Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-33582 March 30, 1982
THE OVERSEAS BANK OF MANLA, petitioner,
vs.
V!ENTE !OR"ERO a#$ !O%RT OF A&&EALS, respondents.

ES!OLN, J.:
Again, We are confronted with another case involving the Overseas Bank of
Manila, filed by one of its depositors.
This is a petition for review on certiorari of the decision of the Court of Appeals
which affired the !udgent of the Court of "irst #nstance of Manila, holding
petitioner bank liable to respondent $icente Cordero in the aount of %&','''.''
representing the latter(s tie deposit with petitioner, plus interest thereon at )*
per annu until fully paid, and costs.
On +uly ,', -.)/, private respondent opened a one0year tie deposit with
petitioner bank in the aount of %&','''.'' to ature on +uly ,', -.)& with
interest at the rate of )* per annu. 1owever, due to its distressed financial
condition, petitioner was unable to pay Cordero his said tie deposit together
with the interest. To enforce payent, Cordero instituted an action in the Court of
"irst #nstance of Manila.
%etitioner, in its answer, raised as special defense the finding by the Monetary
Board of its state of insolvency. #t cited the 2esolution of August -, -.)& of the
Monetary Board which authori3ed petitioner(s board of directors to suspend all its
operations, and the 2esolution of August -4, -.)& of the sae Board, ordering
the 5uperintendent of Banks to take over the assets of petitioner for purposes of
li6uidation.
%etitioner contended that although the 2esolution of August -4, -.)& was then
pending review before the 5upree Court,
1
it effectively barred or abated the
action of respondent for even if !udgent be ultiately rendered in favor of
Cordero, satisfaction thereof would not be possible in view of the restriction
iposed by the Monetary Board, prohibiting petitioner fro issuing anager(s
and cashier(s checks and the provisions of 5ection &7 of 2ep. Act 44/, otherwise
known as the 8eneral Banking Act, forbidding its directors and officers fro
aking any payent out of its funds after the bank had becoe insolvent. #t was
further claied that a !udgent in favor of respondent would create a preference
in favor of a particular creditor to the pre!udice of other creditors and9or
depositors of petitioner bank.
After pre0trial, petitioner filed on :oveber ,., -.)&, a otion to disiss,
reiterating the sae defenses raised in its answer. "inding the sae
uneritorious, the lower court denied the otion and proceeded with the trial on
the erits. #n due tie, the lower court rendered the aforesaid decision.
;issatisfied, petitioner appealed to the Court of Appeals, which affired the
decision of the lower court.
1ence, this petition for review on certiorari.
The issues raised in this petition are 6uite novel. %etitioner stands fir on its
contentions that the suit filed by respondent Cordero for recovery of his tie
deposit is barred or abated by the state of insolvency of petitioner as found by
the Monetary Board of the Central Bank of the %hilippines< and that the !udgent
rendered in favor of respondent would in effect create a preference in his favor to
the pre!udice of other creditors of the bank.
Certain supervening events, however, have rendered these issues oot and
acadeic. The first of these supervening events is the letter of +ulian Cordero,
brother and attorney0in0fact of respondent $icente Cordero, addressed to the
Coercial Bank of Manila =Cobank>, successor of petitioner Overseas Bank
of Manila. #n this letter dated "ebruary -4, -.&-, copy of which was furnished this
Court, it appears that respondent Cordero had received fro the %hilippine
;eposit #nsurance Copany the aount of %-','''.''.
The second is a Manifestation by the sae +ulian Cordero dated +uly 4, -.&-,
acknowledging receipt of the su of %/4,&?'.''. 5aid Manifestation is in the
nature of a 6uitclai, pertinent portions of which We 6uote@
#, the undersigned acting for and in behalf of y brother $icente 2. Cordero who
resides in Canada and by virtue of a 5pecial %ower of Attorney issued by $icente
2oero, our Consul 8eneral in $ancouver, Canada, AeroA copy attached, do
hereby anifest to this honorable court that we have decided to waive all and
any daages that ay be awarded to the above0entioned case and we hereby
also agree to accept the aount of 5eventy Three Thousand Bight 1undred
"orty %esos =%/4,&?'.''> representing the principal and interest as coputed by
the Coercial Bank of Manila. We also agree to hold free and harless the
Coercial Bank of Manila against any clai by any third party or any suit that
ay arise against this agreeent of payent.
... We also confir receipt of 5eventy Three Thousand Bight 1undred "orty
%esos =%/4,&?'.''> with our full satisfaction. ...
When asked to coent on this Manifestation, counsel for Cobank filed on
August -,, -.&- a Coent confiring and ratifying the sae, particularly the
portions which state@
We also agree to hold free and harless the Coercial Bank any third party or
any suit that ay arise against this agreeent of payent, and
We also confir receipt of 5eventy Three Thousand Bight 1undred "orty %esos
=%/4,&?'.''> with our full satisfaction.
1owever, upon further eAaination, this Court noted the absence of the alleged
special power of attorney eAecuted by private respondent in favor of +ulian
Cordero. When directed to produce the sae, +ulian Cordero subitted the
following eAplanatory Coent, to which was attached the special power of
attorney eAecuted by respondent $icente Cordero@
4. This anifestation =referring to the Manifestation of +uly 4, -.&-> applies only
to third party clais, suit and other daages. #t does not ean waiving the
interest it should earn while the bank is closed and also the attorney(s fees as
decided by the lower court. #t is very clear. # did not waive the attorney(s fees
because it belongs to our attorney and interest because it belongs to us and we
are entitled to it.
Thus, with the principal clai of respondent having been satisfied, the only
reaining issue to be deterined is whether respondent is entitled to =-> interest
on his tie deposit during the period that petitioner was closed and =,> to
attorney(s fees.
We find the answer to be in the negative.
The pronounceent ade by this Court, per +ustice Barredo, in the recent case
of Overseas Bank of Manila vs. Court of Appeals
2
is eAplicit and categorical. We
6uote@
#t is a atter of coon knowledge which we take !udicial notice of, that what
enables a bank to pay stipulated interest on oney deposited with it is that thru
the other aspects of its operation, it is able to generate funds to cover the
payent of such interest. Cnless a bank can lend oney, engage in international
transactions, ac6uire foreclosed ortgaged properties or their proceeds and
generally engage in other banking and financing activities, fro which it can
derive incoe, it is inconceivable how it can carry on as a depository obligated to
pay stipulated interest. ... Conse6uently, it should be deeed read into every
contract of deposit with a bank that the obligation to pay interest on the deposit
ceases the oent the operation of the bank is copletely suspended by the
duly constituted authority, the Central Bank.
We consider it of trivial conse6uence that the stoppage of the bank(s operations
by the Central Bank has been subse6uently declared illegal by the 5upree
Court, for before the Court(s order, the bank had no alternative under the law
than to obey the orders of the Central Bank. Whatever be the !uridical
significance of the subse6uent action of the 5upree Court, the stubborn fact
reained that the petitioner was totally crippled fro then on fro earning the
incoe needed to eet its obligations to its depositors. #f such a situation cannot,
strictly speaking be legally denoinated as Dforce a!eureD as aintained by
private respondent, We hold it is a atter of siple e6uity that it be treated as
such.
And concluding, this Court stated@
%arenthetically, We ay add for the guidance of those who ight be concerned
and so that unnecessary litigations ay be avoided fro further clogging the
dockets of the courts that in the light of the consideration eApounded in the above
opinion, the sae forula that eAepts petitioner fro the payent of interest to
its depositors during the whole period of factual stoppage of its operations by
orders of the Central Bank, odified in effect by the decision as well as the
approval of a forula of rehabilitation by this Court, should be, as a atter of
consistency, applicable or followed in respect to all other obligations of petitioner
which could not be paid during the period of its actual coplete closure.
:either can respondent Cordero recover attorney(s fees. The trial court found
that herein petitioner(s refusal to pay was not due to a wilful and dishonest refusal
to coply with its obligation but to restrictions iposed by the Central Bank.
3

5ince respondent did not appeal fro this decision, he is now barred fro
contesting the sae.
W1B2B"O2B, that portion of the lower court(s decision ordering petitioner to pay
interest on Cordero(s tie deposit is set aside. #t appearing that the aount of
the latter(s tie deposit had been fully paid, this case is hereby disissed. :o
costs.
5O O2;B2B;.
Barredo (Chairman), Aquino, Concepcion, Jr., De Castro and ricta, JJ., concur.
A!ad "antos, J., is on leave.
T1#2; ;#$#5#O:
E8.2. :o. -,/../ August /, -..&F
"BG#H $#GGA:CB$A, petitioner, vs. COC2T O" A%%BAG5 and AGMA2#O 8O
MA:CBG, respondents.
;BC#5#O:
2OMB2O, J.@
"or the CourtIs resolution is the petition for review of the decision of the Court of
Appeals in CA08.2. C$ 4./4- entitled JAlario 8o Manuel v. "eliA $illanuevaK
i
E-F
dated +anuary 4', -..), involving an action for su of oney.
#n -..-, private respondent, Alario 8o Manuel filed a civil action for su of
oney with daages before the 2egional Trial Court of Cebu City, Branch &
against petitioner, "eliA $illanueva and his wife Melchora. The sub!ect atter of
the action involved a check dated +une 4', -..- in the aount of %-)/,)''.''
issued by petitioner in favor of private respondent. The check supposedly
represented payent of loans previously obtained by petitioner fro private
respondent as capital for the forerIs ining and fertili3er business. The check
when duly represented for payent was dishonored due to insufficiency of
funds. A deand was ade upon petitioner to ake good the check but he
failed to do so. %rivate respondent then filed a criinal coplaint for violation of
Batas %abansa Bilang ,,
ii
E,F before the Cebu City %rosecutorIs Office and the
sub!ect civil coplaint for su of oney. %etitioner, on the other hand, avers that
his principal obligation only aounts to %,4,?,'.''.
On +uly ,/, -..,, the trial court rendered a decision in favor of private
respondent, the dispositive portion of which reads@
JT1B "O2B8O#:8 CO:5#;B2B;, +udgent is hereby rendered in favor of the
plaintiff and against co0defendant "eliA $illanueva, directing the latter to pay the
forer %-)/,)''.'', the disissal of this case with respect to co0defendant
Melchora $illanueva, and finally with costs against the husband.
5O O2;B2B;.K
iii
E4F
Apparently aggrieved, both parties appealed the decision to the Court of Appeals.
%etitioner prayed for the reversal of the trial courtIs decision and contended that
his principal obligation is only %,4,?,'.'', while private respondent sought
interest of ten percent =-'*> of the principal obligation< twenty0five percent =,7*>
as attorneyIs fees, as well as oral and eAeplary daages.
The Court of Appeals disissed the petition and affired the decision of the trial
court sub!ect to the odification that petitioner was directed to additionally pay
private respondent attorneyIs fees and litigation eApenses in the aount of ten
=-'*> percent of %-)/,)''.'', and the entire obligation to earn interest at siA
=)*> percent per annu fro the filing of the coplaint.
iv
E?F %etitioner now
coes before this Court basically alleging the sae issues raised before the
Court of Appeals as follows@ =a> the Court of Appeals erred in not ruling that the
five =7*> and ten =-'*> percent interest iposed is not enforceable due to
absence of such stipulation in writing< =b> the Court of Appeals erred in not finding
that petitioner is only liable for the aount %,4,?,'.''< and =c> the Court of
Appeals erred in not declaring that the Central Bank and Monetary Board has no
power or authority to repeal the usury law.
v
E7F
The petition should be denied.
Tie and again it has been ruled that the !urisdiction of this Court in cases
brought to it fro the Court of Appeals is liited to the review and revision of
errors of law allegedly coitted by the appellate court, as its findings of fact are
deeed conclusive. As such, this Court is not duty0bound to analy3e and weigh
all over again the evidence already considered in the proceedings below.
vi
E)F The
rule, however, adits of the following eAceptions@ =-> when the inference ade is
anifestly istaken, absurd or ipossible< =,> when there is a grave abuse of
discretion< =4> when the finding is grounded entirely on speculations, surises or
con!ectures< =?> when the !udgent of the Court of Appeals is based on
isapprehension of facts< =7> when the findings are conflicting< =)> when the
Court of Appeals, in aking its findings, went beyond the issues of the case and
the sae is contrary to the adissions of both appellant and appellee< =/> when
the findings of the Court of Appeals are contrary to those of the trial court< =&>
when the findings of fact are conclusions without citation of specific evidence on
which they are based< =.> when the Court of Appeals anifestly overlooked
certain relevant facts not disputed by the parties and which, if properly
considered, would !ustify a different conclusion< and =-'> when the findings of fact
of the Court of Appeals are preised on the absence of evidence and are
contradicted by the evidence on record.
vii
E/F
After a review of the case at bar, we consider petitioner to have failed to raise
issues which would constitute sufficient ground to warrant the reversal of the
findings of the trial and appellate courts.
As regards the atter of legal interest, this Court, in the case of astern
"hippin# $ines, %nc. v. Court of Appeals
viii
E&F laid down the following guidelines@
J#. When an obligation, regardless of its source, i.e., law, contracts, 6uasi0
contracts, delicts or 6uasi0delicts is breached, the contravenor can be held liable
for daages. The provisions under Title H$## on J;aagesK of the Civil Code
govern in deterining the easure of recoverable daages.
##. With regard particularly to an award of interest in the concept of actual and
copensatory daages, the rate of interest, as well as the accrual thereof, is
iposed, as follows@
-. When the obligation is breached, and it consists in the payent of a su
of oney, i.e., a loan or forbearance of oney, the interest due is that which ay
have been stipulated in writing. "urtherore, the interest due shall itself earn
legal interest fro the tie it is !udicially deanded. #n the absence of stipulation,
the rate of interest shall be -,* per annu to be coputed fro default, i.e.,
fro !udicial or eAtra!udicial deand under and sub!ect to the provisions of Article
--). of the Civil Code.
,. When an obligation, not constituting a loan or forbearance of oney, is
breached, an interest on the aount of daages awarded ay be iposed at
the discretion of the court at the rate of )* per annu. A A A.
4. When the !udgent of the court awarding a su of oney becoes final
and eAecutory, the rate of legal interest, whether the case falls under paragraph -
or paragraph ,, above, shall be -,* per annu fro such finality until its
satisfaction, this interi period being deeed to be by then an e6uivalent to a
forbearance of credit.K
Applying the foregoing rules, since the principal obligation in the aount of
%-)/,)''.'' is a loan, the sae should earn legal interest at the rate of -,* per
annu coputed fro the tie the coplaint was filed until the finality of this
decision. On the other hand, if the total obligation is not satisfied it shall further
earn legal interest at the rate of -,* per annu coputed fro the finality of the
decision until payent thereof, the interi period being deeed to be a
forbearance of credit.
W1B2B"O2B, preises considered, the decision of the Court of Appeals in CA0
8.2. C$ 4./4- dated +anuary 4', -..) is hereby A""#2MB; with the
MO;#"#CAT#O: that the rate of legal interest to be paid is TWBG$B %B2CB:T
=-,*> per annu of the aount due coputed fro the tie the coplaint was
filed until the finality of this decision. After this decision becoes final and
eAecutory, the rate of TWBG$B %B2CB:T =-,*> per annu shall be additionally
iposed on the total obligation until payent thereof is satisfied. :o costs.
5O O2;B2B;.
:arvasa C. +. =Chairan>, Lapunan, and %urisia, ++. concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-30''1 Ma( 28, 198)
LAM LA*, plaintiff0appellee,
vs.
OL+M&! SA*MLL !O. a#$ ELNO LEE !H, defendants0appellants.
&eli'ardo ".M. de (u'man for plaintiff)appellee.
Mariano M. de Jo*a for defendants)appellants.

MELEN!O-HERRERA, J.:
This is an appeal by defendants fro a ;ecision rendered by the then Court of
"irst #nstance of Bulacan. The appeal was originally taken to the then Court of
Appeals, which endorsed it to this instance stating that the issue involved was
one of law.
#t appears that on or about 5epteber /, -.7/, plaintiff loaned %-','''.'',
without interest, to defendant partnership and defendant Blino Gee Chi, as the
anaging partner. The loan becae ultiately due on +anuary 4-, -.)', but was
not paid on that date, with the debtors asking for an eAtension of three onths, or
up to April 4', -.)'.
On March -/, -.)', the parties eAecuted another loan docuent. %ayent of the
%-','''.'' was eAtended to April 4', -.)', but the obligation was increased by
%),'''.'' as follows@
That the su of 5#H T1OC5A:; %B5O5 =%),'''.''>, %hilippine currency shall
for part of the principal obligation to answer for attorney(s fees, legal interest,
and other cost incident thereto to be paid unto the creditor and his successors in
interest upon the terination of this agreeent.
;efendants again failed to pay their obligation by April 4', -.)' and, on
5epteber ,4, -.)', plaintiff instituted this collection case. ;efendants aditted
the %-','''.'' principal obligation, but claied that the additional %),'''.''
constituted usurious interest.
Cpon application of plaintiff, the Trial Court issued, on the sae date of
5epteber ,4, -.)', a writ of Attachent on real and personal properties of
defendants located at Laranglan, :ueva Bci!a. After the Writ of Attachent was
ipleented, proceedings before the Trial Court versed principally in regards to
the attachent.
On +anuary -&, -.)-, an Order was issued by the Trial Court stating that Dafter
considerin# the manifestation of !oth counsel in Cham!ers, the Court hereby
allows both parties to siultaneously subit a Motion for 5uary +udgent. 1
The plaintiff filed his Motion for 5uary +udgent on +anuary 4-, -.)-, while
defendants filed theirs on "ebruary ,, -.)l.
2

On +une ,), -.)-, the Trial Court rendered decision ordering defendants to pay
plaintiff Dthe aount of %-','''.'' plus the further su of %),'''.'' by way of
li6uidated daages . . . with legal rate of interest on both aounts fro April 4',
-.)'.D #t is fro this !udgent that defendants have appealed.
We have decided to affir.
Cnder Article -47? of the Civil Code, in regards to the agreeent of the parties
relative to the %),'''.'' obligation, Dit is presued that it eAists and is lawful,
unless the debtor proves the contraryD. :o evidentiary hearing having been held,
it has to be concluded that defendants had not proven that the %),'''.''
obligation was illegal. Confiring the Trial Court(s finding, we view the %),'''.''
obligation as li6uidated daages suffered by plaintiff, as of March -/, -.)',
representing loss of interest incoe, attorney(s fees and incidentals.
The ain thrust of defendants( appeal is the allegation in their Answer that the
%),'''.'' constituted usurious interest. They insist the clai of usury should
have been deeed aditted by plaintiff as it was Dnot denied specifically and
under oathD.
3
5ection . of the Csury Gaw =Act ,)77> provided@
5BC. .. +he person or corporation sued shall file its answer in writing under oath
to any coplaint brought or filed against said person or corporation before a
copetent court to recover the oney or other personal or real property, seeds
or agricultural products, charged or received in violation of the provisions of this
Act. The lack of taking an oath to an answer to a coplaint will ean the
adission of the facts contained in the latter.
The foregoing provision envisages a coplaint filed against an entity which has
coitted usury, for the recovery of the usurious interest paid. #n that case, if the
entity sued shall not file its answer under oath denying the allegation of usury, the
defendant shall be deeed to have aditted the usury. The provision does not
apply to a case, as in the present, where it is the defendant, not the plaintiff, who
is alleging usury.
Moreover, for soetie now, usury has been legally non0eAistent. #nterest can
now be charged as lender and borrower ay agree upon.
)
The 2ules of Court in
regards to allegations of usury, procedural in nature, should be considered
repealed with retroactive effect.
5tatutes regulating the procedure of the courts will be construed as applicable to
actions pending and undeterined at the tie of their passage. %rocedural laws
are retrospective in that sense and to that eAtent.
5

... 5ection ,?=d>, 2epublic Act :o. &/), known as the Arbitration Gaw, which took
effect on -. ;eceber -.74, and ay be retroactively applied to the case at bar
because it is procedural in nature. ...
,

W1B2B"O2B, the appealed !udgent is hereby affired, without
pronounceent as to costs.
5O O2;B2B;.
+eehankee (Chairman), ,lana, -elova, (utierre', Jr. and De la &uente, JJ.,
concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. Nos. L-43697 and L-442200 March 31 193!
"n r# L$%&$da'$on o( 'h# M#rcan'$)# *an+ o( Ch$na
GOPOCO GROCER, -GOPOCO. ET /L. claimantsappellants!
"s#
P/C"0"C CO/ST *"SCU"T CO. ET /L. opposito$sappellees#
A.M. Zarate for appellants Gopoco Grocery et al.
Laurel, Del Rosario and Sabido for appellant Tiong-Cui Gion.
Ross, La!rence and Selp for appellees "acific Coast #iscuit Co. et al.
$usebio %rense and Car&elino G. Al'endia for appellees Cinese Grocers Asso. et al.
Marcelo (ubla for appellees Ang Ceng Lian et al.
1"/2 J.:
On petition of the Ban% Commissione$ &ho alle'e( to ha"e foun(! afte$ an in"esti'ation!
that the Me$cantile Ban% of China coul( not continue ope$atin' as such &ithout $unnin'
the $is% of suffe$in' losses an( p$e)u(ice its (eposito$s an( custome$s* an( that &ith the
$e+uisite app$o"al of the co$$espon(in' autho$ities! he ha( ta%en cha$'e of all the assets
the$eof* the Cou$t of Fi$st Instance of Manila (ecla$e( the sai( ban% in li+ui(ation*
app$o"e( all the acts the$etofo$e e,ecute( b- the commissione$* p$ohibite( the office$s
an( a'ents of the ban% f$om inte$fe$in' &ith sai( commissione$ in the possession of the
assets the$eof! its (ocuments! (ee(! "ouche$s! boo%s of account! pape$s! memo$an(um!
notes! bon(! bon(s an( accounts! obli'ations o$ secu$ities an( its $eal an( pe$sonal
p$ope$ties* $e+ui$e( its c$e(ito$s an( all those &ho ha( an- claim a'ainst it! to p$esent the
same in &$itin' befo$e the commissione$ &ithin ninet- (a-s* an( o$(e$e( the publication!
as &as in fact (one! of the o$(e$ containin' all these p$o"isions! fo$ the t&o consecuti"e
&ee%s in t&o ne&spape$s of 'ene$al ci$culation in the Cit- of Manila! at the e,penses of
the afo$esai( ban%# Afte$ these publications! an( &ithin the pe$io( of ninet- (a-s! the
follo&in' c$e(ito$s! amon' othe$s! p$esente( thei$ p$esente( thei$ claims.
Tion' Chui /ion! /opoco /$oce$-! Tan 0oc%o! 1oo 2 0o 2 Co#! S- /uan 3uat an( 0a
Bella Ton(e4a#
I# The claim of Tion' Chui /ion is fo$ the sum of P56!789#7:# 3e alle'e( that he
(eposite( sai( sum in the ban% un(e$ li+ui(ation on cu$$ent account#
II# The claim of /opoco /$oce$- ;/opoco< is fo$ the sum of P=!>?7#=8 plus P=@6#
It (esc$ibe( its claim as follo&s.
Balance (ue on
open account
sub)ect to chec%
P=!>7:#>9
Inte$est on cAa =!9?
=!>?7#=8
Su$et- (eposit =@6#66
III# The claim of Tan 0oc%o is fo$ the sum of P:!@7=#76! an( he (esc$ibes it in tu$n
as follo&s.
Balance (ue on
open account
sub)ect to chec% 0
:9>
P:!@56#==
Sa"in's account
No# 59@ ;fo$ei'n<
&ith Me$cantile
Ban% of China 0
5@55 Amo-
B59!666!66 Inte$est
on sai( Sa"in's
Account No# 59@ 8#77
Inte$est on
chec%in' aAc
56#9=
:!@7=#76
IV# The claim of 1oo 2 0o 2 Co# is fo$ the sum of P@!>:7#88 an( is set out in its
&$itten claim appea$in' in the $eco$( on appeal as follo&s.
Balance (ue on
open sub)ect to
chec% 08=9
P@!>@5#65
Inte$est on
chec%in' aAc
55#?:
@!>:7#8?
V# The claim of S- /uan 3uat is fo$ the sum of P@!7?7#88 an( the (esc$ibe( it as
follo&s.
Balance (ue on
open account
sub)ect to chec% 0
:58
P@!77=#?=
Inte$est on
chec%in' aAc
8#9=
@!7?7#88
VI# The claim of 0a Bella Ton(e4a is fo$ the sum of P5!>57#:>! also (esc$ibe( as
follo&s.
Balance (ue on
open account
sub)ect to chec%
P5>56#9>
Inte$est on account 7#76
5!>57#:>
To bette$ $esol"e not onl- these claims but also the man- othe$s &hich &e$e p$esente(
a'ainst the ban%! the lo&e$ cou$t! on Cul- 59! 5>?7! appointe( Ful'encio Bo$$omeo as
commissione$ an( $efe$ee to $ecei"e the e"i(ence &hich the inte$este( pa$ties ma- (esi$e
to p$esent* an( the commissione$ an( $efe$ee thus name(! afte$ +ualif-in' fo$ the office
an( $ecei"in' the e"i(ence p$esente( to him! $esol"e( the afo$esai( si, claims b-
$ecommen(in' that the same be consi(e$e( as an o$(ina$- c$e(it onl-! an( not as a
p$efe$$e( c$e(it as the inte$este( pa$ties &ante(! because the- &e$e at the same time
(ebto$s of the ban%#
The e"i(ence a((uce( an( the "e$- a(missions of the sai( inte$este( pa$ties in fact sho&
that ;a< the claimant Tion' Chui /ion! &hile he &as a c$e(ito$ of the Me$cantile Ban% of
China in the sum of P56!789#7: &hich he (eposite( on cu$$ent account! &as also a (ebto$
not onl- in the sum of P@??#:@ but also in the sum of P@@=#::! the amount of a ($aft
&hich he accepte(! plus inte$est the$eon an( the p$otest fees pai( the$efo$* ;b< the
claimant /opoco /$oce$- ;/opoco< ha( a cu$$ent account in the ban% in the sum of
P9!?>7#=8! but it is in(ebte( to it! in Tu$n! in the sum of B7!??=#86! the amount of ce$tain
($afts &hich it ha( accepte(* ;c< the claimant Tan 0oc%o ha( a (eposit of P:!@7=#76! but
he o&e( B5!?:8#>6! the amount of a ($aft &hich he also accepte(* ;(< the claimant 1oo 2
0o 2 Co# ha( a (eposit of P@!>:7#88! but it &as in(ebte( in the sum of B?!=@=#8=! the
amount also of ce$tain ($afts accepte( b- it* ;e< the claimants S- /uan 3uat an( S- Dia
ha( a (eposit of P@!7?7#88! but the- o&e( the sum of B?!56:#?:! fo$ t&o ($afts accepte(
b- them an( al$ea(- (ue* an( ;f< the claimant 0a Bella Ton(e4a ha(! in tu$n! a (eposit of
P5!>57#:>! but it &as! in tu$n! in(ebte( in the sum of B9@9#=6 inclu(in' inte$est an( othe$
e,penses! the amount of t&o ($afts ($a&n upon an( accepte( b- it#
The lo&e$ cou$t app$o"e( all the $ecommen(ations of The commissione$ an( $efe$ee as to
claims of the si, appellants as follo&s* ;5< To app$o"e the claim of Tion' Chui /ion
;P56!789#7:< but onl- as an o$(ina$- c$e(it! minus the amount of the ($aft fo$ P@@=#::*
;7< to app$o"e the claim of /opoco /$oce$- ;/opoco< but also as an o$(ina$- c$e(it onl-
;P9!?8:#>9 acco$(in' to the $efe$ee<! minus its obli'ation amountin' to B7!??=#86 o$
P=!@@>#@6* ;?< to app$o"e the claim of Tan 0oc%o but as an o$(ina$- c$e(it onl-
;P:!@56#== acco$(in' to the $efe$ee<! (e(uctin' the$ef$om his obli'ation amountin' to
B5!?:8#>6 o$ P7!:9:#86* to app$o"e the claim of 1oo 2 0o 2 Co# but onl- as an o$(ina$-
c$e(it ;P@!>@5#65 acco$(in' to the $efe$ee<# afte$ (e(uctin' its obli'ation to the ban%!
amountin' to B?!=@=#8= o$ P@!>7>#@8* ;9< to app$o"e the claim of S- /uan 3uat but onl-
as an o$(ina$- c$e(it ;P@!77=#?= acco$(in' to the $efe$ee<! afte$ (e(uctin' his obli'ation
amountin' to B?!56:#?:< o$ P@!75=#:=* an(! finall-! ;@< to app$o"e the claim of la Bella
Ton(e4a but also as an o$(ina$- c$e(it onl- ;5!>5:#96 acco$(in' to the $efe$ee<! afte$
(e(uctin' it obli'ation amountin' to B9@9#=6 o$ P5!5?6#86* but he e,p$essl- $efuse( to
autho$iEe the pa-ment of the inte$est b- $eason of impossibilit- upon the '$oun( set out
in the (ecision# Not a'$eeable to the (ecision of the lo&e$ cou$t! each of the inte$este(
pa$ties appeale( the$ef$om an( the$eafte$ file( thei$ $especti"e b$iefs#
Tion' Chui /ion a$'ues in his b$ief file( in case in /# R# No# ==7766! that the lo&e$ cou$t
e$$e(.
5# In hol(in' that his (eposit of P56!789#7: in the Me$cantile Ban% of China!
constitutes an o$(ina$- c$e(it onl- an( not a p$efe$$e( c$e(it#
7# In hol(in' as p$efe$$e( c$e(its the ($afts an( chec%s issue( b- the ban% un(e$
li+ui(ation in pa-ment of the ($afts $emitte( to it fo$ collection f$om me$chants
$esi(in' in the count$-! b- fo$ei'n entities o$ ban%s* an( in not hol(in' that the
(eposits on cu$$ent account in sai( ban% shoul( en)o- p$efe$ence o"e$ sai( ($afts
an( chec%s* an(
?# In hol(in' that the amount of P@??#:@ ;&hich shoul( be un(e$stoo( as
P@@=#::<! &hich the claimant o&es to the ban% un(e$ li+ui(ation! be (e(ucte(
f$om his cu$$ent account (eposit the$ein! amountin' to P56!789#7:! upon the
(ist$ibution of the assets of the ban% amon' its "a$ious c$e(ito$s! instea( of
hol(in' that! afte$ (e(uctin' the afo$esai( sum of P@??#:@ ;shoul( be P@@=#::<
f$om his afo$esai( (eposit! the$e be tu$ne( o"e$ to him the balance to'ethe$ &ith
the (i"i(en(s o$ sha$es then co$$espon(in' to him! on the basis of sai( amount#
The othe$ fi"e claimants! that is! /opoco /$oce$- Tan 0oc%o! 1oo 2 0o 2 Co#! S- /uan
3uat an( 0a Bella Ton(e4a! in tu$n a$'ue in the b$ief the- )ointl- file( in case /# R# No#
=?@>:! that the lo&e$ cou$t e$$e(.
5# In not fi$st (e(uctin' f$om thei$ $especti"e (eposits in the ban% un(e$
li+ui(ation! &hose pa-ment the- claim! thei$ $especti"e obli'ation the$eto#
7# In not hol(in' that thei$ claims constitute a p$efe$$e( c$e(it#
?# In hol(in' that the ($afts an( chec%s issue( b- the ban% un(e$ li+ui(ation in
pa-ment of the ($afts $emitte( to it b- fo$ei'n entitles an( ban%s fo$ collection
f$om the ce$tain me$chant $esi(in' in the count$-! a$e p$efe$$e( c$e(its* an( in not
hol(in' that the (eposits ma(e b- each of them en)o- p$efe$ence o"e$ sai( ($afts
an( chec%s! an(
=# In (en-in' thei$ motion fo$ a ne& t$ial base on the p$oposition that the appeale(
(ecision is not in acco$(ance &ith la& an( is cont$a$- to the e"i(ence a((uce( at
the t$ial#
The +uestions $aise( b- the appellant in case /# R# No# ==766 an( b- appellants in case
/#R# =?@>: bein' i(entical in natu$e! &e belie"e it p$actical an( p$ope$ to $esol"e sai(
+uestions )ointl- in one (ecision# Befo$e p$ocee(in'! ho&e"e$! it is con"enient to note
that the commissione$ an( $efe$ee! classif-in' the "a$ious claims p$esente( a'ainst the
ban%! place( un(e$ one '$oup those pa$ta%in' of the same natu$e! the classification
ha"in' $esulte( in si, '$oups#
In the fi$st '$oup he inclu(e( all the claims fo$ cu$$ent account! sa"in's an( fi,e(
(eposits#
In the secon( '$oup he inclu(e( the claims fo$ chec%s o$ ($afts sol( b- the ban% un(e$
li+ui(ation an( not pai( b- the a'ents o$ ban%s in &hose fa"o$ the- ha( been issue(#
In the thi$( '$oup he inclu(e( the claims chec%s o$ ($afts issue( b- the ban% un(e$
li+ui(ation in pa-ment o$ $eimbu$sement of the ($afts o$ 'oo(s $emitte( to it fo$
collection! f$om $esi(ent me$chants an( entitles! b- fo$ei'n ban%s an( entities#
In the fou$th '$oup he inclu(e( the claims fo$ ($afts o$ secu$ities to be collecte( f$om
$esi(ent me$chants an( entities to be collecte( f$om $esi(ent me$chants an( entities &hich
&e$e pen(in' collection on the (ate pa-ments &e$e suspen(e(#
In the fifth '$oup he inclu(e( the claims of ce$tain (eposito$s o$ c$e(ito$s of the ban%
&ho &e$e at the same time (ebto$s the$eof* an( he consi(e$e( of this class the claims of
the appellants in these t&o cases! an(
In the si,th '$oup he inclu(e( the othe$ claims (iffe$ent in natu$e f$om the of the
afo$esai( fi"e claims#
I# No&! then! shoul( the appellantsF (eposits on cu$$ent account in the ban% no& un(e$
li+ui(ation be consi(e$e( p$efe$$e( c$e(its! an( not othe$&ise! o$ shoul( the- be
consi(e$e( o$(ina$- c$e(its onl-G The appellants conten( that the- a$e p$efe$$e( c$e(its
onl-G The appellants conten( that the- a$e p$efe$$e( c$e(its because the- a$e (eposits in
contemplation of la&! an( as such shoul( be $etu$ne( &ith the co$$espon(in' inte$est
the$eon# In suppo$t the$eof the- cite Man$esa ;55 Man$esa! Ci"il Co(e! pa'e @@?<! an(
&hat has been insinuate( in the case of Rogers 's. S&it, #ell ) Co# ;56 Phil#! ?5><!
citin' the sai( commentato$ &ho maintains that! not&ithstan(in' the p$o"isions of
a$ticles 5:@: an( 5:@8 an( othe$s of the afo$esai( Co(e! f$om &hich it is infe$$e( that the
socalle( i$$e'ula$ (eposits no lon'e$ e,ist! the fact is that sai( (eposits still e,ist# An(
the- conten( an( a$'ue that &hat the- ha( in the ban% shoul( be consi(e$e( as of this
cha$acte$# But it happens that the- themsel"es a(mit that the ban% o&es them inte$est
&hich shoul( ha"e been pai( to them befo$e it &as (ecla$e( in a state of li+ui(ation# This
fact un(oubte(l- (est$o-s the cha$acte$ &hich the- nullifies thei$ contention that the same
be consi(e$e( as i$$e'ula$ (eposits! because the pa-ment of inte$est onl- ta%es place in
the case of loans# On the othe$ han(! as &e state( &ith $espect to the claim of Tan Tion'
Tic% ;*n re 0i+ui(ation of Me$cantile Ban% of China! /#R# No# =?@87<! the p$o"isions of
the Co(e of Comme$ce! an( not those of the Ci"il Co(e! a$e applicable to cases of the
natu$e of those at ba$! &hich ha"e to (o &ith pa$ties &ho a$e both me$chants# ;A$ticles
?6? an( ?6>! Co(e of Comme$ce#< 1e the$e sai(! an( it is not amiss to $epeat no&! that
the socalle( cu$$ent account an( sa"in's (eposits ha"e lost thei$ cha$acte$ of (eposits!
p$ope$l- socalle( an( a$e con"e$tible into simple comme$cial loans because! in cases of
such (eposits! the ban% has ma(e use the$eof in the o$(ina$- cou$se of its t$ansactions as
an institution en'a'e( in the ban%in' business! not because it so &ishes! but p$ecisel-
because of the autho$it- (eeme( to ha"e been '$ante( to it b- the appellants to enable
them to collect the inte$est &hich the- ha( been an( the- a$e no& collectin'! an( b-
"i$tue fu$the$ of the autho$it- '$ante( to it b- section 579 of the Co$po$ation 0a& ;Act
No# 5=9><! as amen(e( b- Acts Nos# 766? an( ?@56 an( section > of the Ban%in' 0a&
;Act No# ?59=<! &ithout consi(e$in' of cou$se the p$o"isions of a$ticle 5:@8 of the Ci"il
Co(e# 1he$efo$e! it is hel( that the (eposits on cu$$ent account of the appellants in the
ban% un(e$ li+ui(ation! &ith the $i'ht on thei$ $i'ht on thei$ pa$t to collect inte$est! ha"e
not c$eate( an( coul( not c$eate a )u$i(ical $elation bet&een them e,cept that of c$e(ito$s
an( (ebto$! the- bein' the c$e(ito$s an( the ban% the (ebto$#
1hat has so fa$ been sai( $esol"es a("e$sel- the contention of the appellants! the
+uestion $aise( in the fi$st an( secon( assi'ne( e$$o$s Tion' Chui /ion in case /# R# No#
==766! an( the appellantsF secon( an( thi$( assi'ne( e$$o$s in case /# R# No# =?@>:#
II# As to the thi$( an( fi$st e$$o$s att$ibute( to lo&e$ cou$t b- Tion' Chui /ion in his case!
an( b- the othe$ appellants in thei$s! $especti"el-! it shoul( be state( that the +uestion of
setoff $aise( b- them cannot be $esol"e( a li%e +uestion in the sai( case! /# R# No#
=?@87! entitle( H*n re 0i+ui(ation of Me$cantile Ban% of China# Tan Tion' Tic%!
claimant#H It is p$ope$ that setoffs be ma(e! inasmuch as the appellants an( the ban%
bein' $ecip$ocall- (ebto$s an( c$e(ito$s! the same is onl- )ust an( acco$(in' to la& ;a$t#
55>9! Ci"il Co(e<! pa$ticula$l- as none of the appellants falls &ithin the e,ceptions
mentione( in section 98 of the Insol"enc- 0a& ;Act No# 5>9@<! $ea(in'.
SEC# 98# In all cases of mutual (ebts an( mutual c$e(its bet&een the pa$ties! the account
bet&een them shall be state(! an( one (ebt set off a'ainst the othe$! an( the balance onl-
shall be allo&e( an( pai(# But no setoff o$ counte$claim shall be allo&e( of a claim in its
natu$e not p$o"able a'ainst the estate. P$o"i(e(! That no setoff on counte$claim shall be
allo&e( in fa"o$ of an- (ebto$ to the insol"ent of a claim pu$chase( b- o$ t$ansfe$$e( to
such (ebto$ &ithin thi$t- (a-s imme(iatel- p$ece(in' the filin'! o$ afte$ the filin' of the
petition b- o$ a'ainst the insol"ent#
It has been sai( &ith much basis b- Mo$se! in his &o$% on Ban% an( Ban%in' ;@th e(#!
"ol# 5! pa'es ::@ an( :8=< that.
The $ules of la& as to the $i'ht of setoff bet&een the ban% an( its (eposito$s a$e not
(iffe$ent f$om those applicable to othe$ pa$ties# ;Pa'e ::@#<
1he$e the ban% itself stops pa-ment an( becomes insol"ent! the custome$ ma- a"ail
himself in setoff a'ainst his in(ebte(ness to the ban% of an- in(ebte(ness of the ban% to
himself! as! fo$ e,ample! the balance (ue him on his (eposit account# ;Pa'e :8=#<
But if setoffs a$e p$ope$ in these cases! &hen an( ho& shoul( the- be ma(e! consi(e$in'
that the appellants as% fo$ the pa-ment of inte$estG A$e the- b- an- chance entitle( to
inte$estG If the- a$e! &hen an( until &hat time shoul( the- be pai( the sameG
The +uestion of &hethe$ the- a$e entitle( to inte$est shoul( be $esol"e( in the same &a-
that &e $esol"e( the case of the claimant Tan Tion' Tic% in the sai( case! /# R# No#
=?@87# The ci$cumstances in these t&o cases a$e ce$tainl- the same as those in the sai(
case &ith $efe$ence to the sai( +uestion# The Me$cantile Ban% of China o&es to each of
the appellants the inte$est claime( b- them! co$$espon(in' to the -ea$ en(in' Decembe$
=! 5>?5! the (ate it &as (ecla$e( in a state of li+ui(ation! but not &hich the appellants
claim shoul( be ea$ne( b- thei$ (eposits afte$ sai( (ate an( until the full amounts the$eof
a$e pai( to them# An( &ith $espect to the +uestion of setoff! this shoul( be (eeme( ma(e!
of cou$se! as of the (ate &hen the Me$cantile Ban% of China &as (ecla$e( in a state of
li+ui(ation! that is! on Decembe$ =! 5>?5! fo$ then the$e &as al$ea(- a $ecip$ocal
concu$$ence of (ebts! &ith $espect to sai( ban% an( the appellants# ;A$ts# 55>9 an( 55>@
of the Ci"il Co(e* 8 Man$esa! =th e(#! p# ?@5#<
III# 1ith $espect to the fou$th assi'ne( e$$o$ of the appellants in case /# R# No# =?@>:! &e
hol(! in "ie& of the consi(e$ations set out in $esol"in' the othe$ assi'nments of e$$o$s!
that the lo&e$ cou$t p$ope$l- (enie( the motion fo$ ne& t$ial of sai( appellants#
In "ie& of the fo$e'oin'! &e mo(if- the appeale( )u('ments b- hol(in' that the (eposits
claime( b- the appellants! an( (ecla$e( b- the lo&e$ cou$t to be o$(ina$- c$e(its a$e fo$
the follo&in' amounts. P56!789#7: of Tion' Chui /ion* P9!?8:#>9 of /opoco /$oce$-
;/opoco<* P:!@56#== of Tan 0oc%o* P@>@5#65 of 1oo 2 0o 2 Co#* P@!77=#?= of S-
/uan 3uat* an( P5!>5:#96 of 0a Bella Ton(e4a! plus thei$ co$$espon(in' inte$est up to
Decembe$ =! 5>?5* that thei$ obli'ations to the ban% un(e$ li+ui(ation &hich shoul( be
set off a'ainst sai( (eposits! a$e $especti"el- fo$ the follo&in' amounts. P@@=#:: of Tion'
Chui /ion* P=!@@>#@6 of /opoco /$oce$- ;/opoco<* P7!:9:#86 of Tan 0oc%o* P@!>7>#@8
of 1oo 2 0o 2 Co#* P@!75=#:= of S- 3uat* an( P5!5?6#86 of 0a Bella To(e4a* an( &e
o$(e$ that the setoffs in +uestion be ma(e in the manne$ state( in this (ecision! that is! as
of the (ate al$ea(- in(icate(! Decembe$ =! 5>?5# In all othe$ $espects! &e affi$m the
afo$esai( )u('ments! &ithout special p$onouncement as to costs# So o$(e$e(#
A'ance+a, C.,., -illa-Real, Abad Santos, *&perial and .orrilleno, ,,., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-5909, Oc-o./r 11, 1985
&A!TA F. REFORMNA a#$ HERS OF FRAN!S!O REFORMNA, petitioners,
vs.
THE HONORABLE VALERANO &. TOMOL, 0R., a1 02$3/ o4 -h/ !o2r- o4
F5r1- #1-a#c/, Bra#ch 6, !EB% !T+, SHELL REFNNG !OM&AN+
7&HLS.8, N!., a#$ M!HAEL, N!OR&ORATE", respondents.
Mateo Canono* for petitioners.
-e*naldo A. ,ineda, -e*es, "anta*ana, +a*ao and ,icaso $a. Office for
respondent "hell.
Marcelo &ernan / Associates for respondent Michael, %nc.

!%EVAS, J.:
1ow uch, by way of legal interest, should a !udgent debtor pay the !udgent
creditor0 is the issue raised by the 2B"O2M#:A5 =herein petitioners> in this
%etition for 2eview on certiorari of the 2esolution of the 1on. respondent +udge
$aleriano %. Tool, +r. of the then Court of "irst #nstance of Cebu0Branch H#,
issued in Civil Case :o.
20--,/., an action for 2ecovery of ;aages for in!ury to %erson and Goss of
%roperty.
The dispositive portion of the assailed 2esolution reads as followsM
#n light =sic> of the foregoing, the considered view here that by legal interest is
eant siA =)*> percent as provided for by Article ,,'. of the Civil Code. Get a
writ of eAecution be issued.
5O O2;B2B;.
1
%etitioners( otion for the reconsideration of the 6uestioned 2esolution having
been denied, they now coe before Cs through the instant petition praying for
the setting aside of the said 2esolution and for a declaration that the !udgent in
their favor should bear legal interest at the rate of twelve =-,*> percent per
annu pursuant to Central Bank Circular :o. ?-) dated +uly ,., -./?.
1ereunder are the pertinent antecedents@
On +une /, -./,, !udgent was rendered by the Court of "irst instance of Cebu
in Civil Case :o. 20--,/.,
2
the dispositive portion of which readsM
W1B2B"O2B, !udgent is hereby rendered in favor of the plaintiffs and third
party defendants and against the defendants and third party plaintiffs as follows@
Ordering defendants and third party plaintiffs 5hell and Michael, #ncorporated to
pay !ointly and severally the following persons@
=a> ...
AAA AAA AAA
=g> %laintiffs %acita ". 2eforina and "rancisco 2eforina the su of
%-4-,'&?.'' which is the value of the boat " B %acita #ll together with its
accessories, fishing gear and e6uipent inus %&','''.'' which is the value of
the insurance recovered and the aount of %-','''.'' a onth as the estiated
onthly loss suffered by the as a result of the fire of May ), -.). up to the tie
they are actually paid or already the total su of %4/','''.'' as of +une ?, -./,
.ith le#al interest fro the filing of the coplaint until paid and to pay attorney(s
fees of %7,'''.'' with costs against defendants and third party plaintiffs.
On appeal to the then Court of Appeals, the trial court(s !udgent was odified to
reads as followsM
W1B2B"O2B. the !udgent appealed fro is odified such that defendants0
appellants 5hell 2efining Co. =%hils.>, #nc. and Michael, #ncorporated are hereby
ordered to pay ... The two =,> defendants0 appellants are also directed to pay
%-'','''.'' with legal interests fro the filing of the coplaint until paid as
copensatory and oral daages and %?-,'''.'' copensation for the value
of the lost boat with legal interest fro the filing of the coplaint until fully paid to
%acita ". 2eforina and the heirs of "rancisco 2eforina. The liability of the two
defendants for an the awards is solidary.
AAA AAA AAA
BAcept as odified above, the rest of the !udgent appealed fro is affired.
The defendants0appellants shall pay costs in favor of the plaintiffs. Appellants
5hell and Michael and third party defendant Anita G. Abellanosa shall shoulder
their respective costs.
5O O2;B2B;.
3
The said decision having becoe final on October ,?, -.&', the case was
reanded to the lower court for eAecution and this is where the controversy
started. #n the coputation of the Dlegal interestD decreed in the !udgent sought
to be eAecuted, petitioners clai that the Dlegal interestD should be at the rate of
twelve =-,*> percent per annu, invoking in support of their aforesaid
subission, Central Bank of the %hilippines Circular :o. ?-). Cpon the other
hand, private respondents insist that said legal interest should be at the rate of
siA =)*> percent per annu only, pursuant to and by authority of Article ,,'. of
the :ew Civil Code in relation to Articles ,,-' and ,,-- thereof.
#n support of their stand, petitioners contend that Central Bank Circular :o. ?-)
which provides M
By virtue of the authority granted to it under 5ection - of Act ,)77, as aended,
otherwise known as the DCsury GawD the Monetary Board in its 2esolution :o.
-),, dated +uly ,., -./?, has prescribed that the rate of interest for the loan or
for!earance of any oney, goods, or credits and the rate allowed in 0ud#ments,
in the absence of eApress contract as to such rate of interest, shall be twelve
=-,*> per cent per annu. This Circular shall take effect iediately. =#talics
supplied>
includes the !udgent sought to be eAecuted in this case, because it is covered
by the phrase ,nd the rate allowed in !udgents in the absence of eApress
contract as to such rate of interest ... D in the afore6uoted circular.
The petition is devoid of erit. Conse6uently, its disissal is in order.
Central Bank Circular :o. ?-) which took effect on +uly ,., -./? was issued and
proulgated by the Monetary Board pursuant to the authority granted to the
Central Bank by %.;. :o. --), which aended Act :o. ,)77, otherwise known as
the Csury Gaw. The aendent fro which said authority eanated reads as
followsM
5ection -0a. The Monetary Board is hereby authori3ed to prescribe the aAiu
rate or rates of interest for the loan or rene.al thereof or the for!earance of an*
mone*, #oods or credits, and to change such rate or rates whenever warranted
by prevailing econoic and social conditions@ %rovided, That such changes shall
not be ade oftener than once every twelve onths.
#n the eAercise of the authority herein granted, the Monetary Board ay
prescribe higher aAiu rates for consuer loans or renewals thereof as well
as such loans ade by pawnshops, finance copanies and other siilar credit
institutions although the rates prescribed for these institutions need not
necessarily be unifor. =#talics supplied>
Acting pursuant to this grant of authority, the Monetary Board increased the rate
of legal interest fro that of siA =)*> percent per annu originally allowed under
5ection # of Act :o. ,)77 to twelve =-,*> percent per annu.
#t will be noted that Act :o. ,)77 deals with interest on =-> loans< =,>
forbearances of any oney, goods, or credits< and =4> rate allowed in !udgents.
The issue now isMwhat kind of !udgent is referred to under the said law.
%etitioners aintain that it covers all kinds of onetary !udgent.
The contention is devoid of erit.
The !udgents spoken of and referred to are +udgents in litigations involving
loans or forbearance of any (oney, goods or credits. Any other kind of onetary
!udgent which has nothing to do with, nor involving loans or forbearance of any
oney, goods or credits does not fall within the coverage of the said law for it is
not within the abit of the authority granted to the Central Bank. The Monetary
Board ay not tread on forbidden grounds. #t cannot rewrite other laws. That
function is vested solely with the legislative authority. #t is aAioatic in legal
hereneutics that statutes should be construed as a whole and not as a series of
disconnected articles and phrases. #n the absence of a clear contrary intention,
words and phrases in statutes should not be interpreted in isolation fro one
another.
)
A word or phrase in a statute is always used in association with other
words or phrases and its eaning ay thus be odified or restricted by the
latter.
5
Another foridable arguent against the tenability of petitioners( stand are the
whereases of %; :o. --) which brought about the grant of authority to the
Central Bank and which reads thusM
W1B2BA5, the interest rate, together with other onetary and credit policy
instruents, perfors a vital role in obili3ing doestic savings and attracting
capital resources into preferred areas of investents<
W1B2BA5, the onetary authorities have recogni3ed the need to aend the
present Csury. Gaw to allow for ore fleAible interest rate ceilings that would be
ore responsive to the re6uireents of changing econoic conditions<
W1B2BA5, the availability of ade6uate capital resources is, aong other
factors, a decisive eleent in the achieveent of the declared ob!ective of
accelerating the growth of the national econoy.
Coing to the case at bar, the decision herein sought to be eAecuted is one
rendered in an Action for ;aages for in!ury to persons and loss of property and
does not involve any loan, uch less forbearances of any oney, goods or
credits. As correctly argued by the private respondents, the law applicable to the
said case is Article ,,'. of the :ew Civil Code which readsM
Art. ,,'.. #f the obligation consists in the payent of a su of oney, and the
debtor incurs in delay, the indenity for daages, there being no stipulation to
the contrary, shall be the payent of interest agreed upon, and in the absence of
stipulation, the legal interest which is siA percent per annu.
The above provision reains untouched despite the grant of authority to the
Central Bank by Act :o. ,)77, as aended. To ake Central Bank Circular :o.
?-) applicable to any case other than those specifically provided for by the Csury
Gaw will ake the sae of doubtful constitutionality since the Monetary Board
will be eAercising legislative functions which was beyond the intendent of %.;.
:o. --).
#: $#BW O" T1B "O2B8O#:8 CO:5#;B2AT#O:5, and finding the instant
petition to be without erit, the sae is hereby ;#5M#55B; with costs against
petitioners.
5O O2;B2B;.
Concepcion, Jr., A!ad "antos, Melencio)1errera, scolin, -elova, (utierre', Jr.,
De la &uente, Alampa* and ,ata0o, JJ., concur.
Makasiar, CJ., .ith separate opinion of Justice ,lana.
Aquino, J., concurs in the result.

SECON1 1"3"S"ON
SPOUSES R/MON P/TRON
and LU23"M"N1/ P/TRON
P#'$'$on#rs




- 4#rs&s -



UN"ON */N5 O0 T6E
P6"L"PP"NES T6E
"NTERN/T"ON/L
CORPOR/TE */N5 and
T6E 7UE1/N /N1 RUR/L
CRE1"T GU/R/NTEE
CORPOR/T"ON
R#s8ond#n's.
G.R. No. 17734!

P$esent.

IJISJMBIN/! ,#! Cairperson,
CARPIO MORA0ES!
TIN/A!
VE0ASCO! CR#! an(
BRION! ,,#



P$omul'ate(.

Octobe$ 5:! 7668

, ,


1 E C " S " O N


C/RP"O MOR/LES J.9

The Spouses Ramon an( 0uE"imin(a Pat$on ;petitione$s<! (oin'
business un(e$ the name Ala /ol(en /$ains Rice Mill! obtaine( on
Septembe$ >! 5>88 a P7!666!666 +ue(an loan f$om $espon(ent Inte$national
Co$po$ate Ban% ;Inte$ban%< &hich &as 'ua$antee( b- $espon(ent Iue(an
an( Ru$al C$e(it /ua$antee Co$po$ation ;Iue(anco$<#
5
K5L
Jpon the matu$it- of the loan on Ma$ch 8! 5>8>! it &as $ene&e(! to
matu$e on Septembe$ =! 5>8>#
7
K7L On the matu$it- of the loan on Septembe$
=! 5>8>! it &as a'ain $ene&e(! to matu$e on Ma$ch ?! 5>>6#
?
K?L

In the meantime o$ on Septembe$ @! 5>8>! petitione$s obtaine( an
a((itional P5!966!666 loan f$om Inte$ban% &hich &as to matu$e on Ma$ch 9!
5>>6#
=
K=L

On Ma$ch 5! 5>>6! petitione$s a'ain obtaine( an a((itional P5!966!666
loan an( $ene&e( thei$ outstan(in' loans &hich ha( amounte( to P?!966!666#
Petitione$sM total P9!666!666 loans &e$e consoli(ate( an( co"e$e( b-
P$omisso$- Note No# A/0>66655 &hich &as to matu$e on Au'ust 78!
5>>6#
9
K9L The consoli(ate( loans co"e$e( b- this p$omisso$- note &e$e
5
7
?
=
9
$ene&e( se"e$al times inclu(in' that ma(e on Feb$ua$- 56! 5>>? &hen
P$omisso$- Note No# A/0>?666= &as accomplishe(! to matu$e on Au'ust
>! 5>>?#
@
K@L

On o$ befo$e Au'ust >! 5>>?! petitione$s applie( fo$ the $ene&al of the
loan co"e$e( the$eb-# Petitione$s accomplishe( P$omisso$- Note No#
A/0>?6677 fo$ P=!>66!666 ;the $emainin' balance afte$ some pa-ments
&e$e ma(e<! to matu$e on Feb$ua$- =! 5>>=#
:
K:L

In the meantime! Inte$ban%
8
K8L &as me$'e( &ith $espon(ent Jnion
Ban% of the Philippines ;JBP<#

On Septembe$ 5=! 5>>=! on JBPMs (eman(! 'ua$anto$ Iue(anco$ pai(
P?!::5!?=8#8># JBP the$eafte$ (eman(e(! b- lette$ of Septembe$ ?6! 5>>=!
>
K>L f$om petitione$s the pa-ment of the balance of thei$ loan compute( to be
P7!@=9!88>#8=!
56
K56L but the- faile( to hee( the same#

Petitione$s subse+uentl- file( in No"embe$ 5>>= a complaint a'ainst
$espon(ents befo$e the Re'ional T$ial Cou$t ;RTC< of Iloilo Cit-! fo$
@
:
8
>
56
Cancellation of Documents! Decla$ation of Nullit-! In)unction! an( Dama'es#
The complaint &as (oc%ete( as Ci"il Case No# 776:7#
55
K55L

Petitione$s claime( that in Au'ust 5>>?! the- applie( fo$ the $ene&al
of thei$ +ue(an loan fo$ P=!>66!666! an( afte$ the- ha( submitte( the
$e+ui$ements the$efo$ inclu(in' the (ul- accomplishe( P$omisso$- Note No#
A/0>?6677! Inte$ban% info$me( them that it ;Inte$ban%< ha( al$ea(- been
ac+ui$e( b- JBP &hich stoppe(! (isapp$o"e(! an(Ao$ cancelle( all +ue(an
loan applications* an( that Inte$ban% a("ise( them that the (ocuments
bea$in' on thei$ sai( Au'ust 5>>? application fo$ $ene&al of loan &oul( be
$etu$ne( but the- ne"e$ $ecei"e( them! hence! the- &e$e su$p$ise( to $ecei"e
a (eman( fo$ pa-ment of a P=!>66!666 loan# The- thus p$a-e( as follo&s.

a# Decla$in' as null an( "oi( an( &ithout le'al effect the Iue(an
0oan application an( its suppo$tin' pape$s! especiall- the p$omisso$- note
an( +ue(ans as p$opose( collate$al the$efo$! submitte( b- plaintiffs to
(efen(ant Inte$ban% in Au'ust 5>>?*

b# Decla$in' the plaintiffs not liable fo$ an- an( all obli'ations
a$isin' f$om the sai( loan application an( its suppo$tin' (ocuments! &hich
&as in fact stoppe(! (isapp$o"e( an(Ao$ cancelle( b- (efen(ant ban%s! an(
&hose p$ocee(s plaintiffs ne"e$ $ecei"e(*

c# Di$ectin' the (efen(ant ban%s to $esto$e to plaintiffs the sum of
P966!666#66 (efen(ant Inte$ban% app$op$iate( fo$ itself! &ith inte$est at
the cu$$ent inte$ban% KsicL $ate compute( f$om (ate of sai( app$op$iation
until full pa-ment the$eof to plaintiffs*

(# O$(e$in' the (efen(ants! )ointl- an( se"e$all-! to pa- plaintiffs
the sum of at least P966!666#66 as mo$al (ama'es! P?66!666#66 as
55
atto$ne-Ms fees! P96!666#66 as e,penses of liti'ation! e,empla$-
(ama'es in such this 3ono$able Cou$t ma- (ee( )ust an( p$ope$! an(

e# The costs of this liti'ation#
57
K57L ;Jn(e$sco$in' supplie(<

JBP the$eafte$ also file( a complaint on Decembe$ 57! 5>>= a'ainst
petitione$s befo$e the RTC of Iloilo Cit-! fo$ collection of the $emainin'
P7!@=9!88>#8= unpai( balance of thei$ loan! plus inte$ests! e,penses of
liti'ation! an( atto$ne-Ms fees# The complaint &as (oc%ete( as Ci"il Case No#
77569#
5?
K5?L

Both cases &e$e consoli(ate(#
5=
K5=L

JBP p$esente( testimonial e"i(ence that &hene"e$ petitione$s $ene&e(
thei$ loan on matu$it-! the p$ocee(s of the $ene&e( loan &e$e applie( to the
matu$in' loan! hence! no actual cash &as $elease( to them#
59
K59L

B- Decision of Ma$ch 7?! 766=
5@
K5@L $en(e$e( in both cases! B$anch
?@ of the Iloilo Cit- RTC! ans&e$in' in the affi$mati"e the issue of &hethe$
the$e &as a "ali( e,istin' loan bet&een petitione$s an( Inte$ban% ;befo$e it
57
5?
5=
59
5@
&as me$'e( &ith JBP< &hich matu$e( on Au'ust >! 5>>?! $en(e$e(
)u('ment in fa"o$ of $espon(ents! (isposin' as follo&s.

13EREFORE! )u('ment is he$eb- $en(e$e( as follo&s.

5# Dismissin' the complaint of plaintiffs in Ci"il Case No#
776:7 an( thei$ counte$claim in Ci"il Case No# 77569*

7# Dismissin' the counte$claim of (efen(ant
IJEDANCOR in Ci"il Case No# 77569*




?# Decla$in' that Spouses 0uE"imin(a Pat$on an( Ramon
Pat$on ha"e a loan obli'ation &ith the Inte$ban% ;no&
Jnion Ban%< in the amount of P 7!@=9!88>#8=*

=# O$(e$in' Spouses 0uE"imin(a an( Ramon Pat$on to
pa- Jnion Ban% the sum of P7!@=9#88>#8= plus 57N
inte$est pe$ annum compute( f$om Septembe$ 5=! 5>>=
until the same is full- pai(#

SO ORDERED#
5:
K5:L ;Jn(e$sco$in' supplie(<


5:
On appeal! the Cou$t of Appeals! b- Decision of Septembe$ 55! 766@!
58
K58L affi$me( the RTC (ecision &ith mo(ification on the $ate of inte$est on
petitione$sM obli'ation! it notin' as follo&s.

F$om a pe$usal of the facts as establishe( an( the $eco$( of the
case! it must be pointe( out that the inte$est stipulate( b- the pa$ties
&ith $e'a$( to PN No# A/0>?6677 KsicL (ate( Au'ust >! 5>>? is
5@#9N pe$ annum# 3o&e"e$! in the computation of the Spouses
Pat$onMs liabilit- fo$ the pe$io( Au'ust >! 5>>? until Septembe$ ?6!
5>>=! as e"i(ence( b- Jnion Ban%Ms statement of account as of
Septembe$ ?6! 5>>=! the sai( ban% applie( an inte$est $ate of 7=N pe$
annum#
5>
K5>L ;Emphasis in the o$i'inal* un(e$sco$in' supplie(<

The Cou$t notes that the appellate cou$t! in affi$min' the (ecision of
the t$ial cou$t! e$$e( in basin' petitione$sM liabilit- on P$omisso$- Note No#
A/0>?6677 &hich &as accomplishe( b- them in suppo$t of thei$
application fo$ $ene&al of thei$ loan co"e$e( b- P$omisso$- Note No# A/0
>?666=! but &hich application fo$ $ene&al &as (isapp$o"e(#

The Cou$t of Appeals (ispose(.

:6ERE0ORE! in "ie& of the fo$e'oin' p$emises! )u('ment is
he$eb- $en(e$e( b- us 1"SM"SS"NG the appeal file( in this case an(
/00"RM"NG ;$'h MO1"0"C/T"ON the (ecision (ate( Ma$ch 7?!
766= of the Re'ional T$ial Cou$t! B$anch ?@! in Iloilo Cit- Cases Nos#
58
5>
776:7 an( 77569! such that the inte$est $ate to be applie( on PN No#
A/0>?6677 fo$ the pe$io( Au'ust >! 5>>? until Septembe$ ?6! 5>>= is
5@#9N pe$ annum instea( of 7=N pe$ annum#

SO ORDERED#
76
K76L ;Jn(e$sco$in' supplie(<


Petitione$sM Motion fo$ Reconsi(e$ation
75
K75L ha"in' been (enie(!
77
K77L the- file( the p$esent Petition fo$ Re"ie& on Ce$tio$a$i
7?
K7?L faultin' the
appellate cou$t in.

;a< # # # i'no$Kin'L the fact that $espon(ent Jnion Ban% has
a(mitte( in thei$ plea(in's an( th$ou'h thei$ &itnesses
that the p$e"ious loan of the petitione$s &ith the fo$me$
Inte$ban% &e$e a)) 8a$d an( the Kp$ocee(sL of Kthe sub)ectL
P$omisso$- Note No# A/0>?6677 &e$e not $elease( to
petitione$s*


;b< # # # hol(in' that the loans of petitione$s &ith $espon(ent
Jnion Ban%! 'ua$antee( b- IJEDANCOR &e$e
consoli(ate( into a sin'le loan an( has been $ene&e( fo$
se"e$al times! (espite the fact that the loan of appellants
co"e$e( b- PN No# AGL/0-1122 in te a&ount of "3./
Million is separate and distinct fro& te pre'ious loan,
consi(e$in' that in IJEDAN 0OAN! p$e"ious loan must
be pai( befo$e ne& loan ma- be $elease(! thus a bo$$o&e$
must bo$$o& mone- f$om the outsi(e sou$ces an( pa- the
+ue(an loan befo$e his loan is $ene&e(*

76
75
77
7?
;c< # # # i'no$Kin'L the fact that a(mission ma(e in plea(in's
o$ t$ial o$ othe$ p$ocee(in's nee( not be p$o"e( an( a$e
bin(in' upon the pa$ties ma%in' them &ho a$e not
allo&e( to cont$a(ict them unless the- ma- sho& clea$l-
that the a(missions &e$e ma(e th$u palpable mista%e*

;(< # # # not (ecla$in' as null an( "oi( an( &ithout le'al effect
an( cancelin' PN No# A/0>?6677 (espite the fact that
the loan of the petitione$s &ith $espon(ent ban% &as not
$elease( to them b- the sai( ban%*









;e< # # # not o$(e$in' $espon(ent Jnion Ban% to $esto$e to
appellants the amount of Php966!666#66 &ith inte$est at
the cu$$ent $ate! (espite the fact that appellants ha"e no
obli'ation to pa- the appellee ban%K#L
7=
K7=L ;Jn(e$sco$in'
an( emphasis in the o$i'inal* italics supplie(<

The petition fails#

7=
That petitione$sM application fo$ $ene&al of loan &as (isapp$o"e( (oes
not mean that the- ha( been absol"e( f$om thei$ obli'ation &hich matu$e(
on Au'ust >! 5>>?! sub)ect of P$omisso$- Note No# A/0>?666=# Thus
$espon(ent JBPMs &itness Conathan (e PaE e,plaine(.

, , , ,

ATTO# SA0AS. , , , 1hen -ou sa- this &as not inte$nall- app$o"e(
this loan application fo$ &hich E,hibit POQ KP$omisso$- Note No#
A/0>?6677L &as si'ne( (i( not mate$ialiEe because it &as not
app$o"e(! is that co$$ectG

1ITNESSM ANS1ER. The $ene&al (i( not mate$ialiEe but ho&e"e$
as I ha"e sai( 'h#r# ;as a)r#ad< a )oan *E0ORE $' s'ar'#d =$n> <#ar
19=!9> 'h#n $' acc&?&)a'#d &8 'o @ ?$))$on 'h#r# ;as a 8a<?#n' of
P 566!666 p$io$ to this p$omisso$- note# 3O1EVER! AT T3E TIME
T3AT 1E 3AVE T3IS APPROVED! T6E RENE:/L . . . :/S
1"S/PPRO3E1 *UT "T 1OESNAT ME/N T6/T T6E, 1ONAT
6/3E /N EB"ST"NG LO/N.

ATTO# SA0AS. IMm not as%in' about the e,istin' loan# IMm as%in'
-ou about this p$omisso$- note because the loan fo$ &hich the
p$omisso$- note! E,hibit POQ &as not app$o"e( necessa$il- no mone-
came out of that (isapp$o"e( loanG

1ITNESSM ANS1ER. The$e is no $eall- mone- out of this because it
is )ust a pa-ment# As I ha"e sai( befo$e this is )ust a $ene&al in $ealit-
the$eMs an e,chan'e of pape$# The matu$e( p$omisso$- note &ill be
'i"en to them in e,chan'e of the si'ne( p$omisso$- note! this one#
/c'&a))< 'h#r# ;as no ?on#< o&' C#ca&s# ;ha' has C##n ?on#<
o&'D$' ;as 'o C# da'#d Cac+ 'o 'h# or$E$na) 8ro?$ssor< no'# ! the
fi$st PN 5>8K>L an( some succee(in' inc$easeKsL of the $ene&al &hich
in total is amounte( to P 9 million then the$e &as a pa-ment of
P566!666#66#

COJRT. But -ou a$e no& "e$- clea$ that E,hibit POQ &hich is a
$ene&al of a p$omisso$- note ma$%e( as E,hibit P0Q &as not app$o"e(G

1ITNESSM ANS1ER. Inte$nall-! -ou$ 3ono$#

COJRT. 1hat (o -ou mean b- thatG

1ITNESSM ANS1ER. The common pa$lance of the ban% if a loan is
(isapp$o"e( an( if it is a $ene&al then ou$ (ut- no& is to collect# It
means to sa- that 'h$s r#n#;a) has no' C##n a88ro4#d 'o 'h#? so ;#
ar# d&'< Co&nd 'o co))#c' 'h$s on# as $' $s ?a'&r#d a)r#ad<#
79
K79L
;Emphasis! capitaliEation an( un(e$sco$in' supplie(<


Petitione$ Ramon Pat$onMs lette$ to JBP (ate( Canua$- ?5! 5>>=
appealin' fo$ a con(onation an(Ao$ $e(uction of the penalt- cha$'es of 7N
pe$ annum on the p$omisso$- note fo$ P=!>66!666 &hich matu$e( on Au'ust
>! 5>>? an( $e+uestin' a $est$uctu$in' of sai( loan!
7@
K7@L as &ell as
petitione$sM counselMs lette$ to JBP (ate( Canua$- 56! 5>>= see%in'
cla$ification on P, , , &h- KRamon Pat$onL shoul( be liable fo$ this
a((itional 7N a month be'innin' Au'ust >! 5>>?! &hen the note falls (ue
onl- on Feb$ua$- =! 5>>=!Q
7:
K7:L shoul( (issipate an- (oubts on! an(
un+uestionabl- $eflect the a(mission b- petitione$s of! thei$ liabilit- to
$espon(ent JBP#

79
7@
7:
Thus! petitione$sM obli'ation un(e$ P$omisso$- Note No# A/0>?666=
to JBP stan(s# 3o&e"e$! a $ecomputation of the amount &hich the- o&e
JBP is in o$(e$#




As ea$lie$ mentione(! the Cou$t of Appeals e$$e( in basin' petitione$sM
liabilit- on P$omisso$- Note No# A/0>?6677 &hich &as accomplishe( b-
them in suppo$t of the Au'ust 5>>? application fo$ $ene&al of loan but
&hich &as (isapp$o"e(# Petitione$sM liabilit- shoul( be base( on P$omisso$-
Note No# A/0>?666=! &hich stipulates an inte$est of 7?N per annu&, an(
that Pinte$est not pai( &hen (ue shall be a((e( to an( constitute a pa$t of the
p$incipal an( li%e&ise bea$ inte$est at the same $ate#Q
78
K78L This Cou$t fin(s
such inte$est $ate unconscionable! ho&e"e$! an( $e(uces it to 57N per
annu&#
7>
K7>L The monthl- penalt- cha$'e of 7N of the amount (ue an(
(eman(able is! li%e&ise! un(e$ the ci$cumstances atten(ant to this case!
unconscionable! consi(e$in' that pa$tial pa-ments ha( been ma(e on the
p$incipal#
?6
K?6L Thus! in "al&ares '. Court of Appeals,
?5
K?5L this Cou$t!
citin' its ea$lie$ minute $esolution of Ma- 5@! 5>>= in /#R# No# 557@5=!
eliminate( the penalt- cha$'e alto'ethe$ on the '$oun( that.
Jpon the matte$ of penalt- inte$est! &e a'$ee &ith the Cou$t of
Appeals that the economic impact of the penalt- inte$est of th$ee ;?N< pe$
month of the total amount (ue but unpai( shoul( be e+uitabl- $e(uce(#
The pu$pose fo$ &hich the penalt- inte$est is inten(e( R that is! to punish
the obli'o$ R &ill ha"e been sufficientl- se$"e( b- the effects of
compoun(e( inte$est# Jn(e$ the e,ceptional ci$cumstances in the case at
ba$ , , , the penalt- stipulate( in the pa$tiesM p$omisso$- note is
ini+uitious an( unconscionable an( ma- be e+uitabl- $e(uce( fu$the$ b-
eliminatin' such penalt- inte$est alto'ethe$#
?7
K?7L
78
7>
?6
?5
?7





The penalt- cha$'e of 7N pe$ month shoul( thus be eliminate(#
Petitione$sM liabilit- stan(s then at P5!@?=!=@=#==# Follo&in' $astern
Sipping Lines, *nc. '. Court of Appeals,
??
K??L this amount shall ea$n 57N
inte$est per annu& f$om the time of e,t$a)u(icial (eman( on Septembe$ ?6!
5>>= until it is full- pai(#

In "ie& of the stipulation in P$omisso$- Note No# A/0>?666=
p$o"i(in' fo$ the pa-ment of atto$ne-Ms fees e+ui"alent to 56N of the
amount (ue an( (eman(able! this Cou$t a&a$(s P5@?!==@#== to JBP as
atto$ne-Ms fees#

:6ERE0ORE! the Decision of the Cou$t of Appeals (ate(
Septembe$ 55! 766@ is /00"RME1 &ith MO1"0"C/T"ON# The
inte$est $ate in P$omisso$- Note No# A/0>?666= is $e(uce( to 57N per
annu&! an( the penalt- cha$'e is (elete(! thus fi,in' the liabilit- of the
??
petitione$spouses Ramon an( 0uE"imin(a Pat$on at P5!@?=!=@=#== to bea$
inte$est of 57N per annu& f$om the time of e,t$a)u(icial (eman( on
Septembe$ ?6! 5>>= until it is full- pai(# In a((ition! the petitione$spouses
a$e o$(e$e( to pa- P5@?!==@#== as atto$ne-Ms fees#

Costs a'ainst petitione$s#

SO ORDERED#

SECON1 1"3"S"ON

S/L3/1OR C6U/ and 3"OLET/
C6U/
Petitione$s!
G.R. No. 1704@2

P$esent.



"e$sus

IJISJMBIN/! ,#! Chai$pe$son!
CORONA!

CARPIO MORA0ES!
S
VE0ASCO! CR#! an(
BRION! ,,#

RO1R"GO T"M/N M/. L,NN
T"M/N and L,1"/ T"M/N
Respon(ents#
P$omul'ate(.

Au'ust 5?! 7668
F- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -F

1EC"S"ON

7U"SUM*"NG J.9
Befo$e us is a petition fo$ $e"ie& on ce$tio$a$i assailin' the Decision
34
=1> an(
Resolution
3@
=2> (ate( Ma$ch >! 7669 an( No"embe$ 7=! 7669! $especti"el-! of the Cou$t
of Appeals in CA/#R# CV No# 878@9! &hich ha( affi$me( the Decision
36
=3> (ate( Ma-
5=! 766= of the Re'ional T$ial Cou$t ;RTC< of IueEon Cit-! B$anch 8@! in Ci"il Case No#
I66=57:@# The Cou$t of Appeals $e(uce( the stipulate( o$i'inal inte$est $ates of :N
an( 9N pe$ month to onl- 5N pe$ month o$ 57N pe$ annum an( o$(e$e( petitione$s to
$efun( the e,cess inte$est pa-ments b- $espon(ents#
The pe$tinent facts a$e as follo&s.
In Feb$ua$- an( Ma$ch 5>>>! petitione$s Sal"a(o$ an( Violeta Chua '$ante(
$espon(ents Ro($i'o! Ma# 0-nn an( 0-(ia Timan the follo&in' loans. a< P566!666* b<
?=
?9
?@
P766!666* c< P596!666* (< P56:!666* e< P766!666* an( f< P56:!666# These loans &e$e
e"i(ence( b- p$omisso$- notes &ith inte$est of :N pe$ month! &hich &as late$ $e(uce( to
9N pe$ month# Ro($i'o an( Ma# 0-nn issue( fi"e ;9< post(ate( chec%s to secu$e the
loans! e,cept fo$ the P596!666 loan &hich &as secu$e( b- a post(ate( chec% issue( b-
0-(ia#
Respon(ents pai( the loans initiall- at :N inte$est $ate pe$ month until Septembe$
5>>> an( then at 9N inte$est $ate pe$ month f$om Octobe$ to Decembe$ 5>>># Sometime
in Ma$ch 7666! $espon(ents offe$e( to pa- the p$incipal amount of the loans th$ou'h a
Philippine National Ban% mana'e$Ms chec% &o$th P:@=!666! but petitione$s $efuse( to
accept the same insistin' that the p$incipal amount of the loans totalle( P8@=!666#
On Ma- ?! 7666! $espon(ents (eposite( P8@=!666 &ith the Cle$% of Cou$t of the
RTC of IueEon Cit-# 0ate$! the- file( a case fo$ consi'nation an( (ama'es# Petitione$s
mo"e( to (ismiss the case! but the RTC (enie( the motion! as &ell as the subse+uent
motion fo$ $econsi(e$ation#
B- "i$tue of an o$(e$ of Pa$tial Cu('ment
37
=4> (ate( Octobe$ 5@! 7667! the Cle$%
of Cou$t of the RTC of IueEon Cit- $elease( the amount of P8@=!666 to petitione$s#
T$ial on the "ali(it- of the stipulate( inte$ests on the sub)ect loans! as &ell as on
the issue of (ama'es! then p$ocee(e(#
On Ma- 5=! 766=! the RTC $en(e$e( a (ecision in fa"o$ of $espon(ents# It $ule(
that the o$i'inal stipulate( inte$est $ates of :N an( 9N pe$ month &e$e e,cessi"e# It
fu$the$ o$(e$e( petitione$s to $efun( to $espon(ents all inte$est pa-ments in e,cess of the
le'al $ate of 5N pe$ month o$ 57N pe$ annum# 3o&e"e$! the RTC (enie( petitione$sM
claim fo$ (ama'es#
On appeal! the Cou$t of Appeals affi$me( the t$ial cou$tMs (ecision# The Cou$t of
Appeals (ecla$e( ille'al the stipulate( inte$est $ates of :N an( 9N pe$ month fo$ bein'
?:
e,cessi"e! ini+uitous! unconscionable an( e,o$bitant# Acco$(in'l-! the Cou$t of Appeals
$e(uce( the stipulate( inte$est $ates of :N an( 9N pe$ month ;e+ui"alent to 8=N an(
@6N pe$ annum! $especti"el-< to a fai$ an( $easonable $ate of 5N pe$ month o$ 57N pe$
annum# The Cou$t of Appeals also o$(e$e( petitione$s to $efun( to $espon(ents all
inte$est pa-ments in e,cess of 57N pe$ annum# Petitione$s sou'ht $econsi(e$ation! but it
&as (enie(#
3ence! this petition $aisin' the lone issue of.
13ET3ER OR NOT T3E 3ONORAB0E COJRT OF APPEA0S
COMMITTED A REVERSIB0E ERROR R OR ACTED NOT IN
ACCORD 1IT3 T3E 0A1 AND CJRISPRJDENCE R 13EN IT
AFFIRMED T3E CJD/MENT OF T3E RE/IONA0 TRIA0 COJRT
ORDERIN/ T3E RETJRN OF T3E ETCESS INTEREST TO
RESPONDENTS#
3!
=@>
Essentiall-! the main issue is. ;5< Di( the Cou$t of Appeals e$$ in $ulin' that the
o$i'inal stipulate( inte$est $ates of :N an( 9N! e+ui"alent to 8=N an( @6N pe$ annum!
a$e unconscionable! an( in o$(e$in' petitione$s to $efun( to $espon(ents all pa-ments of
inte$est in e,cess of 57N pe$ annumG
Petitione$s a"e$ that the stipulate( inte$est of 9N monthl- an( hi'he$ cannot be
consi(e$e( unconscionable because these $ates a$e not usu$ious b- "i$tue of Cent$al Ban%
;C#B#< Ci$cula$ No# >6987
39
=6> &hich ha( e,p$essl- $emo"e( the inte$est ceilin's
p$esc$ibe( b- the Jsu$- 0a&# Petitione$s a(( that $espon(ents &e$e in pari delicto since
the- a'$ee( on the stipulate( inte$est $ates of :N an( 9N pe$ month# The- fu$the$ a"e$
the- honestl- belie"e( that the inte$est $ates the- impose( on $espon(entsM loans &e$e not
usu$ious#
Respon(ents! in"o%in' Medel '. Court of Appeals!
40
=7> counte$ that the stipulate(
inte$est $ates of :N an( 9N pe$ month a$e ini+uitous! unconscionable an( e,o$bitant! thus!
?8
?>
=6
the- a$e entitle( to the $etu$n of the e,cessi"e inte$est pai(# The- also conten( that
petitione$s cannot $aise the (efense of in pari delicto fo$ the fi$st time on appeal# The-
fu$the$ conten( that the (efense of 'oo( faith is a factual issue &hich cannot be $aise( b-
petitione$s in a petition fo$ $e"ie& un(e$ Rule =9 of the Rules of Ci"il P$oce(u$e#
The petition is patentl- (e"oi( of me$it#
The stipulate( inte$est $ates of :N an( 9N pe$ month impose( on $espon(entsM
loans must be e+uitabl- $e(uce( to 5N pe$ month o$ 57N pe$ annum#
41
=!> 1e nee( not
unsettle the p$inciple &e ha( affi$me( in a pletho$a of cases that stipulate( inte$est $ates of
?N
42
=9> pe$ month an( hi'he$
43
=10> a$e e,cessi"e! ini+uitous! unconscionable an(
e,o$bitant# Such stipulations a$e "oi( fo$ bein' cont$a$- to mo$als! if not a'ainst the la&#
44
=11> 1hile C#B# Ci$cula$ No# >6987! &hich too% effect on Canua$- 5! 5>8?! effecti"el-
$emo"e( the ceilin' on inte$est $ates fo$ both secu$e( an( unsecu$e( loans! $e'a$(less of
matu$it-!
4@
=12> nothin' in the sai( ci$cula$ coul( possibl- be $ea( as '$antin' carte
blance autho$it- to len(e$s to $aise inte$est $ates to le"els &hich &oul( eithe$ ensla"e thei$
bo$$o&e$s o$ lea( to a hemo$$ha'in' of thei$ assets#
46
=13>
Petitione$s cannot also $aise the (efenses of in pari delicto an( good fait# The
(efense of in pari delicto &as not $aise( in the RTC! hence! such an issue cannot be
$aise( fo$ the fi$st time on appeal# Petitione$s must ha"e seasonabl- $aise( it in the
p$ocee(in's befo$e the lo&e$ cou$t! because +uestions $aise( on appeal a$e confine( onl-
&ithin the issues f$ame( b- the pa$ties#
47
=14> The (efense of 'oo( faith must also fail
because such an issue is a +uestion of fact
4!
=1@> &hich ma- not be p$ope$l- $aise( in a
=5
=7
=?
==
=9
=@
=:
=8
petition fo$ $e"ie& un(e$ Rule =9 of the Rules of Ci"il P$oce(u$e &hich allo&s onl-
+uestions of la&#
49
=16>
As &ell set fo$th in Medel.
@0
=17>
1e a'$ee U that the stipulate( $ate of inte$est at 9#9N pe$ month
on the P966!666#66 loan is e,cessi"e! ini+uitous! unconscionable an(
e,o$bitant# 3o&e"e$! &e can not consi(e$ the $ate Pusu$iousQ because this
Cou$t has consistentl- hel( that Ci$cula$ No# >69 of the Cent$al Ban%!
a(opte( on Decembe$ 77! 5>87! has e,p$essl- $emo"e( the inte$est
ceilin's p$esc$ibe( b- the Jsu$- 0a& an( that the Jsu$- 0a& is no&
Ple'all- ine,istent#Q
In Security #an4 and Trust Co&pany 's. Regional Trial Court of
Ma4ati, #ranc 56! the Cou$t hel( that CB Ci$cula$ No# >69 P(i( not
$epeal no$ in an- &a- amen( the Jsu$- 0a& but simpl- suspen(e( the
latte$Ms effecti"it-#Q In(ee(! &e ha"e hel( that Pa Cent$al Ban% Ci$cula$
can not $epeal a la&# Onl- a la& can $epeal anothe$ la&#Q In the $ecent case
of 7lorendo 's. Court of Appeals! the Cou$t $eite$ate( the $ulin' that Pb-
"i$tue of CB Ci$cula$ >69! the Jsu$- 0a& has been $en(e$e( ineffecti"e#Q
PJsu$- has been le'all- none,istent in ou$ )u$is(iction# Inte$est can no&
be cha$'e( as len(e$ an( bo$$o&e$ ma- a'$ee upon#Q
Ne"e$theless! &e fin( the inte$est at 9#9N pe$ month! o$ @@N pe$
annum! stipulate( upon b- the pa$ties in the p$omisso$- note ini+uitous o$
unconscionable! an(! hence! cont$a$- to mo$als ;Pcontra bonos &oresQ<! if
not a'ainst the la&# The stipulation is "oi(#
:6ERE0ORE the petition is 1EN"E1 fo$ lac% of me$it# The
assaile( Decision an( Resolution (ate( Ma$ch >! 7669 an( No"embe$ 7=!
7669! $especti"el-! of the Cou$t of Appeals in CA/#R# CV No# 878@9 a$e
he$eb- /00"RME1# Costs a'ainst petitione$s#
SO OR1ERE1.

=>
96
Republic of the Philippines
SUPREME COURT
Ba'uio Cit-
T6"R1 1"3"S"ON
G.R. No. 1@!040 /8r$) 14 200!
SPOUSES ONES"0ORO and ROS/R"O /L"N/S petitione$!
"s#
SPOUSES 3"CTOR and ELEN/ /L"N/S $espon(ents#
1 E C " S " O N
/USTR"/-M/RT"NE2 J.9
This $esol"es the Petition fo$ Re"ie& on Certiorari un(e$ Rule =9 of the Rules of Cou$t!
p$a-in' that the Decision
5
of the Cou$t of Appeals ;CA< (ate( Septembe$ 79! 7667! an(
the CA Resolution
7
(ate( Ma$ch ?5! 766?! (en-in' petitione$sF motion fo$
$econsi(e$ation! be $e"e$se( an( set asi(e#
The factual antece(ents of the case a$e as follo&s#
Spouses Onesifo$o an( Rosa$io Alinas ;petitione$s< sepa$ate( sometime in 5>87! &ith
Rosa$io mo"in' to Pa'a(ian Cit- an( Onesifo$o mo"in' to Manila# The- left behin( t&o
lots i(entifie( as 0ot 8>@B>A &ith a bo(e'a stan(in' on it an( 0ot 8>@B>B &ith
petitione$sF house# These t&o lots a$e the sub)ect of the p$esent petition#
Petitione$ Onesifo$o Alinas ;Onesifo$o< an( $espon(ent Victo$ Alinas ;Victo$< a$e
b$othe$s# Petitione$s alle'e that the- ent$uste( thei$ p$ope$ties to Victo$ an( Elena Alinas
;$espon(ent spouses< &ith the a'$eement that an- income f$om $entals of the p$ope$ties
shoul( be $emitte( to the Social Secu$it- S-stem ;SSS< an( to the Ru$al Ban% of
O$o+uieta Cit- ;RBO<! as such $entals &e$e belie"e( sufficient to pa- off petitione$sF
loans &ith sai( institutions# 0ot 8>@B>A &ith the bo(e'a &as mo$t'a'e( as secu$it-
fo$ the loan obtaine( f$om the RBO! &hile 0ot 8>@B>B &ith the house &as mo$t'a'e(
to the SSS# Onesifo$o alle'es that he left blan% pape$s &ith his si'natu$e on them to
facilitate the a(minist$ation of sai( p$ope$ties#
Sometime in 5>>?! petitione$s (isco"e$e( that thei$ t&o lots &e$e al$ea(- title( in the
name of $espon(ent spouses#
Reco$(s sho& that afte$ 0ot 8>@B>A &as e,t$a)u(iciall- fo$eclose(! T$ansfe$
Ce$tificate of Title ;TCT< No# T5589?
?
co"e$in' sai( p$ope$t- &as issue( in the name of
mo$t'a'ee RBO on No"embe$ 5?! 5>8:# On Ma- 7! 5>88! the (ul- autho$iEe(
$ep$esentati"e of RBO e,ecute( a Dee( of Installment Sale of Ban%Fs Ac+ui$e( Assets
=

con"e-in' 0ot 8>@B>A to $espon(ent spouses# RBOFs TCT o"e$ 0ot 8>@B>A &as
then cancelle( an( on Feb$ua$- 77! 5>8>! TCT No# T57@@=
9
co"e$in' sai( lot &as issue(
in the name of $espon(ent spouses#
0ot 8>@B>B &as also fo$eclose( b- the SSS an( on No"embe$ 5:! 5>8@! the E,Oficio
Cit- She$iff of OEamis Cit- issue( a Ce$tificate of Sale
@
o"e$ sai( p$ope$t- in fa"o$ of the
SSS# 3o&e"e$! pu$suant to a Special Po&e$ of Atto$ne-
:
si'ne( b- Onesifo$o in fa"o$ of
Victo$! (ate( Ma$ch 56! 5>8>! the latte$ &as able to $e(eem! on the same (ate! 0ot 8>@B
>B f$om the SSS fo$ the sum of P555!556#6># On Cune 5>! 5>8>! a Ce$tificate of
Re(emption
8
&as issue( b- the SSS#
Onesifo$oFs si'natu$e also appea$s in an Absolute Dee( of Sale
>
li%e&ise (ate( Ma$ch 56!
5>8>! sellin' 0ot 8>@B>B to $espon(ent spouses# The $eco$(s also sho& a nota$iEe(
(ocument (ate( Ma$ch 56! 5>8> an( captione( A'$eement
56
&he$eb- petitione$
Onesifo$o ac%no&le('e( that his b$othe$ Victo$ use( his o&n mone- to $e(eem 0ot 8>@
B>B f$om the SSS an(! thus! Victo$ became the o&ne$ of sai( lot# In the same
A'$eeement! petitione$ Onesifo$o &ai"e( &hate"e$ $i'hts! claims! an( inte$ests he o$ his
hei$s! successo$s an( assi'ns ha"e o$ ma- ha"e o"e$ the sub)ect p$ope$t-# On Ma$ch 59!
5>>?! b- "i$tue of sai( (ocuments! TCT No# 5:?>=
55
co"e$in' 0ot 8>@B>B &as issue(
in the name of $espon(ent spouses#
On Cune 79! 5>>?! petitione$s file( &ith the Re'ional T$ial Cou$t ;RTC< of OEamis Cit- a
complaint fo$ $eco"e$- of possession an( o&ne$ship of thei$ con)u'al p$ope$ties &ith
(ama'es a'ainst $espon(ent spouses#
Afte$ t$ial! the RTC $en(e$e( its Decision (ate( No"embe$ 5?! 5>>9! fin(in' that.
5# Plaintiffs ha"e not p$o"en that the- ent$uste( (efen(ant spouses &ith the ca$e
an( a(minist$ation of thei$ p$ope$ties# It &as Vale$ia Alinas! thei$ mothe$! &hom
plaintiff Onesifo$o $e+ueste(A(i$ecte( to Hta%e ca$e of e"e$-thin' an( sell
e"e$-thin'H an( Te$esita Nu4eE! his el(e$ siste$! to &hom he left a H"e$balH
autho$it- to a(ministe$ his p$ope$ties#
7# Plaintiffs ha"e not p$o"en thei$ alle'ation that (efen(ant spouses a'$ee( to pa-
$ent of P5!966#66 a month fo$ the occupanc- of plaintiffsF house! &hich $ent &as
to be $emitte( to the SSS an( Ru$al Ban% of O$o+uieta to pa- off plaintiffsF loan
an( to %eep fo$ plaintiffs the $est of the $ent afte$ the loans &oul( ha"e been pai(
in full#
?# Plaintiff Onesifo$oFs alle'ation that (efen(ants concocte( (ee(s of con"e-ances
;E,h# HMH! HNH 2 HOH< &ith the use of his si'natu$es in blan% is not &o$th- of
c$e(ence# 1h- his famil- &oul( conspi$e to $ob him at a time &hen life ha(
st$uc% him &ith a c$uel blo& in the fo$m of a faile( ma$$ia'e that sent him
plummetin' to the (epths of (espai$ is not e,plaine( an( li%e&ise (efies
comp$ehension# That his si'natu$es appea$ e,actl- on the spot &he$e the- ou'ht
to be in E,hs# HMH! HNH 2 HOH belies his p$etension that he affi,e( them on blan%
pape$ onl- fo$ the pu$pose of facilitatin' his siste$ Te$$-Fs acts of a(minist$ation#
This Cou$t! the$efo$e! (oes not fin( that (efen(ant spouses ha( scheme( to obtain
title to plaintiffsF p$ope$ties o$ en$iche( themsel"es at the e,pense of plaintiffs#
57
&ith the follo&in' (ispositi"e po$tion.
13EREFORE! this Cou$t $en(e$s )u('ment.
5# (ecla$in' K$espon(entsL Victo$ C$# an( Elena Alinas o&ne$s of 0ot 8>@
B>A &ith the buil(in' ;bo(e'a< stan(in' the$eon an( affi$min' the
"ali(it- of thei$ ac+uisition the$eof f$om the Ru$al Ban% of O$o+uieta!
Inc#*
7# (ecla$in' Kpetitione$sL Onesifo$o an( Rosa$io Alinas o&ne$s of 0ot 8>@
B>B &ith the house stan(in' the$eon! plaintiff Onesifo$oFs sale the$eof to
(efen(ants spouses &ithout the consent of his &ife bein' null an( "oi( an(
(efen(ant spousesF $e(emption the$eof f$om the SSS not ha"in' confe$$e(
its o&ne$ship to them*
?# o$(e$in' Kpetitione$sL to $eimbu$se K$espon(entsL Victo$ C$# an( Elena
Alinas the $e(emption sum of P555!566#6>! pai( b- them to the SSS
;&ithout inte$est as it shall be compensate( &ith the $ental "alue of the
house the- occup-< &ithin si,t- (a-s f$om the finalit- of this )u('ment*
=# o$(e$in' K$espon(entsL to "acate the sub)ect house &ithin thi$t- (a-s
f$om $ecei"in' the $eimbu$sement mentione( in No# ? abo"e* an(
9# $einstatin' TCT No# T:7=8 in the name of Kpetitione$sL an( cancellin'
TCT No# T5:?>= in the name of K$espon(entsL#
No costs#
SO ORDERED#
5?
Onl- $espon(ent spouses appeale( to the CA assailin' the RTCFs $ulin' that the- ac+ui$e(
0ot 8>@B>B f$om the SSS b- me$e $e(emption an( not b- pu$chase# The- li%e&ise
+uestion the $eimbu$sement b- petitione$s of the $e(emption p$ice &ithout inte$est#
On Septembe$ 79! 7667! the CA p$omul'ate( he$ein assaile( Decision! the (ispositi"e
po$tion of &hich $ea(s.
13EREFORE! in "ie& of the fo$e'oin' (is+uisitions! the fi$st pa$a'$aph of the
(ispositi"e po$tion of the assaile( (ecision is AFFIRMED an( the $est
MODIFIED as follo&s.
5# (ecla$in' K$espon(entsL Victo$ C$# an( Elena Alinas o&ne$s of 0ot 8>@
B>A &ith the buil(in' ;bo(e'a< stan(in' the$eon an( affi$min' the
"ali(it- of thei$ ac+uisition the$eof f$om the Ru$al Ban% of O$o+uieta!
Inc#*
7# (ecla$in' Onesifo$oFs sale of 0ot 8>@B>B to'ethe$ &ith the house
stan(in' the$eon to K$espon(entsL in so fa$ as Rosa$io Alinas! his &ifeFs
sha$e of one half the$eof is conce$ne(! of no fo$ce an( effect*
?# o$(e$in' Kpetitione$sL Rosa$io Alinas to $eimbu$se K$espon(entsL the
$e(emption amount of P99!996#66 &ith inte$est of 57N pe$ annum f$om
the time of $e(emption until full- pai(#
=# o$(e$in' the K$espon(entsL to con"e- an( t$ansfe$ one half po$tion of
0ot 8>@B>B unto Rosa$io Alinas! &hich comp$ises he$ sha$e on the
p$ope$t- simultaneous to the ten(e$ of the abo"e $e(emption p$ice! both to
be accomplishe( &ithin si,t- ;@6< (a-s f$om finalit- of this )u('ment#
9# in the e"ent of failu$e of K$espon(entsL to e,ecute the acts as specifie(
abo"e! Kpetitione$L Rosa$io Alinas ma- p$ocee( a'ainst them un(e$
Section 56! Rule ?> of the 5>>: Rules of Ci"il P$oce(u$e#
@# on the othe$ han(! failu$e of Kpetitione$L Rosa$io Alinas to $eimbu$se the
$e(emption p$ice &ithin si,t- ;@6< (a-s f$om the finalit- of this (ecision
&ill $en(e$ the con"e-ance an( sale of he$ sha$e b- he$ husban( to
K$espon(entsL! of full fo$ce an( effect#
No costs#
SO ORDERED#
5=
Petitione$s mo"e( fo$ $econsi(e$ation but the CA (enie( sai( motion pe$ he$ein assaile(
Resolution (ate( Ma$ch ?5! 766?#
3ence! the p$esent petition on the follo&in' '$oun(s.
The 3ono$able Cou$t of Appeals abuse KsicL its (isc$etion in (is$e'a$(in' the
testimon- of the Re'iste$ of Dee(s! Att-# Ne$io Nu4eE! &ho s&o$e that the
si'natu$es appea$in' on "a$ious TCTs &e$e not his o&n*
The 3ono$able Cou$t of Appeals manifestl- abuse KsicL its (isc$etion in (ecla$in'
the $espon(ents to be the o&ne$s of 0ot 8>@B>A &ith the buil(in' ;bo(e'a<
stan(in' the$eon &hen the- me$el- $e(eeme( the p$ope$t- an( a$e the$efo$e me$e
t$ustees of the $eal o&ne$s of the p$ope$t-*
It &as pu$e speculation an( con)ectu$e an( su$mise fo$ the 3ono$able Cou$t of
Appeals to impose an obli'ation to $eimbu$se upon petitione$s &ithout o$(e$in'
$espon(ents to account fo$ the $entals of the p$ope$ties f$om the time the-
occupie( the same up to the p$esent time an( the$eafte$ c$e(it one a'ainst the
othe$ &hiche"e$ is hi'he$#
59
The fi$st issue $aise( b- petitione$s (ese$"es scant consi(e$ation# B- assailin' the
authenticit- of the Re'ist$a$ of Dee(sF si'natu$e on the ce$tificates of title! the- a$e! in
effect! +uestionin' the "ali(it- of the ce$tificates#
Section =8 of P$esi(ential Dec$ee No# 597> p$o"i(es! thus.
Sec# =8# Certificate not sub8ect to collateral attac4. A ce$tificate of title shall not
be sub)ect to collate$al attac%# It cannot be alte$e(! mo(ifie(! o$ cancelle( e,cept
in a (i$ect p$ocee(in' in acco$(ance &ith la&#
Pu$suant to sai( p$o"ision! the Cou$t $ule( in De "edro '. Ro&asan De'elop&ent
Corporation
5@
that.
It has been hel( that a ce$tificate of title! once $e'iste$e(! shoul( not the$eafte$ be
impu'ne(! alte$e(! chan'e(! mo(ifie(! enla$'e( o$ (iminishe( e,cept in a (i$ect
p$ocee(in' pe$mitte( b- la&# , , ,
The ac'$on o( 'h# 8#'$'$on#rs a'ainst the $espon(ents! base( on the mate$ial
alle'ations of the complaint! $s on# (or r#co4#r< o( 8oss#ss$on o( 'h# s&CG#c'
8ro8#r'< and da?aE#s# 3o&e"e$! s&ch ac'$on $s no' a d$r#c' C&' a co))a'#ra)
a''ac+ of TCT No# 7?@6==#
5:
;Emphasis supplie(<
As in De "edro! the complaint file( b- he$ein petitione$s &ith the RTC is also one fo$
$eco"e$- of possession an( o&ne$ship# Ve$il-! the p$esent case is me$el- a collate$al
attac% on TCT No# T5:?>=! &hich is not allo&e( b- la& an( )u$isp$u(ence#
1ith $e'a$( to the secon( issue! petitione$sM claim that it &as the CA &hich (ecla$e(
$espon(ent spouses o&ne$s of 0ot 8>@B>A ;&ith bo(e'a< is mislea(in'# It &as the
RTC &hich $ule( that $espon(ent spouses a$e the o&ne$s of 0ot 8>@B>A an(!
the$efo$e! since onl- the $espon(ent spouses appeale( to the CA! the issue of o&ne$ship
o"e$ 0ot 8>@B>A is not $aise( befo$e the appellate cou$t# Necessa$il-! the CA me$el-
$eite$ate( in the (ispositi"e po$tion of its (ecision the RTCFs $ulin' on $espon(ent
spousesF o&ne$ship of 0ot 8>@B>A#
It is a basic p$inciple that no mo(ification of )u('ment o$ affi$mati"e $elief can be '$ante(
to a pa$t- &ho (i( not appeal#
58
3ence! not ha"in' appeale( f$om the RTC Decision!
petitione$s can no lon'e$ see% the $e"e$sal o$ mo(ification of the t$ial cou$tFs $ulin' that
$espon(ent spouses ha( ac+ui$e( o&ne$ship of 0ot 8>@B>A b- "i$tue of the sale of the
lot to them b- RBO#
Fu$the$mo$e! the CA (i( not commit an- $e"e$sible e$$o$ in affi$min' the t$ial cou$tFs
factual fin(in's as the $eco$(s a$e in(ee( be$eft of p$oof to suppo$t the petitione$sM
alle'ations that the- left the ca$e an( a(minist$ation of thei$ p$ope$ties to $espon(ent
spouses* an( that the$e is an a'$eement bet&een petitione$s an( $espon(ent spouses
$e'a$(in' $emittance to the SSS an( the RBO of $ental income f$om thei$ p$ope$ties#
Thus! $espon(ent spouses ma- not be hel( $esponsible fo$ the nonpa-ment of the loan
&ith RBO an( the e"entual fo$eclosu$e of petitione$sF 0ot 8>@B>A#
Petitione$s (o not assail the "ali(it- of the fo$eclosu$e of sai( lot but a$'ues that
$espon(ent spouses me$el- $e(eeme( the p$ope$t- f$om RBO# This is! ho&e"e$! belie( b-
e"i(ence on $eco$( &hich sho&s that o&ne$ship o"e$ the lot ha( (ul- passe( on to the
RBO! as sho&n b- TCT No# T5589? $e'iste$e( in its name* an( subse+uentl-! RBO sol(
the lot &ith its imp$o"ements to $espon(ent spouses# Nee(less to st$ess! the sale &as
ma(e afte$ the $e(emption pe$io( ha( lapse(# The t$ial cou$t! the$efo$e! co$$ectl- hel( that
$espon(ent spouses ac+ui$e( thei$ title o"e$ the lot f$om RBO an( (efinitel- not f$om
petitione$s#
3o&e"e$! &ith $e'a$( to 0ot 8>@B>B ;&ith house<! the Cou$t fin(s it patentl-
e$$oneous fo$ the CA to ha"e applie( the p$inciple of e+uit- in sustainin' the "ali(it- of
the sale of Onesifo$oMs onehalf sha$e in the sub)ect p$ope$t- to $espon(ent spouses#
Althou'h petitione$s &e$e ma$$ie( befo$e the enactment of the Famil- Co(e on Au'ust ?!
5>88! the sale in +uestion occu$$e( in 5>8># Thus! thei$ p$ope$t- $elations a$e 'o"e$ne(
b- Chapte$ IV on Con)u'al Pa$tne$ship of /ains of the Famil- Co(e#
The CA $ulin' completel- (e"iate( f$om the clea$ (ictate of A$ticle 57= of the Famil-
Co(e &hich p$o"i(es.
A$t# 57=# The a(minist$ation an( en)o-ment of the con)u'al pa$tne$ship p$ope$t-
shall belon' to both spouses )ointl-# , , ,
In the e"ent that one spouse is incapacitate( o$ othe$&ise unable to pa$ticipate in
the a(minist$ation of the con)u'al p$ope$ties! the othe$ spouse ma- assume sole
po&e$s of a(minist$ation# These po&e$s (o not inclu(e the po&e$s of (isposition
o$ encumb$ance &hich must ha"e the autho$it- of the cou$t o$ the &$itten consent
of the othe$ spouse# "n 'h# aCs#nc# o( s&ch a&'hor$'< or cons#n' 'h# d$s8os$'$on
or #nc&?Cranc# sha)) C# 4o$d # , , , ;Jn(e$sco$in' an( emphasis supplie(<
In .o&eo!ners Sa'ings ) Loan #an4 '. Dailo!
5>
the Cou$t cate'o$icall- state( thus.
In /uian' "# Cou$t of Appeals! it &as hel( that the sale of a con)u'al p$ope$t-
$e+ui$es the consent of both the husban( an( &ife# In appl-in' A$ticle 57= of the
Famil- Co(e! this Cou$t (ecla$e( that 'h# aCs#nc# o( 'h# cons#n' o( on# r#nd#rs
'h# #n'$r# sa)# n&)) and 4o$d $nc)&d$nE 'h# 8or'$on o( 'h# conG&Ea) 8ro8#r'<
8#r'a$n$nE 'o 'h# h&sCand ;ho con'rac'#d 'h# sa)## , , ,
, , , ,
, , , B- e,p$ess p$o"ision of A$ticle 57= of the Famil- Co(e! in the absence of
;cou$t< autho$it- o$ &$itten consent of the othe$ spouse! an- (isposition o$
encumb$ance of the con)u'al p$ope$t- shall be "oi(#
76
Thus! pu$suant to A$ticle 57= of the Famil- Co(e an( )u$isp$u(ence! the sale of
petitione$sF con)u'al p$ope$t- ma(e b- petitione$ Onesifo$o alone is "oi( in its enti$et-#
It is t$ue that in a numbe$ of cases! this Cou$t abstaine( f$om appl-in' the lite$al impo$t
of a pa$ticula$ p$o"ision of la& if (oin' so &oul( lea( to un)ust! unfai$ an( absu$(
$esults#
75

In the p$esent case! the Cou$t (oes not see ho& appl-in' A$ticle 57= of the Famil- Co(e
&oul( lea( to in)ustice o$ absu$(it-# It shoul( be note( that $espon(ent spouses &e$e &ell
a&a$e that 0ot 8>@B>B is a con)u'al p$ope$t- of petitione$s# The- also %ne& that the
(isposition bein' ma(e b- Onesifo$o is &ithout the consent of his &ife! as the- %ne& that
petitione$s ha( sepa$ate(! an(! the sale (ocuments (o not bea$ the si'natu$e of petitione$
Rosa$io# The fact that Onesifo$o ha( to e,ecute t&o (ocuments! namel-. the Absolute
Dee( of Sale (ate( Ma$ch 56! 5>8> an( a nota$iEe( A'$eement li%e&ise (ate( Ma$ch 56!
5>8>! $e"eals that the- ha( full %no&le('e of the se"e$e infi$mities of the sale# As hel( in
.eirs of Aguilar-Reyes '. Spouses Mi8ares!
77
Ha pu$chase$ cannot close his e-es to facts
&hich shoul( put a $easonable man on his 'ua$( an( still claim he acte( in 'oo( faith#H
7?

Such bein' the case! no in)ustice is bein' foiste( on $espon(ent spouses as the- $is%e(
t$ansactin' &ith Onesifo$o alone (espite thei$ %no&le('e that the sub)ect p$ope$t- is a
con)u'al p$ope$t-#
Ve$il-! the sale of 0ot 8>@B>B to $espon(ent spouses is enti$el- null an( "oi(#
3o&e"e$! in consonance &ith the saluta$- p$inciple of nonen$ichment at anothe$Ms
e,pense! the Cou$t a'$ees &ith the CA that petitione$s shoul( $eimbu$se $espon(ent
spouses the $e(emption p$ice pai( fo$ 0ot 8>@B>B in the amount of P555!556#6> &ith
le'al inte$est f$om the time of filin' of the complaint#
In .eirs of Aguilar-Reyes! the husban(Fs sale of con)u'al p$ope$t- &ithout the consent of
the &ife &as annulle( but the spouses &e$e o$(e$e( to $efun( the pu$chase p$ice to the
bu-e$s! it &as $ule( that an inte$est of 57N per annu& on the pu$chase p$ice to be
$efun(e( is not p$ope$# The Cou$t eluci(ate( as follo&s.
The t$ial cou$t! ho&e"e$! e$$e( in imposin' 57N inte$est pe$ annum on the amount
(ue the $espon(ents# In Easte$n Shippin' 0ines! Inc# "# Cou$t of Appeals! it &as
hel( that inte$est on obli'ations not constitutin' a loan o$ fo$bea$ance of mone- is
si, pe$cent ;@N< annuall-# If the pu$chase p$ice coul( be establishe( &ith
ce$taint- at the time of the filin' of the complaint! the si, pe$cent ;@N< inte$est
shoul( be compute( f$om the (ate the complaint &as file( until finalit- of the
(ecision# In Lui 's. Loy, in"ol"in' a suit fo$ $econ"e-ance an( annulment of title
file( b- the fi$st bu-e$ a'ainst the selle$ an( the secon( bu-e$! the Cou$t! $ulin' in
fa"o$ of the fi$st bu-e$ an( annullin' the secon( sale! o$(e$e( the selle$ to $efun(
to the secon( bu-e$ ;&ho &as not a pu$chase$ in 'oo( faith< the pu$chase p$ice of
the lots# It &as hel( the$ein that the @N inte$est shoul( be compute( f$om the (ate
of the filin' of the complaint b- the fi$st bu-e$# Afte$ the )u('ment becomes final
an( e,ecuto$- until the obli'ation is satisfie(! the amount (ue shall ea$n inte$est at
57N pe$ -ea$! the inte$im pe$io( bein' (eeme( e+ui"alent to a fo$bea$ance of
c$e(it#
/ccord$nE)< 'h# a?o&n' o( P110000.00 d&# 'h# r#s8ond#n' s8o&s#s ;h$ch
co&)d C# d#'#r?$n#d ;$'h c#r'a$n'< a' 'h# '$?# o( 'h# ($)$nE o( 'h# co?8)a$n'
sha)) #arn 6H $n'#r#s' 8#r ann&? (ro? I&n# 4 19!6 &n'$) 'h# ($na)$'< o( 'h$s
d#c$s$on. "( 'h# adG&dE#d 8r$nc$8a) and 'h# $n'#r#s' -or an< 8ar' 'h#r#o(.
r#?a$n &n8a$d 'h#r#a('#r 'h# $n'#r#s' ra'# sha)) C# ';#)4# 8#rc#n' -12H. 8#r
ann&? co?8&'#d (ro? 'h# '$?# 'h# G&dE?#n' C#co?#s ($na) and #F#c&'or<
&n'$) $' $s (&))< sa'$s($#d#
7=
Thus! he$ein petitione$s shoul( $eimbu$se $espon(ent spouses the $e(emption p$ice plus
inte$est at the $ate of @N per annu& f$om the (ate of filin' of the complaint! an( afte$ the
)u('ment becomes final an( e,ecuto$-! the amount (ue shall ea$n 57N inte$est per
annu& until the obli'ation is satisfie(#
Petitione$s p$a- that sai( $e(emption p$ice an( inte$est be offset o$ compensate( a'ainst
the $entals fo$ the house an( bo(e'a#
The $eco$(s sho& that the testimonial e"i(ence fo$ $entals &as onl- &ith $e'a$( to the
bo(e'a#
79
3o&e"e$! the Cou$t has affi$me( the $ulin' of the RTC that 0ot 8>@B>A &ith
the bo(e'a ha( been "ali(l- pu$chase( b- $espon(ent spouses f$om the RBO an( a TCT
o"e$ sai( p$ope$t- &as issue( in the name of $espon(ent spouses on Feb$ua$- 77! 5>8>#
Testimonial e"i(ence sho&s that the bo(e'a &as lease( out b- $espon(ent spouses onl-
be'innin' Canua$- of 5>>6 &hen o&ne$ship ha( been t$ansfe$$e( to them#
7@
3ence! an-
$entals ea$ne( f$om the lease of sai( bo(e'a $i'htfull- belon's to $espon(ent spouses an(
cannot be offset a'ainst petitione$sF obli'ation to $espon(ent spouses#
As to $entals fo$ 0ot 8>@B>B an( the house the$eon! $espon(ent Victo$ testifie( that
the- ne"e$ a'$ee( to $ent the house an( &hen the- finall- too% o"e$ the same! it &as
p$acticall- inhabitable an( so the- e"en incu$$e( e,penses to $epai$ the house#
7:
The$e is
absolutel- no p$oof of the $ental "alue fo$ the house! consi(e$in' the con(ition it &as in*
as &ell as fo$ the lot $espon(ent spouses a$e occup-in'#
Respon(ent spouses! ha"in' %no&le('e of the fla& in thei$ mo(e of ac+uisition! a$e
(eeme( to be possesso$s in ba( faith un(e$ A$ticle 97@
78
of the Ci"il Co(e# 3o&e"e$! the-
ha"e a $i'ht to be $efun(e( fo$ necessa$- e,penses on the p$ope$t- as p$o"i(e( un(e$
A$ticle 9=@
7>
of the same Co(e# Jnfo$tunatel-! the$e is no c$e(ible p$oof to suppo$t
$espon(ent spousesF alle'ation that the- spent mo$e than P=66!666#66 to $epai$ an( ma%e
the house habitable#
Setoff o$ compensation is 'o"e$ne( b- A$ticle 57:> of the Ci"il Co(e &hich p$o"i(es!
thus.
A$ticle 57:># In o$(e$ that compensation ma- be p$ope$! it is necessa$-.
5# That each one of the obli'o$s be boun( p$incipall-! an( that he be at the time a
p$incipal c$e(ito$ of the othe$*
7# That both (ebts consist in a sum of mone-! o$ if the thin's (ue a$e consumable!
the- be of the same %in(! an( also of the same +ualit- if the latte$ has been state(*
?# That the t&o (ebts be (ue*
=# That the- be li+ui(ate( an( (eman(able*
9# That o"e$ neithe$ of them the$e be an- $etention o$ cont$o"e$s-! commence( b-
thi$( pe$sons an( communicate( in (ue time to the (ebto$#
The$efo$e! un(e$ pa$a'$aph = of the fo$e'oin' p$o"ision! compensation o$ setoff is
allo&e( onl- if the (ebts of both pa$ties a'ainst each othe$ is al$ea(- li+ui(ate( an(
(eman(able# To li+ui(ate means Hto ma%e the amount of in(ebte(ness o$ an obli'ation
clea$ an( settle( in the fo$m of mone-#H
?6
In the p$esent case! no (efinite amounts fo$
$entals no$ fo$ e,penses fo$ $epai$s on sub)ect house has been (ete$mine(# Thus! in the
absence of e"i(ence upon &hich to base the amount of $entals! no compensation o$ setoff
can ta%e place bet&een petitione$s an( $espon(ent spouses#
1hile the cou$ts a$e empo&e$e( to set an amount as $easonable compensation to the
o&ne$s fo$ the use of thei$ p$ope$t-! this Cou$t cannot set such amount base( on me$e
su$mises an( con)ectu$e
:6ERE0ORE! the petition is P/RTL, GR/NTE1# The Decision of the Cou$t of
Appeals (ate( Septembe$ 79! 7667 is MO1"0"E1 to $ea( as follo&s.
5# (ecla$in' $espon(ent spouses Victo$ C$# an( Elena Alinas o&ne$s of 0ot 8>@B>A
&ith the buil(in' ;bo(e'a< stan(in' the$eon an( affi$min' the "ali(it- of thei$ ac+uisition
the$eof f$om the Ru$al Ban% of O$o+uieta! Inc#*
7# d#c)ar$nE On#s$(oroJs sa)# o( Lo' !96-*-9-* 'oE#'h#r ;$'h 'h# ho&s# s'and$nE
'h#r#on 'o r#s8ond#n' s8o&s#s n&)) and 4o$d ab initio*
?# o$(e$in' petitione$s to )ointl- an( se"e$all- $eimbu$se $espon(ent spouses the
$e(emption amount of P555!556#6> &ith inte$est a' 6H per annum (ro? 'h# da'# o(
($)$nE o( 'h# co?8)a$n' &n'$) ($na)$'< o( 'h$s d#c$s$on. /('#r 'h$s d#c$s$on C#co?#s
($na) $n'#r#s' a' 'h# ra'# o( 12H per annum on 'h# 8r$nc$8a) and $n'#r#s' -or an<
8ar' 'h#r#o(. sha)) C# $?8os#d &n'$) (&)) 8a<?#n'*
=# o$(e$in' the $espon(ent spouses to con"e- an( t$ansfe$ 0ot 8>@B>B to petitione$s
an( "acate sai( p$emises &ithin fifteen ;59< (a-s f$om finalit- of this Decision* an(
9# in the e"ent of failu$e of $espon(ent spouses to e,ecute the acts as specifie( abo"e!
petitione$s ma- p$ocee( a'ainst them un(e$ Section 56! Rule ?> of the 5>>: Rules of
Ci"il P$oce(u$e#
No costs#
SO OR1ERE1.
9nares-Santiago, Cairperson, Cico-(a:ario, (acura, Reyes, ,,., concu$#
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