FIRST DIVISION
[G.R. No. 197993. August 8, 2018.]
MANUELITO P. JUGUETA, petitioner, vs. F.F. CRUZ & CO., INC., respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, First Division, issued a Resolution datedAugust 8, 2018which reads as follows:
"G.R. No. 197993 (Manuelito P. Jugueta v. F.F. Cruz & Co., Inc.). — This is a petition for review on certiorari1 under Rule 45 of the Rules of Court filed by petitioner Manuelito P. Jugueta (Jugueta), seeking to nullify the Court of Appeals' (CA) April 19, 2011 Decision 2 and August 4, 2011 Resolution 3 (collectively, assailed Decision) in CA-G.R. SP No. 111842. The CA, in its assailed Decision, affirmed with modification the August 20, 2009 Joint Decision 4 of Branch 258 of the Regional Trial Court (RTC) of Parañaque City. The RTC, in turn, affirmed with modification the March 17, 2009 Decision 5 of Branch 78 of the Metropolitan Trial Court (MTC) of Parañaque City in a collection of a sum of money case, filed by Jugueta against F.F. Cruz & Co., Inc. (FFCCI), docketed as Civil Case No. 2007-4. 6
On January 13, 2003 and March 23, 2006, Jugueta and FFCCI entered into Equipment Rental Agreement Contracts (ERAC) Nos. 03-571 7 and 06-1556. 8 Under the contracts, Jugueta leased to FFCCI an air compressor, two units chipping hammer, two air hoses, and two moil points. Both contracts contained the following stipulation:
3. LESSEE agrees to pay within seven (7) days after presentation of Statement of Account or Invoice and failure to do so will make him liable for Two (2%) percent interest per month or fraction thereof. In case of litigation due to non-compliance with any of the terms and condition hereof, both parties agree to present themselves to the proper court of Parañaque City and the LESSEE/LESSOR shall pay the litigation cost and attorney's fees at the discretion of the court. 9 (Underscoring supplied.)
On September 21, 2006, FFCCI received a demand letter 10 dated September 16, 2006 from Jugueta referring to two outstanding balances of FFCCI in the amount of P118,005.00 and P4,646.86. FFCCI ignored the letter, prompting Jugueta's counsel to send a formal demand letter 11 dated October 27, 2006. This, however, was likewise not heeded.
Consequently, Jugueta filed the complaint 12 for sum of money against FFCCI on January 18, 2007 before the MTC. He sought payment for the following: (1) outstanding obligation in the sum of P122,651.86; (2) interest until full payment is made; (3) moral and exemplary damages; (4) acceptance fee in the amount of P20,000.00 plus P2,000.00 per court appearance and 10% percent of the amount involved as attorney's fees; and (5) costs of litigation.
In its answer, 13 FFCCI averred that Jugueta failed to credit its payment made on March 15, 2003 in the amount of P125,116.72 which was sufficient to discharge its obligation to the latter. Also, it claimed that Jugueta overbilled FFCCI for stand-by hours and interest in the amount of P106,393.02.
After trial, the MTC rendered its Decision 14 dated March 17, 2009 finding FFCCI liable for the principal amount of obligation of P13,378.22, subject to the 2% per month stipulated interest. It further held that the stipulated interest is to be reckoned from the date of demand, on September 21, 2006, and awarded attorney's fees in the amount of P10,000.00. Thus:
WHEREFORE, premises considered, the defendant corporation is hereby adjudged LIABLE TO PAY the plaintiff:
(a) the amount of THIRTEEN THOUSAND THREE HUNDRED SEVENTY-EIGHT PESOS AND TWENTY-TWO CENTAVOS (Php13,378.22) as part of the principal obligation, plus TWO PERCENT (2%) INTEREST RATE PER MONTH OR FRACTION THEREOF from September 21, 2006 until full payment; and
(b) the amount of TEN THOUSAND PESOS (Php10,000.00) as attorney's fees.
No pronouncement as to costs.
SO ORDERED. 15 (Emphasis in the original.)
Both parties appealed to the RTC. In its Joint Decision 16 dated August 20, 2009, the RTC affirmed the MTC Decision with modifications. It disagreed with the MTC that a demand must first be established before the stipulated interest runs. Thus, it reckoned the running of the stipulated interest of 2% per month from the time FFCCI failed to pay the amounts at the time they were due. It also imposed legal interest on both the principal amount and stipulated interest. It held:
WHEREFORE, premises considered, the Court found the Decision of the court a quo in accordance with law and evidence presented, the same is hereby AFFIRMED but with the MODIFICATION that the 2% interest on the unpaid balance shall be computed from the date of delay in the payment which was on June 18, 2003 for ERAC No. 03-571 in the amount of P10,905.42 and May 11, 2006 for the amount of P2,472.80 under ERAC No. 06-1556 until fully paid. So also, the amount due shall likewise earn interest at the rate of 12% per annum counted from date of demand which was on September 21, 2006 until fully paid.
SO ORDERED. 17 (Emphasis in the original.)
Both parties moved for reconsideration, but these motions were denied for lack of merit. 18 Thereafter, only FFCCI appealed the RTC Decision to the CA.
The CA denied FFCCI's petition for review and affirmed with modification the RTC's Joint Decision. In resolving the issues of whether interest on interest should be awarded and when it accrues or begins to run, the CA held that the RTC's imposition of additional legal interest is not accurate. 19 It ruled that the legal interest on interest is only due from finality of judgment until satisfaction. It also upheld the award of attorney's fees on the basis of the stipulation and considered the same to be in the nature of a penalty clause. 20
In this petition, Jugueta questions the amount of outstanding principal obligation of FFCCI. Jugueta argues that he has shown "in his Exhibits, namely 'I,' 'I-1['] to [']I -2,' and [']J' to 'J-1,' that the additional interest [that FFCCI] is liable for, has not been paid." 21 Jugueta also argues that the CA did not apply the law when it deleted the award of legal interest on interest. 22
In opposition, FFCCI asserts that the petition raises factual issues on the amount of principal unpaid obligation. This is not allowed under a Rule 45 petition. 23 It raises that Jugueta did not appeal from the RTC Joint Decision which consequently makes the factual finding of the MTC and RTC conclusive upon him. 24 FFCCI further opposes the imposition of interest on the stipulated interest since it did not agree to capitalize interest. 25 Lastly, FFCCI asserts that attorney's fees are unwarranted because the decisions of the lower courts did not explicitly state the legal reason for the award of attorney's fees. 26
The issues presented here are: (1) whether the CA erred in affirming the amount of the principal obligation because it did not apply payments first to the interest; (2) whether the CA erred in deleting legal interest on the interests due from the time of demand; and (3) whether attorney's fees are proper.
We grant the petition in part.
At the outset, Jugueta did not appeal from the Joint Decision of the RTC. As a consequence, Jugueta can no longer seek its modification or reversal, but may only question the assailed Decision on grounds consistent with the judgment of the RTC. 27
Among the issues resolved with finality as to Jugueta is the issue on the amount of unpaid principal obligation. Jugueta may no longer question the principal amount for his failure to appeal the RTC Decision. More, the determination of the unpaid principal obligation involves the application of partial payments to the outstanding balance which raises a question of fact. 28 As we have often repeated, only questions of law may be entertained in a petition for review under Rule 45 of the Rules of Court. 29 Thus, we affirm the amount of unpaid principal obligation as determined by the MTC, and as affirmed by the RTC and CA.
Nevertheless, we modify the interests imposed by the appellate and lower courts.
In Eastern Shipping Lines, Inc. v. Court of Appeals, 30 we laid down the following rules on the imposition of interests:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. 31 (Citations omitted, italics in the original.)
We modified the rules in Nacar v. Gallery Frames, 32 where we applied Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796 dated May 16, 2013. Effective July 1, 2013, the applicable legal interest rate of 12% was reduced to 6% per annum. 33
As this case involves a forbearance of money arising from the non-payment of equipment rentals, it calls for the application of the first and third paragraphs laid down in Eastern Shipping Lines, Inc. as modified by Nacar.
Under the first paragraph, the principal amount shall earn the stipulated interest. If there is none, the principal amount shall earn legal interest from the time of default, i.e., extrajudicial or judicial demand. Demand is only material when there is no stipulated interest, and on the occasion when legal interest is properly imposable. Here, the contracts determine the maturity date of the payment as seven days after presentation of statement of account or invoice. The contracts explicitly state that FFCCI is liable for damages in the form of stipulated interest from failure to pay on the maturity date. 34 Thus, the stipulated interest of 2% per month began to run from the date agreed upon by the parties.
At this juncture, we uphold the stipulated rate of interest of 2% per month or 24% per annum as reasonable. We note that in recent jurisprudence, specifically in the 2014 case of MCMP Construction Corp. v. Monark Equipment Corp. 35(MCMP case), we declared the interest rate of 24% per annum as iniquitous and unconscionable. 36 In that case, we observed that collectively, the "24% per annum interest on the rental fees as well as a collection fee of 1% per month compounded monthly and a 2% per month penalty charge" foisted upon the debtor is 60% per annum. 37 For this reason, we did not apply the stipulated interest for being void, and imposed, in lieu thereof, the legal interest.
In this case, however, we do not find the need to declare the stipulated interest rate of 24% per annum as void for being iniquitous and unconscionable. Unlike in MCMP case, no penalty charge or collection fee was imposed on FFCCI that will thrust the rate of interest to an unconscionable rate. This is consistent with our previous rulings which sustained the interest rate of 24% per annum as reasonable. 38
The first paragraph 39 allows the further imposition of legal interest on the stipulated interest. This legal interest on the stipulated interest is separate and distinct from the legal interest imposable under the third paragraph. Its basis is Article 2212 of the Civil Code which provides that "[i]nterest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point." On the other hand, the legal interest imposable on the third paragraph finds its basis in Article 2209 of the Civil Code. Under the third paragraph, Eastern Shipping Lines, Inc. explicitly treats all the amounts awarded, both under the first or second paragraph, as equivalent to a forbearance of credit (during the interim period from finality of judgment until satisfaction) that shall earn legal interest.
In this regard, we recall that the RTC imposed legal interest on both the unpaid principal amount and stipulated interest when it decreed that legal interest shall run from the time of demand on the amounts due. On the other hand, the CA modified this and ruled that legal interest is due only on the principal amount to run only from finality of the judgment. Applying the rules laid in Eastern Shipping Lines, Inc. and Nacar, however, we find that while the CA erred in deleting the legal interest on the stipulated interest from judicial demand until finality of judgment, the RTC also erred in determining when the legal interest accrues. The legal interest on the stipulated interest is to run from judicial, and not extrajudicial, demand, i.e., from the time of the filing of complaint on January 18, 2007. 40
Applying the third paragraph, all amounts due (comprising of the unpaid principal obligation, interests, and attorney's fees) shall earn legal interest of 6% per annum from the time of finality of the decision until its satisfaction.
We also affirm the imposition of attorney's fees. The attorney's fees here are in the nature of liquidated damages, as opposed to the attorney's fees recoverable as between attorney and client enunciated and regulated by the Rules of Court. It is in the nature of a penalty clause or "an accessory undertaking to assume greater liability on the part of the obligor in case of breach of an obligation." Its purpose is to strengthen the coercive force of obligation and to provide, in effect, for what could be the liquidated damages resulting from such a breach. As the obligor, FFCCI is bound to pay this stipulated indemnity without the necessity of proof on the existence and on the measure of damages caused by the breach. 41
WHEREFORE, the petition is PARTLY GRANTED. The Regional Trial Court's Joint Decision dated August 20, 2009 is REINSTATED and MODIFIED as follows: The unpaid principal obligation of P10,905.42 for ERAC No. 03-571 and P2,472.80 for ERAC No. 06-1556 shall earn the stipulated interest of 2% per month or 24% per annum from June 18, 2003 and May 11, 2006, respectively, until finality of judgment. Further, the interest due shall earn the legal interest of 12% per annum from the time of the filing of complaint on January 18, 2007 until June 30, 2013, and shall earn the legal interest of 6% per annum from July 1, 2013 until finality of judgment. Thereafter, all amounts due shall earn legal interest at the rate of 6% per annum from the finality of this Decision until satisfaction.
SO ORDERED."Leonardo-de Castro, J., designated as Acting Chairperson of the First Division per Special Order No. 2559 dated May 11, 2018; Gesmundo, J., designated as Acting Member of the First Division per Special Order No. 2560 dated May 11, 2018.
Very truly yours,
(SGD.) LIBRADA C. BUENAActing Division Clerk of Court
Footnotes
1.Rollo, pp. 19-34.
2.Id. at 38-52; penned by Associate Justice Antonio L. Villamor, and concurred in by Associate Justices Jose C. Reyes, Jr. and Ramon A. Cruz.
3.Id. at 62-64.
4.Id. at 170-175; rendered by Judge Raul E. De Leon.
5.Id. at 136-151; rendered by Judge Ramsey Domingo G. Pichay.
6.Id. at 51. The dispositive portion of the CA Decision reads:
WHEREFORE, in view of the foregoing, the Petition for Review is DENIED. The Decision, dated August 20, 2009, and Order, dated November 23, 2009 issued by the Regional Trial Court of the City of Parañaque in Civil Case No. 09-0159 are AFFIRMED with MODIFICATION in that the legal interest of 12% per annum shall be reckoned from the date of finality of judgment until its satisfaction.
SO ORDERED.
7.Id. at 75-76.
8.Id. at 100-101.
9.Id. at 76 & 101.
10.Id. at 107.
11.Id. at 108.
12.Id. at 109-112.
13.Id. at 113-116.
14.Supra note 5.
15.Rollo, p. 151.
16.Supra note 4.
17.Rollo, p. 175.
18.Id. at 181-182; RTC Order dated November 23, 2009.
19.Id. at 44 & 47-48.
20.Id. at 49-50.
21.Id. at 28.
22.Id. at 29.
23.Id. at 254-255.
24.Id. at 288.
25.Id. at 257-258.
26.Id. at 294.
27.Communities Cagayan, Inc. v. Nanol, G.R. No. 176791, November 14, 2012, 685 SCRA 453, 463 citing Raquel-Santos v. Court of Appeals, G.R. Nos. 174986, 175071 & 181415, July 7, 2009, 592 SCRA 169, 190-191.
28. See RGM Industries, Inc. v. United Pacific Capital Corporation, G.R. No. 194781, June 27, 2012, 675 SCRA 400, 404.
29.Id. at 404-405.
30. G.R. No. 97412, July 12, 1994, 234 SCRA 78.
31.Id. at 95-97.
32. G.R. No. 189871, August 13, 2013, 703 SCRA 439.
33.Id. at 454-458.
34. See rollo, pp. 76 & 101.
35. G.R. No. 201001, November 10, 2014, 739 SCRA 432.
36. Id. at 440 & 443.
37. Id. at 440.
38. See Mallari v. Prudential Bank (now Bank of the Philippine Islands), G.R. No. 197861, June 5, 2013, 697 SCRA 555, 564-565 citing Villanueva v. Court of Appeals, G.R. No. 163433, August 22, 2011, 655 SCRA 707.
39. Eastern Shipping Lines, Inc. v. Court of Appeals, supra note 30 at 95.
40. See Gilat Satellite Networks, Ltd. v. United Coconut Planters Bank General Insurance Co., Inc., G.R. No. 189563, December 7, 2016.
41. See Suatengco v. Reyes, G.R. No. 162729, December 17, 2008, 574 SCRA 187, 193-194.