Showing posts with label Credit Transactions - Simple Loan. Show all posts
Showing posts with label Credit Transactions - Simple Loan. Show all posts

CREDIT TRANSACTIONS - SIMPLE LOAN

 Georgia Osmeña-Jalandoni v. Encomienda

G.R. No. 205578, March 1, 2017

Peralta, J.

Doctrine: The existence of a contract of loan cannot be denied merely because it was

not reduced in writing. Surely, there can be a verbal loan. Contracts are binding

between the parties, whether oral or written. The law is explicit that contracts shall be

obligatory in whatever form they may have been entered into, provided all the essential

requisites for their validity are present. A simple loan or mutuum exists when a person

receives a loan of money or any other fungible thing and acquires its ownership. He is

bound to pay to the creditor the equal amount of the same kind and quality.


Facts:

Encomienda met petitioner Georgia Osmeña-Jalandoni and became close friends.

Jalandoni called Encomienda to ask if she could borrow money for the search and

rescue operation of her children in Manila who were allegedly taken by their father.

Encomienda went to the house of Jalandoni and handed P100,000 in a sealed

envelope to the petitioner's security guard. Subsequently, Jalandoni borrowed money

from Encomienda for other errands, such as electric bills, cable bills, water bills,

plane fare, et al. which amounted to P3,245,836.02 and $6,638.20. Encomienda then

gave Jalandoni six weeks to settle her debts. Despite several demands, no payment

was made. When they had to appear before the Baranggay Conciliation, no

settlement was reached. Hence, Encomienda filed a complaint. She impleaded

Jalandoni’s husband, Luis, as a necessary party.

Jalandoni insisted that the amounts given were not in the form of loans. She further

claimed that there was never a discussion or even just an allusion about a loan. She

confirmed that Encomienda would indeed deposit money in her bank account and pay

her bills in Cebu. But when asked, Encomienda would tell her that she just wanted to

extend some help and that it was not a loan. The RTC of Cebu City dismissed

Encomienda's complaint. On appeal to the CA, the CA granted the appeal andreversed

the RTC decision. Jalandoni filed a motion for reconsideration, but the same was

denied. Hence, this petition.


Issue:

Can there be a verbal contract of loan?

Ruling:

Yes there can be a verbal contract of loan.

In a similar case, the Court upheld the CA' s pronouncement that the existence of

a contract of loan cannot be denied merely because it was not reduced in writing.

Surely, there can be a verbal loan. Contracts are binding between the parties,

whether oral or written. The law is explicit that contracts shall be obligatory in

whatever form they may have been entered into, provided all the essential

requisites for their validity are present. A simple loan or mutuum exists when a

person receives a loan of money or any other fungible thing and acquires its

ownership. He is bound to pay to the creditor the equal amount of the same kind

and quality.

Furthermore, Jalandoni posits that the more logical reason behind the

disbursements would be what Encomienda candidly told the trial court, that her

acts were plainly an "unselfish display of Christian help" and done out of

"genuine concern for Georgia's children." However, the "display of Christian help"

is not inconsistent with the existence of a loan. Encomienda immediately offered

a helping hand when a friend asked for it. But this does not mean that she had

already waived her right to collect in the future. Indeed, when Encomienda felt

that Jalandoni was beginning to avoid her, that was when she realized that she

had to protect her right to demand payment. The fact that Encomienda kept the

receipts even for the smallest amounts she had advanced, repeatedly sent

demand letters, and immediately filed the instant case when Jalandoni stubbornly

refused to heed her demands sufficiently disproves the latter’s belief that all the

sums of money she received were merely given out of charity.



Philippine National Bank v. James T. Cua

G.R. No. 199161, April 18, 2018

Martires, J.

Doctrine: A promissory note is the best evidence to prove the existence of the loan.

Facts:

Respondent, in a complaint, averred that he and his brother, Antonio Cua, maintained

a US Dollar Savings Time Deposit with PNC, evidenced by a Certificate of Time

Deposit. James continued that he and Antonio had the practice of pre-signing loan

application documents with PNB for the purpose of having a standby loan or ready

money available anytime. Thereafter, James learned that he had a loan obligation

with PNB which had allegedly become due and demandable. He maintained that

although he had pre-signed loan documents, he had never availed of its proceeds. To

see if his dollar time deposit was still existing and in order to revive his cashstrapped

machine shop business, James requested from PNB the release of

₱500,000.00 to be secured by the Certificate of Time Deposit. PNB rejected his loan

application. After demanding the reason for its refusal, PNB explained that his dollar

time deposit had been applied in payment to the loans he had with the bank, in

accordance with the loan application and other documents he had executed.

Thereafter, James demanded the release of his entire dollar time deposit asserting

that he never made use of any loan amount from his pre-arranged loan from the time

he was issued the Certificate of Time Deposit, and that it was only in 2004 that he

requested the release of its proceeds. PNB failed to heed his demand, thus, James

filed a complaint for sum of money.

The RTC ruled in favor of Jame. It explained that the burden of proof shifted from

James to PNB when the latter asserted that the loan proceeds were released to James

and, thus, PNB properly applied his time deposit as payment of his unpaid loan in

accordance with the provisions of the promissory note. PNB, however, failed to

substantiate such assertion.

On appeal, the CA concurred with the trial court that the burden of proof shifted to

PNB and that the latter failed to substantiate its claims.


Issue:

Did the PNB sufficiently established James’ receipt of the loan proceeds?

Ruling:

Yes. The Supreme Court cited the case of Pentacapital Investment Corporation v

Mahinay, which ruled that “a promissory note is a solemn acknowledgement of a

debt and a formal commitment to repay it on the date and under the conditions

agreed upon by the borrower and the lender. A person who signs such an

instrument is bound to honor it as a legitimate obligation duly assumed by him

through the signature he affixes thereto as a taken of his good faith.”

In the present case, James does not deny that he executed several promissory

notes in favor of PNB. In fact, during the pre-trial, as well as in his Comment to

PNB’s formal offer of documentary evidence, James admitted the genuineness of

his signatures as appearing on several promissory notes, albeit with the caveat

that the same were pre-signed for pre-arranged loans which he allegedly never

availed of. Similarly, by affixing his signature on the promissory note, which

contained the words “FOR VALUE RECEIVED,” James acknowledged receipt of the

proceeds of the loan in the stated amount and committed to pay the same under

the conditions stated therein. As a businessman, James could not pretend not to

understand the contents of the promissory note he signed. He certainly

understood the import and was fully aware of the consequences of signing a

promissory note. Hence, the Court ruled that PNB sufficiently established that

James received the proceeds of the loan.


SIMPLE LOAN OR MUTUUM:

PROOF AND NATURE OF LOAN

SIMPLE LOAN OR MUTUUM:

PROOF AND NATURE OF LOAN


Chee Kiong Yam v. Malik

G.R. Nos. L-50550-52. October 31,1979.

Abad Santos, J.

Doctrine: In a simple loan the borrower acquired ownership of the money, goods or

personal property borrowed. Being the owner, the borrower can dispose of the thing

borrowed and his act will not be considered misappropriation.

Facts:

This is a petition for certiorari, prohibition, and mandamus with preliminary

injunction. Petitioners alleged that respondent Municipal Judge Nabdar Malik acted

without jurisdiction, in excess of jurisdiction and with grave abuse of discretion.

Respondent is said to have acted without jurisdiction because the facts recited in the

complaints, where he decided that there was a prima facie case against the

petitioners, did not constitute the crime of estafa and they were not within the

jurisdiction of the respondent judge.

In Criminal Case No. M-111, respondent Amin charges petitioners with estafa through

misappropriation of the amount of P50,000 but the complaint states on its face that

said petitioners received the amount from respondent “as a loan.”

In Criminal Case No. M-183, respondent Kao charges petitions with estafa through

misappropriation of the amount of P30,000 which also states that the sum was “a

simple loan.” This is also true in Criminal Case No. M-208.

Issue:

Do the facts alleged in the three criminal complaints constitute estafa through

misappropriation?

Ruling:

No. The facts alleged in the complaints do not constitute estafa through

misappropriation.


Art. 1933. — By the contract of loan, one of the parties delivers to another, either

something not consumable so that the latter may use the same for a certain time and

return it, in which case the contract is called a commodatum; or money or other

consumable thing, upon the condition that the same amount of the same kind and

quality shall be paid, in which case the contract is simply

called a loan or mutuum.

Commodatum is essentially gratuitous. A simple loan may be gratuitous or with a

stipulation to pay interest. In commodatum the bailor retains the ownership of the

thing loaned, while in simple loan, ownership passes to the borrower."

In order to be convicted of estafa through misappropriation, it must be proven

that he has the obligation to deliver or return the same money, goods or personal

property that he received. Petitioners had no such obligation to return the money.

This is because as clearly stated in the criminal complaints the sum of money

that petitioners received were loans. Being the owner, the borrower can dispose

of the thing borrowed and his act will not be considered misappropriation.


Patrimonio v. Gutierrez

G.R. No. 187769. June 4, 2014

Brion, J.

Doctrine: A contract of loan cannot be presumed. Without any evidence to prove

authority, a signature in the check cannot be taken as sufficient authorization or

consent to a contract of loan.

Facts:

Alvin Patrimonio and Napoleon Gutierrez entered into a business venture under the

name of Slam Dunk Corporation (Slum Dunk), a production outfit that produced

mini-concerts and shows related to basketball. Petitioner was already a decorated

professional basketball player while Gutierrez was a well-known sports columnist.

In the course of their business, the Patrimonio pre-signed several checks to answer

for the expenses of Slam Dunk. Although signed, these checks had no payee’s name,

date, or amount. The blank checks were entrusted to Gutierrez with the specific

instruction not to fill them out without previous notification to and approval by the

petitioner. According to Patrimonio, the arrangement was made so that he could

verify the validity of the payment and make the proper arrangements to fund the

account.

In the middle of 1993, without the petitioner’s knowledge and consent, Gutierrez

went to Marasigan (Patrimonio’s former teammate), to secure a loan in the amount of

₱200,000.00 on the excuse that Patrimonio needed the money for the construction of

his house. After much contemplation and considering his relationship with

Patrimonio and Gutierrez, Marasigan acceded to Gutierrez’ request and gave him

₱200,000.00 sometime in February 1994. Gutierrez simultaneously delivered to

Marasigan one of the blank checks the petitioner pre-signed with Pilipinas Bank,

Greenhills Branch, Check No. 21001764 with the blank portions filled out with the

words "Cash" "Two Hundred Thousand Pesos Only", and the amount of "₱200,000.00".

The upper right portion of the check corresponding to the date was also filled out

with the words "May 23, 1994" but the petitioner contended that the same was not

written by Gutierrez.

On May 24, 1994, Marasigan deposited the check, but it was dishonored for the

reason "ACCOUNT CLOSED." It was later revealed that the petitioner's account with

the bank had been closed since May 28, 1993. Marasigan sought recovery from

Gutierrez, to no avail. He thereafter sent several demand letters to Patrimonio

asking for the payment of ₱200,000.00, but his demands likewise went unheeded.

Consequently, he filed a criminal case for violation of B.P. 22 against Patrimonio.

On September 10, 1997, Patrimonio filed before the Regional Trial Court (RTC) a

Complaint for Declaration of Nullity of Loan and Recovery of Damages against

Gutierrez and co-respondent Marasigan. He completely denied authorizing the

loan or the check’s negotiation and asserted that he was not privy to the parties’

loan agreement. Only Marasigan filed his answer to the complaint. In the RTC’s

order dated December 22, 1997, Gutierrez was declared in default.

Petitioner avers that there was no loan between him and Marasigan since he

never authorized the borrowing of money nor the check’s negotiation to the

latter. Respondent submits that the petitioner’s act of pre-signing blank checks

and releasing them to Gutierrez suffice to establish that the petitioner had

authorized him to fill them out and contract the loan.

Issue:

May the contract of loan granted by Marasigan to Patriminio, through Gutierrez,

be nullified for being void?

Ruling:

Yes. The Contract of Loan entered into by Gutierrez on behalf of the petitioner

should be nullified for being void and the petitioner is not bound by the contract

of loan.

Article 1318 of the Civil Code enumerates the essential requisites for a valid

contract, namely:

1. Consent of the contracting parties;

2. Object certain which is the subject matter of the contract; and

3. Cause of the obligation which is established.

Art. 1878. Special powers of Attorney are necessary in the following cases: (7). To

loan or borrow money, unless the latter act be urgent and indispensable for the

preservation of the thing which are under administration.

The records reveal that Gutierrez did not have any authority to borrow money on

behalf of the petitioner because it does not show that the petitioner executed

any special power of attorney in favor of Gutierrez. Since there was no authority,

there was no contract because the consent of a contracting party is an essential

requisite of a valid contract. The petitioner entrusting the blank pre-signed

checks to Gutierrez is not legally sufficient because the authority to enter into a

loan cannot be presumed. Without the consent given by one party in a purported

contract, such contract could not have been perfected.

The contract of loan is not binding against the petitioner because Gutierrez had

no authority or special power of attorney to enter into such contract. A contract

of loan cannot be presumed. Without any evidence to prove authority, a signature

in the check cannot be taken as sufficient authorization or consent to a contract

of loan.



The Metropolitan Bank and Trust Co. v. Rosales

G.R. No. 183204, January 13, 2014

Del Castillo, J.

Doctrine: Bank deposits, which are in the nature of a simple loan or mutuum, must be

paid upon demand by the depositor.

Facts:

Respondents Ana Grace Rosales and Yo Yuk To opened a joint peso account with

petitioner’s Pritil-Tondo branch. Thereafter, Rosales accompanied Liu Chiu Fang, a

Taiwanese national, in applying for a retiree’s visa from the Philippine Leisure and

Retirement Authority (PLRA), to petitioner’s Escolta branch to open a savings

account. On another date, respondents opened with the petitioner's Pritil-Tondo

branch a joint dollar account. Months later, the petitioner issued a “Hold Out” order

against respondents’ accounts. After the issuance of the same, the petitioner filed a

criminal action for estafa against Rosales for the alleged unauthorized and

fraudulent withdrawal of US$75,000.00 from Liu Chiu Fang’s dollar account.

However, the prosecutor dismissed the case for lack of probable cause. As such, the

petitioner moved for reconsideration. Almost a year later, respondents filed a

complaint for breach of contract with damages against the petitioner before the trial

court. Respondents alleged that they attempted several times to withdraw their

deposits but were unable to because the petitioner had placed their accounts under

"Hold Out" status. Meanwhile, petitioner countered that respondents have no cause

of action because it has a valid reason for issuing the "Hold Out" order. It argued that

due to the fraudulent scheme of Rosales, it was compelled to reimburse Liu Chiu

Fang the amount of US$75,000.00 and to file a criminal complaint for estafa against

the latter. During the pendency of the case, the prosecutor reversed the dismissal of

the criminal complaint. Thus, an information for estafa was filed against Rosales

before the trial. With regard to the civil case, the trial court found the petitioner

liable for damages for breach of contract. It ruled that it is the duty of petitioner to

release the deposit to respondents as the act of withdrawal of a bank deposit is an

act of demand by the creditor. On appeal, the CA affirmed the decision of the trial

court.


Issue:

(1) Can the “Hold Out” clause in the application and agreement for deposit

account be applied in this case?

(2) Is the petitioner liable for breach of contract when it refused to release

respondents’ deposit despite demand; and thus, liable for damages?

Ruling:

(1) No, the “Hold Out” clause cannot be applied in this case. The “Hold Out”

clause in the application and agreement for deposit account provides that: “A

bank is authorized to withhold as security, for any and all obligations with the

bank, all monies, properties or securities of the depositor x x x for so much

thereof as will be sufficient to pay any or all obligations incurred by depositor

under the account or by reason of any other transactions between the same

parties, x x x to sell in any public or private sale any of such properties or

securities of depositor, and to apply the proceeds to the payment of any

depositor’s obligations heretofore mentioned.” Further, “The bank may, at any

time in its discretion and with or without notice to all of the depositors,

assert a lien on any balance of the account and apply all or any part thereof

against any indebtedness, matured or unmatured, that may then be owing to

the bank by any or all of the depositors.”

The "Hold Out" clause applies only if there is a valid and existing obligation

arising from any of the sources of obligation enumerated in Article 1157 of

the Civil Code. In this case, petitioner failed to show that respondents have an

obligation to it under any law, contract, quasi-contract, delict, or quasi-delict.

And although a criminal case was filed by petitioner against Rosales, this is

not enough reason for petitioner to issue a "Hold Out" order as the case is

still pending and no final judgment of conviction has been rendered against

Rosales. In fact, at the time the petitioner issued the "Hold Out" order, the

criminal complaint had not yet been filed. Considering that Rosales is not

liable under any of the five sources of obligation, there was no legal basis for

petitioner to issue the "Hold Out" order. Hence, the "Hold Out" clause cannot

be applied in this case.


(2) Yes, the petitioner is liable for breach of contract when it refused to

release respondents’ deposit despite demand; and thus, liable for damages.

Under Article 2229 of the Civil Code, exemplary or corrective damages are

imposed, by way of example or correction for the public good, in addition to

the moral, temperate, liquidated or compensatory damages. In this case, the

petitioner acted in a wanton, fraudulent, reckless, oppressive or malevolent

manner when it refused to release the deposits of respondents without any

legal basis. Since the banking industry is impressed with public interest, the

petitioner must treat the accounts of its depositors with meticulous care and

always to have in mind the fiduciary nature of its relationship with them. For

failing to do this, an award of exemplary damages is justified. In relation to

this, under Article 2208, paragraph 1, of the same, in the absence of

stipulation, attorney's fees and expenses of litigation, other than judicial

costs, cannot be recovered, except when exemplary damages are awarded. In

this case, the award of exemplary damages is justified. As such, the award of

attorney’s fees is likewise proper. Hence, the petitioner is liable for breach of

contract when it refused to release respondents’ deposit despite demand; and

thus, liable for damages.



Guingona v. City Fiscal of Manila

G.R. No. L-60033, April 4, 1984

Del Castillo, J.

Doctrine: Article 1980 of the Civil Code provides that "fixed, savings, and current

deposits of money in banks and similar institutions shall be governed by the provisions

concerning simple loan."

Facts:

Private respondent Clement David invested several time and savings account

deposits with the Nation Savings and Loan Association (NSLA) jointly with his sister,

Denise Kuhne. He alleged that he was induced into making such investments by a

close associate of petitioners Guingona Jr., Martin and Santos, who are NSLA

officials. When NSLA was placed under receivership by the Central Bank, private

respondent David filed claims for his investments. Private respondent David then

learned that only a portion of his investments were entered in the records of NSLA.

Thus, he charged petitioners with estafa, among others. Petitioners moved to dismiss

the charges against them for lack of jurisdiction because David's claims allegedly

comprised a purely civil obligation. However, the motion was denied. After the

presentation of private respondent's principal witness, petitioners sought to prohibit

public respondents from proceeding with the preliminary investigation of the case on

the ground, among others, that the production of the Promissory Notes, Banker's

Acceptance, Certificates of Time Deposits and Savings Account allegedly showed that

the transactions between David and NSLA were simple loans, i.e., civil obligations on

the part of NSLA.

Issue:

(1) Are the transactions between private respondent and NSLA simple loans?

(2) Are petitioners criminally liable for failure to return the same money invested

by private respondent?

Ruling:

(1) Yes. Article 1980 of the New Civil Code provides that:

"Article 1980. Fixed, savings, and current deposits of money in banks and similar

institutions shall be governed by the provisions concerning simple loan."

Moreover, in the case of Serrano vs. Central Bank of the Philippines, the Court

ruled that "bank deposits are in the nature of irregular deposits. They are

really loans because they earn interest. All kinds of bank deposits, whether

fixed, savings, or current are to be treated as loans and are to be covered by

the law on loans. Current and savings deposits are loans to a bank because it

can use the same. x x x Thus, failure of the respondent Bank to honor the time

deposit is failure to pay its obligation as a debtor and not a breach of trust

arising from a depository's failure to return the subject matter of the deposit"

In the case, when private respondent David invested his money on time and

savings deposits with NSLA, the contract that was perfected was a contract of

simple loan or mutuum and not a contract of deposit. Hence, the relationship

between the private respondent and NSLA is that of creditor and debtor;

consequently, the ownership of the amount deposited was transmitted to the

Bank upon the perfection of the contract and it can make use of the amount

deposited for its banking operations, such as to pay interests on deposits and

to pay withdrawals. While the Bank has the obligation to return the amount

deposited, it has, however, no obligation to return or deliver the same money

that was deposited. Thus, the failure of the Bank to return the amount

deposited will not constitute estafa through misappropriation punishable

under Article 315, par. 1(b) of the Revised Penal Code, but it will only give

rise to civil liability over which the public respondents have no jurisdiction.

(2) No. "'Art. 1933 of the Civil Code provides:

Art. 1933 - By the contract of loan, one of the parties delivers to another, either

something not consumable so that the latter may use the same for a certain time

and return it, in which case the contract is called a commodatum; or money or

other consumable thing, upon the condition that the same amount of the same

kind and quality shall be paid in which case the contract is simply called a loan

or mutuum.

"'Commodatum is essentially gratuitous.

"'Simple loan may be gratuitous or with a stipulation to pay interest.

"'In commodatum the bailor retains the ownership of the thing loaned, while

in simple loan, ownership passes to the borrower.

Moreover, Article 1953 of the same Code provides:

"'Art. 1953. — A person who receives a loan of money or any other fungible

thing acquires the ownership thereof, and is bound to pay to the creditor an

equal amount of the same kind and quality.'

Thus, in simple loan (mutuum), as contrasted to commodatum, the

borrower acquires ownership of the money, goods or personal property

borrowed. Being the owner, the borrower can dispose of the thing

borrowed and his act will not be considered misappropriation thereof

In the case, petitioners had no such obligation to return the same money,

i.e., the bills or coins, which they received from private respondents. This

is so because as clearly stated in criminal complaints, the related civil

complaints and the supporting sworn statements, the sums of money that

petitioners received were loans. Therefore, since petitioners have become

owners of said money and consequently, cannot be considered to have

misappropriated such money, petitioners cannot be held criminally liable.



People v. Jose C. Go, et. al.

G.R. No. 19105, August 6, 2014

Del Castillo, J.

Doctrine: Banking laws impose high standards on banks in view of the fiduciary nature

of banking.

Facts:

On Oct. 14, 1998, the Monetary Board of the BSP issued Resol. No. 1427 ordering the

closure of the Orient Commercial Banking Corporation (OCBC) and placing such bank

under the receivership of the PDIC, and the latter effectively took charge of OCBC’s

assets and liabilities. PDIC began collecting on OCBC’s past due loans receivable by

sending demand letters to its borrowers for the immediate settlement of their

outstanding loans. Among these borrowers are Timmy’s, Inc. and Asia Textile Mills,

Inc. which appeared to have obtained a loan of P10 Million each. A representative of

Timmy’s, Inc. denied being granted any loan by OCBC and insisted that the signatures

on the loan documents were falsified. A representative of Asia Textile Mills denied

having applied, much less being granted a loan by OCBC. The PDIC then conducted

an investigation and allegedly came out with the finding that the loans were

released in the form of manager’s checks in the name of Philippine Recycler’s and

Zeta International, Inc. These manager’s checks were then allegedly deposited to the

savings account of the private respondent with OCBC and then were automatically

transferred to his current account in order to fund personal checks issued by him

earlier. The PDIC then filed a complaint for 2 counts of Estafa through Falsification

of Commercial Documents against the private respondents and two Informations

were filed in the RTC in Manila. After the presentation of the prosecution’s evidence,

the private respondents filed a Motion for Leave to File Demurrer to Evidence, which

was granted by the RTC judge and thus, the criminal cases were dismissed and all of

the accused were acquitted.

Issue:

(1) Did Go and the other respondents, officers of OCBC, commit estafa and

falsification in this case? If yes, would this render the loan as fictitious?

(2) Who is the owner of the encashed money when OCBC received such in its

fiduciary capacity?

Ruling:

(1) Yes, there was Estafa and falsification in the instant case, and there was

grave abuse of discretion on the part of the trial court when it granted the

accused’s demurrer to evidence. The consequent order of acquittal is void.

The contract between the bank and its depositor is governed by the provisions

of the Civil Code on simple loan. Art. 1980 of the Civil Code expressly

provides that “x x x savings x x x deposits of money in banks and similar

institutions shall be governed by the provisions concerning simple loan.”

There is a debtor-creditor relationship between the bank and its depositor.

The bank is the debtor and the depositor is the creditor. The depositor lends

the bank money and the bank agrees to pay the depositor on demand. The

evidence strongly indicates that Go converted OCBC funds to his own personal

use and benefit when the two manager’s checks were encashed and deposited

in his Savings Account and then transferred to his Current Account to fund his

seven previously-issued personal checks.

In the instant case, there was a simulation of OCBC loan documents such as

loan applications, credit approval memorandums, and the resultant promissory

notes and other credit documents by causing it to appear that persons have

participated in any act or proceeding when they did not in fact so participate,

and by counterfeiting or imitating their handwriting or signatures constitute

falsification of commercial and public documents. Dela Rosa’s involvement, as

OCBC SVP and COO and member of the OCBC Loan Committee, was shown

when she approved the purported Timmy’s Inc. loan and likewise gave specific

instructions to deposit the proceeds of the manager’s checks in Go’s OCBC

Savings Account. On the other hand, Nicomedes as OCBC Senior Manager for

Corporate Accounts Account Management Group, prepared the Credit Approval

Memorandum and recommended the approval of the loans.

The OCBC funds ended up in the personal bank accounts of Go, and were

used to fund his personal checks, even as he was not entitled thereto.

These, if not rebutted, are indicative of estafa.

(2) The true owner of such money is the person who deposited such

money. As may be seen from the ruling in Soriano v. People, where it was

stated that the bank money which came to the possession of petitioner

was money held in trust or administration by him for the bank, in his

fiduciary capacity as the President of said bank. It is not accurate to say

that petitioner became the owner of the money because it was the

proceeds of a loan.

Similarly, in the instant case, the loans were fraudulently made to appear

that they were for Timmy’s, Inc. and Asia Textile Mills, Inc. when in fact,

such entities did not apply or receive any of the loans. Thus, respondents

remained the bank’s fiduciary with respect to that money, which makes it

capable of misappropriation or conversion in their hands.



Bank of the Philippine Islands v. Court of Appeals

G.R No. 136202, January 25, 2007

AZCUNA, J.

Doctrine: A bank generally has a right of set-off over the deposits therein for the

payment of any withdrawals on the part of a depositor. The right of a collecting bank to

debit a client's account for the value of a dishonored check that has previously been

credited has fairly been established by jurisprudence. To begin with, Article 1980 of the

Civil Code provides that "fixed, savings, and current deposits of money in banks and

similar institutions shall be governed by the provisions concerning simple loan."

However, the issue of whether it acted judiciously is an entirely different matter.

Facts:

A.A. Salazar Construction and Engineering Services filed an action for a sum of

money with damages against petitioner Bank of the Philippine Islands before the

Regional Trial Court. Salazar prayed for the recovery of the amount of P267,707.70

debited by petitioner BPI from her account. She likewise prayed for damages and

attorney's fees.

Petitioner BPI alleged that Julio R. Templonuevo demanded from the former payment

of the amount of Two Hundred Sixty-Seven Thousand, Six Hundred Ninety-Two Pesos

and Fifty Centavos (P267,692.50) representing the aggregate value of three (3)

checks, which were allegedly payable to him, but which were deposited with the

petitioner bank to private respondent Salazar's account (Account No. 0203-1187-67)

without his knowledge and corresponding endorsement.

Petitioner BPI froze Account No. 0201-0588-48 of A.A. Salazar and Construction and

Engineering Services, instead of Account No. 0203-1187-67 where the checks were

deposited, since this account was already closed by private respondent Salazar or

had an insufficient balance.

As it appeared that Salazar was not entitled to the checks, petitioner BPI decided to

debit the amount of P267,707.70 from her Account No. 0201-0588-48 and the sum of

P267,692.50 was paid to Templonuevo by means of a cashier's check, the difference of

which represents the bank charges in connection with the issuance of a cashier's check

to Templonuevo.

After trial, the RTC rendered a decision in favor of the private respondent Salazar

and against the petitioner BPI and ordering the latter to pay. On appeal, the Court

of Appeals (CA) affirmed the decision of the RTC

Issue:

(1) Does a collecting bank, over the objections of its depositor, have the

authority to withdraw unilaterally from such depositor's account the amount it

had previously paid upon certain unendorsed order instruments deposited by

the depositor to another account that she later closed?

(2) Did the bank act judiciously in exercising its right to set-off?

Ruling:

(1) Yes, a bank generally has a right of set-off over the deposits therein for

the payment of any withdrawals on the part of a depositor. The right of a

collecting bank to debit a client's account for the value of a dishonored check

that has previously been credited has fairly been established by jurisprudence.

Article 1980 of the Civil Code provides that "[f]ixed, savings, and current

deposits of money in banks and similar institutions shall be governed by the

provisions concerning simple loan."

Hence, the relationship between banks and depositors has been held to be

that of creditor and debtor. Thus, legal compensation under Article 1278 of

the Civil Code may take place when all the requisites mentioned in Article

1279 are present.

(2) No, BPI did not act judiciously. It is said that, in the case of Banco de Oro

Savings and Mortgage Bank v. Equitable Banking Corp., the law imposes a duty

of diligence on the collecting bank to scrutinize checks deposited with it, for

the purpose of determining their genuineness and regularity. The collecting

bank, being primarily engaged in banking, holds itself out to the public as the

expert on this field, and the law thus holds it to a high standard of conduct.

While, however, it is conceded that petitioner had the right of set-off over the

amount it paid to Templonuevo against the deposit of Salazar, the issue of

whether it acted judiciously is an entirely different matter. The irregularity

appeared plainly on the face of the checks. Despite the obvious lack of

indorsement thereon, petitioner permitted the encashment of these checks three

times on three separate occasions. This bolsters the conclusion that petitioner

recognized Salazar's claim of ownership of checks and acted deliberately in

paying the same, contrary to ordinary banking policy and practice.

Therefore, in acting contrary to ordinary banking policy and practice, BPI did not

act judiciously in debiting the account of Salazar.



Pantaleon v. American Express International, Inc.

GR NO. 174269, May 8, 2009 and August 25, 2010

Tinga, J. and Brion, J.

Doctrine: The issuance of a credit card is but an offer to extend a line of open account

credit.

Facts:

Pantaleon together with his family went in a European tour. During the course of the

trip, Mrs. Pantaleon used the AMEX credit card to purchase diamond pieces worth a

total of US$13,826.00 at Coster Diamond House. However, 45 minutes after

Pantaleon presented his credit card, AMEX still had not approved the purchase, this

prompted the Coster to release the items even without approval of the bank. Due to

the delay, their travel companions were visibly irritated as their tour was cancelled

because of lack of time. From the records, it was found out that, in all, it took AMEX

a total of 78 minutes to approve Pantaleon’s purchase and to transmit the approval

to the jewelry store. The delays were also experienced in several transactions made

in the United States.

AMEX emphasizes that Pantaleon experienced delay in Amsterdam because his

transaction was not a normal one, the amount of charged purchase deviated from his

established purchase pattern. AMEX argues that the transaction necessarily required

the credit authorizer to carefully review Pantaleon’s credit history and bank

references. On the other hand, Pantaleon maintains that AMEX was guilty of mora

solvendi, or delay on the part of the debtor, in complying with its obligation to him.

Issue:

Does the act of respondent AMEX constitute culpable delay?

Ruling:

May 8, 2009 Decision (GR No. 174269):

Yes. AMEX is guilty of culpable delay on its part in complying with its obligation to

act promptly on its customer’s purchase request, whether such action be favorable or

unfavorable.

There really is no strict, legally determinative point of demarcation on how long

must it take for a credit card company to approve or disapprove a customer’s

purchase, much less one specifically contracted upon by the parties. One hour

appears to be an awfully long, patently unreasonable length of time to approve or

disapprove a credit card purchase. Thus, the delay committed by the defendant

was clearly attended by unjustified neglect and bad faith, when it consumed more

than one hour to go over the plaintiff’s past credit history when such data was

already available from its computer.

Certainly, had the respondent disapproved petitioner’s purchase "within seconds"

or within a timely manner, petitioner and his family would have returned to the

bus without delay which could have spared the shame of being held accountable

for making them miss the chance to tour the city of Amsterdam.

The culpable failure of respondent herein is not the failure to timely approve

petitioner’s purchase, but the more elemental failure to timely act on the same,

whether favorably or unfavorably.

Hence, there was clearly a delay by the defendant on its obligation to the

petitioner.

August 25, 2010 Decision (GR NO 174269):

No.

The issuance of a credit card is but an offer to extend a line of open account credit,

each credit card transaction is considered a separate offer and acceptance.

The Court 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, the court 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 a 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 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.

AMEX, by the express terms of the credit card agreement, is not obligated to

approve Pantaleon’s purchase request. Furthermore, 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.

Hence, the use of credit cards is a mere offer to enter into a loan agreement, the

respondent cannot be charged guilty of culpable delay.



Far East Bank and Trust Company v. Court of Appeals

G.R. No. 108164, February 23, 1995

Vitug, J.

Doctrine: In culpa contractual, moral damages may be recovered where the defendant is

shown to have acted in bad faith or with malice in the breach of the contract.

Nevertheless, bank's failure, even perhaps inadvertent, to honor its credit card issued to

its client should entitle the latter to recover a measure of damages sanctioned under

Article 2221 of the Civil Code providing thusly:

Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which

has been violated or invaded by the defendant, may be vindicated or recognized, and

not for the purpose of indemnifying the plaintiff for any loss suffered by him.

Facts:

Some time in October 1986, private respondent Luis A. Luna applied for, and was

accorded, a FAREASTCARD issued by petitioner Far East Bank and Trust Company at

its Pasig Branch. Upon his request, the bank also issued a supplemental card to

private respondent Clarita S. Luna. In August 1988, Clarita lost her credit card.

FEBTC was forthwith informed and her card was subsequently cancelled without the

knowledge of Luis. On October 8, 1986, Luis tendered a despedida party for his

friend and used his FarEast card. However he was informed that his card was not

honored. Luis was then forced to pay, and because of the embarrassment he

suffered, he asked for damages through his counsel. Still feeling aggrieved, Luis

filed a case against Petitioner in the Regional Trial Court of Pasig City. The RTC

granted his claim which was affirmed by the Court of Appeals.

Issue:

Is there a contractual relationship between the Petitioner as the card provider and

Luis Plana as the card holder?

Ruling:

Yes. Art. 2220 of the New Civil Code provides that “Willful injury to property may be

a legal ground for awarding moral damages if the court should find that, under

the circumstances, such damages are justly due. The same rule applies to

breaches of contract where the defendant acted fraudulently or in bad faith”. The

Court said that bad faith, in this context, includes gross, but not simple,

negligence.

In this case, there was a contract between the parties because it was the duty of

the credit card provider, the petitioner in this case, to issue the card as well as

the obligation to inform private respondent Luis Plana about its cancellation.

Here, although the bank was remiss for not personally informing Luis that they

previously cancelled his card, nothing in the findings of the trial court and the

appellate court, however, can sufficiently indicate any deliberate intent on the

part of FEBTC to cause harm to private respondents. Neither could FEBTC's

negligence in failing to give personal notice to Luis be considered so gross as to

amount to malice or bad faith since Malice or bad faith implies a conscious and

intentional design to do a wrongful act for a dishonest purpose or moral

obliquity; it is different from the negative idea of negligence in that malice or

bad faith contemplates a state of mind affirmatively operating with furtive design

or ill will. Hence no moral damages. On the other hand, exemplary or corrective

damages, in turn, are intended to serve as an example or as correction for the

public good. In contracts and quasi-contracts, the court may award exemplary

damages if the defendant is found to have acted in a wanton, fraudulent,

reckless, oppressive, or malevolent manner. Given the above premises and the

factual circumstances here obtaining, it would also be just as arduous to sustain

the exemplary damages

Petitioner though not liable for moral damages is required to pay for nominal

damages for the bank's failure to honor the card issued by it. The Court said that,

the bank's failure, even perhaps inadvertent, to honor its credit card issued to

private respondent Luis should entitle him to recover a measure of damages

sanctioned under Article 2221 of the Civil Code providing thusly:

Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff,

which has been violated or invaded by the defendant, may be vindicated or

recognized, and not for the purpose of indemnifying the plaintiff for any loss

suffered by him.



Equitable Banking Corp. v. Calderon

G.R No. 156168, December 14, 2004

Garcia, J.

Doctrine: There is no bad faith as petitioner’s act was justified under the provisions of

its Credit Card Agreement.

Facts:

Respondent Jose T. Calderon, a businessman engaged in several business activities

in the Philippines and abroad applied and was issued an Equitable International

Visa Card by petitioner Equitable Banking Corporation (EBC). The Visa Card can be

used for both peso and dollar transactions within and outside the Philippines. It has

a credit limit of Php20,000.00 for the peso transaction; while in the dollar

transactions, Calderon is required to maintain a dollar account with a minimum

deposit of $3,000.00, the balance of the dollar account shall serve as the credit

limit. While in Hongkong for business and pleasure trips, Calderon and his friend Ed

De Leon went to Gucci Department Store to purchase several Gucci items. Calderon

presented and gave to the saleslady his Visa Card to be used to effect payment of

his purchase. However, the saleslady, in the presence of his friend De Leon, and

other shoppers of different nationalities, informed him that his Visa Card was

blacklisted. When Calderon sought the reconfirmation of the status of his Visa Card,

the saleslady did not honor it and even threatened to cut the card into pieces with

the use of a pair of scissors.

Calderon, upon return to the Philippines filed with the RTC at Makati City a

complaint for damages against EBC. The latter denied any liability to Calderon,

alleging that Calderon’s privileges for dollar transactions were suspended on account

of Calderon’s prior use of the same card in excess of his credit limit, adding that

Calderon failed to settle said prior credit purchase on due date, thereby causing his

obligation to become past due. EBC asserts that Calderon also failed to maintain the

required minimum deposit of $3,000.00. The trial court concluded that EBC was

negligent if not in bad faith, in suspending, or blacklisting Calderon’s credit card

without notice or basis. EBC went to the CA which ruled that no malice or bad faith

attended the petitioner's dishonor of Calderon’s Visa Card, but nonetheless awarded

moral damages to the respondent.

Issue:

Does EBC’s act of blacklisting Calderon’s Visa Card without prior notice constitute

bad faith?

Ruling:

No. The CA is correct in ruling that there is no bad faith on petitioner’s part.

Petitioner was justified in doing so under the provisions of its Credit Card

Agreement. A Credit Card Agreement as what was entered into in this case is a

contract of adhesion, with stipulations therein contained unilaterally prepared

and imposed by petitioner to prospective credit card holders on a take-it-orleave-

it basis. Such a contract is as binding as ordinary contracts, the reason

being that the party who adheres to the contract is free to reject it entirely. The

Credit Card Agreement in this case contains an express provision on automatic

suspension without notice. Although Calderon had made a deposit of

US$14,000.00 to his dollar account with the petitioner, a day before he left for

Hongkong, he never verified the status of his card before departing, much less

requested petitioner to reinstate the same. Respondent could not have justifiably

assumed that the petitioner must have reinstated his card by reason of his

deposit. Petitioner has the option to decide whether to reinstate or terminate a

credit card previously suspended. This option is likewise expressly embodied in

the same Credit Card Agreement. The provision on automatic suspension without

notice being embodied in the Credit Card Agreement in clear and unambiguous

term, petitioner EBC was not in bad faith in blacklisting respondent Calderon’s

Visa Card.



Aznar v. Citibank

G.R. No. 164273, March 28, 2007

Austria-Martinez, J.

Doctrine: While it is true that Citibank may have no control of all the actions of its

merchant affiliates, and should not be held liable therefore, it is incorrect, however, to

give it blanket freedom from liability if its card is dishonored by any merchant affiliate

for any reason.

A stipulation in a credit card agreement which limits the card company’s liability to

P1,000 or the actual damage proven, whichever is lesser, cannot be considered as valid

for being unconscionable as it precludes payment of a larger amount even though

damage may be clearly proven.

Facts:

Emmanuel B. Aznar, a known businessman in Cebu, is a holder of a Preferred Master

Credit Card (Mastercard) issued by Citibank. As he and his wife, Zoraida, planned to

take their two grandchildren, on an Asian tour, Aznar made a total advance deposit

of P485,000.00 with Citibank with the intention of increasing his credit limit to

P635,000.00. With the use of his Mastercard, Aznar purchased plane tickets to Kuala

Lumpur for his group. On July 17, 1994, Aznar, his wife and grandchildren left Cebu

for the said destination.

Aznar claims that when he presented his Mastercard in some establishments in

Malaysia, Singapore and Indonesia, the same was not honored. And when he tried to

use the same in Ingtan Tour and Travel Agency (Ingtan Agency) in Indonesia to

purchase plane tickets to Bali, it was again dishonored for the reason that his card

was blacklisted by Citibank. Such dishonor forced him to buy the tickets in cash. He

further claims that his humiliation caused by the denial of his card was aggravated

when Ingtan Agency spoke of swindlers trying to use blacklisted cards. Aznar and

his group returned to the Philippines on August 10, 1994. On August 26, 1994,

Aznar filed a complaint for damages against Citibank.

Petitioner claimed that Citibank fraudulently or with gross negligence blacklisted

his Mastercard which forced him, his wife and grandchildren to abort important

tour destinations and prevented them from buying certain items in their tour. He

further claimed that he suffered mental anguish, serious anxiety, wounded

feelings, besmirched reputation and social humiliation due to the wrongful

blacklisting of his card.

Citibank denied the allegation that it blacklisted Aznar’s card. It also contended

that under the terms and conditions governing the issuance and use of its credit

cards, Citibank is exempt from any liability for the dishonor of its cards by any

merchant affiliate, and that its liability for any action or incident which may be

brought against it in relation to the issuance and use of its credit cards is limited

to P1,000.00 or the actual damage proven whichever is lesser. To prove that they

did not blacklist Aznar’s card, Citibank’s Credit Card Department Head, Dennis

Flores, presented Warning Cancellation Bulletins which contained the list of its

canceled cards covering the period of Aznar’s trip.

RTC of Cebu City, dismissed Aznar’s complaint for lack of merit. The trial court

held that even if it was shown that Aznar’s credit card was dishonored by a

merchant establishment, Citibank was not shown to have acted with malice or

bad faith when the same was dishonored. Aznar filed a motion for

reconsideration. However, the CA ruled that: Aznar had no personal knowledge of

the blacklisting of his card and only presumed the same when it was dishonored

in certain establishments; such dishonor is not sufficient to prove that his card

was blacklisted by Citibank.

Issue:

1. Is the stipulation that a credit card company will “not be responsible if the

Card is not honored by any merchant affiliate for any reason” valid?

2. Is the stipulation limiting the credit card company’s liability to P1,000.00

or the actual damage proven, whichever is lesser valid?

3. Is Citibank liable for damages for the dishonor of Aznar’s Mastercard?

Ruling:

1. No, the stipulation is not valid. The Supreme Court held that while it is

true that Citibank may have no control of all the actions of its merchant

affiliates, and should not be held liable therefore, it is incorrect, however, to

give it blanket freedom from liability if its card is dishonored by any merchant

affiliate for any reason. In this present case, paragraph 7 of the terms and

conditions states that “Citibank is not responsible if the Card is not honored

by any merchant affiliate for any reason x x x.” Such phrase renders the

statement vague and as the said terms and conditions constitute a contract of

adhesion, any ambiguity in its provisions must be construed against the party

who prepared the contract, in this case, Citibank.

2. No, such stipulation in a credit card agreement cannot be considered as

valid for being unconscionable as it precludes payment of a larger amount

even though damage may be clearly proven. The Court is not precluded from

ruling out blind adherence to the terms of a contract if the attendant facts

and circumstances show that they should be ignored for being obviously too

one sided.

3. No. The invalidity of the terms and conditions being invoked by Citibank,

notwithstanding, the Court still cannot award damages in favor of petitioner.

It is settled that 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 before damages may be awarded and the breach of such duty

should be the proximate cause of the injury. It is not enough that one merely

suffered sleepless nights, mental anguish or serious anxiety as a result of the

actuations of the other party—it is also required that a culpable act or

omission was factually established, that proof that the wrongful act or

omission of the defendant is shown as the proximate cause of the damage

sustained by the claimant and that the case is predicated on any of the

instances expressed or envisioned by Arts. 2219 and 2220 of the Civil Code.

In this case, Aznar failed to prove with a preponderance of evidence that

Citibank blacklisted his Mastercard or placed the same on the “hot list.”. Aznar

in his testimony admitted that he had no personal knowledge that his

Mastercard was blacklisted by Citibank and only presumed such fact from the

dishonor of his card.

While the Court commiserates with Aznar for whatever undue embarrassment

he suffered when his credit card was dishonored by Ingtan Agency, especially

when the agency’s personnel insinuated that he could be a swindler trying to

use blacklisted cards, the Court cannot grant his present petition as he failed

to show by preponderance of evidence that Citibank breached any obligation

that would make it answerable for said suffering.



Bankard, Inc. v. Feliciano

G.R. No. 141761, July 28, 2006

Puno, J.

Doctrine: Considering the widespread use of access devices in commercial and other

transactions, petitioner and other issuers of credit cards should not only guard against

fraudulent uses of credit cards but should also be protective of genuine uses thereof by

the true cardholders.

Since their business and industry are imbued with public interest, banks are required to

exercise extraordinary diligence, which is more than that of a Roman pater familias or

a good father of a family, in handling their transactions.

Facts:

Dr. Antonio Novak Feliciano is the holder of PCIBank Mastercard managed by

Bankard, Inc. An extension of the card was issued to his wife Marietta Feliciano.

When the respondent was in Toronto Canada, he used his card to pay for a breakfast

bill but was dishonored so one of his guests, Dr. Bumanlag, who is a doctor based in

Canada, had to pay the bill. He called the petitioner and found out that his last

billing statement was not paid but he denied such and requested to correct the

status of his credit card. The following day, he reimbursed Dr. Bumanlag. They went

to a mall and bought dressing items but his card was dishonored again to his

embarrassment. He filed a complaint against Bankard and Mastercard International

for breach of contractual rights and damages before the RTC Makati.

Dr. Feliciano alleged that he is a holder in good standing for more than 10 years of

PCIBank and that petitioner and Mastercard International reneged on their

agreement by suspending the services of the card without notice to him. In defense,

the petitioner claimed due diligence before suspending it. It received a fraud alert

from Bank International Indonesia. It was discovered that it was the extension card

issued to the wife. Petitioner’s fraud analys, Mr. Ferdinand Lopez tried to contact the

respondent and his wife but did not succeed. The latter was only able to talk to a

woman other than the respondent or his wife.

The trial court decided in favor of respondent and found that petitioner’s negligence

was the immediate and proximate cause of respondent’s injury. CA affirmed.


Issue:

1. Did Bankard fall short of the degree of diligence required by the

circumstances?

2. Is Bankard liable to Dr. Feliciano for damages when it suspended the

latter’s credit card?

Ruling:

1. Yes. Under Sec. 8 of RA 10870, it provides that “There shall be, in the

service level agreement between the acquiring banks and their partner

merchants, a provision requiring merchants to perform due diligence to

establish the identity of the cardholders. Nothing in this Act shall preclude a

card issuer from verifying or seeking confirmation with the cardholder any

purchase if in their assessment there is reasonable concern as to the validity

of the purchase.” Bankard’s efforts at personally contacting the respondent

regarding the suspension of his credit card fall short of the degree of

diligence required by the circumstances. No further effort was exerted to

personally inform respondent about the cancellation of his card. Petitioner

had more than enough time within which to do so considering that it was not

until four (4) days later or June 18, 1995 that respondent left for Canada. But,

petitioner's Mr. Lopez contented himself with just leaving a message with an

unidentified woman in respondent's house for the latter to return his call.

Before receiving the return call, the credit cards, had been blocked on June

15, 1995. To be sure, a notice of card account blocking was sent to

respondent. However, by the ordinary course of mail, the notice was not

expected to reach respondent for several days yet. Despite the possibility that

respondent or his wife may have occasion to use their credit cards,

petitioner's fraud analyst made no further attempt to contact and warn them.

Thus, respondent left for Canada on June 18, 1995 armed with credit card but

totally unaware that the card had been blocked three (3) days previously, and

that he was not to use the same. Petitioner claims that it suspended the

respondent's card to protect him from fraudulent transactions. However, while

petitioner's motive has to be lauded, we find it lamentable that petitioner was

not equally zealous in protecting respondent from potentially embarrassing

and humiliating situations that may arise from the unsuspecting use of his

suspended PCIBank Mastercard. Considering the widespread use of access

devices in commercial and other transactions, petitioner and other issuers of

credit cards should not only guard against fraudulent uses of credit cards but

should also be protective of genuine uses thereof by the true cardholders.

not equally zealous in protecting respondent from potentially embarrassing

and humiliating situations that may arise from the unsuspecting use of his

suspended PCIBank Mastercard. Considering the widespread use of access

devices in commercial and other transactions, petitioner and other issuers of

credit cards should not only guard against fraudulent uses of credit cards but

should also be protective of genuine uses thereof by the true cardholders.

2. Yes. The award of moral damages is governed by Section 1, Chapter 3, Title

XVIII, Book IV of the Civil Code. Article 2220 provides:

“Willful injury to property may be a legal ground for awarding moral damages

if the court should find that, under the circumstances, such damages are justly

due. The same rule applies to breaches of contract where the defendant acted

fraudulently or in bad faith.” In the case at bar, it is undisputed that

respondent's PCIBank Mastercard was dishonored in a foreign country where

the respondent was not expected to have family members or close friends

nearby to lend him a helping hand. It was twice dishonored in public places.

Worse, the card was first dishonored during a breakfast-cum-business meeting

with respected medical colleagues based in that country. Respondent had

absolutely no inkling then that there was a problem with his card. Moreover,

he had no reason to think that something was amiss since he is a member in

good standing for more than ten (10) years and had no previous bad

experience with the card. Considering the attendant circumstances, we find

the petitioner to have been grossly negligent in suspending the respondent's

credit card. To reiterate, moral damages may be awarded in a breach of

contract when the defendant acted fraudulently or in bad faith, or is guilty of

gross negligence amounting to bad faith.



Acol v. Philippine Commercial Credit Card, Inc.

G.R. No. 135149, July 25, 2006

Corona, J.

Doctrine: Article 1306 of the Civil Code prohibits contracting parties from establishing

stipulations contrary to public policy. The assailed provision was just such a

stipulation.

Facts:

Petitioner Acol applied and was issued by respondent a Bankard credit card and

extensions. For several years, he regularly used this card until it was lost. The day

after the loss, he called up respondent's office and reported it. He reiterated his

report and was advised to put into writing the notice of loss and to submit it and

the extension cards. Petitioner promptly wrote a letter confirming the loss and sent

it to respondent. A day before receiving the written notice, respondent issued a

special cancellation bulletin informing its accredited establishments of the loss of

the cards of the enumerated holders, including petitioner's.

Unfortunately, somebody used petitioner's card to buy commodities worth P76K

which was billed to petitioner. Petitioner refused to pay and confirmed his

exceptions to the billing in writing. At first, respondent agreed to reverse the

disputed billings, and after an investigation and review, the respondent confirmed

that it was not the petitioner who used his Bankard for said purchases.

Nonetheless, respondent reversed its earlier position and insisted on collecting

citing provision no. 1 of the "Terms and Conditions Governing The Issuance and Use

of the Bankard" found at the back of the application form:

“Holder's responsibility for all charges made through the use of the card shall

continue until the expiration or its return to the Card Issuer or until a reasonable

time after receipt by the Card Issuer of written notice of loss of the Card and its

actual inclusion in the Cancellation Bulletin.“

Respondent filed suit in the RTC of Manila against petitioner for the collection of

P76K, plus interest and penalty charges.The RTC dismissed the case and denied the

MR.The CA reversed and denied the MR. Thus, this petition for review on certiorari.

Issue:

Is the provision no. 1 of the Terms and Conditions was valid and binding on the

petitioner?

Ruling:

NO.

Article 1306 of the Civil Code prohibits contracting parties from establishing

stipulations contrary to public policy. The assailed provision was just such a

stipulation

The stipulation in question is contrary to public policy. As petitioner points out,

the effectivity of the cancellation of the lost card rests on an act entirely beyond

the control of the cardholder. Worse, the phrase "after a reasonable time" gives

the issuer the opportunity to actually profit from unauthorized charges despite

receipt of immediate written notice from the cardholder. Under such a

stipulation, petitioner could have theoretically done everything in his power to

give respondent the required written notice. But if respondent took a

"reasonable" time (which could be indefinite) to include the card in its

cancellation bulletin, it could still hold the cardholder liable for whatever

unauthorized charges were incurred within that span of time.



Louh, Jr. v. Bank of the Philippine Islands

G.R. No. 225562, March 08, 2017

REYES, J.

Doctrine: Doctrine: Since, as held in Macalinao v. BPI, the stipulations on the 3.25%

interest rate and 6% penalty charge are void for being exorbitant and unconscionable,

it is as if there was no express contract thereon. Hence, courts may reduce the interest

rate as reason and equity demand.

Facts:

Respondent, BPI, issued a credit card in the name of Petitioner William Louh, with

his spouse and co-petitioner, Irene, as the extension card holder. a 3.5% Finance

charge and 6% late payment charge was imposed monthly upon unpaid credit

availments. The spouses petitioners reguarly paid the amounts indicated in their

Statement of Accounts. However, they were remiss in their obligations starting

October 14, 2009. Come August 15, 2020, their account remained unsettled, which

prompted respondent bank to send demand letters. By September 14, 2010, their

total credit amounted to Php 533,836.27.

On August 4, 2011, BPI filed before the RTC of Makati City a Complaint for

Collection of a Sum of Money. The petitioners filed for a Motion for Extension in

filing their answer but still failed to comply within the extended period. On June

11, 2012, BPI sought to declare the spouses in default. On November 29, 2012, the

RTC rendered a decision ordering the petitioners to solidarily pay the respondent:

1) P533,836.27 plus 12% finance and 12% late payment annual charges starting

from August 7, 2010 until full payment; and 2) 25% of the amount due as attorney's

fees, plus P1,000.00 per court hearing and P8,064.00 as filing or docket fees; and 3)

costs of suit.

The RTC 3.5% finance and 6% late payment monthly charges imposed by BPI as

iniquitous and unconscionable and was, thus, reduced to 1% monthly. Upon the

petitioners' appeal, the CA affirmed in toto the trial court's decision that the

petitioners were properly declared in default for their failure to file an answer

within the reglementary period, and that the respondent offered ample evidence to

support their claim.

In their appeal, to the Supreme Court, the petitioners prayed for the relaxation of

the procedural due to William's health condition. They also claim that the

computations likewise did not show the specific amounts pertaining to the

principal, interests and penalties. They point out that since their credit limit was

only P326,000.00, it is evident that the amount of P533,836.27 demanded by BPI

included unconscionable charges.

Respondent, on the other hand, failed to file their answer.

Issue:

Are the interest and penalty charges imposed by BPI iniquitous or

unconscionable?

Ruling:

Yes. Art. 1229 of the Civil Code provides: The judge shall equitably reduce the

penalty when the principal obligation has been partly or irregularly complied

with by the debtor. Even if there has been no perfomance, the penalty may also

be reduced by the courts if it is iniquitous or unconscionable.

Echoing the ruling in Macalinao v. BPI, where the respondent banl charged the

same interest and penalty rates, the court said: "stipulated interest rates of 3%

per month and higher are excessive, iniquitous, unconscionable and exorbitant.

Such stipulations are void for being contrary to morals, if not against the law."

Since the stipulation on the interest rate is void, it is as if there was no express

contract thereon. Hence, courts may reduce the interest rate as reason and equity

demand.

In the case at bench, BPI imposed a cumulative annual interest of 114%, plus 25%

of the amount due as attorney's fees. Inevitably, the RTC and the CA aptly

reduced the charges imposed by BPI upon the Spouses Louh. Note that

incorporated in the amount of P533,836.27 demanded by BPI as the Spouses

Louh's obligation as of August 7, 2010 were the higher rates of finance and late

payment charges, which the courts a quo had properly directed to be reduced.



Bankard, Inc. v. Luz P. Alarte

G.R. No. 202573 | April 19, 2017

Del Castillo, J.

Doctrine: After all, credit card arrangements are simple loan arrangements between the

card issuer and the card holder.

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.

Facts:

Petitioner Bankard, Inc., (Bankard, now RCBC Bankard Services Corporation) is a

duly constituted domestic corporation doing business as a credit card provider,

extending credit accommodations to its member-cardholders for the purchase of

goods and services obtained from Bankard-accredited business establishments, to

be paid later on by the member-cardholders following billing.

In 2007, petitioner filed a collection case against respondent Luz P. Alarte before

the Metropolitan Trial Court of Pasig City (MeTC). The case was docketed as Civil

Case No. 13956 and ultimately assigned to Branch 72. In its Complaint, petitioner

alleged that respondent applied for and was granted credit accommodations under

Bankard myDream JCB Card No. 3562-8688-5155-1006; that respondent, using the

said Bankard myDream JCB credit card, availed herself of credit accommodations by

"purchasing various products"; that per Statement of Account, dated July 9, 2006,

respondent's credit availments amounted to a total of P67,944.82, inclusive of

unbilled monthly installments, charges and penalties or at least the minimum

amount due under the credit card; and that respondent failed and refuses to pay her

obligations despite her receipt of a written demand. Thus, it prayed that

respondents be ordered to pay the amount of P67,944.82, with interest, attorney's

fees equivalent to 25% of the sum due, and costs of suit.

A perusal of the July 9, 2006 Statement of Account sent to respondent would

indeed show that it does not contain the particulars of purchase transactions

entered into by the latter; it merely contains the following information:

PREVIOUS STATEMENT BALANCE [P]64,615.64

3562-8688-5155-1006 LUZ TATEL ALARTE

07/04/06 07/04/06 LATE CHARGES 1,484.84

07/07/06 07/07/06 INTEREST CHARGES 1,844.34

SUB TOTAL 3,329.18

BALANCE END [P]67,944.82

*** END OF STATEMENT-PAGE 1 ***

Issues:

1. Is the credit card issuer obliged to send a detailed list of all his credit card

transactions?

2. What is the nature of the credit card arrangement?

3. Is the petitioner Bankard entitled to claims against respondent Luz P.

Alarte?

Ruling:

1. No. The Supreme Court held that the petitioner is not obliged, each and

every time, to send a statement of account to the latter containing a detailed

list of all the credit card transactions she made in the past which remain

unsettled and outstanding as of the date of issuance of the latest statement

of account, as she is presumed to know these from past statements of account

received.

Furthermore the Court also made it a point that “However, the manner in

which the statement of account is worded indicates that it is a running

balance, a continuing and mounting bill of charges consisting of a combined

principal amount with finnance and penalty charges imposed, which

respondent appears to have failed to pay in the past. This is shown by the fact

that respondent has failed to pay a past bill amounting to P64,615.64 — the

"previous statement balance" in the very first line of the above-quoted

statement of account. This could mean that there really were no immediate

purchase transactions made by respondent for the month that needed to be

specified in the July 9, 2006 Statement of Account; that instead, she simply

repeatedly failed and continues to fail to pay her credit card debt arising out

of past credit card purchase transactions to petitioner, which thus resulted in

a mounting pile of charges imposed upon her outstanding account as reflected

in a statement or bill of charges or accounts regularly sent to her.”

2. After all, credit card arrangements are simple loan arrangements between

the card issuer and the card holder. 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.

3. Yes. The Court rules in favor of the petitioner. The September 28, 2011

Decision and July 4, 2012 Resolution of the Court of Appeals in CA-G.R. SP No.

114345 are REVERSED and SET ASIDE. Civil Case No. 13956 is reinstated, and

the Metropolitan Trial Court of Pasig City, Branch 72 is ORDERED to conduct

further proceedings in accordance with the foregoing disquisition of the Court

and allow petitioner Bankard, Inc., (now RCBC Bankard Services Corporation)

to amend its Complaint and/or present additional evidence to prove its case.