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 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
acommodatum; 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 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. 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.
Avancea, C.J., Johnson, Malcolm, Villamor, Romualdez and Villa-Real, JJ., concur.



Separate Opinions

JOHNS, J., dissenting and concurring:
The plaintiff Silvestra Baron is the aunt of the defendant, and Guillermo Baron, the plaintiff in the
other action, is his uncle. There is no dispute as to the amount of palay which each delivered to
the mill of the defendant. Owing to the fact that they were relatives and that the plaintiffs
reposed special reposed special trust and confidence in the defendant, who was their nephew,
they were not as careful and prudent in their business dealings with him as they should have
been. Plaintiffs allege that their respective palay was delivered to the defendant at his mill with
the understanding and agreement between them that they should receive the highest market
price for the palay for that season, which was P8.50 per cavan. They further allege that about
August first they made another contract in and by which he promised and agreed to pay them
P8.40 per cavan for their palay, in consideration of which they agreed to extend the time for
payment to the first of December of that year. The amount of palay is not in dispute, and the
defendant admits that it was delivered to his mill, but he claims that he kept it on deposit and as
bailee without hire for the plaintiffs and at their own risk, and that the mill was burned down,
and that at the time of the fire, plaintiffs' palay was in the mill. The lower court found as a fact
that there was no merit in that defense, and that there was but little, if any, palay in the mill at
the time of the fire and that in truth and in fact that defense was based upon perjured testimony.
The two cases were tried separately in the court below, but all of the evidence in the case was
substituted and used in the other. Both plaintiffs testified to the making of the respective
contracts as alleged in their complaint; to wit, that they delivered the palay to the defendant with
the express understanding and agreement that he would pay them for the palay the highest
market price for the season, and to the making of the second contract about the first of August,
in which they had a settlement, and that the defendant then agreed to pay them P8.40 per cavan,
such payment to be made on December first. It appears that the highest market price for palay
for that season was P8.50 per cavan. The defendant denied the making of either one of those
contracts, and offered no other evidence on that question. That is to say, we have the evidence
of both Silvestra Baron and Guillermo Baron to the making of those contracts, which is denied by
the defendant only. Plaintiffs' evidence is also corroborated by the usual and customary manner
in which the growers sell their palay. That is to say, it is their custom to sell the palay at or about
the time it is delivered at the mill and as soon as it is made ready for market in the form of rice.
As stated the lower court found as a fact that the evidence of the defendants as to plaintiffs'
palay being in the mill at the time of the fire was not worthy of belief, and that in legal effect it
was a manufactured defense. Yet, strange as it may seem, both the lower court and this court
have found as a fact that upon the question of the alleged contracts, the evidence for the
defendant is true and entitled to more weight than the evidence of both plaintiffs which is false.
It appears that the plaintiff Silvestra Baron is an old lady about 80 years of age and the aunt of
the defendant, and Guillermo Baron is the uncle. Under the theory of the lower court and of this
court, both of them at all the time during the high prices held their palay in defendant's mill at
their own risk, and that upon that point the evidence of the defendant, standing alone is entitled
to more weight and is more convincing than the combined evidence of the two plaintiffs. In the
very nature of things, if defendant's evidence upon that point is true, it stands to reason that,
following the custom of growers, the plaintiffs would have sold their palay during the period of
high prices, and would not have waited until it dropped from P8.50 per cavan to P6.15 per cavan
about the first of August. Upon that question, both the weight and the credibility of the evidence
is with the plaintiffs, and they should have judgment for the full amount of their palay on the
basis of P8.40 per cavan. For such reason, I vigorously dissent from the majority opinion.
I frankly concede that the attachment was wrongful, and that it should never have been levied.
It remained in force for a period of one hundred and seventy days at which time it was released
on motion of the plaintiffs. The defendant now claims, and the majority opinion has allowed him,
damages for that full period, exclusive of Sundays, at the rate, of P40 per day, found to be the
net profit for the operation of the rice mill. It further appears, and this court finds, that the
defendant was a responsible man, and that he had ample property out which to satisfy plaintiffs'
claim. Assuming that to be true, there was no valid reason why he could not had given a counter
bond and released the attachment. Upon the theory of the majority opinion, if the plaintiffs had
not released the attachment, they would still be liable to the defendant at the rate of P40 per
day up to the present time. When the mill was attached, if he was in a position to do so, it was
the duty of the defendant to give a counter bond and release the attachment and resume its
operation. The majority opinion also allowed the defendant P1,400 "for injury to the goodwill of
his business." The very fact that after a delay of about four years, both of the plaintiffs were
compelled to bring to their respective actions against the defendant to recover from him on a
just and meritorious claim, as found by this court and the lower court, and the further fact that
after such long delay, the defendant has sought to defeat the actions by a sham and
manufactured defense, as found by this and the lower court, would arouse the suspicion of any
customers the defendant ever had, and shake their confidence in his business honor and
integrity, and destroy any goodwill which he ever did have. Under such conditions, it would be
strange that the defendant would have any customers left. He is not entitled to any
compensation for the loss of goodwill, and P5,000 should be the very limit of the amount of his
damages for the wrongful attachment, and upon that point I vigorously dissent. In all other
respects, I agree with the majority opinion.















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.
D E C I S I O N
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 McLoughlin's 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
McLoughlin's key and was able to open the safety deposit box with the assistance of Lopez,
Payam and Lainez.
12
Lopez also told McLoughlin that Tan stole the key assigned to McLoughlin
while the latter was asleep.
13

McLoughlin requested the management for an investigation of the incident. Lopez got in touch
with Tan and arranged for a meeting with the police and McLoughlin. When the police did not
arrive, Lopez and Tan went to the room of McLoughlin at Tropicana and thereat, Lopez wrote on
a piece of paper a promissory note dated 21 April 1988. The promissory note reads as follows:
I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and US$2,000.00 or its
equivalent in Philippine currency on or before May 5, 1988.
14

Lopez requested Tan to sign the promissory note which the latter did and Lopez also signed as a
witness. Despite the execution of promissory note by Tan, McLoughlin insisted that it must be
the hotel who must assume responsibility for the loss he suffered. However, Lopez refused to
accept the responsibility relying on the conditions for renting the safety deposit box
entitled "Undertaking For the Use Of Safety Deposit Box,"
15
specifically paragraphs (2) and (4)
thereof, to wit:
2. To release and hold free and blameless TROPICANA APARTMENT HOTEL from any liability
arising from any loss in the contents and/or use of the said deposit box for any cause whatsoever,
including but not limited to the presentation or use thereof by any other person should the key
be lost;
. . .
4. To return the key and execute the RELEASE in favor of TROPICANA APARTMENT HOTEL upon
giving up the use of the box.
16

On 17 May 1988, McLoughlin went back to Australia and he consulted his lawyers as to the
validity of the abovementioned stipulations. They opined that the stipulations are void for being
violative of universal hotel practices and customs. His lawyers prepared a letter dated 30 May
1988 which was signed by McLoughlin and sent to President Corazon Aquino.
17
The Office of the
President referred the letter to the Department of Justice (DOJ) which forwarded the same to
the Western Police District (WPD).
18

After receiving a copy of the indorsement in Australia, McLoughlin came to the Philippines and
registered again as a hotel guest of Tropicana. McLoughlin went to Malacaang 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 Fiscal's Office. Said affidavit
became the basis of preliminary investigation. However, McLoughlin left again for Australia
without receiving the notice of the hearing on 24 November 1989. Thus, the case at the Fiscal's
Office was dismissed for failure to prosecute. Mcloughlin requested the reinstatement of the
criminal charge for theft. In the meantime, McLoughlin and his lawyers wrote letters of demand
to those having responsibility to pay the damage. Then he left again for Australia.
Upon his return on 22 October 1990, he registered at the Echelon Towers at Malate, Manila.
Meetings were held between McLoughlin and his lawyer which resulted to the filing of a
complaint for damages on 3 December 1990 against YHT Realty Corporation, Lopez, Lainez,
Payam and Tan (defendants) for the loss of McLoughlin's money which was discovered on 16
April 1988. After filing the complaint, McLoughlin left again for Australia to attend to an urgent
business matter. Tan and Lopez, however, were not served with summons, and trial proceeded
with only Lainez, Payam and YHT Realty Corporation as defendants.
After defendants had filed their Pre-Trial Brief admitting that they had previously allowed and
assisted Tan to open the safety deposit box, McLoughlin filed an Amended/Supplemental
Complaint
20
dated 10 June 1991 which included another incident of loss of money and jewelry in
the safety deposit box rented by McLoughlin in the same hotel which took place prior to 16 April
1988.
21
The trial court admitted the Amended/Supplemental Complaint.
During the trial of the case, McLoughlin had been in and out of the country to attend to urgent
business in Australia, and while staying in the Philippines to attend the hearing, he incurred
expenses for hotel bills, airfare and other transportation expenses, long distance calls to
Australia, Meralco power expenses, and expenses for food and maintenance, among others.
22

After trial, the RTC of Manila rendered judgment in favor of McLoughlin, the dispositive portion
of which reads:
WHEREFORE, above premises considered, judgment is hereby rendered by this Court in favor of
plaintiff and against the defendants, to wit:
1. Ordering defendants, jointly and severally, to pay plaintiff the sum of US$11,400.00 or
its equivalent in Philippine Currency of P342,000.00, more or less, and the sum of
AUS$4,500.00 or its equivalent in Philippine Currency of P99,000.00, or a total
of P441,000.00, more or less, with 12% interest from April 16 1988 until said amount has
been paid to plaintiff (Item 1, Exhibit CC);
2. Ordering defendants, jointly and severally to pay plaintiff the sum of P3,674,238.00 as
actual and consequential damages arising from the loss of his Australian and American
dollars and jewelries complained against and in prosecuting his claim and rights
administratively and judicially (Items II, III, IV, V, VI, VII, VIII, and IX, Exh. "CC");
3. Ordering defendants, jointly and severally, to pay plaintiff the sum of P500,000.00 as
moral damages (Item X, Exh. "CC");
4. Ordering defendants, jointly and severally, to pay plaintiff the sum of P350,000.00 as
exemplary damages (Item XI, Exh. "CC");
5. And ordering defendants, jointly and severally, to pay litigation expenses in the sum
of P200,000.00 (Item XII, Exh. "CC");
6. Ordering defendants, jointly and severally, to pay plaintiff the sum of P200,000.00 as
attorney's 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 McLoughlin's 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 McLoughlin's
money, kept in Tropicana's safety deposit box, was taken by Tan without McLoughlin's 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 Fiscal's 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
McLoughlin's 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 court's 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 attorney's 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
court's conclusion on the alleged prior existence and subsequent loss of the subject money and
jewelry is supported by the evidence on record; (b) whether the finding of gross negligence on
the part of petitioners in the performance of their duties as innkeepers is supported by the
evidence on record; (c) whether the "Undertaking For The Use of Safety Deposit Box" admittedly
executed by private respondent is null and void; and (d) whether the damages awarded to private
respondent, as well as the amounts thereof, are proper under the circumstances.
30

The petition is devoid of merit.
It is worthy of note that the thrust of Rule 45 is the resolution only of questions of law and any
peripheral factual question addressed to this Court is beyond the bounds of this mode of review.
Petitioners point out that the evidence on record is insufficient to prove the fact of prior existence
of the dollars and the jewelry which had been lost while deposited in the safety deposit boxes of
Tropicana, the basis of the trial court and the appellate court being the sole testimony of
McLoughlin as to the contents thereof. Likewise, petitioners dispute the finding of gross
negligence on their part as not supported by the evidence on record.
We are not persuaded.l^vvphi1.net 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.1awphi1.nt
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 McLoughlin's 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 McLoughlin's 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 McLoughlin's deposit. If only petitioners exercised due diligence
in taking care of McLoughlin's safety deposit box, they should have confronted him as to his
relationship with Tan considering that the latter had been observed opening McLoughlin's safety
deposit box a number of times at the early hours of the morning. Tan's 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 McLoughlin's money was
consummated through the negligence of Tropicana's employees in allowing Tan to open the
safety deposit box without the guest's consent, both the assisting employees and YHT Realty
Corporation itself, as owner and operator of Tropicana, should be held solidarily liable pursuant
to Article 2193.
36

The issue of whether the "Undertaking For The Use of Safety Deposit Box" executed by
McLoughlin is tainted with nullity presents a legal question appropriate for resolution in this
petition. Notably, both the trial court and the appellate court found the same to be null and void.
We find no reason to reverse their common conclusion. Article 2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the
effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-
keeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to
2001
37
is suppressed or diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to
apply to situations such as that presented in this case. The hotel business like the common
carrier's 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 guest's
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 majeurethat 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 guest's 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 guest's
relatives and visitors.
Petitioners contend that McLoughlin's 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 orP76,341.785 representing
payment to Echelon Tower;
51
one-half of P179,863.20 or P89,931.60 for the taxi or transportation
expenses from McLoughlin's residence to Sydney Airport and from MIA to the hotel here in
Manila, for the eleven (11) trips;
52
one-half of P7,801.94 or P3,900.97 representing Meralco
power expenses;
53
one-half of P356,400.00 or P178,000.00 representing expenses for food and
maintenance.
54

The amount of P50,000.00 for moral damages is reasonable. Although trial courts are given
discretion to determine the amount of moral damages, the appellate court may modify or change
the amount awarded when it is palpably and scandalously excessive.l^vvphi1.net Moral damages
are not intended to enrich a complainant at the expense of a defendant.l^vvphi1.net 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 attorney's 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
McLoughlin's 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 attorney's fees.
With costs.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., and Chico-Nazario, JJ., concur.
Austria-Martinez, J., no part