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    PNB Vs CA - Jessette Amihope Castor

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    Yna Novo
    1) Ambrosio Padilla took out a 1.8 million peso loan from the Philippine National Bank (PNB) at an interest rate of 18% for 2 years. The loan agreement allowed PNB to unilaterally increase the interest rate within legal limits. 2) PNB increased the interest rate on Padilla's loan 3 times in one year, raising it from 18% to 32%, 41%, and 48%, despite Padilla's requests to limit the increase to 21-24%. 3) The Supreme Court ruled that PNB's unilateral increases to the interest rate violated the mutuality required in contracts by the Civil Code, as it allowed one party (PNB) to control the obligations

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    PNB Vs CA - Jessette Amihope Castor

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    Yna Novo
    6 views1 page
    1) Ambrosio Padilla took out a 1.8 million peso loan from the Philippine National Bank (PNB) at an interest rate of 18% for 2 years. The loan agreement allowed PNB to unilaterally increase the interest rate within legal limits. 2) PNB increased the interest rate on Padilla's loan 3 times in one year, raising it from 18% to 32%, 41%, and 48%, despite Padilla's requests to limit the increase to 21-24%. 3) The Supreme Court ruled that PNB's unilateral increases to the interest rate violated the mutuality required in contracts by the Civil Code, as it allowed one party (PNB) to control the obligations

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    Case digest, Obligations an d Contracts, Mutuality of Contracts

    Original Title

    1. PNB vs CA - Jessette Amihope Castor

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    1) Ambrosio Padilla took out a 1.8 million peso loan from the Philippine National Bank (PNB) at an interest rate of 18% for 2 years. The loan agreement allowed PNB to unilaterally increase the interest rate within legal limits. 2) PNB increased the interest rate on Padilla's loan 3 times in one year, raising it from 18% to 32%, 41%, and 48%, despite Padilla's requests to limit the increase to 21-24%. 3) The Supreme Court ruled that PNB's unilateral increases to the interest rate violated the mutuality required in contracts by the Civil Code, as it allowed one party (PNB) to control the obligations

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    6 views1 page

    PNB Vs CA - Jessette Amihope Castor

    Uploaded by

    Yna Novo
    1) Ambrosio Padilla took out a 1.8 million peso loan from the Philippine National Bank (PNB) at an interest rate of 18% for 2 years. The loan agreement allowed PNB to unilaterally increase the interest rate within legal limits. 2) PNB increased the interest rate on Padilla's loan 3 times in one year, raising it from 18% to 32%, 41%, and 48%, despite Padilla's requests to limit the increase to 21-24%. 3) The Supreme Court ruled that PNB's unilateral increases to the interest rate violated the mutuality required in contracts by the Civil Code, as it allowed one party (PNB) to control the obligations

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 1

    Jessette Amihope N.

    Castor BL-5A

    PHILIPPINE NATIONAL BANK, Petitioner,


    vs
    THE HON. COURT OF APPEALS and AMBROSIO PADILLA, Respondents.
    April 30, 1991
    G.R. No. 88880.

    Principle: Unilateral action to increase interest rates, a violation of Article 1308 of Civil Code.

    GRIÑO-AQUINO, J.:

    Facts:
    Private respondent Ambrosio Padilla, applied for and was granted a credit line of 1.8 million,
    by petitioner PNB. This was for a term of 2 years at 18% interest per annum and was secured by
    real estate mortgage and 2 promissory notes executed in favor of Philippine National Bank by
    Padilla. The credit agreement and the promissory notes, in effect, provide that Padilla agrees to
    be bound by “increases to the interest rate stipulated, provided it is within the limits provided
    for by law”. Conflict in this case arose when petitioner unilaterally increased the interest rate from
    18% to: (1) 32%[July 1984]; (2) 41% [October 1984]; and (3) 48% [November 1984], or 3 times within
    the span of a single year. This was done despite the numerous letters of request made by private
    respondent that the interest rate be increased only to 21% or 24%.

    Issue:
    May the bank validly increase the stipulated interest rate on loans contracted with third
    persons as often as necessary and against the protest of such persons?

    Held:
    No. The unilateral action of the PNB in increasing the interest rate on the private
    respondent’s loan, violated the mutuality of contracts ordained in Article 1308 of the Civil Code
    that the contract must bind both contracting parties; its validity or compliance cannot be left to
    the will of one of them. In order that obligations arising from contracts may have the force of law
    between the parties, there must be mutuality between the parties based on their essential equality.

    A contract containing a condition which makes its fulfillment dependent exclusively upon
    the uncontrolled will of one of the contracting parties, is void (Garcia v. Rita Legarda, Inc., 21
    SCRA 555). Hence, even assuming that the P1.8 million loan agreement between the PNB and the
    private respondent gave the PNB a license (although in fact there was none) to increase the
    interest rate at will during the term of the loan, that license would have been null and void for
    being violative of the principle of mutuality essential in contracts. It would have invested the loan
    agreement with the character of a contract of adhesion, where the parties do not bargain on equal
    footing, the weaker party’s (the debtor) participation being reduced to the alternative "to take it
    or leave it" (Qua v. Law Union & Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable
    trap for the weaker party whom the courts of justice must protect against abuse and imposition.

    WHEREFORE, finding no reversible error in the decision of the Court of Appeals the Court
    resolved to deny the petition for review for lack of merit, with costs against the petitioner.

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