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    Security Bank and Trust Co

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    Tin Angus
    Eusebio took out three loans totaling P265k from Security Bank with an agreed interest rate of 23% per year. When Eusebio defaulted, Security Bank sued for collection. The Makati RTC judge ordered Eusebio to pay but lowered the interest rate to the legal rate of 12% per year. The issue is whether courts can reduce agreed interest rates. The Supreme Court held that courts cannot reduce agreed interest rates because Central Bank Circular No. 905 removed interest rate ceilings and the parties voluntarily agreed to the 23% rate in the promissory notes.

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    Security Bank and Trust Co

    Uploaded by

    Tin Angus
    40 views2 pages
    Eusebio took out three loans totaling P265k from Security Bank with an agreed interest rate of 23% per year. When Eusebio defaulted, Security Bank sued for collection. The Makati RTC judge ordered Eusebio to pay but lowered the interest rate to the legal rate of 12% per year. The issue is whether courts can reduce agreed interest rates. The Supreme Court held that courts cannot reduce agreed interest rates because Central Bank Circular No. 905 removed interest rate ceilings and the parties voluntarily agreed to the 23% rate in the promissory notes.

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    Eusebio took out three loans totaling P265k from Security Bank with an agreed interest rate of 23% per year. When Eusebio defaulted, Security Bank sued for collection. The Makati RTC judge ordered Eusebio to pay but lowered the interest rate to the legal rate of 12% per year. The issue is whether courts can reduce agreed interest rates. The Supreme Court held that courts cannot reduce agreed interest rates because Central Bank Circular No. 905 removed interest rate ceilings and the parties voluntarily agreed to the 23% rate in the promissory notes.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    40 views2 pages

    Security Bank and Trust Co

    Uploaded by

    Tin Angus
    Eusebio took out three loans totaling P265k from Security Bank with an agreed interest rate of 23% per year. When Eusebio defaulted, Security Bank sued for collection. The Makati RTC judge ordered Eusebio to pay but lowered the interest rate to the legal rate of 12% per year. The issue is whether courts can reduce agreed interest rates. The Supreme Court held that courts cannot reduce agreed interest rates because Central Bank Circular No. 905 removed interest rate ceilings and the parties voluntarily agreed to the 23% rate in the promissory notes.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Security Bank and Trust Co. vs.

    RTC of Makati
    Central Bank Circular No. 905 Interest Rate 12% Annum Interest Rate
    Legal Rate
    In 1983, Eusebio acquired 3 separate loans from Security Bank amounting
    to P265k. The agreed interest rate was 23% per annum. The promissory
    note was freely and voluntarily signed by both parties. Leia Ventura was
    the co-maker. Eusebio defaulted from paying. Security Bank sued for
    collection. Judge Gorospe of the Makati RTC ordered Eusebio to pay but he
    lowered the interest rate to 12% per annum.
    ISSUE: Whether or not the courts have liberality to reduce stipulated
    interest rates to the legal rate of 12% per annum.
    HELD: No. From the examination of the records, it appears that indeed
    the agreed rate of interest as stipulated on the three (3) promissory notes
    is 23% per annum. The applicable provision of law is the Central Bank
    Circular No. 905 which took effect on December 22, 1982:
    Sec. 1. The rate of interest, including commissions, premiums, fees and
    other charges, on a loan or forbearance of any money, goods or credits,
    regardless of maturity and whether secured or unsecured, that may be
    charged or collected by any person, whether natural or judicial, shall not
    be subject to any ceiling prescribed under or pursuant to the Usury Law,
    as amended.
    Only in the absence of stipulations will the 12% rate be applied or if the
    stipulated rate is grossly excessive.
    Further, Eusebio never questioned the rate. He merely expressed to
    negotiate the terms and conditions. The promissory notes were signed by
    both parties voluntarily. Therefore, stipulations therein are binding
    between them.
    NCC Art. 1306 The 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
    safety.

    Spouses Solangon vs. Salazar


    FACTS: On August 22, 1986, the plaintiffs-appellants executed a deed or
    real estate mortgage in which they mortgaged a parcel of land situated in
    Sta. Maria, Bulacan, in favor of the defendant-appellee, to secure payment
    of a loan of P60,000.00 payable within a period of four (4) months, with
    interest thereon at the rate of 6% per month.On May 27, 1987, the
    plaintiffs-appellants executed a deed of real estate mortgage in which
    they mortgagedthe same parcel of land to the defendant-appellee, to
    secure payment of a loan of P136,512.00, payable within a period of one
    (1) year, with interest thereon at the legal rate.On December 29, 1990,
    the plaintiffs-appellants executed a deed of real estate mortgage in which
    they mortgaged the same parcel of land in favor of defendant-appellee, to
    secure payment of a loan in the amount of P230,000.00 payable within a
    period of four (4) months, with interest thereon at the legal rate.
    ISSUE: Whether or not the interest rate of 72% per annum or 6% per
    month is usurious?
    HELD: We agree with petitioners that the stipulated rate of interest at
    5.5% per month on the P500,000.00 loan is excessive, iniquitous,
    unconscionable and exorbitant. However, we can not consider the rate
    usurious because this Court has consistently held that Circular No. 905 of
    the Central Bank, adopted on December 22, 1982, has expressly removed
    the interest ceilings prescribed by the Usury Law and that the Usury Law
    is now legally inexistent. CB Circular No. 905 did not repeal nor in any
    way amend the Usury Law but simply suspended the latters effectivity.
    Indeed, we have held that a Central Bank Circular cannot repeal a law.
    Only a law can repeal another law. While the Usury Law ceiling on interest
    rates was lifted by C.B. Circular No. 905, nothing in the said circular grants
    lenders carte blanche authority to raise interest rates to level which will
    either enslave their borrowers or lead to a hemorrhaging of their assets.
    Nevertheless, we find the interest at 5.5 % per month, or 66% per annum,
    stipulated upon by the parties in the promissory note iniquitous or
    unconscionable, and hence, contrary to morals (contra bonos mores), if
    not against the law. The stipulation is void

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