FORMAT

Case: Title (sample) | G.R. No: |

Date: | Ponente:
[TOPIC]: [SUB-TOPIC]
DIGESTED BY:

Doctrine (Simplified Take away):

Facts:

Issue:

Ruling:

NOTE: Please paste in order. Base it on the syllabus.

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Sample: Phil. Coconut v. Republic

Re topic and sub-topic; sample:

TOPIC: General Principles

SUB-TOPIC: Eminent Domain

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A. Common Provisions (Articles 1962 to 1967, Civil Code)

✔Case 1: Bank of the Philippine Islands v. IAC | G.R. No: 66826 |

Date: August 19, 1988 | Ponente: Cortes
[TOPIC]: DEPOSIT
[SUB-TOPIC]: General Provisions
DIGESTED BY: Kaye M. Villacrucis

[CLASS DISCUSSION]
● Focus on the pertinent transactions:
○ Contract of Deposit of Foreign Exchange
■ The court however categorized it as a contract of depositum
■ The parties also showed 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.
○ However, the transaction is under the class of prohibited transactions → VOID.
■ 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.

Doctrine (Simplified Take away):

➔ Deposit - when a person receives a thing belonging to another, with the obligation of
safely keeping it and for 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.
(Article 1962 of the New Civil Code)
➔ If the contract is against the provisions of a mandatory/prohibitory law, it is a void
contract. (Article 5 of the Civil Code)
◆ The contract between the parties being void, affords neither of the parties a
cause of action against each other.
➔ 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.
Facts:

Reason why BPI na ang party sa case: BPI absorbed COMSTRUST through a corporate
merger, and was substituted as party to this case.

Rizaldy Zshormack filed before the CFI alleging four causes of action. Since Zshornack did not
appealed to the CA, 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. (Wala man gi mention ug
unsa ang other 2 causes of action, or ako lang ba)

First Cause of Action: Rizaldy T. Zshornack and his wife maintained in COMTRUST a dollar
savings account and a peso current account. An application for a dollar draft was accomplished
by Virgillo Garcia branch manager of COMTRUST payable to a certain Leovigilda Dizon. In the
application, Garcia indicated that the amount was to be charged to the dollar savings account of
the Zshornacks. There was no indication of the name of the purchaser of the dollar draft. On the
same day, Comtrust issued a check payable to the order of Dizon. When Zshornack noticed the
withdrawal from his account, he demanded an explanation from the bank.

The bank’s answer: Comtrust claimed that the peso value of the withdrawal was given
to Atty. Ernesto Zshornack, brother of Rizaldy. When he encashed with COMTRUST a
cashiers check for P8,450 issued by the manila banking corporation payable to Ernesto.

Second Cause of Action [involving deposits]: The complainant filed alleging that Zashornack
entrusted to COMTRUST, thru Garcia $3,000 cash for safekeeping and that the agreement was
embodied in a document. The complainant demanded to return the money, but the bank
refused.

The bank’s answer: When he demanded the return of the money, the money was being
sold, but it was also deposited to Zshornack’s current account in peso ($2,000 for
P14,920 and $1,000 for P8,350)

BPI also argued: The contract embodied in the document is the contract of depositum
(defined in Article 1962 NCC), which banks do not enter into. Garcia exceeded its power,
therefore, the bank cannot be held liable under the contract, and the obligation is purely
personal to Garcia.

Issue:
1. Whether or not the contract between petitioner and respondent bank is a deposit? - YES
2. Whether or not Garcia is personally liable to Zshornack? - NO

Ruling:
1. The contract between Zshornack and the bank, as to the $3,000.00, was a contract
of deposit defined under Art. 1962 of the New Civil Code. The arrangement in this
contract is 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 for 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.
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.

2. The contract between the parties being void, affords neither of the parties a cause
of action against each other. 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:
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 intend 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.
 ✔Case 2: CA Agro-Industrial Development Corp. v. CA & Security Bank and Trust
Company | G.R. No: 90027 |
Date: March 3, 1993 | Ponente: J. Davide
[TOPIC]: DEPOSIT
[SUB-TOPIC]: A. Common Provisions (Articles 1962 to 1967, Civil Code);
Contract to Rent of Safety Deposit Boxes
DIGESTED BY: Earl Guen Padayao
[CLASS DISCUSSION]

Why not lease? No FULL ENJOYMENT of the item. Not a lease, on the side of the depositor, it
cannot be leasing because it does not have FULL CONTROL AND POSSESSION of the box.

What is the difference between this and Sia?

● In Sia, there was a failure to notify. Hence, the liability.
● In this case, no liability is because of lack of evidence.
○ The respondent Bank’s exoneration cannot 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.

Doctrine (Simplified Take away):

Note: The case focused on Article 1975 (special type of deposit), but the rules of 1962 to 1967
was comprehensively explained in passing, viz:
● 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 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.
● In the absence of any stipulation prescribing the degree of diligence required, that of a good
father of a family is to be observed.
● 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.

Facts:

As a general synopsis: The content land titles of a safety deposit box rented by petitioners
which can be opened only with the use of one (1) of two (2) renter’s keys given to the joint
renters and by a guard key in the possession of the bank went missing. Causing a case for
damages.

Petitioner CA Agro-Industrial → through its President, Sergio Aguirre and the spouses Ramon
and Paula Pugao, entered into an agreement. Petitioner purchased from the latter two (2)
parcels of land.

TERMS OF THE AGREEMENT RE THE LAND:

● The titles to the lots shall be transferred to petitioner upon full payment of the purchase
price and that the owner’s copies of certificates of titles thereto.
● [KEY FACT] Such titles 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
petitioners and the spouses upon full payment of the purchase price.

Petitioner then rented a safety deposit box of Security Bank and Trust Company and for this
purpose they signed a contract of lease, which contains inter alia, the following conditions.
[read the following clauses very carefully]

x x x “13. The bank is not a depository of the contents of the safe and 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.’’

Thereafter, Mrs. Margarita Ramos offered to buy from the petitioner the property at a higher
price.

[PROBLEM] When the safety box was opened in the presence of the petitioner and
spouses Ramon and Paula Pugao, and the bank’s representative, the box yielded no
certificates of title. [nawala ang sulod]
 ● Because of the delay in the reconstitution of the title, RAMOS withdrew her earlier offer
to purchase the lots; as a consequence thereof, petitioner, allegedly failed to realize his
expected profits.

[FILING OF THE CASE] Petitioner filed a complaint for damages against the respondent bank.
In its answer, the bank alleged that petitioner has no cause of action because of paragraphs 13
and 14 of the contract of lease.

RTC and CA → Ruled that contract between petitioner and the bank is in the nature of a contract
of lease and as such it is governed by Article 1643 of the Civil Code.

MAIN ARGUMENT AT THE SUPREME COURT: Petitioner argued that regardless of

nomenclature the contract in question is actually a contract of deposit. Accordingly, it is claimed
that the respondent bank is liable for the loss of the certificates of title pursuant to Article 1972.
It further argues that conditions 13 and 14 of the contract are null and void for being contrary to
law and public policy.

MAIN ISSUE: 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?

The contract is one of a special kind of deposit and the relation created was that of
bailor-bailee. [for the succeeding paragraphs, just read the highlighted part for recitation]

(1) Contract is not an ordinary contract of lease but a special kind of deposit. — No FULL
ENJOYMENT of the item. Not a lease, on the side of the depositor, it cannot be leasing
because it does not have FULL CONTROL AND POSSESSION of the box.

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, it is NOT a contract of deposit that is to be strictly
governed by the provisions of the Civil Code on deposit; 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.

Article 1975 [cannot] be invoked by the respondent Court 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.’’

(2) Relation created is that of bailor and bailee. — Under Section 72 of the General Banking
Act,, 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 bailor and bailee, the bailment being
for hire and mutual benefit.

Section 72 of the General Banking Act (R.A. No. 337, as amended.) pertinently provides:

‘SEC. 72. In addition to the operations specifically authorized elsewhere in this Act,
banking institutions other than building and loan associations may perform the following
ser- vices:

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

xxx

The banks shall perform the services permitted under sub-sections (a), (b) and (c) of this
section as depositaries or as agents.’ x x x.5 (emphasis supplied)

[no need to recite subsequent issues, just pasting them here for study purposes]

ISSUE 2: Conditions 13 and 14 of the contract are valid.

No. Conditions 13 and 14 of the contract are void. 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 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. In the absence of any
stipulation prescribing the degree of diligence required, that of a good father of a family is to be
observed. 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 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: ‘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.’

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

It has been said: ‘With respect to property deposited in a safe-deposit box by a customer of a
safe-deposit company, the parties, since the relation is a contractual one, may by special contract
define their respective duties or provide for increasing or limiting the liability of the deposit
company, provided such contract is not in violation of law or public policy. It must clearly appear
that there actually was such a special contract, however, in order to vary the ordinary obligations
implied by law from the relationship of the parties; liability of the deposit company will not be
enlarged or restricted by words of doubtful meaning. The company, in renting safe-deposit boxes,
cannot exempt itself from liability for loss of the contents by its own fraud or negligence or that of
its agents or servants, and if a provision of the contract may be construed as an attempt to do so,
it will be held ineffective for the purpose. Although it has been held that the lessor of a safe-
deposit box cannot limit its liability for loss of the contents thereof through its own negligence, the
view has been taken that such a lessor may limit its liability to some extent by agreement or
stipulation.
Bank was unaware of agreement between the joint renters; no liability. — In the instant case, the
respondent Bank’s exoneration cannot be based on or proceed from a characterization of the impugned
contract as a contract of lease, but rather on the fact that no competent proof was presented to show
that respondent Bank was aware of the agreement between the petitioner and the Pugaos to the
effect that the certificates of title were withdrawable from the safety deposit box only upon both
parties’ joint signatures, and that no evidence was submitted to reveal that the loss of the
certificates of title was due to the fraud or negligence of the respondent Bank. This in turn flows
from this Court’s determination that the contract involved was one of deposit.

Since both the petitioner and the Pugaos agreed that each should have one (1) renter’s key, it was
obvious that either of them could ask the Bank for access to the safety deposit box and, with the use of
such key and the Bank’s own guard key, could open the said box, without the other renter being present.
Since, however, the petitioner cannot be blamed for the filing of the complaint and no bad faith on its part
had been established, the trial court erred in condemning the petitioner to pay the respondent Bank
attorney’s fee.’
 ✔Case 3:Triple-V Food Services v. Filipino Merchants Insurance Co. | G.R. No: 160544 |
Date: February 21, 2005 | Ponente:
[TOPIC]: Deposit
[SUB-TOPIC ] Common Provisions (Articles 1962 to 1967, Civil Code)
DIGESTED BY: Cj Rose Lachica

DEPOSIT IN THIS CASE: when the car was entrusted to the valet attendant. Deposit of the car to the
valley. Yet, in the claim stab: There is a stipulation that the restaurant is NOT LIABLE for any loss or
damage.

● It is a contract of adhesion, strictly construed, but not void per se.

● BUT Court will not hesitate to rule out blind adherence thereto if they prove to be one-sided under
the attendant facts and circumstances.

Doctrine (Simplified Take away):

● In a contract of deposit, a person receives an object belonging to another with the
obligation of safely keeping it and returning the same.

● 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.

Facts: This is an action for damages filed by respondent against petitioner. This case stemmed
when the car of De Asis which was assigned to her by her employer, Crispa, was lost at
petitioner’s Kamayan Restaurant while De Asis was dining at the time. On said date, De
Asis availed of the valet parking service of petitioner and entrusted her car key to petitioner's
valet counter. The car was parked by a certain Madridano, the valet attendant, who parked the
car of De Asis at the designated parking area. The car was never recovered. Hence, Crispa filed
a claim against its insurer, herein respondent Filipino Merchants Insurance Company, Inc.
(FMICI). Respondent then filed a case against herein petitioner for an action for damages.

Petitioner’s argument

1. 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.
 2. 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.

3. In relation to item 2, 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.

[MAIN] ISSUE 1: WON petitioner must be held liable for the loss of the subject vehicle.

RULING 1: YES. In a contract of deposit, a person receives an object belonging to

another with the obligation of safely keeping it and returning the same. 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.

In this case, when De Asis entrusted the car to petitioner's valet attendant while eating at
petitioner's Kamayan Restaurant, De Asis 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.

ISSUE 2: Whether the claim stub issued to De Asis which contains a clear exclusion of
petitioner’s liability may constitute as an explicit waiver by the customer’s to claim
indemnity for any loss of or damage to the vehicle.

RULING 2: NO. 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. 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.
In this case, 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.
B. Voluntary Deposit (Articles 1968 to 1995, Civil Code)

✔Case 1: SERRANO v. CENTRAL BANK | G.R. No. L-30511 |

Date: February 14, 1980 | Ponente: CONCEPCION, JR., J.
[TOPIC]: Voluntary Deposit (Articles 1968 to 1995, Civil Code)
DIGESTED BY: Jezrel Perez

[CLASS DISCUSSION]
● If you opened a savings deposit account, what kind of transaction is this?
○ Governed by rules of simple loan
○ Article 1980. Fixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan.
○ But this does not make the transaction a simple loan
■ It is still a VOLUNTARY DEPOSIT.
● It could also transform fully from deposit to loan:
○ Article 1978. When the depositary has permission to use the thing deposited, the
contract loses the concept of a deposit and becomes a loan or commodatum, except
where safekeeping is still the principal purpose of the contract. The permission shall
not be presumed, and its existence must be proved.

Pounding on the argument that you want interest, you have 2 options:

● BDO → 2% per annum on your 1 million deposit → you will prolly deposit here because this
is safer → so there is an element of keeping the money safe
● But 20% per annum for Rural Bank of Valencia → there are only 20 depositors → you will
be the biggest

DOCTRINES:
● In this case: It is an irregular deposit.
● Bank deposits are in the nature of irregular deposits . They are really loans because
they earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be
treated as loans and are to be covered by the law on loans. Current and savings
deposits are loans to a bank because it can use the same.
○ The petitioner here in making time deposits that earn interests with respondent
Overseas Bank of Manila was in reality a creditor of the respondent Bank and not
a depositor. The respondent Bank was in turn a debtor of the petitioner. Failure
of the respondent Bank to honor the time deposit is failure to pay its obligation as
a debtor and not a breach of trust arising from a depositary’s failure to return the
subject matter of the deposit.

FACTS:
 ● On October 13, 1966 and December 12, 1966, petitioner made a time deposit, for one
year with 6% interest, of One Hundred Fifty Thousand Pesos (P150,000.00) with the
respondent Overseas Bank of Manila.
● Concepcion Maneja also made a time deposit, for one year with 6-½% interest, on
March 6, 1967, of Two Hundred Thousand Pesos (P200,000.00) with the same
respondent Overseas Bank of Manila.
● On August 31, 1968, Concepcion Maneja, married to Felixberto M. Serrano, assigned
and conveyed to petitioner Manuel M. Serrano, her time deposit of P200,000.00 with
respondent Overseas Bank of Manila.
● [START OF THE PROBLEM] : Notwithstanding series of demands for encashment of
the aforementioned time deposits from the respondent Overseas Bank of Manila, dating
from December 6, 1967 up to March 4, 1968, not a single one of the time deposit
certificates was honored by respondent Overseas Bank of Manila

Respondent Central Bank admits, claims and denies the following:

Admits
● it is charged with the duty of administering the banking system of the Republic
● it exercises supervision over all doing business in the Philippines
Claims
● that as of March 12, 1965, the Overseas Bank of Manila, while operating, was only on a
limited degree of banking operations since the Monetary Board decided in its Resolution
No. 322, dated March 12, 1965, to prohibit the Overseas Bank of Manila from making
new loans and investments in view of its chronic reserve deficiencies against its deposit
liabilities. This limited operation of respondent Overseas Bank of Manila continued up to
1968.
● no knowledge of petitioner's claim that the properties given by respondent Overseas
Bank of Manila as additional collaterals to respondent Central Bank of the Philippines for
the former's overdrafts and emergency loans were acquired through the use of
depositors' money, including that of the petitioner and Concepcion Maneja
Denies
● the petitioner's allegation that the Central Bank has the duty to exercise a most rigid and
stringent supervision of banks, implying that respondent Central Bank has to watch
every move or activity of all banks, including respondent Overseas Bank of Manila
● that it is guarantor of the permanent solvency of any banking institution as claimed by
petitioner.
● that a constructive trust was created in favor of petitioner and his predecessor in interest
Concepcion Maneja when their time deposits were made in 1966 and 1967 with the
respondent Overseas Bank of Manila as during that time the latter was not an insolvent
bank and its operation as a banking institution was being salvaged by the respondent
Central Bank
In another case G.R. No. L-29352
● Petitioner filed a motion to intervene in G.R. No. L-29352 (a case wherein respondent
Overseas Bank of Manila sought to prevent respondent Central Bank from closing,
declaring the former insolvent, and liquidating its assets.)
○ However petitioner was not allowed to intervene on 2 reasons: (1) his claim as
depositor should be properly addressed to CFI, not in this case; (2) allowing him
would cause other depositors to do the same.
● Case was resolved in favor of Overseas Bank of Manila
Thus, this present case was filed by petitioner a motion for judgment in this case, praying for a
decision on the merits
1. adjudging respondent Central Bank jointly and severally liable with respondent
Overseas Bank of Manila to the petitioner for the P350,000 time deposit made
with the latter bank, with all interests due therein.
2. and declaring all assets assigned or mortgaged by the respondents Overseas
Bank of Manila and the Ramos groups in favor of the Central Bank as trust funds
for the benefit of petitioner and other depositors.

ISSUE #1: Whether or not it is proper for petitioner to file an action of mandamus for his claims
and causes of action

RULING #1: NO. Claims of these nature are not proper in actions for mandamus and
prohibition

There is no shown clear abuse of discretion by the Central Bank in its exercise of supervision
over the other respondent Overseas Bank of Manila, and if there was, petitioner here is not the
proper party to raise that question, but rather the Overseas Bank of Manila, as it did in G.R. No.
L-29352

Neither is there anything to prohibit in this case, since the questioned acts of the respondent
Central Bank (the acts of dissolving and liquidating the Overseas Bank of Manila), which
petitioner here intends to use as his basis for claims of damages against respondent Central
Bank, had been accomplished a long time ago.

ISSUE #2: What are the nature of the claims and causes of action of the petitioners and where
can these claims be ventilated?

RULING # 2: By the very nature of the claims and causes of action against respondents, they in
reality are (1) recovery of time deposits plus interest from respondent Overseas Bank of
Manila, and (2) recovery of damages against respondent Central Bank for its alleged failure to
strictly supervise the acts of the other respondent Bank and protect the interests of its
depositors by virtue of the constructive trust created.

These claims should be ventilated in the Court of First Instance of proper jurisdiction as
We already pointed out when this Court denied petitioner's motion to intervene in G.R. No. L-
29352.

ISSUE #3: What is the nature of bank deposits?

RULING #3: Bank deposits are in the nature of irregular deposits.

They are really loans because they earn interest. All kinds of bank deposits, whether fixed,
savings, or current are to be treated as loans and are to be covered by the law on loans.
Current and savings deposits are loans to a bank because it can use the same.

The petitioner here in making time deposits that earn interests with respondent Overseas Bank
of Manila was in reality a creditor of the respondent Bank and not a depositor. The
respondent Bank was in turn a debtor of the petitioner. Failure of the respondent Bank to honor
the time deposit is failure to pay s obligation as a debtor and not a breach of trust arising from
depositary's failure to return the subject matter of the deposit.
 ✔Case 2: Sia vs CA| G.R. No: 102970|
Date: May 13, 1993 | Ponente: DAVIDE, JR., J.:
[TOPIC]: Deposit
[SUB-TOPIC]: nature of a contract for the use of a safety deposit box
DIGESTED BY: Mary Rose Saloma

[CLASS DISCUSSION]
What is the source of liability?
● Negligence of the ban is the source of the liability
● Failure of the bank to notify Sia of the flood and that it could reach the safety deposit
boxes. They are aware that the bank was hit by the flood.
● Provisions absolving the bank of liability are void. The bank cannot be shielded from void
provisions

Is this a contract of lease?

● No, it is a contract of SPECIAL DEPOSIT. Herein, what were deposited were STAMPS.
Which were intended to be safely keeped.
○ The bank has possession & 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.
● It cannot be a lease.
● The primary purpose: 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.

Doctrine:

● A contract for the use of a safety deposit box is NOT a contract of lease nor
was it is a contract of deposit to be strictly governed by the Civil Code provision
on deposit; it is a special kind of deposit where the primary function is still found
within the parameters of a contract of deposit

Facts: March 22, 1985: The plaintiff rented the Safety Deposit Box No. 54 of the
defendant, Security Bank and Trust Company (SBTC) at its Binondo Branch wherein
he placed his collection of stamps.

● The said safety deposit box leased by the plaintiff was at the bottom or at the
lowest level of the safety deposit boxes of the defendant bank

KEY FACT: During the floods, the water entered into the defendant bank's premises,
seeped into the safety deposit box leased by the plaintiff and caused damage to his
stamps collection. The defendant bank rejected the plaintiff's claim for compensation for
his damaged stamps collection, so, the plaintiff instituted an action for damages against
the defendant bank. (see the comment for the basis of the denial)
RTC
➔ Directed an ocular inspection and found out that the deposit box contains 2
albums of different sizes and thickness, length and width and a tin box with
printed word 'Tai Ping Shiang Roast Pork in pieces with Chinese designs and
character.
◆ The items were wet, moldy and badly damaged.
➔ Ruled in favor of the plaintiff: found out that the lease agreement is a contract
of adhesion and the bank had failed to exercise the required diligence expected
of a bank in maintaining the safety deposit box
CA
➔ Reversed the ruling of the RTC: held that the contract entered into by the
parties regarding Safe Deposit Box No. 54 was not a contract of deposit wherein
the bank became a depositary of the subject stamp collection.

Contention of the parties:

Defendant Petitioner

● Contended that its contract with
the plaintiff over safety deposit
box No. 54 was one of lease and
not of deposit and, therefore,
governed by the lease agreement
which should be the applicable
law;
● that the destruction of the plaintiff's
stamps collection was due to a
calamity beyond obligation on its
part to notify the plaintiff about the
floodwaters that inundated its
premises at Binondo branch which
allegedly seeped into the safety
deposit box leased to the plaintiff.
● Petitioner insists that the trial court
correctly ruled that SBTC had
failed "to exercise the required
diligence expected of a bank
maintaining such safety deposit
box in the light of the
environmental circumstance of
said safety deposit box after the
floods of 1985 and 1986." as
supported by evidence:
○ SBTC was fully cognizant of
the exact location of the
safety deposit box in
question;
○ it knew that the premises
were inundated by
floodwaters in 1985 and
1986 and considering that
the bank is guarded 24
hours a day hence, it is safe
to conclude that it was also
aware of the inundation of
the premises where the
safety deposit box was
located;
 ○ despite such knowledge,
however, it never bothered
to inform the petitioner of
the flooding or take any
appropriate measures to
insure the safety and good
maintenance of the safety
deposit box in question.

Issue: What is the nature of the contract between the parties?

Ruling: A special kind of deposit

In the recent case CA Agro-Industrial Development Corp. vs. Court of Appeals, the
Court explicitly rejected the contention that a contract for the use of a safety deposit box
is a contract of lease nor was it is a contract of deposit to be strictly governed by the
Civil Code provision on deposit; it is a special kind of deposit.

➔ 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 and 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.
➔ In the absence of any stipulation prescribing the degree of diligence required,
that of a good father of a family is to be observed.
◆ 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.
Issue: Whether the conditions 13 (bank as a depositary with no possession and
control) and 14 (bank has no interest and assumes no liability) of the contract of
lease are valid. (see comment for the exact provisions) → the provisions here are very
important

Ruling: NO.

They are void as they are contrary to law and public policy because 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.
➔ Furthermore condition 13 stands on a wrong premise and is contrary to the
actual practice of the Bank.
◆ REASON: 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, the conditions in the contract in question are void and
ineffective.

In all other situations, it would seem that SBTC is not bound to exercise diligence of any
kind at all. It is not at all difficult to conclude that both conditions must be stricken down
for being contrary to law and public policy as they are meant to exempt SBTC from any
liability for damage, loss or destruction of the contents of the safety deposit box which
may arise from its own or its agents' fraud, negligence or delay. Accordingly, SBTC
cannot take refuge under the said conditions.

Issue: Whether SBTC can be held responsible for the destruction or loss of the
stamp collection.

Ruling: YES

GENERAL RULE: no person shall be responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable.
However, SBTC was guilty of negligence. SBTC's negligence aggravated the injury
or damage to the stamp collection.

● SBTC was aware of the floods of 1985 and 1986;

● Knew that the floodwaters inundated the room where Safe Deposit Box No. 54
was located.
○ In view thereof, it should have lost no time in notifying the petitioner in
order that the box could have been opened to retrieve the stamps, thus
saving the same from further deterioration and loss.
■ However, it failed to exercise the reasonable care and prudence
expected of a good father of a family, thereby becoming a party to
the aggravation of the injury or loss.

The destruction or loss of the stamp collection which was, in the language of the trial
court, the "product of 27 years of patience and diligence" caused the petitioner
pecuniary loss; hence, he must be compensated therefor.
C. Necessary Deposit (Articles 1996 to 2004, Civil Code)

✔Case 1: YHT Realty Corp. v. CA | G.R. No: 126780 |

Date: February 17, 2005 | Ponente: Tinga, J.
[TOPIC]: Necessary Deposit
[SUB-TOPIC]: Article 2003; Responsibility of a hotel-keeper
DIGESTED BY:

[CLASS DISCUSSION]
● He lost some money while staying at the hotel. The incident took place at Tropicana
where one of the employees helped a female friend steal his money in the safety deposit
box.
● Tropicana was held liable based on 2003.
○ Article 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 2001 is suppressed or diminished shall be void.
● Was there a provision to that effect?
○ Paragraphs (2) and (4) of the “undertaking” manifestly contravene Article 2003 for they
allow Tropicana to be released from liability arising from any loss in the contents and/or
use of the safety deposit box for any cause whatsoever.
■ 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.

Is 2003 absolute?
● NO. Check Article 2001 → extraordinary circumstances → where the thief or robbery cannot be
prevented

[DOCTRINE]
● [VERY IMPORTANT] The hotelkeeper 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
hotelkeeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to
2001 is suppressed or diminished is Voi
● [VERY IMPORTANT] 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.

RECIT READY FACTS: (Already paraphrased and summarized)

McLoughlin is an Australian businessman-philanthropist who was convinced by Tan to stay in
Tropicana during his trips to the Philippines. McLoughlin made use of the safety deposit boxes
offered by the hotel for the safekeeping of his money, checkbooks and jewelry. When he arrived
in Hongkong, he opened the envelope which contained US$5,000.00 and discovered upon
counting that only US$3,000.00 were enclosed therein. Considering that the safety deposit box
can only be opened using 2 keys (one held by respondent, and the other held by the
management staff), McLoughlin thought it was only due to bad accounting on his part.

Respondent continued to use the safety deposit boxes and when he arrived in Australia, he
discovered that the envelope with US$10,000 was short of 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.

Despite this, Respondent still continued to use the safety deposit boxes. However, this time he
requested Lainez and Payam to open it and noticed that In the envelope containing
US$15,000.00, US$2,000.00 were missing and in the envelope previously containing
AUS$10,000.00, AUS$4,500.00 were missing.

Respondent confronted Lainez and Payam who admitted that Tan opened the safety deposit
box with the key assigned to him. 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. Lopez
added that Tan stole the key assigned to McLoughlin while the latter was asleep.

McLoughlin claims that it must be the hotel who must assume responsibility for the loss he
suffered. However, he is now faced with a stipulation on the safety deposit agreement stating
that:

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.

*Click here to jump to Issues*

FACTS: (Details lang ni huhu if need detailed pero please read recit ready facts kay gi
summarize na nako tanan didto)

Introduction to Tropicana
● 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 convinced McLoughlin to transfer from Sheraton Hotel to Tropicana where Lainez,
Payam and Danilo Lopez were employed.
● 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

Safety Deposit Box

● 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.

PROCEDURE:
1. 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.
2. 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.

● 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);
(Important!)
○ 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.

Problem
● When he arrived in Hongkong, he opened the envelope which contained US$5,000.00
and discovered upon counting that only US$3,000.00 were enclosed therein. He
thought that it was just a result of bad accounting since he did not spend anything from
that envelope.
● 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.

Discovery
● 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 to which they denied.
● 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.
● 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.
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.

Promissory Note and the "Undertaking For the Use Of Safety Deposit Box”
● McLoughlin requested the management for an investigation of the incident. Lopez
requested Tan to sign a promissory note to pay respondent of the loss 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,”
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.
ISSUE 1: Whether the “Undertaking For The Use of Safety Deposit Box” executed by the
Private Respondent to exonerate the hotel prom liability is null and void?

RULING 1: Yes, 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. Under Art. 2003 of the NCC, it states:

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 2001 is suppressed or diminished shall be void.

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 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. 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.

As such stipulation is void, the Hotel may not escape liability through this stipulation.

ISSUE 2: Whether the Petitioner Committed Gross Negligence for the stolen property of
the Private Respondent?

RULING 1: Yes. It is clear by the hotel’s procedure that two keys are required to open the safety
deposit boxes of Tropicana. 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.

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. 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.
 ✔Case 2: Durban Apartment Corporation, doing business under the name and style of
City Garden Hotel vs Pioneer Insurance and Surety Corp.
| G.R. No:179419 |
Date: January 12, 2011 | Ponente: Nachura, J.
[TOPIC]: [SUB-TOPIC]: Necessary Deposit
DIGESTED BY: JP Antiquiera

[Class notes] bati kayo pagka sulat ni nga kaso haha maka libog
● Does not falls under Article 2001 → this is a carnapping case → pretty straight forward
● 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
○ In a valley, the primary purpose is safe keeping.
○ The insured See deposited his vehicle for safekeeping with the 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, the petitioner is liable for the loss of See’s vehicle.

Facts: Carnapping within the vicinity of the hotel where the guest used the valley of the hotel.

April 30, 2002, Mr. Jeffrey See riding a Suzuki Vitara, arrived and checked in at the City Garden
Hotel in Makati City before midnight. The parking attendant of said hotel, Justimbaste
(defendant) got the keys to said vehicle to park it. At about 1:00 in the morning, Mr. See was
awakened by a telephone call from the Hotel Chief Security Officer and was informed that his
vehicle was carnapped while it was parked unattended at the Equitable PCI Bank. Mr. See
thereafter reported the incident to the Operations Division of Makati City Police Anti-Carnapping
Unit.

Mr. See filed a complaint sheet with the PNP Traffic Management Groupd in Camp Crame,
Quezon City. The Vitara has not yet been recovered since July 23, 2002 as evidence by a
certification of Non-Recovery issued by PNP MTG, it paid the P 1, 163, 250 money claim of Mr.
See and mortgage ABN Amro Savings Bank Inc., as indemnity for the loss of the Vitara.

The police, through their investigation, found that the Vitara was lost due to the negligence of
Durban Apartments [City Garden Hotel] (petitioner) and Justimbaste (defendant) because it
discovered that this was the second time that a similar incident of carnapping happened to the
valet parking service of Durban Apartment (petitioner). There were no necessary precautions
taken to prevent its repetition. The petitioner then failed to pay its valid, just, and lawful claim
despite written demands.

Petitioners Contention:
 ➢ Mr. See did not check in at its hotel and claimed that he was only a guest of a certain
Ching Montero.
➢ Justimbaste also did not get the ignition key of the Suzuki Vitara and claimed that it was
Mr. See who requested to park it at any available parking space. Hence, it was parked at
the Equitable PCI Bank.

Issue: Whether petitioner is liable to respondent for the loss of Mr. See’s vehicle?

Ruling: Yes. Petitioner is liable to the loss vehicle of Mr. See.

Under article 1962 of the Civil Code, in relation to Article 1998,

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. 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.

Based from the facts stated, the Insured, Mr. See deposited his vehicle for safekeeping with
Petitioner, through its employee, Justimbaste. In turn, the latter issued a claim stub to Mr. See.
The contract of deposit was perfected from the moment Mr. See delivered its ignition key
of the vehicle to Justimbaste (employee of Durban Apartment), which the latter also
received. The petitioner had the obligation to safely keep and return the vehicle to the owner.
Hence, petitioner is liable for the loss of Mr. See’s Suzuki Vitara.

Explanation sa ruling for better understanding:

As stated in the facts, Mr. See arrived at the City Garden Hotel (Durban Apartment), driving a
Suzuki Vitara. Upon Arrival, Mr. See gave notice to the doorman and parking attendant of said
hotel, Justimbaste and entrusted the latter its ignition key. Justimbaste even issued a valet
parking customer claim stub to Mr. See and parked the Vitara at the Equitable PCI Bank parking
area and even placed the key inside the safety key box. The Equitable PCI Bank parking area
became an annex of City Garden Hotel when the Bank allowed the parking of the vehicles of
said hotel after its business hours during the evening.
E. Warehouse Receipts Law (Act No. 2137, as amended)

✔Case 1: PNB VS NOAH’S ARK SUGAR REFINERY | G.R. No: 107243 |

Date: JULY 08 1998 | Ponente:
[TOPIC]: [SUB-TOPIC]
DIGESTED BY: JOURNEY R. SEGALES

Doctrine (Simplified Take away):

Why did PNP institute the case?

● Due to default of Noah’s Ark. They wanted Noah to deliver the sugar stock to PNB as holder
of the quedan.

Defense: Noah and its co-defendants claimed that they are still the legal owners of the quedans and the
sugar represented.

SC said: Non-payment by the original depositors of the purchase price will NOT render the
further negotiation of the receipt invalid. The negotiation of the warehouse receipt by the buyer of
goods purchased from and deposited to the warehouseman is valid even if the warehouseman who issued
the negotiable warehouse receipt was not paid by the buyer. The validity of the negotiation cannot be
impaired by the fact that the owner/warehouseman was deprived of the possession of the same by fraud,
mistake or conversion (PNB vs. Noah’s Ark Sugar Refinery, G.R.No. 107243, September 1, 1993) →
Check also Sec 47 of WRL → Sec. 47. When negotiation is not impaired by fraud, mistake or duress.

TO WHOM SHOULD THE ITEMS SHOULD BE DELIVERED?

●

Facts:

In accordance with the Warehouse Receipts Law, Noah's Ark Sugar Refinery (Noah) issued on
several dates warehouse receipts (quedans) to Rosa Sy, RNS Merchandising (Rosa Ng Sy) and
St. Therese Merchandising.

RNS and St Therese Merchandising negotiated and indorsed its quedans to Luis T. Ramos and
Cresencia Zoleta. Zoleta and Ramos then used the quedans as security for loans obtained by
them from PNB in the amounts of P23.5 million and P15.6 million, respectively..
Both Zoleta and Ramos failed to pay their loans upon maturity prompting PNB to wrote to Noah
demanding delivery of the sugar covered by the quedans. However Noah refused to comply
with the demand.

PNB filed with the RTC a verified complaint for "Specific Performance with Damages and
Application for Writ of Attachment"

RTC denied the application for preliminary attachment

Note: (Actors)

1. third-party defendants → Rosa Ng Sy and Teresita Ng

[CLASS HIGHLIGHT] arguments

Noah and its co-defendants claimed that they are still the legal owners of the quedans
and the sugar represented thereon because:

— the check issued by Rosa Ng Sy of RNS and Teresita Ng of St.

Therese Merchandising for the quedans were dishonoured by reason of
"payment stopped" and "drawn against insufficient funds

— Since the vendees and first indorsers of quedans did not acquire
ownership, the subsequent indorsers and PNB did not acquire a better
right of ownership than the original vendees/first indorsers.

— That quedans are not negotiable instruments within the purview of

the Warehouse Receipts Law but simply an internal guarantee of
defendants in the sale of their stocks of sugar.
Issue: (Issue related to WHL: whether or not the transaction between plaintiff and third party
defendants transaction is governed by contract of pledge or Warehouse Receipt Law )

1. Whether the non-payment of the purchase price for the quedans by the original
vendees rendered invalid the negotiation by vendees/first indorsers to indorsers and the
subsequent negotiation of Ramos and Zoleta to PNB.

2. Whether or not PNB as indorsee/ pledgee of quedans was entitled to delivery of sugar
stocks from the warehouseman, Noah's Ark."

Ruling:

1. NO, the non-payment of the purchase price does not render the subsequent negotiation
invalid. The validity of the negotiation in favour of PNB cannot be impaired even if the
negotiation between Noah and its first vendees was in breach of faith on the part of the
vendees or by the fact that Noah was deprived of the possession of the same by fraud,
mistake or conversion if PNB paid value in good faith without notice of such breach of duty,
fraud, mistake or conversion. (Article 1518, New Civil Code).

2. YES, PNB is entitled to the delivery of the sugar covered by the quedans. PNB whose
debtor was the owner of the quedan shall be entitled to such aid from the court of
appropriate jurisdiction attaching such document or in satisfying the claim by means as is
allowed by law or in equity in regard to property which cannot be readily attached or levied
upon by ordinary process. (See Art. 1520, New Civil Code). If the quedans were negotiable
in form and duly indorsed to PNB (the creditor), the delivery of the quedans to PNB makes
the PNB the owner of the property covered by said quedans and on deposit with Noah, the
warehouseman. PNB's right to enforce the obligation of Noah as a warehouseman, to
deliver the sugar stock to PNB as holder of the quedans, does not depend on the outcome
of the third-party complaint because the validity of the negotiation transferring title to the
goods to PNB as holder of the quedans is not affected by an act of RNS Merchandising and
St. Therese Merchandising, in breach of trust, fraud or conversion against Noah's Ark.
 ✔Case 2: PNB vs. Se, Jr. | G.R. No: 119231 |
Date: April 18, 1996| Ponente: HERMOSISIMA, JR., J.
[TOPIC]: Warehouse Receipts Law (Act No. 2137, as amended)
[SUB-TOPIC]: Payment for storage fees
DIGESTED BY: Mary Ruth Kristine Risma

Doctrine (Simplified Take away):

● What happens when goods are parted by a warehouseman w/o satisfying the liens
to the good?
○ You lose your lien.
○ The warehousemen cannot be compelled to release the goods in this custody without
satisfying the lien. Otherwise, you lose the lien.
○ Imperative is the right of the warehouseman to demand payment of his lien at this
juncture, because, in accordance with Section 29 of the Warehouse Receipts Law, the
warehouseman loses his lien upon goods by surrendering possession thereof. In other
words, the lien may be lost where the warehouseman surrenders the possession of the
goods without requiring payment of his lien, because warehouseman's lien is possessory
in nature.
● Se, Jr. used this argument: The argument for warehousemen should have been raised at the
earlier case, in PNB v. Noah:
○ SC said: there was no point in taking up the issue of warehouseman’s lien since the
matter of ownership was as yet being determined. Neither could storage fees be due then
while no one has been declared the owner of the sugar stocks in question.

● PNB is in estoppel in disclaiming liability for the payment of storage fees due to Noah as
warehouseman while claiming to be entitled to the sugar stocks covered by the subject
Warehouse Receipts on the basis of which it anchors its claim for payment or delivery of the
sugar stocks. The unconditional presentment of the receipts by the PNB for payment against
Noah on the strength of the provisions of the R.A. 2137 carried with it the admission of the
existence and validity of the terms, conditions and stipulations written on the face of the
Warehouse Receipts, including the unqualified recognition of the payment of warehouseman’s
lien for storage fees and preservation expenses. PNB may not now retrieve the sugar stocks
without paying the lien due Noah as warehouseman.

● Warehouseman’s Liens — A prior judgment holding that a party is a warehouseman

obligated to deliver sugar stocks covered by the Warehouse Receipts does not
necessarily carry with it a denial of the warehouseman’s lien over the same sugar
stocks.
● Even in the absence of a provision in the Warehouse Receipts, law and equity dictate
the payment of the warehouseman's lien pursuant to Sections 27 and 31 of the
Warehouse Receipts Law.
 Warehouse Receipts Law (R.A. 2137)

Sec. 27. What claims are included in the warehouseman's lien. — Subject to
the provisions of section thirty, a warehouseman shall have a lien on goods
deposited or on the proceeds thereof in his hands, for all lawful charges for
storage and preservation of the goods; also for all lawful claims for money
advanced, interest, insurance, transportation, labor, weighing, coopering and
other charges and expenses in relation to such goods, also for all reasonable
charges and expenses for notice, and advertisements of sale, and for sale of the
goods where default had been made in satisfying the warehouseman's lien.

xxx xxx xxx

Sec. 31. Warehousemen need not deliver until the lien is satisfied. — A
warehouseman having a lien valid against the person demanding the goods may
refuse to deliver the goods to him until the lien is satisfied.

Facts:
● Noah’s Ark Sugar Refinery issued 5 Warehouse Receipts (Quedans) to several
merchants — these were substantial in form, contained the terms, and prescribed for
negotiable warehouse receipts by Sec. 2 of Act No. 2137.
a) Rec. No. 18062 (March 1,1989) → sugar deposited by Rosa Sy
b) Rec. No. 18080 (March 7, 1989) → sugar deposited by RNS Merchandising (Rosa Ng Sy)
c) Rec. No. 18081 (March 21, 1989) → sugar deposited by St. Therese Merchandising
d) Rec. No. 18086 (March 31, 1989) → sugar deposited by St. Therese Merchandising
e) Rec. No. 18087 (April 1, 1989) → sugar deposited by RNS Merchandising (Rosa Ng Sy)

● Subsequently, the following Warehouse Receipts were negotiated and endorsed to:
○ Receipt No. 18080 and 18081 → Luis T. Ramos
○ Receipt No. 18086, 18087 and 18062 → Cresencia K. Zoleta

● They both used the quedans and endorsed as security for two loan agreements
obtained from PNB: one for Php 15.6M; and the other for Php 23.5M (39.1M total) →
both failed to pay their loans upon maturity.

● Consequently, PNB wrote to Noah’s Ark Sugar Refinery demanding delivery of the
sugar stocks covered by the quedan endorsed to it by Zoleta and Ramos, which it
refused to comply with the demand alleging ownership.
[KEY FACT: In the complaint, private respondents claimed ownership of
the sugar stocks. Thus, claiming warehouse lien at this stage was not
proper]

● PNB filed with the RTC of Manila a verified complaint for Specific Performance with
Damages and Application for Writ of Attachment against Noah’s Ark Sugar
 Refinery, Alberto Looyuko (sole proprietor), Jimmy Go (managing partner), and
Wilson Go (VP).

● In their Answer, Noah’s Ark and co-defendants claimed that they are the owners of
the subject quedan and the sugar represented by virtue of the agreement between
them and Rosa Ng Sy and Teresita Ng → a Third Party Complaint against the two was also
incorporated in the Answer, praying that they be ordered to deliver or return to them the quedans
(previously endorsed to PNB and the subject of the suit) and pay damages and litigation
expenses.
9. *** In an agreement dated April 1, 1989, defendants agreed to sell to
Rosa Ng Sy of RNS Merchandising and Teresita Ng of St.Therese
Merchandising the total volume of sugar indicated in the quedans stored
at Noah’s Ark Sugar Refinery for a total consideration of P63,000,000.00,

*** The corresponding payments in the form of checks issued by the

vendees in favor of defendants were subsequently dishonored by the
drawee banks by reason of payment stopped’ and ‘drawn against insufficient
funds,

***Upon proper notification to said vendees and plaintiff in due course,

defendants refused to deliver to vendees therein the quantity of sugar
covered by the subject quedans.

10. *** Considering that the vendees and first endorsers of subject quedans
did not acquire ownership thereof, the subsequent endorsers and plaintiff
itself did not acquire a better right of ownership than the original
vendees/first endorsers.

● Rosa Ng Sy and Teresita Ng answered that the transaction between them and Jimmy
Go concerning the quedans and the sugar stocks covered by them was merely a
simulated one being part of the latter’s complex banking schemes and financial
maneuvers, and thus, they are not answerable in damages to him.

● PNB filed a motion for summary judgement which was denied by the RTC, and nullified by the
CA → declared PNB as the owner of the sugar stocks and ordered RTC to render
summary judgment in favor of PNB

RTC: Rendered summary judgment in favor of PNB, dismissed complaint against

private respondents for lack of cause of action and likewise dismissed private
respondents counterclaim against PNB and of the Third-Party Complaint and the Third-
Party Defendant’s Counterclaim. PNB’s MR was also denied. (no need to recite below)
➔ PNB filed an appeal with the SC through a Petition for Review on Certiorari under
Rule 45, which reversed the RTC’s ruling
➔ Private respondents moved for reconsideration, a Supplemental/Second MR, and
Motion Seeking Clarification of Decision, which were all denied.
 ● Private respondents filed with the RTC an Omnibus Motion seeking deferment of the
proceedings until private respondents are heard on their claim for warehouseman’s
lien, which was granted (NOTE: their claim for ownership was denied so they filed
a claim for warehouseman’s lien instead).
DISPOSITIVE PORTION:

“WHEREFORE, this court hereby finds that there exists in favor of the defendants
a valid warehouseman’s lien under Section 27 of Republic Act 2137 and
accordingly, execution of the judgment is hereby ordered stayed and/or
precluded until the full amount of defendants' lien on the sugar stocks covered
by the five (5) quedans subject of this action shall have been satisfied
conformably with the provisions of Section 31 of Republic Act 2137.”

● PNB filed this petition seeking to nullify the above-assailed orders of the respondent
judge.

PARTIES CONTENTIONS:
PETITIONERS PRIVATE RESPONDENTS

1. Private respondents have lost their 1. Maintain that they could not have
right to recover warehouseman's lien on claimed the right to a warehouseman's
the sugar stocks covered by the five (5) lien in their Answer to the complaint
Warehouse Receipts for the reason that before the trial court as it would have
they failed to set up said claim in been inconsistent with their stand that
their Answer before the trial court they claim ownership of the stocks
and that private respondents did not covered by the quedan since the checks
appeal from the decision in this regard. issued for payment thereof were
dishonored.
2. Denial of respondent’s motion ➔ If they were still the owners, it
seeking clarification of the SC’s would have been absurd for them
decision has foreclosed private to ask payment for storage fees
respondents’ right to enforce their and preservation expenses.
warehouseman's lien for storage fees
and preservation expenses under the 2. SC’s resolution denying their motion for
Warehouse Receipts Act. clarification did not preclude their right to
claim their warehouseman's lien under
Sections 27 and 31 of R.A. No. 2137, as
the resolution merely affirmed and
adopted the earlier decision of the CA
and it did not make any finding on the
matter of the warehouseman's lien.

Issue: Whether the PNB should pay storage fees for sugar stocks covered by the five (5)
Warehouse Receipts stored in the warehouse of private respondents?
Ruling: YES. It is not disputed that under Noah’s Ark’s Warehouse Receipts, storage fees
are chargeable. The receipts pertinently stipulates and provides for private respondent the right
to impose and collect warehouseman's lien:
“Storage of the refined sugar quantities mentioned herein shall be free up to one (1) week from
the date of the quedans covering said sugar and thereafter, storage fees shall be charged in
accordance with the Refining Contract under which the refined sugar covered by this Quedan
was produced.”

The 5 Warehouse Receipts which found their way to petitioner after they were negotiated to
them by Luis T. Ramos and Cresencia K. Zoleta for a loan of Php 39.1 M legally binds PNB to
stand by the express terms and conditions on the face of the Warehouse Receipts as to
the payment of storage fees. And even in the absence of such a provision, law and equity
dictate the payment of the warehouseman’s lien pursuant to Sections 27 and 31 of R.A.
No. 2137.

Thus, after being declared by the CA as not the owner, but the warehouseman, private
respondents cannot legally be deprived of their right to enforce their claim for warehouseman's
lien, for reasonable storage fees and preservation expenses. And pursuant to Section 31, the
goods under storage may not be delivered until said lien is satisfied.

SUPPLEMENTAL QUESTION (incase Sir will ask):

Can Noah's Ark enforce his warehouseman’s lien before delivering the sugar
stocks to PNB?

YES. While the PNB is entitled to the stocks of sugar as the endorser of the quedans,
delivery to it shall be effected only upon payment of the storage fees.

Imperative is the right of the warehouseman to demand payment of his lien at this
juncture, because, in accordance with Section 29 of the Warehouse Receipts Law, the
warehouseman loses his lien upon goods by surrendering possession thereof. In other
words, the lien may be lost where the warehouseman surrenders the possession of the
goods without requiring payment of his lien, because warehouseman's lien is possessory
in nature.