SPOUSES ABELLA vs. SPOUSES ABELLA

FACTS: Petitioners Spouses Salvador and Alma Abella filed a Complaint for sum of money and damages against respondents Spouses Romeo and Annie Abella wherein it was alleged that respondents obtained a loan from them in the amount of P500K. The loan was evidenced by an acknowledgment receipt dated March 22, 1999 and was payable within one (1) year. Petitioners added that respondents were able to pay a total of P200K—P100K paid on two separate occasions—leaving an unpaid balance of P300K.

In their Answer, respondents alleged that the amount involved did not pertain to a loan but was part of the capital for a joint venture involving the lending of money when respondents that they were approached by petitioners, who proposed that if respondents were to "undertake the management of whatever money [petitioners] would give them, [petitioners] would get 2.5% a month with a 2.5% service fee to [respondents]." Moreover, they claimed that the entire amount of P500,000.00 was disposed of in accordance with their agreed terms and conditions and that petitioners terminated the joint venture, prompting them to collect from the joint venture's borrowers. They were, however, able to collect only to the extent of P200,000.00; hence, the P300,000.00 balance remained unpaid.

The RTC ruled in favor of petitioners. On respondents' appeal, the Court of Appeals ruled that while respondents had indeed entered into a simple loan with petitioners, respondents were no longer liable to pay the outstanding amount of P300,000.00.

ISSUES: 1) What contract was entered into by the parties?

2) Whether interest accrued on respondents' loan from petitioner and if in the affirmative, at what rate? 

HELD: 1) Respondents entered into a simple loan or mutuum, rather than a joint venture, with petitioners.

Respondents' claims, as articulated in their testimonies before the trial court, cannot prevail over the clear terms of the document attesting to the relation of the parties. "If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.”

2) Guided by the decision in Nacar v. Gallery Frames:  In the absence of an express stipulation as to the rate of interest that would govern the parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in judgments shall no longer be twelve percent (12%) per annum — as reflected in the case of Eastern Shipping Lines and Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions, before its amendment by BSP-MB Circular No. 799 — but will now be six percent (6%) per annum effective July 1, 2013. 

It should be noted, nonetheless, that the new rate could only be applied prospectively and not retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate of interest when applicable.