Lim, Jr. v. Oville

FIRST DIVISION

[G.R. No. 254835. April 26, 2021.]

ROGELIO LIM, JR. and JENNIFER LIM, petitioners, vs. GERALDINE S. OVILLE, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, First Division, issued a Resolution dated April 26, 2021which reads as follows:

"G.R. No. 254835 — ROGELIO LIM, JR. and JENNIFER LIM,petitioners,versus GERALDINE S. OVILLE,respondent.

This is a Petition for Review on Certiorari1 (Petition) under Rule 45 of the Rules of Court (Rules) which seeks a reversal of the Decision 2 dated June 27, 2019 (assailed Decision) of the Court of Appeals, Twenty-First Division (CA), in CA-G.R. CV No. 04993-MIN, and prays for the following reliefs:

WHEREFORE, premises considered, it is most respectfully prayed of unto this Honorable Supreme Court that the decision of the Court of Appeals dated June 27, 2019 be ordered modified as follows:

1. Declaring that the amount of obligation (New Principal Subject) of the Petitioners is only THREE MILLION THREE HUNDRED FORTY THOUSAND PESOS ([P]3,340,000.00) at the time of the institution of this case on September 11, 2010;

2. Declaring that the Petitioners are not liable to pay interest from March 2010 up to the present;

3. Declaring that in case an interest is imposed in this case, that it should only be six percent (6%) per ANNUM reckoned with from September 11, 2011, to present;

4. And such other favorable reliefs applicable to the instant case are likewise prayed for.

Respectfully submitted. 3

Facts

The facts that gave rise to the instant controversy are straightforward.

On January 26, 2010, petitioner Rogelio Lim, Jr. (Rogelio), on behalf of both him and his wife Jennifer Lim (Jennifer) (collectively, Spouses Lim), approached respondent Geraldine S. Oville (Oville) to borrow P5,000,000.00 with the agreed interest of 5% per month for a period of two months. 4 As a form of security, Oville required Rogelio and Jennifer to issue a check. On March 26, 2010, Jennifer issued a check in compliance with Oville's requirement. Rogelio thereafter signed a voucher upon receipt of the cash loaned. 5 When Oville was about to deposit the check, Rogelio asked for an extension of one month, to which the former agreed upon payment of interest. Thereafter, Rogelio recalled the first check dated March 26, 2010 and issued another check dated April 24, 2010. However, a day before the check was due to be deposited, Rogelio asked for another extension, and issued a third check dated August 18, 2010. 6

On January 28, 2011, Oville deposited the checks but they were dishonored, stamped "Payment Stopped" and noted as "SPO-Unfunded." 7 Oville sent demand letters to Spouses Lim but the same went unheeded, hence the filing of the complaint for collection of sum of money and damages on September 11, 2011. 8

Spouses Lim countered that the total amount that was loaned to them was only P4,500,000.00, with the 10% of the P5,000,000.00 deducted from the loaned amount in advance to cover the payment of the interest agreed upon. Spouses Lim argued that since the 5% monthly interest imposed on the total loan amount is unconscionable and exorbitant, the same was void ab initio for being violative of Article 1306 of the Civil Code. 9

RTC Decision

In its Decision 10 dated August 22, 2017 in Civil Case No. 8089, the Regional Trial Court of General Santos City, Branch 35 (RTC) ruled in favor of Oville, and found, thus:

WHEREFORE, premises considered, defendants Spouses Rogelio Lim, Jr. and Jennifer Lim are directed to settle their total obligations to Plaintiff Geraldine Oville in the amount of FIVE MILLION ([P]5,000,000.00) PESOS and interest at 5% per month from the time of its failure to pay up to the time this case is decided. Attorney's fees in the amount of ONE HUNDRED THOUSAND ([P]100,000.00) PESOS, exclusive of appearance fee of THREE THOUSAND ([P]3,000.00) PESOS and cost of litigation in the amount of TWO HUNDRED THOUSAND ([P]200,000.00) PESOS [shall] be deducted from the counter-bond posted by the defendants and satisfy up to the last centavo the total adjudged obligations.

SO ORDERED. 11

In finding for Oville, the RTC ruled that Spouses Lim may no longer question the 5% monthly interest since there was no showing that they were threatened or induced into agreeing with the said interest rate. It also found that at any rate, Spouses Lim's act of settling the interest on the first payment already qualified as estoppel on their part, in accordance with Section 2, 12 Rule 131 of the Rules. 13 The RTC likewise put a premium on the mutuality of contracts as provided for under Article 1308 14 of the Civil Code, and held that since Jennifer testified on the factual circumstances of the loan and admitted during trial that she and her husband did contract a loan with Oville and correspondingly issued checks for the payment of the interest therefrom, the same only strengthened the mutuality between the parties. 15 It ruled that since it was proven that Oville parted with her money on Spouses Lim's bidding, the latter must therefore return the loaned amount with the agreed interest. 16 Finally, the RTC found that Oville was entitled to the award of attorney's fees since there was no doubt that she was forced to litigate to protect her interest and recover her money. 17

CA Decision

On appeal, the CA in its assailed Decision affirmed the RTC with modification, to wit:

WHEREFORE, in view of all the foregoing, the assailed August 22, 2017 Decision of the Regional Trial Court, 11th Judicial Region, Branch 35, General Santos City in Civil Case No. 8089 is AFFIRMED with MODIFICATION. Appellants are DIRECTED to jointly and severally pay the appellee the amount of [P]3,685,026.30 as the new principal subject to a conventional interest of 1% per month from July 26, 2010 up to September 2, 2011; a conventional interest of 1% and an interest on the conventional interest of 1% per month from September 2, 2011 up to June 30, 2013; and a conventional interest of .05% per month and an interest on the conventional interest of .05% per month beginning July 1, 2013 henceforth. The awards of attorney's fees, appearance fee and litigation expenses are also affirmed.

A legal interest of 6% [per annum] shall likewise be imposed on the total judgment award from the finality of this Decision until its full satisfaction.

SO ORDERED.18

The CA denied Spouses Lim's appeal on the following findings: (i) an interest may be imposed on the loan even though the same was not reduced into writing since in this case, there was a clear intention to impose an interest thereon; 19 (ii) the interest of 5% per month was unconscionable and void, but the contract of loan on which it was imposed remains valid; 20 (iii) the voidness of the unconscionable interest resulted in the contract of loan being subject to the conventional interest of loan or forbearance of money as provided by law at the time the contract was entered into. 21

With respect to the imposition of interest on the loan, the CA, citing Abella v. Abella, 22 found that although the basic rule is that no interest shall be due unless it has been expressly stipulated in writing as provided in Article 1956 23 of the Civil Code, a document of the loan may nevertheless attest that the contracting parties intended to subject the loan to an interest, and the same will be given credence. 24 It ruled that in the instant case, the undisputed cash disbursement voucher dated January 26, 2010 evidenced that the parties agreed that the loan is subject to a monthly interest equivalent to 5% of the principal amount. 25 It also observed that Spouses Lim paid the 5% monthly interest on the principal amount of P5,000,000.00 five times in a span of six months from their first transaction on January 26, 2010 up to their last transaction on July 20, 2010, or equivalent to P250,000.00 each time. 26 It held that clearly, an interest was intended to be imposed on the loan.

However, the CA reversed the RTC's finding that the 5% monthly interest was valid, and held instead that the same was unconscionable and iniquitous. It mentioned that in a string of cases, the Court has held that the 5% monthly interest rate is unconscionable, immoral and unjust notwithstanding the parties' willingness to impose and assume the same. 27

Nevertheless, the CA, citing Mallari v. Prudential Bank (now Bank of the Philippine Islands), 28 held that despite the voidness of the stipulation on the interest rate, the contract is valid. It added that Spouses Lim, as borrowers, may not be allowed to renege on their obligation with what is incumbent upon them under the contract of loan with Oville with respect to the payment of the principal sum since the contract remains the law between them. 29

As a result, since the stipulation on the interest rate is void, the CA found that it is as if there was no express stipulation thereon. As a consequence of the effective absence of stipulation, what applies is the conventional interest at the rate of 12% per annum which is the rate of interest at the time the parties executed their agreement on January 26, 2010. The CA additionally held that the outstanding conventional interest shall itself earn legal interest from the time of the judicial demand of Oville, or on September 2, 2011, when she filed her complaint with the RTC. Such shall be the rate prescribed for the loan or forbearance of any money, goods or credits and the rate allowed in judgments provided under the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB) Circular No. 799, Series of 2013 (Circular No. 799, s. 2013), which shall be 12% per annum legal interest until June 30, 2013 and 6% per annum beginning July 1, 2013. 30

Finally, with respect to the amount that is still due Oville, the CA found that Spouses Lim have paid a total of P1,750,000.00 in monthly interests from their first payment on January 26, 2010 to their last payment on July 20, 2010, as evidenced by the following:

 

Voucher dated January 26, 2010	P500,000.00
Check dated March 26, 2010	P250,000.00
Check dated April 24, 2010	P250,000.00
Check dated May 23, 2010	P250,000.00
Check dated June 21, 2010	P250,000.00
Check dated July 20, 2010	P250,000.00
	––––––––––––––
	P1,750,000.00 31

 

The CA further noted that the parties intended to subject the contract of loan to an interest that incurs on a monthly basis, so applying the same on the applicable interest rate, the CA determined the outstanding amount payable by Spouses Lim to Oville, thus: 32

 

Period	Amount Due(principal + 1% per month interest)	Spouses Lim Payment	Amount Due
January 26, 2010-February 26, 2010	P5,050,000.00 (P5,000,000.00 + P50,000.00)	P250,000.00	P4,800,000.00
February 27, 2010-March 26, 2010	P4,848,000.00 (P4,800,000.00 + P48,000.00)	P250,000.00	P4,598,000.00
March 27, 2010-April 26, 2010	P4,643,980.00 (P4,598,000.00 + P45,980.00)	P500,000.00	P4,143,980.00
April 27, 2010-May 26, 2010	P4,185,419.80 (P4,143,980.00 + P41,439.80)	P250,000.00	P3,935,419.80
May 27, 2010-June 26, 2010	P3,935.80 33 (P3,935,419.80 + P39,354.20)	P250,000.00	P3,896,065.60
June 27, 2010-July 26, 2010	P3,935,026.30 (P3,986,065.60 + P38,960.66)	P250,000.00	P3,685,026.30

 

In all, the CA finds that Spouses Lim owe Oville the outstanding new principal amount of P3,685,026.30, 34 subject to the conventional interest of 1% per month from July 26, 2010 up to September 2, 2011, with conventional interest imposed accordingly:

 

Period	Interest Rate	Interest on the Interest
July 26, 2010-September 2, 2011	1% per month	none
September 2, 2011-June 30, 2013	1% per month	1% per month
July 1, 2013 onwards	0.5% per month	0.5% per month

 

The CA likewise imposed the legal interest of 6% per annum on the total judgment award from the finality of its Decision until full payment thereof. 35 Spouses Lim sought a partial reconsideration thereof, but the same was denied through the CA's Resolution 36 dated September 11, 2020.

Hence, this Petition, where Spouses Lim assail the CA Decision on two main averments: (i) the CA erred in the imposition of interest payments on the third month onwards despite the lack of a written agreement to this effect; 37 and (ii) the CA erred in its determination of the new principal amount as P3,685,026.30 instead of P3,340,000.00.

Issue

The threshold issue in this case is whether the CA committed reversible error in finding the principal amount subject to the interest on the third to sixth months, and its consequent determination of the new outstanding principal amount of P3,685,026.30.

The Court's Ruling

After a careful study of the allegations and the records of this case, the Court finds that the Petition is partly meritorious. The Court agrees with the CA's ruling that the 5% monthly interest is exorbitant and unjust in its excessiveness, but disagrees with the CA's final determination of the new outstanding principal amount and interests.

First, the Court agrees that an imposition of interest was clearly intended by the parties in this case, as may be gleaned in the cash disbursement voucher signed by Rogelio and undisputed by the parties, along with the categorical action of Spouses Lim in paying said interest in advance. Instructive on this point is the case of Abella v. Abella, 38 as cited by the CA, which involves an acknowledgement receipt which clearly showed the parties' intent to impose an interest on the loan therein, to wit:

Article 1956 of the Civil Code spells out the basic rule that "[n]o interest shall be due unless it has been expressly stipulated in writing."

On the matter of interest, the text of the acknowledgment receipt is simple, plain, and unequivocal. It attests to the contracting parties' intent to subject to interest the loan extended by petitioners to respondents. The controversy, however, stems from the acknowledgment receipt's failure to state the exact rate of interest.

Jurisprudence is clear about the applicable interest rate if a written instrument fails to specify a rate. In Spouses Toring v. Spouses Olan, this court clarified the effect of Article 1956 of the Civil Code and noted that the legal rate of interest (then at 12%) is to apply: "In a loan or forbearance of money, according to the Civil Code, the interest due should be that stipulated in writing, and in the absence thereof, the rate shall be 12% per annum." 39

In the instant case, given that the cash disbursement voucher dated January 26, 2010 clearly indicates the interest equivalent to 5% per month, and considering that Spouses Lim did in fact admit to paying the 5% monthly interest outright, the intention to impose an interest on the principal sum may not now be denied by Spouses Lim.

Second, the Court agrees with the CA's finding that even with the recognition of the parties' intent to impose the 5% monthly interest, the same interest rate is clearly unconscionable and shocking to the morals and is therefore invalid. Although it is true that usury has been legally non-existent in view of the suspension of the Usury Law 40 by Central Bank Circular No. 905, Series of 1982 41 (CB Circular No. 905, s. 1982), it nevertheless remains within the courts' power to reduce unreasonable interest rates. In other words, while the courts recognize the right of the parties to enter into contracts, this rule is far from absolute, and admits of the courts' authority to temper interests which they determine to be iniquitous. 42 This is unmistakable in Article 1306 of the Civil Code which provides:

Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a)

The CA is therefore correct in reversing the RTC's analysis that the evident mutuality between the parties as to the interest rate takes precedence over the sheer excess of the same.

On this score, with respect to the threshold of monthly interest rates which the Court has so far determined to be unconscionable, the case of De la Paz v. L & J Development Company, Inc.43 is on point, with its clear-cut ruling that interest rates of 3% per month or higher already cross the line towards unconscionability, to wit:

Time and again, it has been ruled in a plethora of cases that stipulated interest rates of 3% per month and higher, are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law. x x x 44

As applied to the instant case, the agreed upon 5% monthly interest on the loan amount has already been found by the Court to be unconscionable, as in Castro v. Tan, 45viz.:

While we agree with petitioners that parties to a loan agreement have wide latitude to stipulate on any interest rate in view of the [CB Circular No. 905, s. 1982] which suspended the Usury Law ceiling on interest effective January 1, 1983, it is also worth stressing that interest rates whenever unconscionable may still be declared illegal. There is certainly nothing in said circular which grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.

In several cases, we have ruled that stipulations authorizing iniquitous or unconscionable interests are contrary to morals, if not against the law. In Medel v. Court of Appeals, we annulled a stipulated 5.5% per month or 66% per annum interest on a [P]500,000.00 loan and a 6% per month or 72% per annum interest on a [P]60,000.00 loan, respectively, for being excessive, iniquitous, unconscionable and exorbitant. In Ruiz v. Court of Appeals, we declared a 3% monthly interest imposed on four separate loans to be excessive. In both cases, the interest rates were reduced to 12% per annum.

In this case, the 5% monthly interest rate, or 60% per annum, compounded monthly, stipulated in the Kasulatan is even higher than the 3% monthly interest rate imposed in the Ruiz case. Thus, we similarly hold the 5% monthly interest to be excessive, iniquitous, unconscionable and exorbitant, contrary to morals, and the law. It is therefore void ab initio for being violative of Article 1306 of the Civil Code. With this, and in accord with the Medel and Ruiz cases, we hold that the Court of Appeals correctly imposed the legal interest of 12% per annum in place of the excessive interest stipulated in the Kasulatan. 46

Still, in Spouses Albos v. Embisan, 47 the Court held that the 5% monthly interest is unjust and inequitable, even if the parties freely agreed to it:

Nevertheless, even if there was such an agreement that interest will be compounded, We agree with the petitioners that the 5% monthly rate, be it simple or compounded, written or verbal, is void for being too exorbitant, thus running afoul of Article 1306 of the New Civil Code, which provides:

Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. x x x

As case law instructs, the imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to the common sense of man. It has no support in law, in principles of justice, or in the human conscience nor is there any reason whatsoever which may justify such imposition as righteous and as one that may be sustained within the sphere of public or private morals. 48

More, with respect to the operation of estoppel against Spouses Lim, the Court's ruling in Asian Cathay Finance and Leasing Corporation v. Gravador49 enlightens, where the willingness of the parties to impose a clearly exorbitant interest rate was considered of no moment, thus:

x x x The imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to the common sense of man. It has no support in law, in principles of justice, or in the human conscience nor is there any reason whatsoever which may justify such imposition as righteous and as one that may be sustained within the sphere of public or private morals. x x x 50

As squarely summarized in Isla v. Estorga: 51

Anent monetary interest, the parties are free to stipulate their preferred rate. However, courts are allowed to equitably temper interest rates that are found to be excessive, iniquitous, unconscionable, and/or exorbitant, such as stipulated interest rates of three percent (3%) per month or higher. In such instances, it is well to clarify that only the unconscionable interest rate is nullified and deemed not written in the contract; whereas the parties' agreement on the payment of interest on the principal loan obligation subsists. It is as if the parties failed to specify the interest rate to be imposed on the principal amount, in which case the legal rate of interest prevailing at the time the agreement was entered into is applied by the Court. This is because, according to jurisprudence, the legal rate of interest is the presumptive reasonable compensation for borrowed money. 52

There is therefore no doubt that the 5% monthly interest as imposed in the instant contract of loan between Spouses Lim and Oville may not be countenanced by the Court.

Third, the Court further affirms the CA's ruling that despite the invalidity of the 5% monthly interest, the contract of loan survives said invalidity, as the invalidity of the interest rate imposed is considered separate and distinct from the main contract of loan, as well as from the stipulation pertaining to the imposition of interest. As the Court held in Andal v. Philippine National Bank: 53

We cannot subscribe to the contention of petitioners-spouses that no interest should be due on the loan they obtained from respondent bank, or that, at the very least, interest should be computed only from the finality of the judgment declaring the foreclosure sale null and void, on account of the exorbitant rate of interest imposed on their loan.

It is clear from the contract of loan between petitioners-spouses and respondent bank that petitioners-spouses, as borrowers, agreed to the payment of interest on their loan obligation. That the rate of interest was subsequently declared illegal and unconscionable does not entitle petitioners-spouses to stop payment of interest. It should be emphasized that only the rate of interest was declared void. The stipulation requiring petitioners-spouses to pay interest on their loan remains valid and binding. They are, therefore, liable to pay interest from the time they defaulted in payment until their loan is fully paid. 54

Jurisprudence has held that in a similar situation wherein an interest rate on a loan has been declared null and void, the Court shall apply the applicable legal rate of interest, which refers to "the prevailing rate at the time when the agreement was entered into." 55 Given the invalidity of the 5% monthly interest imposed and the validity of the principal loan, the situation that results is one wherein the legal rate of interest at the time the contract of loan was entered into will apply. In the instant case, since the contract of loan in this case was entered into by Spouses Lim and Oville on January 26, 2010, the legal rate of interest prevailing at the time of the entering of the contract of loan is 12% per annum.

More, given that the contract of loan in this case is for a period of two months with subsequent extensions, and since Spouses Lim and Oville clearly agreed that the interest on the principal amount is to accrue on a monthly basis, the net effect is that the principal amount must incur a 1% monthly interest.

On this score, however, the Court notes that the CA erroneously computed the loan's outstanding principal amount. Specifically, since Spouses Lim issued a check in the amount of P500,000.00 in favor of Oville for the purpose of paying the 5% monthly interest for a period of two months in advance on the same date that Oville issued a check in the amount of P5,000,000.00, the original principal amount must be reduced to P4,500,000.00, since an advance payment of interest on a loan which itself has not yet matured must accordingly reduce the face amount by the deduction of the amount of advance interest payment. A situation otherwise would allow for a predatory scheme wherein Spouses Lim would in effect be paying an iniquitous interest rate on a principal sum, from which P500,000.00 was carved out since the said amount was at the onset paid back to Oville by way of advance interest.

Furthermore, with the successive payments of five checks equivalent to P250,000.00 each, all of them have been applied first to the accrued 1% interest and then to the outstanding principal, in accord with Article 1253 of the Civil Code which clearly provides thus:

Art. 1253. If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered. (1173)

For ease of reference, the Court's computation of the correct principal amount is illustrated below:

 

P5,000,000.00
– P500,000.00
––––––––––––
P4,500,000.00	(reduced principal amount)
x 0.02	(two months interest)
––––––––––––
P90,000.00	(interest)
P90,000.00	(interest)
+ P4,500,000.00	(reduced principal)
–––––––––––––
P4,590,000.00
– P250,000.00	(interest payment with check dated March 26, 2010)
––––––––––––
P4,340,000.00	(principal for the first extension on March 2010)
P4,340,000.00
– P250.000.00	(interest payment with check dated April 24, 2010)
––––––––––––
P4,090,000.00
x 0.01
––––––––––––
P40,900.00	(interest)
P40,900.00
+ P4,090,000.00
––––––––––––
P4,130,900.00	(principal for the second extension on April 2010)
P4,130,900.00
– P250,000.00	(interest payment with check dated May 23, 2010)
––––––––––––
P3,880,900.00
x 0.01
––––––––––––
P38,809.00	(interest)
P38,809.00
+ P3,880,900.00
––––––––––––
P3,919,709.00	(principal for the third extension on May 2010)
P3,919,709.00
– P250,000.00	(interest payment with check dated June 21, 2010)
––––––––––––
P3,669,709.00
x 0.01
––––––––––––
P36,697.09	(interest)
P36,697.09
+ P3,669,709.00
––––––––––––
P3,706,406.09	(principal for the fourth extension on June 2010)
P3,706,406.09
– P250,000.00	(interest payment with check dated July 20, 2010)
––––––––––––
P3,456,406.09
x 0.01
––––––––––––
P34,564.06	(interest)
P34,564.06
+ P3,456,406.09
––––––––––––
P3,490,970.15	(principal for the fifth and final extension on July 2010)

 

The correct computation as shown above indicates that the correct outstanding principal amount due Oville is P3,490,970.15.

Apart from the computation of the principal amount and the imposition of the compensatory interest, the Court further corrects the CA's imposition of interests.

Consistent with BSP-MB Circular No. 799, s. 2013, the principal amount of P3,490,970.15 shall be subject to the monetary interest of 12% per annum from July 26, 2010 until June 30, 2013, and the rate of 6% per annum from July 1, 2013 until finality of the Court's decision. 56

In addition, the Court further imposes the interest on the monetary interest which accrued on the correct principal amount of P3,490,970.15 from the time of delay on July 26, 2010 until the date of judicial demand, i.e., the filing of the complaint before the RTC on September 2, 2011, or approximately for a period of 14 months, at the rate of 1% per month. Specifically, the correct principal amount of P3,490,970.15 shall incur a total of 14% interest (at 1% simple monthly interest for each of the subsequent 14 months leading up to the date of judicial demand) or a total accrued interest of P488,735.85. The Court here imposes interest on this accrued interest at the rate of 12% per annum from September 2, 2011 until June 30, 2013 and the rate of 6% per annum from July 1, 2013 until the finality of this Court's decision. 57

This is consistent with Article 2212 of the Civil Code in relation to Section 1, 58 P.D. 116:

Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. (1109a)

Finally, a legal interest of 6% per annum shall also be imposed on the total judgment award from the finality of this Resolution until full satisfaction, in accordance with jurisprudence 59 and Articles 2209 and 2213 of the Civil Code, which respectively provide:

Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum. (1108)

Art. 2213. Interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty.

WHEREFORE, premises considered, the Petition is hereby PARTLY GRANTED. The Decision dated June 27, 2019 of the Court of Appeals Twenty-First Division, in CA-G.R. CV No. 04993-MIN and its Resolution dated September 11, 2020 are AFFIRMED with MODIFICATION.

Petitioners Spouses Rogelio Lim, Jr. and Jennifer Lim are hereby DIRECTED to jointly PAY respondent Geraldine S. Oville, the following:

(i) the outstanding principal loan obligation in the amount of P3,490,970.15 subject to the monetary interest rate of twelve percent (12%) per annum from July 26, 2010 until June 30, 2013, and the rate of six percent (6%) per annum from July 1, 2013 until finality of this Court's decision; and

(ii) the accrued interest from July 26, 2010 to September 2, 2011 in the amount of P488,735.85 shall itself be subject to the rate of twelve percent (12%) per annum from September 2, 2011 until June 30, 2013 and the rate of six percent (6%) per annum from July 1, 2013 until the finality of this Court's decision.

Finally, the total judgment award shall also be subject to a legal interest of six percent (6%) per annum from the finality of this Resolution until full payment thereof.

SO ORDERED."

By authority of the Court:

(SGD.) LIBRADA C. BUENADivision Clerk of Court

By:

MARIA TERESA B. SIBULODeputy Division Clerk of Court

 

Footnotes

1.Rollo, pp. 3-20.

2.Id. at 26-39. Penned by Associate Justice Florencio M. Mamauag, Jr. and concurred in by Associate Justices Edgardo A. Camello and Walter S. Ong.

3.Id. at 13. Emphasis omitted.

4.Id. at 40.

5.Id. at 40-41.

6.Id. at 41.

7.Id.

8.Id.

9.Id.

10.Rollo, pp. 40-45-A. Penned by Judge Oscar P. Noel, Jr.

11.Id. at 45-45-A.

12. RULES OF COURT, Rule 131, Sec. 2 provides:

SEC. 2.Conclusive presumptions. — The following are instances of conclusive presumptions:

(a) Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it.

(b) The tenant is not permitted to deny the title of his landlord at the time of commencement of the relation of landlord and tenant between them. (3a)

13.Rollo, p. 43.

14. CIVIL CODE, Art. 1308 provides:

Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. (1256a)

15.Rollo, pp. 43-44.

16.Id.

17.Id. at 45.

18.Id. at 37-38. Emphasis in the original.

19.Id. at 31.

20.Id.

21.Id. at 33.

22. G.R. No. 195166, July 8, 2015, 762 SCRA 221.

23. CIVIL CODE, Art. 1956 states:

Art. 1956. No interest shall be due unless it has been expressly stipulated in writing. (1755a)

24.Rollo, p. 31.

25.Id. at 35.

26.Id.

27.Id. at 31-33.

28. G.R. No. 197861, June 5, 2013, 697 SCRA 555.

29.Rollo, p. 33.

30.Id. at 33-34.

31.Id. at 35.

32.Id. at 35-37.

33. The computation here, however, is erroneous, as will be shown subsequently.

34.Rollo, p. 37.

35.Id. at 37-38.

36.Id. at 22-24.

37.Id. at 9-11.

38.Supra note 22.

39.Id. at 232-233.

40. AN ACT FIXING RATES OF INTEREST UPON LOANS AND DECLARING THE EFFECT OF RECEIVING OR TAKING USURIOUS RATES, AND FOR OTHER PURPOSES, February 24, 1916, as amended by Presidential Decree No. (P.D.) 116.

41. Sec. 1 thereof provides:

Section 1. The rate of interest, including commissions, premiums, fees and other charges, on a loan or forbearance of any money, goods, or credits, regardless of maturity and whether secured or unsecured, that may be charged or collected by any person, whether natural or juridical, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended.

42.Trade & Investment Development Corporation of the Phils. v. Roblett Industrial Construction Corporation, G.R. No. 139290, May 19, 2006, 490 SCRA 1, 6.

43. G.R. No. 183360, September 8, 2014, 734 SCRA 364.

44.Id. at 376-377. Emphasis supplied; citations omitted.

45. G.R. No. 168940, November 24, 2009, 605 SCRA 231.

46.Id. at 237-239. Emphasis supplied.

47. G.R. No. 210831, November 26, 2014, 743 SCRA 283.

48.Id. at 294-295. Emphasis supplied.

49. G.R. No. 186550, July 5, 2010, 623 SCRA 517.

50.Id. at 524.

51. G.R. No. 233974, July 2, 2018, 869 SCRA 410.

52.Id. at 417-418. Emphasis supplied; citations and underscoring omitted.

53. G.R. No. 194201, November 27, 2013, 711 SCRA 15.

54.Id. at 27-82. Emphasis supplied.

55.Vasquez v. Philippine National Bank, G.R. Nos. 228355 & 228397, August 28, 2019, accessed at <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65670>.

56.Nacar v. Gallery Frames, 716 Phil. 267 (2013).

57.Id. at 282.

58. P.D. 116, Sec. 1 provides:

Sec. 1. The rate of interest for the loan or forbearance of any money, goods, or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be six per centum per annum or such rate as may be prescribed by the Monetary Board of the Central Bank of the Philippines for that purpose in accordance with the authority hereby granted.

59.Supra note 56.