SECOND DIVISION
G.R. No. 215954, August 01, 2016
SPOUSES JOVEN SY AND CORAZON QUE SY, Petitioners, v. CHINA BANKING CORPORATION, Respondent.
D E C I S I O N
MENDOZA, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules of Court,1 filed by Spouses Joven Sy and Corazon Que Sy (petitioners), assails the December 15, 2014 Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 97482, which affirmed the May 21, 2010 Decision3 of the Regional Trial Court, Branch 139, Makati City (RTC), in Civil Case No. 04-1215, ordering petitioners to pay respondent China Banking Corporation (China Bank) the deficiency balance of their loan obligation.
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff China Banking Corporation and against the defendant spouses Joven Sy and Corazon Que Sy ordering the latter to jointly and severally pay the former the following:ChanRoblesVirtualawlibraryPetitioners moved for reconsideration, but their motion was denied by the RTC in its June 7, 2011 Order.10 Petitioners then appealed the case before the CA.Furnish copies of this Decision to the parties and their respective counsels.
(a) The deficiency balance of P13,938,791.69 plus interest thereon at the rate of 12% per annum from the date of extrajudicial demand on 19 April 2004; (b) A 1% penalty on the said deficiency balance for every month of default; (c) The amount of P100,000.00 as and by way of attorney's fees; and (d) Costs of suit.
SO ORDERED.9chanroblesvirtuallawlibrary
Petitioners ascribe as error, on the part of the CA, its computation of the penalty charges because the basis for arriving at the deficiency balance was still the agreed rate of 1/10 of 1% per day instead of the 1% per month of default imposed by the RTC. They also argue that the attorney's fees should have been computed on the basis of the modified amount and that because the penalties were struck down as unconscionable, then the terms and conditions of the PNs should have been declared null and void as a whole.ASSIGNMENT OF ERRORS
- The Honorable Court of Appeals in affirming the Decision of the Honorable Lower Court, failed to appreciate the fact that after finding that the imposition by the Respondent of compounded penalty of 3% monthly on the loan as unconscionable and reduced the same to 1% per month, overlooked the fact that on Exhibit E, for the Respondent to arrive at the amount of their claim P28,438,791.69 as of February 26, 2004 they have imposed compounded penalties of 3% monthly. If the proper imposition of 1% monthly be made then the deficiency balance should be much lower if not nil;
- The Honorable Court of Appeals failed to appreciate the fact that after finding that the imposition of attorney's fees of 10% on the total obligation have overlooked the fact that on exhibit E, for the Respondent to arrive at the amount of their claim P28,438,791.69 as of February 26, 2004 they have imposed P2,585,344.70!!!!! as attorney's fees, the fee which the Honorable Court of Appeals have substantially reduced to P100,000.00 only;
- If the penalties imposed by the Promissory Note and the Real Estate Mortgage as well as attorney's fees were struck down as unconscionable, then the terms and conditions of the Promissory Note is null and void and the very obligation must be recomputed at legal interest of 12% only;
- The case must therefore be remanded back for the computation of the proper amount of the obligation and as to the deficiency.12
Hence, if the lower court committed palpable error or gravely mis appreciated facts in arriving at a conclusion, this Court has the full authority to pass upon issues despite being factual in character. In this case, petitioners request that this Court do the same arguing that the RTC and the CA misappreciated the facts and committed a blatant error in coming up with the amounts they should be held liable to China Bank.
- When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;
- When the inference made is manifestly mistaken, absurd or impossible;
- Where there is a grave abuse of discretion;
- When the judgment is based on a misapprehension of facts;
- When the findings of fact are conflicting;
- When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee;
- When the findings are contrary to those of the trial court;
- When the findings of fact are conclusions without citation of specific evidence on which they are based;
- When the facts set forth in the petition as well as in the petitioners1 main and reply briefs are not disputed by the respondents; and cralawlawlibrary
- When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record.17
Now with respect to the penalty charges stipulated in the Promissory Notes. The Promissory Notes executed by the parties uniformly provided for the payment of an amount equivalent to 1/10 of 1% per day compounded monthly of the amount due or the payment of 3% penalty compounded monthly. This surcharge or penalty partakes of the nature of liquidated damages under Article 2227 of the Civil Code of the Philippines, and is separate and distinct from interest payment.Thus, in holding petitioners liable for the deficiency balance of P13,938,791.69, the computation of which already included penalty charges at the rate of 1/10 of 1% per day, the RTC committed a palpable error and contradicted its own ruling. The penalty charges and, necessarily, the deficiency balance, should have been computed much lower after applying the reduced rate of 1 % per month of default. To be exact, petitioner's total penalty charges should only amount to P1,849,541.26 and not P5,548,623.78.
Also referred to as a penalty clause, it is expressly recognized by law. It is an accessory undertaking to assume greater liability on the part of the obligor in case of breach of an obligation. The obligor would then be bound to pay the stipulated amount of indemnity without the necessity of proof on the existence and on the measure of damages caused by the breach. Although the courts may not at liberty ignore the freedom of the parties to agree on such terms and conditions as they see fit that contravene neither law nor morals, good customs, public order or public policy, a stipulated penalty, nevertheless, may be equitably reduced if it's iniquitous or unconscionable.
Article 1229 of the Civil Code provides:ChanRoblesVirtualawlibrary"Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable."In the case at bar, this Court finds the 3% stipulated penalty to be iniquitous and unconscionable. Applying the ruling of the Supreme Court in Ruiz v. Court of Appeals, supra, a 1% penalty on the principal loan for every month of default is proper under the circumstances.19chanroblesvirtuallawlibrary
Second, as held by the RTC, the deficiency balance was based on interest charges computed at the prevailing market rates but with the divisor, used to arrive at the daily basis of the interest rates per annum by China Bank, at 360 days. For instance, for the period of April 30, 2003 to May 30, 2003 covering 30 days and with a prevailing market rate of 13% per annum, the interest charges stood at P95,333.33. This was arrived at by using the following formula: amount of loan x interest rate per annum / 360 days x number of days covered by the period. Thus P8,800,000 x 13%/360 x 30 = P95,333.33. To the Court, this was erroneous.
Covered period is from 04/30/03 to 02/26/04 or 302 days At 1/10 of 1% per day based on PN At 1% per month based on RTC ruling PN#5070016047 (P8,800,000.00) 2,657,600.00 885,866.67 PN#5070016030 (P5,200,000.00) 1,570,400.00 523,466.67 PN#5070014942 (P4,372,926.43) 1,320,623.78 440,207.93 TOTAL P 5,548,623.78 P 1,849,541.26
The Court likewise sustains the prayer for the payment of attorney's fees and costs of suit as this was expressly stipulated in the Promissory Notes executed by the parties. However, with respected to the award of attorney's fees, as ruled by the Supreme Court in Estrella Palmares vs. Court of Appeals and M.B. Lending Corporation (G.R. No. 126490, 31 March 1998), "even with an agreement thereon between the parties, the court may nevertheless reduce such attorney's fees fixed in the contract when the amount thereof appears to be unconscionable or unreasonable. To that end, it is not even necessary to show, as in other contracts, that it is contrary to morals or public policy." The grant of attorney's fees equivalent to 10% of the total amount due, including interest, charges, and penalties, as stipulated by the parties is, in the opinion of this Court, unreasonable and immoderate, considering the extent of the work in this simple action for collection of sum of money. This Court therefore holds that the amount of P100,000.00 as and for attorney's fees would be sufficient in this case.21chanroblesvirtuallawlibraryUnfortunately, the CA also failed to take note of this plain oversight by the RTC.
Despite all these errors, however, China Bank argues that what the petitioners are doing is introducing new issues only on appeal, which is not allowed.
PN#5070016047 INTEREST INTEREST OUTSTANDING BALANCE FROM TO DAYS RATE DUE 8,800,000.00 30-Apr-03 30-May-03 30 13.00% 94,027.40 8,800,000.00 30-May-03 30-Jun-03 31 12.75% 95,293.15 8,800,000.00 30-Jun-03 30-Jul-03 30 12.50% 90,410.96 8,800,000.00 30-Jul-03 31-Aug-03 32 12.50% 96,438.36 8,800,000.00 31-Aug-03 30-Sep-03 30 12.50% 90,410.96 8,800,000.00 30-Sep-03 31-Oct-03 31 12.50% 93,424.66 8,800,000.00 31-Oct-03 30-Nov-03 30 12.50% 90,410.96 8,800,000.00 30-Nov-03 31-Dec-03 31 12.50% 93,424.66 Interest Due (04/30/03 to 12/31/03) 743,841.10Add: Penalty charged computed per RTC ruling (P8,800,000.00 from 04/30/03 to 12/31/03 or 245 days @ 1 % per month) 718,666.67Total interest Due & Penalty Charged (04/30/03-12/31/03) 1,462,507.76 8,800,000.00 31-Dec-03 31-Jan-04 31 12.50% 93,424.66 8,800,000.00 31-Jan-04 26-Feb-04 26 12.50% 78,356.16Interest Due (12/31/03 to 02/26/04) 171,780.82Add: Penalty charged computed per RTC ruling (P8,800,000.00 from 12/31/03 to 02/26/04 or 57 days @ 1% per month) 167,200.00Total interest Due & Penalty Charged (12/31/03-02/26/04) 338,980.82SUB-TOTAL 1,801,488.58PN#5070016030 5,200,000.00 30-Apr-03 30-May-03 30 13.00% 55,561.64 5,200,000.00 30-May-03 30-Jun-03 31 12.75% 56,309.59 5,200,000.00 30-Jun-03 30-Jul-03 30 12.50% 53,424.66 5,200,000.00 30-Jul-03 31-Aug-03 32 12.50% 56,986.30 5,200,000.00 31-Aug-03 30-Sep-03 30 12.50% 53,424.66 5,200,000.00 30-Sep-03 31-Oct-03 31 12.50% 55,205.48 5,200,000.00 31-Oct-03 30-Nov-03 30 12.50% 53,424.66 5,200,000.00 30-Nov-03 31-Dec-03 31 12.50% 55,205.48 Interest Due (04/30/03 to 12/31/03) 439,542.47Add: Penalty charged computed per RTC ruling (P5,200,000.00 from 04/30/03 to 12/31/03 or 245 days @ 1% per month) 424,666.67Total interest Due & Penalty Charged (04/30/03-12/31/03) 864,209.13 5,200,000.00 31-Dec-03 31-Jan-04 31 12.50% 55,205.48 5,200,000.00 31-Jan-04 26-Feb-04 26 12.50% 46,301.37Interest Due (12/31/03 to 02/26/04) 101,506.85Add: Penalty charged computed per RTC ruling (P5,200,000.00 from 12/31/03 to 02/26/04 or 57 days @ 1 % per month) 98,800.00Total interest Due & Penalty Charged (12/31/03-02/26/04) 200,306.85SUB-TOTAL 1,064,515.98PN#5070014942 4,372,926.43 30-Apr-03 30-May-03 30 13.00% 46,724.42 4,372,926.43 30-May-03 30-Jun-03 31 12.75% 47,353.40 4,372,926.43 30-Jun-03 30-Jul-03 30 12.50% 44,927.33 4,372,926.43 30-Jul-03 31-Aug-03 32 12.50% 47,922.48 4,372,926.43 31-Aug-03 30-Sep-03 30 12.50% 44,927.33 4,372,926.43 30-Sep-03 31-Oct-03 31 12.50% 46,424.90 4,372,926.43 31-Oct-03 30-Nov-03 30 12.50% 44,927.33 4,372,926.43 30-Nov-03 31-Dec-03 31 12.50% 46,424.90 Interest Due (04/30/03 to 12/31/03) 369,632.09Add: Penalty charged computed per RTC ruling (P4,372,926.43 from 04/30/03 to 12/31/03 or 245 days @ 1% per month) 357,122.33Total interest Due & Penalty Charged (04/30/03-12/31/03) 726,754.41 4,372,926.43 31-Dec-03 31-Jan-04 31 12.50% 46,424.90 4,372,926.43 31-Jan-04 26-Feb-04 26 12.50% 38,937.02Interest Due (12/31/03 to 02/26/04) 85,361.92Add: Penalty charged computed per RTC's ruling (P4,372,926.43 from 12/31/03 to 02/26/04 or 57 days @ 1 % per month) 83,085.60Total interest Due & Penalty Charged (12/31/03-02/26/04) 168,447.52SUB-TOTAL 895,201.94Computation: Total Interest Due from 3 PNS 1,911,665.24Total Penalty Charges from 3 PNS 1,849,541.26Add: Principal (3 PNS) 18,372,926.43Add: Attorney's Fees 100,000.00TOTAL INTERST DUE, PENALTY CHARGER], and PRINCIPAL, (AS OF 02/26/2004) 22,234,132.93Less: BID PRICE 14,500,000.00DEFICIENCY BALANCE P7,734,132.93
WHEREFORE, premises considered, the instant appeal is hereby DENIED. The challenged decision, dated 21 May 2010, as well as the order, dated 7 June 2011, are hereby AFFIRMED with MODIFICATIONS. Respondent spouses Joven Sy and Corazon Que Sy are ORDERED to pay petitioner China Banking Corporation P7,734,132.93, representing the deficiency of their obligation, net of the proceeds of the foreclosed property, plus legal interest of 12% per annum from April 19, 2004 until June 30, 2013, and 6% per annum thereafter, until fully satisfied.SO ORDERED.chanRoblesvirtualLawlibrary
Endnotes:
1Rollo, pp. 13-29.
2 Id. at 34-44. Penned by Associate Justice Leoncia Real-Dimagiba, with Associate Justices Rebecca De Guia-Salvador and Ricardo R. Rosario, concurring.
3 Id. at 187-193. Penned by Judge Benjamin T. Pozon.
4 Id. at 164-166.
5 Id. at 160-163.
6 Id. at 61.
7 Id. at 184.
8 Article 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.
9Rollo, p. 193.
10 Id. at 197-198. Penned by Judge Benjamin T. Pozon.
11 Id. at 43.
12 Id. at 18-19.
13 See China Bank's Comment, id. at 276-292.
14 See National Transmission Corporation v. Alphaomega Integrated Corporation, G.R. No. 184295, July 30, 2014, 731 SCRA 299, 307.
15AliƱo v. Heirs of Angelica A. Lorenzo, 578 Phil. 698, 706 (2008); Diesel Construction Co., Inc. v. UPSI Property Holdings, Inc., 572 Phil. 494, 511 (2008).
16 See Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals, 370 Phil. 150 (1999).
17New City Builders, Inc. v. NLRC, 499 Phil. 207, 212-213 (2005), citing Insular Life Assurance Company, Ltd. v. CA, G.R. No. 126850, April 28, 2004, 428 SCRA 79.
18 678 Phil. 148 (2011).
19Rollo, pp. 192-193.
20 Art. 13. Civil Code. When the laws speak of years, months, days or nights, it shall be understood that years are of three hundred sixty-five days each; months, of thirty days; days, of twenty-four hours; and nights from sunset to sunrise.
If months are designated by their name, they shall be computed by the number of days which they respectively have.
In computing a period, the first day shall be excluded, and the last day included.
21Rollo, p. 193.
22 716 Phil. 267 (2013).