G.R. No. 174433, February 24, 2014
PHILIPPPINE NATIONAL BANK, Petitioner, v. SPOUSES ENRIQUE MANALO & ROSALINDA JACINTO, ARNOLD J. MANALO, ARNEL J. MANALO, AND ARMA J. MANALO, Respondents.
D E C I S I O N
In resolving this present case, one of the most significant matters the court has noted is that while during the pre-trial held on 8 September 2003, plaintiff-spouses Manalo with the assistance counsel had agreed to stipulate that defendants had the right to foreclose upon the subject properties and that the plaintiffs[‘] main thrust was to prove that the foreclosure proceedings were invalid, in the course of the presentation of their evidence, they modified their position and claimed [that] the loan document executed were contracts of adhesion which were null and void because they were prepared entirely under the defendant bank’s supervision. They also questioned the interest rates and penalty charges imposed arguing that these were iniquitous, unconscionable and therefore likewise void.The RTC held, however, that the Spouses Manalo’s “contract of adhesion” argument was unfounded because they had still accepted the terms and conditions of their credit agreement with PNB and had exerted efforts to pay their obligation;10 that the Spouses Manalo were now estopped from questioning the interest rates unilaterally imposed by PNB because they had paid at those rates for three years without protest;11 and that their allegation about PNB violating the notice and publication requirements during the foreclosure proceedings was untenable because personal notice to the mortgagee was not required under Act No. 3135.12chanrobleslaw
Not having raised the foregoing matters as issues during the pre-trial, plaintiff-spouses are presumably estopped from allowing these matters to serve as part of their evidence, more so because at the pre-trial they expressly recognized the defendant bank’s right to foreclose upon the subject property (See Order, pp. 193-195).
However, considering that the defendant bank did not interpose any objection to these matters being made part of plaintiff’s evidence so much so that their memorandum contained discussions rebutting plaintiff spouses arguments on these issues, the court must necessarily include these matters in the resolution of the present case.9
THE COURT A QUO SERIOUSLY ERRED IN DISMISSING PLAINTIFF-APPELLANTS’ COMPLAINT FOR BEING (sic) LACK OF MERIT NOTWITHSTANDING THE FACT THAT IT WAS CLEARLY SHOWN THAT THE FORECLOSURE PROCEEDINGS WAS INVALID AND ILLEGAL.13The Spouses Manalo reiterated their arguments, insisting that: (1) the credit agreements they entered into with PNB were contracts of adhesion;14 (2) no interest was due from them because their credit agreements with PNB did not specify the interest rate, and PNB could not unilaterally increase the interest rate without first informing them;15 and (3) PNB did not comply with the notice and publication requirements under Section 3 of Act 3135.16 On the other hand, PNB and Yuvienco did not file their briefs despite notice.17chanrobleslaw
Anent the first issue, PNB argues that by passing upon the issue of the validity of the interest rates, and in nullifying the rates imposed on the Spouses Manalo, the CA decided the case in a manner not in accord with Section 15, Rule 44 of the Rules of Court, which states that only questions of law or fact raised in the trial court could be assigned as errors on appeal; that to allow the Spouses Manalo to raise an issue for the first time on appeal would “offend the basic rules of fair play, justice and due process;”22 that the resolution of the CA was limited to the issues agreed upon by the parties during pre-trial;23 that the CA erred in passing upon the validity of the interest rates inasmuch as the Spouses Manalo did not present evidence thereon; and that the Judicial Affidavit of Enrique Manalo, on which the CA relied for its finding, was not offered to prove the invalidity of the interest rates and was, therefore, inadmissible for that purpose.24chanrobleslaw
WHETHER OR NOT THE COURT OF APPEALS WAS CORRECT IN NULLIFYING THE INTEREST RATES IMPOSED ON RESPONDENT SPOUSES’ LOAN AND IN FIXING THE SAME AT TWELVE PERCENT (12%) FROM DEFAULT, DESPITE THE FACT THAT (i) THE SAME WAS RAISED BY THE RESPONDENTS ONLY FOR THE FIRST TIME ON APPEAL (ii) IT WAS NEVER PART OF THEIR COMPLAINT (iii) WAS EXLUDED AS AN ISSUE DURING PRE-TRIAL, AND WORSE, (iv) THERE WAS NO FORMALLY OFFERED PERTAINING TO THE SAME DURING TRIAL.
WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED THAT THERE WAS NO MUTUALITY OF CONSENT IN THE IMPOSITION OF INTEREST RATES ON THE RESPONDENT SPOUSES’ LOAN DESPITE THE EXISTENCE OF FACTS AND CIRCUMSTANCES CLEARLY SHOWING RESPONDENTS’ ASSENT TO THE RATES OF INTEREST SO IMPOSED BY PNB ON THE LOAN.
5. True to his words, defendant Yuvienco, after several days, sent us a document through a personnel of defendant PNB, Bangkal, Makati City Branch, who required me and my wife to affix our signature on the said document;PNB cross-examined Enrique Manalo upon his Judicial Affidavit. There is no showing that PNB raised any objection in the course of the cross examination.26 Consequently, the RTC rightly passed upon such issues in deciding the case, and its having done so was in total accord with Section 5, Rule 10 of the Rules of Court, which states:
6. When the document was handed over me, I was able to know that it was a Promissory Note which was in ready made form and prepared solely by the defendant PNB;
x x x x
21. As above-noted, the rates of interest imposed by the defendant bank were never the subject of any stipulation between us mortgagors and the defendant PNB as mortgagee;
22. The truth of the matter is that defendant bank imposed rate of interest which ranges from 19% to as high as 28% and which changes from time to time;
23. The irregularity, much less the invalidity of the imposition of iniquitous rates of interest was aggravated by the fact that we were not informed, notified, nor the same had our prior consent and acquiescence therefor. x x x25
Section 5. Amendment to conform to or authorize presentation of evidence. – When issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice will be subserved thereby. The court may grant a continuance to enable the amendment to be made.In Bernardo Sr. v. Court of Appeals,27 we held that:
It is settled that even if the complaint be defective, but the parties go to trial thereon, and the plaintiff, without objection, introduces sufficient evidence to constitute the particular cause of action which it intended to allege in the original complaint, and the defendant voluntarily produces witnesses to meet the cause of action thus established, an issue is joined as fully and as effectively as if it had been previously joined by the most perfect pleadings. Likewise, when issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings.The RTC did not need to direct the amendment of the complaint by the Spouses Manalo. Section 5, Rule 10 of the Rules of Court specifically declares that the “failure to amend does not affect the result of the trial of these issues.” According to Talisay-Silay Milling Co., Inc. v. Asociacion de Agricultores de Talisay-Silay, Inc.:28
The failure of a party to amend a pleading to conform to the evidence adduced during trial does not preclude an adjudication by the court on the basis of such evidence which may embody new issues not raised in the pleadings, or serve as a basis for a higher award of damages. Although the pleading may not have been amended to conform to the evidence submitted during trial, judgment may nonetheless be rendered, not simply on the basis of the issues alleged but also on the basis of issues discussed and the assertions of fact proved in the course of trial. The court may treat the pleading as if it had been amended to conform to the evidence, although it had not been actually so amended. Former Chief Justice Moran put the matter in this way:There is also no merit in PNB’s contention that the CA should not have considered and ruled on the issue of the validity of the interest rates because the Judicial Affidavit of Enrique Manalo had not been offered to prove the same but only “for the purpose of identifying his affidavit.”29 As such, the affidavit was inadmissible to prove the nullity of the interest rates.When evidence is presented by one party, with the expressed or implied consent of the adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly as regards those issues, which shall be considered as if they have been raised in the pleadings. There is implied, consent to the evidence thus presented when the adverse party fails to object thereto.” (Emphasis supplied)Clearly, a court may rule and render judgment on the basis of the evidence before it even though the relevant pleading had not been previously amended, so long as no surprise or prejudice is thereby caused to the adverse party. Put a little differently, so long as the basic requirements of fair play had been met, as where litigants were given full opportunity to support their respective contentions and to object to or refute each other's evidence, the court may validly treat the pleadings as if they had been amended to conform to the evidence and proceed to adjudicate on the basis of all the evidence before it.
The unilateral determination and imposition of the increased rates is violative of the principle of mutuality of contracts under Article 1308 of the Civil Code, which provides that ‘[t]he contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.’ A perusal of the Promissory Note will readily show that the increase or decrease of interest rates hinges solely on the discretion of petitioner. It does not require the conformity of the maker before a new interest rate could be enforced. Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result, thus partaking of the nature of a contract of adhesion, is void. Any stipulation regarding the validity or compliance of the contract left solely to the will of one of the parties is likewise invalid. (Emphasis supplied)PNB could not also justify the increases it had effected on the interest rates by citing the fact that the Spouses Manalo had paid the interests without protest, and had renewed the loan several times. We rule that the CA, citing Philippine National Bank v. Court of Appeals,36 rightly concluded that “a borrower is not estopped from assailing the unilateral increase in the interest made by the lender since no one who receives a proposal to change a contract, to which he is a party, is obliged to answer the same and said party’s silence cannot be construed as an acceptance thereof.”37chanrobleslaw
WHEREFORE, the Court AFFIRMS the decision promulgated by the Court of Appeals on March 28, 2006 in CA-G.R. CV No. 84396, subject to the MODIFICATION that any amount to be refunded to the respondents shall bear interest of 12% per annum computed from March 28, 2006 until June 30, 2013, and 6% per annum computed from July 1, 2013 until finality hereof; that the amount to be refunded and its accrued interest shall earn interest at 6% per annum until full refund; and DIRECTS the petitioner to pay the costs of suit.
- Any amount to be refunded to the Spouses Manalo shall bear interest of 12% per annum computed from March 28, 2006, the date of the promulgation of the CA decision, until June 30, 2013; and 6% per annum computed from July 1, 2013 until finality of this decision; and
- The amount to be refunded and its accrued interest shall earn interest of 6% per annum until full refund.
1Rollo, p. 59.
2 Id. at 60.
4 Id. at 61.
6 Id. at 62.
8 Id. at 62-63.
9 Id. at 95.
10 Id. at 96-97.
11 Id. at 97.
12 Id. at 97-98.
13 Id. at 108.
16 Id. at 108-128.
17 CA rollo, p. 87.
18Rollo, pp. 10-25; penned by Associate Justice Magdangal M. De Leon, and concurred in by Associate Justice Conrado M. Vasquez, Jr. (later Presiding Justice, but now retired) and Associate Justice Mariano C. Del Castillo (now a Member of the Court).
19 G.R. No. 97412, July 12, 1994, 234 SCRA 78, 95.
20 Id. at 145-147.
21Rollo, pp. 212-234.
22 Id. at 220-222.
23 Id. at 222-225.
24 Id. at 225-228.
25 Records, pp. 204, 207.
26 See TSN, November 25, 2003, pp. 8-30.
27 G.R. No. 120730, October 28, 1996, 263 SCRA 660, 673-674.
28 G.R. No. 91852, August 15, 1995, 247 SCRA 361, 377-378.
29Rollo, p. 226.
30Mercader v. Development Bank of the Philippines (Cebu Branch), G.R. No. 130699, May 12, 2000, 332 SCRA 82, 97.
31 Exhibits, pp. 14, 18.
32 Article 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. (1256a)
33Floirendo, Jr. v. Metropolitan Bank and Trust Company, G.R. No. 148325, September 3, 2007, 532 SCRA 43, 51, citing Philippine National Bank v. Court of Appeals, G.R. No. 88880, April 30, 1991, 196 SCRA 536, 545.
34Pilipino Telephone Corporation v. Tecson, G.R. No. 156966, May 7, 2004, 428 SCRA 378, 380.
35 G.R. No. 193178, May 30, 2011, 649 SCRA 527, 533.
36 G.R. No. 107569, November 8, 1994, 238 SCRA 20, 26.
37Rollo, p. 69.
38 Supra note 19.
39 Supra note 18.
40 Supra note 19.
41Rollo, pp. 81-82.
42 Id. at 96.
43 Id. at 128.
44 Supra note 19.
45 G.R. No. 189871, August 13, 2013.
46 G.R. No. 183804, September 11, 2013.
47 Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per annum.