AMERICAN EXPRESS COMPANY, INC., PLAINTIFF-APPELLEE, VS. CIRIO H. SANTIAGO, DEFENDANT-APPELLANT.

American Express versus Santiago

The Case

This is a collection suit. American Express Company, a foreign corporation licensed to do business in the Philippines as a travel agent, sues Cirio Santiago, a holder of its credit card, to recover the charges he incurred on that card in foreign countries. The defendant's central defense is that the plaintiff is not the real party in interest, because the card merely introduced him to the establishments that extended credit, and those establishments, not American Express, should have sued. The case matters because it fixes the legal position of the credit card issuer in a tripartite credit arrangement: the issuer who pays the establishments and bills the cardholder is the cardholder's creditor, and therefore the proper plaintiff.

Procedural History

American Express filed a complaint for collection before the Court of First Instance of Manila. After the parties filed their pleadings, the trial court scheduled the case for pre-trial, and the essential facts were covered by a stipulation. The trial court rendered judgment for the plaintiff, ordering the defendant to pay the amount claimed, with legal interest from the filing of the complaint and attorneys fees. The defendant appealed directly to the Supreme Court, and the appeal was resolved by the Court en banc.

Facts

American Express is a foreign corporation with its main office in New York City and a registered branch office in the Philippines, licensed to transact business as a travel agent. As part of that business, and for the convenience of its customers, it adopted a credit system known as the American Express Credit Card. Upon a customer's application, the company issues a card by which the holder may enjoy charge privileges in establishments all over the world, listed in directories the company issues periodically for the guidance of cardholders.

On the sixth of November 1959, Santiago applied for such a card at the company's office in New York City, and the corresponding card was issued to him. Before the card expired and was cancelled as of the twentieth of June 1961, he used it to make purchases and obtain services on credit in various foreign countries, including Hongkong in June 1960, and France, Switzerland, Germany, Spain, Italy, and Hongkong in May and June 1961. The credit charges ran up to a total of fifteen thousand two hundred ninety seven dollars and fifty three cents. In September 1961, American Express demanded payment, and after the defendant refused, it filed suit for collection.

The trial court found, and this finding was not disputed, that the establishments which sold goods and services on credit bill the American Express Corporation, which settles the accounts directly and in turn bills the cardholders. The company's employee, George de Salvio, testified by deposition upon written interrogatories that the company appoints service establishments which accept the card, that these establishments deliver goods or perform services and then bill the company, that the company reimburses them and in turn bills the cardholders, and that the cardholder is obligated to pay the company upon receipt of the monthly billing. The defendant presented no evidence and relied only on the stipulation of facts.

Issues

• Whether or not American Express is the real party in interest and may maintain the collection suit against the cardholder.
• Whether or not the trial court erred in admitting the deposition of the company's employee over the defendant's objections to the questions propounded.
• Whether or not the deposition was inadmissible because it was delivered to the Clerk of Court by the plaintiff's counsel instead of being filed directly by the officer who took it.

Applicable Provisions

The decision refers to the rule on the filing of depositions, Section 20 of Rule 24, which the defendant invoked. The Court did not quote its text, but the decision describes the relevant portion as requiring the officer who took the deposition to file it promptly with the court, or to send it by registered mail to the Clerk of Court for filing. The defendant argued that this procedure was not followed because the plaintiff's counsel, not the officer, delivered the deposition to the Clerk of Court.

Ruling

On the first issue, the Court held that American Express is the creditor of the cardholder and the proper party to file the suit. The reasoning rests on the established operation of the credit system: the establishments bill the company, the company pays them, and the cardholder is obligated to reimburse the company upon receipt of the monthly billing. The cardholder's purchases are backed by the company through the card, so that when the company pays the establishments, the obligation to repay runs to the company. The Court found no doubt that the appellee is the creditor of the appellant and, as such, is the proper party to file the collection suit.

On the second issue, the Court examined the nature and phrasing of the questions objected to and found the objections either groundless or without material bearing on the merits. The objections were mostly technical: that the matter sought had already been admitted in the stipulation of facts, that it was irrelevant or immaterial, that the question was leading or vague, or that it sought a conclusion from the witness.

On the third issue, the Court held that the manner of delivery did not affect the integrity of the deposition so as to render it inadmissible. The record showed that the Philippine Consulate in New York had transmitted the deposition through the Department of Foreign Affairs to the Clerk of Court, that the Department had not acted on it for some time, and that the Department itself requested the plaintiff's counsel to have it filed, which counsel did by letter, delivering the sealed envelope in exactly the same condition as received. The Court noted that there was no pretense that the appellant did not contract the indebtedness or that it had been paid, the only important issue being whether the appellee is the real party in interest, on which the finding of the lower court, supported by the evidence, is conclusive.

Doctrine

In a credit card arrangement, the issuer who pays the service establishments for the cardholder's purchases and then bills the cardholder is the cardholder's creditor and the real party in interest in a suit to collect the charges. The cardholder's obligation to reimburse the issuer arises upon receipt of the monthly billing, and the establishments' claims are settled by the issuer, so the establishments are not the proper plaintiffs. The doctrine ties directly to the rule that every action must be prosecuted in the name of the real party in interest, and to the finding that the issuer is that party. On procedure, technical objections to questions in a deposition, and a departure from the prescribed manner of filing a deposition that does not affect its integrity, will not render the deposition inadmissible.

Disposition

The judgment appealed from was affirmed, with the principal amount reduced to fourteen thousand nine hundred fifty two dollars and thirty one cents in view of the plaintiff's waiver of part of its claim, and with the further modification that payment of the amount, together with attorneys fees and costs in both instances, be made in Philippine currency at the prevailing rate of exchange at the time of payment.

Remember This

The single line to memorize: the credit card issuer who pays the establishments and bills the cardholder is the cardholder's creditor and the real party in interest. Examiners use this case to test the concept of the real party in interest in tripartite credit arrangements, and to test how far technical objections to deposition procedure will be entertained.