BY ATTY. JULIUS GREGORY B. DELGADO
UNITED COCONUT PLANTERS BANK VS. EDITHA F. ANG AND VIOLETA M. FERNANDEZ, G.R. NO. 222448 (MARCH 3, 2025): FORECLOSURE PROCEEDINGS SET ASIDE SINCE THE CREDIT AGREEMENT WAS DECLARED VOID DUE TO UNILATERAL IMPOSITION OF INTEREST RATE
In a Resolution dated March 3, 2025, the Supreme Court modified its earlier Decision dated November 24, 2021, which affirmed the ruling of the Court of Appeals and Regional Trial Court that while the interests imposed by petitioner United Coconut Planters Bank (UCPB) on the loan obtained by respondents Editha F. Ang and Violeta M. Fernandez were unlawful, as it was not shown that the latter could have agreed to the said interests, much less to the interest rates that petitioner UCPB would charge them, the foreclosure proceedings were still valid.
Upon Motion for Reconsideration by respondents Ang and Fernandez seeking also to invalidate the resultant foreclosure arising from rendering the loan and its interest unlawful, the Supreme Court reexamined its application of the cases of Spouses Andal vs. Philippine National Bank, G.R. No. 194201 (November 27, 2013), and Spouses Albos vs. Spouses Embisan, G.R. No. 210831 (November 26, 2014). Earlier in its Decision, the Supreme Court refused to render the foreclosure invalid stating that the facts in those cases are not at all fours as in the instant case. In its Decision, the Court held that in Spouses Andal vs. Philippine National Bank, supra, the borrowers were unable to pay their loan solely due to “exorbitant rate of interest unilaterally determined and imposed” by the bank. On the other hand, in the present case, respondents Ang and Fernandez defaulted in their loan obligation “due to dollar shortage, high exchange rate.” In Spouses Andal vs. Philippine National Bank, supra, the borrowers were able to pay substantial portion of their loan around Php14,800,000.00 out of Php21,805,000.00 or around 68% while in the instant case, borrowers were only able to pay Php2,349,514.95 of their Php16,000,000.00 principal obligation.
Upon taking a second hard look, the Supreme Court held that Spouses Andal vs. Philippine National Bank, supra, and Spouses Albos vs. Spouses Embisan, supra, were not made to depend on the cause of non-payment of the principal loan; nor was the amount paid against the principal loan taken into consideration, in so making the clarification anent the validity of the subsequent foreclosure proceedings. The Supreme Court held that if the interest rates were unconscionable or unilaterally imposed by the mortgagee, the foreclosure proceedings that followed should be annulled.
The Court held: “In the instant case, not only was there a finding, both by this Court and also by the courts below, that the interest rates being imposed were unilaterally imposed by petitioner, thus making it potestative or entirely dependent on petitioner’s will. Being potestative, the principle of mutuality of contracts, found in Articles 1308 and 1309 of the Civil Code, could not have been present, making the provisions on interest void.
Being void, the subsequent foreclosure proceedings could not have been held validly. This is the essence of both the Spouses Andal and the Spouses Albos cases, which this Court now finds to be applicable after all, and should be relied upon for being more attuned to our civil laws and more in keeping with the spirit of fair play and justice.
Indeed, both Spouses Andal and Spouses Albos support the Dissenting Opinion of Justice Zalameda whose view, to the mind of this Court, should now be adopted. The unilateral imposition of interests, at such rate that the lender or mortgagee so pleases, cannot and should not be a reason to justify a foreclosure sale. The mortgagor should be given a chance to pay their indebtedness at an interest rate clearly agreed upon by the parties, otherwise, they shall be at the mercy of their creditor, standing to lose their property without being afforded a fair opportunity to settle their indebtedness.”
It appears that the core consideration of this ruling of the Supreme Court is equity since the unilateral imposition of interests, will leave the borrower or mortgagor at the mercy of the lender or mortgagee as it may not give the borrower the chance to settle his or her obligation losing his or her property to foreclosure.