G.R. No. 113412, April 17, 1996, 256 SCRA 292


On various dates in 1981, the Philippine National Bank granted to herein petitioners, the spouses Ponciano L. Almeda and Eufemia P. Almeda several loan/credit accommodations totaling P18.0 Million pesos payable in a period of six years at an interest rate of 21% per annum. To secure the loan, the spouses Almeda executed a Real Estate Mortgage Contract covering a 3,500 square meter parcel of land, together with the building erected thereon (the Marvin Plaza) located at Pasong Tamo, Makati, Metro Manila. Between 1981 and 1984, petitioners made several partial payments on the loan totaling. P7,735,004.66, a substantial portion of which was applied to accrued interest. On March 31, 1984, respondent bank, over petitioners’ protestations, raised the interest rate to 28%, allegedly pursuant to Section III-c (1) of its credit agreement. Said interest rate thereupon increased from an initial 21% to a high of 68% between March of 1984 to September of 1986.

Petitioner protested the increase in interest rates, to no avail. Before the loan was to mature in March, 1988, the spouses filed on, February 6, 1988 a petition for declaratory relief with prayer for a writ of preliminary injunction and temporary restraining order. Invoking the Law on Mandatory Foreclosure (Act 3135, as amended and P.D. 385), the PNB countered by ordering the extrajudicial foreclosure of petitioner’s mortgaged properties and scheduled an auction sale for March 14, 1989. Upon motion by petitioners, however, the lower court, on April 5, 1989, granted a supplemental writ of preliminary injunction, staying the public auction of the mortgaged property.


Won PNB was authorized to raise its interest rates from 21% to as high as 68% under the credit agreement.


No. Any contact which appears to be heavily weighted in favor of one of the parties so as to lead to an unconscionable result is void. Likewise, 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.


The Bank reserves the right to increase the interest rate within the limits allowed by law at any time depending on whatever policy it may adopt in the future; provided, that the interest rate on this/these accommodations shall be correspondingly decreased in the event that the applicable maximum interest rate is reduced by law or by the Monetary Board. In either case, the adjustment in the interest rate agreed upon shall take effect on the effectivity date of the increase or decrease of the maximum interest rate.

 * Case digest by Lady Rubyge Denura, LLB-1, Andres Bonifacio Law School, SY 2017-2018