Manila Credit Corporation v. Ramon S. Viroomal

Summary

Manila Credit Corporation filed a petition challenging the Court of Appeals decision that declared unconscionable the interest rates charged on respondents' loan. The Viromals borrowed PHP467,600.00 with 23.36% annual interest but MCC imposed additional charges including a 3% monthly effective interest rate, resulting in total interest of approximately 77.36% per annum. Despite paying PHP1,175,638.12, MCC foreclosed their property claiming unpaid balance. The Supreme Court affirmed that the excessive interest rates were unconscionable and void under Civil Code Article 1409, reducing rates to the legal 12% per annum. The Court found the loan was fully paid by August 2012 with overpayment, declared the foreclosure void, and ordered MCC to refund PHP621,392.05 total overpayment plus legal interest. The decision reinforces the principle that unconscionable interest rates violate public policy and morals, and courts have power to equitably reduce excessive penalties to prevent unjust enrichment of creditors.