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The RTC rendered a Decision holding that respondent made an overpayment of her
loan obligation to petitioner and that the latter should refund the excess amount to
the former. It ratiocinated that respondents 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 respondents total monetary debt because there was no
agreement between them regarding payment of interest. It concluded that since
respondent made an excess payment to petitioner in the amount of P660,000.00
through mistake, petitioner should return the said amount to respondent pursuant
to the principle of solutio indebiti. Also, petitioner should pay moral damages for the
sleepless nights and wounded feelings experienced by respondent. Further,
petitioner should pay exemplary damages by way of example or correction for the
public good, plus attorneys fees and costs of suit.
Issue: (1) Whether or not interest was due to petitioner; and (2) whether the
principle of solutio indebiti applies to the case at bar.
Ruling: (1) 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.
(2) Petitioner cannot be compelled to return the alleged excess amount paid by
respondent as interest. Under Article 1960 of the Civil Code, if the borrower of loan
pays interest when there has been no stipulation therefor, the provisions of the Civil
Code concerning solutio indebiti shall be applied. Article 2154 of the Civil Code
explains the principle of solutio indebiti. Said provision provides that if something is
received when there is no right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises. In such a case, a creditor-debtor
relationship is created under a quasi-contract whereby the payor becomes the
creditor who then has the right to demand the return of payment made by mistake,
and the person who has no right to receive such payment becomes obligated to
return the same. The quasi-contract of solutio indebiti harks back to the ancient
principle that no one shall enrich himself unjustly at the expense of another. The
principle of solutio indebiti applies where (1) a payment is made when there exists
no binding relation between the payor, who has no duty to pay, and the person who
received the payment; and (2) the payment is made through mistake, and not
through liberality or some other cause. We have held that the principle of solutio
indebiti applies in case of erroneous payment of undue interest.
Article 2232 of the Civil Code states that in a quasi-contract, such as solutio indebiti,
exemplary damages may be imposed if the defendant acted in an oppressive
manner. Petitioner acted oppressively when he pestered respondent to pay interest
and threatened to block her transactions with the PNO if she would not pay
interest. This forced respondent to pay interest despite lack of agreement thereto.
Thus, the award of exemplary damages is appropriate so as to deter petitioner and
other lenders from committing similar and other serious wrongdoings.
GSIS vs. COURT OF APPEALS, GR. No. L-52478, October 20, 1986
FACTS:
ISSUE:
HELD:
It has already been settled that the Usury Law applies only to interest by way
of compensation for the use or forbearance of money. Interest by way of damages is
governed byArticle 2209 of the Civil Code of the Philippines which provides that if
the obligation consistsin the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages,there being no stipulation to the contrary, shall
be the payment of the interest agreed upon. TheCivil Code permits the agreement
upon a penalty apart from the interest. Should there be such anagreement, the
penalty does not include the interest, and as such the two are different and
distinctthings which may be demanded separately. The stipulation about payment
of such additional rate partakes of the nature of a penalty clause, which is
sanctioned by law
Facts:
FACTS:
1. Petition for review.
2. TAN OBTAINED 2 LOANS, EACH FOR P2,000,000 FROM CCP.
1. Executed a promissory note in amount of P3,411,421.32; payable in 5
installments.
2. TAN failed to pay any installment on the said restructured loa.
3. In a letter, TAN requested and proposed to respondent CCP a mode of
paying the restructured loan
i. 20% of the principal amount of the loan upon the respondent giving
its conformity to his proposal
ii. Balance on the principal obligation payable 36 monthly installments
until fully paid.
4. TAN requested for a moratorium on his loan obligation until the
following year allegedly due to a substantial deduction in the volume of his business
and on account of the peso devaluation.
i. No favorable response was made to said letters.
ii. CCP demanded full payment, within ten (10) days from receipt of said
letter P6,088,735.03.
3. CCP FILED COMPLAINT collection of a sum of money
1. TAN interposed the defense that he accommodated a friend who asked
for help to obtain a loan from CCP.
i. Claimed that cannot find the friend.
2. TAN filed a Manifestation wherein he proposed to settle his
indebtedness to CCP by down payment of P140,000.00 and to issue1 2 checks
every beginning of the year to cover installment payments for one year, and every
year thereafter until the balance is fully paid.
i. CCP did not agree to the petitioners proposals and so the trial of the
case ensued.
4. TRIAL COURT ORDERED TAN TO PAY CCP P7,996,314.67, representing
defendants outstanding account as of August 28, 1986, with the corresponding
stipulated interest and charges thereof, until fully paid, plus attorneys fees in an
amount equivalent to 25% of said outstanding account, plus P50,000.00, as
exemplary damages, plus costs.
1. REASONS:
i. Reason of loan for accommodation of friend was not credible.
ii. Assuming, arguendo, that the TAN did not personally benefit from
loan, he should have filed a 3rd-party complaint against Wilson Lucmen
iii. 3 times the petitioner offered to settle his loan obligation with CCP.
iv. TAN may not avoid his liability to pay his obligation under the
promissory note which he must comply with in good faith.
v. TAN is estopped from denying his liability or loan obligation to the
private respondent.
5. TAN APPEALED TO CA, asked for the reduction of the penalties and charges
on his loan obligation.
1. Judgment appealed from is hereby AFFIRMED.
1. No alleged partial or irregular performance.
2. However, the appellate court modified the decision of the trial court by deleting
exemplary damages because not proportionate to actual damage caused by the
non-performance of the contract
ISSUES:
WON there are contractual and legal bases for the imposition of the penalty,
interest on the penalty and attorneys fees.
TAN imputes error on CA in not fully eliminating attorney fees and in not reducing
the penalties considering that he made partial payments on the loan.
And if penalty is to be awarded, TAN asking for non-imposition of interest on the
surcharges because compounding of these are not included in promissory note.
No basis in law for the charging of interest on the surcharges for the reason that the
New Civil Code is devoid of any provision allowing the imposition of interest on
surcharges.
WON interest may accrue on the penalty or compensatory interest without violating
ART 1959: Without prejudice to the provisions of Article 2212, interest due and
unpaid shall not earn interest. However, the contracting parties may by stipulation
capitalize the interest due and unpaid, which as added principal, shall earn new
interest.
TAN- No legal basis for the imposition of interest on the penalty charge for the
reason that the law only allows imposition of interest on monetary interest but not
the charging of interest on penalty. Penalties should not earn interest.
WON TAN can file reduction of penalty due to made partial payments.
Petitioner contends that reduction of the penalty is justifiable under ART 1229: The
judge shall equitably reduce the penalty when the principal obligation has been
partly or irregularly complied with by the debtor. Even if there has been no
performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.
HELD
CA DECISION AFFIRMED with MODIFICATION in that the penalty charge of two
percent (2%) per month on the total amount due, compounded monthly, is hereby
reduced to a straight twelve percent (12%) per annum starting from August 28,
1986. With costs against the petitioner.
1. WON there are contractual and legal bases for the imposition of the penalty,
interest on the penalty and attorneys fees. YES. WITH LEGAL BASES.
1. ART 1226: In obligations with a penal clause, the penalty shall
substitute the indemnity for damages and the payment of interests in case of non-
compliance, if there is no stipulation to the contrary. Nevertheless, damages shall
be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment
of the obligation.
i. The penalty may be enforced only when it is demandable in
accordance with the provisions of this Code.
2. CASE AT BAR: promissory note expressed the imposition of both
interest and penalties in case of default on the part of the petitioner in the
payment of the subject restructured loan.
3. PENALTY IN MANY FORMS:
i. If the parties stipulate penalty apart monetary interest, two are
different and distinct from each other and may be demanded separately.
ii. If stipulation about payment of an additional interest rate partakes of
the nature of a penalty clause which is sanctioned by law:
1. ART 2209: If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to the
contrary, shall be the payment of the interest agreed upon, and in the absence of
stipulation, the legal interest, which is six per cent per annum.
4. CASE AT BAR: Penalty charge of 2% per month began to accrue from
the time of default by the petitioner.
i. No doubt petitioner is liable for both the stipulated monetary interest
and the stipulated penalty charge.
1. PENALTY CHARGE = penalty or compensatory interest.
RCBC vs CA
GR Nos. 128833, 128834, 128866, 20 April 1998
289 SCRA 292
FACTS
GOYU was granted credit facilities and accommodations by the RCBC initially
in the amount of P 30 million. Upon GOYUs application, the credit was increased to
P50 Million, then P90 Million, then P117 Million. As security, GOYU executed 2 REM
and 2 CM in favor of RCBC, which were registered with the RD. Under the 4
contracts, GOYU committed itself to insure the mortgaged properties with an
insurance company approved by RCBC, and subsequently endorse and deliver the
insurance policies to RCBC. GOYU then obtained 10 policies from MICO. GOYUs
buildings were gutted by fire and it claimed indemnity from MICO but the latter
denied the claim on the ground that the insurance policies were either attached
pursuant to writs of attachments/garnishments issued by various courts or that the
proceeds were also claimed by other creditors of GOYU. GOYU, alleging better rights
to the proceeds, filed for specific performance and damges before the RTC of Manila
Br 3. The trial court ruled in favor of GOYU for the fire loss claims but ordered it to
pay RCBC its loan obligations. On appeal to the CA, it affirmed the ruling with regard
to the liabilities of MICO and RCBC. The trial court and appellate courts both held
that, since the endorsements do not bear the signature of any officer of GOYU, they
concluded that the endorsements are defective. The CA then ordered GOYU to pay
its obligation to RCBC without any interest, surcharges and penalties.
ISSUE
Whether or not the ruling of the appellate court is correct.
HELD
The Court held in the negative. The essence or rationale for the payment of
interest or cost of money is separate and distinct from that of surcharges and
penalties. The charging of interest for loans forms a very essential and fundamental
element of the banking business.
Petitions granted.
Facts: Padillo obtained two loans from First Fil-SinLending. For the first loan
(P500,000.00),, PAdillo made 13 monthly interst payments before she settled the
loan. For the second loan (P500,000.00), Padillo made 11 monthly interest payment
before she paid the loan. In sum, Padillo paid P792,500.00 for the first loan and
P775,000.00 for the second loan. Padillo filed an action for sum of money against
Fil-Sin alleging that she only agreed to pay interest at the rates of 4.5% and 5% per
annum, respectively, and not 4.5% and 5% per month, Padillo sought to recover the
amounts she alledgely paid in excess of her actual obligations.
Held:YES. the provision as to the annual interest rate is clear and requires no room
for interpretation. Nowhere was it stated that the interest rates shall be applied on a
monthly basis. Thus, when the terms of the agreement are clear and explicit that
they do not justify an attempt to read into it any alleged intention of the parties, the
terms are to be understood literally as they appear on the face of the contract.
Notably, Fil-Sin even admitted that it was solely responsible for the preparation of
the loan documents, and that it failed to correct the pro forma note pa to per
month . Since the mistake is exclusively attributed to the petitioner, the same
should be charged against it. This unilateral mistake cannot be taken against Padillo
who merely affixed her signature on the pro forma loan agreements. As between
two parties to a written agreement, the party who gave rise to the mistake or error
in the provisions of the same is estopped form asserting a contrary intention to that
contained therein.
Integrated Realty Corp vs PNB
GR No. 60705, 28 June 1989
174 SCRA 295
FACTS
Raul Santos made a time deposit with OBM in the amount of P500H and he
was issued a certificate of time deposits. On another date, Santos again made a
time deposit with OBM in the amount of P200H, he was again issued a CTD. IRC,
thru its president Raul Santos, applied for a loan and/or credit line (P700H) with
PNB. To secure such, Santos executed a Deed of Assignment of the 2 time deposits.
After due dates of the time deposit certificates, OBM did not pay PNB. PNB then
demanded payment from IRC and Santos, but they replied that the loan was
deemed paid with the irrevocable assignment of the time deposit certificates.
PB then filed with RTC to collect from IRC and Santos with interest. The trial
court ruled in favor of PNB ordering IRC and Santos to pay PNB the total amount of
P700H plus interest of 9% PA, 2% additional interest and 1& PA penalty interest. On
appeal, the CA ordered OBM to pay IRC and Santos whatever amts they will to PNB
with interest.
IRC and Santos now claim that OBM should reimburse them for whatever
amts they may be adjudged to pay PNB by way of compensation for damages
incurred.
ISSUE
Whether or not the claim of IRC and Santos will prosper.
HELD
The Court held in the affirmative. The 2 time deposits matured on 11
January 1968 and 6 February 1968, respectively. However, OBM was not allowed
and suspended to operate only on 31 July 1968 and resolved on 2 August 1968.
There was a yet no obstacle to the faithful compliance by OBM of its liabilities. For
having incurred in delay in the performance of its obligation, OBM should be held for
damages. OBM contends that it had agreed to pay interest only up to the dates of
maturity of the CTD and that Santos is not entitled to interest after maturity dates
had expired.
While it is true that under Article 1956 of the CC, no interest shall be due
unless it has been expressly stipulated in writing, this applies only to interest for the
use of money. It does not comprehend interest paid as damages. OBM is being
required to pay such interest, not as interest income stipulated in the CTD, but as
damages fro failure and delay in the payment of its obligations which thereby
compelled IRC and Santos to resort to the courts.
The applicable rule is that LI, in the nature of damages for non-compliance
with an obligation to puy sum of money, is recoverable from the date judicially or
extra-judicially demand is made.
Bataan Seedling vs Republic, GR No. 141009, 2 July 2002, 383 SCRA 590
24FEB
FACTS
ISSUE
Whether the order to refund the balance of the fund with 12% interest pa is
proper.
HELD
Catungal vs Hao
GR No. 134972, 22 March 2001
355 SCRA 29
FACTS
The original owner Aniana Galang, leased a 3-storey building in Paraaque
to BPI in 1972. During the lease period, BPI subleased the ground floor to Doris Hao.
In 1984, Galang and Hao executed a lease contract on the 2 nd and 3rd floors of the
building. 2 years later, spouses Catungal bought the property from Galang. Upon
expiration of the lease agreements, Catungal demanded Hao to vacate the building.
The demand was unheeded so petitioners filed for ejectment before the MeTC,
which ordered Hao to vacate the premises and pay P20,000 until she finally vacates.
Petitioners moved for clarificatory or amended judgment on the ground that lthough
MeTC ordered defendant to vacate, it only awarded rent or compensation for the
use of said property for the ground floor and not for the entire subject property. the
MeTC amended the judgment but petitioners moved for reconsideration praing that
respondent be ordered to pay P20,000 pm for the use and occupancy of the ground
floor and P10,000 pm for the 2nd and 3rd floors. The case was referred to RTC which
affirmed the decision. On appeal to the CA, the latter reduced the P20,000 to P8,000
and the P10,000 each to P5,000 each.
ISSUE
Whether or not the RTC decision should be reinstated
HELD
Yes. The plaintiff in an ejectment case is entitled to damages caused by his
loss of the use and possession of the premises.
Banco Filipino vs CA
GR No. 129227, 30 May 2000
332 SCRA 241
FACTS
Elsa and Calvin Arcilla secured, on 3 occassions, loan from petitioner as
evidenced by promissory note. REM was also executed. Under said deeds, Banco
Filipino may increase rate of interest on said loans, within the limits allowed by law.
at that time, under Usury Law, the maximum rate of interest for loans secured by
REM was 12% pa. later, the Central bank issued Circular No. 494 provinding for the
maximum interest of 19%pa. meanwhile, Skyli Builders, thru President Calvin Arcilla
secured loans from BPI with FGU Insurance as surety. Banco Filipino issued an
account statement with 17% pa as interest. The Arcillas filed for annulment of the
loan contracts because the rate of interests charged were usurious.
ISSUE
Whether or not respondents are entitled to refund of the alleged interest
overpayments.
HELD
Yes. Private respondents aver that they are entitled to the refund inasmuch
as the escalation clause incorporated in the loan contracts do not have a
corresponding de-escalation clause and is therefore, illegal.
In Banco Filipino Savings & Mortgage Bank vs Navarro, the Court ruled that
Central Bank Circular 494, although it has the force and effect of law, is not a law
and is not the law contemplated by the parties which authorizes the petitioner to
unilaterally raise the interest rate of loan. The reliance on the circular was without
any legal basis.