CREDIT – Simple Loan or Mutuum – Credit Cards and Related Contracts to “any card x x x or other credit device existing

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.
[17] PANTALEON vs. AMERICAN EXPRESS INTERNATIONAL, INC.1 ○ This means that the consumer-credit arrangement that exists between the
629 SCRA 276 | 25 August 2010 | Brion, J. 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
SUMMARY: not exceed a specified limit.”
Pantaleons had a tour in Amsterdam. They visited a Coster Diamond House where they bought ■ The card holder is, therefore, given “the power to obtain present
diamonds worth US$13,826.00 using AMEX Credit Card. However, it took AMEX 78 minutes to control of goods or service on a promise to pay for them in the
approve the purchase. The Pantaleons filed an action for damages against AMEX. SC in its future.”
2009 Decision found that AMEX is guilty of mora solvendi, entitling Pantaleons to damages. In ○ Under the use of credit card facilities of a non-bank credit card company,
this case, w/c is a Motion for Reconsideration, SC reversed its earlier decision, and deleting all the establishments do not deposit in their bank accounts the credit card
damages it awarded. drafts that arise from the credit sales. Instead, they merely record their
receivables from the credit card company and periodically send the
PROVISIONS APPLICABLE: drafts evidencing those receivables to the latter. The credit card company,
Art. 19, Civil Code. Every person must, in the exercise of his rights and in the performance of in turn, sends checks as payment to these business establishments, but it
his duties, act with justice, give everyone his due, and observe honesty and good faith. does not redeem the drafts at full price
○ Every credit card transaction involves three contracts
Art. 21, Civil Code. Any person who wilfully causes loss or injury to another in manner that is ■ Sales contract between the credit card holder and the merchant
contrary to morals, good customs or public policy shall compensate the latter for the damage. or the business establishment which accepted the credit card
■ Loan agreement between the credit card issuer and the credit
Art. 1169, Civil Code. Those obliged to deliver or to do something incur in delay from the time card holder
the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. ■ Promise to pay between the credit card issuer and the merchant
or business establishment
However, the demand by the creditor shall not be necessary in order that delay may exist: ● [TWO VIEWS ON ISSUER AND CARDHOLDER RELATIONSHIP]
(1) When the obligation or the law expressly so declare; or 2 views on when relationship between issuer and cardholder begin
(2) When from the nature and the circumstances of the obligation it appears that the ○ 1) Each credit card transaction is considered a separate offer and
designation of the time when the thing is to be delivered or the service is to be acceptance, in which offer may be withdrawn at any time w/o constituting a
rendered was a controlling motive for the establishment of the contract; or breach; mere issuance of a credit card did not create a contractual
(3) When demand would be useless, as when the obligor has rendered it beyond his relationship with the cardholder
power to perform. ○ 2) Gray v. American Express Company: recognized the card membership
agreement itself as a binding contract between the credit card issuer
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready and the card holder
to comply in a proper manner with what is incumbent upon him. From the moment one of the ■ In PH jurisdiction, this ruling is generally adhered to:
parties fulfills his obligation, delay by the other begins. recognizing the relationship between the credit card issuer and
the credit card holder as a contractual one governed by the terms
DOCTRINE: and conditions found in the card membership agreement
1st -- Background on the nature of credit cards ● Note: Even if the card membership agreement is a
● [HISTORY] A credit card is defined as “any card, plate, coupon book, or other credit contract of adhesion, it is binding as ordinary contracts
device existing for the purpose of obtaining money, goods, property, labor or services because the party who adheres to the contract si free to
or anything of value on credit” reject it entirely.
○ Traces its roots to charged card – first introduced by Diners Club in New
York in 1950. American Express followed by having its own charged card in 2nd -- Limits in taking some time verifying the purchases made using a credit card
1958 ● Should not cause injury to clients and/or third persons
○ In the Philippines, now defunct Pacific Bank brought the first credit card ○ Art. 19: sets the standard for conduct of all persons, whether artificial or
into the country in 1970s. However, it was only in early 2000s that credit natural. Performance of obligations must (a) act with justice, (b) give
card use gained wide acceptance in the country everyone his due, and (c) observe honesty and good faith. Any person
● [NATURE] As held in CIR v American Express International, Inc., under RA 8484, the suffering damage from the exercise of right or performance of duty of
credit card that is issued by banks in general, or by non-banks in particular, refers another should find himself w/o relief.
○ ART 21: provides remedy for person injured by both willful and unlawful
1 act AND lawful act attended by abuse of right under Art. 19, an action for
We already discussed this case in Torts so I just edited some parts of the digest to highlight
the info relevant for credit. Thank you Jul for the original digest! damages.
 ● SC (2009 decision): AMEX was guilty of mora solvendi or debtors default bc
FACTS: AMEX as debtor had an obligation as the credit provider to act on Pantaleon’s
● American Express (AMEX): resident foreign corporation engaged in the business of purchase requests with timely dispatch which it failed to do
providing credit services through operation of a charge card system ○ Testimony of AMEX’s credit authorizer Edgardo Jaurique: approval time for
○ Pantaleon: AMEX cardholder since 1980 credit card charges is 3-4 seconds under regular circumstances but here, it
● October 1991: Pantaleon and his wife (Julialinda), daughter (Regina), and son (Adrian took AMEX 78 minutes to approve the Amsterdam purchase
Roberto), went on a guided European tour ○ The delay was attributed to AMEX Manila’s credit authorizer, Jaurique, who
○ October 25, 1991: tour group arrived in Amsterdam had to go over Pantaleons past credit history, his payment record and his
■ Arrived late thus postponed tour of the city for the following day credit and bank references before he approved the purchase
○ Next day: sightseeing at around 8:50 a.m. to the Coster Diamond House ● AMEX filed this MFR
(Coster) and planned to leave therefrom by 9:30 a.m. at the latest to ○ Thus this case
have enough time to take a guided city tour of Amsterdam before their
departure on that day PARTIES’ ARGUMENTS:
■ Mrs. Pantaleon decided to buy some diamond pieces worth ● AMEX’s arguments:
US$13,826.00 from Coster ○ Not guilty of culpable delay in complying with its obligation to act with timely
■ 9:15 a.m.: Pantaleon presented his AMEX credit card to pay and dispatch on Pantaleon’s purchases
the charge slip was electronically referred to AMEX’s ■ Pantaleon experienced delay in Amsterdam because his
Amsterdam office at 9:20 a.m. transaction was not a normal one: Previous purchases
■ 9:40 a.m.: Coster still did not receive approval from AMEX for exceeded this but only because they were made over 10 years;
the purchase so Pantaleon asked to cancel the sale but store now it was US$13,826.00 or P383,746.16 in a single transaction
manager convinced him to wait a few more minutes then told (biggest single purchase made by Pantaleon with AMEX
Pantaleon that AMEX was asking for bank references to which card).
Pantaleon answered by giving names of his PH depository banks ■ Required the credit authorizer to review his credit history and
■ 10:05a.m.: Coster decided to release the items to Pantaleon bank references – to ensure Pantaleon’s protection and protect
even without AMEXs approval since the bus could not leave self from risk that Pantaleon might not be able to pay, also in
without the Pantaleons keeping with extraordinary diligence required of banks in handling
● Their travel companions were irritated bc they had to transactions
cancel the tour due to lack of time [should be in Calais, ■ Delay not due to ill will, fraud, or negligence
Belgium by 3 p.m. to catch the ferry to London] ○ Proximate cause of Pantaleon’s humiliation and embarrassment: own
● In all, AMEX (from its branch in Amsterdam to its Manila branch and vice versa) decision to proceed with the purchase despite knowing the tour group was
took 78mins to approve Pantaleon’s purchase and transmit approval to the store waiting
● Pantaleon again experienced delay in securing approval for 2 purchases in the ● Pantaleon maintains that:
US: US$1,475.00 at the Richard Metz Golf Studio in New York and when he wanted ○ AMEX was guilty of mora solvendi (delay on the part of the debtor) in
to purchase children’s shoes worth US$87.00 at the Quiency Market in Boston complying with its obligation to him
● Pantaleon sent AMEX a letter demanding an apology for the humiliation and ■ Based on jurisprudence, just cause for delay does not relieve
inconvenience he and his family experienced due to the delays in obtaining the debtor in delay from the consequences of delay
approval for his credit card purchases ○ Bank’s duty to perform its obligation with extraordinary diligence includes
○ AMEX: explained that the delay in Amsterdam was bc the amount involved the timely or prompt performance of its obligation
(US$13,826.00) deviated from Pantaleon’s established charge ○ Evil motive or design not always necessary to support a finding of bad faith;
purchase pattern gross negligence or wanton disregard of contractual obligations is sufficient
● Pantaleon was dissatisfied with the explanation; filed an action for damages against basis for the award of moral and exemplary damages
the credit card company with the Makati City RTC
● RTC: AMEX guilty of delay; awarded Pantaleon moral damages (P500k), exemplary ISSUES/HOLDING/RATIO [Issues 1 to 3 are relevant] :
damages (P300k), attorney’s fees (P100k), and litigation expenses (P85.2k) 1. W/N AMEX has the obligation to approve all charge requests of Pantaleon -- NO
● CA: reversed the awards ● Although contractual relationship between issuer and cardholder is recognized upon
○ Recognized that delay in the nature of mora accipiendi or creditors default acceptance of cardholder of terms of the card membership agreement, this is to be
attended AMEXs approval of Pantaleon’s purchases, however, disagreed distinguished from the creditor-debtor relationship which only arises after the
that AMEX breached its contract, noting that the delay was not attended by credit card issuer has approved the cardholder’s purchase request
bad faith, malice or gross negligence ○ Contractual relationship merely pertains to agreement providing for credit
○ Pantaleon: questioned CA’s decision thru certiorari with SC facility to cardholder
 ■ In the card membership agreement, AMEX reserved its right to and (c) the creditor judicially or extrajudicially requires the debtors
deny authorization for any requested charge performance
○ Creditor-debtor relationship involves the actual credit on loan ○ First requisite not met because no demandable obligation to approve
agreement involving 3 contracts: sales contract, loan agreement, and Pantaleon’s purchase request: no obligation, no delay
promise to pay ■ Since use of a credit card to pay for a purchase is only an
■ Contractual relationship begins to exist only upon the meeting of offer to the credit card company to enter a loan agreement
the offer and acceptance of the parties involved: when with the credit card holder, before the credit card issuer
cardholders use their credit cards to pay for their purchases, accepts this offer; no obligation relating to the loan
they merely offer to enter into loan agreements with the agreement exists between them
credit card company and only after the latter approves the ■ No demand also bc it presupposes existence of an obligation
purchase requests that the parties enter into binding loan -- in the case of using a credit card, it is only an offer to enter into
contracts loan agreement and before the acceptance by the issuer, no
obligation exists between them
2. W/N AMEX has an obligation to act on the offer within a specific period of time -- NO
● Pantaleon says AMEX should act on his purchase requests in timely dispatch 4. [TORTS PART] W/N AMEX is liable for damages -- NO since (1) it had acted in good faith
because (1) his card has no pre-set spending limit and (2) in 12 yrs of using the card, and (2) his action was the proximate cause of his injury
his charges were approved in seconds ● Pantaleon argues: even if AMEX had a right to review his charge purchases, it
○ SC not convinced abused this right when it unreasonably delayed the processing of the purchases.
○ (1) Jaurigue: having no pre-set spending limit just means that the charges ○ It should have known that failure to act immediately on charge referrals
made by the cardholder are approved based on his ability to pay; still, every would be inconvenient and result to humiliation, anxiety, etc to cardholders,
time cardholder charges a purchase on the credit card, the company who would have had to wait
has to determine w/n it will allow the charge based on past credit ■ Claim for moral and exemplary damages is anchored upon
history this
■ Right to review a card holders credit history is a necessary ● SC says: Although it was established that AMEX had neither contractual nor legal
implication of AMEX’s right to deny authorization for any obligation to act w/in a specific period of time, AMEX does not have unlimited
requested charge right to put off action on cardholder’s purchase requests for indefinite periods of
○ (2) Although in previous experiences, requests were approved in seconds, time
practice or custom is not source of legally demandable or enforceable ○ See 2nd doctrine (regarding Arts. 19 & 21 of the Civil Code)
right ● (1) Although there was a significant lapse of time, AMEX acted in good faith;
● No provision in card membership agreement that obligates AMEX to act on ○ no evidence to suggest that it acted with deliberate intent to cause
cardholder purchase requests within specifically defined period of time nor is Pantaleon any loss or injury, or acted in a manner that was contrary to
there a law that obligates such (only requirement is to work under fair and sound morals, good customs or public policy.
consumer credit practices) ○ The review procedure (of charge purchases) was done to ensure
● Also, the State does not require credit card companies to act upon its Pantaleon’s own protection as a cardholder and to prevent the
cardholders’ purchase requests within a specific period of time possibility that the credit card was being fraudulently used by a third
○ Not in RA 8484 (Acess Devices Regulation Act of 1998), BSP Circular No. person; it was also natural for AMEX to want to ensure that it will extend
398, nor BSP Circular No. 454 credit only to people who will have sufficient means to pay for their
■ RA 8484: emphasizes the obligation on a credit card company to purchases
disclose certain important financial information to credit card ■ In this regard, AMEX did not violate any legal duty to
applicants, as well as a definition of the acts that constitute Pantaleon under the circumstances under the principle of
access device fraud. damnum absque injuria or damages without legal wrong, loss
■ BSP Circular no. 398: highlights that credit cards should be under without injury2
the conditions of “fair and sound consumer practices”
■ BSP Circular no. 454: merely enumerates the unfair collection 2
BPI Express Card v. CA: “[T]here can be damage without injury in those instances in which the
practices of credit card companies 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
3. W/N AMEX is guilty of delay – NOT guilty of culpable delay from an act which does not amount to a legal injury or wrong… [I]n order that a plaintiff may
● Since AMEX has no obligation to approve the purchase requests of its credit maintain an action for the injuries of which he complains, he must establish that such injuries
cardholders, Pantaleon cannot claim that AMEX defaulted in its obligation resulted from a breach of duty which the defendant owed to the plaintiff - a concurrence of injury
○ Under Art. 1169, there are 3 requisites for a finding of default: (a) that the to the plaintiff and legal responsibility by the person causing it. The underlying basis for the
obligation is demandable and liquidated; (b) the debtor delays performance; award of tort damages is the premise that an individual was injured in contemplation of law...”
 ● (2) Since Pantaleon’s action was the proximate cause of the injury, he has no
right to recover damages (based on Garciano v. CA -- “Art. 21 can only grant right to
recover damages to injured persons who are not at fault”)
○ Knew that they should leave by 9:30AM for the tour but only tried to cancel
the sale at 9:40AM and still agreed with the sale manager to wait for
more minutes for the credit card approval despite knowledge that he
already caused 10-minute delay
○ Nikko Hotel Manila Garden v. Reyes: 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.”
○ SC: doctrine is wholly applicable to this case
■ When Pantaleon decided to push through with his purchase,
he must have known that the group would become annoyed
and irritated with him for this was the natural, foreseeable
consequence of his decision to make them all wait

In sum (as regards the award of damages):

● No award of moral damages bc AMEX neither breached its contract with Pantaleon,
nor acted with culpable delay or the willful intent to cause harm
● No basis for award of exemplary damages
○ As a rule, it can only be awarded in contracts if a defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner and plaintiff
must 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
○ In this case, AMEX had legitimate concerns when it verified the purchase
made; no malicious intent was established
● No basis for the award of attorney’s fees and costs of litigation; did not show that he
falls under one of the instances enumerated in Article 2208 of the Civil Code

RULING:
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.