Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-6913

November 21, 1913

THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,

vs.
GREGORIO DE LA PEA, administrator of the estate of Father Agustin
de la Pea, defendant-appellant.
J. Lopez Vito, for appellant.
Arroyo and Horrilleno, for appellee.

MORELAND, J.:
This is an appeal by the defendant from a judgment of the Court of First
Instance of Iloilo, awarding to the plaintiff the sum of P6,641, with interest at
the legal rate from the beginning of the action.
It is established in this case that the plaintiff is the trustee of a charitable
bequest made for the construction of a leper hospital and that father Agustin
de la Pea was the duly authorized representative of the plaintiff to receive
the legacy. The defendant is the administrator of the estate of Father De la
Pea.
In the year 1898 the books Father De la Pea, as trustee, showed that he
had on hand as such trustee the sum of P6,641, collected by him for the
charitable purposes aforesaid. In the same year he deposited in his personal
account P19,000 in the Hongkong and Shanghai Bank at Iloilo. Shortly
thereafter and during the war of the revolution, Father De la Pea was
arrested by the military authorities as a political prisoner, and while thus
detained made an order on said bank in favor of the United States Army
officer under whose charge he then was for the sum thus deposited in said
bank. The arrest of Father De la Pea and the confiscation of the funds in
the bank were the result of the claim of the military authorities that he was an
insurgent and that the funds thus deposited had been collected by him for
revolutionary purposes. The money was taken from the bank by the military

authorities by virtue of such order, was confiscated and turned over to the
Government.
While there is considerable dispute in the case over the question whether
the P6,641 of trust funds was included in the P19,000 deposited as
aforesaid, nevertheless, a careful examination of the case leads us to the
conclusion that said trust funds were a part of the funds deposited and which
were removed and confiscated by the military authorities of the United
States.
That branch of the law known in England and America as the law of trusts
had no exact counterpart in the Roman law and has none under the Spanish
law. In this jurisdiction, therefore, Father De la Pea's liability is determined
by those portions of the Civil Code which relate to obligations. (Book 4, Title
1.)
Although the Civil Code states that "a person obliged to give something is
also bound to preserve it with the diligence pertaining to a good father of a
family" (art. 1094), it also provides, following the principle of the Roman
law, major casus est, cui humana infirmitas resistere non potest, that "no one
shall be liable for events which could not be foreseen, or which having been
foreseen were inevitable, with the exception of the cases expressly
mentioned in the law or those in which the obligation so declares." (Art.
1105.)
By placing the money in the bank and mixing it with his personal funds De la
Pea did not thereby assume an obligation different from that under which
he would have lain if such deposit had not been made, nor did he thereby
make himself liable to repay the money at all hazards. If the had been
forcibly taken from his pocket or from his house by the military forces of one
of the combatants during a state of war, it is clear that under the provisions
of the Civil Code he would have been exempt from responsibility. The fact
that he placed the trust fund in the bank in his personal account does not
add to his responsibility. Such deposit did not make him a debtor who must
respond at all hazards.
We do not enter into a discussion for the purpose of determining whether he
acted more or less negligently by depositing the money in the bank than he
would if he had left it in his home; or whether he was more or less negligent
by depositing the money in his personal account than he would have been if
he had deposited it in a separate account as trustee. We regard such
discussion as substantially fruitless, inasmuch as the precise question is not
one of negligence. There was no law prohibiting him from depositing it as he

did and there was no law which changed his responsibility be reason of the
deposit. While it may be true that one who is under obligation to do or give a
thing is in duty bound, when he sees events approaching the results of
which will be dangerous to his trust, to take all reasonable means and
measures to escape or, if unavoidable, to temper the effects of those events,
we do not feel constrained to hold that, in choosing between two means
equally legal, he is culpably negligent in selecting one whereas he would not
have been if he had selected the other.
The court, therefore, finds and declares that the money which is the subject
matter of this action was deposited by Father De la Pea in the Hongkong
and Shanghai Banking Corporation of Iloilo; that said money was forcibly
taken from the bank by the armed forces of the United States during the war
of the insurrection; and that said Father De la Pea was not responsible for
its loss.
The judgment is therefore reversed, and it is decreed that the plaintiff shall
take nothing by his complaint.
Arellano, C.J., Torres and Carson, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

Security Bank and Trust Company, a domestic banking corporation

hereinafter referred to as the respondent Bank. For this purpose, both
signed a contract of lease (Exhibit "2") which contains, inter alia, the
following conditions:

THIRD DIVISION
13. The bank is not a depositary of the contents of the
safe and it has neither the possession nor control of the
same.
G.R. No. 90027 March 3, 1993
CA AGRO-INDUSTRIAL DEVELOPMENT CORP., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SECURITY BANK AND
TRUST COMPANY, respondents.
Dolorfino & Dominguez Law Offices for petitioner.
Danilo B. Banares for private respondent.
DAVIDE, JR., J.:
Is the contractual relation between a commercial bank and another party in a
contract of rent of a safety deposit box with respect to its contents placed by
the latter one of bailor and bailee or one of lessor and lessee?
This is the crux of the present controversy.
On 3 July 1979, petitioner (through its President, Sergio Aguirre) and the
spouses Ramon and Paula Pugao entered into an agreement whereby the
former purchased from the latter two (2) parcels of land for a consideration
of P350,625.00. Of this amount, P75,725.00 was paid as downpayment
while the balance was covered by three (3) postdated checks. Among the
terms and conditions of the agreement embodied in a Memorandum of True
and Actual Agreement of Sale of Land were that the titles to the lots shall be
transferred to the petitioner upon full payment of the purchase price and that
the owner's copies of the certificates of titles thereto, Transfer Certificates of
Title (TCT) Nos. 284655 and 292434, shall be deposited in a safety deposit
box of any bank. The same could be withdrawn only upon the joint
signatures of a representative of the petitioner and the Pugaos upon full
payment of the purchase price. Petitioner, through Sergio Aguirre, and the
Pugaos then rented Safety Deposit Box No. 1448 of private respondent

14. The bank has no interest whatsoever in said contents,

except herein expressly provided, and it assumes
absolutely no liability in connection therewith. 1
After the execution of the contract, two (2) renter's keys were given to the
renters one to Aguirre (for the petitioner) and the other to the Pugaos. A
guard key remained in the possession of the respondent Bank. The safety
deposit box has two (2) keyholes, one for the guard key and the other for the
renter's key, and can be opened only with the use of both keys. Petitioner
claims that the certificates of title were placed inside the said box.
Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner
the two (2) lots at a price of P225.00 per square meter which, as petitioner
alleged in its complaint, translates to a profit of P100.00 per square meter or
a total of P280,500.00 for the entire property. Mrs. Ramos demanded the
execution of a deed of sale which necessarily entailed the production of the
certificates of title. In view thereof, Aguirre, accompanied by the Pugaos,
then proceeded to the respondent Bank on 4 October 1979 to open the
safety deposit box and get the certificates of title. However, when opened in
the presence of the Bank's representative, the box yielded no such
certificates. Because of the delay in the reconstitution of the title, Mrs.
Ramos withdrew her earlier offer to purchase the lots; as a consequence
thereof, the petitioner allegedly failed to realize the expected profit of
P280,500.00. Hence, the latter filed on 1 September 1980 a complaint 2 for
damages against the respondent Bank with the Court of First Instance (now
Regional Trial Court) of Pasig, Metro Manila which docketed the same as
Civil Case No. 38382.
In its Answer with Counterclaim, 3 respondent Bank alleged that the
petitioner has no cause of action because of paragraphs 13 and 14 of the
contract of lease (Exhibit "2"); corollarily, loss of any of the items or articles
contained in the box could not give rise to an action against it. It then
interposed a counterclaim for exemplary damages as well as attorney's fees

in the amount of P20,000.00. Petitioner subsequently filed an answer to the

counterclaim. 4
In due course, the trial court, now designated as Branch 161 of the Regional
Trial Court (RTC) of Pasig, Metro Manila, rendered a decision 5 adverse to
the petitioner on 8 December 1986, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered dismissing plaintiff's complaint.
On defendant's counterclaim, judgment is hereby rendered
ordering plaintiff to pay defendant the amount of FIVE
THOUSAND (P5,000.00) PESOS as attorney's fees.
With costs against plaintiff. 6
The unfavorable verdict is based on the trial court's conclusion that under
paragraphs 13 and 14 of the contract of lease, the Bank has no liability for
the loss of the certificates of title. The court declared that the said provisions
are binding on the parties.
Its motion for reconsideration 7 having been denied, petitioner appealed from
the adverse decision to the respondent Court of Appeals which docketed the
appeal as CA-G.R. CV No. 15150. Petitioner urged the respondent Court to
reverse the challenged decision because the trial court erred in (a) absolving
the respondent Bank from liability from the loss, (b) not declaring as null and
void, for being contrary to law, public order and public policy, the provisions
in the contract for lease of the safety deposit box absolving the Bank from
any liability for loss, (c) not concluding that in this jurisdiction, as well as
under American jurisprudence, the liability of the Bank is settled and (d)
awarding attorney's fees to the Bank and denying the petitioner's prayer for
nominal and exemplary damages and attorney's fees. 8
In its Decision promulgated on 4 July 1989, 9 respondent Court affirmed the
appealed decision principally on the theory that the contract (Exhibit "2")
executed by the petitioner and respondent Bank is in the nature of a contract
of lease by virtue of which the petitioner and its co-renter were given control
over the safety deposit box and its contents while the Bank retained no right
to open the said box because it had neither the possession nor control over
it and its contents. As such, the contract is governed by Article 1643 of the
Civil Code 10 which provides:

Art. 1643. In the lease of things, one of the parties binds

himself to give to another the enjoyment or use of a thing
for a price certain, and for a period which may be definite
or indefinite. However, no lease for more than ninety-nine
years shall be valid.
It invoked Tolentino vs. Gonzales 11 which held that the owner of
the property loses his control over the property leased during the
period of the contract and Article 1975 of the Civil Code which
provides:
Art. 1975. The depositary holding certificates, bonds,
securities or instruments which earn interest shall be
bound to collect the latter when it becomes due, and to
take such steps as may be necessary in order that the
securities may preserve their value and the rights
corresponding to them according to law.
The above provision shall not apply to contracts for the
rent of safety deposit boxes.
and then concluded that "[c]learly, the defendant-appellee is not
under any duty to maintain the contents of the box. The stipulation
absolving the defendant-appellee from liability is in accordance with
the nature of the contract of lease and cannot be regarded as
contrary to law, public order and public policy." 12 The appellate
court was quick to add, however, that under the contract of lease of
the safety deposit box, respondent Bank is not completely free from
liability as it may still be made answerable in case unauthorized
persons enter into the vault area or when the rented box is forced
open. Thus, as expressly provided for in stipulation number 8 of the
contract in question:
8. The Bank shall use due diligence that no unauthorized
person shall be admitted to any rented safe and beyond
this, the Bank will not be responsible for the contents of
any safe rented from it. 13
Its motion for reconsideration 14 having been denied in the respondent
Court's Resolution of 28 August 1989, 15petitioner took this recourse under
Rule 45 of the Rules of Court and urges Us to review and set aside the
respondent Court's ruling. Petitioner avers that both the respondent Court
and the trial court (a) did not properly and legally apply the correct law in this

case, (b) acted with grave abuse of discretion or in excess of jurisdiction

amounting to lack thereof and (c) set a precedent that is contrary to, or is a
departure from precedents adhered to and affirmed by decisions of this
Court and precepts in American jurisprudence adopted in the Philippines. It
reiterates the arguments it had raised in its motion to reconsider the trial
court's decision, the brief submitted to the respondent Court and the motion
to reconsider the latter's decision. In a nutshell, petitioner maintains that
regardless of nomenclature, the contract for the rent of the safety deposit
box (Exhibit "2") is actually a contract of deposit governed by Title XII, Book
IV
of
the
Civil
Code
of
the
Philippines. 16 Accordingly, it is claimed that the respondent Bank is liable for
the loss of the certificates of title pursuant to Article 1972 of the said Code
which provides:

the lessor) does not operate to alter the foregoing rule.

The argument that there is not, in such a case, a delivery
of exclusive possession and control to the deposit
company, and that therefore the situation is entirely
different from that of ordinary bailment, has been generally
rejected by the courts, usually on the ground that as
possession must be either in the depositor or in the
company, it should reasonably be considered as in the
latter rather than in the former, since the company is, by
the nature of the contract, given absolute control of access
to the property, and the depositor cannot gain access
thereto without the consent and active participation of the
company. . . . (citations omitted).

Art. 1972. The depositary is obliged to keep the thing

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

and a segment from Words and Phrases 18 which states that a

contract for the rental of a bank safety deposit box in consideration
of a fixed amount at stated periods is a bailment for hire.

If the deposit is gratuitous, this fact shall be taken into

account in determining the degree of care that the
depositary must observe.

Petitioner further argues that conditions 13 and 14 of the questioned contract

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

Petitioner
then
quotes
a
passage
from
American
Jurisprudence 17 which is supposed to expound on the prevailing
rule in the United States, to wit:

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

The prevailing rule appears to be that where a safedeposit company leases a safe-deposit box or safe and
the lessee takes possession of the box or safe and places
therein his securities or other valuables, the relation of
bailee and bail or is created between the parties to the
transaction as to such securities or other valuables; the
fact
that
the
safe-deposit company does not know, and that it is not
expected that it shall know, the character or description of
the property which is deposited in such safe-deposit box
or safe does not change that relation. That access to the
contents of the safe-deposit box can be had only by the
use of a key retained by the lessee ( whether it is the sole
key or one to be used in connection with one retained by

The petition is partly meritorious.

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

without the renter's key. In this case, the said key had a duplicate which was
made so that both renters could have access to the box.
Hence, the authorities cited by the respondent Court 20 on this point do not
apply. Neither could Article 1975, also relied upon by the respondent Court,
be invoked as an argument against the deposit theory. Obviously, the first
paragraph of such provision cannot apply to a depositary of certificates,
bonds, securities or instruments which earn interest if such documents are
kept in a rented safety deposit box. It is clear that the depositary cannot
open the box without the renter being present.
We observe, however, that the deposit theory itself does not altogether find
unanimous support even in American jurisprudence. We agree with the
petitioner that under the latter, the prevailing rule is that the relation between
a bank renting out safe-deposit boxes and its customer with respect to the
contents of the box is that of a bail or and bailee, the bailment being for hire
and mutual benefit. 21 This is just the prevailing view because:
There is, however, some support for the view that the
relationship in question might be more properly
characterized as that of landlord and tenant, or lessor and
lessee. It has also been suggested that it should be
characterized as that of licensor and licensee. The relation
between a bank, safe-deposit company, or storage
company, 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 safedeposit boxes. 22 (citations omitted)
In the context of our laws which authorize banking institutions to rent out
safety deposit boxes, it is clear that in this jurisdiction, the prevailing rule in
the United States has been adopted. Section 72 of the General Banking
Act23 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
asdepositories or as agents. . . . 24 (emphasis supplied)
Note that the primary function is still found within the parameters of a
contract of deposit, i.e., the receiving in custody of funds, documents and
other valuable objects for safekeeping. The renting out of the safety deposit
boxes is not independent from, but related to or in conjunction with, this
principal function. A contract of deposit may be entered into orally or in
writing 25 and, pursuant to Article 1306 of the Civil Code, the parties thereto
may establish such stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good
customs, public order or public policy. The depositary's responsibility for the
safekeeping of the objects deposited in the case at bar is governed by Title I,
Book IV of the Civil Code. Accordingly, the depositary would be liable if, in
performing its obligation, it is found guilty of fraud, negligence, delay or
contravention of the tenor of the agreement. 26 In the absence of any
stipulation prescribing the degree of diligence required, that of a good father
of a family is to be observed. 27 Hence, any stipulation exempting the
depositary from any liability arising from the loss of the thing deposited on
account of fraud, negligence or delay would be void for being contrary to law
and public policy. In the instant case, petitioner maintains that conditions 13
and 14 of the questioned contract of lease of the safety deposit box, which
read:
13. The bank is not a depositary of the contents of the
safe and it has neither the possession nor control of the
same.
14. The bank has no interest whatsoever in said contents,
except herein expressly provided, and it assumes
absolutely no liability in connection therewith. 28
are void as they are contrary to law and public policy. We find
Ourselves in agreement with this proposition for indeed, said
provisions are inconsistent with the respondent Bank's

responsibility as a depositary under Section 72(a) of the General

Banking Act. Both exempt the latter from any liability except as
contemplated in condition 8 thereof which limits its duty to exercise
reasonable diligence only with respect to who shall be admitted to
any rented safe, to wit:
8. The Bank shall use due diligence that no unauthorized
person shall be admitted to any rented safe and beyond
this, the Bank will not be responsible for the contents of
any safe rented from it. 29
Furthermore, condition 13 stands on a wrong premise and is
contrary to the actual practice of the Bank. It is not correct to assert
that the Bank has neither the possession nor control of the contents
of the box since in fact, the safety deposit box itself is located in its
premises and is under its absolute control; moreover, the
respondent Bank keeps the guard key to the said box. As stated
earlier, renters cannot open their respective boxes unless the Bank
cooperates by presenting and using this guard key. Clearly then, to
the extent above stated, the foregoing conditions in the contract in
question are void and ineffective. It has been said:
With respect to property deposited in a safe-deposit box
by a customer of a safe-deposit company, the parties,
since the relation is a contractual one, may by special
contract define their respective duties or provide for
increasing or limiting the liability of the deposit company,
provided such contract is not in violation of law or public
policy. It must clearly appear that there actually was such
a special contract, however, in order to vary the ordinary
obligations implied by law from the relationship of the
parties; liability of the deposit company will not be
enlarged or restricted by words of doubtful meaning. The
company,
in
renting
safe-deposit boxes, cannot exempt itself from liability for
loss of the contents by its own fraud or negligence or that
of its agents or servants, and if a provision of the contract
may be construed as an attempt to do so, it will be held
ineffective for the purpose. Although it has been held that
the lessor of a safe-deposit box cannot limit its liability for
loss of the contents thereof through its own negligence,
the view has been taken that such a lessor may limits its
liability
to
some
extent
by
agreement
or
stipulation. 30 (citations omitted)

Thus, we reach the same conclusion which the Court of Appeals arrived at,
that is, that the petition should be dismissed, but on grounds quite different
from those relied upon by the Court of Appeals. In the instant case, the
respondent Bank's exoneration cannot, contrary to the holding of the Court
of Appeals, be based on or proceed from a characterization of the impugned
contract as a contract of lease, but rather on the fact that no competent proof
was presented to show that respondent Bank was aware of the agreement
between the petitioner and the Pugaos to the effect that the certificates of
title were withdrawable from the safety deposit box only upon both parties'
joint signatures, and that no evidence was submitted to reveal that the loss
of the certificates of title was due to the fraud or negligence of the
respondent Bank. This in turn flows from this Court's determination that the
contract involved was one of deposit. Since both the petitioner and the
Pugaos agreed that each should have one (1) renter's key, it was obvious
that either of them could ask the Bank for access to the safety deposit box
and, with the use of such key and the Bank's own guard key, could open the
said box, without the other renter being present.
Since, however, the petitioner cannot be blamed for the filing of the
complaint and no bad faith on its part had been established, the trial court
erred in condemning the petitioner to pay the respondent Bank attorney's
fees. To this extent, the Decision (dispositive portion) of public respondent
Court of Appeals must be modified.
WHEREFORE, the Petition for Review is partially GRANTED by deleting the
award for attorney's fees from the 4 July 1989 Decision of the respondent
Court of Appeals in CA-G.R. CV No. 15150. As modified, and subject to the
pronouncement We made above on the nature of the relationship between
the parties in a contract of lease of safety deposit boxes, the dispositive
portion of the said Decision is hereby AFFIRMED and the instant Petition for
Review is otherwise DENIED for lack of merit.
No pronouncement as to costs.
SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.
Gutierrez, Jr., J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila

A demurrer to the original complaint was overruled, and on the 4th of

January, 1907, the defendants answered the original complaint before its
amendment, setting forth that they acknowledged the facts stated in Nos. 1
and 2 of the complaint; 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 as alleged in
paragraph 3 of the complaint, and also denied all the other statements
contained therein.

EN BANC
G.R. No. 4015

August 24, 1908

ANGEL JAVELLANA, plaintiff-appellee,

vs.
JOSE LIM, ET AL., defendants-appellants.
R.
Zaldarriaga
B. Montinola for appellee.

for

appellants.

TORRES, J.:
The attorney for the plaintiff, Angel Javellana, file a complaint on the 30th of
October, 1906, with the Court of First Instance of Iloilo, praying that the
defendants, Jose Lim and Ceferino Domingo Lim, he sentenced to jointly
and severally pay the sum of P2,686.58, with interest thereon at the rate of
15 per cent per annum from the 20th of January, 1898, until full payment
should be made, deducting from the amount of interest due the sum of
P1,102.16, and to pay the costs of the proceedings.
Authority from the court having been previously obtained, the complaint was
amended on the 10th of January, 1907; it was then alleged, on the 26th of
May, 1897, the defendants executed and subscribed a document in favor of
the plaintiff 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.
That, when the obligation became due, the defendants begged the plaintiff
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 the plaintiff 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.

As a counterclaim, the defendants alleged that they had paid to the plaintiff
sums which, together with the P1,102.16 acknowledged in the complaint,
aggregated the total sum of P5,602.16, and that, deducting therefrom the
total sum of P2,686.58 stated in the document transcribed in the complaint,
the plaintiff still owed the defendants P2,915.58; therefore, they asked that
judgment be entered absolving them, and sentencing the plaintiff to pay
them the sum of P2,915.58 with the costs.
Evidence was adduced by both parties and, upon their exhibits, together
with an account book having been made of record, the court below rendered
judgment on the 15th of January, 1907, in favor of the plaintiff for the
recovery of the sum of P5,714.44 and costs.
The defendants excepted to the above decision and moved for a new trial.
This motion was overruled and was also excepted to by them; the bill of
exceptions presented by the appellants having been approved, the same
was in due course submitted to this court.
The document of indebtedness inserted in the complaint states that the
plaintiff left on deposit with the defendants 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 appearing as Exhibits
2, 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 the
creditor, whereby 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 the aforesaid date of
January 20, and that 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 can not 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.
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; and the
creditor, by granting them the extension, evidently confirmed the express
permission previously given to use and dispose of the amount stated as
having bee 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
(Exhibit 2) 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 codebtor 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, Exhibit 1.
If the amount, together with interest claimed in the complaint, less 1,000
pesos appears as fully established, such is not the case with the defendant's
counterclaim for P5,602.16, because the existence and certainty of said
indebtedness imputed to the plaintiff has not been proven, and the
defendants, who call themselves creditors for the said amount have not
proven in a satisfactory manner that the plaintiff had received partial
payments on account of the same; the latter alleges with good reason, that
they should produce the receipts which he may have issued, and which he
did issue whenever they paid him any money on account. The plaintiffs
allegation that the two amounts of 400 and 1,200 pesos, referred to in
documents marked "C" and "D" offered in evidence by the defendants, had
been received from Ceferino Domingo Lim on account of other debts of his,
has not been contradicted, and the fact that in the original complaint the sum
of 1,102.16 pesos, was expressed in lieu of 1,000 pesos, the only payment
made on account of interest on the amount deposited according to
documents No. 2 and letter "B" above referred to, was due to a mistake.
Moreover, for the reason above set forth it may, as a matter of course, be
inferred that 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.

The original joint obligation contracted by the defendant debtor still exists,
and it has not been shown or proven in the proceedings that the creditor had
released Joe Lim from complying with his obligation in order that he should
not be sued for or sentenced to pay the amount of capital and interest
together with his codebtor, Ceferino Domingo Lim, because the record offers
satisfactory evidence against the pretension of Jose Lim, and it further
appears that document No. 2 was executed by the other debtor, Ceferino
Domingo Lim, for himself and on behalf of Jose Lim; and it has also been
proven that Jose Lim, being fully aware that his debt had not yet been
settled, took steps to secure an extension of the time for payment, and
consented to pay interest in return for the concession requested from the
creditor.
In view of the foregoing, and adopting the findings in the judgment appealed
from, it is our opinion that the same should be and is hereby affirmed with
the costs of this instance against the appellant, provided that the interest
agreed upon shall be paid until the complete liquidation of the debt. So
ordered.
Arellano, C.J., Carson, Willard and Tracey, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-6

November 14, 1901

MANUEL GARCIA GAVIERES, plaintiff-appellant,

vs.
T.H. PARDO DE TAVERA, defendant-appellee.
E.M. Llanos, for appellant.
Simplicio del Rosario, for appellee.
COOPER, J.:
The present appeal has been interposed in the declarative action of greater
import filed in the Court of First Instance of Tondo, commenced on January
10, 1900, by Don Manuel Garcia Gavieres as plaintiff and successor in
interest of the deceased Doa Ignacia de Gorricho against Don Trinidad H.
Pardo de Tavera as universal heir of the deceased Don Felix Pardo de
Tavera for the collection of a balance of 1,423 pesos 75 cents, remaining
due on an original obligation of 3,000 pesos which, as the plaintiff alleges,
was the amount of a deposit delivered by Doa Ignacia Gorricho, deceased,
to Don Felix Pardo de Tavera, deceased, on the 31st day of October, 1859.
The agreement between the parties appears in the following writing:
Received of Seorita Ignacia de Gorricho the sum of 3,000
pesos, gold (3,000 pesos), as a deposit payable on two
months' notice in advance, with interest at 6 per cent per
annum with an hypothecation of the goods now owned by me
or which may be owned hereafter, as security of the payment.
In witness whereof
1859.lawphil.net

I sign in Binondo, January 31,

FELIX PARDO DE TAVERA.

The defendant answering complaint of plaintiff alleges among other things
as a defense, that the document upon which the complaint is based was not

a contract of deposit as alleged in the complaint, but a contract of loan, and

setting forth furthermore the payment of the original obligation as well as the
prescription of the action. The defendant contends that the document upon
which the action is based is not evidence of a deposit, as the plaintiff
maintains, but of a contract of loan, and that the prescription applicable to
loans has extinguished the right of action. Although in the document in
question a deposit is spoken of, nevertheless from an examination of the
entire document it clearly appears that the contract was a loan and that such
was the intention of the parties. It is unnecessary to recur to the canons of
interpretation to arrive at this conclusion. The obligation of the depositary 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 depositary should have the right to
make use of the amount deposited, since it was stimulated 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.)
All personal actions, such as those which arise from a contract of loan,
cease to have legal effect after twenty years according to the former law and
after fifteen years according to the Civil Code now in force. The date of the
document is January 31, 1859. The proof of payment in support of the
defense we consider likewise sufficient to establish such defense. The
document dated January 8, 1869, executed by Don Felix Garcia Gavieres,
husband and legal representative of Doa Ignacia Gorricho, acknowledges
the receipt of 1,224 pesos from Don Manuel Darvin, representative of the
deceased Don Felix Pardo de Tavera. This sum is declared in said document
to be the balance due upon the debt of 2,000 pesos. This was slightly more
or less the amount which remained as due upon the original obligation after
deducting the payment which are admitted to have been made. In the
absence of evidence disclosing that there were other claims in favor of
Gavieres it is reasonably to be supposed that this payment was made to
satisfy the balance due upon the original obligation.
The original contract between the parties was celebrated nearly a half
century ago; the contracting parties have ceased to exist long since; it may
be that there exists or may have existed documents proving a total payment
between the parties and that this document has some time ago suffered the
common fate of perishable things. He who by laches in the exercise of his
rights has caused a failure of proof has no right to complain if the court does
not apply the strict rules of evidence which are applicable in ordinary cases,
and admits to a certain extent the presumption to which the conduct of the
interest party himself naturally gives rise.

It is our opinion that the judgment of the Court of First Instance should be
affirmed, and it is so ordered, with costs of appeal taxed against the
appellant.
Arellano,
C.J.,
Torres,
Willard,
Ladd, J., did not sit in this case.

and

Mapa,

JJ.,

concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. Nos. L-26948 and L-26949

October 8, 1927

SILVESTRA BARON, plaintiff-appellant,

vs.
PABLO DAVID, defendant-appellant.
And
GUILLERMO BARON, plaintiff-appellant,
vs.
PABLO DAVID, defendant-appellant.
Jose Gutierrez David for plaintiff-appellant in case of No. 26948.
Gregorio
Perfecto
for
defendant-appellant
in
both
cases.
Francisco, Lualhati & Lopez and Jose Gutierrez David for plaintiff-appellant
in case No. 26949.

STREET, J.:
These two actions were instituted in the Court of First Instance of the
Province of Pampanga by the respective plaintiffs, Silvestra Baron and
Guillermo Baron, for the purpose of recovering from the defendant, Pablo
David, the value of palay alleged to have been sold by the plaintiffs to the
defendant in the year 1920. Owing to the fact that the defendant is the same
in both cases and that the two cases depend in part upon the same facts,
the cases were heard together in the trial court and determined in a single
opinion. The same course will accordingly be followed here.
In the first case, i. e., that which Silvestra Baron is plaintiff, the court gave
judgment for her to recover of the defendant the sum of P5,238.51, with
costs. From this judgment both the plaintiff and the defendant appealed.

In the second case, i. e., that in which Guillermo Baron, is plaintiff, the court
gave judgment for him to recover of the defendant the sum of P5,734.60,
with costs, from which judgment both the plaintiff and the defendant also
appealed. In the same case the defendant interposed a counterclaim in
which he asked credit for the sum of P2,800 which he had advanced to the
plaintiff Guillermo Baron on various occasions. This credit was admitted by
the plaintiff and allowed by the trial court. But the defendant also interposed
a cross-action against Guillermo Baron in which the defendant claimed
compensation for damages alleged to have Ben suffered by him by reason
of the alleged malicious and false statements made by the plaintiff against
the defendant in suing out an attachment against the defendant's property
soon after the institution of the action. In the same cross-action the
defendant also sought compensation for damages incident to the shutting
down of the defendant's rice mill for the period of one hundred seventy days
during which the above-mentioned attachment was in force. The trial judge
disallowed these claims for damages, and from this feature of the decision
the defendant appealed. We are therefore confronted with five distinct
appeals in this record.
Prior to January 17, 1921, the defendant Pablo David has been engaged in
running a rice mill in the municipality of Magalang, in the Province of
Pampanga, a mill which was well patronized by the rice growers of the
vicinity and almost constantly running. On the date stated a fire occurred that
destroyed the mill and its contents, and it was some time before the mill
could be rebuilt and put in operation again. Silvestra Baron, the plaintiff in
the first of the actions before us, is an aunt of the defendant; while Guillermo
Baron, the plaintiff in the other action; is his uncle. In the months of March,
April, and May, 1920, Silvestra Baron placed a quantity of palay in the
defendant's mill; and this, in connection with some that she took over from
Guillermo Baron, amounted to 1,012 cavans and 24 kilos. During
approximately the same period Guillermo Baron placed other 1,865 cavans
and 43 kilos of palay in the mill. No compensation has ever been received by
Silvestra Baron upon account of the palay delivered by Guillermo Baron, he
has received from the defendant advancements amounting to P2,800; but
apart from this he has not been compensated. Both the plaintiffs claim that
the palay which was delivered by them to the defendant was sold to the
defendant; while the defendant, on the other hand, claims that the palay was
deposited subject to future withdrawal by the depositors or subject to some
future sale which was never effected. He therefore supposes himself to be
relieved from all responsibility by virtue of the fire of January 17, 1921,
already mentioned.
The plaintiff further say that their palay was delivered to the defendant at his
special request, coupled with a promise on his part to pay for the same at

the highest price per cavan at which palay would sell during the year 1920;
and they say that in August of that year the defendant promised to pay them
severally the price of P8.40 per cavan, which was about the top of the
market for the season, provided they would wait for payment until December.
The trial judge found that no such promise had been given; and the
incredulity of the court upon this point seems to us to be justified. A careful
examination of the proof, however, leads us to the conclusion that the
plaintiffs did, some time in the early part of August, 1920, make demand
upon the defendant for a settlement, which he evaded or postponed leaving
the exact amount due to the plaintiffs undetermined.
It should be stated that the palay in question was place by the plaintiffs in the
defendant's mill with the understanding that the defendant was at liberty to
convert it into rice and dispose of it at his pleasure. The mill was actively
running during the entire season, and as palay was daily coming in from
many customers and as rice was being constantly shipped by the defendant
to Manila, or other rice markets, it was impossible to keep the plaintiffs' palay
segregated. In fact the defendant admits that the plaintiffs' palay was mixed
with that of others. In view of the nature of the defendant's activities and the
way in which the palay was handled in the defendant's mill, it is quite certain
that all of the plaintiffs' palay, which was put in before June 1, 1920, been
milled and disposed of long prior to the fire of January 17, 1921.
Furthermore, the proof shows that when the fire occurred there could not
have been more than about 360 cavans of palay in the mill, none of which by
any reasonable probability could have been any part of the palay delivered
by the plaintiffs. Considering the fact that the defendant had thus milled and
doubtless sold the plaintiffs' palay prior to the date of the fire, it result that he
is bound to account for its value, and his liability was not extinguished by the
occurence of the fire. In the briefs before us it seems to have been assumed
by the opposing attorneys that in order for the plaintiffs to recover, it is
necessary that they should be able to establish that the plaintiffs' palay was
delivered in the character of a sale, and that if, on the contrary, the
defendant should prove that the delivery was made in the character of
deposit, the defendant should be absolved. But the case does not depend
precisely upon this explicit alternative; for even supposing that the palay may
have been delivered in the character of deposit, subject to future sale or
withdrawal at plaintiffs' election, nevertheless if it was understood that the
defendant might mill the palay and he has in fact appropriated it to his own
use, he is of course bound to account for its value. Under article 1768 of the
Civil Code, when the depository has permission to make use of the thing
deposited, the contract loses the character of mere deposit and becomes a
loan or acommodatum; and of course by appropriating the thing, the bailee
becomes responsible for its value. In this connection we wholly reject the
defendant's pretense that the palay delivered by the plaintiffs or any part of it

was actually consumed in the fire of January, 1921. Nor is the liability of the
defendant in any wise affected by the circumstance that, by a custom
prevailing among rice millers in this country, persons placing palay with them
without special agreement as to price are at liberty to withdraw it later,
proper allowance being made for storage and shrinkage, a thing that is
sometimes done, though rarely.
In view of what has been said it becomes necessary to discover the price
which the defendant should be required to pay for the plaintiffs' palay. Upon
this point the trial judge fixed upon P6.15 per cavan; and although we are
not exactly in agreement with him as to the propriety of the method by which
he arrived at this figure, we are nevertheless of the opinion that, all things
considered, the result is approximately correct. It appears that the price of
palay during the months of April, May, and June, 1920, had been excessively
high in the Philippine Islands and even prior to that period the Government
of the Philippine Islands had been attempting to hold the price in check by
executive regulation. The highest point was touched in this season was
apparently about P8.50 per cavan, but the market began to sag in May or
June and presently entered upon a precipitate decline. As we have already
stated, the plaintiffs made demand upon the defendant for settlement in the
early part of August; and, so far as we are able to judge from the proof, the
price of P6.15 per cavan, fixed by the trial court, is about the price at which
the defendant should be required to settle as of that date. It was the date of
the demand of the plaintiffs for settlement that determined the price to be
paid by the defendant, and this is true whether the palay was delivered in the
character of sale with price undetermined or in the character of deposit
subject to use by the defendant. It results that the plaintiffs are respectively
entitle to recover the value of the palay which they had placed with the
defendant during the period referred to, with interest from the date of the
filing of their several complaints.
As already stated, the trial court found that at the time of the fire there were
about 360 cavans of palay in the mill and that this palay was destroyed. His
Honor assumed that this was part of the palay delivered by the plaintiffs, and
he held that the defendant should be credited with said amount. His Honor
therefore deducted from the claims of the plaintiffs their respective
proportionate shares of this amount of palay. We are unable to see the
propriety of this feature of the decision. There were many customers of the
defendant's rice mill who had placed their palay with the defendant under the
same conditions as the plaintiffs, and nothing can be more certain than that
the palay which was burned did not belong to the plaintiffs. That palay
without a doubt had long been sold and marketed. The assignments of error
of each of the plaintiffs-appellants in which this feature of the decision is
attacked are therefore well taken; and the appealed judgments must be

modified by eliminating the deductions which the trial court allowed from the
plaintiffs' claims.
The trial judge also allowed a deduction from the claim of the plaintiff
Guillermo Baron of 167 cavans of palay, as indicated in Exhibit 12, 13, 14,
and 16. This was also erroneous. These exhibits relate to transactions that
occurred nearly two years after the transactions with which we are here
concerned, and they were offered in evidence merely to show the character
of subsequent transactions between the parties, it appearing that at the time
said exhibits came into existence the defendant had reconstructed his mill
and that business relations with Guillermo Baron had been resumed. The
transactions shown by these exhibits (which relate to palay withdrawn by the
plaintiff from the defendant's mill) were not made the subject of controversy
in either the complaint or the cross-complaint of the defendant in the second
case. They therefore should not have been taken into account as a credit in
favor of the defendant. Said credit must therefore be likewise of course be
without prejudice to any proper adjustment of the rights of the parties with
respect to these subsequent transactions that they have heretofore or may
hereafter effect.
The preceding discussion disposes of all vital contentions relative to the
liability of the defendant upon the causes of action stated in the complaints.
We proceed therefore now to consider the question of the liability of the
plaintiff Guillermo Baron upon the cross-complaint of Pablo David in case R.
G. No. 26949. In this cross-action the defendant seek, as the stated in the
third paragraph of this opinion, to recover damages for the wrongful suing
out of an attachment by the plaintiff and the levy of the same upon the
defendant's rice mill. It appears that about two and one-half months after
said action was begun, the plaintiff, Guillermo Baron, asked for an
attachment to be issued against the property of the defendant; and to
procure the issuance of said writ the plaintiff made affidavit to the effect that
the defendant was disposing, or attempting the plaintiff. Upon this affidavit
an attachment was issued as prayed, and on March 27, 1924, it was levied
upon the defendant's rice mill, and other property, real and personal. 1awph!
l.net
Upon attaching the property the sheriff closed the mill and placed it in the
care of a deputy. Operations were not resumed until September 13, 1924,
when the attachment was dissolved by an order of the court and the
defendant was permitted to resume control. At the time the attachment was
levied there were, in the bodega, more than 20,000 cavans of palay
belonging to persons who held receipts therefor; and in order to get this
grain away from the sheriff, twenty-four of the depositors found it necessary
to submit third-party claims to the sheriff. When these claims were put in the

sheriff notified the plaintiff that a bond in the amount of P50,000 must be
given, otherwise the grain would be released. The plaintiff, being unable or
unwilling to give this bond, the sheriff surrendered the palay to the claimants;
but the attachment on the rice mill was maintained until September 13, as
above stated, covering a period of one hundred seventy days during which
the mill was idle. The ground upon which the attachment was based, as set
forth in the plaintiff's affidavit was that the defendant was disposing or
attempting to dispose of his property for the purpose of defrauding the
plaintiff. That this allegation was false is clearly apparent, and not a word of
proof has been submitted in support of the assertion. On the contrary, the
defendant testified that at the time this attachment was secured he was
solvent and could have paid his indebtedness to the plaintiff if judgment had
been rendered against him in ordinary course. His financial conditions was
of course well known to the plaintiff, who is his uncle. The defendant also
states that he had not conveyed away any of his property, nor had intended
to do so, for the purpose of defrauding the plaintiff. We have before us
therefore a case of a baseless attachment, recklessly sued out upon a false
affidavit and levied upon the defendant's property to his great and needless
damage. That the act of the plaintiff in suing out the writ was wholly
unjustifiable is perhaps also indicated in the circumstance that the
attachment was finally dissolved upon the motion of the plaintiff himself.
The defendant testified that his mill was accustomed to clean from 400 to
450 cavans of palay per day, producing 225 cavans of rice of 57 kilos each.
The price charged for cleaning each cavan rice was 30 centavos. The
defendant also stated that the expense of running the mill per day was from
P18 to P25, and that the net profit per day on the mill was more than P40. As
the mill was not accustomed to run on Sundays and holiday, we estimate
that the defendant lost the profit that would have been earned on not less
than one hundred forty work days. Figuring his profits at P40 per day, which
would appear to be a conservative estimate, the actual net loss resulting
from his failure to operate the mill during the time stated could not have been
less than P5,600. The reasonableness of these figures is also indicated in
the fact that the twenty-four customers who intervened with third-party
claims took out of the camarin 20,000 cavans of palay, practically all of
which, in the ordinary course of events, would have been milled in this plant
by the defendant. And of course other grain would have found its way to this
mill if it had remained open during the one hundred forty days when it was
closed.
But this is not all. When the attachment was dissolved and the mill again
opened, the defendant found that his customers had become scattered and
could not be easily gotten back. So slow, indeed, was his patronage in
returning that during the remainder of the year 1924 the defendant was able

to mill scarcely more than the grain belonging to himself and his brothers;
and even after the next season opened many of his old customers did not
return. Several of these individuals, testifying as witnesses in this case,
stated that, owing to the unpleasant experience which they had in getting
back their grain from the sheriff to the mill of the defendant, though they had
previously had much confidence in him.
As against the defendant's proof showing the facts above stated the plaintiff
submitted no evidence whatever. We are therefore constrained to hold that
the defendant was damaged by the attachment to the extent of P5,600, in
profits lost by the closure of the mill, and to the extent of P1,400 for injury to
the good-will of his business, making a total of P7,000. For this amount the
defendant must recover judgment on his cross-complaint.
The trial court, in dismissing the defendant's cross-complaint for damages
resulting from the wrongful suing out of the attachment, suggested that the
closure of the rice mill was a mere act of the sheriff for which the plaintiff was
not responsible and that the defendant might have been permitted by the
sheriff to continue running the mill if he had applied to the sheriff for
permission to operate it. This singular suggestion will not bear a moment's
criticism. It was of course the duty of the sheriff, in levying the attachment, to
take the attached property into his possession, and the closure of the mill
was a natural, and even necessary, consequence of the attachment. For the
damage thus inflicted upon the defendant the plaintiff is undoubtedly
responsible.
One feature of the cross-complaint consist in the claim of the defendant
(cross-complaint) for the sum of P20,000 as damages caused to the
defendant by the false and alleged malicious statements contained in the
affidavit upon which the attachment was procured. The additional sum of
P5,000 is also claimed as exemplary damages. It is clear that with respect to
these damages the cross-action cannot be maintained, for the reason that
the affidavit in question was used in course of a legal proceeding for the
purpose of obtaining a legal remedy, and it is therefore privileged. But
though the affidavit is not actionable as a libelous publication, this fact in no
obstacle to the maintenance of an action to recover the damage resulting
from the levy of the attachment.
Before closing this opinion a word should be said upon the point raised in
the first assignment of error of Pablo David as defendant in case R. G. No.
26949. In this connection it appears that the deposition of Guillermo Baron
was presented in court as evidence and was admitted as an exhibit, without
being actually read to the court. It is supposed in the assignment of error

now under consideration that the deposition is not available as evidence to

the plaintiff because it was not actually read out in court. This connection is
not well founded. It is true that in section 364 of the Code of Civil Procedure
it is said that a deposition, once taken, may be read by either party and will
then be deemed the evidence of the party reading it. The use of the word
"read" in this section finds its explanation of course in the American practice
of trying cases for the most part before juries. When a case is thus tried the
actual reading of the deposition is necessary in order that the jurymen may
become acquainted with its contents. But in courts of equity, and in all courts
where judges have the evidence before them for perusal at their pleasure, it
is not necessary that the deposition should be actually read when presented
as evidence.
From what has been said it result that judgment of the court below must be
modified with respect to the amounts recoverable by the respective plaintiffs
in the two actions R. G. Nos. 26948 and 26949 and must be reversed in
respect to the disposition of the cross-complaint interposed by the defendant
in case R. G. No. 26949, with the following result: In case R. G. No. 26948
the plaintiff Silvestra Baron will recover of the Pablo David the sum of
P6,227.24, with interest from November 21, 1923, the date of the filing of her
complaint, and with costs. In case R. G. No. 26949 the plaintiff Guillermo
Baron will recover of the defendant Pablo David the sum of P8,669.75, with
interest from January 9, 1924. In the same case the defendant Pablo David,
as plaintiff in the cross-complaint, will recover of Guillermo Baron the sum of
P7,000, without costs. So ordered.
Avancea, C.J., Johnson, Malcolm, Villamor, Romualdez and Villa-Real, JJ.,
concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-7593

March 27, 1913

THE UNITED STATES, plaintiff-appellee,

vs.
JOSE M. IGPUARA, defendant-appellant.
W. A. Kincaid, Thos. L. Hartigan, and Jose Robles Lahesa for appellant.
Office of the Solicitor-General Harvey for appellee.
ARELLANO, C.J.:
The defendant therein is charged with the crime of estafa, for having
swindled Juana Montilla and Eugenio Veraguth out of P2,498 Philippine
currency, which he had take on deposit from the former to be at the latter's
disposal. The document setting forth the obligation reads:
We hold at the disposal of Eugenio Veraguth the sum of two thousand four
hundred and ninety-eight pesos (P2,498), the balance from Juana Montilla's
sugar. Iloilo, June 26, 1911, Jose Igpuara, for Ramirez and Co.
The Court of First Instance of Iloilo sentenced the defendant to two years
of presidio correccional, to pay Juana Montilla P2,498 Philippine currency,
and in case of insolvency to subsidiary imprisonment at P2.50 per day, not to
exceed one-third of the principal penalty, and the costs.
The defendant appealed, alleging as errors: (1) Holding that the document
executed by him was a certificate of deposit; (2) holding the existence of a
deposit, without precedent transfer or delivery of the P2,498; and (3)
classifying the facts in the case as the crime of estafa.
A deposit is constituted from the time a person receives a thing
belonging to another with the obligation of keeping and returning it.
(Art. 1758, Civil Code.)

That the defendant received P2,498 is a fact proven. The defendant drew up
a document declaring that they remained in his possession, which he could
not have said had he not received them. They remained in his possession,
surely in no other sense than to take care of them, for they remained has no
other purpose. They remained in the defendant's possession at the disposal
of Veraguth; but on August 23 of the same year Veraguth demanded for him
through a notarial instrument restitution of them, and to date he has not
restored them.
The appellant says: "Juana Montilla's agent voluntarily accepted the sum of
P2,498 in an instrument payable on demand, and as no attempt was made
to cash it until August 23, 1911, he could indorse and negotiate it like any
other commercial instrument. There is no doubt that if Veraguth accepted the
receipt for P2,498 it was because at that time he agreed with the defendant
to consider the operation of sale on commission closed, leaving the
collection of said sum until later, which sum remained as a loan payable
upon presentation of the receipt." (Brief, 3 and 4.)
Then, after averring the true facts: (1) that a sales commission was
precedent; (2) that this commission was settled with a balance of P2,498 in
favor of the principal, Juana Montilla; and (3) that this balance remained in
the possession of the defendant, who drew up an instrument payable on
demand, he has drawn two conclusions, both erroneous: One, that the
instrument drawn up in the form of a deposit certificate could be indorsed or
negotiated like any other commercial instrument; and the other, that the sum
of P2,498 remained in defendant's possession as a loan.
It is erroneous to assert that the certificate of deposit in question is
negotiable like any other commercial instrument: First, because every
commercial instrument is not negotiable; and second, because only
instruments payable to order are negotiable. Hence, this instrument not
being to order but to bearer, it is not negotiable.
It is also erroneous to assert that sum of money set forth in said certificate is,
according to it, in the defendant's possession as a loan. In a loan the lender
transmits to the borrower the use of the thing lent, while in a deposit the use
of the thing is not transmitted, but merely possession for its custody or safekeeping.
In order that the depositary may use or dispose oft he things deposited, the
depositor's consent is required, and then:

The rights and obligations of the depositary and of the depositor

shall cease, and the rules and provisions applicable to commercial
loans, commission, or contract which took the place of the deposit
shall be observed. (Art. 309, Code of Commerce.)
The defendant has shown no authorization whatsoever or the consent of the
depositary for using or disposing of the P2,498, which the certificate
acknowledges, or any contract entered into with the depositor to convert the
deposit into a loan, commission, or other contract.
That demand was not made for restitution of the sum deposited, which could
have been claimed on the same or the next day after the certificate was
signed, does not operate against the depositor, or signify anything except
the intention not to press it. Failure to claim at once or delay for sometime in
demanding restitution of the things deposited, which was immediately due,
does not imply such permission to use the thing deposited as would convert
the deposit into a loan.
Article 408 of the Code of Commerce of 1829, previous to the one now in
force, provided:
The depositary of an amount of money cannot use the amount, and
if he makes use of it, he shall be responsible for all damages that
may accrue and shall respond to the depositor for the legal interest
on the amount.
Whereupon the commentators say:
In this case the deposit becomes in fact a loan, as a just
punishment imposed upon him who abuses the sacred nature of a
deposit and as a means of preventing the desire of gain from
leading him into speculations that may be disastrous to the
depositor, who is much better secured while the deposit exists
when he only has a personal action for recovery.
According to article 548, No. 5, of the Penal Code, those who to the
prejudice of another appropriate or abstract for their own use
money, goods, or other personal property which they may have
received as a deposit, on commission, or for administration, or for
any other purpose which produces the obligation of delivering it or
returning it, and deny having received it, shall suffer the penalty of
the preceding article," which punishes such act as the crime

of estafa. The corresponding article of the Penal Code of the

Philippines in 535, No. 5.
In a decision of an appeal, September 28, 1895, the principle was laid down
that: "Since he commits the crime ofestafa under article 548 of the Penal
Code of Spain who to another's detriment appropriates to himself or
abstracts money or goods received on commission for delivery, the court
rightly applied this article to the appellant, who, to the manifest detriment of
the owner or owners of the securities, since he has not restored them,
willfully and wrongfully disposed of them by appropriating them to himself or
at least diverting them from the purpose to which he was charged to devote
them."
It is unquestionable that in no sense did the P2,498 which he willfully and
wrongfully disposed of to the detriments of his principal, Juana Montilla, and
of the depositor, Eugenio Veraguth, belong to the defendant.
Likewise erroneous is the construction apparently at tempted to be given to
two decisions of this Supreme Court (U. S. vs. Dominguez, 2 Phil. Rep., 580,
and U. S. vs. Morales and Morco, 15 Phil. Rep., 236) as implying that what
constitutes estafa is not the disposal of money deposited, but denial of
having received same. In the first of said cases there was no evidence that
the defendant had appropriated the grain deposited in his possession.
On the contrary, it is entirely probable that, after the departure of
the defendant from Libmanan on September 20, 1898, two days
after the uprising of the civil guard in Nueva Caceres, the rice was
seized by the revolutionalists and appropriated to their own uses.
In this connection it was held that failure to return the thing deposited was
not sufficient, but that it was necessary to prove that the depositary had
appropriated it to himself or diverted the deposit to his own or another's
benefit. He was accused or refusing to restore, and it was held that the code
does not penalize refusal to restore but denial of having received. So much
for the crime of omission; now with reference to the crime of commission, it
was not held in that decision that appropriation or diversion of the thing
deposited would not constitute the crime of estafa.
In the second of said decisions, the accused "kept none of the proceeds of
the sales. Those, such as they were, he turned over to the owner;" and there
being no proof of the appropriation, the agent could not be found guilty of the
crime of estafa.

Being in accord and the merits of the case, the judgment appealed from is
affirmed, with costs.
Torres, Johnson and Trent, JJ., concur.