Sia vs. Court of Appeals G.R. No.

102970, May 13, 1990

Contract of the use of a safety deposit box of a bank is not a deposit but a lease
under Sec 72, A of General Banking Act. Accordingly, it should have lost no
time in notifying the petitioner in order that the box could have been opened
to retrieve the stamps, thus saving the same from further deterioration and
loss. The bank’s negligence aggravated the injury or damage to the stamp
collection..

Facts: Plaintiff Luzon Sia rented a safety deposit box of Security Bank and Trust Co.
(Security Bank) at its Binondo Branch wherein he placed his collection of stamps. The
said safety deposit box leased by the plaintiff was at the bottom or at the lowest level of
the safety deposit boxes of the defendant bank. During the floods that took place in 1985
and 1986, floodwater entered into the defendant bank’s premises, seeped into the safety
deposit box leased by the plaintiff and caused, according damage to his stamps collection.
Security Bank rejected the plaintiff’s claim for compensation for his damaged stamps
collection.

Sia, thereafter, instituted an action for damages against the defendant bank. Security
Bank contended that its contract with the Sia over safety deposit box was one of lease
and not of deposit and, therefore, governed by the lease agreement which should
be the applicable law; the destruction of the plaintiff’s stamps collection was due to
a calamity beyond obligation on its part to notify the plaintiff about the floodwaters
that inundated its premises at Binondo branch which allegedly seeped into the safety
deposit box leased to the plaintiff. The trial court rendered in favor of plaintiff Sia and
ordered Sia to pay damages.

Issue: Whether or not the Bank is liable for negligence.

Held: Contract of the use of a safety deposit box of a bank is not a deposit but a lease.
Section 72 of the General Banking Act [R.A. 337, as amended] pertinently provides: In
addition to the operations specifically authorized elsewhere in this Act, banking
institutions other than building and loan associations may perform the following services
(a) Receive in custody funds, documents, and valuable objects, and rent safety deposit
boxes for the safequarding of such effects.

As correctly held by the trial court, Security Bank was guilty of negligence. The bank’s
negligenceaggravated the injury or damage to the stamp collection. SBTC was aware of
the floods of 1985 and 1986; it also knew that the floodwaters inundated the room where
the safe deposit box was located. In view thereof, it should have lost no time in notifying
the petitioner in order that the box could have been opened to retrieve the stamps, thus
saving the same from further deterioration and loss. In this respect, it failed to exercise
the reasonable care and prudence expected of a good father of a family, thereby
becoming a party to the aggravation of the injury or loss. Accordingly, the aforementioned
fourth characteristic of a fortuitous event is absent. Article 1170 of the Civil Code, which
reads “Those who in the performance of their obligation are guilty of fraud, negligence,
or delay, and those who in any manner contravene the tenor thereof, are liable for
damages” is applicable. Hence, the petition was granted.

The provisions contended by Security Bank in the lease agreement which are meant to
exempt SBTC from any liability for damage, loss or destruction of the contents of the
safety deposit box which may arise from its own agents’ fraud, negligence or delay must
be stricken down for being contrary to law and public policy.

a. Sia vs. CA
(G.R. No. 102970, May 13, 1993)
LUZAN SIA, petitioner, vs. COURT OF APPEALS and SECURITY BANK and TRUST
COMPANY, respondents.

FACTS:
Herein petitioner and respondent entered into a contract denominated as a Lease
Agreement whereby the former rented a safety deposit box owned by the latter .
Petitioner placed in the deposit box her stamp collection which was subsequently lost and
damaged due to a flood that took place in 1985 and 1986. The defendant bank rejected
the petitioner’ s claim for compensation for his damaged stamps collection, so, the
plaintiff instituted an action for damages against the defendant bank.

The bank alleged that the contract was that of lease and its liability was limited to
the exercise of the diligence to prevent the opening of the safe by any person other than
the Renter, his authorized agent or legal representative; The Bank is not a depository of
the contents of the safe and it has neither the possession nor the control of the same.
The Bank has no interest whatsoever in said contents, except as herein provided, and it
assumes absolutely no liability in connection therewith.

RTC ruled in favor of petitioner. CA reversed the decision .

ISSUE: Is SBTC liable for damages and loss? YES

HELD:
SBTC is a Depository Notwithstanding the Contract of Lease
In the recent case CA Agro-Industrial Development Corp. vs. Court of Appeals, the
Court held that the use of a safety deposit box is not a contract of lease and that it is
actually a special kind of deposit.

The prevailing rule in American jurisprudence — 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 for hire and mutual benefit — has been adopted
in this jurisdiction, thus:

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 [R.A. 337, as
amended] pertinently provides:

"Sec. 72. In addition to the operations specifically authorized elsewhere in this Act,
banking institutions other than building and loan associations may perform the
following services:

(a) Receive in custody funds, documents, and valuable objects, and rent safety
deposit boxes for the safequarding of such effects.
xxx xxx xxx
The banks shall perform the services permitted under subsections (a), (b) and (c)
of this section asdepositories or as agents. . . ."(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 (Art. 1969, Civil Code] 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 [Art. 1170, id.]. In the absence of any stipulation prescribing the degree of
diligence required, that of a good father of a family is to be observed [Art. 1173, id.].
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.

Condition 13 and 14 of the Contract of Lease are Void

Conditions 13 and l4 of the questioned contract of lease of the safety deposit box,
which read:

"13. The bank is 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 as herein
expressly provided, and it assumes absolutely no liability in connection therewith."

are void as they are contrary to law and public policy. Said provisions are inconsistent
with the respondent Bank's responsibility as a depositary under Section 72 (a) of the
General Banking Act.

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.

SBTC is Negligent
Respondent cannot invoke fortuitous event under Article 1174by reason of its
negligence . SBTC's negligence aggravated the injury or damage to the stamp collection.
SBTC was aware of the floods of 1985 and 1986; it also knew that the floodwaters
inundated the room where Safe Deposit Box No. 54 was located. In view thereof, it should
have lost no time in notifying the petitioner in order that the box could have been opened
to retrieve the stamps, thus saving the same from further deterioration and loss. In this
respect, it failed to exercise the reasonable care and prudence expected of a good father
of a family, thereby becoming a party to the aggravation of the injury or loss. Accordingly,
the aforementioned fourth characteristic of a fortuitous event is absent Article 1170 of
the Civil Code is therefore applicable ;

Those who in the performance of their obligation are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for
damages

Angel Javellana v Jose Lim, et al; GR 4015, 24 August 1908 En banc, Torres, J.

Facts: (1) On 26 May 1897, Jose and others executed a document in favor of Angel,
wherein it stated that they had received a sum of PhP 2,600.86 as a “deposit” without
interest from the latter. The document also stipulated that they would return the same
amount jointly and severally on 20 January 1898. (2) Upon the stipulated due date,
however, Jose and others asked for an extension to pay and bound themselves to pay
15% interest per annum on the amount of their indebtedness, to which the Angel
acceded. Despite the extension, Jose and others still failed to pay the full amount of
their indebtedness. Consequently, this prompted Angel to file a civil action before the
CFI of Iloilo. The CFI of Iloilo subsequently ruled in favor of Angel to recover the
amount due plus the payment of 15% interest per annum.

Issue: Whether or not the contract executed by Angel and Jose and others was that of
a deposit.
Ruling: No, the contract executed by Angel and Jose and others was not a deposit.
Instead, it was a contract of simple loan or mutuum.

Ratio:

(1) It must be understood that Jose and others were lawfully authorized to make use of
the amount deposited, which they have done as subsequently shown when they asked
for an extension of the time for the return thereof. They were conscious that they had
used, for their own profit and gain, the money which they apparently received as a
“deposit”. Moreover, they engaged to pay interest to Angel from the stipulated date
until the time when the refund should have been made.

(2) Where money, consisting of coins of legal tender, is deposited with a person and
the latter is authorized by the depositor to use and dispose of the same, the agreement
is not a contract of deposit, but a loan. Moreover, Article 1768 of the old Civil Code
(now Article 1978 of the New Civil Code) provides that when the depository has per-
mission to make use of the thing deposited, the contract loses the character of a de-
posit and becomes a loan or bailment.

(3) A subsequent agreement between the parties as to interest on the amount said to
have been deposited, because the same could not be returned at the time fixed
therefore, does not constitute a renewal of an agreement of deposit, but it is the best
evidence that the original contract entered into between them was for a loan under the
guise of a deposit.

b. Javellana vs. Lim

(G.R. No. 4015, August 24, 1908)
ANGEL JAVELLANA, plaintiff-appellee, vs. JOSE LIM, ET AL., defendants-appellants

FACTS:
Angel Javellana filed a complaint on the 30th of October, 1906 against Jose Lim
and Ceferino Domingo Lim. It was then alleged that on the 26th of May, 1897, Lim
executed and subscribed a document, in favor of Javellana, reading as follows:
We have received from Angel Javellana, as a deposit without interest, the sum of
two thousand six hundred and eighty-six cents of pesos fuertes, 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.

It was also alleged that, when the obligation became due, Lim begged Javellana
for an extension of time for the payment thereof, building themselves to pay interest at
the rate of 15 per cent on the amount of their indebtedness, to which Javellana acceded;
that on the 15th of May, 1902, the debtors paid on account of interest due the sum of
P1,000 pesos, with the exception of either capital or interest, had thereby been subjected
to loss and damages.

Lim answered that they admitted the statements of the plaintiff relative to the
payment of 1,102.16 pesos made on the 15th 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.

ISSUE: WON the contract is a deposit. NO, it was a contract of loan.

HELD:
The document of indebtedness inserted in the complaint states that the Javellana
left on deposit with Lim 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 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 Javellana. 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 January 20. 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 on the 20th of May, 1897, it is called a deposit 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 subsequent shown when
asking for an extension of the time for the return thereof, inasmuch as, acknowledging
that they have subjected the letter, 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 depository 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 — (now 1978)

When the depository 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.

Depository making use of the thing deposited: When on one of the latter
days of January, 1898, Jose Lim went to the office of the creditor asking for an extension
of one year, in view of the fact the money was scare, 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;

Express permission: Javellana, the creditor, by granting them the extension,

evidently confirmed the express permission previously given to use and dispose of the
amount stated as having been deposited, which, in accordance with the loan, to all intents
and purposes gratuitously, until the 20th of January, 1898, and from that dated 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 that it does not appear that Jose Lim signed the document
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 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.
 There was no renewal of the contract deposited converted into a loan, because,
as has already been stated, the defendants received said amount by virtue of real loan
contract under the name of a deposit, since the so-called bailees were forthwith
authorized to dispose of the amount deposited. This they have done, as has been clearly
shown.

c. Chan vs. Maceda

(402 SCRA 352, G.R. No. 142591, April 30, 2003)
JOSEPH CHAN, WILSON CHAN and LILY CHAN, petitioners, vs. BONIFACIO S.
MACEDA, JR., * respondent.

FACTS:
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.

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 preliminary
attachment against petitioners,7 docketed as Civil Case No. 53044.

ISSUES:
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?
NO
2. If so, does respondent have the right to demand the release of the said materials and
equipment or claim for damages? NO

HELD:
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.
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.

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. 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, 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, 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.

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.

SERRANO vs CENTRAL BANK

Facts: Serrano had P350K worth of time deposits in Overseas Bank of

Manila. He made a series of encashment but was not successful. He filed a case against
Overseas Bank & he also included the Central Bank so that the latter may also be jointly
and severally liable. Serrano argued that the CB failed to supervise the acts of Overseas
Bank and protect the interests of its depositors by virtue of constructive trust.

Issue: W/N the Central Bank is liable?

Ruling: No. There is no breach of trust from a bank’s failure to return the subject
matter of the deposit. Bank deposits are in the nature of irregular deposits. All kinds of
bank deposits are to be treated as loans and are to be covered by the law on loans
Art.1980. In reality the depositor is the creditor while the bank is the debtor. Failure of
the respondent bank to honor the time deposit is failure to pay its obligation as a
debtor.

DURBAN APARTMENTS CORPORATION vs. PIONEER INSURANCE AND

SURETY CORPORATION

G.R. No. 179419

12 January 2011
FACTS: July 22, 2003, Pioneer Insurance and Surety Corp, by right of subrogation, filed
with the RTC of Makati a Complaint for Recovery of Damages against Durban
Apartments Corp. (or City Garden Hotel) and defendant before the RTC, Vicente
Justimbaste. Respondent averred that it is the insurer for loss and damage of Jeffrey S.
See’s 2001 Suzuki Grand Vitara in the amount of P1,175,000.00. On April 30, 2002, See
arrived and checked in at the City Garden Hotel before midnight, and its parking
attendant, Justimbaste got the key to said Vitara from See to park it. On May 1, 2002,
at about 1:00 am, See received a phone call where the Hotel Chief Security Officer
informed him that his Vitara was carnapped while it was parked unattended at the
parking area of Equitable PCI Bank See went to see the Security Officer, thereafter
reported the incident to the Operations Division of the Makati City Police Anti-
Carnapping Unit, and a flash alarm was issued. The police investigated Hotel Security
Officer, Ernesto T. Horlador, Jr. and Justimbaste. See gave his Sinumpaang Salaysay to
the police investigator, and filed a Complaint Sheet with the PNP Traffic Management
Group in Camp Crame. it paid the P1,163,250.00 money claim of See and mortgagee
ABN AMRO Savings Bank, Inc. as indemnity for the loss of the Vitara.

The Vitara was lost due to the negligence of Durban Apartments and Justimbaste
because it was discovered during the investigation that this was the second time that a
similar incident of carnapping happened in the valet parking service and no necessary
precautions were taken to prevent its repetition. Durban Apartments was wanting in
due diligence in the selection and supervision of its employees particularly defendant
Justimbaste. Both failed and refused to pay its valid, just, and lawful claim despite
written demands.

ISSUE: Is petitioner liable for the loss of See’s vehicle?

RULING: Yes.

Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit
and a necessary deposit made by persons in hotels or inns:

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 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.

Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be
regarded as necessary. The keepers of hotels or inns shall be responsible for them as
depositaries, provided that notice was given to them, or to their employees, of the
effects brought by the guests and that, on the part of the latter, they take the
precautions which said hotel-keepers or their substitutes advised relative to the care
and vigilance of their effects.

Plainly, from the facts found by the lower courts, the insured See deposited his vehicle
for safekeeping with petitioner, through the latter’s employee, Justimbaste. In turn,
Justimbaste issued a claim stub to See. Thus, the contract of deposit was
perfected from See’s delivery, when he handed over to Justimbaste the keys
to his vehicle, which Justimbaste received with the obligation of safely
keeping and returning it. Ultimately, petitioner is liable for the loss of See’s vehicle.

YHT Realty Corporation et al vs. CA

G.R. No. 126780 February 17, 2005
2 Division
nd

J. Tinga

FACTS:
Respondent McLoughlin would always stay at Tropicana Hotel every time he is
here in the Philippines and would rent a safety deposit box. The safety deposit box could
only be opened through the use of 2 keys, one of which is given to the registered guest,
and the other remaining in the possession of the management of the hotel.
McLoughlin allegedly placed the following in his safety deposit box – 2 envelopes
containing US Dollars, one envelope containing Australian Dollars, Letters, credit cards,
bankbooks and a checkbook.
On 12 December 1987, before leaving for a brief trip, McLoughlin took some items
from the safety box which includes the ff: envelope containing Five Thousand US Dollars
(US$5,000.00), the other envelope containing Ten Thousand Australian Dollars
(AUS$10,000.00), his passports and his credit cards. The other items were left in the
deposit box. Upon arrival, he found out that a few dollars were missing and the jewelry
he bought was likewise missing.
Eventually, he confronted Lainez and Paiyam who admitted that Tan opened the
safety deposit box with the key assigned to him. McLoughlin went up to his room where
Tan was staying and confronted her. Tan admitted that she had stolen McLouglin’s key
and was able to open the safety deposit box with the assistance of Lopez, Paiyam and
Lainez. Lopez also told McLoughlin that Tan stole the key assigned to McLouglin while
the latter was asleep.
McLoughlin insisted that it must be the hotel who must assume responsibility for
the loss he suffered. Lopez refused to accept responsibility relying on the conditions for
renting the safety deposit box entitled “Undertaking For the Use of Safety Deposit Box”

ISSUE: WON the "Undertaking for the Use of Safety Deposit Box" admittedly executed by
private respondent is null and void.

HELD: YES
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 carrier’s 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 (De Los Santos v. Tan Khey), CA 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. With greater reason should the liability of the hotelkeeper be enforced
when the missing items are taken without the guest’s 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,
CC 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. 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.
YHT REALTY CORPORATION VS. CA, GR. No. 126780, February 17, 2005

FACTS: Maurice Mcloughlin is an Australian philanthropist, businessman, and a tourist.

In his various trips from Australia going to different countries, one of which is the
Philippines, he would stay in Tropicana Inn which is owned by YHT Realty Corp. After
series of transactions with the inn as depositary of his belongings, he noticed that his
money and several jewelries would be either reduced or lost. He then decided to file an
action against Tropicana and its innkeepers. However, the latter argued that they have
no liability with regard to the loss by virtue of the undertaking signed by Mcloughlin.
Such undertaking is a waiver of the inn’s liability in case of any loss. The RTC and CA
both decided that such undertaking is null and void as contrary to
the express provisions of the law. Hence, the petition.

ISSUE: Whether or not the subject undertaking is null and void

HELD: The court ruled in the affirmative. Art. 2003 of the Civil Code provides that, the
hotelkeeper 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 is suppressed or diminished shall be void.

YHT Realty v. CA

FACTS:
 Respondent McLoughlin would stay at Tropicana Hotel every time he is here in the
Philippines and would rent a safety deposit box.
 The safety deposit box could only be opened through the use of 2 keys, one of
which is given to the registered guest, and the other remaining in the possession
of the management of the hotel.
 McLoughlin allegedly placed the following in his safety deposit box – 2 envelopes
containing US Dollars, one envelope containing Australian Dollars, Letters, credit
cards, bankbooks and a checkbook.
 When he went abroad, a few dollars were missing and the jewelry he bought was
likewise missing.
 Eventually, he confronted Lainez and Paiyam who admitted that Tan opened the
safety deposit box with the key assigned to him. McLoughlin went up to his room
where Tan was staying and confronted her. Tan admitted that she had stolen
McLouglin’s key and was able to open the safety deposit box with the assistance
 of Lopez, Paiyam and Lainez. Lopez alsto told McLoughlin that Tan stole the key
assigned to McLouglin while the latter was asleep.
 McLoughlin insisted that it must be the hotel who must assume responsibility for
the loss he suffered.
 Lopez refused to accept responsibility relying on the conditions for renting the
safety deposit box entitled “Undertaking For the Use of Safety Deposit Box”

ISSUE: Whether the hotel’s Undertaking is valid?

HELD: NO
 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 carrier’s 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 (De Los Santos v. Tan Khey), CA 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. With greater reason should the liability of the
hotelkeeper be enforced when the missing items are taken without the guest’s
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,
CC 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.
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.

TRIPLE-V FOOD SERVICES INC. vs. FILIPINO MERCHANTS INSURANCE

COMPANY, GR. No. 160554, February 21, 2005

FACTS: Mary Jo-Anne De Asis dined at petitioner's Kamayan Restaurant. De Asis was
using a Mitsubishi Galant Super Saloon Model 1995 issued by her employer Crispa
Textile Inc.. On said date, De Asis availed of the valet parking service of petitioner and
entrusted her car key to petitioner's valet counter. Afterwards, a certain Madridano,
valet attendant, 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. Having indemnified Crispa 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. Petitioner claimed that the complaint failed to adduce facts to support the
allegations of recklessness and negligence committed in the safekeeping and custody of
the subject vehicle. Besides, when De Asis availed the free parking stab which
contained a waiver of petitioner’s liability in case of loss, she had thereby
waived her rights.

ISSUE: Whether or not petitioner Triple-V Food Services, Inc. is liable for the loss.

HELD: The Supreme Court ruled in the affirmative. In a contract of deposit, a person
receives an object belonging to another with the obligation of safely keeping it and
returning the same. 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. 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.

CA Agro-Industrial vs CA, G.R. No. 90027 March 3, 1993

Facts
 Petitioner (through its President) purchased 2 parcels of land from spouses Pugao
for P350 K with a downpayment of P75 K.
 Per agreement, the land titles will be transferred upon full payment and will be
placed in a safety deposit box (SBDB) of any bank. Moreover, 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.
 Thereafter, Petitioner and spouses placed the titles in SDB of Respondent Security
Bank and signed a lease contract which substantially states that the Bank will not
assume liability for the contents of the SDB.
 Subsequently, 2 renter's keys were given to the renters — one to the Petitioner and
the other to the Pugaos. A guard key remained in the possession of the Respondent
Bank. The SDB can only be opened using these 2 keys simultaneously.
 Afterwards, a certain Mrs. Ramos offered to buy from the Petitioner the 2 lots that
would yield a profit of P285K.
 Mrs. Ramos demanded the execution of a deed of sale which necessarily entailed
the production of the certificates of title. Thus, Petitioner with the spouses went to
Respondent Bank to retrieve the titles.
 However, when opened in the presence of the Bank's representative, the SDB
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, the Petitioner allegedly failed to
realize the expected profit of P285K.
 Hence, Petitioner filed a complaint for damages against Respondent Bank.
 Lower courts ruled in favour of Respondent Bank. Thus, this petition.

Issues:
1. Whether or not the disputed contract is an ordinary contract of lease?
2. Whether or not the provisions of the cited contract are valid?
3. Whether or not Respondent Bank is liable for damages?

Ruling:
1. No. SC ruled that it is a special kind of deposit because:
 the full and absolute possession and control of the SDB was not given to the joint
renters — the Petitioner and the Pugaos.
 The guard key of the box remained with the Respondent Bank; without this key,
neither of the renters could open the box and vice versa.
 In this case, the said key had a duplicate which was made so that both renters
could have access to the box.
 Moreover, the renting out of the SDBs is not independent from, but related to or
in conjunction with, the principal function of a contract of deposit the receiving in
custody of funds, documents and other valuable objects for safekeeping.

2. NO. SC opined that it is void.

 Generally, the Civil Code provides that the depositary (Respondent Bank) would
be liable if, in performing its obligation, it is found guilty of fraud, negligence,
delay or contravention of the tenor of the agreement.
  In the absence of any stipulation, the diligence of a good father of a family is to
be observed.
 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 (which is present in the disputed
contract)
 Said provisions are inconsistent with the Respondent Bank's responsibility as a
depositary under Section 72(a) of the General Banking Act.

3. NO. SC ruled that:

 no competent proof was presented to show that Respondent Bank was aware of
the private agreement between the Petitioner and the Pugaos that the Land
titles were withdrawable from the SDB 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.