[ manilabulletin online] September 30, 2008
By REY G. PANALIGAN
The Supreme Court (SC) has dismissed the petition of the Land Bank of the Philippines (LBP) to reverse a 2005 Court of Appeals (CA) decision that nullified the sale of a foreclosed property and reduced the interest rate and penalty charges on a loan obtained in 1993.
In a decision written by Justice Conchita Carpio Morales, the SC affirmed the CA decision that voided the sale of the property mortgaged by Yolanda G. David to the LBP for a R1.1-million loan and reduced the interest rate from 17 to 12 percent and the penalty charge from 12 to five percent per annum.
"In the case at bar, the purpose of the loan was to finance the construction of two broiler houses and a feeds warehouse. The observation by the Court of Appeals that the loan extended to respondent (David) was part of the social assistance program to improve the plight of farmers is thus well taken," the SC said.
"Given the business losses that respondent suffered, coupled with the fact that she had made partial payments on both the original loan and the restructured loan, the reduction by the appellate court of the interest rate and penalty charge is justified," it added.
On April 21, 1993, David obtained a R1.1-million loan from the LBP for her poultry farm in Arayat, Pampanga.
The loan was to bear interest on the prevailing lender’s rate/special financing rate with a 12 percent penalty charge per annum in case of default in payment.
Her property was mortgaged to the bank. When she suffered financial losses, the loan was restructured on April 18, 1996.
By then, her obligation had reached R1,171,467.18. LBP demanded that she pay R300,623.55 upfront to settle the penalty and interest (R165,146.85) and to partially pay the principal (R135,476.70). It also imposed an interest of 17 percent per annum starting from March 1, 1996 for the remaining principal balance of R870,843.63.
The restructured loan was to be paid in 15 quarterly amortizations at R79,000 from April 30, 1996. David filed a case before the Regional Trial Court (RTC) questioning what she called as usurious interest rates and penalty charges.