Arthur Menchavez v. Marlyn Bermudez
(Note: once
October 11, 2012; Velasco, Jr.:
Topic: Appeal Generally; where to appeal; who may appeal
Note: I think this is included in our syllabus because it shows the appeals
process from the lowest court up to the SC. [ MeTC RTC CA SC ]
FACTS:
Petition for Review on Certiorari (Rule 45)
Nov. 7, 1998: Menchavez and Bermudez entered into a loan
agreement.
o Php 500,000 with interest fixed at 5% per month
o Bermudez executed a promissory note.
Bermudez then issued a Prudential Bank Check to mature on Dec.
17, 1993.
o Thereafter replaced Check with five postdated Prudential
Bank checks totaling Php 565,000.
o Four of the checks were cleared and fully encashed when
presented for payment. (total of Php 465,000)
o The last check, while dishonored, was partially paid by
Bermudez with a replacement check for Php 110,000.
Menchavez alleged entering into a verbal compromise agreement
with Bermudez regarding the delay in payment and the
ISSUES + RULING:
accumulated interest.
o Agreement: Bermudez would deliver 11 postdated
Prudential Bank checks as payment.
o However, when presented for payment, eight of these
checks were dishonored for the reason of Drawn against
Insufficient Funds.
Nine criminal informations were then filed against Bermudez before
MeTC in Makati City charging her with violations of BP 22.
MeTC acquitted Bermudez of the charges against her.
an accused is acquitted, the acquittal cannot be appealed! Or else
double jeopardy!)
o Raised the defense of payment and proved that Bermudez
paid the sum of Php 925,000 or Php 425,000 OVER the Php
500,000 loan.
Menchavez then brought the matter on appeal to the RTC in Makati
City, appealing the civil aspect of the cases.
RTC held that the Php 425,000 excess payment had not fully settled
Bermudezs obligations to Menchavez.
o A total of Php 165,000 remains unpaid.
o However, the 5% monthly interest stipulated could not be
applied because there was no written agreement: thus, the
[legal] rate of 12% per annum would be used.
Bermudez raised the matter to the CA on whether Menchavez could
still demand payment on the original loan of Php 500,000 despite
the payment of the total of Php 925,000.
o CA reversed and set aside the RTC decision.
o The principal of the load had already been paid and the sum
of Php 425,000 added by way of interest at 5% per month
or 60% per annum and that courts could reduce liquidated
damages if these are iniquitous or unconscionable.
Menchavez then brought the matter to the SC.
I. Whether or not the obligation based on the compromise
agreement is separate and independent from Bermudezs
original loan obligation?
It cannot be argued that there are two separate validly
subsisting obligations to be fulfilled by Bermudez.
It is beyond cavil that if a party fails or refuses to abide by a
compromise agreement, the other party may either enforce the
compromise or regard it as rescinded and insist upon his
original demand. To allow petitioner to recover under the terms
 of the compromise agreement and to further seek enforcement
of the original loan transaction would constitute unjust
enrichment. The compromise agreement was entered into
precisely to extinguish the obligation under the loan transaction,
not to create two sources of obligation for respondent. There is
unjust enrichment under Article 22 of the Civil Code when (1) a
person is unjustly benefited; and (2) such benefit is derived at
the expense of or with damages to another.
II. Whether or not the 5% per month stipulated interest is valid?
The 60% per annum interest rate cannot be countenanced.
Castro v. Tan is instructive. The Court, in said case, tagged the 5%
monthly interest rate agreed upon as "excessive, iniquitous,
unconscionable and exorbitant, contrary to morals, and the
law."
Parties may be free to contract and stipulates as they see fit,
but that is not an absolute freedom. Art. 1306 of the Civil Code
provides. "The contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy." While petitioner harps
on the voluntariness with which the parties agreed upon the 5%
per month interest rate, voluntariness does not make the
stipulation on interest valid. The 5% per month, or 60% per
annum, rate of interest is, indeed, iniquitous, and must be
struck down.

DISPOSITIVE: WHEREFORE, the petition is DENIED. The CAs Decision dated

May 30, 2008 and Resolution dated November 7, 2008 in CA-G.R. SP No.
99143 are hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.