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Case Facts Issues Held Doctrine

Eastern Shipping Note: sa lower court, 3 defendant. Si eastern When should the reckoning The Court laid down the following rules in resolving the issue: When an obligation, not constituting
Lines Inc vs CA shipping (carrier), metro port service (arrastre period be for the computation a loan or forbearance of money, is
operator and si allied brokerage (broker). Si of the payment of legal I. When an obligation, regardless of its source, i.e., law, contracts, breached, an interest on the amount
Eastern lang umakyat sa SC. Yung iba dedma interest on an award for loss quasi-contracts, delicts or quasi-delicts is breached, the of damages awarded may be imposed
or damage? contravenor can be held liable for damages. The provisions under at the discretion of the court at the
Eastern Shipping was consigned to deliver a cargo Title XVIII on "Damages" of the Civil Code govern in determining rate of 6% per annum. No interest,
consisting of 2 fiber drums of riboflavin under a Bill What is the applicable rate of the measure of recoverable damages. however, shall be adjudged on
of Lading which were shipped from Yokohama, interest? unliquidated claims or damages
Japan. However, when Allied Brokage Corporation II. With regard particularly to an award of interest in the concept except when or until the demand can
received the shipment from Metro Port Service, one of actual and compensatory damages, the rate of interest, as well be established with reasonable
of the drum was opened and was not sealed. As a as the accrual thereof, is imposed, as follows: certainty. Accordingly, where the
result, the plaintiff in the lower court contests that demand is established with
he suffered losses amounting to P19.032.95 . The 1. When the obligation is breached, and it consists in the payment reasonable certainty, the interest shall
lower court and the CA ruled in favor of the plaintiff of a sum of money, i.e., a loan or forbearance of money, the begin to run from the time the claim
stressing that the amount paid by the insurance interest due should be that which may have been stipulated in is made judicially or extrajudicially
company to the consignee be paid and with the writing. Furthermore, the interest due shall itself earn legal (Art. 1169, Civil Code) but when such
present legal interest of 12% interest from the time it is judicially demanded. In the absence of certainty cannot be so reasonably
per annum commencing on the date of filing of the stipulation, the rate of interest shall be 12% per annum to be established at the time the demand is
complaint, until fully paid. Hence this petition. computed from default, i.e., from judicial or extrajudicial demand made, the interest shall begin to run
under and subject to the provisions of Article 1169 of the Civil only from the date the judgment of
Code. the court is made (at which time the
quantification of damages may be
2. When an obligation, not constituting a loan or forbearance of deemed to have been reasonably
money, is breached, an interest on the amount of damages ascertained). The actual base for the
awarded may be imposed at the discretion of the court at the rate computation of legal interest shall, in
of 6% per annum. No interest, however, shall be adjudged on any case, be on the amount finally
unliquidated claims or damages except when or until the demand adjudged.
can be established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the interest
shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.

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


becomes final and executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a
forbearance of credit.
WHEREFORE, the petition is partly GRANTED. The appealed
decision is AFFIRMED with the MODIFICATION that the legal
interest to be paid is SIX PERCENT (6%) on the amount due
computed from the decision, dated
03 February 1988, of the court a quo. A TWELVE PERCENT
(12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on
such amount upon finality of this decision until the payment
thereof

Gil Jardenil v Hefti This is an action for foreclosure of mortgage Is defendant-appellee bound There is nothing in the mortgage deed to show that the terms A writing must be interpreted
Solas entered inbto berween Gil Jardenil and Hefti Solas. to pay the stipulated interest employed by the parties thereto are at war with their evident according to the legal meaning of its
An agreement between the two parties revealed the only up to the date of intent. On the contrary the act of the mortgage of granting to the language (section 286, Act No. 190,
intention to pay interest only up to the date of maturity as fixed in the mortgagor on the same date of execution of the deed of mortgage, now section 58, Rule 123), and only
maturity, or until March 31, 1934, as can be seen in promissory note, or up to the an extension of one year from the date of maturity within which to when the wording of the written
Paragraph 4 of the mortgage deed. date payment is effected? make payment, without making any mention of any interest which instrument appears to be contrary to
the mortgagor should pay during the additional period (see the evident intention of the parties
Exhibit B attached to the complaint), indicates that the true that such intention must prevail.
intention of the parties was that no interest should be paid during (Article 1281, Civil Code.)
the period of grace. What reason the parties may have therefor, we
need not here seek to explore

Plaintiff is, therefore, entitled only to the stipulated interest of 12


per cent on the loan of P2, 400 from November 8, 1932 to March
31, 1934. And it being a fact that extra judicial demands have been
made which we may assume to have been so made on the
expiration of the year of grace, he shall be entitled to legal interest
upon the principal and the accrued interest from April 1, 1935,
until full payment.

Separate Opinions

PARAS, J., dissenting:


Under the facts stated in the decision of the majority, I come to the
conclusion that interest at the rate of 12 per cent per annum
should be paid up to the date of payment of the whole
indebtedness is made. Payment of such interest is expressly
stipulated. True, it is stated in the mortgage contract that interest
was to be paid up to March 31, 1934, but this date was inserted
merely because it was the date of maturity. The extension note is
silent as regards interest, but its payment is clearly implied from
the nature of the transaction which is only a renewal of the
obligation. In my opinion, the ruling of the majority is anomalous
and at war with common practice and everyday business usage.

Hermojina Estores Petitioner, Hermojina Estores and respondent-spouses The only issue posed before We sustain the ruling of both the RTC and the CA that it is proper Anent the interest rate, the general
v Spouses Arturo Arturo and Laura Supangan entered into a Conditional us is the propriety of the to impose interest notwithstanding the absence of stipulation in rule is that the applicable rate of
and Laura Deed of Sale over a parcel of land located at Naic, Cavite imposition of interest and the contract. The interest at the rate of 12% is applicable in the interest shall be computed in
Supangan for the sum of P4.7 million. attorneys fees. instant case. accordance with the stipulation of the
After almost seven years from the time of the execution of parties. Absent any stipulation, the
the contract and notwithstanding payment of P3.5 The contract involved in this case is admittedly not a loan but a applicable rate of interest shall be 12%
million on the part of respondent-spouses, petitioner still Conditional Deed of Sale. However, the contract provides that the per annum when the obligation arises
failed to comply with her obligation. Hence, respondent seller (petitioner) must return the payment made by the buyer out of a loan or a forbearance of
spouses wrote a letter and demanded the return of the (respondent-spouses) if the conditions are not fulfilled. There is money, goods or credits. In other
amount paid within 15 days. In her reply, petitioner no question that they have in fact, not been fulfilled as the seller cases, it shall be six percent (6%).
acknowledge the amount paid and promised to pay (petitioner) has admitted this. Notwithstanding demand by the
within 120 days, the spouses were amenable to the buyer
proposal upon the condition that an interest of 12% (respondentspouses), the seller (petitioner) has failed to return the
compounded annually shall be imposed over the 3.5M. money and should be considered in default from the time that
Since petitioner still failed to comply with her obligation, demand was made on September 27, 2000.
the spouses were constrained to seek relief to the courts
for collection of sum of money. Petitioner and his agent Even if the transaction involved a Conditional Deed of Sale, can
Arias averred that they are willing to return the principal the stipulation governing the return of the money be considered as
amount of P3.5 million but without any interest as the a forbearance of money which required payment of interest at the
same was not agreed upon. In their Pre-Trial Brief, they rate of 12%? We believe so.
reiterated that the only remaining issue between the
parties is the imposition of interest. They argued that Forbearance of money, goods or credits should therefore refer to
since the Conditional Deed of Sale provided only for the arrangements other than loan agreements, where a person
return of the downpayment in case of breach, they acquiesces to the temporary use of his money, goods or credits
cannot be held liable to pay legal interest as well. The pending happening of certain events or fulfillment of certain
RTC rendered ts judgment in favor of the Spouses but conditions. In this case, the respondent-spouses parted with their
only imposed an interest of 6% per annum. Petioner and money even before the conditions were fulfilled. They have
Arias appealed to the CA which affirmed the decision of therefore allowed or granted forbearance to the seller (petitioner)
the lower court. However, the same shall start to run to use their money pending fulfillment of the conditions. They
only when respondent-spouses formally demanded the were deprived of the use of their money for the period pending
return of their money. Anent the award of attorneys fees, fulfillment of the conditions and when those conditions were
the CA found the award by the trial court (P50,000.00 breached, they are entitled not only to the return of the principal
plus 20% of the recoverable amount) excessive and thus amount paid, but also to compensation for the use of their
reduced the same to P100,000.00. Hence this petition. money. And the compensation for the use of their money, absent
any stipulation, should be the same rate of legal interest applicable
to a loan since the use or deprivation of funds is similar to a loan.

Jesus David v CA The Regional Trial Court of Manila, Branch 27, with whether respondent appellate Article 2212 contemplates the presence of stipulated or The judgment which was sought to be
Judge Ricardo Diaz issued a writ of attachment court erred in affirming conventional interest which has accrued when demand was executed ordered the payment of
over real properties of private respondents. Judge respondent Judges order for judicially made. In cases where no interest had been stipulated by simple legal interest only. It said
Diaz ordered private respondent Afable to pay the payment of simple the parties, as in the case of Philippine American Accident nothing about the payment of
petitioner P66,500.00 plus interest from July 24, interest only rather than Insurance, no accrued conventional interest could further earn compound interest. Accordingly,
1974, until fully paid, plus P5,000.00 as attorneys compounded interest. interest upon judicial demand. when the respondent judge ordered
fees, and to pay the costs of suit. On June 20, 1980, the payment of compound interest he
however, Judge Diaz issued an Order amending In the said case, we further held that when the judgment sought to went beyond the confines of his own
said Decision, so that the legal rate of interest be executed ordered the payment of simple legal interest only and judgment which had been affirmed by
should be computed from January 4, 1966, instead said nothing about payment of compound interest, but the the Court of Appeals and which had
of from July 24, 1974. Respondent Afable appealed respondent judge orders payment of compound interest, then, he become final. Fundamental is the rule
to the Court of Appeals and then to the Supreme goes beyond the confines of a judgment which had become final that execution must conform to that
Court. In both instances, the decision of the lower ordained or decreed in the dispositive
court was affirmed. Upon petitioners motion, part of the decision. Likewise, a court
respondent Judge issued an Alias Writ of Execution cannot, except for clerical errors or
by virtue of which respondent Sheriff Melchor P. omissions amend a judgment that has
Pea conducted a public auction. The total amount become final
of the judgment is P270,940.52. The amount
included a computation of simple
interest. Petitioner, however, claimed that the
judgment award should be P3,027,238.50, because
the amount due ought to be based on compounded
interest. Although the auctioned properties were
sold to the petitioner, Sheriff Pea did not issue the
Certificate of Sale because there was an excess in
the bid price in the amount of P2,941,524.47, which
the petitioner failed to pay despite notice. This
excess was computed by the Sheriff on the basis of
petitioners bid price of P3,027,238.50 minus the
amount of P270,940.52 computed in the judgment
award. Petitioner filed a Motion praying that
judgment be in his favor, placing therein the
amount of the judgment as P3,027,238.50 insisting
on the compound interest as provided for in Article
2212 of the Civil Code. However, respondent judge
denied such petition. Petitioner appealed to the CA
but denied the same. Hence this petition.

Jose soncuya v By reason of the proceedings had in case No. 11489 I. Was the contract entered The first question offers no difficulty if account is taken of the what perhaps could have been
Juan azarraga of the Court of First Instance of Manila, entitled into by-the Azarraga established facts and the conduct of the interested parties after the considered as a antichresis or pacto
"Testate Estate of the Deceased Juan Azarraga y brothers, the defendants expiration of the term of five years fixed in Exhibit A. When the comisorio — not an assignment in
Galvez", the defendants surnamed Azarraga herein, with Attorney plaintiff extended the period to February 16, 1926 within which payment of a debt, or a sale
became indebted to Attorney Leodegario Azarraga, Leodegario Azarraga from the defendants Azarraga could pay him his credit, but imposed on with pacto de retro because there is
who represented them in said case, for attorney's whom the plaintiff derived them the condition that they pay him 12 per cent annual interest nothing in Exhibit A to indicate that
fees, which on October 21, 1919 the court, which his right, a sale with pacto de from August 30, 1924 on the principal of P3,000 (Exh. 5) and gave such was the intention of the
took cognizance of the case, fixed at P3,000 retro, or an assignment in them another extension up to April 26, 1926, under the same defendants Azarraga or, at least, that
payment of a debt, or was it conditions as regard interest (Exh. M), what perhaps could have they bound themselves to deliver the
The defendants Azarraga had previously agreed an antichresis partaking of been considered as a antichresis or pacto comisorio — not an land in question to the plaintiff and
among themselves to pay Attorney Leodegario the nature of what was assignment in payment of a debt, or a sale with pacto de that the latter should pay them the
Azarraga attorney's fees The parties also agree that anciently known as pacto retro because there is nothing in Exhibit A to indicate that such value thereof; and because there was
the parcels of land located in Bay-ang, New comisorio, or a mortgage, or was the intention of the defendants Azarraga or, at least, that they what may be considered the
Washington, Capiz, P. I are specially mortgaged was it merely a loan with real bound themselves to deliver the land in question to the plaintiff resolutory condition of five years —
and subject to the payment of the fees of said estate security? and that the latter should pay them the value thereof; and because was converted into a simple loan by
attorney of the testate estate, which fees shall be there was what may be considered the resolutory condition of five the decisive circumstance that
fixed by the court, and said attorney may hold said II. Was the contract executed years — was converted into a simple loan by the decisive plaintiff chose to collect thereafter,
lands under no obligation to pay any rent until his by the defendant Joaquin circumstance that plaintiff chose to collect thereafter, and the and the obligors agreed to pay him, 12
fees shall have been fully paid upon the condition Azarraga, on the one hand, obligors agreed to pay him, 12 per cent annual interest. It is only in per cent annual interest. It is only in
that if the parties failed to pay the attorneys fee at and the plaintiff, on the other, contracts of loan, with or without guaranty, that interest may be contracts of loan, with or without
the end of the period of five years from the date of embodied in Exhibit E, a sale demanded guaranty, that interest may be
the approval of this project of partition shall be with pacto de retro or simply demanded
definitely adjudicated to said attorney, Mr. a loan with real estate There is also no difficulty in disposing of the second question,
Leodegario Azarraga, as his property, in payment of security? considering the various novations which, as has been said, had
his fees, and all sums which he may have received taken place and had been extended not only to the Azarraga
from time to time from the interested parties in brothers with respect to their obligation of P3,000 or P2,700, but
these testate proceedings, within the said period, also to the defendant Joaquin Azarraga as regard his personal debt
shall be returned to said parties. About nine of P4,000. We must not lose sight of the fact that the plaintiff
months after the court approved Exhibit A, or to be never considered the contract entered into by him with Joaquin
exact, on June 9, 1920, which was long before the Azarraga as, strictly speaking, a sale with pacto de retro. And if he
expiration of the period of five years within which had ever considered it as such, it is, nevertheless, true that he
the defendants Azarraga were bound to pay novated it on February 16, 1926, considering it from the time on as
Attorney Leodegario Azarraga his fees, which had a simple loan, inasmuch as on that date he began to charge the
been fixed at P3,000, said attorney decided to sell said defendant 12 per cent annual interest with the latter's assent
and did sell to the plaintiff his credit against the and confirmity. This clearly appears in Exhibit M which must be
defendants for the sum of P2,500 with all the rights considered together with paragraphs 7 and 8 of Exhibit E, as the
inherent therein in accordance with the agreements plaintiff himself does in his brief (brief for the plaintiff as
and stipulations appearing in said document appellant, pages 4 and 5), because the term of five years to which
When the plaintiff became the creditor of the said Exhibit E refers and which should have expired on February
defendants Azarraga by virtue of the sale and 16, 1926 was extended by the said plaintiff, by Exhibit M, up to
cession which Attorney Azarraga had made in his April 26, 1926 under the aforementioned condition that he should
favor of the rights which said attorney had under be paid 12 per cent annual interest.
Exhibit A, he allowed the defendants an extension
of a few years over the five years with in which they In view of all the foregoing and in resume, we hold that the
would have to pay him his credit. The plaintiff plaintiff alone has the right (1) to recover from the defendants
granted another extension to expire on October 31, Azarraga, by virtue of the assignment and sale made to him by
1928, but subject to the condition that instead of Attorney Leodegario Azarraga of the latters' credit of P2,700
seven thousand and odd pesos, which undoubtedly against the said defendants, the aforesaid sum plus interest at the
referred to the interest of 12 per cent per annum rate of 12 per cent per annum from August 30, 1924; (2) to recover
charged the defendants, they should pay him from the defendant Joaquin Azarraga, in particular, the sum of
P12,000 . Aside from the above transactions P4,000 plus interest at the rate of 12 per cent per annum from
between the plaintiff and the defendants Azarraga, April 26, 1926. We also hold that the defendants are not entitled to
one of the latter, Joaquin Azarraga, executed in anything under their counterclaims.
favor of the former, the deed known as Exhibit E of
the record and dated October 14, 1922, by which he
sold to the plaintiff, for the sum of P4,000, his
portion of the inheritance in the testate estate of the
late Juan Azarraga y Galvez, consisting of an
undivided tract of land containing an estimated
area of 63 hectares and located in Bay-ang Chico,
New Washington, Capiz.
When the plaintiff took possession of part of the
land in question he found fruit-bearing and young
coconut trees, the latter being more numerous. In
1925, 1926 and 1927, Joaquin Azarraga, either by
himself or his laborers, planted therein hundreds of
coconut trees of which but a few hundreds, as we
the case with the old ones, remained on account of
the long droughts or other causes. Sometimes in
May, 1928, the plaintiff went to the house of the
defendants Joaquin Azarraga to collect not only his
credit against all the defendants Azarraga, but also
the special credit which, according to him, he had
against Joaquin Azarraga.
At the time of the filing of the original complaint,
plaintiff simultaneously asked for and obtained on
February 7, 1931, upon posting a bond in the
amount of P2,000, a writ of preliminary injunction
against the defendants. In connection with the
issuance of the writ of preliminary injunction, the
following facts must be mentioned: After the
plaintiff commenced the present case against the
defendants Azarraga on January 28, 1929 by means
of his original complaint, he instituted another
action against them, which was civil case No. 2643,
for the purpose of obtaining a writ of injunction to
prevent them from securing the aforementioned
loan of P25,000 from "Hijos de I. de la Rama".

It appears from the allegations of the complaint


thus amended that the plaintiff has four causes of
action.

1. Plaintiff-appellant seeks to recover from the


defendants the sum of P118,635.68 as damages,
which he alleges to have been caused by the
defendants in fraudulently depriving him of the
possession of four parcels of land with a total area
of 296 hectares, 58 ares and 92 centares, which
they, with knowledge that said real properties
belonged to him exclusively, registered in their
names in the registry of property and mortgaged in
favor of "Hijos de I. de la Rama" to pay a certain
obligation which they had contracted with the
Panay Municipal Cadastre.

2. Plaintiff-appellant seeks to recover P6,080 as the


supposed value of the heads of cattle belonging to
him, which the tenants of the defendants had
slaughtered

3. Plaintiff-appellant seeks payment of the sum of


P5,575 as the supposed value of 1,115 coconut trees
which he had planted on the four parcels of land in
question

4. Plaintiff-appellant prays that the defendants


surnamed Azarraga, with the exception of Joaquin
Azarraga, be ordered to make up to 123 hectares, 13
ares and 99 centares the land which the latter had
sold to him, because plaintiff did not take
possession of the land, except a portion thereof,
having an area of 72 hectares, 83 areas and 5
centares.

Medel vs Court of On November 7, 1985, Servando Franco and Leticia is the Usury Law still We agree with petitioners that the stipulated rate of interest at In Security Bank and Trust
Appeals Medel obtained a loan from Veronica R. Gonzales effective, or has it been 5.5% per month on the P500,000.00 loan is excessive, iniquitous, Company vs. Regional Trial Court of
who was engaged in the money lending business repealed by Central Bank unconscionable and exorbitant. However, we can not consider the Makati, Branch 61 the Court held that
under the name "Gonzales Credit Enterprises", in Circular No. 905, adopted on rate "usurious" because this Court has consistently held that CB Circular No. 905 "did not repeal
the amount of P50,000.00, payable in two December 22, 1982, pursuant Circulr No. 905 of the Central Bank, adopted on December 22, nor in anyway amend the Usury Law
months. However, Veronica only gave the amount to its powers under P.D. No. 1982, has expressly removed the interest ceilings prescribed by the but simply suspended the latter's
of P47,000.00, as the P3,000.00 served as advance 116, as amended by P.D. No. Usury Law and that the Usury Law is now "legally inexistent" effectivity." Indeed, we have held that
interest for one month at 6% per monh. Servado 1684? "a Central Bank Circular can not
and Leticia executed a promissory note Nevertheless, we find the interest at 5.5% per month, or 66% per repeal a law. Only a law can repeal
for P50,000.00, to evidence the loan, payable on annum, stipulated upon by the parties in the promissory note another law.
January 7, 1986. iniquitous or unconscionable, and, hence, contrary to morals
("contra bonos mores"), if not against the law. In the recent case of Florendo vs.
Another loan was executed by servando and leticia The stipulation is void. The courts shall reduce equitably Court of Appeals, the Court reiterated
in the amount of P90,000.00, payable in two liquidated damages, whether intended as an indemnity or a the ruling that "by virtue of CB
months, at 6% interest per month. To which they penalty if they are iniquitous or unconscionable. Circular 905, the Usury Law has been
again, executed a promissory note to evidence the rendered ineffective". "Usury has
loan. They received only P84,000.00, out of the Consequently, the Court of Appeals erred in upholding the been legally non-existent in our
proceeds of the loan. However, On maturity of the stipulation of the parties. Rather, we agree with the trial court jurisdiction. Interest can now be
two promissory notes, the borrowers failed to pay that, under the circumstances, interest at 12% per annum, and an charged as lender and borrower may
the indebtedness. Nevertheless, Servando and additional 1% a month penalty charge as liquidated damages may agree upon
Leticia secured from Veronica still another loan in be more reasonable.
the amount of P300,000.00, maturing in one
month, secured by a real estate mortgage over a WHEREFORE, the Court hereby REVERSES and SETS ASIDE
property belonging to Leticia Makalintal the decision of the Court of Appeals
Yaptinchay, who issued a special power of attorney
in favor of Leticia Medel, authorizing her to execute
the mortgage. Servando and Leticia executed a
promissory note in favor of Veronica to pay the sum
of P300,000.00, after a month, or on July 11,
1986. However, only the sum of P275,000.00, was
given to them out of the proceeds of the loan. On
July 23, 1986, Servando and Leticia with the latter's
husband, Dr. Rafael Medel, consolidated all their
previous unpaid loans totaling P440,000.00, and
sought from Veronica another loan in the amount
of P60,000.00, bringing their indebtedness to a
total of P500,000.00, payable on August 23, 1986.

Consequently, on the maturity of the loan, the


borrowers still failed to pay the indebtedness of
500,000 plus interest and penalties. This fact
prompted Veronica Gonzales and her husband
Danilo Gonzales to file a complaint against herein
defendants.

In his answer, Servando claims that he did not


obtain the loan and that it was defendants Leticia
and Rafael Medel who borrowed from the plaintiffs
and that he merely signed the promissory note as a
witness. On the other hand, Leticia and Rafael that
the loan was the transaction of Leticia Magpantay
and that the interest rate of 5.5% per month is
excessive. Judgment was rendered in favor of the
plaintiff the court fixing the interest rate at 12% per
annum. Both plaintiffs and defendants appealed to
the CA. plaintiffs-appellants argued that the
promissory note, which consolidated all the unpaid
loans of the defendants, is the law that governs the
parties. They further argued that Circular No. 416
of the Central Bank prescribing the rate of interest
for loans or forbearance of money, goods or credit
at 12% per annum, applies only in the absence of a
stipulation on interest rate, but not when the
parties agreed thereon.

The Court of Appeals sustained the plaintiffs-


appellants' contention. It ruled that "the Usury Law
having become 'legally inexistent' with the
promulgation by the Central Bank in 1982 of
Circular No. 905, the lender and borrower could
agree on any interest that may be charged on the
loan". Defendants-appellants filed for a motion for
reconsideration but was denied. Hence this
petition.

Lirag textile mills On September 4, 1961, the plaintiff and the Whether or not the Purchase We uphold the lower court's finding that the Purchase Agreement A stockholder sinks or swims with the
vs SSS defendants Lirag Textile Mills, Inc. and Basilio Agreement entered into by is, indeed, a debt instrument. Its terms and conditions corporation and there is no obligation
Lirag entered into a Purchase Agreement under petitioners and respondent unmistakably show that the parties intended the repurchase of the to return the value of his shares by
which the plaintiff agreed to purchase from the said SSS is a debt instrument. preferred shares on the respective scheduled dates to be an means of repurchase if the
defendant preferred shares of stock worth ONE absolute obligation which does not depend upon the financial corporation incurs losses and
MILLION PESOS subject to condition. Thereafter, ability of petitioner corporation. This absolute obligation on the financial reverses, much less
plaintiff, paid the defendant Lirag Textile Mills, Inc. part of petitioner corporation is made manifest by the fact that a guarantee such repurchase through a
the sum of FIVE HUNDRED THOUSAND PESOS surety was required to see to it that the obligation is fulfilled in the surety.
for which the latter issued to plaintiff 5,000 event of the principal debtor's inability to do so. The unconditional
preferred shares with a par value of one hundred undertaking of petitioner corporation to redeem the preferred
pesos per share as evidenced by stock Certificate shares at the specified dates constitutes a debt which is defined "as
and another in the sum of 500,000. An agreement an obligation to pay money at some fixed future time, or at a time
of repurchase by Lirag Textile Mills Inc was also which becomes definite and fixed by acts of either party and which
entered into. However, defendant corporation they expressly or impliedly, agree to perform in the contract.
failed to redeem the Stock Certificates as well as to
comply with its obligation to pay dividends.
Consequently, a demand letter was sent to the
corporation and to Basilio L. Lirag requiring him to
make good his obligation as surety. The Stock
Certificates issued to plaintiff are still unredeemed
and no dividends have been paid on said stock
certificates notwithstanding such letters of demand
to the defendant Basilio L. Lirag,For failure of Lirag
Textile Mills, Inc. and Basilio L. Lirag to comply
with the terms of the Purchase Agreement, the SSS
filed an action for specific performance. The lower
court, ruling that the purchase agreement was a
debt instrument, decided in favor of SSS Hence,
this petition.

Lucia Tan v Arador That the parcel of land described in the first cause WON the lower court erred in We affirm in part and modify in part. Under article 1875 of the Civil Code of
Valdehueza of action was the subject matter of the public failing to adjudge on the first 1889, registration was a necessary
auction sale held on May 6, 1955 at the Capitol cause of action that there The Valdehuezas submit that the dismissal of civil case 2002 requisite for the validity of a mortgage
Building in Oroquieta, Misamis Occidental, exists res judicata; and operated, upon the principle of res judicata, as a bar to the first even as between the parties, but
wherein the plaintiff was the highest bidder and as cause of action in civil case 2574. We rule that this contention is under article 2125 of the new Civil
such a Certificate of Sale was executed by MR. WON the lower court erred in untenable as the causes of action in the two cases are not Code (in effect since August 30,1950),
VICENTE D. ROA who was then the Ex-Officio making a finding on the identical. The judgment in the first case could not and did not this is no longer so.
Provincial Sheriff in favor of LUCIA TAN the herein second cause of action that encompass the judgment in the second, although the second
plaintiff. Due to the failure of defendant Arador the transactions between the judgment would encompass the first. If the instrument is not recorded, the
Valdehueza to redeem the said land within the parties were simple loan, mortgage is nonetheless binding
period of one year as being provided by law, MR. instead, it should be declared The trial court treated the registered deed of pacto de retro as an between the parties. (Article 2125,
VICENTE D. ROA who was then the Ex-Officio as equitable mortgage equitable mortgage but considered the unregistered deed of pacto 2nd sentence).
Provincial Sheriff executed an ABSOLUTE DEED de retro "as a mere case of simple loan, secured by the property
OF SALE in favor of the plaintiff. Defendants have thus sold under pacto de retro," on the ground that no suit lies to
executed two documents of DEED OF PACTO DE foreclose an unregistered mortgage. It would appear that the trial
RETRO SALE in favor of Lucia Tan of two portions judge had not updated himself on law and jurisprudence; he cited,
of a parcel of land which are marked as 'Annex D' in support of his ruling, article 1875 of the old Civil Code and
and Annex E'. That from the execution of the Deed decisions of this Court circa 1910 and 1912.
of Sale with right to repurchase mentioned,
defendants remained in the possession of the land; Under article 1875 of the Civil Code of 1889, registration was a
that land taxes to the said land were paid by the necessary requisite for the validity of a mortgage even as between
same said defendants. A complaint for injunction the parties, but under article 2125 of the new Civil Code (in effect
filed by against the Valdehuezas, to enjoin them since August 30,1950), this is no longer so.
"from entering the above-described parcel of land
and gathering the nuts therein. The Deed of Pacto If the instrument is not recorded, the mortgage is nonetheless
de Retro referred to as "Annex D" was not binding between the parties. (Article 2125, 2nd sentence).
registered in the Registry of Deeds, while the Deed
of Pacto de Retro referred to as "Annex E" was The Valdehuezas having remained in possession of the land and
registered. Trial ensued and judgment is rendered the realty taxes having been paid by them, the contracts which
in favor of the plaintiff. Hence, this petition purported to be pacto de retro transactions are presumed to be
equitable mortgages, whether registered or not, there being no
third parties involved.

ACCORDINGLY, the judgment a quo is hereby modified, as


follows: (a) the amounts of P1,200 and P300 mentioned in
Annexes E and D shall bear interest at six percent per annum from
the finality of this decision; and (b) the parcel of land covered by
Annex D shall be treated in the same manner as that covered by
Annex E, should the defendants fail to pay to the plaintiff the sum
of P300 within 90 days from the finality of this decision. In all
other respects the judgment is affirmed. No costs

On January 5, 1993, respondent Rebecca Salud, whether the 8% and 10% We find merit in the petition. Stipulations authorizing iniquitous or
joined by her husband Rolando Salud, instituted a monthly interest rates unconscionable interests are contrary
suit for foreclosure of real estate mortgage with imposed on the one-million- Citing Ruiz v. Court of Appeals, the Court declared that the Usury to morals (contra bonos mores), if not
damages against petitioner Mansueto Cuaton and peso loan obligation of Law was suspended by Central Bank Circular No. 905, s. 1982, against the law. Under Article 1409 of
his mother, Conchita Cuaton, with the Regional petitioner to respondent effective on January 1, 1983, and that parties to a loan agreement the Civil Code, these contracts are
Trial Court of General Santos City. The trial court Rebecca Salud are valid. have been given wide latitude to agree on any interest inexistent and void from the
rendered a decision declaring the mortgage rate. However, nothing in the said Circular grants lenders carte beginning. They cannot be ratified nor
constituted on October 31, 1991 as void, because it blanche authority to raise interest rates to levels which will either the right to set up their illegality as a
was executed by Mansueto Cuaton in favor of enslave their borrowers or lead to a hemorrhaging of their defense be waived.
Rebecca Salud without expressly stating that he was assets. The stipulated interest rates are illegal if they are
merely acting as a representative of Conchita unconscionable.
Cuaton, in whose name the mortgaged lot was
titled. The court ordered petitioner to pay Rebecca Stipulations authorizing iniquitous or unconscionable interests are
Salud, inter alia, the loan secured by the mortgage contrary to morals (contra bonos mores), if not against the
in the amount of One Million Pesos plus a total law. Under Article 1409 of the Civil Code, these contracts are
P610,000.00 representing interests of 10% and 8% inexistent and void from the beginning. They cannot be ratified
per month for the period February 1992 to August nor the right to set up their illegality as a defense be waived
1992. The lower court rendered judgment in favor
of the spouses Salud. Both parties appealed to the
CA which affirmed the decision of the lower court.

Overseas bank of Private respondent opened a 1-year time deposit Whether respondent is We consider it of trivial consequence that the stoppage of the The stubborn fact remained that the
manila v Vicente with petitioner bank amounting to P80,000, with entitled to interest and bank's operations by the Central Bank has been subsequently petitioner was totally crippled from
cordero interest of 6% per annum. Due to its distressed attorney’s fees declared illegal by the Supreme Court, for before the Court's order, then on from earning the income
financial condition, the bank was unable to pay. the bank had no alternative under the law than to obey the orders needed to meet its obligations to its
Cordero instituted an action before the CFI Manila. of the Central Bank. Whatever be the juridical significance of the depositors. If such a situation cannot,
subsequent action of the Supreme Court, the stubborn fact strictly speaking be legally
Petitioner raised the defenses of insolvency and remained that the petitioner was totally crippled from then on denominated as "force majeure" as
prejudice to other depositors. The lower court, and from earning the income needed to meet its obligations to its maintained by private respondent, We
the Court of Appeals, ruled in favor of Cordero. depositors. If such a situation cannot, strictly speaking be legally hold it is a matter of simple equity
Hence, the instant petition for review on certiorari. denominated as "force majeure" as maintained by private that it be treated as such.
respondent, We hold it is a matter of simple equity that it be
treated as such.
Certain supervening events rendered the issue
moot and academic. Respondent’s brother and Neither can respondent Cordero recover attorney's fees. The trial
attorney-in-fact sent a letter to the Commercial court found that herein petitioner's refusal to pay was not due to a
Bank of Manila (petitioner’s successor-in-interest), willful and dishonest refusal to comply with its obligation but to
acknowledging receipt of P10,000, and another restrictions imposed by the Central Bank. Since respondent did
manifestation for P73,840, with waiver of damages. not appeal from this decision, he is now barred from contesting
Upon further examination, it was found that the the same.
respondent’s brother has no SPA. Respondent’s
brother submitted the SPA, with explanatory
comment that the waiver applies only to third party
claims, suits and damages, not to interest and
attorney’s fees.