Aznar vs. Citibank, N.A. (Philippines)

A credit card company cannot be held liable for damages arising from the dishonor of a cardholder's credit card absent proof by preponderance of evidence that the company breached a legal duty owed to the cardholder and that such breach was the proximate cause of the injury. The burden of proof in civil cases rests on the plaintiff, and mere dishonor of a credit card, without more, does not establish that the card was blacklisted by the issuing bank or that the bank acted with fraud, bad faith, or gross negligence.

Emmanuel B. Aznar, a prominent businessman in Cebu serving as president and chairman of several corporations, was a holder of a Preferred Master Credit Card issued by Citibank with a credit limit of ₱150,000.00. The credit card agreement contained terms and conditions prepared by Citibank, including provisions exempting the bank from liability when its card is not honored by merchant affiliates and limiting its liability to ₱1,000.00 or actual damages proven, whichever is lesser. Aznar and his wife planned an Asian tour with their two grandchildren, prompting Aznar to make an advance deposit of ₱485,000.00 with Citibank to increase his credit limit to ₱635,000.00.

Emmanuel B. Aznar, a known businessman in Cebu and holder of a Preferred Master Credit Card issued by Citibank with a credit limit of ₱150,000.00, planned an Asian tour with his wife Zoraida and their two grandchildren, Melissa and Richard Beane. To facilitate this, Aznar made a total advance deposit of ₱485,000.00 with Citibank intending to increase his credit limit to ₱635,000.00. Using his Mastercard, Aznar purchased plane tickets to Kuala Lumpur worth ₱237,000.00, and on July 17, 1994, the group left Cebu for their destination.

Aznar claimed that when he presented his Mastercard in establishments in Malaysia, Singapore, and Indonesia, it was not honored. When he attempted to use the card at Ingtan Tour and Travel Agency in Indonesia to purchase plane tickets to Bali, it was dishonored because his card was blacklisted by Citibank, forcing him to buy the tickets in cash. He further claimed that his humiliation was aggravated when Ingtan Agency staff spoke of swindlers trying to use blacklisted cards. The group returned to the Philippines on August 10, 1994.

To prove that Citibank blacklisted his Mastercard, Aznar presented a computer print-out denominated as ON-LINE AUTHORIZATIONS FOREIGN ACCOUNT ACTIVITY REPORT, issued to him by Ingtan Agency, with the signature of one Victrina Elnado Nubi, which showed that his card was "DECL OVERLIMIT" or declared over the limit. Citibank denied blacklisting Aznar's card and invoked the terms and conditions of the credit card agreement, which exempted the bank from liability for dishonor by merchant affiliates and limited liability to ₱1,000.00 or actual damages proven, whichever was lesser. Citibank's Credit Card Department Head, Dennis Flores, presented Warning Cancellation Bulletins covering the period of Aznar's trip, which showed that Aznar's card was not among the canceled or blacklisted cards.

Aznar admitted in his testimony that he had no personal knowledge that his Mastercard was blacklisted by Citibank and only presumed such fact from the dishonor of his card. He testified that when he presented the card at a merchant's store, the staff called somebody for verification and later told him the card was denied, and he presumed it was blacklisted. Aznar also admitted that in other merchant establishments in Kuala Lumpur and Singapore, his Mastercard was accepted and honored.

The computer print-out, Exh. "G," contained the name "Victrina Elnado Nubi" and a signature purportedly belonging to her, with handwritten words on the left dorsal side: "Sorry for the delay since the records had to be retrieved. Regards. Darryl Mario." The print-out also stated the amount of "6,289,195.10" opposite Aznar's account number, which Aznar did not clarify. Citibank's evidence showed that Aznar's purchase of plane tickets worth ₱237,000.00 was approved after his account was augmented, as there was no way the transaction could have been approved with the ₱150,000.00 credit limit alone.

• Factual Finding on Blacklisting: Aznar argued that the CA erroneously made its own factual finding that his Mastercard was not blacklisted when the matter of blacklisting was already a non-issue in the November 25, 1998 Order of the RTC, which found that the card was dishonored for being declared over the credit limit.

• Trial with Implied Consent: Aznar argued that the issue of dishonor on the ground of "DECL OVERLIMIT," although not alleged in the complaint, was tried with the implied consent of the parties and should be treated as if raised in the pleadings pursuant to Section 5, Rule 10 of the Rules of Civil Procedure.

• Admissibility of Electronic Evidence: Aznar argued that Exh. "G" cannot be excluded as it qualifies as electronic evidence under the Rules on Electronic Evidence, which provides that print-outs are also originals for purposes of the Best Evidence Rule, and that the document remained complete and unaltered apart from Nubi's signature.

• Sufficiency of Testimony: Aznar argued that the RTC judge correctly credited his testimony on the issuance of the computer print-out, as he saw that it was signed by Nubi, and that such testimony constitutes the "other evidence showing the integrity and reliability of the print-out to the satisfaction of the judge" required under the Rules on Electronic Evidence.

• Gross Negligence: Aznar argued that the trial court was correct in finding that Citibank was grossly negligent in failing to credit the additional deposit and make the necessary entries in its systems to prevent him from encountering any embarrassing situation with the use of his Mastercard.

• Implied Novation: Aznar argued that when Citibank accepted his additional deposit of ₱485,000.00, there was an implied novation and Citibank was obligated to increase his credit limit and ensure that he would not encounter any embarrassing situation with the use of his Mastercard.

• Contract of Adhesion: Aznar argued that the fine prints in the flyer of the credit card limiting the liability of the bank to ₱1,000.00 or the actual damage proven, whichever is lower, constitute a contract of adhesion which must be interpreted against Citibank.

• Meaning of Blacklisting: In his Reply, Aznar contended that to a layman, the term "blacklisting" is synonymous with the words "hot list" or "declared overlimit," and whether his card was blacklisted or declared over the limit, the same was dishonored due to the fault or gross negligence of Citibank.

• Lack of Personal Knowledge: Citibank contended that Aznar never had personal knowledge that his credit card was blacklisted as he only presumed such fact from the dishonor of his card.

• No Trial with Consent: Citibank argued that the issue of dishonor on the ground that the card was declared over the limit was never tried with the implied consent of both parties.

• Insufficient Authentication: Citibank argued that Aznar's self-serving testimony is not sufficient to prove the integrity and reliability of Exh. "G," as Aznar did not declare that it was Nubi who printed the document and that said document was printed in his presence, and there is no annotation on Exh. "G" to establish that Nubi printed the same.

• Dishonor Alone Insufficient: Citibank argued that even assuming Exh. "G" is admissible and Aznar's credit card was dishonored, the bank still cannot be held liable for damages as the exhibit only shows that the card was dishonored for having been declared over the limit, and Aznar must prove that the dishonor was caused by a grossly negligent act of Citibank.

• No Breach of Obligation: Citibank argued that the award of damages in favor of Aznar was based on Article 1170 of the Civil Code, but there was no proof that Citibank committed fraud or delay or that it contravened its obligations towards Aznar.

• Not a Contract of Adhesion: Citibank argued that the terms and conditions of the credit card cannot be considered as a contract of adhesion since Aznar was entirely free to reject the card if he did not want the conditions stipulated therein, and a person of his stature is expected to be more prudent with respect to his transactions.

• Blacklisting of Credit Card: Whether Aznar established by preponderance of evidence that Citibank blacklisted his Mastercard or placed it on the "hot list."

• Admissibility of Computer Print-out (Exh. "G"): Whether the ON-LINE AUTHORIZATION FOREIGN ACCOUNT ACTIVITY REPORT presented by Aznar was properly authenticated and admissible as evidence.

• Implied Novation: Whether the acceptance by Citibank of Aznar's additional deposit of ₱485,000.00 constituted implied novation obligating Citibank to increase his credit limit.

• Contract of Adhesion and Validity of Liability-Limiting Provisions: Whether the terms and conditions of the credit card agreement constitute a contract of adhesion and whether the liability-limiting provisions are valid.

• Liability for Damages: Whether Citibank is liable for damages for the dishonor of Aznar's Mastercard.

• Blacklisting of Credit Card: No. Aznar failed to prove with a preponderance of evidence that Citibank blacklisted his Mastercard or placed it on the "hot list," as he admitted having no personal knowledge of such blacklisting and only presumed it from the dishonor of his card.

• Admissibility of Computer Print-out (Exh. "G"): No. Exh. "G" cannot be considered admissible as its authenticity and due execution were not sufficiently established, whether under Section 20 of Rule 132 of the Rules of Court or under the Rules on Electronic Evidence.

• Implied Novation: No. The acceptance of the additional deposit did not constitute implied novation, as Citibank credited the deposit and approved the purchase of plane tickets worth ₱237,000.00, which was beyond the original credit limit.

• Contract of Adhesion and Validity of Liability-Limiting Provisions: Yes, the terms and conditions constitute a contract of adhesion, and the liability-limiting provisions are void for being unconscionable, but this does not automatically entitle Aznar to damages.

• Liability for Damages: No. Citibank cannot be held liable for damages because Aznar failed to establish that the dishonor of his card was caused by a breach of duty by Citibank that was the proximate cause of his alleged injury.

• Blacklisting of Credit Card: The Court held that in civil cases, the burden of proof rests on the plaintiff to establish his case based on a preponderance of evidence. Aznar admitted in his testimony that he had no personal knowledge that his Mastercard was blacklisted by Citibank and only presumed such fact from the dishonor of his card. The dishonor of the card is not sufficient to support a conclusion that it was blacklisted, especially in view of Aznar's own admission that in other merchant establishments in Kuala Lumpur and Singapore, his Mastercard was accepted and honored. Citibank's Warning Cancellation Bulletins, which were duly authenticated by Dennis Flores, the head of its credit card department, showed that Aznar's card was not among those blacklisted during the period of his trip.

• Admissibility of Computer Print-out (Exh. "G"): The Court applied Section 20 of Rule 132 of the Rules of Court, which requires that the due execution and authenticity of a private document be proved either by anyone who saw the document executed or written, or by evidence of the genuineness of the signature or handwriting of the maker. Aznar did not actually see the document executed or written, nor was he able to provide evidence on the genuineness of Nubi's signature. Even under the Rules on Electronic Evidence, which took effect on August 1, 2001, the authentication of Exh. "G" would still be found wanting. Aznar's testimony that the person from Ingtan Agency merely handed him the computer print-out and that he thereafter asked said person to sign it cannot be considered sufficient to show the print-out's integrity and reliability. The print-out does not show on its face that it was issued by Ingtan Agency, and the handwritten annotation signed by a certain Darryl Mario even suggests that it was Mario who printed the same and only handed the print-out to Nubi. The identity of the entrant was therefore not established. The Court also noted that Exh. "G" stated the amount of "6,289,195.10" opposite Aznar's account number, which data Aznar did not clarify, and it was incumbent on him to prove that he did not actually incur the said amount which is above his credit limit.

• Implied Novation: The Court found that Citibank never denied receiving Aznar's additional deposit and even claimed that Aznar was able to purchase plane tickets worth ₱237,170.00, which was beyond his ₱150,000.00 limit, because the bank credited the additional deposit to his account. Flores testified that there was no way the ₱237,000.00 transaction could have been approved with the ₱150,000.00 credit limit alone, and that the only way it could be approved was by way of advance payment, which actually happened in this case. Thus, Citibank did not fail to credit the deposit or make the necessary entries in its systems.

• Contract of Adhesion and Validity of Liability-Limiting Provisions: The Court agreed with Aznar that the terms and conditions of Citibank's Mastercard constitute a contract of adhesion, as their terms are prepared by only one party while the other merely affixes his signature signifying his adhesion thereto. Paragraph 7, which states that Citibank is not responsible if the card is not honored by any merchant affiliate "for any reason," was held to be vague, and any ambiguity in its provisions must be construed against the party who prepared the contract. Paragraph 15, which limits Citibank's liability to ₱1,000.00 or the actual damage proven, whichever is lesser, was held to be unconscionable as it precludes payment of a larger amount even though damage may be clearly proven. The Court stated that it is not precluded from ruling out blind adherence to the terms of a contract if the attendant facts and circumstances show that they should be ignored for being obviously too one-sided.

• Liability for Damages: Notwithstanding the invalidity of the liability-limiting provisions, the Court still could not award damages in favor of Aznar. The Court held that in order for a plaintiff to maintain an action for injuries, 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. It is not enough that one merely suffered sleepless nights, mental anguish, or serious anxiety as a result of the actuations of the other party; it is also required that a culpable act or omission was factually established, that proof that the wrongful act or omission of the defendant is shown as the proximate cause of the damage sustained by the claimant, and that the case is predicated on any of the instances expressed or envisioned by Arts. 2219 and 2220 of the Civil Code. In culpa contractual or breach of contract, moral damages are recoverable only if the defendant has acted fraudulently or in bad faith, or is found guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations. The Court commiserated with Aznar for whatever undue embarrassment he suffered but could not grant his petition as he failed to show by preponderance of evidence that Citibank breached any obligation that would make it answerable for said suffering. Citing BPI Express Card Corporation vs. Court of Appeals, the Court distinguished between injury and damage, noting that there can be damage without injury — damnum absque injuria — where the loss or harm was not the result of a violation of a legal duty.

• Contract of Adhesion — A contract of adhesion is one whose terms are prepared by only one party while the other merely affixes his signature signifying his adhesion thereto. The Court applied this doctrine to credit card agreements, holding that contracts between cardholders and credit card companies are contracts of adhesion, and any ambiguity in their provisions must be construed against the party who prepared the contract.

• Damnum Absque Injuria — This doctrine holds that 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, and in such cases, the consequences must be borne by the injured person alone, as the law affords no remedy for damages resulting from an act which does not amount to a legal injury or wrong. The Court applied this doctrine to hold that Aznar's suffering, while unfortunate, was not compensable absent proof of a breach of duty by Citibank.

• Burden of Proof in Civil Cases — The party that alleges a fact has the burden of proving it based on a preponderance of evidence. The Court applied this basic rule to hold that Aznar, as plaintiff, failed to discharge his burden of proving that Citibank blacklisted his card or breached any obligation owed to him.

• Authentication of Private Documents — Under Section 20 of Rule 132 of the Rules of Court, the due execution and authenticity of a private document must be proved either by anyone who saw the document executed or written, or by evidence of the genuineness of the signature or handwriting of the maker. The Court applied this rule to exclude Exh. "G" for failure to authenticate it properly.

• Authentication of Electronic Documents — Under Section 2, Rule 5 of the Rules on Electronic Evidence, the authenticity of a private electronic document must be proved by evidence that it had been digitally signed, by evidence that other appropriate security procedures or devices were applied, or by other evidence showing its integrity and reliability to the satisfaction of the judge. The Court applied this rule to hold that Aznar's testimony was insufficient to establish the integrity and reliability of the computer print-out.

• Entries in the Course of Business — Under Section 43, Rule 130 of the Rules of Court, entries made at or near the time of the transactions to which they refer, by a person deceased or unable to testify, who was in a position to know the facts therein stated, may be received as prima facie evidence if made in the professional capacity or in the performance of duty and in the ordinary or regular course of business. The Court applied this rule to hold that the identity of the entrant of Exh. "G" was not established, as it was unclear whether Nubi or Darryl Mario encoded and printed the document.

• Moral Damages in Breach of Contract — In culpa contractual or breach of contract, moral damages are recoverable only if the defendant has acted fraudulently or in bad faith, or is found guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations. The breach must be wanton, reckless, malicious, or in bad faith, oppressive, or abusive. The Court applied this doctrine to deny Aznar's claim for moral damages absent proof of such culpable conduct by Citibank.

• "It is basic that in civil cases, the burden of proof rests on the plaintiff to establish his case based on a preponderance of evidence. The party that alleges a fact also has the burden of proving it." — This passage states the fundamental rule on burden of proof applied by the Court to deny Aznar's claim, as he failed to prove that Citibank blacklisted his card.

• "The dishonor of Aznar's Mastercard is not sufficient to support a conclusion that said credit card was blacklisted by Citibank, especially in view of Aznar's own admission that in other merchant establishments in Kuala Lumpur and Singapore, his Mastercard was accepted and honored." — This passage articulates the Court's reasoning that mere dishonor of a credit card does not establish blacklisting by the issuing bank, particularly when the card was honored in other establishments.

• "It is settled that contracts between cardholders and the credit card companies are contracts of adhesion, so-called, because their terms are prepared by only one party while the other merely affixes his signature signifying his adhesion thereto." — This passage establishes the doctrine that credit card agreements are contracts of adhesion, which the Court applied to construe ambiguities against Citibank and invalidate unconscionable liability-limiting provisions.

• "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 to 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." — This passage, quoted from BPI Express Card Corporation vs. Court of Appeals, articulates the distinction between injury and damage and the doctrine of damnum absque injuria, which the Court applied to deny Aznar's claim for damages.

• BPI Express Card Corporation vs. Court of Appeals, 357 Phil. 262 (1998) — Cited as controlling precedent for the distinction between injury and damage and the doctrine of damnum absque injuria, holding that damages cannot be awarded where the loss or harm was not the result of a violation of a legal duty.

• BPI Express Card Corp. vs. Olalia, 423 Phil. 593 (2001) — Cited as precedent for the doctrine that contracts between cardholders and credit card companies are contracts of adhesion.

• Polotan, Sr. vs. Court of Appeals, 357 Phil. 250 (1998) — Cited as precedent for the rule that ambiguities in contracts of adhesion must be construed against the party who prepared the contract, and that courts are not precluded from ruling out blind adherence to contract terms that are obviously too one-sided.

• Citibank N.A. Mastercard vs. Teodoro, 458 Phil. 480 (2003) — Cited as precedent for the basic rule that in civil cases, the burden of proof rests on the plaintiff to establish his case based on a preponderance of evidence.

• Security Bank and Trust Company vs. Gan, G.R. No. 150464, June 27, 2006, 493 SCRA 239 — Cited as precedent for the requisites of admissibility of entries in the course of business under Section 43, Rule 130 of the Rules of Court.

• Equitable Banking Corp. vs. Calderon, G.R. No. 156168, December 14, 2004, 446 SCRA 271 — Cited as precedent for the rule that moral damages in breach of contract are recoverable only if the defendant acted fraudulently or in bad faith, or is found guilty of gross negligence amounting to bad faith, or in wanton disregard of contractual obligations.

• Article 1170, Civil Code — Provides that 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. The Court applied this provision as the basis for Aznar's claim but found no proof of fraud, negligence, or delay on the part of Citibank.

• Article 2219, Civil Code — Lists the cases in which moral damages may be recovered, including criminal offenses, quasi-delicts, and acts referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. The Court applied this provision to require that Aznar's claim be predicated on one of the enumerated instances.

• Article 2220, Civil Code — Provides that willful injury to property may be a legal ground for awarding moral damages, and that the same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. The Court applied this provision to require proof of fraud or bad faith in breach of contract cases.

• Section 20, Rule 132, Rules of Court — Requires that before any private document offered as authentic is received in evidence, its due execution and authenticity must be proved either by anyone who saw the document executed or written, or by evidence of the genuineness of the signature or handwriting of the maker. The Court applied this rule to exclude Exh. "G" for failure to authenticate it properly.

• Section 43, Rule 130, Rules of Court — Provides that entries made at or near the time of the transactions to which they refer, by a person deceased or unable to testify, who was in a position to know the facts therein stated, may be received as prima facie evidence if made in the professional capacity or in the performance of duty and in the ordinary or regular course of business. The Court applied this rule to hold that the identity of the entrant of Exh. "G" was not established.

• Section 1 and 2, Rule 5, Rules on Electronic Evidence — Provides that the person seeking to introduce an electronic document has the burden of proving its authenticity, and that such authenticity must be proved by evidence of digital signature, by evidence of other appropriate security procedures or devices, or by other evidence showing its integrity and reliability to the satisfaction of the judge. The Court applied this rule to hold that Aznar's testimony was insufficient to establish the integrity and reliability of the computer print-out.

• Section 5, Rule 10, Rules of Civil Procedure — Provides that when issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Aznar invoked this rule regarding the issue of dishonor on the ground of "DECL OVERLIMIT," but the Court did not find this argument persuasive.

• Justice Consuelo Ynares-Santiago (Chairperson)
• Justice Romeo J. Callejo, Sr.
• Justice Minita V. Chico-Nazario
• Justice Antonio Eduardo B. Nachura

N/A — No dissenting opinions were noted in the provided case text.