CREDIT TRANS MUTUUM TO WAREHOUSE RECEIPTS CASES Ong until complete payment.

Ong until complete payment.” Thereafter, Ong obtained possession of the subject
vessel so he could begin deriving economic benefits therefrom. He, likewise,
Mutuum obtained copies of the unnotarized deed of sale allegedly to be shown to the banks
1. Cebu Intl vs CA to enable him to acquire a loan to replenish his (Ong’s) capital. The aforequoted
2. Tolentino vs Gonzales condition, however, which was handwritten on the original deed of sale does not
3. Colinares vs CA appear on Ong’s copies. Contrary to the aforementioned agreements and without
4. Republic vs Grijaldo the knowledge of Ang Tay, Ong had his copies of the deed of sale (on which the
5. Soncuya vs Azcarraga aforementioned prohibition does not appear) notarized Ong presented the notarized
6. State Investment vs CA deed to the Philippine Coast Guard which subsequently issued him a Certificate of
7. Osmena Jalandoni vs Encomienda Ownership and a Certificate of Philippine Register over the subject vessel. Ong also
8. Spouses Sy vs Westmont Bank succeeded in having the name of the vessel changed to LCT “Orient Hope.”

Deposit Using the acquired vessel, Ong acquired a loan from Cebu International Finance
Corporation to be paid in installments as evidenced by a promissory note of even
1. CA Agro Industrial Development Corp vs CA date. As security for the loan, Ong executed a chattel mortgage over the subject
2. Durban Apartments Corp vs Pioneer Insurance vessel, which mortgage was registered with the Philippine Coast Guard and
3. Compania Agricola de Ultramar v Nepomuceno annotated on the Certificate of Ownership.
4. Marina Port Services Inc. v American Assurance Corp
5. YHT Realty Corp. vs CA -Ong defaulted in the payment of the monthly installments. Consequently, Cebu
6. De Los Santos vs Than Khey International Finance Corporation sent him a letter] demanding delivery of the
7. Sulpicio Lines, Inc vs Sesante mortgaged vessel for foreclosure or in the alternative to pay the balance pursuant to
8. Makati Shangri-La Hotel and Resort Inc., v Harper paragraph 11 of the deed of chattel mortgage. Meanwhile, the two checks paid by
Ong to Ang Tay for the Purchase of the subject vessel bounced. Ang Tay’s search
Warehouse Receipts for the elusive Ong and all attempts to confer with him proved to be futile. A
subsequent investigation and inquiry with the Office of the Coast Guard revealed
1. PNB vs Se, Jr.
that the subject vessel was already in the name of Ong, in violation of the express
2. PNB vs Sayo Jr.
undertaking contained in the original deed of sale. As a result thereof, Ang Tay and
CEBU INTERNATIONAL FINANCE CORPORATION v. COURT OF APPEALS Jacinto Dy filed a civil case for rescission and replevin with damages against Ong
(G.R. NO. 123031 OCTOBER 12, 1999) and his wife.

Doctrine: The prevailing jurisprudence is that a mortgagee has a right to rely in good
faith on the certificate of title of the mortgagor to the property given as security and
in the absence of any sign that might arouse suspicion, has no obligation to
undertake further investigation.
Facts: Jacinto Dy executed a Special Power of Attorney in favor of private
respondent Ang Tay, authorizing the latter to sell the cargo vessel owned by Dy and
christened LCT “Asiatic.” Through a Deed of Absolute Sale, Ang Tay sold the subject
vessel to Robert Ong (Ong). Ong paid the purchase price by issuing three (3) checks
However, since the payment was not made in cash, it was specifically stipulated in
the deed of sale that the “LCT Asiatic shall not be registered or transferred to Robert
Issue: Whether or not Cebu International Finance Corporation can validly foreclose
the chattel mortgage
Held: The prevailing jurisprudence is that a mortgagee has a right to rely in good
faith on the certificate of title of the mortgagor to the property given as security and
in the absence of any sign that might arouse suspicion, has no obligation to
undertake further investigation. Hence, even if the mortgagor is not the rightful owner
of or does not have a valid title to the mortgaged property, the mortgagee or
transferee in good faith is nonetheless entitled to protection. Although this rule
generally pertains to real property, particularly registered land, it may also be applied
1
by analogy to personal property, in this case specifically, since ship owners are,
likewise, required by law to register their vessels with the Philippine Coast Guard.
The chattel mortgage constituted on a vessel by the buyer who was able to register
the vessel in his name despite the agreement with the seller that the vessel would
not be so registered until after full payment of the price which do not appear in the
buyer’s copy of the deed of sale is VALID, for the mortgagee has the right to rely in
good faith on the certificate of registration.
TOLENTINO v. GONZALEZ SY CHIAM (50 PHIL 558)
Tolentino purchased land from Luzon Rice Mills for Php25, 000 payable in three
installments. Tolentino defaulted on the balance so the owner sent a letter of
demand to him. To pay, Tolentino applied for loan from Gonzalez on condition that
he would execute a pacto de retro sale on the property in favor of Gonzalez. Upon
maturation of loan, Tolentino defaulted so Gonzalez is demanding recovery of the
land. Tolentino contends that the pacto de retro sale is a mortgage and not an
absolute sale.
The Supreme Court held that upon its terms, the deed of pacto de retro sale is an
absolute sale with right of repurchase and not a mortgage. Thus, Gonzalez is the
owner of the land and Tolentino is only holding it as a tenant by virtue of a contract
of lease.
**LOAN: A contract of loan signifies the giving of a sum of money, goods or credits
to another, with a promise to repay, but not a promise to return the same thing. It
has been defined as an advancement of money, goods, or credits upon a contract
or stipulation to repay, not to return, the thing loaned at some future day in
accordance with the terms of the contract. The moment the contract is completed,
the money, goods or chattels given cease to be the property of the former owner
and become the property of the obligor to be used according to his own will, unless
the contract itself expressly provides for a special or specific use of the same. At all
events, the money, goods or chattels, the moment the contract is executed, cease
to be the property of the former owner and become the sole property of the obligor.
Commodatum Defined
Art. 1933: By the contract of loan, one of the parties delivers to another something
not consumable so that the latter may use the same for a certain time and return it,
in which case the contract is called a commodatum. xxx
- The bailee acquires the use of the thing loaned but not its fruits (Art. 1935),
EXCEPT if the parties stipulate use of fruits (Art. 1940)
COLINARES v. CA (G.R. NO. 90828. SEPTEMBER 5, 2000)
Facts: Melvin Colinares and Lordino Veloso (hereafter Petitioners) were contracted
for a consideration of P40,000 by the Carmelite Sisters of Cagayan de Oro City to
renovate the latter’s convent at Camaman-an, Cagayan de Oro City. Colinares
applied for a commercial letter of credit with the Philippine Banking Corporation,
Cagayan de Oro City branch (hereafter PBC) in favor of CM Builders Centre. PBC
approved the letter of credit for P22,389.80 to cover the full invoice value of the
goods. Petitioners signed a pro-forma trust receipt as security.
PBC debited P6,720 from Petitioners’ marginal deposit as partial payment of the
loan. After the initial payment, the spouses defaulted. PBC wrote to Petitioners
demanding that the amount be paid within seven days from notice. Instead of
complying with PBC’s demand, Veloso confessed that they lost P19,195.83 in the
Carmelite Monastery Project and requested for a grace period of until 15 June 1980
to settle the account. Colinares proposed that the terms of payment of the loan be
modified P2,000 on or before 3 December 1980, and P1,000 per month . Pending
approval of the proposal, Petitioners paid P1,000 to PBC on 4 December 1980, and
thereafter P500 on 11 February 1981, 16 March 1981, and 20 April 1981.
Concurrently with the separate demand for attorney’s fees by PBC’s legal counsel,
PBC continued to demand payment of the balance. On 14 January 1983, Petitioners
were charged with the violation of P.D. No. 115 (Trust Receipts Law) in relation to
Article 315 of the Revised Penal Code
During trial, petitioner Veloso insisted that the transaction was a “clean loan” as per
verbal guarantee of Cayo Garcia Tuiza, PBC’s former manager. He and petitioner
Colinares signed the documents without reading the fine print, only learning of the
trust receipt implication much later. When he brought this to the attention of PBC,
Mr. Tuiza assured him that the trust receipt was a mere formality. The Trust Receipts
Law does not seek to enforce payment of the loan; rather it punishes the dishonesty
and abuse of confidence in the handling of money or goods to the prejudice of
another regardless of whether the latter is the owner. Here, it is crystal clear that on
the part of Petitioners there was neither dishonesty nor abuse of confidence in the
handling of money to the prejudice of PBC. Petitioners continually endeavored to
meet their obligations, as shown by several receipts issued by PBC acknowledging
payment of the loan.
2
Issue: Whether or not the transaction of Colinares falls within the ambit of the Law
on Trust Receipt
Held: Colinares received the merchandise from CM Builders Centre on 30 October
1979. On that day, ownership over the merchandise was already transferred to
Petitioners who were to use the materials for their construction project. It was only a
day later, 31 October 1979, that they went to the bank to apply for a loan to pay for
the merchandise. This situation belies what normally obtains in a pure trust receipt
transaction where goods are owned by the bank and only released to the importer
in trust subsequent to the grant of the loan.
The bank acquires a “security interest” in the goods as holder of a security title for
the advances it had made to the entrustee. The ownership of the merchandise
continues to be vested in the person who had advanced payment until he has been
paid in full, or if the merchandise has already been sold, the proceeds of the sale
should be turned over to him by the importer or by his representative or successor
in interest. To secure that the bank shall be paid, it takes full title to the goods at the
very beginning and continues to hold that title as his indispensable security until the
goods are sold and the vendee is called upon to pay for them; hence, the importer
has never owned the goods and is not able to deliver possession. In a certain
manner, trust receipts partake of the nature of a conditional sale where the importer
becomes absolute owner of the imported merchandise as soon as he has paid its
price. There are two possible situations in a trust receipt transaction. The first is
covered by the provision which refers to money received under the obligation
involving the duty to deliver it (entregarla) to the owner of the merchandise sold. The
second is covered by the provision which refers to merchandise received under the
obligation to “return” it (devolvera) to the owner. Failure of the entrustee to turn over
the proceeds of the sale of the goods, covered by the trust receipt to the entruster
or to return said goods if they were not disposed of in accordance with the terms of
the trust receipt shall be punishable as estafa under Article 315 (1) of the Revised
Penal Code, without need of proving intent to defraud.
REPUBLIC v. GRIJALDO (G.R. NO. L-20240. DECEMBER 31, 1965.)
Art 1953: A person who receives a loan of money or any other fungible thing acquires
the ownership thereof, and is bound to pay to the creditor an equal amount of the
same kind and quality.
FACTS: Jose Grijaldo obtained five crop loans from the office of the Bank of Taiwan
in Bacolod City, in the total sum of Php 1281.97 with interest of 6% per annum,
compounded quarterly. These loans were evidenced by five promissory notes by the
appellant in favor of the bank. All notes are without due dates, but because the loans
were crop loans it was considered that the loans were due one year after they were
incurred. To secure the payment of the loans the appellant executed a chattel
mortgage on the standing crops on his land known as Hacienda Campaguas.
By virtue of “Trading with the Enemy Act”, the assets of the Bank of Taiwan Ltd. In
the Philippines were vested in the US Government, which were subsequently
transferred to the Republic of the Philippines.
Grijaldo failed to pay the crop loans despite the extra-judicial demand of the
Government. He argued that the Government has no cause of action, that because
the loans were secured by a chattel mortgage on the standing crops of the land
owned by him and those crops were lost or destroyed by enemy action his obligation
to pay the loans was thereby extinguished.
ISSUE: Whether or not Grijaldo’s obligation to pay the crop loans had extinguished
due to the crops that were lost or destroyed through enemy action.
HELD/RATIO: NO. The obligation of Grijaldo under the 5 promissory notes was not
to deliver a determinate thing; namely, the crops to be harvested from his land, or
the value of the crops that would be harvested from his land. Rather, his obligation
was to pay a generic thing the amount of money representing the total sum of the 5
loans, with interest. The chattel mortgage of the crops growing on appellant’s land
simply stood as a security for the fulfillment of appellant’s obligation covered by the
5 promissory notes, and the loss of the crops did not extinguish his obligation to pay,
because the account could still be paid from other sources aside from the mortgaged
crops.
SONCUYA v. AZARRAGA
Facts: In the settlement of the state of Juan Azarraga, the heirs listed Atty. Azarraga
for the amount of PhP 3,000 as fixed by the court. The heirs agreed to pay by special
mortgage 4 parcels of land in Bay-ang, Capiz. The Atty. was to be in possession of
the lands without payment of rent, until the full amount of his fees is paid. After 5
years, if the fees are not yet paid, the lands are to be adjudicated to the Atty. and
the latter is to receive the amounts he received from the heirs. If there is full payment
after 5 years, the lands will continue to be in possession of the Atty. if he has kept
livestock therein. Before the end of 5 years, the Atty. sold his rights to Soncuya.
Soncuya replaced the Atty. as the creditor of the heir, and granted an extension of
the period of payment, but with and increase of the amount owed to PhP7,000 and
the addition of a 12% interest pa. another extension was granted, with an increase
in the payment to PhP12,000, and out of this, PhP 4,000 was paid to the Atty.
3
already. Joaquin Azarraga executed a deed in favor of Soncuya grating to the latter Issues:
his share on the land for the amount of PhP4,000.
1. Whether or not State Investment House inc. was a holder of the check in due
Within the 5 year redemption period, there will be a payment of 12% pa interest for course
the 1st term, and Php7,000 + Php 3,000 payment. The deed however remained
unregistered. Soncuya took possession of the whole land and placed livestock 2. Whether or not Moulic can set up against the petitioner the defense that there was
thereon and built sheephold and fences. Fruit bearing trees were found, among failure or absence of consideration
which were coconut trees which were planted by Joaquin. Soncuya went to the Held:
house of Joquin to seek for payment, and asked if the land would be redeemed for
PhP12,000. The Azarragas were thereafter issued a TCT in their names, which was Yes, Section 52 of the NIL provides what constitutes a holder in due course. The
known by Soncuya. The CFI issued a writ of attachment in favor of Soncuya, with evidence shows that: on the faces of the post dated checks were complete and
PhP16,000 delivered by the Atty. (part of the credit) for the purpose of the business, regular; that State Investment House Inc. bought the checks from Victoriano before
Panay Municipal Cadastre Inc. a writ of preliminary injunction was issued and the due dates; that it was taken in good faith and for value; and there was no
became final with respect to the PhP9,000 still owing. knowledge with regard that the checks were issued as security and not for value. A
prima facie presumption exists that a holder of a negotiable instrument is a holder in
Held: The contract between the Azarragas and the Atty. was one of Antichresis, or due course. Moulic failed to prove the contrary.
a pacto comisoro. It is also a simple loan because Soncuya decided to collect and
the defendants decided to pay 12% pa interest. It is only in the contract of loan where No, Moulic can only invoke this defense against the petitioner if it was a privy to the
interest may be demanded. A simple loan with security does not affect 3rd persons purpose for which they were issued and therefore is not a holder in due course.
because it is not registered. The contract between Soncuya and Joaquin is also a
No, Section 119 of NIL provides how an instruments be discharged. Moulic can only
simple loan. Soncuya was however negligent as he did not protest the registration
invoke paragraphs c and d as possible grounds for the discharge of the instruments.
of the property in the name of the Azarragas. The Azarragas cannot claim damages
Since Moulic failed to get back the possession of the checks as provided by
for the coconut trees, as there is no evidence to show that they were damaged due
paragraph c, intentional cancellation of instrument is impossible. As provided by
to the livestock on the land. Soncuya must be paid: by the Azarragas in the amount
paragraph d, the acts which will discharge a simple contract of payment of money
of PhP2,700 + 12% pa interest, and by Joaquin PhP 4,000 + 12% pa interest.
will discharge the instrument. Correlating Article 1231 of the Civil Code which
(Basically, the contract with the Atty. was initially an antichresis, when it was
enumerates the modes of extinguishing obligation, none of those modes outlined
transferred in writing to Soncuya, it became a contract of loan, due to the extension
therein is applicable in the instant case. Thus, Moulic may not unilaterally discharge
and the imposition of 12% pa interest).
herself from her liability by mere expediency of withdrawing her funds from the
STATE INVESTMENT HOUSE INC. v. CA (GR No. 101163; January 11, 1993) drawee bank. She is thus liable as she has no legal basis to excuse herself from
liability on her check to a holder in due course. Moreover, the fact that the petitioner
Facts: Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery failed to give notice of dishonor is of no moment. The need for such notice is not
to be sold on commission, two postdated checks in the amount of fifty thousand absolute; there are exceptions provided by Sec 114 of NIL.
each. Thereafter, Victoriano negotiated the checks to State Investment House, Inc.
When Moulic failed to sell the jewellry, she returned it to Victoriano before the
maturity of the checks. However, the checks cannot be retrieved as they have been
negotiated. Before the maturity date Moulic withdrew her funds from the bank
contesting that she incurred no obligation on the checks because the jewellery was
never sold and the checks are negotiated without her knowledge and consent. Upon
presentment of for payment, the checks were dishonoured for insufficiency of funds.

4
DEPOSIT CASES
CA AGRO-INDUSTRIAL DEVELOPMENT CORP. v. THE HONORABLE COURT
OF APPEALS and SECURITY BANK AND TRUST COMPANY
G.R. No. 90027, March 3, 1993, THIRD DIVISION (DAVIDE, JR., J.)
FACTS:
CA Agro-Industrial Development Corp. (CA Agro) purchased two (2) parcels
of land from the spouses Ramon and Paula Pugao (Pugaos). CA Agro paid a
downpayment and issued three (3) post-dated checks covering the balance of the
price. It was contracted that the titles to the lots shall be transferred to CA Agro upon
full payment of the purchase price and that the owner's copies of the certificates of
titles thereto 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 CA Agro and the
Pugaos upon full payment of the purchase price.
Forthwith, CA Agro and the Pugaos rented Safety Deposit Box of Security
Bank and Trust Company (Bank). For this purpose, they both signed a contract of
lease containing 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.
After the execution of the contract, two (2) renter's keys were given to the
renters — one to CA Agro and the other to the Pugaos. A guard key remained in the
possession of the 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.
Thereafter, a certain Mrs. Margarita Ramos (Ramos) offered to buy from CA
Agro the two (2) lots at a price that will yield a profit for the latter. Accordingly, Ramos
demanded the execution of a deed of sale which necessarily entailed the production
of the certificates of title. In view thereof, CA Agro, accompanied by the Pugaos,
then proceeded to the bank 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. As a result, Ramos withdrew her offer to buy the lots.
As a consequence, CA Agro failed to realize the expected profit, thus, it filed
a complaint for damages against the Bank. The Bank in its answer with a
counterclaim invoked paragraphs 13 and 14 of the contract of lease for its defense.
In due course, the trial court rendered a decision against CA Agro on the
ground that the provisions of the contract of lease are binding on the parties, and
that under said paragraphs, the Bank has no liability for the loss of the certificates
of title.
On Appeal, the Court of Appeals affirmed the appealed decision principally
on the theory that the contract executed by CA Agro and the Bank is in the nature
of a contract of lease by virtue of which CA Agro 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, thus, the contract is governed by Article 1643 in relation to Article 1975 of
the Civil Code.
Hence, CA Agro elevated the case to the Supreme Court under Rule 45 of
the Rules of Court maintaining that regardless of nomenclature, the contract for the
rent of the safety deposit box is actually a contract of deposit governed by Title XII,
Book IV of the Civil Code.
ISSUE:
Whether 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
HELD:
Petition PARTIALLY GRANTED
5
 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 is one of a bailor and bailee, the bailment being for hire and mutual benefit,
and it is not an ordinary deposit but special kind of deposit.
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. 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.
However, the Court does not fully subscribe to the view that the same is a contract
of deposit that is to be strictly governed by the provisions in the Civil Code on
deposit; the contract in this case is a special kind of deposit.
Neither could Article 1975 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.
The prevailing rule in American Jurisprudence is that the relation between a
bank renting out safe-deposit boxes and its customer with respect to the contents of
the box is that of a bailor and bailee, the bailment being for hire and mutual benefit.
While, in the context of our laws, particularly Section 72(a) of the General Banking
Act (now Section 52) which authorizes banking institutions to rent out safety deposit
boxes, it is clear that the prevailing rule in the United States has been adopted.
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. . . .
Nevertheless, the primary function is still found within the parameters of a
contract of deposit, and, in relation 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. Thus, the depositary's responsibility for the safekeeping
of the objects deposited in this case 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, and
in the absence of any stipulation prescribing the degree of diligence required, that
of a good father of a family is to be observed. Corollary, 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.
Furthermore, 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 Bank
keeps the guard key to the said box and renters cannot open their respective boxes
unless the Bank cooperates by presenting and using this guard key. Clearly then, to
the extent above stated, conditions 13 and 14 in the contract in question are void
and ineffective.
However, the Court reached the same conclusion which the Court of
Appeals arrived at but on grounds quite different from those relied upon by the latter.
The Bank's exoneration cannot 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 Bank was aware of the agreement between CA
Agro 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 Bank. Since both CA Agro 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.
6
 Since, however, CA Agro 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 CA Agro to pay the Bank attorney's fees. To this extent, the Decision of Court of
Appeals was modified.
DURBAN APARTMENTS CORPORATION vs. PIONEER INSURANCE AND
SURETY CORPORATION G.R. No. 179419 12 January 2011
FACTS: July 22, 2003, Pioneer Insurance and Surety Corp, by right of subrogation,
filed with the RTC of Makati a Complaint for Recovery of Damages against Durban
Apartments Corp. (or City Garden Hotel) and defendant before the RTC, Vicente
Justimbaste. Respondent averred that it is the insurer for loss and damage of Jeffrey
S. See’s 2001 Suzuki Grand Vitara in the amount of P1,175,000.00. On April 30,
2002, See arrived and checked in at the City Garden Hotel before midnight, and its
parking attendant, Justimbaste got the key to said Vitara from See to park it. On May
1, 2002, at about 1:00 am, See received a phone call where the Hotel Chief Security
Officer informed him that his Vitara was carnapped while it was parked unattended
at the parking area of Equitable PCI Bank See went to see the Security Officer,
thereafter reported the incident to the Operations Division of the Makati City Police
Anti-Carnapping Unit, and a flash alarm was issued. The police investigated Hotel
Security Officer, Ernesto T. Horlador, Jr. and Justimbaste. See gave his
Sinumpaang Salaysay to the police investigator, and filed a Complaint Sheet with
the PNP Traffic Management Group in Camp Crame. it paid the P1,163,250.00
money claim of See and mortgagee ABN AMRO Savings Bank, Inc. as indemnity
for the loss of the Vitara.
The Vitara was lost due to the negligence of Durban Apartments and Justimbaste
because it was discovered during the investigation that this was the second time
that a similar incident of carnapping happened in the valet parking service and no
necessary precautions were taken to prevent its repetition. Durban Apartments was
wanting in due diligence in the selection and supervision of its employees particularly
defendant Justimbaste. Both failed and refused to pay its valid, just, and lawful claim
despite written demands.
ISSUE: Is petitioner liable for the loss of See’s vehicle?
RULING: Yes.
Article 1962, in relation to Article 1998, of the Civil Code defines a contract
of deposit and a necessary deposit made by persons in hotels or inns:
Art. 1962. A deposit is constituted from the moment a person receives a
thing belonging to another, with the obligation of safely keeping it and returning the
same. If the safekeeping of the thing delivered is not the principal purpose of the
contract, there is no deposit but some other contract.
Art. 1998. The deposit of effects made by travelers in hotels or inns shall
also be regarded as necessary. The keepers of hotels or inns shall be responsible
for them as depositaries, provided that notice was given to them, or to their
employees, of the effects brought by the guests and that, on the part of the latter,
they take the precautions which said hotel-keepers or their substitutes advised
relative to the care and vigilance of their effects.
Plainly, from the facts found by the lower courts, the insured See deposited
his vehicle for safekeeping with petitioner, through the latter’s employee,
Justimbaste. In turn, Justimbaste issued a claim stub to See. Thus, the contract of
deposit was perfected from See’s delivery, when he handed over to Justimbaste the
keys to his vehicle, which Justimbaste received with the obligation of safely keeping
and returning it. Ultimately, petitioner is liable for the loss of See’s vehicle.
COMPANIA AGRICOLA DE ULTRAMAR V. NEPOMUCENO 55 PHIL. 283,
NOVEMBER 14, 1930
FACTS:
On March 17, 1927, the registered partnerships, Mariano Velasco & Co., Mariano
Velasco, Sons, & Co., and Mariano Velasco & Co., Inc., were declared insolvent by
the Court of First Instance of Manila.
On the 16th day of April, 1927, the Compania Agricola de Ultramar filed a
claim against one of the insolvents Mariano Velasco & Co., claiming the sum of
P10,000, with the agreed interest thereon at the rate of 6 per cent per annum from
April 5, 1918, until its full payment was a deposit with said Mariano Velasco & Co.
and asked the court to declare it a preferred claim.
The assignee of the insolvency answered the claim by interposing a general
denial. On September 23, 1929, the court rendered a decision declaring that the
7
alleged deposit was a preferred claim for the sum mentioned, with interest at 6 per
cent per annum from April 5, 1918, until paid. From this decision the assignee
appealed.
The evidence presented by the claimant Compania Agricola de Ultramar consisted
of a receipt in writing, and the testimony of Jose Velasco who was manager of
Mariano Velasco & Co. at the time the note was executed. The receipt reads as
follows:
MANILA, P. I., April 5, 1918.
Received from the "Compania Agricola de Ultramar" the sum of ten thousand
Philippine pesos as a deposit at the interest of six per cent annually, for the term of
three months from date.
In witness thereof, I sign the present.
MARIANO VELASCO & CO.
By (Sgd.) JOSE VELASCO
Manager.
P10,000.00.
In his testimony, Jose Velasco stated that his signature on the receipt was
authentic and that he received the said sum of P10,000 from the appellee and
deposited it with the bank in the current account of Mariano Velasco & Co.
ISSUE: Whether or not the contract between Mariano Velasco & Co., Inc and
Compania Agricola de Ultramar was a contract of deposit.
RULING:
The Supreme Court ruled that the CFI erred in finding that the claim of the appellee
should be considered a deposit.
Article 1767 of the Civil Code provides that —
"The depository cannot 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 not be presumed, and its existence must be proven.
It was sufficiently shown that the ten thousand pesos delivered by the appellee to
Mariano Velasco & Co. cannot de regarded as a technical deposit. But the appellee
argues that it is at least an "irregular deposit." This argument is, we think, sufficiently
answered in the case of Rogers vs. Smith, Bell & Co. (10 Phil., 319). There this court
said:
. . . Manresa, in his Commentaries on the Civil Code (vol. 11, p. 664), states
that there are three points of difference between a loan and an irregular deposit. The
first difference which he points out consists in the fact that in an irregular deposit the
only benefit is that which accrues to the depositor, while in a loan the essential cause
for the transaction is the necessity of the borrower. The contract in question does
not fulfill this requirement of an irregular deposit. It is very apparent that it was not
for the sole benefit of Rogers. It, like any other loan of money, was for the benefit of
both parties. The benefit which Smith, Bell & Co. received was the use of the money;
the benefit which Rogers received was the interest on his money. In the letter in
which Smith, Bell & Co. on the 30th of June, 1888, notified the plaintiff of the
reduction of the interest, they said: "We call your attention to this matter in order that
you may if you think best employ your money in some other place."
Nor does the contract in question fulfill the third requisite indicated by
Manresa, which is, that in an irregular deposit, the depositor can demand the return
of the article at any time, while a lender is bound by the provisions of the contract
and cannot seek restitution until the time for payment, as provided in the contract,
has arisen. It is apparent from the terms of this documents that the plaintiff could not
demand his money at any time. He was bound to give notice of his desire for its
return and then to wait for six months before he could insist upon payment.
In the present case the transaction in question was clearly not for the sole
benefit of the Compania Agricola de Ultramar; it was evidently for the benefit of both
parties. Neither could the alleged depositor demand payment until the expiration of
the term of three months.
8
Petitioner: YHT Realty Corporation (owner and operator of Tropicana
Copacabana Apartment Hotel)
Respondent: Court of Appeals Private Respondent: Maurice McLoughlin
Accused: Tan; Lainez, Payam, & Danilo Lopez (employees of Tropicana
Copacabana Apartment Hotel)
FACTS:
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 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 McLoughlin’s
booking at the Tropicana where he started staying during his trips to the Philippines
from December 1984 to September 1987.
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.
McLoughlin allegedly placed the following in his safety deposit box: US$15,000.00
which he placed in two envelopes, one envelope containing US$10,000.00 and the
other envelope US$5,000.00; AUS$10,000.00 which he also placed in another
envelope; 2 other envelopes containing letters and credit cards; 2 bankbooks; and
a checkbook, arranged side by side inside the safety deposit box.
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 US$5,000.00, the envelope containing
AUS$10,000.00, his passports and his credit cards. 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
US$5,000.00 and discovered upon counting that only US$3,000.00 were enclosed
therein. 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.
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
US$10,000.00 was short of 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.
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 1 envelope containing
US$15,000.00, another envelope containing 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 US$15,000.00, US$2,000.00
were missing and in the envelope previously containing AUS$10,000.00,
AUS$4,500.00 were missing.
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. McLoughlin went up to his room where Tan was staying and confronted her.
Tan admitted that she had stolen McLoughlin’s key and was able to open the safety
deposit box with the assistance of Lopez, Payam and Lainez. Lopez also told
McLoughlin that Tan stole the key assigned to McLoughlin while the latter was
asleep.
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. Lopez requested Tan to sign the promissory note which the latter did and
Lopez also signed as a witness.
9
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,”
specifically paragraphs (2) and (4) thereof.
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. The Office of the President referred the letter to
the DOJ which forwarded the same to the Western Police District.
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
Malacañang 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.
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 Fiscal’s 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 Fiscal’s 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
McLoughlin’s 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 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. 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.
ISSUE:
WON 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.
HELD:
No. 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 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 carrier’s business is imbued with public interest. Catering
10
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.
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.
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. 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.
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. Thus, given the fact that the loss of McLoughlin’s
money was consummated through the negligence of Tropicana’s employees in
allowing Tan to open the safety deposit box without the guest’s 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.
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. 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.
IV. Bank deposits are in the nature or irregular deposits
DE LOS SANTOS vs TAN KHEY O.G.No.26695-R, July 30, 1962
Facts: Tan Khey was the owner of International Hotel located in Iloilo city. Romeo
de los Santos
lodged in Than Khey’s hotel. After arrival, he left the hotel, depositing his revolver
and his bag with the person in charge in the hotel. When he returned to the hotel,
he took his revolver and his bag from the person in charge in the hotel and
proceeded to his room. He locked the door before sleeping. When he woke up, he
discovered that the door in his room was opened and his bag and pants, wherein he
placed his revolver ,was missing. He reported the matter to the Assistant Manager
of the hotel, who in turn informed Tan Khey.
A secret service agent was sent to investigate and it was found that the wall of the
room occupied by De los Santos was only seven feet high with an open space above
through which one could enter from outside. De los Santos told the detective that he
lost his revolver.
Tan Khey disclaimed liability because De los Santos did not deposit his properties
with the manager despite a notice to that effect was posted in the hotel.
Tan Khey contended that to be liable under Article 1998 of the Civil Code, the
following conditions must concur:
1. Deposit of effects by travellers in hotel or inn
2. Notice given to hotel keepers or employees of the effects brought by guests
3. Guest or travellers take the precautions which said hotel keepers or their
substitutes advised relative to the care and vigilance of their effects.
Issue: Whether the hotel owner should be held liable for the loss of the effects of
the guest?
11
Ruling:
The Court ruled that the hotel owner should be liable for the loss of the revolver,
pants and bag of the guest.
Deposit
While the law speaks of “deposit” of effects by travelers in hotels or inns, personal
receipt by the innkeeper for safe keeping of effects is not necessarily meant thereby.
The reason therefor is the fact that it is the nature of business of an innkeeper to
provide not only lodging for travelers but also to security to their persons and effects.
The security mentioned is not confined to the effects actually delivered to the
innkeeper but also to all effects placed within the premises of the hotel. This is
because innkeepers by the nature of their business, have supervision and control of
their inns and the premises thereof.
It is not necessary that the effect was actually delivered but it is enough that they
are within the inn. If a guest and goods are within the inn, that is sufficient to charge
him.The owner of a hotel may exonerate himself from liability by showing that the
guest has taken exclusive control of his own goods, but this must be exclusive
custody and control of a guest, and must not be held under the supervision and care
of the innkeeper,ey are kept in a room assigned to a guest or the other proper
depository in the house in this case, the guest deposited his effects in the hotel
because they are in his room and within the premises of the hotel, and therefore,
within the supervision and control of the hotel owner.
Notice
The Court ruled that there was no doubt that the person in charge had knowledge
of his revolver, the bag, and pants of the guest, De los Santos.
The requirement of notice being evidently for the purpose of closing the door to
fraudulent claims for non-existent articles, the lack thereof was fatal to De los
Santos’ claim for reparation for the loss of his eyeglass, ring, and cash.
Precautions
While an innkeeper cannot free himself from responsibility by posting notices, there
can be no doubt of the innkeeper’s right to make such regulations in the
management of his inn as will more effectually secure the property of his guest and
operate as protection to himself, and that it is incumbent upon the guest, if he means
to hold the inkeeper ho his responsibility, to comply with any regulation that is just
and reasonable, when he is requested to do so.
However, in this case, the notice requiring actual deposit of the effects with the
manager was an unreasonable regulation. It was unreasonable to require the guest
to deposit his bag ,pants and revolver to the manager. De los Santos had exercised
the necessary diligence with respect to the care and vigilance of his effects
Sulpicio Lines Inc. (Petitioner) v Napoleon Sisante (Respondents) GR No.
172682, July 27, 2016
First Division Ponente: Bersamin, J.
Nature of Action: Action for damages for breach of contract of carriage.
FACTS:
The M/V Princess of the Orient, a passenger vessel owned and operated by
the petitioner, sank near Fortune Island in Batangas. Of the 388 recorded
passengers, 150 were lost. Napoleon Sesante, then a member of the Philippine
National Police (PNP) and a lawyer, was one of the passengers who survived the
sinking. He sued the petitioner for breach of contract and damages. In its defense,
the petitioner insisted on the seaworthiness of the M/V Princess of the Orient due to
its having been cleared to sail from the Port of Manila by the proper authorities; that
the sinking had been due to force majeure; that it had not been negligent; and that
its officers and crew had also not been negligent because they had made
preparations to abandon the vessel because they had launched life rafts and had
provided the passengers assistance in that regard. The RTC rendered judgement in
favor of plaintiff Napoleon Sesante and ordered defendant to pay temperate and
moral damages. The RTC observed that the petitioner, being negligent, was liable
to Sesante pursuant to Articles 1739 and 1759 of the Civil Code. The CA reduced
the award of the temperate damages to the approximate cost of Sesante's lost
personal belongings and held that petitioner remained civilly liable.
The petitioner has attributed the sinking of the vessel to the storm
notwithstanding its position on the seaworthiness of M/V Princess of the Orient. Yet,
the findings of the BMI directly contradicted the petitioner's attribution, as the BMI
found that petitioner’s fault was the immediate and proximate cause of the sinking
due to the Captain's erroneous maneuvers of the M/V Princess of the Orient minutes
before she sunk.
12
ISSUE: Whether or not the petitioner is liable for moral damages.
RULING: Yes. The Court awarded moral damages due to the totality of the
negligence by the officers and crew of the Princess of the Orient coupled with the
seeming indifference of the petitioner to render assistance to Sesante.
The petitioner argues that moral damages could be meted against a
common carrier only in the following instances, to wit: (1) in the situations
enumerated by Article 2201 of the Civil Code; (2) in cases of the death of a
passenger; or (3) where there was bad faith on the part of the common carrier. It
contends that none of these instances obtained herein; hence, the award should be
deleted.
We agree with the petitioner that moral damages may be recovered in an
action upon breach of contract of carriage only when: (a) death of a passenger
results, or (b) it is proved that the carrier was guilty of fraud and bad faith, even if
death does not result. However, moral damages may be awarded if the contractual
breach is found to be wanton and deliberately injurious, or if the one responsible
acted fraudulently or with malice or bad faith.
The negligent acts of the officers and crew of M/V Princess of the Orient
could not be ignored in view of the extraordinary duty of the common carrier to
ensure the safety of the passengers. The totality of the negligence by the officers
and crew of M/V Princess of the Orient, coupled with the seeming indifference of the
petitioner to render assistance to Sesante, warranted the award of moral damages.
MAKATI SHANGRI-LA HOTEL AND RESORT, INC., Petitioner, v. ELLEN
JOHANNE HARPER, JONATHAN CHRISTOPHER HARPER, and RIGOBERTO
GILLERA, Respondents. G.R. No. 189998 : August 29, 2012
BERSAMIN, J.:
FACTS:
In the first week of November 1999, Christian Harper (Harper) came to Manila on a
business trip. He checked in at the Makati Shangri-La Hotel and was billeted at
Room 1428. He was due to check out on November 6, 1999. In the early morning of
that date, however, he was murdered inside his hotel room by still unidentified
malefactors.
Thus, the heirs of Christian Harper sued the hotel for damages. Col. Rodrigo de
Guzman, the hotels Security Manager, testified that the management practice prior
to the murder of Harper had been to deploy only one security or roving guard for
every three or four floors of the building; that such ratio had not been enough
considering the L-shape configuration of the hotel that rendered the hallways not
visible from one or the other end; and that he had recommended to management to
post a guard for each floor, but his recommendation had been disapproved because
the hotel "was not doing well" at that particular time.
And to prove heirship of the plaintiffs-appellees, they presented several documents
which were all kept in Norway. The documents had been authenticated by the Royal
Norwegian Ministry of Foreign Affairs and also bore the official seal of the Ministry
and signature of one, Tanja Sorlie. The documents were also accompanied by an
Authentication by the Consul, Embassy of the Republic of the Philippines in
Stockholm, Sweden to the effect that, Tanja Sorlie was duly authorized to legalize
official documents for the Ministry.
The RTC ruled in favor of Christian Harpers heirs and found the hotel negligent. On
appeal, the CA affirmed the RTC.
ISSUES:
I. Whether or not the heirs substantially complied with the rules on the
authentication and proof of documents set by Section 24 and Section 25 of Rule 132
of the Rules of Court?
II. Whether or not Makati Shangri-La Hotel is liable to pay damages?
HELD:
FIRST ISSUE: The requirements for authentication of documents establishing
respondents legal relationship with the victim as his heirs were complied with.
REMEDIAL LAW:
Although Exhibit Q, Exhibit Q-1, Exhibit R and Exhibit R-1 were not attested by the
officer having the legal custody of the record or by his deputy in the manner required
in Section 25 of Rule 132, and said documents did not comply with the requirement
under Section 24 of Rule 132 to the effect that if the record was not kept in the
Philippines a certificate of the person having custody must accompany the copy of
the document that was duly attested stating that such person had custody of the
documents, the deviation was not enough reason to reject the utility of the
documents for the purposes they were intended to serve. The official participation in
the authentication process of Tanja Sorlie of the Royal Ministry of Foreign Affairs of
13
Norway and the attachment of the official seal of that office on each authentication
indicated that Exhibit Q, Exhibit R, Exhibit Q-1 and Exhibit R-1 were documents of
a public nature in Norway, not merely private documents.
That rules of procedure may be mandatory in form and application does not forbid a
showing of substantial compliance under justifiable circumstances, because
substantial compliance does not equate to a disregard of basic rules. For sure,
substantial compliance and strict adherence are not always incompatible and do not
always clash in discord.
SECOND ISSUE: Petitioner was liable due to its own negligence.
CIVIL LAW:
The CA resolved petitioners arguments thuswise: "negligence is defined as the
omission to do something which a reasonable man, guided by those considerations
which ordinarily regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do. It is a relative or
comparative, not an absolute, term and its application depends upon the situation of
the parties and the degree of care and vigilance which the circumstances reasonably
require. In determining whether or not there is negligence on the part of the parties
in a given situation, jurisprudence has laid down the following test:Did defendant, in
doing the alleged negligent act, use that reasonable care and caution which an
ordinarily prudent person would have used in the same situation? If not, the person
is guilty of negligence. The law, in effect, adopts the standard supposed to be
supplied by the imaginary conduct of the discreet pater familias of the Roman law.
Liability on the part of the defendant is based upon the fact that he was in a better
situation than the injured person to foresee and prevent the happening of the
injurious occurrence. Moreover, in applying the premises liability rule in the instant
case as it is applied in some jurisdiction in the United States, it is enough that guests
are injured while inside the hotel premises to make the hotelkeeper liable."
Proximate cause is defined as that cause, which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces, the injury, and
without which the result would not have occurred. More comprehensively, proximate
cause is that cause acting first and producing the injury, either immediately or by
setting other events in motion, all constituting a natural and continuous chain of
events, each having a close causal connection with its immediate predecessor, the
final event in the chain immediately effecting the injury as natural and probable result
of the cause which first acted, under such circumstances that the person responsible
for the first event should, as an ordinarily prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default that an injury to
some person might probably result therefrom. To reiterate, defendant-appellant is
engaged in a business imbued with public interest, ergo, it is bound to provide
adequate security to its guests.
CA AFFIRMED.
WAREHOUSE RECEIPTS
PNB v. Judge Benito C. Se, Jr.(256 SCRA 380)
A prior judgment holding that a party is a warehouseman obligated to deliver sugar
stocks covered by the warehouse receipts does not necessarily carry with it a denial
of its lien over the same sugar stocks. Thus where the judgment creditor (in this
case PNB) makes an unconditional presentment of warehouse receipts for delivery
of sugar stocks against the warehouseman (Noah’s Ark), it thereby admits the
existence and validity of the terms, conditions and stipulations written on the face of
the warehouse receipts, including the unqualified recognition of the payment of
warehouseman’s lien for storage fees and preservation expenses. Thus, PNB may
not retrieve the sugar stocks without paying the warehouseman’s lien.
The warehouseman need not file a separate action to enforce payment of storage
fees. He may enforce his lien before delivering the sugar stocks covered by the
warehouse receipts.
PHILIPPINE NATIONAL BANK, petitioner, vs. HON. PRES. JUDGE BENITO C.
SE, JR., RTC, BR. 45, MANILA; NOAH’S ARK SUGAR REFINERY; ALBERTO T.
LOOYUKO, JIMMY T. GO and WILSON T. GO, respondents. G.R. No. 119231.
April 18, 1996
FACTS:
• In accordance with Act No. 2137, the Warehouse Receipts Law, Noah’s Ark Sugar
Refinery issued on several dates, 5 Warehouse Receipts (Quedans).
• They were endorsed and negotiated to Ramos and Zoleta. They failed to pay their
loans upon maturity. So, PNB wrote to Noah’s Ark Sugar Refinery demanding
14
delivery of the sugar stocks covered by the quedans endorsed to it by Zoleta and
Ramos.
• Noah’s Ark Sugar Refinery refused. So, PNB filed a complaint for “Specific
Performance with Damages and Application for Writ of Attachment”.
• Respondent Judge Benito C. Se, Jr., in whose sala the case was raffled, denied
the Application for Preliminary Attachment.
HELD: Under the subject Warehouse Receipts provision, storage fees are
chargeable. 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 warehouseman’s lien. – Subject to
the provisions of section thirty, a warehouseman shall have lien on goods deposited
or on the proceeds thereof in his hands, for all lawful charges for storage and
preservation of the goods; also for all lawful claims for money advanced, interest,
insurance, transportation, labor, weighing coopering and other charges and
expenses in relation to such goods; also for all reasonable charges and expenses
for notice, and advertisement of sale, and for sale of the goods where default has
been made in satisfying the warehouseman’s lien.
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 as the warehouseman, PRs cannot legally be deprived of their
right to enforce their claim for warehouseman’s lien, for reasonable storage fees and
preservation expenses. Pursuant to Section 31 which we quote earlier, the goods
under storage may not be delivered until said lien is satisfied.
• Considering that PNB does not deny the existence, validity and genuineness of the
Warehouse Receipts on which it anchors its claim for payment against PRs, it cannot
disclaim liability for the payment of the storage fees stipulated therein.
PNB is in estoppel in disclaiming liability for the payment of storage fees due the
PRs 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 PNB for payment against PRs on the strength of the provisions of the
Warehouse Receipts Law (R.A. 2137) carried with it the admission of the existence
and validity of the terms, conditions and stipulations written on the face of the
Warehouse Receipts, including the unqualified recognition of the payment of
warehouseman’s lien for storage fees and preservation expenses. PNB may not now
retrieve the sugar stocks without paying the lien due PRs as warehouseman.
RULE: While the PNB is entitled to the stocks of sugar as the endorsee of the
quedans, delivery to it shall be effected only upon payment of the storage fees.
Imperative is the right of the warehouseman to demand payment of his lien at this
juncture, because, in accordance with Section 29 of the Warehouse Receipts Law,
the warehouseman loses his lien upon goods by surrendering possession thereof.
In other words, the lien may be lost where the warehouseman surrenders the
possession of the goods without requiring payment of his lien, because a
warehouseman’s lien is possessory in nature.
WHEREFORE, the petition should be, as it is, hereby dismissed for lack of merit.
PNB vs. HON. MARCELINO L. SAYO, JR, NOAH'S ARK SUGAR REFINERY,
ALBERTO T. LOOYUKO, JIMMY T. GO and WILSON T. GO G.R. No. G.R.
No. 129918 Date July 9, 1998 Ponente DAVIDE, JR.
TOPIC IN SYLLABUS: Warehouse Receipts Law
SUMMARY: Noah's Ark Sugar Refinery issued Warehouse Receipts (Quedans)
covering sugar deposited by Sy, RNS Merchandising, and St. Therese
Merchandising. These Warehouse Receipts were negotiated and endorsed to
Ramos and to Zoleta. Ramos and Zoleta then used the quedans as security for loan
from the PNB. The quedans were endorsed by them to PNB. Ramos and Zoleta
failed to pay their loans upon maturity. Hence, PNB wrote to Noah's Ark demanding
delivery of the sugar stocks covered by the quedans endorsed to it by Zoleta and
Ramos. Noah's Ark Sugar Refinery refused to comply with the demand alleging
ownership thereof. SC held that private respondents may enforce their
warehouseman’s lien and that PNB is liable for storage fees.
PROCEDURAL ANTECEDENTS:
In this special civil action for certiorari, actually the third dispute between the same
private parties to have reached this Court, petitioner asks us to annul the orders
issued by the Regional Trial Court, Manila, Branch 45.
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FACTS:
In accordance with the Warehouse Receipts Law, Noah's Ark Sugar Refinery issued
on several dates Warehouse Receipts (Quedans) covering sugar deposited by Rosa
Sy, RNS Merchandising, and St. Therese 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 were negotiated and endorsed to Luis T.
Ramos and 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 PNB. The aforementioned quedans were
endorsed by them to PNB.
Ramos and Zoleta failed to pay their loans upon maturity. Hence, PNB wrote to
Noah's Ark Sugar Refinery demanding delivery of the sugar stocks covered by the
quedans endorsed to it by Zoleta and Ramos. Noah's Ark Sugar Refinery refused to
comply with the demand alleging ownership thereof. It alleged that the owner of
Noah’s Ark, Looyuko, entered into an agreement with RNS and St. Therese
Merchandising to sell the sugar indicated in the warehouse receipts stored in Noah
for an amount of P63,000,000. Checks were issued but they were dishonored for
being drawn against insufficient funds. PNB filed with the RTC of Manila a verified
complaint for "Specific Performance with Damages and Application for Writ of
Attachment" against Noah's Ark Sugar Refinery, Alberto T. Looyuko, Jimmy T. Go
and Wilson T. Go, the last three being identified as the sole proprietor, managing
partner, and Executive Vice President of Noah's Ark, respectively. RTC dismissed
said complaint. MR denied.
On appeal to the SC via petition for review on certiorari, the Supreme Court ordered
Noah’s Ark and its owner, Looyuko, to deliver to PNB the sugar stocks covered by
the warehouse receipts in controversy. However, Noah’s Ark filed an Omnibus
Motion seeking deferment of the judgment until it was heard on its warehouseman’s
lien. RTC granted the order and evidence was received in support thereof. RTC
adjudged that there existed a valid lien in favor of Noah’s Ark, and accordingly,
execution of the judgment against Noah’s Ark should be stayed until the full amount
of Noah’s lien shall have been satisfied. PNB then filed certiorari proceedings before
the Supreme Court. The SC held that while PNB was entitled to the sugar stocks as
endorsee of the receipts, delivery to it shall only be effected upon payment of the
storage fees. The Supreme Court further ruled that imperative is the right of the
warehouseman to demand payment of his lien because he loses his lien upon goods
by surrendering possession thereof.RTC Judge Sayo, Jr. allowed a writ of execution
in favor of Noah to collect on its warehouseman’s lien against PNB. Hence, this
certiorari proceeding before the Supreme Court.
ISSUES:
1. WON private respondents may enforce their warehouseman’s lien. YES.
2. WON PNB is liable for storage fees. YES.
RULING:
1. Under the Special Circumstances in This Case, Private Respondents May
Enforce Their Warehouseman's Lien.
The remedies available to a warehouseman, such as private respondents, to enforce
his warehouseman's lien are:
(1) To refuse to deliver the goods until his lien is satisfied, pursuant to Section 31 of
the Warehouse Receipt Law;
(2) To sell the goods and apply the proceeds thereof to the value of the lien pursuant
to Sections 33 and 34 of the Warehouse Receipts Law; and
(3) By other means allowed by law to a creditor against his debtor, for the collection
from the depositor of all charges and advances which the depositor expressly or
impliedly contracted with the warehouseman to pay under Section 32 of the
Warehouse Receipt Law; or such other remedies allowed by law for the enforcement
of a lien against personal property under Section 35 of said law. The third remedy is
sought judicially by suing for the unpaid charges.
CAB: Initially, private respondents availed of the first remedy. While the most
appropriate remedy for private respondents was an action for collection, SC already
recognized their right to have such charges and fees determined. The import of SC’s
holding was that private respondents were likewise entitled to a judgment on their
warehouse charges and fees, and the eventual satisfaction thereof, thereby avoiding
having to file another action to recover these charges and fees, which would only
have further delayed the resolution of the respective claims of the parties, and as a
corollary thereto, the indefinite deferment of the execution of the judgment. Thus we
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note that petitioner, in fact, already acquiesced to the scheduled dates previously
set for the hearing on private respondents' warehouseman's charges. But, it would
be premature to execute the order fixing the warehouseman's charges and fees.
2. Petitioner is Liable for Storage Fees.
Petitioner insisted that it was a mere pledgee as the quedans were used to secure
two loans it granted.
The SC agreed with this and held that the indorsement and delivery of the receipts
by Ramos and Zoleta to PNB was not to convey title to or ownership of the goods
but to secure the loans by way of pledge. The indorsement of the receipts to perfect
the pledge merely constituted a symbolical or constructive delivery of the possession
of the thing thus encumbered. The creditor, in a contract of real security, like pledge,
cannot appropriate without foreclosure the things given by way of pledge. Any
stipulation to the contrary is null and void for being pactum commissorio. The law
requires foreclosure in order to allow a transfer of title of the goods given by way of
security from its pledgor, and before any such foreclosure, the pledgor, not the
pledgee, is theowner of the goods. However, the SC held that the warehouseman
nevertheless is entitled to his lien that attaches to the goods invokable against
anyone who claims a right of possession thereon.
The SC held that where a valid demand by the lawful holder of the receipts for the
delivery of the goods is refused by the warehouseman, despite the absence of a
lawful excuse provided by the law itself, the warehouseman’s lien is thereafter
concomitantly lost. As to what the law deems a valid demand, Section 8 of the
Warehouse Receipts Law enumerates what must accompany a demand; while as
regards the reasons which a warehouseman may invoke to legally refuse to effect
delivery of the goods covered by the quedans, these are:
(1) That the holder of the receipt does not satisfy the conditions prescribed in Section
8 of the Act. (See Sec. 8, Act No. 2137)
(2) That the warehouseman has legal title in himself on the goods, such title or right
being derived directly or indirectly from a transfer made by the depositor at the time
of or subsequent to the deposit for storage, or from the warehouseman's lien. (Sec.
16, Act No. 2137)
(3) That the warehouseman has legally set up the title or right of third persons as
lawful defense for non-delivery of the goods
(4) That the warehouseman having a lien valid against the person demanding the
goods refuses to deliver the goods to him until the lien is satisfied. (Sec. 31 Act No.
2137)
(5) That the failure was not due to any fault on the part of the warehouseman, as by
showing that, prior to demand for delivery and refusal, the goods were stolen or
destroyed by fire, flood, etc., without any negligence on his part, unless he has
contracted so as to be liable in such case, or that the goods have been taken by the
mistake of a third person without the knowledge or implied assent of the
warehouseman, or some other justifiable ground for non-delivery.
The SC explained that regrettably, the factual settings do not sufficiently indicate
whether the demand to obtain possession of the goods complied with Sec. 8. The
presumption, nevertheless, would be that the law was complied with. On the other
hand, it would appear that the refusal of Noah’s Ark to deliver the goods was not
anchored on a valid excuse, i.e., non-satisfaction of the lien over the goods, but on
an adverse claim of ownership. Under the circumstances, this hardly qualified as a
valid, legal excuse. The loss of the lien, however, does not necessarily mean the
extinguishment of the obligation to pay the warehousing fees and charges which
continues to be a personal liability of the owners, i.e., the pledgors, not the pledgee,
in this case. But even as to the owners-pledgors, the warehouseman fees and
charges have ceased to accrue from the date of the rejection by Noah to heed the
lawful demand by PNB for the release of the goods. Hence, the time from which the
fees and charges should be made payable is from the time Noah’s Ark refused to
heed PNB’s demand for delivery of the sugar stocks and in no event beyond the
value of the credit in favor of the pledgee since it is basic that, in foreclosures, the
buyer does not assume the obligations of the pledgor to his other creditors even
while such buyer acquires title over the goods less any existing preferred lien
thereover.
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