Case Digest (G.R. No. 235020)
Facts:
The case involves Atty. Leonard Florent O. Bulatao as the petitioner and Zenaida C. Estonactoc as the respondent. The events leading to the case began on June 3, 2008, when Zenaida executed a Deed of Mortgage of Real Property (DMRP) in favor of Atty. Bulatao, covering a parcel of land in Pongpong, Sto. Tomas, La Union, as security for a loan amounting to P200,000.00. The DMRP stipulated that if Zenaida paid the loan within twelve months, the mortgage would be discharged; otherwise, it would remain enforceable. Zenaida defaulted on her obligation, prompting Atty. Bulatao to initiate foreclosure proceedings, with a Notice of Sale issued on July 15, 2011. In response, Zenaida filed a complaint against Atty. Bulatao and others, seeking to annul the DMRP, claiming it was illegal and unconscionable due to the excessive interest rate of 5% per month. She also alleged that she only received P80,000.00 instead of the full loan amount. Atty. Bulatao denied these allegations, asserting ...
Case Digest (G.R. No. 235020)
Facts:
Execution of Mortgage: On June 3, 2008, Zenaida C. Estonactoc executed a Deed of Mortgage of Real Property (DMRP) in favor of Atty. Leonard Florent O. Bulatao, mortgaging a parcel of land in Pongpong, Sto. Tomas, La Union, as security for a loan of P200,000.00. The DMRP stipulated a 5% monthly interest rate and a one-year loan term, with the mortgage to be discharged upon payment within that period.
Default and Foreclosure: Zenaida defaulted on her obligation, prompting Atty. Bulatao to foreclose the mortgage and initiate a public auction of the property. The Notice of Sale on Extra Judicial Foreclosure was issued on July 15, 2011.
Complaint Filed by Zenaida: Zenaida filed a Complaint for Injunction, Annulment of Deed of Real Estate Mortgage, and Damages, arguing that the 5% monthly interest rate was excessive, unconscionable, and contrary to public policy. She also claimed she only received P80,000.00, not the full P200,000.00, and raised issues regarding the property's ownership and registration.
Trial Court Decision: The Regional Trial Court (RTC) ruled in favor of Atty. Bulatao, dismissing Zenaida’s complaint and ordering her to pay damages, attorney’s fees, and costs of suit.
CA Decision: The Court of Appeals (CA) partly granted Zenaida’s appeal, declaring the mortgage void only with respect to the share of Zenaida’s late husband, reducing the interest rate to 1% per month (12% per annum), and nullifying the foreclosure sale.
Issue:
- (Unlock)
Ruling:
- (Unlock)
Ratio:
Unconscionable Interest Rate: A 5% monthly interest rate (60% per annum) is excessive, unconscionable, and void. Courts may equitably reduce such rates to protect borrowers from iniquitous terms.
Validity of Foreclosure: Foreclosure proceedings are invalid if based on an over-inflated demand that includes void interest rates. A valid demand must reflect the correct principal and legal interest due.
Co-Ownership and Mortgage: Under Article 493 of the Civil Code, a co-owner may validly mortgage their undivided share in a co-owned property. However, the mortgage is limited to the co-owner’s share and does not bind the shares of other co-owners.