CA Agro-Industrial Development Corp v. CA and Security Bank & Trust Company (1993) Davide, Jr., J.

Facts:

CA Agro (through its President, Aguirre) bought 2 parcels of land from Sps Pugao for P350k. It paid P75k as downpayment, covered by 3 postdated checks. The terms of their agreement were: o Titles will be transferred upon full payment o The owners copies of the titles will be deposited in a safety deposit box with any bank o The titles can only be withdrawn by upon their joint signatures They rented a safety deposit bank from Security Bank and signed a contract of lease with the bank. It contained the conditions: o #13: bank is not a depositary of the contents and does not have possession or control of them o #14: bank assumes no liability Both were given renters keys and a guard key remained in the possession of the bank. The safety box has 2 keyholes, and both the renter and guard keys are needed to open it. Later on, a certain Mrs. Ramos offered to buy from CA Agro (the buyer in the orig Agreement) the 2 lots to a profit of P100 per sq mtr. Thats a total P280k for the entire property. Mrs. Ramos demanded the execution of a deed of sale. So, CA Agro and Pugao went to the bank and when the box was opened, the titles were not there. Because of the delay in the title transfer, Mrs. Ramos withdrew her offer. CA Agro claims for the loss of expected profit from the bank. CFI Pasig held in favour of the bank. So did the CA. CA says the relationship is lessor-lessee

Issue/Held: Is the bank liable? NO Is the contractual relation between a commercial bank andanother party in a contract of a rent of a safety deposit box wrt the contents, one of bailor-bailee, or lessor-lessee? BAILOR-BAILEE Ratio:

The contract for the rent of the safety deposit box is not an ordinary contract of lease as defined in Article 1643 (bec the full and absolute possession and control of the safety deposit box was not given to the renters) BUT it is also not fully described that it is a contract of deposit. It is a special kind of deposit. SC agrees with CA Agro that under American Jurisprudence, the prevailing rule is that the relation between a bank renting out a safe deposit and the customer wrt the contents of the box is one of bailor-bailee, the bailment being for hire and mutual benefit. In Philippine jurisdiction, we adopt the American prevailing rule bec it is clear from our statute: Sec 27 Gen Banking Act: o 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 o The banks shall perform the services permitted under subsections (a), (b) and (c) of this section as depositories or as agents The primary function is still within the parameters of a contract of deposit (receiving in custody of funds, docs, etc). The renting out of the safety deposit boxes is not independent from, but in conjunction with, this principal function. A contract of deposit may be entered into orally or in writing and, pursuant to Article 1306: o The parties may establish 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. In this case, 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 (Obligations). o The depositary would be liable if it is found guilty of fraud, negligence, delay or contravention of the tenor of the agreement. o In the absence of any stipulation, that of a good father of a family is to be observed. So, any stipulation exempting the depositary from liability arising from the loss of the thing deposited bec of fraud, negligence or delay would be void bec it is contrary to law and public policy. the contract with the bank #13 and #14 are void #13 is wrong in saying it has no control or possession because the safe box is in the banks premises and under its absolute control & bank keeps the guard key. Petition should be dismissed, not bec of grounds stated by the CA but bec no competent proof was presented to show that the bank was aware of the agreement between the 2 parties that the title could only be withdrawn upon both of their signatures. Also, no evidence that loss was bec of fraud or negligence of the respondent Bank.