G.R. No. 138677 - TOLOMEO LIGUTAN AND LEONIDAS DE LA LLANA, VS. HON. COURT OF APPEALS & SECURITY BANK & TRUST COMPANY.D E C I S I O N - Supreme Court E-Library

Ruling

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, ordering the latter to pay, jointly and severally, to the plaintiff, as follows: "1. The sum of P114,416.00 with interest thereon at the rate of 15.189% per annum, 2% service charge and 5% per month penalty charge, commencing on 20 May 1982 until fully paid; "2. To pay the further sum equivalent to 10% of the total amount of indebtedness for and as attorneys fees; and "3. To pay the costs of the suit. [2] Petitioners interposed an appeal with the Court of Appeals, questioning the rejection by the trial court of their motion to present evidence and assailing the imposition of the 2% service charge, the 5% per month penalty charge and 10% attorney's fees. In its decision [3] of 7 March 1996, the appellate court affirmed the judgment of the trial court except on the matter of the 2% service charge which was deleted pursuant to Central Bank Circular No. 783. Not fully satisfied with the decision of the appellate court, both parties filed their respective motions for reconsideration. [4] Petitioners prayed for the reduction of the 5% stipulated penalty for being unconscionable. The bank, on the other hand, asked that the payment of interest and penalty be commenced not from the date of filing of complaint but from the time of default as so stipulated in the contract of the parties. On 28 October 1998, the Court of Appeals resolved the two motions thusly: We find merit in plaintiff-appellees claim that the principal sum of P114,416.00 with interest thereon must commence not on the date of filing of the complaint as we have previously held in our decision but on the date when the obligation became due. Default generally begins from the moment the creditor demands the performance of the obligation. However, demand is not necessary to render the obligor in default when the obligation or the law so provides. In the case at bar, defendants-appellants executed a promissory note where they undertook to pay the obligation on its maturity date 'without necessity of demand.' They also agreed to pay the interest in case of non-payment from the date of default. x x x x x x x x x While we maintain that defendants-appellants must be bound by the contract which they acknowledged and signed, we take cognizance of their plea for the application of the provisions of Article 1229 x x x. Considering that defendants-appellants partially complied with their obligation under the promissory note by the reduction of the original amount of P120,000.00 to P114,416.00 and in order that they will finally settle their obligation, it is our view and we so hold that in the interest of justice and public policy, a penalty of 3% per month or 36% per annum would suffice. x x x x x x x x x WHEREFORE, the decision sought to be reconsidered is hereby MODIFIED. The defendants-appellants Tolomeo Ligutan and Leonidas dela Llana are hereby ordered to pay the plaintiff-appellee Security Bank