Natalia P. Bustamante v. Spouses Rodito F. Rosel

Summary

This case involves a loan agreement where borrower Norma Rosel obtained P100,000 from the Bustamantes with a 70-square-meter property as collateral, including a provision allowing the lender to purchase the collateral for P200,000 upon default. When the loan matured, the borrower tendered payment but the lender refused, insisting on property sale. The Supreme Court ultimately ruled that the borrower did not default since payment was properly tendered, and declared the purchase option void as pactum commissorium—a prohibited automatic appropriation of collateral by creditors. The Court emphasized that such stipulations allowing creditors to automatically acquire mortgaged property upon default violate Article 2088 of the Civil Code and are contrary to public policy, protecting borrowers from predatory lending practices.