Republic vs.

Grijaldo
15 SCRA 681 . December 31, 1965
Ponente: ZALDIVAR, J.:

FACTS:

In the year 1943 appellant Jose Grijaldo obtained five loans from the branch
office of the Bank of Taiwan, Ltd. in Bacolod City, in the total sum of P1,281.97
with interest at the rate of 6% per annum, compounded quarterly. These loans
are evidenced by five promissory note executed by the appellant in favor of
the Bank of Taiwan. Since the loans were crop loans it was considered that
the loans were due one year after they were incurred. To secure the payment
of the loans the appellant executed a chattel mortgage on the standing crops
on his land, Lot No. 1494 known as Hacienda Campugas in Hinigaran. Negros
Occidental.

By virtue of Vesting Order No. P-4, dated January 21, 1946, the assets in the
Philippines of the Bank of Taiwan, Ltd. were vested in the Government of the
United States. Pursuant to the Philippine Property Act of 1946 of the United
States, these assets, including the loans in question, were subsequently
transferred to the Republic of the Philippines by the Government of the United
States under Transfer Agreement dated July 20, 1954. These assets were
among the properties that were placed under the administration of the Board
of Liquidators created under Executive Order No. 372, dated November 24,
1950, and in accordance with Republic Acts Nos. 8 and 477 and other pertinent
laws.

On September 29, 1954 the appellee, Republic of the Philippines, represented

by the Chairman of the Board of Liquidators, made a written extrajudicial
demand upon the appellant for the payment of the account in question. The
record shows that the appellant had actually received the written demand for
payment, but he failed to pay.

On January 17, 1961 the appellee filed a complaint in the Justice of the Peace
Court of Hinigaran, Negros Occidental, to collect from the appellant the unpaid
account in question. The Justice of the Peace of Hinigaran, after hearing,
dismissed the case on the ground that the action had prescribed. The appellee
appealed to the Court of First Instance of Negros Occidental and on March 26,
1982 the court a quo rendered a decision ordering the appellant to pay the
appellee the sum of P2,377.23 as of December 31, 1959, plus interest at the
rate of 6% per annum compounded quarterly from the date of the filing of the
complaint until full payment was made. The appellant appealed directly to this
Court.
ISSUE:
Whether the Philippine Government had a right to collect the loan which was
obtained from the Bank of Taiwan.

HELD:

Yes. It is true that the Bank of Taiwan, Ltd. was the original creditor and the
transaction between the appellant and the Bank of Taiwan was a private
contract of loans. However, pursuant to the Trading with the Enemy Act, as
amended, and Executive Order No. 9095 of the United States; and under
Vesting Order No. P-4, dated January 21, 1946, the properties of the Bank of
Taiwan, Ltd., were vested in the United States Government. Pursuant, further,
to the Philippine Property Act of 1946 and Transfer Agreements dated July 20,
1954 and June 15, 1957, between the United States Government and the
Republic of the Philippines, the assets of the Bank of Taiwan, Ltd. were
transferred to and vested in the Republic of the Philippines. The successive
transfers of the rights over the loans in question from the Bank of Taiwan,
Ltd. to the United States Government, and from the United States Government
to the government of the Republic of the Philippines, made the Republic of the
Philippines the successor of the rights, title and interests in said loans, thereby
creating a privity of contract between the appellee and the appellant.

Tan vs. Valdehueza

66 SCRA 61 . August 6, 1975
Ponente: CASTRO, J.:

FACTS:

An action instituted by the plaintiff-appellee Lucia Tan against the defendants-

appellants Arador Valdehueza and Rediculo Valdehueza for (a) declaration of
ownership and recovery of possession of the parcel of land described in the
first cause of action of the complaint, and (b) consolidation of ownership of
two portions of another parcel of (unregistered) land described in the second
cause of action of the complaint, purportedly sold to the plaintiff in two
separate deeds of pacto de retro.

The parcel of land described in the first cause of action 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.

Judgment is hereby rendered in favor of the plaintiff. The Valdehuezas

appealed.

ISSUE:

1. Whether the mortgage is valid even if not registered.

2. Whether the defendants can be compelled to pay legal interest on the
amounts stated in the pacto de retro contracts

HELD:

1. Mortgage binding between parties even if instrument not recorded.—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.”

2. No interest due where not expressly stipulated in writing.—The imposition

of legal interest on the amounts subject of the equitable mortgages is without
legal basis, for, “no interest shall be due unless it has been expressly
stipulated in writing.”

Jardenil vs. Solas

73 Phil., 626 . July 24, 1942
Ponente: Moran, J.:

FACTS:

This is an action for foreclosure of mortgage. Defendant-appellee agreed to

pay interest only up to the date of maturity, or until March 31, 1934.

ISSUE: Whether defendant-appellee is bound to pay the stipulated interest

only up to the date of maturity as fixed in the promissory note, or up to the
date payment is effected.

HELD:
Plaintiff is entitled only to the stipulated interest of 12 per cent on the loan of
P2,400 from November 8, 1932 to March 31, 1934. Defendant has agreed to
pay interest only up to the date of maturity, or until March 31, 1934. As the
contract is silent as to whether after that date, in the event of non-payment,
the debtor would continue to pay interest, no legal presumption as to such
interest can be indulged, for this would be imposing upon the debtor an
obligation that the parties have not chosen to agree upon. Article 1755 of the
Civil Code provides that "interest shall be due only when it" has been expressly
stipulated.”

Frias vs. San Diego-Sison

520 SCRA 244 . April 3, 2007
Ponente: AUSTRIA-MARTINEZ, J.:

FACTS:

Petitioner is the owner of a house and lot located at No. 589 Batangas East,
Ayala Alabang, Muntinlupa, Metro Manila, which she acquired from Island
Masters Realty and Development Corporation (IMRDC) by virtue of a Deed of
Sale dated Nov. 16, 1990.

Frias and San Diego-Sison executed a Memorandum of Agreement over the

property in consideration of the sum of THREE MILLION PESOS
(P3,000,000.00) It was agreed that a period of Six (6) months from the date
of the execution of this contract within which to notify the Frias of her intention
to purchase the aforementioned parcel of land together with the
improvements thereon at the price of SIX MILLION FOUR HUNDRED
THOUSAND PESOS (P6,400,000.00). Petitioner received from respondent two
million pesos in cash and one million pesos in a post-dated check dated
February 28, 1990, instead of 1991, which rendered said check stale.7
Petitioner then gave respondent TCT No. 168173 in the name of IMRDC and
the Deed of Absolute Sale over the property between petitioner and IMRDC.

Respondent decided not to purchase the property and notified petitioner

through a letter reminding petitioner of their agreement that the amount of
two million pesos which petitioner received from respondent should be
considered as a loan payable within six months. Petitioner subsequently failed
to pay respondent the amount of two million pesos.

Respondent filed with the Regional Trial Court (RTC) of Manila, a complaint10
for sum of money with preliminary attachment against petitioner. In an Order
dated April 6, 1993, the Executive Judge of the RTC of Manila issued a writ of
preliminary attachment upon the filing of a bond in the amount of two million
pesos. The RTC found that petitioner was under obligation to pay respondent
the amount of two million pesos with compounded interest pursuant to their
Memorandum of Agreement. Petitioner filed her appeal with the CA. In a
Decision dated June 18, 2002, the CA affirmed the RTC decision. Petitioner’s
motion for reconsideration was denied by the CA, Hence the instant Petition
for Review on Certiorari filed by petitioner.

ISSUE:

WHETHER OR NOT THE COMPOUNDED BANK INTEREST SHOULD BE LIMITED

TO SIX (6) MONTHS AS CONTAINED IN THE MEMORANDUM OF AGREEMENT.

HELD:

Yes. The payment of regular interest constitutes the price or cost of the use
of money and thus, until the principal sum due is returned to the creditor,
regular interest continues to accrue since the debtor continues to use such
principal amount.—The payment of regular interest constitutes the price or
cost of the use of money and thus, until the principal sum due is returned to
the creditor, regular interest continues to accrue since the debtor continues
to use such principal amount. It has been held that for a debtor to continue in
possession of the principal of the loan and to continue to use the same after
maturity of the loan without payment of the monetary interest, would
constitute unjust enrichment on the part of the debtor at the expense of the
creditor.

The interest rate of 25% per annum awarded by the Court of Appeals to a P2
million loan is fair and reasonable.—In Bautista v. Pilar Development Corp.,
312 SCRA 611 (1999), we upheld the validity of a 21% per annum interest on
a P142,326.43 loan. In Garcia v. Court of Appeals, 167 SCRA 815 (1988), we
sustained the agreement of the parties to a 24% per annum interest on an
P8,649,250.00 loan. Thus, the interest rate of 25% per annum awarded by
the CA to a P2 million loan is fair and reasonable.

The agreement that the amount given shall bear compounded bank interest
for the last six months only, i.e., referring to the second six-month period,
does not mean that interest will no longer be charged after the second six-
month period since such stipulation was made on the logical and reasonable
expectation that such amount would be paid within the date stipulated.
Considering that petitioner failed to pay the amount given which under the
Memorandum of Agreement shall be considered as a loan, the monetary
interest for the last six months continued to accrue until actual payment of
the loaned amount.

Arwood Industries, Inc. vs. D.M. Consunji, Inc.

394 SCRA 11 . December 11, 2002
Ponente: CORONA, J.:

FACTS:

Petitioner and respondent, as owner and contractor, respectively, entered into

a Civil, Structural and Architectural Works Agreement3 (Agreement) dated
February 6, 1989 for the construction of petitioner’s Westwood Condominium
at No. 23 Eisenhower St., Greenhills, San Juan, Metro Manila. The contract
price for the condominium project aggregated P20,800,000.00.

Despite the completion of the condominium project, the amount of

P962,434.78 remained unpaid by petitioner. Repeated demands by
respondent for petitioner to pay went unheeded.

Thus, on August 13, 1993, respondent, as plaintiff in Civil Case No. 63489
filed its complaint4 for the recovery of the balance of the contract price and for
damages against petitioner.

After trial, the court resolved to grant the relief prayed for by respondent.
Petitioner appealed to the Court of Appeals. The Court of Appeals upheld the
trial court despite dauntless demurring by petitioner. Petitioner moved to
reconsider, unsuccessfully. Hence, this petition for review.

ISSUE:

Whether the imposition of a 2% per month interest on the award of

P962,434.78 is correct.

HELD:

Yes. It must be noted that the Agreement provided the contractor, respondent
in this case, two options in case of delay in monthly payments, to wit: a)
suspend work on the project until payment is remitted by the owner or b)
continue the work but the owner shall be required to pay interest at a rate of
two percent (2%) per month or a fraction thereof. Evidently, respondent chose
the latter option, as the condominium project was in fact already completed.
The payment of the 2% monthly interest, therefore, cannot be jettisoned
overboard.

Since the Agreement stands as the law between the parties,13 this Court cannot
ignore the existence of such provision providing for a penalty for every
month’s delay. Facta legem facunt inter partes.14 Neither can petitioner impugn
the Agreement to which it willingly gave its consent. From the moment
petitioner gave its consent, it was bound not only to fulfill what was expressly
stipulated in the Agreement but also all the consequences which, according to
their nature, may be in keeping with good faith, usage and law.Petitioner’s
attempt to mitigate its liability to respondent should thus fail.

Soncuya vs. Azarraga

65 Phil. 635 . June 14, 1938
Ponente: DIAZ, J.:

FACTS:

Atty, Azarraga represented the defendants in the Testate Estate Proceedings

of the Deceased Juan Azarraga y Galvez. The defendants Azarraga had
previously agreed among themselves to pay Attorney Leodegario Azarraga
attorney's fees, parties also agree that the parcels of land located in Bay-ang
are specially mortgaged and subject to the payment of the fees of said
attorney of the testate estate, which fees shall be fixed by the court, and said
attorney may hold said lands under no obligation to pay any rent until his fees
shall have been fully paid.

About nine months, which was long before the expiration of the period of five
years within which the defendants Azarraga were bound to pay Attorney
Leodegario Azarraga his fees, which had been fixed at P3,000, said attorney
decided to sell and did sell to the plaintiff his credit against the defendants for
the sum of P2,500 with all the rights inherent therein in accordance with the
agreements and stipulations appearing in said document.

When the plaintiff became the creditor of the defendants Azarraga by virtue
of the sale and cession which Attorney Azarraga had made in his favor of the
rights which said attorney had, he allowed the defendants an extension of a
few years over the five years with in which they would have to pay him his
credit, or up to February 16,1926, but with the express condition that they
would pay him interest at the rate of 12 per cent per annum, from August 30,
1924. This term was later extended to April 26, 1926 on the request of the
defendants, but also with the condition that they would pay the plaintiff the
same interest of 12 per cent. The plaintiff granted another extension to expire
on October 31, 1928, but subject to the condition that instead of seven
thousand and odd pesos, which undoubtedly referred to the interest of 12 per
cent per annum charged the defendants, they should pay him P12,000. In
said two amounts of P7,000 and P12,000 the sum of P4,000 which the plaintiff
had given to the defendant Joaquin Azarraga and which will be dealt with
further in detail, was included.
Sometime in May, 1928, the plaintiff went to the house of the defendant
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.

ISSUE:

Was the contract entered Into by-the Azarraga brothers, the defendants
herein, with Attorney Leodegario Azarraga from whom the plaintiff derived his
right, a sale with pacto de retro, or an assignment in payment of a debt, or
was it an antichresis partaking of the nature of what was anciently known as
pacto comisorio, or a mortgage, or was it merely a loan with real estate
security?

HELD:

When the plaintiff extended the period to February 16, 1926 within which the
defendants Azarraga could pay him his credit, but imposed on them" the
condition that they pay him 12 per cent annual interest from August 30, 1924
on the principal of P3,000 (Exh. 5) and gave them another extension up to
April 26, 1926, under the same conditions as regard interest (Exh. M), what
perhaps could have been considered as an antichresis or pacto comisorio—not
an assignment in payment of a debt, or a sale with pacto de retro because
there is nothing in Exhibit A to indicate that such was the intention of the
defendants Azarraga or, at least, that they bound themselves to deliver the
land in question to the plaintiff and that the latter should pay them the value
thereof; and because there was what may be considered the resolutory
condition of five years—was converted into a simple loan by the decisive
circumstance that plaintiff chose to collect thereafter, and the obligors agreed
to pay him, 12 per cent annual interest. It is only in contracts of loan, with or
without guaranty, that interest may be demanded (articles 1108, 1740, 1755,
1868, 1876, and 1881 of the Civil Code). As a matter of fact, the contract
embodied in Exhibit A was novated by Exhibits 5 and M, and the plaintiff
wanted to have it novated for the third time by means of Exhibit 2. It does
not appear of record, however, that the defendants Azarraga ever assented
to the latter novation. Perhaps, their refusal to agree to the same was due to
the fact that the plaintiff wanted to raise their old obligation (P3,000 or P2,700
of all the Azarraga brothers, plus P4,000 which Joaquin Azarraga alone owed,
which two accounts both the plaintiff and the defendants considered as
amounting to P7,000, exclusive of the annual interest of 12 per cent) to the
round sum of P12,000. From all this it may easily be inferred that the
obligation which the defendants had imposed upon themselves by Exhibit A
had ceased to exist and became a simple loan with security, if so desired, of
the lands in question, but without prejudice to third parties as neither Exhibit
A nor the deed of assignment Exhibit C, executed by Leodegario Azarraga in
favor of the plaintiff, was inscribed in the registry of deeds.

Royal Shirt Factory, Inc. vs. Co

94 Phil. 994 . May 14, 1954
Ponente: MONTEMAYOR, J.:

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 Pl,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.

ISSUE:

Whether the defendant is bound to pay 20% interest.

HELD:

No. 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.

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.