Polotan Sr. Vs. Ho. Court of Appeals G.R No.
119379 September 25, 1998
Facts:
Private respondent Security Diners International Corporation (Diners Club), a credit card
company, extends credit accomodations 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 accmodations 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.
Issues:
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
Ruling:
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 must 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:
"x x x [A]ppellant by his own admission is a 'lawyer by profession, a reputable
businessman and a noted 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 as 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.
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]
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 market rates is beyond the control of private respondent.
