G.R. No. 225433 (2024)

G.R. No. 225433, September 20, 2022,
♦ Resolution, Leonen, [J]
♦ Concurring Opinion, Caguioa, [J]
♦ Concurring and Dissenting Opinion, Lazaro-Javier, [J]

Manila

EN BANC

[ G.R. No. 225433. September 20, 2022 ]

LARA'S GIFTS & DECORS, INC., PETITIONER, VS. MIDTOWN INDUSTRIAL SALES, INC. RESPONDENT.

RESOLUTION

LEONEN,ACTING C.J.:

For resolution is respondents' Motion for Reconsideration1of this Court's August 28, 2019 Decision,2which denied the Petition of Lara's Gifts & Decors, Inc. and affirmed the Court of Appeals' Decision3with modification as to damages.

As recalled from the facts of the Petition,4Lara's Gifts & Decors, Inc. (Lara's Gifts) purchased from Midtown Industrial Sales, Inc. (Midtown) various industrial and construction materials, from January to December 2007, in the total amount of P1,263,104.22.

The purchases were on a 60-day credit term, subject to the condition that 24% per annum would be charged on all accounts overdue. Lara's Gifts issued post-dated checks to pay for its purchases. However, these checks were later dishonored due to "insufficiency of funds" or "account closed." Midtown informed Lara's Gifts of the bounced checks and demanded the settlement of its accounts, through a demand letter dated January 21, 2008. However, Lara's Gifts still failed to pay. Thus, on February 5, 2008, Midtown filed a Complaint for Sum of Money with Prayer for Attachment.5

Lara's Gifts admitted its purchases, but claimed that most of the deliveries were substandard and of poor quality. As such, the finished products, using those raw materials, were rejected by U.S. buyers. Lara's Gifts added that clue to the economic recession, some of the orders made by its U.S. buyers were cancelled. Also, on February 19, 2008, a fire razed its factory destroying its equipment, machineries, and inventories.

On January 27, 2014, the Regional Trial Court, Branch 128, Caloocan City rendered a decision6in favor of Midtown. It found insufficient evidence to prove Lara's Gifts' claim that the products were substandard. On the other hand, it found the amount claimed by Midtown to be supported by the sales invoices and checks. It also found the 24% interest not unconscionable. The dispositive of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff MIDTOWN INDUSTRIAL SALES, INC. and against the defendant LARA'S GIFTS [&] DECORS, INC. ordering the latter to pay the former the following amount:

1. ONE MILLION TWO HUNDRED SIXTY THREE THOUSAND ONE HUNDRED FOUR PESOS and 22/100 (Php 1,263,104.22) plus interest fixed at 24% per annum to be computed from February 5, 2008, the date of judicial demand, until the judgment obligation is fully paid.

2. The sum of FIFTY THOUSAND PESOS (Php50,000.00) as and by way of attorney's fees.

Finally, defendant is ordered to pay the cost of suit.

SO ORDERED.

On appeal, the Court of Appeals upheld the Regional Trial Court's decision7which prompted Lara's Gifts to file a Petition for Review8before this Court.

In an August 28, 2019 Decision,9this Court denied Lara's Gifts' Petition, and affirmed the Court of Appeals' Decision with modification as to damages. This Court held that: (1) petitioner's general denial amounts to an admission of the genuineness and due execution of the sales invoices; (2) petitioner failed to prove its claim that the materials delivered did not comply with the specifications or were substandard or of poor quality; and (3) the 24% stipulated interest is valid and binding on petitioner, which is reckoned from date of extrajudicial demand on January 22, 2008 until full payment.

This Court further applied legal interest on the 24% interest, at the rate of: (i) 12%, reckoned from date of judicial demand on February 5, 2008 until June 30, 2013; and (ii) 6%, from July 1, 2013 until full payment. The Decision disposed thus:

WHEREFORE,the Decision dated 21 April 2016 of the Court of Appeals in CA-G.R. CV No. 102465, affirming the 27 January 2014 Decision of the Regional Trial Court, Branch 128, Caloocan City, isAFFIRMEDwithMODIFICATION,as follows:

Petitioner Lara's Gifts & Decors, Inc. is ordered to pay respondent Midtown Industrial Sales, Inc. the following:

1. ONE MILLION TWO HUNDRED SIXTY THREE THOUSAND ONE HUNDRED FOUR PESOS and 22/100 (P1,263,104.22) representing the principal amount plus stipulated interest at 24%per annumto be computed from 22 January 2008, the date of extrajudicial demand, until full payment.

2. Legal interest on the 24%per annuminterest due on the principal amount accruing as of judicial demand, at the rate of 12%per annumfrom the date of judicial demand on 5 February 2008 until 30 June 2013, and thereafter at the rate of 6%per annumfrom 1 July 2013 until full payment.

3. The sum of FIFTY THOUSAND PESOS (P50,000.00) as attorney's fees, plus legal interest thereon at the rate of 6%per annumto be computed from the finality of this Decision until full payment.

4. Cost of the suit.10(Emphasis in the original)

Petitioner filed a Motion for Reconsideration.11It argues that: (1) the due execution of the sales invoices was specifically denied in its Answer;12(2) it cannot be considered in default of its obligation since it did not receive any demand;13(3) it had sufficiently established that the materials delivered by respondent were substandard and of poor quality;14(4) the 24% interest stated in the sales invoices is null and void for being excessive, unconscionable, and exorbitant,15and was unilaterally imposed by respondent without petitioner's consent;16and (5) the imposition of legal interest on the 24% compensatory interest is excessive.17

In its Comment/Opposition,18respondent asserts that the Motion for Reconsideration must be denied outright as no new matters have been raised therein by the petitioner.

This Court partially grants the Motion for Reconsideration.

Petitioner's first to fourth arguments have already been sufficiently passed upon and discussed by this Court in the assailed Decision. We have held that petitioner's general denial in its Answer amounts to an admission of the genuineness and due execution of the sales invoices:

In this case, petitioner did not state the facts or substance of the matters relied upon to support its denial of the due execution of the sales invoices. As held inSy-Quia v. Marsman, "the Rules require that besides specifying the allegations of fact not admitted, the answer should set forth the matters relied upon in support of the denial; so that, in effect, the Rules are no longer satisfied with mere denials, even if specific, but demand that defendant manifest what he considers to be the true facts." The purpose of the specific denial is to compel the defendant to specify the allegations which he or she intends to disprove and disclose the matters relied upon to support such denial, thereby limiting the issues and avoiding unnecessary delays and surprises. Petitioner's general denial amounts to an admission of the genuineness and due execution of the sales invoices.19(Citations omitted)

As to the poor quality of delivered products, this Court held that "other than its bare allegation that the materials delivered were substandard and of poor quality, petitioner failed to prove or substantiate its claims. As found by the trial court, none of petitioner's witnesses was able to present proof that the materials delivered were substandard or of poor quality.”20

Moreover, in upholding the validity of the 24% per annum interest, we ruled:

In the present case, petitioner, which has been doing business since 1990 and has been purchasing various materials from respondent since 2004, cannot claim to have been misled into agreeing to the 24% interest rate which was expressly stated in the sales invoices. Besides, this Court has already ruled in several cases that an interest rate of 24%per annumagreed upon between the parties is valid and binding and not excessive and unconscionable. Thus, the stipulated 24% interestper annumis binding on petitioner.21(Citations omitted)

We find no valid justification to compel a modification or reversal of our Decision as to those issues.

The only matter left for this Court to resolve is whether or not the imposition of legal interest on the compensatory interest of 24% per annum is excessive.

To answer this, an elucidation of the concept and functions of interest is first appropriate.

I

Interest is oftwo major kinds—conventional interest, on one hand, andcompensatory intereston the other.22These two kinds of interest are conceptually different, subsume the other types and kinds of interest, and are governed by different rules that must be consistently applied, otherwise the computation of interest "present[s] intricate situations."23

I(A)

Asimple loan, whether the object is money or other consumable thing, may begratuitous or onerous.24If it isonerous, thecompensationto be paid by the borrower is referred to asconventional interest, as it is the interest agreed to by the parties themselves as distinguished from that prescribed by law.25

Conventional interest is therefore paid not as a consequence of default, nor is it compensatory or a result of a provision of law. It is "rigorously lucrative," and the result of the express will of the parties in a contract.26In onerous simple loans, the payment of conventional interest is a principal condition, if not the most important condition, of the loan. In that case, "any modification must be mutually agreed upon; otherwise, it has no binding effect."27As it is a stipulation covenanted in a valid and effective contract, conventional interest continues to run from the date stipulated, with no break in the continuity of the obligation to pay it.28

However, payment of conventional interest is allowed only if the following conditions concur:

1) There is anexpress stipulationfor the payment of interest,and

2) The stipulation for the payment of interest isin writing.29

The most common type of conventional interest ismonetary interest,also referred to asregular interest.It is the conventional interest in a simple loan of money. The payment of both principal and interest is made in money gradually extinguishing30the loan of money. Monetary interest is, therefore, generally viewed as the "cost of the use of money."31

"The payment of regular interest constitutes the price or cost of the use of money and thus, until the principal sum due is returned to the creditor, regular interest continues to accrue since the debtor continues to use such principal amount."32It has been held that "[f]or [a debtor] to continue in possession of the principal of the loan... and to continue to use the same after maturity of the loan without payment of regular or monetary interest, would constitute unjust enrichment on the part of the [debtor] at the expense of [the creditor][.]"33

Pursuant to theUsury Law,34theapplicable interest ratein theloan of money, goods, or credits (simple loans), shall be determined as follows:

(1)If there is an interest rate stipulated, then the interest rate as stipulated shall be applicable.

(2) If there is no stipulation on the interest rate, then the interest rate prescribed by statute (orlegal interest35) shall be applicable.36

But insofar as simple loans are concerned, this rule on legal interest applies only if in the first place,conventional interest was expressly stipulated in writingand only therateof interest was left unstipulated.

With regard to interest on interest, the following provisions are pertinent:

Civil Code

ARTICLE 1959. Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest.

However, the contracting parties may by stipulation capitalize the interest due and unpaid, which as added principal, shall earn new interest.

ARTICLE 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.

Usury Law

SECTION 5. In computing the interest on any obligation, promissory note or other instrument or contract, compound interest shall not be reckoned, except by agreement; Provided, That whenever compound interest is agreed upon, the effective rate of interest charged by the creditor shall not exceed the equivalent of the maximum rate37prescribed by the Monetary Board, or, in default thereof, whenever the debt is judicially claimed, in which last case it shall draw six per centum per annum interest or such rate as may be prescribed by the Monetary Board.38

Forconventional interest, the general rule is that interest is paid on theprincipalonly(simple interest).39

Consequently,interest on interest, that is, the compensation for interest that is due and unpaid, is generally not demandable.

It is only demandable if, in the first place, there is conventional interest—that is, an express stipulation in writing to pay interest in a contract of loan—andany or both of the following instances are applicable:

(1) Whenby stipulationof the parties, compounding or capitalizing of interest is agreed upon, in which case, previously accumulated interest is added as principal and earns interest as such(compound interest).40

(2) When interest that is due and unpaid isjudicially demanded, whether or not there is an agreement or stipulation to this effect. Judicial demand is reckoned from the date of filing of a complaint in court. The rate of interest shall be the legal rate applicable to loans or forbearance of money.41

I(B)

Compensatory interest, also referred to aspenalty interest, indemnity,ormoratory interest,42is theindemnity for damagesarising fromdelayon the part of the debtor in an obligation consisting in the payment of a sum of money. It is interest allowed by law in the absence of a promise to pay interest as compensation for delay in paying a fixed sum or a delay in assessing and paying damages.43

Since a simple loan of money is necessarily an obligation consisting in the payment of a sum of money, then compensatory interest is always demandable in case the borrower in a simple loan of money incurs delay. However, a simple loan of money is not the only obligation that consists in the payment of a sum of money. Moreover, not every obligation consists in the payment of a sum of money.

Although compensatory interest, unlike conventional interest,need not be expressly stipulated in writing, the parties may freely stipulate on compensatory interest through apenalty or penal clause.The nature of a penal clause was expounded inLigutan v. Court of Appeals:44

A penalty clause, expressly recognized by law, is an accessory undertaking to assume greater liability on the part of an obligor in case of breach of an obligation. It functions to strengthen the coercive force of the obligation and to provide, in effect, for what could be the liquidated damages resulting from such a breach. The obligor would then be bound to pay the stipulated indemnity without the necessity of proof on the existence and on the measure of damages caused by the breach. Although a court may not at liberty ignore the freedom of the parties to agree on such terms and conditions as they see fit that contravene neither law nor morals, good customs, public order or public policy, a stipulated penalty, nevertheless, may be equitably reduced by the courts if it is iniquitous or unconscionable or if the principal obligation has been partly or irregularly complied with.45(Citations omitted)

In distinguishing betweenconventional interestandcompensatory interest, this Court has explained that if the debtor is not in delay, it is properly liable only for the principal of the loan and conventional interest. Even if the debtor is not liable for compensatory interest, this does not mean that it is, as a matter of law, relieved from the payment of conventional interest. The conventional interest continues to accrue under the terms of the loan until actual payment is effected. The payment of conventional interest, specifically monetary interest, constitutes the price or cost of the use of money and thus, continues to accrue until the principal sum due is returned to the creditor.46Corollary to this, if the debtorwere in delay, thencompensatory interest, as a matter of law, will accruein addition to conventional interest.

The "rules of thumb" for the rate ofcompensatory interestwere established inEastern Shipping Lines, Inc. v. Court of Appeals,47and restated48inNacar v. Gallery Frames:49

I. When an obligation, regardless of its source,i.e., law, contracts, quasi-contracts, delicts or quasi-delicts,50is breached, the contravenor can be held liable for damages.51The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.52

II. With regard particularly to anaward of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in thepayment 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.53Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded.54In the absence of stipulation,55the rate of interest shall be 6% 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.

2. When an obligation,not constituting a loan or forbearance of money, is breached, aninterest on the amount of damagesawarded may be imposed at the discretion of the court56at the rate of 6% per annum.57No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty.58Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When thejudgment of the courtawarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein. (Emphasis supplied)

It should be stressed that theEastern Shipping LinesandNacarrules govern onlycompensatory interest, not conventional interest,59and should be read in conjunction with the provisions of Articles 2209 and 1226 of the Civil Code.

ARTICLE 2209. If the obligation consists in the payment of a sum of money, andthe 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, which is six per cent per annum.

See Also

Philippines Interest RateFinancial InclusionOur CompanyUNOBank – UNO Digital Bank

ARTICLE 1226. In obligations with apenal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary. . . . (Emphasis supplied)

Thus, the applicablecompensatory interestin contractsconsisting in the payment of a sum of moneyshould be determined as follows:60

(1) If there is a penal clause that stipulates the penalty or indemnity, then thestipulated penalty or indemnityshall be applicable.

(2) If there is no penal clause, but there is a stipulation on conventional or monetary interest, then theconventional or monetary interestshall be applicable.

(3) If there is no stipulation on the penalty or on conventional interest, then thelegal interest rateshall be applicable. In contracts of simple loan of money, the legal interest rate is currently 6%.61

A question arises on whether interest on interest is applicable to compensatory interest. Jurisprudence supports its application as shown in the following cases.

InPhilippine American Accident Insurance Company, Inc. v. Flores & Navalta,62this Court stated that Article 221263of the Civil Code "contemplate[s] the presence of stipulated or conventional interest which had accrued when demand was judicially made."64Although the statement was made as basis for ruling that Article 2212 cannot be invoked to justify the payment of compound interest if the judgment only involves the payment of simple interest, it also raised the issue of whether Article 2212 can serve as basis for the payment of interest on compensatory interest.

Eastern Shipping Lines, Inc., as restated inNacar, provides:

II. With regard particularly to an award ofinterest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. 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 6% 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.65(Emphasis supplied)

InTan v. Court of Appeals & Cultural Center of the Philippines,66this Court ruled that Articles 195967and 2212 of the Civil Code sanction the compounding of penalty charges in the parties' contract.

Isla v. Estorga,68reiterated that Article 2212 applies to "stipulated or conventional interest,i.e., monetary interest[.]"

In addition, not only the principal amount but also the monetary interest due to respondent as discussed above shall itself earn compensatory interest at the legal rate, pursuant to Article 2212 of the Civil Code, which states that "[i]nterest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. To be sure, Article 2212 contemplates the presence of stipulated or conventional interest,i.e., monetary interest, which has accrued when demand wasjudiciallymade. In cases where no monetary interest had been stipulated by the parties, no accrued monetary interest could further earn compensatory interest upon judicial demand. Thus, the principal amount and monetary interest due to respondent shall earn compensatory interest of twelve percent (12%) per annum from judicial demand,i.e., the date of the filing of the complaint on July 24, 2007, to June 30, 2013, and thereafter, at the rate of six percent (6%) per annum from July 1, 2013 until fully paid.69(Emphasis in the original, citations omitted)

II

Stipulatedinterest rates, whether conventional or compensatory, are subject to the "unconscionability" standard. The concept of unconscionability is a matter of law and equity. Jurisprudence empowers courts to equitably reduce interest rates; and the law70empowers them to reduce penalty charges.71Eastern Shipping Linesrecognized that "factual circ*mstances [of a case] may [call] for different applications, guided by the rule that the courts are vested with discretion, depending on the equities of each case, on the award of interest."72

II (A)

Central Bank Circular No. 905 issued by the Monetary Board of the Central Bank, pursuant to the powers granted by the Usury Law, effectively lifted the ceilings on interest rates. Consequently, usury, although illegal, islegally non-existentand interest can be charged as agreed upon by creditor and borrower73pursuant to the freedom of contract principle under Article 1306 of the Civil Code,viz:

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.

However, courts have not hesitated to voidconventional interestthat is"excessive, iniquitous, unconscionable and exorbitant," for being violative of the same provision of Article 1306 of the Civil Code. As held inCarpo v. Chua & Dy Ng:74

In a long line of cases, this Court has invalidated similar stipulations on interest rates for being excessive, iniquitous, unconscionable and exorbitant. InSolangon v. Salazar75we annulled the stipulation of 6% per month or 72% per annum interest on a P60,000.00 loan. InImperial v. Jaucian,76we reduced the interest rate from 16% to 1.167% per month or 14% per annum. InRuiz v. Court of Appeals,77we 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 inCuaton v. Salud.78Recently, this Court, inArrofo v. Quiño,79reduced the 7% interest per month on a P15,000.00 loan amounting to 84% interest per annum to 18% per annum.

There is no need to unsettle the principle affirmed inMedeland 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.

Conventional interest rates that are unconscionable are deemed unjust, immoral, and contrary to public policy. InSps. Castro v. Tan et al.:80

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.81(Citation omitted)

InVitug v. Abuda,82we held that while parties are free, in view of the suspension of the Usury Law, to set interest rates in their loan contract, they must ensure that their stipulated interest rates are neither iniquitous nor unconscionable. Otherwise, the same would be void for being against public morals. We emphasized that "[t]he lifting of the ceiling on interest rates may not be read as 'grant[ing] lenderscarte blancheto raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.'"83Thus, when stipulated interest rates are later found to be iniquitous or unconscionable, courts have the discretionary power to equitably reduce them, approximating the prevailing market rate "under the circ*mstances had the parties had equal bargaining power."84

The reduction of interest rates is not limited to monetary interest. It is not dependent on the type of interest imposed on the party, but on whether the interest rate was unconscionable or not. Thus, compensatory interest, when found to be unconscionable, may also be reduced.

Articles 1229 and 2227 of the Civil Code allow the reduction of penalty charges or damages that are unconscionable:

ARTICLE 1229. 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.

ARTICLE 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.

InIbarra v. Aveyro,85this Court even held that if a penalty clause is so unconscionable that its enforcement constitutes "a repugnant spoliation and an iniquitous deprivation of property,"86it can be struck down for being invalid.

Accordingly, in several cases,87this Court reduced or removed altogether penalty interests or charges that were unconscionable.

II(B)

"Interest rates become unconscionable in light of the context in which they were imposed or applied."88Thus, the determination of whether an interest rate or penalty charge is reasonable or iniquitous rests on the sound discretion of the courts based on the established facts of a particular case.89

This Court had struck down stipulated monthly interest rates of 2.5%,905%,916%,92and 10%93for being unconscionable. Meanwhile, inToledo v. Hyden,94a monthly interest rate of 6% to 7% was deemed valid. In that case, this Court noted that the borrower was not in dire need of money when she obtained a loan, and it was the borrower herself who was guilty of inequitable acts:

In this case, there was no urgency of the need for money on the part of Jocelyn, the debtor, which compelled her to enter into said loan transactions. She used the money from the loans to make advance payments for prospective clients of educational plans offered by her employer. In this way, her sales production would increase, thereby entitling her to 50% rebate on her sales. This is the reason why she did not mind the 6% to 7% monthly interest.Notably too, a business transaction of this nature between Jocelyn and Marilou continued for more than five years. Jocelyn religiously paid the agreed amount of interest until she ordered for stop payment on some of the checks issued to Marilou.The checks were in fact sufficiently funded when she ordered the stop payment and then filed a case questioning the imposition of a 6% to 7% interest rate for being allegedly iniquitous or unconscionable and, hence, contrary to morals.

It was clearly shown that before Jocelyn availed of said loans, she knew fully well that the same carried with it an interest rate of 6% to 7% per month, yet she did not complain. In fact, when she availed of said loans, an advance interest of 6% to 7% was already deducted from the loan amount, yet she never uttered a word of protest.

After years of benefiting from the proceeds of the loans bearing an interest rate of 6% to 7% per month and paying for the same, Jocelyn cannot now go to court to have the said interest rate annulled on the ground that it is excessive, iniquitous, unconscionable, exorbitant, and absolutely revolting to the conscience of man.95(Emphasis supplied, citations omitted)

Furthermore, while we have sustained the validity of a 21% per annum interest in one case,96we have also reduced an 18% per annum interest rate to 12% per annum in another,97after finding that "the resulting interest charge has turned out to be excessive in the context of its base computation period, and hence, unwarranted[.]"98InLand Bank of the Phils, v. David,99we upheld the reduction of the interest rate of 17% per annum and the penalty charge of 12% per annum to 12% and 5% per annum, respectively, on equitable grounds. This was because the loan extended to respondent was part of the social assistance program to farmers and this Court considered respondent's efforts to pay even after she had suffered business losses.

InVitug, the stipulated interest rates of 5% to 10% per month were found iniquitous considering the "extreme necessity" which compelled petitioner to obtain the loan and the possibility of his property being foreclosed if not for the loan. This Court further said that "it would be unjust to impose a heavier burden upon petitioner, who would already be losing his and his family's home. Respondent would not be unjustly deprived if the interest rate is reduced. After all, respondent still has the right to foreclose the property."100

Also, in another case,101this Court noted that the payment of the principal loan of P500,000 and interest of P425,000, computed at a monthly interest rate of 5% already "sufficiently compensated for the loan and the interest earned, and [the creditor] cannot be allowed to further recover on an interest rate which is unconscionable."102

To determine whether an interest rate is unconscionable, we are guided by the following pronouncements inSps. Abella v. Sps. Abella:103

In determining whether the rate of interest is unconscionable, the mechanical application of pre-established floors would be wanting. The lowest rates that have previously been considered unconscionable need not be an impenetrable minimum. What is more crucial is a consideration of the parties' contexts. Moreover, interest rates must be appreciated in light of the fundamental nature of interest as compensation to the creditor for money lent to another, which he or she could otherwise have used for his or her own purposes at the time it was lent. It is not the default vehicle for predatory gain. As such, interest need only be reasonable. It ought not be a supine mechanism for the creditor's unjust enrichment at the expense of another.104

Hence, this guiding parameter:

The legal rate of interest is the presumptive reasonable compensation for borrowed money. While parties are free to deviate from this, any deviation must be reasonable and fair. Any deviation that is far-removed is suspect.Thus, in cases where stipulated interest is more than twice the prevailing legal rate of interest, it is for the creditor to prove that this rate is required by prevailing market conditions.105(Emphasis supplied)

Conformable to the foregoing pronouncements,"[t]he maximum interest rate that will not cross the line of conscionability is 'not more than twice the prevailing legal rate of interest.' If the stipulated interest exceeds this standard, the creditor must show that the rate is necessary under current market conditions."106The creditor must also show that the parties were on an equal footing when they stipulated on the interest rate.107

Furthermore, where the monetary interest rate is found to be unconscionable, only the rate is nullified and deemed not written into the contract; the parties' agreement on the payment of interest remains. In such instance, "the legal rate of interest prevailing at the time the agreement was entered into"108is applied by the courts.

As for compensatory interest, this Court inLigutan v. Court of Appeals109held:

The question of whether a penalty is reasonable or iniquitous can be partly subjective and partly objective. Its resolution would depend on such factors as, but not necessarily confined to, the type, extent and purpose of the penalty, the nature of the obligation, the mode of breach and its consequences, the supervening realities, the standing and relationship of the parties, and the like, the application of which, by and large, is addressed to the sound discretion of the court.110(Citations omitted)

InPalmares v. Court of Appeals,111this Court removed the monthly 3% penalty charge for being highly inequitable and unreasonable.Palmaresinvolved a P30,000.00 loan, payable in two months with interest at 6% per annum that would be compounded every month.Palmaresheld:

In a case previously decided by this Court which likewise involved private respondent M.B. Lending Corporation, and which is substantially on all fours with the one at bar, we decided to eliminate altogether the penalty interest for being excessive and unwarranted under the following rationalization:

Upon the matter of penalty interest, we agree with the Court of Appeals that the economic impact of the penalty interest of three percent (3%) per month on total amount due but unpaid should be equitably reduced.The purpose for which the penalty interest is intended — that is, to punish the obligor — will have been sufficiently served by the effects of compounded interest.Under the exceptional circ*mstances in the case at bar,e.g., the original amount loaned was only P15,000.00; partial payment of P8,600.00 was made on due date; and the heavy (albeit still lawful) regular compensatory interest, the penalty interest stipulated in the parties" promissory note is iniquitous and unconscionable and may be equitably reduced further by eliminating such penalty interest altogether.112(Emphasis supplied, citation omitted)

InBarons Marketing Corp. v. Court of Appeals,113this Court reduced the 25% penalty charge to cover the attorney's fees and collection fees, which was in addition to the 12% annual interest, to 10% for being manifestly exorbitant. Also, inTan v. Court of Appeals,114the continued monthly accrual of the 2% penalty on the total amount due of about P7.996 million was held to be unconscionable. Considering the debtor's partial payments and offer to settle his outstanding loan in good faith, this Court found it fair and equitable in that case to reduce the 2% penalty charge, compounded monthly, to a straight 12% per annum.

II(C)

However, the standards of unconscionability cannot apply to interest on interest under Article 2212 of the Civil Code,viz:

ARTICLE 2212.Interest due shall earn legal interestfrom the time it is judicially demanded, although the obligation may be silent upon this point. (Emphasis supplied)

As Justice Alfredo Benjamin S. Caguioa elucidated, "interest on interest" is fixed by law. In the absence of a contractual stipulation between the parties on the rate of interest on accrued interest, the legal rate shall apply by operation of law. Its imposition is not subject to the court's discretionary power.115

Article 2212's interest on interest is penalty or indemnity for delay in the payment of stipulated interest.116It is expressly prescribed by law, and deemed written into every contract. This, all contracting parties should be aware of when they stipulate on the payment of interest.

In view of the foregoing discussions, and taking into consideration the viewpoints of Justice Caguioa, the summary of rules on the imposition of interest, as provided inEastern Shipping LinesandNacar, are amended as follows:

With regard 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:

A. In obligations consisting of loans or forbearances of money, goods or credit:

1. The compensatory interest due shall be that which is stipulated by the parties in writing as the penalty or compensatory interest rate,117provided it is not unconscionable.118In the absence of a stipulated penalty or compensatory interest rate, the compensatory interest due shall be that which is stipulated by the parties in writing as the conventional interest rate,119provided it is not unconscionable.120In the absence of a stipulated penalty or a stipulated conventional interest rate, or if these rates are unconscionable, the compensatory interest shall be the prevailing legal interest rate prescribed by the Bangko Sentral ng Pilipinas.121Compensatory interest, in the absence of a stipulated reckoning date, shall be computed from default, i.e., from extrajudicial or judicial demand,until full payment.122

2. Interest on conventional/monetary interest and stipulated compensatory interest shall accrue at the stipulated interest rate (compounded interest) from the stipulated reckoning point or, in the absence thereof, from extrajudicial or judicial demanduntil full payment, provided it is not unconscionable. In the absence of a stipulated compounded interest rate or if this rate is unconscionable, the prevailing legal interest rate prescribed by the Bangko Sentral ng Pilipinas shall apply from the time of judicial demanduntil full payment.123

B. In obligations not consisting of loans or forbearances of money, goods or credit:

1. For liquidated claims:

The compensatory interest due shall be that which is stipulated by the parties in writing as the penalty or compensatory interest rate,124provided it is not unconscionable.125In the absence of a stipulated penalty or compensatory interest rate, or if these rates are unconscionable, the compensatory interest shall be at the rate of 6%.126Compensatory interest, in the absence of a stipulated reckoning date, shall be computed from default, i.e., from extrajudicial or judicial demand,until full payment.127

a. Interest on stipulated compensatory interest shall accrue at the stipulated interest rate (compounded interest) from the stipulated reckoning point or, in the absence thereof, from extrajudicial or judicial demanduntil full payment, provided it is not unconscionable. In the absence of a stipulated compounded interest rate or if this rate is unconscionable, legal interest at the rate of 6% shall apply from the time of judicial demanduntil full payment.128

2. For unliquidated claims:

Compensatory interest on the amount of damages awarded may be imposed in the discretion of the court at the rate of 6% per annum.129No compensatory interest, however, shall be adjudged on unliquidated claims or damages until the demand can be established with reasonable certainty.130Thus, when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date of the judgment of the trial court (at which time the quantification of damages may be deemed to have been reasonably ascertained)until full payment.131The actual base for the computation of the interest shall, in any case, be on the principal amount finally adjudged.

The foregoing guidelines are illustrated in the table below:

Rules on the Imposition of Compensatory Interest

When obligation consists in:	Compensatory Interest (scenario)	Interest rate	Interest Accrual
LOANS OR FORBEAR­ANCE OF
	⇒ If the penalty or compensatory interest rate is stipulated	Stipulated penalty or compensatory interest	⇒ As stipulated ⇒ If not stipulated, from judicial or extrajudicial demand
	⇒ If the penalty or compensatory interest is not stipulated or unconscionable	Stipulated conventional interest	⇒ As stipulated ⇒ If not stipulated, from judicial or extrajudicial demand
	If conventional interest is not stipulated or unconscionable	BSP-prescribed legal rate	From judicial demand
MONEY, GOODS OR CREDIT
	Interested on Interest	Interest rate	Interest Accrual
	(i) Interest onconventionalinterest	Stipulated rate (compound interest rate)	⇒ As stipulated ⇒ If not stipulated from judicial or extrajucial demand
		BSP-prescribed legal rate, if not stipulated or unconscionable.	From judicial demand
	(ii) Interest on compensatory interest	Stipulated rate (compound interest rate)	⇒ As stipulated ⇒ If not stipulated, from judicial or extrajudicial demand
		BSP-prescribed legal rate, if not unconscionable	From judicial demand
NON-LOAN OR NON- FORBEAR­ANCE OF MONEY, GOODS OR CREDIT
	Is demand established with reasonable certainty?	Compensatory interest rate	Interest Accrual
	Yes	Stipulated penalty or compensatory interest Legal rate 6%, if not stipulated or unconscionable.	⇒ As stipulated ⇒ If not stipulated, from judicial or extrajudicial demand
		Interest on interest at 6%	From judicial demand
	No	Discretionary at 6%	From date of judgment

III

Now to this case, we modify our earlier Decision and hold that the contract involved is not a loan or forbearance of money, goods, or credit,132but a sale of goods on credit. From January to December 2007, petitioner Lara's Gifts purchased from respondent Midtown various industrial and construction materials totaling ₱1,263,104.22. The purchases were on a 60-day credit term, with the condition that a 24% interest rate per annum would be charged onall accounts overdue.This means that the 24% interest rate per annum would run only upon petitioner's failure to pay on the due date.

Thus, the 24% interest rate is acompensatory interest, imposed as indemnity for damages caused by the delay in the payment of the raw materials' purchase price, pursuant to Article 2209.

By the express provision of Article 2212, the 24% compensatory interest, which have accrued at the time of judicial demand, may be subject to "interest on interest."

However, as Justice Amy C. Lazaro-Javier pointed out, the Regional Trial Court adjudged in favor of Midtown Industrial Sales only P1,263,104.22 plus interest at 24% per annum, computed from February 5, 2008 until fully paid; and P50,000.00 as attorney's fees. This judgment award became final and executory as to Midtown Industrial Sales as it did not appeal. Thus, the additional award of legal interest on the 24% interest, in an appeal brought by Lara's Gifts, isultra vires.133

ACCORDINGLY,the Motion for Reconsideration isPARTIALLY GRANTED.This Court's August 28, 2019 Decision isMODIFIEDin that the award of legal interest on the 24% per annum compensatory interest is herebyDELETED.

Petitioner Lara's Gifts & Decors, Inc. is ordered toPAYrespondent Midtown Industrial Sales, Inc. the following:

(1) ONE MILLION TWO HUNDRED SIXTY-THREE THOUSAND ONE HUNDRED FOUR PESOS and 22/100 (P1,263,104.22) representing the principal amount plus stipulated interest at 24%per annumto be computed from January 22, 2008, the date of extrajudicial demand, until full payment;

(2) The sum of FIFTY THOUSAND PESOS (P50,000.00) as attorney's fees; and

(3) Cost of the suit.

See Also

Corporate Deposit Rates - Saving and Checking

The total monetary award shall bear legal interest at the rate of 6%per annumfrom finality of this Resolution until full payment.134

SO ORDERED.

Hernando, Inting, Zalameda, Gaerlan, Rosario, J. Lopez, Dimaampao, Marquez, Kho, Jr.,andSingh, JJ., concur.

Gesmundo *,C.J.,andM. Lopez,J.,on official business.

Caguioa, J.,see concurring opinion.

Lazaro-Javier, J.,I concur in the result. See separate opinion.

Footnotes

*On official business.

**Per Special Order No. 2914 dated September 15, 2022.

1Rollo, pp. 379-396.

2Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales. Inc., G.R. No. 225433, August 28, 2019 , [Per J. Carpio, En banc].

3Rollo, pp. 44-58. The Court of Appeals' Decision dated April 21, 2016 was penned by Associate Justice Stephen C. Cruz and concurred in by Associate Justices Jose C. Reyes, Jr. (retired Supreme Court Justice) Ramon Paul L. Hernando (now a Member of this Court) of the Fifth Division, Court of Appeals, Manila.

4As narrated inLara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., G.R. No. 225433, August 28, 2019, [Per J. Carpio, En banc].

5Id.

6Rollo, pp. 62-71.

7Id. at 57.

8Id. at 13-43. Filed under Rule 45.

9Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., G.R. No. 225433, August 28, 2019, [Per J. Carpio, En banc].

10Id.

11Rollo, pp. 379-396.

12Id. at 381.

13Id. at 384-385.

14Id. at 386.

15Id. at 390.

16Id. at 389 and 391.

17Id. at 391.

18Id. at 405-412.

19Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., G.R. No. 225433, August 28 2019, [Per J. Carpio, En banc].

20Id.

21Id.

22This dichotomy goes back toBanal v. Safont & Puig, 19 Phil. 372 (191 1) [Per CJ Arellano, En banc], but it should be noted that inReinsurance Company of the Orient, Inc. v. Court of Appeals, et al., 275 Phil. 20 (1991) [Per J. Feliciano, Third Division],Siga-an v. Villanueva, 596 Phil. 760 (2009) [Per J. Chico-Nazario, Third Division],Asiatrust Development Bank v. Tuble, 691 Phil. 732 (2012) [Per J. Sereno, Second Division] andSun Life of Canada (Phils.) v. Tan Kit, 745 Phil. 482 (2014), and several other cases, the Supreme Court established the dichotomy asmonetary interest, on one hand, andcompensatory interest, on the other. Nevertheless, theBanaldichotomy is used here asconventional interestsubsumes monetary interest, and therefore, allows a broader understanding of the concept.

23Robinson v. Macleod & Postal Savings Bank of the Philippine Islands, 46 Phil. 539, 540 (1924) [Per J. Malcolm, Second Division].

24CIVIL CODE, art. 1933 provides:

ARTICLE 1933. By the contract of loan, one of the parties delivers to another, . . . money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid in which case the contract is simply called a loan or mutuum.

. . . .

Simple loan may be gratuitous or with a stipulation to pay interest. . . .

25BLACK'S LAW DICTIONARY (9th ed. 2009).

26Banal v. Safont & Puig,19 Phil. 372, 374 (1911) [Per CJ Arellano, En banc].

27Spouses Silos v. Philippine National Bank, 738 Phil. 156, 160 (2014) [Per J. Del Castillo, Second Division].

28Banal v. Safont & Puig,19 Phil. 372 (1911) [Per CJ Arellano, En banc].

29CIVIL CODE, art. 1956 provides:

ARTICLE. 1956. No interest shall be due unless it has been expressly stipulated in writing.

See alsoDe la Paz v. L & J Development Co., 742 Phil. 420 (2014) [Per J. Del Castillo, Second Division]; andSiga-an v. Villanueva, 596 Phil. 760 (2009) [Per J. Chico-Nazario, Third Division].

30BLACK S LAW DICTIONARY (9th ed. 2009).

31State Investment House, Inc. v. Court of Appeals, 275 Phil 433, 444 (1991) [Per J. Feliciano, Third Division].

32Id.

33Id. at 445.

34Act No. 2655 (1916), An Act Fixing Rates of Interest Upon Loans and Declaring the Effect of Receiving or Taking Usurious Rates and for Other Purposes, as amended by Presidential Decrees No. 116, 858, and 1684, is generally known as the Usury Law.

36Currently 6% for loans and forbearance of money, goods, or credits pursuant to Bangko Sentral ng Pilipinas Circular No. 799, series of 2013, effective July 1, 2013, which was issued and promulgated by the Monetary Board pursuant to the authority granted to the Bangko Sentral ng Pilipinas by P.D. No. 116, which amended the Usury Law.

36Usury Law, sec. 1 provides:

SECTION 1. The rate of interest for the loan. . . of any money, goods, or credits. . . in the absence of express contract as to such rate of interest, shall be six per centum per annum or such rate as may be prescribed by the Monetary Board of the Central Bank of the Philippines for that purpose in accordance with the authority hereby granted.

37Central Bank Circular No. 905, Series of 1982, effectively lifted the ceiling on interest rates.

38Currently 6% pursuant to Bangko Sentral ng Pilipinas Circular No. 799, series of 2013.

39BLACK'S LAW DICTIONARY (9th ed. 2009).

40Central Bank of the Philippines v. Cloribel, 150-A Phil. 86 (1972) [Per J. Concepcion, Second Division].

41Currently 6% pursuant to Bangko Sentral ng Pilipinas Circular No. 799, series of 2013.

42National Marketing Corp. v. Marquez, et al., 136 Phil. 143 (1969) [Per J. JBL Reyes, En banc]; andMendoza & Lim v. Spouses Gomez, 736 Phil. 460 (2014) [Per J. Perez, Second Division].

43BLACK'S LAW DICTIONARY (9th ed. 2009).

44427 Phil. 42 (2002) [Per J. Vitug, Third Division].

45Id. at 51.

46SeeState Investment House, Inc. v. Court of Appeals, 275 Phil. 433 (1991) [Per J. Feliciano, Third Division], which involved the application of monetary interest.

47304 Phil. 236 (1994) [Per J. Vitug, En banc].

48Taking into account Bangko Sentral ng Pilipinas Circular No. 799, Series of 2013, effective July 1, 2013.

49716 Phil. 267, 282-283 (2013) [Per J. Peralta, En banc].

50CIVIL CODE, art. 1157.

51CIVIL CODE, art. 1170 provides:

ARTICLE 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages

52CIVIL CODE, art. 2195 provides:

ARTICLE 2195. The provisions of this Title (on Damages) shall be respectively applicable to all obligations mentioned in article 1157.

53CIVIL CODE, art. 1956 provides:

ARTICLE 1956. No interest shall be due unless it has been expressly stipulated in writing.

54CIVIL CODE, art. 2212 provides:

ARTICLE 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.

55As explained inState Investment House, Inc. v. Court of Appeals, 275 Phil. 433 (1991) [Per J. Feliciano Third Division]: ". . . in the absence of a stipulation of a particular rate ofpenalty interest, then the payment ofadditional interestat a rate equal to the regular monetary interest; and if no regular interest had been agreed upon, then payment oflegal interest. . ." (Emphasis supplied)

56CIVIL CODE, art. 2210 provides:

ARTICLE 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract.

57CIVIL CODE, art. 2209 provides:

ARTICLE 2209. 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, which is six percent per annum.

58CIVIL CODE, art. 2213 provides:

ARTICLE 2213. Interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty.

59It should be noted, however, that several cases (see for example:Cuaton v. Salud, 465 Phil. 999 (2004) [Per J. Ynares-Santiago, First Division],Rizal Commercial Banking Corporation v. Court of Appeals,352 Phil. 101 (1998) [Per J. Melo, Second Division]) considerEastern Shipping Lines, Inc.as a comprehensive summary of existing rules on the computation of interest, without distinguishing between conventional and compensatory interest.

60SeeReinsurance Company of the Orient, Inc. v. Court of Appeals, 275 Phil. 20 (1991) [Per J. Feliciano, Third Division] andState Investment House, Inc. v. Court of Appeals, 275 Phil. 433 (1991) [Per J. Feliciano, Third Division].

61Bangko Sentral ng Pilipinas Circular No. 799, series of 2013.

62186 Phil. 563 (1980) [Per J. Abad Santos, Second Division] as cited inDavid v. Court of Appeals et al.375 Phil. 177 (1999) [Per J. Quisumbing, Second Division].

63ARTICLE 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.

64Philippine American Accident Insurance Company, Inc. v. Flores & Navalta, 186 Phil. 563, 566 (1980) [Per J. Abad Santos, Second Division].

65Nacar v. Gallery Frames, 716 Phil. 267, 282 (2013) [Per J. Peralta En banc].

66419 Phil. 857 (2001) [Per J. De Leon, Jr., Second Division].

67However, Article 1959 of the Civil Code should only be invoked in cases involving conventional interest. It provides:

ARTICLE 1959. Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest. However, the contracting parties may by stipulation capitalize the interest due and unpaid, which as added principal shall earn new interest.

68834 Phil. 884 (2018) [Per J. Perlas-Bernabe, Second Division].

69Id. at 894citingDavid v. Court of Appeals, et al., 375 Phil. 177 (1999) [Per J. Quisumbing, Third Division], which in turn citedPhilippine American Accident Insurance Co., Inc. v. Flores, 186 Phil. 563 (1980) [Per J. Abad Santos, Second Division].

70CIVIL CODE, art. 1229 provides:

ARTICLE 1229. 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 partial performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.

71Land Bank of the Phils. v. David, 585 Phil. 167 (2008) [Per J. Carpio-Morales, Second Division].

72Eastern Shipping Lines, Inc. v. Court of Appeals, 304 Phil. 236, 252 (1994) [Per J. Vitug, En banc].

73Liam Law v. Olympic Sawmill Co. & Chi, 214 Phil. 385 (1984) [Per J. Melencio-Herrera, First Division].

74508 Phil. 462, 468-469 (2005) [Per J. Tinga, Second Division].

75412 Phil. 816 (2001) [Per J. Sandoval-Gutierrez, Third Division].

76471 Phil. 484 (2004) [Per J. Panganiban, First Division].

77449 Phil. 419 (2003) [Per J. Puno, Third Division].

78465 Phil. 999 (2004) [Per J. Ynares-Santiago, First Division].

79490 Phil. 179 (2005) [Per J. Carpio, First Division].

80620 Phil. 239 (2009) [Per J. Del Castillo, Second Division].

81Id. at 242-243.

82776 Phil. 540 (2016) [Per J. Leonen, Second Division].

83Id. at 568-569.

84Id. at 569.

8537 Phil. 273 (1917) [Per J. Torres, First Division].

86Id. at 282.

87SeeMacalinao v. Bank of the Philippine Islands, 616 Phil. 60 (2009) [Per J. Velasco, Jr., Third Division];State Investment House, Inc. v. Court of Appeals, 413 Phil. 518 (2001) [Per J. Kapunan, First Division];Palmares v. Court of Appeals, 351 Phil. 664 (1998) [Per J. Regalado, Second Division]; andRizal Commercial Banking Corporation v. Court of Appeals, 352 Phil. 101 (1998) [Per J. Melo, Second Division].

88Vitug v. Abuda, 776 Phil. 540, 569 (2016) [Per J. Leonen, Second Division].

89Land Bank of the Phils. v. David, 585 Phil. 167 (2008) [Per J. Carpio Morales, Second Division].

90Spouses Abella v. Spouses Abella,763 Phil. 372, 388 (2015) [Per J. Leonen, Second Division].

91Spouses Castro v. Tan, 620 Phil. 239 (2009) [Per J. Del Castillo, Second Division].

92De La Paz v. L & J Development Company, Inc., 742 Phil. 420, 430-432 (2014) [Per J. Del Castillo, Second Division] andSpouses Solangon v. Salazar, 412 Phil. 816, 823 (2001) [Per J. Sandoval-Gutierrez, Third Division].

93Isla v. Estorga, G.R. No. 233974, July 2, 2018, [Per J. Perlas-Bernabe, Second Division].

94652 Phil. 70 (2010) [Per J. Del Castillo, First Division].

95Id. at 79-80.

96Spouses Bautista v. Pilar Development Corporation, 371 Phil. 533, 543 (1999) [Per J. Puno, First Division].

97Trade & Investment Development Corporation of the Phils. v. Roblett, 523 Phil. 360 (2006) [Per J. Tinga, Special Second Division].

98Id. at 367.

99Land Bank of the Phils. v. David,585 Phil. 167 (2008) [Per J. Carpio-Morales, Second Division].

100Vitug v. Abuda, 776 Phil. 540, 572 (2016) [Per J. Leonen, Second Division].

101Menchavez v. Bermudez, 697 Phil. 447 (2012) [Per J. Velasco, Jr., Third Division].

102Id. at 458.

103763 Phil. 372 (2015) [Per J. Leonen, Second Division].

104Id. at 389.

105Id.

106Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., G.R. No. 225433, August 28, 2019, [Per J. Carpio, En banc].

107SeePhilippine National Bank v. Court of Appeals, 308 Phil 18, 24 (1994) [Per J. Puno, Second Division].

108Isla v. Estorga, 834 Phil. 884, 891 (2018) [Per J. Perlas-Bernabe, Second Division].

109427 Phil. 42 (2002) [Per J. Vitug, Third Division].

110Id. at 52.

111351 Phil. 664 (1998) [Per J. Regalado, Second Division].

112Id. at 693-691.

113349 Phil. 769 (1998) [Per J. Kapunan, Third Division].

114419 Phil. 857 (2001) [Per J. De Leon, Jr., Second Division].

115J. Caguioa, Reflections, p. 2.

116Article 2212 is within Title XVIII, Chapter 2 of the Civil Code, on "Actual or Compensatory Damages."

117CIVIL CODE, arts. 1226 and 2209.

118CIVIL CODE, art. 1306.

119CIVIL CODE, art. 2209.

120CIVIL CODE, art. 1306.

121CIVIL CODE, art. 2209 and Usury Law, sec. 1.

122CIVIL CODE, art. 1169.

123CIVIL CODE, art. 2212.

124CIVIL CODE, art. 1226 and 2209.

125CIVIL CODE, art. 1306.

126CIVIL CODE, art. 2209.

127CIVIL CODE, art. 1169.

128CIVIL CODE, art. 2212.

129CIVIL CODE, art. 2209.

130CIVIL CODE, art. 2213.

131CIVIL CODE, art. 2213.

132Estores v. Spouses Supangan, 686 Phil. 86, 96 (2012) [Per J. Del Castillo, First Division], defined forbearance as an arrangement other than a loan where a person agrees to the temporary use of his money goods, or credits subject to the fulfilment of certain conditions.

133J. Lazaro-Javier, Reflections, pp. 2-3.

134Nacar v. Gallery Frames, 716 Phil. 267 (2013) [Per J. Peralta, En Banc].

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