THIRD DIVISION
G.R. No. 200299, August 17, 2016
SPOUSES JUAN CHUY TAN AND MARY TAN (DECEASED) SUBSTITUTED BY THE SURVIVING HEIRS, JOEL TAN AND ERIC TAN, Petitioners, v. CHINA BANKING CORPORATION, Respondent.
D E C I S I O N
PEREZ, J.:
For resolution of the Court is the instant Petition for Review on Certiorari1 filed by petitioner Spouses Juan Chuy Tan and Mary Tan (deceased) substituted by the surviving heirs, Joel Tan and Eric Tan, seeking to reverse and set aside the Decision2 dated 14 October 2011 and Resolution3 dated 24 January 2012 of the Court of Appeals (CA) in CA-G.R. CV. No. 87450. The assailed decision and resolution affirmed with modification the 29 December 2003 Decision4 of the Regional Trial Court (RTC) of Makati City, Branch 142 by ordering that the penalty surcharge of 24% per annum as stipulated in the contract of loan is reduced to 12% per annum.
DATE | PROMISSORY NOTE NOS. | PRINCIPAL AMOUNT |
27 June 1997 | BDC-0345 | P1,600,000.00 |
30 July 1997 | BDC-0408 | 1,000,000.00 |
13 August 1997 | BDC-0422 | 1,100,000.00 |
18 August 1997 | BDC-0432 | 1,960.000.00 |
21 August 1997 | BDC-0438 | 1,490.000.00 |
2 September 1997 | BDC-0455 | 2,200,000.00 |
1 October 1997 | BDC-0506 | 1,700,000.00 |
20 November 1997 | DLS-0316 | 2,800,000.00 |
18 June 1997 | DLS-0324 | 5,500,000.00 |
18 June 1997 | DLS-0325 | 2,675,000.00 |
04 July 1997 | DLS-0360 | 7,000,000.00 |
24 July 1997 | DLS-0403 | 4,000,000.00 |
28 August 1997 | BDC-0449 | 1,550,000.00 |
20 November 1997 | BDC-0340 | 1,550,000.00 |
8 September 1997 | BDC-0466 | 1,262,500.00 |
31 September 1997 | BDC-0479 | 662,500.00 |
10 July 1997 | DLS 0379 | 33,000,000.00 |
TOTAL |
| P71,050,000.00 |
Principal Amount | P71,050,000.00 |
Interest | 13,521,939.31 |
Penalties | 19,763,257.50 |
Registration Expenses | 9,542,013.00 |
Filing Fee | 351,300.00 |
Publication Fee | 25,970.00 |
Sheriffs Fee | 2,000.00 |
Posting Fee | 700.00 |
WHEREFORE, premises considered, judgment is rendered ordering the defendants to pay [China Bank], jointly and severally, the following:On appeal, the CA affirmed with modification the judgment of the RTC by reducing the rate of the penalty surcharge from 24% per annum to 12% per annum, and, likewise the award of attorney's fees was reduced from 5% to 2% of the total amount due. The appellate court deemed that the rate of penalty agreed by the parties is unconscionable under the circumstances considering that the obligation was already partially satisfied by the sale of the securities constituted for the loan and resolved to fairly and equitably reduce it to 12% per annum. The decretal portion of the appellate court's decision reads:ChanRoblesVirtualawlibrarySO ORDERED.5chanroblesvirtuallawlibrary
- [T]he amount of £29,258,179.81 representing the deficiency claim as of August 10, 1998 plus penalties accruing thereafter at the rate of 2% per month until fully paid;
- 5% of the total amount due as Attorney's [F]ees;
- Expenses of litigation and cost of suit.
WHEREFORE, premises considered, the assailed Decision dated December 29, 2003 of the Regional Trial Court of Makati City, Branch 142 is AFFIRMED with MODIFICATION in that the penalty surcharge of 2% per month or 24% per annum is reduced to 12% per annum and, likewise, the award of attorney's fees is reduced from 5% to 2% of the total amount due.In a Resolution dated 24 January 2012, the CA refused to reconsider its earlier decision by denying the Motion for Reconsideration interposed by Lorenze Realty.No pronouncement as to costs.
SO ORDERED.
WHETHER LORENZE REALTY'S OBLIGATION IS FULLY SETTLED WHEN THE REAL PROPERTIES CONSTITUTED AS SECURITIES FOR THE LOAN WERE SOLD AT THE PUBLIC AUCTION FOR P85,000,000.00.
We resolve to deny the petition.Obligations are extinguished, among others, by payment or performance, the mode most relevant to the factual situation in the present case.6 Under Article 1232 of the Civil Code, payment means not only the delivery of money but also the performance, in any other manner, of an obligation.7 Article 1233 of the Civil Code states that a debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be.8 In contracts of loan, the debtor is expected to deliver the sum of money due the creditor.9 These provisions must be read in relation with the other rules on payment under the Civil Code, such as the application of payment, to wit:ChanRoblesVirtualawlibrary
Art. 1252. He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment is made by the party for whose benefit the term has been constituted, application shall not be made as to debts which are not yet due.In interpreting the foregoing provision of the statute, the Court in Premiere Development Bank v. Central Surety & Insurance Company Inc.10 held that the right of the debtor to apply payment is merely directory in nature and must be promptly exercised, lest, such right passes to the creditor,
If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract.
"The debtor[']s right to apply payment is not mandatory. This is clear from the use of the word [']may['] rather than the word [']shall['] in the provision which reads: [']He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of the same must be applied.[']In the event that the debtor failed to exercise the right to elect the creditor may choose to which among the debts the payment is applied as in the case at bar. It is noteworthy that after the sale of the foreclosed properties at the public auction, Lorenze Realty failed to manifes": its preference as to which among the obligations that were all due the proceeds of the sale should be applied. Its silence can be construed as acquiescence to China Bank's application of the payment first to the interest and penalties and the remainder to the principal which is sanctioned by Article 1253 of the New Civil Code which provides that:,
Indeed, the debtor[']s right to apply payment has been considered merely directory, and not mandatory, following this Court[']s earlier pronouncement that [']the ordinary acceptation of the terms [']may['] and [']shall['] may be resorted to as guides in ascertaining the mandatory or directory character of statutory provisions. [']
Article 1252 gives the right to the debtor to choose to which of several obligations to apply a particular payment that he tenders to the creditor. But likewise granted in the same provision is the right of the creditor to apply such payment in case the debtor fails to direct its application. This is obvious in Art. 1252, par. 2, viz.: [']If the debtor accepts from the creditor a receipt in which an application of payment is made, the former cannot complain of the same.[‘] It is the directory nature of this right and the subsidiary right of the creditor to apply payments when the debtor does not elect to do so that make this right, like any other right, waivable.
Rights may be waived, unless the waiver is contrary to law, public order, public policy, morals or good customs, or prejudicial to a third person with a right recognized by law.
A debtor, in making a voluntary payment, may at the time of payment direct an application of it to whatever account he chooses, unless he has assigned or waived that right. If the debtor does not do so, the right passes to the creditor, who may make such application as he chooses. But if neither party has exercised its option, the court will apply the payment according to the justice and equity of the case, taking into consideration all its circumstances." [Emphasis supplied, citations omitted.]
Art. 1253. If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.That they assume that the obligation is fully satisfied by the sale of the securities does not hold any water. Nowhere in our statutes and jurisprudence do they provide that the sale of the collaterals constituted as security of the obligation results in the extinguishment of the obligation. The rights and obligations of parties are governed by the terms and conditions of the contract and not by assumptions and presuppositions of the parties. The amount of their entire liability should be computed on the basis of the rate of interest as imposed by the CA minus the proceeds of the sale of the foreclosed properties in public auction.
Endnotes:
1Rollo, pp. 57-78.
2 Id. at 87-106; penned by Associate Justice Antonio L, Villamor, concurred by Associate Justices Jane Aurora C. Lantion and Ramon A. Cruz.
3 Id. at 107-108.
4 Id. at 166-171; penned by Judge Estela M. Perlas-Bernabe (now a member of this Court).
5 Id. at 171.
6Go Cinco, et al. v. Court of Appeals, et al., 618 Phil. 104, 112 (2009).
7 Id.
8 Id. at 112-113.
9 Id.
10598 Phil. 827, 844-845 (2009).
11 G.R. No. 210831, 26 November 2014, 743 SCRA 283, 295-
12 296. G.R. No. 201001, 10 November 2014, 739 SCRA 432,
13 442-443. G.R. No. 180144,24 September 2014, 736 SCRA
14 357, 379-380. 697 Phil. 447, 452 (2012).