View full case

NYMPHA S. ODIAMAR v. LINDA ODIAMAR VALENCIA

FACTS:

Petitioner Nympha S. Odiamar owes respondent Linda Odiamar Valencia the amount of P1,010,049.00 as the balance of a loan obligation. In the original case, the Court of Appeals ordered petitioner to pay respondent the said amount. Respondent now filed a motion for reconsideration, asking for the imposition of legal interest on the monetary award and insisting that the loan obligation is not only P1,400,000.00 but P2,100,000.00. The Court granted the motion in part.

ISSUES:

  1. Whether monetary interest can be imposed on the loan obligation in the absence of a written agreement.

  2. Whether the loan obligation should also be subjected to compensatory interest.

  3. Whether respondent should be made to pay P2,100,000.00 instead of P1,400,000.00.

RULING:

  1. No, monetary interest cannot be imposed on the loan obligation because there was no written agreement expressly providing for such.

  2. Yes, the loan obligation may be subjected to compensatory interest. The guidelines laid down in Nacar v. Gallery Frames shall be followed. Under these guidelines, the rate of interest for loans or forbearance of any money, goods or credits, in the absence of an express stipulation, is 6% per annum to be computed from default, i.e., from judicial demand. The legal rate of interest before July 1, 2013, is 12% per annum, while the legal rate of interest from July 1, 2013, until finality of this ruling is 6% per annum.

  3. No, respondent's contention that the loan obligation is P2,100,000.00 instead of P1,400,000.00 is not meritorious. The Court already evaluated and passed upon this issue in the Assailed Decision. There is no reason to modify or reverse the same.

PRINCIPLES:

  • There are two types of interest, monetary interest, and compensatory interest. Monetary interest is the compensation fixed by the parties for the use or forbearance of money, while compensatory interest is that imposed by law or by the courts as penalty or indemnity for damages.

  • No interest shall be due unless it has been expressly stipulated in writing.

  • Compensatory interest may be imposed in the absence of an express stipulation. The rate of interest shall be 6% per annum to be computed from default, until June 30, 2013, and the rate shall be 6% per annum from July 1, 2013, until finality of the ruling.

  • The quantification of damages must be reasonably established before interest can be imposed. Interest starts to run from the time the demand is made judicially or extrajudicially when the demand is established with reasonable certainty. When the demand cannot be reasonably established at the time it is made, interest starts to run only from the date the judgment of the court is made.

  • The legal rate of interest, whether it falls under paragraph 1 or paragraph 2, shall be 6% per annum from the finality of the judgment until its satisfaction.