Case Digest (G.R. No. 13761)
Facts:
The case involves The Bachrach Garage and Taxicab Co. (Inc.) as the plaintiff and Vicente Golingco as the defendant. The dispute arose from a series of transactions related to the sale of a truck and the subsequent promissory note issued by the defendant. On August 23, 1915, Vicente Golingco executed a promissory note (Exhibit A) in favor of the plaintiff for the amount of P8,750, promising to pay this sum with 10% interest per annum by September 1, 1916. The plaintiff claimed that the defendant owed them a total of P7,583.93, P1,059.17, and P1,534.75 across three causes of action, with additional claims for interest and attorney's fees.
On February 16, 1916, Golingco sent a letter (Exhibit 1) to the plaintiff, enclosing a check for P7,000 as a partial payment for the truck, which he requested to be delivered to a representative. The plaintiff acknowledged receipt of this payment in their response (Exhibit C), applying it to the purchase price of the truck, which they ...
Case Digest (G.R. No. 13761)
Facts:
Background of the Case
The case involves a dispute over the recovery of a sum of money. The plaintiff, Bachrach Garage and Taxicab Co. (Inc.), filed a complaint against the defendant, Vicente Golingco, alleging three causes of action for unpaid debts.First Cause of Action
- The plaintiff claimed P7,583.93 with interest from December 14 (year unspecified) and an additional 25% of the total amount.
- The defendant had issued a promissory note (Exhibit A) for P8,750 on August 23, 1915, with 10% annual interest and a 25% attorney’s fee clause in case of non-payment.
Second Cause of Action
- The plaintiff claimed P1,059.17 with interest and an additional 25% of the total amount.
- This amount was based on a debt of P1,000 with accrued interest of P59.17 as of January 19, 1917.
Third Cause of Action
- The plaintiff claimed P1,534.75 with legal interest from January 19, 1917.
Partial Payment and Dispute
- On February 16, 1916, the defendant sent a check for P7,000, which he claimed was a partial payment for the promissory note (Exhibit A).
- The plaintiff, however, applied the P7,000 to the purchase price of a 45-horsepower M. White truck, which the defendant had ordered but not yet received.
Lower Court Decision
- The lower court ruled in favor of the plaintiff, ordering the defendant to pay:
- P7,583.93 with 10% interest from January 19, 1917, plus 12.5% of the total amount (reduced from 25% attorney’s fees).
- P1,059.17 with the same interest and 12.5% of the total amount.
- P1,534.75 with legal interest from January 19, 1917.
- The lower court ruled in favor of the plaintiff, ordering the defendant to pay:
Defendant’s Appeal
- The defendant appealed, assigning three errors:
- The P7,000 payment should have been applied to the promissory note (Exhibit A).
- The court erred in awarding multiple interest rates (8%, 10%, and 12.5%) on the amounts claimed.
- The court erred in not ordering the plaintiff to return P678.50, which the defendant claimed was overpaid.
- The defendant appealed, assigning three errors:
Issue:
- (Unlock)
Ruling:
- (Unlock)
Ratio:
Application of Payments
Under Article 1172 of the Civil Code, a debtor owing multiple debts to the same creditor may specify which debt a payment should be applied to. In this case, the defendant’s payment of P7,000 was clearly intended for the purchase of the M. White truck, not the promissory note (Exhibit A).Interest on Accrued Interest
Article 1109 of the Civil Code and Section 5 of Act No. 2655 prohibit the accrual of interest on interest unless there is an agreement or judicial demand. The lower court erred in awarding interest on accrued interest before judicial demand.Attorney’s Fees
The 25% attorney’s fee clause in the promissory note was valid. However, the lower court reduced it to 12.5%, which the Supreme Court upheld as reasonable. Attorney’s fees are not considered interest under Act No. 2655 and are not subject to the interest computation limits.Overpayment Claim
The defendant failed to provide sufficient evidence to support his claim that the plaintiff owed him P678.50. The Supreme Court found no merit in this contention.
Conclusion:
The Supreme Court affirmed the lower court’s judgment with modifications:
- For the first cause of action, the defendant was ordered to pay P6,828.33 with 10% interest from January 19, 1917, and P755.60 with 6% interest from the same date.
- For the second cause of action, the defendant was ordered to pay P1,000 with 10% interest and P59.17 with 6% interest from January 19, 1917.
- The 12.5% attorney’s fee was upheld.
- No special finding as to costs.