THIRD DIVISION

UNITED COCONUT PLANTERS

BANK,
Petitioner,




- versus -




SPOUSES SAMUEL and ODETTE
BELUSO,
Respondents.
G.R. No. 159912

Present:

YNARES-SANTIAGO, J.,
,irperson,
AUSTRIA-MARTINEZ,
IO-NAZARIO,
NAURA, ,nd
REYES, JJ.


Promulg,ted:

August 17, 2007
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D E I S I O N


IO-NAZARIO, J.:


Tis is , Petition Ior Review on Certiorari under Rule 45 oI te Rules oI ourt, wic
seeks to ,nnul te ourt oI Appe,ls Decision
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d,ted 21 J,nu,ry 2003 ,nd its Resolution
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d,ted 9 September 2003in A-G.R. ' No. 67318. Te ,ss,iled ourt oI Appe,ls Decision ,nd
Resolution ,IIirmed in turn te Decision
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d,ted 23 M,rc 2000 ,nd Order
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d,ted 8 M,y 2000
oI te Region,l Tri,l ourt (RT, Br,nc 65 oI M,k,ti ity, in ivil ,se No. 99-314,
decl,ring void te interest r,te provided in te promissory notes eecuted by te respondents

Spouses S,muel ,nd Odette Beluso (spouses Beluso in I,vor oI petitioner United oconut
Pl,nters B,nk (UPB.

Te procedur,l ,nd I,ctu,l ,ntecedents oI tis c,se ,re ,s Iollows:

On 16 April 1996, UPB gr,nted te spouses Beluso , Promissory Notes Line under ,
redit Agreement wereby te l,tter could ,v,il Irom te Iormer credit oI up to , m,imum
,mount oI P1.2 Million pesos Ior , term ending on 30 April 1997. Te spouses Beluso
constituted, oter t,n teir promissory notes, , re,l est,te mortg,ge over p,rcels oI l,nd in
Ro,s ity, covered by Tr,nsIer ertiIic,tes oI Title No. T-31539 ,nd T-27828, ,s ,ddition,l
security Ior te oblig,tion. Te redit Agreement w,s subsequently ,mended to incre,se te
,mount oI te Promissory Notes Line to , m,imum oI P2.35 Million pesos ,nd to etend te
term tereoI to 28 Febru,ry 1998.

Te spouses Beluso ,v,iled temselves oI te credit line under te Iollowing Promissory
Notes:

PN # D,te oI PN M,turity D,te Amount Secured
8314-96-00083-3 29 April 1996 27 August 1996 P 700,000
8314-96-00085-0 2 M,y 1996 30 August 1996 P 500,000
8314-96-000292-2 20 November 1996 20 M,rc 1997 P 800,000


Te tree promissory notes were renewed sever,l times. On 30 April 1997, te p,yment
oI te princip,l ,nd interest oI te l,tter two promissory notes were debited Irom te spouses
Beluso`s ,ccount wit UPB; yet, , consolid,ted lo,n Ior P1.3 Million w,s ,g,in rele,sed to te
spouses Beluso under one promissory note wit , due d,te oI 28 Febru,ry 1998.

To completely ,v,il temselves oI te P2.35 Million credit line etended to tem by
UPB, te spouses Beluso eecuted two more promissory notes Ior , tot,l oI P350,000.00:

PN # D,te oI PN M,turity D,te Amount Secured
97-00363-1 11 December 1997 28 Febru,ry 1998 P 200,000
98-00002-4 2 J,nu,ry 1998 28 Febru,ry 1998 P 150,000


owever, te spouses Beluso ,lleged t,t te ,mounts covered by tese l,st two promissory
notes were never rele,sed or credited to teir ,ccount ,nd, tus, cl,imed t,t te princip,l
indebtedness w,s only P2 Million.

In ,ny c,se, UPB ,pplied interest r,tes on te diIIerent promissory notes r,nging Irom
18 to 34. From 1996 to Febru,ry 1998 te spouses Beluso were ,ble to p,y te tot,l sum oI
P763,692.03.

From 28 Febru,ry 1998 to 10 June 1998, UPB continued to c,rge interest ,nd pen,lty
on te oblig,tions oI te spouses Beluso, ,s Iollows:

PN # Amount Secured Interest Pen,lty Tot,l
97-00363-1 P 200,000 31 36 P 225,313.24
97-00366-6 P 700,000 30.17
(7 d,ys
32.786
(102 d,ys
P 795,294.72
97-00368-2 P 1,300,000 28
(2 d,ys
30.41
(102 d,ys
P 1,462,124.54
98-00002-4 P 150,000 33
(102 d,ys
36 P 170,034.71


Te spouses Beluso, owever, I,iled to m,ke ,ny p,yment oI te Ioregoing ,mounts.

On 2 September 1998, UPB dem,nded t,t te spouses Beluso p,y teir tot,l oblig,tion
oI P2,932,543.00 plus 25 ,ttorney`s Iees, but te spouses Beluso I,iled to comply terewit.
On 28 December 1998, UPB Ioreclosed te properties mortg,ged by te spouses Beluso to
secure teir credit line, wic, by t,t time, ,lre,dy b,llooned to P3,784,603.00.

On 9 Febru,ry 1999, te spouses Beluso Iiled , Petition Ior Annulment, Accounting ,nd
D,m,ges ,g,inst UPB wit te RT oI M,k,ti ity.

On 23 M,rc 2000, te RT ruled in I,vor oI te spouses Beluso, disposing oI te c,se
,s Iollows:

PREMISES ONSIDERED, judgment is ereby rendered decl,ring te
interest r,te used by |UPB| void ,nd te Ioreclosure ,nd SeriII`s ertiIic,te oI
S,le void. |UPB| is ereby ordered to return to |te spouses Beluso| te
properties subject oI te Ioreclosure; to p,y |te spouses Beluso| te ,mount oI
P50,000.00 by w,y oI ,ttorney`s Iees; ,nd to p,y te costs oI suit. |Te spouses
Beluso| ,re ereby ordered to p,y |UPB| te sum oI P1,560,308.00.
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On 8 M,y 2000, te RT denied UPB`s Motion Ior Reconsider,tion,
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prompting
UPB to ,ppe,l te RT Decision wit te ourt oI Appe,ls. Te ourt oI Appe,ls ,IIirmed te
RT Decision, to wit:

WEREFORE, premises considered, te decision d,ted M,rc 23, 2000
oI te Region,l Tri,l ourt, Br,nc 65, M,k,ti ityin ivil ,se No. 99-314 is
ereby AFFIRMED subject to te modiIic,tion t,t deIend,nt-,ppell,nt UPB is
not li,ble Ior ,ttorney`s Iees or te costs oI suit.
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On 9 September 2003, te ourt oI Appe,ls denied UPB`s Motion Ior Reconsider,tion
Ior l,ck oI merit. UPB tus Iiled te present petition, submitting te Iollowing issues Ior our
resolution:

I

WETER OR NOT TE ONORABLE OURT OF APPEALS
OMMITTED SERIOUS AND RE'ERSIBLE ERROR WEN IT AFFIRMED
TE DEISION OF TE TRIAL OURT WI DELARED 'OID TE

PRO'ISION ON INTEREST RATE AGREED UPON BETWEEN PETITIONER

AND RESPONDENTS


II

WETER OR NOT TE ONORABLE OURT OF APPEALS
OMMITTED SERIOUS AND RE'ERSIBLE ERROR WEN IT AFFIRMED
TE OMPUTATION BY TE TRIAL OURT OF RESPONDENTS`
INDEBTEDNESS AND ORDERED RESPONDENTS TO PAY PETITIONER
TE AMOUNT OF ONLY ONE MILLION FI'E UNDRED SIXTY
TOUSAND TREE UNDRED EIGT PESOS (P1,560,308.00

III

WETER OR NOT TE ONORABLE OURT OF APPEALS
OMMITTED SERIOUS AND RE'ERSIBLE ERROR WEN IT AFFIRMED
TE DEISION OF TE TRIAL OURT WI ANNULLED TE
FORELOSURE BY PETITIONER OF TE SUBJET PROPERTIES DUE TO
AN ALLEGED 'INORRET OMPUTATION OF RESPONDENTS`
INDEBTEDNESS

I'

WETER OR NOT TE ONORABLE OURT OF APPEALS
OMMITTED SERIOUS AND RE'ERSIBLE ERROR WEN IT AFFIRMED
TE DEISION OF TE TRIAL OURT WI FOUND PETITIONER
LIABLE FOR 'IOLATION OF TE TRUT IN LENDING AT

'

WETER OR NOT TE ONORABLE OURT OF APPEALS
OMMITTED SERIOUS AND RE'ERSIBLE ERROR WEN IT FAILED TO
ORDER TE DISMISSAL OF TE ASE BEAUSE TE RESPONDENTS
ARE GUILTY OF FORUM SOPPING
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Validity of the Interest Rates

Te ourt oI Appe,ls eld t,t te imposition oI interest in te Iollowing provision Iound
in te promissory notes oI te spouses Beluso is void, ,s te interest r,tes ,nd te b,ses tereIor
were determined solely by petitioner UPB:

FOR 'ALUE REEI'ED, I, ,nd/or We, on or beIore due d,te, SPS.
SAMUEL AND ODETTE BELUSO (BORROWER, jointly ,nd sever,lly
promise to p,y to UNITED OONUT PLANTERS BANK (LENDER or order
,t UPB Bldg., M,k,ti Avenue, M,k,ti ity, Pilippines, te sum oI
PESOS, (P, Pilippine urrency, wit interest tereon ,t
te r,te indic,tive oI DBD ret,il r,te or ,s determined by te Br,nc e,d.
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UPB ,sserts t,t tis is , reversible error, ,nd cl,ims t,t wile te interest r,te w,s not
numeric,lly qu,ntiIied in te I,ce oI te promissory notes, it w,s noneteless c,tegoric,lly Iied,
,t te time oI eecution tereoI, ,t te 'r,te indic,tive oI te DBD ret,il r,te. UPB contends
t,t s,id provision must be re,d wit ,noter stipul,tion in te promissory notes subjecting to
review te interest r,te ,s Iied:

Te interest r,te s,ll be subject to review ,nd m,y be incre,sed or
decre,sed by te LENDER considering ,mong oters te prev,iling Iin,nci,l ,nd
monet,ry conditions; or te r,te oI interest ,nd c,rges wic oter b,nks or
Iin,nci,l institutions c,rge or oIIer to c,rge Ior simil,r ,ccommod,tions; ,nd/or
te resulting proIit,bility to te LENDER ,Iter due consider,tion oI ,ll de,lings
wit te BORROWER.
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In tis reg,rd, UPB ,vers t,t tese ,re v,lid reIerence r,tes ,kin to , 'prev,iling r,te
or 'prime r,te ,llowed by tis ourt in !olotan v. Court of Appeals.
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Furtermore, UPB
,rgues t,t even iI te proviso ',s determined by te br,nc e,d is considered void, suc ,
decl,r,tion would not ipso facto render te connecting cl,use 'indic,tive oI DBD ret,il r,te
void in view oI te sep,r,bility cl,use oI te redit Agreement, wic re,ds:

Section 9.08 Sep,r,bility l,use. II ,ny one or more oI te provisions
cont,ined in tis AGREEMENT, or documents eecuted in connection erewit
s,ll be decl,red inv,lid, illeg,l or unenIorce,ble in ,ny respect, te v,lidity,

leg,lity ,nd enIorce,bility oI te rem,ining provisions ereoI s,ll not in ,ny w,y
be ,IIected or imp,ired.
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According to UPB, te imposition oI te questioned interest r,tes did not inIringe on
te principle oI mutu,lity oI contr,cts, bec,use te spouses Beluso ,d te liberty to coose
weter or not to renew teir credit line ,t te new interest r,tes pegged by petitioner.
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UPB
,lso cl,ims t,t ,ssuming tere w,s ,ny deIect in te mutu,lity oI te contr,ct ,t te time oI its
inception, suc deIect w,s cured by te subsequent conduct oI te spouses Beluso in ,v,iling
temselves oI te credit line Irom April 1996 to Febru,ry 1998 witout ,iring ,ny protest wit
respect to te interest r,tes imposed by UPB. According to UPB, tereIore, te spouses
Beluso ,re in estoppel.
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We ,gree wit te ourt oI Appe,ls, ,nd Iind no merit in te contentions oI UPB.

Article 1308 oI te ivil ode provides:

Art. 1308. Te contr,ct must bind bot contr,cting p,rties; its v,lidity or
compli,nce c,nnot be leIt to te will oI one oI tem.

We ,pplied tis provision in !ilippine National Bank v. Court of Appeals,
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were
we eld:

In order t,t oblig,tions ,rising Irom contr,cts m,y ,ve te Iorce oI l,w
between te p,rties, tere must be mutu,lity between te p,rties b,sed on teir
essenti,l equ,lity. A contr,ct cont,ining , condition wic m,kes its IulIillment
dependent eclusively upon te uncontrolled will oI one oI te contr,cting p,rties,
is void (G,rci, vs. Rit, Leg,rd,, Inc., 21 SRA 555. ence, even ,ssuming t,t
te P1.8 million lo,n ,greement between te PNB ,nd te priv,te respondent g,ve
te PNB , license (,ltoug in I,ct tere w,s none to incre,se te interest r,te ,t

will during te term oI te lo,n, t,t license would ,ve been null ,nd void Ior
being viol,tive oI te principle oI mutu,lity essenti,l in contr,cts. It would ,ve
invested te lo,n ,greement wit te c,r,cter oI , contr,ct oI ,desion, were te
p,rties do not b,rg,in on equ,l Iooting, te we,ker p,rty's (te debtor
p,rticip,tion being reduced to te ,ltern,tive "to t,ke it or le,ve it" (Qu, vs. L,w
Union & Rock Insur,nce o., 95 Pil. 85. Suc , contr,ct is , verit,ble tr,p Ior
te we,ker p,rty wom te courts oI justice must protect ,g,inst ,buse ,nd
imposition.


Te provision st,ting t,t te interest s,ll be ,t te 'r,te indic,tive oI DBD ret,il r,te or
,s determined by te Br,nc e,d is indeed dependent solely on te will oI petitioner UPB.
Under suc provision, petitioner UPB ,s two coices on w,t te interest r,te s,ll be: (1 ,
r,te indic,tive oI te DBD ret,il r,te; or (2 , r,te ,s determined by te Br,nc e,d. As UPB
is given tis coice, te r,te sould be c,tegoric,lly determin,ble in -ot coices. II eiter oI
tese two coices presents ,n opportunity Ior UPB to Ii te r,te ,t will, te b,nk c,n e,sily
coose suc ,n option, tus m,king te entire interest r,te provision viol,tive oI te principle oI
mutu,lity oI contr,cts.

Not just one, but r,ter bot, oI tese coices ,re dependent solely on te will oI UPB.
le,rly, , r,te ',s determined by te Br,nc e,d gives te l,tter unIettered discretion on w,t
te r,te m,y be. Te Br,nc e,d m,y coose ,ny r,te e or se desires. As reg,rds te r,te
'indic,tive oI te DBD ret,il r,te, te s,me c,nnot be considered ,s v,lid Ior being ,kin to ,
'prev,iling r,te or 'prime r,te ,llowed by tis ourt in !olotan. Te interest r,te in !olotan
re,ds:

Te ,rdolder ,grees to p,y interest per ,nnum ,t 3 plus te prime r,te oI
Security B,nk ,nd Trust omp,ny. .
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In tis provision in !olotan, tere is , Iied m,rgin over te reIerence r,te: 3. Tus, te p,rties
c,n e,sily determine te interest r,te by ,pplying simple ,ritmetic. On te oter ,nd, te
provision in te c,se ,t b,r does not speciIy ,ny m,rgin ,bove or below te DBD ret,il r,te.
UPB c,n peg te interest ,t ,ny percent,ge ,bove or below te DBD ret,il r,te, ,g,in giving it
unIettered discretion in determining te interest r,te.

Te stipul,tion in te promissory notes subjecting te interest r,te to review does not
render te imposition by UPB oI interest r,tes on te oblig,tions oI te spouses Beluso v,lid.
According to s,id stipul,tion:

Te interest r,te s,ll be subject to review ,nd m,y be incre,sed or
decre,sed by te LENDER considering ,mong oters te prev,iling Iin,nci,l ,nd
monet,ry conditions; or te r,te oI interest ,nd c,rges wic oter b,nks or
Iin,nci,l institutions c,rge or oIIer to c,rge Ior simil,r ,ccommod,tions; ,nd/or
te resulting proIit,bility to te LENDER ,Iter due consider,tion oI ,ll de,lings
wit te BORROWER.
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It sould be pointed out t,t te ,utority to review te interest r,te w,s given UPB ,lone ,s
te lender. Moreover, UPB m,y ,pply te consider,tions enumer,ted in tis provision ,s it
wises. As worded in te ,bove provision, UPB m,y give ,s muc weigt ,s it desires to e,c
oI te Iollowing consider,tions: (1 te prev,iling Iin,nci,l ,nd monet,ry condition; (2 te r,te
oI interest ,nd c,rges wic oter b,nks or Iin,nci,l institutions c,rge or oIIer to c,rge Ior
simil,r ,ccommod,tions; ,nd/or (3 te resulting proIit,bility to te LENDER (UPB ,Iter due
consider,tion oI ,ll de,lings wit te BORROWER (te spouses Beluso. Ag,in, ,s in te c,se
oI te interest r,te provision, tere is no Iied m,rgin ,bove or below tese consider,tions.

In view oI te Ioregoing, te Sep,r,bility l,use c,nnot s,ve eiter oI te two options oI
UPB ,s to te interest to be imposed, ,s bot options viol,te te principle oI mutu,lity oI
contr,cts.

UPB likewise I,iled to convince us t,t te spouses Beluso were in estoppel.

Estoppel c,nnot be predic,ted on ,n illeg,l ,ct. As between te p,rties to , contr,ct,
v,lidity c,nnot be given to it by estoppel iI it is proibited by l,w or is ,g,inst public policy.
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Te interest r,te provisions in te c,se ,t b,r ,re illeg,l not only bec,use oI te
provisions oI te ivil ode on mutu,lity oI contr,cts, but ,lso, ,s s,ll be discussed l,ter,
bec,use tey viol,te te Trut in Lending Act. Not disclosing te true Iin,nce c,rges in
connection wit te etensions oI credit is, Iurtermore, , Iorm oI deception wic we c,nnot
counten,nce. It is ,g,inst te policy oI te St,te ,s st,ted in te Trut in Lending Act:

Sec. 2. eclaration of !olicy. It is ereby decl,red to be te policy oI te
St,te to protect its citizens Irom , l,ck oI ,w,reness oI te true cost oI credit to
te user by ,ssuring , Iull disclosure oI suc cost wit , view oI preventing te
uninIormed use oI credit to te detriment oI te n,tion,l economy.
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Moreover, wile te spouses Beluso indeed ,greed to renew te credit line, te oIIending
provisions ,re Iound in te promissory notes temselves, not in te credit line. In Iiing te
interest r,tes in te promissory notes to cover te renewed credit line, UPB still reserved to
itselI te s,me two options (1 , r,te indic,tive oI te DBD ret,il r,te; or (2 , r,te ,s
determined by te Br,nc e,d.

Error in Computation

UPB ,sserts t,t wile bot te RT ,nd te ourt oI Appe,ls voided te interest r,tes
imposed by UPB, bot I,iled to include in teir comput,tion oI te outst,nding oblig,tion oI
te spouses Beluso te leg,l r,te oI interest oI 12 per ,nnum. Furtermore, te pen,lty c,rges
were ,lso deleted in te decisions oI te RT ,nd te ourt oI Appe,ls. Section 2.04, Article II
on 'Interest ,nd oter B,nk ,rges oI te subject redit Agreement, provides:

Section 2.04 Pen,lty ,rges. In ,ddition to te interest provided Ior in
Section 2.01 oI tis ARTILE, ,ny princip,l oblig,tion oI te LIENT ereunder
wic is not p,id wen due s,ll be subject to , pen,lty c,rge oI one percent
(1 oI te ,mount oI suc oblig,tion per mont computed Irom due d,te until
te oblig,tion is p,id in Iull. II te b,nk ,cceler,tes te (sic p,yment oI
,v,ilments ereunder pursu,nt to ARTILE 'III ereoI, te pen,lty c,rge s,ll

be used on te tot,l princip,l ,mount outst,nding ,nd unp,id computed Irom te

d,te oI ,cceler,tion until te oblig,tion is p,id in Iull.
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P,r,gr,p 4 oI te promissory notes ,lso st,tes:

In c,se oI non-p,yment oI tis Promissory Note (Note ,t m,turity, I/We,
jointly ,nd sever,lly, ,gree to p,y ,n ,ddition,l sum equiv,lent to twenty-Iive
percent (25 oI te tot,l due on te Note ,s ,ttorney`s Iee, ,side Irom te
epenses ,nd costs oI collection weter ,ctu,lly incurred or not, ,nd , pen,lty
c,rge oI one percent (1 per mont on te tot,l ,mount due ,nd unp,id Irom
d,te oI deI,ult until Iully p,id.
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Petitioner Iurter cl,ims t,t it is likewise entitled to ,ttorney`s Iees, pursu,nt to Section
9.06 oI te redit Agreement, tus:

II te BANK s,ll require te services oI counsel Ior te enIorcement oI its
rigts under tis AGREEMENT, te Note(s, te coll,ter,ls ,nd oter rel,ted
documents, te BANK s,ll be entitled to recover ,ttorney`s Iees equiv,lent to
not less t,n twenty-Iive percent (25 oI te tot,l ,mounts due ,nd outst,nding
eclusive oI costs ,nd oter epenses.
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Anoter ,lleged comput,tion,l error pointed out by UPB is te neg,tion oI te
ompounding Interest ,greed upon by te p,rties under Section 2.02 oI te redit Agreement:

Section 2.02 ompounding Interest. Interest not p,id wen due s,ll Iorm p,rt oI
te princip,l ,nd s,ll be subject to te s,me interest r,te ,s erein stipul,ted.
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,nd p,r,gr,p 3 oI te subject promissory notes:

Interest not p,id wen due s,ll be ,dded to, ,nd become p,rt oI te princip,l ,nd
s,ll likewise be,r interest ,t te s,me r,te.
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UPB l,stly ,vers t,t te ,pplic,tion oI te spouses Beluso`s p,yments in te disputed
comput,tion does not reIlect te p,rties` ,greement. Te RT deducted te p,yment m,de by te
spouses Beluso ,mounting to P763,693.00 Irom te princip,l oI P2,350,000.00. Tis w,s
,llegedly inconsistent wit te redit Agreement, ,s well ,s wit te ,greement oI te p,rties ,s
to te I,cts oI te c,se. In p,r,gr,p 7 oI te spouses Beluso`s M,niIest,tion ,nd Motion on
Proposed Stipul,tion oI F,cts ,nd Issues vis-a-vis UPB`s M,niIest,tion, te p,rties ,greed t,t
te ,mount oI P763,693.00 w,s ,pplied to te interest ,nd not to te princip,l, in ,ccord wit
Section 3.03, Article II oI te redit Agreement on 'Order oI te Applic,tion oI P,yments,
wic provides:

Section 3.03 Applic,tion oI P,yment. P,yments m,de by te LIENT
s,ll be ,pplied in ,ccord,nce wit te Iollowing order oI preIerence:

1. Accounts receiv,ble ,nd oter out-oI-pocket epenses
2. Front-end Fee, Origin,tion Fee, Attorney`s Fee ,nd oter epenses oI
collection;
3. Pen,lty c,rges;
4. P,st due interest;
5. Princip,l ,mortiz,tion/P,yment in ,rre,rs;
6. Adv,nce interest;
7. Outst,nding b,l,nce; ,nd
8. All oter oblig,tions oI LIENT to te BANK, iI ,ny.
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Tus, ,ccording to UPB, te interest c,rges, pen,lty c,rges, ,nd ,ttorney`s Iees ,d
been erroneously ecluded by te RT ,nd te ourt oI Appe,ls Irom te comput,tion oI te
tot,l ,mount due ,nd dem,nd,ble Irom spouses Beluso.

Te spouses Beluso`s deIense ,s to ,ll tese issues is t,t te dem,nd m,de by UPB is
Ior , consider,bly bigger ,mount ,nd, tereIore, te dem,nd sould be considered void. Tere

being no v,lid dem,nd, ,ccording to te spouses Beluso, tere would be no deI,ult, ,nd tereIore
te interests ,nd pen,lties would not commence to run. As it w,s likewise improper to Ioreclose
te mortg,ged properties or Iile , c,se ,g,inst te spouses Beluso, ,ttorney`s Iees were not
w,rr,nted.

We ,gree wit UPB on tis score. DeI,ult commences upon judici,l or etr,judici,l
dem,nd.
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Te ecess ,mount in suc , dem,nd does not nulliIy te dem,nd itselI, wic is
v,lid wit respect to te proper ,mount. A contr,ry ruling would put commerci,l tr,ns,ctions in
dis,rr,y, ,s v,lidity oI dem,nds would be dependent on te e,ctness oI te comput,tions
tereoI, wic ,re too oIten contested.

Tere being , v,lid dem,nd on te p,rt oI UPB, ,lbeit ecessive, te spouses Beluso
,re considered in deI,ult wit respect to te proper ,mount ,nd, tereIore, te interests ,nd te
pen,lties beg,n to run ,t t,t point.

As reg,rds te ,w,rd oI 12 leg,l interest in I,vor oI petitioner, te RT ,ctu,lly
recognized t,t s,id leg,l interest sould be imposed, tus: 'Tere being no v,lid stipul,tion ,s
to interest, te leg,l r,te oI interest s,ll be c,rged.
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It seems t,t te RT in,dvertently
overlooked its non-inclusion in its comput,tion.

Te spouses Beluso ,d even origin,lly ,sked Ior te RT to impose tis leg,l r,te oI
interest in bot te body ,nd te pr,yer oI its petition wit te RT:

12. Since te provision on te Iiing oI te r,te oI interest by te sole will
oI te respondent B,nk is null ,nd void, only te leg,l r,te oI interest wic is
12 per ,nnum c,n be leg,lly c,rged ,nd imposed by te b,nk, wic would
,mount to only ,bout P599,000.00 since 1996 up to August 31, 1998.

WEREFORE, in view oI te Ioregoing, petiitoners pr,y Ior judgment or

order:



2. By w,y oI e,mple Ior te public good ,g,inst te B,nk`s t,king unI,ir
,dv,nt,ge oI te we,ker p,rty to teir contr,ct, decl,ring te leg,l r,te oI 12 per
,nnum, ,s te impos,ble r,te oI interest up to Febru,ry 28, 1999 on te lo,n oI
2.350 million.
28|28|



All tese sow t,t te spouses Beluso ,d ,cknowledged beIore te RT teir oblig,tion to p,y
, 12 leg,l interest on teir lo,ns. Wen te RT I,iled to include te 12 leg,l interest in its
comput,tion, owever, te spouses Beluso merely deIended in te ,ppell,te courts tis non-
inclusion, ,s te s,me w,s beneIici,l to tem. We see, owever, suIIicient b,sis to impose , 12
leg,l interest in I,vor oI petitioner in te c,se ,t b,r, ,s w,t we ,ve voided is merely te
stipul,ted r,te oI interest ,nd not te stipul,tion t,t te lo,n s,ll e,rn interest.

We must likewise upold te contr,ct stipul,tion providing te compounding oI interest.
Te provisions in te redit Agreement ,nd in te promissory notes providing Ior te
compounding oI interest were neiter nulliIied by te RT or te ourt oI Appe,ls, nor ,ss,iled
by te spouses Beluso in teir petition wit te RT. Te compounding oI interests ,s
Iurtermore been decl,red by tis ourt to be leg,l. We ,ve eld in %an v. Court of
Appeals,
29|29|
t,t:

Witout prejudice to te provisions oI Article 2212, interest due ,nd
unp,id s,ll not e,rn interest. However, the contracting parties may by
stipulation capitalize the interest due and unpaid, which as added principal,
shall earn new interest.


As reg,rds te imposition oI pen,lties, owever, ,ltoug we ,re likewise upolding te
imposition tereoI in te contr,ct, we Iind te r,te iniquitous. Like in te c,se oI grossly

ecessive interests, te pen,lty stipul,ted in te contr,ct m,y ,lso be reduced by te courts iI it is

iniquitous or unconscion,ble.
30|30|


We Iind te pen,lty imposed by UPB, r,nging Irom 30.41 to 36, to be iniquitous
considering te I,ct t,t tis pen,lty is ,lre,dy over ,nd ,bove te compounded interest likewise
imposed in te contr,ct. II , 36 interest in itselI ,s been decl,red unconscion,ble by tis
ourt,
31|31|
w,t more , 30.41 to 36 pen,lty, over ,nd ,bove te p,yment oI compounded
interest? UPB itselI must ,ve re,lized tis, ,s it g,ve us , s,mple comput,tion oI te spouses
Beluso`s oblig,tion iI bot te interest ,nd te pen,lty c,rge ,re reduced to 12.

As reg,rds te ,ttorney`s Iees, te spouses Beluso c,n ,ctu,lly be li,ble tereIor even iI
tere ,d been no dem,nd. Filing , c,se in court is te judici,l dem,nd reIerred to in Article
1169
32|32|
oI te ivil ode, wic would put te obligor in del,y.

Te RT, owever, ,lso eld UPB li,ble Ior ,ttorney`s Iees in tis c,se, ,s te spouses
Beluso were Iorced to litig,te te issue on te illeg,lity oI te interest r,te provision oI te
promissory notes. Te ,w,rd oI ,ttorney`s Iees, it must be rec,lled, I,lls under te sound
discretion oI te court.
33|33|
Since bot p,rties were Iorced to litig,te to protect teir respective
rigts, ,nd bot ,re entitled to te ,w,rd oI ,ttorney`s Iees Irom te oter, pr,ctic,l re,sons
dict,te t,t we set oII or compens,te bot p,rties` li,bilities Ior ,ttorney`s Iees. TereIore,
inste,d oI ,w,rding ,ttorney`s Iees in I,vor oI petitioner, we s,ll merely ,IIirm te deletion oI
te ,w,rd oI ,ttorney`s Iees to te spouses Beluso.

In sum, we old t,t spouses Beluso sould still be eld li,ble Ior , compounded leg,l
interest oI 12 per ,nnum ,nd , pen,lty c,rge oI 12 per ,nnum. We ,lso old t,t, inste,d oI

,w,rding ,ttorney`s Iees in I,vor oI petitioner, we s,ll merely ,IIirm te deletion oI te ,w,rd
oI ,ttorney`s Iees to te spouses Beluso.

Annulment of the Foreclosure Sale

Properties oI spouses Beluso ,d been Ioreclosed, titles to wic ,d ,lre,dy been
consolid,ted on 19 Febru,ry 2001 ,nd 20 M,rc 2001 in te n,me oI UPB, ,s te spouses
Beluso I,iled to eercise teir rigt oI redemption wic epired on 25 M,rc 2000. Te RT,
owever, ,nnulled te Ioreclosure oI mortg,ge b,sed on ,n ,lleged incorrect comput,tion oI te
spouses Beluso`s indebtedness.

UPB ,lleges t,t none oI te grounds Ior te ,nnulment oI , Ioreclosure s,le ,re present
in te c,se ,t b,r. Furtermore, te ,nnulment oI te Ioreclosure proceedings ,nd te certiIic,tes
oI s,le were mooted by te subsequent issu,nce oI new certiIic,tes oI title in te n,me oI s,id
b,nk. UPB cl,ims t,t te spouses Beluso`s ,ction Ior ,nnulment oI Ioreclosure constitutes ,
coll,ter,l ,tt,ck on its certiIic,tes oI title, ,n ,ct proscribed by Section 48 oI Presidenti,l Decree
No. 1529, oterwise known ,s te Property Registr,tion Decree, wic provides:

Section 48. Certificate not su-ect to collateral attack. A certiIic,te oI
title s,ll not be subject to coll,ter,l ,tt,ck. It c,nnot be ,ltered, modiIied or
c,ncelled ecept in , direct proceeding in ,ccord,nce wit l,w.


Te spouses Beluso retort t,t since tey ,d te rigt to reIuse p,yment oI ,n ecessive
dem,nd on teir ,ccount, tey c,nnot be s,id to be in deI,ult Ior reIusing to p,y te s,me.
onsequently, ,ccording to te spouses Beluso, te 'enIorcement oI suc illeg,l ,nd
overc,rged dem,nd troug Ioreclosure oI mortg,ge sould be voided.

We ,gree wit UPB ,nd ,IIirm te v,lidity oI te Ioreclosure proceedings. Since we
,lre,dy Iound t,t , v,lid dem,nd w,s m,de by UPB upon te spouses Beluso, despite being
ecessive, te spouses Beluso ,re considered in deI,ult wit respect to te proper ,mount oI teir
oblig,tion to UPB ,nd, tus, te property tey mortg,ged to secure suc ,mounts m,y be
Ioreclosed. onsequently, proceeds oI te Ioreclosure s,le sould be ,pplied to te etent oI te
,mounts to wic UPB is rigtIully entitled.

As ,rgued by UPB, none oI te grounds Ior te ,nnulment oI , Ioreclosure s,le ,re
present in tis c,se. Te grounds Ior te proper ,nnulment oI te Ioreclosure s,le ,re te
Iollowing: (1 t,t tere w,s Ir,ud, collusion, ,ccident, mutu,l mist,ke, bre,c oI trust or
misconduct by te purc,ser; (2 t,t te s,le ,d not been I,irly ,nd regul,rly conducted; or (3
t,t te price w,s in,dequ,te ,nd te in,dequ,cy w,s so gre,t ,s to sock te conscience oI te
court.
34|34|




Liability for Violation of Truth in Lending Act

Te RT, ,IIirmed by te ourt oI Appe,ls, imposed , Iine oI P26,000.00 Ior UPB`s
,lleged viol,tion oI Republic Act No. 3765, oterwise known ,s te Trut in Lending Act.

UPB c,llenges tis imposition, on te ,rgument t,t Section 6(, oI te Trut in
Lending Act wic m,nd,tes te Iiling oI ,n ,ction to recover suc pen,lty must be m,de under
te Iollowing circumst,nces:

Section 6. (, Any creditor wo in connection wit ,ny credit tr,ns,ction
I,ils to disclose to ,ny person ,ny inIorm,tion in viol,tion oI tis Act or ,ny
regul,tion issued tereunder s,ll be li,ble to suc person in te ,mount oI P100
or in ,n ,mount equ,l to twice te Iin,nce c,rge required by suc creditor in
connection wit suc tr,ns,ction, wicever is gre,ter, ecept t,t suc li,bility
s,ll not eceed P2,000 on ,ny credit tr,ns,ction. Action to recover such
penalty may be brought by such person within one year from the date of the
occurrence of the violation, in any court of competent jurisdiction.
(Emp,sis ours.

According to UPB, te ourt oI Appe,ls even st,ted t,t '|,|dmittedly te origin,l

compl,int did not eplicitly ,llege , viol,tion oI te Trut in Lending Act` ,nd no ,ction to
Iorm,lly ,dmit te ,mended petition |wic epressly ,lleges viol,tion oI te Trut in Lending
Act| w,s m,de eiter by |respondents| spouses Beluso ,nd te lower court. .
35|35|


UPB Iurter cl,ims t,t te ,ction to recover te pen,lty Ior te viol,tion oI te Trut
in Lending Act ,d been b,rred by te one-ye,r prescriptive period provided Ior in te Act.
UPB ,sserts t,t per te records oI te c,se, te l,test oI te subject promissory notes ,d been
eecuted on 2 J,nu,ry 1998, but te origin,l petition oI te spouses Beluso w,s Iiled beIore te
RT on 9 Febru,ry 1999, wic w,s ,Iter te epir,tion oI te period to Iile te s,me on 2
J,nu,ry 1999.

On te m,tter oI ,lleg,tion oI te viol,tion oI te Trut in Lending Act, te ourt oI
Appe,ls ruled:

Admittedly te origin,l compl,int did not eplicitly ,llege , viol,tion oI
te Trut in Lending Act` ,nd no ,ction to Iorm,lly ,dmit te ,mended petition
w,s m,de eiter by |respondents| spouses Beluso ,nd te lower court. In suc
tr,ns,ctions, te debtor ,nd te lending institutions do not de,l on ,n equ,l
Iooting ,nd tis l,w w,s intended to protect te public Irom idden or undisclosed
c,rges on teir lo,n oblig,tions, requiring , Iull disclosure tereoI by te lender.
We Iind t,t its inIringement m,y be inIerred or implied Irom ,lleg,tions t,t
wen |respondents| spouses Beluso eecuted te promissory notes, te interest
r,te c,rge,ble tereon were leIt bl,nk. Tus, |petitioner| UPB I,iled to
disc,rge its duty to disclose in Iull to |respondents| Spouses Beluso te c,rges
,pplic,ble on teir lo,ns.
36|36|



We ,gree wit te ourt oI Appe,ls. Te ,lleg,tions in te compl,int, muc more t,n
te title tereoI, ,re controlling. Oter t,n t,t st,ted by te ourt oI Appe,ls, we Iind t,t te
,lleg,tion oI viol,tion oI te Trut in Lending Act c,n ,lso be inIerred Irom te s,me ,lleg,tion
in te compl,int we discussed e,rlier:

b. In unil,ter,lly imposing ,n incre,sed interest r,tes (sic respondent
b,nk ,s relied on te provision oI teir promissory note gr,nting respondent
b,nk te power to unil,ter,lly Ii te interest r,tes, wic r,te w,s not determined
in te promissory note but w,s leIt solely to te will oI te Br,nc e,d oI te
respondent B,nk, .
37|37|



Te ,lleg,tion t,t te promissory notes gr,nt UPB te power to unil,ter,lly Ii te
interest r,tes cert,inly ,lso me,ns t,t te promissory notes do not cont,in , 'cle,r st,tement in
writing oI '(6 te Iin,nce c,rge epressed in terms oI pesos ,nd cent,vos; ,nd (7 te
percent,ge t,t te Iin,nce c,rge be,rs to te ,mount to be Iin,nced epressed ,s , simple
,nnu,l r,te on te outst,nding unp,id b,l,nce oI te oblig,tion.
38|38|
Furtermore, te spouses
Beluso`s pr,yer 'Ior suc oter relieIs just ,nd equit,ble in te premises sould be deemed to
include te civil pen,lty provided Ior in Section 6(, oI te Trut in Lending Act.

UPB`s contention t,t tis ,ction to recover te pen,lty Ior te viol,tion oI te Trut in
Lending Act ,s ,lre,dy prescribed is likewise witout merit. Te pen,lty Ior te viol,tion oI te
,ct is P100 or ,n ,mount equ,l to twice te finance carge required -y suc creditor in
connection wit suc tr,ns,ction, wicever is gre,ter, ecept t,t suc li,bility s,ll not eceed
P2,000.00 on ,ny credit tr,ns,ction.
39|39|
As tis pen,lty depends on te finance carge required
of te -orrower, te borrower`s c,use oI ,ction would only ,ccrue wen suc Iin,nce c,rge is
required. In te c,se ,t b,r, te d,te oI te dem,nd Ior p,yment oI te Iin,nce c,rge is 2
September 1998, wile te Ioreclosure w,s m,de on 28 December 1998. Te Iiling oI te c,se
on 9 Febru,ry 1999 is tereIore witin te one-ye,r prescriptive period.

UPB ,rgues t,t , viol,tion oI te Trut in Lending Act, being , crimin,l oIIense,
c,nnot be inIerred nor implied Irom te ,lleg,tions m,de in te compl,int.
40|40|
Pertinent
provisions oI te Act re,d:

Sec. 6. (, Any creditor wo in connection wit ,ny credit tr,ns,ction
I,ils to disclose to ,ny person ,ny inIorm,tion in viol,tion oI tis Act or ,ny
regul,tion issued tereunder s,ll be li,ble to suc person in te ,mount oI P100
or in ,n ,mount equ,l to twice te Iin,nce c,rge required by suc creditor in
connection wit suc tr,ns,ction, wicever is te gre,ter, ecept t,t suc
li,bility s,ll not eceed P2,000 on ,ny credit tr,ns,ction. Action to recover suc
pen,lty m,y be brougt by suc person witin one ye,r Irom te d,te oI te
occurrence oI te viol,tion, in ,ny court oI competent jurisdiction. In ,ny ,ction
under tis subsection in wic ,ny person is entitled to , recovery, te creditor
s,ll be li,ble Ior re,son,ble ,ttorney`s Iees ,nd court costs ,s determined by te
court.



(c Any person wo willIully viol,tes ,ny provision oI
tis Act or ,ny regul,tion issued tereunder s,ll be Iined by not less t,n P1,000
or more t,n P5,000 or imprisonment Ior not less t,n 6 monts, nor more t,n
one ye,r or bot.


As c,n be gle,ned Irom Section 6(, ,nd (c oI te Trut in Lending Act, te viol,tion oI te s,id
Act gives rise to bot crimin,l ,nd civil li,bilities. Section 6(c considers , crimin,l oIIense te
willIul viol,tion oI te Act, imposing te pen,lty tereIor oI Iine, imprisonment or bot. Section
6(,, on te oter ,nd, cle,rly provides Ior , civil c,use oI ,ction Ior I,ilure to disclose ,ny
inIorm,tion oI te required inIorm,tion to ,ny person in viol,tion oI te Act. Te pen,lty
tereIor is ,n ,mount oI P100 or in ,n ,mount equ,l to twice te Iin,nce c,rge required by te
creditor in connection wit suc tr,ns,ction, wicever is gre,ter, ecept t,t te li,bility s,ll
not eceed P2,000.00 on ,ny credit tr,ns,ction. Te ,ction to recover suc pen,lty m,y be
instituted by te ,ggrieved priv,te person sep,r,tely ,nd independently Irom te crimin,l c,se
Ior te s,me oIIense.

In te c,se ,t b,r, tereIore, te civil ,ction to recover te pen,lty under Section 6(, oI
te Trut in Lending Act ,d been jointly instituted wit (1 te ,ction to decl,re te interests in
te promissory notes void, ,nd (2 te ,ction to decl,re te Ioreclosure void. Tis joinder is
,llowed under Rule 2, Section 5 oI te Rules oI ourt, wic provides:

SE. 5. Joinder of causes of action.A p,rty m,y in one ple,ding ,ssert,
in te ,ltern,tive or oterwise, ,s m,ny c,uses oI ,ction ,s e m,y ,ve ,g,inst
,n opposing p,rty, subject to te Iollowing conditions:
(, Te p,rty joining te c,uses oI ,ction s,ll comply wit te rules
on joinder oI p,rties;
(b Te joinder s,ll not include speci,l civil ,ctions or ,ctions
governed by speci,l rules;
(c Were te c,uses oI ,ction ,re between te s,me p,rties but pert,in
to diIIerent venues or jurisdictions, te joinder m,y be ,llowed in te Region,l
Tri,l ourt provided one oI te c,uses oI ,ction I,lls witin te jurisdiction oI
s,id court ,nd te venue lies terein; ,nd
(d Were te cl,ims in ,ll te c,uses oI ,ction ,re princip,lly Ior
recovery oI money, te ,ggreg,te ,mount cl,imed s,ll be te test oI jurisdiction.


In ,tt,cking te RT`s disposition on te viol,tion oI te Trut in Lending Act since te
s,me w,s not ,lleged in te compl,int, UPB is ,ctu,lly ,sserting , viol,tion oI due process.
Indeed, due process m,nd,tes t,t , deIend,nt sould be suIIiciently ,pprised oI te m,tters e
or se would be deIending imselI or erselI ,g,inst. owever, in te 1 July 1999 pre-tri,l brieI
Iiled by te spouses Beluso beIore te RT, te cl,im Ior civil s,nctions Ior viol,tion oI te
Trut in Lending Act w,s epressly ,lleged, tus:

Moreover, since Irom te st,rt, respondent b,nk viol,ted te Trut in Lending Act
in not inIorming te borrower in writing beIore te eecution oI te Promissory
Notes oI te interest r,te epressed ,s , percent,ge oI te tot,l lo,n, te
respondent b,nk inste,d is li,ble to p,y petitioners double te ,mount te b,nk is
c,rging petitioners by w,y oI s,nction Ior its viol,tion.
41|41|



In te s,me pre-tri,l brieI, te spouses Beluso ,lso epressly r,ised te Iollowing issue:

b. Does te epression indic,tive r,te oI DBD ret,il (sic comply wit te
Trut in Lending Act provision to epress te interest r,te ,s , simple ,nnu,l
percent,ge oI te lo,n?
42|42|



Tese ,ssertions ,re so cle,r ,nd unequivoc,l t,t ,ny ,ttempt oI UPB to Ieign
ignor,nce oI te ,ssertion oI tis issue in tis c,se ,s to prevent it Irom putting up , deIense
tereto is pl,inly ogw,s.

Petitioner Iurter posits t,t it is te Metropolit,n Tri,l ourt wic ,s jurisdiction to
try ,nd ,djudic,te te ,lleged viol,tion oI te Trut in Lending Act, considering t,t te present
,ction ,llegedly involved , single credit tr,ns,ction ,s tere w,s only one Promissory Note Line.

We dis,gree. We ,ve ,lre,dy ruled t,t te ,ction to recover te pen,lty under Section
6(, oI te Trut in Lending Act ,d been jointly instituted wit (1 te ,ction to decl,re te
interests in te promissory notes void, ,nd (2 te ,ction to decl,re te Ioreclosure void. Tere
,d been no question t,t te ,bove ,ctions belong to te jurisdiction oI te RT. Subsection (c
oI te ,bove-quoted Section 5 oI te Rules oI ourt on Joinder oI ,uses oI Action provides:

(c Were te c,uses oI ,ction ,re between te s,me p,rties but pert,in to
diIIerent venues or jurisdictions, te joinder m,y be ,llowed in te Region,l Tri,l
ourt provided one oI te c,uses oI ,ction I,lls witin te jurisdiction oI s,id
court ,nd te venue lies terein.


Furtermore, opening , credit line does not cre,te , credit tr,ns,ction oI lo,n or 2utuu2,
since te Iormer is merely , prep,r,tory contr,ct to te contr,ct oI lo,n or 2utuu2. Under suc
credit line, te b,nk is merely obliged, Ior te consider,tions speciIied tereIor, to lend to te
oter p,rty ,mounts not eceeding te limit provided. Te credit tr,ns,ction tus occurred not
wen te credit line w,s opened, but r,ter wen te credit line w,s ,v,iled oI. In te c,se ,t b,r,
te viol,tion oI te Trut in Lending Act ,llegedly occurred not wen te p,rties eecuted te

redit Agreement, were no interest r,te w,s mentioned, but wen te p,rties eecuted te
promissory notes, were te ,llegedly oIIending interest r,te w,s stipul,ted.

UPB Iurter ,rgues t,t since te spouses Beluso were duly given copies oI te subject
promissory notes ,Iter teir eecution, ten tey were duly notiIied oI te terms tereoI, in
subst,nti,l compli,nce wit te Trut in Lending Act.

Once more, we dis,gree. Section 4 oI te Trut in Lending Act cle,rly provides t,t te
disclosure st,tement must be Iurnised prior to te consumm,tion oI te tr,ns,ction:

SE. 4. Any creditor s,ll Iurnis to e,c person to wom credit is
etended, prior to the consummation of the transaction, , cle,r st,tement in
writing setting Iort, to te etent ,pplic,ble ,nd in ,ccord,nce wit rules ,nd
regul,tions prescribed by te Bo,rd, te Iollowing inIorm,tion:

(1 te c,s price or delivered price oI te property or service to be
,cquired;

(2 te ,mounts, iI ,ny, to be credited ,s down p,yment ,nd/or tr,de-in;

(3 te diIIerence between te ,mounts set Iort under cl,uses (1 ,nd (2

(4 te c,rges, individu,lly itemized, wic ,re p,id or to be p,id by suc
person in connection wit te tr,ns,ction but wic ,re not incident to
te etension oI credit;

(5 te tot,l ,mount to be Iin,nced;

(6 te Iin,nce c,rge epressed in terms oI pesos ,nd cent,vos; ,nd

(7 te percent,ge t,t te Iin,nce be,rs to te tot,l ,mount to be Iin,nced
epressed ,s , simple ,nnu,l r,te on te outst,nding unp,id b,l,nce oI
te oblig,tion.


Te r,tion,le oI tis provision is to protect users oI credit Irom , l,ck oI ,w,reness oI te
true cost tereoI, proceeding Irom te eperience t,t b,nks ,re ,ble to conce,l suc true cost by
idden c,rges, uncert,inty oI interest r,tes, deduction oI interests Irom te lo,ned ,mount, ,nd
te like. Te l,w tereby seeks to protect debtors by permitting tem to Iully ,ppreci,te te true
cost oI teir lo,n, to en,ble tem to give Iull consent to te contr,ct, ,nd to properly ev,lu,te
teir options in ,rriving ,t business decisions. Upolding UPB`s cl,im oI subst,nti,l
compli,nce would deIe,t tese purposes oI te Trut in Lending Act. Te bel,ted discovery oI
te true cost oI credit will too oIten not be ,ble to reverse te ill eIIects oI ,n ,lre,dy
consumm,ted business decision.

In ,ddition, te promissory notes, te copies oI wic were presented to te spouses
Beluso ,Iter eecution, ,re not suIIicient notiIic,tion Irom UPB. As e,rlier discussed, te
interest r,te provision terein does not suIIiciently indic,te wit p,rticul,rity te interest r,te to
be ,pplied to te lo,n covered by s,id promissory notes.

Forum Shopping

UPB ,d e,rlier moved to dismiss te petition (origin,lly ,se No. 99-314 in RT,
M,k,ti ity on te ground t,t te spouses Beluso instituted ,noter c,se (ivil ,se No. '-
7227 beIore te RT oI Ro,s ity, involving te s,me p,rties ,nd issues. UPB cl,ims t,t
wile ivil ,se No. '-7227 initi,lly ,ppe,rs to be , diIIerent ,ction, ,s it pr,yed Ior te
issu,nce oI , tempor,ry restr,ining order ,nd/or injunction to stop Ioreclosure oI spouses
Beluso`s properties, it poses issues wic ,re simil,r to tose oI te present c,se.
43|43|
To prove
its point, UPB cited te spouses Beluso`s Amended Petition in ivil ,se No. '-7227, wic
cont,ins simil,r ,lleg,tions ,s tose in te present c,se. Te RT oI M,k,ti denied UPB`s
Motion to Dismiss ,se No. 99-314 Ior l,ck oI merit. Petitioner UPB r,ised te s,me issue
wit te ourt oI Appe,ls, ,nd is r,ising te s,me issue wit us now.

Te spouses Beluso cl,im t,t te issue in ivil ,se No. '-7227 beIore te RT oI
Ro,s ity, , Petition Ior Injunction Ag,inst Foreclosure, is te propriety oI te Ioreclosure
beIore te true ,ccount oI spouses Beluso is determined. On te oter ,nd, te issue in ,se No.
99-314 beIore te RT oI M,k,ti ity is te v,lidity oI te interest r,te provision. Te spouses
Beluso cl,im t,t ivil ,se No. '-7227 ,s become moot bec,use, beIore te RT oI Ro,s

ity could ,ct on te restr,ining order, UPB proceeded wit te Ioreclosure ,nd ,uction s,le.
As te ,ct sougt to be restr,ined by ivil ,se No. '-7227 ,s ,lre,dy been ,ccomplised, te
spouses Beluso ,d to Iile , diIIerent ,ction, t,t oI Annulment oI te Foreclosure S,le, ,se
No. 99-314 wit te RT, M,k,ti ity.

Even iI we ,ssume Ior te s,ke oI ,rgument, owever, t,t only one c,use oI ,ction is
involved in te two civil ,ctions, n,mely, te viol,tion oI te rigt oI te spouses Beluso not to
,ve teir property Ioreclosed Ior ,n ,mount tey do not owe, te Rules oI ourt neverteless
,llows te Iiling oI te second ,ction. ivil ,se No. '-7227 w,s dismissed by te RT oI
Ro,s ity beIore te Iiling oI ,se No. 99-314 wit te RT oI M,k,ti ity, since te venue oI
litig,tion ,s provided Ior in te redit Agreement is in M,k,ti ity.

Rule 16, Section 5 b,rs te reIiling oI ,n ,ction previously dismissed only in te
Iollowing inst,nces:

SE. 5. ffect of dis2issal.Subject to te rigt oI ,ppe,l, ,n order
gr,nting , motion to dismiss b,sed on p,r,gr,ps (I, ( ,nd (i oI section 1
ereoI s,ll b,r te reIiling oI te s,me ,ction or cl,im. (n

Improper venue ,s , ground Ior te dismiss,l oI ,n ,ction is Iound in p,r,gr,p (c oI
Section 1, not in p,r,gr,ps (I, ( ,nd (i:

SETION 1. rounds.Witin te time Ior but beIore Iiling te ,nswer
to te compl,int or ple,ding ,sserting , cl,im, , motion to dismiss m,y be m,de
on ,ny oI te Iollowing grounds:

(, T,t te court ,s no jurisdiction over te person oI te deIending
p,rty;

(b T,t te court ,s no jurisdiction over te subject m,tter oI te cl,im;

(c) 1hat venue is improperly laid;

(d T,t te pl,intiII ,s no leg,l c,p,city to sue;

(e T,t tere is ,noter ,ction pending between te s,me p,rties Ior te
s,me c,use;

(f) 1hat the cause of action is barred by a prior judgment or by the
statute of limitations;

(g T,t te ple,ding ,sserting te cl,im st,tes no c,use oI ,ction;

(h) 1hat the claim or demand set forth in the plaintiff's pleading has
been paid, waived, abandoned, or otherwise extinguished;

(i) 1hat the claim on which the action is founded is unenforceable
under the provisions of the statute of frauds; ,nd

(j T,t , condition precedent Ior Iiling te cl,im ,s not been complied
wit.
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(Emp,ses supplied.


Wen ,n ,ction is dismissed on te motion oI te oter p,rty, it is only wen te ground
Ior te dismiss,l oI ,n ,ction is Iound in p,r,gr,ps (I, ( ,nd (i t,t te ,ction c,nnot be
reIiled. As reg,rds ,ll te oter grounds, te compl,in,nt is ,llowed to Iile s,me ,ction, but
sould t,ke c,re t,t, tis time, it is Iiled wit te proper court or ,Iter te ,ccomplisment oI te
erstwile ,bsent condition precedent, ,s te c,se m,y be.

UPB, owever, brings to te ,ttention oI tis ourt , Motion Ior Reconsider,tion Iiled
by te spouses Beluso on 15 J,nu,ry 1999wit te RT oI Ro,s ity, wic Motion ,d not
yet been ruled upon wen te spouses Beluso Iiled ivil ,se No. 99-314 wit te RT oI
M,k,ti. ence, tere were ,llegedly two pending ,ctions between te s,me p,rties on te s,me
issue ,t te time oI te Iiling oI ivil ,se No. 99-314 on 9 Febru,ry 1999 wit te RT oI
M,k,ti. Tis will still not c,nge our Iindings. It is indeed te gener,l rule t,t in c,ses were
tere ,re two pending ,ctions between te s,me p,rties on te s,me issue, it sould be te l,ter
c,se t,t sould be dismissed. owever, tis rule is not ,bsolute. According to tis ourt in
Allied Banking Corporation v. Court of Appeals
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:

In tese c,ses, it is evident t,t te Iirst ,ction w,s Iiled in ,nticip,tion oI

te Iiling oI te l,ter ,ction ,nd te purpose is to preempt te l,ter suit or provide
, b,sis Ior seeking te dismiss,l oI te second ,ction.

Even if this is not the purpose for the filing of the first action, it may
nevertheless be dismissed if the later action is the more appropriate vehicle
for the ventilation of the issues between the parties. Tus, in #a2os v. !eralta,
it w,s eld:

|T|e rule on litis pendenti, does not require t,t te l,ter
c,se sould yield to te e,rlier c,se. W,t is required merely is t,t
tere be ,noter pending ,ction, not , prior pending ,ction.
onsidering te bro,der scope oI inquiry involved in ivil ,se
No. 4102 ,nd te loc,tion oI te property involved, no error w,s
committed by te lower court in deIerring to te B,t,,n court's
jurisdiction.

Given, tereIore, te pendency oI two ,ctions, te Iollowing ,re te
relev,nt consider,tions in determining wic ,ction sould be dismissed: (1 te
d,te oI Iiling, wit preIerence gener,lly given to te Iirst ,ction Iiled to be
ret,ined; (2 weter te ,ction sougt to be dismissed w,s Iiled merely to
preempt te l,ter ,ction or to ,nticip,te its Iiling ,nd l,y te b,sis Ior its
dismiss,l; ,nd (3 weter te ,ction is te ,ppropri,te veicle Ior litig,ting te
issues between te p,rties.


In te c,se ,t b,r, ivil ,se No. '-7227 beIore te RT oI Ro,s ity w,s ,n ,ction
Ior injunction ,g,inst , Ioreclosure s,le t,t ,s ,lre,dy been eld, wile ivil ,se No. 99-314
beIore te RT oI M,k,ti ity includes ,n ,ction Ior te ,nnulment oI s,id Ioreclosure, ,n
,ction cert,inly more proper in view oI te eecution oI te Ioreclosure s,le. Te Iormer c,se
w,s improperly Iiled in Ro,s ity, wile te l,tter w,s Iiled in M,k,ti ity, te proper venue oI
te ,ction ,s m,nd,ted by te redit Agreement. It is evident, tereIore, t,t ivil ,se No. 99-
314 is te more ,ppropri,te veicle Ior litig,ting te issues between te p,rties, ,s comp,red to
ivil ,se No. '-7227. Tus, we rule t,t te RT oI M,k,ti ity w,s not in error in not
dismissing ivil ,se No. 99-314.

HEREFORE, te Decision oI te ourt oI Appe,ls is ereby AFFIRMED wit te
Iollowing MODIFICATIONS:

1. In ,ddition to te sum oI P2,350,000.00 ,s determined by te courts a quo,
respondent spouses S,muel ,nd Odette Beluso ,re ,lso li,ble Ior te Iollowing
,mounts:
,. Pen,lty oI 12 per ,nnum on te ,mount due
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Irom te d,te oI dem,nd;
,nd
b. ompounded leg,l interest oI 12 per ,nnum on te ,mount due
47|47|
Irom d,te
oI dem,nd;
2. Te Iollowing ,mounts s,ll be deducted Irom te li,bility oI te spouses S,muel
,nd Odette Beluso:
,. P,yments m,de by te spouses in te ,mount oI P763,692.00. Tese
p,yments s,ll be ,pplied to the date of actual payment oI te Iollowing in
te order t,t tey ,re listed, to wit:
i. pen,lty c,rges due ,nd dem,nd,ble ,s oI te time oI p,yment;
ii. interest due ,nd dem,nd,ble ,s oI te time oI p,yment;
iii. princip,l ,mortiz,tion/p,yment in ,rre,rs ,s oI te time oI p,yment;
iv. outst,nding b,l,nce.
b. Pen,lty under Republic Act No. 3765 in te ,mount oI P26,000.00. Tis
,mount s,ll be deducted Irom te li,bility oI te spouses S,muel ,nd Odette
Beluso on 9 February 1999 to te Iollowing in te order t,t tey ,re listed,
to wit:
i. pen,lty c,rges due ,nd dem,nd,ble ,s oI time oI p,yment;
ii. interest due ,nd dem,nd,ble ,s oI te time oI p,yment;
iii. princip,l ,mortiz,tion/p,yment in ,rre,rs ,s oI te time oI p,yment;
iv. outst,nding b,l,nce.
3. Te Ioreclosure oI mortg,ge is ereby decl,red 'ALID. onsequently, te
,mounts wic te Region,l Tri,l ourt ,nd te ourt oI Appe,ls ordered
respondents to p,y, ,s modiIied in tis Decision, s,ll be deducted Irom te
proceeds oI te Ioreclosure s,le.