Jonsay vs. Solidbank Corporation

An escalation clause in a loan agreement that grants the lending bank authority to unilaterally increase the interest rate without prior notice to and consent of the borrower is void for violating the principle of mutuality of contracts under Article 1308 of the Civil Code; however, the originally stipulated interest rate remains valid and enforceable if it is not itself unconscionable, and any excess in the foreclosure auction proceeds over the recomputed loan obligation must be refunded to the mortgagor.

Momarco Import Co., Inc., an importer, manufacturer, and distributor of animal health and feedmill products, was owned and controlled by the Spouses Florante E. Jonsay and Luzviminda L. Jonsay. Solidbank Corporation was the lending institution from which Momarco obtained two loans secured by a blanket mortgage over three parcels of land in Calamba City, Laguna. The loan documents, including the promissory note, were prepared by Solidbank and signed in blank by the Spouses Jonsay, containing an escalation clause that purportedly allowed the bank to unilaterally adjust interest rates. The dispute arose from the extrajudicial foreclosure of the mortgage after Momarco defaulted on its interest payments, which the petitioners sought to annul on grounds including defective publication, unconscionable interest rates, and bloated indebtedness.

Momarco Import Co., Inc., controlled and owned by the Spouses Florante E. Jonsay and Luzviminda L. Jonsay, is an importer, manufacturer, and distributor of animal health and feedmill products catering to cattle, hog, and poultry producers. On November 9, 1995, and again on April 28, 1997, Momarco obtained loans of P40,000,000.00 and P20,000,000.00, respectively, from Solidbank Corporation. To secure these loans, the Spouses Jonsay executed a blanket mortgage over three parcels of land they owned in Calamba City, Laguna, registered under Transfer Certificates of Title Nos. T-224751, T-210327, and T-269668, containing a total of 23,733 square meters. On November 3, 1997, the loans were consolidated under one promissory note for the combined amount of P60,000,000.00, signed by Florante as President of Momarco, with Luzviminda signing as co-maker. The stipulated rate of interest was 18.75% per annum, along with an escalation clause tied to increases in pertinent Central Bank-declared interest rates, by which Solidbank was eventually able to unilaterally increase the interest charges up to 30% per annum.

Momarco religiously paid the monthly interests charged by Solidbank from November 1995 until January 1998, when it paid P1,370,321.09. Claiming business reverses brought on by the 1997 Asian financial crisis, Momarco tried unsuccessfully to negotiate a moratorium or suspension of its interest payments. Due to persistent demands by Solidbank, Momarco made its next and last monthly interest payment in April 1998 in the amount of P1,000,000.00, which Solidbank applied to Momarco's accrued interest for February 1998. Momarco sought a loan from Landbank of the Philippines to pay off its debt, but the application fell through. The anticipated expropriation by the Department of Public Works and Highways of the mortgaged lots for the extension of the South Luzon Expressway also did not materialize.

Solidbank proceeded to extrajudicially foreclose on the mortgage. At the auction sale held on March 5, 1999, Solidbank submitted the winning bid of P82,327,249.54, representing Momarco's outstanding loans, interests and penalties, plus attorney's fees of P3,600,000.00. The petitioners claimed that on the date of the auction, the fair market value of the mortgaged lots had increased sevenfold to P441,750,000.00. On March 22, 1999, Sheriff Adelio Perocho issued a certificate of sale to Solidbank, duly annotated on April 15, 1999 on the lots' titles.

On March 9, 2000, a month before the expiration of the period to redeem the lots, the petitioners filed a complaint against Solidbank, Sheriff Perocho, and the Register of Deeds of Calamba, Laguna, for annulment of the extrajudicial foreclosure of mortgage, injunction, accounting, and damages. They averred that the amount claimed by Solidbank as Momarco's total loan indebtedness was bloated; that Solidbank's interest charges were illegal for exceeding the legal rate of 12% per annum; that the filing fee charged had no legal and factual basis; that the attorney's fees of P3,600,000.00 were excessive and unconscionable; that their previous payments from 1995 to 1997 were not taken into account in computing their principal indebtedness; that Sheriff Perocho's certificate of posting was invalid; and that the publication of the notice of the auction sale was defective because the Morning Chronicle, which published the notice, was not a newspaper of general circulation in Calamba, Laguna. The RTC issued a temporary restraining order on April 13, 2000, followed by a writ of preliminary prohibitory injunction on May 2, 2000, suspending the consolidation of Solidbank's titles to the subject lots.

• Conflicting CA Decisions: Petitioners argued that the CA gravely erred by rendering two conflicting decisions on the same set of facts and evidence, and that the Amended Decision was not in accord with law and existing jurisprudence.
• Misapplication of Law on Foreclosure and Contracts of Adhesion: Petitioners contended that the CA incorrectly applied the law and jurisprudence on extrajudicial foreclosure of real estate mortgage, damages, and contracts of adhesion in its Amended Decision, which reversed the earlier ruling that had annulled the foreclosure.
• Defective Publication: Petitioners maintained that the Morning Chronicle was not a newspaper of general circulation in Calamba City, relying on Florante's testimony that it could not be found in local newsstands.
• Unconscionable Interest Rates: Petitioners asserted that the interest rates ranging from 19% to 30%, as well as the penalties, charges, and attorney's fees imposed by Solidbank, were excessive, unconscionable, and immoral.

• Validity of Foreclosure: Respondent argued that the extrajudicial foreclosure proceedings enjoyed the presumption of regularity, and that the burden of proving the absence of a requisite rested on the petitioners, who failed to present evidence to overcome such presumption.
• Sufficient Publication: Respondent relied on the affidavit of publication issued by the publisher of the Morning Chronicle, the certification by the Clerk of Court of RTC-Calamba City that the newspaper was duly accredited to publish legal notices, and the court-supervised raffle that selected the Morning Chronicle to publish the notice of auction sale.
• Contractual Right to Foreclose: Respondent maintained that it was duly authorized under the mortgage contract to extrajudicially foreclose on the mortgage in the event of default, and that no malice could be imputed for its refusal to accept the petitioners' offer of dacion en pago.
• Estoppel: Respondent argued that the petitioners were in estoppel for failing to seasonably question the validity of the loan and mortgage documents within a reasonable time.

• Motion for Reconsideration: Whether the CA gravely erred by rendering two conflicting decisions on the same set of facts and evidence, thereby adopting a position completely contrary to one it had previously taken.
• Publication Requirements: Whether Solidbank sufficiently complied with the publication requirements under Section 3 of Act No. 3135 for the extrajudicial foreclosure sale.
• Dacion en Pago: Whether Solidbank acted in bad faith in refusing the petitioners' proposal for dacion en pago, warranting the award of moral and exemplary damages.
• Escalation Clause: Whether the escalation clause in the promissory note allowing Solidbank to unilaterally increase the interest rate without prior notice to and consent of the borrower is valid.
• Applicable Interest Rate: Whether the legal rate of 12% per annum or the stipulated rate of 18.75% per annum should apply to the petitioners' loan obligation.
• Attorney's Fees: Whether the attorney's fees of P3,600,000.00 charged by Solidbank are proper and reasonable.
• Excess Auction Proceeds: Whether Solidbank must refund any excess in the auction proceeds over the petitioners' total loan indebtedness.

• Motion for Reconsideration: No. There is no legal proscription against an adjudicating court adopting, on motion for reconsideration, a position completely contrary to one it had previously taken, as a motion for reconsideration allows the court to correct errors of judgment.
• Publication Requirements: Yes. Solidbank sufficiently complied with the requirement of publication under Section 3 of Act No. 3135, the foreclosure proceedings enjoying the presumption of regularity which the petitioners failed to overcome with contrary evidence.
• Dacion en Pago: No. No bad faith can be imputed to Solidbank for refusing the petitioners' unaccepted offer of dacion en pago, as a proposal that is not accepted by the creditor neither novates the mortgage contract nor suspends its execution.
• Escalation Clause: No, the escalation clause is void. An escalation clause granting the lending bank authority to unilaterally increase the interest rate without prior notice to and consent of the borrower violates the principle of mutuality of contracts under Article 1308 of the Civil Code.
• Applicable Interest Rate: The stipulated rate of 18.75% per annum applies, not the legal rate of 12%. The stipulated rate was not unconscionable when the loans were contracted in 1995 and 1997, as comparable rates of 23% to 24% had been upheld in contemporaneous jurisprudence.
• Attorney's Fees: The attorney's fees were reduced to 1% of the outstanding obligation, or P675,512.17, as attorney's fees do not form an integral part of the cost of borrowing but arise only on the basis of quantum meruit when the lender collects upon the notes.
• Excess Auction Proceeds: Yes. Solidbank must refund the excess of its auction bid over the total loan obligation due from the petitioners, amounting to P14,100,271.05, plus interest at 6% per annum from the date of filing of the complaint until finality, and thereafter 6% per annum until full satisfaction.

• Motion for Reconsideration: The petitioners' dismay over the CA rendering two opposite decisions on the same facts was understandable, but what the CA did was admit an error of judgment and correct it upon a timely motion for reconsideration. Sections 1, 2, and 3 of Rule 37 of the Rules of Court authorize a court to amend its judgment when it is contrary to law or the evidence. A motion for reconsideration allows the adjudicating court to take a second look at its earlier judgment and correct any errors committed. As explained in Salcedo II vs. COMELEC, there is no legal proscription against the deciding body adopting a new position contrary to one it had previously taken. The filing of a motion for reconsideration interrupts the running of the period to appeal and prevents the finality of the decision from setting in.

• Publication Requirements: Foreclosure proceedings enjoy the presumption of regularity, and the mortgagor who alleges the absence of a requisite has the burden of proving such fact, as held in Cristobal vs. CA. While the petitioners insisted that the Morning Chronicle was not a newspaper of general circulation in Calamba City, their only contrary evidence was Florante's testimonial assertion that it could not be found in local newsstands. The affidavit of publication by publisher Crisostomo constituted prima facie proof that the newspaper was generally circulated in the place where the properties were located, pursuant to Philippine Savings Bank vs. Spouses Geronimo. Moreover, when the RTC accredited the Morning Chronicle to publish legal notices in Calamba City, it could be presumed that the RTC had made a prior determination that the newspaper met the requisites for valid publication. While Metropolitan Bank and Trust Company vs. Peñafiel held that accreditation by the RTC executive judge is not decisive, the petitioners failed to present proof to overcome the presumption of regularity created by the publisher's affidavit and the RTC accreditation. The selection of the Morning Chronicle through a court-supervised raffle further justified Solidbank's reliance on the regularity of the publication.

• Dacion en Pago: Dacion en pago is a special mode of payment whereby the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding obligation. The essential elements of a contract of sale — consent, object certain, and cause or consideration — must be present. It is only when the thing offered is accepted by the creditor that novation takes place, totally extinguishing the debt. As held in Tecnogas Philippines Manufacturing Corporation vs. Philippine National Bank, an unaccepted proposal for dacion en pago neither novates the mortgage contract nor suspends its execution, as there was no meeting of the minds. Upon the debtor's default, foreclosure becomes a matter of right on the part of the mortgagee, for such is the purpose of requiring security for the loans. Solidbank was merely exercising its contractual right to protect its interest when it opted to foreclose, and its supposed insensitivity toward Momarco's financial plight is irrelevant and not indemnifiable as bad faith.

• Escalation Clause: The pro forma promissory note prepared by Solidbank, which the Spouses Jonsay signed in blank, gave the bank unrestrained freedom to unilaterally increase the interest rate in any month "without any advance notice" and tied to Central Bank rate changes. This violated the principle of mutuality of contracts embodied in Article 1308 of the Civil Code, which provides that a contract must bind both contracting parties and its validity or compliance cannot be left to the will of one of them. As held in Philippine National Bank vs. CA, contract changes must be made with the consent of the contracting parties, and any change in the interest rate — a vital component of a loan — must be mutually agreed upon. The unilateral determination and imposition of increased rates is violative of the principle of mutuality. As condemned in New Sampaguita Builders Construction, Inc. vs. PNB, it would be "the zenith of farcicality" to specify and agree upon rates that could be subsequently upgraded at whim by only one party. While escalation clauses are valid in maintaining fiscal stability, giving a bank an unbridled right to adjust interest independently and upwardly completely takes away from the borrower the right to assent to an important modification and negates the element of mutuality. The Usury Law ceiling having been lifted by Central Bank Circular No. 905, nothing in the Circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave borrowers or lead to a hemorrhaging of their assets.

• Applicable Interest Rate: While the CA reduced the interest to the legal rate of 12% per annum, this violated the contractual agreement of the parties imposing an interest of 18.75% per annum. An interest of 18.75% per annum cannot per se be deemed unconscionable back in 1995 or 1997. In Mallari vs. Prudential Bank, contractual interest rates of 21% to 23% per year on loans obtained between 1984 and 1989 were upheld. In Spouses Villanueva vs. CA, loans secured in 1994 carrying interest of 24% per year were upheld. In Advocates for Truth in Lending, Inc. vs. Bangko Sentral Monetary Board, the Court noted that in the later 1990s, banks' prime lending rates ranged from 26% to 31%. The proper approach, as demonstrated in Equitable PCI Bank vs. Ng Sheung Ngor and New Sampaguita Builders, is to disregard the unilaterally escalated interest rates and impose the mutually stipulated rates up to the maturity of the loans, thereafter imposing the legal rate. The stipulated 18.75% per annum was therefore applied from the dates of the loans until the auction date of March 5, 1999, when the mortgage was terminated.

• Attorney's Fees: Attorney's fees do not form an integral part of the cost of borrowing but arise only when collecting upon the notes or loans becomes necessary. Courts have the power to determine their reasonableness based on quantum meruit and to reduce the amount if excessive. As held in New Sampaguita Builders, attorney's fees were reduced from 10% to 1% because they are not an integral part of the cost of borrowing but arise only on the basis of quantum meruit when the lender collects upon the notes. The P3,600,000.00 charged by Solidbank had no factual basis to justify such an excessive amount, and was accordingly reduced to 1% of the outstanding obligation, or P675,512.17.

• Excess Auction Proceeds: Recomputing the petitioners' total loan indebtedness based on the stipulated interest of 18.75% per annum and excluding all penalties and surcharges: the first loan of P40,000,000.00 earned P24,883,500.00 in interest from November 9, 1995 to March 5, 1999 (3.3178 years); the second loan of P20,000,000.00 earned P6,945,000.00 in interest from April 28, 1997 to March 5, 1999 (1.8520 years), for total interest of P31,828,500.00. Adding the principal of P60,000,000.00 yields P91,828,500.00. Deducting the interest paid by the petitioners from November 1995 to April 1998 totaling P24,277,283.22 leaves P67,551,216.78. Adding 1% attorney's fees of P675,512.17 results in a total amount due of P68,226,728.95. Deducting this from Solidbank's winning bid of P82,327,000.00 leaves an excess of P14,100,271.05, which must be paid by Solidbank to the petitioners. As this excess constitutes an ordinary monetary obligation and not a loan or forbearance of credit, it earns simple interest at 6% per annum from judicial demand (March 15, 2000) up to finality, pursuant to Eastern Shipping Lines, Inc. vs. Court of Appeals; thereafter, both the amount and accumulated interest earn 6% per annum pursuant to Monetary Board Circular No. 799 until full satisfaction.

• Mutuality of Contracts (Article 1308, Civil Code) — The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. Applied in this case to strike down the escalation clause that allowed Solidbank to unilaterally increase interest rates without the borrower's prior notice or consent, as such unilateral impositions negate the element of mutuality and are not based on the parties' essential equality.

• Presumption of Regularity of Foreclosure Proceedings — Extrajudicial foreclosure proceedings enjoy the presumption of regularity, and the mortgagor who alleges the absence of a requisite has the burden of proving such fact. Applied here to uphold the validity of the foreclosure sale, as the petitioners failed to present sufficient evidence to overcome the presumption created by the publisher's affidavit of publication and the RTC's accreditation of the Morning Chronicle.

• Dacion en Pago — A special mode of payment whereby the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding obligation. The essential elements of a contract of sale — consent, object certain, and cause or consideration — must be present. Novation takes place only when the thing offered is accepted by the creditor. Applied here to hold that the petitioners' unaccepted proposal for dacion en pago neither novated the mortgage contract nor suspended its execution, and that Solidbank's refusal did not constitute bad faith.

• Equitable Reduction of Interest Rates (Article 1310, Civil Code) — Courts have the authority to reduce or increase interest rates equitably when the determination is evidently inequitable. Applied here to eliminate the unilaterally escalated interest rates and penalties while preserving the originally stipulated rate of 18.75% per annum, which was not itself unconscionable.

• Attorney's Fees on Quantum Meruit — Attorney's fees do not form an integral part of the cost of borrowing but arise only on the basis of quantum meruit when the lender collects upon the notes. Courts have the power to determine their reasonableness and reduce excessive amounts. Applied here to reduce the attorney's fees from P3,600,000.00 to 1% of the outstanding obligation, or P675,512.17.

• Refund of Excess Auction Proceeds — When the foreclosure auction bid exceeds the total amount due from the mortgagor after proper recomputation of the loan obligation — applying the stipulated interest rate, excluding penalties, and reducing attorney's fees — the excess must be refunded to the mortgagor. The excess constitutes an ordinary monetary obligation earning legal interest at 6% per annum from judicial demand until finality, and thereafter 6% per annum until full satisfaction.

• "It is basic that there can be no contract in the true sense in the absence of the element of agreement, or of mutual assent of the parties. If this assent is wanting on the part of one who contracts, his act has no more efficacy than if it had been done under duress or by a person of unsound mind. Similarly, contract changes must be made with the consent of the contracting parties. The minds of all the parties must meet as to the proposed modification, especially when it affects an important aspect of the agreement." — This passage, quoted from Philippine National Bank vs. CA, articulates the foundational rationale for voiding unilateral escalation clauses in loan agreements, grounding the principle in the essential requirement of mutual assent.

• "It would be the zenith of farcicality to specify and agree upon rates that could be subsequently upgraded at whim by only one party to the agreement." — This frequently cited formulation from New Sampaguita Builders Construction, Inc. vs. PNB encapsulates the Court's condemnation of escalation clauses that permit one party to unilaterally adjust interest rates, and is commonly referenced in subsequent jurisprudence on unconscionable interest rates.

• "While the Usury Law ceiling on interest rates was lifted by [Central Bank] Circular No. 905, nothing in the said Circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets." — This passage establishes the boundary on the deregulation of interest rates: the lifting of the Usury Law ceiling does not authorize lenders to impose unconscionable rates, a principle central to the Court's analysis of the escalation clause's validity.

• "Dacion en pago is a special mode of payment whereby the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding obligation. The undertaking is really one of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtor's debt. As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. It is only when the thing offered as an equivalent is accepted by the creditor that novation takes place, thereby, totally extinguishing the debt." — This canonical definition of dacion en pago, quoted from Tecnogas Philippines Manufacturing Corporation vs. Philippine National Bank, establishes the requisites for valid dacion en pago and explains why an unaccepted proposal does not novate the underlying obligation.

• Philippine Savings Bank vs. Spouses Geronimo, 632 Phil. 378 (2010) — Cited for the doctrines that the right to extrajudicially foreclose must be exercised according to the clear mandate of the law, and that the affidavit of publication executed by the newspaper's account executive constitutes prima facie proof that the newspaper is generally circulated in the place where the properties are located.

• Cristobal vs. CA, 384 Phil. 807 (2000) — Cited for the principle that foreclosure proceedings enjoy the presumption of regularity and that the mortgagor who alleges the absence of a requisite has the burden of proving such fact.

• Metropolitan Bank and Trust Company vs. Peñafiel, 599 Phil. 511 (2009) — Cited for the three-part test on newspaper of general circulation and the holding that RTC accreditation of a newspaper is not decisive of whether it is of general circulation. Distinguished in that the petitioners here failed to present evidence to overcome the presumption created by the accreditation.

• Metropolitan Bank and Trust Co. vs. Spouses Miranda, 655 Phil. 265 (2011) — Cited for the rule that compliance with notice and publication requirements is a factual issue generally binding on the Supreme Court, and that a foreclosing bank cannot invoke the presumption of regularity absent any proof of publication.

• Tecnogas Philippines Manufacturing Corporation vs. Philippine National Bank, 574 Phil. 340 (2008) — Cited for the definition and elements of dacion en pago, and the holding that an unaccepted proposal for dacion en pago neither novates the mortgage contract nor suspends its execution.

• Floirendo, Jr. vs. Metropolitan Bank and Trust Co., 558 Phil. 654 (2007) — Cited for the doctrine that increases in interest rate beyond the stipulated rate cannot be collected without the prior consent of the borrower, and that excess interest payments must be applied to the principal obligation.

• Philippine National Bank vs. CA, G.R. No. 107569, November 8, 1994 — Cited for the principle that escalation clauses granting a bank unbridled right to unilaterally adjust interest rates violate the mutuality of contracts, as contract changes must be mutually agreed upon by the parties.

• New Sampaguita Builders Construction, Inc. vs. PNB, 479 Phil. 483 (2004) — Cited extensively for the condemnation of unilateral escalation clauses as contracts of adhesion, the authority of courts to equitably reduce interest rates under Article 1310 of the Civil Code, the reduction of attorney's fees from 10% to 1% on quantum meruit, and the methodology of applying stipulated interest rates up to maturity and the legal rate thereafter.

• Equitable PCI Bank vs. Ng Sheung Ngor, 565 Phil. 520 (2007) — Cited for the methodology of annulling escalation clauses and imposing the original stipulated rate of interest up to maturity, and the legal rate of 12% per annum thereafter on outstanding loans.

• Mallari vs. Prudential Bank, G.R. No. 197861, June 5, 2013 — Cited to demonstrate that contractual interest rates of 21% to 23% per annum on loans obtained in the 1980s were not considered unconscionable, supporting the validity of the 18.75% stipulated rate.

• Spouses Villanueva vs. CA, 671 Phil. 467 (2011) — Cited for the holding that loans secured in 1994 carrying interest of 24% per year were upheld as not unconscionable, further supporting the validity of the 18.75% rate.

• Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 97412, July 12, 1994 — Cited for the rule that an ordinary monetary obligation earns simple interest at 6% per annum from judicial demand until finality, and thereafter the amount and accumulated interest earn 6% per annum until full satisfaction.

• Salcedo II vs. COMELEC, 371 Phil. 377 (1999) — Cited for the principle that a motion for reconsideration allows the adjudicator to take a second opportunity to review the case and decide anew a question previously raised, with no legal proscription against adopting a new position contrary to one previously taken.

• Article 1308, Civil Code — "The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them." Applied to declare void the escalation clause that allowed Solidbank to unilaterally increase interest rates without the borrower's prior notice or consent, as it negated the element of mutuality in the contract.

• Article 1310, Civil Code — "The determination shall not be obligatory if it is evidently inequitable. In such case, the courts shall decide what is equitable under the circumstances." Invoked as authority for courts to equitably reduce interest rates, eliminate penalties and surcharges, and reduce attorney's fees when the amounts charged are iniquitous or unconscionable.

• Section 3, Act No. 3135 (as amended by Act No. 4118) — Requires that notice of the extrajudicial foreclosure sale be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city where the property is situated. Applied to determine whether Solidbank complied with the publication requirement, the Court finding sufficient compliance through the affidavit of publication and the RTC accreditation of the Morning Chronicle.

• Sections 1, 2, and 3, Rule 37, Rules of Court — Govern motions for new trial or reconsideration, authorizing the court to amend its judgment when excessive damages have been awarded or when the judgment is contrary to the evidence or law. Applied to uphold the CA's authority to reverse its earlier decision upon Solidbank's timely motion for reconsideration.

• Monetary Board Circular No. 799 — Sets the legal rate of interest for loans or forbearance of money at 6% per annum starting July 1, 2013. Applied to the excess auction proceeds of P14,100,271.05, which earns 6% per annum from finality until full satisfaction.

• Central Bank Circular No. 905 — Lifted the Usury Law ceiling on interest rates. Cited for the principle that while the ceiling was lifted, nothing in the Circular grants lenders carte blanche authority to raise interest rates to unconscionable levels or to unilaterally raise rates without the other party's consent.

Associate Justice Presbitero J. Velasco, Jr. (Chairperson), Associate Justice Jose Portugal Perez, Associate Justice Jose Catral Mendoza, and Associate Justice Francis H. Jardeza concurred.