Title
Uysipuo vs. RCBC Bankard Services Corp.
Case
G.R. No. 248898
Decision Date
Sep 7, 2020
Credit cardholder defaulted on ₱1.2M debt; Supreme Court ruled excessive 3.5% monthly interest unconscionable, imposing 12% annual rate instead.
credit card dispute
court ruling
principal obligation
A

Case Summary (G.R. No. 248898)

Factual Background

Petitioner obtained a credit card from Bankard, Inc. in 2009 and accepted the card’s terms and conditions providing for interest at 3.5% per month and late payment charges at 7% per month. From April 2009 to October 8, 2009 petitioner made purchases totaling P4,834,774.18 and paid P3,623,773.85, leaving an unpaid balance of P1,211,000.33 based on the card statements. By May 9, 2010 the account statement reflected a balance of P1,757,024.53 inclusive of interest and charges. A formal demand dated November 26, 2010 was received by petitioner, who thereafter did not pay. Bankard filed suit on December 15, 2010. Bankard was later substituted by respondent RCBC Bankard Services Corporation. Petitioner countered that his true purchases amounted to P300,000 and that the balance was inflated by illegal interest and surcharges.

Trial Court Ruling

The RTC, by Decision dated March 24, 2017, found in favor of RCBC and awarded the total outstanding obligation of P1,757,024.53. The RTC likewise awarded interest on the outstanding obligation at 12% per annum from November 26, 2010 until June 30, 2013 and 6% per annum thereafter until full payment. The RTC further awarded interest on accrued interest at 12% per annum from the filing of the complaint on December 15, 2010 until June 30, 2013 and 6% per annum thereafter, plus attorney’s fees of P50,000 and costs. The RTC concluded that RCBC sufficiently established a valid claim and that petitioner had voluntarily accepted the card’s terms.

Court of Appeals Ruling

The Court of Appeals, in its Decision dated April 11, 2019, affirmed with modification the RTC ruling. The CA found the stipulated monthly interest rate of 3.5% and the late payment penalty of 7% to be excessive and unconscionable and equitably reduced such impositions to prevailing legal rates. The CA determined the principal obligation to be P787,500.00 as the balance due in August 2009, and ordered petitioner to pay that sum with legal interest at 6% per annum from the date of extrajudicial demand, late payment interest at 6% per annum from August 2009 until full payment, attorney’s fees of P50,000, and costs. Petitioner’s motion for reconsideration before the CA was denied in a Resolution dated August 20, 2019.

Issue Presented

The sole issue before the Supreme Court was whether the CA erred in fixing the principal obligation at P787,500.00 and in ordering interest and late payment interest at the prevailing legal rates.

Parties’ Contentions

Petitioner admitted indebtedness but maintained that his principal indebtedness was P300,000 and that the balance reflected in the statements resulted from illegal interest and surcharges. RCBC asserted that petitioner used the credit card and accepted the terms and conditions, thereby incurring the indebtedness reflected in its complaint and supporting account statements. The courts below found that petitioner had agreed to pay interest and late payment charges, but that the stipulated rates were unconscionable and required tempering.

Supreme Court Disposition

The petition was denied. The Court affirmed the CA Decision with modification. The Court ordered petitioner to pay RCBC the principal obligation of P1,211,000.33; monetary interest on that principal at 12% per annum from the date of default, i.e., extrajudicial demand on November 26, 2010, until full payment; compensatory interest on the accrued monetary interest at 12% per annum from the date of judicial demand, i.e., the filing of the complaint on December 15, 2010 until June 30, 2013, and thereafter at 6% per annum from July 1, 2013 until full payment; attorney’s fees of P50,000 with legal interest at 6% per annum from the finality of the Decision until full payment; and costs of suit.

Legal Basis and Reasoning on the Principal Obligation

The Court recognized that factual findings of lower courts are generally final but found conflicting findings between the RTC and the CA. The Court therefore made its own factual determination. A review of the card statements showed purchases from May to October 2009 totaling P4,834,774.18 and payments in those months totaling P3,623,773.85, yielding an unpaid principal of P1,211,000.33. The CA’s reliance on the August 2009 balance of P787,500.00 was erroneous because that August balance was later paid by petitioner in succeeding months while petitioner continued to incur additional purchases. On that basis the Court fixed the principal at P1,211,000.33 as the undisputed unpaid obligation.

Legal Basis and Reasoning on Interest and Charges

The Court agreed with the CA that the stipulated monthly rates of 3.5% and 7% were excessive, iniquitous, unconscionable, and subject to judicial tempering. The Court articulated the distinction between monetary interest and compensatory interest. It explained that parties are free to stipulate monetary interest, but courts may nullify unconscionable stipulated rates and substitute the legal rate prevailing when the agreement was entered into, because the legal rate is the presumptive reasonable compensation for borrowed money. The Court held that monetary interest is computed from default, i.e., from extrajudicial or judicial demand, until full payment. The Court further applied Article 2212 of the Civil Code to hold that accrued monetary interest itself shall earn compensatory interest at the prevailing legal rates from the time it is judicially demanded, where stipulated monetary interest exists. The Court therefore imposed

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