NEW SAMPAGUITA BUILDERS V.

PNB (2004) letters of information sent to secure their conformity; and even if
we were to presume these as an offer, there was no acceptance.
FACTS: New Sampaguita Builders (NSB) obtained a loan from No one receiving a proposal to modify a loan contract, especially
PNB amounting to P8-M mortgaging the properties of NSB’S interest -- a vital component -- is "obliged to answer the
president and chairman. NSB also executed promissory notes proposal."
with different dates of payment.
Besides, PNB did not comply with its own stipulation that should
Yung interest rates are as follows: the loan not be paid 2 years after release of money, then it shall
be converted to a medium term loan.
1st PN: 19.5% interest
Under the General Banking Law of 2000, banks shall grant loans
2nd PN: 21.5 % interest and other credit accommodations only in amounts and for
periods of time essential to the effective completion of
3rd PN: 21.5 interest
operations to be financed, "consistent with safe and sound
banking practices."
Under the uniform clause in the agreement, PNB is allowed to
increase “within the limits allowed by law at any time depending
The amount, tenor or maturity of the loan must comport with
on whatever policy it may adopt in the future…” without giving
the actual requirements of the borrower. The purpose of the
prior notice to NSB. It was also stated in the promissory note
loan or credit accommodation must be stated in the application
that if the same is not paid 2 years after release of money then it
and documentation. Any deviation may cause acceleration,
shall be converted to a medium term loan and the interest rate
immediate repayment, foreign currency blacklisting, or
would apply.
conversion from a term loan to a demand loan. (1st par. of sec.
39 of RA 8791 (then sec.75 of RA 337 or The General Banking
NSB defaulted on its payments and failed to comply with its
Act, as amended).
obligations. NSB requested for a 90-day extension but defaulted
again. NSB then asked for loan restructuring. NSB was able to
PNB ordered to refund more than P 3-M for overcollection.
make partial payment on the loan but again failed to pay the
balance. DBP V. BONITA and ALFREDO PEREZ (2004)
PANALO BANK HERE. COMPLAINANTS ALLEGED THAT THEIR
PNB extrajudicially foreclosed the mortgaged properties (sold for
CONSENT WERE VITIATED WHEN THEY SIGNED NEW
P10-M). PNB claims that NSB owed the bank P12-M so they filed
PROMISORRY NOTE. WRONG. FEAR OF FORECLOSURE IS NOT
a case against NSB to recover the balance.
VITIATED CONSENT
FACTS:
RTC: NSB automatically entitled to the debt relief package of the
Respondents obtained industrial loans with DBP totaling
bank. PNB had no cause of action against NSB.
P235,000 for which they executed the corresponding promissory
CA: reversed. NSB not entitled and ordered them to pay the notes. Later on, after several payments, they failed to religiously
deficiency. pay the monthly amortizations forcing DBP to foreclose the
mortgages but Mrs. Perez requested for a restructuring of their
Umabot na sa SC. NSB now claims that the loan was bloated so accounts which was approved by DBP resulting in the signing of a
wala na talaga sila utang talaga dapat kay bank kasi overcharging new promissory note by the spouses (in the amount of
na ginawa daw ng PNB. P231,000). Again, after a few payments, Sps. Perez failed to pay
their obligations forcing DBP to institute foreclosure
ISSUE: WON the loan was bloated proceedings. They later on filed for a complaint for the
nullification of the new promissory note claiming that the
RULING: YES! There was an overpayment of more than P3-M. restructuring of their obligation was made by DBP in bad faith by
Walang deficiency! PNB is also not allowed to unilaterally requiring them to sign another promissory note without
increase interest rates. considering the total payments made on the loan. DBP counters
that the spouses admitted to having signed the new PN and
In the three Promissory Notes, evidently, no complaint for there was no evidence on record showing that the signing of the
collection was filed with the courts. Moreover, respondent did new PN was attended by mistake, violence, intimidation, undue
not supply the interest rate to be charged on medium-term loans influence, or fraud and that their claim of having been forced to
granted by automatic conversion. Because of this deficiency, we sign for fear of having their mortgaged property foreclosed
shall use the legal rate of 12 percent per annum on loans and cannot serve as legal basis to conclude that they did not
forbearance of money, as provided for by CB Circular 416. voluntarily sign the document.
LACK OF RESPONSE IS NOT TANTAMOUNT TO ASSENT It cannot ISSUE:
be argued that assent to the increases can be implied either Whether the new promissory note is voidable for not having
from the June 18, 1991 request of petitioners for loan been voluntarily signed by the respondents.
restructuring or from their lack of response to the statements of
account sent by respondent. Such request does not indicate any HELD:
agreement to an interest increase; there can be no implied No. There was no evidence showing that the respondents signed
waiver of a right when there is no clear, unequivocal and decisive the new promissory note through mistake, violence,
act showing such purpose.[43] Besides, the statements were not
intimidation, undue influence, or fraud. The respondents merely damages. The delay in the performance of the obligation,
alleged that they were forced to restructure their loan for fear of however, must be either malicious or negligent.16 
having their mortgaged properties foreclosed. However, it is
axiomatic that this would not amount to vitiated consent. The Indeed, we agree with the Court of Appeals finding that such
last paragraph of Article 1335 of the New Civil Code specifically omission was mere "in advertence" on the part of private
states that a threat to enforce one’s claim through competent respondent. Even when the checks were delivered to petitioner,
authority, if the claim is just or legal, does not vitiate consent. it did not object to the unsigned check. The bank’s blind and
Foreclosure of mortgaged properties in case of default in mechanical invocation of paragraph 11 of the contract of chattel
payment of a debtor is a legal remedy afforded by law to a mortgage was unwarranted.
creditor. Hence, A THREAT TO FORECLOSE THE MORTGAGE
WOULD NOT, PER SE, VITIATE CONSENT.
Tarantado din kasi talaga si bank. In that period between making
good the unsigned check to making bawi (more than a year),
they could’ve call Atty. To inquire or to make him sign it. RCBC’s
RCBC VS CA conduct, in the light of the circumstances of this case, can only
be described as mercenary.
COMMENT: A simple telephone call and an ounce of good faith
on the part of petitioner could have prevented the present SC now awarded moral plus exemplary damage in favor of Atty.
controversy.

FACTS: Atty. Felipe Lustre purchased a Toyota Corolla from Ocampo vs Land Bank –
Toyota Shaw, Inc. for which he made a down payment. He issued
24 postdated checks. Facts:

Ocampo and her daughter , Tan obtained from the Land Bank a
To secure the balance, Atty executed a promissory note 1 and a PHP10 M quedan loan upon issuance of promissory notes.
contract of chattel mortgage 2 over the vehicle in favor of Toyota Quedan Rural Credit Corporation guaranteed to pay LandBank
Shaw, Inc. with an acceleration clause stating that should the their loan plus interest at the time of maturity. Pursuant thereto,
mortgagor default in the payment of any installment, the whole Ocampo and Tan delivered to Land Bank quedans executed a
amount remaining unpaid shall become due, plus 25% of the Deed o Assignment covering 41,690 cavans of palay in favor of
principal due as liquidated damages. Quedan Rural Credit Corporation.

Toyota Shaw then assigned its rights over the chattel mortgage Ocampo and Tan constituted a REM over 2 parcels of
to RCBC. unregistered land owned by Ocampo to secure the remaining
20%. Such encumbrance was annotated in the land title when
Checks thereafter had been encashed and debited by the bank Ocampo filed for the land’s registration.
from Atty’s account until this one check na walang pirma ni Atty.
Actually, the bank debited the account at first pero binalik din When Ocampo failed to pay the 3 remianing PNS, Landbank filed
nila yung funds much later (more than a year) since naghesitate
the following:
sila dahil ngang walang pirma. In the interim, subsequent checks
were debited. During the time na nirecall nila yung unsigned
1. Claim for guarantee payment with Quedancor;
check, the last two checks were not presented na rin for
2. Criminal case for Estafa against Ocampo for disposing
payment.
stocks of palay covered by the quedans
So, the bank considered that Atty defaulted in payment. They 3. Extrajudicial foreclosure of REM (re: 20% of loan)
now assert the clause in the chattel mortgage na due na yung
whole obligation (acceleration clause) plus liquidated damages. The ex officio provincial sheriff issued a notice of Extrajudicial
Siyempre opposed si Atty. Hence the case. Sale.

ISSUE: Is the bank correct in applying the acceleration clause? RTC issued TRO on the public auction and favored Ocampo and
No. Tan when they filed a complaint for declaration of nullity and
Damages with application of a writ of preliminary injunction
HELD: against the Land Bank and the Sheriff on the basis on forgery
regarding the REM on the 20% of the loan.
THE BANK ASSERTS NA DELAYED IN PAYMENT SI ATTY, PERO
BEFORE THERE IS DELAY, SUCH DELAY MUST BE ATTENDED BY Issue:
NEGLIGENCE OR FAULT - OBLICON, BITCH.
WON the Deed of REM was void?
Art. 170 of the Civil Code states that those who in the
performance of their obligations are guilty of delay are liable for Held:
No. The Deed of REM was valid. There is no forgery. Ocampo and CA: reversed. REM is valid. It allowed its foreclosure since the
Tan failed to present evidence to support the claim. She cannot loan it secured was not paid.
say for certain if she appeared before the notary public.
ISSUE: WON the promissory note is a contract of adhesion
It is well settled that a document acknowledged before a notary
RULING: NO. The promissory note is not a contract of adhesion. 
public is a public document that enjoys the presumption of
regularity. It is prima facie evidence of the truth of the facts In Sweet Lines, Inc. vs. Teves,34 this Court discussed the nature of
stated therein and a conclusive presumption of its existence and a contract of adhesion as follows: " . . there are certain contracts
due execution. almost all the provisions of which have been drafted only by one
party, usually a corporation. Such contracts are called contracts
The real issue is fraud and not forgery. Ocampo claimed that she of adhesion, because the only participation of the other party is
was led to believe by land Bank that the form she signed was to the signing of his signature or his adhesion thereto. Insurance
process her PHP5M loan application and not to secure the contracts, bills of lading, contracts of sale of lots on the
subject 20% of the loan. installment plan fall into this category. And, " . . it is drafted only
by one party, usually the corporation, and is sought to be
accepted or adhered to by the other party . . . who cannot
However, Ocampo was unable to establish clearly and precisely
change the same and who are thus made to adhere hereto on
hoe Land Bank committed the alleged fraud. She failed to lay
the take it or leave it basis . . . "
down the deception through insidious words or machinations or
misrepresentations made by Land Bank so that she signed the The promissory note in question did not contain any fine print
blank form. provision which could not have been examined by the petitioner.
Petitioner had all the time to go over and study the stipulations
Granting for the sake of argument that there was fraud, such embodied in the promissory note. Aside from the March 22,
contract was merely voidable where an action should have been 1995 promissory note for P750,000.00, three other promissory
instituted within 4 years from discovery. notes of different dates and amounts were executed by
petitioner in favor of private respondent. These promissory
RUIZ V. CA (2003) notes contain similar terms and conditions, with a little variance
in the terms of interests and surcharges. The fact that petitioner
BANK WINS. COMPLAINANT ALLEGES CONTRACT OF and private respondent had entered into not only one but
ADHESION. WRONG. ULIT ULIT KA NAG-LOAN EH. YOU ARE several loan transactions shows that petitioner was not in any
PRESUMED NA NABASA MO NANG MAIGI AT ALAM MO ANG way compelled to accept the terms allegedly imposed by private
PINAPASOK MO. respondent.

FACTS: Corazon Ruiz (buy and sell jewelry biz) obtained loans MOREOVER, PETITIONER, IN HER COMPLAINT FILED WITH THE
from private respondent Consuelo Torres on different occasions. TRIAL COURT, NEVER CLAIMED THAT SHE WAS FORCED TO SIGN
THE SUBJECT NOTE. Paragraph five of her complaint states:
In these amounts: P100,000.00; P200,000.00; P300,000.00; and "That on or about March 22, 1995 plaintiff was required by the
P150,000.00. TOTAL 750k. Before maturity, the loans were defendant Torres to execute a promissory note consolidating her
consolidated under 1 promissory note dated March 22, 1995. unpaid principal loan and interests which said defendant
The consolidated loan was secured by a real estate mortgage. computed to be in the sum of P750,000.00 . . ."
Ruiz obtained 3 more loans from Torres, under the following
promissory notes: (1) promissory note dated 21 April 1995, in TO BE REQUIRED IS CERTAINLY DIFFERENT FROM BEING
the amount of P100,000.00; (2) promissory note dated May 23, COMPELLED. She could have rejected the conditions made by
1995, in the amount of P100,000.00; and (3) promissory note private respondent. As an experienced businesswoman, she
dated December 21, 1995, in the amount of P100,000.00. TOTAL ought to understand all the conditions set forth in the subject
300k. These are secured by P571,000.00 worth of jewelry promissory note. As held by this Court in Lee, et al. vs. Court of
pledged by Ruiz. Appeals, et al.,41 it is presumed that a person takes ordinary care
of his concerns. Hence, the natural presumption is that one does
Ruiz defaulted. Torres sought the extra-judicial foreclosure of the not sign a document without first informing himself of its
aforementioned real estate mortgage kaya lang… contents and consequences. This presumption acquires greater
force in the case at bar where not only one but several
RTC: granted a writ of preliminary injunction. It held that the real documents were executed at different times by petitioner in
estate mortgage is unenforceable because of the lack of the favor of private respondent.
participation and signature of petitioners husband. It further
held that the promissory note in question is a unilateral contract ADVOCATES FOR TRUTH IN LENDING, INC. v. BANGKO SENTRAL
of adhesion drafted by private respondent. It struck down the (2013)
contract as repugnant to public policy because it was imposed by
a dominant bargaining party (private respondent) on a weaker SUSPENDING USURY LAW IS NOT TANTAMOUNT TO
party (petitioner). Nevertheless, it held that petitioner still has an AMENDMENT OR REPEAL; ALSO THE LIFTING OF THE CEILINGS
obligation to pay the private respondent. FOR INTEREST RATES DOES NOT AUTHORIZE STIPULATIONS
CHARGING EXCESSIVE, UNCONSCIONABLE, AND INIQUITOUS EXCESSIVE, UNCONSCIONABLE, AND INIQUITOUS INTEREST. It is
INTEREST. settled that nothing in CB Circular No. 905 grants lenders a carte
blanche authority to raise interest rates to levels which will
FACTS: either enslave their borrowers or lead to a hemorrhaging of their
On March 17, 1980, the Usury Law was amended by P.D. No. assets.
1684, giving the CB-MB authority to prescribe different
maximum rates of interest which may be imposed for a loan or FLOIRENDO vs METROBANK
renewal thereof or the forbearance of any money, goods or
credits, provided that the changes are effected gradually and
GENERAL RULE: ESCALATION CLAUSES ARE VALID EXN: WHEN
announced in advance.
ESCALATION CLAUSE WOULD MAKE THE FULFILLMENT OF THE
CONTRACTS DEPENDENT EXCLUSIVELY UPON THE
The Central Bank’s Monetary Board CB-MB issued a Circular (CB
UNCONTROLLED WILL OF RESPONDENT BANK AND IS
Circular No. 905) removing the ceilings on interest rates on loans
THEREFORE VOID. IN THE PRESENT CASE, THE PROMISSORY
or forbearance of any money, goods or credits. The circular also
NOTE GIVES RESPONDENT BANK AUTHORITY TO INCREASE THE
amended MORB by removing the applicable ceilings on specific
INTEREST RATE AT WILL DURING THE TERM OF THE LOAN.
interest rates. Later on, BSP was established to replace the CB.
Petitioners contend that under Section 1-a of Act No. 2655, as
amended by P.D. No. 1684, the CB-MB was authorized only to FACTS: Complainant Reynaldo P. Floirendo, Jr is the president
prescribe or set the maximum rates of interest for a loan or and chairman of the Board of a domestic corporation (real
renewal thereof or for the forbearance of any money, goods or estate). He obtained a loan of P1,000,000.00 from the
credits, and to change such rates whenever warranted by Metrobank for the company. The loan was renewed for another
prevailing economic and social conditions, the changes to be year secured by the same real estate mortgage. Petitioner signed
effected gradually and on scheduled dates; that nothing in P.D. a promissory note fixing the rate of interest at "15.446% per
No. 1684 authorized the CB-MB to lift or suspend the limits of annum for the first 30 days, subject to upward/downward
interest on all credit transactions, when it issued CB Circular adjustment every 30 days thereafter" The promissory note
No. 905. They further insist that under Section 109 of R.A. No. likewise provides that:
265, the authority of the CB-MB was clearly only to fix the banks’
maximum rates of interest, but always within the limits The rate of interest and/or bank charges herein
prescribed by the Usury Law. stipulated, during the term of this Promissory Note, its
extension, renewals or other modifications, may be
ISSUE: increased, decreased…
Whether under R.A. No. 265 and/or P.D. No. 1684, the CB-MB
had the statutory or constitutional authority to remove all ….I/We hereby expressly consent ….
interest ceilings and thus suspended Act No. 2655 as regards
usurious interest rates Bank started imposing higher interest rates on petitioner’s loan
which varied through the months, in fact, as high as 30.244% in
HELD: October 1997. As a result, petitioner could no longer pay the
Yes. The CB-MB merely suspended the effectivity of the Usury high interest rates charged by respondent bank. Thus, he
Law when it issued CB Circular No. 905. THE POWER OF THE CB negotiated for the renewal of his loan. Respondent bank agreed
TO EFFECTIVELY SUSPEND THE USURY LAW PURSUANT TO P.D. provided petitioner would pay the arrears. Despite payment by
NO. 1684 HAS LONG BEEN RECOGNIZED AND UPHELD IN MANY petitioner, nag-foreclose pa din si gagong bank
CASES. CB Circular No. 905 "did not repeal nor in anyway amend
the Usury Law but simply suspended the latter’s effectivity;",
ISSUE: CORRECT BA SI BANK TO IMPOSE INTERESTS
that "a CB Circular cannot repeal a law, for only a law can repeal
UNILATERALLY and MAKARARUNGAN BA ANG AMOUNT? Both
another law;", that "by virtue of CB Circular No. 905, the Usury
no..
Law has been rendered ineffective;" and "Usury has been legally
non-existent in our jurisdiction. Interest can now be charged as
lender and borrower may agree upon." P.D. No. 1684 and C.B. HELD:
Circular No. 905 no more than allow contracting parties to
stipulate freely regarding any subsequent adjustment in the WE HOLD THAT THE INCREASES OF INTEREST RATE
interest rate that shall accrue on a loan or forbearance of UNILATERALLY IMPOSED BY RESPONDENT BANK WITHOUT
money, goods or credits. In fine, they can agree to adjust, PETITIONER’S ASSENT ARE VIOLATIVE OF THE PRINCIPLE OF
upward or downward, the interest previously stipulated. Thus, MUTUALITY OF CONTRACTS
by lifting the interest ceiling, CB Circular No. 905 merely upheld
the parties’ freedom of contract to agree freely on the rate of Article 1308. The contract must bind both contracting
interest. It cited Article 1306 of the New Civil Code, under which parties; its validity or compliance cannot be left to the
the contracting parties may establish such stipulations, clauses, will of one of them.
terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public order, The provision in the promissory note authorizing respondent
or public policy. THE LIFTING OF THE CEILINGS FOR INTEREST bank to increase, decrease or otherwise change from time to
RATES DOES NOT AUTHORIZE STIPULATIONS CHARGING time the rate of interest and/or bank charges "without advance
notice" to petitioner, "in the event of change in the interest rate Whether or not the stipulated interest of 16% per month, 5% per
prescribed by law or the Monetary Board of the Central Bank of month for penalty charge and 25% attorney’s fee are usurious.
the Philippines," is potestative - In effect, void.
HELD:
GENERAL RULE: Escalation clauses are valid EXN: When
escalation clause would make the fulfillment of the contracts YES. The rate must be equitably reduced for being iniquitous,
dependent exclusively upon the uncontrolled will of respondent unconscionable and exorbitant. While the Usury Law ceiling on
bank and is therefore void. In the present case, the promissory interest rates was lifted by C.B. Circular No. 905, nothing in the
note gives respondent bank authority to increase the interest said circular grants lenders carte blanche authority to raise
rate at will during the term of the loan.
interests rates to levels which will either enslave their borrowers
or lead to a hemorrhaging of their assets.
MOREOVER, THE INTERESTS HAVE BECOME INEQUITABLE:
Article 1310 provides: The determination shall not be obligatory
When the agreed rate is iniquitous or unconscionable, it
if it is evidently inequitable. In such case, the courts shall decide
what is equitable under the circumstances. - OBLICON hehe. considered contrary to morals, if not against the law. Such
stipulation is void. Since the stipulation is void, it is as if there
MOREOVER EVEN, THE BANK IS IN BAD FAITH: As mentioned was no express contract thereon. Hence, courts may reduce the
earlier, petitioner negotiated for the renewal of his loan. As interest rate as reason and equity demand.
required by respondent bank, he paid the interests due.
Respondent bank then could not claim that there was no The interest rate of 16% per month was reduced to 1.167% per
attempt on his part to comply with his obligation. Yet, month or 14% per annum and the penalty charge of 5% per
respondent bank hastily filed a petition to foreclose the month was also reduced to 1.167% per month or 14% per
mortgage to gain the upperhand in taking petitioner’s four (4) annum.
parcels of land at bargain prices. Obviously, respondent bank
acted in bad faith. The attorney’s fees here are in the nature of liquidated damages
and the stipulation therefor is aptly called a penal clause. So long
In the end, SC reformed the contract requiring consent from the
as the stipulation does not contravene the law, morals, public
borrower before increase in interest. Tapos ung mga
order or public policy, it is binding upon the obligor.
unconscionable interests that the borrower already paid are
applied to the remaining debt. Nevertheless, in the case at bar, petitioner’s failure to comply
fully with her obligation was not motivated by ill will or malice.
Imperial vs Jaucian – RTC AND CA FOUND 16% INTEREST The partial payments she made were manifestations of her good
UNCONSCIONABLE. THEY REDUCED IT TO 1.167%MO. LENDER faith. Hence the attorney’s fees were reduced to 10% of the total
ALLEGES THAT ABSENT ANY WRITTEN STIPULATION BETWEEN due and payable.
THE PARTIES, THE LOWER COURTS SHOULD HAVE IMPOSED THE
RATE OF 12 PERCENT PER ANNUM ONLY. WRONG.
HUIBONHOA V. CA (1999)

Facts:
INFLATION DUE TO NINOY ASSASINATION IS NOT
EXTRAORDINARY INFLATION THAT WOULD WARRANT
 Petitioner obtained six (6) separate loans amounting to
REFORMATION OF CONTRACT; EXTRAORDINARY EVID MUST BE
P320,000.00 from the respondent. In the written agreement, PROVEN WITH COMPETENT EVIDENCE, LIKE BSP CIRCULAR
they agreed upon the 16% interest per month plus penalty
charge of 5% per month and the 25% attorney’s fee, failure to FACTS: Florencia T. Huibonhoa entered into a memorandum of
pay the said loans on the stipulated date. agreement with Gojocco siblings stipulating that Huibonhoa
would lease from them 3 adjacent commercial lots in Binondo,
Petitioner executed six (6) separate promissory notes and issued Manila.
several checks as guarantee for payment. When the said loans
The parties inked a contract of lease of the same three lots for a
become overdue and unpaid, especially when the petitioner’s period of fifteen (15) years commencing on July 1, 1983 and
checks issued were dishonored, respondent made repeated oral renewable upon agreement of the parties. Huibonhoa was to
and written demands for payment. construct a four-storey reinforced concrete building.

The petitioner was able to pay only P 116,540.00 as found by the Each of the siblings shall be paid P15k each or a total amount
RTC. Although she alleged that she had already paid the amount of P45k as monthly rental for the leased premises, within the
first 5 days of each calendar month. Huibonhoa’s obligation to
of P 441,780.00 and the excess of P 121,780.00 is more than the
pay the rental shall start only upon completion of the building,
interest that could be legally charged, the Court affirms the but if it is not completed within 8 months from date provided,
findings of RTC that petitioner is still indebted to the respondent. monthly rental shall already accrue and shall be paid. In other
words, during the period of construction, no monthly rental shall
ISSUE:   be collected.
During the construction of the building, former Senator Ninoy COMPLAINANT TRIED OFFERING EVID OF EXTRAORDINARY
Aquino was assassinated. The incident must have affected the INFLATION, BUT EFFECTS OF EXTRAORDINARY INFLATION ARE
countrys political and economic stability. The consequent NOT TO BE APPLIED WITHOUT AN OFFICIAL DECLARATION
hoarding of construction materials and increase in interest rates THEREOF BY COMPETENT AUTHORITIES.
allegedly affected adversely the construction of the building such Singson leased her land (located in Cubao) for a period of 20
that Huibonhoa failed to complete the same within the years to Caltex to be used as a gasoline service station. The 1 st-
stipulated eight-month period from July 1, 1983. Dapat finished 10th years shall be for P3,500 and P4,200 on the 11 th- 20th years.
na by February 29, 1984 pero natapos September 1984 (7 Five years before the expiration of the lease contract, Singson
months later). asked respondent to adjust or increase the amount of rentals
citing that the country was experiencing extraordinary inflation
Under the contract, Huibonhoa was supposed to start paying but Caltex refused. Singson instituted a complaint for the
rental in March 1984 but she failed to do so. Gojoccos made payment by of adjusted rentals based on the value of the
several verbal demands upon Huibonhoa for the payment and Philippine peso at the time the contract of lease was executed
for her to vacate the leased premises. Huibonhoa was also invoking Art. 1250 of the Civil Code and due to the extraordinary
notified of their intention to terminate the contract of lease. inflation - a circumstance that was not foreseen and could not
have been reasonably foreseen by the parties at the time they
entered into contract. Singson presented as witness Mr. Uy
Huibonhoa brought an action for reformation of contract so as to
(Assistant Director of the Supervising and Examining Sector of
reflect the true intention of the parties; that its terms be
the CB) who attested that the inflation rate increased abruptly
novated so that the accrual of rents should be computed from
during the period 1982 to 1985, caused mainly by the
October 1984; that the monthly rent of P45,000.00 be equitably
devaluation of the peso. She also submitted into evidence a
reduced to P30,000.00, and the term of the lease be extended by
certification of the official inflation rates from 1966 to 1986
five (5) years.
prepared by the NEDA based on consumer price index, which
Unforeseen event din daw yung nangyari kay Ninoy Aquino reflected that at the time the parties entered into the subject
which caused the economy to turn from bad to worse and as a contract, the inflation rate was only 2.06%; then, it soared to
result, the prices of commodities like construction materials so 34.51% in 1974, and in 1984, reached a high of 50.34%. Both RTC
increased. Also, that by reason of mistake or accident, the lease and CA dismissed Singson’s complaint. Article 1250 of the Civil
contract failed to provide that should an unforeseen event Code states:
dramatically increase the cost of construction, the monthly
rental would be reduced and the term of the lease would be “In case an extraordinary inflation or deflation of the currency
extended for such duration as may be fair and equitable to both stipulated should supervene, the value of the currency at the
the lessors and the lessee. time of the establishment of the obligation shall be the basis of
payment, unless there is an agreement to the contrary.”
RTC: Huibonhoa had not presented clear and convincing
evidence to justify the reformation of the lease contract. It ISSUE:
considered as misplaced her contention that the Aquino Whether there existed an extraordinary inflation during the
assassination was an accident within the purview of Art. 1359 of period 1968 to 1983 that would call for the application of Article
the Civil Code.  1250 of the Civil Code and justify an adjustment or increase of
the rentals between the parties.
ISSUE: WON Huibonhoa’s contention that the Ninoy Aquino
assassination caused building and construction costs to double in HELD:
1983 is meritorious None. Extraordinary inflation exists when there is a decrease or
increase in the purchasing power of the Philippine currency
RULING: NO. IT IS ONLY WHEN AN EXTRAORDINARY INFLATION which is unusual or beyond the common fluctuation in the value
SUPERVENES THAT THE LAW AFFORDS THE PARTIES A RELIEF IN of said currency, and such increase or decrease could not have
CONTRACTUAL OBLIGATIONS. been reasonably foreseen or was manifestly beyond the
contemplation of the parties at the time of the establishment of
Inflation is the sharp increase of money or credit or both without the obligation. The supervening of extraordinary inflation is
a corresponding increase in business transaction. There is never assumed. The party alleging it must lay down the factual
inflation when there is an increase in the volume of money and basis for the application of Article 1250. There is no legal or
credit relative to available goods resulting in a substantial and factual basis to support petitioner's allegation of the existence of
continuing rise in the general price level. extraordinary inflation during this period, or, for that matter, the
entire time frame of 1968 to 1983, to merit the adjustment of
The burden of proving that there had been extraordinary the rentals in the lease contract dated July 16, 1968. Although by
inflation or deflation of the currency is upon the party that petitioner's evidence there was a decided decline in the
alleges it. Such must be proven by competent evidence (like purchasing power of the Philippine peso throughout this period,
from BSP) and it cannot be merely assumed. we are hard put to treat this as an "extraordinary inflation"
within the meaning and intent of Article 1250. Moreover, the
LUCIA R. SINGSON V. CALTEX (PHILIPPINES), INC. (2000) EFFECTS OF EXTRAORDINARY INFLATION ARE NOT TO BE
FACTS: APPLIED WITHOUT AN OFFICIAL DECLARATION THEREOF BY
COMPETENT AUTHORITIES. Lastly, the provisions on rentals in
the lease contract dated July 16, 1968 between petitioner and UPWARDLY WOULD COMPLETELY TAKE AWAY FROM THE
respondent are clear and categorical, and we have no reason to DEBTORS THE RIGHT TO ASSENT TO AN IMPORTANT
suppose that such lease contract does not reflect or express MODIFICATION IN THEIR AGREEMENT AND WOULD ALSO
their true intention and agreement. The contract is the law NEGATE THE ELEMENT OF MUTUALITY IN THEIR CONTRACTS.34
between the parties and if there is indeed reason to adjust the WHILE A CEILING ON INTEREST RATES UNDER THE USURY LAW
rent, the parties could have by themselves negotiated the WAS ALREADY LIFTED UNDER CENTRAL BANK CIRCULAR NO.
amendment of the contract. 905, NOTHING THEREIN "GRANTS LENDERS CARTE BLANCHE
AUTHORITY TO RAISE INTEREST RATES TO LEVELS WHICH WILL
EITHER ENSLAVE THEIR BORROWERS OR LEAD TO A
RAMOS VS. CA HEMORRHAGING OF THEIR ASSETS."

Doctrine: the escalation clause is void if it grants respondent the

THE PROVISION OF ART. 1250 REQUIRES FOR ITS APPLICATION
A DECLARATION OF INFLATION BY THE CENTRAL BANK. power to impose an increased rate of interest without a written
WITHOUT SUCH DECLARATION CREDITORS CANNOT DEMAND notice to petitioners and their written consent.
AN INCREASE OF WHAT IS DUE THEM.
Facts:
A huge chunk of this case is procedural and there are other
substantial matters not related to the topic. I reduced it to the Spouses Ignacio F. Juico and Alice P. Juico (petitioners) obtained
relevant topic lang. a loan from China Banking Corporation (respondent) as
evidenced by two Promissory Notes both dated October 6, 1998
FACTS: Ramos is the owner of factory space No. 5; she entered and numbered 507-001051-345070010520,for thesums of !!
into a contract of lease with Spouses respecting the property in 6,216,000 and P4, 139,000, respectively. The loan was secured
question. by a Real Estate Mortgage (REM) over petitioners’property
located at 49 Greensville St., White Plains, Quezon City
The contract of lease contained, among other things, the respondent demanded the full payment of the outstanding
following stipulations:
balance with accrued monthly interests.

1(3) . . . In case of inflation or devaluation of As of February 23, 2001, the amount due on the two promissory
the Philippine Peso, the monthly rental will notes totaled P19,201,776. On the same day, the mortgaged
automatically increase or decrease
property was sold at public auction, with respondent China bank
depending on the devaluation or inflation
rate of the pesos to a dollar. as highest bidder for the amount of P10,300,000. petitioners
received a demand letter dated May 2, 2001 from respondent
RAMOS files for ejectment because a condition in the lease for the payment ofP8,901,776.63, the amount of deficiency after
regarding replacing the wooden posts with concrete posts was applying the proceeds of the foreclosure sale respondent prayed
not fulfilled by the spouses. that judgment be rendered ordering the petitioners to pay
jointly and severally: (1)P8,901,776.63 representing the amount
RAMOS also makes singil arrears since di nabayaran nina lessees of deficiency, plus interests at the legal rate, from February 23,
yung increases in rent 2001 until fully paid; (2) an additional amount equivalent to 1/10
of 1% per day of the total amount, until fully paid, as penalty; (3)
ISSUE: IS RAMOS entitled to arrears arising from increase in an amount equivalent to 10% of the foregoing amounts as
rent? No.
attorney’s fees; and (4) expenses of litigation and costs of suit.

HELD: SC granted petition for ejectment since the lessees Ms. Annabelle Cokai Yu, its Senior Loans Assistant stated that as
weren’t able to replace the wooden posts with concrete posts
of now the outstanding balance of petitioners was
P15,190,961.48. Yu reiterated that the interest rate changes
But petitioner's last contention (that private respondents failed
every month based on the prevailing market rate. she notified
to pay increased rent despite supervening inflation or
devaluation of the Philippine peso) is untenable. The provision of petitioners of the prevailing rate by calling them monthly .It was
Art. 1250 requires for its application a declaration of inflation by increased unilaterally
the Central Bank. Without such declaration creditors cannot
demand an increase of what is due them. RTC: ordered Spouses to pay bank 9M plus the interest which
amounted to 15M.CA AFFIRMED
SPS. JUICO VS CHINABANK - IT IS NOW SETTLED THAT AN
ESCALATION CLAUSE IS VOID WHERE THE CREDITOR PETITIONER: They insist that the increase in interest rates were
UNILATERALLY DETERMINES AND IMPOSES AN INCREASE IN unilaterally imposed by the bank and thus violate the principle of
THE STIPULATED RATE OF INTEREST WITHOUT THE EXPRESS mutuality of contracts.
CONFORMITY OF THE DEBTOR. SUCH UNBRIDLED RIGHT GIVEN
TO CREDITORS TO ADJUST THE INTEREST INDEPENDENTLY AND
Issue: whether the increase in interest rates is void for violating THE TWO ARE SEPARATELY DISCUSSED AS FOLLOWS:
the mutuality of contract
1. RE: VIOLATION OF DOSRI
HELD: BANK PRESIDENT SAYS THAT SINCE THE LOAN WAS UNDER THE
NAME OF ANOTHER, NOT HIS, DOSRI RULES NEED NOT BE
Yes FOLLOWED.  WRONG

Article 1308. The contract must bind both contracting parties; its THE LAW ITSELF PROVIDES THAT INDIRECT LOAN IS
validity or compliance cannot be left to the will of one of them. LIKEWISE REGULATED Section 83. No director or officer of
Article 1956 of the Civil Code likewise ordains that "no interest any banking institution shall, either directly or indirectly,
shall be due unless it has been expressly stipulated in writing." for himself or as the representative or agent of others,
borrow any of the deposits of funds of such bank, nor shall
The binding effect of any agreement between parties to a he become a guarantor, indorser, or surety for loans from
contract is premised on xxx (2) that there must be mutuality such bank to others, or in any manner be an obligor for
between the parties based on their essential equality. Any moneys borrowed from the bank or loaned by it, except
contract which appears to be heavily weighted in favor of one of with the written approval of the majority of the directors
the parties so as to lead to an unconscionable result is void. Any of the bank, excluding the director concerned. 
stipulation regarding the validity or compliance of the contract
2. RE: FALSIFICATION
which is left solely to the will of one of the parties is likewise,
BANK PRESIDENT NOW MOTIONS FOR QUASHAL OF INFO: he
invalid Escalation clauses refer to stipulations allowing an SAYS THAT HE could not possibly be held liable for estafa in
increase in the interest rate agreed upon by the contracting concurrence with the charge for DOSRI violation. According to
parties. This Court has long recognized that there is nothing him, the DOSRI charge presupposes that he acquired a loan,
inherently wrong with escalation clauses. Nevertheless, an which would make the loan proceeds his own money and which
escalation clause "which grants the creditor an unbridled right to he could neither possibly misappropriate nor convert to the
adjust the interest independently and upwardly, completely prejudice of another, as required by the statutory definition of
estafa.  WRONG.
depriving the debtor of the right to assent to an important
modification in the agreement" is void. A stipulation of such That would have been correct if the bank knowingly extended
nature violates the principle of mutuality of contracts. In a case, the loan to petitioner himself. But that is not the case here.
SC said that petitioner’s assent to the modifications in the According to the information for estafa, the loan was supposed
interest rates cannot be implied from their lack of response to to be for another person, a certain "Enrico Carlos"; petitioner,
the memos sent by respondent through falsification, made it appear that said "Enrico Carlos"
applied for the loan when in fact he ("Enrico Carlos") did not.
It is now settled that an escalation clause is void where the Through such fraudulent device, petitioner obtained the loan
creditor unilaterally determines and imposes an increase in the proceeds and converted the same.
stipulated rate of interest without the express conformity of the
GO VS. BSP
debtor. Such unbridled right given to creditors to adjust the
interest independently and upwardly would completely take FACTS: Criminal INFO says that Go as Pres/CEO of bank “wilfully,
away from the debtors the right to assent to an important unlawfully and knowingly borrow x x x and/or become a
guarantor x x x to the New Zealand Accounts loans in the total
modification in their agreement and would also negate the amount of TWO BILLION AND SEVEN HUNDRED FIFTY-FOUR
element of mutuality in their contracts MILLION NINE HUNDRED FIVE THOUSAND AND EIGHT HUNDRED
FIFTY-SEVEN AND 0/100 PESOS
REPUBLIC VS SANDIGANBAYAN – Tinamad ako basahin. Haba
eh. DEFENSE: He now files for quashal under the theory that

SORIANO VS REPUBLIC 1 the law penalizes a bank director or officer only either for
borrowing the bank's deposits or funds or for guarantying loans
BANK PRESIDENT MADE A LOAN UNDER A FAKE NAME. HE IS by the bank, but not for acting in both capacities.
NOW INDICTED FOR 2 CRIMES.:
2 the Information failed to state that the amount he purportedly
1 VIOLATION OF DOSRI LAW borrowed and/or guarantied was beyond the limit set by law
2 ESTAFA THRU FALSIFICATION OF PUBLIC DOCU
ISSUE: WON his theories were correct – NOT
ISSUE: WON HE COULD BE GUILTY FOR BOTH
HELD:
HELD: YES
1. Under Section 83, RA 337, the following elements must be
present to constitute a violation of its first paragraph:

1. the offender is a director or officer of any banking

institution;

2. the offender, either directly or indirectly, for himself or

as representative or agent of another, performs any of the
following acts:

a. he borrows any of the deposits or funds of

such bank; or

b. he becomes a guarantor, indorser, or surety

for loans from such bank to others, or

c. he becomes in any manner an obligor for

money borrowed from bank or loaned by it;

3. the offender has performed any of such acts without the

written approval of the majority of the directors of the
bank, excluding the offender, as the director concerned.

THE ESSENCE OF THE CRIME is becoming an obligor of the bank

without securing the necessary written approval of the majority
of the bank's directors.

The second element (above) merely lists down the various

modes of committing the offense. Letter C is a catch-all phrase.
Ergo, The language of the law is broad enough to encompass
either act of borrowing or guaranteeing, or both.

2. EXCEEDING THE THRESHOLD OF ALLOWABLE AMOUNT TO BE

BORROWED OF ACCOMODATED IS NOT NECESSARILY AN
ELEMENT OF EVERY DOSRI LAW VIOLATION TO WARRANT
QUASHAL FOR LACK OF ALLEGATION THEREOF. It is but one of
the three ways one may violate DOSRI Law:

THE APPROVAL REQUIREMENT – failure to secure the majority

approval of the board (minus the borrowing member)

THE REPORTORIAL REQUIREMENT – failure to enter upon the

records of the corporation, and a copy of the entry be
transmitted to the appropriate supervising department (BSP).
This one is a violation of the bank, not the borrower 
consequence is quo warranto.
THE CEILING REQUIREMENT failure of the bank to limit the
loan/accommodation amount to that set by law. This is under
the second paragraph of Section 83. This is also an offense that is
violated by bank, not the person borrowing.

ERGO, the ceiling requirement is a separate offense and not

necessary for the prosecution for violation of APPROVAL
REQUIREMENT which the accused here allegedly commit. Hence,
the quashal is denied.