Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Ruling:
The SC ruled that the real estate mortgage and promissory notes were
valid, as well as the foreclosure proceedings. The provision found in the
promissory notes is commonly known as the escalation clause, which
refers to the stipulation allowing increases in the interest rates agreed
upon by the contracting parties. It is validly stipulated in commercial
contracts. The escalation clause is not void per se, the clause would only
be void if it violates the principle of mutuality of contracts wherein it
grants the creditor an unbridled right to adjust the interest
independently and deprive the debtor of the right to assent to an
important modification in the agreement. A de-escalation clause is an
indispensable requisite to the validity of the escalation clause in the
contract. No express de-escalation clause was stipulated in the
promissory notes, yet its absence did not invalidate the repricing of the
interest rates. The repricing notices indicated that on some occasions,
the bank had reduced or adjusted the interest rates downward. Despite
the absence of the corresponding de-escalation clause, the actual grant
by the respondent of the decreases in the interest rates rendered
inexistent the evil of inequality sought to be thwarted.
There was mutuality of contracts between petitioner and respondent,
the former’s president signed the promissory notes and was aware of
the certain provision on the interest rates. The respondent nonetheless
accorded the petitioner the notice of any repricing of the interest rates
despite being not obliged, this is in order to give the petitioner the option
to reject the repricing or has implemented the downward repricing.
The contract of adhesion is not invalid per se but is as binding as any
contract. The petitioner drew the amount of credit line on various
occasions and thus was afforded the opportunity to discuss or negotiate
the interest rates.
There was no showing by the petitioner that it had been placed at any
disadvantage. Respondent bank readily acceded to the request of the
petitioner for the release of some lots. Also, the petitioner’s President,
trained and experienced in the field of business, functioned without
duress or force in signing the various promissory notes and allied
agreement on petitioner’s behalf.
Hence, the petitioner for review on certiorari was denied.