Name: SARACHO, NICOLE R.

Topic: DEPOSIT
Law or Provision Cited:
Article 1643 of the Civil Code: In the lease of things, one of the
parties binds himself to give something to another the
enjoyment or use of a thing for a price certain, and for a period
which may be definite or indefinite. However, no lease for more
than ninety-days shall be valid.
Article 1975 of the Civil Code: The depository holding
certificates, bonds, securities or instruments which earn interest
shall be bound to collect the latter when it becomes due, and to
take such steps as may be necessary in order that the securities
may preserve their value and the rights corresponding to them
according to law.
The above provision shall not apply to contracts for the
rent of safety deposit box.
Article 1972 of the Civil Code: The depository is obliged to keep
the thing safely and to return it, when required, to the depositor,
or to his heirs and successors, or to the person who may have
been designated in the contract. His responsibility with regard to
the safekeeping and loss of the thing shall be governed by Title I
of this Book. If the deposit is gratuitous, the fact shall be taken
into account in determining the degree of care that the
depositary must observed.
Section 53 of the General Banking Act: Other Banking Services. In addition to the operations specifically authorized in this Act, a
bank may perform the following services:
53.5 Rent out safety deposit boxes.
The bank shall perform the services permitted under Subsections
53.1, 53.2,53.3 and 53.4 as depositary or as an agent.
Accordingly, it shall keep the funds, securities and other effects
which it receives duly separate from the bank's own assets and
liabilities.
Title: CA AGRO-INDUSTRIAL DEVELOPMENT CORP., VS COURT OF
APPEALS AND SECURITY BANK TRUST COMPANY
Source, Date: G.R. No. 90027, 03 March 1993
Facts:
Agro Industrial (Agro), through its President, Sergio Aguirre,
purchased from spouses Ramon and Paolo Pugao (Sps Pugao) two
parcel of land for P350,525. A downpayment of P75,725 was given and
the balance were covered by three post-dated checks. It was agreed
upon in the Memorandum of True and Actual Agreement of Sale of

Land that the titles of the lots shall be transferred to Agro upon full
payment and that the Sps Pugao copies of the titles shall be deposited
in a safety deposit box of any bank. The same shall be withdrawn only
upon the joint signatures of a representative of both parties. They
rented Security Bank and Trust Company wherein a contract of lease
with the Bank was signed which contained the following provisions:
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 the contents, except
herein expressly provided, and it asuumes absolutely no liability
in connection therewith.
The parties were given renters keys and a guard key remained
with the Bank. The safety bank has two key holes that can only be
opened by using both the renter and the guard keys. Agro claims that
the certificates of titles were placed inside the bank.
Thereafter, Margarita Ramos offered to buy from ago the two lots
with the profit of P280,500. Ramos demanded for the execution of
deed of sale, which entailed the production of the certificate of titles.
Aguirre then with the Sps Pulao went to Security Bank and opened the
safety deposit box. However, the box did not contain the certificate of
titles. Because of the delay, Mrs. Ramos withdrew to buy the lots. As a
consequence, Agro failed to get the expected profit from the sale. Agro
then filed a complaint of damages against respondent Bank. In its
Answer, the Bank claimed that Sec.13 and 14 of the contract of lease
provided that loss of any articles I the box cannot give rise to an action
against it. The Regional Trial Court decided against the petitioner on
the ground that under the contract of lease, the Bank has no liability
for the loss of the certificate of titles. The said provisions on the
contract of lease are binding to the parties.
Upon appeal, CA affirmed RTCs decision on the ground that the
contract executed by Agro and the Bank is in the nature of contract of
lease by virtue of which Agro and co-renters were given control over
the deposit box and its Bank while the Bank has no right to open the
said box because it had neither the possession nor control over the
contents. Thus, the contract is governed by Article 1643 in relation
with Article 1975.
Hence, Argo brought the case to the Supreme Court maintaining
the claim that the contract for the rent of the deposit box is a contract
of deposit governed by Title XII, Book IV of the NCC. Thus, the Bank is
liable for the loss of certificates pursuant to Article 1972 of the Civil
Code. The petitioner also cited an American Jurisprudence, which
stated that a contract for the rental of a bank safety deposit box in
consideration of a fixed amount at stated period is bailment for hire. In
addition, they also contend that Par.13 and 14 of the contract of lease
as contrary to law and public policy.

Issue: Whether the contractual relation between a commercial bank

and another party in a contract of rent of a safety deposit box with the
respect to its contents placed by the latter one of bailor and bailee or
one of lessor and lessee.
Held: Petition PARTIALLY GRANTED.
Ruling: 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 is one of a bailor and bailee, the
bailment being for hire and mutual benefit, and it is not an ordinary
deposit but a special kind of deposit. This prevailing rule in American
Jurisprudence was adopted in Section 53 of the General Banking Act
which authorizes banking institutions to rent out safety deposit boxes.
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. 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. However, the
Court does not fully subscribe to the view that the same is a contract
of deposit that is to be strictly governed by the provisions in the Civil
Code on deposit; the contract in this case is a special kind of deposit.
Nevertheless, the primary function is still found within the
parameters of a contract of deposit, and, in relation 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. Thus, the depositary's responsibility for the safekeeping
of the objects deposited in this case 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, and in the absence of
any stipulation prescribing the degree of diligence required, that of a
good father of a family is to be observed. Corollary, 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.
Furthermore, 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 Bank keeps the guard key to the
said box and renters cannot open their respective boxes unless the
Bank cooperates by presenting and using this guard key. Clearly then,

to the extent above stated, conditions 13 and 14 in the contract in

question are void and ineffective.
The Court decided that the 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 Bank was aware of the agreement between CA
Agro 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
Bank. Since both CA Agro 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.