Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-66826 August 19, 1988

BANK OF THE PHILIPPINE ISLANDS, petitioner,

vs.
THE INTERMEDIATE APPELLATE COURT and ZSHORNACK respondents.

Pacis & Reyes Law Office for petitioner.

Ernesto T. Zshornack, Jr. for private respondent.

CORTES, J.:

The original parties to this case were Rizaldy T. Zshornack and the Commercial
Bank and Trust Company of the Philippines [hereafter referred to as "COMTRUST."]
In 1980, the Bank of the Philippine Islands (hereafter referred to as BPI absorbed
COMTRUST through a corporate merger, and was substituted as party to the case.

Rizaldy Zshornack initiated proceedings on June 28,1976 by filing in the Court of

First Instance of Rizal — Caloocan City a complaint against COMTRUST alleging
four causes of action. Except for the third cause of action, the CFI ruled in favor of
Zshornack. The bank appealed to the Intermediate Appellate Court which modified
the CFI decision absolving the bank from liability on the fourth cause of action. The
pertinent portions of the judgment, as modified, read:

IN VIEW OF THE FOREGOING, the Court renders judgment as

follows:

1. Ordering the defendant COMTRUST to restore to the dollar savings

account of plaintiff (No. 25-4109) the amount of U.S $1,000.00 as of
October 27, 1975 to earn interest together with the remaining balance
of the said account at the rate fixed by the bank for dollar deposits
under Central Bank Circular 343;

2. Ordering defendant COMTRUST to return to the plaintiff the amount

of U.S. $3,000.00 immediately upon the finality of this decision, without
interest for the reason that the said amount was merely held in custody
for safekeeping, but was not actually deposited with the defendant
COMTRUST because being cash currency, it cannot by law be
deposited with plaintiffs dollar account and defendant's only obligation
is to return the same to plaintiff upon demand;

xxx xxx xxx

 5. Ordering defendant COMTRUST to pay plaintiff in the amount of
P8,000.00 as damages in the concept of litigation expenses and
attorney's fees suffered by plaintiff as a result of the failure of the
defendant bank to restore to his (plaintiffs) account the amount of U.S.
$1,000.00 and to return to him (plaintiff) the U.S. $3,000.00 cash left for
safekeeping.

Costs against defendant COMTRUST.

SO ORDERED. [Rollo, pp. 47-48.]

Undaunted, the bank comes to this Court praying that it be totally absolved from any
liability to Zshornack. The latter not having appealed the Court of Appeals decision,
the issues facing this Court are limited to the bank's liability with regard to the first
and second causes of action and its liability for damages.

1. We first consider the first cause of action, On the dates material to this case,
Rizaldy Zshornack and his wife, Shirley Gorospe, maintained in COMTRUST,
Quezon City Branch, a dollar savings account and a peso current account.

On October 27, 1975, an application for a dollar draft was accomplished by Virgilio
V. Garcia, Assistant Branch Manager of COMTRUST Quezon City, payable to a
certain Leovigilda D. Dizon in the amount of $1,000.00. In the application, Garcia
indicated that the amount was to be charged to Dollar Savings Acct. No. 25-4109,
the savings account of the Zshornacks; the charges for commission, documentary
stamp tax and others totalling P17.46 were to be charged to Current Acct. No.
210465-29, again, the current account of the Zshornacks. There was no indication of
the name of the purchaser of the dollar draft.

On the same date, October 27,1975, COMTRUST, under the signature of Virgilio V.
Garcia, issued a check payable to the order of Leovigilda D. Dizon in the sum of US
$1,000 drawn on the Chase Manhattan Bank, New York, with an indication that it
was to be charged to Dollar Savings Acct. No. 25-4109.

When Zshornack noticed the withdrawal of US$1,000.00 from his account, he

demanded an explanation from the bank. In answer, COMTRUST claimed that the
peso value of the withdrawal was given to Atty. Ernesto Zshornack, Jr., brother of
Rizaldy, on October 27, 1975 when he (Ernesto) encashed with COMTRUST a
cashier's check for P8,450.00 issued by the Manila Banking Corporation payable to
Ernesto.

Upon consideration of the foregoing facts, this Court finds no reason to disturb the
ruling of both the trial court and the Appellate Court on the first cause of action.
Petitioner must be held liable for the unauthorized withdrawal of US$1,000.00 from
private respondent's dollar account.

In its desperate attempt to justify its act of withdrawing from its depositor's savings
account, the bank has adopted inconsistent theories. First, it still maintains that the
peso value of the amount withdrawn was given to Atty. Ernesto Zshornack, Jr. when
the latter encashed the Manilabank Cashier's Check. At the same time, the bank
claims that the withdrawal was made pursuant to an agreement where Zshornack
allegedly authorized the bank to withdraw from his dollar savings account such
amount which, when converted to pesos, would be needed to fund his peso current
account. If indeed the peso equivalent of the amount withdrawn from the dollar
account was credited to the peso current account, why did the bank still have to pay
Ernesto?

At any rate, both explanations are unavailing. With regard to the first explanation,
petitioner bank has not shown how the transaction involving the cashier's check is
related to the transaction involving the dollar draft in favor of Dizon financed by the
withdrawal from Rizaldy's dollar account. The two transactions appear entirely
independent of each other. Moreover, Ernesto Zshornack, Jr., possesses a
personality distinct and separate from Rizaldy Zshornack. Payment made to Ernesto
cannot be considered payment to Rizaldy.

As to the second explanation, even if we assume that there was such an agreement,
the evidence do not show that the withdrawal was made pursuant to it. Instead, the
record reveals that the amount withdrawn was used to finance a dollar draft in favor
of Leovigilda D. Dizon, and not to fund the current account of the Zshornacks. There
is no proof whatsoever that peso Current Account No. 210-465-29 was ever credited
with the peso equivalent of the US$1,000.00 withdrawn on October 27, 1975 from
Dollar Savings Account No. 25-4109.

2. As for the second cause of action, the complaint filed with the trial court alleged
that on December 8, 1975, Zshornack entrusted to COMTRUST, thru Garcia, US
$3,000.00 cash (popularly known as greenbacks) for safekeeping, and that the
agreement was embodied in a document, a copy of which was attached to and made
part of the complaint. The document reads:

Makati Cable Address:

Philippines "COMTRUST"

COMMERCIAL BANK AND TRUST COMPANY

of the Philippines

Quezon City Branch

Decembe
r 8, 1975

MR. RIZALDY T. ZSHORNACK

&/OR MRS SHIRLEY E. ZSHORNACK

Sir/Madam:
 We acknowledged (sic) having received from you today
the sum of US DOLLARS: THREE THOUSAND ONLY
(US$3,000.00) for safekeeping.

Re
cei
ve
d
by:

(Sg
d.)
VI
RG
ILI
O
V.
GA
RC
IA

It was also alleged in the complaint that despite demands, the bank refused to return
the money.

In its answer, COMTRUST averred that the US$3,000 was credited to Zshornack's
peso current account at prevailing conversion rates.

It must be emphasized that COMTRUST did not deny specifically under oath the
authenticity and due execution of the above instrument.

During trial, it was established that on December 8, 1975 Zshornack indeed

delivered to the bank US $3,000 for safekeeping. When he requested the return of
the money on May 10, 1976, COMTRUST explained that the sum was disposed of in
this manner: US$2,000.00 was sold on December 29, 1975 and the peso proceeds
amounting to P14,920.00 were deposited to Zshornack's current account per deposit
slip accomplished by Garcia; the remaining US$1,000.00 was sold on February 3,
1976 and the peso proceeds amounting to P8,350.00 were deposited to his current
account per deposit slip also accomplished by Garcia.

Aside from asserting that the US$3,000.00 was properly credited to Zshornack's
current account at prevailing conversion rates, BPI now posits another ground to
defeat private respondent's claim. It now argues that the contract embodied in the
document is the contract of depositum (as defined in Article 1962, New Civil Code),
which banks do not enter into. The bank alleges that Garcia exceeded his powers
when he entered into the transaction. Hence, it is claimed, the bank cannot be liable
under the contract, and the obligation is purely personal to Garcia.

Before we go into the nature of the contract entered into, an important point which
arises on the pleadings, must be considered.
The second cause of action is based on a document purporting to be signed by
COMTRUST, a copy of which document was attached to the complaint. In short, the
second cause of action was based on an actionable document. It was therefore
incumbent upon the bank to specifically deny under oath the due execution of the
document, as prescribed under Rule 8, Section 8, if it desired: (1) to question the
authority of Garcia to bind the corporation; and (2) to deny its capacity to enter into
such contract. [See, E.B. Merchant v. International Banking Corporation, 6 Phil. 314
(1906).] No sworn answer denying the due execution of the document in question, or
questioning the authority of Garcia to bind the bank, or denying the bank's capacity
to enter into the contract, was ever filed. Hence, the bank is deemed to have
admitted not only Garcia's authority, but also the bank's power, to enter into the
contract in question.

In the past, this Court had occasion to explain the reason behind this procedural
requirement.

The reason for the rule enunciated in the foregoing authorities will, we
think, be readily appreciated. In dealing with corporations the public at
large is bound to rely to a large extent upon outward appearances. If a
man is found acting for a corporation with the external indicia of
authority, any person, not having notice of want of authority, may
usually rely upon those appearances; and if it be found that the
directors had permitted the agent to exercise that authority and thereby
held him out as a person competent to bind the corporation, or had
acquiesced in a contract and retained the benefit supposed to have
been conferred by it, the corporation will be bound, notwithstanding the
actual authority may never have been granted

... Whether a particular officer actually possesses the authority which

he assumes to exercise is frequently known to very few, and the proof
of it usually is not readily accessible to the stranger who deals with the
corporation on the faith of the ostensible authority exercised by some
of the corporate officers. It is therefore reasonable, in a case where an
officer of a corporation has made a contract in its name, that the
corporation should be required, if it denies his authority, to state such
defense in its answer. By this means the plaintiff is apprised of the fact
that the agent's authority is contested; and he is given an opportunity to
adduce evidence showing either that the authority existed or that the
contract was ratified and approved. [Ramirez v. Orientalist Co. and
Fernandez, 38 Phil. 634, 645- 646 (1918).]

Petitioner's argument must also be rejected for another reason. The practical effect
of absolving a corporation from liability every time an officer enters into a contract
which is beyond corporate powers, even without the proper allegation or proof that
the corporation has not authorized nor ratified the officer's act, is to cast corporations
in so perfect a mold that transgressions and wrongs by such artificial beings become
impossible [Bissell v. Michigan Southern and N.I.R. Cos 22 N.Y 258 (1860).] "To say
that a corporation has no right to do unauthorized acts is only to put forth a very plain
truism but to say that such bodies have no power or capacity to err is to impute to
them an excellence which does not belong to any created existence with which we
are acquainted. The distinction between power and right is no more to be lost sight
of in respect to artificial than in respect to natural persons." [Ibid.]

Having determined that Garcia's act of entering into the contract binds the
corporation, we now determine the correct nature of the contract, and its legal
consequences, including its enforceability.

The document which embodies the contract states that the US$3,000.00 was
received by the bank for safekeeping. The subsequent acts of the parties also show
that the intent of the parties was really for the bank to safely keep the dollars and to
return it to Zshornack at a later time, Thus, Zshornack demanded the return of the
money on May 10, 1976, or over five months later.

The above arrangement is that contract defined under Article 1962, New Civil Code,
which reads:

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
of 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.

Note that the object of the contract between Zshornack and COMTRUST was foreign
exchange. Hence, the transaction was covered by Central Bank Circular No. 20,
Restrictions on Gold and Foreign Exchange Transactions, promulgated on
December 9, 1949, which was in force at the time the parties entered into the
transaction involved in this case. The circular provides:

xxx xxx xxx

2. Transactions in the assets described below and all dealings in them

of whatever nature, including, where applicable their exportation and
importation, shall NOT be effected, except with respect to deposit
accounts included in sub-paragraphs (b) and (c) of this paragraph,
when such deposit accounts are owned by and in the name of, banks.

(a) Any and all assets, provided they are held through, in,
or with banks or banking institutions located in the
Philippines, including money, checks, drafts, bullions
bank drafts, deposit accounts (demand, time and
savings), all debts, indebtedness or obligations, financial
brokers and investment houses, notes, debentures,
stocks, bonds, coupons, bank acceptances, mortgages,
pledges, liens or other rights in the nature of
security, expressed in foreign currencies, or if payable
abroad, irrespective of the currency in which they are
expressed, and belonging to any person, firm,
partnership, association, branch office, agency, company
or other unincorporated body or corporation residing or
located within the Philippines;
 (b) Any and all assets of the kinds included and/or
described in subparagraph (a) above, whether or not held
through, in, or with banks or banking institutions, and
existent within the Philippines, which belong to any
person, firm, partnership, association, branch office,
agency, company or other unincorporated body or
corporation not residing or located within the Philippines;

(c) Any and all assets existent within the Philippines

including money, checks, drafts, bullions, bank drafts, all
debts, indebtedness or obligations, financial securities
commonly dealt in by bankers, brokers and investment
houses, notes, debentures, stock, bonds, coupons, bank
acceptances, mortgages, pledges, liens or other rights in
the nature of security expressed in foreign currencies, or
if payable abroad, irrespective of the currency in which
they are expressed, and belonging to any person, firm,
partnership, association, branch office, agency, company
or other unincorporated body or corporation residing or
located within the Philippines.

xxx xxx xxx

4. (a) All receipts of foreign exchange shall be sold daily to the Central

Bank by those authorized to deal in foreign exchange. All receipts of
foreign exchange by any person, firm, partnership, association, branch
office, agency, company or other unincorporated body or corporation
shall be sold to the authorized agents of the Central Bank by
the recipients within one business day following the receipt of such
foreign exchange. Any person, firm, partnership, association, branch
office, agency, company or other unincorporated body or corporation,
residing or located within the Philippines, who acquires on and after the
date of this Circular foreign exchange shall not, unless licensed by the
Central Bank, dispose of such foreign exchange in whole or in part, nor
receive less than its full value, nor delay taking ownership thereof
except as such delay is customary; Provided, further, That within one
day upon taking ownership, or receiving payment, of foreign exchange
the aforementioned persons and entities shall sell such foreign
exchange to designated agents of the Central Bank.

xxx xxx xxx

8. Strict observance of the provisions of this Circular is enjoined; and

any person, firm or corporation, foreign or domestic, who being bound
to the observance thereof, or of such other rules, regulations or
directives as may hereafter be issued in implementation of this
Circular, shall fail or refuse to comply with, or abide by, or shall violate
the same, shall be subject to the penal sanctions provided in the
Central Bank Act.
 xxx xxx xxx

Paragraph 4 (a) above was modified by Section 6 of Central Bank Circular No. 281,
Regulations on Foreign Exchange, promulgated on November 26, 1969 by limiting
its coverage to Philippine residents only. Section 6 provides:

SEC. 6. All receipts of foreign exchange by any resident person, firm,

company or corporation shall be sold to authorized agents of the
Central Bank by the recipients within one business day following the
receipt of such foreign exchange. Any resident person, firm, company
or corporation residing or located within the Philippines, who acquires
foreign exchange shall not, unless authorized by the Central Bank,
dispose of such foreign exchange in whole or in part, nor receive less
than its full value, nor delay taking ownership thereof except as such
delay is customary; Provided, That, within one business day upon
taking ownership or receiving payment of foreign exchange the
aforementioned persons and entities shall sell such foreign exchange
to the authorized agents of the Central Bank.

As earlier stated, the document and the subsequent acts of the parties show that
they intended the bank to safekeep the foreign exchange, and return it later to
Zshornack, who alleged in his complaint that he is a Philippine resident. The parties
did not intended to sell the US dollars to the Central Bank within one business day
from receipt. Otherwise, the contract of depositum would never have been entered
into at all.

Since the mere safekeeping of the greenbacks, without selling them to the Central
Bank within one business day from receipt, is a transaction which is not authorized
by CB Circular No. 20, it must be considered as one which falls under the general
class of prohibited transactions. Hence, pursuant to Article 5 of the Civil Code, it is
void, having been executed against the provisions of a mandatory/prohibitory law.
More importantly, it affords neither of the parties a cause of action against the other.
"When the nullity proceeds from the illegality of the cause or object of the contract,
and the act constitutes a criminal offense, both parties being in pari delicto, they shall
have no cause of action against each other. . ." [Art. 1411, New Civil Code.] The only
remedy is one on behalf of the State to prosecute the parties for violating the law.

We thus rule that Zshornack cannot recover under the second cause of action.

3. Lastly, we find the P8,000.00 awarded by the courts a quo as damages in the
concept of litigation expenses and attorney's fees to be reasonable. The award is
sustained.

WHEREFORE, the decision appealed from is hereby MODIFIED. Petitioner is

ordered to restore to the dollar savings account of private respondent the amount of
US$1,000.00 as of October 27, 1975 to earn interest at the rate fixed by the bank for
dollar savings deposits. Petitioner is further ordered to pay private respondent the
amount of P8,000.00 as damages. The other causes of action of private respondent
are ordered dismissed.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-17585             June 5, 1922

GREGORIO DELA PEÑA, plaintiff-appellant,

vs.
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellee.
Fisher and DeWitt for appellant.
Acting Attorney-General Tuason for appellee.

MALCOLM, J.:

The purpose of this action is to determine the right, if any, of Gregorio de la Peña,
the sole heir of the late Father Agustin dela Peña, to $18,945.35, Mexican currency,
deposited in the Insular Treasury in 1901 by the military authorities of the United
States as funds seized from the insurgent forces. The case was tried before the
Honorable Manuel Camus, sitting in the Court of First Instance Iloilo, who rendered
judgment dismissing the complaint, with costs. Plaintiff appeals.

In June, 1898, Father Agustin de la Peña deposited $18,945.31, Mexican currency,

in the Iloilo branch of the Hongkong and Shanghai Banking Corporation. The money
was withdrawn on May 29, 1900, but was redeposited on the same day. On
December 10, 1900, this money was seized by the military authorities of the United
States. It was deposited in the Insular Treasury, first as a special fund, but later was
covered into the general funds of the government.

In 1907, the Roman Catholic Bishop of Jaro brought action against Gregorio dela
Peña as administrator of the property of the deceased Father Agustin de la Peña to
recover the sum of $6,641, Mexican currency, deposited with Father De la Peña as
the trustee of a charitable bequest. But the Supreme Court held that the money was
forcibly taken from the Hongkong and Shanghai bank by the armed forces of the
United States during the war of the insurrection, and that, consequently, Father de la
Peña was not responsible for its loss. (Roman Catholic Bishop of Jaro vs. De la
Peña [1913], 26 Phil., 144.) In 1919, the Philippine Legislature passed Act No. 2802,
authorizing the heirs or representatives of the late Agustin de la Peña to bring suit
against the Government of the Philippine Islands, to determine the rights of the heirs
of Father De la Peña to the money which had been confiscated by the military
forces.

There is some dispute as to whether or not the funds in question constituted church
funds or personal funds of Father De la Peña.

It is admitted that Father De la Peña occupied, during the years 1898 to 1901, the
position of ecclesiasstical governor of the Diocese of Jaro. It is also established that
$6,641, Mexican currency, had been placed in the hands of Father De la Peña, as
trustee of a charitable bequest made by Antonio Rodriguez for the construction of a
leper hospital. (Roman Catholic Bishop of Jaro vs. De la Peña, supra.) It is further
established by the testimony of Father Gregorio Rosales, clerk and acting secretary
of Father De la Peña, that money to the amount of about #13,000, Mexican currency,
was collected for the Bishop of the Diocese of Iloilo, by Father De la Peña from three
priests, and deposited in the bank. Father Rosales admitted, however, that a part of
the money so deposited might have constituted personal funds of Father De la Peña.
The reason why Father De la Peña deposited the money in the bank in his own
name and not in the name of the Church, according to this witness, was this: "Should
the Bishop quarrel with him, he would appropriate the money and would not give it to
the Bishop; so that when later he was removed from the position of Vicar-General
and the delivery of the money was demanded, he refused to do so, and still later he
was captured; moreover, it was not proper that that money be deposited in the name
of the Church or of the Bishop because at that time there was war."

The issue is also sharply drawn between the claimant and the Government as to
whether or not the funds in question were insurgent funds.

As stated, the money was seized by the military authorities on December 10, 1900.
On December 26 following, Captain Wotherspoon, Collector of Customs, requested
authority from the Assistant Adjutant General, Department of the Visayas, to turn into
the Treasury of the Islands three sums of money, including the $18,945.31, Mex.,
deposited in the Hongkong and Shanghai Banking Corporation to the credit of Father
Agustin de la Peña. On December 28 following, Assistant Adjutant General Noble,
by command of Brigadier General Hughes, returned answer that the moneys
mentioned in the communication could be deposited as a special deposit and
transferred to the treasury of the Islands "it being clearly shown that they were funds
pertaining to the insurgent forces." During this time, Father De La Peña was under
arrest by the military authorities as a political prisoner, and had been made to
execute an assignment of the money standing to his credit in the bank. On January
4, 1901, Captain Glenn, who was instrumental in seizing the money, replying to a
letter of Collector of Customs Wotherspoon, said that the money deposited with the
Hongkong and Shanghai Banking Corporation in the name and to the credit of
Agustin de la Peña, "according to the documentary evidence, on file in this office,
belongs to those in insurrection against the United States Government. This fact is
acknowledged by the said Agustin dela Peña over his own signature and in his own
handwriting." The money was in fact paid into the Treasury of the Philippine Islands
on January 24, 1901, on account of "Insurgent Seized Funds, Miscellaneous."

To make out his case, appellant relies on six propositions of law and fact. Appellant's
first proposition is that plaintiff is the legal successor to the rights for the late Agustin
de la Pena. This is not denied. Appellant's second proposition is that the fund in
question was taken by duress from the deceased and is now in the Insular Treasury.
This, likewise, is not denied. Appellant's third proposition is that the evidence shows
that the funds in question were not insurgent funds. All of the evidence before us
shows that the money was either church funds, as shown by the testimony of Father
Rosales, or insurgent funds, as shown by the documentary evidence, and the
admissions to the military authorities by Father De la Peña. Appellant's fourth
proposition is that the officers of the United States military forces were without
authority to confiscate private property. There is in the record no evidence on this
point, and even if there were, we do not think that it would be conclusive of the case.
Appellant's fifth proposition is that the trial court was not warranted in admitting
evidence on behalf of the Catholic Bishop of Jaro. This is a point which need not be
resolved, for, in the first place, the witness, Father Rosales, was used both by the
plaintiff and the defense, and no objection to his testimony relative to the source of
the fund seems to have been made in the Court of Fist Instance. Appellant's sixth
proposition is that the evidence does not warrant the conclusion that the funds
deposited by the deceased were not his property. This, of course, is the decisive
issue of the case, which counsel argues ingeniously although not convincingly. The
question here is not one of illusive presumptions but one of cold facts. Facts
essential to the existence of a right, although negative in nature, have not been
proved by the party claiming the right.
The conclusions we reach after a close study of the record are that it has not been
proved by a preponderance of the evidence (1) that Father Agustin de la Peña was
in reality the owner of the funds in question; and (2) that this sum of money was not
actually insurgent funds.

These two conclusions might offhand be considered as inconsistent. They are not if
it be remembered that the money was collected and deposited by Father Agustin de
la Peña in his own name, to be true, but yet for the benefit of the Church, and that,
thereafter, Father De la Peña may have conceived the idea of making use of the
money in order to advance the revolutionary cause. Under either assumption,
plaintiff has not proved his right to any portion of the funds deposited in the Insular
Treasury in 1901, by the military authorities of the United States, as funds seized
from the insurgent forces, within the meaning of these phrases as used in Enabling
Act No. 2802.

Judgment must be affirmed, with costs against the appellant. So ordered.

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

In its answer, petitioner argued that the complaint failed to aver

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

During trial, petitioner challenged FMICI's subrogation to Crispa's

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

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

judgment for respondent FMICI, thus:

WHEREFORE, premises considered, judgment is hereby rendered in

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

1.  The amount of P669,500.00, representing actual damages plus

compounded (sic);

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

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

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

4.  Plus, cost of suit.

Defendant Triple V is not therefore precluded from taking

appropriate action against defendant Armando Madridano.

SO ORDERED.

Obviously displeased, petitioner appealed to the Court of Appeals

reiterating its argument that it was not a depositary of the subject
car and that it exercised due diligence and prudence in the safe
keeping of the vehicle, in handling the car-napping incident and in
the supervision of its employees. It further argued that there was
no valid subrogation of rights between Crispa and respondent
FMICI.

In a decision dated October 21, 2003,[2]cralaw the Court of Appeals

dismissed petitioner's appeal and affirmed the appealed decision of
the trial court, thus:
WHEREFORE, based on the foregoing premises, the instant appeal
is hereby DISMISSED. Accordingly, the assailed June 22, 2001
Decision of the RTC of Makati City - Branch 148 in Civil Case No.
98-838 is AFFIRMED.

SO ORDERED.

In so dismissing the appeal and affirming the appealed decision,

the appellate court agreed with the findings and conclusions of the
trial court that: (a) petitioner was a depositary of the subject
vehicle; (b) petitioner was negligent in its duties as a depositary
thereof and as an employer of the valet attendant; and (c) there
was a valid subrogation of rights between Crispa and respondent
FMICI.

Hence, petitioner's present recourse.

We agree with the two (2) courts below.

When De Asis entrusted the car in question to petitioners valet

attendant while eating at petitioner's Kamayan Restaurant, the
former expected the car's safe return at the end of her meal. Thus,
petitioner was constituted as a depositary of the same car.
Petitioner cannot evade liability by arguing that neither a contract
of deposit nor that of insurance, guaranty or surety for the loss of
the car was constituted when De Asis availed of its free valet
parking service.

In a contract of deposit, a person receives an object belonging to

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

Specious is petitioner's insistence that the valet parking claim stub

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

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

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

must not be allowed to use its parking claim stub's exclusionary
stipulation as a shield from any responsibility for any loss or
damage to vehicles or to the valuables contained therein. Here, it
is evident that De Asis deposited the car in question with the
petitioner as part of the latter's enticement for customers by
providing them a safe parking space within the vicinity of its
restaurant. In a very real sense, a safe parking space is an added
attraction to petitioner's restaurant business because customers
are thereby somehow assured that their vehicle are safely kept,
rather than parking them elsewhere at their own risk. Having
entrusted the subject car to petitioner's valet attendant, customer
De Asis, like all of petitioner's customers, fully expects the security
of her car while at petitioner's premises/designated parking areas
and its safe return at the end of her visit at petitioner's restaurant.

Petitioner's argument that there was no valid subrogation of rights

between Crispa and FMICI because theft was not a risk insured
against under FMICI's Insurance Policy No. PC-5975 holds no
water.

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.
 SECOND DIVISION

G.R. No. 126780             February 17, 2005

YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA

PAYAM, petitioners,
vs.
THE COURT OF APPEALS and MAURICE McLOUGHLIN, respondents.

DECISION

TINGA, J.:

The primary question of interest before this Court is the only legal issue in the case:
It is whether a hotel may evade liability for the loss of items left with it for
safekeeping by its guests, by having these guests execute written waivers holding
the establishment or its employees free from blame for such loss in light of Article
2003 of the Civil Code which voids such waivers.

Before this Court is a Rule 45 petition for review of the Decision1 dated 19 October

1995 of the Court of Appeals which affirmed the Decision2 dated 16 December 1991
of the Regional Trial Court (RTC), Branch 13, of Manila, finding YHT Realty
Corporation, Brunhilda Mata-Tan (Tan), Erlinda Lainez (Lainez) and Anicia Payam
(Payam) jointly and solidarily liable for damages in an action filed by Maurice
McLoughlin (McLoughlin) for the loss of his American and Australian dollars
deposited in the safety deposit box of Tropicana Copacabana Apartment Hotel,
owned and operated by YHT Realty Corporation.

The factual backdrop of the case follow.

Private respondent McLoughlin, an Australian businessman-philanthropist, used to

stay at Sheraton Hotel during his trips to the Philippines prior to 1984 when he met
Tan. Tan befriended McLoughlin by showing him around, introducing him to
important people, accompanying him in visiting impoverished street children and
assisting him in buying gifts for the children and in distributing the same to charitable
institutions for poor children. Tan convinced McLoughlin to transfer from Sheraton
Hotel to Tropicana where Lainez, Payam and Danilo Lopez were employed. Lopez
served as manager of the hotel while Lainez and Payam had custody of the keys for
the safety deposit boxes of Tropicana. Tan took care of McLoughlin's booking at the
Tropicana where he started staying during his trips to the Philippines from December
1984 to September 1987.3
On 30 October 1987, McLoughlin arrived from Australia and registered with
Tropicana. He rented a safety deposit box as it was his practice to rent a safety
deposit box every time he registered at Tropicana in previous trips. As a tourist,
McLoughlin was aware of the procedure observed by Tropicana relative to its safety
deposit boxes. The safety deposit box could only be opened through the use of two
keys, one of which is given to the registered guest, and the other remaining in the
possession of the management of the hotel. When a registered guest wished to open
his safety deposit box, he alone could personally request the management who then
would assign one of its employees to accompany the guest and assist him in
opening the safety deposit box with the two keys. 4

McLoughlin allegedly placed the following in his safety deposit box: Fifteen
Thousand US Dollars (US$15,000.00) which he placed in two envelopes, one
envelope containing Ten Thousand US Dollars (US$10,000.00) and the other
envelope Five Thousand US Dollars (US$5,000.00); Ten Thousand Australian
Dollars (AUS$10,000.00) which he also placed in another envelope; two (2) other
envelopes containing letters and credit cards; two (2) bankbooks; and a checkbook,
arranged side by side inside the safety deposit box. 5

On 12 December 1987, before leaving for a brief trip to Hongkong, McLoughlin

opened his safety deposit box with his key and with the key of the management and
took therefrom the envelope containing Five Thousand US Dollars (US$5,000.00),
the envelope containing Ten Thousand Australian Dollars (AUS$10,000.00), his
passports and his credit cards.6 McLoughlin left the other items in the box as he did
not check out of his room at the Tropicana during his short visit to Hongkong. When
he arrived in Hongkong, he opened the envelope which contained Five Thousand
US Dollars (US$5,000.00) and discovered upon counting that only Three Thousand
US Dollars (US$3,000.00) were enclosed therein. 7 Since he had no idea whether
somebody else had tampered with his safety deposit box, he thought that it was just
a result of bad accounting since he did not spend anything from that envelope. 8

After returning to Manila, he checked out of Tropicana on 18 December 1987 and left
for Australia. When he arrived in Australia, he discovered that the envelope with Ten
Thousand US Dollars (US$10,000.00) was short of Five Thousand US Dollars
(US$5,000). He also noticed that the jewelry which he bought in Hongkong and
stored in the safety deposit box upon his return to Tropicana was likewise missing,
except for a diamond bracelet.9

When McLoughlin came back to the Philippines on 4 April 1988, he asked Lainez if
some money and/or jewelry which he had lost were found and returned to her or to
the management. However, Lainez told him that no one in the hotel found such
things and none were turned over to the management. He again registered at
Tropicana and rented a safety deposit box. He placed therein one (1) envelope
containing Fifteen Thousand US Dollars (US$15,000.00), another envelope
containing Ten Thousand Australian Dollars (AUS$10,000.00) and other envelopes
containing his traveling papers/documents. On 16 April 1988, McLoughlin requested
Lainez and Payam to open his safety deposit box. He noticed that in the envelope
containing Fifteen Thousand US Dollars (US$15,000.00), Two Thousand US Dollars
(US$2,000.00) were missing and in the envelope previously containing Ten
Thousand Australian Dollars (AUS$10,000.00), Four Thousand Five Hundred
Australian Dollars (AUS$4,500.00) were missing. 10

When McLoughlin discovered the loss, he immediately confronted Lainez and

Payam who admitted that Tan opened the safety deposit box with the key assigned
to him.11 McLoughlin went up to his room where Tan was staying and confronted her.
Tan admitted that she had stolen McLoughlin's key and was able to open the safety
deposit box with the assistance of Lopez, Payam and Lainez. 12 Lopez also told
McLoughlin that Tan stole the key assigned to McLoughlin while the latter was
asleep.13

McLoughlin requested the management for an investigation of the incident. Lopez

got in touch with Tan and arranged for a meeting with the police and McLoughlin.
When the police did not arrive, Lopez and Tan went to the room of McLoughlin at
Tropicana and thereat, Lopez wrote on a piece of paper a promissory note dated 21
April 1988. The promissory note reads as follows:

I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and

US$2,000.00 or its equivalent in Philippine currency on or before May 5, 1988. 14

Lopez requested Tan to sign the promissory note which the latter did and Lopez also
signed as a witness. Despite the execution of promissory note by Tan, McLoughlin
insisted that it must be the hotel who must assume responsibility for the loss he
suffered. However, Lopez refused to accept the responsibility relying on the
conditions for renting the safety deposit box entitled "Undertaking For the Use Of
Safety Deposit Box,"15 specifically paragraphs (2) and (4) thereof, to wit:

2. To release and hold free and blameless TROPICANA APARTMENT HOTEL from
any liability arising from any loss in the contents and/or use of the said deposit box
for any cause whatsoever, including but not limited to the presentation or use thereof
by any other person should the key be lost;

...

4. To return the key and execute the RELEASE in favor of TROPICANA

APARTMENT HOTEL upon giving up the use of the box. 16

On 17 May 1988, McLoughlin went back to Australia and he consulted his lawyers as
to the validity of the abovementioned stipulations. They opined that the stipulations
are void for being violative of universal hotel practices and customs. His lawyers
prepared a letter dated 30 May 1988 which was signed by McLoughlin and sent to
President Corazon Aquino.17 The Office of the President referred the letter to the
Department of Justice (DOJ) which forwarded the same to the Western Police
District (WPD).18

After receiving a copy of the indorsement in Australia, McLoughlin came to the

Philippines and registered again as a hotel guest of Tropicana. McLoughlin went to
Malacaňang to follow up on his letter but he was instructed to go to the DOJ. The
DOJ directed him to proceed to the WPD for documentation. But McLoughlin went
back to Australia as he had an urgent business matter to attend to.
For several times, McLoughlin left for Australia to attend to his business and came
back to the Philippines to follow up on his letter to the President but he failed to
obtain any concrete assistance.19

McLoughlin left again for Australia and upon his return to the Philippines on 25
August 1989 to pursue his claims against petitioners, the WPD conducted an
investigation which resulted in the preparation of an affidavit which was forwarded to
the Manila City Fiscal's Office. Said affidavit became the basis of preliminary
investigation. However, McLoughlin left again for Australia without receiving the
notice of the hearing on 24 November 1989. Thus, the case at the Fiscal's Office
was dismissed for failure to prosecute. Mcloughlin requested the reinstatement of the
criminal charge for theft. In the meantime, McLoughlin and his lawyers wrote letters
of demand to those having responsibility to pay the damage. Then he left again for
Australia.

Upon his return on 22 October 1990, he registered at the Echelon Towers at Malate,
Manila. Meetings were held between McLoughlin and his lawyer which resulted to
the filing of a complaint for damages on 3 December 1990 against YHT Realty
Corporation, Lopez, Lainez, Payam and Tan (defendants) for the loss of
McLoughlin's money which was discovered on 16 April 1988. After filing the
complaint, McLoughlin left again for Australia to attend to an urgent business matter.
Tan and Lopez, however, were not served with summons, and trial proceeded with
only Lainez, Payam and YHT Realty Corporation as defendants.

After defendants had filed their Pre-Trial Brief admitting that they had previously
allowed and assisted Tan to open the safety deposit box, McLoughlin filed
an Amended/Supplemental Complaint20 dated 10 June 1991 which included another
incident of loss of money and jewelry in the safety deposit box rented by McLoughlin
in the same hotel which took place prior to 16 April 1988. 21 The trial court admitted
the Amended/Supplemental Complaint.

During the trial of the case, McLoughlin had been in and out of the country to attend
to urgent business in Australia, and while staying in the Philippines to attend the
hearing, he incurred expenses for hotel bills, airfare and other transportation
expenses, long distance calls to Australia, Meralco power expenses, and expenses
for food and maintenance, among others.22

After trial, the RTC of Manila rendered judgment in favor of McLoughlin, the
dispositive portion of which reads:

WHEREFORE, above premises considered, judgment is hereby rendered by this

Court in favor of plaintiff and against the defendants, to wit:

1. Ordering defendants, jointly and severally, to pay plaintiff the sum of

US$11,400.00 or its equivalent in Philippine Currency of ₱342,000.00, more
or less, and the sum of AUS$4,500.00 or its equivalent in Philippine Currency
of ₱99,000.00, or a total of ₱441,000.00, more or less, with 12% interest from
April 16 1988 until said amount has been paid to plaintiff (Item 1, Exhibit CC);
 2. Ordering defendants, jointly and severally to pay plaintiff the sum of
₱3,674,238.00 as actual and consequential damages arising from the loss of
his Australian and American dollars and jewelries complained against and in
prosecuting his claim and rights administratively and judicially (Items II, III, IV,
V, VI, VII, VIII, and IX, Exh. "CC");

3. Ordering defendants, jointly and severally, to pay plaintiff the sum of

₱500,000.00 as moral damages (Item X, Exh. "CC");

4. Ordering defendants, jointly and severally, to pay plaintiff the sum of

₱350,000.00 as exemplary damages (Item XI, Exh. "CC");

5. And ordering defendants, jointly and severally, to pay litigation expenses in

the sum of ₱200,000.00 (Item XII, Exh. "CC");

6. Ordering defendants, jointly and severally, to pay plaintiff the sum of

₱200,000.00 as attorney's fees, and a fee of ₱3,000.00 for every appearance;
and

7. Plus costs of suit.

SO ORDERED.23

The trial court found that McLoughlin's allegations as to the fact of loss and as to the
amount of money he lost were sufficiently shown by his direct and straightforward
manner of testifying in court and found him to be credible and worthy of belief as it
was established that McLoughlin's money, kept in Tropicana's safety deposit box,
was taken by Tan without McLoughlin's consent. The taking was effected through the
use of the master key which was in the possession of the management. Payam and
Lainez allowed Tan to use the master key without authority from McLoughlin. The
trial court added that if McLoughlin had not lost his dollars, he would not have gone
through the trouble and personal inconvenience of seeking aid and assistance from
the Office of the President, DOJ, police authorities and the City Fiscal's Office in his
desire to recover his losses from the hotel management and Tan. 24

As regards the loss of Seven Thousand US Dollars (US$7,000.00) and jewelry worth
approximately One Thousand Two Hundred US Dollars (US$1,200.00) which
allegedly occurred during his stay at Tropicana previous to 4 April 1988, no claim
was made by McLoughlin for such losses in his complaint dated 21 November 1990
because he was not sure how they were lost and who the responsible persons were.
But considering the admission of the defendants in their pre-trial brief that on three
previous occasions they allowed Tan to open the box, the trial court opined that it
was logical and reasonable to presume that his personal assets consisting of Seven
Thousand US Dollars (US$7,000.00) and jewelry were taken by Tan from the safety
deposit box without McLoughlin's consent through the cooperation of Payam and
Lainez.25

The trial court also found that defendants acted with gross negligence in the
performance and exercise of their duties and obligations as innkeepers and were
therefore liable to answer for the losses incurred by McLoughlin. 26
Moreover, the trial court ruled that paragraphs (2) and (4) of the "Undertaking For
The Use Of Safety Deposit Box" are not valid for being contrary to the express
mandate of Article 2003 of the New Civil Code and against public policy. 27 Thus,
there being fraud or wanton conduct on the part of defendants, they should be
responsible for all damages which may be attributed to the non-performance of their
contractual obligations.28

The Court of Appeals affirmed the disquisitions made by the lower court except as to
the amount of damages awarded. The decretal text of the appellate court's decision
reads:

THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED but

modified as follows:

The appellants are directed jointly and severally to pay the plaintiff/appellee the
following amounts:

1) ₱153,200.00 representing the peso equivalent of US$2,000.00 and

AUS$4,500.00;

2) ₱308,880.80, representing the peso value for the air fares from Sidney [sic]
to Manila and back for a total of eleven (11) trips;

3) One-half of ₱336,207.05 or ₱168,103.52 representing payment to

Tropicana Apartment Hotel;

4) One-half of ₱152,683.57 or ₱76,341.785 representing payment to Echelon

Tower;

5) One-half of ₱179,863.20 or ₱89,931.60 for the taxi xxx transportation from

the residence to Sidney [sic] Airport and from MIA to the hotel here in Manila,
for the eleven (11) trips;

6) One-half of ₱7,801.94 or ₱3,900.97 representing Meralco power expenses;

7) One-half of ₱356,400.00 or ₱178,000.00 representing expenses for food

and maintenance;

8) ₱50,000.00 for moral damages;

9) ₱10,000.00 as exemplary damages; and

10) ₱200,000 representing attorney's fees.

With costs.

SO ORDERED.29

Unperturbed, YHT Realty Corporation, Lainez and Payam went to this Court in this
appeal by certiorari.
Petitioners submit for resolution by this Court the following issues: (a) whether the
appellate court's conclusion on the alleged prior existence and subsequent loss of
the subject money and jewelry is supported by the evidence on record; (b) whether
the finding of gross negligence on the part of petitioners in the performance of their
duties as innkeepers is supported by the evidence on record; (c) whether the
"Undertaking For The Use of Safety Deposit Box" admittedly executed by private
respondent is null and void; and (d) whether the damages awarded to private
respondent, as well as the amounts thereof, are proper under the circumstances. 30

The petition is devoid of merit.

It is worthy of note that the thrust of Rule 45 is the resolution only of questions of law
and any peripheral factual question addressed to this Court is beyond the bounds of
this mode of review.

Petitioners point out that the evidence on record is insufficient to prove the fact of
prior existence of the dollars and the jewelry which had been lost while deposited in
the safety deposit boxes of Tropicana, the basis of the trial court and the appellate
court being the sole testimony of McLoughlin as to the contents thereof. Likewise,
petitioners dispute the finding of gross negligence on their part as not supported by
the evidence on record.

We are not persuaded.l^vvphi1.net We adhere to the findings of the trial court as

affirmed by the appellate court that the fact of loss was established by the credible
testimony in open court by McLoughlin. Such findings are factual and therefore
beyond the ambit of the present petition.1awphi1.nét

The trial court had the occasion to observe the demeanor of McLoughlin while
testifying which reflected the veracity of the facts testified to by him. On this score,
we give full credence to the appreciation of testimonial evidence by the trial court
especially if what is at issue is the credibility of the witness. The oft-repeated
principle is that where the credibility of a witness is an issue, the established rule is
that great respect is accorded to the evaluation of the credibility of witnesses by the
trial court.31 The trial court is in the best position to assess the credibility of witnesses
and their testimonies because of its unique opportunity to observe the witnesses
firsthand and note their demeanor, conduct and attitude under grilling examination. 32

We are also not impressed by petitioners' argument that the finding of gross
negligence by the lower court as affirmed by the appellate court is not supported by
evidence. The evidence reveals that two keys are required to open the safety deposit
boxes of Tropicana. One key is assigned to the guest while the other remains in the
possession of the management. If the guest desires to open his safety deposit box,
he must request the management for the other key to open the same. In other
words, the guest alone cannot open the safety deposit box without the assistance of
the management or its employees. With more reason that access to the safety
deposit box should be denied if the one requesting for the opening of the safety
deposit box is a stranger. Thus, in case of loss of any item deposited in the safety
deposit box, it is inevitable to conclude that the management had at least a hand in
the consummation of the taking, unless the reason for the loss is force majeure.
Noteworthy is the fact that Payam and Lainez, who were employees of Tropicana,
had custody of the master key of the management when the loss took place. In fact,
they even admitted that they assisted Tan on three separate occasions in opening
McLoughlin's safety deposit box.33 This only proves that Tropicana had prior
knowledge that a person aside from the registered guest had access to the safety
deposit box. Yet the management failed to notify McLoughlin of the incident and
waited for him to discover the taking before it disclosed the matter to him. Therefore,
Tropicana should be held responsible for the damage suffered by McLoughlin by
reason of the negligence of its employees.

The management should have guarded against the occurrence of this incident
considering that Payam admitted in open court that she assisted Tan three times in
opening the safety deposit box of McLoughlin at around 6:30 A.M. to 7:30 A.M. while
the latter was still asleep.34 In light of the circumstances surrounding this case, it is
undeniable that without the acquiescence of the employees of Tropicana to the
opening of the safety deposit box, the loss of McLoughlin's money could and should
have been avoided.

The management contends, however, that McLoughlin, by his act, made its
employees believe that Tan was his spouse for she was always with him most of the
time. The evidence on record, however, is bereft of any showing that McLoughlin
introduced Tan to the management as his wife. Such an inference from the act of
McLoughlin will not exculpate the petitioners from liability in the absence of any
showing that he made the management believe that Tan was his wife or was duly
authorized to have access to the safety deposit box. Mere close companionship and
intimacy are not enough to warrant such conclusion considering that what is involved
in the instant case is the very safety of McLoughlin's deposit. If only petitioners
exercised due diligence in taking care of McLoughlin's safety deposit box, they
should have confronted him as to his relationship with Tan considering that the latter
had been observed opening McLoughlin's safety deposit box a number of times at
the early hours of the morning. Tan's acts should have prompted the management to
investigate her relationship with McLoughlin. Then, petitioners would have exercised
due diligence required of them. Failure to do so warrants the conclusion that the
management had been remiss in complying with the obligations imposed upon hotel-
keepers under the law.

Under Article 1170 of the New Civil Code, those who, in the performance of their
obligations, are guilty of negligence, are liable for damages. As to who shall bear the
burden of paying damages, Article 2180, paragraph (4) of the same Code provides
that the owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the branches in
which the latter are employed or on the occasion of their functions. Also, this Court
has ruled that if an employee is found negligent, it is presumed that the employer
was negligent in selecting and/or supervising him for it is hard for the victim to prove
the negligence of such employer.35 Thus, given the fact that the loss of McLoughlin's
money was consummated through the negligence of Tropicana's employees in
allowing Tan to open the safety deposit box without the guest's consent, both the
assisting employees and YHT Realty Corporation itself, as owner and operator of
Tropicana, should be held solidarily liable pursuant to Article 2193. 36
The issue of whether the "Undertaking For The Use of Safety Deposit Box" executed
by McLoughlin is tainted with nullity presents a legal question appropriate for
resolution in this petition. Notably, both the trial court and the appellate court found
the same to be null and void. We find no reason to reverse their common conclusion.
Article 2003 is controlling, thus:

Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices
to the effect that he is not liable for the articles brought by the guest. Any stipulation
between the hotel-keeper and the guest whereby the responsibility of the former as
set forth in Articles 1998 to 200137 is suppressed or diminished shall be void.

Article 2003 was incorporated in the New Civil Code as an expression of public
policy precisely to apply to situations such as that presented in this case. The hotel
business like the common carrier's business is imbued with public interest. Catering
to the public, hotelkeepers are bound to provide not only lodging for hotel guests and
security to their persons and belongings. The twin duty constitutes the essence of
the business. The law in turn does not allow such duty to the public to be negated or
diluted by any contrary stipulation in so-called "undertakings" that ordinarily appear
in prepared forms imposed by hotel keepers on guests for their signature.

In an early case,38 the Court of Appeals through its then Presiding Justice (later
Associate Justice of the Court) Jose P. Bengzon, ruled that to hold hotelkeepers or
innkeeper liable for the effects of their guests, it is not necessary that they be
actually delivered to the innkeepers or their employees. It is enough that such effects
are within the hotel or inn.39 With greater reason should the liability of the hotelkeeper
be enforced when the missing items are taken without the guest's knowledge and
consent from a safety deposit box provided by the hotel itself, as in this case.

Paragraphs (2) and (4) of the "undertaking" manifestly contravene Article 2003 of the
New Civil Code for they allow Tropicana to be released from liability arising from any
loss in the contents and/or use of the safety deposit box for any cause
whatsoever.40 Evidently, the undertaking was intended to bar any claim against
Tropicana for any loss of the contents of the safety deposit box whether or not
negligence was incurred by Tropicana or its employees. The New Civil Code is
explicit that the responsibility of the hotel-keeper shall extend to loss of, or injury to,
the personal property of the guests even if caused by servants or employees of the
keepers of hotels or inns as well as by strangers, except as it may proceed from
any force majeure.41 It is the loss through force majeure that may spare the hotel-
keeper from liability. In the case at bar, there is no showing that the act of the thief or
robber was done with the use of arms or through an irresistible force to qualify the
same as force majeure.42

Petitioners likewise anchor their defense on Article 2002 43 which exempts the hotel-
keeper from liability if the loss is due to the acts of his guest, his family, or visitors.
Even a cursory reading of the provision would lead us to reject petitioners'
contention. The justification they raise would render nugatory the public interest
sought to be protected by the provision. What if the negligence of the employer or its
employees facilitated the consummation of a crime committed by the registered
guest's relatives or visitor? Should the law exculpate the hotel from liability since the
loss was due to the act of the visitor of the registered guest of the hotel? Hence, this
provision presupposes that the hotel-keeper is not guilty of concurrent negligence or
has not contributed in any degree to the occurrence of the loss. A depositary is not
responsible for the loss of goods by theft, unless his actionable negligence
contributes to the loss.44

In the case at bar, the responsibility of securing the safety deposit box was shared
not only by the guest himself but also by the management since two keys are
necessary to open the safety deposit box. Without the assistance of hotel
employees, the loss would not have occurred. Thus, Tropicana was guilty of
concurrent negligence in allowing Tan, who was not the registered guest, to open the
safety deposit box of McLoughlin, even assuming that the latter was also guilty of
negligence in allowing another person to use his key. To rule otherwise would result
in undermining the safety of the safety deposit boxes in hotels for the management
will be given imprimatur to allow any person, under the pretense of being a family
member or a visitor of the guest, to have access to the safety deposit box without
fear of any liability that will attach thereafter in case such person turns out to be a
complete stranger. This will allow the hotel to evade responsibility for any liability
incurred by its employees in conspiracy with the guest's relatives and visitors.

Petitioners contend that McLoughlin's case was mounted on the theory of contract,
but the trial court and the appellate court upheld the grant of the claims of the latter
on the basis of tort.45 There is nothing anomalous in how the lower courts decided
the controversy for this Court has pronounced a jurisprudential rule that tort liability
can exist even if there are already contractual relations. The act that breaks the
contract may also be tort.46

As to damages awarded to McLoughlin, we see no reason to modify the amounts

awarded by the appellate court for the same were based on facts and law. It is within
the province of lower courts to settle factual issues such as the proper amount of
damages awarded and such finding is binding upon this Court especially if
sufficiently proven by evidence and not unconscionable or excessive. Thus, the
appellate court correctly awarded McLoughlin Two Thousand US Dollars
(US$2,000.00) and Four Thousand Five Hundred Australian dollars (AUS$4,500.00)
or their peso equivalent at the time of payment, 47 being the amounts duly proven by
evidence.48 The alleged loss that took place prior to 16 April 1988 was not
considered since the amounts alleged to have been taken were not sufficiently
established by evidence. The appellate court also correctly awarded the sum of
₱308,880.80, representing the peso value for the air fares from Sydney to Manila
and back for a total of eleven (11) trips; 49 one-half of ₱336,207.05 or ₱168,103.52
representing payment to Tropicana;50 one-half of ₱152,683.57 or ₱76,341.785
representing payment to Echelon Tower; 51 one-half of ₱179,863.20 or ₱89,931.60 for
the taxi or transportation expenses from McLoughlin's residence to Sydney Airport
and from MIA to the hotel here in Manila, for the eleven (11) trips; 52 one-half of
₱7,801.94 or ₱3,900.97 representing Meralco power expenses; 53 one-half of
₱356,400.00 or ₱178,000.00 representing expenses for food and maintenance. 54

The amount of ₱50,000.00 for moral damages is reasonable. Although trial courts
are given discretion to determine the amount of moral damages, the appellate court
may modify or change the amount awarded when it is palpably and scandalously
excessive.l^vvphi1.net Moral damages are not intended to enrich a complainant at
the expense of a defendant.l^vvphi1.net They are awarded only to enable the injured
party to obtain means, diversion or amusements that will serve to alleviate the moral
suffering he has undergone, by reason of defendants' culpable action. 55

The awards of ₱10,000.00 as exemplary damages and ₱200,000.00 representing

attorney's fees are likewise sustained.

WHEREFORE, foregoing premises considered, the Decision of the Court of Appeals

dated 19 October 1995 is hereby AFFIRMED. Petitioners are directed, jointly and
severally, to pay private respondent the following amounts:

(1) US$2,000.00 and AUS$4,500.00 or their peso equivalent at the time of

payment;

(2) ₱308,880.80, representing the peso value for the air fares from Sydney to
Manila and back for a total of eleven (11) trips;

(3) One-half of ₱336,207.05 or ₱168,103.52 representing payment to

Tropicana Copacabana Apartment Hotel;

(4) One-half of ₱152,683.57 or ₱76,341.785 representing payment to Echelon

Tower;

(5) One-half of ₱179,863.20 or ₱89,931.60 for the taxi or transportation

expense from McLoughlin's residence to Sydney Airport and from MIA to the
hotel here in Manila, for the eleven (11) trips;

(6) One-half of ₱7,801.94 or ₱3,900.97 representing Meralco power

expenses;

(7) One-half of ₱356,400.00 or ₱178,200.00 representing expenses for food

and maintenance;

(8) ₱50,000.00 for moral damages;

(9) ₱10,000.00 as exemplary damages; and

(10) ₱200,000 representing attorney's fees.

With costs.

SO ORDERED.