Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&amp;view=article&amp;id=45875:148541&amp;catid=1459&amp;Itemid=566
Timestamp: 2019-04-24 01:55:46+00:00

Document:
G.R. No. 148541 - DEVELOPMENT BANK OF THE PHILIPPINES v. BONITA O. PEREZ, ET AL.
DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, v. BONITA O. PEREZ and ALFREDO PEREZ, respondents.
This is a Petition for Review on Certiorari seeking to reverse and set aside the Decision1 of the Court of Appeals (CA) dated February 28, 2001, and to reinstate the Decision of the Regional Trial Court (RTC), Makati City, Branch 145, in Civil Case No. 12057, as modified by trial court's Order dated June 11, 1993.
On September 6, 1978, the petitioner sent a letter6 to the respondents informing them of the terms for the payment of the P214,000.00 industrial loan. On November 8, 1978, the petitioner sent another letter7 to the respondents informing them about the terms and conditions of their additional P21,000.00 industrial loan.
Due to the respondents' failure to comply with their amortization payments, the petitioner decided to foreclose the mortgages that secured the obligation. However, in a Letter8 dated October 7, 1981, Mrs. Perez requested for a restructuring of their account due to difficulties they were encountering in collecting receivables.
On or before May 7, 1992, for value received, I/we, jointly and severally, promise to pay the DEVELOPMENT BANK OF THE PHILIPPINES, or order at its office at Makati, Metro Manila, Philippines, the sum of TWO HUNDRED THIRTY-ONE THOUSAND PESOS (P231,000.00), Philippine Currency, with interest at the rate of EIGHTEEN per centum (18%) per annum. Before the date of maturity, we hereby bind ourselves to make partial payments, the first payment to be made on August 7, 1982 and the subsequent payments on the 7th day of every three (3) months thereafter, and each of all such payments shall be TWELVE THOUSAND FIVE HUNDRED FIFTY-THREE and 27/100 PESOS (P12,553.27) which shall cover amortizations on the principal and interest at the above-mentioned rate.
On loan with amortizations or portions thereof in arrears irrespective of age.
Additional interest at the basic loan interest rate per annum computed on total amortizations past due irrespective of age.
Penalty charge of 8% per annum computed on total amortizations in arrears irrespective of age.
The DBP further reserves the right to increase, with notice to the mortgagor, the rate of interest on the loan as well as all other fees and charges on loans and advances pursuant to such policy as it may adopt from time to time during the period of the loan; Provided that the rate of interest on the loan shall be reduced in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board; Provided, further, that the adjustment in the rate of interest shall take effect on or after the effectivity of the increase or decrease in the maximum rate of interest.
In case of non-payment of the amount of this note or any portion of it on demand, when due, or any other amount or amounts due on account of this note, the entire obligation shall become due and demandable, and if, for the enforcement of the payment thereof, the DEVELOPMENT BANK OF THE PHILIPPINES, is constrained to entrust the case to its attorneys, I/we, jointly and severally, bind myself/ourselves to pay for attorney's fees, as provided for in the mortgage contract, in addition to the legal fees and other incidental expenses. In the event of foreclosure of the mortgage securing this note, I/we further bind myself/ourselves, jointly and severally, to pay the deficiency, if any.
On October 24, 1985, the respondents filed a Complaint16 for the nullification of the new promissory note with damages and preliminary prohibitory injunction. The complaint alleged that the petitioner restructured the respondents' obligation in bad faith by requiring them to sign another promissory note for P231,000.00 without considering the total payments made on the loan amounting to P224,383.43. The respondents claimed that the petitioner failed to explain to them how it had arrived at the amount of the restructured loan. The respondents also alleged that the petitioner failed to furnish them with a disclosure statement as required by Rep. Act No. 3765, also known as the Truth in Lending Act, prior to the consummation of the transaction. They averred that the interest imposed on the said transaction was usurious. They, likewise, alleged that the new promissory note constituted a novation of the previous obligations.
On October 25, 1985, the trial court ordered the petitioner to desist from holding the public auction of the respondents' properties. The trial court issued an Order on April 25, 1986 to maintain the status quo.
WHEREFORE, judgment is rendered dismissing the complaint for failure of plaintiffs to prove their causes of action by clear preponderance of evidence, with costs against them.
The order issued on April 25, 1986, ordering the defendant Bank to maintain the status quo and suspending the auction sale, is hereby set aside.
Defendant Bank's counterclaim is hereby granted, and plaintiffs are hereby ordered to pay the former the sum of One Million Three Hundred Eighty-four Thousand Four Hundred Sixty-five Pesos and Seventy-one Centavos (P1,384,465.71), representing the latter's obligation as of September 15, 1990, with interest thereon at the legal rate of twelve (12%) percent per annum pursuant to Sec. 2 of CB Circular No. 905; (Sagrador v. Valderrama, supra), from September 15, 1990 up to full payment of said sum. The other counterclaim for exemplary damages is hereby dismissed.
Upon the petitioner's motion for reconsideration, the trial court issued an order20 amending the dispositive portion of its decision by changing the rate of interest to eighteen percent (18%) per annum.
WHEREFORE, premises considered, the Decision dated May 10, 1993, docketed as Civil Case No. 12057 by the Regional Trial Court of Makati, Branch 145, is hereby MODIFIED in the sense that the amount of P1,384,465.71 as of September 1990 is SET ASIDE and the formula mandated by Central Bank Circular No. 158 should be applied by the trial court in computing the total obligation and liability of appellants. All the other parts of the assailed decision are AFFIRMED in toto.
The CA found that the respondents did not voluntarily sign the restructured promissory note as they were only forced to sign it for fear of having their mortgaged property foreclosed by the bank. It ruled that the restructured promissory note which was prepared by the petitioner alone was a contract of adhesion which violates the rule on mutuality of contracts.
Both parties moved to reconsider the said decision. The CA denied the said motions in a Resolution dated May 31, 2001.
1. Whether or not the Honorable Court of Appeals had decided this instant case in a way not in accord with the spirit and intent of Republic Act No. 3765, otherwise known as the Truth in Lending Act, when it declared that "the trial court should have applied the formula provided by Central Bank Circular No. 158, series of 1963, as provided above to arrive at the total obligations of appellants less the amounts paid by appellants as evidenced by the vouchers and receipts attached to the records;"
In a nutshell, the issues in this case are as follows: (1) whether the new promissory note is voidable for not having been voluntarily signed by the respondents and for being a contract of adhesion; (2) whether the interest rate agreed upon by the parties in the new promissory note is usurious; (3) whether Central Bank Circular No. 158 should be applied in computing the total obligations of the respondents; and (4) the amount of the total obligation of the respondents.
On the other hand, the respondents argue that this is a question of fact which is not subject to review by this Court. According to the respondents, the fact that the restructured loan proved disadvantageous to them belies the petitioner's claim that they voluntarily signed the new promissory note.
We agree with the petitioner.
In the instant case, there was no evidence showing that the respondents signed the new promissory note through mistake, violence, intimidation, undue influence, or fraud. The respondents merely alleged that they were forced to restructure their loan for fear of having their mortgaged properties foreclosed. However, it is axiomatic that this would not amount to vitiated consent. The last paragraph of Article 1335 of the New Civil Code specifically states that a threat to enforce one's claim through competent authority, if the claim is just or legal, does not vitiate consent. Foreclosure of mortgaged properties in case of default in payment of a debtor is a legal remedy afforded by law to a creditor. Hence, a threat to foreclose the mortgage would not, per se, vitiate consent.
The CA noted that the petitioner prepared the new promissory note on its own and that the only participation of the respondents was to sign the same. The CA concluded, therefore, that the new promissory note was a contract of adhesion.
On the second issue, the CA held that under CB Circular No. 817, if the loan is secured by a registered real estate, the interest of eighteen percent (18%) is usurious. The petitioner, however, argues that usury has become legally inexistent with the promulgation of CB Circular No. 905.34 It contends that the interest rate should be eighteen percent (18%), the interest rate they agreed upon.35 For their part, the respondents argue that the Central Bank engaged in self-legislation in enacting CB Circular No. 905.
We agree with the ruling of the CA. It is elementary that the laws in force at the time the contract was made generally govern the effectivity of its provision.36 We note that the new promissory note was executed on May 6, 1982, prior to the effectivity of CB Circular No. 905 on January 1, 1983. At that time, The Usury Law, Act No. 2655, as amended by Presidential Decree No. 116, was still in force and effect.
In this case, by specific provision in the new promissory note, the restructured loan continued to be secured by the same mortgage contract executed on May 18, 1978 which covered real and personal properties of the respondents. We, therefore, find the eighteen percent (18%) interest rate plus the additional interest and penalty charges of eighteen percent (18%) and eight percent (8%), respectively, to be highly usurious.
Moreover, considering our previous conclusion that the interest rates prescribed under the new promissory note are usurious, the statement of account presented by the petitioner is no longer pertinent. It must be stressed that such statement of account was arrived at based on the usurious interest rates. Hence, the total amount of the obligation must necessarily be recomputed.
IN LIGHT OF ALL THE FOREGOING, the assailed Decision dated February 28, 2001 of the Court of Appeals and Order dated June 11, 1993 of the Regional Trial Court, Makati City, Branch 145, are AFFIRMED WITH MODIFICATION. The case is hereby REMANDED to the trial court for determination of the total amount of the respondents' obligation according to the reduced interest rate of twelve percent (12%) per annum.
1 Penned by Associate Justice Mercedes Gozo-Dadole, with Associate Justices Fermin A. Martin, Jr. and Portia AliÃ±o-Hormachuelos, concurring.
27 Memorandum for the Petitioner, pp. 17-18.
29 Montecillo v. Reynes, 385 SCRA 244 (2002).
30 Changco v. Court of Appeals, 379 SCRA 590 (2002).
31 ErmitaÃ±o v. Court of Appeals, 306 SCRA 218 (1999).
32 305 SCRA 449 (1999).
36 Puerto v. Court of Appeals, 383 SCRA 185 (2002).
37 Sec. 2, Act No. 2655, as amended by P.D. No. 116.
38 First Metro Investment Corporation v. Este Del Sol Mountain Reserve, Inc., 369 SCRA 99 (2001).
39 CB Circular No. 416 dated July 29, 1974, raised the legal interest to 12% per annum.
43 Sec. 2(i), CB Circular No. 158-63.
44 Sec. 2, Rep. Act No. 3765.

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