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[G.R.No.148163.December6,2004]

BANCO FILIPINO SAVINGS AND MORTGAGE BANK,petitioner, vs. JUANITA B. YBAEZ,

CHARLESB.YBAEZ,JOSEPHB.YBAEZandJEROMEB.YBAEZ,respondents.

DECISION

QUISUMBING,J.:

Inthispetitionforreview,BancoFilipinoSavingsandMortgageBankseeksthereversalof

the Decision[1] dated April 17, 2001 of the Court of Appeals in CA-G.R. CV No. 57927

affirmingtheDecision[2]datedJuly16,1997oftheRegionalTrialCourt,Branch13ofCebu

CityinCivilCaseNo.CEB-16548.

Thefactsofthiscaseareasfollows:

OnMarch7,1978,respondentsobtainedaloansecuredbyaDeedofRealEstateMortgage

overTransferCertificateofTitle(TCT)No.69836frompetitionerbank.Theloanwasused

for the construction of a commercial building in Cebu City. On October 25, 1978,

respondentsobtainedanadditionalloanfromthepetitionerthusincreasingtheirobligation

toonemillionpesos.AcorrespondingAmendmentofRealEstateMortgage wasthereafter

executed.

OnDecember24,1982,theloanwasagainre-structured,increasingtheloanobligationto

P1,225,000and theReal Estate Mortgage was again amended. Respondents executed a

Promissory Note for the sum of P1,225,000 payable in fifteen years, with a stipulated

interestof21%perannum,andstipulatingmonthlypaymentsofP22,426.Thefirstpayment

waspayableonJanuary24,1983,andthesucceedingpaymentsweredueevery24thofeach

monththereafter.[3]Thenotealsostipulatedthatincaseofdefaultinthepaymentofany

ofthemonthlyamortizationandinterest,respondentsshallpayapenaltyequivalentto3%

oftheamountdueeachmonth.[4]

Respondents total payment from 1983 to 1988 amounted[5] to P1,455,385.07, broken

downasfollows:

1983247,631.54

198481,797.24

1985173,875.77

1986284,364.82

1987380,000.00

1988287,715.70[6]

From1989onwards,respondentsdidnotpayasinglecentavo.TheyaverthatBancoFilipino

hadceasedoperations and/orwasnotallowedtocontinue business, havingbeen placed

underliquidationbytheCentralBank.

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On January15, 1990, respondents lawyerwrote SpecialActing Liquidator, Renan Santos,

andrequestedthatplaintiffreturnthemortgagedpropertyoftherespondentssinceithad

sufficiently profited from the loan and that the interest and penalty charges were

excessive.Petitionerbankdeniedtherequest. [7]

Banco Filipino was closed on January 1, 1985 and re-opened for business on July 1,

1994.Fromitsclosuretoitsre-opening,petitionerbankdidnottransactanybusinesswith

itscustomers.[8]

On August 24, 1994, respondents were served a Notice of Extra Judicial Sale of their

propertycoveredbyTCTNo.69836tosatisfytheirindebtednessallegedlyofP6,174,337.46

which includes the principal, interest, surcharges and 10% attorneys fees. The public

auctionwasscheduledonSeptember22,1994at2:00intheafternoon.

OnSeptember19,1994,respondentsfiledasuitfor Injunction,AccountingandDamages,

allegingthattherewasnolegalandfactualbasisfortheforeclosureproceedingssincethe

loanhadalreadybeenfullypaid.Arestrainingorderwasissuedthefollowingdaybythe

lower court enjoiningpetitioner to cease anddesist from sellingthe propertyat a public

auction.[9]

OnJuly16,1997,thelowercourtrenderedaDecision,disposingasfollows:

WHEREFORE,judgmentisherebyrendereddirectingdefendantBancoFilipinoSavingsand

MortgageBanktorenderacorrectaccountingoftheobligationsofplaintiffswithitafter

eliminatinginterestfromJanuary1,1985toJuly1,1994whenitwasclosed,andreducinginterestfrom21%to17%perannum,atthetimeitwasinoperation,andtotallyeliminating

[the]surchargeof 1%permonth, within a period offifteen (15)daysfromthe timethe

judgmentshallhavebecomefinalandexecutory.

Plaintiffsaredirectedtopaythebankwithinaperiodofthirty(30)daysfromthetimethey

willreceivedefendantbankstrueandcorrectaccounting,otherwisetheorderofinjunction

willbelifted/dissolved.

Defendants are enjoined from foreclosing the real estate mortgage on the property of

plaintiffs,unlessthelatterfailtopayinaccordancewiththe[preceding]paragraph.

Withoutspecialpronouncementastocosts.

SOORDERED.[10]

Not satisfied with the decision, both parties appealed the case to the Court of

Appeals.PetitionerfileditsNoticeofAppealonAugust19,1997,whilerespondentsfiled

theirs onAugust22, 1997.OnApril 17, 2001, the Court ofAppeals rendered aDecision

affirmingthedecisionofthetrialcourtstating:

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WHEREFORE,forlackofmerit,bothappealsareDISMISSEDandtheDecisionappealedfrom

isAFFIRMED.

SOORDERED.[11]

Petitionernowallegesthefollowingerrors:

I. THE COURTOFAPPEALSERRED IN CONCURRINGWITH THE TRIALCOURTS DECISION

ORDERING THE DEFENDANT BANK (HEREIN PETITIONER) TO RENDER A CORRECT

ACCOUNTINGOFPLAINTIFFSLOANBECAUSETHESTATEMENTOFACCOUNT(EXH.5and6

Defendant)SUBMITTEDBYDEFENDANTBANKDOESNOTREFLECTTHETRUEANDCORRECT

AMOUNT AS IT IMPOSES A 21% PER ANNUM INTERESTWHICHTHE COURT OFAPPEALS

CONSIDEREDASEXCESSIVEANDTHAT ITHASNO PROBATIVEVALUEAS ITS SIGNATORIES

WERENOTPRESENTEDASWITNESSES.

II. THE COURT OF APPEALSERREDIN ORDERINGTHEDELETIONOF THE 3%PERMONTH

SURCHARGE SIMPLY BECAUSE THE PLAINTIFF-BORROWER HAD MADE SUBSTANTIAL

PAYMENTSFROM1983TO1988.

III. THE COURT OF APPEALS COMMITTED AN ERROR IN RULING THAT THE PLAINTIFFS-

BORROWERS (HEREIN RESPONDENTS) CANNOT BE CONSIDERED TO HAVE DEFAULTED IN

THEIRPAYMENTSINCEDEFENDANTBANKCEASEDOPERATIONFROM1985TO1991. [12]

Toresolve thecontroversyweshalladdressthefollowingpertinentquestions:(1)Whatis

theeffectofthetemporaryclosureofBancoFilipinofromJanuary1,1985toJuly1,1994ontheloan?(2)Istherateofinterestsetat21%perannumlegal?and(3)Isthe3%monthly

surchargevalid?

In Banco Filipino Savings and MortgageBank v. Monetary Board,[13] the validity of the

closureandreceivershipofBancoFilipinowasputinissue.Butthependencyofthecasedid

not diminish the authority of the designated liquidator to administer and continue the

banks transactions. The Court allowed the banks liquidator to continue receiving

collectiblesandreceivablesorpayingoffcreditorsclaimsandothertransactionspertaining

tonormal operations ofa bank.Among these transactionswere theprosecution of suits

againstdebtors forcollectionandfor foreclosureofmortgages.Thebankwasallowedtocollectinterestsonitsloanswhileunderliquidation,providedthattheinterestswerelegal.

Petitionercontendsthatthe21%annualinterestwasfreelyandvoluntarilyagreeduponby

theparties,andthatitwasneitherexcessivenorviolativeoftheUsuryLaw. [14]

Ontheotherhand, respondentsstate that therateof 21%wasusuriousbecausetheloan

wasincurredonDecember24,1982,beforethedefactorepealoftheUsuryLawonJanuary

1, 1983.[15] Respondents add that the normal rate by which petitioner charges its

borrowersatthattimewasonly17%,or4%lowerthantherateitgavetorespondents.

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It isan elementary rule ofcontracts that thecontractingpartiesare free tostipulate the

terms of their contract for as long as the terms are not contrary to law, morals, good

customs,publicpolicy,publicorder,andnationalinterests.[16]Lawsinforceatthetimethe

contractwasmadegenerallygovernitsinterpretationandapplication.Theloanagreement

between petitioner and respondents specifies the obligation of the debtor to pay

interest.Inprinciplesaidstipulationisbindingbetweentheparties. [17]

Wenotethatatthetimethepartiesenteredintothesaidloanagreement,thepertinent

law,ActNo.2655,alreadyprovidedthattherateofinterestfortheforbearanceofmoney

whensecuredbyamortgageuponrealestateshouldnotbemorethan12%perannum or

themaximumrateprescribedbytheMonetaryBoardandinforceatthetimetheloanwas

granted. On December 1, 1979, the Monetary Board of the Central Bank of the

Philippines[18]hadissuedCBPCircularNo.705-79.[19]Onloantransactionswithmaturities

ofmorethan 730days, it fixed the effective rateofinterestat21%perannum for both

securedandunsecuredloans.Sincetheloaninquestionhasfixed15yearsforitsmaturity,itfellwithinthecoverageofsaidCBPCircular.Thus,weagreethatthe21%interestisnot

violativeoftheUsuryLawasitstoodatthetimeoftheloantransaction.

Astothemonthlysurcharge,petitionerreliesonCBPCircularNo.905-82.[20]Theceilingon

interest rates prescribed by the Usury Law, according to petitioner, were expressly

removed. Petitionerarguesthat thesaid circularhadretroactiveeffectsinceit ismerely

procedural in nature. Hence according to petitioner, the imposition of 3% monthly

surchargebythebankagainsttheborrowerislegal.

Onthismatter,wedisagreewithpetitioner.CBPCircularNo.905-82,whichwas effectiveJanuary1,1983,didnotrepealnorinanywayamendtheUsuryLaw.TheCircularsimply

suspended the effectivity of the Usury Law. A Central Bank Circular cannot repeal a

law.Onlyalawcanrepealanotherlaw.Thus,theretroactiveapplicationofaCBPCircular

cannot,andshouldnot,bepresumed.[21]TheloanwasenteredintoonDecember24,1982,

butCBPCircularNo.905-82wasgivenforceandeffectonlyonJanuary1,1983.Thus,CBP

CircularNo.905-82couldnotbemadeapplicabletotheloanagreementinthiscase,and

petitionercouldnotrelyonthisCircularforitsimpositionof3%monthlysurcharge.

Petitioneralsoarguesthatthe3%monthlysurchargepartakesofthenatureofapenalty

clause.[22]Apenalclauseisanaccessoryundertakingtoassumegreaterliabilityincaseof

breachandisattachedtoanobligationinordertosecureitsperformance. [23]Thepenalty

shall substitute the indemnity for damages and the paymentofinterests incaseof non-

compliance.[24]Butifsuchstipulationisfoundcontrarytolawforbeingusurious,itcanbe

nullifiedbythecourtswithoutaffectingtheprincipalobligation. [25]

Intheloanagreementbetweenthepartiesinthiscase,thetotalinterestandothercharges

exceedtheprescribed21%ceiling.Hence,theimpositionofthe3%monthlysurcharge,as

the penal clause to the obligation, violated the limit imposed by the Usury Law. Said

surchargeof3%monthlymustbedeclarednullandvoid.

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To recapitulate: therespondents principal obligation topay themonthlyamortization of

P22,426,validlysubsists.Onlythe3%monthlysurchargeisvoid.Themonthlyamortization

ofP22,426, for15years,wouldamounttoP4,036,680.Todate,respondentsalreadypaid

theamountofP1,455,385.07.Thus,onlytheoutstandingbalanceofP2,581,294.93remains

due.

Respondentsweregivenby theRTC30days fromreceiptofdecision,withinwhichtopay

theiroutstandingobligation.Wenowreiteratethatperiodof30days,fromreceiptofthis

Decision,forrespondentstopaytheamountofP2,581,294.93tothebankasfullpaymentof

the outstanding balance on their loan obligation. Otherwise, the order of injunction

restrainingpetitionerfromforeclosingthepropertyshallbelifted.

WHEREFORE,theDecisionoftheRegionalTrialCourt,whichwassustainedbytheCourtof

Appeals, isherebyMODIFIEDas follows:(1)theinterestrateat21%perannumishereby

declaredVALID;(2)the3%monthlysurchargeisNULLIFIEDforbeingviolativeoftheUsuryLaw at the time; and (3) respondents are ORDERED to pay petitioner the amount of

P2,581,294.93within30daysfromreceiptofthisDecision.Nopronouncementastocosts.

SOORDERED.

Davide,Jr.,C.J.,(Chairman),Ynares-Santiago,Carpio,andAzcuna,JJ.,concur.

Navarrov.Mallari

Facts:ThisactionwasinstitutedintheCourtofFirstInstanceofPampangabySantiagoNavarro,SabasMagtoto,and

VictorinoCalara,astrustees(mandatarios)oftheinhabitantsofthebarrioofSanVicente,inthemunicipalityof

Macabebe,tocompelthedefendants,FelixMallari,asprincipal,andLeonTolentinoandIgnacioTolentino,as

sureties,tocomplywiththecontractfortheconstructionofachapeltothepatronsaintofthebarrio,orin

thealternativetorequirethesamedefendantstoreturnthesumofP12,000paidtothem,uponsaidcontract,

togetherwiththesumofP4,000asstipulateddamagesforfailuretoconstructthechapelaccordingtothe

specifications.

Issue:

WhetherornotFelixMallariisliablefordamages.

Held:

Concurrentlywith the execution of said contract Leon Tolentino and Ignacio Tolentino,also residents of

municipalityofMacabebe,obligatedthemselvesincollateralcontractofguarantytorespondsolidarilyforthe

faithfulandtrueperformanceofthecontractonthepartofFelixMallari.FelixMallari,itmaybestated,isnota

contractororbuilderbyprofessionandknowsnothingaboutconstructinghouses.HissonJose,althoughhe

supposedhimselftohavesomeknowledgeoftheart,wasbutlittlebetterversedinsuchmattersthanhis

father;andheappearstohavehadbutlittleskillevenintheartofdrafting.Asmighthavebeenexpectedfrom

thelackoftechnicalknowledgeonthepartofthe"contractor,"abotchwasmadeofthejob.Thechapelwas

indeedconstructedsomewhatin theexternalshapeindicated inthedesign,buttheworkwasdonewith

completewantofknowledgeoftheartofconstructionandofthematerialemployed.Thesewordswetake

fromthereportofacompetentengineer, SeorEmilioMariadeMoreta,ofManila,whomadeaspecial

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examinationandcarefulreportupontheconditionofthestructure.InconcludinghisreportSeorMoretasays

thattheplansweredrawnbyapersoncompletelyignorantnotonlyofallknowledgeoftheresistingpowerof

materialsandofdescriptivegeometry,aswellasoftechnicalknowledgeingeneral,butthathedidnoteven

possesssufficientinstructioninthedrawingofplans.SeorMoretaconcludeshisreportwiththeobservation

thatthebuildingthreatensruinforwantofproperfoundationandthatupontheslightesttremoroftheearth

itmightcomedown.ThephotographsinevidenceasprepareonefortheconclusionstatedinSeorMoreta's

report.Wedonotencumbertheopinionwiththedetailsstatedofsaidreportbutwillmerelysaythatbythat

reportandthetestimonyadducedatthetrial,thecasestatedinthecomplaintisinouropinioncompletely

demonstrated;andtheplaintiffsarewithoutdoubtentitledtorecoverthestipulateddamagesforfailureofthe

contractingpartiestoconstructachapelinconformitywiththefundamentalprinciplesoftheartofbuildingand

inaccordancewiththespecificationsofthecontract.Butthechapel,suchasitis,appearstobeinuseforthe

purposeforwhichitwasintended,andweareoftheopinionthattheplaintiffsarenotentitledtoconfiscatethe

sum of P4,000 which is as yet unpaid upon the purchase price and at the same time to claim the

stipulateddamages.Theresultisthatthedamagestowhichtheplaintiffsareentitledunderthelastclauseof

thecontract(ExhibitA)mustbesetoffagainsttheportionofthecontractpricewhichhasbeenretainedinthehandsoftheplaintiffs,withtheresultthatneitherpartycanrecoveranythingoftheother.

Lambertvs.Fox26phil588(kf)

Thisisanactionbroughttorecoverapenaltyprescribedonacontractaspunishmentforthe

breachthereof.

Earlyin1911thefirmknownasJohnR.Edgar&Co.,engagedintheretailbookand

stationerybusiness,founditselfinsuchconditionfinanciallythatitscreditors,includingthe

plaintiffandthedefendant,togetherwithmanyothers,agreedtotakeoverthebusiness,

incorporateitandacceptstockthereininpaymentoftheirrespectivecredits.Afewdays

aftertheincorporationwascompletedplaintiffanddefendantenteredintothefollowing

agreement:xxxtheundersignedmutuallyandreciprocallyagreenottosell,transfer,or

otherwisedisposeofanypartoftheirpresentholdingsofstockinsaidJohnR.Edgar&Co.

Inc.,tillafteroneyearfromthedatehereof.Eitherpartyviolatingthisagreementshallpay

totheotherthesumofonethousand(P1,000)pesosasliquidateddamages,unlessprevious

consentinwritingtosuchsale,transfer,orotherdispositionbeobtained.

NotwithstandingthiscontractthedefendantFoxsoldhisstockinthesaidcorporationtoE.C.McCulloughofthefirmofE.C.McCullough&Co.ofManila,astrongcompetitorofthesaid

JohnR.Edgar&Co.,Inc.

Thelearnedtrialcourtdecidedthecaseinfavorofthedefendantuponthegroundthatthe

intentionofthepartiesasitappearedfromthecontractinquestionwastotheeffectthat

theagreementshouldbegoodandcontinueonlyuntilthecorporationreachedasound

financialbasis,andthatthateventhavingoccurredsometimebeforetheexpirationofthe

yearmentionedinthecontract,thepurposeforwhichthecontractwasmadeandhadbeen

fulfilledandthedefendantaccordinglydischargedofhisobligationthereunder.The

complaintwasdismisseduponthemerits.

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ISSUE:Didthecourterredintheconstructionofthecontract?

HELD:"Asforus,wedonotconstrueorinterpretthislaw.Itdoesnotneedit.Weapplyit.

Byapplyingthelaw,weconservebothprovisionsforthebenefitoflitigants.Thefirstand

fundamentaldutyofcourts,inourjudgment,istoapplythelaw.Constructionand

interpretationcomeonlyafterithasbeendemonstratedthatapplicationisimpossibleor

inadequatewithoutthem.Theyaretheverylastfunctionswhichacourtshouldexercise.

Themajorityofthelawneednointerpretationorconstruction.Theyrequireonly

application,andifthereweremoreapplicationandlessconstruction,therewouldbemore

stabilityinthelaw,andmorepeoplewouldknowwhatthelawis."

Inthecaseatbarthepartiesexpresslystipulatedthatthecontractshouldlastoneyear.No

reasonisshownforsayingthatitshalllastonlyninemonths.Whatevertheobjectwasin

specifyingtheyear,itwastheiragreementthatthecontractshouldlastayearanditwas

theirjudgmentandconvictionthattheirpurposeswouldnotbesubversedinanylesstime.

Whatreasoncangiveforrefusingtofollowtheplainwordsofthemenwhomadethe

contract?Weseenone.

Inthisjurisdictionpenaltiesprovidedincontractsofthischaracterareenforced.Itisthe

rulethatpartieswhoarecompetenttocontractmaymakesuchagreementswithinthe

limitationsofthelawandpublicpolicyastheydesire,andthatthecourtswillenforcethem

accordingtotheirterms.(CivilCode,articles1152,1153,1154,and1155;Fornowvs.

Hoffmeister,6Phil.Rep.,33;Palaciosvs.MunicipalityofCavite,12Phil.Rep.,140;Gsellvs.

Koch,16Phil.Rep.,1.)TheonlycaserecognizedbytheCivilCodeinwhichthecourtis

authorizedtointerveneforthepurposeofreducingapenaltystipulatedinthecontractis

whentheprincipalobligationhasbeenpartlyorirregularlyfulfilledandthecourtcanseethatthepersondemandingthepenaltyhasreceivedthebenefitofsuchorirregular

performance.Insuchcasethecourtisauthorizedtoreducethepenaltytotheextentofthe

benefitsreceivedbythepartyenforcingthepenalty.

Inthisjurisdiction,thereisnodifferencebetweenapenaltyandliquidateddamages,sofar

aslegalresultsareconcerned.Ineithercasethepartytowhompaymentistobemadeis

entitledtorecoverthesumstipulatedwithoutthenecessityofprovingdamages.Indeedone

oftheprimarypurposesinfixingapenaltyorinliquidatingdamages,istoavoidsuch

necessity.

Thesuspensionofthepowertosellhasabeneficialpurpose,resultsintheprotectionofthe

corporationaswellasoftheindividualpartiestothecontract,andisreasonableastothe

lengthoftimeofthesuspension.Wedonothereundertaketodiscussthelimitationstothe

powertosuspendtherightofalienationofstock,limitingourselvestothestatementthat

thesuspensioninthisparticularcaseislegalandvalid.

Thejudgmentisreversed,thecaseremandedwithinstructionstoenterajudgmentinfavor

oftheplaintiffandagainstthedefendantforP1,000,withinterest;withoutcostsinthis

instance.

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G.R.No.L-10419

FELIXLAUREANO,plaintiff-appellant,

vs.

EUGENIOKILAYCOandCELSALIZARESDEKILAYCO,defendants-appellees.

Laguda, Ledesma, Jalbuena and Villalobos for appellant.

Lawrence,RossandBlockforappellees.

CARSON,J.:

On the 20th day of February, 1913, the defendants in this action executed a written

agreementwherein,forandinconsiderationofcertainmoneylenttothembytheplaintiff,

they obligated themselves to pay the sum of P10,200 in monthly installments of P500,

payableonthe15thdayofeachmonth,thefirstinstallmenttobepaidonthe15thdayof

April,1913.Bywayofsecurityfortheloantheyexecutedachattelmortgageuponcertain

property,includingthefittingsandstockofacertaindrugstore.Theyobligatedthemselves,

also, in the vent of failure topay any of the installments on the date upon which such

installments fell due, topay interest atthe rate of15per cent onall such overdueand

unpaidinstallmentsuntilthedateofpayment;and, further, intheeventthattheplaintiff

shouldbecompelledtohaverecoursetothecourtsfortherecoveryofthemoneylent,to

paytoplaintiff,bywayofindemnification,thesumofP2,000.Atthetimeofthetrial,which

tookplacein themonthofOctober,1914,it appearedthat therewasstilldueandunpaid

under thecontract thesumofP3,433.75, includingin theamountthe last installmentdue

on the 15th day of November, 1914, and interest at the rate of 15 per cent upon the

installmentsdueandunpaidpriortothedateofthetrial.Thedefendantsthereandthenoffered to pay the total amount of P3,433.75 which appeared to be due on account of

unpaidinstallmentsunderthecontract,includinginterestattherateof15percentfromthe

datewhensuchinstallmentsfelldue;and,theirofferhavingbeendeclined inopencourt,

deposited that amount with the clerk of the court, for payment to the plaintiff in full

settlementoftheirobligationunderthecontract.

Counselforplaintiffdeclinedtoacceptthemoneythustenderedandcontendedthathewas

entitledtoreceivenotonlytheamountoftheunpaidinstallmentsdueuponthedebt,but

also, by way of indemnification, the indemnity of P2,000 which defendants obligated

themselves to pay to plaintiff in the event that he should find it necessary to institute

proceedingsincourttorecoverthedebt;and,allegingthatdefendantshadunlawfullysold,

without plaintiffs knowledge or consent, the drug store on which the defendants had

executedachattelmortgage,counselclaimedalsothesumofP10,000undertheprovisions

ofsection12ofActNo.1508(ChattelMortgageLaw).

Thetrialjudge,beingofopinionthatthedepositbythedefendantswiththeclerkofthe

courtof thesumofP3,433.75constituteda settlementinfullof theirindebtednessunder

thecontract,dismissedthecomplaintatthecostoftheplaintiff.

Fromthisjudgmentplaintiffappealedandassignsaserror:

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1.The failureof the trial court to give judgment against the defendants for the sum of

P2,000,theindemnificationagreeduponintheeventthatplaintiffshouldbecompelledto

institutelegalproceedingstorecoverthedebt.

2.Thecostsoftheaction.

3.ThesumofP10,000towhichheclaimsheisentitledundertheprovisionsofsection12of

ActNo.1508,readtogetherwithsection10ofthesameAct.

Wewillexaminethelastassignmentoferrorfirst.

Sections10and12ofActNo.1508areasfollows:

SEC.10.Amortgagorofpersonalpropertyshallnotsellorpledgesuchproperty,oranypart

thereof,mortgagedbyhimwithouttheconsentofthemortgageeinwritingonthebackof

themortgageandonthemarginoftherecordthereofintheofficewheresuchmortgageis

recorded.

SEC.12.Ifamortgagorviolateseitherofthethreelastprecedingsectionsheshallbefineda

sum double the value of the property so wrongfully removed from the province, sold,

pledgedormortgaged,one-halftotheuseofthepartyinjuredandtheotherhalftotheuse

oftheTreasuryofthePhilippineIslands,orhemaybeimprisonedforaperiodnotexceeding

sixmonths,orpunishedbybothsuchfineandimprisonment,inthediscretionofthecourt.

Withoutstoppingtoconsiderthelegaleffectofachattelmortgagepurportingtosubjectto

mortgagethestockofastore,whereitmanifestlyappearsthatitistheintentoftheparties

thattheownerofthestoreshallcontinuethebusinesswithoutinterruption,itisasufficient

answer to the contentions of plaintiff in this regard to direct attention to the terms of

section12oftheAct,whichclearlycontemplatethatthefineandimprisonmentwhichmay

beimposedthereunderaretobeimposedinthecourseofacriminalaction,whereinthe

accused isentitled to the benefit of the safeguardswhichthe law of criminal procedure

throwsabouttheaccusedineverycaseinwhichheischargedwiththecommissionofan

offensedefinedandpenalizedbylaw.Itfollows,ofcourse,thatplaintiffsclaimofone-half

ofthefinewhichheallegesshouldbeimposeduponthedefendantsbecauseofthealleged

saleofthemortgagedpropertycannotbeenforcedinthisaction.

Plaintiffs claim to the agreed upon indemnity of P2,000 raises a question of greater

difficulty.

Weareofopinion,however,thattheclausesof thecontractprovidingforthepaymentof

interestatanincreasedrateintheeventoffailuretopayanyoftheinstallmentatthedate

uponwhichtheyfelldueandprovidingfurtherforthepayment,bywayofindemnification,

of the sum of P2,000 in the event that plaintiff should find it necessary to institute

proceedings for the enforcementof the contract, must be construed aspenalties in the

senseinwhichthattermisusedinarticles1152,1153,1154and1155oftheCivilCode.

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InitsdecisiondatedMarch24,1909,thesupremecourtofSpainheldthatelsealamiento

de crecidos intereses para el caso de satisfacer el capital al vencer la obligacion, debe

interpretarsecomoclausulapenal.(Thefixingofanincreasedrateofinterestintheevent

ofpayingofftheprincipalwhentheobligationbecomesdueshouldbeconstruedasapenal

clause.)

Itneedsnocitationofauthoritytosustainaholdingthatastipulationforthepaymentof

P2,000by way ofindemnification,in the eventof the failure topayallor any partof an

indebtedness of P10,200 in the event that the creditor should find it necessary tohave

recourse to the courts in the enforcement of the debt, is a penalty which, under the

provisions ofarticle 1154of the code,the courts are authorized tomodify inthe sound

exercise of their discretionwhentheprincipal obligation hasbeen compliedwith by the

debtoreitherinpartorirregularly(enparteoirregularmente).

InitsdecisionofNovember20,1907,thesupremecourtofSpainheldthataunestipuladoen la escritura que en su caso serian de cuenta y cargo del deudor las costas, daos y

perjuicios, la aplicacion de esta penalidad queda sometida al prudente arbitrio de los

Tribunales. (Even when it is stipulated in the instrument that, in a given case, thecost,

lossesanddamagesshallbechargeabletothedebtorandbebornebyhim,theapplication

ofthispenaltyshallrestinthesounddiscretionofthecourts.)

Underallthecircumstancesofthiscase,whereintheprincipalindebtednessappearstohave

been amply secured by a chattel mortgage, and wherein the greater part of the

indebtedness had been paid atthe timewhen the action was brought, and whereinthe

debtortenderedpaymentinfullpendingtheproceedingsinthecourtbelowanddepositedthe amount of the indebtedness then unpaid, together with 15 per cent interest, in the

hands of the clerk of the court for the benefit of the creditor, and wherein substantial

paymentsupontheprincipalobligation,amountingtosomeP2,000,hadbeenmadebythe

debtorandacceptedbythecreditornotlongpriortotheinstitutionoftheaction,weareof

opinion that the trial judgeproperly exercised the discretion conferred upon him under

article1154oftheCivilCodebymodifyingthepenaltiesprescribedunderthecontractsoas

tolimittherightof theplaintiffthereunderto interestattherateof15percentuponthe

lastinstallmentswhichhadbecomeoverdueunderthetermsofthecontract.

Itistruethatitwassaidinaformerdecision(Lambertvs.Fox,26Phil.Rep.,588)thatinthis

jurisdiction there isnosubstantial differencebetweenapenaltyand liquidateddamages so

faraslegalresultsareconcerned;butthisstatementistobeconstruedinconnectionwith

thecasewithreferencetowhichitwasmadeand,onexamination,itwillbefoundthatitis

strictly applicable only to cases wherein there has been neither a partial or irregular

compliancewiththetermsofthecontract,sothatthecourtshavenoauthoritytoproceed

undertheprovisionsofarticle1154oftheCivilCodewhichisasfollows:

Thejudgeshall equitablymitigatethepenaltyif theprincipalobligationshouldhavebeen

partlyorirregularlyfulfilledbythedebtor.

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AswassaidbythesupremecourtofSpaininitssentencedatedJune13,1906,construing

theprovisionsofbook4,title1,chapter3,section6oftheCivilCode:

The rules andprescriptions governing penal mattersare fundamentally applicable to the

penalsanctionsofcivilcharacter.

Itfollowsthat,inanycasewhereintherehasbeenapartialorirregularcompliancewiththe

provisionsinacontractforspecialindemnificationintheeventoffailuretocomplywithits

terms,courtswillrigidlyapplythedoctrineofstrictconstructionagainsttheenforcementin

itsentiretyoftheindemnification,whereitisclearfromthetermsofthecontractthatthe

amount or character of the indemnity is fixed without regard to the probable damages

whichmightbeanticipatedasaresultofabreachofthetermsofthecontract;or,inother

words,wheretheindemnityprovidedforisessentiallyamerepenaltyhavingforitsprincipal

object the enforcement of compliance with the contract. But the courts will be slow in

exercisingthejurisdictionconferredupontheminarticle1154soastomodifythetermsofan agreed upon indemnification where it appears that in fixing such indemnification the

partieshadinmindafairandreasonablecompensationforactualdamagesanticipatedasa

resultofabreachofthecontract,or,inotherwords,wheretheprincipalpurposeofthe

indemnification agreeduponappears tohavebeen toprovide for thepaymentof actual

anticipatedandliquidateddamagesratherthanthepenalizationofabreachofthecontract.

Itwillreadilybeseenthattheapplicationoftheseprinciplestotheparticularfactorsinany

case inwhich therehas been a partial or irregular performance of the condition of a

contractwhichprovidesapenaltyorliquidateddamagesfornoncompliancetherewithwill

leadtoresultssubstantiallyidenticalwiththosearrivedatinlikecasesintheUnitedStatesundergenerallyaccepteddoctrinetouchingtheenforcementofsuchcontracts.(Cf.Ency.of

U.S.SupremeCourtReports,vol.5,p.176,LiquidatedDamages,andcasestherecited.)

Theapplicationoftheseprinciplestothecaseatbarleavesnodoubtinourmindastothe

proprietyoftheactionofthecourtbelowinrestrictingtherightoftheplaintifftorecover

under the penal clauses set forth inhis contract the interest at the rate of 15 per cent

agreed upon by the parties inthe eventof failure to pay the various installmentsof his

indebtednessonthedayanddatewhentheyfelldue.

Astothethirdassignmentoferror,touchingthejudgmentofthecourtagainstplaintifffor

costs,weneedonlyindicatethatwhileitistrue,ascontendedbyplaintiff,thatatenderof

paymentmadeafteractionhasbeeninstituteddoesnotnecessarilyrelieveadefendant,in

anactionforasumofmoney,fromthecostsincurredpriortothedateofthetender,itmay

andasa generalrule should relievehim ofallcosts thereafter in theevent that plaintiff

declinestoacceptpaymentastendered,andifitthereafterappearsthatthetenderactually

madewasforthefullamountdueatthetimewhenitwasmade.Inthecaseatbarthetotal

amountultimatelyfoundduebythetrialcourtwaspaidintocourtduringthecourseofthe

trial, and weare of opinion that under all the circumstancesof the case no errors was

committedbythetrialjudgeintheexerciseofhisdiscretioninimposingthecostsofthetrial

uponplaintiff,whodeclinedtoaccepttenderofpaymentofthefullamountdueandthus

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terminate theproceedingswithout furthercost or expense to eitherparty. (Section 487,

CodeofCivilProcedure.)

Weconcludethat thejudgmententeredin thecourtbelow shouldbeaffirmed, with the

costsofthisinstanceagainsttheappellant.Soordered.

[G.R.No.149004.April14,2004]

RESTITUTAM.IMPERIAL,petitioner,vs.ALEXA.JAUCIAN,respondent.

DECISION

PANGANIBAN,J.:

Iniquitousand unconscionable stipulationson interest rates,penaltiesand attorneysfees

are contrary to morals. Consequently, courts are granted authority to reduce them

equitably.Ifreasonablyexercised,suchauthorityshallnotbedisturbedbyappellatecourts.

TheCase

BeforeusisaPetitionforReview1[1]underRule45oftheRulesofCourt,assailingtheJuly

19,2000Decision2[2]andtheJune14,2001Resolution 3[3]oftheCourtofAppeals(CA)in

CA-GRCVNo.43635.ThedecretalportionoftheDecisionisasfollows:

WHEREFORE,premisesconsidered,theappealedDecisionoftheRegionalTrialCourt,5th

JudicialRegion,Branch21,NagaCity,datedAugust31,1993,inCivilCaseNo.89-1911for

SumofMoney,isherebyAFFIRMEDintoto.4[4]

TheassailedResolutiondeniedpetitionersMotionforReconsideration.

ThedispositiveportionoftheAugust31,1993Decision,promulgatedbytheRegionalTrial

Court(RTC)ofNagaCity(Branch21)andaffirmedbytheCA,readsasfollows:

Wherefore,JudgmentisherebyrendereddeclaringSectionI,CentralBankCircularNo.905,

series of 1982 to be of no force and legal effect, it having been promulgated by the

Monetary Board of the Central Bank of the Philippines with grave abuse of discretion

amountingtoexcessofjurisdiction;declaringthattherateofinterest,penalty,andcharges

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forattorneysfeesagreeduponbetweenthepartiesareunconscionable,iniquitous,andin

violationofActNo.2655,otherwiseknownastheUsuryLaw,asamended;andordering

DefendanttopayPlaintifftheamountofFOURHUNDREDSEVENTY-EIGHTTHOUSAND,ONE

HUNDREDNINETY-FOURand54/100(P478,194.54)PESOS,Philippinecurrency,withregular

and compensatory interests thereon at the rate of twenty-eight (28%) per centum per

annum, computed from August 31, 1993 until full payment of the said amount, and in

addition, an amount equivalent to ten (10%) per centum of the total amount due and

payable,forattorneysfees,withoutpronouncementastocosts. 5[5]

TheFacts

TheCAsummarizedthefactsofthecaseinthiswise:

Thepresentcontroversyarosefromacaseforcollectionofmoney,filedbyAlexA.Jaucian

against Restituta Imperial, on October 26, 1989. The complaint alleges, inter alia, that

defendantobtainedfromplaintiffsix(6)separateloansforwhichtheformerexecutedin

favorofthelattersix(6)separatepromissorynotesandissuedseveralchecksasguarantee

for payment. When the said loans became overdue and unpaid, especially when the

defendantschecksweredishonored,plaintiffmaderepeatedoralandwrittendemandsfor

payment.

Specifically,thesix(6)separateloansobtainedbydefendantfromplaintiffonvariousdates

areasfollows:

(a) November13,1987 P50,000.00(b)December28,1987 40,000.00

(c)January6,1988 30,000.00

(d)January11,1988 50,000.00

(e)January12,1988 50,000.00

(f) January13,1988 100,000.00

Total P320,000.00

Theloanswerecoveredbysix(6)separatepromissorynotesexecutedbydefendant.The

face value of each promissory notes is bigger [than] the amount released to defendant

becausesaidfacevaluealreadyinclude[d]theinterestfromdateofnotetodateofmaturity.Saidpromissorynotes,which indicate the interest of 16%permonth, date of issue,due

date, the corresponding guarantee checks issued by defendant, penalties and attorneys

fees,arethefollowing:

1. ExhibitDforloanofP40,000.00onDecember28,1987,withfacevalue

ofP65,000.00;

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2. ExhibitEforloanofP50,000.00onJanuary11,1988,withfacevalueof

P82,000.00;

3. ExhibitFforloanofP50,000.00onJanuary12,1988,withfacevalueof

P82,000.00;

4. ExhibitGforloanofP100,000.00onJanuary13,1988,withfacevalueof

P164,000.00;

5. ExhibitHThisparticularpromissorynote covers thesecondrenewal of

theoriginalloanofP50,000.00onNovember13,1987,whichwasrenewed

forthefirsttimeonMarch16,1988aftercertainpayments,andwhichwas

renewedfinallyfor thesecond time on January4,1988 also after certain

payments,withafacevalueofP56,240.00;

6. ExhibitIThisparticularpromissorynotecoversthesecondrenewalofthe

originalloanofP30,000.00onJanuary6,1988,whichwasrenewedforthe

first timeon June 4, 1988 after certain payments, and whichwas finally

renewed for the second time on August 6, 1988, also after certain

payments,with[a]facevalueofP12,760.00;

Theparticularsaboutthepostdatedchecks,i.e.,number,amount,date,etc.,areindicated

ineachofthepromissorynotes.Thus,forExhibitD,four(4)PBcheckswereissued;for

ExhibitEfour(4)checks;forExhibitFfour(4)checks;forExhibit Gfour(4)checks;for

ExhibitHone(1)check;forExhibitIone(1)check;

Thearrangementbetweenplaintiffanddefendantregarding theseguaranteecheckswas

thateachtimeacheckmaturesthedefendantwouldexchangeitwithcash.

Although,admittedly,defendantmadeseveralpayments,thesamewerenotenoughand

shealwaysdefaultedwheneverherloansmature[d].AsofAugust16,1991,thetotalunpaid

amount,includingaccruedinterest,penaltiesandattorneysfees,[was]P2,807,784.20.

On the other hand, defendant claims that she was extended loans by the plaintiff on

severaloccasions, i.e., from November13, 1987 to January13,1988,in thetotal sumofP320,000.00attherateofsixteenpercent(16%)permonth.Thenotesmature[d]everyfour

(4)monthswithunearnedinterestcompoundingeveryfour(4)monthsiftheloan[was]not

fullypaid.Theloanreleases[were]asfollows:

(a) November13,1987 P50,000.00

(b)December28,1987 40,000.00

(c)January6,1988 30,000.00

(d)January11,1988 50,000.00

(e)January12,1988 50,000.00

(f) January13,1988 100,000.00

Total P320,000.00

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TheloanonNovember13,1987andJanuary6,1988ha[d]beenfullypaidincludingthe

usuriousinterestsof16%permonth,thisisthereasonwhythesewerenotincludedinthe

complaint.

Defendantallegesthatalltheaboveamountswerereleasedrespectivelybychecksdrawn

bytheplaintiff,andthelattermustproducethesechecksasthesewerereturnedtohim

beingthedrawerifonlytoservethetruth.Theaboveamountaretherealamountreleased

tothedefendantbuttheplaintiffbymasterfulmachinationsmadeitappearthatthetotal

amountreleasedwasP462,600.00.Becauseinhiscomputationhemadeitappearthatthe

trueamountsreleasedwasnottheoriginalamount,sinceitinclude[d]theunconscionable

interestforfourmonths.

Further, defendant claims that as of January 25, 1989, the total payments made by

defendants[were]asfollows:

a. PaidreleasesonNovember13,1987ofP50,000.00andJanuary6,1988

of P30,000.00 these two items were not included in the complaint

affirmingthefactthatthesewerepaid

P80,000.00

b. Exhibit26Receipt 231,000.00

c. Exhibit8-25Receipt 65,300.00

d. Exhibit27Receipt 65,000.00

Total P441,780.00

Less: 320,000.00

ExcessPayment P121,780.00

DefendantcontendsthatfromallperspectivestheaboveexcesspaymentofP121,780.00is

morethantheinterestthatcouldbelegallycharged,andinfactasofJanuary25,1989,the

totalreleaseshavebeenfullypaid.

On31August1993,thetrialcourtrenderedtheassaileddecision. 6[6]

RulingoftheCourtofAppeals

Onappeal,theCAheldthatwithoutjudicialinquiry,itwasimproperfortheRTCtoruleonthe constitutionality of Section 1, Central Bank Circular No. 905, Series of 1982.

Nonetheless,theappellatecourtaffirmedthejudgmentofthetrialcourt,holdingthatthe

lattersclearanddetailedcomputationofpetitionersoutstandingobligationtorespondent

wasconvincingandsatisfactory.

Hence,thisPetition.7[7]

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TheIssues

Petitionerraisesthefollowingargumentsforourconsideration:

1. Thatthepetitionerhasfullypaidherobligationsevenbeforefilingofthis

case.

2. Thatthechargingofinterestoftwenty-eight(28%)percentumperannum

withoutanywritingisillegal.

3. Thatchargingofexcessiveattorneysfeesishemorrhagic.

4. Chargingofexcessivepenaltiespermonthisintheguiseofhiddeninterest.

5. Thenon-inclusionofthehusbandofthepetitioneratthetimethecasewas

filedshouldhavedismissedthiscase. 8[8]

TheCourtsRuling

ThePetitionhasnomerit.

FirstIssue:

ComputationofOutstandingObligation

Arguing that she had already fullypaid the loan before the filing of the case,petitioner

allegesthatthetwolowercourtsmisappreciatedthefactswhentheyruledthatshestillhad

anoutstandingbalanceofP208,430.

Thisissueinvolvesaquestionoffact.Suchquestionexistswhenadoubtordifferencearises

astothetruthorthefalsehoodofallegedfacts;andwhenthereisneedforacalibrationof

the evidence, considering mainly the credibility of witnesses and the existence and the

relevancy of specific surrounding circumstances, their relation to each other and to the

whole,andtheprobabilitiesofthesituation. 9[9]

Itisawell-entrenchedrulethatpurequestionsoffactmaynotbethesubjectofanappeal

by certiorariunderRule 45of theRulesofCourt, as this remedy isgenerally confined to

questionsoflaw.10[10]ThejurisdictionofthisCourtovercasesbroughttoitislimitedtothe

reviewandrectificationoferrorsoflawallegedlycommittedbythelowercourt.Asarule,

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thelattersfactualfindings,whenadoptedandaffirmedbytheCA,arefinalandconclusive

andmaynotbereviewedonappeal. 11[11]

Generally,thisCourtisnotrequiredtoanalyzeandweighalloveragaintheevidencealready

considered in the proceedings below.12[12] In the present case, we find no compelling

reason tooverturn the factual findings of the RTC -- that the total amount of the loans

extendedtopetitionerwasP320,000,andthatshepaidatotalofonlyP116,540ontwenty-

ninedates.Thesefindingsaresupportedbyapreponderanceofevidence.Moreover,the

amountoftheoutstandingobligationhasbeenmeticulouslycomputedbythetrialcourtand

affirmedbytheCA.Petitionerhasnotgivenussufficientreasonwhyhercausefallsunder

anyoftheexceptionstothisruleonthefinalityoffactualfindings.

SecondIssue:

RateofInterest

Thetrialcourt,asaffirmedbytheCA,reducedtheinterestratefrom16percentto1.167

percent per monthor 14 percentper annum; and the stipulatedpenalty charge,from5

percentto1.167percentpermonthor14percentperannum.

Petitionerallegesthatabsentanywrittenstipulationbetweentheparties,thelowercourts

shouldhaveimposedtherateof12percentperannumonly.

Therecordsshowthattherewasawrittenagreementbetweenthepartiesforthepayment

ofintereston the subject loansat the rateof16percentpermonth. Asdecreed bythe

lowercourts,thisratemustbeequitablyreducedforbeinginiquitous,unconscionableandexorbitant.WhiletheUsuryLawceilingoninterestrateswasliftedbyC.B.CircularNo.905,

nothinginthesaidcirculargrantslenders carteblancheauthoritytoraiseinterestratesto

levels which will either enslave their borrowers or lead to a hemorrhaging of their

assets.13[13]

InMedelv.CA,14[14]theCourtfoundthestipulatedinterestrateof5.5percentpermonth,

or 66 percent per annum, unconscionable. In the present case, the rate is even more

iniquitousandunconscionable,asitamountsto192percentperannum.Whentheagreed

rateisiniquitousorunconscionable,itisconsideredcontrarytomorals,ifnotagainstthe

law.[Such]stipulationisvoid. 15[15]

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Sincethestipulationontheinterestrateisvoid,itisasiftherewerenoexpresscontract

thereon.16[16]Hence,courtsmayreducetheinterestrateasreasonandequitydemand.

Wefindnojustificationtoreverseormodifytherateimposedbythetwolowercourts.

ThirdandFourthIssue:

PenaltiesandAttorneysFees

Article1229oftheCivilCodestatesthus:

Thejudgeshallequitablyreducethepenaltywhentheprincipalobligationhasbeenpartly

orirregularly compliedwithby the debtor. Even iftherehas been noperformance, the

penaltymayalsobereducedbythecourtsifitisiniquitousorunconscionable.

Inexercisingthispowertodeterminewhatisiniquitousandunconscionable,courtsmust

considerthecircumstancesofeachcase.17[17]Whatmaybeiniquitousandunconscionable

inone may betotallyjust and equitable inanother. Inthepresent case, iniquitous and

unconscionable was theparties stipulatedpenalty chargeof 5 percentpermonth or 60

percentperannum, inaddition to regularinterestsandattorneys fees. Also, there was

partialperformancebypetitionerwhen sheremittedP116,540 aspartialpaymentof her

principalobligationofP320,000. Under thecircumstances, thetrialcourtwas justified in

reducingthestipulatedpenaltychargetothemoreequitablerateof14percentperannum.

ThePromissoryNotecarriedastipulationforattorneysfeesof25percentoftheprincipal

amountandaccruedinterests.Strictlyspeaking,thiscovenantonattorneysfeesisdifferent

fromthatmentionedinandregulatedbytheRulesofCourt.18[18]Rather,theattorneysfeeshereareinthenatureofliquidateddamagesandthestipulationthereforisaptlycalled

apenalclause.19[19]Solongasthestipulationdoesnotcontravenethelaw,morals,public

orderorpublicpolicy,itisbindingupontheobligor.Itisthelitigant,notthecounsel,whois

thejudgmentcreditorentitledtoenforcethejudgmentbyexecution.

Nevertheless,itappearsthatpetitionersfailuretocomplyfullywithherobligationwasnot

motivated by ill will or malice. The twenty-nine partial payments she made were a

manifestationofhergoodfaith.Again,Article1229oftheCivilCodespecificallyempowers

thejudgetoreducethecivilpenaltyequitably,whentheprincipalobligationhasbeenpartly

or irregularly complied with. Upon this premise, we hold that the RTCs reduction ofattorneysfees--from25percentto10percentofthetotalamountdueandpayable--is

reasonable.

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FifthIssue:

Non-InclusionofPetitionersHusband

Petitioner contends that the case against her should have been dismissed, because her

husbandwasnotincludedintheproceedingsbeforetheRTC.

We are not persuaded. The husbands non-joinder does not warrant dismissal, as it is

merely a formal requirement that may be cured by amendment.20[20] Since petitioner

allegesthatherhusbandhasalreadypassedaway,suchanamendmenthasthusbecome

moot.

WHEREFORE,thePetitionisDENIED.Costsagainstpetitioner.

G.R.No.L-3527September23,1907

TANTIOCO,plaintiff-appellee,

vs.

MARCELINALOPEZ,defendant-appellant.

Luis Ledesma for appellant.

RothrockandFossforappellee.

ARELLANO,C.J.:

Thesubject-matterof thecomplaint iscertain sums ofmoney owing to theplaintiff,Tan

Tioco, on account of some rice sold by him to Roque Lopez, and for money loaned to

MarcianoJardenil,totheextentof524.31pesos.Theplaintiffacknowledgeshavingreceived

paymentof179.37pesos;leavingabalanceof344.94pesos,theamountaskedforinthe

complaint,withlegalinterestfromJanuary29,1901.

The court below in its judgment ordered thedefendant, Marcelina Lopez, to pay312.51

pesos, with legal interest from February 1, 1901. The defendant appealed from this

judgment, the corresponding bill of exceptions was presented to this court, and theappellanthastherighttoreviewoftheevidenceadducedduringthetrial.

Theallegationofthecomplaintare:

1.ThatonSeptember27,1900,RoqueLopezreceivedsomericefromTanTioco,forwhich

heissuedavaleinthefollowingterms""Valeforfiftypiculsofsecondclasswhiterice,in

favoroftheChineseTiuaonaccountofMarcelinaLopez.R.Lopez.Price$53/10apicul

$271.88."

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2.ThatonOctober23,1900,heissuedanotherdocumentreadingasfollows:"Valeforone

piculofrice,secondclasswhite.R.Lopez.$5.31."

3.ThatonOctober30,1900,hesignedanotherdocumentwhichreadsasfollows:"Valefor

fortypiculsofsecondclasswhite,infavoroftheChineseTanTioco.R.Lopez.@$5

2/8$210%MarcelinaLopez."

4.ThatonNovember5,1900,hesignedthefollowingvale:"ValeforonepiculriceNo.1and

three piculs Chinese Tabao, in favor of the Chinese Tan Tioco, on account of the

undersigned.R.Lopez.$22.12."

5.ThatonNovember21,1900,MarcianoJardenilissuedadocumentofthefollowingtenor:

"ValeforthesumoftenpesosfuertesinfavoroftheChineseTanTiocoonaccountandby

orderofMarcelinaLopez.MarcianoJardenil."

All the allegations set up in the complaint having been denied, and all the vales above

referredtohavingbeenproducedatthetrialasevidenceinfavoroftheplaintiff,thecourt

admitted as competent the evidence of allegations No. 1, 3, and 5, and rejected that

referringtoallegationsNo.2and4.

Itappearsfromtherecord:

1.That,althoughatfirstthecourtbelowdidnotadmitallthesaid valesissuedandsignedby

Roque Lopez and Marciano Jardenil, respectively, as evidence against the defendant

Marcelina Lopez, yet the same were admitted afterwards in view of furtherdocumentalevidence, consistingof a letter, acknowledgedby thedefendant,which reads as follows:

"Sir:ToChineseTiua.Jaro,September25,1900.MydearChineseTiua.Kindly

give some lumber inrafts (queentregera elbalsasdemadera).Yours truly. Marcelina

Lopez.50piculssecondclasscurrentrice."

2.ThatMarcelinaLopezdeclaredthattheChinesedidnotknowRoqueLopez,andthelatter

askedher forarecommendation;thatshedidnotgiveRoqueLopez,anyauthoritytosign

vales in favor of the Chinese Tan Tioco on her account and by her order; that she had

nothing todo with the letter and deliveryof the lumber; thatRoqueLopezhad toldher

nothingaboutthericereceived;that"itisstatedinherletterthathe(RoqueLopez)wouldpay the Chinese withlogs, because the Chinesehad an interest insomelogs;" and that,

whenshewrotetheletter,RoqueLopezandMarcianoJardenil,whomshebelievedtobe

partners,werealreadycuttingtimber;andthatitistruethatshewroteinsaidletter,under

hersignature,"thatline;""50piculssecond-classcurrentrice."

3.ThatRoqueLopeztestifiedthathetookthericeonhisownaccount,havingaskedhis

aunt,thedefendant,foraletterofrecommendationbecausetheChineseTanTiocodidnot

knowhim,buthedidnottellthelatterthathewasauthorizedbyhisaunttoobtainriceon

heraccount;thathemadeoutthevalesaying:"Onmyownaccount;andthat,onseeingit

theChinamansaid:No,putitonaccountandbyorderofMarcelina,"and"then[thewitness

said] Iprotested,sayingthatMarcelinahadgivenmenoauthoritytosign forher,butthe

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Chinesereplied:"Signthat,andIwillgiveyoutherice;"and,astheboatwasgettingready

tosailforNegrosinordertotakeadvantageofthatopportunity,Ichangedthevalesoasto

read: "Onaccountand byorder ofMarcelina Lopez;" buthe denieshavingplacedat the

bottomofthevale(allegationNo.2)thenote"onaccountofMarcelinaLopez."

4.ThatTanTiocodeclaredthathesoldthericetoRoqueLopezonaccountofthedefendant,

inasmuchashehasnoaccountwiththewitnessRoqueLopez;"thatRoqueLopeztoldhim,

whenhetooktherice,thattheywouldbringsomeraftsoflumberonthereturnoftheboat

inpayment;thatthepriceofthericewouldbewouldbepaidwiththelumberwhichthey

wouldbringonthereturnoftheboat,"andthat"hespoketoMarcelina,tellingherthat,if

onthereturnoftheboattheydidnotpayhim,hewouldcollecttheamountfromher;"that

RoqueLopeztoldhimthat,onreturnofthe lorcha,whenthelumberwassold,theywould

paywiththeproceedsofthesale.Onbeingasked:"DidyoutellMarcelinaLopezthat,should

Roque Lopez not deliver any lumber, you would collect that amount from her?" he

replied:IthinkthatitwastwoorthreedaysafterhetookthericethatItoldherthat.Q.Onlyafterhetookthe50piculs?A.Yes.AndafterhetookthericeonanotherdayIgave

heradetailedstatementofgoodstakenbyhim.Q.WhenyoudeliveredthattoMarcelino

Lopez,whatdidsheansweryou?A.Wait,andyouwillbepaidforthis.Q.Didshesaythat

shewouldpayforit,orthatshewouldendeavortohaveitpaidyou?A.Thatshewould

endeavortohaveitpaid;"andfinallyhesaidthatthenoteplacedonthebottomofthevale

mentioned in the allegation No. 2 of the complaint was not made byRoque Lopez, but

MarcianoJardenil,althoughtheformerwasthereatthetimewiththelatter.

Thecourtbelowdidnotsentencethedefendanttopaytheamountsexpressedinthetwo

vales mentioned in allegations No. 2 and 4, for $5.31 and $22.12; it has considered,however,asobligationsbindinguponthedefendant,andcontractedbyher,thosecontained

inthevales(allegationsNos.1,3,and5),thatis,thepriceofthe50piculsof secondclass

currentrice,and ofthe40 piculs second class whitetakenbyRoque Lopez,and the $10

loanedtoMarcianoJardenil.

Regardingthisobligations,weconsiderthatthereisnoreasontocompelMarcelinaLopezto

paythepriceofthe40cavanesofsecondclasswhiterice,takenbyRoqueLopez,northe10

pesos borrowedby Marciano Jardenil, inasmuchas theterms of the letteraddressed by

Marcelina Lopez to Tan Tioco, dated September 25, 1900, relating only to 50 cavanes

second-classwhitericewhichRoqueLopezmighttake,cannotbemadetoincludethetwo

otherpersonsmentioned.

Astothe50cavanesofricetowhichthisletterrefers,thereissomedoubt,accordingtoits

terms,whetherthesentence"whowilldeliversomelumberinrafts"(queentregaraelbalsa

demaderas)indicatesasthetruepersonthatmustpay,thatis,athirdpersononthepartof

the principal; in other words, whether the letter is a mere recommendation in favor of

Roque Lopez,or is, on thecontrary,anorder,by virtueofwhich Marcelina Lopezwould

receive the riceand wouldherself pay the price thereof with the raftsof lumber which

Roque Lopez woulddeliver, or is an order given for the profit of the agent and a third

person.

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Weconsiderthatthecontractresultingintheoneexpressedinlaw22,title12,ofthe5th

Partida,whichistheimmediatelegalprecedentoftheCivilCodeinforce,whichcontractis

statedinthefollowingterms:"Mandatesofthefifthclassarethosewhereinamanorders

anothertodoortogivesomethinginfavoronlyofhimwhoreceivestheorderandofathird

person.Asforexample,whereoneordersanothertogivehismoneytoathirdpersonon

interest.Insuchacase, iftheonewhogavethemoneycannotrecoverthesamefromthe

one who received it, the former can recover the money afterwards from the one who

orderedhimtogivethemoney."

TheorderDeleusted(givehim)wasgivenbyMarcelinaLopeztoTanTiocofortheprofitof

theagentonly,whowastoreceivetheprofitonthepriceoftherice,andfortheprofitofa

thirdperson,RoqueLopez,whowishedtogetsomerice.Theobligationtopay,therefore,

rests principally, upon the third person, Roque Lopez, and subsidiarily, on default of

paymentonthepartofthelatter,upontheprincipal,MarcelinaLopez.

The meaning of the phrase que entregara en el balsas de madera, is explained by the

plaintiffhimselfinhisdeclarationinwhichhesaysthatRoqueLopezhadinformedhim,on

takingtherice,thatthey,RoqueLopez,andMarcianoJardenil,wouldbringsomelumber

rafts onthe returnofthe lorcha,and"thattheywouldpayhim,"andhesaidagainthat

"Roque Lopeztold him that, onthe return ofthe lorcha,when the raftswere sold,they

wouldpayhimwiththevalueofthelumber,"addingthattwoorthreedaysafterwards"he

spoketoMarcelinaandtoldherthat,shouldtheynotpayhimonthereturnofthelorcha,

hewould recover the amount fromher." It is, therefore, evident that, on accepting the

contract,theplaintiffdidnotconsiderRoqueLopezasamereagentofthedefendant,asif

thelatterweretheonlypartyobligedunderthetermsoftheletter,butthatheunderstoodfromthelanguageoftheletterthatRoqueLopezwasprimarilyresponsibleforthepayment

of the rice, and that Marcelina Lopez was responsible subsidiarily for Roque Lopez, on

account of her having so said and given the order expressing the quantityof rice tobe

delivered to him, all in conformity with the above-mentioned Law of Partidas, which

determinesverydistinctlytheeffectsofacontractexecutedinsuchaway.Shouldtheagent

be unable to recover from the one who received the thing, he can require payment

afterwards,"fromtheonewhoorderedhimtogiveit."

Theaction,therefore,hasnotbeenproperlybrought.

Byvirtuethereof,andonlyuponthegroundsexpressed,wereversethejudgmentappealed

from,withoutcosts.Soordered.

7/31/2019 obli con case A.1226-1233

23/23

LegardaHermanosvs.Saldana

Facts:

PetitionforreviewofadecisionoftheCourtofAppeals

TheactionoriginatedasacomplaintfordeliveryoftwoparcelsoflandinSampaloc,Manila

and for the execution of the corresponding deed of conveyance after payment of the

balancedueontheirpurchaseprice.

SaldanaenteredintoacontractwithLegardaHermanosassubdivisionowner,forthesaleof

two lots of 150 square meters each, amounting toPhP 1,500 per lot to bepaid in 120

monthlyinstallmentsofPhP19.83with10%interestperannum.Saldanadefaultedinhis

96th

installment,buthaspaidatotalofPhP1,682.28inprincipal,worthmorethanthevalue

ofonelot.

Saldanawrotethepetitionersregardinghisdesire tofullfilhisobligations, addingthathisdesire to build a house on the lot was prevented by Hermanos failure to introduce

improvementstothesubdivision.

Issue:WhetherHermanoshastherighttorescindthecontractduetoSaldanasdefaultof

payment

Held:JMTuasonRulingappliestothecaseinwhichSaldanamustbegrantedlesserbenefits,

since no rescission of contract is permitted. Saldanas substantial compliance of the

obligationentitleshimtothetransferofownershipofonelot.