First Metro Investment vs.

Estate of Del Sol 420 Phil 902 (2001)

FACTS
1. FMIC granted Este del Sol a loan to finance a sports/resort complex in Montalban, Rizal.
2. Under the agreement, the interest was 16% pa based on the diminishing balance. In case of
default, an acceleration clause was provided and the amount due is subject to 20% one-time
penalty on the amount due and such amount shall bear interest at the highest rate permitted by
law.
3. respondent executed a REM, individual continuing suretyship and an underwriting agreement
whereby FMIC shall underwrite the public offering of one P120,000 common shares of
respondents capital stock for one-time underwriting fee of P200,000.
4. For failure to pay its obligation, FMIC caused the foreclosure of the REM.
5. At the public auction, FIC was the highest bidder.
6. Petitioner filed to collect for alleged deficiency balance against respondents since it failed to collect
from the sureties, plus interest at 21% pa. the trial court ruled in favor of FMIC.
7. Respondents appealed before the CA which held that the fees provided for in the Underwriting and
Consultancy Agreements were mere subterfuges to camouflage the excessively usurious interest
charged.
8. The CA ordered FMIC to reimburse petitioner representing what is due to petitioner and what is
due to respondent.
ISSUE
Whether or not the interests are lawful
HELD
No. an apparently lawful loan is usurious when it is intended that additional compensation for the
loan be disguised by an ostensibly unrelated contract for the payment by the borrower for the lenders
services which are of little value or which are not in fact to be rendered. Article 1957 clearly provides:
contracts and stipulations, under any cloak or device whatever, intended to circumvent the law against
usury shall be void. The borrower may recover in accordance with the laws on usury