I.SHORT TITLE: Phil. Phosphate Fertilizer Corp.

VS Kamalig Resources
II. FULL TITLE: Philippine Phosphate Fertilizer Corporation Versus Kamalig Resources,
Inc., G.R. No. 165608, December 13, 2007, J. Tinga

III. TOPIC: Loan

Art. 1956 (Recovery of Interest)

IV. STATEMENT OF FACTS:

Kamalig purchased fertilizer products from Philphos for eventual sale to its customers. On 30
September 1985, Kamalig purchased from and made advance payments for fertilizer products of
various grades to Philphos in the total sum of P4,548,152.53. In the letter dated 21 July
1986,7 Philphos informed Kamalig of its overwithdrawal of various fertilizer stocks in the supply
depots in Manila and Iloilo. According to Philphos, the cost of these overwithdrawals by Kamalig
amounted to P1,016,994.21. But since Philphos also had an obligation to Kamalig in the amount
of P470,348.91 representing the Capital Recovery Component, partial compensation took place by
operation of law thereby reducing Kamalig’s obligation toP546,645.30. Thus, Philphos demanded
that this sum be settled on or before 31 July 1986, otherwise Kamalig would be charged 34%
interest per annum. Kamalig, however, denied that it had exceeded its withdrawals of fertilizer and
thus contended that it should not be made liable for any amount.

V. STATEMENT OF THE CASE:

On 20 August 1987, Philphos filed the case for collection of a sum of money against Kamalig
before the RTC of Makati City. RTC rendered judgment in favor of Philphos. Kamalig appealed
the decision to the Court of Appeals, in which COA reversed the assailed Decision of RTC. The
Court of Appeals likewise held that there was no basis for the imposition of the 34% interest per
annum on the principal claim of Philphos, the same being merely a unilateral act on the part of
Philphos and no evidence was presented to show that the parties stipulated on the payment of
interest.

VI. ISSUE:

Whether or not the imposition of the 34% interest to Kamalig by Philphos is meritorious

VII. RULING:

No. With respect to the 34% per annum interest claimed by Philphos, we agree with the
Court of Appeals that no evidence was presented that would show that the parties stipulated on the
payment of interest. Under Article 1956 of the Civil Code, no interest shall be due unless it has
been expressly stipulated in writing. Philphos presented only its demand letters insisting on
payment of the value of the overwithdrawals and imposition of 34% interest per annum if payment
is not made in due time. Said unilateral impositions of interest do not suffice as proof of agreement
on the alleged 34% per annum interest.
VIII. DISPOSITIVE PORTION:

WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals is MODIFIED.
Petitioner Philippine Phosphate Fertilizer Corporation is ORDERED to PAY respondent Kamalig
Resources, Inc. the amount of P411,144.84, plus legal interest from the finality of this Decision,
and costs of the suit.
I.SHORT TITLE: De la Paz Vs L&J Development Comp.
II. FULL TITLE: Rolando C. De la Paz Versus L & J Development Company,
G R No. 183360, September 8, 2014, J. Del Castillo

III. TOPIC: Loan

Art. 1956: "No interest shall be due unless it has been expressly stipulated
in writing."

IV. STATEMENT OF FACTS:

On December 27, 2000, Rolando lent P350,000.00 without any security to L&J, a property
developer with Atty. Esteban Salonga (Atty. Salonga) as its President and General Manager. The
loan, with no specified maturity date, carried a 6% monthly interest. As L&J failed to pay despite
repeated demands, Rolando filed a Complaint for Collection of Sum of Money with Damages
against L&J and Atty. Salonga in his personal capacity before the Metropolitan Trial Court. L&J
and Atty. Salonga denied Rolando’s allegations. While they acknowledged the loan as a corporate
debt, they claimed that the failure to pay the same was due to a fortuitous event, that is, the
financial difficulties brought about by the economic crisis. They further argued that Rolando
cannot enforce the 6% monthly interest for being unconscionable and shocking to the morals.

V. STATEMENT OF THE CASE:

The MeTC, in its Decision ,upheld the 6% monthly interest. In so ruling, it ratiocinated that since
L&J agreed thereto and voluntarily paid the interest at suchrate from 2000 to 2003, it is already
estopped from impugning the same. Nonetheless, for reasons of equity, the saidcourt reduced the
interest rate to 12% per annum on the remaining principal obligation of P350,000.00. L&J
appealed to the RTC. L&J insisted that the 6% monthly interest rate is unconscionable and
immoral. Hence, the 12% per annum legal interest should have been applied from the time of the
constitution of the obligation. At 12% per annum interest rate, it asserted that the amount of
interest it ought to pay. L&J went to the CA and echoed its argument. In a Decision, the CA
reversed and set aside the RTC Decision. The CA stressed that the parties failed to stipulate in
writing the imposition of interest on the loan. Hence, no interest shall be due thereon pursuant to
Article 1956 of the Civil Code.17 And even if payment of interest has been stipulated in writing, the
6% monthly interest is still out rightly illegal and unconscionable because it is contrary to morals, if
not against the law. Being void, this cannot be ratified and may be set up by the debtor as defense.
For these reasons, Rolando cannot collect any interest even if L&J offered to pay interest.

VI. ISSUE:

Whether or not the 6% monthly interest rate should not have been invalidated
VII. RULING:

Yes. Under Article 1956 of the Civil Code, no interest shall be due unless it has been expressly
stipulated in writing. Jurisprudence on the matter also holds that for interest to be due and payable,
two conditions must concur: a) express stipulation for the payment of interest; and b) the
agreement to pay interest is reduced in writing. Here, it is undisputed that the parties did not put
down in writing their agreement. Thus, no interest is due. The collection of interest without any
stipulation in writing is prohibited by law.Even if the payment of interest has been reduced in
writing, a 6% monthly interest rate on a loan is unconscionable, regardless of who between the
parties proposed the rate. Hence, levying 6% monthly or 72% interest per annumis "definitely
outrageous and inordinate." The situation that it was the debtor who insisted on the interest rate
will not exempt Rolando from a ruling that the rate is void. As this Court cited in Asian Cathay
Finance and Leasing Corporation v. Gravador, "[t]he imposition of an unconscionable rate of
interest on a money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is
tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to the
common sense of man."

VIII. DISPOSITIVE PORTION:

WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED with modification
that petitioner Rolando C. De La Paz is ordered to pay respondent L&J Development Company
the amount of ,P226,000.00,as the excess interest payment made by L & J, plus interest of 6% per
annum from the finality of this Decision until fully paid.
I.SHORT TITLE: Royal Shirt Factory Vs Co Bon Tic
II. FULL TITLE: Royal Shirt Factory, Inc., Versus Co Bon Tic,
G R No. L 6313, May 14, 1954, J. Montemayor

III. TOPIC: Loan

Art. 1956: "No interest shall be due unless it has been expressly stipulated
in writing."

IV. STATEMENT OF FACTS:

The ROYAL SHIRT COURT, INC.,filed present appeal to recover from defendant CO BON
TIC the sum of P1,422 said to represent the balance of the purchase price of 350 pairs of
"Balleteenas" shoes at P7 a pair, with interest at 12 per cent per annum and 25 per cent of said sum
as attorney's fees, and costs. and 25 per cent of said sum as attorney's fees, and costs. The contract
was of sale on consignment; that of the 350 pairs of shoes consigned, 207 pairs were sold at the
rate of P8 a pair, amounting to a total of P1,656; and that defendant had paid the sum of P1,028 to
plaintiff on account of the purchase price of the shoes sold, excluding the amount of P420, value
of Check No. 790264 issued by defendant as payment but returned to him by the plaintiff and not
replaced with cash.

V. STATEMENT OF THE CASE:

The Municipal Court rendered Judgment sentencing the defendant to pay plaintiff the sum of
P628 with interest. The defendant appealed from the judgment to the Court of First Instance of
Manila, and after trial, the appellate court, rendered Judgment in favor of the plaintiff and against
the defendant and the latter was ordered to pay to the former the sum of P1,422, the unpaid
balance of the sales price of 350 pairs of shoes in question, with interest on the amount due at the
rate of 12 per cent per annum from August 27, 1948 until final payment plus the amount of 25 per
cent of the same sum for attorney's fees as stipulated, and costs. Defendant appealed the case to
the Court of Appeals which Tribunal after the submission, granted the same and certified the
appeal to Honorable Court for final determination.

VI. ISSUE:

Whether or not defendant is bound to pay 12 percent interest per annum although not
stipulated in the Order slip

VII. RULING:

The decision appealed from the sentences the defendant to pay to the plaintiff P1,422 with interest
at 12 percent per annum , plus 25 per cent of the same sum for attorney's fees, besides costs. This
rate of interest and the 25 per cent for attorney's fees appears in Exhibit "B" in printed form as
terms or conditions. In Exhibit "A", the order slip, the conditions of sale also printed provide for
20 per cent only as attorney's fees and no rate of interest in case of litigation. Had the defendant
signed Exhibit "A", which he did not, he would have been bound by it and would be liable to 20
per cent of any amount due from him, but because of the absence of stipulation as to the rate of
interest he would be paying only the legal rate of 6 per cent per annum. We do not think it fair for
him to be bound also by the printed terms of the conditions of sale. Moreover, we find under said
printed form the clause in pencil: "as agreed with Mr. Chebat." We may even say that said clause in
handwriting may be considered as having overruled what was printed as to the rate of interest and
the attorney's fees. We therefore hold that the defendant should only pay 6 per cent interest on the
amount due him from the date of the filing of the complaint, with costs, and nothing for attorney's
fees.

VIII. DISPOSITIVE PORTION:

With the above modification, the decision appealed from is hereby affirmed, with costs.
I.SHORT TITLE: PNB V CA 196 SCRA 536
II. FULL TITLE: Philippine National Bank Versus The Hon. Court of Appeals and
Ambrosio Padilla, April 30, 1991, J. Grino Aquino

III. TOPIC: Unilateral Action to Increase Interest Rates

IV. STATEMENT OF FACTS:

In July 1982, the private respondent applied for, and was granted by petitioner PNB, a credit line
of 321.8 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.
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%.
Private respondent made an additional payment of P100,000.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. Private respondent further paid PNB
P150,000.00 then by September, private respondent paid PNB additional P160,000.00. He
reiterated his request that the interest rate should not be increased from 18% to 32% and from
32% to 41%. 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."

V. STATEMENT OF THE CASE:

Private respondent filed in the Regional Trial Court of Manila a complaint against PNB. 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. The trial court rendered
judgment, dismissing the complaint because the increases of interest were properly made. The
private respondent appealed to the Court of Appeals. The Court of Appeals reversed the trial
court’s decision deciding on private respondent’s favor. The (PNB) has appealed
by certiorari from the decision by the Court of Appeals reversing the decision of the trial court
which had dismissed the private respondent’s complaint "to annul interest increases."

VI. ISSUE

Whether the bank may unilaterally change or increase the interest rate stipulated therein at will
and as often as it pleased
VII. RULING:

No .In this case, PNB, over the objection of the private respondent, and without authority from
the Monetary Board, 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. library : red
In the present case, the PNB relied on its own Board Resolution, but those resolution and
circulars are neither laws nor resolutions of the Monetary Board. The unilateral action of the PNB
in increasing the interest rate on the private respondent’s loan, violated the mutuality of contracts
ordained in Article 1308 of the Civil Code:
"ART. 1308. The contract must bind both contracting parties; its validity or compliance cannot be
left to the will of one of them .”
In order that obligations arising from contracts may have the force of law between the parties,
there must be mutuality between the parties based on their essential equality. A contract containing
a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of
the contracting parties is void.

PNB’s successive increases of the interest rate on the private respondent’s loan, over the latter’s
protest, were arbitrary as they violated an express provision of the Credit Agreement The
increases imposed by PNB contravene Art. 1956 of the Civil Code which provides that "no interest
shall be due unless it has been expressly stipulated in writing."
The debtor herein never agreed in writing to pay the interest increases fixed by the PNB beyond
24% per annum, hence, he is not bound to pay a higher rate than that.

VIII. DISPOSITIVE PORTION:

WHEREFORE, finding no reversible error in the decision of the Court of Appeals, the Court
resolved to deny the petition for review for lack of merit, with costs against the petitioner.