Asiatrust Development Bank v. Concepts Trading Corporation

Summary

This case involved a loan dispute between Asiatrust Development Bank and Concepts Trading Corporation over a P2,000,000 credit accommodation. After Concepts defaulted in 1987, the parties executed a Memorandum of Agreement in 1988 allowing modified monthly payments. The key issue was whether this MOA waived the 36% penalty charges imposed under the original promissory note. The Supreme Court affirmed the Court of Appeals' ruling that the bank's liberality in allowing the modified payment scheme effectively waived penalty charges during the compliance period, but penalties would apply after subsequent default. The Court also upheld the reduction of penalty charges from 36% to 3% per annum under Civil Code Article 1229, finding the original rate excessive given partial compliance. The decision clarifies that modification agreements can waive penalty provisions through implication when they provide alternative payment arrangements that render the original acceleration clause inapplicable during performance.