Case Digest (G.R. No. 130759)
Facts:
The case involves Asiatrust Development Bank as the petitioner and Concepts Trading Corporation as the respondent. The events leading to the case began in March 1996 when Concepts Trading Corporation secured a credit accommodation of P2,000,000 from Asiatrust Development Bank, which was formalized through a loan agreement and secured by real and chattel mortgages. The loan was documented in Promissory Note No. 3574, which stipulated an interest rate of 23% per annum, inclusive of a 1% service fee, with a repayment schedule that required quarterly payments over ten years, including a two-year grace period for principal payments.
The first payment was due on May 15, 1986, but Concepts defaulted on the amortizations due on August 15 and November 15, 1987. Consequently, Asiatrust invoked the acceleration clause in the promissory note, demanding full payment of the outstanding obligation amounting to P3,203,049. In response, Concepts expressed willingness to settle and proposed...
Case Digest (G.R. No. 130759)
Facts:
Loan Agreement and Promissory Note
- In March 1986, respondent Concepts Trading Corporation obtained a P2,000,000 loan from petitioner Asiatrust Development Bank, secured by real and chattel mortgages.
- The loan was covered by Promissory Note (PN) No. 3574, with a 23% annual interest rate, inclusive of a 1% service fee.
- The loan was to be amortized quarterly over ten years, with a two-year grace period on principal payments.
Default and Acceleration Clause
- The respondent failed to pay the amortizations due on August 15 and November 15, 1987.
- The petitioner enforced the acceleration clause, making the entire loan due and demandable.
Memorandum of Agreement (MOA)
- On March 30, 1988, the parties entered into an MOA, wherein the respondent agreed to pay the loan in monthly installments of P150,000, starting May 5, 1988.
- The MOA acknowledged that the loan was overdue and demandable, including all interests, penalties, and charges.
Payments and Dispute
- The respondent made payments under the MOA but failed to deliver the last set of checks as required.
- The petitioner demanded full payment of the outstanding obligation, leading the respondent to file a petition for declaratory relief, alleging overpayment and seeking a refund.
Trial Court and Court of Appeals Decisions
- The trial court dismissed the respondent's complaint and ordered it to pay the petitioner P395,210.30, with interest.
- The Court of Appeals modified the decision, reducing the outstanding balance to P309,298.58 and lowering the penalty from 36% to 3% per annum.
Issue:
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Ruling:
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Ratio:
Waiver of Penalties
- The MOA's new payment schedule superseded the original terms of the promissory note, rendering the loan no longer due and demandable in its entirety.
- The petitioner could only impose penalties if the respondent defaulted under the MOA's terms.
Probative Value of Evidence
- The MOA, as a written agreement, contained all the terms agreed upon by the parties. Parol evidence could not be used to contradict its terms.
- The petitioner's statement of account was inconsistent with the MOA and lacked probative value.
Equitable Reduction of Penalty
- Courts have the authority to reduce penalties under Article 1229 of the Civil Code, especially when the principal obligation has been partially complied with.
- The reduction of the penalty from 36% to 3% was justified, given the respondent's partial compliance and the petitioner's imposition of a 23% interest rate.
Conclusion:
The Supreme Court denied the petition, affirming the Court of Appeals' decision. The respondent's outstanding obligation was fixed at P309,298.58, subject to a 3% penalty and 23% interest per annum. The Court upheld the CA's reduction of the penalty and its disregard of the petitioner's statement of account.