411 Phil. 264
VITUG, J.:
"`This collection suit was filed on July 17, 1981 by Industrial Finance Corporation (IFC for short) against defendant Project Builders, Inc. (PBI for short), Galicano Calapatia, Jr., Pablo Malasarte, Teodoro Banas and Leandro Enriquez, arising from an alleged deficiency of P1,323,053.08, after the extrajudicial foreclosure of the real estate mortgage.
`The defendants deny liability and in their answer they allege that plaintiff has no cause or right of action because the obligation is already fully paid out of the proceeds of foreclosure sale of defendants' property. Further, defendants alleged that a proper accounting of the transaction between the parties will show that it is the plaintiff who is liable to the defendants.
`The facts, which led to the filing of the case, are as follows:
`On August 21, 1975, plaintiff and defendant PBI entered into an agreement (Exh. `A') whereby it was agreed that plaintiff would provide a maximum amount of P2,000,000.00 against which said defendant would discount and assign to plaintiff on a `with recourse non-collection basis' its (PBI's) accounts receivable under the contracts to sell specified in said agreement. And on June 15, 1976, the same parties entered into an agreement (Exh. `B') whereby it was agreed that PBI's credit line with plaintiff be increased to P5,000,000.00. It was stipulated that the credit line of P5,000,000.00 granted includes the amount already assigned/discounted.
`Against the above-mentioned `credit line,' defendant PBI discounted with plaintiff on different dates accounts receivables with different maturity dates from different condominium-unit buyers. And each time a certain account receivable was discounted, the covering Contract to Sell (Exh. `C-1' to `O-1') was assigned by defendant to plaintiff.
`The total amount of receivables discounted by defendant PBI is P7,986,815.38 and consists of twenty accounts. Of such receivables amounting to P7,986,815.38 plaintiff released to defendant PBI the amount of P4,549,132.72 and the difference of P3,437,682.66 represents the discounting fee or finance fee.
`To secure compliance with the terms and conditions of the agreement dated June 15, 1976 (Exh. `B'), defendants on the same date executed a Deed of Real Estate Mortgage (Exh. `Q') in favor of plaintiff. When defendants allegedly defaulted in the payment of the subject account, plaintiff foreclosed the mortgage and plaintiff was the highest bidder in the amount of P3,500,000.00.'
`The foreclosed property was redeemed a year later (Exh. `T'), but after application of the redemption payment, plaintiff claims that there is still a deficiency in the amount of P1,323,053.08, hence, this complaint.'
"The terms and conditions of the Agreement dated June 15, 1976 (Exh. `B') which are material to the present appeal state as follows:"'1. That the Assignor assigned all its rights and interests on several Contracts to Sell executed by Assignor and the latter's customers.
`2. That the Assignor requested the Assignee to increase the former's credit line to FIVE MILLION (P5,000,000.00) PESOS, Phil. Currency, which was granted by the Assignee subject to the following terms and conditions:
`a. It is hereby agreed that the credit line of P5,000,000.00 granted includes the amount already assigned/discounted by Assignor to Assignee as stated in paragraph 1 of this Agreement.
`b. This assignment/discounting of the Contracts to Sell shall be with recourse to Assignor and on a non-collection basis.
`c. That Assignee will execute a Real Estate Mortgage on 3 lots described as Transfer Certificate of Title Nos. 491702, 491703 and 491704 of the Registry of Deeds of Rizal to secure the faithful performance of the terms and conditions of this agreement and the Contracts to Sell assigned or which may be assigned to Assignee.
`d. Should there be a default on the part of the Assignor to pay Assignee or should Assignor fail to pay Assignee the amount or amounts due to Assignee arising from the assignment of the accounts receivables or remit to Assignee a lesser amount, the Assignor and/or PABLO MALASARTE, ROLANDO L. JUSTO, LEANDRO D. ENRIQUEZ, TEODORO G. BANAS, GALICANO A. CALAPATIA, JR. shall jointly and severally in their personal capacities upon demand by the Assignee, repurchase the Contracts to Sell or installment papers assigned and/or discounted by Assignor in favor of Assignee and/or pay Assignee the remaining balance of the amount of the receivables discounted and/or assigned by Assignor to Assignee.
`e. That the Performance Bond covering the condominium building `Jovan' located in Mandaluyong, Rizal shall be endorsed and delivered by Assignor to Assignee.
`f. That the Assignor shall comply with all the terms and conditions specified on the said Contracts to Sell, executed by the assignor and its individual purchaser or customers, and assigned/discounted to Assignee whether the assignment is on a with or without recourse basis.
`g. Should it become necessary for the assignee to take any legal action, the Assignor shall pay to the Assignee as attorney's fee allowed by the Rules of Court in the sum equivalent to Twenty (20%) per cent of the total indebtedness then unpaid, plus whatever legal costs incurred, and that any legal action arising out of this agreement may be instituted in the courts of the City of Manila.'"[1]
"1. Ordering plaintiff to return to the defendants the amount of P3,705.91 which plaintiff charged on the account of Dr. Ricardo Ortiz and Olympic Engineering Sales Corporation which had already been paid; "2. Ordering plaintiff to pay to defendants the amount of P238,052.53, representing the amount of the promissory note which was (sic) not been compensated or applied to the account of defendants; "3. Ordering plaintiff to return to defendants the amount of P425,833.33, representing the interest collected by plaintiff from defendants from foreclosure to redemption of the real estate mortgage; "4. Ordering plaintiff to return to defendants the amount of P344,302.18, representing the prepaid interests collected by plaintiff, since defendants were not allowed to use the period of such prepaid interests; "5. Ordering plaintiff to pay attorney's fees in the amount of P20,000.00.
Costs is adjudged against the plaintiff."[2]
"WHEREFORE, the decision appealed from is REVERSED. Defendants are hereby ordered to pay, jointly and severally, to the plaintiff the deficiency in the amount of P1,237,802.48 with interest thereon at the rate of 12% per annum computed from August 13, 1981 minus the amount of the promissory note in the sum of P238,052.53 with interest thereon at the rate of 12% per annum computed from September 14, 1976, the respective computation of the interest to end upon execution of this decision. No special pronouncement as to costs of suit."[3]
At the pith of the controversy lies the question of whether or not the agreement forged by petitioners and private respondent is a simple loan or a financing transaction governed by the provisions of Republic Act No. 5980.[5] Petitioners would have us convinced that the transaction forged by them with private respondent is a simple loan. It is a contention difficult to accept.
1.) Whether Republic Act No. 5980 (Financing Company Act) is intended for the benefit of financing companies or for the protection of public interests; 2.) Whether or not the above-mentioned Act should be made to apply even when the design or scheme to make it appear that there was a purchase of receivables or credit is only a subterfuge to evade Republic Act No. 3765 (Truth in Lending Act), particularly Section 4 thereof, and compound exorbitant interests under the guise of `purchase discount;' 3.) Whether or not said Republic Act No. 5980 should govern the transaction between petitioners and private respondent which in reality was bilateral, not trilateral, and respondent financing company was not really subrogated in the place of the supposed seller or assignor; and 4.) If said Republic Act No. 5980 should govern the transaction of the parties, should petitioners still answer for any deficiency after the mortgage with which they guaranty the collection of the assigned credit, had been foreclosed?"[4]
(a) "Financing companies," x x x organized for the purpose of extending credit facilities to consumers and to industrial, commercial, or agricultural enterprises, either by discounting or factoring commercial papers or accounts receivable, or by buying and selling contracts, leases, chattel mortgages, or other evidences of indebtedness or by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property."[6]
"(c) x x x mean any loan, mortgage, deed of trust, advance, or discount; any conditional sales contract, any contract to sell, or sale or contract of sale of property or service, either for present or future delivery, under which, part or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or money, any purchase, or other acquisition of or any credit upon the security of, any obligation or claim arising out of the foregoing; and any transaction or series of transactions having a similar purpose or effect;"[7]
"We have ruled in Sison & Sison v. Yap Tico and Avanceña, 37 Phil. 587 [1918] that definitely, consent is not necessary in order that assignment may fully produce legal effects. Hence, the duty to pay does not depend on the consent of the debtor. Otherwise, all creditors would be prevented from assigning their credits because of the possibility of the debtors' refusal to give consent.
"What the law requires in an assignment of credit is not the consent of the debtor but merely notice to him. A creditor may, therefore, validly assign his credit and its accessories without the debtor's consent (National Investment and Development Co. v. De los Angeles, 40 SCRA 489 [1971]). The purpose of the notice is only to inform the debtor that from the date of the assignment, payment should be made to the assignee and not to the original creditor."[13]
"f. That the Assignor shall comply with all the terms and conditions specified on the said Contracts to Sell, executed by the assignor and its individual purchaser or customers, and assigned/discounted to Assignee."[14]
"All payments shall be made on or before their respective due dates without necessity of demand therefor, and failure to make such payments on time shall entitle the Developer to charge interest at the rate of one percent (1%) per month without prejudice to the other remedies available to the Developer."[15]
"SEC. 5. Limitation on purchase discount, fees, service and other Charges.— In the case of assignments of credit or the buying of installment papers, accounts receivables and other evidences of indebtedness by financing companies, the purchase discount, exclusive of interest and other charges, shall be limited to fourteen (14%) per cent of the value of the credit assigned or the value of the installment papers, accounts receivable and other evidence of indebtedness purchased based on a period of twelve (12) months or less, and to one and one-sixth (1 1/6%) per cent for each additional month or fraction thereof in excess of twelve months, regardless of the terms and conditions of the assignment or purchase."