Clerical error in computation in interest

• Merely clerical error in the computation of interest, made

without intent to evade any of the provisions of the Usury
Law shall not render a contract “void.”
Usurer’s right to recover principal loaned
• A usurious loan is void but this does not mean that the
debtor may keep the principal received by him as loan
thus justly enriching himself at the expense of the creditor

• But the creditor has no right of action for the recovery of

the stipulated interest, although he may seek for the
recovery of the principal loaned by judicial action.
Usurer can recover the principal by judicial action

(1) A usurious loan is not a complete nullity but only with

respect to the agreed interest.
(2) The prestation to pay the interest is separable from that
to pay the principal debt
(3) To deny the lender the right to recover the principal
would be to unjustly enrich the borrower at the lender’s
expense.
Forfeiture of right to interest of creditor
• Creditor has no right to legal interest or damages

• The stipulation as to interest is considered void, thus

allowing the debtor to claim the whole interest paid.
Escalation clause in a loan agreement
• The unilateral determination and imposition of increased
• interest by the lender will be violative of the principle of
mutuality
• of contracts ordained in Article 1308 of the Civil Code.
(1) Escalation clause must not be solely potestative
(2) De-escalation clause also stipulated
(3) Increase or reduction of interest effected by law or the
Monetary
Board.
Almeda v. CA
• FACTS:
• PNB granted to petitioners, several loan/credit
accommodations totaling P18.0 Million pesos payable in a
period of six years at an interest rate of 21% per annum.
Interest rate increased from an initial 21% to a high of 68%.

• ISSUE:
Whether PNB was authorized to raise its interest rates from
21% to as high as 68% under the credit agreement.
• RULING:
• No. Any contact which appears to be heavily weighted in favor
of one of the parties so as to lead to an unconscionable resultu
is void. Any stipulation regarding the validity or compliance of
the contract which is left solely to the will of one of the parties is
invalid. The binding effect of any agreement between parties to
a contract is premised on two settled principle: that any
obligation arising from the contact has the force of law between
the parties; and that there must be mutuality between the
parties based on their essential equality.