South Carolina Says Borrowers should be given chance to pay loan agreed on by parties

The Supreme Court has said that borrowers should be given a chance to pay the loan at an interest rate that is agreed upon by both parties as it nullified the foreclosure of several properties.

In an nine-page resolution, the SC Special Third Division granted the motion for reconsideration filed by the borrowers whose properties were foreclosed by a bank after they failed to pay back a loan amounting to P16 million.

“The mortgagor should be given a chance to pay their indebtedness at an interest rate clearly agreed upon by both 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,” it said.

According to the court, the loan agreement entered by the borrowers allowed the bank to adjust the interest rate every quarter based on the market conditions.

When the borrowers failed to pay, the bank began extrajudicial foreclosure proceedings.

This led the borrowers to file a petition with a regional trial court to nullify the foreclosure sale, arguing that the bank had the sole power to set the interest rate.

Though the RTC ruled in the borrowers favor, the Court of Appeals reversed this.

The appellate court ruled that both the interest rate and the foreclosure sale were void.

Meanwhile, the SC initially upheld the foreclosure sale but it later ruled that if the interest rate was unconscionable or imposed unilaterally, any foreclosure that follows is also invalid.

“[T]he interest rates being imposed were unilaterally imposed by petitioner, thus making it potestative or entirely dependent on petitioner’s will,” it said.

“Being potestative, the principle of mutuality of contracts, found in Articles 1308 and 1309 of the Civil Code, could not have been present, making the provisions on interest void. Being void, the subsequent foreclosure proceedings could not have been held validly,” it added.

The decision, penned by Associate Justice Ricardo Rosario, was promulgated in March 2025 and made public in October. —AOL, GMA Integrated News