digests assigned

7/26/2019 Digests Assigned

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G.R. No. L-20240

Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-20240 December 31, 1965

REPUL!C O" T#E P#!L!PP!NES,plaintiff-appellee,

vs.$OSE GR!$%LDO, defendant-appellant.

Office of the Solicitor General for plaintiff-appellee.

Isabelo P. Samson for defendant-appellant.

&%LD!'%R,J.:

In the year !"# appellant $ose %ri&aldo obtained five loans fro' the branch office of the Ban(of )ai*an, +td. in Bacolod City, in the total su' of P,.! *ith interest at the rate of /0 per

annu', co'pounded 1uarterly. )hese loans are evidenced by five pro'issory notes e2ecuted by

the appellant in favor of the Ban( of )ai*an, +td., as follo*s3 4n $une , !"#, P/55.556 on $une#, !"#, P7!.6 on $une , !"#, P./6 on Au8ust !, !"#,P#55.556 on Au8ust #, !"#,P55.55, all notes *ithout due dates, but because the loans *ere due one year after they *ere

incurred. )o secure the pay'ent of the loans the appellant e2ecuted a chattel 'ort8a8e on the

standin8 crops on his land, +ot No. "!" (no*n as 9acienda Ca'pu8as in 9ini8iran, Ne8ros4ccidental.

By virtue of :estin8 4rder No. P-", dated $anuary , !"/, and under the authority provided for

in the )radin8 *ith the Ene'y Act, as a'ended, the assets in the Philippines of the Ban( of

)ai*an, +td. *ere vested in the %overn'ent of the ;nited


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pay'ent of the account in 1uestion. )he record sho*s that the appellant had actually received the

*ritten de'and for pay'ent, but he failed to pay.

)he a88re8ate a'ount due as principal of the five loans in 1uestion, co'puted under theBallantyne scale of values as of the ti'e that the loans *ere incurred in !"#, *as P!./"6 and

the interest due thereon at the rate of /0 per annu' co'pounded 1uarterly, co'puted as of=ece'ber #, !7! *as P,#.#.

4n $anuary , !/ the appellee filed a co'plaint in the $ustice of the Peace Court of9ini8aran, Ne8ros 4ccidental, to collect fro' the appellant the unpaid account in 1uestion. )he

$ustice of the Peace 4f 9ini8aran, after hearin8, dis'issed the case on the 8round that the action

had prescribed. )he appellee appealed to the Court of >irst Instance of Ne8ros 4ccidental and onMarch /, !/ the court a quo rendered a decision orderin8 the appellant to pay the appellee the

su' of P,#.# as of =ece'ber #, !7!, plus interest at the rate of /0 per annu'

co'pounded 1uarterly fro' the date of the filin8 of the co'plaint until full pay'ent *as 'ade.

)he appellant *as also ordered to pay the su' e1uivalent to 50 of the a'ount due as attorney?s

fees and costs.

)he appellant appealed directly to this Court. =urin8 the pendency of this appeal the appellant

$ose %ri&aldo died. ;pon 'otion by the


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)he *ord privy denotes the idea of succession ... hence an assi8nee of a credit,

and one subro8ated to it, etc. *ill be privies6 in short, he *ho by succession is

placed in the position of one of those *ho contracted the &udicial relation ande2ecuted the private docu'ent and appears to be substitutin8 hi' in the personal

ri8hts and obli8ation is a privy @Alpurto vs. Pere, # Phil. 7, !5.

)he ;nited


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)his contention of the appellant has no 'erit. >irstly, it should be considered that the co'plaint

in the present case *as brou8ht by the Republic of the Philippines not as a no'inal party but in

the e2ercise of its soverei8n functions, to protect the interests of the


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e1uivalent to P!./" in 8enuine Philippine currency *hich *as considered the a88re8ate

a'ount due as principal of the five loans, and the a'ount of P,#.# as of =ece'ber #, !7!

*as arrived at after co'putin8 the interest on the principal su' of P!./" co'pounded1uarterly fro' the ti'e the obli8ations *ere incurred in !"#.

It is the stand of the appellee that the Ballantyne scale of values should be applied as of the ti'ethe obli8ation *as incurred, and that *as in $une !"#. )his stand of the appellee *as upheld by

the lo*er court6 and the decision of the lo*er court is supported by the rulin8 of this Court in thecase ofilado vs. !e la "osta@%.R. No. +-75, April #5, !"!6 "/ 4.%. 7", *hich states3

... Contracts stipulatin8 for pay'ents presu'ably in $apanese *ar notes 'ay be

enforced in our Courts after the liberation to the e2tent of the &ust obli8ation of thecontractin8 parties and, as said notes have beco'e *orthless, in order that &ustice

'ay be done and the party entitled to be paid can recover their actual value in

Philippine Currency, #hat the debtor or defendant ban$ should return or pa% is

the value of the &apanese militar% notes in relation to the peso in Philippine

"urrenc% obtainin' on the date #hen and at the place #here the obli'ation #asincurred unless the parties had a'reed other#ise. ... . @italics supplied

IN :IE 4> )9E >4RE%4IN%, the decision appealed fro' is affir'ed, *ith costs a8ainst the

appellant. Inas'uch as the appellant $ose %ri&aldo died durin8 the pendency of this appeal, hisestate 'ust ans*er in the e2ecution of the &ud8'ent in the present case.

(en')on* ".&.* "oncepcion* (arrera* Re'ala* (autista +n'elo* Re%es* &.(.,.* Ma$alintal and

(en')on* &.P.* &&.* concur.

)he +a*phil Pro&ect - Arellano +a* >oundation


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REPUL!C () GR!$%LDO, GR L-20240

>acts

Appellant $ose %ri&aldo obtained five loans fro' the branch office of the Ban( of )ai*an

)hese loans are evidenced by five pro'issory notes e2ecuted by the appellant in favor of

the Ban( of )ai*an

)o secure the pay'ent of the loans the appellant e2ecuted a chattel 'ort8a8e on the

standin8 crops on his land

the assets in the Philippines of the Ban( of )ai*an, +td. *ere vested in the %overn'ent

of the ;nited


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)he *ord privy denotes the idea of succession ... hence an assi8nee of a credit, and one

subro8ated to it, etc. *ill be privies

)he ;nited


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M*r+* Soe* Tom+mb*/ () %. $o)e Tom+mb*/

)his resolves the petition for revie* on certiorariunder Rule "7 of the Rules of Court, prayin8 that the

=ecisionFGdated $uly , 55" and ResolutionFGdated Au8ust #, 55"pro'ul8ated by the Court of

Appeals @CA, be reversed and set aside.

)he antecedent facts are as follo*s.

Petitioner and respondent are siblin8s. )heir parents donated to petitioner an ei8ht-door apart'ent located

at "!


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also stopped 'a(in8 'onthly pay'ents and i8nored the de'and letter dated =ece'ber , !! sent by

respondent?s counsel.

4n >ebruary , !!, respondent filed a Co'plaint a8ainst petitioner, de'andin8 the latter to pay the

for'er the net a'ount of P#,!!,5.7 plus interest of 0 per annu' fro' date of default.

At the pre-trial conference, the issues *ere narro*ed do*n as follo*s3

. hether or not a loan *as duly constituted bet*een the plaintiff and the defendant in connection

*ith the i'prove'ents or renovations on apart'ent units A-9, *hich is in the na'e of the defendant

Fherein petitionerG6

. Assu'in8 that such a loan *as duly constituted in favor of plaintiff Fherein respondentG, *hether or

not the sa'e is already due and payable6

#. Assu'in8 that said loan is already due and de'andable, *hether or not it is to be paid out of the

rental proceeds fro' the apart'ent units 'entioned, presu'in8 that such issue *as raised in the Ans*er

of the =efendant6

". Assu'in8 that the said loan *as duly constituted in favor of plaintiff Fherein respondentG, *hether

or not it is in the a'ount of P#,!5!,5.5 and *hether or not it *ill earn le8al interest at the rate of 0

per annu', co'pounded, as provided in Article of the Civil Code of the Philippines, fro' the date

of the e2tra&udicial de'and6 and

7. hether or not the plaintiff Fherein respondentG is entitled to the reliefs prayed for in his Co'plaint

or *hether or not it is the defendant Fherein petitionerG *ho is entitled to the reliefs prayed for in her

Ans*er *ith Counterclai'.F"G

4n Nove'ber 7, 55, the Re8ional )rial Court @R)C of Hueon City, Branch , rendered a =ecision,F7Gthe dispositive portion of *hich reads as follo*s3

9ERE>4RE, pre'ises considered, &ud8'ent is hereby rendered in favor of the plaintiff and a8ainst the

defendant orderin8 the latter to pay the for'er the follo*in83
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. )he su' of P#,!!,5.7 *ith interest thereon at the le8al rate of 0 per annu' co'puted fro'

the date of default until the *hole obli8ation is fully paid6

. )he su' of P75,555.55 as and by *ay of attorney?s fees6 and

#. )he cost of suit.

APPEA+< AC)E= N4) IN ACC4R= I)9 +A AN= APP+ICAB+E

$;RI )9E >IRME= )9E+4ER C4;R)?IN=IN% )9A) )9E +4AN BE)EEN PE)I)I4NER AN= RE APPEA+< ERRE= BJ =EPAR)IN% >R4M )9E ACCEP)E= AN= ; A>>IRMIN% )9E =;E AN= =EMAN=ABI+I)J 4>

)9E +4AN C4N)RARJ )4 )9E E:I=ENCE PRE


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III.

)9E C4;R) 4> APPEA+< ERRE= >R4M )9E ACCEP)E= AN= ; A>>IRMIN% )9E AAR= 4> A))4RNEJ?< >EE< )4 )9E RE


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Respondent also believes that he is entitled to attorney?s fees, as petitioner alle8edly sho*ed bad faith by

abscondin8 and co'pellin8 hi' to liti8ate.

)he Court finds the petition un'eritorious.

It is undisputed that herein parties entered into a valid loan contract. )he only 1uestion is, has petitioner?s

obli8ation beco'e due and de'andableK )he Court resolves the 1uestion in the affir'ative.

)he evidence on record clearly sho*s that after renovation of seven out of the ei8ht apart'ent units had

been co'pleted, petitioner and respondent a8reed that the for'er shall already start 'a(in8 'onthly

pay'ents on the loan even if renovation on the last unit @;nit A *as still pendin8. %enaro )o'i'ban8,

the youn8er brother of herein parties, testified that a 'eetin8 *as held a'on8 petitioner, respondent,

hi'self and their eldest sister Maricion, so'eti'e durin8 the first or second 1uarter of !!, *herein

respondent de'anded pay'ent of the loan, and petitioner a8reed to pay. Indeed, petitioner be8an to 'a(e

'onthly pay'ents fro' $une to 4ctober of !! totallin8 P!#,755.55.FGIn fact, petitioner even ad'itted

in her Ans*er *ith Counterclai' that she had )*re o m*e *me) o *++ ere+

re)oe7 *) e )*me 8*) + *ccor 8+ er comm+me o * 8ee(er )e 8*) *be6 2 2 2 .F!G

Evidently, by virtue of the subse1uent a8ree'ent, the parties 'utually dispensed *ith the condition that

petitioner shall only be8in payin8 after the co'pletion of all renovations.)here *as, in effect, a'odificatory or partial novation, of petitioner?s obli8ation. Article ! of the Civil Code provides, thus3

Art. !. 4bli8ations 'ay be 'odified by3

@ C*/+/their ob&ect or r+c+* co++o)6

@


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No(*+o m* e+er be e+c+(e or mo++c*or, 'uch bein8 dependent on the nature of the chan8e

and the intention of the parties. E2tinctive novation is never presu'ed6 there 'ust be an e2press intention

to novate6 2 2 2 .

An e2tinctive novation *ould thus have the t*in effects of, first, e2tin8uishin8 an e2istin8 obli8ation and,

second, creatin8 a ne* one in its stead. )his (ind of novation presupposes a confluence of four essential

re1uisites3 @ a previous valid obli8ation6 @ an a8ree'ent of all parties concerned to a ne* contract6 @#

the e2tin8uish'ent of the old obli8ation6 and @" the birth of a ne* valid obli8ation. No(*+o +) mere

mo++c*or 8ere e c*/e bro:/ *bo: b * ):b)e;:e */reeme +) mere +c+e* o

e m*+ ob+/*+o + +) +)*ce,

e e8 */reeme 8+ o *(e e eec o e+/:+)+/ e +r) b: 8o: mere ):eme +

or ):* )ome b: o * o +) ro(+)+o).FG

In On' v. (o'albal,FGthe Court also stated, thus3

2 2 2 e eec o o(*+o m* be *r+* or o*. )here is partial novation *hen there is only a

'odification or chan8e in so'e principal conditions of the obli8ation. It is total, *hen the obli8ation is

co'pletely e2tin8uished. Also, the ter' principal conditions in Article ! should be construed to

include a chan8e in the period to co'ply *ith the obli8ation.


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ith the fore8oin8 findin8 that petitioner?s obli8ation is due and de'andable, there is no lon8er any need

to discuss *hether petitioner?s disappearance fro' the fa'ily co'pound prevented the fulfill'ent of the

ori8inal condition, necessitatin8 application of Article / of the Civil Code, or *hether the obli8ation is

one *ith a condition or a period.

As to attorney?s fees, ho*ever, the a*ard therefor cannot be allo*ed by the Court. It is an oft-repeated

rule that the trial court is re1uired to state the factual, le8al or e1uitable &ustification for a*ardin8

attorney?s fees.F7G)he Court e2plained in(uin' v. Santos,F/Gto *it3

2 2 2 hile Article 5 of the Civil Code allo*s attorney?s fees to be a*arded if the clai'ant is

co'pelled to liti8ate *ith third persons or to incur e2penses to protect his interest by reason of an

un&ustified act or o'ission of the party fro' *ho' it is sou8ht, ere m:) be * )o8+/ * e o)+/

*r *ce 8+: or + b* *+ * r*c+c* comee e c*+m* o ++/*e * +c:r

++/*+o ee)e). ! (+e8 o e ec*re o+c o e *8 * *8*r) o *ore?) ee) *re eece+o r*er * e r:e, + +) ece))*r or e r+* co:r o m*e ere)) ++/) o *c)

* *8 * 8o: br+/ e c*)e 8++ e ece+o * @:)+ e /r* o ):c *8*r.2 2 2.

)hus, the 'atter of attorney?s fees cannot be touched upon only in the dispositive portion of the

decision. )he te2t itself 'ust state the reasons *hy attorney?s fees are bein8 a*arded. 2 22FG

In the above-1uoted case, there *as a findin8 that defendants therein had no intention of fulfillin8 their

obli8ation in co'plete disre8ard of the plaintiffs ri8ht, and yet, the Court did not dee' this as sufficient

&ustification for the a*ard of attorney?s fees. :erily, in the present case, *here it is understandable thatso'e 'isunderstandin8 could arise as to *hen the obli8ation *as indeed due and de'andable, the Court

'ust li(e*ise disallo* the a*ard of attorney?s fees.

e no* co'e to a discussion of *hether interest should be i'posed on petitioner?s

indebtedness. InRo%al "ar'o "orp. v. !FS Sports 0nlimited* Inc.,FGthe Court reiterated the settled rule

on i'position of interest, thus3

As to co'putation of le8al interest, the se'inal rulin8 inEastern Shippin' ,ines* Inc. v. "ourt of+ppealscontrols, to *it3

2 2 2 2

II. ith re8ard particularly to an a*ard of interest in the concept of actual and co'pensatory

da'a8es, the rate of interest, as *ell as the accrual thereof, is i'posed, as follo*s3
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. hen an obli8ation is breached, and it consists in the pay'ent of a su' of 'oney, i.e., a loan or

forbearance of 'oney, the interest due should be that *hich 'ay have been stipulated in *ritin8.

>urther'ore, the interest due shall itself earn le8al interest fro' the ti'e it is &udicially de'anded. In the

absence of stipulation, the rate of interest shall be 0 per annu' to be co'puted fro' default, i.e., fro'

&udicial or e2tra&udicial de'and under and sub&ect to the provisions of Article /! of the Civil Code.

. hen an obli8ation, not constitutin8 a loan or forbearance of 'oney, is breached, an interest on

the a'ount of da'a8es a*arded 'ay be i'posed at the discretion of the courtat the rate of /0 per

annu'. No interest, ho*ever, shall be ad&ud8ed on unli1uidated clai's or da'a8es e2cept *hen or until

the de'and can be established *ith reasonable certainty. Accordin8ly, *here the de'and is established

*ith reasonable certainty, the interest shall be8in to run fro' the ti'e the clai' is 'ade &udicially or

e2tra&udicially @Art. /!, Civil Code, but *hen such certainty cannot be so reasonably established at the

ti'e the de'and is 'ade, the interest shall be8in to run only fro' the date the &ud8'ent of the court is

'ade @at *hich ti'e the 1uantification of da'a8es 'ay be dee'ed to have been reasonably ascertained.

)he actual base for the co'putation of le8al interest shall, in any case, be on the a'ount finally ad&ud8ed.

#. hen the &ud8'ent of the court a*ardin8 a su' of 'oney beco'es final and e2ecutory, the rate

of le8al interest, *hether the case falls under para8raph or para8raph , above, shall be 0 per annu'

fro' such finality until its satisfaction, this interi' period bein8 dee'ed to be by then an e1uivalent to a

forbearance of credit.

)he fore8oin8 rule on le8al interest *as e2plained in Sun'a-"han v. "ourt of +ppeals*F!Gin this *ise3

Eastern Shippin' ,ines* Inc. synthesied the rules on the i'position of interest, if proper, and the

applicable rate, as follo*s3 Te 12A er *:m r*e :er C C+rc:*r No. 416 )* * o o

o*) or orbe*r*ce o moe, /oo), or cre+), *) 8e *) o @:/me) +(o(+/ ):c o* or

orbe*r*ce o moe, /oo), or cre+, *hile the /0 per annu' under Art. 5! of the Civil Codeapplies *hen the transaction involves the pay'ent of inde'nities in the concept of da'a8e arisin8 fro'

the breach or a delay in the perfor'ance of obli8ations in 8eneral, *ith the application of both rates

rec(oned fro' the ti'e the co'plaint *as filed until the Fad&ud8edG a'ount is fully paid. In either

instance, the rec(onin8 period for the co''ence'ent of the runnin8 of the le8al interest shall be sub&ect

to the condition that the courts are vested *ith discretion, dependin8 on the e1uities of each case, on the

a*ard of interest.F5G
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In accordance *ith the above rulin8, since the obli8ation in this case involves a loan and there is no

stipulation in *ritin8 as to interest due, the rate of interest shall be 0 per annu' co'puted fro' the

date of e2tra&udicial de'and.

>acts3

Maria


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