G.R. No. L-23689 - Carillo vs. Allied Workers Association of the Philippines

On January 16, 1945, petitioner B.J. Server advanced a loan of P120,000.00 in Japanese Occupation money to respondent Ricardo Sikat.
To secure the repayment, Sikat executed a mortgage on two parcels of land in favor of Server and, together with Jose de Luna Gonzales, signed a promissory note.
The promissory note stated that both undersigned jointly and severally promised to pay Server Six Thousand Pesos (P6,000.00), with interest at six percent per annum, within two years from the termination of hostilities between the United States of America and the Empire of Japan.
The note provided that payment was to be made in the legal Philippine currency circulating at the time of payment, and a separate mortgage document was executed for the real estate described in Transfer Certificate of Title No. 42974 for the City of Manila.

On October 15, 1947, Server sent a letter reminding Sikat of the existence of the loan.
On December 7, 1953, Server formally demanded the payment of the indebtedness under the terms of the promissory note and security instruments.
Sikat, in his answer, disputed the due execution of the mortgage and the promissory note, alleging that they did not reflect the true intention of the parties and were executed against his will.
Respondent also contended that he had attempted to settle the indebtedness—which he asserted amounted to only P60,000.00 in Japanese military notes—by offering to pay the market equivalent (or its adjusted value under the Ballantyne schedule), but the offer was refused by Server.
As a special defense, Sikat argued that the loan was usurious, emphasizing the disparity between the loan's face value in Japanese notes and the sum expressed in Philippine currency, effectively transforming a P60,000.00 debt into an obligation of P6,000.00.

The trial court dismissed Sikat’s defenses, ruling that the written stipulations in the mortgage and promissory note prevailed over any alleged verbal agreement.
The trial court ordered respondent to pay the P6,000.00 with legal interest from January 16, 1945, plus attorney’s fees equivalent to 10% of the indebtedness due, and provided for the sale of the mortgaged properties if defendant defaulted.
On appeal, the Court of Appeals reversed the trial court’s decision. It found that there was sufficient evidence to show that an oral agreement existed whereby the loan could be paid in Japanese money during the Japanese occupation, subject to adjustment.
The Court of Appeals adopted the Ballantyne schedule for adjusting the value, effectively revaluing the indebtedness to P1,000.00 (the equivalent of P120,000.00 in Japanese military notes in January 1945), with corresponding legal interest and attorney’s fees.
A crucial point centered on the interpretation of a stenographic transcript of Server’s testimony, where ambiguity arose over whether the pronoun used was "I" or "he"; the Court of Appeals resolved this in favor of the interpretation that supported the existence of the oral agreement.

Whether there is sufficient evidence to support the claim that, besides the written promissory note, the parties entered into an oral agreement permitting the loan to be paid during the Japanese occupation in Japanese military notes subject to adjustment.
Whether the alleged verbal agreement could modify or override the plain language of the written promissory note, which stipulated a two-year period for payment commencing after the cessation of hostilities.

Whether the ambiguity in the stenographic transcript regarding the pronoun in Server’s answer ("I" versus "he") should be resolved in favor of the existence of the oral agreement.
Whether the trial court erred in dismissing the relevance of the surrounding evidence and circumstances that purportedly supported an understanding between the parties contrary to the explicit written terms.

Whether the adjustment of the indebtedness according to the Ballantyne sliding scale was proper, given that payment during the occupation in Japanese notes was purportedly allowed.
Whether the revaluation of the loan was justified to prevent imposition of a penalty or undue damages resulting from the currency conversion discrepancy.