Topic: Deposit
JOSEPH CHAN, WILSON CHAN and LILY CHAN vs. BONIFACIO MACEDA
FACTS:
Bonifacio Maceda obtained a P7.3 million loan from the Development Bank
of the Philippines (DBP) for the construction of his New Gran Hotel Project.
Maceda entered into a building construction contract with Moreman
Builders where they agreed that the construction would be finished by
December 22, 1977. Maceda purchased various construction materials and
equipment in Manila. Moreman then deposited them in the warehouse of
Wilson and Lily Chan. The deposit was free of charge. Moreman failed to
finish the construction of the hotel at the stipulated time. Maceda filed with
the CFI an action for rescission and damages against Moreman.
The CFI ruled for rescinding the contract between Moreman and Maceda,
awarding Maceda P445,000 as damages; P20,000 representing the increase
in the construction materials; and P35,000 as attorneys fees.
Moreman appealed to the CA but it was dismissed for being dilatory. He
elevated the case to the Supreme Court via a petition for review on
certiorari. The SC denied the petition.
Meanwhile, during pendency of the case, Maceda ordered Jason, Wilson,
and Lily Chan to return to him the construction materials and equipment
which Moreman deposited in their warehouse. Petitioners told Maceda that
Moreman already withdrew the construction materials.
Maceda filed with the RTC an action for damages with a writ of preliminary
attachment against Joseph, Wilson, and Lily Chan. After almost 4 years, the
RTC dismissed the complaint for failure to prosecute and for lack of
interest. After 5 years, Maceda filed a motion for reconsideration, but it was
denied for failure of him and and his counsel to appear on the scheduled
hearing.
Maceda filed a 2nd motion for reconsideration which was granted and the
case was reinstated 10 years from the time the action was originally filed.
Petitioners filed a motion to dismiss, while Maceda moved to declare
petitioners in default on the ground that their motion to dismiss was filed out
of time and had no notice of hearing. The trial court declared petitioners in
default.
Petitioners sought to annul with RTCs decision with the CA, but this was
dismissed. Petitioners elevated the case to the SC which affirmed the order
of the CA.
Deponent Conge, a labor contractor, testified that he was contracted by Lily
Chan to get bags of cement from the New Gran Hotel construction site and
store them into her warehouse. Deponent also hauled about 400 bundles of
steel bars. Corresponding delivery receipts were presented.
Deponent Alfredo Maceda testified that he was Bonifacio Maceda’s
Disbursement and Payroll Officer who supervised the construction and kept
inventory of the properties of the New Gran Hotel. While conducting an
inventory, he found that the approximate total value of the materials stored
in petitioners warehouse was P214,310. This amount was reflected in the
certification signed by Mario Ramos, store clerk and representative of
Moreman who was present during the inventory.
Maceda claims that petitioners, as depositaries under the law, have both the
fiduciary and extraordinary obligations not only to safely keep the
construction material deposited, but also to return them with all their
products, accessories and accessions, pursuant to Articles 1972, 1979, 1983,
and 1988 of the Civil Code. Considering that petitioners duty to return the
construction materials in question has already become impossible, it is only
proper that the prices of those construction materials in 1996 should be the
basis of the award of actual damages. This is the only way to fulfill the duty
to return contemplated in the applicable laws. Maceda further claims that
petitioners must bear the increase in market prices from 1977 to 1996
because liability for fraud includes all damages which may be reasonably
attributed to the non-performance of the obligation.
ISSUE:
Maceda’s claim for damages is based on petitioners failure to return or to
release to him the construction materials and equipment deposited by
Moreman to their warehouse. Hence, the essential issues to be resolved
are: (1) Has respondent presented proof that the construction materials and
equipment were actually in petitioners warehouse when he asked that the
Topic: Deposit

same be turned over to him? (2) If so, does respondent have the right to WHEREFORE, the petition is GRANTED. The challenged Decision of the Court
demand the release of the said materials and equipment or claim for of Appeals dated June 17, 1999 is REVERSED and SET ASIDE. Costs against
damages? respondent.

HELD:
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, there is no contract of deposit, oral or written, between

petitioners and respondent. If at all, it was only between petitioners and
Moreman. And granting arguendo that there was indeed a contract of
deposit between petitioners and Moreman, it is still incumbent upon Maceda
to prove its existence and that it was executed in his favor. However, Maceda
failed to do so.

The only pieces of evidence Maceda presented to prove the contract of

deposit were the delivery receipts which were unsigned and not duly
received or authenticated by either Moreman, petitioners or Maceda or any
of their authorized representatives. Hence, the delivery receipts have no
value.

Moreover, Maceda also failed to prove that there were construction

materials and equipment in petitioners warehouse at the time he made a
demand for their return.

Since there was no contract of deposit between petitioners and Maceda or

Moreman and that actually there were no more construction materials or
equipment in petitioners warehouse when Maceda made a demand for their
return, Maceda has no right to claim for damages.
Topic: Deposit
UNITED STATES vs. JOSE IGPUARA
The Jose Igpuara was charged and found guilty estafa for swindling Juana
Montilla and Eugenio Veraguth of P2,498 which he had taken on deposit from
the Montilla to be at Veraguth’s disposal.
The defendant appealed, alleging that there was no deposit.
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)
Igpuara received P2,498, evidenced by a document declaring that they
remained in his possession. This remained in his possession in no other sense
than to take care of them and was at the disposal of Veraguth.
Veraguth demanded restitution of the amount but Igpuara failed to do so.
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 safe-
keeping.
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
Topic: Deposit

commission, or for administration, or for any other purpose which produces being no proof of the appropriation, the agent could not be found guilty of
the obligation of delivering it or returning it, and deny having received it, shall the crime of estafa.
suffer the penalty of the preceding article," which punishes such act as the Being in accord and the merits of the case, the judgment appealed from is
crime of estafa. The corresponding article of the Penal Code of the Philippines affirmed, with costs.
in 535, No. 5.
In a decision of an appeal, September 28, 1895, the principle was laid down
that: "Since he commits the crime of estafa 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
Topic: Deposit
TRIPLE-V FOOD SERVICES vs. FILIPINO MERCHANTS INSURANCE COMPANY
FACTS:
Mary Jo-Anne De Asis dined at Triple V's Kamayan Restaurant. De Asis had a
Mitsubishi Galant Super Saloon Model 1995 with plate number UBU 955,
assigned to her by her employer Crispa Textile. De Asis availed of the valet
parking service of Triple V and entrusted her car key to their valet counter. A
corresponding parking ticket was issued as receipt for the car. The car was
parked by valet attendant Madridano at the designated parking area. A few
minutes later, Madridano noticed that the car was not in its parking slot and
its key no longer in the box where valet attendants usually keep the keys of
cars entrusted to them. The car was never recovered.
Crispa Textile filed a claim against its insurer, Filipino Merchants Insurance
Company (FMICI). Having indemnified Crispa in the amount of P669.500 for
the loss of the vehicle, FMICI, as subrogee to Crispa's rights, filed with the RTC
an action for damages against Triple-V Food Services.
In its answer, Triple V argued that the complaint failed to aver facts to support
the allegations of recklessness and negligence committed in the safekeeping
and custody of the subject vehicle, claiming that it and its employees wasted
no time in ascertaining the loss of the car and in informing De Asis of the
discovery of the loss. Triple V further argued that in accepting the
complimentary valet parking service, De Asis received a parking ticket which
provided that "Management and staff will not be responsible for any loss of
or damage incurred on the vehicle nor of valuables contained therein", a
provision which is allegedly an explicit waiver of any right to claim indemnity
for the loss of the car; and that De Asis knowingly assumed the risk of loss
when she allowed petitioner to park her vehicle, adding that its valet parking
service did not include extending a contract of insurance or warranty for the
loss of the vehicle.
The RTC rendered judgment in favor of FMICI, thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the plaintiff (FMICI)
Triple V appealed to the CA arguing that it was not a depositary of the car and
that it exercised due diligence and prudence in the safe keeping of the
vehicle, in handling the car-napping incident and in the supervision of its
employees. It further argued that there was no valid subrogation of rights
between Crispa and respondent FMICI.
The CA dismissed Triple V's appeal and affirmed the appealed decision of the
RTC that: (a) petitioner was a depositary of the car; (b) petitioner was
negligent in its duties as a depositary thereof and as an employer of the valet
attendant; and (c) there was a valid subrogation of rights between Crispa and
respondent FMICI.
HELD:
The SC affirmed the RTC’s and CA’s decision.
When De Asis entrusted the car in question to petitioners valet attendant
while eating at petitioner's Kamayan Restaurant, the former expected the
car's safe return at the end of her meal. Thus, petitioner was constituted as a
depositary of the car.
Triple V cannot evade liability by arguing that neither a contract of deposit
nor that of insurance, guaranty or surety for the loss of the car was
constituted when De Asis availed of its free valet parking service.
In a contract of deposit, a person receives an object belonging to another with
the obligation of safely keeping it and returning the same. A deposit may be
constituted even without any consideration. It is not necessary that the
depositary receives a fee before it becomes obligated to keep the item
entrusted for safekeeping and to return it later to the depositor.
Specious is petitioner's insistence that the valet parking claim stub it issued
to De Asis contains a clear exclusion of its liability and operates as an explicit
waiver by the customer of any right to claim indemnity for any loss of or
damage to the vehicle.
The parking claim stub embodying the terms and conditions of the parking,
including that of relieving petitioner from any loss or damage to the car, is
essentially a contract of adhesion, drafted and prepared as it is by the
petitioner alone with no participation whatsoever on the part of the
customers, like De Asis, who merely adheres to the printed stipulations
therein appearing. While contracts of adhesion are not void in themselves,
Topic: Deposit

yet this Court will not hesitate to rule out blind adherence thereto if they
prove to be one-sided under the attendant facts and circumstances.
Hence, Triple V cannot use its parking claim stub's exclusionary stipulation as
a shield from any responsibility for any loss or damage to vehicles or to the
valuables contained therein.

It is evident that De Asis deposited the car in question with Triple V as part of
the enticement for customers by providing them a safe parking space within
the vicinity of its restaurant. A safe parking space is an added attraction to
Triple V’s restaurant business because customers are somehow assured that
their vehicles are safely kept, rather than parking them elsewhere at their
own risk. Having entrusted the subject car to petitioner's valet attendant,
customer De Asis, like all customers, fully expect the security of her car while
at Triple V's premises or designated parking areas and its safe return at the
end of her visit at petitioner's restaurant.

WHEREFORE, petition is hereby DENIED DUE COURSE.

Topic: Deposit
CA AGRO-INDUSTRIAL DEVELOPMENT CORP vs.
CA and SECURITY BANK AND TRUST COMPANY
ISSUE:
Whether 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:
CA Agro-Industrial Development Corp, through its President, Sergio Aguirre,
and spouses Pugao entered into an agreement where the CA Agro purchased
from Pugao two (2) parcels of land for P350,625. A downpayment of P75,725
was paid while the balance was covered by three (3) postdated checks.
They stipulated that the titles to the lots would be transferred to CA Agro
upon full payment of the purchase price and that the owner's copies of the
certificates of titles 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 CA Agro and the Pugaos upon full payment of the purchase price.
CA Agro, through Sergio Aguirre, and the Pugaos rented a Safety Deposit Box
of Security Bank. They signed a contract of lease which contained the
following conditions:
 The bank is not a depositary of the contents of the safe and it has
neither the possession nor control of the same.
 The bank has no interest whatsoever in said contents, except herein
expressly provided, and it assumes absolutely no liability in
connection therewith.
Two (2) renter's keys were given to them — one to Aguirre for CA Agro and
the other to the Pugaos. A guard key remained with 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.
Then, Mrs. Margarita Ramos offered to buy from CA Agro the two (2)
lots at a price of P225 per square meter which CA Agro alleged would
be a profit of P100 per square meter or a total of P280,500 for the
entire property. Mrs. Ramos demanded the execution of a deed of
sale which required the certificates of title. Aguirre, accompanied by
the Pugaos, went 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 did not contain the 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 failed to realize their expected profit and filed a
complaint for damages against Security Bank with the Court of First
Instance (now Regional Trial Court) of Pasig, Metro Manila which
docketed the same as Civil Case No. 38382.
In its Answer with Counterclaim,3 respondent Bank alleged that the petitioner
has no cause of action because of paragraphs 13 and 14 of the contract of
lease (Exhibit "2"); corollarily, loss of any of the items or articles contained in
the box could not give rise to an action against it. It then interposed a
counterclaim for exemplary damages as well as attorney's fees in the amount
of P20,000.00. Petitioner subsequently filed an answer to the counterclaim.4
In due course, the trial court, now designated as Branch 161 of the Regional
Trial Court (RTC) of Pasig, Metro Manila, rendered a decision5 adverse to the
petitioner on 8 December 1986, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing
plaintiff's complaint.
On defendant's counterclaim, judgment is hereby rendered ordering plaintiff
to pay defendant the amount of FIVE THOUSAND (P5,000.00) PESOS as
attorney's fees.
With costs against plaintiff.6
The unfavorable verdict is based on the trial court's conclusion that under
paragraphs 13 and 14 of the contract of lease, the Bank has no liability for the
loss of the certificates of title. The court declared that the said provisions are
binding on the parties.
Its motion for reconsideration7 having been denied, petitioner appealed from
the adverse decision to the respondent Court of Appeals which docketed the
appeal as CA-G.R. CV No. 15150. Petitioner urged the respondent Court to
reverse the challenged decision because the trial court erred in (a) absolving
the respondent Bank from liability from the loss, (b) not declaring as null and
void, for being contrary to law, public order and public policy, the provisions
Topic: Deposit
in the contract for lease of the safety deposit box absolving the Bank from
any liability for loss, (c) not concluding that in this jurisdiction, as well as under
American jurisprudence, the liability of the Bank is settled and (d) awarding
attorney's fees to the Bank and denying the petitioner's prayer for nominal
and exemplary damages and attorney's fees.8
In its Decision promulgated on 4 July 1989,9 respondent Court affirmed the
appealed decision principally on the theory that the contract (Exhibit "2")
executed by the petitioner and respondent Bank is in the nature of a contract
of lease by virtue of which the petitioner and its co-renter were given control
over the safety deposit box and its contents while the Bank retained no right
to open the said box because it had neither the possession nor control over
it and its contents. As such, the contract is governed by Article 1643 of the
Civil Code 10 which provides:
Art. 1643. In the lease of things, one of the parties binds himself to give to
another the enjoyment or use of a thing for a price certain, and for a period
which may be definite or indefinite. However, no lease for more than ninety-
nine years shall be valid.
It invoked Tolentino vs. Gonzales 11 — which held that the owner of the
property loses his control over the property leased during the period of the
contract — and Article 1975 of the Civil Code which provides:
Art. 1975. The depositary holding certificates, bonds, securities or
instruments which earn interest shall be bound to collect the latter when it
becomes due, and to take such steps as may be necessary in order that the
securities may preserve their value and the rights corresponding to them
according to law.
The above provision shall not apply to contracts for the rent of safety deposit
boxes.
and then concluded that "[c]learly, the defendant-appellee is not under any
duty to maintain the contents of the box. The stipulation absolving the
defendant-appellee from liability is in accordance with the nature of the
contract of lease and cannot be regarded as contrary to law, public order and
public policy." 12 The appellate court was quick to add, however, that under
the contract of lease of the safety deposit box, respondent Bank is not
completely free from liability as it may still be made answerable in case
unauthorized persons enter into the vault area or when the rented box is
forced open. Thus, as expressly provided for in stipulation number 8 of the
contract in question:
8. The Bank shall use due diligence that no unauthorized person shall be
admitted to any rented safe and beyond this, the Bank will not be responsible
for the contents of any safe rented from it. 13
Its motion for reconsideration 14 having been denied in the respondent
Court's Resolution of 28 August 1989, 15petitioner took this recourse under
Rule 45 of the Rules of Court and urges Us to review and set aside the
respondent Court's ruling. Petitioner avers that both the respondent Court
and the trial court (a) did not properly and legally apply the correct law in this
case, (b) acted with grave abuse of discretion or in excess of jurisdiction
amounting to lack thereof and (c) set a precedent that is contrary to, or is a
departure from precedents adhered to and affirmed by decisions of this Court
and precepts in American jurisprudence adopted in the Philippines. It
reiterates the arguments it had raised in its motion to reconsider the trial
court's decision, the brief submitted to the respondent Court and the motion
to reconsider the latter's decision. In a nutshell, petitioner maintains that
regardless of nomenclature, the contract for the rent of the safety deposit
box (Exhibit "2") is actually a contract of deposit governed by Title XII, Book
IV of the Civil Code of the Philippines. 16 Accordingly, it is claimed that the
respondent Bank is liable for the loss of the certificates of title pursuant to
Article 1972 of the said Code which provides:
Art. 1972. The depositary is obliged to keep the thing safely and to return it,
when required, to the depositor, or to his heirs and successors, or to the
person who may have been designated in the contract. His responsibility,
with regard to the safekeeping and the loss of the thing, shall be governed by
the provisions of Title I of this Book.
If the deposit is gratuitous, this fact shall be taken into account in determining
the degree of care that the depositary must observe.
Petitioner then quotes a passage from American Jurisprudence 17 which is
supposed to expound on the prevailing rule in the United States, to wit:
The prevailing rule appears to be that where a safe-deposit company leases
a 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
Topic: Deposit
key or one to be used in connection with one retained by the lessor) does not
operate to alter the foregoing rule. The argument that there is not, in such a
case, a delivery of exclusive possession and control to the deposit company,
and that therefore the situation is entirely different from that of ordinary
bailment, has been generally rejected by the courts, usually on the ground
that as possession must be either in the depositor or in the company, it
should reasonably be considered as in the latter rather than in the former,
since the company is, by the nature of the contract, given absolute control of
access to the property, and the depositor cannot gain access thereto without
the consent and active participation of the company. . . . (citations omitted).
and a segment from Words and Phrases 18 which states that a contract for the
rental of a bank safety deposit box in consideration of a fixed amount at
stated periods is a bailment for hire.
Petitioner further argues that conditions 13 and 14 of the questioned
contract are contrary to law and public policy and should be declared null and
void. In support thereof, it cites Article 1306 of the Civil Code which provides
that parties to a contract may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order or public policy.
After the respondent Bank filed its comment, this Court gave due course to
the petition and required the parties to simultaneously submit their
respective Memoranda.
The petition is partly meritorious.
We agree with the petitioner's contention that the contract for the rent of
the safety deposit box is not an ordinary contract of lease as defined in Article
1643 of the Civil Code. However, We do not fully subscribe to its view that
the same is a contract of deposit that is to be strictly governed by the
provisions in the Civil Code on deposit; 19 the contract in the case at bar is a
special kind of deposit. It cannot be characterized as an ordinary contract of
lease under Article 1643 because the full and absolute possession and control
of the safety deposit box was not given to the joint renters — the petitioner
and the Pugaos. The guard key of the box remained with the respondent
Bank; without this key, neither of the renters could open the box. On the
other hand, the respondent Bank could not likewise open the box without the
renter's key. In this case, the said key had a duplicate which was made so that
both renters could have access to the box.
Hence, the authorities cited by the respondent Court 20 on this point do not
apply. Neither could Article 1975, also relied upon by the respondent Court,
be invoked as an argument against the deposit theory. Obviously, the first
paragraph of such provision cannot apply to a depositary of certificates,
bonds, securities or instruments which earn interest if such documents are
kept in a rented safety deposit box. It is clear that the depositary cannot open
the box without the renter being present.
We observe, however, that the deposit theory itself does not altogether find
unanimous support even in American jurisprudence. We agree with the
petitioner that under the latter, the prevailing rule is that the relation
between a bank renting out safe-deposit boxes and its customer with respect
to the contents of the box is that of a bail or and bailee, the bailment being
for hire and mutual benefit. 21 This is just the prevailing view because:
There is, however, some support for the view that the relationship in question
might be more properly characterized as that of landlord and tenant, or lessor
and lessee. It has also been suggested that it should be characterized as that
of licensor and licensee. The relation between a bank, safe-deposit company,
or storage company, and the renter of a safe-deposit box therein, is often
described as contractual, express or implied, oral or written, in whole or in
part. But there is apparently no jurisdiction in which any rule other than that
applicable to bailments governs questions of the liability and rights of the
parties in respect of loss of the contents of safe-deposit boxes. 22 (citations
omitted)
In the context of our laws which authorize banking institutions to rent out
safety deposit boxes, it is clear that in this jurisdiction, the prevailing rule in
the United States has been adopted. Section 72 of the General Banking
Act 23pertinently provides:
Sec. 72. In addition to the operations specifically authorized elsewhere in this
Act, banking institutions other than building and loan associations may
perform the following services:
(a) Receive in custody funds, documents, and valuable objects, and rent
safety deposit boxes for the safeguarding of such effects.
xxx xxx xxx
The banks shall perform the services permitted under subsections (a), (b) and
(c) of this section as depositories or as agents. . . . 24 (emphasis supplied)
Note that the primary function is still found within the parameters of a
contract of deposit, i.e., the receiving in custody of funds, documents and
other valuable objects for safekeeping. The renting out of the safety deposit
boxes is not independent from, but related to or in conjunction with, this
principal function. A contract of deposit may be entered into orally or in
Topic: Deposit
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
Topic: Deposit

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.
Topic: Deposit
ANGEL JAVELLANA vs. JOSE LIM, ET AL
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.
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.
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
Topic: Deposit
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.
Topic: Deposit
SILVESTRA BARON vs. PABLO DAVID
And
GUILLERMO BARON vs. PABLO DAVID
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
Topic: Deposit
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 a commodatum;
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
Topic: Deposit
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
Topic: Deposit
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.
Avanceña, C.J., Johnson, Malcolm, Villamor, Romualdez and Villa-Real, JJ.,
concur.
Separate Opinions
JOHNS, J., dissenting and concurring:
The plaintiff Silvestra Baron is the aunt of the defendant, and Guillermo
Baron, the plaintiff in the other action, is his uncle. There is no dispute as to
the amount of palay which each delivered to the mill of the defendant. Owing
to the fact that they were relatives and that the plaintiffs reposed special
reposed special trust and confidence in the defendant, who was their
nephew, they were not as careful and prudent in their business dealings with
him as they should have been. Plaintiffs allege that their respective palay was
delivered to the defendant at his mill with the understanding and agreement
between them that they should receive the highest market price for the palay
for that season, which was P8.50 per cavan. They further allege that about
August first they made another contract in and by which he promised and
Topic: Deposit
agreed to pay them P8.40 per cavan for their palay, in consideration of which
they agreed to extend the time for payment to the first of December of that
year. The amount of palay is not in dispute, and the defendant admits that it
was delivered to his mill, but he claims that he kept it on deposit and as bailee
without hire for the plaintiffs and at their own risk, and that the mill was
burned down, and that at the time of the fire, plaintiffs' palay was in the mill.
The lower court found as a fact that there was no merit in that defense, and
that there was but little, if any, palay in the mill at the time of the fire and
that in truth and in fact that defense was based upon perjured testimony.
The two cases were tried separately in the court below, but all of the evidence
in the case was substituted and used in the other. Both plaintiffs testified to
the making of the respective contracts as alleged in their complaint; to wit,
that they delivered the palay to the defendant with the express
understanding and agreement that he would pay them for the palay the
highest market price for the season, and to the making of the second contract
about the first of August, in which they had a settlement, and that the
defendant then agreed to pay them P8.40 per cavan, such payment to be
made on December first. It appears that the highest market price for palay
for that season was P8.50 per cavan. The defendant denied the making of
either one of those contracts, and offered no other evidence on that
question. That is to say, we have the evidence of both Silvestra Baron and
Guillermo Baron to the making of those contracts, which is denied by the
defendant only. Plaintiffs' evidence is also corroborated by the usual and
customary manner in which the growers sell their palay. That is to say, it is
their custom to sell the palay at or about the time it is delivered at the mill
and as soon as it is made ready for market in the form of rice. As stated the
lower court found as a fact that the evidence of the defendants as to
plaintiffs' palay being in the mill at the time of the fire was not worthy of
belief, and that in legal effect it was a manufactured defense. Yet, strange as
it may seem, both the lower court and this court have found as a fact that
upon the question of the alleged contracts, the evidence for the defendant is
true and entitled to more weight than the evidence of both plaintiffs which is
false.
It appears that the plaintiff Silvestra Baron is an old lady about 80 years of
age and the aunt of the defendant, and Guillermo Baron is the uncle. Under
the theory of the lower court and of this court, both of them at all the time
during the high prices held their palay in defendant's mill at their own risk,
and that upon that point the evidence of the defendant, standing alone is
entitled to more weight and is more convincing than the combined evidence
of the two plaintiffs. In the very nature of things, if defendant's evidence upon
that point is true, it stands to reason that, following the custom of growers,
the plaintiffs would have sold their palay during the period of high prices, and
would not have waited until it dropped from P8.50 per cavan to P6.15 per
cavan about the first of August. Upon that question, both the weight and the
credibility of the evidence is with the plaintiffs, and they should have
judgment for the full amount of their palay on the basis of P8.40 per cavan.
For such reason, I vigorously dissent from the majority opinion.
I frankly concede that the attachment was wrongful, and that it should never
have been levied. It remained in force for a period of one hundred and
seventy days at which time it was released on motion of the plaintiffs. The
defendant now claims, and the majority opinion has allowed him, damages
for that full period, exclusive of Sundays, at the rate, of P40 per day, found to
be the net profit for the operation of the rice mill. It further appears, and this
court finds, that the defendant was a responsible man, and that he had ample
property out which to satisfy plaintiffs' claim. Assuming that to be true, there
was no valid reason why he could not had given a counter bond and released
the attachment. Upon the theory of the majority opinion, if the plaintiffs had
not released the attachment, they would still be liable to the defendant at
the rate of P40 per day up to the present time. When the mill was attached,
if he was in a position to do so, it was the duty of the defendant to give a
counter bond and release the attachment and resume its operation. The
majority opinion also allowed the defendant P1,400 "for injury to the
goodwill of his business." The very fact that after a delay of about four years,
both of the plaintiffs were compelled to bring to their respective actions
against the defendant to recover from him on a just and meritorious claim,
as found by this court and the lower court, and the further fact that after such
long delay, the defendant has sought to defeat the actions by a sham and
manufactured defense, as found by this and the lower court, would arouse
the suspicion of any customers the defendant ever had, and shake their
confidence in his business honor and integrity, and destroy any goodwill
which he ever did have. Under such conditions, it would be strange that the
defendant would have any customers left. He is not entitled to any
compensation for the loss of goodwill, and P5,000 should be the very limit of
the amount of his damages for the wrongful attachment, and upon that point
I vigorously dissent. In all other respects, I agree with the majority opinion.