THIRD DIVISION

[G.R. No. 130994. September 18, 2002.]

SPOUSES FELIMON and MARIA BARRERA,Petitioners, v. SPOUSES EMILIANO and MARIA CONCEPCION LORENZO,Respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ,J.:

On December 4, 1990, spouses Felimon and Maria Barrera,Petitioners, borrowed P230,000.00 from spouses Miguel and Mary Lazaro. The loan was secured by a real estate mortgages 1 over petitioners residential lot consisting of 432 square meters located at Bunlo, Bocaue, Bulacan and registered in their names under Transfer Certificate of Title (TCT) T-42.373 (M) 2 of the Registry of Deeds of Bulacan.

A month and a half later, the Lazaro spouses needed money and informed petitioners that they would transfer the loan to spouses Emiliano and Maria Concepcion Lorenzo,Respondents. Consequently, on May 14, 1991, petitioners executed another real estate mortgage 3 over their lot, this time in favor of the respondents to secure the loan of P325,000.00, which the latter claimed as the amount they paid spouses Lazaro. The mortgage contract provides, among others, that the new loan shall be payable within three (3) months, or until August 14, 1991; that it shall earn interest at 5% per month; and that should petitioners fail to pay their loan within the said period, the mortgage shall be foreclosed.

When petitioners failed to pay their loan in full on August 14, 1991, respondents allowed them to complete their payment until December 23, 1993. On this date, they made a total payment of P687,000.00.

On January 17, 1994, respondents wrote petitioners demanding payment of P325,000.00, plus interest, otherwise they would foreclose the mortgage. 4 In turn, petitioners responded, claiming that they have overpaid their obligation and demanding the return of their land title and refund of their excess payment. 5 This prompted respondents to file a petition 6 for extrajudicial foreclosure of mortgage with the Office of the Ex-Officio Sheriff, Malolos, Bulacan, docketed therein as EJF 19-94.

For their part, petitioners filed with the Regional Trial Court (RTC), Branch 17, Malolos, Bulacan, a complaint for the return of their TCT No. T-42.373 (M), sum of money and damages, with application for a temporary restraining order and preliminary injunction, docketed as Civil Case No. 156-M-94. 7

In their opposition 8 to the application for a preliminary injunction, respondents alleged that petitioners loan has been restructured three times and that their unpaid balance as of March 14, 1994 was P543,622.00.

After hearing petitioners application for a preliminary injunction, the RTC issued an order, 9 enjoining the sheriff from proceeding with the foreclosure of mortgage, upon their posting of a bond in the amount of P543,622.00.

Thereafter, trial on the merits ensued.

On July 31, 1995, the RTC rendered judgment, 10 the dispositive portion of which reads:

"WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs (now petitioners) and against the defendants (now respondents), ordering the latter:

1. to return to the plaintiffs the amount of P215,750.00 representing the overpaid amount;

2. to return to the plaintiffs the owners copy of TCT No. T-42.373 (M) offered as security;

3. to pay P20,000.000 as attorneys fees;

4. to pay the costs of the suit.

"The writ of preliminary injunction issued on March 21, 1994 is hereby made permanent.

"SO ORDERED." 11

The trial court held that the stipulated 5% monthly interest to be paid by petitioners corresponds only to the period from May 14, 1991 up to August 14, 1991, the term of the loan. Thereafter, the monthly interest should be 12% per annum. The trial court concluded that petitioners made an overpayment of P214,750.00.

Upon appeal, docketed as CA GR-CV No. 51095, the Court of Appeals, in a Decision 12 dated June 18, 1997, held:

"We reverse.

"The law and jurisprudence clearly provide that if the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered. (Article 1253, New Civil Code; Gobonseng, Jr. v. Court of Appeals, 246 SCRA 472). Once it is admitted that an obligation bears interest, partial payments are to be applied first on account of the interest and then to reduce the principal. (San Jose v. Omega, 11 Phil. 442; Sunico v. Ramirez, 14 Phil. 500). We thus find no support, whether in law or in jurisprudence, for the Decision of the court a quo to apply the bigger amounts of P40,000.00, P37, 000.00, P50,000.00 among others, given several times by the Barrera spouses . . . for the payment of the principal loan when the interests due on the loan that have accumulated through the years have not been fully satisfied.

"We also do not agree that the stipulated monthly interest of 5% was to apply only to the 3-month effectivity period of the loan. This is a flawed and a grossly unfair interpretation of the terms and conditions of the agreement of the parties. To rule in this wise is to sanction the irregular performance of ones obligation. The Barrera spouses will be emboldened not to pay their loan within the agreed period of 3-months since on the fourth month and thereafter, they do not have to pay anymore the 5% monthly interest, but only the 12% legal interest per annum, or a measly 1% interest per month. Such an interpretation is totally unfair and unjust to the creditors who could have used their money in some other ways. Until such time that the Barreras have fully paid their total indebtedness, the 5% monthly interest subsists, there being no stipulation to the contrary.

"While we commiserate with the plight of the Barrera spouses, we cannot change the terms of the loan agreement between them and the Lorenzos as the courts have no right to make contracts for (the) parties. (Tolentino and Manio v. Gonzales Sy Chian, 5 Phil. 577). A contract is the law between the parties which not even this Court can interfere with. The only requirement is that the same be not contrary to law, morals and good customs . . . (Article 1306, New Civil Code). We find the agreement to pay a 5% monthly interest until the loan is fully paid to be reasonable and sanctioned by regular usage and practice.

"The Barreras should, therefore, be required to pay the balance of their indebtedness, including the interests thereof. Failure to pay the same should warrant the foreclosure of their mortgaged property to satisfy their obligation to the Lorenzo spouses." 13

Petitioners filed a motion for reconsideration but was denied. 14

Hence this petition.

The sole issue for our resolution is whether the 5% monthly interest on the loan was only for three (3) months, or from May 14, 1991 up to August 14, 1991, as maintained by petitioners, or until the loan was fully paid, as claimed by respondents.

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. 15 In such cases, courts have no authority to alter a contract by construction or to make a new contract for the parties; its duty is confined to the interpretation of the one which they have made for themselves without regard to its wisdom or folly as the court cannot supply material stipulations or read into the contract words which it does not contain. 16 It is only when the contract is vague and ambiguous that courts are permitted to resort to construction of its terms and determine the intention of the parties therein.

The salient provisions of the mortgage contract read

"a) Ang sanglaang ito ay sa loob lamang ng tatlong (3) buwan, o hanggang sa Agosto 14, 1991.

b) Ang tubo na aming napagkasunduan ay 5%, o cinco por ciento isang buwan.

c) Na sakaling mabayaran ko ang aming pagkakautang sa mag-asawa na P325,000.00 ang kasulatang ito ay wala ng lakas at kabuluhan, subalit kung hindi ko mabayaran ang aming pinagkakautangan sa takdang panahong 3 buwan sila ay binibigyan ko nang laya at kapangyarihan na masubasta nila ang lupang aming ipinanagot sa labas ng hukuman sa bisa ng Batas Blg. 3135 at susog nito at akong may utang ang siyang sagot sa lahat ng gastos at pati bayad sa abogado sa nasabing subasta sa labas ng hukuman." 17 (Emphasis supplied)

It is clear from the above stipulations that the loan shall be payable within three (3) months, or from May 14, 1991 up to August 14, 1991. During such period, the loan shall earn an interest of 5% per month. Furthermore, the contract shall have no force and effect once the loan shall have been fully paid within the three-month period, otherwise, the mortgage shall be foreclosed extrajudicially under Act No. 3135.

Records show that upon maturity of the loan on August 14, 1991, petitioners failed to pay their entire obligation. Instead of exercising their right to have the mortgage foreclosed, respondents allowed petitioners to pay the loan on a monthly installment basis until December, 1993. It bears emphasis that there is no written agreement between the parties that the loan will continue to bear 5% monthly interest beyond the agreed three-month period. Respondent Ma. Concepcion Lorenzo testified as follows:"Atty. Marcos:

Q Now, based on this document which was marked as Exh.1, there is no dispute that the monthly interest for the three month period that is from May 14, 1991 to August 14, 1991 is 5% monthly interest, there is no dispute about that. Now, Miss Witness, my question is, could you go over the entire document that Exh. `1 and please tell this Hon. Court whether there is a provision in clear and unequivocal terms providing for that monthly interest after August 14,1991?

A No, sir, there is none.

Q Are you sure of that?

A Yes, sir.

Q You mean to say there is no stipulation in that document providing for the 5% monthly interest to the loan after August 14, 1991?

A Yes, sir, they are supposed to return my money.

Court:

Q After they failed to comply with that provision, was there any subsequent agreement between you and the plaintiffs?xxx

Q Was there an agreement?

A There was, your Honor.

Q What was that agreement about?

A Verbal agreement, your Honor?

Q Why was that agreement not reduced into writing?

A It was not reduced into writing, your Honor.

Q Why?

A I am in good faith, your Honor." 18

Article 1956 of the Civil Code mandates that" (n)o interest shall be due unless it has been expressly stipulated in writing." Applying this provision, the trial court correctly held that the monthly interest of 5% corresponds only to the three-month period of the loan, or from May 14, 1991 to August 14, 1991, as agreed upon by the parties in writing. Thereafter, the interest rate for the loan is 12% per annum. In Eastern Shipping Lines, Inc. v. Court of Appeals, 19 this Court laid down the following doctrine:

"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." (Emphasis supplied)

The above ruling was reiterated in Sulit v. Court of Appeals, 20 Crismina Garments v. Court of Appeals, 21 Eastern Assurance and Surety Corporation v. Court of Appeals, 22 Catungal v. Hao, 23 and Yong Et. Al. v. Tiu Et. Al. 24 Thus, the Court of Appeals erred in reversing the RTC Decision and holding that the 5% monthly interest should be paid by petitioners even beyond August 14, 1991.

WHEREFORE, the assailed Decision of the Court of Appeals dated June 18, 1997 and its Resolution dated October 17, 1997 are REVERSED and SET ASIDE. The Decision of the Regional Trial Court, Branch 17, Malolos, Bulacan dated July 31, 1995 is REINSTATED.

SO ORDERED.

THIRD DIVISION[G.R. NO. 173227 : January 20, 2009]SEBASTIAN SIGA-AN,Petitioner,v.ALICIA VILLANUEVA,Respondent.D E C I S I O NCHICO-NAZARIO,J.:Before Us is a Petition1for Review onCertiorariunder Rule 45 of the Rules of Court seeking to set aside the Decision,2dated 16 December 2005, and Resolution,3dated 19 June 2006 of the Court of Appeals in CA-G.R. CV No. 71814, which affirmed intotothe Decision,4dated 26 January 2001, of the Las Pinas City Regional Trial Court, Branch 255, in Civil Case No. LP-98-0068.The facts gathered from the records are as follows:On 30 March 1998, respondent Alicia Villanueva filed a complaint5for sum of money against petitioner Sebastian Siga-an before the Las Pinas City Regional Trial Court (RTC), Branch 255, docketed as Civil Case No. LP-98-0068. Respondent alleged that she was a businesswoman engaged in supplying office materials and equipments to the Philippine Navy Office (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 PNO and offered to loan her the amount ofP540,000.00. Since she needed capital for her business transactions with the PNO, she accepted petitioner's proposal. The loan agreement was not reduced in writing. Also, there was no stipulation as to the payment of interest for the loan.6On 31 August 1993, respondent issued a check worthP500,000.00 to petitioner as partial payment of the loan. On 31 October 1993, she issued another check in the amount ofP200,000.00 to petitioner as payment of the remaining balance of the loan. Petitioner told her that since she paid a total amount ofP700,000.00 for theP540,000.00 worth of loan, the excess amount ofP160,000.00 would be applied as interest for the loan. Not satisfied with the amount applied as interest, petitioner pestered her to pay additional interest. Petitioner threatened to block or disapprove her transactions with the PNO if she would not comply with his demand. As all her transactions with the PNO were subject to the approval of petitioner as comptroller of the PNO, and fearing that petitioner might block or unduly influence the payment of her vouchers in the PNO, she conceded. Thus, she paid additional amounts in cash and checks as interests for the loan. She asked petitioner for receipt for the payments but petitioner told her that it was not necessary as there was mutual trust and confidence between them. According to her computation, the total amount she paid to petitioner for the loan and interest accumulated toP1,200,000.00.7Thereafter, respondent consulted a lawyer regarding the propriety of paying interest on the loan despite absence of agreement to that effect. Her lawyer told her that petitioner could not validly collect interest on the loan because there was no agreement between her and petitioner regarding payment of interest. Since she paid petitioner a total amount ofP1,200,000.00 for theP540,000.00 worth of loan, and upon being advised by her lawyer that she made overpayment to petitioner, she sent a demand letter to petitioner asking for the return of the excess amount ofP660,000.00. Petitioner, despite receipt of the demand letter, ignored her claim for reimbursement.8Respondent prayed that the RTC render judgment ordering petitioner to pay respondent (1)P660,000.00 plus legal interest from the time of demand; (2)P300,000.00 as moral damages; (3)P50,000.00 as exemplary damages; and (4) an amount equivalent to 25% ofP660,000.00 as attorney's fees.9In his answer10to the complaint, petitioner denied that he offered a loan to respondent. He averred that in 1992, respondent approached and asked him if he could grant her a loan, as she needed money to finance her business venture with the PNO. At first, he was reluctant to deal with respondent, because the latter had a spotty record as a supplier of the PNO. However, since respondent was an acquaintance of his officemate, he agreed to grant her a loan. Respondent paid the loan in full.11Subsequently, respondent again asked him to give her a loan. As respondent had been able to pay the previous loan in full, he agreed to grant her another loan. Later, respondent requested him to restructure the payment of the loan because she could not give full payment on the due date. He acceded to her request. Thereafter, respondent pleaded for another restructuring of the payment of the loan. This time he rejected her plea. Thus, respondent proposed to execute a promissory note wherein she would acknowledge her obligation to him, inclusive of interest, and that she would issue several postdated checks to guarantee the payment of her obligation. Upon his approval of respondent's request for restructuring of the loan, respondent executed a promissory note dated 12 September 1994 wherein she admitted having borrowed an amount ofP1,240,000.00, inclusive of interest, from petitioner and that she would pay said amount in March 1995. Respondent also issued to him six postdated checks amounting toP1,240,000.00 as guarantee of compliance with her obligation. Subsequently, he presented the six checks for encashment but only one check was honored. He demanded that respondent settle her obligation, but the latter failed to do so. Hence, he filed criminal cases for Violation of the Bouncing Checks Law (Batas Pambansa Blg. 22) against respondent. The cases were assigned to the Metropolitan Trial Court of Makati City, Branch 65 (MeTC).12Petitioner insisted that there was no overpayment because respondent admitted in the latter's promissory note that her monetary obligation as of 12 September 1994 amounted toP1,240,000.00 inclusive of interests. He argued that respondent was already estopped from complaining that she should not have paid any interest, because she was given several times to settle her obligation but failed to do so. He maintained that to rule in favor of respondent is tantamount to concluding that the loan was given interest-free. Based on the foregoing averments, he asked the RTC to dismiss respondent's complaint.After trial, the RTC rendered a Decision on 26 January 2001 holding that respondent made an overpayment of her loan obligation to petitioner and that the latter should refund the excess amount to the former. It ratiocinated that respondent's obligation was only to pay the loaned amount ofP540,000.00, and that the alleged interests due should not be included in the computation of respondent's total monetary debt because there was no agreement between them regarding payment of interest. It concluded that since respondent made an excess payment to petitioner in the amount ofP660,000.00 through mistake, petitioner should return the said amount to respondent pursuant to the principle ofsolutio indebiti.13The RTC also ruled that petitioner should pay moral damages for the sleepless nights and wounded feelings experienced by respondent. Further, petitioner should pay exemplary damages by way of example or correction for the public good, plus attorney's fees and costs of suit.The dispositive portion of the RTC Decision reads:WHEREFORE, in view of the foregoing evidence and in the light of the provisions of law and jurisprudence on the matter, judgment is hereby rendered in favor of the plaintiff and against the defendant as follows:(1) Ordering defendant to pay plaintiff the amount ofP660,000.00 plus legal interest of 12% per annum computed from 3 March 1998 until the amount is paid in full;(2) Ordering defendant to pay plaintiff the amount ofP300,000.00 as moral damages;(3) Ordering defendant to pay plaintiff the amount ofP50,000.00 as exemplary damages;(4) Ordering defendant to pay plaintiff the amount equivalent to 25% ofP660,000.00 as attorney's fees; (5) Ordering defendant to pay the costs of suit.14Petitioner appealed to the Court of Appeals. On 16 December 2005, the appellate court promulgated its Decision affirmingin totothe RTC Decision, thus:WHEREFORE, the foregoing considered, the instant appeal is hereby DENIED and the assailed decision [is] AFFIRMEDin toto.15Petitioner filed a motion for reconsideration of the appellate court's decision but this was denied.16Hence, petitioner lodged the instant petition before us assigning the following errors:I.THE RTC AND THE COURT OF APPEALS ERRED IN RULING THAT NO INTEREST WAS DUE TO PETITIONER;II.THE RTC AND THE COURT OF APPEALS ERRED IN APPLYING THE PRINCIPLE OFSOLUTIO INDEBITI.17Interest 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.18The right to interest 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.19Article 1956 of the Civil Code, which refers to monetary interest,20specifically 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.21It 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 petitioner's offer of loan amounting toP540,000.00, there was, nonetheless, no verbal or written agreement for her to pay interest on the loan.22Petitioner presented a handwritten promissory note dated 12 September 199423wherein respondent purportedly admitted owing petitioner "capital and interest." Respondent, however, explained that it was petitioner who made a promissory note and she was told to copy it in her own handwriting; that all her transactions with the PNO were subject to the approval of petitioner as comptroller of the PNO; that petitioner threatened to disapprove her transactions with the PNO if she would not pay interest; that being unaware of the law on interest and fearing that petitioner would make good of his threats if she would not obey his instruction to copy the promissory note, she copied the promissory note in her own handwriting; and that such was the same promissory note presented by petitioner as alleged proof of their written agreement on interest.24Petitioner did not rebut the foregoing testimony. It is evident that respondent did not really consent to the payment of interest for the loan and that she was merely tricked and coerced by petitioner to pay interest. Hence, it cannot be gainfully said that such promissory note pertains to an express stipulation of interest or written agreement of interest on the loan between petitioner and respondent.Petitioner, nevertheless, claims that both the RTC and the Court of Appeals found that he and respondent agreed on the payment of 7% rate of interest on the loan; that the agreed 7% rate of interest was duly admitted by respondent in her testimony in the Batas Pambansa Blg. 22 cases he filed against respondent; that despite such judicial admission by respondent, the RTC and the Court of Appeals, citing Article 1956 of the Civil Code, still held that no interest was due him since the agreement on interest was not reduced in writing; that the application of Article 1956 of the Civil Code should not be absolute, and an exception to the application of such provision should be made when the borrower admits that a specific rate of interest was agreed upon as in the present case; and that it would be unfair to allow respondent to pay only the loan when the latter very well knew and even admitted in the Batas Pambansa Blg. 22 cases that there was an agreed 7% rate of interest on the loan.25We have carefully examined the RTC Decision and found that the RTC did not make a ruling therein that petitioner and respondent agreed on the payment of interest at the rate of 7% for the loan. The RTC clearly stated that although petitioner and respondent entered into a valid oral contract of loan amounting toP540,000.00, they, nonetheless, never intended the payment of interest thereon.26While the Court of Appeals mentioned in its Decision that it concurred in the RTC's ruling that petitioner and respondent agreed on a certain rate of interest as regards the loan, we consider this as merely an inadvertence because, as earlier elucidated, both the RTC and the Court of Appeals ruled that petitioner is not entitled to the payment of interest on the loan. The rule is that factual findings of the trial court deserve great weight and respect especially when affirmed by the appellate court.27We found no compelling reason to disturb the ruling of both courts.Petitioner's reliance on respondent's alleged admission in the Batas Pambansa Blg. 22 cases that they had agreed on the payment of interest at the rate of 7% deserves scant consideration. In the said case, respondent merely testified that after paying the total amount of loan, petitioner ordered her to pay interest.28Respondent did not categorically declare in the same case that she and respondent made anexpressstipulation in writing as regards payment of interest at the rate of 7%. As earlier discussed, monetary interest is due only if there was anexpressstipulation in writing for the payment of interest.There are instances in which an interest may be imposed even in the absence of express stipulation, verbal or written, regarding payment of interest. Article 2209 of the Civil Code states that if the obligation consists in the payment of a sum of money, and the debtor incurs delay, a legal interest of 12% per annum may be imposed as indemnity for damages if no stipulation on the payment of interest was agreed upon. Likewise, Article 2212 of the Civil Code provides that interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent on this point.All the same, the interest under these two instances may be imposed only as a penalty or damages for breach of contractual obligations. It cannot be charged as a compensation for the use or forbearance of money. In other words, the two instances apply only to compensatory interest and not to monetary interest.29The case at bar involves petitioner's claim for monetary interest.Further, said compensatory interest is not chargeable in the instant case because it was not duly proven that respondent defaulted in paying the loan. Also, as earlier found, no interest was due on the loan because there was no written agreement as regards payment of interest.Aproposthe second assigned error, petitioner argues that the principle ofsolutio indebitidoes not apply to the instant case. Thus, he cannot be compelled to return the alleged excess amount paid by respondent as interest.30Under Article 1960 of the Civil Code, if the borrower of loan pays interest when there has been no stipulation therefor, the provisions of the Civil Code concerningsolutioindebitishall be applied. Article 2154 of the Civil Code explains the principle ofsolutio indebiti. Said provision provides that if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. In such a case, a creditor-debtor relationship is created under a quasi-contract whereby the payor becomes the creditor who then has the right to demand the return of payment made by mistake, and the person who has no right to receive such payment becomes obligated to return the same. The quasi-contract ofsolutio indebitiharks back to the ancient principle that no one shall enrich himself unjustly at the expense of another.31The principle ofsolutio indebitiapplies where (1) a payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment; and (2) the payment is made through mistake, and not through liberality or some other cause.32We have held that the principle ofsolutio indebitiapplies in case of erroneous payment of undue interest.33It was duly established that respondent paid interest to petitioner. Respondent was under no duty to make such payment because there was no express stipulation in writing to that effect. There was no binding relation between petitioner and respondent as regards the payment of interest. The payment was clearly a mistake. Since petitioner received something when there was no right to demand it, he has an obligation to return it.We shall now determine the propriety of the monetary award and damages imposed by the RTC and the Court of Appeals.Records show that respondent received a loan amounting toP540,000.00 from petitioner.34Respondent issued two checks with a total worth ofP700,000.00 in favor of petitioner as payment of the loan.35These checks were subsequently encashed by petitioner.36Obviously, there was an excess ofP160,000.00 in the payment for the loan. Petitioner claims that the excess ofP160,000.00 serves as interest on the loan to which he was entitled. Aside from issuing the said two checks, respondent also paid cash in the total amount ofP175,000.00 to petitioner as interest.37Although no receipts reflecting the same were presented because petitioner refused to issue such to respondent, petitioner, nonetheless, admitted in his Reply-Affidavit38in the Batas Pambansa Blg. 22 cases that respondent paid him a total amount ofP175,000.00 cash in addition to the two checks. Section 26 Rule 130 of the Rules of Evidence provides that the declaration of a party as to a relevant fact may be given in evidence against him. Aside from the amounts ofP160,000.00 andP175,000.00 paid as interest, no other proof of additional payment as interest was presented by respondent. Since we have previously found that petitioner is not entitled to payment of interest and that the principle ofsolutio indebitiapplies to the instant case, petitioner should return to respondent the excess amount ofP160,000.00 andP175,000.00 or the total amount ofP335,000.00. Accordingly, the reimbursable amount to respondent fixed by the RTC and the Court of Appeals should be reduced fromP660,000.00 toP335,000.00.As earlier stated, petitioner filed five (5) criminal cases for violation of Batas Pambansa Blg. 22 against respondent. In the said cases, the MeTC found respondent guilty of violating Batas Pambansa Blg. 22 for issuing five dishonored checks to petitioner. Nonetheless, respondent's conviction therein does not affect our ruling in the instant case. The two checks, subject matter of this case, totalingP700,000.00 which respondent claimed as payment of theP540,000.00 worth of loan, were not among the five checks found to be dishonored or bounced in the five criminal cases. Further, the MeTC found that respondent made an overpayment of the loan by reason of the interest which the latter paid to petitioner.39Article 2217 of the Civil Code provides that moral damages may be recovered if the party underwent physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury. Respondent testified that she experienced sleepless nights and wounded feelings when petitioner refused to return the amount paid as interest despite her repeated demands. Hence, the award of moral damages is justified. However, its corresponding amount ofP300,000.00, as fixed by the RTC and the Court of Appeals, is exorbitant and should be equitably reduced. Article 2216 of the Civil Code instructs that assessment of damages is left to the discretion of the court according to the circumstances of each case. This discretion is limited by the principle that the amount awarded should not be palpably excessive as to indicate that it was the result of prejudice or corruption on the part of the trial court.40To our mind, the amount ofP150,000.00 as moral damages is fair, reasonable, and proportionate to the injury suffered by respondent.Article 2232 of the Civil Code states that in a quasi-contract, such assolutio indebiti, exemplary damages may be imposed if the defendant acted in an oppressive manner. Petitioner acted oppressively when he pestered respondent to pay interest and threatened to block her transactions with the PNO if she would not pay interest. This forced respondent to pay interest despite lack of agreement thereto. Thus, the award of exemplary damages is appropriate. The amount ofP50,000.00 imposed as exemplary damages by the RTC and the Court is fitting so as to deter petitioner and other lenders from committing similar and other serious wrongdoings.41Jurisprudence instructs that in awarding attorney's fees, the trial court must state the factual, legal or equitable justification for awarding the same.42In the case under consideration, the RTC stated in its Decision that the award of attorney's fees equivalent to 25% of the amount paid as interest by respondent to petitioner is reasonable and moderate considering the extent of work rendered by respondent's lawyer in the instant case and the fact that it dragged on for several years.43Further, respondent testified that she agreed to compensate her lawyer handling the instant case such amount.44The award, therefore, of attorney's fees and its amount equivalent to 25% of the amount paid as interest by respondent to petitioner is proper.Finally, the RTC and the Court of Appeals imposed a 12% rate of legal interest on the amount refundable to respondent computed from 3 March 1998 until its full payment. This is erroneous.We held inEastern Shipping Lines, Inc. v. Court of Appeals,45that when an obligation, not constituting a loan or forbearance of money is breached, an interest on the amount of damages awarded may be imposed at the rate of 6% per annum. We further declared that when the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether it is a loan/forbearance of money or not, shall be 12% per annum from such finality until its satisfaction, thisinterimperiod being deemed equivalent to a forbearance of credit.In the present case, petitioner's obligation arose from a quasi-contract ofsolutio indebitiand not from a loan or forbearance of money. Thus, an interest of 6% per annum should be imposed on the amount to be refunded as well as on the damages awarded and on the attorney's fees, to be computed from the time of the extra-judicial demand on 3 March 1998,46up to the finality of this Decision. In addition, the interest shall become 12% per annum from the finality of this Decision up to its satisfaction.WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 71814, dated 16 December 2005, is herebyAFFIRMEDwith the followingMODIFICATIONS: (1) the amount ofP660,000.00 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 theP335,000.00, on the damages awarded and on the attorney's 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.SO ORDERED.

FIRST DIVISIONG.R. NO. 187678 : April 10, 2013SPOUSES IGNACIO F. JUICO and ALICE P. JUICO,Petitioners,v.CHINA BANKING CORPORATION,Respondent.D E C I S I O NVILLARAMA, JR.,J.:Before us is a petition for review oncertiorariunder Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the February 20, 2009 Decision1and April 27, 2009 Resolution2of the Court of Appeals (CA) in CA G.R. CV No. 80338. The CA affirmed the April 14, 2003 Decision3of the Regional Trial Court (RTC) of Makati City, Branch 147.The factual antecedents:Spouses Ignacio F. Juico and Alice P. Juico (petitioners) obtained a loan from China Banking Corporation (respondent) as evidenced by two Promissory Notes both dated October 6, 1998 and numbered 507-001051-34and 507-001052-0,5for the sums of !!6,216,000 andP4, 139,000, respectively. The loan was secured by a Real Estate Mortgage (REM) over petitioners' property located at 49 Greensville St., White Plains, Quezon City covered by Transfer Certificate of Title (TCT) No. RT-103568 (167394) PR-412086of the Register of Deeds of Quezon City.When petitioners failed to pay the monthly amortizations due, respondent demanded the full payment of the outstanding balance with accrued monthly interests. On September 5, 2000, petitioners received respondent's last demand letter7dated August 29, 2000.As of February 23, 2001, the amount due on the two promissory notes totaledP19,201,776.63 representing the principal, interests, penalties and attorney's fees. On the same day, the mortgaged property was sold at public auction, with respondent as highest bidder for the amount ofP10,300,000.On May 8, 2001, petitioners received8a demand letter9dated May 2, 2001 from respondent for the payment ofP8,901,776.63, the amount of deficiency after applying the proceeds of the foreclosure sale to the mortgage debt. As its demand remained unheeded, respondent filed a collection suit in the trial court. In its Complaint,10respondent prayed that judgment be rendered ordering the petitioners to pay jointly and severally: (1)P8,901,776.63 representing the amount of deficiency, plus interests at the legal rate, from February 23, 2001 until fully paid; (2) an additional amount equivalent to 1/10 of 1% per day of the total amount, until fully paid, as penalty; (3) an amount equivalent to 10% of the foregoing amounts as attorney's fees; and (4) expenses of litigation and costs of suit.In their Answer,11petitioners admitted the existence of the debt but interposed, by way of special and affirmative defense, that the complaint states no cause of action considering that the principal of the loan was already paid when the mortgaged property was extrajudicially foreclosed and sold forP10,300,000. Petitioners contended that should they be held liable for any deficiency, it should be only forP55,000 representing the difference between the total outstanding obligation ofP10,355,000 and the bid price ofP10,300,000. Petitioners also argued that even assuming there is a cause of action, such deficiency cannot be enforced by respondent because it consists only of the penalty and/or compounded interest on the accrued interest which is generally not favored under the Civil Code. By way of counterclaim, petitioners prayed that respondent be ordered to payP100,000 in attorney's fees and costs of suit.At the trial, respondent presented Ms. Annabelle Cokai Yu, its Senior Loans Assistant, as witness. She testified that she handled the account of petitioners and assisted them in processing their loan application. She called them monthly to inform them of the prevailing rates to be used in computing interest due on their loan. As of the date of the public auction, petitioners' outstanding balance wasP19,201,776.6312based on the following statement of account which she prepared.STATEMENT OF ACCOUNTAs of FEBRUARY 23, 2001IGNACIO F. JUICOPN# 507-0010520 due on 04-07-2004Principal balance of PN# 5070010520. . . . . . 4,139,000.00

Interest onP4,139,000.00 fr. 04-Nov-99

04-Nov-2000 366 days @ 15.00%. . . . . . . . . 622,550.96

Interest onP4,139,000.00 fr. 04-Nov-2000

04-Dec-2000 30 days @ 24.50%. . . . . . . . . . . 83,346.99

Interest onP4,139,000.00 fr. 04-Dec-2000

04-Jan-2001 31 days @ 21.50%. . . . . . . . . . .75,579.27

Interest onP4,139,000.00 fr. 04-Jan-2001

04-Feb-2001 31 days @ 19.50%. . . . . . . . . . 68,548.64

Interest onP4,139,000.00 fr. 04-Feb-2001

23-Feb-2001 19 days @ 18.00%. . . . . . . . . . 38,781.86

Penalty charge @ 1/10 of 1% of the total amount due (P4, 139,000.00 from 11-04-99 to 02-23-2001 @1/10 of 1% per day). . . . . . . . . . . . . . . . .1,974,303.00

Sub-total. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,002,110.73

PN# 507-0010513 due on 04-07-2004Principal balance of PN# 5070010513. . . . . . . 6,216,000.00

Interest onP6, 216,000.00 fr. 06-Oct-9904-Nov-2000 395 days @ 15.00%. . . . . . . . . .1,009,035.62

Interest onP6, 216,000.00 fr. 04-Nov-200004-Dec-2000 30 days @ 24.50%. . . . . . . . . . .125,171.51

Interest onP6, 216,000.00 fr. 04-Dec-200004-Jan-2001 31 days @ 21.50%. . . . . . . . . . .113,505.86

Interest onP6, 216,000.00 fr. 04-Jan-200104-Feb-2001 31 days @ 19.50%. . . . . . . . . . . 102,947.18

Interest onP6, 216,000.00 fr. 04-Feb-200123-Feb-2001 19 days @ 18.00%. . . . . . . . . . .58,243.07

Penalty charge @ 1/10 of 1% of the total amount due (P6, 216,000.00 from 10-06-99 to 02-23-2001 @1/10 of 1% per day). . . . . . . . . . . . . . . . .3,145,296.00

Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,770,199.23

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17,772,309.96

Less: A/P applied to balance of principal(55,000.00)

Less: Accounts payable L & D (261,149.39)17,456,160.57

Add: 10% Attorney's Fee1,745,616.06

Total amount due19,201,776.63

Less: Bid Price10,300,000.00

TOTAL DEFICIENCY AMOUNT AS OFFEB. 23, 20018,901,776.6313

Petitioners thereafter received a demand letter14dated May 2, 2001 from respondent's counsel for the deficiency amount ofP8, 901,776.63. Ms. Yu further testified that based on the Statement of Account15dated March 15, 2002 which she prepared, the outstanding balance of petitioners wasP15, 190,961.48.16On cross-examination, Ms. Yu reiterated that the interest rate changes every month based on the prevailing market rate and she notified petitioners of the prevailing rate by calling them monthly before their account becomes past due. When asked if there was any written authority from petitioners for respondent to increase the interest rate unilaterally, she answered that petitioners signed a promissory note indicating that they agreed to pay interest at the prevailing rate.17Petitioner Ignacio F. Juico testified that prior to the release of the loan, he was required to sign a blank promissory note and was informed that the interest rate on the loan will be based on prevailing market rates. Every month, respondent informs him by telephone of the prevailing interest rate. At first, he was able to pay his monthly amortizations but when he started to incur delay in his payments due to the financial crisis, respondent pressured him to pay in full, including charges and interests for the delay. His property was eventually foreclosed and was sold at public auction.18On cross-examination, petitioner testified that he is a Doctor of Medicine and also engaged in the business of distributing medical supplies. He admitted having read the promissory notes and that he is aware of his obligation under them before he signed the same.19In its decision, the RTC ruled in favor of respondent. The fallo of the RTC decision reads:WHEREFORE, premises considered, the Complaint is hereby sustained, and Judgment is rendered ordering herein defendants to pay jointly and severally to plaintiff, the following:1.P8,901,776.63 representing the amount of the deficiency owing to the plaintiff, plus interest thereon at the legal rate after February 23, 20012. An amount equivalent to 10% of the total amount due as and for attorney's fees, there being stipulation therefor in the promissory notes;3. Costs of suit.SO ORDERED.20The trial court agreed with respondent that when the mortgaged property was sold at public auction on February 23, 2001 forP10,300,000 there remained a balance ofP8,901,776.63 since before foreclosure, the total amount due on the two promissory notes aggregated toP19,201,776.63 inclusive of principal, interests, penalties and attorney's fees. It ruled that the amount realized at the auction sale was applied to the interest, conformably with Article 1253 of the Civil Code which provides that if the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered. This being the case, petitioners' principal obligation subsists but at a reduced amount ofP8,901,776.63.The trial court further held that Ignacio's claim that he signed the promissory notes in blank cannot negate or mitigate his liability since he admitted reading the promissory notes before signing them. It also ruled that considering the substantial amount involved, it is unbelievable that petitioners threw all caution to the wind and simply signed the documents without reading and understanding the contents thereof. It noted that the promissory notes, including the terms and conditions, are pro forma and what appears to have been left in blank were the promissory note number, date of the instrument, due date, amount of loan, and condition that interest will be at the prevailing rates. All of these details, the trial court added, were within the knowledge of the petitioners.When the case was elevated to the CA, the latter affirmed the trial court's decision. The CA recognized respondent's right to claim the deficiency from the debtor where the proceeds of the sale in an extrajudicial foreclosure of mortgage are insufficient to cover the amount of the debt. Also, it found as valid the stipulation in the promissory notes that interest will be based on the prevailing rate. It noted that the parties agreed on the interest rate which was not unilaterally imposed by the bank but was the rate offered daily by all commercial banks as approved by the Monetary Board. Having signed the promissory notes, the CA ruled that petitioners are bound by the stipulations contained therein.Petitioners are now before this Court raising the sole issue of whether the interest rates imposed upon them by respondent are valid. Petitioners contend that the interest rates imposed by respondent are not valid as they were not by virtue of any law or Bangko Sentral ng Pilipinas (BSP) regulation or any regulation that was passed by an appropriate government entity. They insist that the interest rates were unilaterally imposed by the bank and thus violate the principle of mutuality of contracts. They argue that the escalation clause in the promissory notes does not give respondent the unbridled authority to increase the interest rate unilaterally. Any change must be mutually agreed upon.Respondent, for its part, points out that petitioners failed to show that their case falls under any of the exceptions wherein findings of fact of the CA may be reviewed by this Court. It contends that an inquiry as to whether the interest rates imposed on the loans of petitioners were supported by appropriate regulations from a government agency or the Central Bank requires a reevaluation of the evidence on records. Thus, the Court would in effect, be confronted with a factual and not a legal issue.The appeal is partly meritorious.The principle of mutuality of contracts is expressed in Article 1308 of the Civil Code, which provides:Article 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. Article 1956 of the Civil Code likewise ordains that "no interest shall be due unless it has been expressly stipulated in writing."The binding effect of any agreement between parties to a contract is premised on two settled principles: (1) that any obligation arising from contract has the force of law between the parties; and (2) that there must be mutuality between the parties based on their essential equality. Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result is void. Any stipulation regarding the validity or compliance of the contract which is left solely to the will of one of the parties, is likewise, invalid.21Escalation clauses refer to stipulations allowing an increase in the interest rate agreed upon by the contracting parties. This Court has long recognized that there is nothing inherently wrong with escalation clauses which are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money in long term contracts.22Hence, such stipulations are not void per se.23Nevertheless, an escalation clause "which grants the creditor an unbridled right to adjust the interest independently and upwardly, completely depriving the debtor of the right to assent to an important modification in the agreement" is void. A stipulation of such nature violates the principle of mutuality of contracts.24Thus, this Court has previously nullified the unilateral determination and imposition by creditor banks of increases in the rate of interest provided in loan contracts.25In Banco Filipino Savings & Mortgage Bank v. Navarro,26the escalation clause stated: "I/We hereby authorize Banco Filipino to correspondingly increase the interest rate stipulated in this contract without advance notice to me/us in the event a law should be enacted increasing the lawful rates of interest that may be charged on this particular kind of loan." While escalation clauses in general are considered valid, we ruled that Banco Filipino may not increase the interest on respondent borrower's loan, pursuant to Circular No. 494 issued by the Monetary Board on January 2, 1976, because said circular is not a law although it has the force and effect of law and the escalation clause has no provision for reduction of the stipulated interest "in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board" (de-escalation clause).Subsequently, in Insular Bank of Asia and America v. Spouses Salazar27we reiterated that escalation clauses are valid stipulations but their enforceability are subject to certain conditions. The increase of interest rate from 19% to 21% per annum made by petitioner bank was disallowed because it did not comply with the guidelines adopted by the Monetary Board to govern interest rate adjustments by banks and non-banks performing quasi-banking functions.In the 1991 case of Philippine National Bank v. Court of Appeals,28the promissory notes authorized PNB to increase the stipulated interest per annum "within the limits allowed by law at any time depending on whatever policy PNB may adopt in the future; Provided, that, the interest rate on this note shall be correspondingly decreased in the event that the applicable maximum interest rate is reduced by law or by the Monetary Board." This Court declared the increases (from 18% to 32%, then to 41% and then to 48%) unilaterally imposed by PNB to be in violation of the principle of mutuality essential in contracts.29A similar ruling was made in a 1994 case30also involving PNB where the credit agreement provided that "PNB reserves the right to increase the interest rate within the limits allowed by law at any time depending on whatever policy it may adopt in the future: Provided, that the interest rate on this accommodation shall be correspondingly decreased in the event that the applicable maximum interest is reduced by law or by the Monetary Board x x x".Again, in 1996, the Court invalidated escalation clauses authorizing PNB to raise the stipulated interest rate at any time without notice, within the limits allowed by law. The Court observed that there was no attempt made by PNB to secure the conformity of respondent borrower to the successive increases in the interest rate. The borrower's assent to the increases cannot be implied from their lack of response to the letters sent by PNB, informing them of the increases.31In the more recent case of Philippine Savings Bank v. Castillo,32we sustained the CA in declaring as unreasonable the following escalation clause: "The rate of interest and/or bank charges herein stipulated, during the terms of this promissory note, its extensions, renewals or other modifications, may be increased, decreased or otherwise changed from time to time within the rate of interest and charges allowed under present or future law(s) and/or government regulation(s) as the PSBank may prescribe for its debtors." Clearly, the increase or decrease of interest rates under such clause hinges solely on the discretion of petitioner as it does not require the conformity of the maker before a new interest rate could be enforced. We also said that respondents' assent to the modifications in the interest rates cannot be implied from their lack of response to the memos sent by petitioner, informing them of the amendments, nor from the letters requesting for reduction of the rates. Thus:the validity of the escalation clause did not give petitioner the unbridled right to unilaterally adjust interest rates. The adjustment should have still been subjected to the mutual agreement of the contracting parties. In light of the absence of consent on the part of respondents to the modifications in the interest rates, the adjusted rates cannot bind them notwithstanding the inclusion of a de-escalation clause in the loan agreement.33It is now settled that an escalation clause is void where the creditor unilaterally determines and imposes an increase in the stipulated rate of interest without the express conformity of the debtor. Such unbridled right given to creditors to adjust the interest independently and upwardly would completely take away from the debtors the right to assent to an important modification in their agreement and would also negate the element of mutuality in their contracts.34While a ceiling on interest rates under the Usury Law was already lifted under Central Bank Circular No. 905, nothing therein "grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets."35The two promissory notes signed by petitioners provide:I/We hereby authorize the CHINA BANKING CORPORATION to increase or decrease as the case may be, the interest rate/service charge presently stipulated in this note without any advance notice to me/us in the event a law or Central Bank regulation is passed or promulgated by the Central Bank of the Philippines or appropriate government entities, increasing or decreasing such interest rate or service charge.36Such escalation clause is similar to that involved in the case of Floirendo, Jr. v. Metropolitan Bank and Trust Company37where this Court ruled:The provision in the promissory note authorizing respondent bank to increase, decrease or otherwise change from time to time the rate of interest and/or bank charges "without advance notice" to petitioner, "in the event of change in the interest rate prescribed by law or the Monetary Board of the Central Bank of the Philippines," does not give respondent bank unrestrained freedom to charge any rate other than that which was agreed upon. Here, the monthly upward/downward adjustment of interest rate is left to the will of respondent bank alone. It violates the essence of mutuality of the contract.38More recently in Solidbank Corporation v. Permanent Homes, Incorporated,39we upheld as valid an escalation clause which required a written notice to and conformity by the borrower to the increased interest rate. Thus:The Usury Law had been rendered legally ineffective by Resolution No. 224 dated 3 December 1982 of the Monetary Board of the Central Bank, and later by Central Bank Circular No. 905 which took effect on 1 January 1983. These circulars removed the ceiling on interest rates for secured and unsecured loans regardless of maturity. The effect of these circulars is to allow the parties to agree on any interest that may be charged on a loan. The virtual repeal of the Usury Law is within the range of judicial notice which courts are bound to take into account. Although interest rates are no longer subject to a ceiling, the lender still does not have an unbridled license to impose increased interest rates. The lender and the borrower should agree on the imposed rate, and such imposed rate should be in writing.The three promissory notes between Solidbank and Permanent all contain the following provisions:"5. We/I irrevocably authorize Solidbank to increase or decrease at any time the interest rate agreed in this Note or Loan on the basis of, among others, prevailing rates in the local or international capital markets. For this purpose, We/I authorize Solidbank to debit any deposit or placement account with Solidbank belonging to any one of us. The adjustment of the interest rate shall be effective from the date indicated in the written notice sent to us by the bank, or if no date is indicated, from the time the notice was sent.6. Should We/I disagree to the interest rate adjustment, We/I shall prepay all amounts due under this Note or Loan within thirty (30) days from the receipt by anyone of us of the written notice. Otherwise, We/I shall be deemed to have given our consent to the interest rate adjustment."The stipulations on interest rate repricing are valid because (1) the parties mutually agreed on said stipulations; (2) repricing takes effect only upon Solidbank's written notice to Permanent of the new interest rate; and (3) Permanent has the option to prepay its loan if Permanent and Solidbank do not agree on the new interest rate. The phrases "irrevocably authorize," "at any time" and "adjustment of the interest rate shall be effective from the date indicated in the written notice sent to us by the bank, or if no date is indicated, from the time the notice was sent," emphasize that Permanent should receive a written notice from Solidbank as a condition for the adjustment of the interest rates. (Emphasis supplied.)In this case, the trial and appellate courts, in upholding the validity of the escalation clause, underscored the fact that there was actually no fixed rate of interest stipulated in the promissory notes as this was made dependent on prevailing rates in the market. The subject promissory notes contained the following condition written after the first paragraph:With one year grace period on principal and thereafter payable in 54 equal monthly instalments to start on the second year. Interest at the prevailing rates payable quarterly in arrears.40In Polotan, Sr. v. CA (Eleventh Div.),41petitioner cardholder assailed the trial and appellate courts in ruling for the validity of the escalation clause in the Cardholder's Agreement. On petitioner's contention that the interest rate was unilaterally imposed and based on the standards and rate formulated solely by respondent credit card company, we held:The contractual provision in question states that "if there occurs any change in the prevailing market rates, the new interest rate shall be the guiding rate in computing the interest due on the outstanding obligation without need of serving notice to the Cardholder other than the required posting on the monthly statement served to the Cardholder." This could not be considered an escalation clause for the reason that it neither states an increase nor a decrease in interest rate. Said clause simply states that the interest rate should be based on the prevailing market rate.Interpreting it differently, while said clause does not expressly stipulate a reduction in interest rate, it nevertheless provides a leeway for the interest rate to be reduced in case the prevailing market rates dictate its reduction.Admittedly, the second paragraph of the questioned proviso which provides that "the Cardholder hereby authorizes Security Diners to correspondingly increase the rate of such interest in the event of changes in prevailing market rates x x x" is an escalation clause. However, it cannot be said to be dependent solely on the will of private respondent as it is also dependent on the prevailing market rates.Escalation clauses are not basically wrong or legally objectionable as long as they are not solely potestative but based on reasonable and valid grounds. Obviously, the fluctuation in the market rates is beyond the control of private respondent.42(Emphasis supplied.)In interpreting a contract, its provisions should not be read in isolation but in relation to each other and in their entirety so as to render them effective, having in mind the intention of the parties and the purpose to be achieved. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.43Here, the escalation clause in the promissory notes authorizing the respondent to adjust the rate of interest on the basis of a law or regulation issued by the Central Bank of the Philippines, should be read together with the statement after the first paragraph where no rate of interest was fixed as it would be based on prevailing market rates. While the latter is not strictly an escalation clause, its clear import was that interest rates would vary as determined by prevailing market rates. Evidently, the parties intended the interest on petitioners' loan, including any upward or downward adjustment, to be determined by the prevailing market rates and not dictated by respondent's policy. It may also be mentioned that since the deregulation of bank rates in 1983, the Central Bank has shifted to a market-oriented interest rate policy.44There is no indication that petitioners were coerced into agreeing with the foregoing provisions of the promissory notes. In fact, petitioner Ignacio, a physician engaged in the medical supply business, admitted having understood his obligations before signing them. At no time did petitioners protest the new rates imposed on their loan even when their property was foreclosed by respondent.This notwithstanding, we hold that the escalation clause is still void because it grants respondent the power to impose an increased rate of interest without a written notice to petitioners and their written consent. Respondent's monthly telephone calls to petitioners advising them of the prevailing interest rates would not suffice. A detailed billing statement based on the new imposed interest with corresponding computation of the total debt should have been provided by the respondent to enable petitioners to make an informed decision. An appropriate form must also be signed by the petitioners to indicate their conformity to the new rates. Compliance with these requisites is essential to preserve the mutuality of contracts. For indeed, one-sided impositions do not have the force of law between the parties, because such impositions are not based on the parties' essential equality.45Modifications in the rate of interest for loans pursuant to an escalation clause must be the result of an agreement between the parties. Unless such important change in the contract terms is mutually agreed upon, it has no binding effect.46In the absence of consent on the part of the petitioners to the modifications in the interest rates, the adjusted rates cannot bind them. Hence, we consider as invalid the interest rates in excess of 15%, the rate charged for the first year.Based on the August 29, 2000 demand letter of China Bank, petitioners' total principal obligation under the two promissory notes which they failed to settle isP10,355,000. However, due to China Bank's unilateral increases in the interest rates from 15% to as high as 24.50% and penalty charge of 1/10 of 1% per day or 36.5% per annum for the period November 4, 1999 to February 23, 2001, petitioners' balance ballooned toP19,201,776.63. Note that the original amount of principal loan almost doubled in only 16 months. The Court also finds the penalty charges imposed excessive and arbitrary, hence the same is hereby reduced to 1% per month or 12% per annum.Petitioners' Statement of Account, as of February 23, 2001, the date of the foreclosure proceedings, should thus be modified as follows:PrincipalP10,355,000.00

Interest at 15% per annumP10,355,000 x .15 x 477 days/365 days2,029,863.70

Penalty at 12% per annum1,623 ,890. 96

P10,355,000 x .12 x 477days/365 days

Sub-Total14,008,754.66

Less: A/P applied to balance of principal(55,000.00)

Less: Accounts payable L & D(261,149.39)

13,692,605.27

Add: Attorney's Fees1,369,260.53

Total Amount Due15,061,865.79

Less: Bid Price10,300,000.00

TOTAL DEFICIENCY AMOUNT4,761,865.79

WHEREFORE, the petition for review oncertiorariis PARTLY GRANTED. The February 20, 2009 Decision and April 27, 2009 Resolution of the Court of Appeals in CA G.R. CV No. 80338 are hereby MODIFIED. Petitioners Spouses Ignacio F. Juico and Alice P. Juico are hereby ORDERED to pay jointly and severally respondent China Banking CorporationP4, 7 61 ,865. 79 representing the amount of deficiency inclusive of interest, penalty charge and attorney's fees. Said amount shall bear interest at 12% per annum, reckoned from the time of the filing of the complaint until its full satisfaction.No pronouncement as to costs.SO ORDERED.

EN BANC

[G.R. No. 97412. July 12, 1994.]

EASTERN SHIPPING INES, INC.,Petitioner, v. HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC.,Respondents.

SYLLABUS

1. CIVIL LAW; COMMON CARRIERS; TIME FRAME WITHIN WHICH DILIGNCE REQUIRED IN SHIPMENT OF GOODS LAST. The common carriers duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon v. Court of Appeals, 161 SCRA 646; Kui Bai v. Dollar Steamship Lines, 52 Phil. 863).

2. ID.; ID.; ID.; PRESUMPTION OF CARRIERS FAULT ON LOST OR DAMAGED GOODS SHIPPED; CASE AT BAR NOT AN EXCEPTION. When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways v. Court of Appeals, 139 SCRA 87; Metro Port Service v. Court of Appeals, 131 SCRA 365). There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article 1734 of the Civil Code, are exclusive, not one of which can be applied to this case.

3. ID.; DAMAGES; INTEREST AWARDED AS A CONCEPT THEREOF; RATE AND ACCRUAL THEREOF, HOW DETERMINED. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. 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. 2. When a obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date of the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount of finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

D E C I S I O N

VITUG,J.:

The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on a shipment of goods can be a solidary, or joint and several, liability of the common carrier, the arrastre operator and the customs broker; (b) whether the payment of legal interest on an award of loss or damage is to be computed from the time the complaint is filed or from the date the decision appealed from is rendered; and (c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%).

The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and undisputed facts that have led to the controversy are hereunder reproduced:

"This is an action against defendants shipping company, arrastre operator and broker-forwarded for damages sustained by a shipment while in defendants custody, filed by the insurer-subrogee who paid the consignee the value of such losses/damages.

"On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery vessel `SS EASTERN COMET owned by defendant Eastern Shipping Lines under Bill of Lading No. YMA-8 (Exh. B). The shipment was insured under plaintiffs Marine Insurance Policy No. 81/01177 for P36,382,466.38.

"Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the custody of defendant Metro Port Services, Inc. The latter excepted to one drum, said to be in bad order, which damage was unknown to plaintiff.

"On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from defendant Metro Port Service, Inc., one drum opened and without seal (per Request for Bad Order Survey. (Exh. D).

"On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries of the shipment to the consignees warehouse. The latter excepted to one drum which contained spillages, while the rest of the contents was adulterated/fake (per Bad Order Waybill No. 10649, Exh. E).

"Plaintiff contended that due to the losses/damage sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the fault and negligence of defendants. Claims were presented against defendants who failed and refused to pay the same (Exhs. H, I, J, K, L).chanrobles virtual lawlibrary

"As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee against defendants (per Form of Subrogation, Release and Philbanking check, Exhs. M, N, and O)." (pp. 85-86, Rollo.)

There were, to be sure, other factual issues that confronted both courts. Here, the appellate court said:jgc:chanrobles.com.ph

"Defendants filed their respective answers, traversing the material allegations of the compliant contending that: As for defendant Eastern Shipping it alleged that the shipment was discharged in good order from the vessel unto the custody of Metro Port Service so that any damage/losses incurred after the shipment was incurred after the shipment was turned over to the latter, is no longer its liability (p. 17, Record); Metroport averred that although subject shipment was discharged unto its custody, portion of the same was already in bad order (p. 11, Record); Allied Brokerage alleged that plaintiff has no cause of action against it, not having negligent or at fault for the shipment was already in damage and bad order condition when received by it, but nonetheless, it still exercised extra ordinary care and diligence in he handling/delivery of the cargo to consignee in the same condition shipment was received by it.

"From the evidence that court found the following:

"The issues are:

1. Whether or not the shipment sustained losses/damages;

2. Whether or not these losses/damages were sustained while in the custody of defendants (in whose respective custody, if determinable);

3. Whether or not defendant(s) should be held liable for the losses/damages (see plaintiffs pre-Trial Brief, Records, p. 34; Allieds pre-Trial Brief, adopting plaintiffs Records, p. 38).

As to the first issue, there can be no doubt that the shipment sustained losses/damages. The two drums were shipped in good order and condition, as clearly shown by the Bill of Lading and Commercial Invoice which do not indicate any damages drum that was shipped (Exhs. B and C). But when on December 12, 1981 the shipment was delivered to defendant Metro Port Service, Inc., it excepted to one drum in bad order.

Correspondingly, as to the second issue, it follows that the losses/damages were sustained while in the respective and/or successive custody and possession of defendants carrier (Eastern), arrastre operator (Metro Port) and broker (Allied Brokerage). This becomes evident when the Marine Cargo Survey Report (Exh. G), with its Additional Survey Notes, are considered. In the latter notes, it is stated that when the shipment was landed on vessel to dock of Pier # 15, South Harbor, Manila on December 12, 1981, it was observed that one (1) fiber drum (was) in damaged condition, covered by the vessels Agents Bad order Tally Sheet No. 86427. The report further states that when defendant Allied Brokerage withdrew the shipment, from defendant arrastre operators custody on January 7, 1982, one drum was found opened without seal, cello bag partly torn but contents intact. Net unrecovered spillages was 15 kgs. The report went on to state that when the drums reached the consignee, one drum was found with adulterated/faked contents. It is obvious, therefore, that these losses/damages occurred before the shipment reached the consignee while under the successive custodies of defendants. Under Art. 1737 of the New Civil Code, the common carriers duty to observe extraordinary diligence in the vigilance of goods remains in full force and effect even if the goods are temporarily unloaded and stored in transit in the warehouse of the carrier at the place of destination, until the consignee has been advised and has had reasonable opportunity to remove or dispose of the goods (Art. 1738, NCC). Defendant Eastern Shippings own exhibit, the Turn-Over Survey of Bad Order Cargoes (Exhs. 3-Eastern) states that on December 12, 1981 one drum was found open.

"and thus held:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:chanrob1es virtual 1aw library

A. Ordering defendants to pay plaintiff, jointly and severally:chanrob1es virtual 1aw library

1. The amount of P19,032.95 with the present legal interest of 12% per annum from October 1, 1982, the date of filing of this complaints, until fully paid (the liability of defendant Eastern Shipping, Inc. shall not exceed US$500 per case or the CIF value of the loss, whichever is lesser, while the liability of defendant Metro Port Service, Inc. shall be to the extent of the actual invoice value of each package, crate box or container in no case to exceed P5,000.00 each, pursuant to Section 6.01 of the Management Contract);cralawnad

2. P3,000.00 as attorneys fees, and

3. Costs.

B. Dismissing the counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation.

SO ORDERED. (p. 207, Record).

"Dissatisfied, defendants recourse to US.

"The appeal is devoid of merit.

"After a careful scrunity of the evidence on record. We find that the conclusion drawn therefrom is correct. As there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants, and therefore they are liable to the appellee, as subrogee for the amount it paid to the consignee." (pp. 87-89, Rollo.)

The Court of Appeal thus affirmed in toto the judgment of the court a quo.

In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave abuse of discretion on the part of the appellate court when

I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITH THE ARRASTRE OPERATOR AND CUSTOMS BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS GRANTED IN THE QUESTIONED DECISION;

II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE RESPONDENT SHOULD COMMENCE FROM THE DATE OF THE FILING OF THE COMPLAINT AT THE RATE OF TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE DATE OF THE DECISION OF THE TRIAL COURT AND ONLY AT THE RATE OF SIX PERCENT PER ANNUM, PRIVATE RESPONDENTS CLAIM BEING INDISPUTABLY UNLIQUIDATED.

The petition is, in part, granted.

In this decision, we have begun by saying that the questions raised by petitioner carrier are not all that novel. Indeed, we do have a fairly good number of previous decisions this Court can merely tack to.

The common carriers duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon v. Court of Appeals, 161 SCRA 646; Kui Bai v. Dollar Steamship Lines, 52 Phil. 863).When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways v. Court of Appeals, 139 SCRA 87; Metro Port Service v. Court of Appeals, 131 SCRA 365). There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article 1734 1 of the Civil Code, are exclusive, not one of which can be applied to this case.

The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the goods to the consignee has, too, been passed upon by the Court. In Firemans Fund Insurance v. Metro Port Services (182 SCRA 455), we have explained in holding the carrier and the arrastre operator liable in solidum, thus:

"The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, Et Al., 107 Phil. 253 [1960]). Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with the obligation to deliver the goods in goods condition to the consignee."cralaw virtua1aw library

We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker are themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a given case may not vary the rule. The instant petition has been brought solely by Eastern Shipping Lines which, being the carrier and not having been able to rebut the presumption of fault, is, in any event, to be held liable in this particular case. A factual finding of both the court a quo and the appellate court, we take note, is that "there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants" (the herein petitioner among them). Accordingly, the liability imposed on Eastern Shipping Lines, Inc., the sole petitioner in this case, is inevitable regardless of whether there are others solidarily liable with it.

It is over the issue of legal interest adjudged by the appellate court that deserves more than just a passing remark.

Let us first see a chronological recitation of the major rulings of this Court:

The early case of Malayan Insurance Co., Inc., v. Manila Port Service, 2 decided 3 on 15 may 1969, involved a suit for recovery of money arising out of short deliveries and pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the lower court) averred in its complaint that the total amount of its claim for the value of the undelivered goods amounted to P3,947.20. This demand, however, was neither established in its totality nor definitely ascertained. In the stipulation of facts later entered into by the parties, in lieu of proof, the amount of P1,447.51 was agreed upon. The trial court rendered judgment ordering the appellants (defendants) Manila Port Service and Manila Railroad Company to pay appellee Malayan Insurance the sum of P1,447.51 with legal interest thereon from the date the complaint was filed on 28 December 1962 until full payment thereof. The appellants then assailed, inter alia, the award of legal interest. In sustaining the appellants, this Court ruled:

"Interest upon an obligation which calls for the payment of money, absent a stipulation, is the legal rate. Such interest normally is allowable from the date of demand, judicial or extrajudicial. The trial court opted for judicial demand as the starting point.

"But then upon the provisions of Article 2213 of the Civil Code, interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty. And as was held by this Court in Rivera v. Perez 4 , L-6998, February 29, 1956, if the suit were for damages, unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof (Montilla c. Corporacion de P. P. Agustinos, 25 Phil. 447; Lichauco v. Guzman, 38 Phil. 302), then, interest should be from the date of the decision." (Emphasis supplied).

The case of Reformina v. Tomol, 5 rendered on 11 October 1985, was for "Recovery of Damages for Injury to Person and Loss of Property." After trial, the lower court decreed:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third party defendants and against the defendants and third party plaintiffs as follows:

"Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay jointly and severally the following persons:

"(a) . . .

"xxx

"(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00 which is the value of the boat F B Pacita III together with its accessories, fishing gear and equipment minus P80,000.00 which is the value of the insurance recovered and the amount of P10,000.00 a month as the estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time they are actually paid or already the total sum of P370,000.00 as of June 4, 1972 with legal interest from the filing of the complaint until paid and to pay attorneys fees of P5,000.00 with costs against defendants and third party plaintiffs." (Emphasis supplied.)

On appeal of the Court of Appeals, the latter modified the amount of damages awarded but sustained the trial court in adjudging legal interest from the filing of the complaint until fully paid. When the appellate courts decision became final, the case was remanded to the lower court for execution, and this was when the trial court issued its assailed resolution which applied the 6% interest per annum prescribed in Article 2209 of the Civil Code. In their petition for review oncertiorari, the petitioners contended that Central Bank Circular No. 416, providing thus chanrobles virtual lawlibrary

"By virtue of the authority granted to it under Section 1 of Act 2655, as amended, Monetary Board in its Resolution No. 1622 dated July 29, 1974, has prescribed that 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 express contract as to such rate of interest, shall be twelve (12%) percent per annum. This Circular shall take effect immediately." (Emphasis found in the text)

should have, instead, been applied. This Court 6 ruled:

"The judgments spoken of and referred to are judgments in litigations involving loans or forbearance of any money, goods or credits. any other kind of monetary judgment which has nothing to do with, nor involving loans or forbearance of any money, goods or credits does not fall within the coverage of the said law for it is not within the ambit of the authority granted to the Central Bank.

"xxx

"Coming to the case at bar, the decision herein sought to be executed is one rendered in an Action for Damages for injury to persons and loss of property and does not involve any loan, much less forbearances of any money, goods or credits. As correctly argued by the private respondents, the law applicable to the said case is Article 2209 of the New Civil Code which reads

ARTICLE 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 interest agreed upon, and in the absence of stipulation, the legal interest which is six percent per annum."

The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz, 7 promulgated on 28 July 1986. The case was for damages occasioned by an injury to person and loss of property. The trial court awarded private respondent Pedro Manabat actual and compensatory damages in the amount of P72,500.00 with legal interest thereon from the filing of the complaint until fully paid. Relying on the Reformina v. Tomol case, this Court 8 modified the interest award from 12% to 6% interest per annum but sustained the time computation thereof, i.e., from the filing of the complaint until fully paid.

In Nakpil and Sons v. Court of Appeals, 9 the trial court, in an action for the recovery of damages arising from the collapse of a building, ordered inter alia, the "defendant United Construction Co., Inc. (one of the petitioners) . . . to pay the plaintiff, . . ., the sum of P989,335.68 with interest at the legal rate from November 29, 1968, the date of the filing of the complaint until full payment . . . ." Save from the modification of the amount granted by the lower court, the Court of Appeals sustained the trial courts decision. When taken to this Court for review, the case, on 03 October 1986, was decided, thus:

"WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special and environmental circumstances of this case, we deem it reasonable to render a decision imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra. p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5,000,000.00) Pesos to cover all damages (with the exception of attorneys fees) occasioned by the loss of the building and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorneys fees, the total sum being payable upon the finality of this decision. Upon failure to pay on such finality, twelve (12%) per cent interest per annum shall be imposed upon aforementioned amounts from finality until paid. Solidary costs against the defendant and third-party defendants (except Roman Ozaeta)." (Emphasis supplied).

A motion for reconsideration was filed by United Construction, contending that "the interest of twelve (12%) per cent per annum imposed on the total amount of the monetary award was in contravention of law." The Court 10 ruled out the applicability of the Reformina and Philippine Rabbit Bus Lines cases and, in its resolution of 15 April 1988, it explained:

"There should be no dispute that the imposition of 12% interest pursuant to Central Bank Circular No. 416 . . . is applicable only in the following: (1) loans; (2) forbearance of any money, goods or credit; and (3) rate allowed in judgments (judgments spoken of refer to judgments involving loans or forbearance of any money, goods or credits. (Philippine Rabbit Bus Lines Inc. v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260