Case Summary (G.R. No. 175949)
Factual Background
On December 18, 2000, United Alloy Philippines Corporation obtained a credit accommodation from United Coconut Planters Bank in the amount of PHP 50,000,000, evidenced by a Credit Agreement and secured by a Surety Agreement signed by Jakob Van Der Sluis, petitioners Spouses Chua and one Yang Kim Eng. Six promissory notes were later executed in favor of UCPB for various peso and dollar amounts. UNIALLOY also entered a lease-purchase agreement with UCPB concerning certain real properties co-owned with the Development Bank of the Philippines.
Default and Parallel Actions
UNIALLOY failed to pay the loan obligations. On August 27, 2001, UCPB filed a collection action against UNIALLOY, the Spouses Chua, Yang and Van Der Sluis in the RTC of Makati (Civil Case No. 01-1332) and unilaterally rescinded the lease-purchase contract. On the same date, UNIALLOY filed an action for Annulment and/or Reformation of Contract in the RTC of Cagayan de Oro (Civil Case No. 2001-219), seeking among other reliefs annulment or reformation of three promissory notes and asserting fraud and misrepresentation by Van Der Sluis and a UCPB vice-president.
Litigational Friction: Venue, Litis Pendentia and Forum Shopping
UNIALLOY moved to dismiss the Makati collection case on grounds of litis pendentia and forum shopping. The RTC of Makati denied the motion. UCPB and co-defendants moved to dismiss UNIALLOY’s Cagayan de Oro complaint on grounds of improper venue, forum shopping and harassment; the RTC of Cagayan de Oro dismissed UNIALLOY’s complaint for improper venue and forum shopping and ordered turnover of the leased property to UCPB.
Interlocutory Appeals and Certiorari Proceedings
UNIALLOY sought certiorari and injunctive relief from the Court of Appeals (CA G.R. SP. No. 67079). The CA issued a Resolution granting a writ of preliminary injunction on February 18, 2002. UCPB filed a petition for certiorari with the Supreme Court (G.R. No. 152238) which initially restrained enforcement of the CA Resolution; the Supreme Court later denied UCPB’s petition and affirmed the CA Resolution on January 28, 2005. Subsequent proceedings at the CA and this Court culminated in a separate Supreme Court decision in G.R. No. 179257 dated November 23, 2015, which affirmed the dismissal of UNIALLOY’s Cagayan de Oro complaint and became final and executory on January 20, 2016.
Proceedings and Judgment in the Makati Collection Case
The RTC of Makati proceeded with the collection action, denied UNIALLOY’s omnibus motion to suspend proceedings, and rendered judgment on June 17, 2003 in favor of UCPB. The RTC awarded payment of US$435,494.44 and PHP26,940,950.80 with interest and penalty charges from August 1, 2001 until fully paid, attorney’s fees in the amount of PHP1,000,000, and costs. UNIALLOY and the Spouses Chua appealed to the Court of Appeals.
Court of Appeals Decision
On September 21, 2006, the Court of Appeals affirmed the RTC of Makati’s judgment. The CA rejected petitioners’ arguments that proceedings in Makati should have been suspended pending resolution of the Cagayan de Oro litigation and sustained petitioner liability under the operative loan documents and the Surety Agreement.
Issues Raised in the Petition to the Supreme Court
Petitioners urged that the CA erred and committed grave abuse in denying: (i) their motion to dismiss for litis pendentia and forum shopping, (ii) their omnibus motion to suspend proceedings and to lift the writ of preliminary attachment, and (iii) their motion for reconsideration, asserting that resolution of their separate petition in G.R. No. 179257 could render inconsistent determinations on the promissory notes that were common to both actions.
Petitioners’ Principal Contentions
Petitioners maintained that the outcome of G.R. No. 179257 could nullify the promissory notes and thus conflict with a decision in the present collection case; they sought dismissal or suspension of the Makati proceedings pending final resolution of the other Supreme Court petition. Petitioners did not deny execution of the Surety Agreement but relied on the pendency and purported overlapping subject matter of the Cagayan de Oro case to stay enforcement.
Supreme Court’s Threshold Determination on Parallel Litigation
The Supreme Court observed that petitioners’ reliance on possible inconsistency was misplaced because this Court had already rendered final judgment in G.R. No. 179257 affirming the dismissal of UNIALLOY’s Cagayan de Oro complaint on grounds of improper venue, forum shopping and harassment. Consequently, there remained no realistic possibility that the Cagayan de Oro disposition could conflict with the Makati judgment, and the Court proceeded to resolve the merits of the collection action.
Liability under the Surety Agreement
The Court affirmed the findings of the RTC and the CA that UNIALLOY defaulted on the promissory notes and that the Spouses Chua, Van Der Sluis and Yang had freely executed a Surety Agreement that bound them jointly and severally with UNIALLOY to pay UNIALLOY’s loan obligations. The Court reproduced material provisions of the Surety Agreement, noted petitioners’ non-denial of contractual liability, and invoked Article 1159 of the Civil Code that contractual obligations have the force of law between contracting parties and must be performed in good faith.
Judicial Moderation of Interest Rates and Evidentiary Shortcomings
Although petitioners were liable, the Court found that UCPB had imposed interest rates subject to unilateral review and adjustment at the bank’s sole discretion and that UCPB produced no competent evidence beyond a Consolidated Statement of Account to substantiate the total interest claimed. The Court noted that UCPB had applied a 24% rate to peso obligations for a brief six-month interval and held that contractual terms granting unilateral and unbridled power to a lender to vary rates or charges are susceptible to being struck down as unconscionable and violative of mutuality.
Governing Doctrines on Unconscionable Rates and Disclosure
The Court invoked controlling jurisprudence that contracts manifestly one-sided and stipulations left to the whim of one party
...continue readingCase Syllabus (G.R. No. 175949)
Parties and Posture
- UNITED ALLOY PHILIPPINES CORPORATION was the principal debtor and petitioner in the present petition for review on certiorari.
- SPOUSES DAVID C. CHUA AND LUTEN CHUA executed a surety instrument and were co-petitioners seeking reversal of the Court of Appeals' decision affirming the trial court.
- UNITED COCONUT PLANTERS BANK was the respondent and plaintiff in the collection action that obtained judgment against petitioners and co-defendants.
- The petition assailed the Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 81079 dated September 21, 2006 and December 11, 2006, and sought reversal of the Regional Trial Court, Makati City, Branch 135, Civil Case No. 01-1332 judgment dated June 17, 2003.
Key Facts
- UNITED ALLOY PHILIPPINES CORPORATION obtained a credit accommodation from UNITED COCONUT PLANTERS BANK in the amount of PhP50,000,000.00 evidenced by a Credit Agreement dated December 18, 2000.
- Petitioners and co-defendants executed a Surety Agreement dated December 18, 2000 that unconditionally and irrevocably guaranteed payment of all sums due under the Credit Agreement and promissory notes.
- Six promissory notes were executed in favor of UNITED COCONUT PLANTERS BANK, representing obligations in US dollars and Philippine pesos.
- UNITED ALLOY PHILIPPINES CORPORATION defaulted on its obligations, prompting UNITED COCONUT PLANTERS BANK to file a collection action with prayer for preliminary attachment on August 27, 2001.
- UNITED ALLOY PHILIPPINES CORPORATION separately filed an action for annulment and/or reformation of contract in Cagayan de Oro and asserted fraud and misrepresentation against its officers and bank personnel.
Procedural History
- The RTC of Cagayan de Oro dismissed UNITED ALLOY PHILIPPINES CORPORATION's annulment action for improper venue, forum shopping and harassment on September 13, 2001, and issued an Order of Execution on September 14, 2001.
- The Court of Appeals issued a Resolution on February 18, 2002 granting a writ of preliminary injunction to UNITED ALLOY PHILIPPINES CORPORATION, which this Court restrained on March 18, 2002 in G.R. No. 152238 and later affirmed the CA Resolution on January 28, 2005.
- The RTC of Makati denied UNITED ALLOY PHILIPPINES CORPORATION's motion to dismiss the collection case and denied its omnibus motion to suspend proceedings, and rendered judgment for UNITED COCONUT PLANTERS BANK on June 17, 2003.
- The Court of Appeals affirmed the RTC of Makati judgment on September 21, 2006, and denied petitioners' motion for reconsideration on December 11, 2006.
- UNITED ALLOY PHILIPPINES CORPORATION sought certiorari in this Court in G.R. No. 179257 contesting the dismissal in Cagayan de Oro, and this Court on November 23, 2015 denied that petition and rendered the Cagayan de Oro dismissal final and executory on January 20, 2016.
Issues Presented
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