GR 170452; (August, 2008) (Digest)
G.R. No. 170452; August 13, 2008
SALVADOR CHUA and VIOLETA CHUA, petitioners, vs. RODRIGO TIMAN, MA. LYNN TIMAN and LYDIA TIMAN, respondents.
FACTS
Petitioners Salvador and Violeta Chua extended several loans to respondents Rodrigo, Ma. Lynn, and Lydia Timan in 1999, totaling P864,000. These loans were evidenced by promissory notes stipulating interest at 7% per month, later reduced to 5% per month. Respondents made interest payments at these rates until December 1999. In March 2000, respondents attempted to settle the principal amount but petitioners refused, disputing the sum. Respondents subsequently consigned P864,000 with the court and filed a case for consignation and damages.
The Regional Trial Court ruled the stipulated interest rates were excessive and unconscionable. It reduced the rate to 1% per month (12% per annum) and ordered petitioners to refund all excess interest payments. The Court of Appeals affirmed this decision. Petitioners then elevated the case to the Supreme Court via a petition for review on certiorari.
ISSUE
Did the Court of Appeals err in ruling that the stipulated interest rates of 7% and 5% per month are unconscionable and in ordering the refund of excess interest paid?
RULING
No, the Court of Appeals did not err. The Supreme Court affirmed the lower courts’ decisions. While Central Bank Circular No. 905-82 suspended the usury law ceilings, it does not grant lenders unbridled authority to impose excessively high interest rates. The Court, citing established jurisprudence such as Medel v. Court of Appeals, consistently holds that stipulated interest rates of 3% per month or higher are excessive, iniquitous, unconscionable, and exorbitant. Such stipulations are void for being contrary to morals.
The stipulated rates of 7% and 5% per month (equivalent to 84% and 60% per annum) clearly fall within this condemned category. Therefore, the courts properly equitably reduced the rate to 1% per month or 12% per annum and ordered the refund of the excess. The Court also rejected petitioners’ new defenses of in pari delicto and good faith, as the first was not raised timely in the lower court and the second is a factual issue not permissible in a Rule 45 petition limited to questions of law.