Nacar v.

Gallery Frames
GR. 189871

FACTS: Dario Nacar filed a labor case against Gallery Frames and its owner Felipe Bordey, Jr. Nacar
alleged that he was dismissed without cause by Gallery Frames on January 24, 1997. On October 15,
1998, the Labor Arbiter (LA) found Gallery Frames guilty of illegal dismissal hence the Arbiter awarded
Nacar P158,919.92 in damages consisting of backwages and separation pay.

Gallery Frames appealed all the way to the Supreme Court (SC). The Supreme Court affirmed the
decision of the Labor Arbiter and the decision became final on May 27, 2002.

After the finality of the SC decision, Nacar filed a motion before the LA for recomputation as he alleged
that his backwages should be computed from the time of his illegal dismissal (January 24, 1997) until the
finality of the SC decision (May 27, 2002) with interest. The LA denied the motion as he ruled that the
reckoning point of the computation should only be from the time Nacar was illegally dismissed (January
24, 1997) until the decision of the LA (October 15, 1998). The LA reasoned that the said date should be
the reckoning point because Nacar did not appeal hence as to him, that decision became final and
executory.

ISSUE: Whether or not the Labor Arbiter is correct.

HELD: No. There are two parts of a decision when it comes to illegal dismissal cases (referring to cases
where the dismissed employee wins, or loses but wins on appeal). The first part is the ruling that the
employee was illegally dismissed. This is immediately final even if the employer appeals – but will be
reversed if employer wins on appeal. The second part is the ruling on the award of backwages and/or
separation pay. For backwages, it will be computed from the date of illegal dismissal until the date of
the decision of the Labor Arbiter. But if the employer appeals, then the end date shall be extended until
the day when the appellate court’s decision shall become final. Hence, as a consequence, the liability of
the employer, if he loses on appeal, will increase – this is just but a risk that the employer cannot avoid
when it continued to seek recourses against the Labor Arbiter’s decision. This is also in accordance with
Article 279 of the Labor Code.

Anent the issue of award of interest in the form of actual or compensatory damages, the Supreme Court
ruled that the old case of Eastern Shipping Lines vs CA is already modified by the promulgation of the
Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796 which lowered the legal rate of interest
from 12% to 6%. Specifically, the rules on interest are now as follows:

1. Monetary Obligations ex. Loans:

a. If stipulated in writing:

a.1. shall run from date of judicial demand (filing of the case)

a.2. rate of interest shall be that amount stipulated

b. If not stipulated in writing

b.1. shall run from date of default (either failure to pay upon extra-judicial demand or upon judicial
demand whichever is appropriate and subject to the provisions of Article 1169 of the Civil Code)

b.2. rate of interest shall be 6% per annum

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2. Non-Monetary Obligations (such as the case at bar)

a. If already liquidated, rate of interest shall be 6% per annum, demandable from date of judicial or
extra-judicial demand (Art. 1169, Civil Code)

b. If unliquidated, no interest

Except: When later on established with certainty. Interest shall still be 6% per annum demandable from
the date of judgment because such on such date, it is already deemed that the amount of damages is
already ascertained.

3. Compounded Interest

– This is applicable to both monetary and non-monetary obligations

– 6% per annum computed against award of damages (interest) granted by the court. To be computed
from the date when the court’s decision becomes final and executory until the award is fully satisfied by
the losing party.

4. The 6% per annum rate of legal interest shall be applied prospectively:

– Final and executory judgments awarding damages prior to July 1, 2013 shall apply the 12% rate;

– Final and executory judgments awarding damages on or after July 1, 2013 shall apply the 12% rate for
unpaid obligations until June 30, 2013; unpaid obligations with respect to said judgments on or after July
1, 2013 shall still incur the 6% rate.

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[G.R. No. 149004. April 14, 2004]
RESTITUTA M. IMPERIAL, petitioner, vs. ALEX A. JAUCIAN, respondent.

Doctrine

Iniquitous and unconscionable stipulations on interest rates, penalties and attorneys fees are contrary
to morals. Consequently, courts are granted authority to reduce them equitably. If reasonably exercised,
such authority shall not be disturbed by appellate courts.
FACTS:

Petitioner obtained six (6) separate loans amounting to P 320,000.00 from the respondent. In
the written agreement, they agreed upon the 16% interest per month plus penalty charge of 5% per
month and the 25% attorney’s fee, failure to pay the said loans on the stipulated date.

Petitioner executed six (6) separate promissory notes and issued several checks as guarantee
for payment. When the said loans become overdue and unpaid, especially when the petitioner’s checks
issued were dishonored, respondent made repeated oral and written demands for payment.

The petitioner was able to pay only P 116,540.00 as found by the RTC. Although she alleged that
she had already paid the amount of P 441,780.00 and the excess of P 121,780.00 is more than the
interest that could be legally charged, the Court affirms the findings of RTC that petitioner is still
indebted to the respondent.

ISSUE:

Whether or not the stipulated interest of 16% per month, 5% per month for penalty charge and
25% attorney’s fee are usurious.

HELD:

YES. The rate must be equitably reduced for being iniquitous, unconscionable and exorbitant.
While the Usury Law ceiling on interest rates was lifted by C.B. Circular No. 905, nothing in the said
circular grants lenders carte blanche authority to raise interests rates to levels which will either enslave
their borrowers or lead to a hemorrhaging of their assets.

When the agreed rate is iniquitous or unconscionable, it considered contrary to morals, if not
against the law. Such stipulation is void. Since the stipulation is void, it is as if there was no express
contract thereon. Hence, courts may reduce the interest rate as reason and equity demand.

The interest rate of 16% per month was reduced to 1.167% per month or 14% per annum and
the penalty charge of 5% per month was also reduced to 1.167% per month or 14% per annum.

The attorney’s fees here are in the nature of liquidated damages and the stipulation therefor is
aptly called a penal clause. So long as the stipulation does not contravene the law, morals, public order
or public policy, it is binding upon the obligor. Nevertheless, in the case at bar, petitioner’s failure to
comply fully with her obligation was not motivated by ill will or malice. The partial payments she made
were manifestations of her good faith. Hence the attorney’s fees were reduced to 10% of the total due
and payable.

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G.R. No. 42829 September 30, 1935

RADIO CORPORATION OF THE PHILIPPINES, plaintiff-appellee,

vs.
JESUS R. ROA, ET AL., defendants.
RAMON CHAVES, ANDRES ROA and MANUEL ROA, appellants.

FACTS

This is an appeal from decision of the Court of First Instance of the City of Manila which rendered in
favor of the plaintiff Radio Corporation of the Philippines and against the defendants Jesus R. Roa,
Ramon Chavez, Andes Roa and Manuel Roa.
The defendant Jesus R. Roa became indebted to the Philippine Theatrical Enterprises, Inc., in the sum of
P28,400 payable in seventy-one equal monthly installments at the rate of P400 a month commencing
thirty days after December 11, 1931, with five days grace monthly until complete payment of said sum.
On that same date the Philippine Theatrical Enterprises, Inc., assigned all its right and interest in that
contract to the Radio Corporation of the Philippines. The contract contains a paragraph providing for the
acceleration clause with which upon the failure of the vendee-mortgagor to make any payments, the
whole amount remaining unpaid under this mortgage shall immediately become due and payable and
this mortgage on the property herein mentioned as well as the Luzon Surety Bond may be foreclosed by
the vendor-mortgagee; and, in such case, the vendee-mortgager further agrees to pay the vendor-
mortgagee an additional sum equivalent to 25 per cent of the principal due unpaid as costs, expenses
and liquidated damages.

On March 15, 1932, Erlanger & Galinger, Inc., acting in its capacity as attorney-in-fact of the Radio
Corporation of the Philippines wrote a letter ,to the principal debtor, acknowledging the the remittance
as payment for the January installment.

TC held that mere delay in suing for the collection of the does not release the sureties.

The defendants erred the following :

1. The court below erred in not finding that the balance of the total indebtedness became immediately
due and demandable upon the failure of the defendant Jesus R. Roa to pay any installment on his note.

2. The court below erred in not finding that defendant Jesus R. Roa defaulted in the payment of the
installment due on February 27,1932, and that plaintiff corporation gave him an extension of time for
the payment of said installment.

3. The court below erred in not finding that the extension of time given to defendant Jesus R. Roa for
the payment of an overdue installment served as a release of defendant sureties from liability on all the
subsequent installments.

4. The court below erred in not finding that the sureties were discharged from their bond when the
plaintiff authorized Jesus R. Roa to remove the photophone equipment from Cagayan, Misamis Oriental,
to Silay, Occidental Negros, without the knowledge or consent of said sureties.

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5. The court below erred in condemning Ramon Chavez, Andres Roa and Manuel Roa to pay jointly and
severally the sum of P10,000 to the Radio Corporation of the Philippines.

ISSUES

Whether or not the respondents are liable as a result accelerating clause

RULING

The judgment of the trial court is reversed as to the appellants Ramon Chavez, Andres Roa and Manuel
Roa. The stipulation in the contract under consideration, copied above, is to the effect that upon failure
to pay any installment when due the other installments ipso facto become due and payable.

In view of of the fact that under the express provision of the contract, quoted above, the whole unpaid
balance automatically becomes due and payable upon failure to pay one installment, the act of the
plaintiff in extending the payment of the installment corresponding to February, 1932, to April, 1932,
without the consent of the guarantors, constituted in fact an extension of the payment of the whole
amount of the indebtedness, as by that extension the plaintiff could not have filed an action for the
collection of the whole amount until after April, 1932.

Therefore appellants' contention that after default of the payment of one installment the act of the
herein creditor in extending the time of payment discharges them as guarantors in conformity with
articles 1851 and 1852 of the Civil Code is correct.

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G.R. No. L-53955 January 13, 1989
THE MANILA BANKING CORPORATION, plaintiff-appellee,
vs.
ANASTACIO TEODORO, JR. and GRACE ANNA TEODORO, defendants-appellants.

FACTS
On April 25, 1966, defendants, together with Anastacio Teodoro, Sr., jointly and severally, executed in
favor of plaintiff a Promissory Note (No. 11487) for the sum of P10,420.00 payable in 120 days, or on
August 25, 1966, at 12% interest per annum. Defendants failed to pay the said amount inspire of
repeated demands and the obligation as of September 30, 1969 stood at P 15,137.11 including accrued
interest and service charge.
On May 3, 1966 and June 20, 1966, defendants Anastacio Teodoro, Sr. (Father) and Anastacio Teodoro,
Jr. (Son) executed in favor of plaintiff two Promissory Notes (Nos. 11515 and 11699) for P8,000.00 and
P1,000.00 respectively, payable in 120 days at 12% interest per annum. Father and Son made a partial
payment on the May 3, 1966 promissory Note but none on the June 20, 1966 Promissory Note, leaving
still an unpaid balance of P8,934.74 as of September 30, 1969 including accrued interest and service
charge.
The three Promissory Notes stipulated that any interest due if not paid at the end of every month shall
be added to the total amount then due, the whole amount to bear interest at the rate of 12% per
annum until fully paid; and in case of collection through an attorney-at-law, the makers shall, jointly and
severally, pay 10% of the amount over-due as attorney's fees, which in no case shall be less than
P200.00. It appears that on January 24, 1964, the Son executed in favor of plaintiff a Deed of Assignment
of Receivables from the Emergency Employment Administration in the sum of P44,635.00.
The failure of defendants to pay the sums due on the Promissory Note, this action was instituted on
November 13, 1969, originally against the Father, Son, and the latter's wife. Because the Father died,
however, during the pendency of the suit, the case as against him was dismiss under the provisions of
Section 21, Rule 3 of the Rules of Court.
ISSUES
(1) Whether or not the assignment of receivables has the effect of payment of all the loans contracted
by appellants from appellee bank; and
(2) Whether or not appellee bank must first exhaust all legal remedies against the Philippine Fisheries
Commission before it can proceed against appellants for collections of loan under the promissory notes
which are plaintiffs bases in the action for collection in Civil Case No. 78178.

RULING
The appeal is Dismissed for lack of merit and the appealed decision of the trial court is affirmed.
The deed of assignment was intended as collateral security for the bank loans of appellants, as a
continuing guaranty for whatever sums would be owing by defendants to plaintiff, as stated in
stipulation No. 9 of the deed.
As to whether or not appellee bank must have to exhaust all legal remedies against the Philippine
Fisheries Commission before it can proceed against appellants for collection of loans under their
promissory notes, must also be answered in the negative.
The obligation of appellants under the promissory notes not having been released by the assignment of
receivables, appellants remain as the principal debtors of appellee bank rather than mere guarantors.
The deed of assignment merely guarantees said obligations. That the guarantor cannot be compelled to
pay the creditor unless the latter has exhausted all the property of the debtor, and has resorted to all
the legal remedies against the debtor, under Article 2058 of the New Civil Code does not therefore apply
to them

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G.R. No. 166993 December 19, 2005
DSM CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner,
vs.
COURT OF APPEALS and MEGAWORLD GLOBUS, Respondents.

FACTS
Petitioner and respondent entered into agreements for the construction of a condominium project
owned by respondent called “The Salcedo Park”, with petitioner as contractor. In the course of the
project’s construction, differences with respect to billings arose between the parties. Petitioner thus
filed a complaint for compulsory arbitration before the CIAC claiming payment for approximately P97
Million as the outstanding balance due from respondent pursuant to the agreements. The CIAC
rendered a decision partially granting both petitioner’s and respondent’s claims in favor of petitioner.
This award was affirmed by the Court of Appeals. Thereafter, the Supreme Court promulgated its
Decision affirming the judgment of the Court of Appeals and lifting the TRO that was then still in effect.It
became final and executory. Petitioner centers on attempts, regrettably entertained by respondent
Court of Appeals, to thwart the execution of a final and executory decision of the Supreme Court.

ISSUE:
Whether or not the Court of Appeals gravely abused its discretion when it issued a Resolution enjoining
the enforcement of Alias Writ of Execution.

HELD:
YES. Petition was granted. The CIAC is ordered to proceed with the execution of its Decision.

RATIO:
Rule 1, Section 6 of the Rules of Court provides that the Rules shall be liberally construed in order to
promote their objective of securing a just, speedy and inexpensive disposition of every action and
proceeding. We have at times relaxed procedural rules in the interest of substantial justice.
But from the outset, it bears stressing that the subject of petitioner and respondent’s petitions is the
execution of a final judgment was affirmed by no less than this Court. This being so, the appellate court
should have been doubly careful about entertaining an obviously dilatory petition intended merely to
delay the satisfaction of the judgment. Any lower court or tribunal that trifles with the execution of a
final and executory judgment of the Supreme Court flirts with insulting the highest court of the land.
While we do not diminish the availability of judicial remedies to the execution of final judgments of this
Court, as may be sanctioned under the Rules of Court, such actions could only prosper if they have basis
in fact and in law. Any court or tribunal that entertains such baseless actions designed to thwart the
execution of final judgments acts with grave abuse of discretion tantamount to lack of jurisdiction. It is
the positive duty of every court of the land to give full recognition and effect to final and executory
decisions, much less those rendered by the Supreme Court.

The abuse of discretion amounting to lack or excess of jurisdiction in this case was made manifest by the
fact that the appellate court not only took cognizance of the case and issued the assailed restraining
order. It eventually decided the case in petitioner’s (respondent herein) favor as well notwithstanding
the dearth of any basis for doing so

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G.R. No. 173183 November 18, 2013

SYCAMORE VENTURES CORPORATION and SPOUSES SIMON D. PAZ AND LENG LENG
PAZ, Petitioners, vs. METROPOLITAN BANK AND TRUST COMPANY, Respondent.

FACTS

Sixteen years ago (or sometime in 1997), Sycamore and the spouses Paz obtained from respondent
Metropolitan Bank and Trust Company (Metrobank) a credit line of ₱180,000,000.00, secured by 10 real
estate mortgages over Sycamore’s 11 parcels of land,together with their improvements. Sycamore and
the spouses Paz withdrew from the credit line the total amount of ₱65,694,914.26, evidenced by 13
promissory notes.

Because the petitioners failed to pay their loan obligations and for violations of the terms and conditions
of their 13 promissory notes, Metrobank instituted extrajudicial foreclosure proceedings over the six
real estate mortgages, pursuant to Act No. 3135, as amended. The public auction sale was set for
various dates – March 22, 2000, April 23, 2000 and May 23, 2000 – but the sale did not take place
because Sycamore and the spouses Paz asked for postponements.

Metrobank subsequently restructured Sycamore and the spouses Paz’s loan, resulting in the issuance of
one promissory note denominated as PN No. 751622 736864.92508.000.99, in lieu of the 13 promissory
notes9previously issued, and the execution of a single real estate mortgage covering the 12 parcels of
land.

The petitioners disputed Metrobank’s alleged unilateral and arbitrary reduction of the mortgaged
properties’ appraisal value from ₱1,200.00 to ₱300.00-₱400.00 per square meter. They likewise sought
the maintenance of the status quo, to enjoin Metrobank, and to prevent it from proceeding with the
extrajudicial foreclosure.

On the same day, the Executive Judge issued a 72-hour TRO, directing the sheriff to cease and desist
from proceeding with the scheduled public auction. After summary hearing, Judge Carmelita S.
Gutierrez-Fruelda, RTC, San Fernando Pampanga, ordered the extension of the TRO to its full 20-day
term.

On December 17, 2002, Judge Fruelda issued a writ of preliminary injunction which Metrobank
unsuccessfully resisted through a motion for reconsideration that was denied. Thus, Metrobank ran to
the CA on a petition for certiorari to question the RTC orders for grave abuse of discretion. The CA
dismissed Metrobank’s petition for lack of merit and upheld the RTC’s issued injunction

ISSUE

The core issue for our determination is whether the determination of the mortgaged properties’
appraisal value constitutes a prejudicial question that warrants the suspension of the foreclosure
proceedings.

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RULING

It is held in a long line of cases that mere inadequacy of price per se will not invalidate a judicial sale of
real property. It is only when the inadequacy of the price is grossly shocking to the conscience or
revolting to the mind, such that a reasonable man would neither directly nor indirectly be likely to
consent to it, that the sale shall be declared null and void. This rule, however, does not strictly apply in
the case of extrajudicial foreclosure sales where the right of redemption is available.

In the case at bar, other than the mere inadequacy of the bid price at the foreclosure sale, respondent
did not allege any irregularity in the foreclosure proceedings nor did she prove that a better price could
be had for her property under the circumstances.

Therefore, the petition is DENIED for lack of merit; the appealed decision of the Court of Appeals dated
May 3, 2006 is AFFIRMED