4E Steel Builders Corporation vs. Maybank Philippines, Inc.

A foreign bank, though authorized to operate in the Philippine banking system, is disqualified from bidding or taking part in any foreclosure sale of real property mortgaged to it when the foreclosure sale occurred prior to the effectivity of R.A. No. 10641, pursuant to R.A. No. 4882, which prohibits a mortgagee disqualified from acquiring lands of the public domain from participating in such sale. The stipulation on interest at "prevailing prime rate plus 2.5% per annum" without specifying a market-based reference rate violates the principle of mutuality of contracts and is void, warranting the application of legal interest instead.

Maybank Philippines, Inc. is a foreign banking corporation operating in the Philippines. 4E Steel Builders Corporation is a domestic company with Filomeno Ecraela as its President and Virginia Ecraela as its Corporate Secretary. On December 14, 1999, Maybank executed a Credit Agreement in favor of 4E Steel, granting a credit line not exceeding PHP 4,800,000.00, set to expire on November 12, 2000. To secure drawdowns on the credit line, Spouses Ecraela mortgaged five parcels of land covered by various TCT numbers, some owned by them, some by 4E Steel, and others by accommodation mortgagors. The credit agreement was renewed on December 14, 2001, consolidating five promissory notes into a single promissory note (PN No. 04-004-00-0117-5) for PHP 4,800,000.00 maturing on June 10, 2002. The constitutional principle that the right to acquire lands of the public domain is reserved only to Filipino citizens or corporations at least 60% Filipino-owned forms the backdrop for the foreign-ownership restriction at issue.

On December 14, 1999, Maybank Philippines, Inc. executed a Credit Agreement in favor of 4E Steel Builders Corporation, represented by Spouses Filomeno and Virginia Ecraela, granting a credit line not exceeding PHP 4,800,000.00 with an expiry date of November 12, 2000. To secure payment of drawdowns, Spouses Ecraela mortgaged five parcels of land covered by TCT Nos. 340528, C-316200, 215757, 309070, and C-322693. Of these, they owned the land under TCT No. 340528; 4E Steel owned those under TCT Nos. 309070 and C-322693; and the remaining two belonged to accommodation mortgagors Spouses Henry and Sally Sia and Bethaida de los Reyes. 4E Steel drew down five promissory notes from the credit line: PN No. 99-038 (PHP 2,500,000.00, 14.5% interest, 180-day period), PN No. 2000-035 (PHP 100,000.00, 14.5%, 30 days), PN No. 2000-48 (PHP 150,000.00, 14.5%, 32 days), PN No. 2000-051 (PHP 50,000.00, 14.5%, 30 days), and PN No. 2000-066 (PHP 2,000,000.00, 15%, 30 days). Each promissory note contained an acceleration clause rendering the outstanding amount immediately due and payable upon default, with a penalty charge of 24% per annum. PN Nos. 2000-035 and 2000-48 also contained an automatic conversion clause providing that any unpaid portion after 365 days would be converted into a medium or long-term loan subject to the bank's interest rate for such obligations.

On December 14, 2001, Maybank approved the renewal of the credit line, and the parties consolidated the five promissory notes under a single Promissory Note No. 04-004-00-0117-5 dated December 26, 2001, whereby 4E Steel, represented by Spouses Ecraela, promised to pay PHP 4,800,000.00 upon maturity on June 10, 2002, with interest at the "prevailing prime rate plus 2.5% per annum." When the drawdowns became due and demandable, Maybank sent a letter dated February 19, 2003 reminding 4E Steel and Spouses Ecraela to settle their outstanding obligation. In a letter dated April 8, 2003, 4E Steel, through counsel, acknowledged the outstanding loan but asserted that it had only received PHP 2,800,000.00, claiming that the PHP 2,000,000.00 under PN No. 2000-066 was merely an accommodation in favor of Mega Builders. 4E Steel requested a reconciliation of account records and restructuring of the loan. Maybank issued a statement of account indicating that as of May 20, 2003, the total outstanding obligation under PN No. 04-004-00-0117-5 amounted to PHP 6,638,488.34.

Dissatisfied, 4E Steel filed a Complaint for Accounting and Re-application of Payments before the RTC of Caloocan City, Branch 125, docketed as Civil Case No. C-20539. Maybank thereafter filed a Petition for Extrajudicial Foreclosure of the mortgaged properties, and the notary public issued a Notice of Extrajudicial Foreclosure Sale. 4E Steel amended its Complaint to include Spouses Ecraela as plaintiffs and sought nullification of the foreclosure petition and injunctive relief. The RTC denied the application for a writ of preliminary injunction on November 17, 2003, and the foreclosure sale proceeded on November 21, 2003, with Maybank emerging as the highest bidder and a certificate of sale issued in its name. 4E Steel and Spouses Ecraela then filed a Supplemental Complaint contending that Maybank, as a corporation owned and controlled by foreign nationals, was disqualified from acquiring lands in the Philippines, and sought nullification of the sale and cancellation of the mortgage annotation. Maybank countered that it was a domestic corporation organized under Philippine laws, that Section 5 of Act No. 3135 allowed creditor bank participation in foreclosure sales, and that the certificate of sale did not vest absolute ownership due to the right of redemption.

The RTC dismissed the Amended Complaint on August 13, 2012, holding that the foreclosure sale was in accordance with law, and denied the Motion for Reconsideration on April 8, 2013. On appeal, the CA partially granted the appeal on June 21, 2016, annulling the foreclosure sale because Maybank, having admitted that majority of its capital stock was owned and controlled by foreign nationals, was disqualified from bidding under R.A. No. 4882, the law in force at the time of the sale. The CA upheld the principal obligation at PHP 4,800,000.00, reduced the penalty charge from 24% to 6% per annum, and ordered the parties to jointly appoint an independent accountant to compute the outstanding loan obligations. Both parties filed Motions for Reconsideration, which the CA denied on February 17, 2017. Both parties then elevated the case to the Supreme Court via consolidated Petitions for Review on Certiorari.

4E Steel and Spouses Ecraela (G.R. No. 230013):

• Reconveyance of Titles: Petitioners argued that Maybank should reconvey or transfer the title of the foreclosed properties in their name.
• Principal Obligation Amount: Petitioners maintained that their loan obligation was only PHP 2,500,000.00 and not PHP 4,800,000.00, because the PHP 2,000,000.00 difference was actually credited to Mega Builders, and the loans under PN Nos. 2000-035 and 2000-048 had not yet matured.
• Void Interest Rates: Petitioners argued that the interest rates stipulated were void and conflicting.
• Unconscionable Penalty: Petitioners contended that the imposition of the penalty charge was unconscionable.
• Non-Cancellation of Earlier Notes: Petitioners countered that the five promissory notes were not cancelled by PN No. 04-004-00-0117-5, and that the PHP 2,000,000.00 under PN No. 2000-066 should be excluded from the principal obligation.

Maybank (G.R. No. 230100):

• Retroactive Application of R.A. No. 10641: Petitioner contended that R.A. No. 10641, which took effect on July 30, 2014 and allowed foreign bank participation in foreclosure sales, should be given retroactive application.
• No Need for Independent Accountant: Petitioner argued that there was no need to appoint an independent accountant because the five promissory notes had been cancelled and superseded by PN No. 04-004-00-0117-5, where 4E Steel and Spouses Ecraela already agreed to pay PHP 4,800,000.00 plus stipulated interest.
• Validity of 24% Penalty Charge: Petitioner maintained that the 24% penalty charge agreed upon by the parties should prevail.
• Non-Finality of Reconveyance Order: Petitioner asserted that the CA Decision ordering reconveyance had not yet attained finality.
• Supersession of Earlier Notes: Petitioner argued that the five promissory notes had been superseded by PN No. 04-004-00-0117-5 by virtue of the loan restructuring.
• Express Written Agreement on Interest: Petitioner contended that the parties expressly agreed in writing that the loan would bear interest.
• Equity and Social Justice: Petitioner argued that retroactive application of R.A. No. 10641 would be more in accord with equity and social justice.

Maybank (in G.R. No. 230013):

• Non-Finality of Reconveyance: Respondent countered that the CA Decision ordering reconveyance or transfer of titles had not yet attained finality.
• Supersession of Notes: Respondent argued that the five promissory notes had been superseded by PN No. 04-004-00-0117-5 by virtue of the restructuring of the loans.
• Express Interest Agreement: Respondent maintained that the parties expressly agreed in writing that the loan would bear interest.
• Agreed Penalty: Respondent argued that the 24% penalty charge had been agreed upon by the parties.

4E Steel and Spouses Ecraela (in G.R. No. 230100):

• Disqualification Under R.A. No. 4882: Respondents argued that Maybank was disqualified from participating in the extrajudicial foreclosure sale under R.A. No. 133 as amended by R.A. No. 4882.
• Nullity of Foreclosure and Sale: Respondents maintained that Maybank should be ordered to reconvey the titles since the foreclosure and certificate of sale were null and void.
• Necessity of Independent Accountant: Respondents argued that the appointment of an independent accountant was necessary.

• Principal Loan Obligation: Whether the principal loan obligation of 4E Steel Builders Corporation and Spouses Filomeno G. Ecraela & Virginia Ecraela amounts to PHP 4,800,000.00.
• Validity of Foreclosure and Acquisition: Whether Maybank Philippines, Inc.'s foreclosure and acquisition of the subject properties are authorized by law.
• Validity of Interest Rates and Penalty Charges: Whether the interest rates and penalty charges stipulated are valid.
• Necessity of Independent Accountant: Whether the appointment of an independent accountant is necessary to determine the total loan obligation to be paid by 4E Steel and Spouses Ecraela to Maybank.

• Principal Loan Obligation: Yes. The principal loan obligation is PHP 4,800,000.00, as consolidated under PN No. 04-004-00-0117-5, which 4E Steel and Spouses Ecraela acknowledged and signed; the accommodation arrangement with Mega Builders did not excuse their primary liability, and the automatic conversion clause did not extend the maturity dates of the earlier promissory notes.
• Validity of Foreclosure and Acquisition: No. Maybank, as a foreign bank, was disqualified from bidding or participating in the foreclosure sale under R.A. No. 4882, the law in force at the time of the sale in 2003; R.A. No. 10641, which later authorized foreign bank participation, applies prospectively only and cannot be given retroactive effect absent an express retroactivity clause.
• Validity of Interest Rates and Penalty Charges: Partially. The stipulation on interest at "prevailing prime rate plus 2.5% per annum" was declared void for violating the principle of mutuality of contracts, as it failed to specify a market-based reference rate; the penalty charge of 24% per annum was reduced to 6% per annum as unconscionable.
• Necessity of Independent Accountant: Yes. The appointment of an independent accountant was deemed necessary because the records were silent on certain matters required to determine the total amount due, including the interest period covered, partial payments made, and reimbursable amounts due to the modification of the interest rate and penalty charges.

• Principal Loan Obligation: The issue was factual and evidentiary in nature, beyond the scope of review in Rule 45 petitions, but the Court resolved it to allay misgivings. 4E Steel and Spouses Ecraela admitted they had yet to pay in full their drawdowns. They contended that only PN Nos. 99-038 and 2000-051 were due, that the PHP 2,000,000.00 under PN No. 2000-066 should be excluded as an accommodation for Mega Builders, and that PN Nos. 2000-035 and 2000-48 had not matured due to the automatic conversion clause. The Court found that the credit agreement was renewed on December 14, 2001, consolidating the five promissory notes under PN No. 04-004-00-0117-5 for PHP 4,800,000.00. Spouses Ecraela signed the renewal on behalf of 4E Steel. A promissory note is a contract of loan, and obligations arising from contracts have the force of law between the parties. In PN No. 04-004-00-0117-5, 4E Steel already acknowledged the PHP 4,800,000.00 obligation. The statement of account confirmed this. Moreover, 4E Steel and Spouses Ecraela did not question the consolidation before the CA, raising it only before the Supreme Court; issues not raised in the proceedings below cannot be raised for the first time on appeal, as this would violate fair play, justice, and due process. In any event, even as accommodation parties under PN No. 2000-066, 4E Steel and Spouses Ecraela were directly and primarily liable to Maybank, as the relation between an accommodation party and the accommodated party is one of principal and surety. Regarding PN Nos. 2000-035 and 2000-48, the automatic conversion clause did not extend the maturity dates but only determined the applicable interest rate after 365 days; reading the acceleration clause and the automatic conversion clause together pursuant to Article 1374 of the Civil Code, both clauses must be given effect, and interpreting the conversion clause as extending maturity would render the acceleration clause nugatory.

• Validity of Foreclosure and Acquisition: Maybank admitted it was a foreign bank. Under R.A. No. 8791 (General Banking Law), banks may foreclose real estate mortgages and acquire mortgaged properties. However, the participation of a corporation in the foreclosure sale of real property was governed by special laws. R.A. No. 133, enacted in 1947, provided that a mortgagee disqualified to acquire or hold lands of the public domain shall not bid or take part in any sale of such real property. R.A. No. 4882, enacted in 1967, amended R.A. No. 133 and reinforced that a disqualified mortgagee may possess the mortgaged property after default and for the sole purpose of foreclosure, but may not bid or take part in any foreclosure sale. The constitutional principle reserves the right to acquire lands of the public domain to Filipino citizens or corporations at least 60% Filipino-owned; corporations disqualified from acquiring lands of the public domain are also disqualified from acquiring private lands. R.A. No. 7721 (Foreign Bank Liberalization Act of 1994) was silent on whether foreign banks could foreclose and acquire mortgaged properties. R.A. No. 10641, enacted in 2014, amended R.A. No. 7721 and allowed foreign banks to bid and take part in foreclosure sales, subject to limitations including a five-year possession period, prohibition on title transfer to the foreign bank, and mandatory transfer to a qualified Philippine national. However, R.A. No. 10641 does not contain a retroactivity clause, and under Article 4 of the Civil Code, laws shall have no retroactive effect unless the contrary is provided. The credit agreement was entered in 1999 and 2001, and the foreclosure sale took place in 2003, when R.A. No. 4882 was the governing law. The Court applied the doctrine of stare decisis, citing Parcon-Song vs. Parcon, which involved substantially similar facts and held that the foreclosure sale to Maybank was void under R.A. No. 4882. Maybank's argument for retroactive application based on equity was rejected, as equity applies only in the absence of statutory law and never against it. Accordingly, the sale to Maybank was void.

• Validity of Interest Rates and Penalty Charges: The principle of mutuality of contracts, embodied in Article 1308 of the Civil Code, requires that a contract bind both parties; its validity or compliance cannot be left to the will of one of them. If a condition depends solely on the will of one party, it is void. This applies to interest rates: there is no mutuality when the determination or imposition of interest rates is at the sole discretion of one party. The Credit Agreement and PN No. 04-004-00-0117-5 stipulated interest at "prevailing prime rate plus 2.5% per annum" without specifying which market-based reference rate would be used. In Goldwell Properties Tagaytay, Inc. vs. Metropolitan Bank and Trust Co., the Court held that even market-based interest rates must specify the reference rate in writing and must be agreed upon by the parties. The stipulation gave Maybank unilateral authority to determine the applicable rate, rendering it potestative and void. On the penalty charge, Article 2229 of the Civil Code sanctions penalty interest, and Article 1229 authorizes courts to equitably reduce unconscionable penalties. The 24% per annum penalty was higher than the 18% reduced to 6% in Goldwell, and Maybank had already received over PHP 1,000,000.00 in interest and penalties. The Court affirmed the reduction to 6% per annum. Legal interest of 12% per annum was applied from December 26, 2001 to June 30, 2013, and 6% per annum from July 1, 2013 until full payment, in conformity with BSP Circular No. 799. In case of default upon finality, compensatory interest of 6% per annum on the total amount due was imposed, plus 6% per annum legal interest on unpaid interest from judicial demand until full satisfaction, pursuant to Article 2212 of the Civil Code.

• Necessity of Independent Accountant: The records were silent on certain matters necessary to determine the total amount due under PN No. 04-004-00-0117-5, including the interest period covered, partial payments made by 4E Steel, and reimbursable amounts due to the modification of the interest rate and penalty charges. Under Article 1197 of the Civil Code, courts may fix a period when, from the nature and circumstances of the obligation, a period was intended by the parties. Maybank was ordered to furnish 4E Steel and Spouses Ecraela a written detailed accounting within 30 days from finality, after which they would have 30 days to settle the outstanding balance. The appointment of an independent accountant was deemed compelling to render a full, complete, and accurate accounting of the outstanding loan obligations in accordance with the Court's ruling.

• Mutuality of Contracts (Article 1308, Civil Code) — A contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. If a condition in the contract depends solely on the will of one party, it is void. Applied to interest rates, there is no mutuality when the determination or imposition of interest rates is at the sole discretion of one party. The Court held that a stipulation to pay interest at "prevailing prime rate plus 2.5% per annum" without specifying a market-based reference rate violated mutuality, as it gave the bank unilateral authority to determine the applicable rate, rendering the stipulation potestative and void.

• Market-Based Interest Rate Stipulations — Even if interest rates are market-based, the reference rate must be stated in writing and agreed upon by the parties. A stipulation to pay interest at "the prevailing market rate" or "prevailing prime rate" without specifying the market-based reference is void for violating mutuality of contracts, and legal interest shall be applied instead. This doctrine was established in Goldwell Properties Tagaytay, Inc. vs. Metropolitan Bank and Trust Co. and applied in this case.

• Accommodation Party Liability — The relation between an accommodation party and the accommodated party is one of principal and surety. The accommodation party is deemed an original promisor and debtor from the beginning, with immediate, primary, and absolute liability to the creditor, directly and equally bound with the principal. Even if 4E Steel acted merely as an accommodation party for Mega Builders under PN No. 2000-066, it was principally and directly liable to Maybank for the PHP 2,000,000.00.

• Foreign Bank Disqualification in Foreclosure Sales (R.A. No. 4882) — A mortgagee disqualified from acquiring lands of the public domain may possess the mortgaged property after default and solely for the purpose of foreclosure, but may not bid or take part in any foreclosure sale of the real property. Corporations disqualified from acquiring lands of the public domain are also disqualified from acquiring private lands. A foreign bank, though authorized to operate in the Philippine banking system, was disqualified from bidding in foreclosure sales prior to R.A. No. 10641. The sale to a disqualified mortgagee is void.

• Prospective Application of Laws (Article 4, Civil Code) — Laws shall have no retroactive effect unless the contrary is provided. R.A. No. 10641, which allowed foreign bank participation in foreclosure sales, does not contain a retroactivity clause and therefore applies prospectively only. The law in force at the time of the foreclosure sale governs.

• Stare Decisis — Once a case has been decided one way, any other case involving exactly the same point at issue should be decided in the same manner. The Court applied Parcon-Song vs. Parcon, which involved substantially similar facts (Maybank foreclosing in 2001 as a foreign bank), as binding precedent.

• Equity in the Absence of Statutory Law — Equity, described as "justice outside legality," should be applied only in the absence of, and never against, statutory law. Maybank's argument for retroactive application of R.A. No. 10641 based on equity was rejected because Article 4 of the Civil Code expressly provides that laws have no retroactive effect.

• Reduction of Unconscionable Penalty (Article 1229, Civil Code) — Courts may equitably reduce a penalty when the principal obligation has been partly or irregularly complied with, or if the penalty is iniquitous or unconscionable. A 24% per annum penalty charge was reduced to 6% per annum, consistent with Goldwell and considering that Maybank had already received over PHP 1,000,000.00 in interest and penalties and that 4E Steel had partially complied with payment.

• Contractual Interpretation (Article 1374, Civil Code) — The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. Contracts cannot be construed by parts; clauses must be interpreted in relation to one another to give effect to the whole. The acceleration clause and automatic conversion clause were read together, and the conversion clause was held to affect only the applicable interest rate, not the maturity dates, so as to give effect to both provisions.

• Issues Not Raised Below Barred on Appeal — Issues not raised in the proceedings below cannot be raised for the first time on appeal, as allowing fresh issues is violative of fair play, justice, and due process. Issues not timely raised in the lower court are barred by estoppel.

• "It may possess the mortgaged propert[ies] after default and solely for foreclosure, but it cannot take part in any foreclosure sale" — This formulation, drawn from Parcon-Song vs. Parcon, encapsulates the controlling rule on foreign bank disqualification in foreclosure sales under R.A. No. 4882 and was applied as the ratio decidendi for annulling the foreclosure sale to Maybank.

• "even if the interest rates would be market-based, the reference rate should still be stated in writing and must be agreed upon by the parties" — This passage from Goldwell Properties Tagaytay, Inc. vs. Metropolitan Bank and Trust Co. states the canonical formulation of the requirement that market-based interest stipulations must specify a reference rate, and was applied to void the "prevailing prime rate plus 2.5%" stipulation for violating mutuality of contracts.

• "Equity, which has been aptly described as 'justice outside legality,' should be applied only in the absence of, and never against, statutory law." — This principle was invoked to reject Maybank's argument that R.A. No. 10641 should be applied retroactively on grounds of equity and social justice, reinforcing the rule that statutory law prevails over equitable considerations.

• "contracts cannot be construed by parts, but clauses must be interpreted in relation to one another to give effect to the whole" — This articulation of Article 1374 of the Civil Code was applied to construe the acceleration clause and automatic conversion clause together, holding that the latter affected only the interest rate and not the maturity dates, so as to give effect to both provisions.

• Parcon-Song vs. Parcon, G.R. No. 199582, July 7, 2020 — Controlling precedent. The Court held that Maybank, as a foreign bank, was disqualified from bidding in the foreclosure sale under R.A. No. 4882, the law in force at the time of the 2001 foreclosure. Applied as binding under the doctrine of stare decisis due to substantially similar facts.

• Goldwell Properties Tagaytay, Inc. vs. Metropolitan Bank and Trust Co., G.R. No. 209837, May 12, 2021 — Followed. Established that market-based interest rate stipulations must specify the reference rate in writing; a stipulation at "prevailing market rate" without specifying the reference violates mutuality of contracts. Applied to void the "prevailing prime rate plus 2.5%" stipulation and to reduce the 24% penalty charge to 6%.

• Mangayan vs. Robielos, A.C. No. 11520, April 5, 2022 — Followed. Elucidated the relation between an accommodation party and the accommodated party as one of principal and surety, with the accommodation party bearing immediate, primary, and absolute liability to the creditor. Applied to hold 4E Steel liable for the PHP 2,000,000.00 under PN No. 2000-066.

• Polotan Sr. vs. CA, 357 Phil. 250 (1998) — Cited for the proposition that an interest rate based on prevailing market rates is valid where the fluctuation is beyond the control of the bank, distinguishing it from the void stipulation in this case which lacked a specified reference rate.

• United Coconut Planters Bank vs. Ang, G.R. No. 222448, November 24, 2021 — Cited for the principle that when parties subject themselves to prevailing market rates, the borrowers agree that interest will be based on independent and recognized financial rates beyond the bank's control.

• Sps. Juico vs. China Banking Corp., 708 Phil. 495 (2013) — Cited for the historical context that since the deregulation of bank rates in 1983, the Central Bank shifted to a market-oriented interest rate policy.

• Torres vs. Republic, G.R. No. 247490, March 2, 2022 — Cited for the doctrine of stare decisis and its importance in securing certainty and stability of judicial decisions.

• Encarnacion vs. Johnson, 836 Phil. 76 (2018) — Cited for the constitutional principle that corporations disqualified from acquiring lands of the public domain are also disqualified from acquiring private lands.

• Heirs of Wilson P. Gamboa vs. Sec. Teves, 696 Phil. 276 (2012) — Cited for the definition of a Philippine national as a corporation where 60% of the capital stock outstanding and entitled to vote is owned by Philippine citizens.

• Global Medical Center of Laguna, Inc. vs. Ross Systems International, Inc., G.R. Nos. 230112 & 230119, May 11, 2021 — Cited for the rule in statutory construction that a special law prevails over a general law regardless of dates of passage.

• Article 1308, Civil Code — The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. Applied to hold that the interest rate stipulation at "prevailing prime rate plus 2.5% per annum" violated mutuality of contracts by giving Maybank unilateral authority to determine the rate.

• Article 1374, Civil Code — The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. Applied to construe the acceleration clause and automatic conversion clause together, holding that the latter affected only the interest rate, not the maturity dates.

• Article 1229, Civil Code — The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with, or if the penalty is iniquitous or unconscionable. Applied to reduce the 24% per annum penalty charge to 6% per annum.

• Article 2229, Civil Code — If the obligation consists in the payment of a sum of money and the debtor incurs delay, the indemnity for damages shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest of 6% per annum. Cited as authority for penalty interest.

• Article 4, Civil Code — Laws shall have no retroactive effect, unless the contrary is provided. Applied to hold that R.A. No. 10641, which lacks a retroactivity clause, applies prospectively only and cannot govern the 2003 foreclosure sale.

• Article 1197, Civil Code — If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof. Applied to authorize the Court to fix the period for compliance and order Maybank to furnish a detailed accounting.

• Article 2212, Civil Code — Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. Applied to impose 6% per annum legal interest on unpaid interest from judicial demand until full satisfaction.

• Article 1159, Civil Code — Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Cited in support of the binding effect of PN No. 04-004-00-0117-5.

• Section 1, R.A. No. 133 — A mortgagee disqualified to acquire or hold lands of the public domain shall not bid or take part in any sale of such real property as a consequence of such mortgage. Cited as the original law governing corporate participation in foreclosure sales of real property.

• Section 1, R.A. No. 4882 — A disqualified mortgagee may possess the mortgaged property after default and for the sole purpose of foreclosure, but shall not bid or take part in any foreclosure sale. Applied as the governing law at the time of the November 21, 2003 foreclosure sale to disqualify Maybank.

• Section 9, R.A. No. 10641 — Foreign banks authorized to do banking business in the Philippines may bid and take part in foreclosure sales of real property mortgaged to them, subject to limitations including a five-year possession period, prohibition on title transfer, and mandatory transfer to a qualified Philippine national. Discussed but held inapplicable due to lack of a retroactivity clause.

• Section 52, R.A. No. 8791 (General Banking Law) — A bank may acquire, hold, or convey real property mortgaged to it in good faith, and must dispose of such property within five years. Cited as the general law on bank acquisition of real estate, distinguished from the special law (R.A. No. 4882) governing foreign bank participation in foreclosure sales.

• R.A. No. 7721 (Foreign Bank Liberalization Act) — Allowed foreign banks to operate in the Philippine banking system through specified modes of entry. Noted as silent on whether foreign banks could foreclose mortgages and acquire mortgaged properties.

• BSP Circular No. 799 — Referenced by the CA for reducing the legal interest rate from 12% to 6% per annum effective July 1, 2013. Applied in setting the interest rates for the periods after the stipulated interest periods.

Leonen, SAJ. (Chairperson), Lazaro-Javier, M. Lopez, and Kho, Jr., JJ., concurred.