Carpo v. Chua
REITERATIONFacts
The Antecedents: Spouses David B. Carpo and Rechilda S. Carpo (petitioners) obtained a loan of ₱175,000.00 from Eleanor Chua and Elma Dy Ng (respondents) on July 18, 1995, payable within six months with a stipulated interest rate of 6% per month. To secure the loan, petitioners mortgaged their residential house and lot. Petitioners failed to pay the loan upon demand, leading to the extrajudicial foreclosure of the mortgage. Respondents were the sole bidders at the public auction held on July 8, 1996, purchasing the property for ₱367,457.80. A certificate of sale was issued on September 5, 1997, after petitioners failed to exercise their right of redemption. Consequently, the Transfer Certificate of Title (TCT) was cancelled and a new one was issued in the names of respondents. Despite the issuance of the new TCT, petitioners continued to occupy the property. Procedural History: Respondents filed a petition for a writ of possession (SP No. 98-1665), which the RTC granted on March 23, 1999. On July 23, 1999, petitioners filed a complaint for annulment of the real estate mortgage and foreclosure proceedings (Civil Case No. 99-4376), consigning ₱257,197.26 with the RTC. Subsequently, a temporary restraining order was issued in SP No. 98-1665, and the RTC, in an Order dated January 6, 2000, suspended the enforcement of the writ of possession pending the resolution of Civil Case No. 99-4376. Respondents filed a petition for certiorari and mandamus (CA-G.R. SP No. 57297) before the Court of Appeals (CA) assailing the RTC orders. Meanwhile, the RTC dismissed petitioners' complaint in Civil Case No. 99-4376, finding it filed out of time and barred by laches. The CA, in its Decision dated April 30, 2002, annulled and set aside the RTC orders suspending the writ of possession, holding that its issuance was a ministerial duty. The Petition: Two consolidated petitions for review were filed: G.R. No. 150773 assailed the RTC's dismissal of the complaint for annulment of mortgage, and G.R. No. 153599 sought to annul the CA's Decision setting aside the RTC orders suspending the writ of possession.
Issue(s)
Whether the stipulated interest rate of 6% per month is void and whether this invalidity affects the principal loan and the real estate mortgage. Whether the petitioners' action for annulment of the real estate mortgage and foreclosure proceedings was filed out of time or barred by laches. Whether the RTC committed grave abuse of discretion in issuing orders suspending the enforcement of the writ of possession. Whether the Court of Appeals correctly entertained the petition for certiorari and mandamus and correctly concluded that the writ of possession could no longer be stayed.
Ruling
The petitions are DENIED. The Decision of the Court of Appeals is AFFIRMED. The RTC orders suspending the enforcement of the writ of possession are set aside.
Ratio Decidendi
On the validity of the stipulated interest rate and its effect on the mortgage: The Court reiterated the principle that stipulated interest rates that are excessive, iniquitous, unconscionable, and exorbitant are void pursuant to Article 1306 of the Civil Code. Applying this to the 6% monthly interest (72% per annum), the Court found it to be similarly invalid. However, consistent with established jurisprudence, the Court held that the nullity of the interest stipulation does not invalidate the principal loan obligation nor the accessory mortgage contract. The Court affirmed that a usurious loan transaction is not a complete nullity but is defective only with respect to the agreed interest, which should be equitably reduced. The principal debt remains valid and recoverable, along with the mortgage securing it. The Court cited numerous cases, including Medel v. Court of Appeals, Solangon v. Salazar, and Briones v. Cammayo, to support the principle that the principal obligation subsists despite the nullity of the stipulated interest. On prescription and laches: The Court agreed with the RTC's finding that the petitioners' action for annulment of the real estate mortgage was barred by laches. The Court emphasized that petitioners failed to question the validity of the foreclosure proceedings, the issuance of the certificate of sale, the cancellation of their TCT, and the issuance of a new TCT in the respondents' names. Their challenge only came after the issuance of the writ of possession, indicating they had "slept on their rights." Even if undue influence were present, which the Court found no evidence of, the action would still be barred by prescription, as the RTC erroneously applied the rules for voidable contracts when the issue of excessive interest, if considered contrary to public policy, does not prescribe. The Court found no evidence of undue influence, stating that financial distress alone does not equate to the deprivation of free agency required for undue influence. On the RTC orders suspending the writ of possession: The Court found that the RTC orders suspending the enforcement of the writ of possession were improperly issued. The order dated August 3, 1999, was temporary and had become functus officio. The order dated January 6, 2000, which suspended enforcement pending the resolution of the annulment case, was interlocutory in nature and could be assailed via a petition for certiorari and mandamus. The Court held that the Court of Appeals correctly entertained the petition for certiorari and mandamus filed by the respondents. On the ministerial duty to issue a writ of possession: The Court affirmed the Court of Appeals' ruling that the RTC committed grave abuse of discretion in suspending the enforcement of the writ of possession. The issuance of a writ of possession to a purchaser in an extrajudicial foreclosure is a ministerial duty of the court. This right is granted as a matter of course and cannot be stayed by an injunction, especially when the challenges to the mortgage or foreclosure proceedings are barred by prescription or laches. The Court reiterated that the purchaser is entitled to possession as a matter of right, regardless of any pending suit concerning the validity of the mortgage or foreclosure proceedings.
Main Doctrine
The stipulated interest rate of 6% per month (72% per annum) is excessive, iniquitous, unconscionable, and exorbitant, rendering the stipulation void. However, the principal loan obligation and the accessory mortgage contract remain valid, with the interest rate to be equitably reduced. Furthermore, the issuance of a writ of possession to a purchaser in an extrajudicial foreclosure is a ministerial duty that cannot be stayed by injunction, especially when the challenge to the mortgage or foreclosure proceedings is barred by laches or prescription.