Medel vs Court of Appeals, 299 SCRA 481; GR No.

131622, November 27, 1998, digested

(Credit Transactions – Loans, Usury Law, Interest Rates)

Facts: Defendants obtained a loan from Plaintiff in the amount P50, 000.00, payable in 2 months and
executed a promissory note. Plaintiff gave only the amount of P47, 000.00 to the borrowers and
retained P3, 000.00 as advance interest for 1 month at 6% per month.

Defendants obtained another loan from Defendant in the amount of P90, 000.00, payable in 2
months, at 6% interest per month. They executed a promissory note to evidence the loan and received
only P84, 000.00 out of the proceeds of the loan.

For the third time, Defendants secured from Plaintiff another loan in the amount of P300, 000.00,
maturing in 1 month, and secured by a real estate mortgage. They executed a promissory note in
favor of the Plaintiff. However, only the sum of P275, 000.00, was given to them out of the proceeds
of the loan.

Upon maturity of the three promissory notes, Defendants failed to pay the indebtedness.

Defendants consolidated all their previous unpaid loans totalling P440, 000.00, and sought from
Plaintiff another loan in the amount of P60, 000.00, bringing their indebtedness to a total of
P50,000.00. They executed another promissory note in favor of Plaintiff to pay the sum of P500,
000.00 with a 5.5% interest per month plus 2% service charge per annum, with an additional amount
of 1% per month as penalty charges.

On maturity of the loan, the Defendants failed to pay the indebtedness which prompt the Plaintiffs to
file with the RTC a complaint for collection of the full amount of the loan including interests and
other charges.

Declaring that the due execution and genuineness of the four promissory notes has been duly proved,
the RTC ruled that although the Usury Law had been repealed, the interest charged on the loans was
unconscionable and “revolting to the conscience” and ordered the payment of the amount of the first
3 loans with a 12% interest per annum and 1% per month as penalty.

On appeal, Plaintiff-appellants argued that the promissory note, which consolidated all the unpaid
loans of the defendants, is the law that governs the parties.

The Court of Appeals ruled in favor of the Plaintiff-appellants on the ground that the Usury Law has
become legally inexistent with the promulgation by the Central Bank in 1982 of Circular No. 905, the
lender and the borrower could agree on any interest that may be charged on the loan, and ordered the
Defendants to pay the Plaintiffs the sum of P500,000, plus 5.5% per month interest and 2& service
charge per annum , and 1% per month as penalty charges.

Defendants filed the present case via petition for review on certiorari.

Issue: WON the stipulated 5.5% interest rate per month on the loan in the sum of P500, 000.00 is
usurious.

Held: No.

A stipulated rate of interest at 5.5% per month on the P500, 000.00 loan is excessive, iniquitous,
unconscionable and exorbitant, but it cannot be considered “usurious” because Central Bank Circular
No. 905 has expressly removed the interest ceilings prescribed by the Usury Law and that the Usury
Law is now “legally inexistent.”
Doctrine: A CB Circular cannot repeal a law. Only a law can repeal another law.

Jurisprudence provides that CB Circular did not repeal nor in a way amend the Usury Law but simply
suspended the latter’s effectivity (Security Bank and Trust Co vs RTC). Usury has been legally non-
existent in our jurisdiction. Interest can now be charged as lender and borrower may agree upon.

Law: Article 2227, Civil Code

The courts shall reduce equitably liquidated damages, whether intended as an indemnity or a penalty
if they are iniquitous or unconscionable.

Note: While the Usury Law ceiling on interest rates was lifted by the CB Circular 905, nothing in the
said circular could possibly be read as granting carte blanche authority to lenders to raise interest
rates to levels which would either enslave their borrowers or lead to a haemorrhaging of their assets
(Almeda vs. CA, 256 SCRA 292 [1996]).
Nacar v. Gallery Frames ; G.R. No. 189871 : August 13, 2013
DARIO NACAR, Petitioner, v. GALLERY FRAMES AND/OR FELIPE BORDEY, JR.,
Respondents.

FACTS:
On October 15, 1998, the Labor Arbiter rendered a Decisionin favor of petitioner and found that he
was dismissed from employment without a valid or just cause. Thus, petitioner was awarded
backwages and separation pay in lieu of reinstatement in the amount ofP158,919.92.

Respondents appealed to the NLRC, but it was dismissed for lack of merit. Accordingly, the NLRC
sustained the decision of the Labor Arbiter. Respondents filed a motion for reconsideration, but it was
denied. Dissatisfied, respondents filed a Petition for Review on Certiorari before the CA but it was
likewise denied. Respondents then sought relief before the Supreme Court. Finding no reversible
error on the part of the CA, this Court denied the petition in the Resolution dated April 17, 2002.

An Entry of Judgment was later issued certifying that the resolution became final and executory on
May 27, 2002. The case was, thereafter, referred back to the Labor Arbiter for execution. Petitioner
filed a Motion for Correct Computation, praying that his backwages be computed from the date of his
dismissal on January 24, 1997 up to the finality of the Resolution of the Supreme Court on May 27,
2002. Upon recomputation, the Computation and Examination Unit of the NLRC arrived at an
updated amount in the sum ofP471,320.31.

Respondents filed a Motion to Quash Writ of Execution, arguing, among other things, that since the
Labor Arbiter awarded separation pay of P62,986.56 and limited backwages ofP95,933.36, no more
recomputation is required to be made of the said awards. They claimed that after the decision
becomes final and executory, the same cannot be altered or amended anymore. LA denied the motion
but the decision was reversed by the NLRC on appeal.

Petitioner appealed to the CA but was denied, stating that since petitioner no longer appealed the
October 15, 1998 Decision of the Labor Arbiter, which already became final and executory, a belated
correction thereof is no longer allowed. The CA stated that there is nothing left to be done except to
enforce the said judgment. Consequently, it can no longer be modified in any respect, except to
correct clerical errors or mistakes. Thus, petitioner filed this petition for review on certiorari.

ISSUE: Whether or not a re-computation in the course of execution of the labor arbiter's original
computation of the awards made is legally proper.

HELD: Yes.
Labor Law- computation of backwages
A source of misunderstanding in implementing the final decision in this case proceeds from the way
the original labor arbiter framed his decision. The decision consists essentially of two parts.

The first is that part of the decision that cannot now be disputed because it has been confirmed with
finality. This is the finding of the illegality of the dismissal and the awards of separation pay in lieu
of reinstatement, backwages, attorney's fees, and legal interests. The second part is the computation
of the awards made.

Clearly implied from this original computation is its currency up to the finality of the labor arbiter's
decision. As we noted above, this implication is apparent from the terms of the computation itself,
and no question would have arisen had the parties terminated the case and implemented the decision
at that point.

However, the petitioner disagreed with the labor arbiter's findings on all counts - i.e., on the finding
of illegality as well as on all the consequent awards made. Hence, the petitioner appealed the case to
the NLRC which, in turn, affirmed the labor arbiter's decision. By law, the NLRC decision is final,
reviewable only by the CA on jurisdictional grounds.
The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a
timely filed Rule 65 petition for certiorari. The CA decision, finding that NLRC exceeded its
authority in affirming the payment of 13th month pay and indemnity, lapsed to finality and was
subsequently returned to the labor arbiter of origin for execution.

It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the
original labor arbiter's decision, the implementing labor arbiter ordered the award re-computed; he
apparently read the figures originally ordered to be paid to be the computation due had the case been
terminated and implemented at the labor arbiter's level. It was at this point that the present case arose.
Focusing on the core illegal dismissal portion of the original labor arbiter's decision, the
implementing labor arbiter ordered the award re-computed; he apparently read the figures originally
ordered to be paid to be the computation due had the case been terminated and implemented at the
labor arbiter's level.

Thus, the labor arbiter re-computed the award to include the separation pay and the backwages due
up to the finality of the CA decision that fully terminated the case on the merits. Unfortunately, the
labor arbiter's approved computation went beyond the finality of the CA decision (July 29, 2003) and
included as well the payment for awards the final CA decision had deleted - specifically, the
proportionate 13th month pay and the indemnity awards. Hence, the CA issued the decision now
questioned in the present petition.

We see no error in the CA decision confirming that a re-computation is necessary as it essentially

considered the labor arbiter's original decision in accordance with its basic component parts as we
discussed above. To reiterate, the first part contains the finding of illegality and its monetary
consequences; the second part is the computation of the awards or monetary consequences of the
illegal dismissal, computed as of the time of the labor arbiter's original decision.

By the nature of an illegal dismissal case, the reliefs continue to add up until full satisfaction, as
expressed under Article 279 of the Labor Code. The recomputation of the consequences of illegal
dismissal upon execution of the decision does not constitute an alteration or amendment of the final
decision being implemented. The illegal dismissal ruling stands; only the computation of monetary
consequences of this dismissal is affected, and this is not a violation of the principle of immutability
of final judgments. That the amount respondents shall now pay has greatly increased is a
consequence that it cannot avoid as it is the risk that it ran when it continued to seek recourses against
the Labor Arbiter's decision.

CA Decision reversed and set aside.

Filinvest Land vs. Court of Appeals (470 SCRA 57)

FILINVEST LAND, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, PHILIPPINE
AMERICAN GENERAL INSURANCE COMPANY and PACIFIC EQUIPMENT
CORPORATION, respondents.

[G.R. No. 138980. September 20, 2005]

FACTS:

Petitioner awarded to respondent Pacific Equipment Corp (Pecorp) development of its residential
subdivisions, a contract amounting to P12,470,000.00. Pecorp posted two surety bonds to guarantee
faithful compliance. Both agreed that liquidated damages of P15,000/day shall be paid by Pecorp in
case of delay. Petitioner claimed that Pecorp failed to complete the works (94.53%) and claims for
damages. Pecorp on the other hand contended that their work stopped due to failure of petitioner to
pay for certain completed portion. RTC assigned a commissioner to evaluate the claims and counter-
claims. The total amount due to Pecorp was computed to be P1,881,867.66. Petitioner claimed that
liquidated damages amounted to P3,990,000.00 Both claims and counter-claims were dismissed.
Court of Appeals affirmed the ruling of RTC.

ISSUE:

Whether or not the penalty (liquidated damages) of P15,000.00 per day of delay shall be binding
upon mutual agreement of parties.

RULING:

NO. As a general rule, courts are not at liberty to ignore the freedom of the parties to agree on such
terms and conditions as they see fit as long as they are not contrary to law, morals, good customs,
public order or public policy. The judge shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor. Even if there has been no
performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable
(Art.1229, NCC). A penalty interest of P15,000.00 per day of delay as liquidated damages
or P3,990,000.00 (representing 32% penalty of the P12,470,000.00 contract price) is unconscionable
considering that the construction was already not far from completion.
Republic v. Bagtas (1962) ; L-17474 October 25, 1962

Laws Applicable: Commodatum

FACTS:

 May 8, 1948: Jose V. Bagtas borrowed from the Republic of the Philippines through the
Bureau of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a
Bhagnari, of P1,320.56 and a Sahiniwal, of P744.46, for a period of 1 year for breeding
purposes subject to a breeding fee of 10% of the book value of the bulls
 May 7, 1949: Jose requested for a renewal for another year for the three bulls but only one
bull was approved while the others are to be returned
 March 25, 1950: He wrote to the Director of Animal Industry that he would pay the value of
the 3 bulls
 October 17, 1950: he reiterated his desire to buy them at a value with a deduction of yearly
depreciation to be approved by the Auditor General.
 October 19, 1950: Director of Animal Industry advised him that either the 3 bulls are to be
returned or their book value without deductions should be paid not later than October 31,
1950 which he was not able to do
 December 20, 1950: An action at the CFI was commenced against Jose praying that he be
ordered to return the 3 bulls or to pay their book value of P3,241.45 and the unpaid breeding
fee of P199.62, both with interests, and costs
 July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that
because of the bad peace and order situation in Cagayan Valley, particularly in the barrio of
Baggao, and of the pending appeal he had taken to the Secretary of Agriculture and Natural
Resources and the President of the Philippines, he could not return the animals nor pay their
value and prayed for the dismissal of the complaint.
 RTC: granted the action
 December 1958: granted an ex-parte motion for the appointment of a special sheriff to serve
the writ outside Manila
 December 6, 1958: Felicidad M. Bagtas, the surviving spouse of Jose who died on October
23, 1951 and administratrix of his estate, was notified
 January 7, 1959: she file a motion that the 2 bulls where returned by his son on June 26, 1952
evidenced by recipt and the 3rd bull died from gunshot wound inflicted during a Huk raid
and prayed that the writ of execution be quashed and that a writ of preliminary injunction be
issued.

ISSUE: W/N the contract is commodatum and NOT a lease and the estate should be liable for the
loss due to force majeure due to delay.

HELD: YES. writ of execution appealed from is set aside, without pronouncement as to costs

 If contract was commodatum then Bureau of Animal Industry retained ownership or title to
the bull it should suffer its loss due to force majeure. A contract of commodatum is
essentially gratuitous. If the breeding fee be considered a compensation, then the contract
would be a lease of the bull. Under article 1671 of the Civil Code the lessee would be subject
to the responsibilities of a possessor in bad faith, because she had continued possession of the
bull after the expiry of the contract. And even if the contract be commodatum, still the
appellant is liable if he keeps it longer than the period stipulated
 the estate of the late defendant is only liable for the sum of P859.63, the value of the bull
which has not been returned because it was killed while in the custody of the administratrix
of his estate
 Special proceedings for the administration and settlement of the estate of the deceased Jose
V. Bagtas having been instituted in the CFI, the money judgment rendered in favor of the
appellee cannot be enforced by means of a writ of execution but must be presented to the
probate court for payment by the appellant, the administratrix appointed by the court.