G.R. No. L-59519 July 20, 1982 ADELA FRANCISCO, petitioner, vs. HON. ALFREDO M. GORGONIO, as !

"s#$#%& Ju$&" o' ()" Cou!( o' F#!s( I%s(a%*" o' R#+al, ,!a%*) ---., Caloo*a% C#(y, D"/u(y S)"!#'' Da%#lo . No!0"!(o, a%$ S/ous"s C)#%& S#ao a%$ L#1 O. C)u, respondents. ,ARREDO, J.: Petition for certiorari seeking the setting aside of the orders of respondent court of August 15, 1980, November 7, 1980, arch !, 1981, "ctober !7, 1981 and #ecember 1$, 1981, particu%ar%& insofar as said orders re'uire petitioner to pa& interest at the rates stated therein in addition to the amount of P150,000.00 (hich has a%read& been paid to private respondents. )he case be%o( stemmed from a contract of %ease entered into on *u%& 5, 1977 bet(een +enaida ,. -oiser .representing her parents, spouses /uis ,. ,rancisco and Ade%a -%as ,rancisco. 0p. !$, 1ecord2 1 of a piece of %and one hundred thirt&3five s'uare meters, more or %ess, situated at No. $91 0"%d2 1i4a% Avenue 56tension, 7a%oocan 7it&, (ith the fo%%o(ing pertinent provisions8 1. )hat the amount of "N5 9:N#15# ,;,)< )9":=AN# P5="= 0P%50,000.002, Phi%ippine 7urrenc&, sha%% be deposited b& the /essee in favor of the /essor upon signing of this agreement> !. )hat out of the deposit of P150,000.00, the amount of P?0,000.00 e'uiva%ent to t(ent& per cent 0!0@2 of said deposit sha%% represent the good(i%% of the store space> ?. )hat the month%& renta% sha%% be )9155 )9":=AN# =5A5N 9:N#15# ,;,)< P5="= 0P?,750.002, Phi%ippine 7urrenc&, and the amount of P!,500.00 sha%% be deducted against the aforesaid deposit and the amount of P1,!50.00 sha%% be in postdated month%& checks for 1! months. ;t is understood and agreed that the month%& renta% aforesaid sha%% begin upon fina% occupanc& of said store space b& the /essee> B. )hat the proposed bui%ding sha%% be constructed and to be finished b& the /essor (ithin $ months from e6ecution of this agreement8 5. )hat the terms of the %ease contract sha%% be ten 0102 &ears from e6ecution hereof, to be rene(ed for a 53&ear period upon agreement of both parties, subCect ho(ever for a reasonab%e increase of month%& renta% after five 052 &ears from e6ecution hereof> $. )hat in case the parties hereof (i%% not agree as to the conditions and terms to be set up in the fina% contract of %ease, then the /essor agrees to return and refund the amount of P150,000.00 as deposit in fu%% (ith %ega% interest to the /essee and this agreement sha%% be considered nu%% and void and (ithout force and effect, if ho(ever, it is the /essee (ho (i%% back out from this agreement, then the amount of P?0,000.00 sha%% be forfeited. "n a& ?0, 1978, private respondents fi%ed a comp%aint, 7ivi% 7ase No. 73$9?5, precise%& the case be%o(, against +enaida ,. -oiser, as attorne&3in3fact of the spouses /uis ,. ,rancisco and Ade%a ,rancisco, a%%eging that in spite of their having paid the P1!0,000.00 advanced renta%s and P?0,000.00 good(i%% stipu%ated in the agreement, and the promise of said defendant to de%iver to them the %eased premises (ithin si6 months from the signing of the contract, she fai%ed to do so (ithout an& %ega% Custification, and instead (as about to turn over possession thereof to Din4a )e%amart, and, therefore, pra&ed thus8 E9515,"15, in vie( of a%% the foregoing it is most respectfu%%& pra&ed as a pre%iminar& matter that a (rit $f pre%iminar& prohibitor& inCunction be issued b& this court pending the fina% termination of this case ordering defendant to desist from a(arding the %eased premises to another and that after due hearing Cudgment be rendered8 1. aking pre%iminar& prohibitor& inCunction fina% and permanent>

!. )hat p%aintiff be entit%ed to the described %eased portion of the bui%ding and ordering defendant to de%iver the same> ?. "rdering defendant to pa& an amount reasonab%& assessed b& the 9onorab%e 7ourt for mora% damages> B. "rdering the defendant to pa& actua% damage as ma& be proven, p%us %ega% interest> 5. And further ordering defendant to pa& the sum of P15,000.00 as and for attorne&Fs fees.

P%aintiffs herein further pra& for such other re%iefs and remedies Cust and e'uitab%e in the premises. 0Pp. !B3!5, 1ecord2 After being summoned, on *une !9, 1978, defendant -oiser 0(ho (as the on%& one served (ith summons2 fi%ed her ans(er a%%eging and pra&ing8 10. )hat the agreement to %ease (as subCect to the fo%%o(ing conditions8 0a2 the reso%utor& condition contained in paragraph $ thereof 'uoted in paragraph ! of this ans(er> 0b2 the specific area of the bui%ding to be constructed (as sti%% to be agreed upon and it (as not provided in the agreement (hat specific area of the bui%ding (as to be %eased b& p%aintiff> 11. )hat p%aintiff and defendant cou%d not agree on the specific area of the ne( bui%ding to be %eased, the choice of (hich (as made difficu%t b& the fact that the frontage as re'uired b& the cit& government> conse'uent%&, defendant opted to consider the agreement nu%% and void and of no force and effect> that defendant tendered pa&ment to p%aintiff before the comp%aint (as fi%ed of the sum of P150,000.00 (ith interest at the %ega% rate as provided in paragraph $ of the agreement, (hich tender of pa&ment (as refused b& the p%aintiff> 1!. )hat defendant is read&, (i%%ing and ab%e to refund or reimburse the amount of P150,000.00 (ith interest at the %ega% rate as provided in paragraph $ of the agreement> And as counterc%aim, defendant respectfu%%& a%%eges8 1?. )hat defendant reiterates the foregoing a%%egations to form integra% part of this counterc%aim> 1B. )hat defendant is %a(fu%%& entit%ed to consider the agreement nu%% and void and of no force and effect and to make a consignation of the amount of P150,000.00 (ith interest at the %ega% rate under paragraph $ of the agreement and to be re%eased from an& further %iabi%it& thereon> 15. )hat due to the unfounded suit fi%ed b& p%aintiff, defendant has been compe%%ed to %itigate to protect her interest and avai% of the services of counse% at an agreed fee of P5,000.00. E9515,"15, it is respectfu%%& pra&ed8 1. )hat the pra&er for a (rit of pre%iminar& inCunction contained in the comp%aint be denied and the temporar& restraining order be set aside> !. After tria%, that Cudgment be rendered dismissing the comp%aint for %ack of merit> ?. "n the counterc%aim, that the Agreement dated *u%& 5, 1977 bet(een p%aintiff and defendant be dec%ared nu%% and void and of no force and effect pursuant to paragraph $ thereof, that the consignation of the amount of P150,000.00 (ith interest at the %ega% rate from *u%& 5, 1977 unti% its deposit in court be accepted b& the court> and that defendant be dec%ared re%eased from an& further %iabi%it& or ob%igation under the said Agreement> B. /ike(ise on the counterc%aim, that p%aintiff be ordered to pa& defendant attorne&Fs fees in the amount of P5,000.00, such e6penses of %itigation as ma& be proven, and to pa& the costs, if an&. #efendant respectfu%%& pra&s for such other re%ief as the court ma& deem Cust and proper in the premises. 0Pp. !93?1, 1ecord2 5vident%&, the court a quo must have issued the restraining order pra&ed for in private respondentFs comp%aint, for on *u%& !B, 1978, defendant -oiser fi%ed a motion pra&ing8 1. )hat the restraining order contained in the order of *une !$, 1978 be %ifted and set aside> and !. )hat p%aintiff be a%%o(ed to deposit (ith the c%erk of court, or (ith such other depositor& as the court ma& determine, the sum of P%50,000.00 subCect to the disposition of the court in its Cudgment. 0Page ??, 1ecord.2 Acting on the foregoing motion, on August 10, 1978 *udge A%berto G. :ba&, (ho (as then sti%% the Cudge in charge of the case, issued the fo%%o(ing order8

"1#51 )he ."mnibus otion. fi%ed b& defendant, thru counse%, on *u%& !5, 1978, is hereb& D1AN)5#, it appearing from the records of this case and from the testimon& of p%aintiff 7hing =iao that (hen on *une !$, 1978 the 7ourt issued a restraining order re'uiting defendant .to desist and refrain from awarding the leased premises to Ginza Telamart., the premises in 'uestion had a%read& been %eased to the said Din4a )e%amart and has been actua%%& occupied b& it, contrar& to the a%%egation and contention of the herein p%aintiffs. 9ence, the continuance of said restraining order is no %onger Custified. As regards the consignment of the sum of P150,000.00, the 7ourt be%ieves that no va%id reason has been advanced b& p%aintiffs (h& the same shou%d not be accepted or granted, subCect to the outcome of this case on the merits and subCect to the orders of this 7ourt. E9515,"15, the restraining order issued b& the 7ourt dated *une !$, 1978, is hereb& %ifted and set aside> and the defendant +enaida ,. -oiser is hereb& authori4ed to deposit (ith the 7%erk of 7ourt the sum of P150,000.00 subCect to the disposition of the 7ourt, as ma& be provided in the decision to be rendered in this case. =" "1#515#. 0Page, ?5, 1ecord.2 9o(ever, on August !!, 1978, the fo%%o(ing motion appears to have been fi%ed b& defendant8 N"E 7" 5= defendant, b& undersigned counse%, and to the 7ourt respectfu%%& moves for a partia% reconsideration of the "rder of August 10, 1978 insofar as said "rder states that8 ... the defendant +enaida ,. -oiser is hereb& authori4ed to deposit (ith the 7%erk of 7ourt the sum of P150,000.00 subCect to the disposition of the court, as ma& be provided in the decision to be rendered in this case. on the fo%%o(ing grounds8 1. )hat as ear%& as *u%& 18, 1978, Ade%a -. ,rancisco, one of defendantFs principa%s 0(ho is a%so defendantFs mother2 had deposited (ith the Associated 7iti4enFs -ank, =angandaan -ranch, the amount of P150,000.00 intended to be refunded to p%aintiffs, as provided in paragraph $ of the Agreement of *u%& 5, 1977 0Anne6 .A. of the 7omp%aint2> !. )hat the said deposit earns interest of %B@ per annum> ?. )hat the said Ade%a -%as ,rancisco, as signified b& her conformit& to this motion, is (i%%ing to keep the said deposit and make it subCect to the disposition of this court, as ma& be provided in the decision to be rendered in this case8 B. )hat no preCudice (ou%d be caused to p%aintiffs under the foregoing arrangement> on the other hand, it (i%% earn for the parties interest at 1B@ per annum unti% disposed of under the Cudgment of this court> 5. )hat as evidence of the deposit a%%eged in paragraph 1 hereof, there is attached to this motion a 6ero6 cop& of a certificate of time deposit issued b& the Associated 7iti4ens -ank, =angandaan -ranch, as Anne6 .A. hereof. E9515,"15, it is respectfu%%& pra&ed that the portion of the "rder dated August 10, 1978 'uoted in the opening paragraph of this motion be amended to read as fo%%o(s8 ... that the defendant +enaida ,. -oiser is hereb& authori4ed to deposit in the name of Ade%a -. ,rancisco, one of the principa%s in entering into contract (ith p%aintiffs, the sum of P150,000.00 (ith the Associated 7iti4ens -ank, =angandaan -ranch, subCect to the disposition of the court, as ma& be provided in the decision to be rendered in this case. Gue4on 7it& for 7a%oocan 7it&, August !!, 1978. 0=D#.2 ANA7/5)" =. ADN" Attorne& for the #efendant 11? ende4, -aesa Gue4on 7it& E;)9 < 7"N,"1 ;)<8 A#5/A -. ,1AN7;=7" 0Pp. ?83?9, 1ecord.2

7onse'uent%&, *udge :ba& ordered on =eptember 1?, 1978 that8 "1#51 Acting on the . otion for 1econsideration., dated August !!, 1978 and fi%ed b& counse% for defendants, the 7ourt, after a carefu% consideration of the grounds stated therein, as (e%% as the arguments advanced b& counse% for p%aintiff, is of the opinion that the said motion shou%d be, as it is hereb&, D1AN)5#. E9515,"15, the "rder of this 7ourt dated August 10, 1978 is hereb& amended to read as fo%%o(s8 that the defendant +enaida ,. -oiser is hereb& authori4ed to deposit in the name of Ade%a =. ,rancisco, one of her principa%s, in entering into contract (ith the Associated 7iti4ens -ank, =angandaan -ranch, subCect to the disposition of the 7ourt, as ma& be provided in the decision to be rendered in this case, amount sha%% be made (ithout an order from the 7ourt. 0sic2 =" "1#515#. 0Page B1, 1ecord.2 Apparent%&, as a counter3move, respondents fi%ed on *une 10, 1980, a otion to Eithdra( #eposit, asking the court that8

E9515,"15, premises considered, it is respectfu%%& so pra&ed that /im ". 7hu be sno(ed to (ithdra( the P150,000.00 previous%& deposited in bank upon order of this 9onorab%e 7ourt, p%us %ega% rate of interest 01B@ per anum2 from *u%& 5, 1977, the date of the contract, Anne6 .A. of comp%aint. 0Page B?, 1ecord.2 Acting on this motion, on August 15, 1980, the no( respondent Cudge (ho had rep%aced *udge :ba&, after the %atter retired, issued an order pertinent%& ordering that8 7onsidering the foregoing antecedents and subse'uent deve%opments in this case and in the broad interest of Custice and e'uit&, this 7ourt hereb& grants said motion of the p%aintiffs to (ithdra( from the Associated 7iti4ens -ank, 7a%oocan 7it& -ranch, the amount of P150,000.00 p%us the %ega% interests accruing thereon deposited in the name of the defendant Ade%a -. ,rancisco b& (a& of refund to p%aintiffs spouses 7hing =iao and /im ". 7hu and hereb& orders the said bank and defendant +enaida -oiser andHor Ade%a -. ,rancisco in (hose name said amount had been deposited to comp%& (ith this "rder, directing +enaida -oiser andHor Ade%a ,rancisco to (ithdra( from said bank the amount of P150,000.00, together (ith a%% the interests due thereon, and further to turn over said amount to the p%aintiffs spouses (ithin five 052 da&s from receipt of this "rder. ean(hi%e and brushing aside %ega% technica%ities raised b& the parties, this 7ourt (i%% ho%d in abe&ance reso%ution on other matters raised in the p%eadings of the parties 0 otion to Eithdra( #eposit and "pposition to Eithdra(a% of 1enta%s2 unti% such further steps that ma& be henceforth be taken b& the parties3%itigants in this case in the prosecution of their respective side of this case. 0Pp. B53B$, 1ecord.2 )his order (as fo%%o(ed b& another dated November 7, 1980, portions of (hich read8 )he de%iver& of the principa% amount of P150,000.00 to the p%aintiffs no( being a fait accompli (hat remains no( to be reso%ved b& this 7ourt is the amount of the interest to be paid the p%aintiffs. )he defendants maintain that it shou%d be the %ega% rate of si6 0$@2 percent per annum (hi%e the p%aintiffs c%aim their %ega% rate of interest shou%d be t(e%ve percent 01! @2 per annum. -efore reso%ving this issue, this 7ourt finds it i%%uminating that the subCect amount of P150,000.00 as admitted b& the Associated 7iti4ens -ank through their counse%, Att&. )eresita /. Nuguid in her anifestation fi%ed (ith this 7ourt on =eptember ?, 1980, (as deposited b& defendant Ade%a -. ,rancisco thru her attorne&3in3fact, +enaida ,. -oiser in the form of time deposit 0Account No. 7!70, A7-2. 9ence, this 7ourt can take Cudicia% notice of the fact that as time deposit said amount of P150,000.00 earned aggregate interest far above the %ega% rates of 1!@ and 1B@ per annum a%%o(ed b& %a(. ,urthermore, as can be seen from Anne6 .A. of said anifestation of the Associated 7iti4ens -ank, defendant Ade%a -. ,rancisco made an assignment of said time deposit in favor of 5ngr. /aureano 1. Arcadio and no doubt the said ban profited from the interest b& reason of the time deposit far and above said %ega% rates. =aid interest derived b& the defendants b& virtue of said time deposit is of no moment in this case and (hat is contro%%ing as heretofore stated is the agreement not contrar& to %a(, mora%s and pub%ic po%ic& bet(een the parties (hich in this case is and shou%d be the %ega% rate of interest (hich is t(e%ve percent 01!@2 per annum computed from the date of the aforesaid Agreement e6ecuted on *u%& 5, 1977 and to den& the p%aintiffs that the rate of interest due them 01!@2 (ou%d amount to a%%o(ing a part& to enrich himse%f at the e6pense of the other. ;t cannot a%so be said that defendants3 depositor suffered %osses b& reason of making such time deposit because the difference bet(een the %ega% rates of interest and the aggregate interests in time deposits is substantia%.

E9515,"15, premises considered, the defendants Ade%a -. ,rancisco andHor +enaida ,. -oiser, is hereb& ordered8 1. to pa& the p%aintiffs the %ega% rate of interest of t(e%ve percent 01!@2 per annum on the deposit of P150,000.00 computed from *u%& 5, 1977 0date (hen Agreement (as e6ecuted2 up to =eptember 1?, 1978 (hen the mone& (as deposited (ith the Associated 7iti4ens -ank on )ime #eposit pursuant to the "rder of then Presiding *udge, the 9on. A%berto G. :ba&> and !. to pa& the p%aintiffs the %ega% rate of interest of t(e%ve percent 01!@2 per annum on the deposit of P150,000.00 from =eptember 1?, 1978 0date (hen mone& (as deposited (ith the -ank2 up to August !9, 1980, (hen the said deposited mone& (as refunded to the p%aintiffs. 0Pp. B8350, 1ecord.2 And on arch !, 1981, again respondent Cudge ordered8 -efore this 7ourt is p%aintiffsF otion for 56ecution of the "rder dated November 7, 1980, to (hich the defendants fi%e their opposition (ith otion for 1econsideration on *anuar& !9, 1981, and as a reCoinder the p%aintiffs fi%ed their "pposition to #efendantsF otion for 1econsideration on ,ebruar& 1?, 1981. -rushing aside a%% %ega% technica%ities and niceties of the %a( raised b& the respective counse%s in their respective p%eadings, this 7ourt has to reso%ve the issue as to the proper rate of %ega% interest due to the p%aintiffs and to reckon the period from (hich said interest shou%d run in consonance (ith the antecedent facts and circumstances of this case in the broad interest of Custice and e'uit&. )his 7ourt observes that the parties in the prosecution of their respective c%aims are motivated (ith a desire to get the ma6imum of (hat is due him on the one hand and the desire of the other to give the %east or minimum of (hat he is bound to pa&. At first b%ush considering that the bone of contention revo%ves in the determination of the proper rate of interest and the period to be covered, the issue seems inconse'uentia% but considering the amount invo%ved (hich is to the tune of P150,000.00 the respective positions taken b& the parties in the instant case is 'uite understandab%e. 9ence, this 7ourt (i%% reso%ve the issue on the basis of the time3honored %ega% dictum that .no one sha%% enrich himse%f at the e6pense of another. in conCunction (ith the facts and circumstances of this case in the broad interest of Custice and e'uit&. Premises considered, this 7ourt hereb& reconsiders its "rder dated November 7, 1980 and hereb& orders the defendants Ade%a -. ,rancisco andHor +enaida ,. -oiser8 1. )o pa& the p%aintiffs the %ega% rate of interest of nine 09@2 percent per annum on the deposit of P 150,000.00 computed from *u%& 5, 1977 0date of e6ecution of Agreement2 up to =eptember 1?, 1978 (hen the mone& (as deposited (ith the Associated 7iti4ens -ank on )ime #eposit pursuant to the "rder of then Presiding *udge of this 7ourt, 9on. A%berto G. :ba&> and !. )o pa& the p%aintiffs the %ega% rate of interest of t(e%ve 01!@2 percent per annum on the deposit of P150,000.00 from =eptember 1?, 1978 0date (hen mone& (as deposited (ith the -ank2 up to August !9, 1980 0date of refund of the mone& to the p%aintiffs2. 0Pp. 5135?, 1ecord2 "n *u%& ?1, 1981, petitioner fi%ed a motion to 'uash the (rit of e6ecution issued pursuant to the above order, contending that she (as not proper%& made a part& to the case, since the defendant (as her daughter +enaida ,. -oiser. "n "ctober !7, 1981, respondent Cudge denied said motion ho%ding that said movant had b& certain actuations re%ated to the case vitua%%& submitted her person to its Curisdiction a%though she (as not proper%& made a part& thereto. "n "ctober 1$, 1981, respondent denied petitionerFs motion for reconsideration, hence the instant petition before :s. ,rom a reading of the p%eadings of both parties and %ooking at the case as a (ho%e, Ee fee% that someho( both counse% have centered, even (ith vehemence, on t(o points, (hich cou%d be off3tangent, name%&8 012 petitioner insists that the %o(er court had not ac'uired Curisdiction over her person and 0!2 respondents, for their part, maintain that the& shou%d be paid interest. As far as petitioner is concerned, she evident%& over%ooks the fact that the record revea%s that she gave her e6press conformit& to the motion of defendant -oiser dated August !!, 1978, Ee have 'uoted ear%ier. A%though technica%%&, her contention is correct that she is not a part& to the case be%o(, she vo%untari%& forma%%& manifested to the court .her conformit& to this motion 0of defendant -oiser2 0and2 is (i%%ing to keep the said deposit 0made b& her on *u%& 18, 1978 in her o(n name in the Associated 7iti4ens -ank, =angandaan -ranch2 and make it subCect to the disposition of this court, as ma& be provided in the decision to be rendered in this case.. :nder this circumstance, her being a part& or not in the case has become immateria%. )he fact is that she bound herse%f to an ob%igation (ith the court and the respondents, a%beit, in this connection, it is ver& c%ear that her ob%igation is premised on the .decision to be rendered in this case. e6c%usive%&. And that decision has not materia%i4ed, hence she has nothing to ans(er for.

"n the other hand, the insistence of respondents to recover interests on the P150,000.00, can hard%& have an& %ega% basis, as things deve%oped (hen the& first demanded from defendant -oiser comp%iance (ith the agreement. According to the ans(er fi%ed b& said defendant, it is a%%eged therein, and this a%%egation has not been denied b& respondents, .that defendant tendered pa&ment to the p%aintiff before the comp%aint (as fi%ed 0on a& ?0, 19782 of the sum of P150,000.00 (ith interest at the %ega% rate as provided in paragraph $ of the agreement, (hich tender of pa&ment (as refused b& the p%aintiffs.. "n this score, Ee ho%d to be (e%% taken the fo%%o(ing posture of defendant -oiser, (hich, of course, benefits e'ua%%& her mother8 #A AD5= 7ANN") -5 AEA1#5# E;)9":) P1;"1 #5)51 ;NA);"N ", )95 51;)= ", )95 7A=5. ;N AN< 5A5N), #5,5N#AN) -";=51 9AA;ND )5N#515# )95 A ":N), #A AD5= 7ANN") -5 A#*:#D5# ADA;N=) 951 )he a(ard for interests in an action for the recover& of a sum of mone& partakes of a nature of an a(ard for damages. )hus, Artic%e !!09 of the 7ivi% 7ode provides8 Art. !!09. ;f the ob%igation consists in the pa&ment of a sum of mone&, and the debtor incurs in delay, the indemnit& for damages, there being no stipu%ation to the contrar&, sha%% be the pa&ment of the interest agreed upon, and in the absence of stipu%ation, the %ega% interest, (hich is si6 percent per annum. 7%ear%&, the indemnit& for interest on a monetar& ob%igation attaches on%& (hen the ob%igor incurs de%a&, that is, (hen he is in defau%t, it being a fundamenta% princip%e of %a( that8 )hose ob%iged to de%iver or to do something incur in de%a& from the time the ob%igee Cudicia%%& or e6traCudicia%%& demands from them the fu%fi%%ment of their ob%igation. 0Art. 11$9, 7ivi% 7ode.2 ;n the case at bar, it is not disputed that no demands, Cudicia% or e6traCudicia%, (ere made b& private respondents on defendant -oiser for the return of the amount of P150,000.00. )here cou%d not have been an& because of the nature of the action fi%ed b& private respondents, (hich is for specific performance. 9ence, there is no de%a& of the %atterFs ob%igation, assuming that she be eventua%%& re'uired in the decision of the 7ourt to return the same. :pon the contrar&, it (as private respondents (ho (ere in mora accipiende from the time defendant -oiser tendered and consigned the amount in 7ourt. Art. 1!5$. ;f the creditor to (hom tender of pa&ment has been made refuses (ithout Cust cause to accept, the debtor sha%% be re%eased from the responsibi%it& b& the consignation of the thing or sum done.0Art. 1!5$, 7ivi% 7ode2. )ender and consignation having been proper%& made b& defendant -oiser, she shou%d therefore be re%eased from pa&ing the interests on the sum so deposited. ;n Gregorio Araneta, Inc. vs. Tuazon de Paterno, et al., 91 Phi%. 78$, it (as he%d that tender of pa&ment a%one suspends the running of the interest on the ob%igation. )husI )he matter of the suspension of the running of interest on the %oan is governed b& princip%es (hich regard rea%it& rather than technica%it&, substance rather than form. Dood faith of the offeror or abi%it& to make good the offer shou%d in simp%e Custice e6cuse the debtor from pa&ing interest after the offer (as reCected. A debtor cannot be consider de%in'uent (ho offered checks backed b& sufficient deposit or read& to pa& cash it the creditor chose that means of pa&ment. )echnica% defects of the offer cannot be adduced to destro& its effects (hen the obCection to accept the pa&ment (as based on entire%& different grounds. )hus, although the defective consignation made by the debtor did not discharge the mortgage debt, the running of interest on the loan is suspended by the offer and tender of payment. 0Pp. 17318, 1ecord.2 ;N A;5E ", A// )95 ,"15D";ND, Cudgment is hereb& rendered in favor of petitioner abso%ving her from the pa&ment of the interests c%aimed b& respondents be&ond the date (hen defendant -oiser made her tender, not3on%& because the decision on the merits contemp%ated in her ob%igation aforementioned and on (hich her conformit& to defendant -oiserFs motion of August !!, 1978 (as based has not materia%i4ed because respondents opted to get their mone& back instead of insisting on being given possession of the premises> (hich (as the origina% nature of their action, 2 but a%so because, in conse'uence of -oiserFs tender to return the P150,000.00 prior to the fi%ing of the respondentsF comp%aint, and the refusa% of the %atter to accept the same, no ob%igation to pa& an& interest cou%d attach after the tender (as made. ;n other (ords, defendant -oiser andHor petitioner shou%d pa& 1!@ interest on%& from *anuar& 5, 1978, that is, si6 months after the signing of the contract 2 up to, at the %atest, a& ?0, 1978, (hen the respondentsF comp%aint (as fi%ed, rough%& a %itt%e %ess than four months. No costs.

G.R. No. 90343 Ju%" 19, 1991 S5A5E IN.ES5MEN5 HO6SE, INC., petitioner, vs. 5HE HONORA,LE CO6R5 OF A EALS, HON. J6DGE ERLI5A J. 5RIA 5IRONA, !"s#$#%& Ju$&" o' ()" R"&#o%al 5!#al Cou!( o' 7u"+o% C#(y, ,!a%*) CII a%$ S S. RAFAEL a%$ REF6GIO A76INO, respondents. FELICIANO, J.:p "n 5 Apri% 198!, respondent spouses 1afae% and 1efugio A'uino p%edged certain shares of stock to petitioner =tate ;nvestment 9ouse, ;nc. 0.=tate.2 in order to secure a %oan of P1!0,000.00 designated as Account No. ;,38!30$?13AA. Prior to the e6ecution of the p%edge, respondent3spouses, as an accommodation to and together (ith the spouses *ose and arce%ina A'uino, signed an agreement 0Account No. ;,38!31?793AA2 (ith petitioner =tate for the %atterFs purchase of receivab%es amounting to P?75,000.00. Ehen Account No. ;,38!30$?13AA fe%% due, respondent spouses paid the same part%& (ith their o(n funds and part%& from the proceeds of another %oan (hich the& obtained a%so from petitioner =tate designated as Account No. ;,38!3090B3AA. )his ne( %oan (as secured b& the same p%edge agreement e6ecuted in re%ation to Account No. ;,38!0$?13AA. Ehen the ne( %oan matured, =tate demanded pa&ment. 1espondents e6pressed (i%%ingness to pa&, re'uesting that upon pa&ment, the shares of stock p%edged be re%eased. Petitioner =tate denied the re'uest on the ground that the %oan (hich it had e6tended to the spouses *ose and arce%ina A'uino 0Account No. ;,38!3 1?793 AA2 had remained unpaid. "n !9 *une 198B, Att&. 1o%ando =a%onga sent to respondent spouses a Notice of Notaria% =a%e stating that upon re'uest of =tate and b& virtue of the p%edge agreement, he (ou%d se%% at pub%ic auction the shares of stock p%edged to =tate. )his prompted respondents to fi%e a case before the 1egiona% )ria% 7ourt of Gue4on 7it& a%%eging that the intended forec%osure sa%e (as i%%ega% because from the time the ob%igation under Account No. ;,38!3090B3AA became due, the& had been ab%e and (i%%ing to pa& the same, but petitioner had insisted that respondents pa& even the %oan account of *ose and arce%ina A'uino (hich had not been secured b& the p%edge. ;t (as further a%%eged that their fai%ure to pa& their %oan 0Account No. ;,38!3090B3AA2 (as e6cused because the petitioner =tate itse%f had prevented the satisfaction of the ob%igation. )he tria% court, in a decision dated 1B #ecember 198B rendered b& *udge Ei%%e%mo ,ortun, initia%%& dismissed the comp%aint. 1espondent spouses fi%ed a motion for reconsideration pra&ing for a ne( decision ordering petitioner =tate to re%ease the shares upon pa&ment of respondentsF %oan .without interest,. as the %atter had not been in de%a& in the performance of their ob%igation. =tate countered that the p%edge e6ecuted b& respondent spouses a%so covered the %oan e6tended to *ose and arce%ina A'uino, (hich too shou%d be paid before the shares ma& be re%eased. Acting on the motion for reconsideration, *udge ,ortun set aside his origina% decision and rendered a ne( Cudgment dated !9 *anuar& 1985, ordering =tate to immediate%& re%ease the p%edge and to de%iver to respondents the share of stock .upon pa&ment of the %oan under 7ode No. 8!3090B3AA.. "n appea%, the 7ourt of Appea%s affirmed in toto the ne( decision of the tria% court, ho%ding that the %oan e6tended to *ose and arce%ina A'uino, having been e6ecuted prior to the p%edge (as not covered b& the p%edge (hich secured on%& %oans e6ecuted subse'uent%&. )hus, upon pa&ment of the %oan under 7ode No. ;,3090B3AA, the shares of stock shou%d be re%eased. )he decisions of the 7ourt of Appea%s and of *udge ,ortun became fina% and e6ecutor&. :pon remand of the records of the case to the tria% court for e6ecution, there deve%oped disagreement over the amount (hich respondent spouses 1afae% and 1efugio A'uino shou%d pa& to secure the re%ease of the shares of stock I petitioner =tate contending that respondents shou%d a%so pa& interest and respondents arguing the& shou%d not. 1espondent spouses then fi%ed a motion (ith the tria% court to c%arif& the ,ortun decision pra&ing that an order issue c%arif&ing the phrase .upon pa&ment of p%aintiffsF %oan. to mean upon pa&ment of p%aintiffF %oan in the principa% amount of P110,000.00 a%one, .without interest, penalties and other charges.. "n 17 ,ebruar& 1989, the tria% court, speaking this time through *udge Per%ita )ria )irona, rendered a decision purporting to c%arif& the decision of *udge ,ortun and ru%ing that petitioner =tate sha%% re%ease respondentsF shares of stock upon pa&ment b& respondents of the principa% of the %oan as set forth in PN No. 8!3090B3AA in the amount of P110,000.00, without interest, penalties and other charges. Petitioner =tate appea%ed *udge )ironaFs decision to the 7ourt of Appea%s> the appea% (as dismissed. )he 7ourt of Appea%s agreed (ith *udge )irona that no interest need be paid and added that the c%arificator& 0)irona2 decision of the tria% court mere%& restated (hat had been provided for in the ear%ier 0,ortun2 decision> that the )irona decision did not go be&ond (hat had been adCudged in the ear%ier decision. )he motion for reconsideration fi%ed b& petitioner (as according%& denied. 9ence, this Petition for 1evie( contending that no manifest ambiguit& e6isted in the decision penned b& *udge ,ortun> that the tria% court through *udge )irona, erred in c%arif&ing the decision of *udge ,ortun> and that the amendment sought to be introduced in the ,ortun decision b& respondents ma& not be made as the same (as substantia% in nature and the ,ortun decision had become fina%. Ee begin b& noting that the tria% court has asserted authorit& to issue the c%arificator& order in respect of the decision of *udge ,ortun, even though that Cudgment had become fina% and e6ecutor&. ;n einsurance !ompany of the "rient, Inc. v. !ourt of Appeals, 1 this 7ourt had occasion to dea% (ith the app%icab%e doctrine to some e6tent8

3 3 3 J5Kven a Cudgment (hich has become fina% and e6ecutor& ma& be c%arified under certain circumstances. )he dispositive portion of the Cudgment ma&, for instance, contain an error c%ear%& c%erica% in nature 0perhaps best i%%ustrated b& an error in arithmetica% computation2 or an ambiguit& arising from inadvertent omission, (hich error ma& be rectified or ambiguit& c%arified and the omission supp%ied b& reference primari%& to the bod& of the decision itse%f =upp%ementar& reference to the p%eadings previous%& fi%ed in the case ma& a%so be resorted to b& (a& of corroboration of the e6istence of the error or of the ambiguit& in the dispositive part of the Cudgment. ;n #ocsin, et al. v. Parades, et al., this 7ourt a%%o(ed a Cudgment (hich had become fina% and e6ecutor& to be c%arified b& supp%&ing a (ord (hich had been inadvertent%& omitted and (hich, (hen supp%ied, in effect changed the %itera% import of the origina% phraseo%og&8 . . . it c%ear%& appears from the a%%egations of the comp%aint, the promissor& note reproduced therein and made a part thereof, the pra&er and the conc%usions of fact and of %a( contained in the decision of the respondent Cudge, that the ob%igation contracted b& the petitioners is Coint and severa% and that the parties as (e%% as the tria% Cudge so understood it. $nder the %uridical rule that the %udgment should be in accordance with the allegations, the evidence and the conclusions of fact and law, the dispositive part of the %udgment under consideration should have ordered that the debt be paid &severally& and in omitting the word or adverb &severally& inadvertently, said %udgment became ambiguous. This ambiguity may be clarified at any time after the decision is rendered and even after it had become final 0?B 7orpus *uris, !?5, ?!$2. )his respondent Cudge did not, therefore, e6ceed his Curisdiction in c%arif&ing the dispositive part of the Cudgment b& supp%&ing the omission. 05mphasis supp%ied2 ;n 'ilipino #egion !orporation vs. !ourt of Appeals, et al., the app%icab%e princip%e (as set out in the fo%%o(ing terms8 JEKhere there is ambiguity caused by an omission or mista(e in the dispositive portion of a decision, the court may clarify such ambiguity b& an amendment even after the %udgment had become final, and for this purpose it ma& resort to the p%eadings fi%ed b& the parties, the courtFs findings of facts and conc%usions of %a( as e6pressed in the bod& of the decision. 05mphasis supp%ied2 ;n epublic )urety and Insurance !ompany, Inc. v. Intermediate Appellate !ourt, the 7ourt, in app%&ing the above doctrine, said8 . . . Ee c%arif&, in other (ords, (hat (e did affirm. )hat is invo%ved here is not (hat is ordinari%& regarded as a c%erica% error in the dispositive part of the decision of the 7ourt of ,irst ;nstance, . . . At the same time, (hat is invo%ved here is not a correction of an erroneous Cudgment or dispositive portion of a Cudgment. Ehat (e be%ieve is invo%ved here is in the nature of an inadvertent omission on the part of the 7ourt of ,irst ;nstance 0(hich shou%d have been noticed b& private respondentsF counse% (ho had prepared the comp%aint2, of (hat might be described as a %ogica% fo%%o(3through of something set forth both in the bod& of the decision and in the dispositive portion thereof> the inevitab%e fo%%o(3 through, or trans%ation into, operationa% or behaviora% terms, of the annu%ment of the #eed of =a%e (ith Assumption of ortgage, from (hich petitionersF tit%e or c%aim of tit%e embodied in )7) 1??15? f%o(s. 05mphasis supp%ied2 2 0:nderscoring in the origina%> citations omitted2 )he 'uestion (e must reso%ve is thus (hether or not there is an ambiguit& or c%erica% error or inadvertent omission in the dispositive portion of the decision of *udge ,ortun (hich ma& be %egitimate%& c%arified b& referring to the bod& of the decision and perhaps even the p%eadings fi%ed before him. )he decision of *udge ,ortun disposing of the motion for reconsideration fi%ed b& respondent spouses 1afae% and 1efugio A'uino consisted basica%%& of 'uoting practica%%& the (ho%e motion for reconsideration. ;n its dispositive portion, *udge ,ortunFs decision stated8 E9515,"15, p%aintiffs . otion for 1econsideration. dated *anuar& ?, 1985, is granted and the decision of this 7ourt dated #ecember 1B, 198B is hereb& revoked and set aside and another Cudgment is hereb& rendered in favor of p%aintiffs as fo%%o(s8 012 "rdering defendants to immediate%& re%ease the p%edge on, and to de%iver to p%aintiffs, the shares of stocks enumerated and described in paragraph B of p%aintiffsF comp%aint dated *u%& 17, 198B, upon pa&ment of p%aintiffs %oan under 7ode No. 8!3090B3AA to defendants> 0!2 "rdering defendant =tate ;nvestment 9ouse, ;nc. to pa& to p%aintiffs P10,000.00 as mora% damages, P5,000.00 as e6emp%ar& damages, P$,000.00 as attorne&Fs fees, p%us costs> 0?2 #ismissing defendantsF counterc%aim, for %ack of merit and making the pre%iminar& inCunction permanent. =" "1#515#. 2 *udge ,ortun evident%& meant to act favorab%& on the motion for reconsideration of the respondent A'uino spouses and in effect accepted respondent spousesF argument that the& had not incurred mora considering that their fai%ure to pa& PN No. ;,8!3090B3AA on

time had been due to petitioner =tateFs unCustified refusa% to re%ease the shares p%edged to it. ;t is not, ho(ever, c%ear to (hat precise e6tent *udge ,ortun meant to grant the motion for reconsideration. )he promissor& note in Account No. ;,38!3090B3AA had three 0?2 components8 0a2 principa% of the %oan in the amount of P110,000.00> 0b2 regu%ar interest in the amount of seventeen percent 017@2 per annum> and 0c2 additiona% or pena%t& interest in case of non3pa&ment at maturit&, at the rate of t(o percent 0!@2 per month or t(ent&3 four percent 0!B@2 per annum. ;n the dispositive part of his reso%ution, *udge ,ortun did not specif& (hich of these components of the %oan he (as ordering respondent spouses to pa& and (hich component or components he (as in effect de%eting. Ee cannot assume that *udge ,ortun meant to grant the re%ief pra&ed for b& respondent spouses in a%% its parts. ,or one thing, respondent spouses in their motion for reconsideration asked for .at %east P50,000.00. for mora% damages and .at %east P50,000.00. for e6emp%ar& damages, as (e%% as P!0,000.00 b& (a& of attorne&Fs fees and %itigation e6penses. *udge ,ortun granted respondent spouses on%& P10,000.00 as mora% damages and P5,000.00 as e6emp%ar& damages, p%us P$,000.00 as attorne&Fs fees and costs. ,or another, respondent spouses asked *udge ,ortun to order the re%ease of the shares p%edged .upon pa&ment of Jrespondent spousesFK %oan under 7ode No. 8!3090B3 AA without interest, as p%aintiffs (ere not in de%a& in accordance (ith Artic%e $9 of the Ne( 7ivi% 7ode LL . 05mphasis supp%ied2. ;n other (ords, respondent spouses did not themse%ves become ver& c%ear (hat the& (ere asking *udge ,ortun to grant them> the& did not apparent%& distinguish bet(een regu%ar interest or .monetar& interest. in the amount of seventeen percent 017@2 per annum and pena%t& charges or .compensator& interest. in the amount of t(o percent 0!@2 per month or t(ent&3four percent 0!B@2 per annum. ;t thus appears that the ,ortun decision (as ambiguous in the sense that it (as cr&ptic. Ee be%ieve that in these circumstances, (e must assume that *udge ,ortun meant to decide in accordance with law, that (e cannot fair%& assume that *udge ,ortun (as gross%& ignorant of the %a(, or that he intended to grant the respondent spouses re%ief to (hich the& (ere not entit%ed under %a(. )hus, the u%timate 'uestion (hich arises is8 if respondent A'uino spouses (ere not in de%a&, (hat shou%d the& have been he%d %iab%e for in accordance with law* Ee be%ieve and so ho%d that since respondent A'uino spouses (ere he%d not to have been in de%a&, the& (ere proper%& %iab%e on%& for8 0a2 the principa% of the %oan or P110,000.00> and 0b2 regu%ar or monetar& interest in the amount of seventeen percent 017@2 per annum. )he& (ere not %iab%e for pena%t& or compensator& interest, fi6ed b& the promissor& note in Account No. ;,38!3090B3AA at t(o percent 0!@2 per month or t(ent&3four 0!B@2 per annum. ;t must be stressed in this connection that under Artic%e !!09 of the 7ivi% 7ode (hich provides that . . . JiKf the ob%igation consists in the pa&ment of a sum of mone&, and the debtor incurs in de%a&. the indemnit& for damages, there being no stimu%ation to the contrar&. sha%% be the pa&ment of the interest agreed upon, and in the absence of stipu%ation, the %ega% interest, (hich is si6 per cent per annum. the appropriate measure for damages in case of de%a& in discharging an ob%igation consisting of the pa&ment of a sum or mone&, is the pa&ment of pena%t& interest at the rate agreed upon> and in the absence of a stipu%ation of a particu%ar rate of pena%t& interest, then the pa&ment of additiona% interest at a rate e'ua% to the regu%ar monetar& interest> and if no regu%ar interest had been agreed upon, then pa&ment of %ega% interest or si6 percent 0$@2 per annum. 8 )he fact that the respondent A'uino spouses (ere not in defau%t did not mean that the&, as a matter of %a(, (ere re%ieved from the pa&ment not on%& of pena%t& or compensator& interest at the rate of t(ent&3four percent 0!B@2 per annum but a%so of regu%ar or monetar& interest of seventeen percent 017@2 per annum. )he regu%ar or monetar& interest continued to accrue under the terms of the re%evant promissor& note unti% actua% pa&ment is effected. )he pa&ment of regu%ar interest constitutes the price or cost of the use of mone& and thus, unti% the principa% sum due is returned to the creditor, regu%ar interest continues to accrue since the debtor continues to use such principa% amount. )he re%evant ru%e is set out in Artic%e 1!5$ of the 7ivi% 7ode (hich provides as fo%%o(s8 Art. 1!5$. ;f the creditor to (hom tender of pa&ment has been made refuses (ithout Cust cause to accept it, the debtor sha%% be re%eased from responsibi%it& by the consignation of the thing or sum due. 7onsignation a%one sha%% produce the same effect in the fo%%o(ing cases8 012 Ehen the creditor is absent or unkno(n, or does not appear at the p%ace of pa&ment> 0!2 Ehen he is incapacitated to receive the pa&ment at the time it is due> 0?2 Ehen, (ithout Cust cause, he refuses to give a receipt> 0B2 Ehen t(o or more persons c%aim the same right to co%%ect> 052 Ehen the tit%e of the ob%igation has been %ost. 05mphasis supp%ied2 Ehere the creditor unCust%& refuses to accept pa&ment, the debtor desirous of being re%eased from his ob%igation must comp%& (ith t(o 0!2 conditions8 0a2 tender of pa&ment> and 0b2 consignation of the sum due. )ender of pa&ment must be accompanied or fo%%o(ed b& consignation in order that the effects of pa&ment ma& be produced. )hus, in #lamas v. Abaya, 5 the =upreme 7ourt stressed that a (ritten tender of pa&ment a%one, (ithout consignation in court of the sum due, does not suspend the accruing of regu%ar or monetar& interest.

;n the instant case, respondent spouses A'uino, (hi%e the& are proper%& regarded as having made a (ritten tender of pa&ment to petitioner =tate, fai%ed to consign in court the amount due at the time of the maturit& of Account No. ;,38!090B3AA. ;t fo%%o(s that their ob%igation to pa& principa%3cum3regu%ar or monetar& interest under the terms and conditions of Account No. ;,38!3090B3AA (as not e6tinguished b& such tender of pa&ment a%one. ,or the respondent spouses to continue in possession of the principa% of the %oan amounting to P110,000.00 and to continue to use the same after maturit& of the %oan (ithout pa&ment of regu%ar or monetar& interest, (ou%d constitute unCust enrichment on the part of the respondent spouses at the e6pense of petitioner =tate even though the spouses had not been gui%t& of mora. ;t is precise%& this unCust enrichment (hich Artic%e 1!5$ of the 7ivi% 7ode prevents b& re'uiring, in addition to tender of pa&ment, the consignation of the amount due in court (hich amount (ou%d thereafter be deposited b& the 7%erk of 7ourt in a bank and earn interest to (hich the creditor (ou%d be entit%ed. E9515,"15, the Petition for 1evie( is hereb& D1AN)5# #:5 7":1=5. )he #ecision of the 7ourt of Appea%s dated ?0 August 1989 in 7.A.3D.1. No. 1795B and the #ecision of the 1egiona% )ria% 7ourt dated 17 ,ebruar& 1989 in 7ivi% 7ase No. G3B!188 are hereb& 15A51=5# and =5) A=;#5. )he dispositive portion of the decision of *udge ,ortun is hereb& c%arified so as to read as fo%%o(s8 012 "rdering defendants to immediate%& re%ease the p%edge and to de%iver to the p%aintiff spouses 1afae% and 1efugio A'uino the shares of stock enumerated and described in paragraph B of said spousesF comp%aint dated 17 *u%& 198B, upon fu%% pa&ment of the amount of P110,000.00 p%us seventeen percent 017@2 per annum regu%ar interest computed from the time of maturit& of the p%aintiffsF %oan 0Account No. ;,38!3090B3AA2 and unti% fu%% pa&ment of such principa% and interest to defendants> 0!2 "rdering defendant =tate ;nvestment 9ouse, ;nc. to pa& to the p%aintiff spouses 1afae% and 1efugio A'uino P10,000.00 as mora% damages, P5,000.00 as e6emp%ar& damages, P$,000.00 as attorne&Fs fees, p%us costs> and 0?2 #ismissing defendantsF counterc%aim for %ack of merit and making the pre%iminar& inCunction permanent.. No pronouncement as to costs. =" "1#515#.

G.R. No. 43101-02 S"/("10"! 20, 1991 5IO 9HE CHIO, petitioner, vs. 5HE HONORA,LE CO6R5 OF A FERNAN, C.J.:p )he issue in this petition for certiorari and prohibition is the %ega% rate of interest to be imposed in actions for damages arising from unpaid insurance c%aims. Petitioner )io Mhe 7hio c%aims that it shou%d be t(e%ve 01!@2 per cent pursuant to Artic%es !B? and !BB of the ;nsurance 7ode (hi%e private respondent 5astern Assurance and =uret& 7orporation 05A=7"2 c%aims that it shou%d be si6 0$@2 per cent under Artic%e !!09 of the 7ivi% 7ode. )he facts are as fo%%o(s8 "n #ecember 18, 1978, petitioner )io Mhe 7hio imported one thousand 01,0002 bags of fishmea% va%ued at N?$,000.?0 from Agro ;mpe6, :.=.A. #a%%as, )e6as, :.=.A. )he goods (ere insured (ith respondent 5A=7" and shipped on board the HA Peskov, a vesse% o(ned b& ,ar 5astern =hipping 7ompan&. Ehen the goods reached ani%a on *anuar& !8, 1979, the& (ere found to have been damaged b& sea (ater (hich rendered the fishmea% use%ess. Petitioner fi%ed a c%aim (ith 5A=7" and ,ar 5astern =hipping. -oth refused to pa&. Ehereupon, petitioner sued them before the then 7ourt of ,irst ;nstance of 7ebu, -ranch ;; for damages. 5A=7", as the insurer, fi%ed a counterc%aim against the petitioner for the recover& of P18,?87.8$ representing the unpaid insurance premiums. "n *une ?0, 198!, the tria% court rendered Cudgment ordering 5A=7" and ,ar 5astern =hipping to pa& petitioner so%idari%& the sum of P105,98$.$8 %ess the amount of P18,?87.8$ for unpaid premiums (ith interest at the %ega% rate from the fi%ing of the comp%aint, the sum of P15,000.00 as attorne&Fs fees and the costs. 1 )he Cudgment became fina% as to 5A=7" but the shipping compan& appea%ed to the 7ourt of Appea%s and (as abso%ved from %iabi%it& b& the said court in A73D.1. No. 001$1, entit%ed +Tio ,he !hio vs. -astern Assurance and )urety !orporation.+ )he tria% court, upon motion b& petitioner, issued a (rit of e6ecution against 5A=7". )he sheriff enforcing the (rit reported%& fi6ed the %ega% rate of interest at t(e%ve 01!@2. 1espondent 5A=7" moved to 'uash the (rit a%%eging that the %ega% interest to be computed shou%d be si6 0$@2 per cent per annum in accordance (ith Artic%e !!09 of the 7ivi% 7ode and not t(e%ve 01!@2 per cent as insisted upon b& petitionerFs counse%. ;n its order of *u%& ?0, 198$, the tria% court denied 5A=7"Fs motion. 5A=7" then fi%ed a petition for certiorari and prohibition before the 7ourt of Appea%s. "n *u%& ?0, 198$, the Appe%%ate 7ourt rendered the assai%ed Cudgment, the dispositive part of (hich states8 E9515,"15, the order dated *u%& ?0, 198$ is hereb& =5) A=;#5 in so far as it fi6es the interest at 1!@ on the principa% amount of P87,598.8! from the date of fi%ing of the comp%aint unti% the fu%% pa&ment of the amount, and the interest that the private respondent is entit%ed to co%%ect from the petitioner is hereb& reduced to $@ per annum. No pronouncement as to costs. 2 ;n disputing the aforesaid decision of the 7ourt of Appea%s, petitioner maintains that not on%& is it unCust and unfair but it is a%so contrar& to the correct interpretation of the fi6ing of interest rates under =ections !B? and !BB of the ;nsurance 7ode. And since petitionerFs c%aims is based on an insurance contract, then it is the ;nsurance 7ode (hich must govern and not the 7ivi% 7ode. Ee ru%e for respondent 5A=7". )he %ega% rate of interest in the case at bar is si6 0$@2 per annum as correct%& he%d b& the Appe%%ate 7ourt. =ection !B? of the ;nsurance 7ode provides8 )he amount of an& %oss or damage for (hich an insurer ma& be %iab%e, under an& po%ic& other than %ife insurance po%ic&, sha%% be paid (ithin thirt& da&s after proof of %oss is received b& the insurer and ascertainment of the %oss or damage is made either b& agreement bet(een the insured and the insurer or b& arbitration> but if such ascertainment is not had or made (ithin si6t& da&s after such receipt b& the insurer of the proof of %oss, then the %oss or damage sha%% be paid (ithin ninet& da&s after such receipt. 1efusa% or fai%ure to pa& the %oss or damage (ithin the time prescribed herein (i%% entit%e the assured to co%%ect interest on the proceeds of the po%ic& for the duration of the de%a& at the rate of t(ice the cei%ing prescribed b& the onetar& -oard, un%ess such fai%ure or refusa% to pa& is based on the ground that the c%aim is fraudu%ent.

EALS a%$ EAS5ERN ASS6RANCE AND S6RE5: COR ORA5ION, respondents.

=ection !BB of the aforementioned 7ode a%so provides8 ;n case of an& %itigation for the enforcement of an& po%ic& or contract of insurance, it sha%% be the dut& of the 7ommissioner or the 7ourt, as the case ma& be, to make a finding as to (hether the pa&ment of the c%aim of the insured has been unreasonab%& denied or (ithhe%d> and in the affirmative case, the insurance compan& sha%% be adCudged to pa& damages (hich sha%% consist of attorne&Fs fees and other e6penses incurred b& the insured person b& reason of such undeniab%e denia% or (ithho%ding of pa&ment p%us interest of t(ice the cei%ing prescribed b& the onetar& -oard of the amount of the c%aim due the insured, from the date fo%%o(ing the time prescribed in section t(o hundred fort&3t(o or in section t(o hundred fort&3three, as the case ma& be, unti% the c%aim is fu%%& satisfied> Provided, )hat the fai%ure to pa& an& such c%aim (ithin the time prescribed in said sections sha%% be considered prima facie evidence of unreasonab%e de%a& in pa&ment. ;n the case at bar, the 7ourt of Appea%s made no finding that there (as an unCustified refusa% or (ithho%ding of pa&ment on petitionerFs c%aim. ;n fact, respondent court had this to sa& on 5A=7"Fs refusa% to sett%e the c%aim of petitioner8 ... 5A=7"Fs refusa% to sett%e the c%aim to )io Mhe 7hio (as based on some ground (hich, (hi%e not sufficient to free it from %iabi%it& under its po%ic&, neverthe%ess is sufficient to negate an& assertion that in refusing to pa&, it acted unCustifiab%&. 666 666 666 )he case posed some genuine issues of interpretation of the terms of the po%ic& as to (hich persons ma& honest%& differ. )his is the reason the tria% court did not sa& 5A=7"Fs refusa% (as unCustified. 2 =imp%& put, the aforecited sections of the ;nsurance 7ode are not pertinent to the instant case. )he& app%& on%& (hen the court finds an unreasonab%e de%a& or refusa% in the pa&ment of the c%aims. Neither does 7ircu%ar No. B1$ of the 7entra% -ank (hich took effect on *u%& !9, 197B pursuant to Presidentia% #ecree No. 11$ 0:sur& /a(2 (hich raised the %ega% rate of interest from si6 0$@2 to t(e%ve 01!@2 per cent app%& to the case at bar as b& the petitioner. )he adCusted rate mentioned in the circu%ar refers on%& to %oans or forbearances of mone&, goods or credits and court Cudgments thereon but not to court Cudgments for damages arising from inCur& to persons and %oss of propert& (hich does not invo%ve a %oan. 8 ;n the case of Philippine abbit .us #ines, Inc. vs. !ruz, D.1. No. 71017, *u%& !8, 198$, 1B? =71A 158, the 7ourt dec%ared that the %ega% rate of interest is si6 0$@2 per cent per annum, and not t(e%ve 01!@2 per cent, (here a Cudgment a(ard is based on an action for damages for persona% inCur&, not use or forbearance of mone&, goods or credit. ;n the same vein, the 7ourt he%d in G)I) vs. !ourt of Appeals, D.1. No. 5!B78, "ctober ?0, 198$, 1B5 =71A ?11, that the rates under the :sur& /a( 0amended b& P.#. 11$2 are app%icab%e on%& to interest b& (a& of compensation for the use or forbearance of mone&, interest b& (a& of damages is governed b& Artic%e !!09 of the 7ivi% 7ode. 7%ear%&, the app%icab%e %a( is Artic%e !!09 of the 7ivi% 7ode (hich reads8 ;f the ob%igation consists in the pa&ment of a sum of mone& and the debtor incurs in de%a&, the indemnit& for damages, there being no stipu%ation to the contrar&, sha%% be the pa&ment of interest agreed upon, and in the absence of stipu%ation, the %ega% interest (hich is si6 per cent per annum. And in the %ight of the fact that the contending parties did not a%%ege the rate of interest stipu%ated in the insurance contract, the %ega% interest (as proper%& pegged b& the Appe%%ate 7ourt at si6 0$@2 per cent. E9515,"15, in vie( of the foregoing, the petition is #5N;5# for %ack of merit. =" "1#515#.

G.R. No. 94812 July 12, 1998 EAS5ERN SHI ING LINES, INC., petitioner, vs. HON. CO6R5 OF A EALS AND MERCAN5ILE INS6RANCE COM AN:, INC., respondents. .I56G, J.: )he issues, albeit not comp%ete%& nove%, are8 0a2 (hether or not a c%aim for damage sustained on a shipment of goods can be a so%idar&, or Coint and severa%, %iabi%it& of the common carrier, the arrastre operator and the customs broker> 0b2 (hether the pa&ment of %ega% interest on an a(ard for %oss or damage is to be computed from the time the comp%aint is fi%ed or from the date the decision appea%ed from is rendered> and 0c2 (hether the app%icab%e rate of interest, referred to above, is t(e%ve percent 01!@2 or si6 percent 0$@2. )he findings of the court a quo, adopted b& the 7ourt of Appea%s, on the antecedent and undisputed facts that have %ed to the controvers& are hereunder reproduced8 )his is an action against defendants shipping compan&, arrastre operator and broker3for(arder for damages sustained b& a shipment (hi%e in defendantsF custod&, fi%ed b& the insurer3subrogee (ho paid the consignee the va%ue of such %ossesHdamages. "n #ecember B, 1981, t(o fiber drums of ribof%avin (ere shipped from <okohama, *apan for de%iver& vesse% .== 5A=)51N 7" 5). o(ned b& defendant 5astern =hipping /ines under -i%% of /ading No. < A38 056h. -2. )he shipment (as insured under p%aintiffFs arine ;nsurance Po%ic& No. 81H01177 for P?$,?8!,B$$.?8. :pon arriva% of the shipment in ani%a on #ecember 1!, 1981, it (as discharged unto the custod& of defendant etro Port =ervice, ;nc. )he %atter e6cepted to one drum, said to be in bad order, (hich damage (as unkno(n to p%aintiff. "n *anuar& 7, 198! defendant A%%ied -rokerage 7orporation received the shipment from defendant =ervice, ;nc., one drum opened and (ithout sea% 0per .1e'uest for -ad "rder =urve&.. 56h. #2. etro Port

"n *anuar& 8 and 1B, 198!, defendant A%%ied -rokerage 7orporation made de%iveries of the shipment to the consigneeFs (arehouse. )he %atter e6cepted to one drum (hich contained spi%%ages, (hi%e the rest of the contents (as adu%teratedHfake 0per .-ad "rder Ea&bi%%. No. 10$B9, 56h. 52. P%aintiff contended that due to the %ossesHdamage sustained b& said drum, the consignee suffered %osses tota%ing P19,0?!.95, due to the fau%t and neg%igence of defendants. 7%aims (ere presented against defendants (ho fai%ed and refused to pa& the same 056hs. 9, ;, *, M, /2. As a conse'uence of the %osses sustained, p%aintiff (as compe%%ed to pa& the consignee P19,0?!.95 under the aforestated marine insurance po%ic&, so that it became subrogated to a%% the rights of action of said consignee against defendants 0per .,orm of =ubrogation., .1e%ease. and Phi%banking check, 56hs. , N, and "2. 0pp. 8538$, ollo.2 )here (ere, to be sure, other factua% issues that confronted both courts. 9ere, the appe%%ate court said8 #efendants fi%ed their respective ans(ers, traversing the materia% a%%egations of the comp%aint contending that8 As for defendant 5astern =hipping it a%%eged that the shipment (as discharged in good order from the vesse% unto the custod& of etro Port =ervice so that an& damageH%osses incurred after the shipment (as incurred after the shipment (as turned over to the %atter, is no %onger its %iabi%it& 0p. 17, 1ecord2> etroport averred that a%though subCect shipment (as discharged unto its custod&, portion of the same (as a%read& in bad order 0p. 11, 1ecord2> A%%ied -rokerage a%%eged that p%aintiff has no cause of action against it, not having neg%igent or at fau%t for the shipment (as a%read& in damage and bad order condition (hen received b& it, but nonethe%ess, it sti%% e6ercised e6tra ordinar& care and di%igence in the hand%ingHde%iver& of the cargo to consignee in the same condition shipment (as received b& it. ,rom the evidence the court found the fo%%o(ing8 )he issues are8 1. Ehether or not the shipment sustained %ossesHdamages>

!. Ehether or not these %ossesHdamages (ere sustained (hi%e in the custod& of defendants 0in (hose respective custod&, if determinab%e2> ?. Ehether or not defendant0s2 shou%d be he%d %iab%e for the %ossesHdamages 0see p%aintiffFs pre3 )ria% -rief, 1ecords, p. ?B> A%%iedFs pre3)ria% -rief, adopting p%aintiffFs 1ecords, p. ?82. As to the first issue, there can be no doubt that the shipment sustained %ossesHdamages. )he t(o drums (ere shipped in good order and condition, as c%ear%& sho(n b& the -i%% of /ading and 7ommercia% ;nvoice (hich do not indicate an& damages drum that (as shipped 056hs. - and 72. -ut (hen on #ecember 1!, 1981 the shipment (as de%ivered to defendant etro Port =ervice, ;nc., it e6cepted to one drum in bad order. 7orresponding%&, as to the second issue, it fo%%o(s that the %ossesHdamages (ere sustained (hi%e in the respective andHor successive custod& and possession of defendants carrier 05astern2, arrastre operator 0 etro Port2 and broker 0A%%ied -rokerage2. )his becomes evident (hen the arine 7argo =urve& 1eport 056h. D2, (ith its .Additiona% =urve& Notes., are considered. ;n the %atter notes, it is stated that (hen the shipment (as .%anded on vesse%. to dock of Pier O 15, =outh 9arbor, ani%a on #ecember 1!, 1981, it (as observed that .one /01 fiber drum /was1 in damaged condition, covered by the vessel&s Agent&s .ad "rder Tally )heet 2o. 34567.. )he report further states that (hen defendant A%%ied -rokerage (ithdre( the shipment from defendant arrastre operatorFs custod& on *anuar& 7, 198!, one drum (as found opened (ithout sea%, ce%%o bag part%& torn but contents intact. Net unrecovered spi%%ages (as 15 kgs. )he report (ent on to state that (hen the drums reached the consignee, one drum (as found (ith adu%teratedHfaked contents. ;t is obvious, therefore, that these %ossesHdamages occurred before the shipment reached the consignee (hi%e under the successive custodies of defendants. :nder Art. 17?7 of the Ne( 7ivi% 7ode, the common carrierFs dut& to observe e6traordinar& di%igence in the vigi%ance of goods remains in fu%% force and effect even if the goods are temporari%& un%oaded and stored in transit in the (arehouse of the carrier at the p%ace of destination, unti% the consignee has been advised and has had reasonab%e opportunit& to remove or dispose of the goods 0Art. 17?8, N772. #efendant 5astern =hippingFs o(n e6hibit, the .)urn3"ver =urve& of -ad "rder 7argoes. 056hs. ?35astern2 states that on #ecember 1!, 1981 one drum (as found .open.. and thus he%d8 E9515,"15, P15 ;=5= 7"N=;#515#, Cudgment is hereb& rendered8 A. "rdering defendants to pa& p%aintiff, Coint%& and severa%%&8 1. )he amount of P19,0?!.95, (ith the present %ega% interest of 1!@ per annum from "ctober 1, 198!, the date of fi%ing of this comp%aints, unti% fu%%& paid 0the %iabi%it& of defendant 5astern =hipping, ;nc. sha%% not e6ceed :=N500 per case or the 7;, va%ue of the %oss, (hichever is %esser, (hi%e the %iabi%it& of defendant etro Port =ervice, ;nc. sha%% be to the e6tent of the actua% invoice va%ue of each package, crate bo6 or container in no case to e6ceed P5,000.00 each, pursuant to =ection $.01 of the anagement 7ontract2> !. P?,000.00 as attorne&Fs fees, and ?. 7osts. -. #ismissing the counterc%aims and crossc%aim of defendantHcross3c%aimant A%%ied -rokerage 7orporation. =" "1#515#. 0p. !07, 1ecord2. #issatisfied, defendantFs recourse to :=. )he appea% is devoid of merit. After a carefu% scrutin& of the evidence on record. Ee find that the conc%usion dra(n therefrom is correct. As there is sufficient evidence that the shipment sustained damage (hi%e in the successive possession of appe%%ants, and therefore the& are %iab%e to the appe%%ee, as subrogee for the amount it paid to the consignee. 0pp. 87389, ollo.2 )he 7ourt of Appea%s thus affirmed in toto the Cudgment of the court a quo.

;n this petition, 5astern =hipping /ines, ;nc., the common carrier, attributes error and grave abuse of discretion on the part of the appe%%ate court (hen I ;. ;) 95/# P5););"N51 7A11;51 *";N)/< AN# =5A51A//< /;A-/5 E;)9 )95 A11A=)15 "P51A)"1 AN# 7:=)" = -1"M51 ,"1 )95 7/A; ", P1;AA)5 15=P"N#5N) A= D1AN)5# ;N )95 G:5=);"N5# #57;=;"N> ;;. ;) 95/# )9A) )95 D1AN) ", ;N)515=) "N )95 7/A; ", P1;AA)5 15=P"N#5N) =9":/# 7" 5N75 ,1" )95 #A)5 ", )95 ,;/;ND ", )95 7" P/A;N) A) )95 1A)5 ", )E5/A5 P5175N) P- A22$8 ;N=)5A# ", ,1" )95 #A)5 ", )95 #57;=;"N ", )95 )1;A/ 7":1) AN# "N/< A) )95 1A)5 ", =;P P5175N) P- A22$8, P1;AA)5 15=P"N#5N)F= 7/A; -5;ND ;N#;=P:)A-/< :N/;G:;#A)5#. )he petition is, in part, granted. ;n this decision, (e have begun b& sa&ing that the 'uestions raised b& petitioner carrier are not a%% that nove%. ;ndeed, (e do have a fair%& good number of previous decisions this 7ourt can mere%& tack to. )he common carrierFs dut& to observe the re'uisite di%igence in the shipment of goods %asts from the time the artic%es are surrendered to or unconditiona%%& p%aced in the possession of, and received b&, the carrier for transportation unti% de%ivered to, or unti% the %apse of a reasonab%e time for their acceptance b&, the person entit%ed to receive them 0Arts. 17?$317?8, 7ivi% 7ode> Dan4on vs. 7ourt of Appea%s, 1$1 =71A $B$> Mui -ai vs. #o%%ar =teamship /ines, 5! Phi%. 8$?2. Ehen the goods shipped either are %ost or arrive in damaged condition, a presumption arises against the carrier of its fai%ure to observe that di%igence, and there need not be an e6press finding of neg%igence to ho%d it %iab%e 0Art. 17?5, 7ivi% 7ode> Phi%ippine Nationa% 1ai%(a&s vs. 7ourt of Appea%s, 1?9 =71A 87> etro Port =ervice vs. 7ourt of Appea%s, 1?1 =71A ?$52. )here are, of course, e6ceptiona% cases (hen such presumption of fau%t is not observed but these cases, enumerated in Artic%e 17?B 1 of the 7ivi% 7ode, are e6c%usive, not one of (hich can be app%ied to this case. )he 'uestion of charging both the carrier and the arrastre operator (ith the ob%igation of proper%& de%ivering the goods to the consignee has, too, been passed upon b& the 7ourt. ;n 'ireman&s 'und Insurance vs. 8etro Port )ervices 018! =71A B552, (e have e6p%ained, in ho%ding the carrier and the arrastre operator %iab%e in solidum, thus8 )he %ega% re%ationship bet(een the consignee and the arrastre operator is akin to that of a depositor and (arehouseman 0/ua Mian v. ani%a 1ai%road 7o., 19 =71A 5 J19$7K. )he re%ationship bet(een the consignee and the common carrier is simi%ar to that of the consignee and the arrastre operator 0Northern otors, ;nc. v. Prince /ine, et a%., 107 Phi%. !5? J19$0K2. =ince it is the dut& of the A11A=)15 to take good care of the goods that are in its custod& and to de%iver them in good condition to the consignee, such responsibi%it& a%so devo%ves upon the 7A11;51. -oth the A11A=)15 and the 7A11;51 are therefore charged (ith the ob%igation to de%iver the goods in good condition to the consignee. Ee do not, of course, imp%& b& the above pronouncement that the arrastre operator and the customs broker are themse%ves a%(a&s and necessari%& %iab%e so%idari%& (ith the carrier, or vice9versa, nor that attendant facts in a given case ma& not var& the ru%e. )he instant petition has been brought so%e%& b& 5astern =hipping /ines, (hich, being the carrier and not having been ab%e to rebut the presumption of fau%t, is, in an& event, to be he%d %iab%e in this particu%ar case. A factua% finding of both the court a quo and the appe%%ate court, (e take note, is that .there is sufficient evidence that the shipment sustained damage (hi%e in the successive possession of appe%%ants. 0the herein petitioner among them2. According%&, the %iabi%it& imposed on 5astern =hipping /ines, ;nc., the so%e petitioner in this case, is inevitab%e regard%ess of (hether there are others so%idari%& %iab%e (ith it. ;t is over the issue of %ega% interest adCudged b& the appe%%ate court that deserves more than Cust a passing remark. /et us first see a chrono%ogica% recitation of the maCor ru%ings of this 7ourt8 )he ear%& case of 8alayan Insurance !o., Inc., vs. 8anila Port )ervice, 2 decided 2 on 15 a& 19$9, invo%ved a suit for recovery of money arising out of short deliveries and pilferage of goods. ;n this case, appe%%ee a%a&an ;nsurance 0the p%aintiff in the %o(er court2 averred in its comp%aint that the tota% amount of its c%aim for the va%ue of the unde%ivered goods amounted to P?,9B7.!0. )his demand, ho(ever, (as neither estab%ished in its tota%it& nor definite%& ascertained. ;n the stipu%ation of facts %ater entered into b& the parties, in %ieu of proof, the amount of P1,BB7.51 (as agreed upon. )he tria% court rendered Cudgment ordering the appe%%ants 0defendants2 ani%a Port =ervice and ani%a 1ai%road 7ompan& to pa& appe%%ee a%a&an ;nsurance the sum of P1,BB7.51 (ith legal interest thereon from the date the complaint was filed on 63 :ecember 0;46 until full payment thereof. )he appe%%ants then assai%ed, inter alia, the a(ard of %ega% interest. ;n sustaining the appe%%ants, this 7ourt ru%ed8 ;nterest upon an ob%igation (hich ca%%s for the pa&ment of mone&, absent a stipu%ation, is the %ega% rate. =uch interest norma%%& is a%%o(ab%e from the date of demand, Cudicia% or e6traCudicia%. )he tria% court opted for Cudicia% demand as the starting point.

-ut then upon the provisions of Artic%e !!1? of the 7ivi% 7ode, interest .cannot be recovered upon un%i'uidated c%aims or damages, e6cept (hen the demand can be estab%ished (ith reasonab%e certaint&.. And as (as he%d b& this 7ourt in ivera vs. Perez, 8 /3$998, ,ebruar& !9, 195$, if the suit were for damages, .unliquidated and not (nown until definitely ascertained, assessed and determined by the courts after proof /8ontilla c. !orporacion de P.P. Agustinos, 6< Phil. 557= #ichauco v. Guzman, >3 Phil. >?61,. then, interest .should be from the date of the decision.. 05mphasis supp%ied2 )he case of eformina vs. Tomol, 5 rendered on 11 "ctober 1985, (as for . ecovery of :amages for In%ury to Person and #oss of Property.. After tria%, the %o(er court decreed8 E9515,"15, Cudgment is hereb& rendered in favor of the p%aintiffs and third part& defendants and against the defendants and third part& p%aintiffs as fo%%o(s8 "rdering defendants and third part& p%aintiffs =he%% and persons8 ichae%, ;ncorporated to pa& Coint%& and severa%%& the fo%%o(ing

666 666 666 0g2 P%aintiffs Pacita ,. 1eformina and ,rancisco 1eformina the sum of P1?1,08B.00 (hich is the va%ue of the boat , Pacita ;;; together (ith its accessories, fishing gear and e'uipment minus P80,000.00 (hich is the va%ue of the insurance recovered and the amount of P10,000.00 a month as the estimated month%& %oss suffered b& them as a resu%t of the fire of a& $, 19$9 up to the time the& are actua%%& paid or a%read& the total sum of P>7?,???.?? as of @une 5, 0;76 with legal interest from the filing of the complaint until paid and to pa& attorne&Fs fees of P5,000.00 (ith costs against defendants and third part& p%aintiffs. 05mphasis supp%ied.2 "n appea% to the 7ourt of Appea%s, the %atter modified the amount of damages a(arded but sustained the tria% court in adCudging legal interest from the filing of the complaint until fully paid. Ehen the appe%%ate courtFs decision became fina%, the case (as remanded to the %o(er court for e6ecution, and this (as (hen the tria% court issued its assai%ed reso%ution (hich app%ied the $@ interest per annum prescribed in Artic%e !!09 of the 7ivi% 7ode. ;n their petition for revie( on certiorari, the petitioners contended that 7entra% -ank 7ircu%ar No. B1$, providing thus I -& virtue of the authorit& granted to it under =ection 1 of Act !$55, as amended, onetar& -oard in its 1eso%ution No. 1$!! dated *u%& !9, 197B, has prescribed that the rate of interest for the %oan, or forbearance of an& mone&, goods, or credits and the rate a%%o(ed in Cudgments, in the absence of e6press contract as to such rate of interest, sha%% be t(e%ve 01!@2 percent per annum. )his 7ircu%ar sha%% take effect immediate%&. 05mphasis found in the te6t2 I shou%d have, instead, been app%ied. )his 7ourt 3 ru%ed8 )he Cudgments spoken of and referred to are Cudgments in %itigations invo%ving %oans or forbearance of an& mone&, goods or credits. An& other kind of monetar& Cudgment (hich has nothing to do (ith, nor invo%ving %oans or forbearance of an& mone&, goods or credits does not fa%% (ithin the coverage of the said %a( for it is not (ithin the ambit of the authorit& granted to the 7entra% -ank. 666 666 666 7oming to the case at bar, the decision herein sought to be e6ecuted is one rendered in an Action for #amages for inCur& to persons and %oss of propert& and does not invo%ve an& %oan, much %ess forbearances of an& mone&, goods or credits. As correct%& argued b& the private respondents, the %a( app%icab%e to the said case is Artic%e !!09 of the Ne( 7ivi% 7ode (hich reads I Art. !!09. I ;f the ob%igation consists in the pa&ment of a sum of mone&, and the debtor incurs in de%a&, the indemnit& for damages, there being no stipu%ation to the contrar&, sha%% be the pa&ment of interest agreed upon, and in the absence of stipu%ation, the %ega% interest (hich is si6 percent per annum. )he above ru%e (as reiterated in Philippine abbit .us #ines, Inc., v. !ruz, 4 promu%gated on !8 *u%& 198$. )he case (as for damages occasioned b& an inCur& to person and %oss of propert&. )he tria% court a(arded private respondent Pedro anabat actua% and compensator& damages in the amount of P7!,500.00 (ith legal interest thereon from the filing of the complaint until fully paid. 1e%&ing on the eformina v. Tomol case, this 7ourt 8 modified the interest award from 06A to 4A interest per annum but sustained the time computation thereof, i.e., from the filing of the complaint until fully paid. ;n 2a(pil and )ons vs. !ourt of Appeals, 9 the tria% court, in an action for the recover& of damages arising from the co%%apse of a bui%ding, ordered,

inter alia, the .defendant :nited 7onstruction 7o., ;nc. 0one of the petitioners2 . . . to pa& the p%aintiff, . . . , the sum of P989,??5.$8 (ith interest at the legal rate from 2ovember 6;, 0;43, the date of the filing of the complaint until full payment . . . .. =ave from the modification of the amount granted b& the %o(er court, the 7ourt of Appea%s sustained the tria% courtFs decision. Ehen taken to this 7ourt for revie(, the case, on 0? "ctober 198$, (as decided, thus8
E9515,"15, the decision appea%ed from is hereb& "#;,;5# and considering the specia% and environmenta% circumstances of this case, (e deem it reasonab%e to render a decision imposing, as Ee do hereb& impose, upon the defendant and the third3part& defendants 0(ith the e6ception of 1oman "4aeta2 a so%idar& 0Art. 17!?, 7ivi% 7ode, )upra. p. 102 indemnit& in favor of the Phi%ippine -ar Association of ,;A5 ;//;"N 0P5,000,000.002 Pesos to cover a%% damages 0(ith the e6ception to attorne&Fs fees2 occasioned b& the %oss of the bui%ding 0inc%uding interest charges and %ost renta%s2 and an additiona% "N5 9:N#15# )9":=AN# 0P100,000.002 Pesos as and for attorne&Fs fees, the tota% sum being pa&ab%e upon the fina%it& of this decision. $pon failure to pay on such finality, twelve /06A1 per cent interest per annum shall be imposed upon aforementioned amounts from finality until paid. =o%idar& costs against the defendant and third3part& defendants 056cept 1oman "4aeta2. 05mphasis supp%ied2

A motion for reconsideration (as fi%ed b& :nited 7onstruction, contending that .the interest of t(e%ve 01!@2 per cent per annum imposed on the tota% amount of the monetar& a(ard (as in contravention of %a(.. )he 7ourt 10 ru%ed out the app%icabi%it& of the 1eformina and Phi%ippine 1abbit -us /ines cases and, in its reso%ution of 15 Apri% 1988, it e6p%ained8
)here shou%d be no dispute that the imposition of 1!@ interest pursuant to 7entra% -ank 7ircu%ar No. B1$ . . . is app%icab%e on%& in the fo%%o(ing8 012 %oans> 0!2 forbearance of an& mone&, goods or credit> and 0?2 rate a%%o(ed in Cudgments 0Cudgments spoken of refer to Cudgments invo%ving %oans or forbearance of an& mone&, goods or credits. 0Phi%ippine 1abbit -us /ines ;nc. v. 7ru4, 1B? =71A 1$031$1 J198$K> 1eformina v. )omo%, *r., 1?9 =71A !$0 J1985K2. It is true that in the instant case, there is neither a loan or a forbearance, but then no interest is actually imposed provided the sums referred to in the %udgment are paid upon the finality of the %udgment. It is delay in the payment of such final %udgment, that will cause the imposition of the interest. ;t (i%% be noted that in the cases a%read& adverted to, the rate of interest is imposed on the tota% sum, from the fi%ing of the comp%aint unti% paid> in other (ords, as part of the %udgment for damages. 7%ear%&, the& are not app%icab%e to the instant case. 05mphasis supp%ied.2

)he subse'uent case of American -Bpress International, Inc., vs. Intermediate Appellate !ourt 11 (as a petition for revie( on certiorari from the decision, dated !7 ,ebruar& 1985, of the then ;ntermediate Appe%%ate 7ourt reducing the amount of mora% and e6emp%ar& damages a(arded b& the tria% court, to P!B0,000.00 and P100,000.00, respective%&, and its reso%ution, dated !9 Apri% 1985, restoring the amount of damages a(arded b& the tria% court, i.e., P!,000,000.00 as mora% damages and PB00,000.00 as e6emp%ar& damages (ith interest thereon at 06A per annum from notice of %udgment, p%us costs of suit. ;n a decision of 09 November 1988, this 7ourt, (hi%e recogni4ing the right of the private respondent to recover damages, he%d the a(ard, ho(ever, for mora% damages b& the tria% court, %ater sustained b& the ;A7, to be inconceivab%& %arge. )he 7ourt 12 thus set aside the decision of the appe%%ate court and rendered a ne( one, .ordering the petitioner to pa& private respondent the sum of "ne 9undred )housand 0P100,000.002 Pesos as mora% damages, (ith siB /4A1 percent interest thereon computed from the finality of this decision until paid. 05mphasis supp%ied2 1eformina came into fore again in the !1 ,ebruar& 1989 case of 'lorendo v. uiz 12 (hich arose from a breach of emp%o&ment contract. ,or having been i%%ega%%& dismissed, the petitioner (as a(arded b& the tria% court mora% and e6emp%ar& damages (ithout, ho(ever, providing an& %ega% interest thereon. Ehen the decision (as appea%ed to the 7ourt of Appea%s, the %atter he%d8
E9515,"15, e6cept as modified hereinabove the decision of the 7,; of Negros "rienta% dated "ctober ?1, 197! is affirmed in a%% respects, (ith the modification that defendants3appe%%ants, e6cept defendant3appe%%ant erton unn, are ordered to pa&, Coint%& and severa%%&, the amounts stated in the dispositive portion of the decision, inc%uding the sum of P1,B00.00 in concept of compensator& damages, (ith interest at the legal rate from the date of the filing of the complaint until fully paid 05mphasis supp%ied.2 )he petition for revie( to this 7ourt (as denied. )he records (ere thereupon transmitted to the tria% court, and an entr& of Cudgment (as made. )he (rit of e6ecution issued b& the tria% court directed that on%& compensator& damages shou%d earn interest at $@ per annum from the date of the fi%ing of the comp%aint. Ascribing grave abuse of discretion on the part of the tria% Cudge, a petition for certiorari assai%ed the said order. )his 7ourt said8 . . . , it is to be noted that the 7ourt of Appea%s ordered the pa&ment of interest .at the %ega% rate. from the time of the filing of the complaint. . . =aid circu%ar J7entra% -ank 7ircu%ar No. B1$K does not app%& to actions based on a breach of emp%o&ment contract %ike the case at bar. 05mphasis supp%ied2 )he 7ourt reiterated that the $@ interest per annum on the damages shou%d be computed from the time the comp%aint (as fi%ed unti% the amount is fu%%& paid.

Guite recent%&, the 7ourt had another occasion to ru%e on the matter. 2ational Power !orporation vs. Angas, 18 decided on 08 a& 199!, invo%ved the e6propriation of certain parce%s of %and. After conducting a hearing on the comp%aints for eminent domain, the tria% court ordered the petitioner to pa& the private respondents certain sums of mone& as Cust compensation for their %ands so e6propriated .with legal interest thereon . . . until fully paid.. Again, in app%&ing the $@ %ega% interest per annum under the 7ivi% 7ode, the 7ourt 15 dec%ared8

. . . , 0)2he transaction invo%ved is c%ear%& not a %oan or forbearance of mone&, goods or credits but e6propriation of certain parce%s of %and for a pub%ic purpose, the pa&ment of (hich is (ithout stipu%ation regarding interest, and the interest adCudged b& the tria% court is in the nature of indemnit& for damages. )he %ega% interest re'uired to be paid on the amount of Cust compensation for the properties e6propriated is manifest%& in the form of indemnit& for damages for the de%a& in the pa&ment thereof. )herefore, since the kind of interest invo%ved in the Coint Cudgment of the %o(er court sought to be enforced in this case is interest b& (a& of damages, and not b& (a& of earnings from %oans, etc. Art. !!09 of the 7ivi% 7ode sha%% app%&.

7onceded%&, there have been seeming variances in the above ho%dings. )he cases can perhaps be c%assified into t(o groups according to the simi%arit& of the issues invo%ved and the corresponding ru%ings rendered b& the court. )he .first group. (ou%d consist of the cases of eformina v. Tomol 019852, Philippine abbit .us #ines v. !ruz 0198$2, 'lorendo v. uiz 019892 and 2ational Power !orporation v. Angas 0199!2. ;n the .second group. (ou%d be 8alayan Insurance !ompany v. 8anila Port )ervice 019$92, 2a(pil and )ons v. !ourt of Appeals 019882, and American -Bpress International v. Intermediate Appellate !ourt 019882. ;n the .first group., the basic issue focuses on the app%ication of either the $@ 0under the 7ivi% 7ode2 or 1!@ 0under the 7entra% -ank 7ircu%ar2 interest per annum. ;t is easi%& discernib%e in these cases that there has been a consistent ho%ding that the 7entra% -ank 7ircu%ar imposing the 1!@ interest per annum app%ies on%& to %oans or forbearance 13 of mone&, goods or credits, as (e%% as to Cudgments invo%ving such %oan or forbearance of mone&, goods or credits, and that the $@ interest under the 7ivi% 7ode governs (hen the transaction invo%ves the pa&ment of indemnities in the concept of damage arising from the breach or a de%a& in the performance of ob%igations in genera%. "bserve, too, that in these cases, a common time frame in the computation of the $@ interest per annum has been app%ied, i.e., from the time the comp%aint is fi%ed unti% the adCudged amount is fu%%& paid. )he .second group., did not a%ter the pronounced ru%e on the app%ication of the $@ or 1!@ interest per annum, 14 depending on (hether or not the amount invo%ved is a %oan or forbearance, on the one hand, or one of indemnit& for damage, on the other hand. :n%ike, ho(ever, the .first group. (hich remained consistent in ho%ding that the running of the %ega% interest shou%d be from the time of the fi%ing of the comp%aint unti% fu%%& paid, the .second group. varied on the commencement of the running of the %ega% interest. a%a&an he%d that the amount a(arded shou%d bear legal interest from the date of the decision of the court a quo, e6p%aining that .if the suit (ere for damages, Fun%i'uidated and not kno(n unti% definite%& ascertained, assessed and determined b& the courts after proof,F then, interest Fshou%d be from the date of the decision.F. American -Bpress International v. IA!, introduced a different time frame for reckoning the $@ interest b& ordering it to be .computed from the finality of /the1 decision until paid.. )he Nakpi% and =ons case ru%ed that 1!@ interest per annum shou%d be imposed from the fina%it& of the decision unti% the Cudgment amount is paid. )he ostensib%e discord is not difficu%t to e6p%ain. )he factua% circumstances ma& have ca%%ed for different app%ications, guided b& the ru%e that the courts are vested (ith discretion, depending on the e'uities of each case, on the a(ard of interest. Nonethe%ess, it ma& not be un(ise, b& (a& of c%arification and reconci%iation, to suggest the fo%%o(ing ru%es of thumb for future guidance. ;. Ehen an ob%igation, regard%ess of its source, i.e., %a(, contracts, 'uasi3contracts, de%icts or 'uasi3de%icts 18 is breached, the contravenor can be he%d %iab%e for damages. 19 )he provisions under )it%e PA;;; on .#amages. of the 7ivi% 7ode govern in determining the measure of recoverab%e damages. 20 ;;. Eith regard particu%ar%& to an a(ard of interest in the concept of actua% and compensator& damages, the rate of interest, as (e%% as the accrua% thereof, is imposed, as fo%%o(s8 1. Ehen the ob%igation is breached, and it consists in the pa&ment of a sum of mone&, i.e., a %oan or forbearance of mone&, the interest due shou%d be that (hich ma& have been stipu%ated in (riting. 21 ,urthermore, the interest due sha%% itse%f earn %ega% interest from the time it is Cudicia%%& demanded. 22 ;n the absence of stipu%ation, the rate of interest sha%% be 1!@ per annum to be computed from defau%t, i.e., from Cudicia% or e6traCudicia% demand under and subCect to the provisions of Artic%e 11$9 22 of the 7ivi% 7ode. !. Ehen an ob%igation, not constituting a %oan or forbearance of mone&, is breached, an interest on the amount of damages a(arded ma& be imposed at the discretion of the court 28 at the rate of $@ per annum. 25 No interest, ho(ever, sha%% be adCudged on un%i'uidated c%aims or damages e6cept (hen or unti% the demand can be estab%ished (ith reasonab%e certaint&. 23 According%&, (here the demand is estab%ished (ith reasonab%e certaint&, the interest sha%% begin to run from the time the c%aim is made Cudicia%%& or e6traCudicia%%& 0Art. 11$9, 7ivi% 7ode2 but (hen such certaint& cannot be so reasonab%& estab%ished at the time the demand is made, the interest sha%% begin to run on%& from the date the Cudgment of the court is made 0at (hich time the 'uantification of damages ma& be deemed to have been reasonab%& ascertained2. )he actua% base for the computation of %ega% interest sha%%, in an& case, be on the amount fina%%& adCudged. ?. Ehen the Cudgment of the court a(arding a sum of mone& becomes fina% and e6ecutor&, the rate of %ega% interest, (hether the case fa%%s under paragraph 1 or paragraph !, above, sha%% be 1!@ per annum from such fina%it& unti% its satisfaction, this interim period being deemed to be b& then an e'uiva%ent to a forbearance of credit. E9515,"15, the petition is part%& D1AN)5#. )he appea%ed decision is A,,;1 5# (ith the "#;,;7A);"N that the %ega% interest to be paid is =;P P5175N) 0$@2 on the amount due computed from the decision, dated 0? ,ebruar& 1988, of the court a quo. A )E5/A5 P5175N) 01!@2 interest, in %ieu of =;P P5175N) 0$@2, sha%% be imposed on such amount upon fina%it& of this decision unti% the pa&ment thereof. =" "1#515#.

G.R. No. 102590 Ja%ua!y 29, 1992 GO.ERNMEN5 SER.ICE INS6RANCE S:S5EM, petitioner, vs. HON. CO6R5 OF A EALS, 5HE RO.INCIAL SHERIFF OF CA.I5E a%$ .IC5OR G. .ALENCIA, respondents. DA.IDE, JR., J.: ;n this petition for revie( on certiorari under 1u%e B5 of the 1u%es of 7ourt, petitioner (ou%d have :s annu% and set aside, for being inconsistent (ith %a( and Curisprudence, the 1eso%ution 1 of the 7ourt of Appea%s 0=pecia% 5%eventh #ivision2 of 15 *anuar& 199! in 7A3 D.1. =P No. !B0!1 (hich reversed its previous #ecision 2 of !8 *une 1991. )his decision set aside the 7 *une 1990, 10 =eptember 1990 and 5 #ecember 1990 "rders of -ranch 19 of the 1egiona% )ria% 7ourt 01)72 of the ,ourth *udicia% 1egion, sitting at -acoor, 7avite, in 7ivi% 7ase No. -7A 783?? entit%ed .Aictor D. Aa%encia versus GueenFs 1o( =ubdivision, ;nc. and the Dovernment =ervice ;nsurance =&stem.. As disc%osed b& the p%eadings, the sa%ient facts surrounding the instant controvers& are as fo%%o(s8 =evera% &ears back, the GueenFs 1o( =ubdivision, ;nc. 0G1=;2 entered into a construction proCect agreement (ith the Dovernment =ervice ;nsurance =&stem 0D=;=2 b& virtue of (hich the %atter agreed to e6tend a financing %oan to the former for the construction and deve%opment of a residentia% subdivision, comprising some four thousand four hundred ninet&3three 0B,B9?2 housing units, situated at o%ino, -acoor, 7avite> these units (ere to be so%d to D=;= members in accordance (ith the =&stemFs housing program. Pursuant to said proCect agreement, G1=; entered into a construction contract (ith private respondent Aa%encia invo%ving various phases of %and deve%opment in the said subdivision. :pon accomp%ishing and comp%eting his undertaking under the contract, Aa%encia demanded pa&ment from G1=;. #espite repeated demands, ho(ever, G1=; refused to pa&. Aa%encia then fi%ed the comp%aint in the aforementioned 7ivi% 7ase No. -7A3783??, an action for a sum of mone& (ith pra&er for the issuance of a (rit of pre%iminar& attachment. #uring the tria% of the case, Aa%encia, after manifesting that he (as not seeking an& re%ief against the persona% funds of petitioner D=;=, proceeded to present his evidence. No evidence (as offered b& both the petitioner and G1=;. "n ! arch 198!, the tria% court rendered its decision, the dispositive portion of (hich reads8 E9515,"15, premises considered, the 7ourt hereb& renders Cudgment in favor of the p%aintiff and against the defendants, as fo%%o(s8 1. "rdering defendant GueenFs 1o( to pa& p%aintiff the sum of ,":1 9:N#15# ,"1)< 5;D9) )9":=AN# )9155 9:N#15# =5A5N)< ,":1 and 01H100 Pesos 0PBB8,?7B.012, for the first cause of action> the sum of )E" 9:N#15# ,":1 )9":=AN# 5;D9) 9:N#15# )E5N)< "N5 and ?!H100 Pesos 0P!0B,8!1.?!2, for the second cause of action> the sum of "N5 9:N#15# )E" )9":=AN# 5;D9) 9:N#15# =;P)< =;P and ?7H100 0P10!,8$$.?72 Pesos under the third cause of action and ordering the said defendant to return to p%aintiff the amount of )5N )9":=AN# P5="= 0P10,000.002 posted as performance bond, the same amounts to be recovered b& p%aintiff sha%% bear %ega% rate of interest from the date of demands on ,ebruar& 10, 197B, =eptember 1?, 197$ and ,ebruar& ?, 1977, for the first, second and third causes of action, respective%&> !. =entencing defendant GueenFs 1o( to pa& attorne&Fs fees in favor of the p%aintiff in the sum e'ua% to t(ent& 0!0@2 percent of the said amounts ordered recovered and pa&ab%e to said p%aintiff> ?. 1e'uiring the defendant D=;= to ho%d (hatever amounts it has granted to, retained and obtained for defendant GueenFs 1o(, and to de%iver the same to p%aintiff b& (a& of pa&ment to the aforecited amount ordered recovered b& p%aintiff, the same to be credited as pa&ment made b& defendant GueenFs 1o(. ;t is distinct%& made c%ear that defendant D=;= sha%% not be persona%%& %iab%e for the said ob%igation of co3defendant GueenFs 1o(, e6cept as herein above3ordered> ho(ever, pending pa&ment of the said c%aim of p%aintiff, defendants are ordered to respect and satisf& the contractorFs %ien in favor of the p%aintiff as provided for b& %a(. B. #efendant GueenFs 1o( is hereb& ordered to pa& the costs. 5. A%% other c%aims and counterc%aims are hereb& ordered dismissed. =" "1#515#. 2

"n !5 arch 198!, Aa%encia fi%ed a motion for e6ecution pending appea%. Actua%%&, no motion for reconsideration or notice of appea% (as fi%ed b& both G1=; and the petitioner. A%though the motion (as granted b& the tria% court, the (rits issued as a conse'uence thereof (as returned unsatisfied. )hereupon private respondent Aa%encia fi%ed a otion for 56amination of #ebtors of the *udgment #ebtor. Eith the permission of the tria% Cudge, a certain r. Aa%eriano . 5spiritu, a p%aintiff in a separate co%%ection suit against both the petitioner and G1=;, 8 (as Coined as movant (ith Aa%encia. Acting on said motion, the tria% court ordered r. Armando #ia4, Assistant Denera% anager for /oans and ;nvestments of the D=;=, to appear and testif& in accordance (ith =ections ?8 to B0, 1u%e ?9 of the 1u%es of 7ourt. "n 10 November 198!, respondent Aa%encia fi%ed a petition to cite petitioner in contempt of court for the %atterFs fai%ure to comp%& (ith the (rit of e6ecution. "n 15 November 198!, the tria% court issued an order directing the petitioner to comp%& (ith the (rit of e6ecution and instructing r. #ia4 to appear on !$ November 198! under pain of contempt shou%d he fai% to do so. "n !? November 198!, petitioner fi%ed an :rgent otion for 1econsideration of the 15 November 198! "rder. Pending reso%ution of this motion, petitioner partia%%& paid respondent Aa%encia on !$ November 198! the amount of "N5 9:N#15# ,;,)< ,":1 )9":=AN# ,":1 9:N#15# =5A5N)< =;P and 1BH100 P5="= 0P15B,B7$.1B2 out of the retained funds he%d for the account of G1=;. )hereafter, on !0 "ctober 198?, another a%ias (rit of e6ecution (as issued b& the tria% court. "n 5 #ecember 198?, respondent =heriff served upon the petitioner a notice of garnishment upon a%% monies and credits be%onging to G1=; (hich (ere under the contro% and possession of the petitioner. An ans(er to the =heriffFs notice (as submitted b& the %atter stating that the D=;= is not a debtor of G1=;> that it has no credits, monies or interests be%onging to G1=; in its possession or contro%> and that it is in fact the biggest creditor of G1=; (hose outstanding account as of 9 #ecember 198? stood at ,;,)< 5;D9) ;//;"N )E" 9:N#15# =;P)< "N5 )9":=AN# =5A5N 9:N#15# =5A5N)< )9155 and 19H100 P5="= 0P58,!$1,77?.192. ;n its 5 *u%& 1985 "rder, the tria% court ru%ed that the petitioner (as ho%ding funds for G1=;> it thus directed the petitioner to pa& both Aa%encia and Aa%eriano 5spiritu the amount adCudged and covered b& the (rits of e6ecution after deducting the pa&ments previous%& made. )he dispositive portion of the "rder reads8 . . . E9515,"15, premises considered, this 7ourt ho%ds that defendant D=;= ho%ding funds for defendant G1=; has more than sufficient funds to pa& the ob%igation of said GueenFs 1o( =ubdivision, ;nc. (ith the p%aintiffs. 7onse'uent%&, the defendant D=;= is ordered to pa& to p%aintiffs the Cudgment rendered and covered b& (rits of e6ecution after deducting the pa&ments previous%& made . . . . 5 PetitionerFs motion for reconsideration of the said order (as denied b& the tria% court in its "rder of !! a& 198$ on the ground that, inter alia, the c%aim that G1=; is ob%igated to the D=;= (as not estab%ished b& evidence during the tria% of the case. )he "rder reads in part8 . . . 7onsidering that the facts cited are not proper%& sho(n in the record, the court cannot see an& p%ausib%e reason to reverse or other(ise sustain the motion of defendant D=;=. E9515,"15, finding no merit in the motion for reconsideration fi%ed b& defendant D=;=, the same is hereb& denied.
3

"n 9 *une 198$, the tria% court again issued an a%ias (rit of e6ecution. 7onse'uent%&, notices of garnishment (ere served b& the =heriff upon the petitioner and the Phi%ippine Nationa% -ank 0PN-2. "n 1? *une 198$, petitioner fi%ed a motion for the reconsideration of the !! a& 198$ "rder and on 1$ *une 198$, it fi%ed a Notice of Appea% Ad !autelam from the "rders of 5 *u%& 1985 and !! a& 198$. ;t thereafter fi%ed its motion to 'uash the a%ias (rit of e6ecution. ;n its "rder of 10 *u%& 198$, the tria% court denied the aforesaid motion for reconsideration. )he petitioner thus fi%ed on 18 =eptember 198$ (ith the 7ourt of Appea%s a petition for certiorari and prohibition to set aside the aforesaid "rders of 5 *u%& 1985, !! a& 198$ and 10 *u%& 198$, as (e%% as the a%ias (rit of e6ecution of 9 *une 198$ and the Notice of Darnishment of 10 *une 198$. )he case (as docketed as 7A3D.1. =P No. 0995$. ;n its #ecision promu%gated on 17 Apri% 198$, the 7ourt of Appea%s dismissed the aforesaid petition principa%%& on the ground that the tria% courtFs #ecision of ! arch 198! .has %ong become fina%. as neither G1=; nor the herein petitioner had moved for its reconsideration or appea%ed therefrom (ithin the reg%ementar& period. ;t considered as .ine6cusab%e. petitionerFs contention I that it did not need to appea% the decision because according to the tria% court, .defendant D=;= sha%% not be persona%%& %iab%e for the ob%igation of G1=;. I because the fo%%o(ing portion of the tria% courtFs decision8 ?. 1e'uiring defendant D=;= to ho%d (hatever amounts it has granted to, retained and obtained for defendant GueenFs 1o(, and to de%iver same to p%aintiff b& (a& of pa&ment of the aforecited amount ordered recovered b& p%aintiff, the same to be credited as pa&ment made b& the defendant GueenFs 1o(. ;t is distinct%& made c%ear that

defendant D=;= sha%% not be persona%%& %iab%e for the said ob%igation of co3defendant GueenFs 1o(, e6cept, as herein above3ordered> ho(ever, pending pa&ment of the said c%aim of p%aintiff, defendants are ordered to respect and satisf& the contractorFs %ien in favor of the p%aintiff as provided for b& %a(. 4 constitutes8 . . . a fina% or definitive Cudgment on the merits from (hich the part& adverse%& affected can make an appea%. =aid decision imposes an ob%igation on D=;= (hich D=;= has ac'uiesced to do b& its fai%ure to appea% therefrom. 8 and that8 7onse'uent%&, (hen D=;= conformed to the decision and a%%o(ed it to attain fina%it&, it in effect admitted that indeed it has in its possession or contro% credits, monies, and interests be%onging to G1=; and therefore it ob%iged itse%f to pa& the %atterFs ob%igation to Aa%encia as in fact, it did make a partia% pa&ment thereto in the amount of P15B,B7$.1B 0Anne6es .A. and .-., p. 1B1, Ibid2 on November !$, 198!. And as pointed out b& the private respondent in its 7omment to the petition, the cha%%enged decision has not on%& become fina% and e6ecutor& but has in fact been partia%%& e6ecuted b& virtue of the pa&ment on November !$, 198! b& D=;= pursuant to a (rit of e6ecution issued against it out of its retentions. )he fact of pa&ment mean(hi%e a%so constitutes as 0sic2 a (aiver of the %ega% compensation being invoked b& petitioner D=;=. 9 :nsatisfied (ith the said decision, petitioner came to this 7ourt b& (a& of a petition for revie( under 1u%e B5 of the 1u%es of 7ourt> the case (as docketed as D.1. No. 87980. ;n the 1eso%ution of !7 November 1989, this 7ourt denied the petition because o the petitionerFs fai%ure to sho( that the appe%%ate courtFs decision is not supported b& substantia% evidence and that the conc%usions therein are contrar& to %a( and Curisprudence. )his 7ourt stated8 A carefu% revie( of the petition sho(s that it has no merit. )he decision of the respondent 1egiona% )ria% 7ourt had %ong become fina% before the appea% to the 7ourt of Appea%s (as made. )he Argument that GueenFs 1o( o(es D=;= certain sums of mone& (as reCected b& the t(o courts be%o( because it (as never raised during the tria% and no evidence (as presented on the matter. )he respondent court correct%& app%ied P# 159B on government infrastructure contracts regarding progress pa&ments and the (ithho%ding of retention mone& ever&time a certain percentage of the (ork is comp%eted. )he housing units (ere constructed b& the respondent and the& have been so%d b& the D=;= to its members. )he argument of the petitioner that a separate action shou%d be fi%ed b& the private respondent against D=;= (as correct%& reCected because the D=;= (as a part& to the case from the ver& start. As pointed out b& the respondent, the %ega% compensation invoked b& the D=;= (hereb& there (ou%d be compensation as bet(een D=;= and GueenFs 1o( (as (aived b& the fact that D=;= made partia% pa&ments to Aa%encia. 10 )he motion to reconsider this 1eso%ution (as denied (ith fina%it& in the 1eso%ution of 15 *anuar& 1990. )hereafter, respondent Aa%encia moved for the issuance of an a%ias (rit of e6ecution for the amount of ,;A5 ;//;"N =5A5N 9:N#15# ,;,)< N;N5 )9":=AN# =;P 9:N#15# =5A5N)< =5A5N and 97H100 P5="= 0P5,759,$77.972. An opposition thereto (as fi%ed b& the petitioner contesting on%& the amount due and pa&ab%e, particu%ar%& the interests imposed therein. "n 7 *une 1990, the tria% court issued an order the dispositive portion of (hich reads8 E9515,"15, premises considered, this court hereb& orders D=;= to deposit in court or pa& p%aintiff the amounts of the principa% at t(e%ve 01!@2 per cent simp%e interest per annum and attorne&Fs fees %ess pa&ment a%read& made (ithin five 052 da&s from receipt hereof, other(ise, the 7%erk of 7ourt is directed to issue the corresponding a%ias (rit of e6ecution for the said amounts. D=;= is ordered, therefore, to pa& the fo%%o(ing amounts8 a2 PBB8,?7B.01 (ith simp%e interest from ,ebruar& 10, 197B or 195.1$$ months up to 1990. At one percent 0152 0sic2 a month, the interest (ou%d be8 PBB8,?7B.01 6 .01 6 195.1$$ months Q P 875,07?. b2 P!0B,8!1.?! (ith simp%e interest from =eptember 1?, 197$ or 1$B.0$$ months up to 1990. At one percent 01@2 a month, the interest (ou%d be8 P!0B,8!1.?! 6 .01 6 1$B.0$$ mos. Q P??$,0B1.$! 0sic2. a& 15 a& 15,

c2 P10!,8$$.?? (ith simp%e interest from ,eb. ?, 1977 or 159.B months up to percent 01@2 a month, the interest (ou%d be8 P10!,8$$.?? 6 .01 6 159.B mos. Q P1$?,9$8.B0 0sic2. =: Principa% ;nterest )ota% PBB8,?7B.01 P875,07?.$0 P!0B,8!1.?! P??$,0B1.$! 0sic2 P10!,8$$.?7 P1$?,9$8.B0 0sic2 IIIII IIIII P75$,0$1.70 P1,?75,08?.$! Q P!,1?1,1B5.?! Attorne&Fs fees 0!0@2 B!$,!!9.0$ Performance -ond 10,000.00 IIIII )")A/ P!,5$7,?7B.0$ A1<

a& 15, 1990. At one

)his "rder sha%% be (ithout preCudice to (hatever reso%ution that ma& be rendered b& this 7ourt on the issue of proper rate of interest. =" "1#515#. 11 )he rate of interest (as %ater fi6ed in the =upp%ementa% "rder of 10 =eptember 1990 (hich directed the petitioner to pa& the tota% amount of P11,?$?,?0B.!7 I arrived at b& compounding interests ranging from t(e%ve percent 01!@2 to t(ent&3one percent 0!1@2 per annum a%%eged%& in accordance (ith 7entra% -ank 7ircu%ars Nos. B1$, B9B, 58$ and 705 (hich fi6ed the ma6imum %ega% rate of interest at t(e%ve percent 01!@2, seventeen percent 017@2, nineteen percent 019@2 and t(ent&3one percent 0!1@2 per annum, respective%& I %ess the sum of P!,5$7,?7B.0$. 12 ;ts motion for reconsideration of the said supp%ementa% order having been denied b& the tria% court in the "rder of 5 #ecember 1990, petitioner commenced before the respondent 7ourt of Appea%s a petition or certiorari and prohibition to seek the nu%%ification of the "rders of 7 *une 1990, 10 =eptember 1990 and 5 #ecember 1990. )he petition (as docketed as 7A3D.1. =P No. !B0!1. "n !8 *une 1991, respondent 7ourt promu%gated its decision 12 therein in favor of the petitioner8 )he 7ourt, therefore, finds grave abuse of discretion n the tria% courtFs orders re'uiring the petitioner to the pa&ment 0sic2 of mi%%ions of pesos, in favor of the private respondent, Aictor D. Aa%encia, (ithout regard to the amount or amounts that it actua%%& ho%ds, if an&, in favor of GueenFs 1o( =ubdivision, ;nc. )o do other(ise (ou%d vio%ate the ver& Cudgment sought to be e6ecuted. E9515,"15, the orders of *une 7, 1990, =eptember 10, 1990 and #ecember 5, 1990 are hereb& =5) A=;#5. )he case is remanded for proceedings appropriate to determining ho( much funds the petitioner ho%ds in favor of GueenFs 1o( =ubdivision, ;nc., under paragraph ? of the decision of arch ?, Jshou%d be !K 198!, be&ond (hich amount, the petitioner cannot be he%d %iab%e. 18 )he above decision is anchored on the fo%%o(ing dis'uisitions8 )he merit in this petition f%o(s from the %anguage of the no( %ong3fina% decision of arch ?, Jshou%d be !K 198!. )he orders above3cited and comp%ained of have evident%& disregarded, ignored, and he%d ine6istent, he c%ear %anguage of the decision sought to be e6ecuted. )he said Cudgment contains the fo%%o(ing significant restricting and %imiting c%auses, name%&8 012 )hat the Cudgment for mone& resu%ting from the vio%ated contract bet(een respondent Aictor D. Aa%encia and GueenFs 1o( =ubdivision, ;nc. ordered the %atter to pa& the former specific amounts stated in the Cudgment (ith .%ega% rate of interest from the date of demands on ,ebruar& 10, 197B, =eptember 1?, 197$ and ,ebruar& ?, 1977 . . . .. 0!2 )he Dovernment =ervice ;nsurance =&stem is re'uiring to .ho%d (hatever amounts it has granted to, retained and obtained for defendant GueenFs 1o( =ubdivision, ;nc. and de%iver same to p%aintiff b& (a& of pa&ment to the aforecited amount ordered recovered b& the p%aintiff, the same to be credited as pa&ment made b& defendant GueenFs 1o(. ;t is distinct%& made c%ear that defendant D=;= sha%% not be persona%%& %iab%e for the said ob%igation of co3defendant GueenFs 1o(, e6cept as herein above ordered> . . . . . . .

;t does not appear an&(here that the petitioner is in an& manner contractua%%& re%ated to the private respondent, Aictor D. Aa%encia. )he petitioner, under the decision, is ordered to pa&, not because it is principa%%& and direct%& %iab%e to the private respondent under the contracts bet(een GueenFs 1o( =ubdivision, ;nc. and respondent Aictor D. Aa%encia, but because it had granted, retained and obtained funds for GueenFs 1o( =ubdivision, ;nc. ;t is ordered to pa& such funds and to de%iver the same to respondent Aictor D. Aa%encia (hich sha%% be credited as pa&ment for the amounts recovered b& the said private respondent. =trict%& speaking, the petitioner has no standing 'uestioning 0sic2 the rate of interest to be app%ied on the principa%s because on%& GueenFs 1o( =ubdivision ma&, since it is the %atterFs ob%igation that is being %i'uidated and paid for in this manner. )he petitioner is not a debtor of GueenFs 1o( =ubdivision, ;nc. and the decision sought to be e6ecuted does not sa& so. ;t is simp%& being ordered to pa& the funds it ho%ds for GueenFs 1o( =ubdivision, ;nc. in order that the %atterFs indebtedness in favor of Aictor D. Aa%encia ma& be paid fu%%&, or partia%%&. -ut (hi%e the petitioner is ordered to pa& (hatever amount GueenFs 1o( is adCudged to pa&, the Cudgment protects the petitioner b& sa&ing that it sha%% not be persona%%& %iab%e for the pa&ment of the ob%igation of GueenFs 1o( =ubdivision, ;nc., be&ond (hatever funds it ho%ds for GueenFs 1o( =ubdivision, ;nc. )he Cudgment specifica%%& %imits the petitionerFs %iabi%it& to the e6tent of the amounts Fit has granted to be retained and obtained for defendant GueenFs 1o( . . . . . . )herefore, there shou%d be a pre%iminar& in'uir& into ho( much the petitioner ho%ds for GueenFs 1o( =ubdivision, ;nc. )he orders brought up for revie( simp%& order the petitioner to pa& the principa% amounts p%us the computed interest (ithout regard to the amount that the petitioner ho%ds, retains or is granted in favor of GueenFs 1o( =ubdivision, ;nc. -e&ond this amount, the tria% court (ou%d be ordering the pa&ment of the petitionerFs .persona%. mone&, mone& that be%ongs to its thousands of members, thousands of sma%%3sa%aried government emp%o&ees. )heir interests need protection a%so. )he petitioner can, theretofore, be ordered to pa& the ob%igations of GueenFs 1o( =ubdivision, ;nc. to the %imit of (hat it ho%ds, retains or has granted, in favor of GueenFs 1o( =ubdivision. -e&ond this, it cannot be made to pa& because that (ou%d be vio%ative of the ver& Cudgment sought to be e6ecuted. )here is ni basis, therefore, for orders that (ou%d compe% it to pa& (ithout regard to the amounts that it ho%ds in favor of GueenFs 1o( =ubdivision, ;nc., under paragraph ? of the decision of arch ?, Jshou%d be !K 198!. )here must be a previous in'uir& into ho( much these funds amount to. )his has not been made. 15 "n 1! *u%& 1991, respondent Aa%encia sought the reconsideration of the above3'uoted decision c%aiming that the petition fi%ed before the appe%%ate court 07A3D.1. =P No. !B0!12 is barred b& a prior Cudgment and estoppe%. )he prior Cudgment a%%uded to is the decision of the 7ourt of Appea%s in 7A3D.1. =P No. 0995$ and the reso%ution of this 7ourt in D.1. No. 87980, (hi%e the estoppe% is based on the partia% pa&ment made b& the petitioner. "n 15 *anuar& 199!, the respondent 7ourt promu%gated the 'uestioned reso%ution 13 reconsidering its !8 *une 1991 #ecision and dismissing the Petition for !ertiorari and Prohibition, thus8 E9515,"15, the motion for reconsideration is hereb& granted, the decision reconsidered, and the petition for certiorari and prohibition dismissed for %ack of merit. =" "1#515#. 14 )he 7ourt of Appea%s agreed (ith the private respondentFs c%aim of res %udicata or bar b& prior Cudgment. ;t further observed that after making a partia% pa&ment in comp%iance (ith the tria% courtFs "rder of 7 *une 1990 (hich set the interest at t(e%ve percent 01!@2 per annum, petitioner can no %onger assert that the interest shou%d be at si6 percent 0$@2 per annum. #issatisfied (ith the respondent 7ourtFs findings, petitioner took this present recourse and assigns the fo%%o(ing errors8 1. )95 15=P"N#5N) 7":1) ", APP5A/= 5115# ;N 9"/#;ND )9A) )95 P15=5N) P5););"N ;= -A115# -< P1;"1 *:#D 5N) AN# 5=)"PP5/. !. )95 15=P"N#5N) 7":1) ", APP5A/= 5115# ;N 15A51=;ND ;)= "EN #57;=;"N P1" :/DA)5# "N *:N5 !8, 1991. ?. )95 15=P"N#5N) 7":1) ", APP5A/= 5115# E95N ;) ,A;/5# )" 1:/5 )9A) P5););"N51 7AN "N/< -5 95/# )" PA< )95 "-/;DA);"N= ", G:55NF= 1"E =:-#;A;=;"N, ;N7. )" 15=P"N#5N) AA/5N7;A ":) ", 15)5N);"N= AN# "N/< A) A =;P P5175N) 0$@2 =; P/5 ;N)515=) 1A)5 P- A22$8. B. )95 15=P"N#5N) 7":1) ", APP5A/= AN;,5=)/< "A51/""M5# 751)A;N 15/5AAN) ,A7)= N") #;=P:)5# -< )95 PA1);5= AN#, E9;79 ;, P1"P51/< 7"N=;#515#, E":/# *:=);,< A #;,,515N) 7"N7/:=;"N. 18

Petitioner c%aims that res %udicata does not app%& in this case as the re%iefs sought in 7A3D.1. =P No. !B0!1 are distinct from those pra&ed for in D.1. No. 87980. ;t avers that (hi%e the former 'uestions the rate of interest imposed, the %atter invo%ves the issue of (hether the petitioner is a creditor or a debtor of G1=; and the 'uestion of the sufficienc& of the retained mone& in its possession. ;n 7A3D.1. =P No. !B0!1, petitioner assai%ed the tria% courtFs "rders of 7 *une 1990, 10 =eptember 1990 and 5 #ecember 1990 because the& var& the terms of the ver& decision sought to be enforced, particu%ar%& (ith respect to the rate of interest to be app%ied. Petitioner argues further that the partia% pa&ment of the sum of P!,5$7,?7B.0$ in favor of respondent Aa%encia does not ipso facto estop it from asserting that it can on%& be he%d %iab%e for the aggregate amount of P?,?7?,?91.77, the tota% amount retained b& it in favor of G1=;. "n !5 a& 199!, after the private respondent had fi%ed his 7omment 19 and the petitioner had submitted its 1ep%&, 20 Ee reso%ved to give due course to the instant petition and re'uired the parties to submit their respective emoranda 21 (hich the& subse'uent%& comp%ied (ith. )he main issue in this petition is (hether or not respondent 7ourt of Appea%s committed reversib%e error (hen it made a sudden volte9 face b& reversing its o(n #ecision of !8 *une 1991 on the grounds of res %udicata and estoppe%. )his in turn brings :s to the issue of (hether or not the tria% court acted (ithout or in e6cess of Curisdiction, or (ith grave abuse of discretion (hen it ordered the petitioner to pa& interests at various rates ranging from t(e%ve percent 01!@2 to t(ent&3one percent 0!1@2, pursuant to various circu%ars of the 7entra% -ank, and attorne&Fs fees. Ee find merit in this petition. Ee ru%e for the petitioner. 1espondent 7ourt erred in dec%aring, in the cha%%enged reso%ution, that the Cudgments in 7A3D.1. =P No. 0995$ and D.1. No. 87980 bar, because of res %udicata, 7A3D.1. =P No. !B0!1, as these three 0?2 cases invo%ve the same parties. ;n its o(n %anguage, it avers8 )he petitionerFs comment on the motion for reconsideration does not den& the grounds stated in the motion for reconsideration. ;t is, therefore, c%ear that the 7ourt cannot tread over grounds that had a%read& been covered in a previous %itigation bet(een the same parties, especia%%& (here the 9ighest 7ourt of the %and has made a fina%, binding and %asting ru%ing. . . . 22 After taking pains to read the records of D.1. No. 87980 and the decision of the 7ourt of Appea%s in 7A3D.1. =P No. 0995$ cha%%enged therein, Ee agree (ith the petitioner that these ru%ings do not bar 7A3D.1. =P No. !B0!1 because said prior Cudgments did not invo%ve and did not ru%e on the rates of interest chargeab%e against the petitioner for the purpose of e6ecuting Cudgment. A%% that (as ru%ed upon therein (as that the tria% courtFs Cudgment of ! arch 198! is a%read& fina% and e6ecutor& since no motion for reconsideration or appea% (as interposed (ithin the reg%ementar& period, that petitioner is ho%ding more than enough funds for G1=; to pa& for the %atterFs ob%igation to Aa%encia and 5spiritu and that the petitionerFs defense of %ega% compensation (as deemed (aived b& the partia% pa&ment made on !$ November 198!. )hese matters are not sought to be re%itigated in 7A3D.1. =P No. !B0!1. As Ee see it, the %atter mere%& seeks for a correct and proper e6ecutor of the #ecision of ! arch 198!. Petitioner no %onger 'uestions the fina%it& of the decision for as a matter of fact, it had a%read& partia%%& satisfied the portion thereof directed against it. )he app%ication then of the doctrine of res %udicata is not ca%%ed for. ;t is entire%& irre%evant. -esides, the identit& of parties (hich the respondent 7ourt re%ied upon to Custif& the app%ication of the doctrine is on%& one of three />1 identities prescribed b& the fourth re'uisite of res %udicata. )hese four 0B2 re'uisites are 012 the presence of a fina% former Cudgment, 0!2 the former Cudgment is b& a court having Curisdiction over the subCect matter and the parties, 0?2 the former Cudgment is a Cudgment on the merits and 0B2 there is, bet(een the first and the second actions identit& of parties, of subCect matter and of causes of action. 22 =ince a cause of action gives rise to issues, it %ogica%%& fo%%o(s that there must be identica% issues. As heretofore stated, the issue raised in 7A3D.1. =P No. !B0!1 is not identica% (ith an& of the issues posed and reso%ved in 7A3D.1. =P No. 0995$ and D.1. No. 87980. )he genera% ru%e is that an order of e6ecution of a fina% Cudgment is not appea%ab%e. ;t is, ho(ever, recogni4ed that this ru%e is subCect to t(o 0!2 e6ceptions, viz., 012 (hen the order of e6ecution varies or tends to var& the tenor of the Cudgment, and 0!2 (hen the terms of the Cudgment are not c%ear enough that there remains room for their interpretation b& the tria% court. ;n such instances, the aggrieved part& ma& appea% from the order of e6ecution thus issued 28 or avai% of an& other proceeding appropriate and a%%o(ed under the 1u%es of 7ourt I such as the specia% civi% action of certiorari under 1u%e $5 of the 1u%es of 7ourt. 25 ;n the instant case, petitioner is of the honest opinion that the "rders of the tria% court dated 7 *une 1990 and 10 =eptember 1990 upon (hich sha%% be based the subse'uent a%ias (rit of e6ecution, fi6ing the rates of interest on the Cudgment amounts from t(e%ve percent 01!@2 to t(ent&3one percent 0!1@2 on the basis of various circu%ars of the 7entra% -ank, var& the tenor of the Cudgment. 9ence, it cou%d seek remed& therefrom either b& ordinar& appea%, or b& certiorari under 1u%e $5 of the 1u%es of 7ourt> it chose the %atter, the propriet& of (hich is not cha%%enged b& the adverse part&. )he circumstances surrounding the issuance of the orders Custif& such choice. Ee agree (ith the petitioner that indeed, the said orders var& the tenor of the dispositive portion of the ! arch 198! #ecision (ith respect to the petitionerFs specific %iabi%it& thereunder, the rate of interest and, it ma& be added, attorne&Fs fees. As against the petitioner, the dispositive portion mere%& provides8 ?. 1e'uiring defendant D=;= to ho%d (hatever amounts it has granted to, retained and obtained for defendant GueenFs 1o(, and to de%iver same to p%aintiff b& (a& of pa&ment to the aforecited amount ordered recovered b& p%aintiff, the same to be credited as pa&ment made b& defendant GueenFs 1o(. ;t is distinct%& made c%ear that defendant D=;= sha%% not be persona%%& %iab%e for the said ob%igation of co3defendant GueenFs 1o(, e6cept, as herein above3ordered> ho(ever, pending pa&ment of the said c%aim of p%aintiff, defendants are ordered to respect and satisf& the contractorFs %ien in favor of the p%aintiff as provided for b& %a(. 23

;t is c%ear from this disposition that the petitionerFs %iabi%it& is %imited to the ho%ding of (hatever amount it .has granted to, retained and obtained for defendant GueenFs 1o(. and the .de%iver&. thereof to Aa%encia .b& (a& of pa&ment to the aforecited amount ordered recovered b&. Aa%encia. -e&ond such amount, 24 petitioner is no %onger %iab%e. ;t is precise%& for this reason that the tria% court e6p%icit%& incorporated a proviso that petitioner .sha%% not be persona%%& %iab%e for the said ob%igation of co3defendant GueenFs 1o(, e6cept, as herein above3ordered.. Petitioner (as not ordered to pa& interest on the amount it (as to ho%d and de%iver to Aa%encia or to pa& attorne&Fs fees. )he tria% court cannot, therefore, (ithout committing grave abuse of discretion, direct the petitioner to pa& interest and attorne&Fs fees. )o do so (ou%d be to var& the tenor of the Cudgment against the %atter and increase its %iabi%it&, thereb& rendering nugator& the above proviso. =uch imposition (ou%d mean, as in this case, the de%iver& of mone& to Aa%encia in e6cess of that be%onging to G1=; (hich the petitioner has been retaining. ;t is a sett%ed genera% princip%e that a (rit of e6ecution must conform substantia%%& to ever& essentia% particu%ar of the Cudgment promu%gated. 56ecution not in harmon& (ith the Cudgment is bereft of va%idit&. ;t must conform, more particu%ar%&, to that ordained or decreed in the dispositive portion of the decision. 28 And even if Ee are to assume, for the sake of argument, that the amount he%d or retained b& the petitioner for de%iver& to Aa%encia is more than enough to cover the sums adCudged against G1=;, the imposition of interest ranging from t(e%ve percent 01!@2 to t(ent&3 one percent 0!1@2 per annum on said sum pursuant to the 'uoted 7entra% -ank circu%ars, is not Custified and (arranted. Ehi%e it is true that (ith respect to the amounts adCudged against G1=;, enumerated in the first paragraph of the dispositive portion of the #ecision of ! arch 198!, the tria% court imposed thereon the .%ega% rate of interest from the date of demands on ,ebruar& 10, 197B, =eptember 1?, 197$ and ,ebruar& ?, 1977, for the first, second and third causes of action, respective%&,. Ee agree (ith the petitioner that such %ega% rate refers to the %ega% rate provided for in Artic%e !!09 of the 7ivi% 7ode, (hich is si6 percent 0$@2 per annum. 7entra% -ank 7ircu%ar No. B1$, (hich prescribes interest at t(e%ve percent 01!@2 per annum, does not app%& in this case. Ee have he%d in a number of cases 29 that the said circu%ar app%ies on%& to interest for %oans or forbearances of an& mone&, goods or credits or Cudgments in cases invo%ving %oans or forbearances of an& mone&, goods or credits. An& other monetar& Cudgment (hich does not invo%ve or (hich has nothing to do (ith %oans or forbearances of an& mone&, goods or credit does not fa%% (ithin its coverage for such imposition is not (ithin the ambit of the authorit& granted to the 7entra% -ank. )he instant case does not invo%ve %oans or forbearances of mone&, goods or credits. Neither are 7entra% -ank 7ircu%ars Nos. B9B, 58$, 705 and 78? app%icab%e. )he first prescribed cei%ings on the rates of interest on %oans and &ie%ds on purchases of instruments b& banks and non3bank financia% intermediaries. )he second superseded the first (hi%e the third amended the %atter b& increasing the cei%ing to a ma6imum of t(ent&3one percent 0!1@2 per annum> the fourth fi6ed the effective rate of interest, inc%uding commissions, premiums, fees and other charges on %oans or forbearances of mone&, goods or credit (ith a maturit& of 7?0 da&s or %ess not e6ceeding si6teen percent 01$@2 per annum, for secured %oans, and not e6ceeding eighteen percent 018@2 per annum for unsecured %oans. -e&ond 7?0 da&s, the interest rate is not subCect to an& cei%ing. According%&, the respondent 7ourtFs #ecision of !8 *une 1991, the dispositive portion of (hich provides that8 E9515,"15, the orders of *une 7, 1990, =eptember 10, 1990 and #ecember 5, 1990 are hereb& =5) A=;#5. )he case is remanded for proceedings appropriate to determining ho( much funds the petitioner ho%ds in favor of GueenFs 1o( =ubdivision, ;nc., under paragraph ? of the decision of arch ?, Jshou%d be !K 198!, be&ond (hich amount, the petitioner cannot be he%d %iab%e. is in accord (ith the %a( and Curisprudence. )hus, the respondent 7ourt erred in reversing itse%f via its cha%%enged 1eso%ution of 15 *anuar& 199!. )he private respondentFs c%aim that the petitioner is estopped from 'uestioning the t(e%ve percent 01!@2 interest because it had made some pa&ments is untenab%e. )he petitioner is an instrumenta%it& of the Dovernment (hich functions as an administrative bod&. ;ts officia%s are pub%ic officia%s. )he genera% ru%e is that the Dovernment is not estopped b& errors, mistakes or omissions of its officia%s or agents. 20 )his is especia%%& true in the case of the petitioner because of the fiduciar& character of its management (hich is .rendered more strict b& the fact that the funds under its administration are part%& contributed b& the thousands upon thousands of emp%o&ees and (orkers in a%% the branches and instrumenta%ities of the government.. 21 E9515,"15, the instant petition is D1AN)5#. )he 1eso%ution of respondent 7ourt of 15 *anuar& 199! in 7A3D.1. =P No. !B0!1 is =5) A=;#5 and its #ecision therein of !8 *une 1991 is hereb& 15;N=)A)5# and A,,;1 5#. )his decision sha%% be immediate%& e6ecutor&. 7osts against the private respondent. =" "1#515#.

G.R. No. 104539 No;"10"! 8, 1998 HILI INE NA5IONAL ,AN9, petitioner, vs. CO6R5 OF A EALS, REMEDIOS JA:ME-FERNANDE< a%$ AMADO FERNANDE<, respondents. 6NO, J.: Petitioner bank seeks the revie( of the decision, dated "ctober 15, 199!, of the 7ourt of Appea%s 1 in 7A D.1. 7A No. !7195, the dispositive portion of (hich reads as fo%%o(s8 E9515,"15, the Cudgment appea%ed from is hereb& =5) A=;#5 and a ne( one is entered ordering defendant3 appe%%ee PN- to re3app%& the interest rate of 1!@ per annum to p%aintiffs3appe%%antsF 0referring to herein private respondents2 indebtedness and to according%& take the appropriate charges from p%aintiffs3appe%%antsF 0private respondentsF2 pa&ment of P81,000.00 made on #ecember !$, 1985. An& ba%ance on the indebtedness shou%d, %ike(ise, be charged interest at the rate of 1!@ per annum. =" "1#515#. )he parties do not dispute the facts as %aid do(n b& respondent court in its impugned decision, viz.8 "n Apri% 7, 198!, 0private respondents2 as o(ners of a NA7;#A3registered enterprise, obtained a %oan under the 7ottage ;ndustr& Duarant& /oan ,und 07;D/,2 from the Phi%ippine Nationa% -ank 0PN-2 in the amount of ,ift& )housand 0P50,000.002 Pesos, as evidenced b& a 7redit Agreement. :nder the Promissor& Note covering the %oan, the %oan (as to be amorti4ed over a period of three 0?2 &ears to end on arch !9, 1985, at t(e%ve 01!@2 percent interest annua%%&. )o secure the %oan, 0private respondents2 e6ecuted a 1ea% 5state ortgage over a 1.55B!3hectare parce% of unregistered agricu%tura% %and %ocated at 7ambang3ug, )o%edo 7it&, (hich (as appraised b& the PN- at P1,0$!.5! and given a %oan va%ue of P5?1.!$ b& the -ank. ;n addition, 0private respondents2 e6ecuted a 7hatte% ortgage over a thermo p%astic3forming machine, (hich had an appraisa% va%ue of P8,800 and a %oan va%ue of PB,B00.00. )he 7redit Agreement provided inter alia, that I 0a2 )he -ANM reserves the right to increase the interest rate (ithin the %imits a%%o(ed b& %a( at an& time depending on (hatever po%ic& it ma& adopt in the future> Provided, that the interest rate on this accommodation sha%% be corresponding%& decreased in the event that the app%icab%e ma6imum interest is reduced b& %a( or b& the onetar& -oard. ;n either case, the adCustment in the interest rate agreed upon sha%% take effect on the effectivit& date of the increase or decrease in the ma6imum interest rate. )he Promissor& Note, in turn, authori4ed the PN- to raise the rate of interest, at an& time (ithout notice, be&ond the stipu%ated rate of 1!@ but on%& .(ithin the %imits a%%o(ed b& %a(.. )he 1ea% 5state ortgage contract %ike(ise provided that I 0k2 ;N715A=5 ", ;N)515=) 1A)58 )he rate of interest charged on the ob%igation secured b& this mortgage as (e%% as the interest on the amount (hich ma& have been advanced b& the "1)DAD5, in accordance (ith the provision hereof, sha%% be subCect during the %ife of this contract to such an increase (ithin the rate a%%o(ed b& %a(, as the -oard of #irectors of the "1)DAD55 ma& prescribe for its debtors. "n ,ebruar& 17, 198?, 0private respondents2 (ere granted an additiona% NA7;#A %oan of ,ift& )housand 0P50,000.002 Pesos b& the PN-, for (hich 0private respondents2 e6ecuted another Promissor& Note, (hich (as to mature on Apri% 1, 1985. "ther than the date of maturit&, the second promissor& note contained the same terms and stipu%ations as the previous note. )he parties %ike(ise e6ecuted a ne( 7redit Agreement, changing the amount of the %oan from P50,000.00 to P100,000.00, but other(ise preserving the stipu%ations contained in the origina% agreement. As additiona% securit& for the %oan, 0private respondents2 constituted another rea% estate mortgage over ! parce%s of registered %and, (ith a combined area of ?11 s'uare meters, %ocated at Duada%upe, 7ebu 7it&. )he %and, upon (hich

severa% bui%dings are standing, (as appraised b& the PN- to have a va%ue of PB0,000.00 and a %oan va%ue of P!8,000.00. ;n a %etter dated August 1, 198B, the PN- informed 0private respondents2 .that the interest rate of &our 7;D/, %oan account (ith us is no( !5@ per annum p%us a pena%t& of $@ per annum on past dues.. )he PN- further increased this interest rate to ?0@ on "ctober 15, 198B> and to B!@ on "ctober !5, 198B. )he records sho( that as of #ecember 1985, 0private respondents2 had an outstanding principa% account of P81,000.00 of (hich P18,5!?.1B (as credited to the principa%, P57,B88.89 to the interest, and the rest to pena%t& and other charges. )hus, as of said date, the unpaid principa% ob%igation of 0private respondent2 amounted to P$!,8?0.?!. )hereafter, 0private respondents2 e6erted efforts to get the PN- to re3adopt the 1!@ interest and to condone the present interest and pena%ties due> but to no avai%. 2 07itations omitted.2 "n #ecember 15, 1987, private respondents fi%ed a suit for specific performance against petitioner PN- and the NA7;#A. ;t (as docketed as 7ivi% 7ase No. 75-35$10, and raff%ed to the 1egiona% )ria% 7ourt, 7th *udicia% 1egion, 7ebu 7it&, -r. 7. 2 Private respondents pra&ed the tria% court to order8 1. )he PN- and NA7;#A to issue in 0private respondentsF2 favor, a re%ease of mortgage> !. )he PN- to pa& pecuniar& conse'uentia% damages for the destruction of 0private respondentsF2 enterprise> ?. )he PN- to pa& mora% and e6emp%ar& damages as (e%% as the costs of suit> and B. Dranting 0private respondentsF2 such other re%ief as ma& be found Cust and e'uitab%e in the premises. 8 "n ,ebruar& !$, 1990, the tria% court dismissed private respondentsF comp%aint in 7ivi% 7ase No. 75-35$10. "n "ctober 15, 199!, the 7ourt of Appea%s reversed the dismissa% (ith respect to petitioner bank, and disa%%o(ed the increases in interest rates. Petitioner bank no( contends that .respondent 7ourt of Appea%s committed grave error (hen it ru%ed 012 that the increase in interest rates are unauthori4ed> 0!2 that the 7redit Agreement and the Promissor& Notes are not the %a( bet(een the parties> 0?2 that 77ircu%ar No. 77? and 7- 7ircu%ar No. 905 are not app%icab%e> and 0B2 that private respondents are not estopped from 'uestioning the increase of rate interest made b& petitioner.. 5 )he petition is bereft of merit. ;n making the uni%atera% increases in interest rates, petitioner bank re%ied on the esca%ation c%ause contained in their credit agreement (hich provides, as fo%%o(s8 )he -ank reserves the right to increase the interest rate (ithin the %imits a%%o(ed b& %a( at an& time depending on (hatever po%ic& it ma& adopt in the future and provided, that, the interest rate on this accommodation sha%% be corresponding%& decreased in the event that the app%icab%e ma6imum interest rate is reduced b& %a( or b& the onetar& -oard. ;n either case, the adCustment in the interest rate agreed upon sha%% take effect on the effectivit& date of the increase or decrease in ma6imum interest rate. )his c%ause is authori4ed b& =ection ! of Presidentia% #ecree 0P.#.2 No. 1$8B (hich further amended Act No. !$55 0.)he :sur& /a(.2, as amended, thus8 =ection !. )he same Act is hereb& amended b& adding a ne( section after =ection 7, to read as fo%%o(s8 =ec. 73a. Parties to an agreement pertaining to a %oan or forbearance of mone&, goods or credits ma& stipu%ate that the rate of interest agreed upon ma& be increased in the event that the app%icab%e ma6imum rate of interest is increased b& %a( or b& the onetar& -oard> Provided, )hat such stipu%ation sha%% be va%id on%& if there is a%so a stipu%ation in the agreement that the rate of interest agreed upon sha%% be reduced in the event that the app%icab%e ma6imum rate of interest is reduced b& %a( or b& the onetar& -oard> Provided further, )hat the adCustment in the rate of interest agreed upon sha%% take effect on or after the effectivit& of the increase or decrease in the ma6imum rate of interest. =ection 1 of P.#. No. 1$8B a%so empo(ered the 7entra% -ankFs onetar& -oard to prescribe the ma6imum rates of interest for %oans and certain forbearances. Pursuant to such authorit&, the onetar& -oard issued 7entra% -ank 07.-.2 7ircu%ar No. 905, series of 198!, =ection 5 of (hich provides8

=ec. 5. =ection 1?0? of the to read as fo%%o(s8

anua% of 1egu%ations 0for -anks and "ther ,inancia% ;ntermediaries2 is hereb& amended

=ec. 1?0?. Interest and "ther !harges. I )he rate of interest, inc%uding commissions, premiums, fees and other charges, on an& %oan, or forbearance of an& mone&, goods or credits, regard%ess of maturit& and (hether secured or unsecured, sha%% not be subCect to an& cei%ing prescribed under or pursuant to the :sur& /a(, as amended. P.#. No. 1$8B and 7.-. 7ircu%ar No. 905 no more than a%%o( contracting parties to stipu%ate free%& regarding an& subse'uent adCustment in the interest rate that sha%% accrue on a %oan or forbearance of mone&, goods or credits. ;n fine, the& can agree to adCust, up(ard or do(n(ard, the interest previous%& stipu%ated. 9o(ever, contrar& to the stubborn insistence of petitioner bank, the said %a( and circu%ar did not authori4e either part& to unilaterally raise the interest rate (ithout the otherFs consent. ;t is basic that there can be no contract in the true sense in the absence of the e%ement of agreement, or of mutua% assent of the parties. ;f this assent is (anting on the part of the one (ho contracts, his act has no more efficac& than if it had been done under duress or b& a person of unsound mind. 3 =imi%ar%&, contract changes must be made (ith the consent of the contracting parties. )he minds of a%% the parties must meet as to the proposed modification, especia%%& (hen it affects an important aspect of the agreement. ;n the case of %oan contracts, it cannot be gainsaid that the rate of interest is a%(a&s a vita% component, for it can make or break a capita% venture. )hus, an& change must be mutually agreed upon, other(ise, it is bereft of an& binding effect. Ee cannot countenance petitioner bankFs posturing that the esca%ation c%ause at bench gives it unbrid%ed right to unilaterally up(ard%& adCust the interest on private respondentsF %oan. )hat (ou%d completely take a(a& from private respondents the right to assent to an important modification in their agreement, and (ou%d negate the e%ement of mutua%it& in contracts. ;n Philippine 2ational .an( v. !ourt of Appeals, et al., 19$ =71A 5?$, 5BB35B5 019912 (e he%d I . . . )he uni%atera% action of the PN- in increasing the interest rate on the private respondentFs %oan vio%ated the mutua%it& of contracts ordained in Artic%e 1?08 of the 7ivi% 7ode8 Art. 1?08. )he contract must bind both contracting parties> its va%idit& or comp%iance cannot be %eft to the (i%% of one of them. ;n order that ob%igations arising from contracts ma& have the force or %a( bet(een the parties, there must be mutuality bet(een the parties based on their essentia% e'ua%it&. A contract containing a condition (hich makes its fu%fi%%ment dependent e6c%usive%& upon the uncontro%%ed (i%% of one of the contracting parties, is void . . . . 9ence, even assuming that the . . . %oan agreement bet(een the PN- and the private respondent gave the PN- a %icense 0a%though in fact there (as none2 to increase the interest rate at (i%% during the term of the %oan, that %icense (ou%d have been nu%% and void for being vio%ative of the princip%e of mutua%it& essentia% in contracts. ;t (ou%d have invested the %oan agreement (ith the character of a contract of adhesion, (here the parties do not bargain on e'ua% footing, the (eaker part&Fs 0the debtor2 participation being reduced to the a%ternative .to take it or %eave it. . . . . =uch a contract is a veritab%e trap for the (eaker part& (hom the courts of Custice must protect against abuse and imposition. 07itation omitted.2 Private respondents are not a%so estopped from assai%ing the uni%atera% increases in interest rate made b& petitioner bank. No one receiving a proposa% to change a contract to (hich he is a part&, is ob%iged to ans(er the proposa%, and his si%ence per se cannot be construed as an acceptance. 4 ;n the case at bench, the circumstances do not sho( that private respondents imp%icit%& agreed to the proposed increases in interest rate (hich b& an& standard (ere too sudden and too stiff. ;N A;5E )9515",, the instant petition is #5N;5# for %ack of merit, and the decision of the 7ourt of Appea%s in 7A3D.1. 7A No. !7195, dated "ctober 15, 199!, is A,,;1 5#. 7osts against petitioner. =" "1#515#.

=G.R. No. 88888 > D"*"10"! 2, 1990.? E6LALIO M. R6I< a%$ IL6MINADA R6I<, Petitioners, ;s. HON. DORO5EO N. CANE,A, 5HE CI5: SHERIFF OF MANILA AND@OR HIS DE 65IES, <ENAIDA SANGALANG a%$ ADOLFO CR6< , Respondents.

DECISION ARAS, J.:

)his is a petition for !ertiorari and prohibition (ith pre%iminar& inCunction andHor restraining order of the "rder of the respondent Cudge 1 dated *u%& !7, 1988 in 7ivi% 7ase No. 8B3!B0?! entit%ed .5u%a%io . 1ui4 and ;%uminada . 1ui4 vs. +enaida =. =anga%ang and Ado%fo 7ru4. amending the a& 15, 198$ decision of *udge Antonio . artine4 0no( *ustice of the 7ourt of Appea%s2. )he facts of the case are as fo%%o(s8

Private respondents +enaida =anga%ang and Ado%fo 7ru4 are common3%a( spouses and o(ners in common of a !3store& house and %ots described in )ransfer 7ertificate of )it%e 0)7)2 No. 5$05? of the 1egistr& of #eeds of 7a%oocan 7it& but registered on%& in the name of +enaida =anga%ang. Petitioners, the spouses 5u%a%io . 1ui4 and ;%uminada into ! doors, for a month%& renta% of P$50.00.83 nad . 1ui4 are the %essees of #oor No. 1 of the aforesaid t(o store& house divided

=ometime on November 19, 198!, 5u%a%io 1ui4 and +enaida =anga%ang e6ecuted an agreement (here it (as provided that 1ui4 (i%% bu& the house and %ot for the sum of P175,000.00 under the fo%%o(ing terms and conditions8
.)hat ;, 5:/A/;" . 1:;+, of %ega% age, ,i%ipino, married to ;%uminada . 1ui4, (ith residence and posta% address at ?99 Den. /una, 7a%oocan 7it&, etro ani%a, Phi%ippines, am a tenant of ;== +5NA;#A =. =ANDA/AND and ; agree to purchase the above mentioned parce% of %and from ;== +5NA;#A =. =ANDA/AND for the tota% amount of "N5 9:N#15# AN# =5A5N)< ,;A5 )9":=AN# P5="= 0175,000.002, Phi%ippine 7urrenc&, to be paid as fo%%o(s8 =;P)< ,;A5 )9":=AN# P5="= 0P$5,000.002 do(n pa&ment and (i%% assume the amount of ba%ance of )9;1)< "N5 )9":=AN# ,;A5 9:N#15# P5="= 0P?1,500.002 (ith the -ANM ", )95 P9;/;PP;N5 ;=/AN#, aru%as -ranch, etro ani%a> that after pa&ment of said ba%ance mortgage, a ba%ance of sevent& eight thousand five hundred pesos 0P78,500.002 (i%% be pa&ab%e on or before #ecember ?1, 198?> m& fai%ure to comp%& (ith the above conditions of pa&ment, the said propert& above described (i%% be open for sa%e and a%% partia% pa&ments (i%% be refunded b& iss +enaida =. =anga%ang.. 01o%%o, p. B52

;t (as a%so stipu%ated that the 1ui4 spouses (i%% continue pa&ing the month%& renta% of P$50.00 unti% the amount of P175,000.00 sha%% have been fu%%& satisfied. )here is no dispute that the fo%%o(ing pa&ments (ere made b& 1ui48 P$5,000.00 to =anga%ang as do(n pa&ment and P!1,119.$! to the -ank on the assumed mortgage. )here is disagreement ho(ever as to the amount paid to =anga%ang on the ba%ance of P78,500.00. =anga%ang maintains that she received on%& P??,79?.00 (hi%e 1ui4 insists that the& paid P5?,07?.00. )hus, the 1ui4 spouses fi%ed a comp%aint on Apri% !B, 198B for specific performance (ith damages against +enaida =anga%ang and Ado%fo 7ru4. 0;bid, p. 1B2
;n an& event, the tria% court found that the 1ui4 spouses fai%ed to pa& in fu%% the ba%ance of P78,500.00 on or before #ecember ?1, 198? as stipu%ated and even on the e6tended period of arch !!, 198B. 9ence, the 1ui4 spouses are not entit%ed to their pra&er for specific performance (ith damages. ;n the same breath, the tria% court decided that it is on%& fair that +enaida =anga%ang returnHrefund to the 1ui4 spouses the pa&ment made b& the %atter. ,urther, it ru%ed that the 1ui4 spouses sha%% continue to pa& the agreed amount of renta% in the amount of P$50.00 unti% the propert& is surrendered to =anga%ang 01)7 decision, a& 15, 198$, p. 7> 1o%%o, p. B82.8 nad ore specifica%%&, the dispositive portion of the decision reads8 .Eherefore, in vie( of a%% the foregoing, (e hereb& ru%e as fo%%o(s8 .1. "rdering the p%aintiffs to pa& defendant +enaida =anga%ang the amount of P!0,000.00 mora% damages> .!. "rdering p%aintiffs to pa& defendant =anga%ang, attorne&Fs fees in the amount of P15,000.00> and to pa& the costs of suit> and .?. #efendant +enaida =anga%ang is hereb& ordered to return the pa&ments made b& the p%aintiffs pursuant to the Agreement. =" "1#515#.. 01o%%o, p. B82

)he 1ui4 spouses appea%ed the decision to the 7ourt of Appea%s but the same (as dismissed for fai%ure to pa& the docket fee. 01o%%o, p. 1$!2 "n a& !9, 1987, an entr& of Cudgment (as made b& the 7ourt of Appea%s. "n motion of the private respondents, respondent *udge issued an order for the issuance of a (rit of e6ecution. 0;bid., p. 592 )he 7%erk of 7ourt, in his capacit& as e63oficio cit& sheriff, caused the e6ecution of the 1st and !nd paragraphs of the dispositive portion of the a& 15, 198$ decision (ithout inc%uding in the (rit, the e6ecution of the ?rd par. thereof in favor of the 1ui4es. A notice of %ev& as (e%% as a notice of garnishment (ere both issued to the petitioners. 01o%%o, p. 512 "n =eptember !, 1987, the 1ui4 spouses fi%ed an .563parte otion for 56ecution of #ecision No( Part%& 56ecuted,. pra&ing that a (rit of e6ecution be issued for par. ? of the said dispositive portion and that the sheriff be ordered to make fu%% e6ecution of the decision b& .off3setting. andHor setting3off par. ? as against pars. 1 and ! thereof. 0;bid, p. 9!2 An order (as issued b& the respondent Cudge on =eptember 8, 1987 the dispositive portion of (hich reads as fo%%o(s88 nad

.E9515,"15, in vie( of the fact that a (rit of e6ecution has a%read& been issued and the same (as enforced on%& (ith respect to paragraphs 1 and ! of the dispositive portion of the decision dated a& 15, 198$, %et a (rit of e6ecution be issued (ith respect to paragraph ? of the said dispositive portion of the decision. .=" "1#515#. 01o%%o, p. 592

)he afore'uoted order (as reiterated b& the respondent Cudge in his order dated #ecember 11, 1987 0;bid., p. $02 after an omnibus motion (as fi%ed b& the petitioners on =eptember 8, 1987. 0;bid., p. 5?2 As e6pected, the parties cou%d not agree on the e6ecution of the decision, as regards par. ? thereof> that is the amount to be returned b& =anga%ang to the 1ui4 spouses. =anga%ang and Ado%fo 7ru4 on a& 7, 1988 moved to amend said decision of a& 15, 198$ (hich the& a%%eged to have c%ear disparities and evident ambiguities bet(een the bod& of said decision and the dispositive portion. )hus, (hi%e the tria% court is fu%%& a(are that a decision once fina% and e6ecutor& can no %onger be amended or corrected, it opted, for the purpose of fina%%& sett%ing the c%aims of the parties and thereb& avoid mu%tip%icit& of suits, to amend the decision in 'uestion, on *u%& !7, 1988, the dispositive portion of (hich reads8
.E9515,"15, "rder is hereb& issued directing8 .1. the cance%%ation of %is pendens annotated at the back of the tit%e of the subCect propert& b& the 1egister of #eeds of 7a%oocan 7it&> .!. the p%aintiffs to pa& the defendant the sum of P1,500.00 month%& from date the& vacate door No. !> a& 15, 198$, the effective date of the decision up to the

.?. the return of pa&ments made b& the p%aintiffs to defendant +enaida =anga%ang (hich sha%% be (ithout preCudice to off3setting of renta% pa&ments from November 198!> and .B. the (rit of possession be issued on the propert&, subCect matter of the rescission of the contract. .=" "1#515#. 01o%%o, p. $B2

=anga%ang and 7ru4 fi%ed a otion for 56ecution on the above3'uoted order on =eptember 1, 1988 0;bid., p. $52 but before the da& of the hearing of said motion, the 1ui4 spouses fi%ed an .:rgent otion to 7ance% 9earing of otion.. 0;bid., p. 1!72 "n =eptember 15, 1988, the 1ui4es fi%ed the present petition. ;n the reso%ution of the !nd #ivision of this 7ourt dated *anuar& 10, 1990, the petition (as given due course 01o%%o, p. 15!3A2. PetitionersF memorandum (as fi%ed on Apri% 11, 1990 0;bid., p. 19!2 (hi%e respondentsF memorandum (as fi%ed on arch ?0, 1990 0;bid., p. 1712. )he petition is impressed (ith merit. )he principa% issue to be reso%ved in the instant petition is8 (hether or not there is an ambiguit& in the dispositive portion of the a& 15, 198$ decision sufficient to (arrant the 'uestioned order of the respondent court amending subCect fina% and e6ecutor& Cudgment.83 cra%a( )here is no 'uestion that the 1ui4es fai%ed to comp%& (ith the agreement and rescission of the contract is in order. )he parties are a%so agreed that the 1ui4es must return the ph&sica% possession of the propert& to =anga%ang (hi%e the %atter is ob%iged to return a%% partia% pa&ments made on the propert& to the 1ui4es in accordance (ith the agreement. -ut the bone of contention in this case is the e6act amount to be returned b& =anga%ang to the 1ui4 spouses (hich (as not spe%%ed out b& the tria% court. )he 1ui4es c%aim that the& are entit%ed to a refund of P1!B,19!.$! p%us !B@ interest compounded annua%%&, the a%%eged %ega% rate under 7entra% -ank 7ircu%ar, or a tota% amount of P1$9,B1B.95. =anga%ang, on the other hand, countered that she received on%& the amount of P1!0,09!.$! or a difference of PB,100.00 from that c%aimed b& the 1ui4es, %et a%one the computation of interest. ,urthermore, =anga%ang insists that she is entit%ed to a P1,500.00 a month renta% for #oor No. ! of said house (hich the 1ui4es occupied after the e6ecution of the agreement 01o%%o, p. 1$$2 instead of confining themse%ves to #oor No. 1 (hich the& used to occup& and for (hich the& have origina%%& been pa&ing renta%s.8 nad A carefu% stud& of the decision of the tria% court of a& 15, 198$ sho(s that aside from the fact that the refund ordered to be made b& =anga%ang (as not specified in e6act numbers, there appears to be no ambiguit& in the decision to such an e6tent as to (arrant an amendment of the dispositive portion. ,rom the tota% amount of P1?9,19!.$! c%aimed b& the 1ui4 spouses to have been actua%%& paid to =anga%ang, on%& the amount of P15,000.00 in the form of dishonored checks have been discounted b& the tria% court %eaving a ba%ance of P1!B,19!.$!> more specifica%%& sho(n as fo%%o(s8
#o(npa&ment on Nov. 19, 198! P $5,000.00 Pa&ment to the -ank of P.;. P !1,119.$! Pa&ment made to +enaida =anga%ang P5?,07?.00 %ess P15,000.00 tota% sum of t(o 0!2 dishonored checks P ?8,07?.00 IIIII )ota% Pa&ments ade P1!B,19!.$! #ecision, p. ! R ?.

9ence, it is evident that this is the amount that =anga%ang (as ordered to return to the 1ui4es pursuant to par. ? of the said dispositive portion.

)he on%& set3off specified b& the tria% court in the assai%ed a& 15, 198$ decision (ere the %ost profits suffered b& =anga%ang because of the annotation of the notice of %is pendens on her tit%e b& the 1ui4 spouses (hich (ere considered compensated b& the increase in va%ue of the propert& due to the repair made b& the %atter. oreover, it appearing that there (as in fact a part e6ecution of pars. 1 and ! of the dispositive portion of the 198$ decision against the 1ui4es, it is but proper that the amount to be paid b& =anga%ang is the tota% pa&ments made b& the petitioners in the amount of P1!B,19!.$!. Anent the 1ui4esF c%aim of interest as aforementioned, it has been he%d in the case of =antu%an v. ,u%e, 1?? =71A 7$! 0198B2 that (here the court Cudgment (hich did not provide for interest is a%read& fina%, there is no reason to add interest in the Cudgment. ;nterest (as not demanded b& the 1ui4es (hen the case (as pending before the %o(er court, hence, there is no reason for this 7ourt to grant such c%aim. As ru%ed b& this 7ourt, such c%aim is ground%ess since the decision and orders sought to be enforced do not direct the pa&ment of interest and have %ong become fina% 07anoni4ado v. "rdoSe43-enite4, 1B9 =71A 555 J1987K2.
,ina%%&, as to =anga%angFs c%aim for P1,500.00 as month%& renta% for #oor No. !, the records sho( that such c%aim (as never raised in the tria% court. )he issue of additiona% renta%s (as brought up b& =anga%ang on%& (hen the motion for e6ecution of par. ? of the dispositive portion of the decision (as fi%ed b& the 1ui4 spouses 01o%%o, p. 1892. ;t is a basic ru%e that an issue (hich (as not raised in the court be%o( cannot be raised for the first time on appea% as it (ou%d be offensive to the basic ru%es of fair p%a&, Custice and due process 0 atien4o v. =ervidad, 107 =71A !7$ J1981K> #e %a =anta v. 7A, 1B0 =71A BB, J1985K> #ihiansan v. 7A, 157 =71A B?B J1987K> Auchue%o v. 7A, 1B7 =71A B?B J1987K> #u%os 1ea%t& and #evFt. 7orp. v. 7A, 157 =71A B!5 J1988K> 1amos v. ;A7, D1 No. 78!8!, *u%& 5, 1989> ,i%ipino erchants vs. 7A D1 No. 851B1, Nov. !8, 19892. 7onse'uent%&, =anga%angFs c%aim cannot be granted. 9ence, since the a& 15, 198$ decision has %ong become fina% and e6ecutor& and in fact has been part%& e6ecuted, the respondent Cudge had %ost its Curisdiction thereon 0 arcopper ining 7orp. vs. -riones, D.1. 77!10, =ept. 19, 1988> -ac%a&on et a%. v. 7A, D.1. No. 891?!, ,eb. !$, 19902. 9e has e6ceeded his authorit&, considering that the tria% court has no authorit& to modif& or var& the terms and conditions of a fina% and e6ecutor& Cudgment 0Ada. de Nabong v. =adang, 1$7 =71A !?! J1988K> 7ommercia% 7redit 7orporation vs. 7A, 1$9 =71A 1 J1989K> 7hristian /iterature 7rusade v. N/17, 171 =71A 71! J1989K2. Ehat remains in his authorit& in re%ation thereto is pure%& the ministeria% enforcement or e6ecution of the Cudgment. 07hristian /it. 7rusade, supra> -ac%a&an vs. 7A, supra.2 )herefore, for having substantia%%& affected the fina% and e6ecutor& Cudgment such "rder of the respondent Cudge dated *u%& !7, 1988 is nu%% and void for %ack of Curisdiction, inc%uding the entire proceedings he%d for the purpose 0 arcopper ining vs. -riones, supra2. P15 ;=5= 7"N=;#515#, 0a2 the instant petition for !ertiorari and prohibition is hereb& D1AN)5#> 0b2 the "rder of the respondent Cudge dated *u%& !7, 1988 is hereb& #57/A15# nu%% and void ab initio> 0c2 respondent =anga%ang is hereb& re'uired to PA< petitioners3spouses 1ui4es the amount of P1!B,19!.$!> 0d2 petitioners 1ui4es are hereb& re'uired to AA7A)5 the propert& in 'uestion and PA< P$50.00 month%& as renta% as agreed upon and as re'uired b& the a& 15, 198$ decision unti% the& vacate the premises and 0e2 the 1egister of #eeds of 7a%oocan 7it& is hereb& re'uired to 7AN75/ the %is pendens annotated on the tit%e of subCect propert&. =" "1#515#.

G.R. No. 49552 No;"10"! 29, 1988 E.EL:N J. SANGRADOR, Ao#%"$ 0y )"! )us0a%$ RODRIGO SANGRADOR, SR., petitioners, vs. S O6SES FRANCISCO .ALDERRAMA a%$ 5ERESI5A M. .ALDERRAMA, respondents. ADILLA, J.: )his is a petition for revie( on certiorari of the decision 1 of the 7ourt of Appea%s in 7A3D.1. 7A No. 0881?, dated 1? August 1987, (hich modified the decision 2 of the 1egiona% )ria% 7ourt of ;%oi%o 7it&, -ranch PP;;;, in 7ivi% 7ase No. 1$!10, entit%ed .5ve%&n *. =angrador, Coined b& her husband, 1odrigo =angrador, P%aintiffs, versus =pouses ,rancisco Aa%derrama and )eresita Aa%derrama, #efendants.. )he factua% background of the case is narrated in the decision of the 7ourt of Appea%s as fo%%o(s8 "n Apri% 11, 198? the defendants3spouses ,rancisco and )eresita Aa%derrama obtained a P500,000 %oan from anue% Asencio pa&ab%e on or before Apri% 1!, 198B, and secured b& a rea% estate mortgage on their house and %ot 0actua%%& ? %ots2 in front of the *aro P%a4a in ;%oi%o 7it& 056h. 92. ,oreseeing that the& (ou%d not be ab%e to pa& the %oan and redeem their propert& upon maturit& of the %oan, the defendants scouted around for mone&3%enders (ho (ou%d be (i%%ing to %end them mone& (ith (hich to pa& off their mortgage to Asencio. )hrough the he%p of a %oan broker, Ei%son *esena, the& (ere ab%e to obtain on Apri% $, 198B a P1,000,000 %oan from the p%aintiff )eresita =angrador, (ho is an aunt of *esena, on the securit& of the same propert& (hich the& redeemed from Asencio. )he %oan is evidenced b& the fo%%o(ing promissor& note 056h. -2 dated Apri% $, 1 98B providing for the pa&ment of P1,B00,000 to the creditor eight months after dateF. ,"1 AA/:5 1575;A5#, (e Coint%& and severa%%& promise to pa& 5A5/<N *. =AND1A#"1, or order, at her address at No. ! /ocsin =treet, o%o, ;%oi%o 7it&, Phi%ippines, the sum of "N5 ;//;"N ,":1 9:N#15# )9":=AN# P5="= 0P1,B00,000.002 Phi%ippine 7urrenc&, 5;D9) 082 "N)9= after date (ithout need of demand. =hou%d (e defau%t in the pa&ment of the ob%igation or in the manner of performance thereof and it sha%% become necessar& to enforce and co%%ect on this note b& or through an attorne&, the makers sha%% Coint%& and severa%%& pa& )E5N)< 0!02 P51 75N): of the amount due, principa% and interest and charges then unpaid, (hich in no case sha%% be %ess than P1,000.00. )he makers hereb& submit to the Curisdiction of the unicipa% )ria% 7ourt of ;%oi%o or the 1egiona% )ria% 7ourt of ;%oi%o, =i6th *udicia% 1egion, ;%oi%o 7it&, as the case ma& be, in the event of %itigation arising from this note. )he makers of this note, Coint%& and severa%%& undertake that in the event that an e6traordinar& inf%ation of the Phi%ippine Peso shou%d supervene bet(een no( and eight 082 months after date, then the va%ue of the Phi%ippine Peso at the time of the estab%ishment of this ob%igation, sha%% be the basis of pa&ment pursuant to Art. 1!50 of the 7ivi% 7ode of the Phi%ippines, and for this purpose, (e hereb& ackno(%edge the officia% e6change rate of the Phi%ippine Peso to the := #o%%ar at P1B.00! to N1. )he corresponding adCustment in the va%ue of the Phi%ippine Peso sha%% be made in the event that at the time of the maturit& of this ob%igation, the rate of e6change (i%% have changed as a resu%t of the supervening inf%ation. Ee further agree that the officia% rate of e6change as set b& the 7entra% -ank of the Phi%ippines for private transactions, sha%% be the basis of this adCustment. )his note is secured b& a 1ea% 5state ortgage over three 0?2 parce%s of residentia% %and, /ots 700, 701 and 750, of the 7adastra% =urve& of *aro, covered b& )7) Nos. )3B1719, )B17!1 and )3B17!0, respective%&, of the 1egistr& of #eeds for the 7it& of ;%oi%o, together (ith the improvements thereon. ;n case of Cudicia% e6ecution of this ob%igation or an& part thereof, the debtors (aive a%% their rights under the provisions of 1u%e ?9, =ec. 1!, of the 1u%es of 7ourt. 5P57:)5# in the 7it& of ;%oi%o, Phi%ippines, on this $th da& of Apri% 198B.

0=D#2 )515=;)A aker

"N);N"/A3AA/#511A A

0=D#2 ,1AN7;=7" AA/#511A A aker =igned in the presence of. 0i%%egib%e2 0i%%egib%e2 056h. -2 )he debtors a%%ege that the amount actua%%& received b& them (as on%& P1,000,000 the disposition of (hich (as itemi4ed b& the broker, Ei%son *esena a, on a memo pad of .*esena 1ea%t&. as fo%%o(s8 ,rom the desk of8 15A/)"1 E;/="N D. *esena, *r. President R Den. anager 5PP5N=5= P$!5,000.00I anue% Asencio 50,000.00I7ommission -o& B,000.00IAtt&. Argue%%es 1?,?98.$9I)ransfer feesI 1egister of #eeds and -.;.1. P$9!,?98.$9 P1,000,000.00 I $9!,?98.$9 P?07,$01.B0 I -a%ance 056h. 12 According%&, a Prudentia% -ank 7ashierFs check for P$!5,000 (as issued b& =angrador to Asencio to redeem the defendantsF propert& from him. A receipt for that check (as issued b& the Aa%derramas to the p%aintiff as fo%%o(s8 1575;P) #ate Apri% $, 198B 1eceived from 5A5/<N *5=5NA =AND1A#"1 the amount of =;P 9:N#15# )E5N)< ,;A5 )9":=AN# P5="= 0$!5,000.002 -ank Prudential .an( !ashier&s !hec( 2o. 05;>7. )he ba%ance of )9155 9:N#15# =5A5N)< ,;A5 )9":=AN# P5="= 0P?75,000.002 is to be paid to the undersigned after deducting a%% e6penses incurred in pa&ment of rea% estate ta6es, attorne&Fs fees, commission, -ureau of ;nterna% 1evenue fees and 1egister of #eeds fees. A%% e6penses are to be supported b& receipts. 0=D#2 ,1AN7;=7" 0=D#2 )515=;)A 056h. !2 P%aintiff 5ve%&n =angrador made a %ist of the e6penses chargeab%e to the debtors 056h. 52 and submitted it to them 0!! t.s.n., a& 7, 19852. Pa&ment of Att&. Argue%%esF attorne&Fs fees (as du%& ackno(%edged b& him 056h. 82. *esena issued the fo%%o(ing receipt to the defendants for his 5@ commission in procuring the %oan for them> 1575;P) 1eceived from =pouses ,rancisco Aa%derrama and )eresita ontino%a Aa%derrama the amount of ,;,)< )9":=AN# P5="= 0P50,000.002 representing commission for m& efforts and e6pertise in effecting the procurement of a %oan from a financier for the amount of "N5 ;//;"N P5="= 0P1,000,000.002. "N);N"/A3 AA/#511A A AA/#511A A

0=D#2 15A/)"1 E;/="N *5=5NA, *1. 15- /icense No. ?BB131 056h. ?2 )he ba%ance of P?07,$01.B0 (as paid to the defendants b& means of another Prudentia% -ank check for (hich the corresponding receipt 056h. B2 (as a%so signed b& the mortgagors8 1575;P) Apri% 7, 198B 1eceived from 5A5/<N *. =AND1A#"1 the amount of )9155 9:N#15# =5A5N )9":=AN# =;P 9:N#15# "N5 P5="= AN# ,"1)< 75N)AA"= 0P?07,$01.B02 representing fu%% pa&ment per Promissor& Note dated Apri% $,198B. 0=D#2 ,1AN7;=7" 0=D#2 )515=;)A "N);N"/A3 AA/#511A A AA/#511A A

Paid b&IPrudentia% -ank 7hk. O1BB?583!IApri% 7, 198B P?07,$01.B0 cHo O00??3000!!30 paid b&I5ve%&n *. =angrador 056h. B2 5ve%&n =angrador admitted that the receipts 056hs. ! and B2 (ere issued to her b& the defendants 01B, !1 t.s.n., 7, 19852. a&

Ehen the defendants fai%ed to pa& the sum of P1,B00,000 stated in the promissor& note on #ecember $, 198B despite the p%aintiffsF (ritten demands 056hs. 7 and #2 a comp%aint for Cudicia% forec%osure of the rea% estate mortgage (as fi%ed against them on #ecember !1, 198B. 056h. D2. )he defendants in their ans(er denied that the %oan (as P1,B00,000. )he& a%%eged that it (as on%& P1,000,000.00 and that the additiona% PB00,000 represented usurious interest. At the tria%, the p%aintiff testified that the sum of P1,B00,000 (as received b& the defendants. =he a%%eged that besides the e6penses of P$7,?98.$9 itemi4ed in *esenaFs and her %ists 056hs. 1 and 52, the check of P$!5,000 for Asencio and the check of P?07,$01.B0 (hich she issued to the defendants for the ba%ance of the %oan, she gave to the defendants the amount of PB00,000 in cash for (hich no receipt (as issued b& them. "n the other hand ,rancisco Aa%derrama testified that he thought a%% a%ong that the promissor& note 056h. -2 and deed of rea% estate mortgage 056h. A2 provided for a %oan of on%& P1 mi%%ion since that (as the amount (hich the& borro(ed and received from the p%aintiffs. 9e a%%eged%& did not notice that both documents provided for a %oan of P1,B00,000. After the tria%, the court rendered Cudgment on November 7, 1985 binding the debtors to the terms of the promissor& note and mortgage deed. 2 )he dispositive part of the tria% courtFs Cudgment reads as fo%%o(s8 E9515,"15, in the %ight of the foregoing, considerations and findings of this 7ourt, Cudgment is hereb& rendered8 12 #irecting the forec%osure of the #eeds of 1ea% 5state ortgage 056h. FAF2>

!2 "rdering the defendants to pa& the mortgage ob%igation in the amount of P1,B00,000.00 p%us the sum of P5$9,718.$1 pursuant to the esca%ation c%ause contained in paragraph 1B of the #eed of 1ea% 5state ortgage> to pa& attorne&Fs fees e'uiva%ent to t(ent& 0!0@2 percentum of the tota% indebtedness inc%uding costs, p%us 1!@ interest per annum from #ecember 18,198B unti% fu%%& paid, a%% of (hich sha%% be paid into 7ourt (ithin 90 da&s from date of the service of the order>

?2 ;n defau%t of such pa&ment, ordering the mortgaged properties to be so%d at pub%ic auction to rea%i4e the mortgage debt and costs. =" "1#515#. 8 Private respondents, defendants in the tria% court, appea%ed to the 7ourt of Appea%s, (here the appea% (as docketed as 7A D.1. 7A No. 0881?. "n 1! August 1987, respondent 7ourt of Appea%s promu%gated its decision 5 modif&ing the decision of the tria% court, the dispositive part of (hich reads, as fo%%o(s8 E9515,"15, the appea%ed decision is hereb& modified b& ordering the defendants, (ithin 0902 da&s from date of service of this decision, to pa& to the p%aintiffs the principa% %oan of P1,000,000 (ith 1!@ interest per annum from Apri% $,198B unti% fu%%& paid, P50,000 as attorne&Fs fees, and the costs of this suit. ;n defau%t of such pa&ment, the mortgaged propert& sha%% be so%d at pub%ic auction to rea%i4e the sums due to p%aintiffs under this Cudgment. =" "1#515#. 3 9ence, the present petition for revie( on certiorari of the decision of the 7ourt of Appea%s. Petitioners present the fo%%o(ingI A==;DN 5N) ", 511"1= 1. ,;1=) A==;DN5# 511"18 )95 9"N"1A-/5 7":1) ", APP5A/= 5115# ;N N://;,<;ND )95 5=7A/A);"N 7/A:=5 A= ,":N# -< )95 )1;A/ 7":1) "1#51;ND )95 PA< 5N) -< 15=P"N#5N)= ", )95 =: ", P5$9,718.$1. !. =57"N# A==;DN5# 511"18 )95 9"N"1A-/5 7":1) ", APP5A/= 5115# ;N ,;N#;ND )95 P1;N7;PA/ /"AN )" -5 ;N )95 =: ", P1,000,000.00 ;N=)5A# ", P1,B00,000.00 A= ,":N# -< )95 /"E51 7":1). ?. )9;1# A==;DN5# 511"18 )95 9"N"1A-/5 7":1) ", APP5A/= 5115# ;N 15#:7;ND P5););"N51F= AEA1# ", A))"1N5<F= ,55= )" P50,000.00 ;N=)5A# ", !0@ ", )95 )")A/ ;N#5-)5#N5== A= ,":N# -< )95 )1;A/ 7":1). 4 )he pivota% issue to be reso%ved in this case is (hether or not the %oan obtained b& private respondents from petitioners (as in the amount of P1,B00,000.00 or P1,000,000.00 on%&. ;n reso%ving this issue, the 7ourt of Appea%s in its decision under revie(, he%d8 After carefu%%& revie(ing the evidence, Ee are convinced that the tria% court erred in finding that the %oan (as P1,B00,000 as stated in the promissor& note 056h. -2 and deed of mortgage. /ike the tria% court, Ee do not be%ieve defendant Aa%derramaFs a%%egation that he did not notice that the amount stated in the promissor& note (as P1,B00,000, instead of on%& P1,000,000, unti% demands for pa&ment (ere sent to him b& the p%aintiffsF counse%. -ut neither do Ee be%ieve the p%aintiff 5ve%&n =angradorFs a%%egation that besides the sum of P1,000,000 admitted%& received b& the defendants and evidenced b& checks and receipts, she a%so gave them PB00,000.00 in cash (ithout receipt. )his is a case, therefore, (here both parties prevaricated. )he documentar& evidence preponderant%& proves that the %oan (as on%& P1,000,000, not P1,B00,000. )he checks and receipts and the brokerFs computations found in 56hibit F%F sho( c%ear%& that the %oan (as on%& P1,000,000. 5ven the brokerFs P50,000 commission (as computed on the basis of 5@ of P1 mi%%ion. )he circumstance that the a%%eged pa&ment of PB00,000 in cash to the debtors is not evidenced b& a receipt, is conc%usive proof that it (as not a part of the %oan. )he %oan (as on%& P1 mi%%ion. "bvious%&, the PB00,000 that (as added to the principa% represents a hidden interest charge for the promissor& note contains no e6press provision fi6ing the rate of interest on the %oan. 8 Petitioners assai% the foregoing findings and conc%usions of the 7ourt of Appea%s, contending that the amount of the %oan as c%ear%& and e6press%& stated in the #eed of 1ea% 5state ortgage 9 and the Promissor& Note, 10 is P1,B00,000.00 and not P1,000,000.00 on%&.

-ecause the findings of the tria% court and the 7ourt of Appea%s differ on this crucia% factua% issue, (e have carefu%%& revie(ed and e6amined the evidence. )he finding of the 7ourt of Appea%s that the %oan is in the amount of P1,000,000.00 on%& is supported b& substantia% evidence. )he Promissor& Note 056h3 -2 and the #eed of 1ea% 5state ortgage 056h. A2 e6ecuted b& the respondents in favor of the petitioners indeed state that the %oan is in the amount of P1,B00,000.00. 9o(ever, the other documents e6ecuted b& the parties contemporaneous%& (ith said Promissor& Note and #eed of 1ea% 5state ortgage c%ear%& sho( that the actua% %oan, i.e. the amount received b& respondents, (as on%& P1,000,000.00. )hus, for the pa&ment made b& the petitioners for the account of the respondents to anue% Asencio, thereb& re%easing the mortgage on the propert&, so that it cou%d in turn be mortgaged to the petitioners, the respondents signed a receipt in favor of the petitioners in the amount of P$!5,000.00 056h. !2. )he respondents e6ecuted another receipt in favor of the petitioners for the amount of P?07,$01.B0,. representing fu%% pa&ment per promissor& note dated $ Apri% 198B. 056h. B2. )he broker (ho arranged for the %oan signed a receipt in favor of the respondents for the amount of P50,000.00 representing his commission in effecting the %oan .for the amount of P1,000,000.00. 056h. ?2.CDreEEanFG0HwI )he attorne& (ho assisted in the transaction (as paid attorne&Fs fees in the amount of PB,000.00 056h. 82. )he petitioners submitted a %ist of e6penses chargeab%e to the respondents, tota%%ing P1?,?98.$9 covering transfer fees, e6penses in the 1egister of #eeds and pa&ments to the -;1 056h. 52. A%% to%d, the %oan of P1,000,000.00 obtained b& the respondents from the petitioners (as app%ied or used in the fo%%o(ing manner at the time the %oan (as obtained8 P$!5,00.00 I to pa& anue% Asencio 0first creditor2 50,000.00 I to pa& Ei%son *esena 0for brokerFs commission2 B,000.00 I to pa& Att&. 5nri'ue Argue%%es 0for attorne&Fs fees2 1?,?98.$9 I to pa& transfer fees and other e6penses in 1egister of #eeds and -;1 ?07,$01.B0 I to pa& respondents as ba%ance of the %oan P1,000,000.09 )")A/ )he above itemi4ation ta%%ies (ith the breakdo(n of the proceeds of the %oan, made b& the %oan broker Ei%son *esena 056h. 12. Petitioners contend that over and above the P1,000,000.00, the amount of PB00,000.00 (as de%ivered b& them to the respondents in cash and that this de%iver& (as not evidenced b& a receipt because, an&(a&, said amount 0PB00,000.002 is a%read& inc%uded in the statement of the %oan amount in the promissor& note and the deed of rea% estate mortgage, (hich is P1,B00,000.00. Ee find this contention to be 'uite incredib%e, to sa& the %east. ;t is contrar& to ordinar& human e6perience. Norma%%&, in de%ivering a heft& sum %ike PB00,000.00 in cash, one (ou%d re'uire some sort of receipt or ackno(%edgment from the recipient. oreover, if petitioners (ere carefu% enough to re'uire from the respondents the separate receipts above3mentioned, there (as no reason (h& the& (ou%d not re'uire another receipt from the respondents for said amount of PB00,000.00. And if, as petitioners no( a%%ege, the& did not an&more re'uire a receipt for the PB00,000.00 a%%eged%& de%ivered b& them in cash to the respondents because the %oan amount stated in the promissor& note and the rea% estate mortgage a%read& inc%uded said amount of PB00,000.00, then, b& the same reasoning, there (as no need for re'uiring the other separate receipts abovementionedIas the amounts the& referred to (ere a%read& a part of the %oan amount stated in the promissor& note and rea% estate mortgageIand &et, said separate receipts (ere re'uired b& petitioners of the respondents. ;n short, (e agree (ith the finding of the 7ourt of Appea%s that the disputed amount of PB00,000.00 (as a hidden interest that the petitioners had re'uired the respondents to pa& at the maturit& of the %oan, but said amount of PB00,000.00 (as not received b& or de%ivered to the respondents. )his conc%usion is strengthened b& the fact that the promissor& note and the deed of rea% estate mortgage 056hs. - and A2, strange%& enough, do not contain an& e6press stipu%ation on interest, or rate of interest, (hen the %oan invo%ved therein is in the substantia% amount of a%%eged%& P1,B00,000.00. Petitioners ma& conceivab%& argue that, granting that the disputed amount of PB00,000.00 is interest on the %oan of P1,000,000.00, &et, in %ine (ith this 7ourtFs decision in #iam #aw vs. "riental )awmill !o., et al., 11 there is no %onger an& cei%ing on interest or interest rates on %oans. )his ma& be so in a situation (here the parties open%& and e6press%& agree on a specific rate of interest to accrue on the %oan but, as the 7ourt of Appea%s in its decision under revie( correct%& pointed out, in the case at bar, no interest rate is e6press%& stipu%ated in the promissor& note and deed of rea% estate mortgage. 7ircu%ar No. 905 of the 7entra% -ank dated 10 #ecember 198! provides8 =ection 1. The rate of interest, inc%uding commissions, premiums, fees and other charges on a %oan or forbearance of an& mone&, goods, or credits, regard%ess of maturit& and (hether secured or unsecured, that may be charged or collected by any person, (hether natura% or Curidica%, shall not be sub%ect to any ceiling prescribed under or pursuant to the :sur& %a(, as amended. =ection !. The rate of interest for the %oan or forbearance of an& mone&, goods or credits and the rate a%%o(ed in Cudgments, in the absence of eBpress contract as to such rate of interest, sha%% continue to be t(e%ve per cent 01 !@2 per annum. 05mphasis supp%ied2 )he rate of interest for %oans or forbearance of mone&, in the absence of e6press contract as to such rate of interest, sha%% continue therefore to be t(e%ve per cent 01!@2 per annum. 12

According%&, the %oan of P1,000,000.00 in the instant case shou%d earn a t(e%ve per cent 01!@2 interest per annum computed from $ Apri% 198B (hen the %oan (as obtained b& the respondents from the petitioners unti% paid. Petitioners a%so impugn the 7ourt of Appea%s in nu%%if&ing the esca%ation c%ause in the #eed of 1ea% 5state ortgage and Promissor& Note. :nder such esca%ation c%ause, sustained b& the tria% court, the amount of P5$9,718.$1 (as a(arded to herein petitioners b& (a& of adCustment of the %oan of P1,B00,000.00 after the eight 082 month period of the %oan. 12 )he #eed of 1ea% 5state ortgage provides, among others, as fo%%o(s8

1B. That in the event that an eBtra9ordinary inflation of the Philippine peso should supervene, it is hereb& stipu%ated that the va%ue of the currenc& at the time of the estab%ishment of the ob%igation sha%% be the basis of pa&ment pursuant to Art. 1!50 of the Ne( 7ivi% 7ode of the Phi%ippines. ,or this purpose, "1)DAD"1= hereb& recogni4e the officia% e6change rate of the Phi%ippine Peso to the := do%%ar at 1B.00! to one. The corresponding ad%ustment in the value of the Philippine Peso shall be made should at the time of the maturity of this obligation, the rate of eBchange will have changed as a result of the supervening inflation. ;t is further agreed that the officia% rate of e6change as set b& the 7entra% -ank for private transactions sha%% be the basis of this adCustment. 05mphasis supp%ied2. A cursor& reading of the afore'uoted provision of the #eed of 1ea% 5state ortgage 0simi%ar stipu%ation is contained in the Promissor& Note2 sho(s that the esca%ation c%ause takes effect .in the event that an e6traordinar& inf%ation of the Phi%ippine Peso shou%d supervene,. bet(een the date the %oan (as granted and the date of its maturit&, in (hich case, the va%ue of the 0peso2 currenc& at the time of the estab%ishment of the ob%igation sha%% be the basis of pa&ment. )o give meaning to the .va%ue of the currenc& at the time of the estab%ishment of the ob%igation,. the parties agreed that on $ Apri% 198B 0date of %oan2, the e6change rate of the peso to the := do%%ar (as 1B.00! to one. 7onse'uent%&, under the aforesaid esca%ation c%ause, .0t2he corresponding adCustment in the va%ue of the Phi%ippine Peso. at the maturit& of the ob%igation crucia%%& depends upon the supervening of an e6traordinar& inf%ation in the sense contemp%ated in Artic%e 1!50 of the 7ivi% 7ode of the Phi%ippines. 18 ;n 'ilipino Pipe and 'oundry !orporation vs. 2ational Jaterwor(s and )ewerage Authority, 15 this 7ourt he%d8 56traordinar& inf%ation e6ists (hen Fthere is a decrease or increase in the purchasing po(er of the Phi%ippine currenc& (hich is unusua% or be&ond the common f%uctuation in the va%ue of said currenc&, and such decrease or increase cou%d not have been reasonab%& foreseen or (as manifest%& be&ond the contemp%ation of the parties at the time of the estab%ishment of the ob%igation. 0)o%entino 7ommentaries and *urisprudence on the 7ivi% 7ode Ao%. ;A, p. !8B.2 An e6amp%e of e6traordinar& inf%ation is the fo%%o(ing description of (hat happened to the deutschmark in 19!08 ore recent%&, in the 19!0Fs Derman& e6perience a case of h&per3inf%ation. ;n ear%& 19!1, the va%ue of the Derman mark (as B.! to the :.=. do%%ar. -& a& of the same &ear, it had stumb%ed to $! to the :.=. do%%ar. And as prices (ent up rapid%&, so that b& "ctober 19!?, it had reached B.! tri%%ion to the :.=. do%%arT 0-ernardo . Ai%%egas R Aictor 1. Abo%a, 5conomics, An ;ntroduction J)hird 5ditionK. As reported, .prices (ere going up ever& (eek, then ever& da&, then ever& hour. Eomen (ere paid severa% times a da& so that the& cou%d rush out and e6change their mone& for something of va%ue before (hat %itt%e purchasing po(er (as %eft disso%ved in their hands. =ome (orkers tried to beat the constant%& rising prices b& thro(ing their mone& out of the (indo(s to their (aiting (ives, (ho (ou%d rush to un%oad the near%& (orth%ess paper. A postage stamp cost mi%%ions of marks and a %oaf of bread, bi%%ions,. 0=idne& 1utberg, .)he one& -a%oon. Ne( <ork> =imon and =chuster, 1975, p. 19, cited in 5conomics, An ;ntroduction b& Ai%%egas R Abo%a, ?rd 5d.2 Ehi%e appe%%antFs vo%uminous records and statistics proved that there has been a dec%ine in the purchasing po(er of the Phi%ippine peso, this do(n(ard fa%% of the currenc& cannot be considered .e6traordinar&.. ;t is simp%& a universa% trend that has not spared our countr&. 13 =ince petitioners fai%ed to prove the supervening of e6traordinar& inf%ation bet(een $ Apri% 198B and 7 #ecember 198BIno proofs (ere presented on ho( much, for instance, the price inde6 of goods and services had risen during the intervening periodIan e6traordinar& inf%ation cannot be assumed> conse'uent%&, there is no reason or basis, %ega% or factua%, for adCusting the va%ue of the Phi%ippine Peso in the sett%ement of respondentsF ob%igation. ,ina%%&, the 7ourt of Appea%s did not commit an& error in reducing the a(ard of attorne&Fs fees to P50,000.00. )he contractua% provision for attorne&Fs fees ma& be modified b& the courts in the e6ercise of their sound Cudicia% discretion. 14 E9515,"15, the petition is #5N;5#. )he decision of the 7ourt of Appea%s dated 1! August 1987 is A,,;1 5#. Eith costs against petitioners.

=" "1#515#.

G.R. No. 82082 Ma!*) 25, 1988 INS6LAR ,AN9 OF ASIA AND AMERICA, p%aintiff3appe%%ant, vs. S O6SES E IFANIA SALA<AR a%$ RICARDO SALA<AR, defendants3appe%%ees. G65IERRE<, JR., J.: )his is an appea% b& the ;nsu%ar -ank of Asia and America 0;-AA2 from the Cudgment of the 1egiona% )ria% 7ourt of /e&te in 7ivi% 7ase No. $9?! for co%%ection of a sum of mone& (ith pre%iminar& attachment. )he appea% (as origina%%& brought to the 7ourt of Appea%s but (as certified to us b& that tribuna% because it raises on%& a 'uestion of %a(. )he facts are not disputed. "n November !!, 1978, defendants3appe%%ees 5pifania =a%a4ar and 1icardo =a%a4ar obtained a %oan from the p%aintiff3appe%%ant in the amount of ,ort& )(o )housand and ,ift& Pesos 0 PB!,050.00 2 pa&ab%e on or before #ecember 1!, 1980. )his %oan transaction (as evidenced b& a promissor& note (here the defendants3appe%%ees bound themse%ves Coint%& and severa%%& to pa& the amount (ith interest at 19@ per annum and (ith the e6press authorit& to increase (ithout notice the rate of interest up to the ma6imum a%%o(ed b& %a( and subCect further to pena%t& charges or %i'uidated damages upon defau%t e'uiva%ent to !@ per month on an& amount due and unpaid. ;n the event the account (as referred to an attorne& for co%%ection, the defendants3appe%%ees (ere a%so bound to pa& !5@ of an& amount due as attorne&Fs fees p%us e6penses of %itigation and costs. ;n accordance (ith the agreement, the p%aintiff3appe%%ant increased the rate of interest to !1@ pursuant to 7entra% -ank 7ircu%ar No. 705 dated #ecember 1, 1979. )he promissor& note matured but the defendants3appe%%ees fai%ed to pa& their account. ;t (as on%& after severa% demands that the defendants3appe%%ees (ere ab%e to make partia% pa&ment. As of November !5, 198?, the& (ere ab%e to pa& a tota% of P$8,$7$.75 (hich pa&ments (ere app%ied to partia%%& satisf& the pena%t& and interest charges. "n =eptember 1!, 198B, the p%aintiff3appe%%ant fi%ed a comp%aint (ith the 1egiona% )ria% 7ourt a%%eging that the defendants3appe%%ees (ere indebted to ;-AA in the amount of P87,$B7.19 as of =eptember 15, 198B. inc%uding interest at !1@ per annum pena%t& charges, and attorne&Fs fees. At the pre3tria% on "ctober ?1, 198B, the parties and their counse%s appeared. )he defendant3spouses admitted the e6ecution of the promissor& note in consideration of PB8,050.00. )he tria% court then rendered a summar& Cudgment the dispositive portion of (hich reads8 E9515,"15, Cudgment is hereb& ordered in favor of the p%aintiff ordering the defendant spouses 1icardo =a%a4ar and 5pifania =a%a4ar to pa& ;nsu%ar -ank of Asia and America 0;-AA2 the sum of 5%even )housand )(o 9undred ,ift& )hree Pesos and )(ent& ,ive 7entavos 0 P11,!5?.!5 2, (ith interest thereon at the rate of 19@ per annum from the fi%ing of the comp%aint on =eptember 1!, 198B unti% fu%%& paid. )he defendants are further ordered to pa& the p%aintiff3 attorne&Fs fees in the amount of one )housand Pesos 0 P1,000.00 2 and to pa& the costs. 0p. B, P%aintiff3 Appe%%antFs -rief2. P%aintiff3appe%%ant no( raises the fo%%o(ing assigned errors8 ; )95 /"E51 7":1) 5115# ;N N") AEA1#;ND )" P/A;N);,,3APP5//AN) P5NA/)< 79A1D5= "1 /;G:;#A)5# #A AD5= ;N )95 A ":N) ", !@ P51 "N)9 "N A// A ":N)= #:5 AN# :NPA;#> ;; )95 /"E51 7":1) 5115# ;N N") AEA1#;ND ;N)515=) "N )95 /"AN A) !1 @ P51 ANN: .

;;; )95 /"E51 7":1) 5115# ;N )95 7" P:)A);"N ", )95 A ":N) ", "-/;DA);"N #:5 ,1" APP5//55= APP5//55= ;N ,AA"1 ", P/A;N);,,3APP5//AN)

#5,5N#AN)=3

;;; )95 /"E51 7":1) 5115# ;N N") AEA1#;ND P/A;N);,,3 APP5//AN) A))"1N5<F= ,55= 5G:;AA/5N) )" !5@ ", )95 A ":N) #:5 AN# 5PP5N=5= ", /;);DA);"N> and ;A )95 /"E51 7":1) 5115# ;N N") "1#51;ND #5,5N#AN)=3AP5//55= )" *";N)/< AN# =5A51A//< PA< )95 "-/;DA);"N. 0pp. B35, P%aintiff3Appe%%antFs -rief2 )he 5sca%ation 7%ause provided in the promissor& note reads8 )he interest herein charged sha%% be subCect to in , (ithout notice, depending on (hatever po%ic& ;-AA ma& in the future adopt conformab%e to %a(, especia%%& to compensate for an& in 7entra% -ank interests or rediscounting rates. ,inding strength in the argument that the promissor& note is the contract bet(een the parties and, under the %a(, ob%igations arising from contracts have the force of %a( bet(een the parties, the p%aintiff3appe%%ant increased the interest rate to !1@ per annum effective #ecember 1, 1979 pursuant to 7entra% -ank 7ircu%ar No. 705. ;n %ine (ith the 7ourtFs ru%ing in the case of .anco 'ilipino v. 2avarro 0D.1. No. /3B$591, *u%& !8,19872, the interest rate ma& not be increased b& the p%aintiff3appe%%ant in the instant case. ;t is the ni%e that esca%ation c%auses are va%id stipu%ations in commercia% contracts to maintain fisca% stabi%it& and to retain the va%ue of mone& in %ong term contracts. 9o(ever, the enforceabi%it& of such stipu%ations are subCect to certain conditions. ;n the -anco ,i%ipino case, the borro(er 'uestioned the additiona% interest charges on the %oan of PB1,?00.00 she obtained (hen the interest rates (ere increased from 1!@ to 17@ per 7entra% -ank 7ircu%ar No. B9B, issued on *anuar& !, 197$. ;n a %etter (ritten b& the 7entra% -ank to the borro(er, some c%arifications (ere made. Pertinent portions of the %etter read8 ;n this connection, p%ease be advised that the onetar& -oard, in its 1eso%ution No. 1155 dated *une 11, 197$ adopted the fo%%o(ing guide%ines to govern interest rate adCustments b& banks and non3banks performing 'uasi3 banking functions on %oans a%read& e6isting as of *anuar& ?, 197$, in the %ight of 7entra% 1ank 7ircu%ars Nos. B9!3 B988 1 "n%& banks and non3bank financia% intermediaries performing 'uasi3banking functions ma& interest rates on ; a%read& e6isting as of *anuar& !,197$, provided that8 a. )he pertinent %oan contractsHdocuments contain esca%ation c%auses e6press%& authori4ing %ending bank or non3bank performing 'uasi3banking functions to increase the rate of interest stipu%ated in the contract, in the event that an& %a( or 7entra% -ank regu%ation is promu%gated increasing the ma6imum interest rate for %oans> and b. =aid %oans (ere direct%& granted b& them and the remaining maturities thereof were more than 7>? days as of @anuary 6, 0;74, and !. )he increase in the rate of interest can be effective on%& as of *anuar& !, 197$ or on a %ater date. 05mphasis supp%ied2 oreover, in its comment and supp%ementa% comment submit, ted upon orders of this 7ourt, the 7entra% -ank took the position that the issuance of its circu%ars is a va%id e6ercise of its authorit& to prescribe ma6imum rates of interest and based on the genera% princip%es of contract, the 5sca%ation 7%ause is a va%id provision in the %oan agreement provided that3 B12 the increased rate imposed or charged b& petitioner does not e6ceed the cei%ing fi6ed b& %a( or the onetar& -oard> 0!2 the increase is made effective not ear%ier than the effectivit& of the %a( or regu%ation authori4ing such an increase and 0?2 the remaining maturities of the loans are more than 7>? days as of the effectivity of the law or regulation authorizing such an increase. 05mphasis supp%ied2 ;n the case at bar, the %oan (as obtained on November !1, 1978 and (as pa&ab%e on or before November 1!, 1980. 7entra% -ank 7ircu%ar No. 705, authori4ing the increase from 19@ to !1@ (as issued on #ecember 1, 1979. "bvious%&, as of this date, #ecember 1, 1979, the remaining maturit& of the %oan (as %ess than 7?0 da&s. 9ence, the p%aintiff3appe%%antFs second assignment of error is (ithout merit. Eith respect to the pena%t& c%ause, (e have uphe%d the va%idit& of such agreements in severa% cases. As the 7ourt stated in the case of Government )ervice Insurance )ystem v. !ourt of appeals 01B5 =71A ?11, ?!128 ;n the -achrach case 0supra2 the =upreme 7ourt ru%ed that the 7ivi% 7ode permits the agreement upon a pena%t& apart from the interest. =hou%d there be such an agreement, the pena%t& does not inc%ude the interest, and as such

the t(o are different and distinct things (hich ma& be demanded separate%&. 1eiterating the same princip%e in the %ater case of 5'uitab%e -anking 7orp. 0supra2, (here this 7ourt he%d that the stipu%ation about pa&ment of such additiona% rate partakes of the nature of a pena%t& c%ause, (inch is sanctioned b& %a(. ;n the case of -quitable .an(ing !orporation v. #iwanag 0?! =71A !9?, !972, the 7ourt e6p%ained8 666 666 666 ... Ee have not over%ooked the 1B@ interest that appe%%ant has been sentenced to pa&. )his ma& appear to be usurious, but it is not so. )he rate stipu%ated (as 9@, subCect, ho(ever, to an additiona% rate of 5@, in the event of defau%t. )he stipu%ation about pa&ment of such additiona% rate partakes of the nature of a pena%t& c%ause, (hich is sanctioned b& %a(, 0Art. 1!!$, 7ivi% 7ode of the Phi%ippines2, a%though, the pena%t& ma& a%so be reduced b& the courts if it is ini'uitous or unconscionab%e. 0Art 1!!9, 7ivi% 7ode of the Phi%ippines2. ... Admitted%&, the defendants3appe%%ees in the instant case fai%ed to pa& the %oan on the due date. 9o(ever, (ith earnest efforts, the& tried to pa& the %oan %itt%e b& %itt%e so that as of November !5, 198?, a tota% of P$8,$7$.75 had been paid. )he p%aintiff3appe%%ant, on the other hand, mere%& app%ied this amount to satisf& the pena%t& and interest charges (hich it additiona%%& imposed. Ee do not find an& evidence of bad faith on the part of the defendants3appe%%ees in their fai%ure to pa& the %oan on time. 5fforts (ere indeed made to make good their promise. Ee note the tria% courtFs observation that the p%aintiff3appe%%ant did not even state in the comp%aint that the defendants3 appe%%ees had made partia% pa&ments, making it appear that the spouses =a%a4ars refused to pa& the %oan. ;n their ans(er (ith counterc%aim, the defendants3appe%%ees a%%eged that the bank neg%ected to credit said pa&ments in the defendantFs account fo%io and subCected it as it did to the additiona% charges. ,urthermore, (e agree (ith the tria% court that the bank has a%read& profited considerab%& from the %oan. ;n a span of about si6 0$2 &ears, the bank (as enriched b& P !$,$!$.75 0p. 17, 1ecords2. )he pena%t& charges of !@ a month are, therefore, out of proportion to the damage incurred b& the bank. ;n accordance (ith Artic%e 1!!9 of the 7ivi% 7ode, the 7ourt is constrained to reduce the pena%t& for being high%& ini'uitous Eith respect to the attorne&Fs fees, the court is %ike(ise empo(ered to reduce the same if the& are unreasonab%e or unconscionab%e not(ithstanding the e6press contract for attorne&Fs fees. )he a(ard of one thousand 0 P1,000.00 2 pesos b& the tria% court appears to be enough. )he promissor& note signed b& the defendants3appe%%ants states that the %oan of PB!,050.00 sha%% bear interest at the rate of 19@ per annum. )his (ou%d &ie%d interest of P7,989.50 per annum or a tota% of P B$,??9.10 from November !!, 1978 to =eptember 1!, 198B, the date of fi%ing the comp%aint. Pena%t& interest of 1@ a month or 1!@ per annum is reasonab%e so that from #ecember 1!, 1980 up to =eptember 1!, 198B, pena%t& charges shou%d be P19,!0!.8?. 7onsidering that the defendants3appe%%ees have paid the amount of P$8,$7$.75, the&, therefore, o(ed the bank the amount of P?8,915.18 (hen the comp%aint (as fi%ed. )here is no indication in the records as to the f%uctuation of actua% interest rates from 198B and, therefore, (e order interest at the %ega% rate of 1!@ per annum on the unpaid amount. E9515,"15, the decision of the %o(er court is "#;,;5#. )he defendants3appe%%ants 1icardo =a%a4ar and 5pifania =a%a4ar are ordered to pa& ;nsu%ar -ank of Asia and America 0;-AA2 the sum of )9;1)<35;D9) )9":=AN# N;N5 9:N#15# P5="= and 5;D9)55N 75N)AA"= 0P?8,915.18 2 (ith interest thereon at the rate of )(e%ve Percent 01!@2 per annum from the fi%ing of the comp%aint unti% fu%%& paid. =" "1#515#.

=G.R. No. L-83591. July 28, 1984.? ,ANCO FILI INO SA.INGS AND MOR5GAGE ,AN9, /"(#(#o%"!, ;s. HON. MIG6EL NA.ARRO, !"s#$#%& Ju$&", Cou!( o' F#!s( I%s(a%*" o' Ma%#la, ,!a%*) ---I a%$ FLORAN5E DEL .ALLE, !"s/o%$"%(s. =<//A-:= 1. 7;A;/ /AE> 7"N)1A7)=> =A/5 "N ;N=)A// 5N) -A=;=> 5=7A/A);"N 7/A:=5 -A=5# "N 7;17:/A1 N". B9B> 7ANN") -5 )95 -A=;= ,"1 AN ;N715A=5 ;N ;N)515=) 1A)5 "N /"AN. I Ehat shou%d be reso%ved is (hether -AN7" ,;/;P;N" can increase the interest rate on the /"AN from 1!@ to 17@ per annum under the 5sca%ation 7%ause. ;t is our considered opinion that it ma& not. ;t is c%ear from the stipu%ation bet(een the parties that the interest rate ma& be increased .in the event a %a( shou%d be enacted increasing the %a(fu% rate of interest that ma& be charged on this particu%ar kind of %oan.. )he 5sca%ation 7%ause (as dependent on an increase of rate made b& .%a(. a%one. 7;17:/A1 No. B9B, a%though it has the effect of %a(, is not a %a(. .A%though a circu%ar du%& issued is not strict%& a statute or a %a(, it has, ho(ever, the force and effect of %a(.. .An administrative regu%ation adopted pursuant to %a( has the force and effect of %a(.. .)hat administrative ru%es and regu%ations have the force of %a( can no %onger be 'uestioned.. !. =)A):)"1< 7"N=)1:7);"N> /AE #;=);ND:;=95# ,1" A# ;N;=)1A);A5 15D:/A);"N=. I )he distinction bet(een a %a( and an administrative regu%ation is recogni4ed in the onetar& -oard guide%ines 'uoted in the %etter to the -"11"E51 of s. Paderes of =eptember !B, 197$. According to the guide%ines, for a %oanFs interest to be subCect to the increases provided in 7;17:/A1 No. B9B, there must be an 5sca%ation 7%ause a%%o(ing the increase .in the event that an& %a( or 7entra% -ank regu%ation is promu%gated increasing the ma6imum interest rate for %oans.. )he guide%ines thus presuppose that a 7entra% -ank regu%ation is not (ithin the term .an& %a(.. )he distinction is again recogni4ed b& P.#. No. 1$8B, promu%gated on arch 17, 1980, adding section 73a to the :sur& /a(, providing that parties to an agreement pertaining to a %oan cou%d stipu%ate that the rate of interest agreed upon ma& be increased in the event that the app%icab%e ma6imum rate of interest is increased .b& %a( or b& the onetar& -oard.. ?. 7;A;/ /AE> 7"N)1A7)=> =A/5 "N ;N=)A// 5N) -A=;=> 5=7A/A);"N 7/A:=5> 15G:;=;)5 ,"1 AA/;#;)<. I ;t is no( c%ear that from arch 17, 1980, esca%ation c%auses to be va%id shou%d specifica%%& provide8 012 that there can be an increase in interest if increased b& %a( or b& the onetar& -oard> and 0!2 in order for such stipu%ation to be va%id, it must inc%ude a provision for reduction of the stipu%ated interest .in the event that the app%icab%e ma6imum rate of interest is reduced b& %a( or b& the onetar& -oard.. B. ;#.> ;#.> ;#.> ;#.> 7;17:/A1 No. B9B /; ;)5# "N/< )" /"AN= D:A1AN)55# -< =57:1;);5= ")951 )9AN "1)DAD5 :P"N 15D;=)515# 15A/)<. I Apparent from =ections ? and B of P.#. 11$ is that the separate treatment for the t(o c%asses of %oans (as maintained. <et, 7;17:/A1 No. B9B makes no distinction as to the t&pes of %oans that it is app%icab%e to un%ike 7ircu%ar No. 58$ dated *anuar& 1, 1978 and 7ircu%ar No. 705 dated #ecember 1, 1979, (hich fi6 the effective rate of interest on %oan transactions (ith maturities of more than 7?0 da&s to not e6ceeding 19@ per annum 07ircu%ar No. 58$2 and not e6ceeding !1@ per annum 07ircu%ar No. 7052 .on both secured and unsecured %oans as defined b& the :sur& /a(, as amended.. ;n the absence of an& indication in 7;17:/A1 No. B9B as to (hich particu%ar t&pe of %oan (as meant b& the onetar& -oard, the more e'uitab%e construction is to %imit 7;17:/A1 No. B9B to %oans guaranteed b& securities other than mortgage upon registered rea%t&. DECISION MELENCIO-HERRERA, J /> )his is a Petition to revie( on certiorari the #ecision of respondent 7ourt, the dispositive portion of (hich decrees8 .E9515,"15, the 7ourt finds that the enforcement of the esca%ation c%ause retroactive%& before the %apse of the 153&ear period stated in the promissor& note is contrar& to =ec. ? of Presidentia% #ecree No. 11$ and =ec. 109 of 1epub%ic Act No. !$5, and hereb& dec%ares

nu%% and void the said esca%ation c%ause. )he respondent -anco ,i%ipino =avings and enforcing the increased rate of interest on petitionerFs %oan. .=" "1#515#.. )he facts are not in dispute8

ortgage -ank is hereb& ordered to desist from

"n a& !0, 1975, respondent ,%orante de% Aa%%e 0the -"11"E512 obtained a %oan secured b& a rea% estate mortgage 0the /"AN, for short2 from petitioner -AN7" ,;/;P;N" 1 in the sum of ,ort&3one )housand )hree 9undred 0PB1,?00.002 Pesos, pa&ab%e and to be amorti4ed (ithin fifteen 0152 &ears at t(e%ve 01!@2 per cent interest annua%%&. 9ence, the /"AN sti%% had more than 7?0 da&s to run b& *anuar& !, 197$, the date (hen 7;17:/A1 No. B9B (as issued b& the 7entra% -ank. =tamped on the promissor& note evidencing the %oan is an 5sca%ation 7%ause, reading as fo%%o(s8 .;HEe hereb& authori4e -anco ,i%ipino to corresponding%& increase the interest rate stipu%ated in this contract (ithout advance notice to meHus in the event a %a( shou%d be enacted increasing the %a(fu% rates of interest that ma& be charged on this particu%ar kind of %oan.. )he 5sca%ation 7%ause is based upon 7entra% -ank 7;17:/A1 No. B9B issued on *anuar& !, 197$, the pertinent portion of (hich reads8 .?. )he ma6imum rate of interest, inc%uding commissions, premiums, fees and other charges on %oans (ith maturit& of more than seven hundred thirt& 07?02 da&s, b& banking institutions, inc%uding thrift banks and rura% banks, or b& financia% intermediaries authori4ed to engage in 'uasi3banking functions sha%% be nineteen per cent 019@2 per annum. .666 666 666 .7. 56cept as provided in this 7ircu%ar and 7ircu%ar No. B9?, %oans or rene(a%s thereof sha%% continue to be governed b& the :sur& /a(, as amended.. 7;17:/A1 No. B9B (as issued pursuant to the authorit& granted to the onetar& -oard b& Presidentia% #ecree No. 11$ 0Amending ,urther 7ertain =ections of the :sur& /a(2 promu%gated on *anuar& !9, 197?, the app%icab%e section of (hich provides8 .=ec. !. )he same Act is hereb& amended b& adding the fo%%o(ing section immediate%& after section one thereof, (hich reads as fo%%o(s8 .=ec. 13a. )he onetar& -oard is hereb& authori4ed to prescribe the ma6imum rate or rates of interest for the %oan or rene(a% thereof or the forbearance of an& mone&, goods or credits, and to change such rate or rates (henever (arranted b& prevai%ing economic and socia% conditions8 Provided, that such changes sha%% not be made oftener than once ever& t(e%ve months.. )he same grant of authorit& appears in P.#. No. 858, promu%gated on #ecember ?1, 1975, e6cept that the %imitation on the fre'uenc& of changes (as e%iminated. "n the strength of 7;17:/A1 No. B9B -AN7" ,;/;P;N" gave notice to the -"11"E51 on *une ?0, 197$ of the increase of interest rate on the /"AN from 1!@ to 17@ per annum effective on arch 1, 197$. "n =eptember !B, 197$, .=eptember !B, 197$ r. ,%orante de% Aa%%e 1B Pa%anca =treet -.,. 9omes, ParaSa'ue 1i4a%. #ear r. de% Aa%%e8 s. ercedes 7. Paderes of the 7entra% -ank (rote a %etter to the -"11"E51 as fo%%o(s8

)his refers to &our %etter dated August !8, 197$ addressed to the Dovernor, 7entra% -ank of the Phi%ippines, seeking c%arification and our officia% stand on -anco ,i%ipinoFs recent decision to raise interest rates on %ots bought on insta%%ment from 1!@ to 17@ per annum. A verification made b& our 56aminer of the cop& of &our Promissor& Note on fi%e (ith -anco ,i%ipino sho(ed that the fo%%o(ing esca%ation c%ause (ith &our signature is stamped on the Promissor& Note8 F;HEe hereb& authori4e -anco ,i%ipino to corresponding%& increase the interest rate stipu%ated in this contract (ithout advance notice to meHus in the event a %a( shou%d be enacted increasing the %a(fu% rates of interest that ma& he charged on this particu%ar kind of %oan.F ;n this connection, p%ease be advised that the onetar& -oard, in its 1eso%ution No. 1155 dated *une 11, 197$, adopted the fo%%o(ing guide%ines to govern interest rate adCustments b& banks and non banks performing 'uasi3banking functions on %oans a%read& e6isting as of *anuar& ?, 197$, in the %ight of 7entra% -ank 7ircu%ars Nos. B9!B988 F1. "n%& banks and non3bank financia% intermediaries performing 'uasi3banking functions ma& increase interest rates on %oans a%read& e6isting as of *anuar& !, 197$, provided that8 a. )he pertinent %oan contractsHdocuments contain esca%ation c%auses e6press%& authori4ing %ending bank or non3bank performing 'uasi3banking functions to increase the rate of interest stipu%ated in the contract, in the event that an& %a( or 7entra% -ank regu%ation is promu%gated increasing the ma6imum interest rate for %oans> and

b. =aid %oans (ere direct%& granted b& them and the remaining maturities thereof (ere more than 7?0 da&s as of *anuar& !, 197$> and !. )he increase in the rate of interest can be effective on%& as of *anuar& !, 197$ or on a %ater date.F

.)he foregoing guide%ines, ho(ever, sha%% not be understood as prec%uding affected parties from 'uestioning before a competent court of Custice the %ega%it& or va%idit& of such esca%ation c%auses. .Ee trust the above guide%ines (ou%d he%p &ou reso%ve &our prob%ems regarding additiona% interest charges of -anco ,i%ipino. Aer& tru%& &ours, 0=gd.2 5175#5= 7. PA15#5= #irector.

7ontending that 7;17:/A1 No. B9B is not the %a( contemp%ated in the 5sca%ation 7%ause of the promissor& note, the -"11"E51 fi%ed suit against -AN7" ,;/;P;N" for .#ec%arator& 1e%ief. (ith respondent 7ourt, pra&ing that the 5sca%ation 7%ause be dec%ared nu%% and void and that -AN7" ,;/;P;N" be ordered to desist from enforcing the increased rate of interest on the -"11"E51Fs rea% estate %oan. ,or its part, -AN7" ,;/;P;N" maintained that the 5sca%ation 7%ause signed b& the -"11"E51 authori4ed it to increase the interest rate once a %a( (as passed increasing the rate of interest and that its authorit& to increase (as provided for b& 7;17:/A1 No. B9B. ;n its Cudgment, respondent 7ourt nu%%ified the 5sca%ation 7%ause and ordered -AN7" ,;/;P;N" to desist from enforcing the increased rate of interest on the -"11"E51Fs %oan. ;t reasoned out that P.#. No. 11$ does not e6press%& grant the 7entra% -ank authorit& to ma6imi4e interest rates (ith retroactive effect and that -AN7" ,;/;P;N" cannot %ega%%& impose a higher rate of interest before the e6piration of the 153&ear period in (hich the %oan is to be paid other than the 1!@ per annum in force at the time of the e6ecution of the %oan. ;t is from that #ecision in favor of the -"11"E51 that -AN7" ,;/;P;N" has come to this instance on revie( b& 7ertiorari. Ee gave due course to the Petition, the 'uestion being one of %a(. "n ,ebruar& !B, 198?, the parties represented b& their respective counse%, not on%& moved to (ithdra( the appea% on the ground that it had become moot and academic .because of recent deve%opments in the ru%es and regu%ations of the 7entra% -ank,. but a%so pra&ed that .the decision rendered in the 7ourt of ,irst ;nstance be therefore vacated and dec%ared of no force and effect as if the case (as never fi%ed,. since the parties .(ou%d %ike to end this matter once and for a%%.. 9o(ever, .considering the subCect matter of the controvers& in (hich man& persons simi%ar%& situated are interested and because of the need for a definite ru%ing on the 'uestion,. the 7ourt, in its 1eso%ution of ,ebruar& !B, 198?, imp%eaded the 7entra% -ank and re'uired it to submit its 7omment, and encouraged homeo(ners simi%ar%& situated as the -"11"E51 to intervene in the proceedings. At the hearing on ,ebruar& !B, 198?, one /eopo%do +. =o, a mortgage homeo(ner at -.,. 1esort =ubdivision, (as present and manifested that he (as in a simi%ar situation as the -"11"E51. =ince then, he has (ritten severa% %etters to the 7ourt, p%eading for ear%& reso%ution of the case. )he 7ourt a%%o(ed the intervention of /o%ita Perono ! and issued a temporar& restraining order enCoining the 1egiona% )ria% 7ourt 0Pasa& 7it& -ranch2 in the case entit%ed .-anco ,i%ipino =avings and ortgage -ank vs. /o%ita Perono. from issuing a (rit of possession over her mortgaged propert&. A%so a%%o(ed to intervene (ere 5nri'ue )aba%on, *ose /%opis, et a%s., (ho had obtained %oans (ith identica% esca%ation c%auses from Ape6 ortgage and /oans 7orporation, apparent%& an affi%iate of -AN7" ,;/;P;N". :pon motion of *ose /%opis, a )emporar& 1estraining "rder (as %ike(ise issued enCoining the forec%osure of his rea% estate mortgage b& -AN7" ,;/;P;N". )he 7ourt made it e6p%icit, ho(ever, that intervention (as a%%o(ed on%& for the purpose of .Coining in the discussion of the %ega% issue invo%ved in this proceedings, to (it, the va%idit& of the so3ca%%ed Fesca%ation c%ause,F or its app%icabi%it& to e6isting contracts of %oan.. )he 7entra% -ank has submitted its 7omment and =upp%ementa% 7omment and %ike -AN7" ,;/;P;N", has taken the position that the issuance of its 7ircu%ars is a va%id e6ercise of its authorit& to prescribe ma6imum rates of interest and that, based on the genera% princip%es of contract, the 5sca%ation 7%ause is a va%id provision in the %oan agreement provided that .012 the increased rate imposed or charged b& petitioner does not e6ceed the cei%ing fi6ed b& %a( or the onetar& -oard> 0!2 the increase is made effective not ear%ier than the effectivit& of the %a( or regu%ation authori4ing such an increase> and 0?2 the remaining maturities of the %oans are more than 7?0 da&s as of the effectivit& of the %a( or regu%ation authori4ing such an increase. 9o(ever, (ith respect to %oan agreements entered into on or after arch 17, 1980, such agreement, in order to be va%id, must a%so inc%ude a de3esca%ation c%ause as re'uired b& Presidentia% #ecree No. 1$8B.. )he substantia% 'uestion in this case is not rea%%& (hether the 5sca%ation 7%ause is a va%id or void stipu%ation. )here shou%d be no 'uestion that the c%ause is va%id. .=ome contracts contain (hat is kno(n as an Fesca%ator c%auseF (hich is defined as one in (hich the contract fi6es a base price but contains a provision that in the event of specified cost increases, the se%%er or contractor ma& raise the price up to a fi6ed percentage of the base. Attacks on such a c%ause have usua%%& been based on the c%aim that, because of the open price3provision, the contract (as

too indefinite to be enforceab%e and did not evidence an actua% meeting of the minds of the parties, or that the arrangement %eft the price to be determined arbitrari%& b& one part& so that the contract %acked mutua%it&. ;n most instances, ho(ever, these attacks have been unsuccessfu%.. .)he 7ourt further finds as a matter of %a( that the cost of %iving inde6 adCustment, or esca%ator c%ause, is not substantive%& unconscionab%e. .7ost of %iving inde6 adCustment c%auses are (ide%& used in commercia% contracts in an effort to maintain fisca% stabi%it& and to retain Frea% do%%arF va%ue to the price terms of %ong term contracts. )he provision is a common one, and has been universa%%& uphe%d and enforced. ;ndeed, the ,edera% government has recogni4ed the efficac& of esca%ator c%auses in t&ing =ocia% =ecurit& benefits to the cost of %iving inde6, B! :.=.7.s B150i2. Pension benefits and %abor contracts negotiated b& most of the maCor %abor unions are other e6amp%es. )hat inf%ation, e6pected or other(ise, (i%% cause a particu%ar bargain to be more cost%& in terms of tota% do%%ars than origina%%& contemp%ated can be of %itt%e so%ace to the p%aintiffs.. 5 Ehat shou%d be reso%ved is (hether -AN7" ,;/;P;N" can increase the interest rate on the /"AN from 1!@ to 17@ per annum under the 5sca%ation 7%ause. ;t is our considered opinion that it ma& not. )he 5sca%ation 7%ause reads as fo%%o(s8 .;HEe hereb& authori4e -anco ,i%ipino to corresponding%& increase the interest rate stipu%ated in this contract (ithout advance notice to meHus in the event. A %a( increasing the %a(fu% rates of interest that ma& be charged on this particu%ar kind of %oan. 0Paragraphing and emphasis supp%ied2 ;t is c%ear from the stipu%ation bet(een the parties that the interest rate ma& be increased .in the event a %a( shou%d be enacted increasing the %a(fu% rate of interest that ma& be charged on this particu%ar kind of %oan.. )he 5sca%ation 7%ause (as dependent on an increase of rate made b& .%a(. a%one. 7;17:/A1 No. B9B, a%though it has the effect of %a(, is not a %a(. .A%though a circu%ar du%& issued is not strict%& a statute or a %a(, it has, ho(ever, the force and effect of %a(.. .An administrative regu%ation adopted pursuant to %a( has the force and effect of %a(.. 7 .)hat administrative ru%es and regu%ations have the force of %a( can no %onger be 'uestioned.. )he distinction bet(een a %a( and an administrative regu%ation is recogni4ed in the onetar& -oard guide%ines 'uoted in the %etter to the -"11"E51 of s. Paderes of =eptember !B, 197$ 0supra2. According to the guide%ines, for a %oanFs interest to be subCect to the increases provided in 7;17:/A1 No. B9B, there must be an 5sca%ation 7%ause a%%o(ing the increase .in the event that an& %a( or 7entra% -ank regu%ation is promu%gated increasing the ma6imum interest rate for %oans.. )he guide%ines thus presuppose that a 7entra% -ank regu%ation is not (ithin the term .an& %a(.. )he distinction is again recogni4ed b& P.#. No. 1$8B, promu%gated on arch 17, 1980, adding section 73a to the :sur& /a(, providing that parties to an agreement pertaining to a %oan cou%d stipu%ate that the rate of interest agreed upon ma& be increased in the event that the app%icab%e ma6imum rate of interest is increased .b& %a( or b& the onetar& -oard.. )o 'uote8 .=ec. 73a. Parties to an agreement pertaining to a %oan or forbearance of mone&, goods or credits ma& stipu%ate that the rate of interest agreed upon ma& be increased in the event that the app%icab%e ma6imum rate of interest is increased b& %a( or b& the onetar& -oard> Provided, )hat such stipu%ation sha%% be va%id on%& if there is a%so a stipu%ation in the agreement that the rate of interest agreed upon sha%% be reduced in the event that the app%icab%e ma6imum rate of interest is reduced b& %a( or b& the onetar& -oard> Provided, further, )hat the adCustment in the rate of interest agreed upon sha%% take effect on or after the effectivit& of the increase or decrease in the ma6imum rate of interest.. 0Paragraphing and emphasis supp%ied2. ;t is no( c%ear that from arch 17, 1980, esca%ation c%auses to be va%id shou%d specifica%%& provide8 012 that there can be an increase in interest if increased b& %a( or b& the onetar& -oard> and 0!2 in order for such stipu%ation to be va%id, it must inc%ude a provision for reduction of the stipu%ated interest .in the event that the app%icab%e ma6imum rate of interest is reduced b& %a( or b& the onetar& -oard.. Ehi%e P.#. No. 1$8B is not to be given retroactive effect, the absence of a de3esca%ation c%ause in the 5sca%ation 7%ause in 'uestion provides another reason (h& it shou%d not be given effect because of its one3sidedness in favor of the %ender. !. )he 5sca%ation 7%ause specifica%%& stipu%ated that the increase in interest rate (as to be .on this particu%ar kind of %oan, . meaning one secured b& registered rea% estate mortgage. Paragraph 7 of 7;17:/A1 No. B9B specifica%%& directs that .%oans or rene(a%s continue to be governed b& the :sur& /a(, as amended.. =o do 7ircu%ar No. 58$ of the 7entra% -ank, (hich superseded 7ircu%ar No. B9B, and 7ircu%ar No. 705, (hich superseded 7ircu%ar No. 58$. )he :sur& /a(, as amended b& Acts Nos. ?!91, ?998 and B070, became effective on a& 1, 191$. ;t provided for the ma6imum &ear%& interest of 1!@ for %oans secured b& a mortgage upon registered rea% estate 0=ection !2, and a ma6imum annua% interest of 1B@ for %oans covered b& securit& other than mortgage upon registered rea% estate 0=ection ?2. =ignificant is the separate treatment of registered rea% estate %oans and other %oans not secured b& mortgage upon registered rea% estate. ;t appears c%ear in the :sur& /a( that the po%ic& is to make interest rates for %oans guaranteed b& registered rea% estate %o(er than those for %oans guaranteed b& properties other than registered rea%t&. "n *une 15, 19B8, 7ongress approved 1epub%ic Act No. !$5, creating the 7entra% -ank, and estab%ishing the onetar& -oard. )hat %a( provides that .the onetar& -oard ma&, (ithin the %imits prescribed in the :sur& /a(, 9 fi6 the ma6imum rates of interest (hich banks

ma& charge for different t&pes of %oans and for an& other credit operations, . . .. and that .an& modification in the ma6imum interest rates permitted for the borro(ing or %ending operations of the banks sha%% app%& on%& to future operations and not to those made prior to the date on (hich the modification becomes effective. 0=ection 1092. "n *anuar& !9, 197?, P.#. No. 11$ (as promu%gated amending the :sur& /a(. )he #ecree gave authorit& to the onetar& -oard .to prescribe ma6imum rates of interest for the %oan or rene(a% thereof or the forbearance of an& mone&, goods or credits, and to change such rate or rates (henever (arranted b& prevai%ing economic and socia% conditions. ;n one section, 10 the onetar& -oard cou%d prescribe the ma6imum rate of interest for %oans secured b& mortgage upon registered rea% estate or b& an& document conve&ing such rea% estate or an interest therein and, in another separate section, 11 the onetar& -oard (as a%so granted authorit& to fi6 the ma6imum interest rate for %oans secured b& t&pes of securit& other than registered rea% propert&. )he t(o sections read8 //pr .=57. ?. =ection t(o of the same Act is hereb& amended to read as fo%%o(s8 F=57. !. No person or corporation sha%% direct%& or indirect%& take or receive in mone& or other propert&, rea% or persona%, or choses in action, a higher rate of interest or greater sum or va%ue, inc%uding commissions, premiums, fines and pena%ties, for the %oan or rene(a% thereof or forbearance of mone&, goods, or credits, (here such %oan or rene(a% or forbearance is secured in (ho%e or in part b& a mortgage upon rea% estate the tit%e to (hich is du%& registered or b& an& document conve&ing such rea% estate or an interest therein, than t(e%ve per centum per annum or the ma6imum rate prescribed b& the onetar& -oard and in force at the time the %oan or rene(a% thereof or forbearance is granted8 Provided, )hat the rate of interest under this section or the ma6imum rate of interest that ma& be prescribed b& the onetar& -oard under this section ma& %ike(ise app%& to %oans secured b& other t&pes of securit& as ma& be specified b& the onetar& -oard.F. .=57. B. =ection three of the same Act is hereb& amended to read as fo%%o(s8 F=57. ?. No person or corporation sha%% direct%& or indirect%& demand, take, receive, or agree to charge in mone& or other propert&, rea% or persona%, a higher rate or greater sum or va%ue for the %oan or forbearance of mone&, goods, or credits, (here such %oan or forbearance is not secured as provided in =ection t(o hereof, than fourteen per centum per annum or the ma6imum rate or rates prescribed b& the onetar& -oard and in force at the time the %oan or forbearance is granted.F. Apparent then is that the separate treatment for the t(o c%asses of %oans (as maintained. <et, 7;17:/A1 No. B9B makes no distinction as to the t&pes of %oans that it is app%icab%e to un%ike 7ircu%ar No. 58$ dated *anuar& 1, 1978 and 7ircu%ar No. 705 dated #ecember 1, 1979, (hich fi6 the effective rate of interest on %oan transactions (ith maturities of more than 7?0 da&s to not e6ceeding 19@ per annum 07ircu%ar No. 58$2 and not e6ceeding !1@ per annum 07ircu%ar No. 7052 .on both secured and unsecured %oans as defined b& the :sur& /a(, as amended.. ;n the absence of an& indication in 7;17:/A1 No. B9B as to (hich particu%ar t&pe of %oan (as meant b& the onetar& -oard, the more e'uitab%e construction is to %imit 7;17:/A1 No. B9B to %oans guaranteed b& securities other than mortgage upon registered rea%t&. //Cur E9515,"15, the 7ourt ru%es that (hi%e an esca%ation c%ause %ike the one in 'uestion can ordinari%& be he%d va%id, neverthe%ess, petitioner -anco ,i%ipino cannot re%& thereon to raise the interest on the borro(erFs %oan from 1!@ to 17@ per annum because 7ircu%ar No. B9B of the onetar& -oard (as not the .%a(. contemp%ated b& the parties, nor shou%d said 7ircu%ar be he%d as app%icab%e to %oans secured b& registered rea% estate in the absence of an& such specific indication and in contravention of the po%ic& behind the :sur& /a(. )he Cudgment appea%ed from is, therefore, hereb& affirmed in so far as it orders petitioner -anco ,i%ipino to desist from enforcing the increased rate of interest on petitionerFs %oan. )he )emporar& 1estraining "rders heretofore issued are hereb& made permanent if the esca%ation c%auses are identica% to the one herein and the %oans invo%ved have app%ied the increased rate of interest authori4ed b& 7entra% -ank 7ircu%ar No. B9B. =" "1#515#.

G.R. No. 45222 Ma!*) 18, 1990 HILI INE NA5IONAL ,AN9, petitioner vs. 5)" HON. IN5ERMEDIA5E A ELLA5E CO6R5 a%$ S O6SES FERMIN MAGLASANG a%$ AN5ONIA SEDIGO, respondents. ARAS, J.> )his is a petition to revie( on certiorari the decision of the ;ntermediate Appe%%ate 7ourt, B no( 7ourt of Appea%s, rendered in A73D.1. 7A No. 07$78 modif&ing the decision of the 1egiona% )ria% 7ourt of "rmoc 7it&. )he factua% background of this case is as fo%%o(s8 )he petitioner, a government banking institution, e6tended financia% assistance to the private respondents in the form of %oans, the tota% amount of (hich is P8!,$8!.?9 as embodied in the promissor& notes that the %atter have e6ecuted on various dates from ,ebruar& 5, 197$ to a& 18, 1979, the pa&ment of (hich to come from the proceeds of sugar sa%es of the private respondents. )he promissor& notes bore 1!@ interest per annum p%us 1@ interest as pena%t& charge in case of defau%t in the pa&ments. "n *anuar& 1$, 19$9, the private respondents mortgaged severa% rea% estate properties in favor of the petitioner as securit& of their %oans, (hich mortgage (as amended on #ecember 17, 19$9, #ecember !!, 1970 and ,ebruar& 1!, 1975, as to the consideration thereof. Ehen the price of sugar (ent do(n in 1977, the private respondents incurred deficits in the pa&ment of their %oans. "n #ecember 1, 1979, the onetar& -oard of the 7entra% -ank, b& virtue of Presidentia% #ecree No. 11$, issued 7- 7ircu%ar No. 705 increasing the cei%ing on the rate of interest on both secured and unsecured %oans up to no more than !1@ per annum. ;n vie( of this deve%opment, the PN- -oard of #irectors revised its %ending interest rates on the medium and %ong3term %oans effective *une 1, 1980, per PN- board reso%ution dated a& !$, 1980. Ehen the private respondents defau%ted in the pa&ments of their %oans, the petitioner demanded not on%& the sett%ement of their outstanding ob%igation but a%so the pa&ment of the ne( interest rate of !1@ per annum beginning *une 1, 1980 per the PN- board reso%ution. ,or fai%ure of the private respondents to sett%e their ob%igation, then in the amount of P8B,7B?.?B, the petitioner forec%osed the mortgage. =ince the proceeds of the auction sa%e, P$?,000.00 (as not enough to satisf& private respondentsF outstanding ob%igation, the petitioner fi%ed an action for deficienc& Cudgment (ith the 7ourt of ,irst ;nstance of /e&te against the private respondents. After due tria%, the tria% court BB rendered its Cudgment on ,ebruar& !0, 1985, in favor of the petitioner and against the private respondents, the dispositive portion of (hich reads as fo%%o(s8 E9515,"15, in vie( of a%% the foregoing, Cudgment is hereb& rendered in favor of the p%aintiff and against the defendants8

1. "rdering the defendants to pa& the p%aintiff the amount of P!1,7B?.?B> said amount sha%% earn interest at !1 @ per annum and ?@ pena%t& charge starting November !7, 1981, unti% the (ho%e ob%igation is fu%%& paid> !. "rdering the defendants to pa& the p%aintiff attorne&Fs fees in the amount e'uiva%ent to 10@ of the tota% amount due as of November !8, 1981> ?. "rdering the defendants to pa& the p%aintiff the amount of P700.00 as %itigation e6penses> and ordering the defendants a%so to pa& the costs of this action. =" "1#515#. 01ecords, p. !?52. )he private respondents appea%ed to the ;ntermediate Appe%%ate 7ourt, docketed as A73D.1. 7A No. 07$78. "n *une ?0, 198$, the appe%%ate court affirmed the decision of the tria% court (ith modification as fo%%o(s8 E9515,"15, in vie( of the foregoing consideration, the appea%ed decision is hereb& A,,;1 5# (ith modification as fo%%o(s8 1. "rdering the defendants to pa& the p%aintiff the amount of P1!,551.1$ (hich sha%% earn interest at 1!@ per annum and 1@ pena%t& charge starting November !7, 1981 unti% fu%%& paid> and !. No other pronouncement as to attorne&Fs fees and costs of suit. =" "1#515#. 0 ollo, p. !82 9ence, this petition. ;n the reso%ution of =eptember 1B, 1987, the 7ourt gave due course to the petition and re'uired the parties to submit simu%taneous%& their respective memoranda (ithin thirt& 0?02 da&s from notice 0 ollo, p. 802. )he main issue in this case is (hether or not the revised rate of interest imposed on the %oans of the private respondents is %ega%. )he petitioner contends that in a%% the promissor& notes e6ecuted b& the private respondents, it is stipu%ated that the %oans are to be paid together (ith the interest thereon at the rate of 1!@ per annum unti% paid, (hich interest rate the -ank ma&, at an& time (ithout notice, raise (ithin the %imits a%%o(ed b& %a(, and a%so 1@ per annum pena%t& charges b& (a& of %i'uidated damages shou%d the note be unpaid or is not rene(ed on due date. /ike(ise stipu%ated in the covering 1ea% 5state ortgage 7ontracts and the Amendment to 1ea% 5state ortgage of ,ebruar& 1!, 1979 that .this account is a%so subCect to the up(ard revision of interest rate as ma& be imposed b& the mortgagee PN-.. -& these e6p%icit contractua% c%auses, the private respondents fu%%& agreed to an up(ard revision of interest rates on their accounts depending on the ru%e, regu%ation, or po%ic& that the petitioner ma& adopt. At the time (hen said promissor& notes and Amendment of 1ea% 5state ortgage (ere e6ecuted b& private respondent ,ermin ag%asang, Presidentia% #ecree No. 11$ 0amending further certain sections of Act No. !$55, as amended, other(ise kno(n as the .:sur& /a(.2 had %ong been promu%gated on *anuar& !9, 197?, and (as a%read& in fu%% force and effect in the Phi%ippines. Pursuant to Presidentia% #ecree No. 11$, the onetar& -oard issued 7entra% -ank 7ircu%ar No. 705 on #ecember 1, 1979, prescribing the ma6imum rate of interest on %oan transactions (ith maturities of more than seven hundred thirt& 07?02 da&s and sha%% not e6ceed t(ent&3one percent 0!1@2 per annum. 9ence, the up(ard revision of interest rate as stipu%ated in the Promissor& Notes and Amendment of 1ea% 5state ortgage dated ,ebruar& 1!, 1975, is in accordance (ith Presidentia% #ecree No. 11$ promu%gated on *anuar& !9, 197? and 7entra% -ank 7ircu%ar No. 705 issued on #ecember 1, 1979, and the imposition of !1@ rate of interest on the %oan ob%igations of private respondents is (ithin the %imits prescribed b& %a(. "n the other hand, the private respondents maintain that the co%%ection of service charge and %i'uidated damages in e6cess of the ma6imum 1!@ interest origina%%& agreed, are i%%ega% and void for being contrar& to or prohibited under =ection ! of Act No. !$55, as amended b& Act No. B070. )he private respondents a%so insist that the 7ourt of Appea%s committed mathematica% error in computing the 1!@ interest due their deficiencies. According to them, their tota% deficienc& is PB5,B!7.0! and the tota% 1!@ interest of the said amount is P15,7?1.08, hence, their tota% %iabi%it& is in the amount of P$1,158.10. =ince the proceeds of the sa%e of their mortgaged properties are P$?,000.00, there is sti%% a residue in the amount of P1,8B1.90 from the proceeds of the sa%e (hich is recoverab%e or co%%ectib%e b& them. )he petition is (ithout merit. ;n Insular .an( of Asia and America v. )pouses )alazar, 0159 =71A 1?? J1988K2, the 7ourt ru%ed that the 5sca%ation 7%ause is a va%id provision in the %oan agreement provided that I 012 the increased rate imposed or charged does not e6ceed the cei%ing fi6ed b& %a( or

the onetar& -oard> 0!2 the increase is made effective not ear%ier than the effectivit& of the %a( or regu%ation authori4ing such an increase> and 0?2 the remaining maturities of the %oans are more than 7?0 da&s as of the effectivit& of the %a( or regu%ation authori4ing such an increase. /ike(ise in .anco 'ilipino )avings and 8ortgage .an( v. 2avarro, 015! =71A ?B$ J1987K2, the 7ourt said that for an 5sca%ation 7%ause to be va%id, it must inc%ude a de3esca%ation c%ause. )here can be an increase in interest if increased b& %a( or b& the onetar& -oard> and in order for such stipu%ation to be va%id, it must inc%ude a provision for reduction of the stipu%ated interest .in the event that the app%icab%e ma6imum rate of interest is reduced b& %a( or b& the onetar& -oard,. as provided for in P.#. No. 1$8B, promu%gated on arch 17, 1980. )here is no 'uestion that PN- board reso%ution dated a& !$, 1980 contains such de3esca%ation c%ause, under paragraph 8 thereof, to (it8 082 )o enab%e us to adCust interest rates in accordance (ith 7- 7ircu%ar %etter of arch 19, 1980, the covering promissor& note for a%% shortKmediumKlong terms %oans sha%% inc%ude the fo%%o(ing conditions8 )he -ank reserves the right to increase the interest rate (ithin the %imits a%%o(ed b& %a( or b& the onetar& -oard, provided, that the interest rate agreed upon sha%% be reduced in the event that the app%icab%e ma6imum interest rate is reduced b& %a( or b& the onetar& -oard8 Provided, further, that the adCustment in the interest rate sha%% take effect on or after the effectivit& of the increase or increase in the ma6imum rate of interest. 056hibits, p. 772 7entra% -ank 7ircu%ar No. 705, authori4ing the increase from 1!@ to !1@ (as issued on #ecember 1, 1979. )he promissor& notes e6ecuted b& the private respondents sho( that the& are a%% pa&ab%e on demand but the records do not sho( (hen pa&ment (as demanded. 5ven granting that it (as demanded on the effectivit& of %a(, it is obvious that the period of 7?0 da&s has not &et e%apsed at the date the mortgaged properties (ere so%d at the pub%ic auction on November !7, 1981 07ertificate of =heriffFs =a%e, 1ecords of 56hibits, p. 8B2. According%&, as of #ecember 1, 1979, the remaining maturit& da&s of the %oans (ere %ess than 7?0 da&s. 9ence, the increased rate imposed or charged is not va%id. )he c%aim of private respondents that the respondent appe%%ate court committed mathematica% error in computing the 1!@ interest due their deficiencies is a factua% issue. Absent the recogni4ed e6ceptions, finding of facts of the 7ourt of Appea%s are conc%usive on the parties and =upreme 7ourt on the tenet that this 7ourt decides appea%s (hich on%& invo%ve 'uestions of %a( and that it is not the function of the =upreme 7ourt to ana%&4e and to (eigh such evidence a%% over again, its Curisdiction being %imited to revie(ing errors of %a( that might have been committed b& the %o(er court 0Phi%ippine Nationa% -ank v. 7ourt of Appea%s, 159 =71A B?? J1988K2. P15 ;=5= 7"N=;#515#, the petition is hereb& #5N;5# for %ack of merit, and the assai%ed decision of the 7ourt of Appea%s is hereb& A,,;1 5#. =" "1#515#.

G.R. No. 102592 F"0!ua!y 8, 1992 IRENEO F. LLORIN, JR., petitioner, vs. CO6R5 OF A EALS a%$ A E- MOR5GAGE AND LOANS COR ORA5ION, respondents. REGALADO, J.: ;n this petition for revie( on certiorari, petitioner impugns the decision rendered b& respondent 7ourt of Appea%s on *anuar& 17, 199! 1 (hich affirmed in toto the Cudgment of the 1egiona% )ria% 7ourt of ani%a, -ranch 50, dated Apri% 1!, 1991, in 7ivi% 7ase No. 883B5055 2 (hich is an action for co%%ection of a sum of mone&. )he uncontested antecedent facts, as found b& the tria% court and adopted b& respondent court, are as fo%%o(s8 ;t is undisputed that on Apri% 11, 1978, defendant /%orin obtained a %oan from p%aintiff corporation in the amount of 5ight& ,our )housand ,our 9undred )en Pesos 0P8B,B10.002. )he %oan, secured b& a rea% estate mortgage, is pa&ab%e in t(o hundred fort& 0!B02 insta%%ments at P1,1B!.08 month%& commencing a& 11, 1978, (ith interest of 1!@ per annum, service charge of three percent 0?@2 p.a. and 1 1H!@ month%& pena%t& for unpaid or de%a&ed amorti4ations, as evidenced b& a Promissor& Note Eith Authorit& to Assign 7redit. )he promissor& note provides for an esca%ation c%ause (hich reads8 ;HEe hereb& authori4ed 0sic2 AP5P "1)DAD5 AN# /"AN 7"1P"1A);"N to according%& increase the rate of interest andHor service charges stipu%ated in this contract (ithout notice to meHus in the event of a %a( or an& app%icab%e Presidentia% #ecree andHor 7entra% -ank regu%ation 0(hich2 shou%d be enacted increasing the %a(fu% rate of interest andHor service charges that ma& be charged on this particu%ar kind of %oan. Pursuant to the said c%ause and on the basis of 7entra% -ank 7ircu%ar No. 7!1 0,ebruar& !5, 19802 and No. 905 0=eries of 198!2, p%aintiff increased the interest rate on the %oan from 1!@ annua%%& as fo%%o(s8 -ffective :ate 'rom To 8onthly Amortization ,ebruar& !5, 1980 1!@ !1@ P 1,511.91 056hs. .8. R .D.2 0B &ears R 5 months or more2

August 1, 198B !1@ !5@ P 1,77!.$8 056h. .5.2 0B months2 #ecember 1, 198B !5@ ?$@ P !,B8!.9B 056h. .B.2 01 &ear R ! months2 #espite the absence of a de3esca%ation c%ause, the interest rates (ere, ho(ever, %ater reduced corresponding to the reduction in the interest rates prescribed b& the 7entra% -ank as fo%%o(s8 -ffective :ate 'rom To 8onthly Amortization ,ebruar& 1, 198$ ?$@ !8@ P 1,957.00 056hs. .$.2 010 months2 #ecember 1, 198$ !8@ !B@ P 1,7?!.0B 056h. .7.2 0! months2 ,ebruar& 1, 1987 !B@ !1@ P 1,580.1B 056h. .1.2 0? &ears3,eb. 19902 "n a& 11, 198! p%aintiff demanded from defendant the pa&ment of P1!?,7!0.?!. "n *u%& 7, 1987 another (ritten demand (as sent to defendant for pa&ment of P!08,9$B.88 covering the period from =eptember 1981 to *une 1987. As of *u%& !7, 1987, defendant (as ab%e to pa& the p%aintiff the tota% sum of P79,B$!.!7 (hich (as app%ied to satisf& the pena%t&, interest charges and part of 0the2 principa% %oan. "n arch !8, 1988, p%aintiff (rote defendant for pa&ment of P?!?,5!?.B! representing principa% and interest as of arch !1, 1988 computed 0in2 consonant 0sic2 (ith the foregoing 7- 7ircu%ars. #efendant, in his rep%&, re'uested for recomputation of his account invoking the decisions of the =upreme 7ourt in .anco 'ilipino )avings and 8ortgage .an( vs. Lon. 8iguel 2avarro, and 'lorante Malle and Insular .an( of Asia and America vs. )pouses )alazar. . . . 2 "n *une 17, 1988, respondent Ape6 ortgage and /oans 7orporation 0AP5P2 fi%ed a comp%aint (ith the 1egiona% )ria% 7ourt of ani%a for the co%%ection of the amount of P?!?,5!?.B!, (ith interest at !1@ per annum and 10@ of the tota% c%aim as attorne&Fs fees. )hree pre3tria% conferences (ere had before the court a quo. "n ,ebruar& 1!, 1990, the tria% court issued a second pre3tria% order stating, inter alia, that8 666 666 666 -oth parties agreed that the materia% facts of the case are not disputed and that the main issue pertains to (hether or not the esca%ation c%ause contained in the promissor& note va%id%& app%ies to this case in %ight of the =upreme 7ourt decision in the case of -anco ,i%ipino. ,ina% pre3tria% for submission of additiona% stipu%ation of facts on %ast pa&ment, principa% ba%ance, computations according to each otherFs theor&, etc., is set on arch 1!, 1990 at 88?0 a.m. 8 ;n comp%iance (ith said order, the parties submitted their respective computations to the tria% court (hich issued an order on arch 1!, 1990 directing the parties to submit their respective memoranda, after (hich the case (ou%d be considered submitted for decision on the basis of the p%eadings, stipu%ations, affidavits and the three pre3tria% orders, the issue being principa%%& a 'uestion of %a(. "n Apri% 1!, 1991, the %o(er court rendered a decision ordering herein petitioner .to pa& p%aintiff Ape6 ortgage and /oan 7orporation the sum of P80,5$1.1? (ith interest of !1@ and service charge of ?@ per annum from =eptember 1!, 1981 unti% fu%%& paid, p%us P10,000.00 0as2 attorne&Fs fees and the costs of suit.. 5 Petitioner initia%%& (ent to this 7ourt on a petition for revie( on certiorari, (hich (as referred to the 7ourt of Appea%s for determination and disposition pursuant to our reso%ution dated =eptember 18, 1991. As ear%ier stated, respondent court rendered Cudgment upho%ding the decision of the court be%o(.

)he same issue raised b& petitioner before respondent 7ourt of Appea%s is no( being presented before us for reso%ution, that is, (hether the decision of this 7ourt in the case of .anco 'ilipino )avings and 8ortgage .an( vs. Lon 8iguel 2avarro, et al., 3 is app%icab%e to the case at bar and, if so, (hether the computation shou%d be patterned after the formu%a used in Insular .an( of Asia and America vs. )ps. )alazar. 4 Petitioner asseverates that in the .anco 'ilipino case, (e disa%%o(ed the imposition of the increased rates of interest and dec%ared that the esca%ation c%ause shou%d not be given effect because of 012 its one3sidedness in favor of the %ender, and 0!2 the absence of a de3 esca%ation c%ause. ;n the case at bar, petitioner c%aims that the esca%ation c%ause contained in the promissor& note e6ecuted in favor of private respondent AP5P is identica% (ith the esca%ation c%ause subCect of the .anco 'ilipino case. 9ence, he argues, the same shou%d %ike(ise be dec%ared nu%% and void. Ee find the petition to be barren of meritorious submissions or arguments. )he %ega%it& of the esca%ation c%ause, as in the case at bar, has been recogni4ed in this Curisdiction. ;n the aforecited case of .anco 'ilipino )avings and 8ortgage .an( vs. Lon. 8iguel 2avarro, et al., supra, (e dec%ared such c%ause to be va%id and he%d that8 =ome contracts, contain (hat is kno(n as an .esca%ator c%ause,. (hich is defined as one in (hich the contract fi6es a base price but contains a provision that in the event of specified cost increases, the se%%er or contractor ma& increase the price up to a fi6ed percentage of the base. Attacks on such a c%ause have usua%%& been based on the c%aim that, because of the open price provision, the contract (as too indefinite to be enforceab%e and did not evidence an actua% meeting of the minds of the parties, or that the arrangement %eft the price to be determined arbitrari%& b& one part& so that the contract %acked mutua%it&. ;n most instances, ho(ever, these attacks have been unsuccessfu%. )he 7ourt further finds as a matter of %a( that the cost of %iving inde6 adCustment, or esca%ator c%ause, is not substantive%& unconscionab%e. 7ost of %iving inde6 adCustment c%auses are (ide%& used in commercia% contracts in an effort to maintain fisca% stabi%it& and to retain .rea% do%%ar. va%ue to the price terms of %ong term contracts. )he provision is a common one, and has been universa%%& uphe%d and enforced. . . . 9o(ever, it is pointed out that =ection ! of Presidentia% #ecree No. 1$8B, (hich further amended the :sur& /a(, provides8 =ec. !. )he same Act is hereb& amended b& adding a ne( section after =ection 7, to read as fo%%o(s8 =ec. 73a. Parties to an agreement pertaining to a %oan or forbearance of mone&, goods or credits ma& stipu%ate that the rate of interest agreed upon ma& be increased in the event that the app%icab%e ma6imum rate of interest is increased b& %a( or b& the onetar& -oard8 Provided, )hat such stipu%ation sha%% be va%id on%& if there is a%so a stipu%ation in the agreement that the rate of interest agreed upon sha%% be reduced in the event that the app%icab%e ma6imum rate of interest is reduced b& %a( or b& the onetar& -oard8 Provided further, )hat the adCustment in the rate of interest agreed upon sha%% take effect on or after the effectivit& of the increase or decrease in the ma6imum rate of interest. According%&, for a stipu%ation on an esca%ation c%ause to be va%id, it shou%d specifica%%& provide 012 that there can be an increase in interest if increased b& %a( or b& the onetar& -oard, and 0!2 it must inc%ude a provision for reduction of the stipu%ated interest in the event that the app%icab%e ma6imum rate of interest is reduced b& %a( or b& the onetar& -oard. )he purpose of the %a( in mandating the inc%usion of a de3esca%ation c%ause is to prevent one3sidedness in favor of the %ender (hich is considered repugnant to the princip%e of mutua%it& of contracts. As (e he%d in Philippine 2ational .an( vs. !ourt of Appeals, et al.8 8
. . . the uni%atera% action of the PN- in increasing the interest rate on the private respondentFs %oan, vio%ated the mutua%it& of contracts ordained in Artic%e 1?08 of the 7ivi% 7ode8 Art. 1?08. )he contract must bind both contracting parties> its va%idit& or comp%iance cannot be %eft to the (i%% of one of them. ;n order that ob%igations arising from contracts ma& have the force of %a( bet(een the parties, there must be mutua%it& bet(een the parties based on their essentia% e'ua%it&. A contract containing a condition (hich makes its fu%fi%%ment dependent e6c%usive%& upon the uncontro%%ed (i%% of one of the contracting parties, is void . . . . 9ence, even assuming that the P1.8 mi%%ion %oan agreement bet(een the PN- and the private respondent gave the PN- a %icense 0a%though in fact there (as none2 to increase the interest rate at (i%% during the term of the %oan, that %icense (ou%d have been nu%% and void for being vio%ative of the princip%e of mutua%it& essentia% in contracts. ;t (ou%d have invested the %oan agreement (ith the character of a contract of adhesion, (here the parties do not bargain on e'ua% footing, the (eaker part&Fs 0the debtor2 participation being reduced to the a%ternative .to take it or %eave it. . . . . =uch a contract is a veritab%e trap for the (eaker part& (hom the courts of Custice must protect against abuse and imposition.

)he inescapab%e conc%usion is that a de3esca%ation c%ause is an indispensab%e re'uisite to the va%idit& and enforceabi%it& of an esca%ation c%ause in the contract. ;n other (ords, in the absence of a corresponding de3esca%ation c%ause, the esca%ation c%ause sha%% be considered nu%% and void. Ee are fu%%& persuaded, ho(ever, to take particu%ar e6ception from said ru%ing insofar as the case at bar is concerned, considering the pecu%iar circumstances obtaining herein. )here is no dispute that the esca%ation c%ause in the promissor& note invo%ved in this case does not contain a corre%ative de3esca%ation c%ause or a provision providing for the reduction of the stipu%ated interest in the event that the app%icab%e ma6imum rate of interest is reduced b& %a( or b& the onetar& -oard. Not(ithstanding the absence of such stipu%ation, ho(ever, it is simi%ar%& not controverted but, as a matter of fact, specifica%%& admitted b& petitioner that respondent AP5P uni%atera%%& and actua%%& decreased the interest charges it imposed on herein petitioner on three occasions. 7onse'uent%&, (e ho%d that (ith this actua%it&, the esca%ation c%ause invo%ved in this case remains va%id and enforceab%e. )he evi% sought to be th(arted (ith the enactment and b& the app%ication of Presidentia% #ecree No. 1$8B is ine6istent in the present case b& reason of the actua% grant of a concomitant decrease in the interest rates on petitionerFs %oan. Ee do not find here a situation (here it can be said that the parties do not stand on e'ua% footing, (hich is the evi% proscribed b& said decree. 5rgo, cessante ratione legis cessat ipsa leB. )he insistence of petitioner that the ru%ing enunciated in the .anco 'ilipino case shou%d be made to app%& in this case has no %eg to stand on. As correct%& found b& respondent court, the esca%ation c%ause subCect of the aforementioned case is different from that stipu%ated bet(een herein petitioner and private respondent. )hus8
)he esca%ation c%ause found in the promissor& note e6ecuted b& petitioner /%orin in favor of private respondent Ape6 on Apri% 11, 1978 reads8 ;HEe hereb& authori4ed 0sic2 AP5P "1)DAD5 AN# /"AN 7"1P"1A);"N to corresponding%& increase the rate of interest andHor service charges stipu%ated in this contract (ithout notice to meHus in the event of a %a( or an& app%icab%e Presidentia% #ecree andHor 7entra% -ank regu%ation 0(hich2 shou%d be enacted increasing the %a(fu% rate of interest andHor service charges that ma& be charged on this particu%ar kind of %oan. (hi%e the esca%ation c%ause subCect of the .anco 'ilipino vs. 2avarro case 015! =71A ?B$2 reads8 ;HEe hereb& authori4e -anco ,i%ipino to corresponding%& increase the interest rate stipu%ated in this contract (ithout advance notice to meHus in the event a %a( shou%d be enacted increasing the %a(fu% rates of interest that ma& be charged on this particu%ar kind of %oan. )here is a significant difference bet(een the t(o esca%ation c%auses> specifica%%& that the esca%ation c%ause found in the -anco ,i%ipino case refers on%& to a .%a(. increasing the %a(fu% rates of interest that ma& be charged, (hereas the esca%ation c%ause found in this case refers not on%& to a %a( but a%so .to an& Presidentia% #ecree or, 7entra% -ank 1egu%ation. (hich increases such rate of interest andHor service charges. )hus, the =upreme 7ourt stated in the -anco ,i%ipino case that (hi%e 7entra% -ank 7ircu%ar B9B had the force and effect of a %a(, it (as not the %a( contemp%ated in the said esca%ation c%ause contained in the promissor& note e6ecuted b& the respondent de% Aa%%e in favor of petitioner -anco ,i%ipino> the 5sca%ation 7%ause (as dependent on an increase of rate made b& .%a(. a%one. :pon the other hand, the esca%ation c%ause in 'uestion b& speaking of .a %a( or an& app%icab%e Presidentia% #ecree andHor 7entra% -ank 1egu%ation. (hich (ou%d increase the %a(fu% rate of interest and fees chargeab%e on %oans of this nature necessari%& inc%uded 7entra% -ank 7ircu%ar0s2 Nos. 7!1 0,ebruar& !5, 19802 and 905 0s. 198!2 the %ega%it& of (hich, as correct%& pointed out b& the court a quo is not assai%ed b& the defendant, and (hich are app%icab%e to both secured and unsecured %oans. )here e6isted %ega% basis for the increases in the interest rate chargeab%e against petitionerFs account made b& the respondent Ape6 on ,ebruar& !5, 1980 0from 1!@ to !1@ per annum2, August 1, 198B 0from !1@ to !5@ per annum2 and #ecember 1, 198B 0from !5@ to ?$@ per annum2. Notab%& the :sur& /a( ceased to be in e6istence as of #ecember !!, 198! 0see 7entra% -ank 7ircu%ar No. 905> /iam /a( vs. "%&mpic =a(mi%% 7o., 1!9 =71A B?92. 9

Another Custification for the inapp%icabi%it& of the .anco 'ilipino case, as correct%& advanced b& private respondent in its memorandum, 10 is that in said case this 7ourt ru%ed that 7entra% -ank 7ircu%ar No. B9B does not make a distinction as to the t&pe of %oan to (hich it is app%icab%e, hence, -anco ,i%ipino erroneous%& re%ied thereon in imposing the increased rates in interest. "n the other hand and (ith regard to the present case, both 7ircu%ars Nos. 7!1 and 905 e6press%& provide that the interest rates prescribed therein sha%% be app%icab%e to both .secured and unsecured %oans. such that both circu%ars can ver& (e%% be made to app%& to petitionerFs %oan. "n the foregoing premises and in %ight of the foregoing dis'uisitions, the matter of the controverted computation of petitioners tota% %iabi%it& has been rendered moot and academic.
E9515,"15, the Cudgment appea%ed from is hereb& A,,;1 5# in toto and the petition at bar is #5N;5# for %ack of merit. =" "1#515#.

G.R. No. 112812 A/!#l 14, 1993 S/ous"s ONCIANO ALMEDA a%$ E6FEMIA . ALMEDA, petitioner, vs. 5HE CO6R5 OF A EALS a%$ HILI INE NA5IONAL ,AN9, respondents. 9A 6NAN, J.:p "n various dates in 1981, the Phi%ippine Nationa% -ank granted to herein petitioners, the spouses Ponciano /. A%meda and 5ufemia P. A%meda severa% %oanHcredit accommodations tota%ing P18.0 i%%ion pesos pa&ab%e in a period of si6 &ears at an interest rate of !1@ per annum. )o secure the %oan, the spouses A%meda e6ecuted a 1ea% 5state ortgage 7ontract covering a ?,500 s'uare meter parce% of %and, together (ith the bui%ding erected thereon 0the arvin P%a4a2 %ocated at Pasong )amo, akati, etro ani%a. A credit agreement embod&ing the terms and conditions of the %oan (as e6ecuted bet(een the parties. Pertinent portions of the said agreement are 'uoted be%o(8
)P-!IA# !"2:ITI"2) 666 666 666 )he %oan sha%% be subCect to interest at the rate of t(ent& one per cent 0!1@2 per annum, pa&ab%e semi3annua%%& in arrears, the first interest pa&ment to become due and pa&ab%e si6 0$2 months from date of initia% re%ease of the %oan. )he %oan sha%% %ike(ise be subCect to the appropriate service charge and a pena%t& charge of three per cent 0?0@2 per annum to be imposed on an& amount remaining unpaid or not rendered (hen due. 666 666 666 ;;;. ")951 7"N#;);"N= 0c2 ;nterest and 7harges 012 )he -ank reserves the right to increase the interest rate within the limits allowed by law at an& time depending on (hatever po%ic& it ma& adopt in the future> provided, that the interest rate on thisHthese accommodations sha%% be corresponding%& decreased in the event that the app%icab%e ma6imum interest rate is reduced b& %a( or b& the onetar& -oard. ;n either case, the adCustment in the interest rate agreed upon sha%% take effect on the effectivit& date of the increase or decrease of the ma6imum interest rate. 1

-et(een 1981 and 198B, petitioners made severa% partia% pa&ments on the %oan tota%ing. P7,7?5,00B.$$, 2 a substantia% portion of (hich (as app%ied to accrued interest. 2 "n arch ?1, 198B, respondent bank, over petitionersF protestations, raised the interest rate to !8@, a%%eged%& pursuant to =ection ;;;3c 012 of its credit agreement. =aid interest rate thereupon increased from an initia% !1@ to a high of $8@ bet(een arch of 198B to =eptember, 198$. 8 Petitioner protested the increase in interest rates, to no avai%. -efore the %oan (as to mature in arch, 1988, the spouses fi%ed on ,ebruar& $, 1988 a petition for dec%arator& re%ief (ith pra&er for a (rit of pre%iminar& inCunction and temporar& restraining order (ith the

1egiona% )ria% 7ourt of akati, docketed as 7ivi% 7ase No. 1887!. ;n said petition, (hich (as raff%ed to -ranch 1?B presided b& *udge ;gnacio 7apu%ong, the spouses sought c%arification as to (hether or not the PN- cou%d uni%atera%%& raise interest rates on the %oan, pursuant to the credit agreementFs esca%ation c%ause, and in re%ation to 7entra% -ank 7ircu%ar No. 905. As a pre%iminar& measure, the %o(er court, on arch ?, 1988, issued a (rit of pre%iminar& inCunction enCoining the Phi%ippine Nationa% -ank from enforcing an interest rate above the !1@ stipu%ated in the credit agreement. -& this time the spouses (ere a%read& in defau%t of their %oan ob%igations. ;nvoking the /a( on andator& ,orec%osure 0Act ?1?5, as amended and P.#. ?852, the PN- countered b& ordering the e6traCudicia% forec%osure of petitionerFs mortgaged properties and schedu%ed an auction sa%e for arch 1B, 1989. :pon motion b& petitioners, ho(ever, the %o(er court, on Apri% 5, 1989, granted a supp%ementa% (rit of pre%iminar& inCunction, sta&ing the pub%ic auction of the mortgaged propert&. "n *anuar& 15, 1990, upon the posting of a counterbond b& the PN-, the tria% court disso%ved the supp%ementa% (rit of pre%iminar& inCunction. Petitioners fi%ed a motion for reconsideration. ;n the interim, respondent bank once more set a ne( date for the forec%osure sa%e of arvin P%a4a (hich (as arch 1!, 1990. Prior to the schedu%ed date, ho(ever, petitioners tendered to respondent bank the amount of PB0,1B!,518.00, consisting of the principa% 0P18,000,000.002 and accrued interest ca%cu%ated at the origina%%& stipu%ated rate of !1@. )he PN- refused to accept the pa&ment. 5 As a resu%t of PN-Fs refusa% of the tender of pa&ment, petitioners, on arch 8, 1990, forma%%& consigned the amount of PB0,1B!,518.00 (ith the 1egiona% )ria% 7ourt in 7ivi% 7ase No. 903$$?. )he& pra&ed therein for a (rit of pre%iminar& inCunction (ith a temporar& restraining order. )he case (as raff%ed to -ranch 1B7, presided b& *udge )eofi%o Duadi4. "n arch 15, 1990, respondent bank sought the dismissa% of the case. "n arch ?0, 1990 *udge Duadi4 in 7ivi% 7ase No. 903$$? issued an order granting the (rit of pre%iminar& inCunction enCoining the forec%osure sa%e of . arvin P%a4a. schedu%ed on arch 1!, 1990. "n Apri% 17, 1990 respondent bank fi%ed a motion for reconsideration of the said order. "n August 1$, 1991, 7ivi% 7ase No. 903$$? (e transferred to -ranch $$ presided b& *udge 5riberto 1osario (ho issued an order conso%idating said case (ith 7ivi% 7ase 18871 presided b& *udge ;gnacio 7apu%ong. ,or *udge ;gnacioFs refusa% to %ift the (rit of pre%iminar& inCunction issued arch ?0, 1990, respondent bank fi%ed a petition for !ertiorari, Prohibition and 8andamus (ith respondent 7ourt of Appea%s, assai%ing the fo%%o(ing orders of the 1egiona% )ria% 7ourt8
1. "rder dated arch ?0, 1990 of *udge Duadi4 granting the (rit of pre%iminar& inCunction restraining the forec%osure sa%e of P%a4a set on arch 1!, 1990> avin

!. "rder of *udge ;gnacio 7apu%ong dated *anuar& 10, 199! den&ing respondent bankFs motion to %ift the (rit of inCunction issued b& *udge Duadi4 as (e%% as its motion to dismiss 7ivi% 7ase No. 903$$?> ?. "rder of *udge 7apu%ong dated *u%& ?, 199! den&ing respondent bankFs subse'uent motion to %ift the (rit of pre%iminar& inCunction> and B. "rder of *udge 7apu%ong dated "ctober !0, 199! den&ing respondent bankFs motion for reconsideration.

"n August !7, 199?, respondent court rendered its decision setting aside the assai%ed orders and upho%ding respondent bankFs right to forec%ose the mortgaged propert& pursuant to Act ?1?5, as amended and P.#. ?85. PetitionersF otion for 1econsideration and =upp%ementa% otion for 1econsideration, dated =eptember 15, 199? and "ctober !8, 199?, respective%&, (ere denied b& respondent court in its reso%ution dated *anuar& 10, 199B. 9ence the instant petition. )his appea% b& certiorari from the respondent courtFs decision dated August !7, 199? raises t(o principa% issues name%&8 12 Ehether or not respondent bank (as authori4ed to raise its interest rates from !1@ to as high as $8@ under the credit agreement> and !2 Ehether or not respondent bank is granted the authorit& to forec%ose the arvin P%a4a under the mandator& forec%osure provisions of P.#. ?85. ;n its comment dated Apri% 19, 199B, respondent bank vigorous%& denied that the increases in the interest rates (ere i%%ega%, uni%atera%, e6cessive and arbitrar&, it argues that the esca%ated rates of interest it imposed (as based on the agreement of the parties. 1espondent bank further contends that it had a right to forec%ose the mortgaged propert& pursuant to P.#. ?85, after petitioners (ere unab%e to pa& their %oan ob%igations to the bank based on the increased rates upon maturit& in 198B. )he instant petition is impressed (ith merit. )he binding effect of an& agreement bet(een parties to a contract is premised on t(o sett%ed princip%es8 012 that an& ob%igation arising from contract has the force of %a( bet(een the parties> and 0!2 that there must be mutua%it& bet(een the parties based on their essentia% e'ua%it&. 3 An& contract (hich appears to be heavi%& (eighed in favor of one of the parties so as to %ead to an unconscionab%e resu%t is

void. An& stipu%ation regarding the va%idit& or comp%iance of the contract (hich is %eft so%e%& to the (i%% of one of the parties, is %ike(ise, inva%id. ;t is p%ain%& obvious, therefore, from the undisputed facts of the case that respondent bank uni%atera%%& a%tered the terms of its contract (ith petitioners b& increasing the interest rates on the %oan (ithout the prior assent of the %atter. ;n fact, the manner of agreement is itse%f e6p%icit%& stipu%ated b& the 7ivi% 7ode (hen it provides, in Artic%e 195$ that .No interest sha%% be due un%ess it has been e6press%& stipu%ated in (riting.. Ehat has been .stipu%ated in (riting. from a perusa% of interest rate provision of the credit agreement signed bet(een the parties is that petitioners (ere bound mere%& to pa& !1@ interest, subCect to a possib%e esca%ation or de3esca%ation, (hen 12 the circumstances (arrant such esca%ation or de3esca%ation> !2 (ithin the %imits a%%o(ed b& %a(> and ?2 upon agreement. ;ndeed, the interest rate (hich appears to have been agreed upon b& the parties to the contract in this case (as the !1@ rate stipu%ated in the interest provision. An& doubt about this is in fact readi%& reso%ved b& a carefu% reading of the credit agreement because the same p%ain%& uses the phrase .interest rate agreed upon,. in reference to the origina% !1@ interest rate. )he interest provision states8
0c2 interest and 7harges 012 )he -ank reserves the right to increase the interest rate within the limits allowed by law at an& time depending on (hatever po%ic& it ma& adopt in the future> provided, that the interest rate on thisHthese accommodations sha%% be corresponding%& decreased in the event that the app%icab%e ma6imum interest rate is reduced b& %a( or b& the onetar& -oard. ;n either case, the adCustment in the interest rate agreed upon sha%% take effect on the effectivit& date of the increase or decrease of the ma6imum interest rate.

;n Philippine 2ational .an( v. !ourt of Appeals, 4 this 7ourt disauthori4ed respondent bank from uni%atera%%& raising the interest rate in the borro(erFs %oan from 18@ to ?!@, B1@ and B8@ part%& because the aforestated increases vio%ated the princip%e of mutua%it& of contracts e6pressed in Artic%e 1?08 of the 7ivi% 7ode. )he 7ourt he%d8
7- 7ircu%ar No. 905, =eries of 198! 056h. 112 removed the :sur& /a( cei%ing on interest rates I . . . increases in interest rates are not subCect to an& cei%ing prescribed b& the :sur& /a(. but it did not authori4e the PN-, or an& bank for that matter, to uni%atera%%& and successive%& increase the agreed interest rates from 18@ to B8@ (ithin a span of four 0B2 months, in vio%ation of P.#. 11$ (hich %imits such changes to once ever& t(e%ve months. -esides vio%ating P.#. 11$, the uni%atera% action of the PN- in increasing the interest rate on the private respondentFs %oan, vio%ated the mutua%it& of contracts ordained in Artic%e 1?08 of the 7ivi% 7ode8 Art. ?08. )he contract must bind both contracting parties> its va%idit& or comp%iance cannot be %eft to the (i%% of one of them. ;n order that ob%igations arising from contracts ma& have the force of %a( bet(een the parties, there must be mutuality bet(een the parties based on their essentia% e'ua%it&. A contract containing a condition (hich makes its fu%fi%%ment dependent e6c%usive%& upon the uncontro%%ed (i%% of one of the contracting parties, is void 0Darcia vs. 1ita /egarda, ;nc., !1 =71A 5552. 9ence, even assuming that the P1.8 mi%%ion %oan agreement bet(een the PN- and the private respondent gave the PN- a %icense 0a%though in fact there (as none2 to increase the interest rate at (i%% during the term of the %oan, that %icense (ou%d have been nu%% and void for being vio%ative of the princip%e of mutua%it& essentia% in contracts. ;t (ou%d have invested the %oan agreement (ith the character of a contract of adhesion, (here the parties do not bargain on e'ua% footing, the (eaker part&Fs 0the debtor2 participation being reduced to the a%ternative .to take it or %ease it. 0Gua vs. /a( :nion R 1ock ;nsurance 7o., 95 Phi%. 852. =uch a contract is a veritab%e trap for the (eaker part& (hom the courts of Custice must protect against abuse and imposition. PN-Fs successive increases of the interest rate on the private respondentFs %oan, over the %atterFs protest, (ere arbitrar& as the& vio%ated an e6press provision of the 7redit Agreement 056h. 12 =ection 9.01 that its terms .ma& be amended on%& b& an instrument in (riting signed b& the part& to be bound as burdened b& such amendment.. )he increases imposed b& PN- a%so contravene Art. 195$ of the 7ivi% 7ode (hich provides that .no interest sha%% be due un%ess it has been e6press%& stipu%ated in (riting.. )he debtor herein never agreed in (riting to pa& the interest increases fi6ed b& the PN- be&ond !B@ per annum, hence, he is not bound to pa& a higher rate than that. )hat an increase in the interest rate from 18@ to B8@ (ithin a period of four 0B2 months is e6cessive, as found b& the 7ourt of Appea%s, is indisputab%e.

7%ear%&, the ga%%oping increases in interest rate imposed b& respondent bank on petitionersF %oan, over the %atterFs vehement protests, (ere arbitrar&. oreover, respondent bankFs re%iance on 7.-. 7ircu%ar No. 905, =eries of 198! did not authori4e the bank, or an& %ending institution for that matter, to progressive%& increase interest rates on borro(ings to an e6tent (hich (ou%d have made it virtua%%& impossib%e for debtors to comp%& (ith their o(n ob%igations. )rue, esca%ation c%auses in credit agreements are perfect%& va%id and do not contravene pub%ic po%ic&. =uch c%auses, ho(ever, 0as are stipu%ations in other contracts2 are nonethe%ess sti%% subCect to %a(s and provisions governing agreements bet(een parties, (hich agreements I (hi%e the& ma& be the %a( bet(een the contracting parties I imp%icit%& incorporate

provisions of e6isting %a(. 7onse'uent%&, (hi%e the :sur& /a( cei%ing on interest rates (as %ifted b& 7.-. 7ircu%ar 905, nothing in the said circu%ar cou%d possib%& be read as granting respondent bank carte blanche authorit& to raise interest rates to %eve%s (hich (ou%d either ens%ave its borro(ers or %ead to a hemorrhaging of their assets. -orro(ing represents a transfusion of capita% from %ending institutions to industries and businesses in order to stimu%ate gro(th. )his (ou%d not, obvious%&, be the effect of PN-Fs uni%atera% and %opsided po%ic& regarding the interest rates of petitionersF borro(ings in the instant case. Apart from vio%ating the princip%e of mutua%it& of contracts, there is authorit& for disa%%o(ing the interest rates imposed b& respondent bank, for the credit agreement specifica%%& re'uires that the increase be .(ithin the %imits a%%o(ed b& %a(.. ;n the case of P2. v. !ourt of Appeals, cited above, this 7ourt c%ear%& emphasi4ed that 7.-. 7ircu%ar No. 905 cou%d not be proper%& invoked to Custif& the esca%ation c%auses of such contracts, not being a grant of specific authorit&. ,urthermore, the esca%ation c%ause of the credit agreement re'uires that the same be made .(ithin the %imits a%%o(ed b& %a(,. obvious%& referring specifica%%& to %egis%ative enactments not administrative circu%ars. Note that the phrase .%imits imposed b& %a(,. refers on%& to the esca%ation c%ause. 9o(ever, the same agreement a%%o(s reduction on the basis of %a( or the onetar& -oard. 9ad the parties intended the (ord .%a(. to refer to both %egis%ative enactments and administrative circu%ars and issuances, the agreement (ou%d not have gone as far as making a distinction bet(een .%a( or the onetar& -oard 7ircu%ars. in referring to mutua%%& agreed upon reductions in interest rates. )his distinction (as the subCect of the 7ourtFs dis'uisition in the case of .anco 'ilipino )avings and 8ortgage .an( v. 2avarro 8 (here the 7ourt he%d that8
Ehat shou%d be reso%ved is (hether -AN7" ,;/;P;N" can increase the interest rate on the /"AN from 1!@ to 17@ per annum under the 5sca%ation 7%ause. ;t is our considered opinion that it ma& not. )he 5sca%ation 7%ause reads as fo%%o(s8 ;HEe hereb& authori4e -anco ,i%ipino to correspondingly increase. the interest rate stipu%ated in this contract (ithout advance notice to meHus in the event. a %a( increasing the %a(fu% rates of interest that ma& be charged on this particular (ind of loan. 0Paragraphing and emphasis supp%ied2 ;t is c%ear from the stipu%ation bet(een the parties that the interest rate ma& be increased .in the event a law shou%d be enacted increasing the %a(fu% rate of interest that ma& be charged on this particular (ind of loan.. )he 5sca%ation 7%ause (as dependent on an increase of rate made b& .%a(. a%one. 7;17:/A1 No. B9B, a%though it has the effect of %a(, is not a %a(. .A%though a circu%ar du%& issued is not strictly a statute or a law, it has, ho(ever, the force and effect of %a(.. 05mphasis supp%ied2. .An administrative regu%ation adopted pursuant to %a( has the force and effect of %a(.. .)hat administrative ru%es and regu%ations have the force of %a( can no %onger be 'uestioned.. )he distinction bet(een a %a( and an administrative regu%ation is recogni4ed in the onetar& -oard guide%ines 'uoted in the %atter to the -"11"E51 of s. Paderes of =eptember !B, 197$ 0supra2. According to the guide%ines, for a %oanFs interest to be subCect to the increases provided in 7;17:/A1 No. B9B, there must be an 5sca%ation 7%ause a%%o(ing the increase .in the event that any law or !entral .an( regulation is promu%gated increasing the ma6imum rate for %oans.. )he guide%ines thus presuppose that a 7entra% -ank regu%ation is not (ithin the term .an& %a(.. )he distinction is again recogni4ed b& P.#. No. 1$8B, promu%gated on arch 17, 1980, adding section 73a to the :sur& /a(, providing that parties to an agreement pertaining to a %oan cou%d stipu%ate that the rate of interest agreed upon ma& be increased in the event that the app%icab%e ma6imum rate of interest is increased .by law or by the 8onetary .oard.. )o 'uote8 =ec. 73a. Parties to an agreement pertaining to a %oan or forbearance of mone&, goods or credits ma& stipu%ate that the rate of interest agreed upon ma& be increased in the event that the app%icab%e ma6imum rate of interest is increased b& %a( or b& the onetar& -oard8

Provided, )hat such stipu%ation sha%% be va%id on%& if there is a%so a stipu%ation in the agreement that the rate of interest agreed upon sha%% be reduced in the event that the app%icab%e ma6imum rate of interest is reduced b& %a( or b& the onetar& -oard>

Provided, further, )hat the adCustment in the rate of interest agreed upon sha%% take effect on or after the effectivit& of the increase or decrease in the ma6imum rate of interest.F 0Paragraphing and emphasis supp%ied2. ;t is no( c%ear that from arch 17, 1980, esca%ation c%auses to be va%id shou%d specifica%%& provide8 012 that there can be an increase in interest if increased b& %a( or b& the onetar& -oard> and 0!2 in order for such stipu%ation to be va%id, it must inc%ude a provision for reduction of the stipu%ated interest .in the event that the app%icab%e ma6imum rate of interest is reduced b& %a( or b& the onetar& -oard..

Petitioners never agreed in (riting to pa& the increased interest rates demanded b& respondent bank in contravention to the tenor of their credit agreement. )hat an increase in interest rates from 18@ to as much as $8@ is e6cessive and unconscionab%e is indisputab%e. -et(een 1981 and 198B, petitioners had paid an amount e'uiva%ent to virtua%%& ha%f of the entire principa% 0P7,7?5,00B.$$2 which was applied to interest alone. -& the time the spouses tendered the amount of PB0,1B!,518.00 in sett%ement of their ob%igations> respondent bank (as demanding P58,?77,B87.00 over and above those amounts a%read& previous%& paid b& the spouses. 5sca%ation c%auses are not basica%%& (rong or %ega%%& obCectionab%e so %ong as the& are not so%e%& potestative but based on reasonab%e and va%id grounds. 9 9ere, as c%ear%& demonstrated above, not on%& the increases of the interest rates on the basis of the esca%ation c%ause patent%& unreasonab%e and unconscionab%e, but a%so there are no va%id and reasonab%e standards upon (hich the increases are anchored. Ee go no( to respondent bankFs c%aim that the principa% issue in the case at bench invo%ves its right to forec%ose petitionersF properties under P.#. ?85. Ee find respondentFs pretense untenab%e. Presidentia% #ecree No. ?85 (as issued principa%%& to guarantee that government financia% institutions (ou%d not be denied substantia% cash inf%o(s necessar& to finance the governmentFs deve%opment proCects a%% over the countr& b& %arge borro(ers (ho resort to %itigation to prevent or de%a& the governmentFs co%%ection of their debts or %oans. 10 ;n faci%itating co%%ection of debts through its automatic forec%osure provisions, the government is ho(ever, not e6empted from observing basic princip%es of %a(, and ordinar& fairness and decenc& under the due process c%ause of the 7onstitution. 11 ;n the first p%ace, because of the dispute regarding the interest rate increases, an issue (hich (as never sett%ed on merit in the courts be%o(, the e6act amount of petitionerFs ob%igations cou%d not be determined. )hus, the forec%osure provisions of P.#. ?85 cou%d be va%id%& invoked b& respondent on%& after sett%ement of the 'uestion invo%ving the interest rate on the %oan, and on%& after the spouses refused to meet their ob%igations fo%%o(ing such determination. ;n 'ilipinas 8arble !orporation v. Intermediate Appellate !ourt, 12 invo%ving P.#. ?85Fs provisions on mandator& forec%osure, (e he%d that8
Ee cannot, at this point, conc%ude that respondent #-P together (ith the -ancom peop%e actua%%& misappropriated and misspent the N5 mi%%ion %oan in (ho%e or in part a%though the tria% court found that there is .persuasive. evidence that such acts (ere committed b& the respondent. )his matter shou%d rightfu%%& be %itigated be%o( in the main action. Pending the outcome of such %itigation, P.#. ?85 cannot automatica%%& be app%ied for if it is rea%%& proven that respondent #-P is responsib%e for the misappropriation of the %oan, even if on%& in part, then the forec%osure of the petitionerFs properties under the provisions of P.#. ?85 to satisf& the (ho%e amount of the %oan (ou%d be a gross mistake. ;t (ou%d undu%& preCudice the petitioner, its emp%o&ees and their fami%ies. "n%& after tria% on the merits of the main case can the true amount of the %oan (hich (as app%ied (ise%& or not, for the benefit of the petitioner be determined. 7onse'uent%&, the e6tent of the %oan (here there (as no fai%ure of consideration and (hich ma& be proper%& satisfied b& forec%osure proceedings under P.#. ?85 (i%% have to a(ait the presentation of evidence in a tria% on the merits.

;n

epublic Planters .an( v. !ourt of Appeals 12 the 7ourt reiterating the dictum in ,i%ipinas

arb%e 7orporation, he%d8

artia% /a(

)he enforcement of P.#. ?85 (i%% s(eep under the rugF this iceberg of a scanda% in the sugar industr& during the arcos &ears. )his (e can not a%%o( to happen. ,or the benefit of future generations, a%% the dirt& %inen in the P9;/=:7:7" HNA=:)1AH1P- c%osets have to be e6posed in pub%ic so that the same ma& N5A51 be repeated.

;t is of paramount nationa% interest, that (e a%%o( the tria% court to proceed (ith dispatch to a%%o( the parties be%o( to present their evidence.

,urthermore, petitioners made a va%id consignation of (hat the&, in good faith and in comp%iance (ith the %etter of the 7redit Agreement, honest%& be%ieved to be the rea% amount of their remaining ob%igations (ith the respondent bank. )he %atter cou%d not therefore c%aim that there (as no honest3to3goodness attempt on the part of the spouse to sett%e their ob%igations. 1espondentFs rush to ine'uitab%& invoke the forec%osure provisions of P.#. ?85 through its %ega% machinations in the courts be%o(, in spite of the unsett%ed differences in interpretation of the credit agreement (as obvious%& made in bad faith, to gain the upper hand over petitioners. ;n the face of the une'uivoca% interest rate provisions in the credit agreement and in the %a( re'uiring the parties to agree to changes in the interest rate in (riting, (e ho%d that the uni%atera% and progressive increases imposed b& respondent PN- (ere nu%% and void. )heir effect (as to increase the tota% ob%igation on an eighteen mi%%ion peso %oan to an amount (a& over three times that (hich (as origina%%& granted to the borro(ers. )hat these increases, occasioned b& craft& manipu%ations in the interest rates is unconscionab%e and neutra%i4es the sa%utar& po%icies of e6tending %oans to spur business cannot be disputed.

E9515,"15, P15 ;=5= 7"N=;#515#, the decision of the 7ourt of Appea%s dated August !7, 199?, as (e%% as the reso%ution dated ,ebruar& 10, 199B is hereb& 15A51=5# AN# =5) A=;#5. )he case is remanded to the 1egiona% )ria% 7ourt of akati for further proceedings. =" "1#515#.

G.R. No. 109532 July 9, 1993 HILI INE NA5IONAL ,AN9, petitioner, vs. CO6R5 OF A EALS, MARIA AMOR ,ASCOS a%$ MARCIANO ,ASCOS, respondents. MENDO<A, J.:p
)his is a petition seeking revie( of the decision dated August 10, 199!, 1 of the 5ighth #ivision of the 7ourt of Appea%s and its reso%ution dated 199?, 2 both rendered in 7A3D.1. 7A No. !7$5?, (hich affirmed the decision of the 1egiona% )ria% 7ourt 01)72 of =an *ose 7it& 0-ranch ?82. )he facts are as fo%%o(s8 arch !5,

"n *une B, 1979, private respondent spouses aria Amor and arciano -ascos obtained a %oan from the Phi%ippine Nationa% -ank in the amount of P15,000.00 evidenced b& a promissor& note and secured b& a rea% estate mortgage. )he promissor& note contained the fo%%o(ing stipu%ation8 2
,or va%ue received, ;H(e, Jprivate respondentsK Coint%& and severa%%& promise to pa& to the "1#51 of the P9;/;PP;N5 NA);"NA/ -ANM, at its office in =an *ose 7it&, Phi%ippines, the sum of ,;,)55N )9":=AN# "N/< 0P15,000.002, Phi%ippine 7urrenc&, together (ith interest thereon at the rate of 1!@ per annum unti% paid, which interest rate the .an( may at any time without notice, raise within the limits allowed by law, and ;H(e a%so agree to pa& Coint%& and severa%%& UUUU @ per annum pena%t& charge, b& (a& of %i'uidated damages shou%d this note be unpaid or is not rene(ed on due date. Pa&ment of this note sha%% be as fo%%o(s8 B )9155 9:N#15# =;P)< ,;A5 #A<= B A,)51 #A)5

"n the reverse side of the note the fo%%o(ing condition (as stamped8 8
A%% short3term %oans to be granted starting *anuar& 1, 1978 sha%% be made subCect to the condition that an& andHor a%% e6tensions hereof that (i%% %eave an& portion of the amount sti%% unpaid after 7?0 da&s sha%% automatica%%& convert the outstanding ba%ance into a medium or %ong3term ob%igation as the case ma& be and give the .an( the right to charge the interest rates prescribed under it policies from the date the account was originally granted.

)o secure pa&ment of the %oan the parties e6ecuted a rea% estate mortgage contract (hich provided8 5
0k2 ;N715A=5 ", ;N)515=) 1A)58 )he rate of interest charged on the ob%igation secured b& this mortgage as (e%% as the interest on the amount (hich ma& have been advanced b& the "1)DAD55, in accordance (ith the provision hereof, shall be sub%ect during the life of this contract to such an increase within the rate allowed by law, as the -oard of #irectors of the "1)DAD55 ma& prescribe for its debtors.

"n #ecember 1!, 1980, PN- e6tended the period of pa&ment of the %oan to *une 5, 1981, thus converting the %oan from a short3term to a medium3term %oan, i.e., a %oan (hich matured over t(o to five &ears. 3 PN- a%so increased the rate of interest per annum, first to 1B@, effective #ecember 1, 1979> 4 then to !!@ effective ,ebruar& !1, 198?> 8 to !!.5@ effective *une !0, 198?> 9 to !?@ from November !, 198?> 10 to !5@ effective arch !, 198B> 11 and fina%%& to !8@ from Apri% 10, 198B. 12 -ecause private respondents defau%ted in pa&ing their ob%igation, the Provincia% =heriff of Nueva 5ciCa schedu%ed the e6traCudicia% forec%osure of the mortgage on *une 15, 198B to pa& private respondentsF indebtedness (hich, according to PN-, had increased from P15,000.00 to P?5,1!5.8B, p%us !8@ annua% interest. 12 Private respondents brought suit against PN-, its -ranch anager *etro Dodo&, and the Provincia% =heriff of Nueva 5ciCa Numeriano <. Da%ang 012 for a dec%aration of nu%%it& of 7.-. onetar& -oard 1eso%ution No. !1!$ dated November !9, 1979 0embodied in 7.-. 7ircu%ar No. 705 dated #ecember 1, 19792, (hich increased the cei%ing on the interest rate of secured and unsecured %oans to 1$@ per annum and 1B@ per annum, respective%&, on the ground that it (as contrar& to the :sur& /a(, good mora%s, pub%ic po%ic&, customs and traditions, socia% Custice, due process and the e'ua% protection c%ause of the 7onstitution> and 0!2 for a dec%aration that the interest rate increases on their %oan (ere contrar& to Art. 1959 of the 7ivi% 7ode (hich provides that interest due and unpaid sha%% not earn interest. Pending fina% determination of the case, private respondents asked that the auction sa%e be enCoined. PN- fi%ed an ans(er (ith compu%sor& counterc%aim. ;t a%%eged that private respondents had no cause of action because V13a of the :sur& /a(, as amended b& P.#. No. 1$8B, did not %imit the number of times the interest cou%d be increased and that private respondents (ere estopped from 'uestioning the increases because the& fai%ed to obCect to the same. PN- asked that the comp%aint be dismissed and that private respondents be ordered to pa& P?5,1!5.8B, p%us interest from Apri% 10, 198B, unti% the ob%igation (as fu%%& paid, attorne&Fs fees and mora% damages in such amount as ma& be determined b& the court. "n *une 1?, 198B private respondents deposited (ith the c%erk of court P8,000.00 %oan.
18

and on *anuar& 15, 1985 P!,000.00, 15 in partia% pa&ment of their

"n *une 15, 1990, the 1)7 rendered a decision, the dispositive portion of (hich reads8 E9515,"15, Cudgment is hereb& rendered as fo%%o(s8 1. )here having JsicK no evidence against the defendants *etro Dodo&, and the Provincia% =heriff of Nueva 5ciCa, Numeriano Da%ang, the case against them is dismissed> !. )he increase in interest rates based on the esca%ation c%auses in the Promissor& Note and the 1ea% 5state ortgage, par. M, being contrar& to =ec. ?, P.#. No. 11$ are dec%ared nu%% and void, that henceforth, the defendant PN- is hereb& directed to desist from enforcing the increased rate of interest more than )E5/A5 01!@2 per cent on p%aintiffsF %oan> ?. )he compu%sor& counterc%aim of the defendants is a%so dismissed> B. "n the other hand, the p%aintiffs can sett%e their unpaid ob%igation (ith the defendant PN- at the interest rate of )E5/A5 01!@2 per cent per annum computed from the inception of the %oan unti% the same is fu%%& paid> advances made b& the PN- for insurance premiums and pena%ties added> and the P10,000.00 paid to and defendant bank to be credited as pa&ment b& the p%aintiffs> 5. P%aintiffFs c%aim for damages is, %ike(ise, dismissed> and $. )he parties sha%% each bear out JsicK the e6penses incurred b& them. =" "1#515#. )he 1)7 inva%idated the stipu%ations in the promissor& note and the rea% estate mortgage, (hich authori4ed PN- to increase the interest rate, on the ground that there (as no corresponding stipu%ation that the interest rate (ou%d be reduced in the event the %a( reduced the app%icab%e ma6imum rate as provided under P.#. No. 1$8B> that P.#. No. 11$, (hich sets a cei%ing of 1!@ interest on secured %oans, is a .%a(,. (hich shou%d prevai% over 7ircu%ar No. 705, used b& PN- to increase the interest> that co%%ection of the increased interest sanctions unCust enrichment contrar& to Art. !! of the 7ivi% 7ode> and that the promissor& note and rea% estate mortgage (ere contracts of adhesion (hich shou%d be interpreted in favor of private respondents. PN- appea%ed. 9o(ever, the 7ourt of Appea%s affirmed the tria% courtFs decision. )he appe%%ate court he%d that the esca%ation c%ause in the promissor& note cou%d not be given effect because of the absence of a provision for a de3esca%ation in the event a reduction of interest (as ordered b& %a(. ;n addition it he%d that pursuant to the esca%ation c%ause an& increase in interest must be (ithin .the %imits a%%o(ed b& %a(. but 7.-. circu%ars, on the basis of (hich PN- increased the interest, cou%d not be considered .%a(s.. PN- moved for a reconsideration. As its motion (as denied, it fi%ed this petition. PN-Fs argument is that the 7ourt of Appea%s erred in app%&ing V! of P.#. No. 1$8B, (hich makes the va%idit& of an esca%ation c%ause turn on the presence of a de3esca%ation c%ause, to the promissor& note and rea% estate mortgage in this case. PN- contends that the t(o had been e6ecuted on *une B, 1979, before the effectivit& of P.#. No. 1$8B on arch 17, 1980. )o begin (ith, PN-Fs argument rests on a misapprehension of the import of the appe%%ate courtFs ru%ing. )he 7ourt of Appea%s nu%%ified the interest rate increases not because the promissor& note did not comp%& (ith P.#. No. 1$8B b& providing for a de3esca%ation, but because the absence of such provision made the c%ause so one3sided as to make it unreasonab%e. )hat ru%ing is correct. ;t is in %ine (ith our decision in .anco 'ilipino )avings N 8ortgage .an( v. 2avarro 13 that a%though P.#. No. 1$8B is not to be retroactive%& app%ied to %oans granted before its effectivit&, there must neverthe%ess be a de3esca%ation c%ause to mitigate the one3sideness of the esca%ation c%ause. ;ndeed because of concern for the une'ua% status of borro(ers vis9a9vis the banks, our cases after .anco 'ilipino have fashioned the ru%e that an& increase in the rate of interest made pursuant to an esca%ation c%ause must be the resu%t of agreement bet(een the parties. )hus in Philippine 2ational .an( v. !ourt of Appeals, 14 t(o promissor& notes authori4ed PN- to increase the stipu%ated interest per annum .(ithin the %imits a%%o(ed b& %a( at an& time depending on (hatever po%ic& JPN-K ma& adopt in the future> Provided, that the interest rate on this note sha%% be corresponding%& decreased in the event that the app%icab%e ma6imum interest rate is reduced b& %a( or b& the onetar& -oard.. )he rea% estate mortgage %ike(ise provided8

)he rate of interest charged on the ob%igation secured b& this mortgage as (e%% as the interest on the amount (hich ma& have been advanced b& the "1)DAD55, in accordance (ith the provisions hereof, sha%% be subCect during the %ife of this contract to such an increase (ithin the rate a%%o(ed b& %a(, as the -oard of #irectors of the "1)DAD55 ma& prescribe for its debtors.

Pursuant to these c%auses, PN- successive%& increased the interest from 18@ to ?!@, then to B1@ and then to B8@. )his 7ourt dec%ared the increases uni%atera%%& imposed b& PN- to be in vio%ation of the princip%e of mutua%it& as embodied in Art. 1?08 of the 7ivi% 7ode, (hich provides that .JtKhe contract must bind both contracting parties> its va%idit& or comp%iance cannot be %eft to the (i%% of one of them.. As the 7ourt e6p%ained8 18
;n order that ob%igations arising from contracts ma& have the force of %a( bet(een the parties, there must be mutuality bet(een the parties based on their essentia% e'ua%it&. A contract containing a condition (hich makes its fu%fi%%ment dependent e6c%usive%& upon the uncontro%%ed (i%% of one of the contracting parties, is void 0Darcia vs. 1ita /egarda, ;nc., !1 =71A 5552. 9ence, even assuming that the P1.8 mi%%ion %oan agreement bet(een the PN- a %icense 0a%though in fact there (as none2 to increase the interest rate at (i%% during the term of the %oan, that %icense (ou%d have been nu%% and void for being vio%ative of the princip%e of mutua%it& essentia% in contracts. ;t (ou%d have invested the %oan agreement (ith the character of a contract of adhesion, (here the parties do not bargain on e'ua% footing, the (eaker part&Fs 0the debtor2 participation being reduced to the a%ternative .to take it or %eave it. 0Gua vs. /a( :nion R 1ock ;nsurance 7o., 95 Phi%. 852. =uch a contract is a veritab%e trap for the (eaker part& (hom the courts of Custice must protect against abuse and imposition. A simi%ar ru%ing (as made in Philippine 2ational .an( v. !ourt of Appeals. 19 )he credit agreement in that case provided8 )he -ANM reserves the right to increase the interest rate (ithin the %imits a%%o(ed b& %a( at an& time depending on (hatever po%ic& it ma& adopt in the future8 Provided, that the interest rate on this accommodation sha%% be corresponding%& decreased in the event that the app%icab%e ma6imum interest is reduced b& %a( or b& the onetar& -oar. . . . As in the first case, PN- successive%& increased the stipu%ated interest so that (hat (as origina%%& 1!@ per annum became, after on%& t(o &ears, B!@. ;n dec%aring the increases inva%id, (e he%d8 20 Ee cannot countenance petitioner bankFs posturing that the esca%ation c%ause at bench gives it unbrid%ed right to unilaterally up(ard%& adCust the interest on private respondentsF %oan. )hat (ou%d completely take a(a& from private respondents the right to assent to an important modification in their agreement, and (ou%d negate the e%ement of mutua%it& in contracts.

"n%& recent%& (e inva%idated another round of interest increases decreed b& PN- pursuant to a simi%ar agreement it had (ith other borro(ers8 21
JEKhi%e the :sur& /a( cei%ing on interest rates (as %ifted b& 7.-. 7ircu%ar 905, nothing in the said circu%ar cou%d possib%& be read as granting respondent bank carte blanche authorit& to raise interest rates to %eve%s (hich (ou%d either ens%ave its borro(ers or %ead to a hemorrhaging of their assets. ;n this case no attempt (as made b& PN- to secure the conformit& of private respondents to the successive increases in the interest rate. Private respondentsF assent to the increase can not be imp%ied from their %ack of response to the %etters sent b& PN-, informing them of the increases. ,or as stated in one case, 22 no one receiving a proposa% to change a contract is ob%iged to ans(er the proposa%. E9515,"15, the decision of the 7ourt of Appea%s is A,,;1 5#. =" "1#515#.

G.R. No. 118031 Au&us( 2, 1998 9OREAN AIRLINES CO., L5D., petitioner, vs. CO6R5 OF A EALS a%$ J6ANI5O C. LA 6<, respondents. G.R. No. 112882 Au&us( 2, 1998 J6ANI5O C. LA 6<, petitioner, vs. CO6R5 OF A EALS a%$ 9OREAN AIRLINES CO., L5D., respondents. CR6<, J.: =ometime in 1980, *uanito 7. /apu4, an automotive e%ectrician, (as contracted for emp%o&ment in *eddah, =audi Arabia, for a period of one &ear through Pan Pacific "verseas 1ecruiting =ervices, ;nc. /apu4 (as supposed to %eave on November 8, 1980, via Morean Air%ines. ;nitia%%&, he (as .(ait3%isted,. (hich meant that he cou%d on%& be accommodated if an& of the confirmed passengers fai%ed to sho( up at the airport before departure. Ehen t(o of such passengers did not appear, /apu4 and another person b& the name of Perico (ere given the t(o unc%aimed seats. According to /apu4, he (as a%%o(ed to check in (ith one suitcase and one shou%der bag at the check3in counter of MA/. 9e passed through the customs and immigration sections for routine check3up and (as c%eared for departure as Passenger No. 157 of MA/ ,%ight No. M5 90?. )ogether (ith the other passengers, he rode in the shutt%e bus and proceeded to the ramp of the MA/ aircraft for boarding. 9o(ever, (hen he (as at the third or fourth rung of the stairs, a MA/ officer pointed to him and shouted .#o(nT #o(nT. 9e (as thus barred from taking the f%ight. Ehen he %ater asked for another booking, his ticket (as cance%ed b& MA/. 7onse'uent%&, he (as unab%e to report for his (ork in =audi Arabia (ithin the stipu%ated !3(eek period and so %ost his emp%o&ment. MA/, on the other hand, a%%eged that on November 8, 1980, Pan Pacific 1ecruiting =ervices ;nc. coordinated (ith MA/ for the departure of ?0 contract (orkers, of (hom on%& !1 (ere confirmed and 9 (ere (ait3%isted passengers. )he agent of Pan Pacific, *immie *oseph, after being informed that there (as a possibi%it& of having one or t(o seats becoming avai%ab%e, gave priorit& to Perico, (ho (as one of the supervisors of the hiring compan& in =audi Arabia. )he other seat (as (on through %otter& b& /apu4. 9o(ever, on%& one seat became avai%ab%e and so, pursuant to the ear%ier agreement that Perico (as to be given priorit&, he a%one (as a%%o(ed to board. After tria%, the 1egiona% )ria% 7ourt of ani%a, -ranch ?0, 1 adCudged MA/ %iab%e for damages, disposing as fo%%o(s8

E9515,"15, in vie( of the foregoing consideration, Cudgment is hereb& rendered sentencing the defendant Morean Air /ines to pa& p%aintiff *uanito 7. /apu4 the fo%%o(ing8 1. )he amount of )E" 9:N#15# =5A5N)<3)E" )9":=AN# "N5 9:N#15# =;P)< 0P!7!,1$0.002 P5="= as actua%Hcompensator& damages, (ith %ega% interest thereon from the date of the fi%ing of the comp%aint unti% fu%%& paid.

!. )he sum of )E5N)<3,;A5 )9":=AN# 0P!5,000.002 P5="= as and for attorne&Fs fees> and ?. )he costs of suit. )he case is hereb& dismissed (ith respect to defendant Pan Pacific "verseas 1ecruiting =ervices, ;nc. )he counterc%aims and cross3c%aim of defendant Morean Air /ines 7o., /td. are %ike(ise dismissed. "n appea%, this decision (as modified b& the 7ourt of Appea%s 2 as fo%%o(s8 E9515,"15, in vie( of a%% the foregoing, the appea%ed Cudgment is hereb& A,,;1 5# (ith the fo%%o(ing modifications8 the amount of actua% damages and compensator& damages is reduced to P$0,000.00 and defendant3appe%%ant is hereb& ordered to pa& p%aintiff3appe%%ant the sum of "ne 9undred )housand Pesos 0P100,000.002 b& (a& of mora% and e6emp%ar& damages, at $@ interest per annum from the date of the fi%ing of the 7omp%aint unti% fu%%& paid. MA/ and /apu4 fi%ed their respective motions for reconsideration, (hich (ere both denied for %ack of merit. 9ence, the present petitions for revie( (hich have been conso%idated because of the identit& of the parties and the simi%arit& of the issues. ;n D. 1. No. 11B0$1, MA/ assai%s the decision of the appe%%ate court on the fo%%o(ing grounds8 1. )hat the 7ourt of Appea%s erred in conc%uding that petitioner committed a breach of contract of carriage not(ithstanding %ack of proper, competent and sufficient evidence of the e6istence of such contract. !. )hat the 7ourt of Appea%s erred in not according the proper evidentiar& (eight to some evidence presented and the fact that private respondent did not have an& boarding pass to prove that he (as a%%o(ed to board and to prove that his air%ine ticket (as confirmed. ?. )hat the 7ourt of Appea%s erred in conc%uding that the standb& passenger status of private respondent /apu4 (as changed to a confirmed status (hen his name (as entered into the passenger manifest. B. )hat the 7ourt of Appea%s abused its discretion in a(arding mora% and e6emp%ar& damages in the amount of P100,000.00 in favor of private respondent not(ithstanding its %ack of basis and private respondent did not state such amount in his comp%aint nor had private respondent proven the said damages. 5. )hat the 7ourt of Appea%s erred in dismissing the counterc%aims. $. )hat the 7ourt of Appea%s erred in dismissing the counterc%aim of petitioner against Pan Pacific. 7. )hat the 7ourt of Appea%s erred in ru%ing that the $@ per annum %ega% interest on the Cudgment sha%% be computed from the fi%ing of the comp%aint. ;n D. 1. No. 11?8B!, /apu4 seeks8 0a2 the setting aside of the decision of the 7ourt of Appea%s insofar as it modifies the a(ard of damages> b2 actua% and compensator& damages in the sum e'uiva%ent to 5 &earsF %oss of earnings based on the petitionerFs month%& sa%ar& of 1,$00 =audi ria%s at the current conversion rate p%us the cost of baggage and persona% be%ongings (orth P!,000 and the service fee of P?,000 paid to the recruiting agenc&, a%% (ith %ega% interest from the fi%ing of the comp%aint unti% fu%%& paid> c2 mora% damages of not %ess than P1 mi%%ion and e6emp%ar& damages of not %ess than P500,000.00, both (ith interest at $@ per annum from the fi%ing of the comp%aint> and d2 attorne&Fs fees in the sum e'uiva%ent to ?0@ of the a(ard of damages. ;t is evident that the issues raised in these petitions re%ate main%& to the correctness of the factua% findings of the 7ourt of Appea%s and the a(ard of damages. )he 7ourt has consistent%& affirmed that the findings of fact of the 7ourt of Appea%s and the other %o(er courts are as a ru%e binding upon it, subCect to certain e6ceptions. As nothing in the record indicates an& of such e6ceptions, the factua% conc%usions of the appe%%ate court must be affirmed. )he status of /apu4 as standb& passenger (as changed to that of a confirmed passenger (hen his name (as entered in the passenger manifest of MA/ for its ,%ight No. M5 90?. 9is c%earance through immigration and customs c%ear%& sho(s that he had indeed been confirmed as a passenger of MA/ in that f%ight. MA/ thus committed a breach of the contract of carriage bet(een them (hen it fai%ed to bring /apu4 to his destination. )his 7ourt has he%d that a contract to transport passengers is different in kind and degree from an& other contractua% re%ation. 2 )he business of the carrier is main%& (ith the trave%ing pub%ic. ;t invites peop%e to avai% themse%ves of the comforts and advantages it offers. )he contract of air carriage generates a re%ation attended (ith a pub%ic dut&. Passengers have the right to be treated b& the carrierFs emp%o&ees (ith kindness, respect, courtes& and due consideration. )he& are entit%ed to be protected against persona% misconduct,

inCurious %anguage, indignities and abuses from such emp%o&ees. 8 =o it is that an& discourteous conduct on the part of these emp%o&ees to(ard a passenger gives the %atter an action for damages against the carrier. )he breach of contract (as aggravated in this case (hen, instead of courteous%& informing /apu4 of his being a .(ait3%isted. passenger, a MA/ officer rude%& shouted .#o(nT #o(nT. (hi%e pointing at him, thus causing him embarrassment and pub%ic humi%iation. MA/ argues that .the evidence of confirmation of a chance passenger status is not through the entr& of the name of a chance passenger in the passenger manifest nor the c%earance from the 7ommission on ;mmigration and #eportation, because the& are mere%& means of faci%itating the boarding of a chance passenger in case his status is confirmed.. Ee are not persuaded. )he evidence presented b& /apu4 sho(s that he had indeed checked in at the departure counter, passed through customs and immigration, boarded the shutt%e bus and proceeded to the ramp of MA/Fs aircraft. ;n fact, his baggage had a%read& been %oaded in MA/Fs aircraft, to be f%o(n (ith him to *eddah. )he contract of carriage bet(een him and MA/ had a%read& been perfected (hen he (as summari%& and inso%ent%& prevented from boarding the aircraft. MA/Fs a%%egation that the respondent court abused its discretion in a(arding mora% and e6emp%ar& damages is a%so not tenab%e. )he 7ourt of Appea%s granted mora% and e6emp%ar& damages because8 )he findings of the court a quo that the defendant3appe%%ant has committed breach of contract of carriage in bad faith and in (anton, disregard of p%aintiff3appe%%antFs rights as passenger %aid the basis and Custification of an a(ard for mora% damages. 6666 ;n the instant case, (e find that defendant3appe%%ant Morean Air /ines acted in a (anton, fraudu%ent, reck%ess, oppressive or ma%evo%ent manner (hen it .bumped off. p%aintiff3appe%%ant on November 8, 1980, and in addition treated him rude%& and arrogant%& as a .pata& gutom na contract (orker fighting Morean Air /ines,. (hich c%ear%& sho(s ma%ice and bad faith, thus entit%ing p%aintiff3appe%%ant to mora% damages. 6666 7onsidering that the p%aintiff3appe%%antFs entit%ement to mora% damages has been fu%%& estab%ished b& ora% and documentar& evidence, e6emp%ar& damages ma& be a(arded. ;n fact, e6emp%ar& damages ma& be a(arded, even though not so e6press%& p%eaded in the comp%aint 0Mapoe vs. asa, 1?B =71A !?12. -& the same token, to provide an e6amp%e for the pub%ic good, an a(ard of e6emp%ar& damages is a%so proper 0Armovit vs. 7ourt of Appea%s, supra2. "n the other hand, /apu4Fs c%aim that the a(ard of P100,000.00 as mora% and e6emp%ar& damages is inade'uate is not acceptab%e either. 9is pra&er for mora% damages of not %ess than P1 mi%%ion and e6emp%ar& damages of not %ess than P500,000.00 is overb%o(n. )he (e%%3entrenched princip%e is that mora% damages depend upon the discretion of the court based on the circumstances of each case. 5 )his discretion is %imited b& the princip%e that the .amount a(arded shou%d not be pa%pab%& and scanda%ous%& e6cessive. as to indicate that it (as the resu%t of preCudice or corruption on the part of the tria% court. 3 #amages are not intended to enrich the comp%ainant at the e6pense of the defendant. )he& are a(arded on%& to a%%eviate the mora% suffering that the inCured part& had undergone b& reason of the defendantFs cu%pab%e action. 4 )here is no hard3and3fast ru%e in the determination of (hat (ou%d be a fair amount of mora% damages since each case must be governed b& its o(n pecu%iar facts. A revie( of the record of this case sho(s that the inCur& suffered b& /apu4 is not so serious or e6tensive as to (arrant an a(ard of P1.5 mi%%ion. )he assessment of P100,000 as mora% and e6emp%ar& damages in his favor is, in our vie(, reasonab%e and rea%istic. /apu4 %ike(ise c%aims that the respondent court cou%d not ru%e upon the propriet& of the a(ard of actua% damages because it had not been assigned as an error b& MA/. Not so. )he ru%e is that on%& errors specifica%%& assigned and proper%& argued in the brief (i%% be considered e6cept errors affecting Curisdiction over the subCect matter and p%ain as (e%% as c%erica% errors. 8 -ut this is not (ithout 'ua%ification for, as the 7ourt he%d in Mda. de @avellana vs. !ourt of Appeals8 9 . . . J)Khe 7ourt is c%othed (ith amp%e authorit& to revie( matters, even if the& are not assigned as errors in their appea%, if it finds that their consideration is necessar& in arriving at a Cust decision of the case. A simi%ar pronouncement (as made in .aquiran vs. !ourt of Appeals 10 in this (ise8 ;ssues, though not specifica%%& raised in the p%eading in the appe%%ate court, ma&, in the interest of Custice, be proper%& considered b& said court in deciding a case, if the& are 'uestions raised in the tria% court and are

matters of record having some bearing on the issue submitted (hich the parties fai%ed to raise or the %o(er court ignored. )he 7ourt of Appea%s (as therefore Custified in decreasing the a(ard of actua% damages even if the issue (as not assigned as an error b& MA/. 7onsideration of this 'uestion (as necessar& for the Cust and comp%ete reso%ution of the present case. ,urthermore, there (as enough evidence to (arrant the reduction of the origina% a(ard, as the cha%%enged decision correct%& observed8 A perusa% of the p%aintiff3appe%%antFs contract of emp%o&ment sho(s that the effectivit& of the contract is for on%& one &ear, rene(ab%e ever& &ear for five &ears. A%though p%aintiff3appe%%ant intends to rene( his contract, such rene(a% (i%% sti%% be subCect to his foreign emp%o&er. P%aintiff3appe%%ant had not &et started (orking (ith his foreign emp%o&er, hence, there can be no basis as to (hether his contract (i%% be rene(ed b& his foreign emp%o&er or not. )hus, the damages representing the %oss of earnings of p%aintiff3appe%%ant in the rene(a% of the contract of emp%o&ment is at most specu%ative. #amages ma& not be a(arded on the basis of specu%ation or conCecture 0Dacha%ian vs. #e%im, !0? =71A 1!$2. 9ence, defendant3appe%%antFs %iabi%it& is %imited to the one &ear contract on%&. P%aintiff3appe%%ant is, therefore, entit%ed on%& to his %ost earnings for one &ear, i.e., P$0,000.00, (hich is 1H5 of P?00,000.00, the tota% amount of actua% damages, representing %ost earnings for five &ears pra&ed for in the 7omp%aint. P%aintiff3appe%%antFs contention that in computing his %ost earnings, the current rate of the =audi 1ia% to the Phi%ippine Peso at the time of pa&ment shou%d be used, is untenab%e, considering that in his 7omp%aint, p%aintiff3appe%%ant has 'uantified in Phi%ippine Peso his %ost earnings for five &ears. Ee disagree (ith the respondent court, ho(ever, on the date (hen the %ega% interest shou%d commence to run. )he ru%e is that the %ega% interest of si6 percent 0$@2 on the amounts adCudged in favor of /apu4 shou%d resume from the time of the rendition of the tria% courtFs decision instead of November !8, 1980, the date of the fi%ing of the comp%aint. "n this matter, the 7ourt has he%d8 ;f suit (ere for pa&ment of a definite sum of mone&, the contention might be tenab%e. 9o(ever, if it is for damages, un%i'uidated and not kno(n unti% definite%& ascertained, assessed and determined b& the courts after proof, interest shou%d be from the date of the decision. 11 6666 )he ob%igation to pa& interest on a sum fi%ed in a Cudgment e6ists from the date of the sentence, (hen so dec%ared> for unti% the net amount of the debtorFs %iabi%it& has been determined, he cannot he considered de%in'uent in the fu%fi%%ment of his ob%igation to pa& the debt (ith interest thereon. 12 ,ina%%&, (e find that the respondent court did not err in sustaining the tria% courtFs dismissa% of MA/Fs counterc%aim against Pan Pacific "verseas 1ecruiting =ervices ;nc., (hose responsibi%it& ended (ith the confirmation b& MA/ of /apu4 as its passenger in its ,%ight No. 90?. )his is sti%% another case of the ma%treatment of our overseas contract (orkers, this time b& the air%ine supposed to bring the passenger to his foreign assignment. "ur "7EFs sacrifice much in seeking emp%o&ment abroad, (here the& are deprived of the compan& of their %oved ones, the direct protection of our %a(s, and the comfort of our o(n native cu%ture and (a& of %ife. )his 7ourt sha%% e6ert ever& effort to vindicate their rights (hen the& are abused and sha%% accord them the commensurate reparation of their inCuries consistent (ith their dignit& and (orth as members of the (orking c%ass. E9515,"15, the appea%ed Cudgment is A,,;1 5#, but (ith the modification that the %ega% interest on the damages a(arded to private respondent shou%d commence from the date of the decision of the tria% court on November 1B, 1990. )he parties sha%% bear their o(n costs. =" "1#515#.