Professional Documents
Culture Documents
IV. DEPOSITS
A.
B.
C.
D.
CASES:
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.
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withdrawn was used to finance a dollar draft in favor of Leovigilda D. Dizon, and not to fund the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. 210465-29 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) forsafekeeping, 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
Decem
ber 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.
Receiv
ed by:
(Sgd.)
VIRGIL
IO V.
GARCI
A
It was also alleged in the complaint that despite demands, the bank refused to return the money.
In its answer, COMTRUST averred that the US$3,000 was credited to Zshornack's peso current
account at prevailing conversion rates.
It must be emphasized that COMTRUST did not deny specifically under oath the authenticity and
due execution of the above instrument.
During trial, it was established that on December 8, 1975 Zshornack indeed delivered to the bank
US $3,000 for safekeeping. When he requested the return of the money on May 10, 1976,
COMTRUST explained that the sum was disposed of in this manner: US$2,000.00 was sold on
December 29, 1975 and the peso proceeds amounting to P14,920.00 were deposited to Zshornack's
current account per deposit slip accomplished by Garcia; the remaining US$1,000.00 was sold on
February 3, 1976 and the peso proceeds amounting to P8,350.00 were deposited to his current
account per deposit slip also accomplished by Garcia.
Aside from asserting that the US$3,000.00 was properly credited to Zshornack's current account at
prevailing conversion rates, BPI now posits another ground to defeat private respondent's claim. It
now argues that the contract embodied in the document is the contract of depositum (as defined in
Article 1962, New Civil Code), which banks do not enter into. The bank alleges that Garcia exceeded
his powers when he entered into the transaction. Hence, it is claimed, the bank cannot be liable
under the contract, and the obligation is purely personal to Garcia.
Before we go into the nature of the contract entered into, an important point which arises on the
pleadings, must be considered.
The second cause of action is based on a document purporting to be signed by COMTRUST, a copy
of which document was attached to the complaint. In short, the second cause of action was based
on an actionable document. It was therefore incumbent upon the bank to specifically deny under
oath the due execution of the document, as prescribed under Rule 8, Section 8, if it desired: (1) to
question the authority of Garcia to bind the corporation; and (2) to deny its capacity to enter into
such contract. [See, E.B. Merchant v. International Banking Corporation, 6 Phil. 314 (1906).] No
sworn answer denying the due execution of the document in question, or questioning the authority of
Garcia to bind the bank, or denying the bank's capacity to enter into the contract, was ever filed.
Hence, the bank is deemed to have admitted not only Garcia's authority, but also the bank's power,
to enter into the contract in question.
In the past, this Court had occasion to explain the reason behind this procedural requirement.
The reason for the rule enunciated in the foregoing authorities will, we think, be
readily appreciated. In dealing with corporations the public at large is bound to rely to
a large extent upon outward appearances. If a man is found acting for a corporation
with the external indicia of authority, any person, not having notice of want of
authority, may usually rely upon those appearances; and if it be found that the
directors had permitted the agent to exercise that authority and thereby held him out
as a person competent to bind the corporation, or had acquiesced in a contract and
retained the benefit supposed to have been conferred by it, the corporation will be
bound, notwithstanding the actual authority may never have been granted
... Whether a particular officer actually possesses the authority which he assumes to
exercise is frequently known to very few, and the proof of it usually is not readily
accessible to the stranger who deals with the corporation on the faith of the
ostensible authority exercised by some of the corporate officers. It is therefore
reasonable, in a case where an officer of a corporation has made a contract in its
name, that the corporation should be required, if it denies his authority, to state such
defense in its answer. By this means the plaintiff is apprised of the fact that the
agent's authority is contested; and he is given an opportunity to adduce evidence
showing either that the authority existed or that the contract was ratified and
approved. [Ramirez v. Orientalist Co. and Fernandez, 38 Phil. 634, 645- 646 (1918).]
Petitioner's argument must also be rejected for another reason. The practical effect of absolving a
corporation from liability every time an officer enters into a contract which is beyond corporate
powers, even without the proper allegation or proof that the corporation has not authorized nor
ratified the officer's act, is to cast corporations in so perfect a mold that transgressions and wrongs
by such artificial beings become impossible [Bissell v. Michigan Southern and N.I.R. Cos 22 N.Y 258
(1860).] "To say that a corporation has no right to do unauthorized acts is only to put forth a very
plain truism but to say that such bodies have no power or capacity to err is to impute to them an
excellence which does not belong to any created existence with which we are acquainted. The
distinction between power and right is no more to be lost sight of in respect to artificial than in
respect to natural persons." [Ibid.]
Having determined that Garcia's act of entering into the contract binds the corporation, we now
determine the correct nature of the contract, and its legal consequences, including its enforceability.
The document which embodies the contract states that the US$3,000.00 was received by the bank
for safekeeping. The subsequent acts of the parties also show that the intent of the parties was
really for the bank to safely keep the dollars and to return it to Zshornack at a later time, Thus,
Zshornack demanded the return of the money on May 10, 1976, or over five months later.
The above arrangement is that contract defined under Article 1962, New Civil Code, which reads:
Art. 1962. A deposit is constituted from the moment a person receives a thing
belonging to another, with the obligation of safely keeping it and of returning the
same. If the safekeeping of the thing delivered is not the principal purpose of the
contract, there is no deposit but some other contract.
Note that the object of the contract between Zshornack and COMTRUST was foreign exchange.
Hence, the transaction was covered by Central Bank Circular No. 20, Restrictions on Gold and
Foreign Exchange Transactions, promulgated on December 9, 1949, which was in force at the time
the parties entered into the transaction involved in this case. The circular provides:
xxx xxx xxx
2. Transactions in the assets described below and all dealings in them of whatever
nature, including, where applicable their exportation and importation, shall NOT be
effected, except with respect to deposit accounts included in sub-paragraphs (b) and
(c) of this paragraph, when such deposit accounts are owned by and in the name of,
banks.
(a) Any and all assets, provided they are held through, in, or with
banks or banking institutions located in the Philippines,
including money, checks, drafts, bullions bank drafts, deposit
accounts (demand, time and savings), all debts, indebtedness or
implementation of this Circular, shall fail or refuse to comply with, or abide by, or shall
violate the same, shall be subject to the penal sanctions provided in the Central
Bank Act.
xxx xxx xxx
Paragraph 4 (a) above was modified by Section 6 of Central Bank Circular No. 281, Regulations on
Foreign Exchange, promulgated on November 26, 1969 by limiting its coverage to Philippine
residents only. Section 6 provides:
SEC. 6. All receipts of foreign exchange by any resident person, firm, company or
corporation shall be sold to authorized agents of the Central Bank by the recipients
within one business day following the receipt of such foreign exchange.
Any resident person, firm, company or corporation residing or located within the
Philippines, who acquires foreign exchange shall not, unless authorized by the
Central Bank, dispose of such foreign exchange in whole or in part, nor receive less
than its full value, nor delay taking ownership thereof except as such delay is
customary; Provided, That, within one business day upon taking ownership or
receiving payment of foreign exchange the aforementioned persons and entities shall
sell such foreign exchange to the authorized agents of the Central Bank.
As earlier stated, the document and the subsequent acts of the parties show that they intended the
bank to safekeep the foreign exchange, and return it later to Zshornack, who alleged in his complaint
that he is a Philippine resident. The parties did not intended to sell the US dollars to the Central Bank
within one business day from receipt. Otherwise, the contract of depositum would never have been
entered into at all.
Since the mere safekeeping of the greenbacks, without selling them to the Central Bank within one
business day from receipt, is a transaction which is not authorized by CB Circular No. 20, it must be
considered as one which falls under the general class of prohibited transactions. Hence, pursuant to
Article 5 of the Civil Code, it is void, having been executed against the provisions of a
mandatory/prohibitory law. More importantly, it affords neither of the parties a cause of action against
the other. "When the nullity proceeds from the illegality of the cause or object of the contract, and the
act constitutes a criminal offense, both parties being in pari delicto, they shall have no cause of
action against each other. . ." [Art. 1411, New Civil Code.] The only remedy is one on behalf of the
State to prosecute the parties for violating the law.
We thus rule that Zshornack cannot recover under the second cause of action.
3. Lastly, we find the P8,000.00 awarded by the courts a quo as damages in the concept of litigation
expenses and attorney's fees to be reasonable. The award is sustained.
WHEREFORE, the decision appealed from is hereby MODIFIED. Petitioner is ordered to restore to
the dollar savings account of private respondent the amount of US$1,000.00 as of October 27, 1975
to earn interest at the rate fixed by the bank for dollar savings deposits. Petitioner is further ordered
to pay private respondent the amount of P8,000.00 as damages. The other causes of action of
private respondent are ordered dismissed.
SO ORDERED.
Case Title : THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff and appellee,
vs. GREGORIO DE LA PEA, administrator of the estate of Father Agustin de
la Pea, defendant and appellant.Case Nature : APPEAL from a judgment of
the Court of First Instance of Iloilo. Powell, J.
Syllabi Class : TRUST FUNDS|ID.|ID.
Docket Number: No. 6913
Counsel: J. Lopez Vito, Arroyo & Horrilleno
Ponente: MORELAND
Dispositive Portion:
The judgment is therefore reversed, and it is decreed that the plaintiff shall
take nothing by his complaint
Citation Ref:
G.R. No. L-6913
MORELAND, J.:
This is an appeal by the defendant from a judgment of the Court of First Instance of Iloilo, awarding
to the plaintiff the sum of P6,641, with interest at the legal rate from the beginning of the action.
It is established in this case that the plaintiff is the trustee of a charitable bequest made for the
construction of a leper hospital and that father Agustin de la Pea was the duly authorized
representative of the plaintiff to receive the legacy. The defendant is the administrator of the estate of
Father De la Pea.
In the year 1898 the books Father De la Pea, as trustee, showed that he had on hand as such
trustee the sum of P6,641, collected by him for the charitable purposes aforesaid. In the same year
he deposited in his personal account P19,000 in the Hongkong and Shanghai Bank at Iloilo. Shortly
thereafter and during the war of the revolution, Father De la Pea was arrested by the military
authorities as a political prisoner, and while thus detained made an order on said bank in favor of the
United States Army officer under whose charge he then was for the sum thus deposited in said bank.
The arrest of Father De la Pea and the confiscation of the funds in the bank were the result of the
claim of the military authorities that he was an insurgent and that the funds thus deposited had been
collected by him for revolutionary purposes. The money was taken from the bank by the military
authorities by virtue of such order, was confiscated and turned over to the Government.
While there is considerable dispute in the case over the question whether the P6,641 of trust funds
was included in the P19,000 deposited as aforesaid, nevertheless, a careful examination of the case
leads us to the conclusion that said trust funds were a part of the funds deposited and which were
removed and confiscated by the military authorities of the United States.
That branch of the law known in England and America as the law of trusts had no exact counterpart
in the Roman law and has none under the Spanish law. In this jurisdiction, therefore, Father De la
Pea's liability is determined by those portions of the Civil Code which relate to obligations. (Book 4,
Title 1.)
Although the Civil Code states that "a person obliged to give something is also bound to preserve it
with the diligence pertaining to a good father of a family" (art. 1094), it also provides, following the
principle of the Roman law, major casus est, cui humana infirmitas resistere non potest, that "no one
shall be liable for events which could not be foreseen, or which having been foreseen were
inevitable, with the exception of the cases expressly mentioned in the law or those in which the
obligation so declares." (Art. 1105.)
By placing the money in the bank and mixing it with his personal funds De la Pea did not thereby
assume an obligation different from that under which he would have lain if such deposit had not
been made, nor did he thereby make himself liable to repay the money at all hazards. If the had
been forcibly taken from his pocket or from his house by the military forces of one of the combatants
during a state of war, it is clear that under the provisions of the Civil Code he would have been
exempt from responsibility. The fact that he placed the trust fund in the bank in his personal account
does not add to his responsibility. Such deposit did not make him a debtor who must respond at all
hazards.
We do not enter into a discussion for the purpose of determining whether he acted more or less
negligently by depositing the money in the bank than he would if he had left it in his home; or
whether he was more or less negligent by depositing the money in his personal account than he
would have been if he had deposited it in a separate account as trustee. We regard such discussion
as substantially fruitless, inasmuch as the precise question is not one of negligence. There was no
law prohibiting him from depositing it as he did and there was no law which changed his
responsibility be reason of the deposit. While it may be true that one who is under obligation to do or
give a thing is in duty bound, when he sees events approaching the results of which will be
dangerous to his trust, to take all reasonable means and measures to escape or, if unavoidable, to
temper the effects of those events, we do not feel constrained to hold that, in choosing between two
means equally legal, he is culpably negligent in selecting one whereas he would not have been if he
had selected the other.
The court, therefore, finds and declares that the money which is the subject matter of this action was
deposited by Father De la Pea in the Hongkong and Shanghai Banking Corporation of Iloilo; that
said money was forcibly taken from the bank by the armed forces of the United States during the war
of the insurrection; and that said Father De la Pea was not responsible for its loss.
The judgment is therefore reversed, and it is decreed that the plaintiff shall take nothing by his
complaint.
Arellano, C.J., Torres and Carson, JJ., concur.
Separate Opinions
TRENT, J., dissenting:
I dissent. Technically speaking, whether Father De la Pea was a trustee or an agent of the plaintiff
his books showed that in 1898 he had in his possession as trustee or agent the sum of P6,641
belonging to the plaintiff as the head of the church. This money was then clothed with all the
immunities and protection with which the law seeks to invest trust funds. But when De la Pea mixed
this trust fund with his own and deposited the whole in the bank to his personal account or credit, he
by this act stamped on the said fund his own private marks and unclothed it of all the protection it
had. If this money had been deposited in the name of De la Pea as trustee or agent of the plaintiff, I
think that it may be presumed that the military authorities would not have confiscated it for the
reason that they were looking for insurgent funds only. Again, the plaintiff had no reason to suppose
that De la Pea would attempt to strip the fund of its identity, nor had he said or done anything which
tended to relieve De la Pea from the legal reponsibility which pertains to the care and custody of
trust funds.
The Supreme Court of the United States in the United State vs. Thomas (82 U. S., 337), at page
343, said: "Trustees are only bound to exercise the same care and solicitude with regard to the trust
property which they would exercise with regard to their own. Equity will not exact more of them. They
are not liable for a loss by theft without their fault. But this exemption ceases when they mix the
trust-money with their own, whereby it loses its identity, and they become mere debtors."
If this proposition is sound and is applicable to cases arising in this jurisdiction, and I entertain no
doubt on this point, the liability of the estate of De la Pea cannot be doubted. But this court in the
majority opinion says: "The fact that he (Agustin de la Pea) placed the trust fund in the bank in his
personal account does not add to his responsibility. Such deposit did not make him a debtor who
must respond at all hazards. . . . There was no law prohibiting him from depositing it as he did, and
there was no law which changed his responsibility, by reason of the deposit."
I assume that the court in using the language which appears in the latter part of the above quotation
meant to say that there was no statutory law regulating the question. Questions of this character are
not usually governed by statutory law. The law is to be found in the very nature of the trust itself,
and, as a general rule, the courts say what facts are necessary to hold the trustee as a debtor.
If De la Pea, after depositing the trust fund in his personal account, had used this money for
speculative purposes, such as the buying and selling of sugar or other products of the country,
thereby becoming a debtor, there would have been no doubt as to the liability of his estate. Whether
he used this money for that purpose the record is silent, but it will be noted that a considerable
length of time intervened from the time of the deposit until the funds were confiscated by the military
authorities. In fact the record shows that De la Pea deposited on June 27, 1898, P5,259, on June
28 of that year P3,280, and on August 5 of the same year P6,000. The record also shows that these
funds were withdrawn and again deposited all together on the 29th of May, 1900, this last deposit
amounting to P18,970. These facts strongly indicate that De la Pea had as a matter of fact been
using the money in violation of the trust imposed in him.
lawph!1.net
If the doctrine announced in the majority opinion be followed in cases hereafter arising in this
jurisdiction trust funds will be placed in precarious condition. The position of the trustee will cease to
be one of trust.
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
pertinently provides: xxx 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
conjunc- tion with, this principal function.
3. Civil Law; Deposit; Commercial Law; Banks and Banking; Any
stipulation exempting depository from liability for loss of thing deposited on
account of fraud, negligence or delay considered void for being contrary to
law and 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 perform: ng its obligation, it
is found guilty of fraud, negligence, delay or contravention of the tenor of
the agreement. In the absence of any s tipulation prescribing the degree of
diligence required, that of a good father of a family is to be observed.
Hence, any stipulation exempting ng 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.
4. Civil Law; Deposit; Commercial Law; Banks and Banking; Liability of
lessor in contract of lease of safety deposit box can be limited by stipulation
but any stipulation for exemption shall be held ineffective. With respect to property deposited in a safe-deposit box by a customer of a
safedeposit company, the parties, since the relation is a contractual one,
may by special contract 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. xxx 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.
5. Civil Law; Deposit; Commercial Law; Banks and Banking; Bank's
exoneration from liability not by virtue of characterization of impugned
contract as a contract of lease but by reason of the absence of proof as to its
knowledge about existing\agreement between the other parties, as well as,
that the loss of certificates not attributable to its negligence or fraud. -
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 complaint 2 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 decision 5 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 reconsideration 7 having been denied, petitioner appealed from the adverse decision to the
respondent Court of Appeals which docketed the appeal as CA-G.R. CV No. 15150. Petitioner urged the
respondent Court to reverse the challenged decision because the trial court erred in (a) absolving the
respondent Bank from liability from the loss, (b) not declaring as null and void, for being contrary to law,
public order and public policy, the provisions in the contract for lease of the safety deposit box absolving
the Bank from any liability for loss, (c) not concluding that in this jurisdiction, as well as under American
jurisprudence, the liability of the Bank is settled and (d) awarding attorney's fees to the Bank and denying
the petitioner's prayer for nominal and exemplary damages and attorney's fees. 8
In its Decision promulgated on 4 July 1989, 9 respondent Court affirmed the appealed decision
principally on the theory that the contract (Exhibit "2") executed by the petitioner and respondent Bank is
in the nature of a contract of lease by virtue of which the petitioner and its co-renter were given control
over the safety deposit box and its contents while the Bank retained no right to open the said box
because it had neither the possession nor control over it and its contents. As such, the contract is
governed by Article 1643 of the Civil Code 10 which provides:
Art. 1643. In the lease of things, one of the parties binds himself to give to another
the enjoyment or use of a thing for a price certain, and for a period which may be
definite or indefinite. However, no lease for more than ninety-nine years shall be
valid.
It invoked Tolentino vs. Gonzales 11 which held that the owner of the property loses his
control over the property leased during the period of the contract and Article 1975 of the Civil
Code which provides:
Art. 1975. The depositary holding certificates, bonds, securities or instruments which
earn interest shall be bound to collect the latter when it becomes due, and to take
such steps as may be necessary in order that the securities may preserve their value
and the rights corresponding to them according to law.
The above provision shall not apply to contracts for the rent of safety deposit boxes.
and then concluded that "[c]learly, the defendant-appellee is not under any duty to maintain
the contents of the box. The stipulation absolving the defendant-appellee from liability is in
accordance with the nature of the contract of lease and cannot be regarded as contrary to
law, public order and public policy." 12 The appellate court was quick to add, however, that under
the contract of lease of the safety deposit box, respondent Bank is not completely free from
liability as it may still be made answerable in case unauthorized persons enter into the vault area
or when the rented box is forced open. Thus, as expressly provided for in stipulation number 8 of
the contract in question:
8. The Bank shall use due diligence that no unauthorized person shall be admitted to
any rented safe and beyond this, the Bank will not be responsible for the contents of
any safe rented from it. 13
Its motion for reconsideration 14 having been denied in the respondent Court's Resolution of 28 August
1989, 15petitioner 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 safedeposit 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 safedeposit box can be had only by the use of a key retained by the lessee ( whether it is
the sole key or one to be used in connection with one retained by the lessor) does
not operate to alter the foregoing rule. The argument that there is not, in such a case,
a delivery of exclusive possession and control to the deposit company, and that
therefore the situation is entirely different from that of ordinary bailment, has been
generally rejected by the courts, usually on the ground that as possession must be
either in the depositor or in the company, it should reasonably be considered as in
the latter rather than in the former, since the company is, by the nature of the
contract, given absolute control of access to the property, and the depositor cannot
gain access thereto without the consent and active participation of the company. . . .
(citations omitted).
and a segment from Words and Phrases 18 which states that a contract for the rental of a bank
safety deposit box in consideration of a fixed amount at stated periods is a bailment for hire.
Petitioner further argues that conditions 13 and 14 of the questioned contract are contrary to law and
public policy and should be declared null and void. In support thereof, it cites Article 1306 of the Civil
Code which provides that parties to a contract may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order or public policy.
After the respondent Bank filed its comment, this Court gave due course to the petition and required
the parties to simultaneously submit their respective Memoranda.
The petition is partly meritorious.
We agree with the petitioner's contention that the contract for the rent of the safety deposit box is not
an ordinary contract of lease as defined in Article 1643 of the Civil Code. However, We do not fully
subscribe to its view that the same is a contract of deposit that is to be strictly governed by the
provisions in the Civil Code on deposit; 19the 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,
8. The Bank shall use due diligence that no unauthorized person shall be admitted to
any rented safe and beyond this, the Bank will not be responsible for the contents of
any safe rented from it. 29
Furthermore, condition 13 stands on a wrong premise and is contrary to the actual practice
of the Bank. It is not correct to assert that the Bank has neither the possession nor control of
the contents of the box since in fact, the safety deposit box itself is located in its premises
and is under its absolute control; moreover, the respondent Bank keeps the guard key to the
said box. As stated earlier, renters cannot open their respective boxes unless the Bank
cooperates by presenting and using this guard key. Clearly then, to the extent above stated,
the foregoing conditions in the contract in question are void and ineffective. It has been said:
With respect to property deposited in a safe-deposit box by a customer of a safedeposit company, the parties, since the relation is a contractual one, may by special
contract define their respective duties or provide for increasing or limiting the liability
of the deposit company, provided such contract is not in violation of law or public
policy. It must clearly appear that there actually was such a special contract,
however, in order to vary the ordinary obligations implied by law from the relationship
of the parties; liability of the deposit company will not be enlarged or restricted by
words of doubtful meaning. The company, in renting
safe-deposit boxes, cannot exempt itself from liability for loss of the contents by its
own fraud or negligence or that of its agents or servants, and if a provision of the
contract may be construed as an attempt to do so, it will be held ineffective for the
purpose. Although it has been held that the lessor of a safe-deposit box cannot limit
its liability for loss of the contents thereof through its own negligence, the view has
been taken that such a lessor may limits its liability to some extent by agreement or
stipulation. 30 (citations omitted)
Thus, we reach the same conclusion which the Court of Appeals arrived at, that is, that the petition
should be dismissed, but on grounds quite different from those relied upon by the Court of Appeals.
In the instant case, the respondent Bank's exoneration cannot, contrary to the holding of the Court of
Appeals, be based on or proceed from a characterization of the impugned contract as a contract of
lease, but rather on the fact that no competent proof was presented to show that respondent Bank
was aware of the agreement between the petitioner and the Pugaos to the effect that the certificates
of title were withdrawable from the safety deposit box only upon both parties' joint signatures, and
that no evidence was submitted to reveal that the loss of the certificates of title was due to the fraud
or negligence of the respondent Bank. This in turn flows from this Court's determination that the
contract involved was one of deposit. Since both the petitioner and the Pugaos agreed that each
should have one (1) renter's key, it was obvious that either of them could ask the Bank for access to
the safety deposit box and, with the use of such key and the Bank's own guard key, could open the
said box, without the other renter being present.
Since, however, the petitioner cannot be blamed for the filing of the complaint and no bad faith on its
part had been established, the trial court erred in condemning the petitioner to pay the respondent
Bank attorney's fees. To this extent, the Decision (dispositive portion) of public respondent Court of
Appeals must be modified.
WHEREFORE, the Petition for Review is partially GRANTED by deleting the award for attorney's
fees from the 4 July 1989 Decision of the respondent Court of Appeals in CA-G.R. CV No. 15150. As
modified, and subject to the pronouncement We made above on the nature of the relationship
between the parties in a contract of lease of safety deposit boxes, the dispositive portion of the said
Decision is hereby AFFIRMED and the instant Petition for Review is otherwise DENIED for lack of
merit.
No pronouncement as to costs.
SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.
Gutierrez, Jr., J., is on leave.
# Footnotes
1 Rollo, 102.
2 Annex "A" of Petition; Rollo, 28-32.
3 Annex "B", Id.; Id., 33-35.
4 Annex "C", Id.; Id., 36.
5 Annex "D" of Petition; Rollo, 38-54. Per Judge Cicero C. Jurado.
6 Id., 54.
7 Annex "E", Id.; Id., 55-68.
8 Rollo, 100-101.
9 Per Associate Justice Felipe B. Kalalo, concurred in by Associate Justices
Bienvenido C. Ejercito and Luis L. Victor. Annex "I" of Petition; Id., 89-105.
10 Citing PARAS, E.L., Civil Code of the Philippines, vol. 5, 1982 ed., 717.
11 50 Phil. 558 [1927].
12 Rollo, 103.
13 Id.
14 Annex "J" of Petition; Rollo, 106-113.
15 Annex "K", Id.; Id., 114-115.
In an early case, 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. 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.
6. Hotels and Inns; Deposits; Safety Deposit Boxes; QuasiDelicts; Torts; Article 2002 of the Civil Code which exempts the hotelkeeper from liability if the loss is due to the acts of his guest, his family, or
visitors 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.Petitioners likewise anchor their defense on Article 2002 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.
7. Hotels and Inns; Deposits; Safety Deposit Boxes; QuasiDelicts; Torts; The hotel was guilty of concurrent negligence in allowing the
hotel guests companion, who was not the registered guest, to open the
safety deposit box of the guest, even assuming that the latter was also
guilty of negligence in allowing another person to use his keyto 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. 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.
8. Hotels and Inns; Deposits; Safety Deposit Boxes; QuasiDelicts; Torts; A tort liability can exist even if there are already contractual
relationsthe act that breaks the contract may also be tort.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. 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.
9. Damages; It is within the province of lower courts to settle factual issues
such as the proper amount of damages awarded.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.
10. Damages; 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. The amount of P50,000.00 for moral damages is reasonable. Although trial
courts are given discretion to determine the amount of moral damages, the
appellate court may modify or change the amount awarded when it is
palpably and scandalously excessive. Moral damages are not intended to
enrich a complainant at the expense of a defendant. They are awarded only
to enable the injured party to obtain means, diversion or amusements that
will serve to alleviate the moral suffering he has undergone, by reason of
defendants culpable action.
Division: SECOND DIVISION
Docket Number: G.R. No. 126780
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,"15specifically 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
Complaint20 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 nonperformance 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;
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
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 200243 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.48The 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
ofP308,880.80, 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 ofP152,683.57 or P76,341.785 representing payment to Echelon Tower; 51 onehalf 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 onehalf of P7,801.94 or P3,900.97 representing Meralco power expenses;53 one-half of P356,400.00
or P178,000.00 representing expenses for food and maintenance. 54
The amount of P50,000.00 for moral damages is reasonable. Although trial courts are given
discretion to determine the amount of moral damages, the appellate court may modify or change the
amount awarded when it is palpably and scandalously excessive. Moral damages are not intended
to enrich a complainant at the expense of a defendant. They are awarded only to enable the injured
party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he
has undergone, by reason of defendants' culpable action. 55
l^vvphi1.net
l^vvphi1.net
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.
Footnotes
Rollo, p. 38. Decision penned by Justice Bernardo LL. Salas and concurred in by Justices
Pedro A. Ramirez and Ma. Alicia Austria-Martinez.
1
Id. at 119.
Id. at 120.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
10
11
Id. at 42.
12
Ibid.
13
Id. at 121.
14
Exhibit V.
15
Exh. W.
16
Rollo, p. 122.
17
Ibid.
18
Ibid.
19
Id. at 123.
20
Records, p. 52.
21
Rollo, p. 125.
Exh. CC. Records (Exhibit Folder), pp. 146-147. The Itemized Claims for Damages
allegedly incurred by McLoughlin:
22
I.
P153,200.00
257,600.00
II.
308,880.00
III.
336,207.05
IV.
152,683.57
V.
179,863.20
VI.
VII.
7,811.94
5,597.68
Paid in Australia
166,795.20
VIII.
356,400.00
IX.
X.
MORAL DAMAGES
500,000.00
XI.
EXEMPLARY DAMAGES
350,000.00
XII.
LITIGATION EXPENSES
200,000.00
TOTAL
2,160,000.00
P5,135,038.64
ATTORNEY'S FEES
Plus, appearance fee of P3,000.00 for every court appearance.
23
24
Id. at 127.
25
Ibid.
26
Id. at 134.
27
Id. at 135.
28
Id. at 138.
29
Id. at 63-64.
30
Id. at 19-20.
People v. Andales, G.R. Nos. 152624-25, February 5, 2004; People v. Fucio, G.R. No.
151186-95, February 13, 2004; People v. Preciados, G.R. No. 122934, January 5, 2001, 349
SCRA 1; People v. Toyco, Sr., G.R. No. 138609, January 17, 2001, 349 SCRA
385; People v. Cabareo, G.R. No. 138645, January 16, 2001, 349 SCRA 297; People v.
Valdez, G.R. No. 128105, January 24, 2001, 350 SCRA 189.
31
People v. Dimacuha, G.R. Nos. 152592-93, February 13, 2004; People v. Yang, G.R. No.
148077, February 16, 2004; People v. Betonio, G.R. No. 119165, September 26, 1997, 279
SCRA 532; People v. Cabel, G.R. No. 121508, 282 SCRA 410.
32
33
Id. at 125.
34
Id. at 128.
35
Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is
solidary.
36
200,000.00
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.
37
Art. 1999. The hotel-keeper is liable for the vehicles, animals and articles which have
been introduced or placed in the annexes of the hotel.
Art. 2000. The responsibility referred to in the two preceding articles shall include the
loss of, or injury to the personal property of the guests caused by the servants or
employees of the keepers of hotels or inns as well as by strangers; but not that which
may proceed from any force majeure. The fact that travellers are constrained to rely
on the vigilance of the keeper of the hotel or inn shall be considered in determining
the degree of care required of him.
Art. 2001. The act of a thief or robber, who has entered the hotel is not deemed force
majeure, unless it is done with the use of arms or through an irresistible force.
38
39
Ibid at 7694-7695.
40
Exh. W.
41
42
Art. 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of
the guest, his family, servants or visitors, or if the loss arises from the character of the things
brought into the hotel.
43
44
45
46
Zagala v. Jimenez, G.R. No. 33050, July 23, 1987, 152 SCRA 147. "According to the case
of Phoenix Assurance Company v. Macondray & Co., Inc., (64 SCRA 15) a judgment
awarding an amount in U.S. dollars may be paid with its equivalent amount in local currency
based on the conversion rate prevailing at the time of payment. If the parties cannot agree
on the same, the trial court should determine such conversion rate. Needless to say, the
judgment debtor may simply satisfy said award by paying in full the amount in U.S. dollars."
47
48
Exh. V.
49
Id. The Court of Appeals noted that during his stay in the Philippines, McLoughlin's time
was not totally devoted to following up his claim as he had business arrangements to look
into.
50
51
Ibid.
52
Ibid.
53
Ibid. Expenses for power and air-conditioning were separate from room payment.
54
55
Prudenciado v. Alliance Transport System, Inc., G.R. No. 33836, March 16, 1987.
Section 1. Persons who may issue receipts. Warehouse receipts may be issued by
any warehouseman.
Sec. 2. Form of receipts; essential terms. Warehouse receipts need not be in any
particular form but every such receipt must embody within its written or printed
terms:
(a) The location of the warehouse where the goods are stored,
(d) A statement whether the goods received will be delivered to the bearer, to a
specified person or to a specified person or his order,
(g) The signature of the warehouseman which may be made by his authorized
agent,
(h) If the receipt is issued for goods of which the warehouseman is owner, either
solely or jointly or in common with others, the fact of such ownership, and
(i) A statement of the amount of advances made and of liabilities incurred for which
the warehouseman claims a lien. If the precise amount of such advances made or
of such liabilities incurred is, at the time of the issue of, unknown to the
warehouseman or to his agent who issues it, a statement of the fact that advances
have been made or liabilities incurred and the purpose thereof is sufficient.
A warehouseman shall be liable to any person injured thereby for all damages
caused by the omission from a negotiable receipt of any of the terms herein
required.
(b) In any wise impair his obligation to exercise that degree of care in the safekeeping of the goods entrusted to him which is reasonably careful man would
exercise in regard to similar goods of his own.
Sec. 6. Duplicate receipts must be so marked. When more than one negotiable
receipt is issued for the same goods, the word "duplicate" shall be plainly placed
upon the face of every such receipt, except the first one issued. A warehouseman
shall be liable for all damages caused by his failure so to do to any one who
purchased the subsequent receipt for value supposing it to be an original, even
though the purchase be after the delivery of the goods by the warehouseman to the
holder of the original receipt.
(b) An offer to surrender the receipt, if negotiable, with such indorsements as would
be necessary for the negotiation of the receipt; and
(c) A readiness and willingness to sign, when the goods are delivered, an
acknowledgment that they have been delivered, if such signature is requested by
the warehouseman.
In case the warehouseman refuses or fails to deliver the goods in compliance with a
demand by the holder or depositor so accompanied, the burden shall be upon the
warehouseman to establish the existence of a lawful excuse for such refusal.
(a) The person lawfully entitled to the possession of the goods, or his agent;
(b) A person who is either himself entitled to delivery by the terms of a nonnegotiable receipt issued for the goods, or who has written authority from the
person so entitled either indorsed upon the receipt or written upon another paper;
or
(c) A person in possession of a negotiable receipt by the terms of which the goods
are deliverable to him or order, or to bearer, or which has been indorsed to him or in
blank by the person to whom delivery was promised by the terms of the receipt or
by his mediate or immediate indorser.
(b) Had information that the delivery about to be made was to one not lawfully
entitled to the possession of the goods.
Sec. 11. Negotiable receipt must be cancelled when goods delivered. Except as
provided in section thirty-six, where a warehouseman delivers goods for which he
had issued a negotiable receipt, the negotiation of which would transfer the right to
the possession of the goods, and fails to take up and cancel the receipt, he shall be
liable to any one who purchases for value in good faith such receipt, for failure to
deliver the goods to him, whether such purchaser acquired title to the receipt before
or after the delivery of the goods by the warehouseman.
Sec. 12. Negotiable receipts must be cancelled or marked when part of goods
delivered. Except as provided in section thirty-six, where a warehouseman
delivers part of the goods for which he had issued a negotiable receipt and fails
either to take up and cancel such receipt or to place plainly upon it a statement of
what goods or packages have been delivered, he shall be liable to any one who
purchases for value in good faith such receipt, for failure to deliver all the goods
specified in the receipt, whether such purchaser acquired title to the receipt before
or after the delivery of any portion of the goods by the warehouseman.
Sec. 13. Altered receipts. The alteration of a receipt shall not excuse the
warehouseman who issued it from any liability if such alteration was:
(a) Immaterial,
(b) Authorized, or
If the alteration was authorized, the warehouseman shall be liable according to the
terms of the receipt as altered. If the alteration was unauthorized but made without
fraudulent intent, the warehouseman shall be liable according to the terms of the
receipt as they were before alteration.
Material and fraudulent alteration of a receipt shall not excuse the warehouseman
who issued it from liability to deliver according to the terms of the receipt as
originally issued, the goods for which it was issued but shall excuse him from any
other liability to the person who made the alteration and to any person who took
with notice of the alteration. Any purchaser of the receipt for value without notice
of the alteration shall acquire the same rights against the warehouseman which
such purchaser would have acquired if the receipt had not been altered at the time
of purchase.
Sec. 14. Lost or destroyed receipts. Where a negotiable receipt has been lost or
destroyed, a court of competent jurisdiction may order the delivery of the goods
upon satisfactory proof of such loss or destruction and upon the giving of a bond
with sufficient sureties to be approved by the court to protect the warehouseman
from any liability or expense, which he or any person injured by such delivery may
incur by reason of the original receipt remaining outstanding. The court may also in
its discretion order the payment of the warehouseman's reasonable costs and
counsel fees.
The delivery of the goods under an order of the court as provided in this section,
shall not relieve the warehouseman from liability to a person to whom the
negotiable receipt has been or shall be negotiated for value without notice of the
proceedings or of the delivery of the goods.
Sec. 15. Effect of duplicate receipts. A receipt upon the face of which the word
"duplicate" is plainly placed is a representation and warranty by the warehouseman
that such receipt is an accurate copy of an original receipt properly issued and
uncanceled at the date of the issue of the duplicate, but shall impose upon him no
other liability.
Sec. 16. Warehouseman cannot set up title in himself . No title or right to the
possession of the goods, on the part of the warehouseman, unless such title or right
is derived directly or indirectly from a transfer made by the depositor at the time of
or subsequent to the deposit for storage, or from the warehouseman's lien, shall
excuse the warehouseman from liability for refusing to deliver the goods according
to the terms of the receipt.
Sec. 17. Interpleader of adverse claimants. If more than one person claims the
title or possession of the goods, the warehouseman may, either as a defense to an
action brought against him for non-delivery of the goods or as an original suit,
whichever is appropriate, require all known claimants to interplead.
Sec. 19. Adverse title is no defense except as above provided. Except as provided
in the two preceding sections and in sections nine and thirty-six, no right or title of a
third person shall be a defense to an action brought by the depositor or person
claiming under him against the warehouseman for failure to deliver the goods
according to the terms of the receipt.
Sec. 21. Liability for care of goods. A warehouseman shall be liable for any loss or
injury to the goods caused by his failure to exercise such care in regard to them as
reasonably careful owner of similar goods would exercise, but he shall not be liable,
in the absence of an agreement to the contrary, for any loss or injury to the goods
which could not have been avoided by the exercise of such care.
Sec. 22. Goods must be kept separate. Except as provided in the following
section, a warehouseman shall keep the goods so far separate from goods of other
depositors and from other goods of the same depositor for which a separate receipt
has been issued, as to permit at all times the identification and redelivery of the
goods deposited.
depositors of the mingled goods shall own the entire mass in common and each
depositor shall be entitled to such portion thereof as the amount deposited by him
bears to the whole.
Sec. 25. Attachment or levy upon goods for which a negotiable receipt has been
issued. If goods are delivered to a warehouseman by the owner or by a person
whose act in conveying the title to them to a purchaser in good faith for value would
bind the owner, and a negotiable receipt is issued for them, they can not thereafter,
while in the possession of the warehouseman, be attached by garnishment or
otherwise, or be levied upon under an execution unless the receipt be first
surrendered to the warehouseman or its negotiation enjoined. The warehouseman
shall in no case be compelled to deliver up the actual possession of the goods until
the receipt is surrendered to him or impounded by the court.
Sec. 26. Creditor's remedies to reach negotiable receipts. A creditor whose debtor
is the owner of a negotiable receipt shall be entitled to such aid from courts of
appropriate jurisdiction, by injunction and otherwise, in attaching such receipt or in
satisfying the claim by means thereof as is allowed at law or in equity in these
islands in regard to property which can not readily be attached or levied upon by
ordinary legal process.
Sec. 27. What claims are included in the warehouseman's lien. Subject to the
provisions of section thirty, a warehouseman shall have a lien on goods deposited or
on the proceeds thereof in his hands, for all lawful charges for storage and
preservation of the goods; also for all lawful claims for money advanced, interest,
insurance, transportation, labor, weighing, coopering and other charges and
expenses in relation to such goods, also for all reasonable charges and expenses for
notice, and advertisements of sale, and for sale of the goods where default had
been made in satisfying the warehouseman's lien.
Sec. 28. Against what property the lien may be enforced. Subject to the
provisions of section thirty, a warehouseman's lien may be enforced:
(a) Against all goods, whenever deposited, belonging to the person who is liable as
debtor for the claims in regard to which the lien is asserted, and
(b) Against all goods belonging to others which have been deposited at any time by
the person who is liable as debtor for the claims in regard to which the lien is
asserted if such person had been so entrusted with the possession of goods that a
pledge of the same by him at the time of the deposit to one who took the goods in
good faith for value would have been valid.
Sec. 29. How the lien may be lost. A warehouseman loses his lien upon goods:
(b) By refusing to deliver the goods when a demand is made with which he is bound
to comply under the provisions of this Act.
Sec. 30. Negotiable receipt must state charges for which the lien is claimed. If a
negotiable receipt is issued for goods, the warehouseman shall have no lien thereon
except for charges for storage of goods subsequent to the date of the receipt unless
the receipt expressly enumerated other charges for which a lien is claimed. In such
case, there shall be a lien for the charges enumerated so far as they are within the
terms of section twenty-seven although the amount of the charges so enumerated
is not stated in the receipt.
Sec. 31. Warehouseman need not deliver until lien is satisfied. A warehouseman
having a lien valid against the person demanding the goods may refuse to deliver
the goods to him until the lien is satisfied.
Sec. 32. Warehouseman's lien does not preclude other remedies. Whether a
warehouseman has or has not a lien upon the goods, he is entitled to all remedies
allowed by law to a creditor against a debtor for the collection from the depositor of
all charges and advances which the depositor has expressly or impliedly contracted
with the warehouseman to pay.
Sec. 33. Satisfaction of lien by sale. A warehouseman's lien for a claim which has
become due may be satisfied as follows:
(a) An itemized statement of the warehouseman's claim, showing the sum due at
the time of the notice and the date or dates when it becomes due,
(b) A brief description of the goods against which the lien exists,
(c) A demand that the amount of the claim as stated in the notice of such further
claim as shall accrue, shall be paid on or before a day mentioned, not less than ten
days from the delivery of the notice if it is personally delivered, or from the time
when the notice shall reach its destination, according to the due course of post, if
the notice is sent by mail,
(d) A statement that unless the claim is paid within the time specified, the goods
will be advertised for sale and sold by auction at a specified time and place.
In accordance with the terms of a notice so given, a sale of the goods by auction
may be had to satisfy any valid claim of the warehouseman for which he has a lien
on the goods. The sale shall be had in the place where the lien was acquired, or, if
such place is manifestly unsuitable for the purpose of the claim specified in the
notice to the depositor has elapsed, and advertisement of the sale, describing the
goods to be sold, and stating the name of the owner or person on whose account
the goods are held, and the time and place of the sale, shall be published once a
week for two consecutive weeks in a newspaper published in the place where such
sale is to be held. The sale shall not be held less than fifteen days from the time of
the first publication. If there is no newspaper published in such place, the
advertisement shall be posted at least ten days before such sale in not less than six
conspicuous places therein.
From the proceeds of such sale, the warehouseman shall satisfy his lien including
the reasonable charges of notice, advertisement and sale. The balance, if any, of
such proceeds shall be held by the warehouseman and delivered on demand to the
person to whom he would have been bound to deliver or justified in delivering
goods.
At any time before the goods are so sold, any person claiming a right of property or
possession therein may pay the warehouseman the amount necessary to satisfy his
lien and to pay the reasonable expenses and liabilities incurred in serving notices
and advertising and preparing for the sale up to the time of such payment. The
warehouseman shall deliver the goods to the person making payment if he is a
person entitled, under the provision of this Act, to the possession of the goods on
payment of charges thereon. Otherwise, the warehouseman shall retain the
possession of the goods according to the terms of the original contract of deposit.
Sec. 34. Perishable and hazardous goods. If goods are of a perishable nature, or
by keeping will deteriorate greatly in value, or, by their order, leakage,
inflammability, or explosive nature, will be liable to injure other property , the
warehouseman may give such notice to the owner or to the person in whose names
the goods are stored, as is reasonable and possible under the circumstances, to
satisfy the lien upon such goods and to remove them from the warehouse and in the
event of the failure of such person to satisfy the lien and to receive the goods within
the time so specified, the warehouseman may sell the goods at public or private
sale without advertising. If the warehouseman, after a reasonable effort, is unable
to sell such goods, he may dispose of them in any lawful manner and shall incur no
liability by reason thereof.
The proceeds of any sale made under the terms of this section shall be disposed of
in the same way as the proceeds of sales made under the terms of the preceding
section.
Sec. 35. Other methods of enforcing lien. The remedy for enforcing a lien herein
provided does not preclude any other remedies allowed by law for the enforcement
of a lien against personal property nor bar the right to recover so much of the
warehouseman's claim as shall not be paid by the proceeds of the sale of the
property.
Sec. 36. Effect of sale. After goods have been lawfully sold to satisfy a
warehouseman's lien, or have been lawfully sold or disposed of because of their
perishable or hazardous nature, the warehouseman shall not thereafter be liable for
failure to deliver the goods to the depositor or owner of the goods or to a holder of
the receipt given for the goods when they were deposited, even if such receipt be
negotiable.
(a) Where, by terms of the receipt, the warehouseman undertakes to deliver the
goods to the bearer, or
(b) Where, by the terms of the receipt, the warehouseman undertakes to deliver the
goods to the order of a specified person, and such person or a subsequent indorsee
of the receipt has indorsed it in blank or to bearer.
Where, by the terms of a negotiable receipt, the goods are deliverable to bearer or
where a negotiable receipt has been indorsed in blank or to bearer, any holder may
indorse the same to himself or to any other specified person, and, in such case, the
receipt shall thereafter be negotiated only by the indorsement of such indorsee.
Sec. 39. Transfer of receipt. A receipt which is not in such form that it can be
negotiated by delivery may be transferred by the holder by delivery to a purchaser
or donee.
Sec. 40. Who may negotiate a receipt. A negotiable receipt may be negotiated:
(b) By any person to whom the possession or custody of the receipt has been
entrusted by the owner, if, by the terms of the receipt, the warehouseman
undertakes to deliver the goods to the order of the person to whom the possession
or custody of the receipt has been entrusted, or if, at the time of such entrusting,
the receipt is in such form that it may be negotiated by delivery.
Sec. 41. Rights of person to whom a receipt has been negotiated. A person to
whom a negotiable receipt has been duly negotiated acquires thereby:
(a) Such title to the goods as the person negotiating the receipt to him had or had
ability to convey to a purchaser in good faith for value, and also such title to the
goods as the depositor or person to whose order the goods were to be delivered by
the terms of the receipt had or had ability to convey to a purchaser in good faith for
value, and
(b) The direct obligation of the warehouseman to hold possession of the goods for
him according to the terms of the receipt as fully as if the warehouseman and
contracted directly with him.
Sec. 42. Rights of person to whom receipt has been transferred. A person to
whom a receipt has been transferred but not negotiated acquires thereby, as
against the transferor, the title of the goods subject to the terms of any agreement
with the transferor.
If the receipt is non-negotiable, such person also acquires the right to notify the
warehouseman of the transfer to him of such receipt and thereby to acquire the
direct obligation of the warehouseman to hold possession of the goods for him
according to the terms of the receipt.
Sec. 44. Warranties of a sale of receipt. A person who, for value, negotiates or
transfers a receipt by indorsement or delivery, including one who assigns for value a
claim secured by a receipt, unless a contrary intention appears, warrants:
(c) That he has knowledge of no fact which would impair the validity or worth of the
receipt, and
(d) That he has a right to transfer the title to the goods and that the goods are
merchantable or fit for a particular purpose whenever such warranties would have
been implied, if the contract of the parties had been to transfer without a receipt of
the goods represented thereby.
Sec. 45. Indorser not a guarantor. The indorsement of a receipt shall not make
the indorser liable for any failure on the part of the warehouseman or previous
indorsers of the receipt to fulfill their respective obligations.
Sec. 47. When negotiation not impaired by fraud, mistake or duress. The validity
of the negotiation of a receipt is not impaired by the fact that such negotiation was
a breach of duty on the part of the person making the negotiation or by the fact that
the owner of the receipt was induced by fraud, mistake or duress or to entrust the
possession or custody of the receipt to such person, if the person to whom the
receipt was negotiated or a person to whom the receipt was subsequently
negotiated paid value therefor, without notice of the breach of duty, or fraud,
mistake or duress.
Sec. 49. Negotiation defeats vendor's lien. Where a negotiable receipt has been
issued for goods, no seller's lien or right of stoppage in transitu shall defeat the
rights of any purchaser for value in good faith to whom such receipt has been
negotiated, whether such negotiation be prior or subsequent to the notification to
the warehouseman who issued such receipt of the seller's claim to a lien or right of
stoppage in transitu. Nor shall the warehouseman be obliged to deliver or justified
in delivering the goods to an unpaid seller unless the receipt is first surrendered for
cancellation.
IV CRIMINAL OFFENSES
Sec. 50. Issue of receipt for goods not received. A warehouseman, or an officer,
agent, or servant of a warehouseman who issues or aids in issuing a receipt
knowing that the goods for which such receipt is issued have not been actually
received by such warehouseman, or are not under his actual control at the time of
issuing such receipt, shall be guilty of a crime, and, upon conviction, shall be
punished for each offense by imprisonment not exceeding five years, or by a fine
not exceeding ten thousand pesos, or both.
Sec. 52. Issue of duplicate receipt not so marked. A warehouse, or any officer,
agent, or servant of a warehouseman who issues or aids in issuing a duplicate or
additional negotiable receipt for goods knowing that a former negotiable receipt for
the same goods or any part of them is outstanding and uncanceled, without plainly
placing upon the face thereof the word "duplicate" except in the case of a lost or
destroyed receipt after proceedings are provided for in section fourteen, shall be
guilty of a crime, and, upon conviction, shall be punished for each offense by
imprisonment not exceeding five years, or by a fine not exceeding ten thousand
pesos, or by both.
Sec. 53. Issue for warehouseman's goods or receipts which do not state that fact.
Where they are deposited with or held by a warehouseman goods of which he is
owner, either solely or jointly or in common with others, such warehouseman, or
any of his officers, agents, or servants who, knowing this ownership, issues or aids
in issuing a negotiable receipt for such goods which does not state such ownership,
shall be guilty of a crime, and, upon conviction, shall be punished for each offense
by imprisonment not exceeding one year, or by a fine not exceeding two thousand
pesos, or by both.
Sec. 55. Negotiation of receipt for mortgaged goods. Any person who deposits
goods to which he has no title, or upon which there is a lien or mortgage, and who
takes for such goods a negotiable receipt which he afterwards negotiates for value
with intent to deceive and without disclosing his want of title or the existence of the
lien or mortgage, shall be guilty of a crime, and, upon conviction, shall be punished
for each offense by imprisonment not exceeding one year, or by a fine not
exceeding two thousand pesos, or by both.
V INTERPRETATION
Sec. 56. Case not provided for in Act. Any case not provided for in this Act shall
be governed by the provisions of existing legislation, or in default thereof, by the
rule of the law merchant.
Sec. 57. Name of Act. This Act may be cited as the Warehouse Receipts Act.
Sec. 58. Definitions. (a) In this Act, unless the content or subject matter
otherwise requires:
"Fungible goods" means goods of which any unit is, from its nature by mercantile
custom, treated as the equivalent of any other unit.
"Holder" of a receipt means a person who has both actual possession of such
receipt and a right of property therein.
(b) A thing is done "in good faith" within the meaning of this Act when it is in fact
done honestly, whether it be done negligently or not.
Sec. 59. Application of Act. The provisions of this Act do not apply to receipts
made and delivered prior to the taking effect hereof.
Sec. 60. Repeals. All acts and laws and parts thereof inconsistent with this Act are
hereby repealed.
Sec. 61. Time when Act takes effect. This Act shall take effect ninety days after its
publication in the Official Gazette of the Philippines shall have been completed.
In any event, the conclusions of fact and law set out in the Appellate Courts
decision are undeniably binding on all the parties to the case, the
respondent Regional Trial Judge included. Having been rendered by a
competent court within its jurisdiction, and having become final and
executory, the decision now operates as the immutable law among the
parties, the respondent Trial Judge included; it has become the law of the
case and may no longer, in subsequent proceedings, be altered or modified
in any way, much less reversed or set at naught, by the latter, or any other
judge, not even by the Supreme Court; it is an unalterable determination of
the propriety of a summary judgment in the action in question, and upon all
the issues therein raised or which could have been raided relative to the
merits of said action.
3. Remedial Law; Civil Procedure; Appeal; Trial Judge may not evade
compliance with the final judgment of the Court of Appeals on the theory
that the latter had acted only on a mere interlocutory order while he had
subsequently adjudged the action for specific performance on the merits. The Trial Judge may not evade compliance with the final judgment of the
Court of Appeals on the theory that the latter had acted only on a mere
interlocutory order (the order denying PNBs motion for summary judgment)
while he had subsequently adjudged the action for specific performance on
the merits. Quite obvious is that the Court of Appeals had decided that a
summary judgment was proper in said action of specific performance, that
this was in truth a determination of the merits of the suit, that that decision
had become final and executory, and that the decision expressly
commanded. His Honor to render such a judgment. Under the
circumstances, the latters duty was clear and inescapable.
4. Remedial Law; Civil Procedure; Appeal; It was an act of
supererogation of presumptuousness, on His Honors part to disregard the
Courts clear and categorical command and to dispose of the case in a
manner dramatically opposed thereto.It was not within the Trial Judges competence or discretion to take
exception to, much less overturn, any of the factual or legal conclusions laid
down by the Court of Appeals in its verdict. He was as much bound thereby
as the private parties themselves. His only function was to implement and
carry out the Appellate Tribunals judgment. It was an act of supererogation,
of presumptuousness, on His Honors part to disregard the Courts clear and
categorical command, and to dispose of the case in a manner diametrically
opposed thereto. In doing so, the Trial Judge committed grave error which
must forthwith be corrected.
Division: SECOND DIVISION
Docket Number: G.R. No. 107243
Counsel: Santiago, Jr., Vida, Corpuz & Associates, Tomas P. Madella, Jr.
Ponente: NARVASA
Dispositive Portion:
WHEREFORE, the Trial Judges Decision in Civil Case No. 90-53023 dated
June 18, 1992 is REVERSED and SET ASIDE and a new one rendered
conformably with the final and executory Decision of the Court of Appeals in
CA-G.R. SP No. 25938, ordering the private respondents, Noahs Ark Sugar
Refinery, Alberto T. Looyuko, Jimmy T. Go and William T. Go, jointly and
severally:
G.R. No. 107243 September 1, 1993
PHILIPPINE NATIONAL BANK, petitioner,
vs.
NOAH'S ARK SUGAR REFINERY, ALBERTO T. LOOYUKO, JIMMY T. GO, WILSON T.
GO, respondents.
Santiago, Jr. Vida, Corpuz & Associates for petitioner.
Tomas P. Madella Jr. for respondents.
NARVASA, C.J.:
The case at bar involves extraordinary situation in which a Regional Trial
Judge after receiving notice to the final and executory judgment of the Court of Appeals in a
special civil action of certiorari in which said Trial Judge was a respondent, and which judgment
contained the following disposition,viz.:
In issuing the questioned Orders, We find the respondent Court to have acted in
grave abuse of discretion which justify holding null and void and setting aside the
Orders date May 2 and July 4, 1990 of respondent Court, and that a summary
judgment be rendered forthwith in favor of the PNB against Noah's Ark Sugar
Refinery, et al., as prayed for in petitioner's Motion for Summary Judgment.
SO ORDERED.
proceeded to render judgment, not "in favor of the PNB against Noah's Ark Sugar Refinery, et al.,"
but in favor of the latter and its co-defendants. That judgment has been appealed by PNB to this
Court "on pure questions of law."
No dispute exists about the facts which gave rise to the controversy at bar.
In accordance with Act No. 2137, the Warehouse Receipts Law, Noah's Ark Sugar Refinery issued
on several dates warehouse receipts (quedans) as follows:
March 1, 1989, receipt No. 18062 covering sugar deposited by Rosa Sy;
March 7, 1989, receipt No. 18080 covering sugar deposited by RNS Merchandising
(Rosa Ng Sy);
March 21, 1989, receipt No. 18081 covering sugar deposited by RNS Merchandising;
March 31, 1989, receipt No. 18086 covering sugar deposited by St. Therese
Merchandising; and
April 1, 1989, receipt No. 18087 covering sugar deposited by RNS Merchandising.
The receipts are substantially in the form, and contain the terms, prescribed for negotiable
warehouse receipts by Section 2 of the law.
Subsequently, warehouse receipts Numbered 18080 and 18081 (covering sugar deposited by RNS
Merchandising) were negotiated and indorsed to Luis T. Ramos; and receipts Numbered 18086
(sugar of St. Therese Merchandising), 18087 (sugar of RNS Merchandising) and 18062 (sugar of
Rosa Sy) were negotiated and indorsed to Cresencia K. Zoleta. Zoleta and Ramos then used
the quedans as security for loans obtained by them from the Philippine National Bank (PNB) in the
amounts of P23.5 million and P15.6 million, respectively. These quedans they indorsed to the bank.
Both Zoleta and Ramos failed to pay their loans upon maturity on January 9, 1990. Consequently on
March 16, 1990, PNB wrote to Noah's Ark Sugar Refinery (hereafter, simply Noah's Ark) demanding
delivery of the sugar covered by the quedans indorsed to it by Zoleta and Ramos. When Noah's Ark
refused to comply with the demand, PNB filed with the Regional Trial Court of Manila a verified
complaint for "Specific Performance with Damages and Application for Writ of Attachment" against
Noah's Ark, Alberto T. Looyuko, Jimmy T. Go, and Wilson T. Go, the last three being identified as "the
Sole Proprietor, Managing Partner and Executive Vice President of Noah's Ark, respectively."
The Court, by Order dated June 28, 1990, denied the application for preliminary attachment after
conducting a hearing thereon. It denied as well the motion for reconsideration thereafter filed by
PNB, by Order dated August 22, 1990.
Noah's Ark and its co-defendants then filed their responsive pleading entitled "Answer with
Counterclaim and Third Party Complaint," dated June 21, 1990 in which they claimed, inter alia, that
they "are still the legal owners of the subject quedans and the quantity of sugar represented
thereon," a claim founded on the following averments, to wit:
. . . In an agreement dated April 1, 1989, defendants agreed to sell to Rosa Ng Sy of
RNS Merchandising and Teresita Ng of St. Therese Merchandising the total volume
of sugar indicated in the quedans stored at Noah's Ark Sugar Refinery for a total
consideration of P63,000,000.00, . . . The corresponding payments in the form of
checks issued by the vendees in favor of defendants were subsequently dishonored
by the drawee banks by reason of "payment stopped" and "drawn against insufficient
funds," . . . Upon proper notification to said vendees and plaintiff in due course,
whether or not PNB acquired ownership over the quedans considering that "it did not dispose (of)
said quedans under Art. 2112 of the Civil Code, as specifically reflected in the contract of pledge,"
both contentions allegedly being "material facts which has (sic) to be supported by evidence."
The third-party defendants (Rosa Ng Sy and Teresita Ng) also opposed the motion for summary
judgment insofar as concerned their counterclaim in relation to the third-party complaint asserted
against them.
On May 2, 1991, the Trial Court issued an Order denying the motion for summary judgment on the
ground that an "examination of the pleadings and the record readily shows that there exists sharply
conflicting claims among the parties relative to the ownership of the sugar quedans as to whether or
not the subject quedans falls (sic) squarely within the coverage of the Warehouse Receipt Law and
whether or not the transaction between plaintiff and third party defendants is governed by contract of
pledge that would require plaintiff's compliance with Art. 2112, Civil Code on pledge as regards the
disposition of the subjects quedans." PNB's for reconsideration was denied by Order dated July 4,
1991.
PNB thereupon filed a petition for certiorari with the Court of Appeals, which was docketed as CAG.R. SP No. 25938. This special civil action eventuated in a Decision promulgated on December 13,
1991 by the Sixth Division of that Court, 1 nullifying and setting aside the challenged Orders of May 2,
1991 and July 4, 1991, and commanding that "summary judgment be rendered forthwith in favor of the
PNB against Noah's Ark Sugar Refinery, et al., as prayed for in petitioner's Motion for Summary
Judgment." Said the Appellate Court: 2
In issuing the questioned Orders, the respondent Court ruled that "questions of law
should be resolved after and not before, the questions of fact are properly litigated."
A scrutiny of defendants' affirmative defenses does not show material questions of
facts as to the alleged non-payment of purchase price by the vendees/first indorsers,
and which non-payment is not disputed by PNB as it does not materially affect PNB's
title to the sugar stock as holder of the negotiable quedans.
What is determinative of the propriety of summary judgment is not the existence of
conflicting claims for prior parties but whether from an examination of the pleadings,
depositions, admissions and documents on file, the defenses as to the main issue do
not tender material questions of fact (see Garcia vs. Court of Appeals 167 SCRA
815) or the issues thus tendered are in fact sham, fictitious, contrived, set up in bad
faith or so unsubstantial as not to constitute genuine issues for trial. (See Vergara vs.
Suelto, et al., 156 SCRA 753; Mercado, et al. vs. Court of Appeals, 162 SCRA 75).
The questioned Orders themselves do not specify what material facts are in issue.
(See Sec. 4, Rule 34, Rules of Court).
To require a trial notwithstanding pertinent allegations of the pleadings and other
facts appearing on record, would constitute a waste of time and an injustice to the
PNB whose rights to relief to which it is plainly entitled would be further delayed to its
prejudice.
In issuing the questioned Orders, We find the respondent Court to have acted in
grave abuse of discretion which justify holding null and void and setting aside the
Orders dated May 2 and July 4, 1990 of respondent Court, and that a summary
judgment be rendered forthwith in favor of the PNB against Noah's Ark Sugar
Refinery, et al., as prayed for in the petitioner's Motion for Summary Judgment.
SO ORDERED.
Noah's Ark, et al. moved for reconsideration, but their motion was denied by the Appellate Tribunal's
Resolution dated March 6, 1991.
The judgment became final. Entry of Judgment was made on May 26, 1992. Thereafter the case
was remanded to the Court of origin.
On June 18, 1992, the Regional Trial Court rendered judgment, but not in accordance with the
aforesaid decision of the Court of Appeals. As stated in the opening paragraph of this opinion,
instead of a summary judgment "in favor of the PNB against Noah's Ark Sugar Refinery, et al., as
prayed for in . . . (PNB)'s Motion for Summary Judgment," the Trial Court's verdict decreed the
dismissal of "plaintiff's complaint against defendants Noah's Ark Sugar Refinery, Alberto T. Looyuko,
Jimmy Go and Wilson T. Go . . . . for lack of cause of action;" and dismissal as well of the
counterclaim pleaded by the latter against PNB, and of the third-party complaint, and the third-party
defendant's counterclaim.
The Trial Court declared that if "the only material facts established on the basis of the pleadings,
documentary evidence on record, admissions and stipulations during the hearing on PNB's
application for a writ of preliminary attachment, are the facts as alleged by plaintiff and accepted as
established by the Court of Appeals, this Court will have no difficulty in finding for plaintiff as prayed
for in its motion for summary judgment. But are the facts alleged by plaintiff the only material facts
established on the basis of the pleadings, documentary evidence on record, stipulations and
admissions during the proceedings on the application for a writ of preliminary attachment?" To this
question the Trial Court gave a negative answer, it being its view that other facts, "as alleged by
defendants . . . (and) not disputed by PNB, have been likewise established."
The Trial Court later denied PNB's motion for reconsideration (by Order dated September 4, 1992),
evidently finding merit in the argument of Noah's Ark, et al., therein quoted, that "Certiorari as a
mode of appeal involves the review of judgment, award of final order on the merits, while the original
action for certiorari and as a special civil action is generally directed against an interlocutory order of
the Court, prior to an appeal from the judgment of the main case which in the case at bar is specific
performance . . ."
Hence, this appeal.
In CA-G.R. SP No. 25938 above mentioned, after an extensive review of the entire record of the
case before the Regional Trial Court (including the admissions of Noah's Ark, et al. and the parties'
stipulations of fact), as well as the pleadings filed by the parties before it, the Court of Appeals
arrived at the conclusion that a summary judgment was proper since "there was no substantial
controversy on a(ny) material fact, the only issues for the Court's
determination . . . (being) purely . . . questions of law, as follows:
1) Whether or not the non-payment of the purchase price for the
sugar stock evidenced by the quedans, by the original depositors/
vendees (RNS Merchandising and St. Therese Merchandising)
negotiation between Noah's Ark and RNS Merchandising and St. Therese Merchandising was made in
breach of faith on the part of the merchandising firms or by the fact that the owner (Noah's Ark) was
deprived of the possession of the same by fraud, mistake or conversion . . ." 5 It also ruled that
the quedans were negotiable documents and had been duly negotiated to the PNB which thereby
acquired the rights set out in Article 1513 of the Civil Code," 6 viz.:"
(1) Such title to the goods as the person negotiating the documents to him had or
had ability to convey to a purchaser in good faith for value and also such title to the
goods as the person to whose order the goods were to be delivered by the terms of
the document had or had ability to convey to a purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold possession of the
goods for him according to the terms of the document as fully as if such bailee had
contracted directly with him.
The Court of Appeals found correctly that the indications in the pleadings to the contrary
notwithstanding, no substantial triable issue of fact actually existed, and that certain issues raised in
answer, even if taken as established, would not materially change the ultimate findings relative to the
main claim. 7 Its decision is entirely in accord with this Court's rulings regarding the propriety of summary
judgments invoked by the Appellate Tribunal, i.e.,Vergara, Sr. v. Suelto, 8 and Mercado v. Court of
Appeals. 9 According to Vergara, for instance, "even if the answer does tender issues and therefore a
judgment on the pleadings is not proper a summary judgment may still be rendered on the plaintiff's
motion if he can show to the Court's satisfaction that "except as to the amount of damages, there is no
genuine issue as to any material fact," 10 that is to say, the issues thus tendered are not genuine, are in
other words sham, fictitious, contrived, set up in bad faith, patently unsubstantial. 11 The determination
may be made by the Court on the basis of the pleadings, and the depositions, admissions and affidavits
that the movant may submit, as well as those which the defendant may present in turn." 12
In any event, the conclusions of fact and law set out in the Appellate Court's decision are undeniably
binding on all the parties to the case, the respondent Regional Trial Judge included. Having been
rendered by a competent court within its jurisdiction, and having become final and executory, the
decision now operates as the immutable law among the parties, the respondent Trial Judge
included; it has become the law of the case and may no longer, in subsequent proceedings, be
altered or modified in any way, much less reversed or set at naught, by the latter, or any other judge,
not even by the Supreme Court; it is an unalterable determination of the propriety of a summary
judgment in the action in question, and upon all the issues therein raised or which could have been
raised relative to the merits of said action. 13
The Trial Judge may not evade compliance with the final judgment of the Court of Appeals on the
theory that the latter had acted only on a mere interlocutory order (the order denying PNB's motion
for summary judgment), while he had subsequently adjudged the action for specific performance on
the merits. Quite obvious is that the Court of Appeals had decided that a summary judgment was
proper in said action of specific performance, that this was in truth a determination of the merits of
the suit, that that decision had become final and executory, and that the decision expressly
commanded His Honor to render such a judgment. Under the circumstances, the latter's duty was
clear and inescapable.
It was not within the Trial Judge's competence or discretion to take exception to, much less overturn,
any of the factual or legal conclusions laid down by the Court of Appeals in its verdict. He was as
much bound thereby as the private parties themselves. His only function was to implement and carry
out the Appellate Tribunal's judgment. It was an act of supererogation, of presumptuousness, on His
Honor's part to disregard the Court's clear and categorical command, and to dispose of the case in a
manner diametrically opposed thereto. In doing so, the Trial Judge committed grave error which
must forthwith be corrected.
WHEREFORE, the Trial Judge's Decision in Civil Case No. 90-53023 dated June 18, 1992 is
REVERSED and SET ASIDE and a new one rendered conformably with the final and executory
Decision of the Court of Appeals in CA-G.R. SP No. 25938, ordering the private respondents, Noah's
Ark Sugar Refinery, Alberto T. Looyuko, Jimmy T. Go and William T. Go, jointly and severally:
a) to deliver to the petitioner Philippine National Bank, "the sugar stocks covered by the Warehouse
Receipts/Quedans which are now in the latter's possession as holder for value and in due course; or
alternatively, to pay (said) plaintiff actual damages in the amount of P39.1 Million," with legal interest
thereon from the filing of the complaint until full payment; and
b) to pay plaintiff Philippine National Bank attorney's fees, litigation expenses and judicial costs
hereby fixed at the amount of one hundred fifty thousand pesos (150,000.00), as well as the costs.
SO ORDERED.
Padilla, Regalado, Nocon and Puno, JJ., concur.
# Footnotes
1 Campos, J., Chairman, ponente; Aldecoa, Jr. and Mendoza, F., JJ, concurring.
2 Emphasis supplied.
3 Rollo, p. 198 (RTC Decision, p. 7).
4 Id., pp. 198-199 (RTC Decision, pp. 7-8).
5 Id., p. 185 ( CA Decision, p. 7).
6 Id., pp. 183-185 (CA Decision, pp. 5-6); see also Section 8 and 41, Warehouse
Receipts Law (Act No. 2137).
7 SEE Londres v. National Life Insurance Co. of the Philippines, 94 Phil. 627, 629,
cited in Feria, J.,Civil Procedure, 1969 ed., p. 481, also adverting to Miranda v.
Malate Garage & Taxicab, 52 O.G. 5145; Capital Insurance v. Eberly, 53 O.G. 63; Go
Leting & Sons, et al. v. Leyte Land Trans. Col, L-8887, May 28, 1958; and Philippine
National Bank v. Philippine Leather Co., L-10884, March 31, 1959.
8 156 SCRA 753, 760-762 (1987).
9 162 SCRA 75, 83-85 (1988).
10 Footnote No. 18 in text: "Sec. 1, Rule 34. N.B. A defendant may also move for
summary judgment in his favor on the theory that the plaintiff's complaint raises no
genuine issue (Sec. 2, Rule 34)."
11 Footnote No. 19 in text, citing cases.
12 Footnote No. 20 in text: "Sec. 3, Rule 34, Cadirao v. Estenzo, 132 SCRA 93,
100, supra."
13 SEE Sec. 49, Rule 39, Rules of Court; see also, Zarate v. Director of Lands, 39
Phil. 749; Trinidad v. Roman Catholic Archbishop, 63 Phil. 913; People v. Pinuila, 103
Phil. 999; Rodriguez v. Director of Prisons, 47 SCRA 157; Comilang v. Court of
Appeals, 65 SCRA 79.
Case Title : PHILIPPINE NATIONAL BANK, petitioner, vs. HON. PRES. JUDGE
BENITO C. SE, JR., RTC, BR. 45, MANILA; NOAHS ARK SUGAR REFINERY;
ALBERTO T. LOOYUKO, JIMMY T. GO and WILSON T. GO, respondents.Case
Nature : PETITION to nullify a decision of the Regional Trial Court of Manila,
Br. 45.
Syllabi Class : Warehouse Receipts Law (R.A. 2137)|Warehousemans
Liens|Actions|Judgments|Contracts|Receipts|Estoppel
Syllabi:
1. Warehouse Receipts Law (R.A. 2137); Warehousemans
Liens; Actions; Judgments; A prior judgment holding that a party is a
warehouseman obligated to deliver sugar stocks covered by the Warehouse
Receipts does not necessarily carry with it a denial of the warehousemans
lien over the same sugar stocks.We have carefully examined our resolution, dated March 9, 1994, which
denied Noahs Arks motion for clarification of our decision, dated September
1, 1993, wherein we affirmed in full and adopted the Court of Appeals
earlier decision, dated December 13, 1991, in CA-G.R. SP No. 25938. We
are not persuaded by the petitioners argument that our said resolution
carried with it the denial of the warehousemans lien over the sugar stocks
covered by the subject Warehouse Receipts. We have simply resolved and
upheld in our decision, dated September 1, 1993, the propriety of summary
judgment which was then assailed by private respondents. In effect, we
ruled therein that, considering the circumstances obtaining before the trial
court, the issuance of the Warehouse Receipts not being disputed by the
private respondents, a summary judgment in favor of PNB was proper. We
in effect further affirmed the finding that Noahs Ark is a warehouseman
which was obliged to deliver the sugar stocks covered by the Warehouse
Receipts pledged by Cresencia K. Zoleta and Luis T. Ramos to the petitioner
pursuant to the pertinent provisions of Republic Act 2137. In disposing of
the private respondents motion for clarification, we could not contemplate
.
DECISION
HERMOSISIMA, JR., J.:
The source of conflict herein is the question as to whether the
Philippine National Bank should pay storage fees for sugar stocks
covered by five (5) Warehouse Receipts stored in the warehouse of
private respondents in the face of the Court of Appeals decision
(affirmed by the Supreme Court) declaring the Philippine National
Bank as the owner of the said sugar stocks and ordering their
delivery to the said bank. From the same facts but on a different
perspective, it can be said that the issue is: Can the warehouseman
enforce his warehousemans lien before delivering the sugar stocks
as ordered by the Court of Appeals or need he file a separate action
to enforce payment of storage fees?
The herein petition seeks to annul: (1) the Resolution of respondent
Judge Benito C. Se, Jr. of the Regional Trial Court of Manila, Branch
45, dated December 20, 1994, in Civil Case No. 90-53023,
authorizing reception of evidence to establish the claim of
respondents Noahs Ark Sugar Refinery, et al., for storage fees and
preservation expenses over sugar stocks covered by
five (5) Warehouse Receipts which is in the nature of a
warehousemans lien; and (2) the Resolution of the said respondent
Judge, dated March 1, 1995, declaring the validity of private
respondents warehousemans lien under Section 27 of Republic Act
No 2137 and ordering that execution of the Court of Appeals
decision, dated December 13, 1991, be in effect held in abeyance
until the full amount of the warehousemans lien on the sugar stocks
covered by five (5) quedans subject of the action shall have been
satisfied conformably with the provisions of Section 31 of Republic
Act 2137.
Also prayed for by the petition is a Writ of Prohibition to require
respondent RTC Judge to desist from further proceeding with Civil
Case No. 90-53023, except order the execution of the Supreme
Court judgment; and a Writ of Mandamus to compel respondent RTC
Respondent Judge Benito C. Se, Jr., in whose sala the case was
raffled, denied the Application for Preliminary Attachment.
Reconsideration therefor was likewise denied.
Noahs Ark and its co-defendants filed an Answer with Counterclaim
and Third-Party Complaint in which they claimed that they are the
owners of the subject quedans and the sugar represented therein,
averring as they did that:
"9.*** In an agreement dated April 1, 1989, defendants agreed to
sell to Rosa Ng Sy of RNS Merchandising and Teresita Ng of St.
Therese Merchandising the total volume of sugar indicated in the
quedans stored at Noahs Ark Sugar Refinery for a total
consideration of P63,000,000.00,
*** The corresponding payments in the form of checks issued by
the vendees in favor of defendants were subsequently dishonored
by the drawee banks by reason of payment stopped and drawn
against insufficient funds,
*** Upon proper notification to said vendees and plaintiff in due
course, defendants refused to deliver to vendees therein the
quantity of sugar covered by the subject quedans.
10. *** Considering that the vendees and first endorsers of subject
quedans did not acquire ownership thereof, the subsequent
endorsers and plaintiff itself did not acquire a better right of
ownership than the original vendees/first endorsers. "1
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them was merely a simulated one being part of the latters complex
banking schemes and financial maneuvers, and thus, they are not
answerable in damages to him.
On January 31, 1991, the Philippine National Bank filed a Motion for
Summary Judgment in favor of the plaintiff as against the
defendants for the reliefs prayed for in the complaint.
On May 2, 1991, the Regional Trial Court issued an order denying
the Motion for Summary Judgment. Thereupon, the Philippine
National Bank filed a Petition for Certiorari with the Court of
Appeals, docketed as CA-G.R. SP. No. 25938 on December 13,
1991.
Pertinent portions of the decision of the Court of Appeals read:
"In issuing the questioned Orders, the respondent Court ruled that
questions of law should be resolved after and not before, the
questions of fact are properly litigated. A scrutiny of defendants
affirmative defenses does not show material questions of fact as to
the alleged nonpayment of purchase price by the vendees/first
endorsers, and which nonpayment is not disputed by PNB as it does
not materially affect PNBs title to the sugar stocks as holder of the
negotiable quedans.
What is determinative of the propriety of summary judgment is not
the existence of conflicting claims from prior parties but whether
from an examination of the pleadings, depositions, admissions and
documents on file, the defenses as to the main issue do not tender
material questions of fact (see Garcia vs. Court of Appeals, 167
SCRA 815) or the issues thus tendered are in fact sham, fictitious,
contrived, set up in bad faith or so unsubstantial as not to
constitute genuine issues for trial. (See Vergara vs. Suelto, et al.,
156 SCRA 753; Mercado, et al. vs. Court of Appeals, 162 SCRA 75).
The questioned Orders themselves do not specify what material
facts are in issue. (See Sec. 4, Rule 34, Rules of Court).
To require a trial notwithstanding pertinent allegations of the
pleadings and other facts appearing on the record, would constitute
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inconsistent with their stand that they claim ownership of the stocks
covered by the quedans since the checks issued for payment thereof
were dishonored. If they were still the owners, it would have been
absurd for them to ask payment for storage fees and preservation
expenses. They further contend that our resolution, dated March 9,
1994, denying their motion for clarification did not preclude their
right to claim their warehousemans lien under Sections 27 and 31 of
Republic Act 2137, as our resolution merely affirmed and adopted
the earlier decision, dated December 13, 1991, of the Court of
Appeals (6th Division) in CA-G.R. SP. No. 25938 and did not make
any finding on the matter of the warehouseman s lien.
We find for private respondents on the foregoing issue and so the
petition necessarily must fail.
We have carefully examined our resolution, dated March 9, 1994,
which denied Noahs Arks motion for clarification of our decision,
dated September 1, 1993, wherein we affirmed in full and adopted
the Court of Appeals earlier decision, dated December 13, 1991, in
CA-G.R. SP. No. 25938. We are not persuaded by the petitioners
argument that our said resolution carried with it the denial of the
warehousemans lien over the sugar stocks covered by the subject
Warehouse Receipts. We have simply resolved and upheld in our
decision, dated September 1, 1993, the propriety of summary
judgment which was then assailed by private respondents. In effect,
we ruled therein that, considering the circumstances obtaining
before the trial court, the issuance of the Warehouse Receipts not
being disputed by the private respondents, a summary judgment in
favor of PNB was proper. We in effect further affirmed the finding
that Noahs Ark is a warehouseman which was obliged to deliver the
sugar stocks covered by the Warehouse Receipts pledged by
Cresencia K. Zoleta and Luis T. Ramos to the petitioner pursuant to
the pertinent provisions of Republic Act 2137.
In disposing of the private respondents motion for clarification, we
could not contemplate the matter of warehousemans lien because
the issue to be finally resolved then was the claim of private
respondents for retaining ownership of the stocks of sugar covered
by the endorsed quedans. Stated otherwise, there was no point in