Spouses Solangon v. Salazar
REITERATIONFacts
The Antecedents Spouses Danilo and Ursula Solangon obtained loans from Jose Avelino Salazar, executing several deeds of real estate mortgage over the same parcel of land. The first mortgage, dated August 22, 1986, secured a P60,000.00 loan with a 6% monthly interest. Subsequent mortgages were executed on May 27, 1987, for P136,512.00, and on December 29, 1990, for P230,000.00, both with interest at the legal rate. The Solangons initiated this action to prevent the foreclosure of the mortgaged property, alleging they only obtained one loan of P60,000.00 and that the subsequent mortgages were mere continuations. They claimed the first mortgage was void due to an unconscionable interest rate and that Salazar had assured them he would not foreclose as long as they paid the interest. Procedural History The Spouses Solangon filed a complaint for annulment of mortgage against Jose Avelino Salazar before the Regional Trial Court (RTC), Branch 16, Malolos, Bulacan. The RTC rendered judgment against the plaintiffs, ordering the dismissal of their complaint, the dissolution of the preliminary injunction, and payment of attorney's fees and costs. The Solangons appealed this decision to the Court of Appeals (CA). The CA, in its decision in CA-G.R. CV No. 37899, affirmed the RTC's ruling. The Spouses Solangon then filed the present petition for review on certiorari under Rule 45 of the Rules of Civil Procedure. The Petition The petitioners, Spouses Danilo and Ursula Solangon, seek review of the Court of Appeals' decision, assigning several errors. They contend that the CA erred in holding that three mortgage contracts were executed instead of one, in ruling that a 72% per annum (6% per month) interest rate is not unconscionable, in finding that the P136,512.00 loan had not been paid despite the respondent's admission, and in failing to resolve specific issues raised. The respondent, Jose Avelino Salazar, argues that the petition raises questions of fact, which are not permissible in a petition for review on certiorari. The Supreme Court, while affirming the CA's decision, modified it by reducing the stipulated interest rate of 72% per annum to a more equitable 12% per annum.
Issue(s)
Whether the Court of Appeals erred in holding that three (3) mortgage contracts were executed by the parties instead of one (1). Whether the Court of Appeals erred in ruling that a loan obligation secured by a real estate mortgage with an interest of 72% per cent per annum or 6% per month is not unconscionable. Whether the Court of Appeals erred in holding that the loan of P136,512.00 HAS NOT BEEN PAID when the mortgagee himself states in his ANSWER that the same was already paid. Whether the Court of Appeals erred in not resolving the SPECIFIC ISSUES raised by the appellants.
Ruling
The petition is denied. The appealed decision of the Court of Appeals is affirmed, subject to the modification that the interest rate of 72% per annum is ordered reduced to 12% per annum.
Ratio Decidendi
On the issue of the number of mortgage contracts: The Court found that the petitioners were raising questions of fact, which are generally not allowed in a petition for review on certiorari under Rule 45. The Court noted that the trial court, which was in the best position to evaluate the evidence, did not give credence to the petitioners' testimony, deeming it improbable that they signed documents without knowing their contents. The Court reiterated the rule that findings of fact of lower courts are final and conclusive, except in specific instances not present in this case. On the issue of unconscionable interest rate: The Court acknowledged that Central Bank Circular No. 905 lifted the Usury Law ceiling on interest rates, meaning there is no longer a maximum rate based on statute. However, the Court clarified that this does not grant lenders carte blanche to impose rates that are iniquitous, unconscionable, and exorbitant. Citing Medel v. Court of Appeals, the Court held that while the interest rate of 6% per month (72% per annum) is not technically usurious due to the repeal of the Usury Law, it is iniquitous, unconscionable, and exorbitant, and therefore void as it is contrary to morals. The Court equitably reduced the interest rate to 12% per annum, deeming it fair and reasonable. On the issue of payment of the second loan: Similar to the first issue, the Court determined that this presented a question of fact. The petitioners' claim that the respondent admitted payment in his answer was not sufficiently established to warrant a departure from the findings of the lower courts. The Court's general policy is to uphold the factual findings of the trial court and the Court of Appeals when supported by evidence, and the petitioners failed to demonstrate any of the exceptions that would justify a review of these findings. On the issue of failure to resolve specific issues: The Court implicitly addressed the specific issues raised by the petitioners through its analysis of the factual and legal matters presented. The Court's decision to affirm the CA's findings on the number of mortgages and the payment of the second loan, and its ruling on the unconscionable interest rate, demonstrates that the core issues were considered and resolved. The Court found no grave abuse of discretion or misapprehension of facts that would necessitate a different outcome.
Main Doctrine
While the Usury Law ceiling on interest rates was lifted by Central Bank Circular No. 905, lenders do not have carte blanche authority to impose interest rates that are iniquitous, unconscionable, and exorbitant. Such stipulations are void and shall be equitably reduced by the courts, with 12% per annum being deemed fair and reasonable.