Professional Documents
Culture Documents
And since the relation between a depositor in a bank McLoughlin allegedly placed the following in his safety
deposit box – 2 envelopes containing US Dollars, one
and the bank is that of creditor and debtor, Cuaycong
envelope containing Australian Dollars, Letters, credit
has every right to apply his credit with the Bank of cards, bankbooks and a checkbook. When he went
Taiwan against the loans he had obtained from his abroad, a few dollars were missing and the jewelry he
deposit. All the elements necessary for a set-off are bought was likewise missing. Eventually, he confronted
present, and under the law then obtaining, Lainez and Paiyam who admitted that Tan opened the
compensation takes place ipso jure from the day all safety deposit box with the key assigned to him.
McLoughlin went up to his room where Tan was staying
the necessary requisites concur, without need of any
and confronted her. Tan admitted that she had stolen
conscious intent on the part of the parties. McLouglin’s key and was able to open the safety
deposit box with the assistance of Lopez, Paiyam and
Moreover, the Court is satisfied with the explanation Lainez. Lopez also told McLoughlin that Tan stole the
proffered by Cuaycong that, under the abnormal key assigned to McLouglin while the latter was asleep.
conditions then prevailing, the only way by which he
could utilize the proceeds from the sale of the stocks McLoughlin insisted that it must be the
of sugar seized from him was for him to make use of hotel who must assume responsibility for
the loss he suffered. Lopez refused to
the loans made available by the very agency that
accept responsibility relying on the conditions for
arbitrarily retained the said proceeds. In ultimate renting the safety deposit box entitled “Undertaking
effect, it was as though Cuaycong had merely For the Use of Safety Deposit Box”
withdrawn his deposits with the Bank of Taiwan.
ISSUE:
FACTS: HELD:
Respondent McLoughlin would stay at Tropicana Hotel NO. Article 2003 was incorporated in the New Civil
every time he is here in the Philippines and would rent Code as an expression of public policy precisely to
a safety deposit box. apply to situations such as that presented in this case.
The safety deposit box could only be opened through The hotel business like the common carrier’s business
the use of 2 keys, one of which is given to the is imbued with public interest. Catering to the public,
hotelkeepers are bound to provide not only lodging for several loan/credit accommodations totalling P18.0
hotel guests and security to their persons and Million pesos payable in a period of six years at an
belongings. The twin duty constitutes the essence of interest rate of 21 % per annum. To secure the loan,
the business. The law in turn does not allow such duty the spouses Almeda executed a Real Estate Mortgage
to the public to be negated or diluted by any contrary Contract covering a 3,500 square meter parcel of land,
stipulation in so-called “undertakings” that ordinarily together with the building erected thereon (the Marvin
appear in prepared forms imposed by hotel keepers on Plaza) located at Pasong Tamo, Makati, Metro Manila.
guests for their signature.
The credit agreement between the 2 parties contains a
In an early case (De Los Santos v. Tan Khey), CA ruled special condition that PNB reserves the right to
that to hold hotelkeepers or innkeeper liable for the increase the interest rate within the limits allowed by
effects of their guests, it is not necessary that they be law at any time depending on whatever policy it may
actually delivered to the innkeepers or their adopt in the future; provided, that the interest rate on
employees. It is enough that such effects are within this/these accommodations shall be correspondingly
the hotel or inn. With greater reason should the decreased in the event that the applicable maximum
liability of the hotelkeeper be enforced when the interest rate is reduced by law or by the Monetary
missing items are taken without the guest’s knowledge Board. In either case, the adjustment in
and consent from a safety deposit box provided by the the interest rate agreed upon shall take
hotel itself, as in this case. effect on the effectivity date of the
increase or decrease of the maximum
Paragraphs (2) and (4) of the “undertaking” manifestly interest rate.
contravene Article 2003, CC for they allow Tropicana to
be released from liability arising from any loss in the Between 1981 and 1984, the spouses made several
contents and/or use of the safety deposit box for any partial payments on the loan totalling P7,735,004.66, a
cause whatsoever. Evidently, the undertaking was substantial portion of which was applied to accrued
intended to bar any claim against Tropicana for any interest. On March 31, 1984, PNB, over petitioners’
loss of the contents of the safety deposit box whether protestations, raised the interest rate to 28%,
or not negligence was incurred by Tropicana or its allegedly pursuant to its credit agreement. Said
employees. interest rate thereupon increased from 21% to a high
of 68% between March of 1984 to September, 1986.
4. Almeda vs. CA
The spouses protested the increase in interest rates, to
FACTS: no avail. Before the loan was to mature, the spouses
filed a petition praying for a writ of preliminary
On various dates in 1981, the Philippine National Bank injunction and temporary restraining order with the
granted to herein petitioners, the spouses Almeda RTC. In said petition, the spouses sought clarification
as to whether or not the PNB could unilaterally raise It is plainly obvious from the facts of the case PNB
interest rates on the loan, pursuant to the credit unilaterally altered the terms of its contract by
agreement’s escalation clause, and in relation to increasing the interest rates on the loan without the
Central Bank Circular No. 905. As a preliminary prior assent of the latter. In fact, the manner of
measure, the lower court, issued a writ of preliminary agreement is itself explicitly stipulated by the Civil
injunction enjoining PNB from enforcing an interest Code when it provides, in Article 1956 that “No
rate above the 21% stipulated in the credit agreement. interest shall be due unless it has been expressly
By this time the spouses were already in default of stipulated in writing.” What has been “stipulated in
their loan obligations. writing” from a perusal of interest rate provision of the
credit agreement signed between the parties is that
ISSUE(S): petitioners were bound merely to pay 21% interest,
subject to a possible escalation or de-escalation, when
Whether or not respondent bank was authorized to 1) the circumstances warrant such escalation or de-
raise its interest rates from 21% to as high as 68% escalation; 2) within the limits allowed by law; and 3)
under the credit agreement. upon agreement. Indeed, the interest rate which
appears to have been agreed upon by the parties to
HELD: the contract in this case was the 21% rate stipulated in
the interest provision. Any doubt about this is in fact
No. The bank is not authorized to do so. readily resolved by a careful reading of the credit
agreement because the same plainly uses the phrase
PNB vigorously denied that the increases in the
“interest rate agreed upon,” in reference to the
interest rates were illegal, unilateral, excessive and
original 21% interest rate.
arbitrary, it argues that the escalated rates of interest
it imposed was based on the agreement of the parties.
In PNB v. CA it was held that unilaterally
The binding effect of any agreement between
raising the interest rate in the
parties to a contract is premised on two settled
borrower’s loan violated the principle
principles: (1) that any obligation arising from
of mutuality of contracts expressed in
contract has the force of law between the parties; and
Article 1308 of the Civil Code.
(2) that there must be mutuality between the parties
based on their essential equality. Any contract which
ART. 1308. The contract must bind both
appears to be heavily weighed in favor of one of
contracting parties; its validity or compliance
the parties so as to lead to an unconscionable cannot be left to the will of one of them.
result is void. Any stipulation regarding the
validity or compliance of the contract which is
In order that obligations arising from contracts
left solely to the will of one of the parties, is
may have the force of law between the parties,
likewise, invalid.
there must be mutuality between the parties based on
their essential equality. A contract containing a obligations, respondent bank was demanding
condition which makes its fulfillment dependent P58,377,487.00 over and above those amounts
exclusively upon the uncontrolled will of one of already previously paid by the spouses.
the contracting parties, is void (Garcia vs. Rita
Escalation clauses are not basically wrong or
Legarda, Inc., 21 SCRA 555). Hence, even assuming
legally objectionable so long as they are not
that the P1.8 million loan agreement between the PNB
solely potestative but based on reasonable and
and the private respondent gave the PNB a license to
valid grounds. Here, as clearly demonstrated above,
increase the interest rate at will during the term of the
not only the increases of the interest rates on the basis
loan, that license would have been null and void for
of the escalation clause patently unreasonable and
being violative of the principle of mutuality essential in
unconscionable, but also there are no valid and
contracts.
reasonable standards upon which the increases are
anchored.
Apart from violating the principle of mutuality of
contracts, there is authority for disallowing the interest 5. Cebu International Corp. vs. CA
rates imposed by respondent bank, for the credit
agreement specifically requires that the increase be FACTS:
“within the limits allowed by law.” Under PD 1684
(Usury Law), escalation clauses to be valid should Petitioner is a quasi-banking institution
specifically provide: (1) that there can be an involved in money market transactions. Alegre
increase in interest if increased by law or by the invested with petitioner P500,000. Petitioner issued
Monetary Board; and (2) in order for such stipulation then a promissory note, which would mature
to be valid, it must include a provision for reduction of approximately after a month. The note covered for
the stipulated interest ‘in the event that the applicable Alegre’s placement plus interest. On the maturity of
maximum rate of interest is reduced by law or by the the note, petitioner issued a check payable to Alegre,
Monetary Board.’ covering the whole amount due. It was drawn from
petitioner’s current account in BPI. When the wife of
The spouses never agreed in writing to pay the
Alegre tried to deposit the check, the bank
increased interest rates demanded by PNB in
dishonored the check.
contravention to the tenor of their credit agreement.
That an increase in interest rates from 18% to as much
Petitioner was notified of this matter and Alegre
as 68% is excessive and unconscionable is
demanded the immediate payment in cash.
indisputable. Between 1981 and 1984, petitioners had
In turn, petitioner promised to replace the check on
paid an amount equivalent to virtually half of the
the impossible premise that the first issued be
entire principal (P7,735,004.66) which was applied to
returned to them. This prompted Alegre to file a
interest alone. By the time the spouses tendered the
complaint against petitioner and petitioner in turn,
amount of P40,142,518.00 in settlement of their
filed a case against BPI for allegedly unlawfully
deducting from its account counterfeit checks. The loans his money to a borrower through a middleman
trial court decided in favor of Alegre. or dealer.