Ecija town mayor seeks TRO vs bank interest rate

October 24, 2019

The municipal government of San Antonio, Nueva Ecija has asked the Gapan City regional trial court to stop a bank from imposing a 7.25 percent quarterly interest rate on two previous loan agreements worth P106.58-million which was entered into by the past administration under former town mayor Antonino R. Lustre.

In a civil complaint, incumbent Mayor Arvin C. Salonga disclosed that the interest rate being charged by the East-West Banking Corp. was “potestative in nature and violative of the principle of mutuality of contracts.”

Pending litigation, Salonga asked for the issuance of a temporary restraining order and of a writ of preliminary injunction enjoining the bank from imposing the questioned rate, and from applying the acceleration clause, among other reliefs.

Salonga disclosed that he initiated the filing of the civil case to seek remedy and protection from courts since the loans entered into by his predecessor were unilateral and cumbersome, hence, null and void.

However, he admitted that out of good faith, the municipal government of San Antonio town still appropriated the amount of P15.2-million in the 2019 Annual Budget, which was approved by the town council, to “pay under protest”  the amortizations for the said loans.

According to Salonga, the issue started when the defendant-bank unilaterally changed the quarterly interest rate from six percent to 7.25 percent, without any prior notice of consultation with the plaintiff-municipal government.

During this time, Salonga said they discovered that starting the 2nd quarter of 2018, the bank had already increased without notifying the plaintiff the interest rates from 6 percent to 7.125 percent (second quarter), and to 8.125 percent (3rd)