42 SUPREME COURT REPORTS ANNOTATED

American Express International, Inc. vs. Cordero

G.R. No. 138550. October 14, 2005. *

AMERICAN EXPRESS INTERNATIONAL, INC., petitioner, vs. NOEL CORDERO,

defendant.
Remedial Law; Civil Procedure; Appeals;  While it is true under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, the Supreme Court may review only errors of law, however, this rule
admits of well-known recognized exceptions.—While it is true that under Rule 45 of the 1997 Rules
of Civil Procedure, as amended, this Court may review only errors of law, however, this rule
admits of well-known recognized exceptions, thus: “. . . (1) the conclusion is a finding grounded
entirely on speculation, surmise and conjecture; (2) the inference made is manifestly mistaken; (3)
there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the
findings of fact are conflicting; (6) the Court of Appeals went beyond the issues of the case and its
findings are contrary to the admissions of both parties; (7) the findings of fact of the Court of
Appeals are contrary to those of the trial court; (8) said findings of fact are conclusions without
citation of specific evidence on which they are based; (9) the facts set forth in the petition are not
disputed by the respondents; and (10) the findings of fact of the Court of Appeals are premised on
the supposed absence of evidence and contradicted by the evidence on record.”
Civil Law;  Obligations;  Quasi-Delicts;  In order that an obligation based on quasi-delict may
arise, there must be no pre-existing contractual relation between the parties .—In order that an
obligation based on quasi-delict may arise, there must be no pre-existing contractual relation
between the parties. But there are exceptions. There may be an action for quasi-delict
notwithstanding that there is a subsisting contract between the parties. A liability for tort may
arise even under a contract, where tort is that which breaches the contract. Stated differently,
when an act which constitutes a breach of contract would have itself constituted the source of a
quasi-delictual liability, the contract can be said to have been breached by tort, thereby allowing
the rules on tort to apply. Furthermore, to constitute quasi-delict, the fault or negligence must be
the proximate
_______________

 THIRD DIVISION.
*

43
VOL. 473, OCTOBER 14, 2005 43
American Express International, Inc. vs. Cordero
cause of the damage or injury suffered by the plaintiff. Proximate cause is that cause which,
in natural and continuous sequence, unbroken by any efficient intervening cause, produces the
injury and without which the result would not have occurred. Proximate cause is determined by
the facts of each case upon mixed considerations of logic, common sense, policy and precedent.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Sycip,  Salazar, Hernandez and Gatmaitan for petitioner.

SANDOVAL-GUTIERREZ, J.:

This is a petition for review on certiorari of the Decision  of the Court of Appeals dated
1

April 30, 1999 in CA-G.R. CV No. 51671, entitled, “Noel Cordero, Plaintiff-Appellee versus
American Express International, Inc., Defendant-Appellant.”
 Petitioner is a foreign corporation that issues charge cards to its customers, which the
latter then use to purchase goods and services at accredited merchants worldwide.
Sometime in 1988, Nilda Cordero, wife of respondent Noel Cordero, applied for and was
issued an American Express charge card with No. 3769-895901-010020. The issuance of
the charge card was covered by an Amex Cardmember Agreement. As cardholder, Nilda,
upon signing the back portion of the card, manifested her acceptance of the terms of the
Agreement.
An extension charge card, with No. 3769-895901-01010, was likewise issued to
respondent Noel Cordero which he also signed. 2

_______________

 Rollo at pp. 9-25, at p. 25; penned by Associate Justice B.A. Adefuin-Dela Cruz (retired), concurred in by
1

Associate Justices Eugenio S. Labitoria and Presbitero J. Velasco, Jr. (now Court Administrator).
 Exh. “3-C.”
2

44
44 SUPREME COURT REPORTS ANNOTATED
American Express International, Inc. vs. Cordero
On November 29, 1991, respondent, together with his wife, Nilda, daughter, sisters-in-law
and uncle-in-law, went on a three-day holiday trip to Hong Kong. In the early evening of
November 30, 1991, at about 7:00 o’clock, the group went to the Watson’s Chemist Shop
located at 277C Ocean Gallery, Kowloon, Hong Kong. Noel picked up some chocolate
candies and handed to the sales clerk his American Express extension charge card to pay
for his purchases. The sales clerk verified the card by making a telephone call to the
American Express Office in Hong Kong. Moments later, Susan Chong, the store manager,
emerged from behind the counter and informed respondent that she had to confiscate the
card. Thereupon, she cut respondent’s American Express card in half with a pair of
scissors. This, according to respondent, caused him embarrassment and humiliation
considering that it was done in front of his family and the other customers lined up at the
check-out counter. Hence, Nilda had to pay for the purchases using her own American
Express charge card. 3

When they returned to the Excelsior Hotel, Nilda called up petitioner’s Office in Hong
Kong. She was able to talk to Senior Authorizer Johnny Chen, who informed her that on
November 1, 1991, a person in Hong Kong attempted to use a charge card with the same
number as respondent’s card. The Hong Kong American Express Office called up
respondent and after determining that he was in Manila and not in Hong Kong, placed his
card in the “Inspect Airwarn Support System.” This is the system utilized by petitioner as
a protection both for the company and the cardholders against the fraudulent use of their
charge cards. Once a card suspected of unauthorized use is placed in the system, the
person to whom the card is tendered must verify the identity of the holder. If the true
identity of the card owner is established, the card is honored and the charges are
approved. Otherwise, the card is revoked or confiscated. 4

_______________

 TSN, March 25, 1993 at pp. 6-11.

3

 TSN, May 4, 1993 at p. 13.

4

45
VOL. 473, OCTOBER 14, 2005 45
American Express International, Inc. vs. Cordero
When the Watson’s sales clerk called up petitioner’s Hong Kong Office, its representative
said he wants to talk to re-spondent in order to verify the latter’s identity, pursuant to the
procedure observed under the “Inspect Airwarn Support System.” However, respondent
refused. Consequently, petitioner’s representative was unable to establish the identity of
the cardholder.  This led to the confiscation of respondent’s card.
5

On March 31, 1992, respondent filed with the Regional Trial Court, Branch V, Manila,
a complaint for damages against petitioner, docketed as Civil Case No. 92-60807. He
prayed for the award of moral damages and exemplary damages, as well as attorney’s fees
as a result of the humiliation he suffered.
The trial court found that “the inexcusable failure of defendant (petitioner herein) to
inform plaintiff (respondent herein) of the November 1, 1991 incident despite sufficient
time was the proximate cause of the confiscation and cutting of plaintiff’s extension card
which exposed the latter to public humiliation for which defendant should be held
liable.”  On February 20, 1995, the trial court promulgated its Decision, the dispositive
6

portion of which reads:

“WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant,
ordering the latter to pay the former the following amounts, namely:

1. a)The sum of P300,000.00 as and by way of moral damages;

2. b)The sum of P200,000.00 as exemplary damages;
3. c)The sum of P100,000.00 as and for reasonable attorney’s fees; and
4. d)The costs of the suit.

SO ORDERED.” 7

_______________

 TSN of Deposition of Johnny Chen, February 28, 1994, at p. 6.

5

 Rollo at pp. 154-159, 158.

6

Id., at p. 159; penned by Presiding Judge Zeus O. Abrogar.

7

46
46 SUPREME COURT REPORTS ANNOTATED
American Express International, Inc. vs. Cordero
Upon appeal, the Court of Appeals rendered the assailed Decision affirming the trial
court’s Decision with modification in the sense that the amounts of damages awarded were
reduced, thus:
“WHEREFORE, in view of the foregoing, the appealed decision dated February 20, 1995 of the
Regional Trial Court of Manila, Branch V, in Civil Case No. 92-60807 is hereby AFFIRMED,
subject to modifications with respect to the amount of damages awarded, which are reduced as
follows:

1. (a)Moral damages from P300,000.00 to P150,000.00; and

2. (b)Exemplary damages from P200,000.00 to P100,000.00.

No pronouncement as to costs.
SO ORDERED.”
Hence, the instant petition raising the following issues:

1. “A.Whether the lower courts gravely erred in attributing the ‘public humiliation’
allegedly suffered by Cordero to Amex.
 2. B.Whether the lower courts gravely erred in holding Amex liable to Cordero for
moral damages, exemplary damages and attorney’s fees.” 8

Respondent filed his comment contending in the main that the petition raises questions of
fact beyond this Court’s domain.
While it is true that under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
this Court may review only errors of law, however, this rule admits of well-known
recognized exceptions, thus:
“. . . (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2)
the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment
is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court of
Appeals went beyond the issues of the
_______________

 Petition at p. 8; Rollo at p. 60.

8

47
VOL. 473, OCTOBER 14, 2005 47
American Express International, Inc. vs. Cordero
case and its findings are contrary to the admissions of both parties; (7) the findings of fact of the
Court of Appeals are contrary to those of the trial court; (8) said findings of fact are conclusions
without citation of specific evidence on which they are based; (9) the facts set forth in the petition
are not disputed by the respondents; and (10) the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and contradicted by the evidence on record.” 9

In this case, the inference made by the courts below is manifestly mistaken. Therefore, we
are justified in reviewing the records of this case and rendering judgment based on our
own findings.
In his complaint, respondent claimed that he suffered embarrassment and humiliation
because his card was unceremoniously confiscated and cut in half by Susan Chong of
Watson’s Chemist Shop.
Respondent anchors his cause of action on the following provision of the Civil Code:
“Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence,
is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and is governed by the provisions
of this Chapter.” 10

In order that an obligation based on quasi-delict may arise, there must be no pre-existing
contractual relation between the parties. But there are exceptions. There may be an action
for quasi-delict notwithstanding that there is a subsisting contract between the parties. A
liability for tort may arise even under a contract, where tort is that which breaches the
contract. Stated differently, when an act which constitutes a breach of contract would have
itself constituted the source of
_______________

 Baricuatro v. Court of Appeals, G.R. No. 105902, February 9, 2000, 325 SCRA 137.

9

 Civil Code, Article 2176.

10

48
48 SUPREME COURT REPORTS ANNOTATED
American Express International, Inc. vs. Cordero
a quasi-delictual liability, the contract can be said to have been breached by tort, thereby
allowing the rules on tort to apply. 11
 Furthermore, to constitute quasi-delict, the fault or negligence must be the proximate
cause of the damage or injury suffered by the plaintiff. Proximate cause is that cause
which, in natural and continuous sequence, unbroken by any efficient intervening cause,
produces the injury and without which the result would not have occurred. Proximate
cause is determined by the facts of each case upon mixed considerations of logic, common
sense, policy and precedent. 12

According to the trial court, petitioner should have informed respondent that on
November 1, 1991, a person in Hong Kong attempted to use a charge card bearing similar
number to that of respondent’s card; and that petitioner’s inexcusable failure to do so is
the proximate cause of the “confiscation and cutting of [respondent’s] extension card which
exposed the latter to public humiliation for which [petitioner] should be held liable.” 13

We cannot sustain the trial court’s conclusion.

As explained by respondent himself, he could have used his card upon verification by
the sales clerk of Watson that indeed he is the authorized cardholder. This could have
been accomplished had respondent talked to petitioner’s representative, enabling the
latter to determine that respondent is indeed the true holder of the card. Clearly, no
negligence which breaches the contract can be attributed to petitioner. If at all, the cause
of respondent’s humiliation and embarrassment was his refusal to talk to petitioner’s
representative.
_______________

11
 Light Rail Transit Authority, et al. v. Navidad, et al., G.R. No. 145804, February 6, 2003, 397 SCRA 75.
12
 The Consolidated Bank & Trust Co. v. Court of Appeals , G.R. No. 138569, September 11, 2003, 410 SCRA
562.
 Rollo at p. 158.
13

49
VOL. 473, OCTOBER 14, 2005 49
American Express International, Inc. vs. Cordero
That respondent refused to talk to petitioner’s representative can be gleaned from the
testimony of Mr. Chen Heng Kun a.k.a. Johnny Chen during the deposition in Hong
Kong,  thus:
14

“Question No. 9: Was AEII required under its existing policies and/or membership
agreement with its cardholders to advise said cardholders of their card have been put
under the support INSPECT—Strictly Question (for identification) cardmembers before
approving any charge?
Mr. Johnny Chen: Under the existing policies of AEII, we don’t have to inform the
cardholders if they have to pass the INSPECT—Strictly Questions (for identification).
Question No. 10: If the answer to Q9 is in the negative, please explain why not?
Mr. Johnny Chen: The reason why we don’t have to are because, first, we are not
terminating the service to the cardholder. Second, it doesn’t mean that we are going to
limit the service to the cardholder. Third, as long as the cardholder can present an
identification card of his membership, we allow him to use the card. He can show this
by telephoning the company or by presenting us his passport or travel document. When
Watson Company called AEII for authorization, AEII representative requested that he
talk to Mr. Cordero but he refused to talk to any representative of AEII. AEII could not
prove then that he is really the real card holder.”
Mr. Chen Heng Kun was briefly cross-examined by respondent’s counsel, thus:
_______________
  Deposition upon Written Interrogatories and Cross-Examination Re Case of Mr. Johnny Chen before Vice
14

Consul Marlene Brigida B. Agmata at the Philippine Consulate General, 21-22/F Regent Centre, 88 Queen’s Road,
Central, Hong Kong, 28 February 1994 at pp. 5-6.
50
50 SUPREME COURT REPORTS ANNOTATED
American Express International, Inc. vs. Cordero
“Question No. 10: Question 9 is objected to since the best evidence would be the
membership agreement between plaintiffs and AEII.”
Significantly, paragraph 16 of the Cardmember Agreement signed by respondent provides:
“16. THE CARD REMAINS OUR PROPERTY

“The Card remains our property and we can revoke your right and the right of ay Additional
Cardmember to use it at any time, we can do this with or without giving you notice. If we have
revoked the Card without cause, we will refund a proportion of your annual Card Account fee. We
may list revoked Cards in our “Cancellation Bulletin,” or otherwise inform Establishments that
the Card issued to you and, if you are the basic Cardmember, any Additional Cards have been
revoked or cancelled.
“If we revoke the card or it expires, you must return it to us if we request. Also, if any
Establishment asks you to surrender an expired or revoked Card, you must do so. You may not use
the Card after it has expired or after it has been revoked.
“The revocation, repossession or request for the return of the Card is not, and shall not
constitute any reflection of your character or credit-worthiness and we shall not be liable in any
way for any statement made by any person requesting the return or surrender of the Card.” 15

To be sure, pursuant to the above stipulation, petitioner can revoke respondent’s card
without notice, as was done here. It bears reiterating that the subject card would not have
been confiscated and cut had respondent talked to petitioner’s representative and
identified himself as the genuine card-holder. It is thus safe to conclude that there was no
negligence on the part of petitioner and that, therefore, it cannot be held liable to
respondent for damages.
_______________

 Exh. “3-A.”
15

51
VOL. 473, OCTOBER 14, 2005 51
American Express International, Inc. vs. Cordero
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals
in CA-G.R. CV No. 51671 is REVERSED.
SO ORDERED.
     Panganiban  (Chairman), Corona, Carpio-Morales and Garcia, JJ., concur.
Petition granted, assailed decision reversed.
Notes.—In quasi-delict, the negligence or fault should be clearly established because it
is the basis of the action, whereas in breach of contract, the action can be prosecuted
merely by proving the existence of the contract and the fact that the obligor, in this case
the common carrier, failed to transport his passenger safely to his destination. ( Calalas vs.
Court of Appeals, 332 SCRA 356 [2000])
There are material differences between a criminal action and a civil complaint for
quasi-delict arising from the same act of lasciviousness. A judgment of conviction or
acquittal in the criminal case cannot at all be invoked as being one of res judicata in the
independent suit for damages. (London vs. Baguio Club Corporation, 390 SCRA
618 [2002])
An action based on a quasi-delict may proceed independently from the criminal action.
(Cerezo vs. Tuazon, 426 SCRA 167 [2004])

——o0o——

52
© Copyright 2021 Central Book Supply, Inc. All rights reserved.