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Title
Spouses Florendo vs. Court of Appeals

Case Ponente Decision Date

G.R. No. 101771 PANGANIBAN, 17 Dec 1996
J

The court rules in favor of the petitioners in the case of Spouses

Florendo v. Court of Appeals, stating that the bank did not have a
valid basis to impose an increased interest rate on a housing loan,
maintaining the interest rate at 9% per annum and the monthly
amortization at the original amount.

Case Digest (G.R. No. 101771)

Facts:

Spouses Mariano and Gilda Florendo !led a case against the Land
Bank of the Philippines (respondent) for injunction with damages.

Gilda Florendo, an employee of the bank, was granted a housing loan.

The loan agreement and mortgage contract contained provisions

allowing for an increase or decrease in the interest rate in accordance
with prevailing rules and regulations of the Central Bank of the
Philippines.

The bank unilaterally increased the interest rate on the loan from 9%
to 17% based on a ManCom Resolution and PF Memorandum Circular.

The petitioners argued that the increase was onerous, had no basis in
 the contracts, violated the Usury Law, and was contrary to morals,
good customs, public order, and public policy.

Issue:

Whether the bank had a valid and legal basis to impose the increased
interest rate on the housing loan.

Ruling:

The court ruled in favor of the petitioners and held that the bank did
not have a valid basis to impose the increased interest rate.

The court reversed the decision of the Court of Appeals and

maintained the interest rate at 9% per annum and the monthly
amortization at the original amount.

Ratio:

The escalation clause in the mortgage contract only allowed for an

increase or decrease in the interest rate in accordance with prevailing
rules and regulations of the Central Bank.

The ManCom Resolution was not a valid basis for the increase in
interest rate.

The unilateral determination and imposition of increased interest

rates by the bank violated the principle of mutuality of contracts.

The bank had the option to include resignation as a ground for

escalation in the loan contracts, but it did not do so.

Therefore, the bank must live with the omission and cannot impose
such condition retroactively.