usury cases

7/27/2019 usury cases

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CASE FACTS ISSUE RULING

Jardenil vs. Salas This is an action for foreclosure of mortgage. Jardenil mortgage his

property to Salas.

Promissory Note of Jardenil:

debt :(P2,4000.0)

To be paid: (31) de marzo de mil novecientos treintaicuarto (1934), con

los intereses de dicha suma al tipo de doce por ciento (12%) anual a

partir desde fecha hasta el dia de su vencimiento o sea treintaiuno (31)

de marzo de mil novecientos treintaicuatro (1934), por la presente, el

Sr. Hepti Solas cede y traspasa, por via de primera hipoteca

WON defendant-appellee bound to

pay the stipulated interest only up to

the date of maturity as fixed in the

promissory note, or up to the date

payment is effected? This question is,

in our opinion controlled by the

express stipulation of the parties.

Defendant-appellee has, therefore, clearly agreed to pay interes

maturity, or until March 31, 1934. As the contract is silent as to

in the event of non-payment, the debtor would continue to pa

law, indulge in any presumption as to such interest; otherwise

upon the debtor an obligation that the parties have not chose

1755 of the Civil Code provides that "interest shall be d

been expressly stipulated."

There is nothing in the mortgage deed to show that the terms

thereto are at war with their evident intent. On the contrary thegranting to the mortgagor on the same date of execution of th

extension of one year from the date of maturity within which to

making any mention of any interest which the mortgagor

additional period (see Exhibit B attached to the complaint),

intention of the parties was that no interest should be paid du

What reason the parties may have therefore, we need not here s

aras, dissenting:

Under the facts stated in the decision of the majority, I com

interest at the rate of 12 per cent per annum should be paid up

of the whole indebtedness is made. Payment of such interes

True, it is stated in the mortgage contract that interest was to

1934, but this date was inserted merely because it was th

extension note is silent as regards interest, but its payment is

nature of the transaction which is only a renewal of the oblig

ruling of the majority is anomalous and at war with commo

business usage

Cu Unjieng vs.

Mabalacat Sugar Co. Case was Instituted in the Court of First Instance of Pampanga

by Cu Unjieng e Hijos, for the purpose of recovering from the

Mabalacat Sugar Company an indebtedness amounting to

more than P163.00, with interest, and to foreclose a

mortgage given by the debtor to secure the same, as well as

to recover stipulated attorney's fee and the sum of P1,206,

paid by the plaintiff for insurance upon the mortgaged

property, with incidental relief.

In the complaint Siuliong & Co., Inc., was joined as defendant,as a surety of the Mabalacat Sugar Company, and as having a

third mortgage on the mortgaged property. The PhilippineNational Bank was also joined by reason of its interest as

second mortgagee of the land covered by the mortgage to the

WON it is correct for interest charges

be made by the plaintiff by estimating

the amount of the indebtedness?

It is well settled that, under Article 1109 of the Civil Code, as w

the Usury Law (Act No. 2655), the parties may stipulate

compounded; AND rests for the computation of compound

made monthly, as well as quarterly, semi-annually, or annuall

express stipulation for the accumulation of compound inter

collected upon interest until the debt is judicially claimed , an

interest upon accrued interest must be computed is fixed AT 6 P

In the present case, however, the language which we h

NOT JUSTIFY THE CHARGING OF INTEREST UPON INTEREST,

capital is concerned. The provision quoted merely requires th

monthly at the end of each month, such interest to be compute

loan not yet paid. Clearly this provision does not justify the


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plaintiff.

Cu Unjieng e Hijos, agreed to extend the time for payment ofthe indebtedness until June 30, 1929, with certain interim

payments prior to the contemplated final liquidation of the

whole indebtedness. But the debtor party failed to make the

interim payments due and failed altogether to pay the balance

due, according to the terms of this extension, on June 30,

1929.

it is insisted for the appellant that this agreement for theextension of the time of payment had the effect of abrogating

the stipulation of the original contract with respect to the

acceleration of the maturity of the debt by non-compliancewith the terms of the mortgage

Under the second clause of the mortgage, interest should becalculated upon the indebtedness at the rate of 12 per cent

per annum. In the same clause, but in a separate paragraph,

there is another provision with respect to the payment of

interest expressed in Spanish. In English this provision reads

substantially as follows: "Interest, to be computed upon the

still unpaid capital of the loan, shall be paid monthly, at the

end of each month."

interest upon the interest accruing upon the capital mon

subsections (a), (b) and (c) of article IV of the mortgage, it is st

can be thus COMPUTED UPON SUMS which the creditor woul

maintain insurance upon the mortgaged property, (b) to pay the

property, and (c) upon disbursements that might be made by th

the property in good condition. BUT THE CHIEF THING IS THA

THUS ACCUMULATED ON UNPAID INTEREST ACCRUING UPO

DEBT.

The exhibit referred to is merely a receipt showing that the

March 19, 1928, paid by the debtor to the plaintiff as interest

interest is improperly charged, at an unlawful rate, the mere vothe creditor by the debtor is not binding. Such payment, in

usurious, being in excess of 12 per cent which is allowed to be

of the Usury Law, when a debt is secured by mortgage upon real

GSIS vs. Court of

Appeals

A surety agreement by which Domsat obtained a surety bond from

GSIS to secure the payment of the loan from the Banks.

Agreement: DOMSAT HOLDINGS, INC., represented by its President as

PRINCIPAL, and the GOVERNMENT SERVICE INSURANCE SYSTEM, asAdministrator of the GENERAL INSURANCE FUND, are held and firmly

bound unto the OBLIGEES for the payment of which sum, well and truly

to be made, we bind ourselves, our heirs, executors, administrators,

successors and assigns,jointly and severally, firmly by these presents.

Guarantee the repayment of the principal and interest on the loan

granted the PRINCIPAL to be used for the financing of the two (2) year

lease of a Russian Satellite from INTERSPUTNIK, in accordance with

the terms and conditions of the credit package entered into by the

parties.

This bond shall remain valid and effective until the loan including

interest has been fully paid and liquidated,

- - - - -

When Domsat failed to pay the loan, GSIS refused to comply with its

obligation reasoning that Domsat did not use the loan proceeds forthe payment of rental for the satellite. GSIS alleged that Domsat, with

Westmont Bank as the conduit, transferred the U.S. $11 Million loan


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proceeds from the Industrial Bank of Korea to Citibank New York

account of Westmont Bank and from there to the Binondo Branch of

Westmont Bank.[5]

The Banks filed a complaint before the RTC of

Makati against Domsat and GSIS.

RTC- the Court did not find merit in the motion.

CA- declared that Domsats deposit in Westmont Bank is covered by

Republic Act No. 6426 or the Bank Secrecy Law.

Ligutan vs. CAPetitioners

Tolomeo Ligutanand

Leonidas dela Llanaobtained

on 11 May 1981 a loan in th e amount of P120, 000.00 from

respondent Security Bank and Trust Company. Petitioners executed

apromissory note binding them, jointly and severally, to pay the sum

borrowed 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. In addition, petitioners agreed to pay 10%

of the total amount due by way of attorneys fees if the matter were

indorsed to a lawyer for collection or if a suit were instituted to

enforce payment. The obligation matured on 8 September 1981; the

bank, however, granted an extension but only up until 29 December

1981.

Despite several demands from the bank, petitioners failed to

settle the debt which, as of 20 May 1982, amounted to P114, 416.10.

RTC- rendered in favor of the plaintiff and against the

defendants, ordering the latter to pay, jointly and severally, to the

plaintiff

CA- appellate court affirmed the judgment of the trial court

except on the matter of the 2% service charge which was deleted

pursuant to Central Bank Circular No. 783. Not fully satisfied with the

decision of the appellate court, both parties filed their respective

motions for reconsideration.[4]

Petitioners prayed for the reduction of

the 5% stipulated penalty for being unconscionable.

WON the imposed interest to the

mortgage loan precludes the creditorfrom imposing a penalty stipulation?

The respondent Court of Appeals seriously erred in not ho

interest and the penalty of three (3%) percent per month or th

annum imposed by private respondent bank on petitioners

manifestly exorbitant, iniquitous and unconscionable.

Anent the stipulated interest of 15.189% per annum, petitio

question its reasonableness and prays that the Court reduce the

is a fresh issue that has not been raised and ventilated before

event, the interest stipulation, on its face, DOES NOT A

EXCESSIVE. The essence or rationale for the payment of intere

as cost of money, is not exactly the same as that of a surcharge

stipulation is not necessarily preclusive of interest, if there

effect, the two being distinct concepts which may separately be

justify a court in not allowing the creditor to impose full surcharg

an express stipulation therefor in a valid agreement, may not

payment or reduction of interest. Indeed, the interest presarrangements is a fundamental part of the banking business a

existence.

Tan vs. CA On May 14, 1978 and July 6, 1978, petitioner Antonio Tan

obtained two (2) loans each in the principal amount of TwoMillion Pesos (P2, 000,000.00), or in the total principal amount of

Four Million Pesos (P4, 000,000.00) from respondent Cultural

WON computation of the private

respondent whereby the interest,

surcharge and the principal were

added together and that on the total

We find no merit in the petitioners contention. Article 12

provides that:

In obligations with a penal clause, the penalty shall substitute the
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Center of the Philippines (CCP, for brevity) evidenced by two (2)

promissory notes with maturity dates on May 14, 1979 and July 6,

1979, respectively. Petitioner defaulted but after a few partial

payments he had the loans restructured by respondent CCP, and

petitioner accordingly executed a promissory note on August 31,

1979 in the amount of Three Million Four Hundred Eleven

Thousand Four Hundred Twenty-One Pesos and Thirty-Two

Centavos (P3,411,421.32) payable in five (5) instalments.

Petitioner Tan failed to pay any instalment on the saidrestructured loan.

Petitioner requested and proposed to respondent CCP a mode ofpaying the restructured loan, i.e., (a) twenty percent (20%) of the

principal amount of the loan upon the respondent giving its

conformity to his proposal; and (b) the balance on the principal

obligation payable in thirty-six (36) equal monthly instalments

until fully paid.

No favorable response was mad e to said letters. Instead,respondent CCP, through counsel, wrote a letter dated May 30,

1984 to the petitioner demanding full payment, within ten (10)

days from receipt of said letter.

RTC-rendered in favor of plaintiff and against defendant, orderingdefendant to pay plaintiff, the amount of P7,996,314.67,

representing defendants outstanding account as of August 28,

1986, with the corresponding stipulated interest and chargesthereof, until fully paid, plus attorneys fees in an amount

equivalent to 25% of said outstanding account, plus P50,000.00,

as exemplary damages, plus costs

CA- Given the circumstances of the case, plus the fact thatplaintiff was represented by a government lawyer, We believe

the award of 25% as attorneys fees and P500,000.00 as

exemplary damages is out of proportion to the actual damage

caused by the non-performance of the contract and is excessive,

unconscionable and iniquitous.

sum interest is VALID? and the payment of interests in case of non-compliance, if there

contrary. Nevertheless, damages shall be paid if the obligor refu

is guilty of fraud in the fulfilment of the obligation.

The penalty may be enforced only when it is demandable in acco

provisions of this Code.

In the case at bar, the promissory note (Exhibit A) ex

imposition of both interest and penalties in case of defau

petitioner in the payment of the subject restructured loan. T

the promissory note (Exhibit A) imposing interest and penaltie

For value received, I/We jointly and severally promise to pay to t

OF THE PHILIPPINES at its office in Manila, the su m of THREE MI

ELEVEN THOUSAND FOUR HUNDRED + PESOS (P3,411,421.32) Ph

xxx xxx

With interest at the rate of FOURTEEN per cent (14%) per annum

until paid. PLUS THREE PERCENT (3%) SERVICE CHARGE.

In case of non-payment of this note at maturity/on demand or u

of any portion of it when due, I/We jointly and severally agree to

charges at the rate of TWO per cent (2%) per month on the total

payable and computed monthly. Default of payment of this not

when due shall render all other installments and all existing prom

in favor of the CULTURAL CENTER OF THE PHILIPPINES immediat

demandable. (Underscoring supplied)

xxx xxx

The stipulated fourteen percent (14%) per annum interest

of the loan constitutes the monetary interest on the note and

1956 of the New Civil Code.[7]

On the other hand, the stipulat

month penalty is in the form of penalty charge which is separa

monetary interest on the principal of the loan.
http://sc.judiciary.gov.ph/jurisprudence/2001/oct2001/116285.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/2001/oct2001/116285.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/2001/oct2001/116285.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/2001/oct2001/116285.htm#_edn7


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RCBC vs. CA GOYU applied for credit facilities and accommodations with RCBC

at its Binondo Branch.

Credit facility in the amount of P30 million was initiallygranted. Upon GOYUs application and Uys and Laos

recommendation, RCBCs executive committee increased GOYUs

credit facility to P50 million, then to P90 million, and finally to

P117 million.

For its credit facilities with RCBC, GOYU executed two real estatemortgages and two chattel mortgages.

Each of these four mortgage contracts, GOYU committed itself toinsure the mortgaged property with an insurance company

approved by RCBC, and subsequently, to endorse and deliver the

insurance policies to RCBC.

On April 27, 1992, one of GOYUs factory buildings in Valenzuelawas gutted by fire. Consequently, GOYU submitted its claim for

indemnity on account of the loss insured against.

MICO denied the claim on the ground that the insurance policieswere either attached pursuant to writs of

attachments/garnishments issued by various courts or that the

insurance proceeds were also claimed by other creditors of GOYU

alleging better rights to the proceeds than the insured.

Manila RTC rendered judgment in favor of GOYU The Court of Appeals partly granted GOYUs appeal, but sustained

the findings of the trial court with respect to MICO and RCBCs

liabilities.

RCBC and MICO are now before us in G.R. No. 128833 and128866, respectively, seeking review and consequent reversal of

the above dispositions of the Court of Appeals.

Whether or not RCBC, as mortgagee,

has any right over the insurance

policies taken by GOYU, the

mortgagor, in case of the occurrence

of loss?

WON payment of interest should be

included in the insurance to be paid

by MICO?

It is to be noted that nine endorsement documents were

favor of RCBC. The Court is in a quandary how Alchester co

endorsing any specific insurance policy in favor of any particu

other than the insured had not such named payee or bene

disclosed by the insured itself. It is also significant that GOYU

took the insurance policies from MICO, a sister company of RCB

other insurance company.

The need for the payment of interest due upon the

obligation, which is the cost of money to RCBC, the primary end

for RCBCs existence and being, was duly recognized by the

favorably on RCBCs counterclaim, ordering GOYU to pay its lin the amount of P68,785,069.04, as of April 27,1992, with int

stipulated in the resp ective promissory notes (without surch

computation, pp. 14-A, 14-B, 14-C (Record, p. 479).

Regarding defendant RCBCs commitment not to charge additio

and surcharges, the same does not require that it be embodied

form of writing to be binding and enforceable. The principle is w

a verbal agreement or contract is no less binding and effective

the existence of such a verbal agreement has been amply estab

this case. In any event, regardless of the existence of such verb

still be unjust and inequitable for defendant RCBC to charge th

surcharges and penalties considering the latters pitiful situatio

The essence or rationale for the payment of interest or and distinct from that of surcharges and penalties. What m

allowing the creditor to charge surcharges and penalties de

therefor in a valid agreement, may not equally justify non-p

charging of interest for loans forms a very essential and fund

banking business, which may truly be considered to be at the

or being. It is inconceivable for a bank to grant loans for wh

interest at all. We fail to find justification for the Court of App

the payment of interest as agreed upon in the respective

constitutes gross error. There being written stipulations as to t

on each specific promissory note as summarized and tabulate

decision (pp.470 and 471, Record) such agreed interest rates

very clear from paragraph II, sub-paragraph 1 quoted above.

On the issue of payment of surcharges and penalties, we

pitiful situation must be taken into account. We do not agreeof any amount as surcharges and penalties should altog

assuming that RCBC, through its responsible officers, herein p


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Chun Bing, may have relayed its assurance for assistance to

the occurrence of the fire, we cannot accept the lower cour

thereby ipso facto effectively waived collection of any additio

and penalties from GOYU. Assurances of assistance are o

additional interests, surcharges, and penalties is another.

Surcharges and penalties agreed to be paid by the d

partake of the nature of liquidated damages, covered by Sectio

of the Civil Code. Article 2227 thereof provides:

ART. 2227. Liquidated damages, whether intended as a indemn

equitably reduced if they are iniquitous and unconscionable.

In exercising this vested power to determine w

unconscionable, the Court must consider the circumstances o

stressed that the Court will not make any sweeping ruling that

imposed by banks for non-payment of the loans extended

iniquitous and unconscionable. What may be iniquitous an

case, may be totally just and equitable in another. This provis

applied to the established facts of any given case. Given the cir

GOYU found itself after the occurrence of the fire, the Court r

ranging anywhere from 9% to 27%, plus the penalty charges

iniquitous and unconscionable. The Court tempers these

respectively. Furthermore, in the light of GOYUs offer

P116,301,992.60 to RCBC as March 1993 (See: Exhibit BB),

find it more in keeping with justice and equity for RCBC

interest, surcharges, and penalties from that time onward.

Given the factual milieu spread hereover, we rule that it

liable in damages for denying or withholding the proceeds o

GOYU.


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Eastern Shipping Lines

vs. CA

This is an action against defendants shipping company, arrastreoperator and broker-forwarder for damages sustained by a

shipment while in defendants' custody, filed by the insurer-

subrogee who paid the consignee the value of such

losses/damages.

On December 4, 1981, two fiber drums of riboflavin were shippedfrom Yokohama, Japan for delivery vessel "SS EASTERN COMET"

owned by defendant Eastern Shipping Lines under Bill of Lading

No. YMA-8 (Exh. B). The shipment was insured under plaintiff'sMarine Insurance Policy No. 81/01177 for P36,382,466.38.

Upon arrival of the shipment in Manila on December 12, 1981, itwas discharged unto the custody of defendant Metro PortService, Inc. The latter excepted to one drum, said to be in bad

order, which damage was unknown to plaintiff.

On January 7, 1982 defendant Allied Brokerage Corporationreceived the shipment from defendant Metro Port Service, Inc.,

one drum opened and without seal (per "Request for Bad Order

Survey." Exh. D).

On January 8 and 14, 1982, defendant Allied BrokerageCorporation made deliveries of the shipment to the consignee's

warehouse. The latter excepted to one drum which contained

spillages, while the rest of the contents was adulterated/fake.

Whether or not the payment oflegal interest on an award for loss

or damage is to be computed

from the time the complaint is

filed or from the date the decision

appealed from is rendered?

Whether or not the applicablerate of interest, referred to

above, is twelve percent (12%) orsix percent (6%)?

Interest upon an obligation which calls for the payme

stipulation, is the legal rate. Such interest normally is allowable f

judicial or extrajudicial. The trial court opted for judicial demand

But then upon the provisions of Article 2213 of the Civil C

recovered upon unliquidated claims or damages, except wh

established with reasonable certainty." And as was held by this

4 L-6998, February 29, 1956, if the suit were for damages, "unl

until definitely ascertained, assessed and determined by the

interest "should be from the date of the decision."

By virtue of the authority granted to it under Section 1 of Act 2Board in its Resolution No. 1622 dated July 29, 1974, has prescribed tha

loan, or forbearance of any money, goods, or credits and the rate a

absence of express contract as to such rate of interest, shall be twelve

This Circular shall take effect immediately.

The ostensible discord is not difficult to explain. The factua

called for different applications, guided by the rule that the

discretion, depending on the equities of each case, on

Nonetheless, it may not be unwise, by way of clarification and

the following rules of thumb for future guidance.

I. When an obligation, regardless of its source, i.e., law, c

delicts or quasi-delicts 18 is breached, the contravenor can be he

The provisions under Title XVIII on "Damages" of the Civil Code g

measure of recoverable damages. 20

II. With regard particularly to an award of interest in th

compensatory damages, the rate of interest, as well as the accru

follows:

1. When the obligation is breached, and it consists in th

money, i.e., a loan or forbearance of money, the interest due s

have been stipulated in writing. 21 Furthermore, the interest

interest from the time it is judicially demanded. 22 In the absen

of interest shall be 12% per annum to be computed from def

extrajudicial demand under and subject to the provisions of Ar

Code.

2. When an obligation, not constituting a loan or fo

breached, an interest on the amount of damages awarded


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discretion of the court 24 at the rate of 6% per annum. 25 No in

adjudged on unliquidated claims or damages except when or u

established with reasonable certainty. 26 Accordingly, where th

with reasonable certainty, the interest shall begin to run from th

judicially or extrajud icially (Art. 1169, Civil Code) but when suc

reasonably established at the time the demand is made, the in

only from the date the judgment of the court is made (at which

damages may be deemed to have been reasonably ascertained)

computation of legal interest shall, in any case, be on the amoun

3. When the judgment of the court awarding a sum of m

executory, the rate of legal interest, whether the case fallparagraph 2, above, shall be 12% per annum from such finality

interim period being deemed to be by then an equivalent to a for

WHEREFORE, the petition is partly GRANTED. The appeal

with the MODIFICATION that the legal interest to be paid is S

amount due computed from the decision, dated

03 February 1988, of the court a quo. A TWELVE PERCENT

SIX PERCENT (6%), shall be imposed on such amount upon fina

the payment thereof


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First Fil-Sin Lending

Corp. vs. PadilloOn July 22, 1997, respondent Gloria D. Padillo obtained a

P500,000.00 loan from petitioner First Fil-Sin Lending Corp. On

September 7, 1997, respondent obtained another P500,000.00 loan

from petitioner. In both instances, respondent executed a promissory

note and disclosure statement.[2]

For the first loan, respondent made 13 monthly interest

payments of P22,500.00 each before she settled the P500,000.00

outstanding principal obligation on February 2, 1999. As regards the

second loan, respondent made 11 monthly interest payments of

P25,000.00 each before paying the principal loan of P500,000.00 on

February 2, 1999.[3]

In sum, respondent paid a total of P792,500.00 forthe first loan and P775,000.00 for the second loan.

On January 27, 2000, respondent filed an action for sum of money

against herein petitioner before the Regional Trial Court of Manila.

Alleging that she only agreed to pay interest at the rates of 4.5% and

5% per annum, respectively, for the two loans, and not 4.5% and 5%

per month, respondent sought to recover the amounts she allegedly

paid in excess of her actual obligations.

trial court dismissed respondents complaint, and on the

counterclaim, ordered her to pay petitioner P311,125.00 with legal

interest from February 3, 1999 until fully paid plus 10% of the amount

due as attorneys fees and costs of the suit.[5]

The trial court ruled that

by issuing checks representing interest payments at 4.5% and 5%

monthly interest rates, respondent is now estopped from questioningthe provisions of the promissory notes.

On appeal, the Court of Appeals (CA) reversed and set aside the

decision of the court a quo (1) ordering First Fil-Sin Lending

Corporation to return the amount of P114,000.00 to Gloria D. Padillo,

and (2) deleting the award of attorneys fees in favor of appellee. Other

claims and counterclaims are dismissed for lack of sufficient causes.

No pronouncement as to cost.

WON THE APPLICABLE

INTEREST SHOULD BE THE

LEGAL INTEREST OF TWELVE

PER CENT (12%) PER ANNUM

DESPITE THE CLEAR

AGREEMENT OF THE PARTIES

ON ANOTHER APPLICABLE

RATE.

We agree with respondent.

Perusal of the promissory notes and the disclosure statem

22, 1997 and September 7, 1997 loan obligations of

unambiguously provide for interest rates of 4.5% per annu

respectively. Nowhere was it stated that the interest rates shal

basis.

Thus, when the terms of the agreement are clear and e

justify an at tempt to read into it any alleged intention of the pa

understood literally just as they appear on the face of the

instances when the language of a contract is ambiguous or obsc

apply certain established rules of construction in order to ascer

of the parties. However, these rules will not be used to mak

parties or to rewrite the old one , even if the contract is inequ

applied by the court merely to resolve doubts and ambiguities

the agreement.[9]

The lower court and the CA mistook the Loan Transac

Disclosure Statement. The former was prepared exclusively

summarizes the payments made by respondent and the incom

There was no mention of any interest rates and having been

petitioner, the same is self serving. On the contrary, the Dis

signed by both parties and categorically stated that interest ra

annually, not monthly.

As such, since the terms and conditions contained in th

disclosure statements are clear and unambiguous, the same meffect. The expressed intention of the parties as laid down

controls.

Also, reformation cannot be resorted to as the document

on the ground of mutual mistake. When a party sues on a

attempt is made to show any vice therein, he cannot be allow

than what its clear stipulations accord. His omission cannot be

courts by what their own notions of justice or equity may dictate

Notably, petitioner even admitted that it was sole

preparation of the loan documents, and that it failed to cor

p.a. to per month.[11]

Since the mistake is exclusively attr

same should be charged against it. This unilateral mistake

respondent who merely affixed her signature on the pro for

between two parties to a written agreement, the party who gaerror in the provisions of the same is estopped from asserting a

contained therein. The checks issued by respondent do not
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10/20

prove that the real intent of the parties is to apply the interest r

Absent any proof of vice of consent, the promissory notes an

remain the best evidence to ascertain the real intent of the partie

The same promissory note provides that x x x any and all r

the principal upon maturity hereof shall earn interest at the rat

maturity until fully paid. The CA thus properly imposed the

annum from the time the loans matured until the same has been

1999. As decreed in Eastern Shipping Lines, Inc. v. Court of Appe

stipulation, the rate of interest shall be 12% per annum to be co

interest rates on the July 22, 1997 and September 7,

respondent Gloria D. Padillo from petitioner First Fil-Sin Lendingand computed on a per annum basis, and upon their respectiv

rate of 12% per annum shall be imposed until full payment. In

the rate of 12% per annum shall be imposed on the outstanding

default until full payment


11/20

Integrated Realty

Corp. vs. PNB Raul L. Santos made a time deposit with Overseas Bank of the

Philippines in the amount of P500,000.00.Santos also made a

time deposit with OBM in the amount of P200,000.00. Integrated

Realty Corporation, thru itsPresident ---- Raul L. Santos, applied

for a loan and/or credit line in the amount of P700,000.00 with

PNB. To secure the said loan, Santos executed a Deed of

Assignment of the two time deposits in favor of plaintiff. OBM

gave its conformity to the assignment. However, OBM, after the

due dates of the time deposit certificates, did not pay PNB. PNB

demanded payment from IRC and Santos and OBM. IRC and

Santos replied that the obligation (loan) of defendant IRC was

deemed paid with the irrevocable assignment of the time deposit

certificates.- On April 6, 1969, PNB filed a complaint to collect

from IRC and Santos the loan of P700,000.00 with interest as well

as attorney's fees. In its answer to the complaint, OBM denied

knowledge of the time deposit certificates because the alleged

time deposit of Santos 'does not appear' in its books of account.

The trial court ordered IRC and Santos to pay the plaintiff jointly

and solidarily, the total amount of P700,000 plus interest. OBM

was also ordered to pay cross IRC and Santos whatever amount

the latter will pay to PNB. The CA affirmed but deleted the

portion of the judgment ordering OBM to pay IRC and Santos

whatever amounts they will pay to PNB with interest from the

date of payment.

WON the 1-1/2% interestimposed by PNB was illegal?

WON OBM should be heldliable for interests on the

time deposits of IRC and

Santos from the time it

ceased operations until it

resumed its business?

Held: No

Ratio: - We find nothing illegal in the interest of one and o

imposed by PNB pursuant to the resolution of its Board which

accordance with ordinary banking procedures. Not only did

overcome the presumption of regularity of business transactio

estopped from questioning the validity thereof for the first time

nothing in the records to show that they raised this issue durin

countervailing evidence. What was merely touched upon durin

court below was the alleged lack of notice to them of the boar

veracity or validity thereof.

Held: No

Ratio: - It is a matter of common knowledge, that wha

stipulated interest on money deposited with it is that thru

operation it is able to generate funds to cover the payment o

bank can lend money, engage in international transactions, acqu

properties or their proceeds and generally engage in othe

activities from which it can derive income, it is inconceivable

depository obligated to pay stipulated interest. Convention

inexorable fair and just conclusion. And it can be said that all wh

are aware of such a simple economic proposition. Consequen

read into every contract of deposit with a bank that the obligati

deposit ceases the moment the operation of the bank is comp

duly constituted authority, the Central Bank.


12/20

Bataan Seedling

Assoc. Vs. RepublicPetitioner entered into a contract with respondent, represented by

the DENR for the reforestation of a forest land within a period of 3

years. Petitioner undertook to report to DENR any event or condition

which delays or may delay the project. With the contract was the

release of mobilization fund but the fund was to be returned upon

completion or deducted from periodic release of mhoneys to

petitioner. Believing that petitioners failed to comply with their

obligations, respondent sent a notice of cancellation. Petitioners

failed to respond to the notice, thus, respondent filed a complaint for

damages against petitioners. The RTC held that respondent had

sufficient grounds to cancel the contract but saw no reason why the

mobilization fund and the cash advances should be refunded or thatpetitioners are liable for liquidated damages. Both parties appealed to

the CA, which affirmed the trial court and that the balnce of the fund

should be returned with 12% interest.

Whether the order to refund the

balance of the fund with 12% interest

pa is proper.

No. Interest at the rate of 12% per annum is impossible if

the contract. Herein subject contract does not contain any st

However, the amount due to respondent does not represent a

money. The word forbearance is defined, within, the con

contractual obligation of lender or creditor to refrain, during gi

requiring borrower or debtor to repay loan or debt then due an

of stipulation, the legal interest is 6% pa on the amount finally ad


13/20

Catungal vs. HaoOn December 28, 1972, the original owner, Aniana Galang, leased

a three-storey building situated at Quirino Avenue, Baclaran,

Paraaque, Metro Manila, to the Bank of the Philippine Islands (BPI) for

a period of about fifteen (15) years, to expire on June 20, 1986. Du ring

the existence of the lease, BPI subleased the ground floor of said

building to respondent Doris Hao.

On August 24, 1984, Galang and respondent executed a contract

of lease on the second and third floors of the building. The lease was

for a term of four (4) years commencing on August 15, 1984 and

ending on August 15, 1988. On August 15, 1986, petitioner spouses

Ernesto and Mina Catungal bought the property from Aniana Galang.

Invoking her right of first refusal purportedly based on the lease

contract between her and Aniana Galang, respondent filed a complaint

for Annulment of Sale with Damages docketed as Civil Case No. 88-491

of the Regional Trial Court (RTC) of Makati, Metro Manila.

Meanwhile, the lease agreement between BPI and Galang

expired.

Upon expiration of the lease agreements, petitioner spouses sent

demand letters to respondent for her to vacate the building. The

demand letters were unheeded by respondent causing petitioners to

file two complaints for ejectment, docketed as Civil Cases Nos. 7666

and 7667 of the Metropolitan Trial Court (MeTC) of Paraaque, Metro

Manila.

The institution of the ejectment cases prompted respondent to

file an action for injunction

RTC of Makati- granting the injunction and annulling the contract

of sale between Aniana Galang and petitioners.

Court of Appeals reversed and set aside the decision of the RTC

and the complaints in Civil Cases Nos. 88-491 and 90-758 were

accordingly dismissed.

The RTC rightly modified the rental award from P13

considering that it is settled jurisprudence that courts may ta

general increase in rentals of lease contract renewals mu

establishments. Thus, We held in Manila Bay Club Corporation v

It is worth stressing at this juncture that the trial court had the au

reasonable value for the continued use and occupancy of the lea

termination of the lease contract, and that it was not bound by t

the contract of lease since it is equally settled that upon terminat

contract of lease, the rental stipulated therein may no longer be

the use and occupation of the premises as a result or by reason o

values. Moreover, the trial court can take judicial notice of the

rentals of real estate especially of business establishments like th

by the private respondent.[19]

The increased award of rentals ruled by the RTC is

circumstances of the case at bench. We note that respon

petitioners the benefits, including possession, of their rightful ow

property for almost a decade.

The Court also awards interest in favor of petitioners. I n E

vs. Court of Appeals, we gave the following guidelines in the awa

xxx

II With regard particularly to an award of interest in the concep

compensatory damages, the rate of interest, as well as the accr

as follows:

1. When the obligation is breached, and it consists in the payme

i.e., a loan or forbearance of money, the interest due should be t

been stipulated in writing. Furthermore, the interest due shall it

from the time it is judicially demanded. In the absence of stipula

shall be 12% per annum to be computed from default, i.e., from

demand under and subject to the provisions of Article 1169 of th

The back rentals in this case being equivalent to a loan o

the interest due thereon in twelve percent (12%) per annum

judicial demand on September 27, 1988.
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14/20

Banco Filipino vs. CA Elsa Arcilla and her husband, Calvin Arcilla secured on three

occasions, loans from the Banco Filipino Savings and Mortgage

bank in the amount of Php.107,946.00 as evidenced by the

Promissory Note executed by the spouses in favor of the said

bank. To secure payment of said loans, the spouses executed

Real Estate Mortgages in favor of the appellants (Banco

Filipino) over their parcels of land. The appellee spouses failed to

pay their monthly amortization to appellant. On September 2,

1985 the appellees filed a complaint for Annulment of the Loan

Contracts, Foreclosure Sale with Prohibitory and Injunction

which was granted by the RTC. Petitioners appealed to the Court

of Appeals, but the CA affirmed the decision of the RTC.

Whether or not the CA erred when it

held that the cause of action of the

private respondents accrued on

October 30, 1978 and the filing of

their complaint for annulment of their

contracts in 1085 was not yet barred

by the prescription

The court held that the petition is unmeritorious. Petition

of the private respondents have prescribed is bereft of merit. U

Civil Code, the time for prescription of all kinds of action w

provision which ordains otherwise shall be counted from the d

Thus the period of prescription of any cause of action is reckon

the cause of action accrued. The period should not be made to re

execution of the contract, but from the date they received t

showing the increased rate of interest, for it was only from

discovered the petitioners unilateral increase thereof


15/20

Consolidated Bank vs.

CA


16/20

Mendoza vs. CAPetitioner was granted by respondent PNB a credit line for 500H and

1M for LoC/TR line. As security, the former mortgaged properties. The

REM provided for an escalation clause that rate of interest charged on

the obligation secured shall be subject to such increase, during the life

of the contract, within the rates allowed by law. Two PNs were

executed for the credit line and stipulated therein : with interest

thereon at the rate of 12% pa, until paid, with interest rate the Bank

may, at any tie, without notice, raise within the limits allowed by law

xxx. Thereafter, PNB advised Mendoza that the bank raised its

interest rates to 14% pa, in ine with CBMB Reso No 2126. Petitioner

failed to payand requested for restructuring of loans. Two promissory

notes were signed by Mendoza and his wife. Petitioner testified thatrespondent allegedly inserted in first promissory note No. 127/82 an

interest rate of 21% instead of 18% covering the principal amount,and

on the second promissory note 128/82 the interest of 18% instead of

12% representing accrued interest.

Whether or not the interests provided

by respondent is proper?No. it appears that respondent bank increased the i

promissory notes without prior consent of the petitioner. The p

the increase in the stipulated interest. As held in sever

determination and imposition of increased interest rates by res

of the principle of mutuality of contracts ordained in Art. 1308 of


17/20

First Metro

Investments Corp. vs.FMIC granted Este del Sol a loan to finance a sports/resort complex in

Montalban, Rizal. Under the agreement, the interest was 16% pa

based on the diminishing balance. In case of default, an acceleration

clause was provided and the amount due is subject to 20% one-time

penalty on the amount due and such amount shall bear interest at the

highest rate permitted by law. respondent executed a REM, individual

continuing suretyship and an underwriting agreement whereby FMIC

shall underwrite the public offering of one P120,000 common shares

of respondents capital stock for one-time underwriting fee of

P200,000. For failure to pay its obligation, FMIC caused the

foreclosure of the REM. At the public auction, FIC was the highest

bidder. Petitioner filed to collect for alleged deficiency balance againstrespondents since it failed to collect from the sureties, plus interest at

21% pa. the trial court ruled in favor of FMIC. Respondents appealed

before the CA which held that the fees provided for in the

Underwriting and Consultacy Agreements were mere subterfuges to

camouflage the excessively usurious interest charged. The CA ordered

FMIC to reimburse petitioner representing what is ue to petitioner

and what is due to respondent.

Whether or not the interests are

lawful?No. an apparently lawful loan is usurious when it is i

compensation for the loan be disguised by an ostensibly un

payment by the borrower for the lenders services which re o

not in fact to be rendered. Article 1957 clearly provides: contrac

any cloak or device whatever, intended to circumvent the law a

The borrower may recover in accordance with the laws on usury


18/20

Frias vs. San Diego-

SisonPetitioner is the owner of a house and lot located at No. 589 Batangas

East, Ayala Alabang, Muntinlupa, Metro Manila. Frias as First party

and Dra. San Diego-Sison as Second Party.

The parties agreed for and in consideration of the sum of THREE

MILLION PESOS (P3,000,000.00) That the SECOND PARTY has a period

of Six (6) months from the date of the execution of this contract

within which to notify the FIRST PARTY of her intention to purchase

the aforementioned parcel of land together within the improvements

thereon at the price of SIX MILLION FOUR HUNDRED THOUSAND PESOS

(P6,400,000.00). Upon notice to the FIRST PARTY of the intention to

purchase the same, the 2nd party has a period of another six monthswithin which to pay the remaining balance of P3.4 million.

That prior to the six months period given to the SECOND PARTY within

which to decide whether or not to purchase the above-mentioned

property, the FIRST PARTY may still offer the said property to other

persons who may be interested to buy the same provided that the

amount of P3,000,000.00 given to the FIRST PARTY BY THE SECOND

PARTY shall be paid to the latter including interest based on prevailing

compounded bank interest plus the amount of the sale in excess

of P7,000,000.00should the property be sold at a price more than P7

million.

IfFIRST PARTY has no other buyer within the first six months from the

execution, no interest shall be charged by the SECOND PARTY on theP3 million however, in the event that on the sixth month the SECOND

PARTY would decide not to purchase , the FIRST PARTY has a period of

another six months within which to pay the sum of P3 million pesos

provided that the said amount shall earn compounded bank interest

for the last six months only. Under this circumstance, the amount of P3

million given by the SECOND PARTY shall be treated as [a] loan and

the property shall be considered as the security for the mortgage.

Respondent decided not to purchase the property and notified

petitioner through a letter, reminding petitioner of their agreement

that the amount of two million pesos which petitioner received from

respondent should be considered as a loan payable within six months.

Petitioner subsequently failed to pay respondent the amount of two

million pesos.

While the CAs conclusion, that a loan always bears interest othe

flawed since a simple loan may be gratuitous or with a stipulation

find no error committed by the CA in awarding a 25% interest pe

million peso loan even beyond the second six months stipulated

is that if the terms of an agreement are clear and leave no doubt

the contracting parties, the literal meaning of its stipulations sha

required that the various stipulations of a contract shall be inter

attributing to the doubtful ones that sense which may result from

jointly. In this case, the p hrase "for the last six months only" sho

context of the entire agreement. We agree with and adopt the C

phrase in this wise:

Their agreement speaks of two (2) periods of six months each. Th

was given to plaintiff-appellee (respondent) to make up her mind

purchase defendant-appellants (petitioner's) property. The seco

given to defendant-appellant to pay the P2 million loan in the ev

appellee decided not to buy the subject property in which case i

"for the last six months only", referring to the second six-month

no interest will be charged for the first six-month period while ap

her mind whether to buy the property, but only for the second p

appellee had decided not to buy the property. This is the meanin

last six months only". Certainly, there is nothing in their agreeme

interest will be charged for six months only even if it takes defen

eternity to pay the loan.27

The agreement that the amount given shall bear compounded b

six months only, i.e., referring to the second six-month period, dointerest will no longer be charged after the second six-month per

stipulation was made on the logical and reasonable expectation

be paid within the date stipulated. Considering that petitioner fa

given which under the Memorandum of Agreement shall be con

monetary interest for the last six months continued to accrue un

loaned amount. It has been held that for a debtor to continue in

principal of the loan and to continue to use the same after matur

payment of the monetary interest, would constitute unjust enric

debtor at the expense of the creditor .29

Petitioner and responden

loaned amount shall earn compounded bank interests, and per t

Prudential Bank, the interest rate for loans in 1991 ranged from 2

The CA reduced the interest rate to 25% instead of the 32% awar

which petitioner no longer assailed.
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19/20

Siga-an vs. Villanueva On 31 August 1993, respondent issued a check worth P500,000.00 to

petitioner as partial payment of the loan. On 31 October 1993, she

issued another check in the amount of P200,000.00 to petitioner as

payment of the remaining balance of the loan. Petitioner told her that

since she paid a total amount of P700,000.00 for theP540,000.00 worth

of loan, the excess amount of P160,000.00 would be applied as interest

for the loan. Not satisfied with the amount applied as interest,

petitioner pestered her to pay additional interest. Petitioner

threatened to block or disapprove her transactions with the PNO if she

would not comply with his demand. As all her transactions with the

PNO were subject to the approval of petitioner as comptroller of the

PNO, and fearing that petitioner might block or unduly influence the

payment of her vouchers in the PNO, she conceded. Thus, she paid

additional amounts in cash and checks as interests for the loan. She

asked petitioner for receipt for the payments but petitioner told her

that it was not necessary as there was mutual trust and confidence

between them. According to her computation, the total amount she

paid to petitioner for the loan and interest accumulated

to P1,200,000.00.7

Thereafter, respondent consulted a lawyer regarding the propriety of

paying interest on the loan despite absence of agreement to that

effect. Her lawyer told her that petitioner could not validly collect

interest on the loan because there was no agreement between her

and petitioner regarding payment of interest. Since she paid

petitioner a total amount of P1,200,000.00 for the P540,000.00 worth

of loan, and upon being advised by her lawyer that she madeoverpayment to petitioner, she sent a demand letter to petitioner

asking for the return of the excess amount of P660,000.00. Petitioner,

despite receipt of the demand letter, ignored her claim for

reimbursement

RTC rendered a Decision on 26 January 2001 holding that respondent

made an overpayment of her loan obligation to petitioner and that

the latter should refund the excess amount to the former

Petitioner appealed to the Court of Appeals. On 16 December 2005,

the appellate court promulgated its Decision affirming in toto the RTC

Decision

Whether or not THE RTC AND THE

COURT OF APPEALS ERRED IN RULING

THAT NO INTEREST WAS DUE TO

PETITIONER?

Interest is a compensation fixed by the parties for the use o

This is referred to as monetary interest. Interest may also be imp

as penalty or indemnity for damages. This is called compensato

interest arises only by virtue of a contract or by virtue of damag

pay the principal loan on which interest is demanded.

It appears that petitioner and respondent did not agree on the

the loan. Neither was there convincing proof of written agree

regarding the payment of interest. Respondent testified that

petitioners offer of loan amounting to P540,000.00, there was,

written agreement for her to pay interest on the loan.

respondents alleged admission in the Batas Pambansa Blg. 22 con the payment of interest at the rate of 7% deserves scant c

case, respondent merely testified that after paying the total am

ordered her to pay interest.28

Respondent did not categorically

that she and respondent made an express stipulation in writin

interest at the rate of 7%. As earlier discussed, monetary intere

an express stipulation in writing for the payment of interest.

There are instances in which an interest may be imposed even

stipulation, verbal or written, regarding payment of interest.

Code states that if the obligation consists in the payment of a

debtor incurs delay, a legal interest of 12% per annum may be

damages if no stipulation on the payment of interest was agree

2212 of the Civil Code provides that interest due shall earn lega

is judicially demanded, although the obligation may be silent on

All the same, the interest under these two instances may be imp

damages for breach of contractual obligations. It cannot be ch

for the use or forbearance of money. In other words, the two

compensatory interest and not to monetary interest.29

Th

petitioners claim for monetary interest.

Further, said compensatory interest is not chargeable in the ins

not duly proven that respondent defaulted in paying the loan. A

interest was due on the loan because there was no writte

payment of interest.
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20/20

Carpo vs. Chua

Documents

usury cases