Philippine National Bank v. Spouses Enrique Manalo & Rosalinda Jacinto

Summary

The Supreme Court affirmed the Court of Appeals' decision nullifying PNB's unilateral imposition and increases of interest rates on a mortgage loan, finding violation of the principle of mutuality of contracts under Article 1308 of the Civil Code. While upholding the validity of the foreclosure proceedings, the Court declared the credit agreements as contracts of adhesion and ruled that banks cannot arbitrarily determine interest rates without borrower consent. The case established that unilateral interest rate increases without prior notice violate contractual mutuality principles. The Court fixed the interest rate at 12% per annum and ordered recomputation of indebtedness with refund of excess foreclosure proceeds, applying updated interest rates per Nacar v. Gallery Frames for amounts to be refunded.