Case Digest (G.R. No. 193178) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Philippine Savings Bank v. Spouses Castillo and Spouses Capati and Lobo, the respondents Spouses Alfredo M. Castillo and Elizabeth C. Castillo owned a parcel in Tondo, Manila (TCT No. 233242), while Spouses Romeo B. Capati and Aquilina M. Lobo owned another adjacent lot (TCT No. 227858). On May 7, 1997, both pairs obtained from petitioner Philippine Savings Bank a P2.5 million loan secured by real estate mortgages over their respective properties, evidenced by a promissory note providing for a floating interest rate of 17% per annum subject to review every 90 days, with penalties and balloon payment on May 7, 2002. Between release and December 1999, petitioner unilaterally adjusted the rate as high as 29% and as low as 15.5%, notifying but not obtaining express assent from respondents. Respondents continued amortizations until their financial constraints led to default in December 1999, with an outstanding balance of roughly P2.53 million as of February 2000. Upon nonpayment Case Digest (G.R. No. 193178) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Parties and Property
- Petitioners: Philippine Savings Bank (PSBank) as mortgagee.
- Respondents: Spouses Alfredo M. Castillo and Elizabeth C. Castillo (TCT No. 233242), and Spouses Romeo B. Capati and Aquilina M. Lobo (TCT No. 227858), owners of two lots in Tondo, Manila.
- Loan Agreement and Promissory Note (May 7, 1997)
- Principal amount: ₱2,500,000.00, payable in 59 monthly amortizations of ₱43,449.41 plus balloon payment on May 7, 2002.
- Interest rate: 17% p.a., subject to review/adjustment every 90 days; penalty of 3% per month on overdue amortizations; unilateral rate changes allowed within legal limits.
- Interest Rate Adjustments and Default
- From May 1997 to December 1999, PSBank adjusted rates between 15.5% and 29% p.a., notifying respondents by letter; respondents did not formally object but requested reductions.
- Respondents paid amortizations until December 1999, then defaulted; outstanding balance per PSBank’s computation as of February 2000 was ₱2,525,910.29.
- Extrajudicial Foreclosure and Redemption Efforts
- PSBank conducted foreclosure sale on June 16, 2000, as sole bidder credited sale price (₱2,778,611.27) against the loan; certificate of sale issued same day and registered July 3, 2000 without RTC judge’s approval.
- Redemption period lapsed; on July 18, 2001, respondents offered ₱3,000,000 for 60-day extension, which PSBank conceded but respondents still failed to redeem.
- RTC Proceedings and Decision
- Respondents filed for reformation, nullity of foreclosure sale, cancellation of annotations, and damages; RTC issued TRO (Oct. 5, 2001) and preliminary injunction (Oct. 25, 2001).
- RTC Decision (July 30, 2005) declared interest increases unreasonable; voided foreclosure; ordered PSBank to refund excess interest over 17% p.a.; awarded ₱50,000 moral, ₱50,000 exemplary damages, ₱30,000 attorney’s fees and ₱3,000 per appearance.
- RTC modified own decision (Nov. 30, 2005) via reconsideration to reset the base interest rate at 24% p.a.
- Court of Appeals Decision
- CA affirmed with modifications:
- Upheld refund of interest collected in excess of 17% p.a.
- Declared foreclosure valid.
- Reduced moral damages to ₱25,000; retained exemplary damages at ₱50,000; upheld attorney’s fees awards.
- Supreme Court Petition and Disposition
- PSBank’s Petition (Rule 45) challenged (a) finding of unreasonable rate modifications and (b) awards of damages and attorney’s fees.
- SC Decision (May 30, 2011): Petition partially granted; affirmed CA decision with modifications.
Issues:
- Whether the unilateral modifications of interest rates by PSBank without respondents’ consent violated the principle of mutuality of contracts and rendered the adjusted rates void.
- Whether the awards of moral damages, exemplary damages, and attorney’s fees against PSBank were proper.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)