Florendo v. Court of Appeals

Summary

The Supreme Court ruled that Land Bank could not unilaterally increase interest rates on an employee housing loan from 9% to 17% following the borrower's resignation. While the mortgage contract contained a valid escalation clause, it specifically required increases to be based on Central Bank rules, regulations, or circulars. Land Bank's ManCom Resolution No. 85-08, which triggered the rate increase due to employee resignation, was neither a CB rule nor Monetary Board resolution. The Court emphasized that unilateral rate escalation violates the principle of mutuality of contracts under Civil Code Article 1308, making such provisions void as contracts of adhesion. The decision protects borrowers from arbitrary interest rate increases while acknowledging that banks could include resignation-triggered escalation clauses in future loan agreements, but cannot retroactively impose such conditions on existing contracts.