AUTHORSHIP INFORMATION

Digest Author Grace Ann Tamboon

Topic Credit Transactions Interest and Charges
CASE INFORMATION
Petitioner(s) Ileana Dr. Macalinao
Respondent(s Bank of the Philippine Islands
)
Reference G.R. No. 175490
Ponente Justice Velasco Jr.
DOCTRINE(S)
Stipulations on interest rates that are excessive and unconscionable are void for
being contrary to morals, if not against the law. Being void, it is as if there was no
express contract thereon Hence, the courts may reduce the interest rate as
reason and equity demand.

CASE SUMMARY
The petitioner held a BPI Mastercard but failed to pay for her purchases.
BPI sent her a letter demanding payment of P141,518.34. According to
the terms and conditions of the BPI Mastercard, unpaid balances after the
payment due date will accrue 3% interest per month and an additional
Pertinent penalty fee of 3% per month. BPI filed a complaint for sum of money
Facts against the petitioner and her husband after they failed to settle their
obligations. The MeTC ruled in favor of BPI, ordering the petitioner to pay
the amount of P141,518.34 plus interest and penalty charges of 2%. The
RTC affirmed the MeTC's decision, and the petitioner appealed to the CA.
The CA modified the decision of the RTC, ordering the petitioner to pay
P126,706.70 plus interest and penalty charges of 3% per month. The CA
ruled that the amount sought by BPI should not be the basis for
computing the petitioner's total obligation, as it already included previous
higher interest rates.
PROCEDURAL HISTORY
Affirmed in toto the decision of the MeTC and held:
RTC
In any event, the sum of P141,518.34 adjudged by the trial court
appeared to be the result of a re-computation at the reduced rate of
2% per month. Note that the total amount sought by the plaintiff-
appellee was P154,608.75 exclusive of finance charge of 3.25% per
month and late payment charge of 6% per month.

CA Denied petitioner’s motion for reconsideration.

Relevant W/N the CA erred in modifying the interest rate and penalty charge to
Issue(s) 3% from the 2% ordered by the RTC.

The petitioner defaulted on their BPI Mastercard debt, leading to a

complaint filed by the bank. The court ordered the petitioner to pay
the full amount owed plus interest and penalty charges. The
Analysis petitioner appealed to higher courts, resulting in a modified decision
 that reduced the amount owed but increased the interest and penalty
charges. The analysis highlights the importance of understanding
credit card terms and consequences of defaulting on credit card debt.
Yes. While it is stipulated in the Terms and Conditions Governing
the Issuance and Use of the BPI Credit and BPI Mastercard that the
interest rate is at 3% per month, or 36% per annum, the Court held
that the interest rate of 36% per annum is excessive and
unconscionable. In Chua v. Timan, the Court held that such
stipulation is void for being contrary to morals, if not against the law.
Since the stipulation on the interest rate is void, it is as if there was
no express contract thereon. Hence, the courts may reduce the
Ruling(s) & interest rate as reason and equity demand.
Rationale
The Court also held that the same is true with respect to the penalty
charge Article 1229 of the Civil Code provides:

“The judge shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor.
Even if there has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or unconscionable.”

In the instant case, the records would reveal that petitioner

Macalinao made partial payments to respondent BPI, as indicated
in her Billing Statements. Further, the stipulated penalty charge of
3% per month or 36% per annum, in addition to regular interests, is
indeed iniquitous and unconscionable.
Thus, under the circumstances, the Court found it equitable to
reduce the interest rate pegged by the CA at 1.5% monthly to 1%
monthly and penalty charge fixed by the CA at 1.5% monthly to 1%
monthly or a total of 2% per month or 24% per annum in line with
the prevailing jurisprudence and in accordance with Art. 1229 of the
Civil Code.
the petition is PARTLY GRANTED.