PrefinALS and Finals Cases Notes

8/10/2019 PrefinALS and Finals Cases Notes

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THIRD DIVISION

NEW SAMPAGUITA BUILDERS G.R. No. 148753CONSTRUCTION, INC. (NSBCI)!" S#o$%&% EDUARDO R. DEE P'&%&!

!" ARCELITA M.DEE,

P&**o!&'%, P!+!*!,J,

C-*'!,

S!"o/0G$*&''&2,

Co'o!,

!" /&'%$%

C'#*o Mo'0&%,JJ


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PHILIPPINE NATIONAL BAN,

P'o$0+&"

R&%#o!"&!.

$06 3, 4

9 9

DECISION

PANGANIBAN,J.:

Courts have the authority to strike downor to modify provisions in promissory

notes that grant the lendersunrestrained power to increase interestrates, penalties and other charges atthe latters sole discretion andwithout giving prior notice to and


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securing the consent of theborrowers. This unilateral__________________

* On leave.authority is anathema to the mutualityof contracts and enable lenders to takeundue advantage of borrowers.lthough the !sury "aw has beene#ectively repealed, courts may still

reduce ini$uitous or unconscionablerates charged for the use of money.%urthermore, e&cessive interests,penalties and other charges not revealedin disclosure statements issued by banks,even if stipulated in the promissory

notes, cannot be given e#ect under theTruth in "ending ct.

T-& C%&'efore us is a (etition for

)eview+under )ule - of the )ules ofCourt, seeking to nullify the /une 01,011+ 2ecision0 of the Court ofppeals3 4C5 in C67) C8 9o.03+. The decretal portion of the


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assailed 2ecision reads as follows:WHEREFORE, the decision of the

Regional Trial Court of Dagupan City,Branch 4 dated Dece!"er #$, %&&' isREVERSED and SET ASIDE( Theforeclosure proceedings of the !ortgagedproperties of defendants)appellees*4+ andthe Fe"ruary #, %& auction sale aredeclared legal and -alid and saiddefendants)appellees are ordered to pay

plaintiff)appellant ./B,*'+ 0ointly andse-erally*,+ the a!ount of deficiency that 1ill"e co!puted "y the trial court "ased on theoriginal penalty of 2 per annu! ase3plicitly stated in the loan docu!ents andto pay attorneys fees in an a!ounte5ui-alent to 3 3 3 %2 of the total a!ountdue and the costs of suit and e3penses of

litigation(6*+

T-& :;%

The facts are narrated by theC as follows:

On Fe"ruary %%, %&$&, Board

Resolution /o( ', 7eries of %&$& 1asappro-ed "y *.etitioner+ /7BC8 *%9+authori:ing the co!pany to 3 3 3 apply for or


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secure a co!!ercial loan 1ith the ./B inan aggregate a!ount of .$(;, under suchter!s agreed "y the Ban< and the /7BC8,using or !ortgaging the real estateproperties registered in the na!e of its.resident and Chair!an of the Board*.etitioner+ Eduardo R( Dee as collateral=*and+ #9 authori:ing *petitioner)spouses+ tosecure the loan and to sign any *and all+docu!ents 1hich !ay "e re5uired "y*Respondent+ ./B*,+ and that *petitioner)

spouses+ shall act as sureties or co)o"ligors1ho shall "e 0ointly and se-erally lia"le 1ith*.etitioner+ /7BC8 for the pay!ent of any*and all+ o"ligations(

On >ugust %', %&$&, Resolution /o(

?? 1as appro-ed "y granting the re5uest of*Respondent+ ./B thru its Board /7BC8 for

an .$ ;illion loan "rosa.u"lic ;ar)/CRBuildings %, # and &='9 Dupels, 8nc(, E3tensi-e

pra1n far! de-elop!ent


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pro0ect= 9 Bana1e Hotel .hase 88= ?9 Clar< >ir Base ))

Barrac ighting,Ro3as Bl-d( .ainting /E>7apang .alay and >ngelesCity(

The loan of *.etitioner+ /7BC8 1as

secured "y a first !ortgage on the follo1ingAa9 three @9 parcels of residential land

located at ;angaldan, .angasinan 1ith totalland area of %,#%4 s5uare !eters*,+including i!pro-e!ents thereon andregistered under TCT /os( %#$44&, %#?%,and %#?# of the Registry of Deeds of.angasinan= "9 si3 9 parcels of residentialland situated at 7an Fa"ian, .angasinan1ith total area of %,?? s5uare !eters*,+

including i!pro-e!ents thereon andco-ered "y TCT /os( %44, %44',%#4'$, %#$&, %44%%*,+ and %#%%#? ofthe Registry of Deeds of .angasinan= and c9a residential lot and i!pro-e!ents thereonlocated at ;angaldan, .angasinan 1ith anarea of 4,4@? s5uare !eters and co-ered "yTCT /o( %4@?$ of the Registry of Deeds of.angasinan(

The loan 1as further secured "y the

0oint and se-eral signatures of *.etitioners+Eduardo Dee and >rcelita ;ar5ue: Dee,


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1ho signed as acco!!odation)!ortgagorssince all the collaterals 1ere o1ned "y the!and registered in their na!es(

;oreo-er *.etitioner+ /7BC8

e3ecuted the follo1ing docu!ents, -i:A a9pro!issory note dated une #&, %&$& in thea!ount of .',,( 1ith due date onOcto"er #?, %&$&= *"9+ pro!issory notedated 7epte!"er %, %&$& in the a!ount of.#,?,( 1ith due date on Dece!"er

@, %&$&= and c9 pro!issory note dated7epte!"er , %&$& in the a!ount of.@,( 1ith !aturity date on anuary4, %&&(

8n addition, *petitioner+ corporation

also signed the Credit >gree!ent dated>ugust @%, %&$& relating to the re-ol-ing

credit line of .?(? ;illion 3 3 3 and theCredit >gree!ent dated 7epte!"er ', %&$&to support the unad-ised line of .@,((

On >ugust @%, %&$&, *petitioner)

spouses+ e3ecuted a oint and 7olidary>gree!ent 7>9 in fa-or of *Respondent+

./B unconditionally and irre-oca"ly "indingthe!sel-es to "e 0ointly and se-erally lia"le1ith the "orro1er for the pay!ent of allsu!s due and paya"le to the Ban< underthe Credit Docu!ent(


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ater on, *.etitioner+ /7BC8 failed toco!ply 1ith its o"ligations under thepro!issory notes(

On une %$, %&&%, *.etitioner+

Eduardo R( Dee on "ehalf of *.etitioner+/7BC8 sent a letter to the Branch ;anagerof the ./B Dagupan Branch re5uesting fora &)day e3tension for the pay!ent ofinterests and restructuring of its loan foranother ter!(

7u"se5uently, /7BC8 tenderedpay!ent to *Respondent+ ./B *of+ three @9checugust $, %&&%in the a!ount of .#,(= #9 chec< no(@4&&&&? dated >ugust $, %&&% in thea!ount of .',(= and @9 chec< no(

@4&&&&$ dated >ugust %', %&&% in thea!ount of .%',((*$+

8n a !eeting held on >ugust %#,

%&&%, *Respondent+ ./Bs representati-e*,+;r( Rolly Cru:a"ra, 1as infor!ed "y*.etitioner+ Eduardo Dee of his intention tore!it to *Respondent+ ./B post)dated

checugust ##, %&&%, *Respondent+

"an


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*.etitioner+ /7BC8s proposal *1as+accepta"le*,+ pro-ided the total pay!entshould "e .4,%#$,&$(#& that *1ould+ co-erthe a!ount of .%,%&,#@%(@@ as principal,.@,','$(@ as interests and penalties*,+and .'@,?$(&@ for insurance*,+ 1ith theissuance of post)dated chec


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7epte!"er #& and Octo"er #&, %&&% 1eredishonored "y the dra1ee "an< andreturned due *to+ a stop pay!ent order fro!*petitioners+(

On /o-e!"er %#, %&&%, ./Bs ;r(

Carca!o 1rote *.etitioner+ Eduardo Deeinfor!ing hi! that unless the dishonoredchecct @%@',as a!ended*,+ and .residential Decree /o(

@$' dated anuary @, %&(

The notice of e3tra)0udicial sale of the!ortgaged properties relating to said ./Bs*.+etition for *7+ale 1as pu"lished in theFe"ruary $, %' and ##, %& issues of the


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Wee-enue, Gue:on City and

*petitioner)spouses+ address at #%@ Wilson7t(, 7an uan, ;etro ;anila(

On >pril , %&, the ./B DagupanBranch ;anager sent a letter to *petitioners+at their address at %%% *ERDC Building,+ E(


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Rodrigue: 7r( >-enue, Gue:on City*,+infor!ing the! that the properties securingtheir loan account *had+ "een sold at pu"licauction, that the 7heriffs Certificate of 7alehad "een registered 1ith the Registry ofDeeds of .angasinan on ;arch %@, %&*,+and that a period of one %9 year therefro!*1as+ granted to the! 1ithin 1hich toredee! their properties(

*.etitioners+ failed to redee! their

properties 1ithin the one)year rede!ptionperiod*,+ and so *Respondent+ ./B e3ecuteda *D+eed of *>+"solute *7+ale consolidatingtitle to the properties in its na!e( TCT /os(%$&&@' to %$&&44 1ere later issued to*.etitioner+ ./B "y the Registry of Deeds of.angasinan(

On >ugust 4, %&, *Respondent+./B infor!ed *.etitioner+ /7BC8 that theproceeds of the sale conducted on Fe"ruary#, %& 1ere not sufficient to co-er its totalclai! a!ounting to .%#,',4?(4@*,+ andthus de!anded fro! the latter the deficiencyof .#,%?#,4?(4@ plus interest and othercharges*,+ until the a!ount *1as+ fully paid(

*.etitioners+ refused to pay the a"o-e

deficiency clai! 1hich co!pelled*Respondent+ ./B to institute the instant*C+o!plaint for the collection of its deficiencyclai!(


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Finding that the ./B de"t relief

pac


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)eversing the trial court, the Cheld that (etitioner 9='C< did not availitself of respondents debt relief

package 42)(5 or take steps to complywith the conditions for $ualifying underthe program. The appellate court alsoruled that entitlement to the programwas not a matter of right, because suchentitlement was still sub>ect to the

approval of higher bank authorities,based on their assessment of theborrowers repayment capability andsatisfaction of other re$uirements.

s to the misapplication of loan

payments, the C held that thesubsidiary ledgers of 9='C


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4$5 of )ule +3+ of the )ules of Court.(etitioners failed to rebut thispresumption.

The increases in the interest rates

on 9='Custment in penalty from percent to 3 percent per annum. 9otonly did respondent fail to demonstratethe e&istence of market forces andeconomic conditions that would >ustify


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such increasesD it could also havetreated petitioners re$uest forrestructuring as a re$uest for availment

of the 2)(. Conse$uently, the originalpenalty rate of percent per annumwas used to compute the de;ciencyclaim.

The auction sale could not be set

aside on the basis of the inade$uacy ofthe auction price, because in salesmade at public auction, the owner isgiven the right to redeem themortgaged propertiesD the lower the bidprice, the easier it is to e#ect

redemption or to sell such right. Thebid price of (+1,33-,111.11 vis6E6visrespondents claim of (+0,1,-F.-3was found to be neither shocking norunconscionable.

The attorneys fees were alsoreduced by the appellate court from +1percent to + percent of the totalindebtedness. First, there was noe&treme di#iculty in an e&tra>udicial


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foreclosure of a real estate mortgage,as this proceeding was merelyadministrative in nature and did not

involve a court litigation contesting theproceedings prior to the auction sale.Second, the attorneys fees weree&clusive of all stipulated costs andfees. Third, such fees were in thenature of li$uidated damages that did

not inure to respondents salariedcounsel.

)espondent was also declared tohave the un$uestioned right toforeclose the )eal Gstate Bortgage. udicialforeclosure proceedings and auctionsale were valid for the following


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reasons: 4+5 personal notice to themortgagors, although unnecessary, wasactually madeD 405 the notice of

e&tra>udicial sale was duly publishedand postedD 435 the e&tra>udicial salewas conducted through the deputysheri#, under the direction of the clerkof court who was concurrently the e&6o;cio provincial sheri# and acting as

agent of respondentD 4-5 the sale wasconducted within the province wherethe mortgaged properties were locatedDand 45 such sale was not shown to havebeen attended by fraud.

@ence this (etition.+1I%%$&%

(etitioners submit the following

issues for our consideration:

8

Whether or not the Honora"le Court of>ppeals correctly ruled that petitioners didnot a-ail of ./Bs de"t relief pac


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1ere not entitled thereto as a !atter of right(

88

Whether or not petitioners ha-e adducedsufficient and con-incing e-idence too-erthro1 the presu!ption of regularity andcorrectness of the ./B entries in thesu"sidiary ledgers of the loan accounts ofpetitioners(

888

Whether or not the Honora"le Court of>ppeals seriously erred in not holding thatthe Respondent ./B "loated the loanaccount of petitioner corporation "yi!posing interests, penalties and attorneys

fees 1ithout legal, -alid and e5uita"le0ustification(

8IWhether or not the auction price at 1hichthe !ortgaged properties 1as sold 1asdisproportionate to their actual fair !ortgage

-alue(

IWhether or not Respondent ./B is notentitled to reco-er the deficiency in the


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!ortgage account not reali:ed in theforeclosure sale, considering thatA

>( .etitioners are !erely

guarantors of the !ortgagede"t of petitioner corporation1hich has a separatepersonality fro! the*petitioner)spouses+(

B( The 0oint and solidary

agree!ent e3ecuted "y

*petitioner) spouses+ arecontracts of adhesion not"inding on the!=

C( The /7BC8 Board Resolution

is not -alid and "inding on*petitioner)spouses+ "ecausethey 1ere co!pelled to

e3ecute the said Resolution*=+other1ise*,+ Respondent ./B1ould not grant petitionercorporation the loan=

D( The Respondent ./B had

already in its possession theproperties of the *petitioner)spouses+ 1hich ser-ed as acollateral to the loano"ligation of petitionercorporation*,+ and to still allo1Respondent ./B to reco-erthe deficiency clai!a!ounting to a -ery


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su"stantial a!ount of .#(%!illion 1ould constitute un0ustenrich!ent on the part ofRespondent ./B(

I8

Whether or not the e3tra0udicial foreclosureproceedings and auction sale, including allsu"se5uent proceedings*,+ are null and -oidfor non)co!pliance 1ith 0urisdictional andother !andatory re5uire!ents= 1hether ornot the petition for e3tra0udicial foreclosureof !ortgage 1as filed pre!aturely= and1hether or not the finding of fraud "y thetrial court is a!ply supported "y thee-idence on record(6*%%+

The foregoing may be summed upinto two main issues:frst, whether theloan accounts are bloatedD and second,whether the e&tra>udicial foreclosureand subse$uent claim for de;ciency arevalid and proper.

T-& Co$'=% R$0*!+

The (etition is partly meritorious.


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:*'% M*! I%%$&Bloated Loan Accounts

t the outset, it must be stressedthat only $uestions of law+0 may beraised in a petition for review oncertiorari under )ule - of the )ules ofCourt. s a rule, $uestions of factcannot be the sub>ect of this mode of

appeal,+3for Hthe =upreme Court isnot a trier of facts.I+- s e&ceptionsto this rule, however, factual ;ndings ofthe C may be reviewed on appeal+when, inter alia, the factual inferencesare manifestly mistakenD+ the

>udgment is based on amisapprehension of factsD+For the Cmanifestly overlooked certain relevantand undisputed facts that, if properlyconsidered, would >ustify a di#erentlegal conclusion.+J ustice and in the e&ercise of our sound


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discretion.+K


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prior notice to petitioners. The Courtholds that petitioners accessory duty topay interest0+did not give respondent

unrestrained freedom to charge anyrate other than that which was agreedupon. 9o interest shall be due, unlesse&pressly stipulated in writing.00


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an unbridled right to ad>ust the interestindependently and upwardly wouldcompletely take away from petitioners

the Hright to assent to an importantmodi;cation in their agreementI0Jand would also negate the element ofmutuality in their contracts. The clausecited earlier made the ful;llment of thecontracts Hdependent e&clusively upon

the uncontrolled willI0Kof respondentand was therefore void. 'esides, thepro forma promissory notes have thecharacter of a contract dadhsion,31Hwhere the parties do not bargain one$ual footing, the weaker partys the

debtors participation being reduced tothe alternative Lto take it or leaveit.I3+

HMhile the !sury "aw30ceilingon interest rates was lifted by Central'ank Circular 9o. K1,33nothing inthe said Circular grants lenders carte!lancheauthority to raise interest ratesto levels which will either enslave theirborrowers or lead to a hemorrhaging of


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their assets.I3-


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e$uitably reduced for being ini$uitous,unconscionable and e&orbitant.I-1)ates found to be ini$uitous or

unconscionable are void, as if it therewere no e&press contract thereon.-+bove all, it is undoubtedly againstpublic policy to charge e&cessively forthe use of money.-0


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proposal to modify a loan contract,especially interest 66 a vital component66 is Hobliged to answer the

proposal.I--

%urthermore, respondent did notfollow the stipulation in the (romissory9otes providing for the automaticconversion of the portion that remained

unpaid after F31 days 66 or two yearsfrom date of original release 66 into amedium6term loan, sub>ect to theapplicable interest rate to be appliedfrom the dates of original release.-


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same interest rate charged byrespondent on other medium6termloansD and the rate applied from /une

0K, +KJK, =eptember +, +KJK and=eptember , +KJK 66 their respectiveoriginal release 66 until paid. 'ut thesesteps were not taken. side fromsending demand letters, respondent didnot at all e&ercise its option to enforce

collection as of these 9otes due dates.9either did it renew or e&tend theaccount.


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for by C' Circular -+.1

"redit A#reements. side from

the promissory notes, another maindocument involved in the principalobligation is the set of creditagreements e&ecuted and theiranne&es.

The ;rst Credit greement+dated /une +K, +KJK 66 although o#eredand admitted in evidence, and evenreferred to in the ;rst (romissory 9ote66 cannot be given weight.

First, it was not signed byrespondent through its branchmanager.0 pparently it wassurreptitiously acknowledged beforerespondents counsel, who un?inchinglydeclared that it had been signed by theparties on every page, althoughrespondents signature does not appearthereon.3

Second, it was ob>ected to by


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petitioners,- contrary to the trialcourts ;ndings. @owever, it wasnot the greement, but the revolving

credit line of (,111,111, thate&pired one year from the greementsdate of implementation.F

Third, there was no attachedanne& that contained the 7eneral

Conditions.J Gven thecknowledgment did not allude to itse&istence.K Thus, no terms orconditions could be added to thegreement other than those alreadystated therein.

=ince the ;rst Credit greementcannot be given weight, the interestrate on the ;rst availment pegged at 3percent over and above respondentsprime rate1 on the date of suchavailment+has no bearing at all onthe loan. fter the ;rst 9otes duedate, the rate of +K percent agreedupon should continue to be applied onthe availment, until its automatic


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conversion to a medium6term loan.

The second Credit greement0

dated ugust 3+, +KJK, provided forinterest 66 respondents prime rate, plusthe applicable spread3in e#ect as ofthe date of each availment,- on arevolving credit line of (F,F11,11166 but did not state any provision on its

increase or decrease.Conse$uently, petitioners could not bemade to bear interest more than suchprime rate plus spread. The Courtgives weight to this second Creditgreement for the following reasons.

First, this document submitted byrespondent was admitted by petitioners.F gain, contrary to their assertion,it was not the greement 66 but thecredit line 66 that e&pired one year fromthe greements date of implementation.J Thus, the termsand conditions continued to apply, evenif drawdowns could no longer be made.


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Second, there was no F6pageanne&K o#ered in evidence thatcontained the 7eneral Conditions,F1

notwithstanding the cknowledgmentof its e&istence by respondentscounsel. Thus, no terms or conditionscould be appended to the greementother than those speci;ed therein.

Third, the +06page 7eneralConditionsF+o#ered and admitted inevidence had no probative value. Therewas no reference to it in thecknowledgment of the greementDneither was respondents signature on

any of the pages thereof. Thus, the7eneral Conditions stipulations oninterest ad>ustment,F0 whether on a;&ed or a ?oating scheme, had no e#ectwhatsoever on the greement.Contrary to the trial courts ;ndings,F3 the 7eneral Condition werecorrectly ob>ected to by petitioners.F-The rate of 0+. percent agreed upon inthe second 9ote thus continued toapply to the second availment, until its


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automatic conversion into a medium6term loan.

The third Credit greementFdated =eptember , +KJK, provided forthe same rate of interest as that in thesecond greement. This rate was to beapplied to availments of an unadvisedline of (311,111. =ince there was no

mention in the third greement, either,of any stipulation on increases ordecreasesF in interest, there wouldbe no basis for imposing amountshigher than the prime rate plus spread.gain, the 0+. percent rate agreed

upon would continue to apply to thethird availment indicated in the third9ote, until such amount wasautomatically converted into a medium6term loan.

The Court also ;nds that, frst,although this document was admittedby petitioners,FFit was the credit linethat e&pired one year from theimplementation of the greement.FJ


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The terms and conditions thereincontinued to apply, even if availmentscould no longer be drawn after e&piry.

Second, there was again no F6

page anne&FK o#ered that containedthe 7eneral Conditions,J1 regardlessof the cknowledgment by the samerespondents counsel a#irming its

e&istence. Thus, the terms andconditions in this greement relating tointerest cannot be e&panded beyondthat which was already laid down by theparties.

$isclosure Statements.


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s to the ;rst 2isclosure

=tatement on "oanNCredit

TransactionJ0 dated /une +3, +KJK,we hold that the +K. percent e#ectiveinterest rate per annumJ3 wouldindeed apply to the ;rst availment ordrawdown evidenced by the ;rst(romissory 9ote. 9ot only was this

=tatement issued prior to theconsummation of such availment ordrawdown, but the rate shown thereincan also be considered e$uivalent to 3percent over and above respondentsprime rate in e#ect. 'esides,

respondent mentioned no other ratethat it considered to be the prime ratechargeable to petitioners. Gven if wedisregarded the related Creditgreement, we assume that this privatetransaction between the parties was fairand regular,J-and that the ordinarycourse of business was followed.J

s to the second 2isclosure=tatement on "oanNCredit


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TransactionJ dated =eptember 0,+KJK, we hold that the 0+. percente#ective interest rate per annumJF

would de;nitely apply to the secondavailment or drawdown evidenced bythe second (romissory 9ote.


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TransactionK1 dated =eptember ,+KJK, we hold that the same 0+.percent e#ective interest rate per

annumK+ would apply to the thirdavailment or drawdown evidenced bythe third (romissory 9ote. This=tatement was made available topetitioner6spouses, only after therelated Credit greement had been

e&ecuted, but simultaneously with theconsummation of the =tatementsrelated availment or drawdown.9onetheless, the rate herein should stillbe regarded as e$uivalent to the primerate plus spread, under the similar

presumption that this privatetransaction was fair and regular andthat the ordinary course of businesswas followed.


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e&amined, /ulia ng6"opeA, %inanceccount nalyst


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thereof appear either in the 2isclosure=tatementsKor in any of the clausesin the second and the third Credit

greementsKF earlier discussed.Mhile a standard penalty charge of percent per annum has been imposedon the amounts stated in all three(romissory 9otes still remaining unpaidor unrenewed when they fell due,KJ

there is no stipulation therein thatwould >ustify any increase in thatcharges. The e#ect, therefore, whenthe borrower is not clearly informed ofthe 2isclosure =tatements 66 prior to theconsummation of the availment or

drawdown 66 is that the lender will haveno right to collect upon such chargeKKor increases thereof, even if stipulatedin the 9otes. The time is now ripe togive teeth to the often ignored forty6one6year old HTruth in "endingctI+11and thus transform it from asnivelling paper tiger to a growling;nancial watchdog of haplessborrowers.


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'esides, we have earlier said thatthe 9otes are contracts of adhesionDalthough not invalid per se, any

apparent ambiguity in the loancontracts 66 taken as a whole 66 shall bestrictly construed against respondentwho caused it.+1+ Morse, in thestatements of account, the penalty ratehas again been unilaterally increased by

respondent to 3 percent withoutpetitioners consent. s a result of itsmove, such li$uidated damagesintended as a penalty shall be e$uitablyreduced by the Court to Ailch+10 forbeing ini$uitous or unconscionable.

+13lthough the ;rst 2isclosure

=tatement was furnished (etitioner9='C< prior to the e&ecution of thetransaction, it is not a contract that canbe modi;ed by the related (romissory9ote, but a mere statement in writingthat re?ects the true and e#ective costof loans from respondent. 9ovation cannever be presumed,+1- and the


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animus no(andi Hmust appear bye&press agreement of the parties, or bytheir acts that are too clear and

une$uivocal to be mistaken.I+1 Toallow novation will surely ?out theHpolicy of the =tate to protect itscitiAens from a lack of awareness of thetrue cost of credit.I+1

Mith greater reason should suchpenalty charges be indicated in thesecond and third 2isclosure=tatements, yet none can be foundtherein. Mhile the charges are issuedafter the respective availment or

drawdown, the disclosure statementsare given simultaneously therewith.Obviously, novation still does not apply.)ther "har#es &n*arranted


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greements, and no total value or eventhe breakdown ;gures of such non6;nance charge are speci;ed in the

2isclosure =tatements. Boreover, theprovision in the Bortgage that re$uiresthe payment of insurance and othercharges is neither made part of norre?ected in such 9otes, greements, or=tatements.+1F

Attorneys Fees +uita!ly -educed

Me a#irm the e$uitable reductionin attorneys fees.+1J These are notan integral part of the cost of

borrowing, but arise only whencollecting upon the 9otes becomesnecessary. The purpose of these fees isnot to give respondent a largercompensation for the loan than the lawalready allows, but to protect it againstany future loss or damage by beingcompelled to retain counsel in6houseor not 66 to institute >udicial proceedingsfor the collection of its credit.+1KCourts have has the power++1 to


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determine their reasonableness+++based on uantum meruit++0 and toreduce++3 the amount thereof if

e&cessive.++-


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42)(5.

)espondents Circular is not an

outright grant of assistance ore&tension of payment,++Kbut a mereo#er sub>ect to speci;c terms andconditions. (etitioner 9='C< failed toestablish satisfactorily that it had been

seriously and directly a#ected by theeconomic slowdown in the peripheralareas of the then != military bases.


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amortiAations have been established, orwhen the merits of the creditapplication would so >ustify.+03

The branch managersrecommendation to restructure ore&tend a total outstanding loan note&ceeding (J,111,111 is not ;nal, butsub>ect to the approval of respondents

'ranches 2epartment CreditCommittee, chaired by its e&ecutivevice6president.+0- side from beingfurther conditioned on other pertinentpolicies of respondent,+0 suchapproval nevertheless needs to be

reported to its 'oard of 2irectors forcon;rmation.+0


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and limitations under which banks maygrant e&tensions or renewals of theirloans and other credit accommodations.

+0K

+ntries in Su!sidiary Led#ers-e#ular and "orrect

Contrary to petitionersassertions, the subsidiary ledgers ofrespondent properly re?ected allentries pertaining to (etitioner 9='C


48/137

standard in format, but are periodicallysub>ect to audit. 'esides, we go by thepresumption that the recording of

private transactions has been fair andregular, and that the ordinary course ofbusiness has been followed.

S&;o!" M*! I%%$&+/tra'udicial Foreclosure 0alid, But

$efciency "laims +/cessi(e

)espondent aptly e&ercised itsoption to Hforeclose themortgage,I+3 after petitioners hadfailed to pay all the 9otes in full when

they fell due.+3 The e&tra>udicialsale and subse$uent proceedings aretherefore valid, but the allegedde;ciency claim cannot be recovered.

Auction Price Adeuate


49/137

the ful;llment of the principal loanobligation,+-1 the bid price may belower than the propertys fair market

value.+-+


50/137

of registration of the Certi;cate of =alewith the )egistry of 2eeds,++respondent 66 being the highest bidder 66

has the right to a writ of possession, the;nal process that will consummate thee&tra>udicial foreclosure. On the otherhand, petitioner6spouses, who aremortgagors herein, shall lose all theirrights to the property.+0

No $efciency "laim -ecei(a!le

fter the foreclosure and sale ofthe mortgaged property, the )eal GstateBortgage is e&tinguished. lthough the

mortgagors, being third persons, arenot liable for any de;ciency in theabsence of a contrary stipulation,+3the action for recovery of such amount66 being clearly sureties to the principalobligation 66 may still be directedagainst them.+- @owever,respondent may impose only thestipulated interest rates of +K. percentand 0+. percent on the respectiveavailments 66 sub>ect to the +0 percent


51/137

legal rate revision upon automaticconversion into medium6term loans 66plus + percent attorneys fees, without

additional charges on penalty, insuranceor any increases thereof.

ccordingly, the e&cessive interestrates in the =tatements of ccount sentto petitioners are reduced to +K.

percent and 0+. percent, as stipulatedin the (romissory 9otesD upon loanconversion, these rates are furtherreduced to the legal rate of +0 percent.(ayments made by petitioners are pro6rated, the charges on penalty and

insurance eliminated, and the resultingtotal unpaid principal and interest of(,J0,1FF.F1 as of the date of publicauction is then sub>ected to + percentattorneys fees. The total outstandingobligation is compared to the bid price.On the basis of these rates and thecomparison made, the de;ciency claimreceivable amounting to (0,+F0,-F.-3in fact vanishes.


52/137

as shown in the following =chedules:

SCHEDULE 1: PN (1) dra1do1n a!ount on J#&J$&

essA 8nterest deducted in ad-ance per J%@J$& Disclosure 7tate!ent9

/et proceeds

.rincipal

>ddA 8nterest at %&('2 p(a(

%J#$J$&)%#J@%J$& ',, 3 %&('2 3 *'J@'+9

%J%J&)%J'J& ',, 3 %&('2 3 *'J@'+9

>!ount due as of %J'J&

essA .ay!ent on %J'J& pro)rated upon interest9 Balance

>ddA

8nterest at %&('2 p(a(

%JJ&)@J@J& *',,)@',$#%(@+ 3 %&('2 3 *$4J@'+9

>!ount due as of @J@J&

essA .ay!ent on @J@J& pro)rated upon interest9

Balance


53/137

>ddA


@J@%J&)'J@%J& *',,)@',$#%(@+ 3 %&('2 3 *#J@'+9

>!ount due as of 'J@%J&

essA .ay!ent on 'J@%J& pro)rated upon interest9

Balance

>ddA


J%J&)J#&J& *',,)@',$#%(@K$#%(@@9+ 3 %&('2 3 *#&J@'+9

>!ount due as of J#&J&

essA .ay!ent on J#&J& pro)rated upon interest9

Balance

>ddA


J@J&)%#J@%J& *',,)@',$#%(@K$#%(@@K??,$?(+ 3 %&('2

%J%J&%)J#&J&% *',,)@',$#%(@K$#%(@@K??,$?(+ 3 %&('2 3

8nterest at %#2 p(a( upon auto!atic con-ersion

J@J&%)$J$J&% *',,)@',$#%(@K$#%(@@K??,$?(+ 3 %#2 3 *4


54/137

>!ount due as of $J$J&%

essA .ay!ent on $J$J&% pro)rated upon interest9

Balance >ddA

8nterest at %#2 p(a(

$J&J&%)$J%'J&% *',,)@',$#%(@K$#%(@@K??,$?(+ 3 %#2 3 *?

>!ount due as of $J%'J&%

essA .ay!ent on $J%'J&% pro)rated upon interest9

Balance

>ddA


$J%J&%)%%J#&J&% *',,)@',$#%(@K$#%(@@K??,$?(+ 3 %#2 3

>!ount due as of %%J#&J&%

essA .ay!ent on %%J#&J&% pro)rated upon interest9

Balance

>ddA


%%J@J&%)%#J#J&% *',,)@',$#%(@K$#%(@@K??,$?(+ 3 %#2

>!ount due as of %#J#J&%

essA .ay!ent on %#J#J&% pro)rated upon interest9


55/137

Balance

>ddA

8nterest at %#2 p(a( %#J#%J&%)%#J@%J&% *',,)@',$#%(@K$#%(@@K??,$?(+ 3 %#2

%J%J)#J#J *',,)@',$#%(@K$#%(@@K??,$?(+ 3 %#2 3 *'

>!ount due on ./ %9 as of #J#J

SCHEDULE 2: PN (2)dra1do1n a!ount on &J%J$&

essA 8nterest deducted in ad-ance per &J%J$& Disclosure 7tate!ent9

/et proceeds

.rincipal >ddA

8nterest at #%('2 p(a(

%#J@%J$& #,?, 3 #%('2 3 *%J@'+9

%J%J&)%J'J& #,?, 3 #%('2 3 *'J@'+9

>!ount due as of %J'J&

essA .ay!ent on %J'J& pro)rated upon interest9

Balance


56/137

>ddA


%JJ&)@J@J& *#,?,)%$,#&('+ 3 #%('2 3 *$4J@'+9



Balance

>ddA


@J@%J&)'J@%J& *#,?,)%$,#&('+ 3 #%('2 3 *#J@'+9



Balance

>ddA


J%J&)J#&J& *#,?,)%$,#&('K'#@(49+ 3 #%('2 3 *#&J@'+9


essA .ay!ent on J#&J& pro)rated upon interest9 Balance


57/137

>ddA


J@J&)%#J@%J& *#,?,)%$,#&('K'#@(4K4$$,4$4(##9+ 3 #%('2

%J%J&%)$J$J&% *#,?,)%$,#&('K'#@(4K4$$,4$4(##9+ 3 #%('2 3 *#



Balance

>ddA


$J&J&%)$J%'J&% *#,?,)%$,#&('K'#@(4K4$$,4$4(##9+ 3 #%('2 3 *



Balance

>ddA


$J%J&%)&J%J&% *#,?,)%$,#&('K'#@(4K4$$,4$4(##9+ 3 #%('2 3 *

8nterest at %#2 p(a( upon auto!atic con-ersion

&J#J&%)%%J#&J&% *#,?,)%$,#&('K'#@(4K4$$,4$4(##9+ 3 %#2 3 *$




58/137

Balance

>ddA

8nterest at %#2 p(a( %%J@J&%)%#J#J&% *#,?,)%$,#&('K'#@(4K4$$,4$4(##9+ 3 %#2 3



Balance

>ddA


%#J#%J&%)%#J@%J&% *#,?,)%$,#&('K'#@(4K4$$,4$4(##9+ 3 %#2 3

%J%J)#J#J *#,?,)%$,#&('K'#@(4K4$$,4$4(##9+ 3 %#2 3 *'?

>!ount due on ./ #9 as of #J#J

SCHEDULE 3: PN (3)dra1do1n a!ount on &JJ$& essA 8nterest deducted in ad-ance per &JJ$& Disclosure 7tate!ent9

/et proceeds

.rincipal


59/137

>ddA


%J'J& @, 3 #%('2 3 *%J@'+9 >!ount due as of %J'J&

essA .ay!ent on %J'J& pro)rated upon interest9

Balance

>ddA


%JJ&)@J@J& *@,)@@?(##+ 3 #%('2 3 *$4J@'+9



Balance

>ddA


@J@%J&)'J@%J& *@,)@@?(##+ 3 #%('2 3 *#J@'+9



Balance

>ddA



60/137

J%J&)J#&J& *@,)@@?(##K'$(449+ 3 #%('2 3 *#&J@'+9


essA .ay!ent on J#&J& pro)rated upon interest9 Balance

>ddA

8nterest at #%('2 p(a( J@J&)%#J@%J& *@,)@@?(##K'$(44K'4,'$@(%49+ 3 #%('2 3 *%$'J@

%J%J&%)$J$J&% *@,)@@?(##K'$(44K'4,'$@(%49++ 3 #%('2 3 *##J@'+9



Balance >ddA


$J&J&%)$J%'J&% *@,)@@?(##K'$(44K'4,'$@(%49++ 3 #%('2 3 *?J@'+9



Balance

>ddA


61/137


$J%J&%)&JJ&% *@,)@@?(##K'$(44K'4,'$@(%49++ 3 #%('2 3 *##J@'+9

8nterest at %#2 p(a( upon auto!atic con-ersion &J?J&%)%%J#&J&% *@,)@@?(##K'$(44K'4,'$@(%49++ 3 %#2 3 *$4J@'+9



Balance

>ddA


%%J@J&%)%#J#J&% *@,)@@?(##K'$(44K'4,'$@(%49++ 3 %#2 3 *#%J@'



Balance

>ddA


%#J#%J&%)%#J@%J&% *@,)@@?(##K'$(44K'4,'$@(%49++ 3 %#2 3 *%%J@'

%J%J)#J#J *@,)@@?(##K'$(44K'4,'$@(%49++ 3 %#2 3 *'?J@'+9

>!ount due on ./ @9 as of #J#J


62/137

SCHEDULE 4:>pplication of .ay!ents pon 8nterest

Date 8nterest

.aya"le .ro)rated

%J'J& ./ %9 . %$,&$(@ . '4@,$?(%

./ #9 &,'4#(4? #?,?'#(%#

./ @9 %?(?% '%@(&@

%&,?'(4$ '?#,?@('

@J@J& ./ %9 #$,@?('& %@,%$#($'

./ #9 %@#,&@('# %@,&%?(#$

./ @9 %4,$#?(%' %%,%%(?

@'',$&%(# #?$,?%%($@

'J@%J& ./ %9 %&$,&$'(& %&&,$(4#

./ #9 %#,?%(& %#?,#@&(?#

./ @9 %4,%'&(@ %4,#%?(?4


63/137

@@&,$%($ @4%,#@($&

J#&J& ./ %9 ?%,(?4 $@&,%#(

./ #9 4',$%( '@4,#$(%4

./ @9 ',%%?(& '&,?%(4

%##,$44(' %,4@#,&&&($4

$J$J&% ./ %9 $,@&(&& 4&@,&(@%

./ #9 '#@,%%@(&4 @#,@@($

./ @9 '$,4'#( @',?&(%

%,@$$,#('& $',(

$J%'J&% ./ %9 @#%,'#(%% $,'&@(@?

./ #9 #%%,$'#(@@ '?,@@(&

./ @9 #@,?#(@4 ,@?#(&@

''?,%?(?& %',(

%%J#&J&% ./ %9 @?,%&(## %%,&($%

./ #9 #4,&@?(&4 %4,$?#('

./ @9 #?,#4%(#@ %%,$'?(#4


64/137

@$,#$$(@& #??,$#(?

%#J#J&% ./ %9 #@',??(? %#,%%'(?$

./ #9 %'%,#4('% %@,&&(4'

./ @9 %?,?'(4 %%,?4%(@'

. 44,4?($' . #??,$#('?


65/137

on the notes, before deductions weremade from their respective principalamounts. The resulting decrease in

interest balances served as the basesfor subse$uent pro6ratings.

Third, payments were1ro1ortionately applied to all intereststhat were due and of the same nature

and burden.+F This legal principlewas the rationale for the pro6ratedcomputations shown on =chedule -.

Fourth, since there was nostipulation on capitaliAation, no

interests due and unpaid were added tothe principalD hence, such interests didnot earn any additional interest.+JThe simple 66 not compounded 66 methodof interest calculation+Kwas used onall 9otes until the date of publicauction.


66/137

in favor of (9', but rather an e&cessclaim or surplus+0 payable byrespondentD this e&cess should

immediately be returned to petitioner6spouses or their assigns 66 not tomention the buildings andimprovements+3on and the fruits ofthe property 66 to the end that no onemay be un>ustly enriched or bene;ted

at the e&pense of another.+- =uchsurplus is in the amount of (3,J,+1+.0, computed as follows:

Total unpaid principal and interest on the pro!issory notes as of Fe"ruary #, %&A Dra1do1n on une #&, %&$&

7chedule %9 .4,@?,#4(% Dra1do1n on 7epte!"er %,%&$&

7chedule#9 #,#$&,4(@$ Dra1do1n on 7epte!"er ,%&$&

7chedule @9#'',$@@(##

,'$#,??(? >ddA %2 attorneys fees


67/137

',$#(?$ Total outstandingo"ligation ,4?,$&$(4$ essA Bid price%,@@4,( E3cess .@,$,%%('#

Joint and Solidary A#reement.Contrary to the contention of thepetitioner6spouses, their /oint and=olidary greement 4/=5+ wasindubitably a surety, not a guaranty.+ They consented to be >ointly andseverally liable with (etitioner 9='C< 66the borrower 66 not only for the paymentof all sums due and payable in favor ofrespondent, but also for the faithful andprompt performance of all the termsand conditions thereof.+Fdditionally, the corporate secretary of

(etitioner 9='C< certi;ed as early as%ebruary 03, +KJK, that the spousesshould act as such surety.+J 'ut,their solidary liability should be


68/137

carefully studied, not sweepinglyassumed to cover all availmentsinstantly.

First, the /= was e&ecuted on

ugust 3+, +KJK. s correctly advertedto by petitioners,+K it covered onlythe (romissory 9otes of (0,F11,111 and(311,111 made after that date. The

terms of a contract of suretyshipundeniably determine the suretysliability+F1and cannot e&tend beyondwhat is stipulated therein.+F+ Pet, thetotal amount petitioner6spouses agreedto be held liable for was (F,F11,111D by

the time the /= was e&ecuted, the ;rst(romissory 9ote was still unpaid andwas thus brought within the /=sambit.+F0 Second, while the /= includedall costs, charges and e&penses thatrespondent might incur or sustain inconnection with the credit documents,+F3 only the interest was imposedunder the pertinent Creditgreements. Boreover, the relevant


69/137

(romissory 9otes had to be resorted tofor proper valuation of the interestscharged.

Third, although the /=, as a

contract of adhesion, should be takencontra 1ro%erentum against the partywho may have caused any ambiguitytherein, no such ambiguity was found.

(etitioner6spouses, who agreed to beaccommodation mortgagors,+F- canno longer be held individually liable forthe entire onerous obligation+Fbecause, as it turned out, it wasrespondent that still owed them.

To summariAe, to give full force tothe Truth in "ending ct, only theinterest rates of +K. percent and 0+.percent stipulated in the (romissory9otes may be imposed by respondenton the respective availments. fter F31days, the portions remaining unpaid areautomatically converted into medium6term loans at the legal rate of +0percent.


70/137

method of interest computation isfollowed. (ayments made bypetitioners are applied and pro6rated

according to basic legal principles.Charges on penalty and insurance areeliminated, and + percent attorneysfees imposed upon the total unpaidbalance of the principal and interest asof the date of public auction. The (0

million de;ciency claim thereforevanishes, and a refund of (3,J,+1+.0arises.

M@G)G%O)G, this (etition ishereby PA-TL2 3-ANT+$. The

2ecision of the Court of ppeals isAFFI-4+$, with the 4)$IFI"ATI)Nthat (9' is )-$+-+$ to refund thesum of (3,J,+1+.0 representing theovercollection computed above, plusinterest thereon at the legal rate of si&percent 4Q5 per annum from the ;lingof the Complaint until the ;nality of this2ecision. fter this 2ecision becomes;nal and e&ecutory, the applicable rateshall be twelve percent 4+0Q5 per


71/137

annum until its satisfaction. 9o costs.=O O)2G)G2.


72/137

THIRD DIVISION

UNITED COCONUTPLANTERS BANK,

Petitioner,

- versus -

SPOUSES SAMUEL and

ODETTE BELUSO,

Respondents.

G.R. No. 159912

Present:

YNARES-SANTIA

Chairperson,

AUSTRIA-MARTI

CICO-NAZARIONACURA, and

REYES,JJ.

Pro!"#$ated:

A"$"st %&, '((&)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - -)

* E C I S I O N

CICO-NAZARIO,J.:

This is a Petition +or Reie on Certiorari"nder


73/137

R"#e / o+ the R"#es o+ Co"rt, hi0h see1s to ann"# the

Co"rt o+ Appea#s *e0ision2%3 dated '% 4an"ar5 '((6

and its Reso#"tion2'3dated 7 Septe!8er '((6 in CA-

G.R. C9 No. &6%;. The assai#ed Co"rt o+ Appea#s*e0ision and Reso#"tion a++ir!ed in t"rn the

*e0ision263dated '6 Mar0h '((( and Order23dated ;

Ma5 '((( o+ the Re$iona# Tria# Co"rt ran0h /

o+ Ma1ati Cit5, in Cii# Case No. 77-6%, de0#arin$ oid

the interest rate proided in the pro!issor5 notes

e)e0"ted 85 the respondents Spo"ses Sa!"e# and Odette

>e#"so e#"so a Pro!issor5 Notes ?ine "nder a CreditA$ree!ent here85 the #atter 0o"#d aai# +ro! the

+or!er 0redit o+ "p to a !a)i!"! a!o"nt o+ P%.'

Mi##ion pesos +or a ter! endin$ on 6( Apri# %77&. The

spo"ses >e#"so 0onstit"ted, other than their pro!issor5

notes, a rea# estate !ort$a$e oer par0e#s o+ #and in

Ro)as Cit5, 0oered 85 Trans+er Certi+i0ates o+ Tit#e No.

T-6%/67 and T-'&;';, as additiona# se0"rit5 +or theo8#i$ation. The Credit A$ree!ent as s"8se@"ent#5

a!ended to in0rease the a!o"nt o+ the Pro!issor5

Notes ?ine to a !a)i!"! o+ P'.6/ Mi##ion pesos and to

e)tend the ter! thereo+ to '; e8r"ar5 %77;.


74/137

The spo"ses >e#"so aai#ed the!se#es o+ the

0redit #ine "nder the +o##oin$ Pro!issor5 Notes:

PN B *ate o+ PN Mat"rit5 *ate A!o"nt Se0"

;6%-7-(((;6-6 '7 Apri# %77 '& A"$"st %77 P &((,(((

;6%-7-(((;/-( ' Ma5 %77 6( A"$"st %77 P /((,(((

;6%-7-((('7'-' '( Noe!8er %77 '( Mar0h %77& P ;((,(((

The three pro!issor5 notes ere reneed seera#

ti!es. On 6( Apri# %77&, the pa5!ent o+ the prin0ipa#

and interest o+ the #atter to pro!issor5 notes ere

de8ited +ro! the spo"ses >e#"sos a00o"nt ith UCP>D

5et, a 0onso#idated #oan +or P%.6 Mi##ion as a$ain

re#eased to the spo"ses >e#"so "nder one pro!issor5

note ith a d"e date o+ '; e8r"ar5 %77;.

To 0o!p#ete#5 aai# the!se#es o+ the P'.6/

Mi##ion 0redit #ine e)tended to the! 85 UCP>, the

spo"ses >e#"so e)e0"ted to !ore pro!issor5 notes +or

a tota# o+ P6/(,(((.((:

PN B *ate o+ PN Mat"rit5 *ate A!o"nt S

7&-((66-% %% *e0e!8er %77& '; e8r"ar5 %77; P

7;-(((('- ' 4an"ar5 %77; '; e8r"ar5 %77; P


75/137

oeer, the spo"ses >e#"so a##e$ed that the a!o"nts

0oered 85 these #ast to pro!issor5 notes ere neer

re#eased or 0redited to their a00o"nt and, th"s, 0#ai!ed

that the prin0ipa# inde8tedness as on#5 P' Mi##ion.

In an5 0ase, UCP> app#ied interest rates on the

di++erent pro!issor5 notes ran$in$ +ro! %; to 6.

ro! %77 to e8r"ar5 %77; the spo"ses >e#"so ere

a8#e to pa5 the tota# s"! o+ P&6,7'.(6.

ro! '; e8r"ar5 %77; to %( 4"ne %77;, UCP>0ontin"ed to 0har$e interest and pena#t5 on the

o8#i$ations o+ the spo"ses >e#"so, as +o##os:

PN B A!o"nt Se0"red Interest Pena#t5

7&-((66-% P '((,((( 6% 6 P ''/

7&-((6- P &((,((( 6(.%&

de!anded that the

spo"ses >e#"so pa5 their tota# o8#i$ation o+


76/137

P',76',/6.(( p#"s '/ attorne5s +ees, 8"t the spo"ses

>e#"so +ai#ed to 0o!p#5 thereith. On '; *e0e!8er

%77;, UCP> +ore0#osed the properties !ort$a$ed 85 the

spo"ses >e#"so to se0"re their 0redit #ine, hi0h, 85 thatti!e, a#read5 8a##ooned to P6,&;,(6.((.

On 7 e8r"ar5 %777, the spo"ses >e#"so +i#ed a

Petition +or Ann"#!ent, A00o"ntin$ and *a!a$es

a$ainst UCP> ith the RTC o+ Ma1ati Cit5.

On '6 Mar0h '(((, the RTC r"#ed in +aor o+ thespo"ses >e#"so, disposin$ o+ the 0ase as +o##os:

PREMISES CONSI*ERE*, F"d$!ent is

here85 rendered de0#arin$ the interest rate "sed 85

2UCP>3 oid and the +ore0#os"re and Sheri++s

Certi+i0ate o+ Sa#e oid. 2UCP>3 is here85 ordered

to ret"rn to 2the spo"ses >e#"so3 the properties

s"8Fe0t o+ the +ore0#os"reD to pa5 2the spo"ses>e#"so3 the a!o"nt o+ P/(,(((.(( 85 a5 o+

attorne5s +eesD and to pa5 the 0osts o+ s"it. 2The

spo"ses >e#"so3 are here85 ordered to pa5 2UCP>3

the s"! o+ P%,/(,6(;.((.2/3

On ; Ma5 '(((, the RTC denied UCP>s Motion

+or Re0onsideration,23pro!ptin$ UCP> to appea# theRTC *e0ision ith the Co"rt o+ Appea#s. The Co"rt o+

Appea#s a++ir!ed the RTC *e0ision, to it:

EREORE, pre!ises 0onsidered, the

de0ision dated Mar0h '6, '((( o+ the Re$iona# Tria#


77/137

Co"rt, >ran0h /, Ma1ati Cit5 in Cii# Case No. 77-

6% is here85 AIRME* s"8Fe0t to the

!odi+i0ation that de+endant-appe##ant UCP> is not

#ia8#e +or attorne5s +ees or the 0osts o+ s"it.2&3

On 7 Septe!8er '((6, the Co"rt o+ Appea#s

denied UCP>s Motion +or Re0onsideration +or #a01 o+

!erit. UCP> th"s +i#ed the present petition, s"8!ittin$

the +o##oin$ iss"es +or o"r reso#"tion:

I

ETER OR NOT TE ONORA>?E COURT

O APPEA?S COMMITTE* SERIOUS AN*

RE9ERSI>?E ERROR EN IT AIRME*

TE *ECISION O TE TRIA? COURT IC

*EC?ARE* 9OI* TE PRO9ISION ON

INTEREST RATE AGREE* UPON >ETEEN

PETITIONER AN* RESPON*ENTS

II




TE COMPUTATION >Y TE TRIA? COURT O

RESPON*ENTS IN*E>TE*NESS AN*

OR*ERE* RESPON*ENTS TO PAY

PETITIONER TE AMOUNT O ON?Y ONE

MI??ION I9E UN*RE* SIHTY TOUSAN*

TREE UN*RE* EIGT PESOS


78/137

III



RE9ERSI>?E ERROR EN IT AIRME*TE *ECISION O TE TRIA? COURT IC

ANNU??E* TE OREC?OSURE >Y

PETITIONER O TE SU>4ECT PROPERTIES

*UE TO AN A??EGE* INCORRECT

COMPUTATIONJ O RESPON*ENTS

IN*E>TE*NESS

I9




TE *ECISION O TE TRIA? COURT IC

OUN* PETITIONER ?IA>?E OR 9IO?ATION

O TE TRUT IN ?EN*ING ACT

9



RE9ERSI>?E ERROR EN IT AI?E* TO

OR*ER TE *ISMISSA? O TE CASE

>ECAUSE TE RESPON*ENTS ARE GUI?TY

O ORUM SOPPING2;3

Vald!" o# !$% In!%&%'! Ra!%'

The Co"rt o+ Appea#s he#d that the i!position o+


79/137

interest in the +o##oin$ proision +o"nd in the

pro!issor5 notes o+ the spo"ses >e#"so is oid, as the

interest rates and the 8ases there+or ere deter!ined

so#e#5 85 petitioner UCP>:

OR 9A?UE RECEI9E*, I, andKor e, on

or 8e+ore d"e date, SPS. SAMUE? AN* O*ETTE

>E?USO ORROER=, Foint#5 and seera##5

pro!ise to pa5 to UNITE* COCONUT

P?ANTERS >ANL


80/137

a00o!!odationsD andKor the res"#tin$ pro+ita8i#it5

to the ?EN*ER a+ter d"e 0onsideration o+ a##

dea#in$s ith the >ORROER.2%(3

In this re$ard, UCP> aers that these are a#id

re+eren0e rates a1in to a preai#in$ rateJ or pri!e

rateJ a##oed 85 this Co"rt in Polotan v. Court of

Appeals.2%%3 "rther!ore, UCP> ar$"es that een i+

the proiso as deter!ined 85 the 8ran0h headJ is

0onsidered oid, s"0h a de0#aration o"#d not ipso facto

render the 0onne0tin$ 0#a"se indi0atie o+ *>* retai#

rateJ oid in ie o+ the separa8i#it5 0#a"se o+ the Credit

A$ree!ent, hi0h reads:

Se0tion 7.(; Separa8i#it5 C#a"se. I+ an5

one or !ore o+ the proisions 0ontained in this

AGREEMENT, or do0"!ents e)e0"ted in

0onne0tion hereith sha## 8e de0#ared ina#id,

i##e$a# or "nen+or0ea8#e in an5 respe0t, the a#idit5,

#e$a#it5 and en+or0ea8i#it5 o+ the re!ainin$

proisions hereo+ sha## not in an5 a5 8e a++e0ted

or i!paired.2%'3

A00ordin$ to UCP>, the i!position o+ the

@"estioned interest rates did not in+rin$e on the prin0ip#e

o+ !"t"a#it5 o+ 0ontra0ts, 8e0a"se the spo"ses >e#"so

had the #i8ert5 to 0hoose hether or not to rene their0redit #ine at the ne interest rates pe$$ed 85 petitioner.

2%63 UCP> a#so 0#ai!s that ass"!in$ there as an5

de+e0t in the !"t"a#it5 o+ the 0ontra0t at the ti!e o+ its

in0eption, s"0h de+e0t as 0"red 85 the s"8se@"ent


81/137

0ond"0t o+ the spo"ses >e#"so in aai#in$ the!se#es o+

the 0redit #ine +ro! Apri# %77 to e8r"ar5 %77; itho"t

airin$ an5 protest ith respe0t to the interest rates

i!posed 85 UCP>. A00ordin$ to UCP>, there+ore, thespo"ses >e#"so are in estoppe#.2%3

e a$ree ith the Co"rt o+ Appea#s, and +ind no

!erit in the 0ontentions o+ UCP>.

Arti0#e %6(; o+ the Cii# Code proides:

Art. %6(;. The 0ontra0t !"st 8ind 8oth

0ontra0tin$ partiesD its a#idit5 or 0o!p#ian0e

0annot 8e #e+t to the i## o+ one o+ the!.

e app#ied this proision inPhilippine National

Bank v. Court of Appeals,2%/3here e he#d:

In order that o8#i$ations arisin$ +ro!0ontra0ts !a5 hae the +or0e o+ #a 8eteen the

parties, there !"st 8e !"t"a#it5 8eteen the parties

8ased on their essentia# e@"a#it5. A 0ontra0t

0ontainin$ a 0ondition hi0h !a1es its +"#+i##!ent

dependent e)0#"sie#5 "pon the "n0ontro##ed i## o+

one o+ the 0ontra0tin$ parties, is oid


82/137

essentia# in 0ontra0ts. It o"#d hae inested the

#oan a$ree!ent ith the 0hara0ter o+ a 0ontra0t o+

adhesion, here the parties do not 8ar$ain on e@"a#

+ootin$, the ea1er part5s * retai# rate or as deter!ined85 the >ran0h eadJ is indeed dependent so#e#5 on the

i## o+ petitioner UCP>. Under s"0h proision,

petitioner UCP> has to 0hoi0es on hat the interest

rate sha## 8e: * retai# rateD

or


83/137

sa!e 0annot 8e 0onsidered as a#id +or 8ein$ a1in to a

preai#in$ rateJ or pri!e rateJ a##oed 85 this Co"rt

inPolotan. The interest rate inPolotanreads:

The Cardho#der a$rees to pa5 interest per ann"! at

6 p#"s the pri!e rate o+ Se0"rit5 >an1 and Tr"st

Co!pan5. ) ) ).2%3

In this proision inPolotan, there is a +i)ed !ar$in oer

the re+eren0e rate: 6. Th"s, the parties 0an easi#5

deter!ine the interest rate 85 app#5in$ si!p#e

arith!eti0. On the other hand, the proision in the 0aseat 8ar does not spe0i+5 an5 !ar$in a8oe or 8e#o the

*>* retai# rate. UCP> 0an pe$ the interest at an5

per0enta$e a8oe or 8e#o the *>* retai# rate, a$ain

$iin$ it "n+ettered dis0retion in deter!inin$ the interest

rate.

The stip"#ation in the pro!issor5 notes s"8Fe0tin$the interest rate to reie does not render the i!position

85 UCP> o+ interest rates on the o8#i$ations o+ the

spo"ses >e#"so a#id. A00ordin$ to said stip"#ation:

The interest rate sha## 8e s"8Fe0t to reie

and !a5 8e in0reased or de0reased 85 the ?EN*ER

0onsiderin$ a!on$ others the preai#in$ +inan0ia#and !onetar5 0onditionsD or the rate o+ interest and

0har$es hi0h other 8an1s or +inan0ia# instit"tions

0har$e or o++er to 0har$e +or si!i#ar

a00o!!odationsD andKor the res"#tin$ pro+ita8i#it5

to the ?EN*ER a+ter d"e 0onsideration o+ a##


84/137

dea#in$s ith the >ORROER.2%&3

It sho"#d 8e pointed o"t that the a"thorit5 to reie the

interest rate as $ien UCP> a#one as the #ender.

Moreoer, UCP> !a5 app#5 the 0onsiderations

en"!erated in this proision as it ishes. As orded in

the a8oe proision, UCP> !a5 $ie as !"0h ei$ht as

it desires to ea0h o+ the +o##oin$ 0onsiderations:


85/137

The interest rate proisions in the 0ase at 8ar are

i##e$a# not on#5 8e0a"se o+ the proisions o+ the Cii#

Code on !"t"a#it5 o+ 0ontra0ts, 8"t a#so, as sha## 8edis0"ssed #ater, 8e0a"se the5 io#ate the Tr"th in

?endin$ A0t. Not dis0#osin$ the tr"e +inan0e 0har$es in

0onne0tion ith the e)tensions o+ 0redit is, +"rther!ore,

a +or! o+ de0eption hi0h e 0annot 0o"ntenan0e. It is

a$ainst the po#i05 o+ the State as stated in the Tr"th in

?endin$ A0t:

Se0. '.Declaration of Policy. It is here85

de0#ared to 8e the po#i05 o+ the State to prote0t its

0itiens +ro! a #a01 o+ aareness o+ the tr"e 0ost o+

0redit to the "ser 85 ass"rin$ a +"## dis0#os"re o+

s"0h 0ost ith a ie o+ preentin$ the "nin+or!ed

"se o+ 0redit to the detri!ent o+ the nationa#

e0ono!5.2%73

Moreoer, hi#e the spo"ses >e#"so indeed

a$reed to rene the 0redit #ine, the o++endin$ proisions

are +o"nd in the pro!issor5 notes the!se#es, not in the

0redit #ine. In +i)in$ the interest rates in the pro!issor5

notes to 0oer the reneed 0redit #ine, UCP> sti##

resered to itse#+ the sa!e to options * retai# rateD or


86/137

UCP> asserts that hi#e 8oth the RTC and the

Co"rt o+ Appea#s oided the interest rates i!posed 85

UCP>, 8oth +ai#ed to in0#"de in their 0o!p"tation o+ the

o"tstandin$ o8#i$ation o+ the spo"ses >e#"so the #e$a#rate o+ interest o+ %' per ann"!. "rther!ore, the

pena#t5 0har$es ere a#so de#eted in the de0isions o+ the

RTC and the Co"rt o+ Appea#s. Se0tion '.(, Arti0#e II

on Interest and other >an1 Char$esJ o+ the s"8Fe0t

Credit A$ree!ent, proides:

Se0tion '.( Pena#t5 Char$es. In addition tothe interest proided +or in Se0tion '.(% o+ this

ARTIC?E, an5 prin0ipa# o8#i$ation o+ the C?IENT

here"nder hi0h is not paid hen d"e sha## 8e

s"8Fe0t to a pena#t5 0har$e o+ one per0ent


87/137

pena#t5 0har$e o+ one per0ent is the ne$ation o+ the Co!po"ndin$ Interesta$reed "pon 85 the parties "nder Se0tion '.(' o+ the

Credit A$ree!ent:

Se0tion '.(' Co!po"ndin$ Interest. Interest not

paid hen d"e sha## +or! part o+ the prin0ipa# and

sha## 8e s"8Fe0t to the sa!e interest rate as herein

stip"#ated.2'63

and para$raph 6 o+ the s"8Fe0t pro!issor5 notes:

Interest not paid hen d"e sha## 8e added to, and

8e0o!e part o+ the prin0ipa# and sha## #i1eise 8ear


88/137

interest at the sa!e rate.2'3

UCP> #ast#5 aers that the app#i0ation o+ the

spo"ses >e#"sos pa5!ents in the disp"ted 0o!p"tation

does not re+#e0t the parties a$ree!ent. The RTC

ded"0ted the pa5!ent !ade 85 the spo"ses >e#"so

a!o"ntin$ to P&6,76.(( +ro! the prin0ipa# o+

P',6/(,(((.((. This as a##e$ed#5 in0onsistent ith the

Credit A$ree!ent, as e## as ith the a$ree!ent o+ the

parties as to the +a0ts o+ the 0ase. In para$raph & o+ the

spo"ses >e#"sos Mani+estation and Motion on Proposed

Stip"#ation o+ a0ts and Iss"es vis--vis UCP>s

Mani+estation, the parties a$reed that the a!o"nt o+

P&6,76.(( as app#ied to the interest and not to the

prin0ipa#, in a00ord ith Se0tion 6.(6, Arti0#e II o+ the

Credit A$ree!ent on Order o+ the App#i0ation o+

Pa5!ents,J hi0h proides:

Se0tion 6.(6 App#i0ation o+ Pa5!ent.

Pa5!ents !ade 85 the C?IENT sha## 8e app#ied in

a00ordan0e ith the +o##oin$ order o+ pre+eren0e:

%. A00o"nts re0eia8#e and other o"t-o+-

po01et e)penses

'. ront-end ee, Ori$ination ee,

Attorne5s ee and other e)penses o+0o##e0tionD

6. Pena#t5 0har$esD

. Past d"e interestD

/. Prin0ipa# a!ortiationKPa5!ent in

arrearsD


89/137

. Adan0e interestD

&. O"tstandin$ 8a#an0eD and

;. A## other o8#i$ations o+ C?IENT to the

>ANL, i+ an5.2'/3

Th"s, a00ordin$ to UCP>, the interest 0har$es,

pena#t5 0har$es, and attorne5s +ees had 8een

erroneo"s#5 e)0#"ded 85 the RTC and the Co"rt o+

Appea#s +ro! the 0o!p"tation o+ the tota# a!o"nt d"e

and de!anda8#e +ro! spo"ses >e#"so.

The spo"ses >e#"sos de+ense as to a## these

iss"es is that the de!and !ade 85 UCP> is +or a

0onsidera8#5 8i$$er a!o"nt and, there+ore, the de!and

sho"#d 8e 0onsidered oid. There 8ein$ no a#id

de!and, a00ordin$ to the spo"ses >e#"so, there o"#d

8e no de+a"#t, and there+ore the interests and pena#ties

o"#d not 0o!!en0e to r"n. As it as #i1eisei!proper to +ore0#ose the !ort$a$ed properties or +i#e a

0ase a$ainst the spo"ses >e#"so, attorne5s +ees ere not

arranted.

e a$ree ith UCP> on this s0ore. *e+a"#t

0o!!en0es "pon F"di0ia# or e)traF"di0ia# de!and.2'3

The e)0ess a!o"nt in s"0h a de!and does not n"##i+5the de!and itse#+, hi0h is a#id ith respe0t to the

proper a!o"nt. A 0ontrar5 r"#in$ o"#d p"t 0o!!er0ia#

transa0tions in disarra5, as a#idit5 o+ de!ands o"#d 8e

dependent on the e)a0tness o+ the 0o!p"tations thereo+,


90/137

hi0h are too o+ten 0ontested.

There 8ein$ a a#id de!and on the part o+ UCP>,

a#8eit e)0essie, the spo"ses >e#"so are 0onsidered inde+a"#t ith respe0t to the proper a!o"nt and, there+ore,

the interests and the pena#ties 8e$an to r"n at that point.

As re$ards the aard o+ %' #e$a# interest in

+aor o+ petitioner, the RTC a0t"a##5 re0o$nied that

said #e$a# interest sho"#d 8e i!posed, th"s: There 8ein$

no a#id stip"#ation as to interest, the #e$a# rate o+interest sha## 8e 0har$ed.J2'&3 It see!s that the RTC

inadertent#5 oer#oo1ed its non-in0#"sion in its

0o!p"tation.

The spo"ses >e#"so had een ori$ina##5 as1ed +or

the RTC to i!pose this #e$a# rate o+ interest in 8oth the

8od5 and the pra5er o+ its petition ith the RTC:

%'. Sin0e the proision on the +i)in$ o+ the

rate o+ interest 85 the so#e i## o+ the respondent

>an1 is n"## and oid, on#5 the #e$a# rate o+ interest

hi0h is %' per ann"! 0an 8e #e$a##5 0har$ed and

i!posed 85 the 8an1, hi0h o"#d a!o"nt to on#5

a8o"t P/77,(((.(( sin0e %77 "p to A"$"st 6%,

%77;.

) ) ) )

EREORE, in ie o+ the +ore$oin$,

petiitoners pra5 +or F"d$!ent or order:


91/137

) ) ) )

'. >5 a5 o+ e)a!p#e +or the p"8#i0 $ood

a$ainst the >an1s ta1in$ "n+air adanta$e o+ theea1er part5 to their 0ontra0t, de0#arin$ the #e$a#

rate o+ %' per ann"!, as the i!posa8#e rate o+

interest "p to e8r"ar5 ';, %777 on the #oan o+

'.6/( !i##ion.2';3

A## these sho that the spo"ses >e#"so had

a01no#ed$ed 8e+ore the RTC their o8#i$ation to pa5 a%' #e$a# interest on their #oans. hen the RTC +ai#ed

to in0#"de the %' #e$a# interest in its 0o!p"tation,

hoeer, the spo"ses >e#"so !ere#5 de+ended in the

appe##ate 0o"rts this non-in0#"sion, as the sa!e as

8ene+i0ia# to the!. e see, hoeer, s"++i0ient 8asis to

i!pose a %' #e$a# interest in +aor o+ petitioner in the

0ase at 8ar, as hat e hae oided is !ere#5 thestip"#ated rate o+ interest and not the stip"#ation that the

#oan sha## earn interest.

e !"st #i1eise "pho#d the 0ontra0t stip"#ation

proidin$ the 0o!po"ndin$ o+ interest. The proisions

in the Credit A$ree!ent and in the pro!issor5 notes

proidin$ +or the 0o!po"ndin$ o+ interest ere neithern"##i+ied 85 the RTC or the Co"rt o+ Appea#s, nor

assai#ed 85 the spo"ses >e#"so in their petition ith the

RTC. The 0o!po"ndin$ o+ interests has +"rther!ore

8een de0#ared 85 this Co"rt to 8e #e$a#. e hae he#d in


92/137

Tan v. Court of Appeals,2'73that:

itho"t preF"di0e to the proisions o+

Arti0#e ''%', interest d"e and "npaid sha## not earn

interest. Ho+%%&, !$% -on!&a-!n )a&!%' (a" /"

'!)*la!on -a)!al0% !$% n!%&%'! d*% and

*n)ad, +$-$ a' add%d )&n-)al, '$all %a&n n%+

n!%&%'!.

As re$ards the i!position o+ pena#ties, hoeer,

a#tho"$h e are #i1eise "pho#din$ the i!positionthereo+ in the 0ontra0t, e +ind the rate ini@"ito"s. ?i1e

in the 0ase o+ $ross#5 e)0essie interests, the pena#t5

stip"#ated in the 0ontra0t !a5 a#so 8e red"0ed 85 the

0o"rts i+ it is ini@"ito"s or "n0ons0iona8#e.26(3

e +ind the pena#t5 i!posed 85 UCP>, ran$in$

+ro! 6(.% to 6, to 8e ini@"ito"s 0onsiderin$ the+a0t that this pena#t5 is a#read5 oer and a8oe the

0o!po"nded interest #i1eise i!posed in the 0ontra0t.

I+ a 6 interest in itse#+ has 8een de0#ared

"n0ons0iona8#e 85 this Co"rt,26%3hat !ore a 6(.%

to 6 pena#t5, oer and a8oe the pa5!ent o+

0o!po"nded interest UCP> itse#+ !"st hae rea#ied

this, as it $ae "s a sa!p#e 0o!p"tation o+ the spo"ses>e#"sos o8#i$ation i+ 8oth the interest and the pena#t5

0har$e are red"0ed to %'.

As re$ards the attorne5s +ees, the spo"ses >e#"so


93/137

0an a0t"a##5 8e #ia8#e there+or een i+ there had 8een no

de!and. i#in$ a 0ase in 0o"rt is the F"di0ia# de!and

re+erred to in Arti0#e %%726'3o+ the Cii# Code, hi0h

o"#d p"t the o8#i$or in de#a5.

The RTC, hoeer, a#so he#d UCP> #ia8#e +or

attorne5s +ees in this 0ase, as the spo"ses >e#"so ere

+or0ed to #iti$ate the iss"e on the i##e$a#it5 o+ the interest

rate proision o+ the pro!issor5 notes. The aard o+

attorne5s +ees, it !"st 8e re0a##ed, +a##s "nder the so"nd

dis0retion o+ the 0o"rt.2663 Sin0e 8oth parties ere+or0ed to #iti$ate to prote0t their respe0tie ri$hts, and

8oth are entit#ed to the aard o+ attorne5s +ees +ro! the

other, pra0ti0a# reasons di0tate that e set o++ or

0o!pensate 8oth parties #ia8i#ities +or attorne5s +ees.

There+ore, instead o+ aardin$ attorne5s +ees in +aor

o+ petitioner, e sha## !ere#5 a++ir! the de#etion o+ the

aard o+ attorne5s +ees to the spo"ses >e#"so.

In s"!, e ho#d that spo"ses >e#"so sho"#d sti##

8e he#d #ia8#e +or a 0o!po"nded #e$a# interest o+ %'

per ann"! and a pena#t5 0har$e o+ %' per ann"!. e

a#so ho#d that, instead o+ aardin$ attorne5s +ees in

+aor o+ petitioner, e sha## !ere#5 a++ir! the de#etion

o+ the aard o+ attorne5s +ees to the spo"ses >e#"so.

Ann*l(%n! o# !$% o&%-lo'*&% Sal%

Properties o+ spo"ses >e#"so had 8een +ore0#osed,


94/137

tit#es to hi0h had a#read5 8een 0onso#idated on %7

e8r"ar5 '((% and '( Mar0h '((% in the na!e o+

UCP>, as the spo"ses >e#"so +ai#ed to e)er0ise their

ri$ht o+ rede!ption hi0h e)pired on '/ Mar0h '(((.The RTC, hoeer, ann"##ed the +ore0#os"re o+

!ort$a$e 8ased on an a##e$ed in0orre0t 0o!p"tation o+

the spo"ses >e#"sos inde8tedness.

UCP> a##e$es that none o+ the $ro"nds +or the

ann"#!ent o+ a +ore0#os"re sa#e are present in the 0ase at

8ar. "rther!ore, the ann"#!ent o+ the +ore0#os"repro0eedin$s and the 0erti+i0ates o+ sa#e ere !ooted 85

the s"8se@"ent iss"an0e o+ ne 0erti+i0ates o+ tit#e in the

na!e o+ said 8an1. UCP> 0#ai!s that the spo"ses

>e#"sos a0tion +or ann"#!ent o+ +ore0#os"re 0onstit"tes

a 0o##atera# atta01 on its 0erti+i0ates o+ tit#e, an a0t

pros0ri8ed 85 Se0tion ; o+ Presidentia# *e0ree No.

%/'7, otherise 1non as the Propert5 Re$istration*e0ree, hi0h proides:

Se0tion ;. Certificate not subect to

collateral attack. A 0erti+i0ate o+ tit#e sha## not 8e

s"8Fe0t to 0o##atera# atta01. It 0annot 8e a#tered,

!odi+ied or 0an0e##ed e)0ept in a dire0t pro0eedin$

in a00ordan0e ith #a.

The spo"ses >e#"so retort that sin0e the5 had the

ri$ht to re+"se pa5!ent o+ an e)0essie de!and on their

a00o"nt, the5 0annot 8e said to 8e in de+a"#t +or re+"sin$


95/137

to pa5 the sa!e. Conse@"ent#5, a00ordin$ to the spo"ses

>e#"so, the en+or0e!ent o+ s"0h i##e$a# and

oer0har$ed de!and thro"$h +ore0#os"re o+ !ort$a$eJ

sho"#d 8e oided.

e a$ree ith UCP> and a++ir! the a#idit5 o+

the +ore0#os"re pro0eedin$s. Sin0e e a#read5 +o"nd

that a a#id de!and as !ade 85 UCP> "pon the

spo"ses >e#"so, despite 8ein$ e)0essie, the spo"ses

>e#"so are 0onsidered in de+a"#t ith respe0t to the

proper a!o"nt o+ their o8#i$ation to UCP> and, th"s,the propert5 the5 !ort$a$ed to se0"re s"0h a!o"nts

!a5 8e +ore0#osed. Conse@"ent#5, pro0eeds o+ the

+ore0#os"re sa#e sho"#d 8e app#ied to the e)tent o+ the

a!o"nts to hi0h UCP> is ri$ht+"##5 entit#ed.

As ar$"ed 85 UCP>, none o+ the $ro"nds +or the

ann"#!ent o+ a +ore0#os"re sa#e are present in this 0ase.The $ro"nds +or the proper ann"#!ent o+ the +ore0#os"re

sa#e are the +o##oin$:


96/137

The RTC, a++ir!ed 85 the Co"rt o+ Appea#s,

i!posed a +ine o+ P',(((.(( +or UCP>s a##e$ed

io#ation o+ Rep"8#i0 A0t No. 6&/, otherise 1non asthe Tr"th in ?endin$ A0t.

UCP> 0ha##en$es this i!position, on the

ar$"!ent that Se0tion , the Co"rt o+ Appea#s een

stated that 2a3d!itted#5 the ori$ina# 0o!p#aint did not

e)p#i0it#5 a##e$e a io#ation o+ the Tr"th in ?endin$

A0t and no a0tion to +or!a##5 ad!it the a!ended


97/137

petition 2hi0h e)press#5 a##e$es io#ation o+ the Tr"th

in ?endin$ A0t3 as !ade either 85 2respondents3

spo"ses >e#"so and the #oer 0o"rt. ) ) ).J26/3

UCP> +"rther 0#ai!s that the a0tion to re0oer the

pena#t5 +or the io#ation o+ the Tr"th in ?endin$ A0t had

8een 8arred 85 the one-5ear pres0riptie period

proided +or in the A0t. UCP> asserts that per the

re0ords o+ the 0ase, the #atest o+ the s"8Fe0t pro!issor5

notes had 8een e)e0"ted on ' 4an"ar5 %77;, 8"t the

ori$ina# petition o+ the spo"ses >e#"so as +i#ed 8e+orethe RTC on 7 e8r"ar5 %777, hi0h as a+ter the

e)piration o+ the period to +i#e the sa!e on ' 4an"ar5

%777.

On the !atter o+ a##e$ation o+ the io#ation o+ the

Tr"th in ?endin$ A0t, the Co"rt o+ Appea#s r"#ed:

Ad!itted#5 the ori$ina# 0o!p#aint did not

e)p#i0it#5 a##e$e a io#ation o+ the Tr"th in ?endin$

A0t and no a0tion to +or!a##5 ad!it the a!ended

petition as !ade either 85 2respondents3 spo"ses

>e#"so and the #oer 0o"rt. In s"0h transa0tions,

the de8tor and the #endin$ instit"tions do not dea#

on an e@"a# +ootin$ and this #a as intended to

prote0t the p"8#i0 +ro! hidden or "ndis0#osed0har$es on their #oan o8#i$ations, re@"irin$ a +"##

dis0#os"re thereo+ 85 the #ender. e +ind that its

in+rin$e!ent !a5 8e in+erred or i!p#ied +ro!

a##e$ations that hen 2respondents3 spo"ses >e#"so

e)e0"ted the pro!issor5 notes, the interest rate


98/137

0har$ea8#e thereon ere #e+t 8#an1. Th"s,

2petitioner3 UCP> +ai#ed to dis0har$e its d"t5 to

dis0#ose in +"## to 2respondents3 Spo"ses >e#"so the

0har$es app#i0a8#e on their #oans.263

e a$ree ith the Co"rt o+ Appea#s. The

a##e$ations in the 0o!p#aint, !"0h !ore than the tit#e

thereo+, are 0ontro##in$. Other than that stated 85 the

Co"rt o+ Appea#s, e +ind that the a##e$ation o+ io#ation

o+ the Tr"th in ?endin$ A0t 0an a#so 8e in+erred +ro!

the sa!e a##e$ation in the 0o!p#aint e dis0"ssedear#ier:

8.= In "ni#atera##5 i!posin$ an in0reased

interest rates ran0h ead o+ the respondent >an1, ) ) ).26&3

The a##e$ation that the pro!issor5 notes $rant

UCP> the poer to "ni#atera##5 +i) the interest rates

0ertain#5 a#so !eans that the pro!issor5 notes do not

0ontain a 0#ear state!ent in ritin$J o+


99/137


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an5 re$"#ation iss"ed there"nder sha## 8e #ia8#e to

s"0h person in the a!o"nt o+ P%(( or in an a!o"nt

e@"a# to ti0e the +inan0e 0har$e re@"ired 85 s"0h

0reditor in 0onne0tion ith s"0h transa0tion,

hi0heer is the $reater, e)0ept that s"0h #ia8i#it5sha## not e)0eed P',((( on an5 0redit transa0tion.

A0tion to re0oer s"0h pena#t5 !a5 8e 8ro"$ht 85

s"0h person ithin one 5ear +ro! the date o+ the

o00"rren0e o+ the io#ation, in an5 0o"rt o+

0o!petent F"risdi0tion. In an5 a0tion "nder this

s"8se0tion in hi0h an5 person is entit#ed to a

re0oer5, the 0reditor sha## 8e #ia8#e +or reasona8#e

attorne5s +ees and 0o"rt 0osts as deter!ined 85 the0o"rt.

) ) ) )


101/137

o+ P%(( or in an a!o"nt e@"a# to ti0e the +inan0e

0har$e re@"ired 85 the 0reditor in 0onne0tion ith s"0h

transa0tion, hi0heer is $reater, e)0ept that the #ia8i#it5

sha## not e)0eed P',(((.(( on an5 0redit transa0tion.The a0tion to re0oer s"0h pena#t5 !a5 8e instit"ted 85

the a$$rieed priate person separate#5 and

independent#5 +ro! the 0ri!ina# 0ase +or the sa!e

o++ense.

In the 0ase at 8ar, there+ore, the 0ii# a0tion to

re0oer the pena#t5 "nder Se0tion


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0a"ses o+ a0tion +a##s ithin the F"risdi0tion o+ said

0o"rt and the en"e #ies thereinD and

is a0t"a##5 assertin$

a io#ation o+ d"e pro0ess. Indeed, d"e pro0ess!andates that a de+endant sho"#d 8e s"++i0ient#5

apprised o+ the !atters he or she o"#d 8e de+endin$

hi!se#+ or herse#+ a$ainst. oeer, in the % 4"#5 %777

pre-tria# 8rie+ +i#ed 85 the spo"ses >e#"so 8e+ore the

RTC, the 0#ai! +or 0ii# san0tions +or io#ation o+ the

Tr"th in ?endin$ A0t as e)press#5 a##e$ed, th"s:

Moreoer, sin0e +ro! the start, respondent 8an1

io#ated the Tr"th in ?endin$ A0t in not in+or!in$

the 8orroer in ritin$ 8e+ore the e)e0"tion o+ the

Pro!issor5 Notes o+ the interest rate e)pressed as a

per0enta$e o+ the tota# #oan, the respondent 8an1

instead is #ia8#e to pa5 petitioners do"8#e the

a!o"nt the 8an1 is 0har$in$ petitioners 85 a5 o+

san0tion +or its io#ation.2%3

In the sa!e pre-tria# 8rie+, the spo"ses >e#"so

a#so e)press#5 raised the +o##oin$ iss"e:


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8.= *oes the e)pression indi0atie rate o+

*>* retai#


104/137

Re$iona# Tria# Co"rt proided one o+ the 0a"ses o+

a0tion +a##s ithin the F"risdi0tion o+ said 0o"rt and

the en"e #ies therein.

"rther!ore, openin$ a 0redit #ine does not 0reate

a 0redit transa0tion o+ #oan or %utuu%, sin0e the +or!er

is !ere#5 a preparator5 0ontra0t to the 0ontra0t o+ #oan

or %utuu%. Under s"0h 0redit #ine, the 8an1 is !ere#5

o8#i$ed, +or the 0onsiderations spe0i+ied there+or, to #end

to the other part5 a!o"nts not e)0eedin$ the #i!it

proided. The 0redit transa0tion th"s o00"rred not henthe 0redit #ine as opened, 8"t rather hen the 0redit

#ine as aai#ed o+. In the 0ase at 8ar, the io#ation o+

the Tr"th in ?endin$ A0t a##e$ed#5 o00"rred not hen

the parties e)e0"ted the Credit A$ree!ent, here no

interest rate as !entioned, 8"t hen the parties

e)e0"ted the pro!issor5 notes, here the a##e$ed#5

o++endin$ interest rate as stip"#ated.

UCP> +"rther ar$"es that sin0e the spo"ses

>e#"so ere d"#5 $ien 0opies o+ the s"8Fe0t pro!issor5

notes a+ter their e)e0"tion, then the5 ere d"#5 noti+ied

o+ the ter!s thereo+, in s"8stantia# 0o!p#ian0e ith the

Tr"th in ?endin$ A0t.

On0e !ore, e disa$ree. Se0tion o+ the Tr"th

in ?endin$ A0t 0#ear#5 proides that the dis0#os"re

state!ent !"st 8e +"rnished prior to the 0ons"!!ation

o+ the transa0tion:


105/137

SEC. . An5 0reditor sha## +"rnish to ea0h

person to ho! 0redit is e)tended, )&o& !o !$%

-on'*((a!on o# !$% !&an'a-!on, a 0#ear

state!ent in ritin$ settin$ +orth, to the e)tent

app#i0a8#e and in a00ordan0e ith r"#es and

re$"#ations pres0ri8ed 85 the >oard, the +o##oin$

in+or!ation:


106/137

The rationa#e o+ this proision is to prote0t "sers

o+ 0redit +ro! a #a01 o+ aareness o+ the tr"e 0ost

thereo+, pro0eedin$ +ro! the e)perien0e that 8an1s are

a8#e to 0on0ea# s"0h tr"e 0ost 85 hidden 0har$es,

"n0ertaint5 o+ interest rates, ded"0tion o+ interests +ro!

the #oaned a!o"nt, and the #i1e. The #a there85 see1s

to prote0t de8tors 85 per!ittin$ the! to +"##5 appre0iate

the tr"e 0ost o+ their #oan, to ena8#e the! to $ie +"##

0onsent to the 0ontra0t, and to proper#5 ea#"ate their

options in arriin$ at 8"siness de0isions. Upho#din$

UCP>s 0#ai! o+ s"8stantia# 0o!p#ian0e o"#d de+eat

these p"rposes o+ the Tr"th in ?endin$ A0t. The 8e#ated

dis0oer5 o+ the tr"e 0ost o+ 0redit i## too o+ten not 8e

a8#e to reerse the i## e++e0ts o+ an a#read5 0ons"!!ated

8"siness de0ision.

In addition, the pro!issor5 notes, the 0opies o+

hi0h ere presented to the spo"ses >e#"so a+ter

e)e0"tion, are not s"++i0ient noti+i0ation +ro! UCP>.

As ear#ier dis0"ssed, the interest rate proision therein

does not s"++i0ient#5 indi0ate ith parti0"#arit5 the

interest rate to 8e app#ied to the #oan 0oered 85 said

pro!issor5 notes.

o&*( S$o))n

UCP> had ear#ier !oed to dis!iss the petition


107/137

e#"so instit"ted another

0ase e#"sos A!ended Petition in Cii# Case No. 9-&''&, hi0h 0ontains si!i#ar a##e$ations as those in the

present 0ase. The RTC o+ Ma1ati denied UCP>s

Motion to *is!iss Case No. 77-6% +or #a01 o+ !erit.

Petitioner UCP> raised the sa!e iss"e ith the Co"rt o+

Appea#s, and is raisin$ the sa!e iss"e ith "s no.

The spo"ses >e#"so 0#ai! that the iss"e in Cii#Case No. 9-&''& 8e+ore the RTC o+ Ro)as Cit5, a

Petition +or InF"n0tion A$ainst ore0#os"re, is the

propriet5 o+ the +ore0#os"re 8e+ore the tr"e a00o"nt o+

spo"ses >e#"so is deter!ined. On the other hand, the

iss"e in Case No. 77-6% 8e+ore the RTC o+ Ma1ati Cit5

is the a#idit5 o+ the interest rate proision. The spo"ses

>e#"so 0#ai! that Cii# Case No. 9-&''& has 8e0o!e!oot 8e0a"se, 8e+ore the RTC o+ Ro)as Cit5 0o"#d a0t

on the restrainin$ order, UCP> pro0eeded ith the

+ore0#os"re and a"0tion sa#e. As the a0t so"$ht to 8e

restrained 85 Cii# Case No. 9-&''& has a#read5 8een


108/137

a00o!p#ished, the spo"ses >e#"so had to +i#e a di++erent

a0tion, that o+ Ann"#!ent o+ the ore0#os"re Sa#e, Case

No. 77-6% ith the RTC, Ma1ati Cit5.

Een i+ e ass"!e +or the sa1e o+ ar$"!ent,

hoeer, that on#5 one 0a"se o+ a0tion is ino#ed in the

to 0ii# a0tions, na!e#5, the io#ation o+ the ri$ht o+

the spo"ses >e#"so not to hae their propert5 +ore0#osed

+or an a!o"nt the5 do not oe, the R"#es o+ Co"rt

neerthe#ess a##os the +i#in$ o+ the se0ond a0tion. Cii#

Case No. 9-&''& as dis!issed 85 the RTC o+ Ro)asCit5 8e+ore the +i#in$ o+ Case No. 77-6% ith the RTC

o+ Ma1ati Cit5, sin0e the en"e o+ #iti$ation as proided

+or in the Credit A$ree!ent is in Ma1ati Cit5.

R"#e %, Se0tion / 8ars the re+i#in$ o+ an a0tion

preio"s#5 dis!issed on#5 in the +o##oin$ instan0es:

SEC. /.&ffect of#is%issal.VS"8Fe0t to the

ri$ht o+ appea#, an order $rantin$ a !otion to

dis!iss 8ased on para$raphs


109/137

p#eadin$ assertin$ a 0#ai!, a !otion to dis!iss !a5

8e !ade on an5 o+ the +o##oin$ $ro"nds:


110/137

hen an a0tion is dis!issed on the !otion o+ the

other part5, it is on#5 hen the $ro"nd +or the dis!issa#

o+ an a0tion is +o"nd in para$raphs , hoeer, 8rin$s to the attention o+ this

Co"rt a Motion +or Re0onsideration +i#ed 85 the spo"ses

>e#"so on %/ 4an"ar5 %777 ith the RTC o+ Ro)as Cit5,

hi0h Motion had not 5et 8een r"#ed "pon hen the

spo"ses >e#"so +i#ed Cii# Case No. 77-6% ith the

RTC o+ Ma1ati. en0e, there ere a##e$ed#5 topendin$ a0tions 8eteen the sa!e parties on the sa!e

iss"e at the ti!e o+ the +i#in$ o+ Cii# Case No. 77-6%

on 7 e8r"ar5 %777 ith the RTC o+ Ma1ati. This i##

sti## not 0han$e o"r +indin$s. It is indeed the $enera#

r"#e that in 0ases here there are to pendin$ a0tions

8eteen the sa!e parties on the sa!e iss"e, it sho"#d 8e

the #ater 0ase that sho"#d 8e dis!issed. oeer, thisr"#e is not a8so#"te. A00ordin$ to this Co"rt in Allie#

Bankin! Corporation v. Court of Appeals2/3:

In these 0ases, it is eident that the +irst

a0tion as +i#ed in anti0ipation o+ the +i#in$ o+ the


111/137

#ater a0tion and the p"rpose is to pree!pt the #ater

s"it or proide a 8asis +or see1in$ the dis!issa# o+

the se0ond a0tion.

E%n # !$' ' no! !$% )*&)o'% #o& !$%#ln o# !$% #&'! a-!on, ! (a" n%%&!$%l%'' /%

d'(''%d # !$% la!%& a-!on ' !$% (o&%

a))&o)&a!% %$-l% #o& !$% %n!la!on o# !$%

''*%' /%!+%%n !$% )a&!%'. Th"s, in )a%os v.

Peralta,it as he#d:

2T3he r"#e on

Documents

PrefinALS and Finals Cases Notes