Toledo v. Hyden

G.R. No. 172139 (December 8, 2010)

Court upheld "Acknowledgment of Debt," dismissing Jocelyn M. Toledo's coercion claims on loans.

Facts:

Petitioner Jocelyn M. Toledo, who served as Vice-President of College Assurance Plan (CAP) Phils., Inc., entered into several loan agreements with respondent Marilou M. Hyden. The loans, totaling P290,000.00, were obtained at an interest rate of 6% to 7% per month. Despite making regular interest payments from August 1993 to December 1997, the principal amount remained unpaid. In April 1998, Marilou visited Jocelyn at her office, where Jocelyn signed an "Acknowledgment of Debt" for the total amount owed and issued several checks as renewal payments for the loans.

In June 1998, Jocelyn requested the recall of one check and replaced it with six others in staggered amounts. However, after honoring the first three checks, she ordered stop payments on the remaining checks and subsequently filed a complaint against Marilou in the Regional Trial Court (RTC) of Cebu City. Jocelyn alleged that she was coerced into signing the acknowledgment and issuing the checks, claiming that Marilou threatened her with legal action under the Bouncing Checks Law if she did not comply.

Marilou countered that Jocelyn voluntarily entered into the loan agreements and was fully aware of the interest rates, which had been deducted from the loan amounts. The RTC ruled in favor of Marilou, declaring the acknowledgment valid and binding, and ordered Jocelyn to pay the remaining balance with interest. Jocelyn's motion for reconsideration was denied, leading her to appeal to the Court of Appeals (CA), which affirmed the RTC's decision.

Legal Issues:

  1. Whether the imposition of interest at the rate of 6% to 7% per month is contrary to law, morals, good customs, public order, or public policy.
  2. Whether the "Acknowledgment of Debt" is an inexistent contract that is void from the beginning under Article 1409 of the New Civil Code.

Arguments:

Petitioner's Arguments: Jocelyn argued that the CA erred in upholding the interest rates as lawful and not unconscionable. She contended that the acknowledgment of debt should be declared null and void, asserting that her payments, totaling P778,000.00, were applied solely to interest, indicating an oppressive and excessive transaction. Jocelyn maintained that she was coerced into signing the acknowledgment and issuing the checks due to threats from Marilou.

Respondent's Arguments: Marilou contended that the acknowledgment was executed voluntarily in a safe environment, witnessed by Jocelyn's subordinates. She argued that Jocelyn had full knowledge of the interest rates and had benefited from the loans for over five years without complaint. Marilou asserted that Jocelyn's claims of coercion were unfounded, as she had honored several checks before filing the complaint.

Court's Decision and Legal Reasoning:

The Supreme Court denied Jocelyn's petition, affirming the CA's decision. The Court held that the interest rates of 6% to 7% per month were not unconscionable under the circumstances. It noted that the Central Bank Circular No. 905, which suspended the Usury Law ceiling on interest, allowed parties to stipulate their own rates, provided they were not excessively high. The Court distinguished this case from previous rulings where interest rates were deemed excessive, emphasizing that Jocelyn had willingly entered into the loan agreements and had used the funds for business purposes, which justified her acceptance of the interest rates.

The Court also found that Jocelyn's claims of coercion were not substantiated. It ruled that even if Marilou had threatened legal action, such a threat did not vitiate consent under Article 1335 of the New Civil Code, as it pertained to a just or legal claim. Furthermore, the Court applied the principle of estoppel, stating that Jocelyn could not deny the validity of the acknowledgment after benefiting from the loans and making payments.

Significant Legal Principles Established:

  1. The law does not relieve parties from the effects of unwise or disastrous contracts if they entered into them with full awareness of their terms.
  2. Interest rates stipulated in loan agreements are permissible as long as they are not unconscionable, especially in light of the suspension of the Usury Law.
  3. A threat to enforce a legal claim does not vitiate consent if the claim is just or legal.
  4. The principle of estoppel prevents a party from denying the validity of a contract after enjoying its benefits.