Dino vs Jardines 481 SCRA 226

Facts:

Dino filed a petition for Consolidation of Ownership with the RTC of Baguio City alleging that on
January31, 1987, Jardines executed in her favor a Deed of Sale with Pacto de retro over a parcel of land
with improvements which amounted to P165,000.00. It was stipulated that the period for redemption
would expire in sixmonths or on July 29 1987, however none among Dino and his heirs were able to
redeem the property. Jardines countered that the true contract of the parties was that of a loan and the
deed with pacto de retro sale was a mere security to such loan. The amount of the property was around
half a million and respondent averred that it was unthinkable for her to sell the property for only
P165,000.00. In fact, the loan was even covered by interest at the rate of 9% to be paid monthly. The
court rendered its decision declaring the contract as one of deed of sale with right to repurchase or
pacto de retro and that petitioner acquired whatever rights Jardines had over the parcel of land, and she
now became owner of the same. However, upon appeal to the Court of Appeals, the judgment was
reversed with the finding that the contract was one of Equitable Mortgage and not one of Pacto de
Retro. The new judgment ordered among others, Jardinez to pay Dino legal interest on the amount of
Php 165, 000 from the time the said interest fell due, until fully paid.

Issue: Whether Jardinez is liable for the payment of legal interest.

Held:

With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been stipulated in
writing.Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed
from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article
1169 of the Civil Code.

Applied to the present case, since the agreed interest rate is void, the parties are considered to have no
stipulation regarding the interest rate. Thus, the rate of interest should be 12% per annum to be
computed from judicial or extrajudicial demand, subject to the provisions of Article 1169 of the Civil
Code.