PANTALEON v.

AMEX

Doctrine: The contractual relationship that arises between a card-issuer and a cardholder in a card
membership agreement is a consensual contract to loan. The creditor-debtor relationship that arises
after a card-issuer has approved the cardholder’s purchase request is a real contract of loan (see
Somera p. 46).

Facts:
 The Pantaleon family were on a guided tour at the Coster Diamond House in Amsterdam. The
tour group planned on leaving at 9:30 am to have enough time to tour the city before their
departure to Belgium on the same day. 
 9:15 am, while at Coster, petitioner, lawyer Polo Pantaleon used his AMEX credit card to
purchase diamond pieces for his wife amounting to $13, 826. – 600K PHP 672,019.64
 9:40 am, petitioner asked to cancel the sale since Coster still had not received any approval
from AMEX. However, the store manager convinced petitioner to wait for a few more minutes. 
 By 10:05 am or 50 minutes later, Coster released the diamond pieces without AMEX’s
approval considering that the tour was already behind schedule and could not continue
without the Panteleon family onboard the bus. 
 Upon returning to the bus, they found their travel companions irritated considering that the rest of
the tour would be cancelled due to lack of time since they had to be in Belgium by 3 pm. 
 The records also show that it was only at 10:38 am or 78 minutes later when AMEX Manila’s
approval was transmitted to AMEX Amsterdam and to Coster. 
 After their trip to Europe, the Panteleon family went to the USA where they again experienced
delays in securing the approval of AMEX in purchasing golf equipment and children’s shoes. 
 Upon returning to Manila, petitioner demanded an apology from AMEX for the humiliation
and inconvenience he and his family experienced due to the delays in securing approval
for his credit card purchases.
 AMEX explained that the delay in Amsterdam was due to the amount involved which
deviated from petitioner’s established purchase pattern.
 With this, petitioner filed an action for damages against AMEX. Pantaleon contends that:
(1) AMEX has the obligation to approve all his charge requests since his credit card
has no pre-set spending limit.
(2) AMEX was in delay/mora solvendi when it failed to act on his charge requests within a
specific period of time. In his 12 years of being an AMEX cardholder, AMEX has always
approved his charges in a matter of 3 or 4 seconds. 
 RTC ruled found AMEX guilty of delay; CA: delay, mora accipiendi/creditor. With this, petitioner
filed a petition with the SC. SC reversed the decision and found AMEX in delay in complying with
its obligation to act with timely dispatch on petitioner’s purchases. 
 With this, AMEX filed a MR with the SC and contended that: 
(1) While the total amount of Pantaleon’s previous purchases using his AMEX credit card did
exceed said amount, these purchases were made in a span of more than 10 years, and
not in a single transaction.
(2) Because this was the biggest single transaction that was ever made using his credit
card, extraordinary diligence and careful review of credit history and bank
references were required to ensure the cardholder’s protection to minimize the
possibility that a third party was fraudulently using his credit card; and to protect itself
from the risk that the cardholder might not be able to pay for his purchases on credit.

Issue:
a. WON AMEX has the obligation to approve the charges. (NO)
b. WON AMEX was in delay in acting on the charges. (NO)
c. WON Pantaleon is entitled to damages. (NO)

Held:

a) No, AMEX has no obligation to approve the charges. When cardholders use their credit cards
to pay for their purchases, they merely offer to enter into loan agreements with the card-
 issuer. The card-issuer still has to determine whether it will allow the charge, based on the
cardholder’s past credit history. Only after the card-issuer approves the charge that the
parties enter into binding loan contracts. Since the card membership agreement states
that AMEX reserves the right to deny authorization for any requested charge, AMEX has
no obligation to approve the purchase requests of its cardholders. 

A credit card is any card, plate, coupon book, or other credit device existing for the purpose
of obtaining money, goods, property, labor or services or anything of value on credit. Credit
card transactions involve 3 contracts:
(1) a sales contract between the cardholder and merchant or business establishment,
(2) a loan agreement between cardholder and card-issuer, and
(3) a promise to pay between the card-issuer and merchant or business establishment.

b) No, AMEX was never in delay in acting on the charges. Without a demandable obligation,
there can be no finding of default. (in agreement, expressly stated in the terms of the
credit card that Pantaleon is not obligated to approve Pantaleon’s purchase request)
(1) no obligation could arise on the part of AMEX until after AMEX transmits its approval of the
charges. -
(2) AMEX has no obligation to approve charges made by its cardholders.
(3) there is no contractual stipulation nor specific law that requires AMEX to act on
charges within a specific period of time.
 BSP Circular – requires credit card companies to exercise extraordinary
diligence. The “matter of seconds” standard of Pantaleon should be in line with the
NCC’s policy on reasonableness.
(4) Petitioner’s previous experiences with AMEX approving his charges in a matter of seconds is
not a source of a legally enforceable right,
AMEX’s review procedure was done to ensure the cardholder’s protection and to prevent the
possibility that the credit card was being fraudulently used by a third person, Pantaleon thus
cannot claim that AMEX was in delay in acting on the charges.
(5) AMEX acted in good faith. Good faith is presumed. No evidence of bad faith.

c) No, Pantaleon is not entitled to damages. Plaintiff cannot claim damages when his own act
was the proximate cause of the injury. In this case, Pantaleon knew that the bus had to leave
by 9:30 am but he still pushed through with the transaction and made the tour group wait for him
and his wife. He could have prevented humiliation and embarrassment had he cancelled the sale
instead. Thus, Pantaleon is not entitled to damages.

Dispositive: SC granted the MR. No damages were awarded in favor of petitioner.

Defense: Negligence – prove that deliberate ung 78 mins

1. C. issuer and C holder 

a. Contract to loan - embodied in the membership agreement , to deliver money
b. C issuer agrees to extend credit facilities in favor c holder. 
2. C holder and merchant 
a. Contract of sale - merchant delivers the goods purchased and buyer pays the purchase
price. 
3. C issuer and merchant 
a. C Issuer will receive the message from the merchant upon swiping the credit card. 
i. C issuer will either authorize or deny the transaction. 
ii. If C issuer authorizes the transaction, the contract to loan between c issuer and
c holder will be consummated and a contract of loan will be perfected. 
iii. There is constructive delivery of the money by C issuer to C holder THROUGH
electronic transfer from C issuer to merchant. 
Spouses Ong – credit line

Notes:
a) A credit card is any card, plate, coupon book, or other credit device existing for the purpose
of obtaining money, goods, property, labor or services or anything of value on credit.

b) Credit card transactions involve 3 contracts: (1) a sales contract between the cardholder and
merchant or business establishment, (2) a loan agreement between cardholder and card-issuer,
and (3) a promise to pay between the card-issuer and merchant or business establishment.

c) A card membership agreement is a binding contract between the credit card-issuer and the
cardholder. It is a contract of adhesion, which is just as binding as ordinary contracts for the
reason that the party who adheres to the contract is free to reject it entirely. The only effect is that
the terms of the contract are construed strictly against the party who drafted it.

d) While a card-issuer and cardholder relationship relates merely to an agreement providing for
credit facility to the cardholder, a  creditor-debtor relationship involves the actual credit on loan
agreement involving 3 contracts and only arises after the card-issuer has approved the
cardholder’s purchase request.