Verdejo v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Wilfredo Verdejo filed an action for sum of money against private respondents Herminia Patinio and John Doe, alleging that on November 17, 1983, private respondents executed a Deed of Sale with Right to Repurchase for P60,560.00, payable in installments starting January 1984. Private respondents failed to make payments despite demands. Procedural History: Private respondents denied receiving the full amount, claiming it represented their outstanding accounts plus usurious interest (10-12% per month). They argued that the actual loan was much lower and had already been paid. The Regional Trial Court (RTC) dismissed the complaint, ordered petitioner to refund P13,890.00 to private respondents, and pay P5,000.00 as attorney's fees. The RTC found that the P60,560.00 consideration included P38,560.00 in interest, which was void under the Usury Law as the loans predated CB Circular No. 905. The Court of Appeals (CA) modified the RTC decision, ordering a refund of P15,990.00 and disallowing attorney's fees. The Petition: Petitioner sought review of the CA decision, arguing that the Deed of Sale with Right to Repurchase should be enforced despite CB Circular No. 905 and that the CA made factual conclusions unsupported by evidence.
Issue(s)
Whether the Deed of Sale with Right to Repurchase can be enforced against private respondent Herminia Patinio notwithstanding the effectivity of CB Circular No. 905. Whether the Court of Appeals made conclusions of fact unsupported by substantial evidence.
Ruling
The Supreme Court denied the petition for review on certiorari for lack of merit. It affirmed the decision of the Court of Appeals, which modified the judgment of the trial court by ordering petitioner Wilfredo Verdejo to refund defendant Herminia Patinio the amount of P15,990.00 and disallowing the award of attorney's fees.
Ratio Decidendi
On the enforceability of the Deed of Sale with Right to Repurchase and the effect of CB Circular No. 905: The Court held that the loans were obtained by private respondents before the promulgation of CB Circular No. 905. While the Deed of Sale with Right to Repurchase was executed on November 17, 1983, it was a consolidation of previous loan transactions in February and November-December 1982. At the time these transactions took place, the Usury Law was still in effect. Therefore, Exhibit A, the Deed of Sale with Right to Repurchase, which was merely a carry-over of previous transactions, could not legalize the previous unlawful loan transactions. The contract of loan was valid as to the principal amount but void as to the usurious interest. The Court reiterated the principle that factual findings of the trial court and the Court of Appeals are entitled to great weight and respect and should not be disturbed on appeal, finding no reason to depart from the CA's findings. On whether the Court of Appeals made conclusions of fact unsupported by substantial evidence: The Court found that the petition was bereft of merit and merely raised factual issues. The determination of these factual issues is best left to the trial court. The rule that findings of fact of the trial court and the Court of Appeals are not to be disturbed on appeal and are entitled to great weight and respect was applied. The Supreme Court saw no reason to depart from the findings of the Court of Appeals, thus dismissing the claim that the CA made unsupported conclusions of fact.
Main Doctrine
The Supreme Court affirmed the Court of Appeals' decision, holding that loan transactions entered into before the effectivity of CB Circular No. 905 are governed by the Usury Law, and thus, contracts incorporating usurious interest rates are valid as to the loan but void as to the interest. The Court also found that the factual findings of the lower courts were entitled to great weight and respect.