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[G.R.No.148163.December6,2004]
BANCO FILIPINO SAVINGS AND MORTGAGE BANK,petitioner, vs. JUANITA B. YBAEZ,
CHARLESB.YBAEZ,JOSEPHB.YBAEZandJEROMEB.YBAEZ,respondents.
DECISION
QUISUMBING,J.:
Inthispetitionforreview,BancoFilipinoSavingsandMortgageBankseeksthereversalof
the Decision[1] dated April 17, 2001 of the Court of Appeals in CA-G.R. CV No. 57927
affirmingtheDecision[2]datedJuly16,1997oftheRegionalTrialCourt,Branch13ofCebu
CityinCivilCaseNo.CEB-16548.
Thefactsofthiscaseareasfollows:
OnMarch7,1978,respondentsobtainedaloansecuredbyaDeedofRealEstateMortgage
overTransferCertificateofTitle(TCT)No.69836frompetitionerbank.Theloanwasused
for the construction of a commercial building in Cebu City. On October 25, 1978,
respondentsobtainedanadditionalloanfromthepetitionerthusincreasingtheirobligation
toonemillionpesos.AcorrespondingAmendmentofRealEstateMortgage wasthereafter
executed.
OnDecember24,1982,theloanwasagainre-structured,increasingtheloanobligationto
P1,225,000and theReal Estate Mortgage was again amended. Respondents executed a
Promissory Note for the sum of P1,225,000 payable in fifteen years, with a stipulated
interestof21%perannum,andstipulatingmonthlypaymentsofP22,426.Thefirstpayment
waspayableonJanuary24,1983,andthesucceedingpaymentsweredueevery24thofeach
monththereafter.[3]Thenotealsostipulatedthatincaseofdefaultinthepaymentofany
ofthemonthlyamortizationandinterest,respondentsshallpayapenaltyequivalentto3%
oftheamountdueeachmonth.[4]
Respondents total payment from 1983 to 1988 amounted[5] to P1,455,385.07, broken
downasfollows:
1983247,631.54
198481,797.24
1985173,875.77
1986284,364.82
1987380,000.00
1988287,715.70[6]
From1989onwards,respondentsdidnotpayasinglecentavo.TheyaverthatBancoFilipino
hadceasedoperations and/orwasnotallowedtocontinue business, havingbeen placed
underliquidationbytheCentralBank.
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On January15, 1990, respondents lawyerwrote SpecialActing Liquidator, Renan Santos,
andrequestedthatplaintiffreturnthemortgagedpropertyoftherespondentssinceithad
sufficiently profited from the loan and that the interest and penalty charges were
excessive.Petitionerbankdeniedtherequest. [7]
Banco Filipino was closed on January 1, 1985 and re-opened for business on July 1,
1994.Fromitsclosuretoitsre-opening,petitionerbankdidnottransactanybusinesswith
itscustomers.[8]
On August 24, 1994, respondents were served a Notice of Extra Judicial Sale of their
propertycoveredbyTCTNo.69836tosatisfytheirindebtednessallegedlyofP6,174,337.46
which includes the principal, interest, surcharges and 10% attorneys fees. The public
auctionwasscheduledonSeptember22,1994at2:00intheafternoon.
OnSeptember19,1994,respondentsfiledasuitfor Injunction,AccountingandDamages,
allegingthattherewasnolegalandfactualbasisfortheforeclosureproceedingssincethe
loanhadalreadybeenfullypaid.Arestrainingorderwasissuedthefollowingdaybythe
lower court enjoiningpetitioner to cease anddesist from sellingthe propertyat a public
auction.[9]
OnJuly16,1997,thelowercourtrenderedaDecision,disposingasfollows:
WHEREFORE,judgmentisherebyrendereddirectingdefendantBancoFilipinoSavingsand
MortgageBanktorenderacorrectaccountingoftheobligationsofplaintiffswithitafter
eliminatinginterestfromJanuary1,1985toJuly1,1994whenitwasclosed,andreducinginterestfrom21%to17%perannum,atthetimeitwasinoperation,andtotallyeliminating
[the]surchargeof 1%permonth, within a period offifteen (15)daysfromthe timethe
judgmentshallhavebecomefinalandexecutory.
Plaintiffsaredirectedtopaythebankwithinaperiodofthirty(30)daysfromthetimethey
willreceivedefendantbankstrueandcorrectaccounting,otherwisetheorderofinjunction
willbelifted/dissolved.
Defendants are enjoined from foreclosing the real estate mortgage on the property of
plaintiffs,unlessthelatterfailtopayinaccordancewiththe[preceding]paragraph.
Withoutspecialpronouncementastocosts.
SOORDERED.[10]
Not satisfied with the decision, both parties appealed the case to the Court of
Appeals.PetitionerfileditsNoticeofAppealonAugust19,1997,whilerespondentsfiled
theirs onAugust22, 1997.OnApril 17, 2001, the Court ofAppeals rendered aDecision
affirmingthedecisionofthetrialcourtstating:
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WHEREFORE,forlackofmerit,bothappealsareDISMISSEDandtheDecisionappealedfrom
isAFFIRMED.
SOORDERED.[11]
Petitionernowallegesthefollowingerrors:
I. THE COURTOFAPPEALSERRED IN CONCURRINGWITH THE TRIALCOURTS DECISION
ORDERING THE DEFENDANT BANK (HEREIN PETITIONER) TO RENDER A CORRECT
ACCOUNTINGOFPLAINTIFFSLOANBECAUSETHESTATEMENTOFACCOUNT(EXH.5and6
Defendant)SUBMITTEDBYDEFENDANTBANKDOESNOTREFLECTTHETRUEANDCORRECT
AMOUNT AS IT IMPOSES A 21% PER ANNUM INTERESTWHICHTHE COURT OFAPPEALS
CONSIDEREDASEXCESSIVEANDTHAT ITHASNO PROBATIVEVALUEAS ITS SIGNATORIES
WERENOTPRESENTEDASWITNESSES.
II. THE COURT OF APPEALSERREDIN ORDERINGTHEDELETIONOF THE 3%PERMONTH
SURCHARGE SIMPLY BECAUSE THE PLAINTIFF-BORROWER HAD MADE SUBSTANTIAL
PAYMENTSFROM1983TO1988.
III. THE COURT OF APPEALS COMMITTED AN ERROR IN RULING THAT THE PLAINTIFFS-
BORROWERS (HEREIN RESPONDENTS) CANNOT BE CONSIDERED TO HAVE DEFAULTED IN
THEIRPAYMENTSINCEDEFENDANTBANKCEASEDOPERATIONFROM1985TO1991. [12]
Toresolve thecontroversyweshalladdressthefollowingpertinentquestions:(1)Whatis
theeffectofthetemporaryclosureofBancoFilipinofromJanuary1,1985toJuly1,1994ontheloan?(2)Istherateofinterestsetat21%perannumlegal?and(3)Isthe3%monthly
surchargevalid?
In Banco Filipino Savings and MortgageBank v. Monetary Board,[13] the validity of the
closureandreceivershipofBancoFilipinowasputinissue.Butthependencyofthecasedid
not diminish the authority of the designated liquidator to administer and continue the
banks transactions. The Court allowed the banks liquidator to continue receiving
collectiblesandreceivablesorpayingoffcreditorsclaimsandothertransactionspertaining
tonormal operations ofa bank.Among these transactionswere theprosecution of suits
againstdebtors forcollectionandfor foreclosureofmortgages.Thebankwasallowedtocollectinterestsonitsloanswhileunderliquidation,providedthattheinterestswerelegal.
Petitionercontendsthatthe21%annualinterestwasfreelyandvoluntarilyagreeduponby
theparties,andthatitwasneitherexcessivenorviolativeoftheUsuryLaw. [14]
Ontheotherhand, respondentsstate that therateof 21%wasusuriousbecausetheloan
wasincurredonDecember24,1982,beforethedefactorepealoftheUsuryLawonJanuary
1, 1983.[15] Respondents add that the normal rate by which petitioner charges its
borrowersatthattimewasonly17%,or4%lowerthantherateitgavetorespondents.
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It isan elementary rule ofcontracts that thecontractingpartiesare free tostipulate the
terms of their contract for as long as the terms are not contrary to law, morals, good
customs,publicpolicy,publicorder,andnationalinterests.[16]Lawsinforceatthetimethe
contractwasmadegenerallygovernitsinterpretationandapplication.Theloanagreement
between petitioner and respondents specifies the obligation of the debtor to pay
interest.Inprinciplesaidstipulationisbindingbetweentheparties. [17]
Wenotethatatthetimethepartiesenteredintothesaidloanagreement,thepertinent
law,ActNo.2655,alreadyprovidedthattherateofinterestfortheforbearanceofmoney
whensecuredbyamortgageuponrealestateshouldnotbemorethan12%perannum or
themaximumrateprescribedbytheMonetaryBoardandinforceatthetimetheloanwas
granted. On December 1, 1979, the Monetary Board of the Central Bank of the
Philippines[18]hadissuedCBPCircularNo.705-79.[19]Onloantransactionswithmaturities
ofmorethan 730days, it fixed the effective rateofinterestat21%perannum for both
securedandunsecuredloans.Sincetheloaninquestionhasfixed15yearsforitsmaturity,itfellwithinthecoverageofsaidCBPCircular.Thus,weagreethatthe21%interestisnot
violativeoftheUsuryLawasitstoodatthetimeoftheloantransaction.
Astothemonthlysurcharge,petitionerreliesonCBPCircularNo.905-82.[20]Theceilingon
interest rates prescribed by the Usury Law, according to petitioner, were expressly
removed. Petitionerarguesthat thesaid circularhadretroactiveeffectsinceit ismerely
procedural in nature. Hence according to petitioner, the imposition of 3% monthly
surchargebythebankagainsttheborrowerislegal.
Onthismatter,wedisagreewithpetitioner.CBPCircularNo.905-82,whichwas effectiveJanuary1,1983,didnotrepealnorinanywayamendtheUsuryLaw.TheCircularsimply
suspended the effectivity of the Usury Law. A Central Bank Circular cannot repeal a
law.Onlyalawcanrepealanotherlaw.Thus,theretroactiveapplicationofaCBPCircular
cannot,andshouldnot,bepresumed.[21]TheloanwasenteredintoonDecember24,1982,
butCBPCircularNo.905-82wasgivenforceandeffectonlyonJanuary1,1983.Thus,CBP
CircularNo.905-82couldnotbemadeapplicabletotheloanagreementinthiscase,and
petitionercouldnotrelyonthisCircularforitsimpositionof3%monthlysurcharge.
Petitioneralsoarguesthatthe3%monthlysurchargepartakesofthenatureofapenalty
clause.[22]Apenalclauseisanaccessoryundertakingtoassumegreaterliabilityincaseof
breachandisattachedtoanobligationinordertosecureitsperformance. [23]Thepenalty
shall substitute the indemnity for damages and the paymentofinterests incaseof non-
compliance.[24]Butifsuchstipulationisfoundcontrarytolawforbeingusurious,itcanbe
nullifiedbythecourtswithoutaffectingtheprincipalobligation. [25]
Intheloanagreementbetweenthepartiesinthiscase,thetotalinterestandothercharges
exceedtheprescribed21%ceiling.Hence,theimpositionofthe3%monthlysurcharge,as
the penal clause to the obligation, violated the limit imposed by the Usury Law. Said
surchargeof3%monthlymustbedeclarednullandvoid.
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To recapitulate: therespondents principal obligation topay themonthlyamortization of
P22,426,validlysubsists.Onlythe3%monthlysurchargeisvoid.Themonthlyamortization
ofP22,426, for15years,wouldamounttoP4,036,680.Todate,respondentsalreadypaid
theamountofP1,455,385.07.Thus,onlytheoutstandingbalanceofP2,581,294.93remains
due.
Respondentsweregivenby theRTC30days fromreceiptofdecision,withinwhichtopay
theiroutstandingobligation.Wenowreiteratethatperiodof30days,fromreceiptofthis
Decision,forrespondentstopaytheamountofP2,581,294.93tothebankasfullpaymentof
the outstanding balance on their loan obligation. Otherwise, the order of injunction
restrainingpetitionerfromforeclosingthepropertyshallbelifted.
WHEREFORE,theDecisionoftheRegionalTrialCourt,whichwassustainedbytheCourtof
Appeals, isherebyMODIFIEDas follows:(1)theinterestrateat21%perannumishereby
declaredVALID;(2)the3%monthlysurchargeisNULLIFIEDforbeingviolativeoftheUsuryLaw at the time; and (3) respondents are ORDERED to pay petitioner the amount of
P2,581,294.93within30daysfromreceiptofthisDecision.Nopronouncementastocosts.
SOORDERED.
Davide,Jr.,C.J.,(Chairman),Ynares-Santiago,Carpio,andAzcuna,JJ.,concur.
Navarrov.Mallari
Facts:ThisactionwasinstitutedintheCourtofFirstInstanceofPampangabySantiagoNavarro,SabasMagtoto,and
VictorinoCalara,astrustees(mandatarios)oftheinhabitantsofthebarrioofSanVicente,inthemunicipalityof
Macabebe,tocompelthedefendants,FelixMallari,asprincipal,andLeonTolentinoandIgnacioTolentino,as
sureties,tocomplywiththecontractfortheconstructionofachapeltothepatronsaintofthebarrio,orin
thealternativetorequirethesamedefendantstoreturnthesumofP12,000paidtothem,uponsaidcontract,
togetherwiththesumofP4,000asstipulateddamagesforfailuretoconstructthechapelaccordingtothe
specifications.
Issue:
WhetherornotFelixMallariisliablefordamages.
Held:
Concurrentlywith the execution of said contract Leon Tolentino and Ignacio Tolentino,also residents of
municipalityofMacabebe,obligatedthemselvesincollateralcontractofguarantytorespondsolidarilyforthe
faithfulandtrueperformanceofthecontractonthepartofFelixMallari.FelixMallari,itmaybestated,isnota
contractororbuilderbyprofessionandknowsnothingaboutconstructinghouses.HissonJose,althoughhe
supposedhimselftohavesomeknowledgeoftheart,wasbutlittlebetterversedinsuchmattersthanhis
father;andheappearstohavehadbutlittleskillevenintheartofdrafting.Asmighthavebeenexpectedfrom
thelackoftechnicalknowledgeonthepartofthe"contractor,"abotchwasmadeofthejob.Thechapelwas
indeedconstructedsomewhatin theexternalshapeindicated inthedesign,buttheworkwasdonewith
completewantofknowledgeoftheartofconstructionandofthematerialemployed.Thesewordswetake
fromthereportofacompetentengineer, SeorEmilioMariadeMoreta,ofManila,whomadeaspecial
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examinationandcarefulreportupontheconditionofthestructure.InconcludinghisreportSeorMoretasays
thattheplansweredrawnbyapersoncompletelyignorantnotonlyofallknowledgeoftheresistingpowerof
materialsandofdescriptivegeometry,aswellasoftechnicalknowledgeingeneral,butthathedidnoteven
possesssufficientinstructioninthedrawingofplans.SeorMoretaconcludeshisreportwiththeobservation
thatthebuildingthreatensruinforwantofproperfoundationandthatupontheslightesttremoroftheearth
itmightcomedown.ThephotographsinevidenceasprepareonefortheconclusionstatedinSeorMoreta's
report.Wedonotencumbertheopinionwiththedetailsstatedofsaidreportbutwillmerelysaythatbythat
reportandthetestimonyadducedatthetrial,thecasestatedinthecomplaintisinouropinioncompletely
demonstrated;andtheplaintiffsarewithoutdoubtentitledtorecoverthestipulateddamagesforfailureofthe
contractingpartiestoconstructachapelinconformitywiththefundamentalprinciplesoftheartofbuildingand
inaccordancewiththespecificationsofthecontract.Butthechapel,suchasitis,appearstobeinuseforthe
purposeforwhichitwasintended,andweareoftheopinionthattheplaintiffsarenotentitledtoconfiscatethe
sum of P4,000 which is as yet unpaid upon the purchase price and at the same time to claim the
stipulateddamages.Theresultisthatthedamagestowhichtheplaintiffsareentitledunderthelastclauseof
thecontract(ExhibitA)mustbesetoffagainsttheportionofthecontractpricewhichhasbeenretainedinthehandsoftheplaintiffs,withtheresultthatneitherpartycanrecoveranythingoftheother.
Lambertvs.Fox26phil588(kf)
Thisisanactionbroughttorecoverapenaltyprescribedonacontractaspunishmentforthe
breachthereof.
Earlyin1911thefirmknownasJohnR.Edgar&Co.,engagedintheretailbookand
stationerybusiness,founditselfinsuchconditionfinanciallythatitscreditors,includingthe
plaintiffandthedefendant,togetherwithmanyothers,agreedtotakeoverthebusiness,
incorporateitandacceptstockthereininpaymentoftheirrespectivecredits.Afewdays
aftertheincorporationwascompletedplaintiffanddefendantenteredintothefollowing
agreement:xxxtheundersignedmutuallyandreciprocallyagreenottosell,transfer,or
otherwisedisposeofanypartoftheirpresentholdingsofstockinsaidJohnR.Edgar&Co.
Inc.,tillafteroneyearfromthedatehereof.Eitherpartyviolatingthisagreementshallpay
totheotherthesumofonethousand(P1,000)pesosasliquidateddamages,unlessprevious
consentinwritingtosuchsale,transfer,orotherdispositionbeobtained.
NotwithstandingthiscontractthedefendantFoxsoldhisstockinthesaidcorporationtoE.C.McCulloughofthefirmofE.C.McCullough&Co.ofManila,astrongcompetitorofthesaid
JohnR.Edgar&Co.,Inc.
Thelearnedtrialcourtdecidedthecaseinfavorofthedefendantuponthegroundthatthe
intentionofthepartiesasitappearedfromthecontractinquestionwastotheeffectthat
theagreementshouldbegoodandcontinueonlyuntilthecorporationreachedasound
financialbasis,andthatthateventhavingoccurredsometimebeforetheexpirationofthe
yearmentionedinthecontract,thepurposeforwhichthecontractwasmadeandhadbeen
fulfilledandthedefendantaccordinglydischargedofhisobligationthereunder.The
complaintwasdismisseduponthemerits.
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ISSUE:Didthecourterredintheconstructionofthecontract?
HELD:"Asforus,wedonotconstrueorinterpretthislaw.Itdoesnotneedit.Weapplyit.
Byapplyingthelaw,weconservebothprovisionsforthebenefitoflitigants.Thefirstand
fundamentaldutyofcourts,inourjudgment,istoapplythelaw.Constructionand
interpretationcomeonlyafterithasbeendemonstratedthatapplicationisimpossibleor
inadequatewithoutthem.Theyaretheverylastfunctionswhichacourtshouldexercise.
Themajorityofthelawneednointerpretationorconstruction.Theyrequireonly
application,andifthereweremoreapplicationandlessconstruction,therewouldbemore
stabilityinthelaw,andmorepeoplewouldknowwhatthelawis."
Inthecaseatbarthepartiesexpresslystipulatedthatthecontractshouldlastoneyear.No
reasonisshownforsayingthatitshalllastonlyninemonths.Whatevertheobjectwasin
specifyingtheyear,itwastheiragreementthatthecontractshouldlastayearanditwas
theirjudgmentandconvictionthattheirpurposeswouldnotbesubversedinanylesstime.
Whatreasoncangiveforrefusingtofollowtheplainwordsofthemenwhomadethe
contract?Weseenone.
Inthisjurisdictionpenaltiesprovidedincontractsofthischaracterareenforced.Itisthe
rulethatpartieswhoarecompetenttocontractmaymakesuchagreementswithinthe
limitationsofthelawandpublicpolicyastheydesire,andthatthecourtswillenforcethem
accordingtotheirterms.(CivilCode,articles1152,1153,1154,and1155;Fornowvs.
Hoffmeister,6Phil.Rep.,33;Palaciosvs.MunicipalityofCavite,12Phil.Rep.,140;Gsellvs.
Koch,16Phil.Rep.,1.)TheonlycaserecognizedbytheCivilCodeinwhichthecourtis
authorizedtointerveneforthepurposeofreducingapenaltystipulatedinthecontractis
whentheprincipalobligationhasbeenpartlyorirregularlyfulfilledandthecourtcanseethatthepersondemandingthepenaltyhasreceivedthebenefitofsuchorirregular
performance.Insuchcasethecourtisauthorizedtoreducethepenaltytotheextentofthe
benefitsreceivedbythepartyenforcingthepenalty.
Inthisjurisdiction,thereisnodifferencebetweenapenaltyandliquidateddamages,sofar
aslegalresultsareconcerned.Ineithercasethepartytowhompaymentistobemadeis
entitledtorecoverthesumstipulatedwithoutthenecessityofprovingdamages.Indeedone
oftheprimarypurposesinfixingapenaltyorinliquidatingdamages,istoavoidsuch
necessity.
Thesuspensionofthepowertosellhasabeneficialpurpose,resultsintheprotectionofthe
corporationaswellasoftheindividualpartiestothecontract,andisreasonableastothe
lengthoftimeofthesuspension.Wedonothereundertaketodiscussthelimitationstothe
powertosuspendtherightofalienationofstock,limitingourselvestothestatementthat
thesuspensioninthisparticularcaseislegalandvalid.
Thejudgmentisreversed,thecaseremandedwithinstructionstoenterajudgmentinfavor
oftheplaintiffandagainstthedefendantforP1,000,withinterest;withoutcostsinthis
instance.
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G.R.No.L-10419
FELIXLAUREANO,plaintiff-appellant,
vs.
EUGENIOKILAYCOandCELSALIZARESDEKILAYCO,defendants-appellees.
Laguda, Ledesma, Jalbuena and Villalobos for appellant.
Lawrence,RossandBlockforappellees.
CARSON,J.:
On the 20th day of February, 1913, the defendants in this action executed a written
agreementwherein,forandinconsiderationofcertainmoneylenttothembytheplaintiff,
they obligated themselves to pay the sum of P10,200 in monthly installments of P500,
payableonthe15thdayofeachmonth,thefirstinstallmenttobepaidonthe15thdayof
April,1913.Bywayofsecurityfortheloantheyexecutedachattelmortgageuponcertain
property,includingthefittingsandstockofacertaindrugstore.Theyobligatedthemselves,
also, in the vent of failure topay any of the installments on the date upon which such
installments fell due, topay interest atthe rate of15per cent onall such overdueand
unpaidinstallmentsuntilthedateofpayment;and, further, intheeventthattheplaintiff
shouldbecompelledtohaverecoursetothecourtsfortherecoveryofthemoneylent,to
paytoplaintiff,bywayofindemnification,thesumofP2,000.Atthetimeofthetrial,which
tookplacein themonthofOctober,1914,it appearedthat therewasstilldueandunpaid
under thecontract thesumofP3,433.75, includingin theamountthe last installmentdue
on the 15th day of November, 1914, and interest at the rate of 15 per cent upon the
installmentsdueandunpaidpriortothedateofthetrial.Thedefendantsthereandthenoffered to pay the total amount of P3,433.75 which appeared to be due on account of
unpaidinstallmentsunderthecontract,includinginterestattherateof15percentfromthe
datewhensuchinstallmentsfelldue;and,theirofferhavingbeendeclined inopencourt,
deposited that amount with the clerk of the court, for payment to the plaintiff in full
settlementoftheirobligationunderthecontract.
Counselforplaintiffdeclinedtoacceptthemoneythustenderedandcontendedthathewas
entitledtoreceivenotonlytheamountoftheunpaidinstallmentsdueuponthedebt,but
also, by way of indemnification, the indemnity of P2,000 which defendants obligated
themselves to pay to plaintiff in the event that he should find it necessary to institute
proceedingsincourttorecoverthedebt;and,allegingthatdefendantshadunlawfullysold,
without plaintiffs knowledge or consent, the drug store on which the defendants had
executedachattelmortgage,counselclaimedalsothesumofP10,000undertheprovisions
ofsection12ofActNo.1508(ChattelMortgageLaw).
Thetrialjudge,beingofopinionthatthedepositbythedefendantswiththeclerkofthe
courtof thesumofP3,433.75constituteda settlementinfullof theirindebtednessunder
thecontract,dismissedthecomplaintatthecostoftheplaintiff.
Fromthisjudgmentplaintiffappealedandassignsaserror:
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1.The failureof the trial court to give judgment against the defendants for the sum of
P2,000,theindemnificationagreeduponintheeventthatplaintiffshouldbecompelledto
institutelegalproceedingstorecoverthedebt.
2.Thecostsoftheaction.
3.ThesumofP10,000towhichheclaimsheisentitledundertheprovisionsofsection12of
ActNo.1508,readtogetherwithsection10ofthesameAct.
Wewillexaminethelastassignmentoferrorfirst.
Sections10and12ofActNo.1508areasfollows:
SEC.10.Amortgagorofpersonalpropertyshallnotsellorpledgesuchproperty,oranypart
thereof,mortgagedbyhimwithouttheconsentofthemortgageeinwritingonthebackof
themortgageandonthemarginoftherecordthereofintheofficewheresuchmortgageis
recorded.
SEC.12.Ifamortgagorviolateseitherofthethreelastprecedingsectionsheshallbefineda
sum double the value of the property so wrongfully removed from the province, sold,
pledgedormortgaged,one-halftotheuseofthepartyinjuredandtheotherhalftotheuse
oftheTreasuryofthePhilippineIslands,orhemaybeimprisonedforaperiodnotexceeding
sixmonths,orpunishedbybothsuchfineandimprisonment,inthediscretionofthecourt.
Withoutstoppingtoconsiderthelegaleffectofachattelmortgagepurportingtosubjectto
mortgagethestockofastore,whereitmanifestlyappearsthatitistheintentoftheparties
thattheownerofthestoreshallcontinuethebusinesswithoutinterruption,itisasufficient
answer to the contentions of plaintiff in this regard to direct attention to the terms of
section12oftheAct,whichclearlycontemplatethatthefineandimprisonmentwhichmay
beimposedthereunderaretobeimposedinthecourseofacriminalaction,whereinthe
accused isentitled to the benefit of the safeguardswhichthe law of criminal procedure
throwsabouttheaccusedineverycaseinwhichheischargedwiththecommissionofan
offensedefinedandpenalizedbylaw.Itfollows,ofcourse,thatplaintiffsclaimofone-half
ofthefinewhichheallegesshouldbeimposeduponthedefendantsbecauseofthealleged
saleofthemortgagedpropertycannotbeenforcedinthisaction.
Plaintiffs claim to the agreed upon indemnity of P2,000 raises a question of greater
difficulty.
Weareofopinion,however,thattheclausesof thecontractprovidingforthepaymentof
interestatanincreasedrateintheeventoffailuretopayanyoftheinstallmentatthedate
uponwhichtheyfelldueandprovidingfurtherforthepayment,bywayofindemnification,
of the sum of P2,000 in the event that plaintiff should find it necessary to institute
proceedings for the enforcementof the contract, must be construed aspenalties in the
senseinwhichthattermisusedinarticles1152,1153,1154and1155oftheCivilCode.
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InitsdecisiondatedMarch24,1909,thesupremecourtofSpainheldthatelsealamiento
de crecidos intereses para el caso de satisfacer el capital al vencer la obligacion, debe
interpretarsecomoclausulapenal.(Thefixingofanincreasedrateofinterestintheevent
ofpayingofftheprincipalwhentheobligationbecomesdueshouldbeconstruedasapenal
clause.)
Itneedsnocitationofauthoritytosustainaholdingthatastipulationforthepaymentof
P2,000by way ofindemnification,in the eventof the failure topayallor any partof an
indebtedness of P10,200 in the event that the creditor should find it necessary tohave
recourse to the courts in the enforcement of the debt, is a penalty which, under the
provisions ofarticle 1154of the code,the courts are authorized tomodify inthe sound
exercise of their discretionwhentheprincipal obligation hasbeen compliedwith by the
debtoreitherinpartorirregularly(enparteoirregularmente).
InitsdecisionofNovember20,1907,thesupremecourtofSpainheldthataunestipuladoen la escritura que en su caso serian de cuenta y cargo del deudor las costas, daos y
perjuicios, la aplicacion de esta penalidad queda sometida al prudente arbitrio de los
Tribunales. (Even when it is stipulated in the instrument that, in a given case, thecost,
lossesanddamagesshallbechargeabletothedebtorandbebornebyhim,theapplication
ofthispenaltyshallrestinthesounddiscretionofthecourts.)
Underallthecircumstancesofthiscase,whereintheprincipalindebtednessappearstohave
been amply secured by a chattel mortgage, and wherein the greater part of the
indebtedness had been paid atthe timewhen the action was brought, and whereinthe
debtortenderedpaymentinfullpendingtheproceedingsinthecourtbelowanddepositedthe amount of the indebtedness then unpaid, together with 15 per cent interest, in the
hands of the clerk of the court for the benefit of the creditor, and wherein substantial
paymentsupontheprincipalobligation,amountingtosomeP2,000,hadbeenmadebythe
debtorandacceptedbythecreditornotlongpriortotheinstitutionoftheaction,weareof
opinion that the trial judgeproperly exercised the discretion conferred upon him under
article1154oftheCivilCodebymodifyingthepenaltiesprescribedunderthecontractsoas
tolimittherightof theplaintiffthereunderto interestattherateof15percentuponthe
lastinstallmentswhichhadbecomeoverdueunderthetermsofthecontract.
Itistruethatitwassaidinaformerdecision(Lambertvs.Fox,26Phil.Rep.,588)thatinthis
jurisdiction there isnosubstantial differencebetweenapenaltyand liquidateddamages so
faraslegalresultsareconcerned;butthisstatementistobeconstruedinconnectionwith
thecasewithreferencetowhichitwasmadeand,onexamination,itwillbefoundthatitis
strictly applicable only to cases wherein there has been neither a partial or irregular
compliancewiththetermsofthecontract,sothatthecourtshavenoauthoritytoproceed
undertheprovisionsofarticle1154oftheCivilCodewhichisasfollows:
Thejudgeshall equitablymitigatethepenaltyif theprincipalobligationshouldhavebeen
partlyorirregularlyfulfilledbythedebtor.
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AswassaidbythesupremecourtofSpaininitssentencedatedJune13,1906,construing
theprovisionsofbook4,title1,chapter3,section6oftheCivilCode:
The rules andprescriptions governing penal mattersare fundamentally applicable to the
penalsanctionsofcivilcharacter.
Itfollowsthat,inanycasewhereintherehasbeenapartialorirregularcompliancewiththe
provisionsinacontractforspecialindemnificationintheeventoffailuretocomplywithits
terms,courtswillrigidlyapplythedoctrineofstrictconstructionagainsttheenforcementin
itsentiretyoftheindemnification,whereitisclearfromthetermsofthecontractthatthe
amount or character of the indemnity is fixed without regard to the probable damages
whichmightbeanticipatedasaresultofabreachofthetermsofthecontract;or,inother
words,wheretheindemnityprovidedforisessentiallyamerepenaltyhavingforitsprincipal
object the enforcement of compliance with the contract. But the courts will be slow in
exercisingthejurisdictionconferredupontheminarticle1154soastomodifythetermsofan agreed upon indemnification where it appears that in fixing such indemnification the
partieshadinmindafairandreasonablecompensationforactualdamagesanticipatedasa
resultofabreachofthecontract,or,inotherwords,wheretheprincipalpurposeofthe
indemnification agreeduponappears tohavebeen toprovide for thepaymentof actual
anticipatedandliquidateddamagesratherthanthepenalizationofabreachofthecontract.
Itwillreadilybeseenthattheapplicationoftheseprinciplestotheparticularfactorsinany
case inwhich therehas been a partial or irregular performance of the condition of a
contractwhichprovidesapenaltyorliquidateddamagesfornoncompliancetherewithwill
leadtoresultssubstantiallyidenticalwiththosearrivedatinlikecasesintheUnitedStatesundergenerallyaccepteddoctrinetouchingtheenforcementofsuchcontracts.(Cf.Ency.of
U.S.SupremeCourtReports,vol.5,p.176,LiquidatedDamages,andcasestherecited.)
Theapplicationoftheseprinciplestothecaseatbarleavesnodoubtinourmindastothe
proprietyoftheactionofthecourtbelowinrestrictingtherightoftheplaintifftorecover
under the penal clauses set forth inhis contract the interest at the rate of 15 per cent
agreed upon by the parties inthe eventof failure to pay the various installmentsof his
indebtednessonthedayanddatewhentheyfelldue.
Astothethirdassignmentoferror,touchingthejudgmentofthecourtagainstplaintifffor
costs,weneedonlyindicatethatwhileitistrue,ascontendedbyplaintiff,thatatenderof
paymentmadeafteractionhasbeeninstituteddoesnotnecessarilyrelieveadefendant,in
anactionforasumofmoney,fromthecostsincurredpriortothedateofthetender,itmay
andasa generalrule should relievehim ofallcosts thereafter in theevent that plaintiff
declinestoacceptpaymentastendered,andifitthereafterappearsthatthetenderactually
madewasforthefullamountdueatthetimewhenitwasmade.Inthecaseatbarthetotal
amountultimatelyfoundduebythetrialcourtwaspaidintocourtduringthecourseofthe
trial, and weare of opinion that under all the circumstancesof the case no errors was
committedbythetrialjudgeintheexerciseofhisdiscretioninimposingthecostsofthetrial
uponplaintiff,whodeclinedtoaccepttenderofpaymentofthefullamountdueandthus
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terminate theproceedingswithout furthercost or expense to eitherparty. (Section 487,
CodeofCivilProcedure.)
Weconcludethat thejudgmententeredin thecourtbelow shouldbeaffirmed, with the
costsofthisinstanceagainsttheappellant.Soordered.
[G.R.No.149004.April14,2004]
RESTITUTAM.IMPERIAL,petitioner,vs.ALEXA.JAUCIAN,respondent.
DECISION
PANGANIBAN,J.:
Iniquitousand unconscionable stipulationson interest rates,penaltiesand attorneysfees
are contrary to morals. Consequently, courts are granted authority to reduce them
equitably.Ifreasonablyexercised,suchauthorityshallnotbedisturbedbyappellatecourts.
TheCase
BeforeusisaPetitionforReview1[1]underRule45oftheRulesofCourt,assailingtheJuly
19,2000Decision2[2]andtheJune14,2001Resolution 3[3]oftheCourtofAppeals(CA)in
CA-GRCVNo.43635.ThedecretalportionoftheDecisionisasfollows:
WHEREFORE,premisesconsidered,theappealedDecisionoftheRegionalTrialCourt,5th
JudicialRegion,Branch21,NagaCity,datedAugust31,1993,inCivilCaseNo.89-1911for
SumofMoney,isherebyAFFIRMEDintoto.4[4]
TheassailedResolutiondeniedpetitionersMotionforReconsideration.
ThedispositiveportionoftheAugust31,1993Decision,promulgatedbytheRegionalTrial
Court(RTC)ofNagaCity(Branch21)andaffirmedbytheCA,readsasfollows:
Wherefore,JudgmentisherebyrendereddeclaringSectionI,CentralBankCircularNo.905,
series of 1982 to be of no force and legal effect, it having been promulgated by the
Monetary Board of the Central Bank of the Philippines with grave abuse of discretion
amountingtoexcessofjurisdiction;declaringthattherateofinterest,penalty,andcharges
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forattorneysfeesagreeduponbetweenthepartiesareunconscionable,iniquitous,andin
violationofActNo.2655,otherwiseknownastheUsuryLaw,asamended;andordering
DefendanttopayPlaintifftheamountofFOURHUNDREDSEVENTY-EIGHTTHOUSAND,ONE
HUNDREDNINETY-FOURand54/100(P478,194.54)PESOS,Philippinecurrency,withregular
and compensatory interests thereon at the rate of twenty-eight (28%) per centum per
annum, computed from August 31, 1993 until full payment of the said amount, and in
addition, an amount equivalent to ten (10%) per centum of the total amount due and
payable,forattorneysfees,withoutpronouncementastocosts. 5[5]
TheFacts
TheCAsummarizedthefactsofthecaseinthiswise:
Thepresentcontroversyarosefromacaseforcollectionofmoney,filedbyAlexA.Jaucian
against Restituta Imperial, on October 26, 1989. The complaint alleges, inter alia, that
defendantobtainedfromplaintiffsix(6)separateloansforwhichtheformerexecutedin
favorofthelattersix(6)separatepromissorynotesandissuedseveralchecksasguarantee
for payment. When the said loans became overdue and unpaid, especially when the
defendantschecksweredishonored,plaintiffmaderepeatedoralandwrittendemandsfor
payment.
Specifically,thesix(6)separateloansobtainedbydefendantfromplaintiffonvariousdates
areasfollows:
(a) November13,1987 P50,000.00(b)December28,1987 40,000.00
(c)January6,1988 30,000.00
(d)January11,1988 50,000.00
(e)January12,1988 50,000.00
(f) January13,1988 100,000.00
Total P320,000.00
Theloanswerecoveredbysix(6)separatepromissorynotesexecutedbydefendant.The
face value of each promissory notes is bigger [than] the amount released to defendant
becausesaidfacevaluealreadyinclude[d]theinterestfromdateofnotetodateofmaturity.Saidpromissorynotes,which indicate the interest of 16%permonth, date of issue,due
date, the corresponding guarantee checks issued by defendant, penalties and attorneys
fees,arethefollowing:
1. ExhibitDforloanofP40,000.00onDecember28,1987,withfacevalue
ofP65,000.00;
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2. ExhibitEforloanofP50,000.00onJanuary11,1988,withfacevalueof
P82,000.00;
3. ExhibitFforloanofP50,000.00onJanuary12,1988,withfacevalueof
P82,000.00;
4. ExhibitGforloanofP100,000.00onJanuary13,1988,withfacevalueof
P164,000.00;
5. ExhibitHThisparticularpromissorynote covers thesecondrenewal of
theoriginalloanofP50,000.00onNovember13,1987,whichwasrenewed
forthefirsttimeonMarch16,1988aftercertainpayments,andwhichwas
renewedfinallyfor thesecond time on January4,1988 also after certain
payments,withafacevalueofP56,240.00;
6. ExhibitIThisparticularpromissorynotecoversthesecondrenewalofthe
originalloanofP30,000.00onJanuary6,1988,whichwasrenewedforthe
first timeon June 4, 1988 after certain payments, and whichwas finally
renewed for the second time on August 6, 1988, also after certain
payments,with[a]facevalueofP12,760.00;
Theparticularsaboutthepostdatedchecks,i.e.,number,amount,date,etc.,areindicated
ineachofthepromissorynotes.Thus,forExhibitD,four(4)PBcheckswereissued;for
ExhibitEfour(4)checks;forExhibitFfour(4)checks;forExhibit Gfour(4)checks;for
ExhibitHone(1)check;forExhibitIone(1)check;
Thearrangementbetweenplaintiffanddefendantregarding theseguaranteecheckswas
thateachtimeacheckmaturesthedefendantwouldexchangeitwithcash.
Although,admittedly,defendantmadeseveralpayments,thesamewerenotenoughand
shealwaysdefaultedwheneverherloansmature[d].AsofAugust16,1991,thetotalunpaid
amount,includingaccruedinterest,penaltiesandattorneysfees,[was]P2,807,784.20.
On the other hand, defendant claims that she was extended loans by the plaintiff on
severaloccasions, i.e., from November13, 1987 to January13,1988,in thetotal sumofP320,000.00attherateofsixteenpercent(16%)permonth.Thenotesmature[d]everyfour
(4)monthswithunearnedinterestcompoundingeveryfour(4)monthsiftheloan[was]not
fullypaid.Theloanreleases[were]asfollows:
(a) November13,1987 P50,000.00
(b)December28,1987 40,000.00
(c)January6,1988 30,000.00
(d)January11,1988 50,000.00
(e)January12,1988 50,000.00
(f) January13,1988 100,000.00
Total P320,000.00
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TheloanonNovember13,1987andJanuary6,1988ha[d]beenfullypaidincludingthe
usuriousinterestsof16%permonth,thisisthereasonwhythesewerenotincludedinthe
complaint.
Defendantallegesthatalltheaboveamountswerereleasedrespectivelybychecksdrawn
bytheplaintiff,andthelattermustproducethesechecksasthesewerereturnedtohim
beingthedrawerifonlytoservethetruth.Theaboveamountaretherealamountreleased
tothedefendantbuttheplaintiffbymasterfulmachinationsmadeitappearthatthetotal
amountreleasedwasP462,600.00.Becauseinhiscomputationhemadeitappearthatthe
trueamountsreleasedwasnottheoriginalamount,sinceitinclude[d]theunconscionable
interestforfourmonths.
Further, defendant claims that as of January 25, 1989, the total payments made by
defendants[were]asfollows:
a. PaidreleasesonNovember13,1987ofP50,000.00andJanuary6,1988
of P30,000.00 these two items were not included in the complaint
affirmingthefactthatthesewerepaid
P80,000.00
b. Exhibit26Receipt 231,000.00
c. Exhibit8-25Receipt 65,300.00
d. Exhibit27Receipt 65,000.00
Total P441,780.00
Less: 320,000.00
ExcessPayment P121,780.00
DefendantcontendsthatfromallperspectivestheaboveexcesspaymentofP121,780.00is
morethantheinterestthatcouldbelegallycharged,andinfactasofJanuary25,1989,the
totalreleaseshavebeenfullypaid.
On31August1993,thetrialcourtrenderedtheassaileddecision. 6[6]
RulingoftheCourtofAppeals
Onappeal,theCAheldthatwithoutjudicialinquiry,itwasimproperfortheRTCtoruleonthe constitutionality of Section 1, Central Bank Circular No. 905, Series of 1982.
Nonetheless,theappellatecourtaffirmedthejudgmentofthetrialcourt,holdingthatthe
lattersclearanddetailedcomputationofpetitionersoutstandingobligationtorespondent
wasconvincingandsatisfactory.
Hence,thisPetition.7[7]
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TheIssues
Petitionerraisesthefollowingargumentsforourconsideration:
1. Thatthepetitionerhasfullypaidherobligationsevenbeforefilingofthis
case.
2. Thatthechargingofinterestoftwenty-eight(28%)percentumperannum
withoutanywritingisillegal.
3. Thatchargingofexcessiveattorneysfeesishemorrhagic.
4. Chargingofexcessivepenaltiespermonthisintheguiseofhiddeninterest.
5. Thenon-inclusionofthehusbandofthepetitioneratthetimethecasewas
filedshouldhavedismissedthiscase. 8[8]
TheCourtsRuling
ThePetitionhasnomerit.
FirstIssue:
ComputationofOutstandingObligation
Arguing that she had already fullypaid the loan before the filing of the case,petitioner
allegesthatthetwolowercourtsmisappreciatedthefactswhentheyruledthatshestillhad
anoutstandingbalanceofP208,430.
Thisissueinvolvesaquestionoffact.Suchquestionexistswhenadoubtordifferencearises
astothetruthorthefalsehoodofallegedfacts;andwhenthereisneedforacalibrationof
the evidence, considering mainly the credibility of witnesses and the existence and the
relevancy of specific surrounding circumstances, their relation to each other and to the
whole,andtheprobabilitiesofthesituation. 9[9]
Itisawell-entrenchedrulethatpurequestionsoffactmaynotbethesubjectofanappeal
by certiorariunderRule 45of theRulesofCourt, as this remedy isgenerally confined to
questionsoflaw.10[10]ThejurisdictionofthisCourtovercasesbroughttoitislimitedtothe
reviewandrectificationoferrorsoflawallegedlycommittedbythelowercourt.Asarule,
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thelattersfactualfindings,whenadoptedandaffirmedbytheCA,arefinalandconclusive
andmaynotbereviewedonappeal. 11[11]
Generally,thisCourtisnotrequiredtoanalyzeandweighalloveragaintheevidencealready
considered in the proceedings below.12[12] In the present case, we find no compelling
reason tooverturn the factual findings of the RTC -- that the total amount of the loans
extendedtopetitionerwasP320,000,andthatshepaidatotalofonlyP116,540ontwenty-
ninedates.Thesefindingsaresupportedbyapreponderanceofevidence.Moreover,the
amountoftheoutstandingobligationhasbeenmeticulouslycomputedbythetrialcourtand
affirmedbytheCA.Petitionerhasnotgivenussufficientreasonwhyhercausefallsunder
anyoftheexceptionstothisruleonthefinalityoffactualfindings.
SecondIssue:
RateofInterest
Thetrialcourt,asaffirmedbytheCA,reducedtheinterestratefrom16percentto1.167
percent per monthor 14 percentper annum; and the stipulatedpenalty charge,from5
percentto1.167percentpermonthor14percentperannum.
Petitionerallegesthatabsentanywrittenstipulationbetweentheparties,thelowercourts
shouldhaveimposedtherateof12percentperannumonly.
Therecordsshowthattherewasawrittenagreementbetweenthepartiesforthepayment
ofintereston the subject loansat the rateof16percentpermonth. Asdecreed bythe
lowercourts,thisratemustbeequitablyreducedforbeinginiquitous,unconscionableandexorbitant.WhiletheUsuryLawceilingoninterestrateswasliftedbyC.B.CircularNo.905,
nothinginthesaidcirculargrantslenders carteblancheauthoritytoraiseinterestratesto
levels which will either enslave their borrowers or lead to a hemorrhaging of their
assets.13[13]
InMedelv.CA,14[14]theCourtfoundthestipulatedinterestrateof5.5percentpermonth,
or 66 percent per annum, unconscionable. In the present case, the rate is even more
iniquitousandunconscionable,asitamountsto192percentperannum.Whentheagreed
rateisiniquitousorunconscionable,itisconsideredcontrarytomorals,ifnotagainstthe
law.[Such]stipulationisvoid. 15[15]
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Sincethestipulationontheinterestrateisvoid,itisasiftherewerenoexpresscontract
thereon.16[16]Hence,courtsmayreducetheinterestrateasreasonandequitydemand.
Wefindnojustificationtoreverseormodifytherateimposedbythetwolowercourts.
ThirdandFourthIssue:
PenaltiesandAttorneysFees
Article1229oftheCivilCodestatesthus:
Thejudgeshallequitablyreducethepenaltywhentheprincipalobligationhasbeenpartly
orirregularly compliedwithby the debtor. Even iftherehas been noperformance, the
penaltymayalsobereducedbythecourtsifitisiniquitousorunconscionable.
Inexercisingthispowertodeterminewhatisiniquitousandunconscionable,courtsmust
considerthecircumstancesofeachcase.17[17]Whatmaybeiniquitousandunconscionable
inone may betotallyjust and equitable inanother. Inthepresent case, iniquitous and
unconscionable was theparties stipulatedpenalty chargeof 5 percentpermonth or 60
percentperannum, inaddition to regularinterestsandattorneys fees. Also, there was
partialperformancebypetitionerwhen sheremittedP116,540 aspartialpaymentof her
principalobligationofP320,000. Under thecircumstances, thetrialcourtwas justified in
reducingthestipulatedpenaltychargetothemoreequitablerateof14percentperannum.
ThePromissoryNotecarriedastipulationforattorneysfeesof25percentoftheprincipal
amountandaccruedinterests.Strictlyspeaking,thiscovenantonattorneysfeesisdifferent
fromthatmentionedinandregulatedbytheRulesofCourt.18[18]Rather,theattorneysfeeshereareinthenatureofliquidateddamagesandthestipulationthereforisaptlycalled
apenalclause.19[19]Solongasthestipulationdoesnotcontravenethelaw,morals,public
orderorpublicpolicy,itisbindingupontheobligor.Itisthelitigant,notthecounsel,whois
thejudgmentcreditorentitledtoenforcethejudgmentbyexecution.
Nevertheless,itappearsthatpetitionersfailuretocomplyfullywithherobligationwasnot
motivated by ill will or malice. The twenty-nine partial payments she made were a
manifestationofhergoodfaith.Again,Article1229oftheCivilCodespecificallyempowers
thejudgetoreducethecivilpenaltyequitably,whentheprincipalobligationhasbeenpartly
or irregularly complied with. Upon this premise, we hold that the RTCs reduction ofattorneysfees--from25percentto10percentofthetotalamountdueandpayable--is
reasonable.
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FifthIssue:
Non-InclusionofPetitionersHusband
Petitioner contends that the case against her should have been dismissed, because her
husbandwasnotincludedintheproceedingsbeforetheRTC.
We are not persuaded. The husbands non-joinder does not warrant dismissal, as it is
merely a formal requirement that may be cured by amendment.20[20] Since petitioner
allegesthatherhusbandhasalreadypassedaway,suchanamendmenthasthusbecome
moot.
WHEREFORE,thePetitionisDENIED.Costsagainstpetitioner.
G.R.No.L-3527September23,1907
TANTIOCO,plaintiff-appellee,
vs.
MARCELINALOPEZ,defendant-appellant.
Luis Ledesma for appellant.
RothrockandFossforappellee.
ARELLANO,C.J.:
Thesubject-matterof thecomplaint iscertain sums ofmoney owing to theplaintiff,Tan
Tioco, on account of some rice sold by him to Roque Lopez, and for money loaned to
MarcianoJardenil,totheextentof524.31pesos.Theplaintiffacknowledgeshavingreceived
paymentof179.37pesos;leavingabalanceof344.94pesos,theamountaskedforinthe
complaint,withlegalinterestfromJanuary29,1901.
The court below in its judgment ordered thedefendant, Marcelina Lopez, to pay312.51
pesos, with legal interest from February 1, 1901. The defendant appealed from this
judgment, the corresponding bill of exceptions was presented to this court, and theappellanthastherighttoreviewoftheevidenceadducedduringthetrial.
Theallegationofthecomplaintare:
1.ThatonSeptember27,1900,RoqueLopezreceivedsomericefromTanTioco,forwhich
heissuedavaleinthefollowingterms""Valeforfiftypiculsofsecondclasswhiterice,in
favoroftheChineseTiuaonaccountofMarcelinaLopez.R.Lopez.Price$53/10apicul
$271.88."
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2.ThatonOctober23,1900,heissuedanotherdocumentreadingasfollows:"Valeforone
piculofrice,secondclasswhite.R.Lopez.$5.31."
3.ThatonOctober30,1900,hesignedanotherdocumentwhichreadsasfollows:"Valefor
fortypiculsofsecondclasswhite,infavoroftheChineseTanTioco.R.Lopez.@$5
2/8$210%MarcelinaLopez."
4.ThatonNovember5,1900,hesignedthefollowingvale:"ValeforonepiculriceNo.1and
three piculs Chinese Tabao, in favor of the Chinese Tan Tioco, on account of the
undersigned.R.Lopez.$22.12."
5.ThatonNovember21,1900,MarcianoJardenilissuedadocumentofthefollowingtenor:
"ValeforthesumoftenpesosfuertesinfavoroftheChineseTanTiocoonaccountandby
orderofMarcelinaLopez.MarcianoJardenil."
All the allegations set up in the complaint having been denied, and all the vales above
referredtohavingbeenproducedatthetrialasevidenceinfavoroftheplaintiff,thecourt
admitted as competent the evidence of allegations No. 1, 3, and 5, and rejected that
referringtoallegationsNo.2and4.
Itappearsfromtherecord:
1.That,althoughatfirstthecourtbelowdidnotadmitallthesaid valesissuedandsignedby
Roque Lopez and Marciano Jardenil, respectively, as evidence against the defendant
Marcelina Lopez, yet the same were admitted afterwards in view of furtherdocumentalevidence, consistingof a letter, acknowledgedby thedefendant,which reads as follows:
"Sir:ToChineseTiua.Jaro,September25,1900.MydearChineseTiua.Kindly
give some lumber inrafts (queentregera elbalsasdemadera).Yours truly. Marcelina
Lopez.50piculssecondclasscurrentrice."
2.ThatMarcelinaLopezdeclaredthattheChinesedidnotknowRoqueLopez,andthelatter
askedher forarecommendation;thatshedidnotgiveRoqueLopez,anyauthoritytosign
vales in favor of the Chinese Tan Tioco on her account and by her order; that she had
nothing todo with the letter and deliveryof the lumber; thatRoqueLopezhad toldher
nothingaboutthericereceived;that"itisstatedinherletterthathe(RoqueLopez)wouldpay the Chinese withlogs, because the Chinesehad an interest insomelogs;" and that,
whenshewrotetheletter,RoqueLopezandMarcianoJardenil,whomshebelievedtobe
partners,werealreadycuttingtimber;andthatitistruethatshewroteinsaidletter,under
hersignature,"thatline;""50piculssecond-classcurrentrice."
3.ThatRoqueLopeztestifiedthathetookthericeonhisownaccount,havingaskedhis
aunt,thedefendant,foraletterofrecommendationbecausetheChineseTanTiocodidnot
knowhim,buthedidnottellthelatterthathewasauthorizedbyhisaunttoobtainriceon
heraccount;thathemadeoutthevalesaying:"Onmyownaccount;andthat,onseeingit
theChinamansaid:No,putitonaccountandbyorderofMarcelina,"and"then[thewitness
said] Iprotested,sayingthatMarcelinahadgivenmenoauthoritytosign forher,butthe
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Chinesereplied:"Signthat,andIwillgiveyoutherice;"and,astheboatwasgettingready
tosailforNegrosinordertotakeadvantageofthatopportunity,Ichangedthevalesoasto
read: "Onaccountand byorder ofMarcelina Lopez;" buthe denieshavingplacedat the
bottomofthevale(allegationNo.2)thenote"onaccountofMarcelinaLopez."
4.ThatTanTiocodeclaredthathesoldthericetoRoqueLopezonaccountofthedefendant,
inasmuchashehasnoaccountwiththewitnessRoqueLopez;"thatRoqueLopeztoldhim,
whenhetooktherice,thattheywouldbringsomeraftsoflumberonthereturnoftheboat
inpayment;thatthepriceofthericewouldbewouldbepaidwiththelumberwhichthey
wouldbringonthereturnoftheboat,"andthat"hespoketoMarcelina,tellingherthat,if
onthereturnoftheboattheydidnotpayhim,hewouldcollecttheamountfromher;"that
RoqueLopeztoldhimthat,onreturnofthe lorcha,whenthelumberwassold,theywould
paywiththeproceedsofthesale.Onbeingasked:"DidyoutellMarcelinaLopezthat,should
Roque Lopez not deliver any lumber, you would collect that amount from her?" he
replied:IthinkthatitwastwoorthreedaysafterhetookthericethatItoldherthat.Q.Onlyafterhetookthe50piculs?A.Yes.AndafterhetookthericeonanotherdayIgave
heradetailedstatementofgoodstakenbyhim.Q.WhenyoudeliveredthattoMarcelino
Lopez,whatdidsheansweryou?A.Wait,andyouwillbepaidforthis.Q.Didshesaythat
shewouldpayforit,orthatshewouldendeavortohaveitpaidyou?A.Thatshewould
endeavortohaveitpaid;"andfinallyhesaidthatthenoteplacedonthebottomofthevale
mentioned in the allegation No. 2 of the complaint was not made byRoque Lopez, but
MarcianoJardenil,althoughtheformerwasthereatthetimewiththelatter.
Thecourtbelowdidnotsentencethedefendanttopaytheamountsexpressedinthetwo
vales mentioned in allegations No. 2 and 4, for $5.31 and $22.12; it has considered,however,asobligationsbindinguponthedefendant,andcontractedbyher,thosecontained
inthevales(allegationsNos.1,3,and5),thatis,thepriceofthe50piculsof secondclass
currentrice,and ofthe40 piculs second class whitetakenbyRoque Lopez,and the $10
loanedtoMarcianoJardenil.
Regardingthisobligations,weconsiderthatthereisnoreasontocompelMarcelinaLopezto
paythepriceofthe40cavanesofsecondclasswhiterice,takenbyRoqueLopez,northe10
pesos borrowedby Marciano Jardenil, inasmuchas theterms of the letteraddressed by
Marcelina Lopez to Tan Tioco, dated September 25, 1900, relating only to 50 cavanes
second-classwhitericewhichRoqueLopezmighttake,cannotbemadetoincludethetwo
otherpersonsmentioned.
Astothe50cavanesofricetowhichthisletterrefers,thereissomedoubt,accordingtoits
terms,whetherthesentence"whowilldeliversomelumberinrafts"(queentregaraelbalsa
demaderas)indicatesasthetruepersonthatmustpay,thatis,athirdpersononthepartof
the principal; in other words, whether the letter is a mere recommendation in favor of
Roque Lopez,or is, on thecontrary,anorder,by virtueofwhich Marcelina Lopezwould
receive the riceand wouldherself pay the price thereof with the raftsof lumber which
Roque Lopez woulddeliver, or is an order given for the profit of the agent and a third
person.
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Weconsiderthatthecontractresultingintheoneexpressedinlaw22,title12,ofthe5th
Partida,whichistheimmediatelegalprecedentoftheCivilCodeinforce,whichcontractis
statedinthefollowingterms:"Mandatesofthefifthclassarethosewhereinamanorders
anothertodoortogivesomethinginfavoronlyofhimwhoreceivestheorderandofathird
person.Asforexample,whereoneordersanothertogivehismoneytoathirdpersonon
interest.Insuchacase, iftheonewhogavethemoneycannotrecoverthesamefromthe
one who received it, the former can recover the money afterwards from the one who
orderedhimtogivethemoney."
TheorderDeleusted(givehim)wasgivenbyMarcelinaLopeztoTanTiocofortheprofitof
theagentonly,whowastoreceivetheprofitonthepriceoftherice,andfortheprofitofa
thirdperson,RoqueLopez,whowishedtogetsomerice.Theobligationtopay,therefore,
rests principally, upon the third person, Roque Lopez, and subsidiarily, on default of
paymentonthepartofthelatter,upontheprincipal,MarcelinaLopez.
The meaning of the phrase que entregara en el balsas de madera, is explained by the
plaintiffhimselfinhisdeclarationinwhichhesaysthatRoqueLopezhadinformedhim,on
takingtherice,thatthey,RoqueLopez,andMarcianoJardenil,wouldbringsomelumber
rafts onthe returnofthe lorcha,and"thattheywouldpayhim,"andhesaidagainthat
"Roque Lopeztold him that, onthe return ofthe lorcha,when the raftswere sold,they
wouldpayhimwiththevalueofthelumber,"addingthattwoorthreedaysafterwards"he
spoketoMarcelinaandtoldherthat,shouldtheynotpayhimonthereturnofthelorcha,
hewould recover the amount fromher." It is, therefore, evident that, on accepting the
contract,theplaintiffdidnotconsiderRoqueLopezasamereagentofthedefendant,asif
thelatterweretheonlypartyobligedunderthetermsoftheletter,butthatheunderstoodfromthelanguageoftheletterthatRoqueLopezwasprimarilyresponsibleforthepayment
of the rice, and that Marcelina Lopez was responsible subsidiarily for Roque Lopez, on
account of her having so said and given the order expressing the quantityof rice tobe
delivered to him, all in conformity with the above-mentioned Law of Partidas, which
determinesverydistinctlytheeffectsofacontractexecutedinsuchaway.Shouldtheagent
be unable to recover from the one who received the thing, he can require payment
afterwards,"fromtheonewhoorderedhimtogiveit."
Theaction,therefore,hasnotbeenproperlybrought.
Byvirtuethereof,andonlyuponthegroundsexpressed,wereversethejudgmentappealed
from,withoutcosts.Soordered.
7/31/2019 obli con case A.1226-1233
23/23
LegardaHermanosvs.Saldana
Facts:
PetitionforreviewofadecisionoftheCourtofAppeals
TheactionoriginatedasacomplaintfordeliveryoftwoparcelsoflandinSampaloc,Manila
and for the execution of the corresponding deed of conveyance after payment of the
balancedueontheirpurchaseprice.
SaldanaenteredintoacontractwithLegardaHermanosassubdivisionowner,forthesaleof
two lots of 150 square meters each, amounting toPhP 1,500 per lot to bepaid in 120
monthlyinstallmentsofPhP19.83with10%interestperannum.Saldanadefaultedinhis
96th
installment,buthaspaidatotalofPhP1,682.28inprincipal,worthmorethanthevalue
ofonelot.
Saldanawrotethepetitionersregardinghisdesire tofullfilhisobligations, addingthathisdesire to build a house on the lot was prevented by Hermanos failure to introduce
improvementstothesubdivision.
Issue:WhetherHermanoshastherighttorescindthecontractduetoSaldanasdefaultof
payment
Held:JMTuasonRulingappliestothecaseinwhichSaldanamustbegrantedlesserbenefits,
since no rescission of contract is permitted. Saldanas substantial compliance of the
obligationentitleshimtothetransferofownershipofonelot.