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MedelvsCourtofAppeals,299SCRA481GRNo.131622,November27,1998,digested|CASEEATER

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MedelvsCourtofAppeals,299SCRA481GR
No.131622,November27,1998,digested
PostedbyPiusMoradosonNovember30,2011
(CreditTransactionsLoans,UsuryLaw,InterestRates)
Facts:DefendantsobtainedaloanfromPlaintiffintheamountP50,000.00,payablein2months
andexecutedapromissorynote.PlaintiffgaveonlytheamountofP47,000.00totheborrowers
andretainedP3,000.00asadvanceinterestfor1monthat6%permonth.
DefendantsobtainedanotherloanfromDefendantintheamountofP90,000.00,payablein2
months,at6%interestpermonth.Theyexecutedapromissorynotetoevidencetheloanand
receivedonlyP84,000.00outoftheproceedsoftheloan.
Forthethirdtime,DefendantssecuredfromPlaintiffanotherloanintheamountofP300,000.00,
maturingin1month,andsecuredbyarealestatemortgage.Theyexecutedapromissorynotein
favorofthePlaintiff.However,onlythesumofP275,000.00,wasgiventothemoutofthe
proceedsoftheloan.
Uponmaturityofthethreepromissorynotes,Defendantsfailedtopaytheindebtedness.
DefendantsconsolidatedalltheirpreviousunpaidloanstotallingP440,000.00,andsoughtfrom
PlaintiffanotherloanintheamountofP60,000.00,bringingtheirindebtednesstoatotalof
P50,000.00.TheyexecutedanotherpromissorynoteinfavorofPlaintifftopaythesumofP500,
000.00witha5.5%interestpermonthplus2%servicechargeperannum,withanadditional
amountof1%permonthaspenaltycharges.
Onmaturityoftheloan,theDefendantsfailedtopaytheindebtednesswhichpromptthe
PlaintiffstofilewiththeRTCacomplaintforcollectionofthefullamountoftheloanincluding
interestsandothercharges.

Declaringthatthedueexecutionandgenuinenessofthefourpromissorynoteshasbeenduly

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MedelvsCourtofAppeals,299SCRA481GRNo.131622,November27,1998,digested|CASEEATER

Declaringthatthedueexecutionandgenuinenessofthefourpromissorynoteshasbeenduly
proved,theRTCruledthatalthoughtheUsuryLawhadbeenrepealed,theinterestchargedon
theloanswasunconscionableandrevoltingtotheconscienceandorderedthepaymentofthe
amountofthefirst3loanswitha12%interestperannumand1%permonthaspenalty.
Onappeal,Plaintiffappellantsarguedthatthepromissorynote,whichconsolidatedallthe
unpaidloansofthedefendants,isthelawthatgovernstheparties.
TheCourtofAppealsruledinfavorofthePlaintiffappellantsonthegroundthattheUsuryLaw
hasbecomelegallyinexistentwiththepromulgationbytheCentralBankin1982ofCircularNo.
905,thelenderandtheborrowercouldagreeonanyinterestthatmaybechargedontheloan,and
orderedtheDefendantstopaythePlaintiffsthesumofP500,000,plus5.5%permonthinterest
and2&servicechargeperannum,and1%permonthaspenaltycharges.
Defendantsfiledthepresentcaseviapetitionforreviewoncertiorari.
Issue:WONthestipulated5.5%interestratepermonthontheloaninthesumofP500,000.00is
usurious.
Held:No.
Astipulatedrateofinterestat5.5%permonthontheP500,000.00loanisexcessive,iniquitous,
unconscionableandexorbitant,butitcannotbeconsideredusuriousbecauseCentralBank
CircularNo.905hasexpresslyremovedtheinterestceilingsprescribedbytheUsuryLawandthat
theUsuryLawisnowlegallyinexistent.
Doctrine:ACBCircularcannotrepealalaw.Onlyalawcanrepealanotherlaw.
JurisprudenceprovidesthatCBCirculardidnotrepealnorinawayamendtheUsuryLawbut
simplysuspendedthelatterseffectivity(SecurityBankandTrustCovsRTC).Usuryhasbeen
legallynonexistentinourjurisdiction.Interestcannowbechargedaslenderandborrowermay
agreeupon.
Law:Article2227,CivilCode
Thecourtsshallreduceequitablyliquidateddamages,whetherintendedasanindemnityora
penaltyiftheyareiniquitousorunconscionable.
Note:WhiletheUsuryLawceilingoninterestrateswasliftedbytheCBCircular905,nothinginthesaid
circularcouldpossiblybereadasgrantingcarteblancheauthoritytolenderstoraiseinterestratestolevels
whichwouldeitherenslavetheirborrowersorleadtoahaemorrhagingoftheirassets(Almedavs.CA,256
SCRA292[1996]).
ThisentrywaspostedinCreditTransactionsandtaggedCreditTransactions,InterestRates,
Loans,UsuryLaw.Bookmarkthepermalink.
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