1. REPUBLIC v. BAGTAS, 116 SCRA 262

FACTS: On May 8, 1948, Jose Bagtas borrowed from the Bureau of Animal Industry three bulls for one year for breeding purposes upon payment of a breeding fee of 10% of the book value of the bulls. After one year, the contract was renewed but only for one bull. Bagtas offered to buy the bulls at book value less depreciation, but the Bureau told him that he should either return the bulls or pay for their book value. Bagtas failed to pay the book value, so the Republic filed an action with the CFI Manila to order the return of the bulls or the payment of the book value. Felicidad Bagtas, the surviving spouse and administratrix of the decedents estate, said that the two bulls have already been returned in 1952, and that the remaining one died of gunshot during a Huk raid. It was established that the two bulls were returned, thus, there is no more obligation on the part of Bagtas. With regards the bull not returned, Felicidad maintained that the obligation is extinguished since the contract is that of a commodatum and that the loss through fortuitous event should be borne by the owner.

ISSUE: Whether or not the contract entered into between Bagtas and the Republic is that of commodatum making Bagtas not liable for the death of the bull.

HELD: A contract ofcommodatumis essentially gratuitous. If the breeding fee be considered compensation, then the contract would be a lease of the bull. Under article 1671 of the Civil Code the lessee would be subject to the responsibilities of a possessor in bad faith because she had continued possession of the bull after the expiry of the contract. Even if the contract becommodatum, still Bagtas is liable because article 1942 of the Civil Code provides that a bailee in a contract ofcommodatum is liable for loss of the things even if it should be through a fortuitous event if he keeps it longer than the period stipulated or if the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event. The loan of one bull was renewed for another period of one year but Bagtas kept and used the bull more than one year where during a Huk raid it was killed by stray bullets. Furthermore, when lent and delivered to the deceased husband of Bagtas, the bulls had each an appraised book value. It was not stipulated that in case of loss of the bull due to fortuitous event the late husband of the appellant would be exempt from liability.

2. PRODUCERS BANK OF THE PHILIPPINES vs. COURT OF APPEALS, GR No. 115324

FACTS: Sometime in 1979, private respondent Franklin Vives, upon request of his friend Angeles Sanchez and relying on the assurance that he could withdraw his money within a months time, issued a check in the amount of Two Hundred Thousand Pesos in favor of Sterela Marketing and Services owned by one Col. Arturo Doronilla. Subsequently, private respondent and his wife found out that Sterela cant be found on the address previously given to then, so they went to petitioner Producers Bank of the Philippines to verify if their money was still intact. They were informed that part of the amount had been withdrawn by Doronilla and that the latter instructed the bank to debit from the savings account the amount and deposit it in his current account Private respondent filed an action for recovery of sum of money against Doronilla, Sanchez, Dumagpi and petitioner. The trial court ruled in favour of herein private respondents. On appeal of the case, the appellate court affirmed the decision of the RTC. Petitioner contends that the transaction between private respondent and Doronilla is a simple loan (mutuum) since all the elements of a mutuum are present: first, what was delivered by private respondent to Doronilla was money, a consumable thing; and second, the transaction was onerous as Doronilla was obliged to pay interest. Hence, petitioner argues that it cannot be held liable because it is not privy to the transaction between the latter and Doronilla. Private respondent, on the other hand, argues that the transaction between him and Doronilla is not a mutuum but an accommodation,since he did not actually part with the ownership of hisP200,000.00 but retained some degree of control over his money through his wife who was made a signatory to the savings account and in whose possession the savings account passbook was given.

ISSUE: Whether or not the contract between Sanchez and Doronilla and Vives is a contract of commodatum, thus making petitioner Bank liable.

HELD: Supreme Court held that the contract is commodatum. Although in view of Article 1933 of the Civil Code, the object in commodatum is non-consumable, but Article 1936 of the Civil Code provides Consumable goods may be the subject of commodatum if the purpose of the contract is not the consumption of the object, as when it is merely for exhibition. Thus, if consumable goods are loaned only for purposes of exhibition or when the intention of the parties is to lend consumable goods and to have the very same goods returned at the end of the period agreed upon, the loan is commodatum and not a mutuum. The evidence shows that private respondent merely "accommodated" Doronilla by lending his money without consideration, as a favor to his good friend Sanchez. It was however clear to the parties to the transaction that the money would not be removed from Sterelas savings account and would be returned to private respondent after thirty (30) days.

3. CAROLYN M. GARCIA vs. RICA MARIE S. THIO, GR. No. 154878, March 16, 2007

FACTS: Sometime in February 1995, respondent Rica Marie S. Thio received from petitioner Carolyn M. Garccia a crossed check in the amount of $100,000.00 payable to the order of Marilou Santiago. Thereafter, Carolyn received from Rica payments of the sum due. In June 1995, Rica received another check in the amount of P500,000.00 from Carolyn and payable to the order of Marilou. Payments were made by Rica representing interests. There was failure to pay the principal amount hence a complaint for sum of money with damages was filed by Carolyn. Rica contended that she had no obligation to petitioner as it was Marilou who was indebted as she was merely asked to deliver the checks to the latter and that the check payments she issued were merely intended to accommodate Marilou. The RTC ruled in favor of Carolyn but the CA reversed on the ground that there was no contract between Rica and Carolyn as there is nothing in the record that shows that respondent received money from petitioner and that the checks received by respondent, being crossed, may not be encashed but only deposited in the bank by the payee thereof, that is, by Marilou Santiago herself.

ISSUE: Whether or not there was a contract of loan between petitioner and respondent.

HELD: There Court ruled in the affirmative. A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the object of the contract. Art. 1934 of the Civil Code provides that an accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but the commodatum or simpleloan itself shall not be perfected until the delivery of the object of the contract. Upon delivery of the object of the contract of loan (in this case the money received by the debtor when the checks were encashed the debtor acquires ownership of such money or loan proceeds and is bound to pay the creditor an equal amount. It is undisputed that the checks were delivered to respondent. However, these checks were crossed and payable not to the order of respondent but to the order of a certain Marilou Santiago. The Supreme Court agrees with petitioner that delivery is the act by which theresor substance thereof is placed within the actual or constructive possession or control of another. Although respondent did not physically receive the proceeds of the checks, these instruments were placed in her control and possession under an arrangement whereby she actually re-lent the amounts to Santiago. Hence, Rica is the debtor and not Marilou.

4. COLITO T. PAJUYO vs. COURT OF APPEALS, GR. No. 146364, June 3, 2004

FACTS: In June 1979, petitioner Colito T. Pajuyo purchased the rights over a property from Pedro Perez. Thereafter, he constructed a house therein and he and his family lived there. Later, Pajuyo agreed to let private respondent Eddie Guevarra to live in the house for free provided that the latter maintain the cleanliness and orderliness of the house. They also agreed that Guevarra should leave the premises upon demand. Subsequently, when Pajuyo told Guevarra that he needed the house, Guevarra refused, hence an ejectment case was filed. Guevarra claimed that Pajuyo had no valid title or right of possession over the lot where the house stands because the lot is within the 150 hectares set aside for socialized housing. The MTC ruled that the subject of the agreement between Pajuyo and Guevarra is the house and not the lot. Pajuyo is the owner of the house, and he allowed Guevarra to use the house only by tolerance. Thus, Guevarras refusal to vacate the house on Pajuyos demand made Guevarras continued possession of the house illegal. Aggrieved, Guevarra appealed to the Regional Trial Court which only affirmed the MTC decision. At the CA, the latter reversed the RTC decision. The Court of Appeals ruled that the Kasunduanis not a lease contract but acommodatumbecause the agreement is not for a price certain. Since Pajuyo admitted that he resurfaced only in 1994 to claim the property, the appellate court held that Guevarra has a better right over the property under Proclamation No. 137. At that time, Guevarra was in physical possession of the property.

ISSUE: Whether or not the contract between petitioner and private respondent is one of commodatum.

HELD: The Supreme Court held that the contract is not a commodatum. In a contract of commodatum, one of the parties delivers to another something not consumable so that the latter may use the same for a certain time and return it. An essential feature of commodatum is that it is gratuitous. Another feature is that the use of the thing belonging to another is for a certain period. Thus, the bailor cannot demand the return of the thing loaned until after the expiration of the period stipulated, or after accomplishment of the use for which the commodatum is constituted. If the bailor should have urgent need of the thing, he may demand its return for temporary use. If the use of the thing is merely tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual relation is called a precarium. TheKasunduanreveals that the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous. While theKasunduandid not require Guevarra to pay rent, it obligated him to maintain the property in good condition. The imposition of this obligation makes theKasunduana contract different from acommodatum. The effects of theKasunduanare also different from that of acommodatum.

5. QUINTOS vs. BECK, 69 Phil 108FACTS: Beck is a tenant of defendant Margarita Quintos. As such, Beck occupied Quintos house. Quintos granted Beck the use of the furniture found on the leased house, among these were three gas heaters and 4 electric lamps, subject to the condition that the defendant would return them to the plaintiff upon the latter's demand. Quintos sold the pieces of furniture to Maria Lopez and Rosario Lopez and thereafter notified Beck of the conveyance. Beck informed Quintos that the latter can get the furniture at the ground floor of the house, however, at a later date, Beck told Quintos that he will return only the other furniture but not the gas heaters and the electric lamps as he is to return them only after the expiration of the lease contract. When the lease contract expires, Beck deposited the furniture to the sheriffs warehouse. Quintos refused to get the furniture in view of the fact that the defendant had declined to make delivery of all of them. Consequently, Quintos brought an action to compel Beck to return her certain furniture which she lent him for his use. The trial court ruled in favour of Beck holding that Quintos failed to comply with her obligation to get the furniture when they were offered to her. On appeal of the case, the Court of First Instance of Manila affirmed the lower courts decision. Hence, this petition.

ISSUE: Whether or not the trial court erred in ruling that Quintos failed to comply with her obligation to get the furniture when they were offered to her.

HELD: The contract entered into between the parties is one ofcommadatum. Under it the plaintiff gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership thereof. By this contract the defendant bound himself to return the furniture to the plaintiff, upon the latters demand. The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiff's demand, means that he should return all of them to the plaintiff at the latter's residence or house. The defendant did not comply with this obligation when he merely placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters and the four electric lamps. The trial court, therefore, erred when it came to the legal conclusion that the plaintiff failed to comply with her obligation to get the furniture when they were offered to her.

6. FRIAS vs. SAN DIEGO-SISON, GR. No. 155223, April 4, 2007

FACT: Petitioner Bobie Rose V. Frias owned a house and lot which she acquired from Island Masters Realty and Development Corporation (IMRDC) by virtue of a Deed of Sale. She entered into a MOAwith respondent Flora San Diego-Sison. In the MOA, they had agreed among others that in the event that on the 6thmonth of the 6-month period to purchase land, respondent would decide not to purchase, the petitioner has a period of another 6 months to pay P3M provided that the said amount shall earn compounded bank interest for the last six months only. Respondent decided not to purchase the property so what happened was that the P3M would be considered as a loan payable within six months. Petitioner failed to pay the P2M. Consequently, respondent filed with the RTC a complaint for sum of money. RTC rules in favor of respondent and orders the payment of P2M plus compounded interest at 32% interest per annum pursuant to the MOA. Petitioner appeals to CA. The CAaffirms RTC decision with modification with regard to the interest from32% to 25%. Petitioner opposed to the said decision contending that the interest is contrary to the parties Memorandum of Agreement; that the agreement provides that if respondent would decide not to purchase the property, petitioner has the period of another six months to pay the loan with compounded bank interest for the last six months only; that the CAs ruling that a loan always bears interest otherwise it is not a loan is contrary to Art. 1956 of the New Civil Code which provides that no interest shall be due unless it has been expressly stipulated in writing.

ISSUE: Whether or not the compounded bank interest should be limited to six months as contained inthe MOA.

HELD: The agreement stipulated in the MOA that the amount given shall bear compounded bank interest for the last six months only (referring tothe second six-month period), does not mean that interest will no longer be charged after the second six-month period since such stipulation was made on the logical and reasonable expectationthat such amount would be paid within the date stipulated. Considering that the petitioner failedto pay the amount given which under the MOA shall be considered as a loan, the monetary interest for the last six months continued to accrue until the actual payment of the loaned amount. Thepayment of regular interest constitutes the price or cost of the money use and thus, until the principal sum due is returned to the creditor, regular interest continues to accrue since the debtor continues to use such principal amount.

7. LIGUTAN vs. COURT OF APPEALS, GR. No. 138677, February 12, 2002

FACTS: PetitionersTolomeoLigutanandLeonidasdelaLlanaobtained a loan from private respondent Security Bank and Trust Company.Petitioners executed a promissory note to pay the sum loaned with an interest of 15.189% per annum upon maturity and to pay a penalty of 5% every month on the outstanding principal and interest in case of default.On maturity of the obligation, petitioners failed to settle the debt despite several demands from the bank. Consequently, the bank filed a complaint for recovery of the due amount. After trial of the case, the Trial court ruled in favour of the Bank, ordering petitioners to pay the respondent the sum of P114,416.00 with interest thereon at the rate of 15.189% per annum and 5% per month penalty charge among others. On appeal of the case, petitioners prayed for the reduction of the 5% stipulated penalty for being unconscionable.The Court of Appeals ruled that in the interest of justice and public policy, a penalty of 3% per month or 36% per annum would suffice. But still, petitioners dispute the said decision.

ISSUE: Whether or not the 15.189% interest and the penalty of three (3%) percent per month or thirty-six (36%) percent per annum imposed by private respondent bank on petitioners loan obligation are exorbitant, iniquitous and unconscionable.

HELD: The question of whether a penalty is reasonable or iniquitous can be partly subjective and partly objective.Its resolution would depend on such factors as, but not necessarily confined to, the type, extent and purpose of the penalty, the nature of the obligation, the mode of breach and its consequences, the supervening realities, the standing and relationship of the parties, and the like, the application of which, by and large, is addressed to the sound discretion of the court. The essence or rationale for the payment of interest is not exactly the same as that of a surcharge or a penalty.A penalty stipulation is not necessarily preclusive of interest. What may justify a court in not allowing the creditor to impose full surcharges and penalties, despite an express stipulationthereforin a valid agreement, may not equally justify the non-payment or reduction of interest.Indeed, the interest prescribed in loan financing arrangements is a fundamental part of the banking business and the core of a bank's existence. The Court of Appeals, exercising its good judgment in the instant case, has rightly reduced the penalty interest from 5% a month to 3% a month.

8. GSIS vs. COURT OF APPEALS, GR. No. L-52478, October 20, 1986

FACTS: In 1961, herein private respondents spouses Nemencio R. Medina and Josefina G. Medina applied with the herein petitioner Government Service Insurance System for a loan of P600,000.00. The approved loan amount was only P350,000.00 at the rate of interest of 9% per annum compounded monthly and the rate of 9%/12% per month for any installment or amortization that remains due and unpaid. The approved loan amount was further reduced to P295,000.00. The Medinas accepted the reduced amount and executed a promissory note and a real estate mortgage in favor of GSIS. Subsequently, upon application by the Medinas, the GSIS approved anadditionalloan of P230,000.00 on the security of the same mortgaged properties to bear interest at 9% per annum compounded monthly and repayable in ten years. However, in 1965, the Medinas defaulted in the payment of the monthly amortization on their loan despite several demands from petitioner. Hence, the GSIS imposed 9%/12% interest on instalments that are due and unpaid. The Medinas opposed to this contending that the interest rates on the loan accounts are usurious. After trial of the case, the trial court ordered the Medinas full payment of their obligation to the GSIS plus interest at 9% per annum. Aggrieved, the Medinas appealed before the Court of Appeals but the latter affirmed the lower courts decision.

ISSUE: Whether or not the interest rates on the loan accounts of respondent-appellee Medina spouses are usurious.

HELD: It has already been settled that the Usury Law applies only to interest by way of compensation for the use or forbearance of money. Interest by way of damages is governed by Article 2209 of the Civil Code of the Philippines which provides that if the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon. The Civil Code permits the agreement upon a penalty apart from the interest. Should there be such an agreement, the penalty does not include the interest, and as such the two are different and distinct things which may be demanded separately. The stipulation about payment of such additional rate partakes of the nature of a penalty clause, which is sanctioned by law.

9. EASTERN SHIPPING LINES, INC. vs. CA, GR. No. 97412, July 12, 1994

FACTS: Two fiber drums of riboflavin were shipped from Yokohama, Japan on board the vessel owned by herein petitioner Eastern Shipping Lines. When it arrives in Manila, it was put unto the custody of Metro Port Service, Inc. The latter excepted to one drum which is said to be in bad order and which damage was unknown to Eastern Shipping Lines. Later, Allied Brokerage Corporation received the shipment from Metro Port Service, Inc. With one drum damaged, Allied Brokerage Corporation made deliveries to the consignee's warehouse. The latter excepted to one drum that is damaged. Eastern Shipping Lines averred that due to the one drum that is damaged and due to the fault and negligence of Metro Port Service, Inc. and Allied Brokerage Corporation, the consignee suffered losses. The two failed and refused to pay the claims for damages. Consequently, Eastern Shipping Lines was compelled to pay the consignee being subrogated to all the rights of action of said consignee against Metro Port Service, Inc. and Allied Brokerage Corporation. Trial ensued and on appeal of the case, the appellate court affirmed the decision of the trial court ordering Metro Port Service and Allied Brokerage to pay Eastern Shipping Lines, jointly and severally, the amount of P19,032.95, with the present legal interest of 12%per annumfrom the date of filing of the complaints, until fully paid. Metro Port Service and Allied Brokerage opposed especially as to the payment of interest contending that the legal interest on an award for loss or damage should be 6% in view of Article 2209 of the Civil Code.

ISSUE: Whether or not the payment of legal interest on an award for loss or damage is twelve percent (12%) or six percent (6%).

HELD: Article 2209 of the New Civil Code provides that if the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is six percentper annum. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:1. When the obligation is breached, and it consists in the payment of a sum of money,the interest due should be that which may have been stipulated in writing.Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded.In the absence of stipulation, the rate of interest shall be 12%per annumto be computed from default under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at thediscretion of the court at the rate of 6%per annum.No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty.Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when 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 judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12%per annumfrom such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

10. SIGA-AN vs. VILLANUEVA, GR. No. 173227, January 20, 2009

FACTS: Herein respondent Alicia Villanueva is engaged in supplying office materials and equipments to the Philippine Navy Office (PNO) where herein Sebastian Siga-an works as a military officer and comptroller. Villanueva alleged that Siga-an offered to loan her the amount of P540,000.00. Having needed capital for her business transactions with the PNO, Villanueva accepted petitioners proposal. The loan agreement was not reduced in writing and there was no stipulation as to the payment of interest for the loan. Villanueva issued two checks worth P500,000.00 and P200,000.00. Siga-an wanted to apply the payment of P540,000.00 to the principal amount and the excess amount of P160,000.00 would be applied for the interest. He demanded from Villanueva to pay additional interest with a threat to block or disapprove her transactions with the PNO if she would not comply with his demand thus respondent paid additional amounts as interests for the loan. Villanueva asked Siga-an for receipt but petitioner refused to give as it was not necessary as there was mutual trust and confidence between them. The total amount paid by Villanueva totalled P1,200,000.00. When Villanueva was advised by her lawyer that she made an overpayment, she sent a demand letter to Siga-an asking for the return of the excess amount of P660,000.00. Siga-an just ignored Villanuevas claim for reimbursement. Hence, Villanueva instituted a complaint for sum of money against herein petitioner Sebastian Siga-an. After trial of the case, the Trial Court ordered petitioner Siga-an to refund the excess amount to Villanueva pursuant to the principle of solutio indebiti. On appeal of the case, the appellate court affirmed the decision of the RTC. Petitioner filed a motion for reconsideration but this was denied. Hence, the instant petition.

ISSUE: Whether or not there was interest due to petitioner. HELD: There was no interest due to petitioner. Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates that no interest shall be due unless it has been expressly stipulated in writing. Payment of monetary interest is allowed only if there was an express stipulation for the payment of interest; and the agreement for the payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of monetary interest. Thus, the collection of interest without any stipulation therefore in writing is prohibited by law. It appears that petitioner and respondent did not agree on the payment of interest for the loan. Neither was there convincing proof of written agreement between the two regarding the payment of interest. Compensatory interest is not chargeable in the instant case because it was not duly proven that respondent defaulted in paying the loan. Also, as earlier found, no interest was due on the loan because there was no written agreement as regards payment of interest.

11. CARPO vs. CHUA & DY NG, GR. Nos. 150773 & 153599, September 30, 2005

FACTS: Herein petitioner spouses David Carpo and Rechilda Carpo contracted a loan from Eleanor Chua and Elma Dy Ng for a certain sum of money payable within six (6) months with an interest rate of six percent (6%) per month secured by a mortgaged of the spouses Carpo of their residential house and lot. Petitioners failed to pay the loan upon demand. Consequently, the real estate mortgage was extrajudicially foreclosed, mortgaged property sold at a public auction, and the house and lot was awarded to respondents, who were the only bidders. Unable to exercise their right of redemption by petitioners, a certificate of sale was issued in the name of respondents.However, petitioners continued to occupy the said house and lot, thus respondents file a petition for writ of possession which was granted by the Trial Court. Petitioners filed a complaint for annulment of real estate mortgage and the consequent foreclosure proceedings claiming thatthe rate of interest stipulated in the principal loan agreement is clearly null and void for being excessive, iniquitous, unconscionable and exorbitant. Consequently, they also argue that the nullity of the agreed interest rate affects the validity of the real estate mortgage.ISSUE: Whether or not the agreed rate of interest of 6% per month or 72% per annum is so excessive, iniquitous, unconscionable and exorbitant that it should have been declared null and void.

HELD: In a long line of cases, the Supreme Court has invalidated similar stipulations on interest rates for being excessive, iniquitous, unconscionable and exorbitant. Pursuant to the freedom of contract principle embodied in Article 1306 of the Civil Code, contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. In the ordinary course, the codal provision may be invoked to annul the excessive stipulated interest. In the case at bar, the stipulated interest rate is 6% per month, or 72% per annum. By the standards set by jurisprudence, this stipulation is similarly invalid.

12. MACALINAO V. BPI, 600 SCRA 67

FACTS: Petitioner Ileana Macalinao defaulted on the payment of her BPI credit card dues. There was a stipulation in a contract that the charges and/or balance shall earn 3% per month and additional penalty fee of another 3% per month. The Regional Trial Court reduced the 3% monthly interest to 2%. On appeal of the case, the Court of Appeals reversed the decision of the RTC holding that petitioner Macalinao freely availed herself of the credit card facility offered by respondent Bank of the Philippine Islands to general public; contracts of adhesion are not invalid per se. Petitioner assailed the appellate courts decision alleging that the interest rate and penalty charges are unconscionable and iniquitous at 36% per annum.

ISSUE: Whether or not the interest rate and penalty charges are unconscionable and iniquitous at 36% per annum.

HELD: The interest rate and penalty charges are unconscionable and iniquitous at 36% per annum. The Supreme Court held that theinterest rate and penalty charge of3% per month or the 36% per annum should be reduced to 2% per month or 24% per annum. In a long line of cased decided by the Supreme Court, it considered the 36% per annum to beexcessive and unconscionable. Citing Article1229, in exercising this power todetermine what is iniquitous and unconscionable; courts must consider the circumstances of each casesince what may be iniquitous and unconscionable in one maybe totally just and equitable in another. In the instantcase, Macalinao made partial payments to BPI .Therefore, the interest rate and penalty charge of 3% per month or 36% per annum should be reduced to 2% per month or 24% per annum.

13. MENCHAVEZ V. BERMUDEZ (2012) Facts: Menchavez and Bermudez entered into a loan agreement covering the amount of P500, 000 with interest at 5% per month. Bermudez executed a promissory note. She then issued a check which she later replaced with five postdated checks. Four of the checks were cleared and fully encashed while the fifth, although dishonoured, was partially paid with a replacement check. Menchavez allegedly entered into a verbal compromise agreement with Bermudez regarding the delay in payment and the accumulated interest. Under the agreement, Bemudez will deliver 11 postdated Prudential Bank checks as payment. When presented for payment, 8 of those checks were dishonoured. Nine criminal informations were filed against Bermudez, each charging her with violation of BP22. In the MeTC, Bermudez raised the defense of payment, and proved paying Menchavez P925, 000, or P425, 000 over the P500k loan. The MeTC of Makati City acquitted her. Menchavez appealed to the RTC the civil aspect of the case. RTC partially granted the appeal, and modified the decision of the MeTC: Bermudez should pay Menchavez P165, 000 as civil liability with legal interest of 12%. RTC said that the P425k excess payment had not fully settled Bermudezs obligation. No evidence was presented as to the payment on the 8 checks covering the P190k in the compromise agreement. P165k remained unpaid. The 5% monthly interest stipulated in the loan agreement cannot be applied since there was no written agreement. 12% should be used. Bermudez then appealed to the CA. CA reversed and set aside the ruling of the RTC. It said that the compromise agreement could not be detached from and taken independently of the principal loan. Menchavez brought the matter to SC. ISSUE: WON the interest was unconscionableHeld: CA decision is affirmed. Petitioner attempts to exact payment on both the compromise agreement and the original loan transaction. These are NOT separate and distinct. The purpose of the compromise agreement was to extinguish the obligation under the loan. The 5% monthly interest rate is excessive and iniquitous. Also, the statement of account already showed that the original obligation of P500k has already been paid, and the P425k excess would be treated as interest paid, even at the iniquitous rate of 60% per annum. M has been sufficiently compensated for the loan and the interest earned, and cannot be allowed to further recover on an interest rate which is unconscionable. Since the stipulation on the interest rate is void, it is as if there was no express contract on said interest rate. Courts may reduce the interest rate as reason and equity demand.

14. NACAR v GALLERY FRAMESFACTS: Dario Nacar filed a labor case againstGalleryFrames and its owner Felipe Bordey, Jr. Nacar alleged that he was dismissed without cause byGalleryFrames on January 24, 1997. On October 15, 1998, the Labor Arbiter (LA) foundGalleryFrames guilty of illegal dismissal hence the Arbiter awarded Nacar P158,919.92 in damages consisting of backwages and separation pay. GalleryFrames appealed all the way to the Supreme Court (SC). The Supreme Court affirmed the decision of the Labor Arbiter and the decision became final on May 27, 2002. After the finality of the SC decision, Nacar filed a motion before the LA for recomputation as he alleged that his backwages should be computed from the time of his illegal dismissal (January 24, 1997) until the finality of the SC decision (May 27, 2002) with interest. The LA denied the motion as he ruled that the reckoning point of the computationshould only be from the time Nacar was illegally dismissed )January 24, 1997) until the decision of the LA (October 15, 1998). The LA reasoned that the said date should be the reckoning point because Nacar did not appeal hence as to him, that decision became final and executory.

ISSUE:Whether or not the Labor Arbiter is correct.

HELD:No. There are two parts of a decision when it comes to illegal dismissal cases (referring to cases where the dismissed employee wins, or loses but wins on appeal). The first part is the ruling that the employee was illegally dismissed. This is immediately final even if the employer appeals but will be reversed if employer wins on appeal. The second part is the ruling on the award of backwages and/or separation pay. For backwages, it will be computed from the date of illegal dismissal until the date of the decision of the Labor Arbiter. But if the employer appeals, then the end date shall be extended until the day when the appellate courts decision shall become final. Hence, as a consequence, the liability of the employer, if he loses on appeal, will increase this is just but a risk that the employer cannot avoid when it continued to seek recourses against the Labor Arbiters decision. This is also in accordance with Article 279 of the Labor Code.

Anent the issue of award interest in the form of actual or compensatory damages, the Supreme Court ruled that the old case of Eastern Shipping Lines vs CA is already modified by the promulgation of the Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796 which lowered the legal rate of interest from 12% to 6%. Specifically, the rules on interest are now as follows:

1. Monetary Obligations ex. Loans:

a. If stipulated in writing:a.1. shall run from date of judicial demand (filing of the case)a.2. rate of interest shall be that amount stipulatedb. If not stipulated in writingb.1. shall run from date of default (either failure to pay upon extra-judicial demand or upon judicial demand whichever is appropriate and subject to the provisions of Article 1169 of the Civil Code)b.2. rate of interest shall be 6% per annum

2. Non-Monetary Obligations (such as the case at bar)

a. If already liquidated, rate of interest shall be 6% per annum, demandable from date of judicial or extra-judicial demand (Art. 1169, Civil Code)b. If unliquidated, no interest

Except: When later on established with certainty. Interest shall still be 6% per annum demandable from the date of judgment because such on such date, it is already deemed that the amount of damages is already ascertained.

3. Compounded Interest

- This is applicable to both monetary and non-monetary obligations- 6% per annum computed against award of damages (interest) granted by the court. To be computed from the date when the courts decision becomes final and executory until the award is fully satisfied by the losing party.

4. The 6% per annum rate of legal interest shall be applied prospectively:

- Final and executory judgments awarding damages prior to July 1, 2013 shall apply the 12% rate;- Final and executory judgments awarding damages on or after July 1, 2013 shall apply the 12% rate for unpaid obligations until June 30, 2013; unpaid obligations with respect to said judgments on or after July 1, 2013 shall still incur the 6% rate