Agner vs. BPI Family Savings Bank, Inc.

The remedies under Article 1484 of the Civil Code are alternative and not cumulative, but where a writ of replevin is issued but the vehicle is never actually seized, the mortgagee is not deemed to have exercised the remedy of foreclosure and may validly pursue the alternative remedy of exacting fulfillment of the obligation. Additionally, stipulated interest rates of 6% per month (72% per annum) are excessive, iniquitous, unconscionable, and exorbitant, and may be equitably reduced to 1% per month (12% per annum) even absent a finding of usury, as Central Bank Circular No. 905-82 did not grant lenders carte blanche authority to impose interest rates that would enslave borrowers.

Spouses Deo Agner and Maricon Agner obtained financing for the purchase of a 2001 Mitsubishi Adventure Super Sport from Citimotors, Inc., executing a Promissory Note with Chattel Mortgage on February 15, 2001. Citimotors assigned its rights under the promissory note to ABN AMRO Savings Bank, Inc., which in turn assigned the same to BPI Family Savings Bank, Inc. on May 31, 2002. The promissory note stipulated monthly installments of ₱17,391.00 and contained a waiver of notice or demand clause, as well as a provision deeming the mere sending of correspondence to the mortgagor's address as valid notice. The legal framework governing the dispute includes Article 1484 of the Civil Code, which provides three alternative remedies to a vendor in an installment sale of personal property secured by a chattel mortgage, and Central Bank Circular No. 905-82, which removed the ceiling on interest rates.

On February 15, 2001, spouses Deo Agner and Maricon Agner executed a Promissory Note with Chattel Mortgage in favor of Citimotors, Inc. in connection with the purchase of a 2001 Mitsubishi Adventure Super Sport. Under the contract, petitioners received ₱834,768.00 and undertook to pay ₱17,391.00 every 15th day of each succeeding month until the obligation was fully paid. The loan was secured by the vehicle itself, and the contract stipulated an interest of 6% per month for failure to pay any installment on or before its due date. The promissory note further contained a waiver of notice or demand clause, providing that the entire outstanding sum would immediately become due and payable without prior notice in the event of default. It also included a provision stating that the mere act of sending any correspondence to the mortgagor's address—whether or not actually received—constituted valid and effective notice for all legal purposes.

On the same day the promissory note was executed, Citimotors assigned all its rights, title, and interests in the instrument to ABN AMRO Savings Bank, Inc. Subsequently, on May 31, 2002, ABN AMRO assigned the same to respondent BPI Family Savings Bank, Inc. Petitioners thereafter failed to pay four successive installments covering the period from May 15, 2002 to August 15, 2002. Respondent, through counsel, sent a demand letter dated August 29, 2002, declaring the entire obligation due and demandable and requiring payment of ₱576,664.04 or the surrender of the mortgaged vehicle.

As the demand went unheeded, respondent filed an action for Replevin and Damages before the Manila Regional Trial Court on October 4, 2002. A writ of replevin was issued, but the subject vehicle was never actually seized. Trial on the merits ensued. Petitioners denied receiving the demand letter and claimed to have made payments, but they failed to produce the original cash deposit slips or even photocopies of proof of payment. They did not mark any documentary evidence during the presentation of Deo Agner's testimony, nor did they make a formal offer of evidence. The RTC ruled for the respondent on August 11, 2005, ordering petitioners to pay ₱576,664.04 plus interest at 72% per annum from August 20, 2002 until fully paid, and costs of suit. The Court of Appeals affirmed this decision on April 30, 2007 and denied the motion for reconsideration on May 19, 2008.

• Lack of Cause of Action: Petitioner argued that respondent had no cause of action because the Deed of Assignment executed in its favor did not specifically mention ABN AMRO's account receivable from petitioners.
• No Valid Default: Petitioner maintained that they could not be considered to have defaulted in payment for lack of competent proof that they received the demand letter.
• Violation of Article 1484: Petitioner argued that respondent's remedy of resorting to both actions of replevin and collection of sum of money was contrary to the provision of Article 1484 of the Civil Code and the ruling in Elisco Tool Manufacturing Corporation vs. Court of Appeals, which held that the remedies under Article 1484 are alternative and not cumulative.

• Cause of Action: Whether respondent has no cause of action on the ground that the Deed of Assignment did not specifically mention ABN AMRO's account receivable from petitioners.
• Default and Demand: Whether petitioners cannot be considered to have defaulted in payment for lack of competent proof that they received the demand letter.
• Article 1484 Compliance: Whether respondent's resort to both actions of replevin and collection of sum of money violated Article 1484 of the Civil Code and the Elisco ruling.
• Stipulated Interest: Whether the stipulated interest rate of 6% per month (72% per annum) is valid and enforceable.

• Cause of Action: No. The matter surrounding the Deed of Assignment had already been considered by both the trial court and the CA, and it is an issue of fact not proper under a Rule 45 petition for review on certiorari.
• Default and Demand: No. Petitioners expressly waived the necessity of notice or demand in the Promissory Note with Chattel Mortgage, and the mere act of sending the demand letter to their address constituted valid notice regardless of actual receipt.
• Article 1484 Compliance: No. Unlike in Elisco, the vehicle was never actually seized despite the issuance of a writ of replevin, so petitioners were never deprived of its use and respondent never pursued actual foreclosure; the alternative prayer for collection was therefore proper.
• Stipulated Interest: No, as applied. The stipulated interest of 6% per month (72% per annum) was reduced to 1% per month (12% per annum) for being excessive, iniquitous, unconscionable, and exorbitant.

• Cause of Action: The Court held that the issue regarding the Deed of Assignment was factual in nature and therefore not a proper subject of a petition for review under Rule 45, which is limited to questions of law. A factual issue arises when the query invites calibration of the whole evidence, considering credibility of witnesses and surrounding circumstances. The Court reiterated that it is not a trier of facts and does not weigh anew evidence already passed upon by lower courts. Both the trial court and the CA had already considered the matter of the Deed of Assignment.

• Default and Demand: The Court found that both verbal and written demands were in fact made by respondent prior to the institution of the case. Even assuming no demand letter was sent, the Court held that demand was unnecessary because petitioners had expressly waived the necessity of notice or demand in the Promissory Note with Chattel Mortgage, which they voluntarily and knowingly signed. The waiver clause provided that the entire outstanding sum would immediately become due and payable without prior notice upon failure to pay. This was recognized as legal and valid in Bank of the Philippine Islands vs. Court of Appeals, where the Court held that Article 1169 of the Civil Code expressly allows parties to waive demand. Furthermore, in Navarro vs. Escobido, the Court ruled that prior demand is not a condition precedent to an action for a writ of replevin under Section 2, Rule 60 of the Rules of Court. The Court also applied the presumption that a letter duly directed and mailed was received in the regular course of the mail, noting that petitioners' postal address remained unchanged. Petitioners' reliance on Ting vs. Court of Appeals was rejected because that case involved B.P. 22, a criminal statute requiring proof beyond reasonable doubt—a higher quantum of proof than applicable in this civil case. On the burden of proof, the Court held that one who pleads payment has the burden of proving it; respondent's possession of the uncanceled Promissory Note with Chattel Mortgage was prima facie evidence that the obligation had not been extinguished.

• Article 1484 Compliance: The Court distinguished this case from Elisco Tool Manufacturing Corporation vs. Court of Appeals. In Elisco, the vehicle was actually seized by the sheriff pursuant to the writ of replevin, thereby depriving the debtor of possession and use of the vehicle for nearly three years. The creditor in Elisco simultaneously prayed for both the recovery of the vehicle and the payment of the outstanding obligation—essentially seeking to "eat its cake and have it too." In contrast, in the present case, the vehicle was never recovered or delivered to respondent despite the issuance of a writ of replevin. Because no seizure transpired, petitioners were never deprived of the use and enjoyment of the mortgaged vehicle, and respondent never pursued, commenced, or concluded an actual foreclosure. The trial court therefore rightfully granted the alternative prayer for sum of money, which is equivalent to the remedy of "exacting fulfillment of the obligation" under Article 1484(1). There was no double recovery or unjust enrichment.

• Stipulated Interest: The Court held that the stipulated interest rate of 6% per month (72% per annum) was excessive, iniquitous, unconscionable, and exorbitant, citing settled jurisprudence that stipulated interest rates of 3% per month and higher are void for being contrary to morals, if not against the law. While Central Bank Circular No. 905-82 removed the ceiling on interest rates, the Court held that nothing in the circular could be read as granting lenders carte blanche authority to raise interest rates to levels that would enslave borrowers or lead to a hemorrhaging of their assets. Since the stipulation was void, it was as if there was no express contract on the interest rate, and the rate could be reduced as reason and equity demand. The interest was accordingly reduced to 1% per month (12% per annum), reckoned from May 16, 2002 until full payment, with the remaining outstanding balance as of May 15, 2002 as the base amount.

• Alternative Remedies under Article 1484 — The remedies provided in Article 1484 of the Civil Code (exact fulfillment, cancellation of sale, and foreclosure of chattel mortgage) are alternative, not cumulative; the exercise of one bars the exercise of the others. However, where a writ of replevin is issued but the vehicle is never actually seized, the mortgagee has not exercised the remedy of foreclosure, and the alternative remedy of exacting fulfillment of the obligation remains available. The critical distinction is whether the debtor was actually deprived of possession or enjoyment of the thing sold.

• Waiver of Notice or Demand — A contractual provision waiving the necessity of notice or demand for default is legal and valid. Pursuant to Article 1169 of the Civil Code, demand is not necessary when the parties expressly waive it. Such a waiver means the obligor incurs in delay automatically upon failure to pay, without need of any prior demand from the obligee.

• Presumption of Receipt of Mailed Letters — Under Rule 131, Section 3(v) of the Rules of Court, a letter duly directed and mailed is presumed to have been received in the regular course of the mail. This presumption stands in the absence of satisfactory proof to the contrary. A contractual stipulation deeming the mere act of sending correspondence to the mortgagor's address as valid notice—regardless of actual receipt—reinforces this presumption.

• Burden of Proof of Payment — In civil cases, one who pleads payment has the burden of proving it; the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. When the creditor is in possession of the document of credit, proof of non-payment is not needed, as it is presumed. A promissory note in the hands of the creditor is proof of indebtedness rather than proof of payment. An uncanceled mortgage in the possession of the mortgagee gives rise to the presumption that the mortgage debt is unpaid.

• Unconscionable Stipulated Interest Rates — Stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable, and exorbitant, and are void for being contrary to morals, if not against the law. While Central Bank Circular No. 905-82 removed the ceiling on interest rates, it did not grant lenders carte blanche authority to impose rates that would enslave borrowers. When a stipulation on interest is void, it is as if there was no express contract on the interest rate, and the rate may be reduced as reason and equity demand.

• "The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of the others." — This passage, quoted from Elisco Tool Manufacturing Corporation vs. Court of Appeals, articulates the controlling doctrine on the exclusivity of remedies under Article 1484, which the Court then distinguished on the facts of this case.

• "While Central Bank Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets." — This passage defines the outer limits of the deregulation of interest rates and is frequently cited in subsequent jurisprudence on unconscionable interest.

• "Since the stipulation on the interest rate is void for being contrary to morals, if not against the law, it is as if there was no express contract on said interest rate; thus, the interest rate may be reduced as reason and equity demand." — This passage establishes the legal consequence of a void interest stipulation and the Court's equitable power to reduce the rate, even in the absence of a usury law ceiling.

• "The creditor's possession of the evidence of debt is proof that the debt has not been discharged by payment. A promissory note in the hands of the creditor is a proof of indebtedness rather than proof of payment." — This passage, quoted from Bank of the Philippine Islands vs. Spouses Royeca, articulates the evidentiary presumption arising from the creditor's possession of the promissory note.

• Elisco Tool Manufacturing Corporation vs. Court of Appeals, G.R. No. 109966, May 31, 1999, 307 SCRA 731 — Controlling precedent on the alternative nature of remedies under Article 1484. The Court distinguished this case from Elisco on the ground that in Elisco the vehicle was actually seized, whereas in the present case the vehicle was never recovered despite the issuance of a writ of replevin.

• Bank of the Philippine Islands vs. Court of Appeals, 523 Phil. 548 (2006) — Cited for the proposition that a contractual waiver of notice or demand is legal and valid under Article 1169 of the Civil Code, rendering demand unnecessary for the obligor to incur in default.

• Navarro vs. Escobido, G.R. No. 153788, November 27, 2009, 606 SCRA 1 — Cited for the rule that prior demand is not a condition precedent to an action for a writ of replevin under Section 2, Rule 60 of the Rules of Court.

• Ting vs. Court of Appeals, 398 Phil. 481 (2000) — Distinguished. The Court rejected petitioners' reliance on this case because it pertained to B.P. 22 (Bouncing Checks Law), a criminal statute requiring proof beyond reasonable doubt—a higher quantum of proof than applicable in the present civil case.

• Bank of the Philippine Islands vs. Spouses Royeca, G.R. No. 176664, July 21, 2008, 559 SCRA 207 — Followed for the doctrine that a creditor's possession of the promissory note is prima facie evidence that the obligation has not been paid, and that the burden of proving payment devolves upon the debtor.

• Macalinao vs. Bank of the Philippine Islands, G.R. No. 175490, September 17, 2009, 600 SCRA 67 — Cited for the principle that Central Bank Circular No. 905-82 did not grant lenders carte blanche authority to impose excessive interest rates.

• Arthur F. Menchavez vs. Marlyn M. Bermudez, G.R. No. 185368, October 11, 2012 — Cited for the doctrine that stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable, and exorbitant, and that a void interest stipulation may be reduced as reason and equity demand.

• Article 1484, Civil Code — Provides three alternative remedies to a vendor in an installment sale of personal property: (1) exact fulfillment of the obligation, (2) cancel the sale, and (3) foreclose the chattel mortgage. The Court applied this provision by holding that the remedies are alternative and not cumulative, but that since the vehicle was never actually seized, respondent had not exercised the remedy of foreclosure and could validly pursue the alternative remedy of exacting fulfillment.

• Article 1169, Civil Code — Provides that an obligor incurs in delay from the time the obligee demands fulfillment, but expressly allows that demand is not necessary when the parties waive it. The Court applied this provision to uphold the validity of the waiver of notice or demand clause in the promissory note.

• Article 22, Civil Code — Codifies the principle of unjust enrichment, requiring every person who acquires or comes into possession of something at the expense of another without just or legal ground to return the same. The Court cited this provision to confirm that no unjust enrichment resulted from the trial court's grant of the alternative prayer for collection of sum of money.

• Section 2, Rule 60, Rules of Court — Governs actions for replevin. The Court cited this provision, through Navarro vs. Escobido, to hold that prior demand is not a condition precedent to an action for a writ of replevin.

• Section 3(v), Rule 131, Rules of Court — Establishes the presumption that a letter duly directed and mailed was received in the regular course of the mail. The Court applied this presumption to uphold the validity of the demand letter sent to petitioners, whose postal address remained unchanged.

• Central Bank Circular No. 905-82 — Effectively removed the ceiling on interest rates for both secured and unsecured loans as of January 1, 1983. The Court held that this circular did not grant lenders unlimited authority to impose interest rates that would enslave borrowers, and that stipulated rates deemed unconscionable could still be reduced by the Court.

Presbitero J. Velasco, Jr. (Associate Justice, Chairperson), Roberto A. Abad (Associate Justice), Jose Catral Mendoza (Associate Justice), and Marvic Mario Victor F. Leonen (Associate Justice) concurred in the decision. No separate concurring opinions were issued.