ENTRE LOS SIGLOS DE ORO Y EL SIGLO XXI

LOS ALIMENTOSLOS ALIMENTOS

Doctrine: Temperate or moderate damages may be recovered when the court finds that some

pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty

Facts: Petitioner Seven Brothers Shipping Corporation is the owner of the cargo ship M/V "Diamond Rabbit," (vessel), while respondent DMC-Construction Resource, Inc. is the owner of coal-conveyor facility, which was destroyed when the vessel became uncontrollable and unmanueverable during a storm.

On 5 March 1996, respondent sent a formal demand letter to petitioner, claiming the damages sustained by their vessel. When petitioner failed to pay, respondent filed with the RTC a Complaint for damages against respondent. Based on the pieces of evidence presented by both parties, the RTC ruled that as a result of the incident, the loading conveyor and related structures of respondent were indeed damaged. In the course of the destruction, the RTC found that no force majeure existed, considering that petitioner's captain was well aware of the bad weather, and yet proceeded against the strong wind and rough seas, instead of staying at the causeway and waiting out the passage of the typhoon. It further concluded that "there was negligence on the part of the captain; hence, defendant [petitioner] as his employer and owner of the vessel shall be liable for damages caused thereby."

Regarding liability, the RTC awarded respondent actual damages in the amount of

P3,523,175.92 plus legal interest of 6%, based on the testimony of respondent's engineer, Loreto Dalangin (Engr. Dalangin). The value represented 50% of the P7,046,351.84 claimed by the

respondent as the fair and reasonable valuation of the structure at the time of the loss, because as manifested by Engr. Dalangin at the time of the incident, the loading conveyor and related structures were almost five years old, with a normal useful life of 10 years.

Aggrieved, petitioner appealed via a Notice of Appeal which the CA DISMISSED, but MODIFIED in that Seven Brothers Shipping Corporation is found liable to DMC Construction

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Equipment Resources, Inc. for nominal damages in the amount of P3,523,175.92 due to the

destruction of the latter's coal conveyor post and terminal by the cargo ship M/V "Diamond Rabbit."

The CA affirmed the RTC's Decision with respect to the finding of negligence on the part of the vessel's captain. However, the appellate court modified the nature of damages awarded (from actual to nominal), on the premise that actual damages had not been proved. Respondent merely relied on estimates to prove the cost of replacing the structures destroyed by the vessel, as no actual receipt was presented.

Issue: Whether or not the CA erred in awarding nominal damages to respondent after having ruled that the actual damages awarded by the RTC was unfounded.

Held: The SC rule that temperate, and not nominal, damages should be awarded to respondent in the amount of P3,523,175.92.

To resolve the issue at hand, we must first determine whether there was indeed a violation of petitioner's right. In this light, we are inclined to adopt the factual findings of the RTC and the CA.

Under the Civil Code, when an injury has been sustained, actual damages may be awarded under the following condition:

Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

Jurisprudence has consistently held that "[t]o justify an award of actual damages x x x

credence can be given only to claims which are duly supported by receipts." We take this to mean by credible evidence. Otherwise, the law mandates that other forms of damages must be awarded, to wit:

Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages, may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case.

Under Article 2221 of the Civil Code, nominal damages may be awarded in order that the plaintiffs right, which has been violated or invaded by the defendant, may be vindicated or

recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered. We have laid down the concept of nominal damages in the following wise:

Nominal damages are 'recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown.

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In contrast, under Article 2224, temperate or moderate damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty.

Given these findings, we are of the belief that temperate and not nominal damages should have been awarded, considering that it has been established that respondent herein suffered a loss, even if the amount thereof cannot be proven with certainty.

Consequently, in computing the amount of temperate or moderate damages, it is usually left to the discretion of the courts, but the amount must be reasonable, bearing in mind that temperate damages should be more than nominal but less than compensatory. For failure of respondent to establish by competent evidence the exact amount of damages it suffered, we are constrained to award temperate damages. Considering that the lower courts have factually established that the conveyor facility had a remaining life of only five of its estimated total life often years during the time of the collision, then the replacement cost of P7,046,351.84 should rightly be reduced to 50% or P3,523,175.92. This is a fair and reasonable valuation, having taking into account the remaining useful life of the facility.

By: George D. Rocero

SPOUSES TAGUMPAY N. ALBOS AND AIDA C. ALBOS, petitioners, vs. SPOUSES NESTOR M. EMBISAN AND ILUMINADA A. EMBISAN, DEPUTY SHERIFF MARINO V. CACHERO, AND THE

REGISTER OF DEEDS OF QUEZON CITYs. G.R. No. 210831, November 26, 2014

VELASCO JR., J.:

Doctrines: (The compounding of interest should be in writing) Payment of monetary interest shall be due only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for such payment was reduced in writing. Thus, We have held that collection of interest without any stipulation thereof in writing is prohibited by law. Nevertheless, even if there was such an agreement that interest will be compounded, We agree with the petitioners that the 5% monthly rate, be it simple or compounded, written or verbal, is void for being too exorbitant.

A foreclosure should be nullified where the respondents thereof were deprived of the opportunity to settle the debt, in view of the overstated amount demanded from them.

Facts: On October 17, 1984, petitioners entered into an agreement, denominated as “Loan with Real Estate Mortgage,” with respondent spouses Nestor and Iluminada Embisan (spouses Embisan) in the amount of P84,000.00 payable within 90 days with a monthly interest rate of 5%. To secure the

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indebtedness, a parcel of land owned by the petitioners was mortgaged to the spouses Embisan. For failure to settle their account upon maturity, petitioners requested and were given an extension of eleven (11) months to pay the loan obligation. However, when said deadline came, petitioners once again defaulted. Another extension of five (5) months was requested and set. The deadline came and went but the obligation remained unpaid. Thus, when the petitioners requested a third extension, an additional eight (8) months was granted on the condition that the monthly 5% interest from then on, i.e. June 1986 onwards, will be compounded. This stipulation, however, was not reduced in writing.

On February 9, 1987, respondent spouses addressed a letter to petitioners demanding the payment of P234,021.90, representing the unpaid balance and interests from the loan. This was followed, on April 14, 1987, by another letter of the same tenor, but this time demanding from the petitioners the obligation due amounting to P258,009.15.

Due to petitioners’ failure to settle their indebtedness, respondent spouses proceeded to extra- judicially foreclose the mortgaged property on October 12, 1987. Respondent spouses were the highest bidders in the auction sale and were later issued a Sherriff’s Certificate. The property was never redeemed, and so the respondent spouses executed an Affidavit of Consolidation which was then subsequently registered in the Registry of Deeds.

On August 14, 1989, herein petitioners filed a complaint for the annulment of the Loan with Real Estate Mortgage, Certificate of Sale, Affidavit of Consolidation, Deed of Final Sale, before the Regional Trial Court of Quezon City (RTC).

Following trial, the RTC rendered a Decision dismissing the complaint for lack of merit. The CA promulgated the assailed Decision, affirming in toto the held of the trial court.

Hence, the instant petition.

Issue: Whether or not the extra-judicial foreclosure proceedings should be nullified for being based on an allegedly erroneous computation of the loan’s interest.

Held: The petition is meritorious.

The compounding of interest should be in writing

Article 1956 of the New Civil Code, which refers to monetary interest, provides:

Article 1956. No interest shall be due unless it has been expressly stipulated in writing. As mandated by the foregoing provision, payment of monetary interest shall be due only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for such payment

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was reduced in writing. Thus, We have held that collection of interest without any stipulation thereof in writing is prohibited by law.

In the case at bar, it is undisputed that the parties have agreed for the loan to earn 5% monthly interest, the stipulation to that effect put in writing. When the petitioners defaulted, the period for payment was extended, carrying over the terms of the original loan agreement, including the 5% simple interest. However, by the third extension of the loan, respondent spouses decided to alter the agreement by changing the manner of earning interest rate, compounding it beginning June 1986.

Given the circumstances, We rule that the first requirement––that there be an express stipulation for the payment of interest––is not sufficiently complied with, for purposes of imposing compounded interest on the loan. The requirement does not only entail reducing in writing the interest rate to be earned but also the manner of earning the same, if it is to be compounded. Failure to specify the manner of earning interest, however, shall not automatically render the stipulation imposing the interest rate void since it is readily apparent from the contract itself that the parties herein agreed for the loan to bear interest. Instead, in default of any stipulation on the manner of earning interest, simple interest shall accrue.

Imposing 5% monthly interest, whether compounded or simple, is unconscionable

Nevertheless, even if there was such an agreement that interest will be compounded, We agree with the petitioners that the 5% monthly rate, be it simple or compounded, written or verbal, is void for being too exorbitant, thus running afoul of Article 1306 of the New Civil Code, which provides:

Article 1306. The 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. (emphasis added)

As case law instructs, the imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to the common sense of man. It has no support in law, in principles of justice, or in the human conscience nor is there any reason whatsoever which may justify such imposition as righteous and as one that may be sustained within the sphere of public or private morals.

In this case, the 5% monthly interest rate, or 60% per annum, compounded monthly, stipulated in the Kasulatan is even higher than the 3% monthly interest rate imposed in the Ruiz case. Thus, we similarly hold the 5% monthly interest to be excessive, iniquitous, unconscionable and exorbitant, contrary to morals, and the law. It is therefore void ab initio for being violative of Article 1306 of the Civil Code. With this, and in accord with the Medel and Ruiz cases, we hold that the Court of Appeals correctly imposed the legal interest of 12% per annum in place of the excessive interest stipulated in the Kasulatan.(emphasis added)

Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu The foreclosure sale should be nullified

In view of the above disquisitions, We are constrained to nullify the foreclosure proceedings with respect to the mortgaged property in this case, following the doctrine in Heirs of Zoilo and Primitiva Espiritu v. Landrito.

The foreclosure proceeding in Heirs of Espiritu was eventually nullified by this Court because the Landritos were deprived of the opportunity to settle the debt, in view of the overstated amount demanded from them. As held:

Since the Spouses Landrito, the debtors in this case, were not given an opportunity to settle their debt, at the correct amount and without the iniquitous interest imposed, no foreclosure proceedings may be instituted. A judgment ordering a foreclosure sale is conditioned upon a finding on the correct amount of the unpaid obligation and the failure of the debtor to pay the said amount. In this case, it has not yet been shown that the Spouses Landrito had already failed to pay the correct amount of the debt and, therefore, a foreclosure sale cannot be conducted in order to answer for the unpaid debt. x x x

As a result, the subsequent registration of the foreclosure sale cannot transfer any rights over the mortgaged property to the Spouses Espiritu. The registration of the foreclosure sale, herein declared invalid, cannot vest title over the mortgaged property. x x x

Applying Espiritu, the extra-judicial foreclosure of the mortgaged property dated October 12, 1987 is declared null, void, and of no legal effect.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The Decision is

REVERSED and SET ASIDE. Let a new Decision be entered, the dispositive portion of which reads: 1. The stipulation in the Loan with Real Estate Mortgage imposing an interest of 5% monthly is

declared void.

2. In view of the nullity of the interest imposed on the loan which affected the total arrearages upon which foreclosure was based, the foreclosure of mortgage, Certificate of Sale, Affidavit of Consolidation, Deed of Final Sale are declared void.

3. The case is remanded to the Regional Trial Court to compute the current arrearages of petitioners taking into account the partial payments made by them and the imposition of the simple interest rate of 12% per annum.

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December 2014

Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

CAGAYAN II ELECTRIC COOPERATIVE, INC., REPRESENTED BY ITS MANAGER AND CHIEF

In document REVISTA DE POESÍA. NÚMERO 19. AÑO 2022 (página 192-197)