Case Digest (G.R. No. 121982)
Facts:
This case involves Francisco Herrera as plaintiff-appellant and Petrophil Corporation (successor to Esso Standard Eastern, Inc.) as defendant-appellee. On December 5, 1969, Herrera leased to the defendant a portion of his property for 20 years under a Lease Agreement, which included specific rental payments and a condition that the lessee pay eight years of rent in advance with a corresponding discount discounted at 12% interest per annum. On December 31, 1969, the defendant paid Herrera advance rentals for the first eight years, deducting P101,010.73 as interest or discount. After realizing a computational error, the defendant paid an additional P2,182.70, reducing the deducted amount to P98,828.03.
On October 14, 1974, Herrera sued Petrophil for allegedly illegally deducting P98,828.03 from the advance rentals in violation of the Usury Law, claiming the interest was excessive and unlawful. He also sought moral damages and attorney’s fees. Petrophil admitted facts but argued
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Case Digest (G.R. No. 121982)
Facts:
- Contractual Background
- On December 5, 1969, plaintiff-appellant Francisco Herrera and ESSO Standard Eastern, Inc. (later substituted by Petrophil Corporation) entered into a Lease Agreement.
- Under the agreement, Herrera leased to the company a portion of his property measuring approximately 2,093 sqm for 20 years.
- Rental was fixed at P1.40 per sqm. per month for the leased premises, amounting to a total of P2,930.20 monthly, payable yearly in advance within the first 20 days of each year.
- The contract included a financial aid of P15,000 to clear existing improvements on the leased premises (P10,000 upon execution and P5,000 upon delivery within 30 days).
- The lessee was to occupy a 365 sqm portion rent-free during the lease term.
- Crucially, the contract provided that the lessor would be paid 8 years advance rentals, “discounted at 12% interest per annum” amounting to a net P130,288.47 prior to registration of lease.
- Payment and Computation of Rentals
- On December 31, 1969, the defendant-appellee paid advance rentals for 8 years totalling P180,288.47 from which it deducted P101,010.73 as interest or discount for the advance payment.
- On August 20, 1970, the defendant-appellee paid an additional P2,182.70 acknowledging an error in computation, thereby reducing the deducted interest to P98,828.03.
- Litigation
- On October 14, 1974, Herrera sued for the sum of P98,828.03 representing the amount deducted, alleging this was an excessive and illegal interest charge violating the Usury Law.
- He also claimed moral damages and attorney’s fees.
- Defendant admitted the factual allegations but claimed the deduction was a lawful discount for advance payment, not usurious interest.
- Judgment on pleadings was rendered in favor of the defendant-appellee.
- Herrera appealed, arguing the deduction was in excess of lawful limits and unsupported by consent or agreement.
Issues:
- Whether the deduction made by the defendant-appellee from the advance payment constituted an illegal usurious interest contrary to the Usury Law.
- Whether the lease contract’s provision for a 12% discount on 8 years advance rentals was valid and binding.
- Proper interpretation and computation of the discount or interest deducted from the advance rental payments.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)