"x x x.
We affirm the interest rate decreed by the CA. Stipulated interest rates are illegal if they are unconscionable and courts are allowed to temper interest rates when necessary. In exercising this vested power to determine what is iniquitous and unconscionable, the Court must consider the circumstances of each case. What may be iniquitous and unconscionable in one case, may be just in another.[10]
We cannot uphold the petitioner's invocation of our ruling in DBP v. Court of Appeals,[11] wherein the interest rate imposed was reduced to 10% per annum. The overriding circumstance prompting such pronouncement was the regular payments made by the borrower. Evidently, such fact is wanting in the case at bar, hence, the petitioner cannot demand for a similar interest rate.
The circumstances attendant herein are similar to those in Trade & Investment Development Corporation of the Philippines v. Roblett Industrial Construction Corporation[12] wherein we levied the legal interest rate of 12% per annum.
However, pursuant to Bank of the Philippine Islands, Inc. v. Yu,[13] we deem it proper to further reduce the penalty charge decreed by the CA from 2% per month to 1% per month or 12% per annum in view of the following factors: (1) respondent has already received P7,504,522.27 in penalty charges, and (2) the loan extended to respondent was a short-term credit facility.
On the basis of the same precedent, the attorney's fees must likewise be equitably reduced considering that: (1) the petitioner has already made partial payments; (2) the attorney's fees are not an integral part of the cost of borrowing but a mere incident of collection;[14] and (3) the attorney's fees were intended as penal clause to answer for liquidated damages, hence, the rate of 10% of the unpaid obligation is too onerous.[15] Under the premises, attorney’s fees equivalent to one percent (1%) of the outstanding balance is reasonable.[16]
x x x."
