G.R. No.
L-66826 August 19, 1988 Undaunted, the bank comes to this Court praying that it be
BANK OF THE PHILIPPINE ISLANDS, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT and
ZSHORNACK respondents.
Pacis & Reyes Law Office for petitioner.
Ernesto T. Zshornack, Jr. for private respondent.
CORTES, J.:
The original parties to this case were Rizaldy T. Zshornack
and the Commercial Bank and Trust Company of the
Philippines [hereafter referred to as "COMTRUST."] In
1980, the Bank of the Philippine Islands (hereafter referred
to as BPI absorbed COMTRUST through a corporate
merger, and was substituted as party to the case.
Rizaldy Zshornack initiated proceedings on June 28,1976
by filing in the Court of First Instance of Rizal — Caloocan
City a complaint against COMTRUST alleging four causes
of action. Except for the third cause of action, the CFI ruled
in favor of Zshornack. The bank appealed to the
Intermediate Appellate Court which modified the CFI
decision absolving the bank from liability on the fourth
cause of action. The pertinent portions of the judgment, as
modified, read:
IN VIEW OF THE FOREGOING, the Court renders
judgment as follows:
1. Ordering the defendant COMTRUST to restore to
the dollar savings account of plaintiff (No. 25-4109) the
amount of U.S $1,000.00 as of October 27, 1975 to earn
interest together with the remaining balance of the said
account at the rate fixed by the bank for dollar deposits
under Central Bank Circular 343;
2. Ordering defendant COMTRUST to return to the
plaintiff the amount of U.S. $3,000.00 immediately upon the
finality of this decision, without interest for the reason that
the said amount was merely held in custody for
safekeeping, but was not actually deposited with the
defendant COMTRUST because being cash currency, it
cannot by law be deposited with plaintiffs dollar account
and defendant's only obligation is to return the same to
plaintiff upon demand;
xxx xxx xxx
5. Ordering defendant COMTRUST to pay plaintiff in
the amount of P8,000.00 as damages in the concept of
litigation expenses and attorney's fees suffered by plaintiff
as a result of the failure of the defendant bank to restore to
his (plaintiffs) account the amount of U.S. $1,000.00 and to
return to him (plaintiff) the U.S. $3,000.00 cash left for
safekeeping.
Costs against defendant COMTRUST.
SO ORDERED. [Rollo, pp. 47-48.]
totally absolved from any liability to Zshornack. The latter
not having appealed the Court of Appeals decision, the
issues facing this Court are limited to the bank's liability with
regard to the first and second causes of action and its
liability for damages.
1. We first consider the first cause of action, On the
dates material to this case, Rizaldy Zshornack and his wife,
Shirley Gorospe, maintained in COMTRUST, Quezon City
Branch, a dollar savings account and a peso current
account.
On October 27, 1975, an application for a dollar draft was
accomplished by Virgilio V. Garcia, Assistant Branch
Manager of COMTRUST Quezon City, payable to a certain
Leovigilda D. Dizon in the amount of $1,000.00. In the
application, Garcia indicated that the amount was to be
charged to Dollar Savings Acct. No. 25-4109, the savings
account of the Zshornacks; the charges for commission,
documentary stamp tax and others totalling P17.46 were to
be charged to Current Acct. No. 210465-29, again, the
current account of the Zshornacks. There was no indication
of the name of the purchaser of the dollar draft.
On the same date, October 27,1975, COMTRUST, under
the signature of Virgilio V. Garcia, issued a check payable
to the order of Leovigilda D. Dizon in the sum of US $1,000
drawn on the Chase Manhattan Bank, New York, with an
indication that it was to be charged to Dollar Savings Acct.
No. 25-4109.
When Zshornack noticed the withdrawal of US$1,000.00
from his account, he demanded an explanation from the
bank. In answer, COMTRUST claimed that the peso value
of the withdrawal was given to Atty. Ernesto Zshornack, Jr.,
brother of Rizaldy, on October 27, 1975 when he (Ernesto)
encashed with COMTRUST a cashier's check for P8,450.00
issued by the Manila Banking Corporation payable to
Ernesto.
Upon consideration of the foregoing facts, this Court finds
no reason to disturb the ruling of both the trial court and the
Appellate Court on the first cause of action. Petitioner must
be held liable for the unauthorized withdrawal of
US$1,000.00 from private respondent's dollar account.
In its desperate attempt to justify its act of withdrawing from
its depositor's savings account, the bank has adopted
inconsistent theories. First, it still maintains that the peso
value of the amount withdrawn was given to Atty. Ernesto
Zshornack, Jr. when the latter encashed the Manilabank
Cashier's Check. At the same time, the bank claims that the
withdrawal was made pursuant to an agreement where
Zshornack allegedly authorized the bank to withdraw from
his dollar savings account such amount which, when
converted to pesos, would be needed to fund his peso
current account. If indeed the peso equivalent of the
amount withdrawn from the dollar account was credited to
the peso current account, why did the bank still have to pay
Ernesto?
At any rate, both explanations are unavailing. With regard
to the first explanation, petitioner bank has not shown how
the transaction involving the cashier's check is related to
1
the transaction involving the dollar draft in favor of Dizon
financed by the withdrawal from Rizaldy's dollar account.
The two transactions appear entirely independent of each
other. Moreover, Ernesto Zshornack, Jr., possesses a
personality distinct and separate from Rizaldy Zshornack.
Payment made to Ernesto cannot be considered payment
to Rizaldy.
As to the second explanation, even if we assume that there
was such an agreement, the evidence do not show that the
withdrawal was made pursuant to it. Instead, the record
reveals that the amount withdrawn was used to finance a
dollar draft in favor of Leovigilda D. Dizon, and not to fund
the current account of the Zshornacks. There is no proof
whatsoever that peso Current Account No. 210-465-29 was
ever credited with the peso equivalent of the US$1,000.00
withdrawn on October 27, 1975 from Dollar Savings
Account No. 25-4109.
2. As for the second cause of action, the complaint
filed with the trial court alleged that on December 8, 1975,
Zshornack entrusted to COMTRUST, thru Garcia, US
$3,000.00 cash (popularly known as greenbacks) for
safekeeping, and that the agreement was embodied in a
document, a copy of which was attached to and made part
of the complaint. The document reads:
Makati Cable Address:
Philippines "COMTRUST"
COMMERCIAL BANK AND TRUST COMPANY
of the Philippines
Quezon City Branch
December 8, 1975
MR. RIZALDY T. ZSHORNACK
&/OR MRS SHIRLEY E. ZSHORNACK
Sir/Madam:
We acknowledged (sic) having received from you today the
sum of US DOLLARS: THREE THOUSAND ONLY
(US$3,000.00) for safekeeping.
Received by:
(Sgd.) VIRGILIO V. GARCIA
It was also alleged in the complaint that despite demands,
the bank refused to return the money.
In its answer, COMTRUST averred that the US$3,000 was
credited to Zshornack's peso current account at prevailing
conversion rates.
It must be emphasized that COMTRUST did not deny
specifically under oath the authenticity and due execution of
the above instrument.
During trial, it was established that on December 8, 1975
Zshornack indeed delivered to the bank US $3,000 for
safekeeping. When he requested the return of the money
on May 10, 1976, COMTRUST explained that the sum was
disposed of in this manner: US$2,000.00 was sold on
December 29, 1975 and the peso proceeds amounting to
P14,920.00 were deposited to Zshornack's current account
per deposit slip accomplished by Garcia; the remaining
US$1,000.00 was sold on February 3, 1976 and the peso
proceeds amounting to P8,350.00 were deposited to his
current account per deposit slip also accomplished by
Garcia.
Aside from asserting that the US$3,000.00 was properly
credited to Zshornack's current account at prevailing
conversion rates, BPI now posits another ground to defeat
private respondent's claim. It now argues that the contract
embodied in the document is the contract of depositum (as
defined in Article 1962, New Civil Code), which banks do
not enter into. The bank alleges that Garcia exceeded his
powers when he entered into the transaction. Hence, it is
claimed, the bank cannot be liable under the contract, and
the obligation is purely personal to Garcia.
Before we go into the nature of the contract entered into, an
important point which arises on the pleadings, must be
considered.
The second cause of action is based on a document
purporting to be signed by COMTRUST, a copy of which
document was attached to the complaint. In short, the
second cause of action was based on an actionable
document. It was therefore incumbent upon the bank to
specifically deny under oath the due execution of the
document, as prescribed under Rule 8, Section 8, if it
desired: (1) to question the authority of Garcia to bind the
corporation; and (2) to deny its capacity to enter into such
contract. [See, E.B. Merchant v. International Banking
Corporation, 6 Phil. 314 (1906).] No sworn answer denying
the due execution of the document in question, or
questioning the authority of Garcia to bind the bank, or
denying the bank's capacity to enter into the contract, was
ever filed. Hence, the bank is deemed to have admitted not
only Garcia's authority, but also the bank's power, to enter
into the contract in question.
In the past, this Court had occasion to explain the reason
behind this procedural requirement.
The reason for the rule enunciated in the foregoing
authorities will, we think, be readily appreciated. In dealing
with corporations the public at large is bound to rely to a
large extent upon outward appearances. If a man is found
acting for a corporation with the external indicia of authority,
any person, not having notice of want of authority, may
usually rely upon those appearances; and if it be found that
the directors had permitted the agent to exercise that
authority and thereby held him out as a person competent
to bind the corporation, or had acquiesced in a contract and
retained the benefit supposed to have been conferred by it,
the corporation will be bound, notwithstanding the actual
authority may never have been granted
... Whether a particular officer actually possesses the
authority which he assumes to exercise is frequently known
2
to very few, and the proof of it usually is not readily
accessible to the stranger who deals with the corporation
on the faith of the ostensible authority exercised by some of
the corporate officers. It is therefore reasonable, in a case
where an officer of a corporation has made a contract in its
name, that the corporation should be required, if it denies
his authority, to state such defense in its answer. By this
means the plaintiff is apprised of the fact that the agent's
authority is contested; and he is given an opportunity to
adduce evidence showing either that the authority existed
or that the contract was ratified and approved. [Ramirez v.
Orientalist Co. and Fernandez, 38 Phil. 634, 645- 646
(1918).]
Petitioner's argument must also be rejected for another
reason. The practical effect of absolving a corporation from
liability every time an officer enters into a contract which is
beyond corporate powers, even without the proper
allegation or proof that the corporation has not authorized
nor ratified the officer's act, is to cast corporations in so
perfect a mold that transgressions and wrongs by such
artificial beings become impossible [Bissell v. Michigan
Southern and N.I.R. Cos 22 N.Y 258 (1860).] "To say that a
corporation has no right to do unauthorized acts is only to
put forth a very plain truism but to say that such bodies
have no power or capacity to err is to impute to them an
excellence which does not belong to any created existence
with which we are acquainted. The distinction between
power and right is no more to be lost sight of in respect to
artificial than in respect to natural persons." [Ibid.]
Having determined that Garcia's act of entering into the
contract binds the corporation, we now determine the
correct nature of the contract, and its legal consequences,
including its enforceability.
The document which embodies the contract states that the
US$3,000.00 was received by the bank for safekeeping.
The subsequent acts of the parties also show that the intent
of the parties was really for the bank to safely keep the
dollars and to return it to Zshornack at a later time, Thus,
Zshornack demanded the return of the money on May 10,
1976, or over five months later.
The above arrangement is that contract defined under
Article 1962, New Civil Code, which reads:
Art. 1962. A deposit is constituted from the moment a
person receives a thing belonging to another, with the
obligation of safely keeping it and of returning the same. If
the safekeeping of the thing delivered is not the principal
purpose of the contract, there is no deposit but some other
contract.
Note that the object of the contract between Zshornack and
COMTRUST was foreign exchange. Hence, the transaction
was covered by Central Bank Circular No. 20, Restrictions
on Gold and Foreign Exchange Transactions, promulgated
on December 9, 1949, which was in force at the time the
parties entered into the transaction involved in this case.
The circular provides:
xxx xxx xxx
2. Transactions in the assets described below and all
dealings in them of whatever nature, including, where
applicable their exportation and importation, shall NOT be
effected, except with respect to deposit accounts included
in sub-paragraphs (b) and (c) of this paragraph, when such
deposit accounts are owned by and in the name of, banks.
(a) Any and all assets, provided they are held through,
in, or with banks or banking institutions located in the
Philippines, including money, checks, drafts, bullions bank
drafts, deposit accounts (demand, time and savings), all
debts, indebtedness or obligations, financial brokers and
investment houses, notes, debentures, stocks, bonds,
coupons, bank acceptances, mortgages, pledges, liens or
other rights in the nature of security, expressed in foreign
currencies, or if payable abroad, irrespective of the
currency in which they are expressed, and belonging to any
person, firm, partnership, association, branch office,
agency, company or other unincorporated body or
corporation residing or located within the Philippines;
(b) Any and all assets of the kinds included and/or
described in subparagraph (a) above, whether or not held
through, in, or with banks or banking institutions, and
existent within the Philippines, which belong to any person,
firm, partnership, association, branch office, agency,
company or other unincorporated body or corporation not
residing or located within the Philippines;
(c) Any and all assets existent within the Philippines
including money, checks, drafts, bullions, bank drafts, all
debts, indebtedness or obligations, financial securities
commonly dealt in by bankers, brokers and investment
houses, notes, debentures, stock, bonds, coupons, bank
acceptances, mortgages, pledges, liens or other rights in
the nature of security expressed in foreign currencies, or if
payable abroad, irrespective of the currency in which they
are expressed, and belonging to any person, firm,
partnership, association, branch office, agency, company or
other unincorporated body or corporation residing or
located within the Philippines.
xxx xxx xxx
4. (a) All receipts of foreign exchange shall be sold
daily to the Central Bank by those authorized to deal in
foreign exchange. All receipts of foreign exchange by any
person, firm, partnership, association, branch office,
agency, company or other unincorporated body or
corporation shall be sold to the authorized agents of the
Central Bank by the recipients within one business day
following the receipt of such foreign exchange. Any person,
firm, partnership, association, branch office, agency,
company or other unincorporated body or corporation,
residing or located within the Philippines, who acquires on
and after the date of this Circular foreign exchange shall
not, unless licensed by the Central Bank, dispose of such
foreign exchange in whole or in part, nor receive less than
its full value, nor delay taking ownership thereof except as
such delay is customary; Provided, further, That within one
day upon taking ownership, or receiving payment, of foreign
exchange the aforementioned persons and entities shall
sell such foreign exchange to designated agents of the
Central Bank.
3
xxx xxx xxx
8. Strict observance of the provisions of this Circular
is enjoined; and any person, firm or corporation, foreign or
domestic, who being bound to the observance thereof, or of
such other rules, regulations or directives as may hereafter
be issued in implementation of this Circular, shall fail or
refuse to comply with, or abide by, or shall violate the same,
shall be subject to the penal sanctions provided in the
Central Bank Act.
xxx xxx xxx
Paragraph 4 (a) above was modified by Section 6 of Central
Bank Circular No. 281, Regulations on Foreign Exchange,
promulgated on November 26, 1969 by limiting its coverage
to Philippine residents only. Section 6 provides:
expenses and attorney's fees to be reasonable. The award
is sustained.
WHEREFORE, the decision appealed from is hereby
MODIFIED. Petitioner is ordered to restore to the dollar
savings account of private respondent the amount of
US$1,000.00 as of October 27, 1975 to earn interest at the
rate fixed by the bank for dollar savings deposits. Petitioner
is further ordered to pay private respondent the amount of
P8,000.00 as damages. The other causes of action of
private respondent are ordered dismissed.
SO ORDERED.

SEC. 6. All receipts of foreign exchange by any resident

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

As earlier stated, the document and the subsequent acts of

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

Since the mere safekeeping of the greenbacks, without

selling them to the Central Bank within one business day
from receipt, is a transaction which is not authorized by CB
Circular No. 20, it must be considered as one which falls
under the general class of prohibited transactions. Hence,
pursuant to Article 5 of the Civil Code, it is void, having
been executed against the provisions of a
mandatory/prohibitory law. More importantly, it affords
neither of the parties a cause of action against the other.
"When the nullity proceeds from the illegality of the cause or
object of the contract, and the act constitutes a criminal
offense, both parties being in pari delicto, they shall have
no cause of action against each other. . ." [Art. 1411, New
Civil Code.] The only remedy is one on behalf of the State
to prosecute the parties for violating the law.

We thus rule that Zshornack cannot recover under the

second cause of action.

3. Lastly, we find the P8,000.00 awarded by the

courts a quo as damages in the concept of litigation

4
[G.R. No. 142591. April 30, 2003]
JOSEPH CHAN, WILSON CHAN and LILY CHAN,
petitioners, vs. BONIFACIO S. MACEDA, JR., respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
A judgment of default does not automatically imply
admission by the defendant of the facts and causes of
action of the plaintiff. The Rules of Court require the latter to
adduce evidence in support of his allegations as an
indispensable condition before final judgment could be
given in his favor.[1] The trial judge has to evaluate the
allegations with the highest degree of objectivity and
certainty. He may sustain an allegation for which the
plaintiff has adduced sufficient evidence, otherwise, he has
to reject it. In the case at bar, judicial review is imperative to
avert the award of damages that is unreasonable and
without evidentiary support.
Assailed in this petition for review under Rule 45 of the
1997 Rules of Civil Procedure, as amended, is the
Decision[2] dated June 17, 1999 of the Court of Appeals in
CA-G.R. CV No. 57323, entitled Bonifacio S. Maceda, Jr.
versus Joseph Chan, et. al., affirming in toto the Decision[3]
dated December 26, 1996 of the Regional Trial Court,
Branch 160, Pasig City, in Civil Case No. 53044.
The essential antecedents are as follows:
On July 28, 1976, Bonifacio S. Maceda, Jr., herein
respondent, obtained a P7.3 million loan from the
Development Bank of the Philippines for the construction of
his New Gran Hotel Project in Tacloban City.
Thereafter, on September 29, 1976, respondent entered
into a building construction contract with Moreman Builders
Co., Inc., (Moreman). They agreed that the construction
would be finished not later than December 22, 1977.
Respondent purchased various construction materials and
equipment in Manila. Moreman, in turn, deposited them in
the warehouse of Wilson and Lily Chan, herein petitioners.
The deposit was free of charge.
Unfortunately, Moreman failed to finish the construction of
the hotel at the stipulated time. Hence, on February 1,
1978, respondent filed with the then Court of First Instance
(CFI, now Regional Trial Court), Branch 39, Manila, an
action for rescission and damages against Moreman,
docketed as Civil Case No. 113498.
On November 28, 1978, the CFI rendered its Decision[4]
rescinding the contract between Moreman and respondent
and awarding to the latter P 445,000.00 as actual, moral
and liquidated damages; P20,000.00 representing the
increase in the construction materials; and P35,000.00 as
attorneys fees. Moreman interposed an appeal to the Court
of Appeals but the same was dismissed on March 7, 1989
for being dilatory. He elevated the case to this Court via a
petition for review on certiorari. In a Decision[5] dated
February 21, 1990, we denied the petition. On April 23,
1990,[6] an Entry of Judgment was issued.
Meanwhile, during the pendency of the case, respondent
ordered petitioners to return to him the construction
materials and equipment which Moreman deposited in their
warehouse. Petitioners, however, told them that Moreman
withdrew those construction materials in 1977.
Hence, on December 11, 1985, respondent filed with the
Regional Trial Court, Branch 160, Pasig City, an action for
damages with an application for a writ of preliminary
attachment against petitioners,[7] docketed as Civil Case
No. 53044.
In the meantime, on October 30, 1986, respondent was
appointed Judge of the Regional Trial Court, Branch 12,
San Jose Antique.[8]
On August 25, 1989, or after almost four (4) years, the trial
court dismissed respondents complaint for his failure to
prosecute and for lack of interest.[9] On September 6,
1994, or five years thereafter, respondent filed a motion for
reconsideration, but the same was denied in the Order
dated September 9, 1994 because of the failure of
respondent and his counsel to appear on the scheduled
hearing.[10]
On October 14, 1994, respondent filed a second motion for
reconsideration. This time, the motion was granted and the
case was ordered reinstated on January 10, 1995, or ten
(10) years from the time the action was originally filed.[11]
Thereafter, summons, together with the copies of the
complaint and its annexes, were served on petitioners.
On March 2, 1995, counsel for petitioners filed a motion to
dismiss on several grounds.[12] Respondent, on the other
hand, moved to declare petitioners in default on the ground
that their motion to dismiss was filed out of time and that it
did not contain any notice of hearing.[13]
On April 27, 1995, the trial court issued an order declaring
petitioners in default.[14]
Petitioners filed with the Court of Appeals a petition for
certiorari[15] to annul the trial courts order of default, but
the same was dismissed in its Order[16] dated August 31,
1995. The case reached this Court, and in a Resolution
dated October 25, 1995,[17] we affirmed the assailed order
of the Court of Appeals. On November 29, 1995,[18] the
corresponding Entry of Judgment was issued.
Thus, upon the return of the records to the RTC, Branch
160, Pasig City, respondent was allowed to present his
evidence ex-parte.
Upon motion of respondent, which was granted by the trial
court in its Order dated April 29, 1996,[19] the depositions
of his witnesses, namely, Leonardo Conge, Alfredo Maceda
and Engr. Damiano Nadera were taken in the Metropolitan
Trial Court in Cities, Branch 2, Tacloban City.[20] Deponent
Leonardo Conge, a labor contractor, testified that on
December 14 up to December 24, 1977, he was contracted
by petitioner Lily Chan to get bags of cement from the New
Gran Hotel construction site and to store the same into the
latters warehouse in Tacloban City. Aside from those bags
of cement, deponent also hauled about 400 bundles of steel
5
bars from the same construction site, upon order of
petitioners. Corresponding delivery receipts were presented
and marked as Exhibits A, A-1,A-2,A-3 and A-4.[21]
Deponent Alfredo Maceda testified that he was respondents
Disbursement and Payroll Officer who supervised the
construction and kept inventory of the properties of the New
Gran Hotel. While conducting the inventory on November
23, 1977, he found that the approximate total value of the
materials stored in petitioners warehouse was P214,310.00.
This amount was accordingly reflected in the certification
signed by Mario Ramos, store clerk and representative of
Moreman who was present during the inventory.[22]
Deponent Damiano Nadera testified on the current cost of
the architectural and structural requirements needed to
complete the construction of the New Gran Hotel.[23]
On December 26, 1996, the trial court rendered a decision
in favor of respondent, thus:
WHEREFORE, foregoing considered, judgment is hereby
rendered ordering defendants to jointly and severally pay
plaintiff:
1) P1,930,000.00 as actual damages;
2) P2,549,000.00 as actual damages;
3) Moral damages of P150,000.00; exemplary damages of
P50,000.00 and attorneys fees of P50,000.00 and to pay
the costs.
SO ORDERED.
The trial court ratiocinated as follows:
The inventory of other materials, aside from the steel bars
and cement is found highly reliable based on first, the
affidavit of Arthur Edralin dated September 15, 1979,
personnel officer of Moreman Builders that he was
assigned with others to guard the warehouse; (Exhs. M &
O); secondly, the inventory (Exh. C) dated November 23,
1977 shows (sic) deposit of assorted materials; thirdly, that
there were items in the warehouse as of February 3, 1978
as shown in the balance sheet of Moremans stock clerk
Jose Cedilla.
Plaintiff is entitled to payment of damages for the
overhauling of materials from the construction site by Lily
Chan without the knowledge and consent of its owner.
Article 20 of the Civil Code provides:
Art. 20. Every person who contrary to law, willfully or
negligently caused damage to another, shall indemnify the
latter for the same.
As to the materials stored inside the bodega of defendant
Wilson Chan, the inventory (Exh. C) show (sic), that the
same were owned by the New Gran Hotel. Said materials
were stored by Moreman Builders Co., Inc. since it was
attested to by the warehouseman as without any lien or
encumbrances, the defendants are duty bound to release it.
Article 21 of the Civil Code provides:
Art. 21. Any person who willfully caused loss or injury to
another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the
damage.
Plaintiff is entitled to payment of actual damages based on
the inventory as of November 23, 1977 amounting to
P1,930,080.00 (Exhs. Q & Q-1). The inventory was signed
by the agent Moreman Builders Corporation and
defendants.
Plaintiff is likewise entitled to payment of 12,500 bags of
cement and 400 bundles of steel bars totaling
P2,549,000.00 (Exhs. S & S-1; Exhs. B & B-3).
Defendants should pay plaintiff moral damages of
P150,000.00; exemplary damages of P50,000.00 and
attorneys fees of P50,000.00 and to pay the costs.
The claim of defendant for payment of damages with
respect to the materials appearing in the balance sheets as
of February 3, 1978 in the amount of P3,286,690.00, not
having been established with enough preponderance of
evidence cannot be given weight.[24]
Petitioners then elevated the case to the Court of Appeals,
docketed as CA-G.R. CV No. 57323. On June 17, 1999, the
Appellate Court rendered the assailed Decision[25]
affirming in toto the trial courts judgment, ratiocinating as
follows:
Moreover, although the prayer in the complaint did not
specify the amount of damages sought, the same was
satisfactorily proved during the trial. For damages to be
awarded, it is essential that the claimant satisfactorily prove
during the trial the existence of the factual basis thereof and
its causal connection with the adverse partys act (PAL, Inc.
vs. NLRC, 259 SCRA 459. In sustaining appellees claim for
damages, the court a quo held as follows:
The Court finds the contention of plaintiff that materials and
equipment of plaintiff were stored in the warehouse of
defendants and admitted by defendants in the certification
issued to Sheriff Borja. x x x
Evidence further revealed that assorted materials owned by
the New Gran Hotel (Exh. C) were deposited in the bodega
of defendant Wilson Chan with a total market value of
P1,930,000.00, current price.
The inventory of other materials, aside from the steel bars
and cement, is highly reliable based on first, the affidavit of
Arthur Edralin dated September 15, 1979, personnel officer
of Moreman Builders; that he was assigned, with others to
guard the warehouse (Exhs. M & O); secondly, the
inventory (Exh. C) November 23, 1977 shows deposit of
assorted materials; thirdly, that there were items in the
warehouse as of February 3, 1978, as shown in the balance
sheet of Moremans stock clerk, Jose Cedilla (pp. 60-61,
Rollo).
The Court affirms the above findings.
Well settled is the rule that absent any proper reason to
depart from the rule, factual conclusions reached by the trial
6
court are not to be disturbed (People vs. Dupali, 230 SCRA
62). Hence, in the absence of any showing that serious and
substantial errors were committed by the lower court in the
appraisal of the evidence, the trial judges assessment of
the credibility of the witnesses is accorded great weight and
respect (People vs. Jain, 254 SCRA 686). And, there being
absolutely nothing on record to show that the court a quo
overlooked, disregarded, or misinterpreted facts of weight
and significance, its factual findings and conclusions must
be given great weight and should not be disturbed on
appeal.
WHEREFORE, being in accord with law and evidence, the
appealed decision is hereby AFFIRMED in toto.
Hence, this petition for review on certiorari anchored on the
following grounds:
I of Appeals are generally binding and conclusive on this
The Court of Appeals acted with grave abuse of discretion
and under a misapprehension of the law and the facts when
it affirmed in toto the award of actual damages made by the
trial court in favor of respondent in this case.
II
The awards of moral and exemplary damages of the trial
court to respondent in this case and affirmed in toto by the
Court of Appeals are unwarranted by the evidence
presented by respondent at the ex parte hearing of this
case and should, therefore, be eliminated or at least
reduced.
III
The award of attorneys fees by the trial court to respondent
in this case and affirmed by the Court of Appeals should be
deleted because of the failure of the trial court to state the
legal and factual basis of such award.
Petitioners contend inter alia that the actual damages
claimed by respondent in the present case were already
awarded to him in Civil Case No. 113498[26] and hence,
cannot be recovered by him again. Even assuming that
respondent is entitled to damages, he can not recover
P4,479,000.00 which is eleven (11) times more than the
total actual damages of P365,000.00 awarded to him in
Civil Case No. 113498.[27]
In his comment on the petition, respondent maintains that
petitioners, as depositaries under the law, have both the
fiduciary and extraordinary obligations not only to safely
keep the construction material deposited, but also to return
them with all their products, accessories and accessions,
pursuant to Articles 1972,[28] 1979,[29] 1983,[30] and
1988[31] of the Civil Code. Considering that petitioners duty
to return the construction materials in question has already
become impossible, it is only proper that the prices of those
construction materials in 1996 should be the basis of the
award of actual damages. This is the only way to fulfill the
duty to return contemplated in the applicable laws.[32]
Respondent further claims that petitioners must bear the
increase in market prices from 1977 to 1996 because
liability for fraud includes all damages which may be
reasonably attributed to the non-performance of the
obligation. Lastly, respondent insists that there can be no
double recovery because in Civil Case No. 113498,[33] the
parties were respondent himself and Moreman and the
cause of action was the rescission of their building contract.
In the present case, however, the parties are respondent
and petitioners and the cause of action between them is for
recovery of damages arising from petitioners failure to
return the construction materials and equipment.
Obviously, petitioners assigned errors call for a review of
the lower courts findings of fact.
Succinct is the rule that this Court is not a trier of facts and
does not normally undertake the re-examination of the
evidence submitted by the contending parties during the
trial of the case considering that findings of fact of the Court
Court.[34] The jurisdiction of this Court in a petition for
review on certiorari is limited to reviewing only errors of
law,[35] not of fact, unless it is shown, inter alia, that: (1) the
conclusion is a finding grounded on speculations, surmises
or conjectures; (2) the inference is manifestly mistaken,
absurd and impossible; (3) there is grave abuse of
discretion; (4) the judgment is based on misapprehension of
facts; (5) the findings of fact are conflicting; and (6) the
Court of Appeals, in making its findings went beyond the
issues of the case and the same is contrary to the
admission of both parties.[36]
Petitioners submit that this case is an exception to the
general rule since both the trial court and the Court of
Appeals based their judgments on misapprehension of
facts.
We agree.
At the outset, the case should have been dismissed outright
by the trial court because of patent procedural infirmities. It
bears stressing that the case was originally filed on
December 11, 1985. Four (4) years thereafter, or on August
25, 1989, the case was dismissed for respondents failure to
prosecute. Five (5) years after, or on September 6, 1994,
respondent filed his motion for reconsideration. From here,
the trial court already erred in its ruling because it should
have dismissed the motion for reconsideration outright as it
was filed far beyond the fifteen-day reglementary
period.[37] Worse, when respondent filed his second
motion for reconsideration on October 14, 1994, a
prohibited pleading,[38] the trial court still granted the same
and reinstated the case on January 10, 1995. This is a
glaring gross procedural error committed by both the trial
court and the Court of Appeals.
Even without such serious procedural flaw, the case should
also be dismissed for utter lack of merit.
It must be stressed that respondents claim for damages is
based on petitioners failure to return or to release to him the
construction materials and equipment deposited by
Moreman to their warehouse. Hence, the essential issues
to be resolved are: (1) Has respondent presented proof that
the construction materials and equipment were actually in
7
petitioners warehouse when he asked that the same be
turned over to him? (2) If so, does respondent have the
right to demand the release of the said materials and
equipment or claim for damages?
Under Article 1311 of the Civil Code, contracts are binding
upon the parties (and their assigns and heirs) who execute
them. When there is no privity of contract, there is likewise
no obligation or liability to speak about and thus no cause of
action arises. Specifically, in an action against the
depositary, the burden is on the plaintiff to prove the
bailment or deposit and the performance of conditions
precedent to the right of action.[39] A depositary is obliged
to return the thing to the depositor, or to his heirs or
successors, or to the person who may have been
designated in the contract. [40]
or equipment in petitioners warehouse when respondent
made a demand for their return, we hold that he has no
right whatsoever to claim for damages.
As we stressed in the beginning, a judgment of default does
not automatically imply admission by the defendant of
plaintiffs causes of action. Here, the trial court merely
adopted respondents allegations in his complaint and
evidence without evaluating them with the highest degree of
objectivity and certainty.
WHEREFORE, the petition is GRANTED. The challenged
Decision of the Court of Appeals dated June 17, 1999 is
REVERSED and SET ASIDE. Costs against respondent.
SO ORDERED.

In the present case, the record is bereft of any contract of

deposit, oral or written, between petitioners and
respondent. If at all, it was only between petitioners and
Moreman. And granting arguendo that there was indeed a
contract of deposit between petitioners and Moreman, it is
still incumbent upon respondent to prove its existence and
that it was executed in his favor. However, respondent
miserably failed to do so. The only pieces of evidence
respondent presented to prove the contract of deposit were
the delivery receipts.[41] Significantly, they are unsigned
and not duly received or authenticated by either Moreman,
petitioners or respondent or any of their authorized
representatives. Hence, those delivery receipts have no
probative value at all. While our laws grant a person the
remedial right to prosecute or institute a civil action against
another for the enforcement or protection of a right, or the
prevention or redress of a wrong,[42] every cause of action
ex-contractu must be founded upon a contract, oral or
written, express or implied.

Moreover, respondent also failed to prove that there were

construction materials and equipment in petitioners
warehouse at the time he made a demand for their return.

Considering that respondent failed to prove (1) the

existence of any contract of deposit between him and
petitioners, nor between the latter and Moreman in his
favor, and (2) that there were construction materials in
petitioners warehouse at the time of respondents demand
to return the same, we hold that petitioners have no
corresponding obligation or liability to respondent with
respect to those construction materials.

Anent the issue of damages, petitioners are still not liable

because, as expressly provided for in Article 2199 of the
Civil Code,[43] actual or compensatory damages cannot be
presumed, but must be proved with reasonable degree of
certainty. A court cannot rely on speculations, conjectures,
or guesswork as to the fact and amount of damages, but
must depend upon competent proof that they have been
suffered by the injured party and on the best obtainable
evidence of the actual amount thereof. It must point out
specific facts which could afford a basis for measuring
whatever compensatory or actual damages are borne.[44]

Considering our findings that there was no contract of

deposit between petitioners and respondent or Moreman
and that actually there were no more construction materials

8
G.R. No. 90027 March 3, 1993
CA AGRO-INDUSTRIAL DEVELOPMENT CORP.,
petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SECURITY
BANK AND TRUST COMPANY, respondents.
Dolorfino & Dominguez Law Offices for petitioner.
Danilo B. Banares for private respondent.
DAVIDE, JR., J.:
Is the contractual relation between a commercial bank and
another party in a contract of rent of a safety deposit box
with respect to its contents placed by the latter one of bailor
and bailee or one of lessor and lessee?
This is the crux of the present controversy.
On 3 July 1979, petitioner (through its President, Sergio
Aguirre) and the spouses Ramon and Paula Pugao entered
into an agreement whereby the former purchased from the
latter two (2) parcels of land for a consideration of
P350,625.00. Of this amount, P75,725.00 was paid as
downpayment while the balance was covered by three (3)
postdated checks. Among the terms and conditions of the
agreement embodied in a Memorandum of True and Actual
Agreement of Sale of Land were that the titles to the lots
shall be transferred to the petitioner upon full payment of
the purchase price and that the owner's copies of the
certificates of titles thereto, Transfer Certificates of Title
(TCT) Nos. 284655 and 292434, shall be deposited in a
safety deposit box of any bank. The same could be
withdrawn only upon the joint signatures of a representative
of the petitioner and the Pugaos upon full payment of the
purchase price. Petitioner, through Sergio Aguirre, and the
Pugaos then rented Safety Deposit Box No. 1448 of private
respondent Security Bank and Trust Company, a domestic
banking corporation hereinafter referred to as the
respondent Bank. For this purpose, both signed a contract
of lease (Exhibit "2") which contains, inter alia, the following
conditions:
13. The bank is not a depositary of the contents of the
safe and it has neither the possession nor control of the
same.
14. The bank has no interest whatsoever in said
contents, except herein expressly provided, and it assumes
absolutely no liability in connection therewith.1
After the execution of the contract, two (2) renter's keys
were given to the renters — one to Aguirre (for the
petitioner) and the other to the Pugaos. A guard key
remained in the possession of the respondent Bank. The
safety deposit box has two (2) keyholes, one for the guard
key and the other for the renter's key, and can be opened
only with the use of both keys. Petitioner claims that the
certificates of title were placed inside the said box.
Thereafter, a certain Mrs. Margarita Ramos offered to buy
from the petitioner the two (2) lots at a price of P225.00 per
square meter which, as petitioner alleged in its complaint,
translates to a profit of P100.00 per square meter or a total
of P280,500.00 for the entire property. Mrs. Ramos
demanded the execution of a deed of sale which
necessarily entailed the production of the certificates of title.
In view thereof, Aguirre, accompanied by the Pugaos, then
proceeded to the respondent Bank on 4 October 1979 to
open the safety deposit box and get the certificates of title.
However, when opened in the presence of the Bank's
representative, the box yielded no such certificates.
Because of the delay in the reconstitution of the title, Mrs.
Ramos withdrew her earlier offer to purchase the lots; as a
consequence thereof, the petitioner allegedly failed to
realize the expected profit of P280,500.00. Hence, the latter
filed on 1 September 1980 a complaint2 for damages
against the respondent Bank with the Court of First
Instance (now Regional Trial Court) of Pasig, Metro Manila
which docketed the same as Civil Case No. 38382.
In its Answer with Counterclaim,3 respondent Bank alleged
that the petitioner has no cause of action because of
paragraphs 13 and 14 of the contract of lease (Exhibit "2");
corollarily, loss of any of the items or articles contained in
the box could not give rise to an action against it. It then
interposed a counterclaim for exemplary damages as well
as attorney's fees in the amount of P20,000.00. Petitioner
subsequently filed an answer to the counterclaim.4
In due course, the trial court, now designated as Branch
161 of the Regional Trial Court (RTC) of Pasig, Metro
Manila, rendered a decision5 adverse to the petitioner on 8
December 1986, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered dismissing plaintiff's complaint.
On defendant's counterclaim, judgment is hereby rendered
ordering plaintiff to pay defendant the amount of FIVE
THOUSAND (P5,000.00) PESOS as attorney's fees.
With costs against plaintiff.6
The unfavorable verdict is based on the trial court's
conclusion that under paragraphs 13 and 14 of the contract
of lease, the Bank has no liability for the loss of the
certificates of title. The court declared that the said
provisions are binding on the parties.
Its motion for reconsideration7 having been denied,
petitioner appealed from the adverse decision to the
respondent Court of Appeals which docketed the appeal as
CA-G.R. CV No. 15150. Petitioner urged the respondent
Court to reverse the challenged decision because the trial
court erred in (a) absolving the respondent Bank from
liability from the loss, (b) not declaring as null and void, for
being contrary to law, public order and public policy, the
provisions in the contract for lease of the safety deposit box
absolving the Bank from any liability for loss, (c) not
concluding that in this jurisdiction, as well as under
American jurisprudence, the liability of the Bank is settled
and (d) awarding attorney's fees to the Bank and denying
the petitioner's prayer for nominal and exemplary damages
and attorney's fees.8
9
In its Decision promulgated on 4 July 1989,9 respondent
Court affirmed the appealed decision principally on the
theory that the contract (Exhibit "2") executed by the
petitioner and respondent Bank is in the nature of a contract
of lease by virtue of which the petitioner and its co-renter
were given control over the safety deposit box and its
contents while the Bank retained no right to open the said
box because it had neither the possession nor control over
it and its contents. As such, the contract is governed by
Article 1643 of the Civil Code 10 which provides:
Art. 1643. In the lease of things, one of the parties
binds himself to give to another the enjoyment or use of a
thing for a price certain, and for a period which may be
definite or indefinite. However, no lease for more than
ninety-nine years shall be valid.
It invoked Tolentino vs. Gonzales 11 — which held that the
owner of the property loses his control over the property
leased during the period of the contract — and Article 1975
of the Civil Code which provides:
Art. 1975. The depositary holding certificates, bonds,
securities or instruments which earn interest shall be bound
to collect the latter when it becomes due, and to take such
steps as may be necessary in order that the securities may
preserve their value and the rights corresponding to them
according to law.
The above provision shall not apply to contracts for the rent
of safety deposit boxes.
and then concluded that "[c]learly, the defendant-appellee is
not under any duty to maintain the contents of the box. The
stipulation absolving the defendant-appellee from liability is
in accordance with the nature of the contract of lease and
cannot be regarded as contrary to law, public order and
public policy." 12 The appellate court was quick to add,
however, that under the contract of lease of the safety
deposit box, respondent Bank is not completely free from
liability as it may still be made answerable in case
unauthorized persons enter into the vault area or when the
rented box is forced open. Thus, as expressly provided for
in stipulation number 8 of the contract in question:
8. The Bank shall use due diligence that no
unauthorized person shall be admitted to any rented safe
and beyond this, the Bank will not be responsible for the
contents of any safe rented from it. 13
Its motion for reconsideration 14 having been denied in the
respondent Court's Resolution of 28 August 1989, 15
petitioner took this recourse under Rule 45 of the Rules of
Court and urges Us to review and set aside the respondent
Court's ruling. Petitioner avers that both the respondent
Court and the trial court (a) did not properly and legally
apply the correct law in this case, (b) acted with grave
abuse of discretion or in excess of jurisdiction amounting to
lack thereof and (c) set a precedent that is contrary to, or is
a departure from precedents adhered to and affirmed by
decisions of this Court and precepts in American
jurisprudence adopted in the Philippines. It reiterates the
arguments it had raised in its motion to reconsider the trial
court's decision, the brief submitted to the respondent Court
and the motion to reconsider the latter's decision. In a
nutshell, petitioner maintains that regardless of
nomenclature, the contract for the rent of the safety deposit
box (Exhibit "2") is actually a contract of deposit governed
by Title XII, Book IV of the Civil Code of the
Philippines. 16 Accordingly, it is claimed that the
respondent Bank is liable for the loss of the certificates of
title pursuant to Article 1972 of the said Code which
provides:
Art. 1972. The depositary is obliged to keep the thing
safely and to return it, when required, to the depositor, or to
his heirs and successors, or to the person who may have
been designated in the contract. His responsibility, with
regard to the safekeeping and the loss of the thing, shall be
governed by the provisions of Title I of this Book.
If the deposit is gratuitous, this fact shall be taken into
account in determining the degree of care that the
depositary must observe.
Petitioner then quotes a passage from American
Jurisprudence 17 which is supposed to expound on the
prevailing rule in the United States, to wit:
The prevailing rule appears to be that where a safe-deposit
company leases a safe-deposit box or safe and the lessee
takes possession of the box or safe and places therein his
securities or other valuables, the relation of bailee and bail
or is created between the parties to the transaction as to
such securities or other valuables; the fact that the
safe-deposit company does not know, and that it is not
expected that it shall know, the character or description of
the property which is deposited in such safe-deposit box or
safe does not change that relation. That access to the
contents of the safe-deposit box can be had only by the use
of a key retained by the lessee ( whether it is the sole key
or one to be used in connection with one retained by the
lessor) does not operate to alter the foregoing rule. The
argument that there is not, in such a case, a delivery of
exclusive possession and control to the deposit company,
and that therefore the situation is entirely different from that
of ordinary bailment, has been generally rejected by the
courts, usually on the ground that as possession must be
either in the depositor or in the company, it should
reasonably be considered as in the latter rather than in the
former, since the company is, by the nature of the contract,
given absolute control of access to the property, and the
depositor cannot gain access thereto without the consent
and active participation of the company. . . . (citations
omitted).
and a segment from Words and Phrases 18 which states
that a contract for the rental of a bank safety deposit box in
consideration of a fixed amount at stated periods is a
bailment for hire.
Petitioner further argues that conditions 13 and 14 of the
questioned contract are contrary to law and public policy
and should be declared null and void. In support thereof, it
cites Article 1306 of the Civil Code which provides that
parties to a contract may establish such stipulations,
clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals,
good customs, public order or public policy.
10
After the respondent Bank filed its comment, this Court
gave due course to the petition and required the parties to
simultaneously submit their respective Memoranda.
The petition is partly meritorious.
We agree with the petitioner's contention that the contract
for the rent of the safety deposit box is not an ordinary
contract of lease as defined in Article 1643 of the Civil
Code. However, We do not fully subscribe to its view that
the same is a contract of deposit that is to be strictly
governed by the provisions in the Civil Code on deposit; 19
the contract in the case at bar is a special kind of deposit. It
cannot be characterized as an ordinary contract of lease
under Article 1643 because the full and absolute
possession and control of the safety deposit box was not
given to the joint renters — the petitioner and the Pugaos.
The guard key of the box remained with the respondent
Bank; without this key, neither of the renters could open the
box. On the other hand, the respondent Bank could not
likewise open the box without the renter's key. In this case,
the said key had a duplicate which was made so that both
renters could have access to the box.
Hence, the authorities cited by the respondent Court 20 on
this point do not apply. Neither could Article 1975, also
relied upon by the respondent Court, be invoked as an
argument against the deposit theory. Obviously, the first
paragraph of such provision cannot apply to a depositary of
certificates, bonds, securities or instruments which earn
interest if such documents are kept in a rented safety
deposit box. It is clear that the depositary cannot open the
box without the renter being present.
We observe, however, that the deposit theory itself does
not altogether find unanimous support even in American
jurisprudence. We agree with the petitioner that under the
latter, the prevailing rule is that the relation between a bank
renting out safe-deposit boxes and its customer with
respect to the contents of the box is that of a bail or and
bailee, the bailment being for hire and mutual benefit. 21
This is just the prevailing view because:
There is, however, some support for the view that the
relationship in question might be more properly
characterized as that of landlord and tenant, or lessor and
lessee. It has also been suggested that it should be
characterized as that of licensor and licensee. The relation
between a bank, safe-deposit company, or storage
company, and the renter of a safe-deposit box therein, is
often described as contractual, express or implied, oral or
written, in whole or in part. But there is apparently no
jurisdiction in which any rule other than that applicable to
bailments governs questions of the liability and rights of the
parties in respect of loss of the contents of safe-deposit
boxes. 22 (citations omitted)
In the context of our laws which authorize banking
institutions to rent out safety deposit boxes, it is clear that in
this jurisdiction, the prevailing rule in the United States has
been adopted. Section 72 of the General Banking Act 23
pertinently provides:
Sec. 72. In addition to the operations specifically authorized
elsewhere in this Act, banking institutions other than
building and loan associations may perform the following
services:
(a) Receive in custody funds, documents, and
valuable objects, and rent safety deposit boxes for the
safeguarding of such effects.
xxx xxx xxx
The banks shall perform the services permitted under
subsections (a), (b) and (c) of this section as depositories or
as agents. . . . 24 (emphasis supplied)
Note that the primary function is still found within the
parameters of a contract of deposit, i.e., the receiving in
custody of funds, documents and other valuable objects for
safekeeping. The renting out of the safety deposit boxes is
not independent from, but related to or in conjunction with,
this principal function. A contract of deposit may be entered
into orally or in writing 25 and, pursuant to Article 1306 of
the Civil Code, the parties thereto may establish such
stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law,
morals, good customs, public order or public policy. The
depositary's responsibility for the safekeeping of the objects
deposited in the case at bar is governed by Title I, Book IV
of the Civil Code. Accordingly, the depositary would be
liable if, in performing its obligation, it is found guilty of
fraud, negligence, delay or contravention of the tenor of the
agreement. 26 In the absence of any stipulation prescribing
the degree of diligence required, that of a good father of a
family is to be observed. 27 Hence, any stipulation
exempting the depositary from any liability arising from the
loss of the thing deposited on account of fraud, negligence
or delay would be void for being contrary to law and public
policy. In the instant case, petitioner maintains that
conditions 13 and 14 of the questioned contract of lease of
the safety deposit box, which read:
13. The bank is not a depositary of the contents of the
safe and it has neither the possession nor control of the
same.
14. The bank has no interest whatsoever in said
contents, except herein expressly provided, and it assumes
absolutely no liability in connection therewith. 28
are void as they are contrary to law and public policy. We
find Ourselves in agreement with this proposition for
indeed, said provisions are inconsistent with the respondent
Bank's responsibility as a depositary under Section 72(a) of
the General Banking Act. Both exempt the latter from any
liability except as contemplated in condition 8 thereof which
limits its duty to exercise reasonable diligence only with
respect to who shall be admitted to any rented safe, to wit:
8. The Bank shall use due diligence that no
unauthorized person shall be admitted to any rented safe
and beyond this, the Bank will not be responsible for the
contents of any safe rented from it. 29
Furthermore, condition 13 stands on a wrong premise and
is contrary to the actual practice of the Bank. It is not
correct to assert that the Bank has neither the possession
nor control of the contents of the box since in fact, the
11
safety deposit box itself is located in its premises and is subject to the pronouncement We made above on the
under its absolute control; moreover, the respondent Bank nature of the relationship between the parties in a contract
keeps the guard key to the said box. As stated earlier, of lease of safety deposit boxes, the dispositive portion of
renters cannot open their respective boxes unless the Bank the said Decision is hereby AFFIRMED and the instant
cooperates by presenting and using this guard key. Clearly Petition for Review is otherwise DENIED for lack of merit.
then, to the extent above stated, the foregoing conditions in
the contract in question are void and ineffective. It has been No pronouncement as to costs.
said:
SO ORDERED.
With respect to property deposited in a safe-deposit box by
a customer of a safe-deposit company, the parties, since
the relation is a contractual one, may by special contract
define their respective duties or provide for increasing or
limiting the liability of the deposit company, provided such
contract is not in violation of law or public policy. It must
clearly appear that there actually was such a special
contract, however, in order to vary the ordinary obligations
implied by law from the relationship of the parties; liability of
the deposit company will not be enlarged or restricted by
words of doubtful meaning. The company, in renting
safe-deposit boxes, cannot exempt itself from liability for
loss of the contents by its own fraud or negligence or that of
its agents or servants, and if a provision of the contract may
be construed as an attempt to do so, it will be held
ineffective for the purpose. Although it has been held that
the lessor of a safe-deposit box cannot limit its liability for
loss of the contents thereof through its own negligence, the
view has been taken that such a lessor may limits its liability
to some extent by agreement or stipulation. 30 (citations
omitted)

Thus, we reach the same conclusion which the Court of

Appeals arrived at, that is, that the petition should be
dismissed, but on grounds quite different from those relied
upon by the Court of Appeals. In the instant case, the
respondent Bank's exoneration cannot, contrary to the
holding of the Court of Appeals, be based on or proceed
from a characterization of the impugned contract as a
contract of lease, but rather on the fact that no competent
proof was presented to show that respondent Bank was
aware of the agreement between the petitioner and the
Pugaos to the effect that the certificates of title were
withdrawable from the safety deposit box only upon both
parties' joint signatures, and that no evidence was
submitted to reveal that the loss of the certificates of title
was due to the fraud or negligence of the respondent Bank.
This in turn flows from this Court's determination that the
contract involved was one of deposit. Since both the
petitioner and the Pugaos agreed that each should have
one (1) renter's key, it was obvious that either of them could
ask the Bank for access to the safety deposit box and, with
the use of such key and the Bank's own guard key, could
open the said box, without the other renter being present.

Since, however, the petitioner cannot be blamed for the

filing of the complaint and no bad faith on its part had been
established, the trial court erred in condemning the
petitioner to pay the respondent Bank attorney's fees. To
this extent, the Decision (dispositive portion) of public
respondent Court of Appeals must be modified.

WHEREFORE, the Petition for Review is partially

GRANTED by deleting the award for attorney's fees from
the 4 July 1989 Decision of the respondent Court of
Appeals in CA-G.R. CV No. 15150. As modified, and

12
G.R. No. 102970 May 13, 1993
LUZAN SIA, petitioner,
vs.
COURT OF APPEALS and SECURITY BANK and TRUST
COMPANY, respondents.
Asuncion Law Offices for petitioner.
Cauton, Banares, Carpio & Associates for private
respondent.
DAVIDE, JR., J.:
The Decision of public respondent Court of Appeals in CA-
G.R. CV No. 26737, promulgated on 21 August 1991,1
reversing and setting aside the Decision, dated 19 February
1990, 2 of Branch 47 of the Regional Trial Court (RTC) of
Manila in Civil Case No. 87-42601, entitled "LUZAN SIA vs.
SECURITY BANK and TRUST CO.," is challenged in this
petition for review on certiorari under Rule 45 of the Rules
Court.
Civil Case No. 87-42601 is an action for damages arising
out of the destruction or loss of the stamp collection of the
plaintiff (petitioner herein) contained in Safety Deposit Box
No. 54 which had been rented from the defendant pursuant
to a contract denominated as a Lease Agreement. 3
Judgment therein was rendered in favor of the dispositive
portion of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiff and against the defendant,
Security Bank & Trust Company, ordering the defendant
bank to pay the plaintiff the sum of —
a) Twenty Thousand Pesos (P20,000.00), Philippine
Currency, as actual damages;
b) One Hundred Thousand Pesos (P100,000.00),
Philippine Currency, as moral damages; and
c) Five Thousand Pesos (P5,000.00), Philippine
Currency, as attorney's fees and legal expenses.
The counterclaim set up by the defendant are hereby
dismissed for lack of merit.
No costs.
SO ORDERED.4
The antecedent facts of the present controversy are
summarized by the public respondent in its challenged
decision as follows:
The plaintiff rented on March 22, 1985 the Safety Deposit
Box No. 54 of the defendant bank at its Binondo Branch
located at the Fookien Times Building, Soler St., Binondo,
Manila wherein he placed his collection of stamps. The said
safety deposit box leased by the plaintiff was at the bottom
or at the lowest level of the safety deposit boxes of the
defendant bank at its aforesaid Binondo Branch.
During the floods that took place in 1985 and 1986,
floodwater entered into the defendant bank's premises,
seeped into the safety deposit box leased by the plaintiff
and caused, according to the plaintiff, damage to his
stamps collection. The defendant bank rejected the
plaintiff's claim for compensation for his damaged stamps
collection, so, the plaintiff instituted an action for damages
against the defendant bank.
The defendant bank denied liability for the damaged stamps
collection of the plaintiff on the basis of the "Rules and
Regulations Governing the Lease of Safe Deposit Boxes"
(Exhs. "A-1", "1-A"), particularly paragraphs 9 and 13, which
reads (sic):
"9. The liability of the Bank by reason of the lease, is
limited to the exercise of the diligence to prevent the
opening of the safe by any person other than the Renter,
his authorized agent or legal representative;
xxx xxx xxx
"13. The Bank is not a depository of the contents of the
safe and it has neither the possession nor the control of the
same. The Bank has no interest whatsoever in said
contents, except as herein provided, and it assumes
absolutely no liability in connection therewith."
The defendant bank also contended that its contract with
the plaintiff over safety deposit box No. 54 was one of lease
and not of deposit and, therefore, governed by the lease
agreement (Exhs. "A", "L") which should be the applicable
law; that the destruction of the plaintiff's stamps collection
was due to a calamity beyond obligation on its part to notify
the plaintiff about the floodwaters that inundated its
premises at Binondo branch which allegedly seeped into
the safety deposit box leased to the plaintiff.
The trial court then directed that an ocular inspection on
(sic) the contents of the safety deposit box be conducted,
which was done on December 8, 1988 by its clerk of court
in the presence of the parties and their counsels. A report
thereon was then submitted on December 12, 1988
(Records, p. 98-A) and confirmed in open court by both
parties thru counsel during the hearing on the same date
(Ibid., p. 102) stating:
"That the Safety Box Deposit No. 54 was opened by both
plaintiff Luzan Sia and the Acting Branch Manager Jimmy
B. Ynion in the presence of the undersigned, plaintiff's and
defendant's counsel. Said Safety Box when opened
contains two albums of different sizes and thickness, length
and width and a tin box with printed word 'Tai Ping Shiang
Roast Pork in pieces with Chinese designs and character."
Condition of the above-stated Items —
"Both albums are wet, moldy and badly damaged.
1. The first album measures 10 1/8 inches in length, 8
inches in width and 3/4 in thick. The leaves of the album are
attached to every page and cannot be lifted without
destroying it, hence the stamps contained therein are no
longer visible.
13
2. The second album measure 12 1/2 inches in
length, 9 3/4 in width 1 inch thick. Some of its pages can
still be lifted. The stamps therein can still be distinguished
but beyond restoration. Others have lost its original form.
3. The tin box is rusty inside. It contains an album
with several pieces of papers stuck up to the cover of the
box. The condition of the album is the second
abovementioned album."5
The SECURITY BANK AND TRUST COMPANY,
hereinafter referred to as SBTC, appealed the trial court's
decision to the public respondent Court of Appeals. The
appeal was docketed as CA-G.R. CV No. 26737.
In urging the public respondent to reverse the decision of
the trial court, SBTC contended that the latter erred in (a)
holding that the lease agreement is a contract of adhesion;
(b) finding that the defendant had failed to exercise the
required diligence expected of a bank in maintaining the
safety deposit box; (c) awarding to the plaintiff actual
damages in the amount of P20,000.00, moral damages in
the amount of P100,000.00 and attorney's fees and legal
expenses in the amount of P5,000.00; and (d) dismissing
the counterclaim.
On 21 August 1991, the respondent promulgated its
decision the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby
REVERSED and instead the appellee's complaint is hereby
DISMISSED. The appellant bank's counterclaim is likewise
DISMISSED. No costs.6
In reversing the trial court's decision and absolving SBTC
from liability, the public respondent found and ruled that:
a) the fine print in the "Lease Agreement " (Exhibits
"A" and "1" ) constitutes the terms and conditions of the
contract of lease which the appellee (now petitioner) had
voluntarily and knowingly executed with SBTC;
b) the contract entered into by the parties regarding
Safe Deposit Box No. 54 was not a contract of deposit
wherein the bank became a depositary of the subject stamp
collection; hence, as contended by SBTC, the provisions of
Book IV, Title XII of the Civil Code on deposits do not apply;
c) The following provisions of the questioned lease
agreement of the safety deposit box limiting SBTC's liability:
9. The liability of the bank by reason of the lease, is
limited to the exercise of the diligence to prevent the
opening of the Safe by any person other than the Renter,
his authorized agent or legal representative.
xxx xxx xxx
13. The bank is not a depository of the contents of the
Safe and it has neither the possession nor the control of the
same. The Bank has no interest whatsoever in said
contents, except as herein provided, and it assumes
absolutely no liability in connection therewith.
are valid since said stipulations are not contrary to law,
morals, good customs, public order or public policy; and
d) there is no concrete evidence to show that SBTC
failed to exercise the required diligence in maintaining the
safety deposit box; what was proven was that the floods of
1985 and 1986, which were beyond the control of SBTC,
caused the damage to the stamp collection; said floods
were fortuitous events which SBTC should not be held
liable for since it was not shown to have participated in the
aggravation of the damage to the stamp collection; on the
contrary, it offered its services to secure the assistance of
an expert in order to save most of the stamps, but the
appellee refused; appellee must then bear the lose under
the principle of "res perit domino."
Unsuccessful in his bid to have the above decision
reconsidered by the public respondent, 7 petitioner filed the
instant petition wherein he contends that:
I
IT WAS A GRAVE ERROR OR AN ABUSE OF
DISCRETION ON THE PART OF THE RESPONDENT
COURT WHEN IT RULED THAT RESPONDENT SBTC
DID NOT FAIL TO EXERCISE THE REQUIRED
DILIGENCE IN MAINTAINING THE SAFETY DEPOSIT
BOX OF THE PETITIONER CONSIDERING THAT
SUBSTANTIAL EVIDENCE EXIST (sic) PROVING THE
CONTRARY.
II
THE RESPONDENT COURT SERIOUSLY ERRED IN
EXCULPATING PRIVATE RESPONDENT FROM ANY
LIABILITY WHATSOEVER BY REASON OF THE
PROVISIONS OF PARAGRAPHS 9 AND 13 OF THE
AGREEMENT (EXHS. "A" AND "A-1").
III
THE RESPONDENT COURT SERIOUSLY ERRED IN NOT
UPHOLDING THE AWARDS OF THE TRIAL COURT FOR
ACTUAL AND MORAL DAMAGES, INCLUDING
ATTORNEY'S FEES AND LEGAL EXPENSES, IN FAVOR
OF THE PETITIONER.8
We subsequently gave due course the petition and required
both parties to submit their respective memoranda, which
they complied with.9
Petitioner insists that the trial court correctly ruled that
SBTC had failed "to exercise the required diligence
expected of a bank maintaining such safety deposit box . . .
in the light of the environmental circumstance of said safety
deposit box after the floods of 1985 and 1986." He argues
that such a conclusion is supported by the evidence on
record, to wit: SBTC was fully cognizant of the exact
location of the safety deposit box in question; it knew that
the premises were inundated by floodwaters in 1985 and
1986 and considering that the bank is guarded twenty-four
(24) hours a day , it is safe to conclude that it was also
aware of the inundation of the premises where the safety
deposit box was located; despite such knowledge, however,
it never bothered to inform the petitioner of the flooding or
14
take any appropriate measures to insure the safety and
good maintenance of the safety deposit box in question.
SBTC does not squarely dispute these facts; rather, it relies
on the rule that findings of facts of the Court of Appeals,
when supported by substantial exidence, are not reviewable
on appeal by certiorari. 10
The foregoing rule is, of course, subject to certain
exceptions such as when there exists a disparity between
the factual findings and conclusions of the Court of Appeals
and the trial court. 11 Such a disparity obtains in the
present case.
As We see it, SBTC's theory, which was upheld by the
public respondent, is that the "Lease Agreement " covering
Safe Deposit Box No. 54 (Exhibit "A and "1") is just that —
a contract of lease — and not a contract of deposit, and that
paragraphs 9 and 13 thereof, which expressly limit the
bank's liability as follows:
9. The liability of the bank by reason of the lease, is
limited to the exercise of the diligence to prevent the
opening of the Safe by any person other than the Renter,
his autliorized agent or legal representative;
xxx xxx xxx
13. The bank is not a depository of the contents of the
Safe and it has neither the possession nor the control of the
same. The Bank has no interest whatsoever said contents,
except as herein provided, and it assumes absolutely no
liability in connection therewith. 12
are valid and binding upon the parties. In the challenged
decision, the public respondent further avers that even
without such a limitation of liability, SBTC should still be
absolved from any responsibility for the damage sustained
by the petitioner as it appears that such damage was
occasioned by a fortuitous event and that the respondent
bank was free from any participation in the aggravation of
the injury.
We cannot accept this theory and ratiocination.
Consequently, this Court finds the petition to be impressed
with merit.
In the recent case CA Agro-Industrial Development Corp.
vs. Court of Appeals, 13 this Court explicitly rejected the
contention that a contract for the use of a safety deposit box
is a contract of lease governed by Title VII, Book IV of the
Civil Code. Nor did We fully subscribe to the view that it is a
contract of deposit to be strictly governed by the Civil Code
provision on deposit; 14 it is, as We declared, a special kind
of deposit. The prevailing rule in American jurisprudence —
that the relation between a bank renting out safe deposit
boxes and its customer with respect to the contents of the
box is that of a bailor and bailee, the bailment for hire and
mutual benefit 15 — has been adopted in this jurisdiction,
thus:
In the context of our laws which authorize banking
institutions to rent out safety deposit boxes, it is clear that in
this jurisdiction, the prevailing rule in the United States has
been adopted. Section 72 of the General Banking Act [R.A.
337, as amended] pertinently provides:
"Sec. 72. In addition to the operations specifically
authorized elsewhere in this Act, banking institutions other
than building and loan associations may perform the
following services:
(a) Receive in custody funds, documents, and
valuable objects, and rent safety deposit boxes for the
safequarding of such effects.
xxx xxx xxx
The banks shall perform the services permitted under
subsections (a), (b) and (c) of this section as depositories or
as agents. . . ."(emphasis supplied)
Note that the primary function is still found within the
parameters of a contract of deposit, i.e., the receiving in
custody of funds, documents and other valuable objects for
safekeeping. The renting out of the safety deposit boxes is
not independent from, but related to or in conjunction with,
this principal function. A contract of deposit may be entered
into orally or in writing (Art. 1969, Civil Code] and, pursuant
to Article 1306 of the Civil Code, the parties thereto may
establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or
public policy. The depositary's responsibility for the
safekeeping of the objects deposited in the case at bar is
governed by Title I, Book IV of the Civil Code. Accordingly,
the depositary would be liable if, in performing its obligation,
it is found guilty of fraud, negligence, delay or contravention
of the tenor of the agreement [Art. 1170, id.]. In the absence
of any stipulation prescribing the degree of diligence
required, that of a good father of a family is to be observed
[Art. 1173, id.]. Hence, any stipulation exempting the
depositary from any liability arising from the loss of the thing
deposited on account of fraud, negligence or delay would
be void for being contrary to law and public policy. In the
instant case, petitioner maintains that conditions 13 and l4
of the questioned contract of lease of the safety deposit
box, which read:
"13. The bank is a depositary of the contents of the safe
and it has neither the possession nor control of the same.
"14. The bank has no interest whatsoever in said
contents, except as herein expressly provided, and it
assumes absolutely no liability in connection therewith."
are void as they are contrary to law and public policy. We
find Ourselves in agreement with this proposition for
indeed, said provisions are inconsistent with the respondent
Bank's responsibility as a depositary under Section 72 (a) of
the General Banking Act. Both exempt the latter from any
liability except as contemplated in condition 8 thereof which
limits its duty to exercise reasonable diligence only with
respect to who shall be admitted to any rented safe, to wit:
"8. The Bank shall use due diligence that no
unauthorized person shall be admitted to any rented safe
and beyond this, the Bank will not be responsible for the
contents of any safe rented from it."
15
Furthermore condition 13 stands on a wrong premise and is
contrary to the actual practice of the Bank. It is not correct
to assert that the Bank has neither the possession nor
control of the contents of the box since in fact, the safety
deposit box itself is located in its premises and is under its
absolute control; moreover, the respondent Bank keeps the
guard key to the said box. As stated earlier, renters cannot
open their respective boxes unless the Bank cooperates by
presenting and using this guard key. Clearly then, to the
extent above stated, the foregoing conditions in the contract
in question are void and ineffective. It has been said:
"With respect to property deposited in a safe-deposit box by
a customer of a safe-deposit company, the parties, since
the relation is a contractual one, may by special contract
define their respective duties or provide for increasing or
limiting the liability of the deposit company, provided such
contract is not in violation of law or public policy. It must
clearly appear that there actually was such a special
contract, however, in order to vary the ordinary obligations
implied by law from the relationship of the parties; liability of
the deposit company will not be enlarged or restricted by
words of doubtful meaning. The company, in renting safe-
deposit boxes, cannot exempt itself from liability for loss of
the contents by its own fraud or negligence or that, of its
agents or servants, and if a provision of the contract may be
construed as an attempt to do so, it will be held ineffective
for the purpose. Although it has been held that the lessor of
a safe-deposit box cannot limit its liability for loss of the
contents thereof through its own negligence, the view has
been taken that such a lessor may limit its liability to some
extent by agreement or stipulation ."[10 AM JUR 2d., 466].
(citations omitted) 16
It must be noted that conditions No. 13 and No. 14 in the
Contract of Lease of Safety Deposit Box in CA Agro-
Industrial Development Corp. are strikingly similar to
condition No. 13 in the instant case. On the other hand,
both condition No. 8 in CA Agro-Industrial Development
Corp. and condition No. 9 in the present case limit the
scope of the exercise of due diligence by the banks
involved to merely seeing to it that only the renter, his
authorized agent or his legal representative should open or
have access to the safety deposit box. In short, in all other
situations, it would seem that SBTC is not bound to
exercise diligence of any kind at all. Assayed in the light of
Our aforementioned pronouncements in CA Agro-lndustrial
Development Corp., it is not at all difficult to conclude that
both conditions No. 9 and No. 13 of the "Lease Agreement"
covering the safety deposit box in question (Exhibits "A"
and "1") must be stricken down for being contrary to law
and public policy as they are meant to exempt SBTC from
any liability for damage, loss or destruction of the contents
of the safety deposit box which may arise from its own or its
agents' fraud, negligence or delay. Accordingly, SBTC
cannot take refuge under the said conditions.
Public respondent further postulates that SBTC cannot be
held responsible for the destruction or loss of the stamp
collection because the flooding was a fortuitous event and
there was no showing of SBTC's participation in the
aggravation of the loss or injury. It states:
Article 1174 of the Civil Code provides:
"Except in cases expressly specified by the law, or when it
is otherwise declared by stipulation, or when the nature of
the obligation requires the assumption of risk, no person
shall be responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable.'
In its dissertation of the phrase "caso fortuito" the
Enciclopedia Jurisdicada Española 17 says: "In a legal
sense and, consequently, also in relation to contracts, a
"caso fortuito" prevents (sic) 18 the following essential
characteristics: (1) the cause of the unforeseen ands
unexpected occurrence, or of the failure of the debtor to
comply with his obligation, must be independent of the
human will; (2) it must be impossible to foresee the event
which constitutes the "caso fortuito," or if it can be foreseen,
it must be impossible to avoid; (3) the occurrence must be
such as to render it impossible for one debtor to fulfill his
obligation in a normal manner; and (4) the obligor must be
free from any participation in the aggravation of the injury
resulting to the creditor." (cited in Servando vs. Phil., Steam
Navigation Co., supra). 19
Here, the unforeseen or unexpected inundating floods were
independent of the will of the appellant bank and the latter
was not shown to have participated in aggravating damage
(sic) to the stamps collection of the appellee. In fact, the
appellant bank offered its services to secure the assistance
of an expert to save most of the then good stamps but the
appelle refused and let (sic) these recoverable stamps
inside the safety deposit box until they were ruined. 20
Both the law and authority cited are clear enough and
require no further elucidation. Unfortunately, however, the
public respondent failed to consider that in the instant case,
as correctly held by the trial court, SBTC was guilty of
negligence. The facts constituting negligence are
enumerated in the petition and have been summarized in
this ponencia. SBTC's negligence aggravated the injury or
damage to the stamp collection. SBTC was aware of the
floods of 1985 and 1986; it also knew that the floodwaters
inundated the room where Safe Deposit Box No. 54 was
located. In view thereof, it should have lost no time in
notifying the petitioner in order that the box could have
been opened to retrieve the stamps, thus saving the same
from further deterioration and loss. In this respect, it failed
to exercise the reasonable care and prudence expected of
a good father of a family, thereby becoming a party to the
aggravation of the injury or loss. Accordingly, the
aforementioned fourth characteristic of a fortuitous event is
absent Article 1170 of the Civil Code, which reads:
Those who in the performance of their obligation are guilty
of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for
damages,
thus comes to the succor of the petitioner. The destruction
or loss of the stamp collection which was, in the language
of the trial court, the "product of 27 years of patience and
diligence" 21 caused the petitioner pecuniary loss; hence,
he must be compensated therefor.
We cannot, however, place Our imprimatur on the trial
court's award of moral damages. Since the relationship
16
between the petitioner and SBTC is based on a contract,
either of them may be held liable for moral damages for
breach thereof only if said party had acted fraudulently or in
bad faith. 22 There is here no proof of fraud or bad faith on
the part of SBTC.

WHEREFORE, the instant petition is hereby GRANTED.

The challenged Decision and Resolution of the public
respondent Court of Appeals of 21 August 1991 and 21
November 1991, respectively, in CA-G.R. CV No. 26737,
are hereby SET ASIDE and the Decision of 19 February
1990 of Branch 47 of the Regional Trial Court of Manila in
Civil Case No. 87-42601 is hereby REINSTATED in full,
except as to the award of moral damages which is hereby
set aside.

Costs against the private respondent.

SO ORDERED.

17
G.R. Nos. L-26948 and L-26949 October 8, 1927
SILVESTRA BARON, plaintiff-appellant,
vs.
PABLO DAVID, defendant-appellant.
And
GUILLERMO BARON, plaintiff-appellant,
vs.
PABLO DAVID, defendant-appellant.
Jose Gutierrez David for plaintiff-appellant in case of No.
26948.
Gregorio Perfecto for defendant-appellant in both cases.
Francisco, Lualhati & Lopez and Jose Gutierrez David for
plaintiff-appellant in case No. 26949.
STREET, J.:
These two actions were instituted in the Court of First
Instance of the Province of Pampanga by the respective
plaintiffs, Silvestra Baron and Guillermo Baron, for the
purpose of recovering from the defendant, Pablo David, the
value of palay alleged to have been sold by the plaintiffs to
the defendant in the year 1920. Owing to the fact that the
defendant is the same in both cases and that the two cases
depend in part upon the same facts, the cases were heard
together in the trial court and determined in a single
opinion. The same course will accordingly be followed here.
In the first case, i. e., that which Silvestra Baron is plaintiff,
the court gave judgment for her to recover of the defendant
the sum of P5,238.51, with costs. From this judgment both
the plaintiff and the defendant appealed.
In the second case, i. e., that in which Guillermo Baron, is
plaintiff, the court gave judgment for him to recover of the
defendant the sum of P5,734.60, with costs, from which
judgment both the plaintiff and the defendant also
appealed. In the same case the defendant interposed a
counterclaim in which he asked credit for the sum of P2,800
which he had advanced to the plaintiff Guillermo Baron on
various occasions. This credit was admitted by the plaintiff
and allowed by the trial court. But the defendant also
interposed a cross-action against Guillermo Baron in which
the defendant claimed compensation for damages alleged
to have Ben suffered by him by reason of the alleged
malicious and false statements made by the plaintiff against
the defendant in suing out an attachment against the
defendant's property soon after the institution of the action.
In the same cross-action the defendant also sought
compensation for damages incident to the shutting down of
the defendant's rice mill for the period of one hundred
seventy days during which the above-mentioned
attachment was in force. The trial judge disallowed these
claims for damages, and from this feature of the decision
the defendant appealed. We are therefore confronted with
five distinct appeals in this record.
Prior to January 17, 1921, the defendant Pablo David has
been engaged in running a rice mill in the municipality of
Magalang, in the Province of Pampanga, a mill which was
well patronized by the rice growers of the vicinity and
almost constantly running. On the date stated a fire
occurred that destroyed the mill and its contents, and it was
some time before the mill could be rebuilt and put in
operation again. Silvestra Baron, the plaintiff in the first of
the actions before us, is an aunt of the defendant; while
Guillermo Baron, the plaintiff in the other action; is his
uncle. In the months of March, April, and May, 1920,
Silvestra Baron placed a quantity of palay in the defendant's
mill; and this, in connection with some that she took over
from Guillermo Baron, amounted to 1,012 cavans and 24
kilos. During approximately the same period Guillermo
Baron placed other 1,865 cavans and 43 kilos of palay in
the mill. No compensation has ever been received by
Silvestra Baron upon account of the palay delivered by
Guillermo Baron, he has received from the defendant
advancements amounting to P2,800; but apart from this he
has not been compensated. Both the plaintiffs claim that the
palay which was delivered by them to the defendant was
sold to the defendant; while the defendant, on the other
hand, claims that the palay was deposited subject to future
withdrawal by the depositors or subject to some future sale
which was never effected. He therefore supposes himself to
be relieved from all responsibility by virtue of the fire of
January 17, 1921, already mentioned.
The plaintiff further say that their palay was delivered to the
defendant at his special request, coupled with a promise on
his part to pay for the same at the highest price per cavan
at which palay would sell during the year 1920; and they
say that in August of that year the defendant promised to
pay them severally the price of P8.40 per cavan, which was
about the top of the market for the season, provided they
would wait for payment until December. The trial judge
found that no such promise had been given; and the
incredulity of the court upon this point seems to us to be
justified. A careful examination of the proof, however, leads
us to the conclusion that the plaintiffs did, some time in the
early part of August, 1920, make demand upon the
defendant for a settlement, which he evaded or postponed
leaving the exact amount due to the plaintiffs undetermined.
It should be stated that the palay in question was place by
the plaintiffs in the defendant's mill with the understanding
that the defendant was at liberty to convert it into rice and
dispose of it at his pleasure. The mill was actively running
during the entire season, and as palay was daily coming in
from many customers and as rice was being constantly
shipped by the defendant to Manila, or other rice markets, it
was impossible to keep the plaintiffs' palay segregated. In
fact the defendant admits that the plaintiffs' palay was
mixed with that of others. In view of the nature of the
defendant's activities and the way in which the palay was
handled in the defendant's mill, it is quite certain that all of
the plaintiffs' palay, which was put in before June 1, 1920,
been milled and disposed of long prior to the fire of January
17, 1921. Furthermore, the proof shows that when the fire
occurred there could not have been more than about 360
cavans of palay in the mill, none of which by any
reasonable probability could have been any part of the
palay delivered by the plaintiffs. Considering the fact that
the defendant had thus milled and doubtless sold the
plaintiffs' palay prior to the date of the fire, it result that he is
bound to account for its value, and his liability was not
extinguished by the occurence of the fire. In the briefs
before us it seems to have been assumed by the opposing
18
attorneys that in order for the plaintiffs to recover, it is
necessary that they should be able to establish that the
plaintiffs' palay was delivered in the character of a sale, and
that if, on the contrary, the defendant should prove that the
delivery was made in the character of deposit, the
defendant should be absolved. But the case does not
depend precisely upon this explicit alternative; for even
supposing that the palay may have been delivered in the
character of deposit, subject to future sale or withdrawal at
plaintiffs' election, nevertheless if it was understood that the
defendant might mill the palay and he has in fact
appropriated it to his own use, he is of course bound to
account for its value. Under article 1768 of the Civil Code,
when the depository has permission to make use of the
thing deposited, the contract loses the character of mere
deposit and becomes a loan or a commodatum; and of
course by appropriating the thing, the bailee becomes
responsible for its value. In this connection we wholly reject
the defendant's pretense that the palay delivered by the
plaintiffs or any part of it was actually consumed in the fire
of January, 1921. Nor is the liability of the defendant in any
wise affected by the circumstance that, by a custom
prevailing among rice millers in this country, persons
placing palay with them without special agreement as to
price are at liberty to withdraw it later, proper allowance
being made for storage and shrinkage, a thing that is
sometimes done, though rarely.
In view of what has been said it becomes necessary to
discover the price which the defendant should be required
to pay for the plaintiffs' palay. Upon this point the trial judge
fixed upon P6.15 per cavan; and although we are not
exactly in agreement with him as to the propriety of the
method by which he arrived at this figure, we are
nevertheless of the opinion that, all things considered, the
result is approximately correct. It appears that the price of
palay during the months of April, May, and June, 1920, had
been excessively high in the Philippine Islands and even
prior to that period the Government of the Philippine Islands
had been attempting to hold the price in check by executive
regulation. The highest point was touched in this season
was apparently about P8.50 per cavan, but the market
began to sag in May or June and presently entered upon a
precipitate decline. As we have already stated, the plaintiffs
made demand upon the defendant for settlement in the
early part of August; and, so far as we are able to judge
from the proof, the price of P6.15 per cavan, fixed by the
trial court, is about the price at which the defendant should
be required to settle as of that date. It was the date of the
demand of the plaintiffs for settlement that determined the
price to be paid by the defendant, and this is true whether
the palay was delivered in the character of sale with price
undetermined or in the character of deposit subject to use
by the defendant. It results that the plaintiffs are
respectively entitle to recover the value of the palay which
they had placed with the defendant during the period
referred to, with interest from the date of the filing of their
several complaints.
As already stated, the trial court found that at the time of the
fire there were about 360 cavans of palay in the mill and
that this palay was destroyed. His Honor assumed that this
was part of the palay delivered by the plaintiffs, and he held
that the defendant should be credited with said amount. His
Honor therefore deducted from the claims of the plaintiffs
their respective proportionate shares of this amount of
palay. We are unable to see the propriety of this feature of
the decision. There were many customers of the
defendant's rice mill who had placed their palay with the
defendant under the same conditions as the plaintiffs, and
nothing can be more certain than that the palay which was
burned did not belong to the plaintiffs. That palay without a
doubt had long been sold and marketed. The assignments
of error of each of the plaintiffs-appellants in which this
feature of the decision is attacked are therefore well taken;
and the appealed judgments must be modified by
eliminating the deductions which the trial court allowed from
the plaintiffs' claims.
The trial judge also allowed a deduction from the claim of
the plaintiff Guillermo Baron of 167 cavans of palay, as
indicated in Exhibit 12, 13, 14, and 16. This was also
erroneous. These exhibits relate to transactions that
occurred nearly two years after the transactions with which
we are here concerned, and they were offered in evidence
merely to show the character of subsequent transactions
between the parties, it appearing that at the time said
exhibits came into existence the defendant had
reconstructed his mill and that business relations with
Guillermo Baron had been resumed. The transactions
shown by these exhibits (which relate to palay withdrawn by
the plaintiff from the defendant's mill) were not made the
subject of controversy in either the complaint or the cross-
complaint of the defendant in the second case. They
therefore should not have been taken into account as a
credit in favor of the defendant. Said credit must therefore
be likewise of course be without prejudice to any proper
adjustment of the rights of the parties with respect to these
subsequent transactions that they have heretofore or may
hereafter effect.
The preceding discussion disposes of all vital contentions
relative to the liability of the defendant upon the causes of
action stated in the complaints. We proceed therefore now
to consider the question of the liability of the plaintiff
Guillermo Baron upon the cross-complaint of Pablo David in
case R. G. No. 26949. In this cross-action the defendant
seek, as the stated in the third paragraph of this opinion, to
recover damages for the wrongful suing out of an
attachment by the plaintiff and the levy of the same upon
the defendant's rice mill. It appears that about two and one-
half months after said action was begun, the plaintiff,
Guillermo Baron, asked for an attachment to be issued
against the property of the defendant; and to procure the
issuance of said writ the plaintiff made affidavit to the effect
that the defendant was disposing, or attempting the plaintiff.
Upon this affidavit an attachment was issued as prayed,
and on March 27, 1924, it was levied upon the defendant's
rice mill, and other property, real and personal. 1awph!l.net
Upon attaching the property the sheriff closed the mill and
placed it in the care of a deputy. Operations were not
resumed until September 13, 1924, when the attachment
was dissolved by an order of the court and the defendant
was permitted to resume control. At the time the attachment
was levied there were, in the bodega, more than 20,000
cavans of palay belonging to persons who held receipts
therefor; and in order to get this grain away from the sheriff,
twenty-four of the depositors found it necessary to submit
third-party claims to the sheriff. When these claims were put
19
in the sheriff notified the plaintiff that a bond in the amount
of P50,000 must be given, otherwise the grain would be
released. The plaintiff, being unable or unwilling to give this
bond, the sheriff surrendered the palay to the claimants; but
the attachment on the rice mill was maintained until
September 13, as above stated, covering a period of one
hundred seventy days during which the mill was idle. The
ground upon which the attachment was based, as set forth
in the plaintiff's affidavit was that the defendant was
disposing or attempting to dispose of his property for the
purpose of defrauding the plaintiff. That this allegation was
false is clearly apparent, and not a word of proof has been
submitted in support of the assertion. On the contrary, the
defendant testified that at the time this attachment was
secured he was solvent and could have paid his
indebtedness to the plaintiff if judgment had been rendered
against him in ordinary course. His financial conditions was
of course well known to the plaintiff, who is his uncle. The
defendant also states that he had not conveyed away any
of his property, nor had intended to do so, for the purpose
of defrauding the plaintiff. We have before us therefore a
case of a baseless attachment, recklessly sued out upon a
false affidavit and levied upon the defendant's property to
his great and needless damage. That the act of the plaintiff
in suing out the writ was wholly unjustifiable is perhaps also
indicated in the circumstance that the attachment was
finally dissolved upon the motion of the plaintiff himself.
The defendant testified that his mill was accustomed to
clean from 400 to 450 cavans of palay per day, producing
225 cavans of rice of 57 kilos each. The price charged for
cleaning each cavan rice was 30 centavos. The defendant
also stated that the expense of running the mill per day was
from P18 to P25, and that the net profit per day on the mill
was more than P40. As the mill was not accustomed to run
on Sundays and holiday, we estimate that the defendant
lost the profit that would have been earned on not less than
one hundred forty work days. Figuring his profits at P40 per
day, which would appear to be a conservative estimate, the
actual net loss resulting from his failure to operate the mill
during the time stated could not have been less than
P5,600. The reasonableness of these figures is also
indicated in the fact that the twenty-four customers who
intervened with third-party claims took out of the camarin
20,000 cavans of palay, practically all of which, in the
ordinary course of events, would have been milled in this
plant by the defendant. And of course other grain would
have found its way to this mill if it had remained open during
the one hundred forty days when it was closed.
But this is not all. When the attachment was dissolved and
the mill again opened, the defendant found that his
customers had become scattered and could not be easily
gotten back. So slow, indeed, was his patronage in
returning that during the remainder of the year 1924 the
defendant was able to mill scarcely more than the grain
belonging to himself and his brothers; and even after the
next season opened many of his old customers did not
return. Several of these individuals, testifying as witnesses
in this case, stated that, owing to the unpleasant experience
which they had in getting back their grain from the sheriff to
the mill of the defendant, though they had previously had
much confidence in him.
As against the defendant's proof showing the facts above
stated the plaintiff submitted no evidence whatever. We are
therefore constrained to hold that the defendant was
damaged by the attachment to the extent of P5,600, in
profits lost by the closure of the mill, and to the extent of
P1,400 for injury to the good-will of his business, making a
total of P7,000. For this amount the defendant must recover
judgment on his cross-complaint.
The trial court, in dismissing the defendant's cross-
complaint for damages resulting from the wrongful suing out
of the attachment, suggested that the closure of the rice mill
was a mere act of the sheriff for which the plaintiff was not
responsible and that the defendant might have been
permitted by the sheriff to continue running the mill if he had
applied to the sheriff for permission to operate it. This
singular suggestion will not bear a moment's criticism. It
was of course the duty of the sheriff, in levying the
attachment, to take the attached property into his
possession, and the closure of the mill was a natural, and
even necessary, consequence of the attachment. For the
damage thus inflicted upon the defendant the plaintiff is
undoubtedly responsible.
One feature of the cross-complaint consist in the claim of
the defendant (cross-complaint) for the sum of P20,000 as
damages caused to the defendant by the false and alleged
malicious statements contained in the affidavit upon which
the attachment was procured. The additional sum of P5,000
is also claimed as exemplary damages. It is clear that with
respect to these damages the cross-action cannot be
maintained, for the reason that the affidavit in question was
used in course of a legal proceeding for the purpose of
obtaining a legal remedy, and it is therefore privileged. But
though the affidavit is not actionable as a libelous
publication, this fact in no obstacle to the maintenance of an
action to recover the damage resulting from the levy of the
attachment.
Before closing this opinion a word should be said upon the
point raised in the first assignment of error of Pablo David
as defendant in case R. G. No. 26949. In this connection it
appears that the deposition of Guillermo Baron was
presented in court as evidence and was admitted as an
exhibit, without being actually read to the court. It is
supposed in the assignment of error now under
consideration that the deposition is not available as
evidence to the plaintiff because it was not actually read out
in court. This connection is not well founded. It is true that in
section 364 of the Code of Civil Procedure it is said that a
deposition, once taken, may be read by either party and will
then be deemed the evidence of the party reading it. The
use of the word "read" in this section finds its explanation of
course in the American practice of trying cases for the most
part before juries. When a case is thus tried the actual
reading of the deposition is necessary in order that the
jurymen may become acquainted with its contents. But in
courts of equity, and in all courts where judges have the
evidence before them for perusal at their pleasure, it is not
necessary that the deposition should be actually read when
presented as evidence.
From what has been said it result that judgment of the court
below must be modified with respect to the amounts
recoverable by the respective plaintiffs in the two actions R.
20
G. Nos. 26948 and 26949 and must be reversed in respect
to the disposition of the cross-complaint interposed by the
defendant in case R. G. No. 26949, with the following
result: In case R. G. No. 26948 the plaintiff Silvestra Baron
will recover of the Pablo David the sum of P6,227.24, with
interest from November 21, 1923, the date of the filing of
her complaint, and with costs. In case R. G. No. 26949 the
plaintiff Guillermo Baron will recover of the defendant Pablo
David the sum of P8,669.75, with interest from January 9,
1924. In the same case the defendant Pablo David, as
plaintiff in the cross-complaint, will recover of Guillermo
Baron the sum of P7,000, without costs. So ordered.

21
G.R. No. 4015 August 24, 1908
ANGEL JAVELLANA, plaintiff-appellee,
vs.
JOSE LIM, ET AL., defendants-appellants.
R. Zaldarriaga for appellants.
B. Montinola for appellee.
TORRES, J.:
The attorney for the plaintiff, Angel Javellana, file a
complaint on the 30th of October, 1906, with the Court of
First Instance of Iloilo, praying that the defendants, Jose
Lim and Ceferino Domingo Lim, he sentenced to jointly and
severally pay the sum of P2,686.58, with interest thereon at
the rate of 15 per cent per annum from the 20th of January,
1898, until full payment should be made, deducting from the
amount of interest due the sum of P1,102.16, and to pay
the costs of the proceedings.
Authority from the court having been previously obtained,
the complaint was amended on the 10th of January, 1907; it
was then alleged, on the 26th of May, 1897, the defendants
executed and subscribed a document in favor of the plaintiff
reading as follows:
We have received from Angel Javellana, as a deposit
without interest, the sum of two thousand six hundred and
eighty-six cents of pesos fuertes, which we will return to the
said gentleman, jointly and severally, on the 20th of
January, 1898. — Jaro, 26th of May, 1897. — Signed Jose
Lim. — Signed: Ceferino Domingo Lim.
That, when the obligation became due, the defendants
begged the plaintiff for an extension of time for the payment
thereof, building themselves to pay interest at the rate of 15
per cent on the amount of their indebtedness, to which the
plaintiff acceded; that on the 15th of May, 1902, the debtors
paid on account of interest due the sum of P1,000 pesos,
with the exception of either capital or interest, had thereby
been subjected to loss and damages.
A demurrer to the original complaint was overruled, and on
the 4th of January, 1907, the defendants answered the
original complaint before its amendment, setting forth that
they acknowledged the facts stated in Nos. 1 and 2 of the
complaint; that they admitted the statements of the plaintiff
relative to the payment of 1,102.16 pesos made on the 15th
of November, 1902, not, however, as payment of interest
on the amount stated in the foregoing document, but on
account of the principal, and denied that there had been
any agreement as to an extension of the time for payment
and the payment of interest at the rate of 15 per cent per
annum as alleged in paragraph 3 of the complaint, and also
denied all the other statements contained therein.
As a counterclaim, the defendants alleged that they had
paid to the plaintiff sums which, together with the P1,102.16
acknowledged in the complaint, aggregated the total sum of
P5,602.16, and that, deducting therefrom the total sum of
P2,686.58 stated in the document transcribed in the
complaint, the plaintiff still owed the defendants P2,915.58;
therefore, they asked that judgment be entered absolving
them, and sentencing the plaintiff to pay them the sum of
P2,915.58 with the costs.
Evidence was adduced by both parties and, upon their
exhibits, together with an account book having been made
of record, the court below rendered judgment on the 15th of
January, 1907, in favor of the plaintiff for the recovery of the
sum of P5,714.44 and costs.
The defendants excepted to the above decision and moved
for a new trial. This motion was overruled and was also
excepted to by them; the bill of exceptions presented by the
appellants having been approved, the same was in due
course submitted to this court.
The document of indebtedness inserted in the complaint
states that the plaintiff left on deposit with the defendants a
given sum of money which they were jointly and severally
obliged to return on a certain date fixed in the document;
but that, nevertheless, when the document appearing as
Exhibits 2, written in the Visayan dialect and followed by a
translation into Spanish was executed, it was
acknowledged, at the date thereof, the 15th of November,
1902, that the amount deposited had not yet been returned
to the creditor, whereby he was subjected to losses and
damages amounting to 830 pesos since the 20th of
January, 1898, when the return was again stipulated with
the further agreement that the amount deposited should
bear interest at the rate of 15 per cent per annum, from the
aforesaid date of January 20, and that the 1,000 pesos paid
to the depositor on the 15th of May, 1900, according to the
receipt issued by him to the debtors, would be included,
and that the said rate of interest would obtain until the
debtors on the 20th of May, 1897, it is called a deposit
consisted, and they could have accomplished the return
agreed upon by the delivery of a sum equal to the one
received by them. For this reason it must be understood
that the debtors were lawfully authorized to make use of the
amount deposited, which they have done, as subsequent
shown when asking for an extension of the time for the
return thereof, inasmuch as, acknowledging that they have
subjected the letter, their creditor, to losses and damages
for not complying with what had been stipulated, and being
conscious that they had used, for their own profit and gain,
the money that they received apparently as a deposit, they
engaged to pay interest to the creditor from the date named
until the time when the refund should be made. Such
conduct on the part of the debtors is unquestionable
evidence that the transaction entered into between the
interested parties was not a deposit, but a real contract of
loan.
Article 1767 of the Civil Code provides that —
The depository can not make use of the thing deposited
without the express permission of the depositor.
Otherwise he shall be liable for losses and damages.
Article 1768 also provides that —
When the depository has permission to make use of the
thing deposited, the contract loses the character of a
deposit and becomes a loan or bailment.
22
The permission shall not be presumed, and its existence
must be proven.
When on one of the latter days of January, 1898, Jose Lim
went to the office of the creditor asking for an extension of
one year, in view of the fact the money was scare, and
because neither himself nor the other defendant were able
to return the amount deposited, for which reason he agreed
to pay interest at the rate of 15 per cent per annum, it was
because, as a matter of fact, he did not have in his
possession the amount deposited, he having made use of
the same in his business and for his own profit; and the
creditor, by granting them the extension, evidently
confirmed the express permission previously given to use
and dispose of the amount stated as having bee deposited,
which, in accordance with the loan, to all intents and
purposes gratuitously, until the 20th of January, 1898, and
from that dated with interest at 15 per cent per annum until
its full payment, deducting from the total amount of interest
the sum of 1,000 pesos, in accordance with the provisions
of article 1173 of the Civil Code.
already been stated, the defendants received said amount
by virtue of real loan contract under the name of a deposit,
since the so-called bailees were forthwith authorized to
dispose of the amount deposited. This they have done, as
has been clearly shown.
The original joint obligation contracted by the defendant
debtor still exists, and it has not been shown or proven in
the proceedings that the creditor had released Joe Lim from
complying with his obligation in order that he should not be
sued for or sentenced to pay the amount of capital and
interest together with his codebtor, Ceferino Domingo Lim,
because the record offers satisfactory evidence against the
pretension of Jose Lim, and it further appears that
document No. 2 was executed by the other debtor, Ceferino
Domingo Lim, for himself and on behalf of Jose Lim; and it
has also been proven that Jose Lim, being fully aware that
his debt had not yet been settled, took steps to secure an
extension of the time for payment, and consented to pay
interest in return for the concession requested from the
creditor.

Notwithstanding that it does not appear that Jose Lim In view of the foregoing, and adopting the findings in the
signed the document (Exhibit 2) executed in the presence judgment appealed from, it is our opinion that the same
of three witnesses on the 15th of November, 1902, by should be and is hereby affirmed with the costs of this
Ceferino Domingo Lim on behalf of himself and the former, instance against the appellant, provided that the interest
nevertheless, the said document has not been contested as agreed upon shall be paid until the complete liquidation of
false, either by a criminal or by a civil proceeding, nor has the debt. So ordered.
any doubt been cast upon the authenticity of the signatures
of the witnesses who attested the execution of the same;
and from the evidence in the case one is sufficiently
convinced that the said Jose Lim was perfectly aware of
and authorized his joint codebtor to liquidate the interest, to
pay the sum of 1,000 pesos, on account thereof, and to
execute the aforesaid document No. 2. A true ratification of
the original document of deposit was thus made, and not
the least proof is shown in the record that Jose Lim had
ever paid the whole or any part of the capital stated in the
original document, Exhibit 1.

If the amount, together with interest claimed in the

complaint, less 1,000 pesos appears as fully established,
such is not the case with the defendant's counterclaim for
P5,602.16, because the existence and certainty of said
indebtedness imputed to the plaintiff has not been proven,
and the defendants, who call themselves creditors for the
said amount have not proven in a satisfactory manner that
the plaintiff had received partial payments on account of the
same; the latter alleges with good reason, that they should
produce the receipts which he may have issued, and which
he did issue whenever they paid him any money on
account. The plaintiffs allegation that the two amounts of
400 and 1,200 pesos, referred to in documents marked "C"
and "D" offered in evidence by the defendants, had been
received from Ceferino Domingo Lim on account of other
debts of his, has not been contradicted, and the fact that in
the original complaint the sum of 1,102.16 pesos, was
expressed in lieu of 1,000 pesos, the only payment made
on account of interest on the amount deposited according
to documents No. 2 and letter "B" above referred to, was
due to a mistake.

Moreover, for the reason above set forth it may, as a matter

of course, be inferred that there was no renewal of the
contract deposited converted into a loan, because, as has

23
G.R. No. L-4347 March 9, 1908
JOSE ROGERS, plaintiff-appellant,
vs.
SMITH, BELL, & CO., defendants-appellees.
Chicote and Miranda for appellant.
Kinney and Lawrence for appellees.
WILLARD, J.:
The plaintiff brought this action in the Court of First Instance
of the city of Manila upon the following document:
No. 1418. $12,000.
The sum of pesos twelve thousand has been deposited with
us, received from Jose Rogers, which sum we will pay on
the last day of the six months after the presentation of this
document, to the order of Mr. Jose Rogers.
Manila, February 17, 1876.
SMITH, BELL & CO.
The said sum of twelve thousand pesos shall bear interest
at the rate of eight per centum (8%) per annum from this
date, February 17, 1876.
SMITH, BELL & CO.
When this document was delivered by the defendants to the
plaintiff the former delivered to the latter the following letter:
MANILA, 17 February, 1876.
JOSE ROGERS, Esq., Present.
DEAR SIR: We have this day signed a receipt (quedan No.
1418) in your favor for twelve thousand dollars, deposited in
our hands, at interest of 8% per annum, commencing from
to-day.
This interest will be paid to your order every three months,
either in Manila or in London, as you may wish.
If at any time you should desire to receive said deposit of
twelve thousand dollars in London it will be paid to you, or
your order, by Messrs. Smith, Wood and Co., of that place,
after two months' notice, and on presentation of said receipt
or quedan No. 1418.
We are, dear sir, yours, truly,
SMITH, BELL & CO.
The only question in the case is, whether upon these
documents the plaintiff is entitled to recover 12,000 pesos
or 24,000 pesos. The court below held that he was entitled
to recover only 12,000 pesos, and the defendants having
deposited that amount in court, judgment was ordered in
their favor, from which judgment the plaintiff has appealed.
The facts in the case are disputed. When this document
was delivered 12,000 pesos in silver were worth more than
12,000 pesos in gold. the plaintiff delivered to the
defendants in consideration of the execution of the
document 12,000 in gold. Soon thereafter the plaintiff
removed to Barcelona and has since resided there. The
defendants remitted the interest to him every three months
at the rate of 8 per cent per annum until the 30th day of
January, 1888, when they notified him that thereafter the
interest would be 6 per cent. The plaintiff accepted this
reduction and interest at that rate was remitted to him by
the defendants until the 10th of February, 1904. This
interest was remitted in silver; that is to say, every three
months the defendants took 180 pesos in silver and with it
bought exchange on Barcelona or other European point
converted into pesetas. The plaintiff received this payments
in silver without any protest whatever until the 10th day of
February, 1904. He then, in his letter of that date, called the
attention of the defendants to the fact that by the new
American law in force in the Philippines the gold standard
had been introduced and that by reason thereof he was
entitled to receive his interest in gold, in view of the fact that
when he delivered the money to the defendants in 1876 he
delivered it in gold coin. In another letter of the 15th of
December, 1904, he expressly refers to the act of Congress
of March 2, 1903, and to the subsequent proclamations of
the Governor-General relating to coinage. These are
practically all the fat in the case, and the claim of the
plaintiff is that, having paid to the defendants 12,000 pesos
in gold coin, he is now entitled to receive from them the
value of 12,000 pesos in gold coin; that is to say, 24,000
pesos in silver.
It is necessary to determine in the first place the nature of
the contract evidenced by the document of the 17th of
February, 1876.
The important, and to our minds decisive, question in the
case is, whether or not this document is evidence of an
ordinary loan which created between the plaintiff and the
defendants the simple relation of debtor and creditor. The
appellant in his brief repeatedly calls it a deposit, but we do
not understand that he claims that it is or ever was a
deposit in the technical sense of the term; that is, that he
ownership of the particular coin which was delivered by him
to Smith, Bell & Co. did not pass to Smith, Bell & Co. but
remained in him and that Smith, Bell & Co. was bound to
return to him the identical coin which they had received. It is
apparent that no such claim could be maintained in view of
that part of the instrument which provides for the payment
of interest.
It is claimed, however, by the appellant, that while not a
deposit in the strict sense of the word, the document
evidences what is known as an "irregular deposit." The
parties agree that the case must be decided in this respect
in view of the legislation in force prior to the adoption of the
Civil Code, and the appellant says that the definition of an
irregular deposit is found in Law II, Title III of the Fifth
Partida. Manresa, in his Commentaries on the Civil Code
(vol. 11, p. 664), states that there are three points of
difference between a loan and an irregular deposit. The first
difference which he points out consists in the fact that in an
irregular deposit the only benefit is that which accrues to
the depositor, while in loan the essential cause for the
transaction is the necessity of the borrower. The contract in
question does not fulfill this requirement of an irregular
24
deposit. It is very apparent that is was not for the sole
benefit of Rogers. It, like any other loan of money, was for
the benefit of both parties. The benefit which Smith, Bell &
Co. received was the use of the money; the benefit which
Rogers received was the interest of his money. In the letter
which Smith, Bell & Co. on the 30th of June, 1888, notified
the plaintiff of the reduction of the interest, they said: "We
call your attention to this matter in order that you may if you
think best employ your money in some other place."
Nor does the contract in question fulfill the third requisite
indicated by Manresa, which is, in an irregular deposit, the
depositor can demand the return of the article at any time,
while a lender is bound by the provisions of the contract
and can not seek restitution until the time for payment, as
provided in the contract, has arisen. It is apparent from the
terms of this document that the plaintiff could not demand
his money at any time. He was bound to give notice of his
desire for its return and then to wait for six months before
he could insist upon payment.
The second difference which exists, according to Manresa,
between an irregular deposit and a loan lies in the fact that
in an irregular deposit the depositor has a preference over
other creditors in the distribution of the debtor's property.
That this preference may exist and the transaction be still a
loan, appears from the decision of the supreme court of
Spain of the 8th of April, 1881. The court there said:
Whereas, although the irregular deposit is considered as
mutual, with respect to the repayment between the
depositor and the depositary, notwithstanding this, the latter
retains the original status of personal creditor and is simply
privileged, in concurrence with other creditors against the
former, and he must be paid after the mortgage creditors
and before the creditors whose right appears only by written
instruments, in accordance with Law XII, Title XIV, fifth
Partida.
It is apparent, therefore, that this document does not state
those requisites which are essential to an irregular deposit.
But even if it did, it seems that the appellant's contention
could not be sustained. He claims that in accordance with
said Law II, title III, Fifth Partida, the defendants are bound
to return to him the same kind of money which was
received. That law is in part as follows:
And the ownership of the thing given in deposit is not
transferred to the one who receives the same; but, should
the thing be one of those which can be counted, weighed,
or measured, if, when receiving it, the same were given by
count, weight, or measure, then the ownership would be
transferred to him. Yet he would be obliged to return the
same thing, or the same quantity, or another similar to the
one received, to him who gave it to him in deposit.
An examination, however, of Law II, Title I, of the Fifth
Partida, which relates to loans, will show that the obligation
of the borrower in such case is stated in almost exactly the
same words. That law is in part as follows:
A man may loan to another any of the things mentioned in
the last law which are susceptible of being counted,
weighed, or measured. And this is understood with regard
to things belonging to him who lends them, or which are
loaned by another by authority of his principal; provided,
however, that once the thing is in the possession of him
who secures the loan, he may dispose of it as though it
were his own. But he must return to the owner of the thing
equal amount of the same kind and quality, although the
creditor should not specify either of the conditions.
The supreme court of Spain in the judgment of the 27th of
October, 1868, speaking of the obligation of the borrower in
such case, says:
Whereas the principle in Laws I and II of Title I of the Fifth
Partida, according to which the borrower, acquires
ownership of the thing and is bound to return an equal
amount of the same kind and quality, have special
application to cases relating to loans of money or its
equivalent; whereas the thing loaned not being in such
cases what properly constitutes the material or the object of
deposit, as happens with other perishable things, but rather
the value that the coins or the paper money represents, the
obligation of the depository in this kind of contracts is to
return the sum or amount therein expressed, whatever may
have been the increase or depreciation suffered by the
specific kind of coin or paper, unless the contrary be
stipulated.
It seems clear from these citations that the document in
question is evidence of an ordinary loan and created
between the plaintiff and defendants the relation of debtor
and creditor. The two judgments of the supreme court of
Spain cited by the appellant in his brief have no bearing
upon the question. In that of the 9th of July, 1889, it
appeared that the Bank of Havana returned to the plaintiff
the same kind of money which it had received from him.
The other judgment, of the 7th of February, 1891, simply
held that a servant who had left her money with her master
and had taken a written obligation from him to pay the same
was not, in the distribution of his property, entitled to
preference over other creditors on the ground that her debt
was for personal labor.
It having been determined that the contract between the
parties created the common relation of debtor and creditor,
the case is easily resolved. Section 3 of the act of Congress
of March 2, 1903, entitled "An act to establish a standard of
value and to provide for a coinage system in the Philippine
Islands," is as follows:
That the silver Philippine pesos authorized by this act shall
be legal tender in the Philippine Islands for all debts, public
and private, unless otherwise specifically provided by
contract: Provided, That debts contracted prior to the thirty-
first day of December, nineteen hundred and three, may be
paid in the legal tender currency of said Islands existing at
the time of the making of said contracts, unless otherwise
expressly provided by contract.
That this case falls within the terms of this section is very
clear. The debt in question is a private debt, calling for the
payment of 12,000 pesos. This section authorizes the
payment of that debt in the Philippine pesos authorized by
the act. That the act applies as well to debts created prior to
its passage as to those created after, appears from the
proviso. The effect of that proviso is to give the debtor and
25
not the creditor the option as to the kind of money with
which the debt shall be paid.

The only possible way to avoid the application of this

section to the case at bar is by saying that Congress had no
power to pass the act and that sa to debts created prior to
its passage it is therefore null and void. That the act can not
be declared void on this ground is well settled by the
decisions of the Supreme Court of the United States. (Legal
Tender Cases, 12 Wall., 457; Dooley vs. Smith, 13 Wall.,
604; Railroad Company vs. Johnson, 15 Wall., 195;;
Maryland vs. Railroad Company, 22 Wall., 105 and Julliard
vs. Greenman, 110 U. S., 421.) In the first four of those
cases it was held that debts created when the only legal-
tender money was gold and silver could be paid in paper
money issued by the Government and which had no
intrinsic value.

The appellant in his brief discusses at length the meaning

of the word "dollars." We do not see how such a discussion
is material. The contract provides for the payment of
"pesos," not "dollars." It is very evident that the contract was
not changed nor intended to be changed by the use of the
word "dollars" in the letter of February 17, 1876. That in
English houses especially the word "dollars" was, until very
recently, used to indicate pesos of local currency, whether
Mexican, Spanish, or Hongkong, is well known.

In conclusion it may be said that the plaintiff, in 1876,

delivered to the defendants the cheapest kind of money
then in use. If he had desired to be repaid in the same
money which he delivered, he should have so provided
expressly in the contract. He had a perfect right to do so,
and if he had done so he could now, by reason of the
provisions of the said act of Congress, demand payment in
gold.

That the plaintiff's protest in 1904 was based entirely upon

his construction of this act of Congress admits of no doubt;
that he delivered that by the terms of the contract, without
the act of Congress, Smith, Bell & Co. had the right to pay
him in silver is beyond question. This belief is shown not
only by his letters of protest which expressly refer to the act
of Congress as the basis of his claim but also by his
conduct during more than twenty-five years in receiving
interest in silver without a sign of protest. That he would
have received the principal also in silver had the defendants
tendered it to him at any time prior to 1903 is also free from
doubt. In making his protest in 1904 he evidently believed
that the act of Congress required the payment of the 12,000
pesos in gold and that he thereby has acquired additional
rights. His construction of the act is, as we have seen,
wrong.

The judgment of the court below is affirmed, with the costs

of this instance against the appellant. So ordered.

26
G.R. No. L-32778 November 14, 1930
Involuntary insolvency of Mariano Velasco and Co., et al.
COMPAÑIA AGRICOLA DE ULTRAMAR, claimant-
appellee,
vs.
VICENTE NEPOMUCENO, assignee-appellant.
The appellant in his own behalf.
Eusebio Orense and Nicolas Belmonte for appellee.
OSTRAND, J.:
It appears from the record that on March 17, 1927, the
registered partnerships, Mariano Velasco & Co., Mariano
Velasco, Sons, & Co., and Mariano Velasco & Co., Inc.,
were, on petition of the creditors, declared insolvent by the
Court of First Instance of Manila.
On the 16th day of April, 1927, the Compania Agricola de
Ultramar filed a claim against one of the insolvents Mariano
Velasco & Co., claiming the sum of P10,000, with the
agreed interest thereon at the rate of 6 per cent per annum
from April 5, 1918, until its full payment was a deposit with
said Mariano Velasco & Co. and asked the court to declare
it a preferred claim.
The assignee of the insolvency answered the claim by
interposing a general denial. The claim was thereupon
referred by the court to a Commissioner to receive the
evidence, and on September 23, 1929, the court rendered a
decision declaring that the alleged deposit was a preferred
claim for the sum mentioned, with interest at 6 per cent per
annum from April 5, 1918, until paid. From this decision the
assignee appealed.
The evidence presented by the claimant Compania Agricola
de Ultramar consisted of a receipt in writing, and the
testimony of Jose Velasco who was manager of Mariano
Velasco & Co. at the time the note was executed. The
receipt reads as follow (translation):
MANILA, P. I., April 5, 1918.
Received from the "Compania Agricola de Ultramar" the
sum of ten thousand Philippine pesos as a deposit at the
interest of six per cent annually, for the term of three
months from date.
In witness thereof, I sign the present.
MARIANO VELASCO & CO.
By (Sgd.) JOSE VELASCO
Manager.
P10,000.00.
In his testimony, Jose Velasco stated that his signature on
the receipt was authentic and that he received the said sum
of P10,000 from the appellee and deposited it with the bank
in the current account of Mariano Velasco & Co.
In our opinion the court below erred in finding that the claim
of the appellee should be considered a deposit and a
preferred claim. In the case of Gavieres vs. De Tavera (1
Phil., 17), very similar to the present case, this court held
that the transaction therein involved was a loan and not a
deposit. The facts of the case were that in 1859 Ignacia de
Gorricho delivered P3,000 to Felix Pardo de Tavera. The
agreement between them read as follows (translation):
Received of Señorita Ignacia de Gorricho the sum of 3,000
pesos, gold (3,000 pesos), as a deposit payable on two
months' notice in advance, with interest at 6 percent per
annum with a hypothecation of the goods now owned by
me or which may be owned hereafter, as security of the
payment.
In witness whereof I sign in Binondo, January 31, 1859.
FELIX PARDO DE TAVERA
After the death of both parties, Gavieres, as plaintiff and
successor in interest of the deceased Ignacia de Gorricho,
brought the action against Trinidad H. Pardo de Tavera, the
successor in interest of the deceased Felix Pardo de
Tavera, for the collection of the sum of P1,423.75, the
remaining portion of the 3,000 pesos. The plaintiff Gavieres
alleged that the money was delivered to Felix Pardo de
Tavera as a deposit, but the defendant insisted that the
agreement above quoted was not a contract of deposit but
one of loan. This court said:
Although in the document in question a deposit is spoken
of, nevertheless from an examination of the entire
document it clearly appears that the contract was a loan
and that such was the intention of the parties. It is
unnecessary to recur to the cannons of interpretation to
arrive at this conclusion. The obligation of the depository to
pay interest at the rate of 6 per cent to the depositor
suffices to cause the obligation to be considered as a loan
and makes it likewise evident that it was the intention of the
parties that the depository should have the right to make
use of the amount deposited, since it was stipulated that the
amount could be collected after notice of two months in
advance. Such being the case, the contract lost the
character of a deposit and acquired that of a loan. (Art.
1768, Civil Code.)
In the case of Javellana vs. Lim (11 Phil., 141) this court,
speaking through Justice Torres said:
Authority from the court having been previously obtained,
the complaint was amended on the 10th of January, 1907; it
was then alleged, that on the 26th of May, 1897, the
defendants executed and subscribed a document in favor of
the plaintiff reading as follows:
We have received from Angel Javellana, as a deposit
without interest, the sum of two thousand six hundred and
eighty-six pesos and fifty-eight cents of pesos fuertes,
which we will return to the said gentleman, jointly and
severally on the 20th of January, 1898. — Jaro, 26th of May
1879. — Signed: JOSE LIM. — Signed: CEFERINO
DOMINGO LIM.
That, when the obligation became due, the defendants
begged the plaintiff for an extension of time for the payment
thereof binding themselves to pay interest at the rate of 15
27
per cent on the amount of their indebtedness, to which the
plaintiff acceded; that on the 15th of May, 1902, the debtors
paid on account of interest due the sum of 1,000 pesos,
with the exception of which they had not paid any other sum
on account of either capital or interest, notwithstanding the
requests made by the plaintiff, who had thereby been
subjected to loss and damages.
xxx xxx xxx
The document of indebtedness inserted in the complaint
states that the plaintiff left on deposit with the defendants a
given sum of money which they were jointly and severally
obliged to return on a certain date fixed in the document;
but that, nevertheless, when the document appearing as
Exhibit 2, written in the Visayan dialect and followed by a
translation into Spanish was executed, it was
acknowledged, at the date thereof, the 15th of November,
1902 that the amount deposited had not yet been returned
to the creditor, whereby he was subjected to losses and
damages amounting to 830 pesos since the 20th of
January, 1898, when the return was again stipulated with
the further agreement that the amount deposited should
bear interest at the rate of 15 per cent per annum from the
aforesaid date of January 20, and that the 1,000 pesos paid
to the depositor on the 15th of May, 1900, according to the
receipt issued by him to the debtors, would be included,
and that the said rate of interest would obtain until the
debtors paid the creditor the said amount in full. In this
second document the contract between the parties, which is
a real loan of money with interest, appears perfectly
defined, notwithstanding the fact that in the original
document executed by the debtors on the 26th of May,
1897, it is called a deposit; so that when they bound
themselves jointly and severally to refund the sum of
2,686.58 pesos to the depositor, Javellana, they did not
engage to return the same coins received and of which the
amount deposited consisted, and they could have
accomplished the return agreed upon by the delivery of a
sum equal to the one received by them. For this reason it
must be understood that the debtors were lawfully
authorized to make use of the amount deposited, which
they have done, as subsequently shown when asking for an
extension of the time for the return thereof, inasmuch as,
acknowledging that they have subjected the lender, their
creditor, to losses and damages for not complying with what
had been stipulated, and being conscious that they had
used, for their own profit and gain, the money that they
received apparently as a deposit, they engaged to pay
interest to the creditor from the date named until the time
when the refund should be made. Such conduct on the part
of the debtors is unquestionable evidence that the
transaction entered in to between the interested parties was
not a deposit, but a real contract of loan.
Article 1767 of the Civil Code provides that —
"The depository cannot make use of the thing deposited
without the express permission of the depositor."
"Otherwise he shall be liable for losses and damages."
Article 1768 also provides that —
"When the depository has permission to make use of the
thing deposited, the contract loses the character of a
deposit and becomes a loan or bailment."
"The permission not be presumed, and its existence must
be proven."
xxx xxx xxx
Moreover, for the reasons above set forth it may, as a
matter of course, be inferred that there was no renewal of
the contract of deposit converted into a loan, because, as
has already been stated, the defendants received said
amount by virtue of a real loan contract under the name of a
deposit, since the so-called bailees were forthwith
authorized to dispose of the amount deposited. This they
have done, as has been clearly shown.lawphil.net
The two cases quoted are sufficient to show that the ten
thousand pesos delivered by the appellee to Mariano
Velasco & Co. cannot de regarded as a technical deposit.
But the appellee argues that it is at least an "irregular
deposit." This argument is, we think, sufficiently answered
in the case of Rogers vs. Smith, Bell & Co. (10 Phil., 319).
There this court said:
. . . Manresa, in his Commentaries on the Civil Code (vol.
11, p. 664), states that there are three points of difference
between a loan and an irregular deposit. The first difference
which he points out consists in the fact that in an irregular
deposit the only benefit is that which accrues to the
depositor, while in a loan the essential cause for the
transaction is the necessity of the borrower. The contract in
question does not fulfill this requirement of an irregular
deposit. It is very apparent that it was not for the sole
benefit of Rogers. It, like any other loan of money, was for
the benefit of both parties. The benefit which Smith, Bell &
Co. received was the use of the money; the benefit which
Rogers received was the interest on his money. In the letter
in which Smith, Bell & Co. on the 30th of June, 1888,
notified the plaintiff of the reduction of the interest, they
said: "We call your attention to this matter in order that you
may if you think best employ your money in some other
place."
Nor does the contract in question fulfill the third requisite
indicated by Manresa, which is, that in an irregular deposit,
the depositor can demand the return of the article at any
time, while a lender is bound by the provisions of the
contract and cannot seek restitution until the time for
payment, as provided in the contract, has arisen. It is
apparent from the terms of this documents that the plaintiff
could not demand his money at any time. He was bound to
give notice of his desire for its return and then to wait for six
months before he could insist upon payment.
In the present case the transaction in question was clearly
not for the sole benefit of the Compania Agricola de
Ultramar; it was evidently for the benefit of both parties.
Neither could the alleged depositor demand payment until
the expiration of the term of three months.
For the reasons stated, the appealed judgment is reversed,
and we hold that the transaction in question must be
regarded as a loan, without preference. Without costs. So
ordered.
28
G.R. No. 104612 May 10, 1994
BANK OF THE PHILIPPINE ISLANDS (successor-in-
interest of COMMERCIAL AND TRUST CO.), petitioner,
vs.
HON. COURT OF APPEALS, EASTERN PLYWOOD
CORP. and BENIGNO D. LIM, respondents.
Leonen, Ramirez & Associates for petitioner.
Constante A. Ancheta for private respondents.
DAVIDE, JR., J.:
The petitioner urges us to review and set aside the
amended Decision1 of 6 March 1992 of respondent Court
of Appeals in CA- G.R. CV No. 25739 which modified the
Decision of 15 November 1990 of Branch 19 of the
Regional Trial Court (RTC) of Manila in Civil Case No. 87-
42967, entitled Bank of the Philippine Islands (successor-in-
interest of Commercial Bank and Trust Company) versus
Eastern Plywood Corporation and Benigno D. Lim. The
Court of Appeals had affirmed the dismissal of the
complaint but had granted the defendants' counterclaim for
P331,261.44 which represents the outstanding balance of
their account with the plaintiff.
As culled from the records and the pleadings of the parties,
the following facts were duly established:
Private respondents Eastern Plywood Corporation
(Eastern) and
Benigno D. Lim (Lim), an officer and stockholder of Eastern,
held at least one joint bank account ("and/or" account) with
the Commercial Bank and Trust Co. (CBTC), the
predecessor-in-interest of petitioner Bank of the Philippine
Islands (BPI). Sometime in March 1975, a joint checking
account ("and" account) with Lim in the amount of
P120,000.00 was opened by Mariano Velasco with funds
withdrawn from the account of Eastern and/or Lim. Various
amounts were later deposited or withdrawn from the joint
account of Velasco and Lim. The money therein was placed
in the money market.
Velasco died on 7 April 1977. At the time of his death, the
outstanding balance of the account stood at P662,522.87.
On 5 May 1977, by virtue of an Indemnity Undertaking
executed by Lim for himself and as President and General
Manager of Eastern, 2 one-half of this amount was
provisionally released and transferred to one of the bank
accounts of Eastern with CBTC. 3
Thereafter, on 18 August 1978, Eastern obtained a loan of
P73,000.00 from CBTC as "Additional Working Capital,"
evidenced by the "Disclosure Statement on Loan/Credit
Transaction" (Disclosure Statement) signed by CBTC
through its branch manager, Ceferino Jimenez, and
Eastern, through Lim, as its President and General
Manager. 4 The loan was payable on demand with interest
at 14% per annum.
For this loan, Eastern issued on the same day a negotiable
promissory note for P73,000.00 payable on demand to the
order of CBTC with interest at 14% per annum. 5 The note
was signed by Lim both in his own capacity and as
President and General Manager of Eastern. No reference to
any security for the loan appears on the note. In the
Disclosure Statement, the box with the printed word
"UNSECURED" was marked with "X" — meaning
unsecured, while the line with the words "this loan is
wholly/partly secured by" is followed by the typewritten
words "Hold-Out on a 1:1 on C/A No. 2310-001-42," which
refers to the joint account of Velasco and Lim with a
balance of P331,261.44.
In addition, Eastern and Lim, and CBTC signed another
document entitled "Holdout Agreement," also dated 18
August 1978, 6 wherein it was stated that "as security for
the Loan [Lim and Eastern] have offered [CBTC] and the
latter accepts a holdout on said [Current Account No. 2310-
011-42 in the joint names of Lim and Velasco] to the full
extent of their alleged interests therein as these may
appear as a result of final and definitive judicial action or a
settlement between and among the contesting parties
thereto." 7 Paragraph 02 of the Agreement provides as
follows:
Eastply [Eastern] and Mr. Lim hereby confer upon Comtrust
[CBTC], when and if their alleged interests in the Account
Balance shall have been established with finality, ample
and sufficient power as shall be necessary to retain said
Account Balance and enable Comtrust to apply the Account
Balance for the purpose of liquidating the Loan in respect of
principal and/or accrued interest.
And paragraph 05 thereof reads:
The acceptance of this holdout shall not impair the right of
Comtrust to declare the loan payable on demand at any
time, nor shall the existence hereof and the non-resolution
of the dispute between the contending parties in respect of
entitlement to the Account Balance, preclude Comtrust from
instituting an action for recovery against Eastply and/or Mr.
Lim in the event the Loan is declared due and payable and
Eastply and/or Mr. Lim shall default in payment of all
obligations and liabilities thereunder.
In the meantime, a case for the settlement of Velasco's
estate was filed with Branch 152 of the RTC of Pasig,
entitled "In re Intestate Estate of Mariano Velasco," and
docketed as Sp. Proc. No. 8959. In the said case, the whole
balance of P331,261.44 in the aforesaid joint account of
Velasco and Lim was being claimed as part of Velasco's
estate. On 9 September 1986, the intestate court granted
the urgent motion of the heirs of Velasco to withdraw the
deposit under the joint account of Lim and Velasco and
authorized the heirs to divide among themselves the
amount withdrawn. 8
Sometime in 1980, CBTC was merged with BPI. 9 On 2
December 1987, BPI filed with the RTC of Manila a
complaint against Lim and Eastern demanding payment of
the promissory note for P73,000.00. The complaint was
docketed as Civil Case No. 87- 42967 and was raffled to
Branch 19 of the said court, then presided over by Judge
Wenceslao M. Polo. Defendants Lim and Eastern, in turn,
filed a counterclaim against BPI for the return of the
balance in the disputed account subject of the Holdout
29
Agreement and the interests thereon after deducting the
amount due on the promissory note.
After due proceedings, the trial court rendered its decision
on
15 November 1990 dismissing the complaint because BPI
failed to make out its case. Furthermore, it ruled that "the
promissory note in question is subject to the 'hold-out'
agreement," 10 and that based on this agreement, "it was
the duty of plaintiff Bank [BPI] to debit the account of the
defendants under the promissory note to set off the loan
even though the same has no fixed maturity." 11 As to the
defendants' counterclaim, the trial court, recognizing the
fact that the entire amount in question had been withdrawn
by Velasco's heirs pursuant to the order of the intestate
court in Sp. Proc. No. 8959, denied it because the "said
claim cannot be awarded without disturbing the resolution"
of the intestate court. 12
Both parties appealed from the said decision to the Court of
Appeals. Their appeal was docketed as CA-G.R. CV No.
25739.
On 23 January 1991, the Court of Appeals rendered a
decision affirming the decision of the trial court. It, however,
failed to rule on the defendants' (private respondents')
partial appeal from the trial court's denial of their
counterclaim. Upon their motion for reconsideration, the
Court of Appeals promulgated on 6 March 1992 an
Amended Decision 13 wherein it ruled that the settlement of
Velasco's estate had nothing to do with the claim of the
defendants for the return of the balance of their account
with CBTC/BPI as they were not privy to that case, and that
the defendants, as depositors of CBTC/BPI, are the latter's
creditors; hence, CBTC/BPI should have protected the
defendants' interest in Sp. Proc. No. 8959 when the said
account was claimed by Velasco's estate. It then ordered
BPI "to pay defendants the amount of P331,261.44
representing the outstanding balance in the bank account of
defendants." 14
On 22 April 1992, BPI filed the instant petition alleging
therein that the Holdout Agreement in question was subject
to a suspensive condition stated therein, viz., that the
"P331,261.44 shall become a security for respondent Lim's
promissory note only if respondents' Lim and Eastern
Plywood Corporation's interests to that amount are
established as a result of a final and definitive judicial action
or a settlement between and among the contesting parties
thereto." 15 Hence, BPI asserts, the Court of Appeals erred
in affirming the trial court's decision dismissing the
complaint on the ground that it was the duty of CBTC to
debit the account of the defendants to set off the amount of
P73,000.00 covered by the promissory note.
Private respondents Eastern and Lim dispute the
"suspensive condition" argument of the petitioner. They
interpret the findings of both the trial and appellate courts
that the money deposited in the joint account of Velasco
and Lim came from Eastern and Lim's own account as a
finding that the money deposited in the joint account of Lim
and Velasco "rightfully belong[ed] to Eastern Plywood
Corporation and/or Benigno Lim." And because the latter
are the rightful owners of the money in question, the
suspensive condition does not find any application in this
case and the bank had the duty to set off this deposit with
the loan. They add that the ruling of the lower court that
they own the disputed amount is the final and definitive
judicial action required by the Holdout Agreement; hence,
the petitioner can only hold the amount of P73,000.00
representing the security required for the note and must
return the rest. 16
The petitioner filed a Reply to the aforesaid Comment. The
private respondents filed a Rejoinder thereto.
We gave due course to the petition and required the parties
to submit simultaneously their memoranda.
The key issues in this case are whether BPI can demand
payment of the loan of P73,000.00 despite the existence of
the Holdout Agreement and whether BPI is still liable to the
private respondents on the account subject of the Holdout
Agreement after its withdrawal by the heirs of Velasco.
The collection suit of BPI is based on the promissory note
for P73,000.00. On its face, the note is an unconditional
promise to pay the said amount, and as stated by the
respondent Court of Appeals, "[t]here is no question that the
promissory note is a negotiable instrument." 17 It further
correctly ruled that BPI was not a holder in due course
because the note was not indorsed to BPI by the payee,
CBTC. Only a negotiation by indorsement could have
operated as a valid transfer to make BPI a holder in due
course. It acquired the note from CBTC by the contract of
merger or sale between the two banks. BPI, therefore, took
the note subject to the Holdout Agreement.
We disagree, however, with the Court of Appeals in its
interpretation of the Holdout Agreement. It is clear from
paragraph 02 thereof that CBTC, or BPI as its successor-in-
interest, had every right to demand that Eastern and Lim
settle their liability under the promissory note. It cannot be
compelled to retain and apply the deposit in Lim and
Velasco's joint account to the payment of the note. What
the agreement conferred on CBTC was a power, not a duty.
Generally, a bank is under no duty or obligation to make the
application. 18 To apply the deposit to the payment of a
loan is a privilege, a right of set-off which the bank has the
option to exercise. 19
Also, paragraph 05 of the Holdout Agreement itself states
that notwithstanding the agreement, CBTC was not in any
way precluded from demanding payment from Eastern and
from instituting an action to recover payment of the loan.
What it provides is an alternative, not an exclusive, method
of enforcing its claim on the note. When it demanded
payment of the debt directly from Eastern and Lim, BPI had
opted not to exercise its right to apply part of the deposit
subject of the Holdout Agreement to the payment of the
promissory note for P73,000.00. Its suit for the enforcement
of the note was then in order and it was error for the trial
court to dismiss it on the theory that it was set off by an
equivalent portion in C/A No. 2310-001-42 which BPI
should have debited. The Court of Appeals also erred in
affirming such dismissal.
The "suspensive condition" theory of the petitioner is,
therefore, untenable.
30
The Court of Appeals correctly decided on the WHEREFORE, the instant petition is partly GRANTED. The
counterclaim. The counterclaim of Eastern and Lim for the challenged amended decision in CA-G.R. CV No. 25735 is
return of the P331,261.44 20 was equivalent to a demand hereby MODIFIED. As modified:
that they be allowed to withdraw their deposit with the bank.
Article 1980 of the Civil Code expressly provides that (1) Private respondents are ordered to pay the
"[f]ixed, savings, and current deposits of money in banks petitioner the promissory note for P73,000.00 with interest
and similar institutions shall be governed by the provisions at:
concerning simple loan." In Serrano vs. Central Bank of the
Philippines, 21 we held that bank deposits are in the nature (a) 14% per annum on the principal, computed from
of irregular deposits; they are really loans because they 18 August 1978 until payment;
earn interest. The relationship then between a depositor
and a bank is one of creditor and debtor. The deposit under (b) 12% per annum on the interest which had accrued
the questioned account was an ordinary bank deposit; up to the date of the filing of the complaint, computed from
hence, it was payable on demand of the depositor. 22 that date until payment pursuant to Article 2212 of the Civil
Code.
The account was proved and established to belong to
Eastern even if it was deposited in the names of Lim and (2) The award of P331,264.44 in favor of the private
Velasco. As the real creditor of the bank, Eastern has the respondents shall bear interest at the rate of 12% per
right to withdraw it or to demand payment thereof. BPI annum computed from the filing of the counterclaim.
cannot be relieved of its duty to pay Eastern simply
because it already allowed the heirs of Velasco to withdraw No pronouncement as to costs.
the whole balance of the account. The petitioner should not
have allowed such withdrawal because it had admitted in SO ORDERED.
the Holdout Agreement the questioned ownership of the
money deposited in the account. As early as 12 May 1979,
CBTC was notified by the Corporate Secretary of Eastern
that the deposit in the joint account of Velasco and Lim was
being claimed by them and that one-half was being claimed
by the heirs of Velasco.23

Moreover, the order of the court in Sp. Proc. No. 8959

merely authorized the heirs of Velasco to withdraw the
account. BPI was not specifically ordered to release the
account to the said heirs; hence, it was under no judicial
compulsion to do so. The authorization given to the heirs of
Velasco cannot be construed as a final determination or
adjudication that the account belonged to Velasco. We
have ruled that when the ownership of a particular property
is disputed, the determination by a probate court of whether
that property is included in the estate of a deceased is
merely provisional in character and cannot be the subject of
execution. 24

Because the ownership of the deposit remained

undetermined, BPI, as the debtor with respect thereto, had
no right to pay to persons other than those in whose favor
the obligation was constituted or whose right or authority to
receive payment is indisputable. The payment of the money
deposited with BPI that will extinguish its obligation to the
creditor-depositor is payment to the person of the creditor
or to one authorized by him or by the law to receive it. 25
Payment made by the debtor to the wrong party does not
extinguish the obligation as to the creditor who is without
fault or negligence, even if the debtor acted in utmost good
faith and by mistake as to the person of the creditor, or
through error induced by fraud of a third person. 26 The
payment then by BPI to the heirs of Velasco, even if done in
good faith, did not extinguish its obligation to the true
depositor, Eastern.

In the light of the above findings, the dismissal of the

petitioner's complaint is reversed and set aside. The award
on the counterclaim is sustained subject to a modification of
the interest.

31
METROPOLITAN BANK AND TRUST COMPANY (formerly The car was stolen. On Bitangas claim, Malayan Insurance
ASIANBANK CORPORATION), issued a check payable to the order of B.A. Finance
Petitioner, Corporation and Lamberto Bitanga for P224,500, drawn
against China Banking Corporation (China Bank). The
check was crossed with the notation For Deposit Payees
Account Only.[6]

- versus - Without the indorsement or authority of his co-payee BA

Finance, Bitanga deposited the check to his account with
the Asianbank Corporation (Asianbank), now merged with
BA FINANCE CORPORATION and MALAYAN herein petitioner Metropolitan Bank and Trust Company
INSURANCE CO., INC., (Metrobank). Bitanga subsequently withdrew the entire
Respondents. proceeds of the check.
G.R. No. 179952
In the meantime, Bitangas loan became past due, but
Present: despite demands, he failed to settle it.

PUNO, C.J., Chairperson,

CARPIO MORALES, BA Finance eventually learned of the loss of the car and of
LEONARDO-DE CASTRO, Malayan Insurances issuance of a crossed check payable
BERSAMIN, and to it and Bitanga, and of Bitangas depositing it in his
VILLARAMA, JR., JJ. account at Asianbank and withdrawing the entire proceeds
thereof.

BA Finance thereupon demanded the payment of the value

Promulgated:
December 4, 2009
x------------------------------------------
-------x
DECISION
CARPIO MORALES, J.:
Lamberto Bitanga (Bitanga) obtained from respondent BA
Finance Corporation (BA Finance) a P329,280[1] loan to
secure which, he mortgaged his car to respondent BA
Finance.[2] The mortgage contained the following
stipulation:
The MORTGAGOR covenants and agrees that he/it will
cause the property(ies) hereinabove mortgaged to be
insured against loss or damage by accident, theft and fire
for a period of one year from date hereof with an insurance
company or companies acceptable to the MORTGAGEE in
an amount not less than the outstanding balance of
mortgage obligations and that he/it will make all loss, if any,
under such policy or policies, payable to the MORTGAGEE
or its assigns as its interest may appear x x x.[3] (emphasis
and underscoring supplied)
of the check from Asianbank[7] but to no avail, prompting it
to file a complaint before the Regional Trial Court (RTC) of
Makati for sum of money and damages against Asianbank
and Bitanga,[8] alleging that, inter alia, it is entitled to the
entire proceeds of the check.
In its Answer with Counterclaim,[9] Asianbank alleged that
BA Finance instituted [the] complaint in bad faith to coerce
[it] into paying the whole amount of the CHECK knowing
fully well that its rightful claim, if any, is against Malayan
[Insurance].[10]
Asianbank thereafter filed a cross-claim against
Bitanga,[11] alleging that he fraudulently induced its
personnel to release to him the full amount of the check;
and that on being later informed that the entire amount of
the check did not belong to Bitanga, it took steps to get in
touch with him but he had changed residence without
leaving any forwarding address.[12]
And Asianbank filed a third-party complaint against
Malayan Insurance,[13] alleging that Malayan Insurance
was grossly negligent in issuing the check payable to both
Bitanga and BA Finance and delivering it to Bitanga without
the consent of BA Finance.[14]
Bitanga was declared in default in Asianbanks cross-
claim.[15]

Bitanga thus had the mortgaged car insured by respondent
Malayan Insurance Co., Inc. (Malayan Insurance)[4] which
issued a policy stipulating that, inter alia,
Loss, if any shall be payable to BA FINANCE CORP. as its
interest may appear. It is hereby expressly understood that
this policy or any renewal thereof, shall not be cancelled
without prior notification and conformity by BA FINANCE
CORPORATION.[5] (emphasis and underscoring supplied)
Branch 137 of the Makati RTC, finding that Malayan
Insurance was not privy to the contract between BA
Finance and Bitanga, and noting the claim of Malayan
Insurance that it is its policy to issue checks to both the
insured and the financing company, held that Malayan
Insurance cannot be faulted for negligence for issuing the
check payable to both BA Finance and Bitanga.
The trial court, holding that Asianbank was negligent in
allowing Bitanga to deposit the check to his account and to
withdraw the proceeds thereof, without his co-payee BA
Finance having either indorsed it or authorized him to

32
indorse it in its behalf,[16] found Asianbank and Bitanga
jointly and severally liable to BA Finance following Section
41 of the Negotiable Instruments Law and Associated Bank
v. Court of Appeals.[17]
Thus the trial court disposed:
WHEREFORE, premises considered, judgment is hereby
rendered ordering defendants Asian Bank Corporation and
Lamberto Bitanga:
1) To pay plaintiff jointly and severally the
sum of P224,500.00 with interest thereon at the rate of 12%
from September 25, 1992 until fully paid;
2) To pay plaintiff the sum of P50,000.00
as exemplary damages; P20,000.00 as actual damages;
P30,000.00 as attorneys fee; and
3) To pay the costs of suit.
Asianbanks and Bitangas [sic] counterclaims are dismissed.
The third party complaint of defendant/third party plaintiff
against third-party defendant Malayan Insurance, Co., Inc.
is hereby dismissed. Asianbank is ordered to pay Malayan
attorneys fee of P50,000.00 and a per appearance fee of
P500.00.
On the cross-claim of defendant Asianbank, co-defendant
Lamberto Bitanga is ordered to pay the former the amounts
the latter is ordered to pay the plaintiff in Nos. 1, 2 and 3
above-mentioned.
SO ORDERED.[18] (emphasis and underscoring supplied)
Before the Court of Appeals, Asianbank, in its Appellants
Brief, submitted the following issues for consideration:
3.01.1.1 Whether BA Finance has a cause of action
against Asianbank.
3.01.1.2 Assuming that BA Finance has a valid cause
of action, may it claim from Asianbank more than one-half
of the value of the check considering that it is a mere co-
payee or joint payee of the check?
3.01.1.3 Whether BA Finance is liable to Asianbank
for actual and exemplary damages for wrongfully bringing
the case to court.
3.01.1.4 Whether Malayan is liable to Asianbank for
reimbursement of any sum of money which this Honorable
Court may award to BA Finance in this case.[19]
(underscoring supplied)
And it proffered the following arguments:
A. BA Finance has no cause of action against Asianbank as
it has no legal right and title to the check considering that
the check was not delivered to BA Finance. Hence, BA
Finance is not a holder thereof under the Negotiable
Instruments Law.
B. Asianbank, as collecting bank, is not liable to BA Finance
as there was no privity of contract between them.
C. Asianbank, as collecting bank, is not liable to BA
Finance, considering that, as the intermediary between the
payee and the drawee Chinabank, it merely acted on the
instructions of drawee Chinabank to pay the amount of the
check to Bitanga, hence, the consequent damage to BA
Finance was due to the negligence of Chinabank.
D. Malayans act of issuing and delivering the check solely
to Bitanga in violation of the loss payee clause in the Policy,
is the proximate cause of the alleged damage to BA
Finance.
E. Assuming Asianbank is liable, BA Finance can claim only
his proportionate interest on the check as it is a joint payee
thereof.
F. Bitanga alone is liable for the amount to BA Finance on
the ground of unjust enrichment or solutio indebiti.
G. BA Finance is liable to pay Asianbank actual and
exemplary damages.[20] (underscoring supplied)
The appellate court, summarizing the errors attributed to
the trial court by Asianbank to be whetherBA Finance has a
cause of action against [it] even if the subject check had not
been delivered toBA Finance by the issuer itself, held in the
affirmative and accordingly affirmed the trial courts decision
but deleted the award of P20,000 as actual damages.[21]
Hence, the present Petition for Review on Certiorari[22]
filed by Metrobank (hereafter petitioner) to which Asianbank
was, as earlier stated, merged, faulting the appellate court
I. x x x in applying the case of Associated
Bank v. Court of Appeals, in the absence of factual
similarity and of the legal relationships necessary for the
application of the desirable shortcut rule. x x x
II. x x x in not finding that x x x the general
rule that the payee has no cause of action against the
collecting bank absent delivery to him must be applied.
III. x x x in finding that all the elements of a
cause of action by BA Finance Corporation against
Asianbank Corporation are present.
IV. x x x in finding that Article 1208 of the Civil
Code is not applicable.
V. x x x in awarding of exemplary damages
even in the absence of moral, temperate, liquidated or
compensatory damages and a finding of fact that
Asianbank acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.
xxxx
VII. x x x in dismissing Asianbanks counterclaim and
Third Party complaint [against Malayan Insurance].[23]
(italics in the original; underscoring supplied)
Petitioner proffers the following arguments against the
application of Associated Bank v. CA to the case:
x x x [T]he rule established in the Associated Bank case
has provided a speedier remedy for the payee to recover
from erring collecting banks despite the absence of delivery
of the negotiable instrument. However, the application of
the rule demands careful consideration of the factual
settings and issues raised in the case x x x.
33
One of the relevant circumstances raised in Associated
Bank is the existence of forgery or unauthorized
indorsement. x x x
xxxx
In the case at bar, Bitanga is authorized to indorse the
check as the drawer names him as one of the payees.
Moreover, his signature is not a forgery nor has he or
anyone forged the signature of the representative of BA
Finance Corporation. No unauthorized indorsement
appears on the check.
xxxx
Absent the indispensable fact of forgery or unauthorized
indorsement, the desirable shortcut rule cannot be
applied,[24] (underscoring supplied)
The petition fails.
Section 41 of the Negotiable Instruments Law provides:
Where an instrument is payable to the order of two or more
payees or indorsees who are not partners, all must indorse
unless the one indorsing has authority to indorse for the
others. (emphasis and underscoring supplied)
Bitanga alone endorsed the crossed check, and petitioner
allowed the deposit and release of the proceeds thereof,
despite the absence of authority of Bitangas co-payee BA
Finance to endorse it on its behalf.[25]
Denying any irregularity in accepting the check, petitioner
maintains that it followed normal banking procedure. The
testimony of Imelda Cruz, Asianbanks then accounting
head, shows otherwise, however, viz:
Q Now, could you be familiar with a particular policy of the
bank with respect to checks with joined (sic) payees?
A Yes, sir.
Q And what would be the particular policy of the bank
regarding this transaction?
A The bank policy and procedure regarding the joint
checks. Once it is deposited to a single account, we are not
accepting joint checks for single account, depositing to a
single account (sic).
Q What happened to the bank employee who allowed this
particular transaction to occur?
A Once the branch personnel, the bank personnel (sic)
accepted it, he is liable.
Q What do you mean by the branch personnel being held
liable?
A Because since (sic) the bank policy, we are not supposed
to accept joint checks to a [single] account, so we mean
that personnel would be held liable in the sense that (sic)
once it is withdrawn or encashed, it will not be allowed.
Q In your experience, have you encountered any bank
employee who was subjected to disciplinary action by not
following bank policies?
A The one that happened in that case, since I really dont
know who that personnel is, he is no longer connected with
the bank.
Q What about in general, do you know of any disciplinary
action, Madam witness?
A Since theres a negligence on the part of the bank
personnel, it will be a ground for his separation [from] the
bank.[26] (emphasis, italics and underscoring supplied)
Admittedly, petitioner dismissed the employee who allowed
the deposit of the check in Bitangas account.
Petitioners argument that since there was neither forgery,
nor unauthorized indorsement because Bitanga was a co-
payee in the subject check, the dictum in Associated Bank
v. CA does not apply in the present case fails. The payment
of an instrument over a missing indorsement is the
equivalent of payment on a forged indorsement[27] or an
unauthorized indorsement in itself in the case of joint
payees.[28]
Clearly, petitioner, through its employee, was negligent
when it allowed the deposit of the crossed check, despite
the lone endorsement of Bitanga, ostensibly ignoring the
fact that the check did not, it bears repeating, carry the
indorsement of BA Finance.[29]
As has been repeatedly emphasized, the banking business
is imbued with public interest such that the highest degree
of diligence and highest standards of integrity and
performance are expected of banks in order to maintain the
trust and confidence of the public in general in the banking
sector.[30] Undoubtedly, BA Finance has a cause of action
against petitioner.
Is petitioner liable to BA Finance for the full value of the
check?
Petitioner, at all events, argue that its liability to BA Finance
should only be one-half of the amount covered by the check
as there is no indication in the check that Bitanga and BA
Finance are solidary creditors to thus make them
presumptively joint creditors under Articles 1207 and 1208
of the Civil Code which respectively provide:
Art. 1207. The concurrence of two or more creditors or of
two or more debtors in one and the same obligation does
not imply that each one of the former has a right to demand,
or that each one of the latter is bound to render, entire
compliance with the prestations. There is a solidary liability
only when the obligation expressly so states, or when the
law or the nature of the obligation requires solidarity.
Art. 1208. If from the law, or the nature or wording of the
obligations to which the preceding article refers to the
contrary does not appear, the credit or debt shall be
presumed to be divided into as many equal shares as there
are creditors or debtors, the debts or credits being
considered distinct from one another, subject to the Rules
of Court governing the multiplicity of suits.
Petitioners argument is flawed.
34
The provisions of the Negotiable Instruments Law and
underlying jurisprudential teachings on the black-letter law
provide definitive justification for petitioners full liability on
the value of the check.
To be sure, a collecting bank, Asianbank in this case,
where a check is deposited and which indorses the check
upon presentment with the drawee bank, is an indorser.[31]
This is because in indorsing a check to the drawee bank, a
collecting bank stamps the back of the check with the
phrase all prior endorsements and/or lack of endorsement
guaranteed[32] and, for all intents and purposes, treats the
check as a negotiable instrument, hence, assumes the
warranty of an indorser.[33] Without Asianbanks warranty,
the drawee bank (China Bank in this case) would not have
paid the value of the subject check.
Petitioner, as the collecting bank or last indorser, generally
suffers the loss because it has the duty to ascertain the
genuineness of all prior indorsements considering that the
act of presenting the check for payment to the drawee is an
assertion that the party making the presentment has done
its duty to ascertain the genuineness of prior
indorsements.[34]
Accordingly, one who credits the proceeds of a check to the
account of the indorsing payee is liable in conversion to the
non-indorsing payee for the entire amount of the check.[35]
It bears noting that in petitioners cross-claim against
Bitanga, the trial court ordered Bitanga to return to
petitioner the entire value of the check ─ P224,500.00 ─
with interest as well as damages and cost of suit. Petitioner
never questioned this aspect of the trial courts disposition,
yet it now prays for the modification of its liability to BA
Finance to only one-half of said amount. To pander to
petitioners supplication would certainly amount to unjust
enrichment at BA Finances expense. Petitioners
remedywhich is the reimbursement for the full amount of
the check from the perpetrator of the irregularity lies with
Bitanga.
Articles 1207 and 1208 of the Civil Code cannot be applied
to the present case as these are completely irrelevant. The
drawer, Malayan Insurance in this case, issued the check to
answer for an underlying contractual obligation (payment of
insurance proceeds). The obligation is merely reflected in
the instrument and whether the payees would jointly share
in the proceeds or not is beside the point.
Moreover, granting petitioners appeal for partial liability
would run counter to the existing principles on the liabilities
of parties on negotiable instruments, particularly on Section
68 of the Negotiable Instruments Law which instructs that
joint payees who indorse are deemed to indorse jointly and
severally.[36] Recall that when the maker dishonors the
instrument, the holder thereof can turn to those secondarily
liable the indorser for recovery.[37] And since the law
explicitly mandates a solidary liability on the part of the joint
payees who indorse the instrument, the holder thereof
(assuming the check was further negotiated) can turn to
either Bitanga or BA Finance for full recompense.
Respecting petitioners challenge to the award by the
appellate court of exemplary damages to BA Finance, the
same fails. Contrary to petitioners claim that no moral,
temperate, liquidated or compensatory damages were
awarded by the trial court,[38] the RTC did in fact award
compensatory or actual damages of P224,500, the value of
the check, plus interest thereon.
Petitioner argues, however, that assuming arguendo that
compensatory damages had been awarded, the same
contravened Article 2232 of the Civil Code which provides
that in contracts or quasi-contracts, the court may award
exemplary damages only if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent
manner. Since, so petitioner concludes, there was no
finding that it acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner,[39] it is not liable for
exemplary damages.
The argument fails. To reiterate, petitioners liability is based
not on contract or quasi-contract but on quasi-delict since
there is no pre-existing contractual relation between the
parties.[40] Article 2231 of the Civil Code, which provides
that in quasi-delict, exemplary damages may be granted if
the defendant acted with gross negligence, thus applies.
For gross negligence implies a want or absence of or failure
to exercise even slight care or diligence, or the entire
absence of care,[41] evincing a thoughtless disregard of
consequences without exerting any effort to avoid them.[42]
x x x The law allows the grant of exemplary damages to set
an example for the public good. The business of a bank is
affected with public interest; thus it makes a sworn
profession of diligence and meticulousness in giving
irreproachable service. For this reason, the bank should
guard against in injury attributable to negligence or bad faith
on its part. The award of exemplary damages is proper as a
warning to [the petitioner] and all concerned not to
recklessly disregard their obligation to exercise the highest
and strictest diligence in serving their depositors.[43] (Italics
and underscoring supplied)
As for the dismissal by the appellate court of petitioners
third-party complaint against Malayan Insurance, the same
is well-taken. Petitioner based its third-party complaint on
Malayan Insurances alleged gross negligence in issuing the
check payable to both BA Finance and Bitanga, despite the
stipulation in the mortgage and in the insurance policy that
liability for loss shall be payable to BA Finance.[44]
Malayan Insurance countered, however, that it
x x x paid the amount of P224,500 to BA Finance
Corporation and Lamberto Bitanga in compliance with the
decision in the case of Lamberto Bitanga versus Malayan
Insurance Co., Inc., Civil Case No. 88-2802, RTC-Makati
Br. 132, and affirmed on appeal by the Supreme Court [3rd
Division], G.R. no. 101964, April 8, 1992 x x x.[45]
(underscoring supplied)
It is noted that Malayan Insurance, which stated that it was
a matter of company policy to issue checks in the name of
the insured and the financing company, presented a
witness to rebut its supposed negligence. [46] Perforce, it
thus wrote a crossed check with joint payees so as to serve
35
warning that the check was issued for a definite
purpose.[47] Petitioner never ever disputed these
assertions.

The Court takes exception, however, to the appellate courts

affirmance of the trial courts grant of legal interest of 12%
per annum on the value of the check. For the obligation in
this case did not arise out of a loan or forbearance of
money, goods or credit. While Article 1980 of the Civil Code
provides that:

Fixed savings, and current deposits of money in banks and

similar institutions shall be governed by the provisions
concerning simple loan,

said provision does not find application in this case since

the nature of the relationship between BA Finance and
petitioner is one of agency whereby petitioner, as collecting
bank, is to collect for BA Finance the corresponding
proceeds from the check.[48] Not being a loan or
forbearance of money, the interest should be 6% per
annum computed from the date of extrajudicial demand on
September 25, 1992 until finality of judgment; and 12% per
annum from finality of judgment until payment, conformably
with Eastern Shipping Lines, Inc. v. Court of Appeals.[49]

WHEREFORE, the Decision of the Court of Appeals dated

May 18, 2007 is AFFIRMED with MODIFICATION in that
the rate of interest on the judgment obligation of P224,500
should be 6% per annum, computed from the time of
extrajudicial demand on September 25, 1992 until its full
payment before finality of judgment; thereafter, if the
amount adjudged remains unpaid, the interest rate shall be
12% per annum computed from the time the judgment
becomes final and executory until fully satisfied.
Costs against petitioner.

SO ORDERED.

36
G.R. No. 118492 August 15, 2001
GREGORIO H. REYES and CONSUELO PUYAT-REYES,
petitioners,
vs.
THE HON. COURT OF APPEALS and FAR EAST BANK
AND TRUST COMPANY, respondents.
DE LEON, JR., J.:
Before us is a petition for review of the Decision1 dated July
22, 1994 and Resolution2 dated December 29, 1994 of the
Court of Appeals3 affirming with modification the Decision4
dated November 12, 1992 of the Regional Trial Court of
Makati, Metro Manila, Branch 64, which dismissed the
complaint for damages of petitioners spouses Gregorio H.
Reyes and Consuelo Puyat-Reyes against respondent Far
East Bank and Trust Company.
The undisputed facts of the case are as follows:
In view of the 20th Asian Racing Conference then
scheduled to be held in September, 1988 in Sydney,
Australia, the Philippine Racing Club, Inc. (PRCI, for
brevity) sent four (4) delegates to the said conference.
Petitioner Gregorio H. Reyes, as vice-president for finance,
racing manager, treasurer, and director of PRCI, sent
Godofredo Reyes, the club's chief cashier, to the
respondent bank to apply for a foreign exchange demand
draft in Australian dollars.
Godofredo went to respondent bank's Buendia Branch in
Makati City to apply for a demand draft in the amount One
Thousand Six Hundred Ten Australian Dollars
(AU$1,610.00) payable to the order of the 20th Asian
Racing Conference Secretariat of Sydney, Australia. He
was attended to by respondent bank's assistant cashier, Mr.
Yasis, who at first denied the application for the reason that
respondent bank did not have an Australian dollar account
in any bank in Sydney. Godofredo asked if there could be a
way for respondent bank to accommodate PRCI's urgent
need to remit Australian dollars to Sydney. Yasis of
respondent bank then informed Godofredo of a roundabout
way of effecting the requested remittance to Sydney thus:
the respondent bank would draw a demand draft against
Westpac Bank in Sydney, Australia (Westpac-Sydney for
brevity) and have the latter reimburse itself from the U.S.
dollar account of the respondent in Westpac Bank in New
York, U.S.A. (Westpac-New York for brevity). This
arrangement has been customarily resorted to since the
1960's and the procedure has proven to be problem-free.
PRCI and the petitioner Gregorio H. Reyes, acting through
Godofredo, agreed to this arrangement or approach in
order to effect the urgent transfer of Australian dollars
payable to the Secretariat of the 20th Asian Racing
Conference.
On July 28, 1988, the respondent bank approved the said
application of PRCI and issued Foreign Exchange Demand
Draft (FXDD) No. 209968 in the sum applied for, that is,
One Thousand Six Hundred Ten Australian Dollars (AU$
1,610.00), payable to the order of the 20th Asian Racing
Conference Secretariat of Sydney, Australia, and
addressed to Westpac-Sydney as the drawee
bank.1âwphi1.nêt
On August 10, 1988, upon due presentment of the foreign
exchange demand draft, denominated as FXDD No.
209968, the same was dishonored, with the notice of
dishonor stating the following: "xxx No account held with
Westpac." Meanwhile, on August 16, 1988, Wespac-New
York sent a cable to respondent bank informing the latter
that its dollar account in the sum of One Thousand Six
Hundred Ten Australian Dollars (AU$ 1,610.00) was
debited. On August 19, 1988, in response to PRCI's
complaint about the dishonor of the said foreign exchange
demand draft, respondent bank informed Westpac-Sydney
of the issuance of the said demand draft FXDD No. 209968,
drawn against the Wespac-Sydney and informing the latter
to be reimbursed from the respondent bank's dollar account
in Westpac-New York. The respondent bank on the same
day likewise informed Wespac-New York requesting the
latter to honor the reimbursement claim of Wespac-Sydney.
On September 14, 1988, upon its second presentment for
payment, FXDD No. 209968 was again dishonored by
Westpac-Sydney for the same reason, that is, that the
respondent bank has no deposit dollar account with the
drawee Wespac-Sydney.
On September 17, 1988 and September 18, 1988,
respectively, petitioners spouses Gregorio H. Reyes and
Consuelo Puyat-Reyes left for Australia to attend the said
racing conference. When petitioner Gregorio H. Reyes
arrived in Sydney in the morning of September 18, 1988, he
went directly to the lobby of Hotel Regent Sydney to
register as a conference delegate. At the registration desk,
in the presence of other delegates from various member of
the conference secretariat that he could not register
because the foreign exchange demand draft for his
registration fee had been dishonored for the second time. A
discussion ensued in the presence and within the hearing of
many delegates who were also registering. Feeling terribly
embarrassed and humiliated, petitioner Gregorio H. Reyes
asked the lady member of the conference secretariat that
he be shown the subject foreign exchange demand draft
that had been dishonored as well as the covering letter after
which he promised that he would pay the registration fees
in cash. In the meantime he demanded that he be given his
name plate and conference kit. The lady member of the
conference secretariat relented and gave him his name
plate and conference kit. It was only two (2) days later, or
on September 20, 1988, that he was given the dishonored
demand draft and a covering letter. It was then that he
actually paid in cash the registration fees as he had earlier
promised.
Meanwhile, on September 19, 1988, petitioner Consuelo
Puyat-Reyes arrived in Sydney. She too was embarassed
and humiliated at the registration desk of the conference
secretariat when she was told in the presence and within
the hearing of other delegates that she could not be
registered due to the dishonor of the subject foreign
exchange demand draft. She felt herself trembling and
unable to look at the people around her. Fortunately, she
saw her husband, coming toward her. He saved the
situation for her by telling the secretariat member that he
had already arranged for the payment of the registration fee
in cash once he was shown the dishonored demand draft.
Only then was petitioner Puyat-Reyes given her name plate
and conference kit.
37

At the time the incident took place, petitioner Consuelo
Puyat-Reyes was a member of the House of
Representatives representing the lone Congressional
District of Makati, Metro Manila. She has been an officer of
the Manila Banking Corporation and was cited by
Archbishop Jaime Cardinal Sin as the top lady banker of
the year in connection with her conferment of the Pro-
Ecclesia et Pontifice Award. She has also been awarded a
plaque of appreciation from the Philippine Tuberculosis
Society for her extraordinary service as the Society's
campaign chairman for the ninth (9th) consecutive year.
On November 23, 1988, the petitioners filed in the Regional
Trial Court of Makati, Metro Manila, a complaint for
damages, docketed as Civil Case No. 88-2468, against the
respondent bank due to the dishonor of the said foreign
exchange demand draft issued by the respondent bank.
The petitioners claim that as a result of the dishonor of the
said demand draft, they were exposed to unnecessary
shock, social humiliation, and deep mental anguish in a
foreign country, and in the presence of an international
audience.
On November 12, 1992, the trial court rendered judgment in
favor of the defendant (respondent bank) and against the
plaintiffs (herein petitioners), the dispositive portion of which
states:
WHEREFORE, judgment is hereby rendered in favor of the
defendant, dismissing plaintiff's complaint, and ordering
plaintiffs to pay to defendant, on its counterclaim, the
amount of P50,000.00, as reasonable attorney's fees. Costs
against the plaintiff.
SO ORDERED.5
The petitioners appealed the decision of the trial court to
the Court of Appeals. On July 22, 1994, the appellate court
affirmed the decision of the trial court but in effect deleted
the award of attorney's fees to the defendant (herein
respondent bank) and the pronouncement as to the costs.
The decretal portion of the decision of the appellate court
states:
WHEREFORE, the judgment appealed from, insofar as it
dismissed plaintiff's complaint, is hereby AFFIRMED, but is
hereby REVERSED and SET ASIDE in all other respect.
No special pronouncement as to costs.
SO ORDERED.6
According to the appellate court, there is no basis to hold
the respondent bank liable for damages for the reason that
it exerted every effort for the subject foreign exchange
demand draft to be honored. The appellate court found and
declared that:
xxx xxx xxx
Thus, the Bank had every reason to believe that the
transaction finally went through smoothly, considering that
its New York account had been debited and that there was
no miscommunication between it and Westpac-New York.
SWIFT is a world wide association used by almost all banks
and is known to be the most reliable mode of
communication in the international banking business.
Besides, the above procedure, with the Bank as drawer and
Westpac-Sydney as drawee, and with Westpac-New York
as the reimbursement Bank had been in place since 1960s
and there was no reason for the Bank to suspect that this
particular demand draft would not be honored by Westpac-
Sydney.
From the evidence, it appears that the root cause of the
miscommunications of the Bank's SWIFT message is the
erroneous decoding on the part of Westpac-Sydney of the
Bank's SWIFT message as an MT799 format. However, a
closer look at the Bank's Exhs. "6" and "7" would show that
despite what appears to be an asterick written over the
figure before "99", the figure can still be distinctly seen as a
number "1" and not number "7", to the effect that Westpac-
Sydney was responsible for the dishonor and not the Bank.
Moreover, it is not said asterisk that caused the misleading
on the part of the Westpac-Sydney of the numbers "1" to
"7", since Exhs. "6" and "7" are just documentary copies of
the cable message sent to Wespac-Sydney. Hence, if there
was mistake committed by Westpac-Sydney in decoding
the cable message which caused the Bank's message to be
sent to the wrong department, the mistake was Westpac's,
not the Bank's. The Bank had done what an ordinary
prudent person is required to do in the particular situation,
although appellants expect the Bank to have done more.
The Bank having done everything necessary or usual in the
ordinary course of banking transaction, it cannot be held
liable for any embarrassment and corresponding damage
that appellants may have incurred.7
xxx xxx xxx
Hence, this petition, anchored on the following assignment
of errors:
I
THE HONORABLE COURT OF APPEALS ERRED IN
FINDING PRIVATE RESPONDENT NOT NEGLIGENT BY
ERRONEOUSLY APPLYING THE STANDARD OF
DILIGENCE OF AN "ORDINARY PRUDENT PERSON"
WHEN IN TRUTH A HIGHER DEGREE OF DILIGENCE IS
IMPOSED BY LAW UPON THE BANKS.
II
THE HONORABLE COURT OF APPEALS ERRED IN
ABSOLVING PRIVATE RESPONDENT FROM LIABILITY
BY OVERLOOKING THE FACT THAT THE DISHONOR
OF THE DEMAND DRAFT WAS A BREACH OF PRIVATE
RESPONDENT'S WARRANTY AS THE DRAWER
THEREOF.
III
THE HONORABLE COURT OF APPEALS ERRED IN NOT
HOLDING THAT AS SHOWN OVERWHELMINGLY BY
THE EVIDENCE, THE DISHONOR OF THE DEMAND
DRAFT AS DUE TO PRIVATE RESPONDENT'S
NEGLIGENCE AND NOT THE DRAWEE BANK.8
38
The petitioners contend that due to the fiduciary nature of
the relationship between the respondent bank and its
clients, the respondent should have exercised a higher
degree of diligence than that expected of an ordinary
prudent person in the handling of its affairs as in the case at
bar. The appellate court, according to petitioners, erred in
applying the standard of diligence of an ordinary prudent
person only. Petitioners also claim that the respondent bank
violate Section 61 of the Negotiable Instruments Law9
which provides the warranty of a drawer that "xxx on due
presentment, the instrument will be accepted or paid, or
both, according to its tenor xxx." Thus, the petitioners argue
that respondent bank should be held liable for damages for
violation of this warranty. The petitioners pray this Court to
re-examine the facts to cite certain instances of negligence.
It is our view and we hold that there is no reversible error in
the decision of the appellate court.
Section 1 of Rule 45 of the Revised Rules of Court provides
that "(T)he petition (for review) shall raise only questions of
law which must be distinctly set forth." Thus, we have ruled
that factual findings of the Court of Appeals are conclusive
on the parties and not reviewable by this Court – and they
carry even more weight when the Court of Appeals affirms
the factual findings of the trial court.10
The courts a quo found that respondent bank did not
misrepresent that it was maintaining a deposit account with
Westpac-Sydney. Respondent bank's assistant cashier
explained to Godofredo Reyes, representing PRCI and
petitioner Gregorio H. Reyes, how the transfer of Australian
dollars would be effected through Westpac-New York
where the respondent bank has a dollar account to
Westpac-Sydney where the subject foreign exchange
demand draft (FXDD No. 209968) could be encashed by
the payee, the 20th Asian Racing Conference Secretariat.
PRCI and its Vice-President for finance, petitioner Gregorio
H. Reyes, through their said representative, agreed to that
arrangement or procedure. In other words, the petitioners
are estopped from denying the said arrangement or
procedure. Similar arrangements have been a long
standing practice in banking to facilitate international
commercial transactions. In fact, the SWIFT cable message
sent by respondent bank to the drawee bank, Westpac-
Sydney, stated that it may claim reimbursement from its
New York branch, Westpac-New York, where respondent
bank has a deposit dollar account. The facts as found by
the courts a quo show that respondent bank did not cause
an erroneous transmittal of its SWIFT cable message to
Westpac-Sydney. It was the erroneous decoding of the
cable message on the part of Westpac-Sydney that caused
the dishonor of the subject foreign exchange demand draft.
An employee of Westpac-Sydney in Sydney, Australia
mistakenly read the printed figures in the SWIFT cable
message of respondent bank as "MT799" instead of as
"MT199". As a result, Westpac-Sydney construed the said
cable message as a format for a letter of credit, and not for
a demand draft. The appellate court correct found that "the
figure before '99' can still be distinctly seen as a number '1'
and not number '7'." Indeed, the line of a "7" is in a slanting
position while the line of a "1" is in a horizontal position.
Thus, the number "1" in "MT199" cannot be construed as
"7".11
The evidence also shows that the respondent bank
exercised that degree of diligence expected of an ordinary
prudent person under the circumstances obtaining. Prior to
the first dishonor of the subject foreign exchange demand
draft, the respondent bank advised Westpac-New York to
honor the reimbursement claim of Westpac-Sydney and to
debit the dollar account12 of respondent bank with the
former. As soon as the demand draft was dishonored, the
respondent bank, thinking that the problem was with the
reimbursement and without any idea that it was due to
miscommunication, re-confirmed the authority of Westpac-
New York to debit its dollar account for the purpose of
reimbursing Westpac-Sydney.13 Respondent bank also
sent two (2) more cable messages to Westpac-New York
inquiring why the demand draft was not honored.14
With these established facts, we now determine the degree
of diligence that banks are required to exert in their
commercial dealings. In Philippine Bank of Commerce v.
Court of Appeals15 upholding a long standing doctrine, we
ruled that the degree of diligence required of banks, is more
than that of a good father of a family where the fiduciary
nature of their relationship with their depositors is
concerned. In other words banks are duty bound to treat the
deposit accounts of their depositors with the highest degree
of care. But the said ruling applies only to cases where
banks act under their fiduciary capacity, that is, as
depositary of the deposits of their depositors. But the same
higher degree of diligence is not expected to be exerted by
banks in commercial transactions that do not involve their
fiduciary relationship with their depositors.
Considering the foregoing, the respondent bank was not
required to exert more than the diligence of a good father of
a family in regard to the sale and issuance of the subject
foreign exchange demand draft. The case at bar does not
involve the handling of petitioners' deposit, if any, with the
respondent bank. Instead, the relationship involved was
that of a buyer and seller, that is, between the respondent
bank as the seller of the subject foreign exchange demand
draft, and PRCI as the buyer of the same, with the 20th
Asian Racing conference Secretariat in Sydney, Australia
as the payee thereof. As earlier mentioned, the said foreign
exchange demand draft was intended for the payment of
the registration fees of the petitioners as delegates of the
PRCI to the 20th Asian Racing Conference in Sydney.
The evidence shows that the respondent bank did
everything within its power to prevent the dishonor of the
subject foreign exchange demand draft. The erroneous
reading of its cable message to Westpac-Sydney by an
employee of the latter could not have been foreseen by the
respondent bank. Being unaware that its employee
erroneously read the said cable message, Westpac-Sydney
merely stated that the respondent bank has no deposit
account with it to cover for the amount of One Thousand
Six Hundred Ten Australian Dollar (AU $1610.00) indicated
in the foreign exchange demand draft. Thus, the
respondent bank had the impression that Westpac-New
York had not yet made available the amount for
reimbursement to Westpac-Sydney despite the fact that
respondent bank has a sufficient deposit dollar account with
Westpac-New York. That was the reason why the
respondent bank had to re-confirm and repeatedly notify
Westpac-New York to debit its (respondent bank's) deposit
39
dollar account with it and to transfer or credit the
corresponding amount to Westpac-Sydney to cover the
amount of the said demand draft.

In view of all the foregoing, and considering that the

dishonor of the subject foreign exchange demand draft is
not attributable to any fault of the respondent bank,
whereas the petitioners appeared to be under estoppel as
earlier mentioned, it is no longer necessary to discuss the
alleged application of Section 61 of the Negotiable
Instruments Law to the case at bar. In any event, it was
established that the respondent bank acted in good faith
and that it did not cause the embarrassment of the
petitioners in Sydney, Australia. Hence, the Court of
Appeals did not commit any reversable error in its
challenged decision.

WHEREFORE, the petition is hereby DENIED, and the

assailed decision of the Court of Appeals is AFFIRMED.
Costs against the petitioners.

SO ORDERED.1âwphi1.nêt

40
G.R. No. L-60033 April 4, 1984
TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and
TERESITA SANTOS, petitioners,
vs.
THE CITY FISCAL OF MANILA, HON. JOSE B.
FLAMINIANO, ASST. CITY FISCAL FELIZARDO N. LOTA
and CLEMENT DAVID, respondents.
MAKASIAR, Actg. C.J.:ñé+.£ªwph!1
This is a petition for prohibition and injunction with a prayer
for the immediate issuance of restraining order and/or writ
of preliminary injunction filed by petitioners on March 26,
1982.
On March 31, 1982, by virtue of a court resolution issued by
this Court on the same date, a temporary restraining order
was duly issued ordering the respondents, their officers,
agents, representatives and/or person or persons acting
upon their (respondents') orders or in their place or stead to
refrain from proceeding with the preliminary investigation in
Case No. 8131938 of the Office of the City Fiscal of Manila
(pp. 47-48, rec.). On January 24, 1983, private respondent
Clement David filed a motion to lift restraining order which
was denied in the resolution of this Court dated May 18,
1983.
As can be gleaned from the above, 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.
For purposes of brevity, We hereby adopt the antecedent
facts narrated by the Solicitor General in its Comment dated
June 28,1982, as follows:têñ.£îhqwâ£
On December 23,1981, private respondent David filed I.S.
No. 81-31938 in the Office of the City Fiscal of Manila,
which case was assigned to respondent Lota for preliminary
investigation (Petition, p. 8).
In I.S. No. 81-31938, David charged petitioners (together
with one Robert Marshall and the following directors of the
Nation Savings and Loan Association, Inc., namely Homero
Gonzales, Juan Merino, Flavio Macasaet, Victor Gomez,
Jr., Perfecto Manalac, Jaime V. Paz, Paulino B. Dionisio,
and one John Doe) with estafa and violation of Central
Bank Circular No. 364 and related Central Bank regulations
on foreign exchange transactions, allegedly committed as
follows (Petition, Annex "A"):têñ.£îhqwâ£
"From March 20, 1979 to March, 1981, David invested with
the Nation Savings and Loan Association, (hereinafter
called NSLA) the sum of P1,145,546.20 on nine deposits,
P13,531.94 on savings account deposits (jointly with his
sister, Denise Kuhne), US$10,000.00 on time deposit,
US$15,000.00 under 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 filed 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."
Petitioners, Martin and Santos, filed a joint counter-affidavit
(Petition, Annex' B') in which they stated the
following.têñ.£îhqwâ£
"That Martin became President of NSLA in March 1978
(after the resignation of Guingona, Jr.) and served as such
until October 30, 1980, while Santos was General Manager
up to November 1980; that because NSLA was urgently in
need of funds and at David's insistence, his investments
were treated as special- accounts with interest above the
legal rate, an recorded in separate confidential documents
only a portion of which were to be reported because he did
not want the Australian government to tax his total earnings
(nor) to know his total investments; that all transactions with
David were recorded except the sum of US$15,000.00
which was a personal loan of Santos; that David's check for
US$50,000.00 was cleared through Guingona, Jr.'s dollar
account because NSLA did not have one, that a draft of
US$30,000.00 was placed in the name of one Paz Roces
because of a pending transaction with her; that the
Philippine Deposit Insurance Corporation had already
reimbursed David within the legal limits; that majority of the
stockholders of NSLA had filed Special Proceedings No.
82-1695 in the Court of First Instance to contest its
(NSLA's) closure; that after NSLA was placed under
receivership, Martin executed a promissory note in David's
favor and caused the transfer to him of a nine and on behalf
(9 1/2) carat diamond ring with a net value of P510,000.00;
and, that the liabilities of NSLA to David were civil in
nature."
Petitioner, Guingona, Jr., in his counter-affidavit (Petition,
Annex' C') stated the following:têñ.£îhqwâ£
"That he had no hand whatsoever in the transactions
between David and NSLA since he (Guingona Jr.) had
resigned as NSLA president in March 1978, or prior to
those transactions; that he assumed a portion o; the
liabilities of NSLA to David because of the latter's insistence
that he placed his investments with NSLA because of his
faith in Guingona, Jr.; that in a Promissory Note dated June
17, 1981 (Petition, Annex "D") he (Guingona, Jr.) bound
himself to pay David the sums of P668.307.01 and
US$37,500.00 in stated installments; that he (Guingona,
41
Jr.) secured payment of those amounts with second
mortgages over two (2) parcels of land under a deed of
Second Real Estate Mortgage (Petition, Annex "E") in which
it was provided that the mortgage over one (1) parcel shall
be cancelled upon payment of one-half of the obligation to
David; that he (Guingona, Jr.) paid P200,000.00 and
tendered another P300,000.00 which David refused to
accept, hence, he (Guingona, Jr.) filed Civil Case No. Q-
33865 in the Court of First Instance of Rizal at Quezon City,
to effect the release of the mortgage over one (1) of the two
parcels of land conveyed to David under second
mortgages."
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 filed the instant petition because: (a) the
production of the Promisory Notes, Banker's Acceptance,
Certificates 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
testified that the duplicate originals of the aforesaid
instruments of indebtedness were all on file with NSLA,
contrary to David's claim that some of his investments were
not record (Petition, pp. 8-9).
Petitioners alleged that they did not exhaust available
administrative remedies because to do so would be futile
(Petition, p. 9) [pp. 153-157, rec.].
As correctly pointed out by the Solicitor General, the sole
issue for resolution is whether public respondents acted
without jurisdiction when they investigated the charges
(estafa and violation of CB Circular No. 364 and related
regulations regarding foreign exchange transactions)
subject matter of I.S. No. 81-31938.
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 estafa.
A casual perusal of the December 23, 1981 affidavit.
complaint filed in the Office of the City Fiscal of Manila by
private respondent David against petitioners Teopisto
Guingona, Jr., Antonio I. Martin and Teresita G. Santos,
together with one Robert Marshall and the other directors of
the Nation Savings and Loan Association, will show that
from March 20, 1979 to March, 1981, private respondent
David, together with his sister, Denise Kuhne, invested with
the Nation Savings and Loan Association the sum of
P1,145,546.20 on time deposits covered by Bankers
Acceptances and Certificates of Time Deposits and the sum
of P13,531.94 on savings account deposits covered by
passbook nos. 6-632 and 29-742, or a total of
P1,159,078.14 (pp. 15-16, roc.). It appears further that
private respondent David, together with his sister, made
investments in the aforesaid bank in the amount of
US$75,000.00 (p. 17, rec.).
Moreover, the records reveal that when the aforesaid bank
was placed under receivership on March 21, 1981,
petitioners Guingona and Martin, upon the request of
private respondent David, assumed the obligation of the
bank to private respondent David by executing on June 17,
1981 a joint promissory note in favor of private respondent
acknowledging an indebtedness of Pl,336,614.02 and
US$75,000.00 (p. 80, rec.). This promissory note was
based on the statement of account as of June 30, 1981
prepared by the private respondent (p. 81, rec.). The
amount of indebtedness assumed appears to be bigger
than the original claim because of the added interest and
the inclusion of other deposits of private respondent's sister
in the amount of P116,613.20.
Thereafter, or on July 17, 1981, petitioners Guingona and
Martin agreed to divide the said indebtedness, and
petitioner Guingona executed another promissory note
antedated to June 17, 1981 whereby he personally
acknowledged an indebtedness of P668,307.01 (1/2 of
P1,336,614.02) and US$37,500.00 (1/2 of US$75,000.00)
in favor of private respondent (p. 25, rec.). The aforesaid
promissory notes were executed as a result of deposits
made by Clement David and Denise Kuhne with the Nation
Savings and Loan Association.
Furthermore, the various pleadings and documents filed by
private respondent David, before this Court indisputably
show that he has indeed invested his money on time and
savings deposits with the Nation Savings and Loan
Association.
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:têñ.£îhqwâ£
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:têñ.£îhqwâ£
It should be noted that fixed, 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; Pacific Coast Biscuit Co. vs.
Chinese Grocers Association 65 Phil. 375; Fletcher
American National Bank vs. Ang Chong UM 66 PWL 385;
Pacific Commercial Co. vs. American Apothecaries Co., 65
PhiL 429; Gopoco Grocery vs. Pacific 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:têñ.£îhqwâ£
Bank deposits are in the nature of irregular deposits. They
are really 'loans because they earn interest. All kinds of
42
bank deposits, whether fixed, 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.
WE have already laid down the rule that:têñ.£îhqwâ£
In order that a person can be convicted under the above-
quoted provision, it must be proven that he has the
obligation to deliver or return the some money, goods or
personal property that he received Petitioners had no such
obligation to return the same money, i.e., the bills or coins,
which they received from private respondents. This is so
because as clearly as stated in criminal complaints, the
related civil complaints and the supporting sworn
statements, the sums of money that petitioners received
were loans.
The nature of simple loan is defined in Articles 1933 and
1953 of the Civil Code.têñ.£îhqwâ£
"Art. 1933. — By the contract of loan, one of the parties
delivers to another, either something not consumable so
that the latter may use the same for a certain time- and
return it, in which case the contract is called a
commodatum; or money or other consumable thing, upon
the condition that the same amount of the same kind and
quality shall he paid in which case the contract is simply
called a loan or mutuum.
"Commodatum is essentially gratuitous.
"Simple loan may be gratuitous or with a stipulation to pay
interest.
"In commodatum the bailor retains the ownership of the
thing loaned while in simple loan, ownership passes to the
borrower.
"Art. 1953. — A person who receives a loan of money or
any other fungible thing acquires the ownership thereof,
and is bound to pay to the creditor an equal amount of the
same kind and quality."
It can be readily noted from the above-quoted provisions
that in simple loan (mutuum), as contrasted to
commodatum the borrower acquires ownership of the
money, goods or personal property borrowed Being the
owner, the borrower can dispose of the thing borrowed
(Article 248, Civil Code) and his act will not be considered
misappropriation thereof' (Yam vs. Malik, 94 SCRA 30, 34
[1979]; Emphasis supplied).
But even granting that the failure of the bank to pay the time
and savings deposits of private respondent David would
constitute a violation of paragraph 1(b) of Article 315 of the
Revised Penal Code, nevertheless any incipient criminal
liability was deemed avoided, because when the aforesaid
bank was placed under receivership by the Central Bank,
petitioners Guingona and Martin assumed the obligation of
the bank to private respondent David, thereby resulting in
the novation of the original contractual obligation arising
from deposit into a contract of loan and converting the
original trust relation between the bank and private
respondent David into an ordinary debtor-creditor relation
between the petitioners and private respondent.
Consequently, the failure of the bank or petitioners
Guingona and Martin to pay the deposits of private
respondent would not constitute a breach of trust but would
merely be a failure to pay the obligation as a debtor.
Moreover, while it is true that novation does not extinguish
criminal liability, it may however, prevent the rise of criminal
liability as long as it occurs prior to the filing of the criminal
information in court. Thus, in Gonzales vs. Serrano ( 25
SCRA 64, 69 [1968]) We held that:têñ.£îhqwâ£
As pointed out in People vs. Nery, novation prior to the filing
of the criminal information — as in the case at bar — may
convert the relation between the parties into an ordinary
creditor-debtor relation, and place the complainant in
estoppel to insist on the original transaction or "cast doubt
on the true nature" thereof.
Again, in the latest case of Ong vs. Court of Appeals (L-
58476, 124 SCRA 578, 580-581 [1983] ), this Court
reiterated the ruling in People vs. Nery ( 10 SCRA 244
[1964] ), declaring that:têñ.£îhqwâ£
The novation theory may perhaps apply prior to the filling of
the criminal information in court by the state prosecutors
because up to that time the original trust relation may be
converted by the parties into an ordinary creditor-debtor
situation, thereby placing the complainant in estoppel to
insist on the original trust. But after the justice authorities
have taken cognizance of the crime and instituted action in
court, the offended party may no longer divest the
prosecution of its power to exact the criminal liability, as
distinguished from the civil. The crime being an offense
against the state, only the latter can renounce it (People vs.
Gervacio, 54 Off. Gaz. 2898; People vs. Velasco, 42 Phil.
76; U.S. vs. Montanes, 8 Phil. 620).
43
It may be observed in this regard that novation is not one of
the means recognized by the Penal Code whereby criminal
liability can be extinguished; hence, the role of novation
may only be to either prevent the rise of criminal habihty or
to cast doubt on the true nature of the original basic
transaction, whether or not it was such that its breach would
not give rise to penal responsibility, as when money loaned
is made to appear as a deposit, or other similar disguise is
resorted to (cf. Abeto vs. People, 90 Phil. 581; U.S. vs.
Villareal, 27 Phil. 481).
In the case at bar, there is no dispute that petitioners
Guingona and Martin executed a promissory note on June
17, 1981 assuming the obligation of the bank to private
respondent David; while the criminal complaint for estafa
was filed on December 23, 1981 with the Office of the City
Fiscal. Hence, it is clear that novation occurred long before
the filing of the criminal complaint with the Office of the City
Fiscal.
Consequently, as aforestated, any incipient criminal liability
would be avoided but there will still be a civil liability on the
part of petitioners Guingona and Martin to pay the assumed
obligation.
Petitioners herein were likewise charged with violation of
Section 3 of Central Bank Circular No. 364 and other
related regulations regarding foreign exchange transactions
by accepting foreign currency deposit in the amount of
US$75,000.00 without authority from the Central Bank.
They contend however, that the US dollars intended by
respondent David for deposit were all converted into
Philippine currency before acceptance and deposit into
Nation Savings and Loan Association.
Petitioners' contention is worthy of behelf for the following
reasons:
1. It appears from the records that when respondent
David was about to make a deposit of bank draft issued in
his name in the amount of US$50,000.00 with the Nation
Savings and Loan Association, the same had to be cleared
first and converted into Philippine currency. Accordingly, the
bank draft was endorsed by respondent David to petitioner
Guingona, who in turn deposited it to his dollar account with
the Security Bank and Trust Company. Petitioner Guingona
merely accommodated the request of the Nation Savings
and loan Association in order to clear the bank draft through
his dollar account because the bank did not have a dollar
account. Immediately after the bank draft was cleared,
petitioner Guingona authorized Nation Savings and Loan
Association to withdraw the same in order to be utilized by
the bank for its operations.
2. It is safe to assume that the U.S. dollars were
converted first into Philippine pesos before they were
accepted and deposited in Nation Savings and Loan
Association, because the bank is presumed to have
followed the ordinary course of the business which is to
accept deposits in Philippine currency only, and that the
transaction was regular and fair, in the absence of a clear
and convincing evidence to the contrary (see paragraphs p
and q, Sec. 5, Rule 131, Rules of Court).
3. Respondent David has not denied the aforesaid
contention of herein petitioners despite the fact that it was
raised. in petitioners' reply filed on May 7, 1982 to private
respondent's comment and in the July 27, 1982 reply to
public respondents' comment and reiterated in petitioners'
memorandum filed on October 30, 1982, thereby adding
more support to the conclusion that the US$75,000.00 were
really converted into Philippine currency before they were
accepted and deposited into Nation Savings and Loan
Association. Considering that this might adversely affect his
case, respondent David should have promptly denied
petitioners' allegation.
In conclusion, considering that the liability of the petitioners
is purely civil in nature and that there is no clear showing
that they engaged in foreign exchange transactions, We
hold that the public respondents acted without jurisdiction
when they investigated the charges against the petitioners.
Consequently, public respondents should be restrained
from further proceeding with the criminal case for to allow
the case to continue, even if the petitioners could have
appealed to the Ministry of Justice, would work great
injustice to petitioners and would render meaningless the
proper administration of justice.
While as a rule, the prosecution in a criminal offense cannot
be the subject of prohibition and injunction, this court has
recognized the resort to the extraordinary writs of
prohibition and injunction in extreme cases,
thus:têñ.£îhqwâ£
On the issue of whether a writ of injunction can restrain the
proceedings in Criminal Case No. 3140, the general rule is
that "ordinarily, criminal prosecution may not be blocked by
court prohibition or injunction." Exceptions, however, are
allowed in the following instances:têñ.£îhqwâ£
"1. for the orderly administration of justice;
"2. to prevent the use of the strong arm of the law in
an oppressive and vindictive manner;
"3. to avoid multiplicity of actions;
"4. to afford adequate protection to constitutional
rights;
"5. in proper cases, because the statute relied upon is
unconstitutional or was held invalid" ( Primicias vs.
Municipality of Urdaneta, Pangasinan, 93 SCRA 462, 469-
470 [1979]; citing Ramos vs. Torres, 25 SCRA 557 [1968];
and Hernandez vs. Albano, 19 SCRA 95, 96 [1967]).
Likewise, in Lopez vs. The City Judge, et al. ( 18 SCRA
616, 621-622 [1966]), We held that:têñ.£îhqwâ£
The writs of certiorari and prohibition, as extraordinary legal
remedies, are in the ultimate analysis, intended to annul
void proceedings; to prevent the unlawful and oppressive
exercise of legal authority and to provide for a fair and
orderly administration of justice. Thus, in Yu Kong Eng vs.
Trinidad, 47 Phil. 385, We took cognizance of a petition for
certiorari and prohibition although the accused in the case
could have appealed in due time from the order complained
of, our action in the premises being based on the public
44
welfare policy the advancement of public policy. In
Dimayuga vs. Fajardo, 43 Phil. 304, We also admitted a
petition to restrain the prosecution of certain chiropractors
although, if convicted, they could have appealed. We gave
due course to their petition for the orderly administration of
justice and to avoid possible oppression by the strong arm
of the law. And in Arevalo vs. Nepomuceno, 63 Phil. 627,
the petition for certiorari challenging the trial court's action
admitting an amended information was sustained despite
the availability of appeal at the proper time.

WHEREFORE, THE PETITION IS HEREBY GRANTED;

THE TEMPORARY RESTRAINING ORDER PREVIOUSLY
ISSUED IS MADE PERMANENT. COSTS AGAINST THE
PRIVATE RESPONDENT.

SO ORDERED.1äwphï1.ñët

45
DURBAN APARTMENTS CORPORATION, doing business
under the name and style of City Garden Hotel,
Petitioner,
- versus -
PIONEER INSURANCE AND SURETY CORPORATION,
Respondent.
G.R. No. 179419
Present:
CARPIO, J.,
Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.
Promulgated:
January 12, 2011
x------------------------------------------------------------------------------
------x
DECISION
NACHURA, J.:
For review is the Decision[1] of the Court of Appeals (CA) in
CA-G.R. CV No. 86869, which affirmed the decision[2] of
the Regional Trial Court (RTC), Branch 66, Makati City, in
Civil Case No. 03-857, holding petitioner Durban
Apartments Corporation solely liable to respondent Pioneer
Insurance and Surety Corporation for the loss of Jeffrey
Sees (Sees) vehicle.
The facts, as found by the CA, are simple.
On July 22, 2003, [respondent] Pioneer Insurance and
Surety Corporation x x x, by right of subrogation, filed [with
the RTC of Makati City] a Complaint for Recovery of
Damages against [petitioner] Durban Apartments
Corporation, doing business under the name and style of
City Garden Hotel, and [defendant before the RTC] Vicente
Justimbaste x x x. [Respondent averred] that: it is the
insurer for loss and damage of Jeffrey S. Sees [the
insureds] 2001 Suzuki Grand Vitara x x x with Plate No.
XBH-510 under Policy No. MC-CV-HO-01-0003846-00-D in
the amount of P1,175,000.00; on April 30, 2002, See
arrived and checked in at the City Garden Hotel in Makati
corner Kalayaan Avenues, Makati City before midnight, and
its parking attendant, defendant x x x Justimbaste got the
key to said Vitara from See to park it[. O]n May 1, 2002, at
about 1:00 oclock in the morning, See was awakened in his
room by [a] telephone call from the Hotel Chief Security
Officer who informed him that his Vitara was carnapped
while it was parked unattended at the parking area of
Equitable PCI Bank along Makati Avenue between the
hours of 12:00 [a.m.] and 1:00 [a.m.]; See went to see the
Hotel Chief Security Officer, thereafter reported the incident
to the Operations Division of the Makati City Police Anti-
Carnapping Unit, and a flash alarm was issued; the Makati
City Police Anti-Carnapping Unit investigated Hotel Security
Officer, Ernesto T. Horlador, Jr. x x x and defendant x x x
Justimbaste; See gave his Sinumpaang Salaysay to the
police investigator, and filed a Complaint Sheet with the
PNP Traffic Management Group in Camp Crame, Quezon
City; the Vitara has not yet been recovered since July 23,
2002 as evidenced by a Certification of Non- Recovery
issued by the PNP TMG; it paid the P1,163,250.00 money
claim of See and mortgagee ABN AMRO Savings Bank,
Inc. as indemnity for the loss of the Vitara; the Vitara was
lost due to the negligence of [petitioner] Durban Apartments
and [defendant] Justimbaste because it was discovered
during the investigation that this was the second time that a
similar incident of carnapping happened in the valet parking
service of [petitioner] Durban Apartments and no necessary
precautions were taken to prevent its repetition; [petitioner]
Durban Apartments was wanting in due diligence in the
selection and supervision of its employees particularly
defendant x x x Justimbaste; and defendant x x x
Justimbaste and [petitioner] Durban Apartments failed and
refused to pay its valid, just, and lawful claim despite written
demands.
Upon service of Summons, [petitioner] Durban Apartments
and [defendant] Justimbaste filed their Answer with
Compulsory Counterclaim alleging that: See did not check
in at its hotel, on the contrary, he was a guest of a certain
Ching Montero x x x; defendant x x x Justimbaste did not
get the ignition key of Sees Vitara, on the contrary, it was
See who requested a parking attendant to park the Vitara at
any available parking space, and it was parked at the
Equitable Bank parking area, which was within Sees view,
while he and Montero were waiting in front of the hotel; they
made a written denial of the demand of [respondent]
Pioneer Insurance for want of legal basis; valet parking
services are provided by the hotel for the convenience of its
customers looking for a parking space near the hotel
premises; it is a special privilege that it gave to Montero and
See; it does not include responsibility for any losses or
damages to motor vehicles and its accessories in the
parking area; and the same holds true even if it was See
himself who parked his Vitara within the premises of the
hotel as evidenced by the valet parking customers claim
stub issued to him; the carnapper was able to open the
Vitara without using the key given earlier to the parking
attendant and subsequently turned over to See after the
Vitara was stolen; defendant x x x Justimbaste saw the
Vitara speeding away from the place where it was parked;
he tried to run after it, and blocked its possible path but to
no avail; and See was duly and immediately informed of the
carnapping of his Vitara; the matter was reported to the
nearest police precinct; and defendant x x x Justimbaste,
and Horlador submitted themselves to police investigation.
During the pre-trial conference on November 28, 2003,
counsel for [respondent] Pioneer Insurance was present.
46
Atty. Monina Lee x x x, counsel of record of [petitioner]
Durban Apartments and Justimbaste was absent, instead, a
certain Atty. Nestor Mejia appeared for [petitioner] Durban
Apartments and Justimbaste, but did not file their pre-trial
brief.
On November 5, 2004, the lower court granted the motion
of [respondent] Pioneer Insurance, despite the opposition of
[petitioner] Durban Apartments and Justimbaste, and
allowed [respondent] Pioneer Insurance to present its
evidence ex parte before the Branch Clerk of Court.
See testified that: on April 30, 2002, at about 11:30 in the
evening, he drove his Vitara and stopped in front of City
Garden Hotel in Makati Avenue, Makati City; a parking
attendant, whom he had later known to be defendant x x x
Justimbaste, approached and asked for his ignition key, told
him that the latter would park the Vitara for him in front of
the hotel, and issued him a valet parking customers claim
stub; he and Montero, thereafter, checked in at the said
hotel; on May 1, 2002, at around 1:00 in the morning, the
Hotel Security Officer whom he later knew to be Horlador
called his attention to the fact that his Vitara was carnapped
while it was parked at the parking lot of Equitable PCI Bank
which is in front of the hotel; his Vitara was insured with
[respondent] Pioneer Insurance; he together with Horlador
and defendant x x x Justimbaste went to Precinct 19 of the
Makati City Police to report the carnapping incident, and a
police officer came accompanied them to the Anti-
Carnapping Unit of the said station for investigation, taking
of their sworn statements, and flashing of a voice alarm; he
likewise reported the said incident in PNP TMG in Camp
Crame where another alarm was issued; he filed his claim
with [respondent] Pioneer Insurance, and a representative
of the latter, who is also an adjuster of Vesper Insurance
Adjusters-Appraisers [Vesper], investigated the incident;
and [respondent] Pioneer Insurance required him to sign a
Release of Claim and Subrogation Receipt, and finally paid
him the sum of P1,163,250.00 for his claim.
Ricardo F. Red testified that: he is a claims evaluator of
[petitioner] Pioneer Insurance tasked, among others, with
the receipt of claims and documents from the insured,
investigation of the said claim, inspection of damages,
taking of pictures of insured unit, and monitoring of the
processing of the claim until its payment; he monitored the
processing of Sees claim when the latter reported the
incident to [respondent] Pioneer Insurance; [respondent]
Pioneer Insurance assigned the case to Vesper who
verified Sees report, conducted an investigation, obtained
the necessary documents for the processing of the claim,
and tendered a settlement check to See; they evaluated the
case upon receipt of the subrogation documents and the
adjusters report, and eventually recommended for its
settlement for the sum of P1,163,250.00 which was
accepted by See; the matter was referred and forwarded to
their counsel, R.B. Sarajan & Associates, who prepared
and sent demand letters to [petitioner] Durban Apartments
and [defendant] Justimbaste, who did not pay [respondent]
Pioneer Insurance notwithstanding their receipt of the
demand letters; and the services of R.B. Sarajan &
Associates were engaged, for P100,000.00 as attorneys
fees plus P3,000.00 per court appearance, to prosecute the
claims of [respondent] Pioneer Insurance against
[petitioner] Durban Apartments and Justimbaste before the
lower court.
Ferdinand Cacnio testified that: he is an adjuster of Vesper;
[respondent] Pioneer Insurance assigned to Vesper the
investigation of Sees case, and he was the one actually
assigned to investigate it; he conducted his investigation of
the matter by interviewing See, going to the City Garden
Hotel, required subrogation documents from See, and
verified the authenticity of the same; he learned that it is the
standard procedure of the said hotel as regards its valet
parking service to assist their guests as soon as they get to
the lobby entrance, park the cars for their guests, and place
the ignition keys in their safety key box; considering that the
hotel has only twelve (12) available parking slots, it has an
agreement with Equitable PCI Bank permitting the hotel to
use the parking space of the bank at night; he also learned
that a Hyundai Starex van was carnapped at the said place
barely a month before the occurrence of this incident
because Liberty Insurance assigned the said incident to
Vespers, and Horlador and defendant x x x Justimbaste
admitted the occurrence of the same in their sworn
statements before the Anti-Carnapping Unit of the Makati
City Police; upon verification with the PNP TMG [Unit] in
Camp Crame, he learned that Sees Vitara has not yet been
recovered; upon evaluation, Vesper recommended to
[respondent] Pioneer Insurance to settle Sees claim for
P1,045,750.00; See contested the recommendation of
Vesper by reasoning out that the 10% depreciation should
not be applied in this case considering the fact that the
Vitara was used for barely eight (8) months prior to its loss;
and [respondent] Pioneer Insurance acceded to Sees
contention, tendered the sum of P1,163,250.00 as
settlement, the former accepted it, and signed a release of
claim and subrogation receipt.
The lower court denied the Motion to Admit Pre-Trial Brief
and Motion for Reconsideration field by [petitioner] Durban
Apartments and Justimbaste in its Orders dated May 4,
2005 and October 20, 2005, respectively, for being devoid
of merit.[3]
Thereafter, on January 27, 2006, the RTC rendered a
decision, disposing, as follows:
WHEREFORE, judgment is hereby rendered ordering
[petitioner Durban Apartments Corporation] to pay
[respondent Pioneer Insurance and Surety Corporation] the
sum of P1,163,250.00 with legal interest thereon from July
22, 2003 until the obligation is fully paid and attorneys fees
and litigation expenses amounting to P120,000.00.
SO ORDERED.[4]
On appeal, the appellate court affirmed the decision of the
trial court, viz.:
WHEREFORE, premises considered, the Decision dated
January 27, 2006 of the RTC, Branch 66, Makati City in
Civil Case No. 03-857 is hereby AFFIRMED insofar as it
holds [petitioner] Durban Apartments Corporation solely
liable to [respondent] Pioneer Insurance and Surety
Corporation for the loss of Jeffrey Sees Suzuki Grand
Vitara.
47
SO ORDERED.[5]
Hence, this recourse by petitioner.
The issues for our resolution are:
1. Whether the lower courts erred in declaring petitioner as
in default for failure to appear at the pre-trial conference
and to file a pre-trial brief;
2. Corollary thereto, whether the trial court correctly allowed
respondent to present evidence ex-parte;
3. Whether petitioner is liable to respondent for attorneys
fees in the amount of P120,000.00; and
4. Ultimately, whether petitioner is liable to respondent for
the loss of Sees vehicle.
The petition must fail.
We are in complete accord with the common ruling of the
lower courts that petitioner was in default for failure to
appear at the pre-trial conference and to file a pre-trial brief,
and thus, correctly allowed respondent to present evidence
ex-parte. Likewise, the lower courts did not err in holding
petitioner liable for the loss of Sees vehicle.
Well-entrenched in jurisprudence is the rule that factual
findings of the trial court, especially when affirmed by the
appellate court, are accorded the highest degree of respect
and are considered conclusive between the parties.[6] A
review of such findings by this Court is not warranted
except upon a showing of highly meritorious circumstances,
such as: (1) when the findings of a trial court are grounded
entirely on speculation, surmises, or conjectures; (2) when
a lower courts inference from its factual findings is
manifestly mistaken, absurd, or impossible; (3) when there
is grave abuse of discretion in the appreciation of facts; (4)
when the findings of the appellate court go beyond the
issues of the case, or fail to notice certain relevant facts
which, if properly considered, will justify a different
conclusion; (5) when there is a misappreciation of facts; (6)
when the findings of fact are conclusions without mention of
the specific evidence on which they are based, are
premised on the absence of evidence, or are contradicted
by evidence on record.[7] None of the foregoing exceptions
permitting a reversal of the assailed decision exists in this
instance.
Petitioner urges us, however, that strong [and] compelling
reason[s] such as the prevention of miscarriage of justice
warrant a suspension of the rules and excuse its and its
counsels non-appearance during the pre-trial conference
and their failure to file a pre-trial brief.
We are not persuaded.
Rule 18 of the Rules of Court leaves no room for
equivocation; appearance of parties and their counsel at the
pre-trial conference, along with the filing of a corresponding
pre-trial brief, is mandatory, nay, their duty. Thus, Section 4
and Section 6 thereof provide:
SEC. 4. Appearance of parties.It shall be the duty of the
parties and their counsel to appear at the pre-trial. The non-
appearance of a party may be excused only if a valid cause
is shown therefor or if a representative shall appear in his
behalf fully authorized in writing to enter into an amicable
settlement, to submit to alternative modes of dispute
resolution, and to enter into stipulations or admissions of
facts and documents.
SEC. 6. Pre-trial brief.The parties shall file with the court
and serve on the adverse party, in such manner as shall
ensure their receipt thereof at least three (3) days before
the date of the pre-trial, their respective pre-trial briefs
which shall contain, among others:
xxxx
Failure to file the pre-trial brief shall have the same effect as
failure to appear at the pre-trial.
Contrary to the foregoing rules, petitioner and its counsel of
record were not present at the scheduled pre-trial
conference. Worse, they did not file a pre-trial brief. Their
non-appearance cannot be excused as Section 4, in
relation to Section 6, allows only two exceptions: (1) a valid
excuse; and (2) appearance of a representative on behalf of
a party who is fully authorized in writing to enter into an
amicable settlement, to submit to alternative modes of
dispute resolution, and to enter into stipulations or
admissions of facts and documents.
Petitioner is adamant and harps on the fact that November
28, 2003 was merely the first scheduled date for the pre-
trial conference, and a certain Atty. Mejia appeared on its
behalf. However, its assertion is belied by its own
admission that, on said date, this Atty. Mejia did not have in
his possession the Special Power of Attorney issued by
petitioners Board of Directors.
As pointed out by the CA, petitioner, through Atty. Lee,
received the notice of pre-trial on October 27, 2003, thirty-
two (32) days prior to the scheduled conference. In that
span of time, Atty. Lee, who was charged with the duty of
notifying petitioner of the scheduled pre-trial conference,[8]
petitioner, and Atty. Mejia should have discussed which
lawyer would appear at the pre-trial conference with
petitioner, armed with the appropriate authority therefor.
Sadly, petitioner failed to comply with not just one rule; it
also did not proffer a reason why it likewise failed to file a
pre-trial brief. In all, petitioner has not shown any
persuasive reason why it should be exempt from abiding by
the rules.
The appearance of Atty. Mejia at the pre-trial conference,
without a pre-trial brief and with only his bare allegation that
he is counsel for petitioner, was correctly rejected by the
trial court. Accordingly, the trial court, as affirmed by the
appellate court, did not err in allowing respondent to
present evidence ex-parte.
Former Chief Justice Andres R. Narvasas words continue
to resonate, thus:
48
Everyone knows that a pre-trial in civil actions is mandatory,
and has been so since January 1, 1964. Yet to this day its
place in the scheme of things is not fully appreciated, and it
receives but perfunctory treatment in many courts. Some
courts consider it a mere technicality, serving no useful
purpose save perhaps, occasionally to furnish ground for
non-suiting the plaintiff, or declaring a defendant in default,
or, wistfully, to bring about a compromise. The pre-trial
device is not thus put to full use. Hence, it has failed in the
main to accomplish the chief objective for it: the
simplification, abbreviation and expedition of the trial, if not
indeed its dispensation. This is a great pity, because the
objective is attainable, and with not much difficulty, if the
device were more intelligently and extensively handled.
xxxx
Consistently with the mandatory character of the pre-trial,
the Rules oblige not only the lawyers but the parties as well
to appear for this purpose before the Court, and when a
party fails to appear at a pre-trial conference (he) may be
non-suited or considered as in default. The obligation to
appear denotes not simply the personal appearance, or the
mere physical presentation by a party of ones self, but
connotes as importantly, preparedness to go into the
different subject assigned by law to a pre-trial. And in those
instances where a party may not himself be present at the
pre-trial, and another person substitutes for him, or his
lawyer undertakes to appear not only as an attorney but in
substitution of the clients person, it is imperative for that
representative of the lawyer to have special authority to
make such substantive agreements as only the client
otherwise has capacity to make. That special authority
should ordinarily be in writing or at the very least be duly
established by evidence other than the self-serving
assertion of counsel (or the proclaimed representative)
himself. Without that special authority, the lawyer or
representative cannot be deemed capacitated to appear in
place of the party; hence, it will be considered that the latter
has failed to put in an appearance at all, and he [must]
therefore be non-suited or considered as in default,
notwithstanding his lawyers or delegates presence.[9]
We are not unmindful that defendants (petitioners)
preclusion from presenting evidence during trial does not
automatically result in a judgment in favor of plaintiff
(respondent). The plaintiff must still substantiate the
allegations in its complaint.[10] Otherwise, it would be
inutile to continue with the plaintiffs presentation of
evidence each time the defendant is declared in default.
In this case, respondent substantiated the allegations in its
complaint, i.e., a contract of necessary deposit existed
between the insured See and petitioner. On this score, we
find no error in the following disquisition of the appellate
court:
[The] records also reveal that upon arrival at the City
Garden Hotel, See gave notice to the doorman and parking
attendant of the said hotel, x x x Justimbaste, about his
Vitara when he entrusted its ignition key to the latter. x x x
Justimbaste issued a valet parking customer claim stub to
See, parked the Vitara at the Equitable PCI Bank parking
area, and placed the ignition key inside a safety key box
while See proceeded to the hotel lobby to check in. The
Equitable PCI Bank parking area became an annex of City
Garden Hotel when the management of the said bank
allowed the parking of the vehicles of hotel guests thereat in
the evening after banking hours.[11]
Article 1962, in relation to Article 1998, of the Civil Code
defines a contract of deposit and a necessary deposit made
by persons in hotels or inns:
Art. 1962. A deposit is constituted from the moment a
person receives a thing belonging to another, with the
obligation of safely keeping it and returning the same. If the
safekeeping of the thing delivered is not the principal
purpose of the contract, there is no deposit but some other
contract.
Art. 1998. The deposit of effects made by travelers in hotels
or inns shall also be regarded as necessary. The keepers of
hotels or inns shall be responsible for them as depositaries,
provided that notice was given to them, or to their
employees, of the effects brought by the guests and that,
on the part of the latter, they take the precautions which
said hotel-keepers or their substitutes advised relative to
the care and vigilance of their effects.
Plainly, from the facts found by the lower courts, the insured
See deposited his vehicle for safekeeping with petitioner,
through the latters employee, Justimbaste. In turn,
Justimbaste issued a claim stub to See. Thus, the contract
of deposit was perfected from Sees delivery, when he
handed over to Justimbaste the keys to his vehicle, which
Justimbaste received with the obligation of safely keeping
and returning it. Ultimately, petitioner is liable for the loss of
Sees vehicle.
Lastly, petitioner assails the lower courts award of attorneys
fees to respondent in the amount of P120,000.00. Petitioner
claims that the award is not substantiated by the evidence
on record.
We disagree.
While it is a sound policy not to set a premium on the right
to litigate,[12] we find that respondent is entitled to
reasonable attorneys fees. Attorneys fees may be awarded
when a party is compelled to litigate or incur expenses to
protect its interest,[13] or when the court deems it just and
equitable.[14] In this case, petitioner refused to answer for
the loss of Sees vehicle, which was deposited with it for
safekeeping. This refusal constrained respondent, the
insurer of See, and subrogated to the latters right, to litigate
and incur expenses. However, we reduce the award of
P120,000.00 to P60,000.00 in view of the simplicity of the
issues involved in this case.
WHEREFORE, the petition is DENIED. The Decision of the
Court of Appeals in CA-G.R. CV No. 86869 is AFFIRMED
with the MODIFICATION that the award of attorneys fees is
reduced to P60,000.00. Costs against petitioner.
SO ORDERED.
49
[G.R. No. 126780. February 17, 2005]
YHT REALTY CORPORATION, ERLINDA LAINEZ and
ANICIA PAYAM, petitioners, vs. THE COURT OF
APPEALS and MAURICE McLOUGHLIN, respondents.
DECISION
TINGA, J.:
The primary question of interest before this Court is the only
legal issue in the case: It is whether a hotel may evade
liability for the loss of items left with it for safekeeping by its
guests, by having these guests execute written waivers
holding the establishment or its employees free from blame
for such loss in light of Article 2003 of the Civil Code which
voids such waivers.
Before this Court is a Rule 45 petition for review of the
Decision[1] dated 19 October 1995 of the Court of Appeals
which affirmed the Decision[2] dated 16 December 1991 of
the Regional Trial Court (RTC), Branch 13, of Manila,
finding YHT Realty Corporation, Brunhilda Mata-Tan (Tan),
Erlinda Lainez (Lainez) and Anicia Payam (Payam) jointly
and solidarily liable for damages in an action filed by
Maurice McLoughlin (McLoughlin) for the loss of his
American and Australian dollars deposited in the safety
deposit box of Tropicana Copacabana Apartment Hotel,
owned and operated by YHT Realty Corporation.
The factual backdrop of the case follow.
Private respondent McLoughlin, an Australian
businessman-philanthropist, used to stay at Sheraton Hotel
during his trips to the Philippines prior to 1984 when he met
Tan. Tan befriended McLoughlin by showing him around,
introducing him to important people, accompanying him in
visiting impoverished street children and assisting him in
buying gifts for the children and in distributing the same to
charitable institutions for poor children. Tan convinced
McLoughlin to transfer from Sheraton Hotel to Tropicana
where Lainez, Payam and Danilo Lopez were employed.
Lopez served as manager of the hotel while Lainez and
Payam had custody of the keys for the safety deposit boxes
of Tropicana. Tan took care of McLoughlins booking at the
Tropicana where he started staying during his trips to the
Philippines from December 1984 to September 1987.[3]
On 30 October 1987, McLoughlin arrived from Australia and
registered with Tropicana. He rented a safety deposit box
as it was his practice to rent a safety deposit box every time
he registered at Tropicana in previous trips. As a tourist,
McLoughlin was aware of the procedure observed by
Tropicana relative to its safety deposit boxes. The safety
deposit box could only be opened through the use of two
keys, one of which is given to the registered guest, and the
other remaining in the possession of the management of
the hotel. When a registered guest wished to open his
safety deposit box, he alone could personally request the
management who then would assign one of its employees
to accompany the guest and assist him in opening the
safety deposit box with the two keys.[4]
McLoughlin allegedly placed the following in his safety
deposit box: Fifteen Thousand US Dollars (US$15,000.00)
which he placed in two envelopes, one envelope containing
Ten Thousand US Dollars (US$10,000.00) and the other
envelope Five Thousand US Dollars (US$5,000.00); Ten
Thousand Australian Dollars (AUS$10,000.00) which he
also placed in another envelope; two (2) other envelopes
containing letters and credit cards; two (2) bankbooks; and
a checkbook, arranged side by side inside the safety
deposit box.[5]
On 12 December 1987, before leaving for a brief trip to
Hongkong, McLoughlin opened his safety deposit box with
his key and with the key of the management and took
therefrom the envelope containing Five Thousand US
Dollars (US$5,000.00), the envelope containing Ten
Thousand Australian Dollars (AUS$10,000.00), his
passports and his credit cards.[6] McLoughlin left the other
items in the box as he did not check out of his room at the
Tropicana during his short visit to Hongkong. When he
arrived in Hongkong, he opened the envelope which
contained Five Thousand US Dollars (US$5,000.00) and
discovered upon counting that only Three Thousand US
Dollars (US$3,000.00) were enclosed therein.[7] Since he
had no idea whether somebody else had tampered with his
safety deposit box, he thought that it was just a result of
bad accounting since he did not spend anything from that
envelope.[8]
After returning to Manila, he checked out of Tropicana on
18 December 1987 and left for Australia. When he arrived
in Australia, he discovered that the envelope with Ten
Thousand US Dollars (US$10,000.00) was short of Five
Thousand US Dollars (US$5,000). He also noticed that the
jewelry which he bought in Hongkong and stored in the
safety deposit box upon his return to Tropicana was
likewise missing, except for a diamond bracelet.[9]
When McLoughlin came back to the Philippines on 4 April
1988, he asked Lainez if some money and/or jewelry which
he had lost were found and returned to her or to the
management. However, Lainez told him that no one in the
hotel found such things and none were turned over to the
management. He again registered at Tropicana and rented
a safety deposit box. He placed therein one (1) envelope
containing Fifteen Thousand US Dollars (US$15,000.00),
another envelope containing Ten Thousand Australian
Dollars (AUS$10,000.00) and other envelopes containing
his traveling papers/documents. On 16 April 1988,
McLoughlin requested Lainez and Payam to open his safety
deposit box. He noticed that in the envelope containing
Fifteen Thousand US Dollars (US$15,000.00), Two
Thousand US Dollars (US$2,000.00) were missing and in
the envelope previously containing Ten Thousand
Australian Dollars (AUS$10,000.00), Four Thousand Five
Hundred Australian Dollars (AUS$4,500.00) were
missing.[10]
When McLoughlin discovered the loss, he immediately
confronted Lainez and Payam who admitted that Tan
opened the safety deposit box with the key assigned to
him.[11] McLoughlin went up to his room where Tan was
staying and confronted her. Tan admitted that she had
stolen McLoughlins key and was able to open the safety
deposit box with the assistance of Lopez, Payam and
Lainez.[12] Lopez also told McLoughlin that Tan stole the
key assigned to McLoughlin while the latter was asleep.[13]
50
McLoughlin requested the management for an investigation
of the incident. Lopez got in touch with Tan and arranged
for a meeting with the police and McLoughlin. When the
police did not arrive, Lopez and Tan went to the room of
McLoughlin at Tropicana and thereat, Lopez wrote on a
piece of paper a promissory note dated 21 April 1988. The
promissory note reads as follows:
I promise to pay Mr. Maurice McLoughlin the amount of
AUS$4,000.00 and US$2,000.00 or its equivalent in
Philippine currency on or before May 5, 1988.[14]
Lopez requested Tan to sign the promissory note which the
latter did and Lopez also signed as a witness. Despite the
execution of promissory note by Tan, McLoughlin insisted
that it must be the hotel who must assume responsibility for
the loss he suffered. However, Lopez refused to accept the
responsibility relying on the conditions for renting the safety
deposit box entitled Undertaking For the Use Of Safety
Deposit Box,[15] specifically paragraphs (2) and (4) thereof,
to wit:
2. To release and hold free and blameless TROPICANA
APARTMENT HOTEL from any liability arising from any
loss in the contents and/or use of the said deposit box for
any cause whatsoever, including but not limited to the
presentation or use thereof by any other person should the
key be lost;
...
4. To return the key and execute the RELEASE in favor of
TROPICANA APARTMENT HOTEL upon giving up the use
of the box.[16]
On 17 May 1988, McLoughlin went back to Australia and he
consulted his lawyers as to the validity of the
abovementioned stipulations. They opined that the
stipulations are void for being violative of universal hotel
practices and customs. His lawyers prepared a letter dated
30 May 1988 which was signed by McLoughlin and sent to
President Corazon Aquino.[17] The Office of the President
referred the letter to the Department of Justice (DOJ) which
forwarded the same to the Western Police District
(WPD).[18]
After receiving a copy of the indorsement in Australia,
McLoughlin came to the Philippines and registered again as
a hotel guest of Tropicana. McLoughlin went to Malacaňang
to follow up on his letter but he was instructed to go to the
DOJ. The DOJ directed him to proceed to the WPD for
documentation. But McLoughlin went back to Australia as
he had an urgent business matter to attend to.
For several times, McLoughlin left for Australia to attend to
his business and came back to the Philippines to follow up
on his letter to the President but he failed to obtain any
concrete assistance.[19]
McLoughlin left again for Australia and upon his return to
the Philippines on 25 August 1989 to pursue his claims
against petitioners, the WPD conducted an investigation
which resulted in the preparation of an affidavit which was
forwarded to the Manila City Fiscals Office. Said affidavit
became the basis of preliminary investigation. However,
McLoughlin left again for Australia without receiving the
notice of the hearing on 24 November 1989. Thus, the case
at the Fiscals Office was dismissed for failure to prosecute.
Mcloughlin requested the reinstatement of the criminal
charge for theft. In the meantime, McLoughlin and his
lawyers wrote letters of demand to those having
responsibility to pay the damage. Then he left again for
Australia.
Upon his return on 22 October 1990, he registered at the
Echelon Towers at Malate, Manila. Meetings were held
between McLoughlin and his lawyer which resulted to the
filing of a complaint for damages on 3 December 1990
against YHT Realty Corporation, Lopez, Lainez, Payam and
Tan (defendants) for the loss of McLoughlins money which
was discovered on 16 April 1988. After filing the complaint,
McLoughlin left again for Australia to attend to an urgent
business matter. Tan and Lopez, however, were not served
with summons, and trial proceeded with only Lainez,
Payam and YHT Realty Corporation as defendants.
After defendants had filed their Pre-Trial Brief admitting that
they had previously allowed and assisted Tan to open the
safety deposit box, McLoughlin filed an
Amended/Supplemental Complaint[20] dated 10 June 1991
which included another incident of loss of money and
jewelry in the safety deposit box rented by McLoughlin in
the same hotel which took place prior to 16 April 1988.[21]
The trial court admitted the Amended/Supplemental
Complaint.
During the trial of the case, McLoughlin had been in and out
of the country to attend to urgent business in Australia, and
while staying in the Philippines to attend the hearing, he
incurred expenses for hotel bills, airfare and other
transportation expenses, long distance calls to Australia,
Meralco power expenses, and expenses for food and
maintenance, among others.[22]
After trial, the RTC of Manila rendered judgment in favor of
McLoughlin, the dispositive portion of which reads:
WHEREFORE, above premises considered, judgment is
hereby rendered by this Court in favor of plaintiff and
against the defendants, to wit:
1. Ordering defendants, jointly and severally, to pay plaintiff
the sum of US$11,400.00 or its equivalent in Philippine
Currency of P342,000.00, more or less, and the sum of
AUS$4,500.00 or its equivalent in Philippine Currency of
P99,000.00, or a total of P441,000.00, more or less, with
12% interest from April 16 1988 until said amount has been
paid to plaintiff (Item 1, Exhibit CC);
2. Ordering defendants, jointly and severally to pay plaintiff
the sum of P3,674,238.00 as actual and consequential
damages arising from the loss of his Australian and
American dollars and jewelries complained against and in
prosecuting his claim and rights administratively and
judicially (Items II, III, IV, V, VI, VII, VIII, and IX, Exh. CC);
3. Ordering defendants, jointly and severally, to pay plaintiff
the sum of P500,000.00 as moral damages (Item X, Exh.
CC);
51
4. Ordering defendants, jointly and severally, to pay plaintiff
the sum of P350,000.00 as exemplary damages (Item XI,
Exh. CC);
5. And ordering defendants, jointly and severally, to pay
litigation expenses in the sum of P200,000.00 (Item XII,
Exh. CC);
6. Ordering defendants, jointly and severally, to pay plaintiff
the sum of P200,000.00 as attorneys fees, and a fee of
P3,000.00 for every appearance; and
7. Plus costs of suit.
SO ORDERED.[23]
The trial court found that McLoughlins allegations as to the
fact of loss and as to the amount of money he lost were
sufficiently shown by his direct and straightforward manner
of testifying in court and found him to be credible and
worthy of belief as it was established that McLoughlins
money, kept in Tropicanas safety deposit box, was taken by
Tan without McLoughlins consent. The taking was effected
through the use of the master key which was in the
possession of the management. Payam and Lainez allowed
Tan to use the master key without authority from
McLoughlin. The trial court added that if McLoughlin had
not lost his dollars, he would not have gone through the
trouble and personal inconvenience of seeking aid and
assistance from the Office of the President, DOJ, police
authorities and the City Fiscals Office in his desire to
recover his losses from the hotel management and Tan.[24]
As regards the loss of Seven Thousand US Dollars
(US$7,000.00) and jewelry worth approximately One
Thousand Two Hundred US Dollars (US$1,200.00) which
allegedly occurred during his stay at Tropicana previous to
4 April 1988, no claim was made by McLoughlin for such
losses in his complaint dated 21 November 1990 because
he was not sure how they were lost and who the
responsible persons were. But considering the admission of
the defendants in their pre-trial brief that on three previous
occasions they allowed Tan to open the box, the trial court
opined that it was logical and reasonable to presume that
his personal assets consisting of Seven Thousand US
Dollars (US$7,000.00) and jewelry were taken by Tan from
the safety deposit box without McLoughlins consent through
the cooperation of Payam and Lainez.[25]
The trial court also found that defendants acted with gross
negligence in the performance and exercise of their duties
and obligations as innkeepers and were therefore liable to
answer for the losses incurred by McLoughlin.[26]
Moreover, the trial court ruled that paragraphs (2) and (4) of
the Undertaking For The Use Of Safety Deposit Box are not
valid for being contrary to the express mandate of Article
2003 of the New Civil Code and against public policy.[27]
Thus, there being fraud or wanton conduct on the part of
defendants, they should be responsible for all damages
which may be attributed to the non-performance of their
contractual obligations.[28]
The Court of Appeals affirmed the disquisitions made by the
lower court except as to the amount of damages awarded.
The decretal text of the appellate courts decision reads:
THE FOREGOING CONSIDERED, the appealed Decision
is hereby AFFIRMED but modified as follows:
The appellants are directed jointly and severally to pay the
plaintiff/appellee the following amounts:
1) P153,200.00 representing the peso equivalent of
US$2,000.00 and AUS$4,500.00;
2) P308,880.80, representing the peso value for the air
fares from Sidney [sic] to Manila and back for a total of
eleven (11) trips;
3) One-half of P336,207.05 or P168,103.52 representing
payment to Tropicana Apartment Hotel;
4) One-half of P152,683.57 or P76,341.785 representing
payment to Echelon Tower;
5) One-half of P179,863.20 or P89,931.60 for the taxi xxx
transportation from the residence to Sidney [sic] Airport and
from MIA to the hotel here in Manila, for the eleven (11)
trips;
6) One-half of P7,801.94 or P3,900.97 representing
Meralco power expenses;
7) One-half of P356,400.00 or P178,000.00 representing
expenses for food and maintenance;
8) P50,000.00 for moral damages;
9) P10,000.00 as exemplary damages; and
10) P200,000 representing attorneys fees.
With costs.
SO ORDERED.[29]
Unperturbed, YHT Realty Corporation, Lainez and Payam
went to this Court in this appeal by certiorari.
Petitioners submit for resolution by this Court the following
issues: (a) whether the appellate courts conclusion on the
alleged prior existence and subsequent loss of the subject
money and jewelry is supported by the evidence on record;
(b) whether the finding of gross negligence on the part of
petitioners in the performance of their duties as innkeepers
is supported by the evidence on record; (c) whether the
Undertaking For The Use of Safety Deposit Box admittedly
executed by private respondent is null and void; and (d)
whether the damages awarded to private respondent, as
well as the amounts thereof, are proper under the
circumstances.[30]
The petition is devoid of merit.
It is worthy of note that the thrust of Rule 45 is the
resolution only of questions of law and any peripheral
52
factual question addressed to this Court is beyond the
bounds of this mode of review.
Petitioners point out that the evidence on record is
insufficient to prove the fact of prior existence of the dollars
and the jewelry which had been lost while deposited in the
safety deposit boxes of Tropicana, the basis of the trial
court and the appellate court being the sole testimony of
McLoughlin as to the contents thereof. Likewise, petitioners
dispute the finding of gross negligence on their part as not
supported by the evidence on record.
We are not persuaded. We adhere to the findings of the trial
court as affirmed by the appellate court that the fact of loss
was established by the credible testimony in open court by
McLoughlin. Such findings are factual and therefore beyond
the ambit of the present petition.
The trial court had the occasion to observe the demeanor of
McLoughlin while testifying which reflected the veracity of
the facts testified to by him. On this score, we give full
credence to the appreciation of testimonial evidence by the
trial court especially if what is at issue is the credibility of
the witness. The oft-repeated principle is that where the
credibility of a witness is an issue, the established rule is
that great respect is accorded to the evaluation of the
credibility of witnesses by the trial court.[31] The trial court
is in the best position to assess the credibility of witnesses
and their testimonies because of its unique opportunity to
observe the witnesses firsthand and note their demeanor,
conduct and attitude under grilling examination.[32]
We are also not impressed by petitioners argument that the
finding of gross negligence by the lower court as affirmed
by the appellate court is not supported by evidence. The
evidence reveals that two keys are required to open the
safety deposit boxes of Tropicana. One key is assigned to
the guest while the other remains in the possession of the
management. If the guest desires to open his safety deposit
box, he must request the management for the other key to
open the same. In other words, the guest alone cannot
open the safety deposit box without the assistance of the
management or its employees. With more reason that
access to the safety deposit box should be denied if the one
requesting for the opening of the safety deposit box is a
stranger. Thus, in case of loss of any item deposited in the
safety deposit box, it is inevitable to conclude that the
management had at least a hand in the consummation of
the taking, unless the reason for the loss is force majeure.
Noteworthy is the fact that Payam and Lainez, who were
employees of Tropicana, had custody of the master key of
the management when the loss took place. In fact, they
even admitted that they assisted Tan on three separate
occasions in opening McLoughlins safety deposit box.[33]
This only proves that Tropicana had prior knowledge that a
person aside from the registered guest had access to the
safety deposit box. Yet the management failed to notify
McLoughlin of the incident and waited for him to discover
the taking before it disclosed the matter to him. Therefore,
Tropicana should be held responsible for the damage
suffered by McLoughlin by reason of the negligence of its
employees.
The management should have guarded against the
occurrence of this incident considering that Payam admitted
in open court that she assisted Tan three times in opening
the safety deposit box of McLoughlin at around 6:30 A.M. to
7:30 A.M. while the latter was still asleep.[34] In light of the
circumstances surrounding this case, it is undeniable that
without the acquiescence of the employees of Tropicana to
the opening of the safety deposit box, the loss of
McLoughlins money could and should have been avoided.
The management contends, however, that McLoughlin, by
his act, made its employees believe that Tan was his
spouse for she was always with him most of the time. The
evidence on record, however, is bereft of any showing that
McLoughlin introduced Tan to the management as his wife.
Such an inference from the act of McLoughlin will not
exculpate the petitioners from liability in the absence of any
showing that he made the management believe that Tan
was his wife or was duly authorized to have access to the
safety deposit box. Mere close companionship and intimacy
are not enough to warrant such conclusion considering that
what is involved in the instant case is the very safety of
McLoughlins deposit. If only petitioners exercised due
diligence in taking care of McLoughlins safety deposit box,
they should have confronted him as to his relationship with
Tan considering that the latter had been observed opening
McLoughlins safety deposit box a number of times at the
early hours of the morning. Tans acts should have
prompted the management to investigate her relationship
with McLoughlin. Then, petitioners would have exercised
due diligence required of them. Failure to do so warrants
the conclusion that the management had been remiss in
complying with the obligations imposed upon hotel-keepers
under the law.
Under Article 1170 of the New Civil Code, those who, in the
performance of their obligations, are guilty of negligence,
are liable for damages. As to who shall bear the burden of
paying damages, Article 2180, paragraph (4) of the same
Code provides that the owners and managers of an
establishment or enterprise are likewise responsible for
damages caused by their employees in the service of the
branches in which the latter are employed or on the
occasion of their functions. Also, this Court has ruled that if
an employee is found negligent, it is presumed that the
employer was negligent in selecting and/or supervising him
for it is hard for the victim to prove the negligence of such
employer.[35] Thus, given the fact that the loss of
McLoughlins money was consummated through the
negligence of Tropicanas employees in allowing Tan to
open the safety deposit box without the guests consent,
both the assisting employees and YHT Realty Corporation
itself, as owner and operator of Tropicana, should be held
solidarily liable pursuant to Article 2193.[36]
The issue of whether the Undertaking For The Use of
Safety Deposit Box executed by McLoughlin is tainted with
nullity presents a legal question appropriate for resolution in
this petition. Notably, both the trial court and the appellate
court found the same to be null and void. We find no reason
to reverse their common conclusion. Article 2003 is
controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from
responsibility by posting notices to the effect that he is not
53
liable for the articles brought by the guest. Any stipulation
between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in Articles 1998 to
2001[37] is suppressed or diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an
expression of public policy precisely to apply to situations
such as that presented in this case. The hotel business like
the common carriers business is imbued with public
interest. Catering to the public, hotelkeepers are bound to
provide not only lodging for hotel guests and security to
their persons and belongings. The twin duty constitutes the
essence of the business. The law in turn does not allow
such duty to the public to be negated or diluted by any
contrary stipulation in so-called undertakings that ordinarily
appear in prepared forms imposed by hotel keepers on
guests for their signature.
In an early case,[38] the Court of Appeals through its then
Presiding Justice (later Associate Justice of the Court) Jose
P. Bengzon, ruled that to hold hotelkeepers or innkeeper
liable for the effects of their guests, it is not necessary that
they be actually delivered to the innkeepers or their
employees. It is enough that such effects are within the
hotel or inn.[39] With greater reason should the liability of
the hotelkeeper be enforced when the missing items are
taken without the guests knowledge and consent from a
safety deposit box provided by the hotel itself, as in this
case.
Paragraphs (2) and (4) of the undertaking manifestly
contravene Article 2003 of the New Civil Code for they
allow Tropicana to be released from liability arising from
any loss in the contents and/or use of the safety deposit
box for any cause whatsoever.[40] Evidently, the
undertaking was intended to bar any claim against
Tropicana for any loss of the contents of the safety deposit
box whether or not negligence was incurred by Tropicana
or its employees. The New Civil Code is explicit that the
responsibility of the hotel-keeper shall extend to loss of, or
injury to, the personal property of the guests even if caused
by servants or employees of the keepers of hotels or inns
as well as by strangers, except as it may proceed from any
force majeure.[41] It is the loss through force majeure that
may spare the hotel-keeper from liability. In the case at bar,
there is no showing that the act of the thief or robber was
done with the use of arms or through an irresistible force to
qualify the same as force majeure.[42]
Petitioners likewise anchor their defense on Article 2002[43]
which exempts the hotel-keeper from liability if the loss is
due to the acts of his guest, his family, or visitors. Even a
cursory reading of the provision would lead us to reject
petitioners contention. The justification they raise would
render nugatory the public interest sought to be protected
by the provision. What if the negligence of the employer or
its employees facilitated the consummation of a crime
committed by the registered guests relatives or visitor?
Should the law exculpate the hotel from liability since the
loss was due to the act of the visitor of the registered guest
of the hotel? Hence, this provision presupposes that the
hotel-keeper is not guilty of concurrent negligence or has
not contributed in any degree to the occurrence of the loss.
A depositary is not responsible for the loss of goods by
theft, unless his actionable negligence contributes to the
loss.[44]
In the case at bar, the responsibility of securing the safety
deposit box was shared not only by the guest himself but
also by the management since two keys are necessary to
open the safety deposit box. Without the assistance of hotel
employees, the loss would not have occurred. Thus,
Tropicana was guilty of concurrent negligence in allowing
Tan, who was not the registered guest, to open the safety
deposit box of McLoughlin, even assuming that the latter
was also guilty of negligence in allowing another person to
use his key. To rule otherwise would result in undermining
the safety of the safety deposit boxes in hotels for the
management will be given imprimatur to allow any person,
under the pretense of being a family member or a visitor of
the guest, to have access to the safety deposit box without
fear of any liability that will attach thereafter in case such
person turns out to be a complete stranger. This will allow
the hotel to evade responsibility for any liability incurred by
its employees in conspiracy with the guests relatives and
visitors.
Petitioners contend that McLoughlins case was mounted on
the theory of contract, but the trial court and the appellate
court upheld the grant of the claims of the latter on the
basis of tort.[45] There is nothing anomalous in how the
lower courts decided the controversy for this Court has
pronounced a jurisprudential rule that tort liability can exist
even if there are already contractual relations. The act that
breaks the contract may also be tort.[46]
As to damages awarded to McLoughlin, we see no reason
to modify the amounts awarded by the appellate court for
the same were based on facts and law. It is within the
province of lower courts to settle factual issues such as the
proper amount of damages awarded and such finding is
binding upon this Court especially if sufficiently proven by
evidence and not unconscionable or excessive. Thus, the
appellate court correctly awarded McLoughlin Two
Thousand US Dollars (US$2,000.00) and Four Thousand
Five Hundred Australian dollars (AUS$4,500.00) or their
peso equivalent at the time of payment,[47] being the
amounts duly proven by evidence.[48] The alleged loss that
took place prior to 16 April 1988 was not considered since
the amounts alleged to have been taken were not
sufficiently established by evidence. The appellate court
also correctly awarded the sum of P308,880.80,
representing the peso value for the air fares from Sydney to
Manila and back for a total of eleven (11) trips;[49] one-half
of P336,207.05 or P168,103.52 representing payment to
Tropicana;[50] one-half of P152,683.57 or P76,341.785
representing payment to Echelon Tower;[51] one-half of
P179,863.20 or P89,931.60 for the taxi or transportation
expenses from McLoughlins residence to Sydney Airport
and from MIA to the hotel here in Manila, for the eleven (11)
trips;[52] one-half of P7,801.94 or P3,900.97 representing
Meralco power expenses;[53] one-half of P356,400.00 or
P178,000.00 representing expenses for food and
maintenance.[54]
The amount of P50,000.00 for moral damages is
reasonable. Although trial courts are given discretion to
determine the amount of moral damages, the appellate
court may modify or change the amount awarded when it is
54
palpably and scandalously excessive. Moral damages are
not intended to enrich a complainant at the expense of a
defendant. They are awarded only to enable the injured
party to obtain means, diversion or amusements that will
serve to alleviate the moral suffering he has undergone, by
reason of defendants culpable action.[55]

The awards of P10,000.00 as exemplary damages and

P200,000.00 representing attorneys fees are likewise
sustained.

WHEREFORE, foregoing premises considered, the

Decision of the Court of Appeals dated 19 October 1995 is
hereby AFFIRMED. Petitioners are directed, jointly and
severally, to pay private respondent the following amounts:

(1) US$2,000.00 and AUS$4,500.00 or their peso

equivalent at the time of payment;

(2) P308,880.80, representing the peso value for the air

fares from Sydney to Manila and back for a total of eleven
(11) trips;

(3) One-half of P336,207.05 or P168,103.52 representing

payment to Tropicana Copacabana Apartment Hotel;

(4) One-half of P152,683.57 or P76,341.785 representing

payment to Echelon Tower;

(5) One-half of P179,863.20 or P89,931.60 for the taxi or

transportation expense from McLoughlins residence to
Sydney Airport and from MIA to the hotel here in Manila, for
the eleven (11) trips;

(6) One-half of P7,801.94 or P3,900.97 representing

Meralco power expenses;

(7) One-half of P356,400.00 or P178,200.00 representing

expenses for food and maintenance;

(8) P50,000.00 for moral damages;

(9) P10,000.00 as exemplary damages; and

(10) P200,000 representing attorneys fees.

With costs.

SO ORDERED.

55
G.R. No. 189998 August 29, 2012
MAKATI SHANGRI-LA HOTEL AND RESORT, INC.,
Petitioner,
vs.
ELLEN JOHANNE HARPER, JONATHAN CHRISTOPHER
HARPER, and RIGOBERTO GILLERA, Respondents.
DECISION
BERSAMIN, J.:
The hotel owner is liable for civil damages to the surviving
heirs of its hotel guest whom strangers murder inside his
hotel room.
The Case
Petitioner, the owner and operator of the 5-star Shangri-La
Hotel in Makati City (Shangri-La Hotel), appeals the
decision promulgated on October 21, 2009,1 whereby the
Court of Appeals (CA) affirmed with modification the
judgment rendered on October 25, 2005 by the Regional
Trial Court (RTC) in Quezon City holding petitioner liable for
damages for the murder of Christian Fredrik Harper, a
Norwegian national.2 Respondents Ellen Johanne Harper
and Jonathan Christopher Harper are the widow and son of
Christian Harper, while respondent Rigoberto Gillera is their
authorized representative in the Philippines.
Antecedents
In the first week of November 1999, Christian Harper came
to Manila on a business trip as the Business Development
Manager for Asia of ALSTOM Power Norway AS, an
engineering firm with worldwide operations. He checked in
at the Shangri-La Hotel and was billeted at Room 1428. He
was due to check out on November 6, 1999. In the early
morning of that date, however, he was murdered inside his
hotel room by still unidentified malefactors. He was then 30
years old.
How the crime was discovered was a story in itself. A
routine verification call from the American Express Card
Company to cardholder Harper’s residence in Oslo, Norway
(i.e., Bygdoy Terasse 16, 0287 Oslo, Norway) led to the
discovery. It appears that at around 11:00 am of November
6, 1999, a Caucasian male of about 30–32 years in age,
5’4" in height, clad in maroon long sleeves, black denims
and black shoes, entered the Alexis Jewelry Store in
Glorietta, Ayala Center, Makati City and expressed interest
in purchasing a Cartier lady’s watch valued at ₱ 320,000.00
with the use of two Mastercard credit cards and an
American Express credit card issued in the name of Harper.
But the customer’s difficulty in answering the queries
phoned in by a credit card representative sufficiently
aroused the suspicion of saleslady Anna Liza Lumba
(Lumba), who asked for the customer’s passport upon
suggestion of the credit card representative to put the credit
cards on hold. Probably sensing trouble for himself, the
customer hurriedly left the store, and left the three credit
cards and the passport behind.
In the meanwhile, Harper’s family in Norway must have
called him at his hotel room to inform him about the attempt
to use his American Express card. Not getting any
response from the room, his family requested Raymond
Alarcon, the Duty Manager of the Shangri-La Hotel, to
check on Harper’s room. Alarcon and a security personnel
went to Room 1428 at 11:27 a.m., and were shocked to
discover Harper’s lifeless body on the bed.
Col. Rodrigo de Guzman (de Guzman), the hotel’s Security
Manager, initially investigated the murder. In his incident
report, he concluded from the several empty bottles of wine
in the trash can and the number of cigarette butts in the
toilet bowl that Harper and his visitors had drunk that much
and smoked that many cigarettes the night before.3
The police investigation actually commenced only upon the
arrival in the hotel of the team of PO3 Carmelito Mendoza4
and SPO4 Roberto Hizon. Mendoza entered Harper’s room
in the company of De Guzman, Alarcon, Gami Holazo (the
hotel’s Executive Assistant Manager), Norge Rosales (the
hotel’s Executive Housekeeper), and Melvin Imperial (a
security personnel of the hotel). They found Harper’s body
on the bed covered with a blanket, and only the back of the
head could be seen. Lifting the blanket, Mendoza saw that
the victim’s eyes and mouth had been bound with electrical
and packaging tapes, and his hands and feet tied with a
white rope. The body was identified to be that of hotel guest
Christian Fredrik Harper.
Mendoza subsequently viewed the closed circuit television
(CCTV) tapes, from which he found that Harper had
entered his room at 12:14 a.m. of November 6, 1999, and
had been followed into the room at 12:17 a.m. by a woman;
that another person, a Caucasian male, had entered
Harper’s room at 2:48 a.m.; that the woman had left the
room at around 5:33 a.m.; and that the Caucasian male had
come out at 5:46 a.m.
On November 10, 1999, SPO1 Ramoncito Ocampo, Jr.
interviewed Lumba about the incident in the Alexis Jewelry
Shop. During the interview, Lumba confirmed that the
person who had attempted to purchase the Cartier lady’s
watch on November 6, 1999 had been the person whose
picture was on the passport issued under the name of
Christian Fredrik Harper and the Caucasian male seen on
the CCTV tapes entering Harper’s hotel room.
Sr. Insp. Danilo Javier of the Criminal Investigation Division
of the Makati City Police reflected in his Progress Report
No. 25 that the police investigation showed that Harper’s
passport, credit cards, laptop and an undetermined amount
of cash had been missing from the crime scene; and that he
had learned during the follow-up investigation about an
unidentified Caucasian male’s attempt to purchase a Cartier
lady’s watch from the Alexis Jewelry Store in Glorietta,
Ayala Center, Makati City with the use of one of Harper’s
credit cards.
On August 30, 2002, respondents commenced this suit in
the RTC to recover various damages from petitioner,6
pertinently alleging:
xxx
7. The deceased was to check out and leave the hotel on
November 6, 1999, but in the early morning of said date,
56
while he was in his hotel room, he was stabbed to death by
an (sic) still unidentified male who had succeeded to intrude
into his room.
8. The murderer succeeded to trespass into the area of the
hotel’s private rooms area and into the room of the said
deceased on account of the hotel’s gross negligence in
providing the most basic security system of its guests, the
lack of which owing to the acts or omissions of its
employees was the immediate cause of the tragic death of
said deceased.
xxx
10. Defendant has prided itself to be among the top hotel
chains in the East claiming to provide excellent service,
comfort and security for its guests for which reason ABB
Alstom executives and their guests have invariably chosen
this hotel to stay.7
xxx
Ruling of the RTC
On October 25, 2005, the RTC rendered judgment after
trial,8 viz:
WHEREFORE, finding the defendant hotel to be remiss in
its duties and thus liable for the death of Christian Harper,
this Court orders the defendant to pay plaintiffs the amount
of:
PhP 43,901,055.00 as and by way of actual and
compensatory damages;
PhP 739,075.00 representing the expenses of transporting
the remains of Harper to Oslo, Norway;
PhP 250,000.00 attorney’s fees;
and to pay the cost of suit.
SO ORDERED.
Ruling of the CA
Petitioner appealed, assigning to the RTC the following
errors, to wit:
I WHETHER OR NOT THE PLAINTIFFS-APPELLEES
THE TRIAL COURT ERRED IN RULING THAT THE
PLAINTIFFS-APPELLEES ARE THE HEIRS OF THE LATE
CHRISTIAN HARPER, AS THERE IS NO COMPETENT
EVIDENCE ON RECORD SUPPORTING SUCH RULING.
II
THE TRIAL COURT ERRED IN RULING THAT THE
DEFENDANT-APPELLANT’SNEGLIGENCE WAS THE
PROXIMATE CAUSE OF THE DEATH OF MR. HARPER,
OR IN NOT RULING THAT IT WAS MR. CHRISTIAN
HARPER’S OWN NEGLIGENCE WHICH WAS THE SOLE,
PROXIMATE CAUSE OF HIS DEATH.
III
THE TRIAL COURT ERRED IN AWARDING TO THE
PLAINTIFFS-APPELLEES THE AMOUNTOF PH₱
43,901,055.00, REPRESENTING THE ALLEGED LOST
EARNING OF THE LATE CHRISTIAN HARPER, THERE
BEING NO COMPETENT PROOF OF THE EARNING OF
MR. HARPER DURING HIS LIFETIME AND OF THE
ALLEGATION THAT THE PLAINTIFFS-APPELLEES ARE
MR. HARPER’S HEIRS.
IV
THE TRIAL COURT ERRED IN AWARDING TO THE
PLAINTIFFS-APPELLEES THE AMOUNT OF PH₱
739,075.00, REPRESENTING THE ALLEGED COST OF
TRANSPORTING THE REMAINS OF MR. CHRISTIAN
HARPER TO OSLO, NORWAY, THERE BEING NO
PROOF ON RECORD THAT IT WAS PLAINTIFFS-
APPELLEES WHO PAID FOR SAID COST.
V
THE TRIAL COURT ERRED IN AWARDING ATTORNEY’S
FEES AND COST OF SUIT TO THE PLAINTIFFS-
APPELLEES, THERE BEING NO PROOF ON RECORD
SUPPORTING SUCH AWARD.
On October 21, 2009, the CA affirmed the judgment of the
RTC with modification,9 as follows:
WHEREFORE, the assailed Decision of the Regional Trial
Court dated October 25, 2005 is hereby AFFIRMED with
MODIFICATION. Accordingly, defendant-appellant is
ordered to pay plaintiffs-appellees the amounts of ₱
52,078,702.50, as actual and compensatory damages; ₱
25,000.00, as temperate damages; ₱ 250,000.00, as
attorney’s fees; and to pay the costs of the suit.
SO ORDERED.10
Issues
Petitioner still seeks the review of the judgment of the CA,
submitting the following issues for consideration and
determination, namely:
I.
WERE ABLE TO PROVE WITH COMPETENT EVIDENCE
THE AFFIRMATIVE ALLEGATIONS IN THE COMPLAINT
THAT THEY ARE THE WIDOW AND SON OF MR.
CHRISTIAN HARPER.
II.
WHETHER OR NOT THE APPELLEES WERE ABLE TO
PROVE WITH COMPETENT EVIDENCE THE
AFFIRMATIVE ALLEGATIONS IN THE COMPLAINT THAT
THERE WAS NEGLIGENCE ON THE PART OF THE
APPELLANT AND ITS SAID NEGLIGENCE WAS THE
PROXIMATE CAUSE OF THE DEATH OF MR.
CHRISTIAN HARPER.
57
III.
WHETHER OR NOT THE PROXIMATE CAUSE OF THE
DEATH OF MR. CHRISTIAN HARPER WAS HIS OWN
NEGLIGENCE.
Ruling
The appeal lacks merit.
I.
Requirements for authentication of documents
establishing respondents’ legal relationship
with the victim as his heirs were complied with
As to the first issue, the CA pertinently held as follows:
The documentary evidence that plaintiffs-appellees offered
relative to their heirship consisted of the following –
1. Exhibit "Q" - Birth Certificate of Jonathan Christopher
Harper, son of Christian Fredrik Harper and Ellen Johanne
Harper;
2. Exhibit "Q-1" - Marriage Certificate of Ellen Johanne
Clausen and Christian Fredrik Harper;
3. Exhibit "R" - Birth Certificate of Christian Fredrick Harper,
son of Christopher Shaun Harper and Eva Harper; and
4. Exhibit "R-1" - Certificate from the Oslo Probate Court
stating that Ellen Harper was married to the deceased,
Christian Fredrick Harper and listed Ellen Harper and
Jonathan Christopher Harper as the heirs of Christian
Fredrik Harper.
Defendant-appellant points out that plaintiffs-appellees
committed several mistakes as regards the above
documentary exhibits, resultantly making them incompetent
evidence, to wit, (a) none of the plaintiffs-appellees or any
of the witnesses who testified for the plaintiffs gave
evidence that Ellen Johanne Harper and Jonathan
Christopher Harper are the widow and son of the deceased
Christian Fredrik Harper; (b) Exhibit "Q" was labeled as
Certificate of Marriage in plaintiffs-appellees’ Formal Offer
of Evidence, when it appears to be the Birth Certificate of
the late Christian Harper; (c) Exhibit "Q-1" is a translation of
the Marriage Certificate of Ellen Johanne Harper and
Christian Fredrik Harper, the original of which was not
produced in court, much less, offered in evidence. Being a
mere translation, it cannot be a competent evidence of the
alleged fact that Ellen Johanne Harper is the widow of
Christian Fredrik Harper, pursuant to the Best Evidence
Rule. Even assuming that it is an original Marriage
Certificate, it is not a public document that is admissible
without the need of being identified or authenticated on the
witness stand by a witness, as it appears to be a document
issued by the Vicar of the Parish of Ullern and, hence, a
private document; (d) Exhibit "R" was labeled as Probate
Court Certificate in plaintiffs-appellees’ Formal Offer of
Evidence, when it appears to be the Birth Certificate of the
deceased, Christian Fredrik Harper; and (e) Exhibit "R-1" is
a translation of the supposed Probate Court Certificate, the
original of which was not produced in court, much less,
offered in evidence. Being a mere translation, it is an
incompetent evidence of the alleged fact that plaintiffs-
appellees are the heirs of Christian Fredrik Harper,
pursuant to the Best Evidence Rule.
Defendant-appellant further adds that Exhibits "Q-1" and
"R-1" were not duly attested by the legal custodians (by the
Vicar of the Parish of Ullern for Exhibit "Q-1" and by the
Judge or Clerk of the Probate Court for Exhibit "R-1") as
required under Sections 24 and 25, Rule 132 of the
Revised Rules of Court. Likewise, the said documents are
not accompanied by a certificate that such officer has the
custody as also required under Section 24 of Rule 132.
Consequently, defendant-appellant asseverates that
Exhibits "Q-1" and "R-1" as private documents, which were
not duly authenticated on the witness stand by a competent
witness, are essentially hearsay in nature that have no
probative value. Therefore, it is obvious that plaintiffs-
appellees failed to prove that they are the widow and son of
the late Christian Harper.
Plaintiffs-appellees make the following counter arguments,
viz, (a) Exhibit "Q-1", the Marriage Certificate of Ellen
Johanne Harper and Christian Fredrik Harper, was issued
by the Office of the Vicar of Ullern with a statement that
"this certificate is a transcript from the Register of Marriage
of Ullern Church." The contents of Exhibit "Q-1" were
translated by the Government of the Kingdom of Norway,
through its authorized translator, into English and
authenticated by the Royal Ministry of Foreign Affairs of
Norway, which in turn, was also authenticated by the
Consul, Embassy of the Republic of the Philippines in
Stockholm, Sweden; (b) Exhibit "Q", the Birth Certificate of
Jonathan Christopher Harper, was issued and signed by
the Registrar of the Kingdom of Norway, as authenticated
by the Royal Ministry of Foreign Affairs of Norway, whose
signature was also authenticated by the Consul, Embassy
of the Republic of the Philippines in Stockholm, Sweden;
and (c) Exhibit "R-1", the Probate Court Certificate was also
authenticated by the Royal Ministry of Foreign Affairs of
Norway, whose signature was also authenticated by the
Consul, Embassy of the Republic of the Philippines in
Stockholm, Sweden.
They further argue that since Exhibit "Q-1", Marriage
Certificate, was issued by the vicar or parish priest, the
legal custodian of parish records, it is considered as an
exception to the hearsay rule. As for Exhibit "R-1", the
Probate Court Certificate, while the document is indeed a
translation of the certificate, it is an official certification, duly
confirmed by the Government of the Kingdom of Norway; its
contents were lifted by the Government Authorized
Translator from the official record and thus, a written official
act of a foreign sovereign country.
WE rule for plaintiffs-appellees.
The Revised Rules of Court provides that public documents
may be evidenced by a copy attested by the officer having
the legal custody of the record. The attestation must state,
in substance, that the copy is a correct copy of the original,
or a specific part thereof, as the case may be. The
attestation must be under the official seal of the attesting
officer, if there be any, or if he be the clerk of a court having
a seal, under the seal of such court.
58
If the record is not kept in the Philippines, the attested copy
must be accompanied with a certificate that such officer has
the custody. If the office in which the record is kept is in a
foreign country, the certificate may be made by a secretary
of the embassy or legation, consul general, consul, vice
consul, or consular agent or by any officer in the foreign
service of the Philippines stationed in the foreign country in
which the record is kept, and authenticated by the seal of
his office.
The documents involved in this case are all kept in Norway.
These documents have been authenticated by the Royal
Norwegian Ministry of Foreign Affairs; they bear the official
seal of the Ministry and signature of one, Tanja Sorlie. The
documents are accompanied by an Authentication by the
Consul, Embassy of the Republic of the Philippines in
Stockholm, Sweden to the effect that, Tanja Sorlie is duly
authorized to legalize official documents for the Ministry.
Exhibits "Q" and "R" are extracts of the register of births of
both Jonathan Christopher Harper and the late Christian
Fredrik Harper, respectively, wherein the former explicitly
declares that Jonathan Christopher is the son of Christian
Fredrik and Ellen Johanne Harper. Said documents bear
the signature of the keeper, Y. Ayse B. Nordal with the
official seal of the Office of the Registrar of Oslo, and the
authentication of Tanja Sorlie of the Royal Ministry of
Foreign Affairs, Oslo, which were further authenticated by
Philippine Consul Marian Jocelyn R. Tirol. In addition, the
latter states that said documents are the birth certificates of
Jonathan Christopher Harper and Christian Fredrik Harper
issued by the Registrar Office of Oslo, Norway on March
23, 2004.
Exhibits "Q-1", on the other hand, is the Marriage Certificate
of Christian Fredrik Harper and Ellen Johanne Harper
issued by the vicar of the Parish of Ullern while Exhibit "R-
1" is the Probate Court Certificate from the Oslo Probate
Court, naming Ellen Johanne Harper and Jonathan
Christopher Harper as the heirs of the deceased Christian
Fredrik Harper. The documents are certified true
translations into English of the transcript of the said
marriage certificate and the probate court certificate. They
were likewise signed by the authorized government
translator of Oslo with the seal of his office; attested by
Tanja Sorlie and further certified by our own Consul.
In view of the foregoing, WE conclude that plaintiffs-
appellees had substantially complied with the requirements
set forth under the rules. WE would also like to stress that
plaintiffs-appellees herein are residing overseas and are
litigating locally through their representative. While they are
not excused from complying with our rules, WE must take
into account the attendant reality that these overseas
litigants communicate with their representative and counsel
via long distance communication. Add to this is the fact that
compliance with the requirements on attestation and
authentication or certification is no easy process and
completion thereof may vary depending on different factors
such as the location of the requesting party from the
consulate and the office of the record custodian, the volume
of transactions in said offices and even the mode of
sending these documents to the Philippines. With these
circumstances under consideration, to OUR minds, there is
every reason for an equitable and relaxed application of the
rules on the issuance of the required attestation from the
custodian of the documents to plaintiffs-appellees’ situation.
Besides, these questioned documents were duly signed by
the officers having custody of the same.11
Petitioner assails the CA’s ruling that respondents
substantially complied with the rules on the authentication
of the proofs of marriage and filiation set by Section 24 and
Section 25 of Rule 132 of the Rules of Court when they
presented Exhibit Q, Exhibit Q-1, Exhibit R and Exhibit R-1,
because the legal custodian did not duly attest that Exhibit
Q-1 and Exhibit R-1 were the correct copies of the originals
on file, and because no certification accompanied the
documents stating that "such officer has custody of the
originals." It contends that respondents did not competently
prove their being Harper’s surviving heirs by reason of such
documents being hearsay and incompetent.
Petitioner’s challenge against respondents’ documentary
evidence on marriage and heirship is not well-taken.
Section 24 and Section 25 of Rule 132 provide:
Section 24. Proof of official record. — The record of public
documents referred to in paragraph (a) of Section 19, when
admissible for any purpose, may be evidenced by an official
publication thereof or by a copy attested by the officer
having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines,
with a certificate that such officer has the custody. If the
office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of the embassy or
legation, consul general, consul, vice consul, or consular
agent or by any officer in the foreign service of the
Philippines stationed in the foreign country in which the
record is kept, and authenticated by the seal of his office.
Section 25. What attestation of copy must state. —
Whenever a copy of a document or record is attested for
the purpose of evidence, the attestation must state, in
substance, that the copy is a correct copy of the original, or
a specific part thereof, as the case may be. The attestation
must be under the official seal of the attesting officer, if
there be any, or if he be the clerk of a court having a seal,
under the seal of such court.
Although Exhibit Q,12 Exhibit Q-1,13 Exhibit R14 and
Exhibit R-115 were not attested by the officer having the
legal custody of the record or by his deputy in the manner
required in Section 25 of Rule 132, and said documents did
not comply with the requirement under Section 24 of Rule
132 to the effect that if the record was not kept in the
Philippines a certificate of the person having custody must
accompany the copy of the document that was duly
attested stating that such person had custody of the
documents, the deviation was not enough reason to reject
the utility of the documents for the purposes they were
intended to serve.
Exhibit Q and Exhibit R were extracts from the registry of
births of Oslo, Norway issued on March 23, 2004 and
signed by Y. Ayse B. Nordal, Registrar, and corresponded
to respondent Jonathan Christopher Harper and victim
Christian Fredrik Harper, respectively.16 Exhibit Q explicitly
stated that Jonathan was the son of Christian Fredrik
59
Harper and Ellen Johanne Harper, while Exhibit R attested
to the birth of Christian Fredrik Harper on December 4,
1968. Exhibit Q and Exhibit R were authenticated on March
29, 2004 by the signatures of Tanja Sorlie of the Royal
Ministry of Foreign Affairs of Norway as well as by the
official seal of that office. In turn, Consul Marian Jocelyn R.
Tirol of the Philippine Consulate in Stockholm, Sweden
authenticated the signatures of Tanja Sorlie and the official
seal of the Royal Ministry of Foreign Affairs of Norway on
Exhibit Q and Exhibit R, explicitly certifying to the authority
of Tanja Sorlie "to legalize official documents for the Royal
Ministry of Foreign Affairs of Norway."17
Exhibit Q-1,18 the Marriage Certificate of Ellen Johanne
Clausen Harper and Christian Fredrik Harper, contained the
following data, namely: (a) the parties were married on
June 29, 1996 in Ullern Church; and (b) the certificate was
issued by the Office of the Vicar of Ullern on June 29, 1996.
Exhibit Q-1 was similarly authenticated by the signature of
Tanja Sorlie of the Royal Ministry of Foreign Affairs of
Norway, with the official seal of that office. Philippine
Consul Tirol again expressly certified to the capacity of
Sorlie "to legalize official documents for the Royal Ministry
of Foreign Affairs of Norway,"19 and further certified that
the document was a true translation into English of a
transcript of a Marriage Certificate issued to Christian
Frederik Harper and Ellen Johanne Clausen by the Vicar of
the Parish of Ullern on June 29, 1996.
Exhibit R-1,20 a Probate Court certificate issued by the
Oslo Probate Court on February 18, 2000 through Morten
Bolstad, its Senior Executive Officer, was also
authenticated by the signature of Tanja Sorlie and with the
official seal of the Royal Ministry of Foreign Affairs of
Norway. As with the other documents, Philippine Consul
Tirol explicitly certified to the capacity of Sorlie "to legalize
official documents for the Royal Ministry of Foreign Affairs
of Norway," and further certified that the document was a
true translation into English of the Oslo Probate Court
certificate issued on February 18, 2000 to the effect that
Christian Fredrik Harper, born on December 4, 1968, had
reportedly died on November 6, 1999.21
The Oslo Probate Court certificate recited that both Ellen
Johanne Harper and Christopher S. Harper were Harper’s
heirs, to wit:
The above names surviving spouse has accepted
responsibility for the commitments of the deceased in
accordance with the provisions of Section 78 of the Probate
Court Act (Norway), and the above substitute guardian has
agreed to the private division of the estate.
The following heir and substitute guardian will undertake
the private division of the estate:
Ellen Johanne Harper
Christopher S. Harper
This probate court certificate relates to the entire estate.
Oslo Probate Court, 18 February 2000.22
The official participation in the authentication process of
Tanja Sorlie of the Royal Ministry of Foreign Affairs of
Norway and the attachment of the official seal of that office
on each authentication indicated that Exhibit Q, Exhibit R,
Exhibit Q-1 and Exhibit R-1 were documents of a public
nature in Norway, not merely private documents. It cannot
be denied that based on Philippine Consul Tirol’s official
authentication, Tanja Sorlie was "on the date of signing,
duly authorized to legalize official documents for the Royal
Ministry of Foreign Affairs of Norway." Without a showing to
the contrary by petitioner, Exhibit Q, Exhibit R, Exhibit Q-1
and Exhibit R-1 should be presumed to be themselves
official documents under Norwegian law, and admissible as
prima facie evidence of the truth of their contents under
Philippine law.
At the minimum, Exhibit Q, Exhibit R, Exhibit Q-1 and
Exhibit R-1 substantially met the requirements of Section 24
and Section 25 of Rule 132 as a condition for their
admission as evidence in default of a showing by petitioner
that the authentication process was tainted with bad faith.
Consequently, the objective of ensuring the authenticity of
the documents prior to their admission as evidence was
substantially achieved. In Constantino-David v.
Pangandaman-Gania,23 the Court has said that substantial
compliance, by its very nature, is actually inadequate
observance of the requirements of a rule or regulation that
are waived under equitable circumstances in order to
facilitate the administration of justice, there being no
damage or injury caused by such flawed compliance.
The Court has further said in Constantino-David v.
Pangandaman-Gania that the focus in every inquiry on
whether or not to accept substantial compliance is always
on the presence of equitable conditions to administer justice
effectively and efficiently without damage or injury to the
spirit of the legal obligation.24 There are, indeed, such
equitable conditions attendant here, the foremost of which
is that respondents had gone to great lengths to submit the
documents. As the CA observed, respondents’ compliance
with the requirements on attestation and authentication of
the documents had not been easy; they had to contend with
many difficulties (such as the distance of Oslo, their place
of residence, from Stockholm, Sweden, where the
Philippine Consulate had its office; the volume of
transactions in the offices concerned; and the safe
transmission of the documents to the Philippines).25 Their
submission of the documents should be presumed to be in
good faith because they did so in due course. It would be
inequitable if the sincerity of respondents in obtaining and
submitting the documents despite the difficulties was
ignored.
The principle of substantial compliance recognizes that
exigencies and situations do occasionally demand some
flexibility in the rigid application of the rules of procedure
and the laws.26 That rules of procedure may be mandatory
in form and application does not forbid a showing of
substantial compliance under justifiable circumstances,27
because substantial compliance does not equate to a
disregard of basic rules. For sure, substantial compliance
and strict adherence are not always incompatible and do
not always clash in discord. The power of the Court to
suspend its own rules or to except any particular case from
the operation of the rules whenever the purposes of justice
60
require the suspension cannot be challenged.28 In the
interest of substantial justice, even procedural rules of the
most mandatory character in terms of compliance are
frequently relaxed. Similarly, the procedural rules should
definitely be liberally construed if strict adherence to their
letter will result in absurdity and in manifest injustice, or
where the merits of a party’s cause are apparent and
outweigh considerations of non-compliance with certain
formal requirements.29 It is more in accord with justice that
a party-litigant is given the fullest opportunity to establish
the merits of his claim or defense than for him to lose his
life, liberty, honor or property on mere technicalities. Truly,
the rules of procedure are intended to promote substantial
justice, not to defeat it, and should not be applied in a very
rigid and technical sense.30
Petitioner urges the Court to resolve the apparent conflict
between the rulings in Heirs of Pedro Cabais v. Court of
Appeals31 (Cabais) and in Heirs of Ignacio Conti v. Court of
Appeals32 (Conti) establishing filiation through a baptismal
certificate.33
Petitioner’s urging is not warranted, both because there is
no conflict between the rulings in Cabais and Conti, and
because neither Cabais nor Conti is relevant herein.
In Cabais, the main issue was whether or not the CA
correctly affirmed the decision of the RTC that had relied
mainly on the baptismal certificate of Felipa C. Buesa to
establish the parentage and filiation of Pedro Cabais. The
Court held that the petition was meritorious, stating:
A birth certificate, being a public document, offers prima
facie evidence of filiation and a high degree of proof is
needed to overthrow the presumption of truth contained in
such public document. This is pursuant to the rule that
entries in official records made in the performance of his
duty by a public officer are prima facie evidence of the facts
therein stated. The evidentiary nature of such document
must, therefore, be sustained in the absence of strong,
complete and conclusive proof of its falsity or nullity.
On the contrary, a baptismal certificate is a private
document, which, being hearsay, is not a conclusive proof
of filiation. It does not have the same probative value as a
record of birth, an official or public document. In US v.
Evangelista, this Court held that church registers of births,
marriages, and deaths made subsequent to the
promulgation of General Orders No. 68 and the passage of
Act No. 190 are no longer public writings, nor are they kept
by duly authorized public officials. Thus, in this jurisdiction,
a certificate of baptism such as the one herein controversy
is no longer regarded with the same evidentiary value as
official records of birth. Moreover, on this score,
jurisprudence is consistent and uniform in ruling that the
canonical certificate of baptism is not sufficient to prove
recognition.34
The Court sustained the Cabais petitioners’ stance that the
RTC had apparently erred in relying on the baptismal
certificate to establish filiation, stressing the baptismal
certificate’s limited evidentiary value as proof of filiation
inferior to that of a birth certificate; and declaring that the
baptismal certificate did not attest to the veracity of the
statements regarding the kinsfolk of the one baptized.
Nevertheless, the Court ultimately ruled that it was
respondents’ failure to present the birth certificate, more
than anything else, that lost them their case, stating that:
"The unjustified failure to present the birth certificate instead
of the baptismal certificate now under consideration or to
otherwise prove filiation by any other means recognized by
law weigh heavily against respondents."35
In Conti, the Court affirmed the rulings of the trial court and
the CA to the effect that the Conti respondents were able to
prove by preponderance of evidence their being the
collateral heirs of deceased Lourdes Sampayo. The Conti
petitioners disagreed, arguing that baptismal certificates did
not prove the filiation of collateral relatives of the deceased.
Agreeing with the CA, the Court said:
We are not persuaded. Altogether, the documentary and
testimonial evidence submitted xxx are competent and
adequate proofs that private respondents are collateral
heirs of Lourdes Sampayo.
xxx
Under Art. 172 of the Family Code, the filiation of legitimate
children shall be proved by any other means allowed by the
Rules of Court and special laws, in the absence of a record
of birth or a parent’s admission of such legitimate filiation in
a public or private document duly signed by the parent.
Such other proof of one’s filiation may be a baptismal
certificate, a judicial admission, a family Bible in which his
name has been entered, common reputation respecting his
pedigree, admission by silence, the testimonies of
witnesses and other kinds of proof admissible under Rule
130 of the Rules of Court. By analogy, this method of
proving filiation may also be utilized in the instant case.
Public documents are the written official acts, or records of
the official act of the sovereign authority, official bodies and
tribunals, and public officers, whether of the Philippines, or
a foreign country. The baptismal certificates presented in
evidence by private respondents are public documents.
Parish priests continue to be the legal custodians of the
parish records and are authorized to issue true copies, in
the form of certificates, of the entries contained therein.
The admissibility of baptismal certificates offered by Lydia
S. Reyes, absent the testimony of the officiating priest or
the official recorder, was settled in People v. Ritter, citing
U.S. v. de Vera (28 Phil. 105 1914, thus:
.... The entries made in the Registry Book may be
considered as entries made in the course of business under
Section 43 of Rule 130, which is an exception to the
hearsay rule. The baptisms administered by the church are
one of its transactions in the exercise of ecclesiastical
duties and recorded in the book of the church during this
course of its business.
It may be argued that baptismal certificates are evidence
only of the administration of the sacrament, but in this case,
there were four (4) baptismal certificates which, when taken
together, uniformly show that Lourdes, Josefina, Remedios
and Luis had the same set of parents, as indicated therein.
Corroborated by the undisputed testimony of Adelaida
Sampayo that with the demise of Lourdes and her brothers
61
Manuel, Luis and sister Remedios, the only sibling left was
Josefina Sampayo Reyes, such baptismal certificates have
acquired evidentiary weight to prove filiation.36
Obviously, Conti did not treat a baptismal certificate,
standing alone, as sufficient to prove filiation; on the
contrary, Conti expressly held that a baptismal certificate
had evidentiary value to prove filiation if considered
alongside other evidence of filiation. As such, a baptismal
certificate alone is not sufficient to resolve a disputed
filiation.
Unlike Cabais and Conti, this case has respondents
presenting several documents, like the birth certificates of
Harper and respondent Jonathan Harper, the marriage
certificate of Harper and Ellen Johanne Harper, and the
probate court certificate, all of which were presumably
regarded as public documents under the laws of Norway.
Such documentary evidence sufficed to competently
establish the relationship and filiation under the standards
of our Rules of Court.
II
Petitioner was liable due to its own negligence
Petitioner argues that respondents failed to prove its
negligence; that Harper’s own negligence in allowing the
killers into his hotel room was the proximate cause of his
own death; and that hotels were not insurers of the safety of
their guests.
The CA resolved petitioner’s arguments thuswise:
Defendant-appellant contends that the pivotal issue is
whether or not it had committed negligence and corollarily,
whether its negligence was the immediate cause of the
death of Christian Harper. In its defense, defendant-
appellant mainly avers that it is equipped with adequate
security system as follows: (1) keycards or vingcards for
opening the guest rooms, (2) two CCTV monitoring
cameras on each floor of the hotel and (3) roving guards
with handheld radios, the number of which depends on the
occupancy rate of the hotel. Likewise, it reiterates that the
proximate cause of Christian Harper’s death was his own
negligence in inviting to his room the two (2) still
unidentified suspects.
Plaintiffs-appellees in their Brief refute, in that, the liability of
defendant-appellant is based upon the fact that it was in a
better situation than the injured person, Christian Harper, to
foresee and prevent the happening of the injurious
occurrence. They maintain that there is no dispute that
even prior to the untimely demise of Christian Harper,
defendant-appellant was duly forewarned of its security
lapses as pointed out by its Chief Security Officer, Col.
Rodrigo De Guzman, who recommended that one roving
guard be assigned on each floor of the hotel considering
the length and shape of the corridors. They posit that
defendant-appellant’s inaction constitutes negligence.
This Court finds for plaintiffs-appellees.
As the action is predicated on negligence, the relevant law
is Article 2176 of the Civil Code, which states that –
"Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there was no pre-
existing contractual relation between the parties, is called
quasi-delict and is governed by the provisions of this
chapter."
Negligence is defined as the omission to do something
which a reasonable man, guided by those considerations
which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent and
reasonable man would not do. The Supreme Court likewise
ruled that negligence is want of care required by the
circumstances. It is a relative or comparative, not an
absolute, term and its application depends upon the
situation of the parties and the degree of care and vigilance
which the circumstances reasonably require. In determining
whether or not there is negligence on the part of the parties
in a given situation, jurisprudence has laid down the
following test: Did defendant, in doing the alleged negligent
act, use that reasonable care and caution which an
ordinarily prudent person would have used in the same
situation? If not, the person is guilty of negligence. The law,
in effect, adopts the standard supposed to be supplied by
the imaginary conduct of the discreet pater familias of the
Roman law.
The test of negligence is objective. WE measure the act or
omission of the tortfeasor with a perspective as that of an
ordinary reasonable person who is similarly situated. The
test, as applied to the extant case, is whether or not
defendant-appellant, under the attendant circumstances,
used that reasonable care and caution which an ordinary
reasonable person would have used in the same situation.
WE rule in the negative.
In finding defendant-appellant remiss in its duty of
exercising the required reasonable care under the
circumstances, the court a quo reasoned-out, to wit:
"Of the witnesses presented by plaintiffs to prove its (sic)
case, the only one with competence to testify on the issue
of adequacy or inadequacy of security is Col. Rodrigo De
Guzman who was then the Chief Security Officer of
defendant hotel for the year 1999. He is a retired police
officer and had vast experience in security jobs. He was
likewise a member of the elite Presidential Security Group.
He testified that upon taking over the job as the chief of the
security force of the hotel, he made an assessment of the
security situation. Col. De Guzman was not satisfied with
the security set-up and told the hotel management of his
desire to improve it. In his testimony, De Guzman testified
that at the time he took over, he noticed that there were few
guards in the elevated portion of the hotel where the rooms
were located. The existing security scheme then was one
guard for 3 or 4 floors. He likewise testified that he
recommended to the hotel management that at least one
guard must be assigned per floor especially considering
that the hotel has a long "L-shaped" hallway, such that one
cannot see both ends of the hallway. He further opined that
"even one guard in that hallway is not enough because of
the blind portion of the hallway."
62
On cross-examination, Col. De Guzman testified that the
security of the hotel was adequate at the time the crime
occurred because the hotel was not fully booked. He
qualified his testimony on direct in that his recommendation
of one guard per floor is the "ideal" set-up when the hotel is
fully-booked.
Be that as it may, it must be noted that Col. De Guzman
also testified that the reason why the hotel management
disapproved his recommendation was that the hotel was
not doing well. It is for this reason that the hotel
management did not heed the recommendation of Col. De
Guzman, no matter how sound the recommendation was,
and whether the hotel is fully-booked or not. It was a
business judgment call on the part of the defendant.
Plaintiffs anchor its (sic) case on our law on quasi-delicts.
Article 2176. Whoever by act or omission causes damage
to another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is
called quasi-delict.
Liability on the part of the defendant is based upon the fact
that he was in a better situation than the injured person to
foresee and prevent the happening of the injurious
occurrence.
There is no dispute that even prior to the untimely demise
of Mr. Harper, defendant was duly forewarned of the
security lapses in the hotel. Col. De Guzman was
particularly concerned with the security of the private areas
where the guest rooms are. He wanted not just one roving
guard in every three or four floors. He insisted there must
be at least one in each floor considering the length and the
shape of the corridors. The trained eyes of a security officer
was (sic) looking at that deadly scenario resulting from that
wide security breach as that which befell Christian Harper.
The theory of the defense that the malefactor/s was/were
known to Harper or was/were visitors of Harper and that
there was a shindig among [the] three deserves scant
consideration.
The NBI Biology Report (Exh. "C" & "D") and the Toxicology
Report (Exh. "E") belie the defense theory of a joyous party
between and among Harper and the unidentified
malefactor/s. Based on the Biology Report, Harper was
found negative of prohibited and regulated drugs. The
Toxicology Report likewise revealed that the deceased was
negative of the presence of alcohol in his blood.
The defense even suggests that the malefactor/s gained
entry into the private room of Harper either because Harper
allowed them entry by giving them access to the vingcard or
because Harper allowed them entry by opening the door for
them, the usual gesture of a room occupant to his visitors.
While defendant’s theory may be true, it is more likely,
under the circumstances obtaining that the malefactor/s
gained entry into his room by simply knocking at Harper’s
door and the latter opening it probably thinking it was hotel
personnel, without an inkling that criminal/s could be in the
premises.
The latter theory is more attuned to the dictates of reason. If
indeed the female "visitor" is known to or a visitor of Harper,
she should have entered the the room together with Harper.
It is quite unlikely that a supposed "visitor" would wait three
minutes to be with a guest when he/she could go with the
guest directly to the room. The interval of three minutes in
Harper’s entry and that of the alleged female visitor belies
the "theory of acquaintanceship". It is most likely that the
female "visitor" was the one who opened the door to the
male "visitor", undoubtedly, a co-conspirator.
In any case, the ghastly incident could have been
prevented had there been adequate security in each of the
hotel floors. This, coupled with the earlier recommendation
of Col. De Guzman to the hotel management to act on the
security lapses of the hotel, raises the presumption that the
crime was foreseeable.
Clearly, defendant’s inaction constitutes negligence or want
of the reasonable care demanded of it in that particular
situation.
In a case, the Supreme Court defined negligence as:
The failure to observe for the protection of the interests of
another person that degree of care, precaution and
vigilance, which the circumstances justly demand, whereby
such person suffers injury.
Negligence is want of care required by the circumstances. It
is a relative or comparative, not an absolute term, and its
application depends upon the situation of the parties, and
the degree of care and vigilance which the circumstances
reasonably impose. Where the danger is great, a high
degree of care is necessary.
Moreover, in applying the premises liability rule in the
instant case as it is applied in some jurisdiction (sic) in the
United States, it is enough that guests are injured while
inside the hotel premises to make the hotelkeeper liable.
With great caution should the liability of the hotelkeeper be
enforced when a guest died inside the hotel premises.
It also bears stressing that there were prior incidents that
occurred in the hotel which should have forewarned the
hotel management of the security lapses of the hotel. As
testified to by Col. De Guzman, "there were ‘minor’
incidents" (loss of items) before the happening of the instant
case.
These "minor" incidents may be of little significance to the
hotel, yet relative to the instant case, it speaks volume. This
should have served as a caveat that the hotel security has
lapses.
Makati Shangri-La Hotel, to stress, is a five-star hotel. The
"reasonable care" that it must exercise for the safety and
comfort of its guests should be commensurate with the
grade and quality of the accommodation it offers. If there is
such a thing as "five-star hotel security", the guests at
Makati Shangri-La surely deserves just that!
When one registers (as) a guest of a hotel, he makes the
establishment the guardian of his life and his personal
63
belongings during his stay. It is a standard procedure of the
management of the hotel to screen visitors who call on their
guests at their rooms. The murder of Harper could have
been avoided had the security guards of the Shangri-La
Hotel in Makati dutifully observed this standard procedure."
WE concur.
Well settled is the doctrine that "the findings of fact by the
trial court are accorded great respect by appellate courts
and should not be disturbed on appeal unless the trial court
has overlooked, ignored, or disregarded some fact or
circumstances of sufficient weight or significance which, if
considered, would alter the situation." After a conscientious
sifting of the records, defendant-appellant fails to convince
US to deviate from this doctrine.
It could be gleaned from findings of the trial court that its
conclusion of negligence on the part of defendant-appellant
is grounded mainly on the latter’s inadequate hotel security,
more particularly on the failure to deploy sufficient security
personnel or roving guards at the time the ghastly incident
happened.
A review of the testimony of Col. De Guzman reveals that
on direct examination he testified that at the time he
assumed his position as Chief Security Officer of
defendant-appellant, during the early part of 1999 to the
early part of 2000, he noticed that some of the floors of the
hotel were being guarded by a few guards, for instance, 3
or 4 floors by one guard only on a roving manner. He then
made a recommendation that the ideal-set up for an
effective security should be one guard for every floor,
considering that the hotel is L-shaped and the ends of the
hallways cannot be seen. At the time he made the
recommendation, the same was denied, but it was later on
considered and approved on December 1999 because of
the Centennial Celebration.
On cross-examination, Col. De Guzman confirmed that
after he took over as Chief Security Officer, the number of
security guards was increased during the first part of
December or about the last week of November, and before
the incident happened, the security was adequate. He also
qualified that as to his direct testimony on "ideal-set up", he
was referring to one guard for every floor if the hotel is fully
booked. At the time he made his recommendation in the
early part of 1999, it was disapproved as the hotel was not
doing well and it was not fully booked so the existing
security was adequate enough. He further explained that
his advice was observed only in the late November 1999 or
the early part of December 1999.
It could be inferred from the foregoing declarations of the
former Chief Security Officer of defendant-appellant that the
latter was negligent in providing adequate security due its
guests. With confidence, it was repeatedly claimed by
defendant-appellant that it is a five-star hotel. Unfortunately,
the record failed to show that at the time of the death of
Christian Harper, it was exercising reasonable care to
protect its guests from harm and danger by providing
sufficient security commensurate to it being one of the
finest hotels in the country. In so concluding, WE are
reminded of the Supreme Court’s enunciation that the hotel
business like the common carrier’s business is imbued with
public interest. Catering to the public, hotelkeepers are
bound to provide not only lodging for hotel guests but also
security to their persons and belongings. The twin duty
constitutes the essence of the business.
It is clear from the testimony of Col. De Guzman that his
recommendation was initially denied due to the fact that the
business was then not doing well. The "one guard, one
floor" recommended policy, although ideal when the hotel is
fully-booked, was observed only later in November 1999 or
in the early part of December 1999, or needless to state,
after the murder of Christian Harper. The apparent security
lapses of defendant-appellant were further shown when the
male culprit who entered Christian Harper’s room was
never checked by any of the guards when he came inside
the hotel. As per interview conducted by the initial
investigator, PO3 Cornelio Valiente to the guards, they
admitted that nobody know that said man entered the hotel
and it was only through the monitor that they became aware
of his entry. It was even evidenced by the CCTV that before
he walked to the room of the late Christian Harper, said
male suspect even looked at the monitoring camera. Such
act of the man showing wariness, added to the fact that his
entry to the hotel was unnoticed, at an unholy hour, should
have aroused suspicion on the part of the roving guard in
the said floor, had there been any. Unluckily for Christian
Harper, there was none at that time.
Proximate cause is defined as that cause, which, in natural
and continuous sequence, unbroken by any efficient
intervening cause, produces, the injury, and without which
the result would not have occurred. More comprehensively,
proximate cause is that cause acting first and producing the
injury, either immediately or by setting other events in
motion, all constituting a natural and continuous chain of
events, each having a close causal connection with its
immediate predecessor, the final event in the chain
immediately effecting the injury as natural and probable
result of the cause which first acted, under such
circumstances that the person responsible for the first event
should, as an ordinarily prudent and intelligent person, have
reasonable ground to expect at the moment of his act or
default that an injury to some person might probably result
therefrom.
Defendant-appellant’s contention that it was Christian
Harper’s own negligence in allowing the malefactors to his
room that was the proximate cause of his death, is
untenable. To reiterate, defendant-appellant is engaged in a
business imbued with public interest, ergo, it is bound to
provide adequate security to its guests. As previously
discussed, defendant-appellant failed to exercise such
reasonable care expected of it under the circumstances.
Such negligence is the proximate cause which set the chain
of events that led to the eventual demise of its guest. Had
there been reasonable security precautions, the same could
have saved Christian Harper from a brutal death.
The Court concurs entirely with the findings and
conclusions of the CA, which the Court regards to be
thorough and supported by the records of the trial.
Moreover, the Court cannot now review and pass upon the
uniform findings of negligence by the CA and the RTC
because doing so would require the Court to delve into and
revisit the factual bases for the finding of negligence,
64
something fully contrary to its character as not a trier of
facts. In that regard, the factual findings of the trial court
that are supported by the evidence on record, especially
when affirmed by the CA, are conclusive on the Court.37
Consequently, the Court will not review unless there are
exceptional circumstances for doing so, such as the
following:
(a) When the findings are grounded entirely on speculation,
surmises or conjectures;
(b) When the inference made is manifestly mistaken,
absurd or impossible;
(c) When there is grave abuse of discretion;
(d) When the judgment is based on a misapprehension of
facts;
(e) When the findings of facts are conflicting;
(f) When in making its findings the Court of Appeals went
beyond the issues of the case, or its findings are contrary to
the admissions of both the appellant and the appellee;
(g) When the findings are contrary to the trial court;
(h) When the findings are conclusions without citation of
specific evidence on which they are based;
(i) When the facts set forth in the petition as well as in the
petitioner’s main and reply briefs are not disputed by the
respondent;
(j) When the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on
record; and
(k) When the Court of Appeals manifestly overlooked
certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion.38
None of the exceptional circumstances obtains herein.
Accordingly, the Court cannot depart from or disturb the
factual findings on negligence of petitioner made by both
the RTC and the CA.39
Even so, the Court agrees with the CA that petitioner failed
to provide the basic and adequate security measures
expected of a five-star hotel; and that its omission was the
proximate cause of Harper’s death.
The testimony of Col. De Guzman revealed that the
management practice prior to the murder of Harper had
been to deploy only one security or roving guard for every
three or four floors of the building; that such ratio had not
been enough considering the L-shape configuration of the
hotel that rendered the hallways not visible from one or the
other end; and that he had recommended to management
to post a guard for each floor, but his recommendation had
been disapproved because the hotel "was not doing well" at
that particular time.40
Probably realizing that his testimony had weakened
petitioner’s position in the case, Col. De Guzman soon
clarified on cross-examination that petitioner had seen no
need at the time of the incident to augment the number of
guards due to the hotel being then only half-booked. Here is
how his testimony went:
ATTY MOLINA:
I just forgot one more point, Your Honor please. Was there
ever a time, Mr. Witness, that your recommendation to post
a guard in every floor ever considered and approved by the
hotel?
A: Yes, Sir.
Q: When was this?
A: That was on December 1999 because of the Centennial
Celebration when the hotel accepted so many guests
wherein most of the rooms were fully booked and I
recommended that all the hallways should be guarded by
one guard.41
xxx
ATTY COSICO:
Q: So at that time that you made your recommendation, the
hotel was half-filled.
A: Maybe.
Q: And even if the hotel is half-filled, your recommendation
is that each floor shall be maintained by one security guard
per floors?
A: Yes sir.
Q: Would you agree with me that even if the hotel is half-
filled, there is no need to increase the guards because
there were only few customers?
A: I think so.
Q: So you will agree with me that each floor should be
maintained by one security guard if the rooms are filled up
or occupied?
A: Yes sir.
Q: Now, you even testified that from January 1999 to
November 1999 thereof, only minor incidents were
involved?
A: Yes sir.
Q: So it would be correct to say that the security at that time
in February was adequate?
A: I believe so.
Q: Even up to November when the incident happened for
that same reason, security was adequate?
A: Yes, before the incident.
65
Q: Now, you testified on direct that the hotel posted one
guard each floor?

A: Yes sir.

Q: And it was your own recommendation?

A: Yes, because we are expecting that the hotel will be

filled up.

Q: In fact, the hotel was fully booked?

A: Yes sir.42

Petitioner would thereby have the Court believe that Col.

De Guzman’s initial recommendation had been rebuffed
due to the hotel being only half-booked; that there had been
no urgency to adopt a one-guard-per-floor policy because
security had been adequate at that time; and that he
actually meant by his statement that "the hotel was not
doing well" that the hotel was only half-booked.

We are not convinced.

The hotel business is imbued with public interest. Catering

to the public, hotelkeepers are bound to provide not only
lodging for their guests but also security to the persons and
belongings of their guests. The twin duty constitutes the
essence of the business.43 Applying by analogy Article
2000,44 Article 200145 and Article 200246 of the Civil Code
(all of which concerned the hotelkeepers’ degree of care
and responsibility as to the personal effects of their guests),
we hold that there is much greater reason to apply the
same if not greater degree of care and responsibility when
the lives and personal safety of their guests are involved.
Otherwise, the hotelkeepers would simply stand idly by as
strangers have unrestricted access to all the hotel rooms on
the pretense of being visitors of the guests, without being
held liable should anything untoward befall the unwary
guests. That would be absurd, something that no good law
would ever envision.

In fine, the Court sees no reversible-error on the part of the

CA.

WHEREFORE, the Court AFFIRMS the judgment of the

Court of Appeals; and ORDERS petitioner to pay the costs
of suit.

SO ORDERED.

66
[G.R. No. 143994. July 11, 2002]
LOS BAOS RURAL BANK, INC., petitioner, vs. PACITA O.
AFRICA, GLORIA AFRICA, ANTONIO AFRICA, ARISTEO
AFRICA, SOCORRO AFRICA, CONSUELO AFRICA, AND
LOURDES AFRICA, respondents.
DECISION
PANGANIBAN, J.:
A writ of preliminary injunction is issued to preserve the
status quo ante, upon an applicants showing of two
important requisite conditions; namely, (1) the right to be
protected exists prima facie, and (2) the acts sought to be
enjoined are violative of that right. It must be proven that
the violation sought to be prevented would cause an
irreparable injustice.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the
Rules of Court, assailing the June 30, 2000 Decision[1] of
the Court of Appeals[2] (CA) in CA-GR SP No. 53355. The
decretal portion of the Decision reads as follows:
WHEREFORE, the petition is GRANTED. The Order dated
April 19, 1999 insofar as it denied the petitioners application
for the issuance of a writ of preliminary injunction, is hereby
RECALLED and SET ASIDE.
Let a writ of preliminary injunction issue in this case to
restrain the respondent bank from proceeding with the
foreclosure and consolidation of the title over the subject
property upon posting by petitioners of a bond in the
amount of Php20,000.00.[3]
The Order of the Regional Trial Court (RTC) of Quezon City
(Branch 220), which was reversed by the CA, reads as
follows:
WHEREFORE, premises considered, the Order of the
Court dated July 22, 1997 is hereby recalled and set aside.
The application for issuance of writ of preliminary injunction
is hereby DENIED.
Issues in this case having been joined, let this case be set
for pre-trial on May 28, 1999 at 8:30 o clock in the morning.
Send notice of pre-trial to the parties and counsels.[4]
The Facts
The factual antecedents of the case are summarized by the
Court of Appeals in this wise:
Petitioner Pacita Africa (Pacita for brevity) is the widow of
Alberto Africa and the rest of her co-petitioners are their
children.
Records disclose that sometime in June 1989, the Quezon
City Hall building where the Register of Deeds was then
holding office was razed by fire, destroying some of its
records/documents among which was the original Transfer
Certificate of Title (TCT) No. 203492 covering a parcel of
land situated in Diliman, Quezon City, and registered in the
name of petitioner Pacita. The aforesaid property was part
of the conjugal property of petitioner Pacita and her late
husband Alberto Africa.
On request of Pacita, private respondent Macy Africa, the
common-law wife of petitioner Antonio Africa, worked for
the reconstitution of the aforesaid TCT No. 203492. The
same was done and a new Transfer Certificate of Title
(TCT) No. RT-76140 (203492) PR-36463 was issued in the
name of Pacita Africa. While the reconstituted title was in
her possession, Macy allegedly forged, or caused the
forgery of, Pacitas signature on a Deed of Absolute Sale
dated December 29, 1992, purporting to transfer ownership
of the subject property to Macy. On the strength of the
forged Deed of Absolute Sale, Macy was able to cause the
issuance of TCT No. 81519 in her name, without the
knowledge of any of herein petitioners.
Still as part of the scheme to defraud petitioners, Macy
caused the preparation of a fake TCT No. 81519 in the
name of Pacita, which the former showed to the latter to
make Pacita believe that the said title was issued in her
(Pacitas) name.
Sometime in March 1994, petitioners discovered private
respondents fraudulent act. They (petitioners) likewise
came to know that the subject property was mortgaged by
Macy to the respondent bank. To protect their interests over
the subject property, petitioners lodged an action in court
against Macy and the respondent bank for Annulment of
Title, Deed of Absolute Sale and Deed of Mortgage. The
case was originally assigned to Branch 99 of the RTC of
Quezon City and docketed as Civil Case No. Q-94-20898.
After the filing of the aforesaid case, the respondent bank in
utter bad faith, foreclosed the subject property on June 11,
1996 without due notice to the petitioners, prompting the
petitioners to amend [their] complaint, this time
incorporating therein a prayer for the issuance of a
temporary restraining order and/or writ of preliminary
injunction, to stop the respondent bank from, among others,
consolidating title to the subject property.
On July 2, 1997, RTC Branch 99 issued an Order granting
petitioners application for a temporary restraining order.
Meanwhile, the respondent bank filed its Manifestation,
Opposition and Motion to Postpone dated July 11, 1997,
praying, inter alia, for the denial of petitioners application for
a writ of preliminary injunction, or in the alternative, for the
cancellation of the hearing thereon. On July 18, 1997, the
aforesaid court denied the respondent banks motion to
postpone and proceeded with the hearing of petitioners
application. Thereafter, petitioners application was
considered submitted for resolution.
On July 22, 1997, the Court issued an Order granting
petitioners application for a writ of preliminary injunction to
which respondent bank filed a Motion for Reconsideration
dated July 11, 1997 followed by a Motion for Inhibition on
January 1, 1998 praying that Hon. Felix M. de Guzman,
presiding judge of RTC, Branch 99, inhibit himself from
further trying the case. This latter motion was granted, and
the case was re-raffled and assigned to Branch 220.
On April 19, 1999, RTC Branch 220, public respondent
herein, issued the questioned Order. [5]
67

Ruling of the Court of Appeals
The CA overturned the RTC Order dated April 19, 1999,
and granted the issuance of a preliminary injunction to
restrain petitioner from proceeding with the foreclosure and
the consolidation of title over the subject property. The CA
ruled that respondents had title to and possession of the
property and were deprived thereof by petitioner. Thus,
respondents had a clear and unmistakable right to protect
their title and possession.[6]
Hence, this Petition.[7]
Issues
In its Memorandum, petitioner raises the following issues
for the Courts consideration:
I Revised Rules of Court, which reads as follows:
Whether the Court of Appeals acted with patent grave
abuse of discretion in applying the ruling in Verzosa vs.
Court of Appeals, (299 SCRA 100), to the instant case to
justify its reversal of the 19 April 1999 Order of Branch 220
of the Regional Trial Court of Quezon City in Civil Case No.
Q-94-20898[;]
II
Whether the Court of Appeals acted with patent grave
abuse of discretion when it rationalized its decision by citing
factual premises therein that are not borne out by the
records nor based on evidence and in fact contrary to
reality[;]
III
Whether the Court of Appeals acted with patent grave
abuse of discretion when it ignored, disregarded and/or
deviated from established jurisprudence governing the
issuance of preliminary injunction demanded by private
respondents against the petitioner bank[;]
IV
Whether the Court [of] Appeals acted with patent grave
abuse of discretion when it disregarded the pertinent
provisions of Section 3, Rule 58, of the Revised Rules of
Court providing for the grounds for issuance of preliminary
injunction.[8]
In sum, the issues boil down to whether the appellate court
erred in issuing a writ of preliminary injunction to stop
petitioners consolidation of its title to the subject property.
This Courts Ruling
The Petition is not meritorious; it has not shown any
reversible error in the CAs Decision.
Main Issue:
Propriety of Preliminary Injunction
Petitioner argues that respondents do not have a right to
the relief demanded, because they merely have possession
of the property, as the legal title is in the name of Macy
Africa.[9] Furthermore, it claims that the consolidation of
title in its name does not constitute an invasion of a right
that is material and substantial.[10]
On the other hand, respondents maintain that they would
suffer great irreparable damage if the writ of preliminary
injunction is not granted.[11] They likewise contend that if
petitioner is allowed to consolidate its title to the subject
property, they would lose their ancestral home, a loss that
would result in unnecessary and protracted proceedings
involving third parties.[12]
We agree with respondents.
The grounds for the issuance of a writ of preliminary
injunction are enumerated in Rule 58, Section 3 of the
Sec. 3. Grounds for issuance of preliminary injunction. A
preliminary injunction may be granted when it is
established;
(a)That the applicant is entitled to the relief demanded, and
the whole or part of such relief consists in restraining the
commission or continuance of the act or acts complained
of, or in requiring the performance of an act or acts, either
for a limited period or perpetually;
(b)That the commission, continuance or non-performance
of the act or acts complained of during the litigation would
probably work injustice to the applicant; or
(c)That a party, court, agency or a person is doing,
threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation
of the rights of the applicant respecting the subject of the
action or proceeding, and tending to render the judgment
ineffectual.
Injunction is a preservative remedy aimed at no other
purpose than to protect the complainants substantive rights
and interests[13] during the pendency of the principal
action.[14] A preliminary injunction, as the term itself
suggests, is merely temporary.[15] It is to be resorted to
only when there is a pressing necessity to avoid injurious
consequences that cannot be remedied under any standard
of compensation.[16]
Moreover, injunction, like other equitable remedies, should
be issued only at the instance of a suitor who has sufficient
interest in or title to the right or the property sought to be
protected.[17] It is proper only when the plaintiff appears to
be entitled to the relief demanded in the complaint.[18] In
particular, the existence of the right and the violation thereof
must appear in the allegations of the complaint[19] and
must constitute at least a prima facie showing of a right to
the final relief.[20] Thus, there are two requisite conditions
for the issuance of a preliminary injunction, namely, (1) the
right to be protected exists prima facie, and (2) the acts
sought to be enjoined are violative of that right.[21] It must
be proven that the violation sought to be prevented would
cause an irreparable injustice.
68

Further, while a clear showing of the right is necessary, its
existence need not be conclusively established.[22] In fact,
the evidence required to justify the issuance of a writ of
preliminary injunction in the hearing thereon need not be
conclusive or complete. The evidence need only be a
sampling intended merely to give the court an idea of the
justification for the preliminary injunction, pending the
decision of the case on the merits.[23] Thus, to be entitled
to the writ, respondents are only required to show that they
have the ostensible right to the final relief prayed for in their
Complaint.[24]
First Requisite:
Existence of the Right
In the case at bar, we find ample justification for the
issuance of a writ of preliminary injunction.[25] Evidently,
the question on whether or not respondents possess the
requisite right hinges on the prima facie existence of their
legal title to the subject property.[26] They have shown that
they have that right, and that it is directly threatened by the
act sought to be enjoined.[27]
First, as alleged in the Complaint,[28] Respondent Pacita
Africa is the registered owner of the subject property. Her
ownership is evidenced by the reconstituted Transfer
Certificate of Title (TCT) No. RT-76140 (203492) PR-
36463,[29] issued by the Registry of Deeds of Quezon City.
Second, the validity of the Deed of Sale[30] dated
December 29, 1992, is still in dispute because Respondent
Pacita Africa claims that her signature was forged by the
vendee, Macy Africa.[31] Third, there is doubt as to the
validity of the mortgage in favor of petitioner, because there
exists on record two TCTs covering the mortgaged
property: (1) TCT No. 81519[32] registered in the name of
Pacita Africa and (2) TCT No. 81519[33] registered in the
name of Macy Africa.
If indeed the Deed of Sale is a forgery, no parcel of land
was ever transferred to the purported buyer[34] who, not
being the owner, could not have validly mortgaged the
property.[35] Consequently, neither has petitioner -- the
buyer and mortgagee of the same lot -- ever acquired any
title thereto.[36] Significantly, no evidence was presented
by petitioner to controvert these allegations put forward by
respondents. Clearly then, on the basis of the evidence
presented, respondents possess the right to prevent
petitioner from consolidating the title in its name. The first
requisite -- the existence of a right to be protected -- is thus
present.[37]
Second Requisite:
Violation of Applicants Right
As to the second requisite, what is sought to be enjoined by
respondents is the consolidation of the title to the subject
property in petitioners name. After having discovered that
the property had been mortgaged to petitioner, respondents
filed on June 12, 1994 an action for Annulment of Title,
Deed of Sale, and Mortgage to protect their rights over the
property.[38] This notwithstanding, petitioner foreclosed it
on June 11, 1996.[39] To enjoin petitioner from
consolidating the title in its name, respondents then filed an
Amended Complaint,[40] praying for a writ of preliminary
injunction.
Unless legally stopped, petitioner may consolidate title to
the property in its name and enjoy the unbridled freedom to
dispose of it to third persons, to the damage and prejudice
of respondents.[41] What respondents stand to lose is
material and substantial.[42] They would lose their
ancestral home even without the benefit of a trial.[43]
Clearly, the act sought to be enjoined is violative of their
proprietary right over the property.[44]
A writ of preliminary injunction is issued precisely to
preserve threatened or continuous irremediable injury to
some of the parties before their claims can be thoroughly
studied and adjudicated.[45] Denial of the application for
the writ may make the Complaint of respondents moot and
academic. Furthermore, it would render ineffectual a final
judgment in their favor or, at the very least, compel them to
litigate needlessly with third persons who may have
acquired an interest in the property.[46] Such a situation
cannot be countenanced.[47]
Lis Pendens
Petitioner further contends that respondents are not entitled
to the relief prayed for, because they caused a notice of lis
pendens to be annotated at the back of TCT No. 81519,
registered in the name of Macy P. Africa; thus, that notice
provided ample protection of their rights and interests.[48]
We are not persuaded. A notice of lis pendens serves as an
announcement to the whole world that a particular real
property is in litigation and as a warning that those who
acquire an interest in the property do so at their own risk --
they gamble on the result of the litigation over it.[49]
However, the cancellation of such notice may be ordered by
the court that has jurisdiction over it at any given time.[50]
Its continuance or removal -- like the continuance or the
removal of a preliminary attachment or injunction -- is not
contingent on the existence of a final judgment on the
action and ordinarily has no effect on the merits thereof.[51]
Thus, the notice of lis pendens does not suffice to protect
herein respondents rights over the property.[52] It does not
provide complete and ample protection.
Status Quo Ante
Petitioner further claims that the RTC erred in enjoining the
foreclosure sale of the subject property.[53] It argues that
the foreclosure may no longer be enjoined, because it has
long been effected since 1996.[54] We agree with
petitioner.
It is a well-entrenched rule that consummated acts can no
longer be restrained by injunction[55] whose sole objective
is to preserve the status quo until the merits of the case are
fully heard.[56] Status quo is defined as the last actual
peaceful uncontested situation that precedes a controversy,
and its preservation is the office of an injunctive writ.[57]
In the instant case, the status quo was the situation of the
parties at the time of the filing of the Amended
Complaint[58] with a prayer for a writ of preliminary
injunction. It was that point at which petitioner had already
69
foreclosed the subject property and, hence, could no longer
be enjoined from going on with the foreclosure. However,
the last actual uncontested status that preceded the
controversy was when the property in dispute was still
registered in the name of Macy Africa, petitioner not having
consolidated in its name the title thereto.[59] Thus, the
issuance of the writ would no doubt preserve the status
quo.[60]

We cannot rule on the allegation of petitioner that this case

is a scam perpetrated by private respondents to defraud
it.[61] The truth or the falsity of that assertion cannot be
ascertained by this Court at this time. Verily, we refrain from
expressing any opinion on the merits of the case, pending a
full consideration of the evidence that would be presented
by the parties.[62]

WHEREFORE, the Petition is DENIED and the assailed

Decision of the Court of Appeals AFFIRMED. Costs against
petitioner.

SO ORDERED.

70
[G.R. No. 129995. October 19, 2001]
THE PROVINCE OF BATAAN, petitioner-appellant, vs.
HON. PEDRO VILLAFUERTE, JR., as Presiding Judge of
the Regional Trial Court of Bataan (Branch 4), and THE
PRESIDENTIAL COMMISSION ON GOOD
GOVERNMENT, respondents-appellees.
DECISION
BUENA, J.:
Sought to be reversed in the instant Petition for Review on
Certiorari is the Decision[1] of the Court of Appeals, dated
19 December 1996, in C.A. G.R. SP. No. 33344, upholding
the twin orders dated 28 July 1993 and 11 November 1993
of the Regional Trial Court (RTC) of Bataan, Branch 4, in
Civil Case No. 210-ML, for annulment of sale.
In its order dated 28 July 1993,[2] the lower court directed
that herein petitioner Province of Bataan remit to said court
whatever lease rentals petitioner may receive from lessees
7-R Port Services and Marina Port Services, and that such
lease rentals be placed under a special time deposit with
the Land Bank of the Philippines, Balanga Branch, for the
account of the RTC-Balanga, Branch 4, in escrow, for the
person or persons, natural or juridical, who may be
adjudged lawfully entitled thereto. The order dated 11
November 1993,[3] denied herein petitioners motion for
reconsideration of the 28 July, 1993 order.
Involved in the present controversy is an expanse of real
property (hereinafter referred to as the BASECO property)
situated at Mariveles, Bataan and formerly registered and
titled in the name of either the Bataan Shipyard and
Engineering Corporation (BASECO), the Philippine
Dockyard Corporation or the Baseco Drydock and
Construction Co., Inc..
Pursuant to Presidential Decree No. 464, otherwise known
as the Real Property Tax Code of 1974, the Provincial
Treasurer of Bataan advertised for auction sale the
BASECO property due to real estate tax delinquency
amounting to P7,914,281.72, inclusive of penalties.[4] At
the auction sale held on 12 February 1988, no bidder vied
for said property as a result of which, the Provincial
Treasurer of Bataan adjudged the property to, and acquired
the same for, and in the name of herein petitioner Province
of Bataan. Upon the expiration of the one-year redemption
period, and without the owner exercising its right to redeem
the subject property, the Provincial Government of Bataan
consolidated its title thereon; the corresponding certificates
of title were then issued in the name of herein petitioner
Province of Bataan.
Eventually, petitioner, thru then Provincial Governor
Enrique T. Garcia, entered into a ten-year contract of lease
with 7-R Port Services, Inc., whereby portions of the
BASECO property including facilities and improvements
thereon, were leased to the latter for a minimum escalating
annual rental of Eighteen Million Pesos (P18 million). On 10
May 1993, petitioner forged another contract of lease with
Marina Port Services, over a ten-hectare portion of the
BASECO property.
On 11 May 1993, The Presidential Commission on Good
Government (PCGG), for itself and on behalf of the
Republic of the Philippines and the BASECO, the Philippine
Dockyard Corporation and the Baseco Drydock and
Construction Co. Inc., filed with the RTC-Bataan a
complaint for annulment of sale,[5] principally assailing the
validity of the tax delinquency sale of the BASECO property
in favor of petitioner Province of Bataan. Among others, the
complaint alleged that the auction sale held on 12 February
1988, is void for having been conducted:[6]
a) In defiance of an injunctive order issued by the PCGG in
the exercise of its powers under Executive Order No. 1,
Series of 1986;
b) in contravention of the Real Property Tax Code of 1974;
c) while the issue of ownership of the Baseco property and
of whether the same partakes of the nature of ill-gotten
wealth is pending litigation in Civil Case No. 0010 before
the Sandiganbayan; and
d) despite the inscription of the sequestration order at the
back of each title of the BASECO property.
In its prayer, the complaint asked for the following reliefs:
1) The tax delinquency sale held on February 12, 1988 be
declared null and void; and the defendant Province of
Bataan be ordered to reconvey all the properties thus sold
to its rightful owners, the Republic of the Philippines and/or
the other plaintiffs herein;
2) The defendants be ordered to render an accounting to,
and pay plaintiffs all earnings, fruits and income which they
have received or could have received from the time they
claimed ownership and took possession and control of all
the auctioned properties; and to account and pay for all the
losses, deterioration and destruction thereof;
3) The defendants be ordered, jointly and severally to pay
plaintiffs for all damages suffered by it/them by reason of
the unlawful actuations of the defendants, in the sum herein
claimed and proven at the trial of this case, including
attorneys fees and costs of suit;
4) The defendant 7-R Port Services, Inc. be ordered to
immediately cease and desist from paying any lease rentals
to the Province of Bataan, and instead to pay the same
directly to the plaintiffs;
5) The Register of Deeds of Bataan be ordered to cancel
the Torrens titles it had issued in favor of the Province of
Bataan, and issue a new Torrens titles (sic) in favor of
plaintiffs in lieu of the cancelled ones.
Herein respondent PCGG, upon learning of the lease
contracts entered into by and between petitioner and
Marina Port Services, filed with the RTC an urgent motion
for the issuance of a writ of preliminary injunction to enjoin
herein petitioner from entering into a lease contract with
Marina Port Services, Inc. (Marina), or any other entity,
and/or from implementing/enforcing such lease contract, if
one has already been executed, and to maintain the status
quo until further orders from the Court.
71
On 06 July 1993, the lower court denied the motion
ratiocinating that the lease contract with Marina was already
a fait accompli when the motion was filed, and that Marina
was not a party to the suit for not having been impleaded as
party-defendant.
On 30 June 1993, the PCGG filed with the lower court an
Urgent Motion to Deposit Lease Rentals, alleging inter alia
that the rentals amounting to Hundreds of Millions of Pesos
are in danger of being unlawfully spent, squandered and
dissipated to the great and irreparable damage of plaintiffs
who are the rightful owners of the property leased.
On 28 July 1993, the lower court granted the PCGGs
urgent motion and issued its assailed order the dispositive
portion of which reads:
ACCORDINGLY, the defendant Province of Bataan is
hereby ordered to remit to this Court the lease rentals it
may receive from the defendant 7-R Port Services, Inc. and
the Marina Port Services, Inc. to commence from its receipt
of this Order and for the Clerk of Court of this Branch to
deposit said amount under special time deposit with the
Land Bank of the Philippines, Balanga Branch, in Balanga,
Bataan in the name and/or account of this Court to be held
in ESCROW for the person or persons, natural or juridical,
who may be finally adjudged lawfully entitled thereto, and
subject to further orders from this Court.[7]
Petitioner moved to reconsider the aforementioned order,
which motion the lower court denied via its assailed order
dated 11 November 1993.[8] Aggrieved by the lower courts
twin orders, petitioner filed before the Court of Appeals a
petition for certiorari with prayer for issuance of a temporary
restraining order and writ of preliminary injunction.[9]
On 01 December 1995, the Bataan Shipyard and
Engineering Corporation, the Philippine Dockyard
Corporation and the Baseco Drydock and Construction Co.,
Inc., filed a motion for leave to intervene before the Court of
Appeals. In a Resolution dated 26 March 1996, the
appellate court granted the motion.
On 16 April 1996, the intervenors-respondents filed their
Answer-in-Intervention praying for the dismissal of the
petition before the Court of Appeals and the dissolution of
the preliminary injunction issued in favor of petitioners.[10]
In its Decision dated 19 December 1996, the Court of
Appeals dismissed the petition to which a motion for
reconsideration was filed by petitioner. In a Resolution
dated 21 July 1997, respondent court likewise denied the
motion for reconsideration, hence, the instant appeal where
petitioner Province of Bataan imputes to the Court of
Appeals a lone assignment of error, to wit:
The Court of Appeals manifestly erred in refusing to declare
and/or hold that the respondent judge acted without
jurisdiction or with grave abuse of discretion in ordering the
deposit in escrow of the rental payments pertaining to the
petitioner province.
In simpler terms, the sole issue for resolution revolves
around the propriety of the escrow order issued by the
lower court in the civil suit for annulment of sale.
The instant petition is devoid of merit.
In the main, petitioner insists that the issuance of the
escrow order by the trial court was patently irregular, if not
downright anomalous, reasoning that nowhere in the
Revised Rules of Court is the trial court, or any court for
that matter, authorized to issue such escrow order, whether
as a provisional or permanent remedy. According to
petitioner, the escrow orders in question are null and void
ab initio for having been issued absent any legal basis and
are merely calculated to prejudice the petitioner province
without any practical or worthwhile, much less legal
objective.
We do not agree. An escrow[11] fills a definite niche in the
body of the law; it has a distinct legal character.[12] The
usual definition is that an escrow is a written instrument
which by its terms imports a legal obligation and which is
deposited by the grantor, promisor, or obligor, or his agent
with a stranger or third party, to be kept by the depositary
until the performance of a condition or the happening of a
certain event, and then to be delivered over to the grantee,
promisee, or obligee.[13]
While originally, the doctrine of escrow applied only to
deeds by way of grant,[14] or as otherwise stated,
instruments for the conveyance of land,[15] under modern
theories of law, the term escrow is not limited in its
application to deeds, but is applied to the deposit of any
written instrument with a third person.[16] Particular
instruments which have been held to be the subject of an
escrow include bonds or covenants, deeds, mortgages, oil
and gas leases, contracts for the sale of land or for the
purchase of personal property, corporate stocks and stock
subscriptions, promissory notes or other commercial paper,
insurance applications and policies, contracts for the
settlement of will-contest cases, indentures of
apprenticeship, receipts assigning concessions and
discontinuances and releases of causes of action.[17]
Moreover, it is no longer open to question that money may
be delivered in escrow.[18]
In our jurisdiction, an escrow order issued by a court of law
may find ample basis and support in the courts intrinsic
power to issue orders and other ancillary writs and
processes incidental or reasonably necessary to the
exercise of its main jurisdiction. Evidently, judicial power
connotes certain incidental and inherent attributes
reasonably necessary for an effective administration of
justice.[19]
In a manner of speaking, courts have not only the power to
maintain their life, but they have also the power to make
that existence effective for the purpose for which the
judiciary was created. They can, by appropriate means, do
all things necessary to preserve and maintain every quality
needful to make the judiciary an effective institution of
Government. Courts have therefore inherent power to
preserve their integrity, maintain their dignity and to insure
effectiveness in the administration of justice.[20]
72
To lend flesh and blood to this legal aphorism, Rule 135 of
the Rules of Court explicitly provides:
Section 5. Inherent powers of courts- Every court shall have
power:
X X X (g) To amend and control its process and orders so
as to make them conformable to law and justice.
Section 6. Means to carry jurisdiction into effect - When by
law jurisdiction is conferred on a court or judicial officer, all
auxiliary writs, processes and other means necessary to
carry it into effect may be employed by such court or officer,
and if the procedure to be followed in the exercise of such
jurisdiction is not specifically pointed out by law or by these
rules, any suitable process or mode of proceeding may be
adopted which appears conformable to the spirit of said law
or rules. (Emphasis ours)
It is beyond dispute that the lower court exercised
jurisdiction over the main action docketed as Civil Case No.
210-ML, which involved the annulment of sale and
reconveyance of the subject properties. Under this
circumstance, we are of the firm view that the trial court, in
issuing the assailed escrow orders, acted well within its
province and sphere of power inasmuch as the subject
orders were adopted in accordance with the Rules and
jurisprudence and were merely incidental to the courts
exercise of jurisdiction over the main case, thus:
X X X Jurisdiction attaching, the courts powers as a
necessary incident to their general jurisdiction, to make
such orders in relation to the cases pending before them
are as necessary to the progress of the cases and the
dispatch of business follow. Deming v. Foster, 42 N.H. 165,
178 cited in Burleigh v. Wong Sung De Leon 139 A. 184,83
N.H. 115.
XXXXXXXXX
X X X A court is vested, not only with the powers expressly
granted by the statute, but also with all such powers as are
incidentally necessary to the effective exercise of the
powers expressly conferred (In re McLures Estate, 68 Mont.
556, 220 P. 527) and to render its orders, made under such
express powers effective. Brown v. Clark, 102 Tex. 323,
116 S.W. 360, 24 L.R.A. (N.S.) 670 cited in State v. District
Court, 272 P. 525.
XXXXXXXXX
In the absence of prohibitive legislation, courts have
inherent power to provide themselves with appropriate
procedures required for the performance of their tasks. Ex
parte Peterson, 253 U.S. 300, 312, 313, 40 S. Ct. 543, 64
L. Ed. 919; Funk v. U.S., 290 U.S. 371,381-384, 54 A. Ct.
212, 78 L.Ed. 369, 93 A.L.R. 1136 cited in Ex parte U.S.
C.C.A. Wis., 101 F 2d 870.
XXXXXXXXX
A court has inherent power to make such interlocutory
orders as may be necessary to protect its jurisdiction, and
to make certain that its eventual decree may not be
ineffective. (Boynton v. Moffat Tunnel Improvement Dist.
C.C.A. Colo, 57 F, 2d 772.
XXXXXXXXX
In the ordinary case the courts can proceed to the
enforcement of the plaintiffs rights only after a trial had in
the manner prescribed by the laws of the land, which
involves due notice, the right of the trial by jury, etc.
Preliminary to such an adjucation, the power of the court is
generally to preserve the subject matter of the litigation to
maintain the status, or issue some extraordinary writs
provided by law, such as attachments, etc. None of these
powers, however, are exercised on the theory that the court
should, in advance of the final adjudication determine the
rights of the parties in any summary way and put either of
them in the enjoyment thereof; but such actions taken
merely, as means for securing an effective adjudication and
enforcement of rights of the parties after such adjudication.
Colby c. Osgood Tex. Civ. App., 230 S.W. 459;)[21]
(emphasis ours)
On this score, the incisive disquisition of the Court of
Appeals is worthy of mention, to wit:
X X X Given the jurisdiction of the trial court to pass upon
the raised question of ownership and possession of the
disputed property, there then can hardly be any doubt as to
the competence of the same court, as an adjunct of its main
jurisdiction, to require the deposit in escrow of the rentals
thereof pending final resolution of such question. To
paraphrase the teaching in Manila Herald Publishing Co.,
Inc. vs. Ramos (G.R. No. L-4268, January 18, 1951, cited in
Francisco, Revised Rules of Court, Vol. 1, 2nd ed., p. 133),
jurisdiction over an action carries with it jurisdiction over an
interlocutory matter incidental to the cause and deemed
essential to preserve the subject matter of the suit or to
protect the parties interest. X X X
X X X the impugned orders appear to us as a fair response
to the exigencies and equities of the situation.
Parenthetically, it is not disputed that even before the
institution of the main case below, the Province of Bataan
has been utilizing the rental payments on the Baseco
Property to meet its financial requirements. To us, this
circumstance adds a more compelling dimension for the
issuance of the assailed orders. X X X
Applying the foregoing principles and considering the
peculiarities of the instant case, the lower court, in the
course of adjudicating and resolving the issues presented in
the main suit, is clearly empowered to control the
proceedings therein through the adoption, formulation and
issuance of orders and other ancillary writs, including the
authority to place the properties in custodia legis, for the
purpose of effectuating its judgment or decree and
protecting further the interests of the rightful claimants of
the subject property.
To trace its source, the courts authority proceeds from its
jurisdiction and power to decide, adjudicate and resolve the
issues raised in the principal suit. Stated differently, the
deposit of the rentals in escrow with the bank, in the name
of the lower court, is only an incident in the main
proceeding.[22] To be sure, placing property in litigation
73
under judicial possession, whether in the hands of a
receiver, and administrator, or as in this case, in a
government bank,[23] is an ancient and accepted
procedure.[24] Consequently, we find no cogency to disturb
the questioned orders of the lower court and in effect
uphold the propriety of the subject escrow orders.
(emphasis ours)

IN VIEW WHEREOF, the instant petition is hereby DENIED

for lack of merit. ACCORDINGLY, the assailed decision of
the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

74