Spouses Florante E. Jonsay v. Solidbank Corporation (Now Metropolitan Bank

Summary

This case involves a dispute over the extrajudicial foreclosure of real estate mortgage securing P60 million in loans obtained by Momarco Import Co. and guaranteed by Spouses Jonsay from Solidbank Corporation. The key issues were the validity of unilateral interest rate increases from 18.75% to 30% per annum, compliance with publication requirements for foreclosure notices, and proper computation of outstanding obligations. The Supreme Court upheld the foreclosure's validity while declaring void the escalation clause allowing unilateral interest increases without borrower consent, finding it violative of contractual mutuality under Article 1308 of the Civil Code. The Court applied the original stipulated rate of 18.75% per annum, reduced excessive attorney's fees from P3.6 million to 1% of the obligation, and ordered Solidbank to refund P14.1 million in excess auction proceeds to the petitioners. The decision establishes important precedents on the limits of escalation clauses in loan agreements and the requirement of mutual consent for contract modifications affecting essential terms like interest rates.