- Petitioner
- Investors Finance Corporation
- Respondent
- Autoworld Sales Corporation
- Citation
- G.R. No. 128990
- Court
- Supreme Court
- Division
- Second Division
- Ponente
- Bellosillo, J.
- Decided
- September 21, 2000
Summary
The Supreme Court affirmed that a financing company's Installment Paper Purchase transaction was a disguised usurious loan scheme. FNCB Finance created three interconnected contracts to circumvent Usury Law interest rate ceilings: a sale of land from Pio Barretto to Autoworld, assignment of receivables to FNCB, and mortgage security. Key evidence included FNCB drafting all contracts, requiring proceeds be 'flowed back' to borrower, FNCB's own designation of funds as 'loan proceeds,' and subsequent direct lending at 28% after ceiling removal. The Court applied Civil Code Article 1957 voiding contracts intended to circumvent usury laws, ordering reimbursement of the entire usurious interest paid (P3,921,217.78) rather than just the excess over legal rates, establishing that borrowers in usurious transactions may recover the whole interest paid regardless of pari delicto principles.