Bank of the Philippine Islands vs. Spouses Ram M. Sarda and Jane Doe Sarda

A credit card issuer must prove by preponderance of evidence that the alleged cardholder actually received the credit card, authorized the issuance of supplementary cards, and incurred the purchases and cash advances appearing in the statements of account; mere submission of statements of account is insufficient to establish the cardholder's obligation. The bank's failure to exercise proper diligence in issuing pre-approved credit cards, including supplementary cards issued without the cardholder's application or consent, means the bank bears the resulting loss.

Petitioner Bank of the Philippine Islands (BPI) is a domestic commercial banking corporation that offers credit card services to its clients. Respondents are spouses Ram M. Sarda and "Jane Doe" Sarda. Mr. Sarda was a pre-qualified or pre-screened client of BPI, meaning the usual screening procedures for prospective cardholders—such as filing an application form and submitting relevant documents—were dispensed with, and the credit card was issued outright. The regulatory backdrop includes BSP Circular No. 702 (Series of 2010), which prohibits banks from issuing pre-approved credit cards, and BSP Circular No. 845-14, which further clarified the prohibition and enumerated acts tantamount to issuing unsolicited credit cards. The governing law at present is R.A. No. 10870, the Philippine Credit Card Industry Regulation Law.

BPI issued a credit card to Mr. Sarda as a pre-qualified or pre-screened client, without requiring him to file an application form or submit supporting documents. The credit card was delivered to Mr. Sarda's office address at Rm. 507 SF Amberland Plaza, Doña Julia Vargas Ave., Ortigos Center, Pasig City. The delivery receipt, with check marks on both boxes indicating "Cardholder" and "Cousin," was signed by Melissa Tandogon, Mr. Sarda's former office clerk, who received the card. BPI also issued a supplementary card in the name of Ms. Tandogon, linked to Mr. Sarda's primary card, without any written application or request from Mr. Sarda.

BPI alleged that respondents availed of its credit accommodations by using the credit card and incurred an outstanding obligation of ₱1,213,114.19 per the statement of account dated September 22, 2013. Mr. Sarda's last payment prior to cancellation of the card was on March 15, 2013. Despite demands for payment, Mr. Sarda refused to settle the obligation. BPI presented documentary evidence consisting of the delivery receipt, the Terms and Conditions of Use of BPI Express credit card, and original copies of statements of account from September 21, 2009 to September 22, 2013, as well as the testimony of BPI's Account Specialist, Mr. Arlito M. Igos.

Respondents denied having applied for or received the credit card, denied having physical possession of it, and denied having signed or agreed to the terms and conditions referred to in the complaint. They asserted that they never incurred the alleged outstanding obligation. Mr. Sarda testified that he is a retired member of the U.S. Army and confirmed having been to Hickam Air Force Base in Honolulu, as well as other establishments where transactions using his credit card were reflected in the statements of account.

All statements of account were addressed to Mr. Sarda's office at Rm. 507 SF Amberland Plaza, Doña Julia Vargas Ave., Ortigas Center, Pasig City. However, the dorsal portion of the demand letter sent by BPI to the same address contained the remarks: "S/O 2 YRS./MOVEOUT/ROMEO ABDINCULA." BPI's witness admitted that Mr. Sarda did not apply for nor request the issuance of a credit card, being a pre-qualified client, and that there was no application form for the supplementary card issued to Ms. Tandogon. The witness claimed the request for the supplementary card was made through a phone call, but admitted there was no record of that phone call, that he did not personally take it, and that he had no personal knowledge of it. BPI also failed to present charge slips covering the billed transactions, explaining that for each transaction there would only be one copy for the cardholder and another for the merchant, with the merchant's copy electronically transmitted to BPI.

• Irrelevance of Physical Receipt: BPI argued that given the documentary evidence consisting of statements of account showing continuing transactions using the subject credit cards, it is irrelevant to discuss whether Mr. Sarda actually received the credit card issued in his name, or whether the supplementary card issued to Ms. Tandogon was utilized under his responsibility.

• Receipt of Billings and Payments: BPI pointed out that respondents' accountability started way back in 2009, and even assuming respondents had moved out from the address indicated in the statements of account two years prior to the demand letter dated October 1, 2013, it was nevertheless established that Mr. Sarda was receiving the billings and making payments between 2009 and 2011.

• Duty to Notify Change of Address: BPI argued that Mr. Sarda should not be allowed to use as an excuse his failure to receive the statements of account at his previous address because he failed to notify BPI regarding his change of address, citing the terms and conditions of BPI credit card usage and Section 14 of R.A. No. 8484, which imposes a duty to notify the bank of his whereabouts, with failure giving rise to a prima facie presumption of using the credit card with intent to defraud.

• Due Diligence: BPI asserted that there was due diligence on its part, as well as on the part of the merchants/establishments where respondents utilized the credit cards, such as Resorts World Manila, Philippine Airlines, Paras Beach Resort, Del Monte Golf Club, Valley Golf Club Antipolo, S & R membership shopping, Waterfront Hotel Cebu, and abroad at Hickam Air Force Base Commissary, Walmart, and Haley Koa Hotel, underscoring Mr. Sarda's admission that he is a retired U.S. Army member who had been to Hickam Air Force Base.

• Procedural Bar: Respondents contended that BPI raises factual issues before the Supreme Court which are not proper in a Rule 45 petition.

• Full Payment of Primary Card Transactions: Respondents stressed that based on the statements of account submitted by BPI, all transactions purportedly effected under Mr. Sarda's name covering the period September 2009 to July 2011 have all been fully paid, such that there is no longer any outstanding obligation arising from purchases using the primary card.

• Irregular Issuance of Supplementary Card: Respondents noted that the supplementary card issued in the name of Ms. Tandogon was linked to the primary card under Mr. Sarda's name without him applying for it and without his knowledge or conformity, and that the issuance was irregular, in violation of the terms and conditions for the use of BPI credit cards. The delivery receipt itself shows it was highly unlikely for Ms. Tandogon to have applied for a supplementary card as she is not even a member of respondents' family, being a plain office clerk.

• Insufficient Evidence of Receipt: Respondents assailed the RTC for assuming that Ms. Tandogon had passed on the credit card to Mr. Sarda simply because she received it upon delivery, maintaining that in the absence of the required application form signed by respondents, BPI must present clear evidence to prove that Mr. Sarda actually received the subject credit cards.

• Lack of Proof of Conformity to Terms: Respondents argued that the putative cardholder cannot be made to pay the interests and charges contained in the terms and conditions of the credit card issuer without proof of conformity and acceptance by the cardholder of such stipulations, citing BPI Express Card Corporation vs. Olalia.

• Liability for Credit Card Obligation: Whether Mr. Sarda should be held liable to pay the total amounts due under the principal and supplementary credit cards issued by BPI.

• Liability for Credit Card Obligation: No. BPI failed to prove by preponderance of evidence that respondents incurred the alleged credit card obligation. The petition was denied, and the Court of Appeals' decision dismissing the complaint was affirmed.

• Liability for Credit Card Obligation: The Court found no cogent reason to deviate from the CA's findings and conclusion. BPI invoked the eighth exception to the general rule that the Court is limited to reviewing only errors of law in a Rule 45 petition—that the findings of the Court of Appeals are contrary to those of the trial court—but the Court found this exception inapplicable.

On the question of whether Mr. Sarda actually received the credit card, BPI's witness admitted that Mr. Sarda did not apply for nor request the issuance of a credit card, being a pre-qualified client. To prove receipt, BPI presented a delivery receipt signed by Ms. Tandogon, but failed to submit proof that Ms. Tandogon was authorized by Mr. Sarda to receive the credit card on his behalf. The Court held that such evidence is self-serving and insufficient to sustain BPI's claim, especially since respondents denied being related to Ms. Tandogon, who was their former office clerk.

The Court distinguished the situation from cases where a pre-approved client accepted the credit card by signing a receipt and using the card to purchase goods and services, thereby creating a contractual relationship. Here, respondents denied receiving and using the credit card, making it incumbent upon BPI to substantiate its claim that Mr. Sarda used it in various transactions. The submission of statements of account is not enough to establish that the cardholder incurred the obligation to pay the purchases appearing therein. That respondents made those purchases cannot be inferred from the mere fact that substantial payments had been made on the total/minimum amounts due every month, in the absence of proof of the identity of the person who had actually paid them. BPI failed to present any witness from the establishments appearing in the statements of account or any other evidence of respondents' alleged purchases and cash advances. BPI also failed to offer a credible explanation for the unavailability of electronic or other evidence to prove the alleged purchases and cash advances.

As to the supplementary card under the name of Ms. Tandogon, there was no evidence that Mr. Sarda requested or applied for it. BPI's witness admitted there was no application form, that the request was allegedly made through a phone call, but there was no record of that phone call, the witness did not take it, and he had no personal knowledge of it. The issuance of a supplementary card without Mr. Sarda having applied for it is significant because the statements of account covering September 2011 to November 2012 showed huge amounts of purchases and cash advances using the supplementary card. That Mr. Sarda used the supplementary card cannot be inferred solely from the fact that payments were made, in the absence of proof of his actual receipt of the card and identity of the payor.

The burden of proof rests upon BPI, as plaintiff, to establish its case based on a preponderance of evidence under Section 1, Rule 133 of the Rules of Court. BPI failed to prove the material allegations in its complaint that respondents availed of its credit accommodation by using the subject cards.

The Court also addressed the duty imposed on banks to exercise a high degree of diligence in their business transactions. BSP Circular No. 702 (Series of 2010) prohibits banks from issuing pre-approved credit cards and requires them to exercise proper diligence by ascertaining that applicants possess good credit standing and are financially capable of fulfilling their credit commitments. BSP Circular No. 845-14 further clarified the meaning of "Pre-Approved Credit Cards" and enumerated acts tantamount to issuing unsolicited credit cards, including sending unsolicited supplementary cards. R.A. No. 10870, the Philippine Credit Card Industry Regulation Law, now mandates "know-your-client" procedures before issuing credit cards. The Court found that BPI failed to exercise proper diligence in the issuance of the primary and supplementary cards and should thus bear the resulting loss or damage caused by its own acts and policies. Even assuming fraud attended the use of the cards, it was incumbent upon BPI to adduce clear and convincing evidence that respondents connived with Ms. Tandogon; BPI cannot simply rely on bare insinuations and conjectures to establish respondents' liability.

• Preponderance of Evidence in Civil Cases — In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence, considering all the facts and circumstances of the case, the witnesses' manner of testifying, their intelligence, their means and opportunity of knowing the facts, the nature of the facts to which they testify, the probability or improbability of their testimony, their interest or want of interest, and their personal credibility. The Court applied this doctrine in holding that BPI, as plaintiff, failed to prove the material allegations in its complaint that respondents availed of its credit accommodation by using the subject cards.

• Burden of Proof in Credit Card Collection Cases — The credit card issuer bears the burden of proving that the alleged cardholder actually received the credit card, authorized the issuance of supplementary cards, and incurred the purchases and cash advances appearing in the statements of account. The mere submission of statements of account is insufficient to establish the cardholder's obligation, and the identity of the person who made payments cannot be inferred solely from the fact that payments were made.

• High Degree of Diligence Required of Banks — Banks are required to exercise a high degree of diligence in their business transactions, including the issuance of credit cards. BSP regulations prohibit the issuance of pre-approved credit cards and require banks to exercise proper diligence by ascertaining that applicants possess good credit standing and are financially capable of fulfilling their credit commitments. A bank's failure to exercise such diligence means it bears the resulting loss or damage caused by its own acts and policies.

• Rule 45 Limited to Errors of Law — In a petition for review on certiorari under Rule 45 of the Rules of Court, the Court is generally limited to reviewing only errors of law. Exceptions include when: (1) the conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation of specific evidence on which the factual findings are based; (7) the findings of absence of facts are contradicted by the presence of evidence on record; (8) the findings of the Court of Appeals are contrary to those of the trial court; (9) the Court of Appeals manifestly overlooked certain relevant and undisputed facts; (10) the findings of the Court of Appeals are beyond the issues of the case; and (11) such findings are contrary to the admissions of both parties.

• "The submission of statements of account is not enough to establish that the cardholder incurred the obligation to pay the purchases appearing therein. That it was respondents who made those purchases cannot also be inferred from the mere fact that substantial payments had been made on the total/minimum amounts due every month, in the absence of proof of the identity of the person who had actually paid them." — This passage states the core ratio decidendi: the bank's documentary evidence alone is insufficient to prove the cardholder's obligation, and payment alone does not establish the identity of the payor.

• "Since BPI clearly failed to present adequate proof that it was respondents who made purchases and cash advances using the cards, the CA did not err in dismissing its complaint." — This passage summarizes the Court's conclusion that BPI failed to discharge its burden of proof by preponderance of evidence.

• "In view of the foregoing, the Court finds that BPI failed to exercise proper diligence in the issuance of the primary and supplementary cards and should thus bear the resulting loss or damage caused by its own acts and policies." — This passage articulates the Court's holding on the bank's duty of diligence and the consequence of its failure to exercise such diligence.

• Alcaraz vs. Court of Appeals, 529 Phil. 77 (2006) — Cited for the proposition that a pre-approved client accepts a credit card by signing a receipt and using the card to purchase goods and services, thereby creating a contractual relationship between the cardholder and the credit card issuer.

• Spouses Yulo vs. Bank of the Philippine Islands, G.R. No. 217044, January 16, 2019 — Cited in support of the proposition that a delivery receipt signed by someone not authorized by the alleged cardholder is self-serving and insufficient to sustain the bank's claim.

• BPI Express Card Corporation vs. Olalia, 423 Phil. 593 (2001) — Cited by respondents for the proposition that noncompliance with the requirements for the issuance of a supplementary card is a defense against liability.

• Citibank, N.A. Mastercard vs. Teodoro, 458 Phil. 480 (2003) — Cited for the rule that in civil cases, the party that alleges a fact has the burden of proving it.

• Carbonell vs. Carbonnel-Mendes, 762 Phil. 529 (2015) — Cited for the enumeration of exceptions to the general rule that the Court is limited to reviewing only errors of law in a Rule 45 petition.

• Section 1, Rule 133, Rules of Court — Provides that in civil cases, the party having the burden of proof must establish his case by a preponderance of evidence, and enumerates the factors the court may consider in determining where the preponderance lies. Applied to hold that BPI failed to prove its claims against respondents.

• Section 14, Republic Act No. 8484 — The Access Devices Regulation Act of 1998, cited by BPI for the proposition that a cardholder is duty bound to notify the bank of his whereabouts, with failure giving rise to a prima facie presumption of using the credit card with intent to defraud.

• BSP Circular No. 702, Series of 2010 — Prohibits banks, quasi-banks, and credit card companies from issuing pre-approved credit cards and requires them to exercise proper diligence by ascertaining that applicants possess good credit standing and are financially capable of fulfilling their credit commitments. Applied to find that BPI failed to exercise proper diligence in issuing the subject cards.

• BSP Circular No. 845-14, Series of 2014 — Clarifies the meaning of "Pre-Approved Credit Cards" and enhances the prohibition against issuing such cards, enumerating acts tantamount to issuing unsolicited credit cards, including sending unsolicited supplementary cards. Applied to show that BPI's issuance of the supplementary card without application was irregular.

• Republic Act No. 10870 — The Philippine Credit Card Industry Regulation Law, which mandates credit card issuers to conduct "know-your-client" procedures and exercise proper diligence in ascertaining that applicants possess good credit standing and are financially capable of fulfilling their credit commitments. Applied to underscore the regulatory framework governing credit card issuance.

Bersamin, C.J. (Chairperson), Del Castillo, J., J. Reyes, Jr., and Carandang, JJ., concurred.