SC: 6% interest only on pre-approved credit cards

THIRD DIVISION  [ G.R. No. 234835, January 23, 2019 ]  FELICIANO G. FERNANDEZ VS. BANK OF THE PHILIPPINE ISLANDS.

This petition for review challenges the Decision[1] dated June 30, 2016 and the Resolution[2] dated October 5, 2017 of the Court of Appeals (CA) in CA-G.R. SP No. 141855. The CA affirmed the judgment of the Regional Trial Court (RTC), Branch 137 of Makati City, finding Feliciano G. Fernandez (Fernandez) liable to pay Bank of Philippine Islands (BPI) P230,503.61, plus legal interest imposed at the rate of 6% per annum from the date of filing of the complaint until fully paid.

Fernandez, a valued client of BPI, was issued a pre-approved BPI credit card with Customer Number 201003002902302.[3] Under the terms and conditions governing the issuance and use of the BPI credit card, a finance charge of 3.25% is imposed on the unpaid balance after the due date of payment. A late payment charge of 6% is also added for every month that a client fails to pay on the due date indicated on the statement of account.[4]Thereafter, Fernandez used the card for several purchases and paid only the monthly minimum amount required. Later on, he began to default on his payment. In the Statement of Account[5] dated February 20, 2011, the amount due for payment is P275,426.76 representing the outstanding principal amount due, plus penalties and charges incurred.

When Fernandez failed to pay his obligation, BPI demanded payment from him, which went unheeded. Thus, BPI filed with the Metropolitan Trial Court (MeTC) of Makati City a Complaint[6] for sum of money. Fernandez admitted that he has an outstanding obligation, but he assailed the penalties and charges imposed by BPI on the principal amount due.[7]

In a Decision[8] dated August 7, 2014, the MeTC found the penalties and charges imposed by BPI to be iniquitous and unconscionable. Thus, the MeTC imposed only the legal interest rate of 6% on the amount of P230,503.61, which was Fernandez's outstanding obligation per the Statement of Account dated September 20, 2010. The MeTC ruled that the interest shall be reckoned from the filing of the complaint on July 6, 2012 until the obligation is fully paid. Fernandez was also ordered to pay attorney's fees in the amount of (P3,000.00).

Convinced that the principal amount of P230,503.61 should be reduced to exclude the penalties and charges previously imposed by BPI, Fernandez appealed to the RTC. However, the RTC denied the appeal through its Decision[9] dated May 8, 2015. While the RTC found the interest imposed by BPI to be iniquitous, it maintained the amount of principal at P230,503.61, which represented the outstanding balance as of September 2010, when Fernandez last used the credit card issued by BPI.[10] Fernandez filed a motion for reconsideration, which the RTC denied in its Resolution[11] dated July 31, 2015.

Unrelenting, Fernandez filed a petition for review with the CA. On June 30, 2016, the CA promulgated its Decision[12] affirming the ruling of the RTC. The CA held that, following the Court's pronouncement in Alcaraz v. CA, Fernandez is a pre-screened client who did not submit an application form and did not give his consent to the terms and conditions in the issuance and use of the credit card, therefore, the penalties and charges indicated in such terms do not apply to him. Again, the CA pegged the principal amount at P230,503.61.

Hence, the present petition by Fernandez.

The bone of contention in the present case is the principal amount due on which the legal interest rate should be imposed. Fernandez argues that the amount of P230,503.61 is not the principal amount of his obligation since penalties and charges were already incorporated in the total amount due.[13]

In its Comment,[14] BPI disputes that the penalties and charges it imposed are unconscionable. It does not mention whether the amount of P230,503.61 is inclusive of penalties and charges, but it claims that Fernandez used the credit card with full knowledge of the liabilities involved in using such card.[15]

Fernandez's contention is tenable.

In Alcaraz v. CA (Alcaraz),[16] the Court held that a pre-screened client should not be condemned to pay the interests and charges provided in the terms and conditions without any proof of the client's conformity and acceptance of the stipulations contained therein. This is because there was no evidence that the client was shown a copy of the Terms and Conditions before or after the issuance of the credit card in his name, much less that he has given his consent thereto.[17]

Similarly, in Ledda v. Bank of the Philippine Islands (Ledda),[18] BPI failed to prove that Ledda, the petitioner therein, signed any credit card application form prior to the issuance of the credit card. Since there was no proof that Ledda consented to the terms and conditions governing the use of the credit card, she was liable to pay only the principal amount of her unpaid obligation plus legal interest.

Thus, the CA was correct in not applying the penalties and charges indicated in the terms and conditions to Fernandez's credit card obligation. As with Alcaraz and Ledda, there is no showing that Fernandez, a pre-screened client, agreed to be bound by BPI's terms and conditions.

However, it appears that the amount of P230,503.61 based on the statement of account presented by BPI include the finance and late payment charges. As explained earlier, these charges should not be applied to Fernandez's principal obligation. Considering that the Court is not a trier of facts, the case shall be remanded to the CA for reception of evidence. To the amount of the principal which remains to be proven by BPI, the legal interest rate of 12% shall be imposed from the date of the filing of the complaint until June 30, 2013, and the rate of 6% shall be imposed from July 1, 2013 until the obligation is fully paid, in consonance with the Court's rule on forbearance of money in Nacar v. Gallery Frames, et al.[19]

WHEREFORE, premises considered, the case is REMANDED to the same members of the Division of the Court of Appeals that rendered the assailed Decision, for reception of evidence in order to determine the unpaid principal amount, if any, due from Feliciano G. Fernandez, in accordance with this Resolution.

SO ORDERED. (CARANDANG, J., additional Member per S.O. No. 2624 dated November 29, 2018).
[1]Penned by Associate Justice Renato C. Francisco, with Associate Justices Apolinario Bruselas, Jr. and Danton Q. Eueser concurring; rollo, pp. 366-375.

[2]Id. at 376-377

[3]Id. at 240.

[4]Id. at 240.

[5]Id. at 302-303.

[6]Id. at 239-241.

[7]Id. at 306-307.

[8]Rendered by Presiding Judge Barbara Aleli H. Briones; id. at 69-72

[9]Rendered by Presiding Judge Ethel V. Mercado-Gutay: id. at 61-67.

[10]Id. at 66.

[11]Id. at 68.

[12]Id. at 30-39.

[13]Id. at 17-18.

[14]Id. at 193-237.

[15]Id. at 229-237.

[16]529 Phil. 77 (2006).

[17]Id. at 88.

[18]699 Phil. 273,281(2012).

[19]716 Phil. 267(2013).