Civil Case No. 324

For: Sum of Money and Damages

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In their Complaint, the plaintiffs alleged in their first cause of action that the defendant obtained from them on November 23, 2004 a loan amounting to Eighty Five Thousand Two Hundred Pesos (P85,200.00) which shall be paid with monthly interest of five percent (5%) staring in March 2005 but defendant failed to pay despite demand. In addition, they allege in their second cause of action that they were constrained to engage the services of lawyer and incur litigation expenses. They ask the Court to order the defendant to pay them: Five Hundred Sixty Six Thousand Five Hundred Eighty Pesos (P566,580.00) representing the principal amount of the loan and the accumulated interests; P50,000.00 for attorney’s fees; and litigation  expenses as may be proved.

Writ of preliminary attachment was issued on motion of the plaintiffs and upon the posting of the attachment bond. Thereby, the lands covered by TCT Nos. T-3587 and T-3592 of the Register of Deeds of Tayug, Pangasinan were attached, as with respect the rights, interests, shares and participation therein of the defendant.

Summons by publication was resorted to by the plaintiffs. Thereafter, the defendant was declared in default in the Order of the court on May 13, 2016 and the case was submitted for decision.

The obligation of the defendant in favor of the plaintiffs is evidenced by a “Promissory Note”, quoted as follows:


For value which consists in the sum of EIGHTY FIVE THOUSAND TWO HUNDRED PESOS (P85,200.00), Philippine Currency, we SPS. VICTOR AND DOMINGA VICENTE, residents of San Miguel, Natividad, Pangasinan, representing our existing loan from LUZONICA CABADING-OLAZO, resident of Poblacion Zone III, San Quintin, Pangasinan;

That we, the undersigned Promissors, do hereby solemnly promised to pay the sum of 85,200.00 pesos with the agreed interest of five (5) percent monthly in installment basis starting on March 2005 in the sum of more than P10,000.00 pesos a month onward;

That should we fail to pay the aforesaid amount in due time then we will pay compounded interest and should suit be necessary to enforce and protect the rights and interest of Ms. Olazo, then I will pay costs of suit, damages and attorney’s fees that may be incurred by the said Ms. Luzonica Cabading-Olazo.

Done and executed this 23rd day of November 2004 at San Quintin, Pangasinan.


From the “Promissory Note”, it is clear that the obligation of the defendant to the plaintiffs is one of loan. This is pursuant to Article 1933 of the New Civil Code which provides that there is a contract of simple loan when money is delivered upon a condition that the same shall be paid.

However, the rate of interest of 5% per month indicated in the Promissory Note is excessive and unconscionable, and is void as held in the case of Macalinao vs BPI. The stipulation for an excessive and unconscionable rate of interest is void and it is as if there was no express contract thereon. The courts, however, may reduce the interest rate as reason and equity demand and the legal interest may be imposed in lieu thereof. The legal interest is 6% per annum effective on July 1, 2013 pursuant to Bangko Sentral ng Pilipinas (BSP) Circular No. 799 which modified the legal interest in loans or for bearances of any money, goods or credits and the legal rate allowed in judgments to 6% per annum. Prior to July 1, 2013, the legal interest was 12% per annum.

Demand to pay was last made by the plaintiffs on the defendant in a letter dated August 14, 2013 which the latter received on August 30, 2013 as shown by the registry return card. As of August 29, 2014 when the case was filed, the unpaid principal amounts to P85,200.00 and the unpaid interest amounts to P90,283.60 computed as follows:

The plaintiffs are also entitled to compensatory damages pursuant to Article 2209 of the Civil Code which provides that if the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest xxx”. In this case, it will be the legal interest and counted from August 30, 2013 when the demand letter was received by the defendant. Moreover, pursuant to Article 2212 of the Civil Code, the plaintiffs are entitled to be paid interest on the accrued interest from judicial demand or from August 29, 2014 when this case was filed.

On the claim for attorney’s fees and expenses of litigation, having been constrained to litigate, the plaintiffs are also entitled under Article 2208 of the New Civil Code. The same must however be reasonable. The Court deems that the amounts of P30,000.00 for attorney’s fees and P6,755.00, which is the amount paid for docket fees, for expenses of litigation are reasonable.

WHEREFORE, premises considered, judgment is hereby rendered ordering the defendant to pay the plaintiffs the following:

1) Principal amount of Eighty Five Thousand Two Hundred Pesos (P85,200.00) and the accrued interest amount to Ninety Thousand Two Hundred Eighty Three Pesos and Sixty Centavos (P90,283.60). These principal amount and accrued interest shall earn legal interest at the rate of 6% per annum computed from August 29, 2014 until fully paid.

2) Compensatory damages of 6% per annum of the principal amount of Eighty Five Thousand Two Hundred Pesos (P85,200.00) computed from August 30, 2013 until fully paid;

  1. Attorney’s fees amounting to Thirty Thousand (P30,000.00); and
  2. Litigation expenses amounting to Six Thousand Seven Hundred Fifty Five Pesos (P6,755.00)


Natividad, Pangasinan, this 20th day of June, 2016.


Presiding Judge

August 14, 21 and 28, 2016 

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