Ledda vs. Bank of the Philippine Islands

A pre-approved credit card holder who did not sign an application form or consent to the Terms and Conditions is not bound by the stipulated interest and penalty charges, the obligation being subject instead to the 12% per annum legal interest applicable to loans or forbearance of money, computed from extrajudicial demand.

Respondent Bank of the Philippine Islands (BPI) issued a pre-approved credit card to petitioner Anita A. Ledda, who used it for various transactions but eventually defaulted. BPI filed a collection suit in the Regional Trial Court of Makati City, which ruled in favor of BPI, imposing the stipulated monthly finance charge of 3.25% and late payment charge of 6%, plus attorney's fees.

• Issuance and Use: BPI issued a pre-approved credit card to Ledda, delivering the Credit Card Package, including Terms and Conditions, to her residence on 1 July 2005. Ledda did not sign any credit card application form prior to issuance. She subsequently used the card for purchases, services, and cash advances.
• Default and Demand: Ledda defaulted on her payments. BPI claimed P548,143.73 per the Statement of Account dated 9 September 2007, representing the principal obligation plus a 3.25% monthly finance charge and a 6% monthly late payment charge. BPI sent demand letters, including one dated 26 September 2007, which Ledda received through her niece on 2 October 2007.
• Trial Court Proceedings: BPI filed a collection suit. Ledda was declared in default for failing to file an Answer, but the order was lifted upon motion and her Answer Ad Cautelam was admitted. After Ledda and her counsel failed to appear at the continuation of pre-trial, the trial court allowed BPI to present evidence ex parte. The RTC rendered judgment in favor of BPI, imposing the stipulated interest and penalty charges, plus 25% attorney's fees.

• Actionable Document: Petitioner argued that the Terms and Conditions is an actionable document under Section 7, Rule 8 of the 1997 Rules of Civil Procedure, and BPI's failure to attach it to the complaint should be fatal to its cause of action.
• Applicable Precedent: Petitioner maintained that Alcaraz v. Court of Appeals, not Macalinao v. BPI, should apply because she was a pre-screened client who did not sign any application form or document, and never consented to the Terms and Conditions; thus, the stipulated interest and penalties should not bind her.
• Interest Rate: Petitioner contended that in the absence of a written agreement stipulating a higher interest rate, the legal interest should only be 6% per annum under Article 2209 of the Civil Code.
• Attorney's Fees: Petitioner assailed the award of attorney's fees, citing the erroneous reliance on Macalinao and the trial court's failure to state the reasons for the award in the body of its decision.

• Cause of Action: Respondent countered that its cause of action was based on Ledda's availment of credit facilities and subsequent refusal to pay, not on the Terms and Conditions alone, rendering the actionable document rule inapplicable.
• Applicable Precedent: Respondent argued for the application of Macalinao v. BPI, asserting that the stipulated rates, or at least the reduced rates imposed by the CA, should be upheld, claiming the existence of and consent to the Terms and Conditions.

• Actionable Document: Whether the document containing the Terms and Conditions governing the issuance and use of the credit card is an actionable document contemplated in Section 7, Rule 8 of the 1997 Rules of Civil Procedure.
• Applicable Precedent and Interest Rate: Whether Alcaraz v. Court of Appeals, instead of Macalinao v. BPI, applies regarding the imposition of interest and penalty charges on the credit card obligation, and whether the legal interest should be 6% or 12% per annum.
• Attorney's Fees: Whether the award of attorney's fees in favor of BPI is proper.

• Actionable Document: The Terms and Conditions was held not to be an actionable document because BPI's cause of action was primarily based on Ledda's acceptance of the card, usage of the credit facilities, and default in payment, not solely on the written instrument; thus, attachment to the complaint was not required.
• Applicable Precedent and Interest Rate: Alcaraz v. Court of Appeals was applied instead of Macalinao v. BPI because Ledda, as a pre-approved client, did not sign an application form, and BPI failed to prove her conformity to the Terms and Conditions, rendering the stipulated exorbitant rates unbinding. The unpaid credit card obligation constitutes a loan or forbearance of money; consequently, in the absence of stipulation, the 12% per annum legal interest applies from the time of extrajudicial demand, rejecting the invocation of Article 2209 (which governs indemnity for damages, not loans).
• Attorney's Fees: The award of attorney's fees was deleted because the trial court failed to state the factual or legal justification for the award in the body of its decision, as mandated by jurisprudence, and the Court of Appeals is precluded from supplementing such bases on appeal.

• Actionable Document — Section 7, Rule 8 of the 1997 Rules of Civil Procedure applies only when the action or defense is based upon a written instrument or document. A complaint for collection of sum of money based on the defendant's acceptance, use, and default in payment of a credit card does not find its primary basis in the Terms and Conditions, making the document non-actionable.
• Consent to Credit Card Terms — Pre-approved credit card holders who did not sign an application form or the terms and conditions are not bound by the stipulated interest and penalty charges without a clear showing that the cardholder was aware of and consented to the provisions of such document. The credit card issuer bears the burden of proving the cardholder's agreement.
• Legal Interest on Forbearance of Money — An unpaid credit card obligation constitutes a loan or forbearance of money. In the absence of a valid stipulation, the legal interest of 12% per annum (under CB Circular No. 416) applies, reckoned from extrajudicial demand. Article 2209 of the Civil Code, which prescribes a 6% per annum rate, applies only to indemnities in the concept of damages arising from a breach or delay in the performance of obligations in general, not to loans or forbearances of money.
• Award of Attorney's Fees — The trial court must state the factual, legal, or equitable justification for an award of attorney's fees in the body of its decision; it cannot be mentioned only in the dispositive portion. The appellate court is precluded from supplementing the bases for the award when the trial court failed to discuss them.

• "BPI’s cause of action is not based only on the document containing the Terms and Conditions accompanying the issuance of the BPI credit card in favor of Ledda. Therefore, the document containing the Terms and Conditions governing the use of the BPI credit card is not an actionable document contemplated in Section 7, Rule 8 of the 1997 Rules of Civil Procedure."
• "BPI failed to prove Ledda’s conformity and acceptance of the stipulations contained in the Terms and Conditions. Therefore, as the Court held in Alcaraz, the Terms and Conditions do not bind petitioner (Ledda in this case) without a clear showing that x x x petitioner was aware of and consented to the provisions of such document."
• "Article 2209 refers to indemnity for damages and not interest on loan or forbearance of money, which is the case here."
• "The matter of attorney’s fees cannot be mentioned only in the dispositive portion of the decision. They must be clearly explained and justified by the court in the body of its decision. On appeal, the CA is precluded from supplementing the bases for awarding attorney’s fees when the trial court failed to discuss in its Decision the reasons for awarding the same."

• Alcaraz v. Court of Appeals, 529 Phil. 77 (2006) — Applied. Governed the disposition of the case because it involved a pre-screened credit card client who did not sign or consent to the terms and conditions, rendering the stipulated rates unbinding.
• Macalinao v. Bank of the Philippine Islands, G.R. No. 175490, 17 September 2009, 600 SCRA 67 — Distinguished. The cardholder in Macalinao did not challenge the existence of or her consent to the Terms and Conditions, but merely questioned the unconscionability of the stipulated rates, unlike Ledda who denied consent altogether.
• Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78 — Followed. Synthesized the rules on the imposition of interest, establishing that 12% per annum applies to loans or forbearance of money from the time of judicial or extrajudicial demand.
• Sunga-Chan v. Court of Appeals, G.R. No. 164401, 25 June 2008, 555 SCRA 275 — Followed. Clarified the distinction between the 12% interest for loans/forbearance of money and the 6% interest under Art. 2209 for indemnities in the concept of damages.
• Frias v. San Diego-Sison, G.R. No. 155223, 3 April 2007, 520 SCRA 244 — Followed. Required trial courts to clearly explain and justify the award of attorney's fees in the body of the decision, not merely in the dispositive portion.

• Section 7, Rule 8 of the 1997 Rules of Civil Procedure — Governs actions or defenses based on documents, requiring the substance of the instrument to be set forth and the original or copy attached. Applied to determine that the provision is inapplicable when the cause of action is not based solely on the document.
• Article 2209 of the Civil Code — Prescribes a 6% per annum legal interest for indemnity for damages in the payment of a sum of money in the absence of stipulation. Declared inapplicable because a credit card obligation is a loan or forbearance of money, not indemnity for damages.
• Article 2208 of the Civil Code — Enumerates the instances where attorney's fees may be awarded. Applied in relation to the rule that such awards must be justified in the body of the court's decision.
• CB Circular No. 416 — Prescribes the 12% per annum rate for loans or forbearance of money. Applied to determine the proper interest rate on Ledda's unpaid credit card obligation.

Brion, Del Castillo, Perez, Perlas-Bernabe