Fausto v. Multi Agri-Forest
REITERATIONFacts
The Antecedents: Respondent, Multi Agri-Forest and Community Development Cooperative, extended several loans to petitioners Lylith Fausto and Jonathan Fausto, with other petitioners acting as co-makers. These loans, totaling significant amounts, were evidenced by promissory notes with stipulated interest rates of 2.3% per month and a 2% surcharge for default. Lylith and Jonathan failed to pay their respective loans despite repeated demands. Procedural History: On December 12, 2000, the respondent filed five separate complaints for Collection of Sum of Money before the Municipal Trial Court in Cities (MTCC) of Naga City. The petitioners, including the co-makers, filed a demurrer to evidence, questioning the authority of the filing officer and the prematurity of the complaints due to lack of demand letters. The MTCC denied the demurrer and subsequently ruled in favor of the respondent, ordering the petitioners to pay the principal amounts, interests, penalties, and surcharges. The Regional Trial Court (RTC) affirmed this decision with modifications regarding the interest and surcharge rates. The Court of Appeals (CA) further affirmed the RTC's decision. Petitioners sought reconsideration, which was denied by the CA. The Petition: Petitioners filed a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the CA's decision and resolution. They argued that the MTCC lacked jurisdiction due to the totality rule, that the officer who filed the complaints lacked authority, that the respondent failed to resort to mediation, and that demand letters were not sent to all co-makers. The Supreme Court, however, found the petition without merit, affirming the MTCC's jurisdiction, the validity of the officer's authority through ratification, the non-compulsory nature of mediation, and the waiver of demand stipulated in the promissory notes. The Court modified the interest and surcharge rates to conform to prevailing jurisprudence.
Issue(s)
Whether the MTCC has jurisdiction over the five separate complaints filed by the respondent, considering the totality rule. Whether Ma. Lucila G. Nacario had the authority to file the complaints on behalf of the respondent. Whether the respondent's failure to resort to mediation or conciliation before filing the cases with the MTCC is a fatal defect. Whether the co-makers' liability is extinguished due to the alleged lack of demand letters sent to them. Whether the stipulated interest rates and surcharges are excessive and unconscionable.
Ruling
The Supreme Court denied the petition for review on certiorari for lack of merit, affirming the decision of the Court of Appeals with modification regarding the interest rates.
Ratio Decidendi
On the MTCC's jurisdiction and the totality rule: The Court held that the MTCC has jurisdiction over the complaints. The totality rule, which aggregates the amounts of several claims in a single complaint to determine jurisdiction, does not apply here because the respondent filed five separate complaints, each pertaining to a distinct loan transaction. Each of these separate complaints fell within the jurisdictional amount of the MTCC, which, at the time of filing in 2000, was ₱200,000.00 exclusive of interests, damages, attorney's fees, and costs, as amended by Republic Act No. 7691. The petitioners' attempt to lump the total claims from all five complaints to argue for lack of jurisdiction was a misinterpretation of the law. On the authority of Ma. Lucila G. Nacario: The Court affirmed that Nacario had the authority to file the complaints. While a board resolution is generally required for corporate officers to act on behalf of a cooperative, the respondent subsequently ratified Nacario's actions through Board Resolution No. 47, Series of 2008. This resolution recognized, ratified, and affirmed her filing of the complaints as if fully authorized by the Board. The Court cited jurisprudence where subsequent ratification cured defects in the initial authority of corporate officers. On the requirement for mediation or conciliation: The Court ruled that the respondent's failure to resort to mediation or conciliation before filing the cases is not fatal. Section 121 of the Cooperative Code expresses a preference for amicable settlement but does not make mediation or conciliation a mandatory prerequisite for filing a case in court. The provision uses the phrase "as far as practicable," indicating that such procedures are optional and depend on the parties' agreement, not a compulsory requirement. On the alleged lack of demand letters to co-makers: The Court found that the co-makers' liability is not extinguished due to the lack of demand letters. The promissory notes contained a stipulation expressly waiving the need for notice or demand in case of default, stating that the entire balance would become due and payable. This waiver is binding on all co-makers, who are jointly and severally liable, making their obligation immediate and absolute upon default, regardless of whether individual demand letters were sent to them. On the excessive interest rates and surcharges: The Court agreed with the lower courts that the stipulated interest rate of 2.3% per month and a 2% surcharge per month were excessive, iniquitous, exorbitant, and unconscionable, rendering the stipulation void. Consequently, the Court reduced the interest and surcharge to the prevailing legal rate. Applying the ruling in Nacar v. Gallery Frames, et al., the Court modified the interest rate on the principal loans and the corresponding surcharge to six percent (6%) per annum, effective July 1, 2013.
Main Doctrine
The totality rule on jurisdiction does not apply when separate complaints are filed for distinct loan transactions. The authority of an officer to file a complaint may be ratified by a subsequent board resolution. A stipulation in a promissory note waiving notice or demand is valid and binding on co-makers. Stipulated interest rates that are iniquitous and unconscionable are void and shall be reduced to the legal rate, which is now 6% per annum effective July 1, 2013.