BPI vs.
IAC of the contract, and the act constitutes a criminal offense, both parties
FACTS:
The original parties to the case were Zshornack and Commercial Bank
and Trust Company of the Phils (Comtrust). In 1980, BPI absorbed
Comtrust through a merger and was substituted as party to the case.
Zshornack and his wife maintained in Comtrust a dollar savings account
and a peso current account. On Dec 8, 1975, Zshornack delivered to the
bank $3000 for safekeeping. When he requested the return of the
money, Comtrust explained that the sum was disposed of in this manner:
US$2,000.00 was sold on December 29, 1975 and the peso proceeds
amounting to P14,920.00 were deposited to Zshornack's current
account per deposit slip accomplished by Garcia; the remaining
US$1,000.00 was sold on February 3, 1976 and the peso proceeds
amounting to P8,350.00 were deposited to his current account per
deposit slip also accomplished by Garcia.
Aside from asserting that the US$3,000.00 was properly credited to
Zshornack's current account at prevailing conversion rates, BPI now
posits another ground to defeat private respondent's claim. It now
argues that the contract embodied in the document is the contract of
depositum (as defined in Article 1962, New Civil Code), which banks do
not enter into. The bank alleges that Garcia exceeded his powers when
he entered into the transaction. Hence, it is claimed, the bank cannot be
liable under the contract, and the obligation is purely personal to Garcia.
ISSUE: WON the contract between petitioner and respondent bank is a
deposit.
HELD: YES
The document which embodies the contract states that the US$3,000.00
was received by the bank for safekeeping. The subsequent acts of the
parties also show that the intent of the parties was really for the bank to
safely keep the dollars and to return it to Zshornack at a later time, Thus,
Zshornack demanded the return of the money on May 10, 1976, or over
five months later.
The above arrangement is that contract defined under Article 1962, New
Civil Code, which reads:
Art. 1962. A deposit is constituted from the moment a person receives a
thing belonging to another, with the obligation of safely keeping it and of
returning the same. If the safekeeping of the thing delivered is not the
principal purpose of the contract, there is no deposit but some other
contract.
Note that the object of the contract between Zshornack and COMTRUST
was foreign exchange. Hence, the transaction was covered by Central
Bank Circular No. 20, Restrictions on Gold and Foreign Exchange
Transactions, promulgated on December 9, 1949, which was in force at
the time the parties entered into the transaction involved in this case.
Under the said circular, safekeeping of the greenbacks without selling
them to Central Bank within 1 business day from receipt, is a transaction
which is not authorized.
As earlier stated, the document and the subsequent acts of the parties
show that they intended the bank to safekeep the foreign exchange, and
return it later to Zshornack, who alleged in his complaint that he is a
Philippine resident. The parties did not intended to sell the US dollars to
the Central Bank within one business day from receipt. Otherwise, the
contract of depositum would never have been entered into at all.
Since the mere safekeeping of the greenbacks, without selling them to
the Central Bank within one business day from receipt, is a transaction
which is not authorized by CB Circular No. 20, it must be considered as
one which falls under the general class of prohibited transactions.
Hence, pursuant to Article 5 of the Civil Code, it is void, having been
executed against the provisions of a mandatory/prohibitory law. More
importantly, it affords neither of the parties a cause of action against the
other. "When the nullity proceeds from the illegality of the cause or object
being in pari delicto, they shall have no cause of action against each
other. . ." [Art. 1411, New Civil Code.] The only remedy is one on behalf
of the State to prosecute the parties for violating the law.
Therefore, Zshornack cannot recover under this cause of action.
CHAN vs. MACEDA
FACTS:
On July 28, 1976, Bonifacio S. Maceda, Jr., herein Maceda, obtained a
P7.3 million loan from the Development Bank of the Philippines for the
construction of his New Gran Hotel Project in Tacloban City.
Thereafter, on September 29, 1976, Maceda entered into a building
construction contract with Moreman Builders Co., Inc., (Moreman). They
agreed that the construction would be finished not later than December
22, 1977.
Maceda purchased various construction materials and equipment in
Manila. Moreman, in turn, deposited them in the warehouse of Wilson
and Lily Chan, herein the Chans. The deposit was free of charge.
Unfortunately, Moreman failed to finish the construction of the hotel at
the stipulated time. Hence, on February 1, 1978, Maceda filed with the
then CFI an action for rescission and damages against Moreman.
Meanwhile, during the pendency of the case, Maceda ordered the
Chans to return to him the construction materials and equipment which
Moreman deposited in their warehouse. The Chans, however, told them
that Moreman withdrew those construction materials in 1977.
Hence, on December 11, 1985, Maceda filed with the RTC an action for
damages with an application for a writ of preliminary attachment against
the Chans.
After the dismissal of the case for failure to prosecute, and several
motions for reconsideration, the case was reinstated on January 10,
1995, or ten (10) years from the time the action was originally filed.
The RTC later ruled in favor of Maceda, thus ordering the Chans to pay
for damages as well as the return of the materials deposited in their
warehouse.
The Chans then elevated the case to the Court of Appeals, which
affirmed the decision of the RTC, hence this present petition.
ISSUE:
1. Whether or not Maceda presented proof that the construction
materials and equipment were actually in the Chans'
warehouse when he asked that the same be turned over to
him; and,
2. If so, does Maceda have the right to demand the release of
the said materials and equipment or claim for damages?
RULING: NO.
At the outset, the case should have been dismissed outright by the trial
court because of patent procedural infirmities (failure to prosecute,
failure to file MFR within the fifteen-day period, allowing a second MFR,
which is a prohibited pleading, and granting the same). Even without
such serious procedural flaw, the case should also be dismissed for utter
lack of merit.
It must be stressed that Maceda's claim for damages is based on the
Chans' failure to return or to release to him the construction materials
and equipment deposited by Moreman to their warehouse.
Under Article 1311 of the Civil Code, contracts are binding upon the
parties (and their assigns and heirs) who execute them. When there is
no privity of contract, there is likewise no obligation or liability to speak
about and thus no cause of action arises. Specifically, in an action
against the depositary, the burden is on the plaintiff to prove the bailment
or deposit and the performance of conditions precedent to the right of
action. A depositary is obliged to return the thing to the depositor, or to
his heirs or successors, or to the person who may have been designated
in the contract.
In the present case, the record is bereft of any contract of deposit, oral
or written, between the Chans and Maceda. If at all, it was only between
the Chans and Moreman. And granting arguendo that there was indeed
a contract of deposit between the Chans and Moreman, it is still
incumbent upon Maceda to prove its existence and that it was executed
in his favor. However, Maceda miserably failed to do so. The only pieces
of evidence Maceda presented to prove the contract of deposit were the
delivery receipts. Significantly, they are unsigned and not duly received
or authenticated by either Moreman, the Chans or Maceda or any of
their authorized representatives. Hence, those delivery receipts have no
probative value at all. While our laws grant a person the remedial right
to prosecute or institute a civil action against another for the enforcement
or protection of a right, or the prevention or redress of a wrong, every
cause of action ex-contractu must be founded upon a contract, oral or
written, express or implied.
Moreover, Maceda also failed to prove that there were construction
materials and equipment in the Chans' warehouse at the time he made
a demand for their return.
Considering that Maceda failed to prove (1) the existence of any contract
of deposit between him and the Chans, nor between the latter and
Moreman in his favor, and (2) that there were construction materials in
the Chans' warehouse at the time of Maceda's demand to return the
same, we hold that the Chans have no corresponding obligation or
liability to Maceda with respect to those construction materials.
Anent the issue of damages, the Chans are still not liable because, as
expressly provided for in Article 2199 of the Civil Code, actual or
compensatory damages cannot be presumed, but must be proved with
reasonable degree of certainty. A court cannot rely on speculations,
conjectures, or guesswork as to the fact and amount of damages, but
must depend upon competent proof that they have been suffered by the
injured party and on the best obtainable evidence of the actual amount
thereof. It must point out specific facts which could afford a basis for
measuring whatever compensatory or actual damages are borne.
Considering our findings that there was no contract of deposit between
the Chans and Maceda or Moreman and that actually there were no
more construction materials or equipment in the Chans' warehouse
when Maceda made a demand for their return, we hold that he has no
right whatsoever to claim for damages. WHEREFORE, the petition is
GRANTED. SO ORDERED
CA AGRO-INDUSTRIAL vs. SECURITY BANK
. responsibility, with regard to the safekeeping and the loss of the thing,
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?
FACTS:
On 3 July 1979, CA Agro (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 CA Agro 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 CA Agro and the Pugaos upon full payment of the purchase price.
CA Agro, through Sergio Aguirre, and the Pugaos then rented Safety
Deposit Box No. 1448 of Security Bank and Trust Company, a domestic
banking corporation. For this purpose, both signed a contract of lease,
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.
After the execution of the contract, two (2) renter's keys were given to
the renters — one to Aguirre (for the CA Agro) and the other to the
Pugaos. A guard key remained in the possession of the Security 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. CA Agro claims that the certificates of title were placed inside
the said box.
Thereafter, a certain Mrs. Margarita Ramos offered to buy from CA Agro
the two (2) lots at a price of P225.00 per square meter which, as CA
Agro 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 Security Bank 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 CA Agro allegedly failed to realize the
expected profit of P280,500.00. Hence, the latter filed on a complaint for
damages against Security Bank with the CFI.
In its Answer with Counterclaim, Security Bank alleged that the CA Agro
has no cause of action because of paragraphs 13 and 14 of the contract
of lease; corollarily, loss of any of the items or articles contained in the
box could not give rise to an action against it.
The RTC rendered a decision in favor of Security Bank. CA Agro filed
an appeal to the CA, which affirmed the decision of the RTC, and denied
CA Agro’s subsequent motion for reconsideration; hence this present
petition.
ISSUE:
1. Whether the contract for the rent of the safety deposit box is
actually a contract of deposit, not a contract of lease, and so
Security 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
shall be governed by the provisions of Title I of this Book.
2. Whether conditions 13 and 14 of the questioned contract are
contrary to law and public policy and should be declared null
and void.
RULING: 1. NO. 2. YES
We agree with the CA Agro'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 joint renters — the CA Agro and the Pugaos. The guard key of the
box remained with the Security Bank; without this key, neither of the
renters could open the box. On the other hand, Security 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, Article 1975 cannot 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.
Moreover, the deposit theory itself does not altogether find unanimous
support even in American jurisprudence. We agree with the CA Agro
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.
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.
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.
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 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. 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.
In the instant case, CA Agro maintains that conditions 13 and 14 of the
questioned contract of lease of the safety deposit box 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
Security 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.
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, Security 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.
Thus, the case should be dismissed. In the instant case, the Security
Bank's exoneration cannot 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
Security Bank was aware of the agreement between the CA Agro 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 Security Bank. This in
turn flows from this Court's determination that the contract involved was
one of deposit. Since both the CA Agro 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, CA Agro 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 CA Agro to pay the Security Bank attorney's fees. To
this extent, the Decision of the Court of Appeals must be modified.
WHEREFORE, the Petition for Review is DENIED for lack of merit. SO
ORDERED.
SIA vs. CA
FACTS:
The plaintiff rented on March 22, 1985 the Safety Deposit Box No. 54 of
the defendant bank at its Binondo Branch located at the Fookien Times
Building, Soler St., Binondo, Manila wherein he placed his collection of
stamps. The said safety deposit box leased by the plaintiff was at the
bottom or at the lowest level of the safety deposit boxes of the defendant
bank at its aforesaid Binondo Branch.
During the floods that took place in 1985 and 1986, floodwater entered
into the defendant bank's premises, seeped into the safety deposit box
leased by the plaintiff and caused, according to the plaintiff, damage to
his stamps collection. The defendant bank rejected the plaintiff's claim
for compensation for his damaged stamps collection, so, the plaintiff
instituted an action for damages against the defendant bank.
The defendant bank denied liability for the damaged stamps collection
of the plaintiff on the basis of the "Rules and Regulations Governing the
Lease of Safe Deposit Boxes" (Exhs. "A-1", "1-A"), particularly
paragraphs 9 and 13, which reads (sic):
"9. The liability of the Bank by reason of the lease, is limited to the
exercise of the diligence to prevent the opening of the safe by any
person other than the Renter, his authorized agent or legal
representative;
xxx xxx xxx
"13. The Bank is not a depository of the contents of the safe and it has
neither the possession nor the control of the same. The Bank has no
interest whatsoever in said contents, except as herein provided, and it
assumes absolutely no liability in connection therewith."
The defendant bank also contended that its contract with the plaintiff
over safety deposit box No. 54 was one of lease and not of deposit and,
therefore, governed by the lease agreement (Exhs. "A", "L") which
should be the applicable law; that the destruction of the plaintiff's stamps
collection was due to a calamity beyond obligation on its part to notify
the plaintiff about the floodwaters that inundated its premises at Binondo
branch which allegedly seeped into the safety deposit box leased to the
plaintiff.
The trial court then directed that an ocular inspection on (sic) the
contents of the safety deposit box be conducted, which was done on
December 8, 1988 by its clerk of court in the presence of the parties and
their counsels. A report thereon was then submitted on December 12,
1988 (Records, p. 98-A) and confirmed in open court by both parties thru
counsel during the hearing on the same date (Ibid., p. 102) stating:
"That the Safety Box Deposit No. 54 was opened by both plaintiff Luzan
Sia and the Acting Branch Manager Jimmy B. Ynion in the presence of
the undersigned, plaintiff's and defendant's counsel. Said Safety Box
when opened contains two albums of different sizes and thickness,
length and width and a tin box with printed word 'Tai Ping Shiang Roast
Pork in pieces with Chinese designs and character."
Condition of the above-stated Items —
"Both albums are wet, moldy and badly damaged.
1. The first album measures 10 1/8 inches in length, 8 inches in
width and 3/4 in thick. The leaves of the album are attached
to every page and cannot be lifted without destroying it, hence
the stamps contained therein are no longer visible.
2. The second album measure 12 1/2 inches in length, 9 3/4 in
width 1 inch thick. Some of its pages can still be lifted. The
stamps therein can still be distinguished but beyond
restoration. Others have lost its original form.
3. The tin box is rusty inside. It contains an album with several
pieces of papers stuck up to the cover of the box. The
condition of the album is the second abovementioned album."  subject to future withdrawal by the depositors or subject to some future
ISSUES:
1. Whether or not there is deposit
2. Whether or not the bank is negligent
HELD:
Contract of the use of a safety deposit box of a bank is not a deposit but
a lease. In the case of CA AGRO, it ws mentioned that contract of lease
of safety deposit boxes is a special kind of deposit. It is essentially bailor
and bailee relationship, the bailment for hire and mutual benefit. Section
72 of the General Banking Act [R.A. 337, as amended] pertinently
provides: In addition to the operations specifically authorized elsewhere
in this Act, banking institutions other than building and loan associations
may perform the following services (a) Receive in custody funds,
documents, and valuable objects, and rent safety deposit boxes for the
safequarding of such effects.
Article 1174 of the Civil Code provides:
"Except in cases expressly specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those events
which could not be foreseen, or which, though foreseen, were
inevitable.'
As correctly held by the trial court, Security Bank was guilty of
negligence. The bank’s negligenceaggravated the injury or damage to
the stamp collection. SBTC was aware of the floods of 1985 and 1986;
it also knew that the floodwaters inundated the room where the safe
deposit box was located. In view thereof, it should have lost no time in
notifying the petitioner in order that the box could have been opened to
retrieve the stamps, thus saving the same from further deterioration and
loss. In this respect, it failed to exercise the reasonable care and
prudence expected of a good father of a family, thereby becoming a
party to the aggravation of the injury or loss. Accordingly, the
aforementioned fourth characteristic of a fortuitous event is absent.
Article 1170 of the Civil Code, which reads “Those who in the
performance of their obligation are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable
for damages” is applicable. Hence, the petition was granted.
The provisions contended by Security Bank in the lease agreement
which are meant to exempt SBTC from any liability for damage, loss or
destruction of the contents of the safety deposit box which may arise
from its own agents’ fraud, negligence or delay must be stricken down
for being contrary to law and public policy.
BARON VS DAVID
FACTS
Prior to January 17, 1921, the defendant Pablo David has been engaged
in running a rice mill in the municipality of Magalang, in the Province of
Pampanga, a mill which was well patronized by the rice growers of the
vicinity and almost constantly running. On the date stated a fire occurred
that destroyed the mill and its contents, and it was some time before the
mill could be rebuilt and put in operation again. Silvestra Baron, the
plaintiff in the first of the actions before us, is an aunt of the defendant;
while Guillermo Baron, the plaintiff in the other action; is his uncle. In the
months of March, April, and May, 1920, Silvestra Baron placed a
quantity of palay in the defendant's mill; and this, in connection with
some that she took over from Guillermo Baron, amounted to 1,012
cavans and 24 kilos. During approximately the same period Guillermo
Baron placed other 1,865 cavans and 43 kilos of palay in the mill. No
compensation has ever been received by Silvestra Baron upon account
of the palay delivered by Guillermo Baron, he has received from the
defendant advancements amounting to P2,800; but apart from this he
has not been compensated. Both the plaintiffs claim that the palay which
was delivered by them to the defendant was sold to the defendant; while
the defendant, on the other hand, claims that the palay was deposited
sale which was never effected. He therefore supposes himself to be
relieved from all responsibility by virtue of the fire of January 17, 1921,
already mentioned.
The plaintiff further say that their palay was delivered to the defendant
at his special request, coupled with a promise on his part to pay for the
same at the highest price per cavan at which palay would sell during the
year 1920; and they say that in August of that year the defendant
promised to pay them severally the price of P8.40 per cavan, which was
about the top of the market for the season, provided they would wait for
payment until December.
ISSUE: WON there was deposit.
HELD: NO.
Art. 1978 states that when the depositary has permission to use the thing
deposited, the contract loses the concept of a deposit and becomes a
loan or commodatum, except where safekeeping is still the principal
purpose of the contract. The permission shall not be presumed, and its
existence must be proved. However since money is to be paid in
exchange for the delivery of palay it is a contract of sale. It could not be
considered a contract of commodatum because commodatum is
essentially gratuitous and not a loan because obligation to pay the
equivalent same kind and quality of rice delivered. Essentially it is a
contract of sale.
When the palay in question was placed by the plaintiffs in the
defendant's mill there was the understanding that the defendant was at
liberty to convert it into rice and dispose of it at his pleasure. The mill
was actively running during the entire season, and as palay was daily
coming in from many customers and as rice was being constantly
shipped by the defendant to Manila, or other rice markets, it was
impossible to keep the plaintiffs' palay segregated. In fact the defendant
admits that the plaintiffs' palay was mixed with that of others.
It is quite certain that all of the plaintiffs' palay, which was put in before
June 1, 1920, been milled and disposed of long prior to the fire of
January 17, 1921. Furthermore, the proof shows that when the fire
occurred there could not have been more than about 360 cavans of
palay in the mill, none of which by any reasonable probability could have
been any part of the palay delivered by the plaintiffs.
The defendant then is bound to account for the value of the subject
palay, and his liability was not extinguished by the occurence of the fire.
ANGEL JAVELLANA vs. JOSE LIM, ET AL.
FACTS:
Angel Javellana filed a complaint on the 30th of October, 1906 against
Jose Lim and Ceferino Domingo Lim. It was then alleged that on the
26th of May, 1897, Lim executed and subscribed a document, in favor
of Javellana, reading as follows:
We have received from Angel Javellana, as a deposit without interest,
the sum of two thousand six hundred and eighty-six cents of pesos
fuertes, which we will return to the said gentleman, jointly and severally,
on the 20th of January, 1898. — Jaro, 26th of May, 1897. — Signed
Jose Lim. — Signed: Ceferino Domingo Lim.
It was also alleged that, when the obligation became due, Lim begged
Javellana for an extension of time for the payment thereof, building
themselves to pay interest at the rate of 15 per cent on the amount of
their indebtedness, to which Javellana acceded; that on the 15th of May,
1902, the debtors paid on account of interest due the sum of P1,000
pesos, with the exception of either capital or interest, had thereby been
subjected to loss and damages.
Lim answered that they admitted the statements of the plaintiff relative
to the payment of 1,102.16 pesos made
on the 15th of November, 1902, not, however, as payment of interest on
the amount stated in the foregoing document, but on account of the
principal, and denied that there had been any agreement as to an
extension of the time for payment and the payment of interest at the rate
of 15 per cent per annum.
ISSUE: WON the contract is a deposit. NO, it was a contract of loan.
HELD:
The document of indebtedness inserted in the complaint states that the
Javellana left on deposit with Lim a given sum of money which they were
jointly and severally obliged to return on a certain date fixed in the
document; but that, nevertheless, when the document written in the
Visayan dialect and followed by a translation into Spanish was executed,
it was acknowledged, at the date thereof, the 15th of November, 1902,
that the amount deposited had not yet been returned to Javellana. He
was subjected to losses and damages amounting to 830 pesos since
the 20th of January, 1898, when the return was again stipulated with the
further agreement that the amount deposited should bear interest at the
rate of 15 per cent per annum from January 20. The 1,000 pesos paid
to the depositor on the 15th of May, 1900, according to the receipt issued
by him to the debtors, would be included, and that the said rate of
interest would obtain until the debtors on the 20th of May, 1897, it is
called a deposit consisted, and they could have accomplished the return
agreed upon by the delivery of a sum equal to the one received by them.
For this reason it must be understood that the debtors were lawfully
authorized to make use of the amount deposited, which they have done,
as subsequent shown when asking for an extension of the time for the
return thereof, inasmuch as, acknowledging that they have subjected
the letter, their creditor, to losses and damages for not complying with
what had been stipulated, and being conscious that they had used, for
their own profit and gain, the money that they received apparently as a
deposit, they engaged to pay interest to the creditor from the date named
until the time when the refund should be made. Such conduct on the part
of the debtors is unquestionable evidence that the transaction entered
into between the interested parties was not a deposit, but a real contract
of loan.
Article 1767 of the Civil Code provides that —
The depository cannot make use of the thing deposited without the
express permission of the depositor.
Otherwise he shall be liable for losses and damages.
Article 1768 also provides that —
When the depository has permission to make use of the thing deposited,
the contract loses the character of a deposit and becomes a loan or
bailment.
The permission shall not be presumed, and its existence must be
proven.
Depository making use of the thing deposited: When
on one of the latter days of January, 1898, Jose Lim went to the office
of the creditor asking for an extension of one year, in view of the fact the
money was scare, and because neither himself nor the other defendant
were able to return the amount deposited, for which reason he agreed
to pay interest at the rate of 15 per cent per annum, it was because, as
a matter of fact, he did not have in his possession the amount deposited,
he having made use of the same in his business and for his own profit;
Express permission: Javellana, the creditor, by granting them the
extension, evidently confirmed the express
permission previously given to use and dispose of the amount stated as
having been deposited, which, in accordance with the loan, to all intents
and purposes gratuitously, until the 20th of January, 1898, and from that
dated with interest at 15 per cent per annum until its full payment,
deducting from the total amount of interest the sum of 1,000 pesos, in
accordance with the provisions of article 1173 of the Civil Code.
Notwithstanding that it does not appear that Jose Lim signed the
document executed in the presence of three
witnesses on the 15th of November, 1902, by Ceferino Domingo Lim on
behalf of himself and the former, nevertheless, the said document has
not been contested as false, either by a criminal or by a civil proceeding,
nor has any doubt been cast upon the authenticity of the signatures of
the witnesses who attested the execution of the same; and from the
evidence in the case one is sufficiently convinced that the said Jose Lim
was perfectly aware of and authorized his joint co-debtor to liquidate the
interest, to pay the sum of 1,000 pesos, on account thereof, and to
execute the aforesaid document No. 2. A true ratification of the original
document of deposit was thus made, and not the least proof is shown in
the record that Jose Lim had ever paid the whole or any part of the
capital stated in the original document.
There was no renewal of the contract deposited converted into a loan,
because, as has already been stated, the defendants received said
amount by virtue of real loan contract under the name of a deposit, since
the so-called bailees were forthwith authorized to dispose of the amount
deposited. This they have done, as has been clearly shown.
 ROGERS VS. SMITH
FACTS:
Plaintiff Jose Rogers (Rogers) brought this action in the CFI city of
Manila upon the following document:(the subject document of the case)
No. 1418. $12,000
.
The sum of pesos twelve thousand has been deposited with us, received
from Jose Rogers, which sum we will pay on the last day of the six
months after the presentation of this document, to the order of Mr. Jose
Rogers. Manila, February 17, 1876. SMITH, BELL & CO.
The said sum of twelve thousand pesos shall bear interest at the rate of
eight per centum (8%) per annum from this date, February 17, 1876.
SMITH, BELL & CO.
When this document was delivered by the defendants Smith, Bell & CO.
(Smith) to Rogers, 12,000 pesos in silver were worth more than 12,000
pesos in gold.
The only question in the case is, whether upon these documents Rogers
is entitled to recover 12,000 pesos or 24,000 pesos. CFI held that he
was entitled to recover only 12,000 pesos. Rogers has appealed.
Rogers delivered to Smith, in consideration of the execution of the
document, 12,000 in gold.
Soon thereafter Rogers moved to Barcelona and have since resided
there. Smith remitted the interest to him every three months at the rate
of 8 per cent per annum until the 30th day of January, 1888, when they
notified him that thereafter the interest would be 6 per cent. Rogers
accepted this reduction and interest and that rate was remitted to him by
Smith until the 10th of February, 1904. This interest was remitted in
silver; that is to say, every three months the Smith took 180 pesos in
silver and with it bought exchange on Barcelona or other European point
converted into pesetas. Rogers received these payments in silver
without any protest whatever until the 10th day of February, 1904.
In his letter of that date, he called the attention of the Smith to the fact
that by the new American law in force in the Philippines the gold
standard had been introduced and that by reason thereof he was entitled
to receive his interest in gold, in view of the fact that when he delivered
the money to the Smith in 1876 he delivered it in gold coin.
In another letter of the 15th of December, 1904, he expressly refers to
the act of Congress of March 2, 1903, and to the subsequent
proclamations of the Governor-General relating to coinage.
Rogers claims that, having paid to Smith 12,000 pesos in gold coin, he
is now entitled to receive from them the value of 12,000 pesos in gold
coin; that is to say, 24,000 pesos in silver. It is necessary to determine
in the first place the nature of the contract evidenced by the document
of the 17th of February, 1876.
ISSUE: WON the document is an evidence of an ordinary loan which
created between the Rogers and the Smith the simple relation of debtor
and creditor.
HELD: YES
The document is an evidence of ordinary loan.
Rogers repeatedly calls it a deposit, that is, that the ownership of the
particular coin which was delivered by him to Smith did not pass to Smith
but remained in him and that Smith was bound to return to him the
identical coin which they had received. It is apparent that no such claim
could be maintained in view of that part of the instrument which provides
for the payment of interest. But while not a deposit in the strict sense of
the word, the document evidences what is known as an "irregular
deposit."
The Supreme Court cited Manresa's discussion on the differences of a
loan and an irregular deposit namely:
in irregular deposit the benefit accrues to the depositor alone whereas
in loan the benefit is for both parties, the essential cause is the necessity
of the borrower;
in irregular deposit the depositor has a preference over other creditors
whereas in loan there is no such preference;
in irregular deposit the depositor can demand the return of the article at
any time whereas in loan the parties are bound by the contract.
In the first difference, the contract in question does not fulfill this
requirement of an irregular deposit. It is very apparent that is was not for
the sole benefit of Rogers. It like any other loan of money was for the
benefit of both parties. The benefit which Smith, Bell & Co. received was
the use of the money; the benefit which Rogers received was the interest
of his money. In the letter which Smith, Bell & Co. on the 30th of June,
1888, notified the plaintiff of the reduction of the interest, they said: "We
call your attention to this matter in order that you may if you think best
employ your money in some other place."
The second difference which exists, according to Manresa, between an
irregular deposit and a loan lies in the fact that in an irregular deposit the
depositor has a preference over other creditors in the distribution of the
debtor's property. It is apparent, therefore, that this document does not
state those requisites which are essential to an irregular deposit.
Nor does the contract in question fulfill the third requisite, which is, in an
irregular deposit, the depositor can demand the return of the article at
any time, while a lender is bound by the provisions of the contract and
cannot seek restitution until the time for payment, as provided in the
contract, has arisen. It is apparent from the terms of this document that
the plaintiff could not demand his money at any time. He was bound to
give notice of his desire for its return and then to wait for six months
before he could insist upon payment.
From the above discussions, it is very apparent that is was not for the
sole benefit of Rogers. Like any other loan it was for the benefit of both
parties. The benefit of Smith Bell Company was the use of the money
while Jose Rogers' benefit was the interest on his money. Also, he was
not able to demand for the money at any time for he is supposed to give
notice and wait for six months first before payment. Thus, the transaction
is that of an ordinary loan and not an irregular deposit.
COMPAÑIA AGRICOLA VS. NEPOMUCENO
FACTS:
On the 16th day of April, 1927, the Compania Agricola de Ultramar filed
a claim against one of the insolvents Mariano Velasco & Co., claiming
the sum of P10,000, with the agreed interest thereon at the rate of 6 per
cent per annum from April 5, 1918, until its full payment was a deposit
with said Mariano Velasco & Co. and asked the court to declare it a
preferred claim.
The assignee of the insolvency answered the claim by interposing a
general denial.
The claim was thereupon referred by the court to a Commissioner to
receive the evidence, and on September 23, 1929, the court rendered a
decision declaring that the alleged deposit was a preferred claim for the
sum mentioned, with interest at 6 per cent per annum from April 5, 1918,
untilpaid. From this decision the assignee appealed.
The evidence presented by the claimant CompaniaAgricola de Ultramar
consisted of a receipt in writing, and thetestimony of Jose Velasco who
was manager of MarianoVelasco & Co. at the time the note was
executed.
The receipt reads as follow (translation):
MANILA, P. I., April 5, 1918.
Received from the "Compania Agricola de Ultramar" the sum of ten
thousand Philippine pesos as a deposit at the interest of six per cent
annually, for the term of three months from date.
In witness thereof, I sign the present.
MARIANO VELASCO & CO.
By (Sgd.) JOSE VELASCO
Manager.
P10,000.00.
In his testimony, Jose Velasco stated that his signature on the receipt
was authentic and that he received the said sum of P10,000 from the
appellee and deposited it with the bank in the current account of Mariano
Velasco & Co.
ISSUE: WON the claim filed is that of a deposit or a loan? LOAN
HELD:
In the case of Gavieres vs. De Tavera (1 Phil., 17),very similar to the
present case, this court held that thetransaction therein involved was a
loan and not a deposit.The facts of the case were that in 1859 Ignacia
de Gorrichodelivered P3,000 to Felix Pardo de Tavera.
After the death of both parties, Gavieres, as plaintiff and successor in
interest of the deceased Ignacia de Gorricho, brought the action against
Trinidad H. Pardo de Tavera, the successor in interest of the deceased
Felix Pardo de Tavera, for the collection of the sum of P1,423.75, the
remaining portion of the 3,000 pesos. The plaintiff Gavieres alleged that
the money was delivered to Felix Pardo de Tavera as a deposit, but the
defendant insisted that the agreement above quoted was not a contract
of deposit but one of loan. The court said:
Although in the document in question a deposit is spoken of,
nevertheless from an examination of the entiredocument it clearly
appears that the contract was a loan and that such was the intention of
the parties. It isunnecessary to recur to the cannons of interpretation to
arrive at this conclusion. The obligation of the depository to pay interest
at the rate of 6 per cent to the depositor suffices to cause the obligation
to be considered as a loan and makes it likewise evident that it was the
intention of the parties that the depository should have the right to make
use of the amount deposited, since it was stipulated that the amount
could be collected after notice of two months in advance. Such being the
case, the contract lost the character of a deposit and acquired that of a
loan. (Art. 1768, Civil Code.)
Article 1767 of the Civil Code provides that —
"The depository cannot make use of the thing deposited without the
express permission of the depositor." "Otherwise he shall be liable for
losses and damages."
Article 1768 also provides that —
"When the depository has permission to make use of the thing
deposited, the contract loses the character
of a deposit and becomes a loan or bailment."
"The permission not be presumed, and its existence must be proven."
Moreover it may, as a matter of course, be inferred that there was no
renewal of the contract of deposit
converted into a loan, because, as has already been stated, the
defendants received said amount by virtue of a real loan contract under
the name of a deposit, since the so-called bailees were forthwith
authorized to dispose of the amount deposited. This they have done, as
has been clearly shown. (Mura ug second issue pero part lang sa main
issue): But the appellee argues that it is at least an "irregular deposit."
Manresa, in his Commentaries on the Civil Code states that there are
three points of difference between a loan and an irregular deposit.
The first difference which he points out consists in the fact that in an
irregular deposit the only benefit is that which accrues to the depositor,
while in a loan the essential cause for the transaction is the necessity of
the borrower. The contract in question does not fulfill this requirement of
an irregular deposit. Nor does the contract in question fulfill the third
requisite indicated by Manresa, which is, that in an irregular deposit, the
depositor can demand the return of the article at any time, while a lender
is bound by the provisions of the contract and cannot seek restitution
until the time for payment, as provided in the contract, has arisen. It is
apparent from the terms of this documents that the plaintiff could not
demand his money at any time. He was bound to give notice of his desire
for its return and then to wait for six months before he could insist upon
payment.
In the present case the transaction in question was clearly not for the
sole benefit of the Compania Agricola de Ultramar; it was evidently for
the benefit of both parties. Neither could the alleged depositor demand
payment until the expiration of the term of three months.
For the reasons stated, the appealed judgment is reversed, and we hold
that the transaction in question must be regarded as a loan, without
preference. Without costs.
BPI vs. CA
BANK OF THE PHILIPPINE ISLANDS (successor-in- interest of
COMMERCIAL AND TRUST CO.), petitioner, vs. HON. COURT OF
APPEALS, EASTERN PLYWOOD CORP. and BENIGNO D. LIM,
respondents.
FACTS:
Private respondents Eastern Plywood Corporation (Eastern) and
Benigno D. Lim (Lim), held one joint bank account with the Commercial
Bank and Trust Co. (CBTC), the predecessor-in-interest of petitioner
Bank of the Philippine Islands (BPI). Sometime in March 1975, a joint
checking account with Lim in the amount of P120,000.00 was opened
by Mariano Velasco with funds withdrawn from the account of Eastern
and/or Lim.
Velasco died. At the time of his death, the outstanding balance of the
account stood at P662,522.87. On 5 May 1977, by virtue of an Indemnity
Undertaking executed by Lim one-half of this amount was provisionally
released and transferred to one of the bank accounts of Eastern with
CBTC.
Thereafter, Eastern obtained a loan of P73,000.00 from CBTC as
"Additional Working Capital,". Eastern issued a negotiable promissory
note for P73,000.00 payable on demand to the order of CBTC with
interest at 14% per annum. The note was signed by Lim. The loan is
wholly/partly secured by the Hold-Out on a 1:1 on C/A No. 2310-001-42,
which refers to the joint account of Velasco and Lim with a balance of
P331,261.44. In addition, Eastern and Lim, and CBTC signed another
document entitled "Holdout Agreement,"
On the other hand, a case for the settlement of Velasco's estate was
filed. In the said case, the whole balance of P331,261.44 in the aforesaid
joint account of Velasco and Lim was being claimed as part of Velasco's
estate. The intestate court granted motion of the heirs of Velasco to
withdraw the balance and authorized the heirs to divide among
themselves the amount withdrawn.
CBTC was merged with BPI. BPI filed a complaint against Lim and
Eastern demanding payment of the promissory note for P73,000.00.
Defendants Lim and Eastern, in turn, filed a counterclaim against BPI
for the return of the balance in the disputed account subject of the
Holdout Agreement and the interests thereon after deducting the
amount due on the promissory note. RTC dismissed the complaint and
CA affirmed the decision.
PETITIONER’s CONTENTION: BPI alleged that the Holdout Agreement
in question was subject to a suspensive condition stated therein, viz.,
that the "P331,261.44 shall become a security for respondent Lim's
promissory note only if respondents' Lim and Eastern Plywood
Corporation's interests to that amount are established as a result of a
final and definitive judicial action or a settlement between and among
the contesting parties thereto." Hence, BPI asserts, the Court of Appeals
erred in affirming the trial court's decision dismissing the complaint on
the ground that it was the duty of CBTC to debit the account of the
defendants to set off the amount of P73,000.00 covered by the
promissory note.
PRIV. RESPONDENT’s CONTENTION: Eastern and Lim dispute the
"suspensive condition" argument of the petitioner that they are rightful
owners of the money in question, the suspensive condition does not find
any application in this case and the bank had the duty to set off this
deposit with the loan.
ISSUES:
1. WON BPI can demand payment of the loan of P73,000.00
despite the existence of the Holdout Agreement? YES
2. WON BPI is still liable to the private respondents on the
account subject of the Holdout Agreement after its withdrawal
by the heirs of Velasco? YES
HELD:
ISSUE 1:
It is clear in paragraph 02 of the “Holdout Agreement” that CBTC, or BPI
as its successor-in-interest, had every right to demand that Eastern and
Lim settle their liability under the promissory note. It cannot be
compelled to retain and apply the deposit in Lim and Velasco's joint
account to the payment of the note. What the agreement conferred on
CBTC was a power, not a duty. Generally, a bank is under no duty or
obligation to make the application. To apply the deposit to the payment
of a loan is a privilege, a right of set-off which the bank has the option to
exercise.
Also, paragraph 05 of the Holdout Agreement itself states that
notwithstanding the agreement, CBTC was not in any way precluded
from demanding payment from Eastern and from instituting an action to
recover payment of the loan.
What it provides is an alternative, not an exclusive, method of enforcing
its claim on the note. Its suit for the enforcement of the note was then in
order and it was error for the trial court to dismiss it on the theory that it
was set off by an equivalent portion in C/A No. 2310-001-42 which BPI
should have debited. The "suspensive condition" theory of the petitioner
is, therefore, untenable.
ISSUE 2:
The Court of Appeals correctly decided on the counterclaim. The
counterclaim of Eastern and Lim for the return of the P331,261.44 was
equivalent to a demand that they be allowed to withdraw their deposit
with the bank. Article 1980 of the Civil Code expressly provides that
"[f]ixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan."
In Serrano vs. Central Bank of the Philippines, we held that bank
deposits are in the nature of irregular deposits; they are really loans
because they earn interest. The relationship then between a depositor
and a bank is one of creditor and debtor. The deposit under the
questioned account was an ordinary bank deposit; hence, it was payable
on demand of the depositor.
The account was proved and established to belong to Eastern even if it
was deposited in the names of Lim and Velasco. As the real creditor of
the bank, Eastern has the right to withdraw it or to demand payment
thereof. BPI cannot be relieved of its duty to pay Eastern simply because
it already allowed the heirs of Velasco to withdraw the whole balance of
the account. The petitioner should not have allowed such withdrawal
because it had admitted in the Holdout Agreement the questioned
ownership of the money deposited in the account. Moreover, the order
of the court merely authorized the heirs of Velasco to withdraw the
account. BPI was not specifically ordered to release the account to the
said heirs; hence, it was under no judicial compulsion to do so.
Because the ownership of the deposit remained undetermined, BPI, as
the debtor, had no right to pay to persons other than those in whose
favor the obligation was constituted or whose right or authority to receive
payment is indisputable. Payment made by the debtor to the wrong party
does not extinguish the obligation as to the creditor who is without fault
or negligence, even if the debtor acted in utmost good faith and by
mistake as to the person of the creditor, or through error induced by
fraud of a third person. The payment then by BPI to the heirs of Velasco,
even if done
in good faith, did not extinguish its obligation to the true depositor,
Eastern.
POLICY:
Bank deposits are in the nature of irregular deposits; they are really
loans because they earn interest. The relationship then between a
depositor and a bank is one of creditor and debtor.
GUINGONA vs. THE CITY FISCAL OF MANILA
FACTS:
Private respondent David filed a complaint in the Office of the City Fiscal
of Manila. David charged petitioners (with one Robert Marshall and the
directors of the Nation Savings and Loan Association, Inc. (NSLA) with
estafa and violation of CB Circular No. 364 and related Central Bank
regulations on foreign exchange transactions, allegedly committed as
follows:
From March 20, 1979 to March, 1981, David invested with the NSLA the
sum of P1,145,546.20 on nine deposits, P13,531.94 on savings account
deposits (jointly with his sister, Denise Kuhne), US$10,000.00 on time
deposit, US$15,000.00 under a receipt and guarantee of payment and
US$50,000.00 under a receipt dated June 8, 1980 (au jointly with Denise
Kuhne).
That David was induced into making the aforestated investments by
Robert Marshall an Australian national who was allegedly a close
associate of petitioner Guingona Jr., then NSLA President, petitioner
Martin, then NSLA Executive Vice-President of NSLA and petitioner
Santos, then NSLA General Manager; that on March 21, 1981 NSLA
was placed under receivership by the Central Bank, so that David filed
claims therewith for his investments and those of his sister; that David
received a report from the Central Bank that only P305,821.92 of those
investments were entered in the records of NSLA; that, therefore, the
petitioners misappropriated the balance of the investments, at the same
time violating CB Circular No. 364 and related Central Bank regulations
on foreign exchange transactions; that after demands, petitioner
Guingona Jr. paid only P200,000.00, thereby reducing the amounts
misappropriated to P959,078.14 and US$75,000.00.
Petitioners, Martin and Santos, filed a joint counter-affidavit in which they
stated the following:ê
That because NSLA was urgently in need of funds and at David's
insistence, his investments were treated as special- accounts with
interest above the legal rate, an recorded in separate confidential
documents only a portion of which were to be reported because he did
not want the Australian government to tax his total earnings (nor) to
know his total investments; that all transactions with David were
recorded; that David's check for US$50,000.00 was cleared through
Guingona, Jr.'s dollar account because NSLA did not have one, that
after NSLA was placed under receivership, Martin executed a
promissory note in David's favor and caused the transfer to him of a nine
and on behalf (9 1/2) carat diamond ring with a net value of P510,000.00;
and, that the liabilities of NSLA to David were civil in nature.
Petitioner, Guingona, Jr., in his counter-affidavit stated the
following:têñ.£îhqwâ£
That he had no hand whatsoever in the transactions between David and
NSLA since he (Guingona Jr.) had resigned as NSLA president prior to
those transactions; that he assumed a portion of the liabilities of NSLA
to David because of the latter's insistence that he placed his investments
with NSLA because of his faith in Guingona, Jr.; that in a Promissory
Note, he (Guingona, Jr.) bound himself to pay David the sums of
P668.307.01 and US$37,500.00 in stated instalments; that he
(Guingona, Jr.) secured payment of those amounts.
At the inception of the preliminary investigation before respondent Lota,
petitioners moved to dismiss the charges against them for lack of
jurisdiction because David's claims allegedly comprised a purely civil
obligation which was itself novated. Fiscal Lota denied the motion to
dismiss.
But, after the presentation of David's principal witness, petitioners filed
the instant petition because: (a) the production of the Promisory Notes,
Banker's Acceptance, Certificates of Time Deposits and Savings
Account allegedly showed that the transactions between David and
NSLA were simple loans, i.e., civil obligations on the part of NSLA which
were novated when Guingona, Jr. and Martin assumed them;
ISSUE: What is the nature of obligation of NSLA with David? Does the
Manila Fiscal have the jurisdiction to the case? CIVIL in nature;
HELD: NO.
There is merit in the contention of the petitioners that their liability is civil
in nature and therefore, public respondents have no jurisdiction over the
charge of estafa.
A casual perusal of the affidavit complaint filed by David against
petitioners will show that from he, together with his sister, Denise Kuhne,
invested with the NSLA on time deposits covered by Bankers
Acceptances and Certificates of Time Deposits and on savings account
deposits covered by a passbook. It appears further that private
respondent David, together with his sister, made investments in the
aforesaid bank in the amount of US$75,000.00.
Moreover, the records reveal that when the aforesaid bank was placed
under receivership, petitioners Guingona and Martin, upon the request
of private respondent David, assumed the obligation of the bank to
private respondent David by executing a joint promissory note in favor
of private respondent acknowledging an indebtedness of Pl,336,614.02
and US$75,000.00 . This promissory note was based on the statement
of account prepared by the David.
Thereafter, petitioners Guingona and Martin agreed to divide the said
indebtedness, and petitioner Guingona executed another promissory
note antedated to June 17, 1981 whereby he personally acknowledged
an indebtedness of P668,307.01 and US$37,500.00 (1/2 of
US$75,000.00) in favor of private respondent. The aforesaid promissory
notes were executed as a result of deposits made by Clement David and
Denise Kuhne with the Nation Savings and Loan Association.
Furthermore, the various pleadings and documents filed by David before
this Court indisputably show that he has indeed invested his money on
time and savings deposits with the NSLA.
It must be pointed out that when private respondent David invested his
money on nine and savings deposits with the aforesaid bank, the
contract that was perfected was a contract of simple loan or mutuum and
not a contract of deposit. Thus, Article 1980 of the New Civil Code
provides that:têñ.£îhqwâ£
Article 1980. Fixed, savings, and current deposits of-money in banks
and similar institutions shall be governed by the provisions concerning
simple loan.
In the case of Central Bank of the Philippines vs. Morfe, We said: It
should be noted that fixed, savings, and current deposits of money in
banks and similar institutions are hat true deposits. are considered
simple loans and, as such, are not preferred credits.
This Court also declared in the recent case of Serrano vs. Central Bank
of the Philippines that:
Bank deposits are in the nature of irregular deposits. They are really
'loans because they earn interest. All kinds of bank deposits, whether
fixed, savings, or current are to be treated as loans and are to be
covered by the law on loans (Art. 1980 Civil Code Gullas vs. Phil.
National Bank, 62 Phil. 519). Current and saving deposits, are loans to
a bank because it can use the same. The petitioner here in making time
deposits that earn interests will respondent Overseas Bank of Manila
was in reality a creditor of the respondent Bank and not a depositor. The
respondent Bank was in turn a debtor of petitioner. Failure of the
respondent Bank to honor the time deposit is failure to pay its obligation
as a debtor and not a breach of trust arising from a depositary's failure
to return the subject matter of the deposit.
Hence, the relationship between the private respondent and the NSLA
is that of creditor and debtor; consequently, the ownership of the amount
deposited was transmitted to the Bank upon the perfection of the
contract and it can make use of the amount deposited for its banking
operations, such as to pay interests on deposits and to pay withdrawals.
While the Bank has the obligation to return the amount deposited, it has,
however, no obligation to return or deliver the same money that was
deposited. And, the failure of the Bank to return the amount deposited
will not constitute estafa through misappropriation punishable under
Article 315, par. l(b) of the Revised Penal Code, but it will only give rise
to civil liability over which the public respondents have no- jurisdiction.
WE have already laid down the rule that:
In order that a person can be convicted under the above-quoted
provision, it must be proven that he has the obligation to deliver
or return the some money, goods or personal property that he received.
Petitioners had no such obligation to return the same money, i.e., the
bills or coins, which they received from private respondents. This is so
because as clearly as stated in criminal complaints, the related civil
complaints and the supporting sworn statements, the sums of money
that petitioners received were loans.
The nature of simple loan is defined in Articles 1933 and 1953 of the
Civil Code
"Art. 1933. — By the contract of loan, one of the parties delivers to
another, either something not consumable so that the latter may use the
same for a certain time- and return it, in which case the contract is called
a commodatum; or money or other consumable thing, upon the condition
that the same amount of the same kind and quality shall he paid in which
case the contract is simply called a loan or mutuum.
"Commodatum is essentially gratuitous.
"Simple loan may be gratuitous or with a stipulation to pay interest.
"In commodatum the bailor retains the ownership of the thing loaned
while in simple loan, ownership passes to the borrower.
"Art. 1953. — A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay to the
creditor an equal amount of the same kind and quality."
It can be readily noted from the above-quoted provisions that in simple
loan (mutuum), as contrasted to commodatum the borrower acquires
ownership of the money, goods or personal property borrowed. Being
the owner, the borrower can dispose of the thing borrowed (Article 248,
Civil Code) and his act will not be considered misappropriation thereof.
But even granting that the failure of the bank to pay the time and savings
deposits of private respondent David would constitute a violation of
paragraph 1(b) of Article 315 of the Revised Penal Code, nevertheless
any incipient criminal liability was deemed avoided, because when the
aforesaid bank was placed under receivership by the Central Bank,
petitioners Guingona and Martin assumed the obligation of the bank to
private respondent David, thereby resulting in the novation of the original
contractual obligation arising from deposit into a contract of loan and
converting the original trust relation between the bank and private
respondent David into an ordinary debtor-creditor relation between the
petitioners and private respondent. Consequently, the failure of the bank
or petitioners Guingona and Martin to pay the deposits of private
respondent would not constitute a breach of trust but would merely be a
failure to pay the obligation as a debtor.
Moreover, while it is true that novation does not extinguish criminal
liability, it may however, prevent the rise of criminal liability as long as it
occurs prior to the filing of the criminal information in court.
In the case at bar, there is no dispute that petitioners Guingona and
Martin executed a promissory note on June 17, 1981 assuming the
obligation of the bank to private respondent David; while the criminal
complaint for estafa was filed on December 23, 1981 with the Office of
the City Fiscal. Hence, it is clear that novation occurred long before the
filing of the criminal complaint with the Office of the City Fiscal.
Consequently, as aforestated, any incipient criminal liability would be
avoided but there will still be a civil liability on the part of petitioners
Guingona and Martin to pay the assumed obligation.
Petitioners herein were likewise charged with violation of Section 3 of
Central Bank Circular No. 364 and other related regulations regarding
foreign exchange transactions by accepting foreign currency deposit in
the amount of US$75,000.00 without authority from the Central Bank.
They contend however, that the US dollars intended by respondent
David for deposit were all converted into Philippine currency before
acceptance and deposit into Nation Savings and Loan Association.
Petitioners' contention is worthy of behelf for the following reasons:
1. It appears from the records that when respondent David was
about to make a deposit of bank draft issued in his name in
the amount of US$50,000.00 with the NSLA, the same had to
be cleared first and converted into Philippine currency.
Accordingly, the bank draft was endorsed by respondent
David to petitioner Guingona, who in turn deposited it to his
dollar account with the Security Bank and Trust Company.
Petitioner Guingona merely accommodated the request of the
NSLA in order to clear the bank draft through his dollar
account because the bank did not have a dollar account.
2. It is safe to assume that the U.S. dollars were converted first
into Philippine pesos before they were accepted and
deposited in NSLA.
In conclusion, considering that the liability of the petitioners is purely civil
in nature and that there is no clear showing that they engaged in foreign
exchange transactions, We hold that the public respondents acted
without jurisdiction when they investigated the charges against the
petitioners.
THE PROVINCE OF BATAAN vs. VILLAFUERTE
FACTS:
Involved in the present controversy is an expanse of real property
(BASECO property) situated at Mariveles, Bataan and BASECO, the
Philippine Dockyard Corporation or the Baseco Drydock and
Construction Co., Inc..
Pursuant to the Real Property Tax Code of 1974, the Provincial
Treasurer of Bataan advertised for auction sale the BASECO property
due to real estate tax delinquency. At the auction sale, no bidder vied
for said property as a result of which, the Provincial Treasurer adjudged
the property to, and acquired the same for, and in the name of Province
of Bataan. Upon the expiration of the one-year redemption period, and
without the owner exercising its right to redeem the subject property, the
Provincial Government of Bataan consolidated its title thereon.
Eventually, petitioner, thru then Governor Garcia, entered into a ten-year
contract of lease with 7-R Port Services, Inc., whereby portions of the
BASECO property including facilities and improvements thereon, were
leased to the latter for a minimum escalating annual rental of P18 million.
On 10 May 1993, petitioner forged another contract of lease with Marina
Port Services, over a ten-hectare portion of the BASECO property.
The Presidential Commission on Good Government (PCGG), for itself
and on behalf of the Republic of the Philippines and the BASECO, the
Philippine Dockyard Corporation and the Baseco Drydock and
Construction Co. Inc., filed with the RTC-Bataan a complaint for
annulment of sale, principally assailing the validity of the tax delinquency
sale of the BASECO property in favor of petitioner Province of
Bataan. Among others, the complaint alleged that the auction sale is
void for having been conducted:
a) In defiance of an injunctive order issued by the PCGG
b) in contravention of the Real Property Tax Code of 1974;
c) while the issue of ownership of the Baseco property and of whether
the same partakes of the nature of ill-gotten wealth is pending litigation
before the Sandiganbayan; and
d) despite the inscription of the sequestration order at the back of each
title of the BASECO property.
In its prayer, the complaint asked for the following reliefs:
1) The tax delinquency sale be declared null and void;
2) The defendants be ordered to render an accounting to, and pay
plaintiffs all earnings, fruits and income which they have received or
could have received.
4) The defendant 7-R Port Services, Inc. be ordered to immediately
cease and desist from paying any lease rentals to the Province of
Bataan, and instead to pay the same directly to the plaintiffs;
Herein respondent PCGG, upon learning of the lease contracts entered
into by and between petitioner and Marina Port Services, filed with the
RTC an urgent motion for the issuance of a writ of preliminary injunction
to enjoin herein petitioner from entering into a lease contract with Marina
Port Services, Inc. (Marina), or any other entity, and/or from
implementing/enforcing such lease contract, if one has already been
executed, and to maintain the status quo until further orders from the
Court.
The lower court denied the motion ratiocinating that the lease contract
with Marina was already a fait accompli when the motion was filed, and
that Marina was not a party to the suit for not having been impleaded as
party-defendant.
The PCGG filed with the lower court an Urgent Motion to Deposit Lease
Rentals, alleging inter alia that the rentals amounting to Hundreds of
Millions of Pesos are in danger of being unlawfully spent, squandered
and dissipated to the great and irreparable damage of plaintiffs who are
the rightful owners of the property leased.
On 28 July 1993, the lower court granted the PCGGs urgent motion and
issued its assailed order. ACCORDINGLY, the defendant Province of
Bataan is ordered to remit to the Court the lease rentals it may receive
from the defendant 7-R Port Services, Inc. and the Marina Port Services,
Inc. and to deposit said amount under special time deposit with the Land
Bank of the Philippines, in the name and/or account of this Court to be
held in ESCROW for the person or persons, natural or juridical, who may
be finally adjudged lawfully entitled thereto, and subject to further orders
from this Court.
ISSUE: The sole issue for resolution revolves around the propriety of
the escrow order issued by the lower court in the civil suit for annulment
of sale.
HELD: YES
The instant petition is devoid of merit.
In the main, petitioner insists that the issuance of the escrow order by
the trial court was patently irregular, if not downright anomalous,
reasoning that nowhere in the Revised Rules of Court is the trial court,
or any court for that matter, authorized to issue such escrow order,
whether as a provisional or permanent remedy. According to petitioner,
the escrow orders in question are null and void ab initio for having been
issued absent any legal basis and are merely calculated to prejudice the
petitioner province without any practical or worthwhile, much less legal
objective.
We do not agree. An escrow fills a definite niche in the body of the law;
it has a distinct legal character. The usual definition is that an escrow is
a written instrument which by its terms imports a legal obligation and
which is deposited by the grantor, promisor, or obligor, or his agent with
a stranger or third party, to be kept by the depositary until the
performance of a condition or the happening of a certain event, and then
to be delivered over to the grantee, promisee, or obligee.
While originally, the doctrine of escrow applied only to deeds by way of
grant, or as otherwise stated, instruments for the conveyance of land,
under modern theories of law, the term escrow is not limited in its
application to deeds, but is applied to the deposit of any written
instrument with a third person. Particular instruments which have been
held to be the subject of an escrow include bonds or covenants, deeds,
mortgages, oil and gas leases, contracts for the sale of land or for the
purchase of personal property, corporate stocks and stock
subscriptions, promissory notes or other commercial paper, insurance
applications and policies, contracts for the settlement of will-contest
cases, indentures of apprenticeship, receipts assigning concessions
and discontinuances and releases of causes of action. Moreover, it is no
longer open to question that money may be delivered in escrow.
In our jurisdiction, an escrow order issued by a court of law may find
ample basis and support in the courts intrinsic power to issue orders and
other ancillary writs and processes incidental or reasonably necessary
to the exercise of its main jurisdiction. Evidently, judicial power connotes
certain incidental and inherent attributes reasonably necessary for an
effective administration of justice.
In a manner of speaking, courts have not only the power to maintain
their life, but they have also the power to make that existence effective
for the purpose for which the judiciary was created. They can, by
appropriate means, do all things necessary to preserve and maintain
every quality needful to make the judiciary an effective institution of
Government. Courts have therefore inherent power to preserve their
integrity, maintain their dignity and to insure effectiveness in the
administration of justice.
To lend flesh and blood to this legal aphorism, Rule 135 of the Rules of
Court explicitly provides:
Section 6. Means to carry jurisdiction into effect - When by law
jurisdiction is conferred on a court or judicial officer, all auxiliary writs,
processes and other means necessary to carry it into effect may be
employed by such court or officer, and if the procedure to be followed in
the exercise of such jurisdiction is not specifically pointed out by law or
by these rules, any suitable process or mode of proceeding may be
adopted which appears conformable to the spirit of said law or rules.  or decree and protecting further the interests of the rightful claimants of
It is beyond dispute that the lower court exercised jurisdiction over the
main action docketed as Civil Case No. 210-ML, which involved the
annulment of sale and reconveyance of the subject properties. Under
this circumstance, we are of the firm view that the trial court, in issuing
the assailed escrow orders, acted well within its province and sphere of
power inasmuch as the subject orders were adopted in accordance with
the Rules and jurisprudence and were merely incidental to the courts
exercise of jurisdiction over the main case, thus:
Jurisdiction attaching, the courts powers as a necessary incident to their
general jurisdiction, to make such orders in relation to the cases pending
before them are as necessary to the progress of the cases and the
dispatch of business follow. (Deming v. Foster, cited in Burleigh v. Wong
Sung De Leon)
A court is vested, not only with the powers expressly granted by the
statute, but also with all such powers as are incidentally necessary to
the effective exercise of the powers expressly conferred (In re McLures
Estate) and to render its orders, made under such express powers
effective. Brown v. Clark, cited in State v. District Court)
In the absence of prohibitive legislation, courts have inherent power to
provide themselves with appropriate procedures required for the
performance of their tasks. (Ex parte Peterson; Funk v. U.S., cited in Ex
parte U.S. C.C.A. ).
A court has inherent power to make such interlocutory orders as may
be necessary to protect its jurisdiction, and to make certain that its
eventual decree may not be ineffective. (Boynton v. Moffat Tunnel
Improvement Dist)
In the ordinary case the courts can proceed to the enforcement of the
plaintiffs rights only after a trial had in the manner prescribed by the laws
of the land, which involves due notice, the right of the trial by jury,
etc. Preliminary to such an adjucation, the power of the court is generally
to preserve the subject matter of the litigation to maintain the status, or
issue some extraordinary writs provided by law, such as attachments,
etc. None of these powers, however, are exercised on the theory that
the court should, in advance of the final adjudication determine the rights
of the parties in any summary way and put either of them in the
enjoyment thereof; but such actions taken merely, as means for securing
an effective adjudication and enforcement of rights of the parties after
such adjudication. 
On this score, the incisive disquisition of the Court of Appeals is worthy
of mention, to wit:
Given the jurisdiction of the trial court to pass upon the raised question
of ownership and possession of the disputed property, there then can
hardly be any doubt as to the competence of the same court, as an
adjunct of its main jurisdiction, to require the deposit in escrow of the
rentals thereof pending final resolution of such question. To paraphrase
the teaching in Manila Herald Publishing Co., Inc. vs. Ramos, jurisdiction
over an action carries with it jurisdiction over an interlocutory matter
incidental to the cause and deemed essential to preserve the subject
matter of the suit or to protect the parties interest.
The impugned orders appear to us as a fair response to the exigencies
and equities of the situation. Parenthetically, it is not disputed that even
before the institution of the main case below, the Province of Bataan has
been utilizing the rental payments on the Baseco Property to meet its
financial requirements. To us, this circumstance adds a more compelling
dimension for the issuance of the assailed orders.
Applying the foregoing principles and considering the peculiarities of the
instant case, the lower court, in the course of adjudicating and resolving
the issues presented in the main suit, is clearly empowered to control
the proceedings therein through the adoption, formulation and issuance
of orders and other ancillary writs, including the authority to place the
properties in custodia legis, for the purpose of effectuating its judgment
the subject property.
To trace its source, the courts authority proceeds from its jurisdiction and
power to decide, adjudicate and resolve the issues raised in the principal
suit. Stated differently, the deposit of the rentals in escrow with the bank,
in the name of the lower court, is only an incident in the main
proceeding. To be sure, placing property in litigation under judicial
possession, whether in the hands of a receiver, and administrator, or as
in this case, in a government bank, is an ancient and accepted
procedure. Consequently, we find no cogency to disturb the questioned
orders of the lower court and in effect uphold the propriety of the subject
escrow orders. 
DURBAN APARTMENTS vs. PIONEER INSURANCE
FACTS:
Pioneer is the insurer for loss and damage of Jeffrey S. Sees’ Suzuki
Grand Vitara in the amount of P1,175,000.00. On April 30, 2002, See
arrived and checked in at the City Garden Hotel in Makati before
midnight, and its parking attendant, Justimbaste got the key to said
Vitara from See to park it. On May 1, 2002, at about 1:00 oclock in the
morning, See was awakened in his room by a telephone call from the
Hotel Chief Security Officer who informed him that his Vitara was
carnapped while it was parked unattended at the parking area of
Equitable PCI Bank.
His Vitara was insured with Pioneer Insurance. Thereafter, Pioneer
Insurance required See to sign a Release of Claim and Subrogation
Receipt, and finally paid him the sum of P1,163,250.00 for his claim.
On July 22, 2003, Pioneer Insurance and Surety Corporation, by right of
subrogation, filed with the RTC of Makati City a Complaint for Recovery
of Damages against Durban Apartments Corporation, doing business
under the name and style of City Garden Hotel, and Vicente
Justimbaste.
RTC rendered a decision ordering Durban Apartments Corporation to
pay Pioneer Insurance and Surety Corporation the sum of
P1,163,250.00 with legal interest thereon from July 22, 2003 until the
obligation is fully paid and attorneys fees and litigation expenses
amounting to P120,000.00.
The appellate court affirmed the decision of the trial court.
ISSUE: WON a contract of necessary deposit exists in this case.
HELD: Yes
In this case, Pioneer substantiated the allegations in its complaint, i.e.,
a contract of necessary deposit existed between the insured See and
petitioner.
Article 1962, in relation to Article 1998, of the Civil Code defines a
contract of deposit and a necessary deposit made by persons in hotels
or inns:
Art. 1962. A deposit is constituted from the moment a person receives a
thing belonging to another, with the obligation of safely keeping it and
returning the same. If the safekeeping of the thing delivered is not the
principal purpose of the contract, there is no deposit but some other
contract.
Art. 1998. The deposit of effects made by travelers in hotels or inns shall
also be regarded as necessary. The keepers of hotels or inns shall be
responsible for them as depositaries, provided that notice was given to
them, or to their employees, of the effects brought by the guests and
that, on the part of the latter, they take the precautions which said hotel-
keepers or their substitutes advised relative to the care and vigilance of
their effects.
Plainly, from the facts found by the lower courts, the insured See
deposited his vehicle for safekeeping with petitioner, through the latters
employee, Justimbaste. In turn, Justimbaste issued a claim stub to See.
Thus, the contract of deposit was perfected from Sees delivery, when
he handed over to Justimbaste the keys to his vehicle, which
Justimbaste received with the obligation of safely keeping and returning
it. Ultimately, petitioner is liable for the loss of Sees vehicle.
WHEREFORE, the petition is DENIED. SO ORDERED.
YHT REALTY vs. CA
FACTS:
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 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. He rented
a safety deposit box. 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.
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 US$5,000.00, the envelope
containing AUS$10,000.00, his passports and his credit cards. When he
arrived in Hongkong, he opened the envelope which contained
US$5,000.00 and discovered upon counting that only US$3,000.00
were enclosed therein. After returning to Manila, he checked out of
Tropicana on and left for Australia. When he arrived in Australia, he
discovered that the envelope with US$10,000.00 was short of
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.
Tan admitted that she had stolen McLoughlins key and was able to open
the safety deposit box with the assistance of Lopez, Payam and Lainez.
Lopez also told McLoughlin that Tan stole the key assigned to
McLoughlin while the latter was asleep. Thereafter, Lopez wrote on a
piece of paper a promissory note recognizing his liability. Despite the
execution of promissory note, 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.
McLoughlin filed a complaint for damages against YHT Realty
Corporation, Lopez, Lainez, Payam and Tan for the loss of McLoughlins
money.
RTC of Manila rendered judgment in favor of McLoughlin.
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.
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 NCC and against
public policy. 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.
The CA affirmed the disquisitions made by the lower court
ISSUE: WON the hotel is negligent and should be held liable.
HELD: Yes
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.
Tropicana should be held responsible for the damage suffered by
McLoughlin by reason of the negligence of its employees.
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 McLoughlins money was
consummated through the negligence of Tropicanas employees in
allowing Tan to open the safety deposit box without the guests consent,
both the assisting employees and YHT Realty Corporation itself, as
owner and operator of Tropicana, should be held solidarily liable
pursuant to Article 2193.
ISSUE: Whether the Undertaking For The Use of Safety Deposit Box
executed by McLoughlin is tainted with nullity.
HELD: Yes
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.
Article 2003 was incorporated in the NCC as an expression of public
policy. It 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 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, CA 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.
Paragraphs (2) and (4) of the undertaking manifestly contravene Article
2003 of the NCC 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 NCC 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.
Petitioners likewise anchor their defense on Article 2002 which exempts
the hotel-keeper from liability if the loss is due to the acts of his guest,
his family, or visitors. The justification they raise would render nugatory
the public interest sought to be protected by the provision. 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.
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.
WHEREFORE, the Decision of the CA is hereby AFFIRMED.
LOS BANOS vs. AFRICA
FACTS:
Petitioner Pacita Africa (Pacita for brevity) is the widow of Alberto Africa
and the rest of her co-petitioners are their children.
Sometime in June 1989, the Quezon City Hall building where the
Register of Deeds was then holding office was razed by fire, destroying
some of its records/documents among which was the original TCT
covering a parcel of land registered in the name of petitioner Pacita. The
aforesaid property was part of the conjugal property of petitioner Pacita
and her late husband Alberto Africa.
On request of Pacita, private respondent Macy Africa, the common law
wife of petitioner Antonio Africa, worked for the reconstitution of the said
title. The same was done and a new TCT was issued in the name of
Pacita Africa.
While the reconstituted title was in her possession, Macy allegedly
forged, or caused the forgery of, Pacita’s signature on a Deed of
Absolute Sale purporting to transfer ownership of the subject property to
Macy. On the strength of the forged Deed of Absolute Sale, Macy was
able to cause the issuance of a new TCT in her name, without the
knowledge of any of herein petitioners.
Sometime in March 1994, petitioners discovered private respondent’s
fraudulent act. They (petitioners) likewise came to know that the subject
property was mortgaged by Macy to the respondent bank.
To protect their interests over the subject property, petitioners lodged an
action in court against Macy and the respondent bank for Annulment of
Title, Deed of Absolute Sale and Deed of Mortgage.
After the filing of the aforesaid case, the respondent bank in utter bad
faith, foreclosed the subject property on June 11, 1996 without due
notice to the petitioners, prompting the petitioners to amend [their]
complaint, this time incorporating therein a prayer for the issuance of a
temporary restraining order and/or writ of preliminary injunction, to stop
the respondent bank from, among others, consolidating title to the
subject property.
On July 2, 1997, RTC Branch 99 issued an Order granting petitioners
application for a temporary restraining order. Meanwhile, the respondent
bank filed its Manifestation, Opposition and Motion to Postpone dated
July 11, 1997, praying, inter alia, for the denial of petitioners application
for a writ of preliminary injunction, or in the alternative, for the
cancellation of the hearing thereon. On July 18, 1997, the aforesaid
court denied the respondent banks motion to postpone and proceeded
with the hearing of petitioners application. Thereafter, petitioners
application was considered submitted for resolution.
The BANK argues that respondents do not have a right to the relief
demanded, because they merely have possession of the property, as
the legal title is in the name of Macy Africa.[9]Furthermore, it claims that
the consolidation of title in its name does not constitute an invasion of a
right that is material and substantial.[10]
On the other hand, respondents maintain that they would suffer great
irreparable damage if the writ of preliminary injunction is not granted.[11]
They likewise contend that if the bank is allowed to consolidate its title
to the subject property, they would lose their ancestral home, a loss that
would result in unnecessary and protracted proceedings involving third
parties.[12]
ISSUE: WON a writ of Preliminary Injunction is properly issued to stop
petitioner’s consolidation of its title to the subject property.
HELD: YES.
Propriety of Preliminary Injunction
We agree with respondents.
The grounds for the issuance of a writ of preliminary injunction are
enumerated in Rule 58, Section 3 of the Revised Rules of Court, which
reads as follows:
Sec. 3. Grounds for issuance of preliminary injunction. A preliminary
injunction may be granted when it is established;
(a)That the applicant is entitled to the relief demanded, and the whole or
part of such relief consists in restraining the commission or continuance
of the act or acts complained of, or in requiring the performance of an
act or acts, either for a limited period or perpetually;
(b)That the commission, continuance or non-performance of the act or
acts complained of during the litigation would probably work injustice to
the applicant; or
(c)That a party, court, agency or a person is doing, threatening, or is
attempting to do, or is procuring or suffering to be done, some act or acts
probably in violation of the rights of the applicant respecting the subject
of the action or proceeding, and tending to render the judgment
ineffectual.
Injunction is a preservative remedy aimed at no other purpose than to
protect the complainants substantive rights and interests[13] during the
pendency of the principal action.[14] A preliminary injunction, as the term
itself suggests, is merely temporary.[15] It is to be resorted to only when
there is a pressing necessity to avoid injurious consequences that
cannot be remedied under any standard of compensation.[16]
Moreover, injunction, like other equitable remedies, should be issued
only at the instance of a suitor who has sufficient interest in or title to the
right or the property sought to be protected.[17]It is proper only when the
plaintiff appears to be entitled to the relief demanded in the
complaint.[18] In particular, the existence of the right and the violation
thereof must appear in the allegations of the complaint[19] and must
constitute at least a prima facie showing of a right to the final relief.[20]
Thus, there are two requisite conditions for the issuance of a preliminary
injunction, namely, (1) the right to be protected exists prima facie, and
(2) the acts sought to be enjoined are violative of that right.[21] It must
be proven that the violation sought to be prevented would cause an
irreparable injustice.
Further, while a clear showing of the right is necessary, its existence
need not be conclusively established.[22] In fact, the evidence required
to justify the issuance of a writ of preliminary injunction in the hearing
thereon need not be conclusive or complete. The evidence need only be
a sampling intended merely to give the court an idea of the justification
for the preliminary injunction, pending the decision of the case on the
merits.[23] Thus, to be entitled to the writ, respondents are only required
to show that they have the ostensible right to the final relief prayed for in
their Complaint.[24]
First Requisite:
Existence of the Right
In the case at bar, we find ample justification for the issuance of a writ
of preliminary injunction.[25] Evidently, the question on whether or not
respondents possess the requisite right hinges on the prima facie
existence of their legal title to the subject property.[26] They have shown
that they have that right, and that it is directly threatened by the act
sought to be enjoined.[27]
First, as alleged in the Complaint,[28] Respondent Pacita Africa is the
registered owner of the subject property. Her ownership is evidenced by
the reconstituted TCT issued by the Registry of Deeds of Quezon City.
Second, the validity of the Deed of Sale[30] dated December 29, 1992,
is still in dispute because Respondent Pacita Africa claims that her
signature was forged by the vendee, Macy Africa.[31] Third, there is
doubt as to the validity of the mortgage in favor of petitioner, because
there exists on record two TCTs covering the mortgaged property: (1)
TCT No. 81519[32] registered in the name of Pacita Africa and (2) TCT
No. 81519[33] registered in the name of Macy Africa.
If indeed the Deed of Sale is a forgery, no parcel of land was ever
transferred to the purported buyer[34] who, not being the owner, could
not have validly mortgaged the property.[35]Consequently, neither has
petitioner -- the buyer and mortgagee of the same lot -- ever acquired
any title thereto.[36] Significantly, no evidence was presented by
petitioner to controvert these allegations put forward by respondents.
Clearly then, on the basis of the evidence presented, respondents
possess the right to prevent petitioner from consolidating the title in its
name. The first requisite -- the existence of a right to be protected -- is
thus present.[37]
Second Requisite:
Violation of Applicants Right
As to the second requisite, what is sought to be enjoined by respondents
is the consolidation of the title to the subject property in petitioners name.
After having discovered that the property had been mortgaged to
petitioner, respondents filed on June 12, 1994 an action for Annulment
of Title, Deed of Sale, and Mortgage to protect their rights over the
property.[38] This notwithstanding, petitioner foreclosed it on June 11,
1996.[39] To enjoin petitioner from consolidating the title in its name,
respondents then filed an Amended Complaint,[40] praying for a writ of
preliminary injunction.
Unless legally stopped, petitioner may consolidate title to the property in
its name and enjoy the unbridled freedom to dispose of it to third
persons, to the damage and prejudice of respondents.[41] What
respondents stand to lose is material and substantial.[42] They would
lose their ancestral home even without the benefit of a trial.[43] Clearly,
the act sought to be enjoined is violative of their proprietary right over
the property.[44]
A writ of preliminary injunction is issued precisely to preserve threatened
or continuous irremediable injury to some of the parties before their
claims can be thoroughly studied and adjudicated.[45] Denial of the
application for the writ may make the Complaint of respondents moot
and academic. Furthermore, it would render ineffectual a final judgment
in their favor or, at the very least, compel them to litigate needlessly with
third persons who may have acquired an interest in the property.[46]
Such a situation cannot be countenanced.[47]
Lis Pendens
Petitioner further contends that respondents are not entitled to the relief
prayed for, because they caused a notice of lis pendens to be annotated
at the back of TCT No. 81519, registered in the name of Macy P. Africa;
thus, that notice provided ample protection of their rights and
interests.[48]
We are not persuaded. A notice of lis pendens serves as an
announcement to the whole world that a particular real property is in
litigation and as a warning that those who acquire an interest in the
property do so at their own risk -- they gamble on the result of the
litigation over it.[49] However, the cancellation of such notice may be
ordered by the court that has jurisdiction over it at any given time.[50] Its
continuance or removal -- like the continuance or the removal of a
preliminary attachment or injunction -- is not contingent on the existence
of a final judgment on the action and ordinarily has no effect on the
merits thereof.[51] Thus, the notice of lis pendens does not suffice to
protect herein respondents rights over the property.[52] It does not
provide complete and ample protection.
Status Quo Ante
Petitioner further claims that the RTC erred in enjoining the foreclosure
sale of the subject property.[53] It argues that the foreclosure may no
longer be enjoined, because it has long been effected since 1996.[54]
We agree with petitioner.
It is a well-entrenched rule that consummated acts can no longer be
restrained by injunction[55] whose sole objective is to preserve the
status quo until the merits of the case are fully heard.[56] Status quo is
defined as the last actual peaceful uncontested situation that precedes
a controversy, and its preservation is the office of an injunctive writ.[57]
In the instant case, the status quo was the situation of the parties at the
time of the filing of the Amended Complaint[58] with a prayer for a writ
of preliminary injunction. It was that point at which petitioner had already
foreclosed the subject property and, hence, could no longer be enjoined
from going on with the foreclosure. However, the last actual uncontested
status that preceded the controversy was when the property in dispute
was still registered in the name of Macy Africa, petitioner not having
consolidated in its name the title thereto.[59] Thus, the issuance of the
writ would no doubt preserve the status quo.[60]
We cannot rule on the allegation of petitioner that this case is a scam
perpetrated by private respondents to defraud it.[61] The truth or the
falsity of that assertion cannot be ascertained by this Court at this time.
Verily, we refrain from expressing any opinion on the merits of the case,
pending a full consideration of the evidence that would be presented by
the parties.
ROSARIO TEXTILE vs. HOME BANKERS SAVINGS
FACTS:
Sometime in 1989, Rosario Textile Mills Corporation (RTMC) applied
from Home Bankers Savings & Trust Co. for an Omnibus Credit Line for
P10 million. The bank approved RTMCs credit line but for only P8
million.
The bank notified RTMC of the grant of the said loan thru a letter dated
March 2, 1989 which contains terms and conditions conformed by
RTMC thru Edilberto V. Yujuico.
On March 3, 1989, Yujuico signed a Surety Agreement in favor of the
bank, in which he bound himself jointly and severally with RTMC for the
payment of all RTMCs indebtedness to the bank from 1989 to 1990.
RTMC availed of the credit line by making numerous drawdowns, each
drawdown being covered by a separate promissory note and trust
receipt. RTMC, represented by Yujuico, executed in favor of the bank a
total of eleven (11) promissory notes.
Despite the lapse of the respective due dates under the promissory
notes and notwithstanding the banks demand letters, RTMC failed to
pay its loans. Hence, on January 22, 1993, the bank filed a complaint
for sum of money against RTMC and Yujuico before the Regional Trial
Court, Br. 16, Manila.
In their answer, RTMC and Yujuico contend that they should be
absolved from liability. They claimed that although the grant of the credit
line and the execution of the suretyship agreement are admitted, the
bank gave assurance that the suretyship agreement was merely a
formality under which Yujuico will not be personally liable.
They argue that the importation of raw materials under the credit line
was with a grant of option to them to turn-over to the bank the imported
raw materials should these fail to meet their manufacturing
requirements. RTMC offered to make such turn-over since the imported
materials did not conform to the required specifications. However, the
bank refused to accept the same, until the materials were destroyed by
a fire which gutted down RTMCs premises.
Petitioners contend that under the trust receipt contracts between the
parties, they merely held the goods described therein in trust for
respondent Home Bankers Savings and Trust Company (the bank)
which owns the same. Since the ownership of the goods remains with
the bank, then it should bear the loss. With the destruction of the goods
by fire, petitioners should have been relieved of any obligation to pay.
The Court of Appeals, however, affirmed the trial courts judgment,
holding that the bank is merely the holder of the security for its advance
payments to petitioners; and that the goods they purchased, through the
credit line extended by the bank, belong to them and hold said goods at
their own risk.
ISSUES:
(1) whether the Court of Appeals erred in holding that petitioners are not
relieved of their obligation to pay their loan after they tried to tender the
goods to the bank which refused to accept the same, and which goods
were subsequently lost in a fire;
(2) whether the Court of Appeals erred when it ruled that petitioners are
solidarily liable for the payment of their obligations to the bank; and
(3) whether the Court of Appeals violated the Trust Receipts Law.
RULING:
On the first issue…
Petitioners theorize that when petitioner RTMC imported the raw
materials needed for its manufacture, using the credit line, it was merely
acting on behalf of the bank, the true owner of the goods by virtue of the
trust receipts. Hence, under the doctrine of res perit domino, the bank
took the risk of the loss of said raw materials. RTMCs role in the
transaction was that of end user of the raw materials and when it did not
accept those materials as they did not meet the manufacturing
requirements, RTMC made a valid and effective tender of the goods to
the bank. Since the bank refused to accept the raw materials, RTMC
stored them in its warehouse. When the warehouse and its contents
were gutted by fire, petitioners obligation to the bank was accordingly
extinguished.
Petitioners stance, however, conveniently ignores the true nature of its
transaction with the bank. We recall that RTMC filed with the bank an
application for a credit line in the amount of P10 million, but only P8
million was approved. RTMC then made withdrawals from this credit line
and issued several promissory notes in favor of the bank.
In banking and commerce, a credit line is that amount of money or
merchandise which a banker, merchant, or supplier agrees to supply to
a person on credit and generally agreed to in advance.[3] It is the fixed
limit of credit granted by a bank, retailer, or credit card issuer to a
customer, to the full extent of which the latter may avail himself of his
dealings with the former but which he must not exceed and is usually
intended to cover a series of transactions in which case, when the
customers line of credit is nearly exhausted, he is expected to reduce
his indebtedness by payments before making any further drawings.[4]
It is thus clear that the principal transaction between petitioner RTMC
and the bank is a contract of loan. RTMC used the proceeds of this loan
to purchase raw materials from a supplier abroad. In order to secure the
payment of the loan, RTMC delivered the raw materials to the bank as
collateral.
Trust receipts were executed by the parties to evidence this security
arrangement. Simply stated, the trust receipts were mere securities.
In Samo vs. People,[5] we described a trust receipt as a security
transaction intended to aid in financing importers and retail dealers who
do not have sufficient funds or resources to finance the importation or
purchase of merchandise, and who may not be able to acquire credit
except through utilization, as collateral, of the merchandise imported or
purchased.[6]
In Vintola vs. Insular Bank of Asia and America,[7] we elucidated further
that a trust receipt, therefore, is a security agreement, pursuant to which
a bank acquires a security interest in the goods. It secures an
indebtedness and there can be no such thing as security interest that
secures no obligation.[8] Section 3 (h) of the Trust Receipts Law (P.D.
No. 115) defines a security interest as follows:
(h) Security Interest means a property interest in goods, documents, or
instruments to secure performance of some obligation of the entrustee
or of some third persons to the entruster and includes title, whether or
not expressed to be absolute, whenever such title is in substance taken
or retained for security only.
Petitioners insistence that the ownership of the raw materials remained
with the bank is untenable. In Sia vs. People,[9] Abad vs. Court of
Appeals,[10] and PNB vs. Pineda,[11] we held that:

If under the trust receipt, the bank is made to appear as the owner, it
was but an artificial expedient, more of legal fiction than fact, for if it were
really so, it could dispose of the goods in any manner it wants, which it
cannot do, just to give consistency with purpose of the trust receipt of
giving a stronger security for the loan obtained by the importer. To
consider the bank as the true owner from the inception of the transaction
would be to disregard the loan feature thereof...[12]

Thus, petitioners cannot be relieved of their obligation to pay their loan

in favor of the bank.

Anent the second issue…

Petitioner Yujuico contends that the suretyship agreement he signed

does not bind him, the same being a mere formality.

We reject petitioner Yujuicos contentions for two reasons.

First, there is no record to support his allegation that the surety

agreement is a mere formality; and

Second, as correctly held by the Court of Appeals, the Suretyship

Agreement signed by petitioner Yujuico binds him. The terms clearly
show that he agreed to pay the bank jointly and severally with RTMC.
The parole evidence rule under Section 9, Rule 130 of the Revised
Rules of Court is in point, thus:

SEC. 9. Evidence of written agreements. When the terms of an

agreement have been reduced in writing, it is considered as containing
all the terms agreed upon and there can be, between the parties and
their successors in interest, no evidence of such terms other than the
contents of the written agreement.

However, a party may present evidence to modify, explain, or add to the

terms of the written agreement if he puts in issue in his pleading:

(a) An intrinsic ambiguity, mistake, or imperfection in the written

agreement;
(b) The failure of the written agreement to express the true intent and
agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their
successors in interest after the execution of the written agreement.
x x x.

Under this Rule, the terms of a contract are rendered conclusive upon
the parties and evidence aliunde is not admissible to vary or contradict
a complete and enforceable agreement embodied in a document.[13]
We have carefully examined the Suretyship Agreement signed by
Yujuico and found no ambiguity therein. Documents must be taken as
explaining all the terms of the agreement between the parties when
there appears to be no ambiguity in the language of said documents nor
any failure to express the true intent and agreement of the parties.[14]

As to the third and final issue…

At the risk of being repetitious, we stress that the contract between the
parties is a loan. What respondent bank sought to collect as creditor was
the loan it granted to petitioners. Petitioners recourse is to sue their
supplier, if indeed the materials were defective.