G.R. No. 168940 - Spouses Castro vs. Tan

Respondents Angelina de Leon Tan and Ruben Tan were registered owners of a 240-sqm residential lot in Barrio Canalate, Malolos, Bulacan (TCT No. T-8540).
Petitioners Spouses Isagani and Diosdada Castro extended a loan of ₱30,000 to the Tans, secured by a “Kasulatan ng Sanglaan ng Lupa at Bahay.”

The Kasulatan required repayment of ₱30,000 within six months (by August 17, 1994) at 5% interest per month, compounded monthly.
After Ruben Tan’s death (September 2, 1994), Angelina Tan failed to pay; her offer to pay principal plus partial interest was refused, and petitioners demanded ₱359,000.

Petitioners foreclosed extrajudicially on February 5, 1999, then purchased the property at auction as sole bidder.
The one-year redemption period lapsed unredeemed; a writ of possession issued and respondents were ejected.

On September 26, 2000, respondents filed in the RTC a complaint to nullify the mortgage and foreclosure, rescind the interest clause, and recover damages for unconscionable interest.
RTC (June 11, 2002) held the 5% monthly interest iniquitous and rescinded it, reducing interest to 12% per annum plus 1% monthly liquidated damages; allowed redemption on an offered ₱200,000.
CA (October 29, 2004) affirmed but modified: respondents could redeem by paying ₱30,000 plus 12% per annum from February 17, 1994 and penalty at the same rate until June 21, 2000.
CA denied petitioners’ motion for reconsideration (July 18, 2005).
Petitioners filed for review on certiorari before the Supreme Court (G.R. No. 168940).

Whether the CA erred in nullifying the 5% monthly interest voluntarily agreed upon.
Whether the CA improperly altered the mortgage contract by imposing different terms.
Whether the CA erred in extending the redemption period beyond the one-year limit under Act No. 3135.