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
Showing posts with label interest. Show all posts
Showing posts with label interest. Show all posts
Dec 4, 2009
Civil Law 2- ObliCon- SECURITY BANK AND TRUST COMPANY vs. REGIONAL TRIAL COURT OF MAKATI, BRANCH 61, MAGTANGGOL EUSEBIO and LEILA VENTURA,
This is with regard to ART 1170- Interest rate from damages as stipulated by parties
Case of Security Bank and Trust Company vs. R.T.C MAKATI BR. 61 MAGTANGGOL EUSEBIO AND LEILA VENTURA
G.R.No. 113926 23October1996
FACTS OF THE CASE:
On April 27, 1983, private respondent Magtanggol Eusebio executed 3 Promissory Notes from different dates in favor of petitioner Security Bank and Trust Co. (SBTC) in the amounts of 100,000, 100,000, and 65,000. Respondent bound himself to pay the said amounts in six (6) monthly installments plus 23% interest per annum.On all the abovementioned promissory notes, private respondent Leila Ventura had signed as co-maker. Upon maturity there were still principal balance remaining on the notes. Eusebio refused to pay the balance payable, so SBTC filed a collection case against him. The RTC rendered a judgment in favor of SBTC, although the rate of interest imposed by the RTC was 12% p.a. instead of the agreed upon 23% p.a. The court denied the motion filed by SBTC to apply the 23% p.a. instead of the 12% p.a.
ISSUES OF THE CASE:
Did the RTC err in using 12% instead of the 23% as agreed upon by the parties?
- Yes, the rate of interest was agreed upon by the parties freely. Significantly, respondent did not question that rate.
- P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties to stipulate freely regarding any subsequent adjustment in the interest rate that shall accrue on a loan or forbearance of money, goods or credits.
- It is not for respondent court a quo to change the stipulations in the contract where it is not illegal. Furthermore, Article 1306 of the New Civil Code provides that contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
- The 12% shall be applied for obligations arising from loans, or forbearance of money in the absence of express stipulations
HELD:
IN VIEW OF THE FOREGOING, the decision of the respondent court a quo, is hereby AFFIRMED with the MODIFICATION that the rate of interest that should be imposed be 23% per annum.
Obligations and Contracts Terms:
PROMISSORY NOTE - A written document in which a borrower agrees (promises) to pay back money to a lender according to specified terms. A written promise to pay a certain sum of money, at a future time, unconditionally.
A promissory note differs from a mere acknowledgment of debt, without any promise to pay, as when the debtor gives his creditor an I 0 U. In its form it usually contains a promise to pay, at a time therein expressed, a sum of money to a certain person therein named, or to his order, for value received. It is dated and signed by the maker. It is never under seal.
He who makes the promise is called the maker, and he to whom it is made is the payee.
I hope this helps.
Jeff David
Case of Security Bank and Trust Company vs. R.T.C MAKATI BR. 61 MAGTANGGOL EUSEBIO AND LEILA VENTURA
G.R.No. 113926 23October1996
FACTS OF THE CASE:
On April 27, 1983, private respondent Magtanggol Eusebio executed 3 Promissory Notes from different dates in favor of petitioner Security Bank and Trust Co. (SBTC) in the amounts of 100,000, 100,000, and 65,000. Respondent bound himself to pay the said amounts in six (6) monthly installments plus 23% interest per annum.On all the abovementioned promissory notes, private respondent Leila Ventura had signed as co-maker. Upon maturity there were still principal balance remaining on the notes. Eusebio refused to pay the balance payable, so SBTC filed a collection case against him. The RTC rendered a judgment in favor of SBTC, although the rate of interest imposed by the RTC was 12% p.a. instead of the agreed upon 23% p.a. The court denied the motion filed by SBTC to apply the 23% p.a. instead of the 12% p.a.
ISSUES OF THE CASE:
Did the RTC err in using 12% instead of the 23% as agreed upon by the parties?
- Yes, the rate of interest was agreed upon by the parties freely. Significantly, respondent did not question that rate.
- P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties to stipulate freely regarding any subsequent adjustment in the interest rate that shall accrue on a loan or forbearance of money, goods or credits.
- It is not for respondent court a quo to change the stipulations in the contract where it is not illegal. Furthermore, Article 1306 of the New Civil Code provides that contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
- The 12% shall be applied for obligations arising from loans, or forbearance of money in the absence of express stipulations
HELD:
IN VIEW OF THE FOREGOING, the decision of the respondent court a quo, is hereby AFFIRMED with the MODIFICATION that the rate of interest that should be imposed be 23% per annum.
Obligations and Contracts Terms:
PROMISSORY NOTE - A written document in which a borrower agrees (promises) to pay back money to a lender according to specified terms. A written promise to pay a certain sum of money, at a future time, unconditionally.
A promissory note differs from a mere acknowledgment of debt, without any promise to pay, as when the debtor gives his creditor an I 0 U. In its form it usually contains a promise to pay, at a time therein expressed, a sum of money to a certain person therein named, or to his order, for value received. It is dated and signed by the maker. It is never under seal.
He who makes the promise is called the maker, and he to whom it is made is the payee.
I hope this helps.
Jeff David
Nov 16, 2009
Civil Law 2- ObliCon- FGU Insurance vs. GPS Trucking
This case is with reference to Art 1159 of the New Civil Code
Case of FGU INSURANCE CORPORATION vs. G.P.S TRUCKING CORPORATION and LAMBERT M. EROLES
G.R.No. 141910 06August2002
FACTS OF THE CASE:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles. While the truck was traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the covered cargoes: P204, 450.00. FGU, in turn, being the subrogee of the rights and interests of the insured sought reimbursement of the amount, from GPS. Since GPS failed to heed the claim, FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver with the Regional Trial Court, Branch 66, of Makati City. In its answer, respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a common carrier. Respondents further claimed that the cause of damage was purely accidental. GPS, instead of submitting its evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to evidence on the ground that petitioner had failed to prove that it was a common carrier. The RTC and CA both ruled in favor of the Respondent.
ISSUES OF THE CASE:
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.
- In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. Thus, FGU has a claim for the amount paid out.
- The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof
- GPS recognizes the existence of a contract of carriage between it and petitioner’s assured, and admits that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation, a default on, or failure of compliance with, the obligation in this case, the delivery of the goods in its custody to the place of destination - gives rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.
HELD:
The decision of the lower courts insofar as Lambert M. Eroles is concerned is affirmed but assailed decision with regard to GPS trucking is reversed. It, is hereby ordered to pay FGU Insurance Corporation the value of the damaged and lost cargoes in the amount of P204, 450.00
Obligations and Contracts Terms:
• expectation interest- the interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed
• reliance interest- the interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made
• Restitution interest- which is his interest in having restored to him any benefit that he has conferred on the other party.
• Subrogee- the person or entity that assumes the legal right to attempt to collect a claim of another (subrogor) in return for paying the other's expenses or debts which the other claims against a third party. A subrogee is usually the insurance company which has insured the party whose expenses were paid.
I hope this helps.
Jeff David
Case of FGU INSURANCE CORPORATION vs. G.P.S TRUCKING CORPORATION and LAMBERT M. EROLES
G.R.No. 141910 06August2002
FACTS OF THE CASE:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles. While the truck was traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the covered cargoes: P204, 450.00. FGU, in turn, being the subrogee of the rights and interests of the insured sought reimbursement of the amount, from GPS. Since GPS failed to heed the claim, FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver with the Regional Trial Court, Branch 66, of Makati City. In its answer, respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a common carrier. Respondents further claimed that the cause of damage was purely accidental. GPS, instead of submitting its evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to evidence on the ground that petitioner had failed to prove that it was a common carrier. The RTC and CA both ruled in favor of the Respondent.
ISSUES OF THE CASE:
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.
- In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. Thus, FGU has a claim for the amount paid out.
- The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof
- GPS recognizes the existence of a contract of carriage between it and petitioner’s assured, and admits that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation, a default on, or failure of compliance with, the obligation in this case, the delivery of the goods in its custody to the place of destination - gives rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.
HELD:
The decision of the lower courts insofar as Lambert M. Eroles is concerned is affirmed but assailed decision with regard to GPS trucking is reversed. It, is hereby ordered to pay FGU Insurance Corporation the value of the damaged and lost cargoes in the amount of P204, 450.00
Obligations and Contracts Terms:
• expectation interest- the interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed
• reliance interest- the interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made
• Restitution interest- which is his interest in having restored to him any benefit that he has conferred on the other party.
• Subrogee- the person or entity that assumes the legal right to attempt to collect a claim of another (subrogor) in return for paying the other's expenses or debts which the other claims against a third party. A subrogee is usually the insurance company which has insured the party whose expenses were paid.
I hope this helps.
Jeff David
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