Security Bank Corporation v. Spouses Rodrigo

Summary

This consolidated case involves the validity of extrajudicial foreclosure sales and interest rate provisions in a banking agreement. Security Bank granted spouses Mercado a revolving credit line secured by real estate mortgages. When the spouses defaulted, the bank foreclosed the properties, but the published notices contained substantial errors in property descriptions that were corrected only through a single erratum publication. The Supreme Court declared the foreclosure sales void for non-compliance with publication requirements under Act No. 3135, finding that the errors could mislead bidders and affect property values. The Court also invalidated the interest rate provisions for violating the principle of mutuality of contracts, as they gave Security Bank unilateral discretion to determine rates without proper market-based reference rates required by BSP regulations. The decision establishes important precedents on strict compliance with foreclosure publication requirements and the necessity of mutual agreement in contractual modifications, particularly in banking relationships where there is inherent inequality between parties.