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NACAR VS. GALLERY FRAMES AND BORDEY, JR. In Eastern Shipping Lines vs. CA:
Facts: Pet. Nacar filed a complaint for constructive 1. When the obligation is breached, and it consists in
dismissal before NLRC against Resp. Gallery. NLRC the payment of a sum of money, i.e., a loan or
rendered decision in favor of pet. and found that he forbearance of money, the interest due should be that
was dismissed from employment without a valid or just which may have been stipulated in writing.
cause. Thus, he was awarded backwages and Furthermore, the interest due shall itself earn legal
separation pay amounting to P 158,919.92. An Entry of interest from the time it is judicially demanded. In the
Judgment was later issued certifying that the absence of stipulation, the rate of interest shall be
resolution became final and executory on May 27, 12% per annum to be computed from default, i.e.,
2002. Petitioner filed a Manifestation and Motion from judicial or extrajudicial demand under and
praying for the re-computation of the monetary award
subject to the provisions of Article 1169 of the Civil interest that would govern the parties, the rate of legal
Code. interest for loans or forbearance of any money, goods
or credits and the rate allowed in judgments shall no
2. When an obligation, not constituting a loan or longer be twelve percent (12%) per annum - as
forbearance of money, is breached, an interest on the reflected in the case of Eastern Shipping Lines - but
amount of damages awarded may be imposed at the will now be six percent (6%) per annum effective July
discretion of the court at the rate of 6% per annum. No 1, 2013. It should be noted, nonetheless, that the new
interest, however, shall be adjudged on unliquidated rate could only be applied prospectively and not
claims or damages except when or until the demand retroactively. Consequently, the twelve percent (12%)
can be established with reasonable certainty. per annum legal interest shall apply only until June 30,
Accordingly, where the demand is established with 2013. Come July 1, 2013 the new rate of six percent
reasonable certainty, the interest shall begin to run (6%) per annum shall be the prevailing rate of interest
from the time the claim is made judicially or when applicable.
extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the Nonetheless, with regard to those judgments that have
time the demand is made, the interest shall begin to become final and executory prior to July 1, 2013, said
run only from the date the judgment of the court is judgments shall not be disturbed and shall continue to
made (at which time the quantification of damages be implemented applying the rate of interest fixed
may be deemed to have been reasonably ascertained). therein.
The actual base for the computation of legal interest
shall, in any case, be on the amount finally adjudged. Decision of SC as to legal interest awarded to
petitioner:
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal 3) interest of twelve percent (12%) per annum of the
interest, whether the case falls under paragraph 1 or total monetary awards, computed from May 27, 2002
paragraph 2, above, shall be 12% per annum from to June 30, 2013 and six percent (6%) per annum from
such finality until its satisfaction, this interim period July 1, 2013 until their full satisfaction.
being deemed to be by then an equivalent to a
forbearance of credit. The Labor Arbiter is hereby ORDERED to make another
re-computation of the total monetary benefits awarded
However, under BSP-MB Circular No. 799 which and due to petitioner in accordance with this Decision.
modified Eastern Shipping Lines vs CA ruling, in the
absence of an express stipulation as to the rate of
Abella v. Abella (GR 195166)
In their Answer, respondents alleged that the amount
In a loan or forbearance of money, according to the involved did not pertain to a loan they obtained from
Civil Code, the interest due should be that stipulated in petitioners but was part of the capital for a joint
writing, and in the absence thereof, the rate shall be venture involving the lending of money.
12% per annum.
Recently, however, the Bangko Sentral ng Pilipinas Specifically, respondents claimed that they were
amending Section 2 of Circular No. 905, Series of approached by petitioners, who proposed that if
1982: respondents were to "undertake the management of
Section 1. The rate of interest for the loan or whatever money [petitioners] would give them,
forbearance of any money, goods or credits and the [petitioners] would get 2.5% a month with a 2.5%
rate allowed in judgments, in the absence of an service fee to [respondents]." The 2.5% that each
express contract as to such rate of interest, shall be party would be receiving represented their sharing of
six percent (6%) per annum. the 5% interest that the joint venture was supposedly
This Circular shall take effect on 1 July 2013. going to charge against its debtors. Respondents
further alleged that the one year averred by
FACTS: Petitioners alleged that respondents obtained a petitioners was not a deadline for payment but the
loan from them in the amount of P500,000.00. The term within which they were to return the money
loan was evidenced by an acknowledgment receipt placed by petitioners should the joint venture prove to
dated March 22, 1999 and was payable within one (1) be not lucrative. Moreover, they claimed that the
year. Petitioners added that respondents were able to entire amount of P500,000.00 was disposed of in
pay a total of P200,000.00—P100,000.00 paid on two accordance with their agreed terms and conditions and
separate occasions—leaving an unpaid balance of that petitioners terminated the joint venture,
P300,000.00. prompting them to collect from the joint venture's
borrowers. They were, however, able to collect only to
On March 22, 1999, respondents executed an the extent of P200,000.00; hence, the P300,000.00
acknowledgment receipt to petitioners, which states: balance remained unpaid.
This is to acknowledge receipt of the Amount of Five Trial Court ruled in favor of petitioners. Ordering
Hundred Thousand (P500,000.00) Pesos from Mrs. respondents to pay the petitioner the sum of P300,000
Alma R. Abella, payable within one (1) year from date with interest of 30% per annum.
hereof with interest. The CA ruled that while respondents had indeed
Annie C. Abella (sgd.) Romeo M. Abella (sgd. entered into a simple loan with petitioners,
respondents were no longer liable to pay the and return it, in which case the contract is called a
outstanding amount of P300,000.00. CA noted that commodatum; or money or other consumable thing,
while the acknowledgement receipt showed that upon the condition that the same amount of the same
interest was to be charged, no particular interest rate kind and quality shall be paid, in which case the
was specified. Thus, at the time respondents were contract is simply called a loan or mutuum.
making interest payments of 2.5% per month, these
interest payments were invalid for not being properly Commodatum is essentially gratuitous.
stipulated by the parties. Since petitioners' charging of
interest was invalid, the Court of Appeals reasoned Simple loan may be gratuitous or with a stipulation to
that all payments respondents made by way of pay interest.
interest should be deemed payments for the principal
amount of P500,000.00.aThe Court of Appeals further In commodatum the bailor retains the ownership of the
noted that respondents made a total payment of thing loaned, while in simple loan, ownership passes to
P648,500.00, which, as against the principal amount of the borrower.
P500,000.00, entailed an overpayment of
P148,500.00. Applying the principle of solutio indebiti, Art. 1953. A person who receives a loan of money or
the Court of Appeals concluded that petitioners were any other fungible thing acquires the ownership
liable to reimburse respondents for the overpaid thereof, and is bound to pay to the creditor an equal
amount of P148,500. amount of the same kind and quality.
ISSUE 1. WON the party entered into a 2. 12% per annum. In a loan or forbearance of money,
simple loan or mutuum as agreement? according to the Civil Code, the interest due should be
2. Whether interest accrued on respondents' that stipulated in writing, and in the absence thereof,
loan from petitioners, If so, at what rate? the rate shall be 12% per annum.
FACTS: In 1983, Eusebio acquired 3 separate loans Sec. 1. The rate of interest, including commissions,
from Security Bank amounting to P265k. The agreed premiums, fees and other charges, on a loan or
interest rate was 23% per annum. The promissory note forbearance of any money, goods or credits,
regardless of maturity and whether secured or interest on the principal balance owing to petitioner by
unsecured, that may be charged or collected by any respondent in the presence of a valid stipulation. In a
person, whether natural or judicial, shall not be subject loan or forbearance of money, the interest due should
to any ceiling prescribed under or pursuant to the be that stipulated in writing, and in the absence
Usury Law, as amended. thereof, the rate shall be 12% per annum. Hence, only
in the absence of a stipulation can the court impose
Only in the absence of stipulations will the 12% rate be the 12% rate of interest.
applied or if the stipulated rate is grossly excessive.
APPLICABLE PROVISION OF LAW:
Further, Eusebio never questioned the rate. He merely Central Bank Circular No. 905 which took effect on
expressed to negotiate the terms and conditions. The December 22, 1982, particularly Sections 1 and 2
promissory notes were signed by both parties which state:
voluntarily. Therefore, stipulations therein are binding
between them. Sec. 1. The rate of interest, including commissions,
premiums, fees and other charges, on a loan or
2. Do the Courts have the discretion to arbitrarily forbearance of any money, goods or credits,
override stipulated interest rates of promissory notes regardless of maturity and whether secured or
and stipulated interest rates of promissory notes and unsecured, that may be charged or collected by any
thereby impose a 12% interest on the loans, in the person, whether natural or judicial, shall not be subject
absence of evidence justifying the imposition of a to any ceiling prescribed under or pursuant to the
higher rate? Usury Law, as amended.
NO. The rate of interest was agreed upon by the Sec. 2. The rate of interest for the loan or forbearance
parties freely. Significantly, respondent did not of any money, goods or credits and the rate allowed in
question that rate. It is not for respondent court a quo judgments, in the absence of express contract as to
to change the stipulations in the contract where it is such rate of interest, shall continue to be twelve per
not illegal. Furthermore, Article 1306 of the New Civil cent (12%) per annum.
Code provides that contracting parties may establish
such stipulations, clauses, terms and conditions as All the promissory notes were signed in 1983 and,
they may deem convenient, provided they are not therefore, were already covered by CB Circular No.
contrary to law, morals, good customs, public order, or 905. Contrary to the claim of respondent court, this
public policy. We find no valid reason for the circular did not repeal nor in anyway amend the Usury
respondent court a quo to impose a 12% rate of Law but simply suspended the latter's effectivity.
agreement; interest rate increased to a high of 68%
Almeda vs CA 256 SCRA 292 (1996) between March 1984 to Sept 1986 before the loan was
to mature in March 1988, the spouses filed a petition
FACTS: In 1981, Philippine National Bank granted to for declaratory relied with prayer for a writ of
petitioners, spouses Ponciano Almeda and Eufemia preliminary injunction and TRO—spouses sought
Almeda, several loan/credit accommodations totaling clarification as to WON the PNB could unilaterally raise
P18 Million payable in 6 years at an interest rate of interest rates on the loan, pursuant to the credit
21% per annum agreement’s escalation clause
To secure the loan, spouses executed a Real Estate The lower court issued TRO; by this time the spouses
Mortgage Contract covering a 3.5 K sq.m. parcel of were already in default of their loan obligations--->
land and the building erected thereon (the Marvin invoking the law on Mandatory Foreclosure (Act 3135
Plaza) located at Pasong Tamo, Makati and PD 385), PNB countered by ordering the
extrajudicial foreclosure of petitioners’ mortgaged
A credit agreement with the ff pertinent terms and properties----> lower court, however, issued a
conditions: interest of 21% per annum, payable semi- supplemental writ of preliminary injunction
annually in arrears, the first interest payment to
become due and payable 6 months from date of initial PNB posted a counterbond and the trial court dissolved
release of loan the supplemental writ; PNB once more set a new date
”the Bank reserves the right to increase the for the foreclosure of Marvin Plaza
interest rate within the limits allowed by law at any
time depending on whatever policy it may adopt in the Spouses tendered to PNB the amount of 40,142,518
future...the adjustment in the interest rate agreed pesos (interest calculated at 21%); PNB refused to
upon shall take effect on the effectivity date of the accept---> spouses formally consigned the amount
increase/decrease of the maximum interest rate.” with the RTC which granted the writ of preliminary
injunction enjoining the foreclosure of Marvin Plaza
Between 1981 and 1984 petitioners made several
partial payments on the loan totaling 7,735,004.66, a Judge Capulong refused to lift WPI. PNB filed petition
substantial portion of which was applied to accrued for Certiorari, Prohibition and Mandamus with CA. On
interest August 1993 CA rendered its decision setting aside the
assailed orders and upholding respondent’s right to
March 31, 1984 the bank, over petitioners’ protests, foreclose the mortgaged property pursuant to Act
raised the interest rate to 28% pursuant to their credit 3135 and PD 385
- PNB unilaterally altered the terms of its contract with
ISSUES petitioners by increasing the interest rates on the loan
without prior assent of the latter
1. WON PNB was authorized to raise its interest - the manner of agreement is itself explicitly stipulated
rates from 21% to as high as 68% under the by the Civil Code in
credit agreement Art.1956 “no interest shall be due unless it has been
expressly stipulated in writing”--- what has been
2. WON PNB is granted the authority to stipulated in writing is that petitioners were bound
foreclose the Marvin Plaza under the mandatory merely to pay 21% interest, subject to possible
foreclosure provisions of PD385 escalation or de-escalation when the circumstances
warrant it, it is within the limits allowed by law, and
HELD upon agreement
1. Any contract which appears to be heavily weighed - in PNB v. CA, PNB was unauthorized from unilaterally
in favor of one of the parties so as to lead to an raising the interest rate partly because the increase
unconscionable result is void. Any stipulation violated the principle of mutuality of contracts
regarding the validity or compliance of the contract expressed in Art.1308 of the CC “the contract must
which is left solely to the will of one of the parties, is bind both contracting parties; its validity or compliance
likewise, invalid. cannot be left to the will of one of them”
2. In facilitating collection of debts through the - increases were arbitrary
automatic foreclosure provisions of PD 385, the - escalation clauses in credit agreements are perfectly
government is, however, not exempted from observing valid and do not contravene public policy. However,
basic principles of law, and ordinary fairness and they are still subject to laws and provisions governing
decency under the due process clause of the agreements between parties, which agreements
Constitution. implicitly incorporate provisions of existing law
- the credit agreement requires that the increase be
RATIO within the limits allowed by law—refers to legislative
1. – the binding effect of any agreement between enactments not admin circulars (PNB relied on CB
parties to a contract is premised on two settled Circular No. 905) as shown in the credit agreement
principles: that any obligation arising from contract where there is a distinction made between “law or the
has the force of law between the parties; and that Monetary Board Circulars”
there must be mutuality between the parties based on -Banco Filipino Savings and Mortgage Bank v. Navarro:
their essential equality distinction between a law and an admin regulation is
recognized in the Monetary Board guidelines;
guidelines thus presuppose that a Central Bank counterclaim for P2,000.00 attorney’s fees was
regulation is not within the term ‘any law’ interposed.
- petitioners never agreed in writing to pay the
increased interest rates demanded by PNB. Great reliance is made by appellants on Art. 1411 of
the New Civil Code which states:
ANGEL JOSE WAREHOUSING CO., INC., plaintiff-
appellee,
vs.
CHELDA ENTERPRISES and DAVID SYJUECO, Art. 1411. When the nullity proceeds from the illegality
defendants-appellants. of the cause or object of the contract, and the act
constitutes criminal offense, both parties being in pari
FACTS: Plaintiff corporation filed suit in the Court of delicto, they shall have no action against each other,
First Instance of Manila on May 29, 1964 against the and both shall be prosecuted. Moreover, the provisions
partnership Chelda Enterprises and David Syjueco, its of the Penal Code relative to the disposal of effects or
capitalist partner, for recovery of alleged unpaid loans instruments of a crime shall be applicable to the things
in the total amount of P20,880.00, with legal interest or the price of the contract.
from the filing of the complaint, plus attorney’s fees of
P5,000.00. Alleging that post dated checks issued by This rule shall be applicable when only one of the
defendants to pay said account were dishonored, that parties is guilty; but the innocent one may claim what
defendants’ industrial partner, Chellaram I. Mohinani, he has given, and shall not be bound to comply with
had left the country, and that defendants have his promise.
removed or disposed of their property, or are about to
do so, with intent to defraud their creditors, Since, according to the appellants, a usurious loan is
preliminary attachment was also sought. void due to illegality of cause or object, the rule of pari
delicto expressed in Article 1411, supra, applies, so
Answering, defendants averred that they obtained four that neither party can bring action against each other.
loans from plaintiff in the total amount of P26,500.00, Said rule, however, appellants add, is modified as to
of which P5,620.00 had been paid, leaving a balance the borrower, by express provision of the law (Art.
of P20,880.00; that plaintiff charged and deducted 1413, New Civil Code), allowing the borrower to
from the loan usurious interests thereon, at rates of recover interest paid in excess of the interest allowed
2% and 2.5% per month, and, consequently, plaintiff by the Usury Law. As to the lender, no exception is
has no cause of action against defendants and should made to the rule; hence, he cannot recover on the
not be permitted to recover under the law. A contract. So — they continue — the New Civil Code
provisions must be upheld as against the Usury Law, Thousand Five Hundred Pesos (P7,385,500.00) to
under which a loan with usurious interest is not totally finance the construction and development of the Este
void, because of Article 1961 of the New Civil Code, del Sol Mountain Reserve, a sports/resort complex
that: “Usurious contracts shall be governed by the project located at Barrio Puray, Montalban, Rizal.
Usury Law and other special laws, so far as they are
not inconsistent with this Code.” (Emphasis ours.) Under the terms of the Loan Agreement, the proceeds
of the loan were to be released on staggered basis.
ISSUE: Whether or not the illegal terms as to Interest on the loan was pegged at sixteen (16%)
payment of interest likewise renders a nullity percent per annum based on the diminishing balance.
the legal terms as to payments of the principal The loan was payable in thirty-six (36) equal and
debt. consecutive monthly amortizations. In case of default,
an acceleration clause was, among others, provided
HELD and the amount due was made subject to a twenty
(20%) percent one-time penalty on the amount due
Article 1420 of the New Civil Code provides in this and such amount shall bear interest at the highest rate
regard: “In case of a divisible contract, if the illegal permitted by law from the date of default until full
terms can be separated from the legal ones, the latter payment thereof plus liquidated plus attorney’s fees
may be enforced.” equivalent to twenty-five (25%) percent of the sum
sought to be recovered.
In simple loan with stipulation of usurious interest, the
prestation of the debtor to pay the principal debt, Respondent Este del Sol also executed, as provided for
which is the cause of the contract (Article 1350, Civil by the Loan Agreement, an Underwriting Agreement
Code), is not illegal. The illegality lies only as to the with underwriting fee, annual supervision fee and
prestation to pay the stipulated interest; hence, being consultancy fee with Consultancy Agreement for four
separable, the latter only should be deemed void, (4) years, coinciding with the term of the loan The said
since it is the only one that is illegal. fees were deducted from the first release of
loan.Respondent Este del Sol failed to meet the
First Metro Investment vs. Este. Del Sol schedule of repayment in accordance with a revised
G.R. No. 141811, November 15, 2001, 369 SCRA Schedule of Amortization. Accordingly, petitioner FMIC
99 caused the extrajudicial foreclosure of the real estate
mortgage on June 23, 1980. At the public auction,
FACTS: Petitioner FMIC granted respondent Este del petitioner FMIC was the highest bidder of the
Sol a loan of Seven Million Three Hundred Eighty-Five mortgaged properties. Failing to secure from the
individual respondents the payment of the alleged In usurious loans, the entire obligation does not
deficiency balance, despite individual demands sent to become void because of an agreement for usurious
each of them, petitioner instituted the instant interest; the unpaid principal debt still stands and
collection suit against the respondents to collect the remains valid but the stipulation as to the usurious
alleged deficiency balance. interest is void, consequently, the debt is to be
considered without stipulation as to the interest.
ISSUE: Whether or not the fees provided for in
the Underwriting and Consultancy Agreements In simple loan with stipulation of usurious interest, the
were mere subterfuges to camouflage the prestation of the debtor to pay the principal debt,
excessively usurious interest charged. which is the cause of the contract (Article 1350, Civil
Code), is not illegal. The illegality lies only as to the
RULING: prestation to pay the stipulated interest; hence, being
separable, the latter only should be deemed void,
Yes. The Loan, Underwriting and Consultancy since it is the only one that is illegal. Thus, the nullity
Agreements are separate and independent of the stipulation on the usurious interest does not
transactions. The Underwriting and Consultancy affect the lender’s right to receive back the principal
Agreements which were executed and delivered amount of the loan. With respect to the debtor, the
contemporaneously with the Loan Agreement were amount paid as interest under a usurious agreement is
exacted by petitioner FMIC as essential conditions for recoverable by him, since the payment is deemed to
the grant of the loan. An apparently lawful loan is have been made under restraint, rather than
usurious when it is intended that additional voluntarily.
compensation for the loan be disguised by an
ostensibly unrelated contract providing for payment by
the borrower for the lender’s services which are of
little value or which are not in fact to be rendered,
such as in the instant case. In this connection, Article
1957 of the New Civil Code clearly provides that: