Emelie Marie T.

Diez
JD- II

Credit Transactions
Atty. Stephen L. Yu (Mon:8:00-10:00pm)
Thu: 9:00-10:00pm

Case Digest: Pantaleon vs American Express Bank (2010)

Facts:
AMEX is a corporation engaged in providing credit services through the operation of a charge card
system. Pantaleon was a cardholder since 1980.
Pantaleon, his wife, daughter and son went on a guided European tour and subsequently arrived in
Amsterdam. While in Coster Diamond House, his wife wanted to purchase some diamond pieces,
amounting to $13, 826. Pantaleon presented his credit card which was swiped. He was then asked to sign
the charge slip which was electronically transferred to AMEXs Amsterdam office. However, Coster was
not able to receive approval from AMEX for the purchase so Pantaleon asked the clerk to cancel the sale.
The store manager convinced Pantaleon to wait for a few minutes and subsequently told Pantaleon that
AMEX was asking for bank references and Pantaleon responded by giving names of his Phil. depository
banks. Still, it was not approved. But Coster decided to release the items even without AMEXs approval
since the tour couldnt go on without them.
In all, it took AMEX a total of 78 minutes to approve Pantaleons purchase and to transmit the approval to
the jewelry store.
This was followed by two similar incidents when the family then had another trip to the US. They also
experienced inconvenience using the AMEX credit card in purchasing golf equipment and childrens
shoes.
When they got to Manila, Pantaleon sent a letter to AMEX, demanding an apology for the humiliation and
inconvenience. AMEX responded that the delay in Amsterdam was due to the amount involved, saying
that the purchase deviated from his established charge purchase pattern. Dissatisfied, Pantaleon filed an
action for damages in RTC.
The testimony of AMEXs credit authorizer Edgardo Jaurique, the approval time for credit card charges
would be three to four seconds under regular circumstances. Here, it took AMEX 78 minutes to approve
the Amsterdam purchase. SC attributed the unwarranted delay to Jaurique, who had to go over
Pantaleons past credit history, his payment record and his credit and bank references before he
approved the purchase.
In 2009, the SC reversed the ruling in CA; and said 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."
Hence, this motion for reconsideration.
Issue: WON AMEX is liable for breach of its contractual obligations and is liable for damages.
Ruling:
No, AMEX is not liable for breach of contractual obligation with Pantaleon and is not liable for damages.
The Court had the occasion to present the nature of credit card transactions which involves three (3)
contracts. (a) the sales contract between the credit card holder and the merchant; (b) the loan agreement
between the credit card issuer and holder; and (c) the promise to pay between the credit card issuer and
the merchant.

Philippine jurisdiction generally adheres to the Gray ruling, recognizing the relationship between the credit
card issuer and holder as a contractual one that is governed by the terms and conditions found in the card
membership agreement. A card membership agreement is a contract of adhesion.
With regard to AMEXs obligations, Pantaleon assumes that since his credit card has no pre-set spending
limit, AMEX has to approve all charge requests. However, the Court said that there is first a need to
distinguish a relationship between credit card issuer-holder to a creditor-debtor relationship. In an issuerholder relationship, it relates merely to an agreement providing for credit facility to the holder. On the other
hand, in a creditor-debtor relationship, it involves the actual credit on loan agreement involving three
contracts.
When cardholders use their cards to pay, they merely offer to enter into loan agreements with the
company. It is only after the approval do the parties enter into binding loan contracts, in keeping with NCC
1319.This is supported in the reservation found in the card membership agreement which clearly states
that AMEX "reserves the right to deny authorization for any requested Charge."
Thus, since AMEX has no obligation to approve purchase requests, Pantaleon cant claim that AMEX
defaulted. In this case, there is no demandable obligation. Before the credit card issuer accepts this offer,
no obligation relating to the loan agreement exists between them. A demand presupposes the existence
of an obligation between the parties. Moreover, AMEX is not bound or obligated to act on its cardholders
purchase requests within any specific period of time.
Since there is no legal injury or breach of any contractual obligation on the part of AMEX, it is not liable to
pay damages to Pantaleon.