G.R. No. 159709 - HEIRS OF SERVANDO FRANCO, VS. SPOUSES VERONICA AND DANILO GONZALES.D E C I S I O N - Supreme Court E-Library

Ruling

Accordingly, on December 9, 1991, the trial court rendered judgment, the dispositive portion of which reads as follows: WHEREFORE, premises considered, judgment is hereby rendered, as follows: 1. Ordering the defendants Servando Franco and Leticia Medel, jointly and severally, to pay plaintiffs the amount of P47,000.00 plus 12% interest per annum from November 7, 1985 and 1% per month as penalty, until the entire amount is paid in full. 2. Ordering the defendants Servando Franco and Leticia Y. Medel to plaintiffs, jointly and severally the amount of P84,000.00 with 12% interest per annum and 1% per cent per month as penalty from November 19, 1985 until the whole amount is fully paid; 3. Ordering the defendants to pay the plaintiffs, jointly and severally, the amount of P285,000.00 plus 12% interest per annum and 1% per month as penalty from July 11, 1986, until the whole amount is fully paid; 4. Ordering the defendants to pay plaintiffs, jointly and severally, the amount of P50,000.00 as attorney's fees; 5. All counterclaims are hereby dismissed. With costs against the defendants. In due time, both plaintiffs and defendants appealed to the Court of Appeals. In their appeal, plaintiffs-appellants argued that the promissory note, which consolidated all the unpaid loans of the defendants, is the law that governs the parties. They further argued that Circular No. 416 of the Central Bank prescribing the rate of interest for loans or forbearance of money, goods or credit at 12% per annum, applies only in the absence of a stipulation on interest rate, but not when the parties agreed thereon. The Court of Appeals sustained the plaintiffs-appellants' contention. It ruled that the Usury Law having become legally inexistent with the promulgation by the Central Bank in 1982 of Circular No. 905, the lender and borrower could agree on any interest that may be charged on the loan. The Court of Appeals further held that "the imposition of an additional amount equivalent to 1% per month of the amount due and demandable as penalty charges in the form of liquidated damages until fully paid was allowed by law. Accordingly, on March 21, 1997, the Court of Appeals promulgated it decision reversing that of the Regional Trial Court, disposing as follows: WHEREFORE, the appealed judgment is hereby MODIFIED such that defendants are hereby ordered to pay the plaintiffs the sum of P500,000.00, plus 5.5% per month interest and 2% service charge per annum effective July 23, 1986, plus 1% per month of the total amount due and demandable as penalty charges effective August 24, 1986, until the entire amount is fully paid. The award to the plaintiffs of P50,000.00 as attorney's fees is affirmed. And so is the imposition of costs against the defendants. SO ORDERED.