ASG Law

Tag: Mutuality of Contracts

  • Unilateral Power in Contracts: Safeguarding Fairness in Lease Agreements

    The Supreme Court, in Gotesco Properties, Incorporated vs. Victor C. Cua, invalidated an escalation clause in a lease agreement that allowed Gotesco to unilaterally increase common area and aircon dues (CAAD). The Court emphasized that contract modifications, especially regarding interest rates, require mutual consent. This ruling protects lessees from arbitrary rate hikes and reaffirms the principle of mutuality of contracts, ensuring fairness and preventing one-sided agreements where one party has excessive control. This decision highlights the importance of balanced contractual terms and the need for transparency and mutual agreement in financial obligations within lease arrangements.

    Fair Play or One-Sided Deal: When Can a Lessor Dictate Rent Increases?

    In 1994, Victor C. Cua leased commercial spaces from Gotesco Properties, Inc. at Ever-Gotesco Commonwealth Center for his jewelry and amusement businesses. The leases, prepaid for 20 years, included a clause requiring Cua to pay CAAD, covering common areas and centralized services. This case revolves around the validity of an escalation clause that allowed Gotesco to adjust these CAAD fees, specifically whether Gotesco had the right to unilaterally increase these charges without Cua’s explicit agreement.

    The contracts contained a stipulation regarding the payment of CAAD:

    17. Common Area Dues and Other Charges – Unless otherwise arranged with the LESSOR, the LESSEE shall pay monthly common area dues equivalent to Two Pesos (P2.00) per square meter per day and aircon dues of Two and 25/100 Pesos (P2.25) per square meter per day or the gross amount of Four and 25/100 [Pesos] (P4.25) per square meter [per day] on or before the 5th day of each month, without the necessity of demand from the LESSO[R]. Any interruption or disturbance of the possession of the LESSE[E] due to fortuitous events shall not be a cause for non-payment of the common area dues.

    The aforementioned common area and aircon dues shall bear an annual escalation, compounded, at eighteen [percent] (18%) effective calendar year 1995 or at a rate to be determined by [the] LESSOR if said dues shall not be sufficient to meet inflation, Peso[ ]devaluation, and other escalation in utility and maintenance costs at any point in time.

    From 1997 to 2003, Gotesco imposed escalation costs on the CAAD, totaling P2,269,735.64. Cua contested these increases, arguing they were unfair and lacked a factual basis. Gotesco, however, insisted on the validity of the escalation clause, leading Cua to file a complaint for injunctive relief and restitution.

    The Regional Trial Court (RTC) ruled in favor of Cua, invalidating the escalation clause for violating the principle of mutuality of contracts. The RTC explained that Gotesco’s unrestrained right to unilaterally adjust the CAAD escalation costs deprived Cua of the right to assent to an important modification in their contract. The Court of Appeals (CA) partly granted Gotesco’s appeal, interpreting the escalation clause as having two scenarios: an 18% interest rate in the absence of inflation and a rate determined by Gotesco in case of inflation. The CA deemed the latter scenario invalid for violating mutuality but affirmed the RTC’s order to return the collected amount, subject to re-computation.

    The Supreme Court addressed whether the CAAD escalation clause was valid and whether Cua was entitled to attorney’s fees. The Court underscored the principle of mutuality of contracts, which stipulates that a contract binds both parties and its validity or compliance cannot depend on the will of only one party. Modifications to a contract, especially concerning interest rates or financial obligations, must be mutually agreed upon to be binding.

    The second paragraph of Clause 17 of the lease contracts was at the heart of the issue:

    The aforementioned common area and aircon dues shall bear an annual escalation, compounded, at eighteen [percent] (18%) effective calendar year 1995 or at a rate to be determined by [the] LESSOR if said dues shall not be sufficient to meet inflation, Peso[ ]devaluation, and other escalation in utility and maintenance costs at any point in time.

    The Supreme Court found that this clause granted Gotesco the unilateral right to determine the interest rate, violating the principle of mutuality of contracts. An escalation clause allows for an increase in interest rates, but it must not grant one party an unbridled right to adjust the interest independently and upwardly, depriving the other party of the right to assent. Here, Gotesco could impose an 18% interest rate or any rate it determined, making the clause wholly potestative and solely dependent on Gotesco’s will.

    The Court also noted that the CA erred in its interpretation of the clause. The phrase implied that if the CAAD was insufficient to meet economic challenges, Gotesco could impose an interest rate it desired, which could range from 18% or another rate. The Supreme Court emphasized that the imposition of varying interest rates, without Cua’s consent, resulted in a modification of the contract that required mutual agreement. The absence of a clear standard or ceiling on the interest rate, coupled with the fact that the CAAD even exceeded the monthly rent, highlighted the unfairness of the clause.

    In justifying the escalation, Gotesco cited the Asian currency crisis and increased utility rates, but it failed to provide concrete evidence to support these claims. The Court cited Citibank, v. Sabeniano, emphasizing that it cannot simply take judicial notice of the Asian currency crisis and automatically declare extraordinary inflation. The burden of proving such extraordinary conditions rests on the party alleging it and must be supported by competent evidence.

    Montano S. Tejam, Gotesco’s Mall Operations Head, admitted that he had no specific knowledge of the value of the increases and simply computed the 18% escalation based on the economic situation. Moreover, he acknowledged that certain expenses, such as security and administrative salaries, were not included in Clause 17 but were used as grounds for the escalation. This demonstrated Gotesco’s unbridled and baseless manner of determining and imposing CAAD escalation costs.

    Because of the invalid CAAD escalation clause, the Court ordered Gotesco to return P2,269,735.64 to Cua, with interest at 6% per annum from the finality of the ruling. The CAAD dues from 1997 onward were to be re-computed based on the initial rate of P4.25 per square meter per day, as stated in the first paragraph of Clause 17.

    The Supreme Court determined that Cua was entitled to attorney’s fees under Article 2208 of the Civil Code, which allows such awards when a party is compelled to litigate to protect their interests due to another party’s unjustified act or omission. The RTC initially awarded attorney’s fees considering the length of the litigation, the remedies sought, and the discovery availed. The Supreme Court acknowledged the protracted nature of the case, including numerous proceedings and the hiring of two counsels by Cua. Additionally, Gotesco insisted on an escalation clause that was found to be void for violating the principle of mutuality, further justifying the award of attorney’s fees, though the amount was reduced to P100,000.00.

    FAQs

    What was the key issue in this case? The key issue was whether the escalation clause in the lease agreements, allowing Gotesco to unilaterally increase CAAD, was valid under the principle of mutuality of contracts.
    What is the principle of mutuality of contracts? The principle of mutuality of contracts means that a contract is binding on both parties, and its validity or compliance cannot depend on the will of only one party. Any modification must be mutually agreed upon.
    Why did the Supreme Court invalidate the escalation clause? The Court invalidated the clause because it granted Gotesco an unbridled right to determine and impose interest rates without Cua’s consent, violating the principle of mutuality.
    What evidence did Gotesco present to justify the CAAD increases? Gotesco cited the Asian currency crisis and increased utility rates but failed to provide concrete evidence linking these factors directly to the CAAD escalation, relying instead on a general economic situation.
    What did the Court order Gotesco to do? The Court ordered Gotesco to return P2,269,735.64 to Cua, with interest, and to re-compute the CAAD dues based on the initial rate of P4.25 per square meter per day.
    Was Cua awarded attorney’s fees? Yes, Cua was awarded attorney’s fees of P100,000.00, considering the protracted nature of the case, the remedies sought, and Gotesco’s insistence on a void escalation clause.
    What is an escalation clause in a contract? An escalation clause is a provision that allows for an adjustment in prices or rates based on certain conditions, such as inflation, but it must not grant one party unilateral and unchecked power to make adjustments.
    How does this ruling protect lessees? This ruling protects lessees by preventing lessors from unilaterally increasing fees or charges without mutual agreement, ensuring that contractual terms are fair and balanced.

    In conclusion, this case underscores the importance of mutual consent and fairness in contractual agreements, particularly regarding financial obligations in lease contracts. The ruling serves as a reminder that contractual terms must be balanced and transparent, preventing one party from exerting undue influence over the other.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Gotesco Properties, Incorporated vs. Victor C. Cua, G.R. No. 228513 and G.R. No. 228552, February 15, 2023

  • Upholding Mutuality in Loan Agreements: Scrutinizing Interest Rate Adjustments

    This Supreme Court decision clarifies the application of the principle of mutuality of contracts in loan agreements, particularly concerning interest rate adjustments. The Court ruled that an escalation clause allowing for interest rate adjustments is valid if it includes certain conditions, such as providing notice to the borrower and allowing them the option to prepay the loan if they disagree with the new rate. The decision underscores the importance of clearly defined terms in loan agreements and the need for both parties to adhere to the agreed-upon conditions. This case reinforces the idea that while banks can adjust interest rates based on market conditions, they must do so transparently and with the borrower’s consent or option to exit the agreement.

    Variable Interest Rates: Valid Agreements or Unilateral Impositions?

    Sprint Business Network and Cargo Services, Inc. (Sprint) obtained loans from Land Bank of the Philippines (LBP), secured by a real estate mortgage. The loan agreements contained provisions allowing LBP to adjust interest rates quarterly. When Sprint defaulted, LBP foreclosed on the property. Sprint then filed a complaint, arguing that LBP unilaterally increased the interest rates, violating the principle of mutuality of contracts. The Regional Trial Court (RTC) dismissed Sprint’s complaint, but the Court of Appeals (CA) reversed, declaring the interest rates null and void and nullifying the foreclosure. The Supreme Court (SC) then reviewed the CA’s decision, leading to the central question of whether LBP’s interest rate adjustments were valid or a violation of Sprint’s contractual rights.

    The Supreme Court, in reversing the Court of Appeals’ decision, emphasized the principle of mutuality of contracts as enshrined in Article 1308 of the Civil Code, which states that contracts must bind both parties and cannot be left to the will of one party. The Court acknowledged that, per Art. 1956 of the Civil Code, “no interest shall be due unless it has been expressly stipulated in writing.” However, the Court distinguished this case from situations where interest rate adjustments are made without clear, pre-agreed terms. The Court highlighted that the loan agreements between Sprint and LBP included an escalation clause that stipulated the conditions under which interest rates could be adjusted. These conditions were critical to the Court’s finding that LBP did not violate the principle of mutuality.

    The Borrower hereby agrees that the rate of interest fixed herein may be increased or decreased if during the term of the Loan/Line or in any renewal or extension thereof, there are changes in the interest rate prescribed by law or the Monetary Board of the Bangko Sentral ng Pilipinas or there are changes in the Bank’s overall cost of funding/maintaining the Loan/Line or intermediation on account or as a result of any special reserve requirements, credit risk, collateral business, exchange rate fluctuations and changes in the financial market. The Borrower shall be notified of the increase or decrease which shall take effect on the immediately succeeding installment or amortization payment following such notice. Should there be a disagreement with the interest adjustment, the Borrower shall so inform the Bank in writing and within 30 days from receipt of the Bank’s notice of interest adjustment, prepay the Loan/Line in full together with accrued interest and all other charges which may be due thereon except for prepayment penalty. If the Borrower fails to prepay the Loan/Line as herein provided, the Bank may, at its option, consider the Loan/Line as due and demandable unless advised by the Borrower that he/[she] is agreeable to the adjusted interest rate.

    The Court pointed out that these conditions included notifying Sprint of any interest rate adjustments, allowing the adjustments to take effect only on the next installment payment following the notice, and giving Sprint the option to prepay the loan if they disagreed with the adjusted rates. Because Sprint had the option to prepay the loan if they disagreed with any increase in interest rates, the court found that the element of mutuality was preserved. The escalation clause was not solely potestative, meaning it was not solely dependent on the will of LBP.

    The Court emphasized that Sprint voluntarily signed the promissory notes and other loan documents, thereby agreeing to the interest rate adjustments stipulated therein. Absent any evidence of force or compulsion, Sprint was bound by the terms of the contract. The Court acknowledged that while loan documents are often contracts of adhesion, where one party sets the terms, they are not automatically invalid. Sprint, as a business corporation, could have negotiated, renegotiated, or rejected the terms entirely. This freedom to contract is a cornerstone of commercial law, and the Court was hesitant to interfere with agreements freely entered into by parties with presumed business acumen.

    Furthermore, the Supreme Court cited precedents such as Solidbank Corporation v. Permanent Homes, Inc., to support the validity of escalation clauses in loan agreements. The Court noted that the Usury Law had been rendered ineffective, allowing parties to agree on any interest rate. However, this did not give lenders an unlimited license to increase rates. The agreement on interest rates and any adjustments must be mutual and in writing. In this case, the escalation clause met these requirements, as it provided for written notice to Sprint and an option to prepay the loan if the adjusted rates were unacceptable. The Court reiterated that obligations arising from contracts have the force of law between the parties, provided there is mutuality based on essential equality. A contract that makes fulfillment dependent exclusively on one party’s will is void, but that was not the case here.

    The Supreme Court also addressed the Court of Appeals’ reliance on Spouses Juico v. China Banking Corporation, distinguishing it from the present case. In Spouses Juico, the escalation clause allowed the bank to increase interest rates without any advance notice, which the Court found to violate the principle of mutuality. In contrast, the LBP-Sprint loan agreements required notice and provided an option for Sprint to prepay the loan. The LBP adjustments were also tied to objective factors such as changes in legal interest rates, Bangko Sentral ng Pilipinas regulations, and the bank’s cost of funding. The bank’s adjustments in the interest rates were not, therefore, hinged solely on its discretion, but by several factors outside of its control.

    The Court highlighted that Sprint did not present evidence that it did not receive notice of the interest rate adjustments or that it objected to them. The Court also noted that the interest rates varied over time, sometimes increasing and sometimes decreasing, reflecting market fluctuations rather than arbitrary decisions by LBP. Had Sprint disagreed with the adjusted interest rates, it should have formally objected, as per the loan agreements. Instead, it negotiated for loan restructuring, which ultimately failed. The Court noted that Sprint failed to submit a restructuring proposal or prove that LBP agreed to suspend foreclosure pending restructuring. The burden of proof lies with the party asserting a fact, and Sprint did not provide sufficient evidence to support its claims.

    Finally, the Court affirmed the lower court’s finding that LBP complied with the requirements of Act No. 3135, as amended, in conducting the foreclosure proceedings. LBP posted notices of the foreclosure sale in public places and published the notice in a newspaper of general circulation. The Court found no reason to disturb these findings, ultimately granting LBP’s petition and reinstating the RTC’s decision.

    FAQs

    What was the key issue in this case? The key issue was whether the interest rate adjustments made by Land Bank of the Philippines (LBP) on loans to Sprint Business Network and Cargo Services, Inc. (Sprint) violated the principle of mutuality of contracts. Sprint argued that LBP unilaterally increased the interest rates without their consent.
    What is the principle of mutuality of contracts? The principle of mutuality of contracts, as stated in Article 1308 of the Civil Code, means that a contract must bind both parties and its validity or compliance cannot be left to the will of only one party. This ensures fairness and equality in contractual relationships.
    What is an escalation clause in a loan agreement? An escalation clause is a provision in a contract that allows for the adjustment of prices or rates based on certain factors, such as changes in market conditions or legal regulations. In loan agreements, it typically allows the lender to adjust the interest rate under specified conditions.
    Under what conditions is an escalation clause valid? An escalation clause is valid if it is not solely potestative (dependent on the will of one party) and is based on reasonable and valid grounds, such as changes in the law or market rates. The borrower must also be notified of the adjustments and have the option to prepay the loan if they disagree.
    Did the Supreme Court find the escalation clause in this case valid? Yes, the Supreme Court found the escalation clause in the loan agreements between LBP and Sprint to be valid. The Court noted that Sprint was notified of the interest rate adjustments and had the option to prepay the loan if they disagreed with the new rates.
    What evidence did Sprint lack in its argument against LBP? Sprint lacked evidence to show that it did not receive notice of the interest rate adjustments or that it objected to them in writing. Sprint also failed to prove that LBP agreed to suspend the foreclosure pending loan restructuring.
    How did this case differ from Spouses Juico v. China Banking Corporation? In Spouses Juico, the escalation clause allowed the bank to increase interest rates without any advance notice, which violated the principle of mutuality. In contrast, the LBP-Sprint loan agreements required notice and provided an option for Sprint to prepay the loan, thereby preserving mutuality.
    What is the significance of voluntary agreement in contracts? Voluntary agreement is a fundamental principle in contract law. When parties voluntarily sign a contract, they are generally bound by its terms, unless there is evidence of fraud, force, or undue influence. Courts are hesitant to interfere with agreements freely entered into by competent parties.
    What was the final ruling of the Supreme Court? The Supreme Court granted LBP’s petition and reinstated the Regional Trial Court’s decision, which dismissed Sprint’s complaint. The Court upheld the validity of the foreclosure proceedings and the interest rate adjustments made by LBP.

    This decision underscores the importance of clear and comprehensive loan agreements that define the conditions under which interest rates can be adjusted. It serves as a reminder to borrowers to carefully review and understand the terms of their loan agreements before signing, and to promptly raise any objections to adjusted rates in accordance with the agreed-upon procedures. For lenders, it emphasizes the need to adhere to the agreed-upon conditions for adjusting interest rates and to provide clear and timely notice to borrowers.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: LAND BANK OF THE PHILIPPINES vs. SPRINT BUSINESS NETWORK AND CARGO SERVICES, INC., G.R. No. 244414, January 16, 2023

  • GSIS Cannot Unilaterally Alter Contract Terms: Protecting Borrowers’ Rights

    The Supreme Court ruled that the Government Service Insurance System (GSIS) cannot unilaterally change the terms of a Deed of Conditional Sale. This decision protects borrowers by ensuring that GSIS adheres to the original contract terms, preventing unexpected increases in monthly amortizations or changes in the application of payments. The court emphasized that disputes arising from contractual obligations, rather than the GSIS’s internal policies, fall under the jurisdiction of regular courts, ensuring fairness and upholding the principle of mutuality in contracts.

    Housing Loan Hurdles: Can GSIS Unilaterally Change the Rules?

    Spouses Lourdes and Raul Rafael entered into a Deed of Conditional Sale with ARB Construction Company, Inc. in 1990 for a property financed through a GSIS housing loan. Lourdes, a government employee, had her monthly amortizations automatically deducted from her salary. Years later, GSIS claimed the Rafaels had an outstanding balance due to a recalculated interest based on Board Resolution No. 365, which implemented a Graduated Payment Scheme (GPS). GSIS then canceled the Deed of Conditional Sale. The Rafaels filed a complaint for specific performance, injunction, and damages, arguing that GSIS unilaterally increased their monthly payments without proper notice or contractual basis. The core legal question is whether GSIS can unilaterally alter the terms of a contract and whether disputes arising from such alterations fall under the jurisdiction of the regular courts or the GSIS Board of Trustees.

    The Court of Appeals (CA) reversed the trial court’s decision, stating that the GSIS Board of Trustees (GSIS-BOT) had jurisdiction over the case, citing Republic Act No. 8291 (RA 8291), also known as the GSIS Act of 1997, and its implementing rules. The CA relied on Section 30 of RA 8291, which grants the GSIS original and exclusive jurisdiction to settle any dispute arising under this Act and any other laws administered by the GSIS. The CA also pointed to Section 27 of the Revised Implementing Rules and Regulations of RA No. 8291, which includes housing loans and related policies within the GSIS-BOT’s jurisdiction. GSIS argued that the doctrine of primary jurisdiction applied because the resolution of the issues required the special knowledge, experience, and expertise of the GSIS-BOT.

    However, the Supreme Court disagreed with the Court of Appeals’ interpretation. The Court emphasized that interpreting Section 30 of RA 8291 in such a manner would violate the aggrieved party’s right to due process. It stated that it is the solemn duty of the Court to ensure that laws are interpreted in a manner consistent with the letter, spirit, and intent of the Constitution and the law. The Court clarified that the proceedings contemplated under Section 30 involve a two-fold function of investigation and adjudication of rights and obligations. These functions must be carried out impartially and independently, ensuring that the hearing officer and decision-maker are free from bias.

    The Supreme Court held that a body cannot be the investigator, prosecutor, and judge of its own complaint or its own assailed action. This principle is essential to maintain the impartiality and independence of the decision-making process, which is a cornerstone of due process. The Court cited Government Service Insurance System v. Court of Appeals, amplifying Ang Tibay v. Court of Industrial Relations, emphasizing the requirement of an impartial tribunal. The Court stated:

    … what Ang Tibay failed to explicitly state was, prescinding from the general principles governing due process, the requirement of an impartial tribunal which, needless to say, dictates that one called upon to resolve a dispute may not sit as judge and jury simultaneously, neither may he review his decision on appeal.

    The Court further clarified that the clause “any dispute arising under this Act and any other laws administered by the GSIS” in Section 30 of RA 8291 cannot be invoked in disputes that compromise the due process requirement of impartiality and independence. This clause must be construed in a manner that does not make it a potestative condition dependent upon the sole will of the obligor, which would be unfair and offensive to the principle of mutuality of contracts. According to the Court:

    If pursuant to Section 30, it were up just to the GSIS-BOT to determine the fulfilment of its obligations, this scheme will be both unfair and offensive to the principle of mutuality of contracts. We must avoid an interpretation of Section 30 that makes it a potestative condition, which in turn is void.

    Therefore, the Court reasoned that disputes falling under the GSIS-BOT’s jurisdiction must refer only to matters that the GSIS-BOT has the statutory authority to act on, but not to those that have not been committed to it. These are disputes regarding matters on which the GSIS-BOT has acquired expertise and specialized knowledge, consistent with the doctrine of primary jurisdiction. The Supreme Court emphasized that disputes within the GSIS-BOT’s primary jurisdiction would include those concerning the availability of benefits, the amounts thereof, the conditions of their availability, and the circumstances warranting their termination or revocation, including those of loans, to ensure the actuarial solvency of its funds.

    The Court then distinguished disputes that reduce the GSIS to an adverse party-litigant itself, where its policies serve as mere counter-arguments to the claims of a complaining party. These disputes do not qualify as “any dispute arising under” Section 30 of RA 8291. Instead, they revolve around laws other than those administered by GSIS, such as constitutional issues, general questions of law of central importance to the legal system as a whole, and issues related to the jurisdictional boundaries between two or more decision-makers. Applying these principles to the Rafaels’ complaint, the Court held that their dispute with GSIS did not arise under the laws administered by it. The determination of their dispute relied upon the application of other sets of laws, making it a matter the GSIS-BOT had neither the authority nor the specialized knowledge and expertise to resolve originally and exclusively.

    The Supreme Court emphasized that the relief prayed for by the Rafaels was something the GSIS-BOT could not grant. The complaint sought specific performance, injunction, and damages, remedies that required the application of laws beyond the scope of GSIS’s administrative authority. The Court noted that specific performance, which involves requiring exact performance of a contract, falls within the exclusive jurisdiction of the Regional Trial Court. The GSIS, as a decision-maker, cannot restrain itself from canceling the conditional sale or compel itself to continue and complete the sale. These actions pertain to its role as a contracting party, not as an administrative body under Section 30. The Supreme Court emphasized that the trial court had to consult laws that did not bear the imprint of the specialized knowledge and expertise of GSIS. Consequently, the relief granted by the trial court was not within the authority of GSIS to grant.

    The Court also addressed the argument that the dispute involved the application of GSIS Board Resolution No. 365, which recalculated the interests for the Deed of Conditional Sale under the Graduated Payment Scheme. The Court clarified that the central issue was not the interpretation and application of this Board Resolution, which would have fallen within Section 30 of RA 8291. Instead, the issue was whether this Board Resolution was in accord with the undertakings of the GSIS in the Deed of Conditional Sale Account No. HSH4224433 dated November 10, 1990. This issue pertained to principles of contract law and civil law, rather than laws administered by GSIS.

    The Court further emphasized that GSIS had descended to the level of an ordinary contracting party whose actions under the relevant contractual undertakings are subject to review by the courts, not by the GSIS-BOT. To argue otherwise would institutionalize an unfair scheme where the fulfillment of undertakings depends upon the sole will of the obligor, offending the mutuality of contracts. In Rubia v. GSIS, the Court stated that the GSIS may be held liable for the contracts it has entered into in the course of its business investments, without claiming special immunity from liability. The Court distinguished the case from Munar v. Bautista, which revolved around the appropriateness of employing a collateral attack on a GSIS resolution, rather than a direct challenge based on laws not being administered by GSIS.

    Ultimately, the Supreme Court concluded that the trial court correctly exercised jurisdiction over the Rafaels’ complaint and properly set aside the cancellation of the Deed of Conditional Sale. The Court highlighted that the Rafaels were not at fault for the delayed payments or incorrect amounts of amortizations. They were not in control of the amortization payments as to time and amount, and the GSIS was negligent in performing its tasks. The GSIS had the last clear chance to correct the alleged error but failed to do so for 14 years. From 1991 to 2005, GSIS was collecting the same amounts of monthly amortizations, and the Rafaels correctly relied upon GSIS to perform its job professionally and correctly. The Supreme Court emphasized that the stipulations of the Deed of Conditional Sale did not grant GSIS the discretion to unilaterally adjust interest rates or prioritize the application of payments in a manner inconsistent with the terms of the agreement.

    FAQs

    What was the key issue in this case? The central issue was whether GSIS could unilaterally alter the terms of a Deed of Conditional Sale and whether disputes arising from such alterations fell under the jurisdiction of regular courts or the GSIS Board of Trustees.
    What did the Court rule regarding GSIS’s jurisdiction? The Supreme Court ruled that disputes arising from contractual obligations, as opposed to GSIS’s internal policies, fall under the jurisdiction of regular courts, ensuring fairness and upholding the principle of mutuality in contracts.
    Why did the Court find GSIS’s actions to be improper? GSIS was found to have unilaterally changed the terms of the agreement without proper notice or contractual basis, specifically regarding the Graduated Payment Scheme and the application of monthly amortizations.
    What is the significance of Board Resolution No. 365 in this case? While the resolution itself wasn’t the primary issue, the Court considered whether its application was in accord with the original contractual undertakings of the GSIS, emphasizing principles of contract law.
    How did the Court address the issue of delayed payments? The Court found that the Rafaels were not at fault for the delayed payments and that GSIS was negligent in its management of the loan and amortization process.
    What is the principle of mutuality of contracts? The principle of mutuality of contracts states that a contract must bind both parties; its validity or compliance cannot be left to the will of one of them.
    What was the final outcome of the case? The Supreme Court reversed the Court of Appeals’ decision, reinstating the trial court’s ruling with modifications, ordering the GSIS to adhere to the original contract terms and execute the Deed of Absolute Sale upon payment of the remaining balance.
    What are the obligations of Spouses Lourdes V. Rafael and Raul I. Rafael? Spouses Lourdes V. Rafael and Raul I. Rafael are obligated to pay the remaining balance of thirteen (13) monthly amortizations at P3,094.35, without any interests, surcharges, or penalties whatsoever.

    This case underscores the importance of adhering to contractual obligations and protecting the rights of borrowers. The Supreme Court’s decision serves as a reminder that government entities like GSIS must honor their agreements and cannot unilaterally alter contract terms to the detriment of their members. This ruling provides clarity and reinforces the principle of fairness in contractual relationships, ensuring that borrowers are not subjected to unexpected financial burdens due to unilateral changes.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Spouses Lourdes V. Rafael and Raul I. Rafael vs. Government Service Insurance System (GSIS), G.R. No. 252073, July 18, 2022

  • Understanding Mutuality of Contracts and Foreclosure Rights in Philippine Loans

    Loan Interest Rates: How Mutuality of Contracts Affects Foreclosure Rights

    G.R. No. 222448, November 24, 2021

    Imagine taking out a loan, only to find the interest rates constantly changing at the whim of the bank. This uncertainty can lead to financial distress and even foreclosure. The Supreme Court case of United Coconut Planters Bank vs. Editha F. Ang and Violeta M. Fernandez sheds light on the crucial principle of “mutuality of contracts” in loan agreements and how it impacts foreclosure rights in the Philippines. This principle dictates that the terms of a contract, including interest rates, cannot be unilaterally altered by one party without the consent of the other.

    In this case, the borrowers challenged the validity of the foreclosure on their property, arguing that the interest rates imposed by the bank were unilaterally determined and therefore void. The Supreme Court ultimately sided with the bank, upholding the foreclosure despite finding the interest rate stipulations to be invalid. This article delves into the details of this case, exploring the legal principles involved and offering practical guidance for borrowers and lenders alike.

    Legal Context: Mutuality of Contracts and the Truth in Lending Act

    The principle of mutuality of contracts, enshrined in Article 1308 of the Philippine Civil Code, states that a contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. This means that all essential terms of the agreement, including interest rates in a loan, must be mutually agreed upon.

    The Truth in Lending Act (Republic Act No. 3765) further protects borrowers by requiring lenders to disclose key information about the loan, including the finance charges expressed as an annual percentage rate. This ensures transparency and allows borrowers to make informed decisions.

    Article 1308 of the Civil Code states: “The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.”

    For example, if a homeowner takes out a loan with a stated interest rate, the bank cannot arbitrarily increase that rate without the homeowner’s consent. Doing so would violate the principle of mutuality. Similarly, if a car loan agreement doesn’t clearly disclose all fees and charges, it could violate the Truth in Lending Act.

    Case Breakdown: UCPB vs. Ang and Fernandez

    Editha Ang and Violeta Fernandez obtained a loan from United Coconut Planters Bank (UCPB) in 1997 to renovate a resort. The loan agreement stipulated interest rates based on prevailing market rates, subject to quarterly review and resetting at the bank’s option. After making some payments, Ang and Fernandez defaulted, leading UCPB to foreclose on their mortgaged properties.

    The borrowers sued, arguing that the interest rates were unilaterally imposed and the foreclosure was therefore invalid. The case went through several stages:

    • Regional Trial Court (RTC): Initially ruled in favor of the borrowers, declaring the interest rate provisions void and nullifying the auction sale.
    • RTC (Motion for Reconsideration): Reversed its earlier ruling, validating the auction sale but ordering UCPB to recompute the debt with legal interest.
    • Court of Appeals (CA): Upheld the validity of the promissory notes but declared the interest rate provisions void and nullified the auction sale, ordering a recomputation of the debt.
    • Supreme Court: Reversed the CA decision, upholding the validity of the foreclosure.

    The Supreme Court, while acknowledging the invalidity of the interest rate stipulations due to the bank’s unilateral control, emphasized that the borrowers were still obligated to pay the principal amount of the loan. The Court cited the principle that the nullity of usurious interest does not affect the lender’s right to recover the principal.

    The Supreme Court stated: “[T]he nullity of the stipulation of usurious interest does not affect the lender’s right to recover the principal of a loan, nor affect the other terms thereof. Thus, in a usurious loan with mortgage, the right to foreclose the mortgage subsists, and this right can be exercised by the creditor upon failure by the debtor to pay the debt due.”

    The Court distinguished this case from previous rulings where foreclosure was invalidated due to the borrower’s inability to pay solely because of exorbitant, unilaterally imposed interest rates. In this instance, the borrowers cited “dollar shortage and high exchange rates” as the reason for their default.

    The Supreme Court further stated: “Default commences upon judicial or extrajudicial demand. The excess amount in such a demand does not nullify the demand itself, which is valid with respect to the proper amount. A contrary ruling would put commercial transactions in disarray, as validity of demands would be dependent on the exactness of the computations thereof, which are too often contested.”

    Practical Implications: Key Lessons for Borrowers and Lenders

    This case highlights the importance of clearly defined and mutually agreed-upon terms in loan agreements. While lenders cannot unilaterally impose interest rates, borrowers are still responsible for repaying the principal amount of the loan. This ruling reinforces the lender’s right to foreclose on mortgaged properties when borrowers default, even if the interest rate stipulations are later found to be invalid.

    Key Lessons:

    • For Borrowers: Carefully review loan agreements and understand how interest rates are determined. If you believe the interest rates are unfair or unilaterally imposed, seek legal advice immediately. Even if interest stipulations are invalid, you are still obligated to repay the principal.
    • For Lenders: Ensure that interest rate provisions comply with the principle of mutuality of contracts. Clearly define the basis for interest rate adjustments and obtain the borrower’s consent.

    Imagine a small business owner who takes out a loan to expand their operations. If the loan agreement allows the bank to arbitrarily increase the interest rate, the business owner could face unexpected financial strain. This case underscores the need for fairness and transparency in lending practices.

    Frequently Asked Questions (FAQs)

    Q: What is mutuality of contracts?

    A: It means that a contract must bind both parties, and its validity or compliance cannot depend on the will of only one party.

    Q: What happens if an interest rate in a loan agreement is deemed invalid?

    A: The interest rate provision is void, but the borrower is still obligated to repay the principal amount of the loan, subject to legal interest.

    Q: Can a bank unilaterally change the interest rate on my loan?

    A: No, unless the loan agreement clearly allows for it based on mutually agreed-upon market-based reference rates.

    Q: What is the Truth in Lending Act?

    A: A law requiring lenders to disclose all relevant information about a loan, including finance charges, to borrowers.

    Q: Can I stop a foreclosure if I believe the interest rates on my loan are unfair?

    A: You may challenge the foreclosure in court, but you are still obligated to repay the principal amount of the loan. It is best to seek legal counsel immediately to assess your options.

    Q: What should I do before signing a loan agreement?

    A: Carefully review all the terms and conditions, especially those related to interest rates and fees. Seek legal advice if you have any doubts or concerns.

    Q: What is legal interest?

    A: Legal interest is the rate of interest prescribed by law when there is no express agreement between the parties or when the stipulated interest rate is invalid.

    ASG Law specializes in banking and finance law. Contact us or email hello@asglawpartners.com to schedule a consultation.

  • Navigating Unconscionable Interest Rates in Loan Agreements: A Guide for Borrowers

    Unilateral Imposition of Interest Rates Violates Mutuality of Contracts

    Philippine National Bank v. AIC Construction Corporation, G.R. No. 228904, October 13, 2021

    Imagine borrowing money to keep your business afloat, only to find yourself drowning in interest payments that seem to grow exponentially. This is the reality faced by many borrowers who enter into loan agreements with seemingly favorable terms, only to be blindsided by exorbitant interest rates. The Supreme Court case of Philippine National Bank v. AIC Construction Corporation sheds light on this issue, illustrating the importance of transparency and fairness in loan agreements.

    In this case, AIC Construction Corporation and the Bacani Spouses found themselves in a dire financial situation due to the Philippine National Bank’s (PNB) unilateral imposition of interest rates on their loan. The central legal question was whether the interest rates imposed by PNB were unconscionable and thus void, and whether the court could equitably reduce them.

    Legal Context

    The principle of mutuality of contracts, enshrined in Article 1308 of the Civil Code, states that a contract must bind both parties and its validity or compliance cannot be left to the will of one party. This principle is crucial in ensuring fairness and equality between contracting parties, particularly in loan agreements where interest rates are a key component.

    Interest rates in loan agreements are typically agreed upon by both parties. However, the suspension of the Usury Law ceiling on interest rates in 1983 has led to a scenario where lenders can impose rates that may be considered iniquitous or unconscionable. The Supreme Court has clarified that while parties are free to stipulate interest rates, courts can intervene to equitably reduce rates that are found to be unjust.

    In the case of Vitug v. Abuda, the Court emphasized that the freedom to stipulate interest rates assumes a competitive market where borrowers have options and equal bargaining power. However, when one party has more power to set the interest rate, the state must step in to correct market imperfections. The Court noted, “Iniquitous or unconscionable interest rates are illegal and, therefore, void for being against public morals.”

    Case Breakdown

    AIC Construction Corporation, owned by the Bacani Spouses, opened a current account with PNB in 1988 and was granted a credit line of P10 million the following year. The interest provision in their agreement allowed PNB to determine the rate based on its prime rate plus an applicable spread, a clause that would later become the crux of the dispute.

    Over the years, the credit line increased, and by September 1998, the loan had ballooned to P65 million, with P40 million as principal and P25 million as interest charges. AIC Construction proposed a dacion en pago (payment through property) to settle the loan, but negotiations failed, leading to PNB’s foreclosure of the mortgaged properties.

    AIC Construction then filed a complaint against PNB, alleging bad faith and unconscionable interest rates. The Regional Trial Court dismissed the complaint, but the Court of Appeals modified the ruling, finding the interest rates unreasonable and applying the legal rate of interest instead.

    The Supreme Court upheld the Court of Appeals’ decision, emphasizing that the interest rates imposed by PNB violated the principle of mutuality of contracts. The Court cited Spouses Silos v. Philippine National Bank, where similar interest provisions were invalidated due to their one-sided nature. The Court noted, “The interest rates are yet to be determined through a subjective and one-sided criterion. These rates are no longer subject to the approval of respondents.”

    The Court also highlighted the importance of the Truth in Lending Act (Republic Act No. 3765), which requires full disclosure of all charges to protect borrowers from being unaware of the true cost of credit. The Court concluded that the interest rates imposed by PNB were unconscionable and ordered the application of the legal rate of interest.

    Practical Implications

    This ruling underscores the importance of transparency and fairness in loan agreements. Borrowers should be vigilant about the terms of their loans, particularly interest rate provisions, and seek legal advice if they suspect unfair practices. Lenders, on the other hand, must ensure that their interest rate provisions comply with legal standards and do not exploit borrowers.

    The decision may encourage more borrowers to challenge unconscionable interest rates in court, potentially leading to more equitable loan agreements. Businesses and individuals entering into loan agreements should carefully review the terms and consider negotiating for fixed or more transparent interest rate structures.

    Key Lessons:

    • Ensure that loan agreements clearly specify the interest rates and any potential adjustments.
    • Be wary of provisions that allow lenders to unilaterally determine interest rates.
    • Seek legal advice before signing loan agreements to understand your rights and obligations.

    Frequently Asked Questions

    What is the principle of mutuality of contracts?
    The principle of mutuality of contracts requires that a contract binds both parties equally and its validity or compliance cannot be left to the will of one party.

    Can courts reduce interest rates in loan agreements?
    Yes, courts can equitably reduce interest rates if they are found to be iniquitous or unconscionable, even if the parties initially agreed to them.

    What is the Truth in Lending Act?
    The Truth in Lending Act (Republic Act No. 3765) requires creditors to fully disclose to debtors all charges related to the extension of credit, including interest rates, to protect borrowers from being unaware of the true cost of credit.

    How can borrowers protect themselves from unconscionable interest rates?
    Borrowers should carefully review loan agreements, seek legal advice, and negotiate for clear and fair interest rate provisions.

    What should lenders do to comply with legal standards?
    Lenders should ensure transparency in their loan agreements, avoid unilateral interest rate provisions, and comply with the Truth in Lending Act.

    ASG Law specializes in banking and finance law. Contact us or email hello@asglawpartners.com to schedule a consultation.

  • Unilateral Interest Rate Hikes: When Banks Overstep Their Bounds in Loan Agreements

    Unilateral Interest Rate Hikes in Loan Agreements are Unenforceable

    G.R. No. 240495 & 240513, September 15, 2021

    Imagine taking out a loan, only to find the bank arbitrarily increasing the interest rate without your consent. This scenario, unfortunately, happens more often than it should. The Supreme Court case of Metro Alliance Holdings and Equities Corporation vs. Philippine Veterans Bank tackles this very issue, reminding banks that they can’t unilaterally change the terms of a loan agreement. The case highlights the importance of mutuality in contracts and protects borrowers from unfair lending practices.

    The Principle of Mutuality in Contracts

    At the heart of this case lies a fundamental principle of contract law: mutuality. This means that a contract must bind both parties equally, and its validity or compliance cannot be left to the will of one party. Article 1308 of the Civil Code of the Philippines explicitly states this: “The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.”

    Think of it like a seesaw. If one side can unilaterally change the fulcrum point, the balance is disrupted, and the other side is at a disadvantage. In loan agreements, this translates to banks not being able to arbitrarily increase interest rates without the borrower’s consent. The contract should be a fair agreement, not a tool for one party to exploit the other.

    The Civil Code also addresses the requirement for interest to be stipulated in writing:

    Article 1956. No interest shall be due unless it has been expressly stipulated in writing.

    This reinforces the necessity for clear, written agreement on interest rates to protect borrowers from hidden or unexpected charges.

    Background of the Case

    The story begins with Philippine Veterans Bank (PVB) granting a P550 million loan to Metro Alliance Holdings and Equities Corporation (MAHEC) and Polymax Worldwide Limited. The loan agreement underwent several amendments, but eventually, a dispute arose over the interest rates being charged.

    Here’s a breakdown of the key events:

    • 2004: PVB grants a P550 million loan to MAHEC and Polymax.
    • Later Years: PVB unilaterally increases interest rates without MAHEC and Polymax’s explicit consent.
    • 2009: PVB initiates extrajudicial foreclosure of a real estate mortgage due to alleged unpaid debt.
    • Legal Action: MAHEC, Polymax, and Wellex (who provided the real estate mortgage) file a complaint to nullify the foreclosure and question the interest rates.

    The case then made its way through the courts, with the central question being whether PVB had the right to unilaterally increase the interest rates on the loan.

    The Court’s Decision

    The Supreme Court sided with the borrowers, ruling that PVB’s unilateral increases in interest rates were indeed invalid. The Court emphasized the importance of mutuality in contracts, stating that:

    In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality between the parties based on their essential equality.

    The Court further explained that allowing one party to unilaterally change the terms of a contract turns it into a contract of adhesion, where the weaker party has no real bargaining power.

    However, the Court also clarified that while the unilaterally imposed interest rates were nullified, the borrowers were still obligated to pay interest on the loan. The Court applied the legal interest rate prevailing at the time the agreement was entered into, which was 12% per annum until June 30, 2013, and 6% per annum thereafter, as per BSP Circular 799-13.

    As a result of the improper interest rate imposition, the foreclosure proceedings were also declared null and void. The Court cited previous cases, stating:

    The registration of such foreclosure sale has been held to be invalid and cannot vest title over the mortgaged property.

    The Court ordered the cancellation of the Transfer Certificate of Title issued in PVB’s name and the reconstitution of the original title.

    Practical Implications and Key Lessons

    This case serves as a strong reminder to banks and other lending institutions that they cannot arbitrarily change the terms of a loan agreement. Borrowers have the right to expect that the agreed-upon terms will be honored throughout the life of the loan.

    Key Lessons:

    • Mutuality is Key: Loan agreements must be mutually agreed upon and cannot be unilaterally altered by one party.
    • Transparency Matters: Interest rates and other charges must be clearly stated in writing.
    • Foreclosure Risks: Improperly imposed interest rates can invalidate foreclosure proceedings.

    Hypothetical Example: Imagine a small business owner taking out a loan to expand their operations. The bank includes a clause in the agreement allowing them to increase the interest rate if market conditions change. If the bank later increases the rate significantly, making it difficult for the business to repay the loan, this case suggests the business owner could challenge the increase in court based on the principle of mutuality.

    Frequently Asked Questions (FAQs)

    Q: What happens if a loan agreement allows the bank to unilaterally change interest rates?

    A: Such a clause is likely unenforceable, as it violates the principle of mutuality in contracts. The borrower can challenge the increase in court.

    Q: What interest rate applies if the agreed-upon rate is deemed invalid?

    A: The legal interest rate prevailing at the time the agreement was entered into will apply.

    Q: Can a bank foreclose on a property if the borrower fails to pay due to improperly imposed interest rates?

    A: No, the foreclosure proceedings can be declared null and void if the interest rates were improperly imposed.

    Q: What should I do if I believe my bank is charging me excessive or unilaterally increased interest rates?

    A: Consult with a lawyer to review your loan agreement and assess your legal options.

    Q: Does this ruling apply to all types of loans?

    A: Yes, the principle of mutuality applies to all types of contracts, including loan agreements.

    Q: What is the effect of BSP Circular 799?

    A: BSP Circular 799 reduced the legal rate of interest from 12% to 6% per annum, effective July 1, 2013. This rate applies in the absence of a stipulated interest rate, or when the stipulated rate is deemed invalid.

    ASG Law specializes in banking and finance law. Contact us or email hello@asglawpartners.com to schedule a consultation.

  • Interest Rate Escalation: Mutuality of Contracts and Lender Obligations

    In the Philippines, an escalation clause in a loan agreement, allowing the lender to increase interest rates, is valid only if it includes a corresponding de-escalation clause, ensuring rates can also decrease. However, the Supreme Court has clarified that even without an express de-escalation clause, the actual practice of the lender in reducing interest rates can validate the escalation clause. This ruling emphasizes the importance of mutuality in contracts, requiring both parties to have equal footing and preventing one-sided advantages. The decision in Villa Crista Monte Realty & Development Corporation v. Equitable PCI Bank underscores that the essence of fairness and equality in contractual relations prevails over strict adherence to formal requirements.

    Balancing the Scales: Can Banks Unilaterally Raise Loan Interest Rates?

    Villa Crista Monte Realty & Development Corporation sought to nullify promissory notes and mortgage agreements with Equitable PCI Bank (now Banco de Oro Unibank, Inc.), challenging the bank’s unilateral increases in interest rates. The realty corporation argued that these increases, made without prior negotiation or agreement, violated the principle of mutuality of contracts. The bank countered that the realty corporation had voluntarily agreed to the monthly repricing of interest, as evidenced by their signed promissory notes and acceptance of loan proceeds. This case delves into the validity of escalation clauses in loan agreements, particularly when applied without a corresponding de-escalation provision, and examines the extent to which banks can adjust interest rates without violating the borrower’s rights.

    The central legal issue revolves around the validity of the promissory notes and the corresponding repricing of interest rates. An escalation clause permits increases in agreed-upon interest rates, a common tool for maintaining fiscal stability in long-term contracts. While not inherently void, an escalation clause granting the creditor an unbridled right to adjust interest rates upwards, without the debtor’s consent, is invalid. This is because such a clause violates the principle of mutuality of contracts, as enshrined in Article 1308 of the Civil Code, which states: “The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.”

    To address potential one-sidedness, Presidential Decree No. 1684 requires that any agreement allowing interest rate increases must also stipulate a reduction in the event of decreases mandated by law or the Monetary Board. This is known as a de-escalation clause. The necessity of a de-escalation clause was emphasized in Llorin Jr. v. Court of Appeals, where the court explained: “The purpose of the law in mandating the inclusion of a de-escalation clause is to prevent one-sidedness in favor of the lender which is considered repugnant to the principle of mutuality of contracts.” The absence of a de-escalation clause generally renders the escalation clause null and void.

    In this case, the promissory notes lacked an express de-escalation clause. However, the Supreme Court noted that the bank had, on several occasions, actually reduced or adjusted interest rates downwards. This practice, according to the Court, mitigated the one-sidedness typically associated with escalation clauses lacking de-escalation provisions. As the Court opined in Llorin Jr., the actual downward adjustment by the lender bank eliminated any inequality in its contracts with the borrower.

    The principle of mutuality of contracts dictates that obligations arising from contracts have the force of law between the parties, based on their essential equality. Any contract heavily favoring one party, leading to an unconscionable result, is void. The Court found that the realty corporation’s president was aware of the monthly repricing provision and that the bank provided notices of interest rate increases, allowing the corporation to either accept the new rates or prepay the outstanding obligations. This negated the claim of unilateral determination of interest rates.

    While the promissory notes were contracts of adhesion, where one party imposes terms on the other, they are not inherently invalid. Contracts of adhesion are binding unless the weaker party is unduly imposed upon, lacking the opportunity to bargain on equal footing. The Court distinguished this case from Limso v. Philippine National Bank, where the lender failed to consult the borrowers or provide proper notice of interest rate changes. In this instance, the bank provided notices, and the realty corporation had the opportunity to negotiate or reject the repriced rates.

    Furthermore, the Court found no evidence that the realty corporation was at a disadvantage in dealing with the bank. The corporation had successfully negotiated the release of some mortgaged properties and was represented by an experienced president who understood the implications of the agreements. These factors indicated that mutuality pervaded the relationship between the parties, affirming the validity of the escalation clause despite the absence of a formal de-escalation clause.

    FAQs

    What is an escalation clause? An escalation clause is a provision in a contract that allows for an increase in the price or rate, such as interest rates in a loan agreement, under certain conditions.
    What is a de-escalation clause? A de-escalation clause is a corresponding provision that requires a decrease in the price or rate if the conditions that triggered the escalation are reversed.
    Is an escalation clause without a de-escalation clause always invalid? Generally, yes. Presidential Decree No. 1684 requires a de-escalation clause for an escalation clause to be valid, but the Supreme Court has made exceptions where the lender actually decreased interest rates.
    What is mutuality of contracts? Mutuality of contracts means that the contract must bind both parties, and its validity or compliance cannot be left to the will of one party. Both parties must be on equal footing.
    What is a contract of adhesion? A contract of adhesion is a contract where one party sets the terms, and the other party can only accept or reject the contract without negotiation. These are not inherently invalid.
    Did the bank provide notice of interest rate changes? Yes, the bank provided notices of interest rate increases to the realty corporation, allowing them to either accept the new rates or prepay their obligations.
    What was the deciding factor in validating the escalation clause in this case? The deciding factor was that the bank had, on some occasions, actually reduced the interest rates, demonstrating fairness and negating any one-sidedness in the contract.
    Was the borrower at a disadvantage in this case? No, the Court found no evidence that the borrower was at a disadvantage, as they were represented by an experienced president and had successfully negotiated terms with the bank.

    The Supreme Court’s decision underscores the importance of fairness and transparency in loan agreements. While formal requirements like de-escalation clauses are crucial, the actual conduct of the parties can also determine the validity of contractual provisions. This ruling serves as a reminder that contracts must reflect mutual agreement and equitable treatment to be enforceable.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Villa Crista Monte Realty & Development Corporation vs. Equitable PCI Bank, G.R. No. 208336, November 21, 2018

  • Mutuality of Contracts: When Banks Cannot Unilaterally Change Interest Rates

    The Supreme Court ruled that Philippine National Bank (PNB) violated the principle of mutuality of contracts by unilaterally imposing increased interest rates on Engr. Ricardo O. Vasquez’s loans. This decision means that banks cannot arbitrarily change interest rates without the borrower’s consent. The Court declared the foreclosure of Vasquez’s properties null and void, ordering PNB to return ownership. This case underscores the importance of fair agreements in lending and protects borrowers from unpredictable interest rate hikes.

    Loan Sharks Beware: Upholding Fairness in Interest Rates

    This case revolves around two consolidated petitions concerning loans obtained by Engr. Ricardo O. Vasquez from PNB. Vasquez secured a P600,000 loan under PNB’s Pangkabuhayan ng Bayan Program and an additional P800,000 under a Revolving Credit Line (RCL), totaling P1,400,000. These loans were secured by a real estate mortgage on four parcels of land in Trece Martirez, Cavite. However, Vasquez filed a complaint against PNB, alleging that the bank unilaterally increased the interest rates without his consent, leading to a ballooning debt. The central legal question is whether PNB’s method of determining and imposing interest rates on Vasquez’s loans was valid, and if not, what the consequences are for the foreclosure of his properties and his loan obligation.

    The heart of the dispute lies in the interest rate scheme used by PNB. PNB claimed the Pangkabuhayan Loan had a fixed interest rate of 16.5% per annum, while the RCL had 18%. However, the Court found these rates weren’t truly fixed. The Credit Agreement stated that the Pangkabuhayan Loan’s interest would be the “Prime Rate plus Spread,” but it failed to clarify how that rate was determined, lacking a clear reference point. Similarly, the interest rate provision for the RCL was left blank. The promissory notes for both loans simply referred to the “applicable” interest rate, without specifying what that rate was. This ambiguity gave PNB leeway to adjust rates at will.

    The Supreme Court relied on precedents such as Spouses Silos v. Philippine National Bank, where a similar “prime rate plus applicable spread in effect” interest rate scheme was invalidated. The Court deemed such a method “one-sided, indeterminate, and subjective,” as it lacked a fixed standard. Similarly, in Security Bank Corp. v. Spouses Mercado, the imposition of “Security Bank’s prevailing lending rate” was considered arbitrary because the bank could unilaterally determine the rate. These cases highlight the principle that interest rate determination should not solely depend on the will of the bank.

    Even assuming the rates were initially fixed at 16.5% and 18%, the Credit Agreement contained a clause allowing PNB to unilaterally modify these rates. Section 6.02(b) of the General Conditions stated that PNB could increase the interest rate “at any time” based on its future policies. Further, Section 6.02(a) allowed PNB to adjust rates based on changes in its cost of money, and Section 6.02(c) made PNB’s interest calculation “conclusive and binding” on Vasquez, absent manifest error. Even the Real Estate Mortgage allowed PNB to increase the interest rate based on the discretion of its Board of Directors. This unilateral power to modify interest rates, without requiring Vasquez’s consent, is a key factor in the Court’s decision.

    The Statement of Account revealed that PNB did, in fact, impose varying interest rates on the loans. The Pangkabuhayan Loan’s interest rate jumped from 16% to 33%, while the RCL’s rates fluctuated between 34% and 20.189%. PNB couldn’t adequately explain how these rates were determined. During trial, PNB’s counsel admitted that no notices of escalation were sent to Vasquez, confirming that PNB unilaterally modified the rates without prior notice. In its petition, PNB acknowledged its ability to modify interest rates based on its policies, even without notifying Vasquez. This practice aligned with previous cases where similar PNB provisions were struck down, demonstrating a consistent pattern of unilateral interest rate determination.

    The Court clarified that while a floating interest rate system is permissible, it requires a market-based reference rate agreed upon by both parties, citing Security Bank Corp. v. Spouses Mercado and the Bangko Sentral ng Pilipinas (BSP) regulations. In this case, there was no market-based reference rate in the loan documents. PNB’s interest rate scheme depended on its internal policies, not on external market indicators. Moreover, PNB’s witnesses testified to fixed interest rates subject to increase, which is inconsistent with a true floating rate system. Therefore, the Court concluded that the interest rate scheme was “clearly one-sided, unilateral, and violative” of the principle of mutuality of contracts, rendering it null and void.

    Article 1308 of the Civil Code states that a contract’s validity or compliance cannot be left to the will of one party. Recognized Civil Law Commentator, Former CA Justice Eduardo P. Caguioa, said that this principle is in order to maintain the enforceability of contracts, for otherwise the same would be illusory. The Court has consistently held that there’s no mutuality when interest rate determination is at the sole discretion of one party. Such provisions allow lenders to exploit borrowers. Therefore, any modification of interest rates must be mutually agreed upon.

    With the interest rates declared null and void, the Court turned to the effect on the foreclosure of Vasquez’s properties. Jurisprudence dictates that if a debtor isn’t given the chance to settle their debt at the correct amount due to an invalid interest rate scheme, foreclosure proceedings are invalid. Because the obligation to pay interest was illegal, Vasquez wasn’t in default, and the foreclosure shouldn’t have occurred. The Court referenced several cases, including Heirs of Zoilo Espiritu v. Sps. Landrito, where foreclosure was invalidated due to iniquitous interest rates. In line with these precedents, the Court declared the foreclosure sale of Vasquez’s properties null and void, ordering the return of ownership and cancellation of related certificates of title.

    However, Vasquez remains obligated to pay the principal loan of P1,400,000, less P24,266.68 evidenced by Check Voucher No. RCP-97-012, resulting in an outstanding principal loan obligation of P1,375,733.32. The Court applied the legal rate of interest, which was 12% per annum at the time the Credit Agreement was entered into, until June 30, 2013. Following Nacar v. Gallery Frames, the interest rate was then adjusted to 6% per annum from July 1, 2013, until the finality of the decision. Vasquez’s argument for a consistent 6% interest rate was rejected, as the Court distinguished between monetary interest and compensatory interest.

    The Court also rejected PNB’s argument for imposing the originally stipulated rates of 16.5% and 18%, citing the ambiguity and nullity of the original interest rate scheme. The Court imposed the legal rate of interest (12% then 6%) because the original rate was unenforceable. Furthermore, the Court waived penalty interest before the decision’s finality, as Vasquez couldn’t be considered in default due to the illegal interest rates. Default would only occur if Vasquez failed to pay the correct amount after the decision became final.

    FAQs

    What was the key issue in this case? The central issue was whether Philippine National Bank (PNB) could unilaterally increase interest rates on loans without the borrower’s consent, violating the principle of mutuality of contracts. This principle requires that both parties to a contract agree to its terms, and neither party can unilaterally change those terms.
    What did the Supreme Court decide? The Supreme Court ruled that PNB’s actions were a violation of the mutuality of contracts. As a result, the Court declared the foreclosure of Engr. Ricardo O. Vasquez’s properties as null and void.
    What is the principle of mutuality of contracts? The principle of mutuality of contracts, as enshrined in Article 1308 of the Civil Code, states that a contract must bind both contracting parties. Its validity or compliance cannot be left to the will of one of them.
    What is a floating interest rate? A floating interest rate is a variable interest rate stated on a market-based reference rate agreed upon by the parties. It is allowed by the Bangko Sentral ng Pilipinas (BSP) provided it’s based on market-based reference rates like Manila Reference Rates (MRRs) or T-Bill Rates.
    Why was PNB’s interest rate scheme considered invalid? PNB’s interest rate scheme was considered invalid because it allowed the bank to unilaterally determine and increase interest rates based on its own policies, rather than on a mutually agreed-upon market-based reference rate. This violated the principle of mutuality of contracts.
    What interest rate will Vasquez now pay on his loan? Vasquez will pay 12% per annum from November 8, 1996, to June 30, 2013, and 6% per annum from July 1, 2013, until full payment on the outstanding principal loan obligation. This rate was set because the original interest rate was deemed unenforceable.
    What happens to the properties that were foreclosed? The foreclosure sale of Vasquez’s properties was declared null and void. Ownership and possession of the properties were reverted to Vasquez. The certificates of title issued as a result of the foreclosure sale were ordered cancelled and reconstituted in Vasquez’s name.
    What is the significance of this ruling? This ruling reinforces the importance of fair lending practices and protects borrowers from arbitrary interest rate increases. It emphasizes the need for transparency and mutual agreement in loan contracts.

    In conclusion, this case serves as a strong reminder to lending institutions that they cannot unilaterally impose unfair terms on borrowers. The principle of mutuality of contracts ensures that both parties have equal footing and must agree to any changes in the loan agreement. The Supreme Court’s decision protects borrowers from predatory lending practices and upholds the integrity of contractual obligations.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Engr. Ricardo O. Vasquez vs. Philippine National Bank, G.R. No. 228397, August 28, 2019

  • Mutuality of Contracts: Upholding Fairness in Loan Agreements and Foreclosure Sales in the Philippines

    The Supreme Court of the Philippines addressed a case involving Security Bank Corporation and Spouses Mercado, focusing on the principles of mutuality in contracts and the validity of foreclosure sales. The Court ruled that interest rate provisions allowing the bank to unilaterally determine rates without a clear market-based reference violated the mutuality of contracts. Additionally, the Court invalidated the foreclosure sales due to significant errors in the published notices, emphasizing the need for strict compliance with publication requirements to protect potential bidders.

    When a Bank’s Discretion Undermines Loan Mutuality: Examining Foreclosure Validity

    This case, Security Bank Corporation v. Spouses Mercado, revolves around a revolving credit line agreement where the interest rates were determined by Security Bank. The spouses Mercado secured the credit line with real estate mortgages on their properties. When the spouses defaulted, Security Bank initiated extrajudicial foreclosure proceedings. However, the published notices of the foreclosure sales contained errors in the technical descriptions of the properties. The spouses Mercado challenged the foreclosure, arguing the interest rates were unilaterally imposed and the publication requirements were not properly met.

    At the heart of this case is the principle of the mutuality of contracts, enshrined in Article 1308 of the New Civil Code, which mandates that contracts must bind both parties and cannot be left to the will of one. This principle ensures fairness and equality in contractual relationships. As the Supreme Court emphasized, “The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.” This means that any term in a contract, including interest rates, must be agreed upon by both parties.

    The Supreme Court found that the interest rate provisions in the revolving credit line agreement violated this principle. The agreement allowed Security Bank to unilaterally determine the interest rates without a clear, market-based reference. The Court noted that the reference rate of “Security Bank’s prevailing lending rate” was not pegged on a market-based reference rate, as required by the Bangko Sentral ng Pilipinas (BSP). This lack of a defined reference rate gave Security Bank unchecked discretion, making the interest rate stipulation potestative, meaning it depended solely on the will of one party.

    Moreover, the Court highlighted that any change in a contract, especially regarding interest rates, requires mutual agreement. The absence of written consent from the spouses Mercado for the interest rate adjustments further weakened Security Bank’s position. As such, the Court declared that the interest provisions are akin to those invalidated in previous cases, emphasizing that one-sided impositions do not have the force of law between the parties.

    Aside from the interest rate issue, the Court also addressed the validity of the foreclosure sales. Act No. 3135, as amended, governs extrajudicial foreclosure sales and requires strict compliance with the publication requirements. Section 3 of the Act states:

    Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city.

    The Court has consistently emphasized the importance of the notice of sale and its publication to give the foreclosure sale a reasonably wide publicity, securing bidders, and preventing a sacrifice of the property. Any substantial error in a notice of sale will render the notice insufficient and vitiate the sale.

    In this case, the published notices contained errors in the technical descriptions of the properties and omitted the exact locations. The Court found these errors to be substantial because they could deter or mislead bidders, depreciate the value of the properties, or prevent the process from fetching a fair price. The Court cited San Jose v. Court of Appeals, emphasizing that a valid notice of sale must contain the correct title number and the correct technical description of the property to be sold.

    While Security Bank published an erratum to correct the errors, the Court ruled that a single erratum did not cure the defect. The Court held that the corrected notice should have been published once a week for three consecutive weeks, as required by Act No. 3135. The failure to comply with this publication requirement rendered the foreclosure sales void.

    The Court then addressed the issue of interest and penalties. The spouses Mercado argued that interest and penalties should only be imposed after the finality of the decision, relying on the doctrine of operative facts. However, the Court distinguished this case from Andal v. Philippine National Bank, noting that the spouses Mercado never denied defaulting on the principal obligation.

    While the Court upheld the imposition of interest, it reduced the penalty of 2% per month (24% per annum) to 6% per annum, finding the original rate to be iniquitous and unconscionable. Article 1229 of the Civil Code allows the judge to equitably reduce the penalty when it is unconscionable.

    Finally, the Court modified the amount of the outstanding obligation. Since the foreclosure sale of the property in Lipa City was not affected by the annulment proceedings, the proceeds from that sale should be applied to the principal obligation, plus interest and penalty from the extrajudicial demand until the date of the foreclosure sale. The resulting deficiency would then earn legal interest.

    FAQs

    What was the key issue in this case? The key issues were the validity of the interest rate provisions in the loan agreement and the validity of the foreclosure sales, particularly concerning compliance with publication requirements. The Court examined whether the bank had unilaterally imposed unfair terms and whether the public was adequately notified of the foreclosure.
    Why were the foreclosure sales declared void? The foreclosure sales were declared void because the published notices contained errors in the technical descriptions of the properties and omitted their locations. The Court found that these errors could mislead potential bidders and depreciate the value of the properties, failing to strictly comply with the publication requirements of Act No. 3135.
    What is the principle of mutuality of contracts? The principle of mutuality of contracts, as stated in Article 1308 of the New Civil Code, means that a contract must bind both contracting parties, and its validity or compliance cannot be left to the will of one of them. This ensures fairness and equality in contractual relationships, preventing one party from unilaterally imposing terms.
    Why were the interest rate provisions deemed invalid? The interest rate provisions were deemed invalid because they allowed Security Bank to unilaterally determine the interest rates without a clear, market-based reference. The Court found that the reference rate of “Security Bank’s prevailing lending rate” was not pegged on a market-based reference rate, giving the bank unchecked discretion.
    What is a potestative condition? A potestative condition is a condition in a contract that depends solely on the will of one of the contracting parties. Such conditions are generally considered invalid because they undermine the principle of mutuality of contracts, giving one party undue control over the agreement.
    How did the Court address the issue of penalties? While the Court upheld the imposition of penalties for default, it reduced the penalty from 2% per month (24% per annum) to 6% per annum. The Court found the original rate to be iniquitous and unconscionable, exercising its power under Article 1229 of the Civil Code to equitably reduce the penalty.
    What was the significance of the Lipa City property? The foreclosure sale of the property in Lipa City was not affected by the annulment proceedings. Therefore, the proceeds from that sale were applied to the principal obligation, plus interest and penalty, up to the date of the foreclosure sale, reducing the deficiency owed by the spouses Mercado.
    What interest rate applies when the stipulated rate is invalid? In the absence of a valid stipulated interest rate, the legal interest rate applies. The Court ruled that the outstanding obligation would earn legal interest at 12% per annum from January 5, 2001, until June 30, 2013, and then at 6% per annum from July 1, 2013, until the finality of the judgment.

    The Supreme Court’s decision in Security Bank Corporation v. Spouses Mercado underscores the importance of fairness and transparency in loan agreements and foreclosure proceedings. It serves as a reminder to banks to ensure that interest rate provisions are mutually agreed upon and based on clear, market-based references. It also highlights the necessity of strict compliance with publication requirements in foreclosure sales to protect the rights of borrowers and potential bidders. By upholding these principles, the Court reinforces the integrity of contractual relationships and the protection of property rights.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Security Bank Corporation v. Spouses Rodrigo and Erlinda Mercado, G.R. No. 192934, June 27, 2018

  • Lease Agreements: Perfection vs. Performance – Hilltop Market Case Analysis

    In Hilltop Market Fish Vendors’ Association, Inc. v. Yaranon, the Supreme Court ruled that a contract of lease is perfected when there is a meeting of minds on the object and consideration, irrespective of conditions for performance like the issuance of an occupancy certificate. The non-issuance of a certificate, in this case, did not prevent the lease from commencing because the lessee occupied and used the property; thus, the condition was related to the obligation to pay rent rather than the contract’s perfection. This distinction clarifies the difference between conditions affecting the creation of a lease versus those concerning its ongoing obligations.

    Rillera Building Saga: Did a Certificate Delay the Lease or Just the Rent?

    The case revolves around a contract of lease entered into on June 22, 1974, between Hilltop Market Fish Vendors’ Association, Inc. (Hilltop) and the City of Baguio. The agreement involved a 568.80 square meter lot at Hilltop Market, where Hilltop was to construct a building, later known as the Rillera building. The contract stipulated a 25-year lease, renewable at the option of both parties, with an annual rental of P25,000. A key provision stated that the first rental payment would commence upon the City Engineer’s Office issuing a Certificate of full occupancy for the building. Despite the absence of this certificate, Hilltop’s members occupied the building and conducted business.

    Over the years, the City Council of Baguio attempted to rescind the contract due to Hilltop’s failure to complete the building. Concerns about sanitary standards and safety further complicated the situation, leading to orders for closure and eventual takeover of the Rillera building by the city. This culminated in Administrative Order No. 030 S. 2005, issued by then Mayor Braulio Yaranon, ordering the closure and preparation of the building for commercial use. Hilltop responded by filing a complaint seeking an injunction against the implementation of the administrative order and demanding the issuance of the certificate.

    The legal battle centered on whether the contract of lease had even commenced, given the non-issuance of the Certificate of full occupancy. Hilltop argued that without the certificate, the lease period had not begun. The City of Baguio countered that the contract was perfected, and the certificate was merely a condition for the payment of rent, which Hilltop had waived by occupying the building. The Regional Trial Court ruled in favor of the City of Baguio, a decision later affirmed by the Court of Appeals. The Supreme Court then took up the case to resolve the dispute.

    The Supreme Court’s analysis hinged on the distinction between the perfection of a contract and the performance of its obligations. A lease agreement, being a consensual contract, is perfected when there is a meeting of the minds on the object (the property) and the cause (the rent). In this case, both parties agreed on the lot and the terms of the lease. According to Article 1643 of the Civil Code:

    “In a contract of lease, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite.”

    Once the contract is perfected, the lessor is obliged to deliver the property, and the lessee is obliged to use it responsibly and pay the rent. The court emphasized that the issuance of the Certificate of full occupancy was not a condition for the perfection of the contract but rather a condition for the commencement of rental payments. As the court stated:

    “[T]he annual lease rental shall be P25,000 payable within the first 30 days of each and every year; the first payment to commence immediately upon issuance by the City Engineer’s Office of the Certificate of full occupancy of the entire building to be constructed thereon.”

    Because Hilltop occupied the building and conducted business, it effectively waived the condition regarding the certificate, leading to the principle of estoppel. Estoppel prevents a party from denying a fact that has been previously asserted, especially if another party has relied on that assertion. The Court of Appeals highlighted this point, stating that Hilltop was:

    “estopped to claim that the period of lease has not yet begun…By its continued silence, it has agreed that the issuance of the said certificate was not a condition to the perfection of the lease contract.”

    Furthermore, Hilltop’s failure to maintain the building’s sanitation and complete the necessary requirements for the certificate contributed to its unfavorable position. The court also noted that parties cannot benefit from their own wrongdoing, reinforcing the principle that those seeking equity must come with clean hands. Given that the 25-year lease period had lapsed without renewal, the City of Baguio was justified in taking over the building.

    The Supreme Court also addressed the issue of mutuality in contracts, referencing Article 1308 of the Civil Code, which ensures that the validity and performance of contracts cannot be left to the will of only one of the parties. It underscored that the continuance, effectivity, and fulfillment of a contract of lease cannot depend exclusively on the lessee’s uncontrolled choice. This case serves as a clear reminder that while conditions may affect the performance of contractual obligations, they do not necessarily prevent the perfection or commencement of a contract, especially when one party has already begun to enjoy the benefits of the agreement.

    FAQs

    What was the key issue in this case? The central issue was whether the non-issuance of an occupancy certificate prevented the commencement of a lease agreement between Hilltop and the City of Baguio, despite Hilltop’s occupancy and use of the leased property.
    When is a lease agreement considered perfected? A lease agreement is perfected when there is a meeting of the minds on the object of the lease (the property) and the cause (the rent). This is regardless of whether certain conditions for the performance of obligations are met.
    What is the effect of a suspensive condition in a contract? A suspensive condition is one that must be fulfilled for an obligation to arise. In this case, the occupancy certificate was not a suspensive condition for the contract itself but for the obligation to start paying rent.
    What does “estoppel” mean in contract law? Estoppel prevents a party from denying a fact they previously asserted, especially if another party relied on that assertion. In this case, Hilltop was estopped from claiming the lease hadn’t started because they occupied the building.
    What is the significance of the “clean hands” doctrine? The “clean hands” doctrine prevents parties who are at fault from benefiting from their own wrongdoing. Hilltop could not claim the lease hadn’t started due to the lack of a certificate when they were responsible for not fulfilling the requirements for its issuance.
    What are the obligations of the lessor and lessee in a lease agreement? The lessor must deliver the property and ensure peaceful enjoyment, while the lessee must use the property responsibly and pay the rent. These obligations arise once the contract is perfected.
    Can a contract’s validity depend solely on one party’s choice? No, the principle of mutuality in contracts ensures that the validity and performance of contracts cannot depend on the will of only one party. Both parties must have a say in the contract’s terms and continuation.
    What happens when a lease period expires without renewal? Upon expiration of the agreed lease period without renewal, the lessor is entitled to take back possession of the property, unless there is a clear agreement for automatic renewal.

    The Hilltop Market case clarifies the legal distinction between the perfection of a lease contract and the conditions for the performance of its obligations, particularly regarding rental payments. It underscores the importance of fulfilling contractual obligations and the consequences of failing to do so. Further, this highlights the principle that a party cannot use its own failures to its advantage, reinforcing fairness and equity in contractual relationships.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Hilltop Market Fish Vendors’ Association, Inc. v. Hon. Braulio Yaranon, G.R. No. 188057, July 12, 2017