Case Digest (G.R. No. 208336)
Facts:
Villa Crista Monte Realty & Development Corporation v. Equitable PCI Bank, G.R. No. 208336, November 21, 2018, Supreme Court First Division, Bersamin, J., writing for the Court.Petitioner Villa Crista Monte Realty & Development Corporation (borrower) obtained a P130 million credit line from respondent Equitable PCI Bank (E‑PCIB, now Banco de Oro) secured by a real estate mortgage over subdivided lots in Quezon City. Between March and August 1997 the borrower drew multiple advances, each evidenced by bank‑prepared promissory notes that contained a uniform rider providing for monthly repricing (an escalation clause) of interest rates “to be determined by the Lender without need of prior notice,” coupled with an option for the borrower to prepay within five days to reject a new rate. The bank issued notices of repricing and on several occasions actually lowered interest rates; on others it raised rates up to the mid‑20s to 30s percent.
After petitioner defaulted on obligations totaling approximately P129.7 million, E‑PCIB commenced extrajudicial foreclosure and became the highest bidder at auction. Petitioner sought injunctive relief and filed a complaint in the Regional Trial Court (RTC), Branch 216, Quezon City, seeking nullification of the promissory notes and mortgage, accounting, damages, and other reliefs. The RTC ruled for E‑PCIB on April 7, 2009, upholding the promissory notes and mortgage and validating the foreclosure and sale.
Petitioner appealed to the Court of Appeals (CA). On February 21, 2013 the CA affirmed the RTC, finding that the escalation/repricing clause was not void because the borrower had knowledge of and acquiesced to repricing, and because the bank had on some occasions reduced interest—thus mitigating the one‑sidedness the law seeks to prevent; the CA also held that the notes, though bank‑prepared forms, were not void as contracts of adhesion in the absence of proof that petitioner was coerced or deprived of meaningful bargaining. The CA denied petitioner’s motion for reconsideration on July 26, 2013.
Petitioner filed a petition for review on certiorari before the Supreme Court (Rule 45), challenging the CA’...(Subscriber-Only)
Issues:
- Did the Court of Appeals commit reversible error in affirming the validity and enforceability of the promissory notes’ monthly repricing (escalation) clause despite the lack of an express de‑escalation clause?
- If the promissory notes are contracts of adhesion, does that alone render them invalid absent proof of imposition or domination by the bank?
- Were payments made by petitioner in excess of the original interest rate required to be credit...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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