G.R. No. 251157 - David vs. Bank of the Philippine Islands

Case Summary (G.R. No. 251157)

Factual Background

The bank issued petitioner a pre‑approved credit card under Customer No. 0201005001208180. The card’s terms required payment of charges within twenty calendar days from cut‑off without need for demand and provided for monthly 3.25% interest and 6% late payment charge. Petitioner initially paid on time but began to delay in 2007. The bank’s internal record reflected a reference balance of P223,749.48 (the bank witness testified to P223,000.00 by rounding), while the Statement of Account dated January 14, 2007 reflected a higher balance of P278,649.87. Petitioner submitted Statements of Account as Exhibits "1" to "11." During trial the bank’s internal record was identified through the testimony of Account Specialist Michael Alvin Gianan and was marked in the proceedings, but neither party formally offered that internal record in evidence.

Trial Court Proceedings

The bank sued petitioner and his wife for sum of money in Civil Case No. 97505 before MeTC, Branch 67, Makati City. The MeTC, by Decision dated October 7, 2014, used P278,649.87 as the starting point and found unpaid obligation of P194,682.99 including interests and charges, but reduced interest and penalty charges to one percent per month (twelve percent per annum) until June 30, 2013 and six percent thereafter. By Resolution dated May 25, 2015, the MeTC partially granted petitioner’s motion for reconsideration, adopted P223,749.48 per the bank’s internal record as the reference amount, deleted penalty charges for lack of proof that petitioner assented to terms imposing penalty charges, and reduced the obligation to P97,428.51 while retaining twelve percent interest per annum.

RTC Proceedings

Petitioner appealed to the RTC, which, by Judgment dated December 7, 2015, affirmed the MeTC’s adoption of the bank’s internal record as the reckoning point. The RTC held that a document not formally offered may nevertheless be considered if it was properly identified through testimony duly recorded and incorporated into the case records. The RTC observed that the bank’s witness presented and testified to the internal record. Petitioner argued before the RTC that the correct internal figure was P223,000.00 per testimony and that he had paid P211,100.00, leaving P11,900.00 unpaid. The RTC denied reconsideration by Resolution dated February 11, 2016.

Court of Appeals Ruling

On appeal to the Court of Appeals, the CA rejected the bank’s internal record and Gianan’s testimony on the ground that the document had not been formally offered. The CA selected the January 14, 2007 Statement of Account balance of P278,649.87 as the reference point, recalculated the account, and arrived at an unpaid obligation of P63,074.89 as of August 12, 2008. The CA denied petitioner’s motion for reconsideration on January 2, 2020.

The Petition to the Supreme Court

Petitioner filed this petition for review on certiorari seeking reversal of the CA dispositions. He maintained that the bank’s internal record was admissible pursuant to the exception recognized in Sabay v. People because it was identified by testimony and incorporated into the record; he relied on Gianan’s testimony and insisted his unpaid balance was only P11,900.00 after alleged payments totaling P211,100.00. Petitioner also contested the award of attorney’s fees. The bank countered that petitioner failed to establish the P11,900.00 balance.

Issues Presented

(1) Which figure should serve as the reckoning point of petitioner’s obligation among P223,000.00, P223,749.48, and P278,649.87? (2) What was petitioner’s unpaid obligation as of August 12, 2008, and what interest and fees should apply thereafter?

Supreme Court Ruling (Disposition)

The Supreme Court affirmed with modification the Court of Appeals’ dispositions. It held that the proper reckoning amount was P223,749.48 per the bank’s internal record. The Court ordered petitioner to pay respondent P98,527.40, composed of principal P90,392.12 and accrued interest P8,135.28 as of August 12, 2008. It directed twelve percent per annum interest from September 2008 until June 30, 2013, six percent per annum from July 1, 2013 until finality of the decision, and six percent per annum thereafter until full payment. The Court affirmed the award of ten percent of the monetary award as attorney’s fees to the bank.

Legal Basis and Reasoning — Admissibility and Choice of Reckoning Amount

The Court first addressed admissibility and the competing documents. It observed that the bank’s internal record bore P223,749.48 while the bank witness rounded the figure in testimony to P223,000.00 and that the Statement of Account bore P278,649.87. The Court reaffirmed the principle in Sabay v. People, 744 Phil. 760 (2014), that a trial court may consider evidence not formally offered if (1) the evidence was duly identified through testimony duly recorded, and (2) the evidence was incorporated in the case records. Both requisites were present here because the internal record was identified through Gianan’s testimony and the document had been incorporated in the records. The Court held that, between a document and a testimonial rounding, the document controls as the best evidence. The Court further found that the bank, as issuer of both documents and as creditor, effectively corrected the Statement of Account by Gianan’s testimony and by failing to appeal the MeTC and RTC rulings that adopted the internal record. The Court gave particular weight to the bank representative’s statement because it was a declaration against interest, which affords the greatest certainty per Parel v. Prudencio, 521 Phil. 533 (2006). Consequently, the Court concluded that P223,749.48 was the correct reference amount and that the Court of Appeals’ reliance on P278,649.87 was erroneous and not relevant to the contested computations.

Legal Basis and Reasoning — Application of Payments and Computation of Unpaid Obligation

The Court next addressed the computation of payments and interest. It held that the MeTC, RTC, and CA erred in applying payments solely against principal without first extinguishing accrued interest. The Court emphasized Article 1253 of the New Civil Code: “if the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.” Applying that rule, the Court recalculated the account beginning from the correct principal figure P223,749.48, applied subsequent purchases and payments by first covering accrued interest, and traced the evolving principal and interest through August 12, 2008. The Court rejected petitioner’s computation that relied on P223,000.00 and omitted interest. The correct calculation yielded principal P90,392.12 and accrued interest P8,135.28 as of August 12, 2008, or a total unpaid obligation of P98

Case Syllabus (G.R. No. 251157)

Parties and Posture

Danilo A. David filed a petition for review on certiorari seeking to reverse the Court of Appeals' Decision dated November 29, 2018 and Resolution dated January 2, 2020 in CA-G.R. SP No. 144469.
Bank of the Philippine Islands was the respondent and original creditor that issued the pre‑approved credit card and commenced the collection action.
The petition contested the reckoning amount used to compute the credit card indebtedness and sought reduction of the claimed balance and denial of attorney’s fees.

Key Facts

BPI issued petitioner a pre‑approved credit card under Customer No. 0201005001208180 with terms requiring payment within twenty calendar days and providing for monthly 3.25% interest and a six percent late payment charge.
Petitioner timely paid until 2007 and thereafter began delaying payments, prompting accumulation of charges and additional purchases.
The bank’s Statement of Account dated January 14, 2007 showed a beginning balance of P278,649.87.
The bank’s internal record showed a beginning balance of P223,749.48, while its witness testified to a rounded figure of P223,000.00.
The internal record was identified in testimony and marked in the hearing but was not formally offered in evidence by either party.
The bank filed suit on February 26, 2009 after demands failed, with an August 12, 2008 Statement of Account reflecting a total credit card charge of P404,733.03.

Procedural History

The Metropolitan Trial Court issued a Decision on October 7, 2014 fixing the reckoning amount at P278,649.87 and adjudging an unpaid obligation of P194,682.99, later reduced on motion.
The MeTC modified its ruling by Resolution dated May 25, 2015 to adopt the bank’s internal record of P223,749.48, deleted penalty charges for lack of proof of agreement to terms, and reduced the award to P97,428.51.
The Regional Trial Court, Branch 145, Makati City affirmed the MeTC under Judgment dated December 7, 2015 and denied reconsideration on February 11, 2016.
The Court of Appeals in its Decision dated November 29, 2018 reversed and used P278,649.87 as the reference point to compute an unpaid balance of P63,074.89, and denied reconsideration on January 2, 2020.
The Supreme Court reviewed the CA rulings by petition for certiorari.

Issues Presented

Whether the proper reckoning amount for petitioner’s indebtedness is P223,000.00, P223,749.48, or P278,649.87.
What the unpaid obligation of petitioner amounted to as of August 12, 2008 and thereafter.
Whether attorney’s fees were properly awarded.

Ruling

The Court held that the correct reckoning amount is P223,749.48 as reflected in the bank’s internal record.
The Court adjudged petitioner’s unpaid obligation as of August 12, 2008 to be P98,527.40, broken down into principal P90,392.12 and accrued interest P8,135.28.
The Court affirmed award of attorney’s fees at ten percent of the total monetary award under Art. 2208 of the Civil Code.
The Court affirmed the Court of Appeals’ decision with modification as to the reckoning amount and the computation of the unpaid balance.

Reasoning

The Court gave precedence to the b