Title
Asiatrust Development Bank vs. Concepts Trading Corp.
Case
G.R. No. 130759
Decision Date
Jun 20, 2003
Bank sued borrower for loan default; MOA altered payment terms, superseding original note. CA reduced penalty to 3%, upheld P309,298.58 balance. SC affirmed, citing equitable reduction under Civil Code.
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Case Digest (G.R. No. 130759)

Facts:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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:

  1. 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    • The MOA's new payment schedule superseded the original terms of the promissory note, rendering the loan no longer due and demandable in its entirety.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.
  2. 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.
  3. 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.


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