HERRERA vs PETROPHIL CORP. [G.R. No. L-48349, December 29, 98!" CR#$, %.
Facts: On December 5, 1969, Herrera and ESSO Standard, (later substituted by Petrophil Corp,! entered into a lease a"reement, #hereby the $ormer leased to the latter a portion o$ his property $or a period o$ %&yrs sub'ect to the condition that monthly rentals should be paid and there should be an adance payment o$ rentals $or the )rst ei"ht years o$ the contract, to #hich ESSO paid on December *1, 1969 Ho#eer, ESSO deducted the amount o$ 1&1, &1&+* as interest or discount $or the ei"ht years adance rental On u"ust %&, 19+&, ESSO in$ormed Herrera that there had been a mista-e in the computation o$ the interest and paid an additional sum o$ %,1.%+&/ thus, it #as reduced to 9., .%.&* s such, Herrera sued ESSO $or the sum o$ 9., .%.&*, #ith interest, claimin" that this had been ille"ally deducted to him in iolation o$ the 0sury a# ESSO ar"ued that amount deducted #as not usurious interest but rather a discount "ien to it $or payin" the rentals in adance 2ud"ment on the pleadin"s #as rendered in $aor o$ ESSO 3hus, the matter #as eleated to the SC $or only 4uestions o$ la# #as inole
Issue: 7 the contract bet#een the parties is one o$ loan or lease Ruling: Contract bet#een the parties is one o$ lease and not o$ loan 8t is clearly denominated a ESE :;EE
Contract bet#een the parties is one o$ lease and not o$ loan 8t is clearly denominated a ESE :;EE 7 the de$endant iolated the usury la#? 3here is no usury in this case because because no money #as #as "ien by the the de$endant= appellee to the plainti@=appellant, nor did it allo# him to use its money already in
his possession 3here #as neither loan nor $orbearance but a mere discount #hich the plainti@=appellant allo#ed the de$endant=appellee to deduct $rom the total payments because they #ere bein" made in adance $or ei"ht years 3he discount #as in e@ect a reduction o$ the rentals #hich the lessor had the ri"ht to determine, and any reduction thereo$, by any amount, #ould not contraene the 0sury a# 3he di@erence bet#een a discount and a loan or $orbearance is that the $ormer does not hae to be repaid 3he loan or $orbearance is sub'ect to repayment and is there$ore "oerned by the la#s on usury 3o constitute usury, there must be loan or $orbearance/ the loan must be o$ money or somethin" circulatin" as money/ it must be repayable absolutely and in all eents/ and somethin" must be eAacted $or the use o$ the money in eAcess o$ and in addition to interest allo#ed by la# 8t has been held that the elements o$ usury are (1! a loan, eApress or implied/ (%! an understandin" bet#een the parties that the money lent shall or may be returned/ that $or such loan a "reater rate or interest that is allo#ed by la# shall be paid, or a"reed to be paid, as the case may be/ and (B! a corrupt intent to ta-e more than the le"al rate $or the use o$ money loaned 0nless these $our thin"s concur in eery transaction, it is sa$e to arm that no case o$ usury can be declared
G.R. No. L-48349 December 29, 1986 FRANCISCO HERRERA, plaintiff-appellant, vs. PEROPHIL CORPORAION, defendant-appellee. Paterno R. Canlas Law Offices for plaintiff-appellant.
CR!", J.: This is an appeal by the plaintiff-appellant from a decision rendered by the then Court of First Instance of Rizal on a pure question of law. 1 The ud!ment appealed from was rendered on the pleadin!s, the parties havin! a!reed durin! the pretrial conference on the factual antecedents. The facts are as follows" #n $ecember %, &'(', the plaintiff-appellant and )**# *tandard )astern. Inc., +later substituted by etrophil Corporation entered into a /ease 0!reement whereby the former leased to the latter a portion of his property for a period of twenty +12 years from said date, subect inter alia to the followin! conditions" 3. Rental" The /)**)) shall pay the /)**#R a rental of l.42 sqm. per month on 422 sqm. and are to be e5propriated later on +sic or %(2 per month and Fl.42 per sqm. per month on &,('3 sqm. or 1,362.1& per month or a total of 1,'32.12 per month 1,2'3 sqm. more or less, payable yearly in advance within the &st twenty days of each year7 provided, a financial aid in the sum of &%,222 to clear the leased premises of e5istin! improvements thereon is paid in this manner7 &2,222 upon e5ecution of this lease and %,222 upon delivery of leased premises free and clear of improvements thereon within 32 days from the date of
e5ecution of this a!reement. The portion on the sid e of the leased premises with an area of 3(% sqrm. more or less, will be occupied by /)**)) without rental durin! the lifetime of this lease. R#8I$)$ FI90//:, that the /essor is paid ; years advance rental based on 1,'32.62 per month discounted at &1< interest per annum or a total net amount of &32,1;;.46 before re!istration of lease. /eased premises shall b e delivered within 32 days after &st partial payment of financial aid. 2 #n $ecember 3&, &'(', pursuant to the said contract, the defendant-appellee paid to the p laintfffappellant advance rentals for the first ei!ht years, subtractin! therefrom the amount of &2&,2&2.63, the amount it computed as constitutin! the interest or discount for the first ei!ht years, in the total sum &;2,1;;.46. #n 0u!ust 12, &'62, the defendant-appellee, e5plainin! that there had been a mista=e in computation, paid to the appellant the additional sum of 1,&;1.62, thereby reducin! the deducted amount to only ';,;1;.23. 3 #n #ctober &4, &'64, the plaintiff-appellant sued the defendant-appellee for the sum of ';,;1;.23, with interest, claimin! this had been il le!ally deducted from him in violation of the >sury /aw. 4 ?e also prayed for moral dama!es and attorney@s fees. In its answer, the defendant-appellee admitted the factual alle!ations of the complaint but ar!ued that the amount deducted was not #$#r%o#$ %&'ere$' but a !iven to it for payin! the rentals in advance for ei!ht years. ( Aud!ment on the pleadin!s was rendered for the defendant. 6 laintiff-appellant now prays for a reversal of that ud!ment, insistin! that the lower court erred in the computation of the interest collected out of the rentals p aid for the first ei!ht years7 t hat such interest was excessive and violative of the Usury Law; and that he had neither a!reed to nor accepted the defendant-appellant@s computation of the total amount to be deducted for the ei!ht years advance rentals. ) The thrust of the plaintiff-appellant@s position is set forth in para!raph ( of his complaint, which read" (. The interest collected by defendant out of the rentals for the first ei!ht years was e5cessive and beyond that allowable by law, because the total interest on the said amount is only 33,6%%.'2 at 4,1&'.4;;2 per yearly rental7 and considerin! that the interest should be computed e5cludin! the first year rental because at the time the amount of 1;&, &''.12 was paid it was already due under the lease contract hence no interest should be collected from the rental for the first year, the amount of 1',%3(.41 only as the total interest should have been deducted by defendant from the sum of 1;&,1''.12. The defendant maintains that the correct amount of the discount is ';,;1;.23 and that the same is not e5cessive and above that allowed b y law. 0s its title plainly indicates, the contract between the parties is one of lease and not of loan. It is clearly denominated a /)0*) 0BR)))9T.* No+ere %& 'e co&'rc' %$ 'ere & $o+%&/ '' 'e 0r'%e$ %&'e&e o& r'er '& e$e. e 0ro%$%o& or 'e 0me&' o re&'$ %& &ce c&&o' be co&$'r#e $ re0me&' o o& bec#$e 'ere +$ &o /r&' or orber&ce o mo&e $ 'o co&$'%'#'e & %&eb'e&e$$ o& 'e 0r' o 'e e$$or . #n the contrary, the defendant-appellee was dischar!in! its obli!ation in advance by payin! the ei!ht years rentals, and it was for this advance payment that it was !ettin! a rebate or discount. The provision for a discount is not unusual in lease contracts. 0s to its validity, it is settled that the parties may establish such stipulations, clauses, terms and condition as they may want to include7 and as lon! as such a!reements are not contrary to law, morals, !ood customs, public policy or public order, they shall have the force of law between them. 8
ere %$ &o #$#r %& '%$ c$e bec#$e &o mo&e +$ /%e& b 'e ee&&'-00eee 'o 'e 0%&'%-00e&', &or % %' o+ %m 'o #$e %'$ mo&e re %& %$ 0o$$e$$%o&. 9 ere +$ &e%'er o& &or orber&ce b#' mere %$co#&' +%c 'e 0%&'%-00e&' o+e 'e ee&&'-00eee 'o e#c' rom 'e 'o' 0me&'$ bec#$e 'e +ere be%&/ me %& &ce or e%/' er$. e %$co#&' +$ %& eec' re#c'%o& o 'e re&'$ +%c 'e e$$or 'e r%/' 'o e'erm%&e, & & re#c'%o& 'ereo, b & mo#&', +o# &o' co&'re&e 'e !$#r L+. e %ere&ce be'+ee& %$co#&' & o& or orber&ce %$ '' 'e ormer oe$ &o' e 'o be re0%. e o& or orber&ce %$ $#b5ec' 'o re0me&' & %$ 'ereore /oer&e b 'e +$ o& #$#r. 1 o co&$'%'#'e #$#r, *'ere m#$' be o& or orber&ce7 'e o& m#$' be o mo&e or $ome'%&/ c%rc#'%&/ $ mo&e7 %' m#$' be re0be b$o#'e & %& ee&'$7 & $ome'%&/ m#$' be ec'e or 'e #$e o 'e mo&e %& ece$$ o & %& %'%o& 'o %&'ere$' o+e b +.* 11 It has been held that the elements of usury are +& a loan, e5press or implied7 +1 an understandin! between the parties that the money lent shall or may be returned7 that for such loan a !reater rate or interest that is allowed by law shall be paid, or a!reed to be paid, as the case may be7 and +4 a corrupt intent to ta=e more than the le!al rate for the use of money loaned. >nless these four thin!s concur in every transaction, it is safe to affirm that no case of usury can be declared. 12 Concernin! the computation of the deductible discount, the trial court declared" 0s above-quoted, the @/ease 0!reement@ e5pressly provides that the lessee +defendant sha! pay the lessor +plaintiff ei!ht +; years in advance rentals based on 1,'32.12 per month discounted at &1< interest per annum. Thus, the total rental for one-year period is 3%,&(1.42 +1,'32.12 multiplied by &1 months and that the interest therefrom is 4,1&'.4;;2 +3%,&(1.42 multiplied by &1<. *o, therefore, the total interest for the first ei!ht +; years should be only 33,6%%.'2 +4,&1'.4;;2 multiplied by ei!ht +; years and not ';,;1;.23 as the defendant claimed it to be. The afore-quoted manner of computation made by plaintiff is patently erroneous. It is most seriously misleadin!. ?e ust computed the annual discount to be at 4,&1'.4;;2 and then simply multiplied it by ei!ht +; years. ?e did not ta=e i nto consideration the na=ed fact that the rentals due on the ei!ht year were paid in advance by seven +6 years, the rentals due on the seventh year were paid in advance by si5 +( years, those due on the si5th year by five +% years, those due on the fifth year by four +4 years, those due on the fourth year by three +3 years, those due on the third year by two +1 years, and those due on the second year by one +& year, so much so that the total number of years by which the annual rental of 4,&1'.4;;2 was paid in advance is twenty-ei!ht +1;, resultin! in a total amount of &&;,&4%.44 +4,&1'.4; multiplied by 1; years as the discount. ?owever, defendant was most fair to plaintiff. It did not simply multiply the annual rental discount by 1; years. It computed the total discount with the principal d iminishin! month to month as shown by 0nne5 @0@ of its memorandum. This is why the total discount amount to only ;,;1;.23. The alle!ation of plaintiff that defendant made the computation in a compounded manner is erroneous. 0lso after ma=in! its own computations and after e5aminin! closely defendant@s 0nne5 @0@ of its memorandum, the court finds that defendant did not char!e &1< discount on the rentals due for the first year so much so that the computation conforms with the provision of the /ease 0!reement to the effect that the rentals shall be @payable yearly in advance within the &st 12 days of each year. @
De do not a!ree. The above computation appears to be too much technical mumbo-umbo and could not have been the intention of the parties to the transaction. ?ad it been so, then it should have been clearly stipulated in the contract. Contracts should be interpreted accordin! to their literal meanin! and should not be interpreted beyond their obvious intendment. 13 The plaintfff-appellant simply understood that for every year of advance payment there would be a deduction of &1< and this amount would be the same for each of the ei!ht years. There is no showin! that the intricate computation applied by the trial court was e5plained to him by the defendant-appellee or that he =nowin!ly accepted it. The lower court, followin! the defendant-appellee@s formula, declared that the plaintiff-appellant had actually a!reed to a &1< reduction for advance rentals for all of twenty eight years. That is absurd. It is not normal for a person to a!ree to a reduction correspondin! to twenty ei!ht years advance rentals when all he is receivin! in advance rentals is for only ei!ht years. The deduction shall be for only ei!ht years because that was plainly what the parties intended at the time they si!ned the lease a!reement. *implistic it may be, as the *olicitor Beneral describes it, but that is how the lessor understood the arran!ement. In fact, the Court will reect his subsequent modification that the interest should be limited to only seven years because the first year rental was not bein! paid in advance. The a!reement was for a uniform deduction for the advance rentals for each of the eight years, and neither of the parties can deviate from it now. #n the annual rental of 3%,&(;.42, the deducted &1< discount was 4,112.1&7 and for ei !ht years, the total rental was 1;&,346.12 from which was deducted the total discount of 33,6(&.(;, leavin! a difference of 146,%;%.%1. *ubtractin! from this amount, the sum of &;1,46&.&6 already paid will leave a balance of (%,&&4.3% still due the plaintiff-appellant. The above computation is based on the more reasonable interpretation of the contract as a whole rather on the sin!le stipulation invo=ed by the respondent for the flat reduction of &32,1;;.46. D?)R)F#R), the decision of the trial court is hereby modified, and the defendant-appellee etrophil Corporation is ordered to pay plaintiff-appellant the amount of *i5ty Five Thousand #ne ?undred Fourteen pesos and Thirty-Five Centavos +(%,&&4.3%, with interest at the le!al rate until fully paid, plus Ten Thousand esos +&2,222.22 as attorney@s fees. Costs a!ainst the defendantappellee. *# #R$)R)$.
