Case Summary (G.R. No. 217024)
Factual Antecedents
The Rocamoras obtained a loan categorized under the Cottage Industry Guarantee and Loan Fund (CIGLF) with terms that included escalating interest rates. They paid approximately P32,383.65 towards the loan, leading PNB to initiate foreclosure proceedings due to insufficient repayment. Following foreclosure, PNB claimed the Rocamoras still owed P206,297.47 after accounting for the proceeds of the sale.
Procedural History
Initially, the Regional Trial Court (RTC) of Puerto Princesa City dismissed PNB's complaint for a deficiency judgment, ruling that the escalation clause was invalid and that PNB's delay in foreclosure was contrary to the Mandatory Foreclosure Law (PD 385). This ruling was upheld by the Court of Appeals (CA), which found insufficient evidence to support the claimed deficiency amount and held that PNB had unilaterally increased interest rates without the Rocamoras' consent.
The Petition
PNB contends that the lower courts erred in invalidating the escalation clause included in the promissory note and argues that it is entitled to the deficiency judgment. PNB argues that the clause complies with prior jurisprudence and asserts that its actions were within the law's parameters regarding the timing of foreclosure.
Proof of Deficiency Claim Necessary
The court underscores that for PNB to establish a right to a deficiency judgment, evidence must substantiate the alleged obligation after deducting foreclosure proceeds. The findings from the RTC and CA indicated that PNB failed to provide coherent and consistent evidence for the claimed deficiency amount. The differing amounts documented by PNB itself raised questions about the credibility of its claim.
Escalation Clauses and Unilateral Changes
While escalation clauses are acknowledged within the realm of credit agreements, the court emphasizes that these clauses do not grant creditors unrestricted authority to unilaterally adjust interest rates. In line with previous rulings, any adjustment must reflect mutual agreement, and absent consent, such increases lack binding authority.
Delay in Foreclosure Proceedings
The case references PD 385, which mandates that financial institutions must immediately foreclosure if arrearages exceed 20% of the outstanding obligation. PNB commenced foreclosure proceedings three years following Rocamoras' default, which the court interpreted as a significant delay affecting the deficiency claim due to accrued penalties and interest during this period.
Award for Damages
The court clarifies that
...continue readingCase Syllabus (G.R. No. 217024)
Case Overview
- The case involves a petition for review on certiorari by the Philippine National Bank (PNB) against spouses Agustin and Pilar Rocamora regarding a deficiency judgment following a foreclosure proceeding.
- The Supreme Court addressed the legality of the deficiency judgment claimed by PNB against the Rocamoras after the foreclosure of their mortgaged properties.
Factual Antecedents
- On September 25, 1981, the spouses Rocamora secured a loan of P100,000.00 from PNB under the Cottage Industry Guarantee and Loan Fund (CIGLF), repayable in five years.
- The loan terms included:
- P35,000 payable semi-annually.
- P65,000 payable annually.
- An interest rate of 12% per annum, subject to a 5% penalty for late payments.
- The Rocamoras executed two promissory notes and two mortgages (real estate and chattel) to secure their loan obligations.
- An escalation clause in both the promissory note and mortgage allowed PNB to increase the interest rate without notice.
- The Rocamoras paid a total of P32,383.65 on their loan, leading to PNB initiating foreclosure proceedings in 1990.
Foreclosure and Deficiency Judgment
- After the foreclosure sale, which yielded P75,500.00, PNB claimed a deficiency of P206,297.47, asserting that the Rocamoras owed P250,812.10 at the time of foreclosure.
- The Rocamoras contested this claim, arguing that PNB's unilateral increase of interest r