Credit Transactions

2nd Year, 2nd Semester (AY 2020-2021)

Week 2 (Mutuum) Part 3

G.R. No. 159912 August 17, 2007 from the spouses Beluso’s account with UCPB; yet, a
UNITED COCONUT PLANTERS BANK, Petitioner, consolidated loan for P1.3 Million was
vs. again released to the spouses Beluso under one
SPOUSES SAMUEL and ODETTE BELUSO, promissory note with a due date of 28 February 1998. To
Respondents. completely avail themselves of the P2.35 Million credit
line extended to them by UCPB, the spouses Beluso
FACTS: Petition for Review on Certiorari declaring void executed two more promissory notes for a total of
the interest rate provided in the promissory notes P350,000.00. However, the spouses Beluso alleged that
executed by the respondents Spouses Samuel and the amounts covered by these last two promissory notes
Odette Beluso (spouses Beluso) in favor of petitioner were
United Coconut Planters Bank (UCPB) never released or credited to their account and, thus,
claimed that the principal indebtedness was only P2
UCPB granted the spouses Beluso a Promissory Notes Million. The spouses Beluso, however, failed to make any
Line under a Credit Agreement whereby the latter could payment of the foregoing amounts.
avail from the former credit of up to a maximum amount
of P1.2 Million pesos for a term ending on 30 April 1997. On 2 September 1998, UCPB demanded that the spouses
The spouses Beluso constituted, other than their Beluso pay their total obligation of P2,932,543.00 plus
promissory notes, a real estate mortgage over parcels of 25% attorney’s fees, but the spouses Beluso failed to
land in Roxas City, covered by Transfer Certificates of comply therewith. On 28 December 1998, UCPB
Title No. T- 31539 and T-27828, as additional security for foreclosed the properties mortgaged by the spouses
the obligation. The Credit Agreement was subsequently Beluso to secure their credit line, which, by that time,
amended to increase the amount of the Promissory Notes already ballooned to P3,784,603.00.
Line to a maximum of P2.35 Million pesos and to extend
the term thereof to 28 February 1998. On 9 February 1999, the spouses Beluso filed a Petition
for Annulment, Accounting and Damages against UCPB
On 30 April 1997, the payment of the principal and with the RTC of Makati City.
interest of the latter two promissory notes were debited
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Trial court declared in its judgment that: indeed dependent solely on the will of petitioner UCPB.
a. the interest rate used by [UCPB] void Under such provision, petitioner UCPB has two choices
b. the foreclosure and Sheriff’s Certificate of Sale void on what the interest rate shall be: (1) a rate indicative of
c. UCPB is ordered to return to [the spouses Beluso] the the DBD retail rate; or (2) a rate as determined by the
properties subject of the foreclosure Branch Head. As UCPB is given this choice, the rate
d. UCPB to pay [the spouses Beluso] the amount of should be categorically determinable in both choices. If
P50,000.00 by way of attorney’s fees either of these two choices presents an opportunity for
e. UCPB to pay the costs of suit. UCPB to fix the rate at will, the bank can easily choose
f. Spouses Beluso] are hereby ordered to pay [UCPB] the such an option, thus making the entire interest rate
sum of P1,560,308.00 provision violative of the principle of mutuality of
contracts.
Hence this petition.
In addition, the promissory notes, the copies of which
ISSUE: were presented to the spouses Beluso after execution,
1. Whether or not interest rate stipulated was void. are not sufficient notification from UCPB. As earlier
discussed, the interest rate provision therein does not
2. Whether or not Spouses Beluso are subject to 12% sufficiently indicate with particularity the interest rate to
interest and compounding interest stipulations even if be applied to the loan covered by said promissory notes
declared amount by UCPB was excessive. which is required in TRuth in Lending Act.

2. Yes. Default commences upon judicial or extrajudicial

demand. The excess amount in such a demand does not
HELD: 1. Yes, stipulated interest rate is void because it nullify the demand itself, which is valid with respect to
contravenes on the principle of mutuality of contracts the proper amount. There being a valid demand on the
and it violates the Truth in lending Act. The provision part of UCPB, albeit excessive, the spouses Beluso are
stating that the interest shall be at the “rate indicative of considered in default with respect to the proper amount
DBD retail rate or as determined by the Branch Head” is and, therefore, the interests and the penalties began to
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Week 2 (Mutuum) Part 3

run at that point. As regards the award of 12% legal

interest in favor of petitioner, the RTC actually FACTS:
recognized that said legal interest should be imposed, Respondents obtained a loan with face value of
thus: “There being no valid stipulation as to interest, the P2,500,000.00 and 17% interest rate per annum from
legal rate of interest shall be charged.” It seems that the petitioner with real estate mortgage over lots they owned
RTC inadvertently overlooked its non-inclusion in its in Tondo, Manila.
computation. It must likewise uphold the contract
stipulation providing the compounding of interest. The From the release of the loan, the highest interest was
provisions in the Credit Agreement and in the promissory 29% and the lowest was 15.5% per annum.
notes providing for the compounding of interest were Respondents were notified in writing.They neither gave
neither nullified by the RTC or the Court of Appeals, nor their confirmation thereto nor did they formally question
assailed by the spouses Beluso in their petition with the the changes.However, respondent Castillo sent several
RTC. The compounding of interests has furthermore letters to petitioner requesting for the reduction of the
been declared by this Court to be legal rates.
 
Respondents defaulted due to financial constraints.

Thus, petitioner initiated an extrajudicial foreclosure sale

of the mortgaged properties which were auctioned. A
certificate of sale was then issued and submitted to the
Clerk of Court and to the Ex-Officio Sheriff ofManila. The
G.R. No. 193178 May 30, 2011 same, sansthe approval of the Executive Judge of the
PHILIPPINE SAVINGS BANK, Petitioner, RTC, was registered with the Registry of Deeds.
vs.
SPOUSES ALFREDO M. CASTILLO AND ELIZABETH Respondents failed to redeem the property. Respondents
C. CASTILLO, and SPOUSES ROMEO B. CAPATI and filed a case before the RTC. After trial, the RTC decided
AQUILINA M. LOBO, Respondents. that the questioned increases of the interest were
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Credit Transactions
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Week 2 (Mutuum) Part 3

unreasonable, excessive, and arbitrary; that Petitioner compliance of the contract left solely to the will of one of
should refund Respondents of the amount of interest the parties is likewise invalid.
collected in excess of 17% per annum; that the
Extrajudicial Foreclosure conducted by the defendants Petitioner cannot claim that respondent recognized the
are voidab initio;that the Register of Deeds is ordered to legality of the changes. Respondents exhibits readily
cancel the corresponding annotations at the back of shows that the conformity letter signed by them pertain
TCTs; that defendant is to pay plaintiffs moral and only to the amendment of the interest rate review period
exemplary damages, and attorneys fees. from 90 days to 30 days.This is separate from the
modification of the interest rate itself. Moreover,
Petitioner filed an MR.The RTC partially granted the respondents assent cannot be implied from their lack of
motion by modifying the interest rate from 17% to 24% response to the memos sent by petitioner.No one
per annum. The case was appealed to the CA which receiving a proposal to change a contract is obliged to
modified the decision of the RTC ordering PSB to refund answer the proposal; assent is therefore not implied.
to the plaintiffs the amount of interest collected in excess
of 17% per annum; declaring the Extrajudicial Likewise, it cannot be said that respondents recognized
Foreclosure conducted by the defendants as valid; and the rates legality when it requested for a reduction its
modifying the damages awarded to plaintiff. reduction. This does not translate into consent. Further,
the letters were actually questioning the propriety of the
ISSUE: Did the CA err in (1) declaring that the interest rates. Here, we are not sufficiently convinced
modifications in the interest rates are unreasonable; and that fraud, bad faith, or wanton disregard of contractual
(2) sustaining the award of damages and attorneys fees? obligations can be imputed to petitioner simply because it
unilaterally imposed the changes in interest rates. Thus,
HELD: the award of moral and exemplary damages is
Here, the increase or decrease of interest rates hinge unwarranted.In the same vein, respondents cannot
solely on the discretion of petitioner, violated the recover attorneys fees and litigation expenses.
principle of mutuality of contracts, and is unconscionable;
therefore void.Any stipulation regarding the validity or
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2nd Year, 2nd Semester (AY 2020-2021)
Week 2 (Mutuum) Part 3

As regards the award for refund to respondents of their National Bank amounting to P700 Million. The loan
interest payments in excess of 17% per annum, the contract was subsequently restructured on January 1999.
same should include legal interest.We have held that The provision under their loan contract on the interest
when an obligation is breached, and it consists in the rate states that the same shall be determined "at the rate
payment of a sum of money, the interest on the amount per annum to be set by the Bank. The interest rate shall
of damages shall be at the rate of 12%per annum, be reset by the Bank every month."
reckoned from the time of the filing of the complaint.
  The Sps. and Davao Sunrise were notified through a
letter that the interest rate approved by the top
management of PNB is 20.756% and as of December
1998, the interest on the loan amounted to P217 Million.
However, due to their financial difficulties and despite
repeated demands by PNB, Sps. Limso and Davao
Sunrise failed to pay their debt.

The Sps. and Davao Sunrise files a complaint in court

praying for the declaration of nullity of unilateral
G.R. No. 158622 imposition and increases of interest rates.
SPOUSES ROBERT ALAN L. and NANCY LEE LIMSO,
Petitioners, ISSUE:
vs. Whether the provision under the loan contract regarding
PHILIPPINE NATIONAL BANK and THE REGISTER the unilateral imposition and increases of interest rates
OF DEEDS OF DAVAO CITY, Respondents. violates the principle of mutuality of contract.

FACTS: HELD:
In 1993, Sps. Limso and Davao Sunrise took out a loan Yes. The SC held that the provision violates the principle
secured by real estate mortgages from Philippine of mutuality of contract.
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Credit Transactions
2nd Year, 2nd Semester (AY 2020-2021)
Week 2 (Mutuum) Part 3

The importance of the principle of mutuality of contracts

The SC held that the interest on the principal loan was discussed in Juico v. China Banking Corporation:
obligation shall be at the rate of 12% per annum and
computed from January 28, 1999, the date of the The binding effect of any agreement between parties to
execution of the Conversion, Restructuring and Extension a contract is premised on two settled principles: (1) that
Agreement. Interest rate on the conventional interest any obligation arising from contract has the force of law
shall be at the rate of 12% per annum from the date of between the parties; and (2) that there must be
judicial demand, to June 30, 2013. From July 1, 2013 mutuality between the parties based on their essential
until full satisfaction, the interest rate on the equality. Any contract which appears to be heavily
conventional interest shall be computed at 6% per weighed in favor of one of the parties so as to lead to an
annum in view of this court's ruling in Nacar v. Gallery unconscionable result is void. Any stipulation regarding
Frames. the validity or compliance of the contract which is left
solely to the will of one of the parties, is likewise, invalid.
According to the SC, there was no mutuality of contract
between the parties since the interest rates imposed When there is no mutuality between the parties to a
were based on the sole discretion of Philippine National contract, it means that the parties were not on equal
Bank. Further, the escalation clauses in the real estate footing when the terms of the contract were negotiated.
mortgage "[did] not specify a fixed or base interest[.]" Thus, the principle of mutuality of contracts dictates that
Thus, the interest rates are invalid. a contract must be rendered void when the execution of
its terms is skewed in favor of one party.
The principle of mutuality of contracts is stated in Article
1308 of the Civil Code as follows: The Court of Appeals also noted that since the interest
rates imposed were at the sole discretion of Philippine
Article 1308. The contract must bind both contracting National Bank, and that Spouses Limso and Davao
parties; its validity or compliance cannot be left to the Sunrise were merely notified when there were changes in
will of one of them. the interest rates, Philippine National Bank violated the
principle of mutuality of contracts. The Court of Appeals
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Credit Transactions
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Week 2 (Mutuum) Part 3

ruled that: We cannot subscribe to appellant bank’s demandable. The contents of the letter quoted by the
allegation that plaintiffs-appellees agreed to these Court of Appeals show that there was no room for
interest rates by receiving various letters from PNB. negotiation among Philippine National Bank, Spouses
Those letters cannot be construed as agreements as a Limso, and Davao Sunrise when it came to the applicable
simple reading of those letters would show that they are interest rate. Since there was no room for negotiations
mere notices informing plaintiffs-appellees that the bank, between the parties with regard to the increases of the
through its top management, had already imposed rates of interest, the principle of mutuality of contracts
interest rates on their loan. The uniform wordings of the was violated. There was no meeting of the minds
said letters go this way: This refers to your existing credit between Spouses Limso, Davao Sunrise, and Philippine
facility in the principal amount of P850.0 MM granted by National Bank because the increases in the interest rates
the Philippine National Bank by and under the terms and were imposed on them unilaterally.
conditions of that Credit Agreement dated 12.2.97  
(Renewal of Credit Facility).
We wish to advise you that the top management has G.R. No. 197861 June 5, 2013
approved an interest rate of 20.756% which will be used SPOUSES FLORENTINO T. MALLARI and AUREA V.
in computing the interest due on your existing peso and MALLARI, Petitioners,
redenominated availments against the credit facility for vs.
the period July 20 to August 19, 1998. If you are PRUDENTIAL BANK (now BANK OF THE
amenable to this arrangement, please signify your PHILIPPINE ISLANDS), Respondent.
conformity on the space provided below and return to us
the original copy of the document. If we receive no FACTS: On December 11, 1984, petitioner Florentino T.
written objection by the end of 10 days from date of Mallari (Florentino) obtained from respondent Prudential
receipt of this letter, we will take it to mean that you Bank-Tarlac Branch (respondent bank), a loan in the
agree to the new interest rate we quote. On the other amount of P300,000.00 as evidenced by Promissory
hand, if you disagree with the quoted rate, you will have Note (PN) No. BD 84-055. Under the… promissory note,
to pay the loan in full within the same ten-day period the loan was subject to an interest rate of 21% per
otherwise, the entire loan will be considered due and annum (p.a.), attorney's fees equivalent to 15% of the
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Week 2 (Mutuum) Part 3

total amount due but not less than P200.00 and, in case P1,700,000.00 secured by such mortgage,... Respondent
of default, a penalty and collection charges of 12% p.a. bank filed its Answer with counterclaim arguing that: (1)
of the total amount due. The... loan had a maturity date the interest rates were clearly provided in the promissory
of January 10, 1985, but was renewed up to February notes, which were used in computing for interest
17, 1985. Petitioner Florentino executed a Deed of charges; (2) as early as January 1986, petitioners' time
Assignment wherein he authorized the respondent bank deposit was made to apply for the payment of... interest
to pay his loan with his time deposit with the latter... in of their P300,000.00 loan; and (3) the statement of
the amount of P300,000.00. account as of April 10, 1992 provided for a computation
of interest and penalty charges only from May 26, 1989,
On December 22, 1989, petitioners spouses Florentino since the proceeds of petitioners' time deposit was
and Aurea Mallari (petitioners) obtained again from applied to the payment of interest and... penalty charges
respondent bank another loan of P1.7 million as for the preceding period. Respondent bank also claimed
evidenced by PN No. BDS 606-89 with a maturity date of that petitioners were fully apprised of the bank's terms
March 22, 1990. They stipulated... that the loan will bear and conditions;
23% interest p.a., attorney's fees equivalent to 15% p.a.
of the total amount due, but not less than P200.00, and The RTC found no legal basis for petitioners' claim that
penalty and collection charges of 12% p.a. Petitioners since the total obligation was P1.7 million and
executed a Deed of Real Estate Mortgage... in favor of respondent bank's bid price was P3.5 million, the latter
respondent bank covering petitioners' property under should return to petitioners the difference of P1.8
Transfer Certificate of Title (TCT) No. T-215175 of the million. It found that since petitioners' obligation had...
Register of Deeds of Tarlac to answer for the said loan. reached P2,991,294.82 as of January 31, 1992, but the
certificate of sale was executed by the sheriff only on
Petitioners failed to settle their loan obligations with July 7, 1993, after the restraining order was lifted, the
respondent bank, respondent bank filed with the stipulated interest and penalty charges from January 31,
Regional Trial Court (RTC) of Tarlac, a petition for the 1992 to July 7, 1993 added to the loan already...
extrajudicial foreclosure of petitioners' mortgaged amounted to P3.5 million as of the auction sale.
property for the satisfaction of the latter's obligation of
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Week 2 (Mutuum) Part 3

The RTC found that the 23% interest rate p.a., which P1,700,000.00 loan to which they agreed upon is
was then the prevailing loan rate of interest could not be excessive or unconscionable under the circumstances
considered unconscionable, since banks are not
hospitable or equitable institutions but are entities HELD: We are not persuaded. In Medel v. Court of
formed primarily for profit. It also found that Article Appeals, we found the stipulated interest rate of 66%
1229... of the Civil Code invoked by petitioners for the p.a. or a 5.5% per month on a P500,000.00 loan
reduction of the interest was not applicable, since excessive, unconscionable and exorbitant, hence,
petitioners had not paid any single centavo of the P1.7 contrary to morals if not against the law and declared
million loan which showed they had not complied with such stipulation... void. In Toring v. Spouses Ganzon-
any part of the obligation. Olan, the stipulated interest rates involved were 3% and
3.81% per month on a P10 million loan, which we find
The CA found that the time deposit of P300,000.00 was under the circumstances excessive and reduced the same
equivalent only to the principal amount of the loan of to 1% per month. While in Chua... v. Timan, where the
P300,000.00 and would not be sufficient to cover the stipulated interest rates were 7% and 5% a month,
interest, penalty, collection charges and attorney's fees which are equivalent to 84% and 60% p.a., respectively,
agreed upon, thus, in the Statement of Account dated we had reduced the same to 1% per month or 12% p.a.
April 10, 1992, the outstanding balance of petitioners' We said that we need not unsettle the principle we had
loan was P594,043.54. It also found not persuasive affirmed... in a plethora of cases that stipulated interest
petitioners' claim that the P300,000.00 loan was added to rates of 3% per month and higher are excessive,
the P1.7 million loan. The CA, likewise, found that the unconscionable and exorbitant, hence, the stipulation
interest rates and penalty charges imposed were not... was void for being contrary to morals.
unconscionable and adopted in toto the findings of the
RTC on the matter. In this case, the interest rate agreed upon by the parties
was only 23% p.a., or less than 2% per month, which
ISSUE: Whether or not the 23% p.a. interest rate and are much lower than those interest rates agreed upon by
the 12% p.a. penalty charge on petitioners' the parties in the above-mentioned cases. Thus, there is

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no similarity of factual milieu for the application of... Here, petitioners defaulted in the payment of their loan
those cases. obligation with respondent bank and their contract
provided for the payment of 12% p.a. penalty charge,
We do not consider the interest rate of 23% p.a. agreed and since there was no showing that petitioners' failure
upon by petitioners and respondent bank to be to perform their obligation was due to force... majeure or
unconscionable. to respondent bank's acts, petitioners cannot now back
Clearly, jurisprudence establish that the 24% p.a. out on their obligation to pay the penalty charge. A
stipulated interest rate was not considered contract is the law between the parties and they are
unconscionable, thus, the 23% p.a. interest rate imposed bound by the stipulations therein.
on petitioners' loan in this case can by no means be
considered excessive or unconscionable. WHEREFORE, the petition for review is DENIED.
 
We also do not find the stipulated 12% p.a. penalty
charge excessive or unconscionable. G.R. No. 211206, November 07, 2018
ROSEMARIE Q. REY, Petitioner, v. CESAR G.
And in Development Bank of the Philippines v. Family ANSON, Respondent.
Foods Manufacturing Co., Ltd., we held that:... x x x The
enforcement of the penalty can be demanded by the FACTS:
creditor only when the non-performance is due to the Rosemarie Rey is the President and one of the owners of
fault or fraud of the debtor. The non-performance gives Southern Luzon Technological College Foundation
rise to the presumption of fault; in order to avoid the Incorporated, a computer school in Legazpi City.
payment of the penalty, the debtor has the... burden of Sometime in August 2002, she needed a quick infusion of
proving an excuse the failure of the performance was cash for the said school. She approached a friend, Ben
due to either force majeure or the acts of the creditor Del Castillo, who introduced her to his acquaintance,
himself. Cesar Anson.

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Credit Transactions
2nd Year, 2nd Semester (AY 2020-2021)
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On August 23, 2002, Rosemarie Rey borrowed from pay the principal amount of P200,000.00 when it became
Cesar Anson the amount of P200,000.00 payable in one due on August 24, 2003. She appealed to Cesar Anson
year, and subject to 7.5% interest per month or Pl not to foreclose the mortgage or to impose the stipulated
5,000.00 monthly interest, which would be paid bi- penalty charges, but instead to extend the terms thereof.
monthly by way of postdated checks. The loan was Cesar Anson agreed and Rosemarie Rey later signed a
secured by a real estate mortgage on Spouses Teodoro promissory note" dated April 23, 2004and executed a
and Rosemarie Rey's property, Lot 1271-C-4, covered by Deed of Real Estate Mortgage dated May 3, 2004, stating
Transfer Certificate of Title (TCT) No. 50872. In the that the Spouses Rey's principal obligation of
event of default, the Spouses Rey would pay a penalty P200,000.00 shall be payable in four (4) months from the
charge of 10% of the total amount, plus 12% attorney's execution of the Deed of Real Estate Mortgage, and it
fees.The terms and conditions of the loan were embodied shall be subject to interest of 7.5% per month. These
in a Deed of Real Estate Mortgage" dated August 23, two documents cancelled, updated and replaced the
2002.Rosemarie Rey thereafter issued 24 postdated original agreement on the first loan. Rosemarie Rey once
checks for P7,500.00 each, as well as another postdated again issued postdated checks to covert the interest
check for the principal amount of P200,000.00. payments on the amended first loan, the latest of which
was dated August 23, 2004, and another postdated
Three days later, or on August 26, 2002, Rosemarie Rey check for P200,000.00 for the principal amount.
again borrowed from Cesar Anson P350,000.00,subject Rosemarie Rey was able to make good on her interest
to 7% interest per month, and payable in four months. payments, but thereafter failed to pay the principal
The second loan was secured by a real estate mortgage amount of P200,000.00.
over a parcel of land covered by TCT No. 2776,
registered in the name of Rosemarie Rey's mother,Isabel Anent the second loan of P350,000.00, Rosemarie Rey
B. Quinto. The parties executed a second Deed of Real failed to faithfully pay monthly interest thereon and she
Estate Mortgage dated August 26, 2002. was unable to pay the principal amount thereof when it
became due on December 26, 2002. Rosemarie Rey
Rosemarie Rey faithfully paid the interest on the first appealed to Cesar Anson not to foreclose the mortgage
loan for twelve (12) months. She was, however,unable to securing the same or to impose the penalty charges,but
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instead to extend the terms thereof. Cesar Anson agreed,

and the parties executed anew a Deed of Real Estate On February 25, 2005, Cesar Anson sent Rosemarie Rey
Mortgage" dated January 19, 2003 wherein Rosemarie a Statement of Account" seeking full payment of all four
Rey acknowledged her indebtedness to Cesar Anson in loans amounting to P2,214,587.50. Instead of paying her
the amount of P611,340.00, payable within four months loan obligations, Rosemarie Rey, through counsel, sent
from the execution of the Deed of Real Estate Mortgage, Cesar Anson a letter dated August 8, 2005, stating that
and subject to 7% interest per month. the interest rates imposed on the four loans were
irregular, if not contrary to law. The 7.5% and 7%
Four months thereafter, Rosemarie Rey again failed to monthly interest rates imposed on the first and second
fulfill her obligation on the second loan. The same was loans, respectively, were excessive and unconscionable
extended once more in a Deed of Real Estate Mortgage" and should be adjusted to the legal rate.Moreover, no
dated June 19, 2003 wherein Rosemarie Rey interest should have been imposed on the third and
acknowledged indebtedness to Cesar Anson in the fourth loans in the absence of any written agreement
amount of P761,450.00, payable within six months from imposing interest. Per Rosemarie Rey's computation
the execution of the Deed of Real Estate Mortgage, and using the legal rate of interest, all four loans were
subject to the same 7% interest per month. already fully paid, as well as the interests thereon. Rey
contended that she had overpaid the amount
On February 24, 2004, Rosemarie Rey obtained a third ofP283,434.19. She demanded from Cesar Anson the
loan from Cesar Anson in the amount of Pl00,000.00. The return of the excess payment; otherwise, she would be
third loan was not put in writing, but the parties verbally compelled to seek redress in court.
agreed that the same would be subject to 3% monthly
interest. On August 16, 2005, the Spouses Rey and Isabel Quinto
filed a Complaint for Recomputation of Loans and
A week later or on March 2, 2004, Rosemarie Rey Recovery of Excess Payments and Cancellation of Real
obtained a fourth loan from Cesar Anson forP100,000.00. Estate Mortgages and Checks against Cesar Anson with
It was also not put in writing, but there was an oral the RTC of Legazpi City.
agreement of 4% monthly interest.
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RTC ruled for Spouses Rey. CA reversed said interest rates, while the RTC correctly imposed the
legal interest of 12% per annum in place of the said
ISSUES: interest rates.
1. Whether or not the interest rates on the first and 2. NO. Anent the third and fourth loans both in the
second loans are unconscionable and contrary to morals amount of P100,000.00, the Court of Appeals correctly
2. Whether or not the interest rates on the third and held that as the agreement of 3% monthly interest on
fourth loans are valid the third loan and 4% monthly interest on the fourth
3. Whether or not the computation of payment of loan was merely verbal and not put in writing, no interest
interest and the principal amount is correct in Loan 1 and was due on the third and fourth loans. This is in
Loan 2 accordance with Article 1956 of the Civil Code which
provides that " [n]o interest shall be due unless it has
HELD: been stipulated in writing."
1. YES. As case law instructs, the imposition of an Hence, the payments made as of March 18, 2005 in the
unconscionable rate of interest on a money debt,even if third loan amounting to P141,360.00resulted in the over
knowingly and voluntarily assumed, is immoral and payment of P41,360.00. Moreover, the payments made
unjust. In this case, the first loan had a 7.5% monthly as of February 2, 2005in the fourth loan amounting to
interest rate or 90% interest per annum, while the P117,960.00 resulted in an over payment of
second loan had a 7% monthly interest rate or 84% P17,960.00.Consequently, as found by the Court of
interest per annum, which rates are very much higher Appeals, there was a total over payment of
than the 3% monthly interest rate imposed in Ruiz v. P59,320.00for the third and fourth loans.
Court of Appeals and the 5%monthly interest rate 
imposed in Sps. Albos v. Sps. Embisan, et al. Based on 3. YES. Rey contends that the manner by which the RTC
the ruling of the Spouses Albos case, the Court holds that recomputed the four loans after the reduction of the
the interest rates of 7.5% and 7% are interest rates to 12% per annum was erroneous and
excessive,unconscionable, iniquitous, and contrary to law contrary to law. It simply added the principal amount of
and morals; and, therefore, void ab initio. Hence,the the four loans with the 12% per annum legal interest on
Court of Appeals erred in sustaining the imposition of the Loan 1 and Loan 2, and thereafter deducted from the
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Week 2 (Mutuum) Part 3

sum the total amount paid by Rey. It did not take into from November 23, 2003 to August 23, 2004 resulted in
consideration the principle that each particular payment over payment amounting to P144,259.64. The excess
should be applied and credited on the precise time it is payment of P9,259.64 as of November 23, 2003 plus
made, to be applied first on the interest and thereafter excess payments made from December 23, 2003 to April
on the principal of the loan, pursuant to Article 1253 of 23, 2004 amounting to P84,259.64 in Loan 1 may be
the Civil Code. applied to Loan 2, leaving a final excess payment of
P60,000.00 for Loan 1.
Thus, Rey contends that she has made excess payments
for the four loans in the total sum ofP269,700.68, which As regards Loan 2, Rey fully paid the principal amount of
ought to be returned by Cesar Anson in accordance with P350,000.00 and monthly interest thereon on May 26,
the principle of solutio indebiti under Article 2154 of the 2004, leaving an excess payment of P31,856.68.
Civil Code. The Court agrees with Rey that Articles 1253 Payments made thereafter,from June 26, 2004 to
and 2154 of the Civil Code apply to this case, and Cesar September 26, 2004, resulted in excess payments
Anson is obliged to return to Rey excess payments amounting to Pl50,380.68 for Loan 2. Rey also made
received by him. excess payments of P41,360.00 in Loan 3, and
P17,960.00in Loan 4.Hence, the total excess payments
Article 1253 of the Civil Code states that made by Rey in the four loans amounted toP269,700.68.
“[i]f the debt produces interest, payment of the principal Since Cesar Anson received a total over payment of
shall not be deemed to have been made until the P269,700.68 from Rey, he is obliged to return the
interests have been covered.” amount in accordance with the principle of
solutio indebiti under Article 2154 of the Civil Code, to
The Court reviewed the computation above made by Rey wit:
for Loan 1 and Loan 2, and found the computation to be Article 2154. If something is received when there is no
correct.The Court finds that in Loan 1, Rey already paid right to demand it, and it was unduly delivered through
in full the principal amount of P200,000.00 and monthly mistake, the obligation to return it arises. In this case,
interest thereon on November 8, 2003, leaving an excess the excess payments made by Rey were also borne out
payment of P1,759.64. Further payments made by Rey of a mistake that they were due; hence, following the
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ruling in Sps. Abella v. Sps. Abella, the Court deems it in Defendants obtained another loan from Defendant in the
the better interest of equity not to hold Cesar Anson amount of P90, 000.00, payable in 2 months, at 6%
liable for interest on the excess payments.Nevertheless, interest per month. They executed a promissory note to
an interest at the rate of 6% per annum is imposable on evidence the loan and received only P84, 000.00 out of
the total judgment award pursuant to Nacar v. Gallery the proceeds of the loan.
Frames, et al., which held that "[w]hen the judgment of
the court awarding a sum of money becomes final and For the third time, Defendants secured from Plaintiff
executory, the rate of legal interest x xx shall be 6%per another loan in the amount of P300, 000.00, maturing in
annum from such finality until its satisfaction, this interim 1 month, and secured by a real estate mortgage. They
period being deemed to be by thenan equivalent to a executed a promissory note in favor of the Plaintiff.
forbearance of credit." However, only the sum of P275, 000.00, was given to
  them out of the proceeds of the loan.
G.R. No. 131622. November 27, 1998
LETICIA Y. MEDEL DR. RAFAEL MEDEL and Upon maturity of the three promissory notes, Defendants
SERVANDO FRANCO, Petitioners, v. COURT OF failed to pay the indebtedness.
APPEALS, SPOUSES VERONICA R. GONZALES and
DANILO G. GONZALES, JR., doing lending business Defendants consolidated all their previous unpaid loans
under the trade name and style "GONZALES totalling P440, 000.00, and sought from Plaintiff another
CREDIT ENTERPRISES", Respondents. loan in the amount of P60, 000.00, bringing their
indebtedness to a total of P50,000.00. They executed
FACTS: another promissory note in favor of Plaintiff to pay the
Defendants obtained a loan from Plaintiff in the amount sum of P500, 000.00 with a 5.5% interest per month plus
P50, 000.00, payable in 2 months and executed a 2% service charge per annum, with an additional amount
promissory note. Plaintiff gave only the amount of P47, of 1% per month as penalty charges.
000.00 to the borrowers and retained P3, 000.00 as
advance interest for 1 month at 6% per month. On maturity of the loan, the Defendants failed to pay the
indebtedness which prompt the Plaintiffs to file with the
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RTC a complaint for collection of the full amount of the

loan including interests and other charges. ISSUE: Whether or not the stipulated rates of interest at
5.5% per month on the loan in the sum of P500,00 that
Declaring that the due execution and genuineness of the plaintiffs extended to the defendant is usurious?
four promissory notes has been duly proved, the RTC
ruled that although the Usury Law had been repealed, HELD: The Court agree with petitioners that the
the interest charged on the loans was unconscionable stipulated rate of interest at 5.5% per month on the
and “revolting to the conscience” and ordered the P500,000.00 loan is excessive, iniquitous, unconscionable
payment of the amount of the first 3 loans with a 12% and exorbitant. However, SC cannot consider the rate
interest per annum and 1% per month as penalty. "usurious" because it has consistently held that Circular
No. 905 of the Central Bank, adopted on December 22,
On appeal, Plaintiff-appellants argued that the 1982, has expressly removed the interest ceilings
promissory note, which consolidated all the unpaid loans prescribed by the Usury Law and that the Usury Law is
of the defendants, is the law that governs the parties. now "legally inexistent".

The Court of Appeals ruled in favor of the Plaintiff- In Security Bank and Trust Company vs. Regional Trial
appellants on the ground that the Usury Law has become Court of Makati, Branch 61 the Court held that CB
legally inexistent with the promulgation by the Central Circular No. 905 "did not repeal nor in anyway amend
Bank in 1982 of Circular No. 905, the lender and the the Usury Law but simply suspended the latter's
borrower could agree on any interest that may be effectivity." Indeed, we have held that "a Central Bank
charged on the loan, and ordered the Defendants to pay Circular cannot repeal a law. Only a law can repeal
the Plaintiffs the sum of P500,000, plus 5.5% per month another law." In the recent case of Florendo vs. Court of
interest and 2& service charge per annum , and 1% per Appeals, the Court reiterated the ruling that "by virtue of
month as penalty charges. CB Circular 905, the Usury Law has been rendered
ineffective". "Usury has been legally non-existent in our
Defendants filed the present case via petition for review jurisdiction. Interest can now be charged as lender and
on certiorari. borrower may agree upon."
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Nevertheless, SC 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. The courts shall
reduce equitably liquidated damages, whether intended G.R. No. 168782 October 10, 2008
as an indemnity or a penalty if they are iniquitous or SPOUSES JOVENAL TORING and CECILIA
unconscionable. ESCALONA-TORING, petitioners,
vs.
Consequently, the Court of Appeals erred in upholding SPOUSES ROSALIE GANZON-OLAN and GILBERT
the stipulation of the parties. Rather, we agree with the OLAN, and ROWENA OLAN, respondents.
trial court that, under the circumstances, interest at 12%
per annum, and an additional 1% a month penalty FACTS: On September 4, 1998 petitioner's spouses
charge as liquidated damages may be more reasonable. Toring obtained a loan amounting to P6,000,000 at 3%
interest per month from respondents spouses Olan. It
was secured by the real estate mortgage on a parcel of
land. For less than a month, the parties have executed a
deed of absolute sale conveying the mortgaged property
to the respondents. Thereafter, the respondents gave the
petitioner an option to buy the land for P10M. An
agreement that if the option is exercised only after 2
months, the purchase price will increase at the rate of
P300,000 or 3% there of every month and thereafter, at
the rate of P381,000 or 3.81% thereof every month.

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On July 28, 2000, Petitioners filed a complaint on the month, in conformity with our ruling in Ruiz v. Court of
ground that the interest of 3% & 3.81% are Appeals.
unconscionable. The Trial Court and the Court of Appeals
upheld the said stipulated interest rates. In the present case, petitioners failed to pay the principal
loan on its maturity and upon demand by respondents,
ISSUE: Whether or not the stipulated interest rates were as well as the interest payments thereafter. Indeed,
unconscionable. petitioners cannot turn their backs on their obligation;
they have to comply with what is incumbent upon them.
HELD: The Supreme Court held that they were All other claims for damages having been waived by the
unconscionable. In a loan or forbearance of money, parties, petitioners are bound to pay respondents the
according to the Civil Code, the interest due should be principal loan of P10,000,000, plus what the court have
that stipulated in writing, and in the absence thereof, the repeatedly held as the appropriate rate of interest of 1%
rate shall be 12% per annum. per month, from December 6, 199826 until fully paid.
 
While the parties are free to stipulate on the interest to
be imposed on monetary obligations, the Court will
temper interest rates if they are unconscionable.23 Even
if the Usury Law has been suspended by Central Bank
Circular No. 905-82, and parties to a loan agreement
have been given wide latitude to agree on any interest
rate, we have held that stipulated interest rates are
illegal if they are unconscionable.24 Consequently, in our
view, the Court of Appeals erred in sustaining the trial
court's decision upholding the stipulated interest of 3%
and 3.81%. Thus, we are unanimous now in our ruling to
reduce the above stipulated interest rates to 1% per

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7% rate is valid and in the first place, the Timans agreed

to it.

ISSUE: Whether or not the interest rate is valid.

G.R. No. 170452 August 13, 2008 HELD: No. As has been ruled by the Supreme Court in a
SALVADOR CHUA and VIOLETA CHUA, petitioners, multitude of cases, interest rates of 3% and higher are
vs. already excessive. The rate should then be reduced to
RODRIGO TIMAN, MA. LYNN TIMAN and LYDIA 12% per annum or 1% per month (then the prevailing
TIMAN, respondents. legal rate). The Usury Law has been rendered ineffective
by the said CB Circular but it has not repealed the law, it
FACTS: In February and March 1999 Salvador Chua and merely suspended it. Note that only laws can repeal laws,
Violeta Chua loaned Rodrigo, Ma. Lynn, and Lydia (all not circulars.
surnamed Timan) 6 loans amounting to P864k. The
interest rate agreed upon was 7% per month. The While C.B. Circular No. 905-82, which took effect on
Timans paid at that rate until September 1999. In January 1, 1983, effectively removed the ceiling on
October 1999, the monthly interest rate was reduced to interest rates for both secured and unsecured loans,
5%. In March 2000, the Timans offered to pay P764k. regardless of maturity, nothing in the said circular could
Chua did not accept payment as they wanted the full possibly be read as granting carte blanche authority to
amount of P864k. The Timans then consigned with the lenders to raise interest rates to levels which would
court the amount of P864k. either enslave their borrowers or lead to a hemorrhaging
of their assets.
The RTC ruled that the 7% and the reduced rate of 5%  
stipulated rate is excessive, iniquitous, unconscionable *forum shopping main issue sa full txt
and exorbitant (equivalent to 84% and 60% per annum
rate). Chua averred that by virtue of CB Circular 905, the
ceiling on interest rate has been removed hence the 5-
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abovementioned mortgages with the Office of the

Provincial Sheriff of Laguna. however, that the auction
sale did not push through because on June 9, 2000,
respondent Bank re-applied for extrajudicial foreclosure
G.R. No. 163433 August 22, 2011 of the same mortgage. Petitioners then wrote a letter-
SPOUSES NELSON R. VILLANUEVA and MYRA P. request addressed to the Officer-in-Charge of the Office
VILLANUEVA, Petitioners, of the Clerk of Court of the RTC, Santa Cruz, Laguna
vs. questioning the amount of its outstanding obligations to
THE COURT OF APPEALS, PROVIDENT RURAL respondent Bank and requesting that the public auction
BANK OF SANTA CRUZ (LAGUNA), INC., and THE scheduled on August 25, 2000 be suspended until after
CLERK OF COURT OF THE REGIONAL TRIAL its objection to the amount being sought by respondent
COURT OF LAGUNA AS EX-OFFICIO PROVINCIAL Bank is resolved by the court in which the RTC denied.
SHERIFF, Respondents. Aggrieved, petitioners filed, on August 2, 2000, a Petition
for Declaratory Relief, Accounting and Damages praying
FACTS: Sometime in 1994, herein petitioners applied for that the stipulated interests, charges and expenses on its
separate loans amounting to ₱100,000.00 and loans be declared null and void for being contrary to law,
₱125,000.00, which were granted by herein respondent morals, good customs, public order or public policy as
Provident Rural Bank of Sta. Cruz, Laguna, Inc. As they are exorbitant, usurious, iniquitous and
security for the loans, petitioners executed two separate unconscionable.
promissory notes the due dates of which both fall on
August 20, 1995.4 Petitioners also executed two separate On September 5, 2000, respondent Bank filed a Motion
real estate mortgages over the same parcel of to Dismiss contending that the petition is barred by res
agricultural land located in Sta. Cruz, Laguna in which judicata and that petitioners are guilty of forum shopping
the petitioner failed to pay when it became due. that on August 23, 1996, petitioners filed a complaint
against it before the RTC of Sta. Cruz, Laguna, Branch
As a consequence, on June 14, 1996, respondent Bank 86, seeking to declare as usurious the interests, penalties
filed a petition for extrajudicial foreclosure of the and other charges which was subsequently dismissed by
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CA. On July 31, 2001, the RTC issued an Order Thus, the stipulated interest rates are illegal if they are
dismissing petitioners' Petition for Declaratory Relief unconscionable.
holding that the said Petition is barred by prior judgment  
in which CA affirmed. Hence this petition. G.R. No. 180458 July 30, 2009
DEVELOPMENT BANK OF THE PHILIPPINES,
ISSUE: Whether or not the interest rates, penalties and Petitioner,
charges imposed by respondent Bank are usurious and vs.
unconscionable FAMILY FOODS MANUFACTURING CO. LTD., and
SPOUSES JULIANCO and CATALINA CENTENO,
HELD: This Court has consistently held that for Respondent.
sometime now, usury has been legally non-existent and
that interest can now be charged as lender and borrower FACTS:
may agree upon.19 In fact, Section 1 of Central Bank On September 15, 1982, respondent Family Foods
Circular No. 905, Series of 1982, which took effect on Manufacturing Co. Ltd. (FAMILY FOODS), a partnership
January 1, 1983, expressly provides that "[t]he rate of owned and operated by Spouses Julianco and Catalina
interest, including commissions, premiums, fees and Centeno obtained an industrial loan of ₱500,000.00 from
other charges, on a loan or forbearance of any money, DBP evidenced by a promissory note dated September
goods, or credits, regardless of maturity and whether 15, 1982 and payable in seven (7) years, with quarterly
secured or unsecured, that may be charged or collected amortizations of ₱31,760.40 carried an interest rate of
by any person, whether natural or juridical, shall not be 18% per annum, and penalty charge of 8% per annum.
subject to any ceiling prescribed under or pursuant to the As security, spouses Centeno executed a real estate
Usury Law, as amended." Nonetheless, this Court has mortgage on the parcels of land in Los Baños, Laguna
also held in a number of cases, that nothing in the and a chattel mortgage over the buildings, equipment
circular grants lenders carte blanche authority to raise and machineries therein, in favor of DBP. On October 14,
interest rates to levels which will either enslave their 1984, FAMILY FOODS was granted an additional loan of
borrowers or lead to a hemorrhaging of their assets. 20 ₱440,000.00, payable on or before November 8, 1989,

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with interest at 22% per annum and penalty charge of charges stipulated in the two (2) promissory notes for
8%. being iniquitous and unconscionable.

FAMILY FOODS failed to pay the loans when they Respondents filed a motion for reconsideration, while
became due. Accordingly, DBP filed a petition for DBP moved for partial reconsideration of the decision,
extrajudicial foreclosure of mortgage with the Office of but these were both denied by the CA on October 24,
the Clerk of Court of the Regional Trial Court (RTC) of 2007. Hence this petition.
Laguna. However, before the redemption period expired,
FAMILY FOODS entered into a contract of lease over the ISSUE:
foreclosed properties with DBP for agreed monthly Whether or not the interest and charges that were
rentals of ₱12,000.00. in which they, likewise, failed to allegedly imposed or collected in excess of those
redeem the foreclosed properties; hence, DBP provided in the real estate and chattel mortgages was
consolidated its title over the same. unconscionable.

On March 3, 1994, spouses Centeno filed a suit for HELD:

Annulment of Sale with Prayer for Issuance of a Writ of No, respondents’ own evidence shows that they agreed
Injunction and/or Restraining Order. They contends that on the stipulated interest rates of 18% and 22%, and on
DBP imposed interest and other charges in excess of the penalty charge of 8%, in each promissory note. It is
those provided in the promissory note and in the real a basic principle in civil law that parties are bound by the
estate and chattel mortgages, thus, unnecessarily stipulations in the contracts voluntarily entered into by
increasing their outstanding obligation. them. Parties are free to stipulate terms and conditions
that they deem convenient, provided these are not
In due course and after hearing, the RTC rendered a contrary to law, morals, good customs, public order, or
decision5 on January 30, 2003, dismissing the complaint, public policy.
then respondents appealed to the Court of Appeals (CA)
in which the CA reduced the interest rates and penalty There is nothing in the records, and in fact, there is no
allegation, showing that respondents were victims of
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fraud when they signed the promissory notes. Neither is

there a showing that in their contractual relations with G.R. No. 173227 January 20, 2009
DBP, respondents were at a disadvantage on account of SEBASTIAN SIGA-AN, Petitioner,
their moral dependence, mental weakness, tender age or vs.
other handicap, which would entitle them to the vigilant ALICIA VILLANUEVA, Respondent.
protection of the courts as mandated by Article 2419 of
the Civil Code. FACTS: Respondent filed a complaint for sum of money
against petitioner. Respondent claimed that petitioner
Likewise, the 18% and 22% stipulated rates of interest in approached her inside the PNO and offered to loan her
the two (2) promissory notes are not unconscionable or the amount of P540,000.00 of which the loan agreement
excessive, contrary to the CA ruling. In Garcia v. Court of was not reduced in writing and there was no stipulation
Appeals,22 this Court sustained the interest rates of 18% as to the payment of interest for the loan. Respondent
and 24% per annum on the loans obtained by Chemark issued a check worth P500,000.00 to petitioner as partial
from Security Bank. Also, in Bautista v. Pilar payment of the loan. She then issued another check in
Development Corporation,23 the validity of the 21% the amount of P200,000.00 to petitioner as payment of
interest rate was upheld. Thus, the stipulated rates on the remaining balance of the loan of which the excess
respondents’ promissory notes cannot be stricken down amount of P160,000.00 would be applied as interest for
for being contrary to public policy. the loan. Not satisfied with the amount applied as
  interest, petitioner pestered her to pay additional interest
and threatened to block or disapprove her transactions
with the PNO if she would not comply with his demand.
Thus, she paid additional amounts in cash and checks as
interests for the loan. She asked petitioner for receipt for
the payments but was told that it was not necessary as
there was mutual trust and confidence between them.
According to her computation, the total amount she paid

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to petitioner for the loan and interest accumulated to HELD: 1. No. Compensatory interest is not chargeable in
P1,200,000.00. the instant case because it was not duly proven that
respondent defaulted in paying the loan and no interest
The RTC rendered a Decision holding that respondent was due on the loan because there was no written
made an overpayment of her loan obligation to petitioner agreement as regards payment of interest. Article 1956
and that the latter should refund the excess amount to of the Civil Code, which refers to monetary interest,
the former. It ratiocinated that respondent’s obligation specifically mandates that no interest shall be due unless
was only to pay the loaned amount of P540,000.00, and it has been expressly stipulated in writing. As can be
that the alleged interests due should not be included in gleaned from the foregoing provision, payment of
the computation of respondent’s total monetary debt monetary interest is allowed only if: (1) there was an
because there was no agreement between them express stipulation for the payment of interest; and (2)
regarding payment of interest. It concluded that since the agreement for the payment of interest was reduced
respondent made an excess payment to petitioner in the in writing. The concurrence of the two conditions is
amount of P660,000.00 through mistake, petitioner required for the payment of monetary interest. Thus, we
should return the said amount to respondent pursuant to have held that collection of interest without any
the principle of solutio indebiti. Also, petitioner should stipulation therefor in writing is prohibited by law.
pay moral damages for the sleepless nights and wounded
feelings experienced by respondent. Further, petitioner 2. Petitioner cannot be compelled to return the alleged
should pay exemplary damages by way of example or excess amount paid by respondent as interest. Under
correction for the public good, plus attorney’s fees and Article 1960 of the Civil Code, if the borrower of loan
costs of suit. pays interest when there has been no stipulation
therefor, the provisions of the Civil Code concerning
ISSUE: solutio indebiti shall be applied. Article 2154 of the Civil
1. Whether or not interest was due to petitioner; Code explains the principle of solutio indebiti. Said
2. Whether the principle of solutio indebiti applies to provision provides that if something is received when
the case at bar. there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it
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arises. In such a case, a creditor-debtor relationship is other lenders from committing similar and other serious
created under a quasi-contract whereby the payor wrongdoings.
becomes the creditor who then has the right to demand G.R. No. 202176, August 01, 2016
the return of payment made by mistake, and the person METROPOLITAN BANK & TRUST COMPANY,
who has no right to receive such payment becomes Petitioner, v. CHUY LU TAN, MR. ROMEO TANCO,
obligated to return the same. The quasi-contract of DR. SY SE HIONG, AND TAN CHU HSIU YEN,
solutio indebiti harks back to the ancient principle that no Respondent.
one shall enrich himself unjustly at the expense of
another. The principle of solutio indebiti applies where FACTS: Between February 26, 19-96 and May 8, 1996,
(1) a payment is made when there exists no binding herein respondents Chuy Lu Tan (Chuy) and Romeo
relation between the payor, who has no duty to pay, and Tanco (Tanco) obtained five loans from herein petitioner
the person who received the payment; and (2) the Metropolitan Bank & Trust Company (Metrobank) with an
payment is made through mistake, and not through aggregate amount of Nineteen Million Nine Hundred
liberality or some other cause. We have held that the Thousand Pesos (P19,900,000.00) which are evidenced
principle of solutio indebiti applies in case of erroneous by five Promissory Notes executed by Chuy and Tanco on
payment of undue interest. various dates. Subsequently, Chuy and Tanco failed to
settle their loans despite Metrobank's repeated demands
Article 2232 of the Civil Code states that in a quasi- for payment. Consequently, on December 14, 1999,
contract, such as solutio indebiti, exemplary damages Metrobank extrajudicially foreclosed the mortgage and
may be imposed if the defendant acted in an oppressive the property was sold to it (Metrobank) as the highest
manner. Petitioner acted oppressively when he pestered bidder for the amount of P24,572,268.00. However, in
respondent to pay interest and threatened to block her separate letters to the respondents, which were all dated
transactions with the PNO if she would not pay interest. January 26, 2000, Metrobank claimed that after
This forced respondent to pay interest despite lack of application of the bid price to the respondents'
agreement thereto. Thus, the award of exemplary outstanding obligation and the payment of the costs of
damages is appropriate so as to deter petitioner and foreclosure, accrued interest, penalty charges, attorney's
fees and other related expenses, there remained a
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Credit Transactions
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deficiency of P1,641,815.00, as of January 15, 2000. the real estate mortgage. Likewise, it is uncontested that
Metrobank demanded from respondents the payment of by subtracting the amount obtained at the sale of the
the said deficiency. For respondents' failure to heed property, a loan balance still remains. Petitioner merely
Metrobank's demand, the latter filed a suit for collection contends that, contrary to the ruling of the CA, it has the
of a sum of money with the RTC of Makati. Chuy was right to collect from respondents the remainder of their
declared in default for failure to attend the pre-trial and obligation after deducting the amount obtained from the
to file her pre-trial brief. Thereafter, trial ensued wherein extrajudicial foreclosure sale. In the instant case, the
Metrobank was allowed to present its evidence ex parte Court finds the eighteen percent (18%) penalty charge
against Chuy. Both petitioner and respondents, with the imposed by petitioner on the deficiency claim, computed
exception of Chuy, appealed the RTC Decision with the from the time of default, as excessive and, accordingly,
CA. On March 20, 2012, the CA promulgated its assailed reduces it considering that petitioner was already able to
Decision by reversing and setting aside the July 17, 2008 recover a large portion of respondents' principal
Decision of the RTC and dismissing Metrobank's obligation. Settled is the rule that a creditor is not
complaint. The CA ruled that to allow Metrobank to precluded from recovering any unpaid balance on the
recover the amount it seeks from respondents would be principal obligation if the extrajudicial foreclosure sale of
iniquitous, unconscionable and would amount to unjust the property subject of the real estate mortgage results
enrichment. Metrobank filed a Motion for in a deficiency. The fact that the mortgaged property was
Reconsideration,14 but the CA denied. Hence, the sold at an amount less than its actual market value
present petition. should not militate against the right to such recovery.
This Court has likewise ruled that in deference to the rule
ISSUE: Whether or not Metrobank may recover the that a mortgage is simply a security and cannot be
amount it seeks from respondents would be iniquitous, considered payment of an outstanding obligation, the
unconscionable and would amount to unjust enrichment. creditor is not barred from recovering the deficiency even
HELD: No, there is no dispute with respect to the total if it bought the mortgaged property at the extrajudicial
amount of the outstanding loan obligation that foreclosure sale at a lower price than its market value
respondents owed petitioner at the time of the notwithstanding the fact that said value is more than or
extrajudicial foreclosure sale of the property subject of equal to the total amount of the debtor's obligation.
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G.R. NO. 169617 : April 4, 2007 The new loan agreement adopted all other terms and
HEIRS OF ZOILO ESPIRITU AND PRIMITIVA conditions contained in first agreement.
ESPIRITU, Petitioners, v. SPOUSES MAXIMO
LANDRITO AND PAZ LANDRITO, Represented by Due to the continued inability of the Spouses Landrito to
ZOILO LANDRITO, as their Attorney-in-Fact, settle their obligations with the Spouses Espiritu, the loan
Respondents. agreement was renewed three more times until the
principal was increased to P874,125.00. The debt
FACTS: On 5 September 1986, Spouses Landrito loaned remained unpaid. So, the Spouses Espiritu foreclosed the
from the Spouses Espiritu the amount of P350,000.00 mortgaged property in an auction sale and became the
payable in three months. To secure the loan, the lone bidder. Hence, the Sheriff’s certificate of Sale was
Spouses Landrito executed a real estate mortgage over a annotated on the title of the mortgaged property, giving
five hundred forty (540) square meter lot in favor of the the Spouses Landrito until 8 January 1992 to redeem the
Spouses Espiritu. From the 350,000.00 that the Landritos property. However, the Spouses Landrito failed to
were supposed to receive, P17,500.00 was deducted as redeem the subject property although they alleged that
interest for the first month which was equivalent to five they negotiated for the redemption of the property as
percent of the principal debt, and P7,500.00 was further early as 30 October1991.
deducted as service fee. Thus, they actually received a
net amount of P325,000.00. The agreement, however, Spouses Landrito allegedly tendered two manager's
provided that the principal indebtedness earns “interest checks and some cash, totaling P1,800,000.00 to the
at the legal rate.” Spouses Espiritu on 13 January 1992, but the latter
refused to accept the same.However, upon inquiry, they
After three months, when the debt became due and found out that on 24 June 1992, the Spouses Espiritu
demandable, the Spouses Landrito were unable to pay had already executed an Affidavit of Consolidation of
the principal, and the interest. The loan was restructured Ownership and registered the mortgaged property in
in such a way that the unpaid interest became part of the their name, and that the Register of Deeds of Makati had
principal, thus increasing the principal to P385,000. already issued Transfer Certificate of Title No. 179802 in
the name of the Spouses Espiritu.
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On 9 October 1992, the Spouses Landrito, represented Hence, the present petition.
by their son Zoilo Landrito, filed an action for annulment
or reconveyance of title, with damages against the ISSUE: Whether or not the CA erred in finding that
Spouses Espiritu before Branch 146 of the Regional Trial herein petitioners unilaterally imposed on herein
Court of Makati.Among the allegations in their Complaint, respondents the allegedly unreasonable interests on the
they stated that the Spouses Espiritu, as creditors and mortgage loans.
mortgagees, "imposed interest rates that are shocking to
one's moral senses." HELD: The agreement contained no other provision on
interest or any fees or charges incident to the debt. In at
The trial court dismissed the complaint and upheld the least three contracts, all... designated as Amendment of
validity of the foreclosure sale.The Spouses Landrito Real Estate Mortgage, the interest rate imposed was,
appealed to the Court of Appeals pursuant to Rule 41 of likewise, unspecified.
the 1997 Rules of Court.the Court of Appeals reversed The total interest and charges amounting to P559,125.00
the trial court's decision, decreeing that the five percent on the original principal of P350,000 was accumulated
(5%) interest imposed by the Spouses Espiritu on the over only two years and one month. These charges are
first month and the varying interest rates imposed for the not found in any written agreement between the parties.
succeeding months contravened the provisions of the
Real Estate Mortgage contract which provided that The records fail to show any computation on how
interest at the legal rate, i.e., 12% per annum, would be much... interest was charged and what other fees were
imposed. It also ruled that although the Usury Law had imposed. Not only did lack of transparency characterize
been rendered ineffective by Central Bank Circular No. the aforementioned agreements, the interest rates and
905, which, in effect, removed the ceiling rates the service charge imposed, at an average of 6.39% per
prescribed for interests, thus, allowing parties to freely month, are excessive.
stipulate thereon, the courts may render void any
stipulation of interest rates which are found iniquitous or In enacting Republic Act No. 3765, known as the "Truth
unconscionable. in Lending Act," the State seeks to protect its citizens
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from a lack of awareness of the true cost of credit by Moreover, if the proceeds of the sale together with its
assuring the full disclosure of such costs. reasonable rates of interest were applied to the
obligation, only a small part of its original loans would
Article 1956. No interest shall be due unless it has been actually remain outstanding,... but because of the
stipulated in writing. unconscionable interest rates, the larger part
corresponded to said excessive and iniquitous interest.
In several cases, this Court has been known to declare
null and void stipulations on interest and charges that As a result, the subsequent registration of the foreclosure
were found excessive, iniquitous, and unconscionable. sale cannot transfer any rights over the mortgaged
property to the Spouses Espiritu. The registration of the
Stipulation authorizing iniquitous or unconscionable foreclosure sale, herein declared invalid, cannot vest title
interests are contrary to morals, if not against the law. over the mortgaged property.
Under Article 1409 of the Civil Code, these contracts are he records show that the property mortgaged was
inexistent and void from the beginning. purchased by the Spouses Espiritu and had not been
transferred to an innocent purchaser for value. This
Moreover, it is evident from the facts of the case that means that an action for reconveyance may still be
despite considerable effort on their part, the Spouses availed of in this case
Landrito failed to redeem the mortgaged property
because they were unable to raise the total amount, Registration of property by one person in his or her
which was grossly inflated by the excessive interest name, whether by mistake or fraud, the real owner being
imposed. another person, impresses upon the title so acquired the
character of a constructive trust for the real owner,
Since the Spouses Landrito, the debtors in this case, which would justify an action for reconveyance.[34] This
were not given an opportunity to settle their debt, at the is based on Article 1465 of the Civil Code
correct amount and without the iniquitous interest  
imposed, no foreclosure proceedings may be instituted. [G.R. No. 133498. April 18, 2002

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C.F. SHARP & CO., INC., Petitioner, vs. NORTHWEST contended that it had already made partial payments;
AIRLINES, INC., Respondent. hence, it was liable only for the amount of 61,734,633
Yen. Moreover, it argued that it was not liable to pay
On May 9, 1974, respondent, through its Japan Branch, additional interest on top of the 6% interest imposed in
entered into an International Passenger Sales Agency the foreign judgment.
Agreement with petitioner, authorizing the latter to sell The Court of Appeals granted the petition and sustained
its air transport tickets. Petitioner failed to remit the the imposition of additional interest on the liability of
proceeds of the ticket sales, for which reason, petitioner as adjudged in the foreign judgment.The
respondent filed a collection suit against petitioner before appellate court likewise corrected the reckoning date of
the Tokyo District Court which rendered judgment on the imposition of the interests in accordance with the
January 29, 1981, ordering petitioner to pay respondent February 9, 1995 decision to be executed, but lowered
the amount of 83,158,195 Yen and damages for the the additional interest from 12% to 6% per annum.
delay at the rate of 6% per annum from August 28, 1980
up to and until payment is completed. Respondent court is enjoined to execute the said final
judgment with an unpaid principal balance of
respondent then filed a case to enforce said foreign Y61,734,633 plus damages for delay at the rate of 6%
judgment with the Regional Trial Court of Manila, Branch per annum from August 28, 1980, until fully paid, which
54. However, the case was dismissed on the ground of may be paid in local currency based on the conversion
failure of the Japanese Court to acquire jurisdiction over rate prevailing at the time of payment; plus 6% legal
the person of the petitioner. Respondent appealed to the interest per annum from August 28, 1980, the date of
Court of Appeals, which affirmed the decision of the trial the filing of the complaint in the foreign judgment.
court.
Respondent filed a petition for review with this Court in On April 2, 1998, the Court of Appeals denied both the
which the CA granted thus reversing the RTC’s decision. motion for reconsideration and the partial motion for
reconsideration filed by petitioner and respondent,
On December 18, 1995, petitioner filed a petition for respectively.
certiorari under Rule 65 in which the petitioner
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ISSUE: and executory, petitioner is liable to pay respondent the

Whether or not the CA erred in converting and applying amount adjudged in the foreign judgment, with interest
the exchange rate and the legal rate of interest. thereon at the legal rate [12% per annum] from the
filing of the complaint therein [on August 28, 1980] until
HELD: the said foreign judgment is fully satisfied. Since
In ruling that the applicable conversion rate of petitioners petitioner already made partial payments, his obligation
liability is the rate at the time of payment, the Court of was reduced to 61,734,633 Yen. Thus, petitioner should
Appeals cited the case of Zagala v. Jimenez, 10 pay respondent the amount of 61,734,633 Yen plus
interpreting the provisions of Republic Act No. 529, as damages for the delay at the rate of 6% per annum from
amended by R.A. No. 4100.Payments of monetary August 28, 1980 up to and until payment is completed,
obligations, subject to certain exceptions, shall be with interest thereon at the rate of 12% per annum from
discharged in the currency which is the legal tender in the filing of the complaint on August 28, 1980, until fully
the Philippines. The rule that the value of the currency at satisfied.
the time of the establishment of the obligation shall be  
the basis of payment finds application only when there is
an official pronouncement or declaration of the existence
of an extraordinary inflation or deflation.

With regard to the application of legal interest rate, the

Court of Appeals failure to apply the correct legal rate of
interest, to which respondent is lawfully entitled,
amounts to a plain error.In Eastern Shipping Lines, Inc. G.R. No. 225433, August 28, 2019
v. Court of Appeals, 18 it was held that absent any LARA'S GIFTS & DECORS, INC., PETITIONER, v.
stipulation, the legal rate of interest in obligations which MIDTOWN INDUSTRIAL SALES, INC.,
consists in the payment of a sum of money, as in the RESPONDENT.
present case, is 12% per annum. As stated in the
decision of the Court in G.R. No. 112573, which is final
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FACTS: Lara's Gifts & Decors, Inc. (petitioner) is engaged prompting respondent to file on 5 February 2008 a
in the business of manufacturing, selling, and exporting Complaint6 for Sum of Money with Prayer for
handicraft products. On the other hand, respondent Attachment.
Midtown Industrial Sales, Inc. (respondent) is engaged in
the business of selling industrial and construction In its Answer,7 petitioner admitted that from January
materials, and petitioner is one of respondent's 2007 to December 2007, petitioner purchased from
customers. Respondent alleged that from January 2007 respondent, on a 60-day credit term. However, petitioner
up to December 2007, petitioner purchased from claimed that most of the deliveries made were
respondent various industrial and construction materials substandard and of poor quality. Petitioner alleged that
in the total amount of P1,263,104.22. The purchases the checks it issued for payment were not for value
were on a sixty (60)-day credit term, with the condition because not all of the materials delivered by respondent
that 24% interest per annum would be charged on all were received in good order and condition. Thus, when
accounts overduePetitioner paid for its purchases by petitioner used the raw materials, the finished product
issuing several Chinabank postdated checks in favor of allegedly did not pass the standards required by
respondent. However, when respondent deposited the petitioner's buyers from the United States (US) who
Chinabank checks on their maturity dates, the checks rejected the products. Furthermore, due to the economic
bounced. After repeated demands from respondent, recession in the US, subsequent orders made by
petitioner replaced the bounced checks with new petitioner's US buyers were canceled. Petitioner claimed
postdated Export and Industry Bank checks. However, that on 19 February 2008, a fire razed its factory and
when respondent deposited the replacement checks on office, destroying its equipment, machineries, and
their maturity dates, the checks were likewise dishonored inventories, including those rejected by the US buyers.
for being "Drawn Against Insufficient Funds," and
subsequently, for "Account Closed." Respondent sent a The trial court held that petitioner failed to prove that the
demand letter5 dated 21 January 2008, which was deliveries made by respondent did not comply with the
received by petitioner on 22 January 2008, informing required specifications. Other than the self-serving
petitioner of the bounced checks and demanding that denials of its witnesses, no other evidence was offered
petitioner settle its accounts. Still petitioner failed to pay, by petitioner to prove that the materials delivered were
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substandard. On the other hand, the amount of objecting to the stipulations in the sales invoice, it also
P1,263,104.22 claimed by respondent against petitioner bound itself to pay not only the stated selling price but
was supported by the sales invoices and postdated also the interest of 24% per annum on overdue accounts
checks. The trial court also held that the stipulated 24% and the 25% of the unpaid invoice for attorney's fees.
interest per annum on overdue accounts is not Thus, the Court has already ruled in several cases that an
unconscionable. interest rate of 24% per annum agreed upon between
the parties is valid and binding and not excessive and
Thus Ca Affirmed the decision.On the 24% interest per unconscionable. The stipulated 24% interest per annum
annum imposed, the Court of Appeals found implausible is binding on petitioner.
petitioner's claim that it was placed in a disadvantageous
position. Petitioner could not have been cheated or The rates of interest stated in the guidelines on the
misled into agreeing to the 24% interest rate per annum imposition of interests, as laid down in the landmark case
that was stated in the sales invoices. of Eastern Shipping Lines, Inc. v. Court of Appeals have
already been modified in Bangko Sentral ng Pilipinas
ISSUE: WHETHER OR NOT THE INTEREST RATE FIXED Monetary Board (BSP-MB) Circular No. 799, Series of
AT 24% PER ANNUM IS VOID. 2013, which reduced the rate of legal interest from
ASSUMING THAT THE INTEREST RATE OF 24% IS twelve percent (12%) per annum to six percent (6%) per
VALID, WHETHER OR NOT THE SAID RATE SHALL BE annum.
APPLIED ONLY UNTIL FINALITY OF JUDGMENT.
However, if the rate of interest is stipulated, such
HELD: In Asian Construction and Development stipulated interest shall apply and not the legal interest,
Corporation v. Cathay Pacific Steel Corporation, the Court provided the stipulated interest is not excessive and
upheld the validity of interest rate fixed at 24% per unconscionable.The stipulated interest shall be applied
annum that was expressly stipulated in the sales until full payment of the obligation because that is the
invoices. The Court held that petitioner construction law between the parties.
company is presumed to have full knowledge of the
terms and conditions of the contract and that by not
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To repeat, the stipulated interest is the law between the THE HONORABLE COURT OF APPEALS, and LILIA
parties, and should be applied until full payment of the R. ECHAUS, respondents.
obligation. Article 1159 of the Civil Code provides that
"[o]bligations arising from contracts have the force of law FACTS: Echaus filed a complaint against Pilipinas Bank
between the contracting parties and should be complied and its president, Constantino Bautista, for collection of a
with in good faith." Article 1956 of the Civil Code also sum of money. Echuas alleged that Greatland realty
states that "[n]o interest shall be due unless it has been conveyed to Pilipinas Bank by virtue of a contract of
expressly stipulated in writing." Furthermore, the Dacion en Pago parcels of land for a consideration of
contracting parties may establish such stipulations as P7,776,335.69; that Greatland assigned P2,300,000.00
they may deem convenient, provided they are not out of the total consideration of the Dacion en Pago, in
contrary to law, morals, good customs, public order, or her favor; and that despite demand Pilipinas Bank
public policy, and the parties are bound to fulfill what has refused to give her amount.
been expressly stipulated.Thus, unless the stipulated
interest is excessive and unconscionable, there is no legal The RTC and the CA, when appealed, ruled in favor of
basis for the reduction of the stipulated interest at any Echaus and ordered Pilipinas Bank to pay her the P2,
time until full payment of the principal amount. The 300,000.00 with legal interest and other monetary
stipulated interest remains in force until the obligation is awards amounting to P5,517.707.00. Echaus filed a
satisfied. motion for execution pending appeal which was granted
  by the court. Pilipinas Bank complied with the writ of
execution pending appeal by issuing two manger’s
checks in the total amount of P5,517,707.00. However,
CA later on decreased the award of damages and
ordered Pilipinas Bank to pay a total of P2,655,000.00
G.R. No. 97873 August 12, 1993 which became final and executory. Pilipinas Bank filed a
PILIPINAS BANK, petitioner, motion in the trial court praying for respondent to refund
vs. to her the excess payment of P1,898,623.67 with interest
at 6%.
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Credit Transactions
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any money, goods or credit; and (3) judgments.

Contention of the PILIPINAS BANK: The interest rate due Judgments spoken of and referred to in Circular No. 416
on the amount of P2, 300, 000.00 should be 6% and the are "judgments in litigation involving loans or
excess amount paid must be refunded to it with interest forbearance of any money, goods or credits. Any other
of 6% per annum. kind of monetary judgment which has nothing to do with
nor involving loans or forbearance of any money, goods
Contention of the ECHAUS: The interest rate due on the or credits does not fall within the coverage of the said
amount of P2,300.000.00 should be 12% per annum and law for it is not, within the ambit of the authority granted
the amount to be refunded to Pilipinas bank at 6% per to the Central Bank." The amount to be paid was a
annum. portion of the P7,776,335.69 which petitioner was
obligated to pay Greatland as consideration for the sale
HELD: In favour of petitioner. As to the amount to be of several parcels of land by Greatland to petitioner. The
paid to Echaus: P.D. No. 116, the Monetary Board of amount of P2,300,000.00 was assigned by Greatland in
Central Bank issued Central Bank Circular No. 416, which favor of private respondent. The said obligation therefore
provides: arose from a contract of purchase and sale and not from
a contract of loan or mutuum. Hence, what is applicable
By virtue of the authority granted to it under Section 1 of is the rate of 6% per annum as provided in Article 2209
Act 2655, as amended, otherwise known as the "Usury of the Civil Code of the Philippines and not the rate of
Law" the Monetary Board in its Resolution No. 1622 12% per annum as provided in Circular No. 416.
dated July 29, 1974, has prescribed that the rate of
interest for the loan, or forbearance of any money, As to the amount to be refunded to Pilipinas Bank:
goods, or credits and the rate allowed in judgments, in Private respondent was paid in advance the amount of
the absence of express contract as to such rate of P5,517,707.00 by petitioner to the order for the
interest, shall be twelve (12%) per cent per annum. execution pending appeal of the judgment of the trial
court. On appeal, the Court of Appeals reduced the total
Note that Circular No. 416, fixing the rate of interest at damages to P3,619,083.33, leaving a balance of
12% per annum, deals with (1) loans; (2) forbearance of P1,898,623.67 to be refunded by private respondent to
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petitioner. In an execution pending appeal, funds are THE HONORABLE VALERIANO P. TOMOL, JR., as
advanced by the losing party to the prevailing party with Judge of the Court of First Instance, Branch XI,
the implied obligation of the latter to repay former, in CEBU CITY, SHELL REFINING COMPANY (PHILS.),
case the appellate court cancels or reduces the monetary INC., and MICHAEL, INCORPORATED,
award. In the case before us, the excess amount ordered respondents.
to refunded by private respondent falls within the ruling
in Viloria and Buiser that Circular No. 416 applies to FACTS:
cases where money is transferred from one person to This is a a Petition for Review on certiorari of the
another and the obligation to return the same or a Resolution of CFI-Cebu Judge Tomol for an action for
portion thereof is subsequently adjudged. Recovery of Damages for injury to Person and Loss of
  Property. On June 7, 1972, judgment was rendered by
the Court of First instance of Cebu in Civil Case No. R-
11279, the dispositive portion of which reads—
WHEREFORE, judgment is hereby rendered in favor of
the plaintiffs and third party defendants and against the
defendants and third party plaintiffs as follows:

Ordering defendants and third party plaintiffs Shell and

Michael, Incorporated to pay jointly and severally the
following persons: (g) Plaintiffs Pacita and Francisco
Reformina the sum of P131,084.00 which is the value of
the boat F B Pacita Ill together with its accessories,
fishing gear and equipment minus P80,000.00 which is
G.R. No. L-59096 October 11, 1985 the value of the insurance recovered and the amount of
PACITA F. REFORMINA and HEIRS OF FRANCISCO P10,000.00 a month as the estimated monthly loss
REFORMINA, petitioners, suffered by them as a result of the fire of May 6, 1969 up
vs. to the time they are actually paid or already the total
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sum of P370,000.00 as of June 4, 1972 with legal ISSUE:

interest from the filing of the complaint until paid and to How much, by way of legal interest, should a judgment
pay attorney's fees of P5,000.00 with costs against debtor pay the judgment creditor?
defendants and third party plaintiffs. Whether or not legal interest meant 6% as provided for
under Article 2209 of the Civil Code .
On appeal to the then Court of Appeals, the trial court's What kind of judgment is covered under USURY Law?
judgment was modified to reads as follows—
WHEREFORE. the judgment appealed from is modified HELD:
such that defendants- appellants Shell Refining Co. Article 2209 of the Civil Code is applicable in case at bar.
(Phils.), Inc. and Michael, Incorporated are hereby It must be noted that the decision herein sought to be
ordered to pay ... The two (2) defendants- appellants are executed is one rendered in an Action for Damages for
also directed to pay P100,000.00 with legal interests injury to persons and loss of property and does not
from the filing of the complaint until paid as involve any loan, much less for bearances of any money,
compensatory and moral damages and P41,000.00 goods or credits. As correctly argued by the private
compensation for the value of the lost boat with legal respondents, the law applicable to the said case is Article
interest from the filing of the complaint until fully paid to 2209 of the New Civil Code which reads— Art. 2209. If
Pacita F. Reformina and the heirs of Francisco Reformina. the obligation consists in the payment of a sum of
The liability of the two defendants for an the awards is money, and the debtor incurs in delay, the indemnity for
solidary. Petitioners' motion for the reconsideration of the damages, there being no stipulation to the contrary, shall
questioned Resolution having been denied, they now be the payment of interest agreed upon, and in the
come before Us through the instant petition praying for absence of stipulation, the legal interest which is six
the setting aside of the said Resolution and for a percent per annum.
declaration that the judgment in their favor should bear
legal interest at the rate of twelve (12%) percent per The above provision remains untouched despite the
annum pursuant to Central Bank Circular No. 416 dated grant of authority to the Central Bank by Act No. 2655,
July 29, 1974. as amended. To make Central Bank Circular No. 416
applicable to any case other than those specifically
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provided for by the Usury Law will make the same of

doubtful constitutionality since the Monetary Board will
be exercising legislative functions which was beyond the
intendment of P.D. No. 116. Central Bank Circular No.
416 which provides — By virtue of the authority granted
to it under Section 1 of Act 2655, as amended, otherwise
known as the "Usury Law" the Monetary Board in its
Resolution No. 1622 dated July 29, 1974, has prescribed
that 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 express contract as to such
rate of interest, shall be twelve (12%) per cent per
annum.

This Circular shall take effect immediately. The

judgments spoken of and referred to are Judgments in
litigations involving loans or forbearance of any 'money,
goods or credits. Any other kind of monetary judgment
which has nothing to do with, nor involving loans or
forbearance of any money, goods or credits does not fall
within the coverage of the said law for it is not within the
ambit of the authority granted to the Central Bank.

38