G.R. No. 175490 ; September 17, 2009
Ileana Dr. Macalinao, Petitioner, vs. Bank of the Philippine Islands, Respondent.

FACTS

Petitioner Ileana Macalinao was a BPI Mastercard holder who defaulted on her credit card obligations. BPI demanded payment of PhP 141,518.34, computed with monthly interest at 3% and an additional penalty fee of 3% per month as per their card agreement. For her failure to pay, BPI filed a collection suit before the Metropolitan Trial Court (MeTC) of Makati. The MeTC, after petitioner’s failure to answer, rendered a judgment by default ordering her to pay the bank’s claimed amount plus charges.
Petitioner appealed to the Regional Trial Court (RTC), which affirmed the MeTC decision. She then elevated the case to the Court of Appeals (CA) via a Petition for Review, arguing the stipulated interest and penalty charges were excessive and unconscionable. The CA dismissed her petition, ruling she availed of the wrong remedy as a Petition for Review under Rule 42 was improper from an RTC decision rendered in the exercise of its appellate jurisdiction. The CA also found the stipulated charges valid.

ISSUE

The core issues were: (1) whether the CA correctly dismissed the petition for employing the wrong mode of appeal; and (2) whether the stipulated interest and penalty charges in the credit card agreement were valid.

RULING

The Supreme Court granted the petition in part. On procedural grounds, the Court held that while the CA correctly noted the procedural error, it should not have dismissed the petition outright. In the interest of justice, the CA should have treated the petition as a special civil action for certiorari under Rule 65, as the RTC may have committed grave abuse of discretion in affirming the MeTC’s clearly excessive monetary award.
On the substantive issue, the Court declared the stipulated interest and penalty charges void for being excessive and unconscionable. The combined 6% monthly charge (3% interest + 3% penalty) equated to a 72% annual rate, which was contrary to morals and the principle of mutuality of contracts. Citing the Court’s ruling in Medel v. Court of Appeals, such a rate is illegal. The Court reformed the obligation. It recomputed the principal obligation by deducting the excessive charges, arriving at PhP 83,515.00. It then imposed a reduced combined interest and penalty charge of 2% per month from the date of demand until full payment, which it deemed fair and reasonable under the circumstances. Attorney’s fees were also reduced to PhP 10,000.