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In 1983, Magtanggol Eusebio acquired 3 separate loans from Security Bank and Trust Company amounting to P265k. The agreed interest rate was 23% per annum. The promissory note was freely and voluntarily signed by both parties. Leia Ventura was the co-maker. Eusebio defaulted from paying. Security Bank sued for collection. Judge Fernando Gorospe of the Makati RTC ordered Eusebio to pay but he lowered the interest rate to 12% per annum.
ISSUE: Whether or not the courts have liberality to reduce stipulated interest rates to the legal rate of 12% per annum.
HELD: No. From the examination of the records, it appears that indeed the agreed rate of interest as stipulated on the three (3) promissory notes was 23% per annum. The applicable provision of law is the Central Bank Circular No. 905 which took effect on December 22, 1982:
Sec. 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 judicial, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended.
Only in the absence of stipulations will the 12% rate be applied or if the stipulated rate is grossly excessive.
Further, Eusebio never questioned the rate. He merely expressed to negotiate the terms and conditions. The promissory notes were signed by both parties voluntarily. Therefore, stipulations therein are binding between them.
Compare this case with Chua vs Timan.