Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 174269 May 8, 2009

POLO S. PANTALEON, Petitioner,

vs.
AMERICAN EXPRESS INTERNATIONAL, INC., Respondent.

DECISION

TINGA, J.:

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. The tour group arrived in Amsterdam in the afternoon of 25
October 1991, the second to the last day of the tour. As the group had arrived late in the city,
they failed to engage in any sight-seeing. Instead, it was agreed upon that they would start early
the next day to see the entire city before ending the tour.

The following day, 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.1 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.2

Mrs. Pantaleon also selected for purchase a pendant and a chain,3 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.4 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.5

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.6 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.

On 4 March 1992, after coming back to Manila, Pantaleon sent a letter7 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.8 In response, respondent sent a letter dated 24 March 1992,9 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."10

Since respondent refused to accede to Pantaleon’s demand for an apology, the aggrieved
cardholder instituted an action for damages with the Regional Trial Court (RTC) of Makati
City, Branch 145.11 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.12

On 5 August 1996, the Makati City RTC rendered a decision13 in favor of Pantaleon, awarding
him 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. Respondent filed a Notice of Appeal,
while Pantaleon moved for partial reconsideration, praying that the trial court award the
increased amount of moral and exemplary damages he had prayed for.14 The RTC denied
Pantaleon’s motion for partial reconsideration, and thereafter gave due course to respondent’s
Notice of Appeal.15

On 18 August 2006, the Court of Appeals rendered a decision16 reversing the award of damages
in favor of Pantaleon, holding that respondent had not breached its obligations to petitioner.
Hence, this petition.

The key question is whether respondent, in connection with the aforementioned transactions,
had committed a breach of its obligations to Pantaleon. In addition, Pantaleon submits that even
assuming that respondent had not been in breach of its obligations, it still remained liable for
damages under Article 21 of the Civil Code.

The RTC had concluded, based on the testimonial representations of Pantaleon and
respondent’s credit authorizer, Edgardo Jaurigue, that the normal approval time for purchases
was "a matter of seconds." Based on that standard, respondent had been in clear delay with
respect to the three subject transactions. As it appears, the Court of Appeals conceded that there
had been delay on the part of respondent in approving the purchases. However, it made two
critical conclusions in favor of respondent. First, the appellate court ruled that the delay was
not attended by bad faith, malice, or gross negligence. Second, it ruled that respondent "had
exercised diligent efforts to effect the approval" of the purchases, which were "not in
accordance with the charge pattern" petitioner had established for himself, as exemplified by
the fact that at Coster, he was "making his very first single charge purchase of US$13,826,"
and "the record of [petitioner]’s past spending with [respondent] at the time does not favorably
support his ability to pay for such purchase."

On the premise that there was an obligation on the part of respondent "to approve or disapprove
with dispatch the charge purchase," petitioner argues that the failure to timely approve or
disapprove the purchase constituted mora solvendi on the part of respondent in the performance
of its obligation. For its part, respondent characterizes the depiction by petitioner of its
obligation to him as "to approve purchases instantaneously or in a matter of seconds."

Petitioner correctly cites that under mora solvendi, the three requisites for a finding of default
are that the obligation is demandable and liquidated; the debtor delays performance; and the
creditor judicially or extrajudicially requires the debtor’s performance.18 Petitioner asserts that
the Court of Appeals had wrongly applied the principle of mora accipiendi, which relates to
delay on the part of the obligee in accepting the performance of the obligation by the obligor.
The requisites of mora accipiendi are: an offer of performance by the debtor who has the
required capacity; the offer must be to comply with the prestation as it should be performed;
and the creditor refuses the performance without just cause.19 The error of the appellate court,
argues petitioner, is in relying on the invocation by respondent of "just cause" for the delay,
since while just cause is determinative of mora accipiendi, it is not so with the case of mora
solvendi.

We can see the possible source of confusion as to which type of mora to appreciate. Generally,
the relationship between a credit card provider and its card holders is that of creditor-debtor,20
with the card company as the creditor extending loans and credit to the card holder, who as
debtor is obliged to repay the creditor. This relationship already takes exception to the general
rule that as between a bank and its depositors, the bank is deemed as the debtor while the
depositor is considered as the creditor.21

Petitioner is asking us, not baselessly, to again shift perspectives and again see the credit card
company as the debtor/obligor, insofar as it has the obligation to the customer as
creditor/obligee to act promptly on its purchases on credit.

Ultimately, petitioner’s perspective appears more sensible than if we were to still regard
respondent as the creditor in the context of this cause of action. If there was delay on the part
of respondent in its normal role as creditor to the cardholder, such delay would not have been
in the acceptance of the performance of the debtor’s obligation (i.e., the repayment of the debt),
but it would be delay in the extension of the credit in the first place. Such delay would not fall
under mora accipiendi, which contemplates that the obligation of the debtor, such as the actual
purchases on credit, has already been constituted. Herein, the establishment of the debt itself
(purchases on credit of the jewelry) had not yet been perfected, as it remained pending the
approval or consent of the respondent credit card company.

Still, in order for us to appreciate that respondent was in mora solvendi, we will have to first
recognize that there was indeed an obligation on the part of respondent to act on petitioner’s
purchases with "timely dispatch," or for the purposes of this case, within a period significantly
less than the one hour it apparently took before the purchase at Coster was finally approved.

The findings of the trial court, to our mind, amply established that the tardiness on the part of
respondent in acting on petitioner’s purchase at Coster did constitute culpable delay on its part
in complying with its obligation to act promptly on its customer’s purchase request, whether
such action be favorable or unfavorable. We quote the trial court, thus:

As to the first issue, both parties have testified that normal approval time for purchases was a
matter of seconds.

Plaintiff testified that his personal experience with the use of the card was that except for the
three charge purchases subject of this case, approvals of his charge purchases were always
obtained in a matter of seconds.

Defendant’s credit authorizer Edgardo Jaurique likewise testified:

Q. – You also testified that on normal occasions, the normal approval time for charges would
be 3 to 4 seconds?

A. – Yes, Ma’am.

Both parties likewise presented evidence that the processing and approval of plaintiff’s charge
purchase at the Coster Diamond House was way beyond the normal approval time of a "matter
of seconds".

Plaintiff testified that he presented his AmexCard to the sales clerk at Coster, at 9:15 a.m. and
by the time he had to leave the store at 10:05 a.m., no approval had yet been received. In fact,
the Credit Authorization System (CAS) record of defendant at Phoenix Amex shows that
defendant’s Amsterdam office received the request to approve plaintiff’s charge purchase at
9:20 a.m., Amsterdam time or 01:20, Phoenix time, and that the defendant relayed its approval
to Coster at 10:38 a.m., Amsterdam time, or 2:38, Phoenix time, or a total time lapse of one
hour and [18] minutes. And even then, the approval was conditional as it directed in
computerese [sic] "Positive Identification of Card holder necessary further charges require
bank information due to high exposure. By Jack Manila."

The delay in the processing is apparent to be undue as shown from the frantic successive queries
of Amexco Amsterdam which reads: "US$13,826. Cardmember buying jewels. ID seen.
Advise how long will this take?" They were sent at 01:33, 01:37, 01:40, 01:45, 01:52 and 02:08,
all times Phoenix. Manila Amexco could be unaware of the need for speed in resolving the
charge purchase referred to it, yet it sat on its hand, unconcerned.

xxx

To repeat, the Credit Authorization System (CAS) record on the Amsterdam transaction shows
how Amexco Netherlands viewed the delay as unusually frustrating. In sequence expressed in
Phoenix time from 01:20 when the charge purchased was referred for authorization, defendants
own record shows:

01:22 – the authorization is referred to Manila Amexco

01:32 – Netherlands gives information that the identification of the cardmember has been
presented and he is buying jewelries worth US $13,826.

01:33 – Netherlands asks "How long will this take?"

02:08 – Netherlands is still asking "How long will this take?"

The Court is convinced that defendants delay constitute[s] breach of its contractual obligation
to act on his use of the card abroad "with special handling."22 (Citations omitted)

xxx

Notwithstanding the popular notion that credit card purchases are approved "within seconds,"
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.

Notably, petitioner frames the obligation of respondent as "to approve or disapprove" the
purchase "in timely dispatch," and not "to approve the purchase instantaneously or within
seconds." Certainly, had respondent disapproved petitioner’s purchase "within seconds" or
within a timely manner, this particular action would have never seen the light of day. Petitioner
and his family would have returned to the bus without delay – internally humiliated perhaps
over the rejection of his card – yet spared the shame of being held accountable by newly-made
friends for making them miss the chance to tour the city of Amsterdam.

We do not wish do dispute that respondent 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.

Moral damages avail in cases of breach of contract where the defendant acted fraudulently or
in bad faith, and the court should find that under the circumstances, such damages are due. The
findings of the trial court are ample in establishing the bad faith and unjustified neglect of
respondent, attributable in particular to the "dilly-dallying" of respondent’s Manila credit
authorizer, Edgardo Jaurique.23 Wrote the trial court:

While it is true that the Cardmembership Agreement, which defendant 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.24

xxx
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. Defendant’s witness Jaurique
admits:

Q. – But did you discover that he did not have any outstanding account?

A. – Nothing in arrears at that time.

Q. – You were well aware of this fact on this very date?

A. – Yes, sir.

Mr. Jaurique further testified that there were no "delinquencies" in plaintiff’s account.25

It should be emphasized that the reason why petitioner is entitled to damages is not simply
because respondent incurred delay, but because the delay, for which culpability lies under
Article 1170, led to the particular injuries under Article 2217 of the Civil Code for which moral
damages are remunerative.26 Moral damages do not avail to soothe the plaints of the simply
impatient, so this decision should not be cause for relief for those who time the length of their
credit card transactions with a stopwatch. The somewhat unusual attending circumstances to
the purchase at Coster – that there was a deadline for the completion of that purchase by
petitioner before any delay would redound to the injury of his several traveling companions –
gave rise to the moral shock, mental anguish, serious anxiety, wounded feelings and social
humiliation sustained by the petitioner, as concluded by the RTC.27

Those circumstances are fairly unusual, and should not give rise to a general entitlement for
damages under a more mundane set of facts.

We sustain the amount of moral damages awarded to petitioner by the RTC. There is no hard-
and-fast rule in determining what would be a fair and reasonable amount of moral damages,
since each case must be governed by its own peculiar facts, however, it must be commensurate
to the loss or injury suffered.28 Petitioner’s original prayer for P5,000,000.00 for moral
damages is excessive under the circumstances, and the amount awarded by the trial court of
P500,000.00 in moral damages more seemly.1avvphi1

Likewise, we deem exemplary damages available under the circumstances, and the amount of
P300,000.00 appropriate. There is similarly no cause though to disturb the determined award
of P100,000.00 as attorney’s fees, and P85,233.01 as expenses of litigation.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is
REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Makati, Branch
145 in Civil Case No. 92-1665 is hereby REINSTATED. Costs against respondent.
SO ORDERED.