FACTS:

The defendants obtained multiple loans from the plaintiff, but failed to pay them upon maturity. The defendants received P47,000.00 out of a P50,000.00 loan, P84,000.00 out of a P90,000.00 loan, and P275,000.00 out of a P300,000.00 loan. None of these loans were paid. Subsequently, the defendants consolidated their unpaid loans and sought an additional loan of P60,000.00, increasing their total indebtedness to P500,000.00. The defendants executed a promissory note for this amount, which included stipulations for interest, penalty charges, and attorney's fees. Due to the defendants' failure to pay the loan, the plaintiff filed a complaint for collection. The trial court rendered a judgment in favor of the plaintiff, but the Court of Appeals modified the decision and ordered the defendants to pay the plaintiff P500,000.00, plus interest, service charge, and penalty charges.

ISSUES:

1. Whether the borrowers are liable to pay the amounts stated in the promissory notes.

2. Whether the interest rates and penalty charges imposed are valid.

RULING:

1. Yes, the borrowers are liable to pay the amounts stated in the promissory notes. The borrowers executed the promissory notes and failed to pay the loans upon maturity. Thus, they are bound to fulfill their obligation to pay the loan amounts.

2. Yes, the interest rates and penalty charges imposed are valid. The promissory note clearly stated the interest rate, service charge, and penalty charges to be imposed in case of default. The borrowers agreed to these terms and therefore are bound by them. The court upheld the lower court's decision to impose the specified interest rates and penalties on the borrowers.

PRINCIPLES:

• Borrowers are liable to pay the amounts stated in promissory notes upon maturity, in accordance with their agreement.

• Interest rates and penalty charges stated in a promissory note are valid and enforceable if agreed upon by the parties.