G.R. No. 222448 - United Coconut Planters Bank vs. Ang

On April 30, 1997, United Coconut Planters Bank (UCPB) extended a term loan of ₱16,000,000.00 to respondents Editha F. Ang and Violeta M. Fernandez.
The Credit Agreement specified that the loan proceeds were to be used exclusively for financing the renovation of Queen’s Beach Resort and for working capital for resort operations and foreign exchange business.
The loan was drawn in multiple availments with scheduled quarterly amortizations amounting to ₱800,000.00 each over a five-year period, beginning July 1, 1997 until April 30, 2002.

The total principal amount was derived from several individual loans—including loans in US dollars and Philippine pesos—with exact amounts and corresponding promissory notes recorded.
The loans were secured by several real estate mortgages over different properties as evidenced by various Transfer Certificates of Title and Tax Declarations.
Partial repayments were made amounting to US$55,882.90 and ₱198,023.30 (equivalent to ₱2,349,514.95), but the respondents failed to pay their amortizations after April 30, 1998.

Due to non-payment, UCPB sent a demand letter on April 14, 1999, and later initiated foreclosure proceedings under Act No. 3135.
Notary Public Atty. Immanuel L. Sodusta facilitated the extrajudicial foreclosure by issuing a Notice of Sale on June 17, 1999 and conducting the public auction on July 15, 1999.
On August 2, 1999, the mortgaged properties were sold at public auction to UCPB, the highest bidder, for ₱21,985,000.00.

On July 10, 2000, Ang and Fernandez filed a petition for declaring the auction sale, foreclosure proceedings, and interest provisions null and void, and sought a recomputation of their indebtedness on alleged grounds of usurious interest.
The Regional Trial Court (RTC) initially ruled in favor of the petitioners by nullifying the interest rate provisions in the Credit Agreement, the promissory notes, and the foreclosure sale; it found that the unilateral imposition of interest violated Articles 1308 and 1309 of the Civil Code and the Truth in Lending Act.
The RTC later reversed its earlier decision, holding the auction sale valid after determining that the borrowers were negligent in meeting their payment obligations, and ordered that legal interest of 12% per annum (and penalty interest thereafter) be imposed.

On May 11, 2015, the Court of Appeals (CA) partially granted the appeal by declaring:

The five promissory notes as valid.
The interest rate provisions in the contracts as void for violating the principle of mutuality of contracts.
The extrajudicial foreclosure sale conducted on August 2, 1999 as null and void.

The CA remanded the case to the trial court for a determination of the total indebtedness, incorporating both amounts already paid and proper recalculations of interest (12% per annum until June 30, 2013, then reduced to 6% per annum).
UCPB argued for the validity of the foreclosure sale by distinguishing the present circumstances from similar cases like Spouses Andal, asserting that the default was due to factors such as “dollar shortage, high exchange rate” rather than solely due to an exorbitant interest rate.

UCPB sold the foreclosed properties to a subsequent purchaser, Eddie Po, on August 1, 2013, which was later reflected in tax declarations transferring ownership.
Multiple motions, including a petition for review on certiorari by UCPB and manifestations by Ang and Fernandez raising issues of bad faith and forum shopping, were filed during the pendency of the case.
The Supreme Court resolved the petition by addressing questions of fact and law, emphasizing that while questions of evidence are generally not reviewed under Rule 45, certain exceptions allowed a reexamination of the CA’s factual findings.

Whether the petition should be dismissed for raising questions of fact in violation of Rule 45, which confines review on certiorari to issues of law only.

Whether the stipulations on the imposition and adjustment of interest in the Credit Agreement, promissory notes, and disclosure statements are valid or void for violating the principle of mutuality in contract formation.
Whether the unilateral discretion granted to UCPB in resetting interest rates is legally enforceable.

Whether the extrajudicial foreclosure and subsequent public auction sale of the mortgaged properties remain valid despite the nullity of certain interest rate provisions.
Whether the erroneous computation of total indebtedness due to the void interest charge affects the bank’s right to foreclose and apply the sale proceeds to the principal debt.

How the total indebtedness should be recomputed considering the partial payments and the imposition of legal interest in place of the void contractual provisions.