Imperial v. Jaucian

DECISION PANGANIBAN, J.:

Iniquitous and unconscionable stipulations on interest rates, penalties and attorney's fees are contrary to morals. Consequently, courts are granted authority to reduce them equitably. If reasonably exercised, such authority shall not be disturbed by appellate courts.

The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the July 19, 2000 Decision2 and the June 14, 2001 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 43635. The decretal portion of the Decision is as follows: "WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court, 5th Judicial Region, Branch 21, Naga City, dated August 31, 1993, in Civil Case No. 89-1911 for Sum of Money, is hereby AFFIRMED in toto."4 The assailed Resolution denied petitioner's Motion for Reconsideration. The dispositive portion of the August 31, 1993 Decision, promulgated by the Regional Trial Court (RTC) of Naga City (Branch 21) and affirmed by the CA, reads as follows: "Wherefore, Judgment is hereby rendered declaring Section I, Central Bank Circular No. 905, series of 1982 to be of no force and legal effect, it having been promulgated by the Monetary Board of the Central Bank of the Philippines with grave abuse of discretion amounting to excess of jurisdiction; declaring that the rate of interest, penalty, and charges for attorney's fees agreed upon between the parties are unconscionable, iniquitous, and in violation of Act No. 2655, otherwise known as the Usury Law, as amended; and ordering Defendant to pay Plaintiff the amount of FOUR HUNDRED SEVENTY-EIGHT THOUSAND, ONE HUNDRED NINETY-FOUR and 54/100 (₱478,194.54) PESOS, Philippine currency, with regular and compensatory interests thereon at the rate of twenty-eight (28%) per centum per annum, computed from August 31, 1993 until full payment of the said amount, and in addition, an amount equivalent to ten (10%) per centum of the total amount due and payable, for attorney's fees, without pronouncement as to costs."5 The Facts The CA summarized the facts of the case in this wise: "The present controversy arose from a case for collection of money, filed by Alex A. Jaucian against Restituta Imperial, on October 26, 1989.

The complaint alleges, inter alia , that defendant obtained from plaintiff six (6) separate loans for which the former executed in favor of the latter six (6) separate promissory notes and issued several checks as guarantee for payment. When the said loans became overdue and unpaid, especially when the defendant's checks were dishonored, plaintiff made repeated oral and written demands for payment. "Specifically, the six (6) separate loans obtained by defendant from plaintiff on various dates are as follows: (a) November 13, 1987 ₱ 50,000.00 (b) December 28, 1987 40,000.00 (c) January 6, 1988 30,000.00 (d) January 11, 1988 50,000.00 (e) January 12, 1988 50,000.00 (f) January 13, 1988 100,000.00 Total