Prisma Construction & Development Corp. v. Menchavez
REITERATIONFacts
The Antecedents: On December 8, 1993, Rogelio S. Pantaleon, President and Chairman of the Board of PRISMA Construction & Development Corporation (PRISMA), obtained a ₱1,000,000.00 loan from respondent Arthur F. Menchavez. The loan stipulated a monthly interest of ₱40,000.00, payable for six months, resulting in a total obligation of ₱1,240,000.00 to be paid within six months. The payment schedule included monthly interest payments and a lump sum payment of the principal and remaining interest on June 8, 1994. Procedural History: The Regional Trial Court (RTC), Branch 73, Antipolo City, in Civil Case No. 97-4552, held petitioners PRISMA and Pantaleon liable for ₱3,526,117.00 to respondent Menchavez. The Court of Appeals (CA), in its Decision dated May 5, 2003, affirmed the RTC's decision but modified the interest rate from 4% per month to 12% per annum, computed from the filing of the complaint to full payment. The CA denied petitioners’ Motion for Reconsideration through a Resolution dated October 22, 2003. The Petition: Petitioners PRISMA and Pantaleon filed a petition for review on certiorari seeking to reverse and set aside the CA Decision and Resolution.
Issue(s)
Whether the Court of Appeals erred in affirming the Regional Trial Court's decision holding the petitioners liable for payment of ₱3,526,117.00 to the respondent. Whether the Court of Appeals erred in modifying the interest rate from 4% per month to 12% per annum.
Ruling
The petition for review on certiorari was denied. The Supreme Court affirmed the decision of the Court of Appeals, holding the petitioners liable for the payment of the loan amount, but upheld the modification of the interest rate to 12% per annum.
Ratio Decidendi
On the petitioners' liability for payment: The Supreme Court found that the RTC and CA erred in their computation of the total liability of ₱3,526,117.00. While the petitioners were liable for the loan, the amount was based on a misapplication of a 4% monthly interest beyond the initial six-month period. The Court clarified that the loan of P1,000,000.00 should bear a fixed payment of P40,000.00 per month for six months, and any unpaid portion thereafter should bear the legal interest rate of 12% per annum. The case was remanded for proper computation of the amount due. On the modification of the interest rate: The Supreme Court found that the parties did not expressly stipulate in writing a 4% monthly interest rate beyond the initial six-month period for the loan. Instead, they agreed to a specific sum of P40,000.00 per month for six months. Article 1956 of the Civil Code mandates that no interest shall be due unless expressly stipulated in writing. Therefore, in the absence of such a stipulation for an interest rate after the six-month period, the legal interest rate of 12% per annum applies. The Court clarified that the ruling in Medel v. Court of Appeals on unconscionable interest was not applicable here, as no issue on the excessiveness of the stipulated P40,000.00 per month was raised, and the loan terms were not open-ended.
Main Doctrine
The Supreme Court affirmed the decision of the Court of Appeals, holding petitioners liable for the loan amount but modifying the interest rate to 12% per annum from the RTC's original imposition of 4% per month.