Vicente Lopez v. Rosendo Hernaez

Summary

This case involved the enforcement of a promissory note between private parties. Rosendo Hernaez executed a note promising to pay Vicente Lopez P4,925 in two installments with specific penalty clauses for non-payment. After receiving the first installment, Lopez sued for the unpaid second installment when Hernaez defaulted. The Supreme Court affirmed the trial court's judgment, ruling that the contracting parties could validly stipulate both interest and separate penalty damages despite the general rule in Article 1152 of the Civil Code. The Court emphasized that parties may agree to terms contrary to the default rule that penalties substitute for damages and interest. The decision reinforced the principle of contractual freedom and the binding nature of stipulated penalties in obligations and contracts.