CASE 2017-0006: WILLIAM C. LOUH, JR. and IRENE L. LOUH, V. BANK OF THE PHILIPPINE ISLANDS, (G.R. No. 225562, 08 MARCH 2017, REYES,J.:) (SUBJECT: INTERESTS AND PENALTIES IMPOSED BY BANKS ON CREDIT CARD DEBTS SHALL BE REDUCED WHEN EXCESSIVE, INIQUITOUS, UNCONSCIONABPE AND EXORBITANT; PRINCIPAL AMOUNT MUST BE THAT IN THE STATEMENT OF ACCOUNT WHEN CARDHOLDER BECOMES INITIALLY REMISS IN PAYING THEIR OBLIGATION; ATTORNEY’S FEES REDUCED TO 5% OF AMOUNTS DUE FROM 25%; TECHNICAL RULES ON DEFAULT MUST BE FOLLOWED; (BRIEF TITLE: LOUH VS PBI)

 

DISPOSITIVE:

 

WHEREFORE, the Decision and Resolution, dated August 11, 2015 and May 23, 2016, respectively, of the Court of Appeals in CA-G.R. CV No. 100754, finding the Spouses William and Irene Louh liable to the Bank of the Philippine Islands for the payment of their past credit availments, plus finance and late payment charges of 12% each per annum, PS,064.00 as filing or docket fees, and costs of suit, are AFFIRMED. The principal amount due, reckoning period of the computation of finance and late payment charges, and attorney’s fees are, however, MODIFIED as follows:

 

(1)    the principal amount due is Pl 13,756.83 as indicated in the

        Statement of Account dated October 14, 2009;

 

(2)    finance and late payment charges of twelve percent ( 12%) each

per annum shall be computed from October 14, 2009 until full

         payment; and

 

(3)     five percent (5%) of the total amount due is to be paid as attorney’s fees.

 

SO ORDERED.”

 

 SUBJECTS/DOCTRINES/DIGEST:

 

BPI IMPOSED INTEREST OF 3.5% PER MONTH? IS THIS LEGAL?

 

NO. IT IS EXCESSIVE, INIQUITOUS, UNCONSCIONABPE AND EXORBITANT. IT IS VOID FOR BEING CONTRARY TO MORALS, IF NOT AGAINST THE LAW.

 

“We held in Chua vs. Timan:

 

The stipulated interest rates of 7% and 5% per month imposed on respondents’ loans must be equitably reduced to 1 % per month or 12% per annum. We need not unsettle· the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law. While C.B. Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets. x x x

 

Since the stipulation on the interest rate is void, it is as if there was no express contract thereon. Hence, courts may reduce the interest rate as reason and equity demand.”

 

BPI IMPOSED FINANCE CHARGE OR PENALTY OF 6% PER MONTH ON THE ARREARS OF LOUH SPOUSES. IS THIS LEGAL?

 

NO. IT IS INIQUITOUS AND UNCONSCIONABLE. IF THERE IS PARTIAL OR IRREGULAR PERFORMANCE BY THE DEBTOR, COURTS MAY REDUCE THE PENALTY. BUT EVEN IF THERE IS NO PERFORMANCE, THE PENALTY MAY BE REDUCED BY THE COURTS IF IT IS INIQUITOUS OR UNCONSCIONABLE.

 

“The same is true with respect to the penalty charge. x x x Pertinently, Article 1229 of the Civil Code states:

 

Art. 1229. 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.”

 

THE LOWER COURTS IMPOSED ATTORNEY’S FEE 0F 25% OF AMOUNTS DUE? IS THIS LEGAL?

 

NO. IT IS INIQUITOUS AND UNCONSCIONABLE. ATTORNEY’S FEES ARE IN THE NATURE OF LIQUIDATED DAMAGES WHICH UNDER ARTICLE 2227 OF THE NEW CIVIL CODE SHALL BE EUITABLY REDUCED IF THEY ARE INIQUITOUS OR UNCONSCIONABLE.

 

THE SUPREME COURT IMPOSED ATTORNEY’S FEES OF 5%.

 

BPI FIXED THE PRINCIPAL AMOUNT OF P533,836.27, THE AMOUNT DUE WHEN THE CASE WAS FILED. IS THIS CORRECT?

 

NO. THE PRINCIPAL IS P113,756.83, THE AMOUNT INDICAGTED IN THE STATEMENT OF ACCOUNT DATED 14 OCTOBER 2009 WHEN LOUH SPOUSES BECAME INITIALLY REMISS IN THE PAYMENT OF THEIR OBLIGATION.


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SCD-2017-0006-WILLIAM C. LOUH, JR. AND IRENE L. LOUH VS. BANK OF THE PHILIPPINE ISLANDS

 

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