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    UCPB v. Sps. Beluso

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    Grace Ann Tamboon
    The case involves a dispute over interest rates and fees charged in a credit agreement between a bank and borrowers. The court found that the interest rates were invalid because they were determined solely by the bank without input from the borrowers. The bank was also found liable for violating disclosure requirements around interest rates and fees.

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    UCPB v. Sps. Beluso

    Uploaded by

    Grace Ann Tamboon
    12 views2 pages
    The case involves a dispute over interest rates and fees charged in a credit agreement between a bank and borrowers. The court found that the interest rates were invalid because they were determined solely by the bank without input from the borrowers. The bank was also found liable for violating disclosure requirements around interest rates and fees.

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    62. UCPB v. Sps. Beluso

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    The case involves a dispute over interest rates and fees charged in a credit agreement between a bank and borrowers. The court found that the interest rates were invalid because they were determined solely by the bank without input from the borrowers. The bank was also found liable for violating disclosure requirements around interest rates and fees.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    12 views2 pages

    UCPB v. Sps. Beluso

    Uploaded by

    Grace Ann Tamboon
    The case involves a dispute over interest rates and fees charged in a credit agreement between a bank and borrowers. The court found that the interest rates were invalid because they were determined solely by the bank without input from the borrowers. The bank was also found liable for violating disclosure requirements around interest rates and fees.

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    © All Rights Reserved
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    AUTHORSHIP INFORMATION

    Digest Author Grace Ann Tamboon


    Topic Credit Transactions Interest Rates /TILA
    CASE INFORMATION
    Petitioner(s) United Coconut Planters Bank
    Respondent(s) Spouses Samuel and Odette Beluso
    Reference G.R. No. 159912 August 17, 2007
    Ponente Justice Chico-Nazario
    DOCTRINE(S)

    The principle of mutuality requires that the lender and the borrower agree to an interest rate
    that is mutually beneficial and does not unfairly advantage one party over the other.

    Lenders must provide borrowers with a clear and accurate disclosure of the terms and
    conditions of the loan, including the interest rate, fees, and other charges.

    CASE SUMMARY
    Apr 16, 1996: UCPB granted the Sps Beluso a Promissory Notes Line
    under a Credit Agreement whereby the Belusos could avail a credit up to
    a max amt of P1.2M for a term ending on Apr 30, 1997. The Belusos, in
    addition to the promissory notes, executed a real estate mortgage over
    Pertinent some land in Roxas as additional security.
    Facts
    Later, their Credit Agreement was amended to increase the amount of the
    Promissory Notes Line to P2.3M. The term was also amended: extended
    to Feb 23, 1998.

    The Belusos availed of 3 promissory notes amounting to P2M, which were


    renewed several times. Apr 30, 1997, the payment of the principal +
    interest of the last 2 notes was debited form their account with UCPB (both
    added up to P1.3 mil). Later, a loan of P1.3mil was still released to them
    under a promissory note whose due date was Feb 28, 1998. (Meaning their
    loan was still an even P2M)
    To completely avail of the P2.35 mil credit line, they executed 2 more
    promissory notes amounting to P350k. However, they allege that the notes
    were never released to them, so they claim that their debt is still only P2M
    UCPB applied interest rates on the promissory notes ranging from 18% to
    34%:

    • From 1996 to Feb 1998, the Belusos paid P763k.


    • From Feb 1998 to June 1998, UCPB charged them interests and
    penalties.

    The Belusos failed to make any payment on these. Sept 1998, UCPB
    demanded pay P2.93 mil PLUS 25% atty fees. Belusos did not pay.
    PROCEDURAL HISTORY
    Interest rate provided in the promissory notes are void. Imposed fine of
    RTC P26k for violating the Truth in Lending Act.

    CA Affirmed RTC ruling because the rates were determined solely by the
    UCPB.

    Relevant 1. Are the interest rates valid? NO


    Issue(s) 2. Is UCPB liable for violation of the Truth in Lending Act? YES

    The case is a dispute UCPB and the Belusos regarding a credit agreement
    and promissory notes line. The Belusos allege that the two additional
    Analysis promissory notes were never released to them, while UCPB applied
    interest rates ranging from 18% to 34%. The Belusos paid P763,000 from
    1996 to February 1998, but failed to make any payments on interests and
    penalties charged by UCPB. The RTC ruled that the interest rate provided
    in the promissory notes was void, and the CA affirmed the decision due to
    the lack of transparency in determining the rates.

    RE: Interest Rates’ Validity

    SC disagrees with the UCPB. (PNB v. CA: There must be mutuality.) The
    Ruling(s) & provision: “interest shall be at the rate indicative of DBD retail rate OR as
    Rationale determined by the Branch Head” means the interest rates are solely on the
    will of UCPB. Under the provision, UCPB has 2 choices:
    • Rate indicative of the DBD rate
    • Rate as determined by the branch head.
    Because UCPB has the choice, the rate should be determinable in BOTH
    choices. If either gives UCPB to determine the rate at will, then the bank
    can just do that, thus making the entire int rate provision violative of the
    principle of mutuality.

    RE: Liability for violating the Truth in Lending Act


    SC held that the allegations in the complaint are controlling. SC adds some
    other parts in the complaint from which some violations can also be
    inferred: “unilaterally imposed an increased interest rate by relying on the
    provision in the promissory note that granted it the power to unilaterally fix
    the interest rate. Such interest rate was not determined in the promissory
    note but was left solely to the will of the branch head.” this means the
    promissory notes did not contain a clear statement in writing of the finance
    charge expressed in terms of pesos and centavos/the percentage that the
    finance charge bears to the amount to be financed expressed as a simple
    annual rate on the outstanding unpaid balance of the obligation.

    Dispositive: SC modified the CA’s decision.

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