Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the June 30, 2006 Decision of the Court of Appeals (CA) and its November 21, 2006 Resolution denying petitioner’s motion for reconsideration.


Petitioner Ileana Macalinao was an approved cardholder of BPI Mastercard, one of the credit card facilities of respondent Bank of the Philippine Islands (BPI). Petitioner Macalinao made some purchases through the use of the said credit card and defaulted in paying for said purchases. She subsequently received a letter dated January 5, 2004 from respondent BPI, demanding payment of the amount of one hundred forty-one thousand five hundred eighteen pesos and thirty-four centavos (Php 141,518.34), as follows:

Statement Date	Previous Balance	Purchases (Payments)	Penalty Interest	Finance Charges	Balance Due
10/27/2002	94,843.70		559.72	3,061.99	98,456.41
11/27/2002	98,465.41	(15,000)	0	2,885.61	86,351.02
12/31/2002	86,351.02	30,308.80	259.05	2,806.41	119,752.28
1/27/2003	119,752.28		618.23	3,891.07	124,234.58
2/27/2003	124,234.58		990.93	4,037.62	129,263.13
3/27/2003	129,263.13	(18,000.00)	298.72	3,616.05	115,177.90
4/27/2003	115,177.90		644.26	3,743.28	119,565.44
5/27/2003	119,565.44	(10,000.00)	402.95	3,571.71	113,540.10
6/29/2003	113,540.10	8,362.50 (7,000.00)	323.57	3,607.32	118,833.49
7/27/2003	118,833.49		608.07	3,862.09	123,375.65
8/27/2003	123,375.65		1,050.20	4,009.71	128,435.56
9/28/2003	128,435.56		1,435.51	4,174.16	134,045.23
10/28/2003
11/28/2003
12/28/2003
1/27/2004	141,518.34		8,491.10	4,599.34	154,608.78

Under the Terms and Conditions Governing the Issuance and Use of the BPI Credit and BPI Mastercard, the charges or balance thereof remaining unpaid after the payment due date indicated on the monthly Statement of Accounts shall bear interest at the rate of 3% per month and an additional penalty fee equivalent to another 3% per month. Particularly:



For failure of petitioner Macalinao to settle her obligations, respondent BPI filed with the Metropolitan Trial Court (MeTC) of Makati City a complaint for a sum of money against her and her husband, Danilo SJ. Macalinao. This was raffled to Branch 66 of the MeTC and was docketed as Civil Case No. 84462 entitled Bank of the Philippine Islands vs. Spouses Ileana Dr. Macalinao and Danilo SJ. Macalinao.

In said complaint, respondent BPI prayed for the payment of the amount of one hundred fifty-four thousand six hundred eight pesos and seventy-eight centavos (Php 154,608.78) plus 3.25% finance charges and late payment charges equivalent to 6% of the amount due from February 29, 2004 and an amount equivalent to 25% of the total amount due as attorney’s fees, and of the cost of suit.

After the summons and a copy of the complaint were served upon petitioner Macalinao and her husband, they failed to file their Answer. Thus, respondent BPI moved that judgment be rendered in accordance with Section 6 of the Rule on Summary Procedure. This was granted in an Order dated June 16, 2004. Thereafter, respondent BPI submitted its documentary evidence.

In its Decision dated August 2, 2004, the MeTC ruled in favor of respondent BPI and ordered petitioner Macalinao and her husband to pay the amount of Php 141,518.34 plus interest and penalty charges of 2% per month, to wit:


Although sued jointly with her husband, petitioner Macalinao was the only one who filed the petition before the CA since her husband already passed away on October 18, 2005.

In its assailed decision, the CA held that the amount of Php 141,518.34 (the amount sought to be satisfied in the demand letter of respondent BPI) is clearly not the result of the re-computation at the reduced interest rate as previous higher interest rates were already incorporated in the said amount. Thus, the said amount should not be made as basis in computing the total obligation of petitioner Macalinao. Further, the CA also emphasized that respondent BPI should not compound the interest in the instant case absent a stipulation to that effect. The CA also held, however, that the MeTC erred in modifying the amount of interest rate from 3% monthly to only 2% considering that petitioner Macalinao freely availed herself of the credit card facility offered by respondent BPI to the general public. It explained that contracts of adhesion are not invalid per se and are not entirely prohibited.

Petitioner Macalinao’s motion for reconsideration was denied by the CA in its Resolution dated November 21, 2006. Hence, petitioner Macalinao is now before this Court with the following assigned errors:


The petition is partly meritorious.


In its Complaint, respondent BPI originally imposed the interest and penalty charges at the rate of 9.25% per month or 111% per annum. This was declared as unconscionable by the lower courts for being clearly excessive, and was thus reduced to 2% per month or 24% per annum. On appeal, the CA modified the rate of interest and penalty charge and increased them to 3% per month or 36% per annum based on the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, which governs the transaction between petitioner Macalinao and respondent BPI.

In the instant petition, Macalinao claims that the interest rate and penalty charge of 3% per month imposed by the CA is iniquitous as the same translates to 36% per annum or thrice the legal rate of interest. [15] On the other hand, respondent BPI asserts that said interest rate and penalty charge are reasonable as the same are based on the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card.

We find for petitioner. We are of the opinion that the interest rate and penalty charge of 3% per month should be equitably reduced to 2% per month or 24% per annum.

Indeed, in the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, there was a stipulation on the 3% interest rate. Nevertheless, it should be noted that this is not the first time that this Court has considered the interest rate of 36% per annum as excessive and unconscionable. We held in Chua vs. Timan:


Since the stipulation on the interest rate is void, it is as if there was no express contract thereon. Hence, courts may reduce the interest rate as reason and equity demand.

The same is true with respect to the penalty charge. Notably, under the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, it was also stated therein that respondent BPI shall impose an additional penalty charge of 3% per month. Pertinently, Article 1229 of the Civil Code states:


In exercising this power to determine what is iniquitous and unconscionable, courts must consider the circumstances of each case since what may be iniquitous and unconscionable in one may be totally just and equitable in another.

In the instant case, the records would reveal that petitioner Macalinao made partial payments to respondent BPI, as indicated in her Billing Statements. Further, the stipulated penalty charge of 3% per month or 36% per annum, in addition to regular interests, is indeed iniquitous and unconscionable.

Thus, under the circumstances, the Court finds it equitable to reduce the interest rate pegged by the CA at 1.5% monthly to 1% monthly and penalty charge fixed by the CA at 1.5% monthly to 1% monthly or a total of 2% per month or 24% per annum in line with the prevailing jurisprudence and in accordance with Art. 1229 of the Civil Code.


Petitioner Macalinao claims that the basis of the re-computation of the CA, that is, the amount of Php 94,843.70 stated on the October 27, 2002 Statement of Account, was not the amount of the principal obligation. Thus, this allegedly necessitates a re-examination of the evidence presented by the parties. For this reason, petitioner Macalinao further contends that the dismissal of the case or its remand to the lower court would be a more appropriate disposition of the case.

Such contention is untenable. Based on the records, the summons and a copy of the complaint were served upon petitioner Macalinao and her husband on May 4, 2004. Nevertheless, they failed to file their Answer despite such service. Thus, respondent BPI moved that judgment be rendered accordingly. Consequently, a decision was rendered by the MeTC on the basis of the evidence submitted by respondent BPI. This is in consonance with Sec. 6 of the Revised Rule on Summary Procedure, which states:


Considering the foregoing rule, respondent BPI should not be made to suffer for petitioner Macalinao’s failure to file an answer and concomitantly, to allow the latter to submit additional evidence by dismissing or remanding the case for further reception of evidence. Significantly, petitioner Macalinao herself admitted the existence of her obligation to respondent BPI, albeit with reservation as to the principal amount. Thus, a dismissal of the case would cause great injustice to respondent BPI. Similarly, a remand of the case for further reception of evidence would unduly prolong the proceedings of the instant case and render inutile the proceedings conducted before the lower courts.

Significantly, the CA correctly used the beginning balance of Php 94,843.70 as basis for the re-computation of the interest considering that this was the first amount which appeared on the Statement of Account of petitioner Macalinao. There is no other amount on which the re-computation could be based, as can be gathered from the evidence on record. Furthermore, barring a showing that the factual findings complained of are totally devoid of support in the record or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this Court is not expected or required to examine or contrast the evidence submitted by the parties.

In view of the ruling that only 1% monthly interest and 1% penalty charge can be applied to the beginning balance of Php 94,843.70, this Court finds the following computation more appropriate:

Statement Date	Previous Balance	Purchases (Payments)	Balance	Interest (1%)	Penalty Charge (1%)	Total Amount Due for the Month
10/27/2002	94,843.70		94,843.70	948.44	948.44	96,740.58
11/27/2002	94,843.70	(15,000)	79,843.70	798.44	798.44	81,440.58
12/31/2002	79,843.70	30,308.80	110,152.50	1,101.53	1,101.53	112,355.56
1/27/2003	110,152.50		110,152.50	1,101.53	1,101.53	112,355.56
2/27/2003	110,152.50		110,152.50	1,101.53	1,101.53	112,355.56
3/27/2003	110,152.50	(18,000.00)	92,152.50	921.53	921.53	93,995.56
4/27/2003	92,152.50		92,152.50	921.53	921.53	93,995.56
5/27/2003	92,152.50	(10,000.00)	82,152.50	821.53	821.53	83,795.56
6/29/2003	82,152.50	8,362.50 (7,000.00)	83,515.00	835.15	835.15	85,185.30
7/27/2003	83,515.00		83,515.00	835.15	835.15	85,185.30
8/27/2003	83,515.00		83,515.00	835.15	835.15	85,185.30
9/28/2003	83,515.00		83,515.00	835.15	835.15	85,185.30
10/28/2003	83,515.00		83,515.00	835.15	835.15	85,185.30
11/28/2003	83,515.00		83,515.00	835.15	835.15	85,185.30
12/28/2003	83,515.00		83,515.00	835.15	835.15	85,185.30
1/27/2004	83,515.00		83,515.00	835.15	835.15	85,185.30
TOTAL			83,515.00	14,397.26	14,397.26	112,309.52

WHEREFORE, the petition is PARTLY GRANTED. The CA Decision dated June 30, 2006 in CA-G.R. SP No. 92031 is hereby MODIFIED with respect to the total amount due, interest rate, and penalty charge. Accordingly, petitioner Macalinao is ordered to pay respondent BPI the following:

(1) The amount of one hundred twelve thousand three hundred nine pesos and fifty-two centavos (Php 112,309.52) plus interest and penalty charges of 2% per month from January 5, 2004 until fully paid;

(2) Php 10,000 as and by way of attorney’s fees; and

(3) Cost of suit.

SO ORDERED.




WE CONCUR:

Before us is a petition for review on certiorari assailing the Decision ^[1] and Resolution ^[2] dated March 9, 2005 and November 24, 2005, respectively, of the Court of Appeals in CA-G.R. CV No. 82865, which had affirmed the Decision ^[3] dated May 14, 2004 of the Regional Trial Court (RTC) of Quezon City, Branch 86, in Civil Case No. Q-00-41276. The Court of Appeals reduced the stipulated original interest rates of 7% and 5% per month to only 1% per month or 12% per annum and ordered petitioners to refund the excess interest payments by respondents.

In February and March 1999, petitioners Salvador and Violeta Chua granted respondents Rodrigo, Ma. Lynn and Lydia Timan the following loans: a) P100,000; b) Php 200,000; c) Php 150,000; d) Php 107,000; e) Php 200,000; and f) Php 107,000. These loans were evidenced by promissory notes with interest of 7% per month, which was later reduced to 5% per month. Rodrigo and Ma. Lynn issued five (5) postdated checks to secure the loans, except for the Php 150,000 loan which was secured by a postdated check issued by Lydia.

Respondents paid the loans initially at 7% interest rate per month until September 1999 and then at 5% interest rate per month from October to December 1999. Sometime in March 2000, respondents offered to pay the principal amount of the loans through a Philippine National Bank manager's check worth Php 764,000, but petitioners refused to accept the same insisting that the principal amount of the loans totalled Php 864,000.

On May 3, 2000, respondents deposited Php 864,000 with the Clerk of Court of the RTC of Quezon City. Later, they filed a case for consignation and damages. Petitioners moved to dismiss the case, but the RTC denied the motion, as well as the subsequent motion for reconsideration.

By virtue of an order of Partial Judgment ^[4] dated October 16, 2002, the Clerk of Court of the RTC of Quezon City released the amount of Php 864,000 to petitioners.

Trial on the validity of the stipulated interests on the subject loans, as well as on the issue of damages, then proceeded.

On May 14, 2004, the RTC rendered a decision in favor of respondents. It ruled that the original stipulated interest rates of 7% and 5% per month were excessive. It further ordered petitioners to refund to respondents all interest payments in excess of the legal rate of 1% per month or 12% per annum. However, the RTC denied petitioners' claim for damages.

On appeal, the Court of Appeals affirmed the trial court's decision. The Court of Appeals declared illegal the stipulated interest rates of 7% and 5% per month for being excessive, iniquitous, unconscionable and exorbitant. Accordingly, the Court of Appeals reduced the stipulated interest rates of 7% and 5% per month (equivalent to 84% and 60% per annum, respectively) to a fair and reasonable rate of 1% per month or 12% per annum. The Court of Appeals also ordered petitioners to refund to respondents all interest payments in excess of 12% per annum. Petitioners sought reconsideration, but it was denied.

Hence, this petition raising the lone issue of:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR - OR ACTED NOT IN ACCORD WITH THE LAW AND JURISPRUDENCE - WHEN IT AFFIRMED THE JUDGMENT OF THE REGIONAL TRIAL COURT ORDERING THE RETURN OF THE EXCESS INTEREST TO RESPONDENTS. [5]

Essentially, the main issue is: (1) Did the Court of Appeals err in ruling that the original stipulated interest rates of 7% and 5%, equivalent to 84% and 60% per annum, are unconscionable, and in ordering petitioners to refund to respondents all payments of interest in excess of 12% per annum?

Petitioners aver that the stipulated interest of 5% monthly and higher cannot be considered unconscionable because these rates are not usurious by virtue of Central Bank (C.B.) Circular No. 905-82 ^[6] which had expressly removed the interest ceilings prescribed by the Usury Law. Petitioners add that respondents were in pari delicto since they agreed on the stipulated interest rates of 7% and 5% per month. They further aver they honestly believed that the interest rates they imposed on respondents' loans were not usurious.

Respondents, invoking Medel v. Court of Appeals, ^[7] counter that the stipulated interest rates of 7% and 5% per month are iniquitous, unconscionable and exorbitant, thus, they are entitled to the return of the excessive interest paid. They also contend that petitioners cannot raise the defense of in pari delicto for the first time on appeal. They further contend that the defense of good faith is a factual issue which cannot be raised by petitioners in a petition for review under Rule 45 of the Rules of Civil Procedure.

The petition is patently devoid of merit.

The stipulated interest rates of 7% and 5% per month imposed on respondents' loans must be equitably reduced to 1% per month or 12% per annum. ^[8] We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% ^[9] per month and higher ^[10] are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law. ^[11] While C.B. Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, ^[12] nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets. ^[13]

Petitioners cannot also raise the defenses of in pari delicto and good faith. The defense of in pari delicto was not raised in the RTC, hence, such an issue cannot be raised for the first time on appeal. Petitioners must have seasonably raised it in the proceedings before the lower court, because questions raised on appeal are confined only within the issues framed by the parties. ^[14] The defense of good faith must also fail because such an issue is a question of fact ^[15] which may not be properly raised in a petition for review under Rule 45 of the Rules of Civil Procedure which allows only questions of law. ^[16]
As well set forth in Medel: ^[17]>
We agree ... that the stipulated rate of interest at 5.5% per month on the Php 500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. However, we can not consider the rate "usurious" because this Court has consistently held that Circular No. 905 of the Central Bank, adopted on December 22, 1982, has expressly removed the interest ceilings prescribed by the Usury Law and that the Usury Law is now "legally inexistent."

In Security Bank and Trust Company vs. Regional Trial Court of Makati, Branch 61, the Court held that CB Circular No. 905 "did not repeal nor in any way amend the Usury Law but simply suspended the latter's effectivity." Indeed, we have held that "a Central Bank Circular can not repeal a law. Only a law can repeal another law." In the recent case of Florendo vs. Court of Appeals, the Court reiterated the ruling that "by virtue of CB Circular 905, the Usury Law has been rendered ineffective." "Usury has been legally non-existent in our jurisdiction. Interest can now be charged as lender and borrower may agree upon."

Nevertheless, we find the interest at 5.5% per month, or 66% per annum, stipulated upon by the parties in the promissory note iniquitous or unconscionable, and, hence, contrary to morals ("contra bonos mores"), if not against the law. The stipulation is void.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision and Resolution dated March 9, 2005 and November 24, 2005, respectively, of the Court of Appeals in CA-G.R. CV No. 82865 are hereby AFFIRMED. Costs against petitioners.

SO ORDERED.

* Designated as additional member in view of the official leave of absence of Associate Justice Dante O. Tinga.

^[1] Rollo, pp. 28-34. Penned by Associate Justice Juan Q. Enriquez, Jr. with Associate Justices Portia Aliño-Hormachuelos and Vicente Q. Roxas concurring.

^[2] Id. at 36-37.

^[3] Id. at 111-115. Penned by Judge Teodoro A. Bay.

^[4] Id. at 105-106.

^[5] Id. at 212.

^[6] SECTION 1. The rate of interest, including commissions, premiums, fees and other charges, on a loan or forbearance of any money, goods or credits, regardless of maturity and whether secured or unsecured, that may be charged or collected by any person, whether natural or juridical, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended.

^[7] G.R. No. 131622, November 27, 1998, 299 SCRA 481.

^[8] Ruiz v. Court of Appeals, G.R. No. 146942, April 22, 2003, 401 SCRA 410, 421.

^[9] Id.

^[10] Solangon v. Salazar, G.R. No. 125944, June 29, 2001, 360 SCRA 379, 384-385; Imperial v. Jaucian, G.R. No. 149004, April 14, 2004, 427 SCRA 517, 525-526; Cuaton v. Salud, G.R. No. 158382, January 27, 2004, 421 SCRA 278, 282.

^[11] Medel v. Court of Appeals, supra note 7 at 489.

^[12] Dio v. Japor, G.R. No. 154129, July 8, 2005, 463 SCRA 170, 177.

^[13] Almeda v. Court of Appeals, G.R. No. 113412, April 17, 1996, 256 SCRA 292, 302.

^[14] Lim v. Queensland Tokyo Commodities, Inc., G.R. No. 136031, January 4, 2002, 373 SCRA 31, 41.

^[15] Abad v. Guimba, G.R. No. 157002, July 29, 2005, 465 SCRA 356, 366.

^[16] Kay Products, Inc. v. Court of Appeals, G.R. No. 162472, July 28, 2005, 464 SCRA 544, 553.

^[17] Medel v. Court of Appeals, supra note 7 at 489.

Iniquitous and unconscionable stipulations on interest rates, penalties and attorney’s fees are contrary to morals. Consequently, courts are granted authority to reduce them equitably. If reasonably exercised, such authority shall not be disturbed by appellate courts.


Before us is a Petition for Review¹ under Rule 45 of the Rules of Court, assailing the July 19, 2000 Decision² and the June 14, 2001 Resolution³ of the Court of Appeals (CA) in CA-GR CV No. 43635. The decretal portion of the Decision is as follows:

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 19, 2000 Decision and the June 14, 2001 Resolution of the Court of Appeals (CA) in CA-GR CV No. 43635. The decretal portion of the Decision is as follows:

“WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court, 5th Judicial Region, Branch 21, Naga City, dated August 31, 1993, in Civil Case No. 89-1911 for Sum of Money, is hereby AFFIRMED in toto.”

The assailed Resolution denied petitioner’s Motion for Reconsideration.

The dispositive portion of the August 31, 1993 Decision, promulgated by the Regional Trial Court (RTC) of Naga City (Branch 21) and affirmed by the CA, reads as follows:

“Wherefore, Judgment is hereby rendered declaring Section I, Central Bank Circular No. 905, series of 1982 to be of no force and legal effect, it having been promulgated by the Monetary Board of the Central Bank of the Philippines with grave abuse of discretion amounting to excess of jurisdiction; declaring that the rate of interest, penalty, and charges for attorney’s fees agreed upon between the parties are unconscionable, iniquitous, and in violation of Act No. 2655, otherwise known as the Usury Law, as amended; and ordering Defendant to pay Plaintiff the amount of FOUR HUNDRED SEVENTY-EIGHT THOUSAND, ONE HUNDRED NINETY-FOUR and 54/100 (Php 478,194.54) PESOS, Philippine currency, with regular and compensatory interests thereon at the rate of twenty-eight (28%) per centum per annum, computed from August 31, 1993 until full payment of the said amount, and in addition, an amount equivalent to ten (10%) per centum of the total amount due and payable, for attorney’s fees, without pronouncement as to costs.”5

The CA summarized the facts of the case in this wise:

“The present controversy arose from a case for collection of money, filed by Alex A. Jaucian against Restituta Imperial, on October 26, 1989. The complaint alleges, inter alia, that defendant obtained from plaintiff six (6) separate loans for which the former executed in favor of the latter six (6) separate promissory notes and issued several checks as guarantee for payment. When the said loans became overdue and unpaid, especially when the defendant’s checks were dishonored, plaintiff made repeated oral and written demands for payment. “Specifically, the six (6) separate loans obtained by defendant from plaintiff on various dates are as follows:

(a) November 13, 1987 Php 50,000.00 (b) December 28, 1987 40,000.00 (c) January 6, 1988 30,000.00 (d) January 11, 1988 50,000.00 (e) January 12, 1988 50,000.00 (f) January 13, 1988 100,000.00     _____________   Total Php 320,000.00

“The loans were covered by six (6) separate promissory notes executed by defendant. The face value of each promissory notes is bigger [than] the amount released to defendant because said face value already include[d] the interest from date of note to date of maturity. Said promissory notes, which indicate the interest of 16% per month, date of issue, due date, the corresponding guarantee checks issued by defendant, penalties and attorney’s fees, are the following:

1. Exhibit ‘D’ – for loan of Php 40,000.00 on December 28, 1987, with face value of Php 65,000.00; 2. Exhibit ‘E’ – for loan of Php 50,000.00 on January 11, 1988, with face value of Php 82,000.00; 3. Exhibit ‘F’ – for loan of Php 50,000.00 on January 12, 1988, with face value of Php 82,000.00; 4. Exhibit ‘G’ – for loan of Php 100,000.00 on January 13, 1988, with face value of Php 164,000.00; 5. Exhibit ‘H’ – This particular promissory note covers the second renewal of the original loan of Php 50,000.00 on November 13, 1987, which was renewed for the first time on March 16, 1988 after certain payments, and which was renewed finally for the second time on January 4, 1988 also after certain payments, with a face value of Php 56,240.00; 6. Exhibit ‘I’ – This particular promissory note covers the second renewal of the original loan of Php 30,000.00 on January 6, 1988, which was renewed for the first time on June 4, 1988 after certain payments, and which was finally renewed for the second time on August 6, 1988, also after certain payments, with [a] face value of Php 12,760.00;

“The particulars about the postdated checks, i.e., number, amount, date, etc., are indicated in each of the promissory notes. Thus, for Exhibit ‘D’, four (4) PB checks were issued; for Exhibit ‘E’ four (4) checks; for Exhibit ‘F’ four (4) checks; for Exhibit ‘G’ four (4) checks; for Exhibit ‘H’ one (1) check; for Exhibit ‘I’ one (1) check; “The arrangement between plaintiff and defendant regarding these guarantee checks was that each time a check matures the defendant would exchange it with cash. “Although, admittedly, defendant made several payments, the same were not enough and she always defaulted whenever her loans mature[d]. As of August 16, 1991, the total unpaid amount, including accrued interest, penalties and attorney’s fees, [was] Php 2,807,784.20. “On the other hand, defendant claims that she was extended loans by the plaintiff on several occasions, i.e., from November 13, 1987 to January 13, 1988, in the total sum of Php 320,000.00 at the rate of sixteen percent (16%) per month. The notes mature[d] every four (4) months with unearned interest compounding every four (4) months if the loan [was] not fully paid. The loan releases [were] as follows:

(a) November 13, 1987 Php 50,000.00 (b) December 28, 1987 40,000.00 (c) January 6, 1988 30,000.00 (d) January 11, 1988 50,000.00 (e) January 12, 1988 50,000.00 (f) January 13, 1988 100,000.00     _____________   Total Php 320,000.00

“The loan on November 13, 1987 and January 6, 1988 ha[d] been fully paid including the usurious interests of 16% per month, this is the reason why these were not included in the complaint. “Defendant alleges that all the above amounts were released respectively by checks drawn by the plaintiff, and the latter must produce these checks as these were returned to him being the drawer if only to serve the truth. The above amount are the real amount released to the defendant but the plaintiff by masterful machinations made it appear that the total amount released was Php 462,600.00. Because in his computation he made it appear that the true amounts released was not the original amount, since it include[d] the unconscionable interest for four months. “Further, defendant claims that as of January 25, 1989, the total payments made by defendants [were] as follows:

a. Paid releases on November 13, 1987 of P50,000.00 and January 6, 1988 of P30,000.00 these two items were not included in the complaint affirming the fact that these were paid Php 80,000.00 b. Exhibit ‘26’ Receipt 231,000.00 c. Exhibit ‘8-25’ Receipt 65,300.00 d. Exhibit ‘27’ Receipt 65,000.00     _____________ Total Php 441,780.00 Less: 320,000.00     _____________ Excess Payment Php 121,780.00

“Defendant contends that from all perspectives the above excess payment of Php 121,780.00 is more than the interest that could be legally charged, and in fact as of January 25, 1989, the total releases have been fully paid. “On 31 August 1993, the trial court rendered the assailed decision.”6

On appeal, the CA held that without judicial inquiry, it was improper for the RTC to rule on the constitutionality of Section 1, Central Bank Circular No. 905, Series of 1982. Nonetheless, the appellate court affirmed the judgment of the trial court, holding that the latter’s clear and detailed computation of petitioner’s outstanding obligation to respondent was convincing and satisfactory.

Hence, this Petition.⁷


Petitioner raises the following arguments for our consideration:

“1. That the petitioner has fully paid her obligations even before filing of this case.   “2. That the charging of interest of twenty-eight (28%) per centum per annum without any writing is illegal.   “3. That charging of excessive attorney’s fees is hemorrhagic.   “4. Charging of excessive penalties per month is in the guise of hidden interest.   “5. The non-inclusion of the husband of the petitioner at the time the case was filed should have dismissed this case.”8

The Petition has no merit.



Arguing that she had already fully paid the loan before the filing of the case, petitioner alleges that the two lower courts misappreciated the facts when they ruled that she still had an outstanding balance of Php 208,430.

This issue involves a question of fact. Such question exists when a doubt or difference arises as to the truth or the falsehood of alleged facts; and when there is need for a calibration of the evidence, considering mainly the credibility of witnesses and the existence and the relevancy of specific surrounding circumstances, their relation to each other and to the whole, and the probabilities of the situation.⁹

It is a well-entrenched rule that pure questions of fact may not be the subject of an appeal by certiorari under Rule 45 of the Rules of Court, as this remedy is generally confined to questions of law.¹⁰ The jurisdiction of this Court over cases brought to it is limited to the review and rectification of errors of law allegedly committed by the lower court. As a rule, the latter’s factual findings, when adopted and affirmed by the CA, are final and conclusive and may not be reviewed on appeal.¹¹

Generally, this Court is not required to analyze and weigh all over again the evidence already considered in the proceedings below. ¹²In the present case, we find no compelling reason to overturn the factual findings of the RTC -- that the total amount of the loans extended to petitioner was Php 320,000, and that she paid a total of only Php 116,540 on twenty-nine dates. These findings are supported by a preponderance of evidence. Moreover, the amount of the outstanding obligation has been meticulously computed by the trial court and affirmed by the CA. Petitioner has not given us sufficient reason why her cause falls under any of the exceptions to this rule on the finality of factual findings.



The trial court, as affirmed by the CA, reduced the interest rate from 16 percent to 1.167 percent per month or 14 percent per annum; and the stipulated penalty charge, from 5 percent to 1.167 percent per month or 14 percent per annum.

Petitioner alleges that absent any written stipulation between the parties, the lower courts should have imposed the rate of 12 percent per annum only.

The records show that there was a written agreement between the parties for the payment of interest on the subject loans at the rate of 16 percent per month. As decreed by the lower courts, this rate must be equitably reduced for being iniquitous, unconscionable and exorbitant. “While the Usury Law ceiling on interest rates was lifted by C.B. Circular No. 905, nothing in the said circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.”¹³

In Medel v. CA,¹⁴ the Court found the stipulated interest rate of 5.5 percent per month, or 66 percent per annum, unconscionable. In the present case, the rate is even more iniquitous and unconscionable, as it amounts to 192 percent per annum. When the agreed rate is iniquitous or unconscionable, it is considered “contrary to morals, if not against the law. [Such] stipulation is void.”¹⁵

Since the stipulation on the interest rate is void, it is as if there were no express contract thereon. ¹⁶Hence, courts may reduce the interest rate as reason and equity demand. We find no justification to reverse or modify the rate imposed by the two lower courts.



Article 1229 of the Civil Code states thus:

“The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.”

In exercising this power to determine what is iniquitous and unconscionable, courts must consider the circumstances of each case. ¹⁷What may be iniquitous and unconscionable in one may be totally just and equitable in another. In the present case, iniquitous and unconscionable was the parties’ stipulated penalty charge of 5 percent per month or 60 percent per annum, in addition to regular interests and attorney’s fees. Also, there was partial performance by petitioner when she remitted Php 116,540 as partial payment of her principal obligation of Php 320,000. Under the circumstances, the trial court was justified in reducing the stipulated penalty charge to the more equitable rate of 14 percent per annum.

The Promissory Note carried a stipulation for attorney’s fees of 25 percent of the principal amount and accrued interests. Strictly speaking, this covenant on attorney’s fees is different from that mentioned in and regulated by the Rules of Court. ¹⁸“Rather, the attorney’s fees here are in the nature of liquidated damages and the stipulation therefor is aptly called a penal clause.” ¹⁹So long as the stipulation does not contravene the law, morals, public order or public policy, it is binding upon the obligor. It is the litigant, not the counsel, who is the judgment creditor entitled to enforce the judgment by execution.

Nevertheless, it appears that petitioner’s failure to comply fully with her obligation was not motivated by ill will or malice. The twenty-nine partial payments she made were a manifestation of her good faith. Again, Article 1229 of the Civil Code specifically empowers the judge to reduce the civil penalty equitably, when the principal obligation has been partly or irregularly complied with. Upon this premise, we hold that the RTC’s reduction of attorney’s fees -- from 25 percent to 10 percent of the total amount due and payable -- is reasonable.



Petitioner contends that the case against her should have been dismissed, because her husband was not included in the proceedings before the RTC.

We are not persuaded. The husband’s non-joinder does not warrant dismissal, as it is merely a formal requirement that may be cured by amendment. ²⁰Since petitioner alleges that her husband has already passed away, such an amendment has thus become moot.

WHEREFORE, the Petition is DENIED. Costs against petitioner.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

Footnotes

1   Rollo, pp. 13-42.   2   Id., pp. 43-54. Special Twelfth Division. Penned by Justice Bernardo P. Abesamis and concurred in by Justices Eugenio S. Labitoria (Division chairman) and Elvi John S. Asuncion (member).   3   Id., p. 73.   4   Assailed CA Decision, p. 11; rollo, p. 53.   5   RTC Decision, p. 14; rollo, p. 68. Written by Judge David C. Naval.   6   Assailed CA Decision, pp. 2-6; rollo, pp. 44-48.   7   This case was deemed submitted for resolution on May 14, 2002, upon receipt by the Court of petitioner’s Memorandum, which was signed by Atty. Alfredo V. Abundo. Respondent’s Memorandum, filed on March 26, 2002, was signed by Atty. Fred P. Cledera.   8   Petitioner’s Memorandum, p. 7; rollo, p. 206.   9   Sesbreño v. Court of Appeals, 310 Phil. 671, January 26, 1995.   10   Spouses Uy v. Court of Appeals, 411 Phil. 788, June 21, 2001; Metropolitan Bank and Trust Company v. Wong, 412 Phil. 207, June 26, 2001; Spouses Solangon v. Salazar, 412 Phil. 816, June 29, 2001; Llana v. Court of Appeals, 361 SCRA 27, July 11, 2001.   11   Go v. Court of Appeals, 351 SCRA 145, February 5, 2001.   12   Bañas v. Asia Pacific Finance Corporation, 343 SCRA 527, October 18, 2000.   13   Spouses Solangon v. Salazar, supra, p. 822, per Sandoval-Gutierrez, J.   14   359 Phil. 820, November 27, 1998; citing Art. 1306, Civil Code.   15   Id., p. 830, per Pardo, J. See also Ibarra v. Aveyro, 37 Phil. 274, December 6, 1917; Spouses Almeda v. Court of Appeals, 326 Phil. 309, April 17, 1996.   16   Tongoy v. Court of Appeals, 123 SCRA 99, June 28, 1983.   17   RCBC v. Court of Appeals, 352 Phil. 101, April 20, 1998.   18   Bañas v. Asia Pacific Finance Corporation, supra.   19   Id., p. 537, per Bellosillo, J.   20   Spouses Uy v. Court of Appeals, supra.