G.R. No. 213582 , June 28, 2016.
Nympha Odiamar, Petitioner, vs. Linda Odiamar Valencia, Respondent.

FACTS

On August 20, 2003, respondent Linda Odiamar Valencia filed a complaint for sum of money and damages against petitioner Nympha Odiamar, alleging that the latter owed her P2,100,000.00. Petitioner had issued China Bank Check No. GH B 114 721 for said amount to guarantee payment, but it was dishonored upon presentment. Respondent claimed petitioner refused to pay despite demands. Petitioner sought dismissal, contending it was her deceased parents who owed the money, and the claim should be filed in the settlement of their estates. She asserted that as administratrix, she agreed to pay the debt on installment, but respondent refused the payments. Respondent countered that petitioner personally borrowed almost half of the amount, evidenced by the check issued after agreeing to settle in installments. She admitted receiving installment payments from petitioner from December 29, 2000, to May 31, 2003, but stated petitioner failed to make subsequent payments. The Regional Trial Court (RTC) ruled for respondent, ordering petitioner to pay the unpaid balance of P1,710,049.00 plus 12% interest, attorney’s fees, litigation expenses, and costs. The Court of Appeals (CA) affirmed the RTC decision. Petitioner appealed to the Supreme Court.

ISSUE

Whether or not petitioner should be held liable to respondent for the entire debt in the amount of P2,100,000.00.

RULING

The Supreme Court affirmed the CA decision with modification regarding the interest rate. Petitioner is liable, but not for the entire P2,100,000.00. The Court found that petitioner’s liability is well-established based on her judicial admission that she obtained personal loans from respondent. However, respondent admitted that of the P2,100,000.00, P700,000.00 was owed by petitioner’s deceased parents, and only P1,400,000.00 was petitioner’s personal debt. The check for P2,100,000.00 represented a consolidation of both debts, with an additional P100,000.00 as interest for the agreed installment payments. The Court held that novation occurred only as to the person of the debtor, wherein petitioner was substituted in place of her deceased parents for their P700,000.00 debt, but there was no novation of the object of the obligation. The total principal obligation was therefore P2,000,000.00 (P1,400,000.00 personal debt + P700,000.00 parents’ debt, with an apparent P100,000.00 discrepancy treated as part of the consolidated amount for which the check was issued). After deducting petitioner’s proven payments of P389,951.00, the unpaid balance is P1,710,049.00. The stipulated 3% monthly interest (36% per annum) was deemed unconscionable and reduced to 12% per annum from judicial demand on August 20, 2003, until June 30, 2013, and 6% per annum from July 1, 2013, until full payment. The awards for attorney’s fees and litigation expenses were upheld.