CASE DIGEST

MACALINAO v. BPI
Law 101 ObliCon – Usurious Transactions

Court Supreme Court Third Division

Citation G.R. No. 175490
Date 17 September 2009
Petitioner Ileana Dr. Macalinao
Respondent Bank of the Philippine Islands
Ponente Velasco, Jr.
Relevant topic Stipulations on interest rates that are excessive and unconscionable are void for
being contrary to morals, if not against the law. Being void, it is as if there was
no express contract thereon Hence, the courts may reduce the interest rate as
reason and equity demand.
Prepared by Lawdemhar Cabatos

FACTS:

▪ Petitioner was an approved cardholder of BPI Mastarcard but defaulted in paying for purchases made
through the use of said card. She subsequently received a letter from BPI demanding payment of the
amount of P141,518.34.
▪ Under the Terms and Conditions Governing the Issuance and Use of the BPI Credit and BPI Mastercard,
charges or balance thereof remaining unpaid after the payment due date shall bear interest at the rate of
3% per month, and an additional penalty fee equivalent to another 3% per month.
▪ For failure to settle her obligations, respondent BPI filed a complaint for sum of money against petitioner
and her husband. The Metropolitan Trial Court (MeTC) of Makati City ruled in favor of respondent BPI
and ordered petitioner to pay the amount of P141,518.34 plus interest and penalty charges of 2%.
▪ Upon appeal with the RTC of Makati, the MeTC decision was affirmed in toto.
▪ Petitioner filed a petition for review with the CA. The CA affirmed with modification the decision of the
RTC, and ordered petitioner to pay P126,706.70, plus interest and penalty charges of 3% per month,
ruling that the amount sought by BPI to be satisfied was clearly not the result of the re-computation at the
reduced interest rate, as previous higher interest rates were already incorporated in said amount. Thus,
the said amount should not be made as basis in computing the total obligation of petitioner Macalinao.

ISSUE– HELD – RATIO:

ISSUE HELD
WoN the CA erred in modifying the interest rate and penalty charge to 3% from the 2% YES
ordered by the RTC.

While it is stipulated in the Terms and Conditions Governing the Issuance and Use of the BPI Credit and BPI
Mastercard that the interest rate is at 3% per month, or 36% per annum, the Court held that the interest rate
of 36% per annum is excessive and unconscionable. In Chua v. Timan, the Court held that such stipulation
is void for being contrary to morals, if not against the law. Since the stipulation on the interest rate is void, it
is as if there was no express contract thereon. Hence, the courts may reduce the interest rate as reason and
equity demand.

The Court also held that the same is true with respect to the penalty charge Article 1229 of the Civil Code
provides:

“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.”

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CASE DIGEST
MACALINAO v. BPI
Law 101 ObliCon – Usurious Transactions

In the instant case, the records would reveal that petitioner Macalinao made partial payments to respondent
BPI, as indicated in her Billing Statements. Further, the stipulated penalty charge of 3% per month or 36%
per annum, in addition to regular interests, is indeed iniquitous and unconscionable.
Thus, under the circumstances, the Court found it equitable to reduce the interest rate pegged by the CA at
1.5% monthly to 1% monthly and penalty charge fixed by the CA at 1.5% monthly to 1% monthly or a total of
2% per month or 24% per annum in line with the prevailing jurisprudence and in accordance with Art. 1229
of the Civil Code.

RULING:

WHEREFORE, the petition is PARTLY GRANTED. The CA Decision is hereby MODIFIED with respect to
the total amount due, interest rate, and penalty charge. Accordingly, petitioner Macalinao is ordered to pay
respondent BPI the following:

1. The amount of P112,309.52, plus interest and penalty charges of 2% per month from January 5,
2004 until fully paid;
2. P10,000.00 as and by way of attorney’s fees; and
3. Cost of suit.

SO ORDERED.

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