Spouses Antonio E.A. Concepcion v. Hon. Court of Appeals

Summary

The Concepcions obtained a P1.4 million mortgage loan from Home Savings Bank with an escalation clause. When the bank unilaterally increased interest rates from 16% to 38% without proper justification, the borrowers defaulted and the property was foreclosed. The Supreme Court ruled that while the bank breached its contractual obligation to provide proper notice of foreclosure proceedings, the subsequent purchaser Asaje Realty was an innocent buyer. The Court invalidated the unilateral interest rate increases as violative of the mutuality principle in contracts, holding that escalation clauses must be based on actual corresponding increases in Central Bank rates and cannot be implemented solely at the creditor's discretion. The bank was ordered to return any excess proceeds from the sale over the loan balance computed at the original interest rate.