangco the sum of Two Hundred and Fifty Thousand Pesos
(P250,000.00) in Philippine Currency that the laws then authorize a
debtor to tender and require creditor to receive, with interests at the
rate of Eighteen Thousand Pesos (P18,000) yearly, payable in advance
every three (3) months hereafter.

Should I
choose aid decide to pay this ay indebtedness to Dr. D. Sanciangco
within one year from the date of this instrument, then I agree to pay
said Dr, D. Sanciangco the sub of Three Hundred Thousand (P300,000.00)
Pesos in Philippine Currency of legal tender at the time. I also agree
to pay Dr. D. Sanciangco, at his request, by way of loan an additional
amount not exceeding Five Thousand Pesos (P5,000.00) monthly.

Manila,
Philippines, 1st of August, 1944.” (Exh.”A”) On July 19, 1954, Dr. D.
Sanciangco assigned the above note to plain tiff-appellant Modesto
Valero, who, on the basis thereof, filed th« present action in the
Court of First Instance of Manila against defendant-appellee Francisco
Sycip for the payment of P250,000, plus interest at the rate of P18,000
a year beginning August 1, 1944, P5,000 attorney’s fees, and coats.

In his first answer, defendant-appellee interposed
the defenses that the note provides for the payment of usurious
interest and that the loan in question having been contracted on August
1, 1944 when the value of Japanese military notes had greatly
depreciated, it would be unconscionable to require payment of the sane
amount in genuine Philippine currency. Later, with the permission of
the Court, defendant filed an amended answer therein it was alleged as
an additional special defense “that the intention of the parties at the
tine the note was effected (August it 1944) was not to pay in genuine
Philippine currency on the basis of one to one as plaintiff would now
have it appear”.

After trial, the lower court rendered judgment
holding that the loan in question should be payable in accordance with
the Ballantyne Scale of Values, and ordered defendant to pay plaintiff
“the sum of P10,000.00 in actual currency, with interest thereon at
P720.00 a year from August 1, 1944, until fall payment, and costs of
this action”. From this judgment, plaintiff appealed to this Court,
insisting that defendant should be made to pay the full amount of
P250,000 plus annual interest of 145,000 in genuine Philippine
currency, which was the legal tender existing on or about August 1,
1945.

We see no error in the judgment appealed from. The
rule is already settled that where a debtor could have paid his
obligation at any time during the Japanese occupation, payment after
liberation must be adjusted in accordance with the Ballantyne schedule
(De Asis vs. Agdamag, G.R. L-3709, Oct. 25, 1951; Ang Lam vs. Peregrina, G.R. L-4871, Jan. 26, 1953; Wilson vs. Berkenkotter, G.R. L-4476, April 20, 1953, 49 O.G. No. 4, 1401; Samson vs.
Andal de Aguila, G. R. L-5932, Feb. 25, 1954). While the first
paragraph of the promissory note Exh, “A” provides for payment in or
about the first day of August, 1945, its second paragraph, however,
gives the debtor the option to pay his indebtedness at any time within
one year after its date, August 1, 1944. It is thus clear that the note
could have been paid during the Japanese occupation; hence, the lower
court correctly adjusted the amount payable by defendant-appellee in
accordance with the Ballantyne scale of values.

Appellant claims that defendant-appellee’s
obligation to pay under the note Exh. “A” is alternative, and his
failure to avail himself of the opportunity to pay his loan daring the
Japanese occupation subjected his to the provisions of the first
paragraph of the note, pursuant to which he must discharge the full
amount of his debt in genuine Philippine currency, as it was the
currency prevailing “in or about the 1st of August, Nineteen hundred
and forty-five”. The argument is untenable. First, because the
obligation is not in the alternative but facultative, since the option
to pay within the first year was a privilege granted to the debtor, not a duty imposed
upon him. Second, the mere failure of the defendant to pay his debt
during the occupation, as he was authorizes to do under the second
paragraph of the note, does not change the fact that ho had the option
to pay, and could have paid, during tat period. While the creditor,
herein appellant, could not have demanded payment of the note before
August 1, 1945, such circumstance did not preclude the defendant from
settling his obligation at any tine after August 1, 1944, in Japanese
war notes, if he had wanted to.

Nor does the failure of defendant-appellee to
discharge his debt during the occupation obligate him to settle its
full amount in genuine Philippine currency, the legal tender at the tLm
of payment, as contended by appellant. For as pointed out by Mr.
Justice Peria in his concurring opinion In the case of Gomez vs.
Tabia, 47 O.G. 641, cited with approval by this Court in subsequent
cases, the debtor’s mere failure to accomplish payment during the
Japanese occupation did not make him liable to pay, as damage or
penalty, the difference between the value of the Japanese war notes at
the time the obligation became payable and of the Philippine currency
at the tine of payment. To sustain appellant’s position would have
exactly the effect of imposing such penalty upon appellee for not
having discharged his debt during the occupation as authorized by the
second paragraph of the note Exh. “A”. Such penalty becomes the more
inequitable when it is taken into account that the debtor’s privilege
to pay in military script up to August 1, 1945, was cut short upon
liberation, in early 1945, through no fault of the debtor.

Lastly, appellant avers that this case falls under
the rule of par. (e) of the concurring opinion of Mr. Justice Feria in
the Gomez vs. Tabia case, supra, to the effect that
where the parties had stipulated for payment after a certain period had
elapsed and not earlier, and such period elapsed after the liberation
of the Philippines, the obligation shall be discharged at the rate of
one genuine Philippine peso for one Japanese peso “because in such case
the implied agreement of the parties in accordance with law would be
that the obligation shall be paid in legal tender at the time it
becomes payable, that is, * * *in Philippine currency if after the
liberation”. This doctrine does not, however, apply in the present
case, for under the note in question, the parties did not stipulate that it shall be paid only on August 1, 1945 and not earlier. On
the contrary, the defendant was, as previously stated, given the option
to discharge the obligation after August 1, 1944, or during the
Japanese occupation. The rule applicable to his obligation is,
therefore, paragraph—

(d) of the sane opinion of Justice Feria, to wit:

“(d)
If the parties had stipulated that the obligation shall be payable
within a certain period of time, that is, at any tine within that
period, and the whole or part of the period coincides with the Japanese
occupation and, therefore, the debtor might have paid his obligation in
Japanese war notes during the occupation, the above-stated rule (a)
shall be applied; because the debtor had the right to pay his
obligation in Japanese war notes at the time it became payable, and his
mere failure to pay, as damages or penalty, the difference between the
value of the Japanese war notes at the tine the obligation became
payable and of the Philippine currency at the date of the payment.”

the rule (a) referred to being—

“(a)
An obligation incurred or payable during the occupation shall be
revalued on the basis of the relative value of the Japanese military
notes in Philippine currency at the date the obligation was payable,
according to Ballantyne sliding scale of value in the absence of
evidence to the contrary. * * *”

WHEREFORE, the decision appealed from is affirmed, with costs against appellant Modesto Valero.

So Ordered.

Paris, C.J. Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Endencia, and Felix, JJ.concur