G. R. No.

142591 - April 30, 2003

JOSEPH CHAN, WILSON CHAN and LILY

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

SANDOVAL-GUTIERREZ, J.:

A judgment of default does not automatically imply

admission by the defendant of the facts and causes of
action of the plaintiff. The Rules of Court require the latter
to adduce evidence in support of his allegations as an
indispensable condition before final judgment could be
given in his favor.1 The trial judge has to evaluate the
allegations with the highest degree of objectivity and
certainty. He may sustain an allegation for which the
plaintiff has adduced sufficient evidence, otherwise, he has
to reject it. In the case at bar, judicial review is imperative
to avert the award of damages that is unreasonable and
without evidentiary support.

Assailed in this petition for review under Rule 45 of the

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

The essential antecedents are as follows:

On July 28, 1976, Bonifacio S. Maceda, Jr., herein

respondent, obtained a P7.3 million loan from the
Development Bank of the Philippines for the construction
of his New Gran Hotel Project in Tacloban City.

Thereafter, on September 29, 1976, respondent entered

into a building construction contract with Moreman
Builders Co., Inc., (Moreman). They agreed that the
construction would be finished not later than December
22, 1977.

Respondent purchased various construction materials and

equipment in Manila. Moreman, in turn, deposited them in
1
the warehouse of Wilson and Lily Chan, herein petitioners.
The deposit was free of charge.

Unfortunately, Moreman failed to finish the construction of

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

On November 28, 1978, the CFI rendered its

Decision4 rescinding the contract between Moreman and
respondent and awarding to the latter P445,000.00 as
actual, moral and liquidated damages; P20,000.00
representing the increase in the construction materials; and
P35,000.00 as attorney's fees. Moreman interposed an
appeal to the Court of Appeals but the same was dismissed
on March 7, 1989 for being dilatory. He elevated the case to
this Court via a petition for review on certiorari. In a
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

2
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

3
bars from the same construction site, upon order of
petitioners. Corresponding delivery receipts were presented
and marked as Exhibits "A", "A-1", "A-2", "A-3" and "A-4".21

Deponent Alfredo Maceda testified that he was

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

Deponent Damiano Nadera testified on the current cost of

the architectural and structural requirements needed to
complete the construction of the New Gran Hotel.23

On December 26, 1996, the trial court rendered a decision

in favor of respondent, thus:

"WHEREFORE, foregoing considered, judgment is hereby

rendered ordering defendants to jointly and severally pay
plaintiff:

1) P1,930,000.00 as actual damages;

2) P2,549,000.00 as actual damages;

3) Moral damages of P150,000.00; exemplary damages of

P50,000.00 and attorney's fees of P50,000.00 and to pay
the costs.

"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,

4
1977 shows (sic) deposit of assorted materials; thirdly, that
there were items in the warehouse as of February 3, 1978
as shown in the balance sheet of Moreman's stock clerk
Jose Cedilla.

"Plaintiff is entitled to payment of damages for the

overhauling of materials from the construction site by Lily
Chan without the knowledge and consent of its owner.
Article 20 of the Civil Code provides:

'Art. 20. Every person who contrary to law, willfully or

negligently caused damage to another, shall indemnify the
latter for the same.'

"As to the materials stored inside the bodega of defendant

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

'Art. 21. Any person who willfully caused loss or injury to

another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the
damage.'

"Plaintiff is entitled to payment of actual damages based on

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

"Plaintiff is likewise entitled to payment of 12,500 bags of

cement and 400 bundles of steel bars totaling
P2,549,000.00 (Exhs. "S" & "S-1"; Exhs. "B" & "B-3").

"Defendants should pay plaintiff moral damages of

P150,000.00; exemplary damages of P50,000.00 and
attorney's fees of P50,000.00 and to pay the costs.

"The claim of defendant for payment of damages with

respect to the materials appearing in the balance sheets as
of February 3, 1978 in the amount of P3,286,690.00, not
5
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
Decision affirming in toto the trial court's judgment,
25

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. 6061,
Rollo).'

"The Court affirms the above findings.

6
"Well settled is the rule that 'absent any proper reason to
depart from the rule, factual conclusions reached by the
trial court are not to be disturbed (People vs. Dupali, 230
SCRA 62).' Hence, in the absence of any showing that
serious and substantial errors were committed by the lower
court in the appraisal of the evidence, the trial judge's
assessment of the credibility of the witnesses is accorded
great weight and respect (People vs. Jain, 254 SCRA 686).
And, there being absolutely nothing on record to show that
the court a quo overlooked, disregarded, or misinterpreted
facts of weight and significance, its factual findings and
conclusions must be given great weight and should not be
disturbed on appeal.

"WHEREFORE, being in accord with law and evidence, the

appealed decision is hereby AFFIRMED in toto."

Hence, this petition for review on certiorari anchored on the

following grounds:

"I

The Court of Appeals acted with grave abuse of discretion

and under a misapprehension of the law and the facts
when it affirmed in toto the award of actual damages made
by the trial court in favor of respondent in this case.

II

The awards of moral and exemplary damages of the trial

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

III

The award of attorney's fees by the trial court to

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

7
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

8
Court of Appeals are generally binding and conclusive on
this Court.34 The jurisdiction of this Court in a petition for
review on certiorari is limited to reviewing only errors of
law,35 not of fact, unless it is shown, inter alia, that: (1) the
conclusion is a finding grounded on speculations, surmises
or conjectures; (2) the inference is manifestly mistaken,
absurd and impossible; (3) there is grave abuse of
discretion; (4) the judgment is based on misapprehension
of facts; (5) the findings of fact are conflicting; and (6) the
Court of Appeals, in making its findings went beyond the
issues of the case and the same is contrary to the
admission of both parties.36

Petitioners submit that this case is an exception to the

general rule since both the trial court and the Court of
Appeals based their judgments on misapprehension of
facts.

We agree.

At the outset, the case should have been dismissed

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

Even without such serious procedural flaw, the case

should also be dismissed for utter lack of merit.

It must be stressed that respondent's claim for damages is

based on petitioners' failure to return or to release to him
the construction materials and equipment deposited by
9
Moreman to their warehouse. Hence, the essential issues to
be resolved are: (1) Has respondent presented proof that
the construction materials and equipment were actually in
petitioners' warehouse when he asked that the same be
turned over to him? (2) If so, does respondent have the
right to demand the release of the said materials and
equipment or claim for damages?

Under Article 1311 of the Civil Code, contracts are binding

upon the parties (and their assigns and heirs) who execute
them. When there is no privity of contract, there is likewise
no obligation or liability to speak about and thus no cause
of action arises. Specifically, in an action against the
depositary, the burden is on the plaintiff to prove the
bailment or deposit and the performance of conditions
precedent to the right of action.39 A depositary is obliged to
return the thing to the depositor, or to his heirs or
successors, or to the person who may have been
designated in the contract.40

In the present case, the record is bereft of any contract of

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

10
Moreover, respondent also failed to prove that there were
construction materials and equipment in petitioners'
warehouse at the time he made a demand for their return.

Considering that respondent failed to prove (1) the

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

Anent the issue of damages, petitioners are still not liable

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

Considering our findings that there was no contract of

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

As we stressed in the beginning, a judgment of default does

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

WHEREFORE, the petition is GRANTED. The challenged

Decision of the Court of Appeals dated June 17, 1999 is
REVERSED and SET ASIDE. Costs against respondent.

11
SO ORDERED.

Puno, Panganiban, Corona and Carpio Morales, JJ .,

concur.

12
[G.R. No. 160544. February 21, 2005]

TRIPLE-V vs. FILIPINO MERCHANTS

THIRD DIVISION

Gentlemen:

Quoted hereunder, for your information, is a resolution of

this Court dated FEB 21 2005.

G.R. No. 160544 (Triple-V Food Services, Inc. vs. Filipino

Merchants Insurance Company, Inc.)

Assailed in this petition for review on certiorari is the

decision[1]cralaw dated October 21, 2003 of the Court of
Appeals in CA-G.R. CV No. 71223, affirming an earlier
decision of the Regional Trial Court at Makati City, Branch
148, in its Civil Case No. 98-838, an action for damages
thereat filed by respondent Filipino Merchants Insurance,
Company, Inc., against the herein petitioner, Triple-V Food
Services, Inc.

On March 2, 1997, at around 2:15 o'clock in the afternoon,

a certain Mary Jo-Anne De Asis (De Asis) dined at
petitioner's Kamayan Restaurant at 15 West Avenue,
Quezon City. De Asis was using a Mitsubishi Galant Super
Saloon Model 1995 with plate number UBU 955, assigned
to her by her employer Crispa Textile Inc. (Crispa). On said
date, De Asis availed of the valet parking service of
petitioner and entrusted her car key to petitioner's valet
counter. A corresponding parking ticket was issued as
receipt for the car. The car was then parked by petitioner's
valet attendant, a certain Madridano, at the designated
parking area. Few minutes later, Madridano noticed that
the car was not in its parking slot and its key no longer in
the box where valet attendants usually keep the keys of
cars entrusted to them. The car was never recovered.
Thereafter, Crispa filed a claim against its insurer, herein
respondent Filipino Merchants Insurance Company, Inc.
(FMICI). Having indemnified Crispa in the amount of
P669.500 for the loss of the subject vehicle, FMICI, as
subrogee to Crispa's rights, filed with the RTC at Makati

13
City an action for damages against petitioner Triple-V Food
Services, Inc., thereat docketed as Civil Case No. 98-838
which was raffled to Branch 148.

In its answer, petitioner argued that the complaint failed to

aver facts to support the allegations of recklessness and
negligence committed in the safekeeping and custody of the
subject vehicle, claiming that it and its employees wasted
no time in ascertaining the loss of the car and in informing
De Asis of the discovery of the loss. Petitioner further
argued that in accepting the complimentary valet parking
service, De Asis received a parking ticket whereunder it is
so provided that "[Management and staff will not be
responsible for any loss of or damage incurred on the
vehicle nor of valuables contained therein", a provision
which, to petitioner's mind, is an explicit waiver of any
right to claim indemnity for the loss of the car; and that De
Asis knowingly assumed the risk of loss when she allowed
petitioner to park her vehicle, adding that its valet parking
service did not include extending a contract of insurance or
warranty for the loss of the vehicle.

During trial, petitioner challenged FMICI's subrogation to

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

In a decision dated June 22, 2001, the trial court rendered

judgment for respondent FMICI, thus:

WHEREFORE, premises considered, judgment is hereby

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

1. The amount of P669,500.00, representing actual

damages plus compounded (sic);

2. The amount of P30,000.00 as acceptance fee plus the

amount equal to 25% of the total amount due as attorney's
fees;

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

14
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

15
depositary of the same car. Petitioner cannot evade liability
by arguing that neither a contract of deposit nor that of
insurance, guaranty or surety for the loss of the car was
constituted when De Asis availed of its free valet parking
service.

In a contract of deposit, a person receives an object

belonging to another with the obligation of safely keeping it
and returning the same.[3]cralaw A deposit may be
constituted even without any consideration. It is not
necessary that the depositary receives a fee before it
becomes obligated to keep the item entrusted for
safekeeping and to return it later to the depositor.

Specious is petitioner's insistence that the valet parking

claim stub it issued to De Asis contains a clear exclusion of
its liability and operates as an explicit waiver by the
customer of any right to claim indemnity for any loss of or
damage to the vehicle.

The parking claim stub embodying the terms and

conditions of the parking, including that of relieving
petitioner from any loss or damage to the car, is essentially
a contract of adhesion, drafted and prepared as it is by the
petitioner alone with no participation whatsoever on the
part of the customers, like De Asis, who merely adheres to
the printed stipulations therein appearing. While contracts
of adhesion are not void in themselves, yet this Court will
not hesitate to rule out blind adherence thereto if they
prove to be one-sided under the attendant facts and
circumstances.[4]cralaw

Hence, and as aptly pointed out by the Court of Appeals,

petitioner must not be allowed to use its parking claim
stub's exclusionary stipulation as a shield from any
responsibility for any loss or damage to vehicles or to the
valuables contained therein. Here, it is evident that De Asis
deposited the car in question with the petitioner as part of
the latter's enticement for customers by providing them a
safe parking space within the vicinity of its restaurant. In a
very real sense, a safe parking space is an added attraction
to petitioner's restaurant business because customers are
thereby somehow assured that their vehicle are safely kept,
16
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.

17
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.chanroblesvirtualawlibrary chanrobles virtual law
library

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.chanroblesvirtualawlibrary chanrobles
virtual law library

In the year 1898 the books Father De la Peña, as trustee,

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

18
by virtue of such order, was confiscated and turned over to
the Government.chanroblesvirtualawlibrary chanrobles
virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law
library

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.) chanrobles virtual law
library

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.) chanrobles virtual law library

By placing the money in the bank and mixing it with his

personal funds De la Peña did not thereby assume an
obligation different from that under which he would have
lain if such deposit had not been made, nor did he thereby
make himself liable to repay the money at all hazards. If
the had been forcibly taken from his pocket or from his
house by the military forces of one of the combatants
during a state of war, it is clear that under the provisions
of the Civil Code he would have been exempt from
responsibility. The fact that he placed the trust fund in the
19
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.chanroblesvirtualawlibrary chanrobles virtual law
library

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.chanroblesvirtualawlibrary chanrobles virtual law
library

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.chanroblesvirtualawlibrary chanrobles virtual law
library

The judgment is therefore reversed, and it is decreed that

the plaintiff shall take nothing by his
complaint.chanroblesvirtualawlibrary chanrobles virtual
law library

20
Arellano, C.J., Torres and Carson, JJ., concur.

21
G.R. No. 90027 March 3, 1993

CA AGRO-INDUSTRIAL DEVELOPMENT
CORP., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SECURITY
BANK AND TRUST COMPANY, respondents.

Dolorfino & Dominguez Law Offices for petitioner.

Danilo B. Banares for private respondent.

DAVIDE, JR., J.:

Is the contractual relation between a commercial bank and

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

This is the crux of the present controversy.

On 3 July 1979, petitioner (through its President, Sergio

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

22
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.

23
In its Answer with Counterclaim,3 respondent Bank alleged
that the petitioner has no cause of action because of
paragraphs 13 and 14 of the contract of lease (Exhibit "2");
corollarily, loss of any of the items or articles contained in
the box could not give rise to an action against it. It then
interposed a counterclaim for exemplary damages as well
as attorney's fees in the amount of P20,000.00. Petitioner
subsequently filed an answer to the counterclaim.4

In due course, the trial court, now designated as Branch

161 of the Regional Trial Court (RTC) of Pasig, Metro
Manila, rendered a decision5 adverse to the petitioner on 8
December 1986, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is

hereby rendered dismissing plaintiff's complaint.

On defendant's counterclaim, judgment is hereby

rendered ordering plaintiff to pay defendant the
amount of FIVE THOUSAND (P5,000.00) PESOS
as attorney's fees.

With costs against plaintiff.6

The unfavorable verdict is based on the trial court's

conclusion that under paragraphs 13 and 14 of the
contract of lease, the Bank has no liability for the loss of
the certificates of title. The court declared that the said
provisions are binding on the parties.

Its motion for reconsideration7 having been denied,

petitioner appealed from the adverse decision to the
respondent Court of Appeals which docketed the appeal as
CA-G.R. CV No. 15150. Petitioner urged the respondent
Court to reverse the challenged decision because the trial
court erred in (a) absolving the respondent Bank from
liability from the loss, (b) not declaring as null and void, for
being contrary to law, public order and public policy, the
provisions 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

24
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

25
 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 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

26
 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

27
 property, and the depositor cannot gain access
thereto without the consent and active
participation of the company. . . . (citations
omitted).

and a segment from Words and Phrases 18 which

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

Petitioner further argues that conditions 13 and 14 of the

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

After the respondent Bank filed its comment, this Court

gave due course to the petition and required the parties to
simultaneously submit their respective Memoranda.

The petition is partly meritorious.

We agree with the petitioner's contention that the contract

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

28
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
29
 institutions other than building and loan
associations may perform the following services:

(a) Receive in custody funds, documents,

and valuable objects, and rent safety
deposit boxes for the safeguarding of
such effects.

xxx xxx xxx

The banks shall perform the services permitted

under subsections (a), (b) and (c) of this section
as depositories or as agents. . . . 24 (emphasis
supplied)

Note that the primary function is still found within the

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

30
 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
31
 their respective duties or provide for increasing or
limiting the liability of the deposit company,
provided such contract is not in violation of law or
public policy. It must clearly appear that there
actually was such a special contract, however, in
order to vary the ordinary obligations implied by
law from the relationship of the parties; liability of
the deposit company will not be enlarged or
restricted by words of doubtful meaning. The
company, in renting
safe-deposit boxes, cannot exempt itself from
liability for loss of the contents by its own fraud or
negligence or that of its agents or servants, and if
a provision of the contract may be construed as
an attempt to do so, it will be held ineffective for
the purpose. Although it has been held that the
lessor of a safe-deposit box cannot limit its
liability for loss of the contents thereof through its
own negligence, the view has been taken that
such a lessor may limits its liability to some
extent by agreement or stipulation. 30 (citations
omitted)

Thus, we reach the same conclusion which the Court of

Appeals arrived at, that is, that the petition should be
dismissed, but on grounds quite different from those relied
upon by the Court of Appeals. In the instant case, the
respondent Bank's exoneration cannot, contrary to the
holding of the Court of Appeals, be based on or proceed
from a characterization of the impugned contract as a
contract of lease, but rather on the fact that no competent
proof was presented to show that respondent Bank was
aware of the agreement between the petitioner and the
Pugaos to the effect that the certificates of title were
withdrawable from the safety deposit box only upon both
parties' joint signatures, and that no evidence was
submitted to reveal that the loss of the certificates of title
was due to the fraud or negligence of the respondent Bank.
This in turn flows from this Court's determination that the
contract involved was one of deposit. Since both the
petitioner and the Pugaos agreed that each should have
one (1) renter's key, it was obvious that either of them
32
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.

33
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

34
P2,800 which he had advanced to the plaintiff Guillermo
Baron on various occasions. This credit was admitted by
the plaintiff and allowed by the trial court. But the
defendant also interposed a cross-action against Guillermo
Baron in which the defendant claimed compensation for
damages alleged to have Ben suffered by him by reason of
the alleged malicious and false statements made by the
plaintiff against the defendant in suing out an attachment
against the defendant's property soon after the institution
of the action. In the same cross-action the defendant also
sought compensation for damages incident to the shutting
down of the defendant's rice mill for the period of one
hundred seventy days during which the above-mentioned
attachment was in force. The trial judge disallowed these
claims for damages, and from this feature of the decision
the defendant appealed. We are therefore confronted with
five distinct appeals in this record.

Prior to January 17, 1921, the defendant Pablo David has

been engaged in running a rice mill in the municipality of
Magalang, in the Province of Pampanga, a mill which was
well patronized by the rice growers of the vicinity and
almost constantly running. On the date stated a fire
occurred that destroyed the mill and its contents, and it
was some time before the mill could be rebuilt and put in
operation again. Silvestra Baron, the plaintiff in the first of
the actions before us, is an aunt of the defendant; while
Guillermo Baron, the plaintiff in the other action; is his
uncle. In the months of March, April, and May, 1920,
Silvestra Baron placed a quantity of palay in the
defendant's mill; and this, in connection with some that
she took over from Guillermo Baron, amounted to 1,012
cavans and 24 kilos. During approximately the same period
Guillermo Baron placed other 1,865 cavans and 43 kilos of
palay in the mill. No compensation has ever been received
by Silvestra Baron upon account of the palay delivered by
Guillermo Baron, he has received from the defendant
advancements amounting to P2,800; but apart from this he
has not been compensated. Both the plaintiffs claim that
the palay which was delivered by them to the defendant
was sold to the defendant; while the defendant, on the
other hand, claims that the palay was deposited subject to
35
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

36
and doubtless sold the plaintiffs' palay prior to the date of
the fire, it result that he is bound to account for its value,
and his liability was not extinguished by the occurence of
the fire. In the briefs before us it seems to have been
assumed by the opposing attorneys that in order for the
plaintiffs to recover, it is necessary that they should be able
to establish that the plaintiffs' palay was delivered in the
character of a sale, and that if, on the contrary, the
defendant should prove that the delivery was made in the
character of deposit, the defendant should be absolved. But
the case does not depend precisely upon this explicit
alternative; for even supposing that the palay may have
been delivered in the character of deposit, subject to future
sale or withdrawal at plaintiffs' election, nevertheless if it
was understood that the defendant might mill the palay
and he has in fact appropriated it to his own use, he is of
course bound to account for its value. Under article 1768
of the Civil Code, when the depository has permission to
make use of the thing deposited, the contract loses the
character of mere deposit and becomes a loan or
a commodatum; and of course by appropriating the thing,
the bailee becomes responsible for its value. In this
connection we wholly reject the defendant's pretense that
the palay delivered by the plaintiffs or any part of it was
actually consumed in the fire of January, 1921. Nor is the
liability of the defendant in any wise affected by the
circumstance that, by a custom prevailing among rice
millers in this country, persons placing palay with them
without special agreement as to price are at liberty to
withdraw it later, proper allowance being made for storage
and shrinkage, a thing that is sometimes done, though
rarely.

In view of what has been said it becomes necessary to

discover the price which the defendant should be required
to pay for the plaintiffs' palay. Upon this point the trial
judge fixed upon P6.15 per cavan; and although we are not
exactly in agreement with him as to the propriety of the
method by which he arrived at this figure, we are
nevertheless of the opinion that, all things considered, the
result is approximately correct. It appears that the price of
palay during the months of April, May, and June, 1920,
37
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.

38
The trial judge also allowed a deduction from the claim of
the plaintiff Guillermo Baron of 167 cavans of palay, as
indicated in Exhibit 12, 13, 14, and 16. This was also
erroneous. These exhibits relate to transactions that
occurred nearly two years after the transactions with which
we are here concerned, and they were offered in evidence
merely to show the character of subsequent transactions
between the parties, it appearing that at the time said
exhibits came into existence the defendant had
reconstructed his mill and that business relations with
Guillermo Baron had been resumed. The transactions
shown by these exhibits (which relate to palay withdrawn
by the plaintiff from the defendant's mill) were not made
the subject of controversy in either the complaint or the
cross-complaint of the defendant in the second case. They
therefore should not have been taken into account as a
credit in favor of the defendant. Said credit must therefore
be likewise of course be without prejudice to any proper
adjustment of the rights of the parties with respect to these
subsequent transactions that they have heretofore or may
hereafter effect.

The preceding discussion disposes of all vital contentions

relative to the liability of the defendant upon the causes of
action stated in the complaints. We proceed therefore now
to consider the question of the liability of the plaintiff
Guillermo Baron upon the cross-complaint of Pablo David
in case R. G. No. 26949. In this cross-action the defendant
seek, as the stated in the third paragraph of this opinion,
to recover damages for the wrongful suing out of an
attachment by the plaintiff and the levy of the same upon
the defendant's rice mill. It appears that about two and
one-half months after said action was begun, the plaintiff,
Guillermo Baron, asked for an attachment to be issued
against the property of the defendant; and to procure the
issuance of said writ the plaintiff made affidavit to the
effect that the defendant was disposing, or attempting the
plaintiff. Upon this affidavit an attachment was issued as
prayed, and on March 27, 1924, it was levied upon the
defendant's rice mill, and other property, real and
personal. 1awph!l.net

39
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
40
225 cavans of rice of 57 kilos each. The price charged for
cleaning each cavan rice was 30 centavos. The defendant
also stated that the expense of running the mill per day
was from P18 to P25, and that the net profit per day on the
mill was more than P40. As the mill was not accustomed to
run on Sundays and holiday, we estimate that the
defendant lost the profit that would have been earned on
not less than one hundred forty work days. Figuring his
profits at P40 per day, which would appear to be a
conservative estimate, the actual net loss resulting from his
failure to operate the mill during the time stated could not
have been less than P5,600. The reasonableness of these
figures is also indicated in the fact that the twenty-four
customers who intervened with third-party claims took out
of the camarin 20,000 cavans of palay, practically all of
which, in the ordinary course of events, would have been
milled in this plant by the defendant. And of course other
grain would have found its way to this mill if it had
remained open during the one hundred forty days when it
was closed.

But this is not all. When the attachment was dissolved and
the mill again opened, the defendant found that his
customers had become scattered and could not be easily
gotten back. So slow, indeed, was his patronage in
returning that during the remainder of the year 1924 the
defendant was able to mill scarcely more than the grain
belonging to himself and his brothers; and even after the
next season opened many of his old customers did not
return. Several of these individuals, testifying as witnesses
in this case, stated that, owing to the unpleasant
experience which they had in getting back their grain from
the sheriff to the mill of the defendant, though they had
previously had much confidence in him.

As against the defendant's proof showing the facts above

stated the plaintiff submitted no evidence whatever. We are
therefore constrained to hold that the defendant was
damaged by the attachment to the extent of P5,600, in
profits lost by the closure of the mill, and to the extent of
P1,400 for injury to the good-will of his business, making a

41
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

42
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.

G.R. No. 179419 January 12, 2011

43
DURBAN APARTMENTS CORPORATION, doing business
under the name and style of City Garden
Hotel, Petitioner,
vs.
PIONEER INSURANCE AND SURETY
CORPORATION, Respondent.

DECISION

NACHURA, J.:

For review is the Decision1 of the Court of Appeals (CA) in

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

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

On July 22, 2003, [respondent] Pioneer Insurance and

Surety Corporation x x x, by right of subrogation, filed
[with the RTC of Makati City] a Complaint for Recovery of
Damages against [petitioner] Durban Apartments
Corporation, doing business under the name and style of
City Garden Hotel, and [defendant before the RTC] Vicente
Justimbaste x x x. [Respondent averred] that: it is the
insurer for loss and damage of Jeffrey S. See’s [the
insured’s] 2001 Suzuki Grand Vitara x x x with Plate No.
XBH-510 under Policy No. MC-CV-HO-01-0003846-00-D in
the amount of ₱1,175,000.00; on April 30, 2002, See
arrived and checked in at the City Garden Hotel in Makati
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
44
incident to the Operations Division of the Makati City
Police Anti-Carnapping Unit, and a flash alarm was issued;
the Makati City Police Anti-Carnapping Unit investigated
Hotel Security Officer, Ernesto T. Horlador, Jr. x x x and
defendant x x x Justimbaste; See gave his Sinumpaang
Salaysay to the police investigator, and filed a Complaint
Sheet with the PNP Traffic Management Group in Camp
Crame, Quezon City; the Vitara has not yet been recovered
since July 23, 2002 as evidenced by a Certification of Non-
Recovery issued by the PNP TMG; it paid the ₱1,163,250.00
money claim of See and mortgagee ABN AMRO Savings
Bank, Inc. as indemnity for the loss of the Vitara; the
Vitara was lost due to the negligence of [petitioner] Durban
Apartments and [defendant] Justimbaste because it was
discovered during the investigation that this was the
second time that a similar incident of carnapping happened
in the valet parking service of [petitioner] Durban
Apartments and no necessary precautions were taken to
prevent its repetition; [petitioner] Durban Apartments was
wanting in due diligence in the selection and supervision of
its employees particularly defendant x x x Justimbaste;
and defendant x x x Justimbaste and [petitioner] Durban
Apartments failed and refused to pay its valid, just, and
lawful claim despite written demands.

Upon service of Summons, [petitioner] Durban Apartments

and [defendant] Justimbaste filed their Answer with
Compulsory Counterclaim alleging that: See did not check
in at its hotel, on the contrary, he was a guest of a certain
Ching Montero x x x; defendant x x x Justimbaste did not
get the ignition key of See’s Vitara, on the contrary, it was
See who requested a parking attendant to park the Vitara
at any available parking space, and it was parked at the
Equitable Bank parking area, which was within See’s view,
while he and Montero were waiting in front of the hotel;
they made a written denial of the demand of [respondent]
Pioneer Insurance for want of legal basis; valet parking
services are provided by the hotel for the convenience of its
customers looking for a parking space near the hotel
premises; it is a special privilege that it gave to Montero
and See; it does not include responsibility for any losses or
damages to motor vehicles and its accessories in the
45
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

46
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 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.

47
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:

48
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;

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
49
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
50
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.

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

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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
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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 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

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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

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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.

ANTONIO EDUARDO B. NACHURA

Associate Justice

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