CASE DIGEST

LOUH v. BPI
Law 101 ObliCon – Usurious Transactions

Court Supreme Court Third Division

Citation G.R. No. 225562
Date08 March 2017
Petitioners William C. Louh, Jr. and Irene L. Louh
Respondent Bank of the Philippine Islands
Ponente Reyes, J.
Relevant Stipulations on interest rates that are excessive and unconscionable are void for being
topiccontrary 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:
 Respondent BPI issued a credit card in William’s name, with Iren as the extension card holder. Pursuant
to the terms and conditions of the cards’ issuance, 3.5% finance charge and 6% late payment charge
shall be imposed monthly upon unpaid credit availments.
 Spouses Louh were remiss in their obligations starting 14 October 2009 and subsequently received
demand letters from BPI. Upon failure to pay, BPI filed before the RTC of Makati City a complaint for
Collection of a Sum of Money.
 The RTC declared Spouses Louh in default for failing to file an Answer despite being given granted an
extension, and upon rendering a decision, ordered Spouses Louh to solidarily pay BPI P533,836.71 plus
12% finance and 12% late payment annual charges, finding the 3.5% monthly finance charge and 6%
monthly late payment charges iniquitous and unconscionable, and 25% of the amount due as attorney’s
fees.
 The CA affirmed the RTC decision in toto, explaining that the Spouses Louh were properly declared in
default, and that BPI offered ample evidence.

ISSUE– HELD – RATIO:

ISSUE HELD
WoN the CA erred in sustaining BPI’s compliant. NO
BPI had offered as evidence, among others, delivery receipts pertaining to the credit cards and the terms and
conditions governing the use thereof, computer-generated authentic copies of the SOAs, and demand letters
sent by BPI, which Spouses Louh received. The Spouses Louh slept on their rights to refute BPI’s evidence,
including the receipt of the SOAs and demand letters. BPI cannot be made to pay for the Spouses Louh’s
negligence, omission, or belated actions.
Citing the ruling in Macalinao v. BPI, the Court held that the 3.5% monthly finance charge and 6% monthly
late payment charge were excessive and unconscionable, and thus void. Accordingly, the courts may reduce
the interest rate as reason and equity demand, and the penalty charges pursuant to Article 1229 of the Civil
Code. In MCMP Construction Corp. v. Monark Equipment Corp., the Court also held that the 25% of the total
amount due as attorney’s fees was exorbitant and unconscionable, and reduced the same to 5%.

RULING:
WHEREFORE, the Decision of the CA finding the Spouses Louh liable for the payment of credit availments,
plus finance and late payment charges of 12% each per annum are AFFIRMED. The principal amount due,
reckoning period of the computation and late payment charges, and attorney’s fees are MODIFIED as follows:
(1) The principal amount due is P113,756.83 as indicated in the SOA dated October 14, 2009;
(2) Finance and late payment charges of 12% each per annum shall be computed from October 14, 2009
until full payment; and
(3) five percent (5%) of the total amount due is to be paid as attorney's fees.

SO ORDERED.
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