Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-66826 August 19, 1988
BANK OF THE PHILIPPINE ISLANDS, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT and ZSHORNACK respondents.
Pacis & Reyes Law Office for petitioner.
Ernesto T. Zshornack, Jr. for private respondent.

CORTES, J.:
The original parties to this case were Rizaldy T. Zshornack and the
Commercial Bank and Trust Company of the Philippines [hereafter referred to
as "COMTRUST."] In 1980, the Bank of the Philippine Islands (hereafter
referred to as BPI absorbed COMTRUST through a corporate merger, and was
substituted as party to the case.
Rizaldy Zshornack initiated proceedings on June 28,1976 by filing in the Court
of First Instance of Rizal Caloocan City a complaint against COMTRUST
alleging four causes of action. Except for the third cause of action, the CFI
ruled in favor of Zshornack. The bank appealed to the Intermediate Appellate
Court which modified the CFI decision absolving the bank from liability on the
fourth cause of action. The pertinent portions of the judgment, as modified,
read:
IN VIEW OF THE FOREGOING, the Court renders judgment as follows:
1. Ordering the defendant COMTRUST to restore to the dollar savings account
of plaintiff (No. 25-4109) the amount of U.S $1,000.00 as of October 27, 1975
to earn interest together with the remaining balance of the said account at
the rate fixed by the bank for dollar deposits under Central Bank Circular
343;
2. Ordering defendant COMTRUST to return to the plaintiff the amount of U.S.
$3,000.00 immediately upon the finality of this decision, without interest for
the reason that the said amount was merely held in custody for safekeeping,
but was not actually deposited with the defendant COMTRUST because being
cash currency, it cannot by law be deposited with plaintiffs dollar account and
defendant's only obligation is to return the same to plaintiff upon demand;
xxx xxx xxx
5. Ordering defendant COMTRUST to pay plaintiff in the amount of P8,000.00
as damages in the concept of litigation expenses and attorney's fees suffered
by plaintiff as a result of the failure of the defendant bank to restore to his
(plaintiffs) account the amount of U.S. $1,000.00 and to return to him
(plaintiff) the U.S. $3,000.00 cash left for safekeeping.
Costs against defendant COMTRUST.
SO ORDERED. [Rollo, pp. 47-48.]
Undaunted, the bank comes to this Court praying that it be totally absolved
from any liability to Zshornack. The latter not having appealed the Court of
Appeals decision, the issues facing this Court are limited to the bank's liability
with regard to the first and second causes of action and its liability for
damages.
1. We first consider the first cause of action, On the dates material to this
case, Rizaldy Zshornack and his wife, Shirley Gorospe, maintained in
COMTRUST, Quezon City Branch, a dollar savings account and a peso current
account.
On October 27, 1975, an application for a dollar draft was accomplished by
Virgilio V. Garcia, Assistant Branch Manager of COMTRUST Quezon City,
payable to a certain Leovigilda D. Dizon in the amount of $1,000.00. In the
application, Garcia indicated that the amount was to be charged to Dollar
Savings Acct. No. 25-4109, the savings account of the Zshornacks; the
charges for commission, documentary stamp tax and others totalling P17.46
were to be charged to Current Acct. No. 210465-29, again, the current
account of the Zshornacks. There was no indication of the name of the
purchaser of the dollar draft.
On the same date, October 27,1975, COMTRUST, under the signature of
Virgilio V. Garcia, issued a check payable to the order of 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?
At any rate, both explanations are unavailing. With regard to the first
explanation, petitioner bank has not shown how the transaction involving the
cashier's check is related to the transaction involving the dollar draft in favor
of Dizon financed by the withdrawal from Rizaldy's dollar account. The two
transactions appear entirely independent of each other. Moreover, Ernesto
Zshornack, Jr., possesses a personality distinct and separate from Rizaldy
Zshornack. Payment made to Ernesto cannot be considered payment to
Rizaldy.
As to the second explanation, even if we assume that there was such an
agreement, the evidence 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. 25-4109.
2. As for the second cause of action, the complaint filed with the trial court
alleged that on December 8, 1975, Zshornack entrusted to COMTRUST, thru
Garcia, US $3,000.00 cash (popularly known as greenbacks)
for safekeeping, and that the agreement was embodied in a document, a
copy of which was attached to and made part of the complaint. The
document reads:
Makati Cable Address:
Philippines "COMTRUST"
COMMERCIAL BANK AND TRUST COMPANY
of the Philippines
Quezon City Branch
December 8, 1975
MR. RIZALDY T. ZSHORNACK
&/OR MRS SHIRLEY E. ZSHORNACK
Sir/Madam:
We a cknowledged (sic) having received from you today the sum of US
DOLLARS: THREE THOUSAND ONLY (US$3,000.00) for safekeeping.
Received by:
(Sgd.) VIRGILIO V. GARCIA
It was also alleged in the complaint that despite demands, the bank refused
to return the money.
In its answer, COMTRUST averred that the US$3,000 was credited to
Zshornack's peso current account at prevailing conversion rates.
It must be emphasized that COMTRUST did not deny specifically under oath
the authenticity and due execution of the above instrument.
During trial, it was established that on December 8, 1975 Zshornack indeed
delivered to the bank US $3,000 for safekeeping. When he requested the
return of the money on May 10, 1976, COMTRUST explained that the sum was
disposed of in this manner: US$2,000.00 was sold on December 29, 1975 and
the peso proceeds amounting to P14,920.00 were deposited to Zshornack's
current account per deposit slip accomplished by Garcia; the remaining
US$1,000.00 was sold on February 3, 1976 and the peso proceeds amounting
to P8,350.00 were deposited to his current account per deposit slip also
accomplished by Garcia.
Aside from asserting that the US$3,000.00 was properly credited to
Zshornack's current account at prevailing conversion rates, BPI now posits
another ground to defeat private respondent's claim. It now argues that the
contract embodied in the document is the contract of depositum (as defined
in Article 1962, New Civil Code), which banks do not enter into. The bank
alleges that Garcia exceeded his powers when he entered into the
transaction. Hence, it is claimed, the bank cannot be liable under the
contract, and the obligation is purely personal to Garcia.
Before we go into the nature of the contract entered into, an important point
which arises on the pleadings, must be considered.
The second cause of action is based on a document purporting to be signed
by COMTRUST, a copy of which document was attached to the complaint. In
short, the second cause of action was based on an actionable document. It
was therefore incumbent upon the bank to specifically deny under oath the
due execution of the document, as prescribed under Rule 8, Section 8, if it
desired: (1) to question the authority of Garcia to bind the corporation; and
(2) to deny its capacity to enter into such contract. [See, E.B. Merchant v.
International Banking Corporation, 6 Phil. 314 (1906).] No sworn answer
denying the due execution of the document in question, or questioning the
authority of Garcia to bind the bank, or denying the bank's capacity to enter
into the contract, was ever filed. Hence, the bank is deemed to have admitted
not only Garcia's authority, but also the bank's power, to enter into the
contract in question.
In the past, this Court had occasion to explain the reason behind this
procedural requirement.
The reason for the rule enunciated in the foregoing authorities will, we think,
be readily appreciated. In dealing with corporations the public at large is
bound to rely to a large extent upon outward appearances. If a man is found
acting for a corporation with the external indicia of authority, any person, not
having notice of want of authority, may usually rely upon those appearances;
and if it be found that the directors had permitted the agent to exercise that
authority and thereby held him out as a person competent to bind the
corporation, or had acquiesced in a contract and retained the benefit
supposed to have been conferred by it, the corporation will be bound,
notwithstanding the actual authority may never have been granted
... Whether a particular officer actually possesses the authority which he
assumes to exercise is frequently known to very few, and the proof of it
usually is not readily accessible to the stranger who deals with the
corporation on the faith of the ostensible authority exercised by some of the
corporate officers. It is therefore reasonable, in a case where an officer of a
corporation has made a contract in its name, that the corporation should be
required, if it denies his authority, to state such defense in its answer. By this
means the plaintiff is apprised of the fact that the agent's authority is
contested; and he is given an opportunity to adduce evidence showing either
that the authority existed or that the contract was ratified and approved.
[Ramirez v. Orientalist Co. and Fernandez, 38 Phil. 634, 645- 646 (1918).]
Petitioner's argument must also be rejected for another reason. The practical
effect of absolving a corporation from liability every time an officer enters
into a contract which is beyond corporate powers, even without the proper
allegation or proof that the corporation has not authorized nor ratified the
officer's act, is to cast corporations in so perfect a mold that transgressions
and wrongs by such artificial beings become impossible [Bissell v. Michigan
Southern and N.I.R. Cos 22 N.Y 258 (1860).] "To say that a corporation has no
right to do unauthorized acts is only to put forth a very plain truism but to say
that such bodies have no power or capacity to err is to impute to them an
excellence which does not belong to any created existence with which we are
acquainted. The distinction between power and right is no more to be lost
sight of in respect to artificial than in respect to natural persons." [Ibid.]
Having determined that Garcia's act of entering into the contract binds the
corporation, we now determine the correct nature of the contract, and its
legal consequences, including its enforceability.
The document which embodies the contract states that the US$3,000.00 was
received by the bank for safekeeping. The subsequent acts of the parties also
show that the intent of the parties was really for the bank to safely keep the
dollars and to return it to Zshornack at a later time, Thus, Zshornack
demanded the return of the money on May 10, 1976, or over five months
later.
The above arrangement is that contract defined under Article 1962, New Civil
Code, which reads:
Art. 1962. A deposit is constituted from the moment a person receives a thing
belonging to another, with the obligation of safely keeping it and of returning
the same. If the safekeeping of the thing delivered is not the principal
purpose of the contract, there is no deposit but some other contract.
Note that the object of the contract between Zshornack and COMTRUST was
foreign exchange. Hence, the transaction was covered by Central Bank
Circular No. 20, Restrictions on Gold and Foreign Exchange Transactions,
promulgated on December 9, 1949, which was in force at the time the parties
entered into the transaction involved in this case. The circular provides:
xxx xxx xxx
2. Transactions in the assets described below and all dealings in them of
whatever nature, including, where applicable their exportation and
importation, shall NOT be effected, except with respect to deposit accounts
included in sub-paragraphs (b) and (c) of this paragraph, when such deposit
accounts are owned by and in the name of, banks.
(a) Any and all assets, provided they are held through, in, or with banks or
banking institutions located in the Philippines, including money, checks,
drafts, bullions bank drafts, deposit accounts (demand, time and savings), all
debts, indebtedness or obligations, financial brokers and investment houses,
notes, debentures, stocks, bonds, coupons, bank acceptances, mortgages,
pledges, liens or other rights in the nature of security, expressed in foreign
currencies, or if payable abroad, irrespective of the currency in which they are
expressed, and belonging to any person, firm, partnership, association,
branch office, agency, company or other unincorporated body or corporation
residing or located within the Philippines;
(b) Any and all assets of the kinds included and/or described in subparagraph
(a) above, whether or not held through, in, or with banks or banking
institutions, and existent within the Philippines, which belong to any person,
firm, partnership, association, branch office, agency, company or other
unincorporated body or corporation not residing or located within the
Philippines;
(c) Any and all assets existent within the Philippines including money, checks,
drafts, bullions, bank drafts, all debts, indebtedness or obligations, financial
securities commonly dealt in by bankers, brokers and investment houses,
notes, debentures, stock, bonds, coupons, bank acceptances, mortgages,
pledges, liens or other rights in the nature of security expressed in foreign
currencies, or if payable abroad, irrespective of the currency in which they are
expressed, and belonging to any person, firm, partnership, association,
branch office, agency, company or other unincorporated body or corporation
residing or located within the Philippines.
xxx xxx xxx
4. (a) All receipts of foreign exchange shall be sold daily to the Central
Bank by those authorized to deal in foreign exchange. All receipts of foreign
exchange by any person, firm, partnership, association, branch office,
agency, company or other unincorporated body or corporation shall be sold
to the authorized agents of the Central Bank by the recipients within one
business day following the receipt of such foreign exchange. Any person, firm,
partnership, association, branch office, agency, company or other
unincorporated body or corporation, residing or located within the Philippines,
who acquires on and after the date of this Circular foreign exchange shall not,
unless licensed by the Central Bank, dispose of such foreign exchange in
whole or in part, nor receive less than its full value, nor delay taking
ownership thereof except as such delay is customary; Provided, further, That
within one day upon taking ownership, or receiving payment, of foreign
exchange the aforementioned persons and entities shall sell such foreign
exchange to designated agents of the Central Bank.
xxx xxx xxx
8. Strict observance of the provisions of this Circular is enjoined; and any
person, firm or corporation, foreign or domestic, who being bound to the
observance thereof, or of such other rules, regulations or directives as may
hereafter be issued in implementation of this Circular, shall fail or refuse to
comply with, or abide by, or shall violate the same, shall be subject to the
penal sanctions provided in the Central Bank Act.
xxx xxx xxx
Paragraph 4 (a) above was modified by Section 6 of Central Bank Circular No.
281, Regulations on Foreign Exchange, promulgated on November 26, 1969
by limiting its coverage to Philippine residents only. Section 6 provides:
SEC. 6. All receipts of foreign exchange by any resident person, firm,
company or corporation shall be sold to authorized agents of the Central
Bank by the recipients within one business day following the receipt of such
foreign exchange. Any resident person, firm, company or corporation residing
or located within the Philippines, who acquires foreign exchange shall not,
unless authorized by the Central Bank, dispose of such foreign exchange in
whole or in part, nor receive less than its full value, nor delay taking
ownership thereof except as such delay is customary; Provided, That, within
one business day upon taking ownership or receiving payment of foreign
exchange the aforementioned persons and entities shall sell such foreign
exchange to the authorized agents of the Central Bank.
As earlier stated, the document and the subsequent acts of the parties show
that they intended the bank to safekeep the foreign exchange, and return it
later to Zshornack, who alleged in his complaint that he is a Philippine
resident. The parties did not intended to sell the US dollars to the Central
Bank within one business day from receipt. Otherwise, the contract
of depositum would never have been entered into at all.
Since the mere safekeeping of the greenbacks, without selling them to the
Central Bank within one business day from receipt, is a transaction which is
not authorized by CB Circular No. 20, it must be considered as one which falls
under the general class of prohibited transactions. Hence, pursuant to Article
5 of the Civil Code, it is void, having been executed against the provisions of
a mandatory/prohibitory law. More importantly, it affords neither of the
parties a cause of action against the other. "When the nullity proceeds from
the illegality of the cause or object of the contract, and the act constitutes a
criminal offense, both parties being in pari delicto, they shall have no cause
of action against each other. . ." [Art. 1411, New Civil Code.] The only remedy
is one on behalf of the State to prosecute the parties for violating the law.
We thus rule that Zshornack cannot recover under the second cause of
action.
3. Lastly, we find the P8,000.00 awarded by the courts a quo as damages in
the concept of litigation expenses and attorney's fees to be reasonable. The
award is sustained.
WHEREFORE, the decision appealed from is hereby MODIFIED. Petitioner is
ordered to restore to the dollar savings account of private respondent the
amount of US$1,000.00 as of October 27, 1975 to earn interest at the rate
fixed by the bank for dollar savings deposits. Petitioner is further ordered to
pay private respondent the amount of P8,000.00 as damages. The other
causes of action of private respondent are ordered dismissed.
SO ORDERED.
Gutierrez, Jr. and Bidin, JJ., concur.
Fernan, C.J., took no part
Feliciano, J., concur in the result.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-6913 November 21, 1913
THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,
vs.
GREGORIO DE LA PEA, administrator of the estate of Father Agustin de la
Pea, defendant-appellant.
J. Lopez Vito, for appellant.
Arroyo and Horrilleno, for appellee.

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 Father De la Pea, as trustee, showed that he had
on hand as such trustee the sum of P6,641, collected by him for the
charitable purposes aforesaid. In the same year he deposited in his personal
account P19,000 in the Hongkong and Shanghai Bank at Iloilo. Shortly
thereafter and during the war of the revolution, Father De la Pea was
arrested by the military authorities as a political prisoner, and while thus
detained made an order on said bank in favor of the United States Army
officer under whose charge he then was for the sum thus deposited in said
bank. The arrest of Father De la Pea and the confiscation of the funds in the
bank were the result of the claim of the military authorities that he was an
insurgent and that the funds thus deposited had been collected by him for
revolutionary purposes. The money was taken from the bank by the military
authorities by virtue of such order, was confiscated and turned over to the
Government.
While there is considerable dispute in the case over the question whether the
P6,641 of trust funds was included in the P19,000 deposited as aforesaid,
nevertheless, a careful examination of the case leads us to the conclusion
that said trust funds were a part of the funds deposited and which were
removed and confiscated by the military authorities of the United States.
That branch of the law known in England and America as the law of trusts had
no exact counterpart in the Roman law and has none under the Spanish law.
In this jurisdiction, therefore, Father De la Pea's liability is determined by
those portions of the Civil Code which relate to obligations. (Book 4, Title 1.)
Although the Civil Code states that "a person obliged to give something is
also bound to preserve it with the diligence pertaining to a good father of a
family" (art. 1094), it also provides, following the principle of the Roman
law, major casus est, cui humana infirmitas resistere non potest, that "no one
shall be liable for events which could not be foreseen, or which having been
foreseen were inevitable, with the exception of the cases expressly
mentioned in the law or those in which the obligation so declares." (Art.
1105.)
By placing the money in the bank and mixing it with his personal funds De la
Pea did not thereby assume an obligation different from that under which he
would have lain if such deposit had not been made, nor did he thereby make
himself liable to repay the money at all hazards. If the money had been
forcibly taken from his pocket or from his house by the military forces of one
of the combatants during a state of war, it is clear that under the provisions
of the Civil Code he would have been exempt from responsibility. The fact
that he placed the trust fund in the bank in his personal account does not add
to his responsibility. Such deposit did not make him a debtor who must
respond at all hazards.
We do not enter into a discussion for the purpose of determining whether he
acted more or less negligently by depositing the money in the bank than he
would if he had left it in his home; or whether he was more or less negligent
by depositing the money in his personal account than he would have been if
he had deposited it in a separate account as trustee. We regard such
discussion as substantially fruitless, inasmuch as the precise question is not
one of negligence. There was no law prohibiting him from depositing it as he
did and there was no law which changed his responsibility be reason of the
deposit. While it may be true that one who is under obligation to do or give a
thing is in duty bound, when he sees events approaching the results of which
will be dangerous to his trust, to take all reasonable means and measures to
escape or, if unavoidable, to temper the effects of those events, we do not
feel constrained to hold that, in choosing between two means equally legal,
he is culpably negligent in selecting one whereas he would not have been if
he had selected the other.
The court, therefore, finds and declares that the money which is the subject
matter of this action was deposited by Father De la Pea in the Hongkong and
Shanghai Banking Corporation of Iloilo; that said money was forcibly taken
from the bank by the armed forces of the United 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.
Arellano, C.J., Torres and Carson, JJ., concur.

Separate Opinions
TRENT, J., dissenting:
I dissent. Technically speaking, whether Father De la Pea was a trustee or an
agent of the plaintiff his books showed that in 1898 he had in his possession
as trustee or agent the sum of P6,641 belonging to the plaintiff as the head of
the church. This money was then clothed with all the immunities and
protection with which the law seeks to invest trust funds. But when De la
Pea mixed this trust fund with his own and deposited the whole in the bank
to hispersonal account or credit, he by this act stamped on the said fund his
own private marks and unclothed it of all the protection it had. If this money
had been deposited in the name of De la Pea as trustee or agent of the
plaintiff, I think that it may be presumed that the military authorities would
not have confiscated it for the reason that they were looking for insurgent
funds only. Again, the plaintiff had no reason to suppose that De la Pea
would attempt to strip the fund of its identity, nor had he said or done
anything which tended to relieve De la Pea from the legal responsibility
which pertains to the care and custody of trust funds.
The Supreme Court of the United States in the United State vs. Thomas (82 U.
S., 337), at page 343, said: "Trustees are only bound to exercise the same
care and solicitude with regard to the trust property which they would
exercise with regard to their own. Equity will not exact more of them. They
are not liable for a loss by theft without their fault. But this exemption ceases
when they mix the trust-money with their own, whereby it loses its identity,
and they become mere debtors."
If this proposition is sound and is applicable to cases arising in this
jurisdiction, and I entertain no doubt on this point, the liability of the estate of
De la Pea cannot be doubted. But this court in the majority opinion says:
"The fact that he (Agustin de la Pea) placed the trust fund in the bank in his
personal account does not add to his responsibility. Such deposit did not
make him a debtor who must respond at all hazards. . . . There was no law
prohibiting him from depositing it as he did, and there was no law which
changed his responsibility, by reason of the deposit."
I assume that the court in using the language which appears in the latter part
of the above quotation meant to say that there was no statutory law
regulating the question. Questions of this character are not usually governed
by statutory law. The law is to be found in the very nature of the trust itself,
and, as a general rule, the courts say what facts are necessary to hold the
trustee as a debtor.
If De la Pea, after depositing the trust fund in his personal account, had used
this money for speculative purposes, such as the buying and selling of sugar
or other products of the country, thereby becoming a debtor, there would
have been no doubt as to the liability of his estate. Whether he used this
money for that purpose the record is silent, but it will be noted that a
considerable length of time intervened from the time of the deposit until the
funds were confiscated by the military authorities. In fact the record shows
that De la Pea deposited on June 27, 1898, P5,259, on June 28 of that year
P3,280, and on August 5 of the same year P6,000. The record also shows that
these funds were withdrawn and again deposited all together on the 29th of
May, 1900, this last deposit amounting to P18,970. These facts strongly
indicate that De la Pea had as a matter of fact been using the money in
violation of the trust imposed in him.

If the doctrine announced in the majority opinion be followed in cases

hereafter arising in this jurisdiction trust funds will be placed in precarious
condition. The position of the trustee will cease to be one of trust.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 90027 March 3, 1993

CA AGRO-INDUSTRIAL DEVELOPMENT CORP., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SECURITY BANK AND TRUST
COMPANY, respondents.
Dolorfino & Dominguez Law Offices for petitioner.
Danilo B. Banares for private respondent.

DAVIDE, JR., J.:

Is the contractual relation between a commercial bank and another party in a
contract of rent of a safety deposit box with respect to its contents placed by
the latter one of bailor and bailee or one of lessor and lessee?
This is the crux of the present controversy.
On 3 July 1979, petitioner (through its President, Sergio Aguirre) and the
spouses Ramon and Paula Pugao entered into an agreement whereby the
former purchased from the latter two (2) parcels of land for a consideration of
P350,625.00. Of this amount, P75,725.00 was paid as downpayment while
the balance was covered by three (3) postdated checks. Among the terms
and conditions of the agreement embodied in a Memorandum of True and
Actual Agreement of Sale of Land were that the titles to the lots shall be
transferred to the petitioner upon full payment of the purchase price and that
the owner's copies of the certificates of titles thereto, Transfer Certificates of
Title (TCT) Nos. 284655 and 292434, shall be deposited in a safety deposit
box of any bank. The same could be withdrawn only upon the joint signatures
of a representative of the petitioner and the Pugaos upon full payment of the
purchase price. Petitioner, through Sergio Aguirre, and the Pugaos then
rented Safety Deposit Box No. 1448 of private respondent Security Bank and
Trust Company, a domestic banking corporation hereinafter referred to as the
respondent Bank. For this purpose, both signed a contract of lease (Exhibit
"2") which contains, inter alia, the following conditions:
13. The bank is not a depositary of the contents of the safe and it has neither
the possession nor control of the same.
14. The bank has no interest whatsoever in said contents, except herein
expressly provided, and it assumes absolutely no liability in connection
therewith. 1
After the execution of the contract, two (2) renter's keys were given to the
renters one to Aguirre (for the petitioner) and the other to the Pugaos. A
guard key remained in the possession of the respondent Bank. The safety
deposit box has two (2) keyholes, one for the guard key and the other for the
renter's key, and can be opened only with the use of both keys. Petitioner
claims that the certificates of title were placed inside the said box.
Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner
the two (2) lots at a price of P225.00 per square meter which, as petitioner
alleged in its complaint, translates to a profit of P100.00 per square meter or
a total of P280,500.00 for the entire property. Mrs. Ramos demanded the
execution of a deed of sale which necessarily entailed the production of the
certificates of title. In view thereof, Aguirre, accompanied by the Pugaos, then
proceeded to the respondent Bank on 4 October 1979 to open the safety
deposit box and get the certificates of title. However, when opened in the
presence of the Bank's representative, the box yielded no such certificates.
Because of the delay in the reconstitution of the title, Mrs. Ramos withdrew
her earlier offer to purchase the lots; as a consequence thereof, the petitioner
allegedly failed to realize the expected profit of P280,500.00. Hence, the
latter filed on 1 September 1980 a complaint 2 for damages against the
respondent Bank with the Court of First Instance (now Regional Trial Court) of
Pasig, Metro Manila which docketed the same as Civil Case No. 38382.
In its Answer with Counterclaim, 3 respondent Bank alleged that the petitioner
has no cause of action because of paragraphs 13 and 14 of the contract of
lease (Exhibit "2"); corollarily, loss of any of the items or articles contained in
the box could not give rise to an action against it. It then interposed a
counterclaim for exemplary damages as well as attorney's fees in the amount
of P20,000.00. Petitioner subsequently filed an answer to the counterclaim. 4
In due course, the trial court, now designated as Branch 161 of the Regional
Trial Court (RTC) of Pasig, Metro Manila, rendered a decision 5 adverse to the
petitioner on 8 December 1986, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing
plaintiff's complaint.
On defendant's counterclaim, judgment is hereby rendered ordering plaintiff
to pay defendant the amount of FIVE THOUSAND (P5,000.00) PESOS as
attorney's fees.
With costs against plaintiff. 6
The unfavorable verdict is based on the trial court's conclusion that under
paragraphs 13 and 14 of the contract of lease, the Bank has no liability for
the loss of the certificates of title. The court declared that the said provisions
are binding on the parties.
Its motion for reconsideration 7 having been denied, petitioner appealed from
the adverse decision to the respondent Court of Appeals which docketed the
appeal as CA-G.R. CV No. 15150. Petitioner urged the respondent Court to
reverse the challenged decision because the trial court erred in (a) absolving
the respondent Bank from liability from the loss, (b) not declaring as null and
void, for being contrary to law, public order and public policy, the provisions
in the contract for lease of the safety deposit box absolving the Bank from
any liability for loss, (c) not concluding that in this jurisdiction, as well as
under American jurisprudence, the liability of the Bank is settled and (d)
awarding attorney's fees to the Bank and denying the petitioner's prayer for
nominal and exemplary damages and attorney's fees. 8
In its Decision promulgated on 4 July 1989, 9 respondent Court affirmed the
appealed decision principally on the theory that the contract (Exhibit "2")
executed by the petitioner and respondent Bank is in the nature of a contract
of lease by virtue of which the petitioner and its co-renter were given control
over the safety deposit box and its contents while the Bank retained no right
to open the said box because it had neither the possession nor control over it
and its contents. As such, the contract is governed by Article 1643 of the Civil
Code 10 which provides:
Art. 1643. In the lease of things, one of the parties binds himself to give to
another the enjoyment or use of a thing for a price certain, and for a period
which may be definite or indefinite. However, no lease for more than ninety-
nine years shall be valid.
It invoked Tolentino vs. Gonzales 11 which held that the owner of the
property loses his control over the property leased during the period of the
contract and Article 1975 of the Civil Code which provides:
Art. 1975. The depositary holding certificates, bonds, securities or
instruments which earn interest shall be bound to collect the latter when it
becomes due, and to take such steps as may be necessary in order that the
securities may preserve their value and the rights corresponding to them
according to law.
The above provision shall not apply to contracts for the rent of safety deposit
boxes.
and then concluded that "[c]learly, the defendant-appellee is not under any
duty to maintain the contents of the box. The stipulation absolving the
defendant-appellee from liability is in accordance with the nature of the
contract of lease and cannot be regarded as contrary to law, public order and
public policy." 12 The appellate court was quick to add, however, that under
the contract of lease of the safety deposit box, respondent Bank is not
completely free from liability as it may still be made answerable in case
unauthorized persons enter into the vault area or when the rented box is
forced open. Thus, as expressly provided for in stipulation number 8 of the
contract in question:
8. The Bank shall use due diligence that no unauthorized person shall be
admitted to any rented safe and beyond this, the Bank will not be responsible
for the contents of any safe rented from it. 13
Its motion for reconsideration 14 having been denied in the respondent Court's
Resolution of 28 August 1989, 15 petitioner took this recourse under Rule 45 of
the Rules of Court and urges Us to review and set aside the respondent
Court's ruling. Petitioner avers that both the respondent Court and the trial
court (a) did not properly and legally apply the correct law in this case, (b)
acted with grave abuse of discretion or in excess of jurisdiction amounting to
lack thereof and (c) set a precedent that is contrary to, or is a departure from
precedents adhered to and affirmed by decisions of this Court and precepts in
American jurisprudence adopted in the Philippines. It reiterates the
arguments it had raised in its motion to reconsider the trial court's decision,
the brief submitted to the respondent Court and the motion to reconsider the
latter's decision. In a nutshell, petitioner maintains that regardless of
nomenclature, the contract for the rent of the safety deposit box (Exhibit "2")
is actually a contract of deposit governed by Title XII, Book IV of the Civil
Code of the
16
Philippines. Accordingly, it is claimed that the respondent Bank is liable for
the loss of the certificates of title pursuant to Article 1972 of the said Code
which provides:
Art. 1972. The depositary is obliged to keep the thing safely and to return it,
when required, to the depositor, or to his heirs and successors, or to the
person who may have been designated in the contract. His responsibility,
with regard to the safekeeping and the loss of the thing, shall be governed by
the provisions of Title I of this Book.
If the deposit is gratuitous, this fact shall be taken into account in
determining the degree of care that the depositary must observe.
Petitioner then quotes a passage from American Jurisprudence 17 which is
supposed to expound on the prevailing rule in the United States, to wit:
The prevailing rule appears to be that where a safe-deposit company leases a
safe-deposit box or safe and the lessee takes possession of the box or safe
and places therein his securities or other valuables, the relation of bailee and
bail or 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 and Phrases 18 which states that a contract for the
rental of a bank safety deposit box in consideration of a fixed amount at
stated periods is a bailment for hire.
Petitioner further argues that conditions 13 and 14 of the questioned contract
are contrary to law and public policy and should be declared null and void. In
support thereof, it cites Article 1306 of the Civil Code which provides that
parties to a contract may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order or public policy.
After the respondent Bank filed its comment, this Court gave due course to
the petition and required the parties to simultaneously submit their
respective Memoranda.
The petition is partly meritorious.
We agree with the petitioner's contention that the contract for the rent of the
safety deposit box is not an ordinary contract of lease as defined in Article
1643 of the Civil Code. However, We do not fully subscribe to its view that the
same is a contract of deposit that is to be strictly governed by the provisions
in the Civil Code on deposit; 19 the contract in the case at bar is a special kind
of deposit. It cannot be characterized as an ordinary contract of lease under
Article 1643 because the full and absolute possession and control of the
safety deposit box was not given to the joint renters the petitioner and the
Pugaos. The guard key of the box remained with the respondent Bank;
without this key, neither of the renters could open the box. On the other
hand, the respondent Bank could not likewise open the box without the
renter's key. In this case, the said key had a duplicate which was made so
that both renters could have access to the box.
Hence, the authorities cited by the respondent Court 20 on this point do not
apply. Neither could Article 1975, also relied upon by the respondent Court,
be invoked as an argument against the deposit theory. Obviously, the first
paragraph of such provision cannot apply to a depositary of certificates,
bonds, securities or instruments which earn interest if such documents are
kept in a rented safety deposit box. It is clear that the depositary cannot open
the box without the renter being present.
We observe, however, that the deposit theory itself does not altogether find
unanimous support even in American jurisprudence. We agree with the
petitioner that under the latter, the prevailing rule is that the relation
between a bank renting out safe-deposit boxes and its customer with respect
to the contents of the box is that of a bail or and bailee, the bailment being
for hire and mutual benefit. 21 This is just the prevailing view because:
There is, however, some support for the view that the relationship in question
might be more properly characterized as that of landlord and tenant, or lessor
and lessee. It has also been suggested that it should be characterized as that
of licensor and licensee. The relation between a bank, safe-deposit company,
or storage company, and the renter of a safe-deposit box therein, is often
described as contractual, express or implied, oral or written, in whole or in
part. But there is apparently no jurisdiction in which any rule other than that
applicable to bailments governs questions of the liability and rights of the
parties in respect of loss of the contents of safe-deposit boxes. 22 (citations
omitted)
In the context of our laws which authorize banking institutions to rent out
safety deposit boxes, it is clear that in this jurisdiction, the prevailing rule in
the United States has been adopted. Section 72 of the General Banking
Act 23pertinently provides:
Sec. 72. In addition to the operations specifically authorized elsewhere in this
Act, banking institutions other than building and loan associations may
perform the following services:
(a) Receive in custody funds, documents, and valuable objects, and rent
safety deposit boxes for the safeguarding of such effects.
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
limits its liability to some extent by agreement or stipulation. 30 (citations
omitted)
Thus, we reach the same conclusion which the Court of Appeals arrived at,
that is, that the petition should be dismissed, but on grounds quite different
from those relied upon by the Court of Appeals. In the instant case, the
respondent Bank's exoneration cannot, contrary to the holding of the Court of
Appeals, be based on or proceed from a characterization of the impugned
contract as a contract of lease, but rather on the fact that no competent proof
was presented to show that respondent Bank was aware of the agreement
between the petitioner and the Pugaos to the effect that the certificates of
title were withdrawable from the safety deposit box only upon both parties'
joint signatures, and that no evidence was submitted to reveal that the loss of
the certificates of title was due to the fraud or negligence of the respondent
Bank. This in turn flows from this Court's determination that the contract
involved was one of deposit. Since both the petitioner and the Pugaos agreed
that each should have one (1) renter's key, it was obvious that either of them
could ask the Bank for access to the safety deposit box and, with the use of
such key and the Bank's own guard key, could open the said box, without the
other renter being present.
Since, however, the petitioner cannot be blamed for the filing of the
complaint and no bad faith on its part had been established, the trial court
erred in condemning the petitioner to pay the respondent Bank attorney's
fees. To this extent, the Decision (dispositive portion) of public respondent
Court of Appeals must be modified.
WHEREFORE, the Petition for Review is partially GRANTED by deleting the
award for attorney's fees from the 4 July 1989 Decision of the respondent
Court of Appeals in CA-G.R. CV No. 15150. As modified, and subject to the
pronouncement We made above on the nature of the relationship between
the parties in a contract of lease of safety deposit boxes, the dispositive
portion of the said Decision is hereby AFFIRMED and the instant Petition for
Review is otherwise DENIED for lack of merit.
No pronouncement as to costs.
SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.
Gutierrez, Jr., J., is on leave.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 102970 May 13, 1993

LUZAN SIA, petitioner,
vs.
COURT OF APPEALS and SECURITY BANK and TRUST COMPANY, respondents.
Asuncion Law Offices for petitioner.
Cauton, Banares, Carpio & Associates for private respondent.

DAVIDE, JR., J.:

The Decision of public respondent Court of Appeals in CA-G.R. CV No. 26737,
promulgated on 21 August 1991, 1reversing and setting aside the Decision,
dated 19 February 1990, 2 of Branch 47 of the Regional Trial Court (RTC) of
Manila in Civil Case No. 87-42601, entitled "LUZAN SIA vs. SECURITY BANK
and TRUST CO.," is challenged in this petition for review on certiorari under
Rule 45 of the Rules Court.
Civil Case No. 87-42601 is an action for damages arising out of the
destruction or loss of the stamp collection of the plaintiff (petitioner herein)
contained in Safety Deposit Box No. 54 which had been rented from the
defendant pursuant to a contract denominated as a Lease
3
Agreement. Judgment therein was rendered in favor of the dispositive
portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the plaintiff and against the defendant, Security Bank & Trust Company,
ordering the defendant bank to pay the plaintiff the sum of
a) Twenty Thousand Pesos (P20,000.00), Philippine Currency, as actual
damages;
b) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as moral
damages; and
c) Five Thousand Pesos (P5,000.00), Philippine Currency, as attorney's fees
and legal expenses.
The counterclaim set up by the defendant are hereby dismissed for lack of
merit.
No costs.
SO ORDERED. 4
The antecedent facts of the present controversy are summarized by the
public respondent in its challenged decision as follows:
The plaintiff rented on March 22, 1985 the Safety Deposit Box No. 54 of the
defendant bank at its Binondo Branch located at the Fookien Times Building,
Soler St., Binondo, Manila 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 at its aforesaid
Binondo Branch.
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 to the plaintiff, damage to his stamps
collection. The defendant bank rejected the plaintiff's claim for compensation
for his damaged stamps collection, so, the plaintiff instituted an action for
damages against the defendant bank.
The defendant bank denied liability for the damaged stamps collection of the
plaintiff on the basis of the "Rules and Regulations Governing the Lease of
Safe Deposit Boxes" (Exhs. "A-1", "1-A"), particularly paragraphs 9 and 13,
which reads (sic):
"9. The liability of the Bank by reason of the lease, is 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;
xxx xxx xxx
"13. 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."
The defendant bank also contended that its contract with the plaintiff over
safety deposit box No. 54 was one of lease and not of deposit and, therefore,
governed by the lease agreement (Exhs. "A", "L") which should be the
applicable law; that 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 then directed that an ocular inspection on (sic) the contents of
the safety deposit box be conducted, which was done on December 8, 1988
by its clerk of court in the presence of the parties and their counsels. A report
thereon was then submitted on December 12, 1988 (Records, p. 98-A) and
confirmed in open court by both parties thru counsel during the hearing on
the same date (Ibid., p. 102) stating:
"That the Safety Box Deposit No. 54 was opened by both plaintiff Luzan Sia
and the Acting Branch Manager Jimmy B. Ynion in the presence of the
undersigned, plaintiff's and defendant's counsel. Said Safety Box when
opened contains two albums of different sizes and thickness, length and
width and a tin box with printed word 'Tai Ping Shiang Roast Pork in pieces
with Chinese designs and character."
Condition of the above-stated Items
"Both albums are wet, moldy and badly damaged.
1. The first album measures 10 1/8 inches in length, 8 inches in width and 3/4
in thick. The leaves of the album are attached to every page and cannot be
lifted without destroying it, hence the stamps contained therein are no longer
visible.
2. The second album measure 12 1/2 inches in length, 9 3/4 in width 1 inch
thick. Some of its pages can still be lifted. The stamps therein can still be
distinguished but beyond restoration. Others have lost its original form.
3. The tin box is rusty inside. It contains an album with several pieces of
papers stuck up to the cover of the box. The condition of the album is the
second abovementioned album." 5
The SECURITY BANK AND TRUST COMPANY, hereinafter referred to as SBTC,
appealed the trial court's decision to the public respondent Court of Appeals.
The appeal was docketed as CA-G.R. CV No. 26737.
In urging the public respondent to reverse the decision of the trial court, SBTC
contended that the latter erred in (a) holding that the lease agreement is a
contract of adhesion; (b) finding that the defendant had failed to exercise the
required diligence expected of a bank in maintaining the safety deposit box;
(c) awarding to the plaintiff actual damages in the amount of P20,000.00,
moral damages in the amount of P100,000.00 and attorney's fees and legal
expenses in the amount of P5,000.00; and (d) dismissing the counterclaim.
On 21 August 1991, the respondent promulgated its decision the dispositive
portion of which reads:
WHEREFORE, the decision appealed from is hereby REVERSED and instead
the appellee's complaint is hereby DISMISSED. The appellant bank's
counterclaim is likewise DISMISSED. No costs. 6
In reversing the trial court's decision and absolving SBTC from liability, the
public respondent found and ruled that:
a) the fine print in the "Lease Agreement " (Exhibits "A" and "1" ) constitutes
the terms and conditions of the contract of lease which the appellee (now
petitioner) had voluntarily and knowingly executed with SBTC;
b) the contract entered into by the parties regarding Safe Deposit Box No. 54
was not a contract of deposit wherein the bank became a depositary of the
subject stamp collection; hence, as contended by SBTC, the provisions of
Book IV, Title XII of the Civil Code on deposits do not apply;
c) The following provisions of the questioned lease agreement of the safety
deposit box limiting SBTC's liability:
9. The liability of the bank by reason of the lease, is 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.
xxx xxx xxx
13. 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.
are valid since said stipulations are not contrary to law, morals, good
customs, public order or public policy; and
d) there is no concrete evidence to show that SBTC failed to exercise the
required diligence in maintaining the safety deposit box; what was proven
was that the floods of 1985 and 1986, which were beyond the control of
SBTC, caused the damage to the stamp collection; said floods were fortuitous
events which SBTC should not be held liable for since it was not shown to
have participated in the aggravation of the damage to the stamp collection;
on the contrary, it offered its services to secure the assistance of an expert in
order to save most of the stamps, but the appellee refused; appellee must
then bear the lose under the principle of "res perit domino."
Unsuccessful in his bid to have the above decision reconsidered by the public
respondent, 7 petitioner filed the instant petition wherein he contends that:
I
IT WAS A GRAVE ERROR OR AN ABUSE OF DISCRETION ON THE PART OF THE
RESPONDENT COURT WHEN IT RULED THAT RESPONDENT SBTC DID NOT FAIL
TO EXERCISE THE REQUIRED DILIGENCE IN MAINTAINING THE SAFETY
DEPOSIT BOX OF THE PETITIONER CONSIDERING THAT SUBSTANTIAL
EVIDENCE EXIST (sic) PROVING THE CONTRARY.
II
THE RESPONDENT COURT SERIOUSLY ERRED IN EXCULPATING PRIVATE
RESPONDENT FROM ANY LIABILITY WHATSOEVER BY REASON OF THE
PROVISIONS OF PARAGRAPHS 9 AND 13 OF THE AGREEMENT (EXHS. "A" AND
"A-1").
III
THE RESPONDENT COURT SERIOUSLY ERRED IN NOT UPHOLDING THE
AWARDS OF THE TRIAL COURT FOR ACTUAL AND MORAL DAMAGES,
INCLUDING ATTORNEY'S FEES AND LEGAL EXPENSES, IN FAVOR OF THE
PETITIONER. 8
We subsequently gave due course the petition and required both parties to
submit their respective memoranda, which they complied with. 9
Petitioner insists that the trial court correctly ruled that SBTC had failed "to
exercise the required diligence expected of a bank maintaining such safety
deposit box . . . in the light of the environmental circumstance of said safety
deposit box after the floods of 1985 and 1986." He argues that such a
conclusion is supported by the evidence on record, to wit: SBTC was fully
cognizant of the exact location of the safety deposit box in question; it knew
that the premises were inundated by floodwaters in 1985 and 1986 and
considering that the bank is guarded twenty-four (24) hours a day , it is safe
to conclude that it was also aware of the inundation of the premises where
the safety deposit box was located; despite such knowledge, however, it
never bothered to inform the petitioner of the flooding or take any
appropriate measures to insure the safety and good maintenance of the
safety deposit box in question.
SBTC does not squarely dispute these facts; rather, it relies on the rule that
findings of facts of the Court of Appeals, when supported by substantial
exidence, are not reviewable on appeal by certiorari. 10
The foregoing rule is, of course, subject to certain exceptions such as when
there exists a disparity between the factual findings and conclusions of the
Court of Appeals and the trial court. 11 Such a disparity obtains in the present
case.
As We see it, SBTC's theory, which was upheld by the public respondent, is
that the "Lease Agreement " covering Safe Deposit Box No. 54 (Exhibit "A and
"1") is just that a contract of lease and not a contract of deposit, and
that paragraphs 9 and 13 thereof, which expressly limit the bank's liability as
follows:
9. The liability of the bank by reason of the lease, is limited to the exercise of
the diligence to prevent the opening of the Safe by any person other than the
Renter, his autliorized agent or legal representative;
xxx xxx xxx
13. 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 said contents, except as herein provided, and it assumes
absolutely no liability in connection therewith. 12
are valid and binding upon the parties. In the challenged decision, the public
respondent further avers that even without such a limitation of liability, SBTC
should still be absolved from any responsibility for the damage sustained by
the petitioner as it appears that such damage was occasioned by a fortuitous
event and that the respondent bank was free from any participation in the
aggravation of the injury.
We cannot accept this theory and ratiocination. Consequently, this Court finds
the petition to be impressed with merit.
In the recent case CA Agro-Industrial Development Corp. vs. Court of
Appeals, 13 this Court explicitly rejected the contention that a contract for the
use of a safety deposit box is a contract of lease governed by Title VII, Book
IV of the Civil Code. Nor did We fully subscribe to the view that it is a contract
of deposit to be strictly governed by the Civil Code provision on deposit; 14 it
is, as We declared, 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 15 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 as depositories 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. In the instant
case, petitioner maintains that 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. 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."
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 ."[10 AM JUR 2d., 466]. (citations
omitted) 16
It must be noted that conditions No. 13 and No. 14 in the Contract of Lease of
Safety Deposit Box in CA Agro-Industrial Development Corp. are strikingly
similar to condition No. 13 in the instant case. On the other hand, both
condition No. 8 in CA Agro-Industrial Development Corp. and condition No. 9
in the present case limit the scope of the exercise of due diligence by the
banks involved to merely seeing to it that only the renter, his authorized
agent or his legal representative should open or have access to the safety
deposit box. In short, in all other situations, it would seem that SBTC is not
bound to exercise diligence of any kind at all. Assayed in the light of Our
aforementioned pronouncements in CA Agro-lndustrial Development Corp., it
is not at all difficult to conclude that both conditions No. 9 and No. 13 of the
"Lease Agreement" covering the safety deposit box in question (Exhibits "A"
and "1") must be stricken down for being contrary to law and public policy as
they 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 or its agents' fraud, negligence or delay. Accordingly, SBTC cannot take
refuge under the said conditions.
Public respondent further postulates that SBTC cannot be held responsible for
the destruction or loss of the stamp collection because the flooding was a
fortuitous event and there was no showing of SBTC's participation in the
aggravation of the loss or injury. It states:
Article 1174 of the Civil Code provides:
"Except in cases expressly specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those events which
could not be foreseen, or which, though foreseen, were inevitable.'
In its dissertation of the phrase "caso fortuito" the Enciclopedia Jurisdicada
Espaola 17 says: "In a legal sense and, consequently, also in relation to
contracts, a "caso fortuito" prevents (sic) 18 the following essential
characteristics: (1) the cause of the unforeseen ands unexpected occurrence,
or of the failure of the debtor to comply with his obligation, must be
independent of the human will; (2) it must be impossible to foresee the event
which constitutes the "caso fortuito," or if it can be foreseen, it must be
impossible to avoid; (3) the occurrence must be such as to render it
impossible for one debtor to fulfill his obligation in a normal manner; and (4)
the obligor must be free from any participation in the aggravation of the
injury resulting to the creditor." (cited in Servando vs. Phil., Steam Navigation
Co., supra). 19
Here, the unforeseen or unexpected inundating floods were independent of
the will of the appellant bank and the latter was not shown to have
participated in aggravating damage (sic) to the stamps collection of the
appellee. In fact, the appellant bank offered its services to secure the
assistance of an expert to save most of the then good stamps but the appelle
refused and let (sic) these recoverable stamps inside the safety deposit box
until they were ruined. 20
Both the law and authority cited are clear enough and require no further
elucidation. Unfortunately, however, the public respondent failed to consider
that in the instant case, as correctly held by the trial court, SBTC was guilty of
negligence. The facts constituting negligence are enumerated in the petition
and have been summarized in this ponencia. SBTC'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 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, 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,
thus comes to the succor of the petitioner. The destruction or loss of the
stamp collection which was, in the language of the trial court, the "product of
27 years of patience and diligence" 21 caused the petitioner pecuniary loss;
hence, he must be compensated therefor.
We cannot, however, place Our imprimatur on the trial court's award of moral
damages. Since the relationship between the petitioner and SBTC is based on
a contract, either of them may be held liable for moral damages for breach
thereof only if said party had acted fraudulently or in bad faith. 22 There is
here no proof of fraud or bad faith on the part of SBTC.
WHEREFORE, the instant petition is hereby GRANTED. The challenged
Decision and Resolution of the public respondent Court of Appeals of 21
August 1991 and 21 November 1991, respectively, in CA-G.R. CV No. 26737,
are hereby SET ASIDE and the Decision of 19 February 1990 of Branch 47 of
the Regional Trial Court of Manila in Civil Case No. 87-42601 is hereby
REINSTATED in full, except as to the award of moral damages which is hereby
set aside.
Costs against the private respondent.
SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 4015 August 24, 1908
ANGEL JAVELLANA, plaintiff-appellee,
vs.
JOSE LIM, ET AL., defendants-appellants.
R. Zaldarriaga for appellants.
B. Montinola for appellee.
TORRES, J.:
The attorney for the plaintiff, Angel Javellana, file 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, he 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, 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 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.
That, when the obligation became due, the defendants begged the plaintiff
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 the plaintiff 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.
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 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 as alleged in
paragraph 3 of the complaint, and also denied all the other statements
contained therein.
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
total sum of 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.
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 Exhibits
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 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
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.
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; and the creditor, by
granting them the extension, evidently confirmed the express permission
previously given to use and dispose of the amount stated as having bee
deposited, which, in accordance with the loan, to all intents and purposes
gratuitously, until the 20th of January, 1898, and from that 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
(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 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 defendant's
counterclaim for P5,602.16, because the existence and certainty of said
indebtedness imputed to the plaintiff has not been proven, and the
defendants, who call themselves creditors for the said amount have not
proven in a satisfactory manner that the plaintiff had received partial
payments on account of the same; the latter alleges with good reason, that
they should produce the receipts which he may have issued, and which he
did issue whenever they paid him any money on account. The plaintiffs
allegation that the two amounts of 400 and 1,200 pesos, referred to in
documents marked "C" and "D" offered in evidence by the defendants, had
been received from 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 reason above set forth it may, as a matter of course, be
inferred that 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.
The original joint obligation contracted by the defendant debtor still exists,
and it has not been shown or proven in the proceedings that the creditor had
released Joe 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.
Arellano, C.J., Carson, Willard and Tracey, JJ., concur.
 WILSON CHAN and LILY CHAN, petitioners, vs. BONIFACIO S.
MACEDA, JR., respondent.
DECISION
SANDOVAL-GUTIERREZ, 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.
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.
The 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
attorneys 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 preliminary attachment against petitioners, [7] docketed as Civil Case
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 August 25, 1989, or after almost four (4) years, the trial court
dismissed respondents complaint for his failure to prosecute and for lack of
interest.[9] On September 6, 1994, or five years thereafter, respondent filed a
motion for 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]
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.
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 courts order of default, but the same was dismissed in its
Order[16] dated August 31, 1995. The case reached this Court, and in a
Resolution dated October 25, 1995,[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 latters 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 respondents
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]
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]
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
attorneys fees of P50,000.00 and to pay the costs.
SO ORDERED.
The 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 Moremans 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
inventory was signed by the agent Moreman Builders Corporation and
defendants.
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).
Defendants should pay plaintiff moral damages of P150,000.00; exemplary
damages of P50,000.00 and attorneys fees of P50,000.00 and to pay the
costs.
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 courts 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 partys act (PAL, Inc. vs. NLRC, 259 SCRA 459. In
sustaining appellees 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 Moremans 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 judges 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.
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:
I
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 attorneys 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 returncontemplated
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
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.

Obviously, petitioners assigned errors call for a review of the lower courts
findings of fact.
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]
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 respondents 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 respondents 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 respondents demand to return the same,
we hold that petitioners have no corresponding obligation or liability to
respondent with respect to those construction materials.
Anent the issue of damages, petitioners are still not liable because, as
expressly provided for in Article 2199 of the Civil Code, [43]actual or
compensatory damages cannot be presumed, but must be proved with
reasonable degree of certainty. A court cannot rely on speculations,
conjectures, or guesswork as to the fact and amount of damages, but must
depend upon competent proof that they have been suffered by the injured
party and on the best obtainable evidence of the actual amount thereof. It
must point out specific facts which could afford a basis for 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 plaintiffs causes of
action. Here, the trial court merely adopted respondents 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.
Puno, (Chairman), Panganiban, Corona, and Carpio-Morales, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-30511 February 14, 1980
MANUEL M. SERRANO, petitioner,
vs.
CENTRAL BANK OF THE PHILIPPINES; OVERSEAS BANK OF MANILA; EMERITO
M. RAMOS, SUSANA B. RAMOS, EMERITO B. RAMOS, JR., JOSEFA RAMOS DELA
RAMA, HORACIO DELA RAMA, ANTONIO B. RAMOS, FILOMENA RAMOS
LEDESMA, RODOLFO LEDESMA, VICTORIA RAMOS TANJUATCO, and TEOFILO
TANJUATCO, respondents.
Rene Diokno for petitioner.
F.E. Evangelista & Glecerio T. Orsolino for respondent Central Bank of the
Philippines.
Feliciano C. Tumale, Pacifico T. Torres and Antonio B. Periquet for respondent
Overseas Bank of Manila.
Josefina G. Salonga for all other respondents.

CONCEPCION, JR., J.:

Petition for mandamus and prohibition, with preliminary injunction, that seeks
the establishment of joint and solidary liability to the amount of Three
Hundred Fifty Thousand Pesos, with interest, against respondent Central Bank
of the Philippines and Overseas Bank of Manila and its stockholders, on the
alleged failure of the Overseas Bank of Manila to return the time deposits
made by petitioner and assigned to him, on the ground that respondent
Central Bank failed in its duty to exercise strict supervision over respondent
Overseas Bank of Manila to protect depositors and the general
public. 1 Petitioner also prays that both respondent banks be ordered to
execute the proper and necessary documents to constitute all properties
fisted in Annex "7" of the Answer of respondent Central Bank of the
Philippines in G.R. No. L-29352, entitled "Emerita M. Ramos, et al vs. Central
Bank of the Philippines," into a trust fund in favor of petitioner and all other
depositors of respondent Overseas Bank of Manila. It is also prayed that the
respondents be prohibited permanently from honoring, implementing, or
doing any act predicated upon the validity or efficacy of the deeds of
mortgage, assignment. and/or conveyance or transfer of whatever nature of
the properties listed in Annex "7" of the Answer of respondent Central Bank in
G.R. No. 29352. 2
A sought for ex-parte preliminary injunction against both respondent banks
was not given by this Court.
Undisputed pertinent facts are:
On October 13, 1966 and December 12, 1966, petitioner made a time
deposit, for one year with 6% interest, of One Hundred Fifty Thousand Pesos
(P150,000.00) with the respondent Overseas Bank of Manila. 3 Concepcion
Maneja also made a time deposit, for one year with 6-% interest, on March
6, 1967, of Two Hundred Thousand Pesos (P200,000.00) with the same
respondent Overseas Bank of Manila. 4
On August 31, 1968, Concepcion Maneja, married to Felixberto M. Serrano,
assigned and conveyed to petitioner Manuel M. Serrano, her time deposit of
P200,000.00 with respondent Overseas Bank of Manila. 5
Notwithstanding series of demands for encashment of the aforementioned
time deposits from the respondent Overseas Bank of Manila, dating from
December 6, 1967 up to March 4, 1968, not a single one of the time deposit
certificates was honored by respondent Overseas Bank of Manila. 6
Respondent Central Bank admits that it is charged with the duty of
administering the banking system of the Republic and it exercises supervision
over all doing business in the Philippines, but denies the petitioner's
allegation that the Central Bank has the duty to exercise a most rigid and
stringent supervision of banks, implying that respondent Central Bank has to
watch every move or activity of all banks, including respondent Overseas
Bank of Manila. Respondent Central Bank claims that as of March 12, 1965,
the Overseas Bank of Manila, while operating, was only on a limited degree of
banking operations since the Monetary Board decided in its Resolution No.
322, dated March 12, 1965, to prohibit the Overseas Bank of Manila from
making new loans and investments in view of its chronic reserve deficiencies
against its deposit liabilities. This limited operation of respondent Overseas
Bank of Manila continued up to 1968. 7
Respondent Central Bank also denied that it is guarantor of the permanent
solvency of any banking institution as claimed by petitioner. It claims that
neither the law nor sound banking supervision requires respondent Central
Bank to advertise or represent to the public any remedial measures it may
impose upon chronic delinquent banks as such action may inevitably result to
panic or bank "runs". In the years 1966-1967, there were no findings to
declare the respondent Overseas Bank of Manila as insolvent. 8
Respondent Central Bank likewise denied that a constructive trust was
created in favor of petitioner and his predecessor in interest Concepcion
Maneja when their time deposits were made in 1966 and 1967 with the
respondent Overseas Bank of Manila as during that time the latter was not an
insolvent bank and its operation as a banking institution was being salvaged
by the respondent Central Bank. 9
Respondent Central Bank avers no knowledge of petitioner's claim that the
properties given by respondent Overseas Bank of Manila as additional
collaterals to respondent Central Bank of the Philippines for the former's
overdrafts and emergency loans were acquired through the use of depositors'
money, including that of the petitioner and Concepcion Maneja. 10
In G.R. No. L-29362, entitled "Emerita M. Ramos, et al. vs. Central Bank of the
Philippines," a case was filed by the petitioner Ramos, wherein respondent
Overseas Bank of Manila sought to prevent respondent Central Bank from
closing, declaring the former insolvent, and liquidating its assets. Petitioner
Manuel Serrano in this case, filed on September 6, 1968, a motion to
intervene in G.R. No. L-29352, on the ground that Serrano had a real and
legal interest as depositor of the Overseas Bank of Manila in the matter in
litigation in that case. Respondent Central Bank in G.R. No. L-29352 opposed
petitioner Manuel Serrano's motion to intervene in that case, on the ground
that his claim as depositor of the Overseas Bank of Manila should properly be
ventilated in the Court of First Instance, and if this Court were to allow
Serrano to intervene as depositor in G.R. No. L-29352, thousands of other
depositors would follow and thus cause an avalanche of cases in this Court. In
the resolution dated October 4, 1968, this Court denied Serrano's, motion to
intervene. The contents of said motion to intervene are substantially the
same as those of the present petition. 11
This Court rendered decision in G.R. No. L-29352 on October 4, 1971, which
became final and executory on March 3, 1972, favorable to the respondent
Overseas Bank of Manila, with the dispositive portion to wit:
WHEREFORE, the writs prayed for in the petition are hereby granted and
respondent Central Bank's resolution Nos. 1263, 1290 and 1333 (that prohibit
the Overseas Bank of Manila to participate in clearing, direct the suspension
of its operation, and ordering the liquidation of said bank) are hereby
annulled and set aside; and said respondent Central Bank of the Philippines is
directed to comply with its obligations under the Voting Trust Agreement, and
to desist from taking action in violation therefor. Costs against respondent
Central Bank of the Philippines. 12
Because of the above decision, petitioner in this case filed a motion for
judgment in this case, praying for a decision on the merits, adjudging
respondent Central Bank jointly and severally liable with respondent
Overseas Bank of Manila to the petitioner for the P350,000 time deposit
made with the latter bank, with all interests due therein; and declaring all
assets assigned or mortgaged by the respondents Overseas Bank of Manila
and the Ramos groups in favor of the Central Bank as trust funds for the
benefit of petitioner and other depositors. 13
By the very nature of the claims and causes of action against respondents,
they in reality are recovery of time deposits plus interest from respondent
Overseas Bank of Manila, and recovery of damages against respondent
Central Bank for its alleged failure to strictly supervise the acts of the other
respondent Bank and protect the interests of its depositors by virtue of the
constructive trust created when respondent Central Bank required the other
respondent to increase its collaterals for its overdrafts said emergency loans,
said collaterals allegedly acquired through the use of depositors money.
These claims shoud be ventilated in the Court of First Instance of proper
jurisdiction as We already pointed out when this Court denied petitioner's
motion to intervene in G.R. No. L-29352. Claims of these nature are not
proper in actions for mandamus and prohibition as there is no shown clear
abuse of discretion by the Central Bank in its exercise of supervision over the
other respondent Overseas Bank of Manila, and if there was, petitioner here is
not the proper party to raise that question, but rather the Overseas Bank of
Manila, as it did in G.R. No. L-29352. Neither is there anything to prohibit in
this case, since the questioned acts of the respondent Central Bank (the acts
of dissolving and liquidating the Overseas Bank of Manila), which petitioner
here intends to use as his basis for claims of damages against respondent
Central Bank, had been accomplished a long time ago.
Furthermore, both parties overlooked one fundamental principle in the nature
of bank deposits when the petitioner claimed that there should be created a
constructive trust in his favor when the respondent Overseas Bank of Manila
increased its collaterals in favor of respondent Central Bank for the former's
overdrafts and emergency loans, since these collaterals were acquired by the
use of depositors' money.
Bank deposits are in the nature of irregular deposits. They are really loans
because they earn interest. All kinds of bank deposits, whether fixed, savings,
or current are to be treated as loans and are to be covered by the law on
loans. 14 Current and savings deposit are loans to a bank because it can use
the same. The petitioner here in making time deposits that earn interests
with respondent Overseas Bank of Manila was in reality a creditor of the
respondent Bank and not a depositor. The respondent Bank was in turn a
debtor of petitioner. Failure of he respondent Bank to honor the time deposit
is failure to pay s obligation as a debtor and not a breach of trust arising from
depositary's failure to return the subject matter of the deposit
WHEREFORE, the petition is dismissed for lack of merit, with costs against
petitioner.
SO ORDERED.
Antonio, Abad Santos, JJ., concur.
Barredo (Chairman) J., concur in the judgment on the of the concurring
opinion of Justice Aquino.

Separate Opinions

AQUINO, J., concurring:

The petitioner prayed that the Central Bank be ordered to pay his time
deposits of P350,000, plus interests, which he could not recover from the
distressed Overseas Bank of Manila, and to declare all the assets assigned or
mortgaged by that bank and the Ramos group to the Central Bank as trust
properties for the benefit of the petitioner and other depositors.
The petitioner has no causes of action agianst the Central Bank to obtain
those reliefs. They cannot be granted in petitioner's instant original actions in
this Court for mandamus and prohibition. It is not the Central Bank's
ministerial duty to pay petitioner's time deposits or to hold the mortgaged
properties in trust for the depositors of the Overseas Bank of Manila. The
petitioner has no cause of action for prohibition, a remedy usually available
against any tribunal, board, corporation or person exercising judicial or
ministerial functions.
Since the Overseas Bank of Manila was found to be insolvent and the
Superintendent of Banks was ordered to take over its assets preparatory to
its liquidation under section 29 of Republic Act No. 265 (p. 197, Rollo,
Manifestation of September 19, 1973), petitioner's remedy is to file his claim
in the liquidating proceeding (Central Bank vs. Morfe, L-38427, March 12,
1975, 63 SCRA 114; Hernandez vs. Rural Bank of Lucena, Inc., L-29791,
January 10, 1978, 81 SCRA 75).

Separate Opinions
AQUINO, J., concurring:
The petitioner prayed that the Central Bank be ordered to pay his time
deposits of P350,000, plus interests, which he could not recover from the
distressed Overseas Bank of Manila, and to declare all the assets assigned or
mortgaged by that bank and the Ramos group to the Central Bank as trust
properties for the benefit of the petitioner and other depositors.
The petitioner has no causes of action agianst the Central Bank to obtain
those reliefs. They cannot be granted in petitioner's instant original actions in
this Court for mandamus and prohibition. It is not the Central Bank's
ministerial duty to pay petitioner's time deposits or to hold the mortgaged
properties in trust for the depositors of the Overseas Bank of Manila. The
petitioner has no cause of action for prohibition, a remedy usually available
against any tribunal, board, corporation or person exercising judicial or
ministerial functions.
Since the Overseas Bank of Manila was found to be insolvent and the
Superintendent of Banks was ordered to take over its assets preparatory to
its liquidation under section 29 of Republic Act No. 265 (p. 197, Rollo,
Manifestation of September 19, 1973), petitioner's remedy is to file his claim
in the liquidating proceeding (Central Bank vs. Morfe, L-38427, March 12,
1975, 63 SCRA 114; Hernandez vs. Rural Bank of Lucena, Inc., L-29791,
January 10, 1978, 81 SCRA 75).
 Republic of the Philippines
Supreme Court
Manila

SECOND DIVISION

DURBAN APARTMENTS CORPORATION, doing G.R. No. 179419

business under the name and style of City
Garden Hotel, Present:
Petitioner,
CARPIO, J.,
Chairperson,
NACHURA,
PERALTA,
- versus - ABAD, and
MENDOZA, JJ.

PIONEER INSURANCE AND SURETY Promulgated:

CORPORATION,
Respondent. January 12, 2011

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

For review is the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No.
86869, which affirmed the decision [2] of the Regional Trial Court (RTC), Branch
66, Makati City, in Civil Case No. 03-857, holding petitioner Durban
Apartments Corporation solely liable to respondent Pioneer Insurance and
Surety Corporation for the loss of Jeffrey Sees (Sees) vehicle.

The facts, as found by the CA, are simple.

On July 22, 2003, [respondent] Pioneer Insurance and Surety

Corporation x x x, by right of subrogation, filed [with the RTC of
Makati City] a Complaint for Recovery of Damages against
[petitioner] Durban Apartments Corporation, doing business
under the name and style of City Garden Hotel, and [defendant
before the RTC] Vicente Justimbaste x x x. [Respondent averred]
that: it is the insurer for loss and damage of Jeffrey S. Sees [the
insureds] 2001 Suzuki Grand Vitara x x x with Plate No. XBH-510
under Policy No. MC-CV-HO-01-0003846-00-D in the amount
of P1,175,000.00; on April 30, 2002, See arrived and checked in
at the City Garden Hotel in Makati corner Kalayaan Avenues,
Makati City before midnight, and its parking attendant,
defendant x x x Justimbaste got the key to said Vitara from See
to park it[. O]n May 1, 2002, at about 1:00 oclock in the
morning, See was awakened in his room by [a] telephone call
from the Hotel Chief Security Officer who informed him that his
Vitara was carnapped while it was parked unattended at the
parking area of Equitable PCI Bank along Makati Avenue
between the hours of 12:00 [a.m.] and 1:00 [a.m.]; See went to
see the Hotel Chief 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 Makati City
Police Anti-Carnapping Unit investigated Hotel Security Officer,
Ernesto T. Horlador, Jr. x x x and defendant x x x Justimbaste;
See gave his Sinumpaang Salaysay to the police investigator,
and filed a Complaint Sheet with the PNP Traffic Management
Group in Camp Crame, Quezon City; the Vitara has not yet been
recovered since July 23, 2002 as evidenced by a Certification of
Non- Recovery issued by the PNP TMG; 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 [petitioner] Durban Apartments and
[defendant] 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 of
[petitioner] Durban Apartments and no necessary precautions
were taken to prevent its repetition; [petitioner] Durban
Apartments was wanting in due diligence in the selection and
supervision of its employees particularly defendant x x x
Justimbaste; and defendant x x x Justimbaste and [petitioner]
Durban Apartments failed and refused to pay its valid, just, and
lawful claim despite written demands.

Upon service of Summons, [petitioner] Durban Apartments and

[defendant] Justimbaste filed their Answer with Compulsory
Counterclaim alleging that: See did not check in at its hotel, on
the contrary, he was a guest of a certain Ching Montero x x x;
defendant x x x Justimbaste did not get the ignition key of Sees
Vitara, on the contrary, it was See who requested a parking
attendant to park the Vitara at any available parking space, and
it was parked at the Equitable Bank parking area, which was
within Sees view, while he and Montero were waiting in front of
the hotel; they made a written denial of the demand of
[respondent] Pioneer Insurance for want of legal basis; valet
parking services are provided by the hotel for the convenience
of its customers looking for a parking space near the hotel
premises; it is a special privilege that it gave to Montero and
See; it does not include responsibility for any losses or damages
to motor vehicles and its accessories in the parking area; and
the same holds true even if it was See himself who parked his
Vitara within the premises of the hotel as evidenced by the valet
parking customers claim stub issued to him; the carnapper was
able to open the Vitara without using the key given earlier to the
parking attendant and subsequently turned over to See after the
Vitara was stolen; defendant x x x Justimbaste saw the Vitara
speeding away from the place where it was parked; he tried to
run after it, and blocked its possible path but to no avail; and
See was duly and immediately informed of the carnapping of his
Vitara; the matter was reported to the nearest police precinct;
and defendant x x x Justimbaste, and Horlador submitted
themselves to police investigation.

During the pre-trial conference on November 28, 2003, counsel

for [respondent] Pioneer Insurance was present. Atty. Monina Lee
x x x, counsel of record of [petitioner] Durban Apartments and
Justimbaste was absent, instead, a certain Atty. Nestor Mejia
appeared for [petitioner] Durban Apartments and Justimbaste,
but did not file their pre-trial brief.

On November 5, 2004, the lower court granted the motion of

[respondent] Pioneer Insurance, despite the opposition of
[petitioner] Durban Apartments and Justimbaste, and allowed
[respondent] Pioneer Insurance to present its evidence ex
parte before the Branch Clerk of Court.

See testified that: on April 30, 2002, at about 11:30 in the

evening, he drove his Vitara and stopped in front of City Garden
Hotel in Makati Avenue, Makati City; a parking attendant, whom
he had later known to be defendant x x x Justimbaste,
approached and asked for his ignition key, told him that the
latter would park the Vitara for him in front of the hotel, and
issued him a valet parking customers claim stub; he and
Montero, thereafter, checked in at the said hotel; on May 1,
2002, at around 1:00 in the morning, the Hotel Security Officer
whom he later knew to be Horlador called his attention to the
fact that his Vitara was carnapped while it was parked at the
parking lot of Equitable PCI Bank which is in front of the hotel;
his Vitara was insured with [respondent] Pioneer Insurance; he
together with Horlador and defendant x x x Justimbaste went to
Precinct 19 of the Makati City Police to report the carnapping
incident, and a police officer came accompanied them to the
Anti-Carnapping Unit of the said station for investigation, taking
of their sworn statements, and flashing of a voice alarm; he
likewise reported the said incident in PNP TMG in Camp Crame
where another alarm was issued; he filed his claim with
[respondent] Pioneer Insurance, and a representative of the
latter, who is also an adjuster of Vesper Insurance Adjusters-
Appraisers [Vesper], investigated the incident; and [respondent]
Pioneer Insurance required him to sign a Release of Claim and
Subrogation Receipt, and finally paid him the sum
of P1,163,250.00 for his claim.

Ricardo F. Red testified that: he is a claims evaluator of

[petitioner] Pioneer Insurance tasked, among others, with the
receipt of claims and documents from the insured, investigation
of the said claim, inspection of damages, taking of pictures of
insured unit, and monitoring of the processing of the claim until
its payment; he monitored the processing of Sees claim when
the latter reported the incident to [respondent] Pioneer
Insurance; [respondent] Pioneer Insurance assigned the case to
Vesper who verified Sees report, conducted an investigation,
obtained the necessary documents for the processing of the
claim, and tendered a settlement check to See; they evaluated
the case upon receipt of the subrogation documents and the
adjusters report, and eventually recommended for its settlement
for the sum of P1,163,250.00 which was accepted by See; the
matter was referred and forwarded to their counsel, R.B. Sarajan
& Associates, who prepared and sent demand letters to
[petitioner] Durban Apartments and [defendant] Justimbaste,
who did not pay [respondent] Pioneer Insurance notwithstanding
their receipt of the demand letters; and the services of R.B.
Sarajan & Associates were engaged, for P100,000.00 as
attorneys fees plus P3,000.00 per court appearance, to
prosecute the claims of [respondent] Pioneer Insurance against
 [petitioner] Durban Apartments and Justimbaste before the
lower court.

Ferdinand Cacnio testified that: he is an adjuster of Vesper;

[respondent] Pioneer Insurance assigned to Vesper the
investigation of Sees case, and he was the one actually assigned
to investigate it; he conducted his investigation of the matter by
interviewing See, going to the City Garden Hotel, required
subrogation documents from See, and verified the authenticity
of the same; he learned that it is the standard procedure of the
said hotel as regards its valet parking service to assist their
guests as soon as they get to the lobby entrance, park the cars
for their guests, and place the ignition keys in their safety key
box; considering that the hotel has only twelve (12) available
parking slots, it has an agreement with Equitable PCI Bank
permitting the hotel to use the parking space of the bank at
night; he also learned that a Hyundai Starex van was carnapped
at the said place barely a month before the occurrence of this
incident because Liberty Insurance assigned the said incident to
Vespers, and Horlador and defendant x x x Justimbaste admitted
the occurrence of the same in their sworn statements before the
Anti-Carnapping Unit of the Makati City Police; upon verification
with the PNP TMG [Unit] in Camp Crame, he learned that Sees
Vitara has not yet been recovered; upon evaluation, Vesper
recommended to [respondent] Pioneer Insurance to settle Sees
claim for P1,045,750.00; See contested the recommendation of
Vesper by reasoning out that the 10% depreciation should not be
applied in this case considering the fact that the Vitara was used
for barely eight (8) months prior to its loss; and [respondent]
Pioneer Insurance acceded to Sees contention, tendered the
sum of P1,163,250.00 as settlement, the former accepted it, and
signed a release of claim and subrogation receipt.

The lower court denied the Motion to Admit Pre-Trial Brief and
Motion for Reconsideration field by [petitioner] Durban
Apartments and Justimbaste in its Orders dated May 4, 2005 and
October 20, 2005, respectively, for being devoid of merit. [3]

Thereafter, on January 27, 2006, the RTC rendered a decision, disposing, as

follows:

WHEREFORE, judgment is hereby rendered ordering [petitioner

Durban Apartments Corporation] to pay [respondent Pioneer
 Insurance and Surety Corporation] the sum of P1,163,250.00
with legal interest thereon from July 22, 2003 until the obligation
is fully paid and attorneys fees and litigation expenses
amounting to P120,000.00.

SO ORDERED.[4]

On appeal, the appellate court affirmed the decision of the trial court, viz.:

WHEREFORE, premises considered, the Decision dated January

27, 2006 of the RTC, Branch 66, Makati City in Civil Case No. 03-
857 is hereby AFFIRMED insofar as it holds [petitioner] Durban
Apartments Corporation solely liable to [respondent] Pioneer
Insurance and Surety Corporation for the loss of Jeffrey Sees
Suzuki Grand Vitara.

SO ORDERED.[5]

Hence, this recourse by petitioner.

The issues for our resolution are:

1. Whether the lower courts erred in declaring petitioner as in default for

failure to appear at the pre-trial conference and to file a pre-trial brief;

2. Corollary thereto, whether the trial court correctly allowed respondent to

present evidence ex-parte;

3. Whether petitioner is liable to respondent for attorneys fees in the amount

of P120,000.00; and

4. Ultimately, whether petitioner is liable to respondent for the loss of Sees

vehicle.

The petition must fail.

We are in complete accord with the common ruling of the lower courts that
petitioner was in default for failure to appear at the pre-trial conference and
to file a pre-trial brief, and thus, correctly allowed respondent to present
evidence ex-parte. Likewise, the lower courts did not err in holding petitioner
liable for the loss of Sees vehicle.
Well-entrenched in jurisprudence is the rule that factual findings of the trial
court, especially when affirmed by the appellate court, are accorded the
highest degree of respect and are considered conclusive between the parties.
[6]
A review of such findings by this Court is not warranted except upon a
showing of highly meritorious circumstances, such as: (1) when the findings
of a trial court are grounded entirely on speculation, surmises, or conjectures;
(2) when a lower courts inference from its factual findings is manifestly
mistaken, absurd, or impossible; (3) when there is grave abuse of discretion
in the appreciation of facts; (4) when the findings of the appellate court go
beyond the issues of the case, or fail to notice certain relevant facts which, if
properly considered, will justify a different conclusion; (5) when there is a
misappreciation of facts; (6) when the findings of fact are conclusions without
mention of the specific evidence on which they are based, are premised on
the absence of evidence, or are contradicted by evidence on record. [7] None
of the foregoing exceptions permitting a reversal of the assailed decision
exists in this instance.

Petitioner urges us, however, that strong [and] compelling reason[s] such as
the prevention of miscarriage of justice warrant a suspension of the rules and
excuse its and its counsels non-appearance during the pre-trial conference
and their failure to file a pre-trial brief.

We are not persuaded.

Rule 18 of the Rules of Court leaves no room for equivocation; appearance of

parties and their counsel at the pre-trial conference, along with the filing of a
corresponding pre-trial brief, is mandatory, nay, their duty. Thus, Section 4
and Section 6 thereof provide:

SEC. 4. Appearance of parties.It shall be the duty of the parties

and their counsel to appear at the pre-trial. The non-appearance
of a party may be excused only if a valid cause is shown therefor
or if a representative shall appear in his behalf fully authorized
in writing to enter into an amicable settlement, to submit to
alternative modes of dispute resolution, and to enter into
stipulations or admissions of facts and documents.

SEC. 6. Pre-trial brief.The parties shall file with the court and
serve on the adverse party, in such manner as shall ensure their
receipt thereof at least three (3) days before the date of the pre-
trial, their respective pre-trial briefs which shall contain, among
others:

xxxx
 Failure to file the pre-trial brief shall have the same effect as
failure to appear at the pre-trial.

Contrary to the foregoing rules, petitioner and its counsel of record were not
present at the scheduled pre-trial conference. Worse, they did not file a pre-
trial brief. Their non-appearance cannot be excused as Section 4, in relation
to Section 6, allows only two exceptions: (1) a valid excuse; and (2)
appearance of a representative on behalf of a party who is fully authorized in
writing to enter into an amicable settlement, to submit to alternative modes
of dispute resolution, and to enter into stipulations or admissions of facts and
documents.

Petitioner is adamant and harps on the fact that November 28, 2003 was
merely the first scheduled date for the pre-trial conference, and a certain
Atty. Mejia appeared on its behalf. However, its assertion is belied by its own
admission that, on said date, this Atty. Mejia did not have in his possession
the Special Power of Attorney issued by petitioners Board of Directors.

As pointed out by the CA, petitioner, through Atty. Lee, received the notice of
pre-trial on October 27, 2003, thirty-two (32) days prior to the scheduled
conference. In that span of time, Atty. Lee, who was charged with the duty of
notifying petitioner of the scheduled pre-trial conference, [8] petitioner, and
Atty. Mejia should have discussed which lawyer would appear at the pre-trial
conference with petitioner, armed with the appropriate authority therefor.
Sadly, petitioner failed to comply with not just one rule; it also did not proffer
a reason why it likewise failed to file a pre-trial brief. In all, petitioner has not
shown any persuasive reason why it should be exempt from abiding by the
rules.

The appearance of Atty. Mejia at the pre-trial conference, without a pre-trial

brief and with only his bare allegation that he is counsel for petitioner, was
correctly rejected by the trial court. Accordingly, the trial court, as affirmed by
the appellate court, did not err in allowing respondent to present evidence ex-
parte.

Former Chief Justice Andres R. Narvasas words continue to resonate, thus:

Everyone knows that a pre-trial in civil actions is mandatory, and

has been so since January 1, 1964. Yet to this day its place in the
scheme of things is not fully appreciated, and it receives but
perfunctory treatment in many courts. Some courts consider it a
mere technicality, serving no useful purpose save perhaps,
occasionally to furnish ground for non-suiting the plaintiff, or
 declaring a defendant in default, or, wistfully, to bring about a
compromise. The pre-trial device is not thus put to full use.
Hence, it has failed in the main to accomplish the chief objective
for it: the simplification, abbreviation and expedition of the trial,
if not indeed its dispensation. This is a great pity, because the
objective is attainable, and with not much difficulty, if the device
were more intelligently and extensively handled.

xxxx

Consistently with the mandatory character of the pre-trial,

the Rules oblige not only the lawyers but the parties as well to
appear for this purpose before the Court, and when a party fails
to appear at a pre-trial conference (he) may be non-suited or
considered as in default. The obligation to appear denotes not
simply the personal appearance, or the mere physical
presentation by a party of ones self, but connotes as
importantly, preparedness to go into the different subject
assigned by law to a pre-trial. And in those instances where a
party may not himself be present at the pre-trial, and another
person substitutes for him, or his lawyer undertakes to appear
not only as an attorney but in substitution of the clients person,
it is imperative for that representative of the lawyer to have
special authority to make such substantive agreements as only
the client otherwise has capacity to make. That special authority
should ordinarily be in writing or at the very least be duly
established by evidence other than the self-serving assertion of
counsel (or the proclaimed representative) himself. Without that
special authority, the lawyer or representative cannot be
deemed capacitated to appear in place of the party; hence, it
will be considered that the latter has failed to put in an
appearance at all, and he [must] therefore be non-suited or
considered as in default, notwithstanding his lawyers or
delegates presence.[9]

We are not unmindful that defendants (petitioners) preclusion from

presenting evidence during trial does not automatically result in a judgment
in favor of plaintiff (respondent). The plaintiff must still substantiate the
allegations in its complaint.[10]Otherwise, it would be inutile to continue with
the plaintiffs presentation of evidence each time the defendant is declared in
default.
In this case, respondent substantiated the allegations in its complaint, i.e., a
contract of necessary deposit existed between the insured See and petitioner.
On this score, we find no error in the following disquisition of the appellate
court:

[The] records also reveal that upon arrival at the City Garden
Hotel, See gave notice to the doorman and parking attendant of
the said hotel, x x x Justimbaste, about his Vitara when he
entrusted its ignition key to the latter. x x x Justimbaste issued a
valet parking customer claim stub to See, parked the Vitara at
the Equitable PCI Bank parking area, and placed the ignition key
inside a safety key box while See proceeded to the hotel lobby
to check in. The Equitable PCI Bank parking area became an
annex of City Garden Hotel when the management of the said
bank allowed the parking of the vehicles of hotel guests thereat
in the evening after banking hours. [11]

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 latters employee,
Justimbaste. In turn, Justimbaste issued a claim stub to See. Thus, the
contract of deposit was perfected from Sees 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 Sees vehicle.
 Lastly, petitioner assails the lower courts award of attorneys fees to
respondent in the amount of P120,000.00. Petitioner claims that the award is
not substantiated by the evidence on record.

We disagree.

While it is a sound policy not to set a premium on the right to litigate,

[12]
we find that respondent is entitled to reasonable attorneys fees. Attorneys
fees may be awarded when a party is compelled to litigate or incur expenses
to protect its interest,[13] or when the court deems it just and equitable. [14] In
this case, petitioner refused to answer for the loss of Sees vehicle, which was
deposited with it for safekeeping. This refusal constrained respondent, the
insurer of See, and subrogated to the latters right, to litigate and incur
expenses. However, we reduce the award of P120,000.00 to P60,000.00 in
view of the simplicity of the issues involved in this case.

WHEREFORE, the petition is DENIED. The Decision of the Court of

Appeals in CA-G.R. CV No. 86869 is AFFIRMED with the MODIFICATION that
the award of attorneys fees is reduced to P60,000.00. Costs against
petitioner.
SO ORDERED.
 SECOND DIVISION
[G.R. No. 126780. February 17, 2005]
YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA
PAYAM, petitioners, vs. THE COURT OF APPEALS and MAURICE
McLOUGHLIN, respondents.
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 Malacaang to follow up on his letter but he was
instructed to go to the DOJ. The DOJ directed him to proceed to the WPD for
documentation. But McLoughlin went back to Australia as he had an urgent
business matter to attend to.
 For several times, McLoughlin left for Australia to attend to his business
and came back to the Philippines to follow up on his letter to the President
but he failed to obtain any concrete assistance. [19]
McLoughlin left again for Australia and upon his return to the Philippines
on 25 August 1989 to pursue his claims against petitioners, the WPD
conducted an investigation which resulted in the preparation of an affidavit
which was forwarded to the Manila City Fiscals Office. Said affidavit became
the basis of preliminary investigation. However, McLoughlin left again for
Australia without receiving the notice of the hearing on 24 November 1989.
Thus, the case at the Fiscals Office was dismissed for failure to prosecute.
Mcloughlin requested the reinstatement of the criminal charge for theft. In
the meantime, McLoughlin and his lawyers wrote letters of demand to those
having responsibility to pay the damage. Then he left again for Australia.
Upon his return on 22 October 1990, he registered at the Echelon Towers
at Malate, Manila. Meetings were held between McLoughlin and his lawyer
which resulted to the filing of a complaint for damages on 3 December 1990
against YHT Realty Corporation, Lopez, Lainez, Payam and Tan (defendants)
for the loss of McLoughlins money which was discovered on 16 April 1988.
After filing the complaint, McLoughlin left again for Australia to attend to an
urgent business matter. Tan and Lopez, however, were not served with
summons, and trial proceeded with only Lainez, Payam and YHT Realty
Corporation as defendants.
After defendants had filed their Pre-Trial Brief admitting that they had
previously allowed and assisted Tan to open the safety deposit box,
McLoughlin filed an Amended/Supplemental Complaint[20] dated 10 June 1991
which included another incident of loss of money and jewelry in the safety
deposit box rented by McLoughlin in the same hotel which took place prior to
16 April 1988.[21] The trial court admitted the Amended/Supplemental
Complaint.
During the trial of the case, McLoughlin had been in and out of the
country to attend to urgent business in Australia, and while staying in the
Philippines to attend the hearing, he incurred expenses for hotel bills, airfare
and other transportation expenses, long distance calls to Australia, Meralco
power expenses, and expenses for food and maintenance, among others. [22]
After trial, the RTC of Manila rendered judgment in favor of McLoughlin,
the dispositive portion of which reads:
WHEREFORE, above premises considered, judgment is hereby rendered by
this Court in favor of plaintiff and against the defendants, to wit:
1. Ordering defendants, jointly and severally, to pay plaintiff the
sum of US$11,400.00 or its equivalent in Philippine Currency
of P342,000.00, more or less, and the sum of AUS$4,500.00 or its
equivalent in Philippine Currency of P99,000.00, or a total
of P441,000.00, more or less, with 12% interest from April 16
 1988 until said amount has been paid to plaintiff (Item 1, Exhibit
CC);
2. Ordering defendants, jointly and severally to pay plaintiff the
sum of P3,674,238.00 as actual and consequential damages
arising from the loss of his Australian and American dollars and
jewelries complained against and in prosecuting his claim and
rights administratively and judicially (Items II, III, IV, V, VI, VII, VIII,
and IX, Exh. CC);
3. Ordering defendants, jointly and severally, to pay plaintiff the
sum of P500,000.00 as moral damages (Item X, Exh. CC);
4. Ordering defendants, jointly and severally, to pay plaintiff the
sum of P350,000.00 as exemplary damages (Item XI, Exh. CC);
5. And ordering defendants, jointly and severally, to pay litigation
expenses in the sum of P200,000.00 (Item XII, Exh. CC);
6. Ordering defendants, jointly and severally, to pay plaintiff the
sum of P200,000.00 as attorneys fees, and a fee of P3,000.00 for
every appearance; and
7. Plus costs of suit.
SO ORDERED.[23]
The trial court found that McLoughlins allegations as to the fact of loss
and as to the amount of money he lost were sufficiently shown by his direct
and straightforward manner of testifying in court and found him to be
credible and worthy of belief as it was established that McLoughlins money,
kept in Tropicanas safety deposit box, was taken by Tan without McLoughlins
consent. The taking was effected through the use of the master key which
was in the possession of the management. Payam and Lainez allowed Tan to
use the master key without authority from McLoughlin. The trial court added
that if McLoughlin had not lost his dollars, he would not have gone through
the trouble and personal inconvenience of seeking aid and assistance from
the Office of the President, DOJ, police authorities and the City Fiscals Office
in his desire to recover his losses from the hotel management and Tan. [24]
As regards the loss of Seven Thousand US Dollars (US$7,000.00) and
jewelry worth approximately One Thousand Two Hundred US Dollars
(US$1,200.00) which allegedly occurred during his stay at Tropicana previous
to 4 April 1988, no claim was made by McLoughlin for such losses in his
complaint dated 21 November 1990 because he was not sure how they were
lost and who the responsible persons were. But considering the admission of
the defendants in their pre-trial brief that on three previous occasions they
allowed Tan to open the box, the trial court opined that it was logical and
reasonable to presume that his personal assets consisting of Seven Thousand
US Dollars (US$7,000.00) and jewelry were taken by Tan from the safety
deposit box without McLoughlins consent through the cooperation of Payam
and Lainez.[25]
 The trial court also found that defendants acted with gross negligence in
the performance and exercise of their duties and obligations as innkeepers
and were therefore liable to answer for the losses incurred by McLoughlin. [26]
Moreover, the trial court ruled that paragraphs (2) and (4) of
the Undertaking For The Use Of Safety Deposit Box are not valid for being
contrary to the express mandate of Article 2003 of the New Civil Code and
against public policy.[27] Thus, there being fraud or wanton conduct on the
part of defendants, they should be responsible for all damages which may be
attributed to the non-performance of their contractual obligations. [28]
The Court of Appeals affirmed the disquisitions made by the lower court
except as to the amount of damages awarded. The decretal text of the
appellate courts decision reads:
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED
but modified as follows:
The appellants are directed jointly and severally to pay the plaintiff/appellee
the following amounts:
1) P153,200.00 representing the peso equivalent of US$2,000.00
and AUS$4,500.00;
2) P308,880.80, representing the peso value for the air fares
from Sidney [sic] to Manila and back for a total of eleven (11)
trips;
3) One-half of P336,207.05 or P168,103.52 representing
payment to Tropicana Apartment Hotel;
4) One-half of P152,683.57 or P76,341.785 representing
payment to Echelon Tower;
5) One-half of P179,863.20 or P89,931.60 for the taxi xxx
transportation from the residence to Sidney [sic] Airport and
from MIA to the hotel here in Manila, for the eleven (11) trips;
6) One-half of P7,801.94 or P3,900.97 representing Meralco
power expenses;
7) One-half of P356,400.00 or P178,000.00 representing
expenses for food and maintenance;
8) P50,000.00 for moral damages;
9) P10,000.00 as exemplary damages; and
10) P200,000 representing attorneys fees.
With costs.
SO ORDERED.[29]
Unperturbed, YHT Realty Corporation, Lainez and Payam went to this
Court in this appeal by certiorari.
Petitioners submit for resolution by this Court the following issues: (a)
whether the appellate courts conclusion on the alleged prior existence and
subsequent loss of the subject money and jewelry is supported by the
evidence on record; (b) whether the finding of gross negligence on the part of
petitioners in the performance of their duties as innkeepers is supported by
the evidence on record; (c) whether the Undertaking For The Use of Safety
Deposit Box admittedly executed by private respondent is null and void; and
(d) whether the damages awarded to private respondent, as well as the
amounts thereof, are proper under the circumstances. [30]
The petition is devoid of merit.
It is worthy of note that the thrust of Rule 45 is the resolution only of
questions of law and any peripheral factual question addressed to this Court
is beyond the bounds of this mode of review.
Petitioners point out that the evidence on record is insufficient to prove
the fact of prior existence of the dollars and the jewelry which had been lost
while deposited in the safety deposit boxes of Tropicana, the basis of the trial
court and the appellate court being the sole testimony of McLoughlin as to
the contents thereof. Likewise, petitioners dispute the finding of gross
negligence on their part as not supported by the evidence on record.
We are not persuaded. We adhere to the findings of the trial court as
affirmed by the appellate court that the fact of loss was established by the
credible testimony in open court by McLoughlin. Such findings are factual and
therefore beyond the ambit of the present petition.
The trial court had the occasion to observe the demeanor of McLoughlin
while testifying which reflected the veracity of the facts testified to by him.
On this score, we give full credence to the appreciation of testimonial
evidence by the trial court especially if what is at issue is the credibility of the
witness. The oft-repeated principle is that where the credibility of a witness is
an issue, the established rule is that great respect is accorded to the
evaluation of the credibility of witnesses by the trial court. [31] The trial court is
in the best position to assess the credibility of witnesses and their
testimonies because of its unique opportunity to observe the witnesses
firsthand and note their demeanor, conduct and attitude under grilling
examination.[32]
We are also not impressed by petitioners argument that the finding of
gross negligence by the lower court as affirmed by the appellate court is not
supported by evidence. The evidence reveals that two keys are required to
open the safety deposit boxes of Tropicana. One key is assigned to the guest
while the other remains in the possession of the management. If the guest
desires to open his safety deposit box, he must request the management for
the other key to open the same. In other words, the guest alone cannot open
the safety deposit box without the assistance of the management or its
employees. With more reason that access to the safety deposit box should be
denied if the one requesting for the opening of the safety deposit box is a
stranger. Thus, in case of loss of any item deposited in the safety deposit box,
it is inevitable to conclude that the management had at least a hand in the
consummation of the taking, unless the reason for the loss is force majeure.
Noteworthy is the fact that Payam and Lainez, who were employees of
Tropicana, had custody of the master key of the management when the loss
took place. In fact, they even admitted that they assisted Tan on three
separate occasions in opening McLoughlins safety deposit box. [33] This only
proves that Tropicana had prior knowledge that a person aside from the
registered guest had access to the safety deposit box. Yet the management
failed to notify McLoughlin of the incident and waited for him to discover the
taking before it disclosed the matter to him. Therefore, Tropicana should be
held responsible for the damage suffered by McLoughlin by reason of the
negligence of its employees.
The management should have guarded against the occurrence of this
incident considering that Payam admitted in open court that she assisted Tan
three times in opening the safety deposit box of McLoughlin at around 6:30
A.M. to 7:30 A.M. while the latter was still asleep. [34] In light of the
circumstances surrounding this case, it is undeniable that without the
acquiescence of the employees of Tropicana to the opening of the safety
deposit box, the loss of McLoughlins money could and should have been
avoided.
The management contends, however, that McLoughlin, by his act, made
its employees believe that Tan was his spouse for she was always with him
most of the time. The evidence on record, however, is bereft of any showing
that McLoughlin introduced Tan to the management as his wife. Such an
inference from the act of McLoughlin will not exculpate the petitioners from
liability in the absence of any showing that he made the management believe
that Tan was his wife or was duly authorized to have access to the safety
deposit box. Mere close companionship and intimacy are not enough to
warrant such conclusion considering that what is involved in the instant case
is the very safety of McLoughlins deposit. If only petitioners exercised due
diligence in taking care of McLoughlins safety deposit box, they should have
confronted him as to his relationship with Tan considering that the latter had
been observed opening McLoughlins safety deposit box a number of times at
the early hours of the morning. Tans acts should have prompted the
management to investigate her relationship with McLoughlin. Then,
petitioners would have exercised due diligence required of them. Failure to do
so warrants the conclusion that the management had been remiss in
complying with the obligations imposed upon hotel-keepers under the law.
Under Article 1170 of the New Civil Code, those who, in the performance
of their obligations, are guilty of negligence, are liable for damages. As to
who shall bear the burden of paying damages, Article 2180, paragraph (4) of
the same Code provides that the owners and managers of an establishment
or enterprise are likewise responsible for damages caused by their employees
in the service of the branches in which the latter are employed or on the
occasion of their functions. Also, this Court has ruled that if an employee is
found negligent, it is presumed that the employer was negligent in selecting
and/or supervising him for it is hard for the victim to prove the negligence of
such employer.[35] Thus, given the fact that the loss of McLoughlins money
was consummated through the negligence of Tropicanas employees in
allowing Tan to open the safety deposit box without the guests consent, both
the assisting employees and YHT Realty Corporation itself, as owner and
operator of Tropicana, should be held solidarily liable pursuant to Article
2193.[36]
The issue of whether the Undertaking For The Use of Safety Deposit
Box executed by McLoughlin is tainted with nullity presents a legal question
appropriate for resolution in this petition. Notably, both the trial court and the
appellate court found the same to be null and void. We find no reason to
reverse their common conclusion. Article 2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting
notices to the effect that he is not liable for the articles brought by the guest.
Any stipulation between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in Articles 1998 to 2001 [37] is
suppressed or diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an expression of
public policy precisely to apply to situations such as that presented in this
case. The hotel business like the common carriers business is imbued with
public interest. Catering to the public, hotelkeepers are bound to provide not
only lodging for hotel guests and security to their persons and belongings.
The twin duty constitutes the essence of the business. The law in turn does
not allow such duty to the public to be negated or diluted by any contrary
stipulation in so-called undertakings that ordinarily appear in prepared forms
imposed by hotel keepers on guests for their signature.
In an early case,[38] the Court of Appeals through its then Presiding Justice
(later Associate Justice of the Court) Jose P. Bengzon, ruled that to hold
hotelkeepers or innkeeper liable for the effects of their guests, it is not
necessary that they be actually delivered to the innkeepers or their
employees. It is enough that such effects are within the hotel or inn. [39] With
greater reason should the liability of the hotelkeeper be enforced when the
missing items are taken without the guests knowledge and consent from a
safety deposit box provided by the hotel itself, as in this case.
Paragraphs (2) and (4) of the undertaking manifestly contravene Article
2003 of the New Civil Code for they allow Tropicana to be released from
liability arising from any loss in the contents and/or use of the safety deposit
box for any cause whatsoever.[40] Evidently, the undertaking was intended to
bar any claim against Tropicana for any loss of the contents of the safety
deposit box whether or not negligence was incurred by Tropicana or its
employees. The New Civil Code is explicit that the responsibility of the hotel-
keeper shall extend to loss of, or injury to, the personal property of the guests
even if caused by servants or employees of the keepers of hotels or inns as
well as by strangers, except as it may proceed from any force majeure.[41] It is
the loss through force majeure that may spare the hotel-keeper from liability.
In the case at bar, there is no showing that the act of the thief or robber was
done with the use of arms or through an irresistible force to qualify the same
as force majeure.[42]
Petitioners likewise anchor their defense on Article 2002 [43] which exempts
the hotel-keeper from liability if the loss is due to the acts of his guest, his
family, or visitors. Even a cursory reading of the provision would lead us to
reject petitioners contention. The justification they raise would render
nugatory the public interest sought to be protected by the provision. What if
the negligence of the employer or its employees facilitated the
consummation of a crime committed by the registered guests relatives or
visitor? Should the law exculpate the hotel from liability since the loss was
due to the act of the visitor of the registered guest of the hotel? Hence, this
provision presupposes that the hotel-keeper is not guilty of concurrent
negligence or has not contributed in any degree to the occurrence of the loss.
A depositary is not responsible for the loss of goods by theft, unless his
actionable negligence contributes to the loss. [44]
In the case at bar, the responsibility of securing the safety deposit box
was shared not only by the guest himself but also by the management since
two keys are necessary to open the safety deposit box. Without the
assistance of hotel employees, the loss would not have occurred. Thus,
Tropicana was guilty of concurrent negligence in allowing Tan, who was not
the registered guest, to open the safety deposit box of McLoughlin, even
assuming that the latter was also guilty of negligence in allowing another
person to use his key. To rule otherwise would result in undermining the
safety of the safety deposit boxes in hotels for the management will be given
imprimatur to allow any person, under the pretense of being a family member
or a visitor of the guest, to have access to the safety deposit box without fear
of any liability that will attach thereafter in case such person turns out to be a
complete stranger. This will allow the hotel to evade responsibility for any
liability incurred by its employees in conspiracy with the guests relatives and
visitors.
Petitioners contend that McLoughlins case was mounted on the theory of
contract, but the trial court and the appellate court upheld the grant of the
claims of the latter on the basis of tort. [45] There is nothing anomalous in how
the lower courts decided the controversy for this Court has pronounced a
jurisprudential rule that tort liability can exist even if there are already
contractual relations. The act that breaks the contract may also be tort. [46]
As to damages awarded to McLoughlin, we see no reason to modify the
amounts awarded by the appellate court for the same were based on facts
and law. It is within the province of lower courts to settle factual issues such
as the proper amount of damages awarded and such finding is binding upon
this Court especially if sufficiently proven by evidence and not
unconscionable or excessive. Thus, the appellate court correctly awarded
McLoughlin Two Thousand US Dollars (US$2,000.00) and Four Thousand Five
Hundred Australian dollars (AUS$4,500.00) or their peso equivalent at the
time of payment,[47] being the amounts duly proven by evidence. [48] The
alleged loss that took place prior to 16 April 1988 was not considered since
the amounts alleged to have been taken were not sufficiently established by
evidence. The appellate court also correctly awarded the sum of P308,880.80,
representing the peso value for the air fares from Sydney to Manila and back
for a total of eleven (11) trips; [49] one-half of P336,207.05 or P168,103.52
representing payment to Tropicana; [50] one-half of P152,683.57
or P76,341.785 representing payment to Echelon Tower; [51] one-half
of P179,863.20 or P89,931.60 for the taxi or transportation expenses from
McLoughlins residence to Sydney Airport and from MIA to the hotel here in
Manila, for the eleven (11) trips; [52] one-half of P7,801.94 or P3,900.97
representing Meralco power expenses; [53] one-half of P356,400.00
or P178,000.00 representing expenses for food and maintenance. [54]
The amount of P50,000.00 for moral damages is reasonable. Although
trial courts are given discretion to determine the amount of moral damages,
the appellate court may modify or change the amount awarded when it is
palpably and scandalously excessive. Moral damages are not intended to
enrich a complainant at the expense of a defendant. They are awarded only
to enable the injured party to obtain means, diversion or amusements that
will serve to alleviate the moral suffering he has undergone, by reason of
defendants culpable action.[55]
The awards of P10,000.00 as exemplary damages and P200,000.00
representing attorneys fees are likewise sustained.
WHEREFORE, foregoing premises considered, the Decision of the Court of
Appeals dated 19 October 1995 is hereby AFFIRMED. Petitioners are directed,
jointly and severally, to pay private respondent the following amounts:
(1) US$2,000.00 and AUS$4,500.00 or their peso equivalent at the
time of payment;
(2) P308,880.80, representing the peso value for the air fares from
Sydney to Manila and back for a total of eleven (11) trips;
(3) One-half of P336,207.05 or P168,103.52 representing payment
to Tropicana Copacabana Apartment Hotel;
(4) One-half of P152,683.57 or P76,341.785 representing payment
to Echelon Tower;
(5) One-half of P179,863.20 or P89,931.60 for the taxi or
transportation expense from McLoughlins residence to Sydney
Airport and from MIA to the hotel here in Manila, for the eleven
(11) trips;
(6) One-half of P7,801.94 or P3,900.97 representing Meralco power
expenses;
(7) One-half of P356,400.00 or P178,200.00 representing expenses
for food and maintenance;
(8) P50,000.00 for moral damages;
(9) P10,000.00 as exemplary damages; and
 (10) P200,000 representing attorneys fees.
With costs.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., and Chico-Nazario, JJ., concur.
Austria-Martinez, J., no part.
 FIRST DIVISION
[G.R. No. 119231. April 18, 1996]
PHILIPPINE NATIONAL BANK, petitioner, vs. HON. PRES. JUDGE BENITO
C. SE, JR., RTC, BR. 45, MANILA; NOAHS ARK SUGAR REFINERY;
ALBERTO T. LOOYUKO, JIMMY T. GO and WILSON T. GO, respondents.
SYLLABUS
1. COMMERCIAL LAW; WAREHOUSE RECEIPTS LAW; THE UNCONDITIONAL
PRESENTMENT OF THE RECEIPTS FOR PAYMENT CARRIED WITH IT THE
ADMISSIONS 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 WAREHOUSEMANS LIEN FOR STORAGE FEES AND
PRESERVATION EXPENSES; CASE AT BAR. - 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 warehousemans lien for storage fees and preservation
expenses. Petitioner may not now retrieve the sugar stocks without
paying the lien due private respondents as warehouseman.
2. ID.; ID.; ID.; WAREHOUSEMANS LIEN; POSSESSORY IN NATURE. - 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 warehousemans lien is
possessory in nature.
APPEARANCES OF COUNSEL
Rolan A. Nieto for petitioner.
Madella & Cruz Law Offices for private respondents.
DECISION
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 warehousemans 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: (1) 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 Noahs 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 warehousemans lien;
and (2) the Resolution of the said respondent Judge, dated March 1, 1995,
declaring the validity of private respondents warehousemans 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 warehousemans 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, Noahs 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; (b) March 7, 1989, Receipt No. 18080, covering sugar deposited
by RNS Merchandising (Rosa Ng Sy); (c) March 21, 1989, Receipt No. 18081,
covering sugar deposited by St. Therese Merchandising; (d)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 Noahs Ark Sugar Refinery demanding delivery of the
sugar stocks covered by the quedans endorsed to it by Zoleta and Ramos.
Noahs 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
Noahs 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 Noahs 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.
Noahs 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
Noahs 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
Noahs 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 latters 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 defendants affirmative defenses does not
show material questions of fact 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 PNBs title to the sugar stocks as holder
of the negotiable quedans.
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).
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 Noahs
Ark Sugar Refinery, et al., as prayed for in petitioners 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 Defendants Counterclaim. On September 4,
1992, the trial court denied PNBs 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 judges decision in Civil Case No. 90-53023, 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 Noahs Ark Sugar Refinery, Alberto T.
Looyuko, Jimmy T. Go and Wilson T. Go, jointly and severally:
(a) to deliver to the petitioner Philippine National Bank, the sugar
stocks covered by the Warehouse Receipts/ Quedans which are
now in the latters 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 full payment; and
(b) to pay plaintiff Philippine National Bank attorneys 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.
SO ORDERED.3
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 Courts 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 warehousemans 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 warehousemans
lien. The resolution of the PNBs 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 warehousemans 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 above-assailed orders of respondent judge.
The PNB submits that:
I
PNBs 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 RTCS 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 RTCS 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.
Petitioners submission is on a technicality, that is, that private
respondents have lost their right to recover warehousemans 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
warehousemans 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 warehousemans 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. 25938 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 Noahs Arks 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 petitioners argument that our said resolution carried with it
the denial of the warehousemans 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 Noahs 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 warehousemans 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 warehousemans 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 Noahs Arks right to
impose and collect warehousemans 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
It is not disputed, therefore, that, under the subject Warehouse Receipts
provision, storage fees are chargeable.
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:
SECTION 27. What claims are included in the warehousemans 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 warehousemans
lien.
xxx xxx xxx
SECTION 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
warehousemans 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.
SECTION 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 force of law between
the contracting parties and should be complied with in good faith.
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 warehousemans lien for storage fees and preservation expenses.
Petitioner may not now retrieve the sugar stocks without paying the lien due
private respondents as warehouseman.
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 warehousemans 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 Noahs 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 Resolutions 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 n 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.
Padilla (Chairman), Bellosillo, Vitug, and Kapunan, Jr., JJ., concur.

1
Answer with Counterclaim and Third-Party Complaint, p. 3; Rollo, p. 47.
2
Quoted in the Petition, p. 8; Rollo, p. 9.
3
Decision of the Supreme Court in G.R. No. 107243, p. 8; Rollo, p.64.
4
Resolution of the Supreme Court (Section Division) in G.R. No.
107243; Rollo, p. 71.
5
Resolution of the RTC in Civil Case No. 90-53023, p. 5; Rollo, p. 44.
6
Comment, p. 5; Rollo, p. 92.