Herrera vs Petro Phil Corp 146 Scra 385

FACTS:

On December 5, 1969, Herrera and ESSO

Standard, (later substituted by Petrophil
Corp.,) entered into a lease agreement,
whereby the former leased to the latter a
portion of his property for a period of
20yrs. subject to the condition that
monthly rentals should be paid and there
should be an advance payment of rentals
for the first eight years of the contract, to
which ESSO paid on December 31, 1969.
However, ESSO deducted the amount of
101, 010.73 as interest or discount for the
eight years advance rental.
On August 20, 1970, ESSO informed
Herrera that there had been a mistake in
the computation of the interest and paid
an additional sum of 2,182.70; thus, it
was reduced to 98, 828.03.
As such, Herrera sued ESSO for the
sum of 98, 828.03, with interest,
claiming that this had been illegally
 deducted to him in violation of the Usury
Law.
ESSO argued that amount deducted
was not usurious interest but rather a
discount given to it for paying the rentals
in advance. Judgment on the pleadings
was rendered in favor of ESSO. Thus, the
matter was elevated to the SC for only
questions of law was involve.
ISSUE: W/N the contract between the
parties is one of loan or lease.

RULING:

Contract between the parties is one

of lease and not of loan. It is clearly
denominated a "LEASE AGREEMENT."
Nowhere in the contract is there any
showing that the parties intended a loan
rather than a lease. The provision for the
payment of rentals in advance cannot be
construed as a repayment of a loan
because there was no grant or
forbearance of money as to constitute an
indebtedness on the part of the lessor.
 On the contrary, the defendant-appellee
was discharging its obligation in advance
by paying the eight years rentals, and it
was for this advance payment that it was
getting a rebate or discount.
---

There is no usury in this case

because no money was given by the
defendant-appellee to the plaintiff-
appellant, nor did it allow him to use its
money already in his possession. There
was neither loan nor forbearance but a
mere discount which the plaintiff-
appellant allowed the defendant-
appellee to deduct from the total
payments because they were being
made in advance for eight years. The
discount was in effect a reduction of the
rentals which the lessor had the right to
determine, and any reduction thereof, by
any amount, would not contravene the
Usury Law.
The difference between a discount
and a loan or forbearance is that the
former does not have to be repaid. The
 loan or forbearance is subject to
repayment and is therefore governed by
the laws on usury.
To constitute usury, "there must be
loan or forbearance; the loan must be of
money or something circulating as
money; it must be repayable absolutely
and in all events; and something must be
exacted for the use of the money in
excess of and in addition to interest
allowed by law."
It has been held that the elements of
usury are (1) a loan, express or
implied; (2) an understanding
between the parties that the money
lent shall or may be returned; that
for such loan a greater rate or
interest that is allowed by law shall
be paid, or agreed to be paid, as the
case may be; and (4) a corrupt
intent to take more than the legal
rate for the use of money
loaned. Unless these four things concur
in every transaction, it is safe to affirm
that no case of usury can be declared.
Toring vs. Ganzon-Olan
Oct. 10, 2008
Facts: Petitioner's spouses Toring obtained
a loan amounting to P6M at 3% interest
permonth from respondents spouses Olan.
It was secured by the real estate
mortgage. Forless than a month, the
parties have executed a deed of absolute
sale conveying themortgaged property to
the respondents. Thereafter, the
respondents gave the petitioneran option
to buy the land for P10M. An agreement
that if the option is exercised onlyafter 2
months, the purchase price will increase at
the rate of P300,000 or 3% thereofevery
month and thereafter, at the rate of
P381,000 or 3.81% thereof every
month.Petitioners filed a complaint on the
ground that the interest of 3% & 3.81%
areunconscionable. The Trial Court and the
Court of Appeals upheld the said
stipulated interest rates.
Issue: Whether or not the stipulated
interest rates were unconscionable.
Ruling: The Supreme Court held that they
were unconscionable. In a loan or
forbearance of money, according to the
Civil Code, the interest due should be that
stipulated in writing, and in the absence
thereof, the rate shall be 12% per annum.
Thec ourt reduced the stipulated interest
rate to 1% per month.

Banco Filipino vs CA
GR No. 129227, 30 May 2000
332 SCRA 241

FACTS
Elsa and Calvin Arcilla secured, on
3 occassions, loan from petitioner as
evidenced by promissory note. REM was
also executed. Under said deeds, Banco
Filipino may increase rate of interest on
said loans, within the limits allowed by
law. at that time, under Usury Law, the
maximum rate of interest for loans
secured by REM was 12% pa. later, the
Central bank issued Circular No. 494
provinding for the maximum interest of
19%pa. meanwhile, Skyli Builders, thru
President Calvin Arcilla secured loans from
BPI with FGU Insurance as surety. Banco
Filipino issued an account statement with
17% pa as interest. The Arcillas filed for
annulment of the loan contracts because
the rate of interests charged were
usurious.

ISSUE
Whether or not respondents are
entitled to refund of the alleged interest
overpayments.

HELD
Yes. Private respondents aver that
they are entitled to the refund inasmuch
as the escalation clause incorporated in
the loan contracts do not have a
corresponding de-escalation clause and is
therefore, illegal.

In Banco Filipino Savings &

Mortgage Bank vs Navarro, the Court ruled
that Central Bank Circular 494, although it
has the force and effect of law, is not a law
and is not the law contemplated by the
parties which authorizes the petitioner to
unilaterally raise the interest rate of loan.
The reliance on the circular was without
any legal basis.

First Metro vs Este del Sol Credit Digest

First Metro vs Este del Sol

GR No. 141811, 15 November 2001
369 SCRA 99

FACTS
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.

ISSUE
Whether or not the interests are
lawful

HELD
 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.