G.R. No. 192304 - ANCHOR SAVINGS BANK (NOW EQUICOM SAVINGS BANK), VS. PINZMAN REALTY AND DEVELOPMENT CORPORATION, MARYLIN MAÑALAC AND RENATO GONZALES.D E C I S I O N - Supreme Court E-Library

Ruling

WHEREFORE , the foregoing considered, the instant appeal is hereby GRANTED and the assailed Decision dated 16 March 2007 is REVERSED and SET ASIDE. Accordingly, the present complaint is hereby GRANTED and the Extra-judicial Foreclosure, Auction Sale, Certificate of Sale and Certificates of Title issued in favor of appellee bank are hereby ANNULLED , without prejudice to the right of the latter to re-institute foreclosure proceedings based on the recomputed amount of the unpaid loan as herein provided. No costs. SO ORDERED . [11] The CA declared that the loan agreement as embodied in the Promissory Note and Disclosure Statement failed to stipulate a rate of interest. Petitioner bank likewise admitted that there is no written agreement to prove that the parties agreed to the interest rate of 30.33% per annum on the loan. Thus, the CA held that petitioner erred in unilaterally imposing an interest rate of 30.33% on the unpaid portion of the loan. The CA held that said rate was excessive, iniquitous, unconscionable and blatantly contrary to law and morals. Further, the CA ruled that the imposition of such unlawful interest rate will nullify the foreclosure sale arising therefrom. However, this was without prejudice to the lenders right to recover the principal of the loan and the validity of the terms of the real estate mortgage. In particular, the CA affirmed the subsistence of the principal amount due without the unlawful interest rate. In its place, the CA imposed a legal interest rate of 12% per annum. Moreover, the CA annulled the previously held foreclosure sale, but upheld the right of the mortgagee to institute another foreclosure proceedings upon default of the mortgagor. Thus, the petitioner filed the instant petition for review on certiorari raising the following issues: I WHETHER OR NOT ARTICLE 1956 [12] OF THE CIVIL CODE REQUIRES THE RATE OF INTEREST TO BE STIPULATED; and II WHETHER OR NOT FORECLOSURE OF MORTGAGE WAS VALID. [13] Essentially, the sole issue for our resolution is whether the imposition of usurious interest rates on a loan obligation secured by a real estate mortgage will result in the invalidity of the subsequent foreclosure sale of the mortgage. Petitioner argues that the CA was under the mistaken belief that the failure to stipulate a rate of interest was equivalent to the failure to provide for the payment of interest. Thus, petitioner establishes a distinction between stipulation of interest rate and stipulation of interest. Petitioner further contends that while the Promissory Note and Disclosure Statement did not provide a specific interest rate, the parties still agreed to the payment of interest based on the tenor of the language used therein. This, petitioner stresses, militates against the ruling of the CA that there was a unilateral imposition of interest rate. Petitioner further claims that the defect in the Second Notice of Extrajudicial Sale cannot affect the validity of the foreclosure sale. Based on case l