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FIRST FIL-SIN LENDING CORPORATION, petitioner, vs. GLORIA D.

PADILLO,
respondent.
FACTS:
1. Respondent GLORIA D. PADILLO obtain a loan of P500,000.00 on July 22, 1997 & Sep.
7, 1997 both with Promissory Note.
2. For 1st Loan, respondent 13 mo. Interest payment of P 22, 500 & 11 mo.interest payment
of P25,000 for the second loan before she settled principal loan of P1,000,000.00 for 2
loans.
3. In sum, respondent paid P 792,500.00 & P775,000.00, respectively.
4. Respondent filed action for sum of money alleging that she only agreed 4.5 % & 5%
interest per annum and not per month as stated in the PN.
5. RTC dismissed the complaint of the respondent.
6. CA reversed and set aside the decision and ordered petitioner to refund respondent for
P114,000.00.
7. According to the CA, based on the disclosure statements executed by respondent, the
interest rates should be imposed on a monthly basis but only for the 3-month term of the
loan. Thereafter, the legal interest rate of 12 % will apply.
8. Also, the CA found the penalty charges pegged at 1% per day of delay highly
unconscionable as it would translate to 365% per annum. Thus, it was reduced to 1% per
month or 12% per annum.

ISSUE: WON the decision of the CA proper.

HELD:
9. Yes.
10. Perusal of the PN, the interest is stated rate is per annum not monthly.
11. When the terms of the agreement are clear and explicit that they do not justify an attempt
to read into it any alleged intention of the parties, the terms are to be understood literally
just as they appear on the face of the contract.

12. The CA thus properly imposed the legal interest of 12% per annum from the time the
loans matured until the same has been fully paid on February 2, 1999.

13. As regards the penalty charges, we agree with the CA in ruling that the 1% penalty per
day of delay is highly unconscionable. Applying Article 1229 of the Civil Code, courts
shall equitably reduce the penalty when the principal obligation has been partly or
irregularly complied with, or if it is iniquitous or unconscionable.

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BATAAN SEEDLING ASSOCIATION, INC. and CARLOS VALENCIA, petitioners, vs.
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF ENVIRONMENT
and NATURAL RESOURCES,respondent.

FACTS:
1. Petitioner Bataan Seedling Association, Inc. (BSAI for brevity) entered into a Community
Based Reforestation Contract on October 26, 1990 with the Republic of the Philippines,
represented by the Department of Environment and Natural Resources (DENR).

2. Under said contract, BSAI, in consideration of the amount of Nine Hundred Seventy Five
Thousand One Hundred Twenty Six Pesos and Sixty One Centavos (P975,126.61), bound
itself to undertake the reforestation of a fifty-hectare open/denuded forest land in Barangay
Liyang, Pilar, Bataan within a period of three (3) years.

3. BSAI likewise undertook to report to the DENR any event or condition which delays or
may delay or prevent completion of the work,[4] and submit progress billings and
accomplishment reports.
4. Concomitant with the contract is the Project Development Plan and the Approved
Schedule of Progress Payments detailing the annual cash flow and schedule of activities
within the three-year period,[6] and the Contract of Undertaking providing for the
mobilization fund in the amount of Seventy Five Thousand Fifty Four Pesos and Sixty Six
Centavos (P75,054.66), which was release to the petitioner.

5. Believing that petitioners failed to comply with their obligations under the contract,
respondent sent a notice of cancellation dated July 31, 1992 to petitioner asking for an
explanation why the contract should not be terminated.

6. Petitioner failed to respond, thus, notice of cancellation and return of mobilization fund
and complaint for damages amounting to (P75,054.66)MF, and (P62,450.22) first
payment was filed in the court against petitioner.

7. Likewise, respondent sought for LD equivalent to .1% of the total cost.

8. Petitioner posits that the whole area was totally destroyed by a forest fire in December
1991 without their fault and negligence, which incident was duly reported to respondent,
and (2) the cancellation was arbitrary.

9. RTC ruled that there was reason to cancel the contract but had no sufficient ground to
refund the MF and Advance Payment or that to pay LD.

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10.CA affirmed with modification the decision of the RTC adjudicating that the balance of
MF be refunded with interest of 12 %.

ISSUE: WON the decision of the CA to refund the MF with 12% interest proper.

HELD:

11. Yes, MF should be refunded to the respondent.


But with regards to the interest, the court ruled that “ In Eastern Shipping Lines, Inc. vs. Court of
Appeals, we enunciated the following rules:

When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,


delicts or quasi-delicts is breached, the contravenor can be held liable for damages.
The provisions under Title XVIII on Damages of the Civil Code govern in determining
the measure of recoverable damages.
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.
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

12. In the case at bar, the contract between petitioner and respondent is a Community
Based Reforestation Contract by virtue of which petitioner undertook the reforestation of
a fifty-hectare open/denuded forest land and not a loan or forbearance of money, hence, in
the absence of stipulation 6% interest should be applied per annum. Moreover, 12%
interest per annum on P56,290.69 should be applied from date of finality of herein
judgment.
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SPS. ERNESTO and MINA CATUNGAL, petitioners, vs. DORIS HAO, respondent.

FACTS:
13. On December 28, 1972, the original owner, Aniana Galang, leased a three-storey
building situated at Quirino Avenue, Baclaran, Paraaque, Metro Manila, to the Bank of
the Philippine Islands (BPI) for a period of about fifteen (15) years, to expire on June 20,
1986. During the existence of the lease, BPI subleased the ground floor of said building to
respondent Doris Hao.

14.On August 24, 1984, Galang and SPS. ERNESTO and MINA CATUNGAL
executed a contract of lease on the second and third floors of the building. The lease was
for a term of four (4) years commencing on August 15, 1984 and ending on August 15,
1988.

15.Thereafter, respondent purchased the property from Galang.

16.Invoking her right of first refusal purportedly based on the lease contract between
her and Aniana Galang, respondent filed a complaint for Annulment of Sale with
Damages docketed as Civil Case No. 88-491 of the Regional Trial Court (RTC) of
Makati, Metro Manila.

17.Meanwhile, the lease agreement between BPI and Galang expired, thus, petitioner
spouses Catungal sent demand letter to respondent HAO to vacate the premises and filed
for 2 ejectment case against petitioner in the MeTC.
18. RTC rendered a Decision granting the injunction and annulling the contract of sale
between Aniana Galang and petitioners.

19.CA reversed the decision of the RTC and dismissed the case.

20.MeTC of Paranaque proceeded with the ejectment cases.

21.Metc rendered a ordered the defendant Doris T. Hao who is in actual possession of
the property and all persons claiming rights under her to vacate the premises in question
and to pay the plaintiffs the amount of P20,000.00 a month from June 28, 1988, until she
finally vacates the premises and to pay attorney’s fees of P20,000.00.

22.Petitioner file for a clarificatory or amended judgment and the MeTC ordered
defendant Doris T. Hao who is in actual possession of the property and all persons
claiming rights under her to vacate the premises and to pay the plaintiffs the amount of
P8,000.00 a month in Civil Case No. 7666 for the use and occupancy of the first floor of
the premises in question from June 28, 1998 until she finally vacates the premises and to
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pay the plaintiff a rental of P5,000.00 a month in Civil Case No. 7667 from June 28,
1988, until she finally vacates the premises and to pay attorneys fees of P20,000.00.

23.Petitioner filed for MR, and MeTC elevated the case to the RTC.

24.RTC affirmed with modification the decision of the MeTC which is hereby
increased to P20,000.00 a month for the ground floor starting June 28, 1988 and
P10,000.00 a month for the second floor and also P10,000.00 a month for the third floor
(or) a total of P40,000.00 monthly rentals commencing June 28, 1988 until the subject
property has been vacated and possession thereof turner [sic] over to the plaintiffs-
appellees; to pay attorneys fees in the amount of P20,000.00.

25.CA affirmed but reduced the amount of rentals for both the second and third floors
from P20,000.00 to P10,000.00 monthly.

ISSUE: WON the decision of the CA proper.


HELD:

26. No, the petitioners have long been deprived of the exercise of their proprietary
rights over the leased premises and the rightful amount of rentals at the rate of P40,000.00
a month. Consequently, petitioners are entitled to accrued monthly rentals of P27,000.00,
which is the difference between P40,000.00 awarded by the Regional Trial Court and
P13,000.00 awarded by the MeTC and affirmed by the Court of Appeals. Said amount of
P27,000.00 should rightly be the subject of another writ of execution being distinct from
the subject of the first writ of execution filed by petitioners.

27.With regards, to the interest, the court ruled that “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.”

28.Further, the court ruled that at the outset, it should be recalled that there existed no
consensual lessor-lessee relationship between the parties. At most, what we have is a
forced lessor-lessee relationship inasmuch as the respondent by way of detaining the
property without the consent of herein petitioners, was in unlawful possession of the
property belonging to petitioner spouses.

29. The back rentals in this case being equivalent to a loan or forbearance of money,
the interest due thereon in twelve percent (12%) per annum from the time of extra-
judicial demand on September 27, 1988.
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BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioners, vs. THE HON. COURT
OF APPEALS, and
CALVIN & ELSA ARCILLA, respondents.

FACTS:

30.Respondent Spouses Arcilla secured on 3 occasion loan from Banco Filipino Savings
and Mortgage Bank a total of P 107,946.00 which was evidence by a PN.

31.To secured the loan Real Estate Mortgage were executed over a parcel of land located
in BF-Paranaque.

32.Under said deeds, the Appellant may increase the rate of interest, on said loans, within
the limits
allowed by law, as Appellant’s Board of Directors may prescribe for its borrowers.

33.At that time, under the Usury Law, Act 2655, as amended, the maximum rate of
interest for loans secured by real estate mortgages was 12% per annum.

34. On January 10, 1975, the Appellees and the Appellant executed a "Deed of
Consolidation and Amendment of Real Estate Mortgage" whereby the aforementioned
loans of the Appellees and the "Real Estate Mortgage" executed by them as security for
the payment of said loans were consolidated.
35.Likewise, under said deed, the loan of the Appellees from the Appellant was increased to
P188,000.00.

36. TheAppellees executed a "Promissory Note", dated January 15, 1975, whereby they bound
and obliged themselves,jointly and severally, to pay the Appellant the aforesaid amount of
P188,000.00 with interest at the rate of 12% perannum, in nineteen (19) years from date thereof,
in stated installments of P2,096.93 a month.

37. On 1976, the CB issued a Circular#494 stating that “The maximum rate of interest,
including commissions, premiums, fees and other charges on loans with maturity of more than
seven hundred thirty (730) days, by banking institutions, including thrift banks, or by financial
intermediaries authorized to engage in quasi banking functions shall be nineteen percent (19%)
per annum.” Except as provided in this Circular and Circular No. 493, loans or renewals thereof
shall continue to be governed by the Usury Law, as amended.

38.On October 30, 1978, appellant prepared a “ STATEMENT OF ACCOUNT” and it turn
out that the interest was increased from 12% to 17% as authorized by the said CB-Circular.

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39.The appellee failed to pay the obligation, hence, an extrajudicial foreclosure was made.

40.The appellant was the highest bidder and paid the property for P342,798 inclusive of 17%
interest.

41.The appleant file for a Petition for Writ of Possession and it was granted by the RTC>”

42. FGU Insurance Corporation redemmed the property from the appellant and paid
P389,289.41 inclusive of interest computed at 17% per annum.

43.The appelles filed a complaint in the court, alleging that the loan contract between the
appellee and appellant was null and void because according to the appellee the interest were
deducted in advance from the face value of the PN and the rate charged was usurious.

44.According to the appellant, the interest charged was lawful and is based on CB Circular#
494.

45.RTC ruled in favor with the plaintiff and against defendant Banco Filipino ordering
defendant Banco Filipino to refund spouses Calvin S. Arcilla and Elsa B. Arcilla the sum of
P126,139.00 with interest thereon at 12% per annum reckoned from the filing of the complaint.

46.CA affirmed the decision of the RTC.

ISSUE: WON the PRIVATE RESPONDENTS WERE ENTITLED TO THE SAID REFUND the
P126,139.00 overpayment in interest and if the action for prescription prescribed

HELD:

1. The aggrieved must have either actual or presumptive knowledge of the violation, by the
guilty party of his rights either by an act or omission.

2. The question that now comes to the fore is when the Appellees became precisely aware of
the unilateral increase, by the Appellant, of the rate of interest on their loan account to
17% per annum.

3. As can be ascertained from the records, the Appellees discovered or should have
discovered, for the first time, the unilateral increase by the Appellant of the rate of interest
to 17% per annum when they received the "Statement of Account" of the Appellant as of
October 30, 1978.

4. Hence, it was only then that the prescriptive period for the Appellees to institute their
action in the Court a quo commenced.

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5. Since the Appellees filed their complaint in the Court a quo on September 2, 1985, the
same was seasonably filed within the ten year prescriptive period.

6. Anent the second issue, the court has ruled that it is the material allegations of fact in the
complaint, not the legal conclusion made therein or the prayer that determines the relief to
which the plaintiff is entitled.

7. It is the allegations of the pleading which determine the nature of the action and the Court
shall grant relief warranted by the allegations and the proof even if no such relief is prayed
for.

8. Thus, even if the complaint seeks the declaration of nullity of the contract, the Court of
Appeals correctly ruled that the factual allegations contained therein ultimately seek the
return of the excess interests paid.

9. The amended complaint of herein private respondents specifically allege that the contracts
of loan entered into by them and the petitioner were contrary to and signed in violation of the
Usury Law14 and consequentially pray that said contracts be declared null and void because
“The aforementioned loans granted by defendant Banco Filipino to the plaintiffs as stated on the
face of the promissory note and real estate mortgage (Annexes "B" to "D", inclusive) were not
actually received by the plaintiffs because interests, charges, etc. were deducted in advance from
the face value of the loans not in accordance with the contracts;”

10.Increase of interest from 12% to 17% unilaterally is a violation of law and is not pursuant
to CB-Circular 494.
11.CB-Circular provides that there can be an increased ininterest if (a) that there can be an
increase in interest if increased by law or by the Monetary Board; and (b) in order for such
stipulation to be valid, it must include a provision for the reduction of the stipulated interest in
the event that the maximum rate of interest is reduced by law or by the Monetary Board.

12.Petition is denied and the decision of the CA was affirmed.