Philippine Supreme Court Resolutions > Year 2010 > January 2010 Resolutions > [G.R. No. 189736 : January 13, 2010] SPS. LORNA VILLAROSA AND ANDREW VILLAROSA V. SPS. LAWRENCE MCAFFERIY AND BENILDA MCAFFERTY :

Quoted hereunder, for your information, is a resolution of this Court dated 13 January 2010:

G.R. No. 189736 (Sps. Lorna Villarosa and Andrew Villarosa v. Sps. Lawrence McAfferty and Benilda McAfferty).-

This case is about a creditor's notice of adjustment of the amount of the unpaid loan that the debtor insisted was a cancellation or renunciation of the debt.


The Facts and the Case


On four occasions respondents Lawrence and Benilda McAfferty gave loans totaling P900,000.00 to petitioners Lorna and Andrew Villarosa. The parties agreed to compound the interest on the loans. On September 22, 2000 the Villarosas executed a promissory note which showed that their debts had ballooned to P1,091,637.00 with an interest of 6% per month. They secured their debts by turning over to the McAffertys several deeds and land titles. The Villarosas also issued several checks to cover their debts. Some of these checks bounced when the McAffertys deposited them. They did not bother to deposit the others when the Villarosas confirmed to the McAffertys that the account had been closed.

Eventually the McAffertys filed a complaint against the Villarosas for collection of their debts before the Regional Trial Court (RTC) of Palawan and Puerto Princesa City in Civil Case 3741. The McAffertys claimed that the Villarosas failed to pay despite formal demand to do so. They took recourse to the court when the attempt to settle the matter at the barangay level failed.

In their defense, the Villarosas admitted owing money to the McAffertys but disputed the computation of the debts. They alleged having already paid the interest and part of the principal either in cash or in checks. Further, they claimed that the McAffertys rented a house from them and, to further reduce the debts, the rents were to be set off against them.

In the course of trial, the Villarosas presented two contracts of lease, one dated May 3, 1999 and the other dated September 22, 2000. Although they agreed in the first contract that the monthly rent was to be P7,500.00, they stipulated in the second that the lease period would be for 25 years tree of rent until the Villarosas shall have fully paid their debts. Finally, the Villarosas claimed receiving a notice dated March 5, 2001 from the McAffertys, canceling the last promissory note as of April 1, 2001 and indicating that their debts totaled P1,365,419.00 inclusive of interest and payable on that date.

After trial, the RTC rendered a decision dated February 28, 2007, holding that the Villarosas remained in debt to the McAffertys and that the notice of cancellation they got was not a renunciation of that debt but an adjusted statement of the same. The RTC found unconscionable, however, the 6% interest on the loan per month and reduced it to 2% per annum.

The RTC noted that the parties appeared to have intended the leased property to serve as security for the loans, providing for the release of such property when the loans shall have been paid. But this stipulation, said the RTC, in effect unfairly deprived the Villarosas of the incomes due from the McAffertys' use of their property. It held that the latter should not be allowed to unjustly enrich themselves at the expense of their debtors. Consequently, the RTC set off the rental fee that the parties earlier fixed at P7,500.00 per month against the debt, leaving a balance of P742,500.00. The RTC ordered the Villarosas to pay this amount plus attorney's fees and litigation expenses.

On appeal by the Villarosas to the Court of Appeals (CA) in CA-G.R. CV 89520, the latter court rendered judgment on April 17, 2009, affirming in toto the RTC decision. The appellate court also denied the Villarosas' motion for reconsideration, prompting the latter to file the present petition with this Court.


The Issue


The core issue in this case is whether or not the CA erred in affirming the RTC findings that the Villarosas' debts had not been cancelled and that they still owed so much to the McAffertys.


The Court's Ruling


The Court finds no reversible error in the assailed decision. The issues that the Villarosas present are essentially factual and do not merit consideration at this point of the judicial ladder. Based on the findings of both the RTC and the CA, the notice of cancellation that the McAffertys sent to the Villarosas was nothing more than a statement that the latter's debts had increased to P1,365,419.00, inclusive of interest, and was payable on April 1, 2001. The Court observes that every time they extended anew loan, the McAffertys cancelled the previous promissory note and had a new one executed, incorporating the previous loan amount.

ACCORDINGLY, the Court DENIES the petition and entirely affirms the decision of the Court of Appeals in CA-G.R. CV 89520 dated April 17, 2009.

SO ORDERED.

 
WITNESS the Honorable Antonio T. Carpio, Chairperson, Honorable Arturo D. Brion, Mariano C. Del Castillo, Roberto A. Abad and Jose P. Perez, Members, Second Division, this 13^th day of January, 2010.