MEDEL v CA LOWER COURT rulings:
Facts: Leticia Medel obtained a loan
from Veronica on four occasions
amounting to a (Leticia and Dr. Medel)
total indebtedness of P500K.
- P50K – 6% /mo.
- P90K – 6% /mo.
- P300K – secured with a REM
- P 60K (here they consolidated all
four debts to a promissory note)
Medel executed a pro-note (promissory
note) stipulating their agreement as to
interest of 5.5% per month plus 2%
service charge per annum and should
the BSP or law increases the interest
rate, Veronica can charged the
increased interest charges without prior
notice.
The borrowers failed to settle their
obligations upon maturity prompting the
lender to file a collection suit against the
Medels. (Leticia and her Dr. Husband)
CONTENTIONS:
Medels - they admitted the alleged
borrowings HOWEVER the interest
charged was UNCONSCIONALBE and
revolting to the conscience.
VERONICA- the pro-note which is the
consolidation of all the unpaid loans
governs the parties. Although BSP
Circular 416 prescribes the interest rate
of 12% per annum, it only applies when
there is absence of stipulation on the
interest rate and not when the parties
have agreed thereon as such ITC.
RTC- in favor of the MEDELS; it applied
the provision on the NCC that the legal
interest rate for loan or forbearance of
money, goods, or credit is 12%.
CA- reversed. The lender and the
borrower could agree on any interest
that may be charged on the loan when
the USURY became inexistent/
suspended.
ISSUE:
Main: Whether the stipulated interest on
the pro-note is valid.
Incidental: Whether BSP circular repeal
the usury law.
Ruling:
1. No, stipulated rate of interest at
5.5% per month on the
P500,000.00 loan is excessive,
iniquitous, unconscionable and
exorbitant- void. Although the
USURY law was suspended or
rendered ineffective, thereby
allowing parties to charge
interests as they may agree
upon, they cannot stipulate that
which is contrary to morals contra
bonos mores, if not contrary to
law.
2. NO. A circular cannot repeal a
law. Only a law can repeal
another law.
This case is so sisiw .