SPECIAL SECOND DIVISION

[G.R. No. 174269. August 25, 2010.]

POLO S. PANTALEON , petitioner, vs. AMERICAN EXPRESS

INTERNATIONAL, INC., respondent.

RESOLUTION

BRION, * J :
p

We resolve the motion for reconsideration filed by respondent

American Express International, Inc. (AMEX) dated June 8, 2009, 1 seeking to
reverse our Decision dated May 8, 2009 where we ruled that AMEX was
guilty of culpable delay in fulfilling its obligation to its cardholder —
petitioner Polo Pantaleon. Based on this conclusion, we held AMEX liable for
moral and exemplary damages, as well as attorney's fees and costs of
litigation. 2
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
(Regina), and son (Adrian Roberto) , went on a guided European tour. On
October 25, 1991, the tour group arrived in Amsterdam. Due to their late
arrival, they postponed the tour of the city for the following day. 4
The next day, the group began their sightseeing at around 8:50 a.m.
with a trip to the Coster Diamond House (Coster). To have enough time for
take a guided city tour of Amsterdam before their departure scheduled on
that day, the tour group planned to leave Coster by 9:30 a.m. at the
latest.
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 9:15 a.m. The sales clerk swiped the credit card and asked Pantaleon
to sign the charge slip, which was then electronically referred to AMEX's
Amsterdam office at 9:20 a.m. 5 TSaEcH

At around 9:40 a.m., Coster had not received approval from AMEX for
the purchase so Pantaleon asked the store clerk to cancel the sale. The store
manager, however, convinced Pantaleon to wait a few more minutes.
Subsequently, the store manager informed Pantaleon that AMEX was asking
for bank references; Pantaleon responded by giving the names of his
Philippine depository banks.
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 10:05 a.m. the purchased items to Pantaleon even without
AMEX's approval.
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 Calais, Belgium by 3 p.m. to catch the ferry to
London. 6
From the records, it appears that after Pantaleon's purchase was
transmitted for approval to AMEX's Amsterdam office at 9:20 a.m.; was
referred to AMEX's Manila office at 9:33 a.m.; and was approved by the
Manila office at 10:19 a.m. At 10:38 a.m., AMEX's Manila office finally
transmitted the Approval Code to AMEX's Amsterdam office. In all, it took
AMEX a total of 78 minutes to approve Pantaleon's purchase and to
transmit the approval to the jewelry store. 7
After the trip to Europe, the Pantaleon family proceeded to the United
States. Again, Pantaleon experienced delay in securing approval for
purchases using his American Express credit card on two separate occasions.
He experienced the first delay when he wanted to purchase golf equipment
in the amount of US$1,475.00 at the Richard Metz Golf Studio in New York on
October 30, 1991. Another delay occurred when he wanted to purchase
children's shoes worth US$87.00 at the Quiency Market in Boston on
November 3, 1991.
Upon return to Manila, Pantaleon sent AMEX a letter demanding an
apology for the humiliation and inconvenience he and his family experienced
due to the delays in obtaining approval for his credit card purchases. AMEX
responded by explaining that the delay in Amsterdam was due to the
amount involved — the charged purchase of US$13,826.00 deviated from
Pantaleon's established charge purchase pattern. Dissatisfied with this
explanation, Pantaleon filed an action for damages against the credit card
company with the Makati City Regional Trial Court (RTC).
On August 5, 1996, the RTC found AMEX guilty of delay, and awarded
Pantaleon 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. SaDICE

Pantaleon questioned this decision v i a a petition for review on

certiorari with this Court.
In our May 8, 2009 decision, we reversed the appellate court's decision
and held that AMEX was guilty of mora solvendi, or debtor's default. AMEX,
as debtor, had an obligation as the credit provider to act on Pantaleon's
purchase requests, whether to approve or disapprove them, with "timely
dispatch." Based on the evidence on record, we found that AMEX failed to
timely act on Pantaleon's purchases.
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 Amsterdam purchase. We attributed this delay to AMEX's
Manila credit authorizer, Edgardo Jaurique, who had to go over Pantaleon's
past credit history, his payment record and his credit and bank references
before he approved the purchase. Finding this delay unwarranted, we
reinstated the RTC decision and awarded Pantaleon moral and exemplary
damages, as well as attorney's fees and costs of litigation.
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 Amsterdam because his transaction was
not a normal one. To recall, Pantaleon sought to charge in a single
transaction jewelry items purchased from Coster in the total amount of
US$13,826.00 or 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 February 24, 2010, Pantaleon maintains that
AMEX was guilty of mora solvendi, or delay on the part of the debtor, in
complying with its obligation to him. Based on jurisprudence, a just cause for
delay does not relieve the debtor in delay from the consequences of delay;
thus, even if AMEX had a justifiable reason for the delay, this reason would
not relieve it from the liability arising from its failure to timely act on
Pantaleon's purchase. HESAIT

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 New York City in 1950. 10
American Express followed suit by introducing its own charge card to the
American market in 1958. 11 Â
In the Philippines, the now defunct Pacific Bank was responsible for
bringing the first credit card into the country in the 1970s. 12 However, it
was only in the early 2000s that credit card use gained wide acceptance in
the country, as evidenced by the surge in the number of credit card holders
then. 13
Nature of Credit Card Transactions
To better understand the dynamics involved in credit card transactions,
we turn to the United States case of Harris Trust & Savings Bank v. McCray
14 which explains:

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. . . . .
EcATDH

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 . . . or other
credit device existing for the purpose of obtaining . . . goods . . . or
services . . . 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
U.S. decision, held that:

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.
DcTAIH

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. HDIaET

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. Â 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. Â 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. . . . .

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.Â
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; . . .
an asking with authority, claiming or challenging as due." 27 A demand
presupposes the existence of an obligation between the parties. CHDaAE

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 United
States which took AMEX approximately 15 to 20 minutes to approve. This
conclusion appears valid and reasonable at first glance, comparing the time
it took to finally get the Coster purchase approved (a total of 78 minutes), to
AMEX's "normal" approval time of three to four seconds (based on the
testimony of Edgardo Jaurigue, as well as Pantaleon's previous experience).
We come to a different result, however, after a closer look at the factual and
legal circumstances of the case.
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
ICAcHE

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 February 11, 1998, is the controlling legislation 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 August 21, 2003
embodies the BSP's policy when it comes to credit cards —

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, ". . . [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 September 24, 2004, but this circular merely enumerates the
unfair collection practices of credit card companies — a matter not relevant
to the issue at hand.DaCTcA

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. Â 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. Â 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. CTDAaEÂ

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: Â With reference to the transaction at the Coster Diamond

House covered by Exhibit H, also Exhibit 4 for the defendant, the
approval came at 2:19 a.m. after the request was relayed at 1:33
a.m., can you explain why the approval came after about 46
minutes, more or less?

A21: Â 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 h i s 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. 41AHCcET

xxx xxx xxx

Q: Â Why did it take so long?

A: Â 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 . . . 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 t h a t "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 Amsterdam city tour. After thoroughly reviewing
the records of this case, we have come to the conclusion that Pantaleon is
the proximate cause for this embarrassment and humiliation.
As borne by the records, Pantaleon knew even before entering Coster
that the tour group would have to leave the store by 9:30 a.m. to have
enough time to take the city tour of Amsterdam before they left the country.
After 9:30 a.m., Pantaleon's son, who had boarded the bus ahead of his
family, returned to the store to inform his family that they were the only
ones not on the bus and that the entire tour group was waiting for them.
Significantly, Pantaleon tried to cancel the sale at 9:40 a.m. because
he did not want to cause any inconvenience to the tour group.
However, when Coster's sale manager asked him to wait a few more minutes
for the credit card approval, he agreed, despite the knowledge that he had
already caused a 10-minute delay and that the city tour could not start
without him.
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:
DaAETS

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 Amsterdam. We have to acknowledge, however, that
Pantaleon was not a helpless victim in this scenario — at any time, he could
have cancelled the sale so that the group could go on with the city tour. But
he did not.
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 DECSIT

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.Â
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. HTcDEa

WHEREFORE, premises considered, we SET ASIDE our May 8, 2009

Decision and GRANT the present motion for reconsideration. The Court of
Appeals Decision dated August 18, 2006 is hereby AFFIRMED. No costs.
SO ORDERED.
Carpio Morales, Velasco, Jr., Leonardo-de Castro and Bersamin, JJ.,
concur.
Â
Footnotes

*Designated additional Member of the Special Second Division, per Raffle dated
August 10, 2010.Â

1.Rollo, pp. 1504-1514.

2.Id. at 1488-1503.

3.Id. at 14-15.

4.Id. at 735-736.

5.Id. at 739-749.

6.Id. at 20-21.

7.Id., citing defendant's Exhibit "9-G," "9-H," and "9-I."

8.In a decision dated August 18, 2006 penned by Associate Justice E. J. Asuncion,
with the concurrence of Associate Justices J. Mendoza and A. Tayag.

9.Section 3 (f), Republic Act 8484.

10.See M.J. Stephey, A Brief History of: Credit Cards, TIME Magazine, April 23,
2009, http://www.time.com/time/magazine/article/0,9171,1893507,00.html.

11.http://home3.americanexpress.com/corp/os/history.asp.
12.See Advice on Wise Credit Card Use and Money Management, Business Section
of the February 9, 2009 issue of the Philippine Star,
http://www.philstar.com/Article.aspx?articleid=438524.

13.http://www.economywatch.com/credit-card/international/philippines-credit-
cards.html.

14.21 Ill.App.3d 605, 316 N.E.2d 209 (1974).

15.G.R. No. 152609, June 29, 2005, 462 SCRA 197.

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 Atlanta, 259 Ga. 526, 384
S.E.2d 631, 634 (1989), cert denied *1137, 494 U.S. 1004, 110 S.Ct. 1297,
108 L.Ed.2d 474 (1990); Berry v. Hannigan, 7 Cal.App.4th 587, 9 Cal.Rptr.2d
213, 215 (1992), rev. denied Sept. 02, 1992; Cade v. Montgomery Co., 83
Md.App. 419, 575 A.2d 744, 749 (1990), rev. denied Aug. 30, 1990, cert
denied 498 U.S. 1085, 111 S.Ct. 960, 112 L.Ed.2d 1047 (1991).

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, May 3, 2006.

27.Black's Law Dictionary, 5th ed., p. 386.

28.Rollo, p. 1429.

29.Id. at 210.

30.See Makati Stock Exchange, Inc. v. Campos, G.R. No. 138814, April 16, 2009.

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.Albano, Ed Vincent. Persons and Family Relations, 3rd Edition, 2006, p. 66,
citing the Report of the Code Commission, p. 39.

37.Id. at 67.

38.G.R. No. 156841, June 30, 2005, 462 SCRA 466.

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.Id. at 1064.
43.Id. at 1074.

44.G.R. No. 96126, August 10, 1992, citing Mabutas v. Calapan Electric Co. [CA], 50
O.G. 5828 (cited in Padilla, Civil Code Annotated, Vol. 1, 1975 ed., p. 87).

45.G.R. No. 154259, February 28, 2005.

46.RTC records, pp. 1299-1300.

47.See 17 C.J., 1125; Gilchrist v. Cuddy, 29 Phil. 542.

48.G.R. No. 120639, September 25, 1998.

49.CIVIL CODE, Article 2232.

50.Ibid. Article 2234.

51.Tanay Recreation Center and Development Corp. v. Fausto, 495 Phil. 400
(2005).

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.