SECOND DIVISION
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SPOUSES
WILFREDO N. ONG and EDNA SHEILA PAGUIO-ONG, Petitioners, - versus - ROBAN LENDING
CORPORATION, Respondent.
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G.R. No.
172592 Present: QUISUMBING,
J., Chairperson, CARPIO
MORALES, TINGA, BRION, and
AUSTRIA-MARTINEZ,* JJ. Promulgated: July 9, 2008 |
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D E C I S I O N
CARPIO MORALES, J.:
On
different dates from P4,000,000.00. These
loans were secured by a real estate mortgage on petitioners’ parcels of land
located in Binauganan,
On P5,916,117.50. On even date, the parties executed a Dacion
in Payment Agreement[3]
wherein petitioners assigned the properties covered by TCT No. 297840 to respondent
in settlement of their total obligation, and a Memorandum of Agreement[4] reading:
That
the FIRST PARTY [Roban Lending Corporation] and the SECOND PARTY [the
petitioners] agreed to consolidate and restructure all aforementioned loans,
which have been all past due and delinquent since
In April 2002 (the day is illegible),
petitioners filed a Complaint,[6] docketed
as Civil Case No. 9322, before the Regional Trial Court (RTC) of Tarlac City,
for declaration of mortgage contract as abandoned, annulment of deeds, illegal
exaction, unjust enrichment, accounting, and damages, alleging that the
Memorandum of Agreement and the Dacion in Payment executed are void for being pactum
commissorium.[7]
Petitioners alleged that the loans
extended to them from July 14, 1999 to March 20, 2000 were founded on several
uniform promissory notes, which provided for 3.5% monthly interest rates, 5%
penalty per month on the total amount due and demandable, and a further sum of 25%
attorney’s fees thereon,[8] and in addition, respondent exacted certain
sums denominated as “EVAT/AR.”[9] Petitioners decried these additional charges
as “illegal, iniquitous, unconscionable, and revolting to the conscience as
they hardly allow any borrower any chance of survival in case of default.”[10]
Petitioners further alleged that they
had previously made payments on their loan accounts, but because of the illegal
exactions thereon, the total balance appears not to have moved at all, hence, accounting
was in order.[11]
Petitioners thus prayed for judgment:
a) Declaring the Real Estate Mortgage Contract and its amendments x x x as null and void and without legal force and effect for having been renounced, abandoned, and given up;
b) Declaring the “Memorandum of Agreement” xxx and “Dacion in Payment” x x x as null and void for being pactum commissorium;
c) Declaring the interests, penalties, Evat [sic] and attorney’s fees assessed and loaded into the loan accounts of the plaintiffs with defendant as unjust, iniquitous, unconscionable and illegal and therefore, stricken out or set aside;
d) Ordering an accounting on plaintiffs’ loan accounts to determine the true and correct balances on their obligation against legal charges only; and
e) Ordering defendant to [pay] to the plaintiffs: --
e.1 Moral damages in an amount not less than P100,000.00 and exemplary damages of P50,000.00;
e.2 Attorney’s fees in the amount of P50,000.00 plus P1,000.00 appearance fee per hearing; and
e.3 The cost of suit.[12]
as well as other just and
equitable reliefs.
In
its Answer with Counterclaim,[13] respondent
maintained the legality of its transactions with petitioners, alleging that:
x x x x
If the voluntary execution of the Memorandum of Agreement and Dacion in Payment Agreement novated the Real Estate Mortgage then the allegation of Pactum Commissorium has no more legal leg to stand on;
The Dacion in Payment Agreement is lawful and valid as it is recognized x x x under Art. 1245 of the Civil Code as a special form of payment whereby the debtor-Plaintiffs alienates their property to the creditor-Defendant in satisfaction of their monetary obligation;
The
accumulated interest and other charges which were computed for more than two
(2) years would stand reasonable and valid taking into consideration [that] the
principal loan is P4,000,000 and if indeed it became beyond the
Plaintiffs’ capacity to pay then the fault is attributed to them and not the
Defendant[.][14]
After pre-trial, the initial hearing
of the case, originally set on
During the scheduled initial hearing of
Considering
that the plaintiff Wilfredo Ong is not around on the ground that he is in
Just in case [plaintiff’s counsel] Atty. Concepcion cannot present his witness in the person of Mr. Wilfredo Ong in the next scheduled hearing, the counsel manifested that he will submit the case for summary judgment.[16] (Underscoring supplied)
It appears that the
The
counsel[s] agreed to reset this case on
x x x x[18] (Underscoring supplied)
At the scheduled
By Decision of
On appeal,[21]
the Court of Appeals[22] noted
that
x x x [W]hile the trial court in its decision stated that it was rendering judgment on the pleadings, x x x what it actually rendered was a summary judgment. A judgment on the pleadings is proper when the answer fails to tender an issue, or otherwise admits the material allegations of the adverse party’s pleading. However, a judgment on the pleadings would not have been proper in this case as the answer tendered an issue, i.e. the validity of the MOA and DPA. On the other hand, a summary judgment may be rendered by the court if the pleadings, supporting affidavits, and other documents show that, except as to the amount of damages, there is no genuine issue as to any material fact.[23]
Nevertheless, finding the error in
nomenclature “to be mere semantics with no bearing on the merits of the case”,[24]
the Court of Appeals upheld the RTC decision that there was no pactum
commissorium.[25]
Their Motion for Reconsideration[26]
having been denied,[27] petitioners
filed the instant Petition for Review on Certiorari,[28] faulting the Court of Appeals for having
committed a clear and reversible error
I. . . . WHEN IT FAILED AND REFUSED TO APPLY PROCEDURAL REQUISITES WHICH WOULD WARRANT THE SETTING ASIDE OF THE SUMMARY JUDGMENT IN VIOLATION OF APPELLANTS’ RIGHT TO DUE PROCESS;
II. . . . WHEN IT FAILED TO CONSIDER THAT TRIAL IN THIS CASE IS NECESSARY BECAUSE THE FACTS ARE VERY MUCH IN DISPUTE;
III. . . . WHEN IT FAILED AND REFUSED TO HOLD THAT THE MEMORANDUM OF AGREEMENT (MOA) AND THE DACION EN PAGO AGREEMENT (DPA) WERE DESIGNED TO CIRCUMVENT THE LAW AGAINST PACTUM COMMISSORIUM; and
IV.
. . . WHEN IT FAILED TO CONSIDER
THAT THE MEMORANDUM OF AGREEMENT (MOA) AND THE DACION EN PAGO (DPA) ARE NULL
AND VOID FOR BEING CONTRARY TO LAW AND PUBLIC POLICY.[29]
The petition is meritorious.
Both parties admit the execution and contents
of the Memorandum of Agreement and Dacion in Payment. They differ, however, on whether both
contracts constitute pactum commissorium or dacion en pago.
This Court finds that the Memorandum
of Agreement and Dacion in Payment constitute pactum commissorium, which
is prohibited under Article 2088 of the Civil Code which provides:
The creditor cannot appropriate the things given by
way of pledge or mortgage, or dispose of them.
Any stipulation to the contrary is null and void.”
The elements of pactum
commissorium, which enables
the mortgagee to acquire ownership of the mortgaged property without the need
of any foreclosure proceedings,[30]
are: (1) there should be a property
mortgaged by way of security for the payment of the principal obligation, and
(2) there should be a stipulation for automatic appropriation by the creditor
of the thing mortgaged in case of non-payment of the principal obligation
within the stipulated period.[31]
In the case at bar, the Memorandum of
Agreement and the Dacion in Payment contain no provisions for foreclosure
proceedings nor redemption. Under the
Memorandum of Agreement, the failure by the petitioners to pay their debt within
the one-year period gives respondent the right to enforce the Dacion in Payment
transferring to it ownership of the properties covered by TCT No. 297840. Respondent,
in effect, automatically acquires ownership of the properties upon petitioners’
failure to pay their debt within the stipulated period.
Respondent argues that the law
recognizes dacion en pago as a special form of payment whereby the
debtor alienates property to the creditor in satisfaction of a monetary
obligation.[32] This does not persuade. In a true dacion en pago, the
assignment of the property extinguishes the monetary debt.[33] In the case at bar, the alienation of the
properties was by way of security, and not by way of satisfying the debt.[34] The Dacion in Payment did not extinguish petitioners’
obligation to respondent. On the
contrary, under the Memorandum of Agreement executed on the same day as the
Dacion in Payment, petitioners had to execute a promissory note for P5,916,117.50
which they were to pay within one year.[35]
Respondent cites Solid Homes, Inc.
v. Court of Appeals[36]
where this Court upheld a Memorandum of Agreement/Dacion en Pago.[37] That case did not involve the issue of pactum
commissorium.[38]
That the questioned contracts were
freely and voluntarily executed by petitioners and respondent is of no moment, pactum commissorium
being void for being prohibited by law.[39]
Respecting the charges on the loans, courts
may reduce interest rates, penalty charges, and attorney’s fees if they are
iniquitous or unconscionable.[40]
This Court, based on existing
jurisprudence,[41] finds
the monthly interest rate of 3.5%, or 42% per annum unconscionable and thus reduces
it to 12% per annum. This Court finds too the penalty fee at the
monthly rate of 5% (60% per annum) of the total amount due and demandable –
principal plus interest, with interest not paid when due added to and becoming part
of the principal and likewise bearing interest at the same rate, compounded
monthly[42] –
unconscionable and reduces it to a yearly rate of 12% of the amount due, to be
computed from the time of demand.[43] This Court finds the attorney’s fees of 25%
of the principal, interests and interests thereon, and the penalty fees
unconscionable, and thus reduces the attorney’s fees to 25% of the principal
amount only.[44]
The prayer for accounting in petitioners’
complaint requires presentation of evidence, they claiming to have made partial
payments on their loans, vis a vis respondent’s
denial thereof.[45] A remand of the case is thus in order.
Prescinding from the above disquisition, the
trial court and the Court of Appeals erred in holding that a summary judgment is
proper. A summary judgment is permitted
only if there is no genuine issue as to any material fact and a moving party is
entitled to a judgment as a matter of law.[46] A
summary judgment is proper if, while the pleadings on their face appear to
raise issues, the affidavits, depositions, and admissions presented by the
moving party show that such issues are not genuine.[47] A
genuine issue, as opposed to a fictitious or contrived one, is an issue of fact
that requires the presentation of evidence.[48]
As mentioned above, petitioners’ prayer for accounting requires the
presentation of evidence on the issue of partial payment.
But neither is a judgment on the
pleadings proper. A judgment on the
pleadings may be rendered only when an answer fails to tender an issue or
otherwise admits the material allegations of the adverse party’s pleadings.[49] In the case at bar, respondent’s Answer with
Counterclaim disputed petitioners’ claims that the Memorandum of Agreement and
Dation in Payment are illegal and that the extra charges on the loans are
unconscionable.[50] Respondent disputed too petitioners’
allegation of bad faith.[51]
WHEREFORE, the
challenged Court of Appeals Decision is REVERSED
and SET ASIDE. The Memorandum of Agreement and the Dacion in Payment executed by petitioner- spouses
Wilfredo N. Ong and Edna Sheila Paguio-Ong and respondent Roban Lending
Corporation on
In line with the foregoing findings,
the following terms of the loan contracts between the parties are MODIFIED as follows:
1.
The monthly interest rate of 3.5%, or 42% per annum,
is reduced to 12% per annum;
2.
The monthly penalty fee of 5% of the total amount due and
demandable is reduced to 12% per
annum, to be computed from the time of demand; and
3.
The attorney’s fees are reduced to 25% of the principal
amount only.
Civil Case No. 9322 is REMANDED to the court of origin only for
the purpose of receiving evidence on petitioners’ prayer for accounting.
SO ORDERED.
CONCHITA
CARPIO MORALES
Associate Justice
WE CONCUR:
|
LEONARDO A. QUISUMBING Associate Justice Chairperson |
DANTE O. TINGA Associate Justice |
|
PRESBITERO J. VELASCO, JR. Associate Justice |
ARTURO D. BRION Associate Justice |
ATTESTATION
I attest
that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s
Division.
LEONARDO
A. QUISUMBING
Associate
Justice
Chairperson
CERTIFICATION
Pursuant to
Section 13, Article VIII of the Constitution, and the Division Chairperson’s
Attestation, I certify that the conclusions in the above decision had been
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
REYNATO
S. PUNO
Chief Justice
* Additional
member per Raffle dated
[1] Records, pp. 11-16.
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22] Decision of
[23] CA rollo, pp. 40-41.
[24]
[25]
[26]
[27]
[28]
[29] Rollo, p. 15.
[30] Vide
Lumayag v. Heirs of Jacinto Nemeño,
G.R. No. 162112,
[31] Development Bank of the
[32] Records, p. 53. Vide
Civil Code, Article 1245.
[33] Vide
Civil Code, Article 1245; Development
Bank of the
[34] Vide
Development Bank of the
[35] Records, p. 38.
[36] 341 Phil. 261 (1997).
[37] Records, p. 160.
[38] Solid Homes, Inc. v. Court of
Appeals, supra note 37 at 274-280.
[39] Vide
Civil Code, Articles 1409 and
2088.
[40] Vide
Civil Code, Articles 1229 and
2227; United Coconut Planters Bank v. Beluso,
G.R. No. 159912, August 17, 2007; 530 SCRA 567, 590; Poltan
v. BPI Family Savings Bank, Inc., G.R. No. 164307, March 5, 2007, 517 SCRA
430, 444-446; Radiowealth Finance Co., Inc.
v. International Corporate Bank, G.R. Nos. 77042-43, February 28, 1990, 182
SCRA 862, 868-869.
[41] Vide
Poltan v. BPI Family Savings Bank, Inc.,
G.R. No. 164307,
[42] Records, p. 41.
[43] Vide
United Coconut Planters Bank v. Beluso, G.R. No. 159912,
[44] Vide
Titan Construction Corporation v. Uni-Field Enterprises, Inc., G.R. No. 153874,
[45] Vide records, pp. 3, 51-52.
[46] Rules
of Court, Rule 35, Section 3; Pineda v. Heirs of Eliseo
Guevarra, G.R. No. 143188, February 14, 2007, 515
SCRA 627, 638.
[47] Vide
Marcelo v. Sandiganbayan,
G.R. No. 156605,
[48] Ibid.
[49] Rules of Court, Rule 34, Section 1.
[50] Records, pp. 53.
[51]