Verdejo v. CA.............................................................................................................. 1
Philippine Rabbit Bus Lines v. Cruz.............................................................................5
GSIS v CA.................................................................................................................... 9
UCPB v Beluso.......................................................................................................... 18
A.C Ent. Inc. v. CIAC 244 s 55................................................................................... 50
New Sampaguita v PNB............................................................................................ 52
Verdejo v. CA
G.R. No. 77735
RESOLUTION
PADILLA, J.:
On 20 December 1984, the herein petitioner filed a complaint against the private
respondent Herminia Patinio and one John Doe before the Regional Trial Court of
Pasay City, docketed therein as Civil Case No. 2546-P, for collection of a sum of
money amounting to P60,500.00, which said Herminia Patinio had allegedly
borrowed from him but failed to pay when it became due, notwithstanding
demands. 1
Answering, Herminia Patinio admitted having obtained loans from the petitioner but
claimed that the amount borrowed by her was very much less than the amount
demanded in the complaint, which amount she had already paid or settled, and that
the petitioner had exacted or charged interest on the loan ranging from 10% to 12%
per month, which is exorbitant and in gross violation of the Usury Law. Wherefore
she prayed that she be reimbursed the usurious interests charged and paid. She
also asked for damages, attorney's fees and costs of suit. 2
After trial court on 3 September 1986, the trial court rendered Judgment, as follows:
Counsel for the petitioner received a copy of the trial court's decision on 5
September 1986, and on 19 September 1986, he sent a notice of appeal to the
court by special delivery. The notice of appeal was received by the court on 26
September 1986. On that same day the court also received the motion for execution
filed by the private respondent, Herminia Patinio. 4
2
The petitioner opposed the motion claiming that he had already filed a notice of
appeal through the mail so that the motion for execution was improper. 5
The private respondent, however, replied that the petitioner's notice of appeal was
filed beyond the reglementary period and reiterated her prayer for the issuance of a
writ of execution. 6
Resolving the matter, the trial court issued an Order on 8 October 1986, the
dispositive part of which reads as follows:
As the judgment rendered herein has become final and executory, let the
corresponding Writ of Execution issue to enforce the same. 7
Thereafter, the petitioner filed a petition for certiorari before the Court of Appeals,
docketed therein as CA-G.R. No. SP-10429, to annul said Order of 8 October 1986. 8
The appellate court, however, as aforestated, dismissed the petition in a Decision
dated 28 November 1986. 9 The petitioner filed a motion for reconsideration of the
decision, but his motion was denied in a Resolution dated 5 March 1987. 10
The only issue in this petition is whether or not the Court should allow an appeal
where the notice of appeal was sent by special delivery mail within the period for
perfection of appeals, but received in court after the expiration of said period.
For the proper exercise of the right to appeal, the petitioner should have complied
with Section 1, Rule 13 of the Rules of Court which reads as follows:
In justifying his failure to comply strictly with the requirements for perfecting an
appeal, as aforestated, the petitioner alleges that his counsel was sick at the time,
and in order to beat the deadline for the filing of the appeal, he mailed the notice of
appeal by special delivery mail, not knowing that it should be sent by registered
mail. 11
We find merit in the petition. The Rules of Court expressly provide that the rules
should be liberally construed in order to promote their object and to assist the
parties in obtaining just, speedy, and inexpensive determination of every action and
proceeding, 12 and in the absence of a clear lack of merit or intention to delay, a
case should not be allowed to go off on procedural points or technicality. As much as
possible, failure of' justice should be avoided. 13
In the instant case, the notice of appeal was sent by special delivery, instead of
registered mail. Considering that said notice of appeal was sent within the period for
perfection of appeals by the petitioner who, not being a lawyer, is not well versed in
the finer points of the law, and, hence, committed an honest mistake; and that the
petitioner appears to have a good and valid cause of action, we find that there was
substantial compliance with the rules.
The case involves an alleged violation of the Usury Law, where the petitioner was
found by the trial court to have charged and collected usurious interests from the
private respondent on loans which were first obtained on 15 February 1982, later
renewed, and finally culminated with the execution by private respondent of the
Deed of Sale with Right of Repurchase on 17 November 1983. This Court has ruled
in one case 14 that with the promulgation of Central Bank Circular No. 905, series of
1982, usury has become "legally inexistent" as the lender and the borrower can
4
agree on any interest that may be charged on the loan. This Circular was also given
retroactive effect. But, whether or not this Circular should also be given retroactive
effect and applied in this case is yet to be determined by the appellate court at the
proper time.
SO ORDERED.
RESOLUTION
5
NARVASA, J.:
In Civil Case No. 2244 of the Court of First Instance (now Regional Trial Court,
Branch LVI) of Angeles City, Pedro Manabat, (the private respondent) obtained
judgment against Philippine Rabbit Bus Lines, Inc. (petitioner) the dispositive portion
of which reads:
WHEREFORE, in view of the above findings, this Court renders judgment in favor of
the plaintiff Pedro Manabat, and against the defendant, the Philippine Rabbit Bus
Lines, Incorporated, sentencing the latter to pay the former, Pedro Manabat as
actual and compensatory damages the amount of P72,500 with legal interest
thereon from the filing of the complaint until fully paid, and the costs of this suit. 1
The judgment having become final and executory following its affirmance by the
Intermediate Appellate Court, Manabat sought its execution and, at his instance, the
deputy sheriff of Angeles City garnished funds of Philippine Rabbit on deposit with
Manila Bank in said City to the extent of P155,150.00. This amount was released by
the Bank's manager by means of a check drawn in favor of the sheriff and was
thereafter paid to the private respondent. 2 The amount of P155,150.00 included
interest at the rate of twelve (12%) percent per annum on the award of P72,500.00
computed from the date of the filing of the complaint, as prescribed in the
judgment.
Philippine Rabbit moved to dissolve the garnishment, asserting that while it was
willing to pay the award, the interest chargeable should be only six (6%) percent,
not twelve (12%) percent, per annum and upon being rebuffed, has come to this
Court for relief.
Whether or not Circular No. 416 of the Central Bank of the Philippines, issued
pursuant to authority granted under Act No. 2655, as amended (The Usury Law),
and prescribing that:
... the rate of interest for the loan, or forbearance of any money, goods, or credits
and the rate allowed in judgments, in the absence of express contract as to such
rate of interest, shall be twelve (12 %) percent per annum
In Reformina vs. Tomol, Jr. 3 decided October 11, 1985, essentially the same factual
premises obtained, the only difference being that in said case, which concerned also
a judgment awarding damages for loss or injury to person or property, the interest
appeared to have been computed at six (6%) percent, and it was the judgment
creditors who came to this Court on their contention that the rate should be twelve
(12%) percent instead. The Court en banc unanimously rejected that contention, the
majority opinion holding, inter alia, that:
Central Bank Circular No. 416 which took effect on July 29, 1974 was issued and
promulgated by the Monetary Board pursuant to the authority granted to the
Central Bank by P.D. No. 116, which amended Act No. 2655, otherwise known as the
Usury Law. The amendment from said authority emanates reads as follows-
Section 1-a. The Monetary Board is hereby authorized to prescribe the maximum
rate or rates of interest for the loan or renewal thereof or the forbearance of any
money, goods or credit, and to change such rate or rates whenever warranted by
prevailing economic and social conditions. Provided, That such changes shall not be
made oftener than once every twelve months.
In the exercise of the authority herein granted, the Monetary Board may prescribe
higher maximum rates for consumer loans or renewals thereof as well as such loans
made by pawnshops, finance companies and other similar credit institutions
although the rates prescribed for these institutions need not necessarily be
uniform.' (Emphasis supplied)
Acting pursuant to this grant of authority, the Monetary Board increased the rate of
legal interest from that of the six (6%) percent per annum originally allowed under
Section 1 of Act No. 2655 to twelve (12%) percent per annum.
It will be noted that Act No. 2655 deals with interest on (1) loans: (2) forbearances
of any money, goods, or credits, and (3) rate allowed in judgments. The issue now is
what-kind of judgment is referred to under the said law. Petitioners maintain that it
covers all kinds of monetary judgment.
The judgments spoken of and referred to are judgments in litigations involving loans
or forbearance of any money, goods or credits. Any other kind of monetary
judgment which has nothing to do with, nor involving loans or forbearance of any
money, goods or credits does not fall within the coverage of the said law for it is not
within the ambit of the authority granted to the Central Bank. The Monetary Board
may not tread on forbidden grounds. It cannot rewrite other laws. That function is
vested solely with the legislative authority. It is axiomatic in legal hermeneutics that
statutes should be construed as a whole and not as a series of disconnected articles
and phrases. In the absence of a clear contrary intention, words and phrases in
statutes should not be interpreted in isolation from one another. A word or phrase in
a statute is always used in association with other words or phrases and its meaning
may thus be modified or restricted by the latter.
xxx
xxx
xxx
Coming to the case at bar, the decision herein sought to be executed is one
rendered in an Action for Damages for injury to persons and loss of property and
does not involve any loan, much less forbearances of any money, goods or credits.
As correctly argued by private respondents, the law applicable to the said case is
Article 2209 of the New Civil Code which reads
Art. 2209. If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnify for damages, there being no stipulation to the
contrary, shall be the payment of interest agreed upon, and in the absence of
stipulation, the legal interest which is six percent per annum.
8
The above provisions remains untouched despite the grant of authority to the
Central Bank by Act No. 2655, as amended. To make Central Bank Circular No. 416
applicable to any case other than those specifically provided for by the Usury Law
well make the same of doubtful constitutionality since the Monetary Board will be
exercising legislative functions which was beyond the intendment of P.D. No. 116.
There is no reason to depart or deviate from that ruling here. It seems quite clear
that Section 1-a of Act No. 2655, as amended-which, as distinguished from sec.1 of
the same law, appears to be the actual and operative grant of authority to the
Monetary Board of the Central Bank to prescribe maximum rates of interest where
the parties have not stipulated thereon in excluding mention of rates allowed in
judgments, should, at the least, be construed as limiting the authority thus granted
only to loans or forbearances of money, etc., and to judgments involving such loans
or forbearances.
SO ORDERED.
GSIS v CA
G.R. No. L-52478
PARAS, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals in
CA-G.R. No. 62541-R (Nemencio R. Medina and Josefina G. Medina, PlaintiffsAppellants vs. The Government Service Insurance System, Defendant-Appellant)
affirming the January 21, 1977 Decision of the trial court, and at the same time
ordering the GSIS to reimburse the amount of P9,580.00 as over-payment and to
pay the spouses Nemencio R. Medina and Josefina G. Medina P3,000.00 and
P1,000.00 as attorney's fees and litigation expenses.
On July 6, 1962, the Medinas executed in favor of the GSIS an Amendment of Real
Estate Mortgage, the pertinent portion of which reads:
10
WHEREAS, on the 4th day of April, 1962, the Mortgagor executed signed and
delivered a real estate mortgage to and in favor of the Mortgagee on real estate
properties located in the City of Manila, ... to secure payment to the mortgages of a
loan of Two Hundred Ninety Five Thousand Pesos (P295,000.00) Philippine Currency,
granted by the mortgagee to the Mortgagors, ...;
WHEREAS, the parties herein have agreed as they hereby agree to increase the
aforementioned loan from Two Hundred Ninety Five Thousand Pesos (P295,000.00)
to Three Hundred Fifty Thousand Pesos (P350,000.00), Philippine Currency;
(1)
That the mortgagor shall pay to the system P4,433.65 monthly including
principal and interest.
It is hereby expressly understood that with the foregoing amendment, all other
terms and conditions of the said real estate mortgage dated April 4, 1962 insofar as
they are not inconsistent herewith, are hereby confirmed, ratified and continued in
full force and effect and that the parties thereto agree that this amendment be an
integral part of said real estate mortgage. (Rollo, p. 153-154).
Upon application by the Medinas, the GSIS Board of Trustees adopted Resolution No.
121 on January 18, 1963, as amended by Resolution No. 348 dated February 25,
1963, approving an additional loan of P230,000.00 in favor of the Medinas on the
security of the same mortgaged properties and the additional properties covered by
TCT Nos. 49234, 49235 and 49236, to bear interest at 9% per annum compounded
monthly and repayable in ten years. This additional loan of P230,000.00 was
denominated by the GSIS as Account No. 31442.
11
On March 18, 1963, the Economic Coordinator thru the Auditor General interposed
no objection thereto, subject to the conditions of Resolution No. 121 as amended by
Resolution No. 348 of the GSIS.
Beginning 1965, the Medinas having defaulted in the payment of the monthly
amortization on their loan, the GSIS imposed 9%/12% interest on an installments
due and unpaid. In 1967, the Medinas began defaulting in the payment of fire
insurance premiums.
On May 3, 1974, the GSIS notified the Medinas that they had arrearages in the
aggregate amount of P575,652.42 as of April 18, 1974 (Exhibit 9, p. 149, Joint
Record on Appeal, Rollo, p. 79), and demanded payment within seven (7) days from
notice thereof, otherwise, it would foreclose the mortgage.
On April 21, 1975, the GSIS filed an Application for Foreclosure of Mortgage with the
Sheriff of the City of Manila (Exhibit "22," pp. 63 and 149; Rollo, p. 79). On June 30,
1975, the Medinas filed with the Court of First Instance of Manila a complaint,
praying, among other things, that a restraining order or writ of preliminary
injunction be issued to prevent the GSIS and the Sheriff of the City of Manila from
proceeding with the extra-judicial foreclosure of their mortgaged properties (CFI
Decision, p. 121; Rollo, p. 79). However, in view of Section 2 of Presidential Decree
No. 385, no restraining order or writ of preliminary injunction was issued by the trial
court (CFI Decision, p. 212; Rollo, p. 79). On April 25, 1975, the Medinas made a last
partial payment in the amount of P209,662.80.
Under a Notice of Sale on Extra-Judicial Foreclosure dated June 18, 1975, the real
properties of the Medinas covered by Transfer Certificates of Title Nos. 32231,
43527, 51394, 58626, 60534, 63304, 67550, 67551 and 67552 of the Registry of
Property of the City of Manila were sold at public auction to the GSIS as the highest
bidder for the total amount of P440,080.00 on January 12, 1976, and the
corresponding Certificate of Sale was executed by the Sheriff of Manila on January
27, 1976 (CFI Decision, pp. 212-213; Rollo, p. 79).
On January 30, 1976, the Medinas filed an Amended Complaint with the trial court,
praying for (a) the declaration of nullity of their two real estate mortgage contracts
with the GSIS as well as of the extra-judicial foreclosure proceedings; and (b) the
12
refund of excess payments, plus damages and attorney's fees (CFI Decision, p. 213;
Rollo, p. 79).
On March 19, 1976, the GSIS filed its Amended Answer (Joint Record on Appeal, pp.
99-105; Rollo, p. 79). After trial, the trial court rendered a Decision dated January
21, 1977 (Joint Record on Appeal, pp. 210-232), the pertinent dispositive portion of
which reads:
Dissatisfied with the said judgment, both parties appealed with the Court of
Appeals.
The Court of Appeals, in a Decision promulgated on January 18, 1980 (Record, pp.
72-77), ruled in favor of the Medinas
The Second Division of this Court, in a Resolution dated April 25, 1980 (Rollo, p..
88), resolved to deny the petition for lack of merit.
13
Petitioner filed on June 26, 1980 a Motion for Reconsideration dated June 17, 1980
(Rollo, pp. 95-103), of the above-stated Resolution and respondents in a Resolution
dated July 9, 1980 (Rollo, p. 105), were required to comment thereon which
comment they filed on August 6, 1980. (Rollo, pp. 106-116).
The petition was given due course in the Resolution dated July 6, 1981 (Rollo, p.
128). Petitioner filed its brief on November 26, 1981 (Rollo, pp. 147-177); while
private respondents filed their brief on January 27, 1982 (Rollo, pp. 181-224), and
the case was considered submitted for decision in the Resolution of July 19, 1982
(Rollo, p. 229).
1.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE
AMENDMENT OF REAL ESTATE MORTGAGE DATED JULY 6, 1962 SUPERSEDED THE
MORTGAGE CONTRACT DATED APRIL 4, 1962, PARTICULARLY WITH RESPECT TO
COMPOUNDING OF INTEREST;
2.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN SUSTAINING THE
RESPONDENT-APPELLEE SPOUSES MEDINA'S CLAIM OR OVERPAYMENT, BY
CREDITING THE FIRE INSURANCE PROCEEDS IN THE SUM OF P11,152.02 TO THE
TOTAL PAYMENT MADE BY SAID SPOUSES AS OF DECEMBER 11, 1975;
3.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE
INTEREST RATES ON THE LOAN ACCOUNTS OF RESPONDENT-APPELLEE SPOUSES
ARE USURIOUS;
4.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN AFFIRMING THE
ANNULMENT OF THE SUBJECT EXTRAJUDICIAL FORECLOSURE AND SHERIFF'S
CERTIFICATE OF SALE; AND
5.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THE GSIS
LIABLE FOR ATTORNEY'S FEES, EXPENSES OF LITIGATION AND COSTS.
14
There is no dispute as to the facts of the case. By agreement of the parties the
issues in this case are limited to the loan of P350,000.00 denominated as Account
No. 31055 (Rollo, p. 79; Joint Record on Appeal, p. 129) subject of the Amendment
of Real Mortgage dated July 6, 1962, the interpretation of which is the major issue in
this case.
GSIS claims that the amendment of the real estate mortgage did not supersede the
original mortgage contract dated April 4, 1962 which was being amended only with
respect to the amount secured thereby, and the amount of monthly amortizations.
All other provisions of aforesaid mortgage contract including that on compounding
of interest were deemed rewritten and thus binding on and enforceable against the
respondent spouses. (Rollo, pp. 162-166).
On the other hand the Medinas maintain that there is no express stipulation on
compounded interest in the amendment of mortgage contract of July 6, 1962 so
that the compounded interest stipulation in the original mortgage contract of April
4, 1962 which has been superseded cannot be enforced in the later mortgage.
(Rollo, p. 185).
Hence the Medinas claim an overpayment in Account No. 31055. The application of
their total payment in the amount of P991,845.53 as computed by the trial court
and by the Court of Appeals is as follows:
... It appearing and so the parties admit in their own exhibits that as of December
11, 1975, plaintiffs had paid a total of P991,241.17 excluding fire insurance,
P532,038.00 of said amount should have been applied to the full payment of Acct.
No. 31055 and the balance of P459,203.17 applied to the payment of Acct. No.
31442.
15
According to the computation of the GSIS (Exhibit C, also Exhibit 38) the total
amounts, collected on Acct. No. 31442 as of December 11, 1975 total P390,745.66
thus leaving an unpaid balance of P70,028.63. The total amount plaintiffs should
pay on said account should therefore be P460,774.29. Deduct this amount from
P459,163.17 which has been shown to be the difference between the total
payments made by plaintiffs to the G.S.I.S. as of December 11, 1975 and the
amount said plaintiffs should pay under their Acct. No. 31055, there remains an
outstanding balance of P1,611.12. This amount represents the balance of the
obligation of the plaintiffs to the G.S.I.S. on Acct. No. 31442 as of December 11,
1975." (Decision, Civil Case No. 98390; Joint Record on Appeal, pp. 227-228; Rollo,
p. 79).
It is a basic and fundamental rule in the interpretation of contract that if the terms
thereof are clear and leave no doubt as to the intention of the contracting parties,
the literal meaning of the stipulations shall control but when the words appear
contrary to the evident intention of the parties, the latter shall prevail over, the
former. In order to judge the intention of the parties, their contemporaneous and
subsequent acts shall be principally considered. (Sy v. Court of Appeals, 131 SCRA
116; July 31, 1984).
As correctly stated by the GSIS in its brief (Rollo, pp. 162166), a careful perusal of
the title, preamble and body of the Amendment of Real Estate Mortgage dated July
6, 1962, taking into account the prior, contemporaneous, and subsequent acts of
the parties, ineluctably shows that said Amendment was never intended to
completely supersede the mortgage contract dated April 4, 1962.
16
First, the title "Amendment of Real Estate Mortgage" recognizes the existence and
effectivity of the previous mortgage contract. Second, nowhere in the aforesaid
Amendment did the parties manifest their intention to supersede the original
contract. On the contrary in the WHEREAS clauses, the existence of the previous
mortgage contract was fully recognized and the fact that the same was just being
amended as to amount and amortization is fully established as to obviate any
doubt. Third, the Amendment of Real Estate Mortgage dated July 6, 1962 does not
embody the act of conveyancing the subject properties by way of mortgage. In fact
the intention of the parties to be bound by the unaffected provisions of the
mortgage contract of April 4, 1962 expressed in unmistakable language is clearly
evident in the last provision of the Amendment of Real Estate Mortgage dated July
6, 1962 which reads:
It is hereby expressly understood that with the foregoing amendment, all other
terms and conditions of the said real estate mortgage dated April 4, 1962, insofar as
they are not inconsistent herewith, are hereby confirmed, ratified and continued to
be in full force and effect, and that the parties hereto agree that the amendment be
an integral part of said real estate mortgage. (Emphasis supplied).
II
There is an obvious error in the ruling of the Court of Appeals in its Decision dated
January 18, 1980, which reads:
17
... We agree that plaintiff should be credited with P11,152.02 of the fire insurance
proceeds as the same is admitted in paragraph (4) of its Answer and should be
added to their payments. (par. 13).
That they (GSIS) specifically deny the allegations in Paragraph 11, the truth being
that plaintiffs are not entitled to a credit of P19,381.07 as fire insurance proceeds
since they were only entitled to, and were credited with, the amount of P11,152.02
as proceeds of their fire insurance policy. (par. 4, Amended Answer).
III.
As to whether or not the interest rates on the loan accounts of the Medinas are
usurious, it has already been settled that the Usury Law applies only to interest by
way of compensation for the use or forbearance of money (Lopez v. Hernaez, 32
Phil. 631; Bachrach Motor Co. v. Espiritu, 52 Phil. 346; Equitable Banking
Corporation v. Liwanag, 32 SCRA 293, March 30, 1970). Interest by way of damages
is governed by Article 2209 of the Civil Code of the Philippines which provides:
Art. 2209.
If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to the
contrary, shall be the payment of the interest agreed upon,...
In the Bachrach case (supra) the Supreme Court ruled that the Civil Code permits
the agreement upon a penalty apart from the interest. Should there be such an
agreement, the penalty does not include the interest, and as such the two are
different and distinct things which may be demanded separately. Reiterating the
18
same principle in the later case of Equitable Banking Corp. (supra), where this Court
held that the stipulation about payment of such additional rate partakes of the
nature of a penalty clause, which is sanctioned by law.
IV.
Based on the finding that the GSIS had the legal right to impose an interest 9% per
annum, compounded monthly, on the loans of the Medinas and an interest of
9%/12% per annum on all due and unpaid amortizations or installments, there is no
question that the Medinas failed to settle their accounts with the GSIS which as
computed by the latter reached an outstanding balance of P630,130.55 as of April
12, 1975 and that the GSIS had a perfect right to foreclose the mortgage.
There is merit in GSIS' contention that the Sheriff's Certificate of Sale is merely
provisional in character and is not intended to operate as an absolute transfer of the
subject property, but merely to Identify the property, to show the price paid and the
date when the right of redemption expires (Section 27, Rule 39, Rules of Court,
Francisco, The Revised Rules of Court, 1972 Vol., IV-B, Part I, p. 681). Hence the date
of the foreclosed mortgage is not even a material content of the said Certificate.
(Rollo, p. 174).
V.
PREMISES CONSIDERED, the decision of the Court of Appeals, in CA-G.R. No. 62541R Medina, et al. v. Government Service Insurance System et al., is hereby
REVERSED and SET ASIDE, and a new one is hereby RENDERED, affirming the
validity of the extra-judicial foreclosure of the real estate mortgages of the
respondent-appellee spouses Medina dated April 4, 1962, as amended on July 6,
1962, and February 17, 1963.
19
SO ORDERED.
UCPB v Beluso
UNITED
COCONUT
PLANTERS BANK,
Petitioner,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus -
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
SPOUSES SAMUEL
ODETTE BELUSO,
and
Promulgated:
Respondents.
DECISION
20
CHICO-NAZARIO, J.:
21
PN #
Date of PN
Maturity Date
Amount
Secured
8314-96-000833
29 April 1996
27
1996
August P 700,000
8314-96-000850
2 May 1996
30
1996
August P 500,000
8314-96000292-2
20
November 20
1996
1997
March P 800,000
PN #
Date of PN
97-00363-1
11
1997
98-00002-4
2 January 1998
Maturity Date
Amount
Secured
December 28
February P 200,000
1998
28
February P 150,000
1998
22
PN #
Amount
Secured
Interest
Penalty
Total
97-00363-1
P 200,000
31%
36%
P 225,313.24
97-00366-6
P 700,000
30.17%
32.786%
(102
days)
P 795,294.72
(2 days)
30.41%
(102
days)
P 1,462,124.5
4
33%
36%
P 170,034.71
(7 days)
97-00368-2
98-00002-4
P 1,300,000
P 150,000
28%
(102
days)
23
II
III
IV
26
Art. 1308. The contract must bind both contracting parties; its
validity or compliance cannot be left to the will of one of them.
28
29
30
The interest rate provisions in the case at bar are illegal not
only because of the provisions of the Civil Code on mutuality of
contracts, but also, as shall be discussed later, because they
violate the Truth in Lending Act. Not disclosing the true finance
charges in connection with the extensions of credit is,
furthermore, a form of deception which we cannot countenance. It
is against the policy of the State as stated in the Truth in Lending
Act:
Error in Computation
UCPB asserts that while both the RTC and the Court of
Appeals voided the interest rates imposed by UCPB, both failed to
include in their computation of the outstanding obligation of the
spouses Beluso the legal rate of interest of 12% per
annum. Furthermore, the penalty charges were also deleted in the
31
(25%) of the total amounts due and outstanding exclusive of costs and
other expenses.[22]
Section 2.02 Compounding Interest. Interest not paid when due shall
form part of the principal and shall be subject to the same interest rate
as herein stipulated.[23]
Interest not paid when due shall be added to, and become part of the
principal and shall likewise bear interest at the same rate. [24]
33
1.
2.
3.
Penalty charges;
4.
5.
6.
Advance interest;
7.
8.
demand does not nullify the demand itself, which is valid with
respect to the proper amount. A contrary ruling would put
commercial transactions in disarray, as validity of demands would
be dependent on the exactness of the computations thereof,
which are too often contested.
The spouses Beluso had even originally asked for the RTC to
impose this legal rate of interest in both the body and the prayer
of its petition with the RTC:
12. Since the provision on the fixing of the rate of interest by the
sole will of the respondent Bank is null and void, only the legal rate of
interest which is 12% per annum can be legally charged and imposed
by the bank, which would amount to only about P599,000.00 since
1996 up to August 31, 1998.
xxxx
35
xxxx
All these show that the spouses Beluso had acknowledged before
the RTC their obligation to pay a 12% legal interest on their
loans. When the RTC failed to include the 12% legal interest in its
computation, however, the spouses Beluso merely defended in
the appellate courts this non-inclusion, as the same was beneficial
to them. We see, however, sufficient basis to impose a 12% legal
interest in favor of petitioner in the case at bar, as what we have
voided is merely the stipulated rate of interest and not the
stipulation that the loan shall earn interest.
36
As regards the
actually be liable
demand. Filing a case
Article 1169[32] of the
delay.
The RTC, however, also held UCPB liable for attorneys fees in
this case, as the spouses Beluso were forced to litigate the issue
on the illegality of the interest rate provision of the promissory
notes. The award of attorneys fees, it must be recalled, falls under
the sound discretion of the court.[33] Since both parties were
forced to litigate to protect their respective rights, and both are
entitled to the award of attorneys fees from the other, practical
reasons dictate that we set off or compensate both parties
liabilities for attorneys fees. Therefore, instead of awarding
attorneys fees in favor of petitioner, we shall merely affirm the
deletion of the award of attorneys fees to the spouses Beluso.
37
38
The spouses Beluso retort that since they had the right to
refuse payment of an excessive demand on their account, they
cannot be said to be in default for refusing to pay the
same. Consequently, according to the spouses Beluso, the
enforcement of such illegal and overcharged demand through
foreclosure of mortgage should be voided.
42
xxxx
(c)
Any person who willfully violates any provision of this
Act or any regulation issued thereunder shall be fined by not less
than P1,000 or more than P5,000 or imprisonment for not less than 6
months, nor more than one year or both.
Moreover, since from the start, respondent bank violated the Truth in
Lending Act in not informing the borrower in writing before the
execution of the Promissory Notes of the interest rate expressed as a
percentage of the total loan, the respondent bank instead is liable to
pay petitioners double the amount the bank is charging petitioners by
way of sanction for its violation.[41]
b.) Does the expression indicative rate of DBD retail (sic) comply
with the Truth in Lending Act provision to express the interest rate as a
simple annual percentage of the loan? [42]
UCPB further argues that since the spouses Beluso were duly
given copies of the subject promissory notes after their execution,
then they were duly notified of the terms thereof, in substantial
compliance with the Truth in Lending Act.
46
(3) the difference between the amounts set forth under clauses
(1) and (2)
(7) the percentage that the finance bears to the total amount to
be financed expressed as a simple annual rate on the
outstanding unpaid balance of the obligation.
Forum Shopping
The spouses Beluso claim that the issue in Civil Case No. V7227 before the RTC of Roxas City, a Petition for Injunction Against
Foreclosure, is the propriety of the foreclosure before the true
account of spouses Beluso is determined. On the other hand, the
issue in Case No. 99-314 before the RTC of Makati City is the
validity of the interest rate provision. The spouses Beluso claim
that Civil Case No. V-7227 has become moot because, before the
RTC of Roxas City could act on the restraining order, UCPB
proceeded with the foreclosure and auction sale. As the act
sought to be restrained by Civil Case No. V-7227 has already been
accomplished, the spouses Beluso had to file a different action,
that of Annulment of the Foreclosure Sale, Case No. 99-314 with
the RTC, Makati City.
48
(a) That the court has no jurisdiction over the person of the
defending party;
(b) That the court has no jurisdiction over the subject matter of
the claim;
(j) That a condition precedent for filing the claim has not been
complied with.[44] (Emphases supplied.)
Even if this is not the purpose for the filing of the first
action, it may nevertheless be dismissed if the later action is
the more appropriate vehicle for the ventilation of the issues
between the parties. Thus, in Ramos v. Peralta, it was held:
In the case at bar, Civil Case No. V-7227 before the RTC of
Roxas City was an action for injunction against a foreclosure sale
that has already been held, while Civil Case No. 99-314 before the
RTC of Makati City includes an action for the annulment of said
foreclosure, an action certainly more proper in view of the
execution of the foreclosure sale. The former case was improperly
filed in Roxas City, while the latter was filed in Makati City, the
proper venue of the action as mandated by the Credit
Agreement. It is evident, therefore, that Civil Case No. 99-314 is
the more appropriate vehicle for litigating the issues between the
parties, as compared to Civil Case No. V-7227. Thus, we rule that
the RTC of Makati City was not in error in not dismissing Civil Case
No. 99-314.
1.
2.
in
in
SO ORDERED.
53
BANC
No.
101444.
May
9,
1995.]
SYLLABUS
RESOLUTION
QUIASON, J.:
In their Second Motion For Partial Reconsideration, private respondent insists that it is entitled to interests at
the rate of 12 per annum on the monetary award given them by the Construction Industry Arbitration
Commission (CIAC). It contends that under Executive Order No. 1008 dated February 4, 1985 and the Rules
of Procedure Governing Construction Arbitration, arbitral awards are final and "inappealable (sic)" and
pursuant to our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals, 234 SCRA 78 (1994), monetary
awards in all judgments that became final and executory, regardless of the nature of the obligation, shall
bear
legal
interest
of
12
per
annum.
The obligation that was breached in the arbitration case at bench was not based on a loan or forbearance of
money,
and
therefore
was
not
covered
by
Central
Bank
Circular
No.
416.
In Reformina v. Tomol, Jr., 139 SCRA 260 (1985), we made clear that the award of legal interest at 12 per
annum under said Central Bank Circular shall be adjudged only in cases involving the loan or forbearance of
money (See also Pilipinas Bank v. Court of Appeals, 225 SCRA 268 [1993]). However, in Eastern Shipping
Lines, Inc., we held that when the judgment awarding a sum of money becomes final and executory, the
monetary award shall earn interest at 12% per annum from the date of such finality until its satisfaction,
regardless of whether the case involves a loan or forbearance of money. The reason is that this interim
period is deemed to be by then equivalent to a forbearance of credit. We quote from Eastern Shipping Lines,
Inc.,
supra.,
at
pp.
95-97:
jgc:chanrobles.com .ph
"II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the
rate
of
interest,
as
well
as
the
accrual
thereof,
is
imposed,
as
follows:
jgc:chanroble s.com.ph
"1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12 per annum to be computed from default, i.e., from
54
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
"2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6 per annum. No
interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of the court is made (at which time
the quantification of damages may be deemed to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on the amount finally adjudged.
"3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12 per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance
of
credit"
(Emphasis
supplied).
It appears that private respondent equated, and wrongly at that, the term "final and inappealable (sic)" as
used in E.O. No. 1008 and the Rules of Procedure Governing Construction Arbitration with the term "final
and
executory"
as
used
in
Eastern
Shipping
Lines,
Inc.
Section
19
of
E.O.
No.
1008
dated
February
4,
1985
provides
as
follows:
jgc:chanrobles.com .ph
"Finality of Awards The arbitral award shall be binding upon the parties. It shall be final and inappealable
(sic) except on questions of law which shall be appealable to the Supreme Court" (Emphasis Supplied).
Section 2 of Article XVI of the Rules of Procedure Governing Construction Arbitration provides as follows:
jgc:chanroble s.com.ph
"Appeals Pursuant to Section 19 of Executive Order No. 1008 dated 4 February 1985, arbitral awards are
final and inappealable (sic) except on questions of law which shall be appealable to the Supreme Court
before the award becomes final. An appeal shall not stay the award unless the Supreme Court shall direct
otherwise upon such terms as it may deem just. An appeal from an arbitral award or an order/decision of
the CIAC shall be perfected by filing with the CIAC a notice of appeal with the Supreme Court twelve (12)
copies of a petition for review of the award, order, or decision" (Emphasis supplied).
A "final and inappealable (sic)" judgment is not the same as a "final and executory" one. The former
becomes executory only as in the case of an award by the CIAC after the lapse of 30 days from receipt of
notice thereof and no petition for review to the Supreme Court is made (Rules of Procedure Governing
Construction
Arbitration,
Art.
XVI,
Sec.
1).
While the petition for review does not automatically suspend the execution of the award of the CIAC, the
Supreme Court may direct a stay of execution. In case at bench, the Court issued a temporary restraining
order
to
stay
the
execution
of
the
award
(Resolution,
October
14,
1991).
chanrobles
law
library
The CIAC award did not come "final and executory" until after service of a copy of the Resolution dated April
8, 1992 of this Court, denying the motion for reconsideration. The award was fully paid to private
respondent on May 6, 1992 (Rollo, p. 456). We consider the interest that accrued from April 8 to May 6,
1992, a period of less than a month, as de minimis as to warrant its charging against the award.
IN
VIEW
OF
THE
FOREGOING,
the
Court
RESOLVED:
chanrob1es
virtual
1aw
library
(1) to GRANT private respondents Motion for Leave to File and Admit Attached Second Motion for Partial
Reconsideration;
and
(2)
to
DENY
the
Second
Motion
for
Partial
Reconsideration.
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza and
Francisco, JJ.,
concur.
Feliciano, J., took no part.
55
Respondent.
July 30, 2004
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --- -- -- -- x
56
DECISION
PANGANIBAN, J.:
C
ourts have the authority to strike down or to modify
provisions in promissory notes that grant the lenders
unrestrained power to increase interest rates, penalties
and
other
discretion
and
lenders
to
take
undue
advantage
of
courts
may
still
57
reduce
iniquitous
or
unconscionable
rates
charged
for
the
use
of
The Case
The Facts
59
1) MWSS Watermain;
2) NEA-Liberty farm;
3) Olongapo City Pag-Asa Public Market;
4) Renovation of COA-NCR Buildings 1, 2 and 9;
5) Dupels, Inc., Extensive prawn farm development project;
6) Banawe Hotel Phase II;
7) Clark Air Base -- Barracks and Buildings; and
8) Others: EDSA Lighting, Roxas Blvd. Painting NEA Sapang
Palay and Angeles City.
[Petitioners] failed to redeem their properties within the oneyear redemption period[,] and so [Respondent] PNB executed a
[D]eed of [A]bsolute [S]ale consolidating title to the properties in its
name. TCT Nos. 189935 to 189944 were later issued to [Petitioner]
PNB by the Registry of Deeds of Pangasinan.
65
for
qualifying
under
the
program. The
bid
price
of P10,334,000.00
vis--vis
did
not
involve
court
litigation
contesting
the
was
right
also
to
declared
foreclose
the
to
have
Real
the
Estate
conducted
through
the
deputy
sheriff,
under
the
II
III
IV
71
VI
73
inferences
are
manifestly
mistaken;[16] the
exceptions
exist
in
various
instances,
thus
Indeed,
Petitioner
NSBCIs
loan
accounts
with
The
unilateral
determination
and
imposition[23] of
Although
escalation
clauses[26] are
valid
in
made
the
fulfillment
of
the
contracts
dependent
was
therefore
void. Besides,
the
pro
forma
77
transfusion
from
lending
institutions
to
78
but
pronouncement. Although
usurious,
since
the
also
such
Usury
deviates from
increases
Law
is
are
now
this
not
legally
exorbitant.[40] Rates
found
to
be iniquitous
or
to
the
respondent. Such
statements
request
of
does
account
not
sent
indicate
by
any
Besides,
the
statements
were
not
letters
of
to
respondent
answer
did
not
the
proposal.[44]
follow
the
Furthermore,
stipulation
in
the
by
automatic
conversion. Because
of
this
main
document
involved
in
the
principal
before
it
was
respondents
surreptitiously
counsel,
who
but
the
revolving
credit
by
petitioners.[67] Again,
contrary
to
their
implementation.[68] Thus,
the
terms
and
conditions
Second,
there
evidence
that
[70]
was
no
7-page
contained
the
annex[69] offered
General
in
Conditions,
pages
thereof. Thus,
the
General
Conditions
Condition
were
correctly
objected
to
by
86
terms
and
conditions
therein
Disclosure
Statements. In
the
present
case,
the
effective
interest
rate
per
annum[83] would
respondents
prime
rate
in
effect. Besides,
21.5
percent
effective
interest
rate
per
we
presume
that
this
private
of
business
was
followed. That
the
related
89
apply
to
the
third availment
or
Statements
related
availment
or
the
similar
presumption
that
this
private
90
Penalty, or Increases
Thereof, Unjustified
that
would
justify
any
increase
in
that
93
NSBCI
prior
to
the
execution
of
the
94
statements
are
given
simultaneously
in-house
or
not
--
to
institute
judicial
has
the
power[110] to
96
determine
their
only
is
that
reason
certain
for
this
ethical
clarification
considerations
97
on
the
latest
loan
value
of
hard
The
branch
managers
recommendation
to
pertinent
policies
of
respondent,[125] such
approval
of
their
loans
accommodations.[129]
100
and
other
credit
102
103
that
will
consummate
the
extrajudicial
fees. The
total
outstanding
obligation
is
the
receivable
comparison
amounting
made,
the
deficiency
toP2,172,476.43
105
in
claim
fact
173,6
13,35
106
Add:
Interest at 19.5% p.a.
6/30/90-12/31/90 ([5,000,000-(356,821.30+821.33+767,087.92)] x 19.5% x [185/365])
383,
372,
107
50,9
14,2
74,0
108
1,590.
7,952.
109
238,95
284,16
110
21,957
64,161
([2,700,000-(18,209.65+523.04+488,484.22)]
12%
12%
([2,700,000-(18,209.65+523.04+488,484.22)]
7,930.
111
41,092
Net proceeds
Principal
Add:
Interest at 21.5% p.a.
1/5/90 (300,000 x 21.5% x [1/365])
Amount due as of 1/5/90
Less: Payment on 1/5/90 (pro-rated upon interest)
Balance
Add:
Interest at 21.5% p.a.
1/6/90-3/30/90 ([300,000-337.22] x 21.5% x [84/365])
Amount due as of 3/30/90
Less: Payment on 3/30/90 (pro-rated upon interest)
Balance
Add:
Interest at 21.5% p.a.
3/31/90-5/31/90 ([300,000-337.22] x 21.5% x [62/365])
Amount due as of 5/31/90
Less: Payment on 5/31/90 (pro-rated upon interest)
Balance
Add:
112
Add:
Interest at 21.5% p.a.
6/30/90-12/31/90 ([300,000-(337.22+58.44+54,583.14)] x 21.5% x [185/365])
26,700
31,752
113
3,175.
Interest at
conversion
12%
p.a.
upon
automatic
6,766.
on
12/20/91
(pro-rated
upon
Balance
Add:
Interest at 12% p.a.
12/21/91-12/31/91 ([300,000-(337.22+58.44+54,583.14)]] x 12% x [11/365])
886.10
4,591.
Date
Interest
114
Payable
1/5/90
3/30/90
5/31/90
6/29/90
Pro-rated
PN (1) P
186,986.30
PN (2)
9,542.47
27,752.12
PN (3)
176.71
513.93
196,705.48
572,073.65
PN (1)
208,370.59
163,182.85
PN (2)
132,693.52
103,917.28
PN (3)
14,827.15
11,611.70
355,891.26
278,711.83
PN (1)
198,985.09
199,806.42
PN (2)
126,716.69
127,239.72
PN (3)
14,159.30
14,217.74
339,861.08
341,263.89
PN (1)
71,924.74
839,012.66
PN (2)
45,801.92
534,286.14
PN (3)
5,117.90
59,701.04
122,844.56
1,432,999.84
115
543,807.61
8/8/91
8/15/91
11/29/91
12/20/91
PN (1)
806,639.99
493,906.31
PN (2)
523,113.94
320,303.08
PN (3)
58,452.66
35,790.61
1,388,206.59
850,000.00
PN (1)
321,652.11
86,593.37
PN (2)
211,852.33
57,033.69
PN (3)
23,672.34
6,372.93
557,176.79
150,000.00
PN (1)
370,109.22
161,096.81
PN (2)
240,937.94
104,872.65
PN (3)
27,241.23
11,857.24
638,288.39
277,826.70
PN (1)
235,767.70
162,115.78
PN (2)
151,204.51
103,969.45
PN (3)
17,075.64
11,741.35
404,047.85
116
277,826.57
Fourth,
since
there
was
no
stipulation
on
118
rather
an
excess
claim
or
surplus[162] payable
by
Joint
and
Solidary
Agreement. Contrary
to
the
120
with
was
the
imposed
credit
under
documents,[173] only
the
pertinent
the
Credit
121
liable
for
obligation[175] because,
as
the
it
entire
turned
out,
onerous
it
was
by
respondent
on
the
the
respective
portions remaining
method
of
interest
computation
is
122
million
deficiency
claim
therefore
WHEREFORE,
GRANTED. The
Decision
is AFFIRMED, with
is ORDERED to
this
Petition
of
is
the
hereby PARTLY
Court
of
Appeals
refund
the
sum
PNB
of P3,686,101.52
SO ORDERED.
123