Case Digest (G.R. No. 197861)
Facts:
In Spouses Florentino T. Mallari and Aurea V. Mallari v. Prudential Bank (now Bank of the Philippine Islands), the Mallaris secured two loans from Prudential Bank-Tarlac Branch. On December 11, 1984, Florentino obtained a ₱300,000 loan under Promissory Note No. BD 84-055 at 21% interest per annum, with a maturity initially set for January 10, 1985 and renewed to February 17, 1985. He executed a Deed of Assignment of a ₱300,000 time deposit to guarantee payment. On December 22, 1989, the spouses acquired a ₱1.7 million loan under PN No. BDS 606-89, bearing 23% interest p.a., 15% attorney’s fees, and 12% penalty charges, secured by a real estate mortgage on TCT No. T-215175. After default, the bank computed liabilities as of January 31, 1992 at ₱571,218.54 and ₱2,991,294.82 respectively, and filed for extrajudicial foreclosure on February 25, 1992 before the RTC of Tarlac. Despite a temporary restraining order, the mortgage sale proceeded on July 7, 1993, with the bank as highestCase Digest (G.R. No. 197861)
Facts:
- Loan Transactions
- December 11, 1984 – Florentino T. Mallari obtained a ₱300,000.00 loan from Prudential Bank-Tarlac (PN No. BD 84-055) at 21% p.a. interest, 15% attorney’s fees (≥₱200.00), and 12% p.a. penalty; maturity set Jan. 10, 1985 and renewed to Feb. 17, 1985; Florentino assigned a ₱300,000.00 time deposit to secure the loan.
- December 22, 1989 – Spouses Florentino and Aurea Mallari borrowed ₱1.7 million (PN No. BDS 606-89) at 23% p.a. interest, 15% attorney’s fees (≥₱200.00), and 12% p.a. penalty; maturity Mar. 22, 1990; they executed a real estate mortgage over TCT No. T-215175 in Tarlac.
- Default and Extrajudicial Foreclosure
- Petitioners defaulted; demand letters computed obligations as of Jan. 31, 1992: ₱571,218.54 (PN BD 84-055) and ₱2,991,294.82 (PN BDS 606-89). On Feb. 25, 1992, the bank filed for extrajudicial foreclosure; auction scheduled Apr. 23, 1992.
- On Apr. 10, 1992, statements of account showed balances of ₱594,043.54 (₱300k loan) and ₱3,171,836.18 (₱1.7M loan). Petitioners sought annulment of the mortgage and injunctive relief; the RTC first denied, then granted a restraining order (Jan. 14, 1993), later lifted it (Mar. 9, 1993). The property was sold on July 7, 1993 to the bank for ₱3.5 million.
- Judicial Proceedings
- The bank’s Motion to Dismiss was denied (Nov. 19, 1998). At trial, after petitioner’s sole witness, the bank’s Demurrer to Evidence was granted (Nov. 15, 1999), dismissing petitioners’ complaint for lack of proof of bad faith.
- The CA (June 17, 2010) affirmed the RTC decision, and denied reconsideration (July 20, 2011). Petitioners filed a Rule 45 petition before the Supreme Court.
Issues:
- Whether the 23% p.a. interest rate on the ₱1.7 million loan is excessive or unconscionable.
- Whether the 12% p.a. penalty charge for default is excessive or unconscionable.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)