Republic of the Philippines

Supreme Court
Manila
SPECIAL SECOND DIVISION

POLO S. PANTALEON,
Petitioner,

G.R. No. 174269

Present:

versus -

AMERICAN EXPRESS
INTERNATIONAL, INC.,
Respondent.

CARPIO MORALES, J.,

Acting Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION, and

BERSAMIN, JJ.
Promulgated:

August 25, 2010

x----------------------------------------------------------------------------------------x
RESOLUTION
BRION, J.:
We resolve the motion for reconsideration filed by respondent American
Express International, Inc. (AMEX) dated June 8, 2009,[1] seeking to reverse our
Decision datedMay 8, 2009 where we ruled that AMEX was guilty of culpable
delay in fulfilling its obligation to its cardholder petitioner Polo Pantaleon. Based
on this conclusion, we held AMEX liable for moral and exemplary damages, as
well as attorneys fees and costs of litigation.[2]
FACTUAL ANTECEDENTS

The established antecedents of the case are narrated below.

AMEX is a resident foreign corporation engaged in the business of providing
credit services through the operation of a charge card system. Pantaleon has been
an AMEX cardholder since 1980.[3]
In October 1991, Pantaleon, together with his wife (Julialinda), daughter
(Regina), and son (Adrian Roberto), went on a guided European tour. On October
25, 1991, the tour group arrived in Amsterdam. Due to their late arrival, they
postponed the tour of the city for the following day.[4]
The next day, the group began their sightseeing at around 8:50 a.m. with a
trip to the Coster Diamond House (Coster). To have enough time for take a guided
city tour ofAmsterdam before their departure scheduled on that day, the tour
group planned to leave Coster by 9:30 a.m. at the latest.
While at Coster, Mrs. Pantaleon decided to purchase some diamond pieces
worth a total of US$13,826.00. Pantaleon presented his American Express credit
card to the sales clerk to pay for this purchase. He did this at around 9:15 a.m. The
sales clerk swiped the credit card and asked Pantaleon to sign the charge slip,
which was then electronically referred to AMEXs Amsterdam office at 9:20 a.m.[5]
At around 9:40 a.m., Coster had not received approval from AMEX for the
purchase so Pantaleon asked the store clerk to cancel the sale. The store manager,
however, convinced Pantaleon to wait a few more minutes. Subsequently, the store
manager informed Pantaleon that AMEX was asking for bank references;
Pantaleon responded by giving the names of his Philippine depository banks.
At around 10 a.m., or 45 minutes after Pantaleon presented his credit card,
AMEX still had not approved the purchase. Since the city tour could not begin
until the Pantaleons were onboard the tour bus, Coster decided to release at
around 10:05 a.m. the purchased items to Pantaleon even without AMEXs
approval.
When the Pantaleons finally returned to the tour bus, they found their travel
companions visibly irritated. This irritation intensified when the tour guide

announced that they would have to cancel the tour because of lack of time as they
all had to be in Calais, Belgium by 3 p.m. to catch the ferry to London.[6]
From the records, it appears that after Pantaleons purchase was transmitted
for approval to AMEXs Amsterdam office at 9:20 a.m.; was referred to
AMEXs Manilaoffice at 9:33 a.m.; and was approved by the Manila office
at 10:19 a.m. At 10:38 a.m., AMEXs Manila office finally transmitted the
Approval Code to AMEXs Amsterdamoffice. In all, it took AMEX a total of 78
minutes to approve Pantaleons purchase and to transmit the approval to the
jewelry store.[7]
After the trip to Europe, the Pantaleon family proceeded to the United States.
Again, Pantaleon experienced delay in securing approval for purchases using his
American Express credit card on two separate occasions. He experienced the first
delay when he wanted to purchase golf equipment in the amount of US$1,475.00 at
the Richard Metz Golf Studio in New York on October 30, 1991. Another delay
occurred when he wanted to purchase childrens shoes worth US$87.00 at the
Quiency Market in Boston onNovember 3, 1991.
Upon return to Manila, Pantaleon sent AMEX a letter demanding an
apology for the humiliation and inconvenience he and his family experienced due
to the delays in obtaining approval for his credit card purchases. AMEX responded
by explaining that the delay in Amsterdam was due to the amount involved the
charged purchase of US$13,826.00 deviated from Pantaleons established charge
purchase pattern. Dissatisfied with this explanation, Pantaleon filed an action for
damages against the credit card company with the Makati City Regional Trial
Court (RTC).

On August 5, 1996, the RTC found AMEX guilty of delay, and awarded
Pantaleon P500,000.00 as moral damages, P300,000.00 as exemplary
damages, P100,000.00 as attorneys fees, and P85,233.01 as litigation expenses.
On appeal, the CA reversed the awards.[8] While the CA recognized that
delay in the nature of mora accipiendi or creditors default attended AMEXs

approval of Pantaleons purchases, it disagreed with the RTCs finding that AMEX
had breached its contract, noting that the delay was not attended by bad faith,
malice or gross negligence. The appellate court found that AMEX exercised
diligent efforts to effect the approval of Pantaleons purchases; the purchase at
Coster posed particularly a problem because it was at variance with Pantaleons
established charge pattern. As there was no proof that AMEX breached its
contract, or that it acted in a wanton, fraudulent or malevolent manner, the
appellate court ruled that AMEX could not be held liable for any form of damages.
Pantaleon questioned
on certiorari with this Court.

this

decision via a

petition

for

review

In our May 8, 2009 decision, we reversed the appellate courts decision and
held that AMEX was guilty of mora solvendi, or debtors default. AMEX, as
debtor, had an obligation as the credit provider to act on Pantaleons purchase
requests, whether to approve or disapprove them, with timely dispatch. Based on
the evidence on record, we found that AMEX failed to timely act on Pantaleons
purchases.
Based on the testimony of AMEXs credit authorizer Edgardo Jaurique, the
approval time for credit card charges would be three to four seconds under regular
circumstances. In Pantaleons case, it took AMEX 78 minutes to approve
the Amsterdam purchase. We attributed this delay to AMEXs Manila credit
authorizer, Edgardo Jaurique, who had to go over Pantaleons past credit history,
his payment record and his credit and bank references before he approved the
purchase. Finding this delay unwarranted, we reinstated the RTC decision and
awarded Pantaleon moral and exemplary damages, as well as attorneys fees and
costs of litigation.
THE MOTION FOR RECONSIDERATION
In its motion for reconsideration, AMEX argues that this Court erred when it
found AMEX guilty of culpable delay in complying with its obligation to act with
timely dispatch on Pantaleons purchases. While AMEX admits that it normally
takes seconds to approve charge purchases, it emphasizes that Pantaleon
experienced delay inAmsterdam because his transaction was not a normal one. To

recall, Pantaleon sought to charge in a single transaction jewelry items purchased

from Coster in the total amount of US$13,826.00 or P383,746.16. While the total
amount of Pantaleons previous purchases using his AMEX credit card did exceed
US$13,826.00, AMEX points out that these purchases were made in a span of
more than 10 years, not in a single transaction.
Because this was the biggest single transaction that Pantaleon ever made
using his AMEX credit card, AMEX argues that the transaction necessarily
required the credit authorizer to carefully review Pantaleons credit history and
bank references. AMEX maintains that it did this not only to ensure Pantaleons
protection (to minimize the possibility that a third party was fraudulently using his
credit card), but also to protect itself from the risk that Pantaleon might not be able
to pay for his purchases on credit. This careful review, according to AMEX, is also
in keeping with the extraordinary degree of diligence required of banks in handling
its transactions. AMEX concluded that in these lights, the thorough review of
Pantaleons credit record was motivated by legitimate concerns and could not be
evidence of any ill will, fraud, or negligence by AMEX.
AMEX further points out that the proximate cause of Pantaleons
humiliation and embarrassment was his own decision to proceed with the purchase
despite his awareness that the tour group was waiting for him and his wife.
Pantaleon could have prevented the humiliation had he cancelled the sale when he
noticed that the credit approval for the Coster purchase was unusually delayed.
In his Comment dated February 24, 2010, Pantaleon maintains that AMEX
was guilty of mora solvendi, or delay on the part of the debtor, in complying with
its obligation to him. Based on jurisprudence, a just cause for delay does not
relieve the debtor in delay from the consequences of delay; thus, even if AMEX
had a justifiable reason for the delay, this reason would not relieve it from the
liability arising from its failure to timely act on Pantaleons purchase.
In response to AMEXs assertion that the delay was in keeping with its duty
to perform its obligation with extraordinary diligence, Pantaleon claims that this
duty includes the timely or prompt performance of its obligation.

As to AMEXs contention that moral or exemplary damages cannot be

awarded absent a finding of malice, Pantaleon argues that evil motive or design is
not always necessary to support a finding of bad faith; gross negligence or wanton
disregard of contractual obligations is sufficient basis for the award of moral and
exemplary damages.
OUR RULING
We GRANT the motion for reconsideration.
Brief historical background
A credit card is defined as any card, plate, coupon book, or other credit
device existing for the purpose of obtaining money, goods, property, labor or
services or anything of value on credit.[9] It traces its roots to the charge card first
introduced by the Diners Club in New York City in 1950.[10] American Express
followed suit by introducing its own charge card to the American market in 1958.
[11]

In the Philippines, the now defunct Pacific Bank was responsible for
bringing the first credit card into the country in the 1970s. [12] However, it was only
in the early 2000s that credit card use gained wide acceptance in the country, as
evidenced by the surge in the number of credit card holders then.[13]
Nature of Credit Card Transactions
To better understand the dynamics involved in credit card transactions, we
turn to the United States case of Harris Trust & Savings Bank v. McCray[14] which
explains:
The bank credit card system involves a tripartite relationship
between the issuer bank, the cardholder, and merchants participating in
the system. The issuer bank establishes an account on behalf of the
person to whom the card is issued, and the two parties enter into an
agreement which governs their relationship. This agreement provides
that the bank will pay for cardholders account the amount of

merchandise or services purchased through the use of the credit card and
will also make cash loans available to the cardholder. It also states that
the cardholder shall be liable to the bank for advances and payments
made by the bank and that the cardholders obligation to pay the bank
shall not be affected or impaired by any dispute, claim, or demand by the
cardholder with respect to any merchandise or service purchased.
The merchants participating in the system agree to honor the
banks credit cards. The bank irrevocably agrees to honor and pay the
sales slips presented by the merchant if the merchant performs his
undertakings such as checking the list of revoked cards before accepting
the card. x x x.
These slips are forwarded to the member bank which originally
issued the card. The cardholder receives a statement from the bank
periodically and may then decide whether to make payment to the bank
in full within a specified period, free of interest, or to defer payment and
ultimately incur an interest charge.

We adopted a similar view in CIR v. American Express International, Inc.

(Philippine branch),[15] where we also recognized that credit card issuers are not
limited to banks. We said:
Under RA 8484, the credit card that is issued by banks in general,
or by non-banks in particular, refers to any card x x x or other credit
device existing for the purpose of obtaining x x x goods x x x or
services x x x on credit; and is being used usually on a revolving
basis. This means that the consumer-credit arrangement that exists
between the issuer and the holder of the credit card enables the latter to
procure goods or services on a continuing basis as long as the
outstanding balance does not exceed a specified limit. The card holder
is, therefore, given the power to obtain present control of goods or
service on a promise to pay for them in the future.
Business establishments may extend credit sales through the use
of the credit card facilities of a non-bank credit card company to avoid
the risk of uncollectible accounts from their customers. Under this
system, the establishments do not deposit in their bank accounts the
credit card drafts that arise from the credit sales. Instead, they merely

record their receivables from the credit card company and periodically
send the drafts evidencing those receivables to the latter.
The credit card company, in turn, sends checks as payment to
these business establishments, but it does not redeem the drafts at full
price. The agreement between them usually provides for discounts to be
taken by the company upon its redemption of the drafts. At the end of
each month, it then bills its credit card holders for their respective drafts
redeemed during the previous month. If the holders fail to pay the
amounts owed, the company sustains the loss.

Simply put, every credit card transaction involves three contracts, namely:
(a) the sales contract between the credit card holder and the merchant or the
business establishment which accepted the credit card; (b) the loan
agreement between the credit card issuer and the credit card holder; and lastly, (c)
the promise to pay between the credit card issuer and the merchant or business
establishment.[16]
Credit card issuer cardholder
relationship
When a credit card company gives the holder the privilege of charging items
at establishments associated with the issuer,[17] a necessary question in a legal
analysis is when does this relationship begin? There are two diverging views on
the matter. In City Stores Co. v. Henderson,[18] another U.S. decision, held that:
The issuance of a credit card is but an offer to extend a line of open
account credit. It is unilateral and supported by no consideration. The offer may
be withdrawn at any time, without prior notice, for any reason or, indeed, for no
reason at all, and its withdrawal breaches no duty for there is no duty to
continue it and violates no rights.

Thus, under this view, each credit card transaction is considered a separate offer
and acceptance.

Novack v. Cities Service Oil Co.[19] echoed this view, with the court ruling
that the mere issuance of a credit card did not create a contractual relationship with
the cardholder.
On the other end of the spectrum is Gray v. American Express
Company[20] which recognized the card membership agreement itself as a binding
contract between the credit card issuer and the card holder. Unlike in
the Novack and the City Stores cases, however, the cardholder in Gray paid an
annual fee for the privilege of being an American Express cardholder.
In our jurisdiction, we generally adhere to the Gray ruling, recognizing the
relationship between the credit card issuer and the credit card holder as a
contractual one that is governed by the terms and conditions found in the card
membership agreement.[21] This contract provides the rights and liabilities of a
credit card company to its cardholders and vice versa.
We note that a card membership agreement is a contract of adhesion as its
terms are prepared solely by the credit card issuer, with the cardholder merely
affixing his signature signifying his adhesion to these terms. [22] This circumstance,
however, does not render the agreement void; we have uniformly held that
contracts of adhesion are as binding as ordinary contracts, the reason being that
the party who adheres to the contract is free to reject it entirely. [23] The only effect
is that the terms of the contract are construed strictly against the party who drafted
it.[24]

On AMEXs obligations to Pantaleon

We begin by identifying the two privileges that Pantaleon assumes he is
entitled to with the issuance of his AMEX credit card, and on which he anchors his
claims. First, Pantaleon presumes that since his credit card has no pre-set spending
limit, AMEX has the obligation to approve all his charge requests. Conversely,
even if AMEX has no such obligation, at the very least it is obliged to act on his
charge requests within a specific period of time.

i. Use of credit card a mere offer to enter into loan agreements

Although we recognize the existence of a relationship between the credit
card issuer and the credit card holder upon the acceptance by the cardholder of the
terms of the card membership agreement (customarily signified by the act of the
cardholder in signing the back of the credit card), we have to distinguish this
contractual relationship from the creditor-debtor relationship which only
arises after the credit card issuer has approved the cardholders purchase
request. The first relates merely to an agreement providing for credit facility to the
cardholder. The latter involves the actual credit on loan agreement involving three
contracts, namely: the sales contract between the credit card holder and the
merchant or the business establishment which accepted the credit card; the loan
agreement between the credit card issuer and the credit card holder; and the
promise to pay between the credit card issuer and the merchant or business
establishment.
From the loan agreement perspective, the contractual relationship begins to
exist only upon the meeting of the offer[25] and acceptance of the parties involved.
In more concrete terms, when cardholders use their credit cards to pay for their
purchases, they merely offer to enter into loan agreements with the credit card
,company. Only after the latter approves the purchase requests that the parties
enter into binding loan contracts, in keeping with Article 1319 of the Civil Code,
which provides:
Article 1319. Consent is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to constitute
the contract. The offer must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer.

This view finds support in the reservation found in the card membership
agreement itself, particularly paragraph 10, which clearly states that AMEX
reserve[s] the right to deny authorization for any requested Charge. By so
providing, AMEX made its position clear that it has no obligation to approve any
and all charge requests made by its card holders.
ii. AMEX not guilty of culpable delay

Since AMEX has no obligation to approve the purchase requests of its credit
cardholders, Pantaleon cannot claim that AMEX defaulted in its obligation. Article
1169 of the Civil Code, which provides the requisites to hold a debtor guilty of
culpable delay, states:
Article 1169. Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially demands
from them the fulfillment of their obligation. x x x.

The three requisites for a finding of default are: (a) that the obligation is
demandable and liquidated; (b) the debtor delays performance; and (c) the creditor
judicially or extrajudicially requires the debtors performance.[26]
Based on the above, the first requisite is no longer met because AMEX, by
the express terms of the credit card agreement, is not obligated to approve
Pantaleons purchase request. Without a demandable obligation, there can be no
finding of default.
Apart from the lack of any demandable obligation, we also find that
Pantaleon failed to make the demand required by Article 1169 of the Civil Code.
As previously established, the use of a credit card to pay for a purchase is
only an offer to the credit card company to enter a loan agreement with the credit
card holder.Before the credit card issuer accepts this offer, no obligation
relating to the loan agreement exists between them. On the other hand, a
demand is defined as the assertion of a legal right; xxx an asking with authority,
claiming or challenging as due.[27] A demand presupposes the existence of an
obligation between the parties.
Thus, every time that Pantaleon used his AMEX credit card to pay for his
purchases, what the stores transmitted to AMEX were his offers to execute loan
contracts. These obviously could not be classified as the demand required by law to
make the debtor in default, given that no obligation could arise on the part of
AMEX until after AMEX transmitted its acceptance of Pantaleons offers.

Pantaleons act of insisting on and waiting for the charge purchases to be

approved by AMEX[28] is not the demand contemplated by Article 1169 of the
Civil Code.
For failing to comply with the requisites of Article 1169, Pantaleons charge
that AMEX is guilty of culpable delay in approving his purchase requests must fail.
iii. On AMEXs obligation to act on the offer within a specific period of time
Even assuming that AMEX had the right to review his credit card history
before it approved his purchase requests, Pantaleon insists that AMEX had an
obligation to act on his purchase requests, either to approve or deny, in a matter of
seconds or in timely dispatch. Pantaleon impresses upon us the existence of this
obligation by emphasizing two points: (a) his card has no pre-set spending limit;
and (b) in his twelve years of using his AMEX card, AMEX had always approved
his charges in a matter of seconds.
Pantaleons assertions fail to convince us.
We originally held that AMEX was in culpable delay when it acted on the
Coster transaction, as well as the two other transactions in the United States which
took AMEX approximately 15 to 20 minutes to approve. This conclusion appears
valid and reasonable at first glance, comparing the time it took to finally get the
Coster purchase approved (a total of 78 minutes), to AMEXs normal approval
time of three to four seconds (based on the testimony of Edgardo Jaurigue, as well
as Pantaleons previous experience). We come to a different result, however, after
a closer look at the factual and legal circumstances of the case.
AMEXs credit authorizer, Edgardo Jaurigue, explained that having no preset spending limit in a credit card simply means that the charges made by the
cardholder are approved based on his ability to pay, as demonstrated by his past
spending, payment patterns, and personal resources.[29] Nevertheless, every time
Pantaleon charges a purchase on his credit card, the credit card company still
has to determine whether it will allow this charge, based on his past credit
history. This right to review a card holders credit history, although not

specifically set out in the card membership agreement, is a necessary implication

of AMEXs right to deny authorization for any requested charge.
As for Pantaleons previous experiences with AMEX (i.e., that in the past 12
years, AMEX has always approved his charge requests in three or four seconds),
this record does not establish that Pantaleon had a legally enforceable obligation to
expect AMEX to act on his charge requests within a matter of seconds. For one,
Pantaleon failed to present any evidence to support his assertion that AMEX acted
on purchase requests in a matter of three or four seconds as an established practice.
More importantly, even if Pantaleon did prove that AMEX, as a matter of practice
or custom, acted on its customers purchase requests in a matter of seconds, this
would still not be enough to establish a legally demandable right; as a general rule,
a practice or custom is not a source of a legally demandable or enforceable right.[30]
We next examine the credit card membership agreement, the contract that
primarily governs the relationship between AMEX and Pantaleon.
Significantly, there is no provision in this agreement that obligates AMEX to
act on all cardholder purchase requests within a specifically defined period of
time. Thus, regardless of whether the obligation is worded was to act in a matter
of seconds or to act in timely dispatch, the fact remains that no obligation exists
on the part of AMEX to act within a specific period of time. Even Pantaleon admits
in his testimony that he could not recall any provision in the Agreement that
guaranteed AMEXs approval of his charge requests within a matter of minutes.[31]
Nor can Pantaleon look to the law or government issuances as the source of
AMEXs alleged obligation to act upon his credit card purchases within a matter of
seconds. As the following survey of Philippine law on credit card transactions
demonstrates, the State does not require credit card companies to act upon its
cardholders purchase requests within a specific period of time.

Republic Act No. 8484 (RA 8484), or the Access Devices Regulation Act of
1998, approved on February 11, 1998, is the controlling legislation that regulates
the issuance and use of access devices,[32] including credit cards. The more salient
portions of this law include the imposition of the obligation on a credit card
company to disclose certain important financial information[33] to credit card
applicants, as well as a definition of the acts that constitute access device fraud.
As financial institutions engaged in the business of providing credit, credit
card companies fall under the supervisory powers of the Bangko Sentral ng
Pilipinas (BSP).[34] BSP Circular No. 398 dated August 21, 2003 embodies the
BSPs policy when it comes to credit cards
The Bangko Sentral ng Pilipinas (BSP) shall foster the
development of consumer credit through innovative products such as
credit cards under conditions of fair and sound consumer credit
practices. The BSP likewise encourages competition and transparency to
ensure more efficient delivery of services and fair dealings with
customers. (Emphasis supplied)
Based on this Circular, x x x [b]efore issuing credit cards, banks and/or
their subsidiary credit card companies must exercise proper diligence by
ascertaining that applicants possess good credit standing and are financially
capable of fulfilling their credit commitments. [35] As the above-quoted policy
expressly states, the general intent is to foster fair and sound consumer credit
practices.
Other than BSP Circular No. 398, a related circular is BSP Circular No. 454,
issued on September 24, 2004, but this circular merely enumerates the unfair
collection practices of credit card companies a matter not relevant to the issue at
hand.
In light of the foregoing, we find and so hold that AMEX is neither
contractually bound nor legally obligated to act on its cardholders purchase
requests within any specific period of time, much less a period of a matter of
seconds that Pantaleon uses as his standard. The standard therefore is implicit and,
as in all contracts, must be based on fairness and reasonableness, read in relation to
the Civil Code provisions on human relations, as will be discussed below.

AMEX acted with good faith

Thus far, we have already established that: (a) AMEX had neither a
contractual nor a legal obligation to act upon Pantaleons purchases within a
specific period of time; and (b) AMEX has a right to review a cardholders credit
card history. Our recognition of these entitlements, however, does not give
AMEX an unlimited right to put off action on cardholders purchase requests
for indefinite periods of time. In acting on cardholders purchase requests, AMEX
must take care not to abuse its rights and cause injury to its clients and/or third
persons. We cite in this regard Article 19, in conjunction with Article 21, of the
Civil Code, which provide:
Article 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due and
observe honesty and good faith.
Article 21. Any person who willfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.

Article 19 pervades the entire legal system and ensures that a person
suffering damage in the course of anothers exercise of right or performance of
duty, should find himself without relief.[36] It sets the standard for the conduct of all
persons, whether artificial or natural, and requires that everyone, in the exercise of
rights and the performance of obligations, must: (a) act with justice, (b) give
everyone his due, and (c) observe honesty and good faith. It is not because a person
invokes his rights that he can do anything, even to the prejudice and disadvantage
of another.[37]
While Article 19 enumerates the standards of conduct, Article 21 provides
the remedy for the person injured by the willful act, an action for damages. We
explained how these two provisions correlate with each other in GF Equity, Inc. v.
Valenzona:[38]
[Article 19], known to contain what is commonly referred to as
the principle of abuse of rights, sets certain standards which must be

observed not only in the exercise of one's rights but also in the
performance of one's duties. These standards are the following: to act
with justice; to give everyone his due; and to observe honesty and good
faith. The law, therefore, recognizes a primordial limitation on all rights;
that in their exercise, the norms of human conduct set forth in Article 19
must be observed. A right, though by itself legal because recognized
or granted by law as such, may nevertheless become the source of
some illegality. When a right is exercised in a manner which does not
conform with the norms enshrined in Article 19 and results in
damage to another, a legal wrong is thereby committed for which the
wrongdoer must be held responsible. But while Article 19 lays down a
rule of conduct for the government of human relations and for the
maintenance of social order, it does not provide a remedy for its
violation. Generally, an action for damages under either Article 20 or
Article 21 would be proper.

In the context of a credit card relationship, although there is neither a

contractual stipulation nor a specific law requiring the credit card issuer to act on
the credit card holders offer within a definite period of time, these principles
provide the standard by which to judge AMEXs actions.
According to Pantaleon, even if AMEX did have a right to review his charge
purchases, it abused this right when it unreasonably delayed the processing of the
Coster charge purchase, as well as his purchase requests at the Richard Metz Golf
Studio and Kids Unlimited Store; AMEX should have known that its failure to act
immediately on charge referrals would entail inconvenience and result in
humiliation, embarrassment, anxiety and distress to its cardholders who would be
required to wait before closing their transactions.[39]
It is an elementary rule in our jurisdiction that good faith is presumed and
that the burden of proving bad faith rests upon the party alleging it. [40] Although it
took AMEX some time before it approved Pantaleons three charge requests, we
find no evidence to suggest that it acted with deliberate intent to cause Pantaleon
any loss or injury, or acted in a manner that was contrary to morals, good customs
or public policy. We give credence to AMEXs claim that its review procedure was
done to ensure Pantaleons own protection as a cardholder and to prevent the
possibility that the credit card was being fraudulently used by a third person.

Pantaleon countered that this review procedure is primarily intended to

protect AMEXs interests, to make sure that the cardholder making the purchase
has enough means to pay for the credit extended. Even if this were the case,
however, we do not find any taint of bad faith in such motive. It is but natural for
AMEX to want to ensure that it will extend credit only to people who will have
sufficient means to pay for their purchases. AMEX, after all, is running a business,
not a charity, and it would simply be ludicrous to suggest that it would not want to
earn profit for its services. Thus, so long as AMEX exercises its rights, performs its
obligations, and generally acts with good faith, with no intent to cause harm, even
if it may occasionally inconvenience others, it cannot be held liable for damages.
We also cannot turn a blind eye to the circumstances surrounding the Coster
transaction which, in our opinion, justified the wait. In Edgardo Jaurigues own
words:
Q 21: With reference to the transaction at the Coster Diamond House
covered by Exhibit H, also Exhibit 4 for the defendant, the approval
came at 2:19 a.m. after the request was relayed at 1:33 a.m., can you
explain why the approval came after about 46 minutes, more or less?
A21: Because we have to make certain considerations and evaluations of
[Pantaleons] past spending pattern with [AMEX] at that time before
approving plaintiffs request because [Pantaleon] was at that time
making his very first single charge purchase of US$13,826 [this is
below the US$16,112.58 actually billed and paid for by the plaintiff
because the difference was already automatically approved by [AMEX]
office in Netherland[s] and the record of [Pantaleons] past spending
with [AMEX] at that time does not favorably support his ability to
pay for such purchase. In fact, if the foregoing internal policy of
[AMEX] had been strictly followed, the transaction would not have been
approved at all considering that the past spending pattern of the plaintiff
with [AMEX] at that time does not support his ability to pay for such
purchase.[41]
x x x x
Q: Why did it take so long?

A: It took time to review the account on credit, so, if there is any

delinquencies [sic] of the cardmember. There are factors on deciding the
charge itself which are standard measures in approving the authorization.
Now in the case of Mr. Pantaleon although his account is single charge
purchase of US$13,826. [sic] this is below the US$16,000. plus actually
billed x x x we would have already declined the charge outright and
asked him his bank account to support his charge. But due to the length
of his membership as cardholder we had to make a decision on hand. [42]

As Edgardo Jaurigue clarified, the reason why Pantaleon had to wait for
AMEXs approval was because he had to go over Pantaleons credit card history
for the past twelve months.[43] It would certainly be unjust for us to penalize AMEX
for merely exercising its right to review Pantaleons credit history meticulously.
Finally, we said in Garciano v. Court of Appeals that the right to recover
[moral damages] under Article 21 is based on equity, and he who comes to court
to demand equity, must come with clean hands. Article 21 should be construed as
granting the right to recover damages to injured persons who are not themselves at
fault.[44] As will be discussed below, Pantaleon is not a blameless party in all this.
Pantaleons action was the proximate
cause for his injury
Pantaleon mainly anchors his claim for moral and exemplary damages
on the embarrassment and humiliation that he felt when the European tour group
had to wait for him and his wife for approximately 35 minutes, and eventually had
to cancel the Amsterdam city tour. After thoroughly reviewing the records of this
case, we have come to the conclusion that Pantaleon is the proximate cause for this
embarrassment and humiliation.
As borne by the records, Pantaleon knew even before entering Coster that
the tour group would have to leave the store by 9:30 a.m. to have enough time to
take the city tour of Amsterdam before they left the country. After 9:30 a.m.,
Pantaleons son, who had boarded the bus ahead of his family, returned to the store
to inform his family that they were the only ones not on the bus and that the entire
tour group was waiting for them. Significantly, Pantaleon tried to cancel the sale

at 9:40 a.m. because he did not want to cause any inconvenience to the tour
group. However, when Costers sale manager asked him to wait a few more
minutes for the credit card approval, he agreed, despite the knowledge that he had
already caused a 10-minute delay and that the city tour could not start without him.
In Nikko Hotel Manila Garden v. Reyes,[45] we ruled that a person who
knowingly and voluntarily exposes himself to danger cannot claim damages for the
resulting injury:
The doctrine of volenti non fit injuria (to which a person assents
is not esteemed in law as injury) refers to self-inflicted injury or to the
consent to injury which precludes the recovery of damages by one who
has knowingly and voluntarily exposed himself to danger, even if he is
not negligent in doing so.

This doctrine, in our view, is wholly applicable to this case. Pantaleon

himself testified that the most basic rule when travelling in a tour group is that you
must never be a cause of any delay because the schedule is very strict.[46] When
Pantaleon made up his mind to push through with his purchase, he must have
known that the group would become annoyed and irritated with him. This was the
natural, foreseeable consequence of his decision to make them all wait.
We do not discount the fact that Pantaleon and his family did feel
humiliated and embarrassed when they had to wait for AMEX to approve the
Coster purchase inAmsterdam. We have to acknowledge, however, that Pantaleon
was not a helpless victim in this scenario at any time, he could have cancelled the
sale so that the group could go on with the city tour. But he did not.
More importantly, AMEX did not violate any legal duty to Pantaleon under
the circumstances under the principle of damnum absque injuria, or damages
without legal wrong, loss without injury.[47] As we held in BPI Express Card v. CA:
[48]

We do not dispute the findings of the lower court that private respondent
suffered damages as a result of the cancellation of his credit card. However, there
is a material distinction between damages and injury. Injury is the illegal invasion
of a legal right; damage is the loss, hurt, or harm which results from the injury;

and damages are the recompense or compensation awarded for the damage
suffered. Thus, there can be damage without injury in those instances in
which the loss or harm was not the result of a violation of a legal duty. In
such cases, the consequences must be borne by the injured person alone, the
law affords no remedy for damages resulting from an act which does not amount
to a legal injury or wrong. These situations are often called damnum absque
injuria.

In other words, in order that a plaintiff may maintain an action for

the injuries of which he complains, he must establish that such injuries
resulted from a breach of duty which the defendant owed to the plaintiff
- a concurrence of injury to the plaintiff and legal responsibility by the
person causing it. The underlying basis for the award of tort damages
is the premise that an individual was injured in contemplation of
law. Thus, there must first be a breach of some duty and the imposition
of liability for that breach before damages may be awarded; and the
breach of such duty should be the proximate cause of the injury.

Pantaleon is not entitled to damages

Because AMEX neither breached its contract with Pantaleon, nor acted with
culpable delay or the willful intent to cause harm, we find the award of moral
damages to Pantaleon unwarranted.
Similarly, we find no basis to award exemplary damages. In contracts, exemplary
damages can only be awarded if a defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.[49] The plaintiff must also show that he
is entitled to moral, temperate, or compensatory damages before the court may
consider the question of whether or not exemplary damages should be awarded. [50]

As previously discussed, it took AMEX some time to approve Pantaleons

purchase requests because it had legitimate concerns on the amount being charged;
no malicious intent was ever established here. In the absence of any other damages,
the award of exemplary damages clearly lacks legal basis.
Neither do we find any basis for the award of attorneys fees and costs of
litigation. No premium should be placed on the right to litigate and not every
winning party is entitled to an automatic grant of attorney's fees. [51] To be entitled
to attorneys fees and litigation costs, a party must show that he falls under one of

the instances enumerated inArticle 2208 of the Civil Code. [52] This, Pantaleon
failed to do. Since we eliminated the award of moral and exemplary damages, so
must we delete the award for attorney's fees and litigation expenses.
Lastly, although we affirm the result of the CA decision, we do so for the
reasons stated in this Resolution and not for those found in the CA decision.
WHEREFORE, premises considered, we SET ASIDE our May 8,
2009 Decision and GRANT the present motion for reconsideration. The Court of
Appeals Decision dated August 18, 2006 is hereby AFFIRMED. No costs.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

LUCAS P. BERSAMIN
Associate Justice
ATTESTATION

I attest that the conclusions in the above Resolution had been reached in
consultation before the case was assigned to the writer of the opinion of the Courts
Division.

CONCHITA CARPIO MORALES

Associate Justice
Acting Chairperson

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division
Acting Chairpersons Attestation, it is hereby certified that the conclusions in the
aboveResolution had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief
Justice

SECOND DIVISION

[G.R. No. 115324. February 19, 2003]

PRODUCERS
BANK
OF
THE
PHILIPPINES
(now
FIRST
INTERNATIONAL BANK), petitioner, vs. HON. COURT OF
APPEALS AND FRANKLIN VIVES,respondents.
DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision of the Court of Appeals
dated June 25, 1991 in CA-G.R. CV No. 11791 and of its Resolution dated May 5,
1994, denying the motion for reconsideration of said decision filed by petitioner
Producers Bank of the Philippines.
[1]

[2]

Sometime in 1979, private respondent Franklin Vives was asked by his neighbor
and friend Angeles Sanchez to help her friend and townmate, Col. Arturo Doronilla, in
incorporating his business, the Sterela Marketing and Services (Sterela for
brevity). Specifically, Sanchez asked private respondent to deposit in a bank a certain
amount of money in the bank account of Sterela for purposes of its incorporation. She
assured private respondent that he could withdraw his money from said account within
a months time. Private respondent asked Sanchez to bring Doronilla to their house so
that they could discuss Sanchezs request.
[3]

On May 9, 1979, private respondent, Sanchez, Doronilla and a certain Estrella

Dumagpi, Doronillas private secretary, met and discussed the matter. Thereafter,
relying on the assurances and representations of Sanchez and Doronilla, private
respondent issued a check in the amount of Two Hundred Thousand Pesos
(P200,000.00) in favor of Sterela. Private respondent instructed his wife, Mrs. Inocencia
Vives, to accompany Doronilla and Sanchez in opening a savings account in the name
of Sterela in the Buendia, Makati branch of Producers Bank of the
Philippines. However, only Sanchez, Mrs. Vives and Dumagpi went to the bank to
deposit the check. They had with them an authorization letter from Doronilla authorizing
Sanchez and her companions, in coordination with Mr. Rufo Atienza, to open an
account for Sterela Marketing Services in the amount of P200,000.00. In opening the
account, the authorized signatories were Inocencia Vives and/or Angeles Sanchez. A
passbook for Savings Account No. 10-1567 was thereafter issued to Mrs. Vives.
[4]

Subsequently, private respondent learned that Sterela was no longer holding office
in the address previously given to him. Alarmed, he and his wife went to the Bank to
verify if their money was still intact. The bank manager referred them to Mr. Rufo
Atienza, the assistant manager, who informed them that part of the money in Savings
Account No. 10-1567 had been withdrawn by Doronilla, and that only P90,000.00
remained therein. He likewise told them that Mrs. Vives could not withdraw said
remaining amount because it had to answer for some postdated checks issued by
Doronilla. According to Atienza, after Mrs. Vives and Sanchez opened Savings Account

No. 10-1567, Doronilla opened Current Account No. 10-0320 for Sterela and authorized
the Bank to debit Savings Account No. 10-1567 for the amounts necessary to cover
overdrawings in Current Account No. 10-0320. In opening said current account,
Sterela, through Doronilla, obtained a loan of P175,000.00 from the Bank. To cover
payment thereof, Doronilla issued three postdated checks, all of which were
dishonored. Atienza also said that Doronilla could assign or withdraw the money in
Savings Account No. 10-1567 because he was the sole proprietor of Sterela.
[5]

Private respondent tried to get in touch with Doronilla through Sanchez. On June
29, 1979, he received a letter from Doronilla, assuring him that his money was intact
and would be returned to him. On August 13, 1979, Doronilla issued a postdated check
for Two Hundred Twelve Thousand Pesos (P212,000.00) in favor of private
respondent. However, upon presentment thereof by private respondent to the drawee
bank, the check was dishonored. Doronilla requested private respondent to present the
same check on September 15, 1979 but when the latter presented the check, it was
again dishonored.
[6]

Private respondent referred the matter to a lawyer, who made a written demand
upon Doronilla for the return of his clients money. Doronilla issued another check
for P212,000.00 in private respondents favor but the check was again dishonored for
insufficiency of funds.
[7]

Private respondent instituted an action for recovery of sum of money in the Regional
Trial Court (RTC) in Pasig, Metro Manila against Doronilla, Sanchez, Dumagpi and
petitioner. The case was docketed as Civil Case No. 44485. He also filed criminal
actions against Doronilla, Sanchez and Dumagpi in the RTC. However, Sanchez
passed away on March 16, 1985 while the case was pending before the trial court. On
October 3, 1995, the RTC of Pasig, Branch 157, promulgated its Decision in Civil Case
No. 44485, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered sentencing defendants

Arturo J. Doronila, Estrella Dumagpi and Producers Bank of the Philippines to pay
plaintiff Franklin Vives jointly and severally
(a) the amount of P200,000.00, representing the money deposited, with interest at
the legal rate from the filing of the complaint until the same is fully paid;
(b) the sum of P50,000.00 for moral damages and a similar amount for exemplary
damages;
(c)

the amount of P40,000.00 for attorneys fees; and

(d)

the costs of the suit.

SO ORDERED.

[8]

Petitioner appealed the trial courts decision to the Court of Appeals. In its Decision
dated June 25, 1991, the appellate court affirmed in toto the decision of the RTC. It
likewise denied with finality petitioners motion for reconsideration in its Resolution
dated May 5, 1994.
[9]

[10]

On June 30, 1994, petitioner filed the present petition, arguing that
I.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT THE

TRANSACTION BETWEEN THE DEFENDANT DORONILLA AND
RESPONDENT VIVES WAS ONE OF SIMPLE LOAN AND NOT
ACCOMMODATION;
II.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT

PETITIONERS BANK MANAGER, MR. RUFO ATIENZA, CONNIVED WITH
THE OTHER DEFENDANTS IN DEFRAUDING PETITIONER (Sic. Should be
PRIVATE RESPONDENT) AND AS A CONSEQUENCE, THE PETITIONER
SHOULD BE HELD LIABLE UNDER THE PRINCIPLE OF NATURAL JUSTICE;
III.

THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE

RECORDS OF THE REGIONAL TRIAL COURT AND AFFIRMING THE
JUDGMENT APPEALED FROM, AS THE FINDINGS OF THE REGIONAL
TRIAL COURT WERE BASED ON A MISAPPREHENSION OF FACTS;
IV.

THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE

CITED DECISION IN SALUDARES VS. MARTINEZ, 29 SCRA 745,
UPHOLDING THE LIABILITY OF AN EMPLOYER FOR ACTS COMMITTED
BY AN EMPLOYEE IS APPLICABLE;
V.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE

DECISION OF THE LOWER COURT THAT HEREIN PETITIONER BANK IS
JOINTLY AND SEVERALLY LIABLE WITH THE OTHER DEFENDANTS FOR
THE AMOUNT OF P200,000.00 REPRESENTING THE SAVINGS
ACCOUNT DEPOSIT, P50,000.00 FOR MORAL DAMAGES, P50,000.00 FOR
EXEMPLARY DAMAGES, P40,000.00 FOR ATTORNEYS FEES AND THE
COSTS OF SUIT.
[11]

Private respondent filed his Comment on September 23, 1994. Petitioner filed its
Reply thereto on September 25, 1995. The Court then required private respondent to
submit a rejoinder to the reply. However, said rejoinder was filed only on April 21, 1997,
due to petitioners delay in furnishing private respondent with copy of the reply and
several substitutions of counsel on the part of private respondent. On January 17,
2001, the Court resolved to give due course to the petition and required the parties to
submit their respective memoranda. Petitioner filed its memorandum on April 16, 2001
while private respondent submitted his memorandum on March 22, 2001.
[12]

[13]

[14]

Petitioner contends that the transaction between private respondent and Doronilla is
a simple loan (mutuum) since all the elements of a mutuum are present: first, what was
delivered by private respondent to Doronilla was money, a consumable thing; and
second, the transaction was onerous as Doronilla was obliged to pay interest, as
evidenced by the check issued by Doronilla in the amount of P212,000.00, or P12,000
more than what private respondent deposited in Sterelas bank account. Moreover, the
fact that private respondent sued his good friend Sanchez for his failure to recover his
money from Doronilla shows that the transaction was not merely gratuitous but had a
business angle to it. Hence, petitioner argues that it cannot be held liable for the return
of private respondents P200,000.00 because it is not privy to the transaction between
the latter and Doronilla.
[15]

[16]

It argues further that petitioners Assistant Manager, Mr. Rufo Atienza, could not be
faulted for allowing Doronilla to withdraw from the savings account of Sterela since the
latter was the sole proprietor of said company. Petitioner asserts that Doronillas May 8,
1979 letter addressed to the bank, authorizing Mrs. Vives and Sanchez to open a
savings account for Sterela, did not contain any authorization for these two to withdraw
from said account. Hence, the authority to withdraw therefrom remained exclusively
with Doronilla, who was the sole proprietor of Sterela, and who alone had legal title to
the savings account. Petitioner points out that no evidence other than the testimonies
of private respondent and Mrs. Vives was presented during trial to prove that private
respondent deposited his P200,000.00 in Sterelas account for purposes of its
incorporation. Hence, petitioner should not be held liable for allowing Doronilla to
withdraw from Sterelas savings account.
[17]

[18]

Petitioner also asserts that the Court of Appeals erred in affirming the trial courts
decision since the findings of fact therein were not accord with the evidence presented
by petitioner during trial to prove that the transaction between private respondent and
Doronilla was a mutuum, and that it committed no wrong in allowing Doronilla to
withdraw from Sterelas savings account.
[19]

Finally, petitioner claims that since there is no wrongful act or omission on its part, it
is not liable for the actual damages suffered by private respondent, and neither may it
be held liable for moral and exemplary damages as well as attorneys fees.
[20]

Private respondent, on the other hand, argues that the transaction between him and
Doronilla is not a mutuum but an accommodation, since he did not actually part with
the ownership of his P200,000.00 and in fact asked his wife to deposit said amount in
the account of Sterela so that a certification can be issued to the effect that Sterela had
sufficient funds for purposes of its incorporation but at the same time, he retained some
[21]

degree of control over his money through his wife who was made a signatory to the
savings account and in whose possession the savings account passbook was given.
[22]

He likewise asserts that the trial court did not err in finding that petitioner, Atienzas
employer, is liable for the return of his money. He insists that Atienza, petitioners
assistant manager, connived with Doronilla in defrauding private respondent since it
was Atienza who facilitated the opening of Sterelas current account three days after
Mrs. Vives and Sanchez opened a savings account with petitioner for said company, as
well as the approval of the authority to debit Sterelas savings account to cover any
overdrawings in its current account.
[23]

There is no merit in the petition.

At the outset, it must be emphasized that only questions of law may be raised in a
petition for review filed with this Court. The Court has repeatedly held that it is not its
function to analyze and weigh all over again the evidence presented by the parties
during trial. The Courts jurisdiction is in principle limited to reviewing errors of law that
might have been committed by the Court of Appeals. Moreover, factual findings of
courts, when adopted and confirmed by the Court of Appeals, are final and conclusive
on this Court unless these findings are not supported by the evidence on record. There
is no showing of any misapprehension of facts on the part of the Court of Appeals in the
case at bar that would require this Court to review and overturn the factual findings of
that court, especially since the conclusions of fact of the Court of Appeals and the trial
court are not only consistent but are also amply supported by the evidence on record.
[24]

[25]

[26]

No error was committed by the Court of Appeals when it ruled that the transaction
between private respondent and Doronilla was a commodatum and not a mutuum. A
circumspect examination of the records reveals that the transaction between them was
a commodatum. Article 1933 of the Civil Code distinguishes between the two kinds of
loans in this wise:

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.
The foregoing provision seems to imply that if the subject of the contract is a
consumable thing, such as money, the contract would be a mutuum. However, there

are some instances where a commodatum may have for its object a consumable
thing. Article 1936 of the Civil Code provides:

Consumable goods may be the subject of commodatum if the purpose of the contract
is not the consumption of the object, as when it is merely for exhibition.
Thus, if consumable goods are loaned only for purposes of exhibition, or when the
intention of the parties is to lend consumable goods and to have the very same goods
returned at the end of the period agreed upon, the loan is a commodatum and not
a mutuum.
The rule is that the intention of the parties thereto shall be accorded
primordial consideration in determining the actual character of a contract. In
case of doubt, the contemporaneous and subsequent acts of the parties shall be
considered in such determination.
[27]

[28]

As correctly pointed out by both the Court of Appeals and the trial court, the
evidence shows that private respondent agreed to deposit his money in the savings
account of Sterela specifically for the purpose of making it appear that said firm had
sufficient capitalization for incorporation, with the promise that the amount shall be
returned within thirty (30) days. Private respondent merely accommodated Doronilla
by lending his money without consideration, as a favor to his good friend Sanchez. It
was however clear to the parties to the transaction that the money would not be
removed from Sterelas savings account and would be returned to private respondent
after thirty (30) days.
[29]

Doronillas attempts to return to private respondent the amount of P200,000.00

which the latter deposited in Sterelas account together with an additional P12,000.00,
allegedly representing interest on the mutuum, did not convert the transaction from
a commodatum into a mutuum because such was not the intent of the parties and
because the additionalP12,000.00 corresponds to the fruits of the lending of
the P200,000.00. Article 1935 of the Civil Code expressly states that [t]he bailee
in commodatum acquires the use of the thing loaned but not its fruits. Hence, it was
only proper for Doronilla to remit to private respondent the interest accruing to the
latters money deposited with petitioner.
Neither does the Court agree with petitioners contention that it is not solidarily liable
for the return of private respondents money because it was not privy to the transaction
between Doronilla and private respondent. The nature of said transaction, that is,
whether it is a mutuum or a commodatum, has no bearing on the question of petitioners
liability for the return of private respondents money because the factual circumstances
of the case clearly show that petitioner, through its employee Mr. Atienza, was partly
responsible for the loss of private respondents money and is liable for its restitution.
Petitioners rules for savings deposits written on the passbook it issued Mrs. Vives
on behalf of Sterela for Savings Account No. 10-1567 expressly states that

2. Deposits and withdrawals must be made by the depositor personally or upon his
written authority duly authenticated, and neither a deposit nor a withdrawal will be
permitted except upon the production of the depositor savings bank book in
which will be entered by the Bank the amount deposited or withdrawn.
[30]

Said rule notwithstanding, Doronilla was permitted by petitioner, through Atienza,

the Assistant Branch Manager for the Buendia Branch of petitioner, to withdraw
therefrom even without presenting the passbook (which Atienza very well knew was in
the possession of Mrs. Vives), not just once, but several times. Both the Court of
Appeals and the trial court found that Atienza allowed said withdrawals because he was
party to Doronillas scheme of defrauding private respondent:

But the scheme could not have been executed successfully without the knowledge,
help and cooperation of Rufo Atienza, assistant manager and cashier of the Makati
(Buendia) branch of the defendant bank. Indeed, the evidence indicates that Atienza
had not only facilitated the commission of the fraud but he likewise helped in devising
the means by which it can be done in such manner as to make it appear that the
transaction was in accordance with banking procedure.
To begin with, the deposit was made in defendants Buendia branch precisely because
Atienza was a key officer therein. The records show that plaintiff had suggested that
the P200,000.00 be deposited in his bank, the Manila Banking Corporation, but
Doronilla and Dumagpi insisted that it must be in defendants branch in Makati for it
will be easier for them to get a certification. In fact before he was introduced
to plaintiff, Doronilla had already prepared a letter addressed to the Buendia branch
manager authorizing Angeles B. Sanchez and company to open a savings account for
Sterela in the amount ofP200,000.00, as per coordination with Mr. Rufo Atienza,
Assistant Manager of the Bank x x x (Exh. 1). This is a clear manifestation that the
other defendants had been in consultation with Atienza from the inception of the
scheme. Significantly, there were testimonies and admission that Atienza is the
brother-in-law of a certain Romeo Mirasol, a friend and business associate of
Doronilla.
Then there is the matter of the ownership of the fund. Because of the coordination
between Doronilla and Atienza, the latter knew before hand that the money deposited
did not belong to Doronilla nor to Sterela. Aside from such foreknowledge, he was
explicitly told by Inocencia Vives that the money belonged to her and her husband and
the deposit was merely to accommodate Doronilla. Atienza even declared that the
money came from Mrs. Vives.

Although the savings account was in the name of Sterela, the bank records disclose
that the only ones empowered to withdraw the same were Inocencia Vives and
Angeles B. Sanchez. In the signature card pertaining to this account (Exh. J), the
authorized signatories were Inocencia Vives &/or Angeles B. Sanchez. Atienza stated
that it is the usual banking procedure that withdrawals of savings deposits could only
be made by persons whose authorized signatures are in the signature cards on file with
the bank. He, however, said that this procedure was not followed here because Sterela
was owned by Doronilla. He explained that Doronilla had the full authority to
withdraw by virtue of such ownership. The Court is not inclined to agree with
Atienza. In the first place, he was all the time aware that the money came from Vives
and did not belong to Sterela. He was also told by Mrs. Vives that they were only
accommodating Doronilla so that a certification can be issued to the effect that Sterela
had a deposit of so much amount to be sued in the incorporation of the firm. In the
second place, the signature of Doronilla was not authorized in so far as that account is
concerned inasmuch as he had not signed the signature card provided by the bank
whenever a deposit is opened. In the third place, neither Mrs. Vives nor Sanchez had
given Doronilla the authority to withdraw.
Moreover, the transfer of fund was done without the passbook having been
presented. It is an accepted practice that whenever a withdrawal is made in a savings
deposit, the bank requires the presentation of the passbook. In this case, such
recognized practice was dispensed with. The transfer from the savings account to the
current account was without the submission of the passbook which Atienza had given
to Mrs. Vives. Instead, it was made to appear in a certification signed by Estrella
Dumagpi that a duplicate passbook was issued to Sterela because the original
passbook had been surrendered to the Makati branch in view of a loan
accommodation assigning the savings account (Exh. C). Atienza, who undoubtedly
had a hand in the execution of this certification, was aware that the contents of the
same are not true. He knew that the passbook was in the hands of Mrs. Vives for he
was the one who gave it to her. Besides, as assistant manager of the branch and the
bank official servicing the savings and current accounts in question, he also was aware
that the original passbook was never surrendered. He was also cognizant that Estrella
Dumagpi was not among those authorized to withdraw so her certification had no
effect whatsoever.
The circumstance surrounding the opening of the current account also demonstrate
that Atienzas active participation in the perpetration of the fraud and deception that
caused the loss. The records indicate that this account was opened three days later
after the P200,000.00 was deposited. In spite of his disclaimer, the Court believes that
Atienza was mindful and posted regarding the opening of the current account
considering that Doronilla was all the while in coordination with him. That it was

he who facilitated the approval of the authority to debit the savings account to cover
any overdrawings in the current account (Exh. 2) is not hard to comprehend.
Clearly Atienza had committed wrongful acts that had resulted to the loss subject of
this case. x x x.
[31]

Under Article 2180 of the Civil Code, employers shall be held primarily and solidarily
liable for damages caused by their employees acting within the scope of their assigned
tasks. To hold the employer liable under this provision, it must be shown that an
employer-employee relationship exists, and that the employee was acting within the
scope of his assigned task when the act complained of was committed. Case law in
the United States of America has it that a corporation that entrusts a general duty to its
employee is responsible to the injured party for damages flowing from the employees
wrongful act done in the course of his general authority, even though in doing such act,
the employee may have failed in its duty to the employer and disobeyed the latters
instructions.
[32]

[33]

There is no dispute that Atienza was an employee of petitioner. Furthermore,

petitioner did not deny that Atienza was acting within the scope of his authority as
Assistant Branch Manager when he assisted Doronilla in withdrawing funds from
Sterelas Savings Account No. 10-1567, in which account private respondents money
was deposited, and in transferring the money withdrawn to Sterelas Current Account
with petitioner. Atienzas acts of helping Doronilla, a customer of the petitioner, were
obviously done in furtherance of petitioners interests even though in the process,
Atienza violated some of petitioners rules such as those stipulated in its savings
account passbook. It was established that the transfer of funds from Sterelas savings
account to its current account could not have been accomplished by Doronilla without
the invaluable assistance of Atienza, and that it was their connivance which was the
cause of private respondents loss.
[34]

[35]

The foregoing shows that the Court of Appeals correctly held that under Article 2180
of the Civil Code, petitioner is liable for private respondents loss and is solidarily liable
with Doronilla and Dumagpi for the return of the P200,000.00 since it is clear that
petitioner failed to prove that it exercised due diligence to prevent the unauthorized
withdrawals from Sterelas savings account, and that it was not negligent in the
selection and supervision of Atienza. Accordingly, no error was committed by the
appellate court in the award of actual, moral and exemplary damages, attorneys fees
and costs of suit to private respondent.
WHEREFORE, the petition is hereby DENIED. The assailed Decision and
Resolution of the Court of Appeals are AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing and Austria-Martinez, JJ., concur.

[1]

Justice Asaali S. Isnani, Ponente, with Justices Rodolfo A. Nocon, Presiding Justice, and Antonio M.
Martinez, concurring.

[2]

Rollo, pp. 54-55.

[3]

Id. at 37.

[4]

Ibid.

[5]

Id. at 37-38.

[6]

Id. at 38.

[7]

Id.

[8]

Id. at 63.

[9]

Id. at 35-47.

[10]

Id. at 54-55.

[11]

Id. at 18-19.

[12]

Id. at 148, 181.

[13]

Id. at 176, 199.

[14]

Id. at 227.

[15]

Id. at 21.

[16]

Id. at 22.

[17]

Id. at 24-27.

[18]

Id. at 23.

[19]

Id. at 28.

[20]

Rollo, Petitioners Memorandum, pp. 13-14.

[21]

Id. at 11-12.

[22]

Rollo, p. 75; Private respondents Memorandum, pp. 8-9.

[23]

Id. at 75-77; Id. at 12-16.

[24]

Flores v. Uy, G.R. No. 121492, October 26, 2001; Lim v. People, G.R. No. 143231, October 26, 2001.

[25]

Section 1, Rule 45, Revised Rules of Civil Procedure.

[26]

Baas, Jr. v. Court of Appeals, 325 SCRA 259 (2000); Philippine National Construction Corporation v.
Mars Construction Enterprises, Inc., 325 SCRA 624 (2000).

[27]

Tanguilig v. Court of Appeals, 266 SCRA 78, 83-84 (1997), citing Kasilag v. Rodriguez, 69 Phil. 217;
17A Am Jur 2d 27 Contracts, 5, citing Wallace Bank & Trust Co. v. First National Bank, 40 Idaho
712, 237 P 284, 50 ALR 316.

[28]

Tanguilig v. Court of Appeals, supra, p. 84.

[29]

Rollo, pp. 40-41, 60.

[30]

Exhibit B, Folder of Exhibits, p. 3, emphasis supplied.

[31]

Rollo, pp. 43-47, citing the Decision of the Regional Trial Court, pp. 5-8.

[32]

Castilex Industrial Corporation v. Vasquez, Jr., 321 SCRA 393 (1999).

[33]

18B Am Jur 2d, p. 947, Corporations 2125, citing Pittsburgh, C.C. & S.L.R. Co. v. Sullivan, 40 NE
138.

[34]

See note 31.

[35]

Exhibit B, Folder of Exhibits, p. 3.