STATE INVESTMENT HOUSE INC., petitioner vs.

THE HONORABLE COURT OF APPEALS, HON. JUDGE PERLITA J. TRIA TIRONA, PRESIDING JUDGE OF THE
REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH CII, AND SPS. RAFAEL AND REFUGIO AQUINO,
respondents (1991)

FELICIANO, J

NATURE: Petition for Review

SUMMARY:

The sps. Aquino obtained a loan (LOAN1) from SIHI this loan was secured by a pledge of shares of stock. When
LOAN1 fell due, the sps. Aquino paid it partly with their own funds, and partly from the proceeds of another loan (LOAN2)
that they had obtained from SIHI LOAN2 was secured by the same pledge as the first loan. When LOAN2 fell due, the
sps. Aquino expressed their willingness to pay, but requested that the shares of stocks pledged be released upon
payment of the amount due on LOAN2. SIHI denied the request. It wanted to hold on to the pledge till the loan extended
to a different set of spouses had been paid; prior to contracting LOAN1, the sps. Aquino had as an accommodation to
and together with the other set of spouses signed a loan agreement with SIHI. Subsequently, the sps. Aquino were
informed by Notice of Notarial Sale that the stocks pledged to SIHI would be sold in a public auction. Thus, the sps.
Aquino filed a case with the RTC. They argued that the foreclosure was illegal since SIHI had declined to accept payment
without justifiable cause. Although initially the Judge dismissed the case, action on a MfR filed by the sps. Aquino, it
entered a new decision ordering SIHI to release the pledge and deliver the shares of stock to the sps. Aquino, upon
payment of the loan. This was affirmed by the CA, and the decision became final and executor. However, there were on
remand for execution of the Decision disagreements as to the amount to be paid by the sps. The sps. Aquino filed a
motion to clarify the decision and prayed that they (the sps.) be directed ONLY to pay the principal, without any interest.
This was affirmed on appeal by the CA thus this petition for review.

The SC granted the petition. It held that the sps. Aquino were liable for the amount of the principal as well as the
regular/monetary interest, in accordance with law. They would be liable for regular interest that could continue to accrue till
full payment of the loan, since a valid consignation had not been made after they had tendered payment.

DOCTRINE:

If a debtor had not been in delay, in accordance with law he is obliged to pay the creditor the amount of the principal, plus
regular/monetary interest. Such a debtor would not be liable for compensatory interest. In the absence of a valid
consignation i.e. when the debtor only tendered payment regular/monetary interest shall continue to accrue till the
loan has been fully paid.

FACTS:

Antecedents
5 April 1982: Sps. Aquino (private respondents) pledged shares of stock to State
Investment House, Inc. (SIHI) in order to secure a P120k loan (loan1).
Prior to the execution of the pledge, the Sps. Aquino as an accommodation to and
together with sps. Jose and Marcelina Aquino signed an agreement (loan0) with SIHI for
SIHIs purchase of receivables amounting to P375k.
When loan1 fell due, the sps. Aquino paid partly with their own funds and partly from the
proceeds of another loan (loan2) obtained from SIHI.
Loan2 was secured by the same agreement as in the first loan.
When loan2 fell due, SIHI demanded payment sps. Aquino expressed its willingness to
pay, but requested that upon payment the shares of stock pledged be released.
SIHI denied the request on the ground that loan0, extended to Jose and Marcelina
Aquino, had remained unpaid.
Thus, on 29 June 1984, a Notice of Notarial Sale was sent to sps. Aquino they were
informed that by virtue of the pledge agreement, the shares of stock pledged to SIHI
would be sold at a public auction.
The Case
Sps. Aquino filed an action (not expressly mentioned what kind) before the RTC of QC.

They alleged that the intended foreclosure sale was illegal since at the time that loan2 had become due they
had been able and willing to pay the same, but SIHI had insisted that sps. Aquino pay even loan0 which had not
been secured by the pledge.

They alleged that their failure to pay loan2 was excused because SIHI itself prevented the satisfaction of the
obligation.

The RTC judge initially dismissed the complaint.

Sps. Aquino filed a MfR which prayed for a new decision ordering SIHI to release the shares upon payment of
loan 2 without interest, since sps. Aquino had not been in delay.
o

SIHI countered that the pledge also covered loan0 thus loan0 had to be paid before the shares could be
released.

The judge set aside his original decision and rendered a new one ordering SIHI to immediately release the pledge
and deliver to sps. Aquino the shares of stock, upon payment of the loan (loan2).

The CA affirmed in toto the new decision of the RTC.

It held that loan0 had been executed prior to the pledge and was not covered by it. (The pledge only secured
subsequent loans.)

The decisions of the CA and the RTC became final and executory.

The case was remanded to the RTC for execution: disagreements developed as to the amount to be paid by the sps.
In order to secure the release of the shares of stock.

SIHI: sps. Aquino should also pay interest;

Sps. Aquino: we should not pay interest.

Sps. Aquino filed a motion to clarify the decision they prayed that an order be issued clarifying the phrase upon
payment of plaintiffs loan to mean upon payment of loan2 in the principal amount of P110k alone, without interest,
penalties and other charges.

The judge rendered a decision granting sps. Aquinos prayer.

The CA dismissed SIHIs appeal.

It held that no interest need be paid; and, that the RTC decision merely restated what had previously been
provided for.

It subsequently denied the MfR filed by SIHI.

Thus, this Petition for Review.

ISSUE # 1: What are sps. Aquino liable for? (Principal + Regular/Monetary interest with regular/monetary
interest continuing to accrue till full payment)

RATIO # 1:

The SC began by citing jurisprudence stating that even a judgment which had become final and executor may be clarified
under certain circumstances, for instance a clerical error (ex. error in mathematical computation) or an ambiguity arising

from inadvertent omission. (Reinsurance Company of the Orient, Inc. v. CA;Filipino Legion Corporation vs. Court of
Appeals, et al.; Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court)

Judge Fortun evidently meant to act favorably on the motion for reconsideration of the respondent Aquino spouses and in
effect accepted respondent spouses' argument that they had not incurred mora considering that their failure to pay [loan2]
on time had been due to petitioner [SIHI]'s unjustified refusal to release the shares pledged to it.

Unclear to what precise extent Judge Fortun meant to grant the MfR.
o

Loan2 had 3 components: (i) the principal, in the amount of P110k; (ii) the regular interest, in the
amount of 17% per annum; and, additional/penalty interest at 2% per month or 24% per annum, in
case of non-payment at maturity.

In the dispositive of the resolution, Judge Fortun did NOT specify which of these components he
was ordering sps. Aquino to pay, and which components he was in effect deleting.

It cannot be assumed that Judge Fortun meant to grant the relief prayed for in all its parts:
o

Note that the spouses prayed for at least P50k in MD, at least P50k in ED, and P6k as attys fees and
costs, YET, Judge Fortun only granted P10k as MD, P5k as ED, and P6k as attys fees.

For another thing, sps. Aquino themselves were not very clear what they were asking Judge Fortun to
grant them they did not clarify if without interest referred to the regular interest or the penalty interest.

It must be assumed that Judge Fortun meant to decide IN ACCORDANCE WITH LAW it cannot be fairly assumed
that Judge Fortun was grossly ignorant of law law, or that he intended to grant relief to which sps. Aquino were not
entitled.

The ultimate question, then is: if sps. Aquino were NOT in delay, what should they have been held liable for IN
ACCORDANCE WITH LAW?

Principal (P110k)

Regular/monetary interest (17% PA)

Sps. Aquino were NOT liable for penalty or compensatory interest (24% PA).

On the appropriate measure for damages in case of delay in the payment of a sum of money

In accordance with Art. 2209 of the NCC, the payment of penalty interest at the rate agreed upon and in the absence of a
stipulation of a particular rate of penalty interest, the payment of additional interest at a rate equal to the regular money
interest, and if no regular interest had been agreed upon, the payment of legal interest (6% PA).

Regular/monetary interest continues to accrue till full payment of the principal

The fact that sps. Aquino were not in default did NOT mean that they as a matter of law were relieved from the
payment of the penalty interest and the regular or monetary interest.

The monetary interest continued to accrue until ACTUAL PAYMENT IS EFFECTED.

o

The payment of regular interest constitutes the price or cost of the use of money thus it acres until the
principal sum due is returned to the creditor.

Note Art. 1256 of the NCC: in case tender of payment has been made but the creditor refuses (w/o just cause) to
accept it, the debtor shall only be released from responsibility by the CONSIGNATION OF THE THING/SUM
DUE.
o

Tender of payment must be accompanies or followed by consignation in order that the effects of payment
may be produced.

A written tender of payment alone, for example, does not suspend the accruing of regular or monetary
interest. (Llamas v. Abaya)

Sps. Aquino FAILED to consign in court the amount due at the time of the maturity of loan2 the obligation to
pay the principal plus the regular/monetary interest was NOT extinguished by the tender of payment alone.

To allow sps. Aquino to continue in possession of the principal after maturity of the loan w/o payment of regular or
monetary interest: UNJUST ENRICHMENT at the expense of SIHI even if sps. Aquino had not been guilty of
mora.

DISPOSITION:

WHEREFORE, the Petition for Review is hereby GRANTED DUE COURSE. The Decision of the Court of Appeals dated
30 August 1989 in C.A.-G.R. No. 17954 and the Decision of the Regional Trial Court dated 17 February 1989 in Civil Case
No. Q-42188 are hereby REVERSED and SET ASIDE. The dispositive portion of the decision of Judge Fortun is hereby
clarified so as to read as follows:

"(1) Ordering defendants to immediately release the pledge and to deliver to the plaintiff spouses Rafael and Refugio
Aquino the shares of stock enumerated and described in paragraph 4 of said spouses' complaint dated 17 July 1984,
upon full payment of the amount of P10,000.00, plus seventeen percent (17%) per annum regular interest computed from

the time of maturity of the plaintiffs' loan (Account No. IF-82-0904-AA) and until full payment of such principal and interest
to defendants;

(2) Ordering defendant State Investment House, Inc. to pay to the plaintiff spouses Rafael and Refugio Aquino
P10,000.00 as moral damages, P5,000.00 as exemplary damages, P6,000.00 as attorney's fees, plus costs; and

(3) Dismissing defendants' counterclaim for lack of merit and making the preliminary injunction permanent."