SECOND DIVISION
|
SPOUSES
LEOPOLDO S. VIOLA and MERCEDITA VIOLA, Petitioners,
- versus - EQUITABLE PCI BANK, INC., Respondent. |
G.R.
No. 177886 Present:
QUISUMBING, J., Chairperson, CARPIO
MORALES, TINGA, VELASCO, JR., and BRION, JJ. Promulgated: November
27, 2008 |
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D E C I S I O N
CARPIO MORALES, J.:
Via
a contract denominated as “CREDIT LINE AND REAL ESTATE MORTGAGE AGREEMENT
FOR PROPERTY LINE”[1]
(Credit Line Agreement) executed on
March 31, 1997, Leo-Mers Commercial, Inc., as the Client, and its officers spouses Leopoldo and Mercedita
Viola (petitioners) obtained a loan through a credit line
facility in the maximum amount of P4,700,000.00 from the Philippine
Commercial International Bank (PCI Bank), which was later merged with Equitable
Bank and became known as Equitable PCI Bank, Inc. (respondent).
The Credit Line Agreement stipulated that the
loan would bear interest at the “prevailing PCIBank lending rate” per annum on
the principal obligation and a “penalty fee of three percent (3%) per month on
the outstanding amount.”
To secure the payment of the loan, petitioners
executed also on
Petitioners availed of the full amount
of the loan. Subsequently, they made partial
payments which totaled P3,669,210.67.
By respondent’s claim, petitioner had since P14,024,623.22,
broken down as follows:
(a) Principal obligation P4,783,254.69
(b) Past due interest from
at 15% interest P1,345,290.38
(c) Penalty at 3% per
month
from P7,896,078.15
_____________________
P14,024,623.22[3] (Underscoring supplied)
Respondent thus
extrajudicially foreclosed the mortgage before the Office of the Clerk of Court
& Ex-Officio Provincial Sheriff of the Regional Trial Court (RTC) of P4,284,000.00
at public auction to respondent, after which
a Certificate of Sale dated
More than
five months later or on P3,669,210.67
receipts of which were issued without respondent specifying “whether the
payment was for interest, penalty or the principal obligation;” that based on respondent’s
statement of account, not a single centavo of their payments was applied to the
principal obligation; that every time respondent sent them a statement of
account and demand letters, they requested for a proper accounting for the
purpose of determining their actual obligation, but all their requests were
unjustifiably ignored on account of which they were forced to discontinue
payment; that “the foreclosure proceedings and auction sale were not only
irregularly and prematurely held but were null and void because the mortgage
debt is only P2,224,073.31 on the principal obligation and P1,455,137.36
on the interest, or a total of only P3,679,210.67 as of April 15, 2003,
but the mortgaged properties were sold to satisfy an inflated and erroneous
principal obligation of P4,783,254.69,
plus 3% penalty fee per month or 33% per year and 15% interest per year, which
amounted to P14,024,623.22 as of September 30, 2002;” that “the
parties never agreed and stipulated in
the real estate mortgage contract” that
the 15% interest per annum on the
principal loan and the 3% penalty fee per month on the outstanding amount would
be covered or secured by the mortgage; that assuming respondent could impose
such interest and penalty fee, the same are “exorbitant, unreasonable,
iniquitous and unconscionable, hence, must be reduced;” and that respondent is only
allowed to impose the legal rate of interest of 12% per annum on the principal loan absent any stipulation thereon.[6]
In its
Answer, respondent denied petitioners’ assertions, contending, inter alia, that the absence of
stipulation in the mortgage contract securing the payment of 15% interest per
annum on the principal loan, as well as the 3% penalty fee per month on the
outstanding amount, is immaterial since the mortgage contract is “a mere accessory
contract which must take its bearings from the principal Credit Line Agreement.”[7]
During the
pre-trial conference, the parties defined as sole issue in the case whether the mortgage contract also
secured the payment of 15% interest per annum on the principal loan of P4,700,000.00
and the 3% penalty fee per month on the outstanding amount, which interest
and penalty fee are stipulated only in the Credit
Line Agreement.[8]
By Decision[9]
of
Accordingly,
the court nullified the foreclosure proceedings and the Certificate of Sale subsequently
issued, “without prejudice” to the holding anew of foreclosure proceedings based
on the “re-computed amount” of the indebtedness, “if the circumstances so
warrant.”
The
dispositive portion of the trial court’s Decision reads:
WHEREFORE,
judgment is hereby rendered as follows:
1) The
interest on the principal loan in the amount of Four Million Seven Hundred
Thousand (P4,700,000.00) Pesos should be recomputed at 12%
per annum;
2) The
3% per month penalty on delinquent account as stipulated by the parties in the
Credit Line Contract dated
3) The
foreclosure sale conducted on April 10, 2003 by the Clerk of
Court and Ex-Officio Sheriff of Marikina, to satisfy the plaintiff’s mortgage
indebtedness, and the Certificate of Sale
issued as a consequence of the said proceedings, are declared NULL
and VOID, without prejudice to the conduct
of another foreclosure proceedings on the
basis of the re-computed amount of the
plaintiff’s indebtedness, if the circumstances
so warrant.
No pronouncement as to costs.
SO ORDERED.
(Underscoring supplied)
Petitioners
filed a Motion for Partial Reconsideration,[10]
contending that the penalty fee per month on the outstanding amount should have
been taken out of the coverage of the mortgage contract as it was not
stipulated therein. By Order dated
On appeal
by petitioners, the Court of Appeals, by Decision[11]
of P4,700,000.00] but also the ‘interest
and bank charges,’ which [phrase bank charges] refers to the penalty
charges stipulated in the Credit Line Agreement.”[12]
Petitioners’
Motion for Reconsideration having been denied by Resolution[13]
of
THE HONORABLE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN DECIDING THE CASE NOT IN ACCORD WITH LAW AND APPLICABLE
DECISIONS OF THE SUPREME COURT BY RULING THAT THERE IS NO AMBIGUITY
IN
CONSTRUING TOGETHER THE CREDIT LINE AND
MORTGAGE CONTRACTS WHICH PROVIDED CONFLICTING PROVISIONS AS TO
INTEREST AND PENALTY.[14]
The only
issue is whether the mortgage contract also secured the penalty fee per
month on the outstanding amount as stipulated in the Credit Line Agreement.
The Court
holds not.
A mortgage
must “sufficiently describe the debt sought to be secured, which
description must not be such as to mislead or deceive, and an obligation is not
secured by a mortgage unless it comes fairly within the terms of the mortgage.[15]
In the case at bar, the parties executed two
separate documents on P4,700,000.00,
and the Real Estate Mortgage contract securing the payment thereof. Undisputedly, both contracts were prepared by
respondent and written in fine print, single space.
The Credit
Line Agreement contains the following stipulations on interest and
delinquency charges:
A. CREDIT FACILITY
9.
INTEREST ON AVAILMENTS
The CLIENT shall pay the BANK interest on
each availment against the Credit Facility at the rate of:
PREVAILING
PCIBANK LENDING RATE
for the first interest period as defined in
A(10) hereof. x x x.
x x x x
15. DELINQUENCY
CLIENT’s
account shall be considered delinquent if the availments exceed the amount of
the line and/or in case the Account is debited for unpaid interest and the
Available Balance is insufficient to cover the amount debited. In such cases,
the Available Balance shall become negative and the CLIENT shall pay the
deficiency immediately in addition to collection expenses incurred by the
BANK and a penalty fee of three percent (3%) per month of the outstanding
amount to be computed from the day deficiency is incurred up to the date of
full payment thereon.
x x x x.[16] (Underscoring supplied)
The Real
Estate Mortgage contract states its coverage, thus:
That for and
in consideration of certain loans, credit and other banking facilities obtained
x x x from the Mortgagee, the principal amount of which is PESOS FOUR MILLION
SEVEN HUNDERED THOUSAND ONLY (P4,700,000.00) Philippine Currency, and
for the purpose of securing the payment thereof, including the
interest and bank charges accruing thereon, the costs of collecting the
same and of taking possession of and keeping the mortgaged propert[ies], and
all other expenses to which the Mortgagee may be put in connection with or as
an incident to this mortgage, as well as the faithful compliance with the terms
and conditions of this agreement and of the separate instruments under which
the credits hereby secured were obtained, the Mortgagor does hereby constitute
in favor of the Mortgagee, its successors or assigns, a mortgage on the real
property particularly described, and the location of which is set forth, in the
list appearing at the back hereof and/or appended hereto, of which the
Mortgagor declare that he is the absolute owner and the one in possession
thereof, free and clear of any liens, encumbrances and adverse claims.[17] (Emphasis and underscoring supplied)
The immediately-quoted
provision of the mortgage contract does not specifically mention that, aside
from the principal loan obligation, it also secures the payment of “a penalty
fee of three percent (3%) per month of the outstanding amount to be computed
from the day deficiency is incurred up to the date of full payment thereon,” which penalty as the above-quoted
portion of the Credit Line Agreement
expressly stipulates.
Since an
action to foreclose “must be limited to the amount mentioned in the mortgage”[18]
and the penalty fee of 3% per month of the outstanding obligation is not mentioned
in the mortgage, it must be excluded from the computation of the amount
secured by the mortgage.
The ruling
of the Court of Appeals in its assailed Decision that the phrase “including the
interest and bank charges” in the mortgage contract “refers to the penalty
charges stipulated in the Credit Line Agreement” is unavailing.
“Penalty
fee” is entirely different from “bank charges.” The phrase “bank charges” is normally understood
to refer to compensation for services. A “penalty fee” is likened to a compensation for
damages in case of breach of the obligation. Being penal
in nature, such fee must be specific and fixed by the
contracting parties, unlike in the present case which slaps a 3% penalty
fee per month of the outstanding amount
of the obligation.
Moreover,
the “penalty fee” does not belong to the species of obligation enumerated in
the mortgage contract, namely: “loans, credit and other banking facilities
obtained x x x from the Mortgagee, . . . including the interest and bank
charges, . . . the costs of collecting the same and of taking possession of and
keeping the mortgaged properties, and all other expenses to which the Mortgagee
may be put in connection with or as an incident to this mortgage . . .”
In Philippine Bank of Communications v. Court
of Appeals[19]
which raised a similar issue, this Court held:
The sole
issue in this case is whether, in the foreclosure of a real estate mortgage,
the penalties stipulated in two promissory notes secured by the mortgage may be
charged against the mortgagors as part of the sums secured, although the
mortgage contract does not mention the said penalties.
x x x x
We
immediately discern that the mortgage contract does not at all mention the
penalties stipulated in the promissory notes. However, the petitioner
insists that the penalties are covered by the following provision of the
mortgage contract:
This mortgage is given as security for the
payment to the MORTGAGEE on demand or at maturity, as the case may be, of all
promissory notes, letters of credit, trust receipts, bills of exchange, drafts,
overdrafts and all other obligations of every kind already incurred or which
hereafter may be incurred….
x
x x x
The
Court is unconvinced, for the cases relied upon by the petitioner are
inapplicable. x x x.
x
x x x
The
mortgage contract is also one of adhesion as it was prepared solely by the
petitioner and the only participation of the other party was the affixing of
his signature or “adhesion” thereto. Being a contract of adhesion, the
mortgage is to be strictly construed against the petitioner, the party which
prepared the agreement.
A
reading, not only of the earlier quoted provision, but of the entire mortgage
contract yields no mention of penalty charges. Construing this silence strictly
against the petitioner, it can fairly be concluded that the petitioner did not
intend to include the penalties on the promissory notes in the secured amount.
This explains the finding by the trial court, as affirmed by the Court of
Appeals, that “penalties and charges are not due for want of stipulation in the
mortgage contract.”
Indeed,
a mortgage must sufficiently describe the debt sought to be secured,
which description must not be such as to mislead or deceive, and an
obligation is not secured by a mortgage unless it comes fairly within the terms
of the mortgage. In this case, the mortgage contract provides that it
secures notes and other evidences of indebtedness. Under the rule of ejusdem generis, where a description of
things of a particular class or kind is “accompanied by words of a generic
character, the generic words will usually be limited to things of a kindred
nature with those particularly enumerated . . . ” A penalty charge does
not belong to the species of obligations enumerated in the mortgage, hence, the
said contract cannot be understood to secure the penalty.[20] (Emphasis and underscoring supplied)
Respondent’s
contention that the absence in the mortgage contract of a stipulation securing
the payment of the 3% penalty fee per month on the outstanding amount is of no
consequence, the deed of mortgage being merely an “accessory contract” that
“must take its bearings from the principal Credit
Line Agreement,”[21]
fails. Such absence is significant as it
creates an
ambiguity between the two contracts, which ambiguity must be resolved in favor
of petitioners and against respondent who drafted the contracts. Again, as
stressed by the Court in Philippine Bank
of Communications:
There is also sufficient authority to declare
that any ambiguity in a contract whose terms are susceptible of different
interpretations must be read against the party who drafted it.
A mortgage and a note secured by it are deemed
parts of one transaction and are construed together, thus, an ambiguity is
created when the notes provide for the payment of a penalty but the mortgage
contract does not. Construing the ambiguity against the petitioner, it
follows that no penalty was intended to be covered by the mortgage. The mortgage contract consisted of three
pages with no less than seventeen conditions in fine print; it included
provisions for interest and attorney’s fees similar to those in the promissory
notes; and it even provided for the payment of taxes and insurance charges. Plainly,
the petitioner can be as specific as it wants to be, yet it simply did not
specify nor even allude to, that the penalty in the promissory notes would be secured
by the mortgage. This can then only be interpreted to mean that the petitioner
had no design of including the penalty in the amount secured.[22] (Emphasis and underscoring supplied)
WHEREFORE, the assailed Court of Appeals Decision of February
21, 2007 and Resolution of May 16, 2007
in CA-G.R. SP No. CA-G.R. CV No. 86412 affirming the trial court’s decision are,
in light of the foregoing disquisition, AFFIRMED with MODIFICATION
in that the “penalty fee” per
month of the outstanding obligation is excluded in the
computation of the amount secured by the Real Estate Mortgage executed by
petitioners in respondent’s favor.
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
[1] Annex “A,” Petition; rollo, pp. 28-41.
[2] Annex “B,” id. at 42-45.
[3] RTC
Decision dated
[4] Annex “F,” id. at. 51.
[5] Annex “G,” id. at 52-57.
[6]
[7] Respondent’s Answer with Counterclaims, id. at 58, 61-62.
[8] Order
dated
[9] Annex “N,” id. at 108-115.
[10] Annex “O,” id. at 116-126.
[11] Penned by Associate Justice Renato C. Dacudao and concurred in by
Associate Justices Hakim S. Abdulwahid and Arturo G. Tayag; rollo, pp. 182-189.
[12] Rollo, p. 188.
[13] Annex “AA,” Petition, id. at 202.
[14] Petition, id. at 7, 13.
[15] Philippine Bank of Communications v. Court of Appeals, 323 Phil. 297, 312-313 (1996).
[16] CA records (Folder I), pp. 7, 9-10.
[17]
Rollo, p. 42.
[18] Supra
note 15 at 312.
[19] Supra note 15.
[20]
[21] Vide note 7.
[22]