Case Summary (G.R. No. L-923)
Initial Proceedings and Default Judgment
Respondent filed for collection of sums on August 1, 2001, in RTC Pasay City, initially naming an additional defendant whom he later dropped. Summons efforts failed due to petitioners’ relocation. They did not answer, and on January 23, 2002, the RTC declared them in default, conducting an ex parte hearing and rendering judgment on January 14, 2003, awarding principal, accrued interest, moral and exemplary damages, attorney’s fees, and costs.
Petition for Relief from Judgment
Unaware of the default orders, petitioners filed a Petition for Relief from Judgment on June 6, 2006, challenging service and contesting RTC jurisdiction over a ₱75,000 claim. The RTC held a hearing (June 10, 2008) and on September 30, 2008 set aside the default judgment for lack of jurisdiction, dismissing respondent’s complaint. A motion for reconsideration was denied on March 2, 2009.
Appeal to the Court of Appeals
Respondent appealed via Notice of Appeal, arguing the RTC erred in granting relief, dismissing his motion, and misapplying jurisdiction over a ₱489,000 claim (principal plus interest). On August 31, 2012, the CA reversed the RTC, holding that accrued monetary interest forms a primary component of the cause of action and must be included in determining jurisdictional amount. It reinstated the January 14, 2003 default judgment. Reconsideration was denied on April 22, 2014.
Issues on Petition for Review
In the Supreme Court petition, the petitioners contended that:
- The CA improperly entertained respondent’s appeal by Notice of Appeal on purely legal questions;
- The CA lacked jurisdiction for the same reason;
- Interest should be excluded when determining jurisdiction under BP 129.
Modes of Appeal and Questions of Law
Under Rule 41, Rule 50, Rules of Court, appeals raising only questions of law must be dismissed by the CA; they should proceed directly to the Supreme Court by certiorari. The issues here—jurisdictional threshold application of BP 129—are purely legal, inviting no review of factual evidence.
Jurisdictional Threshold under BP 129 and R.A. 7691
BP 129, § 19(8), grants RTC original jurisdiction over claims exceeding ₱100,000, exclusive of “interest, damages, attorney’s fees, litigation expenses, and costs,” adjusted by R.A. 7691 to ₱200,000 (1999) and higher thereafter. At the time of filing in 2001, the RTC’s jurisdictional minimum was ₱200,000.
Interpretation of “Interest” in Computing Jurisdiction
Applying ejusdem generis, “interest” in BP 129 refers to compensatory interest (akin to damages) incidental to a cause of action, and not to contractual (monetary) interest, which is an integral component of the principal debt. Monetary interest agreed at contract formation is primary to the claim and thus included when determining jurisdiction.
Jurisprudence on Interest as a Component of the Cause of Action
In Gomez v. Montalban, the Court held that accrued contractual interest, determinable at filing, must be included in computing jurisdictional amount because it is a primary component of the cause of action. That precedent validates the CA’s inclusion of ₱414,000 accrued interest in reaching a ₱489,000 total claim.
Unconscionable Interest Rates and Legal Substitution
The stipulated 8% monthly (96% per annum) rate is unconscionable under De La Paz and Abella jurisprudence, which permits courts to reduce excessive rates. Absent justification, contractual interest over twice the legal rate is suspect. The Court substituted the unconscionable rate with the prevailing legal rate at loan inception: 12% per annum.
Computation of Interest on Principal and Interest
– Principal: ₱75,000 fixed
– Monetary
Case Syllabus (G.R. No. L-923)
Facts
- On October 30, 1995, petitioners obtained a P75,000.00 loan from respondent, at an agreed interest rate of 8% per month, payable on or before June 30, 1996.
- Petitioners defaulted on payment of principal and accrued interest, despite several extrajudicial demands.
- On August 1, 2001, respondent filed a Complaint for collection of sum of money (P75,000.00 principal + P414,000.00 accrued interest) in RTC Pasay City (Civil Case No. 01-1227).
- An amended complaint (dropping a co-defendant) was filed on August 9, 2001.
Service and Default Proceedings
- Summons issued August 15, 2001; personal service attempted at petitioners’ former address but failed as they had moved to Naga City.
- No answer filed by petitioners; respondent filed Motion to Declare Defendants in Default on November 8, 2001.
- Petitioner Sergio attended the November 16, 2001 hearing upon respondent’s invitation but did not file any pleading.
- RTC Order dated January 23, 2002 declared petitioners in default and allowed ex parte presentation of evidence.
- RTC Order dated January 14, 2003 rendered default judgment ordering petitioners to pay the loan, accrued interest, moral and exemplary damages, attorney’s fees, and costs.
Petition for Relief from Judgment in RTC
- Petitioners, unaware of the default orders, filed Petition for Relief from Judgment on June 6, 2006.
- Respondent opposed on November 14, 2006; petitioners replied on November 30, 2006, objecting to improper service.
- RTC scheduled hearing on June 10, 2008.
- On June 6, 2008, petitioners also moved to dismiss for lack of jurisdiction (claim allegedly within MeTC threshold).
- RTC Decision (September 30, 2008) granted relief, set aside default judgment and dismissed complaint for lack of jurisdiction.
- RTC denied reconsideration on March 2, 2009.
Proceedings Before the Court of Appeals
- Respondent appealed via Notice of Appeal, raising errors in granting relief and in jurisdictional ruling.
- On August 31, 20