[G.R. No. 90828.September 5, 2000]MELVIN COLINARES and LORDINO VELOSO,petitioners, vs.HONORABLE COURT OF APPEALS, and THE PEOPLE OF THE PHILIPPINES,respondents.D E C I S I O NDAVIDE, JR.,C.J.:In 1979 Melvin Colinares and Lordino Veloso (hereafter Petitioners) were contracted for a consideration ofP40,000 by the Carmelite Sisters of Cagayan de Oro City to renovate the latters convent at Camaman-an, Cagayan de Oro City.On 30 October 1979, Petitioners obtained 5,376 SF Solatone acoustical board 2x4x, 300 SF tanguile wood tiles 12x12, 260 SF Marcelo economy tiles and 2 gallons UMYLIN cement adhesive from CM Builders Centre for the construction project.[1]The following day, 31 October 1979, Petitioners applied for a commercial letter of credit[2]with the Philippine Banking Corporation, Cagayan de Oro City branch (hereafter PBC) in favor of CM Builders Centre.PBC approved the letter of credit[3]forP22,389.80 to cover the full invoice value of the goods.Petitioners signed a pro-forma trust receipt[4]as security.The loan was due on 29 January 1980.On 31 October 1979, PBC debitedP6,720 from Petitioners marginal deposit as partial payment of the loan.[5]On 7 May 1980, PBC wrote[6]to Petitioners demanding that the amount be paid within seven days from notice. Instead of complying with PBCs demand, Veloso confessed that they lostP19,195.83 in the Carmelite Monastery Project and requested for a grace period of until 15 June 1980 to settle the account.[7]PBC sent a new demand letter[8]to Petitioners on 16 October 1980 and informed them that their outstanding balance as of 17 November 1979 wasP20,824.40 exclusive of attorneys fees of 25%.[9]On 2 December 1980, Petitioners proposed[10]that the terms of payment of the loan be modified as follows:P2,000 on or before 3 December 1980, andP1,000 per month starting 31 January 1980 until the account is fully paid.Pending approval of the proposal, Petitioners paidP1,000 to PBC on 4 December 1980,[11]and thereafterP500 on 11 February 1981,[12]16 March 1981,[13]and 20 April 1981.[14]Concurrently with the separate demand for attorneys fees by PBCs legal counsel, PBC continued to demand payment of the balance.[15]On 14 January 1983, Petitioners were charged with the violation of P.D. No. 115 (Trust Receipts Law) in relation to Article 315 of the Revised Penal Code in an Information which was filed with Branch 18, Regional Trial Court of Cagayan de Oro City.The accusatory portion of the Information reads:That on or about October 31, 1979, in the City of Cagayan de Oro, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused entered into a trust receipt agreement with the Philippine Banking Corporation at Cagayan de Oro City wherein the accused, as entrustee, received from the entruster the following goods to wit:Solatone Acoustical boardTanguile Wood TilesMarcelo Cement TilesUmylin Cement Adhesivewith a total value of P22,389.80, with the obligation on the part of the accused-entrustee to hold the aforesaid items in trust for the entruster and/or to sell on cash basis or otherwise dispose of the said items and to turn over to the entruster the proceeds of the sale of said goods or if there be no sale to return said items to the entruster on or before January 29, 1980 but that the said accused after receipt of the goods, with intent to defraud and cause damage to the entruster, conspiring, confederating together and mutually helping one another, did then and there wilfully, unlawfully and feloniously fail and refuse to remit the proceeds of the sale of the goods to the entruster despite repeated demands but instead converted, misappropriated and misapplied the proceeds to their own personal use, benefit and gain, to the damage and prejudice of the Philippine Banking Corporation, in the aforesaid sum of P22,389.80, Philippine Currency.Contrary to PD 115 in relation to Article 315 of the Revised Penal Code.[16]The case was docketed as Criminal Case No. 1390.During trial, petitioner Veloso insisted that the transaction was a clean loan as per verbal guarantee of Cayo Garcia Tuiza, PBCs former manager.He and petitioner Colinares signed the documents without reading the fine print, only learning of the trust receipt implication much later.When he brought this to the attention of PBC, Mr. Tuiza assured him that the trust receipt was a mere formality.[17]On 7 July 1986, the trial court promulgated its decision[18]convicting Petitioners of estafa for violating P.D. No. 115 in relation to Article 315 of the Revised Penal Code and sentencing each of them to suffer imprisonment of two years and one day ofprision correccionalas minimum to six years and one day ofprision mayoras maximum, and to solidarily indemnify PBC the amount ofP20,824.44, with legal interest from 29 January 1980, 12 % penalty charge per annum, 25% of the sums due as attorneys fees, and costs.The trial court considered the transaction between PBC and Petitioners as a trust receipt transaction under Section 4, P.D. No. 115.It considered Petitioners use of the goods in their Carmelite monastery project an act of disposing as contemplated under Section 13, P.D. No. 115, and treated the charge invoice[19]for goods issued by CM Builders Centre as a document within the meaning of Section 3 thereof.It concluded that the failure of Petitioners to turn over the amount they owed to PBC constituted estafa.Petitioners appealed from the judgment to the Court of Appeals which was docketed as CA-G.R. CR No. 05408.Petitioners asserted therein that the trial court erred in ruling that they violated the Trust Receipt Law, and in holding them criminally liable therefor.In the alternative, they contend that at most they can only be made civilly liable for payment of the loan.In its decision[20]6 March 1989, the Court of Appeals modified the judgment of the trial court by increasing the penalty to six years and one day ofprision mayoras minimum to fourteen years eight months and one day ofreclusion temporalas maximum.It held that the documentary evidence of the prosecution prevails over Velosos testimony, discredited Petitioners claim that the documents they signed were in blank, and disbelieved that they were coerced into signing them.On 25 March 1989, Petitioners filed a Motion for New Trial/Reconsideration[21]alleging that the Disclosure Statement on Loan/Credit Transaction[22](hereafter Disclosure Statement) signed by them and Tuiza was suppressed by PBC during the trial.That document would have proved that the transaction was indeed a loan as it bears a 14% interest as opposed to the trust receipt which does not at all bear any interest.Petitioners further maintained that when PBC allowed them to pay in installment, the agreement was novated and a creditor-debtor relationship was created.In its resolution[23]of 16 October 1989 the Court of Appeals denied the Motion for New Trial/Reconsideration because the alleged newly discovered evidence was actually forgotten evidence already in existence during the trial, and would not alter the result of the case.Hence, Petitioners filed with us the petition in this case on 16 November 1989.They raised the following issues:I.WHETHER OR NOT THE DENIAL OF THE MOTION FOR NEW TRIAL ON THE GROUND OF NEWLY DISCOVERED EVIDENCE, NAMELY, DISCLOSURE ON LOAN/CREDIT TRANSACTION, WHICH IF INTRODUCED AND ADMITTED, WOULD CHANGE THE JUDGMENT, DOES NOT CONSTITUTE A DENIAL OF DUE PROCESS.2.ASSUMING THERE WAS A VALID TRUST RECEIPT, WHETHER OR NOT THE ACCUSED WERE PROPERLY CHARGED, TRIED AND CONVICTED FOR VIOLATION OF SEC. 13, PD NO. 115 IN RELATION TO ARTICLE 315 PARAGRAPH (I) (B) NOTWITHSTANDING THE NOVATION OF THE SO-CALLED TRUST RECEIPT CONVERTING THE TRUSTOR-TRUSTEE RELATIONSHIP TO CREDITOR-DEBTOR SITUATION.In its Comment of 22 January 1990, the Office of the Solicitor General urged us to deny the petition for lack of merit.On 28 February 1990 Petitioners filed a Motion to Dismiss the case on the ground that they had already fully paid PBC on 2 February 1990 the amount ofP70,000 for the balance of the loan, including interest and other charges, as evidenced by the different receipts issued by PBC,[24]and that the PBC executed an Affidavit of desistance.[25]We required the Solicitor General to comment on the Motion to Dismiss.In its Comment of 30 July 1990, the Solicitor General opined that payment of the loan was akin to a voluntary surrender or plea of guilty which merely serves to mitigate Petitioners culpability, but does not in any way extinguish their criminal liability.In the Resolution of 13 August 1990, we gave due course to the Petition and required the parties to file their respective memoranda.The parties subsequently filed their respective memoranda.It was only on 18 May 1999 when this case was assigned to theponente.Thereafter, we required the parties to move in the premises and for Petitioners to manifest if they are still interested in the further prosecution of this case and inform us of their present whereabouts and whether their bail bonds are still valid.Petitioners submitted their Compliance.The core issues raised in the petition are the denial by the Court of Appeals of Petitioners Motion for New Trial and the true nature of the contract between Petitioners and the PBC.As to the latter, Petitioners assert that it was an ordinary loan, not a trust receipt agreement under the Trust Receipts Law.The grant or denial of a motion for new trial rests upon the discretion of the judge.New trial may be granted if: (1) errors of law or irregularities have been committed during the trial prejudicial to the substantial rights of the accused; or (2) new and material evidence has been discovered which the accused could not with reasonable diligence have discovered and produced at the trial, and which, if introduced and admitted, would probably change the judgment.[26]For newly discovered evidence to be a ground for new trial, such evidence must be (1) discovered after trial; (2) could not have been discovered and produced at the trial even with the exercise of reasonable diligence; and (3) material, not merely cumulative, corroborative, or impeaching, and of such weight that, if admitted, would probably change the judgment.[27]It is essential that the offering party exercised reasonable diligence in seeking to locate the evidence before or during trial but nonetheless failed to secure it.[28]We find no indication in the pleadings that the Disclosure Statement is a newly discovered evidence.Petitioners could not have been unaware that the two-page document exists.The Disclosure Statement itself states, NOTICE TO BORROWER: YOU ARE ENTITLED TO A COPY OF THIS PAPER WHICH YOU SHALL SIGN.[29]Assuming Petitioners copy was then unavailable, they could have compelled its production in court,[30]which they never did.Petitioners have miserably failed to establish the second requisite of the rule on newly discovered evidence.Petitioners themselves admitted that they searched again their voluminous records, meticulously and patiently, until they discovered this new and material evidence only upon learning of the Court of Appeals decision and after they were shocked by the penalty imposed.[31]Clearly, the alleged newly discovered evidence is mere forgotten evidence that jurisprudence excludes as a ground for new trial.[32]However, the second issue should be resolved in favor of Petitioners.Section 4, P.D. No. 115, the Trust Receipts Law, defines a trust receipt transaction as any transaction by and between a person referred to as the entruster, and another person referred to as the entrustee, whereby the entruster who owns or holds absolute title or security interest over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latters execution and delivery to the entruster of a signed document called a trust receipt wherein the entrustee binds himself to hold the designated goods, documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods, documents or instruments themselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt.There are two possible situations in a trust receipt transaction.The first is covered by the provision which refers tomoneyreceived under the obligation involving the duty to deliver it (entregarla) to the owner of the merchandise sold.The second is covered by the provision which refers to merchandise received under the obligation to return it (devolvera) to the owner.[33]Failure of the entrustee to turn over the proceeds of the sale of the goods, covered by the trust receipt to the entruster or to return said goods if they were not disposed of in accordance with the terms of the trust receipt shall be punishable as estafa under Article 315 (1) of the Revised Penal Code,[34]without need of proving intent to defraud.A thorough examination of the facts obtaining in the case at bar reveals that the transaction intended by the parties was a simple loan, not a trust receipt agreement.Petitioners received the merchandise from CM Builders Centre on 30 October 1979.On that day, ownership over the merchandise was already transferred to Petitioners who were to use the materials for their construction project.It was only a day later, 31 October 1979, that they went to the bank to apply for a loan to pay for the merchandise.This situation belies what normally obtains in a pure trust receipt transaction where goods are owned by the bank and only released to the importer in trust subsequent to the grant of the loan.The bank acquires a security interest in the goods as holder of a security title for the advances it had made to the entrustee.[35]The ownership of the merchandise continues to be vested in the person who had advanced payment until he has been paid in full, or if the merchandise has already been sold, the proceeds of the sale should be turned over to him by the importer or by his representative or successor in interest.[36]To secure that the bank shall be paid, it takes full title to the goods at the very beginning and continues to hold that title as his indispensable security until the goods are sold and the vendee is called upon to pay for them; hence, the importer has never owned the goods and is not able to deliver possession.[37]In a certain manner, trust receipts partake of the nature of a conditional sale where the importer becomes absolute owner of the imported merchandise as soon as he has paid its price.[38]Trust receipt transactions are intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased.[39]The antecedent acts in a trust receipt transaction consist of the application and approval of the letter of credit, the making of the marginal deposit and the effective importation of goods through the efforts of the importer.[40]PBC attempted to cover up the true delivery date of the merchandise, yet the trial court took notice even though it failed to attach any significance to such fact in the judgment.Despite the Court of Appeals contrary view that the goods were delivered to Petitioners previous to the execution of the letter of credit and trust receipt, we find that the records of the case speak volubly and this fact remains uncontroverted.It is not uncommon for us to peruse through the transcript of the stenographic notes of the proceedings to be satisfied that the records of the case do support the conclusions of the trial court.[41]After such perusal Grego Mutia, PBCs credit investigator, admitted thus:ATTY. CABANLET: (continuing)QDo you know if the goods subject matter of this letter of credit and trust receipt agreement were received by the accused?AYes, sirQDo you have evidence to show that these goods subject matter of this letter of credit and trust receipt were delivered to the accused?AYes, sir.QI am showing to you this charge invoice, are you referring to this document?AYes, sir.xxxQWhat is the date of the charge invoice?AOctober 31, 1979.COURT:Make it of record as appearing in Exhibit D, the zero in 30 has been superimposed with numeral 1.[42]During the cross and re-direct examinations he also impliedly admitted that the transaction was indeed a loan.Thus:QIn short the amount stated in your Exhibit C, the trust receipt was a loan to the accused you admit that?ABecause in the bank the loan is considered part of the loan.xxxRE-DIRECT BY ATTY. CABANLET:ATTY. CABANLET (to the witness)QWhat do you understand by loan when you were asked?ALoan is a promise of a borrower from the value received.The borrower will pay the bank on a certain specified date with interest[43]Such statement is akin to an admission against interest binding upon PBC.Petitioner Velosos claim that they were made to believe that the transaction was a loan was also not denied by PBC.He declared:QTestimony was given here that that was covered by trust receipt. In short it was a special kind of loan.What can you say as to that?AI dont think that would be a trust receipt because we were made to understand by the manager who encouraged us to avail of their facilities that they will be granting us a loan[44]PBC could have presented its former bank manager, Cayo Garcia Tuiza, who contracted with Petitioners, to refute Velosos testimony, yet it only presented credit investigator Grego Mutia.Nowhere from Mutias testimony can it be gleaned that PBC represented to Petitioners that the transaction they were entering into was not a pure loan but had trust receipt implications.The Trust Receipts Law does not seek to enforce payment of the loan, rather it punishes the dishonesty and abuse of confidence in the handling of money or goods to the prejudice of another regardless of whether the latter is the owner.[45]Here, it is crystal clear that on the part of Petitioners there was neither dishonesty nor abuse of confidence in the handling of money to the prejudice of PBC.Petitioners continually endeavored to meet their obligations, as shown by several receipts issued by PBC acknowledging payment of the loan.The Information charges Petitioners with intent to defraud and misappropriating the money for their personal use.Themala prohibitanature of the alleged offense notwithstanding, intent as a state of mind was not proved to be present in Petitioners situation.Petitioners employed no artifice in dealing with PBC and never did they evade payment of their obligation nor attempt to abscond. Instead, Petitioners sought favorable terms precisely to meet their obligation.Also noteworthy is the fact that Petitioners are not importers acquiring the goods for re-sale, contrary to the express provision embodied in the trust receipt.They are contractors who obtained the fungible goods for their construction project.At no time did title over the construction materials pass to the bank, but directly to the Petitioners from CM Builders Centre.This impresses upon the trust receipt in question vagueness and ambiguity, which should not be the basis for criminal prosecution in the event of violation of its provisions.[46]The practice of banks of making borrowers sign trust receipts to facilitate collection of loans and place them under the threats of criminal prosecution should they be unable to pay it may be unjust and inequitable, if not reprehensible.Such agreements are contracts of adhesion which borrowers have no option but to sign lest their loan be disapproved.The resort to this scheme leaves poor and hapless borrowers at the mercy of banks, and is prone to misinterpretation, as had happened in this case.Eventually, PBC showed its true colors and admitted that it was only after collection of the money, as manifested by its Affidavit of Desistance.WHEREFORE, the challenged Decision of 6 March 1989 and the Resolution of 16 October 1989 of the Court of Appeals in CA-GR. No. 05408 are REVERSED and SETASIDE.Petitioners are hereby ACQUITTED of the crime charged,i.e., for violation of P.D. No. 115 in relation to Article 315 of the Revised Penal Code.No costs.SO ORDERED.

UNITED COCONUT PLANTERS BANK,Petitioner,-versus-SPOUSES SAMUEL and ODETTE BELUSO,Respondents.G.R. No.159912Present:YNARES-SANTIAGO,J.,Chairperson,AUSTRIA-MARTINEZ,CHICO-NAZARIO,NACHURA, andREYES,JJ.Promulgated:August 17, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - -xD E C I S I O NCHICO-NAZARIO,J.:This is a Petition for Review onCertiorariunder Rule 45 of the Rules of Court, which seeks to annul the Court of Appeals Decision[1]dated21 January 2003and its Resolution[2]dated9 September 2003in CA-G.R. CV No. 67318.The assailed Court of Appeals Decision and Resolution affirmed in turn the Decision[3]dated 23 March 2000 and Order[4]dated 8 May 2000 of the Regional Trial Court (RTC), Branch 65 of Makati City, in Civil Case No. 99-314, declaring void the interest rate provided in the promissory notes executed by the respondents Spouses Samuel and Odette Beluso (spouses Beluso) in favor of petitioner United Coconut Planters Bank (UCPB).The procedural and factual antecedents of this case are as follows:On16 April 1996, UCPB granted the spouses Beluso a Promissory Notes Line under a Credit Agreement whereby the latter could avail from the former credit of up to a maximum amount ofP1.2 Million pesos for a term ending on30 April 1997.The spouses Beluso constituted, other than their promissory notes, a real estate mortgage over parcels of land inRoxasCity, covered by Transfer Certificates of Title No. T-31539 and T-27828, as additional security for the obligation.The Credit Agreement was subsequently amended to increase the amount of the Promissory Notes Line to a maximum ofP2.35 Million pesos and to extend the term thereof to28 February 1998.The spouses Beluso availed themselves of the credit line under the following Promissory Notes:PN #Date of PNMaturity DateAmount Secured

8314-96-00083-329 April 199627 August 1996P700,000

8314-96-00085-02 May 199630 August 1996P500,000

8314-96-000292-220 November 199620 March 1997P800,000

The three promissory notes were renewed several times.On30 April 1997, the payment of the principal and interest of the latter two promissory notes were debited from the spouses Belusos account with UCPB; yet, a consolidated loan forP1.3 Million was again released to the spouses Beluso under one promissory note with a due date of28 February 1998.To completely avail themselves of theP2.35 Million credit line extended to them by UCPB, the spouses Beluso executed two more promissory notes for a total ofP350,000.00:PN #Date of PNMaturity DateAmount Secured

97-00363-111 December 199728 February 1998P200,000

98-00002-42 January 199828 February 1998P150,000

However, the spouses Beluso alleged that the amounts covered by these last two promissory notes were never released or credited to their account and, thus, claimed that the principal indebtedness was onlyP2 Million.In any case, UCPB applied interest rates on the different promissory notes ranging from 18% to 34%.From 1996 to February 1998 the spouses Beluso were able to pay the total sum ofP763,692.03.From28 February 1998to10 June 1998, UCPB continued to charge interest and penalty on the obligations of the spouses Beluso, as follows:PN #Amount SecuredInterestPenaltyTotal

97-00363-1P200,00031%36%P225,313.24

97-00366-6P700,00030.17%(7 days)32.786% (102 days)P795,294.72

97-00368-2P1,300,00028%(2 days)30.41% (102 days)P1,462,124.54

98-00002-4P150,00033%(102 days)36%P170,034.71

The spouses Beluso, however, failed to make any payment of the foregoing amounts.On2 September 1998, UCPB demanded that the spouses Beluso pay their total obligation ofP2,932,543.00 plus 25% attorneys fees, but the spouses Beluso failed to comply therewith.On28 December 1998, UCPB foreclosed the properties mortgaged by the spouses Beluso to secure their credit line, which, by that time, already ballooned toP3,784,603.00.On9 February 1999, the spouses Beluso filed a Petition for Annulment, Accounting and Damages against UCPB with the RTC of Makati City.On23 March 2000, the RTC ruled in favor of the spouses Beluso, disposing of the case as follows:PREMISES CONSIDERED, judgment is hereby rendered declaring the interest rate used by [UCPB] void and the foreclosure and Sheriffs Certificate ofSalevoid.[UCPB] is hereby ordered to return to [the spouses Beluso] the properties subject of the foreclosure; to pay [the spouses Beluso] the amount ofP50,000.00 by way of attorneys fees; and to pay the costs of suit.[The spouses Beluso] are hereby ordered to pay [UCPB] the sum ofP1,560,308.00.[5]On8 May 2000, the RTC denied UCPBs Motion for Reconsideration,[6]prompting UCPB to appeal the RTC Decision with the Court of Appeals.The Court of Appeals affirmed the RTC Decision, to wit:WHEREFORE, premises considered, the decision datedMarch 23, 2000of the Regional Trial Court, Branch 65,MakatiCityin Civil Case No. 99-314 is hereby AFFIRMED subject to the modification that defendant-appellant UCPB is not liable for attorneys fees or the costs of suit.[7]On9 September 2003, the Court of Appeals denied UCPBs Motion for Reconsideration for lack of merit.UCPB thus filed the present petition, submitting the following issues for our resolution:IWHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT WHICH DECLARED VOID THE PROVISION ON INTEREST RATE AGREED UPON BETWEEN PETITIONER AND RESPONDENTSIIWHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT AFFIRMED THE COMPUTATION BY THE TRIAL COURT OF RESPONDENTS INDEBTEDNESS AND ORDERED RESPONDENTS TO PAY PETITIONER THE AMOUNT OF ONLY ONE MILLION FIVE HUNDRED SIXTY THOUSAND THREE HUNDRED EIGHT PESOS (P1,560,308.00)IIIWHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT WHICH ANNULLED THE FORECLOSURE BY PETITIONER OF THE SUBJECT PROPERTIES DUE TO AN ALLEGED INCORRECT COMPUTATION OF RESPONDENTS INDEBTEDNESSIVWHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT WHICH FOUND PETITIONER LIABLE FOR VIOLATION OF THE TRUTH IN LENDING ACTVWHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT FAILED TO ORDER THE DISMISSAL OF THE CASE BECAUSE THE RESPONDENTS ARE GUILTY OF FORUM SHOPPING[8]Validity of the Interest RatesThe Court of Appeals held that the imposition of interest in the following provision found in the promissory notes of the spouses Beluso is void, as the interest rates and the bases therefor were determined solely by petitioner UCPB:FOR VALUE RECEIVED, I, and/or We, on or before due date, SPS. SAMUEL AND ODETTE BELUSO (BORROWER), jointly and severally promise to pay to UNITED COCONUT PLANTERS BANK (LENDER) or order at UCPB Bldg., Makati Avenue, Makati City, Philippines, the sum of ______________ PESOS, (P_____), Philippine Currency, with interest thereon at the rate indicative of DBD retail rate or as determined by the Branch Head.[9]UCPB asserts that this is a reversible error, and claims that while the interest rate was not numerically quantified in the face of the promissory notes, it was nonetheless categorically fixed, at the time of execution thereof, at the rate indicative of the DBD retail rate. UCPB contends that said provision must be read with another stipulation in the promissory notes subjecting to review the interest rate as fixed:The interest rate shall be subject to review and may be increased or decreased by the LENDER considering among others the prevailing financial and monetary conditions; or the rate of interest and charges which other banks or financial institutions charge or offer to charge for similar accommodations; and/or the resulting profitability to the LENDER after due consideration of all dealings with the BORROWER.[10]In this regard, UCPB avers that these are valid reference rates akin to a prevailing rate or prime rate allowed by this Court inPolotan v. Court of Appeals.[11]Furthermore, UCPB argues that even if the proviso as determined by the branch head is considered void, such a declaration would notipso factorender the connecting clause indicative of DBD retail rate void in view of the separability clause of the Credit Agreement, which reads:Section 9.08Separability Clause.If any one or more of the provisions contained in this AGREEMENT, or documents executed in connection herewith shall be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.[12]According to UCPB, the imposition of the questioned interest rates did not infringe on the principle of mutuality of contracts, because the spouses Beluso had the liberty to choose whether or not to renew their credit line at the new interest rates pegged by petitioner.[13]UCPB also claims that assuming there was any defect in the mutuality of the contract at the time of its inception, such defect was cured by the subsequent conduct of the spouses Beluso in availing themselves of the credit line from April 1996 to February 1998 without airing any protest with respect to the interest rates imposed by UCPB.According to UCPB, therefore, the spouses Beluso are in estoppel.[14]We agree with the Court of Appeals, and find no merit in the contentions of UCPB.Article 1308 of the Civil Code provides:Art. 1308.The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.We applied this provision inPhilippine National Bank v. Court of Appeals,[15]where we held:In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality between the parties based on their essential equality. A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties, is void (Garcia vs. Rita Legarda, Inc., 21 SCRA 555). Hence, even assuming that the P1.8 million loan agreement between the PNB and the private respondent gave the PNB a license (although in fact there was none) to increase the interest rate at will during the term of the loan, that license would have been null and void for being violative of the principle of mutuality essential in contracts. It would have invested the loan agreement with the character of a contract of adhesion, where the parties do not bargain on equal footing, the weaker party's (the debtor) participation being reduced to the alternative "to take it or leave it" (Qua vs. Law Union & Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable trap for the weaker party whom the courts of justice must protect against abuse and imposition.The provision stating that the interest shall be at the rate indicative of DBD retail rate or as determined by the Branch Head is indeed dependent solely on the will of petitioner UCPB.Under such provision, petitioner UCPB has two choices on what the interest rate shall be: (1) a rate indicative of the DBD retail rate; or (2) a rate as determined by the Branch Head.As UCPB is given this choice, the rate should be categorically determinable inbothchoices.If either of these two choices presents an opportunity for UCPB to fix the rate at will, the bank can easily choose such an option, thus making the entire interest rate provision violative of the principle of mutuality of contracts.Not just one, but rather both, of these choices are dependent solely on the will of UCPB.Clearly, a rate as determined by the Branch Head gives the latter unfettered discretion on what the rate may be.The Branch Head may choose any rate he or she desires.As regards the rate indicative of the DBD retail rate, the same cannot be considered as valid for being akin toa prevailing rate or prime rate allowed by this Court inPolotan.The interest rate inPolotanreads:The Cardholder agrees to pay interest per annum at 3% plus the prime rate of Security Bank and Trust Company.x x x.[16]In this provision inPolotan, there is a fixed margin over the reference rate: 3%.Thus, the parties can easily determine the interest rate by applying simple arithmetic.On the other hand, the provision in the case at bar does not specify any margin above or below the DBD retail rate.UCPB can peg the interest at any percentage above or below the DBD retail rate, again giving it unfettered discretion in determining the interest rate.The stipulation in the promissory notes subjecting the interest rate to review does not render the imposition by UCPB of interest rates on the obligations of the spouses Beluso valid.According to said stipulation:The interest rate shall be subject to review and may be increased or decreased by the LENDER considering among others the prevailing financial and monetary conditions; or the rate of interest and charges which other banks or financial institutions charge or offer to charge for similar accommodations; and/or the resulting profitability to the LENDER after due consideration of all dealings with the BORROWER.[17]It should be pointed out that the authority to review the interest rate was given UCPB alone as the lender.Moreover, UCPB may apply the considerations enumerated in this provision as it wishes.As worded in the above provision, UCPB may give as much weight as it desires to each of the following considerations: (1) the prevailing financial and monetary condition; (2) the rate of interest and charges which other banks or financial institutions charge or offer to charge for similar accommodations; and/or (3) the resulting profitability to the LENDER (UCPB) after due consideration of all dealings with the BORROWER (the spouses Beluso).Again, as in the case of the interest rate provision, there is no fixed margin above or below these considerations.In view of the foregoing, the Separability Clause cannot save either of the two options of UCPB as to the interest to be imposed, as both options violate the principle of mutuality of contracts.UCPB likewise failed to convince us that the spouses Beluso were in estoppel.Estoppel cannot be predicated on an illegal act.As between the parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy.[18]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:Sec. 2.Declaration of Policy. It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy.[19]Moreover, while the spouses Beluso indeed agreed to renew the credit line, the offending provisions are found in the promissory notes themselves, not in the credit line.In fixing the interest rates in the promissory notes to cover the renewed credit line, UCPB still reserved to itself the same two options (1) a rate indicative of the DBD retail rate; or (2) a rate as determined by the Branch Head.Error in ComputationUCPB 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 decisions of the RTC and the Court of Appeals.Section 2.04, Article II on Interest and other Bank Charges of the subject Credit Agreement, provides:Section 2.04Penalty Charges.In addition to the interest provided for in Section 2.01 of this ARTICLE, any principal obligation of the CLIENT hereunder which is not paid when due shall be subject to a penalty charge of one percent (1%) of the amount of such obligation per month computed from due date until the obligation is paid in full.If the bank accelerates teh (sic) payment of availments hereunder pursuant to ARTICLE VIII hereof, the penalty charge shall be used on the total principal amount outstanding and unpaid computed from the date of acceleration until the obligation is paid in full.[20]Paragraph 4 of the promissory notes also states:In case of non-payment of this Promissory Note (Note) at maturity, I/We, jointly and severally, agree to pay an additional sum equivalent to twenty-five percent (25%) of the total due on the Note as attorneys fee, aside from the expenses and costs of collection whether actually incurred or not, and a penalty charge of one percent (1%) per month on the total amount due and unpaid from date of default until fully paid.[21]Petitioner further claims that it is likewise entitled to attorneys fees, pursuant to Section 9.06 of the Credit Agreement, thus:If the BANK shall require the services of counsel for the enforcement of its rights under this AGREEMENT, the Note(s), the collaterals and other related documents, the BANK shall be entitled to recover attorneys fees equivalent to not less than twenty-five percent (25%) of the total amounts due and outstanding exclusive of costs and other expenses.[22]Another alleged computational error pointed out by UCPB is the negation of the Compounding Interest agreed upon by the parties under Section 2.02 of the Credit Agreement:Section 2.02Compounding 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]and paragraph 3 of the subject promissory notes: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]UCPB lastly avers that the application of the spouses Belusos payments in the disputed computation does not reflect the parties agreement.The RTC deducted the payment made by the spouses Beluso amounting toP763,693.00 from the principal ofP2,350,000.00.This was allegedly inconsistent with the Credit Agreement, as well as with the agreement of the parties as to the facts of the case.In paragraph 7 of the spouses Belusos Manifestation and Motion on Proposed Stipulation of Facts and Issuesvis--visUCPBs Manifestation, the parties agreed that the amount ofP763,693.00 was applied to the interest and not to the principal, in accord with Section 3.03, Article II of the Credit Agreement on Order of the Application of Payments, which provides:Section 3.03 Application of Payment.Payments made by the CLIENT shall be applied in accordance with the following order of preference:1.Accounts receivable and other out-of-pocket expenses2.Front-end Fee, Origination Fee, Attorneys Fee and other expenses of collection;3.Penalty charges;4.Past due interest;5.Principal amortization/Payment in arrears;6.Advance interest;7.Outstanding balance; and8.All other obligations of CLIENT to the BANK, if any.[25]Thus, according to UCPB, the interest charges, penalty charges, and attorneys fees had been erroneously excluded by the RTC and the Court of Appeals from the computation of the total amount due and demandable from spouses Beluso.The spouses Belusos defense as to all these issues is that the demand made by UCPB is for a considerably bigger amount and, therefore, the demand should be considered void.There being no valid demand, according to the spouses Beluso, there would be no default, and therefore the interests and penalties would not commence to run.As it was likewise improper to foreclose the mortgaged properties or file a case against the spouses Beluso, attorneys fees were not warranted.We agree with UCPB on this score.Default commences upon judicial or extrajudicial demand.[26]The excess amount in such a 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.There being a valid demand on the part of UCPB, albeit excessive, the spouses Beluso are considered in default with respect to the proper amount and, therefore, the interests and the penalties began to run at that point.As regards the award of 12% legal interest in favor of petitioner, the RTC actually recognized that said legal interest should be imposed, thus: There being no valid stipulation as to interest, the legal rate of interest shall be charged.[27]It seems that the RTC inadvertently overlooked its non-inclusion in its computation.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 toAugust 31, 1998.x x x xWHEREFORE, in view of the foregoing, petiitoners pray for judgment or order:x x x x2. By way of example for the public good against the Banks taking unfair advantage of the weaker party to their contract, declaring the legal rate of 12% per annum, as the imposable rate of interest up toFebruary 28, 1999on the loan of 2.350 million.[28]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.We must likewise uphold the contract stipulation providing the compounding of interest.The provisions in the Credit Agreement and in the promissory notes providing for the compounding of interest were neither nullified by the RTC or the Court of Appeals, nor assailed by the spouses Beluso in their petition with the RTC.The compounding of interests has furthermore been declared by this Court to be legal.We have held inTan v. Court of Appeals,[29]that:Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest.However, the contracting parties may by stipulation capitalize the interest due and unpaid, which as added principal, shall earn new interest.As regards the imposition of penalties, however, although we are likewise upholding the imposition thereof in the contract, we find the rate iniquitous.Like in the case of grossly excessive interests, the penalty stipulated in the contract may also be reduced by the courts if it is iniquitous or unconscionable.[30]We find the penalty imposed by UCPB, ranging from 30.41% to 36%, to be iniquitous considering the fact that this penalty is already over and above the compounded interest likewise imposed in the contract.If a 36% interest in itself has been declared unconscionable by this Court,[31]what more a 30.41% to 36% penalty, over and above the payment of compounded interest?UCPB itself must have realized this, as it gave us a sample computation of the spouses Belusos obligation if both the interest and the penalty charge are reduced to 12%.As regards the attorneys fees, the spouses Beluso can actually be liable therefor even if there had been no demand.Filing a case in court isthejudicial demand referred to in Article 1169[32]of the Civil Code, which would put the obligor in 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.In sum, we hold that spouses Beluso should still be held liable for a compounded legal interest of 12% per annum and a penalty charge of 12% per annum.We also hold that, 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.Annulment of the ForeclosureSaleProperties of spouses Beluso had been foreclosed, titles to which had already been consolidated on19 February 2001and20 March 2001in the name of UCPB, as the spouses Beluso failed to exercise their right of redemption which expired on25 March 2000.The RTC, however, annulled the foreclosure of mortgage based on an alleged incorrect computation of the spouses Belusos indebtedness.UCPB alleges that none of the grounds for the annulment of a foreclosure sale are present in the case at bar.Furthermore, the annulment of the foreclosure proceedings and the certificates of sale were mooted by the subsequent issuance of new certificates of title in the name of said bank.UCPB claims that the spouses Belusos action for annulment of foreclosure constitutes a collateral attack on its certificates of title, an act proscribed by Section 48 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, which provides:Section 48.Certificate not subject to collateral attack. A certificate of title shall not be subject to collateral attack.It cannot be altered, modified or cancelled except in a direct proceeding in accordance with law.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.We agree with UCPB and affirm the validity of the foreclosure proceedings.Since we already found that a valid demand was made by UCPB upon the spouses Beluso, despite being excessive, the spouses Beluso are considered in default with respect to the proper amount of their obligation to UCPB and, thus, the property they mortgaged to secure such amounts may be foreclosed.Consequently, proceeds of the foreclosure sale should be applied to the extent of the amounts to which UCPB is rightfully entitled.As argued by UCPB, none of the grounds for the annulment of a foreclosure sale are present in this case.The grounds for the proper annulment of the foreclosure sale are the following: (1) that there was fraud, collusion, accident, mutual mistake, breach of trust or misconduct by the purchaser; (2) that the sale had not been fairly and regularly conducted; or (3)that the price was inadequate and the inadequacy was so great as to shock the conscience of the court.[34]Liability for Violation of Truth in Lending ActThe RTC, affirmed by the Court of Appeals, imposed a fine ofP26,000.00 for UCPBs alleged violation of Republic Act No. 3765, otherwise known as the Truth in Lending Act.UCPB challenges this imposition, on the argument that Section 6(a) of the Truth in Lending Act which mandates the filing of an action to recover such penalty must be made under the following circumstances:Section 6.(a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount ofP100 or in an amount equal to twice the finance charge required by such creditor in connection with such transaction, whichever is greater, except that such liability shall not exceedP2,000 on any credit transaction.Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction.x x x(Emphasis ours.)According to UCPB, the Court of Appeals even stated that [a]dmittedly the original complaint did not explicitly allege a violation of the Truth in Lending Act and no action to formally admit the amended petition [which expressly alleges violation of the Truth in Lending Act] was made either by [respondents] spouses Beluso and the lower court.x x x.[35]UCPB further claims that the action to recover the penalty for the violation of the Truth in Lending Act had been barred by the one-year prescriptive period provided for in the Act.UCPB asserts that per the records of the case, the latest of the subject promissory notes had been executed on2 January 1998, but the original petition of the spouses Beluso was filed before the RTC on9 February 1999, which was after the expiration of the period to file the same on2 January 1999.On the matter of allegation of the violation of the Truth in Lending Act, the Court of Appeals ruled:Admittedly the original complaint did not explicitly allege a violation of the Truth in Lending Act and no action to formally admit the amended petition was made either by [respondents] spouses Beluso and the lower court.In such transactions, the debtor and the lending institutions do not deal on an equal footing and this law was intended to protect the public from hidden or undisclosed charges on their loan obligations, requiring a full disclosure thereof by the lender.We find that its infringement may be inferred or implied from allegations that when [respondents] spouses Beluso executed the promissory notes, the interest rate chargeable thereon were left blank.Thus, [petitioner] UCPB failed to discharge its duty to disclose in full to [respondents] Spouses Beluso the charges applicable on their loans.[36]We agree with the Court of Appeals.The allegations in the complaint, much more than the title thereof, are controlling.Other than that stated by the Court of Appeals, we find that the allegation of violation of the Truth in Lending Act can also be inferred from the same allegation in the complaint we discussed earlier:b.) In unilaterally imposing an increased interest rates (sic) respondent bank has relied on the provision of their promissory note granting respondent bank the power to unilaterally fix the interest rates, which rate was not determined in the promissory note but was left solely to the will of the Branch Head of the respondent Bank, x x x.[37]The allegation that the promissory notes grant UCPB the power to unilaterally fix the interest rates certainly also means that the promissory notes do not contain a clear statement in writing of (6) the finance charge expressed in terms of pesos and centavos; and (7) the percentage that the finance charge bears to the amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.[38]Furthermore, the spouses Belusos prayer for such other reliefs just and equitable in the premises should be deemed to include the civil penalty provided for in Section 6(a) of the Truth in Lending Act.UCPBs contention that this action to recover the penalty for the violation of the Truth in Lending Act has already prescribed is likewise without merit.The penalty for the violation of the act isP100 or an amount equal to twice thefinance charge required by such creditorin connection with such transaction, whichever is greater, except that such liability shall not exceedP2,000.00 on any credit transaction.[39]As this penalty depends on thefinance charge required of the borrower, the borrowers cause of action would only accrue when such finance charge is required.In the case at bar, the date of the demand for payment of the finance charge is2 September 1998, while the foreclosure was made on28 December 1998.The filing of the case on9 February 1999is therefore within the one-year prescriptive period.UCPB argues that a violation of the Truth in Lending Act, being a criminal offense, cannot be inferred nor implied from the allegations made in the complaint.[40]Pertinent provisions of the Act read:Sec. 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount ofP100 or in an amount equal to twice the finance charge required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceedP2,000 on any credit transaction.Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction.In any action under this subsection in which any person is entitled to a recovery, the creditor shall be liable for reasonable attorneys fees and court costs as determined by the court.x x x x(c)Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less thanP1,000 or more thanP5,000 or imprisonment for not less than 6 months, nor more than one year or both.As can be gleaned from Section 6(a) and (c) of the Truth in Lending Act, the violation of the said Act gives rise to both criminal and civil liabilities.Section 6(c) considers a criminal offense the willful violation of the Act, imposing the penalty therefor of fine, imprisonment or both.Section 6(a), on the other hand, clearly provides for a civil cause of action for failure todisclose any information of the required information to any person in violation of the Act.The penalty therefor is an amount ofP100 or in an amount equal to twice the finance charge required by the creditor in connection with such transaction, whichever is greater, except that the liability shall not exceedP2,000.00 on any credit transaction.The action to recover such penalty may be instituted by the aggrieved private person separately and independently from the criminal case for the same offense.In the case at bar, therefore, the civil action to recover the penalty under Section 6(a) of the Truth in Lending Act had been jointly instituted with (1) the action to declare the interests in the promissory notes void, and (2) the action to declare the foreclosure void.This joinder is allowed under Rule 2, Section 5 of the Rules of Court, which provides:SEC. 5.Joinder of causes of action.A party may in one pleading assert, in the alternative or otherwise, as many causes of action as he may have against an opposing party, subject to the following conditions:(a)The party joining the causes of action shall comply with the rules on joinder of parties;(b)The joinder shall not include special civil actions or actions governed by special rules;(c)Where the causes of action are between the same parties but pertain to different venues or jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action falls within the jurisdiction of said court and the venue lies therein; and(d)Where the claims in all the causes of action are principally for recovery of money, the aggregate amount claimed shall be the test of jurisdiction.In attacking the RTCs disposition on the violation of the Truth in Lending Act since the same was not alleged in the complaint, UCPB is actually asserting a violation of due process.Indeed, due process mandates that a defendant should be sufficiently apprised of the matters he or she would be defending himself or herself against.However, in the1 July 1999pre-trial brief filed by the spouses Beluso before the RTC, the claim for civil sanctions for violation of the Truth in Lending Act was expressly alleged, thus: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]In the same pre-trial brief, the spouses Beluso also expressly raised the following issue: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]These assertions are so clear and unequivocal that any attempt of UCPB to feign ignorance of the assertion of this issue in this case as to prevent it from putting up a defense thereto is plainly hogwash.Petitioner further posits that it is the Metropolitan Trial Court which has jurisdiction to try and adjudicate the alleged violation of the Truth in Lending Act, considering that the present action allegedly involved a single credit transaction as there was only one Promissory Note Line.We disagree.We have already ruled that the action to recoverthe penalty under Section 6(a) of the Truth in Lending Act had been jointly instituted with (1) the action to declare the interests in the promissory notes void, and (2) the action to declare the foreclosure void.There had been no question that the above actions belong to the jurisdiction of the RTC.Subsection (c) of the above-quoted Section 5 of the Rules of Court on Joinder of Causes of Action provides:(c) Where the causes of action are between the same parties but pertain to different venues or jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action falls within the jurisdiction of said court and the venue lies therein.Furthermore, opening a credit line does not create a credit transaction of loan ormutuum, since the former is merely a preparatory contract to the contract of loan ormutuum.Under such credit line, the bank is merely obliged, for the considerations specified therefor, to lend to the other party amounts not exceeding the limit provided.The credit transaction thus occurred not when the credit line was opened, but rather when the credit line was availed of.In the case at bar, the violation of the Truth in Lending Act allegedly occurred not when the parties executed the Credit Agreement, where no interest rate was mentioned, but when the parties executed the promissory notes, where the allegedly offending interest rate was stipulated.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.Once more, we disagree.Section 4 of the Truth in Lending Act clearly provides that the disclosure statement must be furnished prior to the consummation of the transaction:SEC. 4.Any creditor shall furnish to each person to whom credit is extended,prior to the consummation of the transaction,a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information:(1)the cash price or delivered price of the property or service to be acquired;(2)the amounts, if any, to be credited as down payment and/or trade-in;(3)the difference between the amounts set forth under clauses (1) and (2)(4)the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit;(5)the total amount to be financed;(6)the finance charge expressed in terms of pesos and centavos; and(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.The rationale of this provision is to protect users of credit from a lack of awareness of the true cost thereof, proceeding from the experience that banks are able to conceal such true cost by hidden charges, uncertainty of interest rates, deduction of interests from the loaned amount, and the like.The law thereby seeks to protect debtors by permitting them to fully appreciate the true cost of their loan, to enable them to give full consent to the contract, and to properly evaluate their options in arriving at business decisions.Upholding UCPBs claim of substantial compliance would defeat these purposes of the Truth in Lending Act.The belated discovery of the true cost of credit will too often not be able to reverse the ill effects of an already consummated business decision.In addition, the promissory notes, the copies of which were presented to the spouses Beluso after execution, are not sufficient notification from UCPB.As earlier discussed, the interest rate provision therein does not sufficiently indicate with particularity the interest rate to be applied to the loan covered by said promissory notes.Forum ShoppingUCPB had earlier moved to dismiss the petition (originally Case No. 99-314 in RTC,MakatiCity) on the ground that the spouses Beluso instituted another case (Civil Case No. V-7227) before the RTC of Roxas City, involving the same parties and issues. UCPB claims that while Civil Case No. V-7227 initially appears to be a different action, as it prayed for the issuance of a temporary restraining order and/or injunction to stop foreclosure of spouses Belusos properties, it poses issues which are similar to those of the present case.[43]To prove its point, UCPB cited the spouses Belusos Amended Petition in Civil Case No. V-7227, which contains similar allegations as those in the present case.The RTC of Makati denied UCPBs Motion to Dismiss Case No. 99-314 for lack of merit.Petitioner UCPB raised the same issue with the Court of Appeals, and is raising the same issue with us now.The spouses Beluso claim that the issue in Civil Case No. V-7227 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.Even if we assume for the sake of argument, however, that only one cause of action is involved in the two civil actions, namely, the violation of the right of the spouses Beluso not to have their property foreclosed for an amount they do not owe, the Rules of Court nevertheless allows the filing of the second action.Civil Case No. V-7227 was dismissed by the RTC of Roxas City before the filing of Case No. 99-314 with the RTC of Makati City, since the venue of litigation as provided for in the Credit Agreement is inMakatiCity.Rule 16, Section 5 bars the refiling of an action previously dismissed only in the following instances:SEC. 5.Effect ofdismissal.Subject to the right of appeal, an order granting a motion to dismiss based on paragraphs (f), (h) and (i) of section 1 hereof shall bar the refiling of the same action or claim. (n)Improper venue as a ground for the dismissal of an action is found in paragraph (c) of Section 1, not in paragraphs (f), (h) and (i):SECTION 1.Grounds.Withinthe time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:(a) That the court has nojurisdictionover the person of the defending party;(b) That the court hasnojurisdiction over the subject matter of the claim;(c) That venue is improperly laid;(d) That the plaintiff has no legal capacity to sue;(e) That there is another action pending between the same parties for the same cause;(f) That the cause of action is barred by a prior judgment or by the statute of limitations;(g) That the pleading asserting the claim states no cause of action;(h) That the claim or demand set forth in the plaintiffs pleading has been paid, waived, abandoned, or otherwise extinguished;(i) That the claim on which the action is founded is unenforceable under the provisions of the statute of frauds;and(j) That a condition precedent for filing the claim has not been complied with.[44](Emphases supplied.)When an action is dismissed on the motion of the other party, it is only when the ground for the dismissal of an action is found in paragraphs (f), (h) and (i) that the action cannot be refiled.As regards all the other grounds, the complainant is allowed to file same action, but should take care that, this time, it is filed with the proper court or after the accomplishment of the erstwhile absent condition precedent, as the case may be.UCPB, however, brings to the attention of this Court a Motion for Reconsideration filed by the spouses Beluso on15 January 1999with the RTC of Roxas City, which Motion had not yet been ruled upon when the spouses Beluso filed Civil Case No. 99-314 with the RTC of Makati.Hence, there were allegedly two pending actions between the same parties on the same issue at the time of the filing of Civil Case No. 99-314 on9 February 1999with the RTC of Makati.This will still not change our findings.It is indeed the general rule that in cases where there are two pending actions between the same parties on the same issue, it should be the later case that should be dismissed.However, this rule is not absolute.According to this Court inAllied Banking Corporation v. Court of Appeals[45]:In these cases, it is evident that the first action was filed in anticipation of the filing of the later action and the purpose is to preempt the later suit or provide a basis for seeking the dismissal of the second action.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, inRamos v. Peralta,it was held:[T]he rule on litis pendentia does not require that the later case should yield to the earlier case. What is required merely is that there be another pending action, not a prior pending action. Considering the broader scope of inquiry involved in Civil Case No. 4102 and the location of the property involved, no error was committed by the lower court in deferring to theBataancourt's jurisdiction.Given, therefore, the pendency of two actions, the following are the relevant considerations in determining which action should be dismissed: (1) the date of filing, with preference generally given to the first action filed to be retained; (2) whether the action sought to be dismissed was filed merely to preempt the later action or to anticipate its filing and lay the basis for its dismissal; and (3) whether the action is the appropriate vehicle for litigating the issues between the parties.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 inRoxasCity, while the latter was filed inMakatiCity, 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.WHEREFORE, the Decision of the Court of Appeals is herebyAFFIRMEDwith the followingMODIFICATIONS:1.In addition to the sum ofP2,350,000.00 as determined by the courtsa quo, respondent spouses Samuel and Odette Beluso are also liable for the following amounts:a.Penalty of 12% per annum on the amount due[46]from the date of demand; andb.Compounded legal interest of 12% per annum on the amount due[47]from date of demand;2.The following amounts shall be deducted from the liability of the spouses Samuel and Odette Beluso:a.Payments made by the spouses in the amount ofP763,692.00.These payments shall be appliedto the date of actual paymentof the following in the order that they are listed, to wit:i.penalty charges due and demandable as of the time of payment;ii.interest due and demandable as of the time of payment;iii.principal amortization/payment in arrears as of the time of payment;iv.outstanding balance.b.Penalty under Republic Act No. 3765 in the amount ofP26,000.00.This amount shall be deducted from the liability of the spouses Samuel and Odette Beluso on9 February 1999to the following in the order that they are listed, to wit:i.penalty charges due and demandable as of time of payment;ii.interest due and demandable as of the time of payment;iii.principal amortization/payment in arrears as of the time of payment;iv.outstanding balance.3.The foreclosure of mortgage is hereby declared VALID.Consequently, the amounts which the Regional Trial Court and the Court of Appeals ordered respondents to pay, as modified in this Decision, shall be deducted from the proceeds of the foreclosure sale.SO ORDERED.

G.R. No. L-66826 August 19, 1988BANK OF THE PHILIPPINE ISLANDS,petitioner,vs.THE INTERMEDIATE APPELLATE COURT and ZSHORNACKrespondents.Pacis & Reyes Law Office for petitioner.Ernesto T. Zshornack, Jr. for private respondent.CORTES,J.:The original parties to this case were Rizaldy T. Zshornack and the Commercial Bank and Trust Company of the Philippines [hereafter referred to as "COMTRUST."] In 1980, the Bank of the Philippine Islands (hereafter referred to as BPI absorbed COMTRUST through a corporate merger, and was substituted as party to the case.Rizaldy Zshornack initiated proceedings on June 28,1976 by filing in the Court of First Instance of Rizal Caloocan City a complaint against COMTRUST alleging four causes of action. Except for the third cause of action, the CFI ruled in favor of Zshornack. The bank appealed to the Intermediate Appellate Court which modified the CFI decision absolving the bank from liability on the fourth cause of action. The pertinent portions of the judgment, as modified, read:IN VIEW OF THE FOREGOING, the Court renders judgment as follows:1. Ordering the defendant COMTRUST to restore to the dollar savings account of plaintiff (No. 25-4109) the amount of U.S $1,000.00 as of October 27, 1975 to earn interest together with the remaining balance of the said account at the rate fixed by the bank for dollar deposits under Central Bank Circular 343;2. Ordering defendant COMTRUST to return to the plaintiff the amount of U.S. $3,000.00 immediately upon the finality of this decision, without interest for the reason that the said amount was merely held in custody for safekeeping, but was not actually deposited with the defendant COMTRUST because being cash currency, it cannot by law be deposited with plaintiffs dollar account and defendant's only obligation is to return the same to plaintiff upon demand;xxx xxx xxx5. Ordering defendant COMTRUST to pay plaintiff in the amount of P8,000.00 as damages in the concept of litigation expenses and attorney's fees suffered by plaintiff as a result of the failure of the defendant bank to restore to his (plaintiffs) account the amount of U.S. $1,000.00 and to return to him (plaintiff) the U.S. $3,000.00 cash left for safekeeping.Costs against defendant COMTRUST.SO ORDERED. [Rollo, pp. 47-48.]Undaunted, the bank comes to this Court praying that it be totally absolved from any liability to Zshornack. The latter not having appealed the Court of Appeals decision, the issues facing this Court are limited to the bank's liability with regard to the first and second causes of action and its liability for damages.1. We first consider the first cause of action, On the dates material to this case, Rizaldy Zshornack and his wife, Shirley Gorospe, maintained in COMTRUST, Quezon City Branch, a dollar savings account and a peso current account.On October 27, 1975, an application for a dollar draft was accomplished by Virgilio V. Garcia, Assistant Branch Manager of COMTRUST Quezon City, payable to a certain Leovigilda D. Dizon in the amount of $1,000.00. In the application, Garcia indicated that the amount was to be charged to Dollar Savings Acct. No. 25-4109, the savings account of the Zshornacks; the charges for commission, documentary stamp tax and others totalling P17.46 were to be charged to Current Acct. No. 210465-29, again, the current account of the Zshornacks. There was no indication of the name of the purchaser of the dollar draft.On the same date, October 27,1975, COMTRUST, under the signature of Virgilio V. Garcia, issued a check payable to the order of Leovigilda D. Dizon in the sum of US $1,000 drawn on the Chase Manhattan Bank, New York, with an indication that it was to be charged to Dollar Savings Acct. No. 25-4109.When Zshornack noticed the withdrawal of US$1,000.00 from his account, he demanded an explanation from the bank. In answer, COMTRUST claimed that the peso value of the withdrawal was given to Atty. Ernesto Zshornack, Jr., brother of Rizaldy, on October 27, 1975 when he (Ernesto) encashed with COMTRUST a cashier's check for P8,450.00 issued by the Manila Banking Corporation payable to Ernesto.Upon consideration of the foregoing facts, this Court finds no reason to disturb the ruling of both the trial court and the Appellate Court on the first cause of action. Petitioner must be held liable for the unauthorized withdrawal of US$1,000.00 from private respondent's dollar account.In its desperate attempt to justify its act of withdrawing from its depositor's savings account, the bank has adopted inconsistent theories. First, it still maintains that the peso value of the amount withdrawn was given to Atty. Ernesto Zshornack, Jr. when the latter encashed the Manilabank Cashier's Check. At the same time, the bank claims that the withdrawal was made pursuant to an agreement where Zshornack allegedly authorized the bank to withdraw from his dollar savings account such amount which, when converted to pesos, would be needed to fund his peso current account. If indeed the peso equivalent of the amount withdrawn from the dollar account was credited to the peso current account, why did the bank still have to pay Ernesto?At any rate, both explanations are unavailing. With regard to the first explanation, petitioner bank has not shown how the transaction involving the cashier's check is related to the transaction involving the dollar draft in favor of Dizon financed by the withdrawal from Rizaldy's dollar account. The two transactions appear entirely independent of each other. Moreover, Ernesto Zshornack, Jr., possesses a personality distinct and separate from Rizaldy Zshornack. Payment made to Ernesto cannot be considered payment to Rizaldy.As to the second explanation, even if we assume that there was such an agreement, the evidence do not show that the withdrawal was made pursuant to it. Instead, the record reveals that the amount withdrawn was used to finance a dollar draft in favor of Leovigilda D. Dizon, and not to fund the current account of the Zshornacks. There is no proof whatsoever that peso Current Account No. 210-465-29 was ever credited with the peso equivalent of the US$1,000.00 withdrawn on October 27, 1975 from Dollar Savings Account No. 25-4109.2. As for the second cause of action, the complaint filed with the trial court alleged that on December 8, 1975, Zshornack entrusted to COMTRUST, thru Garcia, US $3,000.00cash(popularly known as greenbacks) forsafekeeping,and that the agreement was embodied in a document, a copy of which was attached to and made part of the complaint. The document reads:Makati Cable Address:Philippines "COMTRUST"COMMERCIAL BANK AND TRUST COMPANYof the PhilippinesQuezon City BranchDecember 8, 1975MR. RIZALDY T. ZSHORNACK&/OR MRS SHIRLEY E. ZSHORNACKSir/Madam:We acknowledged (sic) having received from you today the sum of US DOLLARS: THREE THOUSAND ONLY (US$3,000.00) for safekeeping.Received by:(Sgd.) VIRGILIO V. GARCIAIt was also alleged in the complaint that despite demands, the bank refused to return the money.In its answer, COMTRUST averred that the US$3,000 was credited to Zshornack's peso current account at prevailing conversion rates.It must be emphasized that COMTRUST did not deny specifically under oath the authenticity and due execution of the above instrument.During trial, it was established that on December 8, 1975 Zshornack indeed delivered to the bank US $3,000 for safekeeping. When he requested the return of the money on May 10, 1976, COMTRUST explained that the sum was disposed of in this manner: US$2,000.00 was sold on December 29, 1975 and the peso proceeds amounting to P14,920.00 were deposited to Zshornack's current account per deposit slip accomplished by Garcia; the remaining US$1,000.00 was sold on February 3, 1976 and the peso proceeds amounting to P8,350.00 were deposited to his current account per deposit slip also accomplished by Garcia.Aside from asserting that the US$3,000.00 was properly credited to Zshornack's current account at prevailing conversion rates, BPI now posits another ground to defeat private respondent's claim. It now argues that the contract embodied in the document is the contract of depositum (as defined in Article 1962, New Civil Code), which banks do not enter into. The bank alleges that Garcia exceeded his powers when he entered into the transaction. Hence, it is claimed, the bank cannot be liable under the contract, and the obligation is purely personal to Garcia.Before we go into the nature of the contract entered into, an important point which arises on the pleadings, must be considered.The second cause of action is based on a document purporting to be signed by COMTRUST, a copy of which document was attached to the complaint. In short, the second cause of action was based on an actionable document. It was therefore incumbent upon the bank to specifically deny under oath the due execution of the document, as prescribed under Rule 8, Section 8, if it desired: (1) to question the authority of Garcia to bind the corporation; and (2) to deny its capacity to enter into such contract. [See, E.B. Merchant v. International Banking Corporation, 6 Phil. 314 (1906).] No sworn answer denying the due execution of the document in question, or questioning the authority of Garcia to bind the bank, or denying the bank's capacity to enter into the contract, was ever filed. Hence, the bank is deemed to have admitted not only Garcia's authority, but also the bank's power, to enter into the contract in question.In the past, this Court had occasion to explain the reason behind this procedural requirement.The reason for the rule enunciated in the foregoing authorities will, we think, be readily appreciated. In dealing with corporations the public at large is bound to rely to a large extent upon outward appearances. If a man is found acting for a corporation with the external indicia of authority, any person, not having notice of want of authority, may usually rely upon those appearances; and if it be found that the directors had permitted the agent to exercise that authority and thereby held him out as a person competent to bind the corporation, or had acquiesced in a contract and retained the benefit supposed to have been conferred by it, the corporation will be bound, notwithstanding the actual authority may never have been granted... Whether a particular officer actually possesses the authority which he assumes to exercise is frequently known to very few, and the proof of it usually is not readily accessible to the stranger who deals with the corporation on the faith of the ostensible authority exercised by some of the corporate officers. It is therefore reasonable, in a case where an officer of a corporation has made a contract in its name, that the corporation should be required, if it denies his authority, to state such defense in its answer. By this means the plaintiff is apprised of the fact that the agent's authority is contested; and he is given an opportunity to adduce evidence showing either that the authority existed or that the contract was ratified and approved. [Ramirez v. Orientalist Co. and Fernandez, 38 Phil. 634, 645- 646 (1918).]Petitioner's argument must also be rejected for another reason. The practical effect of absolving a corporation from liability every time an officer enters into a contract which is beyond corporate powers, even without the proper allegation or proof that the corporation has not authorized nor ratified the officer's act, is to cast corporations in so perfect a mold that transgressions and wrongs by such artificial beings become impossible [Bissell v. Michigan Southern and N.I.R. Cos 22 N.Y 258 (1860).] "To say that a corporation has no right to do unauthorized acts is only to put forth a very plain truism but to say that such bodies have no power or capacity to err is to impute to them an excellence which does not belong to any created existence with which we are acquainted. The distinction between power and right is no more to be lost sight of in respect to artificial than in respect to natural persons." [Ibid.]Having determined that Garcia's act of entering into the contract binds the corporation, we now determine the correct nature of the contract, and its legal consequences, including its enforceability.The document which embodies the contract states that the US$3,000.00 was received by the bank for safekeeping. The subsequent acts of the parties also show that the intent of the parties was really for the bank to safely keep the dollars and to return it to Zshornack at a later time, Thus, Zshornack demanded the return of the money on May 10, 1976, or over five months later.The above arrangement is that contract defined under Article 1962, New Civil Code, which reads:Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract.Note that the object of the contract between Zshornack and COMTRUST was foreign exchange. Hence, the transaction was covered by Central Bank Circular No. 20, Restrictions on Gold and Foreign Exchange Transactions, promulgated on December 9, 1949, which was in force at the time the parties entered into the transaction involved in this case. The circular provides:xxx xxx xxx2. Transactionsin the assets described below and all dealings in them of whatever nature, including, where applicable their exportation and importation,shall NOT be effected, except with respect to deposit accounts included in sub-paragraphs (b) and (c) of this paragraph, when such deposit accounts are owned by and in the name of, banks.(a) Any and all assets, provided they are held through, in, or with banks or banking institutions located in the Philippines, includingmoney, checks, drafts, bullions bank drafts, deposit accounts (demand, time and savings), all debts, indebtedness or obligations, financial brokers and investment houses, notes, debentures, stocks, bonds, coupons, bank acceptances, mortgages, pledges, liens or other rights in the nature of security,expressed in foreign currencies, or if payable abroad, irrespective of the currency in which they are expressed, and belonging to any person, firm, partnership, association, branch office, agency, company or other unincorporated body or corporation residing or located within the Philippines;(b) Any and all assets of the kinds included and/or described in subparagraph (a) above, whether or not held through, in, or with banks or banking institutions, and existent within the Philippines, which belong to any person, firm, partnership, association, branch office, agency, company or other unincorporated body or corporation not residing or located within the Philippines;(c) Any and all assets existent within the Philippines including money, checks, drafts, bullions, bank drafts, all debts, indebtedness or obligations, financial securities commonly dealt in by bankers, brokers and investment houses, notes, debentures, stock, bonds, coupons, bank acceptances, mortgages, pledges, liens or other rights in the nature of security expressed in foreign currencies, or if payable abroad, irrespective of the currency in which they are expressed, and belonging to any person, firm, partnership, association, branch office, agency, company or other unincorporated body or corporation residing or located within the Philippines.xxx xxx xxx4. (a)All receipts of foreign exchange shall be sold daily to theCentral Bankby those authorized to deal in foreign exchange. All receipts of foreign exchange by any person, firm, partnership, association, branch office, agency, company or other unincorporated body or corporation shall be sold to the authorized agents of the Central Bank by therecipients within one business day following the receipt of such foreign exchange. Any person, firm, partnership, association, branch office, agency, company or other unincorporated body or corporation, residing or located within the Philippines, who acquires on and after the date of this Circular foreign exchange shall not, unless licensed by the Central Bank, dispose of such foreign exchange in whole or in part, nor receive less than its full value, nor delay taking ownership thereof except as such delay is customary; Provided, further, That within one day upon taking ownership, or receiving payment, of foreign exchange the aforementioned persons and entities shall sell such foreign exchange to designated agents of the Central Bank.xxx xxx xxx8. Strict observance of the provisions of this Circular is enjoined; and any person, firm or corporation, foreign or domestic, who being bound to the observance thereof, or of such other rules, regulations or directives as may hereafter be issued in implementation of this Circular, shall fail or refuse to comply with, or abide by, or shall violate the same, shall besubject to the penal sanctions provided in the Central Bank Act.xxx xxx xxxParagraph 4 (a) above was modified by Section 6 of Central Bank Circular No. 281, Regulations on Foreign Exchange, promulgated on November 26, 1969 by limiting its coverage to Philippine residents only. Section 6 provides:SEC. 6. All receipts of foreign exchange by anyresidentperson, firm, company or corporation shall be sold to authorized agents of the Central Bank by the recipients within one business day following the receipt of such foreign exchange. Anyresidentperson, firm, company or corporationresiding or located within the Philippines, who acquires foreign exchange shall not, unless authorized by the Central Bank, dispose of such foreign exchange in whole or in part, nor receive less than its full value, nor delay taking ownership thereof except as such delay is customary; Provided, That, within one business day upon taking ownership or receiving payment of foreign exchange the aforementioned persons and entities shall sell such foreign exchange to the authorized agents of the Central Bank.As earlier stated, the document and the subsequent acts of the parties show that they intended the bank to safekeep the foreign exchange, and return it later to Zshornack, who alleged in his complaint that he is a Philippine resident. The parties did not intended to sell the US dollars to the Central Bank within one business day from receipt. Otherwise, the contract ofdepositumwould never have been entered into at all.Since the mere safekeeping of the greenbacks, without selling them to the Central Bank within one business day from receipt, is a transaction which is not authorized by CB Circular No. 20, it must be considered as one which falls under the general class of prohibited transactions. Hence, pursuant to Article 5 of the Civil Code, it is void, having been executed against the provisions of a mandatory/prohibitory law. More importantly, it affords neither of the parties a cause of action against the other. "When the nullity proceeds from the illegality of the cause or object of the contract, and the act constitutes a criminal offense, both parties beingin pari delicto, they shall have no cause of action against each other. . ." [Art. 1411, New Civil Code.] The only remedy is one on behalf of the State to prosecute the parties f