G.R. No. 142591             April 30, 2003
Moreman, in turn, deposited them in the warehouse of Wilson and Lily Chan,
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.
1
Respondent purchased various construction materials and equipment in Manila.
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 Decision5 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
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
2
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.
"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.
3
"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.
 '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.
4
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 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
5
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 WHEREFORE, the petition is GRANTED. The challenged Decision of the
wrong,42 every cause of action ex-contractu must be founded upon a contract, Court of Appeals dated June 17, 1999 is REVERSED and SET ASIDE. Costs
oral or written, express or implied. against respondent.

Moreover, respondent also failed to prove that there were construction materials SO ORDERED.
and equipment in petitioners' warehouse at the time he made a demand for their
return. Puno, Panganiban, Corona and Carpio Morales, JJ ., concur.

Considering that respondent failed to prove (1) the existence of any contract of [G.R. No. 160544.  February 21, 2005]
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 TRIPLE-V vs. FILIPINO MERCHANTS
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 THIRD DIVISION
construction materials.
Gentlemen:
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 Quoted hereunder, for your information, is a resolution of this Court dated FEB
damages cannot be presumed, but must be proved with reasonable degree of 21 2005.
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
G.R. No. 160544 (Triple-V Food Services, Inc. vs. Filipino Merchants Insurance
they have been suffered by the injured party and on the best obtainable evidence
Company, Inc.)
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
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
Considering our findings that there was no contract of deposit between
an earlier decision of the Regional Trial Court at Makati City, Branch 148, in its
petitioners and respondent or Moreman and that actually there were no more
Civil Case No. 98-838, an action for damages thereat filed by respondent
construction materials or equipment in petitioners' warehouse when respondent
Filipino Merchants Insurance, Company, Inc., against the herein petitioner,
made a demand for their return, we hold that he has no right whatsoever to claim
Triple-V Food Services, Inc.
for damages.
On March 2, 1997, at around 2:15 o'clock in the afternoon, a certain Mary Jo-
As we stressed in the beginning, a judgment of default does not automatically
Anne De Asis (De Asis) dined at petitioner's Kamayan Restaurant at 15 West
imply admission by the defendant of plaintiff's causes of action. Here, the trial
Avenue, Quezon City. De Asis was using a Mitsubishi Galant Super Saloon
court merely adopted respondent's allegations in his complaint and evidence
Model 1995 with plate number UBU 955, assigned to her by her employer
without evaluating them with the highest degree of objectivity and certainty.
Crispa Textile Inc. (Crispa). On said date, De Asis availed of the valet parking

6
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:
7
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.
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
8
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.
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.
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
9
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.
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 money 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.
Separate Opinions
TRENT, J., dissenting:
10
I dissent. Technically speaking, whether Father De la Peña was a trustee or an
agent of the plaintiff his books showed that in 1898 he had in his possession as
trustee or agent the sum of P6,641 belonging to the plaintiff as the head of the
church. This money was then clothed with all the immunities and protection with
which the law seeks to invest trust funds. But when De la Peña mixed this trust
fund with his own and deposited the whole in the bank to his personal account
or credit, he by this act stamped on the said fund his own private marks and
unclothed it of all the protection it had. If this money had been deposited in the
name of De la Peña as trustee or agent of the plaintiff, I think that it may be
presumed that the military authorities would not have confiscated it for the
reason that they were looking for insurgent funds only. Again, the plaintiff had
no reason to suppose that De la Peña would attempt to strip the fund of its
identity, nor had he said or done anything which tended to relieve De la Peña
from the legal reponsibility which pertains to the care and custody of trust funds.
The Supreme Court of the United States in the United State vs. Thomas (82 U.
S., 337), at page 343, said: "Trustees are only bound to exercise the same care
and solicitude with regard to the trust property which they would exercise with
regard to their own. Equity will not exact more of them. They are not liable for a
loss by theft without their fault. But this exemption ceases when they mix the
trust-money with their own, whereby it loses its identity, and they become mere
debtors."
If this proposition is sound and is applicable to cases arising in this jurisdiction,
and I entertain no doubt on this point, the liability of the estate of De la Peña
cannot be doubted. But this court in the majority opinion says: "The fact that he
(Agustin de la Peña) 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. . . . There was no law prohibiting him from
depositing it as he did, and there was no law which changed his responsibility,
by reason of the deposit."
I assume that the court in using the language which appears in the latter part of
the above quotation meant to say that there was no statutory law regulating the
question. Questions of this character are not usually governed by statutory law.
The law is to be found in the very nature of the trust itself, and, as a general rule,
the courts say what facts are necessary to hold the trustee as a debtor.
If De la Peña, after depositing the trust fund in his personal account, had used
this money for speculative purposes, such as the buying and selling of sugar or
other products of the country, thereby becoming a debtor, there would have been
no doubt as to the liability of his estate. Whether he used this money for that
purpose the record is silent, but it will be noted that a considerable length of time
intervened from the time of the deposit until the funds were confiscated by the
military authorities. In fact the record shows that De la Peña deposited on June
27, 1898, P5,259, on June 28 of that year P3,280, and on August 5 of the same
year P6,000. The record also shows that these funds were withdrawn and again
deposited all together on the 29th of May, 1900, this last deposit amounting to
P18,970. These facts strongly indicate that De la Peña had as a matter of fact
been using the money in violation of the trust imposed in him. lawph!1.net
If the doctrine announced in the majority opinion be followed in cases hereafter
arising in this jurisdiction trust funds will be placed in precarious condition. The
position of the trustee will cease to be one of trust.
G.R. No. 90027 March 3, 1993
CA AGRO-INDUSTRIAL DEVELOPMENT CORP., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SECURITY BANK AND
TRUST COMPANY, respondents.
Dolorfino & Dominguez Law Offices for petitioner.
Danilo B. Banares for private respondent.
DAVIDE, JR., J.:
11
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
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.
12
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
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
13
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.
14
We agree with the petitioner's contention that the contract for the rent of the
safety deposit box is not an ordinary contract of lease as defined in Article 1643
of the Civil Code. However, We do not fully subscribe to its view that the same
is a contract of deposit that is to be strictly governed by the provisions in the
Civil Code on deposit; 19 the contract in the case at bar is a special kind of
deposit. It cannot be characterized as an ordinary contract of lease under Article
1643 because the full and absolute possession and control of the safety deposit
box was not given to the joint renters — the petitioner and the Pugaos. The guard
key of the box remained with the respondent Bank; without this key, neither of
the renters could open the box. On the other hand, the respondent Bank could not
likewise open the box without the renter's key. In this case, the said key had a
duplicate which was made so that both renters could have access to the box.
Hence, the authorities cited by the respondent Court 20 on this point do not apply.
Neither could Article 1975, also relied upon by the respondent Court, be invoked
as an argument against the deposit theory. Obviously, the first paragraph of such
provision cannot apply to a depositary of certificates, bonds, securities or
instruments which earn interest if such documents are kept in a rented safety
deposit box. It is clear that the depositary cannot open the box without the renter
being present.
We observe, however, that the deposit theory itself does not altogether find
unanimous support even in American jurisprudence. We agree with the
petitioner that under the latter, the prevailing rule is that the relation between a
bank renting out safe-deposit boxes and its customer with respect to the contents
of the box is that of a bail or and bailee, the bailment being for hire and mutual
benefit. 21 This is just the prevailing view because:
There is, however, some support for the view that the
relationship in question might be more properly characterized as
that of landlord and tenant, or lessor and lessee. It has also been
suggested that it should be characterized as that of licensor and
licensee. The relation between a bank, safe-deposit company, or
storage company, and the renter of a safe-deposit box therein, is
often described as contractual, express or implied, oral or
 written, in whole or in part. But there is apparently no
jurisdiction in which any rule other than that applicable to
bailments governs questions of the liability and rights of the
parties in respect of loss of the contents of safe-deposit
boxes. 22 (citations omitted)
In the context of our laws which authorize banking institutions to rent out safety
deposit boxes, it is clear that in this jurisdiction, the prevailing rule in the United
States has been adopted. Section 72 of the General Banking Act 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
15
found guilty of fraud, negligence, delay or contravention of the tenor of the
agreement. 26 In the absence of any stipulation prescribing the degree of
diligence required, that of a good father of a family is to be observed. 27 Hence,
any stipulation exempting the depositary from any liability arising from the loss
of the thing deposited on account of fraud, negligence or delay would be void for
being contrary to law and public policy. In the instant case, petitioner maintains
that conditions 13 and 14 of the questioned contract of lease of the safety deposit
box, which read:
13. The bank is not a depositary of the contents of the safe and it
has neither the possession nor control of the same.
14. The bank has no interest whatsoever in said contents, except
herein expressly provided, and it assumes absolutely no liability
in connection therewith. 28
are void as they are contrary to law and public policy. We find Ourselves
in agreement with this proposition for indeed, said provisions are
inconsistent with the respondent Bank's responsibility as a depositary
under Section 72(a) of the General Banking Act. Both exempt the latter
from any liability except as contemplated in condition 8 thereof which
limits its duty to exercise reasonable diligence only with respect to who
shall be admitted to any rented safe, to wit:
8. The Bank shall use due diligence that no unauthorized person
shall be admitted to any rented safe and beyond this, the Bank
will not be responsible for the contents of any safe rented from
it. 29
Furthermore, condition 13 stands on a wrong premise and is contrary to
the actual practice of the Bank. It is not correct to assert that the Bank
has neither the possession nor control of the contents of the box since in
fact, the safety deposit box itself is located in its premises and is under
its absolute control; moreover, the respondent Bank keeps the guard key
to the said box. As stated earlier, renters cannot open their respective
 boxes unless the Bank cooperates by presenting and using this guard
key. Clearly then, to the extent above stated, the foregoing conditions in
the contract in question are void and ineffective. It has been said:
With respect to property deposited in a safe-deposit box by a
customer of a safe-deposit company, the parties, since the
relation is a contractual one, may by special contract define their
respective duties or provide for increasing or limiting the
liability of the deposit company, provided such contract is not in
violation of law or public policy. It must clearly appear that
there actually was such a special contract, however, in order to
vary the ordinary obligations implied by law from the
relationship of the parties; liability of the deposit company will
not be enlarged or restricted by words of doubtful meaning. The
company, in renting
safe-deposit boxes, cannot exempt itself from liability for loss of
the contents by its own fraud or negligence or that of its agents
or servants, and if a provision of the contract may be construed
as an attempt to do so, it will be held ineffective for the purpose.
Although it has been held that the lessor of a safe-deposit box
cannot limit its liability for loss of the contents thereof through
its own negligence, the view has been taken that such a lessor
may limits its liability to some extent by agreement or
stipulation. 30 (citations omitted)
Thus, we reach the same conclusion which the Court of Appeals arrived at, that
is, that the petition should be dismissed, but on grounds quite different from
those relied upon by the Court of Appeals. In the instant case, the respondent
Bank's exoneration cannot, contrary to the holding of the Court of Appeals, be
based on or proceed from a characterization of the impugned contract as a
contract of lease, but rather on the fact that no competent proof was presented to
show that respondent Bank was aware of the agreement between the petitioner
and the Pugaos to the effect that the certificates of title were withdrawable from
the safety deposit box only upon both parties' joint signatures, and that no
evidence was submitted to reveal that the loss of the certificates of title was due
16
to the fraud or negligence of the respondent Bank. This in turn flows from this
Court's determination that the contract involved was one of deposit. Since both
the petitioner and the Pugaos agreed that each should have one (1) renter's key, it
was obvious that either of them could ask the Bank for access to the safety
deposit box and, with the use of such key and the Bank's own guard key, could
open the said box, without the other renter being present.
Since, however, the petitioner cannot be blamed for the filing of the complaint
and no bad faith on its part had been established, the trial court erred in
condemning the petitioner to pay the respondent Bank attorney's fees. To this
extent, the Decision (dispositive portion) of public respondent Court of Appeals
must be modified.
WHEREFORE, the Petition for Review is partially GRANTED by deleting the
award for attorney's fees from the 4 July 1989 Decision of the respondent Court
of Appeals in CA-G.R. CV No. 15150. As modified, and subject to the
pronouncement We made above on the nature of the relationship between the
parties in a contract of lease of safety deposit boxes, the dispositive portion of
the said Decision is hereby AFFIRMED and the instant Petition for Review is
otherwise DENIED for lack of merit.
No pronouncement as to costs.
SO ORDERED.
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
17
defendant's property soon after the institution of the action. In the same cross-
action the defendant also sought compensation for damages incident to the
shutting down of the defendant's rice mill for the period of one hundred seventy
days during which the above-mentioned attachment was in force. The trial judge
disallowed these claims for damages, and from this feature of the decision the
defendant appealed. We are therefore confronted with five distinct appeals in this
record.
Prior to January 17, 1921, the defendant Pablo David has been engaged in
running a rice mill in the municipality of Magalang, in the Province of
Pampanga, a mill which was well patronized by the rice growers of the vicinity
and almost constantly running. On the date stated a fire occurred that destroyed
the mill and its contents, and it was some time before the mill could be rebuilt
and put in operation again. Silvestra Baron, the plaintiff in the first of the actions
before us, is an aunt of the defendant; while Guillermo Baron, the plaintiff in the
other action; is his uncle. In the months of March, April, and May, 1920,
Silvestra Baron placed a quantity of palay in the defendant's mill; and this, in
connection with some that she took over from Guillermo Baron, amounted to
1,012 cavans and 24 kilos. During approximately the same period Guillermo
Baron placed other 1,865 cavans and 43 kilos of palay in the mill. No
compensation has ever been received by Silvestra Baron upon account of the
palay delivered by Guillermo Baron, he has received from the defendant
advancements amounting to P2,800; but apart from this he has not been
compensated. Both the plaintiffs claim that the palay which was delivered by
them to the defendant was sold to the defendant; while the defendant, on the
other hand, claims that the palay was deposited subject to future withdrawal by
the depositors or subject to some future sale which was never effected. He
therefore supposes himself to be relieved from all responsibility by virtue of the
fire of January 17, 1921, already mentioned.
The plaintiff further say that their palay was delivered to the defendant at his
special request, coupled with a promise on his part to pay for the same at the
highest price per cavan at which palay would sell during the year 1920; and they
say that in August of that year the defendant promised to pay them severally the
price of P8.40 per cavan, which was about the top of the market for the season,
provided they would wait for payment until December. The trial judge found that
no such promise had been given; and the incredulity of the court upon this point
seems to us to be justified. A careful examination of the proof, however, leads us
to the conclusion that the plaintiffs did, some time in the early part of August,
1920, make demand upon the defendant for a settlement, which he evaded or
postponed leaving the exact amount due to the plaintiffs undetermined.
It should be stated that the palay in question was place by the plaintiffs in the
defendant's mill with the understanding that the defendant was at liberty to
convert it into rice and dispose of it at his pleasure. The mill was actively
running during the entire season, and as palay was daily coming in from many
customers and as rice was being constantly shipped by the defendant to Manila,
or other rice markets, it was impossible to keep the plaintiffs' palay segregated.
In fact the defendant admits that the plaintiffs' palay was mixed with that of
others. In view of the nature of the defendant's activities and the way in which
the palay was handled in the defendant's mill, it is quite certain that all of the
plaintiffs' palay, which was put in before June 1, 1920, been milled and disposed
of long prior to the fire of January 17, 1921. Furthermore, the proof shows that
when the fire occurred there could not have been more than about 360 cavans of
palay in the mill, none of which by any reasonable probability could have been
any part of the palay delivered by the plaintiffs. Considering the fact that the
defendant had thus milled and doubtless sold the plaintiffs' palay prior to the date
of the fire, it result that he is bound to account for its value, and his liability was
not extinguished by the occurence of the fire. In the briefs before us it seems to
have been assumed by the opposing attorneys that in order for the plaintiffs to
recover, it is necessary that they should be able to establish that the plaintiffs'
palay was delivered in the character of a sale, and that if, on the contrary, the
defendant should prove that the delivery was made in the character of deposit,
the defendant should be absolved. But the case does not depend precisely upon
this explicit alternative; for even supposing that the palay may have been
delivered in the character of deposit, subject to future sale or withdrawal at
plaintiffs' election, nevertheless if it was understood that the defendant might
mill the palay and he has in fact appropriated it to his own use, he is of course
bound to account for its value. Under article 1768 of the Civil Code, when the
depository has permission to make use of the thing deposited, the contract loses
18
the character of mere deposit and becomes a loan or a commodatum; and of
course by appropriating the thing, the bailee becomes responsible for its value. In
this connection we wholly reject the defendant's pretense that the palay delivered
by the plaintiffs or any part of it was actually consumed in the fire of January,
1921. Nor is the liability of the defendant in any wise affected by the
circumstance that, by a custom prevailing among rice millers in this country,
persons placing palay with them without special agreement as to price are at
liberty to withdraw it later, proper allowance being made for storage and
shrinkage, a thing that is sometimes done, though rarely.
In view of what has been said it becomes necessary to discover the price which
the defendant should be required to pay for the plaintiffs' palay. Upon this point
the trial judge fixed upon P6.15 per cavan; and although we are not exactly in
agreement with him as to the propriety of the method by which he arrived at this
figure, we are nevertheless of the opinion that, all things considered, the result is
approximately correct. It appears that the price of palay during the months of
April, May, and June, 1920, had been excessively high in the Philippine Islands
and even prior to that period the Government of the Philippine Islands had been
attempting to hold the price in check by executive regulation. The highest point
was touched in this season was apparently about P8.50 per cavan, but the market
began to sag in May or June and presently entered upon a precipitate decline. As
we have already stated, the plaintiffs made demand upon the defendant for
settlement in the early part of August; and, so far as we are able to judge from
the proof, the price of P6.15 per cavan, fixed by the trial court, is about the price
at which the defendant should be required to settle as of that date. It was the date
of the demand of the plaintiffs for settlement that determined the price to be paid
by the defendant, and this is true whether the palay was delivered in the
character of sale with price undetermined or in the character of deposit subject to
use by the defendant. It results that the plaintiffs are respectively entitle to
recover the value of the palay which they had placed with the defendant during
the period referred to, with interest from the date of the filing of their several
complaints.
As already stated, the trial court found that at the time of the fire there were
about 360 cavans of palay in the mill and that this palay was destroyed. His
Honor assumed that this was part of the palay delivered by the plaintiffs, and he
held that the defendant should be credited with said amount. His Honor therefore
deducted from the claims of the plaintiffs their respective proportionate shares of
this amount of palay. We are unable to see the propriety of this feature of the
decision. There were many customers of the defendant's rice mill who had
placed their palay with the defendant under the same conditions as the plaintiffs,
and nothing can be more certain than that the palay which was burned did not
belong to the plaintiffs. That palay without a doubt had long been sold and
marketed. The assignments of error of each of the plaintiffs-appellants in which
this feature of the decision is attacked are therefore well taken; and the appealed
judgments must be modified by eliminating the deductions which the trial court
allowed from the plaintiffs' claims.
The trial judge also allowed a deduction from the claim of the plaintiff
Guillermo Baron of 167 cavans of palay, as indicated in Exhibit 12, 13, 14, and
16. This was also erroneous. These exhibits relate to transactions that occurred
nearly two years after the transactions with which we are here concerned, and
they were offered in evidence merely to show the character of subsequent
transactions between the parties, it appearing that at the time said exhibits came
into existence the defendant had reconstructed his mill and that business
relations with Guillermo Baron had been resumed. The transactions shown by
these exhibits (which relate to palay withdrawn by the 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
19
plaintiff and the levy of the same upon the defendant's rice mill. It appears that
about two and one-half months after said action was begun, the plaintiff,
Guillermo Baron, asked for an attachment to be issued against the property of the
defendant; and to procure the issuance of said writ the plaintiff made affidavit to
the effect that the defendant was disposing, or attempting the plaintiff. Upon this
affidavit an attachment was issued as prayed, and on March 27, 1924, it was
levied upon the defendant's rice mill, and other property, real and
personal. 1awph!l.net
Upon attaching the property the sheriff closed the mill and placed it in the care
of a deputy. Operations were not resumed until September 13, 1924, when the
attachment was dissolved by an order of the court and the defendant was
permitted to resume control. At the time the attachment was levied there were, in
the bodega, more than 20,000 cavans of palay belonging to persons who held
receipts therefor; and in order to get this grain away from the sheriff, twenty-four
of the depositors found it necessary to submit third-party claims to the sheriff.
When these claims were put in the sheriff notified the plaintiff that a bond in the
amount of P50,000 must be given, otherwise the grain would be released. The
plaintiff, being unable or unwilling to give this bond, the sheriff surrendered the
palay to the claimants; but the attachment on the rice mill was maintained until
September 13, as above stated, covering a period of one hundred seventy days
during which the mill was idle. The ground upon which the attachment was
based, as set forth in the plaintiff's affidavit was that the defendant was disposing
or attempting to dispose of his property for the purpose of defrauding the
plaintiff. That this allegation was false is clearly apparent, and not a word of
proof has been submitted in support of the assertion. On the contrary, the
defendant testified that at the time this attachment was secured he was solvent
and could have paid his indebtedness to the plaintiff if judgment had been
rendered against him in ordinary course. His financial conditions was of course
well known to the plaintiff, who is his uncle. The defendant also states that he
had not conveyed away any of his property, nor had intended to do so, for the
purpose of defrauding the plaintiff. We have before us therefore a case of a
baseless attachment, recklessly sued out upon a false affidavit and levied upon
the defendant's property to his great and needless damage. That the act of the
plaintiff in suing out the writ was wholly unjustifiable is perhaps also indicated
in the circumstance that the attachment was finally dissolved upon the motion of
the plaintiff himself.
The defendant testified that his mill was accustomed to clean from 400 to 450
cavans of palay per day, producing 225 cavans of rice of 57 kilos each. The price
charged for cleaning each cavan rice was 30 centavos. The defendant also stated
that the expense of running the mill per day was from P18 to P25, and that the
net profit per day on the mill was more than P40. As the mill was not
accustomed to run on Sundays and holiday, we estimate that the defendant lost
the profit that would have been earned on not less than one hundred forty work
days. Figuring his profits at P40 per day, which would appear to be a
conservative estimate, the actual net loss resulting from his failure to operate the
mill during the time stated could not have been less than P5,600. The
reasonableness of these figures is also indicated in the fact that the twenty-four
customers who intervened with third-party claims took out of
the camarin 20,000 cavans of palay, practically all of which, in the ordinary
course of events, would have been milled in this plant by the defendant. And of
course other grain would have found its way to this mill if it had remained open
during the one hundred forty days when it was closed.
But this is not all. When the attachment was dissolved and the mill again opened,
the defendant found that his customers had become scattered and could not be
easily gotten back. So slow, indeed, was his patronage in returning that during
the remainder of the year 1924 the defendant was able to mill scarcely more than
the grain belonging to himself and his brothers; and even after the next season
opened many of his old customers did not return. Several of these individuals,
testifying as witnesses in this case, stated that, owing to the unpleasant
experience which they had in getting back their grain from the sheriff to the mill
of the defendant, though they had previously had much confidence in him.
As against the defendant's proof showing the facts above stated the plaintiff
submitted no evidence whatever. We are therefore constrained to hold that the
defendant was damaged by the attachment to the extent of P5,600, in profits lost
by the closure of the mill, and to the extent of P1,400 for injury to the good-will
20
of his business, making a total of P7,000. For this amount the defendant must
recover judgment on his cross-complaint.
The trial court, in dismissing the defendant's cross-complaint for damages
resulting from the wrongful suing out of the attachment, suggested that the
closure of the rice mill was a mere act of the sheriff for which the plaintiff was
not responsible and that the defendant might have been permitted by the sheriff
to continue running the mill if he had applied to the sheriff for permission to
operate it. This singular suggestion will not bear a moment's criticism. It was of
course the duty of the sheriff, in levying the attachment, to take the attached
property into his possession, and the closure of the mill was a natural, and even
necessary, consequence of the attachment. For the damage thus inflicted upon
the defendant the plaintiff is undoubtedly responsible.
One feature of the cross-complaint consist in the claim of the defendant (cross-
complaint) for the sum of P20,000 as damages caused to the defendant by the
false and alleged malicious statements contained in the affidavit upon which the
attachment was procured. The additional sum of P5,000 is also claimed as
exemplary damages. It is clear that with respect to these damages the cross-
action cannot be maintained, for the reason that the affidavit in question was
used in course of a legal proceeding for the purpose of obtaining a legal remedy,
and it is therefore privileged. But though the affidavit is not actionable as a
libelous publication, this fact in no obstacle to the maintenance of an action to
recover the damage resulting from the levy of the attachment.
Before closing this opinion a word should be said upon the point raised in the
first assignment of error of Pablo David as defendant in case R. G. No. 26949. In
this connection it appears that the deposition of Guillermo Baron was presented
in court as evidence and was admitted as an exhibit, without being actually read
to the court. It is supposed in the assignment of error now under consideration
that the deposition is not available as evidence to the plaintiff because it was not
actually read out in court. This connection is not well founded. It is true that in
section 364 of the Code of Civil Procedure it is said that a deposition, once
taken, may be read by either party and will then be deemed the evidence of the
party reading it. The use of the word "read" in this section finds its explanation
of course in the American practice of trying cases for the most part before juries.
When a case is thus tried the actual reading of the deposition is necessary in
order that the jurymen may become acquainted with its contents. But in courts of
equity, and in all courts where judges have the evidence before them for perusal
at their pleasure, it is not necessary that the deposition should be actually read
when presented as evidence.
From what has been said it result that judgment of the court below must be
modified with respect to the amounts recoverable by the respective plaintiffs in
the two actions R. G. Nos. 26948 and 26949 and must be reversed in respect to
the disposition of the cross-complaint interposed by the defendant in case R. G.
No. 26949, with the following result: In case R. G. No. 26948 the plaintiff
Silvestra Baron will recover of the Pablo David the sum of P6,227.24, with
interest from November 21, 1923, the date of the filing of her complaint, and
with costs. In case R. G. No. 26949 the plaintiff Guillermo Baron will recover of
the defendant Pablo David the sum of P8,669.75, with interest from January 9,
1924. In the same case the defendant Pablo David, as plaintiff in the cross-
complaint, will recover of Guillermo Baron the sum of P7,000, without costs. So
ordered.
Avanceña, C.J., Johnson, Malcolm, Villamor, Romualdez and Villa-Real, JJ.,
concur.
Separate Opinions
JOHNS, J., dissenting and concurring:
The plaintiff Silvestra Baron is the aunt of the defendant, and Guillermo Baron,
the plaintiff in the other action, is his uncle. There is no dispute as to the amount
of palay which each delivered to the mill of the defendant. Owing to the fact that
they were relatives and that the plaintiffs reposed special reposed special trust
and confidence in the defendant, who was their nephew, they were not as careful
and prudent in their business dealings with him as they should have been.
Plaintiffs allege that their respective palay was delivered to the defendant at his
mill with the understanding and agreement between them that they should
21
receive the highest market price for the palay for that season, which was P8.50
per cavan. They further allege that about August first they made another contract
in and by which he promised and agreed to pay them P8.40 per cavan for their
palay, in consideration of which they agreed to extend the time for payment to
the first of December of that year. The amount of palay is not in dispute, and the
defendant admits that it was delivered to his mill, but he claims that he kept it on
deposit and as bailee without hire for the plaintiffs and at their own risk, and that
the mill was burned down, and that at the time of the fire, plaintiffs' palay was in
the mill. The lower court found as a fact that there was no merit in that defense,
and that there was but little, if any, palay in the mill at the time of the fire and
that in truth and in fact that defense was based upon perjured testimony.
The two cases were tried separately in the court below, but all of the evidence in
the case was substituted and used in the other. Both plaintiffs testified to the
making of the respective contracts as alleged in their complaint; to wit, that they
delivered the palay to the defendant with the express understanding and
agreement that he would pay them for the palay the highest market price for the
season, and to the making of the second contract about the first of August, in
which they had a settlement, and that the defendant then agreed to pay them
P8.40 per cavan, such payment to be made on December first. It appears that the
highest market price for palay for that season was P8.50 per cavan. The
defendant denied the making of either one of those contracts, and offered no
other evidence on that question. That is to say, we have the evidence of both
Silvestra Baron and Guillermo Baron to the making of those contracts, which is
denied by the defendant only. Plaintiffs' evidence is also corroborated by the
usual and customary manner in which the growers sell their palay. That is to say,
it is their custom to sell the palay at or about the time it is delivered at the mill
and as soon as it is made ready for market in the form of rice. As stated the lower
court found as a fact that the evidence of the defendants as to plaintiffs' palay
being in the mill at the time of the fire was not worthy of belief, and that in legal
effect it was a manufactured defense. Yet, strange as it may seem, both the lower
court and this court have found as a fact that upon the question of the alleged
contracts, the evidence for the defendant is true and entitled to more weight than
the evidence of both plaintiffs which is false.
It appears that the plaintiff Silvestra Baron is an old lady about 80 years of age arouse the suspicion of any customers the defendant ever had, and shake their
and the aunt of the defendant, and Guillermo Baron is the uncle. Under the confidence in his business honor and integrity, and destroy any goodwill which
theory of the lower court and of this court, both of them at all the time during the he ever did have. Under such conditions, it would be strange that the defendant
high prices held their palay in defendant's mill at their own risk, and that upon would have any customers left. He is not entitled to any compensation for the
that point the evidence of the defendant, standing alone is entitled to more loss of goodwill, and P5,000 should be the very limit of the amount of his
weight and is more convincing than the combined evidence of the two plaintiffs. damages for the wrongful attachment, and upon that point I vigorously dissent.
In the very nature of things, if defendant's evidence upon that point is true, it In all other respects, I agree with the majority opinion.
stands to reason that, following the custom of growers, the plaintiffs would have
sold their palay during the period of high prices, and would not have waited until
it dropped from P8.50 per cavan to P6.15 per cavan about the first of August.
Upon that question, both the weight and the credibility of the evidence is with
the plaintiffs, and they should have judgment for the full amount of their palay
on the basis of P8.40 per cavan. For such reason, I vigorously dissent from the
majority opinion.

I frankly concede that the attachment was wrongful, and that it should never
have been levied. It remained in force for a period of one hundred and seventy
days at which time it was released on motion of the plaintiffs. The defendant
now claims, and the majority opinion has allowed him, damages for that full
period, exclusive of Sundays, at the rate, of P40 per day, found to be the net
profit for the operation of the rice mill. It further appears, and this court finds,
that the defendant was a responsible man, and that he had ample property out G.R. No. 179419               January 12, 2011
which to satisfy plaintiffs' claim. Assuming that to be true, there was no valid
reason why he could not had given a counter bond and released the attachment. DURBAN APARTMENTS CORPORATION, doing business under the
Upon the theory of the majority opinion, if the plaintiffs had not released the name and style of City Garden Hotel, Petitioner,
attachment, they would still be liable to the defendant at the rate of P40 per day vs.
up to the present time. When the mill was attached, if he was in a position to do PIONEER INSURANCE AND SURETY CORPORATION, Respondent.
so, it was the duty of the defendant to give a counter bond and release the
attachment and resume its operation. The majority opinion also allowed the DECISION
defendant P1,400 "for injury to the goodwill of his business." The very fact that
after a delay of about four years, both of the plaintiffs were compelled to bring to NACHURA, J.:
their respective actions against the defendant to recover from him on a just and
meritorious claim, as found by this court and the lower court, and the further fact For review is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No.
that after such long delay, the defendant has sought to defeat the actions by a 86869, which affirmed the decision2 of the Regional Trial Court (RTC), Branch
sham and manufactured defense, as found by this and the lower court, would 66, Makati City, in Civil Case No. 03-857, holding petitioner Durban

22
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 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
23
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 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
24
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.:
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;
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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.
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.
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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 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
27
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.

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.

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