In United Coconut Planters Bank, substituted by Land Bank of the Philippines vs. Editha F. Ang and Violeta M. Fernandez (G.R. No. 222448. March 03, 2025), the Supreme Court invalidated the foreclosure of multiple properties, ruling that the interest imposed on an unpaid bank loan was unjust and unilaterally applied without the borrower’s agreement. Thus:

“Indeed, both Spouses Andal and Spouses Albos support the Dissenting Opinion of Justice Zalameda whose view, to the mind of this Court, should now be adopted. The unilateral imposition of interests, at such rate that the lender or mortgagee so pleases, cannot and should not be reason to justify a foreclosure sale. The mortgagor should be given a chance to pay their indebtedness at an interest rate clearly agreed upon by the parties, otherwise, they shall be at the mercy of their creditor, standing to lose their property without being afforded a fair opportunity to settle their indebtedness.”

The ruling stressed that under the Civil Code, contracts must reflect mutual consent and fairness. Any agreement where terms are subject to the sole discretion of one party is considered void.

In this case, the bank alone decided on the interest rate. As a result, the Court declared both the rate and the subsequent foreclosure as void.

The SC concluded that the borrowers deserve an opportunity to repay the loan under an interest rate that both sides agree to. Denying them this chance would place them at an unfair disadvantage and expose them to the risk of losing their property without a just process.