Equitable PCI Bank v. Ng Sheung Ngor

Facts:

On October 7, 2001, respondents Ng Sheung Ngor,[4] Ken Appliance Division, Inc. and Benjamin E. Go filed an action for annulment and/or reformation of documents and contracts against petitioner Equitable PCI Bank (Equitable) and its employees, Aimee Yu and Bejan Lionel Apas, in RTC, Branch 16 of Cebu City. They claimed that Equitable induced them to avail of its peso and dollar credit facilities by offering low interest rates so they accepted Equitable's proposal and signed the bank's pre-printed promissory notes on various dates beginning 1996. They, however, were unaware that the documents contained identical escalation clauses granting Equitable authority to increase interest rates without their consent.

Equitable, in its answer, asserted that respondents knowingly accepted all the terms and conditions contained in the promissory notes. In fact, they continuously availed of and benefited from Equitable's credit facilities for five years.

RTC upheld the validity of the promissory notes. Equitable and respondents filed their respective notices of appeal but both were denied by the RTC. Equitable moved for the reconsideration but RTC denied due to lack of merit.

A writ of execution was thereafter issued and three real properties of Equitable were levied upon.

Equitable filed a petition for relief in the RTC from the March 1, 2004 order. It, however, withdrew that petition on March 30, 2004 and instead filed a petition for certiorari with an application for an injunction in the CA to enjoin the implementation and execution of the March 24, 2004 omnibus order. CA granted Equitable’s application for injunction. A writ of preliminary injunction was correspondingly issued.

Notwithstanding the writ of injunction, the properties of Equitable previously levied upon were sold in a public auction on July 1, 2004. Respondents were the highest bidders and certificates of sale were issued to them.

Equitable moved to annul the July 1, 2004 auction sale and to cite the sheriffs who conducted the sale in contempt for proceeding with the auction despite the injunction order of the CA.

CA dismissed the petition for certiorari. It found Equitable guilty of forum shopping because the bank filed its petition for certiorari in the CA several hours before withdrawing its petition for relief in the RTC. Moreover, Equitable failed to disclose, both in the statement of material dates and certificate of non-forum shopping, that it had a pending petition for relief in the RTC.

Equitable moved for reconsideration but it was denied.

Issue:

Whether or not the promissory notes were valid.

Held:

Yes.

The RTC upheld the validity of the promissory notes despite respondents assertion that those documents were contracts of adhesion.

A contract of adhesion is a contract whereby almost all of its provisions are drafted by one party. The participation of the other party is limited to affixing his signature or his adhesion to the contract. For this reason, contracts of adhesion are strictly construed against the party who drafted it.

It is erroneous, however, to conclude that contracts of adhesion are invalid per se. They are, on the contrary, as binding as ordinary contracts. A party is in reality free to accept or reject it. A contract of adhesion becomes void only when the dominant party takes advantage of the weakness of the other party, completely depriving the latter of the opportunity to bargain on equal footing.

That was not the case here. As the trial court noted, if the terms and conditions offered by Equitable had been truly prejudicial to respondents, they would have walked out and negotiated with another bank at the first available instance. But they did not. Instead, they continuously availed of Equitable's credit facilities for five long years.

While the RTC categorically found that respondents had outstanding dollar- and peso-denominated loans with Equitable, it, however, failed to ascertain the total amount due (principal, interest and penalties, if any) as of July 9, 2001. The trial court did not explain how it arrived at the amounts of US$228,200 and P1,000,000. In Metro Manila Transit Corporation v. D.M. Consunji, we reiterated that this Court is not a trier of facts and it shall pass upon them only for compelling reasons which unfortunately are not present in this case. Hence, we ordered the partial remand of the case for the sole purpose of determining the amount of actual damages.