CASE BrieF NO. 2019-0026

CASE: Sps. Rainier Jose M. Yulo and Juliet L. Yulo vs. Bank of the Philippine Islands [G.R. No. 217044, January 16, 2019]

PONENTE: Associate Justice Mario Victor F. Leonen

SUBJECT:

  1. New Civil Code:
    i. Contract of agency (Article 1869)– Elements
    ii. Contract – Consent
    iii. Legal Interests

When issuing a pre-screened or pre-approved credit card, the credit card provider must prove that its client read and consented to the terms and conditions governing the credit card’s use. Failure to prove consent means that the client cannot be bound by the provisions of the terms and conditions, despite admitted use of the credit card.”


FACTS:        The Bank of the Philippine Islands (BPI) issued Rainier Yulo a pre-approved credit card. His wife, Juliet, was also given a credit card as an extension of his account. Rainier and Juliet (the Yulo Spouses) used their respective credit cards by regularly charging goods and services on them.

The Yulo Spouses regularly settled their accounts with the BPI at first, but started to be delinquent with their payments by July 2008.

On November 11, 2008, BPI sent Spouses Yulo a Demand Letterfor the immediate payment of their outstanding balance.

On February 12, 2009, the BPI sent another Demand Letter.

The letters went unheeded so BPI filed a Complaintbefore the MTC for sum of money against the Yulo Spouses.

In their Answer, the Yulo Spouses admitted that they used the credit cards issued by the BPI but claimed that the BPI did not fully disclose to them the Terms and Conditions on their use of the issued credit cards.

The MTC, ruled in favor of BPI and ordered the Spouses Yulo to pay the bank the sum of P229,378.68 and awarded the amount of P15,000.00 in favor of the bank by way of attorney’s fees.

The Yulo Spouses filed an Appeal, but it was dismissed by the RTC, which affirmed the MTC Decision.


The RTC declared that when it comes to pre-approved credit cards, like those issued to the Yulo Spouses, the credit card provider had the burden of proving that the credit card recipient agreed to be bound by the Terms and Conditions governing the use of the credit card. It noted that BPI presented as evidence the Delivery Receipt for the credit card packet, which was signed by Rainier Yulo’s authorized representative, Jessica Baitan (Baitan). It held that the BPI successfully discharged its burden, as the signed Delivery Receipt and Rainier’s use of credit card were proofs that Rainier Yulo agreed to be bound by its Terms and Conditions.

The Yulo Spouses then filed a Petition for Review before the CA.The CA denied the Petition and affirmed the RTC Decision.

The Yulo Spouses then elevated the case to the Supreme Court.

In their Petition for Review on Certiorari,the Yulo Spouses contend that BPI failed to prove their liability. They claim that the only valid proofs that they availed of BPI’s credit line were the transaction slips they signed after purchasing goods or services with their credit cards. They also assert that BPI failed to substantiate its claim that Rainier Yulo consented to the Terms and Conditions.

The Yulo Spouses also claim that BPI failed to prove that it ascertained the authority of Baitan, Rainier’s purported authorized representative, before handing her the credit card packet.

BPI, on the other hand, maintains that when the Yulo Spouses used their credit cards, they bound themselves to its Terms and Conditions in the credit card packet’s Delivery Receipt.

ISSUE:

A.       Whether BPI sufficiently proved that Baitan was authorized by Rainier Yulo to act in his behalf.

          A.1. What are the essential elements of agency?

B.       Whether the Yulo Spouses are liable to pay the penalties and interests provided in the Terms and Conditions of his pre-approved credit card.

C.       Whether the award of P15,000.00 as attorney’s fees in favor of BPI by the MTC is proper.


RULING:

A.       The RTC found that the credit card packet from BPI, which contained Rainier Yulo’s pre-approved credit card and a copy of its Terms and Conditions, was duly delivered to him through his authorized representative, Baitan, as shown in the Delivery Receipt.

This was affirmed by the CA, which stated, “The BPI credit card issued to Rainier Yulo was received by his authorized representative, a certain Jessica Baitan, as evidenced by a Delivery Receipt.”

The RTC and CA are wrong. While the Delivery Receipt showed that Baitan received the credit card packet for Rainier Yulo, it failed to indicate Baitan’s relationship with him. BPI failed to substantiate its claim that Rainier Yulo authorized Baitan to act on his behalf and receive his pre-approved credit card. The only evidence presented was the check mark in the box beside “Authorized Representative” in the Delivery Receipt. This self-serving evidence is obviously insufficient to sustain BPI’s claim.

A contract of agency is created when a person acts for or on behalf of a principal, with the latter’s consent or authority. Unless required by law, an agency does not require a particular form, and may be express or implied from the acts or silence of the principal.

The essential elements of agency are: (1) there is consent, express or implied, of the patties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agents (sic) acts as a representative and not for himself; and (4) the agent acts within the scope of his authority.

BPI fell short in establishing an agency relationship between Rainier and Baitan, as the evidence presented did not support its claim that Rainier authorized Baitan to act on his behalf. Without proof that Rainier read and agreed to the Terms and Conditions of his pre-approved credit card, he cannot be bound by it.


B.       When a credit card provider issues a credit card to a pre-approved or pre-screened client, the usual screening processes “such as the filing of an application form and submission of other relevant documents prior to the issuance of a credit card, are dispensed with and the credit card is issued outright.” As the recipient of an unsolicited credit card, the pre-screened client can then choose to either accept or reject it.

As a pre-screened client, Rainier did not submit or sign any application form as a condition for the issuance of a credit card in his account. Unlike a credit card issued through an application form, with the applicant explicitly consenting to the Terms and Conditions on credit accommodation use, a pre-screened credit card holder’s consent is not immediately apparent.

Under Payment of Charges in the Terms and Conditions, the Spouses Yulo would be furnished monthly Statements of Account and would have a 20-day period from the statement date to settle their outstanding balance, or the minimum required payment. However, with BPI’s failure to prove Rainier Yulo’s conformity and acceptance of the Terms and Conditions, the Spouses Yulo cannot be bound by its provisions.

Nonetheless, spouses Yulo admitted to receiving the Statements of Account from BPI, and was aware of the interest rate charges imposed by it.

This case thus falls squarely within Alcaraz v. Court of Appeals(2006) and Ledda v. Bank of the Philippine Islands (2012), where the credit card provider also failed to prove the pre-screened client’s consent to the credit card’s terms and conditions. Alcaraz ruled that when the credit card provider failed to prove its client’s consent, even if the latter did not deny availing of the credit card by charging purchases on it, the credit card client may only be charged with legal interest:

Xxx the petitioner should not be condemned to pay the interests and charges provided in the Terms and Conditions on the mere claim of the private respondent without any proof of the former’s conformity and acceptance of the stipulations contained therein. Even if we are to accept the private respondent’s averment that the stipulation quoted earlier is printed at the back of each and every credit card issued by private respondent Equitable, such stipulation is not sufficient to bind the petitioner to the Terms and Conditions without a clear showing that the petitioner was aware of and consented to the provisions of this document. This, the private respondent failed to do.

It is, however, undeniable that petitioner Alcaraz accumulated unpaid obligations both in his peso and dollar accounts through the use of the credit card issued to him by private respondent Equitable. As such, petitioner Alcaraz is liable for the payment thereof. Since the provisions of the Terms and Conditions are inapplicable to petitioner Alcaraz, the legal interest on obligations consisting of loan or forbearance of money shall apply. 

The records reveal that as of the July 9, 2008 Statement of Account, the Spouses Yulo had an outstanding balance of P229,378.68. However, since they did not consent to the Terms and Conditions governing their credit card, there is a need to modify the outstanding balance by removing the interests, penalties, and other charges imposed before and on the July 9, 2008 Statement of Account.

A careful review of the Statements of Account from March 2008 to July 2008shows that BPI charged penalties and interests in the amount of P9,321.17 on Rainier Yulo’s account.

Thus, the finance charges, penalties, and interests amounting to P9,321.17 should be deducted from the outstanding balance of P229,378.68, leaving a new outstanding balance of P220,057.51. This outstanding balance shall then be subjected to 12% legal interest from November 11, 2008, the date of respondent’s first extrajudicial demanduntil June 30, 2013, and six percent (6%) legal interest from July 1, 2013 until fully paid [Nacar v. Gallery Frames (2013)].


C.       The award of P15,000.00 as attorney’s fees is deleted for lack of basis. It is well established that the trial court “must state the factual, legal, or equitable justification for the award of attorney’s fees” in the body of its decision [Ledda v. Bank of the Philippine Islands (2012)]. The Metropolitan Trial Court failed to state the factual or legal justification for its award of attorney’s fees in respondent’s favor; instead, it merely declared that the award of P15,000.00 as attorney’s fees was just and equitable. Hence, it must be deleted.

The Fallo

WHEREFORE, premises considered, the Petition for Review on Certiorari is PARTIALLY GRANTED. The assailed Court of Appeals February 20, 2015 Decision in CA-G.R. SP No. 131192 is MODIFIED. Petitioners Rainier Jose M. Yulo and Juliet L. Yulo are DIRECTED TO PAY respondent Bank of the Philippine Islands the amount of Two Hundred Twenty Thousand Fifty-Seven Pesos and Fifty-One Centavos (P220,057.51) plus twelve percent (12%) legal interest per annum from November 11, 2008 until June 30, 2013, and six percent (6%) legal interest per annum from July 1, 2013 until their entire obligation is fully paid.


Related Case BrieFs:

  1. Nacar v. Gallery Frames (2013)
  2. Alcaraz v. Court of Appeals (2006) 
  3. Ledda v. Bank of the Philippine Islands (2012)

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THINGS DECIDED:

A) A contract of agency is created when a person acts for or on behalf of a principal, with the latter’s consent or authority.

B) The essential elements of agency are: (1) there is consent, express or implied, of the patties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agents (sic) acts as a representative and not for himself; and (4) the agent acts within the scope of his authority.

C) When issuing a pre-screened or pre-approved credit card, the credit card provider must prove that its client read and consented to the terms and conditions governing the credit card’s use. Failure to prove consent means that the client cannot be bound by the provisions of the terms and conditions, despite admitted use of the credit card.

D) When the credit card provider failed to prove its client’s consent, even if the latter did not deny availing of the credit card by charging purchases on it, the credit card client may only be charged with legal interest [Alcaraz v. Court of Appeals (2006)].

E) The trial court “must state the factual, legal, or equitable justification for the award of attorney’s fees” in the body of its decision [Ledda v. Bank of the Philippine Islands (2012)]. The mere declaration that the award of attorney’s fees is “just and equitable” is not sufficient.

 ‘Stand by things decided’ ~ Stare Decisis


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