G.R. No. 141811, November 15, 2001, 369 SCRA 99


Petitioner FMIC granted respondent Este del Sol a loan of Seven Million Three Hundred Eighty-Five Thousand Five Hundred Pesos (P7,385,500.00) to finance the construction and development of the Este del Sol Mountain Reserve, a sports/resort complex project located at Barrio Puray, Montalban, Rizal.

Under the terms of the Loan Agreement, the proceeds of the loan were to be released on staggered basis. Interest on the loan was pegged at sixteen (16%) percent per annum based on the diminishing balance. The loan was payable in thirty-six (36) equal and consecutive monthly amortizations. In case of default, an acceleration clause was, among others, provided and the amount due was made subject to a twenty (20%) percent one-time penalty on the amount due and such amount shall bear interest at the highest rate permitted by law from the date of default until full payment thereof plus liquidated plus attorney’s fees equivalent to twenty-five (25%) percent of the sum sought to be recovered.

Respondent Este del Sol also executed, as provided for by the Loan Agreement, an Underwriting Agreement with underwriting fee, annual supervision fee and consultancy fee with Consultancy Agreement for four (4) years, coinciding with the term of the loan The said fees were deducted from the first release of loan.Respondent Este del Sol failed to meet the schedule of repayment in accordance with a revised Schedule of Amortization. Accordingly, petitioner FMIC caused the extrajudicial foreclosure of the real estate mortgage on June 23, 1980. At the public auction, petitioner FMIC was the highest bidder of the mortgaged properties. Failing to secure from the individual respondents the payment of the alleged deficiency balance, despite individual demands sent to each of them, petitioner instituted the instant collection suit against the respondents to collect the alleged deficiency balance.


Whether or not the fees provided for in the Underwriting and Consultancy Agreements were mere subterfuges to camouflage the excessively usurious interest charged.


Yes. The Loan, Underwriting and Consultancy Agreements are separate and independent transactions. The Underwriting and Consultancy Agreements which were executed and delivered contemporaneously with the Loan Agreement were exacted by petitioner FMIC as essential conditions for the grant of the loan. An apparently lawful loan is usurious when it is intended that additional compensation for the loan be disguised by an ostensibly unrelated contract providing for payment by the borrower for the lender’s services which are of little value or which are not in fact to be rendered, such as in the instant case. In this connection, Article 1957 of the New Civil Code clearly provides that:

Art. 1957. Contracts and stipulations, under any cloak or device whatever, intended to circumvent the laws against usury shall be void. The borrower may recover in accordance with the laws on usury.

In usurious loans, the entire obligation does not become void because of an agreement for usurious interest; the unpaid principal debt still stands and remains valid but the stipulation as to the usurious interest is void, consequently, the debt is to be considered without stipulation as to the interest.

In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which is the cause of the contract (Article 1350, Civil Code), is not illegal. The illegality lies only as to the prestation to pay the stipulated interest; hence, being separable, the latter only should be deemed void, since it is the only one that is illegal. Thus, the nullity of the stipulation on the usurious interest does not affect the lender’s right to receive back the principal amount of the loan. With respect to the debtor, the amount paid as interest under a usurious agreement is recoverable by him, since the payment is deemed to have been made under restraint, rather than voluntarily.

 * Case digest by Paula Bianca Eguia, LLB-1, Andres Bonifacio Law School, SY 2017-2018