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BANK OF THE PHILIPPINE ISLANDS, petitioner,

vs. THE INTERMEDIATE APPELLATE COURT and


RIZALDY T. ZSHORNACK respondents.
G.R. No. L-66826 | 1988-08-19
CORTES,

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 (plaintiff's) 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.

SO

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.

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.

Costs

1.

against
ORDERED.

defendant
[Rollo,

COMTRUST.
pp.

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. 210-465-29, 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 Leovigilda D. Dizon in the sum
of US$1,000 drawn on the Chase Manhattan Bank, New
York, 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?

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.

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.

his current account per deposit slip also accomplished


by
Garcia.

As to the second explanation, even if we assume that


there was such an agreement, the evidence do 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. 254109.

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.

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:

Before we go into the nature of the contract entered


into, an important point which arises on the pleadings,
must
be
considered.

Makati----Cable

Address:

Philippines----"COMTRUST"
COMMERCIAL
of
Quezon

BANK
AND
the
City

December
MR.
&/OR

TRUST

8,
RIZALDY
T.
MRS.
SHIRLEY

COMPANY
Philippines
Branch
1975

E.

ZSHORNACK
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
VIRGILIO

by:(Sgd.)
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

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 plaintiffs 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, film, 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

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.

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.

SO ORDERED.
THE ROMAN CATHOLIC BISHOP OF JARO, plaintiffappellee,
vs.
GREGORIO
DE
LA
PENA,
administrator of the estate of Father Agustin de
la Pena, defendant-appellant.
G.R. No. 6913 | 1913-11-21
DECISION
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 bequest 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, shoed 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 dela 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 so 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.
Branch of the law know in England and America as the
law of the trusts had no exact counterpart in the
Roman law and is more has none under the Spanish
law, In this jurisdiction, therefore, Father dela 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 exceptions of
the cases expressly mentioned in the law of 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 take 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 is his personal
account does not add to his responsibility. Such deposit
did not make him a debtor who must respond at all the
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
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 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 the 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 things 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 been constrained to hold that, in choosing
between two means equally legal, he is culpably
negligent in selecting 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 States 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.
CA AGRO-INDUSTRIAL DEVELOPMENT CORP.,
petitioner, vs. THE HONORABLE COURT OF
APPEALS and SECURITY BANK AND TRUST
COMPANY, respondents.
G.R. No. 90027 | 1993-03-03
D

DAVIDE,

I
JR.,

I
J

N
p:

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."

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 defendantappellee 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 safedeposit 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. . . ." (citations omitted).
and a segment from Words
states that a contract for the
deposit box in consideration
stated
periods
is
a

and Phrases 18 which


rental of a bank safety
of a fixed amount at
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.

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 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 suggest that 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:

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.

"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:

The

(a) Receive in custody funds, documents, and valuable


objects, and rent safety deposit boxes for the
safeguarding
of
such
effects.

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

xxx

xxx

xxx

The banks shall perform the services permitted under

subsections (a), (b) and (c) of this section as


depositories or as agents. . . . " 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.
ANGEL JAVELLANA, plaintiff-appellee, vs. JOSE
LIM, ET. AL., defendants-appellants.
G.R. No. 4015 | 1908-08-24
D

TORRES,

As a counterclaim, the defendants alleged that they


had paid to the plaintiff sums which, together with the
P1,102.16 acknowledged in the complaint, aggregated
the total sum of P5,602.16, and that, deducting
therefrom the P2,686.58 stated in the document
transcribed in the complaint, the plaintiff still owed the
defendants P2,915.58; therefore, they asked that
judgment be entered absolving them, and sentencing
the plaintiff to pay them the sum of P2,915.58 with the
costs.

N
J.:

The attorney for the plaintiff, Angel Javellana, filed a


complaint on the 30th of October, 1906, with the Court
of First Instance of Iloilo, praying that the defendants,
Jose Lim and Ceferino Domingo Lim, be sentenced to
jointly and severally pay the sum of P2,686.58, with
interest thereon at the rate of 15 per cent per annum
from the 20th of January, 1898, until full payment
should be made, deducting from the amount of interest
due the sum of P1,102.16, and to pay the costs of the
proceedings.
Authority from the court having been previously
obtained, the complaint was amended on the 10th of
January, 1907; it was then alleged, that on the 26th of
May, 1897, the defendants executed and subscribed a
document in favor of the plaintiff reading as follows:
"We have received from Angel Javellana, as a deposit
without interest, the sum of two thousand six hundred
and eighty-six pesos and fifty-eight cents of pesos
fuentes, which we will return to the said gentleman,
jointly and severally, on the 20th of January, 1898. ---Jaro, 26th of May, 1897. ---- Signed: Jose Lim. ---Signed:
Ceferino
Domingo
Lim."
That, when the obligation became due, the defendants
begged the plaintiff for an extension of time for the
payment thereof, binding themselves to pay interest at
the rate of 15 per cent on the amount of their
indebtedness, to which the plaintiff acceded; that on
the 15th of May, 1902, the debtors paid on account of
interest due the sum of 1,000 pesos, with the
exception of which they had not paid any other sum on
account of either capital or interest, notwithstanding
the requests made by the plaintiff, who had thereby
been
subjected
to
loss
and
damages.
A demurrer to the original complaint was overruled,
and on the 4th of January, 1907, the defendants
answered the original complaint before its amendment,
setting forth that they acknowledged the facts stated
in Nos. 1 and 2 of the complaint; that they admitted
the statements of the plaintiff relative to the payment
of 1,102.16 pesos made on the l5th' of November,
1902, not, however, as payment of interest on the
amount stated in the foregoing document, but on
account of the principal, and denied that there had
been any agreement as to an extension of the time for
payment and the payment of interest at the rate of 15
per cent per annum as alleged in paragraph 3 of the
complaint, and also denied all the other statements
contained
therein.

Evidence was adduced by both parties and, upon their


exhibits, together with an account book having been
made of record, the court below rendered judgment on
the 15th of January, 1907, in favor of the plaintiff for
the recovery of the sum of P5,714.44 and costs.
The defendants excepted to the above decision and
moved for a new trial. This motion was overruled and
was also excepted to by them; the bill of exceptions
presented by the appellants having been approved, the
same was in due course submitted to this court.
The document of indebtedness inserted in the
complaint states that the plaintiff left on deposit with
the defendants a given sum of money which they were
jointly and severally obliged to return on a certain date
fixed in the document; but that, nevertheless, when
the document appearing as Exhibit 2, written in the
Visayan dialect and followed by a translation into
Spanish was executed, it was acknowledged, at the
date thereof, the 15th of November, 1902, that the
amount deposited had not yet been returned to the
creditor, whereby he was subjected to losses and
damages amounting to 830 pesos since the 20th of
January, 1898, when the return was again stipulated
with the further agreement that the amount deposited
should bear interest at the rate of 15 per cent per
annum from the aforesaid date of January 20, and that
the 1,000 pesos paid to the depositor on the 15th of
May, 1900, according to the receipt issued by him to
the debtors, would be included, and that the said rate
of interest would obtain until the debtors, paid the
creditor the said amount in full. In this second
document the contract between the parties, which is a
real loan of money with interest, appears perfectly
defined, notwithstanding the fact that in the original
document executed by the debtors, on the 26th of
May, 1897, it is called a deposit; so that when they
bound themselves jointly and severally to refund the
sum of 2,686.58 pesos to the depositor, Javellana, they
did not engage to return the same coins received and
of which the amount deposited consisted, and they
could have accomplished the return agreed upon by
the delivery of a sum equal to the one received by
them. For this reason it must be understood that the
debtors were lawfully authorized to make use of the
amount deposited, which they have done, as
subsequently shown when asking for an extension of
the time for the return thereof, inasmuch as,
acknowledging that they have subjected the lender,
their creditor, to losses and damages for not complying
with what had been stipulated, and being conscious
that they had used, for their own profit and gain, the
money that they received apparently as a deposit, they
engaged to pay interest to the creditor from the date
named until the time when the refund should be made.
Such conduct on the part of the debtors is

unquestionable evidence that the transaction entered


into between the interested parties was not a deposit,
but
a
real
contract
of
loan.
Article 1767 of the Civil Code provides that ---"The depositary can not make use of the thing
deposited without the express permission of the
depositor.
"Otherwise he shall be liable for losses and damages."
Article

1768

also

provides

that

----

"When the depositary has permission to make use of


the thing deposited, the contract loses the character of
a deposit and becomes a loan or bailment.
"The permission shall not be presumed, and its
existence
must
be
proven."
When on one of the latter days of January, 1898, Jose
Lim went to the office of the creditor asking for an
extension of one year, in view of the fact that money
was scarce, and because neither himself nor the other
defendant were able to return the amount deposited,
for which reason he agreed to pay interest at the rate
of 15 per cent per annum, it was because, as a matter
of fact, he did not have in his possession the amount
deposited, he having made use of the same in his
business and for his own profit; and the creditor, by
granting them the extension, evidently confirmed the
express permission previously given them to use and
dispose of the amount slated as having been
deposited, which, in accordance with the terms of the
law, must be considered as given them on loan, to all
intents and purposes gratuitously, until the 20th of
January, 1898, and from that date with interest at 15
per cent per annum until its full payment, deducting
from the total amount of interest the sum of 1,000
pesos, in accordance with the provisions of article 1173
of
the
Civil
Code.
Notwithstanding the fact that it does not appear that
Jose Lim signed the document (Exhibit 2) executed in
the presence of three witnesses on the 15th of
November, 1902, by Ceferino Domingo Lim on behalf
of himself and the former, nevertheless, the said
document has not been contested as false, either by a
criminal or by a civil proceeding, nor has any doubt
been cast upon the authenticity of the signatures of
the witnesses who attested the execution of the same;
and from the evidence in the case one is sufficiently
convinced that the said Jose Lim was perfectly aware of
and had authorized his joint codebtor to liquidate the
interest, to pay the sum of 1,000 pesos, on account
thereof, and to execute the aforesaid document No. 2.
A true ratification of the original document of deposit
was thus made, and not the least proof is shown in the
record that Jose Lim had ever paid the whole or any
part of the capital stated in the original document,
Exhibit
1.
If the amount, together with interest claimed in the
complaint, less 1,000 pesos appears as fully
established, such is not the case with the defendants'
counterclaim for P5,602.16, because the existence and
certainty of said indebtedness imputed to the plaintiff

has not been proven, and the defendants, who call


themselves creditors for the said amount, have not
proven in a satisfactory manner that the plaintiff had
received partial payments on account of the same; the
latter alleges with good reason, that they should
produce the receipts which he may have issued, and
which he did issue whenever they paid him any money
on account. The plaintiff's allegation that the two
amounts of 400 and 1,200 pesos, referred to in
documents marked "C" and "D" offered in evidence by
the defendants, had been received from Ceferino
Domingo Lim on account of other debts of his, has not
been contradicted, and the fact that in the original
complaint the sum of 1,102.16 pesos, was expressed in
lieu of 1,000 pesos, the only payment made on account
of interest on the amount deposited according to
documents No. 2 and letter "B" above referred to, was
due
to
a
mistake.
Moreover, for the reasons above set forth it may, as a
matter of course, be inferred that there was no renewal
of the contract of deposit converted into a loan,
because, as has already been stated, the defendants
received said amount by virtue of a real loan contract
under the name of a deposit, since the so-called bails
were forthwith authorized to dispose of the amount
deposited. This they have done, as has been clearly
shown.
The original joint obligation contracted by the
defendant debtors still exists, and it has not been
shown or proven in the proceedings that the creditor
had released Jose Lim from complying with his
obligation in order that he should not be sued for or
sentenced to pay the amount of capital and interest
together with his codebtor, Ceferino Domingo Lim,
because the record offers satisfactory evidence against
the pretension of Jose Lim, and it further appears that
document No. 2 was executed by the other debtor,
Ceferino Domingo Lim, for himself and on behalf of
Jose Lim; and it has also been proven that Jose Lim,
being fully aware that his debt had not yet been
settled, took steps to secure an extension of the time
for payment, and consented to pay interest in return
for the concession requested from the creditor.
In view of the foregoing, and adopting the findings in
the
judgment
appealed
from, it is our opinion that the same should be and is
hereby affirmed with the costs of this instance against
the appellant, provided that the interest agreed upon
shall be paid until the complete liquidation of the debt.
So ordered.
JOSEPH CHAN, WILSON CHAN and LILY CHAN,
petitioners, vs. BONIFACIO S. MACEDA, JR.,
respondent.
G.R. No. 142591 | 2003-04-30
D

SANDOVAL-GUTIERREZ,

N
J.:

A judgment of default does not automatically imply


admission by the defendant of the facts and causes of
action of the plaintiff. The Rules of Court require the
latter to adduce evidence in support of his allegations
as an indispensable condition before final judgment
could be given in his favor.[1] The trial judge has to

evaluate the allegations with the highest degree of


objectivity and certainty. He may sustain an allegation
for which the plaintiff has adduced sufficient evidence,
otherwise, he has to reject it. In the case at bar, judicial
review is imperative to avert the award of damages
that is unreasonable and without evidentiary support.

preliminary
docketed

Assailed in this petition for review under Rule 45 of the


1997 Rules of Civil Procedure, as amended, is the
Decision[2] dated June 17, 1999 of the Court of
Appeals in CA-G.R. CV No. 57323, entitled "Bonifacio S.
Maceda, Jr. versus Joseph Chan, et. al.," affirming in
toto the Decision[3] dated December 26, 1996 of the
Regional Trial Court, Branch 160, Pasig City, in Civil
Case
No.
53044.

On August 25, 1989, or after almost four (4) years, the


trial court dismissed respondent's complaint for his
failure to prosecute and for lack of interest."[9] On
September 6, 1994, or five years thereafter,
respondent filed a motion for reconsideration, but the
same was denied in the Order dated September 9,
1994 because of the failure of respondent and his
counsel to appear on the scheduled hearing.[10]

The

On October 14, 1994, respondent filed a second motion


for reconsideration. This time, the motion was granted
and the case was ordered reinstated on January 10,
1995, or ten (10) years from the time the action was
originally filed.[11] Thereafter, summons, together with
the copies of the complaint and its annexes, were
served
on
petitioners.

essential

antecedents

are

as

follows:

On July 28, 1976, Bonifacio S. Maceda, Jr., herein


respondent, obtained a P7.3 million loan from the
Development Bank of the Philippines for the
construction of his New Gran Hotel Project in Tacloban
City.
Thereafter, on September 29, 1976, respondent
entered into a building construction contract with
Moreman Builders Co., Inc., (Moreman). They agreed
that the construction would be finished not later than
December
22,
1977.
Respondent purchased various construction materials
and equipment in Manila. Moreman, in turn, deposited
them in the warehouse of Wilson and Lily Chan, herein
petitioners. The deposit was free of charge.
Unfortunately,
Moreman
failed
to
finish
the
construction of the hotel at the stipulated time. Hence,
on February 1, 1978, respondent filed with the then
Court of First Instance (CFI, now Regional Trial Court),
Branch 39, Manila, an action for rescission and
damages against Moreman, docketed as Civil Case No.
113498.

On November 28, 1978, the CFI rendered its


Decision[4] rescinding the contract between Moreman
and respondent and awarding to the latter P
445,000.00 as actual, moral and liquidated damages;
P20,000.00
representing
the
increase
in
the
construction materials; and P35,000.00 as attorney's
fees. Moreman interposed an appeal to the Court of
Appeals but the same was dismissed on March 7, 1989
for being dilatory. He elevated the case to this Court
via a petition for review on certiorari. In a Decision[5]
dated February 21, 1990, we denied the petition. On
April 23, 1990,[6] an Entry of Judgment was issued.
Meanwhile, during the pendency of the case,
respondent ordered petitioners to return to him the
construction materials and equipment which Moreman
deposited in their warehouse. Petitioners, however,
told them that Moreman withdrew those construction
materials
in
1977.
Hence, on December 11, 1985, respondent filed with
the Regional Trial Court, Branch 160, Pasig City, an
action for damages with an application for a writ of

attachment
as
Civil

against
Case

petitioners,[7]
No.
53044.

In the meantime, on October 30, 1986, respondent was


appointed Judge of the Regional Trial Court, Branch 12,
San
Jose
Antique.[8]

On March 2, 1995, counsel for petitioners filed a


motion to dismiss on several grounds.[12] Respondent,
on the other hand, moved to declare petitioners in
default on the ground that their motion to dismiss was
filed out of time and that it did not contain any notice
of
hearing.[13]
On April 27, 1995, the trial court issued an order
declaring
petitioners
in
default.[14]
Petitioners filed with the Court of Appeals a petition for
certiorari[15] to annul the trial court's order of default,
but the same was dismissed in its Order[16] dated
August 31, 1995. The case reached this Court, and in a
Resolution dated October 25, 1995,[17] we affirmed
the assailed order of the Court of Appeals. On
November 29, 1995,[18] the corresponding Entry of
Judgment
was
issued.
Thus, upon the return of the records to the RTC, Branch
160, Pasig City, respondent was allowed to present his
evidence
ex-parte.
Upon motion of respondent, which was granted by the
trial court in its Order dated April 29, 1996,[19] the
depositions of his witnesses, namely, Leonardo Conge,
Alfredo Maceda and Engr. Damiano Nadera were taken
in the Metropolitan Trial Court in Cities, Branch 2,
Tacloban City.[20] Deponent Leonardo Conge, a labor
contractor, testified that on December 14 up to
December 24, 1977, he was contracted by petitioner
Lily Chan to get bags of cement from the New Gran
Hotel construction site and to store the same into the
latter's warehouse in Tacloban City. Aside from those
bags of cement, deponent also hauled about 400
bundles of steel bars from the same construction site,
upon order of petitioners. Corresponding delivery
receipts were presented and marked as Exhibits "A",
"A-1","A-2","A-3"
and
"A-4".[21]
Deponent Alfredo Maceda testified that he was
respondent's Disbursement and Payroll Officer who
supervised the construction and kept inventory of the
properties of the New Gran Hotel. While conducting the

inventory on November 23, 1977, he found that the


approximate total value of the materials stored in
petitioners' warehouse was P214,310.00. This amount
was accordingly reflected in the certification signed by
Mario Ramos, store clerk and representative of
Moreman who was present during the inventory.[22]

inventory was signed by the agent Moreman Builders


Corporation
and
defendants.

Deponent Damiano Nadera testified on the current cost


of the architectural and structural requirements
needed to complete the construction of the New Gran
Hotel.[23]

"Defendants should pay plaintiff moral damages of


P150,000.00; exemplary damages of P50,000.00 and
attorney's fees of P50,000.00 and to pay the costs.

On December 26, 1996, the trial court rendered a


decision
in
favor
of
respondent,
thus:
"WHEREFORE, foregoing considered, judgment is
hereby rendered ordering defendants to jointly and
severally
pay
plaintiff:
1)

P1,930,000.00

as

actual

damages;

2)

P2,549,000.00

as

actual

damages;

3) Moral damages of P150,000.00; exemplary damages


of P50,000.00 and attorney's fees of P50,000.00 and to
pay
the
costs.
"SO
The

ORDERED."
trial

court

ratiocinated

as

follows:

"The inventory of other materials, aside from the steel


bars and cement is found highly reliable based on first,
the affidavit of Arthur Edralin dated September 15,
1979, personnel officer of Moreman Builders that he
was assigned with others to guard the warehouse;
(Exhs. "M" & "O"); secondly, the inventory (Exh. "C")
dated November 23, 1977 shows (sic) deposit of
assorted materials; thirdly, that there were items in the
warehouse as of February 3, 1978 as shown in the
balance sheet of Moreman's stock clerk Jose Cedilla.
"Plaintiff is entitled to payment of damages for the
overhauling of materials from the construction site by
Lily Chan without the knowledge and consent of its
owner. Article 20 of the Civil Code provides:
'Art. 20. Every person who contrary to law, willfully or
negligently caused damage to another, shall indemnify
the
latter
for
the
same.'
"As to the materials stored inside the bodega of
defendant Wilson Chan, the inventory (Exh. "C") show
(sic), that the same were owned by the New Gran
Hotel. Said materials were stored by Moreman Builders
Co., Inc. since it was attested to by the warehouseman
as without any lien or encumbrances, the defendants
are duty bound to release it. Article 21 of the Civil Code
provides:
'Art. 21. Any person who willfully caused loss or injury
to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for
the
damage.'
"Plaintiff is entitled to payment of actual damages
based on the inventory as of November 23, 1977
amounting to P1,930,080.00 (Exhs. "Q" & "Q-1"). The

"Plaintiff is likewise entitled to payment of 12,500 bags


of cement and 400 bundles of steel bars totaling
P2,549,000.00 (Exhs. "S" & "S-1"; Exhs. "B" & "B-3").

"The claim of defendant for payment of damages with


respect to the materials appearing in the balance
sheets as of February 3, 1978 in the amount of
P3,286,690.00, not having been established with
enough preponderance of evidence cannot be given
weight."[24]
Petitioners then elevated the case to the Court of
Appeals, docketed as CA-G.R. CV No. 57323. On June
17, 1999, the Appellate Court rendered the assailed
Decision[25] affirming in toto the trial court's
judgment,
ratiocinating
as
follows:
"Moreover, although the prayer in the complaint did
not specify the amount of damages sought, the same
was satisfactorily proved during the trial. For damages
to be awarded, it is essential that the claimant
satisfactorily prove during the trial the existence of the
factual basis thereof and its causal connection with the
adverse party's act (PAL, Inc. vs. NLRC, 259 SCRA 459.
In sustaining appellee's claim for damages, the court a
quo
held
as
follows:
'The Court finds the contention of plaintiff that
materials and equipment of plaintiff were stored in the
warehouse of defendants and admitted by defendants
in the certification issued to Sheriff Borja. x x x
'Evidence further revealed that assorted materials
owned by the New Gran Hotel (Exh. "C") were
deposited in the bodega of defendant Wilson Chan with
a total market value of P1,930,000.00, current price.
'The inventory of other materials, aside from the steel
bars and cement, is highly reliable based on first, the
affidavit of Arthur Edralin dated September 15, 1979,
personnel officer of Moreman Builders; that he was
assigned, with others to guard the warehouse (Exhs. M
& O); secondly, the inventory (Exh. C) November 23,
1977 shows deposit of assorted materials; thirdly, that
there were items in the warehouse as of February 3,
1978, as shown in the balance sheet of Moreman's
stock clerk, Jose Cedilla (pp. 60-61, Rollo).'
"The

Court

affirms

the

above

findings.

"Well settled is the rule that 'absent any proper reason


to depart from the rule, factual conclusions reached by
the trial court are not to be disturbed (People vs.
Dupali, 230 SCRA 62).' Hence, in the absence of any
showing that serious and substantial errors were
committed by the lower court in the appraisal of the
evidence, the trial judge's assessment of the credibility
of the witnesses is accorded great weight and respect
(People vs. Jain, 254 SCRA 686). And, there being
absolutely nothing on record to show that the court a
quo overlooked, disregarded, or misinterpreted facts of

weight and significance, its factual findings and


conclusions must be given great weight and should not
be
disturbed
on
appeal.

respondent and petitioners and the cause of action


between them is for recovery of damages arising from
petitioners' failure to return the construction materials
and
equipment.

"WHEREFORE, being in accord with law and evidence,


the appealed decision is hereby AFFIRMED in toto."
Hence, this petition for review on certiorari anchored
on
the
following
grounds:

Obviously, petitioners' assigned errors call for a review


of
the
lower
court's
findings
of
fact.

"I

Succinct is the rule that this Court is not a trier of facts


and does not normally undertake the re-examination of
the evidence submitted by the contending parties
during the trial of the case considering that findings of
fact of the Court of Appeals are generally binding and
conclusive on this Court.[34] The jurisdiction of this
Court in a petition for review on certiorari is limited to
reviewing only errors of law,[35] not of fact, unless it is
shown, inter alia, that: (1) the conclusion is a finding
grounded on speculations, surmises or conjectures; (2)
the inference is manifestly mistaken, absurd and
impossible; (3) there is grave abuse of discretion; (4)
the judgment is based on misapprehension of facts; (5)
the findings of fact are conflicting; and (6) the Court of
Appeals, in making its findings went beyond the issues
of the case and the same is contrary to the admission
of
both
parties.[36]

The Court of Appeals acted with grave abuse of


discretion and under a misapprehension of the law and
the facts when it affirmed in toto the award of actual
damages made by the trial court in favor of respondent
in
this
case.
II
The awards of moral and exemplary damages of the
trial court to respondent in this case and affirmed in
toto by the Court of Appeals are unwarranted by the
evidence presented by respondent at the ex parte
hearing of this case and should, therefore, be
eliminated
or
at
least
reduced.
III
The award of attorney's fees by the trial court to
respondent in this case and affirmed by the Court of
Appeals should be deleted because of the failure of the
trial court to state the legal and factual basis of such
award."
Petitioners contend inter alia that the actual damages
claimed by respondent in the present case were
already awarded to him in Civil Case No. 113498[26]
and hence, cannot be recovered by him again. Even
assuming that respondent is entitled to damages, he
can not recover P4,479,000.00 which is eleven (11)
times more than the total actual damages of
P365,000.00 awarded to him in Civil Case No. 113498.
[27]
In his comment on the petition, respondent maintains
that petitioners, as depositaries under the law, have
both the fiduciary and extraordinary obligations not
only to safely keep the construction material
deposited, but also to return them with all their
products, accessories and accessions, pursuant to
Articles 1972,[28] 1979,[29] 1983,[30] and 1988[31] of
the Civil Code. Considering that petitioners' duty to
return the construction materials in question has
already become impossible, it is only proper that the
prices of those construction materials in 1996 should
be the basis of the award of actual damages. This is
the only way to fulfill the "duty to return" contemplated
in the applicable laws.[32] Respondent further claims
that petitioners must bear the increase in market
prices from 1977 to 1996 because liability for fraud
includes "all damages which may be reasonably
attributed to the non-performance of the obligation."
Lastly, respondent insists that there can be no double
recovery because in Civil Case No. 113498,[33] the
parties were respondent himself and Moreman and the
cause of action was the rescission of their building
contract. In the present case, however, the parties are

Petitioners submit that this case is an exception to the


general rule since both the trial court and the Court of
Appeals based their judgments on misapprehension of
facts.
We

agree.

At the outset, the case should have been dismissed


outright by the trial court because of patent procedural
infirmities. It bears stressing that the case was
originally filed on December 11, 1985. Four (4) years
thereafter, or on August 25, 1989, the case was
dismissed for respondent's failure to prosecute. Five (5)
years after, or on September 6, 1994, respondent filed
his motion for reconsideration. From here, the trial
court already erred in its ruling because it should have
dismissed the motion for reconsideration outright as it
was filed far beyond the fifteen-day reglementary
period.[37] Worse, when respondent filed his second
motion for reconsideration on October 14, 1994, a
prohibited pleading,[38] the trial court still granted the
same and reinstated the case on January 10, 1995.
This is a glaring gross procedural error committed by
both the trial court and the Court of Appeals.
Even without such serious procedural flaw, the case
should also be dismissed for utter lack of merit.

It must be stressed that respondent's claim for


damages is based on petitioners' failure to return or to
release to him the construction materials and
equipment deposited by Moreman to their warehouse.
Hence, the essential issues to be resolved are: (1) Has
respondent presented proof that the construction
materials and equipment were actually in petitioners'
warehouse when he asked that the same be turned
over to him? (2) If so, does respondent have the right
to demand the release of the said materials and

equipment

or

claim

for

damages?

Under Article 1311 of the Civil Code, contracts are


binding upon the parties (and their assigns and heirs)
who execute them. When there is no privity of contract,
there is likewise no obligation or liability to speak about
and thus no cause of action arises. Specifically, in an
action against the depositary, the burden is on the
plaintiff to prove the bailment or deposit and the
performance of conditions precedent to the right of
action.[39] A depositary is obliged to return the thing
to the depositor, or to his heirs or successors, or to the
person who may have been designated in the contract.
[40]
In the present case, the record is bereft of any contract
of deposit, oral or written, between petitioners and
respondent. If at all, it was only between petitioners
and Moreman. And granting arguendo that there was
indeed a contract of deposit between petitioners and
Moreman, it is still incumbent upon respondent to
prove its existence and that it was executed in his
favor. However, respondent miserably failed to do so.
The only pieces of evidence respondent presented to
prove the contract of deposit were the delivery
receipts.[41] Significantly, they are unsigned and not
duly received or authenticated by either Moreman,
petitioners or respondent or any of their authorized
representatives. Hence, those delivery receipts have
no probative value at all. While our laws grant a person
the remedial right to prosecute or institute a civil
action against another for the enforcement or
protection of a right, or the prevention or redress of a
wrong,[42] every cause of action ex-contractu must be
founded upon a contract, oral or written, express or
implied.
Moreover, respondent also failed to prove that there
were construction materials and equipment in
petitioners' warehouse at the time he made a demand
for
their
return.
Considering that respondent failed to prove (1) the
existence of any contract of deposit between him and
petitioners, nor between the latter and Moreman in his
favor, and (2) that there were construction materials in
petitioners' warehouse at the time of respondent's
demand to return the same, we hold that petitioners
have no corresponding obligation or liability to
respondent with respect to those construction
materials.
Anent the issue of damages, petitioners are still not
liable because, as expressly provided for in Article
2199 of the Civil Code,[43] actual or compensatory
damages cannot be presumed, but must be proved
with reasonable degree of certainty. A court cannot rely
on speculations, conjectures, or guesswork as to the
fact and amount of damages, but must depend upon
competent proof that they have been suffered by the
injured party and on the best obtainable evidence of
the actual amount thereof. It must point out specific
facts which could afford a basis for measuring
whatever compensatory or actual damages are borne.
[44]
Considering our findings that there was no contract of
deposit between petitioners and respondent or

Moreman and that actually there were no more


construction materials or equipment in petitioners'
warehouse when respondent made a demand for their
return, we hold that he has no right whatsoever to
claim
for
damages.
As we stressed in the beginning, a judgment of default
does not automatically imply admission by the
defendant of plaintiff's causes of action. Here, the trial
court merely adopted respondent's allegations in his
complaint and evidence without evaluating them with
the highest degree of objectivity and certainty.
WHEREFORE, the petition is GRANTED. The challenged
Decision of the Court of Appeals dated June 17, 1999 is
REVERSED and SET ASIDE. Costs against respondent.
SO ORDERED.
YHT REALTY CORPORATION, ERLINDA LAINEZ and
ANICIA PAYAM, Petitioners, versus THE COURT OF
APPEALS
and
MAURICE
McLOUGHLIN,
Respondents.
G.R. No. 126780 | 2005-02-17

SECOND DIVISION
DECISION
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
Malaca?ang 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
representing payment to Echelon Tower;

P76,341.785

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
Meralco power expenses;

P3,900.97 representing

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
representing payment to Tropicana
Apartment Hotel;

P168,103.52
Copacabana

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

P76,341.785

(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.
TRIPLE-V vs. FILIPINO MERCHANTS
G.R. No. 160544 | 2005-02-21
THIRD DIVISION

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.

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 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,
We

agree

petitioner's
with

the

present
two

(2)

recourse.
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.
PHILIPPINE
NATIONAL
BANK,
petitioner,
vs.
HON. PRES. JUDGE BENITO C. SE, JR., RTC, BR.
45, MANILA; NOAH'S ARK SUGAR REFINERY;
ALBERTO T. LOOYUKO, JIMMY T. GO and WILSON
T. GO, respondents.
G.R. No. 119231 | 1996-04-18
HERMOSISIMA,

JR.,

J.:

The source of conflict herein is the question as to


whether the Philippine National Bank should pay
storage fees for sugar stocks covered by five (5)
Warehouse Receipts stored in the warehouse of private
respondents in the face of the Court of Appeals'
decision (affirmed by the Supreme Court) declaring the
Philippine National Bank as the owner of the said sugar
stocks and ordering their delivery to the said bank.
From the same facts but on a different perspective, it
can be said that the issue is: Can the warehouseman
enforce his warehouseman's lien before delivering the
sugar stocks as ordered by the Court of Appeals or
need he file a separate action to enforce payment of
storage
fees?
The herein petition seeks to annul: (l) the Resolution of
respondent Judge Benito C. Se, Jr. of the Regional Trial
Court of Manila, Branch 45, dated December 20, 1994,
in Civil Case No. 90-53023, authorizing reception of
evidence to establish the claim of respondents Noah's
Ark Sugar Refinery, et al., for storage fees and
preservation expenses over sugar stocks covered by
five (5) Warehouse Receipts which is in the nature of a

warehouseman's lien; and (2) the Resolution of the said


respondent Judge, dated March 1, 1995, declaring the
validity of private respondents' warehousemen's lien
under Section 27 of Republic Act No. 2137 and ordering
that execution of the Court of Appeals' decision, dated
December 13, 1991, be in effect held in abeyance until
the full amount of the warehouseman's lien on the
sugar stocks covered by five (5) quedans subject of the
action shall have been satisfied conformably with the
provisions of Section 31 of Republic Act 2137.
Also prayed for by the petition is a Writ of Prohibition to
require respondent RTC Judge to desist from further
proceeding with Civil Case No. 90-53023, except order
the execution of the Supreme Court judgment; and a
Writ of Mandamus to compel respondent RTC Judge to
issue a Writ of Execution in accordance with the said
executory
Supreme
Court
decision.
THE

FACTS

In accordance with Act No. 2137, the Warehouse


Receipts Law, Noah's Ark Sugar Refinery issued on
several dates, the following Warehouse Receipts
(Quedans): (a) March 1, 1989, Receipt No. 18062,
covering sugar deposited by Rosa Sy; (6) March 7,
1989, Receipt No. 18080, covering sugar deposited by
RNS Merchandising (Rosa Ng Sy); (e) March 21, 1989,
Receipt No. 18081, covering sugar deposited by St.
Therese Merchandising; (0) March 31, 1989, Receipt
No. 18086, covering sugar deposited by St. Therese
Merchandising; and (e) April 1, 1989, Receipt No.
18087,
covering
sugar
deposited
by
RNS
Merchandising. The receipts are substantially in the
form, and contains the terms, prescribed for negotiable
warehouse receipts by Section 2 of the law.
Subsequently, Warehouse Receipts Nos. 18080 and
18081 were negotiated and endorsed to Luis T. Ramos;
and Receipts Nos. 18086, 18087 and 18062 were
negotiated and endorsed to Cresencia K. Zoleta. Ramos
and Zoleta then used the quedans as security for two
loan agreements one for P15.6 million and the other for
P23.5 million obtained by them from the Philippine
National Bank. The aforementioned quedans were
endorsed by them to the Philippine National Bank.
Luis T. Ramos and Cresencia K. Zoleta failed to pay
their loans upon maturity on January 9, 1990.
Consequently, on March 16, 1990, the Philippine
National Bank wrote to Noah's Ark Sugar Refinery
demanding delivery of the sugar stocks covered by the
quedans endorsed to it by Zoleta and Ramos. Noah's
Ark Sugar Refinery refused to comply with the demand
alleging ownership thereof, for which reason the
Philippine National Bank filed with the Regional Trial
Court of Manila a verified complaint for "Specific
Performance with Damages and Application for Writ of
Attachment" against Noah's Ark Sugar Refinery,
Alberto T. Looyuko, Jimmy T. Go and Wilson T. Go, the
last three being identified as the sole proprietor,
managing partner, and Executive Vice President of
Noah's
Ark,
respectively.
Respondent Judge Benito C. Se, Jr., in whose sala the
case was raffled, denied the Application for Preliminary
Attachment, Reconsideration therefor was likewise
denied.

Noah's Ark and its co-defendants filed an Answer with


Counterclaim and Third-Party Complaint in which they
claimed that they are the owners of the subject
quedans and the sugar represented therein, averring
as
they
did
that:
9. . . . In an agreement dated April 1, 1989, defendants
agreed to sell to Rosa Ng Sy of RNS Merchandising and
Teresita Ng of St. Therese Merchandising the total
volume of sugar indicated in the quedans stored at
Noah's Ark Sugar Refinery for a total consideration of
P63,000,000.00, . . . The corresponding payments in
the form of checks issued by the vendees in favor of
defendants were subsequently dishonored by the
drawee banks by reason of "payment stopped" and
"drawn against insufficient funds," . . . Upon proper
notification to said vendees and plaintiff in due course,
defendants refused to deliver to vendees therein the
quantity of sugar covered by the subject quedans.
10. . . . Considering that the vendees and first
endorsers of subject quedans did not acquire
ownership thereof; the subsequent endorsers and
plaintiff itself did not acquire a better right of
ownership than the original vendees/first endorsers. 1
The Answer incorporated a Third-Party Complaint by
Alberto T. Looyuko, Jimmy T. Go and Wilson T. Go, doing
business under the trade name and style Noah's Ark
Sugar Refinery against Rosa Ng Sy and Teresita Ng,
praying that the latter be ordered to deliver or return
to them the quedans (previously endorsed to PNB and
the subject of the suit) and pay damages and litigation
expenses.
The Answer of Rosa Ng Sy and Teresita Ng, dated
September 6, 1990, one of avoidance, is essentially to
the effect that the transaction between them, on the
one hand, and Jimmy T. Go, on the other, concerning
the quedans and the sugar stocks covered by them
was merely a simulated one being part of the latter's
complex banking schemes and financial maneuvers,
and thus, they are not answerable in damages to him.
On January 31, 1991, the Philippine National Bank filed
a Motion for Summary Judgment in favor of the plaintiff
as against the defendants for the reliefs prayed for in
the
complaint.
On May 2, 1991, the Regional Trial Court issued an
order denying the Motion for Summary Judgment.
Thereupon, the Philippine National Bank filed a Petition
for Certiorari with the Court of Appeals, docketed as
CA-G.R SP. No. 25938 on December 13, 1991.
Pertinent portions of the decision of the Court of
Appeals
read:
In issuing the questioned Orders, the respondent Court
ruled that "questions of law should be resolved after
and not before, the questions of fact are properly
litigated." A scrutiny of defendant's affirmative
defenses does not show material questions of facts as
to the alleged nonpayment of purchase price by the
vendees/first endorsers, and which nonpayment is not
disputed by PNB as it does not materially affect PNB's
title to the sugar stocks as holder of the negotiable

quedans.

payment;

What is determinative of the propriety of summary


judgment is not the existence of conflicting claims from
prior parties but whether from an examination of the
pleadings, depositions, admissions and documents on
file, the defenses as to the main issue do not tender
material questions of fact (see Garcia vs. Court of
Appeals, 167 SCRA 815) or the issues thus tendered
are in fact sham, fictitious, contrived, set up in bad
faith or so unsubstantial as not to constitute genuine
issues for trial. (See Vergara vs. Suelto, et al., 156
SCRA 753; Mercado, et al. vs. Court of Appeals, 162
SCRA 75). The questioned Orders themselves do not
specify what material facts are in issue (See Sec. 4,
Rule
34,
Rules
of
Court).

(b) to pay plaintiff Philippine National Bank attorney's


fees, litigation expenses and judicial costs hereby fixed
at the amount of One Hundred Fifty Thousand Pesos
(P150,000.00)
as
well
as
the
costs.

To require a trial notwithstanding pertinent allegations


of the pleadings and other facts appearing on the
record, would constitute a waste of time and an
injustice to the PNB whose rights to relief to which it is
plainly entitled would be further delayed to its
prejudice.
In issuing the questioned Orders, We find the
respondent Court to have acted in grave abuse of
discretion which justify holding null and void and
setting aside the Orders dated May 2 and July 4, 1990
of respondent Court, and that a summary judgment be
rendered forthwith in favor of the PNB against Noah's
Ark Sugar Refinery, et al., as prayed for in petitioner's
Motion
for
Summary
Judgment.
2
On December 13, 1991, the Court of Appeals nullified
and set aside the orders of May 2 and July 4, 1990 of
the Regional Trial Court and ordered the trial court to
render summary judgment in favor of the PNB. On June
18, 1992, the trial court rendered judgment dismissing
plaintiffs complaint against private respondents for
lack of cause of action and likewise dismissed private
respondents' counterclaim against PNB and of the
Third-Party Complaint and the Third-Party Defendant's
Counterclaim. On September 4, 1992, the trial court
denied
PNB's
Motion
for
Reconsideration.
On June 9, 1992, the PNB filed an appeal from the RTC
decision with the Supreme Court, G.R No. 107243, by
way of a Petition for Review on Certiorari under Rule 45
of the Rules of Court. This Court rendered judgment on
September 1, 1993, the dispositive portion of which
reads:
WHEREFORE, the trial judge's decision in Civil Case No.
90-53033, dated June 18, 1992, is reversed and set
aside and a new one rendered conformably with the
final and executory decision of the Court of Appeals in
CA-G.R. SP. No. 25938, ordering the private
respondents Noah's Ark Sugar Refinery, Alberto T.
Looyuko, Jimmy T. Go and Wilson T. Go, jointly and
severally:
(a) to deliver to the petitioner Philippine National Rank,
"the sugar stocks covered by the Warehouse
Receipts/Quedans which are now in the latter's
possession as holder for value and in due course; or
alternatively, to pay (said) plaintiff actual damages in
the amount of P39.1 million," with legal interest
thereon from the filing of the complaint until final

SO

and

ORDERED.

On September 29, 1993, private respondents moved


for
reconsideration
of
this
decision.
A
Supplemental/Second Motion for Reconsideration with
leave of court was filed by private respondents on
November 8, 1993. We denied private respondents'
motion
on
January
10,
1994.
Private respondents filed a Motion Seeking Clarification
of the Decision, dated September 1, 1993. We denied
this
motion
in
this
manner:
It bears stressing that the relief granted in this Court's
decision of September 1, 1993 is precisely that set out
in the final and executory decision of the Court of
Appeals in CA-G.R. SP. No. 25938, dated December 13,
1991, which was affirmed in toto by this Court and
which became unalterable upon becoming final and
executory.
4
Private respondents thereupon filed before the trial
court an Omnibus Motion seeking among others the
deferment of the proceedings until private respondents
are heard on their claim for warehouseman's lien. On
the other hand, on August 22, 1994, the Philippine
National Bank filed a Motion for the Issuance of a Writ
of Execution and an Opposition to the Omnibus Motion
filed
by
private
respondents.
The trial court granted private respondents' Omnibus
Motion on December 20, 1994 and set reception of
evidence on their claim for warehouseman's lien. The
resolution of the PNB's Motion for Execution was
ordered deferred until the determination of private
respondents'
claim.
On February 21, 1995, private respondents' claim for
lien was heard and evidence was received in support
thereof. The trial court thereafter gave both parties five
(5)
days
to
file
respective
memoranda.
On February 28, 1995, the Philippine National Bank
filed a Manifestation with Urgent Motion to Nullify Court
Proceedings. In adjudication thereof, the trial court
issued the following order on March 1, 1995:
WHEREFORE, this court hereby finds that there exists
in favor of the defendants a valid warehouseman's lien
under Section 27 of Republic Act 2137 and accordingly,
execution of the judgment is hereby ordered stayed
and/or precluded until the full amount of defendants'
lien on the sugar stocks covered by the five (5)
quedans subject of this action shall have been satisfied
conformably with the provisions of Section 31 of
Republic
Act
2137.
5
Consequently, the Philippine National Bank filed the
herein petition to seek the nullification of the aboveassailed
orders
of
respondent
judge.

The

PNB

submits

that:

I
PNB'S RIGHT TO A WRIT OF EXECUTION IS SUPPORTED
BY TWO FINAL AND EXECUTORY DECISIONS: THE
DECEMBER 13, 1991 COURT OF APPEALS DECISION IN
CA-G.R. SP. NO. 25938; AND, THE NOVEMBER 9, 1992
SUPREME COURT DECISION IN G.R NO. 107243.
RESPONDENT RTC'S MINISTERIAL, AND MANDATORY
DUTY IS TO ISSUE THE WRIT OF EXECUTION TO
IMPLEMENT THE DECRETAL PORTION OF SAID SUPREME
COURT
DECISION
II
RESPONDENT RTC IS WITHOUT JURISDICTION TO HEAR
PRIVATE RESPONDENTS' OMNIBUS MOTION. THE
CLAIMS SET FORTH IN SAID MOTION: (1) WERE
ALREADY REJECTED BY THE SUPREME COURT IN ITS
MARCH 9, 1994 RESOLUTION DENYING PRIVATE
RESPONDENTS' "MOTION FOR CLARIFICATION OF
DECISION" IN G.R NO. 107243, AND (2) ARE BARRED
FOREVER BY PRIVATE RESPONDENTS' FAILURE TO
INTERPOSE THEM IN THEIR ANSWER AND FAILURE TO
APPEAL FROM THE JUNE 18, 1992 RTC DECISION IN
CIVIL
CASE
NO.
90-52023
III
RESPONDENT RTC'S ONLY JURISDICTION IS TO ISSUE
THE WRIT TO EXECUTE THE SUPREME COURT
DECISION. THUS, PNB IS ENTITLED TO: (1) A WRIT OF
CERTIORARI TO ANNUL THE RTC RESOLUTION DATED
DECEMBER 20, 1994 AND THE ORDER DATED
FEBRUARY 7, 1995 AND ALL PROCEEDINGS TAKEN BY
THE RTC THEREAFTER; (2) A WRIT OF PROHIBITION TO
PREVENT
RESPONDENT
RTC
FROM
FURTHER
PROCEEDING WITH CIVIL CASE NO. 90-53023 AND
COMMITTING OTHER ACTS VIOLATIVE OF THE SUPREME
COURT DECISION IN G.R. NO. 107243, AND (3) A WRIT
OF MANDAMUS TO COMPEL RESPONDENT RTC TO
ISSUE THE WRIT TO EXECUTE THE SUPREME COURT
JUDGMENT
IN
FAVOR
OF
PNB
The issues presented before us in this petition revolve
around the legality of the questioned orders of
respondent judge, issued as they were after we had
denied with finality private respondents' contention
that the PNB could not compel them to deliver the
stocks of sugar in their warehouse covered by the
endorsed quedans or pay the value of the said stocks
of
sugar.
Petitioner's submission is on a technicality, that is, that
private respondents have lost their right to recover
warehouseman's lien on the sugar stocks covered by
the five (5) Warehouse Receipts for the reason that
they failed to set up said claim in their Answer before
the trial court and that private respondents did not
appeal from the decision in this regard, dated June 18,
1992. Petitioner asseverates that the denial by this
Court on March 9, 1994 of the motion seeking
clarification of our decision, dated September 1, 1993,
has foreclosed private respondents' right to enforce
their warehouseman's lien for storage fees and
preservation expenses under the Warehouse Receipts
Act.

On the other hand, private respondents maintain that


they could not have claimed the right to a
warehouseman's lien in their Answer to the complaint
before the trial court as it would have been
inconsistent with their stand that they claim ownership
of the stocks covered by the quedans since the checks
issued for payment thereof were dishonored. If they
were still the owners, it would have been absurd for
them to ask payment for storage fees and preservation
expenses. They further contend that our resolution,
dated March 9, 1994, denying their motion for
clarification did not preclude their right to claim their
warehouseman's lien under Sections 27 and 31 of
Republic Act 2137, as our resolution merely affirmed
and adopted the earlier decision, dated December 13,
1991, of the Court of Appeals (6th Division) in CA-G.R.
SP No. 25968 and did not make any finding on the
matter
of
the
warehouseman's
lien.
We find for private respondents on the foregoing issue
and
so
the
petition
necessarily
must
fail.
We have carefully examined our resolution, dated
March 9, 1994, which denied Noah's Ark's motion for
clarification of our decision, dated September 1, 1993,
wherein we affirmed in full and adopted the Court of
Appeals' earlier decision, dated December 13, 1991, in
CA-G.R. SP. No. 25938. We are not persuaded by the
petitioner's argument that our said resolution carried
with it the denial of the warehouseman's lien over the
sugar stocks covered by the subject Warehouse
Receipts. We have simply resolved and upheld in our
decision, dated September 1, 1993, the propriety of
summary judgment which was then assailed by private
respondents. In effect, we ruled therein that,
considering the circumstances obtaining before the
trial court, the issuance of the Warehouse Receipts not
being disputed by the private respondents, a summary
judgment in favor of PNB was proper. We in effect
further affirmed the finding that Noah's Ark is a
warehouseman which was obliged to deliver the sugar
stocks covered by the Warehouse Receipts pledged by
Cresencia K. Zoleta and Luis T. Ramos to the petitioner
pursuant to the pertinent provisions of Republic Act
2137.
In disposing of the private respondents' motion for
clarification, we could not contemplate the matter of
warehouseman's lien because the issue to be finally
resolved then was the claim of private respondents for
retaining ownership of the stocks of sugar covered by
the endorsed quedans. Stated otherwise, there was no
point in taking up the issue of warehouseman's lien
since the matter of ownership was as yet being
determined. Neither could storage fees be due then
while no one has been declared the owner of the sugar
stocks
in
question.
Of considerable relevance is the pertinent stipulation in
the subject Warehouse Receipts which provides for
respondent Noah's Ark's right to impose and collect
warehouseman's
lien:
Storage of the refined sugar quantities mentioned
herein shall be free up to one (1) week from the date of
the quedans covering said sugar and thereafter,
storage fees shall be charged in accordance with the

Refining Contract under which the refined sugar


covered
by
this
Quedan
was
produced.
6

force of law between the contracting parties and


should
be
complied
with
in
good
faith.

It is not disputed, therefore, that, under the subject


Warehouse Receipts provision, storage fees are
chargeable.

Petitioner is in estoppel in disclaiming liability for the


payment of storage fees due the private respondents
as warehouseman while claiming to be entitled to the
sugar stocks covered by the subject Warehouse
Receipts on the basis of which it anchors its claim for
payment or delivery of the sugar stocks. The
unconditional presentment of the receipts by the
petitioner for payment against private respondents on
the strength of the provisions of the Warehouse
Receipts Law (R.A. 2137) carried with it the admission
of the existence and validity of the terms, conditions
and stipulations written on the face of the Warehouse
Receipts, including the unqualified recognition of the
payment of warehouseman's lien for storage fees and
preservation expenses. Petitioner may not now retrieve
the sugar stocks without paying the lien due private
respondents
as
warehouseman.

Petitioner anchors its claim against private respondents


on the five (5) Warehouse Receipts issued by the latter
to third-party defendants Rosa Ng Sy of RNS
Merchandising and Teresita Ng of St. Therese
Merchandising, which found their way to petitioner
after they were negotiated to them by Luis T. Ramos
and Cresencia K. Zoleta for a loan of P39.1 Million.
Accordingly, petitioner PNB is legally bound to stand by
the express terms and conditions on the face of the
Warehouse Receipts as to the payment of storage fees.
Even in the absence of such a provision, law and equity
dictate the payment of the warehouseman's lien
pursuant to Sections 27 and 31 of the Warehouse
Receipts
Law
(R.A.
2137),
to
wit:
Sec. 27. What claims are included in the
warehouseman's lien. Subject to the provisions of
section thirty, a warehouseman shall have lien on
goods deposited or on the proceeds thereof in his
hands, for all lawful charges for storage and
preservation of the goods; also for all lawful claims for
money advanced, interest, insurance, transportation,
labor, weighing, coopering and other charges and
expenses in relation to such goods; also for all
reasonable charges and expenses for notice, and
advertisement of sale, and for sale of the goods where
default
has
been
made
in
satisfying
the
warehouseman's
lien.
Xxx

xxx

xxx

Sec. 31. Warehouseman need not deliver until lien is


satisfied. A warehouseman having a lien valid against
the person demanding the goods may refuse to deliver
the goods to him until the lien is satisfied.
After being declared not the owner, but the
warehouseman, by the Court of Appeals on December
13, 1991 in CA-G.R. SP. No. 25938, the decision having
been affirmed by us on December 1, 1993, private
respondents cannot legally be deprived of their right to
enforce their claim for warehouseman's lien, for
reasonable storage fees and preservation expenses.
Pursuant to Section 31 which we quote hereunder, the
goods under storage may not be delivered until said
lien
is
satisfied.
Sec. 31. Warehouseman need not deliver until lien is
satisfied A warehouseman having a lien valid against
the person demanding the goods may refuse to deliver
the goods to him until the lien is satisfied.
Considering that petitioner does not deny the
existence, validity and genuineness of the Warehouse
Receipts on which it anchors its claim for payment
against private respondents, it cannot disclaim liability
for the payment of the storage fees stipulated therein.
As contracts, the receipts must be respected by
authority of Article 1159 of the Civil Code, to wit:
Art. 1159. Obligations arising from contracts have the

In view of the foregoing, the rule may be simplified


thus: While the PNB is entitled to the stocks of sugar as
the endorsee of the quedans, delivery to it shall be
effected only upon payment of the storage..fees.
Imperative is the right of the warehouseman to
demand payment of his lien at this juncture, because,
in accordance with Section 29 of the Warehouse
Receipts Law, the warehouseman loses his lien upon
goods by surrendering possession thereof. In other
words, the lien may be lost where the warehouseman
surrenders the possession of the goods without
requiring
payment
of
his
lien,
because
a
warehouseman's lien is possessory in nature.
We, therefore, uphold and sustain the validity of the
assailed orders of public respondent, dated December
20,
1994
and
March
1,
1995.
In fine, we fail to see any taint of abuse of discretion on
the part of the public respondent in issuing the
questioned orders which recognized the legitimate
right of Noah's Ark, after being declared as
warehouseman, to recover storage fees before it would
release to the PNB sugar stocks covered by the five (5)
Warehouse Receipts. Our resolution, dated March 9,
1994, did not preclude private respondents' unqualified
right to establish its claim to recover storage fees
which is recognized under Republic Act No. 2137.
Neither did the Court of Appeals' decision, dated
December
13,
1991,
restrict
such
right.
Our Resolution's reference to the decision by the Court
of Appeals, dated December 13, 1991, in CA-G.R. SP.
No. 25938, was intended to guide the parties in the
subsequent disposition of the case to its final end. We
certainly did not foreclose private respondents'
inherent right as warehouseman to collect storage fees
and preservation expenses as stipulated on the face of
each of the Warehouse Receipts and as provided for in
the
Warehouse
Receipts
Law
(R.A.
2137).
WHEREFORE, the petition should be, as it is, hereby
dismissed for lack of merit, The questioned orders
issued by public respondent judge are affirmed.
Costs

against

the

petitioner.

SO ORDERED.

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