Spouses Bayani H. Andal v. Philippine National Bank

Summary

This landmark case involved spouses who obtained a P21.8 million loan from Philippine National Bank secured by real estate mortgage. The bank imposed varying interest rates of 17.5% to 27% and proceeded to foreclose despite substantial payments made by the borrowers. The Supreme Court upheld lower courts' findings that the borrowers signed promissory notes in blank regarding interest rates, making the bank's unilateral rate determination violative of the principle of mutuality of contracts. While declaring the excessive interest rates void as potestative conditions under Article 1308 of the Civil Code, the Court maintained that borrowers remained liable for legal interest. The decision established important precedents on banking practices, contract adhesion, and the computation of legal interest rates, particularly following changes in monetary policy. The case demonstrates judicial protection of borrowers against unconscionable banking practices while upholding legitimate creditor rights.