Case Digest (G.R. No. 211363) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
On April 30, 1999, Vasudave Sabnani, a British national, obtained a three-month loan totaling ₱7,450,000.00 from Estrella Pabalan. To secure the loan, Sabnani executed two promissory notes (₱1,450,000.00 at 8% per month and ₱6,000,000.00 at 5% per month) and a Deed of Real Estate Mortgage over his Makati condominium. The notes provided for a default interest rate of 20% per month, plus additional interest penalty of 20% per month, liquidated damages of 50%, attorney’s fees of 25%, and other litigation costs in case of collection. Sabnani defaulted on the May 31, 1999 installment, prompting Pabalan to foreclose extrajudicially. At the August 3, 1999 auction, Pabalan was sole bidder at ₱17,400,000.00 based on an updated account reflecting accrued charges. Sabnani then filed an annulment action in the Regional Trial Court (RTC) alleging unauthorized deductions, lack of consideration, and usurious rates. The RTC dismissed his complaint and upheld the loan instruments and foreclosure Case Digest (G.R. No. 211363) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Loan Contract and Securities
- On April 30, 1999, respondent Vasudave Sabnani (a British businessman) obtained a P7,450,000 loan from petitioner Estrella Pabalan, evidenced by:
- Two promissory notes (PNs):
- First PN: P1,450,000 principal, 8% monthly interest, due in three months with scheduled monthly interest and principal payments.
- Second PN: P6,000,000 principal, 5% monthly interest, due in three months with similar payment schedule.
- A Deed of Real Estate Mortgage (REM) over Sabnani’s Makati condominium, containing an acceleration clause and default penalties (20% monthly interest, 50% liquidated damages, 25% attorney’s fees plus costs).
- Default, Foreclosure, and Judicial Proceedings
- Sabnani failed to pay the May 31, 1999 installment; Pabalan demanded P8,940,000 by June 21, 1999; he still did not pay.
- Pabalan initiated extrajudicial foreclosure; TRO/WPI was denied by the RTC on August 3, 1999; foreclosure sale proceeded and Pabalan was sole bidder at P17,400,000 based on an updated account including all accrued charges.
- Sabnani filed suit to annul the REM, PNs, and sale, alleging unauthorized deductions, lack of consideration (loan passed to a third party), and unconscionable rates. RTC dismissed his complaint; on appeal the CA upheld the instruments’ validity but reduced interest, penalties, liquidated damages, and attorney’s fees for being iniquitous, and ordered Pabalan to return the surplus bid.
Issues:
- Did the Court of Appeals err in reducing the stipulated rates of interest, penalties, liquidated damages, and attorney’s fees as unconscionable?
- Did the Court of Appeals err in ordering Pabalan to return the surplus of her foreclosure bid to Sabnani?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)