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EN BANC

G.R. No. L-21451 July 30, 1965

DOMINADOR T. ALMEDA and JOSEFA MENDOZA-ALMEDA, Plaintiffs-Appellees, v. CONCEPCION A. RUBIO and CLEMENTE S. RUBIO, Defendants-Appellants.

Rosales Law Office for plaintiffs-appellees.
Geronimo R. San Jose for defendants-appellants.

PAREDES, J.:chanrobles virtual law library

In a complaint for the Consolidation of Ownership presented with the CFI of Camarines Sur, by plaintiffs-appellees herein, said Court rendered judgment, the pertinent portions of which read:

There are other circumstances showing that the transaction was a mortgage and not a sale with right to repurchase. The Rubios have remained in possession of the property as lessees. This gives rise to the presumption that the contract is an equitable mortgage (Par. 2, Art. 1602, Civil Code; Dorado & Vista v. Virina, 34 Phil. 264). There is also inadequacy of price. The present market value of the house and lot in question is conservatively estimated at P20,000.00. The purchase price is P5,000.00, or only one-fourth (1/4) of the value. This great inadequacy of the price also gives rise to the presumption that the land was offered merely as security for a loan (Cabugao v. Lim, 50 Phil. 844; Par. 1, Art. 1602, Civil Code).chanroblesvirtualawlibrarychanrobles virtual law library

All the foregoing show that Exhibit A is only an equitable mortgage and not a sale with right to repurchase and that the actual amount of the loan is only P5,000.00.chanroblesvirtualawlibrarychanrobles virtual law library

WHEREFORE, decision is rendered declaring Exhibit A an equitable mortgage and ordering 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 Exhibit A until full payment is made, with cost against the plaintiff.

Defendants appealed to the Court of Appeals, claiming that the trial court erred in holding - (1) that the principal obligation of P5,000.00 must bear interest of 12% per annum; and (2) that the interest shall begin to accrue from the date of the execution of the contract. The Court of Appeals, finding that the two issues are purely legal in nature, certified the case to this Court.chanroblesvirtualawlibrarychanrobles virtual law library

Appellants lay great emphasis on Article 2209 of the new Civil Code which provides:

If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal which is six percent per annum.

and on certain cases, enunciating that when there is no stipulation as to the rate of interest, the same should be computed at the legal rate. They also contend that interest becomes due only when there is demand, judicial or otherwise.chanroblesvirtualawlibrarychanrobles virtual law library

Appellees, upon the other hand, argue that if there was no stipulation as to the rate of interest in the contract, it was because such stipulation has no place in a Deed of Sale with Repurchase.chanroblesvirtualawlibrarychanrobles virtual law library

We find the stand of appellees untenable. Having admitted that there was no stipulation, as to the payment of interest, it becomes apparent that Article 2209 of the Civil Code comes into play. The said article mandates that in the absence of stipulation as to interest, the rate is the legal one, which is 6%. It results, therefore, that the imposition of 12% interest on the P5,000.00 by the trial court, has no legal basis.chanroblesvirtualawlibrarychanrobles virtual law library

On the point, as to when the imposition of interest should commence, We also agree with the appellants that it should be when demand for the payment was made. In the case at bar, since there is nothing on record to show when demand was made upon the appellants, the computation of interest should be reckoned from the presentation of the complaint on January 17, 1957 (Article 1169, N.C.C.; Gutierrez Hermanos v. Mariano Fuentebella, 13 Phil. 78; Juaneza v. Palu-ay 55 O.G. [No. 43] 9050).chanroblesvirtualawlibrarychanrobles virtual law library

PREMISES CONSIDERED, the decision appealed from is modified, as herein indicated. All portions of the decision on appeal, not inconsistent with this ruling, are affirmed. No pronouncement as to costs.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.
Barrera, J., is on leave.