Republic of the Philippines MUNICIPAL TRIAL COURT IN CITIES _______________, Bukidnon A FINANCING CORP.

( V Branch) Plaintiff, - versus SUM OF MONEY X and Y, Defendants. X-----------------------------------/ POSITION PAPER DEFENDANT, through the undersigned counsel, and unto this Honorable Court, most respectfully submit this position paper, to wit: STATEMENT OF FACTS Plaintiff A FINANCING CORPORATION approved the loan application of the herein defendant X with Y as Co- maker , in a net total amount of FOUR THOUSAND SEVEN HUNDRED PESOS ( P4,700.00) for TWO (2) monthterm. Furthermore, before the release of the loan to the defendant, the latter and co- maker were then required to execute a promissory note, jointly and severally promising to A FINANCING CORPORATION to pay the amount of FIVE THOUSAND EIGHT HUNDRED FORTEEN PESOS and 100/100 (P5, 814.00) pesos at sixty (60) installments with a 0.14% daily or 7% monthly interest on each unpaid installment from its due date thereof until fully paid beginning on the 13th of February 2008; The defendant, due to financial stresses, unintentionally failed to pay any installment, but when A FINANCING CORPORATION demanded for the entire payment of his obligation, defendants demanded the true statement of the account so that they can offer for a just and conscionable payment however the same was denied. Hence, this civil action for Sum of Money was filed against the defendant before this Honorable Court prematurely and lack of cause in the absence of default. ISSUES CIVIL CASE NO. 1234 For:

I WHETHER OR NOT THERE IS A CAUSE OF ACTION IN FILING THE COMPLAINT ? II WHETHER OR NOT THE PRINCIPAL OBLIGATION IS ONLY IN THE AMOUNT OF P4, 700 OR IN THE AMOUNT OF P5,814.00

III WHETHER OR NOT THE 5% MONTHLY INTEREST IS UNJUST AND UNCONSCIONABLE. IV WHETHER OR NOT THE DEFENDANT IS LIABLE TO PAY THE TOTAL AMOUNT OF SEVENTEEN THOUSAND (P17, 000.00) PESOS TO THE PLAINTIFF FOR DAMAGES, ATTORNEYS FEES, APPEARANCE FEES AND LITIGATION EXPENSES. ARGUMENTS AND DISCUSSIONS The defendant only received FOUR THOUSAND SEVEN HUNDRED PESOS ( P4,700.00) and the contention of the plaintiff that the principal obligation of the defendant is FIVE THOUSAND EIGHT HUNDRED FORTEEN PESOS and 100/100 ( P5,814.00) as evidenced by the promissory note is without merit. The fact that the defendant in the execution of the said promissory note did honestly believed in good faith that the amount of ( P5,814.00 already includes the interest as explained to him is a clear case of mistake of fact which merits a correction of the amount. The presumption that when a person signs a document, that he does it so with the full knowledge of its contents is not absolute. Article 1332 of the New Civil Code provides: When one of the parties is unable to read or if the contract is in the language not understood by him, it is the party enforcing the contract who is duty- bound to show that there has been no fraud or mistake and the terms of the contract have been fully explained.

Besides below:

herein Plaintiff grossly violates

RA 3765

otherwise known

known as the "Truth in Lending Act " Pertinent provision is herein stated

Sec. 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information: (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; (3) (4) the difference between the amounts set forth under the charges, individually itemized, which are paid or to be clauses (1) and paid by such person in connection with the transaction but which are not incident to the extension of credit; (5) the total amount to be financed; (6) the finance charge expressed in terms of pesos and centavos; and (7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. As a consequence, the filing of the complaint was premature in view of the defect in not providing herein defendants true and correct statement of account regarding his obligation. It was because no rightful demand can be had as basis for default without sufficient information given to herein defendants as to the true amount of their obligation. On interest. Plaintiffs allegation and claim of a monthly interest of 7% for the use of money is not tenable. Furthermore, considering the small amount of

the loan, the stipulated rate of 7% per month or 84% per annum penalty is clearly unjust, iniquitous and unconscionable. The Supreme Court, in long line of case as cited in the case of Carpo v. Chua, GR 153599, September 30, 2005, voided the imposition of exorbitant and usurious interest in the following ruling : In a long line of cases, this Court has invalidated similar stipulations on interest rates for being excessive, iniquitous, unconscionable and exorbitant. In Solangon v. Salazar, we annulled the stipulation of 8% per month or 72% per annum interest on a P60,000.00 loan. In Imperial v. Jaucian, we reduced the interest rate from 16% to 1.167% per month or 14% per annum. In Ruiz v. Court of Appeals, we equitably reduced the agreed 3% per month or 36% per annum interest to 1% per month or 12% per annum interest. The 10% and 8% interest rates per month on a P1,000,000.00 loan were reduced to 12% per annum in Cuaton v. Salud. Recently, this Court, in Arrofo v. Quio, reduced the 7% interest per month on a P15,000.00 loan amounting to 84% interest per annum to 18% per annum. There is no need to unsettle the principle affirmed in Medel and like cases. From that perspective, it is apparent that the stipulated interest in the subject loan is excessive, iniquitous, unconscionable and exorbitant. Pursuant to the freedom of contract principle embodied in Article 1306 of the Civil Code, contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. In the ordinary course, the codal provision may be invoked to annul the excessive stipulated interest.

On damages, attorneys fees, appearance fees and cost of litigation for P15, 000.00. The Plaintiffs claims were unsubstantiated, it should be noted that the penalty will already answer for the damages. Also, the Supreme Court has previously ruled that even with an agreement thereon between the parties, the court may nevertheless reduce such attorneys fess fixed in the contract when the amount thereof appears to be unconscionable or unreasonable. ( Security Bank & Trust Co.,v. Court of Appeals, et al., 249 SCRA 206).

Respectfully submitted. This 24th day of November 2010 at ________________ City, Bukidnon, Philippines.

By: Atty. Z Counsel for Defendants Roll No. 1234 PTR No. 223234 MCLE Compliance No. 45464

Copy furnished: Atty. P 2nd Floor, X Club, Inc. Bldg. Davao City