See - G.R. No. 183360
ROLANDO C. DE LA PAZ vs. L & J DEVELOPMENT COMPANY, G.R. No. 183360 September 8, 2014
"x x x.
Even if the payment of interest has been reduced in writing, a 6% monthly interest rate on a loan is unconscionable, regardless of who between the parties proposed the rate.
Indeed at present, usury has been legally non-existent in view of the suspension of the Usury Law25 by Central Bank Circular No. 905 s. 1982.26 Even so, not all interest rates levied upon loans are permitted by the courts as they have the power to equitably reduce unreasonable interest rates. In Trade & Investment Development Corporation of the Philippines v. Roblett Industrial Construction Corporation,27 we said:
While the Court recognizes the right of the parties to enter into contracts and who are expected to comply with their terms and obligations, this rule is not absolute. Stipulated interest rates are illegal if they are unconscionable and the Court is allowed to temper interest rates when necessary. In exercising this vested power to determine what is iniquitous and unconscionable, the Court must consider the circumstances of each case. What may be iniquitous and unconscionable in one case, may be just in another. x x x28
Time and again, it has been ruled in a plethora of cases that stipulated interest rates of 3% per month and higher, are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law.29 The Court, however, stresses that these rates shall be invalidated and shall be reduced only in cases where the terms of the loans are open-ended, and where the interest rates are applied for an indefinite period. Hence, the imposition of a specific sum of P40,000.00 a month for six months on a P1,000,000.00 loan is not considered unconscionable.30
In the case at bench, there is no specified period as to the payment of the loan. Hence, levying 6% monthly or 72% interest per annum is "definitely outrageous and inordinate."31 The situation that it was the debtor who insisted on the interest rate will not exempt Rolando from a ruling that the rate is void. As this Court cited in Asian Cathay Finance and Leasing Corporation v. Gravador,32 "[t]he imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to the common sense of man."33 Indeed, "voluntariness does not make the stipulation on [an unconscionable] interest valid."34
As exhaustibly discussed, no monetary interest is due Rolando pursuant to Article 1956. The CA thus correctly adjudged that the excess interest payments made by L&J should be applied to its principal loan. As computed by the CA, Rolando is bound to return the excess payment of P226,000.00 to L&J following the principle of solutio indebiti.35
However, pursuant to Central Bank Circular No. 799 s. 2013 which took effect on July 1, 2013,36 the interest imposed by the CA must be accordingly modified. The P226,000.00 which Rolando is ordered to pay L&J shall earn an interest of 6% per annum from the finality of this Decision.
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