Case Digest (G.R. No. 175949)
Facts:
On December 18, 2000, United Alloy Philippines Corporation (UNIALLOY) obtained a PhP50,000,000 credit facility from United Coconut Planters Bank (UCPB), and UNIALLOY, Spouses David C. Chua and Luten Chua, Jakob Van Der Sluis and Yang executed a Surety Agreement and several promissory notes. After UNIALLOY defaulted, UCPB filed a collection action in the RTC of Makati on August 27, 2001; UNIALLOY filed a separate annulment action in the RTC of Cagayan de Oro which the RTC of CDO dismissed for improper venue and forum shopping, a dismissal later affirmed by the Court of Appeals and by this Court in G.R. No. 179257.
The RTC of Makati rendered judgment for UCPB on June 17, 2003 awarding US$435,494.44 and PhP26,940,950.80 plus interest and charges; the Court of Appeals affirmed on September 21, 2006, and the petitioners brought the present petition to the Supreme Court.
Issues:
- Did the Court of Appeals (CA) commit reversible error in refusing to resolve whether the RTC erred in denying petitioners' Urgent Motion to Dismiss?
- Did the CA err in refusing to resolve whether the RTC erred in denying petitioners' Omnibus Motion to suspend proceedings and to lift the writ of preliminary attachment?
- Did the RTC commit lack or excess of jurisdiction in rendering judgment while a related action was pending in the RTC of Cagayan de Oro, and did the CA err in denying petitioners' Motion for Reconsideration without stating its factual and legal basis?
Ruling:
The petition was DENIED. The Supreme Court affirmed the Decisions of the CA and the RTC except that it MODIFIED the interest and related charges: it confirmed liability of petitioners and co-defendants to pay UCPB the principal amounts of US$435,494.44 and PhP26,940,950.80, awarded legal interest at 12% per annum from August 1, 2001 until June 30, 2013, penalty charges at 12% per annum from August 1, 2001 until fully paid, and interest at 6% per annum from July 1, 2013 until fully paid, with legal interest at 6% per annum from finality until full payment.
Ratio:
The Court found that the Surety Agreement expressly bound the sureties jointly and severally and constituted an unconditional guarantee of payment enforceable under Art. 1159, Civil Code; petitioners did not controvert their contractual liability and offered no defense to justify nonperformance. However, provisions that grant the lender sole and unreviewable discretion to adjust interest were unconscionable and invalid, and the Court applied its authority to moderate excessive rates consistent with precedent, notably Nacar v. Gallery Frames and related jurisprudence, to set equitable interest rates.
Doctrine:
- Art. 1159, Civil Code: obligations arising from contracts have the force of law between the contracting parties and must be complied with in good faith.
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