Case Digest (G.R. No. 191274)
Facts:
Erma Industries, Inc., Ernesto B. Marcelo and Flerida O. Marcelo v. Security Bank Corporation and Sergio Ortiz‑Luis, Jr., G.R. No. 191274, December 06, 2017, Supreme Court Third Division, Leonen, J., writing for the Court.On May 5, 1992, Erma Industries, Inc. obtained a credit facility from Security Bank Corporation, evidenced by a Credit Agreement; on the same date the parties and two pairs of spouses executed a Continuing Suretyship under which the sureties (including Ernesto Marcelo and Sergio Ortiz‑Luis, Jr.) agreed to be jointly and severally liable for Erma’s indebtedness. Between May 1992 and July 1993 Erma drew several peso and dollar promissory notes that contained stipulated conventional interest rates, monthly compounding, a 2% monthly penalty on unpaid balances, and a contractual attorney’s fee of 20%.
Erma defaulted. By letter of November 8, 1994 Security Bank demanded payment of P17,995,214.47 and US$289,730.10 (as of October 31, 1994). Erma sought restructuring and delivered a title (TCT No. M‑7021, in Ernesto Marcelo’s name) to Security Bank as proposed collateral; Security Bank counter‑offered a partial restructuring of up to P5 million, which Erma did not accept. Security Bank filed suit for collection in the Regional Trial Court (RTC), Makati City, on January 10, 1995.
Security Bank amended its complaint to seek, among other things, execution of a real estate mortgage over TCT No. M‑7021. Erma counterclaimed for return of the title. After trial the RTC (Branch 64) in a May 31, 2004 Decision found Erma liable for P17,995,214.47 and US$289,730.10 inclusive of stipulated interest and penalty as of October 31, 1994, but declined to allow continued compounding of the 2% monthly penalty and other compounded charges thereafter; the trial court instead imposed a straight 12% per annum on the total outstanding balance and denied attorney’s fees to both sides. The RTC held Ernesto Marcelo and Sergio Ortiz‑Luis liable as sureties, but excused the spouses who signed only to give marital consent; the court ordered return of TCT No. M‑7021 to the Marcels.
The Court of Appeals affirmed the RTC in toto in a June 17, 2009 Decision, agreeing there was no perfected loan restructuring (Erma never complied with documentary conditions and did not accept Security Bank’s partial offer), that the 2% monthly penalty compounded was iniquitous, and that a straight 12% per annum ...(Subscriber-Only)
Issues:
- Did the Court of Appeals and the RTC err in finding petitioners liable for P17,995,214.47 and US$289,730.10 inclusive of stipulated interests and penalty as of October 31, 1994?
- Did the Court of Appeals and the RTC err in imposing legal interest of 12% per annum from October/November 1994 until full payment?
- Are petitioners entitled to attorney’s fees?
- Did the Court of Appeals err in holding respondent Sergio Ortiz‑Luis, Jr. solidarily liab...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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