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Cuaton vs. Salud

G.R. No. 158382, January 27, 2004

FACTS: On January 5, 1993, respondent Rebecca Salud instituted a suit for foreclosure of real estate mortgage with
damages against petitioners Mansueto Cuaton and his mother, Conchita Cuaton at the RTC of Gen. Santos City,
Br. 35. RTC declared said mortgage void as executed by Mansueto Cuaton in favour of Rebecca Salud without
expressly stating that he was merely acting as representative of Conchita Cuaton in whose name the mortgage lot
was titled. The court ordered Cuaton to pay Salud the loan secured by the mortgage in the amount of one million
pesos plus P60,000 interest of 10% and 8% per month from February 1992 to August 1992 or 10% interest for the
month of February, March, April, May and June 1992 and 8% interest for the month of July and August1992. In
addition, Cuaton was declared to pay P25,000 as attorneys fees. In total, court ordered Cuaton to pay Salud a
total of P1,635,000. CA affirmed the RTC decision.
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ISSUE: Is the 10% and 8% imposed interest on the loan valid?


RULING: No, in Medel vs. CA, the court annulled a stipulated 5.5% per month or 66% per annum interest on a P500,000
loan and in Sps. Solangan vs. Salazar annulled a 6% per month interest or 72% per annum interest on a P60,000
loan for being excessive, iniquitous, unconscionable and exorbitant. In both cases the interest rates were reduced
to 12% per annum. In the case at bar, the interest rates are even higher than those previously invalidated by the
High Court and reduction to 12% per annum is fair and reasonable. Uniquitous or unconscionable interest are
contrary to morals under Art. 1409 of the civil Code and are void from the beginning.

In Eastern Shipping Lines vs. CA, the following guidelines were laid in the imposition of interest:
(1) For an obligation consisting of a loan or forbearance of money, interest due is that agreed in writing,
which same interest due itself earning a legal interest from the time it is judiciously demanded. In
absence of stipulation interest is at 12% per annum to be computed from default, i.e. from judicial or
extrajudicial demand subject to Art. 1169 of the NCC.
(2) When judgment of court awarding a sum of money becomes final and executor, the legal interest
shall be 12% per annum computed from such finality until satisfaction.

In the case at bar, the interest rate is hereby reduced to 12% per annum computed from the dte of execution of
loan on Oct. 31, 1991 until finality of this decision and after judgment becomes final and executor until obligation
is satisfaction, amount due shall further earn an interest of 12% per annum.

Petition is granted.


Sps. Hendrick and Alicia Biesterbos vs. CA and Bartolome
G.R. No. 152529, Sept. 22, 2003

FACTS: On April 18, 1992, private respondent Efren Bartolome entered into a Contract to Sell with the Sps. Biesterbos in
which Bartolome agreed to sell the petitioner one unit of duplex residential house and lot with an area of 345
sq.m. for P2 million. The property was mortgaged to the PNB at the time of agreement. The agreement requires
from the buyers a downpayment of P1 million, the balance of which is to be paid on or before July 30, 1992.
Between April 1992 and July 30, 1992, a total of P2,081,208.24 was paid by petitioners to Bartolome. However,
several demands were made by respondent for payment of petitioners obligations, one in 20 Dec. 1992 (for
payment of balance of P710, 713.16) and on 24 March 1993 (for payments totalling P718, 407.92). Except for this
letter, petitioners claimed no demand letters were previously received by them.

On July 21, 1994, RTC Br. 7 of Baguio City declared Sps. Bartolome to have complied with their obligations under
the contract to sell and ordered plaintiff Bartolome to transfer lot ownership to the Biesterbos. In addition, Sps.
Biesterbos were ordered to reimburse P518,791.60 representing balance of P600,000 which the latter advanced
to owner of adjacent lot and to pay P2,900 for the cost of transfer of adjacent lot.

CA affirmed the RTC decision except for payment of P518,791.76. In motion for reconsideration CA granted to
respondent 12% interest per annum be awarded to him from the time of default until payment of principal.


ISSUE: (1) Is the 12% per annum interest on the amount of P518,791.76 valid despite no prior agreement of the parties
on the matter?
(2) Was there a valid tender of payment with regards to the period to pay the 12% interest per annum?

RULING:
(1) Yes, as stipulated by the Court in Eastern Shipping Lines, Inc. vs. CA, in an obligation for the payment of
money, interest upon breach is 12% per annum in the absence of any stipulation to the contrary computed
from default (from judicial or extrajudicial demand subject to Art. 1169 of NCC). In addition, when the
judgment of the court awarding a sum of money becomes final and executor, the rate of legal interest shall
be 12% per annum from such finality until its satisfaction
(2) Strictly no, but in petitioners letter of 3 July 1993 petitioners through counsel informed respondent that the
amount of P521,691.76 In Trust for Mr. Efren Bartolome was deposited at the PNB, Session Road, Baguio
City which sum could be withdrawn by respondent anytime during banking hours. While such is not strictly a
valid tender of payment and consignation, it could be considered an act of good faith on the part of petitioners
to fully settle their obligation, such act should have suspended the running of interst on said outstanding
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amount. In Gregorio Araneta vs. De Paterno and Vidal, the Court ruled that good faith of the offeror or ability
to make good the offer should in simple justice excuse the debtor from paying interest after the offer was
rejected.

Petition partly granted, CA decision affirmed with modification that the legal interest to be paid on the amount
of P518,791.76 is 12% per annum shall commence from 18 May 1993 when extrajudicial demand was made
on petitioners until 3 July 1993 when petitioners notified respondent that the amount of P521,691.76 has been
deposited in Bartolomes name with the PNB and withdrawable by him at any time during banking hours.
Another 12% per annum shall be paid on the amount due and owing as of, and fromdate of finality of this
decision until full payment have been made.