Sunday, April 24, 2011

SISTER’S ACT: How an “Outside Catechist” Saves A School From Liability (Aquinas School vs Spouses Inton and Sr. Margarita Yamyamin, OP, G.R. No. 184202, January 26, 2011)

By Siesta-friendly

First of all, we note the long length of time to resolve this issue. The incident subject of this case occurred in 1998.  The trial court issued its decision only in 2006.  The CA decided in 2008 and the SC only this April 2011. The award was for moral damages of P25,000.00, exemplary damages of P25,000.00, and attorney’s fees of P10,000.00 plus the costs of suit.  It took 13 years for complainants to be paid P50,000 in damages.

Anyway, the case as Ponente Justice Abad summarizes, is “about the private school’s liability for the outside catechist’s act of shoving a student and kicking him on the legs when he disobeyed her instruction to remain in his seat and not move around the classroom.”

Based on the Supreme Court’s decision below, an outside catechist is apparently a religion teacher provided by a congregation to teach religion in a school and whose conduct is nobody’s responsibility but himself/herself. 

The Facts

“In 1998 respondent Jose Luis Inton (Jose Luis) was a grade three student at Aquinas School (Aquinas).  Respondent Sister Margarita Yamyamin (Yamyamin), a religion teacher who began teaching at that school only in June of that year, taught Jose Luis’ grade three religion class. 

On July 14, 1998, while Yamyamin was writing on the blackboard, Jose Luis left his assigned seat and went over to a classmate to play a joke of surprising him.  Yamyamin noticed this and sent Jose Luis back to his seat.  After a while, Jose Luis got up again and went over to the same classmate.  This time, unable to tolerate the child’s behavior, Yamyamin approached Jose Luis and kicked him on the legs several times.  She also pulled and shoved his head on the classmate’s seat.  Finally, she told the child to stay where he was on that spot of the room and finish copying the notes on the blackboard while seated on the floor.

As a result of the incident, respondents Jose and Victoria Inton (the Intons) filed an action for damages on behalf of their son Jose Luis against Yamyamin and Aquinas before the Regional Trial Court (RTC) of Pasig City in Civil Case 67427.  The Intons also filed a criminal action against Yamyamin for violation of Republic Act 7610 to which she pleaded guilty and was sentenced accordingly.

With regard to the action for damages, the Intons sought to recover actual, moral, and exemplary damages, as well as attorney’s fees, for the hurt that Jose Luis and his mother Victoria suffered.  The RTC … ruled in Jose Luis’ favor, holding Yamyamin liable to him for moral damages of P25,000.00, exemplary damages of P25,000.00, and attorney’s fees of P10,000.00 plus the costs of suit.

Not satisfied, the Intons elevated the case to the Court of Appeals (CA).  They asked the CA to increase the award of damages and hold Aquinas solidarily liable with Yamyamin.  Finding that an employer-employee relation existed between Aquinas and Yamyamin, the CA found them solidarily liable to Jose Luis.  The CA, however, declined to increase the award of damages.  Jose Luis moved for partial reconsideration but this was denied.  Aquinas, for its part, appealed directly to this Court from the CA decision through a petition for review on certiorari.”

The Ruling

So is the school liable for harm brought by a teacher to a student? Not in this case.  Why not?  Because, believe it or not, Aquinas School – named after St. Thomas Aquinas, the patron saint of Catholic schools of all things – does not have control over its catechists.  So the school says and so the Supreme Court believes.

The SC found that –

“Aquinas had an agreement with a congregation of sisters under which, in order to fulfill its ministry, the congregation would send religion teachers to Aquinas to provide catechesis to its students. The SC favored Aquinas’ insistence that “it was not the school but Yamyamin’s religious congregation that chose her for the task of catechizing the school’s grade three students, much like the way bishops designate the catechists who would teach religion in public schools. Under the circumstances, it was quite evident that Aquinas did not have control over Yamyamin’s teaching methods.  The Intons had not refuted the school directress’ testimony in this regard.  Consequently, it was error for the CA to hold Aquinas solidarily liable with Yamyamin.”

Wow, it’s hard enough to imagine that any school would have an arrangement where they lose control over how their students are educated but who would believe that a private catholic school would even think of losing control over the religious education of their students? 

The SC refers to Sr. Margarita as an “outside cathechist” yet Sr. Margarita is from the same order, O.P. or Ordo Praedicatorum, the Dominican Order. Why then when it comes to religious teaching, is she deemed “outside”?  The only reason she is “outside” is likely because Aquinas is an exclusive school for boys run by Dominican fathers.  Aquinas’ lay teachers would be more “outside” when it comes to catechism as they are outside the Dominican Order. 

Anyway, the SC writes it “applied the “four-fold test” to determine the existence of an employer-employee relationship: the employer (a) selects and engages the employee; (b) pays his wages; (c) has power to dismiss him; and (d) has control over his work.  Of these, the most crucial is the element of control.  Control refers to the right of the employer, whether actually exercised or reserved, to control the work of the employee as well as the means and methods by which he accomplishes the same.

The SC does not specify, beyond finding the existence of the teaching agreement with the congregation, where the loss of Aquinas’ control over Sr. Margarita Yamyamin’s work begins. 

The SC admits that “[O]f course, Aquinas still had the responsibility of taking steps to ensure that only qualified outside catechists are allowed to teach its young students.”  The SC enumerates the steps Aquinas took to “avoid the occurrence of improper conduct towards the students by their religion teacher”: 

“First, Yamyamin’s transcript of records, certificates, and diplomas showed that she was qualified to teach religion. 

Second, there is no question that Aquinas ascertained that Yamyamin came from a legitimate religious congregation of sisters and that, given her Christian training, the school had reason to assume that she would behave properly towards the students. 

Third, the school gave Yamyamin a copy of the school’s Administrative Faculty Staff Manual that set the standards for handling students.  It also required her to attend a teaching orientation before she was allowed to teach beginning that June of 1998. 

Fourth, the school pre-approved the content of the course she was to teach to ensure that she was really catechizing the students.
And fifth, the school had a program for subjecting Yamyamin to classroom evaluation.  Unfortunately, since she was new and it was just the start of the school year, Aquinas did not have sufficient opportunity to observe her methods.  At any rate, it acted promptly to relieve her of her assignment as soon as the school learned of the incident.   It cannot be said that Aquinas was guilty of outright neglect.”

But why does the SC limit its findings on the school’s responsibility only to the above 5 steps to justify absolving Aquinas of neglect?  In any case, aren’t they applicable as regards any teacher “outside” or not?

What now prevents a school from having an agreement with other congregations/groups under which the latter would provide teachers to teach other school subjects so that the school is absolved from any responsibility for any of said teachers’ misconduct?

It seems parents must now check what kind of teaching arrangements their children’s schools have.  As these arrangements may matter when a school’s liability is raised once a teacher does wrong to their children.  Obviously, a Catholic school is not beyond doing a Pontius Pilate by washing its hands of liability for a sister’s act.


Sunday, April 17, 2011

CONTACT CONTRACT? (A spouse's refusal to have sexual relations is not a ground for annulment)

By Obiter07

A husband had reason to go up to the Supreme Court to try and have his marriage annulled on the ground of his wife’s refusal to have sexual intercourse. Sadly for him, the Court ruled,that such refusal is not tantamount to psychological incapacity (see Baccay vs. Baccay, et al., G.R. No. 173138 December 1, 2010).

The petitioner husband and respondent wife were schoolmates. Petitioner courted the respondent and it was only after “years of continuous pursuit” that they became sweethearts. At the outset, petitioner observed that respondent was aloof and distant to his relatives despite his efforts to bring them closer. He later on broke up with her as he found another girl.  Respondent refused the break up and offered to remain friends, despite the other relationship. But they still managed to have “several romantic moments” which petitioner treated casually until sometime in 1998 when respondent informed him that she was pregnant. Petitioner “grudgingly” married respondent, partly at the prompting of his mother.

When they set out to live at petitioner family’s house, respondent still remained aloof from the family, coming and going as she pleased and not contributing to the upkeep of the household. And she now refused to have any sexual contact. Petitioner did not observe any pregnancy symptoms, which observation was shared by respondent’s officemates. Later on, respondent failed to go home for one day and thereafter announced that she had a miscarriage.

Petitioner confronted her about this which intensified into a quarrel. When petitioner’s mother sought to intervene, respondent cursed here.  They were asked to leave the house.  Respondent’s parents then picked her up and never came back despite petitioner’s efforts.  After less than two years of marriage, petitioner filed “a petition for declaration of nullity of marriage.  Respondent did not participate in the proceedings. The RTC ruled in his favor declaring the marriage null and void. On appeal by the Office of the Solicitor General, the decision of the RTC was reversed based on the finding that the respondent’s failure “to establish that Maribel’s supposed Narcissistic Personality Disorder was the psychological incapacity contemplated by law and that it was permanent and incurable. xxx “

Petitioner went to the Supreme Court which found that the issue “to be resolved is whether the marriage between the parties is null and void under Article 36 of the Family Code.”

ART. 36. A marriage contracted by any party who, at the time of the celebration, was psychologically incapacitated to comply with the essential marital obligations of marriage, shall likewise be void even if such incapacity becomes manifest only after its solemnization.

Petitioner argues that respondent’s “refusal to procreate” amounts to psychological incapacity. He states that their last sexual contact was before the marriage when respondent was drunk.  And that “if a spouse senselessly and constantly refuses to perform his or her marital obligations, Catholic marriage tribunals attribute the causes to psychological incapacity rather than to stubborn refusal.” Their pre-marital relations which petitioner considers as “casual” sex should be distinguished from “making love for procreation and consummation of the marriage for the start of family life.”  Respondent just railroaded him into marriage.  

Petitioner submits other indicia” of psychological incapacity as respondent displayed traits of someone suffering from Narcissistic Personality Disorder before and during the marriage.  Respondent would not mingle with his family and was rude to his mother.  She was “arrogant and haughty.” She was “interpersonally exploitative” when she misrepresented her pregnancy.  After marriage, she never showed respect and love to petitioner and his family.  He pointed out that the “psychological incapacity was proven to be permanent and incurable with the root cause existing before the marriage. The psychologist testified that persons suffering from Narcissistic Personality Disorder were unmotivated to participate in therapy session and would reject any form of psychological help rendering their condition long lasting if not incurable.  Such persons would not admit that their behavioral manifestations connote pathology or abnormality.  The psychologist added that Maribel’s psychological incapacity was deeply rooted within her adaptive system since early childhood and manifested during adult life.”

The Supreme Court was unconvinced.

In Santos v. Court of Appeals (G.R. No. 112019, January 4, 1995) the Court held “that the phrase “psychological incapacity” is not meant to comprehend all possible cases of psychoses.  It refers to no less than a mental (not physical) incapacity that causes a party to be truly noncognitive of the basic marital covenants that concomitantly must be assumed and discharged by the parties to the marriage which, as expressed by Article 68 of the Family Code, include their mutual obligations to live together, observe love, respect and fidelity and render help and support.  The intendment of the law has been to confine it to the most serious of cases of personality disorders clearly demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage.”

In Republic of the Phils. v. Court of Appeals (335 Phil. 664, 676-678 (1997), the Court stated the guidelines in resolving petitions for declaration of nullity of marriage amongwhich is that the “burden of proof to show the nullity of the marriage belongs to the plaintiff. Any doubt should be resolved in favor of the existence and continuation of the marriage and against its dissolution and nullity. xxx” Moreover, the “incapacity must also be shown to be medically or clinically permanent or incurable.”

In this case, the “totality of evidence” is not sufficient to sustain a finding of psychological incapacity.  The evidence merely established refusal to have sexual intercourse after marriage and that she left after the quarrel about the alleged miscarriage.  There was no proof of the “root cause of the alleged psychological incapacity and establish the requirements of gravity, juridical antecedence, and incurability.” The report of the psychologist ““did not establish how the personality disorder incapacitated” the respondent “from validly assuming the essential obligations of the marriage.” She even testified that respondent “was capable of entering into a marriage except that it would be difficult for her to sustain one.

“Mere difficulty, it must be stressed, is not the incapacity contemplated by law. The Court emphasizes that the burden falls upon petitioner, not just to prove that private respondent suffers from a psychological disorder, but also that such psychological disorder renders her “truly incognitive of the basic marital covenants that concomitantly must be assumed and discharged by the parties to the marriage.”  Psychological incapacity must be more than just a “difficulty,” a “refusal,” or a “neglect” in the performance of some marital obligations.  An unsatisfactory marriage is not a null and void marriage.” 

As the Court held in in Marcos v. Marcos (397 Phil. 840, 851 (2000)): “Article 36 of the Family Code, we stress, is not to be confused with a divorce law that cuts the marital bond at the time the causes therefor manifest themselves.  It refers to a serious psychological illness afflicting a party even before the celebration of the marriage. It is a malady so grave and so permanent as to deprive one of awareness of the duties and responsibilities of the matrimonial bond one is about to assume. x x x.”

It appears that as far as the Court is concerned that marriage is not just a contact contract.  Now it would take more than a wife saying no to a husband’s advances before it can be annulled.  Where intimacy once defined the term ‘marriage’, the Supreme Court now holds mere capacity to contract as sufficient definition. 


Sunday, April 10, 2011

BAGMEN: Liability for Lost Luggage

By Obiter07

In Air France vs. Gillego, G.R. No 165266, December 15, 2010, the Supreme Court discussed the liability that airlines have for lost luggage, particularly in terms of moral damages due to a passenger.  Unfortunately for the airline, this was no ordinary passenger but a Congressman on his way to deliver a speech.

In 1993, Congressman Gillego was the keynote speaker at the 89th Inter-Parliamentary Conference Symposium on “Parliament: Guardian of Human Rights”.  The Congressman left for Paris and was to take a connecting flight to Budapest.  He learned of an earlier flight to Budapest and made arrangements for the same.  He was given a ticket and a boarding pass for this new flight as well as a new baggage claim stub for his checked-in luggage. 

Upon arrival at Budapest, his luggage was not at the claims section.  He sought assistance and was advised to wait at the hotel. His luggage was never delivered despite inquiries.   

Upon his return home, his lawyer wrote Air France complaining about the loss and the damages he suffered while in Budapest arising from his loss of personal effects, medicines and even the speeches he had prepared, among others.  He only had his travel documents, pocket money and the clothes on his back.  He was constrained to shop for personal items including clothes and medicines which amounted to $1,000. He even had to make another speech which was made more difficult due to the lack of data and information that was in his luggage. He asked for P1,000,000.00 from the petitioner as compensation. Air France ignored his repeated follow-ups on his lost luggage. He thereafter filed a complaint for damages against Air France.

The trial court awarded P1,000,000.00 as moral damages; P500,000.00 as exemplary damages and P50,000.00 as attorney’s fees to the plaintiff.   This was affirmed by the Court of Appeals.

Air France sought relief before the Supreme Court, arguing that the award of “extravagant sums to respondent that already tend to punish the petitioner and enrich the respondent, which is not the function at all of moral damages” and that “the damages awarded are definitely not proportionate or commensurate to the wrong or injury supposedly inflicted.” The plaintiff was after all an expert in the field of human rights who could have delivered his speech even without his notes. 

The petition was found to be partly meritorious.  The Supreme Court held that being a “business intended to serve the travelling public primarily, a contract of carriage is imbued with public interest.”  “Article 1735 of the Civil Code provides that in case of lost or damaged goods, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required by Article 1733.  Thus, in an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its non-performance by the carrier.” [emphasis supplied]

There is no dispute that the checked-in luggage was not found upon arrival at plaintiff’s destination and was only returned two years later. The action is founded on the breach of the contract of carriage with Air France unable to offer any satisfactory explanation for the unreasonable delay in the delivery of the baggage. Since the presumption of negligence was not overcome, liability for the delay was established.  Upon recovery of the baggage during trial, the plaintiff no longer pressed his claim for actual or compensatory damages.

For moral damages to be awarded in the breach of contract of carriage, “the breach must be wanton and deliberately injurious or the one responsible acted fraudulently or with malice or bad faith.  Not every case of mental anguish, fright or serious anxiety calls for the award of moral damages.”  Where there is no showing of fraud or bad faith, “liability for damages is limited to the natural and probable consequences of the breach of the obligation which the parties had foreseen or could have reasonably foreseen. In such a case the liability does not include moral and exemplary damages.”
Air France was found liable for moral damages. Petitioner’s station manager testified that upon receiving the letter-complaint, she immediately began working on the Property Irregularity Report (PIR). This is issued at the airline station upon complaint by a passenger on missing baggage.  From the computer-printout, a PIR was initiated at the Budapest counter.  A search telex was sent out on three subsequent dates.  Based on the PIR printout, the plaintiff only gave his Philippine address and telephone number, and not the address and contact number of his Budapest hotel. The PIR usually is printed in two originals, one for the station manager and the other copy is for the passenger.  There was no record or entry in the PIR of any follow-up call made by the plaintiff in Budapest.  Plaintiff claimed that he was not given a copy of this PIR and that his repeated telephone calls were ignored.

It was found that Air France “acted in bad faith in repeatedly ignoring respondent’s follow-up calls.” The alleged entries in the PIR were not to be considered since these were not authenticated by the airline station representative in Budapest.  The Court did not accept as justification that plaintiff should be faulted in allegedly not giving his hotel address and phone number.  It found unbelievable that the plaintiff would not give his hotel and other information after he had promptly filed a complaint.  And even assuming that only the Philippine details were given, this does not explain why Air France never communicated with plaintiff concerning the lost baggage long after he had returned to the Philippines.  The missing luggage was returned only after the trial.

In addition, the PIR only establishes that telex searches were made but there is no attempt to explain the loss of the luggage.  Air France “did not give the attention and care due to its passenger whose baggage was not transported and delivered to him at his travel destination and scheduled time.  Inattention to and lack of care for the interest of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages.”  Bad faith may be “in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit.”  [emphasis supplied]

The failure to cite any act of discourtesy or rudeness does not make plaintiff’s “loss and moral suffering insignificant and less deserving of compensation.” “In repeatedly ignoring respondent’s inquiries, petitioner’s employees exhibited an indifferent attitude without due regard for the inconvenience and anxiety he experienced after realizing that his luggage was missing.  Petitioner was thus guilty of bad faith in breaching its contract of carriage with the respondent, which entitles the latter to the award of moral damages.” [emphasis supplied]

However, the sum of P1,000,000.00  is “excessive and not proportionate to the loss or suffering inflicted on the passenger under the circumstances.”  The Court cited Trans World Airlines v. Court of Appeals where it considered the social standing of the aggrieved passenger who was a lawyer and director of several companies but nonetheless reduced the award of moral damages.

Moral damages are awarded “to enable the injured party to obtain means, diversion or amusement that will serve to alleviate the moral suffering he has undergone by reason of defendant's culpable action.” Exemplary damages are to “deter serious wrongdoings.” Under Article 2216 of the Civil Code, the assessment of damages is left to the discretion of the court according to the circumstances of each case. This is “limited by the principle that the amount awarded should not be palpably excessive as to indicate that it was the result of prejudice or corruption on the part of the trial court.  Simply put, the amount of damages must be fair, reasonable and proportionate to the injury suffered.”

Since Air France “failed to act timely on the passenger’s predicament caused by its employees’ mistake and more than ordinary inadvertence or inattention, and the passenger failed to show any act of arrogance, discourtesy or rudeness committed by the air carrier’s employees, the amounts of P200,000.00, P50,000.00 and P30,000.00 as moral damages, exemplary damages and attorney’s fees  would be sufficient and justified."

It is ironic that the award of damages, just like the luggage, comes too late since the plaintiff has already passed away.  Justice, just like baggage, can be just as delayed.


Monday, April 4, 2011

CREDIT CAN’T WAIT (Awarding damages for an unreasonably long wait to get a credit card purchase approved/disapproved)

By Siesta-friendly

“[O]ne hour appears to be an awfully long, patently unreasonable length of time to approve or disapprove a credit card purchase” –  Supreme Court (Polo S. Pantaleon vs. American Express International, Inc, G.R. No. 174269, May 8, 2009)

In a nutshell, such was the reasoning behind the Supreme Court’s reinstatement of the Regional Trial Court’s decision awarding American Express credit cardholder Atty. Panteleon P500,000.00 as moral damages, P300,000.00 as exemplary damages, P100,000.00 as attorney’s fees, and P85,233.01 as expenses of litigation. Sweet.

Well, maybe not so, at the time of the incident complained about by said Amex card owner. 

The facts are best lifted verbatim from the decision. Don’t worry, the paragraphs may be long but they are an easy read -

“The petitioner, lawyer Polo Pantaleon, his wife Julialinda, daughter Anna Regina and son Adrian Roberto, joined an escorted tour of Western Europe organized by Trafalgar Tours of Europe, Ltd., in October of 1991.


[On] the last day of the tour, the group arrived at the Coster Diamond House in Amsterdam around 10 minutes before 9:00 a.m.  The group had agreed that the visit to Coster should end by 9:30 a.m. to allow enough time to take in a guided city tour of Amsterdam. The group was ushered into Coster shortly before 9:00 a.m., and listened to a lecture on the art of diamond polishing that lasted for around ten minutes. Afterwards, the group was led to the store’s showroom to allow them to select items for purchase. Mrs. Pantaleon had already planned to purchase even before the tour began a 2.5 karat diamond brilliant cut, and she found a diamond close enough in approximation that she decided to buy.  Mrs. Pantaleon also selected for purchase a pendant and a chain, all of which totaled U.S. $13,826.00.

To pay for these purchases, Pantaleon presented his American Express credit card together with his passport to the Coster sales clerk. This occurred at around 9:15 a.m., or 15 minutes before the tour group was slated to depart from the store. The sales clerk took the card’s imprint, and asked Pantaleon to sign the charge slip. The charge purchase was then referred electronically to respondent’s Amsterdam office at 9:20 a.m.

Ten minutes later, the store clerk informed Pantaleon that his AmexCard had not yet been approved. His son, who had already boarded the tour bus, soon returned to Coster and informed the other members of the Pantaleon family that the entire tour group was waiting for them. As it was already 9:40 a.m., and he was already worried about further inconveniencing the tour group, Pantaleon asked the store clerk to cancel the sale. The store manager though asked plaintiff to wait a few more minutes. After 15 minutes, the store manager informed Pantaleon that respondent had demanded bank references. Pantaleon supplied the names of his depositary banks, then instructed his daughter to return to the bus and apologize to the tour group for the delay.

At around 10:00 a.m, or around 45 minutes after Pantaleon had presented his AmexCard, and 30 minutes after the tour group was supposed to have left the store, Coster decided to release the items even without respondent’s approval of the purchase. The spouses Pantaleon returned to the bus. It is alleged that their offers of apology were met by their tourmates with stony silence. The tour group’s visible irritation was aggravated when the tour guide announced that the city tour of Amsterdam was to be canceled due to lack of remaining time, as they had to catch a 3:00 p.m. ferry at Calais, Belgium to London. Mrs. Pantaleon ended up weeping, while her husband had to take a tranquilizer to calm his nerves.

It later emerged that Pantaleon’s purchase was first transmitted for approval to respondent’s Amsterdam office at 9:20 a.m., Amsterdam time, then referred to respondent’s Manila office at 9:33 a.m, then finally approved at 10:19 a.m., Amsterdam time. The Approval Code was transmitted to respondent’s Amsterdam office at 10:38 a.m., several minutes after petitioner had already left Coster, and 78 minutes from the time the purchases were electronically transmitted by the jewelry store to respondent’s Amsterdam office. 

After the star-crossed tour had ended, the Pantaleon family proceeded to the United States before returning to Manila on 12 November 1992. While in the United States, Pantaleon continued to use his AmEx card, several times without hassle or delay, but with two other incidents similar to the Amsterdam brouhaha. On 30 October 1991, Pantaleon purchased golf equipment amounting to US $1,475.00 using his AmEx card, but he cancelled his credit card purchase and borrowed money instead from a friend, after more than 30 minutes had transpired without the purchase having been approved. On 3 November 1991, Pantaleon used the card to purchase children’s shoes worth $87.00 at a store in Boston, and it took 20 minutes before this transaction was approved by respondent.

[A]fter coming back to Manila, Pantaleon sent a letter through counsel to the respondent, demanding an apology for the “inconvenience, humiliation and embarrassment he and his family thereby suffered” for respondent’s refusal to provide credit authorization for the aforementioned purchases. In response, respondent sent a letter dated 24 March 1992, stating among others that the delay in authorizing the purchase from Coster was attributable to the circumstance that the charged purchase of US $13,826.00 “was out of the usual charge purchase pattern established.”  Since respondent refused to accede to Pantaleon’s demand for an apology, the aggrieved cardholder instituted an action for damages with the [RTC]. Pantaleon prayed that he be awarded P2,000,000.00, as moral damages; P500,000.00, as exemplary damages; P100,000.00, as attorney’s fees; and P50,000.00 as  litigation expenses.

So, was the approximately 1 hour delay by Amex in approving or disapproving its cardholder’s purchase a breach of its obligation to the latter?

We already know what the RTC held. On appeal by Amex to the CA, the latter found no breach on Amex’s part and decided against Atty. Pantaleon.

The CA’s decision was based on the traditional role of creditor-debtor between credit card companies and credit cardholders, respectively. Citing the principle of mora accipiendi (which is delay on the part of the creditor to accept the performance of the obligation), the CA held that Amex, as creditor, may be held liable if it refuses performance of its obligation without just cause.

The CA found that Amex’s “delay was not attended by bad faith, malice, or gross negligence" and that Amex “had exercised diligent efforts to effect the approval” of the purchase because the purchases were “not in accordance with the charge pattern” of Atty. Pantaleon since at the Coster Diamond House, he was “making his very first single charge purchase of US$13,826,” and “the record of [his] past spending with [Amex] at the time [did] not favorably support his ability to pay for such purchase.”

The SC, however, held that Atty. Pantaleon was instead correct in citing the principle of mora solvendi (delay on the part of the debtor to fulfill his obligation), not mora accipiendi.  The traditional role of a credit card company as creditor applies when the cardholder has already incurred a debt.  In this case, the debt had not yet been created; the purchase was still pending approval or disapproval by Amex.  Thus, under mora solvendi, Amex is not creditor but debtor “insofar as it has the obligation to the customer … to act promptly on its purchases on credit.”

So, was Amex guilty of delay?

The SC found culpable delay on the part of Amex citing the findings of the RTC where both parties admitted that “normal approval time for purchases was a matter of seconds”. 

The SC admits:

“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. Yet this is one of those instances when “you’d know it when you’d see it,” and one hour appears to be an awfully long, patently unreasonable length of time to approve or disapprove a credit card purchase. It is long enough time for the customer to walk.” to a bank a kilometer away, withdraw money over the counter, and return to the store.

Ok, now that delay was established, are the P500,000 moral damages awarded correct?  The original prayer was for P5,000,000.

The SC further admits that –

“defendant has the right, if not the obligation, to verify whether the credit it is extending upon on a particular purchase was indeed contracted by the cardholder, and that the cardholder is within his means to make such transaction. 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. Even assuming that respondent’s credit authorizers did not have sufficient basis on hand to make a judgment, we see no reason why respondent could not have promptly informed petitioner the reason for the delay, and duly advised him that resolving the same could take some time. In that way, petitioner would have had informed basis on whether or not to pursue the transaction at Coster, given the attending circumstances. Instead, petitioner was left uncomfortably dangling in the chilly autumn winds in a foreign land and soon forced to confront the wrath of foreign folk.”

The SC found the RTC’s findings below sufficient in establishing that Amex acted fraudulently or in bad faith justifying the award for moral damages –

“While it is true that the Cardmembership Agreement, which [Amex] prepared, is silent as to the amount of time it should take defendant to grant authorization for a charge purchase, defendant acknowledged that the normal time for approval should only be three to four seconds. Specially so with cards used abroad which requires “special handling”, meaning with priority. Otherwise, the object of credit or charge cards would be lost; it would be so inconvenient to use that buyers and consumers would be better off carrying bundles of currency or traveller’s checks, which can be delivered and accepted quickly. Such right was not accorded to plaintiff in the instances complained off for reasons known only to defendant at that time. This, to the Court’s mind, amounts to a wanton and deliberate refusal to comply with its contractual obligations, or at least abuse of its rights, under the contract.

x   x   x

The delay committed by defendant was clearly attended by unjustified neglect and bad faith, since it alleges to have consumed more than one hour to simply go over plaintiff’s past credit history with defendant, his payment record and his credit and bank references, when all such data are already stored and readily available from its computer. This Court also takes note of the fact that there is nothing in plaintiff’s billing history that would warrant the imprudent suspension of action by defendant in processing the purchase…


[Amex Manila’s credit authorizer] further testified that there were no “delinquencies” in plaintiff’s account.

Thus, the SC found that culpable delay existed pursuant to Art. 1170 of the Civil Code which reads:

“Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.”

And that such delay caused Atty. Pantaleon injuries enumerated in Art. 2217 of the Civil Code, namely, “moral shock, mental anguish, serious anxiety, wounded feelings and social humiliation” which gave rise to Amex’s liability for moral damages. 

What’s the moral of the story? Credit card companies, don’t let lawyers your customers wait for an unreasonably long time to approve or disapprove their credit card purchases. And saying sorry, as originally demanded, could avoid expensive litigation.