1. THE ROYAL SHIRT FACTORY vs Co Bon Tic, G.R. No.

L-6313 May 14, 1954

Facts:

The principal issues in the Municipal Court was the nature of the sale of the 350 pairs of shoes by plaintiff to defendant
— whether it was an outright sale as contended by the plaintiff, or a sale merely on consignment as claimed by the
defendant who wanted to return the shoes not yet sold by him. There was also involved the question of the amount
already paid by the defendant to the plaintiff. The Municipal Court held that the contract was of sale on consignment;
that of the 350 pairs of shoes consigned, 207 pairs were sold at the rate of P8 a pair, amounting to a total of P1,656; and
that defendant had paid the sum of P1,028 to plaintiff on account of the purchase price of the shoes sold, excluding the
amount of P420, value of Check No. 790264 issued by defendant as payment but returned to him by the plaintiff and not
replaced with cash. Judgment was rendered sentencing the defendant to pay plaintiff the sum of P628 with interest
thereon at the legal rate from the date of the filing of the complaint, and to return to plaintiff the 143 pairs of shoes still
unsold, unless he preferred to retain and pay for them at the rate of P8 a pair within a period of fifteen days from
receipt of a copy of the decision.

The defendant appealed from the judgment to the Court of First Instance of Manila, and after trial, the appellate court
held that the transaction involved was one of outright sale at P7 per pair of shoes, sales tax included, the court accepting
the version given by the plaintiff to the effect that on the basis of the order slip (Exhibit A), the defendant had 9 days
from delivery of the shoes to make his choice of the two alternatives, that is to consider the sale of the 350 pairs of
shoes closed at the flat rate of P7 per pair, sales tax included, or, at the expiration of 9 days to pay for the shoes sold at
P8 per pair, and to return the remaining unsold ones to plaintiff; and that, inasmuch as defendant, at the expiration of
the 9 days stipulated, failed to return the shoes, and actually began making partial payments on account of the purchase
price agreed upon, the transaction in the nature of a straight sale, was considered closed. The court also found as did
the Municipal Court that the amount of P420 represented by Check No. 790624 was never replaced or exchanged for
cash by the defendant upon its return to him, and consequently, it may not be considered as part payment.

Judgment was rendered in favor of the plaintiff and against the defendant and the latter was ordered to pay to the
former the sum of P1,422, the unpaid balance of the sales price of 350 pairs of shoes in question, with interest on the
amount due at the rate of 12 per cent per annum from August 27, 1948 until final payment plus the amount of 25 per
cent of the same sum for attorney's fees as stipulated, and costs. After failing to get a reconsideration of the judgment,
the defendant appealed the case to the Court of Appeals which Tribunal after the submission of the briefs for both
parties, and acting upon a motion filed by counsel for the appellant that the case be certified to the Supreme Court for
the reason that the question raised in his first and second assignment of errors involved the jurisdiction of the trial
court, granted the same and certified the appeal to us for final determination pursuant to Section 17, par. 2 (3) of
Republic Act. 296.

ISSUE:

Whether the Interest is valid

HELD:
The decision appealed from the sentences the defendant to pay to the plaintiff P1,422 with interest at 12 percent per
annum from August 27, 1948, plus 25 per cent of the same sum for attorney's fees, besides costs. This rate of interest
and the 25 per cent for attorney's fees appears in Exhibit "B" in printed form as terms or conditions. In Exhibit "A", the
order slip, the conditions of sale also printed provide for 20 per cent only as attorney's fees and no rate of interest in
case of litigation. Had the defendant signed Exhibit "A", which he did not, he would have been bound by it and would be
liable to 20 per cent of any amount due from him, but because of the absence of stipulation as to the rate of interest he
would be paying only the legal rate of 6 per cent per annum. There is no explanation of this difference in conditions of
sale about rate of interest and attorney's fees found in the order slip (Exhibit "A") and the invoice (Exhibit "B") both of
the plaintiff. Anyway, neither did the defendant sign Exhibit "B". If we hold defendant bound by Exhibit "B" at all, it is
because of his tacit acceptance of the total value of 350 pairs of shoes and by his notation against it of his partial
payments. We do not think it fair for him to be bound also by the printed terms of the conditions of sale. Moreover, we
find under said printed form the clause in pencil: "as agreed with Mr. Chebat." We may even say that said clause in
handwriting may be considered as having overruled what was printed as to the rate of interest and the attorney's fees.
We therefore hold that the defendant should only pay 6 per cent interest on the amount due him from the date of the
filing of the complaint, with costs, and nothing for attorney's fees. It is also interesting to note that this was the same
ruling of the Municipal Court on this point.
2. Tan v Valdehueza (Credit Transactions)

FACTS:

A parcel of land was the subject matter of the public auction sale held on May 6, 1955 at the Capitol Building in
Oroquieta, Misamis Occidental, wherein the plaintiff was the highest bidder and as such a Certificate of Sale was
executed by MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff in favor of LUCIA TAN the herein
plaintiff. Due to the failure of defendant Arador Valdehueza to redeem the said land within the period of one year as
being provided by law, MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff executed an ABSOLUTE DEED
OF SALE in favor of the plaintiff LUCIA TAN.

DECISION OF LOWER COURTS:

* Trial court: declared tan as the absolute owner. appeal was certified to SC by the Court of Appeals as involving
questions purely of law.

ISSUES & RULING:

1. WON the subject land subject of pacto de retro is actually an equitable mortgage

Yes, it is an equitable mortgage.

The Valdehuezas having remained in possession of the land and the realty taxes having been paid by them, the contracts
which purported to be pacto de retro transactions are presumed to be equitable mortgages, whether registered or not,
there being no third parties involved.

Under article 1875 of the Civil Code of 1889, registration was a necessary requisite for the validity of a mortgage even as
between the parties, but under article 2125 of the new Civil Code (in effect since August 30,1950), this is no longer so.

If the instrument is not recorded, the mortgage is nonetheless binding between the parties. (Article 2125, 2nd
sentence).

2. WON the imposition of legal interest on the amounts subject of the equitable mortgages, P1,200 and P300,
respectively

It is without legal basis, for, "No interest shall be due unless it has been expressly stipulated in writing." (Article 1956,
new Civil Code) Furthermore, the plaintiff did not pray for such interest; her thesis was a consolidation of ownership,
which was properly rejected, the contracts being equitable mortgages.
3. Ching vs Nicdao, G.R. No. 141181, April 27, 2007

FACTS:

On October 21, 1997, petitioner Ching, a Chinese national, instituted criminal complaints for eleven (11) counts of
violation of BP 22 against respondent Nicdao. Consequently, eleven (11) informations were filed with the First Municipal
Circuit Trial Court (MCTC) of Dinalupihan-Hermosa

Respondent Nicdao entered the plea of "not guilty" to all the charges. Claiming that the checks were stolen from them
and Ching deposited it without her knowledge.

The MCTC rendered judgment convicting respondent Nicdao of eleven (11) counts of violation of BP 22.

The RTC affirmed the decision of the MCTC.

CA reversed the decision and acquitted Nicdao.

The CA made the finding that respondent Nicdao borrowed money from Nuguid in the total amount of P2,100,000.00
secured by twenty-four (24) checks drawn against respondent Nicdao's account with HSLB. Upon Nuguid's instruction,
the checks given by respondent Nicdao as security for the loans were left blank as to the payee and the date. The loans
consisted of (a) P950,000.00 covered by ten (10) checks subject of the criminal complaints filed by petitioner Ching (CA-
G.R. CR No. 23055); and (b) P1,150,000.00 covered by fourteen (14) checks subject of the criminal complaints filed by
Nuguid (CA-G.R. CR No. 23054). The loans totaled P2,100,000.00 and they were transacted between respondent Nicdao
and Nuguid only. Respondent Nicdao never dealt with petitioner Ching.

Apart from the demand draft, the CA also stated that respondent Nicdao made interest payments on a daily basis to
Nuguid as evidenced by the computations written at the back of the cigarette wrappers. Based on these computations,
as of July 21, 1997, respondent Nicdao had made a total of P5,780,000.00 payments to Nuguid for the interests alone.
Adding up this amount and that of the Planters Bank demand draft, the CA placed the payments made by respondent
Nicdao to Nuguid as already amounting to P6,980,000.00 for the principal loan amount of only P2,100,000.00.

The CA negated petitioner Ching's contention that the payments as reflected at the back of the cigarette wrappers could
be applied only to the interests due. were Since the transactions not evidenced by any document or writing, the CA
ratiocinated that no interests could be collected because, under Article 1956 of the Civil Code, "no interest shall be due
unless it has been expressly stipulated in writing."

The CA gave credence to the testimony of respondent Nicdao that when she had fully paid her loans to Nuguid, she tried
to retrieve her checks. Nuguid, however, refused to return the checks to respondent Nicdao. Instead, Nuguid and
petitioner Ching filled up the said checks to make it appear that: (a) petitioner Ching was the payee in five checks; (b) the
six checks were payable to cash; (c) Nuguid was the payee in fourteen (14) checks. Petitioner Ching and Nuguid then put
the date October 6, 1997 on all these checks and deposited them the following day. On October 8, 1997, through a joint
demand letter, they informed respondent Nicdao that her checks were dishonored by HSLB and gave her three days to
settle her indebtedness or else face prosecution for violation of BP 22.

With the finding that respondent Nicdao had fully paid her loan obligations to Nuguid, the CA declared that she could no
longer be held liable for violation of BP 22. It was explained that to be held liable under BP 22, it must be established,
inter alia, that the check was made or drawn and issued to apply on account or for value. According to the CA, the word
"account" refers to a pre-existing obligation, while "for value" means an obligation incurred simultaneously with the
issuance of the check. In the case of respondent Nicdao's checks, the pre-existing obligations secured by them were
already extinguished after full payment had been made by respondent Nicdao to Nuguid. Obligations are extinguished
by, among others, payment. The CA believed that when petitioner Ching and Nuguid refused to return respondent
Nicdao's checks despite her total payment of P6,980,000.00 for the loans secured by the checks, petitioner Ching and
Nuguid were using BP 22 to coerce respondent Nicdao to pay a debt which she no longer owed them.

With respect to the P20,000,000.00 check, the CA was not convinced by petitioner Ching's claim that he delivered
P1,000,000.00 every month to respondent Nicdao until the amount reached P20,000,000.00 and, when she refused to
pay the same, he filled up the check, which she earlier delivered to him as security for the loans, by writing thereon the
said amount. In disbelieving petitioner Ching, the CA pointed out that, contrary to his assertion, he was never employed
by the La Suerte Cigar and Cigarette Manufacturing per the letter of Susan Resurreccion, Vice-President and Legal
Counsel of the said company. Moreover, as admitted by petitioner Ching, he did not own the house where he and
Nuguid lived.

Moreover, the CA characterized as incredible and contrary to human experience that petitioner Ching would, as he
claimed, deliver a total sum of P20,000,000.00 to respondent Nicdao without any documentary proof thereof, e.g.,
written acknowledgment that she received the same. On the other hand, it found plausible respondent Nicdao's version
of the story that the P20,000,000.00 check was the same one that was missing way back in 1995. The CA opined that this
missing check surfaced in the hands of petitioner Ching who, in cahoots with Nuguid, wrote the amount P20,000,000.00
thereon and deposited it in his account. To the mind of the CA, the inference that the check was stolen was anchored on
competent circumstantial evidence. Specifically, Nuguid, as previous manager/owner of the grocery store, had access
thereto. Likewise applicable, according to the CA, was the presumption that the person in possession of the stolen
article was presumed to be guilty of taking the stolen article.

The CA emphasized that the P20,000,000.00 check was never delivered by respondent Nicdao to petitioner Ching. As
such, the said check without the details as to the date, amount and payee, was an incomplete and undelivered
instrument when it was stolen and ended up in petitioner Ching's hands. On this point, the CA applied Sections 15 and
16 of the Negotiable Instruments Law:

SEC. 15. Incomplete instrument not delivered. - Where an incomplete instrument has not been delivered, it will not, if
completed and negotiated without authority, be a valid contract in the hands of any holder, as against any person whose
signature was placed thereon before delivery.

SEC. 16. Delivery; when effectual; when presumed. - Every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties and as
regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by
or under the authority of the party making, drawing, accepting or indorsing, as the case may be; and, in such case, the
delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring
the property. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties
prior to him so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the
possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the
contrary is proved.

The CA held that the P20,000,000.00 check was filled up by petitioner Ching without respondent Nicdao's authority.
Further, it was incomplete and undelivered. Hence, petitioner Ching did not acquire any right or interest therein and
could not assert any cause of action founded on the stolen checks. Under these circumstances, the CA concluded that
respondent could not be held liable for violation of BP 22.
ISSUE:

1. WON Nicdao civilly liable?

2. WON Nicdao had already fully paid her obligation?YES

RULING:

1. No.

A painstaking review of the case leads to the conclusion that respondent Nicdao’s acquittal likewise carried with it the
extinction of the action to enforce her civil liability. There is simply no basis to hold respondent Nicdao civilly liable to
petitioner Ching. CA’s acquittal of respondent Nicdao is not merely based on reasonable doubt. Rather, it is based on the
finding that she did not commit the act penalized under BP 22. In particular, the CA found that the P20,000,000.00 check
was a stolen check which was never issued nor delivered by respondent Nicdao to petitioner Ching. CA did not adjudge
her to be civilly liable to petitioner Ching. In fact, the CA explicitly stated that she had already fully paid her obligations.
The finding relative to the P20,000,000.00 check that it was a stolen check necessarily absolved respondent Nicdao of
any civil liability thereon as well. Under the circumstances which have just been discussed lengthily, such acquittal
carried with it the extinction of her civil liability as well.of B.P. Blg. 22.

2. Yes.

According to Article 1956 of the Civil Code, “"no interest shall be due unless it has been expressly stipulated in writing."
CA explicitly stated that respondent Nicdao had already fully paid her obligations. The CA computed the payments made
by respondent Nicdao vis-à-vis her loan obligations in this manner: Clearly, adding the payments recorded at the back of
the cigarette cartons by Emma Nuguid(Wife of Ching) in her own handwriting totaling ₱5,780,000.00 and the
₱1,200,000.00 demand draft received by Emma Nuguid, it would appear that petitioner [respondent herein] had already
made payments in the total amount of ₱6,980,000.00 for her loan obligation of only ₱2,100,000.00 (₱950,000.00 in the
case at bar and ₱1,150,000.00 in CA-G.R. CR No. 23054). The Court agrees with the CA that the daily payments made by
respondent Nicdao amounting to ₱5,780,000.00 cannot be considered as interest payments only. Even respondent
Nicdao testified that the daily payments that she made to Nuguid were for the interests due. However, as correctly ruled
by the CA, no interests could be properly collected in the loan transactions between petitioner Ching and respondent
Nicdao because there was no stipulation therefor in writing. Clearly, the collection of interests without any stipulation
therefor in writing is prohibited by law. Consequently, the daily payments made by respondent Nicdao amounting to
₱5,780,000.00 were properly considered by the CA as applying to the principal amount of her loan obligations.
4. Prisma Construction & Development Corporation vs Menchavez

FACTS

On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA, obtained a ₱1,000,000.00 loan
from the respondent, with a monthly interest of ₱40,000.00 payable for six months, or a total obligation of
₱1,240,000.00 to be paid within six (6) months, under the following schedule of payments:

To secure the payment of the loan, Pantaleon issued a promissory note that states:

I, Rogelio S. Pantaleon, hereby acknowledge the receipt of ONE MILLION TWO HUNDRED FORTY THOUSAND PESOS
(P1,240,000), Philippine Currency, from Mr. Arthur F. Menchavez, representing a six-month loan payable according to
the following schedule:

January 8, 1994 …………………. ₱40,000.00

February 8, 1994 ………………... ₱40,000.00

March 8, 1994 …………………... ₱40,000.00

April 8, 1994 ……………………. ₱40,000.00

May 8, 1994 …………………….. ₱40,000.00

June 8, 1994 ………………… ₱1,040,000.00

The checks corresponding to the above amounts are hereby acknowledged and six (6) postdated checks corresponding
to the schedule of payments. Pantaleon signed the promissory note in his personal capacity, and as duly authorized by
the Board of Directors of PRISMA. The petitioners failed to completely pay the loan within the stipulated six (6)-month
period.

From September 8, 1994 to January 4, 1997, the petitioners paid the following amounts to the respondent:

September 8, 1994 ……………… ₱320,000.00

October 8, 1995…………………. ₱600,000.00

November 8, 1995……………. ₱158,772.00

January 4, 1997 …………………. ₱30,000.0011

As of January 4, 1997, the petitioners had already paid a total of ₱1,108,772.00. However, the respondent found that
the petitioners still had an outstanding balance of ₱1,364,151.00 as of January 4, 1997, to which it applied a 4% monthly
interest.12 Thus, on August 28, 1997, the respondent filed a complaint for sum of money with the RTC to enforce the
unpaid balance, plus 4% monthly interest, ₱30,000.00 in attorney’s fees, ₱1,000.00 per court appearance and costs of
suit.13

In their Answer dated October 6, 1998, the petitioners admitted the loan of ₱1,240,000.00, but denied the stipulation
on the 4% monthly interest, arguing that the interest was not provided in the promissory note. Pantaleon also denied
that he made himself personally liable and that he made representations that the loan would be repaid within six (6)
months.
ISSUE:

Whether or not the parties agreed to the 4% monthly interest on the loan? If so, does the rate of interest apply to the 6-
month payment period only or until full payment of the loan?

HELD:

No.

Interest due should be stipulated in writing; otherwise, 12% per annum

Obligations arising from contracts have the force of law between the contracting parties and should be complied with in
good faith. When the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the
literal meaning of its stipulations governs. In such cases, courts have no authority to alter the contract by construction or
to make a new contract for the parties; a court's duty is confined to the interpretation of the contract the parties made
for themselves without regard to its wisdom or folly, as the court cannot supply material stipulations or read into the
contract words the contract does not contain. It is only when the contract is vague and ambiguous that courts are
permitted to resort to the interpretation of its terms to determine the parties’ intent.

In the present case, the respondent issued a check for ₱1,000,000.00. In turn, Pantaleon, in his personal capacity and as
authorized by the Board, executed the promissory note quoted above. Thus, the ₱1,000,000.00 loan shall be payable
within six (6) months, or from January 8, 1994 up to June 8, 1994. During this period, the loan shall earn an interest of
₱40,000.00 per month, for a total obligation of ₱1,240,000.00 for the six-month period. We note that this agreed sum
can be computed at 4% interest per month, but no such rate of interest was stipulated in the promissory note; rather
a fixed sum equivalent to this rate was agreed upon.

Article 1956 of the Civil Code specifically mandates that "no interest shall be due unless it has been expressly stipulated
in writing." Under this provision, the payment of interest in loans or forbearance of money is allowed only if: (1) there
was an express stipulation for the payment of interest; and (2) the agreement for the payment of interest was reduced
in writing. The concurrence of the two conditions is required for the payment of interest at a stipulated rate. Thus, we
held in Tan v. Valdehueza24 and Ching v. Nicdao that collection of interest without any stipulation in writing is
prohibited by law.

Applying this provision, we find that the interest of ₱40,000.00 per month corresponds only to the six (6)-month period
of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon by the parties in the promissory note. Thereafter,
the interest on the loan should be at the legal interest rate of 12% per annum, consistent with our ruling in Eastern
Shipping Lines, Inc. v. Court of Appeals:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money,
the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In of stipulation the absence, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.

Thus, the RTC and the CA misappreciated the facts of the case; they erred in finding that the parties agreed to a 4%
interest, compounded by the application of this interest beyond the promissory note’s six (6)-month period. The facts
show that the parties agreed to the payment of a specific sum of money of ₱40,000.00 per month for six months, not to
a 4% rate of interest payable within a six (6)-month period.
Kamalig v. Philpos

Facts:

Kamalig purchased fertilizer products from Philphos for eventual sale to its customers. The agreement governing the
business transaction consisted of advance payment to Philphos for Kamalig’s purchases of fertilizer products, followed
by Philphos’s issuance of a Sales Official Receipt and an Authority to Withdraw, indicating the kind of fertilizer product
purchased and the location of the warehouse where the merchandise would be picked up. Kamalig would subsequently
resell the fertilizer products and issue to its customers the corresponding Delivery Orders signed only by its authorized
officers. The customers would then present the Delivery Orders to the proper Philphos warehouse for the release of the
fertilizer products.

On 30 September 1985, Kamalig purchased from and made advance payments for fertilizer products of various grades to
Philphos in the total sum of ₱4,548,152.53, embodied in Sales Official Receipt No. 03539,3 covering the following
commercial invoices: (a) Commercial Invoice (CI) No. 04891 for fertilizer products to be withdrawn from the warehouse
in Poro Point; (b) CI No. 04892 for fertilizer products to be withdrawn from the Manila supply point; (c) CI No. 04893 for
such products to be withdrawn from the Iloilo warehouse; and (d) CI No. 04894 for the products to be withdrawn from
the Davao supply point.4

Prior to the release of fertilizer products at the said supply points, however, Kamalig requested for a readjustment of the
various fertilizer grades and a modification of the locations from which the fertilizer stocks would be picked up. The
request was contained in a letter dated 11 October 1985.5

In a subsequent letter dated 14 October 1985,6 Kamalig requested another adjustment, this time a conversion of its
stocks in Davao to be delivered and picked up in Manila.

All these requests were approved by Philphos.

In the letter dated 21 July 1986,7 Philphos informed Kamalig of its overwithdrawal of various fertilizer stocks in the
supply depots in Manila and Iloilo. This consisted of 291.45 metric tons (MT) of fertilizer grade 21-0-0 from the Manila
supply point and 50 MT each of fertilizer grades 14-14-14, 16-20-0, and 21-0-0 from the Iloilo supply station. According
to Philphos, the cost of these overwithdrawals by Kamalig amounted to ₱1,016,994.21. But since Philphos also had an
obligation to Kamalig in the amount of ₱470,348.91 representing the Capital Recovery Component, partial
compensation took place by operation of law thereby reducing Kamalig’s obligation to ₱546,645.30. Thus, Philphos
demanded that this sum be settled on or before 31 July 1986, otherwise Kamalig would be charged 34% interest per
annum. Kamalig, however, denied that it had exceeded its withdrawals of fertilizer and thus contended that it should
not be made liable for any amount.

Issue:

Whether or not Philphos is entitled to the 34% interest rate?

Held:

With respect to the 34% per annum interest claimed by Philphos, we agree with the Court of Appeals that no evidence
was presented that would show that the parties stipulated on the payment of interest. Under Article 1956 of the Civil
Code, no interest shall be due unless it has been expressly stipulated in writing. Philphos presented only its demand
letters38 insisting on payment of the value of the overwithdrawals and imposition of 34% interest per annum if payment
is not made in due time. Said unilateral impositions of interest do not suffice as proof of agreement on the alleged 34%
per annum interest.
7. ROLANDO C. DE LA PAZ v. L & J DEVELOPMENT COMPANY

FACTS:

On December 27, 2000, DELA PAZ lent P350,000.00 without any security to LJDC. The loan had no specified maturity
date and carried a 6% monthly interest, i.e., P21,000.00. From December 2000 to August 2003, LJDC paid DELA PAZ a
total of P576,000.00 representing interest charges.

DELA PAZ filed a COMPLAINT FOR COLLECTION OF SUM OF MONEY WITH DAMAGES against LJDC, alleging: that the
debt as of January 2005, inclusive of the monthly interest, stood at P772,000.00; that the interest rate was suggested by
LJDC; and, that LJDC tricked him into the loan transaction without it being reduced into writing.

LJDC argued: that their failure to pay the debt was due to a fortuitous event, financial difficulties brought about by the
economic crisis; that DELA PAZ cannot enforce the 6% monthly interest for being unconscionable and shocking to the
morals; and, that the payments already made should be applied to the P350,000.00 principal loan.

ISSUE/S:

Whether DELA PAZ has a valid claim over the interest.

RULING:

Under Article 1956 of the Civil Code, no interest shall be due unless it has been expressly stipulated in writing.

Interest to be due and payable when there is: (a) an express stipulation for the payment of interest, and (b) an
agreement to pay interest is reduced in writing.
REPUBLIC v. UNIMEX

FACTS:

Respondent shipped a 40-foot container and 171 cartons of Atari game computers, and other computer-related
equipment to Handyware Phils., Inc.

When the shipment arrived in Manila, the Bureau of Customs discovered that it did not tally with the description
appearing on the cargo manifest. The BOC instituted seizure proceedings and later issued a warrant of seizure and
detention against the shipment.

After having declared Handyware Phils., Inc. in default, the Collector of Customs forfeited the goods in favor of the
government.

Respondent filed a motion to intervene which was granted. Later, however, the Collector of Customs declared that the
default order against Handyware was final and executory.

Respondent filed a petition for review with the CTA. And in a Decision dated June 15, 1992, the CTA reversed the default
order. There was failure on the part of Respondent to secure a writ of execution to enforce the decision.

On September 5, 2001, Respondent filed in the CTA a petition for revival of its June 15, 1992 decision. It prayed for the
immediate release by the BOC of its shipment, or, in the alternative, payment of the shipment’s value plus damages.

It was later found out that the shipment could no longer be found in the warehouse. The CTA then

rendered a Decision— Directing the BOC to pay P8,675,200.22 representing the commercial value of the shipment at the
time of importation, subject to the payment of proper taxes, duties, fees, and other charges thereon.

Respondent further appealed arguing that the CTA erred in not imposing legal interest on the BOC’s obligation. The CTA
held that BOC was grossly negligent and imposed legal interest on the actual damages awarded to Respondent at 6% per
annum (from the date of the CTA Decision on 19 September 2002).

ISSUE:

Whether or not the BOC is obligated to pay interest?

RULING:

No.

Interest may be paid only either as compensation for the use of money (monetary interest) or as damages

(compensatory interest). As clearly provided under Article 2209, interest is demandable if: a) there is monetary
obligation and b) debtor incurs delay.
In a comprehensive sense, the term “debt” embraces not merely money due by contract, but whatever one is bound to
render to another, either for contract or the requirement of the law, such as taxes. In this case, the Petitioner was never
under monetary obligation to Respondent, no demand can be made either judicially or extrajudicially. Therefore, there
could be no default.

Interest is not chargeable against Petitioner [the Government] except---

1. when it has expressly stipulated to pay it; or

2. when interest is allowed by the legislature; or

3. in eminent domain cases where damages sustained by the owner take the form of interest at the legal rate.
SIGA-AN VS VILLANUEVA

Facts:

Respondent Villanueva claimed that petitioner Siga-an approached her inside the Philippine Navy Office

(PNO) and offered to loan her the amount of P540,000.00 of which the loan agreement was not reduced

in writing and there was no stipulation as to the payment of interest for the loan. Respondent issued a

check worth P500,000.00 to petitioner as partial payment of the loan. She then issued another check in

the amount of P200,000.00 to petitioner as payment of the remaining balance of the loan of which the

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

Respondent paid additional amounts in cash and checks as interests for the loan after she was pestered

by the petitioner to pay additional interest. She then asked petitioner for receipt for the payments but

was told that it was not necessary as there was mutual trust and confidence between them.

Respondent filed a complaint for sum of money against petitioner. The RTC ruled that respondent’s

obligation was only to pay the loaned amount of P540,000.00, and that the alleged interests due should

not be included in the computation of respondent’s total monetary debt because there was no agreement

between them regarding payment of interest.

Issue:

Whether or not interest was due to petitioner.

Ruling:

No. Compensatory interest is not chargeable in the instant case because it was not duly proven that respondent
defaulted in paying the loan and no interest was due on the loan because there was no written agreement as regards
payment of interest.

Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates that no interest shall be due
unless it has been expressly stipulated in writing. As can be gleaned from the foregoing provision, payment of monetary
interest is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for the
payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of
monetary interest. Thus, we have held that collection of interest without any stipulation therefor in writing is prohibited
by law.
CASA FILIPINA DEVELOPMENT CORPORATION, Petitioner, v. THE DEPUTY EXECUTIVE SECRETARY, OFFICE OF THE
PRESIDENT, MALACAÑANG, MANILA, AND JOSE VALENZUELA, JR., Respondents.

Facts:

Jose Valenzuela entered into a contract to sell with Casa Filipina for the purchase of a 120 sq. meter lot in Paranaque,
Metro Manila. Subject lot has a total purchase price of P68,400 with P16,414 as down payment and the balance of P51,
984 to be paid in 12 equal monthly installments with 24% interest per annum starting September 3, 1984.

Herein respondent made his full payment on October 7, 1985 under O.R. No. 6266. He contended that despite his dull
and final payment, the petitioner failed to execute the necessary deed of absolute sale and deliver the corresponding
transfer certificate of title.

Petitioner on the other hand countered that their failure to execute deed of sale and transfer of certificate of title is due
to the respondent’s unpaid conditional requirements of their contract such as payment of transfer expenses.

On January 21, 1987, the OAALA rendered judgment in favor of private respondent, relying on Section 25 of PD No. 957
which state that:

SEC. 25. Issuance of Title — The owner or developer shall deliver the title of the lot or unit to the buyer upon full
payment of the lot or unit. No fee except those required for the registration of the deed of sale in the Registry of Deeds,
shall be collected for the issuance of such title. In the event a mortgage over the lot or unit is outstanding at the time of
the issuance of the title to the buyer, the owner of or developer shall redeem the mortgage or the corresponding
portion thereof within six months from such issuance in order that the title over any fully paid lot or unit may be secured
and delivered to the buyer in accordance herewith.

Issue:

Whether or not the interest rate of 24% for breach of contract is valid?

Held:

Yes. The interest rate of 24% as stipulated by the parties is valid.

"The ruling in Reformina v. Tomol, it must be underscored, deals exclusively with cases where damages in the form of
interest is due but no specific rate has been previously set by the parties. In such cases, the legal interest of 12% per
annum must be applied. In the present case, however, the interest rate of 24% per annum was mutually agreed upon by
petitioner and private respondent in their contract to sell — this was the interest rate imposed on private respondent
for the payment of the installments on the contract price and there is no reason why this same interest rate should not
be equally applied to petitioner which is guilty of violating the reciprocal obligation.

"In Solid Homes Inc. v. Court of Appeals (170 SCRA 63 [1989]), a subdivision owner, in violation of their Offsetting
Agreement, incurred delay in the delivery of a house and lot to the supplier of the construction materials. On review, the
issue of which rate of interest — the 6% per annum which was then the legal interest or the stipulated interest rate of
12% — was raised. This Honorable Court ruled:chanrob1es virtual 1aw library
‘On the matter of interest, we agree with the trial court and the Court of Appeals that the proper rate of interest is
twelve (12%) per centum per annum, which is the rate of interest expressly agreed upon in writing by the parties, as
appearing in the invoices (Exhibits ‘C’ and ‘D’), and sanctioned by Art. 2209 of the Civil Code, . . .’. (Emphasis supplied)

"It is, thus, evident that if a particular rate of interest has been expressly stipulated by the parties, that interest, not the
legal rate of interest, shall be applied.

Here, the 24% interest rate is considered legal as it was agreed upon by the parties at the time of the execution of the
contract.
Eastern Shipping Lines, Inc. v CA (Credit Transactions)

FACTS:

This is an action against defendants shipping company, arrastre operator 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.

the losses/damages were sustained while in the respective and/or successive custody and possession of defendants
carrier (Eastern), arrastre operator (Metro Port) and broker (Allied Brokerage).

As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the
aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee against
defendants.

DECISION OF LOWER COURTS: * trial court: ordered payment of damages, jointly and severally * CA: affirmed trial court.

ISSUES AND RULING:

Whether the payment of legal 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; and

FOLLOW THESE VERY IMPORTANT RULES (GUIDANCE BY THE SUPREME COURT)

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached,
the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern
in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be
12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.

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

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

(c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%).

SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, of the court a quo (Court of
Appeals) AND A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount upon
finality of the Supreme Court decision until the payment thereof.

RATIO: when the judgment awarding a sum of money becomes final and executory, the monetary award shall earn
interest at 12% per annum from the date of such finality until its satisfaction, regardless of whether the case involves a
loan or forbearance of money. The reason is that this interim period is deemed to be by then equivalent to a
forbearance of credit.

NOTES: the Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance of money,
goods or credits, as well as to judgments involving such loan or forbearance of money, goods or credits, and that the 6%
interest under the Civil Code governs when the transaction involves the payment of indemnities in the concept of
damage arising from the breach or a delay in the performance of obligations in general. Observe, too, that in these
cases, a common time frame in the computation of the 6% interest per annum has been applied, i.e., from the time the
complaint is filed until the adjudged amount is fully paid.
Reformina vs Judge Tomol, G.R. No. 59096, October 11, 1985

Doctrine:

Circular No. 416 of the Central Bank which took effect on July 29, 1974 pursuant toP.D. 116, which

amended, Act 2655 (Usury Law), which raised the legal rate of interest from 6% to 12% per annum

applies only to forbearances of money, goods or credit and court judgments thereon, but not to court

judgments for damages arising from injury to persons and loss of property which does not involve a

loan in which cases the rate remains at 6%.

Facts:

On June 7, 1972, judgment was rendered by the Court of First instance of Cebu in favor of Pacita

Reformina and Francisco Reformina for the value of boat (P131,084) and its accessories, fishing gear, and

equipment and a monthly loss suffered by them due to fire.

This judgement was modified upon appeal to CA. The CA ordered the Shell Refining Co. to pay

Reformina P100,000 for compensatory and moral damages and P41,000 for the value of boat with legal

interest.

The controversy arises in the execution of judgment. During the computation of legal interest, petitioners

Reformina claimed that the legal interest must be 12% per annum, invoking the Central Bank Circular

No. 416 (Prescribing that the rate of interest for the loan, or forbearance of any money, goods, or credits

and the rate allowed in judgments,in the absence of express contract as to such rate of interest, shall be

twelve (12%) per cent per annum)

The respondents, Shell, insists that the legal interest must be 6% pursuant to Art. 2209 of NCC in relation

to articles 2210 and 2211.

Issue:

WON the judgment in the present case is covered by the CB Circular No. 416.

Held:

No. (legal interest must be 6% pursuant to Art.2209)

The judgments spoken of and referred to are judgments in litigations involving loans or forbearance of

any money, goods or credits. Any other kind of monetary judgment which has nothing to do with, nor

involving loans or forbearance of any money, goods or credits does not fall within the coverage of the

said law for it is not within the ambit of the authority granted to the Central Bank. The Monetary Board

may not tread on forbidden grounds. It cannot rewrite other laws.

PILIPINAS BANK, vs. THE HONORABLE COURT OF APPEALS, and LILIA R. ECHAUSG.R. No. 97873 August 12, 1993J .
Quiason

Facts:

Echaus filed a complaint against Pilipinas Bank and its president, Constantino Bautista, for collection of asum of money.
Echuas alleged that Greatland realty conveyed to Pilipinas Bank by virtue of a contract of Dacion enPago parcels of land
for a consideration of P7,776,335.69; that Greatland assigned P2,300,000.00 out of the totalconsideration of the Dacion
en Pago, in her favor; and that despite demand Pilipinas Bank refused to give heramount.The RTC and the CA, when
appealed, ruled in favor of Echaus and ordered Pilipinas Bank to pay her the P2, 300,000.00 with legal interest and other
monetary awards amounting to P5,517.707.00. Echaus filed a motion forexecution pending appeal which was granted by
the court. Pilipinas Bank complied with the writ of executionpending appeal by issuing two manger’s checks in the total
amount of P5,517,707.00. However, CA later ondecreased the award of damages and ordered Pilipinas Bank to pay a
total of P2,655,000.00 which became finaland executory. Pilipinas Bank filed a motion in the trial court praying for
respondent to refund to her the excesspayment of P1,898,623.67 with interest at 6%.

Contention of the PILIPINAS BANK: The interest rate due on the amount of P2, 300, 000.00 should be 6% andthe excess
amount paid must be refunded to it with interest of 6% per annum.

Contention of the ECHAUS: The interest rate due on the amount of P2,300.000.00 should be 12% per annum andthe
amount to be refunded to Pilipinas bank at 6% per annum.

Ruling:

In favour of petitioner.As to the amount to be paid to Echaus:P.D. No. 116, the Monetary Board of Central Bank issued
Central Bank Circular No. 416, which provides:By virtue of the authority granted to it under Section 1 of Act 2655, as
amended, otherwise known as the "UsuryLaw" the Monetary Board in its Resolution No. 1622 dated July 29, 1974, has
prescribed that the rate of interest forthe loan, or forbearance of any money, goods, or credits and the rate allowed in
judgments, in the absence ofexpress contract as to such rate of interest, shall be twelve (12%) per cent per annum.Note
that Circular No. 416, fixing the rate of interest at 12% per annum, deals with (1) loans; (2) forbearance of anymoney,
goods or credit; and (3) judgments. Judgments spoken of and referred to in Circular No. 416 are "judgmentsin litigation
involving loans or forbearance of any money, goods or credits. Any other kind of monetary judgmentwhich has nothing
to do with nor involving loans or forbearance of any money, goods or credits does not fall withinthe coverage of the said
law for it is not, within the ambit of the authority granted to the Central Bank."The amount to be paid was a portion of
the P7,776,335.69 which petitioner was obligated to pay Greatland asconsideration for the sale of several parcels of land
by Greatland to petitioner. The amount of P2,300,000.00 wasassigned by Greatland in favor of private respondent. The
said obligation therefore arose from a contract ofpurchase and sale and not from a contract of loan or mutuum. Hence,
what is applicable is the rate of 6% perannum as provided in Article 2209 of the Civil Code of the Philippines and not the
rate of 12% per annum asprovided in Circular No. 416.As to the amount to be refunded to Pilipinas Bank:Private
respondent was paid in advance the amount of P5,517,707.00 by petitioner to the order for the executionpending
appeal of the judgment of the trial court. On appeal, the Court of Appeals reduced the total damages toP3,619,083.33,
leaving a balance of P1,898,623.67 to be refunded by private respondent to petitioner. In anexecution pending appeal,
funds are advanced by the losing party to the prevailing party with the implied obligationof the latter to repay former, in
case the appellate court cancels or reduces the monetary award.