BPI Express Card Corporation vs. Court of Appeals

A credit card corporation does not incur liability for damages arising from the dishonor of a cardholder's credit card when the cardholder's own failure to pay his outstanding obligation was the proximate cause of the dishonor, and the corporation exercised its contractual right to suspend the card in good faith. A postdated check is not equivalent to money and does not operate as payment; its delivery does not discharge the cardholder's obligation. To recover damages for abuse of rights under Article 19 of the Civil Code, the claimant must prove: (1) there is a legal right or duty; (2) which is exercised in bad faith; and (3) for the sole intent of prejudicing or injuring another.

Private respondent Ricardo J. Marasigan was a complimentary member of BPI Express Card Corporation (BECC) from February 1988 to February 1989, holding Credit Card No. 100-012-5534 with a credit limit of P3,000.00 and monthly billing every 27th of the month. His membership was renewed for another year until February 1990, with his credit limit increased to P5,000.00. The credit card agreement contained terms and conditions stipulating that any card with outstanding balances unpaid after thirty (30) days from the original billing/statement date shall automatically be suspended, and those with accounts unpaid after sixty (60) days shall automatically be cancelled.

Private respondent Ricardo J. Marasigan, a lawyer by profession, was a complimentary member of BPI Express Card Corporation (BECC) from February 1988 to February 1989, holding Credit Card No. 100-012-5534 with a credit limit of P3,000.00 and monthly billing every 27th of the month. His membership was renewed for another year until February 1990, and his credit limit was increased to P5,000.00. Although Marasigan oftentimes exceeded his credit limits, this was never held against him by BECC, and even his mode of paying monthly bills in check was tolerated. Their contractual relations proceeded smoothly until his statement of account for October 1989 amounting to P8,987.84 was not paid in due time.

Marasigan admitted having inadvertently failed to pay his account for that month because he was in Quezon province attending to professional and personal commitments. He was informed by his secretary that BECC was demanding immediate payment of his outstanding account, was requiring him to issue a check for P15,000.00 which would include his future bills, and was threatening to suspend his credit card. Marasigan issued Far East Bank and Trust Co. Check No. 494675 in the amount of P15,000.00, postdated December 15, 1989, which was received on November 23, 1989 by Tess Lorenzo, an employee of BECC, who in turn gave the check to Jeng Angeles, a co-employee who handled Marasigan's account. The check remained in the custody of Jeng Angeles. Roberto Maniquiz, head of the collection department of BECC, was formally informed of the postdated check about a week later.

On November 28, 1989, BECC served Marasigan a letter by ordinary mail informing him of the temporary suspension of the privileges of his credit card and the inclusion of his account number in their Caution List. He was told to refrain from further use of his credit card to avoid any inconvenience or embarrassment, and that unless he settled his outstanding account within five days from receipt of the letter, his membership would be permanently cancelled. There was no showing that Marasigan received this letter before December 8, 1989. Confident that he had settled his account with the issuance of the postdated check, Marasigan invited some guests on December 8, 1989 and entertained them at Café Adriatico, an establishment accredited with BECC. When he presented his credit card to Café Adriatico for the bill amounting to P735.32, the card was dishonored. One of his guests, Mary Ellen Ringler, paid the bill by using her own Unibankard credit card.

In a letter dated December 12, 1989, Marasigan requested BECC to send him the exact billing due as of December 15, 1989, to withhold the deposit of his postdated check, and that the check be returned to him because he had already instructed his bank to stop payment thereof, as BECC allegedly violated their agreement that he issue the check to cover his account amounting to only P8,987.84 on the condition that BECC will not suspend the effectivity of the card. A letter dated December 16, 1989 was sent by Marasigan to the manager of FEBTC, Ramada Branch, Manila, requesting the bank to stop payment of the check. No reply was received from BECC to his letter dated December 12, 1989. Marasigan sent another letter dated March 12, 1990, reminding BECC that he had long rescinded and cancelled whatever arrangement he entered into with it, and requesting his correct billing, less improper charges and penalties, and an explanation within five days why his card was dishonored on December 8, 1989 despite assurance to the contrary by BECC's personnel-in-charge, otherwise necessary court action would be filed. BECC served its final demand dated March 21, 1990, requiring Marasigan to pay in full his overdue account, including stipulated fees and charges, within five days from receipt, and to replace the postdated check with cash within the same period or face criminal suit for violation of the Bouncing Check Law. Marasigan replied in a letter dated April 5, 1990, demanding BECC's compliance with his request within three days, otherwise he would file a case.

The trial court found that there was indeed an arrangement between Marasigan and BECC, as inferred from the acts of BECC's employees, that the credit card was still good and could still be used. The trial court observed that while BECC was trying its best to persuade Marasigan to update his account, it had already taken steps to suspend or cancel his card and include him in the caution list, without ever hinting to him that his card had already been suspended or cancelled. The trial court also found reason to believe that Marasigan was assured by BECC's employee that his card would continue to be honored so long as he paid his obligation of P15,000.00.

• Existence of Agreement: Petitioner argued that the lower court erred in declaring that there was indeed an agreement or arrangement entered into between the parties wherein the defendant required the plaintiff to issue a postdated check in its favor in the amount of P15,000.00 as payment for his overdue accounts, with the condition that the plaintiff's credit card will not be suspended or cancelled.
• Liability for Damages: Petitioner argued that the lower court erred in holding the defendant liable for damages and attorney's fees arising from the dishonor of the plaintiff's credit card.

• Abuse of Rights: Private respondent maintained that petitioner abused its right in contravention of Article 19 of the Civil Code by suspending his credit card despite the arrangement that the card would remain effective upon his issuance of the P15,000.00 postdated check.
• Lack of Notice: Private respondent claimed that petitioner failed to notify him of the suspension of his credit card, which caused his humiliation and embarrassment when the card was dishonored at Café Adriatico.

• Right to Suspend: Whether petitioner had the right to suspend the credit card of the private respondent under the terms and conditions of the credit card agreement.
• Existence of Agreement: Whether prior to the suspension of private respondent's credit card on November 28, 1989, the parties entered into an agreement whereby the card could still be used and would be duly honored by duly accredited establishments.
• Abuse of Rights: Whether petitioner abused its right under the terms and conditions of the contract in cancelling the credit card of the private respondent, warranting an award of damages.

• Right to Suspend: Yes. Under the terms and conditions of the credit card signed by private respondent, any card with outstanding balances unpaid after thirty (30) days from the original billing/statement date shall automatically be suspended. Private respondent failed to pay within thirty days for his billing dated September 27, 1989, and did not pay for his billing dated October 27, 1989, so as early as October 28, 1989, petitioner could automatically suspend his credit card.
• Existence of Agreement: No. While there was an arrangement between the parties wherein petitioner required private respondent to issue a check worth P15,000.00 as payment for the latter's billings, private respondent was not able to comply with this obligation because the check he issued was postdated. A check is only a substitute for money and not money; the delivery of such an instrument does not, by itself, operate as payment, especially in the case of a postdated check.
• Abuse of Rights: No. The elements of abuse of rights under Article 19 of the Civil Code were not established. Private respondent failed to prove bad faith on the part of petitioner, and the action of petitioner actually belied the existence of bad faith, as petitioner could have suspended the card outright as early as October 28, 1989, but instead allowed private respondent to use his card for several weeks and made special accommodations for him.

• Right to Suspend: The Court examined the terms and conditions of the credit card agreement, which provided that any card with outstanding balances unpaid after thirty (30) days from the original billing/statement date shall automatically be suspended. By private respondent's own admission, he made no payment within thirty days for his billing dated September 27, 1989, nor did he make payment for his billing dated October 27, 1989. Consequently, as early as October 28, 1989, thirty days from the non-payment of his September billing, petitioner corporation could automatically suspend his credit card. The provision of the card was clear and unambiguous.
• Existence of Agreement: The Court agreed with the Court of Appeals' finding that there was an arrangement between the parties wherein petitioner required private respondent to issue a check worth P15,000.00 as payment for the latter's billings. However, the Court found that private respondent was not able to comply with this obligation. The purpose of the arrangement on November 22, 1989, was for the immediate payment of private respondent's outstanding account, in order that his credit card would not be suspended. Although private respondent issued a check for P15,000.00 the following day, the check was postdated December 15, 1989. Citing settled doctrine, the Court held that a check is only a substitute for money and not money, and the delivery of such an instrument does not, by itself, operate as payment. This is especially true in the case of a postdated check. Thus, the issuance of the postdated check was not effective payment, and petitioner corporation was justified in suspending the credit card.
• Abuse of Rights: The Court applied the elements of abuse of rights under Article 19 of the Civil Code: (1) there is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. The Court noted that good faith is presumed, and the burden of proving bad faith is on the party alleging it, which private respondent failed to do. The action of petitioner belied the existence of bad faith: as early as October 28, 1989, petitioner could have suspended private respondent's card outright, but instead allowed him to use his card for several weeks, notified him of the impending suspension, and made special accommodations for him to settle his outstanding account. The Court also distinguished between damages and injury, noting that there can be damage without injury (damnum absque injuria) when the loss or harm was not the result of a violation of a legal duty. The Court found that it was private respondent's own failure to settle his obligation which caused the suspension of his credit card and subsequent dishonor at Café Adriatico. The Court also noted that the terms and conditions did not require notice before suspension, and that under the Rules on Evidence, there is a disputable presumption that letters duly directed and mailed were received in the regular course of mail. Private respondent's bare denial failed to rebut this presumption, and he even admitted on cross-examination that he received the cancellation notice after November 27.

• Abuse of Rights (Article 19, Civil Code) — To find the existence of an abuse of right under Article 19, the following elements must be present: (1) there is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. The Court applied this test and found that the elements were not satisfied because private respondent failed to prove bad faith on the part of petitioner, and petitioner's actions actually demonstrated good faith in accommodating the cardholder.
• Damnum Absque Injuria — Damage without injury occurs when the loss or harm suffered was not the result of a violation of a legal duty. In such cases, the consequences must be borne by the injured person alone, and 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 private respondent's embarrassment was caused by his own negligence, not by any legal wrong committed by petitioner.
• Postdated Check as Payment — A check is only a substitute for money and not money; the delivery of such an instrument does not, by itself, operate as payment. This is especially true in the case of a postdated check. The Court applied this doctrine to hold that private respondent's issuance of a postdated check did not constitute effective payment of his outstanding obligation, and thus petitioner was justified in suspending his credit card.
• Presumption of Good Faith — Good faith is presumed, and the burden of proving bad faith is on the party alleging it. The Court applied this presumption in favor of petitioner, noting that private respondent failed to discharge his burden of proving bad faith.

• "The aforequoted provision of the card cannot be any clearer. By his own admission private respondent no payment within thirty days for his billing/statement dated 27 September 1989. Neither did he make payment for his original billing/statement dated 27 October 1989. Consequently as early as 28 October 1989 thirty days from the non-payment of his billing dated 27 September 1989, petitioner corporation could automatically suspend his credit card." — This passage establishes the contractual basis for petitioner's right to suspend the credit card, which is central to the Court's ruling that no abuse of rights occurred.
• "Settled is the doctrine that a check is only a substitute for money and not money, the delivery of such an instrument does not, by itself operate as payment. This is especially true in the case of a postdated check. Thus, the issuance by the private respondent of the postdated check was not effective payment. It did not comply with his obligation under the arrangement with Miss Lorenzo. Petitioner corporation was therefore justified in suspending his credit card." — This passage articulates the controlling doctrine on postdated checks and applies it to the facts, forming the basis for the Court's conclusion that petitioner was justified in suspending the card.
• "To find the existence of an abuse of right Article 19 the following elements must be present (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. Time and again this Court has held that good faith is presumed and the burden of proving bad faith is on the party alleging it." — This passage states the canonical formulation of the abuse of rights doctrine under Article 19 and the presumption of good faith, which are central to the Court's reasoning.
• "In other words, in order that the plaintiff may maintain an action for the injuries of which he complaints, 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. The underlying basis for the award of tort damages is the premise that an individual was injured in contemplation of law. Thus, there must first be a breach of some duty and the imposition of liability for that breach before damages may be awarded; and the breach of such duty should be the proximate cause of the injury." — This passage articulates the distinction between damage and injury and the requirement of a legal breach as a prerequisite for damages, which underlies the Court's application of damnum absque injuria.

• Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411 (1990) — Cited as controlling authority for the doctrine that a check is only a substitute for money and not money, and that delivery of such an instrument does not, by itself, operate as payment.
• Albenson Enterprises Corp. vs. CA, 217 SCRA 16, 25 (1993) — Cited as controlling authority for the elements of abuse of rights under Article 19 of the Civil Code.
• Barons Marketing Corp. vs. Court of Appeals and Phelps Dodge Phils., Inc., G.R. No. 126486, February 9, 1998 — Cited for the doctrine that good faith is presumed and the burden of proving bad faith is on the party alleging it.
• Custodio vs. CA, 253 SCRA 483 (1996) — Cited for the doctrine of damnum absque injuria, distinguishing between damage and injury and explaining that there can be damage without injury when the loss or harm was not the result of a violation of a legal duty.

• Article 19, Civil Code — Provides that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. The Court applied this provision to determine whether petitioner abused its right in suspending private respondent's credit card, requiring the presence of bad faith and intent to prejudice or injure another.
• Rule 131, Section 3(m), Revised Rules of Court — Establishes the disputable presumption that letters duly directed and mailed were received in the regular course of mail. The Court applied this presumption to find that private respondent received the notice of suspension, as his bare denial failed to rebut the presumption.

Narvasa, C.J. and Romero, J., concurred. Purisima, J., took no part.