G.R. No. 171925 ; July 23, 2010
SOLIDBANK CORPORATION (now Metropolitan Bank and Trust Company), Petitioner, vs. PERMANENT HOMES, INCORPORATED, Respondent.

FACTS

Respondent Permanent Homes, Inc. obtained an omnibus credit line from petitioner Solidbank Corporation to finance a townhouse project. The loan was secured by mortgages and covered by promissory notes containing an authorization clause allowing Solidbank to unilaterally increase or decrease interest rates based on prevailing market rates, with the adjustment effective from the date indicated in a written notice sent to the borrower. The clause further stated that the borrower’s failure to prepay the loan within thirty days from receipt of such notice would be deemed consent to the adjustment.
Solidbank imposed multiple interest rate changes on Permanent’s loan availments over a short period, with rates fluctuating dramatically, at one point reaching 34% per annum. Permanent Homes filed a complaint before the Regional Trial Court (RTC), arguing that the unilateral adjustments violated the principle of mutuality of contracts under Article 1308 of the Civil Code. It contended there was a separate oral agreement that any rate change required mutual consent. The RTC dismissed the complaint, upholding the validity of the promissory note provisions.

ISSUE

Whether the stipulation in the promissory notes authorizing Solidbank to unilaterally adjust interest rates is valid.

RULING

The Supreme Court affirmed the RTC decision with modification, upholding the validity of the interest rate adjustment clause. The legal logic rests on the principle of freedom of contract and the specific terms agreed upon by the parties. The promissory notes, which Permanent signed, clearly and expressly authorized Solidbank to adjust rates based on prevailing market conditions. The Court found no evidence to support the alleged separate oral agreement for mutual consent, which would contradict the written, signed agreements.
The clause contained a built-in mechanism to protect the borrower: the right to prepay the loan within thirty days upon receipt of notice if it disagreed with the new rate. By not exercising this right, Permanent was deemed to have consented to the adjustments under the very terms it agreed to. This mechanism satisfies the requirement of mutuality, as the borrower retains a choice—to accept the new rate or to prepay. However, the Court modified the RTC decision by ruling that the new interest rates could only take effect upon Permanent’s actual receipt of the written notice from Solidbank, not from the date indicated in the notice itself. The case was remanded to the trial court for a recomputation of interest based on the actual dates of receipt.