G.R. No. 119379




Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 119379 September 25, 1998 RODELO G. POLOTAN, SR., petitioner, vs. HON. COURT OF APPEALS (Eleventh Division), REGIONAL TRIAL COURT IN MAKATI CITY (Branch 132), and SECURITY DINERS INTERNATIONAL CORPORATION, respondents. ROMERO, J.: Assailed before this Court in a Petition for Review on Certiorari is the decision 1 of the Court of Appeals in CA-G.R. CV No. 33270 affirming the decision of Branch 132 of the Regional Trial Court of Makati City. Private respondent Security Diners International Corporation (Diners Club), a credit card company, extends credit accommodations to its cardholders for the purchase of goods and other services from member establishments. Said goods and services are reimbursed later on by cardholders upon proper billing. Petitioner Rodelo G. Polotan, Sr. applied for membership and credit accommodations with Diners Club in October 1985. The application form contained terms and conditions governing the use and availment of the Diners Club card, among which is for the cardholder to pay all charges made through the use of said card within the period indicated in the statement of account and any remaining unpaid balance to earn 3% interest per annum plus prime rate of Security Bank & Trust Company. Notably, in the application form submitted by petitioner, Ofricano Canlas obligated himself to pay jointly and severally with petitioner the latter's obligation to private respondent. Upon acceptance of his application, petitioner was issued Diners Club card No. 3651-212766-3005. As of May 8, 1987, petitioner incurred credit charges plus appropriate interest and service charges in the aggregate amount of P33,819.84 which had become due and demandable. Demands for payment made against petitioner proved futile. Hence, private respondent filed a Complaint for Collection of Sum of Money against petitioner before the lower court. The lower court rued, thus: WHEREFORE, judgment is hereby rendered ordering defendants to pay jointly and severally plaintiff: a) The amount of P33,819.84 and interest of 3% per annum plus prime rate of SBTC and service charges of 2% per month starting May 9, 1987 until the entire obligation is fully paid; b) An amount equivalent to 25% of any and all amounts due and payable as attorney's fees, plus costs of suit. With respect to the cross-claim of defendant Ofricano Canlas, defendant Rodelo G. Polotan, Sr. is ordered to indemnify and/or reimburse the former for whatever he may be ordered to pay plaintiff. The Court of Appeals affirmed the ruling of the lower court. Hence, this petition. Petitioner assigns the following errors: I RESPONDENT COURT OF APPEALS COMMITTED AN ERROR OF LAW IN RULING AS VALID AND LEGAL THE FOLLOWING PROVISION ON INTEREST IN THE DINERS CARD CONTRACT, TO WIT: PAYMENT OF CHARGES — . . . The Cardholder agrees to pay interest per annum at 3% plus the prime rate of Security Bank and Trust Company. . . . Provided that if there occurs any change in the prevailing market rates the new interest rate shall be the guiding rate of computing the interest due on the outstanding obligation without need of serving notice to the Cardholder other than the required posting on the monthly statement served to the Cardholder. The Cardholder hereby authorizes Security Diners to correspondingly increase the rate of such interest in the event of changes in prevailing market rates and to charge additional service fees as may be deemed necessary in order to maintain its service to the Cardholder. II RESPONDENT COURT OF APPEALS COMMITTED AN ERROR OF LAW IN RULING IN EFFECT THAT PRIVATE RESPONDENT'S STATEMENT OF ACCOUNT (Exh. "2"). AS A JUDICIAL ADMISSION THAT MRS. POLOTAN HAD ALREADY PAID COULD BE CONTRADICTED WITHOUT THE PRIVATE RESPONDENT LAYING THE PROPER BASIS FOR THE INTRODUCTION OF CONTRARY EVIDENCE; III RESPONDENT COURT OF APPEALS COMMITTED A GRIEVOUS ERROR OF FACT IN FINDING AS CREDIBLE THE ILLOGICAL AND ABSURD EXPLANATION OF PRIVATE RESPONDENT'S MR. VICENTE; IV RESPONDENT COURT OF APPEALS ERRED IN NOT AWARDING DAMAGES TO PETITIONER. In the first assignment of error, petitioner argues that the provision on interest rate is "obscure and ambiguous and not susceptible of reasonable interpretation" particularly the terms "prime rate", "prevailing market rate" and "guiding rate". In effect, there was no meeting of minds. As such, this being a contract of adhesion, any ambiguity should be resolved against the one who caused it. Petitioner added that the said provision was also illegal as it violated the laws and Central Bank Circulars. While said proviso allowed for the escalation of interest, it did not allow for a downward adjustment of the same. In his second and third assignment of error, petitioner claimed that Diners Club admitted, through its statement of account, that petitioner's wife, Mrs. Polotan, had no more account with it. But then, he claimed that the lower court and the Court of Appeals allowed the testimony of one Mr. Vicente explaining that the reason why Mrs. Polotan had no more account with it was that being a supplementary cardholder, her account was consolidated with that of petitioner in accordance with its new policy. He argued that since Diners Club admitted that Mrs. Polotan had no more account with it, the only way it could contradict such admission was by declaring that the same was a result of a palpable mistake in accordance with Section 4 of Rule 129 of the Revised Rules on Evidence. In admitting said explanation, the lower court and the Court of Appeals violated the rule on the weight to be accorded conflicting evidence. In effect, petitioner insists that both courts favored the uncorroborated testimonial evidence of Mr. Vicente over the documentary evidence presented by petitioner and admitted by Diners Club. In its fourth assignment of error, petitioner claimed that he should have been awarded damages because of Diners Club's bad faith. This Court finds Petitioner's contentions without merit. The issues presented by petitioner are clearly questions of law. Notwithstanding petitioner's submission of the above errors, however, the core issue is basically one of fact. This case stemmed from a simple complaint for collection of sum of money. The lower court and the Court of Appeals found that petitioner indeed owed Diners Club the amount being demanded. In the case of Reyes v. CA, 2 this Court held that factual findings of the trial court, adopted and confirmed by the Court of Appeals, are final and conclusive and may not be reviewed on appeal. The exceptions to this rule are as follows: (1) when the inference made is manifestly mistaken, absurd or impossible; (2) when there is a grave abuse of discretion; (3) when the finding is grounded entirely on speculations, surmises or conjectures; (4) when the judgment of the Court of Appeals is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record. Only a clear showing that any of the above-cited exceptions exists would justify a review of the findings of fact made by the lower court and upheld by the Court of Appeals. In the instant case, a review of the decisions of the lower court, as well as the Court of Appeals, shows that the conclusions have been logically arrived at and substantially supported by the evidence presented by the parties. Be that as it may, this Court sees it fit and proper to discuss the merits of this petition based on petitioner's claim that since the contract he signed with Diners Club was a contract of adhesion, the obscure provision on interest should be resolved in his favor. A contract of adhesion is one in which one of the contracting parties imposes a ready-made form of contract which the other party may accept or reject, but cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his signature or his "adhesion" thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing. 3 Admittedly, the contract containing standard stipulations imposed upon those who seek to avail of its credit services was prepared by Diners Club. There is no way a prospective credit card holder can object to any onerous provision as it is offered on a take-it-or-leave-it basis. Being a contract of adhesion, any ambiguity in its provisions trust be construed against private respondent. Indeed, the terms "prime rate", "prevailing market rate", "2% penalty charge", "service fee", and "guiding rate" are technical terms which are beyond the ken of an ordinary layman. To be sure, petitioner hardly falls into the category of an "ordinary layman." As aptly observed by the Court of Appeals: . . . [A]ppellant by his own admission is a "lawyer by profession, a reputable businessman and a note leader of a number of socio-civic organizations." With such impressive credentials, this Court is hard-put to fathom someone of his calibre entering into a contract with eyes "blindfolded". 4 Nevertheless, these types of contracts have been declared as binding ordinary contracts, the reason being that the party who adheres to the contract is free to reject it entirely. 5 The binding effect of any agreement between parties to a contract is premised on two settled principles: (1) that any obligation arising from a contract has the force of law between the parties; and (2) that there must be mutuality between the parties based on their essential equality. Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result is void. Any stipulation regarding the validity or compliance of the contract which is left solely to the will of one of the parties, is likewise, invalid. 6 It is important to stress that the Court is not precluded from ruling out blind adherence to their terms if the attendant facts and circumstances show that they should be ignored for being obviously too one-sided.7 In this case, petitioner, in effect, claims that the subject contract is one-sided in that the contract allows for the escalation of interests, but does not provide for a downward adjustment of the same in violation of Central Bank Circular 905. The claim is without basis. First, by signing the contract, petitioner and private respondent agreed upon the rate as stipulated in the subject contract. Such is now allowed by C.B. Circular 905. 8 Second, petitioner failed to cite any particular provision of said Circular which was allegedly violated by the subject contract. Be that as it may, there is nothing inherently wrong with escalation clauses. Escalation clauses are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money in long term contracts.9 Petitioner further argues that the interest rate was unilaterally imposed and based on the standards and rate formulated solely by Diners Club. In Florendo v. CA, 10 this Court has held that: . . . the unilateral determination and imposition of increased interest rates by the herein respondent bank is obviously violative of the principle of mutuality of contracts ordained in Article 1308 of the Civil Code. As this Court held in PNB v. CA (196 SCRA 536 [1991]): In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality between the parties based on their essential equality. A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties, is void. . . . The contractual provision in question states that "if there occurs any change in the prevailing market rates, the new interest rate shall be the guiding rate in computing the interest due on the outstanding obligation without need of serving notice to the Cardholder other than the required posting on the monthly statement served to the Cardholder." This could not be considered an escalation clause for the reason that it neither states all increase nor a decrease in interest rate. Said clause simply states that the interest rate should be based on the prevailing market rate. Interpreting it differently, while said clause does not expressly stipulate a reduction in interest rate, it nevertheless provides a leeway for the interest rate to be reduced in case the prevailing market rates dictate its reduction. Admittedly, the second paragraph of the questioned proviso which provides that "the Cardholder hereby authorizes Security Diners to correspondingly increase the rate of such interest in the event of changes in prevailing market rates . . ." is an escalation clause. However, it cannot be said to be dependent solely on the will of private respondent as it is also dependent on the prevailing market rates. Escalation clauses are not basically wrong or legally objectionable as long as they are not solely potestative but based on reasonable and valid grounds. 11 Obviously, the fluctuation in the markets rates is beyond the control of private respondent. As to the second and third assignments of error, it is misleading for petitioner to say that private respondent had judicially admitted that its statement of account is proof that Mrs. Polotan has already paid her account with private respondent. Proceeding from said premise, it is further misleading for petitioner to conclude that private respondent's testimonial evidence about a new policy contradicted its judicially admitted documentary evidence without laying the proper basis for the introduction of contrary evidence and in violation of Section 2, Rule 129 of the Revised Rules on Evidence, which provides that: Admissions made by the parties in the pleadings, or in the course of the trial or other proceedings do not require proof and can be contradicted unless previously shown to have been made through palpable mistake. Certainly, Diners Club could not deny the existence of Exhibit "2" which is the Statement of Account issued to Mrs. Polotan since, precisely, it was the one which issued said statement. But to conclude that said Statement of Account was likewise an admission that Mrs. Polotan has no more account with Diners Club would be equivocatory, or non-sequitur. While private respondent admitted the existence of Exhibit "2", it could not have agreed to the purpose for which the exhibit was presented. As satisfactorily found by the Court of Appeals and to which this Court agrees: Appellant's allegation is misleading. On the contrary, appellee's rebuttal witness, Alfredo Vicente, categorically stated that the reason the Statement of Account in the name of Alicia Polotan showed a zero balance (Exh. "2") was due to the fact that effective February 1989, under a new system, separate monthly statements were produced on supplementary card members. Prior to February 1989, the availment of Mr. and Mrs. Polotan were incorporated under one statement. Moreover, it is to be observed that while the Complaint was filed on 15 May 1987, the Diners Club Monthly Statement in the name of Alicia B. Polotan is dated almost two (2) years later or "02/08/89" (Exh. "2"). This bolsters the testimony of Alfredo Vicente regarding the entry of zero balance in Mrs. Polotan's name. Although said exhibit would, by itself, show that Mrs. Polotan had no more account with Diners Club, it would not have been conclusive to prove that said account was already paid. The proper evidence would have been a receipt of payment. Significantly, petitioner did not contest the purchases as indicated in the statements of account but merely alleged that some of the purchases being claimed to have been made by petitioner were not supported by invoices. The lower court found otherwise. 12 In light of the above, this Court sees no reason to award damages to petitioner. WHEREFORE, in view of the foregoing, the petition for certiorari is hereby DENIED and the Decision of the Court of Appeals AFFIRMED with the MODIFICATION that the attorney's fees are reduced to 15%. SO ORDERED. Narvasa, C.J. Kapunan and Purisima, JJ., concur. Footnotes 1 Penned by Justice Pacita Canizares-Nye and concurred in by Justices Jorge S. Imperial and Bernardo L. Salas. 2 258 SCRA 651 [1996]. 3 Phil. Commercial International Bank v. CA 255 SCRA 299 [1996]. 4 Decision, rollo, p. 101. 5 See note 3. 6 Almeda v. CA, 256 SCRA 292 [1996]. 7 See note 3. 8 People v. Dizon, 260 SCRA 851 (1996). 9 See note 8. 10 265 SCRA 678 (1996). 11 See note 6. 12 Decision in Civil Case No. 16739. The Lawphil Project - Arellano Law Foundation