Republic of the Philippines

MUNICIPAL TRIAL COURT IN CITIES

7th Judicial Region
Branch 2
City of Tagbilaran

FIRST CONSOLIDATED BANK, INC., SMALL CLAIMS CASE NO.

represented by GINA PEREGRINA -TAGBI
B. TAGAAN,
Plaintiff For: Collection of sum of money

- versus

Defendants.

X--------------------------------x

D E C I S I O N

This is a Small Claims case for Collection Of A Sum Of Money filed by

plaintiff on ____________ against the defendants.

Summons under the Rule of Procedure for Small Claims Cases as

Amended, Response Form, Order and Notice of Hearing for ________
were duly served to all the defendants on September 6, 2013 per
return of service from Process Server of Dumarao, Capiz. Defendants
did not respond.

When this case was called for hearing on ___________the _____was

present. Defendants did not appear. This case was then reset on
_________________ 2014, which notices were duly received by all the
defendants per registry return receipts attached to the record.

On the scheduled date of hearing, ___________________ plaintiffs

representative was present. Defendants did not appear.

Section 12 of the Rule of Procedure for Small Claims Cases as Amended

provides that should the defendant fail to file his Response within the
required period, and likewise fail to appear at the date set for hearing,
the court shall render judgment on the same day, as may be warranted
by the facts, hence this decision. The Court however, may, in its
discretion, reduce the amount of damages for being excessive or
unconscionable.

The plaintiff in its Statement of Claims alleged that plaintiff is a

corporation represented by Gina Perigrina B. Tagaan and with office
address at Taloto District, Tagbilaran City while principal defendant is a
resident of ______ and defendants-co-makers are both residents of
_____________, ____________respectively.

Defendants obtained a loan from plaintiff in the amount of

_________(P_____) for ____________ as shown in the Promissory Note
(Annex A) signed by the defendants on ___________. Despite demand
defendants did not fully pay their obligation.

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The dorsal portion of the Promissory Note signed by the Defendants
indicate an interest of 24% per annum on the original loan of
Php________. Apparently, the Defendants have been paying portions of
this loan since the demand letter dated _________ or Annex C of the
Complaint showed that Defendants were indebted to the Plaintiff in the
sum of Php________________representing interest, penalties and
surcharges. At the time the complaint was filed, however, the total
outstanding obligation of the defendants to plaintiff was in the amount
of P_____________, broken down as follows:

Principal Amount P

Penalty after Term

Past Due Interest
Total Amount Due P

The obligation was joint and several.

It is not clear as to how the penalty after term was computed, neither
is it clear how the past due interest was computed. At any rate, the
first paragraph of the promissory note signed by the parties provide
that defendants jointly promise to pay a late payment charge on any
overdue sum, under this note at the rate of 24% per annum from due
date thereof until fully paid. Paragraph 7 of said Promissory Note
furthermore states that, defendants further agree that should this
Note be not paid on its maturity date, the outstanding obligation shall
be charged interest rate at thirty percent (30%) per annum to be
computed from maturity date until fully paid. In sum the late payment
charge and interest rate sums up to an additional 54% per annum or
4.5% monthly of the principal amount immediately after the loan has
not been paid on time or after __________.

The Court finds the need to equitably reduce the imposition of 54% on
the outstanding principal amount. This rate is iniquitous especially
since the Defendants have made previous payments to the Plaintiff,
that presumably charged this rate on the outstanding balance. This is
apt in the light of the Supreme Court decision in Medel v. Court of
Appeals1, as well as in Castro v. Tan2 where the Supreme Court said,
[T]he imposition of an unconscionable rate of interest on a money
debt, even if knowingly and voluntarily assumed, is immoral and
unjust. It is tantamount to a repugnant spoliation and an iniquitous
deprivation of property, repulsive to the common sense of man. It has
no support in law, in principles of justice, or in the human conscience
nor is there any reason whatsoever which may justify such imposition
as righteous and as one that may be sustained within the sphere of
public or private morals.

Accordingly, the principal amount of Php______ owed by the Defendants

shall only incur a 12% interest per annum from the time of the filing of
the complaint until such time that it is duly paid. The penalty is
likewise reduced to 12% per annum in light of Articles 1229 and 12273
1 359 Phil. 820 (1998).

2G.R. No. 168940, November 24, 2009. Also in Ruiz v. Court of Appeals
449 Phil. 419 (2003), the High Court struck down the interest rate of
3% per month or 36% per annum interest on a P3,000,000.00 loan.

3Article 1229. The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by the
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of the Civil Code of the Philippines, as applied in BPI v. Spouses Yu, et.
al4.

The Court furthermore, finds it just to cause the reimbursement of

plaintiff's filing fee expenses as it is undeniable that it paid P3,815.00
as legal fees.

WHEREFORE, Decision is hereby rendered in favor of plaintiff First

Consolidated Bank, Inc., represented by Gina Perigrina B. Tagaan and
against defendants ______________, ____________, ____________, as
follows:

1.Ordering the defendants to pay jointly and severally the plaintiff in

the amount of Php__________ plus 12% interest per annum as well as
an additional 12% on the said principal amount as penalty per
annum from the time of the filing of the complaint until such time
that it is duly paid;

2. Ordering defendants to pay plaintiff jointly and severally the amount

of THREE THOUSAND EIGHT HUNDRED FIFTEEN PESOS (P3,815.00)
as filing fee expenses.

SO ORDERED.

Given in Chambers this _____ day of __________ in Tagbilaran City,

Philippines.

JOY ANGELICA P. SANTOS DOCTOR

Judge Designate

JAPSD/mozb

debtor. Even if there has been no performance, the penalty may also
be reduced by the courts if it is iniquitous or unconscionable; Article
2227: Liquidated damages, whether intended as an indemnity or
penalty, shall be equitably reduced if they are iniquitous and
unconscionable.

4 G.R. No. 184122, January 20, 2010.

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