THIRD DIVISION

[G.R. No. 156168. December 14, 2004.]

EQUITABLE BANKING CORPORATION , petitioner, vs . JOSE T.

CALDERON , respondent.

DECISION

GARCIA , J : p

Thru this petition for review on certiorari under Rule 45 of the Rules of Court,
petitioner Equitable Banking Corporation (EBC), seeks the reversal and setting aside of the
decision dated November 25, 2002 1 of the Court of Appeals in CA-G.R. CV No. 60016,
which partially a rmed an earlier decision of the Regional Trial Court at Makati City,
Branch 61, insofar as it grants moral damages and costs of suit to herein respondent,
Jose T. Calderon.
The decision under review recites the factual background of the case, as follows:
Plaintiff-appellee [now respondent] Jose T. Calderon (Calderon for brevity),
is a businessman engaged in several business activities here and abroad, either in
his capacity as President or Chairman of the Board thereon. In addition thereto, he
is a stockholder of PLDT and a member of the Manila Polo Club, among others.
He is a seasoned traveler, who travels at least seven times a year in the U.S.,
Europe and Asia. On the other hand, the defendant-appellant [now petitioner]
Equitable Banking Corporation (EBC for brevity), is one of the leading commercial
banking institutions in the Philippines, engaged in commercial banking, such as
acceptance of deposits, extension of loans and credit card facilities, among
others.

xxx xxx xxx

Sometime in September 1984, Calderon applied and was issued an

Equitable International Visa card (Visa card for brevity). The said Visa card can be
used for both peso and dollar transactions within and outside the Philippines. The
credit limit for the peso transaction is TWENTY THOUSAND (P20,000.00) PESOS;
while in the dollar transactions, Calderon is required to maintain a dollar account
with a minimum deposit of $3,000.00, the balance of dollar account shall serve
as the credit limit.

In April 1986, Calderon together with some reputable business friends and
associates, went to Hongkong for business and pleasure trips. Speci cally on 30
April 1986, Calderon accompanied by his friend, Ed De Leon went to Gucci
Department Store located at the basement of the Peninsula Hotel (Hongkong).
There and then, Calderon purchased several Gucci items (t-shirts, jackets, a pair of
shoes, etc.). The cost of his total purchase amounted to HK$4,030.00 or
equivalent to US$523.00. Instead of paying the said items in cash, he used his
Visa card (No. 4921 6400 0001 9373) to effect payment thereof on credit. He then
presented and gave his credit card to the saleslady who promptly referred it to the
store cashier for veri cation. Shortly thereafter, the saleslady, in the presence of
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 his friend, Ed De Leon and other shoppers of different nationalities, informed him
that his Visa card was blacklisted. Calderon sought the recon rmation of the
status of his Visa card from the saleslady, but the latter simply did not honor it
and even threatened to cut it into pieces with the use of a pair of scissors.

Deeply embarrassed and humiliated, and in order to avoid further

indignities, Calderon paid cash for the Gucci goods and items that he bought.

Upon his return to the Philippines, and claiming that he suffered much torment and
embarrassment on account of EBC's wrongful act of blacklisting/suspending his VISA
credit card while at the Gucci store in Hongkong, Calderon led with the Regional Trial
Court at Makati City a complaint for damages 2 against EBC. EICScD

In its Answer, 3 EBC denied any liability to Calderon, alleging that the latter's credit
card privileges for dollar transactions were earlier placed under suspension on account of
Calderon's prior use of the same card in excess of his credit limit, adding that Calderon
failed to settle said prior credit purchase on due date, thereby causing his obligation to
become past due. Corollarily, EBC asserts that Calderon also failed to maintain the
required minimum deposit of $3,000.00.
To expedite the direct examination of witnesses, the trial court required the parties
to submit a davits, in question-and-answer form, of their respective witnesses, to be
sworn to in court, with cross examination to be made in open court.
Eventually, in a decision dated October 10, 1997, 4 the trial court, concluding that
"defendant bank was negligent if not in bad faith, in suspending, or 'blacklisting' plaintiff's
credit card without notice or basis", rendered judgment in favor of Calderon, thus:
WHEREFORE PREMISES ABOVE CONSIDERED, judgment is hereby
rendered in favor of plaintiff as against defendant EQUITABLE BANKING
CORPORATION, which is hereby ORDERED to pay plaintiff as follows:

1. the sum of US$150.00 as actual damages;

2. the sum of P200,000.00 as and by way of moral damages;

3. the amount of P100,000.00 as exemplary damages;

4. the sum of P100,000.00 as attorney's fees plus P500.00 per court
hearing and

5. costs of suit.

SO ORDERED.

Therefrom, EBC went to the Court of Appeals (CA), whereat its recourse was
docketed as CA G.R. CV No. 60016 .
After due proceedings, the CA, in a decision dated November 25, 2002 , 5 affirmed
that of the trial court but only insofar as the awards of moral damages, the amount of
which was even reduced, and the costs of suits are concerned. More speci cally, the CA
decision dispositively reads: 6
WHEREFORE, in consideration of the foregoing disquisitions, the decision
of the court a quo dated 10 October 1997 is AFFIRMED insofar as the awards of
moral damages and costs of suit are concerned. However, anent the award of
moral damages, the same is reduced to One Hundred Thousand (P100,000.00)
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 Pesos.

The rest of the awards are deleted.

SO ORDERED.

Evidently unwilling to accept a judgment short of complete exemption from any

liability to Calderon, EBC is now with us via the instant petition on its lone submission that
"THE COURT OF APPEALS ERRED IN HOLDING THAT THE RESPONDENT IS ENTITLED TO
MORAL DAMAGES NOTWITHSTANDING ITS FINDING THAT PETITIONER'S ACTIONS
HAVE NOT BEEN ATTENDED WITH ANY MALICE OR BAD FAITH." 7
The petition is impressed with merit.
In law, moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and
similar injury. 8 However, to be entitled to the award thereof, 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. 9 In Philippine Telegraph & Telephone Corporation vs. Court
of Appeals, 1 0 we have had the occasion to reiterate the conditions to be met in order that
moral damages may be recovered, viz:
An award of moral damages would require, rstly, evidence of besmirched
reputation, or physical, mental or psychological suffering sustained by the
claimant; secondly, a culpable act or omission factually established; thirdly, proof
that the wrongful act or omission of the defendant is the proximate cause of the
damages sustained by the claimant; and fourthly, that the case is predicated on
any of the instances expressed or envisioned by Articles 2219 and 2220 of the
Civil Code.

Particularly, in culpa contractual or breach of contract, as here, moral damages are

recoverable only if the defendant has acted fraudulently or in bad faith, 1 1 or is found guilty
of gross negligence amounting to bad faith, or in wanton disregard of his contractual
obligations. 1 2 Verily, the breach must be wanton, reckless, malicious or in bad faith,
oppressive or abusive. 1 3
Here, the CA ruled, and rightly so, that no malice or bad faith attended petitioner's
dishonor of respondent's credit card. For, as found no less by the same court, petitioner
was justi ed in doing so under the provisions of its Credit Card Agreement 1 4 with
respondent, paragraph 3 of which states:
. . . the CARDHOLDER agrees not to exceed his/her approved credit limit,
otherwise, all charges incurred including charges incurred through the use of the
extension CARD/S, if any in excess of credit limit shall become due and
demandable and the credit privileges shall be automatically suspended without
notice to the CARDHOLDER in accordance with Section 11 hereof.

We are thus at a loss to understand why, despite its very own nding of absence of
bad faith or malice on the part of the petitioner, the CA nonetheless adjudged it liable for
moral damages to respondent. EaCDAT

Quite evidently, in holding petitioner liable for moral damages, the CA justi ed the
award on its assessment that EBC was negligent in not informing Calderon that his credit
card was already suspended even before he left for Hongkong, ratiocinating that
petitioner's right to automatically suspend a cardholder's privileges without notice should
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 not have been indiscriminately used in the case of respondent because the latter has
already paid his past obligations and has an existing dollar deposit in an amount more than
the required minimum for credit card at the time he made his purchases in Hongkong. But,
as explained by the petitioner in the memorandum it led with this Court, 1 5 which
explanations were never controverted by respondent:
". . . prior to the incident in question (i.e., April 30, 1986 when the purchases
at the Gucci store in Hongkong were made), respondent made credit purchases in
Japan and Hongkong from August to September 1985 amounting to
US$14,226.12, while only having a deposit of US$3,639.00 in his dollar account
as evidenced by the pertinent monthly statement of respondent's credit card
transactions and his bank passbook, thus exceeding his credit limit; these
purchases were accommodated by the petitioner on the condition that the
amount needed to cover the same will be deposited in a few days as represented
by respondent's secretary and his company's general manager — a certain Mrs.
Zamora and Mr. F.R. Oliquiano; respondent however failed to make good on his
commitment; later, respondent likewise failed to make the required deposit on the
due date of the purchases as stated in the pertinent monthly statement of
account; as a consequence thereof, his card privileges for dollar transactions were
suspended; it was only four months later — on 31 January 1986, that respondent
deposited the sum of P14,501.89 in his dollar account to cover his purchases; the
said amount however was not su cient to maintain the required minimum dollar
deposit of $3,000.00 as the respondent's dollar deposit stood at only US$2,704.94
after satisfaction of his outstanding accounts; a day before he left for Hongkong,
respondent made another deposit of US$14,000.00 in his dollar account but did
not bother to request the petitioner for the reinstatement of his credit card
privileges for dollar transactions, thus the same remained under suspension." 1 6

The foregoing are based on the sworn a davit of petitioner's Collection Manager, a
certain Lourdes Canlas, who was never cross examined by the respondent nor did the
latter present any evidence to refute its veracity.
Given the above, and with the express provision on automatic suspension without
notice under paragraph 3, supra, of the parties' Credit Card Agreement, there is simply no
basis for holding petitioner negligent for not notifying respondent of the suspended status
of his credit card privileges.
It may be so that respondent, a day before he left for Hongkong, made a deposit of
US$14,000.00 to his dollar account with petitioner. The sad reality, however, is that he
never veri ed the status of his card before departing for Hongkong, much less requested
petitioner to reinstate the same. 1 7
And, certainly, respondent could not have justi ably assumed that petitioner must
have reinstated his card by reason alone of his having deposited US$14,000.00 a day
before he left for Hongkong. As issuer of the card, petitioner has the option to decide
whether to reinstate or altogether terminate a credit card previously suspended on
considerations which the petitioner deemed proper, not the least of which are the
cardholder's payment record, capacity to pay and compliance with any additional
requirements imposed by it. That option, after all, is expressly embodied in the same
Credit Card Agreement, paragraph 12 of which unmistakably states:
The issuer shall likewise have the option of reinstating the card holder's
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 privileges which have been terminated for any reason whatsoever upon
submission of a new accomplished application form if required by the issuer and
upon payment of an additional processing fee equivalent to annual fee. 1 8

Even on the aspect of negligence, therefore, petitioner could not have been properly
adjudged liable for moral damages.
Unquestionably, respondent suffered damages as a result of the dishonor of his
card. There is, however, a material distinction between damages and injury. To quote from
our decision in BPI Express Card Corporation vs. Court of Appeals: 1 9
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 in 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.
In other words, in order that a plaintiff may maintain an action for the
injuries of which he complains, 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 rst 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. (Emphasis supplied).

In the situation in which respondent nds himself, his is a case of damnum absque
injuria. HTCIcE

We do not take issue with the appellate court in its observation that the Credit Card
Agreement herein involved is a contract of adhesion, with the stipulations therein
contained unilaterally prepared and imposed by the petitioner to prospective credit card
holders on a take-it-or-leave-it basis. As said by us in Polotan, Sr. vs. Court of Appeals: 2 0
A contract of adhesion is one in which one of the contracting parties
imposes a ready-made form of contract which the other party may accept or
reject, but cannot modify. One party prepares the stipulation in the contract, while
the other party merely a xes his signature or his 'adhesion' thereto giving no
room for negotiation and depriving the latter of the opportunity to bargain on
equal footing.

On the same breath, however, we have equally ruled that such a contract is " as
binding as ordinary contracts, the reason being that the party who adheres to the contract
is free to reject it entirely." 2 1
Moreover, the provision on automatic suspension without notice embodied in the
same Credit Card Agreement is couched in clear and unambiguous term, not to say that
the agreement itself was entered into by respondent who, by his own account, is a
reputable businessman engaged in business activities here and abroad.
On a nal note, we emphasize that " moral damages are in the category of an award
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 designed to compensate the claim for actual injury suffered and not to impose a penalty
on the wrongdoer." 2 2
WHEREFORE, the instant petition is hereby GRANTED and the decision under review
REVERSED and SET ASIDE.
SO ORDERED.
Panganiban, Sandoval-Gutierrez and Carpio Morales, JJ ., concur.
Corona, J ., is on leave.

Footnotes

1. Penned by Associate Justice Bienvenido L. Reyes and concurred in by Associate

Justices Romeo A. Brawner and Danilo B. Pine.

2. Rollo, pp. 37–41.

3. Rollo, pp. 42–47.
4. Rollo, pp. 50–55.
5. Rollo, pp. 28–36.
6. Rollo, p. 36.
7. Rollo, p. 19.
8. Article 2217, Civil Code.
9. Ace Haulers Corporation vs. Court of Appeals, 338 SCRA 572 [2000].
10. 388 SCRA 270, [2002].
11. Article 2220, Civil Code.

12. Philippine Telegraph & Telephone Corporation vs. Court of Appeals, supra, at p. 277.
13. Herbosa vs. CA, 374, 578, 579 [2002].
14. Exhibit "1".
15. Rollo, pp. 92–108, at p. 95 thereof.
16. Rollo, p. 96.
17. TSN, p. 18, Dec. 13, 1990.
18. Rollo, p. 17.
19. 296 SCRA 260 [1998].
20. 296 SCRA 247, 255 [1998].

21. Polotan, Sr. vs. Court of Appeals, supra, at p. 256.

22. Francisco vs. Ferrer, 353 SCRA 261 [2001].

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