C RE CASES | COMMODATUM Republic v.

. Bagtas (1962, Padilla) Bagtas borrowed from the Republic (thru Bureau of Animal Industry) 3 bulls: Red Sindhi (P1,176.46), Bhagnari (P1320.56) and Sahiniw al (P744.46) for 1 year for breeding purposes, subject to government charge of 10% of the book value of the bulls. Upon expiration of the contract, Bagtas asked for a renewal (for another 1 year) Agri Sec. Approved a renew al of only 1 bull and requested the return of the other 2. Bagtas w rote to the Director that he would pay the value of the 3 bulls; reiterated his desire to buy them at a value w ith deduction of yearly depreciation Director advised him that the book value of the bulls cannot be reduced and that they be returned or their book value paid. Bagtas failed to pay or to return them Republic commenced an action against him to return the bulls or to pay the book value (P3,241.45) and the unpaid breeding fee (P199.62). Bagtas: Because of the bad peace and order situation in Cagayan Valley and of the pending appeal he had taken to the Agri Sec. from the refusal by the Director to deduct from the book value the corresponding yearly depreciation, he could not return the animals nor pay their value. TC: Ordered Bagtas to pay. Republic moved ex parte for a writ of execution and for the appointment of a special sheriff to serve the w rit outside Manila GRANTED. Felicidad (surviving spouse and administratix of Bagtas) w as notified. Felicidad filed a motion alleging that the Sindhi and the Bhagnari w ere returned to the Bureau and that the Sahiniw al died from gunshot w ounds during a Huk raid on Hacienda Felicidad Intal. Prayed for the quashal of the writ of execution and the issuance of a w rit of preliminary injunction. DENIED. TRUE that Bagtas son Jose Jr. Returned the Sindhi and the Bhagnari to the Superintendent of the NVB station, Bureau of Animal Industry in Nueva Vizcaya. RE: Sahiniw al Felicidad contends that since the death w as due to force majeure, she is relieved from the duty of returning the bull or paying its value. NO MERIT. o The loan was subject to payment by the borrower of breeding fee of 10% of the book value. o Felicidad contends that the contract was commodatum and for that reason, as the Republic retained ownership or title to the bull, it should suffer its loss due to force majeure.

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SC: A contract of commodatum is essentially gratuitous. If the breeding fee be considered compensation, the contract w ould be a LEASE. o Art. 1671 Lessee w ould be subject to the responsibilities of a possessor in bad faith, because she continued possession of the bull after expiry of the contract. o Even if the contract be commodatum, Felicidad w ould still be liable because under Art. 1942, a bailee in commodatum is liable for the loss of the things, even if it should be through a fortuitous event, if he keeps it longer than the period stipulated and if the thing loaned has been delivered w ith appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case of fortuitous event. o HERE: The loan of one bull w as extended to May 1950, but w as kept and used by Felicidad until Nov. 1953 w hen during a Huk raid, it w as killed by stray bullets. Moreover, the bulls had an appraised book value when lent and delivered to Bagtas. It w as not stipulated that in case of loss of the bull due to fortuitous event Bagtas would be exempt. The estate of Bagtas is only liable for P859.63, the value of the bull which has not been returned. o Republic v. CA (1986, Paras)

CFI Zambales denied Baloys application for registration. CA reversed; approved the application for registration. o Republic filed MR, alleging that Baloys possessory information title can no longer be invoked and that they w ere not able to prove a registerable title over the land. Denied. Possessory information title show s that the description and the area of the land stated therein substantially coincides w ith the land applied for and that said title had been regularly issued having been acquired by Baloy under the Spanish Mortgage Law . Director of Lands opposed: The land became public land thru Act 627. o Pursuant to the executive order of the US Pres., the area w as declared within the US Naval Reservation. o Under Act 627, a period w as fixed (60 days) w ithin w hich affected persons can file their application, otherw ise the said lands or interests therein will be conclusively adjudged to be public lands, and all claims not presented w ill be forever barred. Since Baloy failed to file his claim within the prescribed period, the land became irrevocably public and could not be the subject of a valid registration for private ow nership. CA: There w as no judicial declaration to the effect that the land in question became public.

C RE Sec. 3, Act 627 Procedures before any affected land can be conclusively adjudged to be public land. o Issue a notice stating that the land was reserved for military purposes Claims for private lands must be presented for registration within 6 months. All claims not presented will be conclusively adjudged to be public lands and will be forever barred. o The notice must be published once a w eek for 3 successive w eeks in 2 new spapers (English and Spanish) If there are no new spapers in the area w here the land lies, it is sufficient compliance to publish the notice in the Spanish and English daily new spaper in Manila. o Clerk shall cause to be personally served the notice in Spanish upon every person living upon or in visible possession of any part of the military reservation. Private land could be deemed to have become public land only by virtue of a judicial declaration after due notice and hearing. This is contrary to Republics contention that failure to present claims made the land ipso facto public land w ithout need of judicial pronouncement. Without a judgment or order declaring the land to be public, its private character and the possessory information title over it must be respected. No order = never became public. It can be presumed that the notice required by law (publication and personal service) did NOT include Baloys name and the subject land He and his land were never brought w ithin the operation of Act 627. CA finding that during the interim (occupation of US Navy) the possessory rights of Baloy w ere merely suspended and not lost by prescription is supported by a communication of the Republic stating that Baloy has been in continuous possession of the land since 1894 as attested by a possessory information title granted by the Spanish Government. Disputed property is private land and this possession w as interrupted only by the occupation of the land by the US Navy in 1945 for recreational purposes. o The US Navy abandoned the premises; Baloys heirs are now in actual possession. Occupancy of US Navy w as not in the concept of an ow ner Partakes the nature of a COMMODATUM. o Ones ownership of a thing may be lost by prescription by reason of anothers possession if such possession be under claim of ow nership, not where possession is only intended to be transient as in this case, where the ow ner is not divested of his title although it cannot be exercised in the meantime.

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De los Santos v. Jarra (1910, Torres) De los Santos filed suit against Jarra (administratix of estate of Jimenea). o Jimenea borrow ed from de los Santos 10 first-class carabaos, to be used at the animal-pow er mill of his hacienda, w ithout recompense or remuneration thereof, under the sole condition that they be returned to the ow ner as soon as the w ork at the mill w as terminated. o He did not return the carabaos despite demands for its return after the work at the mill w as finished. The commissioners of his estate rejected his claim. Jarra: Jimenea only obtained 3 second-class animals w hich were transferred by sale by De los Santos to Jimenea. Atty. Martinez notified Jarra and her counsel (Atty. Hilado) that he made an agreement w ith de los Santos to the effect that the latter w ould not compromise the controversy w ithout his consent and that as professional fees, he was to receive of the amount allow ed in the judgment. TC: Sentenced Jarra to return to de los Santos the remaining 6 second and third class carabaos or value thereof (P720 or P120 each) Jarra admitted that Jimenea asked de los Santos for the loan of 10 carabaos w hich are now claimed by the latter; but Jimenea only obtained 3 second-class carabaos, w hich w ere subsequently sold to him by de los Santos. o De los Santos sent in charge of various persons the 10 carabaos requested by Jimenea (his father-in-law); Jimenea received them in the presence of some of said persons, one of w hom being his brother. o 4 died of rinderpest 6 are involved in the judgment appealed from. o The alleged purchase of 3 carabaos by Jimenea is not evidenced by any trustw orthy documents nor w ere the declarations of the witnesses affirming such sale satisfactory. o TO SUM: As the 6 carabaos w ere not the property of Jimenea nor of his heirs, it is Jarras duty to return them or to indemnify the ow ner. Pertinent provisions of the OCC:
ART. 1740. By the contract of loan, one of the parties delivers to the other, either anything not perishable, in order that the latter may use it during a certain period and return it to the former, in which case it is called commodatum, or money or any other perishable thing, under the condition to return an equal amount of the same kind and quality, in which case it is merely called a loan. Commodatum is essentially gratuitous. A simple loan may be gratuitous, or made under a stipulation to pay interest. ART. 1741. The bailee acquires retains the ownership of the thing loaned. The bailee acquires the use thereof, but not its fruits; if any compensation is involved, to be paid by the person requiring the use, the agreement ceases to be a commodatum. ART. 1742. The obligations and rights which arise from the commodatum pass to the heirs of both contracting parties, unless the loan has been in consideration for the person of the bailee, in which case his heirs shall not have the right to continue using the thing loaned.

C RE The carabaos delivered to be used not being returned by Jimenea upon demand, there is no doubt that she is under obligation to indemnify the ow ner thereof by paying him their value. Supreme Tribunal of Spain: Although it is true that in commodatum, the bailor retains the ownership of the thing loaned, and at the expiration of the period or after the use for which it was loaned has been accomplished, it is the imperative duty of the bailee to return the thing itself to its ow ner or to pay him damages if through the fault of the bailee the thing should have been lost or injured. Manzano v. Perez (2001, Panganiban) Emilia Manzano ow ns a house and lot in Laguna. Nieves Manzano (sister) allegedly borrow ed the property as collateral for a projected loan. Emilia agreed upon the latters promise that she would return the property immediately upon payment of her loan. Emilia executed 2 deeds of conveyance for the sale of the house and the lost, both for P1 plus other valuables received from Nieves. Nieves, together w ith Perez Sr. and their son Macario, obtained a loan from the Rural Bank of Infanta (P30K). Executed a Real Estate Mortgage over the subject property in favor of the bank. When Nieves died, her heirs (Perez Sr. and Macario) refused to return the house and lot to Emilia even after payment of their loan. Sincere efforts to amicably settle the dispute failed and the unw arranted refusal of Perez Sr. to return the property caused her sleepless nights. Emilia sought the annulment of the deeds of sale and execution of a deed of transfer or reconveyance of the subject property in her favor. o Perez Sr. countered that they are the ow ners of the property, being the legal heirs of Nieves w ho purchased the same from Emilia for value and in good faith; and that the latter failed to show any proof that the transaction she entered into w ith her sister w as a loan and not a sale. What the parties agreed upon was to resell the property to Emilia after the payment of the loan w ith the Rural Bank. Since Perez Sr. felt that the property w as the only memory left by Nieves, they informed Emilia of their refusal to sell the same. TC: Ruled in favor of Emilia o The documents covering the properties w ere returned to Emilia by Florencio Perez. o Perez, Sr. failed to present payment of real estate taxes for said properties; it w as Emilia w ho has been paying for same. o Emilia w ent to the house and hacked the stairs, and Perez, Sr. did not file any action against her Indication that Perez, Sr. recognized Emilia as the ow ner.

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Cadastral Notice of said properties were in the name of Emilia and the same w as sent to her. o Upon request to return the property, Perez, Sr. promised and prepared an EJ partition w ith Sale over said properties, but the same did not materialize. o The consideration in question is P1 and other valuables. CA: Not convinced that there was an oral agreement of commodatum over the house and lot; nor w as it persuaded by the allegation that Nieves gave no consideration for the sale of the property. o If Emilia remained as rightful ow ner, she would not have agreed to reacquire thereof for P10K. o If the agreement was to use the property as collateral in a mortgage loan, it w as not explained w hy physical possession of the same had to be w ith the supposed vendee. Mere execution of document transferring title would have sufficed. o Tax receipts only become strong evidence of ow nership w hen accompanied by actual possession of the property. Perez, Sr. et. al. were the ones in actual occupation, w hich was unnecessary if the real agreement w as merely to lend the property to be used as collateral. o Certificate of Tax Declaration named Nieves as the owner and possessor of the property in question. o Execution of a deed purporting to convey ownership of realty is in itself prima facie evidence of existence of valuable consideration. Inadequacy of the same does not render a conveyance null and void, for the vendors liberality may be a sufficient cause for a valid contract. Emilia has presented no convincing proof of her continued ow nership of the subject property. Perez Sr. et. al. presented 2 Deeds of Sale w hich Emilia executed in favor of Nieves. Both deeds having been notarized, they are presumed to have been duly executed. Facts alleged by Emilia in her favor: o She inherited the property from her parents, with her siblings waiving in her favor their claim over the same. o It w as mortgaged to secure a loan of P30K taken in the name of Nieves and Perez, Sr. o Upon full payment, the documents pertaining to the property w ere returned by Florencio Perez to Emilia. o 3 of respondents w ere signatories to a document transferring of the property to Emilia in consideration of P10K, w hich did not materialize because of the refusal of the other respondents to sign the same. o Emilia hacked the stairs of the house yet no case w as filed against her. SC: These are NOT convincing indicators of Emilias ow nership. o How could one of them have obtained a mortgage over the property without having dominion over it? o

C RE Why w ould they execute a reconveyance of of it in favor of Emilia? Why w ould the latter have to pay P10K for that portion if she ow ns the whole? SALE, NOT COMMODATUM. o o Producers Bank v. CA (2003, Callejo Sr.) Vives (respondent) w as asked by Sanchez (formers neighbor and friend) to help Col. Doronilla (latters friend and townmate) in incorporating his business (Sterela). Sanchez asked Vives to deposit in a bank a certain amount in the account of Sterela for the purpose of incorporation; and assured him that he could w ithdraw his money from said account w ithin a months time. Vives, Sanchez, Doronilla and Dumagpi (Doronillas secretary) met and discussed the matter. Vives issued a check for P200K in favor of Sterela. o Vives asked Inocencia (his w ife) to accompany Doronilla and Sanchez in opening a savings account in the name of Sterela in Producers Bank. Only Sanchez, Inocencia and Dumagpi w ent to the bank to deposit the check. o They had an authorization letter from Doronilla, authorizing Sanchez and her companions to open an account for Sterela (Savings account 101567). Authorized signatories w ere Inocencia and/or Sanchez. Vives learned that Sterela w as no longer holding office in the address given to him. He and his w ife went to the bank to verify if their money w as still intact Atienza (Asst. Manager) informed them that part of the money in 10-1567 had been w ithdraw n by Doronilla, and only P90K remained therein. o Inocencia could not w ithdraw the remaining amount because it had to answ er for some postdated checks issued by Doronilla, w ho opened Current account 10-0320 for Sterela and authorized the bank to debit 101567 for the amounts necessary to cover overdraw ings in 10-0320. Sterela, through Doronilla, obtained a loan of P175K from the bank, and to cover payment thereof, Doronilla issued 3 postdated checks, all of w hich were dishonored. Doronilla issued a postdated check for P212K in favor of Vives, w hich w as subsequently dishonored. Vives, thru counsel, made a w ritten demand upon Doronilla for the return of the money. Doronilla issued another check for P212K, w hich was again dishonored for insufficiency of funds. Vives instituted an action for recovery of sum of money in RTC Pasig. RTC: Ordered Doronilla, Dumagpi and Producers to pay Vives jointly and severally P200K (money deposited) as w ell as damages and other costs. CA: Affirmed. Producers:

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The transaction betw een Vives and Doronilla is a simple loan (mutuum) since all the elements are present: What w as delivered by Vives to Doronilla w as money (consumable) The transaction w as onerous as Doronilla w as obliged to pay interest (P212K is P12K more than w hat Vives deposited) The fact that Vives sued his good friend Sanchez for his failure to recover his money from Doronilla show s that the transaction w as not gratuitous but had a business angle to it. HENCE, it cannot be held liable for the return of the P200K because it is not privy to the transaction betw een Vives and Doronilla. o Its Asst. Manager could not be faulted for allowing Doronilla to withdraw from the savings account of Sterela since the latter w as the sole proprietor of said company. Authorization letter did not contain any authorization for Inocencia and Sanchez to w ithdraw from said account. Authority to w ithdraw remained exclusively with Doronilla. Vives: o The transaction betw een him and Doronilla is not a mutuum but an accommodation, since he did not actually part w ith the ow nership of his P200K and in fact asked Inocencia to deposit said amount in Sterelas account so that a certification can be issued to the effect that Sterela had sufficient funds for purposes of its incorporation but at the same time he retained some degree of control over his money through his w ife w ho was made a signatory and in w hose possession the passbook w as given. o Atienza connived with Doronilla in defrauding him since it w as he w ho facilitated the opening of Sterelas Current account 3 days after Inocencia and Sanchez opened a Savings account w ith Producers, as w ell as the approval of the authority to debit Sterelas Savings account to cover any overdraw ings in its Current account. SC: The transaction w as a COMMODATUM. (See Art. 1933) o Art. 1933 seems to imply that if the subject of the contract is a consumable such as money, the contract w ould be a mutuum. BUT, there are some instances w here a commodatum may have for its object a consumable thing. (See Art. 1936) o Under Art. 1936, if consumables are loaned only for purposes of exhibition or w hen the intention of the parties is to lend consumables and to have the very same goods returned at the end of the period agreed upon, the loan is a commodatum and NOT a mutuum. o HERE: Vives agreed to deposit his money in Sterelas saving account specifically for the purpose of making it appear that said firm had sufficient capitalization for incorporation, with the promise that the amount shall be returned within 30 days. He merely accommodated o

C RE Doronilla by lending his money w ithout consideration, as a favor to his friend Sanchez. o Doronillas attempt to return P200K with alleged interest on the mutuum of P12K did not convert the transaction of commodatum into a mutuum because such w as not the intent of the parties and because the additional P12K corresponds to the fruits of lending P200K Under Art. 1935, the bailee acquires the use of thing loaned, but not its fruits. It was only proper therefore, for Doronilla to remit the interest accruing to Vives money deposited with Producers. SC: The nature of the transaction betw een Doronilla and Vives has no bearing on Producers liability because the facts of the case show that Producers, through Atienza, w as partly responsible for the loss of Vives money and is liable for its restitution. o Neither a deposit nor a withdrawal w ill be permitted except upon production of the depositor savings bank book. Even if the passbook was w ith Inocencia, Doronilla w as permitted by Atienza to w ithdraw from the account. o Atienza was show n to be a party to Doronillas scheme: The deposit was made in the Buendia branch w here Atienza w as a key officer. Vives wanted to make the deposit in Manila Banking, but Doronilla insisted that it be made in the Buendia branch for it w ill be easier for them to get a certification. Authorization letter prepared by Doronilla: * * * as per coordination w ith Mr. Atienza * * * Atienza did not follow procedure (that only the signatories can make w ithdraw als) because Sterela w as ow ned by Doronilla. He w as fully aw are that the money came from Vives, and w as told by Inocencia of the purpose of the deposit w hich w as to merely accommodate Doronilla. The transfer from the savings account to the current account w as w ithout the submission of the passbook w hich Atienza gave to Inocencia. It w as made to appear in a certification signed by Dumagpi that a duplicate passbook w as issued to Sterela because the original had been surrendered to the Makati Branch in view of a loan accommodation assigning the savings account. Atienza was aw are that the passbook was w ith Inocencia and that it w as never surrendered. TO SUM, Atienzas active participation in the fraud caused the loss of Vives money. Under Art. 2180, Producers is liable for Vives loss and is solidarily liable w ith Doronilla and Dumagpi for the return of the P200K since it is clear that it failed to prove that it exercised due diligence to prevent the unauthorized w ithdraw als from Sterelas savings account and that it w as not negligent in the selection and supervision of Atienza.

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Saura Import and Export Co. v. DBP (1972, Makalintal) Saura applied to the Rehabilitation Finance Corp. for an industrial loan (P500K): o P250K - factory building o P240,900 - balance of price of jute mill machinery and equipment o P9,100 - additional w orking capital The jute mill machinery had already been purchased by Saura on the strength of a letter of credit extended by Prudential Bank and Trust Co., and to secure its release w ithout first paying the draft, Saura executed a trust receipt in favor of Prudential. RFC passed Reso 145 approving the loan application for P500K to be secured by a first mortgage on the factory buildings to be constructed, land site, and machinery to be installed. o Mr. and Mrs. Saura, Inocencia Arellano, Aniceto Caolboy and Gregoria Estabillo and China Engineers shall sign the promissory notes jointly w ith the borrower-corporation. Saura w rote to RFC, requesting a modification of the terms laid dow n by it In lieu of China Engineers (w hich w as willing to assume liability only to the extent of its stock subscription w ith Saura) sign as co-maker of the notes, Saura w ould put up a bond for P123.5K and that Maria Roca would be substituted for Arellano. RFC passed Reso 736, designating members of its Board to reexamine all aspects of the approved loan. Saura w rote RFC that China Engineers had again agreed to act as co-signer for the loan. Each party named their respective committee of engineers and technical men to undertake the necessary studies in accordance w ith Reso 736; although Saura manifested that the same should not be taken as acquiescence on its part to novate or accept new conditions to the agreement already entered into (Reso 145). Despite the formal execution of the loan agreement, the reexamination in Reso 736 proceeded. It was decided to reduce the loan from P500K to P300K (Reso 3989). F.R. Halling, who signed the promissory note for China Engineers jointly and severally w ith other co-signers, wrote RFC that his company no longer w ished to avail of the loan and therefore considered the same cancelled as far as it w as concerned. Saura w rote to RFC requesting that the loan of P500K be granted. Denied; the loan is considered cancelled. Saura informed RFC that China Engineers w ill reinstate their signature if the latter releases the P500K originally approved.

C RE RFC passed Reso 9083, restoring the original P500K loan (it appearing that China Engineers is now w illing to sign the promissory notes), provided that the Dept. of Agri and Natural Resources certifies to the follow ing: o The raw materials needed are available in the immediate vicinity. o There is prospect of increased production thereof to provide adequately for the requirements of the factory. The certification by the Dept. of Agri and Natural Resources w as required as the intention of the original approval of the loan is to develop the manufacture of sacks on the basis of locally available raw materials. Sauras project is a joint venture to finance, manage and operate a Kenaf mill plant, to manufacture copra and corn bags, runners, floor mattings, carpets, draperies out of 100% local raw materials, principal kenaf. This is w hat moved RFC to approve the loan application in the first place, and to require in Reso 9083 a certification as to the availability of local raw materials to provide adequately for the requirements of the factory. Saura confirmed the RFCs stand impliedly in its letter: o Stating that according to a study by the Bureau of Forestry, kenaf w ill not be available in sufficient quantity this year or probably next year. o Requesting assurances from RFC that the company w ill be able to bring in sufficient jute materials as may be necessary for the full operation of the jute mill o Asking that releases of the loan be made as follow s: Payment of receipt of jute mill P250K machineries with Prudential Purchase of materials and P182,413.91 equipment to enable the jute mill to operate Raw materials and labor P67,586.09 1. P25K on the opening of the L/C for raw jute 2. P25K upon arrival of raw jute 3. P17,586.09 as soon as the mill is ready to operate RFC replied that releases of the loan are proposed to be made from time to time, subject to the availability of funds tow ards the end that the sack factory shall be placed in actual operating status. o With respect to the requirement of certification, the basis of the original approval is to develop the manufacture of sacks on the basis of locally available raw materials. The statement of reliance on importation of jute is not in line with its principle in approving the loan.

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Negotiations came to a standstill. Saura requested RFC to cancel mortgage. RFC executed the corresponding deed of cancellation and delivered it to Saura himself. The cancellation w as requested to make w ay for registration of a mortgage contract executed over the same property in favor of Prudential, under w hich contract Saura had up to Dec. 31 w ithin w hich to pay its obligation on the trust receipt. For failure to pay the obligation, Prudential sued Saura. Almost 9 years after the mortgage in favor of RFC was cancelled at the request of Saura, the latter commenced the present suit for damages, alleging RFCs failure to comply w ith its obligation to release the proceeds of the loan applied for and approved, thereby preventing Saura from completing or paying contractual commitments it entered into in connection with its jute mill project. TC: Ruled in favor of Saura. There w as a perfected contract between the parties and DBP w as guilty of breach thereof. SC: There w as indeed a perfected consensual contract (see Art. 1934). o Application of Saura for a loan of P500K w as approved by resolution of RFC, and the corresponding mortgage w as executed and registered. o BUT, it should be noted that RFC entertained Sauras loan application on the assumption that the factory to be constructed would utilize locally grow n raw materials, principally kenaf. (see 2 conditions) o The imposition of these conditions was by no means a deviation from the terms of the agreement, but rather a step in its implementation. Nothing in said conditions that contradicted the terms in Reso 145. Saura realized that it could not meet the conditions required by RFC and so w rote the latter stating that local jute w ill not be available in sufficient quantity and asking that P67K be released for raw materials and labor. Deviation from terms of Reso 145. o The cancellation of the mortgage w as in the nature of mutual desistance, which is a mode of extinguishing obligations. Saura did not protest against any alleged breach of contract by RFC. Its request for cancellation of mortgage carried no reservation of w hatever rights it believed it might have against RFC for the latters non-compliance. Lastly, the action w as brought only 9 years after the loan agreement w as cancelled at its ow n request. Quintos v. Beck (1939, Imperial)

Beck w as Quintos tenant w ho occupied the latters house in M.H. del Pilar St. Upon the novation of the lease contract, Quintos gratuitously granted to Beck the use of the furniture, subject to the condition that Beck would return them to Quintos upon the latters demand.

C RE Quintos sold the property to Maria and Rosario Lopez. The 3 notified Beck of the conveyance, giving him 60 days to vacate the premises. Quintos thereafter required Beck to return all the furniture transferred to him for his use. Beck answ ered that she may call for them in the house w here they are found. o Beck w rote a letter informing Quintos that he could not give up 3 gas heaters and 4 electric lamps because he w ould use them until the 15 th of the month w hen the lease was due to expire. o Quintos refused to get the furniture in view of the fact that Beck declined to make delivery of all of them. Before vacating, Beck deposited w ith the sheriff all the furniture belonging to Quintos and are now deposited in a w arehouse in Rizal Avenue. Plaintiffs alleged that the TC incorrectly applied the law in (1) holding that they violated the contract by not calling for all the furniture, (2) not ordering Beck to pay them the value of the furniture in case they are not delivered, (3) holding that they should get all the furniture from the sheriff at their expense, (4) ordering them to pay of the expenses claimed by the sheriff for the deposit of the furniture. Contract here is one of COMMODATUM, because under it, Quintos gratuitously granted the use of the furniture to Beck, reserving for herself the ow nership thereof. o Beck bound himself to return the furniture to Quintos upon the latters demand. It means that he should return all of them to the plaintiff at the latters residence or house. o Beck did not comply w ith his obligation w hen he merely placed them at the disposal of Quintos, retaining for his benefit the 3 gas heaters and the 4 electric lamps. As Beck voluntarily undertook to return all the furniture to Quintos upon the latters demand, the Court cannot legally compel her to bear the expenses occasioned by the deposit of the furniture at Becks behest. o Beck, as bailee, w as not entitled to place the furniture on deposit, nor w as Quintos under a duty to accept the offer to return the furniture because Beck w anted to retain the 3 gas heaters and the 4 electric lamps. BUT, Quintos w as not entitled to payment of the value of the furniture in case of Becks inability to return some of the furniture Beck has neither agreed to nor admitted the correctness of the value. Beck w as the one w ho breached the contract of commodatum, and w ithout any reason he refused to return and deliver all the furniture upon Quintos demand. Just and equitable that he pay the legal expenses.

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CASES | DEPOSIT Javellana v. Lim (1908, Torres) Javellana filed a complaint w ith CFI Iloilo, praying that Lim et. al. be sentenced to jointly and severally pay P2686.58 with 15% interest, deducting from the amount of interest due P1102.16. Complaint w as amended Alleged that Lim et. al. executed a document in favor of Javellana: o We received from Javellana, as a deposit without interest, P2682.50 which w e will return to the said person jointly and severally, on Jan. 20, 1898. o When the obligation became due, Lim et. al. begged Javellana for an extension for the payment thereof, binding themselves to pay interest at 15% on the amount of their indebtedness, to w hich Javellana acceded. Lim et. al. paid P1K on account of interest due, w ith the exception of which they had not paid any other sum on account of either capital or interest. LIM: They paid to Javellana sums totaling P5602.16 (including the P1102.16 acknow ledged in the complaint), and deducting therefrom the P2686.58 stated in the document, Javellana still owed them P2915.58. TC: Ruled in favor of Javellana for the recovery of P5714.44 and costs. Document of indebtedness in the complaint: Javellana left on deposit with Lim et. al. a sum of money w hich they w ere jointly and severally obliged to return on a certain date fixed; nevertheless, w hen the document (EXH. 2) written in Visayan and follow ed by a translation into Spanish w as executed, it w as acknow ledged that on Nov. 15, 1902, the amount had not yet been returned to the creditor, whereby he w as subjected to losses amounting to P830 since Jan. 20, 1898 o w here the return w as stipulated with further agreement on interest at 15% from said date (Jan. 20) until the debtors paid the creditor in full and that the P1K paid to depositor on May 1900 would be included. In this second document, the contract, w hich is a real loan of money with interest, appears perfectly defined, notwithstanding the fact that in the original document, it is called a deposit. o When they bound themselves jointly and severally to refund P2686.58 to Javellana, they did not engage to return the same coins received and of which the amount deposited consisted, and they could have accomplished the return agreed upon by the delivery of a sum equal to the one received by them. o Lim et. al. w ere lawfully authorized to make use of the amount deposited, inasmuch as acknow ledging that they have subjected the lender (creditor), to losses and damages for not complying w ith w hat had been stipulated, they engaged to pay interest to the creditor from the date named until the time w hen the refund should be made.

C RE NOT a deposit, but a REAL CONTRACT OF LOAN. Pertinent provisions of the OCC:
Art.1767. 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. Art. 1768. 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.

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When Lim asked Javellana for an extension of payment, it was because he did not have in his possession the amount deposited, he having made use of the same in his business and for his ow n profit; and Javellana, by granting them the extension, evidently confirmed the express permission previously given them to use and dispose of the amount stated as having been deposited, w hich in accordance w ith law , must be considered as given them on loan. Based on evidence, Jose Lim w as perfectly aw are of and had authorized his codebtor (Ceferino Lim) to liquidate the interest, to pay the P1K, and to execute the second document. True ratification of the original documents w as this made. There w as no renew al of the contract of deposit converted into a loan. The original joint obligation contracted by the debtors (Lims) still exists. Serrano v. Central Bank (1980, Concepcion Jr.)

In Oct. and Dec. 1966, Manuel Serrano made a time deposit, for 1 year w ith 6% interest, of P150K with the Overseas Bank of Manila. Maneja also made a time deposit, for 1 year w ith 6-% interest, in Mar. 1967, of P200K w ith the same bank. Maneja, married to Felixberto Serrano, assigned and conveyed her time deposit to petitioner Manuel. Notwithstanding series of demands for encashment of the time deposits, not a single one of the time deposit certificates was honored by the bank. Central Bank: o Admits that it is charged w ith the duty of administering the banking system of the Republic and it exercises supervision over all doing business in the Phils.; denies Serrano's allegation that it has the duty to exercise a most rigid and stringent supervision of banks, implying that it has to watch every move or activity of all banks, including the Overseas Bank. As of Mar. 1965, the Overseas Bank w as only on a limited degree of banking operations since the Monetary Board decided in a Reso to prohibit it from making new loans and investments in view of its chronic reserve deficiencies against its deposit liabilities. This limited operation continued up to 1968.

Also denied that it is guarantor of the permanent solvency of any banking institution. Neither the law nor sound banking supervision requires it to advertise or represent to the public any remedial measures it may impose upon chronic delinquent banks as such action may inevitably result to panic or bank "runs". In 1966-67, there w ere no findings to declare the Overseas Bank as insolvent. o Denied that a constructive trust was created in favor of Serrano and Maneja when their time deposits w ere made in 1966 and 1967 w ith the Overseas Bank as during that time the latter was not an insolvent bank. o Avers no know ledge of Serrano's claim that the properties given by Overseas Bank as additional collaterals to the Central Bank for the former's overdrafts and emergency loans w ere acquired through the use of depositors' money, including that of Serrano and Maneja. Ramos, et al. v. Central Bank: Serrano filed a motion to intervene on the ground that he had a real and legal interest as depositor of the Overseas Bank in the matter in litigation in that case. Central Bank opposed the motion, on the ground that his claim as depositor of the Overseas Bank should properly be ventilated in the CFI, and if he w as to be allow ed to intervene, thousands of other depositors w ould follow and thus cause an avalanche of cases in this Court. SC denied Serranos motion to intervene; the contents of his motion are substantially the same as those of the present petition. o The Court rule in favor of Overseas Bank. o HERE: Because of the above decision, Serrano filed a motion for judgment, praying that the Central Bank be adjudged jointly and severally liable w ith the Overseas Bank for the P350K time deposit made w ith the latter bank; and declaring all assets assigned/mortgaged by the Overseas Bank and the Ramos groups in favor of the Central Bank as trust funds for his benefit and other depositors. SC: The claims in reality are recovery of time deposits plus interest from Overseas Bank, and recovery of damages against the Central Bank for its alleged failure to strictly supervise the acts of the other bank and protect the interests of its depositors by virtue of the constructive trust created w hen it required Overseas Bank to increase its collaterals for its overdrafts said emergency loans, said collaterals allegedly acquired through the use of depositors money. Should be ventilated in the CFI. o Claims of this nature are not proper in actions for mandamus and prohibition as there is no show n clear abuse of discretion by the Central Bank in its exercise of supervision over Overseas Bank, and if there w as, Serrano is NOT the proper party to raise that question, but rather the Overseas Bank. o Neither is there anything to prohibit in this case, since the questioned acts of the Central Bank, w hich Serrano here intends to use as his basis for o

C RE claims of damages against the Central Bank, had been accomplished a long time ago. Both parties overlooked 1 fundamental principle in the nature of bank deposits w hen Serrano claimed that there should be created a constructive trust in his favor w hen Overseas Bank increased its collaterals in favor of the Central Bank for the former's overdrafts and emergency loans, since these collaterals w ere acquired by the use of depositors' money. o Bank deposits are in the nature of irregular deposits. Really LOANS because they earn interest. o All kinds of bank deposits, w hether fixed, savings, or current are to be treated as loans and are to be covered by the law on loans. o Current and savings deposit are loans to a bank because it can use the same. o Serrano, in making time deposits that earn interests w ith Overseas Bank was in reality a creditor of the bank and not a depositor. The bank w as in turn a debtor of petitioner. Failure of the bank to honor the time deposit is failure to pay his obligation as a debtor and NOT a breach of trust arising from depositary's failure to return the subject matter of the deposit. BPI v. IAC (1988, Cortes) BPI absorbed COMTRUST through a corporate merger. Rizaldy Zshornack filed in the CFI Rizal a complaint against COMTRUST (4 COA). Except for 3rd COA, CFI ruled in his favor. IAC absolved the bank from liability on the 4 th COA. o Ordered COMTRUST to restore to the dollar savings account of Zshornack $1K as of Oct. 27, 1975 to earn interest together w ith the remaining balance of said account. o Ordered COMTRUST to return to Zshornack $3K upon finality of this decision, without interest Said amount w as merely held in custody for safekeeping, but w as not actually deposited because being cash currency, it cannot by law be deposited w ith his dollar account. Zshornack and his w ife Shirley Gorospe maintained a dollar savings account and a peso current account in COMTRUST. [1 ST COA] An application for a dollar draft w as accomplished by Virgilio Garcia (Asst. Branch Manager) payable to Leovigilda Dizon, amounting to $1K. The amount was to be charged to Dollar Savings Account 25-4109 (savings account of Zshornacks); the charges for commission, documentary stamp tax etc. totaling P17.46 w ere to be charged to Current Account 210-46529 (current account of Zshornacks). No indication of name of purchaser of dollar draft.

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COMTRUST issued a check payable to the order of Dizon ($1K) draw n on the Chase Manhattan Bank, NY, w ith an indication that it was to be charged to 25-4109. o When Zshornack noticed the w ithdraw al of $1K, he demanded an explanation from the bank. COMTRUST claimed that the peso value of the withdraw al w as given to Atty. Ernesto Zshornack Jr., Rizaldys brother, when the former encashed with COMTRUST a cashiers check for P8450 issued by Manila Banking Corp. payable to Ernesto. SC: COMTRUST must be held liable for the unauthorized withdraw al of $1K. o COMTRUST: (1) The peso value of the amount w ithdraw n w as given to Atty. Zshornack when he encashed the Manilabank Cashiers check. At the same time, it claims that (2) the withdraw al w as made pursuant to an agreement w here Rizaldy allegedly authorized it to withdraw from his dollar savings account such amount w hich, w hen converted to pesos, would be needed to fund his peso current account. SC: If the peso equivalent w as credited to the peso current account, w hy did it still have to pay Atty. Zshornack? Re: (1) COMTRUST has not show n how the transaction involving the cashiers check is related to the transaction involving the dollar draft in favor of Dizon financed by the w ithdrawal from Rizaldys dollar account. Moreover, Atty. Zshornack Rizaldy. Re: (2) Evidence does not show that the w ithdraw al was made pursuant to it. ND COA - based on an actionable document] Zshornack entrusted to [2 COMTRUST (thru Garcia) $3K (greenbacks) for safekeeping, acknow ledged in a document. Despite demands, the bank refused to return the money. o COMTRUST averred that the amount w as credited to Zshornacks peso current account at prevailing conversion rates. o When Zshornack requested the return of the money, COMTRUST explained that the sum w as disposed of in this manner: $2K:$1K was sold and the peso proceeds (P14,920:P8,250) w ere deposited to his current account; both transactions being accompanied by deposit slips accomplished by Garcia. o BPI: Now posits that the contract embodied in the document is one of depositum (Art. 1962) w hich banks do not enter into Garcia exceeded his pow ers w hen he entered into the transaction, hence the bank cannot be liable under the contract. SC: It w as incumbent upon the bank to specifically deny under oath the due execution of the document (1) to question Garcias authority to bind the corp. and (2) to deny its capacity to enter into such contract. Failed to do so, hence it w as deemed to have admitted not only Garcias authority but also the banks pow er to enter into the contract in question. o The practical effect of absolving a corporation from liability every time an officer enters into a contract w hich is beyond corporate pow ers is to cast o

C RE corporations in so perfect a mold that transgressions and w rongs by such artificial beings become impossible. DOCUMENT AND SUBSEQUENT ACTS: The intent of the parties was for the bank to safely keep the dollars and to return it to Zshornack at a later time. Zshornack demanded the return of the money. The arrangement is that of a DEPOSIT (Art. 1962). The object of the contract w as foreign exchange. Covered by CB Circular 20 (Restrictions on Gold and Forex Transactions) Sec. 4(a): All receipts of foreign exchange shall be sold daily to the CB * * * All receipts of foreign exchange * * * shall be sold to the authorized agents of the CB by the recipients w ithin 1 business day following the receipt of such foreign exchange. * * * Modified by Sec. 6 of CB Circular 281 by limiting its coverage to Phil. Residents only. HERE: The parties did not intend to sell the US dollars to the CB w ithin one business day from receipt. Otherw ise, the contract of depositum w ould never have been entered into at all. Since the mere safekeeping of greenbacks w ithout selling them to the CB within 1 business day from receipt is a transaction NOT authorized by CB Circular 20 Must be one w hich falls under the general class of prohibited transactions. = VOID. Parties are IN PARI DELICTO. Sia v. CA (1993, Davide) Sia filed an action for damages arising out of the destruction or loss of his stamp collection contained in Safety Deposit Box No. 54 rented from Security Bank (SBTC) pursuant to a contract (Lease Agreement). TC ruled in favor of Sia. The deposit box w as at the bottom/low est level of SBTCs deposit boxes at its Binondo branch. During the floods of 1985-86, floodw ater entered into SBTCs premises, seeped into the deposit box leased by Sia and caused damage to his stamp collection. SBTC rejected Sias claim for compensation, so he filed an action for damages. SBTC: Denied liability based on the Rules governing the lease of deposit boxes:
Par. 9. Liability of the Bank, by reason of the lease, is limited to the exercise of diligence to prevent the opening of the safe by any person other than the renter, his authorized agent or legal rep. Par. 13. The Bank is NOT a depositary of the contents of the safe and it has neither the possession nor the control of the same. The Bank has no interest whatsoever in said contents, except as herein provided, and it assumes absolutely no liability in connection therewith.

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The destruction was due to a calamity beyond its control; there w as no obligation on its part to notify Sia about floodw aters that inundated its premises. TC ordered an ocular inspection. The 2 albums are w et, moldy and badly damaged. CA: Reversed the TC. o The fine print in the Lease Agreement constitutes the terms and conditions of the lease contract w hich Sia had voluntarily and know ingly executed with SBTC. o The contract entered into by the parties w as not a contract of deposit where the bank became a depositary of the stamp collection. o The state provisions limiting SBTCs liability are valid since they are not contrary to LMGcPoPp. o No concrete evidence to show that SBTC failed to exercise the required diligence in maintaining the deposit box; said floods w ere fortuitous event which SBTC should not be held liable for since it w as not show n to have participated in the aggravation of the damage It even offered to secure the assistance of an expert to save most of the stamps, but Sia refused. Sia: The TC ruled correctly that SBTC failed to exercise the required diligence expected of a bank SBTC knew that the premises w ere inundated, and considering that the bank is guarded 24/7, it can be presumed that it w as aw are of the inundation of the premises w here the deposit box w as located, and despite such know ledge, it never bothered to inform Sia of the flooding or take appropriate measures to insure the safety and maintenance of the deposit box in question. SBTC: The lease agreement is just a contract of lease and not a deposit. SC: Petition is impressed w ith merit. o CA Agro-Industrial v. CA: SC rejected the contention that a contract for the use of a safety deposit box is a contract of lease. It did not fully subscribe to the view that it is a contract of deposit. Special kind of deposit. Prevailing rule in AmJur: Relation betw een a bank and the customer w ith respect to the contents of box Bailor and bailee, the bailment being for hire and mutual benefit. o HERE: The conditions imposed in the lease agreement are similar to that in the agreement in the cited case. In all other situations, it w ould seem that SBTC is not bound to exercise diligence of any kind at all. o HENCE, both conditions 9 and 13 of the Lease Agreement must be stricken dow n for being contrary to law and public policy as they are meant to exempt SBTC from any liability for damage, loss or destruction of the contents of the safety deposit box w hich may arise from its ow n or its agents fraud, negligence or delay. o

The contract w as one of lease and NOT deposit.

C RE o Re: Fortuitous event argument SBTC w as guilty of negligence. Such negligence aggravated the injury or damage to Sia w hich resulted from the loss/destruction of the stamp collection. SBTC should have notified Sia in order that the box be opened to retrieve the stamps. It failed to exercise the reasonable care and prudence expected of a FDD 4 TH characteristic of fortuitous event (obligor must be free from any participation in the aggravation of the injury) is absent and Art. 1170 comes to the succor of Sia. The destruction of the product of 27 years of patience and diligence caused Sia pecuniary loss; he must be compensated therefor. CA Agro-Industrial Devt Corp. v. CA (1993, Davide) Agro (thru Aguirre) and Spouses Pugao Agreement where the former purchased from the latter 2 parcels of land (P350,625 = P75,725 as DP, the balance covered by 3 postdated checks). Memorandum of True and Actual Agreement of Sale of Land: Titles to the lots shall be transferred to Agro upon full payment of the price and the ow ners copies of TCTs shall be deposited in a safety deposit box of any bank (the same could be w ithdraw n only upon joint signatures of a rep of Agro and the Pugaos upon full payment). The parties rented Safety Deposit Box No. 1448 of SBTC Contract of lease:
Par. 13. The bank is not a depositary of the content of the safe and it has neither the possession nor control of the same. Par. 14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it assumes no liability in connection therewith.

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SBTC: Agro has no COA because of Pars. 13 and 14; corollarily, loss of any of the items contained in the box could not give rise to an action against it. RTC: Ruled in favor of SBTC. The provisions of the contract of lease are binding on the parties. CA: Affirmed; the contract w as one of lease by virtue of which Agro and its co-renter w ere given control over the deposit box and its contents w hile SBTC retained no right to open it because it had neither the possession nor control over it and its contents (Art. 1643). o Invoked Tolentino v. Gonzales (Ow ner of the property loses his control over the property leased during the period of the contract) and Art. 1975. SBTC is not under any duty to maintain the contents of the box. o Under the contract of lease, SBTC is not completely free from liability as it may still be made answ erable in case unauthorized persons enter into the vault area or when the deposit box is forced open. o
Par. 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.

Agro: Regardless of nomenclature, the contract for the rent of the safety deposit box is actually a contract of deposit governed by Title XII, Book IV of the Civil Code SBTC is liable for the loss of the certificates of title pursuant to Art. 1972.
o AmJur: 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 bailor is created between the parties to the transaction as to such securities or other valuables; * * * The argument that there is no delivery of exclusive possession and control to the deposit company, and 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 * * * Words and Phrases: 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.

2 renters keys w ere given (1 to Agro, 1 to the Pugaos). A guard key remained w ith the SBTC. The deposit box has 2 keyholes - 1 for renters key and 1 for the guard key - and can be opened only with the use of BOTH keys. Mrs. Ramos offered to buy from Agro the 2 lots at P225/sqm (translating to a profit of P100/sqm or P280.5K for the entire property). She demanded the execution of a deed of sale w hich necessarily entailed the production of the TCTs. o Aguirre and the Pugaos proceeded to SBTC to open the deposit box. When opened in the presence of SBTCs rep, the box yielded no such certificates. o Because of delay in reconstitution of the title, Mrs. Ramos w ithdrew her earlier offer to purchase the lots Agro allegedly failed to realize the expected profit. It filed a complaint for damages against SBTC with CFI Pasig.

Conditions 13 and 14 are contrary to law and public policy and should be declared null and void. SC: The contract for the rent of the deposit box is NOT an ordinary contract of lease (Art. 1643). BUT, it does not fully subscribe to the view that the same is a contract of deposit that is to be strictly governed by the provisions in the Civil Code on deposit The contract here is a special kind of deposit. o NOT an ordinary contract of lease because the full and absolute possession and control of the deposit box was NOT given to the joint renters. The guard key of the box remained w ith SBTC, and w ithout this key, neither of the renters could open the box. SBTC could not likew ise open the box w ithout the renter's key. o Neither could Art. 1975 be invoked as an argument against the deposit theory. The 1 ST Par. cannot apply to a depositary of certificates, bonds, o

C RE securities or instruments w hich earn interest if such documents are kept in a rented safety deposit box. It is clear that the depositary cannot open the box w ithout the renter being present. AmJur: Prevailing rule is that the relation betw een a bank renting out safedeposit 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. In this jurisdiction, the prevailing rule in the US has been adopted. o Sec. 72, Gen. Banking 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. * * * The banks shall perform the services permitted under subsections (a), (b) and (c) of this section as depositories or as agents * * * o The primary function is still found within the parameters of a contract of deposit (the receiving in custody of funds, documents and other valuable objects for safekeeping). o The renting out of the safety deposit boxes is not independent from, but related to or in conjunction with, this principal function. o A contract of deposit may be entered into orally or in w riting and, pursuant to Art. 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 LMGcPoPp. o 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. It w ould be liable if, in performing its obligation, it is found guilty of fraud, negligence, delay or contravention of the tenor of the agreement. o In the absence of any stipulation prescribing the degree of diligence required, that of a GFF. o HENCE, any stipulation exempting the depositary from any liability arising from the loss of the thing deposited on account of fraud, negligence or delay w ould be VOID for being contrary to law and public policy. o HERE: The provisions cited are inconsistent w ith SBTCs responsibility as a depositary under Sec. 72(a) of the Gen. Banking Act. Both exempt the latter from any liability except as contemplated in Par. 8 thereof w hich limits its duty to exercise reasonable diligence only w ith respect to w ho shall be admitted to any rented safe. Par. 13 stands on a wrong premise and is contrary to the actual practice of SBTC Not correct to assert that SBTC has neither the possession nor control of the contents of the box since in fact, the deposit box itself is located in its premises and is under its absolute control; moreover, SBTC keeps the guard key to the said box.

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Renters cannot open their respective boxes unless SBTC cooperates by presenting and using this guard key. o With respect to property deposited in a deposit box, 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. * * * The company, in renting safe-deposit boxes, cannot exempt itself from liability for loss of the contents by its ow n 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 w ill be held ineffective for the purpose. * * * The petition should be dismissed, but on grounds quite different from those relied upon by the CA. o SBTCS exoneration is correctly based on the fact that no competent proof w as presented to show that SBTC was aw are of the agreement betw een Agro and the Pugaos to the effect that the certificates of title were w ithdraw able from the safety deposit box only upon both parties' joint signatures, and that no evidence w as submitted to reveal that the loss of the certificates of title was due to the fraud or negligence of SBTC. This flows from the Court's determination that the contract involved w as one of deposit. Since both the petitioner and the Pugaos agreed that each should have 1 renter's key, it w as obvious that either of them could ask the Bank for access to the safety deposit box and, w ith the use of such key and the Bank's ow n guard key, could open the said box, w ithout the other renter being present. YHT Realty v. CA (2005, Tinga)

McLoughlin used to stay at Sheraton Hotel during his trips prior to 1984, w hen he met Tan. The latter befriended McLoughlin by show ing him around, introducing him to important people and accompanying him in his charitable w ork. Tan convinced him to transfer from Sheraton to Tropicana w here Lopez (manager), Lainez and Payam (custodians of keys to the deposit boxes) w ere employed. McLoughlin started staying in Tropicana from Dec. 1984 Sept. 1987. Procedure in renting a safety deposit box The box can only be opened through use of 2 keys (1 given to the guest and the other remained w ith management); the guest alone could personally request the management w ho w ould assign 1 of its employees to accompany the guest and assist him in opening the deposit box. Oct. 1987: Rented a deposit box and placed US$15K (2 envelopes: 1 ST - 10K; 2 ND - 5K); AUS$10K; letters and credit cards, 2 bankbooks and a checkbook. o Before leaving for a brief trip to HK, he took the 2ND envelope, the envelope containing the AUS$, his passports and credit cards. In HK,

C RE he discovered that only $3K (out of $5K) w as in the envelope. He thought it w as just bad accounting. o After checking out of Tropicana, he discovered that only $5K (out of $10K) w as left in the other envelope. He also noticed that the jew elry he bought in HK and stored in the deposit box was likew ise missing, except for a diamond bracelet/ Apr. 1988: Upon inquiry, Lainez told him that no one found such things and none w ere turned over to management. He again rented a deposit box US$15K; AUS$10K; other envelopes containing his travel documents. o McLoughlin requested Lainez and Payam to open the box US$2K and AUS$4K w ere missing. o He confronted the 2, w ho admitted that Tan opened the deposit box w ith the key assigned to him. o Tan admitted that she stole McLoughlins key w hile the latter was asleep and w as able to open the deposit box w ith the assistance of Lopez, Payam and Lainez. When the police did not arrive for investigation, Lopez and Tan w ent to McLoughlins room and Lopez wrote a promissory note to repay the amounts (or its peso equivalent) lost in the second occasion. Both Lopez and Tan signed, w ith the former as a w itness. o McLoughlin insisted that it is Tropicana w ho must assume responsibility for the loss. Lopez refused to accept the responsibility based on the Undertaking for the Use of the Deposit Box:
Par. 2. To release and hold free and blameless TROPICANA APARTMENT HOTEL from any liability arising from any loss in the contents and/or use of the said deposit box for any cause whatsoever, including but not limited to the presentation or use thereof by any other person should the key be lost; Par. 4. To return the key and execute the RELEASE in favor of TROPICANA APARTMENT HOTEL upon giving up the use of the box.

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May 1988: McLoughlins law yers w rote a letter signed by the former and sent to Pres. Aquino referred the letter to the DOJ, w hich forw arded the same to the WPD. o He came back to the Phils. to follow up on his letter to the Pres. but failed to obtain any concrete assistance. Aug. 1989: WPD prepared an affidavit w hich became the basis of PI. However, McLoughlin left again for Australia w ithout receiving notice of the hearing case at the Fiscals office w as dismissed for failure to prosecute. o McLoughlin requested the reinstatement of the criminal charge for theft. Oct. 1990: He registered at the Echelon Tow ers Filed a complaint for damages against YHT, Lopez, Lainez, Payam and Tan. o Summons w ere not served to Tan and Lopez; trial proceeded with only Lainez, Payam and YHT as defendants.

McLoughlin filed an Amended Complaint w hich included another incident of loss of money and jew elry w hich took place prior to Apr. 1988. RTC: Ruled in favor of McLoughlin. o It w as established that his money w as taken by Tan w ithout his consent; and Payam and Lainez allow ed Tan to use the master key w ithout authority from McLoughlin. o Re: First occasion of theft Considering the admission of defendants that on 3 previous occasions they allow ed Tan to open the box, it w as logical to presume that McLoughlins money ($7K) and jew elry w ere taken by Tan w ithout his consent through the cooperation of Payam and Lainez. o Defendants acted with gross negligence in the performance and exercise of their duties and obligations as innkeepers, therefore they w ere liable to answ er for McLoughlins losses. o Pars. 2 and 4 of the Undertaking w ere not valid for being contrary to the express mandate of Art. 2003 and against public policy. CA affirmed (except as to amount of damages). SC: Petition devoid of merit. Re: Negligence The guest alone cannot open the deposit box w ithout the assistance of management or its employees, w ith more reason that access to the same be denied if the one requesting for the opening of the box is a stranger. Thus, in case of loss, it is inevitable to conclude that management had at least a hand in the consummation of the taking, unless there was force majeure. o Payam and Lainez had custody of the master key; they even admitted that they assisted Tan on 3 separate occasions in opening McLoughlins box Tropicana had prior knowledge that a person aside from the guest had access to the deposit box, yet it failed to notify McLoughlin of the incident. o Without the acquiescence of the employees of Tropicana to the opening of the box, the loss of the money could and should have been avoided. o YHT: McLoughlins acts made the employees believe that Tan w as his spouse NO evidence to show that Tan w as introduced as his w ife. If YHT exercised due diligence in taking care of McLoughlins box, they should have confronted him as to his relationship w ith Tan considering that the latter had been observed opening his box a number of times at the early hours of the morning. Tans acts should have prompted management to investigate her relationship with McLoughlin Failure to do so w arrants the conclusion that management had been remiss in complying w ith the obligations imposed upon hotel-keepers under the law . o Art. 1170: Those w ho, in the performance of their obligations, are guilty of negligence, are liable for damages. o

C RE Art. 2180.4: Ow ners and managers of an establishment or enterprise are likew ise responsible for damages caused by their employees in the service of the branches in w hich the latter are employed or on the occasion of their functions. The loss of McLoughlin's money w as consummated through the negligence of Tropicana's employees in allow ing Tan to open the safety deposit box w ithout the guest's consent Both employees and YHT, as ow ner and operator of Tropicana, should be held solidarily liable pursuant to Art. 2193. Re: Provisions of the Undertaking NULL AND VOID. (See Art. 2003) o Art. 2003 w as incorporated in the Code as an expression of public policy precisely to apply to situations such as that presented in this case. o The hotel business like the common carrier's business is imbued with public interest. o Catering to the public, hotelkeepers are bound to provide not only lodging for hotel guests and security to their persons and belongings. o The law in turn does not allow such duty to the public to be negated or diluted by any contrary stipulation in so-called "undertakings" that ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature. o De los Santos v. Tan Khey: To hold hotelkeepers or innkeeper liable for the effects of their guests, it is not necessary that they be actually delivered to the innkeepers or their employees. It is enough that such effects are within the hotel or inn. o Pars. 2 and 4 manifestly contravene Art. 2003 for they allow Tropicana to be released from liability arising from any loss in the contents and/or use of the safety deposit box for any cause w hatsoever. The Code is explicit that the responsibility of the hotel-keeper shall extend to loss of, or injury to, the personal property of the guests even if caused by servants or employees of the keepers of hotels or inns as w ell as by strangers, except as it may proceed from any force majeure. HERE: There is no show ing that the act of the thief or robber w as done w ith the use of arms or through an irresistible force to qualify the same as force majeure. o YHT: Invokes Art. 2002. SC: Such justification w ould render nugatory the public interest sought to be protected by the provision. This provision presupposes that the hotel-keeper is not guilty of concurrent negligence or has not contributed in any degree to the occurrence of the loss. A depositary is not responsible for the loss of goods by theft, unless his actionable negligence contributes to the loss. HERE: The responsibility of securing the safety deposit box w as shared not only by the guest himself but also by the management o

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since 2 keys are necessary to open the deposit box. Without the assistance of hotel employees, the loss w ould not have occurred. THUS, Tropicana w as guilty of concurrent negligence in allowing Tan, w ho w as not the registered guest, to open McLoughlins deposit box, even assuming that the latter w as also guilty of negligence in allow ing another person to use his key. To rule otherw ise w ould result in undermining the safety of deposit boxes in hotels for the management will be given imprimatur to allow any person, under the pretense of being a family member or a visitor of the guest, to have access to the safety deposit box w ithout fear of any liability that w ill attach thereafter in case such person turns out to be a complete stranger. This w ill allow the hotel to evade responsibility for any liability incurred by its employees in conspiracy w ith the guest's relatives and visitors.