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CREDIT TRANSACTIONS (Atty. Jazzie Sarona-Lozare)1ST EXAM COVERAGE COMPILATION OF CASES

1

USURY LAW

SOLIDBANK v. PERMANENT HOMES

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 171925 Ju! 2"# 2$1$

SOLIDBANK CORPORATION# %&o' M()*o+o,)-& B-&

-&/ T*u0) Co+-&!#Petitioner,

vs.

PERMANENT HOMES# INCORPORATED#Respondent.

D E C I S I O N

CARPIO# J.:

.R. No. !"!#$% is a petition for revie&! assailin' the

Decision$ pro(ul'ated on $# )une $**% b+ the Court of

ppeals -appellate court as &ell as the Resolution/

pro(ul'ated on !0 March $**1 in C2.R. CV No. "%#$1.

3he appellate court 'ranted the petition filed b+ Per(anent

4o(es, Incorporated -Per(anent and reversed the decision

of the Re'ional 3rial Court of Ma5ati Cit+, 6ranch %7 -trialcourt dated % )ul+ $**$ in Civil Case No. #721%0. 3he

appellate court ordered Solidban5 Corporation -Solidban5

and Per(anent to enter into an e8press a'ree(ent about

the applicable interest rates on Per(anent9s loan. Solidban5

&as also ordered to render an accountin' of Per(anent9s

pa+(ents, not to i(pose interest on interest upon

Per(anent9s loans, and to release the re(ainin' a(ount

available under Per(anent9s o(nibus credit line.

T3( 4-)0

3he appellate court narrated the facts as follo&s:

3he records disclose that PERMNEN3 4OMES is a real

estate develop(ent co(pan+, and to finance its housin'

pro;ect 5no&n as the ue Cit+, it applied and

&as subse>uentl+ 'ranted b+ SO?ID6N@ &ith an uoted, there &as a standin' a'ree(ent b+ the parties that

an+ increase or decrease in interest rates shall be sub;ect

to the (utual a'ree(ent of the parties.

or the first loan avail(ent of PERMNEN3 4OMES on

March $*, !##", in the a(ount of !#.1 MI??ION, fro( the

initial interest rate of 16.25per annu( -p.a., the sa(e

&as increased 15 p.a. effective Ma+ !#, !##" it &as

a'ain increased to 28 +.-.effective )ul+ !7, !##". It &as

thereafter reduced to 2$ +.-.effective u'ust !7, !##",

and then increased to 26 +.-.effective Septe(ber !",

!##". 3he rate &as increased further to "$ +.-.effective

October !", !##", then decreased to 27 +.-. on

Nove(ber !", !##", and a'ain increased to "6 +.-.

effective Dece(ber !", !##". 3he rate then decreased to

"$ +.-.on )anuar+ !1, !##7.

or the second loan avail(ent in the a(ount of !7 (illion,

the rate &as initiall+ pe''ed at 15.75 +.-. on )une $0,

!##". (onth later, the rate increased to 2".5 +.-. It

thereafter decreased to 2$ +.-.effective u'ust $0, !##",

but a'ain increased to 22.5 +.-.effective Septe(ber $0,

!##". or the ne8t (onth, the rate sur'ed to "$ +.-.#and

decreased to 27 +.-.for the (onth of Nove(ber. 3he rate

a'ain sur'ed to "6 +.-.for the (onth of Dece(ber, and

&as decreased to "$ +.-. fro( )anuar+ $$, !##7 to

ebruar+ $*, !##7.

or the third loan avail(ent on )ul+ !%, !##", in the a(ount

of /.# (illion, the interest rate &as initiall+ pe''ed at "5

+.-.# but this &as decreased to 21 +.-. fro( u'ust !0

until Septe(ber !!, !##". 3he rate increased sli'htl+ to

2" +.-.on Septe(ber !$, !##", and sur'ed to 27 +.-.
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on October !/, !##". 3he rate &ent do&n sli'htl+ to 27

+.-. for the (onth of Nove(ber, and to 28 +.-. for the

(onth of Dece(ber. 3he rate, ho&ever, a'ain sur'ed to

"$ +.-.on )anuar+ !$, !##7 before settlin' at 29 +.-.

for the (onth of ebruar+.

It is Per(anent9s stand that SO?ID6N@ unilaterall+ and

arbitraril+ accelerated the interest rates &ithout an+

declared basis of such increases, of &hich PERMNEN3

4OMES had not a'reed to, or at the ver+ least, been

infor(ed of. 3his is contrar+ to their earlier a'ree(ent that

an+ interest rate chan'es &ill be sub;ect to (utual

a'ree(ent of the parties. PERMNEN3 4OMES further

ad(its that it &as not able to protest such arbitrar+

increases at the ti(e the+ &ere i(posed b+ SO?ID6N@,

for fear that SO?ID6N@ (i'ht cut off the credit facilit+ it

e8tended to PERMNEN3 4OMES. Per(anent &as then in

the (idst of the construction of its pro;ect in Merville,

Para=a>ue Cit+, and SO?ID6N@ 5ne& that it &as rel+in'substantiall+ on the credit facilit+ the latter e8tended to it.

Per(anent thus filed a case before the trial court see5in'

the follo&in': -! the annul(ent of the increases in interest

rates on the loans it obtained fro( SO?ID6N@, on the

'round that it &as violative of the principle of (utualit+ of

a'ree(ent of the parties, as enunciated in rticle !0*# of

the Ne& Civil Code, -$ the fi8in' of the interest rates at the

applicable interest rate, and -/ for the trial court to order

SO?ID6N@ to (a5e an accountin' of the pa+(ents it

(ade, so as to deter(ine the a(ount of refund

PERMNEN3 is entitled to, as &ell as to order SO?ID6N@to release the re(ainin' available balance of the loan it

e8tended to PERMNEN3. In addition, Per(anent pra+s

for the pa+(ent of co(pensator+, (oral and e8e(plar+

da(a'es.

SO?ID6N@, on the other hand, avers that PERMNEN3

4OMES has no cause of action a'ainst it, in vie& of the

pertinent provisions of the O(nibus Credit ?ine and the

pro(issor+ notes a'reed to and si'ned b+ PERMNEN3

4OMES. 3hus, in accordance &ith said provisions,

SO?ID6N@ &as authoriHed to, upon due notice,

periodicall+ ad;ust the interest rates on PERMNEN3

4OMES9 loan avail(ents durin' the (onthl+ interest

repricin' dates, dependin' on the chan'es in prevailin'

interest rates in the local and international capital (ar5ets.

In fact, SO?ID6N@ avers that four -0 da+s before )ul+ !%,

!##", the 6an'5o Sentral n' Pilipinas -6SP declared that it

could no lon'er support the Philippine currenc+ fro(

e8ternal speculative forces, hence, the local currenc+ &as

allo&ed to see5 its o&n e8chan'e rate level. s a result of

the volatile e8chan'e rate ratio, ban5s &ere then hesitant to

e8tend loans, and in so(e instances that it 'ranted loans,

the+ had to ensure that the+ &ill not be at the losin' end of

the deal, so to spea5, b+ the repricin' of the interest rates

ever+ (onth. SO?ID6N@ insists that PERMNEN34OMES should not be allo&ed to rene'e on its contractual

obli'ations, as it freel+ and voluntaril+ bound itself to the

provisions of the O(nibus Credit ?ine and the pro(issor+

notes.

PERMNEN3 4OMES presented as &itnesses )ac>ueline

S. ?i(, its Vice President and Chief inancial Officer, En'r.

Re+ . Ro(asanta, its E8ecutive Vice President and Chief

Operatin' Officer, and Martha )ulia lores, its 3reasur+

Officer.

On March $0, !##7, the trial court issued a te(porar+

restrainin' order -3RO, after a su((ar+ hearin', &hich

en;oined SO?ID6N@ fro( i(ple(entin' and collectin' the

increases in interest rates and fro( initiatin' an+ action,

includin' the foreclosure of the (ort'a'ed properties.

Ms. ?i(9s testi(on+ centered on PERMNEN3 4OMES9

alle'ations that the repricin' of the interest rates &as done

b+ SO?ID6N@ &ithout an+ &ritten a'ree(ent entered into

bet&een the parties. In fact, Ms. ?i( accounted that

SO?ID6N@ &ill (erel+ advise the( of the interest rate for

the period, after said period had alread+ co((enced, and

at ti(es ver+ late in the period, b+ fa8 (essa'es. FhenPERMNEN3 4OMES called SO?ID6N@9s attention to

the see(in'l+ sur'in' rates it i(posed on its loan,

SO?ID6N@ &ill (erel+ ans&er that it &as the ban59s

polic+, &ithout offerin' an+ basis for such increase.

urther(ore, Ms. ?i( also (entioned SO?ID6N@9s

alle'ed practice of i(posin' interest on unpaid interest, at

the hi'hest rate of /*J p.a.. Ms. ?i( also presented a

tabulation, &hich presents the nu(ber of da+s their billin'

state(ents &ere sent late, fro( the ti(e the interest period

started. It is PERMNEN3 4OMES9 stand that since the

purpose of the billin' state(ents &as to infor( the(

(:o*(3-&/of the applicable interest rate for the period,the late billin's &ill clearl+ sho& SO?ID6N@9s arbitrar+

i(position of the repriced interest rates, as &ell as its

indifference to PERMNEN3 4OMES9 pli'ht.

3o illustrate, for the first loan avail(ent in the a(ount of

P!#.1 (illion, the billin' state(ents &hich should have

notified PERMNEN3 4OMES of the repriced interest rates

&ere fa8ed to PERMNEN3 4OMES bet&een ei'hteen

-!7 to thirt+2three -// da+s late. or the second loan

avail(ent in the a(ount of P!7 (illion, the fa8ed billin's

&ere late bet&een si8 -1 to t&ent+2one -$! da+s, and one

instance &here PERMNEN3 4OMES received no billin'

at all. or the third loan avail(ent in the a(ount of P/.#

(illion, the fa8ed billin's &ere late bet&een seven -" to

t&ent+2nine -$# da+s, and also an instance &here

PERMNEN3 4OMES received no billin' at all.

3his practice, accordin' to Ms. ?i(, clearl+ affected its

operations, as the co(pletion of its construction pro;ect &as

unnecessaril+ dela+ed, to its pre;udice and its bu+ers. 3his

&as the i(port of the testi(on+ of PERMNEN3 4OMES9

second &itness, En'r. Re+ . Ro(asanta. ccordin' to

En'r. Re+, the tar'et date of co(pletion &as u'ust !##",

but in vie& of the shorta'e of funds b+ reason of

SO?ID6N@9s refusal for PERMNEN3 4OMES to (a5efurther avail(ents on its o(nibus credit line, the pro;ect &as

co(pleted onl+ on ebruar+ !##7.


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PERMNEN3 4OMES9 third and final &itness &as Martha

)ulia lores, its 3reasur+ Officer, &ho e8plained that as

such, it &as her &ho received the late billin's fro(

SO?ID6N@. She &ould also call up SO?ID6N@ to as5

&hat the repriced interest rate for the co(in' interest

period, to no avail, as SO?ID6N@ &ill (erel+ fa8 its

billin's al(ost al&a+s, as above(entioned, late in theperiod. Ms. lores ad(itted that she prepared the tabulation

presented before the court, &hich sho&ed ho& late

SO?ID6N@9s billin's &ere sent to PERMNEN3 4OMES,

as &ell as the co(putation of interest rates that

SO?ID6N@ had alle'edl+ overchar'ed on its loan, vis2a2

vis the avera'e of the hi'h and the lo& published lendin'

rates of SO?ID6N@.

SO?ID6N@, to establish its defense, presented its lone

&itness, Mr. Cesar ?u'tu, &ho testified to the effect that,

contrar+ to PERMNEN3 4OMES9 assertions that it &as

not pro(ptl+ infor(ed of the repriced interest rates,SO?ID6N@9s officers v(*-! -/v,0(/ PERMNEN3

4OMES of the repriced rates at the start of the period, and

even added that their transactions &ere based on trust.

side fro( these alle'ations, ho&ever, no &ritten

(e(orandu( or note &as presented b+ SO?ID6N@ to

support their assertion that PERMNEN3 4OMES &as

ti(el+ advised of the repriced interests.0

T3( T*,- Cou*);0 Ru,&uent to

the initial thirt+2da+ -/* period, the le'al rate of t&elve

percent -!$J per annu( is hereb+ 4I>ED, to be applied

on the outstandin' balance of the loan

-$ SO?ID6N@ is ordered to render an accountin' of all

the pa+(ents (ade b+ PERMNEN3 4OMES, and in case

there is e8cess pa+(ent b+ reason of the &ron'ful

i(position of the repriced interest rates, to appl+ such

a(ount to the interest pa+(ent at the le'al rate, and

thereafter to the outstandin' principal a(ount

-/ SO?ID6N@ is directed not to i(pose penalties,

particularl+ interest on interest, upon PERMNEN3

4OMES9 loan, there bein' no evidence that the latter &as in

default on its pa+(ents

-0 SO?ID6N@ is hereb+ ordered to release the re(ainin'

a(ount available under the o(nibus credit line, sub;ect,

ho&ever, to availabilit+ of funds on the part of SO?ID6N@.

No pronounce(ent as to costs.

SO ORDERED.1

3he appellate court resolved to den+ Solidban59s Motion for

Reconsideration for lac5 of (erit."

T3( I00u(0

Solidban5 raised the follo&in' issues in their petition:

- Fhether the 4onorable Court of ppeals &as correct in

rulin' that the increases in the interest rates on

Per(anent9s loans are void for havin' been unilaterall+

i(posed &ithout basis.

-6 Fhether the 4onorable Court of ppeals &as correct in

orderin' the parties to enter into an e8press a'ree(ent

re'ardin' the applicable interest rates on Per(anent9s loan

avail(ents subse>uent to the initial thirt+2da+ -/* period.
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-C Fhether the 4onorable Court of ppeals &as correct in

rulin' that Per(anent is entitled to attorne+9s fees

not&ithstandin' the absence of bad faith or (alice on the

part of Solidban5.7

T3( Cou*);0 Ru,&uestion the authorit+ of arcia to bind the

corporation and -$ to den+ its capacit+ to enter into such

contract. See, E.6. Merchant v. International 6an5in'

Corporation, 1 Phil. /!0 -!#*1. No s&orn ans&er den+in'

the due e8ecution of the docu(ent in >uestion, or

>uestionin' the authorit+ of arcia to bind the ban5, or

den+in' the ban5s capacit+ to enter into the contract, &as

ever filed. 4ence, the ban5 is dee(ed to have ad(itted notonl+ arcias authorit+, but also the ban5s po&er, to enter

into the contract in >uestion.

In the past, this Court had occasion to e8plain the reason

behind this procedural re>uire(ent.

3he reason for the rule enunciated in the fore'oin'

authorities &ill, &e thin5, be readil+ appreciated. In dealin'

&ith corporations the public at lar'e is bound to rel+ to a

lar'e e8tent upon out&ard appearances. If a (an is found

actin' for a corporation &ith the e8ternal indicia of authorit+,

an+ person, not havin' notice of &ant of authorit+, (a+usuall+ rel+ upon those appearances and if it be found that

the directors had per(itted the a'ent to e8ercise that

authorit+ and thereb+ held hi( out as a person co(petent

to bind the corporation, or had ac>uiesced in a contract and

retained the benefit supposed to have been conferred b+ it,

the corporation &ill be bound, not&ithstandin' the actual

authorit+ (a+ never have been 'ranted

... Fhether a particular officer actuall+ possesses the

authorit+ &hich he assu(es to e8ercise is fre>uentl+ 5no&n

to ver+ fe&, and the proof of it usuall+ is not readil+

accessible to the stran'er &ho deals &ith the corporation

on the faith of the ostensible authorit+ e8ercised b+ so(e of

the corporate officers. It is therefore reasonable, in a case

&here an officer of a corporation has (ade a contract in its

na(e, that the corporation should be re>uired, if it denies

his authorit+, to state such defense in its ans&er. 6+ this

(eans the plaintiff is apprised of the fact that the a'ents

authorit+ is contested and he is 'iven an opportunit+ to

adduce evidence sho&in' either that the authorit+ e8isted

or that the contract &as ratified and approved. Ra(ireH v.

Orientalist Co. and ernandeH, /7 Phil. 1/0, 10%2 101

-!#!7.

Petitioners ar'u(ent (ust also be re;ected for anotherreason. 3he practical effect of absolvin' a corporation fro(

liabilit+ ever+ ti(e an officer enters into a contract &hich is

be+ond corporate po&ers, even &ithout the proper

alle'ation or proof that the corporation has not authoriHed

nor ratified the officers act, is to cast corporations in so

perfect a (old that trans'ressions and &ron's b+ such

artificial bein's beco(e i(possible 6issell v. Michi'an

Southern and N.I.R. Cos $$ N.B $%7 -!71*. uainted. 3he distinction bet&een

po&er and ri'ht is no (ore to be lost si'ht of in respect to

artificial than in respect to natural persons.< ()i.

4avin' deter(ined that arcias act of enterin' into the

contract binds the corporation, &e no& deter(ine the

correct nature of the contract, and its le'al conse>uences,

includin' its enforceabilit+.

3he docu(ent &hich e(bodies the contract states that the

KS/,***.** &as received b+ the ban5 for safe5eepin'.3he subse>uent acts of the parties also sho& that the intent

of the parties &as reall+ for the ban5 to safel+ 5eep the

dollars and to return it to Lshornac5 at a later ti(e, 3hus,

Lshornac5 de(anded the return of the (one+ on Ma+ !*,

!#"1, or over five (onths later.

3he above arran'e(ent is that contract defined under

rticle !#1$, Ne& Civil Code, &hich reads:

rt. !#1$. deposit is constituted fro( the (o(ent a

person receives a thin' belon'in' to another, &ith the

obli'ation of safel+ 5eepin' it and of returnin' the sa(e. Ifthe safe5eepin' of the thin' delivered is not the principal

purpose of the contract, there is no deposit but so(e other

contract.

Note that the ob;ect of the contract bet&een Lshornac5 and

COM3RKS3 &as forei'n e8chan'e. 4ence, the transaction

&as covered b+ Central 6an5 Circular No. $*, Restrictions

on old and orei'n E8chan'e 3ransactions, pro(ul'ated

on Dece(ber #, !#0#, &hich &as in force at the ti(e the

parties entered into the transaction involved in this case.

3he circular provides:

888 888 888

$. Tra!sacio!s in the assets described belo& and all

dealin's in the( of &hatever nature, includin', &here

applicable their e8portation and i(portation, sha** NOT )e

effece, e8cept &ith respect to deposit accounts included

in sub2para'raphs -b and -c of this para'raph, &hen such

deposit accounts are o&ned b+ and in the na(e of, ban5s.

-a n+ and all assets, provided the+ are held throu'h, in, or

&ith ban5s or ban5in' institutions located in the Philippines,

includin' +o!ey, chec5s, drafts, bullions ban5 drafts,deposit accounts -de(and, ti(e and savin's, all debts,

indebtedness or obli'ations, financial bro5ers and

invest(ent houses, notes, debentures, stoc5s, bonds,

coupons, ban5 acceptances, (ort'a'es, pled'es, liens or

other ri'hts in the nature of securit+, epresse i! forei'!


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c-rre!cies, or if pa+able abroad, irrespective of the

currenc+ in &hich the+ are e8pressed, and belon'in' to an+

person, fir(, partnership, association, branch office,

a'enc+, co(pan+ or other unincorporated bod+ or

corporation residin' or located &ithin the Philippines

-b n+ and all assets of the 5inds included andGor

described in subpara'raph -a above, &hether or not held

throu'h, in, or &ith ban5s or ban5in' institutions, and

e8istent &ithin the Philippines, &hich belon' to an+ person,

fir(, partnership, association, branch office, a'enc+,

co(pan+ or other unincorporated bod+ or corporation not

residin' or located &ithin the Philippines

-c n+ and all assets e8istent &ithin the Philippines

includin' (one+, chec5s, drafts, bullions, ban5 drafts, all

debts, indebtedness or obli'ations, financial securities

co((onl+ dealt in b+ ban5ers, bro5ers and invest(ent

houses, notes, debentures, stoc5, bonds, coupons, ban5acceptances, (ort'a'es, pled'es, liens or other ri'hts in

the nature of securit+ e8pressed in forei'n currencies, or if

pa+able abroad, irrespective of the currenc+ in &hich the+

are e8pressed, and belon'in' to an+ person, fir(,

partnership, association, branch office, a'enc+, co(pan+ or

other unincorporated bod+ or corporation residin' or

located &ithin the Philippines.

888 888 888

0. -a** receips of forei'! echa!'e sha** )e so* ai*y o

he /e!ra* a!$ b+ those authoriHed to deal in forei'ne8chan'e. ll receipts of forei'n e8chan'e b+ an+ person,

fir(, partnership, association, branch office, a'enc+,

co(pan+ or other unincorporated bod+ or corporation shall

be sold to the authoriHed a'ents of the Central 6an5 b+ the

recipie!s wihi! o!e )-si!ess ay fo**owi!' he receip of

s-ch forei'! echa!'e. n+ person, fir(, partnership,

association, branch office, a'enc+, co(pan+ or other

unincorporated bod+ or corporation, residin' or located

&ithin the Philippines, &ho ac>uires on and after the date of

this Circular forei'n e8chan'e shall not, unless licensed b+

the Central 6an5, dispose of such forei'n e8chan'e in

&hole or in part, nor receive less than its full value, nor

dela+ ta5in' o&nership thereof e8cept as such dela+ is

custo(ar+ Provided, further, 3hat &ithin one da+ upon

ta5in' o&nership, or receivin' pa+(ent, of forei'n

e8chan'e the afore(entioned persons and entities shall

sell such forei'n e8chan'e to desi'nated a'ents of the

Central 6an5.

888 888 888

7. Strict observance of the provisions of this Circular is

en;oined and an+ person, fir( or corporation, forei'n or

do(estic, &ho bein' bound to the observance thereof, or of

such other rules, re'ulations or directives as (a+ hereafter

be issued in i(ple(entation of this Circular, shall fail or

refuse to co(pl+ &ith, or abide b+, or shall violate the sa(e,

shall be s-)ec o he pe!a* sa!cio!s provie i! he

/e!ra* a!$ c.

888 888 888

Para'raph 0 -a above &as (odified b+ Section 1 of Central

6an5 Circular No. $7!, Re'ulations on orei'n E8chan'e,

pro(ul'ated on Nove(ber $1, !#1# b+ li(itin' its covera'e

to Philippine residents onl+. Section 1 provides:

SEC. 1. ll receipts of forei'n e8chan'e b+ an+ resie!

person, fir(, co(pan+ or corporation shall be sold to

authoriHed a'ents of the Central 6an5 b+ the recipients

&ithin one business da+ follo&in' the receipt of such

forei'n e8chan'e. n+ resie! person, fir(, co(pan+ or

corporation resii!' or *ocae wihi! he Phi*ippi!es, &ho

ac>uires forei'n e8chan'e shall not, unless authoriHed b+

the Central 6an5, dispose of such forei'n e8chan'e in

&hole or in part, nor receive less than its full value, nor

dela+ ta5in' o&nership thereof e8cept as such dela+ is

custo(ar+ Provided, 3hat, &ithin one business da+ upon

ta5in' o&nership or receivin' pa+(ent of forei'n e8chan'ethe afore(entioned persons and entities shall sell such

forei'n e8chan'e to the authoriHed a'ents of the Central

6an5.

s earlier stated, the docu(ent and the subse>uent acts of

the parties sho& that the+ intended the ban5 to safe5eep

the forei'n e8chan'e, and return it later to Lshornac5, &ho

alle'ed in his co(plaint that he is a Philippine resident. 3he

parties did not intended to sell the KS dollars to the Central

6an5 &ithin one business da+ fro( receipt. Other&ise, the

contract of eposi-+&ould never have been entered into

at all.

Since the (ere safe5eepin' of the 'reenbac5s, &ithout

sellin' the( to the Central 6an5 &ithin one business da+

fro( receipt, is a transaction &hich is not authoriHed b+ C6

Circular No. $*, it (ust be considered as one &hich falls

under the 'eneral class of prohibited transactions. 4ence,

pursuant to rticle % of the Civil Code, it is void, havin'

been e8ecuted a'ainst the provisions of a

(andator+Gprohibitor+ la&. More i(portantl+, it affords

neither of the parties a cause of action a'ainst the other.


9/9


#

is further ordered to pa+ private respondent the a(ount of

P7,***.** as da(a'es. 3he other causes of action of

private respondent are ordered dis(issed.

SO ORDERED.

Cred Trans 3

Documents

Transcript of Cred Trans 3