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    Menchavez Vs Bermudez

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    Arthur Menchavez loaned Marlyn Bermudez PHP500,000 with 5% monthly interest. Bermudez issued checks to pay but some bounced. The parties entered a compromise for Bermudez to issue more checks but some also bounced. Menchavez filed criminal cases. Courts found Bermudez had paid PHP925,000 total based on Menchavez's own statement of account, so was not liable. The Supreme Court upheld this, finding the compromise agreement was not separate from the original loan. It also found the 5% monthly interest was excessive and Menchavez had already been fully paid based on his own admission.

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    Menchavez Vs Bermudez

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    CML
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    Arthur Menchavez loaned Marlyn Bermudez PHP500,000 with 5% monthly interest. Bermudez issued checks to pay but some bounced. The parties entered a compromise for Bermudez to issue more checks but some also bounced. Menchavez filed criminal cases. Courts found Bermudez had paid PHP925,000 total based on Menchavez's own statement of account, so was not liable. The Supreme Court upheld this, finding the compromise agreement was not separate from the original loan. It also found the 5% monthly interest was excessive and Menchavez had already been fully paid based on his own admission.

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    Menchavez vs Bermudez Oblicon Digest

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    Menchavez vs Bermudez

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    Arthur Menchavez loaned Marlyn Bermudez PHP500,000 with 5% monthly interest. Bermudez issued checks to pay but some bounced. The parties entered a compromise for Bermudez to issue more checks but some also bounced. Menchavez filed criminal cases. Courts found Bermudez had paid PHP925,000 total based on Menchavez's own statement of account, so was not liable. The Supreme Court upheld this, finding the compromise agreement was not separate from the original loan. It also found the 5% monthly interest was excessive and Menchavez had already been fully paid based on his own admission.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    103 views3 pages

    Menchavez Vs Bermudez

    Uploaded by

    CML
    Arthur Menchavez loaned Marlyn Bermudez PHP500,000 with 5% monthly interest. Bermudez issued checks to pay but some bounced. The parties entered a compromise for Bermudez to issue more checks but some also bounced. Menchavez filed criminal cases. Courts found Bermudez had paid PHP925,000 total based on Menchavez's own statement of account, so was not liable. The Supreme Court upheld this, finding the compromise agreement was not separate from the original loan. It also found the 5% monthly interest was excessive and Menchavez had already been fully paid based on his own admission.

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    of 3

    MENCHAVEZ SINGSON vs. BERMUDEZ TRIANGLE HAHAHAHAHAHAHHAHAHAHAHAHAHAA (Menchavez v.

    Bermudez na madaming ganap nyeta)

    FACTS:

    Arthur Menchavez and Marlyn Bermudez entered on November 17, 1993 into a loan agreement, covering
    the amount of PhP500,000, with interest fixed at 5% per month
    Bermudez issued a check, to mature on Dec. 17, 1993 in favor of Menchavez, but with a request that
    petitioner not present the check for payment on its maturity date
    Respondent replaced the check with 5 postdated Prudential Bank checks totaling P565,000. Four checks
    were cleared and fully encashed when presented for payment, covering the sum of P465,000
    The July 17, 1994 check, while dishonored, was partially paid by respondent with a replacement check for
    PhP110,000 issued on June 12, 1995
    Petitioner alleged entering into a verbal compromise agreement with respondent regarding the delay in
    payment and the accumulated interest. Under the agreement, respondent would deliver 11 postdated
    Prudential Bank checks as payment. When presented for payment, eight (8) of these checks were
    dishonored for the reason, "Drawn against Insufficient Funds
    Nine criminal informations were led against respondent Marlyn M. Bermudez before the Metropolitan Trial
    Court (MeTC) in Makati City, each charging her with violations of BP 22 or the Bouncing Check Law. Eight
    counts covered the dishonored checks issued pursuant to the compromise agreement, while the ninth
    covered the adverted check issued on July 17, 1994.
    The checks involved were issued and drawn by respondent against the account of FLB Construction
    Corporation at Prudential Bank, payable to petitioner Menchavez, covering the total sum of P300,000. These
    checks were dishonored by the drawee bank upon presentment for payment on their respective maturity
    dates for the reason, "Drawn Against Insufficient Funds.

    MeTC: Acquitted respondent of the charges against her

    Respondent- raised the defense of payment, and proved paying petitioner the sum of PhP925,000, or
    PhP425,000 over the PhP500,000 loan: The amount of PhP925,000.00 was acknowledged by petitioner in
    the statement of account which he prepared, wherein PhP624,344 was credited to payment of interest, and
    PhP300,656 was credited to payment of the principal.

    Petitioner appealed to RTC: Appeal partially granted

    P425,000 excess payment had not fully settled the respondent's obligations to the petitioner. No evidence
    was presented as to payment on the 8 checks covering the amount of P190,000 in the compromise
    agreement, less partial payment of P25,000. In fine, a total of P165,000 remains unpaid
    However, the 5% monthly interest stipulated in the loan agreement could not be applied, as, according to the
    RTC, there was no written agreement; thus, the rate of 12% per annum would be used.

    Respondent appealed to CA: whether Menchavez could still demand on the original loan of P500,000 despite
    the payment by respondent of the total amount of P925,000

    Decision of RTC reversed


    CA found that petitioner had expressly admitted in a Statement of Account, prepared under his supervision,
    that respondent's payments had already covered the principal loan of PhP500,000, and that he had also
    received excess payment in the amount of PhP425,000, before the criminal charges were filed
    The CA did not agree with the RTC that the issuance of the subject checks resulted from the
    compromise agreement, and not from the loan transaction between petitioner and respondent. It
    held that the compromise agreement could not be detached from and taken independently of the
    principal loan.
    o The compromise agreement bound respondent to pay an exorbitant and unconscionable amount in
    interest and charges, and that further, the principal loan had already been paid, with the sum of
    PhP425,000 added by way of interest at the rate of 5% per month or 60% per annum, and that
    courts could reduce liquidated damages, if these are iniquitous or unconscionable, and thus
    contrary to morals

    Petitioner brought the matter to the SC:


    Petitioner argues that the compromise agreement created an obligation separate and distinct from the
    original loan, for which respondent is now liable.

    ISSUE: WON THE COMPROMISE AGREEMENT CREATED AN OBLIGATION SEPARATE AND DISTINCT FROM
    THE ORIGINAL LOAN

    HELD: NO

    It is undeniable that the compromise agreement is wholly intertwined with the original loan agreement, to the
    extent that this compromise agreement was entered into to fulll respondent's payment on the original
    obligation, without which the compromise agreement would not have existed.
    By stating that the compromise agreement and the original loan transaction are separate and distinct,
    petitioner would now attempt to exact payment on both. This goes against the very purpose of the parties
    entering into a compromise agreement, which was to extinguish the obligation under the loan.
    Petitioner may not seek the enforcement of both the compromise agreement and payment of the loan, even
    in the event that the compromise agreement remains unfulfilled. It is beyond cavil that if a party fails or
    refuses to abide by a compromise agreement, the other party may either enforce the compromise or regard
    it as rescinded and insist upon his original demand
    It cannot, thus, be argued that there are two separate validly subsisting obligations to be fulfilled by
    respondent under both the compromise agreement and the original loan transaction.
    To allow petitioner to recover under the terms of the compromise agreement and to further seek
    enforcement of the original loan transaction would constitute unjust enrichment.
    The compromise agreement was entered into precisely to extinguish the obligation under the loan
    transaction, not to create two sources of obligation for respondent.
    There is unjust enrichment under Article 22 of the Civil Code when
    o a person is unjustly benefited; and
    o such benefit is derived at the expense of or with damages to another.
    o Since respondent only entered into the compromise agreement to commit to payment of the
    original loan, petitioner cannot separate the two and seek payment of both, especially as he has
    already recovered the amount of the original loan.

    WON THE AGREED 5% INTEREST MONTHLY IS VALID? NO

    Petitioner since respondent voluntarily signed a promissory note and voluntarily agreed to pay such interest.
    5% monthly interest rate agreed upon as "excessive, iniquitous, unconscionable and exorbitant, contrary to
    morals, and the law." We need not unsettle the principle we had affirmed in a plethora of cases that
    stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable, and
    exorbitant.

    WON PETITIONER HAS BEEN FULLY PAID? YES

    CA scrutinized the Statement of Account prepared by petitioner, wherein it showed that respondent had already paid
    PhP925,000, or PhP425,000 over the PhP500,000 loan, and treated it as an admission by petitioner. The original
    obligation of PhP500,000 had already been satisfied, and the PhP425,000 would be treated as interest paid, even at
    the iniquitous rate of 60% per annum.

    Totaling the amounts in the Statement of Account results in the sum of PhP925,000, which petitioner admits
    that respondent has already paid. But for him, it is still a contentious matter as he seeks to enforce the
    5% per month interest rate, and would, thus, claim that he has not been fully paid.
    As it has been ruled that the 5% per month interest rate is null and void, petitioner cannot recover the
    grossly inflated amounts listed in the Statement of Account he prepared.
    Petitioner does not contest the amounts in the Statement of Account he prepared, only the import, as in his
    Statement of Account he computes for interest based on the 5% per month interest rate. The Statement of
    Account is evidence that he has already been paid the PhP500,000 subject of the original loan
    agreement, and has benefited further in the amount of PhP425,000, and, thus, must not be allowed to
    recover further.
    Parties may be free to contract and stipulate as they see it, but that is not an absolute freedom. Art.
    1306 of the Civil Code provides, "The contracting parties may establish such stipulations, clauses,
    terms and conditions as they may deem convenient, provided they are not contrary to law, morals,
    good customs, public order, or public policy."
    o While petitioner harps on the voluntariness with which the parties agreed upon the 5% per
    month interest rate, voluntariness does not make the stipulation on interest valid. The 5%
    per month, or 60% per annum, rate of interest is, indeed, iniquitous, and must be struck down.
    Petitioner has been sufficiently compensated for the loan and the interest earned, and cannot be
    allowed to further recover on an interest rate which is unconscionable.
    o Since the stipulation on the interest rate is void, it is as if there was no express contract on said
    interest rate. Hence, courts may reduce the interest rate as reason and equity demand.

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