Supreme Court Reports Annotated Volume 435
Supreme Court Reports Annotated Volume 435
*
G.R. No. 148753. July 30, 2004.
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* THIRD DIVISION.
566
567
568
569
570
Same; Same; Same; Same; Notarial Law; Legal Ethics; Act 496
has repealed the Spanish Notarial Law; A partyÊs engagement of his
counsel in another capacity concurrent with the practice of law is not
prohibited, so long as the roles being assumed by such counsel is
made clear to the client.·The disqualification argument in the
Affidavit of Publication raised by petitioners no longer holds water,
inasmuch as Act 496 has repealed the Spanish Notarial Law.In the
same vein, their engagement of their counsel in another capacity
concurrent with the practice of law is not prohibited, so long as the
roles being assumed by such counsel is made clear to the client. The
only reason for this clarification requirement is that certain ethical
considerations operative in one profession may not be so in the
other.
Same; Same; Evidence; Entries in Ledgers; Presumptions;
Without a doubt, the subsidiary ledgers in a manual accounting
system are mere private documents that support and are controlled
by the general ledger; We go by the presumption that the recording of
private transactions has been fair and regular, and that the ordinary
course of business has been followed.·Contrary to petitionersÊ
assertions, the subsidiary ledgers of respondent properly reflected
all entries pertaining to Petitioner NSBCIÊs loan accounts. In
accordance with the Generally Accepted Accounting Principles
(GAAP) for the Banking Industry, all interests accrued or earned on
such loans, except those that were restructured and non-accruing,
have been periodically taken into income. Without a doubt, the
subsidiary ledgers in a manual accounting system are mere private
documents that support and are controlled by the general ledger.
Such ledgers are neither foolproof nor standard in format, but are
periodically subject to audit. Besides, we go by the presumption
that the recording of private transactions has been fair and regular,
and that the ordinary course of business has been followed.
Same; Same; Same; Words and Phrases; „General Ledgers,‰ and
„Subsidiary Ledgers,‰ Explained.·A „general ledger,‰ on the one
hand, is a summary or repository of accounts to which debits and
credits resulting from financial transactions are posted from
journals or books of original entry; a „subsidiary ledger,‰ on the
other, is a special type of ledger confined chiefly to a particular
account.
Mortgages; Foreclosure of Mortgage; No personal notice is
required in an extrajudicial foreclosure since such action is in rem,
requiring only notice by publication and posting, in order to bind
parties interested in the foreclosed property.·In the accessory
contract of real mortgage, in which immovable property or real
rights thereto are used as security for the fulfillment of the
principal loan obligation,the bid price may be lower than the
propertyÊs fair market value. In fact, the loan value itself is only 70
percent of the appraised value. As correctly emphasized by the
appellate court, a low bid price will make it easier for the owner to
effect redemption
571
VOL. 435, JULY 30, 2004 571
PANGANIBAN, J.:
The Case
1
Before us is a Petition for Review under Rule 45 of the
Rules of2 Court, seeking to nullify
3
the June 20, 2001
Decision of the Court of Appeals (CA) in CA-G.R. CV No.
55231. The decretal portion of the assailed Decision reads
as follows:
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572
The Facts
„On February 11, 1989, Board Resolution No. 05, Series of 1989 was
approved by [Petitioner] NSBCI [1)] authorizing the company to x x
x apply for or secure a commercial loan with the PNB in an
aggregate amount of P8.0M, under such terms agreed by the Bank
and the NSBCI, using or mortgaging the real estate properties
registered in the name of its President and Chairman of the Board
[Petitioner] Eduardo R. Dee as collateral; [and] 2) authorizing
[petitioner-spouses] to secure the loan and to sign any [and all]
documents which may be required by [Respondent] PNB[,] and that
[petitioner-spouses] shall act as sureties or co-obligors who shall be
jointly and severally liable with [Petitioner] NSBCI for the payment
of any [and all] obligations.
„On August 15, 1989, Resolution No. 77 was approved by
granting the request of [Respondent] PNB thru its Board NSBCI for
an P8 Million loan broken down into a revolving credit line of
P7.7M and an unadvised line of P0.3M for additional operating and
7
working capital to mobilize its various construction projects,
namely:
_______________
4 Petitioners herein.
5 Respondent herein.
6 CA Decision, pp. 24-25; Rollo, pp. 182-183.
7 „Working capital‰ refers to current assets minus current liabilities.
573
_______________
574
_______________
575
576
ÂIn view of the foregoing, the Court believes and so holds that the
[respondent] has no cause of action against the [petitioners].Ê
9
WHEREFORE, the case is hereby DISMISSED, without costs.Ê ‰
_______________
577
578
Issues
Petitioners submit the following issues for our
consideration:
„I
„II
„III
„IV
„V
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10 The Petition was deemed submitted for decision on August 19, 2002,
upon receipt by the Court of petitionersÊ Memorandum signed by Atty.
Cesar M. Cariño. RespondentÊs Memorandum, signed by Attys. Flerida P.
Zaballa-Banzuela and Dinah B. Tabada, was filed on June 28, 2002.
579
VOL. 435, JULY 30, 2004 579
New Sampaguita Builders Construction, Inc. (NSBCI) vs.
Philippine National Bank
„VI
At the
12
outset, it must be stressed that only questions of
law may be raised in a petition for review on certiorari
under Rule 45 of the Rules of Court. As a rule, questions of
fact cannot be the
_______________
580
13 Perez v. Court of Appeals, 374 Phil. 388, 409-410; 316 SCRA 43,
October 1, 1999.
14 Far East Bank & Trust Co. v. Court of Appeals, 326 Phil. 15, 18; 256
SCRA 15, 18, April 1, 1996, per Hermosisima Jr., J.
15 Alsua-Betts v. Court of Appeals, 92 SCRA 332, 366, July 30, 1979.
16 Luna v. Linatoc, 74 Phil. 15, October 28, 1942.
17 De La Cruz v. Sosing, 94 Phil. 26, 28, November 27, 1953.
18 Larena v. Mapili, 408 SCRA 484, 489, August 7, 2003, per
Panganiban, J.; and The Heirs of Felicidad Canque v. Court of Appeals,
341 Phil. 738, 750; 27 SCRA 741, July 21, 1997.
19 Feria and Noche, Civil Procedure Annotated, Vol. 2 (2001), p. 203.
20 Exhibits „C‰, „C-1‰, and „C-2‰; Exhibits „13‰, „13-B‰, and „13-C‰;
folder of exhibits, Vol. I, pp. 5-7.
21 De Leon, Comments and Cases on Credit Transactions (1995), p. 32.
581
No interest
22
shall be due, unless expressly stipulated in
writing. It would be the zenith of farcicality to specify and
agree upon rates that could be subsequently upgraded at
whim by only one party to the agreement. 23
The „unilateral determination and imposition‰ of
increased rates is „violative of the principle
24
of mutuality of
25
contracts ordained in Article 1308 of the Civil Code.‰
One-sided impositions do not have the force of law between
the parties, because such impositions are not based on the
partiesÊ essential equality. 26
Although escalation clauses are valid in maintaining
fiscal stability and
27
retaining the value of money on long-
term contracts, giving respondent an unbridled right to
adjust the interest independently and upwardly would
completely take away from petitioners the „right to assent
28
to an important modification in their agreement‰ and
would also negate the element of mutuality in their
contracts. The clause cited earlier made the fulfillment of
the contracts
29
„dependent exclusively upon the uncontrolled
will‰ of respondent and was therefore void. Besides, the
pro forma promis-
_______________
582
_______________
583
38
gally inexistent‰ ·the interest ranging from 39
26 percent to
35 percent in the statements of account ·„must be
equitably reduced
40
for being iniquitous, unconscionable and
exorbitant.‰ Rates found to be iniquitous or
unconscionable are41
void, as if it there were no express
contract thereon. Above all, it is undoubtedly against
42
public policy to charge excessively for the use of money.
It cannot be argued that assent to the increases can be
implied either from the June 18, 1991 request of petitioners
for loan restructuring or from their lack of response to the
statements of account sent by respondent. Such request
does not indicate any agreement to an interest increase;
there can be no implied waiver of a right when there is no 43
clear, unequivocal and decisive act showing such purpose.
Besides, the statements were not letters of information
sent to secure their conformity; and even if we were to
presume these as an offer, there was no acceptance. No one
receiving a proposal to modify a loan contract, especially
interest·a 44
vital component·is „obliged to answer the
proposal.‰
Furthermore, respondent did not follow the stipulation
in the Promissory Notes providing for the automatic
conversion of the portion that remained unpaid after 730
days·or two years from date of original release·into a
medium-term loan, subject to the applicable 45 interest rate to
be applied from the dates of original release.
_______________
38 Medel v. Court of Appeals, 359 Phil. 820, 829; 299 SCRA 481, 489,
November 27, 1998, per Pardo, J. See also People v. Dizon, 329 Phil. 685,
696; 260 SCRA 851, 859, August 22, 1996; Liam Law v. Olympic Sawmill
Co., 214 Phil. 385, 388; 129 SCRA 439, 442, May 28, 1984; PeopleÊs
Financing Corp. v. Court of Appeals, 192 SCRA 34, 40, December 4, 1990;
and Javier v. De Guzman Jr., 192 SCRA 434, 439, December 19, 1990.
39 These are billings sent by respondent to petitioner showing the
details of its outstanding claim against the latter as of a given date.
40 Spouses Solangon v. Salazar, supra, p. 822; p. 384.
41 Imperial v. Jaucian, supra, p. 525.
42 De Leon, supra, p. 50.
43 Tolentino, Commentaries and Jurisprudence on the Civil Code of the
Philippines, Vol. I (1990), p. 29.
44 Philippine National Bank v. Court of Appeals, supra at note 25, p.
63, per Mendoza, J. (citing Philippine National Bank v. Court of Appeals,
supra at note 28, pp. 26-27).
45 Exhibits „C‰, „C-1‰, and „C-2‰; Exhibits „13‰, „13-B‰, and „13-C‰;
folder of exhibits, Vol. I, pp. 5-7.
584
46 47 48
In the first, second and third Promissory Notes, the
amount that remained unpaid as of October 27, 1989,
December 1989 and January 4, 1990·their respective due
dates·should have been automatically converted by
respondent into medium-term loans on June 30, 1991,
September 2, 1991, and September 7, 1991, respectively.
And on this unpaid amount should have been imposed the
same interest rate charged by respondent on other
medium-term loans; and the rate applied from June 29,
1989, September 1, 1989 and September 6, 1989·their
respective original release·until paid. But these steps
were not taken. Aside from sending demand letters,
respondent did not at all exercise its option to enforce
collection as of these NotesÊ due dates. Neither did it renew
or extend the account.
In these three Promissory Notes, evidently, no complaint
for collection was filed with the courts. It was not until
January 30, 1992 that a Petition for Sale of the mortgaged 49
properties was filed·with the provincial sheriff, instead.
Moreover, respondent did not supply the interest rate to be
charged on medium-term loans granted by automatic
conversion. Because of this deficiency, we shall use the
legal rate of 12 percent per annum on loans and 50
forbearance of money, as provided for by CB Circular 416.
Credit Agreements. Aside from the promissory notes,
another main document involved in the principal obligation
is the set of credit agreements executed
51
and their annexes.
The first Credit Agreement dated June 19, 1989·
although offered and admitted in evidence, and even
referred to in the first Promissory Note·cannot be given
weight.
First, it was not52
signed by respondent through its
branch manager. Apparently it was surreptitiously
acknowledged before respondentÊs counsel, who
unflinchingly declared that it had been
_______________
585
_______________
586
587
_______________
588
_______________
589
87
tive interest rate per annum would definitely apply to the
second availment or drawdown evidenced by the second
Promissory Note. Incidentally, this Statement was issued
only after the consummation of its related availment or
drawdown, yet such rate can be deemed equivalent to the
prime rate plus spread, as stipulated in the corresponding
Credit Agreement. Again, we presume that this private
transaction was fair and regular, and that the ordinary
course of business was followed. That the related
Promissory Note was pre-signed would also bolster
petitionersÊ claim although, under cross-examination
88
Efren
Pozon·Assistant Department Manager I of PNB,
Dagupan Branch·testified that the Disclosure
89
Statements
were the basis for preparing the Notes.
As to the 90
third Disclosure Statement on Loan/Credit
Transaction dated September 6, 1989, we hold that 91
the
same 21.5 percent effective interest rate per annum would
apply to the third availment or drawdown evidenced by the
third Promissory Note. This Statement was made available
to petitioner-spouses, only after the related Credit
Agreement had been executed, but simultaneously with the
consummation of the StatementÊs related availment or
drawdown. Nonetheless, the rate herein should still be
regarded as equivalent to the prime rate plus spread,
under the similar presumption that this private
transaction was fair and regular and that the ordinary
course of business was followed.
In sum, the three disclosure statements, as well as the
two credit agreements considered by this Court, did not
provide for any increase in the specified interest rates.
Thus, none would now be permitted. When cross-examined,
Julia Ang-Lopez, Finance Account Analyst II of PNB,
Dagupan Branch, even testified that the bases for
computing such rates were those sent by the head office
from time to time, and92 not those indicated in the notes or
disclosure statements.
_______________
590
Penalty, or Increases
Thereof, Unjustified
No penalty charges or increases
96
thereof appear either in
the Disclosure Statements or in any of97the clauses in the
second and the third Credit Agreements earlier discussed.
While a standard penalty charge of 6 percent per annum
has been imposed on the amounts stated in all three
Promissory Notes still
98
remaining unpaid or unrenewed
when they fell due, there is no stipulation therein that
would justify any increase in that charges. The effect,
therefore, when the borrower is not clearly informed of the
Disclosure Statements·prior to the consummation of the
availment or drawdown·is that the 99
lender will have no
right to collect upon such charge or increases thereof,
even if stipulated in the Notes. The time is now ripe to give
teeth to the 100
often ignored forty-one-year old „Truth in
Lending Act‰ and thus transform it from a snivelling
paper tiger to a growling financial watchdog of hapless
borrowers.
_______________
591
_______________
592
_______________
593
_______________
594
_______________
The amount, tenor or maturity of the loan must comport with the actual
requirements of the borrower. The purpose of the loan or credit accommodation
must be stated in the application and documentation. Any deviation may cause
acceleration, immediate repayment, foreign currency blacklisting, or
conversion from a term loan to a demand loan. Morales, The Philippine General
Banking Law Annotated (2002), pp. 105-106.
595
_______________
596
_______________
597
141
lower than the propertyÊs fair market value. In fact, the 142
loan value itself is only 70 percent of the appraised value.
As correctly emphasized by 143 the appellate court, a low bid
price will 144
make it easier for the owner to effect
redemption by subsequently reacquiring the property or
by selling the right to redeem and thus recover alleged
losses. Besides, the public
145
auction sale has been regularly
and fairly conducted,
146
there has been ample authority to
effect the sale, and the 147 Certificates of Title148can be relied
upon. No personal notice is even required, because an
extrajudicial foreclosure is an action in rem, requiring only
notice by publication and posting, in149order to bind parties
interested in the foreclosed
150
property.
As no redemption was exercised within one year after
the date of registration of the Certificate of Sale with the
Registry of
_______________
598
_______________
599
600
Add:
Interest at 19.5% p.a.
6/30/90-12/31/90 ([5,000,000- 383,014.64
(356,821.30+821.33+767,087.92)]x
19.5% x [185/365])
1/1/91-6/29/91 ([5,000,000- 372,662.90
(356,821.30+821.33+767,087.92)]
x 19.5% x [180/365])
Interest at 12% p.a. upon automatic conversion
6/30/91-8/8/91 ([5,000,000- 50,962.45 806,639.99 806,639.99
(36,821.30+821.33+767,087.92)] x
12% x [40/365])
Amount due as of 8/8/91 4,681,909.43
Less: Payment on 8/8/91 (pro-rated upon 493,906.31 493,906.31
interest)
Balance 312,733.68 4,188,003.13
Add:
Interest at 12% p.a.
8/9/91-8/15/91 ([5,000,000- 8,918.43 8,918.43
(356,821.30+821.33+767,087.92)] x 12% x
[7/365])
Amount due as of 8/15/91 321,652.11 4,196,921.55
Less: Payment on 8/15/91 (pro-rated upon 86,593.37 86,593.37
interest)
Balance 235,058.74 4,110,328.18
Add:
Interest at 12% p.a.
8/16/91-11/29/91 ([5,000,000- 135,050.49 135,050.49
(356,821.30+821.33+767,087.92)]x 12% x
[106/365])
Amount due as of 11/29/91 370,109.22 4,245,378.67
Less: Payment on 11/29/91 (pro-rated upon 161,096.81 161,096.81
interest)
Balance 209,012.41 4,084,281.86
Add:
Interest at 12% p.a.
11/30/91-12/20/91 ([5,000,000- 26,755.28 26,755.28
(356,821.30+821.33+767,087.92)] x12% x
[21/365])
Amount due as of 12/20/91 235,767.70 4,111,037.14
Less: Payment on 12/20/91 (pro-rated upon 162,115.78 162,115.78
interest)
Balance 73,651.92 3,948,921.3
Add:
Interest at 12% p.a.
12/21/91-12/31/91 ([5,000,000- 14,281.03
(356,821.30+821.33+767,087.92)]
x12% x [11/365])
1/1/92-2/26/92 ([5,000,000- 74,001.70 88,282.74 88,282.74
(356,821.30+821.33+767,087.92)]
x 12% x [57/365])
Amount due on PN (1) asof 2/26/92 161,934.66 P4,037,204.10
601
602
Add:
Interest at 21.5% p.a.
6/30/90-12/31/90 ([2,700,000- 238,953.28
(18,209.65+523.04+488,484.22)]
x 21.5%x [185/365])
1/1/91-8/8/91 ([2,700,000- 284,160.66 523,113.94 523,113.94
(18,209.65+523.04+488,484.22)]
x 21.5%x [220/365])
Amount due as of 8/8/91 2,715,897.04
Less: Paymenton 8/8/91 (pro-rated upon 320,303.08 320,303.08
interest)
Balance 202,810.86 2,395,593.95
Add:
Interest at 21.5% p.a.
8/9/91-8/15/91 ([2,700,000- 9,041.48 9,041.48
(18,209.65+523.04+488,484.22)] x 21.5% x
[7/365])
Amount due as of 8/15/91 211,852.33 2,404,635.43
Less: Payment on 8/15/91 (pro-rated upon 57,033.69 57,033.69
interest)
Balance 154,818.64 2,347,601.74
Add:
Interest at 21.5% p.a.
8/16/91-9/1/91 ([2,700,000- 21,957.87
(18,209.65+523.04+488,484.22)]
x 21.5% x [17/365])
Interest at 12% p.a. upon automatic conversion
9/2/91-11/29/91 ([2,700,000- 64,161.43 86,119.30 86,119.30
(18,209.65+523.04+488,484.22)]
x 12% x [89/365])
Amount due as of 11/29/91 240,937.94 2,433,721.04
Less: Payment on 11/29/91 (pro-rated upon 104,872.65 104,872.65
interest)
Balance 136,065.30 2,328,848.39
Add:
Interest at 12% p.a.
11/30/91-12/20/91 ([2,700,000- 15,139.21 15,139.21
(18,209.65+523.04+488,484.22)]x 12% x
[21/365])
Amount due as of 12/20/91 151,204.51 2,343,987.61
Less: Payment on 12/20/91 (pro-rated upon 103,969.45 103,969.45
interest)
Balance 47,235.07 2,240,018.16
Add:
Interest at 12% p.a.
12/21/91-12/31/91 ([2,700,000- 7,930.06
(18,209.65+523.04+488,484.22)]x
12% x [11/365])
1/1/92-2/26/92 ([2,700,000- 41,092.15 49,022.22 49,022.22
(18,209.65+523.04+488,484.22)]
x 12%x [57/365])
Amount dueon PN (2) asof 2/26/92 96,257.28 P2,289,040.38
603
604
Add:
Interest at 21.5% p.a.
6/30/90-12/31/90 ([300,000- 26,700.60
(337.22+58.44+54,583.14)]
x 21.5% x [185/365])
1/1/91-8/8/91 ([300,000- 31,752.06 58,452.66 58,452.66
(337.22+58.44+54,583.14)]]
x 21.5% x [220/365])
Amount due as of 8/8/91 303,473.86
Less:Payment on 8/8/91 (pro-rated 35,790.61 35,790.61
upon interest)
Balance 22,662.05 267,683.25
Add:
Interest at 21.5% p.a.
8/9/91-8/15/91 ([300,000- 1,010.29 1,010.29
(337.22+58.44+54,583.14)]] x 21.5% x
[7/365])
Amount due as of 8/15/91 23,672.34 268,693.54
Less: Payment on 8/15/91 (pro-rated 6,372.93 6,372.93
upon interest)
Balance 17,299.41 262,320.61
Add:
Interest at 21.5% p.a.
8/16/91-9/6/91 ([300,000- 3,175.21
(337.22+58.44+54,583.14)]]
x 21.5% x [22/365])
Interest at 12% p.a. upon automatic conversion
9/7/91-11/29/91 ([300,000- 6,766.61 9,941.82 9,941.82
(337.22+58.44+54,583.14)]]
x 12% x [84/365])
Amount due as of 11/29/91 27,241.23 272,262.43
Less: Payment on 11/29/91 (pro-rated 11,857.24 11,857.24
upon interest)
Balance 15,383.98 260,405.18
Add:
Interest at 12% p.a.
11/30/91-12/20/91 ([300,000- 1,691.65 1,691.65
(337.22+58.44+54,583.14)]] x 12% x
[21/365])
Amount due as of 12/20/91 17,075.64 262,096.84
Less: Payment on 12/20/91 (pro-rated 11,741.35 11,741.35
upon interest)
Balance 5,334.29 250,355.49
Add:
Interest at 12% p.a.
12/21/91-12/31/91 886.10
([300,000-
(337.22+58.44+54,583.14)]]
x 12% x [11/365])
1/1/92-2/26/92 ([300,000- 4,591.63 5,477.73 5,477.73
(337.22+58.44+54,583.14)]]
x 12% x [57/365])
Amount due on PN (3) as of 2/26/92 10,812.03 P255,833.22
605
606
_______________
607
_______________
608
168
1989, that the spouses should act as such surety. But,
their solidary liability should be carefully studied, not
sweepingly assumed to cover all availments instantly.
First, the JSA was executed on 169 August 31, 1989. As
correctly adverted to by petitioners, it covered only the
Promissory Notes of P2,700,000 and P300,000 made after
that date. The terms of a contract
170
of suretyship undeniably
determine the suretyÊs liability171 and cannot extend beyond
what is stipulated therein. Yet, the total amount
petitioner-spouses agreed to be held liable for was
P7,700,000; by the time the JSA was executed, the first
Promissory Note was still
172
unpaid and was thus brought
within the JSAÊs ambit.
Second, while the JSA included all costs, charges and
expenses that respondent might incur 173
or sustain in
connection with the credit documents, only the interest
was imposed under the pertinent Credit Agreements.
Moreover, the relevant Promissory Notes had to be resorted
to for proper valuation of the interests charged.
Third, although the JSA, as a contract of adhesion,
should be taken contra proferentum against the party who
may have caused any ambiguity therein, no such ambiguity
was found. Petitioner-spouses,
174
who agreed to be
accommodation mortgagors, can no
_______________
609
_______________
erty. Peña, Peña Jr., and Peña, supra, p. 255. See Spouses Belo v.
Philippine National Bank, 353 SCRA 359, 371, March 1, 2001.
Like an accommodation party to a negotiable instrument under §29 of Act No.
2031, otherwise known as the „Negotiable Instruments Law,‰ the
accommodation mortgagor uses his or her own property, in effect becoming a
surety, to enable the accommodated debtor to obtain credit. See Spouses
Gardose v. Tarroza, 352 Phil. 797, 807; 290 SCRA 186, May 19, 1998.
610
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