Understanding Credit Card Suspension: Contractual Obligations Prevail

In the Philippines, credit card companies have the right to suspend or cancel credit cards if cardholders fail to meet their payment obligations as outlined in their agreements. This case underscores the importance of understanding and adhering to credit card terms and conditions, highlighting that damage suffered due to suspension, when contractually justified, may not always warrant legal compensation. Essentially, ‘damage without legal injury’ (*damnum absque injuria*) applies when a bank acts within its contractual rights, even if it causes inconvenience or embarrassment to the cardholder.

G.R. No. 120639, September 25, 1998

INTRODUCTION

Imagine the embarrassment of having your credit card declined at a restaurant, especially when you’re treating guests. This was the predicament faced by Atty. Ricardo Marasigan, leading to a legal battle against BPI Express Card Corporation (BECC). Marasigan sued for damages after his credit card was dishonored at Café Adriatico due to suspension for an overdue account. The central legal question: Was BECC justified in suspending Marasigan’s credit card, and is Marasigan entitled to compensation for the resulting humiliation?

LEGAL CONTEXT: CONTRACTS, ABUSE OF RIGHTS, AND *DAMNUM ABSQUE INJURIA*

Philippine law recognizes the principle of abuse of rights, enshrined in Article 19 of the Civil Code. This article states:

“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.”

For abuse of rights to exist, three elements must concur: a legal right or duty, exercise of bad faith, and sole intent to prejudice or injure another. However, good faith is presumed, and the burden of proving bad faith lies with the one alleging it.

Furthermore, the concept of *damnum absque injuria*, meaning “damage without legal injury,” is crucial. It recognizes that damages can occur without a violation of a legal right. In such cases, the law offers no remedy. As jurisprudence explains, injury is the illegal invasion of a legal right, while damage is the resulting loss or harm. Damages are the compensation for that damage. If there’s damage without injury – no breach of legal duty – it’s *damnum absque injuria*.

Credit card agreements are contracts. The terms and conditions stipulated in these agreements are legally binding. Clauses allowing suspension or cancellation for overdue payments are standard and generally upheld, provided they are not exercised in bad faith or with abuse of right.

CASE BREAKDOWN: MARASIGAN VS. BPI EXPRESS CARD CORP.

Ricardo Marasigan, a lawyer, held a BPI Express Credit Card. His card agreement stipulated automatic suspension for accounts with outstanding balances unpaid for 30 days from the billing date. Marasigan consistently exceeded his credit limit and paid his bills by check, which BECC tolerated initially.

However, Marasigan failed to pay his October 1989 statement on time. BECC contacted him, requesting payment and warning of potential suspension. Marasigan issued a postdated check for P15,000, intending to cover his outstanding balance and future charges. An employee of BECC received the check.

Subsequently, BECC sent Marasigan a letter via ordinary mail, informing him of the temporary suspension of his card and its inclusion in a caution list due to the overdue account. Critically, this letter was sent on November 28, 1989, prior to the December 8, 1989 incident at Cafe Adriatico.

On December 8, 1989, Marasigan’s credit card was dishonored at Café Adriatico, causing him embarrassment. He argued that BECC assured him his card would remain active upon issuing the check and that he did not receive prior notice of suspension before the incident.

The case proceeded through the courts:

1. **Regional Trial Court (RTC):** Ruled in favor of Marasigan, awarding moral, exemplary damages, and attorney’s fees. The RTC found BECC had abused its right by suspending the card without proper notice despite assurances to the contrary and the acceptance of the postdated check.
2. **Court of Appeals (CA):** Affirmed the RTC decision but reduced the damage awards. The CA also believed there was an arrangement to keep the card active upon check issuance but still found BECC liable for damages due to the dishonor.
3. **Supreme Court (SC):** Reversed the CA and RTC decisions, ruling in favor of BPI Express Card Corporation. The SC held that BECC was justified in suspending the card based on the contract terms and that Marasigan was not entitled to damages.

The Supreme Court emphasized several key points:

• **Contractual Right to Suspend:** The credit card agreement clearly stated that cards with balances unpaid for 30 days would be automatically suspended. Marasigan admitted to non-payment beyond this period. The Court quoted the agreement: “Any CARD with outstanding balances unpaid after thirty (30) days from original billing/statement date shall automatically be suspended…”
• **No Binding Agreement to Keep Card Active:** While there were communications and a postdated check was issued, the SC found no binding agreement that BECC assured Marasigan his card would remain active. The postdated check was not considered immediate payment.
• **No Abuse of Right by BECC:** The SC found no bad faith on BECC’s part. BECC had grounds to suspend the card as per the contract. They even allowed Marasigan to use the card beyond the 30-day grace period and sent a suspension notice.
• ***Damnum Absque Injuria* Applied:** Marasigan suffered damage (embarrassment), but BECC did not commit a legal injury by suspending the card according to their contractual right. Thus, it was a case of *damnum absque injuria*. The Court stated, “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…”
• **Notice of Suspension:** Although the contract didn’t mandate prior notice beyond the terms, BECC sent a suspension letter via ordinary mail on November 28. The Court invoked the presumption that mail duly sent is received, and Marasigan failed to rebut this presumption.

PRACTICAL IMPLICATIONS: RESPONSIBILITIES AND RIGHTS

This case provides critical lessons for both credit card holders and issuers in the Philippines:

**For Credit Card Holders:**

• **Understand Your Agreement:** Carefully read and understand the terms and conditions of your credit card agreement, especially clauses regarding payment deadlines, interest, fees, and suspension/cancellation policies.
• **Pay on Time:** Ensure timely payments to avoid suspension, penalties, and negative credit history.
• **Checks are Not Immediate Payment:** Recognize that checks, especially postdated ones, are not considered immediate cash payments. Payment is typically considered complete upon check clearing.
• **Presumption of Notice:** Be aware that notices sent via ordinary mail are presumed to be received. Keep your address updated with the credit card company.

**For Credit Card Issuers:**

• **Clear Terms and Conditions:** Ensure credit card agreements are clear, easily understandable, and explicitly state suspension/cancellation policies.
• **Follow Contractual Procedures:** Adhere to the procedures outlined in the agreement when suspending or cancelling cards.
• **Document Communications:** Maintain records of communications with cardholders, including notices of suspension or overdue accounts.

Key Lessons

• Credit card companies have a contractual right to suspend or cancel cards for non-payment as per the agreed terms.
• Cardholders are responsible for understanding and complying with their payment obligations.
• Damage suffered due to justified contractual actions may not be legally compensable under the principle of *damnum absque injuria*.
• Notice sent via ordinary mail is presumed to be received unless proven otherwise.

FREQUENTLY ASKED QUESTIONS (FAQs)

Q: Can my credit card be suspended without prior notice?

A: It depends on your credit card agreement. If the agreement states automatic suspension after a certain period of non-payment, no separate prior notice might be strictly required beyond the terms themselves. However, many companies send courtesy notifications.

Q: What if I sent a postdated check as payment? Is my account considered paid?

A: No, a postdated check is not considered immediate payment. Payment is usually credited when the check clears, which is after the date on the check. Until then, the account may still be considered overdue.

Q: What are moral damages, and when can I claim them?

A: Moral damages are compensation for mental anguish, serious anxiety, wounded feelings, moral shock, etc. They are awarded for wrongful acts or omissions that cause such suffering. In this case, moral damages were denied because the court found no wrongful act by BECC.

Q: What does “abuse of rights” mean in the context of credit card suspension?

A: Abuse of rights means exercising a legal right in bad faith, with the sole intent to harm another. In this case, the court found no bad faith from BECC; they were acting within their contractual rights to manage overdue accounts.

Q: What is *damnum absque injuria*, and how does it apply here?

A: *Damnum absque injuria* means damage without legal injury. It applies when someone suffers a loss or harm, but not due to a violation of their legal rights by another party. In this case, Marasigan suffered embarrassment (damage), but BECC did not violate his legal rights by suspending the card according to the contract (no legal injury).

Q: What should I do if I believe my credit card was wrongly dishonored?

A: First, contact your credit card company immediately to understand why it was dishonored. Review your account statements and credit card agreement. If you believe there was an error or breach of contract, formally dispute the dishonor in writing and seek legal advice.

Q: Is notice of suspension sent by ordinary mail considered valid?

A: Yes, under Philippine Rules of Evidence, there is a presumption that letters duly directed and mailed are received in the ordinary course of mail. It’s up to the recipient to prove non-receipt.

Q: As a business, what should I do if a customer presents a suspended credit card?

A: Follow your established procedures for credit card transactions. If the terminal or system declines the card, inform the customer discreetly and request an alternative payment method. Avoid making judgmental statements.

ASG Law specializes in contract law and commercial litigation in the Philippines. Contact us or email hello@asglawpartners.com to schedule a consultation.