Ruiz Vs Ca GR No. 146942 April 22, 2003
Ruiz Vs Ca GR No. 146942 April 22, 2003
Ruiz Vs Ca GR No. 146942 April 22, 2003
The 1% surcharge on the principal loan for every month of default is valid. This surcharge or penalty
stipulated in a loan agreement in case of default partakes of the nature of liquidated damages under
Art. 2227 of the New Civil Code, and is separate and distinct from interest payment. Also referred to as a
penalty clause, it is expressly recognized by law. It is an accessory undertaking to assume greater liability
on the part of an obligor in case of breach of an obligation.
FACTS:
Corazon Ruiz is engaged in the business of buying and selling, she obtained loans from Consuelo Torres
on different occasions, in the amounts of : P 100k , P 200K , P 300K and P150 K . Before their maturity ,
these loans were consolidated under one promissory note . the 750 k was secured by a real estate3
mortgage and the lot was registered in the name of Ruiz.
Later, Ruiz obtained 3 more loans from Torres and said loans were secured by a promissory note in the
amount of 100k . the combined loans were secured by 571k worth of jewelry pledged by petitioner by
private respondent .
Ruiz paid the stipulated 3 % interest on the 750k loan . however she was unable to make interest
payment due to difficulties on collecting from her clients in her jewelry business. . because of her failure
to pay the principal loan of 750k as well as the interest payments , Torres demanded payment not only
of the 750k loan but also of the 300k loan. When the petitioner failed to pay, Torres sought the extra
judicial foreclose of the real estate.
A notice of Sheriff’s Sale was issued on the lot. The petitioner then filed a complaint with the RTC with a
prayer for the issuance of a TRO to enjoin the sheriff from proceeding with foreclosure sale and to fix
her indebtedness to Torres. The trial court hel that the promissory note is a unilateral contract of
adhesion drafted by private respondent .
ISSUE:
WON the rates of interest and surcharges on the obligation of the petitioner to private respondent are
valid.
RULING:
The Court held that the 1% surcharge on the principal loan for every month of default is valid. This
surcharge or penalty stipulated in a loan agreement in case of default partakes of the nature of
liquidated damages under Art. 2227 of the New Civil Code, and is separate and distinct from interest
payment. Also referred to as a penalty clause, it is expressly recognized by law. It is an accessory
undertaking to assume greater liability on the part of an obligor in case of breach of an obligation