Heirs of Zoilo Espiritu v. Spouses Maximo Landrito

Summary

This case involves a real estate mortgage dispute where the Supreme Court declared excessive interest rates unconscionable and void. Spouses Landrito borrowed P350,000.00 from Spouses Espiritu in 1986, secured by real estate mortgage providing for legal interest rate. However, creditors imposed 5% monthly interest plus service fees without written disclosure, inflating the debt to P874,125.00. When debtors failed to pay the inflated amount, the property was foreclosed and registered in creditors' names. The Court found the average 6.39% monthly interest rate excessive and violative of the Truth in Lending Act and Civil Code provisions. It nullified the foreclosure proceedings as based on an inflated debt amount and ordered reconveyance of the property conditioned upon payment of the principal with 12% annual legal interest. The decision reinforces the principle that courts may void unconscionable interest stipulations despite the removal of usury law ceilings, and that the Torrens system cannot validate transfers based on invalid foreclosures.