CASE Jardenil vs.


FACTS This is an action for foreclosure of mortgage. Jardenil mortgage his property to Salas. Promissory Note of Jardenil: “debt :(P2,4000.0) To be paid: (31) de marzo de mil novecientos treintaicuarto (1934), con los intereses de dicha suma al tipo de doce por ciento (12%) anual a partir desde fecha hasta el dia de su vencimiento o sea treintaiuno (31) de marzo de mil novecientos treintaicuatro (1934), por la presente, el Sr. Hepti Solas cede y traspasa, por via de primera hipoteca”

ISSUE WON defendant-appellee bound to pay the stipulated interest only up to the date of maturity as fixed in the promissory note, or up to the date payment is effected? This question is, in our opinion controlled by the express stipulation of the parties.

RULING Defendant-appellee has, therefore, clearly agreed to pay interest only up to the date of maturity, or until March 31, 1934. As the contract is silent as to whether after that date, in the event of non-payment, the debtor would continue to pay interest, we cannot in law, indulge in any presumption as to such interest; otherwise, we would be imposing upon the debtor an obligation that the parties have not chosen to agree upon. Article 1755 of the Civil Code provides that "interest shall be due only when it has been expressly stipulated." There is nothing in the mortgage deed to show that the terms employed by the parties thereto are at war with their evident intent. On the contrary the act of the mortgage of granting to the mortgagor on the same date of execution of the deed of mortgage, an extension of one year from the date of maturity within which to make payment, without making any mention of any interest which the mortgagor should pay during the additional period (see Exhibit B attached to the complaint), indicates that the true intention of the parties was that no interest should be paid during the period of grace. What reason the parties may have therefore, we need not here seek to explore. PARASParas, dissenting: Under the facts stated in the decision of the majority, I come to the conclusion that interest at the rate of 12 per cent per annum should be paid up to the date of payment of the whole indebtedness is made. Payment of such interest is expressly stipulated. True, it is stated in the mortgage contract that interest was to be paid up to March 31, 1934, but this date was inserted merely because it was the date of maturity. The extension note is silent as regards interest, but its payment is clearly implied from the nature of the transaction which is only a renewal of the obligation. In my opinion, the ruling of the majority is anomalous and at war with common practice and everyday business usage It is well settled that, under Article 1109 of the Civil Code, as well as under section 5 of the Usury Law (Act No. 2655), the parties may stipulate that interest shall be compounded; AND rests for the computation of compound interest can certainly be made monthly, as well as quarterly, semi-annually, or annually. BUT in the absence of express stipulation for the accumulation of compound interest, no interest can be collected upon interest until the debt is judicially claimed , and then the rate at which interest upon accrued interest must be computed is fixed AT 6 PER CENT PER ANNUM. In the present case, however, the language which we have quoted above DOES NOT JUSTIFY THE CHARGING OF INTEREST UPON INTEREST, so far as interest on the capital is concerned. The provision quoted merely requires the debtor to pay interest monthly at the end of each month, such interest to be computed upon the capital of the loan not yet paid. Clearly this provision does not justify the charging of compound

Cu Unjieng vs. Mabalacat Sugar Co.

Case was Instituted in the Court of First Instance of Pampanga by Cu Unjieng e Hijos, for the purpose of recovering from the Mabalacat Sugar Company an indebtedness amounting to more than P163.00, with interest, and to foreclose a mortgage given by the debtor to secure the same, as well as to recover stipulated attorney's fee and the sum of P1,206, paid by the plaintiff for insurance upon the mortgaged property, with incidental relief. In the complaint Siuliong & Co., Inc., was joined as defendant, as a surety of the Mabalacat Sugar Company, and as having a third mortgage on the mortgaged property. The Philippine National Bank was also joined by reason of its interest as second mortgagee of the land covered by the mortgage to the

WON it is correct for interest charges be made by the plaintiff by estimating the amount of the indebtedness?

plaintiff. Cu Unjieng e Hijos, agreed to extend the time for payment of the indebtedness until June 30, 1929, with certain interim payments prior to the contemplated final liquidation of the whole indebtedness. But the debtor party failed to make the interim payments due and failed altogether to pay the balance due, according to the terms of this extension, on June 30, 1929. it is insisted for the appellant that this agreement for the extension of the time of payment had the effect of abrogating the stipulation of the original contract with respect to the acceleration of the maturity of the debt by non-compliance with the terms of the mortgage Under the second clause of the mortgage, interest should be calculated upon the indebtedness at the rate of 12 per cent per annum. In the same clause, but in a separate paragraph, there is another provision with respect to the payment of interest expressed in Spanish. In English this provision reads substantially as follows: "Interest, to be computed upon the still unpaid capital of the loan, shall be paid monthly, at the end of each month."

interest upon the interest accruing upon the capital monthly . It is true that in subsections (a), (b) and (c) of article IV of the mortgage, it is stipulated that the interest can be thus COMPUTED UPON SUMS which the creditor would have to pay out (a) to maintain insurance upon the mortgaged property, (b) to pay the land tax upon the same property, and (c) upon disbursements that might be made by the mortgagee to maintain the property in good condition. BUT THE CHIEF THING IS THAT INTEREST CANNOT BE THUS ACCUMULATED ON UNPAID INTEREST ACCRUING UPON THE CAPITAL OF THE DEBT. The exhibit referred to is merely a receipt showing that the sum of P256.28 was, on March 19, 1928, paid by the debtor to the plaintiff as interest upon interest. But where interest is improperly charged, at an unlawful rate, the mere voluntary payment of it to the creditor by the debtor is not binding. Such payment, in the case before us, was usurious, being in excess of 12 per cent which is allowed to be charged , under section 2 of the Usury Law, when a debt is secured by mortgage upon real property.

GSIS vs. Appeals



A surety agreement by which Domsat obtained a surety bond from GSIS to secure the payment of the loan from the Banks. Agreement: DOMSAT HOLDINGS, INC., represented by its President as PRINCIPAL, and the GOVERNMENT SERVICE INSURANCE SYSTEM, as Administrator of the GENERAL INSURANCE FUND, are held and firmly bound unto the OBLIGEES for the payment of which sum, well and truly to be made, we bind ourselves, our heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents. Guarantee the repayment of the principal and interest on the loan granted the PRINCIPAL to be used for the financing of the two (2) year lease of a Russian Satellite from INTERSPUTNIK, in accordance with the terms and conditions of the credit package entered into by the parties. This bond shall remain valid and effective until the loan including interest has been fully paid and liquidated, ----When Domsat failed to pay the loan, GSIS refused to comply with its obligation reasoning that Domsat did not use the loan proceeds for the payment of rental for the satellite. GSIS alleged that Domsat, with Westmont Bank as the conduit, transferred the U.S. $11 Million loan


This contention is a fresh issue that has not been raised and ventilated before the courts below.000. if there is an agreement to that [18] effect. The essence or rationale for the payment of interest.00).appellate court affirmed the judgment of the trial court except on the matter of the 2% service charge which was deleted pursuant to Central Bank Circular No. both parties filed their respective [4] motions for reconsideration. the interest prescribed in loan financing arrangements is a fundamental part of the banking business and the core of a bank's existence. is not exactly the same as that of a surcharge or a penalty. In addition. however. to the plaintiff CA. surcharge and the principal were added together and that on the total We find no merit in the petitioner’s contention. as of 20 May 1982. Tan vs. jointly and severally. the interest stipulation. despite an express stipulation therefor in a valid agreement. or in the total principal amount of Four Million Pesos (P4. 6426 or the Bank Secrecy Law. Petitioners executed a promissory note binding them. the bank. Petitioners prayed for the reduction of the 5% stipulated penalty for being unconscionable.00 from respondent Security Bank and Trust Company. granted an extension but only up until 29 December 1981. petitioner Antonio Tan obtained two (2) loans each in the principal amount of Two Million Pesos (P2. for the first time. Article 1226 of the New Civil Code provides that: In obligations with a penal clause. CA  On May 14. may not equally justify the nonpayment or reduction of interest.00) from respondent Cultural WON computation of the private respondent whereby the interest.rendered in favor of the plaintiff and against the defendants. WON the imposed interest to the mortgage loan precludes the creditor from imposing a penalty stipulation? The respondent Court of Appeals seriously erred in not holding that the 15.189% per annum upon maturity and to pay a penalty of 5% every month on the outstanding principal and interest in case of default. In any event. ordering the latter to pay. Not fully satisfied with the decision of the appellate court.189% per annum. petitioners agreed to pay 10% of the total amount due by way of attorney’s fees if the matter were indorsed to a lawyer for collection or if a suit were instituted to enforce payment. 000. CA.proceeds from the Industrial Bank of Korea to Citibank New York account of Westmont Bank and from there to the Binondo Branch of [5] Westmont Bank. 000. 1978. the penalty shall substitute the indemnity for damages .declared that Domsat’s deposit in Westmont Bank is covered by Republic Act No. petitioners. RTC. to pay the sum borrowed with an interest of 15. Ligutan vs. 783. Indeed. 000. The obligation matured on 8 September 1981.000. amounted to P114. quite often referred to as cost of money. jointly and severally. CA Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained on 11 May 1981 a loan in the amount of P120.10. iniquitous and unconscionable. DOES NOT APPEAR AS BEING THAT EXCESSIVE. A penalty stipulation is not necessarily preclusive of interest . Anent the stipulated interest of 15. The Banks filed a complaint before the RTC of Makati against Domsat and GSIS.189% interest and the penalty of three (3%) percent per month or thirty-six (36%) percent per annum imposed by private respondent bank on petitioners’ loan obligation are still manifestly exorbitant.the Court did not find merit in the motion. on its face. RTC. the two being distinct concepts which may separately be demanded. 416. petitioners failed to settle the debt which. 1978 and July 6. What may justify a court in not allowing the creditor to impose full surcharges and penalties. question its reasonableness and prays that the Court reduce the amount. Despite several demands from the bank.

Petitioner defaulted but after a few partial payments he had the loans restructured by respondent CCP. plus the fact that plaintiff was represented by a government lawyer. 1984 to the petitioner demanding full payment. 1979. and (b) the balance on the principal obligation payable in thirty-six (36) equal monthly instalments until fully paid.000. I/We jointly and severally agree to payadditional penalty charges at the rate of TWO per cent (2%) per month on the total amount due until paid.411. until fully paid. I/We jointly and severally promise to pay to the CULTURAL CENTER OF THE PHILIPPINES at its office in Manila. In case of non-payment of this note at maturity/on demand or upon default of payment of any portion of it when due. the promissory note (Exhibit “A”) expressly provides for the imposition of both interest and penalties in case of default on the part of the [6] petitioner in the payment of the subject restructured loan.. Petitioner requested and proposed to respondent CCP a mode of paying the restructured loan. respectively.00 as exemplary damages is out of proportion to the actual damage caused by the non-performance of the contract and is excessive. Nevertheless.32) payable in five (5) instalments. if there is no stipulation to the contrary.314. 1986. On the other hand. wrote a letter dated May 30. respondent CCP. No favorable response was made to said letters. We believe the award of 25% as attorney’s fees and P500.Given the circumstances of the case.67. i. PLUS THREE PERCENT (3%) SERVICE CHARGE.996. through counsel. plus attorney’s fees in an amount equivalent to 25% of said outstanding account. with the corresponding stipulated interest and charges thereof.00.000. The pertinent portion of the promissory note (Exhibit “A”) imposing interest and penalties provides that: For value received. RTC-rendered in favor of plaintiff and against defendant. xxx xxx xxx  With interest at the rate of FOURTEEN per cent (14%) per annum from the date hereof until paid.411. 1979 and July 6. Instead.421. damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfilment of the obligation. the stipulated two percent (2%) per month penalty is in the form of penalty charge which is separate and distinct from the monetary interest on the principal of the loan. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. (Underscoring supplied) xxx xxx xxx   The stipulated fourteen percent (14%) per annum interest charge until full payment of the loan constitutes the monetary interest on the note and is allowed under Article [7] 1956 of the New Civil Code. ordering defendant to pay plaintiff. the amount of P7. plus costs CA. .e. and petitioner accordingly executed a promissory note on August 31. within ten (10) days from receipt of said letter. the sum of THREE MILLION FOUR HUNDRED ELEVEN THOUSAND FOUR HUNDRED + PESOS (P3. Default of payment of this note or any portion thereof when due shall render all other installments and all existing promissory notes made by us in favor of the CULTURAL CENTER OF THE PHILIPPINES immediately due and demandable. sum interest is VALID? and the payment of interests in case of non-compliance. for brevity) evidenced by two (2) promissory notes with maturity dates on May 14. In the case at bar. unconscionable and iniquitous.Center of the Philippines (CCP. 1979 in the amount of Three Million Four Hundred Eleven Thousand Four Hundred Twenty-One Pesos and Thirty-Two Centavos (P3. payable and computed monthly. (a) twenty percent (20%) of the principal amount of the loan upon the respondent giving its conformity to his proposal. representing defendant’s outstanding account as of August 28. plus P50. xxx.   Petitioner Tan failed to pay any instalment on the said restructured loan.421. as exemplary damages.32) Philippine Currency.

in case of the occurrence of loss? WON payment of interest should be included in the insurance to be paid by MICO? It is to be noted that nine endorsement documents were prepared by Alchester in favor of RCBC.069. through its responsible officers. On the issue of payment of surcharges and penalties. we partly agree that GOYU’s pitiful situation must be taken into account. We fail to find justification for the Court of Appeals’ outright deletion of the payment of interest as agreed upon in the respective promissory notes. 1992. 14-B. The need for the payment of interest due upon the principal amount of the obligation. has any right over the insurance policies taken by GOYU. What may justify a court in not allowing the creditor to charge surcharges and penalties despite express stipulation therefor in a valid agreement. GOYU submitted its claim for indemnity on account of the loss insured against.785. but sustained the findings of the trial court with respect to MICO and RCBC’s liabilities. it would still be unjust and inequitable for defendant RCBC to charge the plaintiff with surcharges and penalties considering the latter’s pitiful situation . There being written stipulations as to the rate of interest owing on each specific promissory note as summarized and tabulated by the trial court in its decision (pp. Credit facility in the amount of P30 million was initially granted. which may truly be considered to be at the very core of its existence or being. Record) such agreed interest rates must be followed. 479). one of GOYU’s factory bu ildings in Valenzuela was gutted by fire.470 and 471. This is very clear from paragraph II. the mortgagor.04. then to P90 million. and finally to P117 million. however. as of April 27. as mortgagee. seeking review and consequent reversal of the above dispositions of the Court of Appeals. Even assuming that RCBC. The principle is well known that generally a verbal agreement or contract is no less binding and effective than a written one . 14-C” (Record. And the existence of such a verbal agreement has been amply established by the evidence in this case. This constitutes gross error. respectively. and subsequently. a sister company of RCBC. In any event. sub-paragraph 1 quoted above. the primary end and the ultimate reason for RCBC’s existence and being. RCBC’s executive committee increased GOYU’s credit facility to P50 million. 14-A. No. to endorse and deliver the insurance policies to RCBC. For its credit facilities with RCBC. We do not agree. ordering GOYU “to pay its loan obligation with RCBC in the amount of P68. On April 27. MICO denied the claim on the ground that the insurance policies were either attached pursuant to writs of attachments/garnishments issued by various courts or that the insurance proceeds were also claimed by other creditors of GOYU alleging better rights to the proceeds than the insured. the same does not require that it be embodied in a document or some form of writing to be binding and enforceable. Consequently. The charging of interest for loans forms a very essential and fundamental element of the banking business. which is the cost of money to RCBC. regardless of the existence of such verbal agreement.RCBC vs. pp. Whether or not RCBC. herein petitioners Eli Lao and Uy        . was duly recognized by the trial court when it ruled favorably on RCBC’s counterclaim.1992. with interest thereon at the rate stipulated in the respective promissory notes (without surcharges and penalties) per computation. p. and not just from any other insurance company. Regarding defendant RCBC’s commitment not to charge additional interest. Upon GOYU’s application and Uy’s and Lao’s recommendation. GOYU committed itself to insure the mortgaged property with an insurance company approved by RCBC. 128833 and 128866. GOYU executed two real estate mortgages and two chattel mortgages. penalties and surcharges. The essence or rationale for the payment of interest or cost of money is separate and distinct from that of surcharges and penalties. may not equally justify non-payment of interest. Manila RTC rendered judgment in favor of GOYU The Court of Appeals partly granted GOYU’s appeal. RCBC and MICO are now before us in G.R. It is also significant that GOYU voluntarily and purposely took the insurance policies from MICO. The Court is in a quandary how Alchester could arrive at the idea of endorsing any specific insurance policy in favor of any particular beneficiary or payee other than the insured had not such named payee or beneficiary been specifically disclosed by the insured itself. that payment of any amount as surcharges and penalties should altogether be deleted. It is inconceivable for a bank to grant loans for which it will not charge any interest at all. Each of these four mortgage contracts. CA   GOYU applied for credit facilities and accommodations with RCBC at its Binondo Branch.

to be definitely iniquitous and unconscionable. Surcharges and penalties agreed to be paid by the debtor in case of default partake of the nature of liquidated damages. It should be stressed that the Court will not make any sweeping ruling that surcharges and penalties imposed by banks for non-payment of the loans extended by them are generally iniquitous and unconscionable. we rule that it was error to hold MICO liable in damages for denying or withholding the proceeds of the insurance claim to GOYU. but waiver of additional interests. which RCBC refused. plus the penalty charges of 36%. surcharges. we cannot accept the lower courts’ fi nding that RCBC had thereby ipso facto effectively waived collection of any additional interests. The Court tempers these rates to 2% and 3%. 2227. Furthermore.301. In exercising this vested power to determine what is iniquitous and unconscionable. may be totally just and equitable in another. surcharges. . Title XVIII of the Civil Code. in the light of GOYU’s offer to pay the amount of P116. Article 2227 thereof provides: ART. respectively. whether intended as a indemnity or penalty. surcharges.60 to RCBC as March 1993 (See: Exhibit “BB”). the Court rules the surcharges rates ranging anywhere from 9% to 27%. covered by Section 4. Chapter 3. and penalties from GOYU. shall be equitably reduced if they are iniquitous and unconscionable. Assurances of assistance are one thing. What may be iniquitous and unconscionable in one case. and penalties is another. Given the factual milieu spread hereover. Given the circumstances under which GOYU found itself after the occurrence of the fire.Chun Bing. and penalties from that time onward. the Court must consider the circumstances of each case.992. may have relayed its assurance for assistance to GOYU immediately after the occurrence of the fire. Liquidated damages. This provision of law will have to be applied to the established facts of any given case. we find it more in keeping with justice and equity for RCBC not to charge additional interest.

The factual circumstances may have called for different applications. the rate of interest. But then upon the provisions of Article 2213 of the Civil Code. absent a stipulation. a loan or forbearance of money. two fiber drums of riboflavin were shipped from Yokohama. if the suit were for damages. it may not be unwise. as amended. D). This Circular shall take effect immediately. and it consists in the payment of a sum of money. 1974. 22 In the absence of stipulation. 2. Nonetheless. or credits and the rate allowed in judgments. February 29. as well as the accrual thereof. not constituting a loan or forbearance of money. Such interest normally is allowable from the date of demand." And as was held by this Court in Rivera vs. quasi-contracts. 1956.e. Whether or not the payment of legal interest on an award for loss or damage is to be computed from the time the complaint is filed or from the date the decision appealed from is rendered? Interest upon an obligation which calls for the payment of money. interest "cannot be recovered upon unliquidated claims or damages. has prescribed that the rate of interest for the loan. When the obligation is breached. it was discharged unto the custody of defendant Metro Port Service.Eastern Shipping Lines vs. Monetary Board in its Resolution No. When an obligation. said to be in bad order. judicial or extrajudicial. 20 II. filed by the insurersubrogee who paid the consignee the value of such losses/damages. Whether or not the applicable rate of interest. "unliquidated and not known until definitely ascertained. CA      This is an action against defendants shipping company. I.  Upon arrival of the shipment in Manila on December 12. interest "should be from the date of the decision. an interest on the amount of damages awarded may be imposed at the . i.e. depending on the equities of each case. 21 Furthermore. as follows: 1.38." Exh. Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill of Lading No. except when the demand can be established with reasonable certainty.e. The latter excepted to one drum which contained spillages. Inc. in the absence of express contract as to such rate of interest. the contravenor can be held liable for damages. assessed and determined by the courts after proof then. law.382. defendant Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. on the award of interest. i. 19 The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.466. regardless of its source. 4 L-6998. the interest due should be that which may have been stipulated in writing." By virtue of the authority granted to it under Section 1 of Act 2655. which damage was unknown to plaintiff. is imposed. by way of clarification and reconciliation. On December 4. referred to above. The latter excepted to one drum. the interest due shall itself earn legal interest from the time it is judicially demanded. is breached. With regard particularly to an award of interest in the concept of actual and compensatory damages. 1981.. is twelve percent (12%) or six percent (6%)?  The ostensible discord is not difficult to explain.. arrastre  operator and broker-forwarder for damages sustained by a shipment while in defendants' custody. shall be twelve (12%) percent per annum. goods. 1982. the rate of interest shall be 12% per annum to be computed from default. Inc. 81/01177 for P36. The shipment was insured under plaintiff's Marine Insurance Policy No. i. YMA-8 (Exh. On January 7. delicts or quasi-delicts 18 is breached. or forbearance of any money. is the legal rate. B). 1981. On January 8 and 14.. The trial court opted for judicial demand as the starting point. contracts. while the rest of the contents was adulterated/fake. Perez. from judicial or extrajudicial demand under and subject to the provisions of Article 1169 23 of the Civil Code. 1982 defendant Allied Brokerage Corporation received the shipment from defendant Metro Port Service. one drum opened and without seal (per "Request for Bad Order Survey. When an obligation.. to suggest the following rules of thumb for future guidance. guided by the rule that the courts are vested with discretion. 1622 dated July 29.

this interim period being deemed to be by then an equivalent to a forbearance of credit. however. shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. When the judgment of the court awarding a sum of money becomes final and executory. whether the case falls under paragraph 1 or paragraph 2. 26 Accordingly. the rate of legal interest. above. be on the amount finally adjudged. where the demand is established with reasonable certainty. dated 03 February 1988. 1169. of the court a quo. in lieu of SIX PERCENT (6%). the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. The actual base for the computation of legal interest shall. A TWELVE PERCENT (12%) interest. Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made. shall be 12% per annum from such finality until its satisfaction. shall be imposed on such amount upon finality of this decision until the payment thereof . 3. 25 No interest. The appealed decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decision. the petition is partly GRANTED. in any case. the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained).discretion of the court 24 at the rate of 6% per annum. WHEREFORE.

However.” to “per month”. he cannot be allowed to lay claim for more than what its clear stipulations accord. trial court dismissed respondent’s complaint. The trial court ruled that by issuing checks representing interest payments at 4.500. the terms are to be [8] understood literally just as they appear on the face of the contract.00 on [3] February 2. The lower court and the CA mistook the Loan Transactions Summary for the Disclosure Statement. reformation cannot be resorted to as the documents have not been assailed on the ground of mutual mistake. even if the contract is inequitable or harsh. respondent made 11 monthly interest payments of P25.000. We agree with respondent. Since the mistake is exclusively attributed to petitioner.a. Nowhere was it stated that the interest rates shall be applied on a monthly basis. WON THE APPLICABLE INTEREST SHOULD BE THE LEGAL INTEREST OF TWELVE PER CENT (12%) PER ANNUM DESPITE THE CLEAR AGREEMENT OF THE PARTIES ON ANOTHER APPLICABLE RATE. On the contrary. and not 4. vs.5% per annum and 5% per annum. This unilateral mistake cannot be taken against respondent who merely affixed her signature on the pro forma loan agreements. 1997. respectively. On appeal.First Fil-Sin Lending Corp. They are applied by the court merely to resolve doubts and ambiguities within the framework of [9] the agreement.000. respondent Gloria D. It is only in instances when the language of a contract is ambiguous or obscure that courts ought to apply certain established rules of construction in order to ascertain the supposed intent of the parties. As between two parties to a written agreement. since the terms and conditions contained in the promissory notes and disclosure statements are clear and unambiguous . respectively. Other claims and counterclaims are dismissed for lack of sufficient causes.00 for the first loan and P775. 1999 until fully paid plus 10% of the amount [5] due as attorney’s fees and costs of the suit. the party who gave rise to the mistake or error in the provisions of the same is estopped from asserting a contrary intention to that contained therein.000. respondent made 13 monthly interest payments of P22.5% and 5% per annum. There was no mention of any interest rates and having been prepared exclusively by petitioner.500.000. respondent is now estopped from questioning the provisions of the promissory notes. these rules will not be used to make a new contract for the parties or to rewrite the old one. In sum. 1997 loan obligations of respondent clearly and unambiguously provide for interest rates of 4. Thus. respondent sought to recover the amounts she allegedly paid in excess of her actual obligations. Padillo On July 22. Padillo. When a party sues on a written contract and no attempt is made to show any vice therein. the Disclosure Statements were signed by both parties and categorically stated that interest rates were to be imposed annually.00 each before she settled the P500.00 each before paying the principal loan of P500. 2000. respondent executed a promissory [2] note and disclosure statement. As regards the second loan.00 loan from petitioner. respondent obtained another P500.00 outstanding principal obligation on February 2. As such. In both instances. His omission cannot be arbitrarily supplied by the [10] courts by what their own notions of justice or equity may dictate.5% and 5% per month. 1997. 1999. 1997 and September 7. Alleging that she only agreed to pay interest at the rates of 4.00 with legal interest from February 3. Also. The expressed intention of the parties as laid down on the loan documents controls.00 loan from petitioner First Fil-Sin Lending Corp. when the terms of the agreement are clear and explicit that they do not justify an attempt to read into it any alleged intention of the parties. respondent paid a total of P792.000. For the first loan. and (2) deleting the award of attorney’s fees in favor of appellee.000. The checks issued by respondent do not clearly and convincingly . the same is self serving. Padillo obtained a P500. not monthly. No pronouncement as to cost.5% and 5% monthly interest rates. respondent filed an action for sum of money against herein petitioner before the Regional Trial Court of Manila. the Court of Appeals (CA) reversed and set aside the decision of the court a quo (1) ordering First Fil-Sin Lending Corporation to return the amount of P114. and on the counterclaim. On September 7. On January 27. 1999.00 to Gloria D. Perusal of the promissory notes and the disclosure statements pertinent to the July 22.125.00 for the second loan. petitioner even admitted that it was solely responsible for the preparation of the loan documents. Notably. the same must be given full force and effect. the same should be charged against it. ordered her to pay petitioner P311. for the two loans.000. The former was prepared exclusively by petitioner and merely summarizes the payments made by respondent and the income earned by petitioner. and that it failed to correct the pro forma note [11] “p.

and upon their respective maturities. the rate of interest shall be 12% per annum to be computed from default. [12] 1999. Padillo from petitioner First Fil-Sin Lending Corporation be imposed and computed on a per annum basis. “in the absence of stipulation. v. the promissory notes and disclosure statements remain the best evidence to ascertain the real intent of the parties. the interest rate of 12% per annum shall be imposed until full payment. As decreed in Eastern Shipping Lines.” The CA thus properly imposed the legal interest of 12% per annum from the time the loans matured until the same has been fully paid on February 2. 1997 loan obligations of respondent Gloria D. The same promissory note provides that “x x x any and all remaining amount due on the principal upon maturity hereof shall earn interest at the rate of _____ from date of maturity until fully paid. In addition.prove that the real intent of the parties is to apply the interest rates on a monthly basis. Inc. the penalty at the rate of 12% per annum shall be imposed on the outstanding obligations from date of default until full payment . 1997 and September 7.” interest rates on the July 22. Absent any proof of vice of consent. Court of Appeals.

but they are likewise estopped from questioning the validity thereof for the first time in this petition. the Central Bank. OBM gave its conformity to the assignment. Santos made a time deposit with Overseas Bank of the Philippines in the amount of P500.Raul L.. thru itsPresident ---. that what enables a bank to pay stipulated interest on money deposited with it is that thru the other aspects of its operation it is able to generate funds to cover the payment of such interest.00 with interest as well as attorney's fees. 1969. What was merely touched upon during the proceedings in the court below was the alleged lack of notice to them of the board resolution.   WON the 1-1/2% interest imposed by PNB was illegal? WON OBM should be held liable for interests on the time deposits of IRC and Santos from the time it ceased operations until it resumed its business? Held: No Ratio: .On April 6. Held: No Ratio: . vs. but not the veracity or validity thereof. OBM denied knowledge of the time deposit certificates because the alleged time deposit of Santos 'does not appear' in its books of account. Consequently. acquire foreclosed mortgaged properties or their proceeds and generally engage in other banking and financing activities from which it can derive income. PNB demanded payment from IRC and Santos and OBM. it should be deemed read into every contract of deposit with a bank that the obligation to pay interest on the deposit ceases the moment the operation of the bank is completely suspended by the duly constituted authority. engage in international transactions.000. Not only did IRC and Santos fail to overcome the presumption of regularity of business transactions.000. PNB filed a complaint to collect from IRC and Santos the loan of P700. OBM. However. To secure the said loan.00.00. . The trial court ordered IRC and Santos to pay the plaintiff jointly and solidarily. PNB Realty  Raul L.Integrated Corp.000. And it can be said that all who deposit money in banks are aware of such a simple economic proposition.000 plus interest.Santos also made a time deposit with OBM in the amount of P200. In its answer to the complaint.000. IRC and Santos replied that the obligation (loan) of defendant IRC was deemed paid with the irrevocable assignment of the time deposit certificates. it is inconceivable how it cancarry on as a depository obligated to pay stipulated interest. applied for a loan and/or credit line in the amount of P700.We find nothing illegal in the interest of one and one-half percent (1-1/2%) imposed by PNB pursuant to the resolution of its Board which presumably was done in accordance with ordinary banking procedures. OBM was also ordered to pay cross IRC and Santos whatever amount the latter will pay to PNB. Integrated Realty Corporation. after the due dates of the time deposit certificates. The CA affirmed but deleted the portion of the judgment ordering OBM to pay IRC and Santos whatever amounts they will pay to PNB with interest from the date of payment. did not pay PNB. Conventional wisdom dictates this inexorable fair and just conclusion. the total amount of P700.00 with PNB. Santos executed a Deed of Assignment of the two time deposits in favor of plaintiff.It is a matter of common knowledge. Unless a bank can lend money. There is nothing in the records to show that they raised this issue during the trial by presenting countervailing evidence. Santos.

With the contract was the release of mobilization fund but the fund was to be returned upon completion or deducted from periodic release of mhoneys to petitioner. from requiring borrower or debtor to repay loan or debt then due and payable. Vs. Believing that petitioners failed to comply with their obligations. The word “forbearance” is defined. respondent sent a notice of cancellation. respondent filed a complaint for damages against petitioners. However. within. the context of usury law. represented by the DENR for the reforestation of a forest land within a period of 3 years. which affirmed the trial court and that the balnce of the fund should be returned with 12% interest. Interest at the rate of 12% per annum is impossible if there is no stipulation in the contract. during given period of time. Whether the order to refund the balance of the fund with 12% interest pa is proper. No. as a contractual obligation of lender or creditor to refrain. Herein subject contract does not contain any stipulation as to interest. Petitioner undertook to report to DENR any event or condition which delays or may delay the project. the legal interest is 6% pa on the amount finally adjudged by the Court. . In the absence of stipulation. Petitioners failed to respond to the notice. Both parties appealed to the CA. The RTC held that respondent had sufficient grounds to cancel the contract but saw no reason why the mobilization fund and the cash advances should be refunded or that petitioners are liable for liquidated damages.Bataan Seedling Assoc. thus. Republic Petitioner entered into a contract with respondent. the amount due to respondent does not represent a loan or forbearance of money.

Meanwhile.granting the injunction and annulling the contract of sale between Aniana Galang and petitioners. to expire on June 20. Inc. Baclaran. We held in Manila Bay Club Corporation vs. The RTC rightly modified the rental award from P13. In Eastern Shipping Lines.00 to P40. . 1988. Invoking her “right of first refusal” purportedly based on the lease contract between her and Aniana Galang. 1984 and ending on August 15. Metro Manila. petitioner spouses sent demand letters to respondent for her to vacate the building. 1984.e. Galang and respondent executed a contract of lease on the second and third floors of the building. Aniana Galang.00. When the obligation is breached. 1972. the interest due should be that which may have been stipulated in writing. Moreover. the trial court can take judicial notice of the general increase in rentals of real estate especially of business establishments like the leased building owned [19] by the private respondent. and it consists in the payment of a sum of money. The institution of the ejectment cases prompted respondent to file an action for injunction RTC of Makati. Upon expiration of the lease agreements. Court of Appeals reversed and set aside the decision of the RTC and the complaints in Civil Cases Nos. from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 88-491 and 90-758 were accordingly dismissed. Court of Appeals: It is worth stressing at this juncture that the trial court had the authority to fix the reasonable value for the continued use and occupancy of the leased premises after the termination of the lease contract. vs. the rate of interest shall be 12% per annum to be computed from default. During the existence of the lease. we gave the following guidelines in the award of interest: xxx II With regard particularly to an award of interest in the concept of actual and compensatory damages. We note that respondent was able to deny petitioners the benefits. leased a three-storey building situated at Quirino Avenue. as well as the accrual thereof. the lease agreement between BPI and Galang expired. The increased award of rentals ruled by the RTC is reasonable given the circumstances of the case at bench. Metro Manila. The Court also awards interest in favor of petitioners. In the absence of stipulation. 88-491 of the Regional Trial Court (RTC) of Makati. respondent filed a complaint for Annulment of Sale with Damages docketed as Civil Case No. the original owner. and that it was not bound by the stipulated rental in the contract of lease since it is equally settled that upon termination or expiration of the contract of lease.Catungal vs. On August 24..000. Parañaque. 1988. The lease was for a term of four (4) years commencing on August 15. The back rentals in this case being equivalent to a loan or forbearance of money. BPI subleased the ground floor of said building to respondent Doris Hao. i. On August 15. 7666 and 7667 of the Metropolitan Trial Court (MeTC) of Parañaque. Thus. is imposed. the rate of interest. Hao On December 28. 1986. docketed as Civil Cases Nos. The demand letters were unheeded by respondent causing petitioners to file two complaints for ejectment. as follows: 1. 1986. considering that it is settled jurisprudence that courts may take judicial notice of the general increase in rentals of lease contract renewals much more with business [18] establishments. the interest due thereon in twelve percent (12%) per annum from the time of extrajudicial demand on September 27.e. Metro Manila. i. the interest due shall itself earn legal interest from the time it is judicially demanded. the rental stipulated therein may no longer be the reasonable value for the use and occupation of the premises as a result or by reason of the change or rise in values.. a loan or forbearance of money. Court of Appeals. of their rightful ownership over the subject property for almost a decade. petitioner spouses Ernesto and Mina Catungal bought the property from Aniana Galang. to the Bank of the Philippine Islands (BPI) for a period of about fifteen (15) years. Furthermore. including possession.000.

00 as evidenced by the “Promissory Note” executed by the spouses in favor of the said bank.107. 1978 and the filing of their complaint for annulment of their contracts in 1085 was not yet barred by the prescription The court held that the petition is unmeritorious. Petitioners appealed to the Court of Appeals. Under Article 1150 of the Civil Code. for it was only from the moment that they discovered the petitioner’s unilateral increase thereof . loans from the Banco Filipino Savings and Mortgage bank in the amount of Php. but the CA affirmed the decision of the RTC. Calvin Arcilla secured on three occasions. On September 2. Petitioner’s claim that the action of the private respondents have prescribed is bereft of merit. The period should not be made to retroact to the date of the execution of the contract. Whether or not the CA erred when it held that the cause of action of the private respondents accrued on October 30. Thus the period of prescription of any cause of action is reckoned only from the date of the cause of action accrued.946. 1985 the appellee’s filed a complaint for “Annulment of the Loan Contracts. CA  Elsa Arcilla and her husband. To secure payment of said loans. but from the date they received the statement of account showing the increased rate of interest. the spouses executed “Real Estate Mortgages” in favor of the appellants (Banco Filipino) over their parcels of land. the time for prescription of all kinds of action where there is no special provision which ordains otherwise shall be counted from the day they may be brought. The appellee spouses failed to pay their monthly amortization to appellant.Banco Filipino vs. Foreclosure Sale with Prohibitory and Injunction ” which was granted by the RTC.

Consolidated Bank vs. CA .

the former mortgaged properties. it appears that respondent bank increased the interest rates on the 2 promissory notes without prior consent of the petitioner. PNB advised Mendoza that the bank raised its interest rates to 14% pa. with interest rate the Bank may. Two promissory notes were signed by Mendoza and his wife. within the rates allowed by law. 1308 of the CC. Two PNs were executed for the credit line and stipulated therein : with interest thereon at the rate of 12% pa. Whether or not the interests provided by respondent is proper? No.and on the second promissory note 128/82 the interest of 18% instead of 12% representing accrued interest. the unilateral determination and imposition of increased interest rates by respondent bank is violative of the principle of mutuality of contracts ordained in Art. As security. . 127/82 an interest rate of 21% instead of 18% covering the principal amount. in ine with CBMB Reso No 2126. The REM provided for an escalation clause that rate of interest charged on the obligation secured shall be subject to such increase. during the life of the contract. Petitioner failed to payand requested for restructuring of loans. until paid. without notice. at any tie.” Thereafter. CA Petitioner was granted by respondent PNB a credit line for 500H and 1M for LoC/TR line. raise within the limits allowed by law xxx.Mendoza vs. As held in several cases. Petitioner testified that respondent allegedly inserted in first promissory note No. The petitioner did not agree to the increase in the stipulated interest.

Respondents appealed before the CA which held that the fees provided for in the Underwriting and Consultacy Agreements were mere subterfuges to camouflage the excessively usurious interest charged. Under the agreement. The borrower may recover in accordance with the laws on usury. Article 1957 clearly provides: contracts and stipulations. intended to circumvent the law against usury shall be void. the interest was 16% pa based on the diminishing balance.000 common shares of respondent’s capital stock for one-time underwriting fee of P200. The CA ordered FMIC to reimburse petitioner representing what is ue to petitioner and what is due to respondent. Petitioner filed to collect for alleged deficiency balance against respondents since it failed to collect from the sureties. Whether or not the interests are lawful? No. plus interest at 21% pa. In case of default. At the public auction. Rizal. FMIC caused the foreclosure of the REM. FIC was the highest bidder. respondent executed a REM. vs. an acceleration clause was provided and the amount due is subject to 20% one-time penalty on the amount due and such amount shall bear interest at the highest rate permitted by law. an apparently lawful loan is usurious when it is intended that additional compensation for the loan be disguised by an ostensibly unrelated contract for the payment by the borrower for the lender’s services which re of little value or which are not in fact to be rendered. FMIC granted Este del Sol a loan to finance a sports/resort complex in Montalban. For failure to pay its obligation. . individual continuing suretyship and an underwriting agreement whereby FMIC shall underwrite the public offering of one P120. under any cloak or device whatever. the trial court ruled in favor of FMIC.First Metro Investments Corp.000.

This means that no interest will be charged for the first six-month period while appellee was making up her mind whether to buy the property. San Diego-Sison as Second Party. Upon notice to the FIRST PARTY of the intention to nd purchase the same.000.. i. referring to the second six-month period. In this case. Certainly. in the event that on the sixth month the SECOND PARTY would decide not to purchase. While the CA’s conclusion.000. is 23 flawed since a simple loan may be gratuitous or with a stipulation to pay interest.00). Under this circumstance. Petitioner and respondent stipulated that the loaned amount shall earn compounded bank interests. Considering that petitioner failed to pay the amount given which under the Memorandum of Agreement shall be considered as a loan. the interest rate for loans in 1991 ranged from 25% to 32% per annum.000.00 given to the FIRST PARTY BY THE SECOND PARTY shall be paid to the latter including interest based on prevailing compounded bank interest plus the amount of the sale in excess of P7. The first six-month period was given to plaintiff-appellee (respondent) to make up her mind whether or not to purchase defendant-appellant’s (petitioner's) property. referring to the second six-month period. the literal meaning of its stipulations shall prevail. there is nothing in their agreement that suggests that interest will be charged for six months only even if it takes defendant-appellant an 27 eternity to pay the loan. .000. reminding petitioner of their agreement that the amount of two million pesos which petitioner received from respondent should be considered as a loan payable within six months. does not mean that interest will no longer be charged after the second six-month period since such stipulation was made on the logical and reasonable expectation that such amount would be paid within the date stipulated.4 million. the amount of P3 million given by the SECOND PARTY shall be treated as [a] loan and the property shall be considered as the security for the mortgage .00 should the property be sold at a price more than P7 million. We agree with and adopt the CA’s interpretation of the phrase in this wise: Their agreement speaks of two (2) periods of six months each. The second six -month period was given to defendant-appellant to pay the P2 million loan in the event that plaintiffappellee decided not to buy the subject property in which case interest will be charged "for the last six months only". 589 Batangas East.000. the FIRST PARTY has a period of another six months within which to pay the sum of P3 million pesos provided that the said amount shall earn compounded bank interest for the last six months only.000. Petitioner subsequently failed to pay respondent the amount of two million pesos. The general rule is that if the terms of an agreement are clear and leave no doubt as to the intention of 25 the contracting parties. Muntinlupa. The CA reduced the interest rate to 25% instead of the 32% awarded by the trial court which petitioner no longer assailed.00) That the SECOND PARTY has a period of Six (6) months from the date of the execution of this contract within which to notify the FIRST PARTY of her intention to purchase the aforementioned parcel of land together within the improvements thereon at the price of SIX MILLION FOUR HUNDRED THOUSAND PESOS (P6. Metro Manila. Frias as First party and Dra.e. the phrase "for the last six months only" should be taken in the context of the entire agreement. This is the meaning of the phrase "for the last six months only".400. no interest shall be charged by the SECOND PARTY on the P3 million however. attributing to the doubtful ones that sense which may result from all of them taken jointly.000. The agreement that the amount given shall bear compounded bank interest for the last six months only.Frias vs. The parties agreed for and in consideration of the sum of THREE MILLION PESOS (P3. That prior to the six months period given to the SECOND PARTY within which to decide whether or not to purchase the above-mentioned property. the monetary interest for the last six months continued to accrue until actual payment of the loaned amount. would constitute unjust enrichment on the part of the 29 debtor at the expense of the creditor. Ayala Alabang. the FIRST PARTY may still offer the said property to other persons who may be interested to buy the same provided that the amount of P3. It is further required that the various stipulations of a contract shall be interpreted together. Respondent decided not to purchase the property and notified petitioner through a letter. the 2 party has a period of another six months within which to pay the remaining balance of P3. If FIRST PARTY has no other buyer within the first six months from the execution. that a loan always bears interest otherwise it is not a loan. and per the certification issued by Prudential Bank. San DiegoSison Petitioner is the owner of a house and lot located at No. It has been held that for a debtor to continue in possession of the principal of the loan and to continue to use the same after maturity of the loan without payment of the monetary interest. we find no error committed by the CA in awarding a 25% interest per annum on the twomillion peso loan even beyond the second six months stipulated period. but only for the second period of six months after appellee had decided not to buy the property.

no interest was due on the loan because there was no written agreement as regards payment of interest. verbal or written.000. Likewise. despite receipt of the demand letter. and the debtor incurs delay. respondent consulted a lawyer regarding the propriety of paying interest on the loan despite absence of agreement to that effect. Article 2209 of the Civil Code states that if the obligation consists in the payment of a sum of money.00 to petitioner as payment of the remaining balance of the loan.000. According to her computation. As earlier discussed. although the obligation may be silent on this point. Also. the appellate court promulgated its Decision affirming in toto the RTC Decision Whether or not THE RTC AND THE COURT OF APPEALS ERRED IN RULING THAT NO INTEREST WAS DUE TO PETITIONER? Interest is a compensation fixed by the parties for the use or forbearance of money. In other words. the excess amount of P160. the interest under these two instances may be imposed only as a penalty or damages for breach of contractual obligations. As all her transactions with the PNO were subject to the approval of petitioner as comptroller of the PNO.00 worth of loan. All the same. This is referred to as monetary interest. the two instances apply only to 29 compensatory interest and not to monetary interest.Siga-an vs. The case at bar involves petitioner’s claim for monetary interest.000.000.000. Not satisfied with the amount applied as interest. Petitioner told her that since she paid a total amount of P700. Petitioner’s reliance on respondent’s alleged admission in the Batas Pambansa Blg. nonetheless. there was. There are instances in which an interest may be imposed even in the absence of express stipulation. petitioner pestered her to pay additional interest. Villanueva On 31 August 1993. regarding payment of interest. Respondent testified that although she accepted petitioner’s offer of loan amounting to P540. said compensatory interest is not chargeable in the instant case because it was not duly proven that respondent defaulted in paying the loan.000.00 would be applied as interest for the loan. she paid additional amounts in cash and checks as interests for the loan.00. On 31 October 1993. Thereafter.00 worth of loan. This is called compensatory interest. and upon being advised by her lawyer that she made overpayment to petitioner. Interest may also be imposed by law or by courts 18 as penalty or indemnity for damages. she issued another check in the amount of P200. 22 cases that they had agreed on the payment of interest at the rate of 7% deserves scant consideration. Petitioner threatened to block or disapprove her transactions with the PNO if she would not comply with his demand. as earlier found.000. respondent issued a check worth P500.00. petitioner 28 ordered her to pay interest. Neither was there convincing proof of written agreement between the two regarding the payment of interest. It cannot be charged as a compensation for the use or forbearance of money. She asked petitioner for receipt for the payments but petitioner told her that it was not necessary as there was mutual trust and confidence between them. Article 2212 of the Civil Code provides that interest due shall earn legal interest from the time it is judicially demanded. On 16 December 2005. Her lawyer told her that petitioner could not validly collect interest on the loan because there was no agreement between her and petitioner regarding payment of interest. ignored her claim for reimbursement RTC rendered a Decision on 26 January 2001 holding that respondent made an overpayment of her loan obligation to petitioner and that the latter should refund the excess amount to the former Petitioner appealed to the Court of Appeals.200.00 for theP540.200. Further. and fearing that petitioner might block or unduly influence the payment of her vouchers in the PNO. Petitioner.000. a legal interest of 12% per annum may be imposed as indemnity for damages if no stipulation on the payment of interest was agreed upon. Since she paid petitioner a total amount of P1.000. she sent a demand letter to petitioner asking for the return of the excess amount of P660. Thus. The right to interest arises only by virtue of a contract or by virtue of damages for delay or failure to pay the principal loan on which interest is demanded.00 for the P540. It appears that petitioner and respondent did not agree on the payment of interest for the loan.00 to petitioner as partial payment of the loan. monetary interest is due only if there was an express stipulation in writing for the payment of interest. she conceded.000. . respondent merely testified that after paying the total amount of loan. no verbal or written agreement for her to pay interest on the loan. Respondent did not categorically declare in the same case that she and respondent made an express stipulation in writing as regards payment of interest at the rate of 7%.00. the total amount she paid to petitioner for the loan and interest accumulated 7 to P1. In the said case.

Chua .Carpo vs.

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