516 Phil. 575
AUSTRIA-MARTINEZ, J.:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered as follows:Respondent then appealed to the CA which reversed the RTC judgment. The CA held that the true nature of the contract between herein parties is one of equitable mortgage, as shown by the fact that (a) respondent is still in actual physical possession of the property; (b) respondent is the one paying the real property taxes on the property; and (c) the amount of the supposed sale price, P165,000.00, earns monthly interest. The dispositive portion of the CA Decision promulgated on June 9, 2000 reads:
a) Declaring the contract (Exh. A) entered into by the contending parties as one of deed of sale with right to repurchase or pacto de retro sale;
b) Declaring the plaintiff Diño to have acquired whatever rights Jardines has over the parcel of land involved it being that Jardines has no torrens title yet over said land;
c) Declaring the plaintiff Diño the owner of the residential house and other improvements standing on the parcel of land in question;
d) Ordering the consolidation of ownership of Diño over the residential house and other improvements, and over the rights, she (Diño) acquired over the parcel of land in question; and ordering the corresponding government official (The City Assessor) of Baguio City to undertake the consolidation by putting in the name of plaintiff Diño the ownership and/or rights which she acquired from the defendant Jardines in the corresponding document (Tax Declarations) on file in his/her office; after the plaintiff has complied with all the requirements and has paid the fees necessary or incident to the issuance of a new tax declaration as required by law;
e) Ordering the cancellation of Tax Declaration 44250;
f) Ordering defendant Jardines to pay actual and/or compensatory damages to the plaintiff as follows:1) P3,000.00 representing expenses in going to and from Jardines' place to collect the redemption money;
2) P1,000.00 times the number of times Diño came to Baguio to attend the hearing of the case as evidenced by the signatures of Diño appearing on the minutes of the proceedings found in the Rollo of the case;
3) P10,000.00 attorney's fee.
Costs against defendant Jardines.
SO ORDERED.[3]
WHEREFORE, foregoing premises considered, we find that the Regional Trial Court, First Judicial Region, Branch 07, Baguio City, committed reversible errors in rendering its decision dated 20 November 1996 in Civil Case No. 2669-R, entitled Leonides G. Diño, etc. vs. Lina Jardines'. The appeal at bar is herby GRANTED and the assailed decision is hereby REVERSED and SET ASIDE. Let a new judgment be entered as follows:Petitioner moved for reconsideration of said decision, but the same was denied per Resolution dated October 25, 2000.SO ORDERED.[4]
- Declaring that the true nature of the contract entered into by the contending parties as one of equitable mortgage and not a pacto de retro sale;
- Ordering the defendant-appellant to pay plaintiff-appellee legal interest on the amount of P165,000.00 from July 29, 1987, the time the said interest fell due, until fully paid;
- No pronouncement as to cost.
Hence, herein petition for review on certiorari alleging that:The petition lacks merit.
- THE LOWER COURT COMMITTED AN ERROR IN DECLARING THAT THE TRUE NATURE OF THE CONTRACT ENTERED INTO BY THE PARTIES AS ONE EQUITABLE MORTGAGE AND NOT A PACTO DE RETRO SALE;
- THE LOWER COURT COMMITTED AN ERROR IN ORDERING THE RESPONDENT TO PAY PETITIONER LEGAL INTEREST DESPITE THE CONFLICTING ADMISSIONS OF THE PARTIES THAT THE AGREED INTERESTS WAS EITHER 9% OR 10%;
- THE FINDINGS OF FACTS OF THE LOWER COURT ARE CONTRARY TO EVIDENCE AND THE ADMISSIONS OF THE PARTIES;
- THE LOWER COURT COMMITTED AN ERROR IN GOING BEYOND THE ISSUES OF THE CASE BY DELETING THE AWARD FOR DAMAGES DESPITE THE FACT THAT THE SAME WAS NOT RAISED AS AN ISSUE IN THE APPEAL; [5]
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:In Legaspi vs. Ong,[7] the Court further explained that:
(1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. (Emphasis supplied)
The presence of even one of the above-mentioned circumstances as enumerated in Article 1602 is sufficient basis to declare a contract of sale with right to repurchase as one of equitable mortgage. As stated by the Code Commission which drafted the new Civil Code, in practically all of the so-called contracts of sale with right of repurchase, the real intention of the parties is that the pretended purchase price is money loaned and in order to secure the payment of the loan, a contract purporting to be a sale with pacto de retro is drawn up.[8]In the same case, the Court cited Article 1603 of the Civil Code, which provides that in case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.[9]
Sec. 8. Questions that may be decided. – No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed from or the proceedings therein will be considered unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors.Clearly, the appellate court may pass upon plain errors even if they are not stated in the assignment of errors. In Villegas vs. Court of Appeals,[10] the Court held:
[T]he Court is clothed with ample authority to review matters, even if they are not assigned as errors in the appeal, if it finds that their consideration is necessary in arriving at a just decision of the case.[11]In the present case, the RTC's award for actual damages is a plain error because a reading of said trial court's Decision readily discloses that there is no sufficient evidence on record to prove that petitioner is entitled to the same. Petitioner's only evidence to prove her claim for actual damages is her testimony that she has spent P3,000.00 in going to and from respondent's place to try to collect payment and that she spent P1,000.00 every time she travels from Bulacan, where she resides, to Baguio in order to attend the hearings.
In a long line of cases, this Court has invalidated similar stipulations on interest rates for being excessive, iniquitous, unconscionable and exorbitant. In Solangon v. Salazar, we annulled the stipulation of 6% per month or 72% per annum interest on a P60,000.00 loan. In Imperial v. Jaucian, we reduced the interest rate from 16% to 1.167% per month or 14% per annum. In Ruiz v. Court of Appeals, we equitably reduced the agreed 3% per month or 36% per annum interest to 1% per month or 12% per annum interest. The 10% and 8% interest rates per month on a P1,000,000.00 loan were reduced to 12% per annum in Cuaton v. Salud. Recently, this Court, in Arrofo v. Quino, reduced the 7% interest per month on a P15,000.00 loan amounting to 84% interest per annum to 18% per annum.Applying the afore-cited rulings to the instant case, the inescapable conclusion is that the agreed interest rate of 9% per month or 108% per annum, as claimed by respondent; or 10% per month or 120% per annum, as claimed by petitioner, is clearly excessive, iniquitous, unconscionable and exorbitant. Although respondent admitted that she agreed to the interest rate of 9%, which she believed was exorbitant, she explained that she was constrained to do so as she was badly in need of money at that time. As declared in the Medel case[19] and Imperial vs. Jaucian,[20] "[i]niquitous and unconscionable stipulations on interest rates, penalties and attorney's fees are contrary to morals." Thus, in the present case, the rate of interest being charged on the principal loan of P165,000.00, be it 9% or 10% per month, is void. The CA correctly reduced the exhorbitant rate to "legal interest."
There is no need to unsettle the principle affirmed in Medel and like cases. From that perspective, it is apparent that the stipulated interest in the subject loan is excessive, iniquitous, unconscionable and exorbitant. Pursuant to the freedom of contract principle embodied in Article 1306 of the Civil Code, contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. In the ordinary course, the codal provision may be invoked to annul the excessive stipulated interest.
In the case at bar, the stipulated interest rate is 6% per month, or 72% per annum. By the standards set in the above-cited cases, this stipulation is similarly invalid. x x x.[18]
In Eastern Shipping Lines, Inc. v. Court of Appeals, this Court laid down the following rules with respect to the manner of computing legal interest:Applied to the present case, since the agreed interest rate is void, the parties are considered to have no stipulation regarding the interest rate. Thus, the rate of interest should be 12% per annum to be computed from judicial or extrajudicial demand, subject to the provisions of Article 1169 of the Civil Code, to wit:
- When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on 'Damages' of the Civil Code govern in determining the measure of recoverable damages.
- With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
- When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. [22] (Underscoring supplied)
Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of the obligation.The records do not show any of the circumstances enumerated above. Consequently, the 12% interest should be reckoned from the date of extrajudicial demand.
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declares; or
(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.
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