Friday, June 16, 2017

The stipulated interest rates of 7% and 5% per month imposed on respondents’ loans must be equitably reduced to 1% per month or 12% per annum. - G.R. No. 170452

"x x x.

The stipulated interest rates of 7% and 5% per month imposed on respondents’ loans must be equitably reduced to 1% per month or 12% per annum.8 We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3%9 per month and higher10 are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law.11 While C.B. Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity,12 nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets.13

Petitioners cannot also raise the defenses of in pari delicto and good faith. The defense of in pari delicto was not raised in the RTC, hence, such an issue cannot be raised for the first time on appeal. Petitioners must have seasonably raised it in the proceedings before the lower court, because questions raised on appeal are confined only within the issues framed by the parties.14 The defense of good faith must also fail because such an issue is a question of fact15 which may not be properly raised in a petition for review under Rule 45 of the Rules of Civil Procedure which allows only questions of law.16

As well set forth in Medel:17

We agree … that the stipulated rate of interest at 5.5% per month on the P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. However, we can not consider the rate "usurious" because this Court has consistently held that Circular No. 905 of the Central Bank, adopted on December 22, 1982, has expressly removed the interest ceilings prescribed by the Usury Law and that the Usury Law is now "legally inexistent."

In Security Bank and Trust Company vs. Regional Trial Court of Makati, Branch 61, the Court held that CB Circular No. 905 "did not repeal nor in any way amend the Usury Law but simply suspended the latter’s effectivity." Indeed, we have held that "a Central Bank Circular can not repeal a law. Only a law can repeal another law." In the recent case of Florendo vs. Court of Appeals, the Court reiterated the ruling that "by virtue of CB Circular 905, the Usury Law has been rendered ineffective." "Usury has been legally non-existent in our jurisdiction. Interest can now be charged as lender and borrower may agree upon."

Nevertheless, we find the interest at 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 ("contra bonos mores"), if not against the law. The stipulation is void.

x x x."