TAN v VALDEHUEZA G.R. No.

L-38745 August 6, 1975

FACTS:

A parcel of land was the subject matter of the public auction sale held on May 6, 1955 at the Capitol
Building in Oroquieta, Misamis Occidental, wherein the plaintiff was the highest bidder and as such a
Certificate of Sale was executed by MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff
in favor of LUCIA TAN the herein plaintiff. Due to the failure of defendant Arador Valdehueza to redeem
the said land within the period of one year as being provided by law, MR. VICENTE D. ROA who was
then the Ex-Officio Provincial Sheriff executed an ABSOLUTE DEED OF SALE in favor of the plaintiff
LUCIA TAN.

ISSUE:

1. Whether or not the subject land subject of pacto de retro is actually an equitable mortgage

2. Whether or not the imposition of legal interest on the amounts subject of the equitable mortgages,
P1,200 and P300, respectively

RULING:

1. Yes, it is an equitable mortgage. The Valdehuezas having remained in possession of the land and the
realty taxes having been paid by them, the contracts which purported to be pacto de retro transactions
are presumed to be equitable mortgages, whether registered or not, there being no third parties involved.
The trial court treated the registered deed of pacto de retro as an equitable mortgage but considered the
unregistered deed of pacto de retro "as a mere case of simple loan, secured by the property thus sold
under pacto de retro," on the ground that no... suit lies to foreclose an unregistered mortgage. It would
appear that the trial judge had not updated himself on law and jurisprudence: he cited, in support of his
ruling, article 1875 of the old Civil Code and decisions of this Court circa 1910 and 1912.

Under article 1875 of the Civil Code of 1889, registration was a necessary requisite for the validity of a
mortgage even as between the parties, but under article 2125 of the new Civil Code (in effect since
August 30,1950), this is no longer so.

If the instrument is not recorded, the mortgage is nonetheless binding between the parties. (Article 2125,
2nd sentence).

2. It is without legal basis, for, "No interest shall be due unless it has been expressly stipulated in writing."
(Article 1956, new Civil Code) Furthermore, the... plaintiff did not pray for such interest; her thesis was a
consolidation of ownership, which was properly rejected, the contracts being equitable mortgages.

"No interest shall be due unless it has been expressly stipulated in writing." (Article 1956, new Civil Code)

With the definitive resolution of the rights of the parties as discussed above, we find it needless to pass
upon the plaintiff's petition for receivership. Should the circumstances so warrant, she may address the
said petition to the court a quo.
JARDENIL VS. SOLAS - G.R. No. L-47878

FACTS:

Solas entered into a mortgage with Jardenil, in connection with a loan from Nov 1932 to March
1934. Solas was unable to pay his obligation. Jardenil extended to another year from the date of maturity
within which to make payment, without making any mention of any interest which the mortgagor should
pay during the additional period. Still, Solas was unable to pay. The original mortgage show that there
was an agreement to pay interest only up to the date of maturity (first day of maturity), May 31, 1934.

ISSUE:

Whether or not Solas is bound to pay the stipulated interest only up to the date of maturity as
fixed in the promissory note, or up to the date payment is effected?

HELD:

Defendant-appellee has clearly agreed to pay interest only up to the date of maturity, or until
March 31, 1934. As the contract is silent as to whether after that date, in the event of non-payment, the
debtor would continue to pay interest, we cannot in law, indulge in any presumption as to such interest;
otherwise, we would be imposing upon the debtor an obligation that the parties have not chosen to agree
upon.

Article 1755 of the Civil Code provides that "interest shall be due only when it has been expressly
stipulated."

There is nothing in the mortgage deed to show that the terms employed by the parties thereto are
at war with their evident intent. Neither has either of the parties shown that, by mutual mistake, the deed
of mortgage fails to express their agreement, for if such mistake existed, plaintiff would have undoubtedly
adduced evidence to establish it and asked that the deed be reformed accordingly, under the
parcel-evidence rule.

We hold therefore, that as the contract is clear and unmistakable and the terms employed therein
have not been shown to belie or otherwise fail to express the true intention of the parties and that the
deed has not been assailed on the ground of mutual mistake which would require its reformation, same
should be given its full force and effect.

Plaintiff is, therefore, entitled only to the stipulated interest of 12 per cent on the loan of P2, 400
from November 8, 1932 to March 31, 1934. And it being a fact that extra judicial demands have been
made which we may assume to have been so made on the expiration of the year of grace, he shall be
entitled to legal interest upon the principal and the accrued interest from April 1, 1935, until full payment.
BOBIE ROSE V. FRIAS v. FLORA SAN DIEGO-SISON, GR NO. 155223, 2007-04-03

FACTS:
Frias is the owner of a lot in Alabang, Mandaluyong she acquired from Island Master Realty and
Development Corp. (IMRDC) by virtue of a deed of sale dated Nov. 16, 1990. On Dec. 7, 1990, Frias and
San Diego-Sison entered into a MOA over the property for the consideration of 3M pesos.
The terms of the MOA are as follows: San Diego-Sison has 6 months from the date of the
execution of the contract to notify Frias of her intention to purchase the property with improvements at 6.4
M pesos. Frias may still offer the property to other persons, provided that the 3M pesos be paid to Sison,
including interest based on prevailing compounded bank interest plus the amount of sale in excess of 7M
pesos should the property be sold at a price greater than 7M pesos. But, if Frias has no other buyer within
6 months from the contract’s execution, no interest shall be charged by San Diego-Sison on the 3M
pesos. If San Diego-Sison decides not to buy the property, Frias has 6 months to pay 3M pesos. The 3M
pesos is treated as a loan and the property is considered the security for the mortgage.
Frias gave San Diego-Sison the TCT and Deed of Absolute Sale, but the latter decided not to
purchase the property and notified the later through a letter dated March 20, 1991. Frias received the
letter on June 11, 1991 with the reminder that that the 2M pesos San Diego-Sison paid earlier should be
considered as a loan payable within 6 months. Frias defaulted and San Diego-Sison filed a complaint for
sum of money with preliminary attachment. San Diego-Sison averred that Frias tried to deprive her of the
security for the loan by making a false report of the loss of her owner’s copy of TCT, executing an affidavit
of loss and by filing a petition for the issuance of a new owner’s duplicate copy.
RTC ordered Frias to pay Sison : 2M pesos + 32% annual interest beginning December 7, 1991
until fully paid, 70k pesos representing premiums paid by Sison on the attachment bond with legal interest
counted from the date of this decision until fully paid, 100k pesos moral, corrective, exemplary damages,
and 100k pesos attorney’s fees plus cost of litigation. CA affirmed RTC with modification—32% reduced
to 25%.
ISSSUE:
Whether or not the compounded bank interest should be limited to 6 months as contained in the MOA.
RULING:
A loan always bears interest otherwise it is not a loan, is flawed since a simple loan may be
gratuitous or with a stipulation to pay interest. No error committed by the CA in awarding a 25% interest
per annum on the two-million-peso loan even beyond the second six months stipulated period.
The agreement that the amount given shall bear compounded bank interest for the last six
months only, i.e., referring to the second six-month period, does not mean that interest will no longer be
charged after the second six-month period since such stipulation was made on the logical and reasonable
expectation that such amount would be paid within the date stipulated. Considering that Frias failed to pay
the amount given which under the MOA shall be considered as a loan, the monetary interest for the last
six months continued to accrue until actual payment of the loaned amount.
The payment of regular interest constitutes the price or cost of the use of money and thus, until
the principal sum due is returned to the creditor, regular interest continues to accrue since the debtor
continues to use such principal amount. It has been held that for a debtor to continue in possession of the
principal of the loan and to continue to use the same after maturity of the loan without payment of the
monetary interest, would constitute unjust enrichment on the part of the debtor at the expense of the
creditor.
ARWOOD INDUSTRIES v. D.M. CONSUNJI, GR No. 142277, 2002-12-11

FACTS:

Petitioner and respondent, as owner and contractor, respectively, entered into a Civil, Structural
and Architectural Works Agreement dated February 6, 1989 for the construction of petitioner's Westwood
Condominium at No. 23 Eisenhower St. Greenhills, San Juan, Metro Manila. The contract price for the
condominium project aggregated P20,800,000.00. Despite the completion of the condominium project,
the amount of P962,434.78 remained unpaid by petitioner. Repeated demands by respondent for
petitioner to pay went unheeded. Thus, on August 13, 1993, respondent, as plaintiff in Civil Case No.
63489 filed its complaint for the recovery of the balance of the contract price and for damages against
petitioner.

Respondent specifically prayed for the payment of the (a) amount of P962,434.78 with interest of
2% per month or a fraction thereof, from November 1990 up to the time of payment; (b) the amount of
P250,000 as attorney's fees and litigation expenses; (c) amount of P150,000 as... exemplary damages
and (d) costs of suit.[5]

The Court of Appeals upheld the trial court despite dauntless demurring by petitioner.
Respondent court found basis in Article 6.03 of the Agreement concerning the imposition of the 2%
interest. Respondent court, however, modified the decision of the trial court by deleting the award of
attorney's fees

ISSUES:

Whether or not the court erred in the imposition of two percent per month interest in favor of respondent
D.M. Consunji, Inc. and against petitioner Arwood Industries, Inc on the award of P962, 434.78

HELD:

Petitioner's stance hardly deserves this Court's attention.

The Agreement or the contract between the parties is the formal expression of the parties' rights,
duties and obligations. It is the best evidence of the intention of the parties. Thus, "when the terms of an
agreement have been reduced to writing, it is considered as... containing all the terms agreed upon and
there can be, between the parties and their successors in interest, no evidence of such terms other than
the contents of the written agreement."

Consequently, upon the fulfillment by respondent of its obligation to complete the construction
project, petitioner had the correlative duty to pay for respondent's services. However, petitioner refused to
pay the balance of the contract price. From the moment respondent... completed the construction of the
condominium project and petitioner refused to pay in full, there was delay on the part of petitioner. This
delay was never disputed. Delay in the performance of an obligation is looked upon with disfavor
because, when a party to a contract incurs delay, the other party who performs his part of the contract
suffers damages thereby. Dilationes in lege sunt idiosae. Obviously,... respondent suffered damages
brought about by the failure of petitioner to comply with its obligation on time. And, sans elaboration of the
matter at hand, damages take the form of interest. Accordingly, the appropriate measure of damages in
this case is the payment of interest... at the rate agreed upon, which is 2% interest for every month of
delay.

It must be noted that the Agreement provided the contractor, respondent in this case, two options
in case of delay in monthly payments, to wit: a) suspend work on the project until payment is remitted by
the owner or b) continue the work but the owner shall be required to pay... interest at a rate of two percent
(2%) per month or a fraction thereof. Evidently, respondent chose the latter option, as the condominium
project was in fact already completed. The payment of the 2% monthly interest, therefore, cannot be
jettisoned overboard.
"Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon,
and in the absence of stipulation, the legal... interest, which is six percent per annum."

Hence, even in the absence of a stipulation on interest, under Article 2209 of the Civil Code, respondent
would still be entitled to recover the balance of the contract price with interest. Respondent court,
therefore, correctly interpreted the terms of the agreement which... provides that "the OWNER shall be
required to pay the interest at a rate of two percent (2%) per month or the fraction thereof in days of the
amount due for payment by the OWNER."

We, therefore, find no basis to alter the findings of the Court of Appeals affirming the decision of the trial
court.

WHEREFORE, the petition is hereby DENIED.

FACTS:

Atty. Attorney Leodegario Azarraga served as counsel for the defendant Azzaragas (heirs of Don
Juan Azarraga y Galvez) in a case for which the latter owed the lawyer P2700 for his services. Thereafter,
he was made an administrator of the undivided estate and the defendants mortgaged to him a parcel of
land and subject to the payment of the fees of said attorney of the estate, which fees shall be fixed by the
court, and said attorney may hold said lands under no obligation to pay any rent until his fees shall have
been fully paid and which the lawyer assigned to Petitioner Soncuya through a” sale and cession” of his
rights.

Soncuya possessed the land, brought in cattle that allegedly destroyed the crops and coconut
trees planted by one of the defendants (but was actually destroyed by drought).

The petitioner became the creditor of the defendants. When the debt matured, he allowed them
extension to Feb. 16, 1926 with condition (12% annual interest); he later agreed to an extension to April
26, 1926 with same condition which were made in writing. The plaintiff granted another extension to
expire on October 31, 1928, but subject to the condition that instead of seven thousand and odd pesos,
which undoubtedly referred to the interest of 12 per cent per annum charged

ISSUE: Whether or not Soncuya is the rightful owner of the land

HELD:

NO. It is only in contracts of loan, with or without guaranty, that interest may be demanded. The
contention of the defendants that the plaintiff did not and could never receive the lands in question as an
assignment in payment of a debt, and much less did he acquire them by purchase with pacto de retro, is
well taken.

Moreover, the plaintiff has no reason to complain that his lien, if his right over said lands could be
termed as such, was not annotated in the certificate of title which the defendants Azarraga had obtained,
or that the latter did not ask that... it be stated therein that the lands to which it refers are charged with his
credit against them; inasmuch as he was himself negligent in that he did not ask the court, while the
registration case relating to said lands was being heard, for the annotation of what he considered...
necessary to protect his rights, and in not seeking the revision or modification of the decree of registration
within the period of one year provided for that purpose.

In view of all the foregoing and in resume, we hold that the plaintiff alone has the right (1) to
recover from the defendants Azarraga, by virtue of the assignment and sale made to him by Attorney
Leodegario Azarraga of the latter's credit of P2,700 against the said... defendants, the aforesaid sum plus
interest at the rate of 12 per cent per annum from August 30, 1924; (2) to recover from the defendant
Joaquin Azarraga, in particular, the sum of P4,000 plus interest at the rate of 12 per cent per annum from
April 26, 1926. We also hold that... the defendants are not entitled to anything under their counterclaims.