### Facts:
On October 19, 1989, Clodualdo de Jesus, a lawyer and businessman, hosted a dinner at Mandarin Villa Seafood Village in Mandaluyong City, Philippines. After dining, de Jesus attempted to pay the bill with a BANKARD credit card, which was initially declined due to an incorrect expiration date reported by the restaurant’s verification system. Despite de Jesus’s assertion that the card was valid until September 1990, the restaurant refused the card, leading to an awkward situation wherein one of de Jesus’s guests joked about possibly needing to wash dishes to settle the bill. Ultimately, de Jesus retrieved a BPI Express Credit Card from his vehicle, which was accepted for payment.
De Jesus filed a lawsuit for damages, resulting in a trial court judgment in his favor, awarding substantial moral and exemplary damages and attorney’s fees, jointly against Mandarin Villa and BANKARD. Both defendants appealed to the Court of Appeals, which modified the decision, holding only Mandarin Villa liable and reducing the awarded damages and attorney’s fees.
Mandarin Villa then escalated the case to the Supreme Court, challenging the appeals court’s decision on several grounds, notably questioning the obligation to accept credit payments and disputing allegations of negligence.
### Issues:
1. Is Mandarin Villa obligated to accept payment via credit card?
2. Was Mandarin Villa negligent in the handling of de Jesus’s credit card payment?
3. If negligent, was such negligence the proximate cause of de Jesus’s damages?
### Court’s Decision:
The Supreme Court dismissed Mandarin Villa’s petition, reinforcing the appellate court’s findings. The Court concluded:
1. **Credit Card Payments:** Mandarin Villa was affiliated with BANKARD through an agreement that mandated acceptance of validly issued BANKARD credit cards. This arrangement, coupled with visible signage promoting BANKARD acceptance, obligated Mandarin to honor de Jesus’s credit card, effectively rendering the refusal a breach under the principles of stipulation pour autri and estoppel.
2. **Negligence:** The Court determined Mandarin Villa negligent in not adhering to the proper verification procedures as outlined by BANKARD. Specifically, Mandarin failed to manually check the credit card’s expiry date, which would have confirmed its validity. Such failure did not meet the standard of care expected in the circumstance.
3. **Proximate Cause:** The Court refuted Mandarin Villa’s argument that de Jesus’s lack of cash or a guest’s remark constituted negligence or proximate causes of the embarrassment suffered. Instead, it affirmed that the mishandling and wrongful refusal of the credit card were the direct causes of the damages incurred by de Jesus.
### Doctrine:
– **Stipulation pour autri:** The Supreme Court applied this principle, affirming that a contract stipulation intended to benefit a third party (such as a credit card holder) allows that party to demand its fulfillment.
– **Estoppel:** The court held that the restaurant’s visible representation of accepting BANKARD credit cards created an obligation it could not later deny to the detriment of a cardholder who relied on such representation.
### Class Notes:
– **Stipulation pour autri (Civil Code Article 1311):** A third party can demand fulfillment of a contract provision made for their benefit if they communicate acceptance to the obligor before its revocation.
– **Estoppel (Civil Code Article 1431):** A party is prevented from denying or contradicting its own prior statement, act, or omission when another has relied upon that act or statement to their detriment.
– **Negligence Test:** Evaluates if the defendant used reasonable care and caution that a prudent person would in similar circumstances. Failure to do so constitutes negligence.
– **Principle of Proximate Cause:** Identifies the primary cause of damage, which must be a direct and natural result of an act or omission.
These legal principles and the procedural posture of this case illuminate pivotal aspects of contract law, consumer protection, and negligence in the context of business operations and transactions.
### Historical Background:
This case emphasizes the evolving nature of commercial transactions, particularly the widespread acceptance and reliance on credit card payments in the business sector. It reflects the legal system’s adaptability in addressing disputes arising from technological advancements and contractual arrangements. Furthermore, the case underscores the judiciary’s role in resolving conflicts between commercial establishments and consumers, contributing to the development of legal doctrines pertaining to estoppel, contract benefits to third parties, and the interpretation of negligence within modern commercial practices.
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