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First Metro vs Este del Sol

GR No. 141811, 15 November 2001

369 SCRA 99

FMIC granted Este del Sol a loan to finance a sports/resort complex in Montalban, Rizal.
Under the agreement, the interest was 16% pa based on the diminishing balance. In case of default,
an acceleration clause was provided and the amount due is subject to 20% one-time penalty on the
amount due and such amount shall bear interest at the highest rate permitted by law. respondent
executed a REM, individual continuing suretyship and an underwriting agreement whereby FMIC
shall underwrite the public offering of one P120,000 common shares of respondents capital stock
for one-time underwriting fee of P200,000. For failure to pay its obligation, FMIC caused the
foreclosure of the REM. At the public auction, FIC was the highest bidder. Petitioner filed to collect
for alleged deficiency balance against respondents since it failed to collect from the sureties, plus
interest at 21% pa. the trial court ruled in favor of FMIC. Respondents appealed before the CA
which held that the fees provided for in the Underwriting and Consultacy Agreements were mere
subterfuges to camouflage the excessively usurious interest charged. The CA ordered FMIC to
reimburse petitioner representing what is ue to petitioner and what is due to respondent.

Whether or not the interests are lawful

No. an apparently lawful loan is usurious when it is intended that additional compensation
for the loan be disguised by an ostensibly unrelated contract for the payment by the borrower for
the lenders services which re of little value or which are not in fact to be rendered. Article 1957
clearly provides: contracts and stipulations, under any cloak or device whatever, intended to
circumvent the law agaistn usury shall be void. The borrower may recover in accordance with the
laws on usury.