Civil Law

Dorie Nicolas vs Del-Nacia Corporation

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G.R. NO. 158026 – 552 SCRA 545 – Civil Law – Credit Transactions – Mortgage – Interest – Penalty Apart from Interest

Spouses Armando and Dorie Nicolas bought a parcel of land in Bulacan from Del Nacia via an Agreement. It was agreed that the downpayment would be P40k and the rest (P510k) would be payable in 120 months at about P9k/mo. inclusive of interest (18%/yr). No specific date of monthly payment was indicated but it said payment was to start on April 20, 1988. Also, arrears shall incur 18%/yr interest. On top of that would be 10% of the amount due for atty’s fees in case of default.

Shortly after the Agreement, Mr. Nicolas died. Mrs. Nicolas defaulted. Del Nacia then caused the notarial cancellation of the Agreement. It then sent Mrs. Nicolas a check representing the cash surrender amounting to P270k.

Mrs. Nicolas filed a complaint against Del Nacia before the HLURB. The Arbiter found Mrs. Nicolas to be in default and ordered Del Nacia to compute what she owes inclusive of interests and other penalties.

Nicolas appealed before the HLURB Board. She avers that what she has paid in interest is more than the principal amount. And that payments she made were applied to interest (in bulk) hence there is no basis for Del Nacia to charge her more interest (as per Agreement). And that she’s not in default because there is no specific date cited in the Agreement (w/c was agreed upon by HLURB Board).

ISSUE: Whether or not Mrs. Nicolas is right.

HELD: No. The ruling of the Arbiter is reinstated. Mrs. Nicolas is clearly in default and as per the Agreement which they voluntarily entered into, she has to suffer the consequences for it is the law between them. Hence, as agreed upon, Del Nacia can unilaterally compute what Nicolas owe the corporation inclusive of interest and penalties incurred. The law allows the imposition of a separate penalty (in case of default) other than interest penalty so long as it is stipulated in writing (Art. 1956 of the Civil Code). The court cannot relieve a party from complying with the terms of a contract if it turns out to be financially disadvantageous to such party. Parties are bound to the contract.

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