SPOUSES
ZACARIAS BACOLOR and CATHERINE BACOLOR,
Petitioners, -
versus - BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondents.
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G.R.
No. 148491 Present: PUNO, c.j., Chairperson, Sandoval-Gutierrez, * AZCUNA,
and **GARCIA, JJ. Promulgated: February
8, 2007 |
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DECISION
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SANDOVAL-GUTIERREZ, J.: |
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Petition for Review on Certiorari
under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the
Decision[1] of
the Court of Appeals in CA-G.R. CV No. 47732 promulgated on
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
From
P412,
199.36. Thereafter, they failed to pay
the remaining balance of the loan.
On
P840,845.61.
In its
letter dated
Due to
petitioners’ failure to settle their obligation, respondent instituted, on
Prior
thereto, or on
On
(1) The terms and conditions of the Deed of
Mortgage and the Promissory Note are legal and not usurious.
The plaintiff freely signed the Deed
of Mortgage and the Promissory Note with full knowledge of its terms and
conditions.
The interest rate of 24% per annum
is not usurious and does not violate the Usury Law (Act 2655) as amended by
P.D. No. 166.
The rate of interest, including
commissions, premiums, fees and other charges, on a loan or forbearance of any
money etc., regardless of maturity
x x x, shall not be subject to any ceiling under
or pursuant to the Usury Law, as amended (CB Circular no. 905). Hence, the 24% interest per annum is allowed
under P.D. No. 166.
For sometime now, usury has been
legally non-existent. Interest can now
be as lender and borrower may agree upon (Verdejo v. CA, Jan. 29, 1988. 157
SCRA 743).
The imposition of penalties in case
the obligation is not fulfilled is not prohibited by the Usury Law. Parties to
a contract of loan may validly agree upon the imposition of penalty charges in
case of delay or non-payment of the loan.
The purpose is to compel the debtor to pay his debt on time (Go Chioco
v.
(2) The closure of Banco Filipino did not
suspend or stop its usual and normal banking operations like the collection of
loan receivables and foreclosures of mortgages.
In view of the
foregoing, plaintiffs failed to substantiate their cause of action against the
defendant.[2]
On appeal,
the Court of Appeals rendered its Decision affirming the Decision of the trial
court. Petitioner’s subsequent motion
for reconsideration was denied.
Hence,
this present petition for review on certiorari raising this lone issue: whether the interest rate is “excessive and unconscionable.”
It is the
petitioners’ contention that while the Usury Law ceiling on interest rates was
lifted by Central Bank Circular No. 905, there is nothing in the said circular
which grants respondent bank carte
blanche authority to raise interest rates to levels which “either
enslave the borrower or lead to a hemorrhaging of their assets.”[3]
In its comment[4],
respondent bank maintained that petitioner, by signing the Deed of Mortgage and
Promissory Note, knowingly and freely consented to its terms and conditions. A contract between the parties must not be
impaired. The interest rate of 24% per annum is not
usurious and does not violate the Usury Law.[5]
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
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
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.[6]
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.[7] 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.[8]
Moreover,
in Trade & Investment
Development Corporation of the Philippines v. Roblett Industrial Construction
Corporation,[9] this Court has ruled that:
With
the suspension of the Usury Law and the removal of interest ceiling, the
parties are free to stipulate the interest to be imposed on monetary
obligations. Absent any evidence of
fraud, undue influence, or any vice of consent exercised by one party against
the other, the interest rate agreed upon is binding upon them.
There is
no indication in the records that any of the incidents which vitiate consent on
the part of petitioners is present.
Indeed, the interest rate agreed upon is binding on them. With respect to the penalty and service
charges, the same are unconscionable or excessive.
Petitioners
invoke this Court’s rulings in Almeda vs. Court of Appeals[10] and Medel vs. Court of Appeals[11] to show that the interest rate in the subject
promissory note is unconscionable. Their
reliance on these cases is misplaced. In
Almeda, what this Court struck down as being unconscionable and
excessive was the unilateral increase in the interest rates from 18% to 68%. This Court ruled thus:
It is plainly obvious, therefore, from the
undisputed facts of the case that respondent bank unilaterally altered the
terms of its contract by increasing the interest rates of the loan without the
prior assent of the latter. In fact,
the manner of agreement is itself explicitly stipulated by the Civil Code when
it provides, in Article 1956, that “No interest shall be due unless it has been
expressly stipulated in writing.” What
has been “stipulated in writing” from a perusal of the interest rate provision
of the credit agreement signed between the parties is that petitioners were
bound merely to pay 21% interest x x x.
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.
Verily,
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.[12]
Petitioners further contend that
during the closure of respondent bank (from
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:
x x
x. 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. x x x.
Likewise, in Banco Filipino Savings and Mortgage Bank vs.
Ybañez,[14] where one
of the issues was whether respondent bank can collect interest on its loans
during its period of liquidation and closure, this Court held:
In
Banco Filipino Savings and Mortgage Bank v. Monetary Board, the validity of the
closure and receivership of Banco Filipino was put in issue. But the pendency of the case did not diminish
the authority of the designated liquidator to administer and continue the
bank’s transactions. The Court allowed
the bank liquidator to continue receiving collectibles and receivables or
paying off creditor’s claims and other transactions pertaining to normal
operations of a bank. Among these
transactions were the prosecution of suits against debtors for collection and
for foreclosure of mortgages. The bank was allowed to collect interests
on its loans while under liquidation, provided that the interests were legal.
In fine, we hold that 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.
WHEREFORE, we DENY the petition and AFFIRM
the challenged Decision and Resolution of the Court of Appeals in CA-G.R.
CV No. 47732. Costs against
petitioners.
SO
ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE
CONCUR:
Chief
Justice
Chairperson
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(On leave) RENATO C. CORONA Associate Justice |
ADOLFO S. AZCUNA Associate Justice |
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(No Part) CANCIO C. GARCIA Associate Justice |
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REYNATO S. PUNO
Chief Justice
* On leave.
** No part.
[1] Rollo, pp.19-30. Penned by Associate
Justice Cancio Garcia (now a member of this Court), with Associate Justice
Oswaldo D. Agcaoili (Retired) and Associate Justice Elvi John S. Asuncion,
concurring.
[2]
[3] Id., p.14, citing Almeda vs.
Court of Appeals, G.R. No. 113412, April 17, 1996, 256 SCRA 292.
[4]
[5] Section 1 P.D. 166 provides: “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 any contract as to such rate or interest shall be six percentum per annum, or such rate as may be prescribed by the Monetary Board of the Central Bank for that purpose in accordance with the authority hereby granted.
[6] 77 O.G. No. 12, p. 1555,
[7] Liam Law v. Olympic Sawmill
[8] Central Bank Circular No. 905, Series of 1982, 78 Off. Gaz. 7336.
[9] G.R. No. 139290,
[10] G.R. No. 113412,
[11] G.R. No. 131622,
[12]
[13] G.R. No. 70054,
[14] G.R. No. 148163,