FACTS:

American Express International, Inc. (AMEX) is a resident foreign corporation engaged in the business of providing credit services. Polo Pantaleon has been an AMEX cardholder since 1980. In October 1991, Pantaleon and his family went on a guided European tour. While in Amsterdam, Pantaleon purchased diamond pieces worth US$13,826.00 at Coster Diamond House using his AMEX credit card. The transaction was delayed for approval, causing Pantaleon and his family to miss their city tour and resulting in humiliation. Similar delays occurred when Pantaleon tried to make purchases in the United States. Pantaleon filed an action for damages against AMEX, which was initially awarded damages by the Regional Trial Court (RTC). However, the Court of Appeals (CA) reversed the award, finding that AMEX did not act in bad faith. Pantaleon appealed to the Supreme Court, which ruled that AMEX was guilty of delay and awarded damages. AMEX filed a motion for reconsideration, arguing that the delay was justified due to the amount involved and the need for a thorough review of Pantaleon's credit history. Pantaleon maintained that AMEX was still liable for delay and that moral and exemplary damages can be awarded even without malice.

ISSUES:

1. When does the credit card issuer-cardholder relationship begin?

2. Is the card membership agreement a binding contract between the credit card issuer and the cardholder?

3. Whether AMEX has the obligation to approve all charge requests made by its credit cardholders.

4. Whether AMEX is guilty of culpable delay in approving the charge requests of the plaintiff.

5. Whether AMEX is guilty of culpable delay in approving the purchase requests of the cardholder.

6. Whether AMEX has an obligation to act on the purchase requests within a specific period of time.

7. Whether AMEX had an obligation to act upon Pantaleon's purchase requests within a specific period of time.

8. Whether AMEX abused its rights in delaying the processing of Pantaleon's purchase requests.

9. Whether AMEX acted in good faith in its review procedure.

10. Whether the delay in the approval of the credit card purchase constitutes a violation of Pantaleon's rights.

11. Whether Pantaleon is the proximate cause of his own embarrassment and humiliation.

12. Whether the plaintiff is entitled to damages.

13. Whether the plaintiff is entitled to exemplary damages.

14. Whether the plaintiff is entitled to attorney's fees and litigation costs.

RULING:

1. The credit card issuer-cardholder relationship begins when the credit card issuer gives the cardholder the privilege of charging items at establishments associated with the issuer.

2. Yes, the card membership agreement is a binding contract between the credit card issuer and the cardholder.

3. The court ruled that AMEX does not have the obligation to approve all charge requests made by its credit cardholders. The contractual relationship between the credit card issuer and the credit card holder begins to exist only upon the approval of the cardholder's purchase request. The use of a credit card to pay for a purchase is considered an offer to enter into a loan agreement with the credit card company, and the actual credit on loan agreement only arises after the credit card issuer approves the purchase request. AMEX reserves the right to deny authorization for any requested charge, as stated in the card membership agreement.

4. The court ruled that AMEX is not guilty of culpable delay in approving the charge requests of the plaintiff. Since AMEX has no obligation to approve the purchase requests of its credit cardholders, there can be no finding of default. In order to hold a debtor guilty of culpable delay, there must be a demand for performance by the creditor. The offers made by the plaintiff to AMEX, through the use of his credit card, cannot be classified as the demand required to make the debtor in default. The failure to comply with the requisites of Article 1169 of the Civil Code, which include a demand for performance, prevents the plaintiff from claiming that AMEX is guilty of culpable delay.

5. AMEX is not guilty of culpable delay in approving the purchase requests of the cardholder. The court held that AMEX's right to review the cardholder's credit history is a necessary implication of its right to deny authorization for any requested charge. The fact that AMEX took approximately 15 to 20 minutes to approve the transactions does not constitute culpable delay.

6. AMEX does not have an obligation to act on the purchase requests within a specific period of time. The court found that there is no provision in the credit card membership agreement that obligates AMEX to act on all cardholder purchase requests within a specifically defined period of time. Additionally, Philippine law does not require credit card companies to act upon cardholders' purchase requests within a specific period of time.

7. AMEX had neither a contractual nor a legal obligation to act upon Pantaleon's purchase requests within a specific period of time.

8. AMEX did not abuse its rights in delaying the processing of Pantaleon's purchase requests as there was no evidence to suggest deliberate intent to cause loss or injury, or acting in a manner contrary to morals, good customs, or public policy.

9. AMEX acted in good faith in its review procedure to protect Pantaleon as a cardholder and to prevent fraudulent use of the credit card.

10. The delay in the approval of the credit card purchase does not constitute a violation of Pantaleon's rights. Pantaleon knew that AMEX needed to review his credit card history before approving the purchase. While there was a delay, AMEX had the right to exercise its discretion in assessing Pantaleon's ability to pay. The approval came after careful consideration of Pantaleon's past spending pattern and the decision was made based on his length of membership as a cardholder. Furthermore, Pantaleon did not come to court with clean hands as he was not blameless in the situation.

11. Pantaleon is the proximate cause of his own embarrassment and humiliation. He knew that the tour group had a strict schedule and that the city tour could not start without him. Despite knowing this, Pantaleon proceeded with the purchase and caused a delay. He could have cancelled the sale to avoid inconveniencing the tour group, but he chose not to. Under the doctrine of volenti non fit injuria, a person who knowingly and voluntarily exposes themselves to danger cannot claim damages for resulting injury. Pantaleon willingly caused the delay and therefore cannot claim damages for the embarrassment and humiliation he experienced.

12. The plaintiff is not entitled to damages as there was no breach of contract or culpable delay by the defendant.

13. The plaintiff is not entitled to exemplary damages as the defendant did not act in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

14. The plaintiff is not entitled to attorney's fees and litigation costs as there was no showing that he falls under one of the instances enumerated in Article 2208 of the Civil Code.

PRINCIPLES:

• Credit card transactions involve three contracts: (a) the sales contract between the credit card holder and the merchant, (b) the loan agreement between the credit card issuer and the cardholder, and (c) the promise to pay between the credit card issuer and the merchant.

• The credit card issuer-cardholder relationship begins when the credit card issuer gives the cardholder the privilege of charging items at establishments associated with the issuer.

• The card membership agreement is a binding contract between the credit card issuer and the cardholder.

• The relationship between a credit card issuer and a credit card holder is a contractual one, governed by the terms and conditions found in the card membership agreement.

• A card membership agreement is a contract of adhesion, but still binding as an ordinary contract. The terms of the contract are construed strictly against the party who drafted it.

• The use of a credit card to pay for a purchase is considered an offer to enter into a loan agreement with the credit card company.

• The actual credit on loan agreement between the credit card issuer and the credit card holder only arises upon the approval of the purchase request by the credit card issuer.

• To hold a debtor guilty of culpable delay, there must be a demand for performance by the creditor. The failure to comply with the requisites of Article 1169 of the Civil Code, including a demand for performance, prevents the finding of culpable delay.

• A credit card company has the right to review a cardholder's credit history before approving purchase requests.

• A practice or custom is not a source of a legally demandable or enforceable right.

• The credit card membership agreement governs the relationship between the credit card company and the cardholder.

• Philippine law does not require credit card companies to act upon cardholders' purchase requests within a specific period of time.

• Article 19 of the Civil Code provides that every person must act with justice, give everyone their due, and observe honesty and good faith in the exercise of their rights and performance of their duties.

• Article 21 of the Civil Code allows for damages against any person who causes loss or injury to another willfully and in a manner contrary to morals, good customs, or public policy.

• The principles in Articles 19 and 21 provide the standard by which to judge AMEX's actions in a credit card relationship.

Note: This is a partial digest and may not include all the issues, rulings, and principles in the complete case.

• Damnum absque injuria - Loss or harm without legal wrong. In cases where the loss or harm was not the result of a violation of a legal duty, the consequences must be borne by the injured person alone and the law affords no remedy for damages resulting from an act that does not amount to a legal injury or wrong.

• Doctrine of volenti non fit injuria - A person who knowingly and voluntarily exposes themselves to danger cannot claim damages for resulting injury.

• In order for a plaintiff to maintain an action for damages, he must establish that the injuries resulted from a breach of duty by the defendant and that the breach was the proximate cause of the injury.

• Exemplary damages can only be awarded in contracts if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

• To be entitled to attorney's fees and litigation costs, a party must show that he falls under one of the instances enumerated in Article 2208 of the Civil Code.