THIRD DIVISION

G.R. No. L-66826 August 19, 1988

BANK OF THE PHILIPPINE ISLANDS, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT and ZSHORNACK respondents.
Pacis & Reyes Law Office for petitioner.
Ernesto T. Zshornack, Jr. for private respondent.

CORTES, J.:
The original parties to this case were Rizaldy T. Zshornack and the Commercial Bank and Trust Company
of the Philippines [hereafter referred to as "COMTRUST."] In 1980, the Bank of the Philippine Islands
(hereafter referred to as BPI absorbed COMTRUST through a corporate merger, and was substituted as
party to the case.
Rizaldy Zshornack initiated proceedings on June 28,1976 by filing in the Court of First Instance of Rizal
Caloocan City a complaint against COMTRUST alleging four causes of action. Except for the third cause of
action, the CFI ruled in favor of Zshornack. The bank appealed to the Intermediate Appellate Court
which modified the CFI decision absolving the bank from liability on the fourth cause of action. The
pertinent portions of the judgment, as modified, read:
IN VIEW OF THE FOREGOING, the Court renders judgment as follows:
1. Ordering the defendant COMTRUST to restore to the dollar savings account of plaintiff (No. 25-4109)
the amount of U.S $1,000.00 as of October 27, 1975 to earn interest together with the remaining
balance of the said account at the rate fixed by the bank for dollar deposits under Central Bank Circular
343;
2. Ordering defendant COMTRUST to return to the plaintiff the amount of U.S. $3,000.00 immediately
upon the finality of this decision, without interest for the reason that the said amount was merely held
in custody for safekeeping, but was not actually deposited with the defendant COMTRUST because
being cash currency, it cannot by law be deposited with plaintiffs dollar account and defendant's only
obligation is to return the same to plaintiff upon demand;
xxx xxx xxx
5. Ordering defendant COMTRUST to pay plaintiff in the amount of P8,000.00 as damages in the concept
of litigation expenses and attorney's fees suffered by plaintiff as a result of the failure of the defendant
bank to restore to his (plaintiffs) account the amount of U.S. $1,000.00 and to return to him (plaintiff)
the U.S. $3,000.00 cash left for safekeeping.
Costs against defendant COMTRUST.
SO ORDERED. [Rollo, pp. 47-48.]
Undaunted, the bank comes to this Court praying that it be totally absolved from any liability to
Zshornack. The latter not having appealed the Court of Appeals decision, the issues facing this Court are
limited to the bank's liability with regard to the first and second causes of action and its liability for
damages.
1. We first consider the first cause of action, on the dates material to this case, Rizaldy Zshornack and his
wife, Shirley Gorospe, maintained in COMTRUST, Quezon City Branch, a dollar savings account and a
peso current account.
On October 27, 1975, an application for a dollar draft was accomplished by Virgilio V. Garcia, Assistant
Branch Manager of COMTRUST Quezon City, payable to a certain Leovigilda D. Dizon in the amount of
$1,000.00. In the application, Garcia indicated that the amount was to be charged to Dollar Savings Acct.
No. 25-4109, the savings account of the Zshornacks; the charges for commission, documentary stamp
tax and others totalling P17.46 were to be charged to Current Acct. No. 210465-29, again, the current
account of the Zshornacks. There was no indication of the name of the purchaser of the dollar draft.
On the same date, October 27,1975, COMTRUST, under the signature of Virgilio V. Garcia, issued a check
payable to the order of with an indication that it was to be charged to Dollar Savings Acct. No. 25-4109.
When Zshornack noticed the withdrawal of US$1,000.00 from his account, he demanded an explanation
from the bank. In answer, COMTRUST claimed that the peso value of the withdrawal was given to Atty.
Ernesto Zshornack, Jr., brother of Rizaldy, on October 27, 1975 when he (Ernesto) encashed with
COMTRUST a cashier's check for P8,450.00 issued by the Manila Banking Corporation payable to
Ernesto.
Upon consideration of the foregoing facts, this Court finds no reason to disturb the ruling of both the
trial court and the Appellate Court on the first cause of action. Petitioner must be held liable for the
unauthorized withdrawal of US$1,000.00 from private respondent's dollar account.
In its desperate attempt to justify its act of withdrawing from its depositor's savings account, the bank
has adopted inconsistent theories. First, it still maintains that the peso value of the amount withdrawn
was given to Atty. Ernesto Zshornack, Jr. when the latter encashed the Manilabank Cashier's Check. At
the same time, the bank claims that the withdrawal was made pursuant to an agreement where
Zshornack allegedly authorized the bank to withdraw from his dollar savings account such amount
which, when converted to pesos, would be needed to fund his peso current account. If indeed the peso
equivalent of the amount withdrawn from the dollar account was credited to the peso current account,
why did the bank still have to pay Ernesto?
At any rate, both explanations are unavailing. With regard to the first explanation, petitioner bank has
not shown how the transaction involving the cashier's check is related to the transaction involving the
dollar draft in favor of Dizon financed by the withdrawal from Rizaldy's dollar account. The two
transactions appear entirely independent of each other. Moreover, Ernesto Zshornack, Jr., possesses a
personality distinct and separate from Rizaldy Zshornack. Payment made to Ernesto cannot be
considered payment to Rizaldy.
As to the second explanation, even if we assume that there was such an agreement, the evidence does
not show that the withdrawal was made pursuant to it. Instead, the record reveals that the amount
withdrawn was used to finance a dollar draft in favor of Leovigilda D. Dizon, and not to fund the current
account of the Zshornacks. There is no proof whatsoever that peso Current Account No. 210-465-29 was
ever credited with the peso equivalent of the US$1,000.00 withdrawn on October 27, 1975 from Dollar
Savings Account No. 25-4109.
2. As for the second cause of action, the complaint filed with the trial court alleged that on December 8,
1975, Zshornack entrusted to COMTRUST, thru Garcia, US $3,000.00 cash (popularly known as
greenbacks) for safekeeping, and that the agreement was embodied in a document, a copy of which was
attached to and made part of the complaint. The document reads:
Makati Cable Address:
Philippines "COMTRUST"
COMMERCIAL BANK AND TRUST COMPANY
of the Philippines
Quezon City Branch
December 8, 1975
MR. RIZALDY T. ZSHORNACK
&/OR MRS SHIRLEY E. ZSHORNACK
Sir/Madam:
We acknowledged (sic) having received from you today the sum of US DOLLARS: THREE THOUSAND
ONLY (US$3,000.00) for safekeeping.
Received by:
(Sgd.) VIRGILIO V. GARCIA
It was also alleged in the complaint that despite demands, the bank refused to return the money.
In its answer, COMTRUST averred that the US$3,000 was credited to Zshornack's peso current account
at prevailing conversion rates.
It must be emphasized that COMTRUST did not deny specifically under oath the authenticity and due
execution of the above instrument.
During trial, it was established that on December 8, 1975 Zshornack indeed delivered to the bank US
$3,000 for safekeeping. When he requested the return of the money on May 10, 1976, COMTRUST
explained that the sum was disposed of in this manner: US$2,000.00 was sold on December 29, 1975
and the peso proceeds amounting to P14,920.00 were deposited to Zshornack's current account per
deposit slip accomplished by Garcia; the remaining US$1,000.00 was sold on February 3, 1976 and the
peso proceeds amounting to P8,350.00 were deposited to his current account per deposit slip also
accomplished by Garcia.
Aside from asserting that the US$3,000.00 was properly credited to Zshornack's current account at
prevailing conversion rates, BPI now posits another ground to defeat private respondent's claim. It now
argues that the contract embodied in the document is the contract of depositum (as defined in Article
1962, New Civil Code), which banks do not enter into. The bank alleges that Garcia exceeded his powers
when he entered into the transaction. Hence, it is claimed, the bank cannot be liable under the contract,
and the obligation is purely personal to Garcia.
Before we go into the nature of the contract entered into, an important point which arises on the
pleadings, must be considered.
The second cause of action is based on a document purporting to be signed by COMTRUST, a copy of
which document was attached to the complaint. In short, the second cause of action was based on an
actionable document. It was therefore incumbent upon the bank to specifically deny under oath the due
execution of the document, as prescribed under Rule 8, Section 8, if it desired: (1) to question the
authority of Garcia to bind the corporation; and (2) to deny its capacity to enter into such contract. [See,
E.B. Merchant v. International Banking Corporation, 6 Phil. 314 (1906).] No sworn answer denying the
due execution of the document in question, or questioning the authority of Garcia to bind the bank, or
denying the bank's capacity to enter into the contract, was ever filed. Hence, the bank is deemed to
have admitted not only Garcia's authority, but also the bank's power, to enter into the contract in
question.
In the past, this Court had occasion to explain the reason behind this procedural requirement.
The reason for the rule enunciated in the foregoing authorities will, we think, be readily appreciated. In
dealing with corporations the public at large is bound to rely to a large extent upon outward
appearances. If a man is found acting for a corporation with the external indicia of authority, any
person, not having notice of want of authority, may usually rely upon those appearances; and if it be
found that the directors had permitted the agent to exercise that authority and thereby held him out as
a person competent to bind the corporation, or had acquiesced in a contract and retained the benefit
supposed to have been conferred by it, the corporation will be bound, notwithstanding the actual
authority may never have been granted
... Whether a particular officer actually possesses the authority which he assumes to exercise is
frequently known to very few, and the proof of it usually is not readily accessible to the stranger who
deals with the corporation on the faith of the ostensible authority exercised by some of the corporate
officers. It is therefore reasonable, in a case where an officer of a corporation has made a contract in its
name, that the corporation should be required, if it denies his authority, to state such defense in its
answer. By this means the plaintiff is apprised of the fact that the agent's authority is contested; and he
is given an opportunity to adduce evidence showing either that the authority existed or that the
contract was ratified and approved. [Ramirez v. Orientalist Co. and Fernandez, 38 Phil. 634, 645- 646
(1918).]
Petitioner's argument must also be rejected for another reason. The practical effect of absolving a
corporation from liability every time an officer enters into a contract which is beyond corporate powers,
even without the proper allegation or proof that the corporation has not authorized nor ratified the
officer's act, is to cast corporations in so perfect a mold that transgressions and wrongs by such artificial
beings become impossible [Bissell v. Michigan Southern and N.I.R. Cos 22 N.Y 258 (1860).] "To say that a
corporation has no right to do unauthorized acts is only to put forth a very plain truism but to say that
such bodies have no power or capacity to err is to impute to them an excellence which does not belong
to any created existence with which we are acquainted. The distinction between power and right is no
more to be lost sight of in respect to artificial than in respect to natural persons." [Ibid.]
Having determined that Garcia's act of entering into the contract binds the corporation, we now
determine the correct nature of the contract, and its legal consequences, including its enforceability.
The document which embodies the contract states that the US$3,000.00 was received by the bank for
safekeeping. The subsequent acts of the parties also show that the intent of the parties was really for
the bank to safely keep the dollars and to return it to Zshornack at a later time, Thus, Zshornack
demanded the return of the money on May 10, 1976, or over five months later.
The above arrangement is that contract defined under Article 1962, New Civil Code, which reads:
Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another,
with the obligation of safely keeping it and of 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.
Note that the object of the contract between Zshornack and COMTRUST was foreign exchange. Hence,
the transaction was covered by Central Bank Circular No. 20, Restrictions on Gold and Foreign Exchange
Transactions, promulgated on December 9, 1949, which was in force at the time the parties entered into
the transaction involved in this case. The circular provides:
xxx xxx xxx
2. Transactions in the assets described below and all dealings in them of whatever nature, including,
where applicable their exportation and importation, shall NOT be effected, except with respect to
deposit accounts included in sub-paragraphs (b) and (c) of this paragraph, when such deposit accounts
are owned by and in the name of, banks.
(a) Any and all assets, provided they are held through, in, or with banks or banking institutions located in
the Philippines, including money, checks, drafts, bullions bank drafts, deposit accounts (demand, time
and savings), all debts, indebtedness or obligations, financial brokers and investment houses, notes,
debentures, stocks, bonds, coupons, bank acceptances, mortgages, pledges, liens or other rights in the
nature of security, expressed in foreign currencies, or if payable abroad, irrespective of the currency in
which they are expressed, and belonging to any person, firm, partnership, association, branch office,
agency, company or other unincorporated body or corporation residing or located within the
Philippines;
(b) Any and all assets of the kinds included and/or described in subparagraph (a) above, whether or not
held through, in, or with banks or banking institutions, and existent within the Philippines, which belong
to any person, firm, partnership, association, branch office, agency, company or other unincorporated
body or corporation not residing or located within the Philippines;
(c) Any and all assets existent within the Philippines including money, checks, drafts, bullions, bank
drafts, all debts, indebtedness or obligations, financial securities commonly dealt in by bankers, brokers
and investment houses, notes, debentures, stock, bonds, coupons, bank acceptances, mortgages,
pledges, liens or other rights in the nature of security expressed in foreign currencies, or if payable
abroad, irrespective of the currency in which they are expressed, and belonging to any person, firm,
partnership, association, branch office, agency, company or other unincorporated body or corporation
residing or located within the Philippines.
xxx xxx xxx
4. (a) All receipts of foreign exchange shall be sold daily to the Central Bank by those authorized to deal
in foreign exchange. All receipts of foreign exchange by any person, firm, partnership, association,
branch office, agency, company or other unincorporated body or corporation shall be sold to the
authorized agents of the Central Bank by the recipients within one business day following the receipt of
such foreign exchange. Any person, firm, partnership, association, branch office, agency, company or
other unincorporated body or corporation, residing or located within the Philippines, who acquires on
and after the date of this Circular foreign exchange shall not, unless licensed by the Central Bank,
dispose of such foreign exchange in whole or in part, nor receive less than its full value, nor delay taking
ownership thereof except as such delay is customary; Provided, further, That within one day upon taking
ownership, or receiving payment, of foreign exchange the aforementioned persons and entities shall sell
such foreign exchange to designated agents of the Central Bank.
xxx xxx xxx
8. Strict observance of the provisions of this Circular is enjoined; and any person, firm or corporation,
foreign or domestic, who being bound to the observance thereof, or of such other rules, regulations or
directives as may hereafter be issued in implementation of this Circular, shall fail or refuse to comply
with, or abide by, or shall violate the same, shall be subject to the penal sanctions provided in the Central
Bank Act.
xxx xxx xxx
Paragraph 4 (a) above was modified by Section 6 of Central Bank Circular No. 281, Regulations on
Foreign Exchange, promulgated on November 26, 1969 by limiting its coverage to Philippine residents
only. Section 6 provides:
SEC. 6. All receipts of foreign exchange by any resident person, firm, company or corporation shall be
sold to authorized agents of the Central Bank by the recipients within one business day following the
receipt of such foreign exchange. Any resident person, firm, company or corporation residing or located
within the Philippines, who acquires foreign exchange shall not, unless authorized by the Central Bank,
dispose of such foreign exchange in whole or in part, nor receive less than its full value, nor delay taking
ownership thereof except as such delay is customary; Provided, That, within one business day upon
taking ownership or receiving payment of foreign exchange the aforementioned persons and entities
shall sell such foreign exchange to the authorized agents of the Central Bank.
As earlier stated, the document and the subsequent acts of the parties show that they intended the
bank to safekeep the foreign exchange, and return it later to Zshornack, who alleged in his complaint
that he is a Philippine resident. The parties did not intended to sell the US dollars to the Central Bank
within one business day from receipt. Otherwise, the contract of depositum would never have been
entered into at all.
Since the mere safekeeping of the greenbacks, without selling them to the Central Bank within one
business day from receipt, is a transaction which is not authorized by CB Circular No. 20, it must be
considered as one which falls under the general class of prohibited transactions. Hence, pursuant to
Article 5 of the Civil Code, it is void, having been executed against the provisions of a
mandatory/prohibitory law. More importantly, it affords neither of the parties a cause of action against
the other. "When the nullity proceeds from the illegality of the cause or object of the contract, and the
act constitutes a criminal offense, both parties being in pari delicto, they shall have no cause of action
against each other. . ." [Art. 1411, New Civil Code.] The only remedy is one on behalf of the State to
prosecute the parties for violating the law.
We thus rule that Zshornack cannot recover under the second cause of action.
3. Lastly, we find the P8,000.00 awarded by the courts a quo as damages in the concept of litigation
expenses and attorney's fees to be reasonable. The award is sustained.
WHEREFORE, the decision appealed from is hereby MODIFIED. Petitioner is ordered to restore to the
dollar savings account of private respondent the amount of US$1,000.00 as of October 27, 1975 to earn
interest at the rate fixed by the bank for dollar savings deposits. Petitioner is further ordered to pay
private respondent the amount of P8,000.00 as damages. The other causes of action of private
respondent are ordered dismissed.
.


[G.R. No. 160544. February 21, 2005]
TRIPLE-V vs. FILIPINO MERCHANTS
THIRD DIVISION
Gentlemen:
Quoted hereunder, for your information, is a resolution of this Court dated FEB 21 2005.
G.R. No. 160544 (Triple-V Food Services, Inc. vs. Filipino Merchants Insurance Company, Inc.)
Assailed in this petition for review on certiorari is the decision
[1]
dated October 21, 2003 of the Court of
Appeals in CA-G.R. CV No. 71223, affirming an earlier 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 Insurance, Company, Inc., against the herein petitioner, Triple-V Food Services, Inc.
On March 2, 1997, at around 2:15 o'clock in the afternoon, a certain Mary Jo-Anne 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 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.
In its answer, petitioner argued that the complaint failed to aver facts to support the 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 ascertaining the loss of the car and in informing De Asis of
the discovery of the loss. Petitioner further argued that in accepting the complimentary valet parking
service, De Asis received a parking ticket whereunder it is so provided that "[Management and staff will
not be responsible for any loss of or damage incurred on the vehicle nor of valuables contained therein",
a provision which, to petitioner's mind, is an 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, adding that its valet parking service did not include extending a contract of insurance or
warranty for the loss of the vehicle.
During trial, petitioner challenged FMICI's subrogation to Crispa's right to file a claim for the loss of the
car, arguing that theft is not a risk insured against under FMICI's Insurance Policy No. PC-5975 for the
subject vehicle.
In a decision dated June 22, 2001, the trial court rendered judgment for respondent FMICI, thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff (FMICI) and
against the defendant Triple V (herein petitioner) and the latter is hereby ordered to pay plaintiff the
following:
1. The amount of P669,500.00, representing actual damages plus compounded (sic);
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;
3. The amount of P50,000.00 as exemplary damages;
4. Plus, cost of suit.
Defendant Triple V is not therefore precluded from taking appropriate action against defendant
Armando Madridano.
SO ORDERED.
Obviously displeased, petitioner appealed to the Court of Appeals reiterating its 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-napping incident and in the supervision of its employees. It further
argued that there was no valid subrogation of rights between Crispa and respondent FMICI.
In a decision dated October 21, 2003,
[2]
the Court of Appeals dismissed petitioner's appeal and affirmed
the appealed decision of the trial court, thus:
WHEREFORE, based on the foregoing premises, the instant appeal is hereby DISMISSED. Accordingly, the
assailed June 22, 2001 Decision of the RTC of Makati City - Branch 148 in Civil Case No. 98-838
is AFFIRMED.
SO ORDERED.
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 depositary of the subject vehicle; (b)
petitioner was negligent in its duties as a depositary thereof and as an employer of the valet attendant;
and (c) there was a valid subrogation of rights between Crispa and respondent FMICI.
Hence, petitioner's present recourse.
We agree with the two (2) courts below.
When De Asis entrusted the car in question to petitioners valet attendant while eating at
petitioner's Kamayan Restaurant, the former expected the car's safe return 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 that of insurance, guaranty or surety for the loss of the car
was constituted when De Asis availed of its free valet parking service.
In a contract of deposit, a person receives an object belonging to another with the obligation of safely
keeping it and returning the same.
[3]
A deposit may be 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 safekeeping and to return it later to the depositor.
Specious is petitioner's insistence that the valet parking claim stub it issued to De 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 vehicle.
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 contract of adhesion, drafted and
prepared as it is by the petitioner alone with no participation whatsoever on the part of the customers,
like De Asis, who merely 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 adherence thereto
if they prove to be one-sided under the attendant facts and circumstances.
[4]

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
expects the security of her car while at petitioner's premises/designated parking areas and its safe
return at the end of her visit at petitioner's restaurant.
Petitioner's argument that there was no valid subrogation of rights between Crispa and FMICI because
theft was not a risk insured against under FMICI's Insurance Policy No. PC-5975 holds no water.
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 Vehicle-P800.000".
[5]
On the basis of such
item, the trial court concluded that the coverage includes a full comprehensive insurance of the vehicle
in case of damage or loss. Besides, Crispa paid a premium of P10,304 to cover theft. This is clearly shown
in the breakdown of premiums in the same policy.
[6]
Thus, having indemnified CRISPA for the stolen car,
FMICI, as correctly ruled by the trial court and the Court of Appeals, was properly subrogated to Crispa's
rights against petitioner, pursuant to Article 2207 of the New Civil Code
[7]
.
Anent the trial court's findings of negligence on the part of the petitioner, which findings were affirmed
by the appellate court, we have consistently ruled that findings of facts of trial courts, more so when
affirmed, as here, by the Court of Appeals, are conclusive on this Court unless the trial court itself
ignored, overlooked or misconstrued facts and circumstances which, if considered, warrant a reversal of
the outcome of the case.
[8]
This is not so in the case at bar. For, we have ourselves reviewed the records
and find no justification to deviate from the trial court's findings.
WHEREFORE, petition is hereby DENIED DUE COURSE.
SO ORDERED.
Very truly yours,
(Sgd.) LUCITA ABJELINA-SORIANO
Clerk of Court


G.R. No. 90027


THIRD DIVISION*
[ G.R. No. 90027, March 03, 1993 ]
CA AGRO-INDUSTRIAL DEVELOPMENT CORP., PETITIONER, VS. THE HONORABLE COURT OF APPEALS
AND SECURITY BANK AND TRUST COMPANY, RESPONDENTS.

D E C I S I O N
DAVIDE, JR., J.:
Is the contractual relation between a commercial bank and another party in a contract of rent of a safety
deposit box with respect to its contents placed by the latter one of bailor and bailee or one of lessor and
lessee?

This is the crux of the present controversy.
On 3 July 1979, petitioner (through its President, Sergio Aguirre) and the spouses Ramon and Paula
Pugao entered into an agreement whereby the former purchased from the latter two (2) parcels of land
for a consideration of P350,625.00. Of this amount, P75,725.00 was paid as downpayment while the
balance was covered by 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 that the titles to the
lots shall be transferred to the petitioner upon full payment of the purchase price and that the owner's
copies of the certificates of titles thereto, Transfer Certificates of Title (TCT) Nos. 284655 and 292434,
shall be deposited in a safety deposit box of any bank. The same could be withdrawn only upon the joint
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 Safety Deposit Box No. 1448 of private
respondent Security Bank and Trust Company, a domestic banking corporation hereinafter referred to as
the respondent Bank. For this purpose, both signed a contract of lease (Exhibit "2") which contains, inter
alia, the following conditions:
"13. The bank is not a depositary of the contents of the safe and it has neither the possession nor
control of the same.

14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it
assumes absolutely no liability in connection therewith."
[1]

After the execution of the contract, two (2) renter's keys were given to the renters -- 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 (2) keyholes, one for the guard key and the other for the renter's
key, and can be opened only with the use of both keys. Petitioner claims that the certificates of title
were placed inside the said box.

Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner the two (2) lots at a price
of P225.00 per square meter which, as petitioner alleged in its complaint, translates to a profit of
P100.00 per square meter or a total of 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
thereof, Aguirre, accompanied by the Pugaos, then proceeded to the respondent Bank on 4 October
1979 to open the safety deposit box and get the certificates of title. However, when opened in the
presence of the Bank's representative, the box yielded no such certificates. Because of the delay in the
reconstitution of the title, Mrs. Ramos withdrew her earlier offer to purchase the lots; as a consequence
thereof, the petitioner allegedly failed to realize the expected profit of P280,500.00. Hence, the latter
filed on 1 September 1980 a complaint
[2]
for damages against the respondent Bank with the Court of
First Instance (now Regional Trial Court) of Pasig, Metro Manila which docketed the same as Civil Case
No. 38382.

In its Answer with Counterclaim,
[3]
respondent Bank alleged that the petitioner has no cause of action
because of paragraphs 13 and 14 of the contract of lease (Exhibit "2"); corollarily, loss of any of the
items or articles contained in the box could not 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
subsequently filed an answer to the counterclaim.
[4]


In due course, the trial court, now designated as Branch 161 of the Regional Trial Court (RTC) of Pasig,
Metro Manila, rendered a decision
[5]
adverse to the petitioner on 8 December 1986, the dispositive
portion of which reads:
"WHEREFORE, premises considered, judgment is hereby rendered dismissing plaintiff's complaint.

On defendant's counterclaim, judgment is hereby rendered ordering plaintiff to pay defendant the
amount of FIVE THOUSAND (P5,000.00) PESOS as attorney's fees.

With costs against plaintiff."
[6]

The unfavorable verdict is based on the trial court's conclusion that under paragraphs 13 and 14 of the
contract of lease, the Bank has no liability for the loss of the certificates of title. The court declared that
the said provisions are binding on the parties.

Its motion for reconsideration
[7]
having been denied, petitioner appealed from the adverse decision to
the respondent Court of Appeals which docketed the appeal as CA-G.R. CV No. 15150. Petitioner urged
the respondent Court to reverse the 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 to
law, public order and public policy, the provisions in the contract for lease of the safety deposit box
absolving the Bank from any liability for loss, (c) not concluding 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 petitioner's prayer for nominal and exemplary damages and attorney's fees.
[8]


In its Decision promulgated on 4 July 1989,
[9]
respondent Court affirmed the appealed decision
principally on the theory that the contract (Exhibit "2") executed by the petitioner and respondent Bank
is in the nature of a contract of lease by virtue of which the petitioner and its co-renter were given
control over the safety deposit box and its contents while the Bank retained no right to open the said
box because it had neither the possession nor control over it and its contents. As such, 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 give to another the enjoyment or
use of a thing for a price certain, and for a period which may be definite or indefinite. However, no lease
for more than ninety-nine years shall be valid."
It invoked Tolentino vs. Gonzales
[11]
-- which held that the owner of the property loses his control over
the property leased during the period of the contract -- and Article 1975 of the Civil Code which
provides:
"ART. 1975. The depositary holding certificates, bonds, securities or instruments which earn interest
shall be bound to collect the latter when it becomes due, and to take such steps as may be necessary in
order that the securities may preserve their value and the rights corresponding to them according to
law.

The above provision shall not apply to contracts for the rent of safety deposit boxes."
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 defendant-appellee from liability is in accordance with
the nature of the contract of lease and cannot be regarded as contrary to law, public order and public
policy."
[12]
The appellate court was quick to add, however, that 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 unauthorized persons enter into the vault area or when the rented box is forced open. Thus, as
expressly provided for in stipulation number 8 of the contract in question:
"8. The Bank shall use due diligence that no unauthorized person shall be admitted to any rented safe
and beyond this, the Bank will not be responsible for the contents of any safe rented from it.
[13]

Its motion for reconsideration
[14]
having been denied in the respondent Court's Resolution of 28 August
1989,
[15]
petitioner took this recourse under Rule 45 of the Rules of Court and urges Us to review and set
aside the respondent Court's ruling. Petitioner avers that both the respondent Court and the trial court
(a) did not properly and legally apply the correct law in this case, (b) acted with grave abuse of discretion
or in excess of jurisdiction amounting to lack thereof and (c) set a precedent that is contrary to, or is a
departure from precedents adhered to and affirmed by decisions of this Court and precepts in American
jurisprudence adopted in the Philippines. It reiterates the arguments it had raised in its motion to
reconsider the trial court's decision, the brief submitted to the respondent Court and the motion 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 actually a contract of deposit governed by
Title XII, Book IV of the Civil Code of the Philippines.
[16]
Accordingly, it is claimed that the respondent
Bank is liable for the loss of the certificates of title pursuant to Article 1972 of the said Code which
provides:
"ART. 1972. The depositary is obliged to keep the thing safely and to return it, when required, to the
depositor, or to his heirs and successors, or to the person who may have been designated in the
contract. His responsibility, with regard to the safekeeping and the loss of the thing, shall be governed
by the provisions of Title I of this Book.

If the deposit is gratuitous, this fact shall be taken into account in determining the degree of care that
the depositary must observe."
Petitioner then quotes a passage from American Jurisprudence
[17]
which is supposed to expound on the
prevailing rule in the United States, to wit:
"The prevailing rule appears to be that where a safe-deposit company leases a safe-deposit box or safe
and the lessee takes possession of the box or safe and places therein his securities or other valuables,
the relation of bailee and bailor is created between the parties to the transaction as to such securities or
other valuables; the fact that the safe-deposit company does not know, and that it is not expected that
it shall know, the character or description of the property which is deposited in such safe-deposit box or
safe does not change that relation. That access to the contents of the safe-deposit box can be had only
by the use of a key retained by the lessee (whether it is the 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 that there is
not, in such a case, a delivery of exclusive possession and control to the deposit company, and that
therefore the situation is entirely different from that of ordinary bailment, has been generally rejected
by the courts, usually on the ground that as possession must be either in the depositor or in the
company, it should reasonably be considered as in the latter rather than in the former, since the
company is, by the nature of the contract, given absolute control of access to the property, and the
depositor cannot gain access thereto without the consent and active participation of the company. x x x"
(citations omitted)
and a segment from Words and Phrases
[18]
which states that a contract for the rental of a bank safety
deposit box in consideration of a fixed amount at stated periods is a bailment for hire.

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 thereof, it cites Article 1306 of the Civil
Code which provides that parties to a contract may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good customs,
public order or public policy.

After the respondent Bank filed its comment, this Court gave due course to the petition and required
the parties to simultaneously submit their respective Memoranda.

The petition is partly meritorious.
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 Code. However, We do not fully
subscribe to its view that the same is a contract of deposit that is to be strictly governed by the
provisions in the Civil Code on deposit;
[19]
the contract in the case at bar is a special kind of deposit. It
cannot be characterized as an ordinary contract of lease under Article 1643 because the full and
absolute possession and control of the safety deposit box was not given to the joint renters -- the
petitioner and the Pugaos. The guard key of the box remained with the respondent Bank; without this
key, neither of the renters could open the box. On the other hand, the respondent Bank could not
likewise open the box without the renter's key. In this case, the said key had a duplicate which was
made so that both renters could have access to the box.

Hence, the authorities cited by the respondent Court
[20]
on this point do not apply. Neither could Article
1975, also relied upon by the respondent Court, be invoked as an argument against the deposit theory.
Obviously, the first paragraph of such provision cannot apply to a depositary of certificates, bonds,
securities or instruments which earn interest if such documents are kept in a rented safety deposit box.
It is clear that the depositary cannot open the box without the renter being present.

We observe, however, that the deposit theory itself does not altogether find unanimous support even in
American jurisprudence. We agree with the petitioner that under the latter, the prevailing rule is that
the relation between a bank renting out safe-deposit boxes and its customer with respect to the
contents of the box is that of a bailor and bailee, the bailment being for hire and mutual benefit.
[21]
This
is just the prevailing view because:
"There is, however, some support for the view that the relationship in question might be more properly
characterized as that of landlord and tenant, or lessor and lessee. It has also been suggested that it
should be characterized as that of licensor and licensee. The relation between a bank, safe-deposit
company, or storage company, and the 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 apparently no
jurisdiction in which any rule other than that applicable to bailments governs questions of the liability
and rights of the parties in respect of loss of the contents of safe-deposit boxes."
[22]
(citations omitted)
In the context of our laws which authorize banking institutions to rent out safety deposit boxes, it is
clear that in this jurisdiction, the prevailing rule in the United States has been adopted. Section 72 of the
General Banking Act
[23]
pertinently provides:
"SEC. 72. In addition to the operations specifically authorized elsewhere in this Act, banking institutions
other than building and loan associations may perform the following services:

(a) Receive in custody funds, documents, and valuable objects, and rent safety deposit boxes for the
safeguarding of such effects.

x x x

The banks shall perform the services permitted under subsections (a), (b) and (c) of this section as
depositories or as agents. x x x"
[24]
(emphasis supplied)
Note that the primary function is still found within the parameters of a contract of deposit, i.e., the
receiving in custody of funds, documents and other valuable objects for safekeeping. The renting out of
the safety deposit boxes is not independent from, but related to or in conjunction with, this principal
function. A 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, terms and conditions as
they may deem convenient, provided they are not contrary to law, morals, good customs, public order
or public policy. The depositary's responsibility for the safekeeping of the objects deposited in the case
at bar is governed by Title I, Book IV of the Civil Code. Accordingly, the depositary would be liable if, in
performing its obligation, it is found guilty of fraud, negligence, delay or 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 observed.
[27]
Hence, any stipulation exempting the depositary from any
liability arising from the loss of the thing deposited on account of fraud, negligence or delay would be
void for being contrary to law and public policy. In the instant case, petitioner maintains that conditions
13 and 14 of the questioned contract of lease of the safety deposit box, which read:
"13. The bank is not a depositary of the contents of the safe and it has neither the possession nor
control of the same.

14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it
assumes absolutely no liability in connection therewith."
[28]

are void as they are contrary to law and public policy. We find Ourselves in agreement with this
proposition for indeed, said provisions are inconsistent with the respondent Bank's responsibility as a
depositary under Section 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 exercise reasonable diligence only
with respect to who shall be admitted to any rented safe, to wit:
"8. The Bank shall use due diligence that no unauthorized person shall be admitted to any rented safe
and beyond this, the Bank will not be responsible for the contents of any safe rented from it."
[29]

Furthermore, condition 13 stands on a wrong premise and is contrary to the actual practice of the Bank.
It is not correct to assert that the Bank has neither the possession nor control of the contents of the box
since in fact, 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 said box. As stated earlier, renters cannot
open their respective boxes unless the Bank cooperates by presenting and using this guard key. Clearly
then, to the extent above stated, the foregoing conditions in the contract in question are void and
ineffective. It has been said:
"With respect to property deposited in a safe-deposit box by a customer of a safe-deposit company, the
parties, since the relation is a contractual one, may by special contract define their respective duties or
provide for increasing or limiting the liability of the deposit company, provided such contract is not in
violation of law or public policy. It must clearly appear that there actually was such a special contract,
however, in order to vary the ordinary obligations implied by law from the relationship of the parties;
liability of the deposit company will not be enlarged or restricted by words of doubtful meaning. The
company, in renting safe-deposit boxes, cannot 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 limit 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 Bank was
aware of the agreement between the petitioner and the Pugaos to the 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 that the loss of the certificates of title was due to the fraud or
negligence of the respondent Bank. This in turn flows from this Court's determination that the contract
involved was one of deposit. Since both the petitioner and the Pugaos agreed that each should have one
(1) renter's key, it was obvious that either of them could ask the Bank for access to the safety deposit
box and, with the use of such key and the Bank's own guard key, could open the said box, without the
other renter being present.

Since, however, the petitioner cannot be blamed for the filing of the complaint and no bad faith on its
part had been established, the trial court erred in condemning the petitioner to pay the respondent
Bank attorney's fees. To this extent, the Decision (dispositive portion) of public respondent Court of
Appeals must be modified.

WHEREFORE, the Petition for Review is partially GRANTED by deleting the award for attorney's fees
from the 4 July 1989 Decision of the respondent Court of Appeals in CA-G.R. CV No. 15150. As modified,
and subject to the pronouncement We made above on the nature of the relationship between the
parties in a contract of lease of safety deposit boxes, the dispositive portion of the said Decision is
hereby AFFIRMED and the instant Petition for Review is otherwise DENIED for lack of merit.

No pronouncement as to costs.
SO ORDERED.

Feliciano, (Acting Chairman), Bidin, Romero, and Melo, JJ., concur.
[ G.R. No. 6913, November 21, 1913 ]
THE ROMAN CATHOLIC BISHOP OF JARO, PLAINTIFF AND APPELLEE, VS. GREGORIO DE LA PEA,
ADMINISTRATOR OF THE ESTATE OF FATHER AGUSTIN DE LA PENA, DEFENDANT AND APPELLANT.


D E C I S I O N
MORELAND, J.:
This is an appeal by the defendant from a judgment of the Court of First Instance of Iloilo, awarding to
the plaintiff the sum of P6,641, with interest at the legal rate from the beginning of the action.

It is established in this case that the plaintiff is the trustee of a charitable made for the construction of
a leper hospital and that Father Agustin de la Pea was the duly authorized representative of the
plaintiff to receive the legacy. The defendant is the administrator of the estate of Father De la Pea.

In the year 1898 the books of Father De la Pea, as trustee, showed that he had on hand as such trustee
the sum of P6,641, collected by him for the charitable 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 of the revolution, Father De la Pea was arrested by the military
authorities as a political prisoner, and while thus detained made an order on said bank in favor of the
United States Army officer under whose charge he then was for the sum thus deposited in said
bank. The arrest of Father De la Pea and the confiscation of the funds in the bank were the result of
the claim of the military authorities that he was 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
authorities by virtue of such order, was confiscated and turned over to the Government.

While there is considerable dispute in the case over the question whether the P6,641 of trust funds was
included in the P19,000 deposited as aforesaid, 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
confiscated by the military authorities of the United States.
That branch of the law known in England and America as the law of trusts had no exact counterpart in
the Roman law and has none under the Spanish law. In this jurisdiction, therefore, Father De la Pea's
liability is determined by those portions of the Civil Code which relate to obligations. (Book 4, Title 1.)

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 the
exception of the cases expressly mentioned in the law or those in which the obligation so
declares." (Art. 1105.)
By placing the money in the bank and mixing it with his personal funds De la Pea did not thereby
assume an obligation different from that under which he would have lain if such deposit had not been
made, nor did he thereby make himself liable to repay the money at all hazards. If the money had
been forcibly taken from his pocket or from his house by the military forces of one of the combatants
during a state of war, it is clear that under the provisions of the Civil Code he would have been exempt
from responsibility. The fact that he placed the trust fund in the bank in his personal account does not
add to his responsibility. Such deposit did not make him a debtor who must respond at all hazards.

We do not enter into a discussion for the purpose of determining whether he acted more or less
negligently by depositing the money in the bank than he would if he 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 separate account as trustee. We regard such discussion as substantially
fruitless, inasmuch as the precise question is not one of negligence. There was no law prohibiting him
from depositing it as he did and there was no law which changed his responsibility by reason of the
deposit. While it may be true that one who is under obligation to do or give a thing is in duty bound,
when he sees events approaching the results of which will be dangerous to his trust, to take all
reasonable means and 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 culpably
negligent in selecting one whereas he would not have been if he had selected the other.

The court, therefore, finds and declares that the money which is the subject matter of this action was
deposited by Father De la Pea in the Hongkong and Shanghai Banking Corporation of Iloilo; that said
money was forcibly taken from the bank by the armed forces of the United Sates during the war of the
insurrection; and that said Father De la Pea was not responsible for its loss. The judgment is therefore
reversed, and it is decreed that the plaintiff shall take nothing by his complaint.

Arellano, C. J., Torres and Carson, JJ., concur.
DISSENTING

TRENT, J.,

I dissent. Technically speaking, whether Father De la Pea was a trustee or an agent of the plaintiff his
books showed that in 1898 he had in his possession as trustee or agent the sum of P6,641 belonging to
the plaintiff as the head of the church. This money was then clothed with all the immunities and
protection with which the law seeks to invest trust funds. But when De la Pea mixed this trust fund
with his own and deposited the whole in the bank to his personal account or credit, he by this act
stamped on the said fund his own private marks and unclothed it of all the protection it had. If this
money had been deposited in the name of De la Pea as trustee or agent of the plaintiff, I think that it
may be presumed that the military authorities would not have confiscated it for the reason that they
were looking for insurgent funds only. Again, the plaintiff had no reason to suppose that De la Pea
would attempt to strip the fund of its identity, nor had he said or done anything which tended to relieve
De la Pea from the legal responsibility which pertains to the care and custody of trust funds.

The Supreme Court of the United States in United States vs. Thomas (82 U. S., 337), at page 343,
said: "Trustees are only bound to exercise the same care and solicitude with regard to the trust
property which they would exercise with regard to their own. Equity will not exact more of them. They
are not liable for a loss by theft without their fault. But this exemption ceases when they mix the trust-
money with their own, whereby it loses its identity, and they become mere debtors."

If this proposition is sound and is applicable to cases arising in this jurisdiction, and I entertain no doubt
on this point, the liability of the estate of De la Pea cannot be doubted. But this court in the majority
opinion says: "The fact that he (Agustin de la Pea) placed the trust fund in the bank in his personal
account does not add to his responsibility. Such deposit did not make him a debtor who must respond
at all hazards. * * * There was no law prohibiting him from depositing it as he did, and there was no
law which changed his responsibility, by reason of the deposit."

I assume that the court in using the language which appears in the latter part of the above quotation
meant to say that there was no statutory law regulating the question. Questions of this character are
not usually governed by statutory law. The law is to be found in the very nature of the trust itself, and,
as a general rule, the courts say what facts are necessary to hold the trustee as a debtor.

If De la Pea, after depositing the trust fund in his personal account, had used this money for speculative
purposes, such as the buying and selling of sugar or other products of the country, thereby becoming a
debtor, there would have been no doubt as to the liability of his estate. Whether he used this money
for that purpose the record is silent, but it will be noted that a considerable length of time intervened
from the time of the deposit until the funds were confiscated by the military authorities. In fact the
record shows that De la Pea deposited on June 27, 1898, P5,259, on June 28 of that year P3,280, and
on August 5 of the same year P6,000. The record also shows that these funds were withdrawn and
again deposited all together on the 29th of May, 1900, this last deposit amounting to P18.970. These
facts strongly indicate that De la Pea had as a matter of fact been using the money in violation of the
trust imposed in him.

If the doctrine announced in the majority opinion be followed in cases hereafter arising in this
jurisdiction trust funds will be placed in a precarious condition. The position of the trustee will cease to
be one of trust.










G.R. No. 126780


SECOND DIVISION
[ G.R. NO. 126780, February 17, 2005 ]
YHT REALTY CORPORATION, ERLINDA LAINEZ AND ANICIA PAYAM, PETITIONERS, VS. THE COURT OF
APPEALS AND MAURICE MCLOUGHLIN, RESPONDENTS.

D E C I S I O N
TINGA, J.:
The primary question of interest before this Court is the only legal issue in the case: It is whether a hotel
may evade liability for the loss of items left with it for safekeeping by its guests, by having these guests
execute written waivers holding the establishment or its employees free from blame for such loss in
light of Article 2003 of the Civil Code which voids such waivers.

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 December 1991 of the Regional Trial Court (RTC),
Branch 13, of Manila, finding YHT Realty Corporation, Brunhilda Mata-Tan (Tan), Erlinda Lainez (Lainez)
and Anicia Payam (Payam) jointly and solidarily liable for damages in an action filed by Maurice
McLoughlin (McLoughlin) for the loss of his American and Australian dollars deposited in the safety
deposit box of Tropicana Copacabana Apartment Hotel, owned and operated by YHT Realty Corporation.

The factual backdrop of the case follow.

Private respondent McLoughlin, an Australian businessman-philanthropist, 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 important people, accompanying him in visiting impoverished
street children and assisting him in buying gifts for the children and in distributing the same to
charitable institutions for poor children. Tan convinced McLoughlin to transfer from Sheraton Hotel to
Tropicana where Lainez, Payam and Danilo Lopez were employed. Lopez served as manager of the hotel
while Lainez and Payam had 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 the Philippines
from December 1984 to September 1987.
[3]


On 30 October 1987, McLoughlin arrived from Australia and registered with Tropicana. He rented a
safety deposit box as it was his practice to rent a safety deposit box every time he registered at
Tropicana in previous trips. As a tourist, McLoughlin was aware of the procedure observed by Tropicana
relative to its safety deposit boxes. The safety deposit box could only be opened through the use of two
keys, one of which is given to the registered guest, and the other remaining in the possession of the
management of the hotel. When a registered guest wished to open his safety deposit box, he alone
could personally request the management who then would assign one of its employees to accompany
the guest and assist him in opening the safety deposit box with the two keys.
[4]


McLoughlin allegedly placed the following in his safety deposit box: Fifteen Thousand US Dollars
(US$15,000.00) which he placed in two envelopes, one envelope containing Ten Thousand US Dollars
(US$10,000.00) and the other envelope Five Thousand US Dollars (US$5,000.00); Ten Thousand
Australian Dollars (AUS$10,000.00) which he also placed in another envelope; two (2) other envelopes
containing letters and credit cards; two (2) bankbooks; and a checkbook, arranged side by side inside the
safety deposit box.
[5]


On 12 December 1987, before leaving for a brief trip to Hongkong, McLoughlin opened his safety
deposit box with his key and with the key of the management and took therefrom the envelope
containing Five Thousand US Dollars (US$5,000.00), the envelope containing Ten Thousand Australian
Dollars (AUS$10,000.00), his passports and his credit cards.
[6]
McLoughlin left the other items in the box
as he did not check out of his room at the Tropicana during his short visit to Hongkong. When 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 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 a result of bad accounting since he did not spend anything from that envelope.
[8]


After returning to Manila, he checked out of Tropicana on 18 December 1987 and left for Australia.
When he arrived in Australia, he discovered that the envelope with Ten Thousand US Dollars
(US$10,000.00) was short of Five Thousand US Dollars (US$5,000). He also noticed that the jewelry
which he bought in Hongkong and stored in the safety deposit box upon his return to Tropicana was
likewise missing, except for a diamond bracelet.
[9]


When McLoughlin came back to the Philippines on 4 April 1988, he asked 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 such things and none were turned over to the management. He again
registered at Tropicana and rented a safety deposit box. He placed therein one (1) envelope containing
Fifteen Thousand US Dollars (US$15,000.00), another envelope containing Ten Thousand Australian
Dollars (AUS$10,000.00) and other envelopes containing his traveling papers/documents. On 16 April
1988, McLoughlin requested Lainez and Payam to open his safety deposit box. He noticed that in the
envelope containing Fifteen Thousand US Dollars (US$15,000.00), Two Thousand US Dollars
(US$2,000.00) were missing and in the envelope previously containing Ten Thousand Australian Dollars
(AUS$10,000.00), Four Thousand Five Hundred Australian Dollars (AUS$4,500.00) were missing.
[10]


When McLoughlin discovered the loss, he immediately confronted Lainez and Payam who admitted that
Tan opened the safety deposit box with the key assigned to him.
[11]
McLoughlin went up to his room
where Tan was staying and confronted her. Tan admitted that she had stolen McLoughlins key and was
able to open the safety deposit box with the assistance of Lopez, Payam and Lainez.
[12]
Lopez also told
McLoughlin that Tan stole the key assigned to McLoughlin while the latter was asleep.
[13]


McLoughlin requested the management for an investigation of the incident. Lopez got in touch with Tan
and arranged for a meeting with the police and McLoughlin. When the police did not arrive, Lopez and
Tan went to the room of McLoughlin at Tropicana and thereat, Lopez wrote on a piece of paper a
promissory note dated 21 April 1988. The promissory note reads as follows:
I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and US$2,000.00 or its
equivalent in Philippine currency on or before May 5, 1988.
[14]

Lopez requested Tan to sign the promissory note which the latter did and Lopez also signed as a witness.
Despite the execution of promissory note by Tan, 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 conditions for renting the safety deposit box entitled Undertaking For the Use Of Safety
Deposit Box,
[15]
specifically paragraphs (2) and (4) thereof, to wit:
2. To release and hold free and blameless TROPICANA APARTMENT HOTEL from any liability arising
from any loss in the contents and/or use of the said deposit box for any cause whatsoever,
including but not limited to the presentation or use thereof by any other person should the key
be lost;
. . .
4. To return the key and execute the RELEASE in favor of TROPICANA APARTMENT HOTEL upon
giving up the use of the box.
[16]

On 17 May 1988, McLoughlin went back to Australia and he consulted his lawyers as to the validity of
the abovementioned stipulations. They opined that the stipulations are void for being violative of
universal hotel practices and customs. His 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 to the Department of Justice (DOJ) which forwarded the same to the Western Police District
(WPD).
[18]


After receiving a copy of the indorsement in Australia, McLoughlin came to the Philippines and
registered again as a hotel guest of Tropicana. McLoughlin went to MalacaHang to follow up on his
letter but he was instructed to go to the DOJ. The DOJ directed him to proceed to the WPD for
documentation. But McLoughlin went back to Australia as he had an urgent business matter to attend
to.

For several times, McLoughlin left for Australia to attend to his business and came back to the
Philippines to follow up on his letter to the President but he failed to obtain any concrete assistance.
[19]


McLoughlin left again for Australia and upon his return to the Philippines on 25 August 1989 to pursue
his claims against petitioners, the WPD conducted an investigation which resulted in the preparation of
an affidavit which was forwarded to the Manila City Fiscals Office. Said affidavit became the basis of
preliminary investigation. However, McLoughlin left again for Australia without receiving the notice of
the hearing on 24 November 1989. Thus, the case at the Fiscals Office was dismissed for failure to
prosecute. Mcloughlin requested the reinstatement of the criminal charge for theft. In the meantime,
McLoughlin and his lawyers wrote letters of demand to those having responsibility to pay the damage.
Then he left again for Australia.

Upon his return on 22 October 1990, he registered at the Echelon Towers at Malate, Manila. Meetings
were held between McLoughlin and his lawyer which 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 McLoughlins money which was discovered on 16 April 1988. After filing the complaint,
McLoughlin left again for Australia to attend to an urgent business matter. Tan and Lopez, however,
were not served with summons, and trial proceeded with only Lainez, Payam and YHT Realty
Corporation as defendants.

After defendants had filed their Pre-Trial Brief admitting that they had previously allowed and assisted
Tan to open the safety deposit box, McLoughlin filed an Amended/Supplemental Complaint
[20]
dated 10
June 1991 which included another incident of loss of money and jewelry in the safety deposit box rented
by McLoughlin in the same hotel which took place prior to 16 April 1988.
[21]
The trial court admitted
the Amended/Supplemental Complaint.

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 the hearing, he incurred expenses for hotel
bills, airfare and other transportation expenses, long distance calls to Australia, Meralco power
expenses, and expenses for food and maintenance, among others.
[22]


After trial, the RTC of Manila rendered judgment in favor of McLoughlin, the dispositive portion of which
reads:
WHEREFORE, above premises considered, judgment is hereby rendered by this Court in favor of plaintiff
and against the defendants, to wit:
1. Ordering defendants, jointly and severally, to pay plaintiff the sum of US$11,400.00 or its
equivalent in Philippine Currency of P342,000.00, more or less, and the sum of AUS$4,500.00 or
its equivalent in Philippine Currency of P99,000.00, or a total of P441,000.00, more or less, with
12% interest from April 16 1988 until said amount has been paid to plaintiff (Item 1, Exhibit CC);

2. Ordering defendants, jointly and severally to pay plaintiff the sum of P3,674,238.00 as actual
and consequential damages arising from the loss of his Australian and American dollars and
jewelries complained against and in prosecuting his claim and rights administratively and
judicially (Items II, III, IV, V, VI, VII, VIII, and IX, Exh. CC);

3. Ordering defendants, jointly and severally, to pay plaintiff the sum of P500,000.00 as moral
damages (Item X, Exh. CC);

4. Ordering defendants, jointly and severally, to pay plaintiff the sum of P350,000.00 as exemplary
damages (Item XI, Exh. CC);

5. And ordering defendants, jointly and severally, to pay litigation expenses in the sum of
P200,000.00 (Item XII, Exh. CC);

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 appearance; and

7. Plus costs of suit.
SO ORDERED.
[23]

The trial court found that McLoughlins allegations as to the fact of loss and as to the amount of money
he lost were sufficiently shown by his direct and straightforward manner of testifying in court and found
him to be credible and worthy of belief as it was established that McLoughlins money, kept in
Tropicanas safety deposit box, was taken by Tan without McLoughlins consent. The taking was effected
through the use of the master key which was in the possession of the management. Payam and Lainez
allowed Tan to use the master key without authority from McLoughlin. The trial court added that if
McLoughlin had not lost his dollars, he would not have gone through the trouble and personal
inconvenience of seeking aid and assistance from the Office of the President, DOJ, police authorities and
the City Fiscals Office in his desire to recover his losses from the hotel management and Tan.
[24]


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 allegedly occurred during his stay at Tropicana
previous to 4 April 1988, no claim was made by McLoughlin for such losses in his complaint dated 21
November 1990 because he was not sure how they were lost and who the responsible persons were.
But considering the admission of the defendants in their pre-trial brief that on three previous occasions
they allowed Tan to open the box, the trial court opined that it was logical and reasonable to presume
that his personal assets consisting of Seven Thousand US Dollars (US$7,000.00) and jewelry were taken
by Tan from the safety deposit box without McLoughlins consent through the cooperation of Payam
and Lainez.
[25]


The trial court also found that defendants acted with gross negligence in the performance and exercise
of their duties and obligations as innkeepers and were therefore liable to answer for the losses incurred
by McLoughlin.
[26]


Moreover, the trial court ruled that paragraphs (2) and (4) of the Undertaking For The Use Of Safety
Deposit Box are not valid for being contrary to the express mandate of Article 2003 of the New Civil
Code and against public policy.
[27]
Thus, there being fraud or wanton conduct on the part of defendants,
they should be responsible for all damages which may be attributed to the non-performance of their
contractual obligations.
[28]


The Court of Appeals affirmed the disquisitions made by the lower court except as to the amount of
damages awarded. The decretal text of the appellate courts decision reads:
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED but modified as follows:

The appellants are directed jointly and severally to pay the plaintiff/appellee the following amounts:

1) P153,200.00 representing the peso equivalent of US$2,000.00 and AUS$4,500.00;

2) P308,880.80, representing the peso value for the air fares from Sidney [sic] to Manila and back for a
total of eleven (11) trips;

3) One-half of P336,207.05 or P168,103.52 representing payment to Tropicana Apartment Hotel;

4) One-half of P152,683.57 or P76,341.785 representing payment to Echelon Tower;

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 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 P178,000.00 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.
[29]

Unperturbed, YHT Realty Corporation, Lainez and Payam went to this Court in this appeal by certiorari.

Petitioners submit for resolution by this Court the following issues: (a) whether the appellate courts
conclusion on the alleged prior existence and subsequent loss of the subject money and jewelry is
supported by the evidence on record; (b) whether the finding of gross negligence on the part of
petitioners in the performance of their duties as innkeepers is supported by the evidence on record; (c)
whether the Undertaking For The Use of Safety Deposit Box admittedly executed by private
respondent is null and void; and (d) whether the damages awarded to private respondent, as well as the
amounts thereof, are proper under the circumstances.
[30]


The petition is devoid of merit.

It is worthy of note that the thrust of Rule 45 is the resolution only of questions of law and any
peripheral factual question addressed to this Court is beyond the bounds of this mode of review.

Petitioners point out that the evidence on record is insufficient to prove the fact of prior existence of the
dollars and the jewelry which had been lost while deposited in the safety deposit boxes of Tropicana,
the basis of the trial court and the appellate court being the sole testimony of McLoughlin as to the
contents thereof. Likewise, petitioners dispute the finding of gross negligence on their part as not
supported by the evidence on record.

We are not persuaded. We adhere to the findings of the trial court as affirmed by the appellate court
that the fact of loss was established by the credible testimony in open court by McLoughlin. Such
findings are factual and therefore beyond the ambit of the present petition.

The trial court had the occasion to observe the demeanor of McLoughlin while testifying which reflected
the veracity of the facts testified to by him. On this score, we give full credence to the appreciation of
testimonial evidence by the trial court especially if what is at issue is the credibility of the witness. The
oft-repeated principle is that where the credibility of a witness is an issue, the established rule is that
great respect is accorded to the evaluation of the credibility of witnesses by the trial court.
[31]
The trial
court is in the best position to assess the credibility of witnesses and their testimonies because of its
unique opportunity to observe the witnesses firsthand and note their demeanor, conduct and attitude
under grilling examination.
[32]


We are also not impressed by petitioners argument that the finding of gross negligence by the lower
court as affirmed by the appellate court is not supported by 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 remains in the possession of the management. If the guest desires to open his safety deposit
box, he must request the management for the other key to open the same. In other words, the guest
alone cannot open the safety deposit box without the assistance of the management or its employees.
With more reason that access to the safety deposit box should be denied if the one requesting for the
opening of the safety deposit box is a stranger. Thus, in case of loss of any item deposited in the safety
deposit box, it is inevitable to conclude that the management had at least a hand in the consummation
of the taking, unless the reason for the loss is force majeure.

Noteworthy is the fact that Payam and Lainez, who were employees of Tropicana, had custody of the
master key of the management when the loss took 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
Tropicana had prior knowledge that a person aside from the registered guest had access to the safety
deposit box. Yet the management failed to notify McLoughlin of the incident and waited for him to
discover the taking before it disclosed the matter to him. Therefore, Tropicana should be held
responsible for the damage suffered by McLoughlin by reason of the negligence of its employees.

The management should have guarded against the occurrence of this incident considering that Payam
admitted in open court that she assisted Tan three times in opening the safety deposit box of
McLoughlin at around 6:30 A.M. to 7:30 A.M. while the latter was still asleep.
[34]
In light of the
circumstances surrounding this case, it is undeniable that without the acquiescence of the employees of
Tropicana to the opening of the safety deposit box, the loss of McLoughlins money could and should
have been avoided.

The management contends, however, that McLoughlin, by his act, made its employees believe that Tan
was his spouse for she was always with him most of the time. The evidence on record, however, is
bereft of any showing that McLoughlin 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 showing that he made the management believe that Tan was his wife or was duly authorized to
have access to the safety deposit box. Mere close companionship and intimacy are not enough to
warrant such conclusion considering that what is involved in the instant case is the very safety of
McLoughlins deposit. If only petitioners exercised due diligence in taking care of McLoughlins safety
deposit box, they should have confronted him as to his relationship with Tan considering that the latter
had been observed opening McLoughlins safety deposit box a number of times at the early hours of the
morning. Tans acts should have prompted the management to investigate her relationship with
McLoughlin. Then, petitioners would have exercised due diligence required of them. Failure to do so
warrants the conclusion that the management had been remiss in complying with the obligations
imposed upon hotel-keepers under the law.

Under Article 1170 of the New Civil Code, those who, in the performance of their obligations, are guilty
of negligence, are liable for damages. As to who shall bear the burden of paying damages, Article 2180,
paragraph (4) of the same Code 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
branches in which the latter are employed or on the occasion of their functions. Also, this Court has
ruled that if an employee is found negligent, it is presumed that the employer was negligent in selecting
and/or supervising him for it is hard for the victim to prove the negligence of such employer.
[35]
Thus,
given the fact that the loss of McLoughlins money was consummated through the negligence of
Tropicanas employees in allowing Tan to open the safety deposit box without the guests consent, both
the assisting employees and YHT Realty Corporation itself, as owner and operator of Tropicana, should
be held solidarily liable pursuant to Article 2193.
[36]


The issue of whether the Undertaking For The Use of Safety Deposit Box executed by McLoughlin is
tainted with nullity presents a legal question appropriate for resolution in this petition. Notably, both
the trial court and the appellate court found the same to be null and void. We find no reason to reverse
their common conclusion. Article 2003 is controlling, thus:
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 stipulation between the hotel-keeper and the
guest whereby the responsibility of the former as set forth in Articles 1998 to 2001
[37]
is suppressed or
diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply
to situations such as that presented in this case. The hotel business like the common carriers business is
imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only lodging
for hotel guests and security to their persons and belongings. The twin duty constitutes the essence of
the business. The law in turn does not allow such duty to the public to be negated or diluted by any
contrary stipulation in so-called undertakings that ordinarily appear in prepared forms imposed by
hotel keepers on guests for their signature.

In an early case,
[38]
the Court of Appeals through its then Presiding Justice (later Associate Justice of the
Court) Jose P. Bengzon, ruled that to hold hotelkeepers or innkeeper liable for the effects of their guests,
it is not necessary that they be 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 hotelkeeper be
enforced when the missing items are taken without the guests knowledge and consent from a safety
deposit box provided by the hotel itself, as in this case.

Paragraphs (2) and (4) of the undertaking manifestly contravene Article 2003 of the New Civil Code for
they allow Tropicana to be released from liability arising from any loss in the contents and/or use of the
safety deposit box for any cause whatsoever.
[40]
Evidently, the undertaking was intended to bar any
claim against Tropicana for any loss of the contents of the safety deposit box whether or not negligence
was incurred by Tropicana or its employees. The New Civil Code is explicit that the responsibility of the
hotel-keeper shall extend to loss of, or injury to, the personal property of the guests even if caused by
servants or employees of the keepers of hotels or inns as well as by strangers, except as it may proceed
from 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 or robber was done with the use
of arms or through an irresistible force to qualify the same as force majeure.
[42]


Petitioners likewise anchor their defense on Article 2002
[43]
which exempts the hotel-keeper from
liability if the loss is due to the acts of his guest, his family, or visitors. Even a cursory reading of the
provision would lead us to reject petitioners contention. The justification they raise would render
nugatory the public interest sought to be protected by the provision. What if the negligence of the
employer or its employees facilitated the consummation of a crime committed by the registered guests
relatives or visitor? Should the law exculpate the hotel from liability since the loss was due to the act of
the visitor of the registered guest of the hotel? Hence, this provision presupposes that the hotel-keeper
is not guilty of concurrent negligence or has not contributed in any degree to the occurrence of the loss.
A depositary is not responsible for the loss of goods by theft, unless his actionable negligence
contributes to the loss.
[44]


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 are necessary to open the safety deposit box.
Without the assistance of hotel employees, the loss would not have occurred. Thus, Tropicana was guilty
of concurrent negligence in allowing Tan, who was not the registered guest, to open the safety deposit
box of McLoughlin, even assuming that the latter was also guilty of negligence in allowing another
person to use his key. To rule otherwise would result in undermining the safety of the safety deposit
boxes in hotels for the 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 box without fear of
any liability that will attach thereafter in case such person turns 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 visitors.

Petitioners contend that McLoughlins case was mounted on the theory of contract, but the trial court
and the appellate court upheld the grant of the claims of the latter on the basis of tort.
[45]
There is
nothing anomalous in how the lower courts decided the controversy for this Court has pronounced a
jurisprudential rule that tort liability can exist even if there are already contractual relations. The act
that breaks the contract may also be tort.
[46]


As to damages awarded to McLoughlin, we see no reason to modify the 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 amount of damages awarded and such finding is binding upon
this Court especially if sufficiently proven by evidence and not unconscionable or excessive. Thus, the
appellate court correctly awarded McLoughlin Two Thousand US Dollars (US$2,000.00) and Four
Thousand Five Hundred Australian dollars (AUS$4,500.00) or their peso equivalent at the time of
payment,
[47]
being the amounts duly proven by evidence.
[48]
The alleged loss that took place prior to 16
April 1988 was not considered since the amounts alleged to have been taken were not sufficiently
established by evidence. The appellate court also correctly awarded the sum of P308,880.80,
representing the peso value for the air fares from Sydney to Manila and back for a total of eleven (11)
trips;
[49]
one-half of P336,207.05 or P168,103.52 representing payment to Tropicana;
[50]
one-half of
P152,683.57 or P76,341.785 representing payment to Echelon Tower;
[51]
one-half of P179,863.20 or
P89,931.60 for the taxi or transportation expenses from McLoughlins residence to Sydney Airport and
from MIA to the hotel here in Manila, for the eleven (11) trips;
[52]
one-half 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]


The amount of P50,000.00 for moral damages is reasonable. Although trial courts are given discretion to
determine the amount of moral damages, the appellate court may modify or change the amount
awarded when it is palpably and scandalously excessive. Moral damages are not intended to enrich a
complainant at the expense of a defendant. They are awarded only to enable the injured party to obtain
means, diversion or amusements that will serve to alleviate the moral suffering he has undergone, by
reason of defendants culpable action.
[55]


The awards of P10,000.00 as exemplary damages and P200,000.00 representing attorneys fees are
likewise sustained.

WHEREFORE, foregoing premises considered, the Decision of the Court of Appeals dated 19 October
1995 is hereby AFFIRMED. Petitioners are directed, jointly and severally, to pay private respondent the
following amounts:
(1) US$2,000.00 and AUS$4,500.00 or their peso equivalent at the time of payment;

(2) P308,880.80, representing the peso value for the air fares from Sydney to Manila and back for a total
of eleven (11) trips;

(3) One-half of P336,207.05 or P168,103.52 representing payment to Tropicana Copacabana Apartment
Hotel;

(4) One-half of P152,683.57 or P76,341.785 representing payment to Echelon Tower;

(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.

Puno, (Chairman), Callejo, Sr., and Chico-Nazario, JJ., concur.

Austria-Martinez, J., no part.