- Petitioner
- Erma Industries
- Respondent
- Security Bank Corporation
- Citation
- G.R. No. 191274
- Court
- Supreme Court
- Division
- Third Division
- Ponente
- Leonen, J.
- Decided
- December 6, 2017
Summary
Erma Industries borrowed money from Security Bank under credit facilities secured by continuing suretyship from Spouses Marcelo and Ortiz-Luis. After defaulting on loans totaling P17,995,214.47 and US$289,730.10, Erma attempted restructuring but negotiations failed. Security Bank filed collection case. The courts held Erma and sureties liable but reduced the 2% monthly penalty charges to straight 12% annual interest, finding the original penalty iniquitous given borrower's partial payments and good faith settlement efforts. The Supreme Court affirmed, rejecting claims that sureties were mere accommodation parties or that novation occurred, emphasizing the binding nature of express suretyship agreements and courts' discretion to equitably reduce unconscionable penalties under Article 1229 of the Civil Code.