G.R. No. 146942 ; April 22, 2003
CORAZON G. RUIZ, petitioner, vs. COURT OF APPEALS and CONSUELO TORRES, respondents.

FACTS

Petitioner Corazon G. Ruiz obtained several loans from private respondent Consuelo Torres, which were consolidated into a single P750,000.00 loan secured by a promissory note dated March 22, 1995. This loan was secured by a real estate mortgage on Ruiz’s property, executed two days prior. Ruiz subsequently obtained three additional loans totaling P300,000.00, secured by pledged jewelry. After paying the 3% monthly interest on the P750,000.00 loan for a year, Ruiz defaulted. Torres demanded payment for both the consolidated and subsequent loans and initiated the extrajudicial foreclosure of the mortgage.
Ruiz filed a complaint to enjoin the foreclosure sale, arguing the mortgage was unenforceable due to her husband’s lack of signature and that the promissory note was an unconscionable contract of adhesion. The trial court granted a permanent injunction, declaring the mortgage unenforceable and modifying the loan’s terms by striking down the surcharge and a 10% compounded monthly interest stipulation. The Court of Appeals reversed, upholding the mortgage’s validity and the loan’s enforceability, but found the stipulated interest rate excessive.

ISSUE

The core issue is whether the real estate mortgage and the promissory note, with its stipulated interest and charges, are valid and enforceable.

RULING

The Supreme Court affirmed the Court of Appeals with modification. On the mortgage’s validity, the Court held that Ruiz, as the registered owner, had the capacity to mortgage the property. Her claim that the mortgage was void due to her husband’s lack of signature was unavailing, as she executed it as attorney-in-fact for herself and her husband. The burden of proof to show the absence of such authority lay with her, which she failed to discharge. Therefore, the mortgage was valid and foreclosure could proceed for the unpaid P750,000.00 loan it secured.
Regarding the loan terms, the Court upheld the 3% per month (36% per annum) interest as having been voluntarily paid by Ruiz without objection for a year, constituting implied consent. However, the stipulation for a 10% per month compounded interest on the remaining balance after maturity, along with a 1% monthly surcharge, was declared void for being excessive, iniquitous, and unconscionable. Following jurisprudence, the Court reduced the interest rate to 12% per annum from judicial demand. The subsequent loans totaling P300,000.00 were separate obligations secured by the pledged jewelry, not by the real estate mortgage, and thus their collection was a distinct matter not barring foreclosure for the primary secured loan.