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CASE Jardenil vs.

Salas

FACTS ISSUE This is an action for foreclosure of mortgage. Jardenil *+, defendant-appellee mortgage his property to Salas. bound to pay the stipulated interest only up to the date Promissory Note of Jardenil: of maturity as fi.ed in the debt :(P2,4 . ! promissory note, or up to To be paid: ("#! de mar$o de mil no%ecientos the date payment is treintaicuarto (#&"4!, con los intereses de dicha suma effected/ This 0uestion is, al tipo de doce por ciento (#2'! anual a partir desde in our opinion controlled fecha hasta el dia de su %encimiento o sea treintaiuno by the e.press stipulation ("#! de mar$o de mil no%ecientos treintaicuatro of the parties. (#&"4!, por la presente, el Sr. (epti Solas cede y traspasa, por %ia de primera hipoteca)

RULING 1efendant-appellee has, therefore, clearly agreed to pay interest only up to the date of maturity, or until 2arch "#, #&"4. 3s the contract is silent as to 4hether after that date, in the e%ent of non-payment, the debtor 4ould continue to pay interest, 4e cannot in la4, indulge in any presumption as to such interest5 other4ise, 4e 4ould be imposing upon the debtor an obligation that the parties ha%e not chosen to agree upon. 3rticle #677 of the 8i%il 8ode pro%ides that 9interest shall be due only 4hen it has been expressly stipulated.9 There is nothing in the mortgage deed to sho4 that the terms employed by the parties thereto are at 4ar 4ith their e%ident intent. +n the contrary the act of the mortgage of granting to the mortgagor on the same date of e.ecution of the deed of mortgage, an e.tension of one year from the date of maturity 4ithin 4hich to ma:e payment, 4ithout ma:ing any mention of any interest 4hich the mortgagor should pay during the additional period (see ;.hibit < attached to the complaint!, indicates that the true intention of the parties 4as that no interest should be paid during the period of grace. *hat reason the parties may ha%e therefore, 4e need not here see: to e.plore.

PARASParas, dissenting: =nder the facts stated in the decision of the ma>ority, ? come to the conclusion that interest at the rate of 1 !er "ent !er ann#m s$o#ld %e !aid #! to t$e date of !ayment of t$e &$ole inde%tedness is made. Payment of such interest

is e'!ressly sti!#lated. True, it is stated in the mortgage contract that interest 4as to be paid up to 2arch "#, #&"4, but this date 4as inserted merely because it 4as the date of maturity. The e.tension note is silent as regards interest, but its payment is clearly implied from the nature of the transaction 4hich is only a rene4al of the obligation. ?n my opinion, the ruling of the ma>ority is anomalous and at 4ar 4ith common practice and e%eryday business usage

C# Un(ien) vs. *a%ala"a t S#)ar Co.

8ase 4as ?nstituted in the 8ourt of @irst ?nstance of Pampanga by 8u =n>ieng e (i>os, for the purpose of re"overin) from t$e *a%ala"at S#)ar Com!any an inde%tedness amo#ntin) to more t$an P1+,.--, 4ith interest, and to foreclose a mortgage gi%en by the debtor to secure the same, as 4ell as to reco%er stipulated attorneyAs fee and the sum of P#,2 B, paid by the plaintiff for insurance upon the mortgaged property, 4ith incidental relief. ?n the complaint Si#lion) . Co./ In"., 4as >oined as defendant, as a s#rety of t$e *a%ala"at S#)ar Com!any, and as ha%ing a third mortgage on the mortgaged property. T$e P$ili!!ine National 0an1 4as also >oined by reason of its interest as second mortgagee of the land co%ered by the mortgage to the plaintiff. 8u =n>ieng e (i>os, agreed to e.tend the time for payment of the indebtedness until June " ,

*+, it is correct for interest charges be made by the plaintiff by estimating the amount of the indebtedness/

?t is 4ell settled that, #nder Arti"le 11-2 of t$e Civil Code, as 4ell as #nder se"tion 3 of t$e Us#ry La& 4A"t No. +335/ the parties may stipulate that interest shall be compounded5 3,1 rests for the computation of compound interest can certainly be made mont$ly, as 4ell as 6#arterly/ semi7ann#ally/ or ann#ally. <=T in t$e a%sen"e of e'!ress sti!#lation for t$e a""#m#lation of "om!o#nd interest/ no interest "an %e "olle"ted #!on interest #ntil t$e de%t is (#di"ially "laimed, and then the rate at 4hich interest upon accrued interest must be computed is fi.ed AT + PER CENT PER ANNU*. ?n the present case, ho4e%er, t$e lan)#a)e 4hich 4e ha%e 0uoted abo%e 89ES N9T JUSTIF: T;E C;ARGING 9F INTEREST UP9N INTEREST, so far as interest on the capital is concerned. The pro%ision 0uoted merely re0uires the debtor to

#&2&, 4ith certain interim payments prior to the contemplated final li0uidation of the 4hole indebtedness. <ut the debtor party failed to ma:e the interim payments due and failed altogether to pay the balance due, according to the terms of this e.tension, on June " , #&2&. it is insisted for the appellant that this agreement for the e.tension of the time of payment had the effect of abrogating the stipulation of the original contract 4ith respect to the acceleration of the maturity of the debt by non-compliance 4ith the terms of the mortgage =nder the se"ond "la#se of the mortgage, interest should be calculated upon the indebtedness at the rate of #2 per cent per annum. ?n the same clause, but in a separate paragraph, there is anot$er !rovision 4ith respect to the payment of interest e.pressed in Spanish. ?n ;nglish this pro%ision reads substantially as follo4s: 9?nterest, to be computed upon the still unpaid capital of the loan, shall be paid monthly, at the end of each month.9

pay interest monthly at the end of each month, such interest to be computed upon the capital of the loan not yet paid. 8learly this !rovision does not (#stify t$e "$ar)in) of "om!o#nd interest #!on t$e interest a""r#in) #!on t$e "a!ital mont$ly. ?t is true that in subsections (a!, (b! and (c! of article ?C of the mortgage, it is stipulated that the interest can be thus C9*PUTE8 UP9N SU*S which the creditor would have to pay out (a) to maintain insurance upon the mortgaged property, (b) to pay the land tax upon the same property, and (c) upon disbursements that might be made by the mortgagee to maintain the property in good condition. 0UT T;E C;IEF T;ING IS T;AT INTEREST CANN9T 0E T;US ACCU*ULATE8 9N UNPAI8 INTEREST ACCRUING UP9N T;E CAPITAL 9F T;E 8E0T. The e.hibit referred to is merely a receipt sho4ing that the sum of P27B.2D 4as, on 2arch #&, #&2D, paid by the debtor to the plaintiff as interest upon interest. <ut 4here interest is improperly charged, at an unla4ful rate, the mere %oluntary payment of it to the creditor by the debtor is not binding. Such !ayment/ in t$e "ase %efore #s/ &as #s#rio#s/ %ein) in e'"ess of 1 !er "ent &$i"$ is allo&ed to %e "$ar)ed, under section 2 of the =sury Ea4, 4hen a debt is secured by mortgage upon real property.

GSIS vs. 3 surety agreement by 4hich 1omsat obtained a Co#rt of surety bond from FS?S to secure the payment of the A!!eals loan from the <an:s. 3greement: 89*SAT ;9L8INGS/ INC./

re!resented %y its President as PRINCIPAL , and the G9<ERN*ENT SER<ICE INSURANCE S:STE*/ as Administrator of the F;,;G3E ?,S=G3,8; @=,1, are held and firmly bound unto the +<E?F;;S for the payment of 4hich sum, 4ell and truly to be made, 4e bind oursel%es, our heirs, e.ecutors, administrators, successors and assigns, (ointly and severally, firmly by these presents. Fuarantee the repayment of the principal and interest on the loan granted the PG?,8?P3E to be used for the financing of the t4o (2! year lease of a Gussian Satellite from ?,T;GSP=T,?H, in accordance 4ith the terms and conditions of the credit pac:age entered into by the parties. This bond shall remain %alid and effecti%e until the loan including interest has been fully paid and li0uidated, ----*hen 8omsat failed to !ay t$e loan/ GSIS ref#sed to "om!ly &it$ its o%li)ation reasonin) t$at 8omsat did not #se t$e loan proceeds for the payment of rental for the satellite. FS?S alleged that 1omsat, 4ith *estmont <an: as the conduit, transferred t$e U.S. =11 *illion loan !ro"eeds from t$e Ind#strial 0an1 of >orea to Citi%an1 Ne& :or1 a""o#nt of *estmont <an: and from there to the <inondo <ranch of *estmont <an:. I7J The <an:s filed a complaint before the GT8 of 2a:ati against 1omsat and FS?S. GT8- the 8ourt did not find merit in the motion. 83- declared that 1omsatKs deposit in *estmont <an: is co%ered by Gepublic 3ct ,o. B42B or the <an: Secrecy Ea4.

Li)#tan vs. CA

Petitioners Tolomeo Li)#tan and Leonidas del a Llana obtained on ## 2ay #&D# a loan in the amount of P#2 , . from respondent Se"#rity 0an1 and Tr#st Com!any. Petitioners e.ecuted a promissory note binding them, >ointly and se%erally, to pay the sum borro4ed 4ith an interest of #7.#D&' per annum upon maturity and to pay a !enalty of 7' e%ery month on the o#tstandin) !rin"i!al and interest in "ase of defa#lt . ?n addition, petitioners agreed to pay # ' of t$e total amo#nt d#e %y &ay of attorney?s fees if the matter 4ere indorsed to a la4yer for collection or if a suit 4ere instituted to enforce payment. The obligation matured on D September #&D#5 the ban:, ho4e%er, granted an e.tension but only up until 2& 1ecember #&D#. 1espite se%eral demands from the ban:, petitioners failed to settle the debt 4hich, as of 2 2ay #&D2, amounted to P##4, 4#B.# . GT8- rendered in fa%or of the plaintiff and against the defendants, ordering the latter to pay, >ointly and se%erally, to the plaintiff 83- appellate court affirmed the >udgment of the trial court e.cept on the matter of the 2' ser%ice charge 4hich 4as deleted pursuant to 8entral <an: 8ircular ,o. 6D". ,ot fully satisfied 4ith the decision of the appellate court, both parties filed their respecti%e motions for reconsideration. I4J Petitioners prayed for the reduction of the 7' stipulated penalty for being unconscionable.

*+, the imposed interest The respondent 8ourt of 3ppeals seriously to the mortgage loan erred in not holding that the #7.#D&' interest precludes the creditor from and the penalty of three ("'! percent per month imposing a penalty or thirty-si. ("B'! percent per annum imposed stipulation/ by pri%ate respondent ban: on petitionersK loan obligation are still manifestly e.orbitant, ini0uitous and unconscionable. 3nent the stipulated interest of #7.#D&' per annum, petitioners, for the first time, 0uestion its reasonableness and prays that the 8ourt reduce the amount. This contention is a fresh issue that has not been raised and %entilated before the courts belo4. ?n any e%ent, the interest stipulation, on its face, 89ES N9T APPEAR AS 0EING T;AT E@CESSI<E. The essence or rationale for the payment of interest, 0uite often referred to as cost of money, is not e.actly the same as that of a surcharge or a penalty. A !enalty sti!#lation is not ne"essarily !re"l#sive of interest, if there is an agreement to that effect, the t4o being distinct concepts 4hich may separately be demanded.I#DJ *hat may >ustify a court in not allo4ing the creditor to impose full surcharges and penalties, despite an e.press stipulation therefor in a %alid agreement, may not e0ually >ustify the non-payment or reduction of interest. ?ndeed, the interest prescribed in loan financing arrangements is a fundamental part of the ban:ing business and the core of a ban:As e.istence.

Tan CA

vs.

+n 2ay #4, #&6D and July B, #&6D, petitioner 3ntonio Tan obtained t4o (2! loans each in the

*+, computation of the pri%ate respondent 4hereby

*e find no merit in the petitionerKs contention. 3rticle #22B of the ,e4 8i%il 8ode

principal amount of T4o 2illion Pesos (P2, , . !, or in the total principal amount of @our 2illion Pesos (P4, , . ! from respondent 8ultural 8enter of the Philippines (88P, for bre%ity! e%idenced by t4o (2! promissory notes 4ith maturity dates on 2ay #4, #&6& and July B, #&6&, respecti%ely. Petitioner defaulted but after a fe4 partial payments he had the loans restructured by respondent 88P, and petitioner accordingly e.ecuted a promissory note on 3ugust "#, #&6& in the amount of Three 2illion @our (undred ;le%en Thousand @our (undred T4enty-+ne Pesos and Thirty-T4o 8enta%os (P",4##,42#."2! payable in fi%e (7! instalments. Petitioner Tan failed to pay any instalment on the said restructured loan. Petitioner re0uested and proposed to respondent 88P a mode of paying the restructured loan, i.e., (a! t4enty percent (2 '! of the principal amount of the loan upon the respondent gi%ing its conformity to his proposal5 and (b! the balance on the principal obligation payable in thirty-si. ("B! e0ual monthly instalments until fully paid. ,o fa%orable response 4as made to said letters. ?nstead, respondent 88P, through counsel, 4rote a letter dated 2ay " , #&D4 to the petitioner demanding full payment, 4ithin ten (# ! days from receipt of said letter. GT8-rendered in fa%or of plaintiff and against defendant, ordering defendant to pay plaintiff, the amount of P6,&&B,"#4.B6, representing defendantKs outstanding account as of 3ugust 2D, #&DB, 4ith the corresponding stipulated interest

the interest, surcharge and pro%ides that: the principal 4ere added together and that on the ?n obligations 4ith a penal clause, the penalty total sum interest is shall substitute the indemnity for damages and C3E?1/ the payment of interests in case of noncompliance, if there is no stipulation to the contrary. ,e%ertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfilment of the obligation. The penalty may be enforced only 4hen it is demandable in accordance 4ith the pro%isions of this 8ode. ?n the case at bar, the promissory note (;.hibit 3)! e.pressly pro%ides for the imposition of both interest and penalties in case of default on the part of the petitioner in the payment of the sub>ect restructured loan. The pertinentIBJ portion of the promissory note (;.hibit 3)! imposing interest and penalties pro%ides that: @or %alue recei%ed, ?L*e >ointly and se%erally promise to pay to the 8=ET=G3E 8;,T;G +@ T(; P(?E?PP?,;S at its office in 2anila, the sum of T(G;; 2?EE?+, @+=G (=,1G;1 ;E;C;, T(+=S3,1 @+=G (=,1G;1 M P;S+S (P",4##,42#."2! Philippine 8urrency, .... ... ... *ith interest at the rate of @+=GT;;, per cent (#4'! per annum from the date hereof ...

and charges thereof, until fully paid, plus attorneyKs fees in an amount e0ui%alent to 27' of said outstanding account, plus P7 , . , as e.emplary damages, plus costs 83- Fi%en the circumstances of the case, plus the fact that plaintiff 4as represented by a go%ernment la4yer, *e belie%e the a4ard of 27' as attorneyKs fees and P7 , . as e.emplary damages is out of proportion to the actual damage caused by the non-performance of the contract and is e.cessi%e, unconscionable and ini0uitous.

until paid. PE=S T(G;; P;G8;,T ("'! S;GC?8; 8(3GF;. ?n case of non-payment of this note at maturityLon demand or upon default of payment of any portion of it 4hen due, ?L*e >ointly and se%erally agree to payadditional penalty charges at the rate of T*+ per cent (2'! per month on the total amount due until paid, payable and computed monthly. 1efault of payment of this note or any portion thereof 4hen due shall render all other installments and all e.isting promissory notes made by us in fa%or of the 8=ET=G3E 8;,T;G +@ T(; P(?E?PP?,;S immediately due and demandable. (=nderscoring supplied! ... ... The stipulated fourteen percent (#4'! per annum interest charge until full payment of the loan constitutes the monetary interest on the note and is allo4ed under 3rticle #&7B of the ,e4 8i%il 8ode.I6J +n the other hand, the stipulated t4o percent (2'! per month penalty is in the form of penalty charge 4hich is separate and distinct from the monetary interest on the principal of the loan. ...

RC0C vs. CA

F+N= applied for credit facilities and accommodations 4ith G8<8 at its <inondo <ranch. 8redit facility in the amount of P" million 4as initially granted. =pon F+N=Ks application and =yKs and EaoKs recommendation, G8<8Ks e.ecuti%e committee increased F+N=Ks credit facility to P7 million, then to P& million, and finally to P##6 million. @or its credit facilities 4ith G8<8, F+N= e.ecuted t4o real estate mortgages and t4o chattel mortgages. ;ach of these four mortgage contracts, F+N= committed itself to insure the mortgaged property 4ith an insurance company appro%ed by G8<8, and subse0uently, to endorse and deli%er the insurance policies to G8<8. +n 3pril 26, #&&2, one of F+N=Ks factory buildings in Calen$uela 4as gutted by fire. 8onse0uently, F+N= submitted its claim for indemnity on account of the loss insured against. 2?8+ denied the claim on the ground that the insurance policies 4ere either attached pursuant to 4rits of attachmentsLgarnishments issued by %arious courts or that the insurance proceeds 4ere also claimed by other creditors of F+N= alleging better rights to the proceeds than the insured. 2anila GT8 rendered >udgment in fa%or of F+N= The 8ourt of 3ppeals partly granted F+N=Ks

*hether or not G8<8, as mortgagee, has any right o%er the insurance policies ta:en by F+N=, the mortgagor, in case of the occurrence of loss/ *+, payment of interest should be included in the insurance to be paid by 2?8+/

?t is to be noted that nine endorsement documents 4ere prepared by 3lchester in fa%or of G8<8. The 8ourt is in a 0uandary ho4 3lchester could arri%e at the idea of endorsing any specific insurance policy in fa%or of any particular beneficiary or payee other than the insured had not such named payee or beneficiary been specifically disclosed by the insured itself. ?t is also significant that F+N= %oluntarily and purposely too: the insurance policies from 2?8+, a sister company of G8<8, and not >ust from any other insurance company. The need for the payment of interest due upon the principal amount of the obligation, 4hich is the cost of money to G8<8, the primary end and the ultimate reason for G8<8Ks e.istence and being, 4as duly recogni$ed by the trial court 4hen it ruled fa%orably on G8<8Ks counterclaim, ordering F+N= to pay its loan obligation 4ith G8<8 in the amount of PBD,6D7, B&. 4, as of 3pril 26,#&&2, 4ith interest thereon at the rate stipulated in the respecti%e promissory notes (4ithout surcharges and penalties! per computation, pp. #4-3, #4-<, #4-8) (Gecord, p. 46&!. Gegarding defendant G8<8Ks commitment not to charge additional interest, penalties and surcharges, the same does not re0uire that it be embodied in a document or some form of 4riting to be binding and enforceable. The principle is 4ell :no4n that generally a ver%al a)reement or "ontra"t is no less %indin) and effe"tive t$an a &ritten one. 3nd the e.istence of such a %erbal agreement has been

appeal, but sustained the findings of the trial court 4ith respect to 2?8+ and G8<8Ks liabilities. G8<8 and 2?8+ are no4 before us in F.G. ,o. #2DD"" and #2DDBB, respecti%ely, see:ing re%ie4 and conse0uent re%ersal of the abo%e dispositions of the 8ourt of 3ppeals.

amply established by the e%idence in this case. ?n any e%ent, regardless of the e.istence of such %erbal agreement, it &o#ld still %e #n(#st and ine6#ita%le for defendant RC0C to "$ar)e t$e !laintiff 4ith surcharges and penalties considering the latterKs pitiful situation. The essence or rationale for the !ayment of interest or cost of money is separate and distinct from that of s#r"$ar)es and !enalties. *hat may (#stify a "o#rt in not allo&in) t$e "reditor to "$ar)e s#r"$ar)es and !enalties despite e.press stipulation therefor in a %alid agreement, may not e6#ally (#stify non7!ayment of interest. The charging of interest for loans forms a %ery essential and fundamental element of the ban:ing business, 4hich may truly be considered to be at the %ery core of its e.istence or being. ?t is inconcei%able for a ban: to grant loans for 4hich it 4ill not charge any interest at all. *e fail to find >ustification for the 8ourt of 3ppealsK outright deletion of the payment of interest as agreed upon in the respecti%e promissory notes. This constitutes gross error. There being 4ritten stipulations as to the rate of interest o4ing on each specific promissory note as summari$ed and tabulated by the trial court in its decision (pp.46 and 46#, Gecord! such agreed interest rates must be follo4ed. This is %ery clear from paragraph ??, sub-paragraph # 0uoted abo%e. +n the issue of payment of surcharges and penalties, 4e partly agree that F+N=Ks

pitiful situation must be ta:en into account. *e do not agree, ho4e%er, that payment of any amount as surcharges and penalties should altogether be deleted. ;%en assuming that G8<8, through its responsible officers, herein petitioners ;li Eao and =y 8hun <ing, may ha%e relayed its assurance for assistance to F+N= immediately after the occurrence of the fire, 4e cannot accept the lo4er courtsK finding that G8<8 had thereby ipso facto effecti%ely 4ai%ed collection of any additional interests, surcharges, and penalties from F+N=. 3ssurances of assistance are one thing, but 4ai%er of additional interests, surcharges, and penalties is another. Surcharges and penalties agreed to be paid by the debtor in case of default parta:e of the nature of li0uidated damages, co%ered by Section 4, 8hapter ", Title OC??? of the 8i%il 8ode. 3rticle 2226 thereof pro%ides: 3GT. 2226. Ei0uidated damages, 4hether intended as a indemnity or penalty, shall be e0uitably reduced if they are ini0uitous and unconscionable. ?n e.ercising this %ested po4er to determine 4hat is ini0uitous and unconscionable, the 8ourt must consider the circumstances of each case. ?t should be stressed that the 8ourt 4ill not ma:e any s4eeping ruling that surcharges and penalties imposed by ban:s for non-payment of the loans e.tended by them are generally ini0uitous and unconscionable. *hat may be ini0uitous and unconscionable in one case,

may be totally >ust and e0uitable in another. This pro%ision of la4 4ill ha%e to be applied to the established facts of any gi%en case. Fi%en the circumstances under 4hich F+N= found itself after the occurrence of the fire, the 8ourt rules the surcharges rates ranging any4here from &' to 26', plus the penalty charges of "B', to be definitely ini0uitous and unconscionable. The 8ourt tempers these rates to 2' and "', respecti%ely. @urthermore, in the light of F+N=Ks offer to pay the amount of P##B," #,&&2.B to G8<8 as 2arch #&&" (See: ;.hibit <<)!, 4hich G8<8 refused, 4e find it more in :eeping 4ith >ustice and e0uity for G8<8 not to charge additional interest, surcharges, and penalties from that time on4ard. Fi%en the factual milieu spread hereo%er, 4e rule that it 4as error to hold 2?8+ liable in damages for denying or 4ithholding the proceeds of the insurance claim to F+N=.

Eastern S$i!!in) Lines vs. CA

This is an action against defendants shipping company, arrastre operator and bro:er-for4arder for damages sustained by a shipment 4hile in defendantsA custody, filed by the insurersubrogee 4ho paid the consignee the %alue of such lossesLdamages. +n 1ecember 4, #&D#, t4o fiber drums of ribofla%in 4ere shipped from No:ohama, Japan for deli%ery %essel 9SS ;3ST;G, 8+2;T9 o4ned by defendant ;astern Shipping Eines under <ill of Eading ,o. N23-D (;.h. <!. The shipment 4as insured under plaintiffAs 2arine ?nsurance Policy ,o. D#L ##66 for P"B,"D2,4BB."D. =pon arri%al of the shipment in 2anila on 1ecember #2, #&D#, it 4as discharged unto the custody of defendant 2etro Port Ser%ice, ?nc. The latter e.cepted to one drum, said to be in bad order, 4hich damage 4as un:no4n to plaintiff. +n January 6, #&D2 defendant 3llied <ro:erage 8orporation recei%ed the shipment from defendant 2etro Port Ser%ice, ?nc., one drum opened and 4ithout seal (per 9Ge0uest for <ad +rder Sur%ey.9 ;.h. 1!. +n January D and #4, #&D2, defendant 3llied <ro:erage 8orporation made deli%eries of the shipment to the consigneeAs 4arehouse. The latter e.cepted to one drum 4hich contained spillages, 4hile the rest of the contents 4as adulteratedLfa:e.

*hether or not the payment of legal interest on an a4ard 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/

?nterest upon an obligation 4hich calls for the payment of money, absent a stipulation, is the legal rate. Such interest normally is allo4able from the date of demand, >udicial or e.tra>udicial. The trial court opted for >udicial demand as the starting point. <ut then upon the pro%isions of 3rticle 22#" of the 8i%il 8ode, interest 9cannot be reco%ered upon unli0uidated claims or damages, e.cept 4hen the demand can be established 4ith reasonable certainty.9 3nd as 4as held by this 8ourt in Gi%era %s. Pere$, 4 EB&&D, @ebruary 2&, #&7B, if the suit 4ere for damages, 9unli0uidated and not :no4n until definitely ascertained, assessed and determined by the courts after proof then, interest 9should be from the date of the decision.9 <y %irtue of the authority granted to it under Section # of 3ct 2B77, as amended, 2onetary <oard in its Gesolution ,o. #B22 dated July 2&, #&64, has prescribed that the rate of interest for the loan, or forbearance of any money, goods, or credits and the rate allo4ed in >udgments, in the absence of e.press contract as to such rate of interest, shall be t4el%e (#2'! percent per annum. This 8ircular shall ta:e effect immediately. The ostensible discord is not difficult to e.plain. The factual circumstances may ha%e called for different applications, guided by the rule that the courts are %ested 4ith discretion, depending on the e0uities of each case, on the a4ard of interest. ,onetheless, it may not be un4ise, by 4ay of clarification and reconciliation, to suggest the follo4ing rules of

*hether or not the applicable rate of interest, referred to abo%e, is t4el%e percent (#2'! or si. percent (B'!/

thumb for future guidance. ?. *hen an obligation, regardless of its source, i.e., la4, contracts, 0uasi-contracts, delicts or 0uasi-delicts #D is breached, the contra%enor can be held liable for damages. #& The pro%isions under Title OC??? on 91amages9 of the 8i%il 8ode go%ern in determining the measure of reco%erable damages. 2 ??. *ith regard particularly to an a4ard of interest in the concept of actual and compensatory damages, the rate of interest, as 4ell as the accrual thereof, is imposed, as follo4s: #. *hen the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that 4hich may ha%e been stipulated in 4riting. 2# @urthermore, the interest due shall itself earn legal interest from the time it is >udicially demanded. 22 ?n the absence of stipulation, the rate of interest shall be #2' per annum to be computed from default, i.e., from >udicial or e.tra>udicial demand under and sub>ect to the pro%isions of 3rticle ##B& 2" of the 8i%il 8ode. 2. *hen an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages a4arded may be imposed at the discretion of the court 24 at the rate of B' per annum. 27 ,o interest, ho4e%er, shall be ad>udged on unli0uidated claims or damages e.cept 4hen or until the demand can be established 4ith reasonable certainty. 2B 3ccordingly, 4here the demand is

established 4ith reasonable certainty, the interest shall begin to run from the time the claim is made >udicially or e.tra>udicially (3rt. ##B&, 8i%il 8ode! but 4hen such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the >udgment of the court is made (at 4hich time the 0uantification of damages may be deemed to ha%e been reasonably ascertained!. The actual base for the computation of legal interest shall, in any case, be on the amount finally ad>udged. ". *hen the >udgment of the court a4arding a sum of money becomes final and e.ecutory, the rate of legal interest, 4hether the case falls under paragraph # or paragraph 2, abo%e, shall be #2' per annum from such finality until its satisfaction, this interim period being deemed to be by then an e0ui%alent to a forbearance of credit. *(;G;@+G;, the petition is partly FG3,T;1. The appealed decision is 3@@?G2;1 4ith the 2+1?@?83T?+, that the legal interest to be paid is S?O P;G8;,T (B'! on the amount due computed from the decision, dated " @ebruary #&DD, of the court a 0uo. 3 T*;EC; P;G8;,T (#2'! interest, in lieu of S?O P;G8;,T (B'!, shall be imposed on such amount upon finality of this decision until the payment thereof

First Fil7 +n July 22, #&&6, respondent Floria 1. Padillo Sin obtained a P7 , . loan from petitioner @irst @ilLendin) Sin Eending 8orp. +n September 6, #&&6, Cor!. vs. respondent obtained another P7 , . loan from Padillo petitioner. ?n both instances, respondent e.ecuted a promissory note and disclosure statement.I2J @or the first loan, respondent made #" monthly interest payments of P22,7 . each before she settled the P7 , . outstanding principal obligation on @ebruary 2, #&&&. 3s regards the second loan, respondent made ## monthly interest payments of P27, . each before paying the principal loan of P7 , . on @ebruary 2, #&&&. I"J ?n sum, respondent paid a total of P6&2,7 . for the first loan and P667, . for the second loan. +n January 26, 2 , respondent filed an action for sum of money against herein petitioner before the Gegional Trial 8ourt of 2anila. 3lleging that she only agreed to pay interest at the rates of 4.7' and 7' per annum, respecti%ely, for the t4o loans, and not 4.7' and 7' per month, respondent sought to reco%er the amounts she allegedly paid in e.cess of her actual obligations. trial court dismissed respondentKs complaint, and on the counterclaim, ordered her to pay petitioner P"##,#27. 4ith legal interest from @ebruary ", #&&& until fully paid plus # ' of the amount due as attorneyKs fees and costs of the suit.I7J The trial court ruled that by issuing chec:s representing interest payments at 4.7' and 7' monthly interest rates, respondent is no4 estopped from 0uestioning the pro%isions of the promissory notes. +n appeal, the 8ourt of 3ppeals (83! re%ersed and set aside the decision of the court a quo (#! ordering @irst @il-Sin Eending 8orporation to return

*+, T(; 3PPE?83<E; ?,T;G;ST S(+=E1 <; T(; E;F3E ?,T;G;ST +@ T*;EC; P;G 8;,T (#2'! P;G 3,,=2 1;SP?T; T(; 8E;3G 3FG;;2;,T +@ T(; P3GT?;S +, 3,+T(;G 3PPE?83<E; G3T;.

*e agree 4ith respondent. Perusal of the promissory notes and the disclosure statements pertinent to the July 22, #&&6 and September 6, #&&6 loan obligations of respondent clearly and unambiguously pro%ide for interest rates of 4.7' per annum and 7' per annum, respecti%ely. ,o4here 4as it stated that the interest rates shall be applied on a monthly basis. Thus, 4hen the terms of the agreement are clear and e.plicit that they do not >ustify an attempt to read into it any alleged intention of the parties, the terms are to be understood literally >ust as they appear on the face of the contract.IDJ ?t is only in instances 4hen 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. (o4e%er, t$ese r#les &ill not %e #sed to ma1e a ne& "ontra"t for t$e !arties or to re&rite t$e old one, e%en if the contract is ine0uitable or harsh. They are applied by the court merely to resol%e doubts and ambiguities 4ithin the frame4or: of the agreement.I&J The lo&er "o#rt and t$e CA mistoo1 t$e Loan Transa"tions S#mmary for t$e 8is"los#re Statement. The former 4as prepared e.clusi%ely by petitioner and merely summari$es the payments made by respondent and the income earned by petitioner. There 4as no mention of any interest rates and ha%ing been prepared e.clusi%ely by petitioner, the same is self ser%ing. +n the contrary, the 1isclosure Statements 4ere signed by both

the amount of P##4, . to Floria 1. Padillo, and (2! deleting the a4ard of attorneyKs fees in fa%or of appellee. +ther claims and counterclaims are dismissed for lac: of sufficient causes. ,o pronouncement as to cost.

parties and categorically stated that interest rates 4ere to be imposed annually, not monthly. 3s such, since the terms and conditions contained in the !romissory notes and dis"los#re statements are "lear and #nam%i)#o#s, the same must be gi%en full force and effect. The e.pressed intention of the parties as laid do4n on the loan documents controls. 3lso, reformation "annot %e resorted to as the documents ha%e not been assailed on the ground of mutual mista:e. *hen a party sues on a 4ritten contract and no attempt is made to sho4 any %ice therein, he cannot be allo4ed to lay claim for more than 4hat its clear stipulations accord. (is omission cannot be arbitrarily supplied by the courts by 4hat their o4n notions of >ustice or e0uity may dictate.I# J ,otably, !etitioner even admitted t$at it &as solely res!onsi%le for t$e !re!aration of t$e loan do"#ments/ and t$at it failed to "orre"t t$e pro forma note A!.a.B to A!er mont$B.I##J Since the mista:e is e.clusi%ely attributed to petitioner, the same should be charged against it. This unilateral mista:e cannot be ta:en against respondent 4ho merely affi.ed her signature on the pro forma loan agreements. 3s bet4een t4o parties to a 4ritten agreement, the party 4ho ga%e rise to the mista:e or error in the pro%isions of the same is estopped from asserting a contrary intention to that contained therein. The chec:s issued by respondent do not clearly and con%incingly pro%e that the real intent of the parties is to apply the interest rates on a

monthly basis. 3bsent any proof of %ice of consent, the promissory notes and disclosure statements remain the best e%idence to ascertain the real intent of the parties. The same promissory note pro%ides that . . . any and all remaining amount due on the principal upon maturity hereof shall earn interest at the rate of PPPPP from date of maturity until fully paid.) The 83 thus properly imposed the legal interest of #2' per annum from the time the loans matured until the same has been fully paid on @ebruary 2, #&&&. 3s decreed in ;astern Shipping Lines, Inc. v. ourt of !ppeals,I#2J Ain t$e a%sen"e of sti!#lation/ t$e rate of interest s$all %e 1 C !er ann#m to %e "om!#ted from defa#lt.B interest rates on the July 22, #&&6 and September 6, #&&6 loan obligations of respondent Floria 1. Padillo from petitioner @irst @il-Sin Eending 8orporation be imposed and computed on a per annum basis, and upon their respecti%e maturities, the interest rate of #2' per annum shall be imposed until full payment. ?n addition, the penalty at the rate of #2' per annum shall be imposed on the outstanding obligations from date of default until full payment

Inte)rated Realty Cor!. vs. PN0

Gaul E. Santos made a time deposit 4ith +%erseas <an: of the Philippines in the amount of P7 , . .Santos also made a time deposit 4ith +<2 in the amount of P2 , . . ?ntegrated Gealty 8orporation, thru itsPresident ---- Gaul E. Santos, applied for a loan andLor credit line in the amount of P6 , . 4ith P,<. To secure the said loan, Santos e.ecuted a 1eed of 3ssignment of the t4o time deposits in fa%or of plaintiff. +<2 ga%e its conformity to the assignment. (o4e%er, +<2, after the due dates of the time deposit certificates, did not pay P,<. P,< demanded payment from ?G8 and Santos and +<2. ?G8 and Santos replied that the obligation (loan! of defendant ?G8 4as deemed paid 4ith the irre%ocable assignment of the time deposit certificates.- +n 3pril B, #&B&, P,< filed a complaint to collect from ?G8 and Santos the loan of P6 , . 4ith interest as 4ell as attorneyAs fees. ?n its ans4er to the complaint, +<2 denied :no4ledge of the time deposit certificates because the alleged time deposit of Santos Adoes not appearA in its boo:s of account. The trial court ordered ?G8 and Santos to pay the plaintiff >ointly and solidarily, the total amount of P6 , plus interest. +<2 4as also ordered to pay cross ?G8 and Santos 4hate%er amount the latter 4ill pay to P,<. The 83 affirmed but deleted the portion of the >udgment ordering +<2 to pay ?G8 and Santos 4hate%er amounts they 4ill pay to P,< 4ith interest from the date of payment.

*+, the #-#L2' interest imposed by P,< 4as illegal/ *+, +<2 should be held liable for interests on the time deposits of ?G8 and Santos from the time it ceased operations until it resumed its business/

(eld: ,o Gatio: - *e find nothing illegal in the interest of one and one-half percent (#-#L2'! imposed by P,< pursuant to the resolution of its <oard 4hich presumably 4as done in accordance 4ith ordinary ban:ing procedures. ,ot only did ?G8 and Santos fail to o%ercome the presumption of regularity of business transactions, but they are li:e4ise estopped from 0uestioning the %alidity thereof for the first time in this petition. There is nothing in the records to sho4 that they raised this issue during the trial by presenting counter%ailing e%idence. *hat 4as merely touched upon during the proceedings in the court belo4 4as the alleged lac: of notice to them of the board resolution, but not the %eracity or %alidity thereof. (eld: ,o Gatio: - ?t is a matter of common :no4ledge, that 4hat enables a ban: to pay stipulated interest on money deposited 4ith it is that thru the other aspects of its operation it is able to generate funds to co%er the payment of such interest. =nless a ban: can lend money, engage in international transactions, ac0uire foreclosed mortgaged properties or their proceeds and generally engage in other ban:ing and financing acti%ities from 4hich it can deri%e income, it is inconcei%able ho4 it cancarry on as a depository obligated to pay stipulated interest. 8on%entional 4isdom dictates this ine.orable fair and >ust conclusion. 3nd it can be said that all 4ho deposit money in ban:s are a4are of such a simple economic

proposition. 8onse0uently, it should be deemed read into e%ery contract of deposit 4ith a ban: that the obligation to pay interest on the deposit ceases the moment the operation of the ban: is completely suspended by the duly constituted authority, the 8entral <an:.

0ataan Petitioner entered into a contract 4ith respondent, Seedlin) represented by the 1;,G for the reforestation of a Asso". <s. forest land 4ithin a period of " years. Petitioner Re!#%li" undertoo: to report to 1;,G any e%ent or condition 4hich delays or may delay the pro>ect. *ith the contract 4as the release of mobili$ation fund but the fund 4as to be returned upon completion or deducted from periodic release of mhoneys to petitioner. <elie%ing that petitioners failed to comply 4ith their obligations, respondent sent a notice of cancellation. Petitioners failed to respond to the notice, thus, respondent filed a complaint for damages against petitioners. The GT8 held that respondent had sufficient grounds to cancel the contract but sa4 no reason 4hy the mobili$ation fund and the cash ad%ances should be refunded or that petitioners are liable for li0uidated damages. <oth parties appealed to the 83, 4hich affirmed the trial court and that the balnce of the fund should be returned 4ith #2' interest.

*hether the order to refund ,o. ?nterest at the rate of #2' per annum is the balance of the fund 4ith impossible if there is no stipulation in the #2' interest pa is proper. contract. (erein sub>ect contract does not contain any stipulation as to interest. (o4e%er, the amount due to respondent does not represent a loan or forbearance of money. The 4ord forbearance) is defined, 4ithin, the conte.t of usury la4, as a contractual obligation of lender or creditor to refrain, during gi%en period of time, from re0uiring borro4er or debtor to repay loan or debt then due and payable. ?n the absence of stipulation, the legal interest is B' pa on the amount finally ad>udged by the 8ourt.

Cat#n)al vs. ;ao

+n 1ecember 2D, #&62, the original o4ner, 3niana Falang, leased a three-storey building situated at Quirino 3%enue, <aclaran, ParaRa0ue, 2etro 2anila, to the <an: of the Philippine ?slands (<P?! for a period of about fifteen (#7! years, to e.pire on June 2 , #&DB. 1uring the e.istence of the lease, <P? subleased the ground floor of said building to respondent 1oris (ao. +n 3ugust 24, #&D4, Falang and respondent e.ecuted a contract of lease on the second and third floors of the building. The lease 4as for a term of four (4! years commencing on 3ugust #7, #&D4 and ending on 3ugust #7, #&DD. +n 3ugust #7, #&DB, petitioner spouses ;rnesto and 2ina 8atungal bought the property from 3niana Falang. ?n%o:ing her right of first refusal) purportedly based on the lease contract bet4een her and 3niana Falang, respondent filed a complaint for 3nnulment of Sale 4ith 1amages doc:eted as 8i%il 8ase ,o. DD4&# of the Gegional Trial 8ourt (GT8! of 2a:ati, 2etro 2anila. 2ean4hile, the lease agreement bet4een <P? and Falang e.pired. =pon e.piration of the lease agreements, petitioner spouses sent demand letters to respondent for her to %acate the building. The demand letters 4ere unheeded by respondent causing petitioners to file t4o complaints for e>ectment, doc:eted as 8i%il 8ases ,os. 6BBB and 6BB6 of the 2etropolitan Trial 8ourt (2eT8! of ParaRa0ue, 2etro 2anila. The institution of the e>ectment cases prompted respondent to file an action for in>unction GT8 of 2a:ati- granting the in>unction and annulling the contract of sale bet4een 3niana Falang

The GT8 rightly modified the rental a4ard from P#", . to P4 , . , considering that it is settled >urisprudence that courts may ta:e >udicial notice of the general increase in rentals of lease contract rene4als much more 4ith business establishments. Thus, *e held in "anila #ay lub orporation vs. ourt of !ppeals:I#DJ ?t is 4orth stressing at this >uncture that the trial court had the authority to fi. the reasonable %alue for the continued use and occupancy of the leased premises after the termination of the lease contract, and that it 4as not bound by the stipulated rental in the contract of lease since it is e0ually settled that upon termination or e.piration of the contract of lease, the rental stipulated therein may no longer be the reasonable %alue for the use and occupation of the premises as a result or by reason of the change or rise in %alues. 2oreo%er, the trial court can ta:e >udicial notice of the general increase in rentals of real estate especially of business establishments li:e the leased building o4ned by the pri%ate respondent.I#&J The increased a4ard of rentals ruled by the GT8 is reasonable gi%en the circumstances of the case at bench. *e note that respondent 4as able to deny petitioners the benefits, including possession, of their rightful o4nership o%er the sub>ect property for almost a decade. The 8ourt also a4ards interest in fa%or of petitioners. ?n $astern Shipping Lines, Inc. vs. ourt of !ppeals, 4e ga%e the follo4ing guidelines in the a4ard of interest:

and petitioners. 8ourt of 3ppeals re%ersed and set aside the decision of the GT8 and the complaints in 8i%il 8ases ,os. DD-4&# and & -67D 4ere accordingly dismissed.

... ?? *ith regard particularly to an a4ard of interest in the concept of actual and compensatory damages, the rate of interest, as 4ell as the accrual thereof, is imposed, as follo4s: #. *hen the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that 4hich may ha%e been stipulated in 4riting. @urthermore, the interest due shall itself earn legal interest from the time it is >udicially demanded. ?n the absence of stipulation, the rate of interest shall be #2' per annum to be computed from default, i.e., from >udicial or e.tra>udicial demand under and sub>ect to the pro%isions of 3rticle ##B& of the 8i%il 8ode. The bac: rentals in this case being e0ui%alent to a loan or forbearance of money, the interest due thereon in t4el%e percent (#2'! per annum from the time of e.tra->udicial demand on September 26, #&DD.

0an"o Fili!ino vs. CA

;lsa 3rcilla and her husband, 8al%in 3rcilla secured on three occasions, loans from the <anco @ilipino Sa%ings and 2ortgage ban: in the amount of Php.# 6,&4B. as e%idenced by the Promissory ,ote) e.ecuted by the spouses in fa%or of the said ban:. To secure payment of said loans, the spouses e.ecuted Geal ;state 2ortgages) in fa%or of the appellants (<anco @ilipino! o%er their parcels of land. The appellee spouses failed to pay their monthly amorti$ation to appellant. +n September 2, #&D7 the appelleeKs filed a complaint for 3nnulment of the Eoan 8ontracts, @oreclosure Sale 4ith Prohibitory and ?n>unction) 4hich 4as granted by the GT8. Petitioners appealed to the 8ourt of 3ppeals, but the 83 affirmed the decision of the GT8.

*hether or not the 83 erred 4hen it held that the cause of action of the pri%ate respondents accrued on +ctober " , #&6D and the filing of their complaint for annulment of their contracts in # D7 4as not yet barred by the prescription

The court held that the petition is unmeritorious. PetitionerKs claim that the action of the pri%ate respondents ha%e prescribed is bereft of merit. =nder 3rticle ##7 of the 8i%il 8ode, the time for prescription of all :inds of action 4here there is no special pro%ision 4hich ordains other4ise shall be counted from the day they may be brought. Thus the period of prescription of any cause of action is rec:oned only from the date of the cause of action accrued. The period should not be made to retroact to the date of the e.ecution of the contract, but from the date they recei%ed the statement of account sho4ing the increased rate of interest, for it 4as only from the moment that they disco%ered the petitionerKs unilateral increase thereof

Consolida ted 0an1 vs. CA

*endoDa vs. CA

Petitioner 4as granted by respondent P,< a credit line for 7 ( and #2 for Eo8LTG line. 3s security, the former mortgaged properties. The G;2 pro%ided for an escalation clause that rate of interest charged on the obligation secured shall be sub>ect to such increase, during the life of the contract, 4ithin the rates allo4ed by la4. T4o P,s 4ere e.ecuted for the credit line and stipulated therein : 4ith interest thereon at the rate of #2' pa, until paid, 4ith interest rate the <an: may, at any tie, 4ithout notice, raise 4ithin the limits allo4ed by la4 ....) Thereafter, P,< ad%ised 2endo$a that the ban: raised its interest rates to #4' pa, in ine 4ith 8<2< Geso ,o 2#2B. Petitioner failed to payand re0uested for restructuring of loans. T4o promissory notes 4ere signed by 2endo$a and his 4ife. Petitioner testified that respondent allegedly inserted in first promissory note ,o. #26LD2 an interest rate of 2#' instead of #D' co%ering the principal amount,and on the second promissory note #2DLD2 the interest of #D' instead of #2' representing accrued interest.

*hether or not the interests ,o. it appears that respondent ban: pro%ided by respondent is increased the interest rates on the 2 promissory proper/ notes 4ithout prior consent of the petitioner. The petitioner did not agree to the increase in the stipulated interest. 3s held in se%eral cases, the unilateral determination and imposition of increased interest rates by respondent ban: is %iolati%e of the principle of mutuality of contracts ordained in 3rt. #" D of the 88.

First *etro Investmen ts Cor!. vs.

@2?8 granted ;ste del Sol a loan to finance a sportsLresort comple. in 2ontalban, Gi$al. =nder the agreement, the interest 4as #B' pa based on the diminishing balance. ?n case of default, an acceleration clause 4as pro%ided and the amount due is sub>ect to 2 ' one-time penalty on the amount due and such amount shall bear interest at the highest rate permitted by la4. respondent e.ecuted a G;2, indi%idual continuing suretyship and an under4riting agreement 4hereby @2?8 shall under4rite the public offering of one P#2 , common shares of respondentKs capital stoc: for one-time under4riting fee of P2 , . @or failure to pay its obligation, @2?8 caused the foreclosure of the G;2. 3t the public auction, @?8 4as the highest bidder. Petitioner filed to collect for alleged deficiency balance against respondents since it failed to collect from the sureties, plus interest at 2#' pa. the trial court ruled in fa%or of @2?8. Gespondents appealed before the 83 4hich held that the fees pro%ided for in the =nder4riting and 8onsultacy 3greements 4ere mere subterfuges to camouflage the e.cessi%ely usurious interest charged. The 83 ordered @2?8 to reimburse petitioner representing 4hat is ue to petitioner and 4hat is due to respondent.

*hether or not the interests are la4ful/

,o. an apparently la4ful loan is usurious 4hen it is intended that additional compensation for the loan be disguised by an ostensibly unrelated contract for the payment by the borro4er for the lenderKs ser%ices 4hich re of little %alue or 4hich are not in fact to be rendered. 3rticle #&76 clearly pro%ides: contracts and stipulations, under any cloa: or de%ice 4hate%er, intended to circum%ent the la4 against usury shall be %oid. The borro4er may reco%er in accordance 4ith the la4s on usury.

Frias vs. Petitioner is the o4ner of a house and lot located at San ,o. 7D& <atangas ;ast, 3yala 3labang, 2untinlupa, 8ie)o7 2etro 2anila. @rias as @irst party and 1ra. San Sison 1iego-Sison as Second Party. The parties agreed for and in consideration of the sum of T(G;; 2?EE?+, P;S+S (P", , . ! That the S;8+,1 P3GTN has a !eriod of Si' 4+5 mont$s from t$e date of t$e e'e"#tion of t$is "ontra"t &it$in &$i"$ to notify t$e FIRST PART: of $er intention to !#r"$ase t$e aforementioned !ar"el of land to)et$er &it$in t$e im!rovements thereon at the price of S?O 2?EE?+, @+=G (=,1G;1 T(+=S3,1 P;S+S (PB,4 , . !. =pon notice to the @?GST P3GTN of the intention to purchase the same, the 2nd party has a period of another si. months 4ithin 4hich to !ay the remaining balance of P".4 million. That prior to the si. months period gi%en to the S;8+,1 P3GTN 4ithin 4hich to decide 4hether or not to purchase the abo%e-mentioned property, the @?GST P3GTN may still offer the said property to other persons 4ho may be interested to buy the same pro%ided that the amount of P", , . gi%en to the @?GST P3GTN <N T(; S;8+,1 P3GTN shall be paid to the latter including interest %ased on !revailin) "om!o#nded %an1 interest !l#s t$e amo#nt of t$e sale in e'"ess of PE/---/---.-should the property be sold at a price more t$an PE million. ?f FIRST PART: $as no ot$er %#yer 4ithin the first si. months from the e.ecution, no interest s$all %e "$ar)ed %y t$e SEC9N8 PARTN on the P" million ho4e%er, in the e%ent that on the si.th month the SEC9N8 PART: &o#ld de"ide not to

*hile the 83Ks conclusion, that a loan al4ays bears interest other4ise it is not a loan, is fla4ed since a simple loan may be gratuitous or 4ith a stipulation to pay interest,2" 4e find no error committed by the 83 in a4arding a 27' interest per annum on the t4o-million peso loan e%en beyond the second si. months stipulated period. The general rule is that if the terms of an agreement are clear and lea%e no doubt as to the intention of the contracting parties, the literal meaning of its stipulations shall pre%ail.27 ?t is further re0uired that the %arious stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense 4hich may result from all of them ta:en >ointly. ?n this case, the phrase 9for the last si. months only9 should be ta:en in the conte.t of the entire agreement. *e agree 4ith and adopt the 83Ks interpretation of the phrase in this 4ise: Their agreement spea:s of t4o (2! periods of si. months each. The first si.-month period 4as gi%en to plaintiff-appellee (respondent! to ma:e up her mind 4hether or not to purchase defendant-appellantKs (petitionerAs! property. The second si.-month period 4as gi%en to defendant-appellant to pay the P2 million loan in the e%ent that plaintiff-appellee decided not to buy the sub>ect property in 4hich case interest 4ill be charged 9for the last si. months only9, referring to the second si.-month period. This means that no interest 4ill be charged for the first si.-month period 4hile appellee 4as ma:ing up her mind 4hether to buy the property, but only for the second period of si. months after appellee had decided not to buy the property. This is the meaning of the phrase 9for the last si. months only9. 8ertainly, there

!#r"$ase, the FIRST PART: $as a !eriod of anot$er si' mont$s &it$in &$i"$ to !ay t$e s#m of P, million !esos !rovided t$at t$e said amo#nt shall earn compounded ban: interest for the last si. months only. =nder this circumstance, the amount of P" million gi%en by the S;8+,1 P3GTN s$all %e treated as FaG loan and t$e !ro!erty s$all %e "onsidered as t$e se"#rity for t$e mort)a)e. Gespondent decided not to purchase the property and notified petitioner through a letter, reminding petitioner of their agreement that the amount of t4o million pesos 4hich petitioner recei%ed from respondent should be considered as a loan payable 4ithin si. months. Petitioner subse0uently failed to pay respondent the amount of t4o million pesos.

is nothing in their agreement that suggests that interest 4ill be charged for si. months only e%en if it ta:es defendant-appellant an eternity to pay the loan.26 The agreement that the amount gi%en shall bear compounded ban: interest for the last si. months only, i.e., referring to the second si.month period, does not mean that interest 4ill no longer be charged after the second si.-month period since such stipulation 4as made on the logical and reasonable e.pectation that such amount 4ould be paid 4ithin the date stipulated. 8onsidering that petitioner failed to pay the amount gi%en 4hich under the 2emorandum of 3greement shall be considered as a loan, the monetary interest for the last si. months continued to accrue until actual payment of the loaned amount. ?t 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 4ithout payment of the monetary interest, 4ould constitute un>ust enrichment on the part of the debtor at the e.pense of the creditor.2&Petitioner and respondent stipulated that the loaned amount shall earn compounded ban: interests, and per the certification issued by Prudential <an:, the interest rate for loans in #&&# ranged from 27' to "2' per annum. The 83 reduced the interest rate to 27' instead of the "2' a4arded by the trial court 4hich petitioner no longer assailed.

Si)a7an vs. <illan#ev a

+n "# 3ugust #&&", respondent issued a chec: 4orth P7 , . to petitioner as partial payment of the loan. +n "# +ctober #&&", she issued another chec: in the amount of P2 , . to petitioner as payment of the remaining balance of the loan. Petitioner told her that since she paid a total amount of P6 , . for theP74 , . 4orth of loan, the e.cess amount of P#B , . 4ould be applied as interest for the loan. ,ot satisfied 4ith the amount applied as interest, petitioner pestered her to pay additional interest. Petitioner threatened to bloc: or disappro%e her transactions 4ith the P,+ if she 4ould not comply 4ith his demand. 3s all her transactions 4ith the P,+ 4ere sub>ect to the appro%al of petitioner as comptroller of the P,+, and fearing that petitioner might bloc: or unduly influence the payment of her %ouchers in the P,+, she conceded. Thus, she paid additional amounts in cash and chec:s as interests for the loan. She as:ed petitioner for receipt for the payments but petitioner told her that it 4as not necessary as there 4as mutual trust and confidence bet4een them. 3ccording to her computation, the total amount she paid to petitioner for the loan and interest accumulated to P#,2 , . .6 Thereafter, respondent consulted a la4yer regarding the propriety of paying interest on the loan despite absence of agreement to that effect. (er la4yer told her that petitioner could not %alidly collect interest on the loan because there 4as no agreement bet4een her and petitioner regarding payment of interest. Since she paid petitioner a total amount of P#,2 , . for the P74 , . 4orth of loan, and upon being ad%ised by her la4yer that she made o%erpayment to petitioner, she sent a demand letter to petitioner as:ing for the return of the e.cess amount of PBB , . . Petitioner, despite receipt of

*hether or not T(; GT8 3,1 T(; 8+=GT +@ 3PP;3ES ;GG;1 ?, G=E?,F T(3T ,+ ?,T;G;ST *3S 1=; T+ P;T?T?+,;G/

?nterest is a compensation fi.ed by the parties for the use or forbearance of money. This is referred to as monetary interest. ?nterest may also be imposed by la4 or by courts as penalty or indemnity for damages. This is called compensatory interest.#D The right to interest arises only by %irtue of a contract or by %irtue of damages for delay or failure to pay the principal loan on 4hich interest is demanded. ?t appears that petitioner and respondent did not agree on the payment of interest for the loan. ,either 4as there con%incing proof of 4ritten agreement bet4een the t4o regarding the payment of interest. Gespondent testified that although she accepted petitionerKs offer of loan amounting to P74 , . , there 4as, nonetheless, no %erbal or 4ritten agreement for her to pay interest on the loan. PetitionerKs reliance on respondentKs alleged admission in the <atas Pambansa <lg. 22 cases that they had agreed on the payment of interest at the rate of 6' deser%es scant consideration. ?n the said case, respondent merely testified that after paying the total amount of loan, petitioner ordered her to pay interest.2D Gespondent did not categorically declare in the same case that she and respondent made an express stipulation in 4riting as regards payment of interest at the rate of 6'. 3s earlier discussed, monetary interest is due only if there 4as an express stipulation in 4riting for the payment of interest. There are instances in 4hich an interest may be imposed e%en in the absence of e.press stipulation, %erbal or 4ritten, regarding payment of interest. 3rticle 22 & of the 8i%il

the demand letter, reimbursement

ignored

her

claim

for

GT8 rendered a 1ecision on 2B January 2 # holding that respondent made an o%erpayment of her loan obligation to petitioner and that the latter should refund the e.cess amount to the former Petitioner appealed to the 8ourt of 3ppeals. +n #B 1ecember 2 7, the appellate court promulgated its 1ecision affirming in toto the GT8 1ecision

8ode states that if the obligation consists in the payment of a sum of money, and the debtor incurs delay, a legal interest of #2' per annum may be imposed as indemnity for damages if no stipulation on the payment of interest 4as agreed upon. Ei:e4ise, 3rticle 22#2 of the 8i%il 8ode pro%ides that interest due shall earn legal interest from the time it is >udicially demanded, although the obligation may be silent on this point. 3ll the same, the interest under these t4o instances may be imposed only as a penalty or damages for breach of contractual obligations. ?t cannot be charged as a compensation for the use or forbearance of money. ?n other 4ords, the t4o instances apply only to compensatory interest and not to monetary interest.2& The case at bar in%ol%es petitionerKs claim for monetary interest. @urther, said compensatory interest is not chargeable in the instant case because it 4as not duly pro%en that respondent defaulted in paying the loan. 3lso, as earlier found, no interest 4as due on the loan because there 4as no 4ritten agreement as regards payment of interest.

Car!o vs. C$#a