Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&amp;view=article&amp;id=51675:gr-168782-2008&amp;catid=1510&amp;Itemid=566
Timestamp: 2019-04-19 08:59:31+00:00

Document:
SPOUSES JOVENAL TORING and CECILIA ESCALONA-TORING, Petitioners, v. SPOUSES ROSALIE GANZON-OLAN and GILBERT OLAN, and ROWENA OLAN, Respondents.
This Petition for Review on Certiorari assails the Decision1 and Resolution,2 dated March 28, 2005 and June 30, 2005, respectively, of the Court of Appeals in CA-G.R. CV No. 76831. The Court of Appeals affirmed the Resolution3 dated June 10, 2002 of the Regional Trial Court, Branch 276, Muntinlupa City, in Civil Case No. 00-137 which had ordered petitioners to pay respondents the sum of P20,000,000 representing the total amount of petitioners' loan and interest due.
On September 4, 1998, petitioner Jovenal Toring obtained from respondents a loan amounting to P6,000,000 at 3% interest per month. The loan was secured by a mortgage on a parcel of land covered by Transfer Certificate of Title No. T-27418,4 as evidenced by a Deed of Real Estate Mortgage5 dated September 8, 1998.
On July 28, 2000, petitioners filed a Complaint10 docketed as Civil Case No. 00-137 for reformation of instruments, abuse of rights and damages against respondents. Petitioners prayed that the Deed of Absolute Sale dated September 23, 1998 and Option to Buy dated September 28, 1998, be treated as an equitable mortgage instead of a sale.
...the document of mortgage specified the interest at 3.81% per month from the time it was obtained, and which was now estimated to be P7,239,000.00. This sum should be added to the total loan of TEN MILLION PESOS, . . .
Therefore, judgment is rendered for defendants ROSALIE GANZON OLAN and GILBERT OLAN [and] ROWENA GANZON since the loan is not denied, directing spouses [p]laintiffs JOVENAL TORING and CECILIA ESCALONA TORING, to pay the sum of TWENTY MILLION PESOS within one month from receipt of this decision.
Petitioners appealed, contending that the trial court erred in awarding interest. Petitioners stress that Article 160214 of the Civil Code governing equitable mortgages provides that any money, fruits or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. Thus, there should have been no award of interest.
WHEREFORE, the June 10, 2002 Resolution of the Regional Trial Court, Branch 276, Muntinlupa City, is hereby AFFIRMED.
Petitioners contend that they are not liable to pay interest as the stipulated monthly rates of 3% and 3.81%17 are unconscionable. Petitioners further contend that the reformed instrument, i.e., the Option to Buy dated September 28, 1998, did not mention any rate of interest chargeable to the loan but rather, an escalation18 of the purchase price.
On the other hand, respondents maintain that petitioners are liable to pay interest based on the Deed of Absolute Sale and Option to Buy executed by the parties. Respondents assert that the P300,000 and P381,000 differences per month as stated in the Option to Buy represents the 3% or 3.81% interest to be charged on the loan. Respondents further assert that the 3% or 3.81% interest is not usurious since Central Bank Circular No. 905-8219 removed the ceiling on interest rates on secured and unsecured loans.
In resolving the issue in this controversy, we have agreed to focus our attention on the basic provisions of statutes as well as the prior decisions of this Court bearing on rates of interest on monetary obligations.
The first time that the parties in this case entered into a loan transaction was on September 4, 1998 when petitioners obtained the P6,000,000 loan from respondents. Based on the Deed of Real Estate Mortgage dated September 8, 1998 embodying the promissory note dated September 4, 1998, the parties agreed on an interest rate of 3% per month.
The second and third times that the parties transacted were on September 23 and 28, 1998 when they executed the Deed of Absolute Sale and the Option to Buy, respectively. These two documents were the instruments reformed in Civil Case No. 00-137, where both parties agreed that the transactions embodied therein were really that of an equitable mortgage. The stipulation in a contract sharply escalating the repurchase price every month is for the purpose of securing the return of money invested with substantial profit or interest.22 Undoubtedly, the P300,000 and P381,000 successive increases stated in the Option to Buy represent the monthly interest which respondents sought to recover from petitioners.
... Nothing in the said circular [CB Circular No. 905, s. 1982] 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.
Undeniably, in the present case, petitioners failed to pay the principal loan on its maturity and upon demand by respondents, as well as the interest payments thereafter. Indeed, petitioners cannot turn their backs on their obligation; they have to comply with what is incumbent upon them. All other claims for damages having been waived by the parties, petitioners are bound to pay respondents the principal loan of P10,000,000, plus what we have repeatedly held as the appropriate rate of interest of 1% per month, from December 6, 199826 until fully paid.
WHEREFORE, the assailed Decision and Resolution dated March 28, 2005 and June 30, 2005, respectively, of the Court of Appeals in CA-G.R. CV No. 76831 are MODIFIED to the effect that the stipulated interest rate of 3% or 3.81% per month on the subject equitable mortgage is hereby ordered REDUCED to 1% per month only. No pronouncement as to costs.
1 Rollo, pp. 34-45. Penned by Associate Justice Jose Catral Mendoza, with Associate Justices Romeo A. Brawner and Edgardo P. Cruz concurring.
3 Id. at 48-50. Penned by Presiding Judge N.C. Perello.
4 Records, Vol. I, pp. 20-23.
11 Records, Vol. II, p. 274.
In any of the foregoing cases, any money, fruits or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.
17 See Records, Vol. I, p. 29. Represents the rate increase beginning October 5, 1999.
19 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. Effective on January 1, 1983.
20 ART. 1956. No interest shall be due unless it has been expressly stipulated in writing.
21 Security Bank and Trust Company v. RTC of Makati, Br. 61, G.R. No. 113926, October 23, 1996, 263 SCRA 483, 489.
22 Bundalian v. Court of Appeals, No. L-55739, June 22, 1984, 129 SCRA 645, 654.
23 Trade & Investment Development Corporation of the Phils. v. Roblett Industrial Construction Corporation, G.R. No. 139290, May 19, 2006, 490 SCRA 1, 6.
24 Ruiz v. Court of Appeals, G.R. No. 146942, April 22, 2003, 401 SCRA 410, 421.
25 Id., citing Spouses Solangon v. Salazar, G.R. No. 125944, 29 June 2001, 360 SCRA 379, invalidating stipulated rates of interest that are "excessive, iniquitous, unconscionable and exorbitant."
26 See Records, Vol. I, p. 28.

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