Leticia Y. Medel v. Court of Appeals

Summary

This case involves multiple loan transactions where borrowers Servando Franco and Leticia Medel obtained loans totaling P500,000 from money lender Veronica Gonzales at 5.5% monthly interest. When borrowers defaulted, lender sued for collection. The trial court found the interest rate unconscionable and applied 12% annual rate. The Court of Appeals reversed, upholding the stipulated rate under CB Circular No. 905 which suspended the Usury Law. The Supreme Court reversed the appellate court, holding that while the Usury Law is suspended, courts retain power under Civil Code Article 2227 to reduce unconscionable liquidated damages. The Court found 66% annual interest excessive and contrary to morals, affirming the trial court's reduction to 12% annual interest as more equitable.