CA AGRO-INDUSTRIAL

DEVELOPMENT CORP. V. CA &

SECURITY BANK AND TRUST
COMPANY, GR NO. 90037, March 3,
1993 (CUBILLAN)

Topic: DEPOSIT - Safety Deposit Box

Legal Principle:

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. 2 6 In the
absence of any stipulation prescribing the degree of diligence
required, that of a good father of a family is to be observed. 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

Facts:
On 3 July 1979, petitioner, through its president, and the spouses
Pugao entered into an agreement whereby the former purchased
from the latter two (2) parcels of land for a consideration of
P350,625.00. 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 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 The same could be withdrawn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. For this purpose, both signed a contract of lease.

After the execution of the contract, 2 keys were given - one to

petitioner, the other to Spouses Pugao. A guard key remained in the
possession of the 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 Ramos offered to buy the two lots and
demanded the execution of the deed of sale which necessarily
entailed the production of the certificate of title. Thus, petitioner
accompanied by the Pugaos proceeded to the Bank to open the
safety box, but when they opened it in the presence of the bank’s
representative, the box yielded no such certificates.

Because of the delay of the reconstitution of the title, Mrs. Ramos

withdrew from purchasing the lot, thus, petitioners filed a complaint
for damages due to the alleged failed realization of their expected
profit (P280,500) which they said is because of the fault of the
respondent bank.

Respondent bank averred that there is no cause of action due to

paragraphs 13 and 14 of their contract of lease which basically says
that loss of any of the items or articles contained in the box could
not give rise to an action against it.

RTC dismissed the case because 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 to the parties.

CA affirmed the appealed decision using Art 1643 and 1975 of the
Civil Code as justification as well as the case of Tolentino v
Gonzales.

Issues:

1. W
/N the contractual relation between a commercial bank and
another party in the contract of rent of a safety box is one of
bailor and bailee.
2. W
/N paragraphs 13 and 14 are contrary to law and public policy
and should be declared null and void.

Ruling

1. Ye
s.
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;
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 renters — the petitioner and the
Pugaos.

We agree with the petitioner that under the American jurisprudence,

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 bailor and bailee, the bailment being for hire and
mutual benefit.

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 in Section 72
of the General Banking Act 23. 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. 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. 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.
3. Ye
s. Because the said provisions are inconsistent with the
respondent Bank's responsibility as a depositary under Section
72(a) of the General Banking Act, thus, the paragraphs are
contrary to law and public policy.

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.

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.

Notes

Paragraphs 13 and 14 of the contract of lease

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."

SECTION 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.

DURBAN APARTMENTS CORP V

PIONEER AND SURETY CORP, GR
NO. 179419, January, 12, 2011
(CUBILLAN)
Topic: Necessary Deposit - By transients (Art 1998, 1999)

Legal Principle:

Article 1962, in relation to Article 1998, of the Civil Code defines a

contract of deposit and a necessary deposit made by persons in
hotels or inns:

Art. 1962. A deposit is constituted from the moment a person

receives a thing belonging to another, with the obligation of safely
keeping it and returning the same. If the safekeeping of the thing
delivered is not the principal purpose of the contract, there is no
deposit but some other contract.

Art. 1998. The deposit of effects made by travelers in hotels or inns

shall also be regarded as necessary. The keepers of hotels or inns
shall be responsible for them as depositaries, provided that notice
was given to them, or to their employees, of the effects brought by
the guests and that, on the part of the latter, they take the precautions
which said hotel-keepers or their substitutes advised relative to the
care and vigilance of their effects.

Facts:
Respondent filed a case for recovery of damages against petitioner
for the loss of Jeffrey See’s vehicle. Respondent averred that it is the
insurer for the loss and damage of See’s 2011 Suzuki Vitara.
See arrived and checked in at the City Garden Hotel (name under
which petitioner is doing business) in Makati before midnight, and
its parking attendant, Justimbaste got the key to said Vitara from
See to park it. At about 1 AM, See was awakened in his room by [a]
telephone call from the Hotel Chief Security Officer who informed
him that his Vitara was carnapped while it was parked unattended at
the parking area of Equitable PCI Bank. See then reported the
incident and a flash alarm was issued. An investigation was then
conducted by the Makati City Police Anti-catnapping unit. But the
Vitara was not recovered.

Respondent paid P1,163,250.00 money claim of See and alleges that

Vitara was lost due to the negligence of [petitioner] Durban
Apartments and [defendant] Justimbaste because it was discovered
during the investigation that this was the second time that a similar
incident of carnapping happened in the valet parking service of
[petitioner] Durban Apartments and no necessary precautions were
taken to prevent its repetition.

Petitioner averred that See did not check in at its hotel, on the
contrary, he was a guest of a certain Ching Montero. Justimbaste did
not get the ignition key of See's Vitara, on the contrary, it was See
who requested a parking attendant to park the Vitara at any available
parking space, and it was parked at the Equitable Bank parking area,
which was within See's view, while he and Montero were waiting in
front of the hotel. Valet parking services are special privilege that it
gave to See and it t does not include responsibility for any losses or
damages to motor vehicles and its accessories in the parking area.
The carnapper was able to open the Vitara without using the key
given earlier to the parking attendant and subsequently turned over
to See after the Vitara was stolen. Justimbaste saw the Vitara
speeding away from the place where it was parked; he tried to run
after it, and blocked its possible path but to no avail; and See was
duly and immediately informed of the carnapping of his Vitara; the
matter was reported to the nearest police precinct; and defendant . . .
Justimbaste, and Horlador submitted themselves to police
investigation. Thus, due to these aversions, petitioner claims to have
not acted in negligence.

During the pre-trial conference, counsel of record of petitioner was

absent, instead, a certain Atty. Nestor Mejia appeared for petitioner,
but did not file their pre-trial brief. Lower Court granted the motion
to present respondent’s evidence ex parte. See testified that
Justimbaste, approached and asked for his ignition key, told him that
the latter would park the Vitara for him in front of the hotel, and
issued him a valet parking customer's claim stub.

Later on, lower court denied the Motion to Admit Pre-Trial Brief
and Motion for Reconsideration filed by petitioner and decided
against the petitioner.

CA affirmed the decision.

Issues:
W/N petitioner is responsible for the loss of See’s vehicle.

Ruling:
Yes.

Plainly, from the facts found by the lower courts, the insured See
deposited his vehicle for safekeeping with petitioner, through the
latter's employee, Justimbaste. In turn, Justimbaste issued a claim
stub to See. Thus, the contract of deposit was perfected from See's
delivery, when he handed over to Justimbaste the keys to his
vehicle, which Justimbaste received with the obligation of safely
keeping and returning it. Ultimately, petitioner is liable for the loss
of See's vehicle.

Notes

YHT REALTY CORP, LAINEZ, &

PAYAM V. CA & MCLOUGHLIN, GR
NO. 126780, Feb 17, 2005 (CUBILLAN)
Topic: Necessary Deposit - Effect of Notices (Art. 2003)

Legal Principle:

Art. 2003. The hotel-keeper cannot free himself from responsibility

by posting notices to the effect that he is not liable for the articles
brought by the guest. Any stipulation between the hotel-keeper and
the guest whereby the responsibility of the former as set forth in
Articles 1998 to 2001 is suppressed or diminished shall be void.

Facts:
Maurice McLoughlin is an Australian businessman-philanthropist
that used to stay at Sheraton Hotel during his trips to the Philippines
prior to 1984 when he met Tan. Tan befriended him, showed him
around, and convinced him to transfer to Tropicana hotel where
petitioners 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. McLoughlin
started staying during his trips to the Philippines from December
1984 to September 1987.

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.

Respondent placed the following to his safety box: (1) US

$15,000.00, which he placed in two envelopes, one envelope
US$10,000.00 and the other envelope US$5,000.00; (2)
AUS$10,000.00 which he also placed in another envelope; (3) 2
other envelopes containing letters and credit cards; (4) 2 bankbooks;
and (5) a checkbook, arranged side by side inside the safety deposit
box.

On 12 December 1987, before leaving for a brief trip to Hongkong,

McLoughlin opened his safety deposit box and took therefrom
US$5,000.00, the envelope containing AUS$10,000.00, his
passports and his credit cards. He left the other items in the hotel
since he did not check out. When he arrived in Hongkong, he
opened the envelope and discovered that instead of 5, it was only
US $3,000. He thought it was just a result of bad accounting since
he did not spend anything from the envelope.
After returning in Manila, he checked out and flew back to Australia
where he found out that US$10,000.00 was short of US$5,000 and
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.

He went back to the Philippines on April 4, 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 checked in once again in Tropicana and rented another safety

box. He placed therein one (1) envelope containing US$15,000.00,
another envelope containing 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 US$15,000.00),
US$2,000.00 were missing and in the envelope previously
containing AUS$10,000.00, AUS$4,500.00 were missing.

He immediately confronted Lainez and Payam who admitted that

Tan opened the safety deposit box with the key assigned to him. 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. Lopez also told McLoughlin that Tan stole the key assigned
to McLoughlin while the latter was asleep.

Respondent requested an investigation to be conducted which

resulted to Tan signing a promissory note promising to pay
respondent on or before May 5, 1988. 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”, specifically
paragraphs (2) and (4) thereof.

Respondent went back to Australia and his lawyers wrote a letter to

the then President Aquino which was forwarded to the DOJ, then to
the Western Police District. Respondent went back and forth to the
country, but he failed to obtain any concrete assistance.

On December 3, 1990, respondent filed a complaint for damages

against petitioner for the loss of McLoughlin's money which was
discovered on 16 April 1988. This was amended to add 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.

RTC rendered judgment in favor or respondent McLoughlin and

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. It also 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.

Court of Appeals affirmed the disquisitions made by the lower court

except as to the amount of damages awarded.

Issues:

1. W
/N 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.
4. W
/N the "Undertaking For the Use Of Safety Deposit Box”
admittedly executed by private respondent is null and void.

Ruling:

1. N
o.

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. 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.

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. 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.

2. Ye
s,

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.

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.

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. 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.

Notes:

3. 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;
xxx xxx xxx

4. To return the key and execute the RELEASE in favor of

TROPICANA APARTMENT HOTEL upon giving up the use of the
box.