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Spouses Roxas Vs Asia United Bank (Aub)

1) Kamakura Food Corporation obtained loans from Asiatrust Development Bank totaling P8 million, evidenced by promissory notes. Alfredo and Cecilia Roxas executed a continuing suretyship, jointly and severally binding themselves with Kamakura to guarantee payment. 2) When Kamakura defaulted on payment, Asiatrust sued Kamakura and the Roxases. The RTC and CA ruled in favor of Asiatrust, finding the Roxases liable as sureties. 3) The Supreme Court upheld the rulings, finding that the 18.5% interest rate and 12% penalty charge imposed were not excessive or unconscionable according to Article 2212 of

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307 views3 pages

Spouses Roxas Vs Asia United Bank (Aub)

1) Kamakura Food Corporation obtained loans from Asiatrust Development Bank totaling P8 million, evidenced by promissory notes. Alfredo and Cecilia Roxas executed a continuing suretyship, jointly and severally binding themselves with Kamakura to guarantee payment. 2) When Kamakura defaulted on payment, Asiatrust sued Kamakura and the Roxases. The RTC and CA ruled in favor of Asiatrust, finding the Roxases liable as sureties. 3) The Supreme Court upheld the rulings, finding that the 18.5% interest rate and 12% penalty charge imposed were not excessive or unconscionable according to Article 2212 of

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Eam Canoy
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Z Digested by: Rona Mae O Canoy

Spouses Roxas VS ASIA UNITED BANK [AUB]


G.R. No. 203506. January 6, 2020

Ponente: Delos Santos, J.,


Topic: Contract of Loan and Suretyship

Principle:
Article 2212. Interest due shall earn legal interest from the time it is judicially
demanded, although the obligation may be silent upon this point.

Facts:
Kamakura Food Corporation was granted a Credit Line in the amount of
P13,000,000.00 by the Asiatrust Development Bank, Inc. In consideration thereof, its
Vice-President, Nancy Dy, along with its authorized signatories, Alfredo and Cecilia
Roxas, executed a Continuing Suretyship on May 19, 1999, whereby they jointly and
severally bound themselves with Kamakura and guaranteed the full and due payment
and performance of all the obligations of Kamakura. They likewise guaranteed that if
such obligation was not fully or duly paid or performed on due date thereof, they shall
pay and perform the same together with any and all interests, penalties and other fees
and charges thereon. Subsequently, Kamakura, through Nancy Dy, Alfredo and
Cecilia Roxas, obtained a loan from Asiatrust in the amount of P7,000,000.00 and
P1,000,000.00 evidenced by Promissory Note. Upon maturity of the promissory notes
and despite several demands, Kamakura failed to pay its indebtedness.
Consequently, Asiatrust filed a Complaint for Sum of Money and Damages against
Kamakura, Nancy Dy, Alfredo and Cecilia Roxas before the Regional Trial Court
wherein it alleged that its demands remained unheeded and the loan obligation
remains unpaid. Thus, it prayed that judgment be rendered ordering the [petitioners] to
pay the following; P25,851,218.72, plus legal interests, judicial expenses and other
charges; P500,000.00 as moral damages; P250,000.00 as exemplary damages;
P250,000.00 as attorney's fees.

RTC Ruling:
RTC rendered judgmennt in favor of plaintiff Asiatrust Development Bank, Inc., as
substituted by Schuykill Asset Strategists (SPV-AMC) and against the [petitioners],
ordering the latter (1) to pay the total loan obligation of P25,851,218.72 plus legal
interest from the date this case is filed in court until fully paid; and (2) the costs of suit.
CA Ruling:
CA rendered the assailed Decision which partially modified the RTC Decision. On the
substantive issues, the CA observed that petitioners did not deny that they voluntarily
executed the document denominated as Continuing Suretyship, which expressly
states that they are jointly and severally liable with Kamakura for the full and due
payment and performance of all its obligations. Consequently, they bound themselves
to pay Kamakura's loans amounting to P7,000,000.00 and P1,000,000.00, evidenced
by Promissory Note along with interest, penalty charges, attorney's fees and other
expenses. CA, however, modified the applicable interest rate from 24% to 24.5% per
annum to 18.5% per annum, which was the rate agreed upon by the parties. It also
reduced the penalty charges of 36% per annum, which it held to be iniquitous and
unconscionable, to 12% per annum.

Arguments of the Petitioner/s:


Petitioners argued that they cannot be held jointly liable with Kamakura Food
Corp. (Kamakura) for its obligations; and the unilateral authority of Asiatrust to impose
increased interest rates in the Promissory Notes is null and void, and the penalty
charges at the rate of 36% per annum is iniquitous and unconscionable. 

Arguments of the Respondents:


In consideration thereof, its Vice-President, Nancy Dy, along with its authorized
signatories, Alfredo and Cecilia Roxas, executed a Continuing Suretyship on May 19,
1999, whereby they jointly and severally bound themselves with Kamakura and
guaranteed the full and due payment and performance of all the obligations of
Kamakura. They likewise guaranteed that if such obligation was not fully or duly paid
or performed on due date thereof, they shall pay and perform the same together with
any and all interests, penalties and other fees and charges thereon.

Issue:
Whether or not the increased interest rates in the Promissory Notes and the penalty
charges at the rate of 36% per annum is iniquitous and unconscionable. 

SC Ruling:
The 18.5% per annum interest rate on the loan agreed upon by the parties, as
well as the 12% per annum penalty charge imposed by the CA, are not
excessive or unconscionable.
Moreover, in accordance with Article 2212 of the Civil Code, the 18.5%
interest per annum due on the principal obligation shall earn legal interest from
the filing of the complaint on August 15, 2003 until June 30, 2013 at the rate of
12% per annum, which is the prevailing legal interest at the time, and from July
1, 2013 until full payment, 6% per annum as prescribed under Bangko Sentral
ng Pilipinas Monetary Board (BSP-MB) Circular No. 799 which took effect on
July 1, 2013.

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