May the surety be held liable when the cardholder renewed the credit card without his consent?

Facts: Ongkeko acted as surety for his employee, Lodovica, in the latter’s application for credit card with BPI. The application was approved and Lodovica was given a P3,000.00 credit limit. In 1991, the credit card was renewed and Lodovica’s credit limit was increased to P10,000.00. As of May 12, 1996, Lodovica’s outstanding balance amounted to P22,476.61. BPI filed an action for sum of money against Lodovica and Ongkeko. In his Answer, Ongkeko admitted his undertaking but claimed that he can only be liable for the original credit limit of P3,000.00 and that the renewal of the credit card without his consent extinguished his undertaking.

Ruling: Article 1730 of the Civil Code provides: “If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.” Under the suretyship contract, Ongkeko solidarily obliged himself to pay BPI all the liabilities incurred under the credit card account, whether under the principal, renewal, or extension card issued, regardless of the changes or novation in the terms and conditions in the issuance and use of the credit card. The terms and conditions of his undertaking are unambiguous and well-defined; thus, there is no room for interpretation – only application. Given that Lodovica reneged on her obligations under the credit card account, Ongkeko is, therefore, liable (Ongkeko vs. BECC, G.R. No. 147275, March 31, 2006).

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Should a credit cardholder be liable for purchases made through his lost card?

Facts: Luis Ermitaño was a BPI credit cardholder while his wife, Manuelita Ermitaño, was an extension cardholder. In 1989, Manuelita’s bag which contained the credit card was snatched. Immediately, she reported the loss and thereafter sent written notice to BPI. BPI, however, billed Luis for purchases made through Manuelita’s lost card totalling P3,197.70 citing the following stipulation in their contract: “...the cardholder continues to be liable for the purchases made through the use of the lost/stolen BPI Express Card until after such notice has been given to BPI and the latter has communicated such loss/theft to its member establishments.”

Ruling: The stipulation is not valid. Prompt notice by the cardholder to the credit card company of the loss or theft of his card should be enough to relieve the former of any liability occasioned by the unauthorized use of his lost or stolen card. The questioned stipulation in this case, which still requires the cardholder to wait until the credit card company has notified all its member-establishments, puts the cardholder at the mercy of the credit card company which may delay indefinitely the notification of its members to minimize if not to eliminate the possibility of incurring any loss from unauthorized purchases. Or, as in this case, the credit card company may for some reason fail to promptly notify its members through absolutely no fault of the cardholder. To require the cardholder to still pay for unauthorized purchases after he has given prompt notice of the loss or theft of his card to the credit card company would simply be unfair and unjust. The Court cannot give its assent to such a stipulation which could clearly run against public policy (Sps. Ermitaño vs. Court of Appeals, G.R. No. 127246, April 21, 1999).

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