View full case

BANK OF PHILIPPINE ISLANDS

FACTS:

Respondents Norman and Angelina Yu, doing business as Tuanson Trading, and Tuanson Builders Corporation borrowed various sums from Far East Bank and Trust Company using several properties as collateral. Unable to pay their loans, they requested a loan restructuring, which the bank granted. However, they still had difficulties paying and requested the release of some of the mortgaged lands. When the bank ignored their request, they withheld payments on their amortizations. Consequently, the bank extrajudicially foreclosed the properties and the respondents filed a court action seeking the annulment of the foreclosure sale. A compromise agreement was later entered into by the respondents and the winning bidder, affirming the latter's ownership of three out of the 10 parcels of land that were auctioned. The complaint was then dismissed without prejudice to the filing of a new one against the bank. The respondents then filed a new complaint against the bank, alleging excessive penalty charges, interest, attorney's fees, and foreclosure expenses. The respondents moved for summary judgment and the trial court granted a partial summary judgment, but further proceedings were needed to resolve some issues. The respondents moved for partial reconsideration and a summary judgment was subsequently rendered, deleting the penalty charges, reducing the attorney's fees, upholding the reasonableness of the foreclosure expenses, and dismissing the counterclaims of the bank. The bank appealed to the Court of Appeals, which affirmed the trial court's decision. Dissatisfied, the bank sought recourse to this Court.

ISSUES:

  1. Whether or not the case presented no genuine issues of fact such as to warrant a summary judgment by the RTC.

  2. Where summary judgment is proper, whether or not the RTC and the CA a) correctly deleted the penalty charges because of BPI's alleged failure to comply with the Truth in Lending Act; b) correctly reduced the attorney's fees to 1% of the judgment debt; and c) properly dismissed BPI's counterclaims for moral and exemplary damages, attorney's fees, and litigation expenses.

RULING:

  1. The Court held that there were no genuine issues of fact that would warrant a trial, thus affirming the propriety of the RTC's summary judgment. The admitted facts and evidence presented by both parties were sufficient to resolve the issues raised by the Yus.

  2. a) The Court affirmed the deletion of the penalty charges imposed by BPI due to its failure to comply with the Truth in Lending Act. BPI's disclosure did not state the rate of penalties on late amortizations, thereby violating the mandatory disclosure requirement under the law.

  3. b) The Court agreed with the reduction of the attorney's fees to 1% of the judgment debt. The original rate of 10% was deemed excessive, and a reduction to 1% was deemed reasonable.

  4. c) The Court upheld the dismissal of BPI's counterclaims for moral and exemplary damages, attorney's fees, and litigation expenses for lack of merit. This was because summary judgment was already rendered in favor of the Yus.

PRINCIPLES:

  • Summary judgment may be granted when there are no genuine issues of fact and the case can be decided based on the admitted facts and evidence presented by the parties.

  • The Truth in Lending Act requires full disclosure of all charges, including penalties, which must be clearly stated in the loan documents. Failure to comply with this requirement may result in the deletion of penalty charges.

  • Attorney's fees awarded must be reasonable and proportionate to the amount of the judgment debt.

  • Counterclaims may be dismissed if summary judgment has already been rendered in favor of the opposing party.