Sangrador v. Spouses Valderrama
REITERATIONFacts
The Antecedents: Spouses Francisco and Teresita Valderrama obtained a P500,000 loan from Manuel Asencio, secured by a real estate mortgage on their property. Foreseeing inability to pay, they sought other lenders. Through a broker, Wilson Jesena, they obtained a P1,000,000 loan from Evelyn J. Sangrador on April 6, 1984, secured by the same property. The loan was evidenced by a promissory note for P1,400,000 payable eight months after date, with a stipulation for attorney's fees and an escalation clause based on extraordinary inflation. The Valderramas alleged they only received P1,000,000, with the P400,000 difference being usurious interest. Documentary evidence, including checks and receipts, showed the P1,000,000 loan was disbursed for the redemption of the property from Asencio (P625,000), broker's commission (P50,000), attorney's fees (P4,000), transfer and BIR fees (P13,398.69), and the balance to the Valderramas (P307,601.40). Evelyn Sangrador claimed she also gave P400,000 in cash, for which no receipt was issued. Procedural History: The Valderramas failed to pay the P1,400,000 on December 6, 1984. Sangrador filed a complaint for judicial foreclosure. The Regional Trial Court (RTC) ruled in favor of Sangrador, ordering foreclosure and payment of P1,400,000 plus P569,718.61 due to the escalation clause, attorney's fees, and interest. The Valderramas appealed. The Court of Appeals (CA) modified the RTC decision, finding the principal loan to be P1,000,000 with 12% interest per annum, P50,000 attorney's fees, and costs, deeming the P400,000 as hidden interest and nullifying the escalation clause. The CA found that both parties prevaricated but that documentary evidence preponderantly proved the loan was P1,000,000. The Petition: Evelyn J. Sangrador, joined by her husband, filed a petition for review on certiorari, assailing the CA's decision for nullifying the escalation clause, finding the principal loan to be P1,000,000 instead of P1,400,000, and reducing attorney's fees.
Issue(s)
Whether the principal loan amount was P1,400,000.00 or P1,000,000.00. Whether the escalation clause based on extraordinary inflation was valid and applicable. Whether the attorney's fees awarded were proper.
Ruling
The petition is DENIED. The decision of the Court of Appeals dated 12 August 1987 is AFFIRMED. The respondents are ordered to pay the principal loan of P1,000,000.00 with 12% interest per annum from April 6, 1984, until fully paid, P50,000.00 as attorney's fees, and the costs of suit. In default of payment, the mortgaged property shall be sold at public auction.
Ratio Decidendi
On the principal loan amount: The Supreme Court affirmed the Court of Appeals' finding that the principal loan was P1,000,000.00, not P1,400,000.00. While the promissory note and mortgage deed stated P1,400,000.00, other contemporaneous documents, including receipts for payments made to the original creditor, broker's commission computed on P1,000,000.00, and the breakdown of loan proceeds, supported the P1,000,000.00 amount. The Court found the claim of an additional P400,000.00 delivered in cash without a receipt to be incredible and contrary to ordinary human experience, especially since other smaller amounts were receipted. The Court concluded that the P400,000.00 represented hidden interest, as no interest rate was expressly stipulated in the loan documents. On the escalation clause and extraordinary inflation: The Court upheld the Court of Appeals' nullification of the escalation clause. The clause was predicated on the occurrence of "extraordinary inflation" as contemplated in Article 1250 of the Civil Code. The Court reiterated that extraordinary inflation requires a decrease or increase in the purchasing power of currency that is unusual, beyond common fluctuations, and could not have been reasonably foreseen. The evidence presented only showed a general decline in the peso's purchasing power, a common trend, and not the "extraordinary" inflation required by law. Without proof of such extraordinary inflation between the loan's establishment and maturity, the escalation clause could not be invoked. On attorney's fees: The Court affirmed the Court of Appeals' reduction of attorney's fees to P50,000.00. It reiterated the principle that contractual provisions for attorney's fees are subject to modification by courts in the exercise of their sound judicial discretion, implying that the CA's reduction was a valid exercise of such discretion.
Main Doctrine
The Supreme Court affirmed the Court of Appeals' finding that the actual loan amount was P1,000,000.00, not P1,400,000.00 as stated in the promissory note and mortgage deed, with the difference considered hidden interest. The Court also held that an escalation clause based on extraordinary inflation under Article 1250 of the Civil Code requires proof of an unusual and unforeseeable decrease in currency value, which was not sufficiently established in this case.