Dear Atty. Angela,

I obtained a P10-million housing loan from the bank in 2022 where the loan agreement stated that the bank is allowed to adjust the interest rate every quarter depending on the market conditions. When I was unable to pay my monthly amortizations, the bank foreclosed and auctioned my property. I intend to file a case to invalidate the foreclosure due to the unfair provision that the bank had the sole power and discretion to increase the interest rate. Will my case proceed against the bank?

Amber

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Dear Amber,

Yes, you could file a civil case against the bank claiming that since the interest rate was unreasonable and excessive, then the foreclosure of your property was invalid.

Under the Civil Code, there must be mutuality of contracts where obligations and contracts would reflect a fair agreement between the parties. Article 1308 of the Civil Code states that, “The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.”

In the case of United Coconut Planters Bank v. Ang and Fernandez, G.R. No. 222448 (3 March 2025), the Supreme Court emphasized that a contract that depends only on the will of one party is void.

In this case, the interest rate was solely determined by the bank UCPB. Since the interest rate was invalid, the loan was not yet due, and the foreclosure of the properties was void.

It was explained that the borrowers should be given a chance to pay the loan at an interest rate agreed upon by both parties. Otherwise, they would be at the mercy of the lender and risk losing their property without a fair opportunity to settle their debt.

In light of this ruling, where the interest rate imposed by the bank was unilateral and without consent, the foreclosure of your property is likewise invalid.

Atty. Angela Antonio