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When Interest Imposed by the Lender is Excessive

Posted by lexforiphilippines on July 29, 2010

In Asian Cathay Finance and Leasing Corporation vs. Spouses Cesario Gravador and Norma de Vera, et al. (G.R. No. 186550; 5 July 2010), the Supreme Court declared –

“Stipulations authorizing the imposition of iniquitous or unconscionable interest are contrary to morals, if not against the law.  Under Article 1409 of the Civil Code, these contracts are inexistent and void from the beginning. They cannot be ratified nor the right to set up their illegality as a defense be waived. The nullity of the stipulation on the usurious interest does not, however, affect the lender’s right to recover the principal of the loan. Nor would it affect the terms of the real estate mortgage.  The right to foreclose the mortgage remains with the creditors, and said right can be exercised upon the failure of the debtors to pay the debt due.  The debt due is to be considered without the stipulation of the excessive interest.  A legal interest of 12% per annum will be added in place of the excessive interest formerly imposed. x x”

Click on Digested Cases under Tools for a digest of Asian Cathay Finance and Leasing Corporation vs. Spouses Cesario Gravador and Norma de Vera, et al. (G.R. No. 186550; 5 July 2010).

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One Response to “When Interest Imposed by the Lender is Excessive”

  1. […] When Interest Imposed by the Lender is Excessive « Lex Fori Philippines […]

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