Vladimir Karl A.

Tolentino
Taxation 1

TRUTH IN LENDING ACT:

G.R. No. 148541 November 11, 2004

DEVELOPMENT BANK OF THE PHILIPPINES vs. BONITA O. PEREZ and

ALFREDO PEREZ

Facts:

On April 28, 1978, petitioner Development Bank of the Philippines (DBP) sent a letter
to respondent Bonita Perez, informing the latter of the approval of an industrial loan
amounting to P214,000.00 for the acquisition of machinery and equipment and for
working capital, and an additional industrial loan amounting to P21,000.00 to cover
unforeseen price escalation. On May 18, 1978, the respondents were made to sign
four promissory notes covering the total amount of the loan, P235,000.00. Three
promissory notes for P24,000.00, P48,000.00, and P142,000.00, respectively, were
executed, totaling P214,000.00. These promissory notes were all due on August 31,
1988.3 A fourth promissory note due on September 19, 1988 was, likewise, executed
to cover the additional loan of P21,000.00.4 The promissory notes were to be paid in
equal quarterly amortizations and were secured by a mortgage contract covering real
and personal properties.5On September 6, 1978, the petitioner sent a letter6 to the
respondents informing them of the terms for the payment of the P214,000.00
industrial loan. On November 8, 1978, the petitioner sent another letter 7 to the
respondents informing them about the terms and conditions of their additional
P21,000.00 industrial loan.

Issue: Whether or not the Honorable Court of Appeals had decided this instant case
in a way not in accord with the spirit and intent of Republic Act No. 3765, otherwise
known as the Truth in Lending Act.

Held: No, the total obligation of the respondents must be computed according to the
terms and conditions agreed upon. The formula provided under paragraph 3, Sec.
2(i), CB Circular No. 158 cannot be used in computing the total obligation of the
respondents because it merely applies to the computation of the simple annual rate.
Simple annual rate is the uniform percentage which represents the ratio, on an
annual basis, between the finance charges and the amount to be financed.[43] It is
one of the items required to be disclosed under the Truth in Lending Act pursuant to
the States policy to protect its citizens from lack of awareness of the true cost of
credit.[44]
G.R. No. 159912 August 17, 2007

UNITED COCONUT PLANTERS BANK vs. SPOUSES SAMUEL and ODETTE

BELUSO

Facts:

On 16 April 1996, UCPB granted the spouses Beluso a Promissory Notes

Line under a Credit Agreement whereby the latter could avail from the former credit
of up to a maximum amount of ₱1.2 Million pesos for a term ending on 30 April 1997.
The spouses Beluso constituted, other than their promissory notes, a real estate
mortgage over parcels of land in Roxas City, covered by Transfer Certificates of Title
No. T-31539 and T-27828, as additional security for the obligation. The Credit
Agreement was subsequently amended to increase the amount of the Promissory
Notes Line to a maximum of ₱2.35 Million pesos and to extend the term thereof to 28
February 1998.The spouses Beluso availed themselves of the credit line under
certain promissory notes

Issue: Whether or not the honorable court of appeals committed serious and
reversible error when it affirmed the decision of the trial court which found petitioner
liable for violation of the truth in lending act.

Held: No, in the case at bar, the violation of the Truth in Lending Act allegedly
occurred not when the parties executed the Credit Agreement, where no interest rate
was mentioned, but when the parties executed the promissory notes, where the
allegedly offending interest rate was stipulated.
G.R. No. 169617 April 4, 2007

HEIRS OF ZOILO ESPIRITU AND PRIMITIVA ESPIRITU, vs. SPOUSES MAXIMO

LANDRITO AND PAZ LANDRITO, Represented by ZOILO LANDRITO, as their
Attorney-in-Fact

Facts:

Petitioners DULCE, BENLINDA, EDWIN, CYNTHIA, AND MIRIAM ANDREA,

all surnamed ESPIRITU, are the only children and legal heirs of the Spouses Zoilo
and Primitiva Espiritu, who both died during the pendency of the case before the
Honorable Court of Appeals.2Respondents Spouses Maximo and Paz Landrito
(Spouses Landrito) are herein represented by their son and attorney-in-fact, Zoilo
Landrito.3On 5 September 1986, Spouses Landrito loaned from the Spouses Espiritu
the amount of ₱350,000.00 payable in three months. To secure the loan, the
Spouses Landrito executed a real estate mortgage over a five hundred forty (540)
square meter lot located in Alabang, Muntinlupa, covered by Transfer Certificate of
Title No. S-48948, in favor of the Spouses Espiritu. From the ₱350,000.00 that the
Landritos were supposed to receive, ₱17,500.00 was deducted as interest for the
first month which was equivalent to five percent of the principal debt, and ₱7,500.00
was further deducted as service fee. Thus, they actually received a net amount of
₱325,000.00. The agreement, however, provided that the principal indebtedness
earns "interest at the legal rate."4

Issue: Whether or not the Truth in Lending Act was violated.

Held; Yes, the omission of the Spouses Espiritu in specifying in the contract the
interest rate which was actually imposed, in contravention of the law, manifested bad
faith.

G.R. No. 181045 July 2, 2014

SPOUSES EDUARDO and LYDIA SILOS vs. PHILIPPINE NATIONAL BANK

Facts:

Spouses Eduardo and Lydia Silos (petitioners) have been in business for
about two decades of operating a department store and buying and selling of ready-
to-wear apparel. Respondent Philippine National Bank (PNB) is a banking
corporation organized and existing under Philippine laws. To secure a one-year
revolving credit line of ₱150,000.00 obtained from PNB, petitioners constituted in
August 1987 a Real Estate Mortgage5 over a 370-square meter lot in Kalibo, Aklan
covered by Transfer Certificate of Title No. (TCT) T-14250. In July 1988,the credit
line was increased to ₱1.8 million and the mortgage was correspondingly increased
to ₱1.8 million.6And in July 1989, a Supplement to the Existing Real Estate
Mortgage7 was executed to cover the same credit line, which was increased to ₱2.5
million, and additional security was given in the form of a 134-square meter lot
covered by TCT T-16208. In addition, petitioners issued eight Promissory Notes8 and
signed a Credit Agreement.9 This July 1989 Credit Agreement contained a
stipulation on interest.

Issue: Whether or not the Truth in lending Act was violated.

Held: Yes, Section 4 of the Truth in Lending Act clearly provides that the disclosure
statement must be furnished prior to the consummation of the transaction. The
rationale of the provision is to protect users of credit from a lack of awareness of the
true cost thereof, proceeding from the experience that banks are able to conceal
such true cost by hidden charges, uncertainty of interest rates, deduction of interests
from the loaned amount, and the like.

G.R. No. 175949 January 30, 2017

UNITED ALLOY PHILIPINES CORPORATION, SPOUSES DAVID C. CHUA and

LUTEN CHUA vs.UNITED COCONUT PLANTERS BANK

Facts:

On December 18, 2000, herein petitioner corporation, United Alloy Philippines

Corporation (UNIALLOY) applied for and was granted a credit accommodation by
herein respondent United Coconut Planters Bank (UCPB) in the amount of
PhP50,000,000.00, as evidenced by a Credit Agreement. 3 Part of UNIALLOY's
obligation under the Credit Agreement was secured by a Surety Agreement, 4 dated
December 18, 2000, executed by UNIALLOY Chairman, Jakob Van Der Sluis (Van
Der Sluis), UNIALLOY President, David Chua and his spouse, Luten Chua (Spouses
Chua), and one Yang Kim Eng (Yang). Six (6) Promissory Notes,5 were later
executed by UNIALLOY in UCPB's favour. In addition, as part of the consideration
for the credit accommodation, UNIALLOY and UCPB also entered into a "lease-
purchase" contract wherein the former assured the latter that it will purchase several
real properties which UCPB co-owns with the Development Bank of the
Philippines.Subsequently, UNIALLOY failed to pay its loan obligations. As a result,
UCPB filed against UNIALLOY, the spouses Chua, Yang and Van Der Sluis an
action for Sum of Money with Prayer for Preliminary Attachment6 on August 27,
2001. The collection case was filed with the Regional Trial Court of Makati City (RTC
of Makati) and docketed as Civil Case No. 01-1332. Consequently, UCPB also
unilaterally rescinded its lease purchase contract with UNIALLOY.
Issue: Whether or not the truth in lending Act was violated.

Held: Yes, excessive interests, penalties and other charges not revealed in
disclosure statements issued by banks, even if stipulated in the promissory notes,
cannot be given effect under the Truth in Lending Act.