G.R. No.

90676 June 19, 1991

STATE INVESTMENT HOUSE, INC., petitioner,

vs.
THE HONORABLE COURT OF APPEALS, HON. JUDGE PERLITA J. TRIA TIRONA, Presiding Judge of the
Regional Trial Court of Quezon City, Branch CII and SPS. RAFAEL and REFUGIO AQUINO, respondents.

Facts:
‐ Respondent Spouses Rafael and Refugio Aquino, as an accommodation to and together with Spouses Jose and
Marcelina Aquino, signed an agreement with State Investment Co., Inc. (SIHI) for the latter’s purchase of
receivables equal to P375, 000 (Loan #1).
‐ Respondent Sps. obtained a loan of P120,000 (Loan #2), which was secured by a pledge of certain shares of stock
in favor of SIHI.
‐ When Loan #2 became due, Respondent Sps. paid it off partly with their own funds and partly from another
loan (Loan #3) obtained from SIHI. Loan #3 was secured by the same pledge agreement as Loan #2.
o The promissory note that went along with Loan #3 provided:
 P110,000: principal of the loan
 17% per annum: monetary or regular interest
 24% per annum: compensatory or penalty interest in case of noon-payment at maturity.
‐ When Loan #3 matured, SIHI demanded payment, which Respondent Sps. were ready to do, but they requested
that the shares of stock pledged be released.
‐ SIHI refused to do so because Loan #1 was unpaid yet.
‐ SIHI attempted to foreclose on the shares by sending the Respondent Sps. a Notice of Notarial Sale, which was
prevented by the ruling of RTC, that was affirmed by both CA and SC. All 3 courts ruled that since Loan #1
was executed before the pledge, the pledge only covered the subsequent loans (i.e. Loans #2 and #3).
Therefore, the shares of stock shall be released upon the payment of Loan #3.
‐ When the judgment was to be executed, the parties had different interpretations to the phrase “upon payment of
the loan”.
o SIHI interpreted it as to include the interest
o Respondent Sps. thought that it shouldn’t.
‐ Upon a motion to clarify said phrase, RTC held that it meant for Respondent Sps. to pay without interest,
which was affirmed by the CA.

Issues:
1. W/N Respondent Sps. have to pay interest – YES, but only monetary interest.

Held:
‐ SC pointed out the confusion arose from the fact that when Respondent Sps. asked for the release of the shares
pledged upon payment of the loan without interest, they did not distinguish between monetary interest and
compensatory interest, which the promissory note provided

‐ SC interpreted the ambiguous phrase to have to mean in accordance with law. It asked what would be the liability
of Respondent Sps. if they were not in delay, which it ruled that they weren’t (Court didn’t explain why, but
it’s because SIHI prevented the fulfillment of their obligation).

‐ It held that they were only liable for (a) the principal of the loan or P110,000; and (b) the monetary interest of
17% per annum. Pursuant to Article 22091, the penalty interest only applies if the debtor incurs in delay.
‐ The fact that they weren’t in default does not relieve them from payment of the penalty interest and
monetary interest.
‐ Monetary interest continues to accrue under the terms of the promissory note until actual payment is affected,
which according to Article 12562, there must be tender of payment and consignation of the sum due in order to

1 “If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of
stipulation, the legal interest, which is six per cent per annum.”
1
 discharge the debtor from his/her obligation. Respondent Sps. were able to make a written tender of payment, but
failed to consign the sum to the court.

‐ To allow Respondent Sps. to use the principal of the loan after its maturity without payment of monetary
interest is considered as unjust enrichment (at the expense of SIHI even if Respondent Sps. were not in
delay), which is exactly what Article 1256 was aiming to prevent.

RTC and CA Decision are reversed. Ordering SIHI to release the pledge and to deliver to Respondent Sps. the shares
of stock upon full payment of P110,000 plus 17% per annum regular interest computed form the time of maturity
of Loan #3 and until full payment of such principal and interest to SIHI.

2 “If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be
released from responsibility by the consignation of the thing or sum due. Consignation alone shall produce the same
effect in the following cases: (1) When the creditor is absent or unknown, or does not appear at the place of payment; (2)
When he is incapacitated to receive the payment at the time it is due; (3) When, without just cause, he refuses to give a
receipt; (4) When two or more persons claim the same right to collect; (5) When the title of the obligation has been lost.”
2