the reason why the foreclosure proceedings involving petitioners-spouses’ properties were invalidated.

SPOUSES BAYANI H. ANDAL AND GRACIA G. ANDAL, Petitioners, vs.PHILIPPINE NATIONAL BANK REGISTER OF DEEDS OF BATANGAS CITY JOSE C. CORALES, Respondents.SECOND DIVISIONG.R. No. 194201       November 27, 2013

We cannot subscribe to the contention of petitioners-spouses that no interest should be due on the loan they obtained from respondent bank, or that, at the very least, interest should be computed only from the finality of the judgment declaring the foreclosure sale null and void, on account of the exorbitant rate of interest imposed on their loan.

It is clear from the contract of loan between petitioners-spouses and respondent bank that petitioners-spouses, as borrowers, agreed to the payment of interest on their loan obligation. That the rate of interest was subsequently declared illegal and unconscionable does not entitle petitioners-spouses to stop payment of interest.1âwphi1 It should be emphasized that only the rate of interest was declared void. The stipulation requiring petitioners-spouses to pay interest on their loan remains valid and binding. They are, therefore, liable to pay interest from the time they defaulted in payment until their loan is fully paid.

It is worth mentioning that both the RTC and the CA are one in saying that "[petitioners-spouses] cannot be considered in default for their inability to pay the arbitrary, illegal and unconscionable interest rates and penalty charges unilaterally imposed by [respondent] bank."17 This is precisely the reason why the foreclosure proceedings involving petitioners-spouses’ properties were invalidated. As pointed out by the CA, "since the interest rates are null and void, [respondent] bank has no right to foreclose [petitioners-spouses’] properties and any foreclosure thereof is illegal. x x x. Since there was no default yet, it is premature for [respondent] bank to foreclose the properties subject of the real estate mortgage contract."18

Thus, for the purpose of computing the amount of liability of petitioners-spouses, they are considered in default from the date the Resolution of the Court in G.R. No. 194164 (Philippine National Bank v. Spouses Bayani H. Andal and Gracia G. Andal) – which is the appeal interposed by respondent bank to the Supreme Court from the judgment of the CA – became final and executory. Based on the records of G.R. No. 194164, the Court denied herein respondent bank’s appeal in a Resolution dated 10 January 2011. The Resolution became final and executory on 20 May 2011.19

In addition, pursuant to Circular No. 799, series of 2013, issued by the Office of the Governor of the Bangko Sentral ng Pilipinas on 21 June 2013, and in accordance with the ruling of the Supreme Court in the recent case of Dario Nacar v. Gallery Frames and/or Felipe Bordey, Jr.,20 effective 1 July 2013, the rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per annum. Accordingly, the rate of interest of 12% per annum on petitioners-spouses’ obligation shall apply from 20 May 2011 – the date of default – until 30 June 2013 only. From 1 July 2013 until fully paid, the legal rate of 6% per annum shall be applied to petitioners-spouses’ unpaid obligation.

....that the 12% interest per annum shall be applied from the date of default until 30 June 2013 only, after which date and until fully paid, the outstanding obligation of petitioners-spouses shall earn interest at 6% per annum. Let the records of this case be remanded to the trial court for the proper computation of the amount of liability of petitioners Spouses Bayani H. Andal and Gracia G. Andal, in accordance with the pronouncements of the Court herein and with due regard to the payments previously made by petitioners-spouses.