Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=83823:56695&catid=1580&Itemid=566
Timestamp: 2019-04-25 02:23:37+00:00

Document:
G.R. No. 174433, February 24, 2014 - PHILIPPPINE NATIONAL BANK, Petitioner, v. SPOUSES ENRIQUE MANALO & ROSALINDA JACINTO, ARNOLD J. MANALO, ARNEL J. MANALO, AND ARMA J. MANALO, Respondents.
PHILIPPPINE NATIONAL BANK, Petitioner, v. SPOUSES ENRIQUE MANALO & ROSALINDA JACINTO, ARNOLD J. MANALO, ARNEL J. MANALO, AND ARMA J. MANALO, Respondents.
In resolving this present case, one of the most significant matters the court has noted is that while during the pre-trial held on 8 September 2003, plaintiff-spouses Manalo with the assistance counsel had agreed to stipulate that defendants had the right to foreclose upon the subject properties and that the plaintiffs[‘] main thrust was to prove that the foreclosure proceedings were invalid, in the course of the presentation of their evidence, they modified their position and claimed [that] the loan document executed were contracts of adhesion which were null and void because they were prepared entirely under the defendant bank’s supervision. They also questioned the interest rates and penalty charges imposed arguing that these were iniquitous, unconscionable and therefore likewise void.
Not having raised the foregoing matters as issues during the pre-trial, plaintiff-spouses are presumably estopped from allowing these matters to serve as part of their evidence, more so because at the pre-trial they expressly recognized the defendant bank’s right to foreclose upon the subject property (See Order, pp. 193-195).
In its decision promulgated on March 28, 2006,18 the CA affirmed the decision of the RTC insofar as it upheld the validity of the foreclosure proceedings initiated by PNB, but modified the Spouses Manalo’s liability for interest. It directed the RTC to see to the recomputation of their indebtedness, and ordered that should the recomputed amount be less than the winning bid in the foreclosure sale, the difference should be immediately returned to the Spouses Manalo.
The CA found it necessary to pass upon the issues of PNB’s failure to specify the applicable interest and the lack of mutuality in the execution of the credit agreements considering the earlier cited observation made by the trial court in its decision. Applying Article 1956 of the Civil Code, the CA held that PNB’s failure to indicate the rate of interest in the credit agreements would not excuse the Spouses Manalo from their contractual obligation to pay interest to PNB because of the express agreement to pay interest in the credit agreements. Nevertheless, the CA ruled that PNB’s inadvertence to specify the interest rate should be construed against it because the credit agreements were clearly contracts of adhesion due to their having been prepared solely by PNB.
The CA further held that PNB could not unilaterally increase the rate of interest considering that the credit agreements specifically provided that prior notice was required before an increase in interest rate could be effected. It found that PNB did not adduce proof showing that the Spouses Manalo had been notified before the increased interest rates were imposed; and that PNB’s unilateral imposition of the increased interest rate was null and void for being violative of the principle of mutuality of contracts enshrined in Article 1308 of the Civil Code. Reinforcing its “contract of adhesion” conclusion, it added that the Spouses Manalo’s being in dire need of money rendered them to be not on an equal footing with PNB. Consequently, the CA, relying on Eastern Shipping Lines, v. Court of Appeals,19 fixed the interest rate to be paid by the Spouses Manalo at 12% per annum, computed from their default.
The CA deemed to be untenable the Spouses Manalo’s allegation that PNB had failed to comply with the requirements for notice and posting under Section 3 of Act 3135. The CA stated that Sheriff Norberto Magsajo’s testimony was sufficient proof of his posting of the required Notice of Sheriff’s Sale in three public places; that the notarized Affidavit of Publication presented by Sheriff Magsajo was prima facie proof of the publication of the notice; and that the Affidavit of Publication enjoyed the presumption of regularity, such that the Spouses Manalo’s bare allegation of non-publication without other proof did not overcome the presumption.
WHETHER OR NOT THE COURT OF APPEALS WAS CORRECT IN NULLIFYING THE INTEREST RATES IMPOSED ON RESPONDENT SPOUSES’ LOAN AND IN FIXING THE SAME AT TWELVE PERCENT (12%) FROM DEFAULT, DESPITE THE FACT THAT (i) THE SAME WAS RAISED BY THE RESPONDENTS ONLY FOR THE FIRST TIME ON APPEAL (ii) IT WAS NEVER PART OF THEIR COMPLAINT (iii) WAS EXLUDED AS AN ISSUE DURING PRE-TRIAL, AND WORSE, (iv) THERE WAS NO FORMALLY OFFERED PERTAINING TO THE SAME DURING TRIAL.
WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED THAT THERE WAS NO MUTUALITY OF CONSENT IN THE IMPOSITION OF INTEREST RATES ON THE RESPONDENT SPOUSES’ LOAN DESPITE THE EXISTENCE OF FACTS AND CIRCUMSTANCES CLEARLY SHOWING RESPONDENTS’ ASSENT TO THE RATES OF INTEREST SO IMPOSED BY PNB ON THE LOAN.
Contrary to PNB’s argument, the validity of the interest rates and of the increases, and on the lack of mutuality between the parties were not raised by the Spouses Manalo’s for the first time on appeal. Rather, the issues were impliedly raised during the trial itself, and PNB’s lack of vigilance in voicing out a timely objection made that possible.
Section 5. Amendment to conform to or authorize presentation of evidence. – When issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice will be subserved thereby. The court may grant a continuance to enable the amendment to be made.
It is settled that even if the complaint be defective, but the parties go to trial thereon, and the plaintiff, without objection, introduces sufficient evidence to constitute the particular cause of action which it intended to allege in the original complaint, and the defendant voluntarily produces witnesses to meet the cause of action thus established, an issue is joined as fully and as effectively as if it had been previously joined by the most perfect pleadings. Likewise, when issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings.
Clearly, a court may rule and render judgment on the basis of the evidence before it even though the relevant pleading had not been previously amended, so long as no surprise or prejudice is thereby caused to the adverse party. Put a little differently, so long as the basic requirements of fair play had been met, as where litigants were given full opportunity to support their respective contentions and to object to or refute each other's evidence, the court may validly treat the pleadings as if they had been amended to conform to the evidence and proceed to adjudicate on the basis of all the evidence before it.
There is also no merit in PNB’s contention that the CA should not have considered and ruled on the issue of the validity of the interest rates because the Judicial Affidavit of Enrique Manalo had not been offered to prove the same but only “for the purpose of identifying his affidavit.”29 As such, the affidavit was inadmissible to prove the nullity of the interest rates.
Section 5, Rule 10 of the Rules of Court is applicable in two situations. The first is when evidence is introduced on an issue not alleged in the pleadings and no objection is interposed by the adverse party. The second is when evidence is offered on an issue not alleged in the pleadings but an objection is raised against the offer.30 This case comes under the first situation. Enrique Manalo’s Judicial Affidavit would introduce the very issues that PNB is now assailing. The question of whether the evidence on such issues was admissible to prove the nullity of the interest rates is an entirely different matter. The RTC accorded credence to PNB’s evidence showing that the Spouses Manalo had been paying the interest imposed upon them without protest. On the other hand, the CA’s nullification of the interest rates was based on the credit agreements that the Spouses Manalo and PNB had themselves submitted.
The CA’s directive to PNB (a) to recompute the Spouses Manalo’s indebtedness under the oversight of the RTC; and (b) to refund to them any excess of the winning bid submitted during the foreclosure sale over their recomputed indebtedness was warranted and equitable. Equally warranted and equitable was to make the amount to be refunded, if any, bear legal interest, to be reckoned from the promulgation of the CA’s decision on March 28, 2006.39 Indeed, the Court said in Eastern Shipping Lines, Inc. v. Court of Appeals40 that interest should be computed from the time of the judicial or extrajudicial demand. However, this case presents a peculiar situation, the peculiarity being that the Spouses Manalo did not demand interest either judicially or extrajudicially. In the RTC, they specifically sought as the main reliefs the nullification of the foreclosure proceedings brought by PNB, accounting of the payments they had made to PNB, and the conversion of their loan into a long term one.41 In its judgment, the RTC even upheld the validity of the interest rates imposed by PNB.42 In their appellant’s brief, the Spouses Manalo again sought the nullification of the foreclosure proceedings as the main relief.43 It is evident, therefore, that the Spouses Manalo made no judicial or extrajudicial demand from which to reckon the interest on any amount to be refunded to them. Such demand could only be reckoned from the promulgation of the CA’s decision because it was there that the right to the refund was first judicially recognized. Nevertheless, pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,44 the amount to be refunded and the interest thereon should earn interest to be computed from the finality of the judgment until the full refund has been made.
Anent the correct rates of interest to be applied on the amount to be refunded by PNB, the Court, in Nacar v. Gallery Frames45 and S.C. Megaworld Construction v. Parada,46 already applied Monetary Board Circular No. 799 by reducing the interest rates allowed in judgments from 12% per annum to 6% per annum.47 According to Nacar v. Gallery Frames, MB Circular No. 799 is applied prospectively, and judgments that became final and executory prior to its effectivity on July 1, 2013 are not to be disturbed but continue to be implemented applying the old legal rate of 12% per annum. Hence, the old legal rate of 12% per annum applied to judgments becoming final and executory prior to July 1, 2013, but the new rate of 6% per annum applies to judgments becoming final and executory after said dater.
The amount to be refunded and its accrued interest shall earn interest of 6% per annum until full refund.
WHEREFORE, the Court AFFIRMS the decision promulgated by the Court of Appeals on March 28, 2006 in CA-G.R. CV No. 84396, subject to the MODIFICATION that any amount to be refunded to the respondents shall bear interest of 12% per annum computed from March 28, 2006 until June 30, 2013, and 6% per annum computed from July 1, 2013 until finality hereof; that the amount to be refunded and its accrued interest shall earn interest at 6% per annum until full refund; and DIRECTS the petitioner to pay the costs of suit.
17 CA rollo, p. 87.
18Rollo, pp. 10-25; penned by Associate Justice Magdangal M. De Leon, and concurred in by Associate Justice Conrado M. Vasquez, Jr. (later Presiding Justice, but now retired) and Associate Justice Mariano C. Del Castillo (now a Member of the Court).
19 G.R. No. 97412, July 12, 1994, 234 SCRA 78, 95.
25 Records, pp. 204, 207.
26 See TSN, November 25, 2003, pp. 8-30.
27 G.R. No. 120730, October 28, 1996, 263 SCRA 660, 673-674.
28 G.R. No. 91852, August 15, 1995, 247 SCRA 361, 377-378.
30Mercader v. Development Bank of the Philippines (Cebu Branch), G.R. No. 130699, May 12, 2000, 332 SCRA 82, 97.
31 Exhibits, pp. 14, 18.
33Floirendo, Jr. v. Metropolitan Bank and Trust Company, G.R. No. 148325, September 3, 2007, 532 SCRA 43, 51, citing Philippine National Bank v. Court of Appeals, G.R. No. 88880, April 30, 1991, 196 SCRA 536, 545.
34Pilipino Telephone Corporation v. Tecson, G.R. No. 156966, May 7, 2004, 428 SCRA 378, 380.
35 G.R. No. 193178, May 30, 2011, 649 SCRA 527, 533.
36 G.R. No. 107569, November 8, 1994, 238 SCRA 20, 26.
45 G.R. No. 189871, August 13, 2013.
46 G.R. No. 183804, September 11, 2013.
47 Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per annum.

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