Case Digest (G.R. No. 183360) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
On December 27, 2000, Architect Rolando C. De La Paz advanced ₱350,000.00 to L & J Development Company, a property developer led by Atty. Esteban Salonga, under an oral agreement carrying a 6% monthly interest. From December 2000 until August 2003, L & J remitted ₱576,000.00 as interest but thereafter defaulted. In January 2005, Rolando sued L & J and Atty. Salonga before the Metropolitan Trial Court (MeTC) for collection of sum of money with damages, claiming outstanding interest and principal. The MeTC (June 30, 2006) upheld the interest but, on equitable grounds, reduced it to 12% per annum on the unpaid principal, and awarded attorney’s fees. The RTC, Branch 192, Marikina City, affirmed on April 19, 2007. On appeal, the Court of Appeals (CA) in a February 27, 2008 decision reversed, holding that under Article 1956, Civil Code, no interest is due absent a written stipulation, declared the 6% monthly rate unconscionable, ordered Rolando to return the excess interest of ₱576,00 Case Digest (G.R. No. 183360) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Origination of Loan
- On December 27, 2000, Architect Rolando C. De La Paz (petitioner) lent L & J Development Company (respondent) ₱350,000.00 without security or any written agreement.
- A 6% monthly interest (₱21,000.00) was orally stipulated at the suggestion of Atty. Esteban Salonga, president of L & J, and negotiated by its secretary/treasurer, Arlene San Juan.
- Payment History and Default
- From December 2000 to August 2003, L & J made thirty interest payments totaling ₱576,000.00 (initially ₱21,000.00 per month, later varying amounts).
- Payments ceased when L & J claimed financial difficulties due to the economic crisis.
- Commencement of Proceedings
- On January 20, 2005, Rolando filed a Complaint for Collection of Sum of Money with Damages against L & J and Atty. Salonga before the Metropolitan Trial Court (MeTC), Civil Case No. 05-7755.
- Defendants admitted the corporate debt but argued that the 6% monthly rate was unconscionable, that no written stipulation existed, and that payments made should apply to principal only.
- Trial Court and RTC Decisions
- MeTC (June 30, 2006) – Upheld the 6% monthly rate by estoppel but reduced interest on the remaining principal (₱350,000.00) to 12% per annum; denied moral damages; absolved Atty. Salonga personally.
- RTC (April 19, 2007) – Affirmed MeTC decision in toto.
- Court of Appeals Decision
- CA (February 27, 2008) – Held no interest due for lack of written stipulation (Art. 1956, Civil Code); declared 6% monthly rate unconscionable and void; ordered set-off of ₱576,000.00 interest payments against ₱350,000.00 principal, resulting in an excess of ₱226,000.00 payable by Rolando with 12% p.a. interest.
- CA Resolution (June 6, 2008) – Denied Rolando’s motion for reconsideration.
Issues:
- Whether interest is due on the loan in the absence of a written stipulation under Article 1956 of the Civil Code.
- Whether a 6% monthly interest rate is unconscionable and void even if voluntarily agreed.
- Whether L & J’s excess interest payments must be applied to the principal or returned to the borrower.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)