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    52) Silos vs. Philippine National Bank, 728, SCRA 617 (2014)

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    Zyrene Cabaldo
    Eduardo and Lydia Silos secured a revolving credit line with the Philippine National Bank (PNB) through a real estate mortgage. Over time, their interest rates increased from 19.5% up to 32% according to PNB's policies. When the Silos defaulted during an economic crisis, PNB foreclosed on their property. The Silos sued, arguing the increasing interest rates were imposed without their consent. The lower courts ruled for PNB. The Supreme Court found the escalating interest clauses were invalid, so the interest rate should be the original 19.5% until maturity, and 12% annually after, as per prior rulings. Payments made must first pay unpaid interest at the legal rate

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    52) Silos vs. Philippine National Bank, 728, SCRA 617 (2014)

    Uploaded by

    Zyrene Cabaldo
    34 views1 page
    Eduardo and Lydia Silos secured a revolving credit line with the Philippine National Bank (PNB) through a real estate mortgage. Over time, their interest rates increased from 19.5% up to 32% according to PNB's policies. When the Silos defaulted during an economic crisis, PNB foreclosed on their property. The Silos sued, arguing the increasing interest rates were imposed without their consent. The lower courts ruled for PNB. The Supreme Court found the escalating interest clauses were invalid, so the interest rate should be the original 19.5% until maturity, and 12% annually after, as per prior rulings. Payments made must first pay unpaid interest at the legal rate

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    52) Silos vs. Philippine National Bank, 728, SCRA 617 (2014)_

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    Eduardo and Lydia Silos secured a revolving credit line with the Philippine National Bank (PNB) through a real estate mortgage. Over time, their interest rates increased from 19.5% up to 32% according to PNB's policies. When the Silos defaulted during an economic crisis, PNB foreclosed on their property. The Silos sued, arguing the increasing interest rates were imposed without their consent. The lower courts ruled for PNB. The Supreme Court found the escalating interest clauses were invalid, so the interest rate should be the original 19.5% until maturity, and 12% annually after, as per prior rulings. Payments made must first pay unpaid interest at the legal rate

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    34 views1 page

    52) Silos vs. Philippine National Bank, 728, SCRA 617 (2014)

    Uploaded by

    Zyrene Cabaldo
    Eduardo and Lydia Silos secured a revolving credit line with the Philippine National Bank (PNB) through a real estate mortgage. Over time, their interest rates increased from 19.5% up to 32% according to PNB's policies. When the Silos defaulted during an economic crisis, PNB foreclosed on their property. The Silos sued, arguing the increasing interest rates were imposed without their consent. The lower courts ruled for PNB. The Supreme Court found the escalating interest clauses were invalid, so the interest rate should be the original 19.5% until maturity, and 12% annually after, as per prior rulings. Payments made must first pay unpaid interest at the legal rate

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    52. SPOUSES EDUARDO & LYDIA SILOS v.

    PHILIPPINE NATIONAL BANK

    FACTS:
    Petitioners Eduardo and Lydia Silos secured a revolving credit line with Philippine National Bank
    (PNB) through a real estate mortgage as a security. After two years, their credit line increased.

    Spouses Silos then signed a Credit Agreement, which was also amended two years later, and
    several Promissory Notes as regards their Credit Agreements with PNB. The said loan was
    initially subjected to a 19.5% interest rate per annum. In the Credit Agreements, Spouses Silos
    bound themselves to the power of PNB to modify the interest rate depending on whatever policy
    that PNB may adopt in the future, without the need of notice upon them. Thus, the said interest
    rates played from 16% to as high as 32% per annum. Spouses Silos acceded to the policy by
    pre-signing a total of twenty-six (26) Promissory Notes leaving the individual applicable interest
    rates at hand blank since it would be subject to modification by PNB. Spouses Silos regularly
    renewed and made good on their Promissory Notes, religiously paid the interests without
    objection or fail. However, during the 1997 Asian Financial Crisis, Spouses Silos faltered when
    the interest rates soared. Spouses Silos’ 26th Promissory Note became past due, and despite
    repeated demands by PNB, they failed to make good on the note. Thus, PNB foreclosed and
    auctioned the involved security for the mortgage. Spouses Silos instituted an action to annul the
    foreclosure sale on the ground that the succeeding interest rates used in their loan agreements
    was left to the sole will of PNB, the same fixed by the latter without their prior consent and thus,
    void. RTC ruled that such stipulation authorizing both the increase and decrease of interest
    rates as may be applicable is valid. The Court of Appeals (CA) affirmed the RTC decision.

    ISSUE: Whether or not the principal amount is subject to the stipulated rate of interest

    RULING:
    Since the escalation clause is annulled, the principal amount of the loan is subject to the original
    or stipulated rate of interest, and upon maturity, the amount due shall be subject to legal interest
    at the rate of 12% per annum. This is the uniform ruling adopted in previous cases, including
    those cited. The interests paid by petitioners should be applied first to the payment of the
    stipulated or legal and unpaid interest, as the case may be, and later, to the capital or principal.
    Subsequent higher interest rates have been declared illegal; but because only the rates are
    found to be improper, the obligation to pay interest subsists, the same to be fixed at the legal
    rate of 12% per annum. However, the 12% interest shall apply only until June 30, 2013. Starting
    July1, 2013, the prevailing rate of interest shall be 6% per annum pursuant to our ruling in Nacar
    v. Gallery Frames99 and Bangko Sentral ng Pilipinas-Monetary Board Circular No.

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