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.
