In Bank of the Philippine Islands v. Spouses Sarda, the Supreme Court held that a credit card company bears the burden of proving that a cardholder expressly consented to and actually used a credit card, especially when the card was issued on a pre-approved basis. The court emphasized that simply presenting statements of account is insufficient to prove liability. This decision protects consumers from unwarranted credit card charges and reinforces the necessity for banks to exercise due diligence in issuing credit cards and verifying card usage.

Unsolicited Credit Card, Unsubstantiated Debt: Who Pays?

Bank of the Philippine Islands (BPI) filed a complaint against Spouses Sarda, seeking payment for unpaid credit card obligations. BPI claimed that Mr. Sarda had an outstanding balance of P1,213,114.19. The Sarda spouses denied applying for or receiving the credit card, leading to a legal battle that reached the Supreme Court. The central issue was whether BPI sufficiently proved that Mr. Sarda received and used the credit card, thereby incurring the debt.

The Regional Trial Court (RTC) initially ruled in favor of BPI, finding that Mr. Sarda likely received the card through his former employee and failed to notify BPI of non-receipt. However, the Court of Appeals (CA) reversed this decision, stating that BPI failed to prove Mr. Sarda’s possession of the card or his authorization for a supplementary card issued to his employee. The CA also noted that BPI did not establish that the Sarda spouses received monthly billing statements or a demand letter.

The Supreme Court affirmed the CA’s decision, emphasizing that factual findings of the Court of Appeals are generally binding and will not be disturbed unless certain exceptions apply. BPI argued that because the RTC’s decision was in its favor, the Supreme Court should reverse the CA decision and reinstate the RTC judgment. However, the Supreme Court found no compelling reason to deviate from the CA’s findings and conclusions. The court highlighted that BPI’s witness admitted Mr. Sarda did not apply for the credit card but was rather a pre-qualified client. When a client is pre-qualified, the standard screening procedures are often waived, and the card is issued directly, giving the client the option to accept or reject it upon receipt.

Furthermore, BPI presented a delivery receipt signed by Mr. Sarda’s former employee, Ms. Tandogon, as proof of delivery. The court found this insufficient, stating that BPI failed to provide evidence showing Mr. Sarda authorized Ms. Tandogon to receive the card on his behalf. The court reiterated that this evidence was self-serving and insufficient to support BPI’s claim, especially considering the respondents’ denial of any relationship with Ms. Tandogon and her role as their former office clerk. The responsibility to prove the cardholder’s usage of the card rested on BPI, and they failed to meet this burden.

In civil cases, the burden of proof lies with the party making the allegation. As stated in the Rules of Court:

SECTION 1. Preponderance of evidence, how determined. – In civil cases, the party having [the] burden of proof must establish his case by a preponderance of evidence.

BPI relied on the monthly statements of account to prove that Mr. Sarda had incurred the debt. However, the Supreme Court held that merely submitting these statements was not enough to prove that Mr. Sarda had indeed incurred the obligation. It was also not enough to show that payments had been made on the account, as the identity of the person making those payments was not established.

BPI argued that reputable establishments have strict policies for verifying the identity of credit card users. However, it failed to present any witnesses from these establishments or any other evidence linking Mr. Sarda to the purchases. During the trial, respondents’ counsel requested charge slips for the transactions, but BPI could not provide them, citing that only the cardholder and the merchant received copies, and the merchant’s copy was electronically transmitted to BPI. Yet, BPI failed to provide electronic evidence of these purchases.

Regarding the supplementary card issued to Ms. Tandogon, there was no evidence that Mr. Sarda had requested or applied for it. This was conceded by BPI’s witness during cross-examination. The issuance of the supplementary card without Mr. Sarda’s application was particularly significant because the statements of account showed large amounts of purchases and cash advances made using this card. Despite payments being made on the single account for both cards, penalties and late payment charges accumulated, leading to the disputed P1,213,114.19 debt. Absent proof that Mr. Sarda had received the supplementary card and the identity of the payor, the fact that payments were made could not be solely relied upon to prove he had used the card.

Moreover, the Supreme Court highlighted the importance of banks exercising a high degree of diligence in their transactions. This responsibility is emphasized in regulations from the Bangko Sentral ng Pilipinas (BSP). Prior to the issuance of credit cards, banks must now conduct “know-your-client” procedures and ensure that applicants are financially capable and have good credit standing. The current governing law, Republic Act No. 10870, known as the Philippine Credit Card Industry Regulation Law, mandates these practices, with violations subject to imprisonment, fines, or both.

Consequently, the Supreme Court found that BPI had not exercised proper diligence in issuing both the primary and supplementary cards. The court stated that the bank must bear the resulting loss caused by its own actions and policies. Even if fraud had occurred, BPI had the burden of providing clear and convincing evidence that Mr. Sarda had colluded with Ms. Tandogon. The bank could not rely on mere assumptions or conjecture to prove the liability for the outstanding debt.

Ultimately, this case underscores the importance of credit card companies adhering to strict verification processes and demonstrating clear consent and usage by the cardholder. Banks need to ensure they meet their burden of proof in establishing liability and that consumers are adequately protected from unauthorized charges.

FAQs

What was the key issue in this case?	The central issue was whether BPI sufficiently proved that Mr. Sarda received and used the credit card, thereby incurring the debt of P1,213,114.19. The court examined whether BPI met its burden of proof.
What did the Court rule?	The Supreme Court affirmed the Court of Appeals’ decision, ruling that BPI failed to prove that Mr. Sarda received and used the credit card, or that he authorized the issuance of a supplementary card to Ms. Tandogon. Therefore, Mr. Sarda was not liable for the debt.
What evidence did BPI present to prove Mr. Sarda’s liability?	BPI presented a delivery receipt signed by Mr. Sarda’s former employee, Ms. Tandogon, and monthly statements of account. However, the court found these insufficient to prove Mr. Sarda’s receipt and usage of the card.
Why was the delivery receipt deemed insufficient?	The delivery receipt was deemed insufficient because BPI failed to prove that Mr. Sarda had authorized Ms. Tandogon to receive the credit card on his behalf. The court stated the evidence was self-serving.
What is the burden of proof in civil cases?	In civil cases, the party making the allegation has the burden of proving it by a preponderance of evidence. This means they must present more convincing evidence than the opposing party.
What is a pre-qualified credit card?	A pre-qualified credit card is issued to a client without the usual screening procedures. The client has the option to accept or reject the card upon receipt, highlighting the need for clear acceptance.
What is the significance of the BSP regulations in this case?	The BSP regulations emphasize the importance of banks exercising due diligence in issuing credit cards. They must conduct “know-your-client” procedures and ensure applicants are financially capable and have good credit standing.
What is RA 10870?	RA 10870, also known as the Philippine Credit Card Industry Regulation Law, mandates that credit card issuers conduct KYC procedures and exercise proper diligence in assessing applicants’ financial capabilities. Violations are subject to penalties.

This ruling reinforces the importance of clear consent and proper diligence in credit card transactions. It protects consumers from liability for unauthorized charges and highlights the responsibility of banks to verify cardholder consent and usage.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Bank of the Philippine Islands, vs. Spouses Ram M. Sarda and Jane Doe Sarda, G.R. No. 239092, June 26, 2019