G.R. No. 144712 - Sps. Pascual vs. Ramos

On June 3, 1987, Spouses Silvestre and Celia Pascual (the PASCUALs) executed in favor of Rodrigo V. Ramos (RAMOS) a Deed of Absolute Sale with Right to Repurchase over two parcels of land in Bambang, Bulacan, for P150,000, annotated on TCT No. 305626.
The PASCUALs failed to exercise their one-year repurchase right (due June 3, 1988), prompting RAMOS on July 5, 1993 to file in the RTC, Malolos, Bulacan, Branch 21, Civil Case No. 526-M-93, a petition to consolidate title in his name.

The PASCUALs admitted signing the Deed but characterized it as a real estate mortgage without a fixed repurchase period and alleged overpayment of the obligation.
They interposed defenses (lack of jurisdiction, barred by prescription, lack of cause of action, failure of barangay conciliation, etc.) and counterclaimed for:

The RTC in its pre-trial order framed issues: nature of the deed (sale vs. mortgage), payment/overpayment, consolidation of title, and entitlement to damages.
RAMOS offered as evidence a Sinumpaang Salaysay (unsigned by a notary) stipulating a P150,000 loan at 7% interest per month, secured by the property, and giving RAMOS foreclosure rights upon six months’ non-payment of interest. The PASCUALs presented receipts totaling payments of P344,000.

Decision of March 15, 1995: Held the transaction an equitable mortgage; found total payments of P344,000 and an overpayment of P141,500; dismissed RAMOS’s petition; ordered cancellation of annotation; awarded defendants P141,500 plus P15,000 attorney’s fees and P3,000 litigation expenses.
RAMOS moved for reconsideration, contending interest was 7% per month (not per annum). The court, invoking Article 24 (Civil Code) to protect the allegedly disadvantaged debtors, unilaterally reduced the rate to 5% per month and, by Order of June 5, 1995, deleted the overpayment award and ordered the PASCUALs to pay RAMOS P511,000.
On September 7, 1995, the RTC denied the PASCUALs’ motion for reconsideration of the June 5 order.

The Court of Appeals in its Decision of November 5, 1999 (CA-G.R. CV No. 52848) affirmed the RTC’s June 5 and September 7, 1995 orders, finding the interest balance issue tried by implied consent under Rule 10, Sec. 5, Rules of Court.
The PASCUALs sought review before the Supreme Court, raising the sole issue of whether they are liable for 5% interest per month from June 3, 1987 to April 3, 1995.

Whether the issue of the excessiveness or validity of the stipulated 5% per month interest was timely raised and tried.
Whether the stipulated monthly interest rate (originally 7%, reduced to 5%) is exorbitant, unconscionable, or contrary to law and public policy, warranting its reduction.
Whether the Court may, under Article 24 of the Civil Code, unilaterally reduce the agreed interest rate.
Whether RAMOS may likewise collect legal interest on the interest due without having appealed the RTC’s June 5, 1995 Order.