G.R. No. 112392.

February 29, 2000

BANK OF THE PHILIPPINE ISLANDS, Petitioner, vs. COURT OF APPEALS and BENJAMIN C.
NAPIZA, Respondents.

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R.
CV No. 37392 affirming in toto that of the Regional Trial Court of Makati, Branch 139,2 which
dismissed the complaint filed by petitioner Bank of the Philippine Islands against private
respondent Benjamin C. Napiza for sum of money.d

On September 3, 1987, private respondent deposited in Foreign Currency Deposit Unit

(FCDU) Savings Account No. 028-1873 which he maintained in petitioner banks Buendia
Avenue Extension Branch, Continental Bank Managers Check No. 00014757 4 dated August
17, 1984, payable to "cash" in the amount of Two Thousand Five Hundred Dollars
($2,500.00) and duly endorsed by private respondent on its dorsal side.5 It appears that the
check belonged to a certain Henry Chan who went to the office of private respondent and
requested him to deposit the check in his dollar account by way of accommodation and for
the purpose of clearing the same. Private respondent acceded, and agreed to deliver to Chan
a signed blank withdrawal slip, with the understanding that as soon as the check is cleared,
both of them would go to the bank to withdraw the amount of the check upon private
respondents presentation to the bank of his passbook.

Using the blank withdrawal slip given by private respondent to Chan, on October 23, 1984,
one Ruben Gayon, Jr. was able to withdraw the amount of $2,541.67 from FCDU Savings
Account No. 028-187. Notably, the withdrawal slip shows that the amount was payable to
Ramon A. de Guzman and Agnes C. de Guzman and was duly initialed by the branch assistant
manager, Teresita Lindo.6cräläwvirtualibräry

On November 20, 1984, petitioner received communication from the Wells Fargo Bank
International of New York that the said check deposited by private respondent was a
counterfeit check7 because it was "not of the type or style of checks issued by Continental
Bank International."8 Consequently, Mr. Ariel Reyes, the manager of petitioners Buendia
Avenue Extension Branch, instructed one of its employees, Benjamin D. Napiza IV, who is
private respondents son, to inform his father that the check bounced. 9 Reyes himself sent a
telegram to private respondent regarding the dishonor of the check. In turn, private
respondents son wrote to Reyes stating that the check had been assigned "for encashment"
to Ramon A. de Guzman and/or Agnes C. de Guzman after it shall have been cleared upon
instruction of Chan. He also said that upon learning of the dishonor of the check, his father
immediately tried to contact Chan but the latter was out of town.10cräläwvirtualibräry

Private respondents son undertook to return the amount of $2,500.00 to petitioner bank. On
December 18, 1984, Reyes reminded private respondent of his sons promise and warned
that should he fail to return that amount within seven (7) days, the matter would be referred
to the banks lawyers for appropriate action to protect the banks interest.11 This was followed
by a letter of the banks lawyer dated April 8, 1985 demanding the return of the
$2,500.00.12cräläwvirtualibräry

In reply, private respondent wrote petitioners counsel on April 20, 1985 13 stating that he
deposited the check "for clearing purposes" only to accommodate Chan. He added:

"Further, please take notice that said check was deposited on September 3, 1984 and
withdrawn on October 23, 1984, or a total period of fifty (50) days had elapsed at the time
of withdrawal. Also, it may not be amiss to mention here that I merely signed an authority to
withdraw said deposit subject to its clearing, the reason why the transaction is not reflected
in the passbook of the account. Besides, I did not receive its proceeds as may be gleaned from
the withdrawal slip under the captioned signature of recipient.

If at all, my obligation on the transaction is moral in nature, which (sic) I have been and is
(sic) still exerting utmost and maximum efforts to collect from Mr. Henry Chan who is
directly liable under the circumstances.

xxx......xxx......xxx."

On August 12, 1986, petitioner filed a complaint against private respondent, praying for the
return of the amount of $2,500.00 or the prevailing peso equivalent plus legal interest from
date of demand to date of full payment, a sum equivalent to 20% of the total amount due as
attorney's fees, and litigation and/or costs of suit.

Private respondent filed his answer, admitting that he indeed signed a "blank" withdrawal
slip with the understanding that the amount deposited would be withdrawn only after the
check in question has been cleared. He likewise alleged that he instructed the party to whom
he issued the signed blank withdrawal slip to return it to him after the bank drafts clearance
so that he could lend that party his passbook for the purpose of withdrawing the amount of
$2,500.00. However, without his knowledge, said party was able to withdraw the amount of
$2,541.67 from his dollar savings account through collusion with one of petitioners
employees. Private respondent added that he had "given the Plaintiff fifty one (51) days with
which to clear the bank draft in question." Petitioner should have disallowed the withdrawal
because his passbook was not presented. He claimed that petitioner had no one to blame
except itself "for being grossly negligent;" in fact, it had allegedly admitted having paid the
amount in the check "by mistake" x x x "if not altogether due to collusion and/or bad faith on
the part of (its) employees." Charging petitioner with "apparent ignorance of routine bank
procedures," by way of counterclaim, private respondent prayed for moral damages of
P100,000.00, exemplary damages of P50,000.00 and attorneys fees of 30% of whatever
amount that would be awarded to him plus an honorarium of P500.00 per appearance in
court.

Private respondent also filed a motion for admission of a third party complaint against Chan.
He alleged that "thru strategem and/or manipulation," Chan was able to withdraw the
amount of $2,500.00 even without private respondents passbook. Thus, private respondent
prayed that third party defendant Chan be made to refund to him the amount withdrawn and
to pay attorneys fees of P5,000.00 plus P300.00 honorarium per appearance.

Petitioner filed a comment on the motion for leave of court to admit the third party
complaint, wherein it asserted that per paragraph 2 of the Rules and Regulations governing
BPI savings accounts, private respondent alone was liable "for the value of the credit given
on account of the draft or check deposited." It contended that private respondent was
estopped from disclaiming liability because he himself authorized the withdrawal of the
amount by signing the withdrawal slip. Petitioner prayed for the denial of the said motion so
as not to unduly delay the disposition of the main case asserting that private respondents
claim could be ventilated in another case.

Private respondent replied that for the parties to obtain complete relief and to avoid
multiplicity of suits, the motion to admit third party complaint should be granted.
Meanwhile, the trial court issued orders on August 25, 1987 and October 28, 1987 directing
private respondent to actively participate in locating Chan. After private respondent failed
to comply, the trial court, on May 18, 1988, dismissed the third party complaint without
prejudice.

On November 4, 1991, a decision was rendered dismissing the complaint. The lower court
held that petitioner could not hold private respondent liable based on the checks face value
alone. To so hold him liable "would render inutile the requirement of clearance from the
drawee bank before the value of a particular foreign check or draft can be credited to the
account of a depositor making such deposit." The lower court further held that "it was
incumbent upon the petitioner to credit the value of the check in question to the account of
the private respondent only upon receipt of the notice of final payment and should not have
authorized the withdrawal from the latters account of the value or proceeds of the check."
Having admitted that it committed a "mistake" in not waiting for the clearance of the check
before authorizing the withdrawal of its value or proceeds, petitioner should suffer the
resultant loss. Supremax

On appeal, the Court of Appeals affirmed the lower courts decision. The appellate court held
that petitioner committed "clear gross negligence" in allowing Ruben Gayon, Jr. to withdraw
the money without presenting private respondents passbook and, before the check was
cleared and in crediting the amount indicated therein in private respondents account. It
stressed that the mere deposit of a check in private respondents account did not mean that
the check was already private respondents property. The check still had to be cleared and its
proceeds can only be withdrawn upon presentation of a passbook in accordance with the
banks rules and regulations. Furthermore, petitioners contention that private respondent
warranted the checks genuineness by endorsing it is untenable for it would render useless
the clearance requirement. Likewise, the requirement of presentation of a passbook to
ascertain the propriety of the accounting reflected would be a meaningless exercise. After
all, these requirements are designed to protect the bank from deception or fraud.
The Court of Appeals cited the case of Roman Catholic Bishop of Malolos, Inc. v. IAC,14 where
this Court stated that a personal check is not legal tender or money, and held that the check
deposited in this case must be cleared before its value could be properly transferred to
private respondent's account.

Without filing a motion for the reconsideration of the Court of Appeals Decision, petitioner
filed this petition for review on certiorari, raising the following issues:

1.......WHETHER OR NOT RESPONDENT NAPIZA IS LIABLE UNDER HIS WARRANTIES AS A

GENERAL INDORSER.

2.......WHETHER OR NOT A CONTRACT OF AGENCY WAS CREATED BETWEEN RESPONDENT

NAPIZA AND RUBEN GAYON.

3.......WHETHER OR NOT PETITIONER WAS GROSSLY NEGLIGENT IN ALLOWING THE

WITHDRAWAL.

Petitioner claims that private respondent, having affixed his signature at the dorsal side of
the check, should be liable for the amount stated therein in accordance with the following
provision of the Negotiable Instruments Law (Act No. 2031):

"SEC. 66. Liability of general indorser. Every indorser who indorses without qualification,
warrants to all subsequent holders in due course

(a)......The matters and things mentioned in subdivisions (a), (b), and (c) of the next
preceding section; and

(b)......That the instrument is at the time of his indorsement, valid and subsisting.

And, in addition, he engages that on due presentment, it shall be accepted or paid, or both,
as the case may be, according to its tenor, and that if it be dishonored, and the necessary
proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to
any subsequent indorser who may be compelled to pay it."

Section 65, on the other hand, provides for the following warranties of a person negotiating
an instrument by delivery or by qualified indorsement: (a) that the instrument is genuine
and in all respects what it purports to be; (b) that he has a good title to it, and (c) that all
prior parties had capacity to contract. 15 In People v. Maniego,16 this Court described the
liabilities of an indorser as follows:

"Appellants contention that as mere indorser, she may not be liable on account of the
dishonor of the checks indorsed by her, is likewise untenable. Under the law, the holder or
last indorsee of a negotiable instrument has the right to enforce payment of the instrument
for the full amount thereof against all parties liable thereon. Among the parties liable thereon
is an indorser of the instrument, i.e., a person placing his signature upon an instrument
otherwise than as a maker, drawer or acceptor * * unless he clearly indicated by appropriate
words his intention to be bound in some other capacity. Such an indorser who indorses
without qualification, inter alia engages that on due presentment, * * (the instrument) shall
be accepted or paid, or both, as the case may be, according to its tenor, and that if it be
dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the
amount thereof to the holder, or any subsequent indorser who may be compelled to pay it.
Maniego may also be deemed an accommodation party in the light of the facts, i.e., a person
who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his name to some other person. As such, she is
under the law liable on the instrument to a holder for value, notwithstanding such holder at
the time of taking the instrument knew * * (her) to be only an accommodation party, although
she has the right, after paying the holder, to obtain reimbursement from the party
accommodated, since the relation between them is in effect that of principal and surety, the
accommodation party being the surety."

It is thus clear that ordinarily private respondent may be held liable as an indorser of the
check or even as an accommodation party.17 However, to hold private respondent liable for
the amount of the check he deposited by the strict application of the law and without
considering the attending circumstances in the case would result in an injustice and in the
erosion of the public trust in the banking system. The interest of justice thus demands
looking into the events that led to the encashment of the check.

Petitioner asserts that by signing the withdrawal slip, private respondent "presented the
opportunity for the withdrawal of the amount in question." Petitioner relied "on the genuine
signature on the withdrawal slip, the personality of private respondents son and the lapse of
more than fifty (50) days from date of deposit of the Continental Bank draft, without the
same being returned yet."18 We hold, however, that the propriety of the withdrawal should
be gauged by compliance with the rules thereon that both petitioner bank and its depositors
are duty-bound to observe.

In the passbook that petitioner issued to private respondent, the following rules on
withdrawal of deposits appear:

"4.......Withdrawals must be made by the depositor personally but in some exceptional

circumstances, the Bank may allow withdrawal by another upon the depositors written
authority duly authenticated; and neither a deposit nor a withdrawal will be permitted
except upon the presentation of the depositors savings passbook, in which the amount
deposited withdrawn shall be entered only by the Bank.

5.......Withdrawals may be made by draft, mail or telegraphic transfer in currency of the

account at the request of the depositor in writing on the withdrawal slip or by authenticated
cable. Such request must indicate the name of the payee/s, amount and the place where the
funds are to be paid. Any stamp, transmission and other charges related to such withdrawals
shall be for the account of the depositor and shall be paid by him/her upon demand.
Withdrawals may also be made in the form of travellers checks and in pesos. Withdrawals in
the form of notes/bills are allowed subject however, to their (availability).
6.......Deposits shall not be subject to withdrawal by check, and may be withdrawn only in the
manner above provided, upon presentation of the depositors savings passbook and with the
withdrawal form supplied by the Bank at the counter."19cräläwvirtualibräry

Under these rules, to be able to withdraw from the savings account deposit under the
Philippine foreign currency deposit system, two requisites must be presented to petitioner
bank by the person withdrawing an amount: (a) a duly filled-up withdrawal slip, and (b) the
depositors passbook. Private respondent admits that he signed a blank withdrawal slip
ostensibly in violation of Rule No. 6 requiring that the request for withdrawal must name the
payee, the amount to be withdrawn and the place where such withdrawal should be made.
That the withdrawal slip was in fact a blank one with only private respondents two
signatures affixed on the proper spaces is buttressed by petitioners allegation in the instant
petition that had private respondent indicated therein the person authorized to receive the
money, then Ruben Gayon, Jr. could not have withdrawn any amount. Petitioner contends
that "(i)n failing to do so (i.e., naming his authorized agent), he practically authorized any
possessor thereof to write any amount and to collect the same." 20cräläwvirtualibräry

Such contention would have been valid if not for the fact that the withdrawal slip itself
indicates a special instruction that the amount is payable to "Ramon A. de Guzman &/or
Agnes C. de Guzman." Such being the case, petitioners personnel should have been duly
warned that Gayon, who was also employed in petitioners Buendia Ave. Extension
branch,21 was not the proper payee of the proceeds of the check. Otherwise, either Ramon or
Agnes de Guzman should have issued another authority to Gayon for such withdrawal. Of
course, at the dorsal side of the withdrawal slip is an "authority to withdraw" naming Gayon
the person who can withdraw the amount indicated in the check. Private respondent does
not deny having signed such authority. However, considering petitioners clear admission
that the withdrawal slip was a blank one except for private respondents signature, the
unavoidable conclusion is that the typewritten name of "Ruben C. Gayon, Jr." was
intercalated and thereafter it was signed by Gayon or whoever was allowed by petitioner to
withdraw the amount. Under these facts, there could not have been a principal-agent
relationship between private respondent and Gayon so as to render the former liable for the
amount withdrawn.

Moreover, the withdrawal slip contains a boxed warning that states: "This receipt must be
signed and presented with the corresponding foreign currency savings passbook by the
depositor in person. For withdrawals thru a representative, depositor should accomplish the
authority at the back." The requirement of presentation of the passbook when withdrawing
an amount cannot be given mere lip service even though the person making the withdrawal
is authorized by the depositor to do so. This is clear from Rule No. 6 set out by petitioner so
that, for the protection of the banks interest and as a reminder to the depositor, the
withdrawal shall be entered in the depositors passbook. The fact that private respondents
passbook was not presented during the withdrawal is evidenced by the entries therein
showing that the last transaction that he made with the bank was on September 3, 1984, the
date he deposited the controversial check in the amount of $2,500.00. 22cräläwvirtualibräry
In allowing the withdrawal, petitioner likewise overlooked another rule that is printed in the
passbook. Thus:

"2.......All deposits will be received as current funds and will be repaid in the same manner;
provided, however, that deposits of drafts, checks, money orders, etc. will be accepted as
subject to collection only and credited to the account only upon receipt of the notice of final
payment. Collection charges by the Banks foreign correspondent in effecting such collection
shall be for the account of the depositor. If the account has sufficient balance, the collection
shall be debited by the Bank against the account. If, for any reason, the proceeds of the
deposited checks, drafts, money orders, etc., cannot be collected or if the Bank is required to
return such proceeds, the provisional entry therefor made by the Bank in the savings
passbook and its records shall be deemed automatically cancelled regardless of the time that
has elapsed, and whether or not the defective items can be returned to the depositor; and
the Bank is hereby authorized to execute immediately the necessary corrections,
amendments or changes in its record, as well as on the savings passbook at the first
opportunity to reflect such cancellation." (Italics and underlining supplied.)

As correctly held by the Court of Appeals, in depositing the check in his name, private
respondent did not become the outright owner of the amount stated therein. Under the
above rule, by depositing the check with petitioner, private respondent was, in a way, merely
designating petitioner as the collecting bank. This is in consonance with the rule that a
negotiable instrument, such as a check, whether a managers check or ordinary check, is not
legal tender.23 As such, after receiving the deposit, under its own rules, petitioner shall credit
the amount in private respondents account or infuse value thereon only after the drawee
bank shall have paid the amount of the check or the check has been cleared for deposit. Again,
this is in accordance with ordinary banking practices and with this Courts pronouncement
that "the collecting bank or last endorser generally suffers the loss because it has the duty to
ascertain the genuineness of all prior endorsements considering that the act of presenting
the check for payment to the drawee is an assertion that the party making the presentment
has done its duty to ascertain the genuineness of the endorsements." 24 The rule finds more
meaning in this case where the check involved is drawn on a foreign bank and therefore
collection is more difficult than when the drawee bank is a local one even though the check
in question is a managers check.25cräläwvirtualibräry

In Banco Atlantico v. Auditor General,[26] Banco Atlantico, a commercial bank in Madrid,

Spain, paid the amounts represented in three (3) checks to Virginia Boncan, the finance
officer of the Philippine Embassy in Madrid. The bank did so without previously clearing the
checks with the drawee bank, the Philippine National Bank in New York, on account of the
"special treatment" that Boncan received from the personnel of Banco Atlanticos foreign
department. The Court held that the encashment of the checks without prior clearance is
"contrary to normal or ordinary banking practice specially so where the drawee bank is a
foreign bank and the amounts involved were large." Accordingly, the Court approved the
Auditor Generals denial of Banco Atlanticos claim for payment of the value of the checks that
was withdrawn by Boncan.
Said ruling brings to light the fact that the banking business is affected with public interest.
By the nature of its functions, a bank is under obligation to treat the accounts of its depositors
"with meticulous care, always having in mind the fiduciary nature of their relationship."27 As
such, in dealing with its depositors, a bank should exercise its functions not only with the
diligence of a good father of a family but it should do so with the highest degree of care.[28]

In the case at bar, Petitioner, in allowing the withdrawal of private respondents deposit,
failed to exercise the diligence of a good father of a family. In total disregard of its own rules,
petitioners personnel negligently handled private respondents account to petitioners
detriment. As this Court once said on this matter:

"Negligence is the omission to do something which a reasonable man, guided by those

considerations which ordinarily regulate the conduct of human affairs, would do, or the
doing of something which a prudent and reasonable man would do. The seventy-eight (78)-
year-old, yet still relevant, case of Picart v. Smith, provides the test by which to determine the
existence of negligence in a particular case which may be stated as follows: Did the defendant
in doing the alleged negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is guilty of negligence.
The law here in effect adopts the standard supposed to be supplied by the imaginary conduct
of the discreet pater-familias of the Roman law. The existence of negligence in a given case is
not determined by reference to the personal judgment of the actor in the situation before
him. The law considers what would be reckless, blameworthy, or negligent in the man of
ordinary intelligence and prudence and determines liability by that." 29cräläwvirtualibräry

Petitioner violated its own rules by allowing the withdrawal of an amount that is definitely
over and above the aggregate amount of private respondents dollar deposits that had yet to
be cleared. The banks ledger on private respondents account shows that before he deposited
$2,500.00, private respondent had a balance of only $750.00.30 Upon private respondents
deposit of $2,500.00 on September 3, 1984, that amount was credited in his ledger as a
deposit resulting in the corresponding total balance of $3,250.00.31 On September 10, 1984,
the amount of $600.00 and the additional charges of $10.00 were indicated therein as
withdrawn thereby leaving a balance of $2,640.00. On September 30, 1984, an interest of
$11.59 was reflected in the ledger and on October 23, 1984, the amount of $2,541.67 was
entered as withdrawn with a balance of $109.92.32 On November 19, 1984 the word "hold"
was written beside the balance of $109.92.33 That must have been the time when Reyes,
petitioners branch manager, was informed unofficially of the fact that the check deposited
was a counterfeit, but petitioners Buendia Ave. Extension Branch received a copy of the
communication thereon from Wells Fargo Bank International in New York the following day,
November 20, 1984.34 According to Reyes, Wells Fargo Bank International handled the
clearing of checks drawn against U.S. banks that were deposited with
petitioner.35cräläwvirtualibräry

From these facts on record, it is at once apparent that petitioners personnel allowed the
withdrawal of an amount bigger than the original deposit of $750.00 and the value of the
check deposited in the amount of $2,500.00 although they had not yet received notice from
the clearing bank in the United States on whether or not the check was funded. Reyes
contention that after the lapse of the 35-day period the amount of a deposited check could
be withdrawn even in the absence of a clearance thereon, otherwise it could take a long time
before a depositor could make a withdrawal,36 is untenable. Said practice amounts to a
disregard of the clearance requirement of the banking system.

While it is true that private respondents having signed a blank withdrawal slip set in motion
the events that resulted in the withdrawal and encashment of the counterfeit check, the
negligence of petitioners personnel was the proximate cause of the loss that petitioner
sustained. Proximate cause, which is determined by a mixed consideration of logic, common
sense, policy and precedent, is "that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury, and without which the
result would not have occurred."37 The proximate cause of the withdrawal and eventual loss
of the amount of $2,500.00 on petitioners part was its personnels negligence in allowing such
withdrawal in disregard of its own rules and the clearing requirement in the banking system.
In so doing, petitioner assumed the risk of incurring a loss on account of a forged or
counterfeit foreign check and hence, it should suffer the resulting damage.

WHEREFORE , the petition for review on certiorari is DENIED. The Decision of the Court of
Appeals in CA-G.R. CV No. 37392 is AFFIRMED.

SO ORDERED.
G.R. Nos. 173654-765 August 28, 2008

PEOPLE OF THE PHILIPPINES, petitioner,

vs.
TERESITA PUIG and ROMEO PORRAS, respondents.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review under Rule 45 of the Revised Rules of Court with petitioner
People of the Philippines, represented by the Office of the Solicitor General, praying for the
reversal of the Orders dated 30 January 2006 and 9 June 2006 of the Regional Trial Court
(RTC) of the 6th Judicial Region, Branch 68, Dumangas, Iloilo, dismissing the 112 cases of
Qualified Theft filed against respondents Teresita Puig and Romeo Porras, and denying
petitioner’s Motion for Reconsideration, in Criminal Cases No. 05-3054 to 05-3165.

The following are the factual antecedents:

On 7 November 2005, the Iloilo Provincial Prosecutor’s Office filed before Branch 68 of the
RTC in Dumangas, Iloilo, 112 cases of Qualified Theft against respondents Teresita Puig
(Puig) and Romeo Porras (Porras) who were the Cashier and Bookkeeper, respectively, of
private complainant Rural Bank of Pototan, Inc. The cases were docketed as Criminal Cases
No. 05-3054 to 05-3165.

The allegations in the Informations1 filed before the RTC were uniform and pro-forma,
except for the amounts, date and time of commission, to wit:

INFORMATION

That on or about the 1st day of August, 2002, in the Municipality of Pototan, Province
of Iloilo, Philippines, and within the jurisdiction of this Honorable Court, above-
named [respondents], conspiring, confederating, and helping one another, with
grave abuse of confidence, being the Cashier and Bookkeeper of the Rural Bank of
Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of the
management of the Bank and with intent of gain, did then and there willfully,
unlawfully and feloniously take, steal and carry away the sum of FIFTEEN THOUSAND
PESOS (P15,000.00), Philippine Currency, to the damage and prejudice of the said
bank in the aforesaid amount.

After perusing the Informations in these cases, the trial court did not find the existence of
probable cause that would have necessitated the issuance of a warrant of arrest based on the
following grounds:

(1) the element of ‘taking without the consent of the owners’ was missing on the
ground that it is the depositors-clients, and not the Bank, which filed the complaint in
 these cases, who are the owners of the money allegedly taken by respondents and
hence, are the real parties-in-interest; and

(2) the Informations are bereft of the phrase alleging "dependence, guardianship
or vigilance between the respondents and the offended party that would have
created a high degree of confidence between them which the respondents could
have abused."

It added that allowing the 112 cases for Qualified Theft filed against the respondents to push
through would be violative of the right of the respondents under Section 14(2), Article III of
the 1987 Constitution which states that in all criminal prosecutions, the accused shall enjoy
the right to be informed of the nature and cause of the accusation against him. Following
Section 6, Rule 112 of the Revised Rules of Criminal Procedure, the RTC dismissed the cases
on 30 January 2006 and refused to issue a warrant of arrest against Puig and Porras.

A Motion for Reconsideration2 was filed on 17 April 2006, by the petitioner.

On 9 June 2006, an Order3 denying petitioner’s Motion for Reconsideration was issued by
the RTC, finding as follows:

Accordingly, the prosecution’s Motion for Reconsideration should be, as it hereby,

DENIED. The Order dated January 30, 2006 STANDS in all respects.

Petitioner went directly to this Court via Petition for Review on Certiorari under Rule 45,
raising the sole legal issue of:

WHETHER OR NOT THE 112 INFORMATIONS FOR QUALIFIED THEFT SUFFICIENTLY

ALLEGE THE ELEMENT OF TAKING WITHOUT THE CONSENT OF THE OWNER, AND
THE QUALIFYING CIRCUMSTANCE OF GRAVE ABUSE OF CONFIDENCE.

Petitioner prays that judgment be rendered annulling and setting aside the Orders dated 30
January 2006 and 9 June 2006 issued by the trial court, and that it be directed to proceed
with Criminal Cases No. 05-3054 to 05-3165.

Petitioner explains that under Article 1980 of the New Civil Code, "fixed, savings, and current
deposits of money in banks and similar institutions shall be governed by the provisions
concerning simple loans." Corollary thereto, Article 1953 of the same Code provides that "a
person who receives a loan of money or any other fungible thing acquires the ownership
thereof, and is bound to pay to the creditor an equal amount of the same kind and quality."
Thus, it posits that the depositors who place their money with the bank are considered
creditors of the bank. The bank acquires ownership of the money deposited by its clients,
making the money taken by respondents as belonging to the bank.

Petitioner also insists that the Informations sufficiently allege all the elements of the crime
of qualified theft, citing that a perusal of the Informations will show that they specifically
allege that the respondents were the Cashier and Bookkeeper of the Rural Bank of Pototan,
Inc., respectively, and that they took various amounts of money with grave abuse of
confidence, and without the knowledge and consent of the bank, to the damage and prejudice
of the bank.

Parenthetically, respondents raise procedural issues. They challenge the petition on the
ground that a Petition for Review on Certiorari via Rule 45 is the wrong mode of appeal
because a finding of probable cause for the issuance of a warrant of arrest presupposes
evaluation of facts and circumstances, which is not proper under said Rule.

Respondents further claim that the Department of Justice (DOJ), through the Secretary of
Justice, is the principal party to file a Petition for Review on Certiorari, considering that the
incident was indorsed by the DOJ.

We find merit in the petition.

The dismissal by the RTC of the criminal cases was allegedly due to insufficiency of the
Informations and, therefore, because of this defect, there is no basis for the existence of
probable cause which will justify the issuance of the warrant of arrest. Petitioner assails the
dismissal contending that the Informations for Qualified Theft sufficiently state facts which
constitute (a) the qualifying circumstance of grave abuse of confidence; and (b) the element
of taking, with intent to gain and without the consent of the owner, which is the Bank.

In determining the existence of probable cause to issue a warrant of arrest, the RTC judge
found the allegations in the Information inadequate. He ruled that the Information failed to
state facts constituting the qualifying circumstance of grave abuse of confidence and the
element of taking without the consent of the owner, since the owner of the money is not the
Bank, but the depositors therein. He also cites People v. Koc Song,4 in which this Court held:

There must be allegation in the information and proof of a relation, by reason of

dependence, guardianship or vigilance, between the respondents and the offended
party that has created a high degree of confidence between them, which the
respondents abused.

At this point, it needs stressing that the RTC Judge based his conclusion that there was no
probable cause simply on the insufficiency of the allegations in the Informations concerning the
facts constitutive of the elements of the offense charged. This, therefore, makes the issue of
sufficiency of the allegations in the Informations the focal point of discussion.

Qualified Theft, as defined and punished under Article 310 of the Revised Penal Code, is
committed as follows, viz:

ART. 310. Qualified Theft. – The crime of theft shall be punished by the penalties next
higher by two degrees than those respectively specified in the next preceding article,
if committed by a domestic servant, or with grave abuse of confidence, or if the
property stolen is motor vehicle, mail matter or large cattle or consists of coconuts
taken from the premises of a plantation, fish taken from a fishpond or fishery or if
 property is taken on the occasion of fire, earthquake, typhoon, volcanic eruption, or
any other calamity, vehicular accident or civil disturbance. (Emphasis supplied.)

Theft, as defined in Article 308 of the Revised Penal Code, requires the physical taking of
another’s property without violence or intimidation against persons or force upon things.
The elements of the crime under this Article are:

1. Intent to gain;

2. Unlawful taking;

3. Personal property belonging to another;

4. Absence of violence or intimidation against persons or force upon things.

To fall under the crime of Qualified Theft, the following elements must concur:

1. Taking of personal property;

2. That the said property belongs to another;

3. That the said taking be done with intent to gain;

4. That it be done without the owner’s consent;

5. That it be accomplished without the use of violence or intimidation against persons,

nor of force upon things;

6. That it be done with grave abuse of confidence.

On the sufficiency of the Information, Section 6, Rule 110 of the Rules of Court requires, inter
alia, that the information must state the acts or omissions complained of as constitutive of
the offense.

On the manner of how the Information should be worded, Section 9, Rule 110 of the Rules of
Court, is enlightening:

Section 9. Cause of the accusation. The acts or omissions complained of as constituting

the offense and the qualifying and aggravating circumstances must be stated in
ordinary and concise language and not necessarily in the language used in the statute
but in terms sufficient to enable a person of common understanding to know what
offense is being charged as well as its qualifying and aggravating circumstances and
for the court to pronounce judgment.

It is evident that the Information need not use the exact language of the statute in alleging
the acts or omissions complained of as constituting the offense. The test is whether it enables
a person of common understanding to know the charge against him, and the court to render
judgment properly.5

The portion of the Information relevant to this discussion reads:

A]bove-named [respondents], conspiring, confederating, and helping one another, with grave abuse of confidence, being the
Cashier and Bookkeeper of the Rural Bank of Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of the
management of the Bank x x x.

It is beyond doubt that tellers, Cashiers, Bookkeepers and other employees of a Bank who
come into possession of the monies deposited therein enjoy the confidence reposed in them
by their employer. Banks, on the other hand, where monies are deposited, are considered
the owners thereof. This is very clear not only from the express provisions of the law, but
from established jurisprudence. The relationship between banks and depositors has been
held to be that of creditor and debtor. Articles 1953 and 1980 of the New Civil Code, as
appropriately pointed out by petitioner, provide as follows:

Article 1953. A person who receives a loan of money or any other fungible thing
acquires the ownership thereof, and is bound to pay to the creditor an equal amount
of the same kind and quality.

Article 1980. Fixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning loan.

In a long line of cases involving Qualified Theft, this Court has firmly established the nature
of possession by the Bank of the money deposits therein, and the duties being performed by
its employees who have custody of the money or have come into possession of it. The Court
has consistently considered the allegations in the Information that such employees acted
with grave abuse of confidence, to the damage and prejudice of the Bank, without
particularly referring to it as owner of the money deposits, as sufficient to make out a case
of Qualified Theft. For a graphic illustration, we cite Roque v. People,6 where the accused
teller was convicted for Qualified Theft based on this Information:

That on or about the 16th day of November, 1989, in the municipality of

Floridablanca, province of Pampanga, Philippines and within the jurisdiction of his
Honorable Court, the above-named accused ASUNCION GALANG ROQUE, being then
employed as teller of the Basa Air Base Savings and Loan Association Inc. (BABSLA)
with office address at Basa Air Base, Floridablanca, Pampanga, and as such was
authorized and reposed with the responsibility to receive and collect capital
contributions from its member/contributors of said corporation, and having
collected and received in her capacity as teller of the BABSLA the sum of TEN
THOUSAND PESOS (P10,000.00), said accused, with intent of gain, with grave abuse
of confidence and without the knowledge and consent of said corporation, did
then and there willfully, unlawfully and feloniously take, steal and carry away the
amount of P10,000.00, Philippine currency, by making it appear that a certain
depositor by the name of Antonio Salazar withdrew from his Savings Account No.
 1359, when in truth and in fact said Antonio Salazar did not withdr[a]w the said
amount of P10,000.00 to the damage and prejudice of BABSLA in the total amount
of P10,000.00, Philippine currency.

In convicting the therein appellant, the Court held that:

[S]ince the teller occupies a position of confidence, and the bank places money in the
teller’s possession due to the confidence reposed on the teller, the felony of qualified
theft would be committed.7

Also in People v. Sison,8 the Branch Operations Officer was convicted of the crime of
Qualified Theft based on the Information as herein cited:

That in or about and during the period compressed between January 24, 1992 and
February 13, 1992, both dates inclusive, in the City of Manila, Philippines, the said
accused did then and there wilfully, unlawfully and feloniously, with intent of gain
and without the knowledge and consent of the owner thereof, take, steal and carry
away the following, to wit:

Cash money amounting to P6,000,000.00 in different denominations belonging to the

PHILIPPINE COMMERCIAL INTERNATIONAL BANK (PCIBank for brevity), Luneta
Branch, Manila represented by its Branch Manager, HELEN U. FARGAS, to the damage
and prejudice of the said owner in the aforesaid amount of P6,000,000.00, Philippine
Currency.

That in the commission of the said offense, herein accused acted with grave abuse of
confidence and unfaithfulness, he being the Branch Operation Officer of the said
complainant and as such he had free access to the place where the said amount of
money was kept.

The judgment of conviction elaborated thus:

The crime perpetuated by appellant against his employer, the Philippine Commercial
and Industrial Bank (PCIB), is Qualified Theft. Appellant could not have committed
the crime had he not been holding the position of Luneta Branch Operation Officer
which gave him not only sole access to the bank vault xxx. The management of the
PCIB reposed its trust and confidence in the appellant as its Luneta Branch Operation
Officer, and it was this trust and confidence which he exploited to enrich himself to
the damage and prejudice of PCIB x x x.9

From another end, People v. Locson,10 in addition to People v. Sison, described the nature
of possession by the Bank. The money in this case was in the possession of the defendant as
receiving teller of the bank, and the possession of the defendant was the possession of the
Bank. The Court held therein that when the defendant, with grave abuse of confidence,
removed the money and appropriated it to his own use without the consent of the Bank,
there was taking as contemplated in the crime of Qualified Theft.11
Conspicuously, in all of the foregoing cases, where the Informations merely alleged the
positions of the respondents; that the crime was committed with grave abuse of confidence,
with intent to gain and without the knowledge and consent of the Bank, without necessarily
stating the phrase being assiduously insisted upon by respondents, "of a relation by reason
of dependence, guardianship or vigilance, between the respondents and the offended
party that has created a high degree of confidence between them, which respondents
abused,"12 and without employing the word "owner" in lieu of the "Bank" were considered
to have satisfied the test of sufficiency of allegations.

As regards the respondents who were employed as Cashier and Bookkeeper of the Bank in
this case, there is even no reason to quibble on the allegation in the Informations that they
acted with grave abuse of confidence. In fact, the Information which alleged grave abuse of
confidence by accused herein is even more precise, as this is exactly the requirement of the
law in qualifying the crime of Theft.

In summary, the Bank acquires ownership of the money deposited by its clients; and the
employees of the Bank, who are entrusted with the possession of money of the Bank due to
the confidence reposed in them, occupy positions of confidence. The Informations, therefore,
sufficiently allege all the essential elements constituting the crime of Qualified Theft.

On the theory of the defense that the DOJ is the principal party who may file the instant
petition, the ruling in Mobilia Products, Inc. v. Hajime Umezawa13 is instructive. The Court
thus enunciated:

In a criminal case in which the offended party is the State, the interest of the private
complainant or the offended party is limited to the civil liability arising therefrom.
Hence, if a criminal case is dismissed by the trial court or if there is an acquittal, a
reconsideration of the order of dismissal or acquittal may be undertaken, whenever
legally feasible, insofar as the criminal aspect thereof is concerned and may be made
only by the public prosecutor; or in the case of an appeal, by the State only, through
the OSG. x x x.

On the alleged wrong mode of appeal by petitioner, suffice it to state that the rule is well-
settled that in appeals by certiorari under Rule 45 of the Rules of Court, only errors of law
may be raised,14 and herein petitioner certainly raised a question of law.

As an aside, even if we go beyond the allegations of the Informations in these cases, a closer
look at the records of the preliminary investigation conducted will show that, indeed,
probable cause exists for the indictment of herein respondents. Pursuant to Section 6, Rule
112 of the Rules of Court, the judge shall issue a warrant of arrest only upon a finding of
probable cause after personally evaluating the resolution of the prosecutor and its
supporting evidence. Soliven v. Makasiar,15 as reiterated in Allado v. Driokno,16 explained
that probable cause for the issuance of a warrant of arrest is the existence of such facts and
circumstances that would lead a reasonably discreet and prudent person to believe that an
offense has been committed by the person sought to be arrested. 17 The records reasonably
indicate that the respondents may have, indeed, committed the offense charged.
Before closing, let it be stated that while it is truly imperative upon the fiscal or the judge, as
the case may be, to relieve the respondents from the pain of going through a trial once it is
ascertained that no probable cause exists to form a sufficient belief as to the guilt of the
respondents, conversely, it is also equally imperative upon the judge to proceed with the
case upon a showing that there is a prima facie case against the respondents.

WHEREFORE, premises considered, the Petition for Review on Certiorari is

hereby GRANTED. The Orders dated 30 January 2006 and 9 June 2006 of the RTC dismissing
Criminal Cases No. 05-3054 to 05-3165 are REVERSED and SET ASIDE. Let the
corresponding Warrants of Arrest issue against herein respondents TERESITA PUIG and
ROMEO PORRAS. The RTC Judge of Branch 68, in Dumangas, Iloilo, is directed to proceed
with the trial of Criminal Cases No. 05-3054 to 05-3165, inclusive, with reasonable dispatch.
No pronouncement as to costs.

SO ORDERED.
G.R. No. 90027 March 3, 1993

CA AGRO-INDUSTRIAL DEVELOPMENT CORP., petitioner,

vs.
THE HONORABLE COURT OF APPEALS and SECURITY BANK AND TRUST
COMPANY, respondents.

Dolorfino & Dominguez Law Offices for petitioner.

Danilo B. Banares for private respondent.

DAVIDE, JR., J.:

Is the contractual relation between a commercial bank and another party in a contract of
rent of a safety deposit box with respect to its contents placed by the latter one of bailor and
bailee or one of lessor and lessee?

This is the crux of the present controversy.

On 3 July 1979, petitioner (through its President, Sergio Aguirre) and the spouses Ramon
and Paula Pugao entered into an agreement whereby the former purchased from the latter
two (2) parcels of land for a consideration of P350,625.00. Of this amount, P75,725.00 was
paid as downpayment while the balance was covered by three (3) postdated checks. Among
the terms and conditions of the agreement embodied in a Memorandum of True and Actual
Agreement of Sale of Land were that the titles to the lots shall be transferred to the petitioner
upon full payment of the purchase price and that the owner's copies of the certificates of
titles thereto, Transfer Certificates of Title (TCT) Nos. 284655 and 292434, shall be
deposited in a safety deposit box of any bank. The same could be withdrawn only upon the
joint signatures of a representative of the petitioner and the Pugaos upon full payment of the
purchase price. Petitioner, through Sergio Aguirre, and the Pugaos then rented Safety
Deposit Box No. 1448 of private respondent Security Bank and Trust Company, a domestic
banking corporation hereinafter referred to as the respondent Bank. For this purpose, both
signed a contract of lease (Exhibit "2") which contains, inter alia, the following conditions:

13. The bank is not a depositary of the contents of the safe and it has neither
the possession nor control of the same.

14. The bank has no interest whatsoever in said contents, except herein
expressly provided, and it assumes absolutely no liability in connection
therewith.1

After the execution of the contract, two (2) renter's keys were given to the renters — one to
Aguirre (for the petitioner) and the other to the Pugaos. A guard key remained in the
possession of the respondent Bank. The safety deposit box has two (2) keyholes, one for the
guard key and the other for the renter's key, and can be opened only with the use of both
keys. Petitioner claims that the certificates of title were placed inside the said box.

Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner the two (2)
lots at a price of P225.00 per square meter which, as petitioner alleged in its complaint,
translates to a profit of P100.00 per square meter or a total of P280,500.00 for the entire
property. Mrs. Ramos demanded the execution of a deed of sale which necessarily entailed
the production of the certificates of title. In view thereof, Aguirre, accompanied by the
Pugaos, then proceeded to the respondent Bank on 4 October 1979 to open the safety deposit
box and get the certificates of title. However, when opened in the presence of the Bank's
representative, the box yielded no such certificates. Because of the delay in the reconstitution
of the title, Mrs. Ramos withdrew her earlier offer to purchase the lots; as a consequence
thereof, the petitioner allegedly failed to realize the expected profit of P280,500.00. Hence,
the latter filed on 1 September 1980 a complaint2 for damages against the respondent Bank
with the Court of First Instance (now Regional Trial Court) of Pasig, Metro Manila which
docketed the same as Civil Case No. 38382.

In its Answer with Counterclaim,3 respondent Bank alleged that the petitioner has no cause
of action because of paragraphs 13 and 14 of the contract of lease (Exhibit "2"); corollarily,
loss of any of the items or articles contained in the box could not give rise to an action against
it. It then interposed a counterclaim for exemplary damages as well as attorney's fees in the
amount of P20,000.00. Petitioner subsequently filed an answer to the counterclaim.4

In due course, the trial court, now designated as Branch 161 of the Regional Trial Court (RTC)
of Pasig, Metro Manila, rendered a decision5 adverse to the petitioner on 8 December 1986,
the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered dismissing

plaintiff's complaint.

On defendant's counterclaim, judgment is hereby rendered ordering plaintiff

to pay defendant the amount of FIVE THOUSAND (P5,000.00) PESOS as
attorney's fees.

With costs against plaintiff.6

The unfavorable verdict is based on the trial court's conclusion that under paragraphs 13
and 14 of the contract of lease, the Bank has no liability for the loss of the certificates of title.
The court declared that the said provisions are binding on the parties.

Its motion for reconsideration7 having been denied, petitioner appealed from the adverse
decision to the respondent Court of Appeals which docketed the appeal as CA-G.R. CV No.
15150. Petitioner urged the respondent Court to reverse the challenged decision because the
trial court erred in (a) absolving the respondent Bank from liability from the loss, (b) not
declaring as null and void, for being contrary to law, public order and public policy, the
provisions in the contract for lease of the safety deposit box absolving the Bank from any
liability for loss, (c) not concluding that in this jurisdiction, as well as under American
jurisprudence, the liability of the Bank is settled and (d) awarding attorney's fees to the Bank
and denying the petitioner's prayer for nominal and exemplary damages and attorney's
fees.8

In its Decision promulgated on 4 July 1989,9 respondent Court affirmed the appealed
decision principally on the theory that the contract (Exhibit "2") executed by the petitioner
and respondent Bank is in the nature of a contract of lease by virtue of which the petitioner
and its co-renter were given control over the safety deposit box and its contents while the
Bank retained no right to open the said box because it had neither the possession nor control
over it and its contents. As such, the contract is governed by Article 1643 of the Civil
Code 10 which provides:

Art. 1643. In the lease of things, one of the parties binds himself to give to
another the enjoyment or use of a thing for a price certain, and for a period
which may be definite or indefinite. However, no lease for more than ninety-
nine years shall be valid.

It invoked Tolentino vs. Gonzales 11 — which held that the owner of the property loses
his control over the property leased during the period of the contract — and Article
1975 of the Civil Code which provides:

Art. 1975. The depositary holding certificates, bonds, securities or instruments

which earn interest shall be bound to collect the latter when it becomes due,
and to take such steps as may be necessary in order that the securities may
preserve their value and the rights corresponding to them according to law.

The above provision shall not apply to contracts for the rent of safety deposit
boxes.

and then concluded that "[c]learly, the defendant-appellee is not under any duty to
maintain the contents of the box. The stipulation absolving the defendant-appellee
from liability is in accordance with the nature of the contract of lease and cannot be
regarded as contrary to law, public order and public policy." 12 The appellate court
was quick to add, however, that under the contract of lease of the safety deposit box,
respondent Bank is not completely free from liability as it may still be made
answerable in case unauthorized persons enter into the vault area or when the rented
box is forced open. Thus, as expressly provided for in stipulation number 8 of the
contract in question:

8. The Bank shall use due diligence that no unauthorized person shall be
admitted to any rented safe and beyond this, the Bank will not be responsible
for the contents of any safe rented from it. 13

Its motion for reconsideration 14 having been denied in the respondent Court's Resolution of
28 August 1989, 15 petitioner took this recourse under Rule 45 of the Rules of Court and
urges Us to review and set aside the respondent Court's ruling. Petitioner avers that both the
respondent Court and the trial court (a) did not properly and legally apply the correct law in
this case, (b) acted with grave abuse of discretion or in excess of jurisdiction amounting to
lack thereof and (c) set a precedent that is contrary to, or is a departure from precedents
adhered to and affirmed by decisions of this Court and precepts in American jurisprudence
adopted in the Philippines. It reiterates the arguments it had raised in its motion to
reconsider the trial court's decision, the brief submitted to the respondent Court and the
motion to reconsider the latter's decision. In a nutshell, petitioner maintains that regardless
of nomenclature, the contract for the rent of the safety deposit box (Exhibit "2") is actually a
contract of deposit governed by Title XII, Book IV of the Civil Code of the
Philippines. 16 Accordingly, it is claimed that the respondent Bank is liable for the loss of the
certificates of title pursuant to Article 1972 of the said Code which provides:

Art. 1972. The depositary is obliged to keep the thing safely and to return it,
when required, to the depositor, or to his heirs and successors, or to the person
who may have been designated in the contract. His responsibility, with regard
to the safekeeping and the loss of the thing, shall be governed by the provisions
of Title I of this Book.

If the deposit is gratuitous, this fact shall be taken into account in determining
the degree of care that the depositary must observe.

Petitioner then quotes a passage from American Jurisprudence 17 which is supposed

to expound on the prevailing rule in the United States, to wit:

The prevailing rule appears to be that where a safe-deposit company leases a

safe-deposit box or safe and the lessee takes possession of the box or safe and
places therein his securities or other valuables, the relation of bailee and bail
or is created between the parties to the transaction as to such securities or
other valuables; the fact that the
safe-deposit company does not know, and that it is not expected that it shall
know, the character or description of the property which is deposited in such
safe-deposit box or safe does not change that relation. That access to the
contents of the safe-deposit box can be had only by the use of a key retained
by the lessee ( whether it is the sole key or one to be used in connection with
one retained by the lessor) does not operate to alter the foregoing rule. The
argument that there is not, in such a case, a delivery of exclusive possession
and control to the deposit company, and that therefore the situation is entirely
different from that of ordinary bailment, has been generally rejected by the
courts, usually on the ground that as possession must be either in the
depositor or in the company, it should reasonably be considered as in the
latter rather than in the former, since the company is, by the nature of the
contract, given absolute control of access to the property, and the depositor
cannot gain access thereto without the consent and active participation of the
company. . . . (citations omitted).
 and a segment from Words and Phrases 18 which states that a contract for the rental
of a bank safety deposit box in consideration of a fixed amount at stated periods is a
bailment for hire.

Petitioner further argues that conditions 13 and 14 of the questioned contract are contrary
to law and public policy and should be declared null and void. In support thereof, it cites
Article 1306 of the Civil Code which provides that parties to a contract may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are
not contrary to law, morals, good customs, public order or public policy.

After the respondent Bank filed its comment, this Court gave due course to the petition and
required the parties to simultaneously submit their respective Memoranda.

The petition is partly meritorious.

We agree with the petitioner's contention that the contract for the rent of the safety deposit
box is not an ordinary contract of lease as defined in Article 1643 of the Civil Code. However,
We do not fully subscribe to its view that the same is a contract of deposit that is to be strictly
governed by the provisions in the Civil Code on deposit; 19 the contract in the case at bar is a
special kind of deposit. It cannot be characterized as an ordinary contract of lease under
Article 1643 because the full and absolute possession and control of the safety deposit box
was not given to the joint renters — the petitioner and the Pugaos. The guard key of the box
remained with the respondent Bank; without this key, neither of the renters could open the
box. On the other hand, the respondent Bank could not likewise open the box without the
renter's key. In this case, the said key had a duplicate which was made so that both renters
could have access to the box.

Hence, the authorities cited by the respondent Court 20 on this point do not apply. Neither
could Article 1975, also relied upon by the respondent Court, be invoked as an argument
against the deposit theory. Obviously, the first paragraph of such provision cannot apply to
a depositary of certificates, bonds, securities or instruments which earn interest if such
documents are kept in a rented safety deposit box. It is clear that the depositary cannot open
the box without the renter being present.

We observe, however, that the deposit theory itself does not altogether find unanimous
support even in American jurisprudence. We agree with the petitioner that under the latter,
the prevailing rule is that the relation between a bank renting out safe-deposit boxes and its
customer with respect to the contents of the box is that of a bail or and bailee, the bailment
being for hire and mutual benefit. 21 This is just the prevailing view because:

There is, however, some support for the view that the relationship in question
might be more properly characterized as that of landlord and tenant, or lessor
and lessee. It has also been suggested that it should be characterized as that of
licensor and licensee. The relation between a bank, safe-deposit company, or
storage company, and the renter of a safe-deposit box therein, is often
described as contractual, express or implied, oral or written, in whole or in
 part. But there is apparently no jurisdiction in which any rule other than that
applicable to bailments governs questions of the liability and rights of the
parties in respect of loss of the contents of safe-deposit boxes. 22 (citations
omitted)

In the context of our laws which authorize banking institutions to rent out safety deposit
boxes, it is clear that in this jurisdiction, the prevailing rule in the United States has been
adopted. Section 72 of the General Banking Act 23 pertinently provides:

Sec. 72. In addition to the operations specifically authorized elsewhere in this

Act, banking institutions other than building and loan associations may
perform the following services:

(a) Receive in custody funds, documents, and valuable objects,

and rent safety deposit boxes for the safeguarding of such
effects.

xxx xxx xxx

The banks shall perform the services permitted under subsections (a), (b) and
(c) of this section as depositories or as agents. . . . 24 (emphasis supplied)

Note that the primary function is still found within the parameters of a contract
of deposit, i.e., the receiving in custody of funds, documents and other valuable objects for
safekeeping. The renting out of the safety deposit boxes is not independent from, but related
to or in conjunction with, this principal function. A contract of deposit may be entered into
orally or in writing 25 and, pursuant to Article 1306 of the Civil Code, the parties thereto may
establish such stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order or public policy.
The depositary's responsibility for the safekeeping of the objects deposited in the case at bar
is governed by Title I, Book IV of the Civil Code. Accordingly, the depositary would be liable
if, in performing its obligation, it is found guilty of fraud, negligence, delay or contravention
of the tenor of the agreement. 26 In the absence of any stipulation prescribing the degree of
diligence required, that of a good father of a family is to be observed. 27 Hence, any stipulation
exempting the depositary from any liability arising from the loss of the thing deposited on
account of fraud, negligence or delay would be void for being contrary to law and public
policy. In the instant case, petitioner maintains that conditions 13 and 14 of the questioned
contract of lease of the safety deposit box, which read:

13. The bank is not a depositary of the contents of the safe and it has neither
the possession nor control of the same.

14. The bank has no interest whatsoever in said contents, except herein
expressly provided, and it assumes absolutely no liability in connection
therewith. 28
 are void as they are contrary to law and public policy. We find Ourselves in agreement
with this proposition for indeed, said provisions are inconsistent with the respondent
Bank's responsibility as a depositary under Section 72(a) of the General Banking Act.
Both exempt the latter from any liability except as contemplated in condition 8
thereof which limits its duty to exercise reasonable diligence only with respect to who
shall be admitted to any rented safe, to wit:

8. The Bank shall use due diligence that no unauthorized person shall be
admitted to any rented safe and beyond this, the Bank will not be responsible
for the contents of any safe rented from it. 29

Furthermore, condition 13 stands on a wrong premise and is contrary to the actual

practice of the Bank. It is not correct to assert that the Bank has neither the possession
nor control of the contents of the box since in fact, the safety deposit box itself is
located in its premises and is under its absolute control; moreover, the respondent
Bank keeps the guard key to the said box. As stated earlier, renters cannot open their
respective boxes unless the Bank cooperates by presenting and using this guard key.
Clearly then, to the extent above stated, the foregoing conditions in the contract in
question are void and ineffective. It has been said:

With respect to property deposited in a safe-deposit box by a customer of a

safe-deposit company, the parties, since the relation is a contractual one, may
by special contract define their respective duties or provide for increasing or
limiting the liability of the deposit company, provided such contract is not in
violation of law or public policy. It must clearly appear that there actually was
such a special contract, however, in order to vary the ordinary obligations
implied by law from the relationship of the parties; liability of the deposit
company will not be enlarged or restricted by words of doubtful meaning. The
company, in renting
safe-deposit boxes, cannot exempt itself from liability for loss of the contents
by its own fraud or negligence or that of its agents or servants, and if a
provision of the contract may be construed as an attempt to do so, it will be
held ineffective for the purpose. Although it has been held that the lessor of a
safe-deposit box cannot limit its liability for loss of the contents thereof
through its own negligence, the view has been taken that such a lessor may
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.
G.R. No. 126780 February 17, 2005

YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA PAYAM, petitioners,

vs.
THE COURT OF APPEALS and MAURICE McLOUGHLIN, respondents.

DECISION

TINGA, J.:

The primary question of interest before this Court is the only legal issue in the case: It is
whether a hotel may evade liability for the loss of items left with it for safekeeping by its
guests, by having these guests execute written waivers holding the establishment or its
employees free from blame for such loss in light of Article 2003 of the Civil Code which voids
such waivers.

Before this Court is a Rule 45 petition for review of the Decision1 dated 19 October 1995 of
the Court of Appeals which affirmed the Decision2 dated 16 December 1991 of the Regional
Trial Court (RTC), Branch 13, of Manila, finding YHT Realty Corporation, Brunhilda Mata-Tan
(Tan), Erlinda Lainez (Lainez) and Anicia Payam (Payam) jointly and solidarily liable for
damages in an action filed by Maurice McLoughlin (McLoughlin) for the loss of his American
and Australian dollars deposited in the safety deposit box of Tropicana Copacabana
Apartment Hotel, owned and operated by YHT Realty Corporation.

The factual backdrop of the case follow.

Private respondent McLoughlin, an Australian businessman-philanthropist, used to stay at

Sheraton Hotel during his trips to the Philippines prior to 1984 when he met Tan. Tan
befriended McLoughlin by showing him around, introducing him to important people,
accompanying him in visiting impoverished street children and assisting him in buying gifts
for the children and in distributing the same to charitable institutions for poor children. Tan
convinced McLoughlin to transfer from Sheraton Hotel to Tropicana where Lainez, Payam
and Danilo Lopez were employed. Lopez served as manager of the hotel while Lainez and
Payam had custody of the keys for the safety deposit boxes of Tropicana. Tan took care of
McLoughlin's booking at the Tropicana where he started staying during his trips to the
Philippines from December 1984 to September 1987.3

On 30 October 1987, McLoughlin arrived from Australia and registered with Tropicana. He
rented a safety deposit box as it was his practice to rent a safety deposit box every time he
registered at Tropicana in previous trips. As a tourist, McLoughlin was aware of the
procedure observed by Tropicana relative to its safety deposit boxes. The safety deposit box
could only be opened through the use of two keys, one of which is given to the registered
guest, and the other remaining in the possession of the management of the hotel. When a
registered guest wished to open his safety deposit box, he alone could personally request the
management who then would assign one of its employees to accompany the guest and assist
him in opening the safety deposit box with the two keys.4
McLoughlin allegedly placed the following in his safety deposit box: Fifteen Thousand US
Dollars (US$15,000.00) which he placed in two envelopes, one envelope containing Ten
Thousand US Dollars (US$10,000.00) and the other envelope Five Thousand US Dollars
(US$5,000.00); Ten Thousand Australian Dollars (AUS$10,000.00) which he also placed in
another envelope; two (2) other envelopes containing letters and credit cards; two (2)
bankbooks; and a checkbook, arranged side by side inside the safety deposit box.5

On 12 December 1987, before leaving for a brief trip to Hongkong, McLoughlin opened his
safety deposit box with his key and with the key of the management and took therefrom the
envelope containing Five Thousand US Dollars (US$5,000.00), the envelope containing Ten
Thousand Australian Dollars (AUS$10,000.00), his passports and his credit
cards.6 McLoughlin left the other items in the box as he did not check out of his room at the
Tropicana during his short visit to Hongkong. When he arrived in Hongkong, he opened the
envelope which contained Five Thousand US Dollars (US$5,000.00) and discovered upon
counting that only Three Thousand US Dollars (US$3,000.00) were enclosed therein. 7 Since
he had no idea whether somebody else had tampered with his safety deposit box, he thought
that it was just a result of bad accounting since he did not spend anything from that
envelope.8

After returning to Manila, he checked out of Tropicana on 18 December 1987 and left for
Australia. When he arrived in Australia, he discovered that the envelope with Ten Thousand
US Dollars (US$10,000.00) was short of Five Thousand US Dollars (US$5,000). He also
noticed that the jewelry which he bought in Hongkong and stored in the safety deposit box
upon his return to Tropicana was likewise missing, except for a diamond bracelet. 9

When McLoughlin came back to the Philippines on 4 April 1988, he asked Lainez if some
money and/or jewelry which he had lost were found and returned to her or to the
management. However, Lainez told him that no one in the hotel found such things and none
were turned over to the management. He again registered at Tropicana and rented a safety
deposit box. He placed therein one (1) envelope containing Fifteen Thousand US Dollars
(US$15,000.00), another envelope containing Ten Thousand Australian Dollars
(AUS$10,000.00) and other envelopes containing his traveling papers/documents. On 16
April 1988, McLoughlin requested Lainez and Payam to open his safety deposit box. He
noticed that in the envelope containing Fifteen Thousand US Dollars (US$15,000.00), Two
Thousand US Dollars (US$2,000.00) were missing and in the envelope previously containing
Ten Thousand Australian Dollars (AUS$10,000.00), Four Thousand Five Hundred Australian
Dollars (AUS$4,500.00) were missing.10

When McLoughlin discovered the loss, he immediately confronted Lainez and Payam who
admitted that Tan opened the safety deposit box with the key assigned to him. 11 McLoughlin
went up to his room where Tan was staying and confronted her. Tan admitted that she had
stolen McLoughlin's key and was able to open the safety deposit box with the assistance of
Lopez, Payam and Lainez.12 Lopez also told McLoughlin that Tan stole the key assigned to
McLoughlin while the latter was asleep.13
McLoughlin requested the management for an investigation of the incident. Lopez got in
touch with Tan and arranged for a meeting with the police and McLoughlin. When the police
did not arrive, Lopez and Tan went to the room of McLoughlin at Tropicana and thereat,
Lopez wrote on a piece of paper a promissory note dated 21 April 1988. The promissory note
reads as follows:

I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and US$2,000.00 or
its equivalent in Philippine currency on or before May 5, 1988.14

Lopez requested Tan to sign the promissory note which the latter did and Lopez also signed
as a witness. Despite the execution of promissory note by Tan, McLoughlin insisted that it
must be the hotel who must assume responsibility for the loss he suffered. However, Lopez
refused to accept the responsibility relying on the conditions for renting the safety deposit
box entitled "Undertaking For the Use Of Safety Deposit Box,"15 specifically paragraphs (2) and
(4) thereof, to wit:

2. To release and hold free and blameless TROPICANA APARTMENT HOTEL from any
liability arising from any loss in the contents and/or use of the said deposit box for any cause
whatsoever, including but not limited to the presentation or use thereof by any other person
should the key be lost;

...

4. To return the key and execute the RELEASE in favor of TROPICANA APARTMENT HOTEL
upon giving up the use of the box.16

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

After receiving a copy of the indorsement in Australia, McLoughlin came to the Philippines
and registered again as a hotel guest of Tropicana. McLoughlin went to Malacaňang to follow
up on his letter but he was instructed to go to the DOJ. The DOJ directed him to proceed to
the WPD for documentation. But McLoughlin went back to Australia as he had an urgent
business matter to attend to.

For several times, McLoughlin left for Australia to attend to his business and came back to
the Philippines to follow up on his letter to the President but he failed to obtain any concrete
assistance.19

McLoughlin left again for Australia and upon his return to the Philippines on 25 August 1989
to pursue his claims against petitioners, the WPD conducted an investigation which resulted
in the preparation of an affidavit which was forwarded to the Manila City 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 ₱342,000.00, more or less, and the sum of
AUS$4,500.00 or its equivalent in Philippine Currency of ₱99,000.00, or a total of
₱441,000.00, 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 ₱3,674,238.00
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 ₱500,000.00
as moral damages (Item X, Exh. "CC");
 4. Ordering defendants, jointly and severally, to pay plaintiff the sum of ₱350,000.00
as exemplary damages (Item XI, Exh. "CC");

5. And ordering defendants, jointly and severally, to pay litigation expenses in the sum
of ₱200,000.00 (Item XII, Exh. "CC");

6. Ordering defendants, jointly and severally, to pay plaintiff the sum of ₱200,000.00
as attorney's fees, and a fee of ₱3,000.00 for every appearance; and

7. Plus costs of suit.

SO ORDERED.23

The trial court found that McLoughlin's allegations as to the fact of loss and as to the amount
of money he lost were sufficiently shown by his direct and straightforward manner of
testifying in court and found him to be credible and worthy of belief as it was established
that McLoughlin's money, kept in Tropicana's safety deposit box, was taken by Tan without
McLoughlin's consent. The taking was effected through the use of the master key which was
in the possession of the management. Payam and Lainez allowed Tan to use the master key
without authority from McLoughlin. The trial court added that if McLoughlin had not lost his
dollars, he would not have gone through the trouble and personal inconvenience of seeking
aid and assistance from the Office of the President, DOJ, police authorities and the City
Fiscal's Office in his desire to recover his losses from the hotel management and Tan. 24

As regards the loss of Seven Thousand US Dollars (US$7,000.00) and jewelry worth
approximately One Thousand Two Hundred US Dollars (US$1,200.00) which allegedly
occurred during his stay at Tropicana previous to 4 April 1988, no claim was made by
McLoughlin for such losses in his complaint dated 21 November 1990 because he was not
sure how they were lost and who the responsible persons were. But considering the
admission of the defendants in their pre-trial brief that on three previous occasions they
allowed Tan to open the box, the trial court opined that it was logical and reasonable to
presume that his personal assets consisting of Seven Thousand US Dollars (US$7,000.00) and
jewelry were taken by Tan from the safety deposit box without McLoughlin's consent
through the cooperation of Payam and Lainez. 25

The trial court also found that defendants acted with gross negligence in the performance
and exercise of their duties and obligations as innkeepers and were therefore liable to
answer for the losses incurred by McLoughlin.26

Moreover, the trial court ruled that paragraphs (2) and (4) of the "Undertaking For The Use
Of Safety Deposit Box" are not valid for being contrary to the express mandate of Article 2003
of the New Civil Code and against public policy.27 Thus, there being fraud or wanton conduct
on the part of defendants, they should be responsible for all damages which may be
attributed to the non-performance of their contractual obligations.28
The Court of Appeals affirmed the disquisitions made by the lower court except as to the
amount of damages awarded. The decretal text of the appellate court's decision reads:

THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED but modified as
follows:

The appellants are directed jointly and severally to pay the plaintiff/appellee the following
amounts:

1) ₱153,200.00 representing the peso equivalent of US$2,000.00 and AUS$4,500.00;

2) ₱308,880.80, 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 ₱336,207.05 or ₱168,103.52 representing payment to Tropicana

Apartment Hotel;

4) One-half of ₱152,683.57 or ₱76,341.785 representing payment to Echelon Tower;

5) One-half of ₱179,863.20 or ₱89,931.60 for the taxi xxx transportation from the
residence to Sidney [sic] Airport and from MIA to the hotel here in Manila, for the
eleven (11) trips;

6) One-half of ₱7,801.94 or ₱3,900.97 representing Meralco power expenses;

7) One-half of ₱356,400.00 or ₱178,000.00 representing expenses for food and

maintenance;

8) ₱50,000.00 for moral damages;

9) ₱10,000.00 as exemplary damages; and

10) ₱200,000 representing attorney's fees.

With costs.

SO ORDERED.29

Unperturbed, YHT Realty Corporation, Lainez and Payam went to this Court in this appeal
by certiorari.

Petitioners submit for resolution by this Court the following issues: (a) whether the appellate
court's conclusion on the alleged prior existence and subsequent loss of the subject money
and jewelry is supported by the evidence on record; (b) whether the finding of gross
negligence on the part of petitioners in the performance of their duties as innkeepers is
supported by the evidence on record; (c) whether the "Undertaking For The Use of Safety
Deposit Box" admittedly executed by private respondent is null and void; and (d) whether
the damages awarded to private respondent, as well as the amounts thereof, are proper
under the circumstances.30

The petition is devoid of merit.

It is worthy of note that the thrust of Rule 45 is the resolution only of questions of law and
any peripheral factual question addressed to this Court is beyond the bounds of this mode of
review.

Petitioners point out that the evidence on record is insufficient to prove the fact of prior
existence of the dollars and the jewelry which had been lost while deposited in the safety
deposit boxes of Tropicana, the basis of the trial court and the appellate court being the sole
testimony of McLoughlin as to the contents thereof. Likewise, petitioners dispute the finding
of gross negligence on their part as not supported by the evidence on record.

We are not persuaded.l^vvphi1.net We adhere to the findings of the trial court as affirmed by
the appellate court that the fact of loss was established by the credible testimony in open
court by McLoughlin. Such findings are factual and therefore beyond the ambit of the present
petition.1awphi1.nét

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 200137 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.48 The alleged loss that took place prior to 16 April 1988 was not
considered since the amounts alleged to have been taken were not sufficiently established
by evidence. The appellate court also correctly awarded the sum of ₱308,880.80,
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 ₱336,207.05 or ₱168,103.52 representing payment to
Tropicana;50 one-half of ₱152,683.57 or ₱76,341.785 representing payment to Echelon
Tower;51 one-half of ₱179,863.20 or ₱89,931.60 for the taxi or transportation expenses from
McLoughlin's residence to Sydney Airport and from MIA to the hotel here in Manila, for the
eleven (11) trips;52 one-half of ₱7,801.94 or ₱3,900.97 representing Meralco power
expenses;53 one-half of ₱356,400.00 or ₱178,000.00 representing expenses for food and
maintenance.54

The amount of ₱50,000.00 for moral damages is reasonable. Although trial courts are given
discretion to determine the amount of moral damages, the appellate court may modify or
change the amount awarded when it is palpably and scandalously
excessive.l^vvphi1.net Moral damages are not intended to enrich a complainant at the
expense of a defendant.l^vvphi1.net They are awarded only to enable the injured party to
obtain means, diversion or amusements that will serve to alleviate the moral suffering he
has undergone, by reason of defendants' culpable action.55

The awards of ₱10,000.00 as exemplary damages and ₱200,000.00 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) ₱308,880.80, 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 ₱336,207.05 or ₱168,103.52 representing payment to Tropicana

Copacabana Apartment Hotel;

(4) One-half of ₱152,683.57 or ₱76,341.785 representing payment to Echelon Tower;

(5) One-half of ₱179,863.20 or ₱89,931.60 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 ₱7,801.94 or ₱3,900.97 representing Meralco power expenses;

(7) One-half of ₱356,400.00 or ₱178,200.00 representing expenses for food and

maintenance;

(8) ₱50,000.00 for moral damages;

(9) ₱10,000.00 as exemplary damages; and

(10) ₱200,000 representing attorney's fees.

With costs.

SO ORDERED.

Puno, (Chairman), Callejo, Sr., and Chico-Nazario, JJ., concur.

Austria-Martinez, J., no part.
[G.R. No. 160544. February 21, 2005]

TRIPLE-V vs. FILIPINO MERCHANTS

THIRD DIVISION

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated FEB 21 2005.

G.R. No. 160544 (Triple-V Food Services, Inc. vs. Filipino Merchants Insurance Company, Inc.)

Assailed in this petition for review on certiorari is the decision[1]cralaw dated October 21,
2003 of the Court of Appeals in CA-G.R. CV No. 71223, affirming an earlier decision of the
Regional Trial Court at Makati City, Branch 148, in its Civil Case No. 98-838, an action for
damages thereat filed by respondent Filipino Merchants Insurance, Company, Inc., against
the herein petitioner, Triple-V Food Services, Inc.

On March 2, 1997, at around 2:15 o'clock in the afternoon, a certain Mary Jo-Anne De Asis
(De Asis) dined at petitioner's Kamayan Restaurant at 15 West Avenue, Quezon City. De Asis
was using a Mitsubishi Galant Super Saloon Model 1995 with plate number UBU 955,
assigned to her by her employer Crispa Textile Inc. (Crispa). On said date, De Asis availed of
the valet parking service of petitioner and entrusted her car key to petitioner's valet counter.
A corresponding parking ticket was issued as receipt for the car. The car was then parked by
petitioner's valet attendant, a certain Madridano, at the designated parking area. Few
minutes later, Madridano noticed that the car was not in its parking slot and its key no longer
in the box where valet attendants usually keep the keys of cars entrusted to them. The car
was never recovered. Thereafter, Crispa filed a claim against its insurer, herein respondent
Filipino Merchants Insurance Company, Inc. (FMICI). Having indemnified Crispa in the
amount of P669.500 for the loss of the subject vehicle, FMICI, as subrogee to Crispa's rights,
filed with the RTC at Makati City an action for damages against petitioner Triple-V Food
Services, Inc., thereat docketed as Civil Case No. 98-838 which was raffled to Branch 148.

In its answer, petitioner argued that the complaint failed to aver facts to support the
allegations of recklessness and negligence committed in the safekeeping and custody of the
subject vehicle, claiming that it and its employees wasted no time in ascertaining the loss of
the car and in informing De Asis of the discovery of the loss. Petitioner further argued that
in accepting the complimentary valet parking service, De Asis received a parking ticket
whereunder it is so provided that "[Management and staff will not be responsible for any
loss of or damage incurred on the vehicle nor of valuables contained therein", a provision
which, to petitioner's mind, is an explicit waiver of any right to claim indemnity for the loss
of the car; and that De Asis knowingly assumed the risk of loss when she allowed petitioner
to park her vehicle, adding that its valet parking service did not include extending a contract
of insurance or warranty for the loss of the vehicle.
During trial, petitioner challenged FMICI's subrogation to Crispa's right to file a claim for the
loss of the car, arguing that theft is not a risk insured against under FMICI's Insurance Policy
No. PC-5975 for the subject vehicle.

In a decision dated June 22, 2001, the trial court rendered judgment for respondent FMICI,
thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff

(FMICI) and against the defendant Triple V (herein petitioner) and the latter is hereby
ordered to pay plaintiff the following:

1. The amount of P669,500.00, representing actual damages plus compounded (sic);

2. The amount of P30,000.00 as acceptance fee plus the amount equal to 25% of the total
amount due as attorney's fees;

3. The amount of P50,000.00 as exemplary damages;

4. Plus, cost of suit.

Defendant Triple V is not therefore precluded from taking appropriate action against
defendant Armando Madridano.

SO ORDERED.

Obviously displeased, petitioner appealed to the Court of Appeals reiterating its argument
that it was not a depositary of the subject car and that it exercised due diligence and
prudence in the safe keeping of the vehicle, in handling the car-napping incident and in the
supervision of its employees. It further argued that there was no valid subrogation of rights
between Crispa and respondent FMICI.

In a decision dated October 21, 2003,[2]cralaw the Court of Appeals dismissed petitioner's
appeal and affirmed the appealed decision of the trial court, thus:

WHEREFORE, based on the foregoing premises, the instant appeal is hereby DISMISSED.
Accordingly, the assailed June 22, 2001 Decision of the RTC of Makati City - Branch 148 in
Civil Case No. 98-838 is AFFIRMED.

SO ORDERED.

In so dismissing the appeal and affirming the appealed decision, the appellate court agreed
with the findings and conclusions of the trial court that: (a) petitioner was a depositary of
the subject vehicle; (b) petitioner was negligent in its duties as a depositary thereof and as
an employer of the valet attendant; and (c) there was a valid subrogation of rights between
Crispa and respondent FMICI.
Hence, petitioner's present recourse.

We agree with the two (2) courts below.

When De Asis entrusted the car in question to petitioners valet attendant while eating at
petitioner's Kamayan Restaurant, the former expected the car's safe return at the end of her
meal. Thus, petitioner was constituted as a depositary of the same car. Petitioner cannot
evade liability by arguing that neither a contract of deposit nor that of insurance, guaranty
or surety for the loss of the car was constituted when De Asis availed of its free valet parking
service.

In a contract of deposit, a person receives an object belonging to another with the obligation
of safely keeping it and returning the same.[3]cralaw A deposit may be constituted even
without any consideration. It is not necessary that the depositary receives a fee before it
becomes obligated to keep the item entrusted for safekeeping and to return it later to the
depositor.

Specious is petitioner's insistence that the valet parking claim stub it issued to De Asis
contains a clear exclusion of its liability and operates as an explicit waiver by the customer
of any right to claim indemnity for any loss of or damage to the vehicle.

The parking claim stub embodying the terms and conditions of the parking, including that of
relieving petitioner from any loss or damage to the car, is essentially a contract of adhesion,
drafted and prepared as it is by the petitioner alone with no participation whatsoever on the
part of the customers, like De Asis, who merely adheres to the printed stipulations therein
appearing. While contracts of adhesion are not void in themselves, yet this Court will not
hesitate to rule out blind adherence thereto if they prove to be one-sided under the attendant
facts and circumstances.[4]cralaw

Hence, and as aptly pointed out by the Court of Appeals, petitioner must not be allowed to
use its parking claim stub's exclusionary stipulation as a shield from any responsibility for
any loss or damage to vehicles or to the valuables contained therein. Here, it is evident that
De Asis deposited the car in question with the petitioner as part of the latter's enticement for
customers by providing them a safe parking space within the vicinity of its restaurant. In a
very real sense, a safe parking space is an added attraction to petitioner's restaurant
business because customers are thereby somehow assured that their vehicle are safely kept,
rather than parking them elsewhere at their own risk. Having entrusted the subject car to
petitioner's valet attendant, customer De Asis, like all of petitioner's customers, fully expects
the security of her car while at petitioner's premises/designated parking areas and its safe
return at the end of her visit at petitioner's restaurant.

Petitioner's argument that there was no valid subrogation of rights between Crispa and
FMICI because theft was not a risk insured against under FMICI's Insurance Policy No. PC-
5975 holds no water.
Insurance Policy No. PC-5975 which respondent FMICI issued to Crispa contains, among
others things, the following item: "Insured's Estimate of Value of Scheduled
Vehicle- P800.000".[5]cralaw On the basis of such item, the trial court concluded that the
coverage includes a full comprehensive insurance of the vehicle in case of damage or loss.
Besides, Crispa paid a premium of P10,304 to cover theft. This is clearly shown in the
breakdown of premiums in the same policy.[6]cralaw Thus, having indemnified CRISPA for
the stolen car, FMICI, as correctly ruled by the trial court and the Court of Appeals, was
properly subrogated to Crispa's rights against petitioner, pursuant to Article 2207 of the New
Civil Code[7].

Anent the trial court's findings of negligence on the part of the petitioner, which findings
were affirmed by the appellate court, we have consistently ruled that findings of facts of trial
courts, more so when affirmed, as here, by the Court of Appeals, are conclusive on this Court
unless the trial court itself ignored, overlooked or misconstrued facts and circumstances
which, if considered, warrant a reversal of the outcome of the case.[8]cralaw This is not so in
the case at bar. For, we have ourselves reviewed the records and find no justification to
deviate from the trial court's findings.

WHEREFORE, petition is hereby DENIED DUE COURSE.

SO ORDERED.
G.R. No. 179382 January 14, 2013

SPOUSES BENJAMIN C. MAMARIL AND SONIA P. MAMARIL, Petitioners,

vs.
THE BOY SCOUT OF THE PHILIPPINES, AIB SECURITY AGENCY, INC., CESARIO
PEÑA,* AND VICENTE GADDI, Respondents.

DECISION

PERLAS-BERNABE, J.:

This is a Petition for Review on Certiorari assailing the May 31, 2007 Decision 1 and August
16, 2007 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 75978. The dispositive
portion of the said Decision reads:

WHEREFORE, the Decision dated November 28, 2001 and the Order dated June 11, 2002
rendered by the Regional Trial Court of Manila, Branch 39 is hereby MODIFIED to the effect
that only defendants AIB Security Agency, Inc., Cesario Peña and Vicente Gaddi are held
jointly and severally liable to pay plaintiffs-appellees Spouses Benjamin C. Mamaril and Sonia
P. Mamaril the amount of Two Hundred Thousand Pesos (₱200,000.00) representing the
cost of the lost vehicle, and to pay the cost of suit. The other monetary awards are DELETED
for lack of merit and/or basis.

Defendant-Appellant Boy Scout of the Philippines is absolved from any liability.

SO ORDERED.3

The Antecedent Facts

Spouses Benjamin C. Mamaril and Sonia P. Mamaril (Sps. Mamaril) are jeepney operators
since 1971. They would park their six (6) passenger jeepneys every night at the Boy Scout of
the Philippines' (BSP) compound located at 181 Concepcion Street, Malate, Manila for a fee
of ₱300.00 per month for each unit. On May 26, 1995 at 8 o'clock in the evening, all these
vehicles were parked inside the BSP compound. The following morning, however, one of the
vehicles with Plate No. DCG 392 was missing and was never recovered.4 According to the
security guards Cesario Peña (Peña) and Vicente Gaddi (Gaddi) of AIB Security Agency, Inc.
(AIB) with whom BSP had contracted5 for its security and protection, a male person who
looked familiar to them took the subject vehicle out of the compound.

On November 20, 1996, Sps. Mamaril filed a complaint6 for damages before the Regional
Trial Court (RTC) of Manila, Branch 39, against BSP, AIB, Peña and Gaddi. In support thereof,
Sps. Mamaril averred that the loss of the subject vehicle was due to the gross negligence of
the above-named security guards on-duty who allowed the subject vehicle to be driven out
by a stranger despite their agreement that only authorized drivers duly endorsed by the
owners could do so. Peña and Gaddi even admitted their negligence during the ensuing
investigation. Notwithstanding, BSP and AIB did not heed Sps. Mamaril's demands for a
conference to settle the matter. They therefore prayed that Peña and Gaddi, together with
AIB and BSP, be held liable for: (a) the value of the subject vehicle and its accessories in the
aggregate amount of ₱300,000.00; (b) ₱275.00 representing daily loss of income/boundary
reckoned from the day the vehicle was lost; (c) exemplary damages; (d) moral damages; (e)
attorney's fees; and (f) cost of suit.

In its Answer,7 BSP denied any liability contending that not only did Sps. Mamaril directly
deal with AIB with respect to the manner by which the parked vehicles would be handled,
but the parking ticket8 itself expressly stated that the "Management shall not be responsible
for loss of vehicle or any of its accessories or article left therein." It also claimed that Sps.
Mamaril erroneously relied on the Guard Service Contract. Apart from not being parties
thereto, its provisions cover only the protection of BSP's properties, its officers, and
employees.

In addition to the foregoing defenses, AIB alleged that it has observed due diligence in the
selection, training and supervision of its security guards while Peña and Gaddi claimed that
the person who drove out the lost vehicle from the BSP compound represented himself as
the owners' authorized driver and had with him a key to the subject vehicle. Thus, they
contended that Sps. Mamaril have no cause of action against them.

The RTC Ruling

After due proceedings, the RTC rendered a Decision9 dated November 28, 2001 in favor of
Sps. Mamaril. The dispositive portion of the RTC decision reads:

WHEREFORE, judgment is hereby rendered ordering the defendants Boy Scout of the
Philippines and AIB Security Agency, with security guards Cesario Pena and Vicente Gaddi: -

1. To pay the plaintiffs jointly and severally the cost of the vehicle which is
₱250,000.00 plus accessories of ₱50,000.00;

2. To pay jointly and severally to the plaintiffs the daily loss of the income/boundary
of the said jeepney to be reckoned fromits loss up to the final adjudication of the case,
which is ₱275.00 a day;

3. To pay jointly and severally to the plaintiffs moral damages in the amount of
₱50,000.00;

4. To pay jointly and severally to the plaintiffs exemplary damages in the amount of
₱50,000.00;

5. To pay jointly and severally the attorney's fees of ₱50,000.00 and appearances in
court the amount of ₱1,500.00 per appearance; and

6. To pay cost.
SO ORDERED.10

The RTC found that the act of Peña and Gaddi in allowing the entry of an unidentified person
and letting him drive out the subject vehicle in violation of their internal agreement with Sps.
Mamaril constituted gross negligence, rendering AIB and its security guards liable for the
former's loss. BSP was also adjudged liable because the Guard Service Contract it entered
into with AIB offered protection to all properties inside the BSP premises, which necessarily
included Sps. Mamaril's vehicles. Moreover, the said contract stipulated AIB's obligation to
indemnify BSP for all losses or damages that may be caused by any act or negligence of its
security guards. Accordingly, the BSP, AIB, and security guards Peña and Gaddi were held
jointly and severally liable for the loss suffered by Sps. Mamaril.

On June 11, 2002, the RTC modified its decision reducing the cost of the stolen vehicle from
₱250,000.00 to ₱200,000.00.11

Only BSP appealed the foregoing disquisition before the CA.

The CA Ruling

In its assailed Decision,12 the CA affirmed the finding of negligence on the part of security
guards Peña and Gaddi. However, it absolved BSP from any liability, holding that the Guard
Service Contract is purely between BSP and AIB and that there was nothing therein that
would indicate any obligation and/or liability on the part of BSP in favor of third persons,
such as Sps. Mamaril. Nor was there evidence sufficient to establish that BSP was negligent.

It further ruled that the agreement between Sps. Mamaril and BSP was substantially a
contract of lease whereby the former paid parking fees to the latter for the lease of parking
slots. As such, the lessor, BSP, was not an insurer nor bound to take care and/or protect the
lessees' vehicles.

On the matter of damages, the CA deleted the award of ₱50,000.00 representing the value of
the accessories inside the lost vehicle and the ₱275.00 a day for loss of income in the absence
of proof to support them. It also deleted the award of moral and exemplary damages and
attorney's fees for lack of factual and legal bases.

Sps. Mamaril's motion for reconsideration thereof was denied in the August 16, 2007
Resolution.13

Issues Before the Court

Hence, the instant petition based on the following assignment of errors, to wit:

I.

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ABSOLVING

RESPONDENT BOY SCOUT OF THE PHILIPPINES FROM ANY LIABILITY.
 II.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS MISTAKE WHEN IT

RULED THAT THE GUARD SERVICE CONTRACT IS PURELY BETWEEN BOY SCOUT OF
THE

PHILIPPINES AND AIB SECURITY AGENCY, INC., AND IN HOLDING THAT THERE IS
ABSOLUTELY NOTHING IN THE SAID CONTRACT THAT WOULD INDICATE ANY
OBLIGATION AND/OR LIABILITY ON THE PART OF THE PARTIES THEREIN IN
FAVOR OF THIRD PERSONS, SUCH AS PETITIONERS HEREIN.

III.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN THE

INTERPRETATION OF LAW WHEN IT CONSIDERED THE AGREEMENT BETWEEN
BOY SCOUT OF THE PHILIPPINES AND PETITIONERS A CONTRACT OF LEASE,
WHEREBY THE BOY SCOUT IS NOT DUTY BOUND TO PROTECT OR TAKE CARE OF
PETITIONERS' VEHICLES.

IV.

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT RULED THAT

PETITIONERS ARE NOT ENTITLED TO DAMAGES AND ATTORNEY'S FEES.14

In fine, Sps. Mamaril maintain that: (1) BSP should be held liable for the loss of their vehicle
based on the Guard Service Contract and the parking ticket it issued; and (2) the CA erred in
deleting the RTC awards of damages and attorney's fees.

The Court's Ruling

The petition lacks merit.

Article 20 of the Civil Code provides that every person, who, contrary to law, willfully or
negligently causes damage to another, shall indemnify the latter for the same. Similarly,
Article 2176 of the Civil Code states:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
preexisting contractual relation between the parties, is called a quasi-delict and is governed
by the provisions of this Chapter.

In this case, it is undisputed that the proximate cause of the loss of Sps. Mamaril's vehicle
was the negligent act of security guards Peña and Gaddi in allowing an unidentified person
to drive out the subject vehicle. Proximate cause has been defined as that cause, which, in
natural and continuous sequence, unbroken by any efficient intervening cause, produces the
injury or loss, and without which the result would not have occurred.15
Moreover, Peña and Gaddi failed to refute Sps. Mamaril's contention16 that they readily
admitted being at fault during the investigation that ensued.

On the other hand, the records are bereft of any finding of negligence on the part of BSP.
Hence, no reversible error was committed by the CA in absolving it from any liability for the
loss of the subject vehicle based on fault or negligence.

Neither will the vicarious liability of an employer under Article 218017 of the Civil Code apply
in this case. It is uncontested that Peña and Gaddi were assigned as security guards by AIB
to BSP pursuant to the Guard Service Contract. Clearly, therefore, no employer-employee
relationship existed between BSP and the security guards assigned in its premises.
Consequently, the latter's negligence cannot be imputed against BSP but should be attributed
to AIB, the true employer of Peña and Gaddi.18

In the case of Soliman, Jr. v. Tuazon,19 the Court enunciated thus:

It is settled that where the security agency, as here, recruits, hires and assigns the work of
its watchmen or security guards, the agency is the employer of such guards and watchmen.
Liability for illegal or harmful acts committed by the security guards attaches to the
employer agency, and not to the clients or customers of such agency. As a general rule, a
client or customer of a security agency has no hand in selecting who among the pool of
security guards or watchmen employed by the agency shall be assigned to it; the duty to
observe the diligence of a good father of a family in the selection of the guards cannot, in the
ordinary course of events, be demanded from the client whose premises or property are
protected by the security guards. The fact that a client company may give instructions or
directions to the security guards assigned to it, does not, by itself, render the client
responsible as an employer of the security guards concerned and liable for their wrongful
acts or omissions. Those instructions or directions are ordinarily no more than requests
commonly envisaged in the contract for services entered into with the security agency. 20

Nor can it be said that a principal-agent relationship existed between BSP and the security
guards Peña and Gaddi as to make the former liable for the latter's complained act. Article
1868 of the Civil Code states that "by the contract of agency, a person binds himself to render
some service or to do something in representation or on behalf of another, with the consent
or authority of the latter." The basis for agency therefore is representation,21 which element
is absent in the instant case. Records show that BSP merely hired the services of AIB, which,
in turn, assigned security guards, solely for the protection of its properties and premises.
Nowhere can it be inferred in the Guard Service Contract that AIB was appointed as an agent
of BSP. Instead, what the parties intended was a pure principal-client relationship whereby
for a consideration, AIB rendered its security services to BSP.

Notwithstanding, however, Sps. Mamaril insist that BSP should be held liable for their loss
on the basis of the Guard Service Contract that the latter entered into with AIB and their
parking agreement with BSP.

Such contention cannot be sustained.

Article 1311 of the Civil Code states:

Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in
case where the rights and obligations arising from the contract are not transmissible by their
nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the
property he received from the decedent.

If a contract should contain some stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation. A
mere incidental benefit or interest of a person is not sufficient. The contracting parties must
have clearly and deliberately conferred a favor upon a third person.

Thus, in order that a third person benefited by the second paragraph of Article 1311, referred
to as a stipulation pour autrui, may demand its fulfillment, the following requisites must
concur: (1) There is a stipulation in favor of a third person; (2) The stipulation is a part, not
the whole, of the contract; (3) The contracting parties clearly and deliberately conferred a
favor to the third person - the favor is not merely incidental; (4) The favor is unconditional
and uncompensated; (5) The third person communicated his or her acceptance of the favor
before its revocation; and (6) The contracting parties do not represent, or are not authorized,
by the third party.22 However, none of the foregoing elements obtains in this case.

It is undisputed that Sps. Mamaril are not parties to the Guard Service
Contract.1âwphi1 Neither did the subject agreement contain any stipulation pour autrui.
And even if there was, Sps. Mamaril did not convey any acceptance thereof. Thus, under the
principle of relativity of contracts, they cannot validly claim any rights or favor under the
said agreement.23 As correctly found by the CA:

First, the Guard Service Contract between defendant-appellant BSP and defendant AIB
Security Agency is purely between the parties therein. It may be observed that although the
whereas clause of the said agreement provides that defendant-appellant desires security and
protection for its compound and all properties therein, as well as for its officers and
employees, while inside the premises, the same should be correlated with paragraph 3(a)
thereof which provides that the security agency shall indemnify defendant-appellant for all
losses and damages suffered by it attributable to any act or negligence of the former's guards.

Otherwise stated, defendant-appellant sought the services of defendant AIB Security Agency
for the purpose of the security and protection of its properties, as well as that of its officers
and employees, so much so that in case of loss of [sic] damage suffered by it as a result of any
act or negligence of the guards, the security agency would then be held responsible therefor.
There is absolutely nothing in the said contract that would indicate any obligation and/or
liability on the part of the parties therein in favor of third persons such as herein plaintiffs-
appellees.24

Moreover, the Court concurs with the finding of the CA that the contract between the parties
herein was one of lease25 as defined under Article 164326 of the Civil Code. It has been held
that the act of parking a vehicle in a garage, upon payment of a fixed amount, is a lease.27 Even
in a majority of American cases, it has been ruled that where a customer simply pays a fee,
parks his car in any available space in the lot, locks the car and takes the key with him, the
possession and control of the car, necessary elements in bailment, do not pass to the parking
lot operator, hence, the contractual relationship between the parties is one of lease. 28

In the instant case, the owners parked their six (6) passenger jeepneys inside the BSP
compound for a monthly fee of ₱300.00 for each unit and took the keys home with them.
Hence, a lessor-lessee relationship indubitably existed between them and BSP. On this score,
Article 1654 of the Civil Code provides that "the lessor (BSP) is obliged: (1) to deliver the
thing which is the object of the contract in such a condition as to render it fit for the use
intended; (2) to make on the same during the lease all the necessary repairs in order to keep
it suitable for the use to which it has been devoted, unless there is a stipulation to the
contrary; and (3) to maintain the lessee in the peaceful and adequate enjoyment of the lease
for the entire duration of the contract." In relation thereto, Article 1664 of the same Code
states that "the lessor is not obliged to answer for a mere act of trespass which a third person
may cause on the use of the thing leased; but the lessee shall have a direct action against the
intruder." Here, BSP was not remiss in its obligation to provide Sps. Mamaril a suitable
parking space for their jeepneys as it even hired security guards to secure the premises;
hence, it should not be held liable for the loss suffered by Sps. Mamaril.

It bears to reiterate that the subject loss was caused by the negligence of the security guards
in allowing a stranger to drive out plaintiffs-appellants' vehicle despite the latter's
instructions that only their authorized drivers may do so. Moreover, the agreement with
respect to the ingress and egress of Sps. Mamaril's vehicles were coordinated only with AIB
and its security guards,29 without the knowledge and consent of BSP. Accordingly, the
mishandling of the parked vehicles that resulted in herein complained loss should be
recovered only from the tort feasors (Peña and Gaddi) and their employer, AIB; and not
against the lessor, BSP.30

Anent Sps. Mamaril's claim that the exculpatory clause: "Management shall not be
responsible for loss of vehicle or any of its accessories or article left therein"31 contained in
the BSP issued parking ticket was void for being a contract of adhesion and against public
policy, suffice it to state that contracts of adhesion are not void per se. It is binding as any
other ordinary contract and a party who enters into it is free to reject the stipulations in its
entirety. If the terms thereof are accepted without objection, as in this case, where plaintiffs-
appellants have been leasing BSP's parking space for more or less 20 years, 32 then the
contract serves as the law between them.33 Besides, the parking fee of ₱300.00 per month or
₱10.00 a day for each unit is too minimal an amount to even create an inference that BSP
undertook to be an insurer of the safety of plaintiffs-appellants' vehicles.

On the matter of damages, the Court noted that while Sonia P. Mamaril testified that the
subject vehicle had accessories worth around !J50,000.00, she failed to present any receipt
to substantiate her claim.34 Neither did she submit any record or journal that would have
established the purported ₱275.0035 daily earnings of their jeepney. It is axiomatic that
actual damages must be proved with reasonable degree of certainty and a party is entitled
only to such compensation for the pecuniary loss that was duly proven. Thus, absent any
competent proof of the amount of damages sustained, the CA properly deleted the said
awards.36

Similarly, the awards of moral and exemplary damages and attorney's fees were properly
disallowed by the CA for lack of factual and legal bases. While the RTC granted these awards
in the dispositive portion of its November 28, 2001 decision, it failed to provide sufficient
justification therefor.37

WHEREFORE premises considered, the instant petition is DENIED. The May 31, 2007
Decision and August 16, 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 75978 are
AFFIRMFED.

SO ORDERED.