G.R. No. 47878, July 24, 1942
Gil Jardenil, plaintiff-appellant, vs. Hefti Solas (alias Hepti Solas, Jepti Solas), defendant-appellee.

FACTS

This is an action for the foreclosure of a mortgage. The dispute centers on the payment of interest on a loan. The mortgage deed, executed on November 8, 1932, stipulated that the defendant, Hefti Solas, would pay the plaintiff, Gil Jardenil, the sum of P2,400 on or before March 31, 1934, with interest on that sum at 12% per annum from the date of the deed “hasta el dia de su vencimiento o sea treintaiuno (31) de marzo de mil novecientos treintaicuatro (1934)” (until the date of its maturity or March 31, 1934). On the same date as the mortgage deed, the mortgagee (Jardenil) granted the mortgagor (Solas) an extension of one year from the maturity date (March 31, 1934) within which to pay, but this extension note (Exhibit B) made no mention of any interest to be paid during this additional period. The question raised on appeal is whether the defendant is obligated to pay the stipulated 12% interest only up to the original maturity date (March 31, 1934) or up to the date actual payment is made.

ISSUE

Is the defendant-appellee bound to pay the stipulated 12% interest only up to the original date of maturity (March 31, 1934) as fixed in the promissory note and mortgage deed, or up to the date payment is effected?

RULING

The Supreme Court ruled that the defendant is obligated to pay interest only up to the original maturity date, March 31, 1934. The contract is clear and unambiguous: the defendant agreed to pay interest “until the date of its maturity or March 31, 1934.” The contract is silent regarding the payment of interest after that date in the event of non-payment. Applying Article 1755 of the Civil Code, which states that “interest shall be due only when it has been expressly stipulated,” the Court held it cannot impose an obligation the parties did not agree upon. The extension note’s silence on interest for the grace period further indicates the parties’ intention that no interest be paid during that time. Since the written contract was not assailed on grounds of mutual mistake or reformed, its clear terms must be given full effect. Therefore, the plaintiff is entitled only to 12% interest on the P2,400 loan from November 8, 1932, to March 31, 1934. However, as extrajudicial demands were made after the expiration of the year of grace (assumed to be on April 1, 1935), the plaintiff is entitled to legal interest on the principal and accrued interest from April 1, 1935, until full payment. The judgment was affirmed with this modification.
DISSENTING OPINION (PARAS, J.):
Justice Paras dissented, arguing that interest at 12% per annum should be paid up to the date the full indebtedness is settled. He viewed the specified date (March 31, 1934) in the contract as merely indicating the maturity date, not a cut-off for interest. He considered the extension note as a renewal of the obligation, implying the continued payment of interest based on the nature of the transaction, common practice, and business usage. He found the majority’s ruling to be anomalous and contrary to everyday business practice.