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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 acknowledged (sic) having received from you today the sum of US DOLLARS: THREE THOUSAND ONLY (US$3,000.00)
for safekeeping.

Received by:

(Sgd.) VIRGILIO V. GARCIA

It was also alleged in the complaint that despite demands, the bank refused to return the money.

In its answer, COMTRUST averred that the US$3,000 was credited to Zshornack's peso current account at prevailing
conversion rates.

It must be emphasized that COMTRUST did not deny specifically under oath the authenticity and due execution of the
above instrument.

During trial, it was established that on December 8, 1975 Zshornack indeed delivered to the bank US $3,000 for
safekeeping. When he requested the return of the money on May 10, 1976, COMTRUST explained that the sum was
disposed of in this manner: US$2,000.00 was sold on December 29, 1975 and the peso proceeds amounting to
P14,920.00 were deposited to Zshornack's current account per deposit slip accomplished by Garcia; the remaining
US$1,000.00 was sold on February 3, 1976 and the peso proceeds amounting to P8,350.00 were deposited to his current
account per deposit slip also accomplished by Garcia.

Aside from asserting that the US$3,000.00 was properly credited to Zshornack's current account at prevailing conversion
rates, BPI now posits another ground to defeat private respondent's claim. It now argues that the contract embodied in
the document is the contract of depositum (as defined in Article 1962, New Civil Code), which banks do not enter into.
The bank alleges that Garcia exceeded his powers when he entered into the transaction. Hence, it is claimed, the bank
cannot be liable under the contract, and the obligation is purely personal to Garcia.
Before we go into the nature of the contract entered into, an important point which arises on the pleadings, must be
considered.

The second cause of action is based on a document purporting to be signed by COMTRUST, a copy of which document
was attached to the complaint. In short, the second cause of action was based on an actionable document. It was
therefore incumbent upon the bank to specifically deny under oath the due execution of the document, as prescribed
under Rule 8, Section 8, if it desired: (1) to question the authority of Garcia to bind the corporation; and (2) to deny its
capacity to enter into such contract. [See, E.B. Merchant v. International Banking Corporation, 6 Phil. 314 (1906).] No
sworn answer denying the due execution of the document in question, or questioning the authority of Garcia to bind the
bank, or denying the bank's capacity to enter into the contract, was ever filed. Hence, the bank is deemed to have
admitted not only Garcia's authority, but also the bank's power, to enter into the contract in question.

In the past, this Court had occasion to explain the reason behind this procedural requirement.

The reason for the rule enunciated in the foregoing authorities will, we think, be readily appreciated. In dealing with
corporations the public at large is bound to rely to a large extent upon outward appearances. If a man is found acting for a
corporation with the external indicia of authority, any person, not having notice of want of authority, may usually rely
upon those appearances; and if it be found that the directors had permitted the agent to exercise that authority and
thereby held him out as a person competent to bind the corporation, or had acquiesced in a contract and retained the
benefit supposed to have been conferred by it, the corporation will be bound, notwithstanding the actual authority may
never have been granted

... Whether a particular officer actually possesses the authority which he assumes to exercise is frequently known to very
few, and the proof of it usually is not readily accessible to the stranger who deals with the corporation on the faith of the
ostensible authority exercised by some of the corporate officers. It is therefore reasonable, in a case where an officer of a
corporation has made a contract in its name, that the corporation should be required, if it denies his authority, to state
such defense in its answer. By this means the plaintiff is apprised of the fact that the agent's authority is contested; and
he is given an opportunity to adduce evidence showing either that the authority existed or that the contract was ratified
and approved. [Ramirez v. Orientalist Co. and Fernandez, 38 Phil. 634, 645- 646 (1918).]

Petitioner's argument must also be rejected for another reason. The practical effect of absolving a corporation from
liability every time an officer enters into a contract which is beyond corporate powers, even without the proper allegation
or proof that the corporation has not authorized nor ratified the officer's act, is to cast corporations in so perfect a mold
that transgressions and wrongs by such artificial beings become impossible [Bissell v. Michigan Southern and N.I.R. Cos 22
N.Y 258 (1860).] "To say that a corporation has no right to do unauthorized acts is only to put forth a very plain truism but
to say that such bodies have no power or capacity to err is to impute to them an excellence which does not belong to any
created existence with which we are acquainted. The distinction between power and right is no more to be lost sight of in
respect to artificial than in respect to natural persons." [Ibid.]

Having determined that Garcia's act of entering into the contract binds the corporation, we now determine the correct
nature of the contract, and its legal consequences, including its enforceability.

The document which embodies the contract states that the US$3,000.00 was received by the bank for safekeeping. The
subsequent acts of the parties also show that the intent of the parties was really for the bank to safely keep the dollars
and to return it to Zshornack at a later time, Thus, Zshornack demanded the return of the money on May 10, 1976, or
over five months later.

The above arrangement is that contract defined under Article 1962, New Civil Code, which reads:

Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of
safely keeping it and of returning the same. If the safekeeping of the thing delivered is not the principal purpose of the
contract, there is no deposit but some other contract.

Note that the object of the contract between Zshornack and COMTRUST was foreign exchange. Hence, the transaction
was covered by Central Bank Circular No. 20, Restrictions on Gold and Foreign Exchange Transactions, promulgated on
December 9, 1949, which was in force at the time the parties entered into the transaction involved in this case. The
circular provides:

xxx xxx xxx

2. Transactions in the assets described below and all dealings in them of whatever nature, including, where
applicable their exportation and importation, shall NOT be effected, except with respect to deposit accounts included in
sub-paragraphs (b) and (c) of this paragraph, when such deposit accounts are owned by and in the name of, banks.

(a) Any and all assets, provided they are held through, in, or with banks or banking institutions located in the
Philippines, including money, checks, drafts, bullions bank drafts, deposit accounts (demand, time and savings), all debts,
indebtedness or obligations, financial brokers and investment houses, notes, debentures, stocks, bonds, coupons, bank
acceptances, mortgages, pledges, liens or other rights in the nature of security, expressed in foreign currencies, or if
payable abroad, irrespective of the currency in which they are expressed, and belonging to any person, firm, partnership,
association, branch office, agency, company or other unincorporated body or corporation residing or located within the
Philippines;

(b) Any and all assets of the kinds included and/or described in subparagraph (a) above, whether or not held through,
in, or with banks or banking institutions, and existent within the Philippines, which belong to any person, firm,
partnership, association, branch office, agency, company or other unincorporated body or corporation not residing or
located within the Philippines;

(c) Any and all assets existent within the Philippines including money, checks, drafts, bullions, bank drafts, all debts,
indebtedness or obligations, financial securities commonly dealt in by bankers, brokers and investment houses, notes,
debentures, stock, bonds, coupons, bank acceptances, mortgages, pledges, liens or other rights in the nature of security
expressed in foreign currencies, or if payable abroad, irrespective of the currency in which they are expressed, and
belonging to any person, firm, partnership, association, branch office, agency, company or other unincorporated body or
corporation residing or located within the Philippines.

xxx xxx xxx

4. (a) All receipts of foreign exchange shall be sold daily to the Central Bank by those authorized to deal in foreign
exchange. All receipts of foreign exchange by any person, firm, partnership, association, branch office, agency, company
or other unincorporated body or corporation shall be sold to the authorized agents of the Central Bank by the recipients
within one business day following the receipt of such foreign exchange. Any person, firm, partnership, association, branch
office, agency, company or other unincorporated body or corporation, residing or located within the Philippines, who
acquires on and after the date of this Circular foreign exchange shall not, unless licensed by the Central Bank, dispose of
such foreign exchange in whole or in part, nor receive less than its full value, nor delay taking ownership thereof except as
such delay is customary; Provided, further, That within one day upon taking ownership, or receiving payment, of foreign
exchange the aforementioned persons and entities shall sell such foreign exchange to designated agents of the Central
Bank.

xxx xxx xxx

8. Strict observance of the provisions of this Circular is enjoined; and any person, firm or corporation, foreign or
domestic, who being bound to the observance thereof, or of such other rules, regulations or directives as may hereafter
be issued in implementation of this Circular, shall fail or refuse to comply with, or abide by, or shall violate the same, shall
be subject to the penal sanctions provided in the Central Bank Act.

xxx xxx xxx

Paragraph 4 (a) above was modified by Section 6 of Central Bank Circular No. 281, Regulations on Foreign Exchange,
promulgated on November 26, 1969 by limiting its coverage to Philippine residents only. Section 6 provides:

SEC. 6. All receipts of foreign exchange by any resident person, firm, company or corporation shall be sold to authorized
agents of the Central Bank by the recipients within one business day following the receipt of such foreign exchange. Any
resident person, firm, company or corporation residing or located within the Philippines, who acquires foreign exchange
shall not, unless authorized by the Central Bank, dispose of such foreign exchange in whole or in part, nor receive less
than its full value, nor delay taking ownership thereof except as such delay is customary; Provided, That, within one
business day upon taking ownership or receiving payment of foreign exchange the aforementioned persons and entities
shall sell such foreign exchange to the authorized agents of the Central Bank.

As earlier stated, the document and the subsequent acts of the parties show that they intended the bank to safekeep the
foreign exchange, and return it later to Zshornack, who alleged in his complaint that he is a Philippine resident. The
parties did not intended to sell the US dollars to the Central Bank within one business day from receipt. Otherwise, the
contract of depositum would never have been entered into at all.

Since the mere safekeeping of the greenbacks, without selling them to the Central Bank within one business day from
receipt, is a transaction which is not authorized by CB Circular No. 20, it must be considered as one which falls under the
general class of prohibited transactions. Hence, pursuant to Article 5 of the Civil Code, it is void, having been executed
against the provisions of a mandatory/prohibitory law. More importantly, it affords neither of the parties a cause of action
against the other. "When the nullity proceeds from the illegality of the cause or object of the contract, and the act
constitutes a criminal offense, both parties being in pari delicto, they shall have no cause of action against each other. . ."
[Art. 1411, New Civil Code.] The only remedy is one on behalf of the State to prosecute the parties for violating the law.
We thus rule that Zshornack cannot recover under the second cause of action.

3. Lastly, we find the P8,000.00 awarded by the courts a quo as damages in the concept of litigation expenses and
attorney's fees to be reasonable. The award is sustained.

WHEREFORE, the decision appealed from is hereby MODIFIED. Petitioner is ordered to restore to the dollar savings
account of private respondent the amount of US$1,000.00 as of October 27, 1975 to earn interest at the rate fixed by the
bank for dollar savings deposits. Petitioner is further ordered to pay private respondent the amount of P8,000.00 as
damages. The other causes of action of private respondent are ordered dismissed.

SO ORDERED.

Gutierrez, Jr. and Bidin, JJ., concur.

Fernan, C.J., took no part

Feliciano, J., concur in the result.

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UNITED STATES SUPREME COURT JURISPRUDENCE

PHILIPPINE SUPREME COURT JURISPRUDENCE

Home > Philippine Supreme Court Resolutions > Year 2005 > Triple V vs Fil Merchants : 160544 : February 21, 2005 : Atty
Abjelina-Soriano : Third Division:

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[G.R. No. 160544. February 21, 2005]

TRIPLE-V vs. FILIPINO MERCHANTS

THIRD DIVISION

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated FEB 21 2005.

G.R. No. 160544 (Triple-V Food Services, Inc. vs. Filipino Merchants Insurance Company, Inc.)

Assailed in this petition for review on certiorari is the decision[1]cralaw dated October 21, 2003 of the Court of Appeals in
CA-G.R. CV No. 71223, affirming an earlier decision of the Regional Trial Court at Makati City, Branch 148, in its Civil Case
No. 98-838, an action for damages thereat filed by respondent Filipino Merchants Insurance, Company, Inc., against the
herein petitioner, Triple-V Food Services, Inc.

On March 2, 1997, at around 2:15 o'clock in the afternoon, a certain Mary Jo-Anne De Asis (De Asis) dined at petitioner's
Kamayan Restaurant at 15 West Avenue, Quezon City. De Asis was using a Mitsubishi Galant Super Saloon Model 1995
with plate number UBU 955, assigned to her by her employer Crispa Textile Inc. (Crispa). On said date, De Asis availed of
the valet parking service of petitioner and entrusted her car key to petitioner's valet counter. A corresponding parking
ticket was issued as receipt for the car. The car was then parked by petitioner's valet attendant, a certain Madridano, at
the designated parking area. Few minutes later, Madridano noticed that the car was not in its parking slot and its key no
longer in the box where valet attendants usually keep the keys of cars entrusted to them. The car was never recovered.
Thereafter, Crispa filed a claim against its insurer, herein respondent Filipino Merchants Insurance Company, Inc. (FMICI).
Having indemnified Crispa in the amount of P669.500 for the loss of the subject vehicle, FMICI, as subrogee to Crispa's
rights, filed with the RTC at Makati City an action for damages against petitioner Triple-V Food Services, Inc., thereat
docketed as Civil Case No. 98-838 which was raffled to Branch 148.

In its answer, petitioner argued that the complaint failed to aver facts to support the allegations of recklessness and
negligence committed in the safekeeping and custody of the subject vehicle, claiming that it and its employees wasted no
time in ascertaining the loss of the car and in informing De Asis of the discovery of the loss. Petitioner further argued that
in accepting the complimentary valet parking service, De Asis received a parking ticket whereunder it is so provided that
"[Management and staff will not be responsible for any loss of or damage incurred on the vehicle nor of valuables
contained therein", a provision which, to petitioner's mind, is an explicit waiver of any right to claim indemnity for the loss
of the car; and that De Asis knowingly assumed the risk of loss when she allowed petitioner to park her vehicle, adding
that its valet parking service did not include extending a contract of insurance or warranty for the loss of the vehicle.
During trial, petitioner challenged FMICI's subrogation to Crispa's right to file a claim for the loss of the car, arguing that
theft is not a risk insured against under FMICI's Insurance Policy No. PC-5975 for the subject vehicle.

In a decision dated June 22, 2001, the trial court rendered judgment for respondent FMICI, thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff (FMICI) and against the
defendant Triple V (herein petitioner) and the latter is hereby ordered to pay plaintiff the following:

1. The amount of P669,500.00, representing actual damages plus compounded (sic);

2. The amount of P30,000.00 as acceptance fee plus the amount equal to 25% of the total amount due as attorney's fees;

3. The amount of P50,000.00 as exemplary damages;

4. Plus, cost of suit.

Defendant Triple V is not therefore precluded from taking appropriate action against defendant Armando Madridano.

SO ORDERED.

Obviously displeased, petitioner appealed to the Court of Appeals reiterating its argument that it was not a depositary of
the subject car and that it exercised due diligence and prudence in the safe keeping of the vehicle, in handling the car-
napping incident and in the supervision of its employees. It further argued that there was no valid subrogation of rights
between Crispa and respondent FMICI.

In a decision dated October 21, 2003,[2]cralaw the Court of Appeals dismissed petitioner's appeal and affirmed the
appealed decision of the trial court, thus:

WHEREFORE, based on the foregoing premises, the instant appeal is hereby DISMISSED. Accordingly, the assailed June 22,
2001 Decision of the RTC of Makati City - Branch 148 in Civil Case No. 98-838 is AFFIRMED.

SO ORDERED.

In so dismissing the appeal and affirming the appealed decision, the appellate court agreed with the findings and
conclusions of the trial court that: (a) petitioner was a depositary of the subject vehicle; (b) petitioner was negligent in its
duties as a depositary thereof and as an employer of the valet attendant; and (c) there was a valid subrogation of rights
between Crispa and respondent FMICI.
Hence, petitioner's present recourse.

We agree with the two (2) courts below.

When De Asis entrusted the car in question to petitioners valet attendant while eating at petitioner's Kamayan
Restaurant, the former expected the car's safe return at the end of her meal. Thus, petitioner was constituted as a
depositary of the same car. Petitioner cannot evade liability by arguing that neither a contract of deposit nor that of
insurance, guaranty or surety for the loss of the car was constituted when De Asis availed of its free valet parking service.

In a contract of deposit, a person receives an object belonging to another with the obligation of safely keeping it and
returning the same.[3]cralaw A deposit may be constituted even without any consideration. It is not necessary that the
depositary receives a fee before it becomes obligated to keep the item entrusted for safekeeping and to return it later to
the depositor.

Specious is petitioner's insistence that the valet parking claim stub it issued to De Asis contains a clear exclusion of its
liability and operates as an explicit waiver by the customer of any right to claim indemnity for any loss of or damage to the
vehicle.

The parking claim stub embodying the terms and conditions of the parking, including that of relieving petitioner from any
loss or damage to the car, is essentially a contract of adhesion, drafted and prepared as it is by the petitioner alone with
no participation whatsoever on the part of the customers, like De Asis, who merely adheres to the printed stipulations
therein appearing. While contracts of adhesion are not void in themselves, yet this Court will not hesitate to rule out blind
adherence thereto if they prove to be one-sided under the attendant facts and circumstances.[4]cralaw

Hence, and as aptly pointed out by the Court of Appeals, petitioner must not be allowed to use its parking claim stub's
exclusionary stipulation as a shield from any responsibility for any loss or damage to vehicles or to the valuables contained
therein. Here, it is evident that De Asis deposited the car in question with the petitioner as part of the latter's enticement
for customers by providing them a safe parking space within the vicinity of its restaurant. In a very real sense, a safe
parking space is an added attraction to petitioner's restaurant business because customers are thereby somehow assured
that their vehicle are safely kept, rather than parking them elsewhere at their own risk. Having entrusted the subject car
to petitioner's valet attendant, customer De Asis, like all of petitioner's customers, fully expects the security of her car
while at petitioner's premises/designated parking areas and its safe return at the end of her visit at petitioner's
restaurant.

Petitioner's argument that there was no valid subrogation of rights between Crispa and FMICI because theft was not a risk
insured against under FMICI's Insurance Policy No. PC-5975 holds no water.

Insurance Policy No. PC-5975 which respondent FMICI issued to Crispa contains, among others things, the following item:
"Insured's Estimate of Value of Scheduled Vehicle- P800.000".[5]cralaw On the basis of such item, the trial court
concluded that the coverage includes a full comprehensive insurance of the vehicle in case of damage or loss. Besides,
Crispa paid a premium of P10,304 to cover theft. This is clearly shown in the breakdown of premiums in the same
policy.[6]cralaw Thus, having indemnified CRISPA for the stolen car, FMICI, as correctly ruled by the trial court and the
Court of Appeals, was properly subrogated to Crispa's rights against petitioner, pursuant to Article 2207 of the New Civil
Code[7].

Anent the trial court's findings of negligence on the part of the petitioner, which findings were affirmed by the appellate
court, we have consistently ruled that findings of facts of trial courts, more so when affirmed, as here, by the Court of
Appeals, are conclusive on this Court unless the trial court itself ignored, overlooked or misconstrued facts and
circumstances which, if considered, warrant a reversal of the outcome of the case.[8]cralaw This is not so in the case at
bar. For, we have ourselves reviewed the records and find no justification to deviate from the trial court's findings.

WHEREFORE, petition is hereby DENIED DUE COURSE.

SO ORDERED.

Very truly yours,

(Sgd.) LUCITA ABJELINA-SORIANO

Clerk of Court

Endnotes:

[1]cralaw Penned by Associale Justice Elvi John S. Asuncion and concurred in by Associate Justices Renato C. Dacudao and
Lucas P. Bersamin of the Special Fourth Division.

[2]cralaw Rollo, pp. 52-58.

[3]cralaw Calibo vs. Court of Appeals, 350 SCRA 427 [2001] citing Article 1962 of the New Civil Code.

[4]cralaw Ermitano vs. Court of Appeals, 306 SCRA 218 [ 1999].

[5]cralaw Rollo, p. 633.

[6]cralaw Ibid
[7]cralaw Article 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall
be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. xxx

[8]cralaw C & S Fishfarm Corporation vs. Court of Appeals, et al, 394 SCRA 82 [2002]; Peñalosa vs. Santos, 363 SCRA 545
[2001]; Marvin Mercado vs. People of the Philippines, 392 SCRA 687 [2002].

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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
complaint2 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 decision5 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 reconsideration7 having been denied, petitioner appealed from the adverse decision to the respondent
Court of Appeals which docketed the appeal as CA-G.R. CV No. 15150. Petitioner urged the respondent Court to reverse
the challenged decision because the trial court erred in (a) absolving the respondent Bank from liability from the loss, (b)
not declaring as null and void, for being contrary to law, public order and public policy, the provisions in the contract for
lease of the safety deposit box absolving the Bank from any liability for loss, (c) not concluding that in this jurisdiction, as
well as under American jurisprudence, the liability of the Bank is settled and (d) awarding attorney's fees to the Bank and
denying the petitioner's prayer for nominal and exemplary damages and attorney's fees.8

In its Decision promulgated on 4 July 1989,9 respondent Court affirmed the appealed decision principally on the theory
that the contract (Exhibit "2") executed by the petitioner and respondent Bank is in the nature of a contract of lease by
virtue of which the petitioner and its co-renter were given control over the safety deposit box and its contents while the
Bank retained no right to open the said box because it had neither the possession nor control over it and its contents. As
such, the contract is governed by Article 1643 of the Civil Code 10 which provides:

Art. 1643. In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing
for a price certain, and for a period which may be definite or indefinite. However, no lease for more than ninety-nine
years shall be valid.

It invoked Tolentino vs. Gonzales 11 — which held that the owner of the property loses his control over the property
leased during the period of the contract — and Article 1975 of the Civil Code which provides:

Art. 1975. The depositary holding certificates, bonds, securities or instruments which earn interest shall be bound to
collect the latter when it becomes due, and to take such steps as may be necessary in order that the securities may
preserve their value and the rights corresponding to them according to law.

The above provision shall not apply to contracts for the rent of safety deposit boxes.

and then concluded that "[c]learly, the defendant-appellee is not under any duty to maintain the contents of the box. The
stipulation absolving the defendant-appellee from liability is in accordance with the nature of the contract of lease and
cannot be regarded as contrary to law, public order and public policy." 12 The appellate court was quick to add, however,
that under the contract of lease of the safety deposit box, respondent Bank is not completely free from liability as it may
still be made answerable in case unauthorized persons enter into the vault area or when the rented box is forced open.
Thus, as expressly provided for in stipulation number 8 of the contract in question:

8. The Bank shall use due diligence that no unauthorized person shall be admitted to any rented safe and beyond
this, the Bank will not be responsible for the contents of any safe rented from it. 13
Its motion for reconsideration 14 having been denied in the respondent Court's Resolution of 28 August 1989, 15
petitioner took this recourse under Rule 45 of the Rules of Court and urges Us to review and set aside the respondent
Court's ruling. Petitioner avers that both the respondent Court and the trial court (a) did not properly and legally apply the
correct law in this case, (b) acted with grave abuse of discretion or in excess of jurisdiction amounting to lack thereof and
(c) set a precedent that is contrary to, or is a departure from precedents adhered to and affirmed by decisions of this
Court and precepts in American jurisprudence adopted in the Philippines. It reiterates the arguments it had raised in its
motion to reconsider the trial court's decision, the brief submitted to the respondent Court and the motion to reconsider
the latter's decision. In a nutshell, petitioner maintains that regardless of nomenclature, the contract for the rent of the
safety deposit box (Exhibit "2") is actually a contract of deposit governed by Title XII, Book IV of the Civil Code of the

Philippines. 16 Accordingly, it is claimed that the respondent Bank is liable for the loss of the certificates of title pursuant
to Article 1972 of the said Code which provides:

Art. 1972. The depositary is obliged to keep the thing safely and to return it, when required, to the depositor, or to
his heirs and successors, or to the person who may have been designated in the contract. His responsibility, with regard to
the safekeeping and the loss of the thing, shall be governed by the provisions of Title I of this Book.

If the deposit is gratuitous, this fact shall be taken into account in determining the degree of care that the depositary must
observe.

Petitioner then quotes a passage from American Jurisprudence 17 which is supposed to expound on the prevailing rule in
the United States, to wit:

The prevailing rule appears to be that where a safe-deposit company leases a safe-deposit box or safe and the lessee
takes possession of the box or safe and places therein his securities or other valuables, the relation of bailee and 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 23
pertinently provides:

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

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

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.

# Footnotes

1 Rollo, 102.
2 Annex "A" of Petition; Rollo, 28-32.

3 Annex "B", Id.; Id., 33-35.

4 Annex "C", Id.; Id., 36.

5 Annex "D" of Petition; Rollo, 38-54. Per Judge Cicero C. Jurado.

6 Id., 54.

7 Annex "E", Id.; Id., 55-68.

8 Rollo, 100-101.

9 Per Associate Justice Felipe B. Kalalo, concurred in by Associate Justices Bienvenido C. Ejercito and Luis L. Victor.
Annex "I" of Petition; Id., 89-105.

10 Citing PARAS, E.L., Civil Code of the Philippines, vol. 5, 1982 ed., 717.

11 50 Phil. 558 [1927].

12 Rollo, 103.

13 Id.

14 Annex "J" of Petition; Rollo, 106-113.

15 Annex "K", Id.; Id., 114-115.

16 Articles 1962 to 2009, inclusive.

17 10 Am Jur 2d., 440-441.

18 While the citation is 5 Words and Phrases Permanent Edition, 71-72, We failed to locate this in the said work and
volume.

19 Title XII, Book IV, Civil Code.

20 PARAS, E.L., op. cit., and Tolentino vs. Gonzales, supra.

21 10 Am Jur 2d., 441.

22 10 Am Jur 2d., 442-443.

23 R.A. No. 337, as amended.

24 "Agents" refers to paragraphs (b) and (c) while "depositories" refers to paragraph (a).

25 Article 1969, Civil Code.

26 Article 1170, Id.

27 Article 1173, Id.

28 Supra.

29 Supra.

30 10 Am Jur 2d., 448.

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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 PEÑA, administrator of the estate of Father Agustin de la Peña, 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 Peña was the duly authorized representative of the plaintiff to receive the legacy.
The defendant is the administrator of the estate of Father De la Peña.

In the year 1898 the books Father De la Peña, 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 Peña 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 Peña 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 Peña'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 Peña 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 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 Peña 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 Peña 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 Peña 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 Peña mixed this trust fund with his own and deposited the whole in the bank to his personal account or credit,
he by this act stamped on the said fund his own private marks and unclothed it of all the protection it had. If this money
had been deposited in the name of De la Peña 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 Peña would attempt to strip the fund of its identity, nor had he said or
done anything which tended to relieve De la Peña from the legal reponsibility 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 Peña cannot be doubted. But this court in the majority opinion says: "The fact that he
(Agustin de la Peña) 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 Peña, 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 Peña 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 Peña
had as a matter of fact been using the money in violation of the trust imposed in him. lawph!1.net
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.

The Lawphil Project - Arellano Law Foundation

Constitution Statutes Executive Issuances Judicial Issuances Other Issuances Jurisprudence International Legal
Resources AUSL ExclusiveSECOND 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 Malacaňang 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.

[1] Rollo, p. 38. Decision penned by Justice Bernardo LL. Salas and concurred in by Justices Pedro A. Ramirez and Ma.
Alicia Austria-Martinez.

[2] Id. at 118. Decision penned by Judge Gerardo M.S. Pepito.

[3] Id. at 119.

[4] Id. at 120.

[5] Ibid.

[6] Ibid.

[7] Ibid.

[8] Ibid.

[9] Ibid.

[10] Id. at 121 and 41. TSN, 9 September 1991, p. 10.

[11] Id. at 42.

[12] Ibid.

[13] Id. at 121.

[14] Exhibit V.
[15] Exh. W.

[16] Rollo, p. 122.

[17] Ibid.

[18] Ibid.

[19] Id. at 123.

[20] Records, p. 52.

[21] Rollo, p. 125.

[22] Exh. CC. Records (Exhibit Folder), pp. 146-147. The Itemized Claims for Damages allegedly incurred by McLoughlin:

I. CLAIMS FOR STOLEN MONIES AND PERSONAL PROPERTY:

A. US$2,000.00

US$4,500.00..P153,200.00

B. US$8,000.00 cash and US$1,200.00 with jewelry257,600.00

II. AIR FARES from Sydney to Manila and

back (11trips up to date of testimony).308,880.00

III. PAYMENTS TO TROPICANA APARTMENT HOTEL336,207.05

IV. PAYMENTS TO ECHELON TOWER......152,683.57

V. Taxes, fees, transportation from residence to

Sydney airport and from MIA to hotel in Manila

and vice versa..179,863.20

VI. MERALCO POWER EXPENSES....7,811.94

VII. PLDT EXPENSES(overseas telephone calls)

Paid in the Philippines.....5,597.68

Paid in Australia....166,795.20

VIII. EXPENSES FOR FOOD AND MAINTENANCE..356,400.00

IX. BUSINESS/OPPORTUNITY LOSS IN SYDNEY

WHILE IN THE PHILIPPINES BECAUSE OF CASE..2,160,000.00

X. MORAL DAMAGES........500,000.00

XI. EXEMPLARY DAMAGES...350,000.00

XII. LITIGATION EXPENSES.... 200,000.00

TOTAL. . P5,135,038.64

ATTORNEYS FEES...200,000.00

Plus, appearance

fee of P3,000.00 for

every court appearance.

[23] Rollo, pp. 141-142.

[24] Id. at 127.

[25] Ibid.

[26] Id. at 134.

[27] Id. at 135.

[28] Id. at 138.

[29] Id. at 63-64.

[30] Id. at 19-20.

[31] People v. Andales, G.R. Nos. 152624-25, February 5, 2004; People v. Fucio, G.R. No. 151186-95, February 13, 2004;
People v. Preciados, G.R. No. 122934, January 5, 2001, 349 SCRA 1; People v. Toyco, Sr., G.R. No. 138609, January 17,
2001, 349 SCRA 385; People v. Cabareňo, G.R. No. 138645, January 16, 2001, 349 SCRA 297; People v. Valdez, G.R. No.
128105, January 24, 2001, 350 SCRA 189.

[32] People v. Dimacuha, G.R. Nos. 152592-93, February 13, 2004; People v. Yang, G.R. No. 148077, February 16, 2004;
People v. Betonio, G.R. No. 119165, September 26, 1997, 279 SCRA 532; People v. Cabel, G.R. No. 121508, 282 SCRA 410.

[33] Id. at 125.

[34] Id. at 128.

[35] Campo, et al. v. Camarote and Gemilga, 100 Phil. 459 (1956).

[36] Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary.
[37] 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.

Art. 1999. The hotel-keeper is liable for the vehicles, animals and articles which have been introduced or placed in the
annexes of the hotel.

Art. 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal
property of the guests caused by the servants or employees of the keepers of hotels or inns as well as by strangers; but
not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the
keeper of the hotel or inn shall be considered in determining the degree of care required of him.

Art. 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the
use of arms or through an irresistible force.

[38] De Los Santos v. Tan Khey, 58 O.G. No. 45-53, p. 7693.

[39] Ibid at 7694-7695.

[40] Exh. W.

[41] Art. 2000, New Civil Code.

[42] Art. 2001, supra at note 39.

[43] Art. 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family,
servants or visitors, or if the loss arises from the character of the things brought into the hotel.

[44] 26 C.J.S. 731 citing Griffith v. Zipperwick, 28 Ohio St. 388.

[45] Rollo, pp. 31-32.

[46] Air France v. Carrascoso, et al., 124 Phil. 722 (1966).

[47] Zagala v. Jimenez, G.R. No. 33050, July 23, 1987, 152 SCRA 147. According to the case of Phoenix Assurance Company
v. Macondray & Co., Inc., (64 SCRA 15) a judgment awarding an amount in U.S. dollars may be paid with its equivalent
amount in local currency based on the conversion rate prevailing at the time of payment. If the parties cannot agree on
the same, the trial court should determine such conversion rate. Needless to say, the judgment debtor may simply satisfy
said award by paying in full the amount in U.S. dollars.

[48] Exh. V.

[49] Exh. CC, p. 146.

[50] Id. The Court of Appeals noted that during his stay in the Philippines, McLoughlins time was not totally devoted to
following up his claim as he had business arrangements to look into.

[51] Ibid.

[52] Ibid.

[53] Ibid. Expenses for power and air-conditioning were separate from room payment.

[54] Ibid. Business losses were rejected because of lack of proof.

[55] Prudenciado v. Alliance Transport System, Inc., G.R. No. 33836, March 16, 1987.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:

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.