G.R. No.

118375             October 3, 2003 documents such as checks shall produce the effect of payment
CELESTINA T. NAGUIAT vs COURT OF APPEALS and only when they have been cashed. 20  It is only after the checks
AURORA QUEAÑO have produced the effect of payment that the contract of loan
may be deemed perfected. 

FACTS: Queaño applied with Naguiat for a loan in the amount

of P200,000.00 which Naguiat granted. On 11 August 1980,
Naguiat indorsed to Queaño Associated Bank Check for the G.R. No. 158495             October 21, 2004
amount of Ninety Five Thousand Pesos (₱95,000.00). She ELIZABETH EUSEBIO-CALDERON vs PEOPLE OF THE
PHILIPPINES
also issued her own Filmanbank Check to the order of
Queaño, also dated 11 August 1980 and for the amount of
Ninety Five Thousand Pesos (₱95,000.00). The proceeds of FACTS: On May 15, 1994, petitioner borrowed from her aunt
these checks were to constitute the loan granted by Naguiat to Teresita P50,000.00, in exchange for which she issued an
Queaño.3 Allied Bank Check postdated November 15, 1994, in the
amount of P52,500.00. On May 30, 1994, petitioner again
To secure the loan, Queaño executed a Deed of Real Estate borrowed from Teresita the amount of P100,000.00, in
Mortgage dated 11 August 1980 in favor of Naguiat, and exchange for which she issued Allied Bank Check No.
surrendered to the latter the owner’s duplicates of the titles 16076402, postdated November 14, 1994, in the amount of
P105,000.00.
covering the mortgaged properties. On the same day, Queaño
issued to Naguiat a promissory note for the amount of
P200,000.00 with interest at 12% per annum, payable on 11 Also on May 30, 1994, Amelia Casanova lent to petitioner  the
September 1980.5Queaño also issued a Security Bank and amount of P100,000.00, allegedly to be used for the expansion
of her business. In exchange, petitioner issued Allied Bank
Trust Company check, postdated 11 September 1980, for the
Check No. 16041982, postdated November 30, 1994, for
amount of P200,000.00 and payable to the order of Naguiat.
P100,000.00 and six other checks in various amounts
Upon presentment on its maturity date, the Security Bank purportedly to cover the interests.
check was dishonored for insufficiency of funds. On 16
October 1980, Queaño received a letter from Naguiat’s lawyer, Manolito Eusebio alleges that in November 1994, petitioner
demanding settlement of the loan. Shortly thereafter, Queaño borrowed money from him because she needed it for her
and one Ruby Ruebenfeldt met with Naguiat. At the meeting, pharmaceutical business. Manolito loaned her P50,000.00, for
Queaño told Naguiat that she did not receive the proceeds of which she issued Allied Bank Check No. 16063578 covering
the principal amount of the loan, dated December 6, 1994, and
the loan, adding that the checks were retained by Ruebenfeldt,
four other postdated checks for the interests thereon.
who purportedly was Naguiat’s agent.

Naguiat applied for the extrajudicial foreclosure of the According to private complainants, petitioner assured them that
mortgage. Queaño filed the case before a Pasay City RTC, the checks will be honored upon maturity. 
seeking the annulment of the mortgage deed which the latter
eventually declared as null and void and ordering Naguiat to Petitioner Elizabeth Eusebio-Calderon was charged with
return to Queaño the owner’s duplicates of her titles to the Estafa in three separate Informations.
mortgaged lots. Naguiat appealed the decision before the
Court of Appeals but the CA affirmed the decision of RTC in RTC found petitioner guilty beyond reasonable doubt of three
toto. counts of Estafa but ruled that her liability for the "interest
checks" was only civil.
ISSUE: Whether or not a contract of loan was constituted?

RULING: None CA modified the decision, acquitting petitioner crimes charged

on the ground that her guilt has not been proven beyond
 Art. 1934 of the Civil Code provides: reasonable doubt. However, she is held civilly liable for the
principal amounts of the issued checks with interest thereon at
"An accepted promise to deliver something by way of the rate of 12% per annum effective December 20, 1994, the
commodatum or simple loan is binding upon the parties, but date of complainants’ demand thru their counsel, until fully
the commodatum or simple loan itself shall not be perfected paid.
until the delivery of the object of the contract."
ISSUE: Whether or not petitioner is liable to pay the interest?
A loan contract is a real contract, not consensual, and, as
such, is perfected only upon the delivery of the object of the
RULING: NO.
contract.21 In this case, the objects of the contract are the loan
proceeds which Queaño would enjoy only upon the
encashment of the checks signed or indorsed by Naguiat. If An accused who is acquitted of Estafa may nevertheless be
indeed the checks were encashed or deposited, Naguiat would held civilly liable where the facts established by the evidence
so warrant.16 Petitioner Elizabeth Calderon is clearly liable to
have certainly presented the corresponding documentary
the private respondents for the amount borrowed. The Court of
evidence, such as the returned checks and the pertinent bank
Appeals found that the former did not employ trickery or deceit
records. Since Naguiat presented no such proof, it follows that in obtaining money from the private complainants, instead, it
the checks were not encashed or credited to Queaño’s concluded that the money obtained was undoubtedly loans for
account. which petitioner paid interest. The checks issued by petitioner
as payment for the principal loan constitute evidence of her
All told, we find no compelling reason to disturb the finding of civil liability which was deemed instituted with the criminal
the courts a quo that the lender did not remit and the borrower action.
did not receive the proceeds of the loan. That being the case, it
follows that the mortgage which is supposed to secure the loan
The civil liability of petitioner includes only the principal amount
is null and void. The consideration of the mortgage contract is
of the loan. With respect to the interest checks she issued, the
the same as that of the principal contract from which it receives same are void. There was no written proof of the payable
life, and without which it cannot exist as an independent interest except for the verbal agreement that the loan shall
contract.28 A mortgage contract being a mere accessory earn 5% interest per month. Under Article 1956 of the Civil
contract, its validity would depend on the validity of the loan Code, an agreement as to payment of interest must be in
secured by it. writing, otherwise it cannot be valid.17 Consequently, no
interest is due and the interest checks she issued should be
NOTE: The mere issuance of the checks did not result in the eliminated from the computation of her civil liability.
perfection of the contract of loan. For the Civil Code provides
that the delivery of bills of exchange and mercantile
However, while there can be no stipulated interest, there can form28 and a copy of its "Visa Card" issued to another client in
be legal interest pursuant to Article 2209 of the Civil Code. 18 It order to show the alleged standard stipulation printed at the
is elementary that in the absence of a stipulation as to interest, back of the card.29 The standard application form presented to
the loan due will now earn interest at the legal rate of 12% per the court does not bear the signature of the petitioner. In fact,
annum. Hence, petitioner is liable for the payment of legal as admitted by private respondent Equitable, petitioner
interest per annum to be computed from December 20, 1994, Alcaraz, as a pre-screened client, did not submit or sign any
the date when she received the demand letter.
application form or document prior to the issuance of the credit
card. Neither is there any evidence on record that the petitioner
G.R. No. 152202             July 28, 2006 was shown a copy of the Terms and Conditions before or after
CRISOSTOMO ALCARAZ vs. COURT OF APPEALS and the issuance of the credit card in his name, much less that he
EQUITABLE CREDIT CARD NETWORK, INC. has given his consent thereto. As correctly pointed out by the
Court of Appeals, the petitioner should not be condemned to
FACTS: Private respondent, Equitable Credit Card Network, pay the interests and charges provided in the Terms and
Inc. (Equitable), is a company engaged in the business of Conditions on the mere claim of the private respondent without
extending credit accommodations/facilities through the use of any proof of the former's conformity and acceptance of the
the credit cards issued to its clientele. stipulations contained therein.30 Even if we are to accept the
private respondent's averment that the stipulation quoted
In May 1995, private respondent Equitable issued a credit earlier is printed at the back of each and every credit card
card, Equitable Visa Gold International Card with card number issued by private respondent Equitable, such stipulation is not
4921-0100-0743-2013 and account base number 4921-0100- sufficient to bind the petitioner to the Terms and Conditions
0743-2005 with peso and dollar accounts/facilities, to petitioner without a clear showing that the petitioner was aware of and
Crisostomo Alcaraz. The petitioner through the use of the said consented to the provisions of this document. This, the private
credit card secured cash advances and purchased goods and respondent failed to do.
services on credit with private respondent Equitable's affiliated
merchant establishments.2 Thus, the petitioner accumulated It is, however, undeniable that petitioner Alcaraz accumulated
unpaid credit with private respondent and despite the receipt of unpaid obligations both in his peso and dollar accounts through
several demand letters, failed to pay his outstanding the use of the credit card issued to him by private respondent
obligations. Equitable. As such, petitioner Alcaraz is liable for the payment
thereof. Since the provisions of the Terms and Conditions are
In its complaint before the lower court, private respondent inapplicable to petitioner Alcaraz, the legal interest on
Equitable sought the payment of the accumulated outstanding obligations consisting of loan or forbearance of money shall
balance including interest of 2.5% per month as well as a apply.
monthly late penalty/surcharge of 1.5% for the peso account,
and 1.5% monthly interest and 1% late penalty/surcharge per In the present case, the records reveal that the principal
month for the dollar account until full payment thereof as amount of the obligation on the peso account of the subject
provided in the "Terms and Conditions Governing the Issuance credit card as of March 17, 1996 is P81,000.00,34 while the
and Use of Equitable Visa Card"  dollar account of the same credit card has an unpaid balance
of $4,397.34 exclusive of any interests, penalties and other
Private respondent Equitable claims petitioner Alcaraz has an charges as of March 3, 1996.35 The extrajudicial demand for
accumulated outstanding balance of US$8,970.54 in his dollar payment for the dollar account was made on June 25, 1996 by
account as of February 18, 1999, and P192,500.00 on his peso virtue of a letter sent to and duly received by the petitioner. The
account as of February 28, 1999 inclusive of interest and June 25, 1996 demand letter was, however, silent on the
surcharges. unpaid balance on the peso account. The records likewise
reveal that it was only on October 5, 1996 that private
It is the petitioner's contention that since he never signed an respondent Equitable may be deemed to have extrajudicially
application form or any other document containing the Terms demanded payment of the outstanding obligation of petitioner
and Conditions, the same should not be applied to him as it Alcaraz on his peso account. Hence, it is only from the
violates one of the most essential and basic tenets of contract aforesaid dates that the legal rate of interest shall apply on the
law which is consent. It is petitioner Alcaraz's position that he is dollar and peso accounts, respectively, until full payment
not bound by the Terms and Conditions as he never signed it. thereof.

Private respondent Equitable, on the other hand, avers that

while petitioner Alcaraz did not file or sign an application for the
credit card, this did not exempt him from the provisions of the G.R. No. 113412 April 17, 1996
Terms and Conditions. That the waiver of the filing of an Spouses PONCIANO ALMEDA and EUFEMIA P. ALMEDA
application simply means that petitioner Alcaraz has been pre- vs.THE COURT OF APPEALS and PHILIPPINE NATIONAL
screened. Such a status is conferred on a person by virtue of BANK
his good credit standing or upon recommendation of a
reputable client or officer of private respondent Equitable. That
FACTS: On various dates in 1981, the Philippine National
by signing the credit card and subsequently using the same,
Bank granted to herein petitioners, the spouses Ponciano L.
the petitioner has agreed to the Terms and Conditions and any
amendment thereto as stated in the back of the credit card Almeda and Eufemia P. Almeda several loan/credit
itself. accommodations totaling P18.0 Million pesos payable in a
period of six years at an interest rate of 21%  per annum. To
secure the loan, the spouses Almeda executed a Real Estate
The back of the credit card itself the following is stated:
Mortgage Contract covering a 3,500 square meter parcel of
land, together with the building erected thereon (the Marvin
By signing or using this card, the holder agrees to be Plaza) located at Pasong Tamo, Makati, Metro Manila. A credit
bound by Equitable Bank's Credit Card Agreement, all
agreement embodying the terms and conditions of the loan
future amendments thereto. . . .
was executed between the parties. Pertinent portions of the
said agreement are quoted below:
ISSUE: Whether or not Petitioner is liable to pay the in the
amount demanded by Respondent?
SPECIAL CONDITIONS
RULING: NO
xxx xxx xxx
In support for the allegation for the applicability of the terms
and condition  respondent Equitable presented a copy of the
The loan shall be subject to interest at the rate of
Terms and Conditions as contained in its standard application
twenty one per cent (21%)  per annum, payable semi-
 annually in arrears, the first interest payment to agreement is itself explicitly stipulated by the Civil Code when
become due and payable six (6) months from date of it provides, in Article 1956 that "No interest shall be due unless
initial release of the loan. The loan shall likewise be it has been expressly stipulated in writing." What has been
subject to the appropriate service charge and a "stipulated in writing" from a perusal of interest rate provision of
penalty charge of three per cent (30%) per annum to the credit agreement signed between the parties is that
be imposed on any amount remaining unpaid or not petitioners were bound merely to pay 21% interest, subject to a
rendered when due.
possible escalation or de-escalation, when 1) the
circumstances warrant such escalation or de-escalation; 2)
xxx xxx xxx within the limits allowed by law; and 3) upon agreement.

III. OTHER CONDITIONS Indeed, the interest rate which appears to have been agreed
upon by the parties to the contract in this case was the 21%
rate stipulated in the interest provision. 
(c) Interest and Charges
Moreover, respondent bank's reliance on C.B. Circular No.
(1) The Bank reserves the right to 905, Series of 1982 did not authorize the bank, or any lending
increase the interest rate within the institution for that matter, to progressively increase interest
limits allowed by law at any time rates on borrowings to an extent which would have made it
depending on whatever policy it virtually impossible for debtors to comply with their own
may adopt in the future; provided,
obligations. While the Usury Law ceiling on interest rates was
that the interest rate on this/these
lifted by C.B. Circular 905, nothing in the said circular could
accommodations shall be
correspondingly decreased in the possibly be read as granting respondent bank carte
event that the applicable maximum blanche authority to raise interest rates to levels which would
interest rate is reduced by law or by either enslave its borrowers or lead to a hemorrhaging of their
the Monetary Board. In either case, assets. 
the adjustment in
the interest rate agreed upon shall In the face of the unequivocal interest rate provisions in the
take effect on the effectivity date of credit agreement and in the law requiring the parties to agree
the increase or decrease of the to changes in the interest rate in writing, we hold that the
maximum interest rate. unilateral and progressive increases imposed by respondent
PNB were null and void. Their effect was to increase the total
Between 1981 and 1984, petitioners made several partial obligation on an eighteen million peso loan to an amount way
payments on the loan totaling. P7,735,004.66. On March 31, over three times that which was originally granted to the
1984, respondent bank, over petitioners' protestations, raised borrowers. That these increases, occasioned by crafty
the interest rate to 28%, allegedly pursuant to Section III-c (1) manipulations in the interest rates is unconscionable and
of its credit agreement. Said interest rate thereupon increased neutralizes the salutary policies of extending loans to spur
from an initial 21% to a high of 68% between March of 1984 to business cannot be disputed.
September, 1986.
The decision of the Court of Appeals was REVERSED AND
Petitioner protested the increase in interest rates, to no SET ASIDE.
avail. PNB ordered the extrajudicial foreclosure of petitioner's
NOTE: Article 1308 of the Civil Code:
mortgaged properties. Prior to the scheduled date of the
auction petitioners tendered to respondent bank the amount of In order that obligations arising from contracts may have the
P40,142,518.00, consisting of the principal (P18,000,000.00) force of law between the parties, there must
and accrued interest calculated at the originally stipulated rate be  mutuality  between the parties based on their essential
of 21%. The PNB refused to accept the payment. As a result of equality. A contract containing a condition which makes its
PNB's refusal of the tender of payment, petitioners, on March fulfillment dependent exclusively upon the uncontrolled will of
8, 1990, formally consigned the amount of P40,142,518.00 one of the contracting parties, is void
with the Regional Trial Court
G.R. No. 154878             March 16, 2007
Respondent bank vigorously denied that the increases in the CAROLYN M. GARCIA, Petitioner, vs.RICA MARIE S.
interest rates were illegal, unilateral, excessive and arbitrary, it THIO, Respondent.
argues that the escalated rates of interest it imposed was
based on the agreement of the parties. Respondent bank
further contends that it had a right to foreclose the mortgaged FACTS: Sometime in February 1995, respondent Rica Marie
property pursuant to P.D. 385, after petitioners were unable to S. Thio received from petitioner Carolyn M. Garcia a crossed
pay their loan obligations to the bank based on the increased check4 dated February 24, 1995 in the amount of US$100,000
rates upon maturity in 1984 payable to the order of a certain Marilou Santiago. In June
1995, respondent received from petitioner another crossed
ISSUE: Whether or not respondent bank was authorized to check9 dated June 29, 1995 in the amount of ₱500,000, also
raise its interest rates from 21% to as high as 68% under the payable to the order of Marilou Santiago.
credit agreement?
According to petitioner, respondent failed to pay the principal
RULING: NO amounts of the loans (US$100,000 and ₱500,000) when they
fell due. Thus, petitioner filed a complaint for sum of money
The binding effect of any agreement between parties to a and damages against respondent, seeking to collect the sums
contract is premised on two settled principles: (1) that any of US$100,000, with interest thereon at 3% a month from
obligation arising from contract has the force of law between October 26, 1995 and ₱500,000, with interest thereon at 4% a
the parties; and (2) that there must be mutuality between the month from November 5, 1995.
parties based on their essential equality.6 Any contract which
appears to be heavily weighed in favor of one of the parties so The RTC ruled in favor of petitioner.19 It found that respondent
as to lead to an unconscionable result is void. Any stipulation borrowed from petitioner the amounts of US$100,000 with
regarding the validity or compliance of the contract which is left monthly interest of 3% and ₱500,000 at a monthly interest of
solely to the will of one of the parties, is likewise, invalid. 4%

It is plainly obvious, therefore, from the undisputed facts of the On appeal, the CA reversed the decision of the RTC and ruled
case that respondent bank unilaterally altered the terms of its that there was no contract of loan between the parties.
contract with petitioners by increasing the interest rates on the
loan without the prior assent of the latter. In fact, the manner of CONTENTION OF RESPONDENT
Respondent denied that she contracted the two loans with Fourth, in the petition for insolvency sworn to and filed by
petitioner and countered that it was Marilou Santiago to whom Santiago, it was respondent, not petitioner, who was listed as
petitioner lent the money. She claimed she was merely asked one of her (Santiago’s) creditors.
by petitioner to give the crossed checks to Santiago. 17 She
issued the checks for ₱76,000 and ₱20,000 not as payment of Last, respondent inexplicably never presented Santiago as a
interest but to accommodate petitioner’s request that witness to corroborate her story.39 The presumption is that
respondent use her own checks instead of Santiago’s. "evidence willfully suppressed would be adverse if produced.

CONTENTION OF PETITIONER However, respondent is not liable for the 3% and 4% monthly
interest for the US$100,000 and ₱500,000 loans respectively.
Petitioner insists that it was upon respondent’s instruction that There was no written proof of the interest payable except for
both checks were made payable to Santiago.27 She maintains the verbal agreement that the loans would earn 3% and 4%
that it was also upon respondent’s instruction that both checks interest per month. Article 1956 of the Civil Code provides that
were delivered to her (respondent) so that she could, in turn, "[n]o interest shall be due unless it has been expressly
deliver the same to Santiago.28 Furthermore, she argues that stipulated in writing."
once respondent received the checks, the latter had
possession and control of them such that she had the choice to Be that as it may, while there can be no stipulated interest,
either forward them to Santiago (who was already her debtor), there can be legal interest pursuant to Article 2209 of the Civil
to retain them or to return them to petitioner. Code. It is well-settled that:
ISSUE: Whether or not a contract of loan exists between
petitioner and respondent? When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
RULING: YES money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself
A loan is a real contract, not consensual, and as such is earn legal interest from the time it is judicially demanded. In the
perfected only upon the delivery of the object of the absence of stipulation, the rate of interest shall be 12% per
contract.25 This is evident in Art. 1934 of the Civil Code which annum to be computed from default, i.e., from judicial or
provides: extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.41

An accepted promise to deliver something by way of

commodatum or simple loan is binding upon the parties, but Hence, respondent is liable for the payment of legal
the commodatum or simple loan itself shall not be perfected interest per annum to be computed from November 21, 1995,
until the delivery of the object of the contract.  the date when she received petitioner’s demand letter. 42 From
the finality of the decision until it is fully paid, the amount due
shall earn interest at 12% per annum, the interim period being
Upon delivery of the object of the contract of loan (in this case deemed equivalent to a forbearance of credit.
the money received by the debtor when the checks were
encashed) the debtor acquires ownership of such money or FIRST FIL-SIN LENDING CORPORATION, petitioner, vs.
loan proceeds and is bound to pay the creditor an equal LORIA D. PADILLO, respondent.
amount.

Delivery is the act by which the res or substance thereof is FACTS: On uly 22, 1997, respondent loria D. Padillo obtained
placed within the actual or constructive possession or control a P500,000.00 loan from petitioner First FilSin Lending Corp.
of another.  Although respondent did not physically receive the On September 7, 1997, respondent obtained another
P500,000.00 loan from petitioner. In both instances,
proceeds of the checks, these instruments were placed in her
respondent eecuted a promissory note and disclosure
control and possession under an arrangement whereby she
statement.
actually re-lent the amounts to Santiago.

Several factors support this conclusion. For the first loan, respondent made 13 monthly interest
payments of P22,500.00 each before she settled the
First, respondent admitted that petitioner did not personally P500,000.00 outstanding principal obligation on February 2,
know Santiago.31 It was highly improbable that petitioner would 1999. As regards the second loan, respondent made 11
grant two loans to a complete stranger without requiring as monthly interest payments of P25,000.00 each before paying
much as promissory notes or any written acknowledgment of the principal loan of P500,000.00 on February 2, 1999.3 In
the debt considering that the amounts involved were quite big. sum, respondent paid a total of P792,500.00 for the first loan
Respondent, on the other hand, already had transactions with and P775,000.00 for the second loan.
Santiago at that time.
On anuary 27, 2000, respondent filed an action for sum of
Second, Leticia Ruiz, a friend of both petitioner and respondent money against herein petitioner before the Regional Trial Court
(and whose name appeared in both parties’ list of witnesses) of Manila. Alleging that she only agreed to pay interest at the
testified that respondent’s plan was for petitioner to lend her rates of 4.5 and 5 per annum, respectively, for the two loans,
money at a monthly interest rate of 3%, after which respondent and not 4.5 and 5 per month, respondent sought to recover the
would lend the same amount to Santiago at a higher rate of 5% amounts she allegedly paid in ecess of her actual obligations.
and realize a profit of 2%.
On October 12, 2001,4 the trial court dismissed respondents
Third, for the US$100,000 loan, respondent admitted issuing complaint. On appeal, the Court of Appeals CA reversed and
her own checks in the amount of ₱76,000 each (peso set aside the decision of the court a quo ordering First FilSin
equivalent of US$3,000) for eight months to cover the monthly Lending Corporation to return the amount of P114,000.00 to
interest. For the ₱500,000 loan, she also issued her own loria D. Padillo
checks in the amount of ₱20,000 each for four
months.34 According to respondent, she merely accommodated CONTENTION OF PETITIONER
petitioner’s request for her to issue her own checks to cover
the interest payments since petitioner was not personally Petitioner maintains that the trial court and the CA are correct
acquainted with Santiago.35 She claimed, however, that in ruling that the interest rates are to be imposed on a monthly
Santiago would replace the checks with cash.36Her explanation and not on a per annum basis.
is simply incredible. It is difficult to believe that respondent
would put herself in a position where she would be compelled CONTENTION OF RESPONDENT
to pay interest, from her own funds, for loans she allegedly did
not contract. We declared in one case that:
The interest on the loans is per annum as expressly stated in On January 17, 1994, respondents wrote petitioners
the promissory notes and disclosure statements. The provision demanding payment of P325,000.00, plus interest, otherwise
as to annual interest rate is clear and reuires no room for they would foreclose the mortgage.4 In turn, petitioners
interpretation. Respondent asserts that any ambiguity in the responded, claiming that they have overpaid their obligation
promissory notes and disclosure statements should not favor and demanding the return of their land title and refund of their
petitioner since the loan documents were prepared by the excess payment.5 This prompted respondents to file a
latter.\ petition6 for extrajudicial foreclosure of mortgage

ISSUE: Whether or not the interest to be applied is per month Petitioners filed with the Regional Trial Court (RTC), Branch
or per annum? 17, Malolos, Bulacan, a complaint for the return of their TCT ,
sum of money and damages, with application for a temporary
RULING: Per annum. restraining order and preliminary injunction. After hearing
petitioners’ application for a preliminary injunction, the RTC
issued an order,9 enjoining the sheriff from proceeding with the
Perusal of the promissory notes and the disclosure statements foreclosure of mortgag
pertinent to the uly 22, 1997 and September 7, 1997 loan
obligations of respondent clearly and unambiguously provide
for interest rates of 4.5 per annum and 5 per annum, Thereafter, trial on the merits ensued. RTC rendered judgment
respectively. Nowhere was it stated that the interest rates shall in favor of the petitioners to return to the plaintiffs the amount
be applied on a monthly basis. of P215,750.00 and to return to the plaintiffs the owner’s copy
of TCT.
Thus, when the terms of the agreement are clear and eplicit
that they do not ustify an attempt to read into it any alleged The trial court held that the stipulated 5% monthly interest to
intention of the parties, the terms are to be understood literally be paid by petitioners corresponds only to the period from May
ust as they appear on the face of the contract.8 It is only in 14, 1991 up to August 14, 1991, the term of the loan.
instances when the language of a contract is ambiguous or Thereafter, the monthly interest should be 12% per annum.
obscure that courts ought to apply certain established rules of The trial court concluded that petitioners made an
construction in order to ascertain the supposed intent of the overpayment of P214,750.00.
parties. owever, these rules will not be used to make a new
contract for the parties or to rewrite the old one, even if the Upon appeal, CA reversed.
contract is ineuitable or harsh. They are applied by the court
merely to resolve doubts and ambiguities within the framework ISSUES: Whether or not the 5% monthly interest on the loan
of the agreement. was only for three (3) months, or from May 14, 1991 up to
August 14, 1991, as maintained by petitioners, or until the loan
The lower court and the CA mistook the Loan Transactions was fully paid, as claimed by respondents.
Summary for the Disclosure Statement. The former was
prepared eclusively by petitioner and merely summaries the When the terms of a contract are clear and leave no doubt as
payments made by respondent and the income earned by to the intention of the contracting parties, the literal meaning of
petitioner. There was no mention of any interest rates and its stipulations governs.15 In such cases, courts have no
having been prepared eclusively by petitioner, the same is self authority to alter a contract by construction or to make a new
serving. On the contrary, the Disclosure Statements were contract for the parties; its duty is confined to the interpretation
signed by both parties and categorically stated that interest of the one which they have made for themselves without
rates were to be imposed annually, not monthly. regard to its wisdom or folly as the court cannot supply material
stipulations or read into the contract words which it does not
As such, since the terms and conditions contained in the contain. It is only when the contract is vague and ambiguous
promissory notes and disclosure statements are clear and that courts are permitted to resort to construction of its terms
unambiguous, the same must be given full force and effect. and determine the intention of the parties therein.
The expressed intention of the parties as laid down on the loan
documents controls. It is clear from the stipulations of the mortgage contract that the
loan shall be payable within three (3) months, or from May 14,
SPOUSES FELIMON and MARIA BARRERA, petitioners, 1991 up to August 14, 1991. During such period, the loan shall
vs. SPOUSES EMILIANO and MARIA CONCEPCION earn an interest of 5% per month. Furthermore, the contract
LORENZO, respondents. shall have no force and effect once the loan shall have been
fully paid within the three-month period, otherwise, the
FACTS: On December 4, 1990, spouses Felimon and Maria mortgage shall be foreclosed extrajudicially under Act No.
Barrera, petitioners, borrowed P230,000.00 from spouses 3135.
Miguel and Mary Lazaro. The loan was secured by a real
estate mortgage1 over petitioners’ residential lot consisting of Records show that upon maturity of the loan on August 14,
432 square meters located at Bunlo, Bocaue, Bulacan and 1991, petitioners failed to pay their entire obligation. Instead of
registered in their names. exercising their right to have the mortgage foreclosed,
respondents allowed petitioners to pay the loan on a monthly
A month and a half later, the Lazaro spouses needed money installment basis until December, 1993. It bears emphasis that
and informed petitioners that they would transfer the loan to there is no written agreement between the parties that the loan
spouses Emiliano and Maria Concepcion Lorenzo, will continue to bear 5% monthly interest beyond the agreed
respondents. Consequently, on May 14, 1991, petitioners three-month period.
executed another real estate mortgage3 over their lot, this time
in favor of the respondents to secure the loan of P325,000.00, Article 1956 of the Civil Code mandates that “(n)o interest shall
which the latter claimed as the amount they paid spouses be due unless it has been expressly stipulated in writing.”
Lazaro. The mortgage contract provides, among others, that Applying this provision, the trial court correctly held that the
the new loan shall be payable within three (3) months, or until monthly interest of 5% corresponds only to the three-month
August 14, 1991; that it shall earn interest at 5% per month; period of the loan, or from May 14, 1991 to August 14, 1991,
and that should petitioners fail to pay their loan within the said as agreed upon by the parties in writing. Thereafter, the
period, the mortgage shall be foreclosed. interest rate for the loan is 12% per annum.

When petitioners failed to pay their loan in full on August 14, The decision of RTC reinstated.
1991, respondents allowed them to complete their payment
until December 23, 1993. On this date, they made a total Eastern Shipping vs CA
payment of P687,000.00. GR No. 97412, 12 July 1994
234 SCRA 78
 FACTS
            Two fiber drums were shipped owned by Eastern
Shipping from Japan. The shipment as insured with a marine
policy. Upon arrival in Manila unto the custody of metro Port
Service, which excepted to one drum, said to be in bad order
and which damage was unknown the Mercantile Insurance
Company. Allied Brokerage Corporation received the shipment
from Metro, one drum opened and without seal. Allied
delivered the shipment to the consignee’s warehouse. The
latter excepted to one drum which contained spillages while
the rest of the contents was adulterated/fake. As consequence
of the loss, the insurance company paid the consignee, so that
it became subrogated to all the rights of action of consignee
against the defendants Eastern Shipping, Metro Port and Allied
Brokerage. The insurance company filed before the trial court.
The trial court ruled in favor of plaintiff an ordered defendants
to pay the former with present legal interest of 12% per annum
from the date of the filing of the complaint. On appeal by
defendants, the appellate court denied the same and affirmed
in toto the decision of the trial court.

ISSUE
(1)   Whether the applicable rate of legal interest is 12% or 6%.

(2)   Whether the payment of legal interest on the award for loss or

damage is to be computed from the time the complaint is filed
from the date the decision appealed from is rendered.

HELD
(1)           The Court held that the legal interest is 6%
computed from the decision of the court a quo. When an
obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damaes awarded may
be imposed at the discretion of the court at the rate of 6% per
annum. No interest shall be adjudged on unliquidated claims or
damages except when or until the demand can be established
with reasonable certainty.

When the judgment of the court awarding a sum

of money becomes final and executor, the rate of legal interest
shall be 12% per annum from such finality until satisfaction,
this interim period being deemed to be by then an equivalent to
a forbearance of money.

The interest due shall be 12% PA to be

computed fro default, J or EJD.

(2)           From the date the judgment is made. Where

the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made
judicially or EJ but when such certainty cannot be so
reasonably established at the time the demand is made, the
interest shll begin to run only from the date of judgment of the
court is made.

(3)   The Court held that it should be computed from the decision

rendered by the court a quo