A close examination of the records of this case
reveals that the findings of fact of the CA are all based on documentary
evidence and on admissions and stipulation of facts made by the parties. The
CA’s finding that there was no gross inadequacy of the price of respondent’s
residential house as stated in the contract, was based on respondent’s own evidence,
Tax Declaration No. 44250, which stated that the actual market value of subject
residential house in 1986 was only P93,080.00. The fact that respondent has
remained in actual physical possession of the property in question, and that
respondent has been the one paying the real property taxes on the subject
property was established by the admission made by petitioner during the
pre-trial conference and embodied in the Pre-Trial Order dated
May 25, 1994. The finding that the purchase price in the amount of P165,000.00
earns monthly interest was based on petitioner’s own testimony and admission in
her appellee’s brief that the amount of P165,000.00, if not paid on July 29,
1987, shall bear an interest of 10% per month.
The Court sees no reversible error with the foregoing findings of fact made by the CA. The CA correctly ruled that the true nature of the contract entered into by herein parties was one of equitable mortgage.
Article 1602 of the Civil Code enumerates the instances when a purported pacto de retro sale may be considered an equitable mortgage, to wit:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
|(1)||When the price of a sale with right to repurchase is unusually inadequate;|
|(2)||When the vendor remains in possession as lessee or otherwise;|
|(3)||When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;|
|(4)||When the purchaser retains for himself a part of the purchase price;|
|(5)||When the vendor binds himself to pay the taxes on the thing sold;|
|(6)||In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.|
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. (Emphasis supplied)
In Legaspi vs. Ong, the Court
further explained that:
The presence of even one of the above-mentioned circumstances as enumerated in Article 1602 is sufficient basis to declare a contract of sale with right to repurchase as one of equitable mortgage. As stated by the Code Commission which drafted the new Civil Code, in practically all of the so-called contracts of sale with right of repurchase, the real intention of the parties is that the pretended purchase price is money loaned and in order to secure the payment of the loan, a contract purporting to be a sale with pacto de retro is drawn up.
In the same case, the Court cited Article 1603
of the Civil Code, which provides that in case of doubt, a contract purporting
to be a sale with right to repurchase shall be construed as an equitable
In the instant case, the presence of the circumstances provided for under paragraphs (2) and (5) of Article 1602 of the Civil Code, and the fact that petitioner herself demands payment of interests on the purported purchase price of the subject property, clearly show that the intention of the parties was merely for the property to stand as security for a loan. The transaction between herein parties was then correctly construed by the CA as an equitable mortgage.
The allegation that the appellate court should not have deleted the award for actual and/or compensatory damages is likewise unmeritorious.
Section 8, Rule 51 of the Rules of Court provides as follows:
Sec. 8. Questions that may be decided. – No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed from or the proceedings therein will be considered unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors.
Clearly, the appellate court may pass upon
plain errors even if they are not stated in the assignment of errors. In
Villegas vs. Court of Appeals, the Court held:
[T]he Court is clothed with ample authority to review matters, even if they are not assigned as errors in the appeal, if it finds that their consideration is necessary in arriving at a just decision of the case.
In the present case, the RTC’s award for actual
damages is a plain error because a reading of said trial court’s Decision
readily discloses that there is no sufficient evidence on record to prove that
petitioner is entitled to the same. Petitioner’s only evidence to prove her
claim for actual damages is her testimony that she has spent P3,000.00 in going
to and from respondent’s place to try to collect payment and that she spent
P1,000.00 every time she travels from Bulacan, where she resides, to Baguio in
order to attend the hearings.
In People vs. Sara, the Court held that a witness’ testimony cannot be “considered as competent proof and cannot replace the probative value of official receipts to justify the award of actual damages, for jurisprudence instructs that the same must be duly substantiated by receipts.” Hence, there being no official receipts whatsoever to support petitioner’s claim for actual or compensatory damages, said claim must be denied.
The appellate court was also correct in ordering respondent to pay “legal interest” on the amount of P165,000.00.
Both parties admit that they came to an agreement whereby respondent shall pay petitioner interest, at 9% (according to respondent) or 10% (according to petitioner) per month, if she is unable to pay the principal amount of P165,000.00 on July 29, 1987.
In the Pre-Trial Order dated May 25, 1994, one of the issues for resolution of the trial court was “whether or not the interest to be paid under the agreement is 10% or 9% or whether or not this amount of interest shall be reduced equitably pursuant to law.”
The factual milieu of Carpo vs. Chua is closely analogous to the present case. In the Carpo case, petitioners therein contracted a loan in the amount of P175,000.00 from respondents therein, payable within six months with an interest rate of 6% per month. The loan was not paid upon demand. Therein petitioners claimed that following the Court’s ruling in Medel vs. Court of Appeals, the rate of interest of 6% per month or 72% per annum as stipulated in the principal loan agreement is null and void for being excessive, iniquitous, unconscionable and exorbitant. The Court then held thus:
In a long line of cases, this Court has invalidated similar
stipulations on interest rates for being excessive, iniquitous, unconscionable
and exorbitant. In Solangon v. Salazar, we annulled the stipulation
of 6% per month or 72% per annum interest on a P60,000.00 loan. In Imperial
v. Jaucian, we reduced the interest rate from 16% to 1.167% per month
or 14% per annum. In Ruiz v. Court of Appeals, we equitably reduced
the agreed 3% per month or 36% per annum interest to 1% per month or 12% per
annum interest. The 10% and 8% interest rates per month on a P1,000,000.00 loan
were reduced to 12% per annum in Cuaton v. Salud. Recently, this
Court, in Arrofo v. Quino, reduced the 7% interest per month
on a P15,000.00 loan amounting to 84% interest per annum to 18% per annum.
There is no need to unsettle the principle affirmed in Medel and like cases. From that perspective, it is apparent that the stipulated interest in the subject loan is excessive, iniquitous, unconscionable and exorbitant. Pursuant to the freedom of contract principle embodied in Article 1306 of the Civil Code, 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. In the ordinary course, the codal provision may be invoked to annul the excessive stipulated interest.
In the case at bar, the stipulated interest rate is 6% per month, or 72% per annum. By the standards set in the above-cited cases, this stipulation is similarly invalid. x x x.
Applying the afore-cited rulings to the instant
case, the inescapable conclusion is that the agreed interest rate of 9% per
month or 108% per annum, as claimed by respondent; or 10% per month or 120% per
annum, as claimed by petitioner, is clearly excessive, iniquitous,
unconscionable and exorbitant. Although respondent admitted that she agreed to
the interest rate of 9%, which she believed was exorbitant, she explained that
she was constrained to do so as she was badly in need of money at that time. As
declared in the Medel case and Imperial vs. Jaucian, “[i]niquitous
and unconscionable stipulations on interest rates, penalties and attorney’s
fees are contrary to morals.” Thus, in the present case, the rate of
interest being charged on the principal loan of P165,000.00, be it 9% or 10%
per month, is void. The CA correctly reduced the exhorbitant rate to “legal
In Trade & Investment Development Corporation of the Philippines vs. Roblett Industrial Construction Corporation, the Court held that:
In Eastern Shipping Lines, Inc. v. Court of Appeals, this Court laid down the following rules with respect to the manner of computing legal interest:
- 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.
- With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
- 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. (Underscoring supplied)
Applied to the present case, since the agreed
interest rate is void, the parties are considered to have no stipulation
regarding the interest rate. Thus, the rate of interest should be 12% per annum
to be computed from judicial or extrajudicial demand, subject to the provisions
of Article 1169 of the Civil Code, to wit:
Art. 1169. Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially demands from them
the fulfillment of the obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declares; or
(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.
x x x x
The records do not show any of the circumstances enumerated above. Consequently, the 12% interest should be reckoned from the date of extrajudicial demand.
Petitioner testified that she went to respondent’s place several times to try to collect payment, but she (petitioner) failed to specify the dates on which she made such oral demand. The only evidence which clearly shows the date when petitioner made a demand on respondent is the demand letter dated March 19, 1989 (Exh. “C”), which was received by respondent or her agent on March 29, 1989 per the Registry Return Receipt (Exh. “C-1”). Hence, the interest of 12% per annum should only begin to run from March 29, 1989, the date respondent received the demand letter from petitioner.
WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated June 9, 2000 is AFFIRMED with the MODIFICATION that the legal interest rate to be paid by respondent on the principal amount of P165,000.00 is twelve (12%) percent per annum from March 29, 1989 until fully paid.
SOURCE: [ G.R. NO. 145871, January 31, 2006 ]LEONIDES C. DIÑO, PETITIONER, VS. LINA JARDINES, RESPONDENT. Tags: Alcantara Alcoy moral damages Alegria actual damages Aloguinsan Argao Asturias Badian Balamban Bantayan Barili Boljoon Borbon Carmen Catmon Compostela Consolacion Cordova Daanbantayan Dumaguete Bais Sibulan Tampi Bacong Negros Bacolod Separation pay Resign Resignation Back wages Backwages Length of service pay benefit employee employer relationship Silay Kabankalan Daan Bantayan Dalaguete Dumanjug Ginatilan Liloan compensatory damages Madridejos Malabuyoc Medellin Minglanilla Moalboal Oslob Pilar Pinamungajan Poro Ronda Samboan San Fernando San Francisco San Remigio Sante Fe Santander Sibonga Sogod Tabogon Tabuelan Tuburan attorney’s fees Tudela exemplary damages Camotes General Luna Siargao Cagayan Davao Kidapawan Attorney Abogado Lawyer Architect Real Estate Broker nominal damages Sales Agent Properties for Sale Looking for Buyers Design Build House and Lot for Sale for Rent Talisay City Mandaue City Lapu Lapu Lapu-Lapu City Yncierto Sesante Villanueva Ruz Jan Edmond Marc Tim Timothy temperate damages Luz liquidated damages Kristin tct transfer certificate of title tax declaration birth certificate relocation survey surveying judicial titling administrative titling patent title denr cenro foreshore lease ecc environmental compliance certificate design build architect cebu engineer interior design designer residential commercial cebu property warehouse for rent for lease marc Christian yncierto ruz jan Edmond yncierto ruz Kristin Villanueva ruz Edmond mabalot ruz marriage certificate timber land forest land watershed agricultural lot land use conversion hearing trial illegal drugs trial lawyer business corporate lawyer labor lawyer immigration law bureau of immigration cebu 9g visa search warrant warrant of arrest motion to quash information complaint police officers buy bust physical suffering shocked horrified mental anguish fright serious anxiety besmirched reputation sleepless nights wounded feelings moral shock social humiliation similar injuries