G.R. No. 213582 September 12, 2018
NYMPHA S. ODIAMAR, Petitioner, vs. LINDA ODIAMAR VALENCIA, Respondent.

FACTS

This case originated from a complaint for sum of money filed by respondent Linda Odiamar Valencia against her sister, petitioner Nympha S. Odiamar. The Regional Trial Court (RTC) found that petitioner obtained a loan from respondent in the principal amount of ₱1,400,000.00. The RTC ordered petitioner to pay the remaining balance of ₱1,010,049.00, along with attorney’s fees and litigation expenses. The Court of Appeals affirmed this decision, which was subsequently upheld by the Supreme Court in its June 28, 2016 Decision. Respondent then filed a Motion for Reconsideration, praying for the imposition of legal interest on the monetary award and insisting that the total loan obligation was ₱2,100,000.00, not just ₱1,400,000.00.

ISSUE

The core issues for resolution were: (1) whether legal interest should be imposed on the petitioner’s loan obligation; and (2) whether the loan amount should be increased to ₱2,100,000.00.

RULING

The Supreme Court partly granted the motion. On the first issue, the Court clarified the distinction between monetary interest and compensatory interest. Monetary interest arises from a contract and requires an express written stipulation, pursuant to Article 1956 of the Civil Code. Since no such written agreement existed between the parties, no monetary interest could be imposed. However, compensatory interest may be imposed by law as indemnity for damages arising from delay in payment. Applying the guidelines in Nacar v. Gallery Frames, the Court ruled that the loan obligation, being a forbearance of money, is subject to compensatory interest at the legal rate. The legal interest was set at twelve percent (12%) per annum from the date of judicial demand (August 20, 2003) until June 30, 2013, and at six percent (6%) per annum from July 1, 2013, until the finality of the Court’s ruling. Furthermore, all monetary awards (including attorney’s fees and litigation expenses) shall earn interest at six percent (6%) per annum from the finality of judgment until full payment. On the second issue, the Court found respondent’s contention regarding a higher loan amount to be a mere reiteration of arguments already fully evaluated and rejected in the assailed Decision. Thus, there was no cogent reason to modify the principal obligation, which remained at ₱1,010,049.00. The dispositive portion affirmed the previous Decision with the stated modification on the imposition of legal interest.