SECOND DIVISION
G.R. No. 195166, July 08, 2015
SPOUSES SALVADOR ABELLA AND ALMA ABELLA, Petitioners, v. SPOUSES ROMEO ABELLA AND ANNIE ABELLA, Respondents.
D E C I S I O N
LEONEN, J.:
This resolves a Petition for Review on Certiorari under Rule 45 of the Rules of Court praying that judgment be rendered reversing and setting aside the September 30, 2010 Decision1 and the January 4, 2011 Resolution2 of the Court of Appeals Nineteenth Division in CA-G.R. CV No. 01388. The Petition also prays that respondents Spouses Romeo and Annie Abella be ordered to pay petitioners Spouses Salvador and Alma Abella 2.5% monthly interest plus the remaining balance of the amount loaned.
The assailed September 30, 2010 Decision of the Court of Appeals reversed and set aside the December 28, 2005 Decision3 of the Regional Trial Court, Branch 8, Kalibo, Aklan in Civil Case No. 6627. It directed petitioners to pay respondents P148,500.00 (plus interest), which was the amount respondents supposedly overpaid. The assailed January 4, 2011 Resolution of the Court of Appeals denied petitioners' Motion for Reconsideration.
The Regional Trial Court's December 28, 2005 Decision ordered respondents to pay petitioners the supposedly unpaid loan balance of P300,000.00 plus the allegedly stipulated interest rate of 30% per annum, as well as litigation expenses and attorney's fees.4redarclaw
On July 31, 2002, petitioners Spouses Salvador and Alma Abella filed a Complaint5 for sum of money and damages with prayer for preliminary attachment against respondents Spouses Romeo and Annie Abella before the Regional Trial Court, Branch 8, Kalibo, Aklan. The case was docketed as Civil Case No. 6627.6redarclaw
In their Complaint, petitioners alleged that respondents obtained a loan from them in the amount of P500,000.00. The loan was evidenced by an acknowledgment receipt dated March 22, 1999 and was payable within one (1) year. Petitioners added that respondents were able to pay a total of P200,000.00—P100,000.00 paid on two separate occasions—leaving an unpaid balance of P300,000.00.7redarclaw
In their Answer8 (with counterclaim and motion to dismiss), respondents alleged that the amount involved did not pertain to a loan they obtained from petitioners but was part of the capital for a joint venture involving the lending of money.9redarclaw
Specifically, respondents claimed that they were approached by petitioners, who proposed that if respondents were to "undertake the management of whatever money [petitioners] would give them, [petitioners] would get 2.5% a month with a 2.5% service fee to [respondents]."10 The 2.5% that each party would be receiving represented their sharing of the 5% interest that the joint venture was supposedly going to charge against its debtors. Respondents further alleged that the one year averred by petitioners was not a deadline for payment but the term within which they were to return the money placed by petitioners should the joint venture prove to be not lucrative. Moreover, they claimed that the entire amount of P500,000.00 was disposed of in accordance with their agreed terms and conditions and that petitioners terminated the joint venture, prompting them to collect from the joint venture's borrowers. They were, however, able to collect only to the extent of P200,000.00; hence, the P300,000.00 balance remained unpaid.11redarclaw
In the Decision12 dated December 28, 2005, the Regional Trial Court ruled in favor of petitioners. It noted that the terms of the acknowledgment receipt executed by respondents clearly showed that: (a) respondents were indebted to the extent of P500,000.00; (b) this indebtedness was to be paid within one (1) year; and (c) the indebtedness was subject to interest. Thus, the trial court concluded that respondents obtained a simple loan, although they later invested its proceeds in a lending enterprise.13 The Regional Trial Court adjudged respondents solidarity liable to petitioners. The dispositive portion of its Decision reads:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, judgment is hereby rendered:LawlibraryofCRAlawIn the Order dated March 13, 2006,15 the Regional Trial Court denied respondents' Motion for Reconsideration.For lack of legal basis, plaintiffs' claim for moral and exemplary damages has to be denied, and for lack of merit the counter-claim is ordered dismissed.14
- Ordering the defendants jointly and severally to pay the plaintiffs the sum of P300,000.00 with interest at the rate of 30% per annum from the time the complaint was filed on July 31, 2002 until fully paid;chanRoblesvirtualLawlibrary
- Ordering the defendants to pay the plaintiffs the sum of P2,227.50 as reimbursement for litigation expenses, and another sum of P5,000.00 as attorney's fees.
WHEREFORE, the Decision of the Regional Trial Court is hereby REVERSED and SET ASIDE, and a new one issued, finding that the Spouses Salvador and Alma Abella are DIRECTED to jointly and severally pay Spouses Romeo and Annie Abella the amount of P148,500.00, with interest of 6% interest (sic) per annum to be computed upon receipt of this decision, until full satisfaction thereof. Upon finality of this judgment, an interest as the rate of 12% per annum, instead of 6%, shall be imposed on the amount due, until full payment thereof.23In the Resolution24 dated January 4, 2011, the Court of Appeals denied petitioners' Motion for Reconsideration.
Art. 1933. By the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum.On March 22, 1999, respondents executed an acknowledgment receipt to petitioners, which states:LawlibraryofCRAlaw
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the borrower.
....
Art. 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality. (Emphasis supplied)
The text of the acknowledgment receipt is uncomplicated and straightforward. It attests to: first, respondents' receipt of the sum of P500,000.00 from petitioner Alma Abella; second, respondents' duty to pay tack this amount within one (1) year from March 22, 1999; and third, respondents' duty to pay interest. Consistent with what typifies a simple loan, petitioners delivered to respondents with the corresponding condition lat respondents shall pay the same amount to petitioners within one (1) year.Batan, Aklan
March 22, 1999
This is to acknowledge receipt of the Amount of Five Hundred Thousand (P500,000.00) Pesos from Mrs. Alma R. Abella, payable within one (1) year from date hereof with interest.Annie C. Abella (sgd.) Romeo M. Abella (sgd.)33
(Emphasis supplied)
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.39 (Emphasis supplied)The rule is not only definite; it is cast in mandatory language. From Eastern Shipping to Security Bank to Spouses Toring, jurisprudence has repeatedly used the word "shall," a term that has long been settled to denote something imperative or operating to impose a duty.40 Thus, the rule leaves no room for alternatives or otherwise does not allow for discretion. It requires the application of the legal rate of interest.
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 2 of Circular No. 905, Series of 1982 and, accordingly, issued Circular No. 799, Series of 2013, effective July 1, 2013, the pertinent portion of which reads:LawlibraryofCRAlawNevertheless, both Bangko Sentral ng Pilipinas Circular No. 799, Series of 2013 and Nacar retain the definite and mandatory framing of the rule articulated in Eastern Shipping, Security Bank, and Spouses Toring. Nacar even restates Eastern Shipping:LawlibraryofCRAlaw
ChanRoblesVirtualawlibraryThe 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:LawlibraryofCRAlawThus, 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 Lines 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.42 (Emphasis supplied, citations omitted)
ChanRoblesVirtualawlibrarySection 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.This Circular shall take effect on 1 July 2013.
Section 2. In view of the above, 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 are hereby amended accordingly.
To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines are accordingly modified to embody BSP-MB Circular No. 799, as follows:LawlibraryofCRAlawThus, it remains that where interest was stipulated in writing by the debtor and creditor in a simple loan or mutuum, but no exact interest rate was mentioned, the legal rate of interest shall apply. At present, this is 6% per annum, subject to Nacar's qualification on prospective application.
....
- When the obligation is breached, and it consists in the payment of a sum of money, i.e., a Joan 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.43 (Emphasis supplied, citations omitted)
In sum, two (2) things must be established for parol evidence to be admitted: first, that the existence of any of the four (4) exceptions has been put in issue in a party's pleading or has not been objected to by the adverse party; and second, that the parol evidence sought to be presented serves to form the basis of the conclusion proposed by the presenting party.48The issue of admitting parol evidence is a matter that is proper to the trial, not the appellate, stage of a case. Petitioners raised the issue of applying the exceptions to the Parol Evidence Rule only in the Reply they filed before this court. This is the last pleading that either of the parties has filed in the entire string of proceedings culminating in this Decision. It is, therefore, too late for petitioners to harp on this rule. In any case, what is at issue is not admission of evidence per se, but the appreciation given to the evidence adduced by the parties. In the Petition they filed before this court, petitioners themselves acknowledged that checks supposedly attesting to payment of monthly interest at the rate of 2.5% were admitted by the trial court (and marked as Exhibits "2," "3," "4," "5," "6," "7," and "8").49 What petitioners have an issue with is not the admission of these pieces of evidence but how these have not been appreciated in a manner consistent with the conclusions they advance.
The imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to the common sense of man. It has no support in law, in principles of justice, or in the human conscience nor is there any reason whatsoever which may justify such imposition as righteous and as one that may be sustained within the sphere of public or private morals.51The imposition of an unconscionable interest rate is void ab initio for being "contrary to morals, and the law."52redarclaw
Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.So, too, Nacar states that "the interest due shall itself earn legal interest from the time it is judicially demanded."53redarclaw
Art. 1253. If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.Thus, the payments respondents made must first be reckoned as interest payments. Thereafter, any excess payments shall be charged against the principal. As respondents paid a total of P156,000.00 within the first year, the conventional interest of P60,000.00 must be deemed fully paid and the remaining amount that respondents paid (i.e., P96,000.00) is to be charged against the principal. This yields a balance of P404,000.00.
(a) | Between March 22, 2001 and June 30, 2001, respondents completed three (3) monthly payments of P12,500.00 each, totaling P37,500.00. |
(b) | On June 30, 2001, respondents paid P100,000.00, which was charged as principal payment. |
(c) | Between June 30, 2001 and December 30, 2001, respondents delivered monthly payments of P10,000.00 each. At this point, the monthly payments no longer amounted to P12,500.00 each because the supposed monthly interest payments were pegged to the supposedly remaining principal of P400,000.00. Thus, during this period, they paid a total of six (6) monthly payments totaling P60,000.00. |
(d) | On December 30, 2001, respondents paid P100,000.00, which, like the June 30, 2001 payment, was charged against the principal. |
(e) | From the end of December 2002 to the end of February 2002, respondents delivered monthly payments of P7,500.00 each. At this point, the supposed monthly interest payments were now pegged to the supposedly remaining principal of P300,000.00. Thus, during this period, they delivered three (3) monthly payments totaling P22,500.00. |
Article 2154. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.In Moreno-Lentfer v. Wolff,65 this court explained the application of solutio indebiti:LawlibraryofCRAlaw
The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of another. It applies where (1) a payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment, and (2) the payment is made through mistake, and not through liberality or some other cause.66As respondents had already fully paid the principal and all conventional interest that had accrued, they were no longer obliged to make further payments. Any further payment they made was only because of a mistaken impression that they were still due. Accordingly, petitioners are now bound by a quasi-contractual obligation to return any and all excess payments delivered by respondents.
Art. 2159. Whoever in bad faith accepts an undue payment, shall pay legal interest if a sum of money is involved, or shall be liable for fruits received or which should have been received if the thing produces fruits.Consistent however, with our finding that the excess payment made by respondents were borne out of a mere mistake that it was due, we find it in the better interest of equity to no longer hold petitioners liable for interest arising from their quasi-contractual obligation.
He shall furthermore be answerable for any loss or impairment of the thing from any cause, and for damages to the person who delivered the thing, until it is recovered.
Endnotes:
* Designated Acting Member per S.O. No. 2088 dated July 1, 2015.
** Designated Acting Member per S.O. No. 2079 dated June 29, 2015.
*** Designated Acting Chairperson per S.O. No. 2087 (Revised) dated July 1, 2015.
1Rollo, pp. 28-42. The Decision was penned by Associate Justice Ramon A. Cruz and concurred in by Associate Justices Pampio A. Abarintos and Myra V. Garcia-Fernandez of the Court of Appeals Cebu.
2 Id. at 50-51.
3 Id. at 102-112. The Decision was penned by Judge Eustaquio G. Terencio.
4 Id. at 112.
5 Id. at 53-55.
6 Id. at 29.
7 Id. at 53-55.
8 Id. at 58-63.
9 Id. at 59.
10 Id.
11 Id. at 59-60.
12 Id. at 102-112.
13 Id. at 111-112.
14 Id. at 112.
15 Id. at 123.
16 Id. at 39-41.
17 Art. 1956. No interest shall be due unless it has been expressly stipulated in writing.
18Rollo, p. 39.
19 484 Phil. 87 (2004) [Per J. Ynares-Santiago, First Division].
20Rollo, p. 39.
21 Id. at 39-40,
22 Id.
23 Id. at 41.
24 Id. at 50-51.
25 Id. at 10-25.
26 Art. 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered.
27Rollo, pp. 19-20.
28 Id. at 128-137.
29 Id. at 133-136.
30 Id. at 178-181.
31 Id. at 178-179.
32 CIVIL CODE, art. 1370.
33 Id. at 57.
34Cf. interest on interest (i.e., interest due on conventional interest) and compensatory interest / penalty interest / indemnity interest (i.e., damages paid arising from delay in paying a fixed sum of money or delay in assessing and paying damages).
35 589 Phil. 362 (2008) [Per J. Quisumbing, Second Division].
36 Id. at 368, citing CIVIL CODE, art. 1956 and Security Bank and Trust Company v. RTC of Makati, Br. 61, 331 Phil. 787 (1996) [Per J. Hermosisima, Jr., First Division], emphasis supplied.
37 331 Phil. 787, 794 (1996) [Per J. Hermosisima, Jr., First Division], citing Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78 [Per J. Vitug, En Banc], emphasis supplied.
38 G.R. No. 97412, July 12, 1994, 234 SCRA 78 [Per J. Vitug, En Banc].
39 Id. at 95, citing CIVIL CODE, art. 2195, 1956, and 1169.
40See Philippine Registered Electrical Practitioners, Inc. v. Francia, Jr., 379 Phil. 634 (2000) [Per J. Quisumbing, Second Division]; University of Mindanao, Inc. v. Court of Appeals, 659 Phil. 1 (2011) [Per J. Peralta, Second Division]; and Bersabal v. Salvador, 173 Phil. 379 (1978) [Per J. Makasiar, First Division].
41 G.R. No. 189871, August 13, 2013, 703 SCRA 439 [Per J. Peralta, En Banc].
42 Id. at 454-456.
43 Id. at 457-458.
44 CIVIL CODE, art. 1371.
45 Section 9. Evidence of written agreements. — 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.
However, a party may present evidence to modify, explain or add to the terms of written agreement if he puts in issue in his pleading:LawlibraryofCRAlaw
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement.
The term "agreement" includes wills.
46 See National Power Corporation v. Presiding Judge, RTC, 10th Judicial Region, Br. XXV, Cagayan De Oro City, 268 Phil. 507 (1990) [Per C.J. Fernan, Third Division].
47 G.R. No. 171601, April 8, 2015, <http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2015/april2015/171601 .pdf> [Per J. Leonen. Second Division].
48 Id.
49Rollo, p. 19.
50 620 Phil. 239, (2009) [Per J. Del Castillo, Second Division].
51 Id. at 242-243, citing Ibarra v. Aveyro, 37 Phil. 273, 282 (1917) [Per J. Torres, First Division].
52 Id. at 248, citing CIVIL CODE, art. 1306.
53 G.R. No. 189871, August 13, 2013, 703 SCRA439, 457 [Per J. Peralta, En Banc].
54 G.R. No. 184458, January 14, 2015, <http://sc.judiciary.gov.ph/jurisprudence/2015/january2015/184458.pdf> [Per J. Perez, First Division].
55Rollo, p. 31.
56 Id.
57 Id. at 40.
58 Id. at 125-126.
59 Id. at 125.
60 Id.
61 Id. at 40.
62 Id.
63 Id.
64 Art. 2154. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.
65 484 Phil. 552 (2004) [Per J. Quisumbing, First Division].
66 Id. at 559-560, citing Power Commercial and Industrial Corp. v. Court of Appeals, 340 Phil. 705 (1997) [Per J. Panganiban, Third Division]; and National Commercial Bank of Saudi Arabia v. Court of Appeals, 480 Phil. 391 (2003) [Per J. Carpio-Morales, Third Division].
67Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439, 458 [Per J. Peralta, En Banc].
68 Id.