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SECURITY BANK vs RTC MAKATI

GR ## GR No. 113926
Petitioner: Security Bank and Trust Company,
Respondent: Regional Trial Court of Makati, Branck
61, Magtanggol Eusebio and Leila Ventura
Date October 23, 1996
DOCTRINE CB Circular No. 905 did not repeal nor un
any way amend the Usury Law but simply suspended the
latters effectivity
(SHORT VERSION)
Respondent Eusebio executed 3 promissory notes in
favour of petitioner SBTC with an interest rate of 23%
per annum. After awhile, Eusebio stopped paying and
SBTC filed a collection case against he former. RTC
ruled in favour of SBTC but the interest rate of the
payable amount was decreased to 12%. SBTC alleged
that the interest should remain in 23%. SC ruled in their
favour.
FACTS
Private respondent Magtanggol Eusebio executed 3
Promissory notes in favor of petitioner Security Bank
and Trust Co. (SBTC) with co-respondent Leila Venture
signed as co-maker.
(1) April 27, 1983- total of P100,000 payable in 6
months with a stipulated interest of 23% per annum up
to the fifth installment
(2) July 28, 1983- total of P100,000 payable in 6
monthly installment plus 23% interest per annum
(3) August 31, 1983- in amount of P65,000 payable in 6
monthly installment plus interest at the rate of 23% per
annum.
After some time, when Eusebio failed and refused to pay
the remaining principal payable a collection case was
filed by the petitioner SBTC. RTC ruled in favor of the
petitioner and against defendant Eusebio and is hereby
ordered to pay the remaining balance plus interest of
12% per annum and the cost of the suit.
Not satisfied with the ruling, petitioner SBTC filed a
motion for partial reconsideration contending that:
(1) the interest rate agreed upon by the parties during the
signing of the promissory notes was 23% per annum;
(2) the interest awarded should be compounded quarterly
from due date as provided in the three (3) promissory
note;
(3) defendant Leila Ventura should likewise be liable to
pay the balance on the promissory notes since she has
signed as co-maker and as such, is liable jointly and
severally with defendant Eusebio without a need for
demand upon her.

ISSUES/HELD
(1) WoN the 23% rate of interest per annum agreed upon
by petitioner bank and respondents is allowable and not
against the Usury Law - YES
RATIO
(1) The applicable provision of law is the Central Bank
Circular No. 905 which took effect on December 22,
1982, particularly Sections 1 and 2 which state:
Sec1. 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.
Sec2. The rate of interest for the load or
forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of express contract
as to such rate of interest, shall continue to be twelve per
cent(12%) per annum.
CB Circular 905 was issued by the Central Banks
Monetary Board pursuant to P.D. 1684 empowering
them to prescribe the maximum rates of interests for
loans and certain forbearances.
The court cited the ruling in PNB vs. CA which says
that: PD No. 1684 and CB Circular No. 905 no more
than allow contracting parties to stipulate freely
regarding any subsequent adjustment in the interest rate
that shall accrue on a loan or forbearance of money,
goods or credits. In fine, they can agree to adjust,
upward or downward, the interest previously
stipulated.
All the promissory notes were signed in 1983 and,
therefore, were already covered by CB Circular No. 905.
Contrary to the claim of respondent court, this circular
did not repeal nor in any way amend the Usury Law but
simply suspended the latters effectivity.
The rate of interest was agreed upon by the parties
freely. Significantly, the respondent did not question that
rate. It is not for respondent court a quo (RTC Makati) to
change the stipulations in the contract where it is not
illegal.
DECISION
Judgment affirmed with modifications. Rate of interest
should be imposed at 23% per annum.