Philippine National Bank vs. Court of Appeals, G.R. No.

88880, 196 SCRA 536 , April 30, 1991 PETITION for certiorari to review the decision of the Court of Appeals. The facts are stated in the opinion of the Court. The Chief Legal Counsel for petitioner. Ambrosio Padilla, Mempin & Reyes Law Offices for private respondent. GRIÑO-AQUINO, J.: The Philippine National Bank (PNB) has appealed by certiorari from the decision promulgated on June 27, 1989 by the Court of Appeals in CA-G.R. CV No. 09791 entitled, “AMBROSIO PADILLA, plaintiffappellant versus PHILIPPINE NATIONAL BANK, defendant-appellee,” reversing the decision of the trial court which had dismissed the private respondent‟s complaint “to annul interest increases.” (p. 32, Rollo.) The Court of Appeals rendered judgment: “x x x declaring the questioned increases of interest as unreasonable, excessive and arbitrary and ordering the defendant-appellee [PNB] to refund to the plaintiff-appellant the amount of interest collected from July, 1984 in excess of twenty-four percent (24%) per annum. Costs against the defendant-appellee.” (pp. 14-15, Rollo.) In July 1982, the private respondent applied for, and was granted by petitioner PNB, a credit line of P1.8 million, secured by a real estate mortgage, for a term of two (2) years, with 18% interest per annum. Private respondent executed in favor of the PNB a Credit Agreement, two (2) promissory notes in the amount of P900,000.00 each, and a Real Estate Mortgage Contract. The Credit Agreement provided that “9.06 Other Conditions. The Borrowers hereby agree to be bound by the rules and regulations of the Central Bank and the current and general policies of the Bank and those which the Bank may adopt in the future, which may have relation to or in any way affect the Line, which rules, regulations and policies are incorporated herein by reference as if set forth herein in full. Promptly upon receipt of a written request from the Bank, the Borrowers shall execute and deliver such documents and instruments, in form and substance satisfactory to the Bank, in order to effectuate or otherwise comply with such rules, regulations and policies.” (p. 85, Rollo.) The Promissory Notes, in turn, uniformly authorized the PNB to increase the stipulated 18% interest per annum “within the limits allowed by law at any time depending on whatever policy it [PNB] may adopt in the future; Provided, that, the interest rate on this note shall be correspondingly decreased in the event that the applicable maximum interest rate is reduced by law or by the Monetary Board.” (pp. 85 -86, Rollo; italics ours.) The Real Estate Mortgage Contract likewise provided that: “(k) INCREASE OF INTEREST RATE “The rate of interest charged on the obligation secured by this mortgage as well as the i nterest on the amount which may have been advanced by the MORTGAGEE, in accordance with the provisions hereof, shall be subject during the life of this contract to such an increase within the rate allowed by law, as the Board of Directors of the MORTGAGEE may prescribe for its debtors.” (p. 86, Rollo; emphasis supplied.) Four (4) months advance interest and incidental expenses/ charges were deducted from the loan, the net proceeds of which were released to the private respondent by crediting or transferring the amount to his current account with the bank. On June 20, 1984, PNB informed the private respondent that (1) his credit line of P1.8 million “will expire on July 4, 1984,” (2) “[i]f renewal of the line for another year is intended, please submit soones t possible your request,” and (3) the “present policy of the Bank requires at least 30% reduction of principal before your line can be renewed.” (pp. 86-87, Rollo.) Complying, private respondent on June 25, 1984, paid PNB P540,000.00 (30% of P1.8 million) and requested that “the balance of P1,260,000.00 be renewed for another period of two (2) years under the same arrangement” and that “the increase of the interest rate of my mortgage loan be from 18% to 21%” (p. 87, Rollo.) On July 4, 1984, private respondent paid PNB P360,000.00. On July 18, 1984, private respondent reiterated in writing his request that “the increase in the rate of interest from 18% be fixed at 21% of 24%. (p. 87, Rollo.) On July 26, 1984, private respondent made an additional payment of P100,000. On August 10, 1984, PNB informed private respondent that “we can not give due course to your request for preferential interest rate in view of the following reasons: Existing Loan Policies of the bank requires 32% for loan of more than one year; Our present cost of funds has substantially increased.” (pp. 87 -88, Rollo.) On August 17, 1984, private respondent further paid PNB P150,000.00.

In a letter dated August 24, 1984 to PNB, private respondent announced that he would “continue making further payments, and instead of a „loan of more than one year,‟ I shall pay the said loan before the lapse of one year or before July 4, 1985. x x x I reiterate my request that the increase of my rate of interest from 18% „be fixed at 21% or 24%.‟ ” (p. 88, Rollo.) On September 12, 1984, private respondent paid PNB P160,000.00. In letters dated September 12, 1984 and September 13, 1984, PNB informed private respondent that “the interest rate on your outstanding line/loan is hereby adjusted from 32% p.a. to 41% p.a. (35% prime rate + 6%) effective September 6, 1984;” and further explained “why we can not grant your request for a lower rate of 21% or 24%.” (pp. 88-89, Rollo.) In a letter dated September 24, 1984 to PNB, private respondent registered his protest against the increase of interest rate from 18% to 32% on July 4, 1984 and from 32% to 41% on September 6, 1984. On October 15, 1984, private respondent reiterated his request that the interest rate should not be increased from 18% to 32% and from 32% to 41%. He also attached (as payment) a check for P140,000.00. Like rubbing salt on the private respondent‟s wound, the petitioner informed private respondent on October 29, 1984, that “the interest rate on your outstanding line/loan is hereby adjusted from 41% p.a. to 48% p.a. (42% prime rate plus 6% spread) effective 25 October 1984.” (p. 89, Rollo.) In November 1984, private respondent paid PNB P50,000.00 thus reducing his principal loan obligation to P300,000.00. On December 18, 1984, private respondent filed in the Regional Trial Court of Manila a complaint against PNB entitled, “AMBROSIO PADILLA vs. PHILIPPINE NATIONAL BANK” (Civil Case No. 84 28391), praying that judgment be rendered: “a. Declaring that the unilateral increase of interest rates from 18% to 32%, then to 41% and again to 48% are illegal, not valid nor binding on plaintiff, and that an adjustment of his interest rate from 18% to 24% is reasonable, fair and just; “b. The interest rate on the P900,000.00 released on September 27, 1982 be counted from said date and not from July 4, 1984; “c. The excess of interest payment collected by defendant bank by debiting plaintiff‟s current account be refunded to plaintiff or credited to his current account; “d. Pending the determination of the merits of this case, a restraining order and/or a writ of preliminary injunction be issued (1) to restrain and/or enjoin defendant bank for [sic] collecting from plaintiff and/or debiting his current account with illegal and excessive increases of interest rates; and (2) to prevent defendant bank from declaring plaintiff in default for non-payment and from instituting any foreclosure proceeding, extrajudicial or judicial, of the valuable commercial property of plaintiff.” (pp. 89 -90, Rollo.) In its answer to the complaint, PNB denied that the increases in interest rates were illegal, unilateral excessive and arbitrary and recited the reasons justifying said increases. On March 31, 1985, the private respondent paid the P300,000-balance of his obligation to PNBN (Exh. 5). The trial court rendered judgment on April 14, 1986, dismissing the complaint because the increases of interest were properly made. The private respondent appealed to the Court of Appeals. On June 27, 1989, the Court of Appeals reversed the trial court, hence, PNB‟s recourse to this Court by a petition for review under Rule 45 of the Rules of Court. The assignments of error raised in PNB‟s petition for review can be resolved into a single legal issue of whether the bank, within the term of the loan which it granted to the private respondent, may unilaterally change or increase the interest rate stipulated therein at will and as often as it pleased. The answer to that question is no. In the first place, although Section 2, P.D. No. 116 of January 29, 1973, authorizes the Monetary Board to prescribe the maximum rate or rates of interest for loans or renewal thereof and to change such rate or rates whenever warranted by prevailing economic and social conditions, it expressly provides that “such changes shall not be made oftener than once every twelve months.” In this case, PNB, over the objection of the private respondent, and without authority from the Monetary Board, within a period of only four (4) months, increased the 18% interest rate on the private respondent‟s loan obligation three (3) times: (a) to 32% in July 1984; (b) to 41% in October 1984; and (c) to 48% in November 1984. Those increases were null and void, for if the Monetary Board itself was not authorized to make such changes oftener than once a year, even less so may a bank which is subordinate to the Board. Secondly, as pointed out by the Court of Appeals, while the private respondent-debtor did agree in the Deed of Real Estate Mortgage (Exh. 5) that the interest rate may be increased during the life of the contract “to such increase within the rate allowed by law, as the Board of Directors of the MORTGAGEE

11 -12. including commissions premiums. 5-e-1) or “within the limits allowed by law” (Promissory Notes. PNB‟s successive increases of the interest rate on the private respondent‟s loan. over the latter‟s protest. or any bank for that matter. Hence. Court of Appeals.‟ „3-B. and (5) Exhibit „5‟—Real Estate Mortgage contract dated July 1. Such a contract is a veritable trap for the weaker party whom the courts of justice must protect against abuse and imposition.:p As payments for the purchase of medicines.‟ and „4-B‟ uniformly authorize the defendant bank to increase the stipualted interest rte of 18% per annum „within the limits allowed by law at any time depending on whatever policy it may adopt in the future: Provided. to wit: (1) Exhibit „1‟—Credit Agreement dated July 1.R. and PNB Circular No. to unilaterally and successively increase the agreed interest rates from 18% to 48% within a span of four (4) months. It would have invested the loan agreement with the character of a contract of adhesion.R. 111. and 4). For her failure to receive the full payment for the medicines. 4079-84 (Exh. in order to effectuate or otherwise comply with such rules. Justice Ameurfina M. 09791. CV No. hence. and no documents were executed and delivered by the debtor to effectuate the increases. as the Board of Directors of the MORTGAGEE may prescribe for its debtors.” Speaking through Mme. is void (Garcia vs. 905. 41% and 48% (per annum). vs. The contract must bind both contracting parties. the unilateral action of the PNB in increasing the interest rate on the private respondent‟s loan.) [Philippine National Bank vs. 3. Law Union & Rock Insurance Co. IBARROLA. Rollo. 13). concur.‟ “Exhibits „2. although it has the effect of law is not a law. “Exhibit „1‟ states in its portion marked Exhibit „1-g-1‟: „9. the Court resolved to deny the petition for review for lack of merit. COURT OF APPEALS and DR. 1982. 1982. in form and substance satisfactory to the Bank. violated the mutuality of contracts ordained in Article 130 8 of the Civil Code: “ART. 1956 of the Civil Code which provides that “no interest shall be due unless it has been expressly stipulated in writing. the PNB relied on its own Board Resolution No..‟ and „4‟ in their portions respectively marked Exhibits „2 -B. 123643 October 30. the Province of Isabela issued several checks drawn against its account with petitioner Philippine National Bank (PNB) in favor of the seller. 1980. 1996 PHILIPPINE NATIONAL BANK. with costs against the petitioner. 1976 (72 O. its validity or compliance cannot be left to the will of one of them. escalation clauses to be valid should specifically provide: (1) that there can be an increase in interest if increased by law or by the Monetary Board. Cruz. 95 Phil. he is not bound to pay a higher rate than that. except 23 checks amounting to P98. the two agents and PNB.‟ “Clearly. 85). the weaker party‟s (the debtor) participation being reduced to the alternative “to take it or leave it” (Qua vs. 676-J) which provided that “the maximum rate of interest. regulations and policies. Rita Legarda.691.” In order that obligations arising from contracts may have the force of law between the parties. Herrera. Gancayco and Medialdea. 494 dated July 1. RESOLUTION FRANCISCO. 1974 before the Regional Trial Court (RTC) an "action for a sum of money and damages.may prescribe” (Exh. PNB Circular No. its Treasurer. 1) Section 9. 3.” Besides violating P. Ibarrola filed on November 6. p. A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties. ERLINDA G. finding no reversible error in the decision of the Court of Appeals in CA-G. that. Lyndon Pharmaceuticals Laboratories. which the agents appropriated after negotiating them with PNB. The Court of Appeals observed. SO ORDERED. no law was ever passed in July to November 1984 increasing the interest rates on loans or renewals thereof to 32%. petitioner.G. regulations and policies are incorporated herein by reference as if set forth herein in full. 494. 116 which limits such changes to “once every twelve months. then. 116.‟ „3. that license would have been null and void for being violative of the principle of mutuality essential in contracts.‟ ” (p.” (pp. That an increase in the interest rate from 18% to 48% within a period of four (4) months is excessive." docketed as Civil Case 4226-p. 15 SCRA 346 (1987).01 that its terms “may be amended only by an instrument in writing signed by the party to be bound as burdened by such amendment. 2 against the Province of Isabela. The checks were delivered to the seller's agents 1 who turned them over to Ibarrola. 2.. 5 of the Usury Law refer to stipulated or conventional interest and does not apply where no interest was stipulated by the parties (Philippine American Accident Insurance Company.” (italics supplied. the Borrowers shall execute and deliver such documents and instruments. Rollo. 40-129-84 (Exh. 11) removed the Usury Law ceiling on interest rates — “x x x increases in interest rates are not subject to any ceiling prescribed by the Usury Law. this Court disauthorized the bank from raising the interest rate on the borrowers‟ loan from 12% to 17% despite an escalation clause in the loan agreement signed by the debtors authorizing Banco Filipino “to correspondingly increase the interest rate stipulated in this contract without advance notice to me/us in the event a law should be enacted increasing the lawful rates of interest that may be charged on this particular kind of loan. 1983. where the parties do not bargain on equal footing.” but it did not authorize the PNB. (3) Exhibit „3‟—Promissory Note dated January 3. WHEREFORE. 1308. Inc.8 million loan agreement between the PNB and the private respondent gave the PNB a license (although in fact there was none) to increase the interest rate at will during the term of the loan. 681 (Exh. in accordance with the provisions hereof. J. No. The Borrowers hereby agree to be bound by the rules and regulations of the Central Bank and the current and general policies of the Bank and those which the Bank may adopt in the future. 97 SCRA 811. JJ.” The increases imposed by PNB also contravene Art.D.06 Other Conditions.) In the present case.90. the interest rate on this note shall be correspondingly decreased in the event that the applicable maximum interest rate is reduced by law or by the Monetary Board. . and (2) in order for such stipulation to be valid. Note. No. a business operated by private respondent Ibarrola. as found by the Court of Appeals. 15). Promptly upon receipt of a written request from the Bank. dated December 13. CB Circular No. were arbitrary as they violated an express provision of the Credit Agreement (Exh. which rules. Exhs. the bank relied on Section 3 of CB Circular No.) In the Banco Filipino case. is indisputable.D. there must be mutuality between the parties based on their essential equality. Narvasa (Chairman). Navarro.—Both Article 2212 of the Civil Code and Sec. “x x x We focus Our attention first of all on the agreement between the parties as embodied in the following instruments. Petition denied. 10).” This Court disallowed the increase for the simple reason that said “Circular No. it must include a provision for reduction of the stipulated in terest „in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board. (4) Exhibit „4‟—Promissory Note.‟ “Exhibit „5‟ in its portion marked Exhibit „5-e-1‟ stipulates: „(k) INCREASE OF INTEREST RATE „The rate of interest charged on the obligation secured by this mortgage as well as the interest on the amount which may have been advanced by the MORTGAGEE. 21 SCRA 555).. the agreement between the parties auth orized the defendant bank to increase the interest rate beyond the original rate of 18% per annum but „within the limits allowed by law‟ or „within the rate allowed by law. respondents. 1983. Inc. in violation of P.‟ it being declared the obligation of the plaintiff as borrower to execute and deliv er the corresponding documents and instruments to effectuate the increase. (2) Exhibit „2‟— Promissory Note dated July 5. but those resolution and circulars are neither laws nor resolutions of the Monetary Board. which may have relation to or in any way affect the Line. vs.” The debtor herein never agreed in writing to pay the interest increases fixed by the PNB beyond 24% per annum. 1982. shall be subject during the life of this contract to such an increase within the rate allowed by law. this Court held: “It is now clear that from March 17. 196 SCRA 536(1991)] G. Flores. even assuming that the P1. fees and other charges on loans with a maturity of more than 730 days by banking institution x x x shall be 19%. Series of 1982 (Exh.) In Banco Filipino Savings and Mortgage Bank vs.

PNB's direct appeal to this court from that order was referred to the CA which affirmed the RTC order. the sheriff computed the interest mentioned in the judgment at the rate of 12% which PNB opposed insisting that the rate should only be 6%.691. Three civil suits were filed against herein respondents which were consolidated for trial before the Court of First Instance of Laguna (San Pablo City). 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). is deemed to be equivalent to a forbearance of credit. Thereafter. 1994 said court issued an order clarifying that the rate is 12%. shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. not constituting a loan or forbearance of money. 1993 until fully satisfied.691. if the amount adjudged remains unpaid. OF THE PHILIPPINES) and PORVENIR ABAJAR BARRETO. respectively. CLARO SAMONTE. 10 (Emphasis ours.) The case at bench does not involve a loan. of the Court of Appeals 1 affirming the decision of the court a quo with modification to include an award of legal interest on the amounts adjudged in favor of the petitioners from the date of the decision of the Court of Appeals to the time of actual payment. 1987. 8 this Court had provided a rule "of thumb for future guidance. all passengers of the LTB bus. except the treasurer who died in the meantime. where the demand is established with reasonable certainty. G. PNB's liability is based only on the RTC's judgment where it was held solidarily liable with the other defendants due to its negligence when it "failed to assure itself" if the Provincial Treasurer was "properly authorized" by Ibarrola to "make endorsements" of said checks." the applicable rate is "6% per annum as provided in Article 2209 of the NCC and not the rate of 12% per annum as provided in (CB) Cir. 7 and (2) whether such rate shall be computed from the filing of the complaint until fully paid? The issues are not new.. Hence. This interest according to Eastern Shipping shall be computed from the time of the filing of the complaint considering that the amount adjudged (P98. 416. At the execution stage. computed from the time the judgment became final and executory on November 26.) Applying the aforequoted rule. Said amount being merely the uncollected balance of the purchase price covered by the 23 checks encashed and appropriated by Ibarrola's agents. computed from the time of the filing of the complaint until its full payment before finality of judgment. or to cases where money is transferred from one person to another and the obligation to return the same or a portion thereof is adjudged. Ty. this petition for review under Rule 45 where two legal issues are raised: (1) whether in an action for damages." 11 Indeed. Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made. NEMESIO FLORES. 3 (Emphasis supplied." 9 to wit: When an obligation. Accordingly. petitioners.. respondents. however. This present action arose from a collision between a passenger bus of the Laguna Tayabas Bus Co. . No. of the Philippines which took place on June 3." 14 Thus. the appealed decision is REVERSED. The actual base for the computation of this 12% interest after the judgment in this damage suit became final shall be the amount adjudged (P98. GANCAYCO. the proper rate of interest referred to in the judgment under execution is only 6%.a. the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art.a. the "interim period from the finality of judgment awarding a monetary claim and until payment thereof. SO ORDERED. Vasquez for petitioners. in accordance with the pronouncement in Eastern Shipping the rate of 12% p.90 with interest thereon at the legal rate from the date of the filing of the complaint until the entire amount is fully paid. Leon O.In its decision dated September 29.a. v. 416 applies only to: [L]oan or forbearance of money. hence the proper imposable rate of interest is six (6%) per cent. L-35697-99 April 15. the interest rate shall be 12% p. therefore. the trial court ordered all the defendants in said civil case. However. among which is: (1) P98. LAGUNA TAYABAS CO. should be imposed. an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. 1993. POTENCIANO REQUIJO. de Lara and Associates for respondents. did not specify whether the legal rate of interest referred to in the judgment is 6% or 12%. SANTIAGO SYJUCO. DOMINADOR REQUIJO and MARIO REQUIJO. On August 4. CA. ACCORDINGLY. 1169. forbearance of money or judgment involving a loan or forbearance of money as it arose from a contract of sale whereby Ibarrola did not receive full payment for her merchandise. (LTB) and a delivery truck of the Seven-up Bottling Co. be on the amount finally adjudged. 1958 resulting in the death of Petra de la Cruz and serious physical injuries of Eladia de Lima and Nemesio Flores. 1988 ELADlA DE LIMA. 2209 of the Civil Code. When an obligation arises "from a contract of purchase and sale and not from a contract of loan or mutuum. the monetary judgment in favor of private respondent does not involve a loan or forbearance of money.) PNB's appeal to the Court of Appeals (CA) and later to the Supreme Court were denied and dismissed.. (SEVEN-UP BOTTLING CO.90).R. to "jointly and solidarily" pay Ibarrola several amounts. vs. Laguna Tayabas Co. in any case. Ibarrola sought clarification from the same RTC which promulgated the decision. J. however.90) can be established with reasonable certainty. and to be computed from the time the judgment became final and executory until fully satisfied. Any other monetary judgment which does not involve or which has nothing to do with loans or forbearance of any money.691. Gesmundo and Gesmundo and Renato B.: Before Us is a petition for review on certiorari of the decision De Lima vs. the legal rate of interest is 6% as provided by Article 2209 6 of the New Civil Code or 12% as provided by CB Circular 416 series of 1974. The rate of interest shall be 6% p. is breached. once the judgment becomes final and executory. No interest. goods or credit does not fall within its coverage for such imposition is not within the ambit of the authority granted to the Central Bank. All the three courts. In the case of Estern Shipping Lines. 13 (Emphasis ours. The judgment in Civil Case 4226-P became final and executory on November 26. No. 12 The rate of 12% interest referred to in Cir. When an obligation not constituting a loan or forbearance of money is breached then an interest on the amount of damages 4 5 awarded may be imposed at the discretion of the court at the rate of 6% per annum in accordance with Art. Domingo E. REYNALDO REQUIJO. The actual base for the computation of legal interest shall. Indeed. INC. Inc.

00 In the motion of petitioners dated December 29. the court a quo rendered its decision.00 1.00 P18. .00 8. For loss of earning capacity for 5 year from June 3. Only the said defendants appealed the decision to the Court of Appeals.500.00 P14. in view of all the foregoing considerations. TOTAL 800.82 3. Plaintiffs Requijos: 1 For the death of Petra de la Cruz including funeral expenses P 3. et al. judgment is hereby rendered against the defendants LTB Co. In Civil Case No.00 2.680. 1971 filed with the Court of Appeals.000. who are hereby ordered to pay jointly and severally. 1958 to November 3.000. the resolve plaintiffs. and its driver Claro Samonte will be persuaded to make immediate payment to them as adjudged by the court a quo. For expenses of litigation and attorney's fees. SP-239. For loss of earnings from June 3.00 a month P 3.On December 27. SP-239 and SP-240 filed a motion for reconsideration of the decision seeking an award of legal interest on the amounts adjudged in their favor from the date of the said decision but their motion was not acted upon by the court a quo. 3 3.00 .000.00 In Civil Case No. 924. All of the plaintiffs voluntarily desisted from appealing the decision by reason of financial necessity and in the hope that the defendants LTB Co. .82 2. Inc. 1958 at the rate of P228.883.1. For loss of money and medical expenses.000.) 4 For the loss of earning capacity for 5 years 5 For expenses of litigation and attorney's fees TOTAL 2.00 2 For the money lost during the trip Moral damages for mental anguish (of Mercado Plaintiffs in Civil Cases Nos.00 In Civil Case No. 1958 P960.183. 1963. Lira. SP-268: To Plaintiff Nemesio Flores: 1 . 2 they sought for an immediate decision of the case with a prayer for the granting of legal interest from the date of the decision .00 P 2. the dispositive part of which reads as follows: WHEREFORE. Plaintiff Eladia de Lima: 1 vs. and Claro Samonte. For expenses of litigation and attorney's fees TOTAL .680.884. SP-240.

12The claim for legal interest and increase in the indemnity should be entertained in spite of the failure of the claimants to appeal the judgment. SP-239 and SP-240 moved for the reconsideration of the decision appealed from to include the award of legal interest on the amounts adjudicated from the date of the decision. We find merit in the petition. Although said plaintiffs failed to appeal on this issue. the date of the decision of the Court of Appeals.of the court a quo and for the increase to P12. in the petition of the court. if any. and did not file their brief to reiterate their claim for interest thereon. and while he may make counter assignment of errors. The assignment of errors raised the following issues. are now precluded from questioning the ruling of the Court of Appeals. 7 A party who does not appeal from the decision may not obtain any affirmative relief from the appellate court other than what he has obtained from the lower court.appellants. Court will start to run from the date of the decision of the trial court on December 27. Under the first issue. In view of the consistent rulings of this Court. Nemesio Flores. to wit: 1) Whether or not the Court of Appeal. unfair and inequitous. a jeepney passenger injured in a vehicular accident. the plaintiff in Civil Case No. On January 31. the said heirs who did not appeal the judgment. SP-240) from P3.00 awarded for the death of Petra de la Cruz. Also noteworthy is the case of Fores v. Although they may not have appealed. 14 . as much as possible be decided on their merits and not on technicality.000.000. the Appellate Court pointed out — A further examination of the record will also show that the plaintiffs in Civil Cases Nos. but also the facts and circumstances obtaining in these cases.10 We take note of the fact that petitioners are litigating as paupers. 2) Whether or not the Court of Appeals erred in not increasing the indemnity for the death of Petra de La Cruz (in Civil Case No. At any rate. 1963 instead of January 31. to Our mind. considering the provision of Article 2210. respondents failed to note that the legal interest was awarded by the Appellate Court in its discretion based on equitable grounds which is duly sanctioned by Art. the now disputed decision of the Court of Appeals was promulgated. We hold that the legal interest of six percent (6) 13 on the amounts adjudged in favor of petitioners should start from the time of the rendition of the trial court's decision on December 27. the promulgation of the decision of the Court of Appeals. 3 Petitioners moved for a reconsideration of this decision 4 seeking its modification so that the legal interest awarded by the Appellate. therefore. By reason of their indigence. 1963 instead of January 31. SP-268. he can do so only to sustain the judgment on other grounds but not to seek modification or reversal thereof.000. the effectivity of the interest should not be rolled back to the time the decision of the court a quo was rendered. petitioners contend that the ruling of she Appellate Court departs from the consistent rulings of this court that the award of the legal rate of interest should be computed from the promulgation of the decision of the tonal court. under the circumstances of this case where the heirs of the victim in the traffic accident chose not to appeal in the hope that the transportation company will pay the damages awarded by the lower court but unfortunately said company still appealed to the Court of Appeals.00. should be afforded equitable relief by the courts as it must be vigilant for their protection. 1972.000. 6 for in such case he must appeal. stating that "Interest may. The Appellate Court denied the motion for reconsideration holding that since the plaintiffs did not appeal from the failure of the court a quo to award interest on the damages and that the court on its own discretion awarded such interest in view of Art. Petitioner potenciano Requijo as heir of the deceased Petra de la Cruz further sought an increase in the civil indemnity of P3. We take exception to the ruling of the Appellate Court as to the date when the legal interest should commence to ran. not only of the provision of the Civil Code above referred to. But to grant the imposition of interest on the amounts awarded to and as prayed for by one of the plaintiffs and deny the same to the others considering that the cases arose from one single incident would be. 2210 of the Civil Code which provides — Interest may. It is true that the rule is well-settled that a party cannot impugn the correctness of a judgment not appealed from by him. 1972. New Civil Code. 8 However. Thus. The Appellate Court found the award to be justified because the respondent asked for damages in his answer and the said court considered the attorney's fees as included in the concept of damages which can be awarded whenever the court deems it just and equitable (Art.000. Respondents counter that petitioners having failed to appeal from the lower court's decision they. Civil Code of the Philippines). 11 Moreover.00 of the civil indemnity of P3. in the discretion of the court. We believe that on equitable grounds legal interest. 2208.00 to P 12." There is no doubt that the damages awarded in these civil cases arise from the breach of a contractual obligation on the part of the defendants. this Court is inclined to adopt a liberal stance in this case as We have done in previous decisions where We have held that litigations should. erred in granting legal interest on damages to start only from the date of its decision instead of from the date of the trial court's decision. In the light. Pleadings as well as remedial laws should be construed liberally in order that the litigants may have ample opportunity to pursue their respective claims and that a possible denial of substantial justice due to legal technicalities may be avoided. 5 Hence this petition. 2210 of the Civil Code. did not appeal from the decision of the trial court. be allowed upon damages awarded for breach of contract. We are not left without discretion to resolve this issue. they failed to appeal but petitioners De Lima and Requijo had filed their manifestation making reference to the law and jurisprudence upon which they base their prayer for relief while petitioner Flores filed his brief. be allowed upon damages awarded for breach of contract. but said motion was not acted upon by the court a quo.00. Miranda 9 where this Court upheld the granting by the Court of Appeals of attorney's fees even if the respondent. 1972. whose decision is brought up on appeal. which step was obviously dilatory and oppressive of the rights of the said claimants: that the case had been pending in court for about 30 years from the date of the accident in 1958 so that as an exception to the general rule aforestated. should be allowed on the amounts adjudged in favor of the plaintiffs from the date of this decision up to the time of actual payment thereof. filed his brief and prayed for the imposition of interest from the date of the decision. they had filed their motion for reconsideration with the court a quo which unfortunately did not act on it.000 to P12.

and when the trucks 77197 and 92744 were included in the mortgages. 1925 the defendant Faustino Espiritu purchased of the plaintiff corporation a two-ton White truck for P11.50. who witnessed the execution of all these documents. The judgment appealed from ordered the defendants and the intervenor to pay plaintiff in case 28497 the sum of P7. These facts are supported by the testimony of Bachrach.. In accordance with prevailing jurisprudence the indemnity of P3. 1925 until fully paid. there were presented two of defendant's letters to Hidalgo. But the evidence shows that while the intervenor Rosario Espiritu did not sign the two mortgage deeds (Exhibits A and C).000. These two trucks had been purchased from the same plaintiff and were fully paid for by the defendant and his brother Rosario Espiritu. If the transportation company had only accepted the judgment of the trial court and paid its just awards instead of appealing the same to the Court of Appeals.000.net While these two cases were pending in the lower court the mortgaged trucks were sold by virtue of the mortgage.As to the second issue. We do not find the statement of the intervenor Rosario Espiritu that he did not sign promissory notes Exhibits B and C to be sufficient to overthrow this evidence. convinces us that the latter are his signatures. the defendant sold his rights in said trucks Nos. And the fact that on the 24th of said month of July.09 with interest at the rate of 12 per cent per annum from May 1. three others. and all of the White make (Exhibit A).269. 2206 of the Civil Code of the Philippines which allows a minimum indemnity of P3. the intervenor Rosario Espiritu was aware of it and consented to such inclusion.28 of this sum.477.983. the defendants mortgaged the said truck purchased and. Appellants also alleged that on February 4. No. many miles away from Manila. notwithstanding the evidence presented to establish that on the date when Exhibits B appears to have been signed. all of them together bringing in.00 should be increased to P30. The defendant failed to pay P4. alleging to be the exclusive owner of the two White trucks Nos. L-28497 November 6. and in case of non-payment of the total debt upon its maturity. the trial court ordered the defendant and the intervenor to pay plaintiff the sum of P4. SO ORDERED. the subject decision is modified in that the legal interest on the damages awarded to petitioners commences from the date of the decision of the court a quo until actual payment while the civil indemnity for the death of Petra de la Cruz is increased to P 30. the intervenor was in Batac. B. which appear to have been mortgaged by the defendants to the plaintiff. when the defendant signed the mortgage deeds these trucks were not included in those documents. an employee of the plaintiff's written a few days before the transaction. 77197 and 92744 to the intervenor. No. and were only put in later. Francisco for appellee.50 within the periods agreed upon. 1925.983. We hope this relief is not too late. 1925. who witnessed the execution of Exhibits B and D. 1926 until fully paid. 1764 in relation to Art.00 as prayed for by petitioner. that on July 28. were tried together. and ROSARIO ESPIRITU.82 of the price secured by this mortgage. defendant-appellant. the petition is hereby GRANTED. lawphi1. Besides. 25 per cent thereon.000 down to apply on account of this price. no further delay would have been occasioned on the simple issue of interest and indemnity.. To mitigate the impact of such a great delay in this case the Court finds ample justification in the aforesaid award for interest and indemnity.00 and not P12. 1928 In connection with case 28498.. It appears.000. FAUSTINO ESPIRITU. in connection with case 28497. Benito Soliven and Jose Varela Calderon for intervenor-appellant. C. FAUSTINO ESPIRITU. and 25 per cent thereon as penalty. To secure this payment the defendant mortgaged to the plaintiff corporation the said truck purchased and two others. in the mortgage (Exhibit H-I). paying P1. In both sales it was agreed that 12 per cent interest would be paid upon the unpaid portion of the price at the executon of the contracts. defendant-appellant. numbered 77197 and 92744. and after having deducted the P500 cash payment and the 12 per cent annual interest on the unpaid principal. 77197 and 92744. which the defendant executed in favor of the plaintiff.000. civil indemnity for the death of Petra de la Cruz was properly awarded by virtue of Art. he signed the two promissory notes (Exhibits B and D) secured by these two mortgages. To secure the payment of this sum.28 with interest at 12 per cent per annum from December 1. Rosario Espiritu appeared in these two cases as intervenor. A comparison of his genuine signature on Exhibit AA with those appearing on promissory notes B and C. The defendant failed to pay P10. that is July 25.: These two cases.R. the defendant at the same time also signed a promissory note solidarily with his brother Rosario Espiritu for the several sums secured by the two mortgages (Exhibits B and D). the net sum of P3. And such is our conclusion.208. 28497 and 28948.50.58.732. such trucks cannot be considered as mortgaged. and obligating himself to pay the remaining P10. it appears that on February 18. In case 28498. of Agustin Ramirez. INC. besides. -----------------------------G. acquiescing in the inclusion of all his White trucks already paid for. WHEREFORE.000. L-28498 November 6. plaintiff-appellee. and that as the latter did not sign the mortgage deeds. INC.. In addition to the mortagage deeds referred to. the same that were mortgaged in the purchase of the other truck referred to in the other case. 1925 the defendant bought a oneton Whitetruck of the plaintiff corporation for the sum of P7. But there is positive proof that they were included at the time the defendant signed these documents. Nos. Ernesto Zaragoza and Simeon Ramos for defendant-appellant. manager of the plaintiff corporation. vs. as penalty. 1928 THE BACHRACH MOTOR CO. AVANCEÑA. Ilocos Norte. without defendant's knowledge. and 25 per cent thereof in addition as penalty. yet. obligated himself to make payment of this sum within the periods agreed upon. the THE BACHRACH MOTOR CO. because.136.208.00. All these instruments were executed at the same time. respectively. two of which are numbered 77197 and 92744 respectively. plaintiff-appellee. .00 for the death of a passenger caused by the breach of contract by a common carrier. together with the defendants Faustino Espiritu. G. The appellants contend that trucks 77197 and 92744 were not mortgaged. intervenor-appellant. and of Angel Hidalgo.R. after deducting the sheriff's fees and transportation charges to Manila. J. This judgment is immediately executory and no motion for extension of time to file motion for reconsideration shall be entertained. vs.

they were able to pay a total of P68. and IV THE LOWER COURT ERRED IN NOT ORDERING DEFENDANTS-APELLEES TO JOINTLY AND SEVERALLY PAY THE OBLIGATION.050. 1984. Such a contention is not well founded. It was only after several demands that the defendants-appellees were able to make partial payment. with interest thereon at the rate of 19% per annum from the filing of the complaint on September 12. In view of his conclusion that the intervenor signed the promissory notes secured by trucks 77197 and 92744 and consented to the mortgage of the same. including interest at 21% per annum penalty charges.050.APPELLANT ATTORNEY'S FEES EQUIVALENT TO 25% OF THE AMOUNT DUE AND EXPENSES OF LITIGATION. 631).253. It is the nile that . July 28. As of November 25. does not include the interest.00 ) and to pay the costs. the plaintiff-appellant increased the rate of interest to 21% pursuant to Central Bank Circular No.676.19 as of September 15. So ordered. PlaintiffAppellant's Brief). Finding strength in the argument that the promissory note is the contract between the parties and. the penalty is not to be added to the interest for the determination of whether the interest exceeds the rate fixed by the law. 705 dated December 1. 1983. 1979 pursuant to Central Bank Circular No.R. The facts are not disputed. This loan transaction was evidenced by a promissory note where the defendants-appellees bound themselves jointly and severally to pay the amount with interest at 19% per annum and with the express authority to increase without notice the rate of interest up to the maximum allowed by law and subject further to penalty charges or liquidated damages upon default equivalent to 2% per month on any amount due and unpaid. It is finally contended that the 25 per cent penalty upon the debt.plaintiff-appellant.plaintiff sent some truck accessory parts by rail to Ilocos for the intervenor does not necessarily prove that the latter could not have been in Manila on the 25th of that month. 6932 for collection of a sum of money with preliminary attachment. No. vs. Navarro (G. 705. the interest rate may not be increased by the plaintiff-appellant in the instant case. At the pre-trial on October 31. 1980. 1984. Should there be such an agreemnet. the defendants-appellees were also bound to pay 25% of any amount due as attorney's fees plus expenses of litigation and costs. and which may be demamded separetely. On September 12. 1978. On November 22.75 which payments were applied to partially satisfy the penalty and interest charges. obligations arising from contracts have the force of law between the parties. The defendants are further ordered to pay the plaintiff-attorney's fees in the amount of one Thousand Pesos ( P1.: This is an appeal by the Insular Bank of Asia and America (IBAA) from the judgment of the Regional Trial Court of Leyte in Civil Case No.. as was held in the case of Lopez vs. In line with the Court's ruling in the case of Banco Filipino v. In the event the account was referred to an attorney for collection. The appeal was originally brought to the Court of Appeals but was certified to us by that tribunal because it raises only a question of law. But considering that the obligation was partly performed. G. the plaintiff-appellant filed a complaint with the Regional Trial Court alleging that the defendants-appellees were indebted to IBAA in the amount of P87.25 ). The promissory note matured but the defendants-appellees failed to pay their account.647.. According to this. 4-5. the defendants need pay only 10 per cent thereon as penalty. the penalty. judgment is hereby ordered in favor of the plaintiff ordering the defendant spouses Ricardo Salazar and Epifania Salazar to pay Insular Bank of Asia and America (IBAA) the sum of Eleven Thousand Two Hundred Fifty Three Pesos and Twenty Five Centavos ( P11. makes the contract usurious. L-46591. 1984 until fully paid. 4.00. (p. JR. The trial court then rendered a summary judgment the dispositive portion of which reads: WHEREFORE. The defendant-spouses admitted the execution of the promissory note in consideration of P48. 1988 INSULAR BANK OF ASIA AND AMERICA. in addition to the interest of 12 per cent per annum.00 ) payable on or before December 12. No. Article 1152 of the Civil Code permits the agreement upon a penalty apart from the interest. this penalty is reduced to 10 per cent of the unpaid debt. the plaintiff-appellant increased the interest rate to 21% per annum effective December 1. it is immaterial whether he was or was not the exclusive owner thereof. the judgment appealed from is affired in all other respects without special pronouncement as to costs. 82082 March 25. In accordance with the agreement. defendants-appellees. 1984. Hernaez (32 Phil. GUTIERREZ. SPOUSES EPIFANIA SALAZAR and RICARDO SALAZAR. since said rate was fixed only for the interest. under the law. and making use of the power given to the court by article 1154 of the Civil Code. With the sole modification that instead of 25 per cent upon the sum owed. J. and attorney's fees.1987). Plaintiff-Appellant's Brief) The Escalation Clause provided in the promissory note reads: The interest herein charged shall be subject to in . depending on whatever policy IBAA may in the future adopt conformable to law. II THE LOWER COURT ERRED IN NOT AWARDING INTEREST ON THE LOAN AT 21 % PER ANNUM. 1979.000. the parties and their counsels appeared.R. (pp. without notice. Plaintiff-appellant now raises the following assigned errors: I THE LOWER COURT ERRED IN NOT AWARDING TO PLAINTIFF-APPELLANT PENALTY CHARGES OR LIQUIDATED DAMAGES IN THE AMOUNT OF 2% PER MONTH ON ALL AMOUNTS DUE AND UNPAID. III THE LOWER COURT ERRED IN THE COMPUTATION OF THE AMOUNT OF OBLIGATION DUE FROM DEFENDANTS-APPELLEES APPELLEES IN FAVOR OF PLAINTIFF-APPELLANT III THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF. especially to compensate for any in Central Bank interests or rediscounting rates. defendants-appellees Epifania Salazar and Ricardo Salazar obtained a loan from the plaintiff-appellant in the amount of Forty Two Thousand and Fifty Pesos ( P42.

In a span of about six (6) years. In the Banco Filipino case. 1226. This may appear to be usurious. The stipulation about payment of such additional rate partakes of the nature of a penalty clause. The pertinent loan contracts/documents contain escalation clauses expressly authorizing lending bank or non-bank performing quasi-banking functions to increase the rate of interest stipulated in the contract. Liwanag (32 SCRA 293. and as such the two are different and distinct things which may be demanded separately.banking functions on loans already existing as of January 3. some clarifications were made. the plaintiff-appellant's second assignment of error is without merit. as of this date.. 705. the decision of the lower court is MODIFIED. making it appear that the spouses Salazars refused to pay the loan. 492-498: 1 Only banks and non-bank financial intermediaries performing quasi-banking functions may interest rates on I already existing as of January 2. and b. to an additional rate of 5%. the borrower questioned the additional interest charges on the loan of P41.75 (p. SO ORDERED.300. (supra). 17. Pertinent portions of the letter read: In this connection.75. 297). With respect to the penalty clause.626. 321): In the Bachrach case (supra) the Supreme Court ruled that the Civil Code permits the agreement upon a penalty apart from the interest. 1979.18 when the complaint was filed. Said loans were directly granted by them and the remaining maturities thereof were more than 730 days as of January 2. Penalty interest of 1% a month or 12% per annum is reasonable so that from December 12. In accordance with Article 1229 of the Civil Code. which is sanctioned by law.050.75 had been paid. the loan was obtained on November 21. December 1. therefore. Court of appeals (145 SCRA 311. authorizing the increase from 19% to 21% was issued on December 1.00 shall bear interest at the rate of 19% per annum. 494. the defendants-appellees alleged that the bank neglected to credit said payments in the defendant's account folio and subjected it as it did to the additional charges. Records). the remaining maturity of the loan was less than 730 days.. However. on the other hand.339. In a letter written by the Central Bank to the borrower. merely applied this amount to satisfy the penalty and interest charges which it additionally imposed. the penalty does not include the interest. therefore. (2) the increase is made effective not earlier than the effectivity of the law or regulation authorizing such an increase and (3) the remaining maturities of the loans are more than 730 days as of the effectivity of the law or regulation authorizing such an increase. 1976 or on a later date.202.676. and 2. The penalty charges of 2% a month are.00 ) pesos by the trial court appears to be enough. Considering that the defendants-appellees have paid the amount of P68. however.1976. the Central Bank took the position that the issuance of its circulars is a valid exercise of its authority to prescribe maximum rates of interest and based on the general principles of contract. 1978 to September 12. in the event of default. 1978 and was payable on or before November 12. they. with earnest efforts. Civil Code of the Philippines). 1976.676.50 per annum or a total of P 46. subject. (Art. penalty charges should be P19. The increase in the rate of interest can be effective only as of January 2. Hence. the bank was enriched by P 26. There is no indication in the records as to the fluctuation of actual interest rates from 1984 and. (Emphasis supplied) In the case at bar. 1976 adopted the following guidelines to govern interest rate adjustments by banks and non-banks performing quasi. the court is likewise empowered to reduce the same if they are unreasonable or unconscionable notwithstanding the express contract for attorney's fees. they tried to pay the loan little by little so that as of November 25. Obviously. Furthermore. Admittedly.41) the increased rate imposed or charged by petitioner does not exceed the ceiling fixed by law or the Monetary Board. a total of P68. the penalty may also be reduced by the courts if it is iniquitous or unconscionable. 1984. we have upheld the validity of such agreements in several cases. therefore. we order interest at the legal rate of 12% per annum on the unpaid amount.83. in its Resolution No.989. provided that: a. Civil Code of the Philippines).escalation clauses are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money in long term contracts. This would yield interest of P7. (Art 1229. winch is sanctioned by law. out of proportion to the damage incurred by the bank. Efforts were indeed made to make good their promise.915. the Court explained: xxx xxx xxx . we agree with the trial court that the bank has already profited considerably from the loan. the enforceability of such stipulations are subject to certain conditions. in its comment and supplemental comment submit. The defendants-appellants Ricardo Salazar and Epifania Salazar are ordered to pay Insular Bank of Asia and America (IBAA) the sum of THIRTYEIGHT THOUSAND NINE HUNDRED PESOS and EIGHTEEN CENTAVOS (P38. The promissory note signed by the defendants-appellants states that the loan of P42. the date of filing the complaint. We do not find any evidence of bad faith on the part of the defendants-appellees in their failure to pay the loan on time. Reiterating the same principle in the later case of Equitable Banking Corp. The rate stipulated was 9%. the Court is constrained to reduce the penalty for being highly iniquitous With respect to the attorney's fees. in the light of Central Rank Circulars Nos. 1984. The award of one thousand ( P1. issued on January 2. WHEREFORE. 1155 dated June 11. owed the bank the amount of P38. . but it is not so. where this Court held that the stipulation about payment of such additional rate partakes of the nature of a penalty clause.10 from November 22. 1980. We note the trial court's observation that the plaintiff-appellant did not even state in the complaint that the defendants-appellees had made partial payments. the defendants-appellees in the instant case failed to pay the loan on the due date. the Escalation Clause is a valid provision in the loan agreement provided that. 1983. 1980 up to September 12... However.000. We have not overlooked the 14% interest that appellant has been sentenced to pay. 1979.915. in the event that any law or Central Bank regulation is promulgated increasing the maximum interest rate for loans. As the Court stated in the case of Government Service Insurance System v. . The plaintiff-appellant. Central Bank Circular No. 1976. although.18 ) with interest thereon at the rate of Twelve Percent (12%) per annum from the filing of the complaint until fully paid. ted upon orders of this Court. In their answer with counterclaim. please be advised that the Monetary Board. In the case of Equitable Banking Corporation v. (Emphasis supplied) Moreover. 1976. Should there be such an agreement.00 she obtained when the interest rates were increased from 12% to 17% per Central Bank Circular No.

000.187. from which I expect a crop of at least 1. 1919. this thirtieth day of June.187. represented by Mr. 1919.G. the firm of Siuliong & Co. . entered into a contract (Exhibit A). Tiburcio Lutero in favor of Messrs.. 2. In refusing to allow defendant interest at eight per cent per annum as provided for in Exhibit C. itself to advance to Mr. . do hereby bind myself as joint and several surety for Mr. In not ordering the defendant to pay plaintiff said amount of P8. I. for the sum of three thousand pesos (P3. constitute a second mortgage in favor of said firm on a sugar plantation located in the barrio of Ramirez. and P11 for No. or P30 per picul. should be fixed as the price of the sugar delivered by the plaintiff to the defendant. respectively. 4. the defendant. On the other hand. 1 sugar.. at the rate of P6 a picul for No. In not rendering judgment in favor of the defendant and against plaintiff for all of the amounts prayed for in defendant's counter-complaint.50 for No. without costs. I. the pertinent parts of which are as follows: Know all men by these presents: These are two appeals taken by plaintiff Tiburcio Lutero and by defendant Siuliong & Co.200 to 1. In support of his appeal. DO HEREBY STATE: That I own a sugar plantation located in the municipality of January. Lutero should be unable to fulfill his obligations stipulated in this contract. Power and Hill for defendant-appellant. 2. Tiburcio Lutero. That by virtue of this agreement to sell. P. No. Iloilo. municipality of Janiuay. to fix the selling price of 500 piculs of my sugar crop from said plantation during the season of 1919-1920 at the rate of P12 per picul for high class No. called San Ramon. Yap-Inchong.75 against the defendant. penalties and payment for sugar at prices agreed upon in the contracts between plaintiff and defendant. and the remainder shall be paid to said Mr. through its manager. In finding that the defendant by its silence had renounced its rights under its contracts with the plaintiff. 1920.. until the full price of said 500 piculs of sugar is covered. attorney's fees. (b) that the P3. (b) that said contracts are usurious. 2. (d) consequently. from the judgment of the Court of First Instance of Iloilo absolving the defendant from the complaint. landowner. 3... I bind myself to pay in specie to said form of Siuliong & Co. That I have agreed with the firm of Siuliong & Co. I further state that should I be unable to deliver said 500 piculs. the price of the undelivered portion according to the current market price during said month of March. in support of its appeal. to be delivered to said firm in the month of March of next year. 5. 3. defendant-appellant.600 mentioned in said contracts are advances on the selling price of 500 and 800 piculs of sugar.. farmer. and is described as follows: .: 4. to wit: The lower court erred: 1. Tiburcio Lutero. as he sends his sugar to the Iloilo market. Philippine currency. P11. and a resident of the municipality of January. Guevara. That I. J. more or less. to wit: The court erred in all of the following particulars: 1. a battery with two ovens and eight cauas and a warehouse of mixed materials. the plaintiff Tiburcio Lutero and the defendant Siuliong & Co. consisting of a six-horse power steam engine with an eight-horse power boiler. Siuliong & Co. Province of Iloilo. Philippine Islands.. as an advance upon the sale of said 500 piculs. the plaintiff assigns the following alleged errors as committed by the court below in its judgment. Maximino Jalandoni. 1930 TIBURCIO LUTERO. binds.75. Tiburcio Lutero the amount of P3.000) in case said Mr. and resident of the municipality of Jaro. SIULIONG and CO. and the plaintiff from the cross-complaint. and P0. The following facts were proved at the trial without dispute: On June 30. In denying the plaintiff's motion for a new trial. including interest. VILLA-REAL. which plantation is encumbered by a first mortgage in favor of the National Bank. In holding: (a) That Exhibits A and C are contracts of sale of sugar. "Any of the parties failing to fulfill the terms of this contract hereby binds himself to pay an indemnity of P200 as costs and attorney's fees.500 piculs of sugar. In refusing to permit witness Rufino Abordo to testify with regard to a conversation between the plaintiff and the deceased manager of the defendant. the current market price at the time of delivery. plaintiff-appellant. with all the improvements thereon. the plaintiff is entitled to a balance of P8. 3. married. In refusing to allow defendant attorney's fees as provided for in contracts Exhibits A and C.50 less for each succeeding picul.. Province of Iloilo. assigns the following alleged errors as committed by the court below in its judgment. I state likewise that for the security of Siuliong & Co. . (c) therefore. of age. Francisco and Recto and Tiburcio Lutero for plaintiff-appellant.R. Province of Iloilo. . In not holding: (a) That Exhibits A and C are contracts of loans of money payable in sugar. or. In witness whereof. vs. I. 1. we sign these presents in Iloilo. of this City of Iloilo. Lutero from time to time. L-31125 January 21.000 and P5. That for the security of Siuliong & Co.

of the year 1920. The first question to be decided in the present appeal is whether the contracts Exhibits A and C. 4. Province of Iloilo. of this year. the total price of which amounts of P3.I. P. which are free from all liens and incubrances. I. That I have agreed with the firm Siuliong & Co.862 (Exhibit 2).. the sum of five thousand six hundred pesos (P5. are for usurious loans of money payable in sugar.) TIBURCIO LUTERO SIULIONG & CO. Philippine currency. In conformity with the contract Exhibit C. and of which the documents of ownership are described as follows: xxx xxx xxx Should any or all of said animals thus mortgaged die. advanced to me by the firm of Siuliong & Co. with the exception of the five hundred (500) piculs. until the full price of said eight hundred piculs (800) is covered. on August 15. 500 piculs of sugar from the crop of the agricultural year 1919-1920. February... the sum of P6. I hereby state that the amount of five thousand six hundred pesos (P5. I do hereby mortgage in favor of said firm of Siuliong & Co. (Sgd. and P12 for No.600) Philippine currency. the pertinent parts of which are as follows: Know all men by these presents: That I. which power remains to this day unrevoked. the forty head of cattle.40 (Exhibit 2). twelve pesos and fifty centavos (P12. and the balance shall be paid to me from time to time as I forward my sugar to the Iloilo market. Tiburcio Lutero.600) which I have received from the same as an advance upon this sale. Province of Antique. March. Province of Iloilo. I hereby mortgaged to said firm all the sugar cane now planted on my said San Ramon plantation.. and resident of the municipality of Sibalum. The plaintiff received from the defendant in kind and specie the amount of P4. the total price of which amounts to P3. binds itself to advance to me the amount of five thousand six hundred pesos (P5. municipality of Iloilo. that is.. and by virtue of the power of attorney conferred upon me by Mr. own a sugar plantation located in the municipality of Janiuay. to be delivered to said firm in the months of December. the firm Siuliong & Co. leaving an undelivered balance of 162 piculs and 44 cates. Province of Antique. I bind myself to pay in specie the price of the undelivered portion to said firm of Siuliong & Co. P. the plaintiff bound himself to sell to the defendant 800 piculs of sugar from his crop of the agricultural year 1919-1920 at the rate of P14 a picul for No. P13 for No. 2.(Sgd. thirteen pesos and fifty centavos (P13. Florentino Magalona. of age. married. 1919. and on different dates. 3..822. By virtue of the second contract Exhibit C.. I. P. 2. resident of the district of Molo. and April of said year of 1920.) YAP-INCHONG On August 21. which was the subject of my contract with the same firm of Siuliong & Co.) YAP-INCHONG By virtue of the contract Exhibit A. through its manager. to fix the selling price of Eight hundred (800) piculs of sugar from my crop from said plantation during the season of 1919-1920 at the rate of fourteen pesos (P14) a picul for No. By contract Exhibit A. farmer. and P11 for No. Tiburcio Lutero in favor of the firm of Siuliong & Co. of age. P.. 3. I. Province of Iloilo. 1920. That by virtue of this agreement to sell. situated in the municipality of Janiuay. I hereby state that the date of maturity of this contract was fixed as April 30. and twelve pesos (P12) for No. in kind and specie. P11. this 21st day of August.. 5. the same parties entered into another contract (Exhibit C). 1920. Province of Antique. we have hereunto set our hands in Iloilo. Ramon Masa. farmer. Tiburcio Lutero.600). do hereby state that I hereby bind myself as joint and several surety for Mr. the plaintiff delivered to the defendant 309 piculs and 77 cates of muscovado sugar. Nicolas Tordecillas. (Sgd. the plaintiff bound himself to sell to the defendant during the month of March. I likewise state that should I be unable to deliver said eight hundred piculs of sugar of any part thereof.50) a picul for No.50 for No. Masa's farm in the municipality of San Remigio. to be delivered in the months of December. Mr.. By (Sgd.. and resident of the municipality of Janiuay. through its branch in this City of Iloilo.606. the plaintiff delivered to the defendant a total of 337 piculs and 57 cates of muscovado sugar of different classes. at the rate of P7 per picul as an advance payment upon the selling price of said eight hundred piculs of sugar. 1 sugar. from which I expect a crop of one thousand two hundred to one thousand five hundred piculs of sugar more or less. January. at the rate of P12 a picul for No.15. 1919. 1 sugar..I. landowner. I bind myself to replace the loss with my own carabaos. should he be unable to meet his obligation stipulated in this contract.) TIBURCIO LUTERO (Sgd. and April. 5. I.58 (Exhibit 1). February. Province of Iloilo. married. 1 superior sugar. P12. dated June 30th of this year.50) for No. thirteen pesos (P13) for No. DO HEREBY STATE: That I.405. 4. consisting of cows and carabaos. 3.) FLORENTINO MAGALONA SIULIONG & CO. Any of the parties who fails to comply with the terms of this contract shall be bound to pay an indemnity of five hundred pesos (P500) as costs and attorney's fees. 2 sugar. according to the current market price in said months and on the day of the settlement of my account.50 for No. March. . attorney. P13. P. entered into by and between the plaintiff Tiburcio Lutero and the defendant Siuliong & Co. The plaintiff received by virtue of said contract Exhibit C. shall earn 8 per cent annual interest until full settlement of my account. In witness whereof. all of which are at present on said Mr. I state further that to secure to said firm of Siuliong & Co. January. Province of Iloilo.. duly acknowledged before the justice of the peace of Sibalum.50 for No. leaving an undelivered balance of 490 piculs and 24 cates. That for a further security of said firm of Siuliong & Co.

(2) that the fact that the purchaser does not bring suit against the vendor immediately upon the latter's default in the delivery of the sugar sold. considering the price of each picul of sugar to be P30.314. the defendant was bound to buy the 500 piculs of sugar mentioned in the contract Exhibit A.431. 1920. mentioned above. and not the market price. this amount and the difference just mentioned. under the law are entitled to require of others the fulfillment of their obligations.54. according to the respective contracts. The second question to be decided in the present appeal is whether or not the plaintiff must pay to be defendant for the sugar which the former failed to deliver in accordance with the aforesaid contracts. more or less. are not usurious or illegal. and if out of the 800 piculs of sugar which he bound himself to deliver in accordance with the contract Exhibit C. and the 800 piculs of sugar mentioned in the contract Exhibit C. held that the defendant had been more than paid with the sugar delivered by the plaintiff. and at P12. For the foregoing considerations. 1 of the Code of Civil Procedure. The undelivered quantity of 162 piculs and 44 cates of sugar under contract Exhibit A. he only delivered 337 piculs and 57 cates of sugar. as the sum collected in excess of plaintiff's debt.40. in order that it may serve alike as a punishment for those who do not know how to look after their own interest. he had still a balance of P1. Inasmuch as under said contract the plaintiff owned the defendant P1.15. The court below. its market price is higher than that stipulated.463. That the defendant had not waived its rights to the balance of the amount of sugar specified in said contracts. does not make them usurious or illegal. thus incurring a shortage of 162 piculs and 44 cates. had slumped. and at P12 under the contract Exhibit C. to deliver said balance and that the latter kept on asking for extension of time by reason of his critical financial situation. the action which one of the parties may bring against the other to require the fulfillment of his obligation. Exhibits A and C. and the attorney's fees. Inasmuch as the plaintiff owed a balance of P3. as has happened to many farmers and merchants due to the sudden slump of prices at the end of the world war. at the price stipulated in said contracts. and if the price.22 with legal interest from the date of the filing of the counterclaim until fully paid.086.199. If so. and the defendant is absolved from the complaint. we are of the opinion and so hold that the contracts of sale of agricultural products to be delivered in future. considering the circumstances of this case.56. he only delivered 309 piculs and 77 cates.96. the defendant would have had to pay the price stipulated. at P19 a picul.862. we do not believe it equitable to award them. according to the law. until December 8. because the defendant assumed the same risk of a loss taken by the plaintiff. the judgment appealed from is reversed. and also to insure economic stability and the certainty of rights.624. have elapsed from the time the defendant last demanded of the plaintiff the fulfillment of the obligation incurred by him by virtue of the contracts Exhibits A and C until it filed its counterclaim herein. praying that said contracts be declared usurious. the sum of P2. Code of Civil Procedure). with costs against the appellee. and if of the 500 piculs of sugar which the plaintiff bound himself to deliver in pursuance of the contract Exhibit A. and the price stipulated in said contracts was not even onehalf of the market price. which is the aggregate amount which the plaintiff should pay to the defendant under the aforesaid contract Exhibit C. the contracts made by the plaintiff and the defendant are perfectly valid. and 162 piculs and 44 cates of sugar to deliver. for the undelivered difference. the full value whereof is P3. and that the defendant be sentenced to return the amount of P16. when the defendant demanded of the plaintiff the delivery of the remaining portion of the sugar. we are of opinion and so hold: (1) That the sale of sugar to be delivered at a future definite time and for a fixed price. and.031. the sum of P6. is neither usurious nor illegal even though said price should prove to be much less than the market price on the date of delivery. which.36. when the cross-complaint was filed. and that as the maximum price of sugar on the respective dates of delivery was P30. he had still a balance of P3.661. and that he allows six years to elapse. there are written contracts by virtue of which the parties incurred mutual obligations. this amount and the difference just mentioned. taking this circumstance into account. and the defendant is entitled to have a judicial pronouncement thereon.87.44.882. and as he cannot now deliver said shortages since the period for delivery has elapsed. is shown by the fact that it several times required the plaintiff. leaving a difference of P3.822. and other expenses the amount of P4. at the minimum price of P19 yields a total of P9. the statute of limitations has been enacted. and (3) that the purchaser is entitled to damages sustained on account of the vendor's default. In accordance with contracts Exhibits A and C.199. the difference between said respective contracts and the minimum market price would be the loss sustained by the defendant through plaintiff's failure to deliver the sugar at the proper time according to said contracts. give a total of P6.661. and considering also that from the month of July. under contract Exhibit C. said damages consisting in the difference between the price stipulated and the market price of the goods at the time delivery thereof should have been made. With respect to interest upon the sums advanced by the defendant to the plaintiff. until the plaintiff brought this action against the defendant. Having delivered 319 piculs and 77 cates of muscovado. So ordered. due to difference in price. Now then.22.031. what damages is the defendant entitled to? Under contract Exhibit A. by virtue of the defendant's counterclaim to pay to the latter. No. For the foregoing considerations. said action has not prescribed. which the plaintiff failed to deliver to the defendant. fixing a selling price. Fixing the average price of the sugar. Under contract Exhibit C. even when the market price of the products sold should turn out to be higher at the time of delivery.It is contended by the plaintiff-appellant that the defendant having advanced money to the plaintiff upon both contracts.68. For laches and neglect on the part of those. does not deprive him of his right to bring such action on account of laches. the plaintiff had received from the defendant in cash. a total of P5.88.410. inasmuch as such action. Having delivered 337 piculs and 57 cates of muscovado. goods. give a total of P2. according to the current market price. and as a source of reassurance to those who may have rested in the belief that their creditors had waived their rights. (section 43. a total of P1. did not press its demands on the plaintiff. The minimum market price of muscovado in the month of May.461.83 with legal interest from the date of the filing of the counterclaim until fully paid. was P19 per picul. goods. arising from a written contract. and the plaintiff is ordered. In the case before us. Inasmuch as only six years. According to both contracts. does not prescribed until after ten years. at P10 under the contract Exhibit A. and allowed some six years to elapse. 1921. the plaintiff received from the defendant in cash. who. according to section 43. said contracts are usurious. must be computed on the basis of the market price at the time of delivery. 1927. It is no contended by the plaintiff-appellant that contracts for the sale of agricultural products to be delivered in future cannot be entered into.87 to pay. yields a total sum of P3.83. the plaintiff bound himself to pay in cash.54 to pay. a part of which is advanced by the purchaser to the vendor. by means of letters. and the fact that on the date of delivery of the sugar. the total value of which is P3. which provides that such rights prescribe after a certain period of time. which is the aggregate amount which the plaintiff should pay to the defendant under said contract Exhibit A. instead of rising.463. The undelivered quantity of 490 piculs and 24 cates of sugar under the contract Exhibit C. By virtue whereof. and. thereby defaulting with respect to 490 piculs and 23 cates. .58.405. and at P10 a picul. does not prescribed until after ten years from the time the cause of action arises. The defendant. and 490 piculs and 24 cates of sugar to deliver. under contract Exhibit A. almost six years had elapsed. said money was given as a loan payable in sugar. leaving a difference of P1. said court held that the defendant had renounced its rights and had been satisfied with the sugar theretofore received from plaintiff.606. This opinion of the court below is based neither on law nor on equity. and other expenses the total sum of P6. if the defendant is entitled to demand of the plaintiff the fulfillment of his obligations under the terms of the contracts Exhibits A and C.

551 of the Piedad estate subdivision for P50.57 was disposed of by the mortgagee as follows: Proceeds of Sale (TCT No. and without necessity of demand the mortgaged may immediately foreclose the mortgage.57 Plaintiffs brought this action to obtain a judicial declaration that the stipulation in the deeds of mortgage fixing the amount of 30% as attorney's fees and liquidated damages is excessive.000.000. the mortgage shall become due and demandable. that the mortgagors are estopped from alleging that the stipulation regarding liquidated damages and attorney's fees is excessive and unreasonable.00 P68. that we may assume that he demanded the insertion of the iniquitous clause or 30% damages to cover a usurious deal.00 P68. the judge below appears to be fully justified. GENIZA. mortgaged to the defendant Asia Mercantile Corporation Lot No.00 13. No. the judgment appealed from is hereby affirmed.000. Neither is there any allegation or claim that the mortgage is contra bonos mores. payable within period of thirty days with interest at the rate of 12% per annum. Copies of the contracts of mortgage are annexed to the complaint in this case as Annex "A" and Annex "B". Rivera the sum of P13.500.G.00 2.00. presiding.000. CATALINA CARREON RIVERA and ZACARIAS RIVERA. As the loan was for a period of thirty days only.000. We do not agree with counsel for plaintiffsappellants that the contract was a usurious contract there being no allegation of fact that the mortgagee's intention was to exact a usurious interest.500. HENRY SY and ASIA MERCANTILE CORPORATION. nor evidence to that effect. On the same date another mortgage was executed by plaintiffs Emma R. Nicasio Yatco.57 The case having been tried in the Court of First Instance of Quezon City. Hon. 1959. Vicente J.000. It was further expressly agreed that in case of foreclosure the mortgagor binds himself to pay the mortgagee 30% of the sum owing and unpaid as attorney's fees and liquidated damages.57 It is against the above judgment that the plaintiff have prosecuted the appeal to this Court. with the consent of her husband Zacarias Rivera. The mortgagors in both mortgage contracts defaulted in the payment of their respective obligations. vs. judicially or extrajudicially and for this purpose the mortgagor appoint the mortgagee as his attorney-in-fact to sell the properties and to sign all documents and perform any act requisite and necessary to accomplish said purpose. In reducing the 30% attorney's fees and liquidated damages from 30% to 5%.567.00.57 P55.R. Francisco for plaintiffs-appellants. exclusive of costs and expenses of the sale.000.567. claiming the lower court erred in not reducing the liquidated damages and the attorney's fees to not more than P500.567. Dakila F.00 13. The defendants set up the defense that the complaint states no cause of action. defendants-appellees. 7464) Less: Amount of Loan 12% Interest 5% Attorney's fees and liquidated damages Total Obligation Excess Recoverable P50. The complainants also asked for P5. P55. The mortgage executed by Catalina Carreon Rivera and Zacarias Rivera was foreclosed extrajudicially and the proceeds of the sale of the land amounting to P68. LORENZO RIVERA. Catalina Carreon.00 as attorney's fees for bringing this action. plaintiffs-appellants.57 which represents the excess of the total obligations of the mortgagor based on the following computation: Proceeds of Sale (TCT No. .000.000.567.00 2. 7464) Less: Amount of Loan 12% Interest 5% Attorney's fees and liquidated damages Total Obligation Excess Recoverable P50.00 in not declaring the stipulation exacting attorney's fees and liquidated damages as a usurious stipulation. Aurelio Geniza and Lorenzo Rivera over two parcels of registered land for the sum of P50. J. AURELIO GENIZA. Geniza. by reason of which plaintiffs (appellants herein) should be entitled to attorney's fees amounting to P5.00. L-17165 July 31. So ordered. 1962 EMMA R. and with the same conditions as the mortgage executed by the spouses Catalina Carreon and Zacarias Rivera. We also find the reduced liquidated damages and attorney's fees to be fair and we find no reason for disturbing the discretion of the court below in this respect.000 would appear to be iniquitous and subject to reduction in accordance with the provisions of Articles 1227 and 1229 of the Civil Code of the Philippines. and ordering the defendant Asia Mercantile Corporation to return plaintiff Catalina C. rendered judgment dismissing the action of plaintiffs Emma Geniza and Aurelio Geniza as premature. Geniza and Aurelio Geniza has not yet been foreclosed. LABRADOR. with costs against the plaintiffsappellants. unconscionable and iniquitous and that the same should be reduced to P200.567.: On July 8. Castro for defendants-appellees. WHEREFORE. Under these circumstances we cannot sustain claim of the plaintiffs-appellants that the agreement was usurious one. Paragraph 4 of the contract provides that upon failure of the mortgagor to pay the indebtedness and the interest when due.00 2.567.00. damages amounting to 30% of the loan of P50.00 2. so that we hold that the trial court was fully justified in considering the provision only as iniquitous clause subject to reduction.000. that the mortgage executed by Emma R.

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