CASE DIGEST

ANTONIO M. GARCIA, DYNETICS, INC., and MATRIX MANAGEMENT CORPORATION, petitioners, vs. COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY respondents. , G.R. Nos. 82282-83; November 24, 1988

Facts: In August 1981, Chemark was granted by SBTC a credit line of 4M that was increased to 20M (Export Loan= 15M + Import Loan=5M) in February 8, 1982. On the same day, in 3 indemnity agreements, Garcia, Dynetics, & Matrix bound themselves solidarily with Chemark to pay SBTC upon demand and without excussion of whatever amount Chemark may be indebted to the bank. As security to the loans, Chemark issued 2 promissory notes to SBTC. Chemark failed to pay its obligations when they became due so SBTC demanded payment from the petitioners. SBTC filed a collection case against the petitioners in RTC Makati. The RTC, in its decision ordered petitioners to pay the total amount of 20M plus the interest rates of 18% for the export loan and 24% for the import loan and penalty at 36% per annum for each loan. The petitioners assail the interest rates of 18% and 24% as well as the 36% penalty charges, are excessive. On appeal, CA affirmed the RTCs decision. Issue: Whether or not the interest rates assailed are excessive. Ruling: The interest rates of 18% and 24% are not excessive since they are expressly provided in the indemnity agreements, which they signed and in the promissory notes executed by Chemark. Parties are bound by their stipulations. The penalty charges @ 36% per annum are excessive and unconscionable. The interest rates of 18% and 24% are enough punishment for the petitioners failure to comply with their obligation.