REPUBLIC OF THE PHILIPPINES

OFFICE OF THE OMBUDSMAN

Quezon City

ATTY. JOSE TEODORICO V. MOLINA

Plaintiff,

-versus- CIVIL CASE NO. ____

For: Violation of letter (e)
Sec. 3 RA 3019

BANGKO SENTRAL NG PILIPINAS (BSP)

BSP Governor
CARLOS G. DOMINGUEZ III,
FELIPE M. MEDALLA,
JUAN DE ZUNIGA, JR.,
PETER B. FAVILA,
ANTONIO S. ABACAN JR., and
BRUCE J. TOLENTINO
Defendants
X-------------------------------X

ANSWER

COMES NOW, the defendants, through the undersigned counsel and unto this
Honorable Court, most respectfully avers:

ADMISSIONS AND DENIALS

1. Paragraphs 1 to 4 of the Complaint are admitted.

2. Paragraphs 5 (a) to (i) of the Complaint are denied for lack of knowledge or
information sufficient to form a belief as to the veracity or falsity thereof, the allegations
therein being matters known only to, and are within the control only, of the plaintiff.

SPECIAL AND AFFIRMATIVE DEFENSES

3. The Complaint filed by Plaintiff is nothing but a malicious lawsuit calculated to

harass the Defendants, not to mention that it does not state a cause of action and is a
clear resort to forum-shopping, thereby rendering it dismissible outright.

4. With the suspension of the Usury Law and the removal of interest ceilings, the
parties are generally free to stipulate the interest rates to be imposed on monetary
obligations. As a rule, the interest rate agreed by the creditor and the debtor is binding
upon them. This rule, however, is not absolute.

5. In a recent case, the Supreme Court again dealt with the validity of interest
agreed by the parties, stating that:

Stipulated interest rates are illegal if they are unconscionable and the Court is allowed
to temper interest rates when necessary. In exercising this vested power to determine
what is iniquitous and unconscionable, the Court must consider the circumstances of
each case. What may be iniquitous and unconscionable in one case, may be just in
another.
6. In that case, the SC reduced the interest rate from 18% to 12% per annum,
noting, among others, that the amount involved has ballooned to an outrageous amount
four times the principal debt.

7. Indeed, there is no hard and fast rule to determine the reasonableness of interest
rates. Stipulated interest rates of 21%, 23% and 24% per annum had been sustained in
certain cases.

8. In the case of SECURITY BANK AND TRUST COMPANY vs. REGIONAL TRIAL
COURT OF MAKATI, BRANCH 61, MAGTANGGOL EUSEBIO and LEILA VENTURA,
G.R. No. 113926. October 23, 1996. The sole issue to be settled in the petition was
whether or not the 23% rate of interest per annum agreed upon by petitioner bank and
respondents is allowable and not against the Usury Law. P.D. No. 1684 and C.B.
Circular No. 905 no more than allow contracting parties to stipulate freely regarding any
subsequent adjustment in the interest rate that shall accrue on a loan or forbearance of
money, goods or credits. It is not for respondent court a quo to change the stipulations
in the contract where it is not illegal. Furthermore, Article 1306 of the New Civil Code
provides that contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.

9. In the case of Philippine National Bank v. Court of Appeals, 238 SCRA 20, it was
held P.D. No. 1684 and C.B. Circular No. 905 allowed the contracting parties to
stipulate freely regarding any subsequent adjustment in the interest rate that shall
accrue on a loan or forbearance of money, goods or credits. In fine, they can agree to
adjust, upward or downward, the interest previously stipulated.

10. On the other hand, there are plenty of cases when the SC equitably reduced the
stipulated interest rates; for instance, from 18% to 10% per annum. The SC also voided
the stipulated interest of 5.5% per month (or 66% per annum), for being excessive,
iniquitous, unconscionable and exorbitant, hence, contrary to morals (“contra bonos
mores”), if not against the law. The same is true with cases involving 36% per annum,
6% per month (or 72% per annum), and 10% and 8% per month. In these instances, the
SC imposed the legal interest of 12%.

11. In the case of LETICIA Y. MEDEL, DR. RAFAEL MEDEL and SERVANDO
FRANCO vs. COURT OF APPEALS, SPOUSES VERONICA R. GONZALES and
DANILO G. GONZALES, JR. doing lending business under the trade name and style
“GONZALES CREDIT ENTERPRISES”, G.R. No. 131622 November 27, 1998. The
Court found the interest at 5.5% per month, or 66% per annum, stipulated upon by the
parties in the promissory note iniquitous or unconscionable, and, hence, contrary to
morals (“contra bonos mores”), if not against the law. The stipulation was void. The
courts may reduce equitably liquidated damages, whether intended as an indemnity or a
penalty if they are iniquitous or unconscionable.

12. In the case of ROLANDO C. DE LA PAZ vs. L & J DEVELOPMENT COMPANY,

G.R. No. 183360 September 8, 2014. Time and again, it has been ruled in a plethora of
cases that stipulated interest rates of 3% per month and higher, are excessive,
iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary
to morals, if not against the law. The Court, however, stresses that these rates shall be
invalidated and shall be reduced only in cases where the terms of the loans are open-
ended, and where the interest rates are applied for an indefinite period. Hence, the
imposition of a specific sum of P40, 000.00 a month for six months on a P1, 000,000.00
loans is not considered unconscionable.
13. Just to be clear, “legal interest” doesn’t mean that anything beyond 12% is
“illegal”. It simply means that in a loan or forbearance of money, the interest due should
be that stipulated in writing, and in the absence thereof, the rate shall be 12% per
annum.

COMPULSORY COUNTERCLAIM

14. By reason of the abuse of right committed by the plaintiff and by reason of the
instant precipitate and unfounded suit, the defendant was constrained to hire the
services of a lawyer to defend his rights and interests for a professional fee of
P20,000.00 plus P3,000.00 per court appearance;

15. Similarly, the plaintiff’s unfounded suit has caused the defendant mental anguish
and suffering and public humiliation and embarrassment, for which the defendant claims
moral damages of P100, 000.00.

PRAYER

WHEREFORE, premises considered, it is respectfully prayed that the parties be

given ample time to reach an amicable settlement before the xxx City Mediation Center;
and that in case of a failure thereof, and after trial, the complaint be dismissed for lack
of merit and the defendant’s compulsory counterclaim be granted, i.e... Attorney’s fees
of P20, 000.00 plus moral damages of P100, 000.00, plus costs of suit.

The defendant respectfully prays for such and other reliefs as may be deemed
just and equitable in the premises.

XXX LAW OFFICES

Counsel for Defendant xxx

Unit 90 LB Building, H. V. Dela Costa St.

Salcedo Village, Makati City 1209