SPS. MALLARI vs.

PRUDENTIAL BANK
[G.R. No. 197861. June 5, 2013. 697 SCRA 555]

DOCTRINE:
Unconscionable interest rates – The SC has ruled in the following cases that the interest is
unconscionable: 3% and 3.81% per month on a P10 Million loan (Toring vs. Sps. Ganzon-Olan, 2008);
66% per annum or 5.5% per month on a P500 thousand loan (Medel vs. Court of Appeals, 1998) and;
7% and 5% or 84% and 60% per annum (Chua vs. Timan, 2008). The Court has also ruled affirmed in a
plethora of cases that stipulated interest rates of 3% per month and higher are excessive,
unconscionable and exorbitant.

Conscionable interest rates – In this case 23% per annum or 2% per month as agreed upon by
petitioner and respondent bank is NOT unconscionable. It is much lower than the above mentioned
unconscionable interest rates and there is no similarity of factual milieu.

FACTS:
[Decided 2013] In 1984, Petitioner Florentino Mallari obtained a loan from respondent Prudential Bank in
the amount of P300,000.00. It was subject to an interest rate of 21% per annum and, in case of default,
a penalty of 12% per annum of the total amount due and attorneys fees equivalent of 15% of the total
amount due. This was secured by a Deed of Assignment (DOA) over petitioner's time deposit account.
In 1989, Spouses Florentino and Aurea Mallari obtained another loan from respondent for P1.7 million,
stipulating interest of 23% per annum with the same penalties in case of default. This was secured by
Real Estate Mortgage (REM).

Petitioners defaulted. When computed in 1992, the total debt was P571,218.54 and P2,991,294.82 for
the first and second loans respectively.

Respondent tried to extrajudicially foreclose the mortgage. Petitioners on the other hand tried to nullify
the mortgage claiming that the Bank imposed onerous terms and conditions and that the bank was
unilaterally increasing its charges and interest over and above those stipulated. The Bank claimed that
the basis for its computation was all written in the Promissory Notes.

The RTC ruled in favor of respondent bank. CA affirmed.

ISSUE: Whether or not an interest rate of 23% per annum and 12% per annum penalty is
unconscionable.

HELD:
No. The Court has also ruled affirmed in a plethora of cases that stipulated interest rates of 3% per
month and higher are excessive, unconscionable and exorbitant. thus, the 23% per annum interest rate
imposed on petitioners’ loan in this case can by no means be considered excessive or unconscionable.
And neither is the 12% per annum penalty charge unconscionable as the counrt found in DBP vs. Family
Foods (2009) and Ruiz vs. Court of Appeals (2003).