G.R. No. 149004 April 14, 2004

RESTITUTA M. IMPERIAL, petitioner, vs.ALEX A. JAUCIAN, respondent.

Iniquitous and unconscionable stipulations on interest rates, penalties and attorneys fees are contrary to morals. Consequently, courts are granted authority to reduce them equitably. If reasonably exercised, such authority shall not be disturbed by appellate courts.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the July 19, 2000 Decision2 and the June 14, 2001 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 43635. The decretal portion of the Decision is as follows:

"WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court, 5th Judicial Region, Branch 21, Naga City, dated August 31, 1993, in Civil Case No. 89-1911 for Sum of Money, is hereby AFFIRMED in toto."4

The assailed Resolution denied petitioners Motion for Reconsideration.

The dispositive portion of the August 31, 1993 Decision, promulgated by the Regional Trial Court (RTC) of Naga City (Branch 21) and affirmed by the CA, reads as follows:

"Wherefore, Judgment is hereby rendered declaring Section I, Central Bank Circular No. 905, series of 1982 to be of no force and legal effect, it having been promulgated by the Monetary Board of the Central Bank of the Philippines with grave abuse of discretion amounting to excess of jurisdiction; declaring that the rate of interest, penalty, and charges for attorneys fees agreed upon between the parties are unconscionable, iniquitous, and in violation of Act No. 2655, otherwise known as the Usury Law, as amended; and ordering Defendant to pay Plaintiff the amount of FOUR HUNDRED SEVENTY-EIGHT THOUSAND, ONE HUNDRED NINETY-FOUR and 54/100 (P478,194.54) PESOS, Philippine currency, with regular and compensatory interests thereon at the rate of twenty-eight (28%) per centum per annum, computed from August 31, 1993 until full payment of the said amount, and in addition, an amount equivalent to ten (10%) per centum of the total amount due and payable, for attorneys fees, without pronouncement as to costs."5

The Facts

The CA summarized the facts of the case in this wise:

"The present controversy arose from a case for collection of money, filed by Alex A. Jaucian against Restituta Imperial, on October 26, 1989. The complaint alleges, inter alia, that defendant obtained from plaintiff six (6) separate loans for which the former executed in favor of the latter six (6) separate promissory notes and issued several checks as guarantee for payment. When the said loans became overdue and unpaid, especially when the defendants checks were dishonored, plaintiff made repeated oral and written demands for payment.

"Specifically, the six (6) separate loans obtained by defendant from plaintiff on various dates are as follows:

(a) November 13, 1987P 50,000.00(b) December 28, 198740,000.00(c) January 6, 198830,000.00(d) January 11, 198850,000.00(e) January 12, 198850,000.00(f) January 13, 1988100,000.00TotalP320,000.00"The loans were covered by six (6) separate promissory notes executed by defendant. The face value of each promissory notes is bigger [than] the amount released to defendant because said face value already include[d] the interest from date of note to date of maturity. Said promissory notes, which indicate the interest of 16% per month, date of issue, due date, the corresponding guarantee checks issued by defendant, penalties and attorneys fees, are the following:

1. Exhibit D for loan of P40,000.00 on December 28, 1987, with face value of P65,000.00;

2. Exhibit E for loan of P50,000.00 on January 11, 1988, with face value of P82,000.00;

3. Exhibit F for loan of P50,000.00 on January 12, 1988, with face value of P82,000.00;

4. Exhibit G for loan of P100,000.00 on January 13, 1988, with face value of P164,000.00;

5. Exhibit H This particular promissory note covers the second renewal of the original loan of P50,000.00 on November 13, 1987, which was renewed for the first time on March 16, 1988 after certain payments, and which was renewed finally for the second time on January 4, 1988 also after certain payments, with a face value of P56,240.00;

6. Exhibit I This particular promissory note covers the second renewal of the original loan of P30,000.00 on January 6, 1988, which was renewed for the first time on June 4, 1988 after certain payments, and which was finally renewed for the second time on August 6, 1988, also after certain payments, with [a] face value of P12,760.00;

"The particulars about the postdated checks, i.e., number, amount, date, etc., are indicated in each of the promissory notes. Thus, for Exhibit D, four (4) PB checks were issued; for Exhibit E four (4) checks; for Exhibit F four (4) checks; for Exhibit G four (4) checks; for Exhibit H one (1) check; for Exhibit I one (1) check;

"The arrangement between plaintiff and defendant regarding these guarantee checks was that each time a check matures the defendant would exchange it with cash.

"Although, admittedly, defendant made several payments, the same were not enough and she always defaulted whenever her loans mature[d]. As of August 16, 1991, the total unpaid amount, including accrued interest, penalties and attorneys fees, [was] P2,807,784.20.

"On the other hand, defendant claims that she was extended loans by the plaintiff on several occasions, i.e., from November 13, 1987 to January 13, 1988, in the total sum of P320,000.00 at the rate of sixteen percent (16%) per month. The notes mature[d] every four (4) months with unearned interest compounding every four (4) months if the loan [was] not fully paid. The loan releases [were] as follows:

(a) November 13, 1987P 50,000.00(b) December 28, 198740,000.00(c) January 6, 198830,000.00(d) January 11, 198850,000.00(e) January 12, 198850,000.00(f) January 13, 1988100,000.00TotalP320,000.00"The loan on November 13, 1987 and January 6, 1988 ha[d] been fully paid including the usurious interests of 16% per month, this is the reason why these were not included in the complaint.

"Defendant alleges that all the above amounts were released respectively by checks drawn by the plaintiff, and the latter must produce these checks as these were returned to him being the drawer if only to serve the truth. The above amount are the real amount released to the defendant but the plaintiff by masterful machinations made it appear that the total amount released was P462,600.00. Because in his computation he made it appear that the true amounts released was not the original amount, since it include[d] the unconscionable interest for four months.

"Further, defendant claims that as of January 25, 1989, the total payments made by defendants [were] as follows:

a. Paid releases on November 13, 1987 of P50,000.00 and January 6, 1988 of P30,000.00 these two items were not included in the complaint affirming the fact that these were paidP 80,000.00b. Exhibit 26 Receipt231,000.00c. Exhibit 8-25 Receipt65,300.00d. Exhibit 27 Receipt65,000.00TotalP441,780.00Less:320,000.00Excess PaymentP121,780.00"Defendant contends that from all perspectives the above excess payment of P121,780.00 is more than the interest that could be legally charged, and in fact as of January 25, 1989, the total releases have been fully paid.

"On 31 August 1993, the trial court rendered the assailed decision."6

Ruling of the Court of Appeals

On appeal, the CA held that without judicial inquiry, it was improper for the RTC to rule on the constitutionality of Section 1, Central Bank Circular No. 905, Series of 1982. Nonetheless, the appellate court affirmed the judgment of the trial court, holding that the latters clear and detailed computation of petitioners outstanding obligation to respondent was convincing and satisfactory.

Hence, this Petition.7

The Issues

Petitioner raises the following arguments for our consideration:

"1. That the petitioner has fully paid her obligations even before filing of this case.

"2. That the charging of interest of twenty-eight (28%) per centum per annum without any writing is illegal.

"3. That charging of excessive attorneys fees is hemorrhagic.

"4. Charging of excessive penalties per month is in the guise of hidden interest.

"5. The non-inclusion of the husband of the petitioner at the time the case was filed should have dismissed this case."8

The Courts Ruling

The Petition has no merit.

First Issue:

Computation of Outstanding Obligation

Arguing that she had already fully paid the loan before the filing of the case, petitioner alleges that the two lower courts misappreciated the facts when they ruled that she still had an outstanding balance of P208,430.

This issue involves a question of fact. Such question exists when a doubt or difference arises as to the truth or the falsehood of alleged facts; and when there is need for a calibration of the evidence, considering mainly the credibility of witnesses and the existence and the relevancy of specific surrounding circumstances, their relation to each other and to the whole, and the probabilities of the situation.9

It is a well-entrenched rule that pure questions of fact may not be the subject of an appeal by certiorari under Rule 45 of the Rules of Court, as this remedy is generally confined to questions of law.10 The jurisdiction of this Court over cases brought to it is limited to the review and rectification of errors of law allegedly committed by the lower court. As a rule, the latters factual findings, when adopted and affirmed by the CA, are final and conclusive and may not be reviewed on appeal.11

Generally, this Court is not required to analyze and weigh all over again the evidence already considered in the proceedings below.12 In the present case, we find no compelling reason to overturn the factual findings of the RTC -- that the total amount of the loans extended to petitioner was P320,000, and that she paid a total of only P116,540 on twenty-nine dates. These findings are supported by a preponderance of evidence. Moreover, the amount of the outstanding obligation has been meticulously computed by the trial court and affirmed by the CA. Petitioner has not given us sufficient reason why her cause falls under any of the exceptions to this rule on the finality of factual findings.

Second Issue:

Rate of Interest

The trial court, as affirmed by the CA, reduced the interest rate from 16 percent to 1.167 percent per month or 14 percent per annum; and the stipulated penalty charge, from 5 percent to 1.167 percent per month or 14 percent per annum.

Petitioner alleges that absent any written stipulation between the parties, the lower courts should have imposed the rate of 12 percent per annum only.

The records show that there was a written agreement between the parties for the payment of interest on the subject loans at the rate of 16 percent per month. As decreed by the lower courts, this rate must be equitably reduced for being iniquitous, unconscionable and exorbitant. "While the Usury Law ceiling on interest rates was lifted by C.B. Circular No. 905, nothing in the said circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets."13

In Medel v. CA,14 the Court found the stipulated interest rate of 5.5 percent per month, or 66 percent per annum, unconscionable. In the present case, the rate is even more iniquitous and unconscionable, as it amounts to 192 percent per annum. When the agreed rate is iniquitous or unconscionable, it is considered "contrary to morals, if not against the law. [Such] stipulation is void."15

Since the stipulation on the interest rate is void, it is as if there were no express contract thereon.16 Hence, courts may reduce the interest rate as reason and equity demand. We find no justification to reverse or modify the rate imposed by the two lower courts.

Third and Fourth Issue:

Penalties and Attorneys Fees

Article 1229 of the Civil Code states thus:

"The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable."

In exercising this power to determine what is iniquitous and unconscionable, courts must consider the circumstances of each case.17 What may be iniquitous and unconscionable in one may be totally just and equitable in another. In the present case, iniquitous and unconscionable was the parties stipulated penalty charge of 5 percent per month or 60 percent per annum, in addition to regular interests and attorneys fees. Also, there was partial performance by petitioner when she remitted P116,540 as partial payment of her principal obligation of P320,000. Under the circumstances, the trial court was justified in reducing the stipulated penalty charge to the more equitable rate of 14 percent per annum.

The Promissory Note carried a stipulation for attorneys fees of 25 percent of the principal amount and accrued interests. Strictly speaking, this covenant on attorneys fees is different from that mentioned in and regulated by the Rules of Court.18 "Rather, the attorneys fees here are in the nature of liquidated damages and the stipulation therefor is aptly called a penal clause."19 So long as the stipulation does not contravene the law, morals, public order or public policy, it is binding upon the obligor. It is the litigant, not the counsel, who is the judgment creditor entitled to enforce the judgment by execution.

Nevertheless, it appears that petitioners failure to comply fully with her obligation was not motivated by ill will or malice. The twenty-nine partial payments she made were a manifestation of her good faith. Again, Article 1229 of the Civil Code specifically empowers the judge to reduce the civil penalty equitably, when the principal obligation has been partly or irregularly complied with. Upon this premise, we hold that the RTCs reduction of attorneys fees -- from 25 percent to 10 percent of the total amount due and payable -- is reasonable.

Fifth Issue:

Non-Inclusion of Petitioners Husband

Petitioner contends that the case against her should have been dismissed, because her husband was not included in the proceedings before the RTC.

We are not persuaded. The husbands non-joinder does not warrant dismissal, as it is merely a formal requirement that may be cured by amendment.20 Since petitioner alleges that her husband has already passed away, such an amendment has thus become moot.

WHEREFORE, the Petition is DENIED. Costs against petitioner.

G.R. No. 172139 December 8, 2010

JOCELYN M. TOLEDO, Petitioner, vs.MARILOU M. HYDEN, Respondent.

It is true that the imposition of an unconscionable rate of interest on a money debt is immoral and unjust and the court may come to the aid of the aggrieved party to that contract. However, before doing so, courts have to consider the settled principle that the law will not relieve a party from the effects of an unwise, foolish or disastrous contract if such party had full awareness of what she was doing.

This Petition for Review on Certiorari1 assails the Decision2 dated August 24, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 79805, which affirmed the Decision dated March 10, 20033 of the Regional Trial Court (RTC), Branch 22, Cebu City in Civil Case No. CEB-22867. Also assailed is the

Resolution dated March 8, 2006 denying the motion for reconsideration.

Factual Antecedents

Petitioner Jocelyn M. Toledo (Jocelyn), who was then the Vice-President of the College Assurance Plan (CAP) Phils., Inc., obtained several loans from respondent Marilou M. Hyden (Marilou). The transactions are briefly summarized below:

1) August 15, 1993P 30,000.00with 6% monthly interest2) April 21, 1994100,000.003) October 2, 199530,000.004) October 9, 199530,000.005) May 22, 1997100,000.00with 7% monthly interestTOTAL AMOUNT OF LOANP 290,000.004From August 15, 1993 up to December 31, 1997, Jocelyn had been religiously paying Marilou the stipulated monthly interest by issuing checks and depositing sums of money in the bank account of the latter. However, the total principal amount of P290,000.00 remained unpaid. Thus, in April 1998, Marilou visited Jocelyn in her office at CAP in Cebu City and asked Jocelyn and the other employees who were likewise indebted to her to acknowledge their debts. A document entitled "Acknowledgment of Debt"5 for the amount of P290,000.00 was signed by Jocelyn with two of her subordinates as witnesses. The said amount represents the principal consolidated amount of the aforementioned previous debts due on December 25, 1998. Also on said occasion, Jocelyn issued five checks to Marilou representing renewal payment of her five previous loans, viz:

Check No. 0010761 dated September 2, 1998. . . . . . . . .P 30,000.00Check No. 0010762 dated September 9, 1998. . . . . . . . .30,000.00Check No. 0010763 dated September 15, 1998. . . . . . . . .30,000.00Check No. 0010764 dated September 22, 1998. . . . . . . . .100,000.00Check No. 0010765 dated September 25, 1998. . . . . . . . .100,000.00 TOTALP 290,000.00In June 1998, Jocelyn asked Marilou for the recall of Check No. 0010761 in the amount of P30,000.00 and replaced the same with six checks, in staggered amounts, namely:

Check No. 0010494 dated July 2, 1998. . . . . . . . .P 6,625.00Check No. 0010495 dated August 2, 1998. . . . . . . . .6,300.00Check No. 0010496 dated September 2, 1998. . . . . . . . .5,975.00Check No. 0010497 dated October 2, 1998. . . . . . . . .6,500.00Check No. 0010498 dated November 2, 1998. . . . . . . . .5,325.00Check No. 0010499 dated December 2, 1998. . . . . . . . .5,000.00 TOTALP 35,725.00After honoring Check Nos. 0010494, 0010495 and 0010496, Jocelyn ordered the stop payment on the remaining checks and on October 27, 1998, filed with the RTC of Cebu City a complaint6 against Marilou for Declaration of Nullity and Payment, Annulment, Sum of Money, Injunction and Damages.

Jocelyn averred that Marilou forced, threatened and intimidated her into signing the "Acknowledgment of Debt" and at the same time forced her to issue the seven postdated checks. She claimed that Marilou even threatened to sue her for violation of Batas Pambansa (BP) Blg. 22 or the Bouncing Checks Law if she will not sign the said document and draw the above-mentioned checks. Jocelyn further claimed that the application of her total payment of P528,550.00 to interest alone is illegal, unfounded, unjust, oppressive and contrary to law because there was no written agreement to pay interest.

On November 23, 1998, Marilou filed an Answer7 with Special Affirmative Defenses and Counterclaim alleging that Jocelyn voluntarily obtained the said loans knowing fully well that the interest rate was at 6% to 7% per month. In fact, a 6% to 7% advance interest was already deducted from the loan amount given to Jocelyn.

Ruling of the Regional Trial Court

The court a quo did not find any showing that Jocelyn was forced, threatened, or intimidated in signing the document referred to as "Acknowledgment of Debt" and in issuing the postdated checks. Thus, in its March 10, 2003 Decision the trial court ruled in favor of Marilou, viz:

WHEREFORE, premised on the foregoing, the Court hereby declares the document "Acknowledgment of Debt" valid and binding. PLAINTIFF is indebted to DEFENDANT [for] the amount of TWO HUNDRED NINETY THOUSAND (P290,000.00) PESOS since December 25, 1998 less the amount of EIGHTEEN THOUSAND NINE HUNDRED (P18,900.00) PESOS, equivalent to the three checks made good (P6,625.00 dated 07-02-1998; P6,300.00 dated 08-02-1998; and P5,975.00 dated 09-02-1998).

Consequently, PLAINTIFF is hereby ordered to pay DEFENDANT the amount of TWO HUNDRED SEVENTY ONE THOUSAND ONE HUNDRED (P271,100.00) PESOS due on December 25, 1998 with a 12% interest per annum or 1% interest per month until such time that the said amount shall have been fully paid.

No pronouncement as to costs.

SO ORDERED.8

On March 26, 2003, Jocelyn filed an Earnest Motion for Reconsideration,9 which was denied by the trial court in its Order10 dated April 29, 2003 stating that it finds no sufficient reason to disturb its March 10, 2003 Decision.

Ruling of the Court of Appeals

On appeal, Jocelyn asserts that she had made payments in the total amount of P778,000.00 for a principal amount of loan of only P290,000.00. What is appalling, according to Jocelyn, was that such payments covered only the interest because of the excessive, iniquitous, unconscionable and exorbitant imposition of the 6% to 7% monthly interest.

On August 24, 2005, the CA issued its Decision which provides:

WHEREFORE, premises considered, the Decision dated March 10, 2003 and the Order dated April 29, 2003, of the Regional Trial Court, 7th Judicial Region, Branch 22, Cebu City, in Civil Case No. CEB-22867 are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.11

The Motion for Reconsideration12 filed by Jocelyn was denied by the CA through its Resolution13 dated March 8, 2006.

Issues

Hence, this petition raising the following issues:

I.

Whether the CA gravely erred when it held that the imposition of interest at the rate of six percent (6%) to seven percent (7%) is not contrary to law, morals, good customs, public order or public policy.

II.

Whether the CA gravely erred when it failed to declare that the "Acknowledgment of Debt" is an inexistent contract that is void from the very beginning pursuant to Article 1409 of the New Civil Code.

Petitioners Arguments

Jocelyn posits that the CA erred when it held that the imposition of interest at the rates of 6% to 7% per month is not contrary to law, not unconscionable and not contrary to morals. She likewise contends that the CA erred in ruling that the "Acknowledgment of Debt" is valid and binding. According to Jocelyn, even assuming that the execution of said document was not attended with force, threat and intimidation, the same must nevertheless be declared null and void for being contrary to law and public policy. This is borne out by the fact that the payments in the total amount of P778,000.00 was applied to interest payment alone. This only proves that the transaction was iniquitous, excessive, oppressive and unconscionable.

Respondents Arguments

On the other hand, Marilou would like this Court to consider the fact that the document referred to as "Acknowledgment of Debt" was executed in the safe surroundings of the office of Jocelyn and it was witnessed by two of her staff. If at all there had been coercion, then Jocelyn could have easily prevented her staff from affixing their signatures to said document. In fact, petitioner had admitted that she was the one who went to the tables of her staff to let them sign the said document.

Our Ruling

The petition is without merit.

The 6% to 7% interest per month paid by Jocelyn is not excessive under the circumstances of this case.

In view of Central Bank Circular No. 905 s. 1982, which suspended the Usury Law ceiling on interest effective January 1, 1983, parties to a loan agreement have wide latitude to stipulate interest rates. Nevertheless, such stipulated interest rates may be declared as illegal if the same is unconscionable.14 There is certainly nothing in said circular which grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.15 In fact, in Medel v. Court of Appeals,16 we annulled a stipulated 5.5% per month or 66% per annum interest with additional service charge of 2% per annum and penalty charge of 1% per month on a P500,000.00 loan for being excessive, iniquitous, unconscionable and exorbitant.

In this case, however, we cannot consider the disputed 6% to 7% monthly interest rate to be iniquitous or unconscionable vis--vis the principle laid down in Medel. Noteworthy is the fact that in Medel, the defendant-spouses were never able to pay their indebtedness from the very beginning and when their obligations ballooned into a staggering sum, the creditors filed a collection case against them. In this case, there was no urgency of the need for money on the part of Jocelyn, the debtor, which compelled her to enter into said loan transactions. She used the money from the loans to make advance payments for prospective clients of educational plans offered by her employer. In this way, her sales production would increase, thereby entitling her to 50% rebate on her sales. This is the reason why she did not mind the 6% to 7% monthly interest. Notably too, a business transaction of this nature between Jocelyn and Marilou continued for more than five years. Jocelyn religiously paid the agreed amount of interest until she ordered for stop payment on some of the checks issued to Marilou. The checks were in fact sufficiently funded when she ordered the stop payment and then filed a case questioning the imposition of a 6% to 7% interest rate for being allegedly iniquitous or unconscionable and, hence, contrary to morals.

It was clearly shown that before Jocelyn availed of said loans, she knew fully well that the same carried with it an interest rate of 6% to 7% per month, yet she did not complain. In fact, when she availed of said loans, an advance interest of 6% to 7% was already deducted from the loan amount, yet she never uttered a word of protest.

After years of benefiting from the proceeds of the loans bearing an interest rate of 6% to 7% per month and paying for the same, Jocelyn cannot now go to court to have the said interest rate annulled on the ground that it is excessive, iniquitous, unconscionable, exorbitant, and absolutely revolting to the conscience of man. "This is so because among the maxims of equity are (1) he who seeks equity must do equity, and (2) he who comes into equity must come with clean hands. The latter is a frequently stated maxim which is also expressed in the principle that he who has done inequity shall not have equity. It signifies that a litigant may be denied relief by a court of equity on the ground that his conduct has been inequitable, unfair and dishonest, or fraudulent, or deceitful as to the controversy in issue." 17

We are convinced that Jocelyn did not come to court for equitable relief with equity or with clean hands. It is patently clear from the above summary of the facts that the conduct of Jocelyn can by no means be characterized as nobly fair, just, and reasonable. This Court likewise notes certain acts of Jocelyn before filing the case with the RTC. In September 1998, she requested Marilou not to deposit her checks as she can cover the checks only the following month. On the next month, Jocelyn again requested for another extension of one month. It turned out that she was only sweet-talking Marilou into believing that she had no money at that time. But as testified by Serapio Romarate,18 an employee of the Bank of Commerce where Jocelyn is one of their clients, there was an available balance of P276,203.03 in the latters account and yet she ordered for the stop payments of the seven checks which can actually be covered by the available funds in said account. She then caught Marilou by surprise when she surreptitiously filed a case for declaration of nullity of the document and for damages.

The document "Acknowledgment of Debt" is valid and binding.

Jocelyn seeks for the nullification of the document entitled "Acknowledgment of Debt" and wants this Court to declare that she is no longer indebted to Marilou in the amount of P290,000.00 as she had already paid a total amount of P778,000.00. She claims that said document is an inexistent contract that is void from the very beginning as clearly provided for by Article 140919 of the New Civil Code.

Jocelyn further claims that she signed the said document and issued the seven postdated checks because Marilou threatened to sue her for violation of BP Blg. 22.

Jocelyn is misguided. Even if there was indeed such threat made by Marilou, the same is not considered as threat that would vitiate consent. Article 1335 of the New Civil Code is very specific on this matter. It provides:

Art. 1335. There is violence when in order to wrest consent, serious or irresistible force is employed.

x x x x

A threat to enforce ones claim through competent authority, if the claim is just or legal, does not vitiate consent. (Emphasis supplied.)

Clearly, we cannot grant Jocelyn the relief she seeks.

As can be seen from the records of the case, Jocelyn has failed to prove her claim that she was made to sign the document "Acknowledgment of Debt" and draw the seven Bank of Commerce checks through force, threat and intimidation. As earlier stressed, said document was signed in the office of Jocelyn, a high ranking executive of CAP, and it was Jocelyn herself who went to the table of her two subordinates to procure their signatures as witnesses to the execution of said document. If indeed, she was forced to sign said document, then Jocelyn should have immediately taken the proper legal remedy. But she did not. Furthermore, it must be noted that after the execution of said document, Jocelyn honored the first three checks before filing the complaint with the RTC. If indeed she was forced she would never have made good on the first three checks.

It is provided, as one of the conclusive presumptions under Rule 131, Section 2(a), of the Rules of Court that, "Whenever a party has, by his own declaration, act or omission, intentionally and deliberately led another to believe a particular thing to be true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it." This is known as the principle of estoppel.

"The essential elements of estoppel are: (1) conduct amounting to false representation or concealment of material facts or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by, or at least influence, the other party; and, (3) knowledge, actual or constructive, of the real facts."20

Here, it is uncontested that Jocelyn had in fact signed the "Acknowledgment of Debt" in April 1998 and two of her subordinates served as witnesses to its execution, knowing fully well the nature of the contract she was entering into. Next, Jocelyn issued five checks in favor of Marilou representing renewal payment of her loans amounting to P290,000.00. In June 1998, she asked to recall Check No. 0010761 in the amount of P30,000.00 and replaced the same with six checks, in staggered amounts. All these are indicia that Jocelyn treated the "Acknowledgment of Debt" as a valid and binding contract.1avvphi1

More significantly, Jocelyn already availed herself of the benefits of the "Acknowledgment of Debt," the validity of which she now impugns. As aptly found by the RTC and the CA, Jocelyn was making a business out of the loaned amounts. She was actually using the money to make advance payments for her prospective clients so that her sales production would increase. Accordingly, she did not mind the 6% to 7% interest per month as she was getting a 50% rebate on her sales.

Clearly, by her own acts, Jocelyn is estopped from impugning the validity of the "Acknowledgment of Debt." "[A] party to a contract cannot deny the validity thereof after enjoying its benefits without outrage to ones sense of justice and fairness."21 "It is a long established doctrine that the law does not relieve a party from the effects of an unwise, foolish or disastrous contract, entered into with all the required formalities and with full awareness of what she was doing. Courts have no power to relieve parties from obligations voluntarily assumed, simply because their contracts turned out to be disastrous or unwise investments."22

WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 79805 dated August 24, 2005 affirming the Decision dated March 10, 2003 of the Regional Trial Court, Branch 22, Cebu City, in Civil Case No. CEB-22867 is AFFIRMED.

SO ORDERED.G.R. No. 171925 July 23, 2010

SOLIDBANK CORPORATION, (now Metropolitan Bank and Trust Company), Petitioner, vs.PERMANENT HOMES, INCORPORATED, Respondent.

G.R. No. 171925 is a petition for review1 assailing the Decision2 promulgated on 29 June 2005 by the Court of Appeals (appellate court) as well as the Resolution3 promulgated on 14 March 2006 in CA-G.R. CV No. 75926. The appellate court granted the petition filed by Permanent Homes, Incorporated (Permanent) and reversed the decision of the Regional Trial Court of Makati City, Branch 58 (trial court) dated 5 July 2002 in Civil Case No. 98-654. The appellate court ordered Solidbank Corporation (Solidbank) and Permanent to enter into an express agreement about the applicable interest rates on Permanents loan. Solidbank was also ordered to render an accounting of Permanents payments, not to impose interest on interest upon Permanents loans, and to release the remaining amount available under Permanents omnibus credit line.

The Facts

The appellate court narrated the facts as follows:

The records disclose that PERMANENT HOMES is a real estate development company, and to finance its housing project known as the "Buena Vida Townhomes" located within Merville Subdivision, Paraaque City, it applied and was subsequently granted by SOLIDBANK with an "Omnibus Line" credit facility in the total amount of SIXTY MILLION PESOS. Of the entire loan, FIFTY NINE MILLION as [sic] time loan for a term of up to three hundred sixty (360) days, with interest thereon at prevailing market rates, and subject to monthly repricing. The remaining ONE MILLION was available for domestic bills purchase.

To secure the aforesaid loan, PERMANENT HOMES initially mortgaged three (3) townhouse units within the Buena Vida project in Paraaque. At the time, however, the instant complaint was filed against SOLIDBANK, a total of thirty six (36) townhouse units were mortgaged with said bank.

Of the 60 million available to PERMANENT HOMES, it availed of a total of 41.5 million pesos, covered by three (3) promissory notes, which contain the following provisions, thus:

"xxx

5. We/I irrevocably authorize Solidbank to increase or decrease at any time the interest rate agreed in this Note or Loan on the basis of, among others, prevailing rates in the local or international capital markets. For this purpose, We/I authorize Solidbank to debit any deposit or placement account with Solidbank belonging to any one of us. The adjustment of the interest rate shall be effective from the date indicated in the written notice sent to us by the bank, or if no date is indicated, from the time the notice was sent.

6. Should We/I disagree to the interest rate adjustment, We/I shall prepay all amounts due under this Note or Loan within thirty (30) days from the receipt by anyone of us of the written notice. Otherwise, We/I shall be deemed to have given our consent to the interest rate adjustment."

Contrary, however, to the specific provisions as afore-quoted, there was a standing agreement by the parties that any increase or decrease in interest rates shall be subject to the mutual agreement of the parties.

For the first loan availment of PERMANENT HOMES on March 20, 1997, in the amount of 19.6 MILLION, from the initial interest rate of 14.25% per annum (p.a.), the same was increased 15% p.a. effective May 19, 1997; it was again increased to 26% p.a. effective July 18, 1997. It was thereafter reduced to 20% p.a. effective August 18, 1997, and then increased to 24% p.a. effective September 17, 1997. The rate was increased further to 30% p.a. effective October 17, 1997, then decreased to 27% p.a. on November 17, 1997, and again increased to 34% p.a. effective December 17, 1997. The rate then decreased to 30% p.a. on January 16, 1998.

For the second loan availment in the amount of 18 million, the rate was initially pegged at 15.75% p.a. on June 24, 1997. A month later, the rate increased to 23.5% p.a. It thereafter decreased to 20% p.a. effective August 24, 1997, but again increased to 22.5% p.a. effective September 24, 1997. For the next month, the rate surged to 30% p.a., and decreased to 27% p.a. for the month of November. The rate again surged to 34% p.a. for the month of December, and was decreased to 30% p.a. from January 22, 1998 to February 20, 1998.

For the third loan availment on July 15, 1997, in the amount of 3.9 million, the interest rate was initially pegged at 35% p.a., but this was decreased to 21% p.a. from August 14 until September 11, 1997. The rate increased slightly to 23% p.a. on September 12, 1997, and surged to 27% p.a. on October 13, 1997. The rate went down slightly to 27% p.a. for the month of November, and to 26% p.a. for the month of December. The rate, however, again surged to 30% p.a. on January 12, 1998 before settling at 29% p.a. for the month of February.

It is [Permanents] stand that SOLIDBANK unilaterally and arbitrarily accelerated the interest rates without any declared basis of such increases, of which PERMANENT HOMES had not agreed to, or at the very least, been informed of. This is contrary to their earlier agreement that any interest rate changes will be subject to mutual agreement of the parties. PERMANENT HOMES further admits that it was not able to protest such arbitrary increases at the time they were imposed by SOLIDBANK, for fear that SOLIDBANK might cut off the credit facility it extended to PERMANENT HOMES. Permanent was then in the midst of the construction of its project in Merville, Paraaque City, and SOLIDBANK knew that it was relying substantially on the credit facility the latter extended to it.

[Permanent] thus filed a case before the trial court seeking the following: (1) the annulment of the increases in interest rates on the loans it obtained from SOLIDBANK, on the ground that it was violative of the principle of mutuality of agreement of the parties, as enunciated in Article 1409 of the New Civil Code, (2) the fixing of the interest rates at the applicable interest rate, and (3) for the trial court to order SOLIDBANK to make an accounting of the payments it made, so as to determine the amount of refund PERMANENT is entitled to, as well as to order SOLIDBANK to release the remaining available balance of the loan it extended to PERMANENT. In addition, [Permanent] prays for the payment of compensatory, moral and exemplary damages.

SOLIDBANK, on the other hand, avers that PERMANENT HOMES has no cause of action against it, in view of the pertinent provisions of the Omnibus Credit Line and the promissory notes agreed to and signed by PERMANENT HOMES. Thus, in accordance with said provisions, SOLIDBANK was authorized to, upon due notice, periodically adjust the interest rates on PERMANENT HOMES loan availments during the monthly interest repricing dates, depending on the changes in prevailing interest rates in the local and international capital markets. In fact, SOLIDBANK avers that four (4) days before July 15, 1997, the Bangko Sentral ng Pilipinas (BSP) declared that it could no longer support the Philippine currency from external speculative forces, hence, the local currency was allowed to seek its own exchange rate level. As a result of the volatile exchange rate ratio, banks were then hesitant to extend loans, and in some instances that it granted loans, they had to ensure that they will not be at the losing end of the deal, so to speak, by the repricing of the interest rates every month. SOLIDBANK insists that PERMANENT HOMES should not be allowed to renege on its contractual obligations, as it freely and voluntarily bound itself to the provisions of the Omnibus Credit Line and the promissory notes.

PERMANENT HOMES presented as witnesses Jacqueline S. Lim, its Vice President and Chief Financial Officer, Engr. Rey A. Romasanta, its Executive Vice President and Chief Operating Officer, and Martha Julia Flores, its Treasury Officer.

On March 24, 1998, the trial court issued a temporary restraining order (TRO), after a summary hearing, which enjoined SOLIDBANK from implementing and collecting the increases in interest rates and from initiating any action, including the foreclosure of the mortgaged properties.

Ms. Lims testimony centered on PERMANENT HOMES allegations that the repricing of the interest rates was done by SOLIDBANK without any written agreement entered into between the parties. In fact, Ms. Lim accounted that SOLIDBANK will merely advise them of the interest rate for the period, after said period had already commenced, and at times very late in the period, by fax messages. When PERMANENT HOMES called SOLIDBANKs attention to the seemingly surging rates it imposed on its loan, SOLIDBANK will merely answer that it was the banks policy, without offering any basis for such increase. Furthermore, Ms. Lim also mentioned SOLIDBANKs alleged practice of imposing interest on unpaid interest, at the highest rate of 30% p.a.. Ms. Lim also presented a tabulation, which presents the number of days their billing statements were sent late, from the time the interest period started. It is PERMANENT HOMES stand that since the purpose of the billing statements was to inform them beforehand of the applicable interest rate for the period, the late billings will clearly show SOLIDBANKs arbitrary imposition of the repriced interest rates, as well as its indifference to PERMANENT HOMES plight.

To illustrate, for the first loan availment in the amount of P19.6 million, the billing statements which should have notified PERMANENT HOMES of the repriced interest rates were faxed to PERMANENT HOMES between eighteen (18) to thirty-three (33) days late. For the second loan availment in the amount of P18 million, the faxed billings were late between six (6) to twenty-one (21) days, and one instance where PERMANENT HOMES received no billing at all. For the third loan availment in the amount of P3.9 million, the faxed billings were late between seven (7) to twenty-nine (29) days, and also an instance where PERMANENT HOMES received no billing at all.

This practice, according to Ms. Lim, clearly affected its operations, as the completion of its construction project was unnecessarily delayed, to its prejudice and its buyers. This was the import of the testimony of PERMANENT HOMES second witness, Engr. Rey A. Romasanta. According to Engr. Rey, the target date of completion was August 1997, but in view of the shortage of funds by reason of SOLIDBANKs refusal for PERMANENT HOMES to make further availments on its omnibus credit line, the project was completed only on February 1998.

PERMANENT HOMES third and final witness was Martha Julia Flores, its Treasury Officer, who explained that as such, it was her who received the late billings from SOLIDBANK. She would also call up SOLIDBANK to ask what the repriced interest rate for the coming interest period, to no avail, as SOLIDBANK will merely fax its billings almost always, as abovementioned, late in the period. Ms. Flores admitted that she prepared the tabulation presented before the court, which showed how late SOLIDBANKs billings were sent to PERMANENT HOMES, as well as the computation of interest rates that SOLIDBANK had allegedly overcharged on its loan, vis-a-vis the average of the high and the low published lending rates of SOLIDBANK.

SOLIDBANK, to establish its defense, presented its lone witness, Mr. Cesar Lugtu, who testified to the effect that, contrary to PERMANENT HOMES assertions that it was not promptly informed of the repriced interest rates, SOLIDBANKs officers verbally advised PERMANENT HOMES of the repriced rates at the start of the period, and even added that their transaction[s] were based on trust. Aside from these allegations, however, no written memorandum or note was presented by SOLIDBANK to support their assertion that PERMANENT HOMES was timely advised of the repriced interests.4

The Trial Courts Ruling

On 5 July 2002, the trial court promulgated its Decision in favor of Solidbank. The trial court ratiocinated and ruled thus:

It becomes crystal clear that there is sufficient proof to show that the instant case was instituted by [Permanent] as an after-thought and as an obvious subterfuge intended to completely lay on the defendant the blame for the debacle of its Buena Vida project. An afterthought because the records of the case show that the complaint was filed in March 16, 1998, already after it was having difficulty making the amortization payments, the last of which being in February 1998. A subterfuge because plaintiff, instead of blaming itself and its own business judgment that went sour, would rather put the blame on [Solidbank], taking advantage of every conceivable gray area of its contract with [Solidbank] to avoid its own liabilities. In fact, this complaint was made the very basis for [Permanent] to altogether stop the payment of its loan from [Solidbank] including the interest payment (TSN, May 07, 1998, p. 60).

x x x x

WHEREFORE, finding the complaint not impressed with merit, judgment is hereby rendered dismissing the said complaint. The Counterclaim is likewise dismissed for lack of evidence to support the same.

SO ORDERED.5

Permanent filed an appeal before the appellate court.

The Appellate Courts Ruling

The appellate court granted Permanents appeal, and set aside the trial courts ruling. The appellate court not only recognized the validity of escalation clauses, but also underscored the necessity of a basis for the increase in interest rates and of the principle of mutuality of contracts.

The dispositive portion of the appellate courts decision reads, thus:

THE FOREGOING CONSIDERED, the instant appeal is hereby GRANTED, the assailed decision dated July 5, 2002 is REVERSED and SET ASIDE, and a new one is hereby entered as follows:

(1) Unless the parties herein subsequently enter into an express agreement regarding the applicable interest rates on PERMANENT HOMES loan availments subsequent to the initial thirty-day (30) period, the legal rate of twelve percent (12%) per annum is hereby FIXED, to be applied on the outstanding balance of the loan;

(2) SOLIDBANK is ordered to render an accounting of all the payments made by PERMANENT HOMES, and in case there is excess payment by reason of the wrongful imposition of the repriced interest rates, to apply such amount to the interest payment at the legal rate, and thereafter to the outstanding principal amount;

(3) SOLIDBANK is directed not to impose penalties, particularly interest on interest, upon PERMANENT HOMES loan, there being no evidence that the latter was in default on its payments;

(4) SOLIDBANK is hereby ordered to release the remaining amount available under the omnibus credit line, subject, however, to availability of funds on the part of SOLIDBANK.

No pronouncement as to costs.

SO ORDERED.6

The appellate court resolved to deny Solidbanks Motion for Reconsideration for lack of merit.7

The Issues

Solidbank raised the following issues in their petition:

(A) Whether the Honorable Court of Appeals was correct in ruling that the increases in the interest rates on [Permanents] loans are void for having been unilaterally imposed without basis.

(B) Whether the Honorable Court of Appeals was correct in ordering the parties to enter into an express agreement regarding the applicable interest rates on Permanents loan availments subsequent to the initial thirty-day (30) period.

(C) Whether the Honorable Court of Appeals was correct in ruling that [Permanent] is entitled to attorneys fees notwithstanding the absence of bad faith or malice on the part of [Solidbank].8

The Courts Ruling

The petition has merit.

The Usury Law had been rendered legally ineffective by Resolution No. 224 dated 3 December 1982 of the Monetary Board of the Central Bank, and later by Central Bank Circular No. 905 which took effect on 1 January 1983. These circulars removed the ceiling on interest rates for secured and unsecured loans regardless of maturity. The effect of these circulars is to allow the parties to agree on any interest that may be charged on a loan. The virtual repeal of the Usury Law is within the range of judicial notice which courts are bound to take into account.9 Although interest rates are no longer subject to a ceiling, the lender still does not have an unbridled license to impose increased interest rates. The lender and the borrower should agree on the imposed rate, and such imposed rate should be in writing.

The three promissory notes between Solidbank and Permanent all contain the following provisions:

5. We/I irrevocably authorize Solidbank to increase or decrease at any time the interest rate agreed in this Note or Loan on the basis of, among others, prevailing rates in the local or international capital markets. For this purpose, We/I authorize Solidbank to debit any deposit or placement account with Solidbank belonging to any one of us. The adjustment of the interest rate shall be effective from the date indicated in the written notice sent to us by the bank, or if no date is indicated, from the time the notice was sent.

6. Should We/I disagree to the interest rate adjustment, We/I shall prepay all amounts due under this Note or Loan within thirty (30) days from the receipt by anyone of us of the written notice. Otherwise, We/I shall be deemed to have given our consent to the interest rate adjustment.

The stipulations on interest rate repricing are valid because (1) the parties mutually agreed on said stipulations; (2) repricing takes effect only upon Solidbanks written notice to Permanent of the new interest rate; and (3) Permanent has the option to prepay its loan if Permanent and Solidbank do not agree on the new interest rate. The phrases "irrevocably authorize," "at any time" and "adjustment of the interest rate shall be effective from the date indicated in the written notice sent to us by the bank, or if no date is indicated, from the time the notice was sent," emphasize that Permanent should receive a written notice from Solidbank as a condition for the adjustment of the interest rates.

In order that obligations arising from contracts may have the force of law between the parties, there must be a mutuality between the parties based on their essential equality.10 A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties is void.11 There was no showing that either Solidbank or Permanent coerced each other to enter into the loan agreements. The terms of the Omnibus Line Agreement and the promissory notes were mutually and freely agreed upon by the parties.

Moreover, Solidbanks range of lending rates were consistent with "prevailing rates in the local or international capital markets." Permanent presented a tabulation12 of the range of Solidbanks lending rates, as reported to Bangko Sentral ng Pilipinas and compared the lending rates with the interest rates charged by Solidbank on Permanents loans, thus:

Solidbanks range of lending rates as per BSP records HighLowInterest rates charged by Solidbank on Permanents loansExcess Interest Rate Over the Average of High and Low RatesSept. 12, 199725.0%22.0%23.0% Sept. 17, 199727.0%24.0%24.0% Sept. 22, 199726.0%23.0%22.5% Oct. 13, 199729.0%26.0%28.0% Oct. 17, 199730.0%27.0%30.0% Oct. 22, 199732.0%29.0%30.0% Nov. 12, 199728.0%25.0%27.0% Nov. 17, 199728.0%25.0%27.0% Nov. 21, 199727.0%24.0%27.0% Dec. 12, 199725.0%23.0%26.0%2.0%Dec. 17, 199725.0%23.0%34.0%10.0%Dec. 22, 199725.0%23.0%32.0%8.0%Jan. 12, 199826.0%24.0%30.0%5.0%Jan. 16, 199828.0%25.0%30.0%3.5%Jan. 22, 199828.0%25.0%30.0%3.5%Feb. 9, 199827.0%24.0%30.0%3.5%Feb. 11, 199827.0%24.0%29.0%4.5%Feb. 12, 199827.0%24.0%30.0%4.5%The repriced interest rates from 12 September to 21 November 1997 conformed to the range of Solidbanks lending rates to other borrowers. The 12 December 1997 to 12 February 1998 repriced interest rates were not unconscionably out of line with the upper range of lending rates to other borrowers. The interest rate repricing happened at the height of the Asian financial crises in late 1997, when banks clamped down on lendings because of higher credit risks across industries, particularly the real estate industry.

We also recognize that Solidbank admitted that it did not promptly send Permanent written repriced rates, but rather verbally advised Permanents officers over the phone at the start of the period. Solidbank did not present any written memorandum to support its allegation that it promptly advised Permanent of the change in interest rates.13 Solidbank advised Permanent on the repriced interest rate applicable for the 30-day interest period only after the period had begun. Permanent presented a tabulation which showed that Solidbank either did not send a billing statement, or sent a billing statement 6 to 33 days late.14 We reproduce the tabulation below:

PN #435 P19.6MMReference No.Interest PeriodDate Billing Statements were faxed to PermanentNumber of days Billing Statement was Late103/20/9704/18/9704/17/9728204/18/9705/19/9705/16/9728 05/19/9706/19/97 no statement received306/19/9707/18/9707/12/9723407/18/9708/18/9708/05/9718508/18/9709/17/9709/10/9723609/17/9710/17/9710/06/9719710/17/9711/17/9711/11/9725811/17/9712/17/9712/12/9725912/17/9701/16/9801/09/98231401/16/9802/20/9802/18/9833

PN #969 P18MMReference No.Interest PeriodDate Billing Statements were faxed to PermanentNumber of days Billing Statement was Late306/24/9707/24/9707/12/9718407/24/9708/22/9708/05/9712508/22/9709/22/9709/10/9719609/22/9710/22/9710/06/9714710/22/9711/21/9711/11/9720811/21/9712/22/9712/12/9721912/22/9701/22/9801/09/9818 01/22/9802/12/97 no statement received1402/12/9802/20/9802/18/986

PN #1077 P3.9MMReference No.Interest PeriodDate Billing Statements were faxed to PermanentNumber of days Billing Statement was Late1007/15/9708/14/9708/14/97301108/14/9708/26/9708/26/9712508/26/9709/12/9709/10/9715609/12/9710/13/9710/06/9724710/13/9711/12/9711/11/97291211/12/9712/12/9712/10/9728912/12/9701/12/9801/09/98281301/12/9802/09/9802/09/9828 02/09/9802/11/98 no statement received1402/11/9803/13/9802/18/987We rule that Solidbanks computation of the interest due from Permanent should be adjusted to take effect only upon Permanents receipt of the written notice from Solidbank.1avvphi1

WHEREFORE, we GRANT the petition in part. We SET ASIDE the Decision of the Court of Appeals promulgated on 29 June 2005 as well as the Resolution promulgated on 14 March 2006 in CA-G.R. CV No. 75926 and AFFIRM the decision of the Regional Trial Court of Makati City, Branch 58 dated 5 July 2002 in Civil Case No. 98-654 with the MODIFICATION that the repricing of the interest rates should take effect only upon Permanent Homes, Incorporateds receipt of the written notice from Solidbank Corporation of the adjustment in interest rate. The records of this case are therefore remanded to the trial court for the computation of the proper interest payments based on the dates of receipt of written notice.

G.R. No. 189871 August 13, 2013

DARIO NACAR, PETITIONER, vs.GALLERY FRAMES AND/OR FELIPE BORDEY, JR., RESPONDENTS.

This is a petition for review on certiorari assailing the Decision1 dated September 23, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 98591, and the Resolution2 dated October 9, 2009 denying petitioners motion for reconsideration.

The factual antecedents are undisputed.

Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch of the National Labor Relations Commission (NLRC) against respondents Gallery Frames (GF) and/or Felipe Bordey, Jr., docketed as NLRC NCR Case No. 01-00519-97.

On October 15, 1998, the Labor Arbiter rendered a Decision3 in favor of petitioner and found that he was dismissed from employment without a valid or just cause. Thus, petitioner was awarded backwages and separation pay in lieu of reinstatement in the amount of P158,919.92. The dispositive portion of the decision, reads:

With the foregoing, we find and so rule that respondents failed to discharge the burden of showing that complainant was dismissed from employment for a just or valid cause. All the more, it is clear from the records that complainant was never afforded due process before he was terminated. As such, we are perforce constrained to grant complainants prayer for the payments of separation pay in lieu of reinstatement to his former position, considering the strained relationship between the parties, and his apparent reluctance to be reinstated, computed only up to promulgation of this decision as follows:

SEPARATION PAYDate Hired=August 1990Rate=P198/dayDate of Decision=Aug. 18, 1998Length of Service=8 yrs. & 1 monthP198.00 x 26 days x 8 months = P41,184.00BACKWAGESDate Dismissed=January 24, 1997Rate per day=P196.00Date of Decisions=Aug. 18, 1998a) 1/24/97 to 2/5/98 = 12.36 mos.P196.00/day x 12.36 mos.= P62,986.56b) 2/6/98 to 8/18/98 = 6.4 monthsPrevailing Rate per day= P62,986.00P198.00 x 26 days x 6.4 mos.= P32,947.20T O T A L= P95.933.76x x x x

WHEREFORE, premises considered, judgment is hereby rendered finding respondents guilty of constructive dismissal and are therefore, ordered:

To pay jointly and severally the complainant the amount of sixty-two thousand nine hundred eighty-six pesos and 56/100 (P62,986.56) Pesos representing his separation pay;

To pay jointly and severally the complainant the amount of nine (sic) five thousand nine hundred thirty-three and 36/100 (P95,933.36) representing his backwages; and

All other claims are hereby dismissed for lack of merit.

SO ORDERED.4

Respondents appealed to the NLRC, but it was dismissed for lack of merit in the Resolution5 dated February 29, 2000. Accordingly, the NLRC sustained the decision of the Labor Arbiter. Respondents filed a motion for reconsideration, but it was denied.6

Dissatisfied, respondents filed a Petition for Review on Certiorari before the CA. On August 24, 2000, the CA issued a Resolution dismissing the petition. Respondents filed a Motion for Reconsideration, but it was likewise denied in a Resolution dated May 8, 2001.7

Respondents then sought relief before the Supreme Court, docketed as G.R. No. 151332. Finding no reversible error on the part of the CA, this Court denied the petition in the Resolution dated April 17, 2002.8

An Entry of Judgment was later issued certifying that the resolution became final and executory on May 27, 2002.9 The case was, thereafter, referred back to the Labor Arbiter. A pre-execution conference was consequently scheduled, but respondents failed to appear.10

On November 5, 2002, petitioner filed a Motion for Correct Computation, praying that his backwages be computed from the date of his dismissal on January 24, 1997 up to the finality of the Resolution of the Supreme Court on May 27, 2002.11 Upon recomputation, the Computation and Examination Unit of the NLRC arrived at an updated amount in the sum of P471,320.31.12

On December 2, 2002, a Writ of Execution13 was issued by the Labor Arbiter ordering the Sheriff to collect from respondents the total amount of P471,320.31. Respondents filed a Motion to Quash Writ of Execution, arguing, among other things, that since the Labor Arbiter awarded separation pay of P62,986.56 and limited backwages of P95,933.36, no more recomputation is required to be made of the said awards. They claimed that after the decision becomes final and executory, the same cannot be altered or amended anymore.14 On January 13, 2003, the Labor Arbiter issued an Order15 denying the motion. Thus, an Alias Writ of Execution16 was issued on January 14, 2003.

Respondents again appealed before the NLRC, which on June 30, 2003 issued a Resolution17 granting the appeal in favor of the respondents and ordered the recomputation of the judgment award.

On August 20, 2003, an Entry of Judgment was issued declaring the Resolution of the NLRC to be final and executory. Consequently, another pre-execution conference was held, but respondents failed to appear on time. Meanwhile, petitioner moved that an Alias Writ of Execution be issued to enforce the earlier recomputed judgment award in the sum of P471,320.31.18

The records of the case were again forwarded to the Computation and Examination Unit for recomputation, where the judgment award of petitioner was reassessed to be in the total amount of only P147,560.19.

Petitioner then moved that a writ of execution be issued ordering respondents to pay him the original amount as determined by the Labor Arbiter in his Decision dated October 15, 1998, pending the final computation of his backwages and separation pay.

On January 14, 2003, the Labor Arbiter issued an Alias Writ of Execution to satisfy the judgment award that was due to petitioner in the amount of P147,560.19, which petitioner eventually received.

Petitioner then filed a Manifestation and Motion praying for the re-computation of the monetary award to include the appropriate interests.19

On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion, but only up to the amount of P11,459.73. The Labor Arbiter reasoned that it is the October 15, 1998 Decision that should be enforced considering that it was the one that became final and executory. However, the Labor Arbiter reasoned that since the decision states that the separation pay and backwages are computed only up to the promulgation of the said decision, it is the amount of P158,919.92 that should be executed. Thus, since petitioner already received P147,560.19, he is only entitled to the balance of P11,459.73.

Petitioner then appealed before the NLRC,21 which appeal was denied by the NLRC in its Resolution22 dated September 27, 2006. Petitioner filed a Motion for Reconsideration, but it was likewise denied in the Resolution23 dated January 31, 2007.

Aggrieved, petitioner then sought recourse before the CA, docketed as CA-G.R. SP No. 98591.

On September 23, 2008, the CA rendered a Decision24 denying the petition. The CA opined that since petitioner no longer appealed the October 15, 1998 Decision of the Labor Arbiter, which already became final and executory, a belated correction thereof is no longer allowed. The CA stated that there is nothing left to be done except to enforce the said judgment. Consequently, it can no longer be modified in any respect, except to correct clerical errors or mistakes.

Petitioner filed a Motion for Reconsideration, but it was denied in the Resolution25 dated October 9, 2009.

Hence, the petition assigning the lone error:

I

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED, COMMITTED GRAVE ABUSE OF DISCRETION AND DECIDED CONTRARY TO LAW IN UPHOLDING THE QUESTIONED RESOLUTIONS OF THE NLRC WHICH, IN TURN, SUSTAINED THE MAY 10, 2005 ORDER OF LABOR ARBITER MAGAT MAKING THE DISPOSITIVE PORTION OF THE OCTOBER 15, 1998 DECISION OF LABOR ARBITER LUSTRIA SUBSERVIENT TO AN OPINION EXPRESSED IN THE BODY OF THE SAME DECISION.26

Petitioner argues that notwithstanding the fact that there was a computation of backwages in the Labor Arbiters decision, the same is not final until reinstatement is made or until finality of the decision, in case of an award of separation pay. Petitioner maintains that considering that the October 15, 1998 decision of the Labor Arbiter did not become final and executory until the April 17, 2002 Resolution of the Supreme Court in G.R. No. 151332 was entered in the Book of Entries on May 27, 2002, the reckoning point for the computation of the backwages and separation pay should be on May 27, 2002 and not when the decision of the Labor Arbiter was rendered on October 15, 1998. Further, petitioner posits that he is also entitled to the payment of interest from the finality of the decision until full payment by the respondents.

On their part, respondents assert that since only separation pay and limited backwages were awarded to petitioner by the October 15, 1998 decision of the Labor Arbiter, no more recomputation is required to be made of said awards. Respondents insist that since the decision clearly stated that the separation pay and backwages are "computed only up to [the] promulgation of this decision," and considering that petitioner no longer appealed the decision, petitioner is only entitled to the award as computed by the Labor Arbiter in the total amount of P158,919.92. Respondents added that it was only during the execution proceedings that the petitioner questioned the award, long after the decision had become final and executory. Respondents contend that to allow the further recomputation of the backwages to be awarded to petitioner at this point of the proceedings would substantially vary the decision of the Labor Arbiter as it violates the rule on immutability of judgments.

The petition is meritorious.

The instant case is similar to the case of Session Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth Division),27 wherein the issue submitted to the Court for resolution was the propriety of the computation of the awards made, and whether this violated the principle of immutability of judgment. Like in the present case, it was a distinct feature of the judgment of the Labor Arbiter in the above-cited case that the decision already provided for the computation of the payable separation pay and backwages due and did not further order the computation of the monetary awards up to the time of the finality of the judgment. Also in Session Delights, the dismissed employee failed to appeal the decision of the labor arbiter. The Court clarified, thus:

In concrete terms, the question is whether a re-computation in the course of execution of the labor arbiter's original computation of the awards made, pegged as of the time the decision was rendered and confirmed with modification by a final CA decision, is legally proper. The question is posed, given that the petitioner did not immediately pay the awards stated in the original labor arbiter's decision; it delayed payment because it continued with the litigation until final judgment at the CA level.

A source of misunderstanding in implementing the final decision in this case proceeds from the way the original labor arbiter framed his decision. The decision consists essentially of two parts.

The first is that part of the decision that cannot now be disputed because it has been confirmed with finality. This is the finding of the illegality of the dismissal and the awards of separation pay in lieu of reinstatement, backwages, attorney's fees, and legal interests.

The second part is the computation of the awards made. On its face, the computation the labor arbiter made shows that it was time-bound as can be seen from the figures used in the computation. This part, being merely a computation of what the first part of the decision established and declared, can, by its nature, be re-computed. This is the part, too, that the petitioner now posits should no longer be re-computed because the computation is already in the labor arbiter's decision that the CA had affirmed. The public and private respondents, on the other hand, posit that a re-computation is necessary because the relief in an illegal dismissal decision goes all the way up to reinstatement if reinstatement is to be made, or up to the finality of the decision, if separation pay is to be given in lieu reinstatement.

That the labor arbiter's decision, at the same time that it found that an illegal dismissal had taken place, also made a computation of the award, is understandable in light of Section 3, Rule VIII of the then NLRC Rules of Procedure which requires that a computation be made. This Section in part states:

[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events, as far as practicable, shall embody in any such decision or order the detailed and full amount awarded.

Clearly implied from this original computation is its currency up to the finality of the labor arbiter's decision. As we noted above, this implication is apparent from the terms of the computation itself, and no question would have arisen had the parties terminated the case and implemented the decision at that point.

However, the petitioner disagreed with the labor arbiter's findings on all counts - i.e., on the finding of illegality as well as on all the consequent awards made. Hence, the petitioner appealed the case to the NLRC which, in turn, affirmed the labor arbiter's decision. By law, the NLRC decision is final, reviewable only by the CA on jurisdictional grounds.

The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a timely filed Rule 65 petition for certiorari. The CA decision, finding that NLRC exceeded its authority in affirming the payment of 13th month pay and indemnity, lapsed to finality and was subsequently returned to the labor arbiter of origin for execution.

It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the original labor arbiter's decision, the implementing labor arbiter ordered the award re-computed; he apparently read the figures originally ordered to be paid to be the computation due had the case been terminated and implemented at the labor arbiter's level. Thus, the labor arbiter re-computed the award to include the separation pay and the backwages due up to the finality of the CA decision that fully terminated the case on the merits. Unfortunately, the labor arbiter's approved computation went beyond the finality of the CA decision (July 29, 2003) and included as well the payment for awards the final CA decision had deleted - specifically, the proportionate 13th month pay and the indemnity awards. Hence, the CA issued the decision now questioned in the present petition.

We see no error in the CA decision confirming that a re-computation is necessary as it essentially considered the labor arbiter's original decision in accordance with its basic component parts as we discussed above. To reiterate, the first part contains the finding of illegality and its monetary consequences; the second part is the computation of the awards or monetary consequences of the illegal dismissal, computed as of the time of the labor arbiter's original decision.28

Consequently, from the above disquisitions, under the terms of the decision which is sought to be executed by the petitioner, no essential change is made by a recomputation as this step is a necessary consequence that flows from the nature of the illegality of dismissal declared by the Labor Arbiter in that decision.29 A recomputation (or an original computation, if no previous computation has been made) is a part of the law specifically, Article 279 of the Labor Code and the established jurisprudence on this provision that is read into the decision. By the nature of an illegal dismissal case, the reliefs continue to add up until full satisfaction, as expressed under Article 279 of the Labor Code. The recomputation of the consequences of illegal dismissal upon execution of the decision does not constitute an alteration or amendment of the final decision being implemented. The illegal dismissal ruling stands; only the computation of monetary consequences of this dismissal is affected, and this is not a violation of the principle of immutability of final judgments.30

That the amount respondents shall now pay has greatly increased is a consequence that it cannot avoid as it is the risk that it ran when it continued to seek recourses against the Labor Arbiter's decision. Article 279 provides for the consequences of illegal dismissal in no uncertain terms, qualified only by jurisprudence in its interpretation of when separation pay in lieu of reinstatement is allowed. When that happens, the finality of the illegal dismissal decision becomes the reckoning point instead of the reinstatement that the law decrees. In allowing separation pay, the final decision effectively declares that the employment relationship ended so that separation pay and backwages are to be computed up to that point.31

Finally, anent the payment of legal interest. In the landmark case of Eastern Shipping Lines, Inc. v. Court of Appeals,32 the Court laid down the guidelines regarding the manner of computing legal interest, to wit:

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.33

Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No. 796 dated May 16, 2013, approved the amendment of Section 234 of Circular No. 905, Series of 1982 and, accordingly, issued Circular No. 799,35 Series of 2013, effective July 1, 2013, the pertinent portion of which reads:

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.136 of the Manual of Regulations for Banks and Sections 4305Q.1,37 4305S.338 and 4303P.139 of the Manual of Regulations for Non-Bank Financial Institutions are hereby amended accordingly.

This Circular shall take effect on 1 July 2013.

Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that would govern the parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in judgments shall no longer be twelve percent (12%) per annum - as reflected in the case of Eastern Shipping Lines40 and Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions, before its amendment by BSP-MB Circular No. 799 - but will now be six percent (6%) per annum effective July 1, 2013. It should be noted, nonetheless, that the new rate could only be applied prospectively and not retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate of interest when applicable.

Corollarily, in the recent case of Advocates for Truth in Lending, Inc. and Eduardo B. Olaguer v. Bangko Sentral Monetary Board,41 this Court affirmed the authority of the BSP-MB to set interest rates and to issue and enforce Circulars when it ruled that "the BSP-MB may prescribe the maximum rate or rates of interest for all loans or renewals thereof or the forbearance of any money, goods or credits, including those for loans of low priority such as consumer loans, as well as such loans made by pawnshops, finance companies and similar credit institutions. It even authorizes the BSP-MB to prescribe different maximum rate or rates for different types of borrowings, including deposits and deposit substitutes, or loans of financial intermediaries."

Nonetheless, with regard to those judgments that have become final and executory prior to July 1, 2013, said judgments shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.1awp++i1

To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines42 are accordingly modified to embody BSP-MB Circular No. 799, as follows:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.1wphi1

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.

WHEREFORE, premises considered, the Decision dated September 23, 2008 of the Court of Appeals in CA-G.R. SP No. 98591, and the Resolution dated October 9, 2009 are REVERSED and SET ASIDE. Respondents are Ordered to Pay petitioner:

(1) backwages computed from the time petitioner was illegally dismissed on January 24, 1997 up to May 27, 2002, when the Resolution of this Court in G.R. No. 151332 became final and executory;

(2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one month pay per year of service; and

(3) interest of twelve percent (12%) per annum of the total monetary awards, computed from May 27, 2002 to June 30, 2013 and six percent (6%) per annum from July 1, 2013 until their full satisfaction.

The Labor Arbiter is hereby ORDERED to make another recomputation of the total monetary benefits awarded and due to petitioner in accordance with this Decision..G.R. No. 197861 June 5, 2013

SPOUSES FLORENTINO T. MALLARI and AUREA V. MALLARI, Petitioners, vs.PRUDENTIAL BANK (now BANK OF THE PHILIPPINE ISLANDS), Respondent.

Before us is a Petition for Review on Certiorari under Rule 45, assailing the Decision1 dated June 17, 2010 and the Resolution2 dated July 20, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 65993.

The antecedent facts are as follows:

On December 11, 1984, petitioner Florentino T. Mallari (Florentino) obtained from respondent Prudential Bank-Tarlac Branch (respondent bank), a loan in the amount of P300,000.00 as evidenced by Promissory Note (PN) No. BD 84-055.3 Under the promissory note, the loan was subject to an interest rate of 21% per annum (p.a.), attorney's fees equivalent to 15% of the total amount due but not less than P200.00 and, in case of default, a penalty and collection charges of 12% p.a. of the total amount due. The loan had a maturity date of January 10, 1985, but was renewed up to February 17, 1985. Petitioner Florentino executed a Deed of Assignment4 wherein he authorized the respondent bank to pay his loan with his time deposit with the latter in the amount of P300,000.00.

On December 22, 1989, petitioners spouses Florentino and Aurea Mallari (petitioners) obtained again from respondent bank another loan of P1.7 million as evidenced by PN No. BDS 606-895 with a maturity date of March 22, 1990. They stipulated that the loan will bear 23% interest p.a., attorney's fees equivalent to 15% p.a. of the total amount due, but not less than P200.00, and penalty and collection charges of 12% p.a. Petitioners executed a Deed of Real Estate Mortgage6 in favor of respondent bank covering petitioners' property under Transfer Certificate of Title (TCT) No. T-215175 of the Register of Deeds of Tarlac to answer for the said loan.

Petitioners failed to settle their loan obligations with respondent bank, thus, the latter, through its lawyer, sent a demand letter to the former for them to pay their obligations, which when computed up to January 31, 1992, amounted to P571,218.54 for PN No. BD 84-055 and P2,991,294.82 for PN No. BDS 606-89.

On February 25, 1992, respondent bank filed with the Regional Trial Court (RTC) of Tarlac, a petition for the extrajudicial foreclosure of petitioners' mortgaged property for the satisfaction of the latter's obligation of P1,700,000.00 secured by such mortgage, thus, the auction sale was set by the Provincial Sheriff on April 23, 1992.7

On April 10, 1992, respondent bank's Assistant Manager sent petitioners two (2) separate Statements of Account as of April 23, 1992, i.e., the loan of P300,000.00 was increased to P594,043.54, while the P1,700,000.00 loan was already P3,171,836.18.

On April 20, 1992, petitioners filed a complaint for annulment of mortgage, deeds, injunction, preliminary injunction, temporary restraining order and damages claiming, among others, that: (1) the P300,000.00 loan obligation should have been considered paid, because the time deposit with the same amount under Certificate of Time Deposit No. 284051 had already been assigned to respondent bank; (2) respondent bank still added the P300,000.00 loan to the P1.7 million loan obligation for purposes of applying the proceeds of the auction sale; and (3) they realized that there were onerous terms and conditions imposed by respondent bank when it tried to unilaterally increase the charges and interest over and above those stipulated. Petitioners asked the court to restrain respondent bank from proceeding with the scheduled foreclosure sale.

Respondent bank filed its Answer with counterclaim arguing that: (1) the interest rates were clearly provided in the promissory notes, which were used in computing for interest charges; (2) as early as January 1986, petitioners' time deposit was made to apply for the payment of interest of their P300,000.00 loan; and (3) the statement of account as of April 10, 1992 provided for a computation of interest and penalty charges only from May 26, 1989, since the proceeds of petitioners' time deposit was applied to the payment of interest and penalty charges for the preceding period. Respondent bank also claimed that petitioners were fully apprised of the bank's terms and conditions; and that the extrajudicial foreclosure was sought for the satisfaction of the second loan in the amount of P1.7 million covered by PN No. BDS 606-89 and the real estate mortgage, and not the P300,000.00 loan covered by another PN No. 84-055.

In an Order8 dated November 10, 1992, the RTC denied the Application for a Writ of Preliminary Injunction. However, in petitioners' Supplemental Motion for Issuance of a Restraining Order and/or Preliminary Injunction to enjoin respondent bank and the Provincial Sheriff from effecting or conducting the auction sale, the RTC reversed itself and issued the restraining order in its Order9 dated January 14, 1993.

Respondent bank filed its Motion to Lift Restraining Order, which the RTC granted in its Order10 dated March 9, 1993. Respondent bank then proceeded with the extrajudicial foreclosure of the mortgaged property. On July 7, 1993, a Certificate of Sale was issued to respondent bank being the highest bidder in the amount of P3,500,000.00.

Subsequently, respondent bank filed a Motion to Dismiss Complaint11 for failure to prosecute action for unreasonable length of time to which petitioners filed their Opposition.12 On November 19, 1998, the RTC issued its Order13 denying respondent bank's Motion to Dismiss Complaint.

Trial thereafter ensued. Petitioner Florentino was presented as the lone witness for the plaintiffs. Subsequently, respondent bank filed a Demurrer to Evidence.

On November 15, 1999, the RTC issued its Order14 granting respondent's demurrer to evidence, the dispositive portion of which reads:

WHEREFORE, this case is hereby ordered DISMISSED. Considering there is no evidence of bad faith, the Court need not order the plaintiffs to pay damages under the general concept that there should be no premium on the right to litigate.

NO COSTS.

SO ORDERED.15

The RTC found that as to the P300,000.00 loan, petitioners had assigned petitioner Florentino's time deposit in the amount of P300,000.00 in favor of respondent bank, which maturity coincided with petitioners' loan maturity. Thus, if the loan was unpaid, which was later extended to February 17, 1985, respondent bank should had just applied the time deposit to the loan. However, respondent bank did not, and allowed the loan interest to accumulate reaching the amount of P594,043.54 as of April 10, 1992, hence, the amount of P292,600.00 as penalty charges was unjust and without basis.

As to the P1.7 million loan which petitioners obtained from respondent bank after the P300,000.00 loan, it had reached the amount of P3,171,836.18 per Statement of Account dated April 27, 1993, which was computed based on the 23% interest rate and 12% penalty charge agreed upon by the parties; and that contrary to petitioners' claim, respondent bank did not