GOLDEN BELL GRAND CENTER, INC., SPOUSES DAVID C. ANG AND SIOK HA (JENY) T. ANG, PLAINTIFFS-APPELLANTS, VS. PLANTERS DEVELOPMENT BANK, DEFENDANT-APPELLEE.

Golden Bell Grand Center versus Planters Development Bank

The Case

This is a lecture on Golden Bell Grand Center versus Planters Development Bank, a case about a borrower who sued its own bank to annul its loan obligations, the promissory notes, and the accessory contracts, and to compel an accounting. The plaintiffs are Golden Bell Grand Center, a chain of department stores, together with its owners, the spouses David Ang and Siok Ha Ang. The defendant is Planters Development Bank. The borrowers claimed that the bank unilaterally imposed interest rates, that the documents were contracts of adhesion signed in blank, and that the penalty charges were iniquitous. The case matters because it gathers in one place the rules every examinee needs on the binding force of signed contracts, the validity of escalation clauses, the treatment of contracts of adhesion, and the limits on judicial rescue from bad bargains.

Procedural History

The plaintiffs filed a complaint for annulment of obligations, accessory contracts, and accounting before the Regional Trial Court of Makati City. The trial court dismissed the complaint for lack of factual, legal, and evidentiary support, and partially granted the bank's counterclaim, ordering the plaintiffs to pay jointly and severally the principal of 69,600,755 pesos plus interest at fifteen percent per annum and penalty at twelve percent per annum, less payments already made, plus attorney's fees of 30,000 pesos and costs. The trial court reduced the stipulated penalty from twenty-four percent to twelve percent per annum. The plaintiffs then appealed directly to the Supreme Court, assigning as errors the failure to annul the promissory notes for unilateral interest rates and for being contracts of adhesion, the failure to hold that they were entitled to an accounting, and the order to pay the loan obligations.

Facts

Golden Bell operated department stores in Zamboanga, Davao, and Cagayan de Oro, and banked with the Davao branch of Planters Development Bank. Beginning in 2003, the bank granted it a series of credit lines and term loans, each secured by real estate mortgages, a pledge of shares, a chattel mortgage on inventory, an assignment of a lease contract, and surety agreements. The loans were drawn through promissory notes, including one for 25,000,000 pesos, one for 950,754.69 pesos, and one for 43,750,000 pesos, each carrying interest of fifteen percent per annum and a penalty of two percent per month upon default.

The borrowers paid for several years, but David Ang testified that the bank sent blank documents for pre-signing, that the interest rate was left blank when he signed, and that he learned the rate only from the statements of account. He also testified that the bank charged varying rates over the years, ranging from thirteen and a half to seventeen percent, and that his protests to the bank's lending officer went unheeded. In September 2007, the borrowers stopped paying. A meeting at the bank's head office on restructuring ended without agreement, and demand letters followed.

At pre-trial, the parties stipulated on the genuineness and due execution of the promissory notes, the mortgage instruments, the pledge, and the chattel mortgage, and on the fifteen percent interest, the two percent monthly penalty, and the attorney's fees. The trial court dismissed the complaint and upheld the obligations, reducing only the penalty. Hence the appeal.

Issues

• Whether or not the promissory notes should be annulled because the bank unilaterally imposed the interest rates.
• Whether or not the promissory notes should be annulled for being contracts of adhesion.
• Whether or not the borrowers are entitled to an accounting.
• Whether or not the borrowers are liable to pay the loan obligations under the promissory notes.

Applicable Provisions

Section 13, Rule 44 of the Revised Rules of Court, on the contents of the appellant's brief, provides:

Section 13. Contents of appellant's brief. — The appellant's brief shall contain the following: (a) A subject index of the matter in the brief with a digest of the argument and page references; x x x (c) A table of cases alphabetically arranged, textbooks and statutes cited with references to the pages where they are cited; (d) A reference to the record showing whether the issue was properly raised before the trial court and, if not, the reason therefor; x x x (f) The page references to the record.

The Court noted that the appellants failed to comply with these requirements, which affects the procedural handling of the appeal.

Section 1, Rule 50 of the Revised Rules of Court, on grounds for dismissal of appeal, provides:

Section 1. Grounds for dismissal of appeal. — An appeal may be dismissed by the Court of Appeals, on its own motion or on that of the appellee, on the following grounds: x x x (f) Absence of specific assignment of errors in the appellant's brief, or of page references to the record as required in Section 13, paragraphs (a), (c), (d), and (f) of Rule 44.

This is the procedural sanction the Court cites for the appellants' deficient brief, though it proceeds to resolve the substantive questions.

Ruling

On the first issue, the Court held that the interest rates were not shown to be unilateral impositions. The principal amounts were admitted at pre-trial, and what the borrowers contested were the terms of notes whose due execution they had stipulated. The Court refused to accept that seasoned businessmen signed blank documents, reasoning that one who signs a contract is presumed to know its contents, a rule applied even to illiterate persons, and far more so to experienced executives like David Ang, who had run the business since the seventies and served as president since the middle of the eighties.

On the second issue, the Court held that a contract of adhesion is not invalid per se. The borrowers dealt with the bank under the same terms for years without objection, and the rates charged did not reach unreasonable levels.

On the third issue, the Court found no basis for a separate accounting, since the statements of account had been regularly furnished and the obligations were documented.

On the fourth issue, the Court held the borrowers liable. It stressed that courts cannot extricate a man from bad bargains or relieve him from one-sided contracts, and that there must be a violation of law before courts may intervene. It also quoted the rule that to permit a party sued on a written contract to admit signing it but deny that it expresses his agreement would absolutely destroy the value of all contracts. The penalty was sustained at the reduced rate of twelve percent per annum.

Doctrine

First, one who signs a contract is presumed to know its contents, and this presumption binds even illiterate signers, and all the more the experienced businessman. Second, a contract of adhesion is not invalid per se; it is binding unless the stipulations are shown to be unreasonable or contrary to law. Third, courts do not rescue parties from unwise or one-sided bargains absent a violation of law. Fourth, the genuineness and due execution of promissory notes admitted at pre-trial cannot later be undermined by claims of blank signing. Fifth, a deficient appellant's brief under Section 13, Rule 44 is a ground for dismissal under Section 1, Rule 50 of the Revised Rules of Court.

Disposition

The appeal was denied and the decision of the trial court was affirmed; the borrowers lost and were ordered to pay the principal, interest, reduced penalty, attorney's fees, and costs.

Remember This

Memorize the line that one who signs a contract is presumed to know its contents, and that courts do not extricate men from bad bargains. Examiners use this case on contracts of adhesion, escalation clauses, and the binding effect of pre-trial admissions on promissory notes.