148. Pentacapital Investment Corporation Vs Mahinay.docx

G.R. No. 171736

PENTACAPITAL INVESTMENT CORPORATION, Petitioner, vs MAKILITO B. MAHINAY, Respondent Article 1229, Reduction of Penalty by the Court July 5, 2010

FACTS OF THE CASE: Petitioner filed a complaint for a sum of money against respondent Makilito Mahinay based on two separate loans obtained by the latter, a total amount of P1,936,800.00. These loans were evidenced by two promissory notes dated February 23, 1996. Despite repeated demands, respondent failed to pay the loans, hence, the complaint. In his Answer with Compulsory Counterclaim, respondent claimed that petitioner had no cause of action because the promissory notes on which its complaint was based were subject to a condition that did not occur. While admitting that he indeed signed the promissory notes, he insisted that he never took out a loan and that the notes were not intended to be evidences of indebtedness. By way of counterclaim, respondent prayed for the payment of moral and exemplary damages plus attorney’s fees.

ISSUE: Whether or not the respondent is bound by promissory notes.

Conclusion: Yes. As it appears, the promissory notes clearly stated that respondents promised to pay petitioner 1,520,000.00 and 416,000.00, plus interest and penalty charges a year after their execution. Nowhere in the notes was it stated that they were subject to a condition.

The promissory notes likewise required the payment of a penalty charge of 3% per month or 36% per annum. However, a penalty charge of 3% per month is unconscionable; hence, we reduce it to1% per month or 12% per annum, pursuant to Article 1229 of the Civil Code.