Security Bank v.

RTC Makati (1996)

Petitioners: SECURITY BANK AND TRUST COMPANY (SBTC)
Respondents: REGIONAL TRIAL COURT OF MAKATI, BRANCH 61, MAGTANGGOL
EUSEBIO AND LEILA VENTURA
Ponente: HERMOSISIMA, JR.
Topic: Remedies for Breach
SUMMARY: (1-2 sentence summary of facts, issue, ratio and ruling)
FACTS:
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Magtanggol Eusebio executed 3 promissory notes amounting to a total of P265,000 in

favor of SBTC in 1983. Ventura signed as co-maker.
All promissory notes stipulated a 23% interest rate per annum.
Upon maturity, Eusebio failed and refused to pay the balance; thus SBTC filed a
collectible (collection?) case in RTC Makati.
Said Court decided in favor of SBTC but ordered Eusebio to pay the balance with 12%
interest per annum.
SBTC moved for reconsideration, arguing that the interest rate agreed upon by the
parties during the signing of the promissory notes was 23% per annum. The RTC
denied. Hence this petition.

ISSUES:

WON the 23% rate of interest per annum agreed upon by SBTC and Eusebio is
allowable and not against the Usury Law
o YES. CB Circular 905 suspended the effectivity of the Usury Law, thereby
removing the ceiling on interest rates for loans and forbearances.
o All the promissory notes were signed in 1983 and, therefore, were already
covered by CB Circular No. 905. Contrary to the claim of the RTC, this circular
did not repeal nor in anyway amend the Usury Law but simply suspended the
latters effectivity.
o The rate of interest was agreed upon by the parties freely. Significantly,
Eusebio did not question that rate. It is not for the RTC to change the stipulations
in the contract where it is not illegal. Furthermore, Article 1306 of the New Civil
code provides that contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public policy.
o In a loan or forbearance of money, the interest due should be that stipulated in
writing, and in the absence thereof, the rate shall be 12% per annum. Hence,
only in the absence of a stipulation can the court impose the 12% rate of interest.

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