Spouses Ponciano Almeda v. The Court of Appeals

Summary

This case involved a P18 million loan granted by Philippine National Bank to spouses Almeda in 1981 at 21% annual interest, secured by their Makati property. When PNB unilaterally increased interest rates to as high as 68% between 1984-1986, the spouses challenged this in court and attempted to settle their obligation based on the original 21% rate. The Supreme Court ruled that PNB's unilateral interest rate increases violated the mutuality of contracts principle under Civil Code Article 1308, as the credit agreement's escalation clause required mutual consent and compliance with legal limits. The Court found the increases from 21% to 68% excessive and unconscionable, and held that P.D. 385's mandatory foreclosure provisions could not be invoked until the interest rate dispute was resolved on the merits. The decision was reversed and remanded for further proceedings, protecting borrowers from arbitrary and unconscionable interest rate manipulations by lending institutions.