PAN PACIFIC SERVICE CONTRACTORS, INC.

and
RICARDO F. DEL ROSARIO,
Petitioners,
- versus -
EQUITABLE PCI BANK (formerly THE PHILIPPINE COMMERCIAL INTERNATIONAL BANK),
Respondent. (G.R. No. 169975) March 18, 2010

HELD:

Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates
that no interest shall be due unless it has been expressly stipulated in writing. Therefore, payment
of monetary interest is allowed only if:

(1) there was an express stipulation for the payment of interest; and
(2) the agreement for the payment of interest was reduced in writing. The concurrence
of the two conditions is required for the payment of monetary interest. 33 cЃa cЃaląw

We agree with petitioner’s interpretation that in case of default, the consent of the
respondent is not needed in order to impose interest at the current bank lending rate. chanrob

Applicable Interest Rate

Under Article 2209 of the Civil Code, the appropriate measure for damages in case of
delay in discharging an obligation consisting of the payment of a sum of money is the payment
of penalty interest at the rate agreed upon in the contract of the parties. In the absence of a
stipulation of a particular rate of penalty interest, payment of additional interest at a rate equal
to the regular monetary interest becomes due and payable. Finally, if no regular interest had
been agreed upon by the contracting parties, then the damages payable will consist of
payment of legal interest which is 6%, or in the case of loans or forbearances of money, 12% per
annum. It is only when the parties to a contract have failed to fix the rate of interest or when
cЃąw

such amount is unwarranted that the Court will apply the 12% interest per annum on a loan or
forbearance of money.
The written agreement entered into between petitioners and respondent provides for an
interest at the current bank lending rate in case of delay in payment and the promissory note
charged an interest of 18%. ch anroblesvirt ua|aw libary

To prove petitioners entitlement to the 18% bank lending rate of interest, petitioners
presented the promissory note prepared by respondent bank itself. This promissory note,
cЃaąw

although declared void by the lower courts because it did not express the real intention of the
parties, is substantial proof that the bank lending rate at the time of default was 18% per annum.
Absent any evidence of fraud, undue influence or any vice of consent exercised by petitioners
against the respondent, the interest rate agreed upon is binding on them. cЃaw

1) Whether or not respondent bank was authorized to raise its interest rates from 21% to as high
as 68% under the credit agreement; and 2) Whether or not respondent bank is granted the
authority to foreclose the Marvin Plaza under the mandatory foreclosure provisions of P.D. 385
In its comment dated April 19, 1994, respondent bank vigorously denied that the increases in the
interest rates were illegal, unilateral, excessive and arbitrary, it argues that the escalated rates of
interest it imposed was based on the agreement of the parties. Respondent bank further
contends that it had a right to foreclose the mortgaged property pursuant to P.D. 385, after
petitioners were unable to pay their loan obligations to the bank based on the increased rates
upon maturity in 1984.

1. The binding effect of any agreement between parties to a contract is premised on two settled
principles: (1) that any obligation arising from contract has the force of law between the parties;
and (2) that there must be mutuality between the parties based on their essential equality. Any
contract which appears to be heavily weighted in favor of one of the parties so as to lead to an
unconscionable result is void. Any stipulation regarding the validity or compliance of the
contract which is left solely to the will of one of the parties, is likewise, invalid.

in Article 1956 that "No interest shall be due unless it has been expressly stipulated in writing."

What has been "stipulated in writing" from a perusal of interest rate provision of the credit
agreement signed between the parties is that petitioners were bound merely to pay 21%
interest…

In Philippine National Bank v. Court of Appeals, 7 this Court disauthorized respondent bank from
unilaterally raising the interest rate in the borrower's loan from 18% to 32%, 41% and 48% partly
because the aforestated increases violated the principle of mutuality of contracts expressed in
Article 1308 of the Civil Code. The Court held:

CB Circular No. 905, Series of 1982 (Exh. 11) removed the Usury Law ceiling on interest rates

. . . increases in interest rates are not subject to any ceiling prescribed by the Usury Law.

but it did not authorize the PNB, or any bank for that matter, to unilaterally and successively
increase the agreed interest rates from 18% to 48% within a span of four (4) months, in violation
of P.D. 116 which limits such changes to once every twelve months.

Besides violating P.D. 116, the unilateral action of the PNB in increasing the interest rate on the
private respondent's loan, violated the mutuality of contracts ordained in Article 1308 of the Civil
Code:

Art. 308. The contract must bind both contracting parties; its validity or compliance cannot be
left to the will of one of them.
In order that obligations arising from contracts may have the force of law between the parties,
there must be mutuality between the parties based on their essential equality. A contract
containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled
will of one of the contracting parties, is void (Garcia vs. Rita Legarda, Inc., 21 SCRA 555).

CIRCULAR No. 494, although it has the effect of law, is not a law. "Although a circular duly issued
is not strictly a statute or a law, it has, however, the force and effect of law." (Emphasis supplied).
"An administrative regulation adopted pursuant to law has the force and effect of law." "That
administrative rules and regulations have the force of law can no longer be questioned."

[G.R. NO. 140425 : March 10, 2005]

JESSE1 YOUNG, Petitioner, v. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES,
Respondents.

In Vaca v. Court of Appeals,29 we held that in determining the penalty to be imposed for
violation of B.P. No. 22, the philosophy underlying the Indeterminate Sentence Law applies. The
philosophy is to redeem valuable human material, and to prevent unnecessary deprivation of
personal liberty and economic usefulness with due regard to the protection of the social order.
There, we deleted the prison sentence imposed on petitioners. We imposed on them only a fine
double the amount of the check issued. We considered the fact that petitioners brought the
appeal, believing in good faith, that no violation of B.P. No. 22 was committed, "otherwise, they
would have simply accepted the judgment of the trial court and applied for probation to evade
prison term."30 We do the same here. We believe such would best serve the ends of criminal
justice.

G.R. No. 197010, June 27, 2018

SPOUSES RODRIGO AND ERLINDA MERCADO, Petitioner, v. SECURITY BANK AND TRUST COMPANY,
Respondent.

The principle of mutuality of contracts is found in Article 1308 of the New Civil Code, which states
that contracts must bind both contracting parties, and its validity or compliance cannot be left
to the will of one of them. The binding effect of any agreement between parties to a contract is
premised on two settled principles: (I) that any obligation arising from contract has the force of
law between the parties; and (2) that there must be mutuality between the parties based on
their essential equality.72 As such, 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 that is potestative or is left solely to the will
of one of the parties is invalid.