Case Summary (G.R. No. 225562)
Petitioner and Respondent
Petitioners: William C. Louh, Jr. and Irene L. Louh
Respondent: Bank of the Philippine Islands
Key Dates
• October 14, 2009 – Spouses Louh first failed to settle their credit card balance.
• August 7, 2010; January 25, 2011; May 19, 2011 – BPI demand letters issued.
• August 4, 2011 – BPI filed a collection suit in the Makati City RTC.
• February 27, 2012 – RTC granted 15-day extension to file an answer (until March 4, 2012).
• July 20, 2012 – Spouses Louh filed an answer, more than three months late.
• July 24, 2012 – RTC declared the Spouses Louh in default and set ex parte presentation.
• November 29, 2012 – RTC rendered judgment ordering payment of P533,836.27 plus annual charges and attorney’s fees.
• April 8, 2013 – RTC denied Spouses Louh’s motion for reconsideration.
• August 11, 2015 – Court of Appeals (CA) affirmed the RTC decision.
• May 23, 2016 – CA denied Spouses Louh’s motion for reconsideration.
• March 8, 2017 – Supreme Court resolution.
Applicable Law
• 1987 Constitution (decision after 1990)
• Rules of Civil Procedure, Rule 9, Section 3 (default and relief therefrom)
• Civil Code of the Philippines, Article 1229 (equitable reduction of penalties)
• Civil Code of the Philippines, Article 2227 (equitable reduction of liquidated damages)
• Central Bank Circular No. 905-82 (removed statutory ceiling on interest rates)
Factual Background
The Spouses Louh regularly used and paid their credit cards until October 14, 2009, when they ceased payment. By August 15, 2010, their balance stood at P533,836.27. Despite written demands, the debt remained unpaid.
Procedural History
BPI filed for collection in August 2011. The Spouses Louh sought an extension to answer but failed to comply by March 4, 2012. Their belated answer on July 20, 2012, came after a default order. They did not move to set aside the default. The RTC conducted an ex parte hearing, issued a decision reducing the monthly charges to 1% (from 3.5% and 6%) but otherwise awarding full relief, including 25% attorney’s fees. The CA affirmed in toto.
Issue
Whether the Court of Appeals erred in affirming the RTC decision given the Spouses Louh’s procedural default, evidentiary sufficiency, and alleged unconscionable charges.
Procedural Default and Relaxation of Rules
Under Rule 9, Section 3, failure to answer within the reglementary period warranted a default declaration. A defaulting party may file a motion to set aside upon showing excusable negligence and a meritorious defense. The Spouses Louh never sought such relief. Citing Magsino v. De Ocampo, the Court held that rules may be relaxed only for compelling reasons and a reasonable attempt at compliance. The heart bypass surgery of William Louh did not constitute excusable negligence sufficient to merit relief from default.
Evidentiary Sufficiency
BPI presented: (1) delivery receipts and signed card agreements; (2) computer-generated Statements of Account (SOAs); (3) demand letters acknowledged by the Spouses Louh; and (4) a judicial affidavit of an account specialist. The Spouses Louh admitted the debt’s existence. Having slept on their rights, they could not later challenge the evidence. Dismissing or remanding the case would unjustly penalize BPI and prolong proceedings, per Macalinao v. BPI.
Unconscionable Charges and Equitable Reduction
Interest and penalty rates above 3% per month are deemed iniquitous and unconscionable. In Macalinao, the Court reduced 3.25% interest and 6% penalty to 12% each per annum. Article 1229 permits equit
Case Syllabus (G.R. No. 225562)
Facts
- The Bank of the Philippine Islands (BPI) issued a credit card to William C. Louh, Jr., with his spouse Irene L. Louh as an extension cardholder, under terms providing for a 3.5% monthly finance charge and a 6% monthly late payment charge on unpaid balances.
- William and Irene Louh made purchases and initially paid according to the Statements of Accounts (SOAs) but became delinquent beginning October 14, 2009.
- By August 15, 2010, the Louhs owed a total of ₱533,836.27. BPI sent written demand letters on August 7, 2010; January 25, 2011; and May 19, 2011, which the Louhs received but ignored.
Procedural History
- August 4, 2011: BPI filed a Complaint for Collection of a Sum of Money in the RTC of Makati City.
- February 21 and 27, 2012: William Louh sought, and the RTC granted, a 15-day extension to file an Answer, but no response was filed by March 4, 2012.
- June 11, 2012: BPI moved to declare the Louhs in default.
- July 20, 2012: Louhs belatedly filed an Answer; July 24, 2012: RTC declared them in default and set an ex parte presentation of evidence.
- November 29, 2012: RTC rendered judgment ordering the Louhs to pay ₱533,836.27 plus 12% annual finance and late payment charges (reduced from 42% and 72% per annum), 25% of the amount due as attorney’s fees, ₱1,000 per hearing, ₱8,064 filing fees, and costs.
- April 8, 2013: RTC denied the Louhs’ motion for reconsideration.
- CA Decision (August 11, 2015) and Resolution (May 23,