Republic of the
Supreme Court
FIRST DIVISION
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JOCELYN M. TOLEDO , |
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G.R. No. 172139 |
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Petitioner, |
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Present: |
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- versus - |
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LEONARDO-DE CASTRO, |
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ABAD,⃰ and |
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PEREZ, JJ. |
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MARILOU M. HYDEN, |
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Promulgated: |
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Respondent. |
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December 8, 2010 |
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D E C I S I O N
It is true that the imposition of an unconscionable rate of interest on
a money debt is immoral and unjust and the court may come to the aid of the
aggrieved party to that contract. However,
before doing so, courts have to consider the settled principle that the law will
not relieve a party from the effects of an unwise, foolish or disastrous
contract if such party had full awareness of what she was doing.
This Petition for Review
on Certiorari[1] assails the Decision[2] dated August 24, 2005 of
the Court of Appeals (CA) in CA-G.R. CV No. 79805, which affirmed the Decision
dated March 10, 2003[3] of the Regional Trial Court
(RTC), Branch 22,
Resolution dated March 8, 2006 denying the motion for reconsideration.
Factual
Antecedents
Petitioner Jocelyn M. Toledo
(Jocelyn), who was then the Vice-President of the College Assurance Plan (CAP)
Phils., Inc., obtained several loans from respondent Marilou M. Hyden (Marilou).
The transactions are briefly summarized
below:
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1) August 15, 1993 |
……… |
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2) April 21, 1994 |
……… |
100,000.00 |
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3) October 2, 1995 |
……… |
30,000.00 |
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4) October 9, 1995 |
……… |
30,000.00 |
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5) May 22, 1997 |
……… |
100,000.00 with
7% monthly interest |
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TOTAL AMOUNT OF LOAN |
……… |
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From August 15, 1993 up to December
31, 1997, Jocelyn had been religiously paying Marilou the stipulated monthly
interest by issuing checks and depositing sums of money in the bank account of
the latter. However, the total principal
amount of P290,000.00 remained unpaid.
Thus, in April 1998, Marilou visited Jocelyn in her office at CAP in P290,000.00 was signed by Jocelyn with two of her subordinates
as witnesses. The said amount represents
the principal consolidated amount of the aforementioned previous debts due on
December 25, 1998. Also on said
occasion, Jocelyn issued five checks to Marilou representing renewal payment of
her five previous loans, viz:
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Check No. 0010761 dated September 2, 1998 |
. . . . . . . . . |
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Check No. 0010762 dated September 9, 1998 |
. . . . . . . . . |
30,000.00 |
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Check No. 0010763 dated September 15, 1998 |
. . . . . . . . . |
30,000.00 |
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Check No. 0010764 dated September 22, 1998 |
. . . . . . . . . |
100,000.00 |
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Check No. 0010765 dated September 25, 1998 |
. . . . . . . . . |
100,000.00 |
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TOTAL |
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In June 1998,
Jocelyn asked Marilou for the recall of Check No. 0010761 in the amount of P30,000.00
and replaced the same with six checks, in staggered amounts, namely:
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Check No. 0010494 dated July 2, 1998 |
. . . . . . . . . |
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Check No. 0010495 dated August 2, 1998 |
. . . . . . . . . |
6,300.00 |
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Check No. 0010496 dated September 2, 1998 |
. . . . . . . . . |
5,975.00 |
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Check No. 0010497 dated October 2, 1998 |
. . . . . . . . . |
6,500.00 |
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Check No. 0010498 dated November 2, 1998 |
. . . . . . . . . |
5,325.00 |
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Check No. 0010499 dated December 2, 1998 |
. . . . . . . . . |
5,000.00 |
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TOTAL |
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After honoring Check Nos.
0010494, 0010495 and 0010496, Jocelyn ordered the stop payment on the remaining
checks and on October 27, 1998, filed with the RTC of Cebu City a complaint[6]
against Marilou for Declaration of Nullity and Payment, Annulment, Sum of
Money, Injunction and Damages.
Jocelyn averred that Marilou forced,
threatened and intimidated her into signing the “Acknowledgment of Debt” and at
the same time forced her to issue the seven postdated checks. She claimed that Marilou even threatened to
sue her for violation of Batas Pambansa (BP)
Blg. 22 or the Bouncing Checks Law if
she will not sign the said document and draw the above-mentioned checks. Jocelyn further claimed that the application
of her total payment of P528,550.00 to interest alone is illegal,
unfounded, unjust, oppressive and contrary to law because there was no written
agreement to pay interest.
On November 23,
1998, Marilou filed an Answer[7]
with Special Affirmative Defenses and Counterclaim alleging that Jocelyn
voluntarily obtained the said loans knowing fully well that the interest rate
was at 6% to 7% per month. In fact, a 6% to 7% advance interest was already
deducted from the loan amount given to Jocelyn.
Ruling of the Regional Trial Court
The court a quo did not find any showing that
Jocelyn was forced, threatened, or intimidated in signing the document referred
to as “Acknowledgment of Debt” and in issuing the postdated checks. Thus, in
its March 10, 2003 Decision the trial court ruled in favor of Marilou, viz:
WHEREFORE, premised on the foregoing, the Court
hereby declares the document “Acknowledgment of Debt” valid and binding.
PLAINTIFF is indebted to DEFENDANT [for] the amount of TWO HUNDRED NINETY
THOUSAND (P290,000.00) PESOS since December 25, 1998 less the amount of
EIGHTEEN THOUSAND NINE HUNDRED (P18,900.00) PESOS, equivalent to the
three checks made good (P6,625.00 dated 07-02-1998; P6,300.00
dated 08-02-1998; and P5,975.00 dated 09-02-1998).
Consequently, PLAINTIFF is hereby ordered to pay
DEFENDANT the amount of TWO HUNDRED SEVENTY ONE THOUSAND ONE HUNDRED (P271,100.00)
PESOS due on December 25, 1998 with a 12% interest per annum or 1% interest per
month until such time that the said amount shall have been fully paid.
No pronouncement as to costs.
SO ORDERED.[8]
On March 26, 2003, Jocelyn filed an
Earnest Motion for Reconsideration,[9]
which was denied by the trial court in its Order[10]
dated April 29, 2003 stating that it finds no sufficient reason to disturb its
March 10, 2003 Decision.
Ruling of the
Court of Appeals
On appeal,
Jocelyn asserts that she had made payments in the total amount of P778,000.00
for a principal amount of loan of only P290,000.00. What is appalling, according to Jocelyn, was
that such payments covered only the interest because of the excessive,
iniquitous, unconscionable and exorbitant imposition of the 6% to 7% monthly
interest.
On August 24,
2005, the CA issued its Decision which provides:
WHEREFORE, premises considered, the Decision dated
March 10, 2003 and the Order dated April 29, 2003, of the Regional Trial Court,
7th Judicial Region, Branch 22,
SO ORDERED.[11]
The Motion for Reconsideration[12]
filed by Jocelyn was denied by the CA through its Resolution[13]
dated March 8, 2006.
Issues
Hence, this
petition raising the following issues:
I.
Whether the CA gravely erred when it held that the
imposition of interest at the rate of six percent (6%) to seven percent (7%) is
not contrary to law, morals, good customs, public order or public policy.
II.
Whether the CA gravely erred when it failed to
declare that the “Acknowledgment of Debt” is an inexistent contract that is
void from the very beginning pursuant to Article 1409 of the New Civil Code.
Petitioner’s Arguments
Jocelyn posits that the CA erred
when it held that the imposition of interest at the rates of 6% to 7% per month
is not contrary to law, not unconscionable and not contrary to morals. She likewise contends that the CA erred in
ruling that the “Acknowledgment of Debt” is valid and binding. According to Jocelyn, even assuming that the
execution of said document was not attended with force, threat and
intimidation, the same must nevertheless be declared null and void for being
contrary to law and public policy. This
is borne out by the fact that the payments in the total amount of P778,000.00
was applied to interest payment alone. This only proves that the transaction was
iniquitous, excessive, oppressive and unconscionable.
Respondent’s
Arguments
On the other
hand, Marilou would like this Court to consider the fact that the document
referred to as “Acknowledgment of Debt” was executed in the safe surroundings
of the office of Jocelyn and it was witnessed by two of her staff. If at all there had been coercion, then Jocelyn
could have easily prevented her staff from affixing their signatures to said
document. In fact, petitioner had
admitted that she was the one who went to the tables of her staff to let them
sign the said document.
Our Ruling
The petition is without merit.
The 6% to 7% interest per month
paid by Jocelyn is not excessive under the circumstances of this case.
In view of Central Bank Circular
No. 905 s. 1982, which suspended the Usury Law ceiling on interest effective
January 1, 1983, parties to a loan agreement have wide latitude to stipulate
interest rates. Nevertheless, such
stipulated interest rates may be declared as illegal if the same is unconscionable.[14]
There is certainly nothing in said
circular which grants lenders carte
blanche authority to raise interest rates to levels which will either
enslave their borrowers or lead to a hemorrhaging of their assets.[15]
In fact, in Medel v. Court of Appeals,[16]
we annulled a stipulated 5.5% per month or 66% per annum interest with
additional service charge of 2% per annum and penalty charge of 1% per month on
a P500,000.00 loan for being excessive, iniquitous, unconscionable and
exorbitant.
In this case, however, we cannot
consider the disputed 6% to 7% monthly interest rate to be iniquitous or
unconscionable vis-à-vis the
principle laid down in Medel. Noteworthy
is the fact that in Medel, the defendant-spouses were never able to pay
their indebtedness from the very beginning and when their obligations ballooned
into a staggering sum, the creditors filed a collection case against them. In this case, there was no urgency of the
need for money on the part of Jocelyn, the debtor, which compelled her to enter
into said loan transactions. She used
the money from the loans to make advance payments for prospective clients of
educational plans offered by her employer. In this way, her sales production would
increase, thereby entitling her to 50% rebate on her sales. This is the reason why she did not mind the 6%
to 7% monthly interest. Notably too, a
business transaction of this nature between Jocelyn and Marilou continued for
more than five years. Jocelyn
religiously paid the agreed amount of interest until she ordered for stop
payment on some of the checks issued to Marilou. The checks were in fact sufficiently funded
when she ordered the stop payment and then filed a case questioning the
imposition of a 6% to 7% interest rate for being allegedly iniquitous or
unconscionable and, hence, contrary to morals.
It was clearly shown that before
Jocelyn availed of said loans, she knew fully well that the same carried with
it an interest rate of 6% to 7% per month, yet she did not complain. In fact,
when she availed of said loans, an advance interest of 6% to 7% was already
deducted from the loan amount, yet she never uttered a word of protest.
After years of
benefiting from the proceeds of the loans bearing an interest rate of 6% to 7%
per month and paying for the same, Jocelyn cannot now go to court to have the
said interest rate annulled on the ground that it is excessive, iniquitous,
unconscionable, exorbitant, and absolutely revolting to the conscience of man. “This is so
because among the maxims of equity are (1) he who seeks equity must do equity,
and (2) he who comes into equity must come with clean hands. The latter is a frequently stated maxim which
is also expressed in the principle that he who has done inequity shall not have
equity. It signifies that a litigant may
be denied relief by a court of equity on the ground that his conduct has been
inequitable, unfair and dishonest, or fraudulent, or deceitful as to the
controversy in issue.” [17]
We are convinced that Jocelyn did
not come to court for equitable relief with equity or with clean hands. It is patently clear from the above summary of
the facts that the conduct of Jocelyn can by no means be characterized as nobly
fair, just, and reasonable. This Court
likewise notes certain acts of Jocelyn before filing the case with the RTC. In September 1998, she requested Marilou not
to deposit her checks as she can cover the checks only the following month. On the next month, Jocelyn again requested for
another extension of one month. It
turned out that she was only sweet-talking Marilou into believing that she had
no money at that time. But as testified
by Serapio Romarate,[18] an
employee of the Bank of Commerce where Jocelyn is one of their clients, there
was an available balance of P276,203.03 in the latter’s account and yet
she ordered for the stop payments of the seven checks which can actually be
covered by the available funds in said account. She then caught Marilou by surprise when she
surreptitiously filed a case for declaration of nullity of the document and for
damages.
The document “Acknowledgment of
Debt” is valid and binding.
Jocelyn seeks for the nullification
of the document entitled “Acknowledgment of Debt” and wants this Court to
declare that she is no longer indebted to Marilou in the amount of P290,000.00
as she had already paid a total amount of P778,000.00. She claims that said document is an
inexistent contract that is void from the very beginning as clearly provided
for by Article 1409[19]
of the New Civil Code.
Jocelyn further claims that she
signed the said document and issued the seven postdated checks because Marilou threatened
to sue her for violation of BP Blg. 22.
Jocelyn is
misguided. Even if there was indeed such
threat made by Marilou, the same is not considered as threat that would vitiate
consent. Article 1335 of the New Civil Code is very specific on this matter. It provides:
Art. 1335. There is violence when in order to wrest consent, serious or irresistible force is employed.
x x x x
A threat to enforce
one’s claim through competent authority, if the claim is just or legal, does
not vitiate consent. (Emphasis supplied.)
Clearly, we cannot grant Jocelyn the
relief she seeks.
As can be seen from the records of
the case, Jocelyn has failed to prove her claim that she was made to sign the
document “Acknowledgment of Debt” and draw the seven Bank of Commerce checks
through force, threat and intimidation. As
earlier stressed, said document was signed in the office of Jocelyn, a high
ranking executive of CAP, and it was Jocelyn herself who went to the table of
her two subordinates to procure their signatures as witnesses to the execution
of said document. If indeed, she was
forced to sign said document, then Jocelyn should have immediately taken the
proper legal remedy. But she did not. Furthermore, it must be noted that after the
execution of said document, Jocelyn honored the first three checks before
filing the complaint with the RTC. If
indeed she was forced she would never have made good on the first three checks.
It is
provided, as one of the conclusive presumptions under Rule 131, Section 2(a),
of the Rules of Court that, “Whenever a party has, by his own declaration, act
or omission, intentionally and deliberately led another to believe a particular
thing to be true, and to act upon such belief, he cannot, in any litigation
arising out of such declaration, act or omission, be permitted to falsify it.” This is known as the principle of estoppel.
“The essential elements
of estoppel are: (1) conduct amounting to false representation or
concealment of material facts or at least calculated to convey the impression
that the facts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; (2) intent, or at least expectation, that this
conduct shall be acted upon by, or at least influence, the other party; and,
(3) knowledge, actual or constructive, of the real facts.”[20]
Here, it is uncontested
that Jocelyn had in fact signed the “Acknowledgment of Debt” in April 1998 and
two of her subordinates served as witnesses to its execution, knowing fully
well the nature of the contract she was entering into. Next, Jocelyn issued five checks in favor of
Marilou representing renewal payment of her loans amounting to P290,000.00.
In June 1998, she asked to recall Check
No. 0010761 in the amount of P30,000.00 and replaced the same with six
checks, in staggered amounts. All these
are indicia that Jocelyn treated the “Acknowledgment of Debt” as a valid
and binding contract.
More significantly, Jocelyn
already availed herself of the benefits of the “Acknowledgment of Debt,” the
validity of which she now impugns. As
aptly found by the RTC and the CA, Jocelyn was making a business out of the
loaned amounts. She was actually using
the money to make advance payments for her prospective clients so that her
sales production would increase. Accordingly, she did not mind the 6% to 7%
interest per month as she was getting a 50% rebate on her sales.
Clearly, by her own
acts, Jocelyn is estopped from impugning the validity of the
“Acknowledgment of Debt.” “[A] party to
a contract cannot deny the validity thereof after enjoying its benefits without
outrage to one’s sense of justice and fairness.”[21] “It is a long established doctrine that the
law does not relieve a party from the effects of an unwise, foolish or
disastrous contract, entered into with all the required formalities and with
full awareness of what she was doing. Courts
have no power to relieve parties from obligations voluntarily assumed, simply
because their contracts turned out to be disastrous or unwise investments.”[22]
WHEREFORE, the instant
petition for review on certiorari is DENIED. The Decision of the
Court of Appeals in CA-G.R. CV No. 79805 dated August 24, 2005 affirming the
Decision dated March 10, 2003 of the Regional Trial Court, Branch 22,
SO ORDERED.
MARIANO C.
Associate Justice
WE
CONCUR:
RENATO C. CORONA
Chief Justice
Chairperson
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TERESITA J. LEONARDO-DE CASTRO Associate
Justice |
ROBERTO A. ABAD Associate
Justice |
JOSE
Associate Justice
C E R T I F I C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution, it is hereby certified 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.
RENATO C. CORONA
Chief Justice