Written stipulation

No interest shall be due unless it is stipulated in writing (Article 1956 Civil Code). This is the law that the spouses Greg and Tessie tried to use in their case.

The case was about an alleged loan of P130,000 which the spouses obtained from Remy as evidenced by a Promissory Note with Rosie as co-maker. According to Remy, the loan bears interest of 5% per month which the spouses in fact paid by remitting P6,500 a month from January 1991 to March 1994. Thereafter, despite Remy’s demands, the spouses failed to pay any interest or the principal obligation. Tessie just wrote a letter to Remy begging the latter’s indulgence regarding her difficulty and that of her husband in paying the 5% monthly interest on their P130,000 loan.

Considering however that the spouses continued to fail or refuse in paying their obligation, Remy already sued them in court asking that the spouses pay the loan with accrued interest thereon and attorney’s fees. To prove her complaint, Remy offered in evidence the Promissory Note and Tessie’s letter showing that she and her husband Greg agreed to pay 5% monthly interest.

In their answer the spouses admitted having received the P130,000. However they denied having agreed to pay interest thereon. While they paid P6,500 every month, said payment was for the settlement of amount they received from Remy which Tessie claimed was in the form of investment while the monthly payment corresponded to Remy’s share in the profits. In fact the spouses alleged that they already over paid by P123,500.

After trial, the Metropolitan Trial Court rendered judgment in favor of Remy ordering the spouses and their co-maker to pay her P130,000 plus accrued interest of 5% per month from April 1994 until fully paid plus attorney’s fees. This was affirmed in toto by the Regional Trial Court and subsequently, by the Court of Appeals (CA).

The spouses questioned this decision. They claimed that the CA erred when it failed to apply Article 1956 of the Civil Code providing that no interest shall be due unless it has been stipulated in writing. Were Greg and Tessie correct?

No. Tessie sent Remy a letter begging the latter’s indulgence regarding her difficulty and that of her husband in paying the 5% monthly interest on their P130,000 loan. Such letter proves that the spouses agreed to pay interest. Verily, the CA did not err when it sustained the lower courts’ finding that Remy is entitled to the payment of interest on the subject loan. The findings of fact by the trial court when affirmed by the CA are binding and conclusive (Spouses Rustia vs. Rivera G.R. 156903, November 24, 2006)

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