Ligutan v. CA (2002) G.R.
138677 |Interest Rate in Loan 
PETITIONER: Tolomeo Ligutan and Leonidas De La Llana
RESPONDENT: Court of Appeals and Security Bank & Trust Company
SUMMARY: Ligutan and dela Llana obtained a loan of P120,000 from Security Bank. Ligutan
and dela Llana executed a promissory note that binded them, which also includes several
additional fees (penalty, attorney’s fees, and interest rate). Obligation became due, but
Petitioners were always in default despite multiple demand letters from Security bank to pay
what is due (P114,416.10). 2 years later, Ligutan and dela Llana filed a motion for
reconsideration questioning the rejection to present evidence, and the imposition of the
additional fees. The CA reduced the penalty to 3% from 5%. The petitioners filed an omnibus
motion for reconsideration and admission of new evidence. They claimed that the real estate
mortgage entered into by Tolomeo and Bienvenida Ligutan novated the previous contract.
The Court said that it was not a novation because petitioners acknowledge that the real estate
mortgage does not contain any express stipulation by the parties intending to supersede the
existing loan agreement between the petitioners and the bank.
DOCTRINE:
1. No. The Court states that it does not need to reduce the penalty further from 3%
given the circumstance. Also, regarding the 15.189% interest, it was a fresh issue
that has not been raised during previous proceedings.
a. On its face, the interest does not appear excessive.
b. A penalty stipulation is not necessarily preclusive of interest, IF there is an
agreement to that effect.
c. What may justify a Court in preventing the creditor from imposing full
surcharges and penalties, despite an express stipulation therefor in a valid
agreement, may not equally justify the non-payment or reduction of
interest.
FACTS:
 Ligutan and dela Llana obtained a loan in the amount of P120,000 from Security Bank.
 Ligutan and dela Llana executed a promissory note binding themselves, jointly and
severally, to pay the sum borrowed with an interest of 15.189% per annum upon
maturity and to pay a penalty of 5% every month on the outstanding principal and
interest in case of default.
o There was an additional 10% for attorney’s fees just in case if it was endorsed
to a lawyer, or if there were a collection suit instituted.
 Obligation became due, and bank granted an extension (Sep. 8, 1981  Dec. 29, 1981).
 Ligutan and dela Llana failed to settle the debt, which amounted to P114,416.10 despite
several demands from the bank.
 Due to the default of Ligutan and dela Llana after the final demand letter, the bank filed
a complaint for recovery with the Makati RTC
 The case was resolved after the absence of the petitioners in the case.
 2 years later, Ligutan and dela Llana filed a motion for reconsideration to the trial court
stating that they waived their right to present evidence and prayed that they be allowed
to prove their case. The trial court dismissed his case
 Ligutan and dela Llana appealed to the CA
o Questioning the rejection of the trial court of their motion to present
evidence.
o Assailing the imposition of the 2% service charge, the 5% per month penalty
charge and 10% attorney’s fee.
 CA affirmed the trial court’s decision except for the 2% service charge, which was
removed.
Not satisfied with the ruling, both parties filed motions for reconsideration to the CA
o Ligutan and dela Llana: Reduction of the 5% penalty for being
unconscionable.
o Bank: Payment of interest and penalty should be commenced from time of
default, not from date of filing of complaint.
 CA rendered a decision
o Ligutan and dela Llana: 5% penalty was reduced to 3%
o Bank: Affirmed
 Petitioners filed an omnibus motion for reconsideration and to admit newly discovered
evidence that while the case was pending before the trial court, spouses Ligutan
(Tolomeo and Bienvenida) executed a real estate mortgage to secure the existing
indebtedness of Petitioners (Ligutan and dela Llana) with the bank.
o They contended that the execution of the real estate mortgage had the effect
of novating the contract between them and the bank.
o They also contended that the mortgage was extrajudicially foreclosed without
being informed about it, and the bank did not credit them with the proceeds
to the sale.
 CA denied the omnibus motion because it cannot be entertained under Section 2, Rule
52 of the 1997 Rules oof Civil Procedure1 and the evidence being invoked was already
known.
 Petitioners elevated their case to the SC
ISSUE(S):
1. W/N 15.189% interest and 3% per month penalty be imposed?  NO!
2. W/N 10% attorney’s fees should be reduced?  NO!
3. W/N the Court should admit the new evidence?  NO!
4. W/N the real estate mortgage created a novation of the previous contract?  NO!
HELD:
1. No. The Court states that it does not need to reduce the penalty further from 3% given
the circumstance. Also, regarding the 15.189% interest, it was a fresh issue that has not
been raised during previous proceedings.
a. On its face, the interest does not appear excessive.
b. A penalty stipulation is not necessarily preclusive of interest, IF there is an
agreement to that effect.
c. What may justify a Court in preventing the creditor from imposing full
surcharges and penalties, despite an express stipulation therefor in a valid
agreement, may not equally justify the non-payment or reduction of interest.
2. No. The attorney’s fees has been agreed to by the parties and intended to answer not
only for the litigation expenses but also for collection efforts as well, the Court, like the
appellate court deems the award of 10% to be reasonable.
3. No. No second motion for reconsideration of a judgment or final resolution by the
same party shall be entertained according to Section 2, Rule 52 of the 1997 Rules of
Civil Procedure2. It is quite surprising why the new evidence was brought up recently
when it was already in existence during the first motion for reconsideration.
4. No. Petitioners acknowledge that the real estate mortgage does not contain any express
stipulation by the parties intending to supersede the existing loan agreement between
the petitioners and the bank.
a. Extinctive Novation requires
1 Section 2. Second motion for reconsideration. — No second motion for reconsideration of a judgment or final resolution by the same party shall be entertained. (n)
2 Id.
 i. Previous valid obligation
ii. Agreement of all parties to the new contract
iii. Extinguishment of the obligation
iv. Validity of the new obligation
b. In order for the extinguishment of the previous one, it must be declares in
unequivocal terms, or that every point is incompatible with each other.
c. Incompatibility is required if there is no declaration. It should take place in
any of the essential elements of the obligation.3
WHEREFORE, petition is DENIED.

3 1. Juridical Tie
2. Object or principal conditions
3. subjects.