First Instance (CFI, now Regional Trial Court), Branch 39, Manila, an action for

rescission and damages against Moreman, docketed as Civil Case No. 113498.
CASES on Credit Transactions  
On November 28, 1978, the CFI rendered its Decision[4] rescinding the contract
(Deposit) between Moreman and respondent and awarding to the latter P 445,000.00 as
actual, moral and liquidated damages; P20,000.00 representing the increase in
[G.R. No. 142591. April 30, 2003] the construction materials; and P35,000.00 as attorneys fees. Moreman
JOSEPH CHAN, WILSON CHAN and LILY CHAN vs. interposed an appeal to the Court of Appeals but the same was dismissed on March
BONIFACIO S. MACEDA, JR. 7, 1989 for being dilatory. He elevated the case to this Court via a petition for review
on certiorari. In a Decision[5] dated February 21, 1990, we denied the petition. On
SANDOVAL-GUTIERREZ, J.: April 23, 1990,[6] an Entry of Judgment was issued.
A judgment of default does not automatically imply admission by the defendant
of the facts and causes of action of the plaintiff. The Rules of Court require the latter Meanwhile, during the pendency of the case, respondent ordered petitioners to
to adduce evidence in support of his allegations as an indispensable condition return to him the construction materials and equipment which Moreman deposited in
before final judgment could be given in his favor.[1] The trial judge has to evaluate their warehouse.Petitioners, however, told them that Moreman withdrew those
the allegations with the highest degree of objectivity and certainty. He may sustain construction materials in 1977.
an allegation for which the plaintiff has adduced sufficient evidence, otherwise, he
has to reject it. In the case at bar, judicial review is imperative to avert the award of Hence, on December 11, 1985, respondent filed with the Regional Trial Court,
damages that is unreasonable and without evidentiary support. Branch 160, Pasig City, an action for damages with an application for a writ of
preliminary attachment against petitioners,[7] docketed as Civil Case No. 53044.
Assailed in this petition for review under Rule 45 of the 1997 Rules of Civil In the meantime, on October 30, 1986, respondent was appointed Judge of the
Procedure, as amended, is the Decision [2] dated June 17, 1999 of the Court of Regional Trial Court, Branch 12, San Jose Antique.[8]
Appeals in CA-G.R. CV No. 57323, entitled Bonifacio S. Maceda, Jr. versus Joseph
Chan, et. al., affirming in toto the Decision[3] dated December 26, 1996 of the On August 25, 1989, or after almost four (4) years, the trial court dismissed
Regional Trial Court, Branch 160, Pasig City, in Civil Case No. 53044. respondents complaint for his failure to prosecute and for lack of interest. [9] On
September 6, 1994, or five years thereafter, respondent filed a motion for
The essential antecedents are as follows: reconsideration, but the same was denied in the Order dated September 9, 1994
On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained a P7.3 because of the failure of respondent and his counsel to appear on the scheduled
million loan from the Development Bank of the Philippines for the construction of his hearing.[10]
New Gran Hotel Project in Tacloban City.
On October 14, 1994, respondent filed a second motion for
Thereafter, on September 29, 1976, respondent entered into a building reconsideration. This time, the motion was granted and the case was ordered
construction contract with Moreman Builders Co., Inc., (Moreman). They agreed that reinstated on January 10, 1995, or ten (10) years from the time the action was
the construction would be finished not later than December 22, 1977. originally filed.[11] Thereafter, summons, together with the copies of the complaint
and its annexes, were served on petitioners.
Respondent purchased various construction materials and equipment in
Manila. Moreman, in turn, deposited them in the warehouse of Wilson and Lily On March 2, 1995, counsel for petitioners filed a motion to dismiss on several
Chan, herein petitioners. The deposit was free of charge. grounds.[12] Respondent, on the other hand, moved to declare petitioners in default
on the ground that their motion to dismiss was filed out of time and that it did not
Unfortunately, Moreman failed to finish the construction of the hotel at the contain any notice of hearing.[13]
stipulated time. Hence, on February 1, 1978, respondent filed with the then Court of

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 On April 27, 1995, the trial court issued an order declaring petitioners in default. 3) Moral damages of P150,000.00; exemplary damages of P50,000.00 and
[14]
attorneys fees of P50,000.00 and to pay the costs.
Petitioners filed with the Court of Appeals a petition for certiorari [15] to annul the SO ORDERED.
trial courts order of default, but the same was dismissed in its Order [16] dated August
31, 1995. The case reached this Court, and in a Resolution dated October 25, 1995, The trial court ratiocinated as follows:
[17]
 we affirmed the assailed order of the Court of Appeals. On November 29, 1995, The inventory of other materials, aside from the steel bars and cement is found
[18]
 the corresponding Entry of Judgment was issued. highly reliable based on first, the affidavit of Arthur Edralin dated September 15,
Thus, upon the return of the records to the RTC, Branch 160, Pasig City, 1979, personnel officer of Moreman Builders that he was assigned with others to
respondent was allowed to present his evidence ex-parte. guard the warehouse; (Exhs. M & O); secondly, the inventory (Exh. C) dated
November 23, 1977 shows (sic) deposit of assorted materials; thirdly, that there
Upon motion of respondent, which was granted by the trial court in its Order were items in the warehouse as of February 3, 1978 as shown in the balance sheet
dated April 29, 1996,[19] the depositions of his witnesses, namely, Leonardo Conge, of Moremans stock clerk Jose Cedilla.
Alfredo Maceda and Engr. Damiano Nadera were taken in the Metropolitan Trial
Court in Cities, Branch 2, Tacloban City.[20] Deponent Leonardo Conge, a labor Plaintiff is entitled to payment of damages for the overhauling of materials from the
contractor, testified that on December 14 up to December 24, 1977, he was construction site by Lily Chan without the knowledge and consent of its
contracted by petitioner Lily Chan to get bags of cement from the New Gran Hotel owner. Article 20 of the Civil Code provides:
construction site and to store the same into the latters warehouse in Tacloban
City. Aside from those bags of cement, deponent also hauled about 400 bundles of Art. 20. Every person who contrary to law, willfully or negligently caused
steel bars from the same construction site, upon order of petitioners. Corresponding damage to another, shall indemnify the latter for the same.
delivery receipts were presented and marked as Exhibits A, A-1,A-2,A-3 and A-4.[21]
As to the materials stored inside the bodega of defendant Wilson Chan, the
Deponent Alfredo Maceda testified that he was respondents Disbursement and inventory (Exh. C) show (sic), that the same were owned by the New Gran Hotel.
Payroll Officer who supervised the construction and kept inventory of the properties Said materials were stored by Moreman Builders Co., Inc. since it was attested to
of the New Gran Hotel. While conducting the inventory on November 23, 1977, he by the warehouseman as without any lien or encumbrances, the defendants are
found that the approximate total value of the materials stored in petitioners duty bound to release it. Article 21 of the Civil Code provides:
warehouse was P214,310.00. This amount was accordingly reflected in the
certification signed by Mario Ramos, store clerk and representative of Moreman Art. 21. Any person who willfully caused loss or injury to another in a manner
who was present during the inventory.[22] that is contrary to morals, good customs or public policy shall compensate
the latter for the damage.
Deponent Damiano Nadera testified on the current cost of the architectural and
structural requirements needed to complete the construction of the New Gran Hotel. Plaintiff is entitled to payment of actual damages based on the inventory as of
[23]
November 23, 1977 amounting to P1,930,080.00 (Exhs. Q & Q-1). The inventory
was signed by the agent Moreman Builders Corporation and defendants.
On December 26, 1996, the trial court rendered a decision in favor of
respondent, thus: Plaintiff is likewise entitled to payment of 12,500 bags of cement and 400 bundles of
steel bars totaling P2,549,000.00 (Exhs. S & S-1; Exhs. B & B-3).
WHEREFORE, foregoing considered, judgment is hereby rendered ordering
defendants to jointly and severally pay plaintiff: Defendants should pay plaintiff moral damages of P150,000.00; exemplary
1) P1,930,000.00 as actual damages; damages of P50,000.00 and attorneys fees of P50,000.00 and to pay the costs.
2) P2,549,000.00 as actual damages;

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The claim of defendant for payment of damages with respect to the materials of weight and significance, its factual findings and conclusions must be given great
appearing in the balance sheets as of February 3, 1978 in the amount weight and should not be disturbed on appeal.
of P3,286,690.00, not having been established with enough preponderance of
evidence cannot be given weight.[24] WHEREFORE, being in accord with law and evidence, the appealed decision is
hereby AFFIRMED in toto.
Petitioners then elevated the case to the Court of Appeals, docketed as CA-
G.R. CV No. 57323. On June 17, 1999, the Appellate Court rendered the assailed Hence, this petition for review on certiorari anchored on the following grounds:
Decision[25] affirming intoto the trial courts judgment, ratiocinating as follows:

Moreover, although the prayer in the complaint did not specify the amount of I. The Court of Appeals acted with grave abuse of discretion and
damages sought, the same was satisfactorily proved during the trial. For damages under a misapprehension of the law and the facts when it
to be awarded, it is essential that the claimant satisfactorily prove during the trial the affirmed in toto the award of actual damages made by the trial court
existence of the factual basis thereof and its causal connection with the adverse in favor of respondent in this case.
partys act (PAL, Inc. vs. NLRC, 259 SCRA 459. In sustaining appellees claim for II. The awards of moral and exemplary damages of the trial court to
damages, the court a quo held as follows: respondent in this case and affirmed in toto by the Court of Appeals
are unwarranted by the evidence presented by respondent at the ex
The Court finds the contention of plaintiff that materials and equipment of plaintiff parte hearing of this case and should, therefore, be eliminated or at
were stored in the warehouse of defendants and admitted by defendants in the least reduced.
certification issued to Sheriff Borja. x x x III. The award of attorneys fees by the trial court to respondent in this
case and affirmed by the Court of Appeals should be deleted
Evidence further revealed that assorted materials owned by the New Gran because of the failure of the trial court to state the legal and factual
Hotel (Exh. C) were deposited in the bodega of defendant Wilson Chan with a total basis of such award.
market value of P1,930,000.00, current price.
Petitioners contend inter alia that the actual damages claimed by respondent in
The inventory of other materials, aside from the steel bars and cement, is highly the present case were already awarded to him in Civil Case No. 113498 [26] and
reliable based on first, the affidavit of Arthur Edralin dated September 15, 1979, hence, cannot be recovered by him again. Even assuming that respondent is
personnel officer of Moreman Builders; that he was assigned, with others to guard entitled to damages, he can not recover P4,479,000.00 which is eleven (11) times
the warehouse (Exhs. M & O); secondly, the inventory (Exh. C) November 23, 1977 more than the total actual damages of P365,000.00 awarded to him in Civil Case
shows deposit of assorted materials; thirdly, that there were items in the warehouse No. 113498.[27]
as of February 3, 1978, as shown in the balance sheet of Moremans stock clerk,
Jose Cedilla (pp. 60-61, Rollo). In his comment on the petition, respondent maintains that petitioners, as
depositaries under the law, have both the fiduciary and extraordinary obligations not
The Court affirms the above findings. only to safely keep the construction material deposited, but also to return them with
all their products, accessories and accessions, pursuant to Articles 1972,[28] 1979,
[29]
Well settled is the rule that absent any proper reason to depart from the rule, factual  1983,[30] and 1988[31] of the Civil Code.Considering that petitioners duty to return
conclusions reached by the trial court are not to be disturbed (People vs. Dupali, the construction materials in question has already become impossible, it is only
230 SCRA 62). Hence, in the absence of any showing that serious and substantial proper that the prices of those construction materials in 1996 should be the basis of
errors were committed by the lower court in the appraisal of the evidence, the trial the award of actual damages. This is the only way to fulfill the duty to
judges assessment of the credibility of the witnesses is accorded great weight and return contemplated in the applicable laws.[32] Respondent further claims that
respect (People vs. Jain, 254 SCRA 686). And, there being absolutely nothing on petitioners must bear the increase in market prices from 1977 to 1996 because
record to show that the court a quo overlooked, disregarded, or misinterpreted facts liability for fraud includes all damages which may be reasonably attributed to the

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non-performance of the obligation. Lastly, respondent insists that there can be no Even without such serious procedural flaw, the case should also be dismissed
double recovery because in Civil Case No. 113498, [33] the parties were respondent for utter lack of merit.
himself and Moreman and the cause of action was the rescission of their building  
contract. In the present case, however, the parties are respondent and petitioners It must be stressed that respondents claim for damages is based on petitioners
and the cause of action between them is for recovery of damages arising from failure to return or to release to him the construction materials and equipment
petitioners failure to return the construction materials and equipment. deposited by Moreman to their warehouse. Hence, the essential issues to be
  resolved are: (1) Has respondent presented proof that the construction materials
Obviously, petitioners assigned errors call for a review of the lower courts and equipment were actually in petitioners warehouse when he asked that the same
findings of fact. be turned over to him? (2) If so, does respondent have the right to demand the
Succinct is the rule that this Court is not a trier of facts and does not normally release of the said materials and equipment or claim for damages?
undertake the re-examination of the evidence submitted by the contending parties Under Article 1311 of the Civil Code, contracts are binding upon the parties
during the trial of the case considering that findings of fact of the Court of Appeals (and their assigns and heirs) who execute them. When there is no privity of contract,
are generally binding and conclusive on this Court.[34] The jurisdiction of this Court in there is likewise no obligation or liability to speak about and thus no cause of action
a petition for review on certiorari is limited to reviewing only errors of law, [35] not of arises. Specifically, in an action against the depositary, the burden is on the plaintiff
fact, unless it is shown, inter alia, that: (1) the conclusion is a finding grounded on to prove the bailment or deposit and the performance of conditions precedent to the
speculations, surmises or conjectures; (2) the inference is manifestly mistaken, right of action.[39] A depositary is obliged to return the thing to the depositor, or to his
absurd and impossible; (3) there is grave abuse of discretion; (4) the judgment is heirs or successors, or to the person who may have been designated in the
based on misapprehension of facts; (5) the findings of fact are conflicting; contract. [40]
and (6) the Court of Appeals, in making its findings went beyond the issues of the
case and the same is contrary to the admission of both parties.[36] In the present case, the record is bereft of any contract of deposit, oral or
written, between petitioners and respondent. If at all, it was only between petitioners
Petitioners submit that this case is an exception to the general rule since both and Moreman. And granting arguendo that there was indeed a contract of deposit
the trial court and the Court of Appeals based their judgments on misapprehension between petitioners and Moreman, it is still incumbent upon respondent to prove its
of facts. existence and that it was executed in his favor. However, respondent miserably
failed to do so. The only pieces of evidence respondent presented to prove the
We agree. contract of deposit were the delivery receipts.[41] Significantly, they are unsigned
and not duly received or authenticated by either Moreman, petitioners or
At the outset, the case should have been dismissed outright by the trial court respondent or any of their authorized representatives. Hence, those delivery
because of patent procedural infirmities. It bears stressing that the case was receipts have no probative value at all. While our laws grant a person the remedial
originally filed on December 11, 1985. Four (4) years thereafter, or on August 25, right to prosecute or institute a civil action against another for the enforcement or
1989, the case was dismissed for respondents failure to prosecute. Five (5) years protection of a right, or the prevention or redress of a wrong, [42] every cause of
after, or on September 6, 1994, respondent filed his motion for action ex-contractu must be founded upon a contract, oral or written, express or
reconsideration. From here, the trial court already erred in its ruling because it implied.
should have dismissed the motion for reconsideration outright as it was filed far
beyond the fifteen-day reglementary period. [37] Worse, when respondent filed his Moreover, respondent also failed to prove that there were construction
second motion for reconsideration on October 14, 1994, a prohibited pleading,[38] the materials and equipment in petitioners warehouse at the time he made a demand
trial court still granted the same and reinstated the case on January 10, 1995. This for their return.
is a glaring gross procedural error committed by both the trial court and the Court of
Appeals. Considering that respondent failed to prove (1) the existence of any contract of
deposit between him and petitioners, nor between the latter and Moreman in his
favor, and (2) that there were construction materials in petitioners warehouse at the

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time of respondents demand to return the same, we hold that petitioners have no
corresponding obligation or liability to respondent with respect to those construction
materials.

Anent the issue of damages, petitioners are still not liable because, as
expressly provided for in Article 2199 of the Civil Code, [43] actual or compensatory
damages cannot be presumed, but must be proved with reasonable degree of
certainty. A court cannot rely on speculations, conjectures, or guesswork as to the
fact and amount of damages, but must depend upon competent proof that they have
been suffered by the injured party and on the best obtainable evidence of the actual
amount thereof. It must point out specific facts which could afford a basis for [G.R. No. 160544.  February 21, 2005]
measuring whatever compensatory or actual damages are borne.[44] TRIPLE-V vs. FILIPINO MERCHANTS

Considering our findings that there was no contract of deposit between Gentlemen:
petitioners and respondent or Moreman and that actually there were no more Quoted hereunder, for your information, is a resolution of this Court dated FEB 21
construction materials or equipment in petitioners warehouse when respondent 2005.
made a demand for their return, we hold that he has no right whatsoever to claim for
damages. G.R. No. 160544
(Triple-V Food Services, Inc. vs. Filipino Merchants Insurance Company, Inc.)
As we stressed in the beginning, a judgment of default does not automatically
imply admission by the defendant of plaintiffs causes of action. Here, the trial court Assailed in this petition for review on certiorari is the decision [1]cralaw dated October
merely adopted respondents allegations in his complaint and evidence without 21, 2003 of the Court of Appeals in CA-G.R. CV No. 71223, affirming an earlier
evaluating them with the highest degree of objectivity and certainty. decision of the Regional Trial Court at Makati City, Branch 148, in its Civil Case No.
98-838, an action for damages thereat filed by respondent Filipino Merchants
WHEREFORE, the petition is GRANTED. The challenged Decision of the Court Insurance, Company, Inc., against the herein petitioner, Triple-V Food Services, Inc.
of Appeals dated June 17, 1999 is REVERSED and SET ASIDE. Costs against On March 2, 1997, at around 2:15 o'clock in the afternoon, a certain Mary Jo-Anne
respondent. De Asis (De Asis) dined at petitioner's Kamayan Restaurant at 15 West Avenue,
Quezon City. De Asis was using a Mitsubishi Galant Super Saloon Model 1995 with
SO ORDERED. plate number UBU 955, assigned to her by her employer Crispa Textile Inc.
(Crispa). On said date, De Asis availed of the valet parking service of petitioner and
entrusted her car key to petitioner's valet counter. A corresponding parking ticket
was issued as receipt for the car. The car was then parked by petitioner's valet
attendant, a certain Madridano, at the designated parking area. Few minutes later,
Madridano noticed that the car was not in its parking slot and its key no longer in the
box where valet attendants usually keep the keys of cars entrusted to them. The car
was never recovered. Thereafter, Crispa filed a claim against its insurer, herein
respondent Filipino Merchants Insurance Company, Inc. (FMICI). Having
indemnified Crispa in the amount of P669.500 for the loss of the subject vehicle,
FMICI, as subrogee to Crispa's rights, filed with the RTC at Makati City an action for
damages against petitioner Triple-V Food Services, Inc., thereat docketed as Civil
Case No. 98-838 which was raffled to Branch 148.

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 napping incident and in the supervision of its employees. It further argued that there
In its answer, petitioner argued that the complaint failed to aver facts to support the was no valid subrogation of rights between Crispa and respondent FMICI.
allegations of recklessness and negligence committed in the safekeeping and
custody of the subject vehicle, claiming that it and its employees wasted no time in In a decision dated October 21, 2003,[2]cralaw the Court of Appeals dismissed
ascertaining the loss of the car and in informing De Asis of the discovery of the loss. petitioner's appeal and affirmed the appealed decision of the trial court, thus:
Petitioner further argued that in accepting the complimentary valet parking service,
De Asis received a parking ticket whereunder it is so provided that "[Management WHEREFORE, based on the foregoing premises, the instant appeal is hereby
and staff will not be responsible for any loss of or damage incurred on the vehicle DISMISSED. Accordingly, the assailed June 22, 2001 Decision of the RTC of
nor of valuables contained therein", a provision which, to petitioner's mind, is an Makati City - Branch 148 in Civil Case No. 98-838 is AFFIRMED.
explicit waiver of any right to claim indemnity for the loss of the car; and that De Asis
knowingly assumed the risk of loss when she allowed petitioner to park her vehicle, SO ORDERED.
adding that its valet parking service did not include extending a contract of
insurance or warranty for the loss of the vehicle. In so dismissing the appeal and affirming the appealed decision, the appellate court
agreed with the findings and conclusions of the trial court that: (a) petitioner was a
During trial, petitioner challenged FMICI's subrogation to Crispa's right to file a claim depositary of the subject vehicle; (b) petitioner was negligent in its duties as a
for the loss of the car, arguing that theft is not a risk insured against under FMICI's depositary thereof and as an employer of the valet attendant; and (c) there was a
Insurance Policy No. PC-5975 for the subject vehicle. valid subrogation of rights between Crispa and respondent FMICI.
Hence, petitioner's present recourse.
In a decision dated June 22, 2001, the trial court rendered judgment for respondent
FMICI, thus: We agree with the two (2) courts below.

WHEREFORE, premises considered, judgment is hereby rendered in favor of the When De Asis entrusted the car in question to petitioners valet attendant while
plaintiff (FMICI) and against the defendant Triple V (herein petitioner) and the latter eating at petitioner's Kamayan Restaurant, the former expected the car's safe return
is hereby ordered to pay plaintiff the following: at the end of her meal. Thus, petitioner was constituted as a depositary of the same
car. Petitioner cannot evade liability by arguing that neither a contract of deposit nor
1.  The amount of P669,500.00, representing actual damages plus compounded that of insurance, guaranty or surety for the loss of the car was constituted when De
(sic); Asis availed of its free valet parking service.
2.  The amount of P30,000.00 as acceptance fee plus the amount equal to 25% of
the total amount due as attorney's fees; In a contract of deposit, a person receives an object belonging to another with the
3.  The amount of P50,000.00 as exemplary damages; obligation of safely keeping it and returning the same.[3] A deposit may be
4.  Plus, cost of suit. constituted even without any consideration. It is not necessary that the depositary
receives a fee before it becomes obligated to keep the item entrusted for
Defendant Triple V is not therefore precluded from taking appropriate action against safekeeping and to return it later to the depositor.
defendant Armando Madridano.
Specious is petitioner's insistence that the valet parking claim stub it issued to De
SO ORDERED. Asis contains a clear exclusion of its liability and operates as an explicit waiver by
the customer of any right to claim indemnity for any loss of or damage to the
Obviously displeased, petitioner appealed to the Court of Appeals reiterating its vehicle.
argument that it was not a depositary of the subject car and that it exercised due
diligence and prudence in the safe keeping of the vehicle, in handling the car- The parking claim stub embodying the terms and conditions of the parking, including
that of relieving petitioner from any loss or damage to the car, is essentially a

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contract of adhesion, drafted and prepared as it is by the petitioner alone with no ourselves reviewed the records and find no justification to deviate from the trial
participation whatsoever on the part of the customers, like De Asis, who merely court's findings.
adheres to the printed stipulations therein appearing. While contracts of adhesion
are not void in themselves, yet this Court will not hesitate to rule out blind WHEREFORE, petition is hereby DENIED DUE COURSE.
adherence thereto if they prove to be one-sided under the attendant facts and
circumstances.[4] SO ORDERED.

Hence, and as aptly pointed out by the Court of Appeals, petitioner must not be
allowed to use its parking claim stub's exclusionary stipulation as a shield from any
responsibility for any loss or damage to vehicles or to the valuables contained
therein. Here, it is evident that De Asis deposited the car in question with the
petitioner as part of the latter's enticement for customers by providing them a safe
parking space within the vicinity of its restaurant. In a very real sense, a safe
parking space is an added attraction to petitioner's restaurant business because
customers are thereby somehow assured that their vehicle are safely kept, rather
than parking them elsewhere at their own risk. Having entrusted the subject car to
petitioner's valet attendant, customer De Asis, like all of petitioner's customers, fully G.R. No. L-6913            November 21, 1913
expects the security of her car while at petitioner's premises/designated parking THE ROMAN CATHOLIC BISHOP OF JARO vs GREGORIO DE LA PEÑA,
areas and its safe return at the end of her visit at petitioner's restaurant. administrator of the estate of Father Agustin de la Peña

Petitioner's argument that there was no valid subrogation of rights between Crispa MORELAND, J.:
and FMICI because theft was not a risk insured against under FMICI's Insurance This is an appeal by the defendant from a judgment of the Court of First Instance of
Policy No. PC-5975 holds no water. Iloilo, awarding to the plaintiff the sum of P6,641, with interest at the legal rate from
the beginning of the action.
Insurance Policy No. PC-5975 which respondent FMICI issued to Crispa contains,
among others things, the following item: "Insured's Estimate of Value of Scheduled It is established in this case that the plaintiff is the trustee of a charitable bequest
Vehicle- P800.000".[5]cralaw On the basis of such item, the trial court concluded that made for the construction of a leper hospital and that father Agustin de la Peña was
the coverage includes a full comprehensive insurance of the vehicle in case of the duly authorized representative of the plaintiff to receive the legacy. The
damage or loss. Besides, Crispa paid a premium of P10,304 to cover theft. This is defendant is the administrator of the estate of Father De la Peña.
clearly shown in the breakdown of premiums in the same policy. [6]cralaw Thus,
having indemnified CRISPA for the stolen car, FMICI, as correctly ruled by the trial In the year 1898 the books Father De la Peña, as trustee, showed that he had on
court and the Court of Appeals, was properly subrogated to Crispa's rights against hand as such trustee the sum of P6,641, collected by him for the charitable
petitioner, pursuant to Article 2207 of the New Civil Code[7]. purposes aforesaid. In the same year he deposited in his personal account P19,000
in the Hongkong and Shanghai Bank at Iloilo. Shortly thereafter and during the war
Anent the trial court's findings of negligence on the part of the petitioner, which of the revolution, Father De la Peña was arrested by the military authorities as a
findings were affirmed by the appellate court, we have consistently ruled that political prisoner, and while thus detained made an order on said bank in favor of
findings of facts of trial courts, more so when affirmed, as here, by the Court of the United States Army officer under whose charge he then was for the sum thus
Appeals, are conclusive on this Court unless the trial court itself ignored, overlooked deposited in said bank. The arrest of Father De la Peña and the confiscation of the
or misconstrued facts and circumstances which, if considered, warrant a reversal of funds in the bank were the result of the claim of the military authorities that he was
the outcome of the case.[8]cralaw This is not so in the case at bar. For, we have an insurgent and that the funds thus deposited had been collected by him for
revolutionary purposes. The money was taken from the bank by the military

Credit Transactions | DEPOSIT AMTL | 7

authorities by virtue of such order, was confiscated and turned over to the the results of which will be dangerous to his trust, to take all reasonable means and
Government. measures to escape or, if unavoidable, to temper the effects of those events, we do
not feel constrained to hold that, in choosing between two means equally legal, he is
While there is considerable dispute in the case over the question whether the culpably negligent in selecting one whereas he would not have been if he had
P6,641 of trust funds was included in the P19,000 deposited as aforesaid, selected the other.
nevertheless, a careful examination of the case leads us to the conclusion that said
trust funds were a part of the funds deposited and which were removed and The court, therefore, finds and declares that the money which is the subject matter
confiscated by the military authorities of the United States. of this action was deposited by Father De la Peña in the Hongkong and Shanghai
Banking Corporation of Iloilo; that said money was forcibly taken from the bank by
That branch of the law known in England and America as the law of trusts had no the armed forces of the United States during the war of the insurrection; and that
exact counterpart in the Roman law and has none under the Spanish law. In this said Father De la Peña was not responsible for its loss.
jurisdiction, therefore, Father De la Peña's liability is determined by those portions of
the Civil Code which relate to obligations. (Book 4, Title 1.) The judgment is therefore reversed, and it is decreed that the plaintiff shall take
nothing by his complaint.
Although the Civil Code states that "a person obliged to give something is also
bound to preserve it with the diligence pertaining to a good father of a family" (art.
1094), it also provides, following the principle of the Roman law, major casus est,
cui humana infirmitas resistere non potest, that "no one shall be liable for events
which could not be foreseen, or which having been foreseen were inevitable, with Separate Opinions
the exception of the cases expressly mentioned in the law or those in which the TRENT, J., dissenting:
obligation so declares." (Art. 1105.) I dissent. Technically speaking, whether Father De la Peña was a trustee or an
agent of the plaintiff his books showed that in 1898 he had in his possession as
By placing the money in the bank and mixing it with his personal funds De la Peña trustee or agent the sum of P6,641 belonging to the plaintiff as the head of the
did not thereby assume an obligation different from that under which he would have church. This money was then clothed with all the immunities and protection with
lain if such deposit had not been made, nor did he thereby make himself liable to which the law seeks to invest trust funds. But when De la Peña mixed this trust fund
repay the money at all hazards. If the had been forcibly taken from his pocket or with his own and deposited the whole in the bank to hispersonal account or credit,
from his house by the military forces of one of the combatants during a state of war, he by this act stamped on the said fund his own private marks and unclothed it of all
it is clear that under the provisions of the Civil Code he would have been exempt the protection it had. If this money had been deposited in the name of De la Peña as
from responsibility. The fact that he placed the trust fund in the bank in his personal trustee or agent of the plaintiff, I think that it may be presumed that the military
account does not add to his responsibility. Such deposit did not make him a debtor authorities would not have confiscated it for the reason that they were looking for
who must respond at all hazards. insurgent funds only. Again, the plaintiff had no reason to suppose that De la Peña
would attempt to strip the fund of its identity, nor had he said or done anything which
We do not enter into a discussion for the purpose of determining whether he acted tended to relieve De la Peña from the legal reponsibility which pertains to the care
more or less negligently by depositing the money in the bank than he would if he and custody of trust funds.
had left it in his home; or whether he was more or less negligent by depositing the
money in his personal account than he would have been if he had deposited it in a The Supreme Court of the United States in the United State vs. Thomas (82 U. S.,
separate account as trustee. We regard such discussion as substantially fruitless, 337), at page 343, said: "Trustees are only bound to exercise the same care and
inasmuch as the precise question is not one of negligence. There was no law solicitude with regard to the trust property which they would exercise with regard to
prohibiting him from depositing it as he did and there was no law which changed his their own. Equity will not exact more of them. They are not liable for a loss by theft
responsibility be reason of the deposit. While it may be true that one who is under without their fault. But this exemption ceases when they mix the trust-money with
obligation to do or give a thing is in duty bound, when he sees events approaching their own, whereby it loses its identity, and they become mere debtors."

Credit Transactions | DEPOSIT AMTL | 8

If this proposition is sound and is applicable to cases arising in this jurisdiction, and I This is the crux of the present controversy.
entertain no doubt on this point, the liability of the estate of De la Peña cannot be
doubted. But this court in the majority opinion says: "The fact that he (Agustin de la On 3 July 1979, petitioner (through its President, Sergio Aguirre) and the spouses
Peña) placed the trust fund in the bank in his personal account does not add to his Ramon and Paula Pugao entered into an agreement whereby the former purchased
responsibility. Such deposit did not make him a debtor who must respond at all from the latter two (2) parcels of land for a consideration of P350,625.00. Of this
hazards. . . . There was no law prohibiting him from depositing it as he did, and amount, P75,725.00 was paid as downpayment while the balance was covered by
there was no law which changed his responsibility, by reason of the deposit." three (3) postdated checks. Among the terms and conditions of the agreement
embodied in a Memorandum of True and Actual Agreement of Sale of Land were
I assume that the court in using the language which appears in the latter part of the that the titles to the lots shall be transferred to the petitioner upon full payment of the
above quotation meant to say that there was no statutory law regulating the purchase price and that the owner's copies of the certificates of titles thereto,
question. Questions of this character are not usually governed by statutory law. The Transfer Certificates of Title (TCT) Nos. 284655 and 292434, shall be deposited in a
law is to be found in the very nature of the trust itself, and, as a general rule, the safety deposit box of any bank. The same could be withdrawn only upon the joint
courts say what facts are necessary to hold the trustee as a debtor. signatures of a representative of the petitioner and the Pugaos upon full payment of
the purchase price. Petitioner, through Sergio Aguirre, and the Pugaos then rented
If De la Peña, after depositing the trust fund in his personal account, had used this Safety Deposit Box No. 1448 of private respondent Security Bank and Trust
money for speculative purposes, such as the buying and selling of sugar or other Company, a domestic banking corporation hereinafter referred to as the respondent
products of the country, thereby becoming a debtor, there would have been no Bank. For this purpose, both signed a contract of lease (Exhibit "2") which
doubt as to the liability of his estate. Whether he used this money for that purpose contains, inter alia, the following conditions:
the record is silent, but it will be noted that a considerable length of time intervened 13. The bank is not a depositary of the contents of the safe and it has
from the time of the deposit until the funds were confiscated by the military neither the possession nor control of the same.
authorities. In fact the record shows that De la Peña deposited on June 27, 1898, 14. The bank has no interest whatsoever in said contents, except
P5,259, on June 28 of that year P3,280, and on August 5 of the same year P6,000. herein expressly provided, and it assumes absolutely no liability in
The record also shows that these funds were withdrawn and again deposited all connection therewith.1
together on the 29th of May, 1900, this last deposit amounting to P18,970. These
facts strongly indicate that De la Peña had as a matter of fact been using the money After the execution of the contract, two (2) renter's keys were given to the renters —
in violation of the trust imposed in him.  one to Aguirre (for the petitioner) and the other to the Pugaos. A guard key
remained in the possession of the respondent Bank. The safety deposit box has two
If the doctrine announced in the majority opinion be followed in cases hereafter (2) keyholes, one for the guard key and the other for the renter's key, and can be
arising in this jurisdiction trust funds will be placed in precarious condition. The opened only with the use of both keys. Petitioner claims that the certificates of title
position of the trustee will cease to be one of trust. were placed inside the said box.

Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner the
G.R. No. 90027 March 3, 1993 two (2) lots at a price of P225.00 per square meter which, as petitioner alleged in its
CA AGRO-INDUSTRIAL DEVELOPMENT CORP. vs. THE HONORABLE COURT complaint, translates to a profit of P100.00 per square meter or a total of
OF APPEALS and SECURITY BANK AND TRUST COMPANY P280,500.00 for the entire property. Mrs. Ramos demanded the execution of a deed
of sale which necessarily entailed the production of the certificates of title. In view
DAVIDE, JR., J.: thereof, Aguirre, accompanied by the Pugaos, then proceeded to the respondent
Is the contractual relation between a commercial bank and another party in a Bank on 4 October 1979 to open the safety deposit box and get the certificates of
contract of rent of a safety deposit box with respect to its contents placed by the title. However, when opened in the presence of the Bank's representative, the box
latter one of bailor and bailee or one of lessor and lessee? yielded no such certificates. Because of the delay in the reconstitution of the title,

Credit Transactions | DEPOSIT AMTL | 9

Mrs. Ramos withdrew her earlier offer to purchase the lots; as a consequence by the petitioner and respondent Bank is in the nature of a contract of lease by
thereof, the petitioner allegedly failed to realize the expected profit of P280,500.00. virtue of which the petitioner and its co-renter were given control over the safety
Hence, the latter filed on 1 September 1980 a complaint 2 for damages against the deposit box and its contents while the Bank retained no right to open the said box
respondent Bank with the Court of First Instance (now Regional Trial Court) of because it had neither the possession nor control over it and its contents. As such,
Pasig, Metro Manila which docketed the same as Civil Case No. 38382. the contract is governed by Article 1643 of the Civil Code 10 which provides:
Art. 1643. In the lease of things, one of the parties binds himself to
In its Answer with Counterclaim,3 respondent Bank alleged that the petitioner has no give to another the enjoyment or use of a thing for a price certain,
cause of action because of paragraphs 13 and 14 of the contract of lease (Exhibit and for a period which may be definite or indefinite. However, no
"2"); corollarily, loss of any of the items or articles contained in the box could not lease for more than ninety-nine years shall be valid.
give rise to an action against it. It then interposed a counterclaim for exemplary
damages as well as attorney's fees in the amount of P20,000.00. Petitioner It invoked Tolentino vs. Gonzales  11 — which held that the owner of the
subsequently filed an answer to the counterclaim.4 property loses his control over the property leased during the period of the
contract — and Article 1975 of the Civil Code which provides:
In due course, the trial court, now designated as Branch 161 of the Regional Trial Art. 1975. The depositary holding certificates, bonds, securities or
Court (RTC) of Pasig, Metro Manila, rendered a decision 5 adverse to the petitioner instruments which earn interest shall be bound to collect the latter
on 8 December 1986, the dispositive portion of which reads: when it becomes due, and to take such steps as may be necessary
WHEREFORE, premises considered, judgment is hereby rendered in order that the securities may preserve their value and the rights
dismissing plaintiff's complaint. corresponding to them according to law.
On defendant's counterclaim, judgment is hereby rendered ordering The above provision shall not apply to contracts for the rent of safety
plaintiff to pay defendant the amount of FIVE THOUSAND deposit boxes.
(P5,000.00) PESOS as attorney's fees.
With costs against plaintiff.6 and then concluded that "[c]learly, the defendant-appellee is not under any
duty to maintain the contents of the box. The stipulation absolving the
The unfavorable verdict is based on the trial court's conclusion that under defendant-appellee from liability is in accordance with the nature of the
paragraphs 13 and 14 of the contract of lease, the Bank has no liability for the loss contract of lease and cannot be regarded as contrary to law, public order
of the certificates of title. The court declared that the said provisions are binding on and public policy." 12 The appellate court was quick to add, however, that
the parties. under the contract of lease of the safety deposit box, respondent Bank is not
completely free from liability as it may still be made answerable in case
Its motion for reconsideration7 having been denied, petitioner appealed from the unauthorized persons enter into the vault area or when the rented box is
adverse decision to the respondent Court of Appeals which docketed the appeal as forced open. Thus, as expressly provided for in stipulation number 8 of the
CA-G.R. CV No. 15150. Petitioner urged the respondent Court to reverse the contract in question:
challenged decision because the trial court erred in (a) absolving the respondent
Bank from liability from the loss, (b) not declaring as null and void, for being contrary 8. The Bank shall use due diligence that no unauthorized person
to law, public order and public policy, the provisions in the contract for lease of the shall be admitted to any rented safe and beyond this, the Bank will
safety deposit box absolving the Bank from any liability for loss, (c) not concluding not be responsible for the contents of any safe rented from it. 13
that in this jurisdiction, as well as under American jurisprudence, the liability of the
Bank is settled and (d) awarding attorney's fees to the Bank and denying the Its motion for reconsideration 14 having been denied in the respondent Court's
petitioner's prayer for nominal and exemplary damages and attorney's fees.8 Resolution of 28 August 1989, 15petitioner took this recourse under Rule 45 of the
Rules of Court and urges Us to review and set aside the respondent Court's ruling.
In its Decision promulgated on 4 July 1989, 9 respondent Court affirmed the Petitioner avers that both the respondent Court and the trial court (a) did not
appealed decision principally on the theory that the contract (Exhibit "2") executed properly and legally apply the correct law in this case, (b) acted with grave abuse of

Credit Transactions | DEPOSIT AMTL | 10

discretion or in excess of jurisdiction amounting to lack thereof and (c) set a considered as in the latter rather than in the former, since the
precedent that is contrary to, or is a departure from precedents adhered to and company is, by the nature of the contract, given absolute control of
affirmed by decisions of this Court and precepts in American jurisprudence adopted access to the property, and the depositor cannot gain access thereto
in the Philippines. It reiterates the arguments it had raised in its motion to reconsider without the consent and active participation of the company. . . .
the trial court's decision, the brief submitted to the respondent Court and the motion (citations omitted).
to reconsider the latter's decision. In a nutshell, petitioner maintains that regardless
of nomenclature, the contract for the rent of the safety deposit box (Exhibit "2") is and a segment from Words and Phrases 18 which states that a contract for
actually a contract of deposit governed by Title XII, Book IV of the Civil Code of the the rental of a bank safety deposit box in consideration of a fixed amount at
Philippines. 16 Accordingly, it is claimed that the respondent Bank is liable for the stated periods is a bailment for hire.
loss of the certificates of title pursuant to Article 1972 of the said Code which
provides: Petitioner further argues that conditions 13 and 14 of the questioned contract are
contrary to law and public policy and should be declared null and void. In support
Art. 1972. The depositary is obliged to keep the thing safely and to thereof, it cites Article 1306 of the Civil Code which provides that parties to a
return it, when required, to the depositor, or to his heirs and contract may establish such stipulations, clauses, terms and conditions as they may
successors, or to the person who may have been designated in the deem convenient, provided they are not contrary to law, morals, good customs,
contract. His responsibility, with regard to the safekeeping and the public order or public policy.
loss of the thing, shall be governed by the provisions of Title I of this
Book. After the respondent Bank filed its comment, this Court gave due course to the
If the deposit is gratuitous, this fact shall be taken into account in petition and required the parties to simultaneously submit their respective
determining the degree of care that the depositary must observe. Memoranda.
The petition is partly meritorious.
Petitioner then quotes a passage from American Jurisprudence 17 which is
supposed to expound on the prevailing rule in the United States, to wit: We agree with the petitioner's contention that the contract for the rent of the safety
deposit box is not an ordinary contract of lease as defined in Article 1643 of the Civil
The prevailing rule appears to be that where a safe-deposit company Code. However, We do not fully subscribe to its view that the same is a contract of
leases a safe-deposit box or safe and the lessee takes possession of deposit that is to be strictly governed by the provisions in the Civil Code on
the box or safe and places therein his securities or other valuables, deposit; 19 the contract in the case at bar is a special kind of deposit. It cannot be
the relation of bailee and bail or is created between the parties to the characterized as an ordinary contract of lease under Article 1643 because the full
transaction as to such securities or other valuables; the fact that the and absolute possession and control of the safety deposit box was not given to the
safe-deposit company does not know, and that it is not expected that joint renters — the petitioner and the Pugaos. The guard key of the box remained
it shall know, the character or description of the property which is with the respondent Bank; without this key, neither of the renters could open the
deposited in such safe-deposit box or safe does not change that box. On the other hand, the respondent Bank could not likewise open the box
relation. That access to the contents of the safe-deposit box can be without the renter's key. In this case, the said key had a duplicate which was made
had only by the use of a key retained by the lessee ( whether it is the so that both renters could have access to the box.
sole key or one to be used in connection with one retained by the
lessor) does not operate to alter the foregoing rule. The argument Hence, the authorities cited by the respondent Court 20 on this point do not apply.
that there is not, in such a case, a delivery of exclusive possession Neither could Article 1975, also relied upon by the respondent Court, be invoked as
and control to the deposit company, and that therefore the situation is an argument against the deposit theory. Obviously, the first paragraph of such
entirely different from that of ordinary bailment, has been generally provision cannot apply to a depositary of certificates, bonds, securities or
rejected by the courts, usually on the ground that as possession must instruments which earn interest if such documents are kept in a rented safety
be either in the depositor or in the company, it should reasonably be

Credit Transactions | DEPOSIT AMTL | 11

deposit box. It is clear that the depositary cannot open the box without the renter independent from, but related to or in conjunction with, this principal function. A
being present. contract of deposit may be entered into orally or in writing 25 and, pursuant to Article
1306 of the Civil Code, the parties thereto may establish such stipulations, clauses,
We observe, however, that the deposit theory itself does not altogether find terms and conditions as they may deem convenient, provided they are not contrary
unanimous support even in American jurisprudence. We agree with the petitioner to law, morals, good customs, public order or public policy. The depositary's
that under the latter, the prevailing rule is that the relation between a bank renting responsibility for the safekeeping of the objects deposited in the case at bar is
out safe-deposit boxes and its customer with respect to the contents of the box is governed by Title I, Book IV of the Civil Code. Accordingly, the depositary would be
that of a bail or and bailee, the bailment being for hire and mutual benefit. 21 This is liable if, in performing its obligation, it is found guilty of fraud, negligence, delay or
just the prevailing view because: contravention of the tenor of the agreement. 26 In the absence of any stipulation
prescribing the degree of diligence required, that of a good father of a family is to be
There is, however, some support for the view that the relationship in observed. 27 Hence, any stipulation exempting the depositary from any liability
question might be more properly characterized as that of landlord arising from the loss of the thing deposited on account of fraud, negligence or delay
and tenant, or lessor and lessee. It has also been suggested that it would be void for being contrary to law and public policy. In the instant case,
should be characterized as that of licensor and licensee. The relation petitioner maintains that conditions 13 and 14 of the questioned contract of lease of
between a bank, safe-deposit company, or storage company, and the the safety deposit box, which read:
renter of a safe-deposit box therein, is often described as contractual,
express or implied, oral or written, in whole or in part. But there is 13. The bank is not a depositary of the contents of the safe and it has
apparently no jurisdiction in which any rule other than that applicable neither the possession nor control of the same.
to bailments governs questions of the liability and rights of the parties 14. The bank has no interest whatsoever in said contents, except
in respect of loss of the contents of safe-deposit boxes. 22 (citations herein expressly provided, and it assumes absolutely no liability in
omitted) connection therewith. 28

In the context of our laws which authorize banking institutions to rent out safety are void as they are contrary to law and public policy. We find Ourselves in
deposit boxes, it is clear that in this jurisdiction, the prevailing rule in the United agreement with this proposition for indeed, said provisions are inconsistent
States has been adopted. Section 72 of the General Banking Act 23pertinently with the respondent Bank's responsibility as a depositary under Section
provides: 72(a) of the General Banking Act. Both exempt the latter from any liability
except as contemplated in condition 8 thereof which limits its duty to
Sec. 72. In addition to the operations specifically authorized exercise reasonable diligence only with respect to who shall be admitted to
elsewhere in this Act, banking institutions other than building and any rented safe, to wit:
loan associations may perform the following services: 8. The Bank shall use due diligence that no unauthorized person
(a) Receive in custody funds, documents, and shall be admitted to any rented safe and beyond this, the Bank will
valuable objects, and rent safety deposit boxes for the not be responsible for the contents of any safe rented from it. 29
safeguarding of such effects.
xxx xxx xxx Furthermore, condition 13 stands on a wrong premise and is contrary to the
The banks shall perform the services permitted under subsections actual practice of the Bank. It is not correct to assert that the Bank has
(a), (b) and (c) of this section as depositories or as neither the possession nor control of the contents of the box since in fact,
agents. . . . 24 (emphasis supplied) the safety deposit box itself is located in its premises and is under its
absolute control; moreover, the respondent Bank keeps the guard key to the
Note that the primary function is still found within the parameters of a contract said box. As stated earlier, renters cannot open their respective boxes
of deposit, i.e., the receiving in custody of funds, documents and other valuable unless the Bank cooperates by presenting and using this guard key. Clearly
objects for safekeeping. The renting out of the safety deposit boxes is not

Credit Transactions | DEPOSIT AMTL | 12

 then, to the extent above stated, the foregoing conditions in the contract in petitioner to pay the respondent Bank attorney's fees. To this extent, the Decision
question are void and ineffective. It has been said: (dispositive portion) of public respondent Court of Appeals must be modified.

With respect to property deposited in a safe-deposit box by a WHEREFORE, the Petition for Review is partially GRANTED by deleting the award
customer of a safe-deposit company, the parties, since the relation is for attorney's fees from the 4 July 1989 Decision of the respondent Court of Appeals
a contractual one, may by special contract define their respective in CA-G.R. CV No. 15150. As modified, and subject to the pronouncement We
duties or provide for increasing or limiting the liability of the deposit made above on the nature of the relationship between the parties in a contract of
company, provided such contract is not in violation of law or public lease of safety deposit boxes, the dispositive portion of the said Decision is hereby
policy. It must clearly appear that there actually was such a special AFFIRMED and the instant Petition for Review is otherwise DENIED for lack of
contract, however, in order to vary the ordinary obligations implied by merit.
law from the relationship of the parties; liability of the deposit No pronouncement as to costs.
company will not be enlarged or restricted by words of doubtful
meaning. The company, in renting safe-deposit boxes, cannot SO ORDERED.
exempt itself from liability for loss of the contents by its own fraud or
negligence or that of its agents or servants, and if a provision of the
contract may be construed as an attempt to do so, it will be held
ineffective for the purpose. Although it has been held that the lessor
of a safe-deposit box cannot limit its liability for loss of the contents
thereof through its own negligence, the view has been taken that
such a lessor may limits its liability to some extent by agreement or
stipulation. 30 (citations omitted)

Thus, we reach the same conclusion which the Court of Appeals arrived at, that is,
that the petition should be dismissed, but on grounds quite different from those
relied upon by the Court of Appeals. In the instant case, the respondent Bank's
exoneration cannot, contrary to the holding of the Court of Appeals, be based on or
proceed from a characterization of the impugned contract as a contract of lease, but
rather on the fact that no competent proof was presented to show that respondent G.R. No. 4015            August 24, 1908
Bank was aware of the agreement between the petitioner and the Pugaos to the ANGEL JAVELLANA vs JOSE LIM, ET AL.
effect that the certificates of title were withdrawable from the safety deposit box only
upon both parties' joint signatures, and that no evidence was submitted to reveal The attorney for the plaintiff, Angel Javellana, file a complaint on the 30th of
that the loss of the certificates of title was due to the fraud or negligence of the October, 1906, with the Court of First Instance of Iloilo, praying that the defendants,
respondent Bank. This in turn flows from this Court's determination that the contract Jose Lim and Ceferino Domingo Lim, he sentenced to jointly and severally pay the
involved was one of deposit. Since both the petitioner and the Pugaos agreed that sum of P2,686.58, with interest thereon at the rate of 15 per cent per annum from
each should have one (1) renter's key, it was obvious that either of them could ask the 20th of January, 1898, until full payment should be made, deducting from the
the Bank for access to the safety deposit box and, with the use of such key and the amount of interest due the sum of P1,102.16, and to pay the costs of the
Bank's own guard key, could open the said box, without the other renter being proceedings.
present.
Authority from the court having been previously obtained, the complaint was
Since, however, the petitioner cannot be blamed for the filing of the complaint and amended on the 10th of January, 1907; it was then alleged, on the 26th of May,
no bad faith on its part had been established, the trial court erred in condemning the

Credit Transactions | DEPOSIT AMTL | 13

1897, the defendants executed and subscribed a document in favor of the plaintiff presented by the appellants having been approved, the same was in due course
reading as follows: submitted to this court.

We have received from Angel Javellana, as a deposit without interest, the sum of The document of indebtedness inserted in the complaint states that the plaintiff left
two thousand six hundred and eighty-six cents of pesos fuertes, which we will return on deposit with the defendants a given sum of money which they were jointly and
to the said gentleman, jointly and severally, on the 20th of January, 1898. — Jaro, severally obliged to return on a certain date fixed in the document; but that,
26th of May, 1897. — Signed Jose Lim. — Signed: Ceferino Domingo Lim. nevertheless, when the document appearing as Exhibits 2, written in the Visayan
dialect and followed by a translation into Spanish was executed, it was
That, when the obligation became due, the defendants begged the plaintiff for an acknowledged, at the date thereof, the 15th of November, 1902, that the amount
extension of time for the payment thereof, building themselves to pay interest at the deposited had not yet been returned to the creditor, whereby he was subjected to
rate of 15 per cent on the amount of their indebtedness, to which the plaintiff losses and damages amounting to 830 pesos since the 20th of January, 1898,
acceded; that on the 15th of May, 1902, the debtors paid on account of interest due when the return was again stipulated with the further agreement that the amount
the sum of P1,000 pesos, with the exception of either capital or interest, had thereby deposited should bear interest at the rate of 15 per cent per annum, from the
been subjected to loss and damages. aforesaid date of January 20, and that the 1,000 pesos paid to the depositor on the
15th of May, 1900, according to the receipt issued by him to the debtors, would be
A demurrer to the original complaint was overruled, and on the 4th of January, included, and that the said rate of interest would obtain until the debtors on the 20th
1907, the defendants answered the original complaint before its amendment, setting of May, 1897, it is called a deposit consisted, and they could have accomplished the
forth that they acknowledged the facts stated in Nos. 1 and 2 of the complaint; that return agreed upon by the delivery of a sum equal to the one received by them. For
they admitted the statements of the plaintiff relative to the payment of 1,102.16 this reason it must be understood that the debtors were lawfully authorized to make
pesos made on the 15th of November, 1902, not, however, as payment of interest use of the amount deposited, which they have done, as subsequent shown when
on the amount stated in the foregoing document, but on account of the principal, asking for an extension of the time for the return thereof, inasmuch as,
and denied that there had been any agreement as to an extension of the time for acknowledging that they have subjected the letter, their creditor, to losses and
payment and the payment of interest at the rate of 15 per cent per annum as damages for not complying with what had been stipulated, and being conscious that
alleged in paragraph 3 of the complaint, and also denied all the other statements they had used, for their own profit and gain, the money that they received
contained therein. apparently as a deposit, they engaged to pay interest to the creditor from the date
named until the time when the refund should be made. Such conduct on the part of
As a counterclaim, the defendants alleged that they had paid to the plaintiff sums the debtors is unquestionable evidence that the transaction entered into between
which, together with the P1,102.16 acknowledged in the complaint, aggregated the the interested parties was not a deposit, but a real contract of loan.
total sum of P5,602.16, and that, deducting therefrom the total sum of P2,686.58
stated in the document transcribed in the complaint, the plaintiff still owed the Article 1767 of the Civil Code provides that —
defendants P2,915.58; therefore, they asked that judgment be entered absolving The depository can not make use of the thing deposited without the express
them, and sentencing the plaintiff to pay them the sum of P2,915.58 with the costs. permission of the depositor.
Otherwise he shall be liable for losses and damages.
Evidence was adduced by both parties and, upon their exhibits, together with an Article 1768 also provides that —
account book having been made of record, the court below rendered judgment on
the 15th of January, 1907, in favor of the plaintiff for the recovery of the sum of When the depository has permission to make use of the thing deposited, the
P5,714.44 and costs. contract loses the character of a deposit and becomes a loan or bailment.
The permission shall not be presumed, and its existence must be proven.
The defendants excepted to the above decision and moved for a new trial. This
motion was overruled and was also excepted to by them; the bill of exceptions When on one of the latter days of January, 1898, Jose Lim went to the office of the
creditor asking for an extension of one year, in view of the fact the money was

Credit Transactions | DEPOSIT AMTL | 14

scare, and because neither himself nor the other defendant were able to return the Moreover, for the reason above set forth it may, as a matter of course, be inferred
amount deposited, for which reason he agreed to pay interest at the rate of 15 per that there was no renewal of the contract deposited converted into a loan, because,
cent per annum, it was because, as a matter of fact, he did not have in his as has already been stated, the defendants received said amount by virtue of real
possession the amount deposited, he having made use of the same in his business loan contract under the name of a deposit, since the so-called bailees were forthwith
and for his own profit; and the creditor, by granting them the extension, evidently authorized to dispose of the amount deposited. This they have done, as has been
confirmed the express permission previously given to use and dispose of the clearly shown.
amount stated as having bee deposited, which, in accordance with the loan, to all
intents and purposes gratuitously, until the 20th of January, 1898, and from that The original joint obligation contracted by the defendant debtor still exists, and it has
dated with interest at 15 per cent per annum until its full payment, deducting from not been shown or proven in the proceedings that the creditor had released Joe Lim
the total amount of interest the sum of 1,000 pesos, in accordance with the from complying with his obligation in order that he should not be sued for or
provisions of article 1173 of the Civil Code. sentenced to pay the amount of capital and interest together with his codebtor,
Ceferino Domingo Lim, because the record offers satisfactory evidence against the
Notwithstanding that it does not appear that Jose Lim signed the document (Exhibit pretension of Jose Lim, and it further appears that document No. 2 was executed by
2) executed in the presence of three witnesses on the 15th of November, 1902, by the other debtor, Ceferino Domingo Lim, for himself and on behalf of Jose Lim; and
Ceferino Domingo Lim on behalf of himself and the former, nevertheless, the said it has also been proven that Jose Lim, being fully aware that his debt had not yet
document has not been contested as false, either by a criminal or by a civil been settled, took steps to secure an extension of the time for payment, and
proceeding, nor has any doubt been cast upon the authenticity of the signatures of consented to pay interest in return for the concession requested from the creditor.
the witnesses who attested the execution of the same; and from the evidence in the
case one is sufficiently convinced that the said Jose Lim was perfectly aware of and
authorized his joint codebtor to liquidate the interest, to pay the sum of 1,000 pesos, In view of the foregoing, and adopting the findings in the judgment appealed from, it
on account thereof, and to execute the aforesaid document No. 2. A true ratification is our opinion that the same should be and is hereby affirmed with the costs of this
of the original document of deposit was thus made, and not the least proof is shown instance against the appellant, provided that the interest agreed upon shall be paid
in the record that Jose Lim had ever paid the whole or any part of the capital stated until the complete liquidation of the debt. So ordered.
in the original document, Exhibit 1.

If the amount, together with interest claimed in the complaint, less 1,000 pesos
appears as fully established, such is not the case with the defendant's counterclaim
for P5,602.16, because the existence and certainty of said indebtedness imputed to
the plaintiff has not been proven, and the defendants, who call themselves creditors
for the said amount have not proven in a satisfactory manner that the plaintiff had
received partial payments on account of the same; the latter alleges with good
reason, that they should produce the receipts which he may have issued, and which
he did issue whenever they paid him any money on account. The plaintiffs
allegation that the two amounts of 400 and 1,200 pesos, referred to in documents
marked "C" and "D" offered in evidence by the defendants, had been received from G.R. No. L-6          November 14, 1901
Ceferino Domingo Lim on account of other debts of his, has not been contradicted, MANUEL GARCIA GAVIERES vs. T.H. PARDO DE TAVERA
and the fact that in the original complaint the sum of 1,102.16 pesos, was expressed
in lieu of 1,000 pesos, the only payment made on account of interest on the amount COOPER, J.:
deposited according to documents No. 2 and letter "B" above referred to, was due The present appeal has been interposed in the declarative action of greater import
to a mistake. filed in the Court of First Instance of Tondo, commenced on January 10, 1900, by
Don Manuel Garcia Gavieres as plaintiff and successor in interest of the deceased

Credit Transactions | DEPOSIT AMTL | 15

Doña Ignacia de Gorricho against Don Trinidad H. Pardo de Tavera as universal declared in said document to be the balance due upon the debt of 2,000 pesos. This
heir of the deceased Don Felix Pardo de Tavera for the collection of a balance of was slightly more or less the amount which remained as due upon the original
1,423 pesos 75 cents, remaining due on an original obligation of 3,000 pesos which, obligation after deducting the payment which are admitted to have been made. In
as the plaintiff alleges, was the amount of a deposit delivered by Doña Ignacia the absence of evidence disclosing that there were other claims in favor of Gavieres
Gorricho, deceased, to Don Felix Pardo de Tavera, deceased, on the 31st day of it is reasonably to be supposed that this payment was made to satisfy the balance
October, 1859. The agreement between the parties appears in the following writing: due upon the original obligation.

Received of Señorita Ignacia de Gorricho the sum of 3,000 pesos, The original contract between the parties was celebrated nearly a half century ago;
gold (3,000 pesos), as a deposit payable on two months' notice in the contracting parties have ceased to exist long since; it may be that there exists or
advance, with interest at 6 per cent per annum with an may have existed documents proving a total payment between the parties and that
hypothecation of the goods now owned by me or which may be this document has some time ago suffered the common fate of perishable things.
owned hereafter, as security of the payment. He who by laches in the exercise of his rights has caused a failure of proof has no
In witness whereof I sign in Binondo, January 31, 1859. right to complain if the court does not apply the strict rules of evidence which are
FELIX PARDO DE TAVERA. applicable in ordinary cases, and admits to a certain extent the presumption to
which the conduct of the interest party himself naturally gives rise.
The defendant answering complaint of plaintiff alleges among other things as a
defense, that the document upon which the complaint is based was not a contract of It is our opinion that the judgment of the Court of First Instance should be affirmed,
deposit as alleged in the complaint, but a contract of loan, and setting forth and it is so ordered, with costs of appeal taxed against the appellant.
furthermore the payment of the original obligation as well as the prescription of the
action. The defendant contends that the document upon which the action is based is
not evidence of a deposit, as the plaintiff maintains, but of a contract of loan, and
that the prescription applicable to loans has extinguished the right of action.
Although in the document in question a deposit is spoken of, nevertheless from an
examination of the entire document it clearly appears that the contract was a loan
and that such was the intention of the parties. It is unnecessary to recur to the
canons of interpretation to arrive at this conclusion. The obligation of the depositary
to pay interest at the rate of 6 per cent to the depositor suffices to cause the
obligation to be considered as a loan and makes it likewise evident that it was the
intention of the parties that the depositary should have the right to make use of the
amount deposited, since it was stimulated that the amount could be collected after
notice of two months in advance. Such being the case, the contract lost the
character of a deposit and acquired that of a loan. (Art. 1768, Civil Code.)

All personal actions, such as those which arise from a contract of loan, cease to G.R. Nos. L-26948 and L-26949             October 8, 1927
have legal effect after twenty years according to the former law and after fifteen SILVESTRA BARON vs.PABLO DAVID and
years according to the Civil Code now in force. The date of the document is January GUILLERMO BARON vs. PABLO DAVID
31, 1859. The proof of payment in support of the defense we consider likewise
sufficient to establish such defense. The document dated January 8, 1869, STREET, J.:
executed by Don Felix Garcia Gavieres, husband and legal representative of Doña These two actions were instituted in the Court of First Instance of the Province of
Ignacia Gorricho, acknowledges the receipt of 1,224 pesos from Don Manuel Pampanga by the respective plaintiffs, Silvestra Baron and Guillermo Baron, for the
Darvin, representative of the deceased Don Felix Pardo de Tavera. This sum is purpose of recovering from the defendant, Pablo David, the value of palay alleged

Credit Transactions | DEPOSIT AMTL | 16

to have been sold by the plaintiffs to the defendant in the year 1920. Owing to the to the defendant was sold to the defendant; while the defendant, on the other hand,
fact that the defendant is the same in both cases and that the two cases depend in claims that the palay was deposited subject to future withdrawal by the depositors or
part upon the same facts, the cases were heard together in the trial court and subject to some future sale which was never effected. He therefore supposes
determined in a single opinion. The same course will accordingly be followed here. himself to be relieved from all responsibility by virtue of the fire of January 17, 1921,
already mentioned.
In the first case, i. e., that which Silvestra Baron is plaintiff, the court gave judgment
for her to recover of the defendant the sum of P5,238.51, with costs. From this The plaintiff further say that their palay was delivered to the defendant at his special
judgment both the plaintiff and the defendant appealed. request, coupled with a promise on his part to pay for the same at the highest price
per cavan at which palay would sell during the year 1920; and they say that in
In the second case, i. e., that in which Guillermo Baron, is plaintiff, the court gave August of that year the defendant promised to pay them severally the price of P8.40
judgment for him to recover of the defendant the sum of P5,734.60, with costs, from per cavan, which was about the top of the market for the season, provided they
which judgment both the plaintiff and the defendant also appealed. In the same would wait for payment until December. The trial judge found that no such promise
case the defendant interposed a counterclaim in which he asked credit for the sum had been given; and the incredulity of the court upon this point seems to us to be
of P2,800 which he had advanced to the plaintiff Guillermo Baron on various justified. A careful examination of the proof, however, leads us to the conclusion that
occasions. This credit was admitted by the plaintiff and allowed by the trial court. the plaintiffs did, some time in the early part of August, 1920, make demand upon
But the defendant also interposed a cross-action against Guillermo Baron in which the defendant for a settlement, which he evaded or postponed leaving the exact
the defendant claimed compensation for damages alleged to have Ben suffered by amount due to the plaintiffs undetermined.
him by reason of the alleged malicious and false statements made by the plaintiff
against the defendant in suing out an attachment against the defendant's property It should be stated that the palay in question was place by the plaintiffs in the
soon after the institution of the action. In the same cross-action the defendant also defendant's mill with the understanding that the defendant was at liberty to convert it
sought compensation for damages incident to the shutting down of the defendant's into rice and dispose of it at his pleasure. The mill was actively running during the
rice mill for the period of one hundred seventy days during which the above- entire season, and as palay was daily coming in from many customers and as rice
mentioned attachment was in force. The trial judge disallowed these claims for was being constantly shipped by the defendant to Manila, or other rice markets, it
damages, and from this feature of the decision the defendant appealed. We are was impossible to keep the plaintiffs' palay segregated. In fact the defendant admits
therefore confronted with five distinct appeals in this record. that the plaintiffs' palay was mixed with that of others. In view of the nature of the
defendant's activities and the way in which the palay was handled in the defendant's
Prior to January 17, 1921, the defendant Pablo David has been engaged in running mill, it is quite certain that all of the plaintiffs' palay, which was put in before June 1,
a rice mill in the municipality of Magalang, in the Province of Pampanga, a mill 1920, been milled and disposed of long prior to the fire of January 17, 1921.
which was well patronized by the rice growers of the vicinity and almost constantly Furthermore, the proof shows that when the fire occurred there could not have been
running. On the date stated a fire occurred that destroyed the mill and its contents, more than about 360 cavans of palay in the mill, none of which by any reasonable
and it was some time before the mill could be rebuilt and put in operation again. probability could have been any part of the palay delivered by the plaintiffs.
Silvestra Baron, the plaintiff in the first of the actions before us, is an aunt of the Considering the fact that the defendant had thus milled and doubtless sold the
defendant; while Guillermo Baron, the plaintiff in the other action; is his uncle. In the plaintiffs' palay prior to the date of the fire, it result that he is bound to account for its
months of March, April, and May, 1920, Silvestra Baron placed a quantity of palay in value, and his liability was not extinguished by the occurence of the fire. In the briefs
the defendant's mill; and this, in connection with some that she took over from before us it seems to have been assumed by the opposing attorneys that in order
Guillermo Baron, amounted to 1,012 cavans and 24 kilos. During approximately the for the plaintiffs to recover, it is necessary that they should be able to establish that
same period Guillermo Baron placed other 1,865 cavans and 43 kilos of palay in the the plaintiffs' palay was delivered in the character of a sale, and that if, on the
mill. No compensation has ever been received by Silvestra Baron upon account of contrary, the defendant should prove that the delivery was made in the character of
the palay delivered by Guillermo Baron, he has received from the defendant deposit, the defendant should be absolved. But the case does not depend precisely
advancements amounting to P2,800; but apart from this he has not been upon this explicit alternative; for even supposing that the palay may have been
compensated. Both the plaintiffs claim that the palay which was delivered by them delivered in the character of deposit, subject to future sale or withdrawal at plaintiffs'

Credit Transactions | DEPOSIT AMTL | 17

election, nevertheless if it was understood that the defendant might mill the palay were many customers of the defendant's rice mill who had placed their palay with
and he has in fact appropriated it to his own use, he is of course bound to account the defendant under the same conditions as the plaintiffs, and nothing can be more
for its value. Under article 1768 of the Civil Code, when the depository has certain than that the palay which was burned did not belong to the plaintiffs. That
permission to make use of the thing deposited, the contract loses the character of palay without a doubt had long been sold and marketed. The assignments of error
mere deposit and becomes a loan or a commodatum; and of course by of each of the plaintiffs-appellants in which this feature of the decision is attacked
appropriating the thing, the bailee becomes responsible for its value. In this are therefore well taken; and the appealed judgments must be modified by
connection we wholly reject the defendant's pretense that the palay delivered by the eliminating the deductions which the trial court allowed from the plaintiffs' claims.
plaintiffs or any part of it was actually consumed in the fire of January, 1921. Nor is
the liability of the defendant in any wise affected by the circumstance that, by a The trial judge also allowed a deduction from the claim of the plaintiff Guillermo
custom prevailing among rice millers in this country, persons placing palay with Baron of 167 cavans of palay, as indicated in Exhibit 12, 13, 14, and 16. This was
them without special agreement as to price are at liberty to withdraw it later, proper also erroneous. These exhibits relate to transactions that occurred nearly two years
allowance being made for storage and shrinkage, a thing that is sometimes done, after the transactions with which we are here concerned, and they were offered in
though rarely. evidence merely to show the character of subsequent transactions between the
parties, it appearing that at the time said exhibits came into existence the defendant
In view of what has been said it becomes necessary to discover the price which the had reconstructed his mill and that business relations with Guillermo Baron had
defendant should be required to pay for the plaintiffs' palay. Upon this point the trial been resumed. The transactions shown by these exhibits (which relate to palay
judge fixed upon P6.15 per cavan; and although we are not exactly in agreement withdrawn by the plaintiff from the defendant's mill) were not made the subject of
with him as to the propriety of the method by which he arrived at this figure, we are controversy in either the complaint or the cross-complaint of the defendant in the
nevertheless of the opinion that, all things considered, the result is approximately second case. They therefore should not have been taken into account as a credit in
correct. It appears that the price of palay during the months of April, May, and June, favor of the defendant. Said credit must therefore be likewise of course be without
1920, had been excessively high in the Philippine Islands and even prior to that prejudice to any proper adjustment of the rights of the parties with respect to these
period the Government of the Philippine Islands had been attempting to hold the subsequent transactions that they have heretofore or may hereafter effect.
price in check by executive regulation. The highest point was touched in this season
was apparently about P8.50 per cavan, but the market began to sag in May or June The preceding discussion disposes of all vital contentions relative to the liability of
and presently entered upon a precipitate decline. As we have already stated, the the defendant upon the causes of action stated in the complaints. We proceed
plaintiffs made demand upon the defendant for settlement in the early part of therefore now to consider the question of the liability of the plaintiff Guillermo Baron
August; and, so far as we are able to judge from the proof, the price of P6.15 per upon the cross-complaint of Pablo David in case R. G. No. 26949. In this cross-
cavan, fixed by the trial court, is about the price at which the defendant should be action the defendant seek, as the stated in the third paragraph of this opinion, to
required to settle as of that date. It was the date of the demand of the plaintiffs for recover damages for the wrongful suing out of an attachment by the plaintiff and the
settlement that determined the price to be paid by the defendant, and this is true levy of the same upon the defendant's rice mill. It appears that about two and one-
whether the palay was delivered in the character of sale with price undetermined or half months after said action was begun, the plaintiff, Guillermo Baron, asked for an
in the character of deposit subject to use by the defendant. It results that the attachment to be issued against the property of the defendant; and to procure the
plaintiffs are respectively entitle to recover the value of the palay which they had issuance of said writ the plaintiff made affidavit to the effect that the defendant was
placed with the defendant during the period referred to, with interest from the date of disposing, or attempting the plaintiff. Upon this affidavit an attachment was issued
the filing of their several complaints. as prayed, and on March 27, 1924, it was levied upon the defendant's rice mill, and
As already stated, the trial court found that at the time of the fire there were about other property, real and personal. 
360 cavans of palay in the mill and that this palay was destroyed. His Honor
assumed that this was part of the palay delivered by the plaintiffs, and he held that Upon attaching the property the sheriff closed the mill and placed it in the care of a
the defendant should be credited with said amount. His Honor therefore deducted deputy. Operations were not resumed until September 13, 1924, when the
from the claims of the plaintiffs their respective proportionate shares of this amount attachment was dissolved by an order of the court and the defendant was permitted
of palay. We are unable to see the propriety of this feature of the decision. There to resume control. At the time the attachment was levied there were, in the bodega,

Credit Transactions | DEPOSIT AMTL | 18

more than 20,000 cavans of palay belonging to persons who held receipts therefor; But this is not all. When the attachment was dissolved and the mill again opened,
and in order to get this grain away from the sheriff, twenty-four of the depositors the defendant found that his customers had become scattered and could not be
found it necessary to submit third-party claims to the sheriff. When these claims easily gotten back. So slow, indeed, was his patronage in returning that during the
were put in the sheriff notified the plaintiff that a bond in the amount of P50,000 remainder of the year 1924 the defendant was able to mill scarcely more than the
must be given, otherwise the grain would be released. The plaintiff, being unable or grain belonging to himself and his brothers; and even after the next season opened
unwilling to give this bond, the sheriff surrendered the palay to the claimants; but the many of his old customers did not return. Several of these individuals, testifying as
attachment on the rice mill was maintained until September 13, as above stated, witnesses in this case, stated that, owing to the unpleasant experience which they
covering a period of one hundred seventy days during which the mill was idle. The had in getting back their grain from the sheriff to the mill of the defendant, though
ground upon which the attachment was based, as set forth in the plaintiff's affidavit they had previously had much confidence in him.
was that the defendant was disposing or attempting to dispose of his property for
the purpose of defrauding the plaintiff. That this allegation was false is clearly As against the defendant's proof showing the facts above stated the plaintiff
apparent, and not a word of proof has been submitted in support of the assertion. submitted no evidence whatever. We are therefore constrained to hold that the
On the contrary, the defendant testified that at the time this attachment was secured defendant was damaged by the attachment to the extent of P5,600, in profits lost by
he was solvent and could have paid his indebtedness to the plaintiff if judgment had the closure of the mill, and to the extent of P1,400 for injury to the good-will of his
been rendered against him in ordinary course. His financial conditions was of business, making a total of P7,000. For this amount the defendant must recover
course well known to the plaintiff, who is his uncle. The defendant also states that judgment on his cross-complaint.
he had not conveyed away any of his property, nor had intended to do so, for the
purpose of defrauding the plaintiff. We have before us therefore a case of a The trial court, in dismissing the defendant's cross-complaint for damages resulting
baseless attachment, recklessly sued out upon a false affidavit and levied upon the from the wrongful suing out of the attachment, suggested that the closure of the rice
defendant's property to his great and needless damage. That the act of the plaintiff mill was a mere act of the sheriff for which the plaintiff was not responsible and that
in suing out the writ was wholly unjustifiable is perhaps also indicated in the the defendant might have been permitted by the sheriff to continue running the mill if
circumstance that the attachment was finally dissolved upon the motion of the he had applied to the sheriff for permission to operate it. This singular suggestion
plaintiff himself. will not bear a moment's criticism. It was of course the duty of the sheriff, in levying
the attachment, to take the attached property into his possession, and the closure of
The defendant testified that his mill was accustomed to clean from 400 to 450 the mill was a natural, and even necessary, consequence of the attachment. For the
cavans of palay per day, producing 225 cavans of rice of 57 kilos each. The price damage thus inflicted upon the defendant the plaintiff is undoubtedly responsible.
charged for cleaning each cavan rice was 30 centavos. The defendant also stated
that the expense of running the mill per day was from P18 to P25, and that the net One feature of the cross-complaint consist in the claim of the defendant (cross-
profit per day on the mill was more than P40. As the mill was not accustomed to run complaint) for the sum of P20,000 as damages caused to the defendant by the false
on Sundays and holiday, we estimate that the defendant lost the profit that would and alleged malicious statements contained in the affidavit upon which the
have been earned on not less than one hundred forty work days. Figuring his profits attachment was procured. The additional sum of P5,000 is also claimed as
at P40 per day, which would appear to be a conservative estimate, the actual net exemplary damages. It is clear that with respect to these damages the cross-action
loss resulting from his failure to operate the mill during the time stated could not cannot be maintained, for the reason that the affidavit in question was used in
have been less than P5,600. The reasonableness of these figures is also indicated course of a legal proceeding for the purpose of obtaining a legal remedy, and it is
in the fact that the twenty-four customers who intervened with third-party claims took therefore privileged. But though the affidavit is not actionable as a libelous
out of the camarin 20,000 cavans of palay, practically all of which, in the ordinary publication, this fact in no obstacle to the maintenance of an action to recover the
course of events, would have been milled in this plant by the defendant. And of damage resulting from the levy of the attachment.
course other grain would have found its way to this mill if it had remained open
during the one hundred forty days when it was closed. Before closing this opinion a word should be said upon the point raised in the first
assignment of error of Pablo David as defendant in case R. G. No. 26949. In this
connection it appears that the deposition of Guillermo Baron was presented in court

Credit Transactions | DEPOSIT AMTL | 19

as evidence and was admitted as an exhibit, without being actually read to the hire for the plaintiffs and at their own risk, and that the mill was burned down, and
court. It is supposed in the assignment of error now under consideration that the that at the time of the fire, plaintiffs' palay was in the mill. The lower court found as a
deposition is not available as evidence to the plaintiff because it was not actually fact that there was no merit in that defense, and that there was but little, if any,
read out in court. This connection is not well founded. It is true that in section 364 of palay in the mill at the time of the fire and that in truth and in fact that defense was
the Code of Civil Procedure it is said that a deposition, once taken, may be read by based upon perjured testimony.
either party and will then be deemed the evidence of the party reading it. The use of
the word "read" in this section finds its explanation of course in the American The two cases were tried separately in the court below, but all of the evidence in the
practice of trying cases for the most part before juries. When a case is thus tried the case was substituted and used in the other. Both plaintiffs testified to the making of
actual reading of the deposition is necessary in order that the jurymen may become the respective contracts as alleged in their complaint; to wit, that they delivered the
acquainted with its contents. But in courts of equity, and in all courts where judges palay to the defendant with the express understanding and agreement that he would
have the evidence before them for perusal at their pleasure, it is not necessary that pay them for the palay the highest market price for the season, and to the making of
the deposition should be actually read when presented as evidence. the second contract about the first of August, in which they had a settlement, and
that the defendant then agreed to pay them P8.40 per cavan, such payment to be
From what has been said it result that judgment of the court below must be modified made on December first. It appears that the highest market price for palay for that
with respect to the amounts recoverable by the respective plaintiffs in the two season was P8.50 per cavan. The defendant denied the making of either one of
actions R. G. Nos. 26948 and 26949 and must be reversed in respect to the those contracts, and offered no other evidence on that question. That is to say, we
disposition of the cross-complaint interposed by the defendant in case R. G. No. have the evidence of both Silvestra Baron and Guillermo Baron to the making of
26949, with the following result: In case R. G. No. 26948 the plaintiff Silvestra Baron those contracts, which is denied by the defendant only. Plaintiffs' evidence is also
will recover of the Pablo David the sum of P6,227.24, with interest from November corroborated by the usual and customary manner in which the growers sell their
21, 1923, the date of the filing of her complaint, and with costs. In case R. G. No. palay. That is to say, it is their custom to sell the palay at or about the time it is
26949 the plaintiff Guillermo Baron will recover of the defendant Pablo David the delivered at the mill and as soon as it is made ready for market in the form of rice.
sum of P8,669.75, with interest from January 9, 1924. In the same case the As stated the lower court found as a fact that the evidence of the defendants as to
defendant Pablo David, as plaintiff in the cross-complaint, will recover of Guillermo plaintiffs' palay being in the mill at the time of the fire was not worthy of belief, and
Baron the sum of P7,000, without costs. So ordered. that in legal effect it was a manufactured defense. Yet, strange as it may seem, both
the lower court and this court have found as a fact that upon the question of the
Separate Opinions alleged contracts, the evidence for the defendant is true and entitled to more weight
JOHNS, J., dissenting and concurring: than the evidence of both plaintiffs which is false.
The plaintiff Silvestra Baron is the aunt of the defendant, and Guillermo Baron, the
plaintiff in the other action, is his uncle. There is no dispute as to the amount of It appears that the plaintiff Silvestra Baron is an old lady about 80 years of age and
palay which each delivered to the mill of the defendant. Owing to the fact that they the aunt of the defendant, and Guillermo Baron is the uncle. Under the theory of the
were relatives and that the plaintiffs reposed special reposed special trust and lower court and of this court, both of them at all the time during the high prices held
confidence in the defendant, who was their nephew, they were not as careful and their palay in defendant's mill at their own risk, and that upon that point the evidence
prudent in their business dealings with him as they should have been. Plaintiffs of the defendant, standing alone is entitled to more weight and is more convincing
allege that their respective palay was delivered to the defendant at his mill with the than the combined evidence of the two plaintiffs. In the very nature of things, if
understanding and agreement between them that they should receive the highest defendant's evidence upon that point is true, it stands to reason that, following the
market price for the palay for that season, which was P8.50 per cavan. They further custom of growers, the plaintiffs would have sold their palay during the period of
allege that about August first they made another contract in and by which he high prices, and would not have waited until it dropped from P8.50 per cavan to
promised and agreed to pay them P8.40 per cavan for their palay, in consideration P6.15 per cavan about the first of August. Upon that question, both the weight and
of which they agreed to extend the time for payment to the first of December of that the credibility of the evidence is with the plaintiffs, and they should have judgment
year. The amount of palay is not in dispute, and the defendant admits that it was for the full amount of their palay on the basis of P8.40 per cavan. For such reason, I
delivered to his mill, but he claims that he kept it on deposit and as bailee without vigorously dissent from the majority opinion.

Credit Transactions | DEPOSIT AMTL | 20

I frankly concede that the attachment was wrongful, and that it should never have
been levied. It remained in force for a period of one hundred and seventy days at
which time it was released on motion of the plaintiffs. The defendant now claims,
and the majority opinion has allowed him, damages for that full period, exclusive of
Sundays, at the rate, of P40 per day, found to be the net profit for the operation of
the rice mill. It further appears, and this court finds, that the defendant was a
responsible man, and that he had ample property out which to satisfy plaintiffs'
claim. Assuming that to be true, there was no valid reason why he could not had
given a counter bond and released the attachment. Upon the theory of the majority
opinion, if the plaintiffs had not released the attachment, they would still be liable to
the defendant at the rate of P40 per day up to the present time. When the mill was
attached, if he was in a position to do so, it was the duty of the defendant to give a
counter bond and release the attachment and resume its operation. The majority
opinion also allowed the defendant P1,400 "for injury to the goodwill of his
business." The very fact that after a delay of about four years, both of the plaintiffs
were compelled to bring to their respective actions against the defendant to recover
from him on a just and meritorious claim, as found by this court and the lower court,
and the further fact that after such long delay, the defendant has sought to defeat
the actions by a sham and manufactured defense, as found by this and the lower
court, would arouse the suspicion of any customers the defendant ever had, and
shake their confidence in his business honor and integrity, and destroy any goodwill
which he ever did have. Under such conditions, it would be strange that the
defendant would have any customers left. He is not entitled to any compensation for
the loss of goodwill, and P5,000 should be the very limit of the amount of his
damages for the wrongful attachment, and upon that point I vigorously dissent. In all
other respects, I agree with the majority opinion.

Credit Transactions | DEPOSIT AMTL | 21

 G.R. No. L-7593            March 27, 1913 on commission closed, leaving the collection of said sum until later, which sum
THE UNITED STATES vs JOSE M. IGPUARA remained as a loan payable upon presentation of the receipt." (Brief, 3 and 4.)
Then, after averring the true facts: (1) that a sales commission was precedent; (2)
ARELLANO, C.J.: that this commission was settled with a balance of P2,498 in favor of the principal,
The defendant therein is charged with the crime of estafa, for having swindled Juana Montilla; and (3) that this balance remained in the possession of the
Juana Montilla and Eugenio Veraguth out of P2,498 Philippine currency, which he defendant, who drew up an instrument payable on demand, he has drawn two
had take on deposit from the former to be at the latter's disposal. The document conclusions, both erroneous: One, that the instrument drawn up in the form of
setting forth the obligation reads: a deposit certificate could be indorsed or negotiated like any other commercial
instrument; and the other, that the sum of P2,498 remained in defendant's
We hold at the disposal of Eugenio Veraguth the sum of two thousand four hundred possession as a loan.
and ninety-eight pesos (P2,498), the balance from Juana Montilla's sugar. — Iloilo,
June 26, 1911, — Jose Igpuara, for Ramirez and Co. It is erroneous to assert that the certificate of deposit in question is negotiable like
any other commercial instrument: First, because every commercial instrument is not
The Court of First Instance of Iloilo sentenced the defendant to two years of presidio negotiable; and second, because only instruments payable to order are negotiable.
correccional, to pay Juana Montilla P2,498 Philippine currency, and in case of Hence, this instrument not being to order but to bearer, it is not negotiable.
insolvency to subsidiary imprisonment at P2.50 per day, not to exceed one-third of
the principal penalty, and the costs. It is also erroneous to assert that sum of money set forth in said certificate is,
according to it, in the defendant's possession as a loan. In a loan the lender
The defendant appealed, alleging as errors: (1) Holding that the document executed transmits to the borrower the use of the thing lent, while in a deposit the use of the
by him was a certificate of deposit; (2) holding the existence of a deposit, without thing is not transmitted, but merely possession for its custody or safe-keeping.
precedent transfer or delivery of the P2,498; and (3) classifying the facts in the case
as the crime of estafa. In order that the depositary may use or dispose oft he things deposited, the
depositor's consent is required, and then:
A deposit is constituted from the time a person receives a thing belonging to
another with the obligation of keeping and returning it. (Art. 1758, Civil The rights and obligations of the depositary and of the depositor shall cease,
Code.) and the rules and provisions applicable to commercial loans, commission, or
contract which took the place of the deposit shall be observed. (Art. 309,
That the defendant received P2,498 is a fact proven. The defendant drew up a Code of Commerce.)
document declaring that they remained in his possession, which he could not have
said had he not received them. They remained in his possession, surely in no other The defendant has shown no authorization whatsoever or the consent of the
sense than to take care of them, for they remained has no other purpose. They depositary for using or disposing of the P2,498, which the certificate acknowledges,
remained in the defendant's possession at the disposal of Veraguth; but on August or any contract entered into with the depositor to convert the deposit into a loan,
23 of the same year Veraguth demanded for him through a notarial instrument commission, or other contract.
restitution of them, and to date he has not restored them.
That demand was not made for restitution of the sum deposited, which could have
The appellant says: "Juana Montilla's agent voluntarily accepted the sum of P2,498 been claimed on the same or the next day after the certificate was signed, does not
in an instrument payable on demand, and as no attempt was made to cash it until operate against the depositor, or signify anything except the intention not to press it.
August 23, 1911, he could indorse and negotiate it like any other commercial Failure to claim at once or delay for sometime in demanding restitution of the things
instrument. There is no doubt that if Veraguth accepted the receipt for P2,498 it was deposited, which was immediately due, does not imply such permission to use the
because at that time he agreed with the defendant to consider the operation of sale thing deposited as would convert the deposit into a loan.

Credit Transactions | DEPOSIT AMTL | 22

Article 408 of the Code of Commerce of 1829, previous to the one now in force,
provided: On the contrary, it is entirely probable that, after the departure of the
The depositary of an amount of money cannot use the amount, and if he defendant from Libmanan on September 20, 1898, two days after the
makes use of it, he shall be responsible for all damages that may accrue and uprising of the civil guard in Nueva Caceres, the rice was seized by the
shall respond to the depositor for the legal interest on the amount. revolutionalists and appropriated to their own uses.

Whereupon the commentators say: In this connection it was held that failure to return the thing deposited was not
In this case the deposit becomes in fact a loan, as a just punishment sufficient, but that it was necessary to prove that the depositary had appropriated it
imposed upon him who abuses the sacred nature of a deposit and as a to himself or diverted the deposit to his own or another's benefit. He was accused or
means of preventing the desire of gain from leading him into speculations refusing to restore, and it was held that the code does not penalize refusal to restore
that may be disastrous to the depositor, who is much better secured while but denial of having received. So much for the crime of omission; now with
the deposit exists when he only has a personal action for recovery. reference to the crime of commission, it was not held in that decision that
appropriation or diversion of the thing deposited would not constitute the crime
According to article 548, No. 5, of the Penal Code, those who to the of estafa.
prejudice of another appropriate or abstract for their own use money, goods,
or other personal property which they may have received as a deposit, on In the second of said decisions, the accused "kept none of the proceeds of the
commission, or for administration, or for any other purpose which produces sales. Those, such as they were, he turned over to the owner;" and there being no
the obligation of delivering it or returning it, and deny having received it, shall proof of the appropriation, the agent could not be found guilty of the crime of estafa.
suffer the penalty of the preceding article," which punishes such act as the
crime of estafa. The corresponding article of the Penal Code of the Being in accord and the merits of the case, the judgment appealed from is affirmed,
Philippines in 535, No. 5. with costs.

In a decision of an appeal, September 28, 1895, the principle was laid down that:
"Since he commits the crime of estafa under article 548 of the Penal Code of Spain
who to another's detriment appropriates to himself or abstracts money or goods
received on commission for delivery, the court rightly applied this article to the
appellant, who, to the manifest detriment of the owner or owners of the securities,
since he has not restored them, willfully and wrongfully disposed of them by
appropriating them to himself or at least diverting them from the purpose to which
he was charged to devote them."

It is unquestionable that in no sense did the P2,498 which he willfully and wrongfully
disposed of to the detriments of his principal, Juana Montilla, and of the depositor,
Eugenio Veraguth, belong to the defendant.

Likewise erroneous is the construction apparently at tempted to be given to two

decisions of this Supreme Court (U. S. vs. Dominguez, 2 Phil. Rep., 580, and U.
S. vs. Morales and Morco, 15 Phil. Rep., 236) as implying that what
constitutes estafa is not the disposal of money deposited, but denial of having
received same. In the first of said cases there was no evidence that the defendant
had appropriated the grain deposited in his possession.

Credit Transactions | DEPOSIT AMTL | 23

 G.R. No. 179419 the P1,163,250.00 money claim of See and mortgagee ABN AMRO
DURBAN APARTMENTS CORPORATION, doing business under the name and Savings Bank, Inc. as indemnity for the loss of the Vitara; the Vitara
style of City Garden Hotel vs PIONEER INSURANCE AND SURETY was lost due to the negligence of [petitioner] Durban Apartments and
CORPORATION [defendant] Justimbaste because it was discovered during the
investigation that this was the second time that a similar incident of
NACHURA, J.: carnapping happened in the valet parking service of [petitioner]
For review is the Decision [1] of the Court of Appeals (CA) in CA-G.R. CV No. 86869, Durban Apartments and no necessary precautions were taken to
which affirmed the decision [2] of the Regional Trial Court (RTC), Branch 66, Makati prevent its repetition; [petitioner] Durban Apartments was wanting in
City, in Civil Case No. 03-857, holding petitioner Durban Apartments Corporation due diligence in the selection and supervision of its employees
solely liable to respondent Pioneer Insurance and Surety Corporation for the loss of particularly defendant x x x Justimbaste; and defendant x x x
Jeffrey Sees (Sees) vehicle. Justimbaste and [petitioner] Durban Apartments failed and refused to
  pay its valid, just, and lawful claim despite written demands.
The facts, as found by the CA, are simple.  
  Upon service of Summons, [petitioner] Durban Apartments and
On July 22, 2003, [respondent] Pioneer Insurance and Surety [defendant] Justimbaste filed their Answer with Compulsory
Corporation x x x, by right of subrogation, filed [with the RTC of Counterclaim alleging that: See did not check in at its hotel, on the
Makati City] a Complaint for Recovery of Damages against contrary, he was a guest of a certain Ching Montero x x x; defendant
[petitioner] Durban Apartments Corporation, doing business under x x x Justimbaste did not get the ignition key of Sees Vitara, on the
the name and style of City Garden Hotel, and [defendant before the contrary, it was See who requested a parking attendant to park the
RTC] Vicente Justimbaste x x x. [Respondent averred] that: it is the Vitara at any available parking space, and it was parked at the
insurer for loss and damage of Jeffrey S. Sees [the insureds] 2001 Equitable Bank parking area, which was within Sees view, while he
Suzuki Grand Vitara x x x with Plate No. XBH-510 under Policy No. and Montero were waiting in front of the hotel; they made a written
MC-CV-HO-01-0003846-00-D in the amount of P1,175,000.00; on denial of the demand of [respondent] Pioneer Insurance for want of
April 30, 2002, See arrived and checked in at the City Garden Hotel legal basis; valet parking services are provided by the hotel for the
in Makati corner Kalayaan Avenues, Makati City before midnight, and convenience of its customers looking for a parking space near the
its parking attendant, defendant x x x Justimbaste got the key to said hotel premises; it is a special privilege that it gave to Montero and
Vitara from See to park it[. O]n May 1, 2002, at about 1:00 oclock in See; it does not include responsibility for any losses or damages to
the morning, See was awakened in his room by [a] telephone call motor vehicles and its accessories in the parking area; and the same
from the Hotel Chief Security Officer who informed him that his Vitara holds true even if it was See himself who parked his Vitara within the
was carnapped while it was parked unattended at the parking area of premises of the hotel as evidenced by the valet parking customers
Equitable PCI Bank along Makati Avenue between the hours of 12:00 claim stub issued to him; the carnapper was able to open the Vitara
[a.m.] and 1:00 [a.m.]; See went to see the Hotel Chief Security without using the key given earlier to the parking attendant and
Officer, thereafter reported the incident to the Operations Division of subsequently turned over to See after the Vitara was stolen;
the Makati City Police Anti-Carnapping Unit, and a flash alarm was defendant x x x Justimbaste saw the Vitara speeding away from the
issued; the Makati City Police Anti-Carnapping Unit investigated place where it was parked; he tried to run after it, and blocked its
Hotel Security Officer, Ernesto T. Horlador, Jr. x x x and defendant x possible path but to no avail; and See was duly and immediately
x x Justimbaste; See gave his Sinumpaang Salaysay to the police informed of the carnapping of his Vitara; the matter was reported to
investigator, and filed a Complaint Sheet with the PNP Traffic the nearest police precinct; and defendant x x x Justimbaste, and
Management Group in Camp Crame, Quezon City; the Vitara has not Horlador submitted themselves to police investigation.
yet been recovered since July 23, 2002 as evidenced by a  
Certification of Non- Recovery issued by the PNP TMG; it paid

Credit Transactions | DEPOSIT AMTL | 24

 During the pre-trial conference on November 28, 2003, counsel for inspection of damages, taking of pictures of insured unit, and
[respondent] Pioneer Insurance was present. Atty. Monina Lee x x x, monitoring of the processing of the claim until its payment; he
counsel of record of [petitioner] Durban Apartments and Justimbaste monitored the processing of Sees claim when the latter reported the
was absent, instead, a certain Atty. Nestor Mejia appeared for incident to [respondent] Pioneer Insurance; [respondent] Pioneer
[petitioner] Durban Apartments and Justimbaste, but did not file their Insurance assigned the case to Vesper who verified Sees report,
pre-trial brief. conducted an investigation, obtained the necessary documents for
  the processing of the claim, and tendered a settlement check to See;
On November 5, 2004, the lower court granted the motion of they evaluated the case upon receipt of the subrogation documents
[respondent] Pioneer Insurance, despite the opposition of [petitioner] and the adjusters report, and eventually recommended for its
Durban Apartments and Justimbaste, and allowed [respondent] settlement for the sum of P1,163,250.00 which was accepted by See;
Pioneer Insurance to present its evidence ex parte before the Branch the matter was referred and forwarded to their counsel, R.B. Sarajan
Clerk of Court. & Associates, who prepared and sent demand letters to [petitioner]
  Durban Apartments and [defendant] Justimbaste, who did not pay
See testified that: on April 30, 2002, at about 11:30 in the evening, he [respondent] Pioneer Insurance notwithstanding their receipt of the
drove his Vitara and stopped in front of City Garden Hotel in Makati demand letters; and the services of R.B. Sarajan & Associates were
Avenue, Makati City; a parking attendant, whom he had later known engaged, for P100,000.00 as attorneys fees plus P3,000.00 per court
to be defendant x x x Justimbaste, approached and asked for his appearance, to prosecute the claims of [respondent] Pioneer
ignition key, told him that the latter would park the Vitara for him in Insurance against [petitioner] Durban Apartments and Justimbaste
front of the hotel, and issued him a valet parking customers claim before the lower court.
stub; he and Montero, thereafter, checked in at the said hotel; on  
May 1, 2002, at around 1:00 in the morning, the Hotel Security Ferdinand Cacnio testified that: he is an adjuster of Vesper;
Officer whom he later knew to be Horlador called his attention to the [respondent] Pioneer Insurance assigned to Vesper the investigation
fact that his Vitara was carnapped while it was parked at the parking of Sees case, and he was the one actually assigned to investigate it;
lot of Equitable PCI Bank which is in front of the hotel; his Vitara was he conducted his investigation of the matter by interviewing See,
insured with [respondent] Pioneer Insurance; he together with going to the City Garden Hotel, required subrogation documents from
Horlador and defendant x x x Justimbaste went to Precinct 19 of the See, and verified the authenticity of the same; he learned that it is the
Makati City Police to report the carnapping incident, and a police standard procedure of the said hotel as regards its valet parking
officer came accompanied them to the Anti-Carnapping Unit of the service to assist their guests as soon as they get to the lobby
said station for investigation, taking of their sworn statements, and entrance, park the cars for their guests, and place the ignition keys in
flashing of a voice alarm; he likewise reported the said incident in their safety key box; considering that the hotel has only twelve (12)
PNP TMG in Camp Crame where another alarm was issued; he filed available parking slots, it has an agreement with Equitable PCI Bank
his claim with [respondent] Pioneer Insurance, and a representative permitting the hotel to use the parking space of the bank at night; he
of the latter, who is also an adjuster of Vesper Insurance Adjusters- also learned that a Hyundai Starex van was carnapped at the said
Appraisers [Vesper], investigated the incident; and [respondent] place barely a month before the occurrence of this incident because
Pioneer Insurance required him to sign a Release of Claim and Liberty Insurance assigned the said incident to Vespers, and
Subrogation Receipt, and finally paid him the sum of P1,163,250.00 Horlador and defendant x x x Justimbaste admitted the occurrence of
for his claim. the same in their sworn statements before the Anti-Carnapping Unit
  of the Makati City Police; upon verification with the PNP TMG [Unit]
Ricardo F. Red testified that: he is a claims evaluator of [petitioner] in Camp Crame, he learned that Sees Vitara has not yet been
Pioneer Insurance tasked, among others, with the receipt of claims recovered; upon evaluation, Vesper recommended to [respondent]
and documents from the insured, investigation of the said claim, Pioneer Insurance to settle Sees claim for P1,045,750.00; See

Credit Transactions | DEPOSIT AMTL | 25

 contested the recommendation of Vesper by reasoning out that the 1. Whether the lower courts erred in declaring petitioner as in default for failure to
10% depreciation should not be applied in this case considering the appear at the pre-trial conference and to file a pre-trial brief;
fact that the Vitara was used for barely eight (8) months prior to its  
loss; and [respondent] Pioneer Insurance acceded to Sees 2. Corollary thereto, whether the trial court correctly allowed respondent to present
contention, tendered the sum of P1,163,250.00 as settlement, the evidence ex-parte;
former accepted it, and signed a release of claim and subrogation  
receipt. 3. Whether petitioner is liable to respondent for attorneys fees in the amount
  of P120,000.00; and
The lower court denied the Motion to Admit Pre-Trial Brief and  
Motion for Reconsideration field by [petitioner] Durban Apartments 4. Ultimately, whether petitioner is liable to respondent for the loss of Sees vehicle.
and Justimbaste in its Orders dated May 4, 2005 and October 20,  
2005, respectively, for being devoid of merit.[3] The petition must fail.
   
  We are in complete accord with the common ruling of the lower courts that petitioner
Thereafter, on January 27, 2006, the RTC rendered a decision, disposing, as was in default for failure to appear at the pre-trial conference and to file a pre-trial
follows: brief, and thus, correctly allowed respondent to present evidence ex-parte. Likewise,
  the lower courts did not err in holding petitioner liable for the loss of Sees vehicle.
WHEREFORE, judgment is hereby rendered ordering [petitioner  
Durban Apartments Corporation] to pay [respondent Pioneer Well-entrenched in jurisprudence is the rule that factual findings of the trial court,
Insurance and Surety Corporation] the sum of P1,163,250.00 with especially when affirmed by the appellate court, are accorded the highest degree of
legal interest thereon from July 22, 2003 until the obligation is fully respect and are considered conclusive between the parties.[6] A review of such
paid and attorneys fees and litigation expenses amounting findings by this Court is not warranted except upon a showing of highly meritorious
to P120,000.00. circumstances, such as: (1) when the findings of a trial court are grounded entirely
  on speculation, surmises, or conjectures; (2) when a lower courts inference from its
SO ORDERED.[4] factual findings is manifestly mistaken, absurd, or impossible; (3) when there is
  grave abuse of discretion in the appreciation of facts; (4) when the findings of the
On appeal, the appellate court affirmed the decision of the trial court, viz.: appellate court go beyond the issues of the case, or fail to notice certain relevant
  facts which, if properly considered, will justify a different conclusion; (5) when there
WHEREFORE, premises considered, the Decision dated January 27, is a misappreciation of facts; (6) when the findings of fact are conclusions without
2006 of the RTC, Branch 66, Makati City in Civil Case No. 03-857 is mention of the specific evidence on which they are based, are premised on the
hereby AFFIRMED insofar as it holds [petitioner] Durban Apartments absence of evidence, or are contradicted by evidence on record. [7]None of the
Corporation solely liable to [respondent] Pioneer Insurance and foregoing exceptions permitting a reversal of the assailed decision exists in this
Surety Corporation for the loss of Jeffrey Sees Suzuki Grand Vitara. instance.
   
SO ORDERED.[5] Petitioner urges us, however, that strong [and] compelling reason[s] such as the
  prevention of miscarriage of justice warrant a suspension of the rules and excuse its
Hence, this recourse by petitioner. and its counsels non-appearance during the pre-trial conference and their failure to
  file a pre-trial brief.
The issues for our resolution are:  
  We are not persuaded.
 

Credit Transactions | DEPOSIT AMTL | 26

Rule 18 of the Rules of Court leaves no room for equivocation; appearance of discussed which lawyer would appear at the pre-trial conference with petitioner,
parties and their counsel at the pre-trial conference, along with the filing of a armed with the appropriate authority therefor. Sadly, petitioner failed to comply with
corresponding pre-trial brief, is mandatory, nay, their duty. Thus, Section 4 and not just one rule; it also did not proffer a reason why it likewise failed to file a pre-
Section 6 thereof provide: trial brief. In all, petitioner has not shown any persuasive reason why it should be
  exempt from abiding by the rules.
SEC. 4. Appearance of parties.It shall be the duty of the parties and  
their counsel to appear at the pre-trial. The non-appearance of a The appearance of Atty. Mejia at the pre-trial conference, without a pre-trial brief
party may be excused only if a valid cause is shown therefor or if a and with only his bare allegation that he is counsel for petitioner, was correctly
representative shall appear in his behalf fully authorized in writing to rejected by the trial court. Accordingly, the trial court, as affirmed by the appellate
enter into an amicable settlement, to submit to alternative modes of court, did not err in allowing respondent to present evidence ex-parte.
dispute resolution, and to enter into stipulations or admissions of  
facts and documents. Former Chief Justice Andres R. Narvasas words continue to resonate, thus:
   
SEC. 6. Pre-trial brief.The parties shall file with the court and serve Everyone knows that a pre-trial in civil actions is mandatory, and has
on the adverse party, in such manner as shall ensure their receipt been so since January 1, 1964. Yet to this day its place in the
thereof at least three (3) days before the date of the pre-trial, their scheme of things is not fully appreciated, and it receives but
respective pre-trial briefs which shall contain, among others: perfunctory treatment in many courts. Some courts consider it a mere
  technicality, serving no useful purpose save perhaps, occasionally to
xxxx furnish ground for non-suiting the plaintiff, or declaring a defendant in
  default, or, wistfully, to bring about a compromise. The pre-trial
Failure to file the pre-trial brief shall have the same effect as failure to device is not thus put to full use. Hence, it has failed in the main to
appear at the pre-trial. accomplish the chief objective for it: the simplification, abbreviation
  and expedition of the trial, if not indeed its dispensation. This is a
Contrary to the foregoing rules, petitioner and its counsel of record were not present great pity, because the objective is attainable, and with not much
at the scheduled pre-trial conference. Worse, they did not file a pre-trial brief. Their difficulty, if the device were more intelligently and extensively
non-appearance cannot be excused as Section 4, in relation to Section 6, allows handled.
only two exceptions: (1) a valid excuse; and (2) appearance of a representative on  
behalf of a party who is fully authorized in writing to enter into an amicable xxxx
settlement, to submit to alternative modes of dispute resolution, and to enter into  
stipulations or admissions of facts and documents. Consistently with the mandatory character of the pre-trial, the
  Rules oblige not only the lawyers but the parties as well to appear for
Petitioner is adamant and harps on the fact that November 28, 2003 was merely the this purpose before the Court, and when a party fails to appear at a
first scheduled date for the pre-trial conference, and a certain Atty. Mejia appeared pre-trial conference (he) may be non-suited or considered as in
on its behalf. However, its assertion is belied by its own admission that, on said default. The obligation to appear denotes not simply the personal
date, this Atty. Mejia did not have in his possession the Special Power of Attorney appearance, or the mere physical presentation by a party of ones
issued by petitioners Board of Directors. self, but connotes as importantly, preparedness to go into the
  different subject assigned by law to a pre-trial. And in those instances
As pointed out by the CA, petitioner, through Atty. Lee, received the notice of pre- where a party may not himself be present at the pre-trial, and another
trial on October 27, 2003, thirty-two (32) days prior to the scheduled conference. In person substitutes for him, or his lawyer undertakes to appear not
that span of time, Atty. Lee, who was charged with the duty of notifying petitioner of only as an attorney but in substitution of the clients person, it is
the scheduled pre-trial conference,[8] petitioner, and Atty. Mejia should have imperative for that representative of the lawyer to have special

Credit Transactions | DEPOSIT AMTL | 27

 authority to make such substantive agreements as only the client  
otherwise has capacity to make. That special authority should Art. 1998. The deposit of effects made by travelers in hotels or inns
ordinarily be in writing or at the very least be duly established by shall also be regarded as necessary. The keepers of hotels or inns
evidence other than the self-serving assertion of counsel (or the shall be responsible for them as depositaries, provided that notice
proclaimed representative) himself. Without that special authority, the was given to them, or to their employees, of the effects brought by
lawyer or representative cannot be deemed capacitated to appear in the guests and that, on the part of the latter, they take the
place of the party; hence, it will be considered that the latter has precautions which said hotel-keepers or their substitutes advised
failed to put in an appearance at all, and he [must] therefore be non- relative to the care and vigilance of their effects.
suited or considered as in default, notwithstanding his lawyers or  
delegates presence.[9]  
  Plainly, from the facts found by the lower courts, the insured See deposited his
  vehicle for safekeeping with petitioner, through the latters employee, Justimbaste. In
We are not unmindful that defendants (petitioners) preclusion from presenting turn, Justimbaste issued a claim stub to See. Thus, the contract of deposit was
evidence during trial does not automatically result in a judgment in favor of plaintiff perfected from Sees delivery, when he handed over to Justimbaste the keys to his
(respondent). The plaintiff must still substantiate the allegations in its complaint. vehicle, which Justimbaste received with the obligation of safely keeping and
[10]
 Otherwise, it would be inutile to continue with the plaintiffs presentation of returning it. Ultimately, petitioner is liable for the loss of Sees vehicle.
evidence each time the defendant is declared in default.  
  Lastly, petitioner assails the lower courts award of attorneys fees to
In this case, respondent substantiated the allegations in its complaint, i.e., a respondent in the amount of P120,000.00. Petitioner claims that the award is not
contract of necessary deposit existed between the insured See and petitioner. On substantiated by the evidence on record.
this score, we find no error in the following disquisition of the appellate court:  
  We disagree.
[The] records also reveal that upon arrival at the City Garden Hotel,  
See gave notice to the doorman and parking attendant of the said While it is a sound policy not to set a premium on the right to litigate, [12] we
hotel, x x x Justimbaste, about his Vitara when he entrusted its find that respondent is entitled to reasonable attorneys fees. Attorneys fees may be
ignition key to the latter. x x x Justimbaste issued a valet parking awarded when a party is compelled to litigate or incur expenses to protect its
customer claim stub to See, parked the Vitara at the Equitable PCI interest,[13] or when the court deems it just and equitable. [14] In this case, petitioner
Bank parking area, and placed the ignition key inside a safety key refused to answer for the loss of Sees vehicle, which was deposited with it for
box while See proceeded to the hotel lobby to check in. The safekeeping. This refusal constrained respondent, the insurer of See, and
Equitable PCI Bank parking area became an annex of City Garden subrogated to the latters right, to litigate and incur expenses. However, we reduce
Hotel when the management of the said bank allowed the parking of the award of P120,000.00 to P60,000.00 in view of the simplicity of the issues
the vehicles of hotel guests thereat in the evening after banking involved in this case.
hours.[11]  
  WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals
Article 1962, in relation to Article 1998, of the Civil Code defines a contract of in CA-G.R. CV No. 86869 is AFFIRMED with the MODIFICATION that the award of
deposit and a necessary deposit made by persons in hotels or inns: attorneys fees is reduced to P60,000.00. Costs against petitioner.
Art. 1962. A deposit is constituted from the moment a person SO ORDERED.
receives a thing belonging to another, with the obligation of safely
keeping it and returning the same. If the safekeeping of the thing
delivered is not the principal purpose of the contract, there is no
deposit but some other contract.

Credit Transactions | DEPOSIT AMTL | 28

 [G.R. No. 126780. February 17, 2005] open his safety deposit box, he alone could personally request the management
YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA PAYAM vs. THE who then would assign one of its employees to accompany the guest and assist him
COURT OF APPEALS and MAURICE McLOUGHLIN in opening the safety deposit box with the two keys.[4]

TINGA, J.: McLoughlin allegedly placed the following in his safety deposit box: Fifteen
The primary question of interest before this Court is the only legal issue in the Thousand US Dollars (US$15,000.00) which he placed in two envelopes, one
case: It is whether a hotel may evade liability for the loss of items left with it for envelope containing Ten Thousand US Dollars (US$10,000.00) and the other
safekeeping by its guests, by having these guests execute written waivers holding envelope Five Thousand US Dollars (US$5,000.00); Ten Thousand Australian
the establishment or its employees free from blame for such loss in light of Article Dollars (AUS$10,000.00) which he also placed in another envelope; two (2) other
2003 of the Civil Code which voids such waivers. envelopes containing letters and credit cards; two (2) bankbooks; and a checkbook,
arranged side by side inside the safety deposit box.[5]
Before this Court is a Rule 45 petition for review of the Decision[1] dated 19
October 1995 of the Court of Appeals which affirmed the Decision[2] dated 16 On 12 December 1987, before leaving for a brief trip to Hongkong, McLoughlin
December 1991 of the Regional Trial Court (RTC), Branch 13, of Manila, finding opened his safety deposit box with his key and with the key of the management and
YHT Realty Corporation, Brunhilda Mata-Tan (Tan), Erlinda Lainez (Lainez) and took therefrom the envelope containing Five Thousand US Dollars (US$5,000.00),
Anicia Payam (Payam) jointly and solidarily liable for damages in an action filed by the envelope containing Ten Thousand Australian Dollars (AUS$10,000.00), his
Maurice McLoughlin (McLoughlin) for the loss of his American and Australian dollars passports and his credit cards.[6] McLoughlin left the other items in the box as he did
deposited in the safety deposit box of Tropicana Copacabana Apartment Hotel, not check out of his room at the Tropicana during his short visit to Hongkong. When
owned and operated by YHT Realty Corporation. he arrived in Hongkong, he opened the envelope which contained Five Thousand
US Dollars (US$5,000.00) and discovered upon counting that only Three Thousand
The factual backdrop of the case follow. US Dollars (US$3,000.00) were enclosed therein. [7] Since he had no idea whether
somebody else had tampered with his safety deposit box, he thought that it was just
Private respondent McLoughlin, an Australian businessman-philanthropist, a result of bad accounting since he did not spend anything from that envelope.[8]
used to stay at Sheraton Hotel during his trips to the Philippines prior to 1984 when
he met Tan. Tan befriended McLoughlin by showing him around, introducing him to After returning to Manila, he checked out of Tropicana on 18 December 1987
important people, accompanying him in visiting impoverished street children and and left for Australia. When he arrived in Australia, he discovered that the envelope
assisting him in buying gifts for the children and in distributing the same to with Ten Thousand US Dollars (US$10,000.00) was short of Five Thousand US
charitable institutions for poor children. Tan convinced McLoughlin to transfer from Dollars (US$5,000). He also noticed that the jewelry which he bought in Hongkong
Sheraton Hotel to Tropicana where Lainez, Payam and Danilo Lopez were and stored in the safety deposit box upon his return to Tropicana was likewise
employed. Lopez served as manager of the hotel while Lainez and Payam had missing, except for a diamond bracelet.[9]
custody of the keys for the safety deposit boxes of Tropicana. Tan took care of
McLoughlins booking at the Tropicana where he started staying during his trips to When McLoughlin came back to the Philippines on 4 April 1988, he asked
the Philippines from December 1984 to September 1987.[3] Lainez if some money and/or jewelry which he had lost were found and returned to
her or to the management. However, Lainez told him that no one in the hotel found
On 30 October 1987, McLoughlin arrived from Australia and registered with such things and none were turned over to the management. He again registered at
Tropicana. He rented a safety deposit box as it was his practice to rent a safety Tropicana and rented a safety deposit box. He placed therein one (1) envelope
deposit box every time he registered at Tropicana in previous trips. As a tourist, containing Fifteen Thousand US Dollars (US$15,000.00), another envelope
McLoughlin was aware of the procedure observed by Tropicana relative to its safety containing Ten Thousand Australian Dollars (AUS$10,000.00) and other envelopes
deposit boxes. The safety deposit box could only be opened through the use of two containing his traveling papers/documents. On 16 April 1988, McLoughlin requested
keys, one of which is given to the registered guest, and the other remaining in the Lainez and Payam to open his safety deposit box. He noticed that in the envelope
possession of the management of the hotel. When a registered guest wished to containing Fifteen Thousand US Dollars (US$15,000.00), Two Thousand US Dollars

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(US$2,000.00) were missing and in the envelope previously containing Ten to the Department of Justice (DOJ) which forwarded the same to the Western Police
Thousand Australian Dollars (AUS$10,000.00), Four Thousand Five Hundred District (WPD).[18]
Australian Dollars (AUS$4,500.00) were missing.[10]
After receiving a copy of the indorsement in Australia, McLoughlin came to the
When McLoughlin discovered the loss, he immediately confronted Lainez and Philippines and registered again as a hotel guest of Tropicana. McLoughlin went to
Payam who admitted that Tan opened the safety deposit box with the key assigned Malacaňang to follow up on his letter but he was instructed to go to the DOJ. The
to him.[11] McLoughlin went up to his room where Tan was staying and confronted DOJ directed him to proceed to the WPD for documentation. But McLoughlin went
her. Tan admitted that she had stolen McLoughlins key and was able to open the back to Australia as he had an urgent business matter to attend to.
safety deposit box with the assistance of Lopez, Payam and Lainez. [12] Lopez also For several times, McLoughlin left for Australia to attend to his business and
told McLoughlin that Tan stole the key assigned to McLoughlin while the latter was came back to the Philippines to follow up on his letter to the President but he failed
asleep.[13] to obtain any concrete assistance.[19]

McLoughlin requested the management for an investigation of the incident. McLoughlin left again for Australia and upon his return to the Philippines on 25
Lopez got in touch with Tan and arranged for a meeting with the police and August 1989 to pursue his claims against petitioners, the WPD conducted an
McLoughlin. When the police did not arrive, Lopez and Tan went to the room of investigation which resulted in the preparation of an affidavit which was forwarded to
McLoughlin at Tropicana and thereat, Lopez wrote on a piece of paper a promissory the Manila City Fiscals Office. Said affidavit became the basis of preliminary
note dated 21 April 1988. The promissory note reads as follows: investigation. However, McLoughlin left again for Australia without receiving the
I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and notice of the hearing on 24 November 1989. Thus, the case at the Fiscals Office
US$2,000.00 or its equivalent in Philippine currency on or before May 5, 1988.[14] was dismissed for failure to prosecute. Mcloughlin requested the reinstatement of
the criminal charge for theft. In the meantime, McLoughlin and his lawyers wrote
Lopez requested Tan to sign the promissory note which the latter did and letters of demand to those having responsibility to pay the damage. Then he left
Lopez also signed as a witness. Despite the execution of promissory note by Tan, again for Australia.
McLoughlin insisted that it must be the hotel who must assume responsibility for the
loss he suffered. However, Lopez refused to accept the responsibility relying on the Upon his return on 22 October 1990, he registered at the Echelon Towers at
conditions for renting the safety deposit box entitled Undertaking For the Use Of Malate, Manila. Meetings were held between McLoughlin and his lawyer which
Safety Deposit Box,[15] specifically paragraphs (2) and (4) thereof, to wit: resulted to the filing of a complaint for damages on 3 December 1990 against YHT
Realty Corporation, Lopez, Lainez, Payam and Tan (defendants) for the loss of
2. To release and hold free and blameless TROPICANA APARTMENT McLoughlins money which was discovered on 16 April 1988. After filing the
HOTEL from any liability arising from any loss in the contents and/or use of complaint, McLoughlin left again for Australia to attend to an urgent business
the said deposit box for any cause whatsoever, including but not limited to matter. Tan and Lopez, however, were not served with summons, and trial
the presentation or use thereof by any other person should the key be lost; proceeded with only Lainez, Payam and YHT Realty Corporation as defendants.
...
4. To return the key and execute the RELEASE in favor of TROPICANA After defendants had filed their Pre-Trial Brief admitting that they had previously
APARTMENT HOTEL upon giving up the use of the box.[16] allowed and assisted Tan to open the safety deposit box, McLoughlin filed
an Amended/Supplemental Complaint[20] dated 10 June 1991 which included
On 17 May 1988, McLoughlin went back to Australia and he consulted his another incident of loss of money and jewelry in the safety deposit box rented by
lawyers as to the validity of the abovementioned stipulations. They opined that the McLoughlin in the same hotel which took place prior to 16 April 1988. [21] The trial
stipulations are void for being violative of universal hotel practices and customs. His court admitted the Amended/Supplemental Complaint.
lawyers prepared a letter dated 30 May 1988 which was signed by McLoughlin and
sent to President Corazon Aquino.[17] The Office of the President referred the letter During the trial of the case, McLoughlin had been in and out of the country to
attend to urgent business in Australia, and while staying in the Philippines to attend

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the hearing, he incurred expenses for hotel bills, airfare and other transportation dollars, he would not have gone through the trouble and personal inconvenience of
expenses, long distance calls to Australia, Meralco power expenses, and expenses seeking aid and assistance from the Office of the President, DOJ, police authorities
for food and maintenance, among others.[22] and the City Fiscals Office in his desire to recover his losses from the hotel
management and Tan.[24]
After trial, the RTC of Manila rendered judgment in favor of McLoughlin, the
dispositive portion of which reads: As regards the loss of Seven Thousand US Dollars (US$7,000.00) and jewelry
worth approximately One Thousand Two Hundred US Dollars (US$1,200.00) which
WHEREFORE, above premises considered, judgment is hereby rendered by this allegedly occurred during his stay at Tropicana previous to 4 April 1988, no claim
Court in favor of plaintiff and against the defendants, to wit: was made by McLoughlin for such losses in his complaint dated 21 November 1990
1. Ordering defendants, jointly and severally, to pay plaintiff the sum of because he was not sure how they were lost and who the responsible persons
US$11,400.00 or its equivalent in Philippine Currency of P342,000.00, were. But considering the admission of the defendants in their pre-trial brief that on
more or less, and the sum of AUS$4,500.00 or its equivalent in three previous occasions they allowed Tan to open the box, the trial court opined
Philippine Currency of P99,000.00, or a total of P441,000.00, more or that it was logical and reasonable to presume that his personal assets consisting of
less, with 12% interest from April 16 1988 until said amount has been Seven Thousand US Dollars (US$7,000.00) and jewelry were taken by Tan from the
paid to plaintiff (Item 1, Exhibit CC); safety deposit box without McLoughlins consent through the cooperation of Payam
2. Ordering defendants, jointly and severally to pay plaintiff the sum and Lainez.[25]
of P3,674,238.00 as actual and consequential damages arising from
the loss of his Australian and American dollars and jewelries The trial court also found that defendants acted with gross negligence in the
complained against and in prosecuting his claim and rights performance and exercise of their duties and obligations as innkeepers and were
administratively and judicially (Items II, III, IV, V, VI, VII, VIII, and IX, therefore liable to answer for the losses incurred by McLoughlin.[26]
Exh. CC);
3. Ordering defendants, jointly and severally, to pay plaintiff the sum Moreover, the trial court ruled that paragraphs (2) and (4) of the Undertaking
of P500,000.00 as moral damages (Item X, Exh. CC); For The Use Of Safety Deposit Box are not valid for being contrary to the express
4. Ordering defendants, jointly and severally, to pay plaintiff the sum mandate of Article 2003 of the New Civil Code and against public policy. [27] Thus,
of P350,000.00 as exemplary damages (Item XI, Exh. CC); there being fraud or wanton conduct on the part of defendants, they should be
5. And ordering defendants, jointly and severally, to pay litigation expenses responsible for all damages which may be attributed to the non-performance of their
in the sum of P200,000.00 (Item XII, Exh. CC); contractual obligations.[28]
6. Ordering defendants, jointly and severally, to pay plaintiff the sum
of P200,000.00 as attorneys fees, and a fee of P3,000.00 for every The Court of Appeals affirmed the disquisitions made by the lower court except
appearance; and as to the amount of damages awarded. The decretal text of the appellate courts
7. Plus costs of suit. decision reads:
SO ORDERED.[23]
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED but
The trial court found that McLoughlins allegations as to the fact of loss and as modified as follows:
to the amount of money he lost were sufficiently shown by his direct and The appellants are directed jointly and severally to pay the plaintiff/appellee the
straightforward manner of testifying in court and found him to be credible and worthy following amounts:
of belief as it was established that McLoughlins money, kept in Tropicanas safety 1) P153,200.00 representing the peso equivalent of US$2,000.00 and
deposit box, was taken by Tan without McLoughlins consent. The taking was AUS$4,500.00;
effected through the use of the master key which was in the possession of the 2) P308,880.80, representing the peso value for the air fares from Sidney
management. Payam and Lainez allowed Tan to use the master key without [sic] to Manila and back for a total of eleven (11) trips;
authority from McLoughlin. The trial court added that if McLoughlin had not lost his

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 3) One-half of P336,207.05 or P168,103.52 representing payment to We are not persuaded. We adhere to the findings of the trial court as affirmed
Tropicana Apartment Hotel; by the appellate court that the fact of loss was established by the credible testimony
4) One-half of P152,683.57 or P76,341.785 representing payment to in open court by McLoughlin. Such findings are factual and therefore beyond the
Echelon Tower; ambit of the present petition.
5) One-half of P179,863.20 or P89,931.60 for the taxi xxx transportation
from the residence to Sidney [sic] Airport and from MIA to the hotel The trial court had the occasion to observe the demeanor of McLoughlin while
here in Manila, for the eleven (11) trips; testifying which reflected the veracity of the facts testified to by him. On this score,
6) One-half of P7,801.94 or P3,900.97 representing Meralco power we give full credence to the appreciation of testimonial evidence by the trial court
expenses; especially if what is at issue is the credibility of the witness. The oft-repeated
7) One-half of P356,400.00 or P178,000.00 representing expenses for food principle is that where the credibility of a witness is an issue, the established rule is
and maintenance; that great respect is accorded to the evaluation of the credibility of witnesses by the
8) P50,000.00 for moral damages; trial court.[31] The trial court is in the best position to assess the credibility of
9) P10,000.00 as exemplary damages; and witnesses and their testimonies because of its unique opportunity to observe the
10) P200,000 representing attorneys fees. witnesses firsthand and note their demeanor, conduct and attitude under grilling
With costs. examination.[32]
SO ORDERED.[29]
We are also not impressed by petitioners argument that the finding of gross
Unperturbed, YHT Realty Corporation, Lainez and Payam went to this Court in negligence by the lower court as affirmed by the appellate court is not supported by
this appeal by certiorari. evidence. The evidence reveals that two keys are required to open the safety
deposit boxes of Tropicana. One key is assigned to the guest while the other
Petitioners submit for resolution by this Court the following issues: (a) whether remains in the possession of the management. If the guest desires to open his
the appellate courts conclusion on the alleged prior existence and subsequent loss safety deposit box, he must request the management for the other key to open the
of the subject money and jewelry is supported by the evidence on record; (b) same. In other words, the guest alone cannot open the safety deposit box without
whether the finding of gross negligence on the part of petitioners in the performance the assistance of the management or its employees. With more reason that access
of their duties as innkeepers is supported by the evidence on record; (c) whether the to the safety deposit box should be denied if the one requesting for the opening of
Undertaking For The Use of Safety Deposit Box admittedly executed by private the safety deposit box is a stranger. Thus, in case of loss of any item deposited in
respondent is null and void; and (d) whether the damages awarded to private the safety deposit box, it is inevitable to conclude that the management had at least
respondent, as well as the amounts thereof, are proper under the circumstances.[30] a hand in the consummation of the taking, unless the reason for the loss is force
The petition is devoid of merit. majeure.

It is worthy of note that the thrust of Rule 45 is the resolution only of questions Noteworthy is the fact that Payam and Lainez, who were employees of
of law and any peripheral factual question addressed to this Court is beyond the Tropicana, had custody of the master key of the management when the loss took
bounds of this mode of review. place. In fact, they even admitted that they assisted Tan on three separate
occasions in opening McLoughlins safety deposit box.[33] This only proves that
Petitioners point out that the evidence on record is insufficient to prove the fact Tropicana had prior knowledge that a person aside from the registered guest had
of prior existence of the dollars and the jewelry which had been lost while deposited access to the safety deposit box. Yet the management failed to notify McLoughlin of
in the safety deposit boxes of Tropicana, the basis of the trial court and the the incident and waited for him to discover the taking before it disclosed the matter
appellate court being the sole testimony of McLoughlin as to the contents thereof. to him. Therefore, Tropicana should be held responsible for the damage suffered by
Likewise, petitioners dispute the finding of gross negligence on their part as not McLoughlin by reason of the negligence of its employees.
supported by the evidence on record.

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 The management should have guarded against the occurrence of this incident The issue of whether the Undertaking For The Use of Safety Deposit
considering that Payam admitted in open court that she assisted Tan three times in Box executed by McLoughlin is tainted with nullity presents a legal question
opening the safety deposit box of McLoughlin at around 6:30 A.M. to 7:30 A.M. appropriate for resolution in this petition. Notably, both the trial court and the
while the latter was still asleep.[34] In light of the circumstances surrounding this appellate court found the same to be null and void. We find no reason to reverse
case, it is undeniable that without the acquiescence of the employees of Tropicana their common conclusion. Article 2003 is controlling, thus:
to the opening of the safety deposit box, the loss of McLoughlins money could and
should have been avoided. Art. 2003. The hotel-keeper cannot free himself from responsibility by posting
notices to the effect that he is not liable for the articles brought by the guest. Any
The management contends, however, that McLoughlin, by his act, made its stipulation between the hotel-keeper and the guest whereby the responsibility of the
employees believe that Tan was his spouse for she was always with him most of the former as set forth in Articles 1998 to 2001 [37] is suppressed or diminished shall be
time. The evidence on record, however, is bereft of any showing that McLoughlin void.
introduced Tan to the management as his wife. Such an inference from the act of
McLoughlin will not exculpate the petitioners from liability in the absence of any Article 2003 was incorporated in the New Civil Code as an expression of public
showing that he made the management believe that Tan was his wife or was duly policy precisely to apply to situations such as that presented in this case. The hotel
authorized to have access to the safety deposit box. Mere close companionship and business like the common carriers business is imbued with public interest. Catering
intimacy are not enough to warrant such conclusion considering that what is to the public, hotelkeepers are bound to provide not only lodging for hotel guests
involved in the instant case is the very safety of McLoughlins deposit. If only and security to their persons and belongings. The twin duty constitutes the essence
petitioners exercised due diligence in taking care of McLoughlins safety deposit box, of the business. The law in turn does not allow such duty to the public to be negated
they should have confronted him as to his relationship with Tan considering that the or diluted by any contrary stipulation in so-called undertakings that ordinarily appear
latter had been observed opening McLoughlins safety deposit box a number of in prepared forms imposed by hotel keepers on guests for their signature.
times at the early hours of the morning. Tans acts should have prompted the
management to investigate her relationship with McLoughlin. Then, petitioners In an early case,[38] the Court of Appeals through its then Presiding Justice (later
would have exercised due diligence required of them. Failure to do so warrants the Associate Justice of the Court) Jose P. Bengzon, ruled that to hold hotelkeepers or
conclusion that the management had been remiss in complying with the obligations innkeeper liable for the effects of their guests, it is not necessary that they be
imposed upon hotel-keepers under the law. actually delivered to the innkeepers or their employees. It is enough that such
effects are within the hotel or inn. [39] With greater reason should the liability of the
Under Article 1170 of the New Civil Code, those who, in the performance of hotelkeeper be enforced when the missing items are taken without the guests
their obligations, are guilty of negligence, are liable for damages. As to who shall knowledge and consent from a safety deposit box provided by the hotel itself, as in
bear the burden of paying damages, Article 2180, paragraph (4) of the same Code this case.
provides that the owners and managers of an establishment or enterprise are
likewise responsible for damages caused by their employees in the service of the Paragraphs (2) and (4) of the undertaking manifestly contravene Article 2003 of
branches in which the latter are employed or on the occasion of their functions. the New Civil Code for they allow Tropicana to be released from liability arising from
Also, this Court has ruled that if an employee is found negligent, it is presumed that any loss in the contents and/or use of the safety deposit box for any cause
the employer was negligent in selecting and/or supervising him for it is hard for the whatsoever.[40] Evidently, the undertaking was intended to bar any claim against
victim to prove the negligence of such employer. [35] Thus, given the fact that the loss Tropicana for any loss of the contents of the safety deposit box whether or not
of McLoughlins money was consummated through the negligence of Tropicanas negligence was incurred by Tropicana or its employees. The New Civil Code is
employees in allowing Tan to open the safety deposit box without the guests explicit that the responsibility of the hotel-keeper shall extend to loss of, or injury to,
consent, both the assisting employees and YHT Realty Corporation itself, as owner the personal property of the guests even if caused by servants or employees of the
and operator of Tropicana, should be held solidarily liable pursuant to Article 2193. keepers of hotels or inns as well as by strangers, except as it may proceed from
[36]
any force majeure.[41] It is the loss through force majeure that may spare the hotel-
keeper from liability. In the case at bar, there is no showing that the act of the thief

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or robber was done with the use of arms or through an irresistible force to qualify amount of damages awarded and such finding is binding upon this Court especially
the same as force majeure.[42] if sufficiently proven by evidence and not unconscionable or excessive. Thus, the
appellate court correctly awarded McLoughlin Two Thousand US Dollars
Petitioners likewise anchor their defense on Article 2002 [43] which exempts the (US$2,000.00) and Four Thousand Five Hundred Australian dollars (AUS$4,500.00)
hotel-keeper from liability if the loss is due to the acts of his guest, his family, or or their peso equivalent at the time of payment, [47] being the amounts duly proven by
visitors. Even a cursory reading of the provision would lead us to reject petitioners evidence.[48] The alleged loss that took place prior to 16 April 1988 was not
contention. The justification they raise would render nugatory the public interest considered since the amounts alleged to have been taken were not sufficiently
sought to be protected by the provision. What if the negligence of the employer or established by evidence. The appellate court also correctly awarded the sum
its employees facilitated the consummation of a crime committed by the registered of P308,880.80, representing the peso value for the air fares from Sydney to Manila
guests relatives or visitor? Should the law exculpate the hotel from liability since the and back for a total of eleven (11) trips; [49] one-half of P336,207.05 or P168,103.52
loss was due to the act of the visitor of the registered guest of the hotel? Hence, this representing payment to Tropicana;[50] one-half of P152,683.57 or P76,341.785
provision presupposes that the hotel-keeper is not guilty of concurrent negligence or representing payment to Echelon Tower;[51] one-half of P179,863.20 or P89,931.60
has not contributed in any degree to the occurrence of the loss. A depositary is not for the taxi or transportation expenses from McLoughlins residence to Sydney
responsible for the loss of goods by theft, unless his actionable negligence Airport and from MIA to the hotel here in Manila, for the eleven (11) trips; [52] one-half
contributes to the loss.[44] of P7,801.94 or P3,900.97 representing Meralco power expenses;[53] one-half
of P356,400.00 or P178,000.00 representing expenses for food and maintenance.[54]
In the case at bar, the responsibility of securing the safety deposit box was
shared not only by the guest himself but also by the management since two keys The amount of P50,000.00 for moral damages is reasonable. Although trial
are necessary to open the safety deposit box. Without the assistance of hotel courts are given discretion to determine the amount of moral damages, the
employees, the loss would not have occurred. Thus, Tropicana was guilty of appellate court may modify or change the amount awarded when it is palpably and
concurrent negligence in allowing Tan, who was not the registered guest, to open scandalously excessive. Moral damages are not intended to enrich a complainant at
the safety deposit box of McLoughlin, even assuming that the latter was also guilty the expense of a defendant. They are awarded only to enable the injured party to
of negligence in allowing another person to use his key. To rule otherwise would obtain means, diversion or amusements that will serve to alleviate the moral
result in undermining the safety of the safety deposit boxes in hotels for the suffering he has undergone, by reason of defendants culpable action.[55]
management will be given imprimatur to allow any person, under the pretense of
being a family member or a visitor of the guest, to have access to the safety deposit The awards of P10,000.00 as exemplary damages and P200,000.00
box without fear of any liability that will attach thereafter in case such person turns representing attorneys fees are likewise sustained.
out to be a complete stranger. This will allow the hotel to evade responsibility for
any liability incurred by its employees in conspiracy with the guests relatives and WHEREFORE, foregoing premises considered, the Decision of the Court of
visitors. Appeals dated 19 October 1995 is hereby AFFIRMED. Petitioners are directed,
jointly and severally, to pay private respondent the following amounts:
Petitioners contend that McLoughlins case was mounted on the theory of (1) US$2,000.00 and AUS$4,500.00 or their peso equivalent at the time of
contract, but the trial court and the appellate court upheld the grant of the claims of payment;
the latter on the basis of tort. [45] There is nothing anomalous in how the lower courts (2) P308,880.80, representing the peso value for the air fares from Sydney to
decided the controversy for this Court has pronounced a jurisprudential rule that tort Manila and back for a total of eleven (11) trips;
liability can exist even if there are already contractual relations. The act that breaks (3) One-half of P336,207.05 or P168,103.52 representing payment to
the contract may also be tort.[46] Tropicana Copacabana Apartment Hotel;
(4) One-half of P152,683.57 or P76,341.785 representing payment to Echelon
As to damages awarded to McLoughlin, we see no reason to modify the Tower;
amounts awarded by the appellate court for the same were based on facts and law.
It is within the province of lower courts to settle factual issues such as the proper

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 (5) One-half of P179,863.20 or P89,931.60 for the taxi or transportation
expense from McLoughlins residence to Sydney Airport and from MIA
to the hotel here in Manila, for the eleven (11) trips;
(6) One-half of P7,801.94 or P3,900.97 representing Meralco power
expenses;
(7) One-half of P356,400.00 or P178,200.00 representing expenses for food
and maintenance;
(8) P50,000.00 for moral damages;
(9) P10,000.00 as exemplary damages; and
(10) P200,000 representing attorneys fees.
With costs.
SO ORDERED.

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