Dear PAO,

Six months ago, I started a ‘pakaskas’ business using my credit cards, where I let other people swipe my cards for their purchases, usually on an installment basis, for a fee. It seemed promising at first because aside from the standard fee that I charge from every transaction, I am also able to maximize cashbacks and rebates from my credit cards. From the get-go, I made it a rule to only lend to those I know personally, i.e., friends and relatives. As such, I did not feel the need to draw up a loan contract or any agreement of some sort. Three months ago, my friend used my card to purchase a smart phone amounting to P80,000 on a 12-month installment plan. He was able to promptly remit the first two monthly payments. However, when I tried to contact him last week to remind him of the next billing cycle, he refused to answer my calls. I also heard that he moved out of the apartment he was staying at, but I was able to get hold of his new address. What is the easiest way to compel him to honor our agreement despite the lack of a written contract?

Hazel

Dear Hazel,

It bears stating at the outset that Article 1356 of the Civil Code of the Philippines provides that “[c]ontracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. xxx.” Thus, loan agreements may be considered valid even if the same have not been reduced into writing, provided that the following essential requisites are present: 1) consent of the contracting parties; 2) object certain which is the subject matter of the contract; and 3) cause of the obligation. (Article 1318, Civil Code of the Philippines)

Having established the validity of your agreement, the Supreme Court of the Philippines promulgated AM 08-8-7-SC, or the Rules on Expedited Procedures in the First Level Courts, which took effect on April 11, 2022, to establish a more expeditious, inexpensive, and simplified procedure for individuals to pursue monetary claims not exceeding the jurisdictional amount of P1,000,000.

The foregoing applies to purely civil claims for payment or reimbursement of a sum of money arising from contracts of lease, loan, services, sale, or mortgage, and damages arising therefrom. In order to initiate a small claims case, the claimant must file a Verified Statement of Claim — a standard form prescribed by the Court, in the first-level court (MeTC, MTCC, MTC, or MCTC) of the city/municipality where the plaintiff or defendant resides or the last known address you have for him. (Rule IV, Section 2) The court will then issue a summons to the defendant, together with a copy of the Statement of Claim and the Notice of Hearing, and allow him an opportunity to file a Verified Response. (Rule IV, Section 10)

Certainly, the easiest way to collect the outstanding credit card balance from your friend is by filing a small claims case against him. Note, however, that in order for your case to prosper, it is essential for the court to acquire jurisdiction over the person of the defendant through a valid service of summons. Thus, it is crucial that you first verify your friend’s address prior to the filing of a case, not only to ensure proper service of summons but also to avoid unnecessary delays and costs.

It is, likewise, important to note that you have to present proof of your agreement in order to establish your claim. After all, it is elementary that the party who alleges a fact or claim has the burden of proving his or her allegation.

We hope that we were able to answer your queries. This advice was based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

We appreciate your trust and support.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to [email protected].