GR 160026; (December, 2007) (Digest)
G.R. No. 160026 ; December 10, 2007
EDMERITO ANG GOBONSENG and EDUARDO ANG GOBONSENG, SR., Petitioners, vs. UNIBANCARD CORPORATION, Respondent.
FACTS
Respondent Unibancard Corporation issued a credit card to petitioner Edmerito Ang Gobonseng, with a co-obligor, petitioner Eduardo Ang Gobonseng, Sr. The card had a monthly credit limit of ₱10,000. Petitioners accumulated charges amounting to ₱179,638.74 and defaulted on payments. Unibancard filed a collection case. Petitioners were declared in default for failure to file an answer, leading to an ex-parte presentation of evidence by Unibancard. The trial court rendered a decision ordering petitioners to pay the principal plus 3% monthly interest, 5% monthly penalty, and 25% attorney’s fees.
The Court of Appeals affirmed the trial court’s orders but modified the penalties, reducing the penalty charge to 1% per month and attorney’s fees to 10% of the amount due. Petitioners sought further review, arguing the 3% monthly interest was exorbitant and contrary to precedent, the 5% penalty violated the Civil Code, and attorney’s fees should be below 10%.
ISSUE
Whether the Court of Appeals erred in: (1) not reducing the stipulated 3% monthly interest to 12% per annum; (2) not disregarding the penalty charge; and (3) not reducing attorney’s fees below 10%.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals. On the interest rate, the Court held that the 3% per month (36% per annum) stipulated in the credit card agreement was not unconscionable or excessive. Citing Medel v. Court of Appeals and Eastern Assurance and Surety Corporation v. Court of Appeals, the Court ruled that stipulated interest rates are binding unless they are contrary to morals, public policy, or are unconscionable. The 3% monthly rate was not deemed shocking to the conscience, and the obligation arising from a contract has the force of law between the parties.
Regarding the penalty, the Court sustained the appellate court’s reduction to 1% per month as justified. The original 5% monthly penalty, combined with the 3% interest, would result in an almost 100% annual charge, which was excessive. The reduction considered the contributory negligence of Unibancard for failing to monitor the card usage that exceeded the credit limit by over tenfold. Finally, on attorney’s fees, the Court found the reduction to 10% reasonable. While the contract stipulated 25%, the court has the power to determine the reasonableness of such fees, and 10% was not deemed excessive under the circumstances.