Civil Code OBLICON Cases 2

8/13/2019 Civil Code OBLICON Cases 2

1/40

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 170452 August 13, 2008

SALVADOR CHUA and VIOLETA CHUA, petitioners,vs.RODRIGO TIMAN, MA. LYNN TIMAN and LYDIA TIMAN, respondents.

D E C I S I O N

QUISUMBING, J . :

Before us is a petition for review on certiorari assailing the Decision 1 and Resolution 2 dated March 9,

2005 and November 24, 2005, respectively, of the Court of Appeals in CA-G.R. CV No. 82865, whichhad affirmed the Decision 3 dated May 14, 2004 of the Regional Trial Court (RTC) of Quezon City,Branch 86, in Civil Case No. Q-00-41276. The Court of Appeals reduced the stipulated original interestrates of 7% and 5% per month to only 1% per month or 12% per annum and ordered petitioners torefund the excess interest payments by respondents.

The pertinent facts are as follows:

In February and March 1999, petitioners Salvador and Violeta Chua granted respondents Rodrigo, Ma.Lynn and Lydia Timan the following loans: a) P100,000; b) P200,000; c) P150,000; d) P107,000;e) P200,000; and f) P107,000. These loans were evidenced by promissory notes with interest of 7% permonth, which was later reduced to 5% per month. Rodrigo and Ma. Lynn issued five (5) postdated

checks to secure the loans, except for the P150,000 loan which was secured by a postdated checkissued by Lydia.

Respondents paid the loans initially at 7% interest rate per month until September 1999 and then at 5%interest rate per month from October to December 1999. Sometime in March 2000, respondents offeredto pay the principal a mount of the loans through a Philippine National Bank managers checkworth P764,000, but petitioners refused to accept the same insisting that the principal amount of theloans totalled P864,000.

On May 3, 2000, respondents deposited P864,000 with the Clerk of Court of the RTC of Quezon City.Later, they filed a case for consignation and damages. Petitioners moved to dismiss the case, but theRTC denied the motion, as well as the subsequent motion for reconsideration.

By virtue of an order of Partial Judgmen t4 dated October 16, 2002, the Clerk of Court of the RTC ofQuezon City released the amount of P864,000 to petitioners.

Trial on the validity of the stipulated interests on the subject loans, as well as on the issue of damages,then proceeded.
http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt1http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt1http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt2http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt2http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt3http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt3http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt4http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt4http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt4http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt4http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt3http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt2http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt1


2/40

On May 14, 2004, the RTC rendered a decision in favor of respondents. It ruled that the originalstipulated interest rates of 7% and 5% per month were excessive. It further ordered petitioners torefund to respondents all interest payments in excess of the legal rate of 1% per month or 12% perannum. However, the RTC denied petitioners claim for damages.

On appeal, the Court of Appeals affirmed the trial courts decision. The Court of Appeals declaredillegal the stipulated interest rates of 7% and 5% per month for being excessive, iniquitous,unconscionable and exorbitant. Accordingly, the Court of Appeals reduced the stipulated interest ratesof 7% and 5% per month (equivalent to 84% and 60% per annum, respectively) to a fair and reasonablerate of 1% per month or 12% per annum. The Court of Appeals also ordered petitioners to refund torespondents all interest payments in excess of 12% per annum. Petitioners sought reconsideration, butit was denied.

Hence, this petition raising the lone issue of:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLEERROR OR ACTED NOT IN ACCORD WITH THE LAW AND JURISPRUDENCE WHEN IT

AFFIRMED THE JUDGMENT OF THE REGIONAL TRIAL COURT ORDERING THE RETURNOF THE EXCESS INTEREST TO RESPONDENTS .5

Essentially, the main issue is: (1) Did the Court of Appeals err in ruling that the original stipulatedinterest rates of 7% and 5%, equivalent to 84% and 60% per annum, are unconscionable, and inordering petitioners to refund to respondents all payments of interest in excess of 12% per annum?

Petitioners aver that the stipulated interest of 5% monthly and higher cannot be consideredunconscionable because these rates are not usurious by virtue of Central Bank (C.B.) Circular No. 905-82 6 which had expressly removed the interest ceilings prescribed by the Usury Law. Petitioners addthat respondents were in pari delicto since they agreed on the stipulated interest rates of 7% and 5%per month. They further aver they honestly believed that the interest rates they imposed onrespondents loans were not usurious.

Respondents, invoking Medel v. Court of Appeals ,7 counter that the stipulated interest rates of 7% and5% per month are iniquitous, unconscionable and exorbitant, thus, they are entitled to the return of theexcessive interest paid. They also contend that petitioners cannot raise the defense of in pari delicto forthe first time on appeal. They further contend that the defense of good faith is a factual issue whichcannot be raised by petitioners in a petition for review under Rule 45 of the Rules of Civil Procedure.

The petition is patently devoid of merit.

The stipulated interest rates of 7% and 5% per month imposed on respondents loans must beequitably reduced to 1% per month or 12% per annum .8 We need not unsettle the principle we had

affirmed in a plethora of cases that stipulated interest rates of 3%9

per month and highe r 10

areexcessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary tomorals, if not against the law .11 While C.B. Circular No. 905-82, which took effect on January 1, 1983,effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless ofmaturity ,12 nothing in the said circular could possibly be read as granting carte blanche authority tolenders to raise interest rates to levels which would either enslave their borrowers or lead to ahemorrhaging of their assets .13
http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt5http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt5http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt5http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt6http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt6http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt6http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt7http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt7http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt7http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt8http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt8http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt8http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt9http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt9http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt10http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt10http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt10http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt11http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt11http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt11http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt12http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt12http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt12http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt13http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt13http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt13http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt13http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt12http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt11http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt10http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt9http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt8http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt7http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt6http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt5


3/40

Petitioners cannot also raise the defenses of in pari delicto and good faith . The defense of in paridelicto was not raised in the RTC, hence, such an issue cannot be raised for the first time on appeal.Petitioners must have seasonably raised it in the proceedings before the lower court, becausequestions raised on appeal are confined only within the issues framed by the parties .14 The defense ofgood faith must also fail because such an issue is a question of fac t15 which may not be properly raisedin a petition for review under Rule 45 of the Rules of Civil Procedure which allows only questions oflaw.16

As well set forth in Medel :17

We agree that the stipulated rate of interest a t 5.5% per month on the P500,000.00 loan isexcessive, iniquitous, unconscionable and exorbitant. However, we can not consider the rate"usurious" because this Court has consistently held that Circular No. 905 of the Central Bank,adopted on December 22, 1982, has expressly removed the interest ceilings prescribed by theUsury Law and that the Usury Law is now "legally inexistent."

In Security Bank and Trust Company vs. Regional Trial Court of Makati, Branch 61 , the Courtheld that CB Circular No. 905 "did not repeal nor in any way amend the Usury Law but simplysuspended the latters effectivity." Indeed, we have held that "a Central Bank Circular can notrepeal a law. Only a law can repeal another law." In the recent case of Florendo vs. Court of

Appeals , the Court reiterated the ruling that "by virtue of CB Circular 905, the Usury Law hasbeen rendered ineffective." "Usury has been legally non-existent in our jurisdiction. Interest cannow be charged as lender and borrower may agree upon."

Nevertheless, we find the interest at 5.5% per month, or 66% per annum, stipulated upon by theparties in the promissory note iniquitous or unconscionable, and, hence, contrary to morals("contra bonos mores "), if not against the law. The stipulation is void.

WHEREFORE , the petition is DENIED for lack of merit. The assailed Decision and Resolution datedMarch 9, 2005 and November 24, 2005, respectively, of the Court of Appeals in CA-G.R. CV No. 82865are hereby AFFIRMED . Costs against petitioners.

SO ORDERED .

LEONARDO A. QUISUMBING Associate Justice

WE CONCUR:

*RENATO C. CORONA

Associate Justice

CONCHITA CARPIO MORALES Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice

ARTURO D. BRION
http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt14http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt14http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt14http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt15http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt15http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt15http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt16http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt16http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt16http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt17http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt17http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt17http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt*http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt*http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt17http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt16http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt15http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#fnt14


4/40

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the casewas assigned to the writer of the opinion of the Courts Division.


Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it ishereby certified that the conclusions in the above Decision were reached in consultation before thecase was assigned to the writer of the opinion o f the Courts Division.

REYNATO S. PUNO Chief Justice

Footnotes * Designated as additional member in view of the official leave of absence of Associate JusticeDante O. Tinga.

1 Rollo, pp. 28-34. Penned by Associate Justice Juan Q. Enriquez, Jr. with Associate JusticesPortia Alio-Hormachuelos and Vicente Q. Roxas concurring.

2 Id. at 36-37.

3 Id. at 111-115. Penned by Judge Teodoro A. Bay.

4 Id. at 105-106.

5 Id. at 212.

6 SECTION 1. The rate of interest, including commissions, premiums, fees and other charges,on a loan or forbearance of any money, goods or credits, regardless of maturity and whethersecured or unsecured, that may be charged or collected by any person, whether natural or
http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt*http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt*http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt1http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt1http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt2http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt2http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt3http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt3http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt4http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt4http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt5http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt5http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt6http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt6http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt6http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt5http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt4http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt3http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt2http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt1http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt*


5/40

juridical, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, asamended.

7 G.R. No. 131622, November 27, 1998, 299 SCRA 481.

8 Ruiz v. Court of Appeals, G.R. No. 146942, April 22, 2003, 401 SCRA 410, 421.

9 Id.

10 Solangon v. Salazar , G.R. No. 125944, June 29, 2001, 360 SCRA 379, 384-385; Imperial v.Jaucian , G.R. No. 149004, April 14, 2004, 427 SCRA 517, 525-526; Cuaton v. Salud , G.R. No.158382, January 27, 2004, 421 SCRA 278, 282.

11 Medel v. Court of Appeals , supra note 7 at 489.

12 Dio v. Japor, G.R. No. 154129, July 8, 2005, 463 SCRA 170, 177.

13

Almeda v. Court of Appeals , G.R. No. 113412, April 17, 1996, 256 SCRA 292, 302.14 Lim v. Queensland Tokyo Commodities, Inc. , G.R. No. 136031, January 4, 2002, 373 SCRA31, 41.

15 Abad v. Guimba, G.R. No. 157002, July 29, 2005, 465 SCRA 356, 366.

16 Kay Products, Inc. v. Court of Appeals , G.R. No. 162472, July 28, 2005, 464 SCRA 544, 553.

17 Medel v. Court of Appeals , supra note 7 at 489.


Manila

SECOND DIVISION

G.R. No. 175381 February 26, 2008

JAMES SVENDSEN, petitioner,vs.PEOPLE OF THE PHILIPPINES, respondent.

D E C I S I O N

CARPIO MORALES, J .:

Assailed via Petition for Review on Certiorari is the Court of Appeals Decision 1 of November 16, 2006denying pet itioners appeal from the December 22, 2005 Decision 2 of the Regional Trial Court (RTC) ofManila, Branch 14 which affirmed the December 17, 2003 Judgmen t3 of the Metropolitan Trial Court(MeTC) of Manila, Branch 5, finding James Svendsen (petitioner) guilty of violation of Batas PambansaBlg . (B.P. Blg.) 22 or the Bouncing Checks Law.
http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt7http://www.lawphil.net/judjuris/juri1998/nov1998/gr_131622_1998.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt8http://www.lawphil.net/judjuris/juri2003/apr2003/gr_146942_2003.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt9http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt9http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt10http://www.lawphil.net/judjuris/juri2001/jun2001/gr_125944_2001.htmlhttp://www.lawphil.net/judjuris/juri2001/jun2001/gr_125944_2001.htmlhttp://www.lawphil.net/judjuris/juri2001/jun2001/gr_125944_2001.htmlhttp://www.lawphil.net/judjuris/juri2004/apr2004/gr_149004_2004.htmlhttp://www.lawphil.net/judjuris/juri2004/apr2004/gr_149004_2004.htmlhttp://www.lawphil.net/judjuris/juri2004/apr2004/gr_149004_2004.htmlhttp://www.lawphil.net/judjuris/juri2004/apr2004/gr_149004_2004.htmlhttp://www.lawphil.net/judjuris/juri2004/jan2004/gr_158382_2004.htmlhttp://www.lawphil.net/judjuris/juri2004/jan2004/gr_158382_2004.htmlhttp://www.lawphil.net/judjuris/juri2004/jan2004/gr_158382_2004.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt11http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt11http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt12http://www.lawphil.net/judjuris/juri2005/jul2005/gr_154129_2005.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt13http://www.lawphil.net/judjuris/juri1996/apr1996/gr_113412_1996.htmlhttp://www.lawphil.net/judjuris/juri1996/apr1996/gr_113412_1996.htmlhttp://www.lawphil.net/judjuris/juri1996/apr1996/gr_113412_1996.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt14http://www.lawphil.net/judjuris/juri2002/jan2002/gr_136031_2002.htmlhttp://www.lawphil.net/judjuris/juri2002/jan2002/gr_136031_2002.htmlhttp://www.lawphil.net/judjuris/juri2002/jan2002/gr_136031_2002.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt15http://www.lawphil.net/judjuris/juri2005/jul2005/gr_157002_2005.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt16http://www.lawphil.net/judjuris/juri2005/jul2005/gr_162472_2005.htmlhttp://www.lawphil.net/judjuris/juri2005/jul2005/gr_162472_2005.htmlhttp://www.lawphil.net/judjuris/juri2005/jul2005/gr_162472_2005.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt17http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt17http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt1http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt1http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt2http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt2http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt3http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt3http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt3http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt3http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt2http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt1http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt17http://www.lawphil.net/judjuris/juri2005/jul2005/gr_162472_2005.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt16http://www.lawphil.net/judjuris/juri2005/jul2005/gr_157002_2005.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt15http://www.lawphil.net/judjuris/juri2002/jan2002/gr_136031_2002.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt14http://www.lawphil.net/judjuris/juri1996/apr1996/gr_113412_1996.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt13http://www.lawphil.net/judjuris/juri2005/jul2005/gr_154129_2005.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt12http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt11http://www.lawphil.net/judjuris/juri2004/jan2004/gr_158382_2004.htmlhttp://www.lawphil.net/judjuris/juri2004/apr2004/gr_149004_2004.htmlhttp://www.lawphil.net/judjuris/juri2004/apr2004/gr_149004_2004.htmlhttp://www.lawphil.net/judjuris/juri2001/jun2001/gr_125944_2001.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt10http://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt9http://www.lawphil.net/judjuris/juri2003/apr2003/gr_146942_2003.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt8http://www.lawphil.net/judjuris/juri1998/nov1998/gr_131622_1998.htmlhttp://www.lawphil.net/judjuris/juri2008/aug2008/gr_170452_2008.html#rnt7


6/40

In October 1997, Cristina Reyes (Cristina) extended a loan to petitioner in the amount of P200,000, tobear interest at 10% a month. After petitioner had partially paid his obligation, he failed to settle thebalance thereof which had reached P380,000 inclusive of interest .4

Cristina thus filed a collection suit against petitioner, which was eventually settled when petitioner paidherP200,00 0 5 and issued in her favor an International Exchange Bank check postdated February 2,1999 (the check) in the amount of P160,000 representing interest .6 The check was co-signed by oneWilhelm Bolton.

When the check was presented for payment on February 9, 1999, it was dishonored for having beenDrawn Against Insufficient Funds (DAIF) .7

Cristina, through counsel, thus sent a letter to petitioner by registered mail informing him that the checkwas dishonored by the drawee bank, and demanding that he make it good within five (5) days fromreceipt thereof .8

No settlement having been made by petitioner, Cristina filed a complaint dated March 1, 1999 againsthim and his co-signatory to the check, Bolton, for violation of B.P. Blg. 22 before the City Pros ecutorsOffice of Manila. No counter-affidavit was submitted by petitioner and his co-respondent. An Informationdated April 13, 1999 for violation of B.P. Blg. No. 22 was thus filed on April 29, 1999 before the MeTCof Manila against the two, the accusatory portion of which reads:

That sometime in December 1998 the said accused did then and there willfully, unlawfully, andfeloniously and jointly make or draw and issue to CRISTINA C. REYES to apply on account orfor value INTERNATIONAL EXCHANGE BANK check no. 0000009118 dated February 2, 1999payable to CRISTINA REYES in the amount of P160,000.00 said accused well knowing that atthe time of issue she/he/they did not have sufficient funds and/or credit with the drawee bank forpayment of such check in full upon its presentment, which check after having been deposited inthe City of Manila, Philippines, and upon being presented for payment within ninety (90) daysfrom the date thereof was subsequently dishonored by the drawee bank for INSUFFICIENCYOF FUNDS and despite receipt of notice of such dishonor, said accused failed to pay saidCRISTINA C. REYES the amount of the check or to make arrangement for full payment of thesame within five (5) banking days after receiving said notice.

CONTRARY TO LAW .9

Bolton having remained at large, the trial court never acquired jurisdiction over his person .10

By Judgment of December 17, 2003, Branch 5 of the Manila MeTC found petitioner guilty as charged,disposing as follows:

WHEREFORE, this Court finds accused James Robert Svendson [ sic ] GUILTY beyondreasonable doubt of a violation of Batas Pambansa Blg. 22 (Bouncing Checks Law) andimposes upon him to pay a fine of ONE HUNDRED SIXTY THOUSAND PESOS (P160,000.00) ,with subsidiary imprisonment in case of insolvency.

Accused is also made liable to pay private complainant Cristina C. Reyes civil indemnity in thetotal amount of ONE HUNDRED SIXTY THOUSAND PESOS (P160,000.00) representing hiscivil obligation covered by subject check.
http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt4http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt4http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt4http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt5http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt5http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt5http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt6http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt6http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt6http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt7http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt7http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt7http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt8http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt8http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt8http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt9http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt9http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt9http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt10http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt10http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt10http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt10http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt9http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt8http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt7http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt6http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt5http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt4


7/40

Meantime, considering that other accused Wilhelm Bolton remains at large, let a warrant ofarrest against him ISSUE . Pending his apprehension, let the case against him be sent tothe ARCHIVES . (Emphasis in the original; underscoring supplied)

As priorly stated, the RTC affirmed the MeTC judgment and the Court of Appeals deni ed petitionersappeal.

Hence, the present petition for review.

Petitioner argues that the appellate court erred in finding that the first element of violation of B.P. Blg.22 the making, drawing, and issuance of any check "to apply on account or for value" was present,as the obligation to pay interest is void, the same not being in writing and the 10% monthly interest isunconscionable; in holding him civilly liable in the amount of P160,000 to private complainant,notwithstanding the invalidity of the interest stipulation; and in violating his right to due process when itconvicted him, notwithstanding the absence of proof of receipt by him of a written notice of dishonor.

The petition is impressed with merit.

Section 1 of B.P. Blg. 22 or the Bouncing Checks Law reads:

SECTION 1. Checks without sufficient funds . Any person who makes or draws and issues anycheck to apply on account or for value, knowing at the time of issue that he does not havesufficient funds in or credit with the drawee bank for the payment of such check in full upon itspresentment, which check is subsequently dishonored by the drawee bank for insufficiency offunds or credit or would have been dishonored for the same reason had not the drawer, withoutany valid reason, ordered the bank to stop payment, shall be punished by imprisonment of notless than thirty days but not more than one (1) year or by fine of not less than but not more thandouble the amount of the check which fine shall in no case exceed Two Hundred Thousandpesos, or both such fine and imprisonment at the discretion of the court.

The same penalty shall be imposed upon any person who, having sufficient funds in or creditwith the drawee bank when he makes or draws and issues a check, shall fail to keep sufficientfunds or to maintain a credit to cover the full amount of the check if presented within a period ofninety (90) days from the date appearing thereon, for which reason it is dishonored by thedrawee bank. Where the check is drawn by a corporation, company or entity, the person orpersons who actually signed the check in behalf of such drawer shall be liable under this Act.

For petitioner to be validly convicted of the crime under B.P. Blg. 22, the following requisites must thusconcur: (1) the making, drawing and issuance of any check to apply for account or for value; (2) theknowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds inor credit with the drawee bank for the payment of the check in full upon its presentment; and (3) the

subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor forthe same reason had not the drawer, without any valid cause, ordered the bank to stop payment .11

Petitioner admits having issued the postdated check to Cristina. The check, however, was dishonoredwhen deposited for payment in Banco de Oro due to DAIF. Hence, the first and the third elementsobtain in the case.

As for the second element, Section 2 of B.P. Blg. 22 provides that
http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt11http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt11http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt11http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt11


8/40

[t]he making, drawing and issuance of a check payment of which is refused by the draweebecause of insufficient funds in or credit with such bank, when presented within ninety (90) daysfrom the date of the check, shall be prima facie evidence of knowledge of such insufficiency offunds or credit unless such maker or drawer pays the holder thereof the amount due thereon, ormakes arrangements for payment in full by the drawee of such check within five (5) bankingdays after receiving notice that such check has not been paid by the drawee.

In Rico v. People of the Philippines ,12 this Court held:

x x x [I]f x x x notice of non-payment by the drawee bank is not sent to the maker or drawer ofthe bum check, or if there is no proof as to when such notice was received by the drawer, thenthe presumption of knowledge as provided in Section 2 of B.P. 22 cannot arise, since therewould simply be no way of reckoning the crucial five-day period .

x x x In recent cases, we had the occasion to emphasize that not only must there be a writtennotice of dishonor or demand letters actually received by the drawer of a dishonored check,but there must also be proof of receipt thereof that is properly authenticated, and not mereregistered receipt and/or return receipt.

Thus, as held in Domagsang vs. Court of Appeals , while Section 2 of B.P. 22 indeed does notstate that the notice of dishonor be in writing, this must be taken in conjunction with Section 3 ofthe law, i.e. , "that where there are no sufficient funds in or credit with such drawee bank, suchfact shall always be explicitly stated in the notice of dishonor or refusal". A mere oral notice ordemand to pay would appear to be insufficient for conviction under the law. In our view, both thespirit and letter of the Bouncing Checks Law require for the act to be punished thereunder notonly that the accused issued a check that is dishonored, but also that the accused has actuallybeen notified in writing of the fact of dishonor. This is consistent with the rule that penal statuesmust be construed strictly against the state and liberally in favor of the accused. x x x

In fine, the failure of the prosecution to prove the existence and receipt by petitioner of therequisite written notice of dishonor and that he was given at least five banking days within whichto settle his account constitutes sufficient ground for his acquittal .13 (Italics in the original;emphasis and underscoring supplied)

The evidence for the prosecution failed to prove the second element. While the registry receipt ,14 whichis said to cover the letter-notice of dishonor and of demand sent to petitioner, was presented, there isno proof that he or a duly authorized agent received the same. Receipts for registered letters includingreturn receipts do not themselves prove receipt; they must be properly authenticated to serve as proofof receipt of the letters .15 Thus in Ting v. Court of Appeals ,16 this Court observed:

x x x All that we have on record is an illegible signature on the registry receipt as evidence that

someone received the letter. As to whether this signature is that of one of the petitioners or oftheir authorized agent remains a mystery. From the registry receipt alone, it is possible thatpetitioners or their authorized agent did receive the demand letter. Possibilities, however,cannot replace proof beyond reasonable doubt .17

For failure then to prove all the elements of violation of B.P. Blg. 22, petitioners acquittal is in order.
http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt12http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt12http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt12http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt13http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt13http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt13http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt14http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt14http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt14http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt15http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt15http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt15http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt16http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt16http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt16http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt17http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt17http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt17http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt17http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt16http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt15http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt14http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt13http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#fnt12


9/40


10/40

He is, however, ordered to pay private complainant, Cristina C. Reyes, the amount of SIXTEENTHOUSAND PESOS (P16,000) representing civil indemnity, plus 12% interest per annum computedfrom April 29, 1999 up to the finality of this judgment. After the judgment becomes final and executoryuntil the obligation is satisfied, the total amount due shall earn interest at 12% per annum .

SO ORDERED .

CONCHITA CARPIO MORALES Associate Justice

WE CONCUR:


Chairperson

ANTONIO T. CARPIO Associate Justice

DANTE O. TINGA Associate Justice


ATTESTATION



Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, Icertify that the conclusions in the above decision had been reached in consultation before the case wasassigned to the writer of the opinion of the Cour ts Division.



11/40

Footnotes

1 Rollo, pp. 108-116. Penned by Associate Justice Estela Perlas-Bernabe and concurred in by Associate Justices Renato Dacudao and Rosmari Carandang.

2 Id. at 45-50. Penned by Judge Cesar M. Solis.

3 Id. at 21-30. Penned by Acting Presiding Judge Ma. Theresa Dolores Gomez-Estoesta.

4 Id. at 109.

5 Ibid.

6 TSN, October 11, 1999, p. 23.

7 Rollo, p. 109.

8 Id. at 109-110.

9 MeTC records, p. 2.

10 Rollo, pp. 110-111.

11 Arceo, Jr. v. People , G.R. No. 142641, July 17, 2006, 495 SCRA 204, 211; Josef v. People , G.R. No. 146424, November 18, 2005, 475 SCRA 417, 420; Domagsang v. Court of Appeals ,400 Phil. 847, 853 (2000); Lim v. People, 394 Phil. 844, 851-852 (2000).

12 440 Phil. 540 (2002).

13 Id. at 554-555.

14 MeTC records, p. 49.

15 Supra note 12 at 540-555.

16 398 Phil. 481 (2000).

17

Id. at 494.18 1 Reyes, The Revised Penal Code, 15 th ed., 2001, p. 875; vide also Ramos v. Gonong, 164Phil. 557, 563 (1976).

19 TSN, October 11, 1999, p. 20.
http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt1http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt1http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt2http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt2http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt3http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt3http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt4http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt4http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt5http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt5http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt6http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt6http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt7http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt7http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt8http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt8http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt9http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt9http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt10http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt10http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt11http://www.lawphil.net/judjuris/juri2006/jul2006/gr_142641_2006.htmlhttp://www.lawphil.net/judjuris/juri2006/jul2006/gr_142641_2006.htmlhttp://www.lawphil.net/judjuris/juri2006/jul2006/gr_142641_2006.htmlhttp://www.lawphil.net/judjuris/juri2005/nov2005/gr_146424_2005.htmlhttp://www.lawphil.net/judjuris/juri2005/nov2005/gr_146424_2005.htmlhttp://www.lawphil.net/judjuris/juri2005/nov2005/gr_146424_2005.htmlhttp://www.lawphil.net/judjuris/juri2005/nov2005/gr_146424_2005.htmlhttp://www.lawphil.net/judjuris/juri2005/nov2005/gr_146424_2005.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt12http://www.lawphil.net/judjuris/juri2002/nov2002/gr_137191_2002.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt13http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt13http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt14http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt14http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt15http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt15http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt16http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt16http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt17http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt17http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt18http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt18http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt19http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt19http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt19http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt18http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt17http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt16http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt15http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt14http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt13http://www.lawphil.net/judjuris/juri2002/nov2002/gr_137191_2002.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt12http://www.lawphil.net/judjuris/juri2005/nov2005/gr_146424_2005.htmlhttp://www.lawphil.net/judjuris/juri2006/jul2006/gr_142641_2006.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt11http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt10http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt9http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt8http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt7http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt6http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt5http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt4http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt3http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt2http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt1


12/40

20 Solangon v. Salazar , 412 Phil. 816, 822 (2001); Ruiz v. Court of Appeals , G.R. No. 146942, April 22, 2002, 401 SCRA 410, 421.

21 ART. 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law, morals, good customs,public order or public policy;

(2) Those which are absolutely simulated or fictitious;

(3) Those whose cause or object did not exist at the time of the transaction;

(4) Those whose object is outside the commerce of men;

(5) Those which contemplate an impossible service;

(6) Those where the intention of the parties relative to the principal object of the contract

cannot be ascertained;

(7) Those expressly prohibited or declared void by law.

These contracts cannot be ratified. Neither can the right to set up the defense of illegalitybe waived.

22 Cuaton v. Salud, 465 Phil. 999, 1005 (2004) .

23 G.R. No. 164358, December 20, 2006, 511 SCRA 400.

24 G.R. No. 145871, January 31, 2006, 481 SCRA 226.

25 G.R. No. 158382, January 27, 2004, 421 SCRA 278.

26 In Arrofo v. Quio (G.R. No. 145794, January 26, 2005, 449 SCRA 284), this Court reducedthe 7% interest per month to 18% per annum . In Medel v. Court of Appeals (359 Phil. 820[1998]), the interest stipulated at 5.5% per month was found unconscionable and was reducedto 12% per annum . In Ruiz v. Court of Appeals (G.R. No. 146942, April 22, 2003, 401 SCRA410), the interest rate of 3% per month was reduced to 1% per month. In Solangon v.Salazar (412 Phil. 816, [2001]), the stipulated interest rate of 6% per month was reduced to12% per annum .

27 Cuaton v. Salud , 465 Phil. 999, 1006-1007 (2004) citing Eastern Shipping Lines, Inc. v. Courtof Appeals , G.R. No. 97412, July 13, 1994, 234 SCRA 78, 95-97.
http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt20http://www.lawphil.net/judjuris/juri2001/jun2001/gr_125944_2001.htmlhttp://www.lawphil.net/judjuris/juri2001/jun2001/gr_125944_2001.htmlhttp://www.lawphil.net/judjuris/juri2001/jun2001/gr_125944_2001.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt21http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt21http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt22http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt22http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt23http://www.lawphil.net/judjuris/juri2006/dec2006/gr_164358_2006.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt24http://www.lawphil.net/judjuris/juri2006/jan2006/gr_145871_2006.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt25http://www.lawphil.net/judjuris/juri2004/jan2004/gr_158382_2004.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt26http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt26http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt27http://www.lawphil.net/judjuris/juri2004/jan2004/gr_158382_2004.htmlhttp://www.lawphil.net/judjuris/juri2004/jan2004/gr_158382_2004.htmlhttp://www.lawphil.net/judjuris/juri2004/jan2004/gr_158382_2004.htmlhttp://www.lawphil.net/judjuris/juri1994/jul1994/gr_97412_1994.htmlhttp://www.lawphil.net/judjuris/juri1994/jul1994/gr_97412_1994.htmlhttp://www.lawphil.net/judjuris/juri1994/jul1994/gr_97412_1994.htmlhttp://www.lawphil.net/judjuris/juri1994/jul1994/gr_97412_1994.htmlhttp://www.lawphil.net/judjuris/juri1994/jul1994/gr_97412_1994.htmlhttp://www.lawphil.net/judjuris/juri1994/jul1994/gr_97412_1994.htmlhttp://www.lawphil.net/judjuris/juri2004/jan2004/gr_158382_2004.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt27http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt26http://www.lawphil.net/judjuris/juri2004/jan2004/gr_158382_2004.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt25http://www.lawphil.net/judjuris/juri2006/jan2006/gr_145871_2006.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt24http://www.lawphil.net/judjuris/juri2006/dec2006/gr_164358_2006.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt23http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt22http://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt21http://www.lawphil.net/judjuris/juri2001/jun2001/gr_125944_2001.htmlhttp://www.lawphil.net/judjuris/juri2008/feb2008/gr_175381_2008.html#rnt20


13/40


Manila

THIRD DIVISION

G.R. No. 175490 September 17, 2009

ILEANA DR. MACALINAO, Petitioner,vs.BANK OF THE PHILIPPINE ISLANDS, Respondent.

D E C I S I O N

VELASCO, JR., J .:

The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to reverseand set aside the June 30, 2006 Decision 1 of the Court of Appeals (CA) and its November 21, 2006Resolution 2 denying petitioners motion for reconsideration.

The Facts

Petitioner Ileana Macalinao was an approved cardholder of BPI Mastercard, one of the credit cardfacilities of respondent Bank of the Philippine Islands (BPI) .3 Petitioner Macalinao made somepurchases through the use of the said credit card and defaulted in paying for said purchases. Shesubsequently received a letter dated January 5, 2004 from respondent BPI, demanding payment of theamount of one hundred forty-one thousand five hundred eighteen pesos and thirty-four centavos (PhP

141,518.34), as follows:

StatementDate

PreviousBalance

Purchases(Payments)

PenaltyInterest

FinanceCharges

BalanceDue

10/27/2002 94,843.70 559.72 3,061.99 98,456.41

11/27/2002 98,465.41 (15,000) 0 2,885.61 86,351.02

12/31/2002 86,351.02 30,308.80 259.05 2,806.41 119,752.28

1/27/2003 119,752.28 618.23 3,891.07 124,234.58

2/27/2003 124,234.58 990.93 4,037.62 129,263.13

3/27/2003 129,263.13 (18,000.00) 298.72 3,616.05 115,177.90

4/27/2003 115,177.90 644.26 3,743.28 119,565.44

5/27/2003 119,565.44 (10,000.00) 402.95 3,571.71 113,540.10

6/29/2003 113,540.10 8,362.50(7,000.00) 323.57 3,607.32 118,833.49
http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt1http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt1http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt2http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt2http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt3http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt3http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt3http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt3http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt2http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt1


14/40


15/40

established herein, whether arising from crimes, negligence or breach thereof, shall be in the processof courts of the City of Makati or in other courts at the option of BCC .4 (Emphasis supplied.) 1avvphi1

For failure of petitioner Macalinao to settle her obligations, respondent BPI filed with the MetropolitanTrial Court (MeTC) of Makati City a complaint for a sum of money against her and her husband, DaniloSJ. Macalinao. This was raffled to Branch 66 of the MeTC and was docketed as Civil Case No. 84462entitled Bank of the Philippine Islands vs. Spouses Ileana Dr. Macalinao and Danilo SJ. Macalinao .5

In said complaint, respondent BPI prayed for the payment of the amount of one hundred fifty-fourthousand six hundred eight pesos and seventy-eight centavos (PhP 154,608.78) plus 3.25% financecharges and late payment charges equivalent to 6% of the amount due from February 29, 2004 and anamount equivalent to 25% of the total amount due as attorneys fees, and of the cost of suit . 6

After the summons and a copy of the complaint were served upon petitioner Macalinao and herhusband, they failed to file their Answer .7 Thus, respondent BPI moved that judgment be rendered inaccordance with Section 6 of the Rule on Summary Procedure .8 This was granted in an Order datedJune 16, 2004 .9 Thereafter, respondent BPI submitted its documentary evidence .101avvphi1

In its Decision dated August 2, 2004, the MeTC ruled in favor of respondent BPI and ordered petitionerMacalinao and her husband to pay the amount of PhP 141,518.34 plus interest and penalty charges of2% per month, to wit:

WHEREFORE, finding merit in the allegations of the complaint supported by documentary evidence, judgment is hereby rendered in favor of the plaintiff, Bank of the Philippine Islands and againstdefendant-spouses Ileana DR Macalinao and Danilo SJ Macalinao by ordering the latter to pay theformer jointly and severally the following:

1. The amount of PESOS: ONE HUNDRED FORTY ONE THOUSAND FIVE HUNDREDEIGHTEEN AND 34/100 (P141,518.34) plus interest and penalty charges of 2% per month from

January 05, 2004 until fully paid;

2. P10,000.00 as a nd by way of attorneys fees; and

3. Cost of suit.

SO ORDERED .11

Only petitioner Macalinao and her husband appealed to the Regional Trial Court (RTC) of Makati City,their recourse docketed as Civil Case No. 04-1153. In its Decision dated October 14, 2004, the RTCaffirmed in toto the decision of the MeTC and held:

In any event, the sum of P141,518.34 adjudged by the trial court appeared to be the result of arecomputation at the reduced rate of 2% per month. Note that the total amount sought by the plaintiff-appellee was P154,608.75 exclusive of finance charge of 3.25% per month and late payment charge of6% per month.

WHEREFORE, the appealed decision is hereby affirmed in toto.

No pronouncement as to costs.
http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt4http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt4http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt4http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt5http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt5http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt5http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt6http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt6http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt6http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt7http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt7http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt7http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt8http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt8http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt8http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt9http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt9http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt9http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt10http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt10http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt11http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt11http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt11http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt11http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt10http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt9http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt8http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt7http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt6http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt5http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt4


16/40

SO ORDERED .12

Unconvinced, petitioner Macalinao filed a petition for review with the CA, which was docketed as CA-G.R. SP No. 92031. The CA affirmed with modification the Decision of the RTC:

WHEREFORE, the appealed decision is AFFIRMED but MODIFIED with respect to the total amountdue and interest rate. Accordingly, petitioners are jointly and severally ordered to pay respondent Bankof the Philippine Islands the following:

1. The amount of One Hundred Twenty Six Thousand Seven Hundred Six Pesos and SeventyCentavos plus interest and penalty charges of 3% per month from January 5, 2004 until fullypaid;

2. P10,000.00 as and by way of attorneys fees; and

3. Cost of Suit.

SO ORDERED .13

Although sued jointly with her husband, petitioner Macalinao was the only one who filed the petitionbefore the CA since her husband already passed away on October 18, 2005 .14

In its assailed decision, the CA held that the amount of PhP 141,518.34 (the amount sought to besatisfied in the demand letter of respondent BPI) is clearly not the result of the re-computation at thereduced interest rate as previous higher interest rates were already incorporated in the said amount.Thus, the said amount should not be made as basis in computing the total obligation of petitionerMacalinao. Further, the CA also emphasized that respondent BPI should not compound the interest inthe instant case absent a stipulation to that effect. The CA also held, however, that the MeTC erred inmodifying the amount of interest rate from 3% monthly to only 2% considering that petitioner Macalinao

freely availed herself of the credit card facility offered by respondent BPI to the general public. Itexplained that contracts of adhesion are not invalid per se and are not entirely prohibited.

Petitioner Macali naos motion for reconsideration was denied by the CA in its Resolution datedNovember 21, 2006. Hence, petitioner Macalinao is now before this Court with the following assignederrors:

I.

THE REDUCTION OF INTEREST RATE, FROM 9.25% TO 2%, SHOULD BE UPHELD SINCE THESTIPULATED RATE OF INTEREST WAS UNCONSCIONABLE AND INIQUITOUS, AND THUSILLEGAL.

II.

THE COURT OF APPEALS ARBITRARILY MODIFIED THE REDUCED RATE OF INTEREST FROM2% TO 3%, CONTRARY TO THE TENOR OF ITS OWN DECISION.

III.
http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt12http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt12http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt12http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt13http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt13http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt13http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt14http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt14http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt14http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt14http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt13http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt12


17/40


18/40

shall impose an additional penalty charge of 3% per month. Pertinently, Article 1229 of the Civil Codestates:

Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly orirregularly complied with by the debtor. Even if there has been no performance, the penalty may also bereduced by the courts if it is iniquitous or unconscionable.

In exercising this power to determine what is iniquitous and unconscionable, courts must consider thecircumstances of each case since what may be iniquitous and unconscionable in one may be totally

just and equitable in another .19

In the instant case, the records would reveal that petitioner Macalinao made partial payments torespondent BPI, as indicated in her Billing Statements .20 Further, the stipulated penalty charge of 3%per month or 36% per annum, in addition to regular interests, is indeed iniquitous and unconscionable.

Thus, under the circumstances, the Court finds it equitable to reduce the interest rate pegged by the CAat 1.5% monthly to 1% monthly and penalty charge fixed by the CA at 1.5% monthly to 1% monthly or atotal of 2% per month or 24% per annum in line with the prevailing jurisprudence and in accordancewith Art. 1229 of the Civil Code.

There Is No Basis for the Dismissal of the Case,

Much Less a Remand of the Same for Further Reception of Evidence

Petitioner Macalinao claims that the basis of the re-computation of the CA, that is, the amount of PhP94,843.70 stated on the October 27, 2002 Statement of Account, was not the amount of the principalobligation. Thus, this allegedly necessitates a re-examination of the evidence presented by the parties.For this reason, petitioner Macalinao further contends that the dismissal of the case or its remand to thelower court would be a more appropriate disposition of the case.

Such contention is untenable. Based on the records, the summons and a copy of the complaint wereserved upon petitioner Macalinao and her husband on May 4, 2004. Nevertheless, they failed to filetheir Answer despite such service. Thus, respondent BPI moved that judgment be renderedaccordingly .21 Consequently, a decision was rendered by the MeTC on the basis of the evidencesubmitted by respondent BPI. This is in consonance with Sec. 6 of the Revised Rule on SummaryProcedure, which states:

Sec. 6. Effect of failure to answer. Should the defendant fail to answer the complaint within theperiod above provided, the court, motu proprio, or on motion of the plaintiff, shall render judgment asmay be warranted by the facts alleged in the complaint and limited to what is prayed for therein:Provided, however, that the court may in its discretion reduce the amount of damages and attorneys

fees claimed for being excessive or otherwise unconscionable. This is without prejudice to theapplicability of Section 3(c), Rule 10 of the Rules of Court, if there are two or more defendants. (Asamended by the 1997 Rules of Civil Procedure; emphasis supplied.)

Considering the foregoing rule, respondent BPI should not be made to suffer for petitioner Macalinaosfailure to file an answer and concomitantly, to allow the latter to submit additional evidence bydismissing or remanding the case for further reception of evidence. Significantly, petitioner Macalinaoherself admitted the existence of her obligation to respondent BPI, albeit with reservation as to theprincipal amount. Thus, a dismissal of the case would cause great injustice to respondent BPI. Similarly,
http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt19http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt19http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt19http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt20http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt20http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt20http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt21http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt21http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt21http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt21http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt20http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt19


19/40

a remand of the case for further reception of evidence would unduly prolong the proceedings of theinstant case and render inutile the proceedings conducted before the lower courts.

Significantly, the CA correctly used the beginning balance of PhP 94,843.70 as basis for the re-computation of the interest considering that this was the first amount which appeared on the Statementof Account of petitioner Macalinao. There is no other amount on which the re-computation could bebased, as can be gathered from the evidence on record. Furthermore, barring a showing that thefactual findings complained of are totally devoid of support in the record or that they are so glaringlyerroneous as to constitute serious abuse of discretion, such findings must stand, for this Court is notexpected or required to examine or contrast the evidence submitted by the parties .22

In view of the ruling that only 1% monthly interest and 1% penalty charge can be applied to thebeginning balance of PhP 94,843.70, this Court finds the following computation more appropriate:

StatementDate

PreviousBalance

Purchases(Payments) Balance

Interest(1%)

PenaltyCharge

(1%)

Total AmountDue for the

Month

10/27/2002 94,843.70 94,843.70 948.44 948.44 96,740.58

11/27/2002 94,843.70 (15,000) 79,843.70 798.44 798.44 81,440.58

12/31/2002 79,843.70 30,308.80 110,152.50 1,101.53 1,101.53 112,355.56

1/27/2003 110,152.50 110,152.50 1,101.53 1,101.53 112,355.56

2/27/2003 110,152.50 110,152.50 1,101.53 1,101.53 112,355.56

3/27/2003 110,152.50 (18,000.00) 92,152.50 921.53 921.53 93,995.56

4/27/2003 92,152.50 92,152.50 921.53 921.53 93,995.56

5/27/2003 92,152.50 (10,000.00) 82,152.50 821.53 821.53 83,795.56

6/29/2003 82,152.50 8,362.50(7,000.00) 83,515.00 835.15 835.15 85,185.30

7/27/2003 83,515.00 83,515.00 835.15 835.15 85,185.30

8/27/2003 83,515.00 83,515.00 835.15 835.15 85,185.30

9/28/2003 83,515.00 83,515.00 835.15 835.15 85,185.30

10/28/2003 83,515.00 83,515.00 835.15 835.15 85,185.30

11/28/2003 83,515.00 83,515.00 835.15 835.15 85,185.30

12/28/2003 83,515.00 83,515.00 835.15 835.15 85,185.30

1/27/2004 83,515.00 83,515.00 835.15 835.15 85,185.30

TOTAL 83,515.00 14,397.26 14,397.26 112,309.52

WHEREFORE, the petition is PARTLY GRANTED . The CA Decision dated June 30, 2006 in CA-G.R.SP No. 92031 is hereby MODIFIED with respect to the total amount due, interest rate, and penaltycharge. Accordingly, petitioner Macalinao is ordered to pay respondent BPI the following:
http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt22http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt22http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt22http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#fnt22


20/40

(1) The amount of one hundred twelve thousand three hundred nine pesos and fifty-twocentavos (PhP 112,309.52) plus interest and penalty charges of 2% per month from January 5,2004 until fully paid;

(2) PhP 10,000 as and by way of attorneys fees; and

(3) Cost of suit.

SO ORDERED.


WE CONCUR:

CONSUELO YNARES-SANTIAGO Associate Justice

Chairperson

MINITA V. CHICO-NAZARIO Associate Justice

ANTONIO EDUARDO B. NACHURA Associate Justice

DIOSDADO M. PERALTA Associate Justice

A T T E S T A T I O N


CONSUELO YNARES-SANTIAGO Associate JusticeChairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, Icertify that the conclusions in the above Decision had been reached in consultation before the casewas assigned to the writer of the opi nion of the Courts Division.


Footnotes


21/40

1 Rollo , pp. 29-38. Penned by Associate Justice Magdangal M. De Leon and concurred in by Associate Justices Godardo A. Jacinto and Rosalinda Asuncion-Vicente.

2 Id. at 40-41.

3 Id. at 30.

4 Id. at 30-31.

5 Id. at 184.

6 Id. at 2-3.

7 Id. at 141.

8 Id. at 165.

9

Id. at 228.10 Id. at 192-223. The documentary evidence was presented pursuant to the Order dated June16, 2004 of the MeTC.

11 Id. at 166. Penned by Judge Perpetua Atal-Pao.

12 Id. at 142-143. Penned by Hon. Manuel D. Victorio.

13 Id. at 37.

14 Id. at 146.

15 Id. at 17.

16 Id. at 323.

17 G.R. No. 170452, August 13, 2008, 562 SCRA 146, 149-150.

18 Imperial v. Jaucian, G.R. No. 149004, April 14, 2004, 427 SCRA 517; citing Tongoy v. Courtof Appeals, No. L-45645, June 28, 1983, 123 SCRA 99.

19 Imperial, id.

20 Rollo, pp. 56-81.

21 Id. at 165.

22 Atlantic Gulf and Pacific Company of Manila v. Court of Appeals, G.R. Nos. 114841-43, August 23, 1995, 247 SCRA 606.
http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt1http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt1http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt2http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt2http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt3http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt3http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt4http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt4http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt5http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt5http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt6http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt6http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt7http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt7http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt8http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt8http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt9http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt9http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt10http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt10http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt11http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt11http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt12http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt12http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt13http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt13http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt14http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt14http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt15http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt15http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt16http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt16http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt17http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt17http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt18http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt18http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt19http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt19http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt20http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt20http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt21http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt21http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt22http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt22http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt22http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt21http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt20http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt19http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt18http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt17http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt16http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt15http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt14http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt13http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt12http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt11http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt10http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt9http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt8http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt7http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt6http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt5http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt4http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt3http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt2http://www.lawphil.net/judjuris/juri2009/sep2009/gr_175490_2009.html#rnt1


22/40


Manila

SECOND DIVISION

G.R. No. 126444 December 4, 1998

ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA QUIJADA, DEMETRIO QUIJADA,ELIUTERIA QUIJADA, EULALIO QUIJADA, and WARLITO QUIJADA, petitioners,vs.COURT OF APPEALS, REGALADO MONDEJAR, RODULFO GOLORAN, ALBERTO ASIS,SEGUNDINO RAS, ERNESTO GOLORAN, CELSO ABISO, FERNANDO BAUTISTA, ANTONIOMACASERO, and NESTOR MAGUINSAY, respondents.

MARTINEZ, J .:

Petitioners, as heirs of the late Trinidad Quijada, filed a complaint against private respondents forquieting of title, recovery of possession and ownership of parcels of land with claim for attorney's feesand damages. The suit was premised on the following facts found by the court of Appeals which ismaterially the same as that found by the trial court:

Plaintiffs-appellees (petitioners) are the children of the late Trinidad Corvera Vda, deQuijada. Trinidad was one of the heirs of the late Pedro Corvera and inherited from thelatter the two-hectare parcel of land subject of the case, situated in the barrio of San

Agustin, Talacogon, Agusan del Sur. On April 5, 1956, Trinidad Quijada together withher sisters Leonila Corvera Vda. de Sequea and Paz Corvera Cabiltes and brotherEpapiadito Corvera executed a conditional deed of donation (Exh. C) of the two-hectareparcel of land subject of the case in favor of the Municipality of Talacogon, the conditionbeing that the parcel of land shall be used solely and exclusively as part of the campusof the proposed provincial high school in Talacogon. Apparently, Trinidad remained inpossession of the parcel of land despite the donation. On July 29, 1962, Trinidad soldone (1) hectare of the subject parcel of land to defendant-appellant Regalado Mondejar(Exh. 1). Subsequently, Trinidad verbally sold the remaining one (1) hectare todefendant-appellant (respondent) Regalado Mondejar without the benefit of a writtendeed of sale and evidenced solely by receipts of payment. In 1980, the heirs of Trinidad,who at that time was already dead, filed a complaint for forcible entry (Exh. E) against

defendant-appellant (respondent) Regalado Mondejar, which complaint was, however,dismissed for failure to prosecute (Exh. F). In 1987, the proposed provincial high schoolhaving failed to materialize, the Sangguniang Bayan of the municipality of Talacogonenacted a resolution reverting the two (2) hectares of land donated back to the donors(Exh. D). In the meantime, defendant-appellant (respondent) Regalado Mondejar soldportions of the land to defendants-appellants (respondents) Fernando Bautista (Exh. 5),Rodolfo Goloran (Exh. 6), Efren Guden (Exh. 7) and Ernesto Goloran (Exh. 8).


23/40

On July 5, 1988, plaintiffs-appellees (petitioners) filed this action against defendants-appellants (respondents). In the complaint, plaintiffs-appellees (petitioners) alleged thattheir deceased mother never sold, conveyed, transferred or disposed of the property inquestion to any person or entity much less to Regalado Mondejar save the donationmade to the Municipality of Talacogon in 1956; that at the time of the alleged sale toRegalado Mondejar by Trinidad Quijada, the land still belongs to the Municipality ofTalacogon, hence, the supposed sale is null and void.

Defendants-appellants (respondents), on the other hand, in their answer claimed that theland in dispute was sold to Regalado Mondejar, the one (1) hectare on July 29, 1962,and the remaining one (1) hectare on installment basis until fully paid. As affirmativeand/or special defense, defendants-appellants (respondents) alleged that plaintiffs actionis barred by laches or has prescribed.

The court a quo rendered judgment in favor of plaintiffs-appellees (petitioners): firstlybecause "Trinidad Quijada had no legal title or right to sell the land to defendantMondejar in 1962, 1966, 1967 and 1968, the same not being hers to dispose of becauseownership belongs to the Municipality of Talacogon (Decision, p. 4; Rollo , p. 39) and,secondly, that the deed of sale executed by Trinidad Quijada in favor of Mondejar did notcarry with it the conformity and acquiescence of her children, more so that she wasalready 63 years old at the time, and a widow (Decision, p. 6; Rollo , p. 41)." 1

The dispositive portion of the trial court's decision reads:

WHEREFORE, viewed from the above perceptions, the scale of justice having tilted infavor of the plaintiffs, judgment is, as it is hereby rendered:

1) ordering the Defendants to return and vacate the two (2)hectares of land to Plaintiffs as described in TaxDeclaration No. 1209 in the name of Trinidad Quijada;

2) ordering any person acting in Defendants' behalf tovacate and restore the peaceful possession of the land inquestion to Plaintiffs;

3) ordering the cancellation of the Deed of Sale executedby the late Trinidad Quijada in favor of DefendantRegalado Mondejar as well as the Deeds ofSale/Relinquishments executed by Mondejar in favor of theother Defendants;

4) ordering Defendants to remove their improvementsconstructed on the questioned lot;

5) ordering the Defendants to pay Plaintiffs, jointly andseverally, the amount of P10,000.00 representingattorney's fees;

6) ordering Defendants to pays the amount of P8,000.00as expenses of litigation; and


24/40

7) ordering Defendants to pay the sum of P30,000.00representing moral damages.

SO ORDERED. 2

On appeal, the Court of Appeals reversed and set aside the judgment a quo 3 ruling that the sale madeby Trinidad Quijada to respondent Mondejar was valid as the former retained an inchoate interest onthe lots by virtue of the automatic reversion clause in the deed of donation. 4 Thereafter, petitioners fileda motion for reconsideration. When the CA denied their motion, 5 petitioners instituted a petition forreview to this Court arguing principally that the sale of the subject property made by Trinidad Quijada torespondent Mondejar is void, considering that at that time, ownership was already transferred to theMunicipality of Talacogon. On the contrary, private respondents contend that the sale was valid, thatthey are buyers in good faith, and that petitioners' case is barred by laches. 6

We affirm the decision of the respondent court.

The donation made on April 5, 1956 by Trinidad Quijada and her brother and sisters 7 was subject tothe condition that the donated property shall be "used solely and exclusively as a part of the campus ofthe proposed Provincial High School in Talacogon." 8 The donation further provides that should "theproposed Provincial High School be discontinued or if the same shall be opened but for some reason oranother, the same may in the future be closed" the donated property shall automatically revert to thedonor. 9 Such condition, not being contrary to law, morals, good customs, public order or public policywas validly imposed in the donation. 10

When the Municipality's acceptance of the donation was made known to the donor, the former becamethe new owner of the donated property donation being a mode of acquiring and transmittingownership 11 notwithstanding the condition imposed by the donee. The donation is perfected oncethe acceptance by the donee is made known to the donor. 12 According, ownership is immediatelytransferred to the latter and that ownership will only revert to the donor if the resolutory condition is notfulfilled.

In this case, that resolutory condition is the construction of the school. It has been ruled that when aperson donates land to another on the condition that the latter would build upon the land a school, thecondition imposed is not a condition precedent or a suspensive condition but a resolutory one. 13 Thus,at the time of the sales made in 1962 towards 1968, the alleged seller (Trinidad) could not have soldthe lots since she had earlier transferred ownership thereof by virtue of the deed of donation. So longas the resolutory condition subsists and is capable of fulfillment, the donation remains effective and thedonee continues to be the owner subject only to the rights of the donor or his successors-in-interestunder the deed of donation. Since no period was imposed by the donor on when must the doneecomply with the condition, the latter remains the owner so long as he has tried to comply with thecondition within a reasonable period. Such period, however, became irrelevant herein when the donee-

Municipality manifested through a resolution that it cannot comply with the condition of building a schooland the same was made known to the donor. Only then when the non-fulfillment of the resolutorycondition was brought to the donor's knowledge that ownership of the donated property reverted tothe donor as provided in the automatic reversion clause of the deed of donation.

The donor may have an inchoate interest in the donated property during the time that ownership of theland has not reverted to her. Such inchoate interest may be the subject of contracts including a contractof sale. In this case, however, what the donor sold was the land itself which she no longer owns. Itwould have been different if the donor-seller sold her interests over the property under the deed of


25/40

donation which is subject to the possibility of reversion of ownership arising from the non-fulfillment ofthe resolutory condition.

As to laches, petitioners' action is not yet barred thereby. Laches presupposes failure or neglect for anunreasonable and unexplained length of time, to do that which, by exercising due diligence, could orshould have been done earlier; 14 "it is negligence or omission to assert a right within a reasonable time,thus, giving rise to a presumption that the party entitled to assert it either has abandoned or declined toassert it." 15 Its essential elements of:

a) Conduct on the part of the defendant, or of one underwhom he claims, giving rise to the situation complained of;

b) Delay in asserting complainant's right after he hadknowledge of the defendant's conduct and after he has anopportunity to sue;

c) Lack of knowledge or notice on the part of the defendantthat the complainant would assert the right on which hebases his suit; and,

d) Injury or prejudice to the defendant in the event relief isaccorded to the complainant. 16

are absent in this case. Petioners' cause of action to quiet title commenced only when theproperty reverted to the donor and/or his successors-in-interest in 1987. Certainly, when the suitwas initiated the following year, it cannot be said that petioners had slept on their rights for along time. The 1960's sales made by Trinidad Quijada cannot be the reckoning point as to whenpetitioners' cause of action arose. They had no interest over the property at that time exceptunder the deed of donation to which private respondents were not privy. Moreover, petitioners

had previously filed an ejectment suit against private respondents only that it did not prosper ona technicality.

Be that at it may, there is one thing which militates against the claim of petitioners. Sale, being aconsensual contract, is perfected by mere consent, which is manifested the moment there is a meetingof the minds 17 as to the offer and acceptance thereof on three (3) elements: subject matter, price andterms of payment of the price. 18 Ownership by the seller on the thing sold at the time of the perfectionof the contract of sale is not an element for its perfection. What the law requires is that the seller hasthe right to transfer ownership at the time the thing sold is delivered. 19 Perfection per se does nottransfer ownership which occurs upon the actual or constructive delivery of the thing sold. 20 Aperfected contract of sale cannot be challenged on the ground of non-ownership on the part of theseller at the time of its perfection; hence, the sale is still valid.

The consummation, however, of the perfected contract is another matter. It occurs upon theconstructive or actual delivery of the subject matter to the buyer when the seller or her successors-in-interest subsequently acquires ownership thereof. Such circumstance happened in this case whenpetitioners who are Trinidad Quijada's heirs and successors-in-interest became the owners of thesubject property upon the reversion of the ownership of the land to them. Consequently, ownership istransferred to respondent Mondejar and those who claim their right from him. Article 1434 of the NewCivil Code supports the ruling that the seller's "title passes by operation of law to the buyer." 21 This rule


26/40

applies not only when the subject matter of the contract of sale is goods, 22 but also to other kinds ofproperty, including real property. 23

There is also no merit in petitioners' contention that since the lots were owned by the municipality at thetime of the sale, they were outside the commerce of men under Article 1409 (4) of the NCC; 24 thus, thecontract involving the same is inexistent and void from the beginning. However, nowhere in Article 1409(4) is it provided that the properties of a municipality, whether it be those for public use or its patrimonialproperty 25 are outside the commerce of men. Besides, the lots in this case were conditionally owned bythe municipality. To rule that the donated properties are outside the commerce of men would rendernugatory the unchallenged reasonableness and justness of the condition which the donor has the rightto impose as owner thereof. Moreover, the objects referred to as outsides the commerce of man arethose which cannot be appropr

Date post:	04-Jun-2018
Category:	Documents
Upload:	jeremy-llanda
View:	243 times
Download:	0 times

Civil Code OBLICON Cases 2

Documents