G.R. No. L-49494 - Ponce vs. Court of Appeals

On June 3, 1969, Jesusa B. Afable, Felisa L. Mendoza, and Ma. Aurora C. Dino executed a promissory note in favor of Nelia G. Ponce for P814,868.42, payable without interest on or before July 31, 1969.
The note stipulated that if unpaid at maturity, it would draw 12% interest per annum without demand; in case of suit to enforce payment, the debtors would pay 10% attorney's fees; and upon failure, a first mortgage would be executed over certain properties.

Upon non-payment, Nelia G. Ponce and her husband filed a complaint on July 27, 1970, for the recovery of the principal, interest, and damages.
Ma. Aurora C. Dino denied borrowing from plaintiffs and claimed her signature was for formality only.
Jesusa B. Afable contended that the note did not reflect the true agreement, that Felisa Mendoza was the sole obligor, and Afable only signed as President of Carmen Planas Memorial, Inc., thus incurring no personal obligation.
Felisa Mendoza admitted executing the note but claimed it was a recapitulation of prior transactions with her as the sole debtor and others as accommodation parties; she also alleged usurious transactions and counterclaimed for accounting of interests paid.
Plaintiffs denied usury allegations under oath.

Respondents repeatedly failed to appear to present evidence, leading to submission of the case.
On March 9, 1972, the Court of First Instance (CFI) of Manila ordered Afable, Mendoza, and Dino jointly and severally to pay petitioners P814,868.42 plus 12% interest from maturity date, 10% attorney’s fees, and costs.

Only Jesusa Afable appealed, arguing illegality on the basis that the contract involved payment in US dollars.
Initially, on December 13, 1977, the Court of Appeals affirmed the trial court judgment.
The first motion for reconsideration was denied on February 27, 1978.
On a second motion for reconsideration, on June 8, 1978, the Court of Appeals reversed itself, ruling the promissory note was payable in US dollars, making the transaction illegal under Republic Act No. 529, and applied the in pari delicto doctrine to dismiss the complaint.
Subsequent motions for reconsideration by petitioners were denied on July 6, 1978 and November 27, 1978.

Petitioners filed the instant petition to set aside the Court of Appeals’ resolutions.
They raised assignments of error challenging the Court of Appeals’ interpretation that the note was payable in dollars, the applicability of RA 529, the failure to consider defenses not properly pleaded, and the applicability of the in pari delicto doctrine.

Whether the Court of Appeals erred in holding that the promissory note was payable in US dollars despite its clear terms indicating payment in Philippine currency.

Whether Republic Act No. 529 applies to the parties’ transaction and if such application renders the contract void and unenforceable.

Whether the defense of illegality under RA 529 and the doctrine of in pari delicto can be raised when these were not pleaded or adopted in trial court.

Whether, assuming RA 529 applies, the doctrine of in pari delicto bars recovery by the petitioners.