G.R. No.

186550 : July 5, 2010ASIAN CATHAY FINANCE AND LEASING CORPORATION

Petitioner ,vs.SPOUSES CESARIO GRAVADOR and NORMA DE VERA, and SPOUSES EMMA CONCEPCION
G.DUMIGPI AND FEDERICO L. DUMIGPI,Respondents
FACTS:
On October 22, 1999, petitioner Asain Cathay Finance and Leasing Corporation (ACFLC) extended a loan
of Eight Hundred Thousand Pesos (800,000.00) to respondent Cesario Gravador, with respondents
Norma de Vera and Emma Concepcion Dumigpi as co-makers. The loan was payable in sixty (60)monthly
installments of 24,000.00 each. To secure the loan, respondent Cesario executed real estate mortgage
over his property in Sta. Maria, Bulacan, covered by Transfer Certificate of Title No. T29234.Respondents
paid the initial installment due in November 1999. However, they were unable to pay the subsequent
ones. Consequently, on February 1, 2000, respondents received a letter demanding payment
of 1,871,480.00 within five (5) days from receipt thereof. Respondents requested for an additional
period to settle their account, but ACFLC denied the request. Petitioner filed a petition for extrajudicial
foreclosure of mortgage with the Office of the Deputy Sherrif of Malolos, Bulacan.
ISSUE:
WON the Honorable Court of Appeals erred in invalidating the interest rates imposed on the respondents
loan, and the waiver of the right of redemption.
RULING:
No.
The imposition of an unconscionable rate of interest on a money debt, even if knowinglyand voluntarily
assumed, is immoral and unjust. It is tantamount to a repugnant spoilation and aniniquitous deprivation
of property, repulsive to the common sense of man. It has no support on law, inprinciples of justice, or in
the human conscience nor is there any reason whatsoever which may justifysuch imposition as
righteous and as one that may be sustained within the sphere of public or privatemorals.Settled is the
rule that for a waiver to be valid and effective, it must, in the first place, be couched inclear and
unequivocal terms which will leave no doubt as to the intention of a party to give up a right orbenefit
which legally pertains to him. Additonally, the intention to waive a right or an advantage mustbe shown
clearlly and convincingly. Unfortunately, ACFLC failed to convince us that respondents waivedtheir right
of redemption voluntarily.
G.R. No. 148491 / February 8, 2007 / SPOUSES ZACARIAS BACOLOR and CATHERINE BACOLOR vs. BANCO FILIPINO
SAVINGS AND MORTGAGE BANK, DAGUPAN CITY BRANCH and MARCELINO C. BONUAN
SANDOVAL-GUTIERREZ, J.:
FACTS:
On February 11, 1982, spouses Zacarias and Catherine Bacolor, herein petitioners, obtained a loan of P244,000.00 from Banco
Filipino Savings and Mortgage Bank, Dagupan City Branch, respondent. They executed a promissory note providing that the
amount shall be payable within a period of ten (10) years with a monthly amortization of P5,380.00 beginning March 11, 1982 and
every 11th day of the month thereafter; that the interest rate shall be twenty-four percent (24%) per annum, with a penalty of three
percent (3%) on any unpaid monthly amortization; that there shall be a service charge of three percent (3%) per annum on the
loan; and that in case respondent bank seeks the assistance of counsel to enforce the collection of the loan, petitioners shall be
liable for ten percent (10%) of the amount due as attorney's fees and fifteen percent (15%) of the amount due as liquidated
damages. As security for the loan, petitioners mortgaged with respondent bank their parcel of land located in Dagupan City,
Pangasinan, registered under Transfer Certificate of Title No. 40827. From March 11, 1982 to July 10, 1991, petitioners paid
respondent bank P412, 199.36. Thereafter, they failed to pay the remaining balance of the loan. On August 7, 1992, petitioners
received from respondent bank a statement of account stating that their indebtedness as of July 31, 1992 amounts to P840,845.61.
January 13, 1993, respondent bank informed petitioners that should they fail to pay their loan within fifteen (15) days from notice,
appropriate action shall be taken against them. Due to petitioners' failure to settle their obligation, respondent instituted, on March
5, 1993, an action for extra-judicial foreclosure of mortgage. Prior thereto, or on February 1, 1993, petitioners filed with Branch 40
of the same RTC, a complaint for violation of the Usury Law against respondent, docketed as Civil Case No. D-10480. They alleged
that the provisions of the promissory note constitute a usurious transaction considering the (1) rate of interest, (2) the rate of
penalties, service charge, attorney's fees and liquidated damages, and (3) deductions for surcharges and insurance premium. In
their amended complaint, petitioners further alleged that, during the closure of respondent bank, it ceased to be a banking
institution and, therefore, could not charge interests and institute foreclosure proceeding. On August 25, 1994, the RTC rendered its
decision dismissing petitioners' complaint. On appeal, the Court of Appeals rendered its Decision affirming the Decision of the trial

court. Petitioner's subsequent motion for reconsideration was denied.

ISSUE: Whether the interest rate is "excessive and unconscionable."
RULING:
The petition lacks merit.
Article 1956 of the Civil Code provides that no interest shall be due unless it has been expressly stipulated in writing. Here, the
parties agreed in writing on February 11, 1982 that the rate of interest on the petitioners' loan shall be 24% per annum. At the time
the parties entered into the loan transaction, the applicable law was the Usury Law (Act 2655), as amended by P.D. No. 166, which
provides that the rate of interest for the forbearance of money when secured by a mortgage upon real estate, should not be more
than 6% per annum or the maximum rate prescribed by the Monetary Board of the Central Bank of the Philippines in force at the
time the loan was granted. Central Bank Circular No. 783, which took effect on July 1, 1981, removed the ceiling on interest rates
on a certain class of loans, thus: SECTION 2. The interest rate on a loan forbearance of any money, goods, or credits with a
maturity of more than seven hundred thirty (730) days shall not be subject to any ceiling. In the present case, the term of the
subject loan is for a period of 10 years. Considering that its maturity is more than 730 days, the interest rate is not subject to any
ceiling following the above provision. Therefore, the 24% interest rate agreed upon by parties does not violate the Usury Law, as
amended by P.D. 116. This Court has consistently held that for sometime now, usury has been legally non-inexistent and that
interest can now be charged as lender and borrower may agree upon. As a matter of fact, Section 1 of Central Bank Circular No.
905 states that: SECTION 1. The rate of interest, including commissions, premiums, fees and other charges , on a loan or
forbearance of any money, goods, or credits, regardless of maturity and whether secured or unsecured, that may be charged or
collected by any person, whether natural or judicial, shall not be subject to any ceiling prescribed under or pursuant to the Usury
Law, as amended. Petitioners also cannot find refuge in Medel. In this case, what this Court declared as unconscionable was the
imposition of a 66% interest rate per annum. In the instant case, the interest rate is only 24% per annum, agreed upon by both
parties. By no means can it be considered unconscionable or excessive. Petitioners cannot now renege on their obligation to
comply with what is incumbent upon them under the loan agreement. A contract is the law between the parties and they are bound
by its stipulations. Petitioners contend that during the closure of respondent bank (from January 1, 1985 to July 1, 1994), it lost its
function as a banking institution and, therefore, could no longer charge interests and institute foreclosure proceedings. In the case
of Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank of the Philippines, 13 this Court ruled that the bank's
closure did not diminish the authority and powers of the designated liquidator to effectuate and carry on the administration of the
bank, thus: We did not prohibit however acts such as receiving collectibles and receivables or paying off creditors' claims and other
transactions pertaining to the normal operations of a bank. There is no doubt that that the prosecution of suits for collection and the
foreclosure of mortgages against debtors of the bank by the liquidator are among the usual and ordinary transactions pertaining to
the administration of a bank. The interest rate on the loan agreed upon between the parties is not excessive or unconscionable; and
that during the closure of respondent bank, it could still function as a bonding institution, hence, could continue collecting interests
from petitioners.
DENY the petition and AFFIRM the Decision and Resolution of the Court of Appeals. Costs against petitioners.

Contracts Dacion en Pago Indebtedness CB Circular 905 Interest Rate

In 1988, Bulos, Atty. Tabalingcos and Dr. Lim incurred a P2.5M loan from Yasuma, a Japanese national. The terms
of the loan provide that it is payable in 3 months at 4% interest rate; that in case of nonpayment, it shall continue
at that rate until paid or 48% per annum. And in case of litigation, plus 20% of principal balance for attys fees. Dr.
Lim signed the promissory note in behalf of the others as agreed upon. Each of them mortgaged their respective
properties in favor of Yasuma.
The three failed to pay upon maturity in 1989. Loan then was already at P2.7M. Yasuma foreclosed the mortgaged
properties. The sale amounted to P1.6M leaving a balance of P1.06M. Interest also accrued and other
penalties ballooning the balance to P2.4M.

Yasuma won a subsequent collection suit. Bulos appealed. The Court of Appeals affirmed the lower court. It ruled
that Yasuma is entitled to the 20% principal balance for attys fees as per contract. The CA however reduced the
interest rate to 21% per annum.
In the main, Bulos claims that his obligation was extinguished when his property was foreclosed via dacion en
pago and when he offered his shares of stock in the Rural Bank of Paranaque to Yasuma.
ISSUE: Whether or not Bulos is correct.
HELD: No. The dacion en pago merely paid off a portion of the loan. Second, Yasuma is a foreign national and is
banned by law to be shareholder in a rural bank.
The additional penalty of paying an additional 20% for attys fees is valid for it was agreed upon in the promissory
note. The parties are bound by it.
The 48% per annum interest rate is excessive as well as the reduced amount of 21% per annum. Though the
ceiling of interest rate has been removed by CB Circular 905, in no way shall interest rates be excessive as to
enslave borrowers. Interest rates of 3% per month or higher is already excessive. Hence, the interest is reduced
to the legal rate which is at 12% per annum.