G.R. No. 170452 - SALVADOR CHUA AND VIOLETA CHUA, VS. RODRIGO TIMAN, MA. LYNN TIMAN AND LYDIA TIMAN.D E C I S I O N - Supreme Court E-Library

Ruling

Accordingly, the Court of Appeals reduced the stipulated interest rates of 7% and 5% per month (equivalent to 84% and 60% per annum, respectively) to a fair and reasonable rate of 1% per month or 12% per annum. The Court of Appeals also ordered petitioners to refund to respondents all interest payments in excess of 12% per annum. Petitioners sought reconsideration, but it was denied. Hence, this petition raising the lone issue of: WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR - OR ACTED NOT IN ACCORD WITH THE LAW AND JURISPRUDENCE - WHEN IT AFFIRMED THE JUDGMENT OF THE REGIONAL TRIAL COURT ORDERING THE RETURN OF THE EXCESS INTEREST TO RESPONDENTS. [5] Essentially, the main issue is: (1) Did the Court of Appeals err in ruling that the original stipulated interest rates of 7% and 5%, equivalent to 84% and 60% per annum, are unconscionable, and in ordering petitioners to refund to respondents all payments of interest in excess of 12% per annum? Petitioners aver that the stipulated interest of 5% monthly and higher cannot be considered unconscionable because these rates are not usurious by virtue of Central Bank (C.B.) Circular No. 905-82 [6] which had expressly removed the interest ceilings prescribed by the Usury Law. Petitioners add that respondents were in pari delicto since they agreed on the stipulated interest rates of 7% and 5% per month. They further aver they honestly believed that the interest rates they imposed on respondents' loans were not usurious. Respondents, invoking Medel v. Court of Appeals , [7] counter that the stipulated interest rates of 7% and 5% per month are iniquitous, unconscionable and exorbitant, thus, they are entitled to the return of the excessive interest paid. They also contend that petitioners cannot raise the defense of in pari delicto for the first time on appeal. They further contend that the defense of good faith is a factual issue which cannot be raised by petitioners in a petition for review under Rule 45 of the Rules of Civil Procedure. The petition is patently devoid of merit. The stipulated interest rates of 7% and 5% per month imposed on respondents' loans must be equitably reduced to 1% per month or 12% per annum. [8] We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% [9] per month and higher [10] are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law. [11] While C.B. Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, [12] nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets. [13] Petitioners cannot also raise the defenses of in pari delicto and good fait