Leticia Medel et al VS CA and Sps.

Gonzales (Gonzales Lending

Enterprises)
GR no. 131622, 27 November 1998
Facts:
Sps Gonzales filed a complaint for collection of the full amount of the
loan amounting P500,000 including interest and other charges to Servendo
and Sps Medel. The petitioner assails that the interest rate given by the Sps
Gonzales is excessive at 5.5% per annum with additional charge of 2% per
annum, and penalty charge of 1% per month; that the stipulation for attorneys
fees of 25% of the amount due is unconscionable, illegal and excessive. RTC
rendered decision in favor of the petitioner but reversed by CA, hence present
review.
Issue:
Whether or not the stipulated rate of 5.5% per month on the loan in the
sum of P500,000 is usurious?
Held:
The SC held that stipulated interest of 5.5% per month on the P500,000
loan is excessive, iniquitous, unconscionable and exorbitant. SC upheld the
decision of RTC in applying the provision of new Civil Code that the legal rate of
interest for loan or forbearance of money, goods or credit is 12% per annum.
The interest of 5.5% per month or 66% per annum, stipulated upon by
the parties in the promissory note iniquitous or unconscionable and hence
contrary to morals if not against the law. The stipulation is void. The courts
shall reduce equitably liquidated damages whether intended as an indemnity
or a penalty if they are iniquitous or unconscionable.
Security bank vs rtc of Makati held that CN 905 did not repeal nor in anyway
amend the Usury Law but simply suspended the latters effectivity.