Friday, February 24, 2012

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 respondent’s 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 lender’s 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.

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