G.R. No. L-1927 - Rono vs. Gomez

On October 5, 1944, during the Japanese occupation, Cristobal Rono secured a loan of 4,000 pesos in Japanese war notes from Jose L. Gomez.
Rono represented that the funds were to be utilized to purchase a jitney, a point later raised in controversy regarding the true value of the money.
Rono executed a promissory note stating:

He promised to pay 4,000 pesos one year after the date of the loan.
The note explicitly indicated that no interest would accrue on the principal sum.
Payment was to be rendered in the currency that would be prevailing at the end of the stipulated period (i.e., after the war, Philippine currency).
The note contained a waiver clause whereby Rono renounced any rights or privileges that might arise from any postwar legislative adjustments that could devalue the sum received.

After the liberation of the Philippines, on October 15, 1945, Rono was sued in the Laguna Court of First Instance for the payment of the 4,000 pesos in Philippine currency.
Rono’s primary defense centered on the argument that the contract was void on grounds of immorality and contrary to law, public order, and good morals—asserting that the repayment should only be the equivalent of the value of the Japanese notes (calculated by Government experts as approximately 100 pesos).
The trial court ruled in favor of Jose L. Gomez by ordering Rono to pay 4,000 pesos in Philippine currency, with legal interest computed from the filing of the complaint, plus costs.
The Court of Appeals affirmed the decision, highlighting:

Rono’s voluntary and knowledgeable assent to the terms of the note.
The absence of misrepresentation regarding the contract’s contents.
The validity of contractual stipulations under general principles of contract law.

Asserted that the agreement was valid on its face since both parties willingly accepted and understood the terms, including the contingency provision on currency conversion.
Emphasized that the contract was aleatory in nature, similar to insurance policies and life annuities, where the outcome depended on future events (i.e., the change in currency).
Held that the increase in the intrinsic value of Philippine currency was a consequence of an unforeseeable event and not a violation of any usury law, as no additional interest was charged.

Expressed agreement with the majority regarding the legality and enforceability of the contract.
In one concurring opinion, additional criticism was directed towards the morality of sweepstakes and other forms of gambling, though this was a separate issue from the contract’s substance.

Argued that while the contract’s language was clear on its face, the circumstances under which it was executed—during wartime uncertainty—meant that Rono was in a position of economic and informational disadvantage.
Contended that enforcing the contract to its literal sum (4,000 pesos in postwar currency) was unconscionable, considering that the borrowed Japanese war notes, in ordinary terms, possessed a significantly lower purchasing power.

Whether the express stipulation in the promissory note—in which Rono agreed to repay 4,000 pesos in the currency prevailing one year later—renders the contract valid despite the dramatic change in value between Japanese war notes and postwar Philippine currency.
Determination if such an agreement, containing a waiver of any postwar devaluation benefits, contravenes principles of law, public order, or good morals.

Whether the parties’ freedom to contract under Article 1255 of the Civil Code, which allows for stipulated terms provided they are not contrary to law, morals, or public order, applies in this instance.
The significance of Article 1091 in enforcing the expressed terms of the contract even when unforeseen events such as a change in legal tender occur.

Whether the increase in the purchasing power of the Philippine peso, following the liberation and the change of currency, transformed the nature of the obligational performance.
Consideration of the concept of aleatory contracts, notably if the resultant gain to Jose L. Gomez constitutes interest or is merely the realization of a risk assumed by both parties.

Whether any alleged misrepresentation or undue advantage was present in the drafting and signing of the promissory note.
The impact of the lender’s superior knowledge and potential professional predation on the fairness of the remote commitment.