Catungal vs Hao, GR No.

134972, 22 March 2001, 355 SCRA 29

FACTS
The original owner Aniana Galang, leased a 3-storey building in
Paraaque to BPI in 1972. During the lease period, BPI subleased the
ground floor to Doris Hao. In 1984, Galang and Hao executed a lease
nd
rd
contract on the 2 and 3 floors of the building. 2 years later, spouses
Catungal bought the property from Galang. Upon expiration of the lease
agreements, Catungal demanded Hao to vacate the building. The demand
was unheeded so petitioners filed for ejectment before the MeTC, which
ordered Hao to vacate the premises and pay P20,000 until she finally
vacates. Petitioners moved for clarificatory or amended judgment on the
ground that lthough MeTC ordered defendant to vacate, it only awarded rent
or compensation for the use of said property for the ground floor and not for
the entire subject property. the MeTC amended the judgment but petitioners
moved for reconsideration praing that respondent be ordered to pay P20,000
pm for the use and occupancy of the ground floor and P10,000 pm for the
nd
rd
2 and 3 floors. The case was referred to RTC which affirmed the decision.
On appeal to the CA, the latter reduced the P20,000 to P8,000 and the
P10,000 each to P5,000 each.

meanwhile, Skyli Builders, thru President Calvin Arcilla secured loans from
BPI with FGU Insurance as surety. Banco Filipino issued an account
statement with 17% pa as interest. The Arcillas filed for annulment of the
loan contracts because the rate of interests charged were usurious.
ISSUE
Whether or not respondents are entitled to refund of the alleged
interest overpayments.
HELD
Yes. Private respondents aver that they are entitled to the refund
inasmuch as the escalation clause incorporated in the loan contracts do not
have a corresponding de-escalation clause and is therefore, illegal.
In Banco Filipino Savings & Mortgage Bank vs Navarro, the Court
ruled that Central Bank Circular 494, although it has the force and effect of
law, is not a law and is not the law contemplated by the parties which
authorizes the petitioner to unilaterally raise the interest rate of loan. The
reliance on the circular was without any legal basis.
Consolidated Bank vs CA, GR No. 114286, 19 April 2001, 356 SCRA 671

ISSUE
24FEB
Whether or not the RTC decision should be reinstated
FACTS
HELD
Yes. The plaintiff in an ejectment case is entitled to damages caused
by his loss of the use and possession of the premises.

Banco Filipino vs CA
FACTS
Elsa and Calvin Arcilla secured, on 3 occassions, loan from petitioner
as evidenced by promissory note. REM was also executed. Under said
deeds, Banco Filipino may increase rate of interest on said loans, within the
limits allowed by law. at that time, under Usury Law, the maximum rate of
interest for loans secured by REM was 12% pa. later, the Central bank
issued Circular No. 494 provinding for the maximum interest of 19%pa.

Continental Cement Corp obtained from Consolidated Bank letter of credit

used to purchased 500,000 liters of bunker fuel oil. Respondent Corporation
made a marginal deposit to petitioner. A trust receipt was executed by
respondent corporation, with respondent Gregory Lim as signatory. Claiming
that respondents failed to turn over the goods or proceeds, petitioner filed a
complaint for sum of money before the RTC of Manila. In their answer,
respondents aver that the transaction was a simple loan and not a trust
receipt one, and tht the amount claimed by petitioner did not take into
account payments already made by them. The court dismissed the
complaint, CA affirmed the same.
ISSUE
Whether or not the marginal deposit should not be deducted outright from the
amount of the letter of credit.

HELD
No. petitioner argues that the marginal deposit should be considered only
after computing the principal plus accrued interest and other charges. It could
be onerous to compute interest and other charges on the face value of the
letter of credit which a bank issued, without first crediting or setting off the
marginal deposit which the borrower paid to it-compensation is proper and
should take effect by operation of law because the requisited in Art. 1279 are
present and should extinguish both debts to the concurrent amount. Unjust
enrichment.

Mendoza vs. Court of Appeals (359 SCRA 438)

FACTS:
Respondent was granted by respondent Philippine National Bank (PNB)
credit line and Letter of Credit/Trust Receipt (LC/TR) line. As security for the
credit accommodations and for those which may thereinafter be granted,
petitioner mortgaged to respondent PNB some of his properties. Petitioner
later requested for loan restructuring and issued promissory notes, which he
failed to comply. Respondent PNB extra-judicially foreclosed the real and
chattel mortgages, and the mortgaged properties were sold at public auction
to respondent PNB, as highest bidder. Petitioner filed a case in the RTC
contending that foreclosure is illegal invoking promissory estoppel, and
secured favorable judgment. The decision of RTC was reversed by the Court
of Appeals.

attempt to tender any redemption price during the one-year redemption

period.
First Metro vs Este del Sol,, GR No. 141811, 15 November 2001, 369
SCRA 99
24FEB
FACTS
FMIC granted Este del Sol a loan to finance a sports/resort complex
in Montalban, Rizal. Under the agreement, the interest was 16% pa based on
the diminishing balance. In case of default, an acceleration clause was
provided and the amount due is subject to 20% one-time penalty on the
amount due and such amount shall bear interest at the highest rate permitted
by law. respondent executed a REM, individual continuing suretyship and an
underwriting agreement whereby FMIC shall underwrite the public offering of
one P120,000 common shares of respondents capital stock for one-time
underwriting fee of P200,000. For failure to pay its obligation, FMIC caused
the foreclosure of the REM. At the public auction, FIC was the highest bidder.
Petitioner filed to collect for alleged deficiency balance against respondents
since it failed to collect from the sureties, plus interest at 21% pa. the trial
court ruled in favor of FMIC. Respondents appealed before the CA which
held that the fees provided for in the Underwriting and Consultacy
Agreements were mere subterfuges to camouflage the excessively usurious
interest charged. The CA ordered FMIC to reimburse petitioner representing
what is ue to petitioner and what is due to respondent.
ISSUE

ISSUE:
Whether or not the foreclosure of petitioners real estate and chattel
mortgages were legal and valid as opposed to promissory estoppel.
RULING:
YES. First, there was no promissory estoppel as the promise (of respondent
bank) must be plain and unambiguous and sufficiently specific. Second,
there was no meeting of the minds leading to another contract, hence loan
was not restructured. Third, promissory notes petitioner issued were valid.
Fourth, stipulation in the mortgage, extending its scope and effect to afteracquired property is valid and binding after the correct and valid process of
extra-judicial foreclosure. Finally, record showed that petitioner did not even

Whether or not the interests are lawful

HELD
No. an apparently lawful loan is usurious when it is intended that
additional compensation for the loan be disguised by an ostensibly unrelated
contract for the payment by the borrower for the lenders services which re of
little value or which are not in fact to be rendered. Article 1957 clearly
provides: contracts and stipulations, under any cloak or device whatever,
intended to circumvent the law agaistn usury shall be void. The borrower
may recover in accordance with the laws on usury.
Frias v. San Diego-Sison

BOBIE ROSE FRIAS v. FLORA SAN DIEGO-SISON

duplicate copy. RTC issued a writ of preliminary attachment upon the filing of
a 2M bond.

2007 / Austria-Martinez
On 7 Dec 1990, Bobie Rose Frias and Dr. Flora San-Diego Sison entered
into a MOA over Friasproperty
MOA consideration is 3M
Sison has 6 months from the date of contracts execution to notify Frias of
her intention to purchase the property with the improvements at 6.4M
Prior to this 6 month period, Frias may still offer the property to other
persons, provided that 3M shall be paid to Sison including interest based on
prevailing compounded bank interest + amount of sale in excess of 7M
[should the property be sold at a price greater than 7M]
In case Frias has no other buyer within 6 months from the contracts
execution, no interest shall be charged by Sison on the 3M
th

In the event that on the 6 month, Sison would decide not to purchase
the property, Frias has 6 months to pay 3M (amount shall
earncompounded bank interest for the last 6 months only)
3M treated as a loan and the property considered as the security for the
mortgage
Upon notice of intention to purchase, Sison has 6 months to pay the balance
of 3.4M (6.4M less 3M MOA consideration)
Frias received from Sison 3M (2M in cash; 1M post-dated check dated
February 28, 1990, instead of 1991, which rendered the check stale). Frias
gave Sison the TCT and the Deed of Absolute Sale over the
property. Sison decided not to purchase the property, so she notified
Frias through a letter dated March 20, 1991 [Frias received it only on June
11, 1991], and Sison reminded Frias of their agreement that the 2M Sison
paid should be considered as a loan payable within 6 months. Frias
failed to pay this amount.
Sison filed a complaint for sum of money with preliminary attachment.
Sison averred that Frias tried to deprive her of the security for the loan by
making a false report of the loss of her owners copy of TCT, executing an
affidavit of loss and by filing a petition[1] for the issuance of a new owners

RTC found that Frias was under obligation to pay Sison 2M with
compounded interestpursuant to their MOA. RTC ordered Frias to pay
Sison:
2M + 32% annual interest beginning December 7, 1991 until fully paid
70k representing premiums paid by Sison on the attachment bond with legal
interest counted from the date of this decision until fully paid
100k moral, corrective, exemplary damages [liable for moral damages
because of Frias fraudulent scheme]
100k attorneys fees + cost of litigation

CA affirmed RTC with modification32% reduced to 25%. CA said that

there was no basis for Frias to say that the interest should be charged for 6
months only. It said that a loan always bears interest; otherwise, it is not a
loan. The interest should commence on June 7, 1991 until fully paid, with
compounded bank interest prevailing at the time [June 1991] the 2M was
considered as a loan (as certified by the bank).
ISSUES & HOLDING Ratio only discusses topic of INTEREST (as per
syllabus)
WON compounded bank interest should be limited to 6 months as contained
in the MOA.NO
WON Sison is entitled to moral damages. YES
WON the grant of attorneys fees is proper, even if not mentioned in the body
of the decision. NO
CA committed no error in awarding an annual 25% interest on the 2M even
beyond the 6-month stipulated period. In this case, the phrase "for the last
six months only" should be taken in the context of the entire agreement.

SC notes that the agreement speaks of two (2) periods of 6 months

each (see FACTSwords in bold & underline). No interest will be charged
st
for the 1 6-month period [while Sison was making up her mind], but only for
nd
the 2 6-month period after Sison decided not to buy the property.
There is nothing in the MOA that suggests that interest will be charged
for 6 months only even if it takes forever for Frias to pay the loan.
The payment of regular interest constitutes the price or cost of the use of
money, and until the principal sum due is returned to the creditor, regular
interest continues to accrue since the debtor continues to use such
principal amount. For a debtor to continue in possession of the principal
of the loan and to continue to use the same after maturity of the
loan without payment of the monetary interest constitutes unjust
enrichment on the part of the debtor at the expense of the creditor.

CA DECISION AND RESOLUTION AFFIRMED WITH MODIFICATION

Award of attorneys fees deleted

customs, public order or public policy, a stipulated penalty,nevertheless, may

be equitably reduced by the courts if it is iniquitous or unconscionable or if
theprincipal obligation has been partly or irregularly complied with.The
question of whether a penalty is reasonable or iniquitous can be partly
subjective and partlyobjective. Its resolution would depend on such factors
as, but not necessarily confined to, the type,extent and purpose of the
penalty, the nature of the obligation, the mode of breach and
itsconsequences, the supervening realities, the standing and relationship of
the parties, and the like, theapplication of which, by and large, is addressed
to the sound discretion of the court.The CA exercised good judgment in reducing the
stipulated penalty interest from 5% to 3% a month. It
was also been held that the 15.189% per annum stipulated interest and the 10% attorneys
is reasonable
and not excessive. The interest prescribed in loan financing arrangements is
a fundamental part of thebanking business and the core of a
bank's existence.

Ligutan vs. CA G.R#138677

Eastern Shipping vs CA Credit Digest

Facts: Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained a loan
in the amount of P120,000.00 from respondent Security Bank and Trust Company.
Petitioners executed a promissorynote binding themselves, jointly and severally, with an
interest of 15.189% per annum upon maturityand to pay a penalty of 5% every
month on the outstanding principal and interest in case of default and

Eastern Shipping vs CA
GR No. 97412, 12 July 1994
234 SCRA 78

also a 10% attorneys fees if the matter were indorsed to a lawyer for collection.
The obligation matured, the petitioners were not able to settle the obligation; The bank gave
anextension, still the same happened. Since the petitioners still defaulted, the
former filed a complaint forrecovery of the due amount.
Issue: Whether the interest and penalty charge imposed by private
respondent bank on petitioners loan
are manifestly exorbitant, iniquitous and unconscionable?Ruling: The obligor
would then be bound to pay the stipulated indemnity without the necessity of
proof on the existence and on the measure of damages caused by the breach. Although a
court may not atliberty ignore the freedom of the parties to agree on such terms
and conditions as they see fit thatcontravene neither law nor morals, good

FACTS
Two fiber drums were shipped owned by Eastern Shipping from
Japan. The shipment as insured with a marine policy. Upon arrival in Manila
unto the custody of metro Port Service, which excepted to one drum, said to
be in bad order and which damage was unknown the Mercantile Insurance
Company. Allied Brokerage Corporation received the shipment from Metro,
one drum opened and without seal. Allied delivered the shipment to the
consignees warehouse. The latter excepted to one drum which contained
spillages while the rest of the contents was adulterated/fake. As
consequence of the loss, the insurance company paid the consignee, so that
it became subrogated to all the rights of action of consignee against the

defendants Eastern Shipping, Metro Port and Allied Brokerage. The

insurance company filed before the trial court. The trial court ruled in favor of
plaintiff an ordered defendants to pay the former with present legal interest of
12% per annum from the date of the filing of the complaint. On appeal by
defendants, the appellate court denied the same and affirmed in toto the
decision of the trial court.

(2)
From the date the judgment is made. Where the demand is
established with reasonable certainty, the interest shall begin to run from the
time the claim is made judicially or EJ but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shll
begin to run only from the date of judgment of the court is made.

ISSUE
(1) Whether the applicable rate of legal interest is 12% or 6%.

(3) The Court held that it should be computed from the decision rendered by
the court a quo.
Siga-an v. Villanueva (2009)Chico-Nazario, J.Facts:

(2) Whether the payment of legal interest on the award for loss or damage
is to be computed from the time the complaint is filed from the date the
decision appealed from is rendered.

Alicia Villanueva filed a complaint against Sebastian Sigaan bec she wants a
return of her money (the excess interest shepaid). Events according to her:
o

HELD
(1)
The Court held that the legal interest is 6% computed from the
decision of the court a quo. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the amount of damaes
awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable
certainty.

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 satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of money.

Sigaan, the comptroller of the Phillipine Navy, offered to loan money to

her. She accepted because she needed
capital for her office supply business venture. She currently supplies office
matl and equipment to the Phil
Navy.
o
She agrees to the loan of P540k. Loan was not in writing and there was
no stipulation as to payment of interest.
o
She issues a check worth P500; as partial payment. 2 months later, she
issues another check worth P200k.
o

The interest due shall be 12% PA to be computed fro default, J or EJD.

Sigaan (who now received P700k from Villanueva) said the excess money
Villanueva paid would be applied asinterest. But Sigaan still kept pestering
her for additional interest and threatened to block her transactions with
the Phil Navy if she wont comply. Fearing this, she paid additional amounts
totalling to P1.2m.

evas obligation only amounted to P540k because there was no interest

agreement. CA affirmed.Issue: Was there overpayment? What about
interest?Held: [Yes. Sigaan should return the excess amounts.] [No interest
to be paid by Villanueva. However, Sigaan should pay intereston the
amounts he should refund Villanueva.]Ratio:

She asked for areceipt but was told that there was no need bec they had
mutual trust and confidence.
SC defines interest: monetary and compensatory:
o
o
She then consulted a lawyer who told her that Sigaan could not validly collect
interest because there was noagreement of interest. She demands from
Sigaan the return of the P660k.

Monetary interest: Interest is a COMPENSATION fixed by the PARTIES for

the use or forbearance of money.
o

According to Sigaan, however:

Compensatory: Interest imposed by LAW or by COURTS as PENALTY or

INDEMNITY.

o
He did not offer to loan but was instead propositioned by Villanueva and
insists that there was no overpayment,as that there was a promissory note
by Villanueva admitting to having borrowed P1.24m.

The right to interest arises only:1. By a contract; or 2. By virtue

of damages for delay or failure to pay the principal loanRE: Interest should
be stipulated in writing

o
As payment, Villanueva issued 6 postdated checks. Only 1 was honoured.
He filed criminal cases againstVillanueva (BP 22). In this BP 22 case, Sigaan
claims that Villanueva, in her testimony, admitted to havingagreed to a 7%
interest. This should be an exception (to the rule that interests should be in
writing) because itwould be unfair since Villanueva already admits to the
interest.
o

NCC 1956: Refers to monetary interest and mandates that no interest shall
be due unless stipulated in writing. So, it isallowed only when the
following concur:1. If there was express stipulation for interest payment2. AN
D if the agreement was in writing

Also Villanueva was already estopped from complaining because she was
given several times to settle her obligation but failed.

In this case, the parties did not agree. As explained by Villanueva,

the presented promissory note was in her handwritingbecause Sigaan told
her to copy it and she did because she feared the threats of Sigaan to block
her deals with the PhilNavy. (this was not rebutted by Sigaan so the SC
believed this explanation)

RTC says: there was overpayment. Villanu

Clearly, there was NO CONSENT to the payment of interest, she was

coerced.RE: Exceptions

Eastern Shipping v. CA:

o

Sigaans claim that

when an obligation NOT constituting a loan or forbearance of money

is breached, interest on amount of damages may be imposed at the rate of
6% per annum.
o

Villanueva admitting to the interest should be an exception, SC says: In the

BP22 case, Villanueva didnot declare to have made an express stipulation in
writing as to the interest. There instances in which interest may beimposed in
the absence of stipulation, verbal or written, are:1. NCC 2209: If
obligation consists in payment of sum of money, no stipulation on interest,
and debtor incurs delay= legal interest 12% per annum2. NCC 2212: interest
due shall earn legal interest from the time it is judicially demanded

Under those 2 instances, interest MAY be imposed only as PENALTY or

damages for breach of CONTRACTUALobligations and NOT for
compensation for the use or forbearance of money.
o
MEANING: those 2 are only applicable to COMPENSATORY interests and
not to monetary interest.

When judgment awarding a sum of money becomes final and executory,

legal interest (whether loan/forbearance or money or not) shall be 12% per
annum from finality
o
The INTERIM period is deemed a forbearance of credit

Sigaans obligation arises from

a quasi-contract of solutio indebitu and NOT from a loan or forbearance of
money. So:
o

o
This case involves a claim for monetary interest. Compensatory is not
chargeable because it was not proventhat Villanueva defaulted in paying
the loan.RE: Solutio indebiti (NCC 2154: 1. if something is received where
there is no right to demand it and 2. it was delivered throughmistake, the
obligation to return it arises)

6%
per annum should be imposed on the amount to be refunded (as well as to
the damages and atty fees)
from time of extra judicial demand (March 3, 1998) up to finality
.

Principle: no one shall enrich himself unjustly at expense of another

o
RE: Interest payment
Amount shall become
12% per annum from finality

of decision
up to its satisfaction

Nacar vs gallery frames

Dario Nacar filed a labor case against Gallery Frames and its owner Felipe
Bordey, Jr. Nacar alleged that he was dismissed without cause by Gallery
Frames on January 24, 1997. On October 15, 1998, the Labor Arbiter (LA)
found Gallery Frames guilty of illegal dismissal hence the Arbiter awarded
Nacar P158,919.92 in damages consisting of backwages and separation
pay.

will increase this is just but a risk that the employer cannot avoid when it
continued to seek recourses against the Labor Arbiters decision. This is also
in accordance with Article 279 of the Labor Code.
Anent the issue of award interest in the form of actual or compensatory
damages, the Supreme Court ruled that the old case of Eastern Shipping
Lines vs CA is already modified by the promulgation of the Bangko Sentral
ng Pilipinas Monetary Board Resolution No. 796 which lowered the legal rate
of interest from 12% to 6%. Specifically, the rules on interest are now as
follows:
1. Monetary Obligations ex. Loans:
a. If stipulated in writing:
a.1. shall run from date of judicial demand (filing of the case)

Gallery Frames appealed all the way to the Supreme Court (SC). The
Supreme Court affirmed the decision of the Labor Arbiter and the decision
became final on May 27, 2002.

a.2. rate of interest shall be that amount stipulated

After the finality of the SC decision, Nacar filed a motion before the LA for
recomputation as he alleged that his backwages should be computed from
the time of his illegal dismissal (January 24, 1997) until the finality of the SC
decision (May 27, 2002) with interest. The LA denied the motion as he ruled
that the reckoning point of the computation should only be from the time
Nacar was illegally dismissed )January 24, 1997) until the decision of the LA
(October 15, 1998). The LA reasoned that the said date should be the
reckoning point because Nacar did not appeal hence as to him, that decision
became final and executory.

b.1. shall run from date of default (either failure to pay upon extra-judicial
demand or upon judicial demand whichever is appropriate and subject to the
provisions of Article 1169 of the Civil Code)

ISSUE: Whether or not the Labor Arbiter is correct.

b. If unliquidated, no interest

HELD: No. There are two parts of a decision when it comes to illegal
dismissal cases (referring to cases where the dismissed employee wins, or
loses but wins on appeal). The first part is the ruling that the employee was
illegally dismissed. This is immediately final even if the employer appeals
but will be reversed if employer wins on appeal. The second part is the ruling
on the award of backwages and/or separation pay. For backwages, it will be
computed from the date of illegal dismissal until the date of the decision of
the Labor Arbiter. But if the employer appeals, then the end date shall be
extended until the day when the appellate courts decision shall become final.
Hence, as a consequence, the liability of the employer, if he loses on appeal,

Except: When later on established with certainty. Interest shall still be 6% per
annum demandable from the date of judgment because such on such date, it
is already deemed that the amount of damages is already ascertained.

b. If not stipulated in writing

b.2. rate of interest shall be 6% per annum

2.

Non-Monetary Obligations (such as the case at bar)

a. If already liquidated, rate of interest shall be 6% per annum, demandable

from date of judicial or extra-judicial
demand (Art. 1169, Civil Code)

3. Compounded Interest
- This is applicable to both monetary and non-monetary obligations

- 6% per annum computed against award of damages (interest) granted by

the court. To be computed from the date when the courts decision becomes
final and executory until the award is fully satisfied by the losing party.

payment made by the buyer (respondent-spouses) if the conditions are not

fulfilled. There is no question that they have in fact, not been fulfilled as the seller
(petitioner) has admitted this. Notwithstanding demand by the buyer (respondentspouses), the seller (petitioner) has failed to return the money and

4. The 6% per annum rate of legal interest shall be applied prospectively:

- Final and executory judgments awarding damages prior to July 1, 2013
shall apply the 12% rate;
- Final and executory judgments awarding damages on or after July 1, 2013
shall apply the 12% rate for unpaid obligations until June 30, 2013; unpaid
obligations with respect to said judgments on or after July 1, 2013 shall still
incur the 6% rate.

should be considered in default from the time that demand was made on September
27, 2000.

Even if the transaction involved a Conditional Deed of Sale, can the stipulation
governing the return of the money be considered as a forbearance of money which
required payment of interest at the rate of 12%? We believe so.

Breach of contract; when 12% interest p.a. applies - G.R. No. 175139
G.R. No. 175139
"x x x.

The interest at the rate of 12% is applicable in the instant case.

Anent the interest rate, the general rule is that the applicable rate of interest shall be
[31]
computed in accordance with the stipulation of the parties.
Absent any
stipulation, the applicable rate of interest shall be 12% per annum when the
obligation arises out of a loan or a forbearance of money, goods or credits. In other
[32]
cases, it shall be six percent (6%). In this case, the parties did not stipulate as to
the applicable rate of interest. The only question remaining therefore is whether the
6% as provided under Article 2209 of the Civil Code, or 12% under Central Bank
Circular No. 416, is due.

The contract involved in this case is admittedly not a loan but a Conditional Deed of
Sale. However, the contract provides that the seller (petitioner) must return the

[33]

In Crismina Garments, Inc. v. Court of Appeals, forbearance was defined as a

contractual obligation of lender or creditor to refrain during a given period of time,
from requiring the borrower or debtor to repay a loan or debt then due and
payable. This definition describes a loan where a debtor is given a period within
which to pay a loan or debt. In such case, forbearance of money, goods or credits
will have no distinct definition from a loan. We believe however, that the phrase
forbearance of money, goods or credits is meant to have a separate meaning from
a loan, otherwise there would have been no need to add that phrase as a loan is
[34]
already sufficiently defined in the Civil Code. Forbearance of money, goods or
credits should therefore refer to arrangements other than loan agreements, where a
person acquiesces to the temporary use of his money, goods or credits pending
happening of certain events or fulfillment of certain conditions. In this case, the
respondent-spouses parted with their money even before the conditions were
fulfilled. They have therefore allowed or granted forbearance to the seller (petitioner)
to use their money pending fulfillment of the conditions. They were deprived of the
use of their money for the period pending fulfillment of the conditions and when those
conditions were breached, they are entitled not only to the return of the principal
amount paid, but also to compensation for the use of their money. And the
compensation for the use of their money, absent any stipulation, should be the same
rate of legal interest applicable to a loan since the use or deprivation of funds is
similar to a loan.

Petitioners unwarranted withholding of the money which rightfully pertains to

respondent-spouses amounts to forbearance of money which can be considered as
an involuntary loan. Thus, the applicable rate of interest is 12% per
[35]
annum. In Eastern Shipping Lines, Inc. v. Court of Appeals, cited in Crismina
[36]
Garments, Inc. v. Court of Appeals, the Court suggested the following guidelines:

I.
When an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasi-delicts is breached, the contravenor can be held liable for
damages. The provisions under Title XVIII on Damages of the Civil Code govern in
determining the measure of recoverable damages.

II.
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 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
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 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 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
[37]
credit.

[38]

Eastern Shipping Lines, Inc. v. Court of Appeals and its predecessor

[39]
case,Reformina v. Tongol both involved torts cases and hence, there was no
forbearance of money, goods, or credits. Further, the amount claimed (i.e.,
damages) could not be established with reasonable certainty at the time the claim
was made. Hence, we arrived at a different ruling in those cases.

Since the date of demand which is September 27, 2000 was satisfactorily
established during trial, then the interest rate of 12% should be reckoned from said
date of demand until the principal amount and the interest thereon is fully satisfied.