De Las Llagas v. Philippine Savings Bank

FIRST DIVISION

[G.R. No. 254525. March 3, 2021.]

EUFROCINA I. DE LAS LLAGAS, petitioner,vs. PHILIPPINE SAVINGS BANK, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, First Division, issued a Resolution dated March 3, 2021which reads as follows:

"G.R. No. 254525 (Eufrocina I. De Las Llagas v. Philippine Savings Bank). — The petitioner's motion for an extension of thirty (30) days within which to file a petition for review on certiorari is GRANTED, counted from the expiration of the reglementary period.

For resolution is a Petition for Review on Certiorari1 under Rule 45, assailing the Decision 2 dated February 19, 2020 and the Resolution 3 dated November 19, 2020 of the Court of Appeals (CA) in CA-G.R. CV No. 112196. The CA affirmed with modification the Decision 4 dated October 17, 2018 of the Regional Trial Court (RTC) of Pasay City, Branch 108 in Civil Case No. R-PSY-10-03545-CV, finding Eufrocina I. De Las Llagas (petitioner) liable to pay a sum of money due under a promissory note, plus liquidated damages, attorney's fees, and legal interest.

Facts of the Case

The facts, as found by the CA, are not disputed.

Petitioner executed a Promissory Note with Chattel Mortgage dated May 20, 2009 promising to pay Car & Recreational Vehicles, Inc. (Dealer) the sum of P1,226,160.00, which was secured by a 2009 Nissan Urvan Escapade with Motor No. TD27-869212 and Serial No. TVP4LEFE24A37942. It was agreed that petitioner would pay a monthly installment of P25,545.00 beginning June 14, 2009 and every 14th day of every succeeding month with an interest rate of 21.25% per annum. 5

It was also stipulated that in case of breach or default and legal action is filed, the unpaid balance would be subject to a late penalty of 5% per month from due date until the entire obligation is paid, liquidated damages at the rate of 20%, and in case of litigation, attorney's fees at the rate of 25%. 6

Further, it was agreed that default in the payment of any installment or other charges due and/or other violations of the terms and conditions shall make the unpaid balance due and payable. It would also entitle the Dealer to obtain possession of the mortgaged vehicle for purposes of foreclosure. 7

The promissory note incorporates a Deed of Assignment where the Dealer assigned its rights and interest in the note to respondent Philippine Savings Bank (PSB). 8

Beginning January 14, 2010, petitioner failed to pay the monthly installments. In a letter dated March 15, 2010, PSB demanded payment of the outstanding balance of P1,026,106.69 or the surrender of the mortgaged vehicle to satisfy petitioner's obligation. Petitioner failed to do either. 9

On May 20, 2010, PSB filed a complaint against petitioner, praying that a writ of replevin be issued ordering the seizure of the mortgaged vehicle and that the same be delivered to PSB for purposes of foreclosure and satisfying petitioner's obligation. Alternatively, PSB prayed that if the vehicle cannot be recovered, petitioner be ordered to pay the principal amount of P1,026,106.69 plus all charges that have accrued until the same are fully paid. 10

In her Answer with Counterclaim, petitioner alleged that: (1) she never received the demand letter dated March 15, 2010; (2) that as the owner of the mortgaged vehicle, she cannot be ordered to surrender possession thereof; and (3) and that a certain Joshua Han, a Taiwanese national, borrowed the said vehicle but never returned it. She had reported the matter to the headquarters of the Philippine National Police-Highway Patrol Group, but the vehicle was never found. Because she does not know where the vehicle is, she argued that she could not be compelled to deliver the same to PSB. She prayed for the dismissal of the complaint and claimed attorney's fees. 11

Ruling of the Regional Trial Court

In a Decision 12 dated October 17, 2018, the RTC rendered judgment in favor of PSB as follows:

WHEREFORE, premises considered, judgment is hereby rendered ordering the defendant EUFROCINA ESPEJO SONDIA to pay plaintiff PHILIPPINE SAVINGS BANK the amount of P1,026,106.69 plus twelve (12%) interest per annum from the filing of the complaint until the same is fully paid.

SO ORDERED. 13

The RTC took special note of paragraph 18 of the Promissory Note, viz.:

Should the mortgaged property/ies be changed in form or in use, lost, destroyed, or damaged from any cause whatsoever, the MORTGAGEE or its assigns shall have the right to declare the whole amount of the principal and interest secured by this mortgage immediately due and payable and may at his option proceed at once to foreclose the mortgage, but if the MORTGAGOR shall give additional major substitute security to the satisfaction and approval of the MORTGAGEE or its assigns then and in that case the MORTGAGEE or its assigns may grant a reasonable extension of time to the MORTGAGOR for the payment of his obligation. The property/ies mortgaged shall be deemed lost to all intents and purposes if the MORTGAGOR shall fail to produce the same or any part thereof on demand by the MORTGAGEE or its assigns. 14

Because petitioner failed to produce the mortgage vehicle upon PSB's demand, the RTC ruled that she must pay the outstanding balance of P1,026,106.69 with 12% per annum interest until fully paid. 15

Petitioner appealed to the CA, 16 assigning only one error: that the RTC erred in imposing a 12% per annum interest rate. 17 Citing Advocates for Truth in Lending, Inc. v. Bangko Sentral Monetary Board18 and Nacar v. Gallery Frames, 19 she argued that the correct interest rate is 6% per annum, because the promissory note does not contain a stipulation for the "interest rates as to the indemnity arising from breach or delay in performance of obligations." 20

Ruling of the Court of Appeals

In its Decision 21 dated February 19, 2020, the CA affirmed the RTC's Decision, but adjusted the legal interest rate due on the promissory note and also added other monetary awards, viz.:

WHEREFORE, premises considered, the appeal is PARTLY GRANTED. The Decision dated October 17, 2018 of the Regional Trial Court, Branch 108, Pasay City, in Civil Case No. R-PSY-10-03545-CV, is MODIFIED in that the judgment shall now read, as follows:

WHEREFORE, premises considered, judgment is hereby rendered ordering the defendant-appellant EUFROCINA ESPEJO SONDIA to pay plaintiff-appellee PHILIPPINE SAVINGS BANK the following:

1. The amount of P1,026,106.69 plus the interest of 21.25% per annum, and penalty of 12% per annum from January 14, 2010, until June 30, 2013, and thereafter the legal rate of 6% per annum from July 1, 2013 until finality of this Decision;

2. 20% of the total deficiency claim by way of liquidated damages;

3. 10% of the total deficiency claim by way of attorney's fees;

4. The total monetary awards shall earn interest at the rate of 6% per annum, computed from the finality of the Decision until full satisfaction.

SO ORDERED. 22 (Emphasis and underscoring in the original).

The CA distinguished between monetary interest and compensatory interest. The former refers to the compensation fixed by the parties for the use or forbearance of money; while the latter refers to that which is imposed by law or the courts as penalty or indemnity for damages. The CA pointed out that the RTC had overlooked that the promissory note provided for a monetary interest of 21.25% per annum. Thus, the CA applied it to the principal amount due. 23

As regards compensatory interest, the CA set aside the late penalty of 5% per month (or 60% per annum) for being unconscionable. Imposed in its place is the legal interest rate 12% per annum from January 14, 2010, until June 30, 2013, and thereafter the legal rate of 6% per annum from July 1, 2013 until finality of the decision 24 in conformity to Our ruling in the case of Nacar v. Gallery Frames. 25

The CA also noted that the parties had agreed to liquidated damages equivalent to 20% of the amount due. 26

Meanwhile, the CA justified the award of attorney's fees on Article 2208 (2) and (5) of the Civil Code, finding petitioner to be in bad faith for plainly refusing PSB's claim, compelling the latter to incur expenses to protects its interest. The Promissory Note itself also contains a stipulation for attorney's fees pegged at 25% of the principal amount due. However, citing the case of Metropolitan Bank & Trust Company v. Chuy Lu Tan, 27 the CA reduced the rate of attorney's fees to 10%, holding that the 25% rate would be unreasonable considering that liquidated damages and a penalty charge have already been imposed. 28

Lastly, the CA imposed a 6% per annum interest rate on the total monetary awards from finality of decision until full satisfaction thereof, 29 citing United Alloy Philippines Corporation v. UCPB. 30

Petitioner filed a motion for reconsideration, but the same was denied. 31 Hence this petition.

Petitioner does not contest that she is liable to pay under the note, but maintains that it should only be P1,026,106.69 with 6% per annum interest from finality of judgment until fully paid. She argues that the CA should not have awarded the 21.25% per annum interest rate, attorney's fees, or 20% liquidated damages because they cannot be recovered in a suit for replevin, in which the sole issue is whether the plaintiff is entitled to the possession of personal property. She argues that they are only applicable if PSB had filed a foreclosure of mortgage or collection suit. Here, the complaint was one for replevin. Moreover, she argues that the monetary claims are excessive and unconscionable, thus, the CA should not have imposed them. 32

Petitioner also argues that the Promissory Note is a contract of adhesion which is void given the facts and circumstances of this case. Furthermore, she argues that PSB had no reason to litigate because as agreed by the parties, she acquired insurance for the mortgaged vehicle so that in case of loss of the vehicle, the insurance proceeds may be applied to the principal obligation of the mortgage. 33

PSB has not filed a comment, but the same is not necessary for the court to act on the petition. 34

Issues

The propriety of the CA's modifications to the RTC's decision hinges on the following issues:

1) whether PSB's complaint was in the nature of a simple replevin case or a collection suit/foreclosure of mortgage; and

2) whether under Section 8, Rule 51, the above issue may be adjudicated upon by the CA if it is closely related to petitioner's assigned error that the RTC erred in imposing a 12% per annum interest rate.

Ruling of the Court

The petition lacks merit. Nevertheless, the Court must modify the CA's ruling.

What determines the nature of the action and which court has jurisdiction over it are the allegations in the complaint and the character of the relief sought. 35 While PSB captioned the Complaint as one for "Recovery of Possession with Application for Preliminary Writ of Replevin with Alternative Prayer for Sum of Money," 36 a perusal of the material allegations therein shows that essentially it is for the recovery of the credit due under the promissory note either through the payment of a sum or the foreclosure of the chattel mortgage. PSB's complaint is clear that the reason it sought recovery of the possession of the property is because under the promissory note, petitioner has the obligation to deliver the same to the plaintiff for purposes of foreclosure or in the event that the mortgaged motor vehicle cannot be found, seized, and foreclosed, that the defendants be held liable to pay the amount of P1,026,106.69 plus all accruing charges. 37

Petitioner argues that it should be treated as one for replevin — not a collection case. Not only does the text of the complaint go against such a view, it would also result in a splitting of causes of action. In a loan secured by a mortgage, the creditor has a single cause of action — the recovery of the credit with execution upon the security. The creditor cannot split his single cause of action by filing a complaint on the loan, and thereafter another separate complaint for the foreclosure of the mortgage. 38 Thus, the complaint is in consonance with the prohibition against splitting of causes of action.

In light of the foregoing, We agree with the CA that petitioner's obligation under the promissory note consists in the payment of a sum of money. Thus, following Nacar v. Gallery Frames, 39 the legal interest ought to have been charged upon petitioner's obligation at the rate of 12% per annum (from date of demand until June 30, 2013) and 6% per annum (from July 1, 2013 and thereafter). This legal interest is distinct from the 21.25% monetary interest that the parties had agreed in the promissory note.

However, under Section 8, Rule 51 of the Rules of Court, 40 the CA cannot provide relief on matters that have not been raised on appeal. In Hiponia-Mayuga v. Metropolitan Bank and Trust Co., 41 We said:

As a general rule, the CA cannot consider errors on appeal unless stated in the assignment of errors in the appellant's brief. As an exception, however, even if a question is not raised in the assignment of errors, the same may still be adjudicated by the appellate court if the unraised issue or question is closely related or dependent to an assigned error. 42

Furthermore, We have held that the benefit of the rule cannot be applied to the appellee. 43 Thus, an appellee who has not himself appealed cannot obtain from the appellate court any affirmative relief other than those granted in the decision of the court below. 44 As to him, the judgment becomes immutable and unalterable and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law. 45

In this case, PSB did not appeal the trial court's judgment. In fact, in its appellee's brief, PSB prayed that petitioner's "[a]ppeal be dismissed for utter lack of merit and that the assailed Decision dated October 17, 2018 of the lower court be affirmed." 46 Despite this, the CA granted PSB additional reliefs which the RTC had not, i.e.: (1) the application of 21.25% monetary interest; (2) 20% of the total deficiency claim as liquidated damages; and (3) 10% as attorney's fees. The award of these reliefs was not a question that was explicitly brought on appeal by either party, because the only error petitioner had assigned was the proper legal interest rate to be applied. The CA may pass upon the propriety of awarding these reliefs only if: (1) they had been raised by the appellant; or (2) it is proven that they are closely related or dependent to an assigned error.

In this case, the additional reliefs were not issues raised on appeal by petitioner. Furthermore, there is no reason to believe that the award of monetary interest, liquidated damages, and attorney's fees are in any way related with or dependent on the proper legal interest rate to be applied. As such, the CA had gone beyond the scope of the appeal. These may be awarded if PSB had appealed and argued that they be imposed. It did not. As it stands, the RTC's judgment has become immutable and unalterable except with regard to the sole issue raised on appeal: the proper legal interest rate. As explained above and in accordance with our ruling in Nacar v. Gallery Frames, 47 the legal interest ought to have been charged upon petitioner's obligation at the rate of 12% per annum (from date of demand until June 30, 2013) and 6% per annum (from July 1, 2013 and thereafter).

WHEREFORE, the petition is DENIED. The Decision dated February 19, 2020 and the Resolution dated November 19, 2020 of the Court of Appeals in CA-G.R. CV No. 112196 are hereby AFFIRMED with MODIFICATION. The award of monetary interest of 21.25% per annum, liquidated damages, and attorney's fees are deleted.

Petitioner Eufrocina I. De Las Llagas is ORDERED to pay respondent Philippine Savings Bank the amount of P1,026,106.69 plus legal interest at the rate of 12% per annum from May 20, 2010 until June 30, 2013 and 6% per annum from July 1, 2013 until finality of this Resolution.

The total monetary award shall itself earn the legal interest rate of 6% per annum from finality of this Resolution until fully paid.

SO ORDERED."

By authority of the Court:

(SGD.) LIBRADA C. BUENADivision Clerk of Court

by:

MARIA TERESA B. SIBULODeputy Division Clerk of Court

 

Footnotes

1.Rollo, pp. 26-47.

2. Penned by Associate Justice Victoria Isabel A. Paredes with the concurrence of Associate Justices Mariflor P. Punzalan Castillo and Walter S. Ong; id. at 7-17.

3.Id. at 19-22.

4. Penned by Acting Presiding Judge Gina M. Bibat-Palamos; id. at 122-124.

5.Id. at 7-8.

6.Id. at 8.

7.Id.

8.Id.

9.Id.

10.Id. at 7, 9.

11.Id. at 9.

12.Supra note 4.

13.Rollo, p. 124.

14.Id. at 123.

15.Id. at 123-124.

16.Id. at 126.

17.Id. at 141-143.

18. 701 Phil. 483 (2013).

19. 716 Phil. 267 (2013).

20.Rollo, p. 143.

21.Supra note 2.

22.Rollo, pp. 61-62.

23.Id. at 55-60.

24.Id. at 58.

25.Supra note 19.

26.Rollo, p. 59.

27. 792 Phil. 70 (2016).

28.Rollo, p. 60.

29.Id. at 61.

30. 804 Phil. 423 (2017).

31.Supra note 3.

32.Rollo, pp. 34-43.

33.Id. at 43-46.

34. RULES OF COURT, Rule 45, Section 5.

35.Sps. Munsalud v. National Housing Authority, 595 Phil. 750, 764-765 (2008).

36.Rollo, p. 69.

37.Id. at 69-71.

38.Central Visayas Finance Corp. v. Spouses Adlawan, G.R. No. 212674, March 25, 2019.

39.Supra note 19.

40. Section 8. Questions that may be decided. — No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed from or the proceedings therein will be considered unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors.

41. 761 Phil. 521 (2015).

42.Id. at 530.

43.Id. at 531.

44.Id. at 529.

45.Id.

46.Rollo, p. 184.

47.Supra note 19.