G.R. No. 151258 - Villareal vs. People

On 30 May 1996, Security Bank Corporation (SBC) granted Booklight, Inc. an omnibus line credit facility amounting to ₱10,000,000.00.
The loan was covered by a Credit Agreement and a Continuing Suretyship, both dated 1 August 1996, with petitioner Aniceto G. Saludo, Jr. as surety, to secure full payment and performance of obligations.
Booklight drew on the credit facility between 1996 and 1997 and complied with loan terms during this period.

On 30 October 1997, SBC approved renewal of Booklight’s credit facility for ₱10,000,000.00 under prevailing security lending rates.
From August 3 to August 14, 1998, Booklight executed nine (9) promissory notes payable to SBC totalling ₱9,652,725.00.
Booklight failed to settle loans upon maturity; demands for payment were made on Booklight and petitioner, both of whom failed to pay.
As of 15 May 2000, Booklight’s outstanding obligation was ₱10,487,875.41, inclusive of past due interest and penalties.

SBC filed a collection suit against Booklight and petitioner on 16 June 2000.
Booklight moved to dismiss the case, which was denied. It disputed that the loan amount was based on the omnibus credit line and denied executing the promissory notes.
Booklight claimed it was not in default, having paid ₱1,599,126.11 on 30 September 1999 and negotiated for loan restructuring until 5 July 2000.
Petitioner, as surety, claimed his liability was only as an accommodation guarantor and argued that Booklight’s partial payment offer constituted valid tender discharging the obligation to that extent.
Petitioner also argued that the 2% per month penalty rate was unconscionable.

Booklight was declared in default on 7 March 2005; SBC presented evidence ex-parte.
Petitioner presented evidence in his defense.
The Regional Trial Court ruled Booklight and petitioner jointly and solidarily liable under the Continuing Suretyship Agreement.
The RTC ordered payment of specific promissory notes with high-interest rates (approx. 20.178%-20.189% per annum) and attorney’s fees of ₱100,000 plus costs.

The Court of Appeals affirmed the RTC decision in its entirety on 24 January 2008.
Petitioner’s motion for reconsideration was denied on 7 August 2008.
Petitioner filed the instant petition for review on certiorari, raising issues related to the coverage of the Continuing Suretyship over the second credit facility, the necessity of his consent for the renewal, the nature of the promissory notes, the contractual terms, and the interest rate imposed.

Whether petitioner, as the surety under the Continuing Suretyship Agreement, is solidarily liable with Booklight for the unpaid loans availed under the second credit facility.

Whether petitioner’s consent was necessary for the renewal of the credit facility and extension of liability.

Whether the execution of the nine (9) promissory notes in 1998 created obligations covered by the Continuing Suretyship.

Whether the Continuing Suretyship contract is a contract of adhesion and whether such characterization affects petitioner’s liability.

Whether the interest rate imposed by the RTC of approximately 20.178%-20.189% per annum is unconscionable and violative of law.