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Medel Vs Court of Appeals, 299 SCRA 481 GR No

Defendants obtained multiple loans from Plaintiff over time, consolidating unpaid amounts into larger loans with higher interest rates. For the final loan of P500,000, Defendants agreed to an interest rate of 5.5% per month. While not technically usurious due to Central Bank lifting interest rate ceilings, the Supreme Court found this rate excessive and unconscionable. A Central Bank circular cannot repeal laws, only amend them temporarily, so usury remains prohibited if interest leads to enslavement or asset loss of borrowers. The court reduced the interest rate accordingly.

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513 views3 pages

Medel Vs Court of Appeals, 299 SCRA 481 GR No

Defendants obtained multiple loans from Plaintiff over time, consolidating unpaid amounts into larger loans with higher interest rates. For the final loan of P500,000, Defendants agreed to an interest rate of 5.5% per month. While not technically usurious due to Central Bank lifting interest rate ceilings, the Supreme Court found this rate excessive and unconscionable. A Central Bank circular cannot repeal laws, only amend them temporarily, so usury remains prohibited if interest leads to enslavement or asset loss of borrowers. The court reduced the interest rate accordingly.

Uploaded by

Pilyang Sweet
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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5/11/2015

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

CASEEATER
Acompilationofcasedigests.

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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