Case Digest (G.R. No. 258526)
Facts:
In September 2009, respondents Ramon S. Viroomal and Anita S. Viroomal obtained a loan from petitioner Manila Credit Corporation (MCC) amounting to PHP 467,600.00 evidenced by Promissory Note (PN) No. 7155, payable over 60 months with an interest rate of 23.36% per annum. The loan was secured by a real estate mortgage over respondent Ramon’s property in Parañaque City. Due to difficulties in payment, respondents requested a loan restructuring, leading to the second promissory note (PN No. 8351) for PHP 495,840.00 payable in 84 months at an interest rate of 24.99% per annum. This restructured amount covered the unpaid balance under PN No. 7155 including interests and penalties. Respondents defaulted on timely payments, prompting MCC to demand full payment of PHP 549,029.69 as of October 2016. Respondents claimed to have already paid PHP 1,175,638.12 and sought a re-computation, which MCC ignored and proceeded with extra-judicial foreclosure. Respondents filed a complaint before tCase Digest (G.R. No. 258526)
Facts:
- Loan Agreement and Initial Promissory Note
- In September 2009, respondents Ramon S. Viroomal and Anita S. Viroomal borrowed PHP 467,600.00 from Manila Credit Corporation (MCC) under Promissory Note (PN) No. 7155.
- The loan was payable over 60 months with an interest rate of 23.36% per annum, secured by a real estate mortgage over Ramon’s property in Parañaque City (TCT No. 72248).
- Loan Restructuring and Second Promissory Note
- Respondents sought loan restructuring and executed PN No. 8351 for PHP 495,840.00 payable in 84 months at 24.99% interest per annum.
- This amount included unpaid balance from PN No. 7155, accumulated interests, and penalty charges.
- Failure to Pay and Foreclosure
- Respondents failed to make timely payments; MCC demanded full payment of PHP 549,029.69 as of October 15, 2016.
- Respondents claimed they had already paid PHP 1,175,638.12 and requested a re-computation which MCC ignored.
- MCC initiated extra-judicial foreclosure on the mortgaged property.
- Court Proceedings
- Respondents filed a civil complaint for nullification of mortgage, injunction, and specific performance.
- They argued the effective interest rate (EIR) of 36% per annum and other charges were unconscionable and immoral.
- MCC countered that respondents consented to the terms including EIR; respondents were estopped from contesting the validity of promissory notes.
- Trial Court Decision
- The RTC ruled the interest and penalties charged were grossly excessive and unconscionable.
- Interest rate was equitably reduced to the legal interest rate of 12% per annum.
- PN No. 7155 was declared fully paid including interests; PN No. 8351 declared void ab initio for lack of consideration.
- Respondents entitled to recover overpayment; foreclosure and MCC’s title void; original title reinstated to respondents.
- Court of Appeals Ruling
- The CA affirmed the RTC decision, finding that the total imposed interest amounted to approximately 77.36% per annum which was exorbitant.
- CA declared compounded interests and penalty charges void.
- The foreclosure proceedings were voided; title returned to respondents.
- Petition for Review by MCC
- MCC challenged the invalidation of the stipulated interest and penalty charges asserting contracts have the force of law.
- MCC argued second note was based on valid consideration owing to outstanding balance.
Issues:
- Whether or not the stipulated interest rates, penalty charges, and 36% EIR imposed by MCC are valid and enforceable.
- Whether the respondents fully paid their loan obligations under PN No. 7155.
- Whether PN No. 8351 is valid considering the alleged overpayment and lack of consideration.
- Whether the foreclosure proceedings and title consolidation in MCC’s name are valid.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)