Estanislao v. China Banking Corporation

REYES, J.:

Before this Court is a Petition for Review on Certiorari1 of the Decision2 dated May 19, 2010 of the Court of Appeals (CA) in CA-G.R. CV. No. 66274 modifying the Decision3 dated July 30, 1999 of the Regional Trial Court (RTC) of San Fernando City, Pampanga, Branch 45 for Sum of Money in Civil Case No. 11708. Factual Antecedents On February 19, 1990, the spouses Danilo and Magdalena Manalastas (spouses Manalastas) executed a Real Estate Mortgage (REM)4 in favor of respondent China Banking Corporation (Chinabank) over two real estate properties covered by Transfer Certificate of Title Nos. 173532-R and 173533-R, Registry of Deeds of Pampanga, to secure a loan from Chinabank of ₱700,000.00 intended as working capital in their rice milling business.

During the next few years, they executed several amendments to the mortgage contract progressively increasing their credit line secured by the aforesaid mortgage. Thus, from ₱700,000.00 in 1990, their loan limit was increased to ₱1,140,000.00 on October 31, 1990, then to ₱1,300,000.00 on March 4, 1991, and then to2,450,000.00 on March 23, 1994.5 The spouses Manalastas executed several promissory notes (PNs) in favor of Chinabank. In two of the PNs, petitioners Estanislao and Africa Sinamban (spouses Sinamban) signed as co-makers.

On November 18, 1998, Chinabank filed a Complaint6 for sum of money, docketed as Civil Case No. 11708, against the spouses Manalastas and the spouses Sinamban (collectively called the defendants) before the RTC. The complaint alleged that they reneged on their loan obligations under the PNs which the spouses Manalastas executed in favor of Chinabank on different dates, namely: 1. PN No. OACL 634-95, dated April 24, 1995, for a loan principal of ₱1,800,000.00, with interest at 23% per annum; the spouses Manalastas signed alone as makers.7 2.

PN No. OACL 636-95, dated May 23, 1995, for a loan principal of 325,000.00, with interest at 21% per annum; the spouses Sinamban signed as solidary co-makers;8 3. PN No. CLF 5-93, dated February 26, 1991, for a loan principal of ₱1,300,000.00, with interest at 22.5% per annum; only Estanislao Sinamban signed as solidary co-maker.9 All of the three promissory notes carried an acceleration clause stating that if the borrowers failed to pay any stipulated interest, installment or loan amortization as they accrued, the notes shall, at the option of Chinabank and without need of notice, immediately become due and demandable. A penalty clause also provides that an additional amount shall be paid equivalent to 1/10 of 1% per day of the total amount due from date of default until fully paid, and the further sum of 10% of the total amount due, inclusive of interests, charges and penalties, as and for attorney's fees and costs.10 In Chinabank's Statement of Account11 dated May 18, 1998, reproduced below, the outstanding balances of the three loans are broken down, as follows: (a) PN No. OACL 636-95 has an outstanding principal of ₱325,000.00, cumulative interest of ₱184,679.00, and cumulative penalties of ₱258,050.00, or a total amount due of ₱767,729.00; (b) PN No. OACL 634-95 has an outstanding principal of ₱1,800,000.00, cumulative interest of ₱1,035,787.50, and cumulative penalties of 1,429,200.00, or a total amount due of 4,264,987.50; and (c) PN No. CLF 5-93 has an outstanding principal of ₱148,255.08, cumulative interest of ₱64,461.84, and cumulative penalties of ₱156,541.58, or a total amount due of ₱369,258.50.

Note that from the original amount of ₱1,300,000.00, the loan principal had been reduced to only ₱148,255.08 as of May 18, 1998.12 CHINA BANKING CORPORATION San Fernando, Pampanga SPS.

DANILO & MAGDALENA MANALASTAS STATEMENT OF ACCOUNT As of May 18, 1998 PN NUMBER PRINCIPAL INTEREST 36% PENALTY FEE TOTAL OACL 636-95 325,000.00 184,679.00 258,050.00 767,729.00 OACL 634-95 1,800,000.00 1,035,787.50 1,429,200.00 4,264,987.50 CLF 005-93 148,255.08 64,461.84 156,541.58 369,258.50 TOTAL P2,273,255.08 1,284,928.34 1,843,791.58 5,401,975.00 TOTAL AMOUNT DUE - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5,401,975.00 PLUS 10% ATTORNEY'S FEE - - - - - - - - - - - - - - - - - - - - - - - - - - 540,197.50 5,942,172.50 ADD: OTHER EXPENSES INSURANCE PREMIUM 22,618.37 POSTING OF NOTICE OF SALE 700.00 PUBLICATION FEE 17,500.00 REGISTRATION OF CERTIFICATE OF SALE (MISC.) 1,000.00 REGISTRATION OF CERTIFICATE OF SALE (REGISTER OF DEEDS) Registration fee 10,923.00 Entry fee 30.00 Legal fund 20.00 BIR certification 60.00 Doc. stamps tax 69,000.00 Capital Gains tax 276,000.00 356,033.00 EXPENSES INCURRED ON OCULAR INSPECTION MADE ON TCT#173532-R & TCT#173533-R 404.00 ATTORNEY'S FEE 18,000.00