G.R. No. 80849 - Sta. Ines Melale Forest Products Corporation vs. Macaraig, Jr.

On December 8, 1993, Pantaleon, who served as President and Chairman of PRISMA Construction & Development Corporation, obtained a loan of P1,000,000.00 from Arthur F. Menchavez.
The transaction was arranged with a prescribed monthly interest amount of P40,000.00, payable over a six-month period.
The payment schedule was clearly set as follows:

To secure the repayment, Pantaleon executed a promissory note accompanied by six (6) postdated checks corresponding to the scheduled payments.
He signed the note both in his personal capacity and in accordance with the authorization granted by the Board of Directors of PRISMA.

The petitioners failed to completely settle the loan within the stipulated six-month period.
Subsequent payments made from September 8, 1994 to January 4, 1997 amounted to a total of P1,108,772.00.
Despite these payments, an outstanding balance of P1,364,151.00 was computed as of January 4, 1997, to which a 4% monthly interest was applied.

On October 27, 2000, the RTC, Branch 73, Antipolo City, rendered a Decision affirming the petitioners’ indebtedness by acknowledging the issuance of a check for P1,000,000.00 that would earn P40,000.00 per month over six months.
The RTC found that although the petitioners remitted several payments amounting to P1,228,772.00, the remaining debt, with accumulated interest, totaled P3,526,117.00.
The RTC also determined that PRISMA was essentially a one-man corporation, thereby justifying the piercing of the veil of corporate fiction and holding petitioners jointly and severally liable.

The CA, in its ruling dated May 5, 2003, upheld the RTC’s findings but reviewed the issue of the prescribed interest rate.
Based on a board resolution authorizing a maximum interest of 4% per month, the CA initially agreed that a 4% monthly interest was implicated.
However, the CA found this rate (equivalently 48% per annum) to be unreasonable and modified it to a legal rate of 12% per annum for amounts remaining unpaid after the six-month period.
The CA further denied the petitioners’ Motion for Reconsideration, prompting the filing of the present petition for review.

The petitioners contended that there was no express stipulation in the promissory note for a 4% monthly interest beyond agreeing to a fixed monthly sum of P40,000.00 during the six-month period.
They argued that the board resolution, merely an authorization for Pantaleon to secure a loan, did not amount to a contractual interest rate stipulation.
Conversely, the respondent maintained that the board resolution, being integral to the promissory note, evidenced an agreed 4% monthly interest, and further argued that the petitioners were estopped from contesting its application.
The main dispute centered on whether the parties had agreed to a 4% monthly interest mechanism and, if so, whether such interest was applicable only during the six-month period or beyond, until full repayment was effected.

Whether the parties, by their conduct and documented arrangements, agreed to a 4% monthly interest rate or simply to the payment of a fixed sum of P40,000.00 per month for six months.
Whether the agreed interest rate was intended to apply exclusively during the stipulated six-month period or should extend until the loan was fully paid.
The propriety of the Court of Appeals’ modification of the interest rate from 4% per month (48% per annum) to 12% per annum for overdue amounts, and if such modification aligns with the contractual terms.