Lent v. Court Of Appeals

MENDOZA, J.:

This is a petition for review of the decision 1 of the Court of Appeals affirming in toto the decision of the Regional Trial Court of Manila (Branch 149), ordering petitioners to pay private respondent the amount of P266,146.88 plus interest, service charge, penalty fees, and attorney's fees and the costs, otherwise the chattel mortgage given to secure payment of the loan would be foreclosed. The following are the facts: On May 10,1979, the parties in this case entered into a Loan Agreement with Assumption of Solidary Liability whereby petitioners were given a loan of P500,000.00 by private respondent. The contract provided for the payment of 12% annual interest, 2% monthly penalty, 1 1/2% monthly service charge, and 10% attorney's fees.

2 Denominated the first Industrial Guarantee and Loan Fund (IGLF), the loan was secured by a chattel mortgage on the printing machinery in petitioners' establishment. 3 Petitioners subsequently obtained a second IGLF loan of P300,000.00 evidenced by two promissory notes, dated July 3, 1981 and September 30, 1981. For this purpose, a new loan agreement 4 was entered into by the parties containing identical provisions as the first one, except as to the annual interest which was increased to 14% and the service charge which was reduced to 1% per annum.

The deed of chattel mortgage was amended correspondingly. 5 By April 2, 1985, petitioners had paid their first loan of P500,000.00. On November 4, 1985, private respondent was placed under receivership by the Central Bank and Ricardo Lirio and Cristina Destajo were appointed as receiver and in-house examiner, respectively.

On May 17, 1986, petitioners made a partial payment of P50,000.00 on the second loan. They later wrote private respondent a letter, dated June 18, 1986, proposing to settle their obligation. On July 2, 1986, private respondent, through its counsel, replied with a counter-offer, namely, that it would reduce the penalty charges up to P140,000.00, provided petitioners can pay their obligation on or before July 30, 1986.

6 As of July 31, 1986, petitioners' total liability to private respondent was P727,001.35, broken down as follows: 7 Principal - P295,469.47 Interest - 165,385.00 Penalties - 254,820.55 Service Charges - 11,326.33 TOTAL