Prisma Construction & Development Corporation v. Arthur F. Menchavez

Summary

This case involves a loan dispute between lender Arthur Menchavez and borrowers Prisma Construction and its President Rogelio Pantaleon over a P1,000,000 loan with P40,000 monthly payments for six months. The key issue was whether the parties agreed to a 4% monthly interest rate beyond the six-month period. The RTC and CA found such agreement and applied continuing 4% monthly interest, though CA reduced it to 12% annually. The Supreme Court reversed, ruling that Article 1956 of the Civil Code requires written stipulation for interest, and only a specific sum of P40,000 monthly for six months was agreed upon, not a continuing interest rate. After the six-month period, legal interest of 12% per annum applies. The Court also rejected piercing the corporate veil absent evidence of fraud or wrongdoing. This decision reinforces the strict requirement for written interest stipulations in loan agreements and clarifies the distinction between agreed fixed monthly payments versus continuing interest rates.