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Spouses Villanueva Vs CA
Spouses Villanueva Vs CA
expenses on its loans be declared null and void for being contrary to
VILLANUEVA, Petitioners, law, morals, good customs, public order or public policy as they are
vs. exorbitant, usurious, iniquitous and unconscionable.
THE COURT OF APPEALS, PROVIDENT RURAL BANK OF SANTA
CRUZ (LAGUNA), INC., and THE CLERK OF COURT OF THE 7. Respondent Bank filed a Motion to Dismiss contending that the
REGIONAL TRIAL COURT OF LAGUNA AS EX-OFFICIO PROVINCIAL petition is barred by res judicata and that petitioners are guilty of forum
SHERIFF, Respondents. shopping. Respondent Bank argued that:
a. petitioners filed a complaint against it before the RTC, seeking to
NATURE: Petition for review on certiorari declare as usurious the interests, penalties and other charges
which petitioners and respondent Bank had agreed upon in the
subject real estate mortgages and promissory notes;
FACTS:
8. *RTC: dismissed petitioners' Petition for Declaratory Relief as said
1. Petitioners applied for separate loans amounting to P100,000 Petition is barred by prior judgment, since CA already settled the
and P125,000, which were granted by respondent Provident Rural issues of usury and the right of petitioners to claim the abolition or
Bank. reduction of the subject interest rates, which are the same issues
a. As security for the loans, petitioners executed two separate raised by petitioners in their Petition for Declaratory Relief.
promissory notes.
b. They also executed two separate real estate mortgages over a 9. *CA: Petitioners filed an appeal assailing the Order of the RTC.
parcel of agricultural land. a. affirmed the Order of the RTC. All the elements of res judicata are
present.
2. Later on, petitioners failed to pay their loans when they became due.
10. *SC: Petitioners contend that res judicata does not apply on the
3. Consequently, Rural Bank filed a petition for extrajudicial ground that there is no identity of subject matter and cause of action in
foreclosure of the two mortgages. both civil cases.
a. Petitioners' obligations amounted to P287,187.50, plus interests, 11. Petitioners further argue that even if all the elements of res judicata are
charges and expenses. present in the instant case, equity dictates that this principle should not
b. Provincial Sheriff issued a Notice of Sale of the subject mortgaged be applied; otherwise, the court would be sanctioning respondent
property. Bank's enrichment at the expense of petitioners through the imposition
of exorbitant, unconscionable and usurious interest rates, penalties
4. However, the auction sale did not push through because Rural Bank and other charges; in such a case, petitioners claim that justice would
re-applied for extrajudicial foreclosure of the same mortgage. be sacrificed in favor of technicality.
a. Provincial Sheriff issued a Notice of Sale Re-Application of
Foreclosure Case and set the public auction of the subject property.
ISSUE: W/N the exception to res judicata applies as the interests, penalties,
b. Petitioners' mortgage debt grew to P713,465.35, plus interests,
and charges stipulated in this case are illegal for being unconscionable
charges and expenses.
The issues (W/N the interest rates, penalties and charges imposed by The Court also upholds the validity of the 6% per annum penalty
respondent Bank are usurious and unconscionable) and the reliefs sought charge. In Development Bank of the Philippines v. Family Foods
(reduction of the said interest rates, penalties and surcharges to an amount Manufacturing Co., Ltd.,24 this Court, sustaining the validity of an 8% per
not exceeding 12% per annum) in both cases are essentially the same. annum penalty charge on separate loans of P500,000.00 and P440,000.00,
held that:
SC is not persuaded by petitioners' contention that the Court should
not apply the principle of res judicata because to do so would be This Court has recognized a penalty clause as an accessory obligation which the parties
attach to a principal obligation for the purpose of insuring the performance thereof by imposing
tantamount to allowing respondent Bank to unjustifiably and illegally on the debtor a special prestation (generally consisting in the payment of a sum of money) in
enrich itself at the expense of petitioners by imposing interests, case the obligation is not fulfilled or is irregularly or inadequately fulfilled. The enforcement of
penalties and other charges beyond what the law and equity allows. the penalty can be demanded by the creditor only when the non-performance is due to the
fault or fraud of the debtor. The non-performance gives rise to the presumption of fault; in order
to avoid the payment of the penalty, the debtor has the burden of proving an excuse — the
The present case does not fall under this exception. failure of the performance was due to either force majeure or the acts of the creditor himself.
Petitioners contend that the interest rate of 24% per annum stipulated In this case, respondents failed to discharge the burden. Thus, they cannot
in the mortgage contract, which they executed in favor of respondent avoid the payment of the agreed penalty charge. 25
Bank, is usurious. This Court has consistently held that for sometime now,
usury has been legally non-existent and that interest can now be charged In a similar manner, herein petitioners bound themselves to pay the
as lender and borrower may agree upon. In fact, Section 1 of Central Bank stipulated penalty charge of 6% per annum "of the principal amount of loan
Circular No. 905, Series of 1982, which took effect on January 1, 1983, as penalty for inexcusable neglect to pay any amount of t[he] loan when
expressly provides that "[t]he rate of interest, including commissions, due." Since petitioners failed to present evidence that their failure to
premiums, fees and other charges, on a loan or forbearance of any money, perform their obligation was due to either force majeure or the acts of
goods, or credits, regardless of maturity and whether secured or unsecured, respondent Bank or to any justifiable or excusable cause, they are obliged
that may be charged or collected by any person, whether natural or juridical, to pay the penalty charge as agreed upon.
shall not be subject to any ceiling prescribed under or pursuant to the Usury
Law, as amended." Nonetheless, this Court has also held in a number of
cases, that nothing in the circular grants lenders carte blanche authority to WHEREFORE, the petition is DENIED.
raise interest rates to levels which will either enslave their borrowers or lead
to a hemorrhaging of their assets. Thus, the stipulated interest rates are
illegal if they are unconscionable.
SUB-ISSUE: W/N the 24% per annum interest rate is unreasonable under
the circumstances obtaining in the present case.