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Case No.

17
SEBASTIAN SIGA-AN, Petitioner, vs.ALICIA VILLANUEVA, Respondent.
G.R. No. 173227
January 20, 2009
No interest was due on the loan because there was no written agreement as
regards payment of interest
Facts:
Respondent Alicia Villanueva filed a complaint for sum of money against petitioner
Sebastian Siga-an before the Las Pinas City Regional Trial Court (RTC), Branch 255.
Respondent alleged that she was a businesswoman engaged in supplying office materials and
equipments to the (PNO) located at Fort Bonifacio, Taguig City, while petitioner was a military
officer and comptroller of the PNO from 1991 to 1996.
Respondent claimed that sometime in 1992, petitioner approached her inside the
Philippine Navy Office PNO and offered to loan her the amount of P540,000.00 which she
accepted since she needed money for a capital, which however was not reduced to writing,
nor a stipulation as to the payment of interest for the loan.
On 31 August 1993, respondent issued a check worth P500,000.00 to petitioner as
partial payment of the loan which was followed by another check in the amount
of P200,000.00 as payment of the remaining balance. Petitioner told her the excess amount
of P160,000.00 would be applied as interest for the loan.
Wanting for payment of an additional interest, petitioner pestered her and
threatened to block or disapprove her transactions with the PNO if she would not comply with
his demand. Fearing that her transactions with the PNO would be affected, respondent
conceded and paid additional interests in cash and checks which petitioner refused to issue
receipts. The total payment she made accumulated to P1,200,000. 00.
Respondent consulted a lawyer and there, she was told that petitioner could not
validly collect interest on the loan since there was no agreement between them. Petitioner,
despite receipt of the demand letter, ignored her claim for reimbursement. RTC rendered its
decision in favor of respondent which was affirmed by the Court of Appeals.
Issue: Whether or not interest was due to the petitioner.

arises only by virtue of a contract or by virtue of damages for delay or failure to pay the
principal loan on which interest is demanded.
Article 1956 of the Civil Code, which refers to monetary interest, specifically
mandates that no interest shall be due unless it has been expressly stipulated in writing. As
can be gleaned from the foregoing provision, payment of monetary interest is allowed only if:
(1) there was an express stipulation for the payment of interest; and (2) the agreement for
the payment of interest was reduced in writing. The concurrence of the two conditions is
required for the payment of monetary interest. Thus, we have held that collection of interest
without any stipulation therefor in writing is prohibited by law.
It appears that petitioner and respondent did not agree on the payment of interest
for the loan. Neither was there convincing proof of written agreement between the two
regarding the payment of interest. Respondent testified that although she accepted
petitioners offer of loan amounting to P540,000.00, there was, nonetheless, no verbal or
written agreement for her to pay interest on the loan.
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 71814, dated
16 December 2005, is hereby AFFIRMED with the following MODIFICATIONS: (1) the
amount of P660,000.00 as refundable amount of interest is reduced to THREE HUNDRED
THIRTY FIVE THOUSAND PESOS (P335,000.00); (2) the amount ofP300,000.00 imposed as
moral damages is reduced to ONE HUNDRED FIFTY THOUSAND PESOS (P150,000.00); (3) an
interest of 6% per annum is imposed on the P335,000.00, on the damages awarded and on
the attorneys fees to be computed from the time of the extra-judicial demand on 3 March
1998 up to the finality of this Decision; and (4) an interest of 12% per annum is also imposed
from the finality of this Decision up to its satisfaction. Costs against petitioner.

Case No. 18
NACAR v GALLERY FRAMES
Principle: When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest shall be 6% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of
credit.
Facts

Petitioner Dario Nacar filed a complaint for constructive dismissal before the
Arbitration Branch of the National Labor Relations Commission (NLRC) against
respondents Gallery Frames (GF) and/or Felipe Bordey, Jr.,

On October 15, 1998, the Labor Arbiter rendered a Decision in favor of petitioner
and was awarded backwages and separation pay in lieu of reinstatement in the
amount of P158,919.92.

Ruling:No.
Interest is a compensation fixed by the parties for the use or forbearance of money.
This is referred to as monetary interest. Interest may also be imposed by law or by courts as
penalty or indemnity for damages. This is called compensatory interest. The right to interest

Respondents appealed to the NLRC, but it was dismissed for lack of merit in the
Resolution5 dated February 29, 2000.

Respondents then sought relief before the Supreme Court but were denied in the
Resolution dated April 17, 2002.

An Entry of Judgment was later issued certifying that the resolution became final and
executory on May 27, 2002.

On November 5, 2002, petitioner filed a Motion for Correct Computation, praying


that his back wages be computed from the date of his dismissal on January 24, 1997
up to the finality of the Resolution of the Supreme Court on May 27, 2002.

The monetary award was recomputed to P471,320.31; upon appeal of the


respondents it was reduced to P147,560.19. The P147,560.19 was paid and later on
additional P11,459.73 was granted for a total of P158,919.92 (Oct. 15, 1998
decision).

Petitioner then appealed for recomputation of his back wages until it reached the
Supreme Court.

Petitioner maintains that considering that the October 15, 1998 decision of the Labor
Arbiter did not become final and executory until the April 17, 2002 Resolution of the
Supreme Court in G.R. No. 151332 was entered in the Book of Entries on May 27,
2002, the reckoning point for the computation of the back wages and separation pay
should be on May 27, 2002 and not when the decision of the Labor Arbiter was
rendered on October 15, 1998. Further, petitioner posits that he is also entitled to
the payment of interest from the finality of thedecision until full payment by the
respondents.

On their part, respondents assert that since only separation pay and limited back
wages were awarded to petitioner by the October 15, 1998 decision of the Labor
Arbiter, no more recomputation is required to be made of said awards. Respondents
insist that the decision clearly stated that the separation pay and back wages are
computed only up to [the] promulgation of this decision, Respondents contend
that to allow the further recomputation of the back wages to be awarded to
petitioner at this point of the proceedings would substantially vary the decision of
the Labor Arbiter as it violates the rule on immutability of judgments.

Issue:
WON the back wages should be computed until May 27, 2002 and legal interest be
allowed thereafter without violation of the principle of immutability of judgment.
Held:

Yes
The labor arbiter's decision is composed of two parts: the first part contains the
finding of illegality and its monetary consequences; the second part is the
computation of the awards or monetary consequences of the illegal dismissal.

The recomputation of the consequences of illegal dismissal upon execution of the


decision does not constitute an alteration or amendment of the final decision being
implemented. The illegal dismissal ruling stands; only the computation of monetary
consequences of this dismissal is affected, and this is not a violation of the principle
of immutability of final judgments.

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the
following revisions governing the rate of interest in the absence of stipulation in loan
contracts.

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and
the rate allowed in judgments, in the absence of an express contract as to such rate of
interest, shall be six percent (6%) per annum (previously it was 12% per annum according to
Art. 1169 of the Civil Code).

WHEREFORE, premises considered, the Decision dated September 23, 2008 of the
Court of Appeals in CA-G.R. SP No. 98591, and the Resolution dated October 9, 2009
are REVERSED and SET ASIDE. Respondents are ORDERED to PAY petitioner: (
1) Back wages computed from the time petioner was illegally dismissed on January
24, 1997 up to May 27, 2002, when the Resolution of this Court in G.R. No. 151332
became final and executory;
(2) separation pay computed from August 1990 up to May 27, 2002 at the rate of
one month pay per year of service; and
(3) Interest of twelve percent (12%) per annum of the total monetary awards,
computed from May 27, 2002 to June 30, 2013 and six percent (6%) per annum from
July 1, 2013 (effectivity of 6% as legal rate of interest) full satisfaction. The Labor
Arbiter is hereby ORDERED to make another recomputation of the total monetary
benefits awarded and due to petitioner in accordance with this Decision.