Danilo D. Mendoza v. Court of Appeals

Summary

This case involved a dispute between businessman Danilo Mendoza and Philippine National Bank over alleged loan restructuring arrangements. Mendoza claimed PNB agreed to restructure his overdue loans into a five-year term loan but filled out his blank promissory notes for only two years. When the notes became due in 1984, PNB foreclosed his mortgaged properties. The Supreme Court affirmed the Court of Appeals decision dismissing Mendoza's complaint, ruling that no five-year restructuring agreement existed as PNB never categorically accepted his proposals - the parties remained in preliminary negotiations. However, the Court declared null and void PNB's unilateral increases in interest rates from 21% to 32% and 18% to 32%, finding this violated the principle of mutuality of contracts. The foreclosure was upheld as valid since the promissory notes were due and unpaid. The case establishes important precedents on contract formation requiring clear acceptance, the invalidity of unilateral contract modifications, and the distinction between preliminary negotiations and binding agreements in banking transactions.