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    BAR QA Mutuum

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    Carlo Mercado
    Samuel borrowed P300,000 from a bank at 18% annual interest. The loan agreement allowed the bank to increase the interest rate according to law. The bank increased the rate periodically until it reached 48% annually without Samuel's consent. Samuel sued questioning the bank's right to increase the rate. The bank argued that the Usury Law had been suspended. The action will prosper because unilateral increases require mutual consent even if interest ceilings are removed.

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    BAR QA Mutuum

    Uploaded by

    Carlo Mercado
    100 views6 pages
    Samuel borrowed P300,000 from a bank at 18% annual interest. The loan agreement allowed the bank to increase the interest rate according to law. The bank increased the rate periodically until it reached 48% annually without Samuel's consent. Samuel sued questioning the bank's right to increase the rate. The bank argued that the Usury Law had been suspended. The action will prosper because unilateral increases require mutual consent even if interest ceilings are removed.

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    Bar Questions on Mutuum

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    Samuel borrowed P300,000 from a bank at 18% annual interest. The loan agreement allowed the bank to increase the interest rate according to law. The bank increased the rate periodically until it reached 48% annually without Samuel's consent. Samuel sued questioning the bank's right to increase the rate. The bank argued that the Usury Law had been suspended. The action will prosper because unilateral increases require mutual consent even if interest ceilings are removed.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    100 views6 pages

    BAR QA Mutuum

    Uploaded by

    Carlo Mercado
    Samuel borrowed P300,000 from a bank at 18% annual interest. The loan agreement allowed the bank to increase the interest rate according to law. The bank increased the rate periodically until it reached 48% annually without Samuel's consent. Samuel sued questioning the bank's right to increase the rate. The bank argued that the Usury Law had been suspended. The action will prosper because unilateral increases require mutual consent even if interest ceilings are removed.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 6

    (2001)

    Samuel borrowed P300,000.00 housing loan from the bank at 18% per annum
    interest. However, the promissory note contained a proviso that the bank
    “reserves the right to increase interest within the limits allowed by law,” By virtue
    of such proviso, over the objections of Samuel, the bank increased the interest
    rate periodically until it reached 48% per annum. Finally, Samuel filed an action
    questioning the right of the bank to increase the interest rate up to 48%. The
    bank raised the defense that the Central Bank of the Philippines had already
    suspended the Usury Law. Will the action prosper or not? Why?
    SUGGESTED ANSWER:

    The action will prosper. While it is true that the interest ceilings set by the Usury
    Law are no longer in force, it has been held that PD No. 1684 and CB Circular
    No. 905 merely allow contracting parties to stipulate freely on any adjustment in
    the interest rate on a loan or forbearance of money but do not authorize a
    unilateral increase of the interest rate by one party without the other’s consent
    (PNB v. CA, 238 SCRA 2O [1994]). To say otherwise will violate the principle of
    mutuality of contracts under Article 1308 of the Civil Code. To be valid, therefore,
    any change of interest must be mutually agreed upon by the parties (Dizon v.
    Magsaysay, 57 SCRA 25O [1974]). In the present problem, the debtor not having
    given his consent to the increase in interest, the increase is void.
    (2002)

    Carlos sues Dino for (a) collection on a promissory note for a loan, with no
    agreement on interest, on which Dino defaulted, and (b) damages caused by Dino
    on his (Carlos’) priceless Michaelangelo painting on which Dino is liable on the
    promissory note and awards damages to Carlos for the damaged painting, with
    interests for both awards. What rates of interest may the court impose with
    respect to both awards? Explain.
    SUGGESTED ANSWER:

    With respect to the collection of money or promissory note, it being a


    forbearance of money, the legal rate of interest for having defaulted on the
    payment of 12% will apply. With respect to the damages to the painting, it is 6%
    from the time of the final demand up to the time of finality of judgment until
    judgment credit is fully paid. The court considers the latter as a forbearance of
    money. (Eastern Shipping Lines, Inc. v. CA. 234 SCRA 78 [1994]; Art. 2210 and
    2211, CC)
    (2004)

    The parties in a contract of loan of money agreed that the yearly interest rate is
    12% and it can be increased if there is a law that would authorize the increase of
    interest rates. Suppose OB, the lender, would increase by 5% the rate of interest
    to be paid by TY, the borrower, without a law authorizing such increase, would
    OB’s action be just and valid? Why? Has TY a remedy against the imposition of
    the rate increase? Explain.
    SUGGESTED ANSWER:

    OB’s action is not just and valid. The debtor cannot be required to pay the
    increase in interest there being no law authorizing it, as stipulated in the contract.
    Increasing the rate in the absence of such law violates the principle of mutuality
    of contracts.

    ALTERNATIVE ANSWER:

    Even if there was a law authorizing the increase in interest rate, the stipulation is
    still void because there is no corresponding stipulation to decrease the interest
    due when the law reduces the rate of interest.

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