SPECIAL SECOND DIVISION
TRADE & INVESTMENT DEVE- G.R. No. 139290
LOPMENT CORPORATION OF
THE
Philippine
Export & Foreign
Loan Guarantee Corporation,
Petitioner, PUNO, J.,
Chairman,
AUSTRIA-MARTINEZ,
- versus - CALLEJO,
SR.
TINGA,
and
CHICO-NAZARIO, JJ.
ROBLETT INDUSTRIAL CONS-
TRUCTION CORPORATION,
ROBERTO G. ABIERA and Promulgated:
LETICIA ABIERA, and
INSURANCE CORPORATION,
Respondents. May
19, 2006
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R E S O L U T
I O N
Tinga, J.:
Under
consideration are the motion for reconsideration[1]
dated 23 December 2005 and supplemental motion for reconsideration[2]
dated 23 January 2006, both filed by respondent Paramount Insurance Corporation
(Paramount) with regard to our Decision[3]
dated 11 November 2005 which disposed of the case as follows:
WHEREFORE, premises considered, the petition is hereby
GRANTED. The Decision of the Court of
Appeals is REVERSED and the judgment of the Regional Trial Court is REINSTATED
with the following modifications:
a) ordering respondents Roblett, the Abieras, and P11,775,611.25, with the following rates of interest and
penalty charge, to wit:
i. for
respondent
ii. for respondents Roblett and the Abieras, sixteen percent
(16%) interest per annum from
b) ordering respondents Roblett and the Abieras, jointly and
severally, to pay petitioner Philguarantee the amount of P18,029,219.78
plus 12% interest thereon from the time of finality of judgment until fully
paid;
c) ordering respondents Roblett and the Abieras, jointly and
severally, to pay petitioner Philguarantee ten percent (10%) of P11,775,611.25,
as attorney's fees, plus the costs of suit;
d) ordering respondent P100,000.00 as reasonable
attorney's fees;
e) ordering
respondents Roblett and Benlot, jointly and severally, to reimburse respondent
Paramount whatever amount it would pay petitioner Philguarantee including all
interests, attorney's fees and the costs; and
f) ordering
all the respondents, jointly and severally, and the third-party defendants,
also jointly and severally, to pay petitioner Philguarantee legal interest of
12% per annum on the judgment awards respectively against them from the time of
finality of judgment until fully paid.
SO ORDERED.[4]
In support of its motion for
reconsideration, Paramount submits the following grounds: (1) Paramount issued
a bidder’s bond and not a performance or guarantee bond so that when respondent
Roblett Industrial Construction Corporation (Roblett) executed the sub-contract
agreement, Paramount was released from liability thereunder; (2) petitioner is
guilty of misrepresentation and concealment in securing Paramount’s continuing
commitment to answer for Roblett’s repayment scheme; (3) petitioner and Roblett
entered into a rehabilitation program which novated the principal obligation of
the parties resulting in the discharge of Paramount; (4) the subject surety
bond expired without any claim being made against the same; and (5) Paramount
is not liable for attorney’s fees.
The supplemental motion for
reconsideration essentially reiterates the allegations and arguments found in
the motion for reconsideration with the additional contention that the interest
charge on the principal debt is unconscionable.
We have
perused the instant motions and find no new substantial arguments to warrant
the reversal or modification of our Decision. Respondent’s motion essentially concerns
issues that have been passed upon and fully considered by the Court in the
decision sought to be reconsidered. Thus, we find no cogent reason to
depart from the ruling subject of this recourse. The only matter left to be resolved is the
validity of the interest charge against the principal amount involved in this
case.
Under the surety bond,[5]
P11,775,611.35 for whatever damages and liabilities the latter
may suffer by virtue of its counterguarantee.
In our Decision, we found that none of the parties questioned the validity
of the stipulated interest rate. Finding
the same legal, we upheld its validity. With the suspension of the Usury Law
and the removal of interest ceiling, the parties are free to stipulate the
interest to be imposed on monetary obligations. Absent any evidence of fraud,
undue influence, or any vice of consent exercised by one party against the
other, the interest rate agreed upon is binding upon them.[6]
Nevertheless, we ruled that
P48 million, the bulk of which
is the interest charge and not the principal amount. It then submits that the interest is clearly
iniquitous, unconscionable and exorbitant, thus contrary to morals,[7]
citing our ruling in Medel v. Court of
Appeals.[8] In the said case, we held as void the
stipulation on interest at the rate of 5.5% per month or 66% per annum, on a P500,000.00
loan, the same being “excessive, iniquitous, unconscionable and exorbitant,
hence, contrary to morals ("contra
bonos mores"), if not against the law.”[9]
It would
seem that Paramount’s opposition to the interest awarded herein does not spring
from the invalidity of the stipulated interest rate but rather on the resulting
amount of interest charge alone, which if counted from the date of judicial
demand would come to roughly P32 million which is thrice the amount of
the principal debt of P11,775,611.35.
While the
Court recognizes the right of the parties to enter into contracts and who are
expected to comply with their terms and obligations, this rule is not
absolute. Stipulated
interest rates are illegal if they are unconscionable[10]
and the Court is allowed to temper interest rates when necessary.[11] In exercising this vested power to determine
what is iniquitous and unconscionable, the Court must consider the
circumstances of each case.[12]
What may be iniquitous and unconscionable in one case, may be just in
another. In a number of cases,[13]
this Court equitably reduced the interest rate agreed upon by the parties for
being iniquitous, unconscionable, and/or exhorbitant.
Notably in
the case of Development Bank of the
Philippines v. Court of Appeals[14],
while this Court held that respondents were liable for the stipulated
interest rate of 18% per annum, we equitably reduced the same to 10% per annum
after finding that the interests and penalty charges alone exceeded the amount
of the principal debt. As such, the
interests were found to be excessive. We
further held that the additional penalty charge of 8% per annum would
sufficiently cover whatever else damages petitioner may have incurred such as
attorney’s fees and litigation expenses.
In the
instant case, the resulting interest charge has turned out to be excessive in
the context of its base computation period, and hence, unwarranted in fact and
in operation. We are not unmindful of
the length of time this case has been pending in court for which the amount
involved has ballooned to the outrageous amount of more than P45 million
which is four times the principal debt.
While we have sustained the validity of much higher interest rates of 21% per
annum in Bautista v. Pilar
Development Corporation[15] and 24% per annum in Garcia v. Court of Appeals[16] as
the factual circumstances therein warrant, it is well to note that
compared to the instant case, the said cases were litigated for a shorter
period of time—12 years and 3 years, respectively. Development Bank of the Philippines[17] was finally decided after only 10 years of litigation. Here, the complaint was filed in the lower
court on
WHEREFORE,
premises considered, respondent
SO ORDERED.
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Associate Justice
Chairman
MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.
Associate Justice Associate Justice
MINITA
V. CHICO-NAZARIO
Associate Justice
I
attest that the conclusions in the above Resolution were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Associate Justice
Chairman
C E R T I F I C A T I O N
Pursuant
to Article VIII, Section 13 of the Constitution, and the Division Chairman’s
Attestation, it is hereby certified that the conclusions in the above
Resolution were reached in consultation before the case was assigned to the
writer of the opinion of the Court.
ARTEMIO V. PANGANIBAN
Chief Justice
[2]
[12]Rizal Commercial Banking Corporation. v. Court of Appeals, G.R. Nos. 128833, 128834, and 128866,
[13]See Medel v. Court of
Appeals, supra
note 8; Development Bank of the Philippines v. Court of Appeals, G.R.
No. 137557, October 30, 2000, 334 SCRA 492; Ruiz v. Court of Appeals, supra
note 10; Imperial v. Jaucian, G.R. No. 149004,
April 14, 2004, 427 SCRA 517; Carpo v.
Chua, G.R. Nos. 150773 & 153599, September 30, 2005.