CREDIT TRANSACTIONS DIGEST

REPUBLIC vs BAGTAS
Laws Applicable: Commodatum
Lessons Applicable:
FACTS:
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May 8, 1948: Jose V. Bagtas borrowed from the Republic of the Philippines
through the Bureau of Animal Industry three bulls: a Red Sindhi with a book value of
P1,176.46, a Bhagnari, of P1,320.56 and a Sahiniwal, of P744.46, for a period of 1
year for breeding purposes subject to a breeding fee of 10% of the book value of the
bulls
May 7, 1949: Jose requested for a renewal for another year for the three bulls
but only one bull was approved while the others are to be returned
March 25, 1950: He wrote to the Director of Animal Industry that he would pay
the value of the 3 bulls
October 17, 1950: he reiterated his desire to buy them at a value with a
deduction of yearly depreciation to be approved by the Auditor General.
October 19, 1950: Director of Animal Industry advised him that either the 3
bulls are to be returned or their book value without deductions should be paid not
later than October 31, 1950 which he was not able to do
December 20, 1950: An action at the CFI was commenced against Jose
praying that he be ordered to return the 3 bulls or to pay their book value of
P3,241.45 and the unpaid breeding fee of P199.62, both with interests, and costs
July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete and Manalo,
answered that because of the bad peace and order situation in Cagayan Valley,
particularly in the barrio of Baggao, and of the pending appeal he had taken to the
Secretary of Agriculture and Natural Resources and the President of the Philippines,
he could not return the animals nor pay their value and prayed for the dismissal of
the complaint.
RTC: granted the action
December 1958: granted an ex-parte motion for the appointment of a special
sheriff to serve the writ outside Manila
December 6, 1958: Felicidad M. Bagtas, the surviving spouse of Jose who died
on October 23, 1951 and administratrix of his estate, was notified
January 7, 1959: she file a motion that the 2 bulls where returned by his son
on June 26, 1952 evidenced by recipt and the 3rd bull died from gunshot wound
inflicted during a Huk raid and prayed that the writ of execution be quashed and that
a writ of preliminary injunction be issued.
ISSUE: W/N the contract is commodatum and NOT a lease and the estate should be
liable for the loss due to force majeure due to delay.
HELD: YES. writ of execution appealed from is set aside, without pronouncement as
to costs
If contract was commodatum then Bureau of Animal Industry retained

ownership or title to the bull it should suffer its loss due to force majeure. A contract
of commodatum is essentially gratuitous. If the breeding fee be considered a
compensation, then the contract would be a lease of the bull. Under article 1671 of
the Civil Code the lessee would be subject to the responsibilities of a possessor in
bad faith, because she had continued possession of the bull after the expiry of the
contract. And even if the contract be commodatum, still the appellant is liable if he
keeps it longer than the period stipulated
the estate of the late defendant is only liable for the sum of P859.63, the
value of the bull which has not been returned because it was killed while in the
custody of the administratrix of his estate
Special proceedings for the administration and settlement of the estate
of the deceased Jose V. Bagtas having been instituted in the CFI, the money judgment
rendered in favor of the appellee cannot be enforced by means of a writ of execution
but must be presented to the probate court for payment by the appellant, the
administratrix appointed by the court.
Naguiat v. CA and Queano
G.R. No. 118375

October 3, 2003

FACTS:
Queao applied with Naguiat for a loan in the amount of P200,000.00, which Naguiat
granted. On 11 August 1980, Naguiat indorsed to Queao Associated Bank Check
(dated 11 August 1980) for the amount of P95,000.00 and also issued her own
Filmanbank Check, to the order of Queao, also dated 11 August 1980 and for the
amount of P95,000.00 to constitute the loan granted.To secure the loan, Queao
executed a Deed of Real Estate Mortgage dated 11 August 1980 in favor of Naguiat,
and surrendered to the latter the owners duplicates of the titles covering the
mortgaged properties. On the same day, the mortgage deed was notarized, and
Queao issued to Naguiat a promissory note for the amount of the loan with interest
at 12% per annum, payable on 11 September 1980. Queao also issued a Security
Bank and Trust Company check, postdated 11 September 1980, for the amount of
P200,000.00.
Upon presentment on its maturity date, the Security Bank check was dishonored for
insufficiency of funds.
Demand letter were sent to Queano settlement of the loan from Naguiat. Shortly
thereafter, Queao and one Ruby Ruebenfeldt (Ruebenfeldt) met with Naguiat.
Queao told Naguiat that she did not receive the proceeds of the loan, adding that
the checks were retained by Ruebenfeldt, who purportedly was Naguiats agent.
Naguiat applied for the extrajudicial foreclosure of the mortgage and the foreclosure
sale was scheduled. Three days before the scheduled sale, Queao filed the case to
RTC seeking the annulment of the mortgage deed.
ISSUE:

Whether or not the contract of loan has been perfected

Whether or not Ruebenfeldt is Naguiats agent
HELD:
1. There is no perfected contract of loan
Absolutely no evidence was submitted by Naguiat that the checks she issued or
endorsed were actually encashed or deposited. The mere issuance of the checks did
not result in the perfection of the contract of loan. For the Civil Code provides that
the delivery of bills of exchange and mercantile documents such as checks shall
produce the effect of payment only when they have been cashed. It is only after the
checks have produced the effect of payment that the contract of loan may be
deemed perfected.
A loan contract is a real contract, not consensual, and, as such, is perfected only
upon the delivery of the object of the contract.
2. Ruebenfeldt is Naguiats agent
The existence of an agency relationship between Naguiat and Ruebenfeldt is
supported by ample evidence. Ruebenfeldt was not a stranger or an unauthorized
person. Naguiat instructed Ruebenfeldt to withhold from Queao the checks she
issued or indorsed to Queao, pending delivery by the latter of additional collateralIt
was also Ruebenfeldt who accompanied Queao in her meeting with Naguiat and on
that occasion, on her own and without Queao asking for it, Reubenfeldt actually
drew a check for the sum ofP220,000.00 payable to Naguiat, to cover for Queaos
alleged liability to Naguiat under the loan agreement.

Apparently, the existence of agency by estoppel considered that at the very least, as
a consequence of the interaction between Naguiat and Ruebenfeldt, Queao got the
impression that Ruebenfeldt was the agent of Naguiat, but Naguiat did nothing to
correct Queaos impression. In that situation, the rule is clear. One who clothes
another with apparent authority as his agent, and holds him out to the public as such,
cannot be permitted to deny the authority of such person to act as his agent, to the
prejudice of innocent third parties dealing with such person in good faith, and in the
honest belief that he is what he appears to be.

CALDERON vs. PEOPLE

Facts:
Elizabeth Eusebio-Calderon was charged by her aunt Teresita Eusebio, Amelia
Casanova and cousin Manolito Eusebio with three count Estafa.

According to private complainants, petitioner assured them that the checks

will be honored upon maturity. They gave her the money because she showed them
her pieces of jewelry which convinced them that she has the ability to pay the loans.
In her defense, petitioner admits that she issued the checks but alleges that it
was not done to defraud her creditors.
After trial, the lower court rendered a joint decision finding petitioner guilty
beyond reasonable doubt, but ruled that her liability for the interest checks was
only civil, thereby acquitting the accused but indemnify to pay.
The Decision of the Court of Appeals which reversed and set aside the
Decision of the Regional Trial Court acquitting the accused but ordering her to pay
civil liability.
Issues: (1) Did the Court of Appeals err in finding the appellant civilly liable to
complainants with respect to the interest in the principal loan despite the
dismissal of the interest checks by the Regional Trial Court?
(2) Is the interest agreed upon by the parties usurious?
(3) Should the private respondents file a separate civil complaint for the claim
of Sum of Money?
Ruling:
The court finds the petition meritorious.
When petitioner appealed her conviction, the dismissal of the interest checks
by the lower court did not preclude the Court of Appeals from reviewing such decision
and modifying her civil liability. The appeal conferred upon the appellate court full
jurisdiction and rendered it competent to examine the records, revise the judgment
appealed from, increase the penalty and cite the proper provision of the penal law.
Under Article 29 of the Civil Code, when the accused in a criminal prosecution
is acquitted on the ground that his guilt has not been proven beyond reasonable
doubt, a civil action for damages for the same act or omission may be instituted. The
judgment of acquittal extinguishes the liability of the accused for damages only when
it includes a declaration that the fact from which the civil liability might arise did not
exist. Thus, Section 1, paragraph (a) of Rule 111 of the Rules of Court provides:
SECTION 1. Institution of criminal and civil actions. (a) When a criminal
action is instituted, the civil action for the recovery of civil liability arising from the
offense charged shall be deemed instituted with the criminal action unless the
offended party waives the civil action, reserves the right to institute it separately or
institutes the civil action prior to the criminal action.

An accused who is acquitted of Estafa may nevertheless be held civilly liable

where the facts established by the evidence so warrant. Petitioner Elizabeth Calderon
is clearly liable to the private respondents for the amount borrowed. The Court of
Appeals found that the former did not employ trickery or deceit in obtaining money
from the private complainants, instead, it concluded that the money obtained was
undoubtedly loans for which petitioner paid interest. The checks issued by petitioner
as payment for the principal loan constitute evidence of her civil liability which was
deemed instituted with the criminal action.
The civil liability of petitioner includes only the principal amount of the loan.
With respect to the interest checks she issued, the same are void. There was no
written proof of the payable interest except for the verbal agreement that the loan
shall earn 5% interest per month. Under Article 1956 of the Civil Code, an agreement
as to payment of interest must be in writing, otherwise it cannot be valid.
Consequently, no interest is due and the interest checks she issued should be
eliminated from the computation of her civil liability.
However, while there can be no stipulated interest, there can be legal interest
pursuant to Article 2209 of the Civil Code. It is elementary that in the absence of a
stipulation as to interest, the loan due will now earn interest at the legal rate of 12%
per annum.
In view of our ruling that there can be no stipulated interest in this case, there is no
need to pass upon the second issue of whether or not the interests were usurious.
The Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that
petitioner is ordered to pay Amelia Casanova,Teresita Eusebio, and Manolito Eusebio
as civil liability with legal interest of twelve percent (12%) per annum until its
satisfaction.
32.] Almeda vs CA 256 SCRA 292 (1996)
FACTS
1. in 1981, Philippine National Bank granted to petitioners, spouses Ponciano
Almeda and Eufemia Almeda, several loan/credit accommodations totaling
P18 Million payable in 6 years at an interest rate of 21% per annum
2. to secure the loan, spouses executed a Real Estate Mortgage Contract
covering a 3.5 K sq.m. parcel of land and the building erected thereon (the
Marvin Plaza) located at Pasong Tamo, Makati
3. a credit agreement with the ff pertinent terms and conditions:
interest of 21% per annum, payable semi- annually in arrears, the first
interest payment to become due and payable 6 months from date of
initial release of loan
the Bank reserves the right to increase the interest rate within the
limits allowed by law at any time depending on whatever policy it may
adopt in the future...the adjustment in the interest rate agreed upon

shall take effect on the effectivity date of the increase/decrease of the

maximum interest rate.
4. between 1981 and 1984 petitioners made several partial payments on the
loan totaling 7,735,004.66, a substantial portion of which was applied to
accrued interest
5. March 31, 1984 the bank, over petitioners protests, raised the interest rate to
28% pursuant to their credit agreement; interest rate increased to a high of
68% between March 1984 to Sept 1986 before the loan was to mature in
March 1988, the spouses filed a petition for declaratory relied with prayer for
a writ of preliminary injunction and TROspouses sought clarification as to
WON the PNB could unilaterally raise interest rates on the loan, pursuant to
the credit agreements escalation clause
6. lower court issued TRO; by this time the spouses were already in default of
their loan obligations---> invoking the law on Mandatory Foreclosure (Act 3135
and PD 385), PNB countered by ordering the extrajudicial foreclosure of
petitioners mortgaged properties----> lower court, however, issued a
supplemental writ of preliminary injunction
7. PNB posted a counterbond and the trial court dissolved the supplemental writ;
PNB once more set a new date for the foreclosure of Marvin Plaza
8. spouses tendered to PNB the amount of 40,142,518 pesos (interest calculated
at 21%); PNB refused to accept---> spouses formally consigned the amount
with the RTC which granted the writ of preliminary injunction enjoining the
foreclosure of Marvin Plaza
9. Judge Capulong refused to lift WPI
10. PNB filed petition for Certiorari, Prohibition and Mandamus with CA
11. On August 1993 CA rendered its decision setting aside the assailed orders and
upholding respondents right to foreclose the mortgaged property pursuant to
Act
12. 3135 and PD 385
ISSUES
1. WON PNB was authorized to raise its interest rates from 21% to as high as 68%
under the credit agreement
2. WON PNB is granted the authority to foreclose the Marvin Plaza under the
mandatory foreclosure provisions of PD385
HELD
1. Any contract which appears to be heavily weighed in favor of one of the parties so
as to lead to an unconscionable result is void. Any stipulation regarding the validity or
compliance of the contract which is left solely to the will of one of the parties, is
likewise, invalid.
2. In facilitating collection of debts through the automatic foreclosure provisions of PD
385, the government is, however, not exempted from observing basic principles of
law, and ordinary fairness and decency under the due process clause of the
Constitution.

Reasoning
1. the binding effect of any agreement between parties to a contract is premised on
two settled principles: that any obligation arising from contract has the force of law
between the parties; and that there must be mutuality between the parties based on
their essential equality
- PNB unilaterally altered the terms of its contract with petitioners by increasing the
interest rates on the loan without prior assent of the latter
- the manner of agreement is itself explicitly stipulated by the Civil Code in
Art.1956 no interest shall be due unless it has been expressly stipulated in
writing--- what has been stipulated in writing is that petitioners were bound merely
to pay 21% interest, subject to possible escalation or de-escalation when the
circumstances warrant it, it is within the limits allowed by law, and upon agreement
- in PNB v. CA, PNB was disauthorized from unilaterally raising the interest rate partly
because the increase violated the principle of mutuality of contracts expressed in
Art.1308 of the CC the contract must bind both contracting parties; its validity or
compliance cannot be left to the will of one of them
- increases were arbitrary
- escalation clauses in credit agreements are perfectly valid and do not contravene
public policy. However, they are still subject to laws and provisions governing
agreements between parties, which agreements implicitly incorporate provisions of
existing law
- the credit agreement requires that the increase be within the limits allowed by law
refers to legislative enactments not admin circulars (PNB relied on CB Circular No.
905) as shown in the credit agreement where there is a distinction made between
law or the Monetary Board Circulars
-Banco Filipino Savings and Mortgage Bank v. Navarro: distinction between a law and
an admin regulation is recognized in the Monetary Board guidelines; guidelines thus
presuppose that a Central Bank regulation is not within the term any law
- petitioners never agreed in writing to pay the increased interest rates demanded by
PNB
2. PD 385 was issued principally to guarantee that government financial institutions
would not be denied substantial cash inflows necessary to finance the governments
development projects by large borrowers who resort to litigation to prevent or delay
the governments collection of their debts or loans
- the dispute regarding the interest rate increases was never settled so the exact
amount of petitioners obligations could not be determined
- the foreclosure provisions could be validly invoked by PNB only after settlement of
the question involving the interest rate on the loan, and only after the spouses
refused to meet their obligations following such determination
- PNB cannot claim that there was no honest-to-goodness attempt on the part of the
spouses to settle their obligations
Disposition The unilateral and progressive increases imposed by PNB were null and
void. The decision and resolution of the CA is REVERSED AND SET ASIDE. The case is
remanded to RTC for further proceedings.

Carolyn M. Garcia
-vsRica Marie S. Thio
GR No. 154878, 16 March 2007
FACTS
Respondent Thio received from petitioner Garcia two crossed checks which
amount to US$100,000 and US$500,000, respectively, payable to the order of Marilou
Santiago. According to petitioner, respondent failed to pay the principal amounts of
the loans when they fell due and so she filed a complaint for sum of money and
damages with the RTC. Respondent denied that she contracted the two loans and
countered that it was Marilou Satiago to whom petitioner lent the money. She
claimed she was merely asked y petitioner to give the checks to Santiago. She issued
the checks for P76,000 and P20,000 not as payment of interest but to accommodate
petitioners request that respondent use her own checks instead of Santiagos.
RTC ruled in favor of petitioner. CA reversed RTC and ruled that there was no
contract of loan between the parties.
ISSUE
(1) Whether or not there was a contract of loan between petitioner and respondent.
(2) Who borrowed money from petitioner, the respondent or Marilou Santiago?
HELD
(1)
The Court held in the affirmative. A loan is a real contract, not consensual,
and as such I perfected only upon the delivery of the object of the contract. Upon
delivery of the contract of loan (in this case the money received by the debtor when
the checks were encashed) the debtor acquires ownership of such money or loan
proceeds and is bound to pay the creditor an equal amount. It is undisputed that the
checks were delivered to respondent.
(2)
However, the checks were crossed and payable not to the order of the
respondent but to the order of a certain Marilou Santiago. Delivery is the act by which
the res or substance is thereof placed within the actual or constructive possession or
control of another. Although respondent did not physically receive the proceeds of the
checks, these instruments were placed in her control and possession under an
arrangement whereby she actually re-lent the amount to Santiago.
Petition granted; judgment and resolution reversed and set aside.
First Fil-Sin Lending vs. Padillo
June 12, 2005
Facts: Padillo obtained two loans from First Fil-SinLending. For the first loan
(P500,000.00),, PAdillo made 13 monthly interst payments before she settled the
loan. For the second loan (P500,000.00), Padillo made 11 monthly interest payment
before she paid the loan. In sum, Padillo paid P792,500.00 for the first loan and
P775,000.00 for the second loan.

Padillo filed an action for sum of money against Fil-Sin alleging that she only
agreed to pay interest at the rates of 4.5% and 5% per annum, respectively, and not
4.5% and 5% per month, Padillo sought to recover the amounts she alledgely paid in
excess of her actual obligations.
Issue:
Held: the provision as to the annual interest rate is clear and requires no room for
interpretation. Nowhere was it stated that the interest rates shall be applied on a
monthly basis.
Thus, when the terms of the agreement are clear and explicit that they do not
justify an attempt to read into it any alleged intention of the parties, the terms are to
be understood literally as they appear on the face of the contract.
Notably, Fil-Sin even admitted thatit was solely responsible for the preparation
of he loan documents, and that it failed to correct the pro forma note p.a. to per
month . Since the mistake is exclusively attributed to the petitioner, the same
should be charged against it. This unilateral mistake cannot be taken against Padillo
who merely affixed her signature on the pro forma loan agreements. As between two
parties to a written agreement, the party who gave rise to the mistake or error in the
provisions of the same is estopped form asserting a contrary intention to that
contained therein.
Commonwealth Insurance Corporation vs. RCBC
January 29, 2004
Facts: RCBC granted two export loan lines, one, for P2,500,000.00 to Jigs
Manufacturing and, the other, for P1,000,000.00 to Elba Industries. JIGS and ELBA
which are sister corporations both drew from their respective credit lines, the former
in the amount of P2,499,992.00 and the latter for P998,033.37 plusP478,985.05 from
the case-to-case basis and trust receipts. These loans were evidenced by promissory
notes and secured by surety bonds executed by CIC.
Specifically, the surety bonds issued by CIC in favor of appellant RCBC to
secure the obligations of JIGS totaled P2,894,128.00, while that securing ELBAs
obligation was P1,570,000.00. Hence, the total face value of the surety bonds issued
by CIC wasP4,464,128.00.
JIGS and ELBA defaulted in the payment of their respective loans. RCBC made
a written demand on CIC to pay JIGs account to the full extent of the suretyship. A
similar demand was made on for CIC to pay ELBAs account to the full extent of the
suretyship. In response to those demands, CIC made several payments from in the
total amount of P2,000,000.00. There having been a substantial balance unpaid,
RCBC made a final demand for payment upon CIC but the latter ignored it. Thus,
appellant RCBC filed the Complaint for a Sum of Money against CIC.

Issue: Whether or not CIC should be held liable to pay legal interest over and above
its principal obligation under the surety bonds issued by it
Held: We have sustained the principle that if a surety upon demand fails to pay, he
can be held liable for interest, even if in thus paying, its liability becomes more than
the principal obligation. The increased liability is not because of the contract but
because of the default and the necessity of judicial collection.
CICs liability under the suretyship contract is different from its liability under
the law. There is no question that as a surety, petitioner should not be made to pay
more
than
its
assumed
obligation
under
the
surety
bonds.http://sc.judiciary.gov.ph/jurisprudence/2004/jan2004/130886.htm
_ftn13
However, it is clear from the above-cited jurisprudence that petitioners liability for
the payment of interest is not by reason of the suretyship agreement itself but
because of the delay in the payment of its obligation under the said agreement.
CIC admits having incurred in delay. Nonetheless, it insists that mere delay
does not warrant the payment of interest. Citing Section 244 of the Insurance
Code, petitioner submits that under the said provision of law, interest shall accrue
only when the delay or refusal to pay is unreasonable; that the delay in the payment
of its obligation is not unreasonable because such delay was brought about by
negotiations being made with RCBC for the amicable settlement of the case.
CICs contention that what prevented it from paying its obligation to RCBC is
the fact that the latter insisted on imposing interest and penalties over and above the
principal sum it seeks to recover is not plausible.
The issue of CICs payment of interest is a matter that is totally different from
its obligation to pay the principal amount covered by the surety bonds it issued.
Petitioner offered no valid excuse for not paying the balance of its principal obligation
when demanded by RCBC. Its failure to pay is, therefore, unreasonable. Thus, we find
no error in the appellate courts ruling that petitioner is liable to pay interest.
Medel vs. Court of Appeals
299 SCRA 481
Facts: Medel obtained several loans from Gonzales totalling P500,000. These were
evidenced by several promissory notes agreeing to an interest rate of 5.5% per
month with additional service charge of 2% per annum, and penalty charge of 1% per
month.. On maturity, Medel failed to pay their indebtedness. Hence, Gonzales filed
with the RTC of Bulacan a complaint for collection of the full amount of the loan.
RTC declared that the promissory notes were genuine, however, it ruled that
although the Usury Law had been repealed, the interest charged by Gonzales on the
loans was unconscionable. Hence, RTC applied the legal rate of interest for loan of
money,
goods
or
credit
of
12%
per
annum.
CA reversed the ruling of the RTC holding that the Usury Law had become legally
inexistent. Hence, this petition for review on certiorari.

Issue: Whether or not the interest rate stipulated upon was valid.
Held: NO. SC held that the stipulated rate of interest at 5.5% per month on the
P500,000 loan was excessive. However, it could not consider the rate usurious
because CB Circular No. 905 has expressly removed the interest ceilings prescribed
by the Usury Law and that said law is now legally inexistent.
CB Circular 905 did not repeal nor in any way amend the Usury Law but simply
suspended the latters effectivity. A CB Circular cannot repeal a law. Only a law can
repeal another law. By virtue of this circular, the Usury Law has been rendered
ineffective. Interest can no be charged as lender and borrower may agree upon.
Nevertheless, SC held that the interest of 5.5% per month, or 66% per annum,
stipulated upon by the parties in the promissory note was unconscionable, and
hence, contrary to morals, if not against the law. The stipulation is void. The courts
shall reduce equitably liquidated damages, whether intended as an indemnity or a
penalty if they are iniquitous or unconscionable.
SC ordered that the interest of 12% per annum and additional 1% a month
penalty charge as liquidated damages reasonable.
Pascual vs. Ramos
GR No. 144712
Facts: Petitioners executed a Deed of Absolute Sale with Right to Repurchase with
respondent, in consideration of Php 150,000. The petitioners did not exercise their
right to repurchase the property within the stipulated one-year period; hence,
respondent prayed that the title over the parcels of land be consolidated in his favor.
Petitioners aver that what was really executed between them and the respondent is a
real estate mortgage and that there was no agreement limiting the period within
which to exercise the right to repurchase and that they have even overpaid
respondent.
Respondent offered in evidence a document denominated as Sinumpaang
Salaysay which had a provision of an interest of 7% per month on the principal loan
of Php 150,000. RTC ruled that the transaction was actually a loan and the payment
was secured by a mortgage of the property, and that the petitioners had made
payments which resulted in overpayment as the interest was at 7% per annum.
Respondent filed an MR alleging that the interest stipulated in the Sinumpaang
Salaysay was 7% per month. The RTC ruled in favor of the respondent acknowledging
that the correct interest rate stipulated was 7% per month. However, the RTC
declared that the 7% per month interest is too burdensome and onerous and so the
court unilaterally reduced the interest rate from 7% per month to 5% per month.
Petitioners filed an MR alleging that either 5% or 7% per month is exorbitant,
unconscionable, unreasonable, usurious and inequitable.
Issue: Whether or not the interest of 5% month is exorbitant, unconscionable,
unreasonable, usurious and inequitable.

Held: NO. It is a basic principle in civil law that parties are bound by the stipulations
in the contracts voluntarily entered into by them. Parties are free to stipulate terms
and conditions which they deem convenient provided they are not contrary to law,
morals, good customs, public order, or public policy.
The interest rate of 7% per month was voluntarily agreed upon by RAMOS and
the PASCUALs. There is nothing from the records and, in fact, there is no allegation
showing that petitioners were victims of fraud when they entered into the agreement
with RAMOS. Neither is there a showing that in their contractual relations with
RAMOS, the PASCUALs were at a disadvantage on account of their moral dependence,
ignorance, mental weakness, tender age or other handicap, which would entitle them
to the vigilant protection of the courts as mandated by Article 24 of the Civil Code.
With the suspension of the Usury Law and the removal of interest ceiling, the
parties are free to stipulate the interest to be imposed on loans. Absent any evidence
of fraud, undue influence, or any vice of consent exercised by RAMOS on the
PASCUALs, the interest agreed upon is binding upon them. This Court is not in a
position to impose upon parties contractual stipulations different from what they
have agreed upon.
Imperial vs. Jaucian
GR No. 149004
Facts: Alex A. Jaucian filed a case for collection of money against Restituta
Imperial. The complaint alleges, that Restituta obtained from Alex six (6) separate
loans for which the former executed in favor of the latter six (6) separate promissory
notes and issued several checks as guarantee for payment. When the said loans
became overdue and unpaid, especially when the Restitutas checks were
dishonored, Alex made repeated oral and written demands for payment.
The loans were covered by six (6) separate promissory notes executed by
Restituta. The face value of each promissory notes is bigger than the amount
released to Restituta because said face value already included the interest, which is
16% per month, from date of note to date of maturity.
The arrangement between plaintiff and defendant regarding these guarantee
checks was that each time a check matures the defendant would exchange it with
cash.
Although, admittedly, defendant made several payments, the same were not
enough and she always defaulted whenever her loans matured. On the other hand,
Restituta claims that she was extended loans by the Alex on several occasions, i.e.,
from November 13, 1987 to January 13, 1988, in the total sum of P320,000.00 at the
rate of sixteen percent (16%) per month. The notes matured every four (4) months
with unearned interest compounding every four (4) months if the loan was not fully
paid.

Issue: Whether or not the charging of interest of twenty-eight (28%) per centum per
annum without any writing is illegal?
Held: The trial court, as affirmed by the CA, reduced the interest rate from 16
percent to 1.167 percent per month or 14 percent per annum; and the stipulated
penalty charge, from 5 percent to 1.167 percent per month or 14 percent per annum.
Petitioner alleges that absent any written stipulation between the parties, the
lower courts should have imposed the rate of 12 percent per annum only.
The records show that there was a written agreement between the parties for
the payment of interest on the subject loans at the rate of 16 percent per month. As
decreed by the lower courts, this rate must be equitably reduced for being iniquitous,
unconscionable and exorbitant. While the Usury Law ceiling on interest rates was
lifted by C.B. Circular No. 905, nothing in the said circular grants lenders carte
blanche authority to raise interest rates to levels which will either enslave their
borrowers or lead to a hemorrhaging of their assets.
In Medel v. CA, the Court found the stipulated interest rate of 5.5 percent per
month, or 66 percent per annum, unconscionable. In the present case, the rate is
even more iniquitous and unconscionable, as it amounts to 192 percent per
annum. When the agreed rate is iniquitous or unconscionable, it is considered
contrary
to
morals,
if
not
against
the
law. Such
stipulation
is
void.http://sc.judiciary.gov.ph/jurisprudence/2004/apr2004/149004.htm - _ftn15
Since the stipulation on the interest rate is void, it is as if there were no
express contract thereon. Hence, courts may reduce the interest rate as reason and
equity demand. We find no justification to reverse or modify the rate imposed by the
two lower courts.
Spouses Zacarias and Bacolor vs. Banco Filipino Savings Bank
GR No. 148491
Facts: On February 11, 1982, spouses Zacarias and Catherine Bacolor, obtained a
loan of P244,000.00 from Banco Filipino Savings and Mortgage Bank, Dagupan City
Branch. They executed a promissory note providing that the amount shall be payable
within a period of ten (10) years with a monthly amortization of P5,380.00 beginning
March 11, 1982 and every 11th day of the month thereafter; that the interest rate
shall be twenty-four percent (24%) per annum, with a penalty of three percent (3%)
on any unpaid monthly amortization; that there shall be a service charge of three
percent (3%) per annum on the loan; and that in case respondent bank seeks the
assistance of counsel to enforce the collection of the loan, Zacarias and Bacolor shall
be liable for ten percent (10%) of the amount due as attorneys fees and fifteen
percent (15%) of the amount due as liquidated damages.
As security for the loan, Zacarias and Bacolor mortgaged with respondent
bank their parcel of land. From March 11, 1982 to July 10, 1991, Zacarias and Bacolor
paid respondent bank P412, 199.36. Thereafter, they failed to pay the remaining
balance of the loan. On August 7, 1992, Zacarias and Bacolor received from
respondent bank a statement of account stating that their indebtedness as of July 31,

1992 amounts to P840,845.61. In its letter dated January 13, 1993, respondent bank
informed Zacarias and Bacolor that should they fail to pay their loan within fifteen
(15) days from notice, appropriate action shall be taken against them. Due to the of
Zacarias and Bacolor to settle their obligation, respondent instituted, on March 5,
1993, an action for extra-judicial foreclosure of mortgage. Prior thereto, or on
February 1, 1993, Zacarias and Bacolor filed a complaint for violation of the Usury
Law against respondent. On August 25, 1994, the RTC rendered its decision
dismissing petitioners complaint.
Issue: Whether or
unconscionable.

not

the

interest

rate

is

considered

excessive

and

Held: It is stated in Article 1956 of the Civil Code that no interest shall be due unless
it has been expressly stipulated in writing. Here the parties agreed in writing on
February 11, 1982 that the rate of interest on the petitioners loan shall be 24% per
annum. At the time the parties entered into the loan transaction the applicable law
was Section 2 of Act 2655 of the Usury Law as amended by P.D. No. 166, which
provides that the rate of interest for the forbearance of money when secured by a
mortgage upon real estate, should not be more than 6% per annum or the maximum
rate prescribed by the Monetary Board of the Central Bank of the Philippines in force
at the time the loan was granted. Thus, the interest rate on a loan forbearance of any
money, goods, or credits with a maturity of more than 730 days shall not be subject
to any ceiling. Therefore, the 24% rate agreed upon does not violate the Usury Law.
A contract is the law between the parties and they are bound by its
stipulations. Verily, petitioners cannot now renege their obligation to comply with
what is incumbent upon them under the loan agreement. During the closure of
respondent bank, it could still function as a bonding institution, hence, could continue
collecting interests from petitioners. Thus, petition is denied and the challenged
Decision and Resolution of the Court of Appeals Affirmed.
Dio vs. Jardines
GR No. 145871
Facts: Leonides C. Dio filed a Petition for Consolidation of Ownership. She alleged
that Lina Jardines executed in her favor a Deed of Sale with Pacto de Retro over a
parcel of land with improvements thereon, the consideration for which amounted
to P165,000.00; it was stipulated in the deed that the period for redemption would
expire in six months; such period expired but neither Jardines nor any of her legal
representatives were able to redeem or repurchase the subject property; as a
consequence, absolute ownership over the property has been consolidated in favor of
Dio.
Jardines countered in her Answer tha the Deed of Sale with Pacto de Retro did not
embody the real intention of the parties; the transaction actually entered into by the
parties was one of simple loan and the Deed of Sale with Pacto de Retro was
executed just as a security for the loan; the amount borrowed by Jardines during the
first week of January 1987 was only P50,000.00 with monthly interest of 9% to be
paid within a period of six months, but since said amount was insufficient to buy

construction materials for the house she was then building, she again borrowed an
additional amount of P30,000.00; it was never the intention of respondent to sell her
property to petitioner; the value of respondents residential house alone is over a
million pesos and if the value of the lot is added, it would be around one and a half
million pesos; it is unthinkable that Jardines would sell her property worth one and a
half million pesos for only P165,000.00; Jardines has even paid a total of P55,000.00
out of the amount borrowed and she is willing to settle the unpaid amount, but Dio
insisted on appropriating the property of respondent which she put up as collateral
for the loan; Jardines has been the one paying for the realty taxes on the subject
property; and due to the malicious suit filed by Dio, Jardines suffered moral
damages.
On September 14, 1993, Dio filed an Amended Complaint adding allegations that
she suffered actual and moral damages. Thus, she prayed that she be declared the
absolute owner of the property and/or that respondent be ordered to pay
her P165,000.00 plus the agreed monthly interest of 10%; moral and exemplary
damages, attorneys fees and expenses of litigation.
Issue: Whether or not the interest to be paid under the agreement is 10% or 9% or
whether or not this amount of interest shall be reduced equitably pursuant to law?
Held: Both parties admit that they came to an agreement whereby respondent shall
pay petitioner interest, at 9% (according to respondent) or 10% (according to
petitioner) per month, if she is unable to pay the principal amount ofP165,000.00 on
July 29, 1987.
It is apparent that the stipulated interest in the subject loan is excessive,
iniquitous, unconscionable and exorbitant. Pursuant to the freedom of contract
principle embodied in Article 1306 of the Civil Code, contracting parties 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. In the ordinary course, the codal provision may be invoked to
annul the excessive stipulated interest.
In the case at bar, the stipulated interest rate is 6% per month, or 72% per
annum. By the standards set in the above-cited cases, this stipulation is similarly
invalid.
Applying the afore-cited rulings to the instant case, the inescapable
conclusion is that the agreed interest rate of 9% per month or 108% per annum, as
claimed by respondent; or 10% per month or 120% per annum, as claimed by
petitioner, is clearly excessive, iniquitous, unconscionable and exorbitant. Although
respondent admitted that she agreed to the interest rate of 9%, which she believed
was exorbitant, she explained that she was constrained to do so as she was badly in
need of money at that time. As declared in the Medel case and Imperial vs.
Jaucian,20 "[i]niquitous and unconscionable stipulations on interest rates, penalties
and attorneys fees are contrary to morals." Thus, in the present case, the rate of

interest being charged on the principal loan of P165,000.00, be it 9% or 10% per

month, is void. The CA correctly reduced the exorbitant rate to "legal interest."
Eastern Shipping Lines v. CA
GR No. 97412
Facts: On December 4, 1981, two fiber drums of riboflavin were shipped from
Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by defendant
Eastern Shipping Lines under Bill of Lading. The shipment was insured under
plaintiff's Marine Insurance Policy.
Upon arrival of the shipment in Manila, it was discharged unto the custody of
defendant Metro Port Service, Inc. The latter excepted to one drum, said to be in bad
order, which damage was unknown to plaintiff.
On January 7, 1982 Allied Brokerage Corporation received the shipment from
defendant Metro Port Service, Inc., one drum opened and without seal.
On January 8 and 14, 1982, Allied Brokerage Corporation made deliveries of
the shipment to the consignee's warehouse. The latter excepted to one drum which
contained spillages, while the rest of the contents was adulterated/fake.
Plaintiff contended that due to the losses/damage sustained by said drum, the
consignee suffered losses totaling P19,032.95, due to the fault and negligence of
defendants. Claims were presented against defendants who failed and refused to pay
the same.
As a consequence of the losses sustained, plaintiff was compelled to pay the
consignee P19,032.95 under the aforestated marine insurance policy, so that it
became subrogated to all the rights of action of said consignee against defendants.
Facts: Petitioner-defendant was consigned to deliver a cargo. Upon embarkment, the
cargo was found to be damaged while on transit. Private respondent-plaintiff,
Mercantile Insurance, paid the consignee the amount of damage based on a marine
insurance policy. Mercantile consequently sued the petitioner for recovery of
damages it paid to the consignee. The court a quo decided in favor of the plaintiff
and further stressing the amount paid by the insurance company to the consignee be
paid and with the present legal interest of 12% per annum commencing on the date
of filing of the complaint, until fully paid. The petitioner now contests the ruling
particularly on the issue of interest.
Issue: When should the reckoning period be for the computation of the payment of
legal interest on an award for loss or damage? What is the applicable rate of interest?
Held: The Court laid down the following rules of thumb for guidance in cases like
that of the above:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the contravenor can be held liable for damages.

The provisions under Title XVIII on "Damages" of the Civil Code govern in determining
the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of
the
Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached,
an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be
so reasonably established at the time the demand is made, the interest shall begin to
run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any case, be on the
amount
finally
adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit.

CITIBANK vs. SABENIANO

G.R.No. 156132, October 16, 2006
FACTS: Petitioner Citibank is a banking corporation duly authorized under the laws
of the USA to do commercial banking activities n the Philippines. Sabeniano was a
client of both Petitioners Citibank and FNCB Finance. Respondent filed a complaint
against petitioners claiming to have substantial deposits, the proceeds of which were
supposedly deposited automatically and directly to respondents account with the
petitioner Citibank and that allegedly petitioner refused to despite repeated
demands. Petitioner alleged that respondent obtained several loans from the former
and in default, Citibank exercised its right to set-off respondents outstanding loans
with her deposits and money. RTC declared the act illegal, null and void and ordered

the petitioner to refund the amount plus interest, ordering Sabeniano, on the other
hand to pay Citibank her indebtedness. CA affirmed the decision entirely in favor of
the respondent.
ISSUE: Whether petitioner may exercise its right to set-off respondents loans with
her deposits and money in Citibank-Geneva
RULING: Petition is partly granted with modification.
1. Citibank is ordered to return to respondent the principal amount of P318,897.34
and P203,150.00 plus 14.5% per annum
2. The remittance of US $149,632.99 from respondents Citibank-Geneva account is
declared illegal, null and void, thus Citibank is ordered to refund said amount in
Philippine currency or its equivalent using exchange rate at the time of payment.
3. Citibank to pay respondent moral damages of P300,000, exemplary damages for
P250,000, attorneys fees of P200,000.
4. Respondent to pay petitioner the balance of her outstanding loans of
P1,069,847.40 inclusive off interest.
First Metro vs Este del Sol
GR No. 141811, 15 November 2001
369 SCRA 99
FACTS
FMIC granted Este del Sol a loan to finance a sports/resort complex in
Montalban, Rizal. Under the agreement, the interest was 16% pa based on the
diminishing balance. In case of default, an acceleration clause was provided and the
amount due is subject to 20% one-time penalty on the amount due and such amount
shall bear interest at the highest rate permitted by law. respondent executed a REM,
individual continuing suretyship and an underwriting agreement whereby FMIC shall
underwrite the public offering of one P120,000 common shares of respondents
capital stock for one-time underwriting fee of P200,000. For failure to pay its
obligation, FMIC caused the foreclosure of the REM. At the public auction, FIC was the
highest bidder. Petitioner filed to collect for alleged deficiency balance against
respondents since it failed to collect from the sureties, plus interest at 21% pa. the
trial court ruled in favor of FMIC. Respondents appealed before the CA which held
that the fees provided for in the Underwriting and Consultacy Agreements were mere
subterfuges to camouflage the excessively usurious interest charged. The CA ordered
FMIC to reimburse petitioner representing what is ue to petitioner and what is due to
respondent.
ISSUE
Whether or not the interests are lawful
HELD
No. an apparently lawful loan is usurious when it is intended that additional
compensation for the loan be disguised by an ostensibly unrelated contract for the
payment by the borrower for the lenders services which re of little value or which are
not in fact to be rendered. Article 1957 clearly provides: contracts and stipulations,

under any cloak or device whatever, intended to circumvent the law agaistn usury
shall be void. The borrower may recover in accordance with the laws on usury.
703 SCRA 439 Civil Law Torts and Damages Actual and Compensatory Damages
Legal Rate of Interest is now 6%
Labor Law Labor Relations Illegal Dismissal Computation of Monetary Benefits
Dario Nacar filed a labor case against Gallery Frames and its owner Felipe Bordey, Jr.
Nacar alleged that he was dismissed without cause by Gallery Frames on January 24,
1997. On October 15, 1998, the Labor Arbiter (LA) found Gallery Frames guilty of
illegal dismissal hence the Arbiter awarded Nacar P158,919.92 in damages consisting
of backwages and separation pay.
Gallery Frames appealed all the way to the Supreme Court (SC). The Supreme Court
affirmed the decision of the Labor Arbiter and the decision became final on May 27,
2002.
After the finality of the SC decision, Nacar filed a motion before the LA for
recomputation as he alleged that his backwages should be computed from the time
of his illegal dismissal (January 24, 1997) until the finality of the SC decision (May 27,
2002) with interest. The LA denied the motion as he ruled that the reckoning point of
the computation should only be from the time Nacar was illegally dismissed (January
24, 1997) until the decision of the LA (October 15, 1998). The LA reasoned that the
said date should be the reckoning point because Nacar did not appeal hence as to
him, that decision became final and executory.
ISSUE: Whether or not the Labor Arbiter is correct.
HELD: No. There are two parts of a decision when it comes to illegal dismissal cases
(referring to cases where the dismissed employee wins, or loses but wins on appeal).
The first part is the ruling that the employee was illegally dismissed. This is
immediately final even if the employer appeals but will be reversed if employer
wins on appeal. The second part is the ruling on the award of backwages and/or
separation pay. For backwages, it will be computed from the date of illegal dismissal
until the date of the decision of the Labor Arbiter. But if the employer appeals, then
the end date shall be extended until the day when the appellate courts decision shall
become final. Hence, as a consequence, the liability of the employer, if he loses on
appeal, will increase this is just but a risk that the employer cannot avoid when it
continued to seek recourses against the Labor Arbiters decision. This is also in
accordance with Article 279 of the Labor Code.
Anent the issue of award of interest in the form of actual or compensatory damages,
the Supreme Court ruled that the old case of Eastern Shipping Lines vs CA is already
modified by the promulgation of the Bangko Sentral ng Pilipinas Monetary Board
Resolution No. 796 which lowered the legal rate of interest from 12% to 6%.
Specifically, the rules on interest are now as follows:
1. Monetary Obligations ex. Loans:
a. If stipulated in writing:
a.1. shall run from date of judicial demand (filing of the case)
a.2. rate of interest shall be that amount stipulated
b. If not stipulated in writing
b.1. shall run from date of default (either failure to pay upon extra-judicial demand or
upon judicial demand whichever is appropriate and subject to the provisions of Article
1169 of the Civil Code)

b.2. rate of interest shall be 6% per annum

2. Non-Monetary Obligations (such as the case at bar)
a. If already liquidated, rate of interest shall be 6% per annum, demandable from
date of judicial or extra-judicial
demand (Art. 1169, Civil Code)
b. If unliquidated, no interest
Except: When later on established with certainty. Interest shall still be 6% per annum
demandable from the date of judgment because such on such date, it is already
deemed that the amount of damages is already ascertained.
3. Compounded Interest
This is applicable to both monetary and non-monetary obligations
6% per annum computed against award of damages (interest) granted by the court.
To be computed from the date when the courts decision becomes final and executory
until the award is fully satisfied by the losing party.
4. The 6% per annum rate of legal interest shall be applied prospectively:
Final and executory judgments awarding damages prior to July 1, 2013 shall apply
the 12% rate;
Final and executory judgments awarding damages on or after July 1, 2013 shall
apply the 12% rate for unpaid obligations until June 30, 2013; unpaid obligations with
respect to said judgments on or after July 1, 2013 shall still incur the 6% rate.

DEPOSIT DIGESTS
BPI vs. Intermediate Appellate Court GR# L-66826, August 19, 1988

Facts:
Rizaldy T. Zshornack and his wife maintained in COMTRUST a dollar savings account
and a peso current account. An application for a dollar drat was accomplished by
Virgillo Garcia branch manager of COMTRUST payable to a certain Leovigilda Dizon.
In the PPLICtion, Garcia indicated that the amount was to be charged to the dolar
savings account of the Zshornacks. There wasa no indication of the name of the
purchaser of the dollar draft. Comtrust issued a check payable to the order of Dizon.
When Zshornack noticed the withdrawal from his account, he demanded an
explainaiton from the bank. In its answer, Comtrust claimed that the peso value of
the withdrawal was given to Atty. Ernesto Zshornack, brother of Rizaldy. When he
encashed with COMTRUST a cashiers check for P8450 issued by the manila banking
corporation payable to Ernesto.

Issue: Whether the contract between petitioner and respondent bank is a deposit?

Held: 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.
CA AGRO-INDUSTRIAL DEVELOPMENT CORP. vs. THE HONORABLE COURT OF
APPEALS
FACTS : 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?
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. P75,725.00 was paid as downpayment while the balance was
covered by three (3) postdated checks and based on the agreement 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 certi cates of titles thereto, Transfer Certi cates 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 stating that the nank is not depositary of the contents
of the safe neither the possession nor control of the same and assumes absolutely no
liability in connection therewith.
Thereafter, a certain Mrs. Margarita Ramos o ered 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 pro t 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 certi cates 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 certi cates of title. However, when
opened in the presence of the Bank's representative, the box
2
yielded no such certi cates. Hence, the latter led on 1 September 1980 a complaint
for damages against the respondent Bank with the Court of First Instance. In its
answer with counterclaim, respondent bank alleges that the petitioner has no cause

of action because of the provisions stated in the contract of lease.

The trial court rendered a decision adverse to the petitioner. 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 certi cates of title. The
court declared that the said provisions are binding on the parties.
ISSUE : 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?
RULINGS : We observe, however, that the deposit theory itself does not altogether nd
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
21
that of a bail or and bailee, the bailment being for hire and mutual bene t.
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
22
safe-deposit boxes.
(citations omitted)
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 ine ective. It has been said:
With respect to property deposited in a safe-deposit box by a customer of a safedeposit company, the parties, since the relation is a contractual one, may by special
contract de ne 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 safedeposit 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 ine ective 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 di erent 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 e ect that the certi
cates 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
certi cates of title was due to the fraud or negligence of the respondent Bank. This in
turn ows 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.
G.R. No. 102970 May 13, 1993
LUZAN SIA,vs. COURT OF APPEALS and SECURITY BANK and TRUST
COMPANY, respondents.
FACTS: The plaintiff rented on March 22, 1985 the Safety Deposit Box No. 54 of the
defendant bank at its Binondo Branch wherein he placed his collection of stamps. The
said safety deposit box leased by the plaintiff was at the bottom or at the lowest level
of the safety deposit boxes of the defendant bank .During the floods that took place,
floodwater entered into the defendant bank's premises, seeped into the safety
deposit box leased by the plaintiff and caused, according to the plaintiff, damage to
his stamps collection. The defendant bank rejected the plaintiff's claim for
compensation for his damaged stamps collection, so, the plaintiff instituted an action
for damages against the defendant bank.
ISSUE: Whether it was a grave error or an abuse of discretion on the part of the
respondent court when it ruled that respondent SBTC did not fail to exercise the
required diligence in maintaining the safety deposit box
RULING: Note that the primary function is still found within the parameters of a
contract of deposit, i.e., the receiving in custody of funds, documents and other
valuable objects for safekeeping. The renting out of the safety deposit boxes is not
independent from, but related to or in conjunction with, this principal function. A
contract of deposit may be entered into orally or in writing (Art. 1969, Civil Code]
and, pursuant to Article 1306 of the Civil Code, the parties thereto may establish
such stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order or public

policy. Accordingly, the depositary would be liable if, in performing its obligation, it is
found guilty of fraud, negligence, delay or contravention of the tenor of the
agreement [Art. 1170, id.]. In the absence of any stipulation prescribing the degree of
diligence required, that of a good father of a family is to be observed [Art. 1173, id.].
Hence, any stipulation exempting the depositary from any liability arising from the
loss of the thing deposited on account of fraud, negligence or delay would be void for
being contrary to law and public policy. In the instant case, petitioner maintains that
conditions 13 and l4 of the questioned contract of lease of the safety deposit box,
which read:
"13. The bank is a depositary of the contents of the safe and it has neither the
possession nor control of the same.
"14. The bank has no interest whatsoever in said contents, except as herein expressly
provided, and it assumes absolutely no liability in connection therewith."
are void as they are contrary to law and public policy.
Public respondent further postulates that SBTC cannot be held responsible for the
destruction or loss of the stamp collection because the flooding was a fortuitous
event and there was no showing of SBTC's participation in the aggravation of the loss
or injury. Both the law and authority cited are clear enough and require no further
elucidation. Unfortunately, however, the public respondent failed to consider that in
the instant case, as correctly held by the trial court, SBTC was guilty of negligence.
thus comes to the succor of the petitioner. The destruction or loss of the stamp
collection which was, in the language of the trial court, the "product of 27 years of
patience and diligence" caused the petitioner pecuniary loss; hence, he must be
compensated therefor.

Serrano vs central bank

V.KEY FACTS Manuel Serrano made a time deposit, for one year with 6% interest of
One Hundred Fifty Thousand Pesos with the Respondent Overseas Bank of Manila.
Concepcion Maneja also made a time deposit, for one year with 6-1/2 % interest, of
Two Hundred Thousand Pesos on the same respondent Overseas Bank of Manila.
Concepcion MAneja, then married, assigned and conveyed to petitioner Manuel
Serrano, her time deposit of Php200,000.00. Notwithstanding series of demands for
encashment of the aforementioned time deposit from the respondent Overseas Bank
of Manila, not a single one of the time deposit certificates was honored by respondent
Overseas Bank of Manila.
Respondent Central Bank dissolve and liquidated the Overseas Bank of Manila. The
former denied that it is a guarantor of the permanent solvency of any banking

institution as claimed by the petitioner. Respondent Central Bank avers no knowledge

of petitioners claim that the properties given by the respondent Overseas Bank of
Manila as additional collaterals to the respondent Central Bank of the Philippines for
the formers overdrafts and emergency loans were acquired from the depositors
money including the time deposits of the petitioner.
VI.ISSUE
Whether or not the respondents are jointly and solidary liable for damages due to
breach of trust.
VIII. RATIO DECIDENDI
Both parties overlooked the fundamental principle in the nature of bank deposits
when the petitioner claimed that there should be created a constructive trust in his
favor when the respondent Overseas Bank of Manila increased the collaterals in favor
of the respondent Central Bank of the Philippines for the formers overdrafts and
emergency loans, since these collaterals were acquired by the use of depositors
money.
Bank deposits are in nature of irregular deposits. They are really loans because they
earn interest. All kinds of bank deposits, whether fixed, savings or current are to be
treated as loans and are to be covered by the loans. Current and savings deposits are
loans to a bank because it can use the same. The petitioner here in the making time
deposits that earn interests with respondent Overseas Bank of Manila was in reality a
creditor of the respondent bank and not a depositor. The respondent bank was in turn
a debtor of petitioner. Failure of the respondent bank to honor the time deposit is
failure to pay obligation as a debtor and not a breach of trust arising from
depositorys failure to return the subject matter of the deposit.

GUINGONA vs. CITY FISCAL OF MANILA FACTS:

The instant petition seeks to prohibit public respondents from proceeding with the
preliminary investigation of I.S. No. 81-31938, in which petitioners were charged by
private respondent Clement David, with estafa and violation of Central Bank Circular
No. 364 and related regulations regarding foreign exchange transactions principally,
on the ground of lack of jurisdiction in that the allegations of the charged, as well as
the testimony of private respondent's principal witness and the evidence through
said witness, showed that petitioners' obligation is civil in nature.
From March 20, 1979 to March, 1981, David invested with
Loan Association, (hereinafter called NSLA) the sum of
deposits, P13,531.94 on savings account deposits (jointly
Kuhne), US$10,000.00 on time deposit, US$15,000.00 under

the Nation Savings and

P1,145,546.20 on nine
with his sister, Denise
a receipt and guarantee

of payment and US$50,000.00 under a receipt dated June 8, 1980 (au jointly with
Denise Kuhne), that David was induced into making the aforestated investments by
Robert Marshall an Australian national who was allegedly a close associate of
petitioner Guingona Jr., then NSLA President, petitioner Martin, then NSLA Executive
Vice-President of NSLA and petitioner Santos, then NSLA General Manager; that on
March 21, 1981 N LA was placed under receivership by the Central Bank, so that
David led claims therewith for his investments and those of his sister; that on July 22,
1981 David received a report from the Central Bank that only P305,821.92 of those
investments were entered in the records of NSLA; that, therefore, the respondents in
I.S. No. 81-31938 misappropriated the balance of the investments, at the same time
violating Central Bank Circular No. 364 and related Central Bank regulations on
foreign exchange transactions; that after demands, petitioner Guingona Jr. paid only
P200,000.00, thereby reducing the amounts misappropriated to P959,078.14 and
US$75,000.00."
At the inception of the preliminary investigation before respondent Lota, petitioners
moved to dismiss the charges against them for lack of jurisdiction because David's
claims allegedly comprised a purely civil obligation which was itself novated. Fiscal
Lota denied the motion to dismiss (Petition, p. 8).
But, after the presentation of David's principal witness, petitioners led the instant
petition because: (a) the production of the Promisory Notes, Banker's Acceptance,
Certi cates of Time Deposits and Savings Account allegedly showed that the
transactions between David and NSLA were simple loans, i.e., civil obligations on the
part of NSLA which were novated when Guingona, Jr. and Martin assumed them; and
(b) David's principal witness allegedly testi ed that the duplicate originals of the
aforesaid instruments of indebtedness were all on le with NSLA, contrary to David's
claim that some of his investments were not record
ISSUE:Whether or not the petitioner in this case is properly charge of esta a through
misappropriation of funds deposited in NSLA making them subject to the jurisdiction
of the respondents investigation.
SC Ruling:
There is merit in the contention of the petitioners that their liability is civil in nature
and therefore, public respondents have no jurisdiction over the charge of esta a.
It must be pointed out that when private respondent David invested his money on
nine. and savings deposits with the aforesaid bank, the contract that was
perfected was a contract of simple loan or mutuum and not a contract of
deposit. Thus, Article 1980 of the New Civil Code provides that:
Article 1980. Fixed, savings, and current deposits of-money in banks and similar
institutions shall be governed by the provisions concerning simple loan.In the case of
Central Bank of the Philippines vs. Morfe (63 SCRA 114,119 [1975], We said:

It should be noted that xed, savings, and current deposits of money in banks and
similar institutions are hat true deposits. are considered simple loans and, as such,
are not preferred credits (Art. 1980 Civil Code; In re Liquidation of Mercantile Batik of
China Tan Tiong Tick vs. American Apothecaries Co., 66 Phil 414; Paci c Coast Biscuit
Co. vs. Chinese Grocers Association 65 Phil. 375; Fletcher American National Bank vs.
Ang Chong UM 66 PWL 385; Paci c Commercial Co. vs. American Apothecaries Co., 65
PhiL 429; Gopoco Grocery vs. Paci c Coast Biscuit CO.,65 Phil. 443)."
This Court also declared in the recent case of Serrano vs. Central Bank of the
Philippines (96 SCRA 102 [1980]) that:
Bank deposits are in the nature of irregular deposits. They are really 'loans because
they earn interest. All kinds of bank deposits, whether xed, savings, or current are to
be treated as loans and are to be covered by the law on loans (Art. 1980 Civil Code
Gullas vs. Phil. National Bank, 62 Phil. 519). Current and saving deposits, are loans to
a
bank because it can use the same. The petitioner here in making time deposits that
earn interests will respondent Overseas Bank of Manila was in reality a creditor of the
respondent Bank and not a depositor. The respondent Bank was in turn a debtor of
petitioner. Failure of the respondent Bank to honor the time deposit is failure to pay
its obligation as a debtor and not a breach of trust arising from a depositary's failure
to return the subject matter of the deposit (Emphasis supplied).
Hence, the relationship between the private respondent and the Nation Savings and
Loan Association is that of creditor and debtor; consequently, the ownership of the
amount deposited was transmitted to the Bank upon the perfection of the contract
and it can make use of the amount deposited for its banking operations, such as to
pay interests on deposits and to pay withdrawals. While the Bank has the obligation
to return the amount deposited, it has, however, no obligation to return or deliver the
same money that was deposited. And, the failure of the Bank to return the amount
deposited will not constitute estafa through misappropriation punishable under
Article 315, par. l(b) of the Revised Penal Code, but it will only give rise to civil liability
over which the public respondents have no- jurisdiction.
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] 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] 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] 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]
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] 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] 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] 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.
YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA PAYAM, petitioners
VS.
THE COURT OF APPEALS and MAURICE McLOUGHLIN, respondents.G.R. No.
126780
FACTS
Respondent McLoughlin would always stay at Tropicana Hotel every time he is here in
thePhilippines and would rent a safety deposit box. The safety deposit box could only
be openedthrough the use of 2 keys, one of which is given to the registered guest,
and the other remaining inthe possession of the management of the hotel.McLoughlin
allegedly placed the following in his safety deposit box 2 envelopes containingUS
Dollars, one envelope containing Australian Dollars, Letters, credit cards, bankbooks
and acheckbook.On 12 December 1987, before leaving for a brief trip, McLoughlin
took some items from thesafety box which includes the ff: envelope containing Five
Thousand US Dollars (US$5,000.00), theother envelope containing Ten Thousand
Australian Dollars (AUS$10,000.00), his passports and hiscredit cards. The other
items were left in the deposit box. Upon arrival, he found out that a fewdollars were
missing and the jewelry he bought was likewise missing.Eventually, he confronted
Lainez and Paiyam who admitted that Tan opened the safetydeposit box with the key
assigned to him. McLoughlin went up to his room where Tan was stayingand
confronted her. Tan admitted that she had stolen McLouglins key and was able to
open thesafety deposit box with the assistance of Lopez, Paiyam and Lainez. Lopez
also told McLoughlinthat Tan stole the key assigned to McLouglin while the latter was
asleep.McLoughlin insisted that it must be the hotel who must assume responsibility
for the loss hesuffered. Lopez refused to accept responsibility relying on the
conditions for renting the safetydeposit box entitled Undertaking For the Use of
Safety Deposit Box
ISSUE
WON the Undertaking for the Use of Safety Deposit Box admittedly executed by
privaterespondent is null and void.
HELD
YES Article 2003 was incorporated in the New Civil Code as an expression of public
policyprecisely to apply to situations such as that presented in this case. The hotel
business like thecommon carriers business is imbued with public interest. Catering to
the public, hotelkeepers arebound 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 tothe public to be negated or
diluted by any contrary stipulation in so-called undertakings thatordinarily appear
in prepared forms imposed by hotel keepers on guests for their signature.In an early
case (De Los Santos v. Tan Khey), CA ruled that to hold hotelkeepers orinnkeeper
liable for the effects of their guests, it is not necessary that they be actually delivered
tothe innkeepers or their employees. It is enough that such effects are within the
hotel or inn. Withgreater reason should the liability of the hotelkeeper be enforced
when the missing items aretaken without the guests knowledge and consent from a

safety deposit box provided by the hotelitself, as in this case.Paragraphs (2) and (4)
of the undertaking manifestly contravene Article 2003, CC for theyallow Tropicana
to be released from liability arising from any loss in the contents and/or use of
thesafety deposit box for any cause whatsoever. Evidently, the undertaking was
intended to bar anyclaim against Tropicana for any loss of the contents of the safety
deposit box whether or notnegligence was incurred by Tropicana or its employees.
The New Civil Code is explicit that theresponsibility of the hotel-keeper shall extend
to loss of, or injury to, the personal property of theguests even if caused by servants
or employees of the keepers of hotels or inns as well as bystrangers, except as it may
proceed from any force majeure.