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Floreindo v. Metrobank
Floreindo v. Metrobank
FACTS: On March 20, 1996 Floirendo, Jr. obtained a loan from Metrobank to infuse additional working capital for his company. As
security he executed a REM over his four parcels of land in CDO. The loan was renewed for another year secured by the same REM. It
fixed the interest at 15.4% per annum for the first 30 days and subject to upward/downward adjustment every 30 days thereafter based on
any unpaid principal.
On 1997, Metrobank started imposing higher interest rates on loan as high as 30.244% on October 1997. As a result petitioner could no
longer pay the high interest rate charged by Metrobank.
Metrobank agreed to the proposal of Floreindo to renew his loan provided that he would pay the arrears in interest amounting to the total
sum of P163,138.33. Despite payment by petitioner, respondent bank, instead of renewing the loan, foreclosed the mortgaged property.
On August 17, 1998, the auction sale was set.
Prior on auction sale, Floirendo complaint for reformation of real estate mortgage contract and PN referring to them as Contracts of
Adhesion alleging that Metrobank’s increased interest rates unilaterally imposed by respondent bank are scandalous, immoral, illegal
and unconscionable. He also alleged that the terms and conditions of the real estate mortgage and the promissory note are such that they
could be interpreted by respondent bank in whatever manner it wants, leaving petitioner at its mercy
ISSUE: WON the mortgage contract and the promissory note express the true agreement between the parties therein.
RULING: The provision in the promissory note authorizing respondent bank to increase, decrease or otherwise change from time to
time the rate of interest and/or bank charges “without advance notice” to petitioner, “in the event of change in the interest rate prescribed
by law or the Monetary Board of the Central Bank of the Philippines,” does not give respondent bank unrestrained freedom to charge
any rate other than that which was agreed upon.
Here, the monthly upward/downward adjustment of interest rate is left to the will of respondent bank alone. It violates the essence of
mutuality of the contract.
The promissory note gives respondent bank authority to increase the interest rate at will during the term of the loan. This stipulation
violates the principle of mutuality between the parties. It would be converting the loan agreement into a contract of adhesion where the
parties do not bargain on equal footing, the weaker party’s (petitioner’s) participation being reduced to the alternative “to take it or leave
it.”
There has been meeting of minds of the parties upon these documents. However, these documents do not express the parties’ true
agreement on interest rates. And the failure of these documents to express their agreement on interest rates was due to respondent bank’s
inequitable conduct.