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SPS. RAINIER JOSE M. YULO v. BANK OF PHILIPPINE ISLANDS

FACTS:

On October 9, 2006, the Bank of the Philippine Islands (BPI) issued Rainier a pre-approved credit card, with his wife, Juliet, being given a credit card as an extension of his account. Both Rainier and Juliet used their credit cards, regularly charging goods and services to them. Initially, they settled their accounts, but by July 2008, they became delinquent in their payments. The outstanding balance reached P264,773.56 by November 29, 2008.

The BPI sent several demand letters to the Yulo Spouses, requesting immediate payment of their outstanding balance. However, when they failed to comply, the bank filed a complaint in court seeking payment of the amount owed. The Metropolitan Trial Court ruled in favor of the bank and ordered the Yulo Spouses to pay the outstanding balance, along with interest and penalty.

The Yulo Spouses appealed the decision to the Regional Trial Court, but it was dismissed, with the court affirming the Metropolitan Trial Court's ruling. Dissatisfied, they filed a petition before the Court of Appeals, but it was denied. Seeing no other recourse, the Yulo Spouses filed a petition for review on certiorari before the Supreme Court, arguing that the bank failed to establish their liability. They contended that the only valid evidence of their credit card charges were the transaction slips they signed, and the terms and conditions were never presented.

The bank countered the Yulo Spouses' argument, asserting that the Yulo Spouses were bound by the terms and conditions as evidenced by the credit card packet's delivery receipt, which was signed by Rainier's authorized representative.

ISSUES:

  1. Whether or not petitioners Rainier Jose M. Yulo and Juliet L. Yulo are bound by the Terms and Conditions on their use of credit cards issued by respondent.

  2. Whether the credit card client is liable for the payment of outstanding balance despite the failure of the credit card provider to prove the client's consent to the credit card's terms and conditions.

  3. What is the issue in this case?

  4. What are the sub-issues related to the main issue?

RULING:

  1. Petitioners Rainier Jose M. Yulo and Juliet L. Yulo are not bound by the Terms and Conditions on their use of credit cards issued by respondent. The evidence presented by the respondent failed to establish that petitioners consented to the Terms and Conditions surrounding the use of the credit cards issued to them. Therefore, petitioners cannot be bound by the provisions of the Terms and Conditions.

  2. Yes, the credit card client is liable for the payment of the outstanding balance. However, the outstanding balance should be modified by removing the interests, penalties, and other charges imposed before and on the Statement of Account, to which the client did not consent. The new outstanding balance shall be subjected to legal interest.

  3. What is the ruling of the Supreme Court on the main issue?

  4. What are the sub-rulings on the sub-issues?

PRINCIPLES:

  • A contract of agency is created when a person acts for or on behalf of a principal, with the latter's consent or authority. The elements of agency are consent, the execution of a juridical act in relation to a third person, the agent acting as a representative and not for himself, and the agent acting within the scope of his authority.

  • When a credit card is accepted and used by the cardholder, a contractual relationship is created between the cardholder and the credit card provider, governed by the Terms and Conditions found in the card membership agreement. The Terms and Conditions constitute the law between the parties.

  • The burden of proving the cardholder's consent to the Terms and Conditions lies with the credit card provider. Failure to establish the cardholder's consent renders the cardholder not bound by the provisions of the Terms and Conditions.

  • To impose a credit card client's liability for the payment of outstanding balance, the credit card provider must prove the client's consent to the credit card's terms and conditions.

  • When the credit card provider fails to prove the client's consent to the credit card's terms and conditions, the client may only be charged with legal interest.

  • The legal interest on obligations consisting of loan or forbearance of money shall apply if the provisions of the credit card's Terms and Conditions are inapplicable to the client.

  • The trial court must state the factual, legal, or equitable justification for the award of attorney's fees in the body of its decision.

  • List the legal principles and doctrines found in the case.