194 BUENAVENTURA v METROPOLITAN BANK AND TRUST COMPANY

G.R. No. 167082 | 03 August 2016 | J. Bersamin | TIGLAO

TOPIC:

Contracts of Adhesion

DOCTRINE:

A contract of adhesion is so-called because its terms are preparedby only one party while the other
party merely affixes his signature signifying his adhesion thereto. Such contract is just as binding as
ordinary contracts.It is true that we have, on occasion, struck down such contracts as void whenthe
weaker party is imposed upon in dealing with the dominant bargainingparty and is reduced to the
alternative of taking it or leaving it, completelydeprived of the opportunity to bargain on equal footing.
Nevertheless,contracts of adhesion are not invalid per se and they are not entirely prohibited.The one
who adheres to the contract is in reality free to reject it entirely, if headheres, he gives his consent.

FACTS:

1.

Buenaventure executed a PN payable to Metrobank.2.

For having failed to fully pay, Metrobank filed an action for collectionagainst Buenaventura.3.

Buenaventura argues that the PNs she executed were a contract ofadhesion because her only
participation was affixing her signature andthat the terms of the PN should be strictly construed against
Metrobank.4.

Metrobank counters that the terms and conditions of the PNs wereclear and unambigious; hence, there
was no need or room forinterpretation.

ISSUE/S:

W/N the promissory notes were contracts of adhesion

NO. But evenassuming that it was a contract of adhesion, such did not entitle her to bar
theirliteral enforcement.

HELD/RULING:

The promissory notes were written as follows:

FOR VALUE RECEIVED, I/we jointly and severally promise to payMetropolitan Bank and Trust Company,
at its office x x x the principalsum of PESOS xx x, Philippine currency, together with interest and credit

evaluation and supervision fee (CESF) thereon at the effective rate of•

x x x per centum x x x per annum, inclusive, from date hereof and untilfully paid.What the petitioner
advocates is for the Court to now read into the promissorynotes terms and conditions that would
contradict their clear and unambiguousterms in the guise of such promissory notes being contracts of
adhesion. Thiscannot be permitted, for, even assuming that the promissory notes werecontracts of
adhesion, such circumstance alone did not necessarily entitle herto bar their literal enforcement against
her if their terms were unequivocal. It ispreposterous on her part to disparage the promissory notes for
being contractsof adhesion, for she thereby seems to forget that the validity and enforceabilityof
contracts of adhesion were the same as those of other valid contracts.As a rule, indeed, the contract of
adhesion is no different from any othercontract. Its interpretation still aligns with the literal meaning of
its terms andconditions absent any ambiguity, or with the intention of the parties. The termsand
conditions of the promissory notes involved herein, being clear and beyonddoubt, should then be
enforced accordingly.As fittingly declared in

The Insular Life Assurance Company, Ltd. vs. Court of Appeals and Sun Brothers & Company,

"[w]hen the language of the contract isexplicit leaving no doubt as to the intention of the drafters
thereof, the courtsmay not read into it any other intention that would contradict its plain
import."Accordingly, no court, even this Court, can "make new contracts for the partiesor ignore those
already made by them, simply to avoid seeming hardships.Neither abstract justice nor the rule of liberal
construction justifies the creationof a contract for the parties which they did not make themselves or
theimposition upon one party to a contract of an obligation not assumed.

AMPARO JOVEN DE CORTES v. MARY E. VENTURANZA, GR No. L-26058, 1977-10-28

Facts:

original plaintiffs in this case were Felix Cortes y Ochoa and Noel J. Cortes... original defendants were
Gregorio Venturanza, Mary E. Venturanza, Jose Oledan and Erlinda M. Oledan.

On December 11, 1967, defendant Gregorio Venturanza... died

Accordingly surviving spouse and children of the deceased Gregorio Venturanza, were substituted as
appellants, in place of... the deceased, by resolution of this Court dated February 28, 1968.

September 12, 1968, Felix Cortes y Ochoa died.

y Ochoa died

Plaintiff Felix Cortes y Ochoa and Noel J. Cortes filed the instant action for foreclosure of real estate
against the defendants... original owner of nine (9) parcels of land covered by Transfer Certificates of
Title Nos. 21334 to 21342,... Noel J. Cortes... original owner of twenty-four (24) parcels of land covered
by Transfer Certi-ficates of

Title Nos. 21343, 21345, 21347 to 21367

October 24, 1958 said plaintiffs sold and delivered to the defendants all the above-mentioned thirty-
three (33) parcels of land with all the improvements thereon for the total sum of P716,573.90...
defendants agreed to pay jointly and severally the plaintiffs the sum of P100,000.00 upon the signing
and execution of a deed of sale and P40,000.00 on January 1, 1959 thereby leaving a balance of
P576,573.90 which the defendants agreed and bound themselves,to pay plaintiffs jointly and severally
within three (3) years from January 1, 1959 with interest thereon at the rate of 6% per annum;... agreed
and bound them-selves to secure the payment of the said balance of P576,573.90 with a first mortgage
upon the... said 33 parcels of land with improvements;... defendants have already paid the plaintiffs the
total sum of P140,000.00 that of the unpaid balance owing to plaintiffs, P169,484.24 pertain(ing)s to
plaintiff Felix Cortes and P407,089.66 pertains to plaintiff Noel J.Cortes;... defendants have already paid
the plaintiffs the total sum of P140,000.00 that of the unpaid balance owing to plaintiffs, P169,484.24
pertain(ing)s to plaintiff Felix Cortes and P407,089.66 pertains to plaintiff Noel J.Cortes... mortgage
obligation fell due on January 1, 1962, but despite repeated demands for payment... defendants failed
and refused to pay the said balance of P576,573.90 to plaintiffs... due and demandable up to December
1, 1962 the total... interest due from the defendants 8103,783.32 computed at the stipulated interest of
6% per annum... obligated and bound to pay the plaintiffs' reasonable compensation for attorney's fees
which... plaintiffs fixed at P50,000.00.

Defendants... admit the allegations of the complaint regarding plaintiffs' former ownership of the lands
in question as well as their execution of the mortgage in favor of plaintiffs... allege that they are at
present the registered... owners of the same parcels of land by virtue of the sale thereof made to
them... he allotment of payment to plaintiffs of the balance of their obligation, but allege that the said
balance has not yet become due and demandable so that they have not incurred in... default.

defendants will pay the balance of the purchase price in the amount of P576,573.90 to the plaintiffs, and
the latter agreed... efendants Oledan allege that on December 28, 1958... executed and entered into an
agreement whereby they sold, transferred unto their co-defendants all their shares, ownership... and
interest in the property subject of a deed of sale with purchase money mortgage... soon as defendants
will have received from the Land Tenure Administration the purchase price of... their (defendants')
hacienda in Bugo, Cagayan de Oro in the amount of P360,000.00... the sum of P44,571.66 payable at the
time and in the manner specified in the written agreement... defendants have paid to... them the sum of
P22,285.83'balance still due and unpaid in the amount of P22,285.83... cross-defendants have failed to
pay within the period stipulated in their agreement... hall pay to them the sum of P6,367.30 for the
period August 8, 1960 to August 28, 1961; another amount of P6,367.30 for the period August 28, 1961
to August 28, 1962 and... still another amount of P6,367.30 for the period August 28, 1963 by way of
penalty,... despite repeated demands cross-defendants have failed to pay

There is no question that defendants are indebted to plaintiffs on the mortgage executed by them
contained in the document denominated as 'Deed of Sale with Purchase Money Mortgage' (Exhibit 'A')
to the tune of P576,573.90 with interest thereon at the stipulated... rate of 6% per annum.

the event that the vendees shall fail to pay to the vendors, in the form and manner provided... or should
the vendees make... default in the performance of any one or more of the conditions stipulated herein,
the Vendors shall have the right,... to foreclos(ur)e this mortgage... the vendors are hereby... appointed
the attorneys-in-fact, for the Vendees, with full power of... substitution, to enter upon and take
possession of the mortgaged properties, without the order of any court or any other authority other
than herein granted, and to sell and dispose of the same to the highest bidder at public auction

Defendants claim that there had been a novation of the contract between them and plaintiffs on
account of the transfer made by defendants Oledans of their interest in the property in favor of their co-
defendants Venturanzas, with the knowledge and consent of the... plaintiffs.

efendants are indeed indebted to plaintiffs on the mortgage constituted by them over the parcels of
land in question, the period of payment of the obligations having become due, plaintiffs are,
therefore,... entitled to a foreclosure of the said mortgage.

This is a clear case of an obligation with a definite period ex die, which period was incidentally
established for the benefit of the defendants.
The evidence presented by the plaintiffs to substantiate these facts approaches moral certainty, not
merely preponderance of evidence. Hence, defendants' defense of novation as to the period for
payment, fails.

Issues:

a. Whether, upon the filing by plaintiffs of their complaint against the defendants on December 12,
1962, the obligation of the defendants had not yet become due and demandable and, hence, the
complaint was filed prematurely.

b. Whether the payment of P576,573.90 with interest thereon at the stipulated rate of 6% per annum
was to be made dependent upon the consummation of the sale of the two haciendas of defendants
Venturanzas and, hence, there was a novation of the... contract of sale with purchase money mortgage,
Exhibit B, as a result of a change in the manner of payment.

c. Whether the sale on December 28, 1959 by the defendants Oledans to their co-defendants
Venturanzas, of all their rights and interests in the property, subject-matter of the deed of sale with
purchase money mortgage, Exhibit B, likewise... consti-tuted a novation thereof and, therefore, had the
effect of discharging the defendants Oledans from their original obligation to the plaintiffs.

Ruling:

judgment is hereby rendered in favor of plaintiffs and against the defendants, ordering the latter jointly
and severally to pay to the former or to deposit with the clerk of court the sum of P576,573.90 with
interest thereon at the stipulated rate of 6%... per annum until fully paid, within 90 days from notice
hereof. In default of such payment the mortgaged property will be sold at public auction to realize the
mortgage indebtedness and costs, in accordance with law.

The parties will bear their own costs and expenses of litigation... judgment is hereby rendered in favor of
plaintiffs and against the defendants ordering the latter, jointly and severally, to pay the former or to
deposit with the clerk of court the sum of P576,573.90 with interest thereon at the stipulated rate of 6%
per annum... from January 1, 1959 until fully paid, within 90 days from notice hereof. In default of such
payment the mort-gaged property will be sold at public auction to realize the mortgage indebtedness
and costs, in accordance with law.
parties will bear their own costs and expenses of litigation

The Supreme Court ruled... the PARTIES OF THE FIRST PART (the Venturanzas) will pay to the PARTIES OF
THE SECOND PART (the Oledans), and the latter hereby acknowledge receipt thereof, of the sum of

P22,285.83)... shall... be paid... within eight (8) months from the date and execution of this Agreement
and Deed of Sale... on or before August 28, 1960

Ligutan vs CA DOCTRINE: penalty clause is an accessory undertaking to assume greater liability on the
part of the obligor in case of breach. although parties are free to stipulate in their contract the terms,
courts may reduce interest if it is unconscionable F: Ligutan and de Llana obtained a lon from Security
bank and trust company. petitioners (ligutan and de llana) executed a promissory note binding
themselves solidarily to pay with an interest of 15.189% and pay a penalty of 5% for every month in case
of default and in addition, to pay 10% of the total amount due by way of attorneys fees if the matter
were indorsed to a lawyer. despite several demands, petitioner failed to pay.first demand was made on
may 20 1982. bank filed a case. RTC ruling: 1. sum of 114k with interest of 15%, 2% sservice charge, 5%
penalty charge,commencing on may 20 1982 until fully paid 2. pay further sum of 10% attorneys fees.
petitioners appealed. CA affirmed except on 2% service charge which was deleted pursuant to Cetral
bank circular 783. parties filed for motion for reconsideration. petitioners prayed for the reduction of
5%. bank on the other hand prayed that the payment of interest and penalty be commenced not from
the date of filinf but from the time of default. CA resolved the two motion thusly

SPS DELOS SANTOS VS METROBANK (GR NO. G.R. NO. 153852

OCTOBER 24, 2012)
Sps Delos Santos vs Metropolitan Bank & Trust Company
G.R. No. 153852 October 24, 2012

Facts: From December 9, 1996 until March 20, 1998, the petitioners took out several loans totaling P12,000,000.00
from Metrobank, Davao City Branch, the proceeds of which they would use in constructing a hotel on their 305-
square-meter parcel of land located in Davao City and covered by Transfer Certificate of Title No. I-218079 of the
Registry of Deeds of Davao City. They executed various promissory notes covering the loans, and constituted a
mortgage over their parcel of land to secure the performance of their obligation. The stipulated interest rates were
15.75% per annum for the long term loans (maturing on December 9, 2006) and 22.204% per annum for a short term
loan of P4,400,000.00 (maturing on March 12, 1999). The interest rates were fixed for the first year, subject to
escalation or de-escalation in certain events without advance notice to them. The loan agreements further stipulated
that the entire amount of the loans would become due and demandable upon default in the payment of any installment,
interest or other charges. On December 27, 1999, Metrobank sought the extrajudicial foreclosure of the real estate
mortgage after the petitioners defaulted in their installment payments. The petitioners were notified of the foreclosure
and of the forced sale being scheduled on March 7, 2000. The notice of the sale stated that the total amount of the
obligation was P16,414,801.36 as of October 26, 1999. On April 4, 2000, prior to the scheduled foreclosure sale (i.e.,
the original date of March 7, 2000 having been meanwhile reset to April 6, 2000), the petitioners filed in the RTC a
complaint (later amended) for damages, fixing of interest rate, and application of excess payments (with prayer for a
writ of preliminary injunction). They alleged therein that Metrobank had no right to foreclose the mortgage because
they were not in default of their obligations; that Metrobank had imposed interest rates (i.e., 15.75% per annum for
two long-term loans and 22.204% per annum for the short term loan) on three of their loans that were different from
the rate of 14.75% per annum agreed upon; that Metrobank had increased the interest rates on some of their loans
without any basis by invoking the escalation clause written in the loan agreement; that they had paid P2,561,557.87
instead of only P1,802,867.00 based on the stipulated interest rates, resulting in their excess payment of P758,690.87
as interest, which should then be applied to their accrued obligation; that they had requested the reduction of the
escalated interest rates on several occasions because of its damaging effect on their hotel business, but Metrobank had
denied their request; and that they were not yet in default because the long-term loans would become due and
demandable on December 9, 2006 yet and they had been paying interest on the short-term loan in advance.

Issue: Whether or not injunction may issue pending extrajudicial foreclosure.

Held: Yes. No writ of preliminary injunction to enjoin an impending extrajudicial foreclosure

sale should issue except upon a clear showing of a violation of the mortgagors’ unmistakable
right to the injunction.

Injunction will not protect contingent, abstract or future rights whose existence is doubtful or
disputed. Indeed, there must exist an actual right, because injunction will not be issued to protect
a right not in esse and which may never arise, or to restrain an act which does not give rise to a
cause of action. At any rate, an application for injunctive relief is strictly construed against the
pleader.

Nor do we discern any substantial controversy that had any real bearing on Metrobank’s right to
foreclose the mortgage. The mere possibility that the RTC would rule in the end in the
petitioners’ favor by lowering the interest rates and directing the application of the excess
payments to the accrued principal and interest did not diminish the fact that when Metrobank
filed its application for extrajudicial foreclosure they were already in default as to their
obligations and that their short-term loan of P4,400,000.00 had already matured. Under such
circumstances, their application for the writ of preliminary injunction could not but be viewed as
a futile attempt to deter or delay the forced sale of their property.

Escalation clauses are valid and do not contravene public policy. These clauses are common in
credit agreements as means of maintaining fiscal stability and retaining the value of money on
long-term contracts. To avoid any resulting one sided situation that escalation clauses may bring,
we required in Banco Filipino the inclusion in the parties’ agreement of a de-escalation clause
that would authorize a reduction in the interest rates corresponding to downward changes made
by law or by the Monetary Board.

The validity of escalation clauses notwithstanding, we cautioned that these clauses do not give
creditors the unbridled right to adjust interest rates unilaterally. As we said in the same Banco
Filipino case, any increase in the rate of interest made pursuant to an escalation clause must be
the result of an agreement between the parties. The minds of all the parties must meet on the
proposed modification as this modification affects an important aspect of the agreement. There
can be no contract in the true sense in the absence of the element of an agreement, i.e., the
parties’ mutual consent. Thus, any change must be mutually agreed upon, otherwise, the change
carries no binding effect. A stipulation on the validity or compliance with the contract that is left
solely to the will of one of the parties is void; the stipulation goes against the principle of
mutuality of contract under Article 1308 of the Civil Code.

As with all equitable remedies, injunction must be issued only at the instance of a party who
possesses sufficient interest in or title to the right or the property sought to be protected. It is
proper only when the applicant appears to be entitled to the relief demanded in the complaint,
which must aver the existence of the right and the violation of the right, or whose averments
must in the minimum constitute a prima facie showing of a right to the final relief sought.
Accordingly, the conditions for the issuance of the injunctive writ are: (a) that the right to be
protected exists prima facie; (b) that the act sought to be enjoined is violative of that right; and
(c) that there is an urgent and paramount necessity for the writ to prevent serious damage. An
injunction will not issue to protect a right not in esse, or a right which is merely contingent and
may never arise; or to restrain an act which does not give rise to a cause of action; or to prevent
the perpetration of an act prohibited by statute. Indeed, a right, to be protected by injunction,
means a right clearly founded on or granted by law or is enforceable as a matter of law.

Triple-V vs. Filipino Merchants

FACTS:
1.) Mary Jo-Anne De Asis ate at Kamayan Restaurant. She
drove a car which was assigned to her by her employer Crispa Textile
Inc. (Crispa). She availed of the valet parking service of petitioner.
2.) The car was parked by valet attendant, Madridano. A few minutes
later, they noticed that the car was gone and its key is no longer in the
box where valet attendants usually keep the keys of cars entrusted to
them.
3.) The car was never recovered so Crispa filed a claim against its
insurer, resp. Filipino Merchants Insurance Company (FMICI).
P669,500 was given for the loss of the car.

4.) As a subrogee to Crispa’s rights, FMICI filed an action for

damages against petitioner Triple-V Food Services.
5.) Petitioner argued that the complaint failed to support allegations of
recklessness and negligence committed in the safekeeping and
custody of the car. They also said that the parking ticket provided 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.
6.) RTC ruled in favor of FMICI and ordered Triple V to pay so Triple V
appealed to the CA saying that it was not a depositary of the car and
that it exercised due diligence and prudence
7.) CA affirmed RTC saying that petitioner was a depositary and it
was negligent in its duties as a depositary and as an employer of the
valet attendant
ISSUE:
WON Triple V was a depositary and WON it was negligent
HELD:
Yes, Yes
RATIO:
1. When De Asis entrusted her car, she expected its safe
return. Thus, petitioner was constituted as a depositary of the same
car and cannot evade liability even if she availed of its free valet
parking service.
2. 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.
3. The waiver a contract of adhesion. Petitioner must not be allowed
to use its exclusionary stipulation as a shield from liability. A safe
parking space is an added attraction to the restaurant. Having said
that, customers fully expects the security of their car while dining.
Note: There was valid subrogation of rights between Crispa and
FMICI. Theft was covered in the insurance. RTC and CA ruling
affirmed.
YHT Realty Corp. v. CA
FACTS:
1.) Private respondent McLoughlin, an Australian
businessman-philanthropist, used to stay at Sheraton Hotel during his
trips to the Phil. prior to 1984 when he met Tan. She befriended him,
showed him around, introduced him to important people,
accompanied him in visiting and helping street children.
2.) Tan convinced McLoughlin to transfer to Tropicana Hotel where
Lainez, Payam (custodian of safety deposit boxes) and Lopez
(manager) was employed. It was also Tan who booked the hotel for
McLoughlin’s 1984-1987 trips.
3.) Having a practice of renting safety deposit boxes during his trips,
he rented one in Tropicana. He knew that the box could only be
opened with 2 keys (1 given to the guest, and 1 in the possession of
the management). Only the guest, himself, could request the
management to accompany the him and assist in opening the safety
deposit box with the 2 keys.
4.) McLoughlin allegedly placed US$15k [contained in 2 envelopes: 1
with 10k and another with 5k], AUS$10k, credit cards, etc.
5.) He didn’t check out when he went for a short trip in HK so he just
left his belongings in the box. He only brought with him the envelope
containing US$5k, AUS$10k, passports and credit cards.
6.) He found out that only US$3k was in the envelope but thought that
it was just a result of bad accounting.
7.) When he got back, he checked the other envelopes and
discovered that only US$5k was remaining from the one that
supposedly contained US$10k and that jewelries were missing.
8.) He checked in at the hotel again in 1988, and a similar incident
happened. This time, he immediately confronted Lainez and Payam
who admitted that Tan opened the safety deposit box.
9.) Upon knowing this, McLoughin went to his room where Tan was
staying and confronted her. Tan admitted that she had stolen the key
while he was sleeping and was able to open the box with assistance
of Lopez, Payam and Lainez.
10.) Then, Lopez wrote a promissory note promising to pay
McLoughin the missing money, and requested Tan to sign the note.
However, McLoughin insists that it must be the hotel who must
assume responsibility. Lopez refuses to accept liability saying that
there was an “Undertaking for the Use of Safety Deposit Box” which
explicitly releases Tropicana from any liability from loss in the
contents of the deposit boxes for any cause whatsoever.
11.) Thus, McLoughin filed a complaint. RTC ruled in favor of him. CA
affirmed.
ISSUE:
WON the undertaking exempts Tropicana or its employees
from liability – NO
WON Tropicana is negligent -- YES
RATIO:
1. The Undertaking was found to be null and void. (Art. 2003)
Catering to the public, hotel-keepers are bound to provide not only
lodging but also security to their guests and their belongings. Art.
2003 provides that a 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. The hotel business is like the
common carrier’s business which is imbued with public interest.
2. Mere close companionship and intimacy are not enough to warrant
the conclusion that a hotel guest and his companion are husband and
wife. It is no excuse for the hotel to have allowed the latter to open the
safety deposit box of the former.
3. Hotel employees and the owner and operator are solidarily liable
where there is a loss of a guest’s money through the negligence of an
employee in allowing the companion of said guest to open the safety
deposit box w/o guest’s consent. (Art. 1170, 2180, 2193 NCC)
4. Petitioner’s defense invoking Art. 2002 of the CC is invalid. The
exemption of a hotel keeper from liability if the loss is due to the acts
of his guest, family, or visitors presupposes that the hotel keeper is
not guilty of negligence—a depositary is not responsible for the loss
of goods by theft unless his actionable negligence contributes to the
loss.
5. Tropicana is guilty of concurrent negligence in allowing Tan who
was not the registered guest to open the safety deposit box.
6.) RTC and CA affirmed.

THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,

vs.
GREGORIO DE LA PEÑA, administrator of the estate of Father Agustin de la Peña, defendant-
appellant.
Lopez Vito, for appellant.
Arroyo and Horrilleno, for appellee.
MORELAND, J.:
FACTS: In 1898 Fr. De la Peña assigned as trustee of the sum of P6,641, collected by him for the
charitable purposes he deposited in his personal account P19,000 in the Hongkong and
Shanghai Bank at Iloilo. During the war of the revolution, Father De la Peña was arrested by the
military authorities as a political prisoner. The arrest of Father De la Peña and the confiscation
of the funds in the bank were the result of the claim of the military authorities that he was an
insurgent and that the funds deposited had been collected by him is for revolutionary purposes.
The money was taken from the bank by the military authorities by virtue of such order, was
confiscated and turned over to the Government.
ISSUES: Whether or not Father De la Peña is liable for the loss of the funds?
RULLING: No, he is not liable because there is no negligent act on the part of Fr. De la Peña. It
was so happened that during that time the money was taken from him by the U.S. military
forces which is unforeseen event. Although the Civil Code states that “a person obliged to give
something is also bound to preserve it with the diligence pertaining to a good father of a
family”, it also provides, following the principle of the Roman law that “no one shall be liable
for events which could not be foreseen, or which having been foreseen were inevitable, with
the exception of the cases expressly mentioned in the law or those in which the obligation so
declares.”

CA Agro-Industrial Development Corporation vs CA GR No. 90027. March 3, 1993

Facts:
CA Agro (through its President, Aguirre) and spouses Pugao entered into an
agreement whereby the former purchased two parcels of land for P350, 525 with a P75, 725
down payment while the balance was covered by three (3) postdated checks. Among the terms
embodied in a Memorandum of True and Actual Agreement of Sale of Land were that titles to
the lots shall be transferred to the petitioner upon full payment of the purchase price and that
the owner’s copies of the certificates of titles thereto shall be deposited in a safety deposit box
of any bank. The same could be withdrawn only upon the joint signatures of a representative of
the petitioner upon full payment of the purchase price. They then rented Safety Deposit box of
private respondent Security Bank and Trust Company (SBTC). For this purpose, both signed a
contract of lease which contains the following conditions:
13. The bank is not a depositary of the contents of the safe and it has neither the possession
nor control of the same.
14. The bank has no interest whatsoever in said contents, except herein expressly provided,
and it assumes absolutely no liability in connection therewith.

After the execution of the contract, two (2) renter’s key were given to Aguirre, and Pugaos. A
key guard remained with the bank. The safety deposit box has two key holes and can be
opened with the use of both keys. Petitioner claims that the CTC were placed inside the said
box.

Thereafter, a certain Mrs. Ramos offered to buy from the petitioner the two (2) lots at a price of
P225 per sqm. Mrs. Ramose demanded the execution of a deed of sale which necessarily
entailed the production of the CTC. Aguirre and Pugaos then proceeded to the bank to open the
safety deposit box. However, when opened in the presence of bank’s representative, the box
yielded no certificates. Because of the delay in reconstitution of title, Mrs. Ramos withdrew her
earlier offer and as a consequence petitioner failed to realize the expected profit of P280 , 500.
Hence, the latter filed a complaint for damages.
RTC: Dismissed the complaint
CA: Affirmed

Issue:
Whether or not the contractual relation between a commercial bank and another party in
the contract of rent of a safety deposit box is one of bailor and bailee.

Ruling:
Yes.
 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 Pugaos.
American Jurisprudence:
The prevailing rule is that the relation between a bank renting out safe-deposit boxes and
its customer with respect to the contents of the box is that of a bail or bailee, the bailment
being for hire and mutual benefit.

Our provisions on safety deposit boxes are governed by Section 72 (a) of the General
Banking Act, and this primary function is still found within the parameters of a contract of
deposit like 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. Thus, depositary’s liability is governed by our
civil code rules on obligation and contracts, and thus the SBTC would be liable if, in performing
its obligation, it is found guilty of fraud, negligence, delay or contravention of the tenor of the
agreement.
Angel Javellana v Jose Lim, et al; GR 4015, 24 August 1908En banc, Torres, J.
Facts:(1) On 26 May 1897, Jose and others executed a document in favor of Angel, wherein
itstated that they had received a sum of PhP 2,600.86 as a “deposit” without interestfrom the
latter. The document also stipulated that they would return the same amount jointly
and severally on 20 January 1898.(2) Upon the stipulated due date, however, Jose and others
asked for an extension topay and bound themselves to pay 15% interest per annum on the
amount of theirindebtedness, to which the Angel acceded. Despite the extension, Jose and
othersstill failed to pay the full amount of their indebtedness. Consequently, this
promptedAngel to file a civil action before the CFI of Iloilo. The CFI of Iloilo subsequently ruledin
favor of Angel to recover the amount due plus the payment of 15% interest
perannum.Issue: Whether or not the contract executed by Angel and Jose and others was that
of adeposit.Ruling: No, the contract executed by Angel and Jose and others was not a deposit.
Instead, itwas a contract of simple loan or
mutuum
.Ratio: (1) It must be understood that Jose and others were lawfully authorized to make use
ofthe amount deposited, which they have done as subsequently shown when theyasked for an
extension of the time for the return thereof. They were conscious thatthey had used, for their
own profit and gain, the money which they apparentlyreceived as a “deposit”. Moreover, they
engaged to pay interest to Angel from thestipulated date until the time when the refund should
have been made.(2) Where money, consisting of coins of legal tender, is deposited with a
person and thelatter is authorized by the depositor to use and dispose of the same, the
agreementis not a contract of deposit, but a loan. Moreover, Article 1768 of the old Civil
Code(now Article 1978 of the New Civil Code) provides that
when the depository has per-

mission to make use of the thing deposited, the contract loses the character of a de-posit and
becomes a loan or bailment
.(3) A subsequent agreement between the parties as to interest on the amount said tohave
been deposited, because the same could not be returned at the time fixedtherefore, does not
constitute a renewal of an agreement of deposit, but it is the bestevidence that the original
contract entered into between them was for a loan underthe guise of a deposit.

Manuel Gavieres v. Trinidad Pardo de Tavera

Facts:

 The plaintiff and defendant of this case are both successors of the deceased depositary and
depositor.

 Manuel Gavieres for Ignacia de Gorricho (Depositor)

 Trinidad Pardo de Tavera for Felix Pardo de Tavera (Depositary)

 January 10, 1900: Appealed case is about collection of balance 1,423.75 petot from de Tavera,
remaining from an
original obligation of 3,000.00 petot.

 3,000 petot is the amount of the deposit delivered by Ignacia Gorricho to Felix Pardo de
Tavera on October 31, 1859.

 As stated in an agreement that:

o Felix received from Ignacia, 3,000 petot, as DEPOSIT payable on 2 months’
notice in advance. With
INTEREST at 6% per annum.

 Trinidad contended as a defense that the document was not a contract of deposit, rather, a
contract of loan.

 Trinidad also alleged that being a contract of loan, the original obligation was already
extinguished due to prescription.
Issue: W/N this is a contract of deposit.
Held: No, although in the document there was a “DEPOSIT” spoken of, nevertheless, it clearly
appears that it is a contract of
loan. The obligation of the depositary to PAY INTEREST of 6% per annum suffices to cause the
obligation to be considered as a loan. Furthermore, it was stated that the amount could be
collected after notice of 2 months in advance.
The contract lost the character of a deposit and acquired that of a loan. All personal actions,
such as those arise from a contract of loan, cease upon 15 years according to the Civil Code
(1900).
In addition, the original contract was nearly half century ago, which states that there MAY exist
or MAY have existed documents proving a total payment between the parties. However,
this document has some time ago suffered the common fate of perishable things.
Facts:
Durban Apartments Corporation solely liable to respondent Pioneer Insurance and Surety
Corporation for the loss of Jeffrey See's (See's) vehicle.
on April 30, 2002, See arrived and checked in at the City Garden Hotel in Makati corner
Kalayaan Avenues, Makati City before midnight, and its parking attendant, defendant x x x
Justimbaste got the key to said Vitara from
See to park it[. O]n May 1, 2002, at about 1:00 o'clock in the morning, See was awakened in his
room by [a] telephone call from the Hotel Chief Security Officer who informed him that his
Vitara was carnapped while it was parked unattended at the parking area of Equitable
PCI Bank along Makati Avenue between the hours of 12:00 [a.m.] and 1:00 [a.m.];
Vitara was lost due to the negligence of [petitioner] Durban Apartments and [defendant]
Justimbaste because it was discovered during the investigation that this was the second time
that a similar incident of carnapping happened in the valet parking service of [petitioner]
Durban
Apartments and no necessary precautions were taken to prevent its repetition;... upon arrival
at the City Garden Hotel, See gave notice to the doorman and parking attendant of the said
hotel, x x x Justimbaste, about his Vitara when he entrusted its ignition key to the latter. x x x
Justimbaste issued a valet... parking customer claim stub to See, parked the Vitara at the
Equitable PCI Bank parking area, and placed the ignition key inside a safety key box while See
proceeded to the hotel lobby to check in. The Equitable PCI Bank parking area became an annex
of City Garden Hotel when the... management of the said bank allowed the parking of the
vehicles of hotel guests thereat in the evening after banking hours.
Issues:
Ultimately, whether petitioner is liable to respondent for the loss of See's vehicle.
Ruling:
Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit and a
necessary deposit made by persons in hotels or inns:
Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to
another, with the obligation of safely keeping it and returning the same. If the safekeeping of
the thing delivered is not the principal purpose of the contract, there is no... deposit but some
other contract.
Art. 1998. The deposit of effects made by
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.
Plainly, from the facts found by the lower courts, the insured See deposited his vehicle for
safekeeping with petitioner, through the latter's employee, Justimbaste. In turn, Justimbaste
issued a claim stub to See. Thus, the contract of deposit was perfected from See's delivery,...
when he handed over to Justimbaste the keys to his vehicle, which Justimbaste received with
the obligation of safely keeping and returning it. Ultimately, petitioner is liable for the loss of
See's vehicle
Facts:
gional Trial Court (RTC), Branch 13, of
Manila, finding YHT Realty Corporation, Brunhilda Mata-Tan (Tan), Erlinda Lainez (Lainez) and
Anicia Payam (Payam) jointly an
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:
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;
To return the key and execute the RELEASE in favor of TROPICANA APARTMENT HOTEL upon
giving up the use of the box.
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.
The Office of the President referred the letter to the Department of Justice (DOJ) which
forwarded the same to the Western Police District (WPD).
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.
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.
Issues:
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.
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.
Ruling:
The petition is devoid of merit.
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.
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.
Main issue relevant to topic (necessary deposits):
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.
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.
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.
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.
Principles:
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 2001[37] is suppressed or diminished shall be void