GR 97237; (August, 1991) (Digest)
March 16, 2026GR 153587; (February, 2008) (Digest)
March 16, 2026G.R. No. 139290 ; May 19, 2006
TRADE & INVESTMENT DEVELOPMENT CORPORATION OF THE PHILIPPINES (Formerly Philippine Export & Foreign Loan Guarantee Corporation), Petitioner, vs. ROBLETT INDUSTRIAL CONSTRUCTION CORPORATION, ROBERTO G. ABIERA and LETICIA ABIERA, and PARAMOUNT INSURANCE CORPORATION, Respondents.
FACTS
Petitioner Philguarantee filed a complaint for sum of money against respondents Roblett Industrial Construction Corporation, its sureties the Abieras, and its surety Paramount Insurance Corporation. The Supreme Court, in a Decision dated November 11, 2005, granted the petition, reinstating the RTC judgment with modifications. The Court held Paramount jointly and severally liable under a surety bond for P11,775,611.25 with 18% per annum interest from June 5, 1990. Paramount filed a motion for reconsideration, raising several grounds already passed upon by the Court, and a supplemental motion arguing that the accrued interest charge had become unconscionable. Paramount highlighted that the interest, calculated from 1990, amounted to roughly P32 million, thrice the principal debt.
ISSUE
Whether the stipulated 18% per annum interest rate, as applied from the date of judicial demand for sixteen years, resulting in an interest charge thrice the principal obligation, is unconscionable and subject to equitable reduction.
RULING
The Supreme Court granted the motion in part and modified its Decision. The Court reaffirmed that parties are generally free to stipulate interest rates following the suspension of the Usury Law, and the validity of the 18% rate was not initially questioned. However, the Court possesses the equitable power to temper interest rates when necessary, assessing whether they have become iniquitous, unconscionable, or exorbitant based on the circumstances. While the Court has sustained similar or higher rates in other cases, the decisive factor here was the protracted sixteen-year litigation period. This lengthy delay caused the interest to accumulate to a sum disproportionately large compared to the principal debt. Consequently, the Court exercised its equitable discretion and reduced the interest rate to 12% per annum from June 5, 1990, deeming this rate reasonable under the specific circumstances. The Decision was affirmed with finality in all other respects.