Case Summary (G.R. No. 211206)
Relevant Date and Jurisdiction
This case reached the Supreme Court, with the decision rendered on November 7, 2018, which indicates that the provisions of the 1987 Philippine Constitution are applicable.
Factual Background
In August 2002, Rosemarie Rey borrowed two substantial amounts from Cesar Anson, totaling P200,000 and P350,000, respectively. The first loan carried a monthly interest rate of 7.5%, while the second loan had a rate of 7%. Both loans were secured by real estate mortgages on properties owned by the Reys or related parties. Over time, Rey experienced difficulty in repaying these loans as scheduled and requested extensions of payment terms, which were granted by Anson through subsequent legal agreements. Despite partial payments on the loans, Rey later argued that the interest rates imposed were excessive and unconscionable.
Lower Court Proceedings
Initially, the Regional Trial Court (RTC) ruled in favor of Rey, determining that the interest rates agreed upon in the loans were unconscionable, declaring them void, and replacing them with the legal interest rate of 12% per annum. The RTC ordered Anson to return an overpayment amounting to approximately P143,688. This ruling was contested by both parties.
Decision of the Court of Appeals
On appeal, the Court of Appeals reversed the RTC’s decision, ruling that the stipulated interest rates were valid due to the suspension of the Usury Law, which allowed parties greater freedom in contracting terms. It upheld the validity of the 7.5% and 7% monthly interest rates, ordering Rey to pay a total of P902,847.87, with applicable interest, derived from the complexities of compensating the amounts owed and overpaid across the separate loan agreements.
Key Issues Raised in the Supreme Court
Rey raised several points of contention on appeal to the Supreme Court: firstly, whether the interest rates stipulated in the loan contracts were indeed unconscionable, and thus, should be revised to the legal rate; secondly, whether the RTC had made errors in its handling of the recomputation of payments and the resulting overpayments; and thirdly, whether Rey was entitled to recover attorney's fees and expenses associated with the litigation.
Supreme Court’s Ruling
The Supreme Court reaffirmed the fundamental principle from Article 1306 of the Civil Code, emphasizing that while parties can stipulate interest rates freely, such stipulations must not be contrary to morals, public policy, or law. The Court found that the imposed rates of 7.5% and 7% were excessively high and declared them void. In contrast, it upheld the lower court’s decision that structured interest payments on the initial loans based on the applicable legal interest rate of 12%.
The ruling further recognized that Rey had made excessive payments on the loans,
...continue readingCase Syllabus (G.R. No. 211206)
Case Overview
- This case involves a petition for review on certiorari under Rule 45 of the Rules of Court concerning a decision made by the Court of Appeals that reversed a ruling from the Regional Trial Court (RTC) concerning a loan agreement between Rosemarie Rey and Cesar Anson.
- The Court of Appeals' decision ordered Rey to pay Anson a total of P902,847.87, with additional interest.
Background Facts
- Rosemarie Rey, President of Southern Luzon Technological College Foundation, borrowed money from Cesar Anson on two occasions in 2002:
- First loan of P200,000.00 at a monthly interest rate of 7.5%.
- Second loan of P350,000.00 at a monthly interest rate of 7%.
- Loans were secured by real estate mortgages on Rey's property.
- Rey defaulted on both loans, leading to renegotiations of terms and the issuance of new promissory notes and mortgages.
Legal Proceedings Initiated
- Rey filed a complaint in RTC seeking recomputation of loans, claiming the interest rates were excessive and sought the return of overpayments.
- Anson countered, asserting that the parties freely agreed to the interest rates, and sought damages.
RTC Decision
- The RTC decided in favor of Rey, ruling that the interest rates on the lo