Bringing small claims cases against delinquent microfinance clients

MABS Microfinance Specialists Mark Guillermo and Jennifer Sabianan share lessons learned at the RBAP-MABS Regional Roundtable Conference 2010

(left) Hon. Maria Filomena Singh of the Regional Trial Court 85; (right) Hon. Mary Jane Buenaventura of the MTCC in San Fernando City, Pampanga

(left) Hon. Maria Filomena Singh of the Regional Trial Court 85; (right) Hon. Mary Jane Buenaventura of the MTCC in San Fernando City, Pampanga

One of the lively topics presented during the recent RBAP-MABS Regional Roundtable Conferences was the small claims courts (SCC) presented to Luzon and Visayas bankers by Hon. Maria Filomena Singh of the Regional Trial Court 85, and to Mindanao bankers by Hon. Mary Jane Buenaventura, presiding judge of the MTCC (Municipal Trial Courts in Cities) in San Fernando City, Pampanga.  The presentation mainly focused on the rules of procedure for filing a small claim, especially for managing delinquent accounts.

Filing a Small Claims Case
Qualification
To qualify as a small claim, the amount involved should not exceed P100,000 (principal only) and should be civil in nature.
Filing procedures
In order to file for a small claim, the plaintiff should complete a verified statement of claim and a certification of no-forum shopping, accompanied by all pertinent documentation and evidences.  These documents shall be filed with the Clerk of Court (CoC) of the MTC (Municipal Trial Court or Metropolitan Trial Court) or MTCC (Municipal Trial Court in Cities) either in the area where the defendant resides or in the involved bank branch’s area of operations.
Once the Clerk of Court has already accepted the claim and has administered the oath to the plaintiff, the claim is docketed, numbered according to its date of acceptance and raffled to an MTCC Judge.  Within 24 hours, the CoC should issue a summons to the defendant with a schedule of hearing. On the scheduled date, both parties should personally be present and no lawyer is allowed, not even as a representative of each party.
Any number of cases can be filed, however, all cases in excess of 10 per calendar year are charged with additional fees. The 11th to 20th case filed by a plaintiff within the same year will be charged P500 aside from the regular fee. The 21st to 30th case would be charged an additional P600, and so on. However Atty. Fe Maloloy-on, CoC of the MTCC in Davao City, added that the fee for a small claims case should not exceed more than P20,000. She also said that plaintiffs should find ways to reduce these fees.  The best option available is the fact that the case can either be filed in the location of the bank’s head office or the residence of the defendant.  Choosing the court with jurisdiction over the residence of the client will usually provide the banks with more venues to choose from.
Settlement
Amicable settlement is first offered by the Judge to both parties and if no settlement is reached, the case is heard and decided on in the same day.  If a settlement is reached, a signed compromise agreement is submitted to the Judge.  If the defendant fails to comply with the terms of the agreement, the entire obligation should be due and demandable. This will be the basis for the writ issuance of obligation. For example, if the client has paid the obligation during the 1st and 2nd monthly amortization and he failed to pay the 3rd and 4th, the whole amount due is demandable already. There is no need to wait for the last payment. This provision should be included immediately in the compromise agreement.

Filing a Small Claims Case

Qualification

To qualify as a small claim, the amount involved should not exceed P100,000 (principal only) and should be civil in nature.

Filing procedures

In order to file for a small claim, the plaintiff should complete a verified statement of claim and a certification of no-forum shopping, accompanied by all pertinent documentation and evidences.  These documents shall be filed with the Clerk of Court (CoC) of the MTC (Municipal Trial Court or Metropolitan Trial Court) or MTCC (Municipal Trial Court in Cities) either in the area where the defendant resides or in the involved bank branch’s area of operations.

Once the Clerk of Court has already accepted the claim and has administered the oath to the plaintiff, the claim is docketed, numbered according to its date of acceptance and raffled to an MTCC Judge.  Within 24 hours, the CoC should issue a summons to the defendant with a schedule of hearing. On the scheduled date, both parties should personally be present and no lawyer is allowed, not even as a representative of each party.

Any number of cases can be filed, however, all cases in excess of 10 per calendar year are charged with additional fees. The 11th to 20th case filed by a plaintiff within the same year will be charged P500 aside from the regular fee. The 21st to 30th case would be charged an additional P600, and so on. However Atty. Fe Maloloy-on, CoC of the MTCC in Davao City, added that the fee for a small claims case should not exceed more than P20,000. She also said that plaintiffs should find ways to reduce these fees.  The best option available is the fact that the case can either be filed in the location of the bank’s head office or the residence of the defendant.  Choosing the court with jurisdiction over the residence of the client will usually provide the banks with more venues to choose from.

Settlement

Amicable settlement is first offered by the Judge to both parties and if no settlement is reached, the case is heard and decided on in the same day.  If a settlement is reached, a signed compromise agreement is submitted to the Judge.  If the defendant fails to comply with the terms of the agreement, the entire obligation should be due and demandable. This will be the basis for the writ issuance of obligation. For example, if the client has paid the obligation during the 1st and 2nd monthly amortization and he failed to pay the 3rd and 4th, the whole amount due is demandable already. There is no need to wait for the last payment. This provision should be included immediately in the compromise agreement.

Tips, clarifications and experiences of the rural bankers

How the small claims courts help in managing delinquent accounts

At the Luzon-Visayas conference, Rural Bank of Camalig President Miel Moraleda commended the establishment of the small claims court in Legaspi City. He shared that since the bank began seeking the intervention of the small claims court, 35% of their cases have been acted upon.

Small claims for written off accounts

Dr. Leocadio Ignacio, President of Mallig Plains Rural Bank, inquired at the Luzon-Visayas conference if banks could still file for a case at the small claims court for accounts that have already been written off. Judge Singh answered that the banks can always file a case for up to 10 years.  Even if a bank has written off an account, it can still bring a small claims case against the client.

Timeline for the enforcement of court decision

Mr. Roderick Tumalad, from the Rural Bank of Abucay, asked at the Luzon-Visayas conference whether the court has to specify a date for the enforcement of its decision, particularly on the collection of loan payments. To this, Judge Singh explained that once the decision has been granted, the bank should ensure that the collection and payment period is specified in the final agreement with the client or judgment of the court.  If the client again defaults, the bank can still rely on the final judgment for up to (10) years to collect from the borrower.

More efficient filing of small claims

Green BankAt the Mindanao conference, Green Bank shared that it’s best for banks wanting to file for small claims to have a complete record of all the documents from both the clients and their co-makers.  They shared that they once filed small claims cases for all of their overdue accounts without realizing that the documents were not complete.  A lot of their filed cases were dismissed because of this.

Judge Buenaventura added that it is equally important to ensure that the defendant can still be located. A summon that is not served shall be dismissed in 2 months.  Atty.  Maloloy-on, CoC of the Davao City MTCC explained that they are “very strict in these documents, especially on the exact address and contact numbers of the parties involved.”

Small claims courts and barangay courts

When asked if barangay courts are faster than small claims courts, Judge Buenaventura explained that juridical entities like banks should file their claims with the small claims courts. Normal entities or individual persons could file claims with the barangay courts which usually have limits up to P5,000 as opposed to the small claims cases which can go up to P100,000.

Demandable amount

RB MontevistaRural Bank of Montevista shared that they once filed two cases with the small claims court.  The judge for the 1st case decided not to include the interest in the amount demandable from the client, while the judge for the 2nd other case decided that the client should pay the whole amount with interest. Judge Buenaventura explained that the court has the power to reduce interest to 12% per year. There should be a compromise agreement and consensus. For example, there could be 1% interest per month or 12% annually or you can include in the agreement that there is additional 1% per default. This additional interest starts from the time the demand letter is sent from the bank to the client. If the ruling is in favor of the bank, the small claims court docket fees are also allowed to be claimed by the bank.

For queries or clarifications on the small claims court, rural banks can contact any RBAP-MABS staff or leave a comment on this post. The following guidelines can also be downloaded: