[G.R. No. 113926. October 23, 1996.

]
Upon maturity which fell on the different dates below,
SECURITY BANK AND TRUST COMPANY, Petitioner, the principal balance remaining on the notes stood at:
v.
REGIONAL TRIAL COURT OF MAKATI, BRANCH 61, 1) PN No. TL/74/748/83 — P16,665.00 as of September
MAGTANGGOL EUSEBIO and LEILA 1983.
VENTURA, Respondents.
2) PN No. TL/74/1296/83 — P83,333.00 as of August
DECISION 1983.

HERMOSISIMA, JR., J.: 3) PN No. TL/74/1991/83 — 65,000.00 as of August

1983.

Questions of law which are of first impression are Upon the failure and refusal of respondent Eusebio to
sought to be resolved in this case: Should the rate of pay the aforestated balance payable, a collection case
interest on a loan or forbearance of money, goods or was filed in court by petitioner SBTC. 5 On March 30,
credits, as stipulated in a contract, far in excess of the 1993, the court a quo rendered a judgment in favor of
ceiling prescribed under or pursuant to the Usury Law, petitioner SBTC, the dispositive portion which
prevail over Section 2 of Central Bank: Circular No 905 reads:jgc:chanrobles.com.ph
which prescribes that the rate of interest thereof shall
continue to be 12% per annum? Do the Courts have the "WHEREFORE, premises above-considered, and
discretion to arbitrarily override stipulated interest plaintiffs claim having been duly proven, judgment is
rates of promissory notes and stipulated interest rates hereby rendered in favor of plaintiff and as against
of promissory notes and thereby impose a 12% interest defendant Eusebio who is hereby ordered
on the loans, in the absence of evidence justifying the to:chanrob1es virtual 1aw library
imposition of a higher rate?
1. Pay the sum of P16,665.00, plus interest of 12% per
This is a petition for review on certiorari for the purpose annum starting 27 September 1983, until fully paid;
of assailing the decision of Honorable Judge Fernando
V. Gorospe of the Regional Trial Court of Makati, Branch 2. Pay the sum of P83,333.00, plus interest of 12% per
61, dated March 30, 1993, which found private annum starting 28 August 1983, until fully paid;
respondent Eusebio liable to petitioner for a sum of
money. Interest was lowered by the court a quo from 3. Pay the sum of P65,000.00, plus interest of 12% per
23% per annum as agreed upon by the parties to 12% annum starting 31 August 1983, until fully paid;
per annum.
4. Pay the sum equivalent to 20% of the total amount
The undisputed facts are as follows:chanrob1es virtual due and payable to plaintiff as and by way of attorney’s
1aw library fees; and to

On April 27, 1983, private respondent Magtanggol 5. Pay the costs of this suit.
Eusebio executed Promissory Note No. TL/74/178/83 in
favor of petitioner Security Bank and Trust Co. (SBTC) in SO ORDERED." 6
the total amount of One Hundred Thousand Pesos
(P100,000.00) payable in six monthly installments with a
stipulated interest of 23% per annum up to the fifth On August 6, 1993, a motion for partial reconsideration
installment. 1 was filed by petitioner SBTC contending
that:chanrob1es virtual 1aw library
On July 28, 1983, respondent Eusebio again executed
Promissory Note No. TL/74/1296/83 in favor of (1) the interest rate agreed upon by the parties during
petitioner SBTC. Respondent bound himself to pay the the signing of the promissory notes was 23% per
sum of One Hundred Thousand Pesos (P100,000.00) in annum;
six (6) monthly installments plus 23% interest per
annum. 2 (2) the interests awarded should be compounded
quarterly from due date as provided in the three (3)
Finally, another Promissory Note No. TL74/1491/83 was promissory notes;
executed on August 31, 1983 in the amount of Sixty Five
Thousand Pesos (P65,000.00). Respondent agreed to MISSING PAGE 4
pay this note in six (6) monthly installments plus
interest at the rate of 23% per annum. 3 CB Circular 905 was issued by the Central Bank’s
Monetary Board pursuant to P.D. 1684 empowering
On all the abovementioned promissory notes, private them to prescribe the maximum rates of interest for
respondent Leila Ventura signed as co-maker. 4
Page 1 of 2
loans and certain forbearances, to no discretion is left to the judiciary. It must see to it that
wit:jgc:chanrobles.com.ph its mandate is obeyed."cralaw virtua1aw library

"SECTION 1. Section 1-a of Act No. 2655, as amended, is The rate of interest was agreed upon by the parties
hereby amended to read as freely. Significantly, respondent did not question that
follows:jgc:chanrobles.com.ph rate. It is not for respondent court a quo to change the
stipulations in the contract where it is not illegal.
"SEC. 1-a. The Monetary Board is hereby authorized to Furthermore, Article 1306 of the New Civil Code
prescribe the maximum rate or rates of interest for the provides that contracting parties may establish such
loan or renewal thereof or the forbearance of any stipulations, clauses, terms and conditions as they may
money, goods or credits, and to change such rate or deem convenient, provided they are not contrary to
rates whenever warranted by prevailing economic and law, morals, good customs, public order, or public
social conditions: Provided, That changes in such rate or policy. We find no valid reason for the respondent court
rates may be effected gradually on scheduled dates a quo to impose a 12% rate of interest on the principal
announced in advance. balance owing to petitioner by respondent in the
presence of a valid stipulation. In a loan or forbearance
"In the exercise of the authority herein granted, the of money, the interest due should be that stipulated in
Monetary Board may prescribe higher maximum rates writing, and in the absence thereof, the rate shall be
for loans of low priority, such as consumer loans or 12% per annum. 13 Hence, only in the absence of a
renewals thereof as well as such loans made by stipulation can the court impose the 12% rate of
pawnshops, finance companies and other similar credit interest.
institutions although the rates prescribed for these
institutions need not necessarily be uniform. The The promissory notes were signed by both parties
Monetary Board is also authorized to prescribed voluntarily. Therefore, stipulations therein are binding
different maximum rate or rates for different types of between them. Respondent Eusebio, likewise, did not
borrowings, including deposits and deposit substitutes, question any of the stipulations therein. In fact, in the
or loans of financial intermediaries." 10 Comment filed by respondent Eusebio to this court, he
chose not to question the decision and instead
This court has ruled in the case of Philippine National expressed his desire to negotiate with the petitioner
Bank v. Court of Appeals 11 that:jgc:chanrobles.com.ph bank for "terms within which to settle his obligation."
14
"P.D. No. 1684 and C.B. Circular No. 905 no more than
allow contracting parties to stipulate freely regarding IN VIEW OF THE FOREGOING, the decision of the
any subsequent adjustment in the interest rate that respondent court a quo, is hereby AFFIRMED with the
shall accrue on a loan or forbearance of money, goods MODIFICATION that the rate of interest that should be
or credits. In fine, they can agree to adjust, upward or imposed be 23% per annum.
downward, the interest previously stipulated."cralaw
virtua1aw library SO ORDERED.

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 anyway amend the Usury Law but
simply suspended the latter’s effectivity.

Basic is the rule of statutory construction that when the

law is clear and unambiguous, the court is left with no
alternative but to apply the same according to its clear
language. As we have held in the case of Quijano v.
Development Bank of the Philippines: 12

". . . We cannot see any room for interpretation or

construction in the clear and unambiguous language of
the above-quoted provision of law. This Court had
steadfastly adhered to the doctrine that its first and
fundamental duty is the application of the law
according to its express terms, interpretation being
called for only when such literal application is
impossible. No process of interpretation or construction
need be resorted to where a provision of law
peremptorily calls for application. Where a requirement
or condition is made in explicit and unambiguous terms,
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