G.R. No. L-21451 July 30, 1965
DOMINADOR T. ALMEDA and JOSEFA MENDOZA-ALMEDA, plaintiffs-appellees, vs. CONCEPCION A. RUBIO and CLEMENTE S. RUBIO, defendants-appellants.

FACTS

Plaintiffs-appellees filed a complaint for the Consolidation of Ownership in the CFI of Camarines Sur. The trial court declared the contract (Exhibit A) between the parties as an equitable mortgage, not a sale with right to repurchase, based on circumstances such as the defendants-appellants remaining in possession as lessees and the gross inadequacy of the price (P5,000.00 for property valued at P20,000.00). The court ordered the defendants to pay Josefa Almeda the sum of P5,000.00 plus interest at 12% per annum from the date of the execution of the contract. The defendants appealed to the Court of Appeals, contesting the rate of interest and the start of its accrual. The Court of Appeals certified the case to the Supreme Court as the issues were purely legal.

ISSUE

1. Whether the trial court correctly imposed a 12% per annum interest on the principal obligation of P5,000.00.
2. Whether the interest should accrue from the date of the execution of the contract.

RULING

1. No. The Supreme Court modified the trial court’s decision. Applying Article 2209 of the Civil Code, the Court held that in the absence of a stipulation on the rate of interest, the legal rate of 6% per annum shall apply. Since the contract contained no stipulation on interest, the imposition of 12% interest had no legal basis.
2. No. The Court ruled that interest should commence from the date of demand. As the record did not show when demand was made, the computation of interest should be reckoned from the presentation of the complaint on January 17, 1957, in accordance with Article 1169 of the Civil Code and pertinent jurisprudence. The decision was modified accordingly.