Mondragon International Philippines v. Union Bank of the Philippines

Summary

The Supreme Court denied petitioners' appeal but modified the Court of Appeals decision in two key aspects. First, it restored the principal obligation amount to P116,000,000.00 as determined by the RTC, noting that Union Bank waived its right to challenge this amount by not appealing. Second, applying Article 1229 of the Civil Code, the Court reduced the unconscionable penalty charge from 2% monthly (24% per annum) to 1% monthly (12% per annum) starting from the 1999 default date. The case establishes that appellees cannot obtain relief beyond what was granted in lower court decisions without filing their own appeal, and that courts have discretion to reduce iniquitous penalty clauses in contracts. This decision balances contractual obligations with principles of equity and fairness in commercial lending relationships.