Case Summary (G.R. No. 103592)
Applicable Law
The relevant legal framework for this case arises from the 1987 Philippine Constitution and includes the Usury Law and relevant Presidential Decrees, especially Presidential Decree No. 1684, which stipulates the conditions under which interest rates can be increased or decreased.
Loan Agreement and Escalation Clause
Llorin obtained a loan from Apex Mortgage, which stipulated a monthly payment plan with a 12% annual interest rate, escalating under specific circumstances dictated by an escalation clause embedded in the promissory note. This clause allowed Apex to unilaterally adjust interest rates in response to legislative or regulatory changes without prior notice to Llorin.
Interest Rate Adjustments
The trial court documented various adjustments to the interest rate according to Central Bank Circulars: from 12% to 21% in 1980, 21% to 25% in 1984, and subsequently to 36%, with later reductions as per legal requirements. Llorin raised concerns about the validity of these escalations and requested a recomputation of the loan amount.
Procedural History and Court Rulings
Apex filed a complaint for collection when payment demands were not met. The trial court ruled in favor of Apex on April 12, 1991, affirming the validity of the escalation clause. Following Llorin's petition for certiorari, the Court of Appeals upheld the trial court’s decision on January 17, 1992, which prompted this review.
Legal Arguments by Petitioner
Llorin contended that the escalation clause's validity was compromised by its one-sided nature favoring the lender and the absence of a de-escalation clause. He argued that similar clauses in the Supreme Court case of Banco Filipino Savings and Mortgage Bank were ruled invalid under analogous legal principles.
Court's Analysis on Escalation Clause
The Court established that the legality of such escalation clauses had been recognized in Philippine jurisprudence, specifically referencing the Banco Filipino case, where the constitutionality of such clauses was upheld under the right conditions. However, it emphasized the necessity for a corresponding de-escalation clause to ensure mutuality in the contract.
Distinction from Banco Filipino Case
The Court distinguished this case from the Banco Filipino ruling by noting that the escalation clause here included provisions for
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Case Background
- The case involves a petition for review on certiorari filed by Irineo F. Llorin, Jr. against the Court of Appeals and Apex Mortgage and Loans Corporation.
- The petition was prompted by a decision rendered by the Court of Appeals on January 17, 1992, which upheld the judgment of the Regional Trial Court of Manila, Branch 50, dated April 12, 1991.
- The underlying action was a collection of a sum of money, specifically concerning a loan obtained by Llorin from Apex Mortgage.
Facts of the Case
- On April 11, 1978, Llorin secured a loan of P84,410.00 from Apex Mortgage, with monthly installments of P1,142.08 starting May 11, 1978, at an interest rate of 12% per annum.
- The loan was secured by a real estate mortgage and included a service charge of 3% per annum and a penalty of 1.5% for late payments.
- The promissory note included an escalation clause allowing Apex to increase interest rates without notice if a law or any applicable regulation increased the maximum interest rate.
- Following Central Bank Circulars No. 721 and No. 905, Apex Mortgage raised the interest rates on several occasions, resulting in higher monthly amortizations.
Legal Proceedings
- Apex Mortgage demanded payment from Llorin on multiple occasions, with amounts due increasing over time due to accrued interest and penalties.
- Llorin contested the computations based on prior Supreme Court decisions, specifically referencing Ba