Case Digest (G.R. No. 152058)
Facts:
In First Metro Investment Corporation v. Este del Sol Mountain Reserve, Inc. (G.R. No. 141811, November 15, 2001), petitioner First Metro Investment Corporation (FMIC) granted respondent Este del Sol Mountain Reserve, Inc. a loan of ₱7,385,500.00 on January 31, 1978 to finance a sports–resort project in Barrio Puray, Montalban, Rizal. Under the Loan Agreement, interest was set at 16% per annum on the diminishing balance, with repayment in thirty-six equal monthly installments beginning the thirteenth month after the first release. An acceleration clause provided a one-time 20% penalty on defaulted amounts, interest at the highest legal rate from default, 2% per month liquidated damages, and 25% attorney’s fees. As security, Este del Sol executed a Real Estate Mortgage over two parcels in Rizal and individual Continuing Suretyship agreements by seven officers. Simultaneously, FMIC required an Underwriting Agreement (₱200,000.00 one-time fee plus ₱200,000.00 annual supervision feeCase Digest (G.R. No. 152058)
Facts:
- Loan Agreement and Security
- On January 31, 1978, First Metro Investment Corporation (FMIC) granted Este del Sol Mountain Reserve, Inc. (Este del Sol) a loan of ₱7,385,500.00 at 16% per annum (diminishing balance), payable in 36 equal monthly amortizations beginning the 13th month after first release.
- The agreement provided for acceleration upon default, a one-time 20% penalty on the amount due, interest at the highest rate permitted by law, 2% monthly liquidated damages (compounded quarterly), and attorney’s fees of 25% of the amount recovered (minimum ₱20,000).
- Simultaneous Underwriting and Consultancy Agreements
- Underwriting Agreement (January 31, 1978): FMIC to underwrite a public offering of 120,000 common shares for a one-time fee of ₱200,000 and a supervision fee of ₱200,000 per annum for four years.
- Consultancy Agreement (January 31, 1978): FMIC to provide general consultancy services for ₱332,500 per annum for four years.
- Loan Release, Billing and Default
- On February 22, 1978, FMIC released the first tranche of ₱2,382,500 and deducted underwriting, supervision and consultancy fees totaling ₱1,730,000.
- Este del Sol defaulted on the revised amortization schedule. By June 23, 1980, its total obligation amounted to ₱12,679,630.98.
- Foreclosure and Deficiency
- FMIC foreclosed the real estate mortgage on June 23, 1980; it was the highest bidder at ₱9,000,000.
- After deducting publication fees (₱4,964), sheriff’s fees (₱15,000) and attorney’s fees (₱3,168,666.75), there remained a deficiency of ₱6,863,297.73.
- Court Proceedings
- FMIC sued the individual sureties for the deficiency plus 21% interest from June 24, 1980 and 25% attorney’s fees.
- RTC ruled for FMIC (₱6,863,297.73 + interest + fees). On appeal, CA held the fees were usurious devices, reduced penalty to 20% and attorney’s fees to 10%, dismissed sureties, and ordered FMIC to reimburse Este del Sol ₱971,000.
- FMIC’s motion for reconsideration was denied by the CA. FMIC then petitioned the Supreme Court.
Issues:
- Whether the Underwriting and Consultancy Agreements are separate and valid contracts or subterfuges to conceal usurious interest.
- Whether the fees stipulated under those agreements and the Loan Agreement’s penalties, liquidated damages and attorney’s fees are excessive and unconscionable.
- Whether Central Bank Circular No. 905 (1983) removing the interest ceiling applies retroactively to the 1978 contract.
- Whether parol evidence may be admitted to show a device to conceal usury.
- Whether the deficiency and reimbursement computations by the CA are correct.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)