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  • Spouses Toring v. Ganzon-Olan

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    Karen Ryl Lozada Brito
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    This case involved a loan agreement between spouses Toring and respondents Ganzon-Olan. Under the agreement, Toring received a loan of P6,000,000 at 3% monthly interest, secured by a mortgage. The parties later executed a deed of absolute sale for the property along with an option for Toring to repurchase for P10,000,000, with the price increasing monthly at 3% or 3.81%. Toring argued the interest rates were unconscionable while respondents claimed they represented the agreed monthly rate. The Supreme Court ruled the Court of Appeals erred in upholding the 3% and 3.81% rates, reducing the monthly interest to 1% in line with prior r

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    5. Spouses Toring v. Ganzon-Olan

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    This case involved a loan agreement between spouses Toring and respondents Ganzon-Olan. Under the agreement, Toring received a loan of P6,000,000 at 3% monthly interest, secured by a mortgage. The parties later executed a deed of absolute sale for the property along with an option for Toring to repurchase for P10,000,000, with the price increasing monthly at 3% or 3.81%. Toring argued the interest rates were unconscionable while respondents claimed they represented the agreed monthly rate. The Supreme Court ruled the Court of Appeals erred in upholding the 3% and 3.81% rates, reducing the monthly interest to 1% in line with prior r

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    117 views1 page

    Spouses Toring v. Ganzon-Olan

    Uploaded by

    Karen Ryl Lozada Brito
    This case involved a loan agreement between spouses Toring and respondents Ganzon-Olan. Under the agreement, Toring received a loan of P6,000,000 at 3% monthly interest, secured by a mortgage. The parties later executed a deed of absolute sale for the property along with an option for Toring to repurchase for P10,000,000, with the price increasing monthly at 3% or 3.81%. Toring argued the interest rates were unconscionable while respondents claimed they represented the agreed monthly rate. The Supreme Court ruled the Court of Appeals erred in upholding the 3% and 3.81% rates, reducing the monthly interest to 1% in line with prior r

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 1

    Spouses Toring v. Ganzon-Olan, G.R. No.

    168782, October 10, 2008

    FACTS: In September 4, 1998, Toring obtained from respondents a loan amounting to P6,000,000 at 3%
    interest per month. It was secured by a mortgage on a parcel of land as evidenced by a Deed of Real Estate
    Mortgage.

    On September 23, 1998, the parties executed a Deed of Absolute Sale conveying the mortgaged property in
    favor of respondents. Subsequently, respondents gave petitioners an exclusive option to repurchase the land
    for P10,000,000 which was embodied in an Option to Buy. The Option to Buy provided that if the option is
    exercised after December 5, 1998, the purchase price shall increase at the rate of P300,000 or 3% of the
    purchase price every month until September 5, 1999 and thereafter at the rate of P381,000 or 3.81% of the
    purchase price every month, with the fifth of every month as the cut-off date for said increases.

    On July 28, 2000, petitioners filed a Complaint for reformation of instruments, abuse of rights and damages
    against respondents. At the pre-trial, the parties made the following stipulations: (1) the principal amount of
    P10,000,000 has long become overdue; (2) no payment has been made; (3) the parties had agreed on an
    equitable mortgage and not a sale. The parties limited the issues on the amount of interest due and the time of
    payment of the entire obligation.

    The RTC upheld the interest at 3.81% and ordered Spouses Toring to pay the sum of P20,000,000.00. On
    appeal, the CA affirmed the decision. Hence, this petition.

    Petitioners contend that they are not liable to pay interest as the stipulated monthly rates of 3% and 3.81% are
    unconscionable and that the Option to Buy did not mention any rate of interest chargeable to the loan but
    rather, an escalation of the purchase price.

    On the other hand, respondents maintain that petitioners are liable to pay interest based on the Deed of
    Absolute Sale and Option to Buy. They assert that the P300,000 and P381,000 differences per month
    represents the 3% or 3.81% interest to be charged on the loan. Further, it is not usurious since Central Bank
    Circular No. 905-82 removed the ceiling on interest rates on secured and unsecured loans.

    ISSUE: Did the Court of Appeals err in sustaining the trial court's ruling upholding the 3% and 3.81% stipulated
    monthly interest? - YES

    RULING: 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. While the parties are free to
    stipulate on the interest to be imposed on monetary obligations, the Court will temper interest rates if they are
    unconscionable. Even if the Usury Law has been suspended, the Court held that stipulated interest rates are
    illegal if they are unconscionable.

    Based on the Deed of Real Estate mortgage, the parties agreed on an interest rate of 3% per month. In the
    reformed instrument, the P300,000 and P381,000 successive increases stated therein represent the monthly
    interest.

    In this case, the Court of Appeals erred in sustaining the trial court's decision upholding the stipulated interest
    of 3% and 3.81%. Thus, the Court reduced the stipulated interest rates to 1% per month, in conformity with
    Ruiz v. Court of Appeals: “Nothing in the said circular [CB Circular No. 905, s. 1982] 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.”

    Thus, petitioners are bound to pay respondents the principal loan of P10,000,000, plus what we have
    repeatedly held as the appropriate rate of interest of 1% per month, from December 6, 1998 until fully paid.

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