GONZALES, Jerome DP.

BSLM 3C

SPOUSES LIMSO vs. PHILIPPINE NATIONAL BANK

G.R. No. 158622, 169441, 172958, 173194, 196958, 197120, 205463

27 JANUARY 2016

DOCTRINE: 
When the determination of interest rates is solely at the discretion of one party, there is no
mutuality of contracts. Escalation clauses in contracts that allow for unilateral adjustment of
interest rates without the debtor's consent are void.

FACTS: 
In 1993, Spouses Limso and Davao Sunrise obtained a loan from the Philippine National Bank
(PNB), secured by real estate mortgages. PNB filed a request to review the decision of the Court
of Appeals that deemed the interest rates imposed by PNB as invalid. PNB believes there was a
mutual agreement between the parties and that the imposed interest rates were legal per the
escalation clauses in their contract. However, Spouses Limso argues that the letters sent by PNB
were notifications, not agreements.

ISSUE:
Whether the decision of the Court of Appeals that the interest rates imposed by the Philippine
National Bank were excessive and unjust was incorrect.

RULING:
The Court of Appeals did not make a mistake in determining that the interest rates imposed by
PNB were unreasonable and unjust. As per the loan agreement between the parties, interest rates
were not specified, and PNB had the sole discretion to increase the interest rates. As such, the
interest rates imposed by PNB were usurious and unconscionable since Spouses Limso and
Davao Sunrise had no way of knowing the interest rate imposed on their loan as it was always at
the discretion of PNB. Therefore, the petition for review on certiorari was denied, and the
Supreme Court upheld the ruling of the Court of Appeals with modifications.