Case Digest (G.R. No. 32455)
Facts:
In 1994, Villa Crista Monte Realty & Development Corporation organized to undertake a residential subdivision in Old Balara, Quezon City, acquired initially eight hectares from Alfonso Lim and later an adjoining 13.5 hectares, consolidating 21.5 hectares. To finance development, it secured an ₱80 million credit line from Equitable PCI Bank (now Banco de Oro Unibank, Inc.) and executed a real estate mortgage over its 80,000 sqm property (TCT No. T-145652) with improvements. On August 5, 1995, the mortgaged land was subdivided into 174 lots, each averaging 340 sqm. The corporation applied for and obtained an additional ₱50 million credit, amending its real estate mortgage to cover 41 lots as sufficient security, and releasing the remaining 133 titles. Under the approved ₱130 million credit line, Villa Crista drew funds on multiple occasions between March and August 1997, evidenced by promissory notes with initial interest rates ranging from 13% to 15.5% per annum and maturity dateCase Digest (G.R. No. 32455)
Facts:
- Parties and Transaction
- Villa Crista Monte Realty & Development Corporation (borrower) established a real estate subdivision project in Quezon City.
- Equitable PCI Bank (E-PCIB, now BDO) granted a P130 million credit line secured by a real estate mortgage over 80,000 sqm, later subdivided into 174 lots.
- From March to August 1997, the borrower drew multiple promissory notes under the credit line, each bearing initial interest rates of 13.0%–24.0% per annum and containing a uniform monthly repricing (escalation) clause without an express de-escalation provision.
- Default, Foreclosure, and Proceedings
- E-PCIB, pursuant to the repricing clause, increased interest rates to 21%–36% and notified the borrower; the borrower defaulted on payment.
- E-PCIB initiated extrajudicial foreclosure; the borrower sought nullification of the promissory notes and mortgage, injunctive relief, detailed accounting, and damages.
- The RTC (Apr. 7, 2009) and the CA (Feb. 21, 2013) found the promissory notes, mortgage, and foreclosure valid and denied relief. The borrower’s motion for reconsideration was denied.
Issues:
- Whether an escalation clause lacking a corresponding de-escalation clause violates PD 1684 and the principle of mutuality of contracts.
- Whether the monthly repricing clause in the promissory notes is void as an unconscionable contract of adhesion.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)