IBAA vs Spouses Salazar

G.R. No. 82082, March 25, 1988

Facts: SS obtained loan from I Bank with these express stipulations: 1) AN

INITIAL 19% INTEREST and to INCREASE SUCH WITHOUT NOTICE ALLOWABLE
BY LAW; 2) a PENALTY OF 2% of AMOUNT DUE SHOULD THEY DEFAULT; and 3)
IF collection was REFERRED TO AN ATTY., an ADDITIONAL 25% of any AMOUNT
DUE AS ATTY’S FEES. Though they MADE PARTIAL PAYMENTS, SS eventually
defaulted. I Bank made these claims: 1) rate INCREASED TO 21%, 2) THE 2%
PENALTY for defaulting, and 3) 25% of the total debt as ATTY’S FEES. Trial court
held that no 1) no rate increase, 2) no 2% penalty, and 3) atty. fees not equal to
25% of total debt, to which I Bank deemed are erroneous.

Issue: Whether or not the Trial court erred in judgment.

Held: No.

Banco Filipino vs Navarro provides that interest rates MAY BE ADJUSTED

PROVIDED that maturity date of loans are BEYOND 730 DAYS (2 years?) from
the date of allowing adjustment of interest rates by Monetary Board. Second,
Art. 1229 provides that THE JUDGE MAY REDUCE THE PENALTY UPON PARTIAL
COMPLIANCE of debtor. Furthermore, PENALTY MAY BE REDUCED IF IT IS
INIQUITOUS OR UNCONSCIONABLE.

In this case, the maturity date of the remaining loan WAS LESS THAN 730
DAYS; therefore the 21% interest cannot stand. Second, though it is true that
THE INTEREST AND PENALTY MAY BOTH BE CLAIMED, as the parties have
stipulated (ART. 1226), the Court observed that 1) SS made PARTIAL
PAYMENTS before eventually defaulting; and 2) EFFORTS WERE MADE by SS TO
MAKE GOOD OF THEIR PROMISE; alas, they did so in vain. As such, the Court
REDUCED THE PENALTY FOR BEING INIQUITOUS (unfair, immoral); the atty’s
fees REDUCED FOR BEING UNCONSCIONABLE (unreasonable).