Sampaguita Builders Construction, Inc. vs.

PNB, 435 SCRA 565 [2004]  

Article 1175: Usurious transaction shall be governed by special laws

Facts:
 New Sampaguita Builders Construction Incorporated secured a loan from PNB with an aggregate
amount of 8m mortgaging the properties of the President and chairman of the board
 NSBCI executed 3 promissory notes on different dates and of different amount
 NSBCI defaulted its payment and failed to comply with the obligation on promissory notes
 NSBCI requested 90-day extension to pay the loan and failed to comply.
 PNB extrajudicially foreclsed the mortgaged properties amounting to 10,334m
 PNB later claimed asking NSBCU to pay for deficiency amounting to 2,172,476
 RTC found that NSBCI was automatically entitled to the Debt Relief Package of PNB and ruled
that the latter had no cause againt the former
 CA reversed and ordered NSBCI to pay the deficiency

Issue:
Can the PNB increase unilaterally increase interest rates?

Held:
While the Usury Law ceiling on interest rates was lifted by [Central Bank] Circular No. 905, nothing in the
said Circular grants lenders carte blanche authority to raise interest rates to levels which will either
enslave their borrowers or lead to a hemorrhaging of their assets." In fact, we have declared nearly ten
years ago that neither this Circular nor PD 1684, which further amended the Usury Law, "authorized
either party to unilaterally raise the interest rate without the other's consent."

Moreover, a similar case eight years ago pointed out to the same respondent (PNB) that borrowing
signified a capital transfusion from lending institutions to businesses and industries and was done for
the purpose of stimulating their growth; yet respondent's continued "unilateral and lopsided policy" of
increasing interest rates "without the prior assent “of the borrower not only defeats this purpose, but
also deviates from this pronouncement. Although such increases are not usurious, since the "Usury Law
is now legally inexistent" -- the interest ranging from 26 percent to 35 percent in the statements of
account -- "must be equitably reduced for being iniquitous, unconscionable and exorbitant. “Rates
found to be iniquitous or unconscionable are void, as if it there were no express contract thereon.
Above all, it is undoubtedly against public policy to charge excessively for the use of money.