Land Bank of the Philippines v. Yolanda G. David

Summary

This case involves a loan dispute between Land Bank of the Philippines and Yolanda David, who obtained a P1.1 million loan for her poultry farm business. After business reverses, they restructured the loan with 17% annual interest and 12% penalty charges. When David defaulted and Land Bank foreclosed, she challenged the interest rates as usurious. The Supreme Court affirmed the Court of Appeals' decision that the rates were exorbitant and unconscionable, particularly considering the loan was part of a social assistance program for farmers under R.A. No. 8435. The Court reduced the interest to 12% and penalty to 5% per annum, nullified the foreclosure sale, and emphasized that courts have discretion to equitably reduce excessive interest rates and penalties under Article 1229 of the Civil Code. The decision reinforces judicial authority to protect borrowers from iniquitous contractual terms while preserving lenders' rights to recover principal amounts.