Case Summary (G.R. No. 210831)
Applicable Law
The applicable laws in this case derive from the 1987 Philippine Constitution and provisions of the New Civil Code, particularly concerning contracts, interest, and foreclosure proceedings.
Background and Events
The Alboses took out a loan of P84,000.00 from the Embisans, secured by a mortgage on their property. Following defaults on repayment and after multiple extensions, the mortgage was foreclosed, with the property sold at auction. The Alboses later contested the validity of the foreclosure on grounds that the imposition of compounded interest was unilaterally agreed upon without proper documentation.
Trial Court Decision
Following a trial, the Regional Trial Court (RTC) dismissed the Alboses' complaint for lack of merit, affirming that they had insufficiently paid their obligation. The court found it credible that the Embisans had a right to foreclose the mortgage based on managed payment records.
Court of Appeals Ruling
On appeal, the Court of Appeals upheld the RTC ruling, stating that the imposition of compounded interest was justified due to the petitioners' repeated payment defaults. The appellate court noted the reasonableness of the compounded interest, given that the Alboses had requested multiple extensions.
Legal Issues Presented
The key issues centered on whether there was valid documentation supporting the imposition of compounded interest, whether the interest rate was excessive or unconscionable, and whether the foreclosure proceedings were improperly computed based on the outstanding loan amount.
Supreme Court's Findings on Interest
The Supreme Court ruled that any stipulation for the payment of interest must be in writing per Article 1956 of the Civil Code. It found the agreement for compounded interest to be improperly enforced since it was not documented. The lack of clarity regarding whether the interest was to be simple or compounded meant that the petitioners were only liable for simple interest.
Ruling on Excessive Interest
Furthermore, the Court held that a 5% monthly interest rate was excessively high and thus void as it contradicted public morals under Article 1306 of the Civil Code. Historical jurisprudence supported the conclusion that such exorbitant rates cannot be sustained legally.
Nullification of Foreclosure
Given the judgment tha
...continue readingCase Syllabus (G.R. No. 210831)
Nature of the Case
- This case involves a Petition for Review on Certiorari under Rule 45 of the Rules of Court.
- The petitioners, spouses Tagumpay and Aida Albos, seek to reverse the Decision of the Court of Appeals (CA) dated May 29, 2013, and its Resolution dated January 13, 2014, which upheld the validity of an extra-judicial foreclosure sale concerning their mortgaged property in favor of the private respondents.
Facts of the Case
- On October 17, 1984, the petitioners entered into a Loan with Real Estate Mortgage agreement with respondents Nestor and Iluminada Embisan for the amount of P84,000.00, payable within 90 days at a monthly interest rate of 5%.
- The petitioners mortgaged a parcel of land in Quezon City as security for the loan.
- Due to non-payment by the maturity date, they requested and received several extensions for repayment, culminating in a third extension where the interest was to be compounded, though this was not documented in writing.
- By February 9, 1987, the respondents demanded payment of P234,021.90, which escalated to P258,009.15 by April 14, 1987.
- The petitioners made a partial payment of P44,500.00 on October 2, 1987, but ultimately defaulted, leading to the extra-judicial foreclosure of the property on October 12, 1987.
- The respondents emerged as the highest bidders at the foreclosure auction for P330,000.00, and subsequently executed an Affidavit of Consolidation, leading to their ownership of the property.
Procedural History
- The petitioners filed a complaint for annulment of the Loan with Real Estate Mortgage and