G.R. No.

142591 April 30, 2003

JOSEPH CHAN, WILSON CHAN and LILY CHAN, petitioners,

vs.
BONIFACIO S. MACEDA, JR., * respondent.

SANDOVAL-GUTIERREZ, J.:

A judgment of default does not automatically imply admission by the defendant of the facts and causes of action of
the plaintiff. The Rules of Court require the latter to adduce evidence in support of his allegations as an
indispensable condition before final judgment could be given in his favor. 1 The trial judge has to evaluate the
allegations with the highest degree of objectivity and certainty. He may sustain an allegation for which the plaintiff
has adduced sufficient evidence, otherwise, he has to reject it. In the case at bar, judicial review is imperative to
avert the award of damages that is unreasonable and without evidentiary support.

Assailed in this petition for review under Rule 45 of the 1997 Rules of Civil Procedure, as amended, is the
Decision2 dated June 17, 1999 of the Court of Appeals in CA-G.R. CV No. 57323, entitled "Bonifacio S. Maceda,
Jr. versus Joseph Chan, et al.," affirming in toto the Decision3 dated December 26, 1996 of the Regional Trial
Court, Branch 160, Pasig City, in Civil Case No. 53044.

The essential antecedents are as follows:

On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained a P7.3 million loan from the Development
Bank of the Philippines for the construction of his New Gran Hotel Project in Tacloban City.

Thereafter, on September 29, 1976, respondent entered into a building construction contract with Moreman
Builders Co., Inc., (Moreman). They agreed that the construction would be finished not later than December 22,
1977.

Respondent purchased various construction materials and equipment in Manila. Moreman, in turn, deposited
them in the warehouse of Wilson and Lily Chan, herein petitioners. The deposit was free of charge.

Unfortunately, Moreman failed to finish the construction of the hotel at the stipulated time. Hence, on February 1,
1978, respondent filed with the then Court of First Instance (CFI, now Regional Trial Court), Branch 39, Manila, an
action for rescission and damages against Moreman, docketed as Civil Case No. 113498.

On November 28, 1978, the CFI rendered its Decision4 rescinding the contract between Moreman and respondent
and awarding to the latter P445,000.00 as actual, moral and liquidated damages; P20,000.00 representing the
increase in the construction materials; and P35,000.00 as attorney's fees. Moreman interposed an appeal to the
Court of Appeals but the same was dismissed on March 7, 1989 for being dilatory. He elevated the case to this
Court via a petition for review on certiorari. In a Decision 5 dated February 21, 1990, we denied the petition. On
April 23, 1990,6 an Entry of Judgment was issued.

Meanwhile, during the pendency of the case, respondent ordered petitioners to return to him the construction
materials and equipment which Moreman deposited in their warehouse. Petitioners, however, told them that
Moreman withdrew those construction materials in 1977.

Hence, on December 11, 1985, respondent filed with the Regional Trial Court, Branch 160, Pasig City, an action
for damages with an application for a writ of preliminary attachment against petitioners, 7 docketed as Civil Case
No. 53044.

In the meantime, on October 30, 1986, respondent was appointed Judge of the Regional Trial Court, Branch 12,
San Jose Antique.8
1
On August 25, 1989, or after almost four (4) years, the trial court dismissed respondent's complaint for his failure
to prosecute and for lack of interest."9 On September 6, 1994, or five years thereafter, respondent filed a motion
for reconsideration, but the same was denied in the Order dated September 9, 1994 because of the failure of
respondent and his counsel to appear on the scheduled hearing. 10

On October 14, 1994, respondent filed a second motion for reconsideration. This time, the motion was granted
and the case was ordered reinstated on January 10, 1995, or ten (10) years from the time the action was originally
filed.11 Thereafter, summons, together with the copies of the complaint and its annexes, were served on
petitioners.

On March 2, 1995, counsel for petitioners filed a motion to dismiss on several grounds. 12 Respondent, on the
other hand, moved to declare petitioners in default on the ground that their motion to dismiss was filed out of time
and that it did not contain any notice of hearing.13

On April 27, 1995, the trial court issued an order declaring petitioners in default. 14

Petitioners filed with the Court of Appeals a petition for certiorari15 to annul the trial court's order of default, but the
same was dismissed in its Order16 dated August 31, 1995. The case reached this Court, and in a Resolution dated
October 25, 1995,17 we affirmed the assailed order of the Court of Appeals. On November 29, 1995,18 the
corresponding Entry of Judgment was issued.

Thus, upon the return of the records to the RTC, Branch 160, Pasig City, respondent was allowed to present his
evidence ex-parte.

Upon motion of respondent, which was granted by the trial court in its Order dated April 29, 1996, 19 the
depositions of his witnesses, namely, Leonardo Conge, Alfredo Maceda and Engr. Damiano Nadera were taken in
the Metropolitan Trial Court in Cities, Branch 2, Tacloban City. 20 Deponent Leonardo Conge, a labor contractor,
testified that on December 14 up to December 24, 1977, he was contracted by petitioner Lily Chan to get bags of
cement from the New Gran Hotel construction site and to store the same into the latter's warehouse in Tacloban
City. Aside from those bags of cement, deponent also hauled about 400 bundles of steel bars from the same
construction site, upon order of petitioners. Corresponding delivery receipts were presented and marked as
Exhibits "A", "A-1", "A-2", "A-3" and "A-4".21

Deponent Alfredo Maceda testified that he was respondent's Disbursement and Payroll Officer who supervised
the construction and kept inventory of the properties of the New Gran Hotel. While conducting the inventory on
November 23, 1977, he found that the approximate total value of the materials stored in petitioners' warehouse
was P214,310.00. This amount was accordingly reflected in the certification signed by Mario Ramos, store clerk
and representative of Moreman who was present during the inventory. 22

Deponent Damiano Nadera testified on the current cost of the architectural and structural requirements needed to
complete the construction of the New Gran Hotel.23

On December 26, 1996, the trial court rendered a decision in favor of respondent, thus:

"WHEREFORE, foregoing considered, judgment is hereby rendered ordering defendants to jointly and severally
pay plaintiff:

1) P1,930,000.00 as actual damages;

2) P2,549,000.00 as actual damages;

3) Moral damages of P150,000.00; exemplary damages of P50,000.00 and attorney's fees of P50,000.00 and to
pay the costs.
2
"SO ORDERED."

The trial court ratiocinated as follows:

"The inventory of other materials, aside from the steel bars and cement is found highly reliable based on first, the
affidavit of Arthur Edralin dated September 15, 1979, personnel officer of Moreman Builders that he was assigned
with others to guard the warehouse; (Exhs. "M" & "O"); secondly, the inventory (Exh. "C") dated November 23,
1977 shows (sic) deposit of assorted materials; thirdly, that there were items in the warehouse as of February 3,
1978 as shown in the balance sheet of Moreman's stock clerk Jose Cedilla.

"Plaintiff is entitled to payment of damages for the overhauling of materials from the construction site by Lily Chan
without the knowledge and consent of its owner. Article 20 of the Civil Code provides:

'Art. 20. Every person who contrary to law, willfully or negligently caused damage to another, shall indemnify the
latter for the same.'

"As to the materials stored inside the bodega of defendant Wilson Chan, the inventory (Exh. "C") show (sic), that
the same were owned by the New Gran Hotel. Said materials were stored by Moreman Builders Co., Inc. since it
was attested to by the warehouseman as without any lien or encumbrances, the defendants are duty bound to
release it. Article 21 of the Civil Code provides:

'Art. 21. Any person who willfully caused loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.'

"Plaintiff is entitled to payment of actual damages based on the inventory as of November 23, 1977 amounting to
P1,930,080.00 (Exhs. "Q" & "Q-1"). The inventory was signed by the agent Moreman Builders Corporation and
defendants.

"Plaintiff is likewise entitled to payment of 12,500 bags of cement and 400 bundles of steel bars totaling
P2,549,000.00 (Exhs. "S" & "S-1"; Exhs. "B" & "B-3").

"Defendants should pay plaintiff moral damages of P150,000.00; exemplary damages of P50,000.00 and
attorney's fees of P50,000.00 and to pay the costs.

"The claim of defendant for payment of damages with respect to the materials appearing in the balance sheets as
of February 3, 1978 in the amount of P3,286,690.00, not having been established with enough preponderance of
evidence cannot be given weight."24

Petitioners then elevated the case to the Court of Appeals, docketed as CA-G.R. CV No. 57323. On June 17, 1999,
the Appellate Court rendered the assailed Decision25 affirming in toto the trial court's judgment, ratiocinating as
follows:

"Moreover, although the prayer in the complaint did not specify the amount of damages sought, the same was
satisfactorily proved during the trial. For damages to be awarded, it is essential that the claimant satisfactorily
prove during the trial the existence of the factual basis thereof and its causal connection with the adverse party's
act (PAL, Inc. vs. NLRC, 259 SCRA 459). In sustaining appellee's claim for damages, the court a quo held as
follows:

'The Court finds the contention of plaintiff that materials and equipment of plaintiff were stored in the warehouse of
defendants and admitted by defendants in the certification issued to Sheriff Borja. x x x

'Evidence further revealed that assorted materials owned by the New Gran Hotel (Exh. "C") were deposited in the
bodega of defendant Wilson Chan with a total market value of P1,930,000.00, current price.
3
'The inventory of other materials, aside from the steel bars and cement, is highly reliable based on first, the
affidavit of Arthur Edralin dated September 15, 1979, personnel officer of Moreman Builders; that he was assigned,
with others to guard the warehouse (Exhs. M & O); secondly, the inventory (Exh. C) November 23, 1977 shows
deposit of assorted materials; thirdly, that there were items in the warehouse as of February 3, 1978, as shown in
the balance sheet of Moreman's stock clerk, Jose Cedilla (pp. 60–61, Rollo).'

"The Court affirms the above findings.

"Well settled is the rule that 'absent any proper reason to depart from the rule, factual conclusions reached by the
trial court are not to be disturbed (People vs. Dupali, 230 SCRA 62).' Hence, in the absence of any showing that
serious and substantial errors were committed by the lower court in the appraisal of the evidence, the trial judge's
assessment of the credibility of the witnesses is accorded great weight and respect (People vs. Jain, 254 SCRA
686). And, there being absolutely nothing on record to show that the court a quo overlooked, disregarded, or
misinterpreted facts of weight and significance, its factual findings and conclusions must be given great weight and
should not be disturbed on appeal.

"WHEREFORE, being in accord with law and evidence, the appealed decision is hereby AFFIRMED in toto."

Hence, this petition for review on certiorari anchored on the following grounds:

"I

The Court of Appeals acted with grave abuse of discretion and under a misapprehension of the law and the facts
when it affirmed in toto the award of actual damages made by the trial court in favor of respondent in this case.

II

The awards of moral and exemplary damages of the trial court to respondent in this case and affirmed in toto by
the Court of Appeals are unwarranted by the evidence presented by respondent at the ex parte hearing of this
case and should, therefore, be eliminated or at least reduced.

III

The award of attorney's fees by the trial court to respondent in this case and affirmed by the Court of Appeals
should be deleted because of the failure of the trial court to state the legal and factual basis of such award."

Petitioners contend inter alia that the actual damages claimed by respondent in the present case were already
awarded to him in Civil Case No. 11349826 and hence, cannot be recovered by him again. Even assuming that
respondent is entitled to damages, he can not recover P4,479,000.00 which is eleven (11) times more than the
total actual damages of P365,000.00 awarded to him in Civil Case No. 113498. 27

In his comment on the petition, respondent maintains 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, 28 1979,29 1983,30 and
198831 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.32 Respondent 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." Lastly, respondent insists that there can be no double recovery because in Civil Case No.
113498,33 the parties were respondent himself and Moreman and the cause of action was the rescission of their
building contract. In the present case, however, the parties are respondent and petitioners and the cause of action

4
between them is for recovery of damages arising from petitioners' failure to return the construction materials and
equipment.

Obviously, petitioners' assigned errors call for a review of the lower court's findings of fact.

Succinct is the rule that this Court is not a trier of facts and does not normally undertake the re-examination of the
evidence submitted by the contending parties during the trial of the case considering that findings of fact of the
Court of Appeals are generally binding and conclusive on this Court.34 The jurisdiction of this Court in a petition for
review on certiorari is limited to reviewing only errors of law,35 not of fact, unless it is shown, inter alia, that: (1) the
conclusion is a finding grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken,
absurd and impossible; (3) there is grave abuse of discretion; (4) the judgment is based on misapprehension of
facts; (5) the findings of fact are conflicting; and (6) the Court of Appeals, in making its findings went beyond the
issues of the case and the same is contrary to the admission of both parties. 36

Petitioners submit that this case is an exception to the general rule since both the trial court and the Court of
Appeals based their judgments on misapprehension of facts.

We agree.

At the outset, the case should have been dismissed outright by the trial court because of patent procedural
infirmities. It bears stressing that the case was originally filed on December 11, 1985. Four (4) years thereafter, or
on August 25, 1989, the case was dismissed for respondent's failure to prosecute. Five (5) years after, or on
September 6, 1994, respondent filed his motion for reconsideration. From here, the trial court already erred in its
ruling because it should have dismissed the motion for reconsideration outright as it was filed far beyond the
fifteen-day reglementary period.37 Worse, when respondent filed his second motion for reconsideration on October
14, 1994, a prohibited pleading,38 the trial court still granted the same and reinstated the case on January 10, 1995.
This is a glaring gross procedural error committed by both the trial court and the Court of Appeals.

Even without such serious procedural flaw, the case should also be dismissed for utter lack of merit.

It must be stressed that respondent'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 same be turned over to him? (2) If so, does respondent
have the right to demand the release of the said materials and equipment or claim for damages?

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. 39 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.40

In the present case, the record is bereft of any 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 respondent to prove its existence
and that it was executed in his favor. However, respondent miserably failed to do so. The only pieces of evidence
respondent presented to prove the contract of deposit were the delivery receipts.41 Significantly, they are unsigned
and not duly received or authenticated by either Moreman, petitioners or respondent or any of their authorized
representatives. Hence, those delivery receipts have no probative value at all. While our laws grant a person the
remedial right to prosecute or institute a civil action against another for the enforcement or protection of a right, or
the prevention or redress of a wrong,42 every cause of action ex-contractu must be founded upon a contract, oral
or written, express or implied.

5
Moreover, respondent also failed to prove that there were construction materials and equipment in petitioners'
warehouse at the time he made a demand for their return.

Considering that respondent failed to prove (1) the existence of any contract of deposit between him and
petitioners, nor between the latter and Moreman in his favor, and (2) that there were construction materials in
petitioners' warehouse at the time of respondent's demand to return the same, we hold that petitioners have no
corresponding obligation or liability to respondent with respect to those construction materials.

Anent the issue of damages, petitioners are still not liable because, as expressly provided for in Article 2199 of the
Civil Code,43 actual or compensatory damages cannot be presumed, but must be proved with reasonable degree
of certainty. A court cannot rely on speculations, conjectures, or guesswork as to the fact and amount of damages,
but must depend upon competent proof that they have been suffered by the injured party and on the best
obtainable evidence of the actual amount thereof. It must point out specific facts which could afford a basis for
measuring whatever compensatory or actual damages are borne.44

Considering our findings that there was no contract of deposit between petitioners and respondent or Moreman
and that actually there were no more construction materials or equipment in petitioners' warehouse when
respondent made a demand for their return, we hold that he has no right whatsoever to claim for damages.

As we stressed in the beginning, a judgment of default does not automatically imply admission by the defendant of
plaintiff's causes of action. Here, the trial court merely adopted respondent's allegations in his complaint and
evidence without evaluating them with the highest degree of objectivity and certainty.

WHEREFORE, the petition is GRANTED. The challenged Decision of the Court of Appeals dated June 17, 1999 is
REVERSED and SET ASIDE. Costs against respondent.

SO ORDERED.

6
G.R. No. 160544 February 21, 2005

TRIPLE-V vs. FILIPINO MERCHANTS

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated FEB 21 2005.

G.R. No. 160544 (Triple-V Food Services, Inc. vs. Filipino Merchants Insurance Company, Inc.)

Assailed in this petition for review on certiorari is the decision [1]cralaw dated October 21, 2003 of the Court of
Appeals in CA-G.R. CV No. 71223, affirming an earlier decision of the Regional Trial Court at Makati City, Branch

7
148, in its Civil Case No. 98-838, an action for damages thereat filed by respondent Filipino Merchants Insurance,
Company, Inc., against the herein petitioner, Triple-V Food Services, Inc.

On March 2, 1997, at around 2:15 o'clock in the afternoon, a certain Mary Jo-Anne De Asis (De Asis) dined at
petitioner's Kamayan Restaurant at 15 West Avenue, Quezon City. De Asis was using a Mitsubishi Galant Super
Saloon Model 1995 with plate number UBU 955, assigned to her by her employer Crispa Textile Inc. (Crispa). On
said date, De Asis availed of the valet parking service of petitioner and entrusted her car key to petitioner's valet
counter. A corresponding parking ticket was issued as receipt for the car. The car was then parked by petitioner's
valet attendant, a certain Madridano, at the designated parking area. 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. Thereafter, Crispa filed a claim against its insurer, herein
respondent Filipino Merchants Insurance Company, Inc. (FMICI). Having indemnified Crispa in the amount of
P669.500 for the loss of the subject vehicle, FMICI, as subrogee to Crispa's rights, filed with the RTC at Makati
City an action for damages against petitioner Triple-V Food Services, Inc., thereat docketed as Civil Case No.
98-838 which was raffled to Branch 148.

In its answer, petitioner 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.
Petitioner further argued that in accepting the complimentary valet parking service, De Asis received a parking
ticket whereunder it is so 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, to petitioner's mind, is 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.

During trial, petitioner challenged FMICI's subrogation to Crispa's right to file a claim for the loss of the car, arguing
that theft is not a risk insured against under FMICI's Insurance Policy No. PC-5975 for the subject vehicle.

In a decision dated June 22, 2001, the trial court rendered judgment for respondent FMICI, thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff (FMICI) and against the
defendant Triple V (herein petitioner) and the latter is hereby ordered to pay plaintiff the following:

1. The amount of P669,500.00, representing actual damages plus compounded (sic);

2. The amount of P30,000.00 as acceptance fee plus the amount equal to 25% of the total amount due as
attorney's fees;

3. The amount of P50,000.00 as exemplary damages;

4. Plus, cost of suit.

Defendant Triple V is not therefore precluded from taking appropriate action against defendant Armando
Madridano.

SO ORDERED.

Obviously displeased, petitioner appealed to the Court of Appeals reiterating its argument that it was not a
depositary of the subject 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.

8
In a decision dated October 21, 2003,[2]cralaw the Court of Appeals dismissed petitioner's appeal and affirmed the
appealed decision of the trial court, thus:

WHEREFORE, based on the foregoing premises, the instant appeal is hereby DISMISSED. Accordingly, the
assailed June 22, 2001 Decision of the RTC of Makati City - Branch 148 in Civil Case No. 98-838 is AFFIRMED.

SO ORDERED.

In so dismissing the appeal and affirming the appealed decision, the appellate court agreed with the findings and
conclusions of the trial court that: (a) petitioner was a depositary of the subject vehicle; (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.

Hence, petitioner's present recourse.

We agree with the two (2) courts below.

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 same car. Petitioner 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.[3]cralaw 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, 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.[4]cralaw

Hence, and as aptly pointed out by the Court of Appeals, petitioner must not be allowed to 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. Here, it is evident that De Asis deposited the car in question with the petitioner as part
of the latter's enticement for customers by providing them a safe parking space within the vicinity of its restaurant.
In a very real sense, a safe parking space is an added attraction to petitioner's restaurant business because
customers are thereby somehow assured that their vehicle 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 of
petitioner's customers, fully expects the security of her car while at petitioner's premises/designated parking areas
and its safe return at the end of her visit at petitioner's restaurant.

Petitioner's argument that there was no valid subrogation of rights between Crispa and FMICI because theft was
not a risk insured against under FMICI's Insurance Policy No. PC-5975 holds no water.

9
Insurance Policy No. PC-5975 which respondent FMICI issued to Crispa contains, among others things, the
following item: "Insured's Estimate of Value of Scheduled Vehicle- P800.000".[5]cralaw On the basis of such item,
the trial court concluded that the coverage includes a full comprehensive insurance of the vehicle in case of
damage or loss. Besides, Crispa paid a premium of P10,304 to cover theft. This is clearly shown in the breakdown
of premiums in the same policy.[6]cralaw Thus, having indemnified CRISPA for the stolen car, FMICI, as correctly
ruled by the trial court and the Court of Appeals, was properly subrogated to Crispa's rights against petitioner,
pursuant to Article 2207 of the New Civil Code[7].

Anent the trial court's findings of negligence on the part of the petitioner, which findings were affirmed by the
appellate court, we have consistently ruled that findings of facts of trial courts, more so when affirmed, as here, by
the Court of Appeals, are conclusive on this Court unless the trial court itself ignored, overlooked or misconstrued
facts and circumstances which, if considered, warrant a reversal of the outcome of the case.[8]cralaw This is not so
in the case at bar. For, we have ourselves reviewed the records and find no justification to deviate from the trial
court's findings.

WHEREFORE, petition is hereby DENIED DUE COURSE.

SO ORDERED.

10
G.R. No. L-6913 November 21, 1913

THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,

vs.
GREGORIO DE LA PEÑA, administrator of the estate of Father Agustin de la Peña, defendant-appellant.

J. Lopez Vito, for appellant.

Arroyo and Horrilleno, for appellee.

MORELAND, J.:

This is an appeal by the defendant from a judgment of the Court of First Instance of Iloilo, awarding to the plaintiff
the sum of P6,641, with interest at the legal rate from the beginning of the action.

It is established in this case that the plaintiff is the trustee of a charitable bequest made for the construction of a
leper hospital and that father Agustin de la Peña was the duly authorized representative of the plaintiff to receive
the legacy. The defendant is the administrator of the estate of Father De la Peña.

In the year 1898 the books Father De la Peña, as trustee, showed that he had on hand as such trustee the sum of
P6,641, collected by him for the charitable purposes aforesaid. In the same year he deposited in his personal
account P19,000 in the Hongkong and Shanghai Bank at Iloilo. Shortly thereafter and during the war of the
revolution, Father De la Peña was arrested by the military authorities as a political prisoner, and while thus
detained made an order on said bank in favor of the United States Army officer under whose charge he then was
for the sum thus deposited in said bank. The arrest of Father De la Peña and the confiscation of the funds in the
bank were the result of the claim of the military authorities that he was an insurgent and that the funds thus
deposited had been collected by him for revolutionary purposes. The money was taken from the bank by the
military authorities by virtue of such order, was confiscated and turned over to the Government.

While there is considerable dispute in the case over the question whether the P6,641 of trust funds was included
in the P19,000 deposited as aforesaid, nevertheless, a careful examination of the case leads us to the conclusion
that said trust funds were a part of the funds deposited and which were removed and confiscated by the military
authorities of the United States.

11
That branch of the law known in England and America as the law of trusts had no exact counterpart in the Roman
law and has none under the Spanish law. In this jurisdiction, therefore, Father De la Peña's liability is determined
by those portions of the Civil Code which relate to obligations. (Book 4, Title 1.)

Although the Civil Code states that "a person obliged to give something is also bound to preserve it with the
diligence pertaining to a good father of a family" (art. 1094), it also provides, following the principle of the Roman
law, major casus est, cui humana infirmitas resistere non potest, that "no one shall be liable for events which could
not be foreseen, or which having been foreseen were inevitable, with the exception of the cases expressly
mentioned in the law or those in which the obligation so declares." (Art. 1105.)

By placing the money in the bank and mixing it with his personal funds De la Peña did not thereby assume an
obligation different from that under which he would have lain if such deposit had not been made, nor did he
thereby make himself liable to repay the money at all hazards. If the had been forcibly taken from his pocket or
from his house by the military forces of one of the combatants during a state of war, it is clear that under the
provisions of the Civil Code he would have been exempt from responsibility. The fact that he placed the trust fund
in the bank in his personal account does not add to his responsibility. Such deposit did not make him a debtor who
must respond at all hazards.

We do not enter into a discussion for the purpose of determining whether he acted more or less negligently by
depositing the money in the bank than he would if he had left it in his home; or whether he was more or less
negligent by depositing the money in his personal account than he would have been if he had deposited it in a
separate account as trustee. We regard such discussion as substantially fruitless, inasmuch as the precise
question is not one of negligence. There was no law prohibiting him from depositing it as he did and there was no
law which changed his responsibility be reason of the deposit. While it may be true that one who is under
obligation to do or give a thing is in duty bound, when he sees events approaching the results of which will be
dangerous to his trust, to take all reasonable means and measures to escape or, if unavoidable, to temper the
effects of those events, we do not feel constrained to hold that, in choosing between two means equally legal, he
is culpably negligent in selecting one whereas he would not have been if he had selected the other.

The court, therefore, finds and declares that the money which is the subject matter of this action was deposited by
Father De la Peña in the Hongkong and Shanghai Banking Corporation of Iloilo; that said money was forcibly
taken from the bank by the armed forces of the United States during the war of the insurrection; and that said
Father De la Peña was not responsible for its loss.

The judgment is therefore reversed, and it is decreed that the plaintiff shall take nothing by his complaint.

Arellano, C.J., Torres and Carson, JJ., concur.

12
G.R. No. 90027 March 3, 1993

CA AGRO-INDUSTRIAL DEVELOPMENT CORP., petitioner,

vs.
THE HONORABLE COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, respondents.
13
Dolorfino & Dominguez Law Offices for petitioner.

Danilo B. Banares for private respondent.

DAVIDE, JR., J.:

Is the contractual relation between a commercial bank and another party in a contract of rent of a safety deposit
box with respect to its contents placed by the latter one of bailor and bailee or one of lessor and lessee?

This is the crux of the present controversy.

On 3 July 1979, petitioner (through its President, Sergio Aguirre) and the spouses Ramon and Paula Pugao
entered into an agreement whereby the former purchased from the latter two (2) parcels of land for a consideration
of P350,625.00. Of this amount, P75,725.00 was paid as downpayment while the balance was covered by three (3)
postdated checks. Among the terms and conditions of the agreement embodied in a Memorandum of True and
Actual Agreement of Sale of Land were that the titles to the lots shall be transferred to the petitioner upon full
payment of the purchase price and that the owner's copies of the certificates of titles thereto, Transfer Certificates
of Title (TCT) Nos. 284655 and 292434, shall be deposited in a safety deposit box of any bank. The same could
be withdrawn only upon the joint signatures of a representative of the petitioner and the Pugaos upon full payment
of the purchase price. Petitioner, through Sergio Aguirre, and the Pugaos then rented Safety Deposit Box No.
1448 of private respondent Security Bank and Trust Company, a domestic banking corporation hereinafter
referred to as the respondent Bank. For this purpose, both signed a contract of lease (Exhibit "2") which
contains, inter alia, the following conditions:

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.1

After the execution of the contract, two (2) renter's keys were given to the renters — one to Aguirre (for the
petitioner) and the other to the Pugaos. A guard key remained in the possession of the respondent Bank. The
safety deposit box has two (2) keyholes, one for the guard key and the other for the renter's key, and can be
opened only with the use of both keys. Petitioner claims that the certificates of title were placed inside the said
box.

Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner the two (2) lots at a price of P225.00
per square meter which, as petitioner alleged in its complaint, translates to a profit of P100.00 per square meter or
a total of P280,500.00 for the entire property. Mrs. Ramos demanded the execution of a deed of sale which
necessarily entailed the production of the certificates of title. In view thereof, Aguirre, accompanied by the Pugaos,
then proceeded to the respondent Bank on 4 October 1979 to open the safety deposit box and get the certificates
of title. However, when opened in the presence of the Bank's representative, the box yielded no such certificates.
Because of the delay in the reconstitution of the title, Mrs. Ramos withdrew her earlier offer to purchase the lots;
as a consequence thereof, the petitioner allegedly failed to realize the expected profit of P280,500.00. Hence, the
latter filed on 1 September 1980 a complaint2 for damages against the respondent Bank with the Court of First
Instance (now Regional Trial Court) of Pasig, Metro Manila which docketed the same as Civil Case No. 38382.

In its Answer with Counterclaim,3 respondent Bank alleged that the petitioner has no cause of action because of
paragraphs 13 and 14 of the contract of lease (Exhibit "2"); corollarily, loss of any of the items or articles contained
in the box could not give rise to an action against it. It then interposed a counterclaim for exemplary damages as
well as attorney's fees in the amount of P20,000.00. Petitioner subsequently filed an answer to the counterclaim.4
14
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 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

15
Its motion for reconsideration 14 having been denied in the respondent Court's Resolution of 28 August
1989, 15 petitioner 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
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

16
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 23 pertinently provides:

Sec. 72. In addition to the operations specifically authorized elsewhere in this Act, banking institutions other than
building and loan associations may perform the following services:

(a) Receive in custody funds, documents, and valuable objects, and rent safety deposit boxes for the safeguarding
of such effects.

xxx xxx xxx

The banks shall perform the services permitted under subsections (a), (b) and (c) of this section as depositories or
as agents. . . . 24 (emphasis supplied)

Note that the primary function is still found within the parameters of a contract of deposit, i.e., the receiving in
custody of funds, documents and other valuable objects for safekeeping. The renting out of the safety deposit
boxes is not independent from, but related to or in conjunction with, this principal function. A contract of deposit
may be entered into orally or in writing 25 and, pursuant to Article 1306 of the Civil Code, the parties thereto may
establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or public policy. The depositary's responsibility for the
safekeeping of the objects deposited in the case at bar is governed by Title I, Book IV of the Civil Code.
Accordingly, the depositary would be liable if, in performing its obligation, it is found guilty of fraud, negligence,
delay or contravention of the tenor of the agreement. 26 In the absence of any stipulation prescribing the degree of
diligence required, that of a good father of a family is to be observed. 27 Hence, any stipulation exempting the
depositary from any liability arising from the loss of the thing deposited on account of fraud, negligence or delay

17
would be void for being contrary to law and public policy. In the instant case, petitioner maintains that conditions
13 and 14 of the questioned contract of lease of the safety deposit box, which read:

13. The bank is not a depositary of the contents of the safe and it has neither the possession nor control of the
same.

14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it assumes
absolutely no liability in connection therewith. 28

are void as they are contrary to law and public policy. We find Ourselves in agreement with this proposition for
indeed, said provisions are inconsistent with the respondent Bank's responsibility as a depositary under Section
72(a) of the General Banking Act. Both exempt the latter from any liability except as contemplated in condition 8
thereof which limits its duty to exercise reasonable diligence only with respect to who shall be admitted to any
rented safe, to wit:

8. The Bank shall use due diligence that no unauthorized person shall be admitted to any rented safe and beyond
this, the Bank will not be responsible for the contents of any safe rented from it. 29

Furthermore, condition 13 stands on a wrong premise and is contrary to the actual practice of the Bank. It is not
correct to assert that the Bank has neither the possession nor control of the contents of the box since in fact, the
safety deposit box itself is located in its premises and is under its absolute control; moreover, the respondent Bank
keeps the guard key to the said box. As stated earlier, renters cannot open their respective boxes unless the Bank
cooperates by presenting and using this guard key. Clearly then, to the extent above stated, the foregoing
conditions in the contract in question are void and ineffective. It has been said:

With respect to property deposited in a safe-deposit box by a customer of a safe-deposit company, the parties,
since the relation is a contractual one, may by special contract define their respective duties or provide for
increasing or limiting the liability of the deposit company, provided such contract is not in violation of law or public
policy. It must clearly appear that there actually was such a special contract, however, in order to vary the ordinary
obligations implied by law from the relationship of the parties; liability of the deposit company will not be enlarged
or restricted by words of doubtful meaning. The company, in renting
safe-deposit boxes, cannot exempt itself from liability for loss of the contents by its own fraud or negligence or that
of its agents or servants, and if a provision of the contract may be construed as an attempt to do so, it will be held
ineffective for the purpose. Although it has been held that the lessor of a safe-deposit box cannot limit its liability
for loss of the contents thereof through its own negligence, the view has been taken that such a lessor may limits
its liability to some extent by agreement or stipulation. 30 (citations omitted)

Thus, we reach the same conclusion which the Court of Appeals arrived at, that is, that the petition should be
dismissed, but on grounds quite different from those relied upon by the Court of Appeals. In the instant case, the
respondent Bank's exoneration cannot, contrary to the holding of the Court of Appeals, be based on or proceed
from a characterization of the impugned contract as a contract of lease, but rather on the fact that no competent
proof was presented to show that respondent Bank was aware of the agreement between the petitioner and the
Pugaos to the effect that the certificates of title were withdrawable from the safety deposit box only upon both
parties' joint signatures, and that no evidence was submitted to reveal that the loss of the certificates of title was
due to the fraud or negligence of the respondent Bank. This in turn flows from this Court's determination that the
contract involved was one of deposit. Since both the petitioner and the Pugaos agreed that each should have one
(1) renter's key, it was obvious that either of them could ask the Bank for access to the safety deposit box and,
with the use of such key and the Bank's own guard key, could open the said box, without the other renter being
present.

Since, however, the petitioner cannot be blamed for the filing of the complaint and no bad faith on its part had
been established, the trial court erred in condemning the petitioner to pay the respondent Bank attorney's fees. To
this extent, the Decision (dispositive portion) of public respondent Court of Appeals must be modified.

18
WHEREFORE, the Petition for Review is partially GRANTED by deleting the award for attorney's fees from the 4
July 1989 Decision of the respondent Court of Appeals in CA-G.R. CV No. 15150. As modified, and subject to the
pronouncement We made above on the nature of the relationship between the parties in a contract of lease of
safety deposit boxes, the dispositive portion of the said Decision is hereby AFFIRMED and the instant Petition for
Review is otherwise DENIED for lack of merit.

No pronouncement as to costs.

SO ORDERED.

G.R. Nos. L-26948 and L-26949 October 8, 1927

SILVESTRA BARON, plaintiff-appellant,
vs.
PABLO DAVID, defendant-appellant. And
GUILLERMO BARON, plaintiff-appellant,
vs.
PABLO DAVID, defendant-appellant.

Jose Gutierrez David for plaintiff-appellant in case of No. 26948.

Gregorio Perfecto for defendant-appellant in both cases.
Francisco, Lualhati & Lopez and Jose Gutierrez David for plaintiff-appellant in case No. 26949.

STREET, J.:

These two actions were instituted in the Court of First Instance of the Province of Pampanga by the
respective plaintiffs, Silvestra Baron and Guillermo Baron, for the purpose of recovering from the defendant, Pablo
David, the value of palay alleged to have been sold by the plaintiffs to the defendant in the year 1920. Owing to the
fact that the defendant is the same in both cases and that the two cases depend in part upon the same facts, the
cases were heard together in the trial court and determined in a single opinion. The same course will accordingly
be followed here.
In the first case, i. e., that which Silvestra Baron is plaintiff, the court gave judgment for her to recover of
the defendant the sum of P5,238.51, with costs. From this judgment both the plaintiff and the defendant appealed.
In the second case, i. e., that in which Guillermo Baron, is plaintiff, the court gave judgment for him to
recover of the defendant the sum of P5,734.60, with costs, from which judgment both the plaintiff and the
defendant also appealed. In the same case the defendant interposed a counterclaim in which he asked credit for
the sum of P2,800 which he had advanced to the plaintiff Guillermo Baron on various occasions. This credit was
admitted by the plaintiff and allowed by the trial court. But the defendant also interposed a cross-action against
Guillermo Baron in which the defendant claimed compensation for damages alleged to have Ben suffered by him
by reason of the alleged malicious and false statements made by the plaintiff against the defendant in suing out an
attachment against the defendant's property soon after the institution of the action. In the same cross-action the
defendant also sought compensation for damages incident to the shutting down of the defendant's rice mill for the
period of one hundred seventy days during which the above-mentioned attachment was in force. The trial judge
disallowed these claims for damages, and from this feature of the decision the defendant appealed. We are
therefore confronted with five distinct appeals in this record.
Prior to January 17, 1921, the defendant Pablo David has been engaged in running a rice mill in the
municipality of Magalang, in the Province of Pampanga, a mill which was well patronized by the rice growers of the
vicinity and almost constantly running. On the date stated a fire occurred that destroyed the mill and its contents,
and it was some time before the mill could be rebuilt and put in operation again. Silvestra Baron, the plaintiff in the
first of the actions before us, is an aunt of the defendant; while Guillermo Baron, the plaintiff in the other action; is
his uncle. In the months of March, April, and May, 1920, Silvestra Baron placed a quantity of palay in the
defendant's mill; and this, in connection with some that she took over from Guillermo Baron, amounted to 1,012
cavans and 24 kilos. During approximately the same period Guillermo Baron placed other 1,865 cavans and 43
kilos of palay in the mill. No compensation has ever been received by Silvestra Baron upon account of the palay
delivered by Guillermo Baron, he has received from the defendant advancements amounting to P2,800; but apart
19
from this he has not been compensated. Both the plaintiffs claim that the palay which was delivered by them to the
defendant was sold to the defendant; while the defendant, on the other hand, claims that the palay was deposited
subject to future withdrawal by the depositors or subject to some future sale which was never effected. He
therefore supposes himself to be relieved from all responsibility by virtue of the fire of January 17, 1921, already
mentioned.
The plaintiff further say that their palay was delivered to the defendant at his special request, coupled with
a promise on his part to pay for the same at the highest price per cavan at which palay would sell during the year
1920; and they say that in August of that year the defendant promised to pay them severally the price of P8.40 per
cavan, which was about the top of the market for the season, provided they would wait for payment until
December. The trial judge found that no such promise had been given; and the incredulity of the court upon this
point seems to us to be justified. A careful examination of the proof, however, leads us to the conclusion that the
plaintiffs did, some time in the early part of August, 1920, make demand upon the defendant for a settlement,
which he evaded or postponed leaving the exact amount due to the plaintiffs undetermined.
It should be stated that the palay in question was place by the plaintiffs in the defendant's mill with the
understanding that the defendant was at liberty to convert it into rice and dispose of it at his pleasure. The mill was
actively running during the entire season, and as palay was daily coming in from many customers and as rice was
being constantly shipped by the defendant to Manila, or other rice markets, it was impossible to keep the plaintiffs'
palay segregated. In fact the defendant admits that the plaintiffs' palay was mixed with that of others. In view of the
nature of the defendant's activities and the way in which the palay was handled in the defendant's mill, it is quite
certain that all of the plaintiffs' palay, which was put in before June 1, 1920, been milled and disposed of long prior
to the fire of January 17, 1921. Furthermore, the proof shows that when the fire occurred there could not have
been more than about 360 cavans of palay in the mill, none of which by any reasonable probability could have
been any part of the palay delivered by the plaintiffs. Considering the fact that the defendant had thus milled and
doubtless sold the plaintiffs' palay prior to the date of the fire, it result that he is bound to account for its value, and
his liability was not extinguished by the occurence of the fire. In the briefs before us it seems to have been
assumed by the opposing attorneys that in order for the plaintiffs to recover, it is necessary that they should be
able to establish that the plaintiffs' palay was delivered in the character of a sale, and that if, on the contrary, the
defendant should prove that the delivery was made in the character of deposit, the defendant should be absolved.
But the case does not depend precisely upon this explicit alternative; for even supposing that the palay may have
been delivered in the character of deposit, subject to future sale or withdrawal at plaintiffs' election, nevertheless if
it was understood that the defendant might mill the palay and he has in fact appropriated it to his own use, he is of
course bound to account for its value. Under article 1768 of the Civil Code, when the depository has permission to
make use of the thing deposited, the contract loses the character of mere deposit and becomes a loan or
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.

20
 As already stated, the trial court found that at the time of the fire there were about 360 cavans of palay in
the mill and that this palay was destroyed. His Honor assumed that this was part of the palay delivered by the
plaintiffs, and he held that the defendant should be credited with said amount. His Honor therefore deducted from
the claims of the plaintiffs their respective proportionate shares of this amount of palay. We are unable to see the
propriety of this feature of the decision. There were many customers of the defendant's rice mill who had placed
their palay with the defendant under the same conditions as the plaintiffs, and nothing can be more certain than
that the palay which was burned did not belong to the plaintiffs. That palay without a doubt had long been sold and
marketed. The assignments of error of each of the plaintiffs-appellants in which this feature of the decision is
attacked are therefore well taken; and the appealed judgments must be modified by eliminating the deductions
which the trial court allowed from the plaintiffs' claims.
The trial judge also allowed a deduction from the claim of the plaintiff Guillermo Baron of 167 cavans of
palay, as indicated in Exhibit 12, 13, 14, and 16. This was also erroneous. These exhibits relate to transactions
that occurred nearly two years after the transactions with which we are here concerned, and they were offered in
evidence merely to show the character of subsequent transactions between the parties, it appearing that at the
time said exhibits came into existence the defendant had reconstructed his mill and that business relations with
Guillermo Baron had been resumed. The transactions shown by these exhibits (which relate to palay withdrawn by
the plaintiff from the defendant's mill) were not made the subject of controversy in either the complaint or the
cross-complaint of the defendant in the second case. They therefore should not have been taken into account as a
credit in favor of the defendant. Said credit must therefore be likewise of course be without prejudice to any proper
adjustment of the rights of the parties with respect to these subsequent transactions that they have heretofore or
may hereafter effect.
The preceding discussion disposes of all vital contentions relative to the liability of the defendant upon the
causes of action stated in the complaints. We proceed therefore now to consider the question of the liability of the
plaintiff Guillermo Baron upon the cross-complaint of Pablo David in case R. G. No. 26949. In this cross-action the
defendant seek, as the stated in the third paragraph of this opinion, to recover damages for the wrongful suing out
of an attachment by the plaintiff and the levy of the same upon the defendant's rice mill. It appears that about two
and one-half months after said action was begun, the plaintiff, Guillermo Baron, asked for an attachment to be
issued against the property of the defendant; and to procure the issuance of said writ the plaintiff made affidavit to
the effect that the defendant was disposing, or attempting the plaintiff. Upon this affidavit an attachment was
issued as prayed, and on March 27, 1924, it was levied upon the defendant's rice mill, and other property, real and
personal. 1awph!l.net
Upon attaching the property the sheriff closed the mill and placed it in the care of a deputy. Operations
were not resumed until September 13, 1924, when the attachment was dissolved by an order of the court and the
defendant was permitted to resume control. At the time the attachment was levied there were, in the bodega, more
than 20,000 cavans of palay belonging to persons who held receipts therefor; and in order to get this grain away
from the sheriff, twenty-four of the depositors found it necessary to submit third-party claims to the sheriff. When
these claims were put in the sheriff notified the plaintiff that a bond in the amount of P50,000 must be given,
otherwise the grain would be released. The plaintiff, being unable or unwilling to give this bond, the sheriff
surrendered the palay to the claimants; but the attachment on the rice mill was maintained until September 13, as
above stated, covering a period of one hundred seventy days during which the mill was idle. The ground upon
which the attachment was based, as set forth in the plaintiff's affidavit was that the defendant was disposing or
attempting to dispose of his property for the purpose of defrauding the plaintiff. That this allegation was false is
clearly apparent, and not a word of proof has been submitted in support of the assertion. On the contrary, the
defendant testified that at the time this attachment was secured he was solvent and could have paid his
indebtedness to the plaintiff if judgment had been rendered against him in ordinary course. His financial conditions
was of course well known to the plaintiff, who is his uncle. The defendant also states that he had not conveyed
away any of his property, nor had intended to do so, for the purpose of defrauding the plaintiff. We have before us
therefore a case of a baseless attachment, recklessly sued out upon a false affidavit and levied upon the
defendant's property to his great and needless damage. That the act of the plaintiff in suing out the writ was wholly
unjustifiable is perhaps also indicated in the circumstance that the attachment was finally dissolved upon the
motion of the plaintiff himself.
The defendant testified that his mill was accustomed to clean from 400 to 450 cavans of palay per day,
producing 225 cavans of rice of 57 kilos each. The price charged for cleaning each cavan rice was 30 centavos.
The defendant also stated that the expense of running the mill per day was from P18 to P25, and that the net profit

21
per day on the mill was more than P40. As the mill was not accustomed to run on Sundays and holiday, we
estimate that the defendant lost the profit that would have been earned on not less than one hundred forty work
days. Figuring his profits at P40 per day, which would appear to be a conservative estimate, the actual net loss
resulting from his failure to operate the mill during the time stated could not have been less than P5,600. The
reasonableness of these figures is also indicated in the fact that the twenty-four customers who intervened with
third-party claims took out of the camarin 20,000 cavans of palay, practically all of which, in the ordinary course of
events, would have been milled in this plant by the defendant. And of course other grain would have found its way
to this mill if it had remained open during the one hundred forty days when it was closed.
But this is not all. When the attachment was dissolved and the mill again opened, the defendant found
that his customers had become scattered and could not be easily gotten back. So slow, indeed, was his patronage
in returning that during the remainder of the year 1924 the defendant was able to mill scarcely more than the grain
belonging to himself and his brothers; and even after the next season opened many of his old customers did not
return. Several of these individuals, testifying as witnesses in this case, stated that, owing to the unpleasant
experience which they had in getting back their grain from the sheriff to the mill of the defendant, though they had
previously had much confidence in him.
As against the defendant's proof showing the facts above stated the plaintiff submitted no evidence
whatever. We are therefore constrained to hold that the defendant was damaged by the attachment to the extent
of P5,600, in profits lost by the closure of the mill, and to the extent of P1,400 for injury to the good-will of his
business, making a total of P7,000. For this amount the defendant must recover judgment on his cross-complaint.
The trial court, in dismissing the defendant's cross-complaint for damages resulting from the wrongful
suing out of the attachment, suggested that the closure of the rice mill was a mere act of the sheriff for which the
plaintiff was not responsible and that the defendant might have been permitted by the sheriff to continue running
the mill if he had applied to the sheriff for permission to operate it. This singular suggestion will not bear a
moment's criticism. It was of course the duty of the sheriff, in levying the attachment, to take the attached property
into his possession, and the closure of the mill was a natural, and even necessary, consequence of the attachment.
For the damage thus inflicted upon the defendant the plaintiff is undoubtedly responsible.
One feature of the cross-complaint consist in the claim of the defendant (cross-complaint) for the sum of
P20,000 as damages caused to the defendant by the false and alleged malicious statements contained in the
affidavit upon which the attachment was procured. The additional sum of P5,000 is also claimed as exemplary
damages. It is clear that with respect to these damages the cross-action cannot be maintained, for the reason that
the affidavit in question was used in course of a legal proceeding for the purpose of obtaining a legal remedy, and
it is therefore privileged. But though the affidavit is not actionable as a libelous publication, this fact in no obstacle
to the maintenance of an action to recover the damage resulting from the levy of the attachment.
Before closing this opinion a word should be said upon the point raised in the first assignment of error of
Pablo David as defendant in case R. G. No. 26949. In this connection it appears that the deposition of Guillermo
Baron was presented in court as evidence and was admitted as an exhibit, without being actually read to the court.
It is supposed in the assignment of error now under consideration that the deposition is not available as evidence
to the plaintiff because it was not actually read out in court. This connection is not well founded. It is true that in
section 364 of the Code of Civil Procedure it is said that a deposition, once taken, may be read by either party and
will then be deemed the evidence of the party reading it. The use of the word "read" in this section finds its
explanation of course in the American practice of trying cases for the most part before juries. When a case is thus
tried the actual reading of the deposition is necessary in order that the jurymen may become acquainted with its
contents. But in courts of equity, and in all courts where judges have the evidence before them for perusal at their
pleasure, it is not necessary that the deposition should be actually read when presented as evidence.
From what has been said it result that judgment of the court below must be modified with respect to the
amounts recoverable by the respective plaintiffs in the two actions R. G. Nos. 26948 and 26949 and must be
reversed in respect to the disposition of the cross-complaint interposed by the defendant in case R. G. No. 26949,
with the following result: In case R. G. No. 26948 the plaintiff Silvestra Baron will recover of the Pablo David the
sum of P6,227.24, with interest from November 21, 1923, the date of the filing of her complaint, and with costs. In
case R. G. No. 26949 the plaintiff Guillermo Baron will recover of the defendant Pablo David the sum of P8,669.75,
with interest from January 9, 1924. In the same case the defendant Pablo David, as plaintiff in the cross-complaint,
will recover of Guillermo Baron the sum of P7,000, without costs.

So ordered.

22
G.R. No. 179419 January 12, 2011

DURBAN APARTMENTS CORPORATION, doing business under the name and style of City Garden
Hotel, Petitioner,
vs.
PIONEER INSURANCE AND SURETY CORPORATION, Respondent.

DECISION

NACHURA, J.:

For review is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 86869, which affirmed the decision2 of
the Regional Trial Court (RTC), Branch 66, Makati City, in Civil Case No. 03-857, holding petitioner Durban
Apartments Corporation solely liable to respondent Pioneer Insurance and Surety Corporation for the loss of
Jeffrey See’s (See’s) vehicle.

The facts, as found by the CA, are simple.

On July 22, 2003, [respondent] Pioneer Insurance and Surety Corporation x x x, by right of subrogation, filed [with
the RTC of Makati City] a Complaint for Recovery of Damages against [petitioner] Durban Apartments Corporation,
doing business under the name and style of City Garden Hotel, and [defendant before the RTC] Vicente
Justimbaste x x x. [Respondent averred] that: it is the insurer for loss and damage of Jeffrey S. See’s [the
insured’s] 2001 Suzuki Grand Vitara x x x with Plate No. XBH-510 under Policy No. MC-CV-HO-01-0003846-00-D
in the amount of ₱1,175,000.00; on April 30, 2002, See arrived and checked in at the City Garden Hotel in Makati

23
corner Kalayaan Avenues, Makati City before midnight, and its parking attendant, defendant x x x Justimbaste got
the key to said Vitara from See to park it[. O]n May 1, 2002, at about 1:00 o’clock in the morning, See was
awakened in his room by [a] telephone call from the Hotel Chief Security Officer who informed him that his Vitara
was carnapped while it was parked unattended at the parking area of Equitable PCI Bank along Makati Avenue
between the hours of 12:00 [a.m.] and 1:00 [a.m.]; See went to see the Hotel Chief Security Officer, thereafter
reported the incident to the Operations Division of the Makati City Police Anti-Carnapping Unit, and a flash alarm
was issued; the Makati City Police Anti-Carnapping Unit investigated Hotel Security Officer, Ernesto T. Horlador,
Jr. x x x and defendant x x x Justimbaste; See gave his Sinumpaang Salaysay to the police investigator, and filed
a Complaint Sheet with the PNP Traffic Management Group in Camp Crame, Quezon City; the Vitara has not yet
been recovered since July 23, 2002 as evidenced by a Certification of Non- Recovery issued by the PNP TMG; it
paid the ₱1,163,250.00 money claim of See and mortgagee ABN AMRO Savings Bank, Inc. as indemnity for the
loss of the Vitara; the Vitara was lost due to the negligence of [petitioner] Durban Apartments and [defendant]
Justimbaste because it was discovered during the investigation that this was the second time that a similar
incident of carnapping happened in the valet parking service of [petitioner] Durban Apartments and no necessary
precautions were taken to prevent its repetition; [petitioner] Durban Apartments was wanting in due diligence in
the selection and supervision of its employees particularly defendant x x x Justimbaste; and defendant x x x
Justimbaste and [petitioner] Durban Apartments failed and refused to pay its valid, just, and lawful claim despite
written demands.

Upon service of Summons, [petitioner] Durban Apartments and [defendant] Justimbaste filed their Answer with
Compulsory Counterclaim alleging that: See did not check in at its hotel, on the contrary, he was a guest of a
certain Ching Montero x x x; defendant x x x Justimbaste did not get the ignition key of See’s Vitara, on the
contrary, it was See who requested a parking attendant to park the Vitara at any available parking space, and it
was parked at the Equitable Bank parking area, which was within See’s view, while he and Montero were waiting
in front of the hotel; they made a written denial of the demand of [respondent] Pioneer Insurance for want of legal
basis; valet parking services are provided by the hotel for the convenience of its customers looking for a parking
space near the hotel premises; it is a special privilege that it gave to Montero and See; it does not include
responsibility for any losses or damages to motor vehicles and its accessories in the parking area; and the same
holds true even if it was See himself who parked his Vitara within the premises of the hotel as evidenced by the
valet parking customer’s claim stub issued to him; the carnapper was able to open the Vitara without using the key
given earlier to the parking attendant and subsequently turned over to See after the Vitara was stolen; defendant x
x x Justimbaste saw the Vitara speeding away from the place where it was parked; he tried to run after it, and
blocked its possible path but to no avail; and See was duly and immediately informed of the carnapping of his
Vitara; the matter was reported to the nearest police precinct; and defendant x x x Justimbaste, and Horlador
submitted themselves to police investigation.

During the pre-trial conference on November 28, 2003, counsel for [respondent] Pioneer Insurance was present.
Atty. Monina Lee x x x, counsel of record of [petitioner] Durban Apartments and Justimbaste was absent, instead,
a certain Atty. Nestor Mejia appeared for [petitioner] Durban Apartments and Justimbaste, but did not file their
pre-trial brief.

On November 5, 2004, the lower court granted the motion of [respondent] Pioneer Insurance, despite the
opposition of [petitioner] Durban Apartments and Justimbaste, and allowed [respondent] Pioneer Insurance to
present its evidence ex parte before the Branch Clerk of Court.

See testified that: on April 30, 2002, at about 11:30 in the evening, he drove his Vitara and stopped in front of City
Garden Hotel in Makati Avenue, Makati City; a parking attendant, whom he had later known to be defendant x x x
Justimbaste, approached and asked for his ignition key, told him that the latter would park the Vitara for him in
front of the hotel, and issued him a valet parking customer’s claim stub; he and Montero, thereafter, checked in at
the said hotel; on May 1, 2002, at around 1:00 in the morning, the Hotel Security Officer whom he later knew to be
Horlador called his attention to the fact that his Vitara was carnapped while it was parked at the parking lot of
Equitable PCI Bank which is in front of the hotel; his Vitara was insured with [respondent] Pioneer Insurance; he
together with Horlador and defendant x x x Justimbaste went to Precinct 19 of the Makati City Police to report the
carnapping incident, and a police officer came accompanied them to the Anti-Carnapping Unit of the said station
24
for investigation, taking of their sworn statements, and flashing of a voice alarm; he likewise reported the said
incident in PNP TMG in Camp Crame where another alarm was issued; he filed his claim with [respondent]
Pioneer Insurance, and a representative of the latter, who is also an adjuster of Vesper Insurance
Adjusters-Appraisers [Vesper], investigated the incident; and [respondent] Pioneer Insurance required him to sign
a Release of Claim and Subrogation Receipt, and finally paid him the sum of ₱1,163,250.00 for his claim.

Ricardo F. Red testified that: he is a claims evaluator of [petitioner] Pioneer Insurance tasked, among others, with
the receipt of claims and documents from the insured, investigation of the said claim, inspection of damages,
taking of pictures of insured unit, and monitoring of the processing of the claim until its payment; he monitored the
processing of See’s claim when the latter reported the incident to [respondent] Pioneer Insurance; [respondent]
Pioneer Insurance assigned the case to Vesper who verified See’s report, conducted an investigation, obtained
the necessary documents for the processing of the claim, and tendered a settlement check to See; they evaluated
the case upon receipt of the subrogation documents and the adjuster’s report, and eventually recommended for its
settlement for the sum of ₱1,163,250.00 which was accepted by See; the matter was referred and forwarded to
their counsel, R.B. Sarajan & Associates, who prepared and sent demand letters to [petitioner] Durban
Apartments and [defendant] Justimbaste, who did not pay [respondent] Pioneer Insurance notwithstanding their
receipt of the demand letters; and the services of R.B. Sarajan & Associates were engaged, for ₱100,000.00 as
attorney’s fees plus ₱3,000.00 per court appearance, to prosecute the claims of [respondent] Pioneer Insurance
against [petitioner] Durban Apartments and Justimbaste before the lower court.

Ferdinand Cacnio testified that: he is an adjuster of Vesper; [respondent] Pioneer Insurance assigned to Vesper
the investigation of See’s case, and he was the one actually assigned to investigate it; he conducted his
investigation of the matter by interviewing See, going to the City Garden Hotel, required subrogation documents
from See, and verified the authenticity of the same; he learned that it is the standard procedure of the said hotel as
regards its valet parking service to assist their guests as soon as they get to the lobby entrance, park the cars for
their guests, and place the ignition keys in their safety key box; considering that the hotel has only twelve (12)
available parking slots, it has an agreement with Equitable PCI Bank permitting the hotel to use the parking space
of the bank at night; he also learned that a Hyundai Starex van was carnapped at the said place barely a month
before the occurrence of this incident because Liberty Insurance assigned the said incident to Vespers, and
Horlador and defendant x x x Justimbaste admitted the occurrence of the same in their sworn statements before
the Anti-Carnapping Unit of the Makati City Police; upon verification with the PNP TMG [Unit] in Camp Crame, he
learned that See’s Vitara has not yet been recovered; upon evaluation, Vesper recommended to [respondent]
Pioneer Insurance to settle See’s claim for ₱1,045,750.00; See contested the recommendation of Vesper by
reasoning out that the 10% depreciation should not be applied in this case considering the fact that the Vitara was
used for barely eight (8) months prior to its loss; and [respondent] Pioneer Insurance acceded to See’s contention,
tendered the sum of ₱1,163,250.00 as settlement, the former accepted it, and signed a release of claim and
subrogation receipt.

The lower court denied the Motion to Admit Pre-Trial Brief and Motion for Reconsideration field by [petitioner]
Durban Apartments and Justimbaste in its Orders dated May 4, 2005 and October 20, 2005, respectively, for
being devoid of merit.3

Thereafter, on January 27, 2006, the RTC rendered a decision, disposing, as follows:

WHEREFORE, judgment is hereby rendered ordering [petitioner Durban Apartments Corporation] to pay
[respondent Pioneer Insurance and Surety Corporation] the sum of ₱1,163,250.00 with legal interest thereon from
July 22, 2003 until the obligation is fully paid and attorney’s fees and litigation expenses amounting to
₱120,000.00.

SO ORDERED.4

On appeal, the appellate court affirmed the decision of the trial court, viz.:

25
WHEREFORE, premises considered, the Decision dated January 27, 2006 of the RTC, Branch 66, Makati City in
Civil Case No. 03-857 is hereby AFFIRMED insofar as it holds [petitioner] Durban Apartments Corporation solely
liable to [respondent] Pioneer Insurance and Surety Corporation for the loss of Jeffrey See’s Suzuki Grand Vitara.

SO ORDERED.5

Hence, this recourse by petitioner.

The issues for our resolution are:

1. Whether the lower courts erred in declaring petitioner as in default for failure to appear at the pre-trial
conference and to file a pre-trial brief;

2. Corollary thereto, whether the trial court correctly allowed respondent to present evidence ex-parte;

3. Whether petitioner is liable to respondent for attorney’s fees in the amount of ₱120,000.00; and

4. Ultimately, whether petitioner is liable to respondent for the loss of See’s vehicle.

The petition must fail.

We are in complete accord with the common ruling of the lower courts that petitioner was in default for failure to
appear at the pre-trial conference and to file a pre-trial brief, and thus, correctly allowed respondent to present
evidence ex-parte. Likewise, the lower courts did not err in holding petitioner liable for the loss of See’s vehicle.

Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the
appellate court, are accorded the highest degree of respect and are considered conclusive between the parties.6 A
review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances,
such as: (1) when the findings of a trial court are grounded entirely on speculation, surmises, or conjectures; (2)
when a lower court’s inference from its factual findings is manifestly mistaken, absurd, or impossible; (3) when
there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go
beyond the issues of the case, or fail to notice certain relevant facts which, if properly considered, will justify a
different conclusion; (5) when there is a misappreciation of facts; (6) when the findings of fact are conclusions
without mention of the specific evidence on which they are based, are premised on the absence of evidence, or
are contradicted by evidence on record.7 None of the foregoing exceptions permitting a reversal of the assailed
decision exists in this instance.

Petitioner urges us, however, that "strong [and] compelling reason[s]" such as the prevention of miscarriage of
justice warrant a suspension of the rules and excuse its and its counsel’s non-appearance during the pre-trial
conference and their failure to file a pre-trial brief.

We are not persuaded.

Rule 18 of the Rules of Court leaves no room for equivocation; appearance of parties and their counsel at the
pre-trial conference, along with the filing of a corresponding pre-trial brief, is mandatory, nay, their duty. Thus,
Section 4 and Section 6 thereof provide:

SEC. 4. Appearance of parties.–It shall be the duty of the parties and their counsel to appear at the pre-trial. The
non-appearance of a party may be excused only if a valid cause is shown therefor or if a representative shall
appear in his behalf fully authorized in writing to enter into an amicable settlement, to submit to alternative modes
of dispute resolution, and to enter into stipulations or admissions of facts and documents.

26
SEC. 6. Pre-trial brief.–The parties shall file with the court and serve on the adverse party, in such manner as shall
ensure their receipt thereof at least three (3) days before the date of the pre-trial, their respective pre-trial briefs
which shall contain, among others:

xxxx

Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-trial.

Contrary to the foregoing rules, petitioner and its counsel of record were not present at the scheduled pre-trial
conference. Worse, they did not file a pre-trial brief. Their non-appearance cannot be excused as Section 4, in
relation to Section 6, allows only two exceptions: (1) a valid excuse; and (2) appearance of a representative on
behalf of a party who is fully authorized in writing to enter into an amicable settlement, to submit to alternative
modes of dispute resolution, and to enter into stipulations or admissions of facts and documents.

Petitioner is adamant and harps on the fact that November 28, 2003 was merely the first scheduled date for the
pre-trial conference, and a certain Atty. Mejia appeared on its behalf. However, its assertion is belied by its own
admission that, on said date, this Atty. Mejia "did not have in his possession the Special Power of Attorney issued
by petitioner’s Board of Directors."

As pointed out by the CA, petitioner, through Atty. Lee, received the notice of pre-trial on October 27, 2003,
thirty-two (32) days prior to the scheduled conference. In that span of time, Atty. Lee, who was charged with the
duty of notifying petitioner of the scheduled pre-trial conference,8 petitioner, and Atty. Mejia should have discussed
which lawyer would appear at the pre-trial conference with petitioner, armed with the appropriate authority therefor.
Sadly, petitioner failed to comply with not just one rule; it also did not proffer a reason why it likewise failed to file a
pre-trial brief. In all, petitioner has not shown any persuasive reason why it should be exempt from abiding by the
rules.

The appearance of Atty. Mejia at the pre-trial conference, without a pre-trial brief and with only his bare allegation
that he is counsel for petitioner, was correctly rejected by the trial court. Accordingly, the trial court, as affirmed by
the appellate court, did not err in allowing respondent to present evidence ex-parte.

Former Chief Justice Andres R. Narvasa’s words continue to resonate, thus:

Everyone knows that a pre-trial in civil actions is mandatory, and has been so since January 1, 1964. Yet to this
day its place in the scheme of things is not fully appreciated, and it receives but perfunctory treatment in many
courts. Some courts consider it a mere technicality, serving no useful purpose save perhaps, occasionally to
furnish ground for non-suiting the plaintiff, or declaring a defendant in default, or, wistfully, to bring about a
compromise. The pre-trial device is not thus put to full use. Hence, it has failed in the main to accomplish the chief
objective for it: the simplification, abbreviation and expedition of the trial, if not indeed its dispensation. This is a
great pity, because the objective is attainable, and with not much difficulty, if the device were more intelligently and
extensively handled.

xxxx

Consistently with the mandatory character of the pre-trial, the Rules oblige not only the lawyers but the parties as
well to appear for this purpose before the Court, and when a party "fails to appear at a pre-trial conference (he)
may be non-suited or considered as in default." The obligation "to appear" denotes not simply the personal
appearance, or the mere physical presentation by a party of one’s self, but connotes as importantly, preparedness
to go into the different subject assigned by law to a pre-trial. And in those instances where a party may not himself
be present at the pre-trial, and another person substitutes for him, or his lawyer undertakes to appear not only as
an attorney but in substitution of the client’s person, it is imperative for that representative of the lawyer to have
"special authority" to make such substantive agreements as only the client otherwise has capacity to make. That
"special authority" should ordinarily be in writing or at the very least be "duly established by evidence other than
27
the self-serving assertion of counsel (or the proclaimed representative) himself." Without that special authority, the
lawyer or representative cannot be deemed capacitated to appear in place of the party; hence, it will be
considered that the latter has failed to put in an appearance at all, and he [must] therefore "be non-suited or
considered as in default," notwithstanding his lawyer’s or delegate’s presence. 9

We are not unmindful that defendant’s (petitioner’s) preclusion from presenting evidence during trial does not
automatically result in a judgment in favor of plaintiff (respondent). The plaintiff must still substantiate the
allegations in its complaint.10 Otherwise, it would be inutile to continue with the plaintiff’s presentation of evidence
each time the defendant is declared in default.

In this case, respondent substantiated the allegations in its complaint, i.e., a contract of necessary deposit existed
between the insured See and petitioner. On this score, we find no error in the following disquisition of the appellate
court:

[The] records also reveal that upon arrival at the City Garden Hotel, See gave notice to the doorman and parking
attendant of the said hotel, x x x Justimbaste, about his Vitara when he entrusted its ignition key to the latter. x x x
Justimbaste issued a valet parking customer claim stub to See, parked the Vitara at the Equitable PCI Bank
parking area, and placed the ignition key inside a safety key box while See proceeded to the hotel lobby to check
in. The Equitable PCI Bank parking area became an annex of City Garden Hotel when the management of the
said bank allowed the parking of the vehicles of hotel guests thereat in the evening after banking hours.11

Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit and a necessary deposit
made by persons in hotels or inns:

Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the
obligation of safely keeping it and returning the same. If the safekeeping of the thing delivered is not the principal
purpose of the contract, there is no deposit but some other contract.

Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be regarded as
necessary.1avvphi1 The keepers of hotels or inns shall be responsible for them as depositaries, provided that
notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the
latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and
vigilance of their effects.

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

Lastly, petitioner assails the lower courts’ award of attorney’s fees to respondent in the amount of ₱120,000.00.
Petitioner claims that the award is not substantiated by the evidence on record.

We disagree.

While it is a sound policy not to set a premium on the right to litigate,12 we find that respondent is entitled to
reasonable attorney’s fees. Attorney’s fees may be awarded when a party is compelled to litigate or incur
expenses to protect its interest,13 or when the court deems it just and equitable.14 In this case, petitioner refused to
answer for the loss of See’s vehicle, which was deposited with it for safekeeping. This refusal constrained
respondent, the insurer of See, and subrogated to the latter’s right, to litigate and incur expenses. However, we
reduce the award of ₱120,000.00 to ₱60,000.00 in view of the simplicity of the issues involved in this case.

28
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 86869 is
AFFIRMED with the MODIFICATION that the award of attorney’s fees is reduced to ₱60,000.00. Costs against
petitioner.

SO ORDERED.

29