This case is with regard to Art 1170 of the NCC (Stipulated interest held unconscionable)
Case of DANILO SOLANGON AND URSULA SOLANGON vs JOSE AVELINO SALAZAR
G.R.No. 125994 29June2001
FACTS OF THE CASE:
On 1986, 1987, and 1990 the Solangons’ executed 3 real estate mortgages in which they mortgaged a parcel of land situated in Sta. Maria, Bulacan, in favor of the Salazar to secure payment of a loan of P60, 000.00 payable within a period of four (4) months, with interest thereon at the rate of 6% per month, to secure payment of a loan of P136, 512.00, payable within a period of one (1) year, with interest thereon at the legal rate, and to secure payment of a loan in the amount of P230, 000.00 payable within a period of four (4) months, with interest thereon at the legal rate.
This action was initiated by the Solangons to prevent the foreclosure of the mortgaged property. They alleged that they obtained only one loan form the defendant-appellee, and that was for the amount of P60, 000.00, the payment of which was secured by the first of the above-mentioned mortgages. The subsequent mortgages were merely continuations of the first one, which is null and void because it provided for unconscionable rate of interest. They have already paid the defendant-appellee P78, 000.00 and tendered P47, 000.00 more, but the latter has initiated foreclosure proceedings for their alleged failure to pay the loan P230, 000.00 plus interest.
ISSUES OF THE CASE:
Is a loan obligation that is secured by a real estate mortgage with an interest of 72% p.a. or 6% a month unconscionable?
- Yes, although the C.B. Circular No 905 lifted the ceiling on interest rates there is nothing in the said circular that grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to hemorrhaging of their assets.
- In the case of Medel vs. C.A. the S.C. has held that 5.5% per month was reduced for being iniquitous, unconscionable and exorbitant hence it is contrary to morals (contra bonos mores)
- In this case the Solangons’ are in a worse situation than the Medel case (6% per month interest rate) the said interest rate should be reduced equitably.
-
HELD:
WHEREFORE, the appealed decision of the Court of Appeals is AFFIRMED subject to the MODIFICATION that the interest rate of 72% per annum is ordered reduced to 12 % per annum.
Obligations and Contracts Terms:
Legal Interest- the legal rate of interest for the loan or forbearance of any money, goods or credits, where such loan or renewal or forbearance is secured in whole or in part by a mortgage upon real estate the title to which is duly registered, in the absence of express contract as to such rate of interest, shall be 12% per annum, unless it is unconscionable or contrary to laws, morals, public policy.
I hope this helps.
Jeff David
Dec 4, 2009
Subscribe to:
Post Comments (Atom)
Posts
what if the upon mortgaging a property with 4% per month to a person, aside from mortgage contract a deed of sale was also produced for the purpose that failure to pay the loan amount a deed of sale was signed by the debtor. Hence, the loan amount interest was being paid unconsecutively but active in paying. Does the lender can forclose the property? what if the lender rejected the payments on the capital and she demanded the full amount of loan? and threatened the debtor that a deed of sale was was executed? is that right or contrary to law? thank you very much.
ReplyDelete