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ERNESTO V. RONQUILLO vs HONORABLE COURT OF APPEALS AND ANTONIO P.

SO,

[G.R. No. L-55138; September 28, 1984] Obligations and Contracts| Joint and Solidary Liability|

FACTS:

Ernesto V. Ronquillo was one of four (4) defendants for the collection of the sum of money. The other
defendants were Offshore Catertrade Inc., Johnny Tan and Pilar Tan. The amount of P117k sought to be
collected represents the value of the checks issued by said defendants in payment for foodstuffs
delivered to and received by them. The said checks were dishonored by the drawee bank. The lower
court rendered a decision,

x x x defendants individually and jointly agree to pay within a period of six months from January 1980, or
before June 30, 1980 x x x.

Private respondent filed for the reconsideration and/or modification of the Order of execution and
prayed instead for the “execution of the decision in its entirety against all defendants, jointly and
severally.” Petitioner opposed the said motion arguing the liability of the four (4) defendants was not
expressly declared to be solidary, consequently each defendant is obliged to pay only his own pro-rata
or 1/4 of the amount due and payable.

ISSUE:

Whether the nature of the liability of the defendants (including petitioner), was joint or several or
solidary?

HELD:

SOLIDARY. Clearly then, by the express term of the compromise agreement and the decision based upon
it, the defendants obligated themselves to pay their obligation “individually and jointly”.

The term “individually” has the same meaning as “collectively”, “separately”, “distinctively”, respectively
or “severally”. An agreement to be “individually liable” undoubtedly creates a several obligation, and a
“several obligation is one by which one individual binds himself to perform the whole obligation. The
obligation in the case at bar being described as “individually and jointly”, the same is therefore
enforceable against one of the numerous obligors.

Republic Glass v. Qua

Solidary Obligation, Novation

Facts

Republic Glass, Gervel and Qua were shareholders of Ladtek

Ladtek obtained loans from Metrobank and Private Dev’t Corp of the Phils (PDCP)

They entered into agreement that in case of default in payment of Ladtek loans, the parties will
reimburse each other the proportionate shares of any sum that any might pay to creditors

Ladtek defaulted on its obligation to Metrobank and PDCP

Republic Glass Corp and Gervel Corp payed Metrobank 7M (not full payment of the amount due)

Republic Glass and Gervel demanded to Qua reimbursement of the total amount that RGC and GC paid
to Metrobank

Qua refused to pay

Qua filed a complaint for injunction with damages with application for TRO

Issues

W/N payment of the entire obligation is an essential condition for reimbursement?

W/N there was novation of agreements as held by CA (that there was implied novation)

Ruling

On the first issue:

Contrary to RGC and GC’s claim, payment of any amount will not automatically result in reimbursement.
If a solidary debtor pays the obligation in part, he can recover reimbursement from the co-debtors only
in so far his payment exceeded his share in the obligation. This is precisely because if solidary debtor
pays an amount equal to his proportionate share in the obligation, then he in effects pay only what is
due to him. If the debtor pays less than his share in the obligation, he cannot demand reimbursement
because his payment is less than his actual debt.

Since they only made partial payments, RGC and GC should clearly and convincingly show that their
payments to Metro bank and PDCP exceeded their proportionate shares in the obligations before they
can seek reimbursement from Qua. RGC and GC failed to do this, thus they cannot seek reimbursement
from Qua

On the second issue:


There was no novation of the agreements. The parties did not constitute new obligations to substitute
the agreements. The terms and conditions of the agreement remains the same.

Novation extinguishes obligation by 1) changing the object or principal conditions; 2) substituting the
person of the debtor and 3) subrogating a third person in the rights of the creditor

Construction Development Corporation of the Philippines vs. Rebecca Estrella, Rachel Fletcher,
Philippine Phoenix Surety & Insurance, Inc. Batangas Laguna Tayabas Bus Co and Wilfredo Datinguinoo

G.R. No. 147791

September 8, 2006

FACTS: From San Pablo City, Rebecca Estrella and her granddaughter Rachel Fletcher boarded a BLTB
bus (driven by Wilfredo Datinguinoo) for Pasay City, but they did not reach their destination because a
tractor-truck owned by CDCP (driven by Espiridion Payunan), rammed the bus from behind.

As a result of the accident, both Rebecca and Rachel sustained several injuries, wounds and fractures.
They then filed a complaint for damages in the RTC, alleging that both drivers were negligent in their
duties and did not obey traffic rules.

They also included the drivers’ employers – BLTB and CDCP for not exercising due diligence when it
came to the proper selection and training of their employees, and for lack of vehicle maintenance. CDCP
included a third-party complaint against Philippine Phoenix Surety and Insurance Inc.

The RTC ruled in favor of the plaintiffs, ordering BLTB and Datinguinoo jointly and severally liable to pay
a total of Php 89,254.43 as actual damages and attorney’s fees. This includes a 6% interest per annum
which is counted from the day of judicial demand (or filing of the complaint) which was pegged on
February 1980.

CDCP and Payunan on the other hand are ordered to pay exemplary damages worth Php 20,000 each to
Rachel and Rebecca, with an additional Php 80,000 to Rachel as moral damages. The third-party
complaint of CDCP to Philippine Phoenix is however dropped.

CDCP raised an appeal to the CA, contending that the award of damages are excessive and unfounded
since both plaintiffs are passengers of BLTB, hence BLTB and Datinguinoo should be solely liable based
on culpa contractual.
They also appealed the RTC’s decision of dropping Philippine Phoenix from any liability, since they are
entitled to recover expenses therefrom by virtue of their insurance. The CA affirmed the RTC’s findings.

ISSUE: Whether or not CDCP is liable for damages.

HELD: Yes. The Supreme Court held that CDCP and Payunan are liable under quasi-delict (culpa
aquilania). However, the Supreme Court disagreed on the ruling of the lower courts regarding the
commencement of the 6% legal interest rate. It should not be on the day of the filing of the complaint,
but rather on the day of judgment – which was on February 1993. This is because the amount of
damages is still unknown and uncertain unless the court renders its judgment.

In addition, the Supreme Court says that if the liabilities are still not satisfied from the time of final
judgment, the total amount will earn an additional interest rate of 12% per annum.

SOCIAL SECURITY SYSTEM v. MOONWALK DEVELOPMENT, GR No. 73345, 1993-04-07

Facts:

"On February 20, 1980, the Social Security System, SSS for brevity, filed a complaint in the Court of First
Instance of Rizal against Moonwalk Development & Housing Corporation, Moonwalk for short, alleging
that the former had committed an error in failing to... compute the 12% interest due on delayed
payments on the loan of Moonwalk --- resulting in a chain of errors in the application of payments made
by Moonwalk and, in an unpaid balance on the principal loan agreement in the amount of P7,053.77
and, also in not reflecting in its... statement or account an unpaid balance on the said penalties for
delayed payments in the amount of P7,517,178.21 as of October 10, 1979.

defendant's counsel told plaintiff that it had completely paid its obligations to SSS;

"10. The genuineness and due execution of the documents marked as Annex (sic) 'A' to 'O' inclusive, of
the Complaint and th... the trial court issued an order dismissing the complaint on the ground that the
obligation was already extinguished by the payment by Moonwalk of its indebtedness to SSS

Moonwalk's obligation was... extinguished and affirmed the trial court.


Appellate Court, through Justice Eduardo P. Caguioa, held in the negative.

We find no reason to depart from the appellate court's decision. We, however, advance the following
reasons for the denial of this petition.

Article 1226 of the Civil Code provides:

"Art. 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages
and the payment of interests in case of noncompliance, if there is no stipulation to the contrary.
Nevertheless, damages shall be paid if the obligor refuses to pay... the penalty or is guilty of fraud in the
fulfillment of the obligation.

The penalty may be enforced only when it is demandable in accordance with the provisions of this
Code."

Issues:

defendants‑appellees, namely, Moonwalk Development and Housing Corporation, Rosita U. Alberto,


Rosita U. Alberto, JMA

House, Inc. still liable for the unpaid penalties as claimed by plaintiff-appellant or is their obligation
extinguished?"

Is the penalty demandable even after the extinguishment of the principal obligation?

Appellate Court, through Justice Eduardo P. Caguioa, held in the negative

Ruling:

It is noteworthy that in the present case... during all the period when the principal obligation was still
subsisting, although there were late amortizations there was no demand made by the creditor, plaintiff-
appellant for the payment of the penalty. Therefore up to the time of the letter of plaintiff-appellant
there was... no demand for the payment of the penalty, hence the debtor was not in mora in the
payment of the penalty.

However, on October 1, 1979, plaintiff‑appellant issued its statement of account (Exhibit F) showing the
total obligation of Moonwalk as P15,004,905.74, and forthwith demanded payment from defendant-
appellee. Because of the demand for payment, Moonwalk made several... payments on September 29,
October 9 and 19, 1979 respectively, all in all totalling P15,004,905.74 which was a complete payment of
its obligation as stated in Exhibit F. Because of this payment the obligation of Moonwalk was considered
extinguished

For all purposes therefore the principal obligation of defendant-appellee was deemed extinguished as
well as the accessory obligation of real... estate mortgage

Now, besides the Real Estate Mortgages, the penal clause which is also an accessory obligation, must
also be deemed extinguished considering that the principal obligation was considered extinguished, and
the penal clause being an accessory obligation cannot exist... without a principal obligation.

That being the case, the demand for payment of the penal clause made by plaintiff-appellant in its
demand letter dated November 28, 1979 and its follow up letter dated December 17, 1979 (which
parenthetically are the only demands for... payment of the penalties) are therefore ineffective as there
was nothing to demand.

Let it be emphasized that at the time of the demand made in the letters of November 28, 1979 and
December 17, 1979 as far as the penalty is concerned, the defendant-appellee was not in default since
there was no mora prior to the demand.

Let Us emphasize that the obligation of defendant-appellee was fully complied with by the debtor, that
is, the amount loaned together with the 12% interest has been fully paid by the appellee. That being so,
there is no basis for demanding the penal clause since he... obligation has been extinguished. Here there
has been a waiver of the penal clause as it was not demanded before the full obligation was fully paid
and extinguished.

We find no reason to depart from the appellate court's decision. We, however, advance the following
reasons for the denial of this petition.
Article 1226 of the Civil Code provides:

"Art. 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages
and the payment of interests in case of noncompliance, if there is no stipulation to the contrary.
Nevertheless, damages shall be paid if the obligor refuses to pay... the penalty or is guilty of fraud in the
fulfillment of the obligation.

The penalty may be enforced only when it is demandable in accordance with the provisions of this
Code."

"Now when is the penalty deemed demandable in accordance with the provisions of the Civil Code? We
must make a distinction between a positive and a negative obligation. With regard to obligations which
are positive (to give and to do), the penalty is demandable when... the debtor is in mora; hence, the
necessity of demand by the debtor unless the same is excused.

Under the Civil Code, delay begins from the time the obligee judicially or extrajudicially demands from
the obligor the performance of the obligation.

"Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially
or extrajudicially demands from them the fulfillment of their obligation."

There are only three instances when demand is not necessary to render the obligor in default. These are
the following:

"(1) When the obligation or the law expressly so declares;

(2) When from the nature and the circumstances of the obligation it appears that the designation of
the time when the thing is to be delivered or the service is to be rendered was a controlling motive for
the establishment of the... contract; or

(3) When the demand would be useless, as when the obligor has rendered it beyond his power to
perform."[
In order that the debtor may be in... default it is necessary that the following requisites be present: (1)
that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and
(3) that the creditor requires the performance judicially and... extrajudicially.[12] Default generally
begins from the moment the creditor demands the performance of the obligation.[13]

Nowhere in this case did it appear that SSS demanded from Moonwalk the payment of its monthly
amortizations. Neither did it show that petitioner demanded the payment of the stipulated penalty
upon the failure of Moonwalk to meet its monthly amortization.

complaint itself showed was that SSS tried to enforce the obligation sometime in September, 1977 by
foreclosing the real estate mortgages executed by Moonwalk in favor of SSS. But this foreclosure did not
push through upon Moonwalk's requests and promises to pay in full.

The next demand for payment happened on October 1, 1979 when SSS issued a Statement of Account to
Moonwalk. And in accordance with said statement, Moonwalk paid its loan in full

What is clear, therefore, is that Moonwalk was never in default because SSS never... compelled
performance.

Antonio Tan vs. Court of Appeals/CCP

GR No. 116285

FACTS:

Petition for review.

TAN OBTAINED 2 LOANS, EACH FOR P2,000,000 FROM CCP.

Executed a promissory note in amount of P3,411,421.32; payable in 5 installments.

TAN failed to pay any installment on the said restructured loa.

In a letter, TAN requested and proposed to respondent CCP a mode of paying the restructured loan

i. 20% of the principal amount of the loan upon the respondent giving its
conformity to his proposal

ii. Balance on the principal obligation payable 36 monthly installments until


fully paid.
TAN requested for a moratorium on his loan obligation until the following year allegedly due to a
substantial deduction in the volume of his business and on account of the peso devaluation.

i. No favorable response was made to said letters.

ii. CCP demanded full payment, within ten (10) days from receipt of said
letter P6,088,735.03.

CCP FILED COMPLAINT collection of a sum of money

TAN interposed the defense that he accommodated a friend who asked for help to obtain a loan from
CCP.

i. Claimed that cannot find the friend.

TAN filed a Manifestation wherein he proposed to settle his indebtedness to CCP by down payment of
P140,000.00 and to issue1 2 checks every beginning of the year to cover installment payments for one
year, and every year thereafter until the balance is fully paid.

i. CCP did not agree to the petitioner’s proposals and so the trial of the case
ensued.

TRIAL COURT ORDERED TAN TO PAY CCP P7,996,314.67, representing defendant’s outstanding account
as of August 28, 1986, with the corresponding stipulated interest and charges thereof, until fully paid,
plus attorney’s fees in an amount equivalent to 25% of said outstanding account, plus P50,000.00, as
exemplary damages, plus costs.

REASONS:

i. Reason of loan for accommodation of friend was not credible.

ii. Assuming, arguendo, that the TAN did not personally benefit from loan, he
should have filed a 3rd-party complaint against Wilson Lucmen

iii. 3 times the petitioner offered to settle his loan obligation with CCP.

iv. TAN may not avoid his liability to pay his obligation under the promissory
note which he must comply with in good faith.

v. TAN is estopped from denying his liability or loan obligation to the private
respondent.

TAN APPEALED TO CA, asked for the reduction of the penalties and charges on his loan obligation.

Judgment appealed from is hereby AFFIRMED.

1. No alleged partial or irregular performance.

2. However, the appellate court modified the decision of the trial court by deleting exemplary damages
because not proportionate to actual damage caused by the non-performance of the contract
ISSUES:

WON there are contractual and legal bases for the imposition of the penalty, interest on the penalty and
attorney’s fees.

TAN imputes error on CA in not fully eliminating attorney fees and in not reducing the penalties
considering that he made partial payments on the loan.

And if penalty is to be awarded, TAN asking for non-imposition of interest on the surcharges because
compounding of these are not included in promissory note.

No basis in law for the charging of interest on the surcharges for the reason that the New Civil Code is
devoid of any provision allowing the imposition of interest on surcharges.

WON interest may accrue on the penalty or compensatory interest without violating ART 1959:
“Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest.
However, the contracting parties may by stipulation capitalize the interest due and unpaid, which as
added principal, shall earn new interest.”

TAN- No legal basis for the imposition of interest on the penalty charge for the reason that the law only
allows imposition of interest on monetary interest but not the charging of interest on penalty. Penalties
should not earn interest.

WON TAN can file reduction of penalty due to made partial payments.

Petitioner contends that reduction of the penalty is justifiable under ART 1229: “The judge shall
equitably reduce the penalty when the principal obligation has been partly or irregularly complied with
by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if
it is iniquitous or unconscionable.”

HELD

CA DECISION AFFIRMED with MODIFICATION in that the penalty charge of two percent (2%) per month
on the total amount due, compounded monthly, is hereby reduced to a straight twelve percent (12%)
per annum starting from August 28, 1986. With costs against the petitioner.

WON there are contractual and legal bases for the imposition of the penalty, interest on the penalty and
attorney’s fees. –YES. WITH LEGAL BASES.
ART 1226: In obligations with a penal clause, the penalty shall substitute the indemnity for damages and
the payment of interests in case of non-compliance, if there is no stipulation to the contrary.
Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the
fulfillment of the obligation.

i. The penalty may be enforced only when it is demandable in accordance


with the provisions of this Code.

CASE AT BAR: promissory note expressed the imposition of both interest and penalties in case of default
on the part of the petitioner in the payment of the subject restructured loan.

PENALTY IN MANY FORMS:

i. If the parties stipulate penalty apart monetary interest, two are different
and distinct from each other and may be demanded separately.

ii. If stipulation about payment of an additional interest rate partakes of the


nature of a penalty clause which is sanctioned by law:

1. ART 2209: 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.

CASE AT BAR: Penalty charge of 2% per month began to accrue from the time of default by the
petitioner.

i. No doubt petitioner is liable for both the stipulated monetary interest and
the stipulated penalty charge.

1. PENALTY CHARGE = penalty or compensatory interest.

WON interest may accrue on the penalty or compensatory interest without violating ART 1959.

Penalty clauses can be in the form of penalty or compensatory interest.

i. Thus, the compounding of the penalty or compensatory interest is


sanctioned by and allowed pursuant to the above-quoted provision of Article 1959 of the New Civil Code
considering that:

1. There is an express stipulation in the promissory note (Exhibit “A”) permitting the compounding of
interest.

a. 5th paragraph of the said promissory note provides that: “Any interest which may be due if not paid
shall be added to the total amount when due and shall become part thereof, the whole amount to bear
interest at the maximum rate allowed by law.”.
2. Therefore, any penalty interest not paid, when due, shall earn the legal interest of twelve percent
(12%) per annum, in the absence of express stipulation on the specific rate of interest, as in the case at
bar.

ART 2212: “Interest due shall earn legal interest from the time it is judicially demanded, although the
obligation may be silent upon this point.”

CASE AT BAR: interest began to run on the penalty interest upon the filing of the complaint in court by
CCP.

i. Hence, the courts did not err in ruling that the petitioner is bound to pay
the interest on the total amount of the principal, the monetary interest and the penalty interest.

WON TAN can file reduction of penalty due to made partial payments. –YES. BUT NOT 10% REDUCTION
AS SUGGESTED BY PETITIONER.

REDUCED TO 2% REDUCTION:

i. PARTIAL PAYMENTS showed his good faith despite difficulty in complying


with his loan obligation due to his financial problems.

1. However, we are not unmindful of the respondent’s long overdue deprivation of the use of its
money collectible.

The petitioner also imputes error on the part of the appellate court for not declaring the suspension of
the running of the interest during period when the CCP allegedly failed to assist the petitioner in
applying for relief from liability

Alleges that his obligation to pay the interest and surcharge should have been suspended because the
obligation to pay such interest and surcharge has become conditional

i. Dependent on a future and uncertain event which consists of whether the


petitioner’s request for condonation of interest and surcharge would be recommended by the
Commission on Audit.

1. Since the condition has not happened due to the private respondent’s reneging on its promise, his
liability to pay the interest and surcharge on the loan has not arisen.

COURT ANSWER:

i. Running of the interest and surcharge was not suspended.

ii. CCP correctly asserted that it was the primary responsibility of petitioner
to inform the Commission on Audit of his application for condonation of interest and surcharge.

PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION and ROGELIO S. PANTALEON vs ARTHUR F.


MENCHAVEZ

G.R. No. 160545; March 9, 2010


FACTS:

December 8, 1993, Pantaleon, President and Chairman of the Board of PRISMA, obtained a P1M loan
from the respondent, with monthly interest of P40,000.00 payable for 6 months, or a total obligation of
P1,240,000.00 payable within 6 mos. To secure the payment of the loan, Pantaleon issued a promissory.
Pantaleon signed the promissory note in his personal capacity and as duly authorized by the Board of
Directors of PRISMA. The petitioners failed to completely pay the loan within the 6-month period.

As of January 4, 1997, respondent found that the petitioners still had an outstanding balance of
P1,364,151.00, to which respondent applied a 4% monthly interest.

On August 28, 1997, respondent filed a complaint for sum of money to enforce the unpaid balance, plus
4% monthly interest. In their Answer, the petitioners admitted the loan of P1,240,000.00, but denied the
stipulation on the 4% monthly interest, arguing that the interest was not provided in the promissory
note. Pantaleon also denied that he made himself personally liable and that he made representations
that the loan would be repaid within six (6) months.

RTC found that the respondent issued a check for P1M in favor of the petitioners for a loan that would
earn an interest of 4% or P40,000.00 per month, or a total of P240,000.00 for a 6-month period. RTC
ordered the petitioners to jointly and severally pay the respondent the amount of P3,526,117.00 plus
4% per month interest from February 11, 1999 until fully paid.

Petitioners appealed to CA insisting that there was no express stipulation on the 4% monthly interest.
CA favored respondent but noted that the interest of 4% per month, or 48% per annum, was
unreasonable and should be reduced to 12% per annum. MR denied hence this petition.

ISSUE:

Whether the parties agreed to the 4% monthly interest on the loan. If so, does the rate of interest apply
to the 6-month payment period only or until full payment of the loan?

RULING:

Petition is meritorious. Interest due should be stipulated in writing; otherwise, 12% per annum
Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith. When the terms of a contract are clear and leave no doubt as to the
intention of the contracting parties, the literal meaning of its stipulations governs. Courts have no
authority to alter the contract by construction or to make a new contract for the parties; a court’s duty
is confined to the interpretation of the contract the parties made for themselves without regard to its
wisdom or folly, as the court cannot supply material stipulations or read into the contract words the
contract does not contain. It is only when the contract is vague and ambiguous that courts are permitted
to resort to the interpretation of its terms to determine the parties’ intent.

In the present case, the respondent issued a check for P1M. In turn, Pantaleon, in his personal capacity
and as authorized by the Board, executed the promissory note. Thus, the P1M loan shall be payable
within 6 months. The loan shall earn an interest of P40,000.00 per month, for a total obligation of
P1,240,000.00 for the six-month period. We note that this agreed sum can be computed at 4% interest
per month, but no such rate of interest was stipulated in the promissory note; rather a fixed sum
equivalent to this rate was agreed upon.

Article 1956 of the Civil Code specifically mandates that “no interest shall be due unless it has been
expressly stipulated in writing.” The payment of interest in loans or forbearance of money 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 interest at a stipulated rate. The collection of interest without any stipulation in writing is
prohibited by law.

The interest of P40,000.00 per month corresponds only to the six-month period of the loan, or from
January 8, 1994 to June 8, 1994, as agreed upon by the parties in the promissory note. Thereafter, the
interest on the loan should be at the legal interest rate of 12% per annum.

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

The facts show that the parties agreed to the payment of a specific sum of money of P40,000.00 per
month for six months, not to a 4% rate of interest payable within a 6-month period.
No issue on the excessiveness of the stipulated amount of P40,000.00 per month was ever put in issue
by the petitioners; they only assailed the application of a 4% interest rate, since it was not agreed upon.

It is a familiar doctrine in obligations and contracts that the parties are bound by the stipulations,
clauses, terms and conditions they have agreed to, which is the law between them, the only limitation
being that these stipulations, clauses, terms and conditions are not contrary to law, morals, public order
or public policy. The payment of the specific sum of money of P40,000.00 per month was voluntarily
agreed upon by the petitioners and the respondent. There is nothing from the records and, in fact, there
is no allegation showing that petitioners were victims of fraud when they entered into the agreement
with the respondent.

Therefore, as agreed by the parties, the loan of P1M shall earn P40,000.00 per month for a period of 6
months, for a total principal and interest amount of P1,240,000.00. Thereafter, interest at the rate of
12% per annum shall apply. The amounts already paid by the petitioners during the pendency of the
suit, amounting toP1,228,772.00 as of February 12, 1999, should be deducted from the total amount
due, computed as indicated above. We remand the case to the trial court for the actual computation of
the total amount due.

Case Digest: Radiowealth Finance Company v. Del Rosario (2000)

Radiowealth Finance Company v. Del Rosario

G.R. No. 138739 July 6, 2000

Lessons Applicable: Demurrer to Evidence, Promissory Note, When Demandable, Penalty, Interest
(Credit Transactions)

Laws Applicable: Rule 33 of the 1997 Rules of Court (Civil Procedure)

FACTS:

• March 2, 1991: Spouses Vicente and Maria Sumilang del Rosario jointly and severally executed,
signed and delivered in favor of Radiowealth Finance Company a Promissory Note for P138,948 without
need of notice or demand, in instalments of P11,579.00 payable for 12 consecutive months leaving the
period for the instalments blank. Upon default, the late payment, 2.5% penalty charge per month shall
be added to each unpaid installment from due date thereof until fully paid.

• June 7, 1993: Radiowealth filed a complaint for the collection of a sum of money before the Regional
Trial Court of Manila. During the trial, Jasmer Famatico, the credit and collection officer of Radiowealth,
presented in evidence the Spouses’ check payments, the demand letter dated July 12, 1991, Spouses’
customer’s ledger card, another demand letter and Metropolitan Bank dishonor slips. Famatico
admitted that he did not have personal knowledge of the transaction or the execution of any of these
pieces of documentary evidence, which had merely been endorsed to him.

• July 29, 1994: Spouses filed a Demurrer to Evidence for alleged lack of cause of action

• RTC: Dismissed for Radiowealth’s failure to substantiate the claims, the evidence it had presented
being merely hearsay

• CA: reversed and remanded the case for further proceedings

o During the pretrial, through judicial admissions or the spouses admitted the genuineness of the
Promissory Note and demand letter dated July 12, 1991. Their only defense was the absence of an
agreement on when the installment payments were to begin

ISSUES:

1. W/N the spouses can still present evidence after the appellate court’s reversal of the dismissal on
demurer of evidence (Civil Procedure)

2. W/N the obligation is due and demandable (Credit Transaction)

HELD: Petition is GRANTED. Appealed Decision is MODIFIED. Ordered to PAY P138,948, plus 2.5 percent
penalty charge per month beginning April 2, 1991 until fully paid, and 10 percent of the amount due as
attorney’s fees.

1. NO.

• Rule 33 of the 1997 Rules

o SECTION 1. Demurrer to evidence.—After the plaintiff has completed the presentation of his
evidence, the defendant may move for dismissal on the ground that upon the facts and the law the
plaintiff has shown no right to relief. If his motion is denied, he shall have the right to present evidence.
If the motion is granted but on appeal the order of dismissal is reversed he shall be deemed to have
waived the right to present evidence.

• Defendants who present a demurrer to the plaintiff’s evidence retain the right to present their own
evidence, if the trial court disagrees with them; if the trial court agrees with them, but on appeal, the
appellate court disagrees with both of them and reverses the dismissal order, the defendants lose the
right to present their own evidence

• The appellate court shall resolve the case and render judgment on the merits, inasmuch as a
demurrer aims to discourage prolonged litigations

2. Yes.
• The act of leaving blank the due date of the first installment did NOT necessarily mean that the
debtors were allowed to pay as and when they could. While the specific date on which each installment
would be due was left blank, the Note clearly provided that each installment should be payable each
month. It also provided for an acceleration clause and a late payment penalty, both of which showed the
intention of the parties that the installments should be paid at a definite date. Per the acceleration
clause, the whole debt became due one month (April 2, 1991) after the date of the Note because the
check representing their first installment bounced.

• Respondents started paying installments on the Promissory Note, even if the checks were
dishonored by their drawee bank.

• The Note already stipulated a late payment penalty of 2.5 percent monthly to be added to each
unpaid installment until fully paid. Payment of interest was not expressly stipulated in the Note. Thus,
it should be deemed included in such penalty. Liquidated damages, however, should no longer be
imposed for being unconscionable. Such damages should also be deemed included in the 2.5 percent
monthly penalty. Furthermore, we hold that petitioner is entitled to attorney’s fees, but only in a sum
equal to 10 percent of the amount due which we deem reasonable under the proven facts

Araneta v. Philippine Sugar Estate Development Co.

G.R. No. L-22558, 31 May 1967

FACTS:

J.M. Tuason & Co., Inc. through Gregorio Araneta, Inc. sold a portion of their land to Philippine Sugar
Estates Development with a condition that the buyer will build a church in the said land while the seller
will construct a street within the property. The buyer had already finished building the church while the
seller had failed to do the construction of the street in Northeast side because a certain person was
occupying its middle portion and refused to vacate.

Now the buyer filed a case in court contending that the seller must evict the person occupying the
property and finish the construction. The seller now contends that the case was premature because it is
without definite period. The lower court then gave a two year period to seller to evict the squatter and
to construct the street.

ISSUE:

Whether or not the parties agreed that the petitioner should have reasonable time to perform its part of
the bargain
RULING:

If the contract so provided, then there was a period fixed, a “reasonable time;” and all that the court
should have done was to determine if that reasonable time had already elapsed when suit was filed if it
had passed, then the court should declare that petitioner had breached the contract, as averred in the
complaint, and fix the resulting damages. On the other hand, if the reasonable time had not yet elapsed,
the court perforce was bound to dismiss the action for being premature.

Article 1197 of the Civil Code involves a two-step process. The Court must first determine that “the
obligation does not fix a period but from the nature and the circumstances it can be inferred that a
period was intended”. The Court must then proceed to the second step, and decide what period was
“probably contemplated by the parties” So the Court cannot fix a period merely because in its opinion it
is or should be reasonable, but must set the time that the parties are shown to have intended.

In this connection, it is to be borne in mind that the contract shows that the parties were fully aware
that the land described therein was occupied by squatters. As the parties must have known that they
could not take the law into their own hands, but must resort to legal processes in evicting the squatters,
they must have realized that the duration of the suits to be brought would not be under their control
nor could the same be determined in advance. The conclusion is thus forced that the parties must have
intended to defer the performance of the obligations under the contract until the squatters were duly
evicted, as contended by the petitioner Gregorio Araneta, Inc.

LEGARDA VS MIAILHE GR No. L-3435 April 28, 1951

FACTS:

On June 3, 1944, plaintiffs filed a complaint against the original defendant William J.B. Burke, alleging
defendants unjustified refusal to accept payment in discharge of a mortgage indebtedness in his favor,
and praying that the latter be order (1) to receive the sum of P75,920.83; (2) to execute the
corresponding deed of release of mortgage, and; (3) to pay damages in the sum of P1,000. The Court
then decided in favor of plaintiff Legarda. After the war and the subsequent defeat of the Japanese
occupants, defendant filed a case in court claiming that plaintiff Clara de Legarda violated her
agreement with defendant, by forcing to deposit worthless Japanese military notes when they originally
agreed that the interest was to be condoned until after the occupation and that payment was rendered
either in Philippine or English currency. Defendant was later substituted upon death by his heir Miailhe
and the Courts judged in defendants favor. Plaintiff now assails said decision.
ISSUE:

Is the tender of payment by Legarda valid?

HELD:

On February 17, 1943, the only currency available was the Philippine currency, or the Japanese Military
notes, because all other currencies, including the English, were outlawed by a proclamation issued by
the Japanese Imperial Commander on January 3, 1942. The right to election ceased to exist on the date
of plaintiffs payment because it had become legally impossible. And this is so because in alternative
obligations there is no right to choose undertakings that are impossible or illegal. In other words, the
obligation on the part of the debtor to pay the mortgage indebtedness has since then ceased to be
alternative. It appears therefore, that the tender of payment in Japanese Military notes was a valid
tender because it was the only currency permissible at the time and its payment was tantamount to
payment in Philippine currency.

Arco Pulp and Paper Co, v. Lim

G.R. No. 206806, 25 June 2014

FACTS:

Lim works in the business of supplying scrap papers, cartons, and other raw materials, under the name
Quality Paper and Plastic Products, Enterprises, to factories engaged in the paper mill business. Lim
delivered scrap papers to Arco Pulp and Paper Company, Inc. The parties allegedly agreed that Arco Pulp
and Paper would either pay Dan T. Lim the value of the raw materials or deliver to him their finished
products of equivalent value. Arco Pulp and Paper and a certain Eric Sy executed a memorandum of
agreement where Arco Pulp and Paper bound themselves to deliver their finished products to Megapack
Container Corporation, owned by Eric Sy. The liability of Arco Pulp was now transferred to Megapack in
paying Lim. Dan T. Lim sent a letter to Arco Pulp and Paper demanding payment but no payment was
made to him. Now Lim filed a case against Arco Pulp. The Arco Pulp now contends that their agreement
was novated because of the MOA agreed upon Sy and Arco.

ISSUE:

Whether or not the obligation between the parties was an alternative obligation
RULING:

Yes. The rule on alternative obligations is governed by Article 1199 of the Civil Code, which states:

Article 1199. A person alternatively bound by different prestations shall completely perform one of
them.

The creditor cannot be compelled to receive part of one and part of the other undertaking.

In an alternative obligation, there is more than one object, and the fulfillment of one is sufficient,
determined by the choice of the debtor who generally has the right of election.” The right of election is
extinguished when the party who may exercise that option categorically and unequivocally makes his or
her choice known.

Alipio v CA (Obligations and Contracts)

Alipio v CA

GR No. 134100

September 29, 2000

EXTINGUISHMENT OF OBLIGATIONS - DEATH

FACTS:

(1) Respondent Romeo Jaring was the lessee of a 14.5 hectare fishpond in Barito, Mabuco, Hermosa,
Bataan. The lease was for a period of five years ending on September 12, 1990. On June 19, 1987, he
subleased the fishpond, for the remaining period of his lease, to the spouses Placido and Purita Alipio
and the Manuel Spouses.

(2) The sublessees only satisfied a portion thereof, leaving an unpaid balance of P50,600.00.

(3) Purita Alipio moved to dismiss the case on the ground that her husband, Placido Alipio, had passed
away on December 1, 1988.
RTC: Surviving spouse should pay. The trial court denied petitioner's motion on the ground that since
petitioner was herself a party to the sublease contract, she could be independently impleaded in the suit
together with the Manuel spouses and that the death of her husband merely resulted in his exclusion
from the case.

CA: Surviving spouse should pay. It is noted that all the defendants, including the deceased, were
signatories to the contract of sub-lease. The remaining defendants cannot avoid the action by claiming
that the death of one of the parties to the contract has totally extinguished their obligation.

ISSUE: (1) Whether a creditor can sue the surviving spouse for the collection of a debt which is owed by
the conjugal partnership of gains, or

(2) whether such claim must be filed in proceedings for the settlement of the estate of the decedent.

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APPLICABLE LAW/S:

• Rule 3. Section 20 of the 1997 Rules of Civil Procedure. When the action is for the recovery of money
arising from contract, express or implied, and the defendant dies before entry of final judgment in the
court in which the action was pending at the time of such death, it shall not be dismissed but shall
instead be allowed to continue until entry of final judgment. A favorable judgment obtained by the
plaintiff therein shall be enforced in the manner especially provided in these Rules for prosecuting
claims against the estate of a deceased person.

• Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same
obligation does not imply that each one of the former has a right to demand, or that each one of the
latter is bound to render, entire compliance with the prestation. There is a solidary liability only when
the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.
(1137a)

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HELD: (1) Surviving spouse is not liable. The conjugal partnership of gains is liable. It is clear that Climaco
had a cause of action against the persons named as defendants therein. It was, however, a cause of
action for the recovery of damages, that is, a sum of money, and the corresponding action is,
unfortunately, one that does not survive upon the death of the defendant, in accordance with the
provisions of Section 21, Rule 3 of the Rules of Court. As held in Calma v. Tañedo, after the death of
either of the spouses, no complaint for the collection of indebtedness chargeable against the conjugal
partnership can be brought against the surviving spouse. Instead, the claim must be made in the
proceedings for the liquidation and settlement of the conjugal property. The reason for this is that upon
the death of one spouse, the powers of administration of the surviving spouse ceases and is passed to
the administrator appointed by the court having jurisdiction over the settlement of estate proceedings.
Indeed, the surviving spouse is not even a de facto administrator such that conveyances made by him of
any property belonging to the partnership prior to the liquidation of the mass of conjugal partnership
property is void. the inventory of the Alipios' conjugal property is necessary before any claim
chargeable against it can be paid. Needless to say, such power exclusively pertains to the court having
jurisdiction over the settlement of the decedent's estate and not to any other court.

(2) The obligation is joint. Indeed, if from the law or the nature or the wording of the obligation the
contrary does not appear, an obligation is presumed to be only joint, i.e., the debt is divided into as
many equal shares as there are debtors, each debt being considered distinct from one another. Clearly,
the liability of the sublessees is merely joint. Since the obligation of the Manuel and Alipio spouses is
chargeable against their respective conjugal partnerships, the unpaid balance of P50,600.00 should be
divided into two so that each couple is liable to pay the amount of P25,300.00.

ERNESTO V. RONQUILLO vs HONORABLE COURT OF APPEALS AND ANTONIO P. SO,

[G.R. No. L-55138; September 28, 1984] Obligations and Contracts| Joint and Solidary Liability|

FACTS:

Ernesto V. Ronquillo was one of four (4) defendants for the collection of the sum of money. The other
defendants were Offshore Catertrade Inc., Johnny Tan and Pilar Tan. The amount of P117k sought to be
collected represents the value of the checks issued by said defendants in payment for foodstuffs
delivered to and received by them. The said checks were dishonored by the drawee bank. The lower
court rendered a decision,

x x x defendants individually and jointly agree to pay within a period of six months from January 1980, or
before June 30, 1980 x x x.

Private respondent filed for the reconsideration and/or modification of the Order of execution and
prayed instead for the “execution of the decision in its entirety against all defendants, jointly and
severally.” Petitioner opposed the said motion arguing the liability of the four (4) defendants was not
expressly declared to be solidary, consequently each defendant is obliged to pay only his own pro-rata
or 1/4 of the amount due and payable.

ISSUE:

Whether the nature of the liability of the defendants (including petitioner), was joint or several or
solidary?

HELD:

SOLIDARY. Clearly then, by the express term of the compromise agreement and the decision based upon
it, the defendants obligated themselves to pay their obligation “individually and jointly”.

The term “individually” has the same meaning as “collectively”, “separately”, “distinctively”, respectively
or “severally”. An agreement to be “individually liable” undoubtedly creates a several obligation, and a
“several obligation is one by which one individual binds himself to perform the whole obligation. The
obligation in the case at bar being described as “individually and jointly”, the same is therefore
enforceable against one of the numerous obligors.