Receiving a court summons (technically a "Summons") and a copy of a Complaint for a sum of money can be an overwhelming experience. In the Philippines, credit disputes are governed by the Rules of Court and, for smaller amounts, the Revised Rules on Summary Procedure or the Rules on Expedited Procedures in First Level Courts.
Ignoring these documents is the most critical mistake a defendant can make. Here is a comprehensive breakdown of the legal procedures and your rights under Philippine law.
1. Understanding the Summons
A Summons is an official notice issued by a court informing you that a case has been filed against you. It grants the court jurisdiction over your person.
- Service of Summons: This is usually done via personal service (handing it to you). If you cannot be found after several attempts, substituted service may occur (leaving it with a person of legal age at your residence or office).
- The "Clock" Starts: The moment you (or a representative via substituted service) receive the summons, the legal deadlines begin.
2. Determining the Venue and Rule
The court where the case was filed depends on the principal amount of the loan:
| Amount of Claim (Principal) | Court Level | Applicable Rules |
|---|---|---|
| PHP 1,000,000 and below | Metropolitan/Municipal Trial Courts (MeTC/MTCC/MTC) | Rules on Expedited Procedures (Small Claims or Summary Procedure) |
| Above PHP 1,000,000 | Regional Trial Court (RTC) | Regular Rules of Civil Procedure |
Note on Small Claims: If the loan is PHP 1,000,000 or less (exclusive of interests and costs), the case likely falls under Small Claims. In these cases, lawyers are strictly prohibited from representing parties during hearings; you must appear personally.
3. The Critical First Step: Filing an Answer
You must respond to the complaint by filing a formal Answer.
- The Deadline: Under the 2019 Amendments to the Rules of Civil Procedure, you generally have thirty (30) calendar days from service of summons to file your Answer. If it is a Small Claims case, you only have ten (10) days to file a Response.
- What to Include: You must specifically deny the allegations you believe are false and state your Affirmative Defenses (e.g., the debt is already paid, the interest is usurious/unconscionable, or the action has prescribed).
- The Danger of Default: If you fail to file an Answer within the period, the court may, upon motion of the plaintiff, declare you in Default. This allows the court to render judgment based on the plaintiff’s evidence alone, without your participation.
4. Affirmative Defenses and Counterclaims
When drafting your Answer, consider the following legal protections:
- Unconscionable Interest Rates: While the Philippines does not have a formal Usury Law ceiling, the Supreme Court has repeatedly struck down interest rates (e.g., 3% per month or higher) for being "iniquitous, unconscionable, and contrary to morals." You can pray for the court to reduce these rates to the legal rate (6% per annum).
- Prescription of Action: Written contracts must be sued upon within ten (10) years from the time the right of action accrues. If the loan is older, the debt may no longer be legally enforceable.
- Compulsory Counterclaims: If the creditor did something illegal (e.g., harassment or violating the Truth in Lending Act), you must include these claims in your Answer, or they may be barred forever.
5. Mandatory Mediation and Judicial Dispute Resolution (JDR)
The Philippine legal system encourages settlements. Before a full-blown trial:
- Mediation: The case is referred to the Philippine Mediation Center (PMC). A neutral third party helps both sides reach a compromise (e.g., a restructured payment plan).
- Judicial Dispute Resolution (JDR): If mediation fails, the judge may attempt to mediate the case one last time.
If a settlement is reached, a Compromise Agreement is signed, which has the force of a final judgment.
6. Pre-Trial and Trial
If no settlement is reached, the case proceeds to:
- Pre-Trial: The parties simplify the issues, mark their evidence, and name their witnesses. Under the new rules, "Trial Briefs" are required.
- Trial: The creditor (Plaintiff) presents evidence of the loan and your default. You (Defendant) then present your evidence (receipts, proof of payment, or evidence of excessive interest).
7. Judgment and Execution
The court will issue a Decision. If the court finds you liable:
- The Writ of Execution: If you do not appeal or pay voluntarily, the court issues a Writ of Execution. A sheriff will be tasked to satisfy the judgment.
- Exempt Properties: Under the Rules of Court (Rule 39, Section 13), certain properties are exempt from execution, such as your family home (up to a certain value), ordinary tools of trade, and clothing/furniture for family use.
8. Common Misconceptions
- "I can go to jail for unpaid loans." Under the Philippine Constitution, no person shall be imprisoned for debt. However, you can face imprisonment if you issued a "bouncing check" (B.P. 22) or committed Estafa (fraud), which are criminal offenses, not just civil ones.
- "I wasn't notified, so I don't have to pay." If the summons was served via substituted service, the case proceeds whether you personally held the paper or not. Always monitor your last known address.