GR 160545; (March, 2010) (Digest)
G.R. No. 160545 March 9, 2010
PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION and ROGELIO S. PANTALEON, Petitioners, vs. ARTHUR F. MENCHAVEZ, Respondent.
FACTS
On December 8, 1993, Rogelio S. Pantaleon, President and Chairman of Prisma Construction & Development Corporation, obtained a ₱1,000,000.00 loan from Arthur F. Menchavez. The obligation was to be paid within six months, with a schedule totaling ₱1,240,000.00, which included monthly payments of ₱40,000.00 from January to May 1994 and a final payment of ₱1,040,000.00 in June 1994. Pantaleon executed a promissory note reflecting this schedule and issued six postdated checks. He signed the note in his personal capacity and as authorized by a corporate board resolution. The petitioners failed to pay completely within the stipulated period and made subsequent payments from September 1994 to January 1997 totaling ₱1,108,772.00. The respondent, claiming an outstanding balance with a 4% monthly interest, filed a complaint for sum of money. The Regional Trial Court held the petitioners jointly and severally liable for ₱3,526,117.00 plus 4% monthly interest, piercing the corporate veil. The Court of Appeals affirmed liability but reduced the interest to 12% per annum.
ISSUE
Whether the parties agreed to a 4% monthly interest on the loan, and if so, whether that rate applies only to the initial six-month period or until full payment.
RULING
The Supreme Court found the petition meritorious. It ruled that the interest of ₱40,000.00 per month corresponded only to the agreed six-month period (January 8 to June 8, 1994) as stipulated in the promissory note. There was no express written stipulation for a 4% monthly interest rate beyond that period, as required by Article 1956 of the Civil Code. Consequently, after the six-month term, the legal interest rate of 12% per annum should apply from the time of judicial demand. The Court clarified that the agreement was for the payment of a fixed sum (₱40,000.00 monthly for six months), not for a continuing 4% interest rate. The decisions of the lower courts imposing a 4% monthly interest beyond the stipulated period were erroneous. The case of Medel v. Court of Appeals was deemed inapplicable.