Philippine National Bank v. Aic Construction Corporation

Summary

Philippine National Bank granted AIC Construction a credit line with variable interest rates determined solely by the bank. When the loan matured, interest charges comprised a significant portion of the total obligation. The Supreme Court found the interest provision unconscionable as it violated the principle of mutuality of contracts under Article 1308 of the Civil Code, allowing the bank to unilaterally impose rates through subjective criteria without borrower input. Following precedent in Spouses Silos v. PNB, the Court applied the legal interest rate of 12% per annum instead of the variable rates, emphasizing that courts may equitably reduce iniquitous interest charges to prevent unjust enrichment and protect borrowers from predatory lending practices.