Cu Unjieng E Hijos v. The Mabalacat Sugar Co.

Summary

This 1930 Supreme Court case involved Cu Unjieng e Hijos' action against Mabalacat Sugar Company for mortgage foreclosure and debt collection of over P163,000. The main legal issue concerned whether compound interest could be charged on mortgage debt without express contractual stipulation. The Supreme Court held that while parties may stipulate compound interest under Civil Code Article 1109 and Usury Law Section 5, the mortgage provision requiring monthly interest payments on unpaid capital did not authorize accumulating interest on interest. The Court established that absent express stipulation, interest on accrued interest is only allowed at 6% annually from judicial demand. The decision reduced the principal debt by P1,136.12 while affirming other aspects of the trial court's judgment, including attorney's fees and foreclosure orders. This case clarified important principles regarding compound interest calculations in mortgage transactions and usury law limitations.