Case Digest (G.R. No. 131622) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Leticia Y. Medel et al. v. Court of Appeals, petitioners Servando Franco, Leticia Y. Medel and Dr. Rafael Medel applied for and obtained a series of loans from Veronica R. Gonzales, doing business as Gonzales Credit Enterprises, between November 7, 1985 and July 23, 1986. The initial loans—₱50,000.00 on November 7, ₱90,000.00 on November 19 and ₱300,000.00 on June 11, 1986—were evidenced by promissory notes stipulating 6% interest per month and retained interest amounts. On July 23, 1986, all unpaid obligations totaling ₱440,000.00 were consolidated with a new ₱60,000.00 advance into a single ₱500,000.00 promissory note with stipulations of 5.5% monthly interest, 2% annual service charge, 1% per month penalty and 25% attorney’s fee. Upon failure to pay at maturity, Plaintiffs Veronica and Danilo Gonzales filed a complaint for collection in the Regional Trial Court (RTC) of Bulacan on February 20, 1990. The RTC held that although the Usury Law had been repealed, the agreed int Case Digest (G.R. No. 131622) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Loan Transactions
- First Loan (November 7, 1985)
- Promissory note for ₱50,000.00, payable January 7, 1986.
- Net proceeds of ₱47,000.00 advanced; ₱3,000.00 withheld as one-month interest at 6% per month.
- Second Loan (November 19, 1985)
- Promissory note for ₱90,000.00, payable January 19, 1986.
- Net proceeds of ₱84,000.00; interest rate of 6% per month.
- Subsequent Loans and Consolidation
- Third Loan (June 11, 1986)
- Promissory note for ₱300,000.00, maturing July 11, 1986.
- Secured by real estate mortgage over property of Leticia Makalintal Yaptinchay.
- Net proceeds of ₱275,000.00; standard interest terms.
- Fourth Loan and Consolidation (July 23, 1986)
- Consolidated unpaid loans into one promissory note for ₱500,000.00, maturing August 23, 1986.
- Interest at 5.5% per month, 2% service charge per annum, 1% per month penalty after maturity.
- Clause for 25% attorney’s fees and adjustment for peso-value changes.
- Judicial Proceedings
- Complaint filed (February 20, 1990) in RTC of Bulacan for collection of ₱500,000.00 plus charges.
- RTC Decision (December 9, 1991)
- Found promissory notes valid but interest “revolting to the conscience.”
- Applied New Civil Code rate of 12% per annum and 1% per month penalty.
- Awarded ₱50,000.00 attorney’s fees.
- Court of Appeals Decision (March 21, 1997)
- Held Usury Law “legally inexistent” under CB Circular 905.
- Enforced 5.5% per month interest, 2% service charge, 1% penalty.
- Affirmed ₱50,000.00 attorney’s fees.
- CA Resolution (November 25, 1997) denying motion for reconsideration.
- Petition for review on certiorari filed (April 3, 1998) before the Supreme Court under Rule 45.
Issues:
- Whether the 5.5% per month interest, 2% service charge, 1% penalty and 25% attorney’s fees stipulated in the July 23, 1986 promissory note are usurious or unconscionable.
- Whether Central Bank Circular No. 905 effectively repealed the Usury Law and removed all interest ceilings.
- What rate of interest and penalties should properly apply under the Civil Code if the stipulated rates are void.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)