CASE NO. 5 Bankard, Inc. v. Feliciano

MODULE NUMBER:2
CASE NO. 5 BANKARD, INC. V. FELICIANO

G.R. No. 141761 | Puno, J. | July 28, 2006
Topic: Credit Card
DOCTRINE:
Under the law, a loan requires the delivery of money or any other
consumable object by one party to another who acquires ownership thereof, on
the condition that the same amount or quality shall be paid. Loan is a
reciprocal obligation, as it arises from the same cause where one party is the
creditor, and the other the debtor.
FACTS:
This is a petition for review on certiorari on the Decision and Resolution
of the Court of Appeals (CA) which modified the Decision of the Regional Trial
Court (RTC).
Respondent Dr. Antonio Novak Feliciano (Dr. Feliciano) is the holder of

PCIBank Mastercard No. 5407-2610-0000-5864, issued and managed by
petitioner Bankard, Inc. An extension of the card, PCIBank Mastercard No.
5407-2611-0000-5863, was issued to his wife, Mrs. Marietta N. Feliciano.
In June 1995, Dr. Feliciano used his credit card to pay his breakfast meal in
Toronto, Canada. However, the card was dishonored for payment. As a result,
his guests who were his fellow doctors had to pay for the bill. Dr. Feliciano
immediately called the US toll-free number of petitioner to inquire on the cause
of dishonor. He was informed that his card was dishonored due to nonpayment
of his last billing statement. However, the respondent argued that he failed to
pay his bill and asked the person on the line to verify the correct status of his
credit card again. Likewise, he called his secretary to confirm the fact of
payment and coordinate with petitioner’s office in Manila.
The next day, respondent met with Dr. Bumanlag to reimburse her for
the cost of the breakfast the previous day. Thereafter, they went to Eddie Bauer
Fairview Mall and bought several dressing items. However, his card was again
dishonored when he presented it for payment. This caused embarrassment to
Dr. Feliciano and worse, the manager of the department store confiscated the
card in front of Dr. Bumanlag and other shoppers. Dr. Feliciano protested but
the manager called the security and forcibly retained the card. To avoid further
commotion, respondent just asked for the receipt of the confiscated card.
In October 1995, Dr. Feliciano then filed a complaint against petitioner

Bankard, Inc. and Mastercard International for breach of contractual rights
and damages. In his Complaint, he alleged that he is a holder in good standing
for more than ten (10) years and that petitioner and Mastercard International
reneged on their agreement by suspending the services of the card without
notice to him. As a result of the suspension and confiscation of his card in
Toronto, Canada, respondent suffered social humiliation, embarrassment and
besmirched reputation.
On defense, the petitioner argued that it suspended the privileges of

respondent's credit card in order to protect the respondent from fraudulent
transactions.
RTC: Ruled In favor of Dr. Feliciano. RTC held that petitioner’s negligence was
the immediate and proximate cause of respondent’s inquiry.
CA: Affirmed RTC’s Decision. However, it modified the ruling by deleting the
award of exemplary damages and reducing the moral damages and attorney’s
fees. CA likewise disallowed the award of actual damages for lack of proof.
Upon the denial of petitioner’s motion for reconsideration, it filed a petition

with the Court.
ISSUE:
Whether or not the petitioner is liable to respondent for moral damages
and attorney’s fees.
HELD:
YES. The petitioner is liable to pay respondent for moral damages and
attorney’s fees. Article 2220 provides:
Willful injury to property may be a legal ground for awarding moral damages if the
court should find that, under the circumstances, such damages are justly due.
The same rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith.
Under the foregoing, moral damages may be recovered in culpa

contractual where the defendant acted in bad faith or with malice in the breach
of the contract. Malice or bad faith implies moral obliquity or a conscious and
intentional design to do a wrongful act for a dishonest purpose. However, a
conscious or intentional design need not always be present since negligence
may occasionally be so gross as to amount to malice or bad faith. Bad faith, in
the context of Art. 2220 of the Civil Code, includes gross negligence.
The main argument of the petitioner for suspending the respondent’s

card was to protect him from fraudulent transactions. According to the
petitioner, they received a fraud alert from Indonesia and they tried to call the
respondent at his clinic and at home, but was not successful. Apart from this,
no further efforts was exerted by petitioner to inform the respondent about the
cancellation of his card.
The Court pointed that the petitioner’s motive should be praised,

however, it failed to protect the respondent from potentially embarrassing and
humiliating situations that may arise from the unsuspecting use of his
suspended PCIBank Mastercard.
Considering the widespread use of access devices in commercial and

other transactions, petitioner and other issuers of credit cards should not only
guard against fraudulent uses of credit cards but should also be protective of
genuine uses thereof by the true cardholders.
In the case at bar, the duty is much more demanding for the evidence
shows that respondent is a credit cardholder for more than ten (10) years in
good standing, and has not been shown to have violated any of the provisions
of his credit card agreement with petitioner. Considering the attendant
circumstances, we find petitioner to have been grossly negligent in suspending
respondent's credit card. To reiterate, moral damages may be awarded in a
breach of contract when the defendant acted fraudulently or in bad faith, or is
guilty of gross negligence amounting to bad faith.
Moral Damages: (P500,000.00) Depends on the discretion of the court ( based

on the circumstances of each case.
Attorney’s fees: (P50,000.00) AFFIRMED CA’s ruling. Dr. Feliciano was

compelled to litigate to protect his interest.
WHEREFORE, the petition is DENIED.

CASE NO. 5 Bankard, Inc. v. Feliciano

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MODULE NUMBER:2

CASE NO. 5 BANKARD, INC. V. FELICIANO

Respondent Dr. Antonio Novak Feliciano (Dr. Feliciano) is the holder of

In October 1995, Dr. Feliciano then filed a complaint against petitioner

On defense, the petitioner argued that it suspended the privileges of

Upon the denial of petitioner’s motion for reconsideration, it filed a petition

Under the foregoing, moral damages may be recovered in culpa

The main argument of the petitioner for suspending the respondent’s

The Court pointed that the petitioner’s motive should be praised,

Considering the widespread use of access devices in commercial and

Moral Damages: (P500,000.00) Depends on the discretion of the court ( based

Attorney’s fees: (P50,000.00) AFFIRMED CA’s ruling. Dr. Feliciano was

WHEREFORE, the petition is DENIED.

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