B. J. SERVER, PETITIONER, VS. RICARDO SIKAT, RESPONDENT.

Petition to review the decision of the Court of
Appeals, in CA-G.R. No. 28440-R, which reversed that of the Court of First
Instance of Manila (in its Civil Case No. 25997).

There is no
dispute as to the following facts:

On 16 January 1945,
Ricardo Sikat obtained from B.J. Server a loan of
P120,000.00 in Japanese Occupation money.  To secure payment of this loan, Sikat constituted a mortgage on two parcels of land in
favor of Server and, with Jose de Luna Gonzales, executed a promissory note which reads as follows:

“We, the undersigned, jointly and severally promise to pay to
Mr. B.J. Server, or order, Six Thousand Pesos (P6,000.00)
with interest thereon at the rate of six Per Centum (6%) per annum, 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 United States of America and the Empire of Japan.  As security for the payment of said sum
together with its interests, a real estate mortgage has been
executed on this date by Mr. Ricardo Sikat on certain parcels of land and improvements thereon
embraced in Transfer Certificate of Title No. 42974 of the Register of Deeds
for the City of Manila, in favor of Mr. B.J. Server.”

On 15
October 1947, Server
reminded Sikat, by letter, of the loan, and on 7
December 1953
formally demanded payment thereof.  As
the latter allegedly refused to pay the indebtedness, Server commenced
proceedings for collection of the loan and foreclosure of mortgage in the Court
of First Instance of Manila (Civil Case No. 25997).  It was plaintiff’s allegation that defendant
had failed to pay the loan of P6,000.00 although it
had already become due and payable two years after the cessation of the
hostilities in the Philippines between the United States and Japan .

Answering the amended
complaint, defendant Ricardo Sikat disputed the due
execution of the mortgage contract and the promissory note which were the bases
of plaintiff’s action.  It was claimed,
among other things, that the docu­ments were executed against his will and that
they do not express the true in­tention of the parties; that defendant tried to
settle the indebtedness, which was only P60,000.00 in
Japanese military notes, by offering to pay the market value of said notes at
the time the obligation was contracted, or its equivalent in ac­cordance with
the Ballantyne schedule, but plaintiff refused to
accept the offer.  As special defense,
defendant also charged that the loan is usurious, because it compels him to pay
P6,000.00, Philippine currency, for P60,000.00 in Jap­anese military
notes, which is only equivalent to P60.00.

After hearing, judgment
was rendered for the plaintiff.  The
trial court, finding defendant’s evidence to be insufficient to overcome the
probative value of the stipulations embodied in the mortgage contract and the
promissory note, rejected
defendant’s claim that the parties had agreed verbally that the loan was
payable during the Japanese occupation. 
The allegation of usury was also denied, on the ground that the
provision in the contract that the loan was to be paid in the currency
circulating after the war is neither immoral nor unlawful.  Consequently, and enforcing the terms of the
written agreement, the court ordered (1) the defendant to pay to plaintiff the
sum of P6,000.00 with legal interest thereon, from 16 January 1945 until the
same is fully paid, plus attorney’s fees in an amount equivalent to 10% of the
indebtedness due; (2) that in the event of defendant’s failure to pay the
foregoing amounts within the period prescribed in Section 2 of Rule 70, the
properties subject of the mortgage be sold at public auction; (3) the defendant
to pay the deficiency if the proceeds of the sale would be insufficient to
satisfy the obligation; and (4) the defendant to pay the costs.

On Appeal by defendant,
the Court of Appeals reversed
the above decision of the trial court upon the finding that the oral agreement,
that the loan may be paid during the Japanese occupation, has been sufficiently
established.  Thus, defendant was ordered
to pay to plaintiff the sum of P1,000.00 (the value of
P120,000.00 Japanese military notes in January, 1945), with legal interest
thereon from 16 January 1945, and attorneys’ fees equivalent to 10% of the
indebtedness due, payable in 90 days from the finality of the decision, with
provision for the sale at public auction
of the mortgaged property upon defendant’s default in the payments.  This is the decision subject of the present
petition for review.

Respondent maintained that the promissory note notwithstanding, the
parties also agreed, orally and on the same occasion when the contract was
executed, that the loan may be paid during the Japanese occupation, subject to
certain adjustment.  The trial court,
while it allowed defendant’s (herein respondent) witness to testify on this
alleged verbal agreement, nevertheless overruled the contention on the ground
that the same had not been duly established, and gave effect to the terms of
the written contract.  The Court of
Appeals, on the other hand, made a contrary finding, and ordered that the loan
be paid in accordance with the Ballantyne schedule.

Clearly, the issue to be resolved in this proceeding is whether
or not there is proof to support the conclusion of the Court of Appeals about
the existence of that verbal agreement between the parties.  This is essentially a question of fact.

The Court of Appeals (Decision, pages 3-7) reasoned as follows:

“…………………………………………………..
Upon a careful consideration of the evidence and the circumstances that
surrounded the transaction in question, we are persuaded that plaintiff agreed
that the loan could be paid by defendant during the occupation subject to
adjust­ment.  So that while the
promissory note, Exhibit A, states that payment is to be made “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”,
the evidence likewise reveal that plaintiff
and defendant had a contemporaneous
oral understand­ing that the loan could be paid during the occupation in
Japanese money, subject to adjustment. 

“We do not agree with the trial court that the evidence on the
verbal agreement between the parties is not sufficient to show that payment may
be made during the occupation.

“Plaintiff himself testified on cross-examination thus:

“Q.  Now, Mr. Server, I
am showing to you this document which has already been previously marked as
Exhibit A, will you please read said document and tell this honorable court
whether you have the same provision in
that document Exhibit 1, that no payment may be made before Jan. 1, 1946?

“A.   There is no
provision like that, sir.

“Q.  Because of this lack
of provision, Mr. Server, payment could have been made on this loan before Jan. 1, 1956 (1946?), is that right?

“A.   If I (he?) had wanted to, yes, I will be forced to accept payment.  (page 129, t.s.n., Aquilizan)

“There
appears to be a controversy as to whether the pronoun ‘I’ or ‘he’ was used by
the plaintiff in the first part of his statement.  Considering the antecedent questions and
answers, the testimony of Benito Serrano, who was a witness to the mortgage
instrument (Exhibit B) and the transaction itself, as well as the affidavits of
stenographer Florencio U. Aquilizan
(page 206, R. A.) and Pacifico Ma. Castro (p. 209,
R.A.), we are convinced that plaintiff used the word ‘he’ and not ‘I’ as
transcribed by the stenographer.  Indeed,
the subsequent clause ‘I will be forced to accept payment,’ is both a logical,
not to mention grammatical, corollary to the antecedent clause ‘If he had wanted to . . . . . . . .’.  If the witness used the pronoun ‘I’, there
would have been no need to say he will be ‘forced to accept payment’.  The clause ‘If I had wanted to’ connotes a discretion on the part of plaintiff, an act within his
control – to grant or not to grant.  We
have here an obvious error in transcribing the stenographic notes.  In the same page of the transcript, it is
signifi­cant that the stenographer wrote the year ‘1956’ when ob­viously the
correct year is 1946 (p. 129, t.s.n., id.) The
subsequent question and the objections as well as the trial court’s remark,
strongly support the fact that plaintiff used the word ‘he’ referring to
defendant, and this was so understood by his counsel and the trial court, thus:

“Q.  And because of this
lack of provision in this promissory note by the defendant he could have paid
the loan even 2, 3, 4 or 5 days before – (interrupted) –

“Atty. Sison:  If your honor please, I would object to the
question as it would interpret the terms of Exhibit A. The terms mentioned in
Exhibit A are clear and there is no need to interpret them.

“Atty. Lugtu:  If your honor please, this is material to the
case.

“Atty. Sison:  The question has been answered, your honor.

“Atty. Lugtu:  If your honor, please, I believe the question
is only a follow-up of the last answer of the witness;

“Court:  There is no
more question about that. The repetition of the
question is unnecessary. (pages 129-131, t.s.n., Aquilizan)”

Petitioner-appellant strenuously objects that, in not cleaving to
the plain text of the transcript, the Court of Appeals went beyond its lawful
authority.  We see no reversible error in
the refusal of the Court of Appeals to accept the literal tenor of the
stenographic transcript recording the answer of petitioner Server to the query
whether defendant could have paid the loan before 1 January 1946.  As transcribed, the answer is:  “If I had wanted to, yes, I
will be forced to accept payment”. 
In the performance of its fact finding function, the Court of Appeals
had authority to determine what was the real answer,
for Server’s transcribed reply was senseless, absurd and
auto-contradictory.  After con­sidering
the circumstances and the evidence of the stenographer, of the witness,
Serrano, and of one of the attorneys, the Court of Appeals reached the
conclusion that the true answer had been “If he (Sikat) had wanted to, yes, I will be forced to accept
payment”, which is a logical and coherent answer and fitted the circums­tances
of the case.  It is true that this power
of construction may be abused and must be used with extreme caution, but the
construction of ambiguities in a transcript of stenographic notes does, not
differ in essence from the interpreta­tion of ambiguous and doubtful terms of
written instruments, and in the case  before us, we find that no abuse was
committed.

An alternative construction suggests itself to the mind, and it
is that the later part of Server’s answer is but a correction of the first
portion thereof: “If I had wanted to — yes, I will be forced to accept
payment”, the starting words being a lapsus that the witness later realized and
rectified.  The result is identical to
that reached by the Court of Appeals, but fits closer to the words on record.

At any rate, Server’s answer, if taken literally, is
unintelligible and can in no way overcome the evidence of respondent-appellee and of his witness, Serrano.

It is well to observe that even without the oral agreement relied
upon by appellee and upheld by the Court of Appeals, the conclusion would be in no way altered.  For the terms of the promissory note of 16 January 1945 provided for
satisfaction of the loan “within two (2) years counted from and
after the termination of hostilities in the Philippines
between the United States of America
and the Empire of Japan”.  Normally,
the word “within” connotes or signifies “before” or
“not later than” (the end of the second year after the termination of
hostilities) and does not mean “not earlier“.  Such being the case, the debtor had the right
to repay the loan at any time after 15th January 1945 until expiration of the
second year after hostilities had ended; he could, therefore, have insisted in
repaying it in occupation currency during the remaining days of the occupation
(Gomez vs. Tabia, concurring opinion, 84 Phil. 276) –

“(d) If the parties had stipulated that the obligation shall
be payable within a certain period of time, that is, at any time within that
period, and the whole or a 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 it would not,
as above stated, make him liable to pay, as damages 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 date of the payment.”  (cas.
cit.)

Rule “a” referred to in the above quotation runs as follows
(84 Phil. 275-276):

“(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 Ballantine sliding scale of value in the absence
of evidence to the contrary.  Because to
compel the debtor to pay his obligation in Philippine currency at the rate of
one Philippine peso for each peso due in Japanese military notes would be to
make him pay, as damages or penalty for the delay in making the payment,
the difference in value between the Japanese military notes at the time the
obligation was incurred and the Philippine currency at the time of the
payment,”

As the debtor thus had the privilege to repay the loan during the
remaining days of January, 1945, and could do so in Japanese fiat money (the
same being the legal currency at the time), the indebtedness should be revalued
(as was done by the Court of Appeals) conformably to the Ballantyne
schedule of comparative values of Japanese notes and Commonwealth
Currency.  This Court has, so ruled in
numerous cases: De Asis vs. Agdamag,
90 Phil. 249; Ang Lam vs. Peregrina,
92 Phil. 507; Wilson vs. Berkenkotter, 92 Phil. 918;
Samson vs. Aguila, 94 Phil. 403; Golez
vs. Camara, 93 Phil. 1081, 1087; Valero vs. Sycip, 103 Phil. 1151.

WHEREFORE,
the decision under appeal is affirmed.  Costs against appellant Server.

Concepcion, C.J., Dizon,
Makalintal, Sanchez, Castro, Angeles, Fernando, and Capistrano, JJ., concur.

Zaldivar, J., on leave, did not take part.