Republic of the Philippines

COURT OF APPEALS
National Capital Judicial Region
Manila
PROPERTIES GALORE CORPORATION,
Plaintiff-Appellee,
CA GR. CV. 031108-2010
-versus-

SPOUSES HARVEY SANTOS AND

SELINA SANTOS
Defendants-Appellants.
X ----------------------------------- X
BRIEF FOR THE APPELANT
DEFENDANTS-APPELANTS, by counsel, unto this Honorable Court
respectfully submit their Brief, in support of their appeal from the Decision dated 20
July 2009 and the Order dated 18 September 2009 of the Regional Trial Court of
Malolos, Bulacan, Branch 10, in Civil Case No. 890-M-2006, and state:
I. THE PARTIES
Plaintiff-Appellee PROPERTIES GALORE CORPORATION is a corporation
duly organized and existing under Philippines laws, with principal office at Victoneta
Avenue, Malabon City, Metro Manila.
Defendants-Appellants HARVEY SANTOS and SELINA SANTOS are
spouses, of legal age, Filipino, and with address at No. 64 Catanghalan Street,
Meycauayan, Bulacan.

II. STATEMENT OF MATERIAL DATES

1. Orders dated 29 September 2008 1 and 15 April 20092 by the lower court
favored the plaintiff-appellee to sold at public auction the properties of defendantappellant given as security for the loan.
2. On 08 August 20093 defendants-appellants filed a Motion for Reconsideration but
was denied in the court a quo's dated 18 September 2009 4.
III. STATEMENT OF THE CASE
This is an ordinary appeal under Rule 41 of the 1997 Rules of Civil Procedure
filed by the herein Defendants-Appellants (brevity) Spouses Harvey and Selina
Santos against Plaintiff-Appellee Properties Galore Corporation seeking to SET
ASIDE and REVERSE the Decision dated 20 July 2009 and the Order dated 18
September 2009 of the Regional Trial Court of Malolos, Bulacan, Branch 10, in the
case entitled, Properties Corporation vs. Spouses Harvey Santos and Selina
Santos, docketed as Civil Case No. 890-M-2006.
In the appealed Decision dated 20 July 2009, the court a quo rendered
judgment in favor of the plaintiff-appellee as follows:
WHEREFORE, it appearing that the material allegations of the
complaints
had been established by clear and convincing and comment evidence,
judgment is hereby rendered in favor of the plaintiff and against the
defendants-spouses, ordering the latter to pay the former within a
period of one hundred twenty (120) days from the entry of judgment,
the following:
(1)
The principal amount of Five Million Pesos
(Php5,000,000.00) plus twelve percent (12%) interest per annum
computed from June 26, 2001, less the payment effected on February
23, 2009 in the amount of Php 500,000,00 to be initially to be initially
applied to be accrued interest;
(2)
The amount equivalent to five percent (5%) of the total
amount due as attorneys fees; and
1 Order date 29 September 2008, Rollo, p. 218.
2 Order dated 15 April 2009, Rollo, p. 303.
3 Motion for Reconsideration dated 08 August 2009, Rollo,
pp. 348-354.
4 Order dated 18 September 2009, Rollo, pp. 364-365.
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(3)

Cost of suit.

If defendants-spouses fail to pay the aforementioned amount

within the period as afore-stated, the properties covered by Transfer
Certificate of Title (TCT) Nos. T-389849 (M), TCT-389850 (M) shall be
sold at public auction to satisfy the judgment in the manner and under
the provisions of Rules of Court and other regulations governing sales
of sales of real estate under execution.
Defendants-spouses counterclaims are dismissed for lack of merit.
SO ORDERED.
A Complaint for Judicial Foreclosure of Mortgage filed by Plaintiff-appellee
against herein Defendant-Appellants, where it prayed for judgment in its favor,
asking the court to order the defendants to pay plaintiff the amount of NINE MILLION
NINE HUNDRED THOUSAND PESOS (P9,900,000.00); a sum equivalent to fifteen
percent of total indebtedness, inclusive of principal and interest as and by way of
attorneys fees, expenses, and costs; and to issue a decree of foreclosure for the
sale at public auction of the properties located at Meycauayan, Bulacan, and
covered by Transfer Certificate of Title (TCT) Nos. T-389849 (M), TCT -389850 (M)
issued by the Registry of Deeds for Meycauayan, Bulacan, and for the disposition of
the proceeds thereof in accordance with law, upon failure of the defendants to fully
pay the sums set forth in the complaint, within the period set by law. 5
Indeed, it was further alleged by plaintiff-appellee in its Complaint that: (a) out of the
total amount of Ten Million Four Hundred Thousand Pesos (P10,400,000.00), the
defendants were only able to pay the amount of Five Hundred Thousand Pesos
(P500,000.00) by a check dated 23 February 2003, leaving a balance of NINE
MILLION NINE HUNDRED THOUSAND PESOS (P9,900,000.00); (b) despite
numerous and repeated demands, defendants failed to pay the afore-stated amount
and that on 26 April 2005, final demand was made upon them to pay the total
amount of Twelve Million Six Hundred Ten Thousand Pesos (12,610,000.00),
inclusive of the principal amount of the loan, interest due thereon as of 26 December
2004 and fifteen percent (15%) of the sum thereof, as and by way of attorneys fee
and liquidated damages.6
Defendants-appellants sought the dismissal of the Complaint, and by way of
compulsory counterclaims, sought payment by plaintiff of the following amounts: Five
Hundred Thousand Pesos (P500,000.00) as and by way of moral and exemplary
damages; One Hundred Thousand Pesos (P100,000.00), as and by way of
5 Complaint dated 8 November 2006, pp. 6-7; Rollo, pp.
65-72.
6 Complaint dated 8 November 2006, pp. 467; Rollo, pp.
65-72.
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attorneys fees; and Fifty Thousand Pesos (P50,000.00) as and by way of litigation
expenses.7
Pre-trial8 and trial of the case ensued, with the parties presenting their respective
testimonial and documentary evidence. Plaintiff-appellee presented witnesses in the
persons of Ayne and Alfred Ramos, while Harvey and Selina Santos testified for the
defendants. The parties were also ordered to file their respective Formal Offer of
Exhibits as well as the Comments/Objections thereto, and the court accordingly ruled
upon the same in its Orders dated 29 September 2008 9 and 15 April 2009.10
Defendants-appellant sought a reconsideration of the assailed Decision by filing a
Motion for Reconsideration dated 08 August 2009 11 where they averred, among
others that: (a) the evidence presented by plaintiff was insufficient to justify the
decision; (b) the monetary award was excessive; and (c) they should be granted
damages and attorneys fees.
Plaintiff-appellee filed its Comment/Opposition dated 04 September 2009 12 to the
Motion for Reconsideration filed by defendants.
On 18 September 2009, the court rendered the Assailed Order denying the Motion
for Reconsideration filed by the defendants-appellant. 13
IV. STATEMENT OF FACTS
On 18 December 2001, the defendants-appellant obtained a loan from the plaintiff in
the amount of FIVE MILLION PESOS (P5,000,000.00), as evidenced by the
Promissory Note dated 18 December 2011 14, wherein they promised to pay plaintiff
the aforementioned amount with interest at the rate of three percent (3%) per month
on or before 26 December 2004.
7 Defendants Answer (with Compulsory Counterclaims)
dated 25 October 2006, pp. 3-4; Rollo, pp.57-61.
8 Pre-trial Order was issued on 22 February 2008, After
attempts at setting the case proved futile, the case was
set for initial trial on 16 May 2008.
9 Order dated 29 September 2008, Rollo, p. 218.
10 Order dated 15 April 2009, Rollo, p. 303.
11 Motion for Reconsideration dated 08 August 2009,
Rollo, pp. 348-354.
12 Comment/Opposition dated 04 September 2009, Rollo,
pp.358-363.
13 Order dated 18 September 2009, Rollo, pp.364-365.
14 Promissory Note dated 18 December 2001, Plaintiffs
Exhibits B to B-2, Inclusive, Rollo, p. 194.
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To secure the payment of the loan, the defendants-appellants executed a real estate
mortgage dated 9 December 2001 15 over real properties located in Meycauayan,
Bulacan and covered by Transfer Certificate of Title (TCT) Nos. T-389849 (M) 16, TCT389850 (M)17.
The REM was duly annotated at the back of both TCT Nos. T-389849 (M) 18 and
389850 (M)19 under Entry No. 5251175 (M).
Pursuant to the Promissory Note dated 18 December 2001, the appellantsdefendants agreed and committed themselves to pay plaintiff-appellee in accordance
with the terms and conditions state.
The defendants-appellant failed to pay the amount due on 26 June 2002 in
accordance with the terms and condition of the afore-mentioned Promissory Note,
and out of the total amount of Ten Million Four Hundred Thousand Pesos
(Php10,400,000.00) due plaintiff, the defendants were only able to pay the amount of
Five Hundred Thousand Pesos (Php5,000,000.00) by a check dated 23 February
2003. Said amount was applied to the payment of the interest outstanding and
overdue as of 26 June 2002, thereby leaving a balance of Nine Million Nine Hundred
Thousand Pesos (Php9,900,000.00) as of 26 December 2004.
Since the defendants-appellant failed to make good their obligation despite
numerous and repeated demands mace upon them. In a letter dated 26 April 2005 20,
final demand was made upon the defendants to pay the total amount of Twelve
Million Six Hundred Ten Thousand Pesos (Php12,610,000.00), inclusive of the
principal amount of the loan, interest due thereon as of 26 December 2004 and
fifteen percent (15%) of the sum thereof, as and by way of attorneys fees and
liquidated damages.
Despite having received the aforementioned letter, the defendants-appellant failed
and/or refused to settle their obligation to the plaintiff. This prompted the plaintiffappellee to institute the action for Judicial Foreclosure of Mortgage before the Trial
Court.
15 Real Estate Mortgage dated 19 December 2001,
Plaintiffs Exhibits C to C-14, inclusive, Rollo, pp. 195198.
16 Transfer Certificate of Title No. T-389849 (M), Plaintiffs
Exhibits D to D-1, inclusive, Rollo, p. 199.
17 Transfer Certificate of Title No. T-389850 (M), Plaintiffs
Exhibits E to E-1, inclusive, Rollo, p. 200-201.
18 Entry No. 525117 (M)- Plaintiffs Exhibit D-1,
inclusive, Rollo, p. 199.
19 Entry No. 525117 (M)inclusive, Rollo, pp. 200-201.

Plaintiffs

Exhibit E-1,

20 Demand letter dated 26 April 2005, Plaintiffs Exhibit

F, Rollo, pp. 202-204.
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V. ASSIGNMENT OF ERROR
A. The Honorable Trial Court committed reversible error in
declaring/granting that Appellees prayer to exercise its
right to foreclose Appellants real properties despite the
finding that Appellee charged exorbitant rate of interest of
3% per month (36% interest per annum).
B. The Honorable Trial Court erred in granting Appellees
prayer to exercise its right to foreclose Appellants real
properties despite the breach of contract made by the
Appellee.
VI. ARGUMENTS / DISCUSSION
A. The Honorable Trial Court committed
reversible error in declaring/granting
that Appellees prayer to exercise its
right to foreclose Appellants real
properties despite the finding that
Appellee charged exorbitant rate of
interest of 3% per month (36% interest
per annum).
Though it is a settled rule that the contract is the law between the parties,
there are exceptions to such which must be given due course. In this present case, it
is very clear that the interest of 3% per month for the loan obtained by the defendantappellant was excessive, iniquitous, unconscionable and exorbitant, contrary to
morals, and the law which should render the contact void ab initio.
In a case of ASIAN CATHAY FINANCE AND LEASING CORPORATION VS.
SPOUSES CESARIO GRAVADOR, et. Al, G.R. No. 186550, July 05, 2010, the
Supreme Court ruled as follows:
"Thus, we similarly hold the 3% monthly interest to be
excessive, iniquitous, unconscionable and exorbitant, contrary to
morals, and the law. It is therefore void ab initio for being violative of
Article 1306.
Stipulations authorizing the imposition of iniquitous or
unconscionable interest are contrary to morals, if not against the law.
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Under Article 1409 of the Civil Code, these contracts are inexistent and
void from the beginning."
Though the defendants-appellants, admitted that they obtained a loan from
the plaintiff and agreed to the terms and conditions of the Real Estate Mortgage and
Promissory Note, such contract must be void for being violative of Article 1306.

B. The Honorable Trial Court erred in

granting Appellees prayer to exercise
its right to foreclose Appellants real
properties despite the breach of
contract made by the Appellee.

The Appellant should have received the loaned amount of

5,000,000.00 in full. It was necessary for the business of piggery intended by
the Appellants.
On cross-examination, Selina Santos mentioned that they received the loan
on installment basis and not in full.
Q:
But the amount of P5M was eventually given?
A:
Yes sir, it was given to us, the full amount but not
immediately and on installment basis.
Breach of contract is defined as the failure without legal reason to comply with
the terms of a contract. It is also defined as the failure, without legal excuse, to
perform any promise which forms the whole or part of the contract. 21
The Plaintiff-Appellees committed a breach of contract by releasing the loan
on installment basis instead of being in full. As a result of the breach of contract, the
Appellants may elect to rescind the contract as the case of MANUEL RIOS v.
JACINTO PALMA provides:

21 R.S. Tomas, Inc. v. Rizal Cement Company, Inc., G.R. No.

173155, March 21, 2012.

At first blush it might appear that the case would perhaps be

affected by the reservation contained in the demand of plaintiffs'
attorney for the surrender of the premises, in which he stated that the
demand was without prejudice to ulterior responsibility for damages.
But a moment's reflection ought to show that the right of action here
reserved must be understood as having reference to such damages as
might be recoverable in law, consistently with the election of the
plaintiffs to rescind the contract.22
The Appellants should not anymore pay the interest of the loan to
compensate the damages brought about by the non-performance of the contractual
obligation of the Appellee. The Appellees are liable further of actual and moral
damages due to their breach of contract.
In cases such as this, Art. 2219 of the Code provides that moral damages
may be recovered in acts referred to in its Art. 21. 23
ART. 2219.Moral damages may be recovered in the following
and "analogous cases":
(1)

A criminal offense resulting in physical injuries;

(2)

Quasi-delicts causing physical injuries;

(3)

Seduction, abduction, rape, or other lascivious

(4)

Adultery or concubinage;

(5)

Illegal or arbitrary detention or arrest;

(6)

Illegal search;

(7)

Libel, slander or any other form of defamation;

(8)

Malicious prosecution;

(9)

Acts mentioned in article 309;

acts;

(10) Acts and actions referred to in articles 21, 26, 27,

28, 29, 30, 32, 34 and 35;

PRAYER
WHEREFORE, in view of the foregoing premises, defendants-appellant
Spouses Harvey and Selina Santos respectfully prays for this Honorable Court that
22 Manuel Rios and Pacience Reyes v. Jacinto Palma Y
Hermanos, G.R. No. L-23893, March 23, 1926.
23 Eusebio Gonzales v. Philippine Commercial and International
Bank, Edna Ocampo, and Roberto Noceda, G.R. No. 180257,
February 23, 2011.

the Decision dated 20 July 2009 and Order dated 18 September 2009 of the
Honorable Regional Trial Court of Malolos, Bulacan, Branch 10 appealed from be
REVERSED and SET ASIDE, and lieu thereof, judgment be rendered and a new one
be issued dismissing the Complaint for lack of merit.
Other relief and remedies just and equitable under the premises are likewise
prayed for.
RESPECTFULLY SUBMITTED.
City of Pasay for City of Manila, 15 February 2010.

CRUZ SULIGAN BANJAO NARCISO

DELA CALZADA LUCMAN LAW OFFICE
Counsels for Defendants-Appellant
Spouses Harvey and Selina Santos
4/F Spouses BLDG., No. 143 Sen. Gil Puyat
Avenue,
1108 Makati City
Tel. No. 895-2010

By:
ATTY. ROSEMARIE V. NARCISO
P.T.R. NO. 5152968/ Jan. 20, 2009/Pasig City
I.B.P. NO. 785922/March 5, 2009/Quezon City
ROLL NO. 27078
MCLE Compliance No. II-0012599

COPY FURNISHED:
Counsel for the Plaintiff-Appellee
Properties Galore Corp.
12TH Floor, Allied Bank Center
Ayala Avenue, Makati City
The Presiding Judge
Regional Trial Court of Malolos, Bulacan
Branch 10
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Malolos, Bulacan, Hall of Justice

EXPLANATION:
(Pursuant to Sec. 11, Rule 13 of the 1997 Rules of Civil Procedure)
This pleading is being served by Registered Mail as evidenced by the registry
receipts attached to/indicated in the affidavit of service, personal services being
impractical on account of the distance, heavy vehicular traffic and the lack of
messengerial staff at this time.

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