Republic of the
Supreme Court
POLO
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G.R. No. 174269
Present:
CARPIO MORALES, J., Acting Chairperson, VELASCO,
JR., LEONARDO-DE CASTRO, BRION, and *BERSAMIN, JJ. Promulgated: August 25, 2010 |
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R E S O L U T I O N
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BRION, J.:
We
resolve the motion for reconsideration filed by respondent American Express
International, Inc. (AMEX) dated
FACTUAL ANTECEDENTS
The
established antecedents of the case are narrated below.
AMEX
is a resident foreign corporation engaged in the business of providing credit
services through the operation of a charge card system. Pantaleon has been an
AMEX cardholder since 1980.[3]
In October 1991,
Pantaleon, together with his wife (Julialinda),
daughter (
The next day, the group
began their sightseeing at around
While at Coster, Mrs.
Pantaleon decided to purchase some diamond pieces worth a total of
US$13,826.00. Pantaleon presented his American Express credit card to the sales
clerk to pay for this purchase. He did
this at around
At
around
At
around 10 a.m., or 45 minutes after Pantaleon presented his credit card, AMEX
still had not approved the purchase. Since the city tour could not begin until
the Pantaleons were onboard the tour bus, Coster decided to release at around
When the Pantaleons finally returned
to the tour bus, they found their travel companions visibly irritated. This irritation intensified when the tour
guide announced that they would have to cancel the tour because of lack of time
as they all had to be in
From
the records, it appears that after Pantaleon’s purchase was transmitted for
approval to AMEX’s
After
the trip to
Upon
return to
On P500,000.00 as moral damages, P300,000.00 as exemplary damages, P100,000.00 as attorney’s fees, and P85,233.01 as litigation expenses.
On appeal, the CA
reversed the awards.[8] While the CA recognized that delay in the
nature of mora accipiendi or
creditor’s default attended AMEX’s approval of Pantaleon’s purchases, it
disagreed with the RTC’s finding that AMEX had breached its contract, noting
that the delay was not attended by bad faith, malice or gross negligence. The appellate court found that AMEX exercised
diligent efforts to effect the approval of Pantaleon’s purchases; the purchase
at Coster posed particularly a problem because it was at variance with Pantaleon’s
established charge pattern. As there was
no proof that AMEX breached its contract, or that it acted in a wanton,
fraudulent or malevolent manner, the appellate court ruled that AMEX could not
be held liable for any form of damages.
Pantaleon questioned this
decision via a petition for review on
certiorari with this Court.
In
our
Based
on the testimony of AMEX’s credit authorizer
Edgardo Jaurique, the approval time for credit card charges would be three to four
seconds under regular circumstances. In
Pantaleon’s case, it took AMEX 78 minutes to approve the
THE MOTION FOR RECONSIDERATION
In its motion for reconsideration,
AMEX argues that this Court erred when it found AMEX guilty of culpable delay
in complying with its obligation to act with timely dispatch on Pantaleon’s
purchases. While AMEX admits that it normally takes seconds to approve charge
purchases, it emphasizes that Pantaleon experienced delay in P383,746.16.
While the total amount of Pantaleon’s previous purchases using his AMEX credit
card did exceed US$13,826.00, AMEX points out that these purchases were made in
a span of more than 10 years, not in a single transaction.
Because
this was the biggest single transaction that Pantaleon ever made using his AMEX
credit card, AMEX argues that the transaction necessarily required the credit
authorizer to carefully review Pantaleon’s credit history and bank
references. AMEX maintains that it did
this not only to ensure Pantaleon’s protection (to minimize the possibility
that a third party was fraudulently using his credit card), but also to protect
itself from the risk that Pantaleon might not be able to pay for his purchases
on credit. This careful review, according to AMEX, is also in keeping with the
extraordinary degree of diligence required of banks in handling its
transactions. AMEX concluded that in
these lights, the thorough review of Pantaleon’s credit record was motivated by
legitimate concerns and could not be evidence of any ill will, fraud, or
negligence by AMEX.
AMEX
further points out that the proximate cause of Pantaleon’s humiliation and
embarrassment was his own decision to proceed with the purchase despite his
awareness that the tour group was waiting for him and his wife. Pantaleon could
have prevented the humiliation had he cancelled the sale when he noticed that
the credit approval for the Coster purchase was unusually delayed.
In
his Comment dated
In
response to AMEX’s assertion that the delay was in keeping with its duty to
perform its obligation with extraordinary diligence, Pantaleon claims that this
duty includes the timely or prompt performance of its obligation.
As
to AMEX’s contention that moral or exemplary damages cannot be awarded absent a
finding of malice, Pantaleon argues that evil motive or design is not always
necessary to support a finding of bad faith; gross negligence or wanton
disregard of contractual obligations is sufficient basis for the award of moral
and exemplary damages.
OUR RULING
We GRANT the motion for reconsideration.
Brief historical background
A credit card is defined as “any card, plate, coupon book, or other credit device existing
for the purpose of obtaining money, goods, property, labor or services or anything
of value on credit.”[9] It
traces its roots to the charge card
first introduced by the Diners Club in
In
the
Nature of Credit Card Transactions
To better understand the
dynamics involved in credit card transactions, we turn to the
The bank credit card system involves a tripartite relationship between
the issuer bank, the cardholder, and merchants participating in the system. The
issuer bank establishes an account on behalf of the person to whom the card is
issued, and the two parties enter into an agreement which governs their
relationship. This agreement provides that the bank will pay for cardholder’s
account the amount of merchandise or services purchased through the use of the
credit card and will also make cash loans available to the cardholder. It also
states that the cardholder shall be liable to the bank for advances and
payments made by the bank and that the cardholder’s obligation to pay the bank
shall not be affected or impaired by any dispute, claim, or demand by the
cardholder with respect to any merchandise or service purchased.
The merchants participating in the system agree to honor the bank’s
credit cards. The bank irrevocably agrees to honor and pay the sales slips
presented by the merchant if the merchant performs his undertakings such as
checking the list of revoked cards before accepting the card. x x x.
These slips are forwarded to the member bank which originally issued the
card. The cardholder receives a statement from the bank periodically and may then
decide whether to make payment to the bank in full within a specified period,
free of interest, or to defer payment and ultimately incur an interest charge.
We adopted a similar view in
CIR v. American Express International,
Inc. (Philippine branch),[15] where we also recognized
that credit card issuers are not limited to banks. We said:
Under RA 8484, the credit card that is
issued by banks in general, or by non-banks in particular, refers to “any card
x x x or
other credit device existing for the purpose of obtaining x x x goods
x x x or services x x x on
credit;” and is being used “usually on a revolving basis.” This means
that the consumer-credit arrangement that exists between the issuer and the
holder of the credit card enables the latter to procure goods or services “on a
continuing basis as long as the outstanding balance does not exceed a specified
limit.” The card holder is, therefore, given “the power to obtain present
control of goods or service on a promise to pay for them in the future.”
Business
establishments may extend credit sales through the use of the credit card
facilities of a non-bank credit card company to avoid the risk of uncollectible
accounts from their customers. Under this system, the establishments do
not deposit in their bank accounts the credit card drafts that arise from the
credit sales. Instead, they merely record their receivables from the
credit card company and periodically send the drafts evidencing those
receivables to the latter.
The
credit card company, in turn, sends checks as payment to these business
establishments, but it does not redeem the drafts at full price. The
agreement between them usually provides for discounts to be taken by the
company upon its redemption of the drafts. At the end of each month, it then
bills its credit card holders for their respective drafts redeemed during the
previous month. If the holders fail to pay the amounts owed, the company
sustains the loss.
Simply put, every credit card
transaction involves three contracts, namely: (a) the sales contract between the credit card holder and the merchant or
the business establishment which accepted the credit card; (b) the loan agreement between the credit card
issuer and the credit card holder; and lastly, (c) the promise to pay between the credit card issuer and the merchant or
business establishment.[16]
Credit card issuer –
cardholder relationship
When a credit card company gives the holder the privilege
of charging items at establishments associated with the issuer,[17] a necessary question in a
legal analysis is – when does this relationship begin? There are two diverging views on the matter. In City
Stores Co. v. Henderson,[18] another
The issuance
of a credit card is but an offer to extend a line of open account credit. It is
unilateral and supported by no consideration. The offer may be withdrawn at any
time, without prior notice, for any reason or, indeed, for no reason at all,
and its withdrawal breaches no duty – for there is no duty to continue it – and violates no
rights.
Thus, under this view, each credit card
transaction is considered a separate offer and acceptance.
Novack v. Cities Service Oil Co.[19] echoed
this view, with the court ruling that the mere issuance of a credit card did
not create a contractual relationship with the cardholder.
On
the other end of the spectrum is Gray v.
American Express Company[20] which recognized the card
membership agreement itself as a binding contract between the credit card issuer
and the card holder. Unlike in the Novack
and the City Stores cases, however,
the cardholder in Gray paid an annual
fee for the privilege of being an American Express cardholder.
In
our jurisdiction, we generally adhere to the Gray ruling, recognizing the relationship between the credit card
issuer and the credit card holder as a contractual one that is governed by the
terms and conditions found in the card membership agreement.[21] This contract provides the
rights and liabilities of a credit card company to its cardholders and vice
versa.
We note that a card membership
agreement is a contract of adhesion as its terms are prepared solely by the credit card issuer,
with the cardholder merely affixing his signature signifying his adhesion to
these terms.[22] This
circumstance, however, does not render the agreement void; we have uniformly
held that contracts of adhesion are “as binding as ordinary contracts, the
reason being that the party who adheres to the contract is free to reject it
entirely.”[23]
The only effect is that the terms of the contract are construed strictly
against the party who drafted it.[24]
On AMEX’s obligations to Pantaleon
We begin by
identifying the two privileges that Pantaleon assumes he is entitled to with
the issuance of his AMEX credit card, and on which he anchors his claims.
First, Pantaleon presumes that since his credit card has no pre-set spending
limit, AMEX has the obligation to approve all his charge requests. Conversely,
even if AMEX has no such obligation, at the very least it is obliged to act on
his charge requests within a specific period of time.
i.
Use of credit card a mere offer to enter into loan agreements
Although we recognize the existence of a relationship between
the credit card issuer and the credit card holder upon the acceptance by the
cardholder of the terms of the card membership agreement (customarily signified
by the act of the cardholder in signing the back of the credit card), we have to distinguish this contractual
relationship from the creditor-debtor relationship which only arises after the credit card issuer has
approved the cardholder’s purchase request. The first relates merely to an
agreement providing for credit facility to the cardholder. The latter involves the actual credit on loan
agreement involving three contracts,
namely: the sales contract between the credit card holder and
the merchant or the business establishment which accepted the credit card; the loan agreement between the credit card
issuer and the credit card holder; and the promise
to pay between the credit card issuer and the merchant or business
establishment.
From
the loan agreement perspective, the contractual relationship begins to exist
only upon the meeting of the offer[25] and
acceptance of the parties involved. In more concrete terms, when
cardholders use their credit cards to pay for their purchases, they merely offer
to enter into loan agreements with the credit card company. Only after the latter
approves the purchase requests that the parties enter into binding loan contracts, in keeping
with Article 1319 of the Civil Code, which provides:
Article 1319. Consent is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are
to constitute the contract. The offer must be certain and the acceptance
absolute. A qualified acceptance constitutes a counter-offer.
This view finds support in the reservation
found in the card membership agreement itself, particularly paragraph 10, which
clearly states that AMEX “reserve[s] the right to deny authorization for any
requested Charge.” By so providing, AMEX made its position clear that it
has no obligation to approve any and all charge requests made by its card
holders.
ii. AMEX
not guilty of culpable delay
Since
AMEX has no obligation to approve the purchase requests of its credit cardholders,
Pantaleon cannot claim that AMEX defaulted in its obligation. Article 1169 of
the Civil Code, which provides the requisites to hold a debtor guilty of
culpable delay, states:
Article 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. x x x.
The three requisites for
a finding of default are: (a) that the obligation is demandable and liquidated;
(b) the debtor delays performance; and (c) the creditor judicially or
extrajudicially requires the debtor’s performance.[26]
Based
on the above, the first requisite is no longer met because AMEX, by the express
terms of the credit card agreement, is not obligated to approve Pantaleon’s
purchase request. Without a demandable obligation, there can be no finding of
default.
Apart
from the lack of any demandable obligation, we also find that Pantaleon failed
to make the demand required by Article 1169 of the Civil Code.
As
previously established, the use of a credit card to pay for a purchase is only an
offer to the credit card company to enter a loan agreement with the credit card
holder. Before the credit card issuer accepts this offer, no obligation
relating to the loan agreement exists between them. On the other hand, a
demand is defined as the “assertion of a legal right; xxx an asking with
authority, claiming or challenging as due.”[27] A demand presupposes
the existence of an obligation between the parties.
Thus,
every time that Pantaleon used his AMEX credit card to pay for his purchases,
what the stores transmitted to AMEX were his offers to execute loan contracts. These
obviously could not be classified as the demand required by law to make the
debtor in default, given that no obligation could arise on the part of AMEX
until after AMEX transmitted its acceptance of Pantaleon’s offers. Pantaleon’s
act of “insisting on and waiting for the charge purchases to be approved by
AMEX”[28] is not the demand
contemplated by Article 1169 of the Civil Code.
For
failing to comply with the requisites of Article 1169, Pantaleon’s charge that AMEX
is guilty of culpable delay in approving his purchase requests must fail.
iii. On
AMEX’s obligation to act on the offer within a specific period of time
Even
assuming that AMEX had the right to review his credit card history before it
approved his purchase requests, Pantaleon insists that AMEX had an obligation
to act on his purchase requests, either to approve or deny, in “a matter of seconds”
or “in timely dispatch.” Pantaleon impresses upon us the existence of this
obligation by emphasizing two points: (a) his card has no pre-set spending
limit; and (b) in his twelve years of using his AMEX card, AMEX had always
approved his charges in a matter of seconds.
Pantaleon’s
assertions fail to convince us.
We
originally held that AMEX was in culpable delay when it acted on the Coster
transaction, as well as the two other transactions in the
AMEX’s
credit authorizer, Edgardo Jaurigue, explained that having no pre-set spending
limit in a credit card simply means that the charges made by the cardholder are
approved based on his ability to pay, as demonstrated by his past spending,
payment patterns, and personal resources.[29] Nevertheless, every time Pantaleon charges
a purchase on his credit card, the credit card company still has to determine
whether it will allow this charge, based on his past credit history. This
right to review a card holder’s credit history, although not specifically set
out in the card membership agreement, is a necessary implication of AMEX’s right
to deny authorization for any requested charge.
As
for Pantaleon’s previous experiences with AMEX (i.e., that in the past 12 years, AMEX has always approved his charge
requests in three or four seconds), this record does not establish that Pantaleon
had a legally enforceable obligation to expect AMEX to act on his charge
requests within a matter of seconds. For one, Pantaleon failed to present any
evidence to support his assertion that AMEX acted on purchase requests in a
matter of three or four seconds as an established practice. More importantly, even
if Pantaleon did prove that AMEX, as a matter of practice or custom, acted on
its customers’ purchase requests in a matter of seconds, this would still not be
enough to establish a legally demandable right; as a general rule, a practice
or custom is not a source
of a legally demandable or enforceable right.[30]
We
next examine the credit card membership agreement, the contract that primarily
governs the relationship between AMEX and Pantaleon. Significantly, there is
no provision in this agreement that obligates AMEX to act on all cardholder purchase
requests within a specifically defined period of time. Thus, regardless of
whether the obligation is worded was to “act in a matter of seconds” or to “act
in timely dispatch,” the fact remains that no obligation exists on the part of
AMEX to act within a specific period of time. Even Pantaleon admits in his
testimony that he could not recall any provision in the Agreement that guaranteed
AMEX’s approval of his charge requests within a matter of minutes.[31]
Nor
can Pantaleon look to the law or government issuances as the source of AMEX’s
alleged obligation to act upon his credit card purchases within a matter of
seconds. As the following survey of Philippine law on credit card transactions
demonstrates, the State does not require credit card companies to act upon its
cardholders’ purchase requests within a specific period of time.
Republic Act No. 8484 (RA 8484), or the Access Devices
Regulation Act of 1998, approved on
that regulates the issuance and use of access devices,[32] including credit cards. The more salient portions of this law include
the imposition of the obligation on a credit card company to disclose certain
important financial information[33] to credit card applicants,
as well as a definition of the acts that constitute access device fraud.
As financial institutions engaged in the business of providing credit,
credit card companies fall under the supervisory powers of the Bangko Sentral ng Pilipinas (BSP).[34] BSP Circular No.
398 dated
The Bangko Sentral ng
Pilipinas (BSP) shall foster the development of consumer credit through
innovative products such as credit cards under conditions of fair and
sound consumer credit practices. The BSP likewise encourages
competition and transparency to ensure more efficient delivery of services and
fair dealings with customers. (Emphasis supplied)
Based on this Circular, “x x x [b]efore
issuing credit cards, banks and/or their subsidiary credit card companies must
exercise proper diligence by ascertaining that applicants possess good credit
standing and are financially capable of fulfilling their credit commitments.”[35]
As the above-quoted policy expressly states, the general intent is to foster “fair
and sound consumer credit practices.”
Other than BSP Circular No. 398, a
related circular is BSP Circular No. 454, issued on
In light of the foregoing, we find and
so hold that AMEX is neither contractually bound nor legally obligated to act
on its cardholders’ purchase requests within any specific period of time, much
less a period of a “matter of seconds” that Pantaleon uses as his standard. The
standard therefore is implicit and, as in all contracts, must be based on
fairness and reasonableness, read in relation to the Civil Code provisions on
human relations, as will be discussed below.
AMEX acted with good faith
Thus far, we have already
established that: (a) AMEX had neither a contractual nor a legal obligation to
act upon Pantaleon’s purchases within a specific period of time; and (b) AMEX
has a right to review a cardholder’s credit card history. Our recognition of
these entitlements, however, does not give AMEX an unlimited right to put off
action on cardholders’ purchase requests for indefinite periods of time. In
acting on cardholders’ purchase requests, AMEX must take care not to abuse its
rights and cause injury to its clients and/or third persons. We cite in this
regard Article 19, in conjunction with Article 21, of the Civil Code, which
provide:
Article 19. Every person must,
in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due and observe honesty and good faith.
Article 21. Any person who
willfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the
damage.
Article 19
pervades the entire legal system and ensures that a person suffering damage in
the course of another’s exercise of right or performance of duty, should find
himself without relief.[36] It sets the standard for the conduct
of all persons, whether artificial or natural, and requires that everyone, in
the exercise of rights and the performance of obligations, must: (a) act with
justice, (b) give everyone his due, and (c) observe honesty and good faith. It
is not because a person invokes his rights that he can do anything, even to the
prejudice and disadvantage of another.[37]
While Article 19 enumerates the standards of
conduct, Article 21 provides the remedy for the person injured by the willful
act, an action for damages. We
explained how these two provisions correlate with each other in GF Equity,
Inc. v. Valenzona:[38]
[Article 19], known to contain what is
commonly referred to as the principle of abuse of rights, sets certain
standards which must be observed not only in the exercise of one's rights but
also in the performance of one's duties. These standards are the following: to
act with justice; to give everyone his due; and to observe honesty and good
faith. The law, therefore, recognizes a primordial limitation on all rights;
that in their exercise, the norms of human conduct set forth in Article 19 must
be observed. A right, though by itself legal because recognized or granted
by law as such, may nevertheless become the source of some illegality. When a
right is exercised in a manner which does not conform with the norms enshrined
in Article 19 and results in damage to another, a legal wrong is thereby
committed for which the wrongdoer must be held responsible. But while Article
19 lays down a rule of conduct for the government of human relations and for
the maintenance of social order, it does not provide a remedy for its
violation. Generally, an action for damages under either Article 20 or Article
21 would be proper.
In the context of a credit
card relationship, although there is neither a contractual stipulation nor a specific
law requiring the credit card issuer to act on the credit card holder’s offer within
a definite period of time, these principles provide the standard by which to judge
AMEX’s actions.
According to Pantaleon, even
if AMEX did have a right to review his charge purchases, it abused this right
when it unreasonably delayed the processing of the Coster charge purchase, as
well as his purchase requests at the Richard Metz’ Golf Studio and Kids’
Unlimited Store; AMEX should have known that its failure to act immediately on
charge referrals would entail inconvenience and result in humiliation,
embarrassment, anxiety and distress to its cardholders who would be required to
wait before closing their transactions.[39]
It is an elementary rule in our
jurisdiction that good faith is presumed and
that the burden of proving bad faith rests upon the party alleging it.[40] Although it took AMEX some time before it approved
Pantaleon’s three charge requests, we find no evidence to suggest that it acted
with deliberate intent to cause Pantaleon any loss or injury, or acted in a
manner that was contrary to morals, good customs or public policy. We give credence to AMEX’s claim that
its review procedure was done to ensure Pantaleon’s own protection as a
cardholder and to prevent the possibility that the credit card was being
fraudulently used by a third person.
Pantaleon countered that this review
procedure is primarily intended to protect AMEX’s interests, to make sure that
the cardholder making the purchase has enough means to pay for the credit
extended. Even if this were the case, however, we do not find any taint of bad
faith in such motive. It is but natural for AMEX to want to ensure that it will
extend credit only to people who will have sufficient means to pay for their
purchases. AMEX, after all, is running a business, not a charity, and it would
simply be ludicrous to suggest that it would not want to earn profit for its
services. Thus, so long as AMEX
exercises its rights, performs its obligations, and generally acts with good
faith, with no intent to cause harm, even if it may occasionally inconvenience
others, it cannot be held liable for damages.
We
also cannot turn a blind eye to the circumstances surrounding the Coster
transaction which, in our opinion, justified the wait. In Edgardo Jaurigue’s
own words:
Q 21: With reference to the transaction at
the Coster Diamond House covered by Exhibit H, also Exhibit 4 for the
defendant, the approval came at
A21: Because we have to make certain
considerations and evaluations of [Pantaleon’s] past spending pattern with
[AMEX] at that time before approving plaintiff’s request because [Pantaleon]
was at that time making his very first single charge purchase of
US$13,826 [this is below the US$16,112.58 actually billed and paid for by
the plaintiff because the difference was already automatically approved by [AMEX]
office in Netherland[s] and the record of [Pantaleon’s] past spending with
[AMEX] at that time does not favorably support his ability to pay for such
purchase. In fact, if the foregoing internal policy of [AMEX] had been
strictly followed, the transaction would not have been approved at all considering
that the past spending pattern of the plaintiff with [AMEX] at that time does
not support his ability to pay for such purchase.[41]
x
x x x
Q: Why did it take so
long?
A: It took time to review the account on
credit, so, if there is any delinquencies [sic] of the cardmember. There are
factors on deciding the charge itself which are standard measures in approving
the authorization. Now in the case of Mr. Pantaleon although his account is
single charge purchase of US$13,826. [sic]
this is below the US$16,000. plus actually billed x x
x we would have already declined
the charge outright and asked him his bank account to support his charge. But
due to the length of his membership as cardholder we had to make a decision on
hand.[42]
As
Edgardo Jaurigue clarified, the reason why Pantaleon had to wait for AMEX’s
approval was because he had to go over Pantaleon’s credit card history for the
past twelve months.[43] It would certainly be
unjust for us to penalize AMEX for merely exercising its right to review
Pantaleon’s credit history meticulously.
Finally, we said in Garciano v. Court of Appeals that “the right to recover [moral damages] under Article 21 is based on
equity, and he who comes to court to demand equity, must come with clean hands.
Article 21 should be construed as granting the right to recover damages to
injured persons who are not themselves at fault.”[44]
As will be discussed below, Pantaleon is not a blameless party in all this.
Pantaleon’s
action was the proximate cause for his injury
Pantaleon mainly anchors his claim for moral and exemplary
damages on the embarrassment and humiliation that he felt when the European
tour group had to wait for him and his wife for approximately 35 minutes, and
eventually had to cancel the
As borne by the records,
Pantaleon knew even before entering Coster that the tour group would have to
leave the store by
In Nikko Hotel Manila Garden v. Reyes,[45]
we ruled that a person who knowingly and voluntarily exposes himself to danger
cannot claim damages for the resulting injury:
The doctrine of volenti non fit injuria (“to which a person assents is not esteemed in law as injury”) refers to self-inflicted injury or to the consent to injury which precludes the recovery of damages by one who has knowingly and voluntarily exposed himself to danger, even if he is not negligent in doing so.
This doctrine, in our
view, is wholly applicable to this case. Pantaleon himself testified
that the most basic rule when travelling in a tour group is that you must never be a cause of any delay
because the schedule is very strict.[46]
When Pantaleon made up his mind to push through with his purchase, he must have
known that the group would become annoyed and irritated with him. This was the
natural, foreseeable consequence of his decision to make them all wait.
We do not discount the fact that Pantaleon and
his family did feel humiliated and embarrassed when they had to wait for AMEX to
approve the Coster purchase in
More
importantly, AMEX did not violate any legal duty to Pantaleon under the
circumstances under the principle of damnum
absque injuria, or damages without legal wrong, loss without injury.[47] As we held in BPI Express Card v. CA:[48]
We do not
dispute the findings of the lower court that private respondent suffered
damages as a result of the cancellation of his credit card. However,
there is a material distinction between damages and injury. Injury is the illegal invasion of a legal
right; damage is the loss, hurt, or harm which results from the injury; and
damages are the recompense or compensation awarded for the damage
suffered. Thus, there can be damage without injury in those instances in which the loss
or harm was not the result of a violation of a legal duty. In such cases, the consequences must be
borne by the injured person alone, the law affords no remedy for damages
resulting from an act which does not amount to a legal injury or wrong. These situations are often called damnum absque injuria.
In other words, in order
that a plaintiff may maintain an action for the injuries of which he complains,
he must establish that such injuries resulted from a breach of duty which the
defendant owed to the plaintiff - a concurrence of injury to the plaintiff and
legal responsibility by the person causing it. The underlying basis for the award of tort damages is the premise that
an individual was injured in contemplation of law. Thus, there must first be a breach of some
duty and the imposition of liability for that breach before damages may be
awarded; and the breach of such duty should be the proximate cause of the
injury.
Pantaleon is not entitled to damages
Because AMEX neither
breached its contract with Pantaleon, nor acted with culpable delay or the
willful intent to cause harm, we find
the award of moral damages to Pantaleon unwarranted.
Similarly, we find no basis to award
exemplary damages. In contracts, exemplary damages can only be awarded if a
defendant acted “in a wanton, fraudulent, reckless, oppressive or malevolent
manner.”[49] The plaintiff must also show that he is entitled to
moral, temperate, or compensatory damages before the court may consider the
question of whether or not exemplary damages should be awarded.[50]
As previously discussed, it took AMEX
some time to approve Pantaleon’s purchase requests because it had legitimate
concerns on the amount being charged; no malicious intent was ever established
here. In the absence of any other damages, the award of exemplary damages
clearly lacks legal basis.
Neither do we find any basis for the
award of attorney’s fees and costs of litigation. No premium should be placed on the
right to litigate and not every winning party is entitled to an automatic grant
of attorney's fees.[51]
To be entitled to attorney’s fees and
litigation costs, a party must show that he falls under one of the instances
enumerated in Article
2208 of the Civil Code.[52]
This, Pantaleon failed to do. Since we eliminated the award of moral and
exemplary damages, so must we delete the award for attorney's fees and
litigation expenses.
Lastly, although we affirm the result of the CA decision,
we do so for the reasons stated in this Resolution and not for those found in
the CA decision.
WHEREFORE, premises considered, we SET ASIDE our
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE
CONCUR:
CONCHITA CARPIO MORALES
Associate
Justice |
|
|
|
PRESBITERO J. VELASCO, JR. Associate
Justice |
TERESITA J. LEONARDO-DE CASTRO Associate Justice |
|
LUCAS P. BERSAMIN
Associate Justice
ATTESTATION
I attest that the conclusions in the above Resolution
had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.
CONCHITA CARPIO MORALES
Associate Justice
Acting Chairperson
CERTIFICATION
RENATO
C. CORONA
Chief Justice
* Designated additional Member of the Special
Second Division, per Raffle dated
[1] Rollo, pp. 1504-1514.
[2]
[3]
[4]
[5]
[6]
[7]
[8] In a decision dated
[9] Section 3(f), Republic Act 8484.
[12]
See Advice on Wise Credit Card Use and Money Management, Business
Section of the
[14] 21 Ill.App.3d 605, 316 N.E.2d 209 (1974).
[15]
G.R. No. 152609,
[16] In Presta Oil, Inc. v. Van Waters & Rogers Corporation, the court
characterized the nature of this last contract, thus:
Credit
cards are more automatic in their operation than checks or notes, but courts
which have examined whether a credit card is legal tender have concluded that
it is not. Instead, these courts held that the debt incurred in a credit card
transaction is discharged when the merchant receives payment from the card
issuer.
276 F.Supp.2d 1128, (2003) citing Porter v. City of
[17] Katz v. Carte Blanche Corp., 496 F.2d 747 (3d Cir. 1974).
[18] 116 Ga.App. 114, 156 S.E.2d 818 (1967).
[19] 149 NJ Super 542, 374 A.2d 89 (1977), aff’d, 159 NJ Super. 400, 388 A.2d 264 (1978).
[20] 743 F.2d 10, 240 US.App.D.C. 10 (1984).
[21] See BPI Express v. CA, G.R. No. 120639,
September 25, 1998; Aznar v. Citibank,
G.R. No. 164273, March 28, 2007; Sps. Ermitano v. CA, G.R. No. 127246, April 21, 1999; Acol
v. Philippine Commercial Credit Card Incorporation,G.R.
No. 135149, July 25, 2006; Equitable
Banking Corporation v. Calderon, G.R.
No. 156168, December 14, 2004; Bankard
v. Feliciano, G.R. No. 141761, July
28, 2006.
[22] See BPI Express Card Corp. v. Olalia, 423 Phil. 593, 599 (2001).
[23] Polotan, Sr. vs. Court of Appeals, 296 SCRA 247, 255 [1998].
[24] Palmares vs. Court of Appeals, G.R. No. 126490, 288 SCRA 422, 433 (1998), citing Philippine Airlines vs. Court of Appeals, et al., G.R. No. 119706, 255 SCRA 48, 58 (1996).
[25] An offer is defined as “a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” Black’s Law Dictionary, 5th edition, p. 976.
[26]
See Selegna Management and Development Corporation v. UCPB, G.R. No.
165662,
[27] Black’s Law Dictionary, 5th ed., p. 386.
[28] Rollo, p. 1429.
[29]
[30]
See Makati Stock Exchange, Inc. v.
[31] RTC records, p. 893-894.
[32] Defined in Section 3 of RA 8484 as “any card, plate, code, account number, electronic serial number, personal identification number, or other telecommunications service, equipment, or instrumental identifier, or other means of account access that can be used to obtain money, goods, services, or any other thing of value or to initiate a transfer of funds (other than a transfer originated solely by paper instrument).”
[33] Credit card companies are required to provide information on the annual interest rates on the amount of credit obtained by the card holder, the annual membership fees, if any, the manner by which all charges and fees are computed, among others.
[34] Section 3 of
Republic Act No. 7653, or the New Central Bank Act, provides:
Section 3. Responsibility and Primary Objective. - The
Bangko Sentral shall provide policy directions in the areas of money, banking,
and credit. It shall have supervision over the operations of banks and exercise
such regulatory powers as provided in this Act and other pertinent laws over
the operations of finance companies and non-bank financial institutions
performing quasi-banking functions, hereafter referred to as quasi-banks, and
institutions performing similar functions.
The
primary objective of the Bangko Sentral is to maintain price stability
conducive to a balanced and sustainable growth of the economy. It shall also
promote and maintain monetary stability and the convertibility of the peso.
[35] Subsections X320.3 and 4301N.3 of BSP Circular No. 398.
[36]
[37]
[38]
G.R. No. 156841,
[39] Rollo, p. 50.
[40] Barons Marketing Corp. v. Court of Appeals, G.R. No. 126486, February 9, 1998, 286 SCRA 96, 105.
[41] RTC Records,
p. 210.
[42]
[43]
[44]
G.R. No. 96126,
[45] G.R. No. 154259,
[46] RTC records, pp. 1299-1300.
[47] See 17 C.J., 1125; Gilchrist v. Cuddy, 29 Phil. 542.
[48] G.R.
No. 120639,
[49] CIVIL CODE, Article 2232.
[50] Ibid. Article 2234.
[51]
[52] Article 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.
In all cases, the attorney’s fees and expenses of litigation must be reasonable.