PRISMA CONSTRUCTION & DEVELOPMENT CORP.

and
ROGELIO PANTALEON v. ARTHUR MENCHAVEZ
(Medel case NOT APPLICABLE) RULING:

FACTS:  No. The CA erred in taking the Board Reso as evidence as

 On December 8, 1993 – Pantaleon, President & Chairman
of the Board of PRISMA obtained a P1 Million loan from
Menchavez with a monthly interest of P40 Thousand
payable in 6 months
 To secure payment, Pantaleon issued a Promissory Note
(PN) indicating:
1. “acknowledge receipt of ONE MILLION TWO
HUNDRED FORTY THOUSAND PESOS” and
2. Schedule of payment:
January 8, 1994.......................P40,000.00
February 8, 1994......................P40,000.00
March 8, 1994..........................P40,000.00
April 8, 1994.............................P40,000.00
May 8, 1994............................. P40,000.00
June 8, 1994....................... P1,040,000.00
Total                                    P1,240,000.00
 Pantaleon signed the PN in his personal capacity and as
duly authorized by PRISMA. Attached with the PN is a
Board Resolution of PRISMA allowing Pantaleon to
transact and obtain a loan but only up to 4% interest rate.
it is only for the authorization of Pantaleon to transact on
behalf of PRISMA. There was no stipulation in the PN of
payment of 4% monthly interest, BUT parties agreed to a
fixed equivalent rate which is a specific sum of P40
Thousand per month which corresponds only to the 6-
month period of the loan.
 NO APPLICATION OF MEDEL. In Medel, the terms of
the loans were open-ended and the stipulated interests were
applied for an indefinite period.
In this case, there is no application of Medel because there
is no other stipulation that exists for the payment of any
extra amount except a specific sum of P40 Thousand
per month on the principal loan payable within 6
months.
 12% per annum interest rate shall be added only after the
judicial demand.

 PRISMA & Pantaleon failed to completely pay within the

6-month period stipulated. As of January 4, 1997, PRISMA
& Pantaleon has only paid P 1,108,772.00 and according to
Menchavez, there is still an outstanding balance of P 1,
364,151.00.

 On August 28, 1997, Menchavez filed a complaint for

collection of sum of money with the RTC for the unpaid
amount and as well as applying the 4% monthly interest
rate. PRISMA & Pantaleon, in its answer, only admitted the
loan of P 1, 240,000.00 and that there was no stipulation in
the PN that there is a 4% monthly installment.

 RTC ruled in favor of Menchavez and stated that PRISMA

& Pantaleon is indebted to Menchavez P 3, 526,117.00 as
of February 11, 1999. The court ordered the payment of the
same plus 4% monthly interest until fully paid.

 CA also ruled in favor of Menchavez stating that there was

indeed stipulation of 4% monthly interest between the
parties as evidenced by the Board Resolution attached with
the PN. However, it stated that the 4% monthly interest or
48% per annum rate in unreasonable, thus it reduced the
interest rate to 12% per annum.

ISSUE:
Did the parties agree to a 4% monthly interest rate?

If so, does the rate of the interest apply to the 6-month payment
period or until full payment?