An underage boy improperly used his father's credit card for expensive services - the court affirmed breach of care duty by the credit-card company
The following shows a case where an underage boy stole his father's credit card (hereinafter called "card") and improperly used it for expensive services at hostess bars. The court affirmed cancellation of the service contracts made by the minor at the hostess bars. The court also judged that the contracts are void because it is considered as a profiteering to encourage the minor to improperly use the card for expensive service which impairs healthy life of the minor. Moreover, the court did not affirm part of the claim by the credit-card company because the company did not fulfill the obligation to conduct a survey to prevent improper use of cards. (Judgment by the Kyoto District Court on May 23, 2013)
- Page 52 of Hanrei Jiho No.2199
Summary of the case
- Plaintiff:
- X1 (father, cardholder)
- X2 (son of X1)
- Defendant:
- Y1 & Y2 (hostess bars)
- Y3 (credit-card company)
X2, aged 16, took a card of his father (X1's card issued by Y3) without permission after X1 came home in the midnight. X2 and his two peers since junior high went to a few hostess bars by taxi and X2 used the card there. X2 repeatedly used the card in this way and put it back where it was after he returned home.
X1 runs a company and owns a private card as well as a corporate card for business. X2 took these cards alternatively. The amount of money used for hostess bars at one night varied from about 50 thousand yen to about 2 million 550 thousand yen.
Several times X2 ordered expensive brandy (approximately 200-500 thousand yen per one bottle) as well as top-class champagne to make a champagne tower (a pyramid made of champagne glasses, from top of which champagne is poured and flowed down - a kind of show).
At later date, X1 found out that X2 had improperly used his card. X1 paid 398,692 yen to Y3 which X2 improperly used at supermarkets, etc. Concerning X2's use of the card at hostess bars, however, X1 did not consider he was obliged to pay the charge because the bars were in bad faith when providing alcohol to minors without reproaching them.
Then, X1 requested hostess bars through a lawyer to cancel the service contracts (contract to provide alcohol and service by hostesses) and refund the money used through the card to Y3 on the ground that the card was improperly used by the minor without parent's consent. Some of the hostess bars agreed to refund the money, but Y1 and Y2 did not. Therefore, X1 brought an action to the court on this case.
Reasons
1. Service contract at hostess bars
Considering that the customer is underage, the service contract should be void because it is a profiteering and against Article 90 of the Civil Code if the hostess bars made the service contracts with the customer and requested to fulfill the contracts without asking his age when it is dubious if he is adult from his appearance (serious fault which could be considered intentional). Eight service contracts (about 4 million 750 thousand yen in total) conflict with Article 90 of the Civil Code and goes against public policy.
2. Claim to the credit-card holder by the credit-card company
In case of suspected unauthorized use of the card, the credit company should be obliged to take reasonable measures to check if the user is the cardholder under the principle of good faith, and if the identification is doubtful, to tentatively put the clearance on hold in order to protect card members against disadvantage due to unauthorized use of card.
Meanwhile, it has to be recognized that the abovementioned member stores may include member stores of a company tied with Y3. There is no ground to make difference in existence or nonexistence of the above obligation between direct member stores and member stores of a company tied with Y3.
If unauthorized use should be expanded due to insufficient fulfillment of obligation by the credit company and the resulting contracts* between the thief and member stores are against public policy, it should be construed that the court can seek a solution by public authority based on Article 1 (2) and (3) of the Civil Code on the ground that the right of claim for the charges for using the card is regarded abuse of rights or against the principle of good faith considering the level of contribution to violation of public policy and circumstances including identification of a person by the credit company.
- * It refers to the service contracts between the thief (X2) and the member stores (Y1 & Y2).
Explanation
This precedent shows a case where a minor stole and improperly used parent's card, while it is unusual in that the card was used for outrageous waste at hostess bars.
According to the clause for cases of unauthorized use of card in the credit card membership terms and conditions, it is construed that the credit-card company is obligated to prevent expansion of damages of members under the principle of good faith. In case of suspected unauthorized use, the credit-card company is obligated to take proper measures including identification confirmation of the user.
It can be valued in that the court judged that the amount to be charged for using the card can be decreased if the credit-card company breached its obligation, which can be widely used as a reference for cases of unauthorized use of cards.
Most of the credit card membership terms and conditions have an exemption clause by which the cardholder is retroactively exempt from payment for 60 days transactions up to a certain amount till the day when the cardholder reports loss or theft of the card to the credit-card company and the police in case of unauthorized use of the card by someone else (There may be no limit to the exempted amount depending on credit-card companies).
In this case, it is specified that the exemption shall not be applied to cases where the unauthorized user is a relative within the four degree of relationship or a cohabiter of the cardholder, and the cardholder is obliged to pay all the charges.
In case of the said card, the following cases have been excluded from the exemption clause.
"Cases where a cardholder's family member, a cohabiter or those who help the cardholder as requested by the cardholder including house-sitter lost, improperly used or stole the card, or cases where any of these persons got involved in the loss or theft of the card" (exception written on the article 7 (3) of the credit card membership terms and conditions)
It was claimed in the suit that this clause was unfair under Article 10 of the Consumer Contract Act, but the court denied the claim and judged that the clause was reasonable.
However, it is reasonable that the court mentioned the following:
"Even in the case where the contract resulting from third-party payment (service contract between the member store and the thief) is against public policy, if it is construed that the credit company can pass the charges for using the card to the member, the credit company will get the commission income from the contract against public policy and the member stores will get income from the contract against public policy because the credit company will not claim a refund of the third-party payment from the member stores. *snip*
Article 90 of the Civil Code is supposed to provide that profit shall not be made through a contract against public policy in Japan. If the article 7 of the credit card membership terms and conditions should be directly applied to this case, it has to be said that the significance of Article 90 of the Civil Code would be extremely degraded. It is even more so in cases where the contract resulting from the third-party payment is void, considered as a profiteering".
When the card was used at one of the hostess bars, the credit-card company called the hostess bar to identify the user.
However, a staff member of the hostess bar gave a false answer that the user was in his 40s. Afterwards, the user (X2) came on line and was not able to tell the name of bank using for the card. However, the credit-card company allowed him to use the card. The court judged that the credit-card company had failed to perform its care duty.
In light of the above, the court ordered X1 to pay about 750 thousand yen out of the total amount about 5 million 500 thousand yen charged by the credit-card company (Y3). Then, the court denied X1's obligation of payment for the remaining amount (about 4 million 750 thousand yen) because Y3's claim falls under the abuse of right.
