QUINTOS vs.

BECK, 69 Phil 108

Plaintiffs-appellants: MARGARITA QUINTOS and ANGEL A. ANSALDO

Defendant-Appellee: BECK

Ponente: Imperial, J.:

FACTS:

Beck is a tenant of defendant Margarita Quintos. As such, Beck occupied Quintos’

house. Quintos granted Beck the use of the furniture found on the leased house, among
these were three gas heaters and 4 electric lamps, subject to the condition that the
defendant would return them to the plaintiff upon the latter's demand. Quintos sold the
pieces of furniture to Maria Lopez and Rosario Lopez and thereafter notified Beck of the
conveyance. Beck informed Quintos that the latter can get the furniture at the ground
floor of the house, however, at a later date, Beck told Quintos that he will return only the
other furniture but not the gas heaters and the electric lamps as he is to return them
only after the expiration of the lease contract. When the lease contract expires, Beck
deposited the furniture to the sheriff’s warehouse. Quintos refused to get the furniture in
view of the fact that the defendant had declined to make delivery of all of them.
Consequently, Quintos brought an action to compel Beck to return her certain furniture
which she lent him for his use. The trial court ruled in favour of Beck holding that
Quintos failed to comply with her obligation to get the furniture when they were offered
to her. On appeal of the case, the Court of First Instance of Manila affirmed the lower
court’s decision. Hence, this petition.
ISSUE:

Did the trial court erred in ruling that Quintos failed to comply with her obligation to get
the furniture when they were offered to her?

HELD:

YES. The trial court erred in ruling that Quintos failed to comply with her obligation to
get the furniture when they were offered to her.

The Supreme Court held that the contract entered into between the parties is one of
commadatum. Under it the plaintiff gratuitously granted the use of the furniture to the
defendant, reserving for herself the ownership thereof. By this contract the defendant
bound himself to return the furniture to the plaintiff, upon the latter’s demand. The
obligation voluntarily assumed by the defendant to return the furniture upon the
plaintiff's demand, means that he should return all of them to the plaintiff at the latter's
residence or house. The defendant did not comply with this obligation when he merely
placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters
and the four electric lamps.

Therefore, the trial court erred when it came to the legal conclusion that the plaintiff
failed to comply with her obligation to get the furniture when they were offered to her.
 FRIAS vs. SAN DIEGO-SISON,
GR. No. 155223, April 4, 2007

Petitioner: BOBIE ROSE V. FRIAS, represented by her Attorney-in-fact, MARIE F.

FUJITA

Respondent: FLORA SAN DIEGO-SISON

Ponente: MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

FACT:

Petitioner Bobie Rose V. Frias owned a house and lot which she acquired from Island
Masters Realty and Development Corporation (IMRDC) by virtue of a Deed of Sale. She
entered into a MOA with respondent Flora San Diego-Sison. In the MOA, they had
agreed among others that in the event that on the 6thmonth of the 6-month period to
purchase land, respondent would decide not to purchase, the petitioner has a period of
another 6 months to pay P3M provided that the said amount shall earn compounded
bank interest for the last six months only.

Respondent decided not to purchase the property so what happened was that the P3M
would be considered as a loan payable within six months. Petitioner failed to pay the
P2M. Consequently, respondent filed with the RTC a complaint for sum of money. RTC
rules in favor of respondent and orders the payment of P2M plus compounded interest
at 32% interest per annum pursuant to the MOA.

Petitioner appeals to CA. The CA affirms RTC decision with modification with regard to
the interest from 32% to 25%. Petitioner opposed to the said decision contending that
the interest is contrary to the parties’ Memorandum of Agreement; that the agreement
provides that if respondent would decide not to purchase the property, petitioner has the
period of another six months to pay the loan with compounded bank interest for the last
six months only; that the CA’s ruling that a loan always bears interest otherwise it is not
a loan is contrary to Art. 1956 of the New Civil Code which provides that no interest
shall be due unless it has been expressly stipulated in writing.

ISSUE:

Whether or not the compounded bank interest should be limited to six months as
contained in the MOA.

HELD:
The Supreme Court held that while the CA’s conclusion, that a loan always bears
interest otherwise it is not a loan, is flawed since a simple loan may be gratuitous or with
a stipulation to pay interest, there was no error committed by the CA in awarding a 25%
interest per annum on the two-million peso loan even beyond the second six months
stipulated period.

The general rule is that if the terms of an agreement are clear and leave no doubt as to
the intention of the contracting parties, the literal meaning of its stipulations shall prevail.
It is further required that the various stipulations of a contract shall be interpreted
together, attributing to the doubtful ones that sense which may result from all of them
taken jointly.

In the case at bar, the phrase "for the last six months only" should be taken in the
context of the entire agreement.

The agreement stipulated in the MOA that the amount given shall bear compounded
bank interest for the last six months only (referring to the second six-month period),
does not mean that interest will no longer be charged after the second six-month period
since such stipulation was made on the logical and reasonable expectation that such
amount would be paid within the date stipulated.

Considering that the petitioner failed to pay the amount given which under the MOA
shall be considered as a loan, the monetary interest for the last six months continued to
accrue until the actual payment of the loaned amount. The payment of regular interest
constitutes the price or cost of the money use and thus, until the principal sum due is
returned to the creditor, regular interest continues to accrue since the debtor continues
to use such principal amount.

It has been held that for a debtor to continue in possession of the principal of the loan
and to continue to use the same after maturity of the loan without payment of the
monetary interest, would constitute unjust enrichment on the part of the debtor at the
expense of the creditor.
 LIGUTAN vs. COURT OF APPEALS,
GR. No. 138677, February 12, 2002

Petitioners: TOLOMEO LIGUTAN and LEONIDAS DE LA LLANA

Respondents: HON. COURT OF APPEALS & SECURITY BANK & TRUST COMPANY

Ponente: VITUG, J.:

FACTS:

Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained a loan from private
respondent Security Bank and Trust Company. Petitioners executed a promissory note
to pay the sum loaned 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.
On maturity of the obligation, petitioners failed to settle the debt despite several
demands from the bank. Consequently, the bank filed a complaint for recovery of the
due amount. After trial of the case, the Trial court ruled in favour of the Bank, ordering
petitioners to pay the respondent the sum of P114,416.00 with interest thereon at the
rate of 15.189% per annum and 5% per month penalty charge among others. On appeal
of the case, petitioners prayed for the reduction of the 5% stipulated penalty for being
unconscionable. The Court of Appeals ruled that in the interest of justice and public
policy, a penalty of 3% per month or 36% per annum would suffice. But still, petitioners
dispute the said decision.

HELD:

No. The Court of Appeals, exercising its good judgment in the instant case, has rightly
reduced the penalty interest from 5% a month to 3% a month.

The Supreme Court held that the question of whether a penalty is reasonable or
iniquitous can be partly subjective and partly objective. Its resolution would depend on
such factors as, but not necessarily confined to, the type, extent and purpose of the
penalty, the nature of the obligation, the mode of breach and its consequences, the
supervening realities, the standing and relationship of the parties, and the like, the
application of which, by and large, is addressed to the sound discretion of the court.

The essence or rationale for the payment of interest is not exactly the same as that of a
surcharge or a penalty. A penalty stipulation is not necessarily preclusive of interest.
What may justify a court in not allowing the creditor to impose full surcharges and
penalties, despite an express stipulation therefor in a valid agreement, may not equally
justify the non-payment or reduction of interest. Indeed, the interest prescribed in loan
financing arrangements is a fundamental part of the banking business and the core of a
bank's existence.

Therefore, the Court sees no cogent ground to modify the ruling of the appellate court.
 GSIS vs. COURT OF APPEALS,
GR. No. L-52478, October 20, 1986

Petitioners: THE GOVERNMENT SERVICE INSURANCE SYSTEM

Respondents: HONORABLE COURT OF APPEALS, NEMENCIO R. MEDINA and

JOSEFINA G. MEDINA

Ponente: PARAS, J.:

FACTS:

In 1961, herein private respondents spouses Nemencio R. Medina and Josefina G.

Medina applied with the herein petitioner Government Service Insurance System for a
loan of P600,000.00. The approved loan amount was only P350,000.00 at the rate of
interest of 9% per annum compounded monthly and the rate of 9%/12% per month for
any installment or amortization that remains due and unpaid. The approved loan
amount was further reduced to P295,000.00.

The Medinas accepted the reduced amount and executed a promissory note and a real
estate mortgage in favor of GSIS. Subsequently, upon application by the Medinas, the
GSIS approved an additional loan of P230,000.00 on the security of the same
mortgaged properties to bear interest at 9% per annum compounded monthly and
repayable in ten years.

However, in 1965, the Medinas defaulted in the payment of the monthly amortization on
their loan despite several demands from petitioner. Hence, the GSIS imposed 9%/12%
interest on instalments that are due and unpaid. The Medinas opposed to this
contending that the interest rates on the loan accounts are usurious. After trial of the
case, the trial court ordered the Medinas full payment of their obligation to the GSIS
plus interest at 9% per annum. Aggrieved, the Medinas appealed before the Court of
Appeals but the latter affirmed the lower court’s decision.

ISSUE:

Whether or not the interest rates on the loan accounts of respondent-appellee Medina
spouses are usurious.

HELD:

It has already been settled that the Usury Law applies only to interest by way of
compensation for the use or forbearance of money. Interest by way of damages is
governed by Article 2209 of the Civil Code of the Philippines which provides that “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.” The Civil Code permits the agreement upon a
penalty apart from the interest. Should there be such an agreement, the penalty does
not include the interest, and as such the two are different and distinct things which may
be demanded separately.

Therefore the Supreme Court held that the stipulation about payment of such additional
rate partakes of the nature of a penalty clause, which is sanctioned by law.