GONZALES, Jerome DP.

BSLM 3C

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner,

vs.
JUANITA B. YBAÑEZ, CHARLES B. YBAÑEZ, JOSEPH B. YBAÑEZ and JEROME B.
YBAÑEZ, respondents.
G.R. No. 148163             December 6, 2004

DOCTRINE: 
The laws in effect when the contract was established usually dictate its understanding and
implementation.

FACTS:
The respondents obtained a loan that was restructured twice, reaching a total amount of
P1,225,000, to be paid over 15 years with an interest rate of 21% per annum and required
monthly payments of P22,426 with a penalty of 3% if not paid on the 24th of each month starting
in January 1983, as stated in a promissory note. The respondents made payments until 1988, but
after the plaintiff bank was put into liquidation by the Central Bank, they did not make any
further payments. The petitioner bank then served the respondents a notice for the extrajudicial
sale of their property to settle the outstanding debt of P6,174,337.46. Respondents filed a lawsuit
for an injunction, accounting, and damages, stating that there was no legal or factual basis for the
foreclosure proceedings as the loan had already been fully paid.

ISSUE:
Is it lawful to set the interest rate at 21% per year, and is the 3% monthly surcharge allowable?

RULING:

Yes. The Central Bank of the Philippines Circular No. 705-79 states that loan transactions that
have a maturity period of more than 730 days, such as the one in question with a maturity of 15
years, have a fixed interest rate of 21% per year for both secured and unsecured loans, therefore
the rate of 21% per annum is legal.

The loan in question was created on December 24, 1982. However, the Central Bank of the
Philippines Circular No. 905-82, which suspends the Usury Law, took effect on January 1, 1983.
Therefore, the 3% monthly surcharge, as a penalty for the loan, is in violation of the Usury Law's
imposed limit.