Case Summary (G.R. No. 148163)
Loan Transactions and Mortgage
On March 7, 1978, the respondents secured a loan from the petitioner with a Deed of Real Estate Mortgage over Transfer Certificate of Title No. 69836. Over the course of several transactions, the loan amount increased from the original sum to P1,225,000, with a stipulated interest rate of 21% per annum. The respondents were required to make monthly payments of P22,426 starting January 24, 1983, with a penalty for late payments set at 3% of the amount due.
Payment History and Petitioner's Closure
The respondents made a total payment of P1,455,385.07 from 1983 to 1988. However, from 1989 onwards, they ceased payments, citing the bank’s closure and involvement in liquidation proceedings by the Central Bank. The bank was closed on January 1, 1985, and re-opened on July 1, 1994. During its closure, no business transactions were conducted, impacting the ability of the bank to collect indebtedness.
Legal Proceedings and Injunction
On August 24, 1994, respondents received a Notice of Extra Judicial Sale regarding their property due to a claimed indebtedness of P6,174,337.46. Respondents subsequently filed for injunction, asserting that the loan had been fully paid. The Regional Trial Court issued a restraining order prohibiting the bank from proceeding with the auction.
Lower Court Decision
On July 16, 1997, the Regional Trial Court ruled in favor of the respondents, mandating Banco Filipino to provide a corrected accounting of the obligations. It ordered a reduction of the interest rate to 17% per annum and eliminated the 1% monthly surcharge. The decision allowed for an injunction against foreclosure, contingent upon the respondents' compliance with payment obligations.
Appeals and Court of Appeals Decision
Both parties appealed the trial court's decision. The Court of Appeals affirmed the trial court's ruling on April 17, 2001, rejecting Banco Filipino's claims that its interest rates and surcharges were valid, thus dismissing the appeals for lack of merit.
Legal Issues for Consideration
The case principally contemplates three legal questions: (1) the effect of Banco Filipino's closure on loan obligations, (2) the legality of the 21% interest rate applied, and (3) the validity of the 3% monthly surcharge imposed. It was established that despite the bank's temporary closure, it retained the authority to collect on loans during liquidation, provided that the interest rates adhered to legal limitations.
Interest Rate and Usury Law
Banco Filipino contended that the 21% interest rate was freely agreed upon and compliant with existing laws. Conversely, respondents argued that this rate violated the Usury Law effective at the time the loan was secured in 1982, especially since the bank's usual rates were significantly lower. The applicable laws held that interest must not exceed rates set by relevant Central Bank circulars, which at the t
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Case Background
- This case involves a petition for review by Banco Filipino Savings and Mortgage Bank, challenging the Decision dated April 17, 2001, of the Court of Appeals.
- The appeal sought to overturn the earlier ruling of the Regional Trial Court (RTC) in Cebu City, which was issued on July 16, 1997, in Civil Case No. CEB-16548.
Facts of the Case
- On March 7, 1978, respondents Juanita B. Ybañez and her family secured a loan from Banco Filipino, backed by a Deed of Real Estate Mortgage over Transfer Certificate of Title (TCT) No. 69836, to construct a commercial building in Cebu City.
- An additional loan was acquired on October 25, 1978, escalating their total debt to one million pesos, followed by another restructuring on December 24, 1982, raising the obligation to P1,225,000.
- The loan was structured with an interest rate of 21% per annum, requiring monthly payments of P22,426 over a period of fifteen years, starting January 24, 1983.
- A penalty of 3% on any overdue payments was stipulated in the loan agreement.
- Respondents made total payments amounting to P1,455,385.07 from 1983 to 1988 but ceased payments completely from 1989 onward, citing the bank's closure and liquidation by the Central Bank.
- The bank was closed from January 1, 1985, until it reopened on July 1, 1994, during which it did not conduct business transactions, including loan collections.
- On August 24, 1994, respondents received a Notice o