G.R. No. 228904 - PHILIPPINE NATIONAL BANK, VS. AIC CONSTRUCTION CORPORATION, SPOUSES RODOLFO C. BACANI AND MA. AURORA C. BACANI.

Ruling

WHEREFORE , premises considered, judgment is hereby rendered dismissing the instant complaint. [23] (Emphasis in the original) AIC Construction and the Bacani Spouses moved for reconsideration, which the trial court denied in its February 5, 2015 Order. Thus, they appealed to the Court of Appeals. [24] The Court of Appeals modified the Regional Trial Court's ruling. [25] It affirmed that Philippine National Bank is not bound by the dacion en pago as there was no showing that it accepted the offer. [26] It also held that AIC Construction failed to prove that Philippine National Bank acted in bad faith especially since it was shown that it constantly communicated with AIC Construction regarding the negotiations on the loan payments. [27] However, the Court of Appeals held that the applied interest rates were unreasonable, usurious, and unconscionable. It found that the interest rate was not specified in the real estate mortgage and the credit documents. [28] Furthermore, the provision on interest violated the principle of mutuality of contracts under Article 1308 of the Civil Code. [29] It noted that the Supreme Court has struck down similar Philippine National Bank provisions in other credit documents. It applied the legal rate of interest under Nacar v. Gallery Frames . [30] It also struck down the penalty charge of 24% per annum as the parties did not agree that penalties would be included in the secured amount. [31] The dispositive portion of the Court of Appeals' Decision reads: WHEREFORE , the Decision dated December 5, 2013 and Order dated February 5, 2015 of the trial court are affirmed insofar as it declared that there is no binding dacion en pago contract between the parties and that defendant-appellee Philippine National Bank was in good faith in dealing with plaintiffs-appellants. The Decision dated December 5, 2013 and Order dated February 5, 2015 are modified as follows: 1. Defendant-appellee Philippine National Bank is ordered to furnish plaintiffs-appellants, within th[ir]ty (30) days from finality of this judgment, a written detailed accounting of the latter's outstanding loan obligation, with clear explanation of the computation thereof; 2. The computation of interest on the principal loan obligation of P65 million shall be at the rate of 12% per annum computed from effectivity of the pertinent loan agreement up to November 17, 2003, the date of issuance of the certificate of sale by the Ex-Officio Sheriff of Mandaluyong City; interest rate on the conventional interest shall be at the rate of 12% per annum from January 21, 2002, the date of judicial demand, to November 17, 2003; and, 3. The penalty charge imposed on plaintiffs-appellants' loan obligation shall be excluded from the amount secured by the real estate mortgage. SO ORDERED . [32] (Emphasis in the original) The Court of Appeals denied reconsideration in its December 28, 2016 Resolution. [33] Philippine National Bank thus filed this Petition for Review. [34] Petitioner c