Professional Documents
Culture Documents
CA (1996)
Petitioners: SPOUSES PONCIANO ALMEDA AND EUFEMIA P. ALMEDA
Respondents: CA AND PNB
Ponente: KAPUNAN
Topic: Remedies for Breach
SUMMARY: (1-2 sentence summary of facts, issue, ratio and ruling)
FACTS:
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PNB vigorously denied that the increases in the interest rates were illegal, unilateral,
excessive and arbitrary, it argued that the escalated rates of interest it imposed was
based on the agreement of the parties.
ISSUES:
WoN PNB was authorized to raise its interest rates from 21% to as high as 68% under
the credit agreement
o NO. Any contract which appears to be heavily weighed 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.
o The binding effect of any agreement between parties to a contract is premised on
two settled principles: that any obligation arising from contract has the force of
law between the parties and that there must be mutuality between the parties
based on their essential equality.
o PNB unilaterally altered the terms of its contract with the Almedas by
increasing the interest rates on the loan without prior assent of the latter, in
violation of the mutuality principle of contracts expressed in A1308, NCC.
o While interest escalation clauses in credit agreements are perfectly valid and do
not contravene public policy, they are still subject to laws and provisions.
o The stipulation in the credit agreement, which requires that the increase be
within the limits allowed by law refers to legislative enactments, not
administration circulars, otherwise the credit agreement would not have made
the distinction between law and the Monetary Board in the phrase 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.
o The increased interest rates, to which the Almedas never assented, thereby
resulting to PNBs contravention of their credit agreement by implementing the
same, are patently unconscionable and excessive, unjustly disabling the
Almedas from fulfilling their obligation due to the new amount of the loan that is
way above the original amount of the old interest rate.
NOTES: