Case Digest (G.R. No. 176344)
Facts:
Land Bank of the Philippines (Land Bank) extended Yolanda G. David, doing business under the trade name David Poultry Farm, a PHP 1,100,000 loan dated April 21, 1993, payable with interest “based on the prevailing lender’s rates/special financing rate” and a 12% per annum penalty charge upon default, secured by a real estate mortgage over land covered by TCT No. 334702-R. After respondent’s business reverses, the parties executed a Restructuring Agreement dated April 18, 1996, setting the restructured principal at PHP 870,843.63 and providing for interest at 17% per annum from March 1, 1996, with foreclosure as a consequence of default in two consecutive quarterly amortizations.Respondent defaulted, prompting foreclosure, and Land Bank proceeded despite her filing on July 28, 1997 in the RTC of San Fernando, Pampanga a complaint with prayer for preliminary injunction, later amended and supplemented to assail the public auction sale on grounds of usurious and unconscionable i
Case Digest (G.R. No. 176344)
Facts:
- Parties and the loan transaction
- Respondent, Yolanda G. David, doing business under the trade name David Poultry Farm, obtained from petitioner, Land Bank of the Philippines (Land Bank), a P1,100,000 loan on April 21, 1993.
- The loan carried interest “based on the prevailing lender’s rates/special financing rate” and a penalty charge of 12% per annum in case of default in settlement.
- To secure the loan, respondent mortgaged a parcel of land covered by Transfer Certificate of Title No. 334702-R through a Real Estate Mortgage.
- Restructuring of the loan
- Due to serious business reverses suffered by respondent, respondent and petitioner executed on April 18, 1996 a Restructuring Agreement.
- The Restructuring Agreement treated the outstanding obligation as of February 29, 1996 in the amount of P1,171,467.18, with the following restructuring terms:
- An upfront payment of P300,623.55 presently lodged to Accounts Payable (A/P), allocated as follows:
- P165,146.85 to settle the penalty and interest.
- P135,476.70 to partially pay the principal.
- The remaining principal balance of P870,843.63, after the above application, was to be charged interest at 17% per annum, effective March 1, 1996.
- The restructured loan was to be paid in fifteen quarterly amortizations of P79,000.00 starting April 30, 1996 and every quarter thereafter until fully paid.
- Failure to remit two consecutive quarterly amortizations was a sufficient ground to initiate foreclosure proceedings.
- The Restructuring Agreement provided that all other terms of the original Loan Agreement and existing collateral documents not inconsistent therewith remained effective.
- Default, demand, and foreclosure
- Respondent defaulted in the payment of monthly amortizations of the loan.
- Due to the default, the entire balance became due and demandable.
- As of March 31, 1997, the loan balance stood at P971,324.89.
- Despite demand, respondent failed to settle, prompting petitioner to initiate foreclosure proceedings.
- Civil action for injunction and subsequent sale
- Respondent filed on July 28, 1997 before the Regional Trial Court (RTC) of San Fernando, Pampanga, a Complaint with prayer for Preliminary Injunction against petitioner, the Clerk of Court and Ex-Officio Sheriff of the RTC of Pampanga, and Sheriff Efren Cannivel.
- Respondent alleged that the interest on the loan was usurious.
- Respondent prayed for:
- A restraining order stopping the sale on July 28 until final resolution.
- A preliminary injunction after hearing.
- A declaration that CB Circular No. 905 and any other circular floating the interest rate were without legal basis and therefore null and void.
- A declaration that PD No. 116 authorizing the CB (now BSP) to fix interest rates or ceiling was unconstitutional for undue delegation.
- A ruling that all payments made by respondent be considered as payments of principal without interest.
- An order for petitioner to pay attorney’s fees of P50,000.00.
- The Executive Judge-Presiding Judge of Branch 42 of the RTC immediately issued a Temporary Restraining Order.
- Petitioner filed an Answer with a compulsory counterclaim for damages and attorney’s fees.
- After hearing, Branch 43 of the San Fernando RTC denied respondent’s application for a writ of preliminary injunction on January 28, 1998.
- On June 8, 1998, respondent filed a Supplemental Complaint alleging that even before the denial of the application for writ of preliminary injunction, the mortgaged property was sold at public auction for P1,298,460.88, and a Certificate of Sale was issued.
- Respondent sought annulment of the Certificate of Sale on the ground that the amount sought to have the property sold was mostly an accumulation of usurious interest.
- The trial court admitted the Supplemental Complaint, and it admitted a subsequently filed Amended Supplemental Complaint.
- Trial court decision and appellate disposition
- After trial, the trial court, by Decision dated April 18, 2000, dismissed respondent’s complaint.
- In acting on petitioner’s counterclaim, the trial court ordered respondent to pay moral damages, exemplary damages, attorney’s fees, expenses of litigation...(Subscriber-Only)
Issues:
- Exorbitance and unconscionability of the interest and penalty
- Whether the 17% per annum interest rate and the 12% per annum penalty charge in the Restructuring Agreement were exorbitant and unconscionable.
- Validity of foreclosure despite reduction of interest and penalty...(Subscriber-Only)
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)