G.R. No. 192934 - SECURITY BANK CORPORATION, V. SPOUSES RODRIGO AND ERLINDA MERCADO.

Ruling

WHEREFORE , in view of the foregoing premises, the instant appeal is hereby PARTIALLY GRANTED . Accordingly, the assailed Decision dated February 26, 2007 and the Amendatory Order dated June 19, 2007 are hereby MODIFIED . [Spouses Mercado] are hereby ordered to pay [Security Bank] the sum of Seven Million Five Hundred Sixteen Thousand Eight Hundred Eighty Pesos (P7,516,880.00) with interest at the rate of twelve percent (12%) per annum from March 30, 1999, the date of extrajudicial demand, until fully paid. [Spouses Mercado] are further ordered to pay the stipulated penalty of two percent (2%) per month on the amount due in favor of Security Bank. The award of attorney's fees in favor of [spouses Mercado] is hereby deleted for lack of merit. All other dispositions of the trial court are hereby AFFIRMED . [40] Hence, these consolidated petitions. Security Bank argues that the CA erred in declaring: (1) the foreclosure sale invalid; and (2) the provisions on interest rate violative of the principle of mutuality of contracts. First, the foreclosure sale is valid because Security Bank complied with the publication requirements of Act No. 3135, as amended. The mistake in the original notice is inconsequential or minor since it only pertains to a letter and number in the technical description without actually affecting the actual size, location, and/or description or title number of the property. [41] It invokes Office of the Court Administrator (OCA) Circular No. 14 [42] issued on May 29, 1984 governing the format of sale which allegedly does not require that the complete technical description of the property be published. [43] Second , Security Bank insists that the provision on the interest rate observed the principle of mutuality of contracts. Absolute discretion on its part is wanting because a ceiling on the maximum applicable rate is found in the addendum. It is the market forces that dictate and establish the rate of interest to be applied and takes into account various factors such as but not limited to, Singapore Rate, London Rate, Inter-Bank Rate which serve as reference rates. This is acceptable, as held in Polotan, Sr. v. Court of Appeals ( Eleventh Division ). [44] Further, the spouses Mercado are bound by the rate because they were aware of, and had freely and voluntarily assented to it. [45] The spouses Mercado on the other hand, claim that the CA erred in imposing interest and penalty from the date of extrajudicial demand until finality of the Decision. Under the doctrine of operative facts laid down in Spouses Caraig v. Alday [46] and Andal v. Philippine National Bank , [47] the interest and penalty were considered paid by the auction sale. [48] As such, interest should only run from the finality of this Decision. They also assert that they should be excused from paying the penalty because of economic crises, and their lack of bad faith in this case. [49] Initially, we denied the spouses Mercados petition (G.R. No. 197010) in our Res