DEPOSIT
VOLUNTARY DEPOSIT
THIRD DIVISION
[G.R. No. 66826. August 19, 1988.]
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. THE INTERMEDIATE
APPELLATE COURT and RIZALDY T. ZSHORNACK respondents.
Pacis & Reyes Law Office for petitioner.
Ernesto T. Zshornack, Jr. for private respondent.
SYLLABUS
1. CIVIL LAW; DEPOSIT; NATURE; CASE AT BAR. — The Commercial Bank and Trust Co. (subsequently
absorbed by petitioner Bank of the Philippine Islands) through its assistant branch manager for Quezon
City acknowledged receipt from the private respondent of US$3,000.00 for safekeeping. The subsequent
acts of the parties also show that the intent of the parties was really for the bank to safely keep the
dollars and to return it to Zshornack at a later time. Thus, Zshornack demanded the return of the money
on May 10, 1976, or over five months later. The above arrangement is that contract defined under
Article 1962, New Civil Code, which reads: Art. 1962. A deposit is constituted from the moment a person
receives a thing belonging to another, with the obligation of safely keeping it and of returning the same.
If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit
but some other contract.
2. REMEDIAL LAW; ALLEGATIONS IN PLEADINGS; EFFECT OF FAILURE TO SPECIFICALLY DENY
THEREIN THE DUE EXECUTION OF DOCUMENTS. — The respondent's second cause of action was
based on an actionable document. It was therefore incumbent upon the bank to specifically deny under
oath the due execution of the document, as prescribed under Rule 8, Section 8, if it desired: (1) to
question the authority of Garcia to bind the corporation; and (2) to deny its capacity to enter into such
contract. No sworn answer denying the due execution of the document in question, or questioning the
authority of Garcia to bind the bank, or denying the bank's capacity to enter into the contract, was ever
filed. Hence, the bank is deemed to have admitted not only Garcia's authority, but also the bank's
power, to enter into the contract in question.
3. ID.; VOID CONTRACTS; CONTRACTS EXECUTED AGAINST A MANDATORY/PROHIBITORY LAW. —
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.
4. ID.; ID.; ID.; EFFECT. — 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.
DECISION
CORTES, J p:
The original parties to this case were Rizaldy T. Zshornack and the Commercial Bank and Trust
Company of the Philippines [hereafter referred to as "COMTRUST."] In 1980, the Bank of the Philippine
Islands (hereafter referred to as "BPI") absorbed COMTRUST through a corporate merger, and was
substituted as party to the case. prLL
Rizaldy Zshornack initiated proceedings on June 28, 1976 by filing in the Court of First Instance of Rizal
— Caloocan City a complaint against COMTRUST alleging four causes of action. Except for the third
cause of action, the CFI ruled in favor of Zshornack. The bank appealed to the Intermediate Appellate
Court which modified the CFI decision absolving the bank from liability on the fourth cause of action.
The pertinent portions of the judgment, as modified, read:
IN VIEW OF THE FOREGOING, the Court renders judgment as follows:
1. Ordering the defendant COMTRUST to restore to the dollar savings account
of plaintiff (No. 25-4109) the amount of U.S $1,000.00 as of October 27, 1975 to
earn interest together with the remaining balance of the said account at the
rate fixed by the bank for dollar deposits under Central Bank Circular 343;
2. Ordering defendant COMTRUST to return to the plaintiff the amount of U.S.
$3,000.00 immediately upon the finality of this decision, without interest for
the reason that the said amount was merely held in custody for safekeeping,
but was not actually deposited with the defendant COMTRUST because being
cash currency, it cannot by law be deposited with plaintiff's dollar account and
defendant's only obligation is to return the same to plaintiff upon demand;
xxx xxx xxx
5. Ordering defendant COMTRUST to pay plaintiff in the amount of P8,000.00
as damages in the concept of litigation expenses and attorney's fees suffered
by plaintiff as a result of the failure of the defendant bank to restore to his
(plaintiff's) account the amount of U.S. $1,000.00 and to return to him
(plaintiff) the U.S. $3,000.00 cash left for safekeeping.
Costs against defendant COMTRUST.
SO ORDERED. [Rollo, pp. 47-48.]
Undaunted, the bank comes to this Court praying that it be totally absolved from any liability to
Zshornack. The latter not having appealed the Court of Appeals decision, the issues facing this Court are
limited to the bank's liability with regard to the first and second causes of action and its liability for
damages.
1. We first consider the first cause of action.
On the dates material to this case, Rizaldy Zshornack and his wife, Shirley Gorospe, maintained in
COMTRUST, Quezon City Branch, a dollar savings account and a peso current account.
On October 27, 1975, an application for a dollar draft was accomplished by Virgilio V. Garcia, Assistant
Branch Manager of COMTRUST Quezon City, payable to a certain Leovigilda D. Dizon in the amount of
$1,000.00. In the application, Garcia indicated that the amount was to be charged to Dollar Savings
Acct. No. 25-4109, the savings account of the Zshornacks; the charges for commission, documentary
stamp tax and others totalling P17.46 were to be charged to Current Acct. No. 210-465-29, again, the
current account of the Zshornacks. There was no indication of the name of the purchaser of the dollar
draft.
On the same date, October 27, 1975, COMTRUST, under the signature of Virgilio V. Garcia, issued a
check payable to the order of Leovigilda D. Dizon in the sum of US$1,000 drawn on the Chase
Manhattan Bank, New York, with an indication that it was to be charged to Dollar Savings Acct. No. 25-
4109. prcd
When Zshornack noticed the withdrawal of US$1,000.00 from his account, he demanded an explanation
from the bank. In answer, COMTRUST claimed that the peso value of the withdrawal was given to Atty.
Ernesto Zshornack, Jr., brother of Rizaldy, on October 27, 1975 when he (Ernesto) encashed with
COMTRUST a cashier's check for P8,450.00 issued by the Manila Banking Corporation payable to
Ernesto.
Upon consideration of the foregoing facts, this Court finds no reason to disturb the ruling of both the
trial court and the Appellate Court on the first cause of action. Petitioner must be held liable for the
unauthorized withdrawal of US$1,000.00 from private respondent's dollar account.
In its desperate attempt to justify its act of withdrawing from its depositor's savings account, the bank
has adopted inconsistent theories. First, it still maintains that the peso value of the amount withdrawn
was given to Atty. Ernesto Zshornack, Jr. when the latter encashed the Manilabank Cashier's Check. At
the same time, the bank claims that the withdrawal was made pursuant to an agreement where
Zshornack allegedly authorized the bank to withdraw from his dollar savings account such amount
which, when converted to pesos, would be needed to fund his peso current account. If indeed the peso
equivalent of the amount withdrawn from the dollar account was credited to the peso current account,
why did the bank still have to pay Ernesto?
At any rate, both explanations are unavailing. With regard to the first explanation, petitioner bank has
not shown how the transaction involving the cashier's check is related to the transaction involving the
dollar draft in favor of Dizon financed by the withdrawal from Rizaldy's dollar account. The two
transactions appear entirely independent of each other. Moreover, Ernesto Zshornack, Jr., possesses a
personality distinct and separate from Rizaldy Zshornack. Payment made to Ernesto cannot be
considered payment to Rizaldy. prcd
As to the second explanation, even if we assume that there was such an agreement, the evidence do not
show that the withdrawal was made pursuant to it. Instead, the record reveals that the amount
withdrawn was used to finance a dollar draft in favor of Leovigilda D. Dizon, and not to fund the current
account of the Zshornacks. There is no proof whatsoever that peso Current Account No. 210-465-29 was
ever credited with the peso equivalent of the US$1,000.00 withdrawn on October 27, 1975 from Dollar
Savings Account No. 25-4109.
2. As for the second cause of action, the complaint filed with the trial court alleged that on December 8,
1975, Zshornack entrusted to COMTRUST, thru Garcia, US$3,000.00 cash (popularly known as
greenbacks) for safekeeping,and that the agreement was embodied in a document, a copy of which was
attached to and made part of the complaint. The document reads:
Makati Cable Address:
Philippines "COMTRUST"
COMMERCIAL BANK AND TRUST COMPANY
of the Philippines
Quezon City Branch
Dece
mber 8, 1975
MR. RIZALDY T. ZSHORNACK
&/OR MRS. SHIRLEY E. ZSHORNACK
Sir/Madam:
We acknowledged (sic) having received from you today the sum of US
DOLLARS: THREE THOUSAND ONLY (US$3,000.00) for safekeeping.
Received
by:(Sgd.)
VIRGILIO V.
GARCIA
It was also alleged in the complaint that despite demands, the bank refused to return the money.
In its answer, COMTRUST averred that the US$3,000 was credited to Zshornack's peso current account
at prevailing conversion rates.
It must be emphasized that COMTRUST did not deny specifically under oath the authenticity and due
execution of the above instrument.
During trial, it was established that on December 8, 1975 Zshornack indeed delivered to the bank
US$3,000 for safekeeping. When he requested the return of the money on May 10, 1976, COMTRUST
explained that the sum was disposed of in this manner: US$2,000.00 was sold on December 29, 1975
and the peso proceeds amounting to P14,920.00 were deposited to Zshornack's current account per
deposit slip accomplished by Garcia; the remaining US$1,000. 00 was sold on February 3, 1976 and the
peso proceeds amounting to P8,350.00 were deposited to his current account per deposit slip also
accomplished by Garcia.
Aside from asserting that the US$3,000.00 was properly credited to Zshornack's current account at
prevailing conversion rates, BPI now posits another ground to defeat private respondent's claim. It now
argues that the contract embodied in the document is the contract of depositum (as defined in Article
1962, New Civil Code), which banks do not enter into. The bank alleges that Garcia exceeded his powers
when he entered into the transaction. Hence, it is claimed, the bank cannot be liable under the contract,
and the obligation is purely personal to Garcia. LexLib
Before we go into the nature of the contract entered into, an important point which arises on the
pleadings, must be considered.
The second cause of action is based on a document purporting to be signed by COMTRUST, a copy of
which document was attached to the complaint. In short, the second cause of action was based on an
actionable document. It was therefore incumbent upon the bank to specifically deny under oath the due
execution of the document, as prescribed under Rule 8, Section 8, if it desired: (1) to question the
authority of Garcia to bind the corporation; and (2) to deny its capacity to enter into such contract.
[See, E.B. Merchant v. International Banking Corporation, 6 Phil. 314 (1906).] No sworn answer denying
the due execution of the document in question, or questioning the authority of Garcia to bind the bank,
or denying the bank's capacity to enter into the contract, was ever filed. Hence, the bank is deemed to
have admitted not only Garcia's authority, but also the bank's power, to enter into the contract in
question.
In the past, this Court had occasion to explain the reason behind this procedural requirement.
The reason for the rule enunciated in the foregoing authorities will, we think,
be readily appreciated. In dealing with corporations the public at large is bound
to rely to a large extent upon outward appearances. If a man is found acting for
a corporation with the external indicia of authority, any person, not having
 notice of want of authority, may usually rely upon those appearances; and if it
be found that the directors had permitted the agent to exercise that authority
and thereby held him out as a person competent to bind the corporation, or
had acquiesced in a contract and retained the benefit supposed to have been
conferred by it, the corporation will be bound notwithstanding the actual
authority may never have been granted . . . Whether a particular officer actually
possesses the authority which he assumes to exercise is frequently known to
very few, and the proof of it usually is not readily accessible to the stranger who
deals with the corporation on the faith of the ostensible authority exercised by
some of the corporate officers. It is therefore reasonable in a case where an
officer of a corporation has made a contract in its name, that the corporation
should be required, if it denies his authority, to state such defense in its answer.
By this means the plaintiffs apprised of the fact that the agent's authority is
contested; and he is given an opportunity to adduce evidence showing either
that the authority existed or that the contract was ratified and approved
[Ramirez v. Orientalist Co. and Fernandez, 38 Phil. 634, 645-646 (1918).]
Petitioner's argument must also be rejected for another reason. The practical effect of absolving a
corporation from liability every time an officer enters into a contract which is beyond corporate powers,
even without the proper allegation or proof that the corporation has not authorized nor ratified the
officer's act, is to cast corporations in so perfect a mold that transgressions and wrongs by such artificial
beings become impossible [Bissell v. Michigan Southern and N.I.R Cos, 22 N.Y 258 (1860).] "To say that
a corporation has no right to do unauthorized acts is only to put forth a very plain truism; but to say that
such bodies have no power or capacity to err is to impute to them an excellence which does not belong
to any created existence with which we are acquainted. The distinction between power and right is no
more to be lost sight of in respect to artificial than in respect to natural persons." [Ibid.]
Having determined that Garcia's act of entering into the contract binds the corporation, we now
determine the correct nature of the contract, and its legal consequences, including its
enforceability. LibLex
The document which embodies the contract states that the US$3,000.00 was received by the bank
for safekeeping. The subsequent acts of the parties also show that the intent of the parties was really for
the bank to safely keep the dollars and to return it to Zshornack at a later time. Thus, Zshornack
demanded the return of the money on May 10, 1976, or over five months later.
The above arrangement is that contract defined under Article 1962, New Civil Code, which reads:
Art. 1962. A deposit is constituted from the moment a person receives a thing
belonging to another, with the obligation of safely keeping it and of returning
the same. If the safekeeping of the thing delivered is not the principal purpose
of the contract, there is no deposit but some other contract.
Note that the object of the contract between Zshornack and COMTRUST was foreign exchange. Hence,
the transaction was covered by Central Bank Circular No. 20, Restrictions on Gold and Foreign Exchange
Transactions, promulgated on December 9, 1949, which was in force at the time the parties entered into
the transaction involved in this case. The circular provides:
xxx xxx xxx
2. Transactions in the assets described below and all dealings in them of
whatever nature, including, where applicable their exportation and
importation, shall NOT be effected, except with respect to deposit accounts
included in sub-paragraphs (b) and (c) of this paragraph, when such deposit
accounts are owned by and in the name of banks.
(a) Any and all assets, provided they are held through, in,
or with banks or banking institutions located in the Philippines,
including money, checks, drafts, bullions, bank drafts deposit
accounts (demand, time and savings), all debts, indebtedness or
obligations, financial brokers and investment houses notes,
debentures, stocks, bonds, coupons, bank acceptances, mortgages,
pledges, liens or other rights in the nature of security, expressed in
foreign currencies, or if payable abroad, irrespective of the currency
in which they are expressed, and belonging to any person, firm,
partnership, association, branch office, agency, company or other
unincorporated body or corporation residing or located within the
Philippines;
(b) Any and all assets of the kinds included and or
described in subparagraph (a) above, whether or not held through,
in, or with banks or banking institutions, and existent within the
Philippines, which belong to any person, film, partnership,
association, branch office, agency, company or other
unincorporated body or corporation not residing or located within
the Philippines;
(c) Any and all assets existent within the Philippines
including money, checks, drafts, bullions, bank drafts, all debts,
indebtedness or obligations, financial securities commonly dealt in
by bankers, brokers and investment houses, notes, debentures,
stock, bonds, coupons, bank acceptances, mortgages, pledges, liens
or other rights in the nature of security expressed in foreign
currencies, or if payable abroad, irrespective of the currency in which
they are expressed, and belonging to any person, firm, partnership,
association, branch office, agency, company or other
unincorporated body or corporation residing or located within the
Philippines.
xxx xxx xxx
4. (a) All receipts of foreign exchange shall be sold daily to the Central Bank by
those authorized to deal in foreign exchange. All receipts of foreign exchange
by any person, firm, partnership, association, branch office, agency, company
or other unincorporated body or corporation shall be sold to the authorized
agents of the Central Bank by the recipients within one business day following
the receipt of such foreign exchange. Any person, firm, partnership,
association, branch office, agency, company or other unincorporated body or
corporation, residing or located within the Philippines, who acquires on and
after the date of this Circular foreign exchange shall not unless licensed by the
Central Bank, dispose of such foreign exchange in whole or in part, nor receive
less than its full value, nor delay taking ownership thereof except as such delay
is customary; Provided, further, That within one day upon taking ownership, or
receiving payment, of foreign exchange the aforementioned persons and
entities shall sell such foreign exchange to designated agents of the Central
Bank.
xxx xxx xxx
8. Strict observance of the provisions of this Circular is enjoined; and any
person, firm or corporation, foreign or domestic, who being bound to the
observance thereof, or of such other rules, regulations or directives as may
 hereafter be issued in implementation of this Circular, shall fail or refuse to
comply with, or abide by, or shall violate the same, shall be subject to the penal
sanctions provided in the Central Bank Act.
xxx xxx xxx
Paragraph 4 (a) above was modified by Section 6 of Central Bank Circular No. 281, Regulations on
Foreign Exchange, promulgated on November 26, 1969 by limiting its coverage to Philippine residents
only. Section 6 provides:
SEC. 6. All receipts of foreign exchange by any resident person, firm, company
or corporation shall be sold to authorized agents of the Central Bank by the
recipients within one business day following the receipt of such foreign
exchange. Any resident person, firm, company or corporation residing or located
within the Philippines,who acquires foreign exchange shall not, unless
authorized by the Central Bank, dispose of such foreign exchange in whole or in
part, nor receive less than its full value, nor delay taking ownership thereof
except as such delay is customary; Provided, That, within one business day
upon taking ownership or receiving payment of foreign exchange the
aforementioned persons and entities shall sell such foreign exchange to the
authorized agents of the Central Bank.
As earlier stated, the document and the subsequent acts of the parties show that they intended the
bank to safekeep the foreign exchange, and return it later to Zshornack, who alleged in his complaint
that he is a Philippine resident. The parties did not intended to sell the US dollars to the Central Bank
within one business day from receipt. Otherwise, the contract of depositum would never have been
entered into at all.
Since the mere safekeeping of the greenbacks, without selling them to the Central Bank within one
business day from receipt, is a transaction which is not authorized by CB Circular No. 20, it must be
considered as one which falls under the general class of prohibited transactions. Hence, pursuant
to Article 5 of the Civil Code, it is void, having been executed against the provisions of a
mandatory/prohibitory law. More importantly, it affords neither of the parties a cause of action against
the other. "When the nullity proceeds from the illegality of the cause or object of the contract, and the
act constitutes a criminal offense, both parties being in pari delicto, they shall have no cause of action
against each other . . . " [Art. 1411, New Civil Code.] The only remedy is one on behalf of the State to
prosecute the parties for violating the law.
We thus rule that Zshornack cannot recover under the second cause of action.
3. Lastly, we find the P8,000.00 awarded by the courts a quo as damages in the concept of litigation
expenses and attorney's fees to be reasonable. The award is sustained. LLpr
WHEREFORE, the decision appealed from is hereby MODIFIED. Petitioner is ordered to restore to the
dollar savings account of private respondent the amount of US$1,000.00 as of October 27, 1975 to earn
interest at the rate fixed by the bank for dollar savings deposits. Petitioner is further ordered to pay
private respondent the amount of P8,000.00 as damages. The other causes of action of private
respondent are ordered dismissed.
SO ORDERED.
Gutierrez, Jr. and Bidin, JJ., concur.
Fernan, C.J., took no part — was counsel for Bank of P.I. (Cebu).
Feliciano, J., concurs in the result.
||| (Bank of the Philippine Islands v. Intermediate Appellate Court, G.R. No. 66826, [August 19, 1988], 247
PHIL 599-611)
Triple V vs Fil Merchants : 160544 : February 21, 2005 : Atty Abjelina-Soriano :
Third Division
[G.R. No. 160544. February 21, 2005]
TRIPLE-V vs. FILIPINO MERCHANTS
THIRD DIVISION
Gentlemen:
Quoted hereunder, for your information, is a resolution of this Court dated FEB 21 2005.
G.R. No. 160544 (Triple-V Food Services, Inc. vs. Filipino Merchants Insurance Company, Inc.)
Assailed in this petition for review on certiorari is the decision[1]cralaw dated October 21, 2003 of
the Court of Appeals in CA-G.R. CV No. 71223, affirming an earlier decision of the Regional Trial
Court at Makati City, Branch 148, in its Civil Case No. 98-838, an action for damages thereat
filed by respondent Filipino Merchants Insurance, Company, Inc., against the herein petitioner,
Triple-V Food Services, Inc.
On March 2, 1997, at around 2:15 o'clock in the afternoon, a certain Mary Jo-Anne De Asis (De
Asis) dined at petitioner's Kamayan Restaurant at 15 West Avenue, Quezon City. De Asis was
using a Mitsubishi Galant Super Saloon Model 1995 with plate number UBU 955, assigned to her
by her employer Crispa Textile Inc. (Crispa). On said date, De Asis availed of the valet parking
service of petitioner and entrusted her car key to petitioner's valet counter. A corresponding
parking ticket was issued as receipt for the car. The car was then parked by petitioner's valet
attendant, a certain Madridano, at the designated parking area. Few minutes later, Madridano
noticed that the car was not in its parking slot and its key no longer in the box where valet
attendants usually keep the keys of cars entrusted to them. The car was never recovered.
Thereafter, Crispa filed a claim against its insurer, herein respondent Filipino Merchants
Insurance Company, Inc. (FMICI). Having indemnified Crispa in the amount of P669.500 for the
loss of the subject vehicle, FMICI, as subrogee to Crispa's rights, filed with the RTC at Makati
City an action for damages against petitioner Triple-V Food Services, Inc., thereat docketed as
Civil Case No. 98-838 which was raffled to Branch 148.
In its answer, petitioner argued that the complaint failed to aver facts to support the allegations
of recklessness and negligence committed in the safekeeping and custody of the subject vehicle,
claiming that it and its employees wasted no time in ascertaining the loss of the car and in
informing De Asis of the discovery of the loss. Petitioner further argued that in accepting the
complimentary valet parking service, De Asis received a parking ticket whereunder it is so
provided that "[Management and staff will not be responsible for any loss of or damage incurred
on the vehicle nor of valuables contained therein", a provision which, to petitioner's mind, is an
explicit waiver of any right to claim indemnity for the loss of the car; and that De Asis knowingly
assumed the risk of loss when she allowed petitioner to park her vehicle, adding that its valet
parking service did not include extending a contract of insurance or warranty for the loss of the
vehicle.
During trial, petitioner challenged FMICI's subrogation to Crispa's right to file a claim for the
loss of the car, arguing that theft is not a risk insured against under FMICI's Insurance Policy No.
PC-5975 for the subject vehicle.
In a decision dated June 22, 2001, the trial court rendered judgment for respondent FMICI,
thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff
(FMICI) and against the defendant Triple V (herein petitioner) and the latter is hereby ordered
to pay plaintiff the following:
1. The amount of P669,500.00, representing actual damages plus compounded (sic);
2. The amount of P30,000.00 as acceptance fee plus the amount equal to 25% of the total
amount due as attorney's fees;
3. The amount of P50,000.00 as exemplary damages;
4. Plus, cost of suit.
Defendant Triple V is not therefore precluded from taking appropriate action against defendant
Armando Madridano.
SO ORDERED.
Obviously displeased, petitioner appealed to the Court of Appeals reiterating its argument that it
was not a depositary of the subject car and that it exercised due diligence and prudence in the
safe keeping of the vehicle, in handling the car-napping incident and in the supervision of its
employees. It further argued that there was no valid subrogation of rights between Crispa and
respondent FMICI.
In a decision dated October 21, 2003,[2]cralaw the Court of Appeals dismissed petitioner's appeal
and affirmed the appealed decision of the trial court, thus:
WHEREFORE, based on the foregoing premises, the instant appeal is hereby DISMISSED.
Accordingly, the assailed June 22, 2001 Decision of the RTC of Makati City - Branch 148 in Civil
Case No. 98-838 is AFFIRMED.
SO ORDERED.
In so dismissing the appeal and affirming the appealed decision, the appellate court agreed with
the findings and conclusions of the trial court that: (a) petitioner was a depositary of the subject
vehicle; (b) petitioner was negligent in its duties as a depositary thereof and as an employer of
the valet attendant; and (c) there was a valid subrogation of rights between Crispa and
respondent FMICI.
Hence, petitioner's present recourse.
We agree with the two (2) courts below.
When De Asis entrusted the car in question to petitioners valet attendant while eating at
petitioner's Kamayan Restaurant, the former expected the car's safe return at the end of her
meal. Thus, petitioner was constituted as a depositary of the same car. Petitioner cannot evade
liability by arguing that neither a contract of deposit nor that of insurance, guaranty or surety for
the loss of the car was constituted when De Asis availed of its free valet parking service.
In a contract of deposit, a person receives an object belonging to another with the obligation of
safely keeping it and returning the same.[3]cralaw A deposit may be constituted even without any
consideration. It is not necessary that the depositary receives a fee before it becomes obligated to
keep the item entrusted for safekeeping and to return it later to the depositor.
Specious is petitioner's insistence that the valet parking claim stub it issued to De Asis contains a
clear exclusion of its liability and operates as an explicit waiver by the customer of any right to
claim indemnity for any loss of or damage to the vehicle.
The parking claim stub embodying the terms and conditions of the parking, including that of
relieving petitioner from any loss or damage to the car, is essentially a contract of adhesion,
drafted and prepared as it is by the petitioner alone with no participation whatsoever on the part
of the customers, like De Asis, who merely adheres to the printed stipulations therein appearing.
While contracts of adhesion are not void in themselves, yet this Court will not hesitate to rule out
blind adherence thereto if they prove to be one-sided under the attendant facts and
circumstances.[4]cralaw
Hence, and as aptly pointed out by the Court of Appeals, petitioner must not be allowed to use its
parking claim stub's exclusionary stipulation as a shield from any responsibility for any loss or
damage to vehicles or to the valuables contained therein. Here, it is evident that De Asis
deposited the car in question with the petitioner as part of the latter's enticement for customers
by providing them a safe parking space within the vicinity of its restaurant. In a very real sense, a
safe parking space is an added attraction to petitioner's restaurant business because customers
are thereby somehow assured that their vehicle are safely kept, rather than parking them
elsewhere at their own risk. Having entrusted the subject car to petitioner's valet attendant,
customer De Asis, like all of petitioner's customers, fully expects the security of her car while at
petitioner's premises/designated parking areas and its safe return at the end of her visit at
petitioner's restaurant.
Petitioner's argument that there was no valid subrogation of rights between Crispa and FMICI
because theft was not a risk insured against under FMICI's Insurance Policy No. PC-5975 holds
no water.
Insurance Policy No. PC-5975 which respondent FMICI issued to Crispa contains, among others
things, the following item: "Insured's Estimate of Value of Scheduled Vehicle-
P800.000".[5]cralaw On the basis of such item, the trial court concluded that the coverage
includes a full comprehensive insurance of the vehicle in case of damage or loss. Besides, Crispa
paid a premium of P10,304 to cover theft. This is clearly shown in the breakdown of premiums in
the same policy.[6]cralaw Thus, having indemnified CRISPA for the stolen car, FMICI, as
correctly ruled by the trial court and the Court of Appeals, was properly subrogated to Crispa's
rights against petitioner, pursuant to Article 2207 of the New Civil Code[7].
Anent the trial court's findings of negligence on the part of the petitioner, which findings were
affirmed by the appellate court, we have consistently ruled that findings of facts of trial courts,
more so when affirmed, as here, by the Court of Appeals, are conclusive on this Court unless the
trial court itself ignored, overlooked or misconstrued facts and circumstances which, if
considered, warrant a reversal of the outcome of the case.[8]cralaw This is not so in the case at
bar. For, we have ourselves reviewed the records and find no justification to deviate from the
trial court's findings.
WHEREFORE, petition is hereby DENIED DUE COURSE.
SO ORDERED.
Very truly yours,
(Sgd.) LUCITA ABJELINA-SORIANO
Clerk of Court
THIRD DIVISION
[G.R. No. 90027. March 3, 1993.]
CA AGRO-INDUSTRIAL DEVELOPMENT CORP., petitioner, vs. THE
HONORABLE COURT OF APPEALS and SECURITY BANK AND TRUST
COMPANY, respondents.
Dolorfino & Dominguez Law Offices for petitioner.
Danilo B. Banares for private respondent.
SYLLABUS
1. CIVIL LAW; CONTRACTS; CONTRACT FOR RENT OF SAFETY DEPOSIT BOX; A SPECIAL KIND OF
DEPOSIT NOT STRICTLY GOVERNED BY CIVIL CODE PROVISIONS ON DEPOSIT. — We agree with the
petitioner's contention that the contract for the rent of the safety deposit box is not an ordinary contract
of lease as defined in Article 1643 of the Civil Code. However, We do not fully subscribe to its view that
the same is a contract of deposit that is to be strictly governed by the provisions in the Civil Code on
deposit; 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.
2. ID.; ID.; ID.; PREVAILING RULE IN AMERICAN JURISPRUDENCE ADOPTED IN THIS JURISDICTION.
— We observe, however, that the deposit theory itself does not altogether find unanimous support even
in American jurisprudence. We agree with the petitioner that under the latter, the prevailing rule is that
the relation between a bank renting out safe-deposit boxes and its customer with respect to the
contents of the box is that of a bailor and bailee, the bailment being for hire and mutual benefit. This is
just the prevailing view because: "There is, however, some support for the view that the relationship in
question might be more properly characterized as that of landlord and tenant, or lessor and lessee. It
has also been suggested that it should be characterized as that of licensor and licensee. The relation
between a bank, safe-deposit company, or storage company, and the renter of a safe-deposit box
therein, is often described as contractual, express or implied, oral or written, in whole or in part. But
there is apparently no jurisdiction in which any rule other than that applicable to bailments governs
questions of the liability and rights of the parties in respect of loss of the contents of safe-deposit
boxes." In the context of our laws which authorize banking institutions to rent out safety deposit boxes,
it is clear that in this jurisdiction, the prevailing rule in the United States has been adopted. Section 72 of
the General Banking Act 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 services: (a) Receive in custody funds, documents, and valuable objects, and rent
safety deposit boxes for the safeguarding of such effects. . . . The banks shall perform the services
permitted under subsections (a), (b) and (c) of this section as depositories or as agents. . . ." 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.
3. ID.; ID.; ID.; DEGREE OF DILIGENCE REQUIRED OF DEPOSITARY; FREEDOM TO STIPULATE;
EXCEPTION. — 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 depository 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. . . . 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."
4. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. — In the instant case, petitioner maintains that conditions 13
and 14 of the questioned contract of lease of the safety deposit box, which read: "13. That 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." are void as they are contrary to law and public policy.
We find Ourselves in agreement with this proposition for indeed, said provisions are inconsistent with
the respondent Bank's responsibility as a depositary under Section 72(a) of the General Banking Act.
Both exempt the latter from any liability except as contemplated in condition 8 thereof which limits its
duty to exercise reasonable diligence only with respect to who shall be admitted to any rented safe, to
wit: "8. The Bank shall use due diligence that no unauthorized person shall be admitted to any rented
safe and beyond this, the Bank will not be responsible for the contents of any safe rented from it."
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.
DECISION
DAVIDE, JR., J p:
Is the contractual relation between a commercial bank and another party in a contract of rent of a safety
deposit box with respect to its contents placed by the latter one of bailor and bailee or one of lessor and
lessee?
This is the crux of the present controversy. LLjur
On 3 July 1979, petitioner (through its President, Sergio Aguirre) and the spouses Ramon and Paula
Pugao entered into an agreement whereby the former purchased from the latter two (2) parcels of land
for a consideration of P350,625.00. Of this amount, P75,725.00 was paid as downpayment while the
balance was covered by three (3) postdated checks. Among the terms and conditions of the agreement
embodied in a Memorandum of True and Actual Agreement of Sale of Land were that the titles to the
lots shall be transferred to the petitioner upon full payment of the purchase price and that the owner's
copies of the certificates of titles thereto, Transfer Certificates of Title (TCT) Nos. 284655 and 292434,
shall be deposited in a safety deposit box of any bank. The same could be withdrawn only upon the joint
signatures of a representative of the petitioner and the Pugaos upon full payment of the purchase price
.Petitioner, through Sergio Aguirre, and the Pugaos then rented Safety Deposit Box No. 1448 of private
respondent Security Bank and Trust Company, a domestic banking corporation hereinafter referred to
as the respondent Bank. For this purpose, both signed a contract of lease (Exhibit "2") which
contains, inter alia, the following conditions:
"13. The bank is not a depositary of the contents of the safe and it has neither
the possession nor control of the same.
14. The bank has no interest whatsoever in said contents, except herein
expressly provided, and it assumes absolutely no liability in connection
therewith." 1
After the execution of the contract, two (2) renter's keys were given to the renters — one to Aguirre (for
the petitioner) and the other to the Pugaos. A guard key remained in the possession of the respondent
Bank. The safety deposit box has two (2) keyholes, one for the guard key and the other for the renter's
key, and can be opened only with the use of both keys. Petitioner claims that the certificates of title
were placed inside the said box.
Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner the two (2) lots at a price
of P225.00 per square meter which, as petitioner alleged in its complaint, translates to a profit of
P100.00 per square meter or a total of P280,500.00 for the entire property. Mrs. Ramos demanded the
execution of a deed of sale which necessarily entailed the production of the certificates of title. In view
thereof, Aguirre, accompanied by the Pugaos, then proceeded to the respondent Bank on 4 October
1979 to open the safety deposit box and get the certificates of title. However, when opened in the
presence of the Bank's representative, the box yielded no such certificates. Because of the delay in the
reconstitution of the title, Mrs. Ramos withdrew her earlier offer to purchase the lots; as a consequence
thereof, the petitioner allegedly failed to realize the expected profit of P280,500.00. Hence, the latter
filed on 1 September 1980 a complaint 2 for damages against the respondent Bank with the Court of
First Instance (now Regional Trial Court) of Pasig, Metro Manila which docketed the same as Civil Case
No. 38382. Cdpr
In its Answer with Counterclaim, 3 respondent Bank alleged that the petitioner has no cause of action
because of paragraphs 13 and 14 of the contract of lease (Exhibit "2"); corollarily, loss of any of the items
or articles contained in the box could not give rise to an action against it. It then interposed a
counterclaim for exemplary damages as well as attorney's fees in the amount of P20,000.00. Petitioner
subsequently filed an answer to the counterclaim. 4
In due course, the trial court. now designated as Branch 161 of the Regional Trial Court (RTC) of Pasig,
Metro Manila, rendered a decision 5 adverse to the petitioner on 8 December 1986, the dispositive
portion of which reads:
"WHEREFORE, premises considered, judgment is hereby rendered dismissing
plaintiff's complaint.
On defendant's counterclaim, judgment is hereby rendered ordering plaintiff to
pay defendant the amount of FIVE THOUSAND (P5,000.00) PESOS as
attorney's fees.
With costs against plaintiff." 6
The unfavorable verdict is based on the trial court's conclusion that under paragraphs 13 and 14 of the
contract of lease, the Bank has no liability for the loss of the certificates of title. The court declared that
the said provisions are binding on the parties.
Its motion for reconsideration 7 having been denied, petitioner appealed from the adverse decision to
the respondent Court of Appeals which docketed the appeal as CA-G.R. CV No. 15150. Petitioner urged
the respondent Court to reverse the challenged decision because the trial court erred in (a) absolving the
respondent Bank from liability from the loss, (b) not declaring as null and void, for being contrary to law,
public order and public policy, the provisions in the contract for lease of the safety deposit box absolving
the Bank from any liability for loss, (c) not concluding that in this jurisdiction, as well as under American
jurisprudence, the liability of the Bank is settled and (d) awarding attorney's fees to the Bank and
denying the petitioner's prayer for nominal and exemplary damages and attorney's fees. 8
In its Decision promulgated on 4 July 1989, 9 respondent Court affirmed the appealed decision
principally on the theory that the contract (Exhibit "2") executed by the petitioner and respondent Bank
is in the nature of a contract of lease by virtue of which the petitioner and its co-renter were given
control over the safety deposit box and its contents while the Bank retained no right to open the said
box because it had neither the possession nor control over it and its contents. As such, the contract is
governed by Article 1643 of the Civil Code 10 which provides:
"ARTICLE 1643. In the lease of things, one of the parties binds himself to give to
another the enjoyment or use of a thing for a price certain, and for a period
which may be definite or indefinite. However, no lease for more than ninety-
nine years shall be valid."
It invoked Tolentino vs. Gonzales 11 — which held that the owner of the property loses his control
over the property leased during the period of the contract — and Article 1975 of the Civil Code
which provides:
"ARTICLE 1975. The depositary holding certificates, bonds, securities or
instruments which earn interest shall be bound to collect the latter when it
becomes due, and to take such steps as may be necessary in order that the
securities may preserve their value and the rights corresponding to them
according to law.
The above provision shall not apply to contracts for the rent of safety deposit
boxes."
and then concluded that "[c]learly, the defendant-appellee is not under any duty to maintain the
contents of the box. The stipulation absolving the defendant-appellee from liability is in
accordance with the nature of the contract of lease and cannot be regarded as contrary to law,
public order and public policy." 12 The appellate court was quick to add, however, that under the
contract of lease of the safety deposit box, respondent Bank is not completely free from liability as
it may still be made answerable in case unauthorized persons enter into the vault area or when the
 rented box is forced open. Thus, as expressly provided for in stipulation number 8 of the contract in
question:
"8. The Bank shall use due diligence that no unauthorized person shall be
admitted to any rented safe and beyond this, the Bank will not be responsible
for the contents of any safe rented from it." 13
Its motion for reconsideration 14 having been denied in the respondent Court's Resolution of 28 August
1989, 15petitioner took this recourse under Rule 45 of the Rules of Court and urges Us to review and set
aside the respondent Court's ruling. Petitioner avers that both the respondent Court and the trial court
(a) did not properly and legally apply the correct law in this case, (b) acted with grave abuse of discretion
or in excess of jurisdiction amounting to lack thereof and (c) set a precedent that is contrary to, or is a
departure from precedents adhered to and affirmed by decisions of this Court and precepts in American
jurisprudence adopted in the Philippines. It reiterates the arguments it had raised in its motion to
reconsider the trial court's decision, the brief submitted to the respondent Court and the motion to
reconsider the latter's decision. In a nutshell, petitioner maintains that regardless of nomenclature, the
contract for the rent of the safety deposit box (Exhibit "2") is actually a contract of deposit governed by
Title XII, Book IV of the Civil Code of the Philippines. 16 Accordingly, it is claimed that the respondent
Bank is liable for the loss of the certificates of title pursuant to Article 1972 of the said Code which
provides: prLL
"ARTICLE 1972. The depositary 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 the loss of the thing, shall be governed by the
provisions of Title I of this Book.
If the deposit is gratuitous, this fact shall be taken into account in determining
the degree of care that the depositary must observe."
Petitioner then quotes a passage from American Jurisprudence 17 which is supposed to expound
on the prevailing rule in the United States, to wit:
"The prevailing rule appears to be that where a safe-deposit company leases a
safe-deposit box or safe and the lessee takes possession of the box or safe and
places therein his securities or other valuables, the relation of bailee and bailor
is created between the parties to the transaction as to such securities or other
valuables; the fact that the safe-deposit company does not know, and that it is
not expected that it shall know, the character or description of the property
which is deposited in such safe-deposit box or safe does not change that
relation. That access to the contents of the safe-deposit box can be had only by
the use of a key retained by the lessee (whether it is the sole key or one to be
used in connection with one retained by the lessor) does not operate to alter
the foregoing rule. The argument that there is not, in such a case, a delivery of
exclusive possession and control to the deposit company, and that therefore
the situation is entirely different from that of ordinary bailment, has been
generally rejected by the courts, usually on the ground that as possession must
be either in the depositor or in the company, it should reasonably be
considered as in the latter rather than in the former, since the company is, by
the nature of the contract, given absolute control of access to the property, and
the depositor cannot gain access thereto without the consent and active
participation of the company. . . ." (citations omitted).
and a segment from Words and Phrases 18 which states that a contract for the rental of a bank
safety deposit box in consideration of a fixed amount at stated periods is a bailment for hire.
Petitioner further argues that conditions 13 and 14 of the questioned contract are contrary to law and
public policy and should be declared null and void. In support thereof, it cites Article 1306 of the Civil
Code which provides that parties to a contract may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good customs,
public order or public policy.
After the respondent Bank filed its comment, this Court gave due course to the petition and required
the parties to simultaneously submit their respective Memoranda.
The petition is partly meritorious.
We agree with the petitioner's contention that the contract for the rent of the safety deposit box is not
an ordinary contract of lease as defined in Article 1643 of the Civil Code. However, We do not fully
subscribe to its view that the same is a contract of deposit that is to be strictly governed by the
provisions in the Civil Code on deposit; 19 the contract in the case at bar is a special kind of deposit. It
cannot be characterized as an ordinary contract of lease under Article 1643 because the full and absolute
possession and control of the safety deposit box was not given to the 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.
Hence, the authorities cited by the respondent Court 20 on this point do not apply. Neither could Article
1975, also relied upon by the respondent Court, be invoked as an argument against the deposit theory.
Obviously, the first paragraph of such provision cannot apply to a depositary of certificates, bonds,
securities or instruments which earn interest if such documents are kept in a rented safety deposit box.
It is clear that the depositary cannot open the box without the renter being present. prcd
We observe, however, that the deposit theory itself does not altogether find unanimous support even in
American jurisprudence. We agree with the petitioner that under the latter, the prevailing rule is that
the relation between a bank renting out safe-deposit boxes and its customer with respect to the
contents of the box is that of a bailor and bailee, the bailment being for hire and mutual benefit. 21 This
is just the prevailing view because:
"There is, however, some support for the view that the relationship in question
might be more properly characterized as that of landlord and tenant, or lessor
and lessee. It has also been suggest that should be characterized as that of
licensor and licensee. The relation between a bank, safe-deposit company, or
storage company, and the renter of a safe-deposit box therein, is often
described as contractual, express or implied, oral or written, in whole or in part.
But there is apparently no jurisdiction in which any rule other than that
applicable to bailments governs questions of the liability and rights of the
parties in respect of loss of the contents of safe-deposit boxes." 22 (citations
omitted).
In the context of our laws which authorize banking institutions to rent out safety deposit boxes, it is
clear that in this jurisdiction, the prevailing rule in the United States has been adopted. Section 72 of
the General Banking Act 23 pertinently provides:
"SECTION 72. In addition to the operations specifically authorized elsewhere in
this Act, banking institutions other than building and loan associations may
perform the following services:
 (a) Receive in custody funds, documents, and valuable company, in renting safe-deposit boxes, cannot exempt itself from liability for
objects, and rent safety deposit boxes for the safeguarding of such loss of the contents by its own fraud or negligence or that of its agents or
effects. 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
xxx xxx xxx 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
The banks shall perform the services permitted under subsections (a), (b) and
may limit its liability to some extent by agreement or stipulation." 30 (citations
(c) of this section as depositoriesor as agents. . . . " 24 (emphasis supplied).
omitted).
Note that the primary function is still found within the parameters of a contract of deposit, i.e., the
Thus, we reach the same conclusion which the Court of Appeals arrived at, that is, that the petition
receiving in custody of funds, documents and other valuable objects for safekeeping. The renting out of
should be dismissed, but on grounds quite different from those relied upon by the Court of Appeals. In
the safety deposit boxes is not independent from, but related to or in conjunction with, this principal
the instant case, the respondent Bank's exoneration cannot, contrary to the holding of the Court of
function. A contract of deposit may be entered into orally or in writing 25 and, pursuant to Article 1306
Appeals, be based on or proceed from a characterization of the impugned contract as a contract of
of the Civil Code, the parties thereto may establish such stipulations, clauses, terms and conditions as
lease, but rather on the fact that no competent proof was presented to show that respondent Bank was
they may deem convenient, provided they are not contrary to law, morals, good customs, public order
aware of the agreement between the petitioner and the Pugaos to the effect that the certificates of title
or public policy. The depositary's responsibility for the safekeeping of the objects deposited in the case
were withdrawable from the safety deposit box only upon both parties' joint signatures, and that no
at bar is governed by Title I, Book IV of the Civil Code. Accordingly, the depositary would be liable if, in
evidence was submitted to reveal that the loss of the certificates of title was due to the fraud or
performing its obligation, it is found guilty of fraud, negligence, delay or contravention of the tenor of
negligence of the respondent Bank. This in turn flows from this Court's determination that the contract
the agreement. 2 6 In the absence of any stipulation prescribing the degree of diligence required, that of
involved was one of deposit. Since both the petitioner and the Pugaos agreed that each should have one
a good father of a family is to be observed. 27 Hence, any stipulation exempting the depositary from any
(1) renter's key, it was obvious that either of them could ask the Bank for access to the safety deposit
liability arising from the loss of the thing deposited on account of fraud, negligence or delay would be
box and, with the use of such key and the Bank's own guard key, could open the said box, without the
void for being contrary to law and public policy. In the instant case, petitioner maintains that conditions
other renter being present.
13 and 14 of the questioned contract of lease of the safety deposit box, which read:
Since, however, the petitioner cannot be blamed for the filing of the complaint and no bad faith on its
"13. The bank is not a depositary of the contents of the safe and it has neither
part had been established, the trial court erred in condemning the petitioner to pay the respondent
the possession nor control of the same. LLphil
Bank attorney's fees. To this extent, the Decision (dispositive portion) of public respondent Court of
14. The bank has no interest whatsoever in said contents, except herein Appeals must be modified.
expressly provided, and it assumes absolutely no liability in connection
WHEREFORE, the Petition for Review is partially GRANTED by deleting the award for attorney's fees
therewith." 28
from the 4 July 1989 Decision of the respondent Court of Appeals in CA-G.R. CV No. 15150. As modified,
are void as they are contrary to law and public policy. We find Ourselves in agreement with this and subject to the pronouncement We made above on the nature of the relationship between the
proposition for indeed, said provisions are inconsistent with the respondent Bank's responsibility parties in a contract of lease of safety deposit boxes, the dispositive portion of the said Decision is
as a depositary under Section 72(a) of the General Banking Act. Both exempt the latter from any hereby AFFIRMED and the instant Petition for Review is otherwise DENIED for lack of merit. LLpr
liability except as contemplated in condition 8 thereof which limits its duty to exercise reasonable
No pronouncement as to costs.
diligence only with respect to who shall be admitted to any rented safe, to wit:
"8. The Bank shall use due diligence that no unauthorized person shall be SO ORDERED.
admitted to any rented safe and beyond this, the Bank will not be responsible
Feliciano, Bidin, Romero and Melo, JJ ., concur.
for the contents of any safe rented from it." 2 9
Gutierrez, Jr., J ., is on terminal leave.
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 ||| (CA Agro-Industrial Development Corp. v. Court of Appeals, G.R. No. 90027, [March 3, 1993])
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
THIRD DIVISION
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 [G.R. No. 156940. December 14, 2004.]
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 ASSOCIATED BANK (Now WESTMONT BANK), petitioner, vs. VICENTE
such a special contract, however, in order to vary the ordinary obligations HENRY TAN, respondent.
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
DECISION
PANGANIBAN, J p:
While banks are granted by law the right to debit the value of a dishonored check from a depositor's
account, they must do so with the highest degree of care, so as not to prejudice the depositor unduly.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, assailing the January 27, 2003
Decision 2 of the Court of Appeals (CA) in CA-GR CV No. 56292. The CA disposed as follows:
"WHEREFORE, premises considered, the Decision dated December 3, 1996, of
the Regional Trial Court of Cabanatuan City, Third Judicial Region, Branch 26,
in Civil Case No. 892-AF is hereby AFFIRMED. Costs against the [petitioner]." 3
The Facts
The CA narrated the antecedents as follows:
"Vicente Henry Tan (hereafter TAN) is a businessman and a regular depositor-
creditor of the Associated Bank (hereinafter referred to as the BANK).
Sometime in September 1990, he deposited a postdated UCPB check with the
said BANK in the amount of P101,000.00 issued to him by a certain Willy Cheng
from Tarlac. The check was duly entered in his bank record thereby making his
balance in the amount of P297,000.00, as of October 1, 1990, from his original
deposit of P196,000.00. Allegedly, upon advice and instruction of the BANK
that the P101,000.00 check was already cleared and backed up by sufficient
funds, TAN, on the same date, withdrew the sum of P240,000.00, leaving a
balance of P57,793.45. A day after, TAN deposited the amount of P50,000.00
making his existing balance in the amount of P107,793.45, because he has
issued several checks to his business partners, to wit:
CHECK NUMBERS DATE AMOUNT
a. 138814 Sept. 29, 1990 P9,000.00
b. 138804 Oct. 8, 1990 9,350.00
c. 138787 Sept. 30, 1990 6,360.00
d. 138847 Sept. 29, 1990 21,850.00
e. 167054 Sept. 29, 1990 4,093.40
f. 138792 Sept. 29, 1990 3,546.00
g. 138774 Oct. 2, 1990 6,600.00
h. 167072 Oct. 10, 1990 9,908.00
i. 168802 Oct. 10, 1990 3,650.00
"However, his suppliers and business partners went back to him alleging that
the checks he issued bounced for insufficiency of funds. Thereafter, TAN, thru
his lawyer, informed the BANK to take positive steps regarding the matter for
he has adequate and sufficient funds to pay the amount of the subject checks.
Nonetheless, the BANK did not bother nor offer any apology regarding the
incident. Consequently, TAN, as plaintiff, filed a Complaint for Damages on
December 19, 1990, with the Regional Trial Court of Cabanatuan City, Third
Judicial Region, docketed as Civil Case No. 892-AF, against the BANK, as
defendant. SDITAC
"In his [C]omplaint, [respondent] maintained that he ha[d] sufficient funds to
pay the subject checks and alleged that his suppliers decreased in number for
lack of trust. As he has been in the business community for quite a time and has
established a good record of reputation and probity, plaintiff claimed that he
suffered embarrassment, humiliation, besmirched reputation, mental anxieties
and sleepless nights because of the said unfortunate incident. [Respondent]
further averred that he continuously lost profits in the amount of P250,000.00.
[Respondent] therefore prayed for exemplary damages and that [petitioner] be
ordered to pay him the sum of P1,000,000.00 by way of moral damages,
P250,000.00 as lost profits, P50,000.00 as attorney's fees plus 25% of the
amount claimed including P1,000.00 per court appearance. 2004cdasia
"Meanwhile, [petitioner] filed a Motion to Dismiss on February 7, 1991, but the
same was denied for lack of merit in an Order dated March 7, 1991. Thereafter,
[petitioner] BANK on March 20, 1991 filed its Answer denying, among others,
the allegations of [respondent] and alleged that no banking institution would
give an assurance to any of its client/depositor that the check deposited by him
had already been cleared and backed up by sufficient funds but it could only
presume that the same has been honored by the drawee bank in view of the
lapse of time that ordinarily takes for a check to be cleared. For its part,
[petitioner] alleged that on October 2, 1990, it gave notice to the [respondent]
as to the return of his UCPB check deposit in the amount of P101,000.00,
hence, on even date, [respondent] deposited the amount of P50,000.00 to
cover the returned check.
"By way of affirmative defense, [petitioner] averred that [respondent] had no
cause of action against it and argued that it has all the right to debit the
account of the [respondent] by reason of the dishonor of the check deposited
by the [respondent] which was withdrawn by him prior to its clearing.
[Petitioner] further averred that it has no liability with respect to the clearing of
deposited checks as the clearing is being undertaken by the Central Bank and in
accepting [the] check deposit, it merely obligates itself as depositor's collecting
agent subject to actual payment by the drawee bank. [Petitioner] therefore
prayed that [respondent] be ordered to pay it the amount of P1,000,000.00 by
way of loss of goodwill, P7,000.00 as acceptance fee plus P500.00 per
appearance and by way of attorney's fees.
"Considering that Westmont Bank has taken over the management of the
affairs/properties of the BANK, [respondent] on October 10, 1996, filed an
Amended Complaint reiterating substantially his allegations in the original
complaint, except that the name of the previous defendant ASSOCIATED
BANK is now WESTMONT BANK.
"Trial ensured and thereafter, the court rendered its Decision dated December
3, 1996 in favor of the [respondent] and against the [petitioner], ordering the
latter to pay the [respondent] the sum of P100,000.00 by way of moral
damages, P75,000.00 as exemplary damages, P25,000.00 as attorney's fees,
plus the costs of this suit. In making said ruling, it was shown that [respondent]
was not officially informed about the debiting of the P101,000.00 [from] his
existing balance and that the BANK merely allowed the [respondent] to use the
 fund prior to clearing merely for accommodation because the BANK
considered him as one of its valued clients. The trial court ruled that the bank
manager was negligent in handling the particular checking account of the
[respondent] stating that such lapses caused all the inconveniences to the
[respondent]. The trial court also took into consideration that [respondent's]
mother was originally maintaining with the . . . BANK [a] current account as
well as [a] time deposit, but [o]n one occasion, although his mother made a
deposit, the same was not credited in her favor but in the name of another." 4
Petitioner appealed to the CA on the issues of whether it was within its rights, as collecting bank, to
debit the account of its client for a dishonored check; and whether it had informed respondent about
the dishonor prior to debiting his account.
Ruling of the Court of Appeals
Affirming the trial court, the CA ruled that the bank should not have authorized the withdrawal of the
value of the deposited check prior to its clearing. Having done so, contrary to its obligation to treat
respondent's account with meticulous care, the bank violated its own policy. It thereby took upon itself
the obligation to officially inform respondent of the status of his account before unilaterally debiting the
amount of P101,000. Without such notice, it is estopped from blaming him for failing to fund his
account.
The CA opined that, had the P101,000 not been debited, respondent would have had sufficient funds for
the postdated checks he had issued. Thus, the supposed accommodation accorded by petitioner to him
is the proximate cause of his business woes and shame, for which it is liable for damages.
Because of the bank's negligence, the CA awarded respondent moral damages of P100,000. It also
granted him exemplary damages of P75,000 and attorney's fees of P25,000.
Hence this Petition. 5
Issue
In its Memorandum, petitioner raises the sole issue of "whether or not the petitioner, which is acting as a
collecting bank, has the right to debit the account of its client for a check deposit which was dishonored
by the drawee bank." 6
The Court's Ruling
The Petition has no merit. ESaITA
Sole Issue:
Debit of Depositor's Account
Petitioner-bank contends that its rights and obligations under the present set of facts were
misappreciated by the CA. It insists that its right to debit the amount of the dishonored check from the
account of respondent is clear and unmistakable. Even assuming that it did not give him notice that the
check had been dishonored, such right remains immediately enforceable.
In particular, petitioner argues that the check deposit slip accomplished by respondent on September
17, 1990, expressly stipulated that the bank was obligating itself merely as the depositor's collecting
agent and — until such time as actual payment would be made to it — it was reserving the right to
charge against the depositor's account any amount previously credited. Respondent was allowed to
withdraw the amount of the check prior to clearing, merely as an act of accommodation, it added.
At the outset, we stress that the trial court's factual findings that were affirmed by the CA are not
subject to review by this Court. 7 As petitioner itself takes no issue with those findings, we need only to
determine the legal consequence, based on the established facts.
Right of Setoff
A bank generally has a right of setoff over the deposits therein for the payment of any withdrawals on
the part of a depositor. 8 The right of a collecting bank to debit a client's account for the value of a
dishonored check that has previously been credited has fairly been established by jurisprudence. To
begin with, Article 1980 of the Civil Code provides that "[f]ixed, savings, and current deposits of money
in banks and similar institutions shall be governed by the provisions concerning simple loan."
Hence, the relationship between banks and depositors has been held to be that of creditor and
debtor. 9 Thus, legal compensation under Article 1278 10 of the Civil Code may take place "when all the
requisites mentioned in Article 1279 are present," 11 as follows:
"(1) That each one of the obligors be bound principally, and that he be at the
same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter
has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy,
commenced by third persons and communicated in due time to the debtor." 12
Nonetheless, the real issue here is not so much the right of petitioner to debit respondent's account but,
rather, the manner in which it exercised such right. The Court has held that even while the right of setoff
is conceded, separate is the question of whether that remedy has properly been exercised. 13
The liability of petitioner in this case ultimately revolves around the issue of whether it properly
exercised its right of setoff. The determination thereof hinges, in turn, on the bank's role and
obligations, first, as respondent's depositary bank; and second, as collecting agent for the check in
question.
Obligation as
Depositary Bank
In BPI v. Casa Montessori, 14 the Court has emphasized that the banking business is impressed with
public interest. "Consequently, the highest degree of diligence is expected, and high standards of
integrity and performance are even required of it. By the nature of its functions, a bank is under
obligation to treat the accounts of its depositors with meticulous care." 15
Also affirming this long standing doctrine, Philippine Bank of Commerce v. Court of Appeals 16 has held
that "the degree of diligence required of banks is more than that of a good father of a family where the
fiduciary nature of their relationship with their depositors is concerned." 17 Indeed, the banking
business is vested with the trust and confidence of the public; hence the "appropriate standard of
diligence must be very high, if not the highest, degree of diligence." 18The standard applies, regardless
of whether the account consists of only a few hundred pesos or of millions. 19
The fiduciary nature of banking, previously imposed by case law, 20 is now enshrined in Republic Act
No. 8791 or the General Banking Law of 2000. Section 2 of the law specifically says that the State
recognizes the "fiduciary nature of banking that requires high standards of integrity and performance."
Did petitioner treat respondent's account with the highest degree of care? From all indications, it did
not.
It is undisputed — nay, even admitted — that purportedly as an act of accommodation to a valued client,
petitioner allowed the withdrawal of the face value of the deposited check prior to its clearing. That act
certainly disregarded the clearance requirement of the banking system. Such a practice is unusual,
because a check is not legal tender or money; 21 and its value can properly be transferred to a
depositor's account only after the check has been cleared by the drawee bank. 22
Under ordinary banking practice, after receiving a check deposit, a bank either immediately credit the
amount to a depositor's account; or infuse value to that account only after the drawee bank shall have
paid such amount. 23 Before the check shall have been cleared for deposit, the collecting bank can only
"assume" at its own risk — as herein petitioner did — that the check would be cleared and paid out.
Reasonable business practice and prudence, moreover, dictated that petitioner should not have
authorized the withdrawal by respondent of P240,000 on October 1, 1990, as this amount was over and
above his outstanding cleared balance of P196,793.45. 24 Hence, the lower courts correctly appreciated
the evidence in his favor.
Obligation as
Collecting Agent
Indeed, the bank deposit slip expressed this reservation:
"In receiving items on deposit, this Bank obligates itself only as the Depositor's
Collecting agent, assuming no responsibility beyond carefulness in selecting
correspondents, and until such time as actual payments shall have come to its
possession, this Bank reserves the right to charge back to the Depositor's
account any amounts previously credited whether or not the deposited item is
returned. . . ." 25
However, this reservation is not enough to insulate the bank from any liability. In the past, we have
expressed doubt about the binding force of such conditions unilaterally imposed by a bank without the
consent of the depositor. 26 It is indeed arguable that "in signing the deposit slip, the depositor does so
only to identify himself and not to agree to the conditions set forth at the back of the deposit slip." 27
Further, by the express terms of the stipulation, petitioner took upon itself certain obligations as
respondent's agent, consonant with the well-settled rule that the relationship between the payee or
holder of a commercial paper and the collecting bank is that of principal and agent. 28 Under Article
1909 29 of the Civil Code, such bank could be held liable not only for fraud, but also for negligence.
As a general rule, a bank is liable for the wrongful or tortuous acts and declarations of its officers or
agents within the course and scope of their employment. 30 Due to the very nature of their business,
banks are expected to exercise the highest degree of diligence in the selection and supervision of their
employees. 31 Jurisprudence has established that the lack of diligence of a servant is imputed to the
negligence of the employer, when the negligent or wrongful act of the former proximately results in an
injury to a third person; 32 in this case, the depositor.
The manager of the bank's Cabanatuan branch, Consorcia Santiago, categorically admitted that she and
the employees under her control had breached bank policies. They admittedly breached those policies
when, without clearance from the drawee bank in Baguio, they allowed respondent to withdraw on
October 1, 1990, the amount of the check deposited. Santiago testified that respondent "was not
officially informed about the debiting of the P101,000 from his existing balance of P170,000 on October
2, 1990 . . . " 33
Being the branch manager, Santiago clearly acted within the scope of her authority in authorizing the
withdrawal and the subsequent debiting without notice. Accordingly, what remains to be determined is
whether her actions proximately caused respondent's injury. Proximate cause is that which — in a
natural and continuous sequence, unbroken by any efficient intervening cause — produces the injury,
and without which the result would not have occurred. 34
Let us go back to the facts as they unfolded. It is undeniable that the bank's premature authorization of
the withdrawal by respondent on October 1, 1990, triggered — in rapid succession and in a natural
sequence — the debiting of his account, the fall of his account balance to insufficient levels, and the
subsequent dishonor of his own checks for lack of funds. The CA correctly noted thus:
". . . [T]he depositor . . . withdrew his money upon the advice by [petitioner]
that his money was already cleared. Without such advice, [respondent] would
not have withdrawn the sum of P240,000.00. Therefore, it cannot be denied
that it was [petitioner's] fault which allowed [respondent] to withdraw a huge
sum which he believed was already his. TaCEHA
"To emphasize, it is beyond cavil that [respondent] had sufficient funds for the
check. Had the P101,000.00 not [been] debited, the subject checks would not
have been dishonored. Hence, we can say that [respondent's] injury arose from
the dishonor of his well-funded checks. . . ." 35
Aggravating matters, petitioner failed to show that it had immediately and duly informed respondent of
the debiting of his account. Nonetheless, it argues that the giving of notice was discernible from his act
of depositing P50,000 on October 2, 1990, to augment his account and allow the debiting. This
argument deserves short shrift.
First, notice was proper and ought to be expected. By the bank manager's account, respondent was
considered a "valued client" whose checks had always been sufficiently funded from 1987 to
1990, 36 until the October imbroglio. Thus, he deserved nothing less than an official notice of the
precarious condition of his account.
Second, under the provisions of the Negotiable Instruments Law regarding the liability of a general
indorser 37 and the procedure for a notice of dishonor, 38 it was incumbent on the bank to give proper
notice to respondent. In Gullas v. National Bank, 39 the Court emphasized:
". . . [A] general indorser of a negotiable instrument engages that if the
instrument — the check in this case — is dishonored and the necessary
proceedings for its dishonor are duly taken, he will pay the amount thereof to
the holder (Sec. 66) It has been held by a long line of authorities that notice of
dishonor is necessary to charge an indorser and that the right of action against
him does not accrue until the notice is given.
". . . The fact we believe is undeniable that prior to the mailing of notice of
dishonor, and without waiting for any action by Gullas, the bank made use of
the money standing in his account to make good for the treasury warrant. At
this point recall that Gullas was merely an indorser and had issued checks in good
faith. As to a depositor who has funds sufficient to meet payment of a check
drawn by him in favor of a third party, it has been held that he has a right of
action against the bank for its refusal to pay such a check in the absence of notice
to him that the bank has applied the funds so deposited in extinguishment of past
due claims held against him. (Callahan vs. Bank of Anderson [1904], 2 Ann. Cas.,
203.) However this may be, as to an indorser the situation is different, and notice
should actually have been given him in order that he might protect his
interests." 40
Third, regarding the deposit of P50,000 made by respondent on October 2, 1990, we fully subscribe to
the CA's observations that it was not unusual for a well-reputed businessman like him, who "ordinarily
takes note of the amount of money he takes and releases," to immediately deposit money in his current
account to answer for the postdated checks he had issued. 41
 Damages
Inasmuch as petitioner does not contest the basis for the award of damages and attorney's fees, we will
no longer address these matters.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Carpio Morales and Garcia, JJ ., concur.
Corona, J ., is on leave.
||| (Associated Bank (now Westmont Bank) v. Tan, G.R. No. 156940, [December 14, 2004], 487 PHIL 512-
530)
NECESSARY DEPOSIT
SECOND DIVISION
[G.R. No. 126780. February 17, 2005.]
YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA
PAYAM, petitioners, vs. THE COURT OF APPEALS and MAURICE
McLOUGHLIN, respondents.
DECISION
TINGA, J p:
The primary question of interest before this Court is the only legal issue in the case: It is whether a hotel
may evade liability for the loss of items left with it for safekeeping by its guests, by having these guests
execute written waivers holding the establishment or its employees free from blame for such loss in
light of Article 2003 of the Civil Code which voids such waivers.
Before this Court is a Rule 45 petition for review of the Decision 1 dated 19 October 1995 of the Court of
Appeals which affirmed the Decision 2 dated 16 December 1991 of the Regional Trial Court (RTC),
Branch 13, of Manila, finding YHT Realty Corporation, Brunhilda Mata-Tan (Tan), Erlinda Lainez (Lainez)
and Anicia Payam (Payam) jointly and solidarily liable for damages in an action filed by Maurice
McLoughlin (McLoughlin) for the loss of his American and Australian dollars deposited in the safety
deposit box of Tropicana Copacabana Apartment Hotel, owned and operated by YHT Realty
Corporation.
The factual backdrop of the case follow. IHcSCA
Private respondent McLoughlin, an Australian businessman-philanthropist, used to stay at Sheraton
Hotel during his trips to the Philippines prior to 1984 when he met Tan. Tan befriended McLoughlin by
showing him around, introducing him to important people, accompanying him in visiting impoverished
street children and assisting him in buying gifts for the children and in distributing the same to
charitable institutions for poor children. Tan convinced McLoughlin to transfer from Sheraton Hotel to
Tropicana where Lainez, Payam and Danilo Lopez were employed. Lopez served as manager of the
hotel while Lainez and Payam had custody of the keys for the safety deposit boxes of Tropicana. Tan
took care of McLoughlin's booking at the Tropicana where he started staying during his trips to the
Philippines from December 1984 to September 1987. 3
On 30 October 1987, McLoughlin arrived from Australia and registered with Tropicana. He rented a
safety deposit box as it was his practice to rent a safety deposit box every time he registered at
Tropicana in previous trips. As a tourist, McLoughlin was aware of the procedure observed by Tropicana
relative to its safety deposit boxes. The safety deposit box could only be opened through the use of two
keys, one of which is given to the registered guest, and the other remaining in the possession of the
management of the hotel. When a registered guest wished to open his safety deposit box, he alone
could personally request the management who then would assign one of its employees to accompany
the guest and assist him in opening the safety deposit box with the two keys. 4
McLoughlin allegedly placed the following in his safety deposit box: Fifteen Thousand US Dollars
(US$15,000.00) which he placed in two envelopes, one envelope containing Ten Thousand US Dollars
(US$10,000.00) and the other envelope Five Thousand US Dollars (US$5,000.00); Ten Thousand
Australian Dollars (AUS$10,000.00) which he also placed in another envelope; two (2) other envelopes
containing letters and credit cards; two (2) bankbooks; and a checkbook, arranged side by side inside
the safety deposit box. 5
On 12 December 1987, before leaving for a brief trip to Hongkong, McLoughlin opened his safety
deposit box with his key and with the key of the management and took therefrom the envelope
containing Five Thousand US Dollars (US$5,000.00), the envelope containing Ten Thousand Australian
Dollars (AUS$10,000.00), his passports and his credit cards. 6 McLoughlin left the other items in the box
as he did not check out of his room at the Tropicana during his short visit to Hongkong. When he arrived
in Hongkong, he opened the envelope which contained Five Thousand US Dollars (US$5,000.00) and
discovered upon counting that only Three Thousand US Dollars (US$3,000.00) were enclosed
therein. 7 Since he had no idea whether somebody else had tampered with his safety deposit box, he
thought that it was just a result of bad accounting since he did not spend anything from that envelope. 8
After returning to Manila, he checked out of Tropicana on 18 December 1987 and left for Australia.
When he arrived in Australia, he discovered that the envelope with Ten Thousand US Dollars
(US$10,000.00) was short of Five Thousand US Dollars (US$5,000). He also noticed that the jewelry
which he bought in Hongkong and stored in the safety deposit box upon his return to Tropicana was
likewise missing, except for a diamond bracelet. 9
When McLoughlin came back to the Philippines on 4 April 1988, he asked Lainez if some money and/or
jewelry which he had lost were found and returned to her or to the management. However, Lainez told
him that no one in the hotel found such things and none were turned over to the management. He again
registered at Tropicana and rented a safety deposit box. He placed therein one (1) envelope containing
Fifteen Thousand US Dollars (US$15,000.00), another envelope containing Ten Thousand Australian
Dollars (AUS$10,000.00) and other envelopes containing his traveling papers/documents. On 16 April
1988, McLoughlin requested Lainez and Payam to open his safety deposit box. He noticed that in the
envelope containing Fifteen Thousand US Dollars (US$15,000.00), Two Thousand US Dollars
(US$2,000.00) were missing and in the envelope previously containing Ten Thousand Australian Dollars
(AUS$10,000.00), Four Thousand Five Hundred Australian Dollars (AUS$4,500.00) were missing. 10
When McLoughlin discovered the loss, he immediately confronted Lainez and Payam who admitted
that Tan opened the safety deposit box with the key assigned to him. 11 McLoughlin went up to his
room where Tan was staying and confronted her. Tan admitted that she had stolen McLoughlin's key
and was able to open the safety deposit box with the assistance of Lopez, Payam and Lainez. 12 Lopez
also told McLoughlin that Tan stole the key assigned to McLoughlin while the latter was asleep. 13
McLoughlin requested the management for an investigation of the incident. Lopez got in touch with
Tan and arranged for a meeting with the police and McLoughlin. When the police did not arrive, Lopez
and Tan went to the room of McLoughlin at Tropicana and thereat, Lopez wrote on a piece of paper a After defendants had filed their Pre-Trial Brief admitting that they had previously allowed and assisted
promissory note dated 21 April 1988. The promissory note reads as follows: Tan to open the safety deposit box, McLoughlin filed an Amended/Supplemental Complaint 20 dated 10
June 1991 which included another incident of loss of money and jewelry in the safety deposit box rented
I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and by McLoughlin in the same hotel which took place prior to 16 April 1988. 21 The trial court admitted
US$2,000.00 or its equivalent in Philippine currency on or before May 5, the Amended/Supplemental Complaint. IcDESA
1988. 14
During the trial of the case, McLoughlin had been in and out of the country to attend to urgent business
Lopez requested Tan to sign the promissory note which the latter did and Lopez also signed as a in Australia, and while staying in the Philippines to attend the hearing, he incurred expenses for hotel
witness. Despite the execution of promissory note by Tan, McLoughlin insisted that it must be the hotel bills, airfare and other transportation expenses, long distance calls to Australia, Meralco power
who must assume responsibility for the loss he suffered. However, Lopez refused to accept the expenses, and expenses for food and maintenance, among others. 22
responsibility relying on the conditions for renting the safety deposit box entitled "Undertaking For the
Use Of Safety Deposit Box," 15 specifically paragraphs (2) and (4) thereof, to wit: After trial, the RTC of Manila rendered judgment in favor of McLoughlin, the dispositive portion of
which reads:
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 WHEREFORE, above premises considered, judgment is hereby rendered by this
deposit box for any cause whatsoever, including but not limited to the Court in favor of plaintiff and against the defendants, to wit:
presentation or use thereof by any other person should the key be lost;
1. Ordering defendants, jointly and severally, to pay plaintiff
xxx xxx xxx the sum of US$11,400.00 or its equivalent in
Philippine Currency of P342,000.00, more or less,
4. To return the key and execute the RELEASE in favor of TROPICANA
and the sum of AUS$4,500.00 or its equivalent in
APARTMENT HOTEL upon giving up the use of the box. 16
Philippine Currency of P99,000.00, or a total of
On 17 May 1988, McLoughlin went back to Australia and he consulted his lawyers as to the validity of P441,000.00, more or less, with 12% interest
the abovementioned stipulations. They opined that the stipulations are void for being violative of from April 16, 1988 until said amount has been
universal hotel practices and customs. His lawyers prepared a letter dated 30 May 1988 which was paid to plaintiff (Item 1, Exhibit CC);
signed by McLoughlin and sent to President Corazon Aquino. 17 The Office of the President referred
the letter to the Department of Justice (DOJ) which forwarded the same to the Western Police District 2. Ordering defendants, jointly and severally to pay plaintiff
(WPD). 18 the sum of P3,674,238.00 as actual and
consequential damages arising from the loss of
After receiving a copy of the indorsement in Australia, McLoughlin came to the Philippines and his Australian and American dollars and jewelries
registered again as a hotel guest of Tropicana. McLoughlin went to Malacañang to follow up on his complained against and in prosecuting his claim
letter but he was instructed to go to the DOJ. The DOJ directed him to proceed to the WPD for and rights administratively and judicially (Items
documentation. But McLoughlin went back to Australia as he had an urgent business matter to attend II, III, IV, V, VI, VII, VIII, and IX, Exh. "CC");
to.

For several times, McLoughlin left for Australia to attend to his business and came back to the 3. Ordering defendants, jointly and severally, to pay plaintiff
Philippines to follow up on his letter to the President but he failed to obtain any concrete assistance. 19 the sum of P500,000.00 as moral damages (Item
X, Exh. "CC");
McLoughlin left again for Australia and upon his return to the Philippines on 25 August 1989 to pursue
his claims against petitioners, the WPD conducted an investigation which resulted in the preparation of 4. Ordering defendants, jointly and severally, to pay plaintiff
an affidavit which was forwarded to the Manila City Fiscal's Office. Said affidavit became the basis of the sum of P350,000.00 as exemplary damages
preliminary investigation. However, McLoughlin left again for Australia without receiving the notice of (Item XI, Exh. "CC");
the hearing on 24 November 1989. Thus, the case at the Fiscal's Office was dismissed for failure to
prosecute. McLoughlin requested the reinstatement of the criminal charge for theft. In the meantime, 5. And ordering defendants, jointly and severally, to pay
McLoughlin and his lawyers wrote letters of demand to those having responsibility to pay the damage. litigation expenses in the sum of P200,000.00
Then he left again for Australia. (Item XII, Exh. "CC");
Upon his return on 22 October 1990, he registered at the Echelon Towers at Malate, Manila. Meetings
were held between McLoughlin and his lawyer which resulted to the filing of a complaint for damages 6. Ordering defendants, jointly and severally, to pay plaintiff
on 3 December 1990 against YHT Realty Corporation, Lopez, Lainez, Payam and Tan (defendants) for the sum of P200,000.00 as attorney's fees, and a
the loss of McLoughlin's money which was discovered on 16 April 1988. After filing the complaint, fee of P3,000.00 for every appearance; and
McLoughlin left again for Australia to attend to an urgent business matter. Tan and Lopez, however,
were not served with summons, and trial proceeded with only Lainez, Payam and YHT Realty 7. Plus costs of suit.
Corporation as defendants. jur2005cd
 SO ORDERED. 23
The trial court found that McLoughlin's allegations as to the fact of loss and as to the amount of money
he lost were sufficiently shown by his direct and straightforward manner of testifying in court and found
him to be credible and worthy of belief as it was established that McLoughlin's money, kept in
Tropicana's safety deposit box, was taken by Tan without McLoughlin's consent. The taking was
effected through the use of the master key which was in the possession of the management. Payam and
Lainez allowed Tan to use the master key without authority from McLoughlin. The trial court added that
if McLoughlin had not lost his dollars, he would not have gone through the trouble and personal
inconvenience of seeking aid and assistance from the Office of the President, DOJ, police authorities
and the City Fiscal's Office in his desire to recover his losses from the hotel management and Tan. 24
As regards the loss of Seven Thousand US Dollars (US$7,000.00) and jewelry worth approximately One
Thousand Two Hundred US Dollars (US$1,200.00) which allegedly occurred during his stay at Tropicana
previous to 4 April 1988, no claim was made by McLoughlin for such losses in his complaint dated 21
November 1990 because he was not sure how they were lost and who the responsible persons were. But
considering the admission of the defendants in their pre-trial brief that on three previous occasions they
allowed Tan to open the box, the trial court opined that it was logical and reasonable to presume that
his personal assets consisting of Seven Thousand US Dollars (US$7,000.00) and jewelry were taken by
Tan from the safety deposit box without McLoughlin's consent through the cooperation of Payam and
Lainez. 25
The trial court also found that defendants acted with gross negligence in the performance and exercise
of their duties and obligations as innkeepers and were therefore liable to answer for the losses incurred
by McLoughlin. 26
Moreover, the trial court ruled that paragraphs (2) and (4) of the "Undertaking For The Use Of Safety
Deposit Box" are not valid for being contrary to the express mandate of Article 2003 of the New Civil
Code and against public policy. 27Thus, there being fraud or wanton conduct on the part of defendants,
they should be responsible for all damages which may be attributed to the non-performance of their
contractual obligations. 28
The Court of Appeals affirmed the disquisitions made by the lower court except as to the amount of
damages awarded. The decretal text of the appellate court's decision reads:
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED
but modified as follows:
The appellants are directed jointly and severally to pay the plaintiff/appellee
the following amounts:
1) P153,200.00 representing the peso equivalent of US$2,000.00 and
AUS$4,500.00;
2) P308,880.80, representing the peso value for the air fares from Sidney [sic]
to Manila and back for a total of eleven (11) trips;
3) One-half of P336,207.05 or P168,103.52 representing payment to Tropicana
Apartment Hotel;
4) One-half of P152,683.57 or P76,341.785 representing payment to Echelon
Tower;
5) One-half of P179,863.20 or P89,931.60 for the taxi . . . transportation from
the residence to Sidney [sic] Airport and from MIA to the hotel here
in Manila, for the eleven (11) trips;
6) One-half of P7,801.94 or P3,900.97 representing Meralco power expenses;
7) One-half of P356,400.00 or P178,000.00 representing expenses for food and
maintenance;
8) P50,000.00 for moral damages;
9) P10,000.00 as exemplary damages; and
10) P200,000 representing attorney's fees.
With costs.
SO ORDERED. 29
Unperturbed, YHT Realty Corporation, Lainez and Payam went to this Court in this appeal
by certiorari. cACEHI
Petitioners submit for resolution by this Court the following issues: (a) whether the appellate court's
conclusion on the alleged prior existence and subsequent loss of the subject money and jewelry is
supported by the evidence on record; (b) whether the finding of gross negligence on the part of
petitioners in the performance of their duties as innkeepers is supported by the evidence on record; (c)
whether the "Undertaking For The Use of Safety Deposit Box" admittedly executed by private
respondent is null and void; and (d) whether the damages awarded to private respondent, as well as the
amounts thereof, are proper under the circumstances. 30
The petition is devoid of merit.
It is worthy of note that the thrust of Rule 45 is the resolution only of questions of law and any peripheral
factual question addressed to this Court is beyond the bounds of this mode of review.
Petitioners point out that the evidence on record is insufficient to prove the fact of prior existence of the
dollars and the jewelry which had been lost while deposited in the safety deposit boxes of Tropicana,
the basis of the trial court and the appellate court being the sole testimony of McLoughlin as to the
contents thereof. Likewise, petitioners dispute the finding of gross negligence on their part as not
supported by the evidence on record.
We are not persuaded. We adhere to the findings of the trial court as affirmed by the appellate court
that the fact of loss was established by the credible testimony in open court by McLoughlin. Such
findings are factual and therefore beyond the ambit of the present petition.
The trial court had the occasion to observe the demeanor of McLoughlin while testifying which reflected
the veracity of the facts testified to by him. On this score, we give full credence to the appreciation of
testimonial evidence by the trial court especially if what is at issue is the credibility of the witness. The
oft-repeated principle is that where the credibility of a witness is an issue, the established rule is that
great respect is accorded to the evaluation of the credibility of witnesses by the trial court. 31 The trial
court is in the best position to assess the credibility of witnesses and their testimonies because of its
unique opportunity to observe the witnesses firsthand and note their demeanor, conduct and attitude
under grilling examination. 32
We are also not impressed by petitioners' argument that the finding of gross negligence by the lower
court as affirmed by the appellate court is not supported by evidence. The evidence reveals that two
keys are required to open the safety deposit boxes of Tropicana. One key is assigned to the guest while
the other remains in the possession of the management. If the guest desires to open his safety deposit
box, he must request the management for the other key to open the same. In other words, the guest
alone cannot open the safety deposit box without the assistance of the management or its employees.
With more reason that access to the safety deposit box should be denied if the one requesting for the
opening of the safety deposit box is a stranger. Thus, in case of loss of any item deposited in the safety
deposit box, it is inevitable to conclude that the management had at least a hand in the consummation
of the taking, unless the reason for the loss is force majeure.
Noteworthy is the fact that Payam and Lainez, who were employees of Tropicana, had custody of the
master key of the management when the loss took place. In fact, they even admitted that they assisted
Tan on three separate occasions in opening McLoughlin's safety deposit box. 33 This only proves that
Tropicana had prior knowledge that a person aside from the registered guest had access to the safety
deposit box. Yet the management failed to notify McLoughlin of the incident and waited for him to
discover the taking before it disclosed the matter to him. Therefore, Tropicana should be held
responsible for the damage suffered by McLoughlin by reason of the negligence of its employees.
The management should have guarded against the occurrence of this incident considering that Payam
admitted in open court that she assisted Tan three times in opening the safety deposit box of
McLoughlin at around 6:30 A.M. to 7:30 A.M. while the latter was still asleep. 34 In light of the
circumstances surrounding this case, it is undeniable that without the acquiescence of the employees of
Tropicana to the opening of the safety deposit box, the loss of McLoughlin's money could and should
have been avoided.
The management contends, however, that McLoughlin, by his act, made its employees believe that Tan
was his spouse for she was always with him most of the time. The evidence on record, however, is bereft
of any showing that McLoughlin introduced Tan to the management as his wife. Such an inference from
the act of McLoughlin will not exculpate the petitioners from liability in the absence of any showing that
he made the management believe that Tan was his wife or was duly authorized to have access to the
safety deposit box. Mere close companionship and intimacy are not enough to warrant such conclusion
considering that what is involved in the instant case is the very safety of McLoughlin's deposit. If only
petitioners exercised due diligence in taking care of McLoughlin's safety deposit box, they should have
confronted him as to his relationship with Tan considering that the latter had been observed opening
McLoughlin's safety deposit box a number of times at the early hours of the morning. Tan's acts should
have prompted the management to investigate her relationship with McLoughlin. Then, petitioners
would have exercised due diligence required of them. Failure to do so warrants the conclusion that the
management had been remiss in complying with the obligations imposed upon hotel-keepers under the
law. TEDHaA
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. 35Thus,
given the fact that the loss of McLoughlin's money was consummated through the negligence of
Tropicana's employees in allowing Tan to open the safety deposit box without the guest's consent, both
the assisting employees and YHT Realty Corporation itself, as owner and operator of Tropicana, should
be held solidarily liable pursuant to Article 2193. 36
The issue of whether the "Undertaking For The Use of Safety Deposit Box" executed by McLoughlin is
tainted with nullity presents a legal question appropriate for resolution in this petition. Notably, both
the trial court and the appellate court found the same to be null and void. We find no reason to reverse
their common conclusion. Article 2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting
notices to the effect that he is not liable for the articles brought by the guest.
Any stipulation between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in Articles 1998 to 2001 37 is suppressed
or diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply
to situations such as that presented in this case. The hotel business like the common carrier's business is
imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only lodging
for hotel guests and security to their persons and belongings. The twin duty constitutes the essence of
the business. The law in turn does not allow such duty to the public to be negated or diluted by any
contrary stipulation in so-called "undertakings" that ordinarily appear in prepared forms imposed by
hotel keepers on guests for their signature.
In an early case, 38 the Court of Appeals through its then Presiding Justice (later Associate Justice of the
Court) Jose P. Bengzon, ruled that to hold hotelkeepers or innkeeper liable for the effects of their
guests, it is not necessary that they be actually delivered to the innkeepers or their employees. It is
enough that such effects are within the hotel or inn. 39With greater reason should the liability of the
hotelkeeper be enforced when the missing items are taken without the guest's knowledge and consent
from a safety deposit box provided by the hotel itself, as in this case.
Paragraphs (2) and (4) of the "undertaking" manifestly contravene Article 2003 of the New Civil Code for
they allow Tropicana to be released from liability arising from any loss in the contents and/or use of the
safety deposit box for anycause whatsoever. 40 Evidently, the undertaking was intended to bar any
claim against Tropicana for any loss of the contents of the safety deposit box whether or not negligence
was incurred by Tropicana or its employees. The New Civil Code is explicit that the responsibility of the
hotel-keeper shall extend to loss of, or injury to, the personal property of the guests even if caused by
servants or employees of the keepers of hotels or inns as well as by strangers, except as it may proceed
from any force majeure. 41 It is the loss through force majeure that may spare the hotel-keeper from
liability. In the case at bar, there is no showing that the act of the thief or robber was done with the use
of arms or through an irresistible force to qualify the same as force majeure. 42
Petitioners likewise anchor their defense on Article 2002 43 which exempts the hotel-keeper from
liability if the loss is due to the acts of his guest, his family, or visitors. Even a cursory reading of the
provision would lead us to reject petitioners' contention. The justification they raise would render
nugatory the public interest sought to be protected by the provision. What if the negligence of the
employer or its employees facilitated the consummation of a crime committed by the registered guest's
relatives or visitor? Should the law exculpate the hotel from liability since the loss was due to the act of
the visitor of the registered guest of the hotel? Hence, this provision presupposes that the hotel-keeper
is not guilty of concurrent negligence or has not contributed in any degree to the occurrence of the loss.
A depositary is not responsible for the loss of goods by theft, unless his actionable negligence
contributes to the loss. 44
In the case at bar, the responsibility of securing the safety deposit box was shared not only by the guest
himself but also by the management since two keys are necessary to open the safety deposit box.
Without the assistance of hotel employees, the loss would not have occurred. Thus, Tropicana was
guilty of concurrent negligence in allowing Tan, who was not the registered guest, to open the safety
deposit box of McLoughlin, even assuming that the latter was also guilty of negligence in allowing
another person to use his key. To rule otherwise would result in undermining the safety of the safety
deposit boxes in hotels for the management will be given imprimatur to allow any person, under the
pretense of being a family member or a visitor of the guest, to have access to the safety deposit box
without fear of any liability that will attach thereafter in case such person turns out to be a complete
stranger. This will allow the hotel to evade responsibility for any liability incurred by its employees in
conspiracy with the guest's relatives and visitors. DaECST
Petitioners contend that McLoughlin's case was mounted on the theory of contract, but the trial court
and the appellate court upheld the grant of the claims of the latter on the basis of tort. 45 There is
nothing anomalous in how the lower courts decided the controversy for this Court has pronounced a
jurisprudential rule that tort liability can exist even if there are already contractual relations. The act that
breaks the contract may also be tort. 46
As to damages awarded to McLoughlin, we see no reason to modify the amounts awarded by the (10) P200,000 representing attorney's fees.
appellate court for the same were based on facts and law. It is within the province of lower courts to
settle factual issues such as the proper amount of damages awarded and such finding is binding upon With costs.
this Court especially if sufficiently proven by evidence and not unconscionable or excessive. Thus, the
SO ORDERED.
appellate court correctly awarded McLoughlin Two Thousand US Dollars (US$2,000.00) and Four
Thousand Five Hundred Australian dollars (AUS$4,500.00) or their peso equivalent at the time of Puno, Callejo, Sr. and Chico-Nazario, JJ., concur.
payment, 47 being the amounts duly proven by evidence. 48 The alleged loss that took place prior to 16
April 1988 was not considered since the amounts alleged to have been taken were not sufficiently Austria-Martinez, J., took no part.
established by evidence. The appellate court also correctly awarded the sum of P308,880.80,
representing the peso value for the air fares from Sydney to Manila and back for a total of eleven (11) ||| (YHT Realty Corp. v. Court of Appeals, G.R. No. 126780, [February 17, 2005], 492 PHIL 29-51)
trips; 49 one-half of P336,207.05 or P168,103.52 representing payment to Tropicana; 50 one-half of
P152,683.57 or P76,341.785 representing payment to Echelon Tower; 51 one-half of P179,863.20 or BANK DEPOSIT
P89,931.60 for the taxi or transportation expenses from McLoughlin's residence to Sydney Airport and
from MIA to the hotel here in Manila, for the eleven (11) trips; 52 one-half of P7,801.94 or P3,900.97
representing Meralco power expenses; 53 one-half of P356,400.00 or P178,000.00 representing
expenses for food and maintenance. 54 SECOND DIVISION

The amount of P50,000.00 for moral damages is reasonable. Although trial courts are given discretion to
determine the amount of moral damages, the appellate court may modify or change the amount [G.R. No. L-30511. February 14, 1980.]
awarded when it is palpably and scandalously excessive. Moral damages are not intended to enrich a
complainant at the expense of a defendant. They are awarded only to enable the injured party to obtain
means, diversion or amusements that will serve to alleviate the moral suffering he has undergone, by MANUEL M. SERRANO, petitioner, vs. CENTRAL BANK OF THE PHILIPPINES;
reason of defendants' culpable action. 55 OVERSEAS BANK OF MANILA; EMERITO M. RAMOS, SUSANA B. RAMOS,
EMERITO B. RAMOS, JR., JOSEFA RAMOS DELA RAMA, HORACIO DELA RAMA,
ANTONIO B. RAMOS, FILOMENA RAMOS LEDESMA, RODOLFO LEDESMA,
VICTORIA RAMOS TANJUATCO, and TEOFILO TANJUATCO, respondents.
The awards of P10,000.00 as exemplary damages and P200,000.00 representing attorney's fees are
likewise sustained.

WHEREFORE, foregoing premises considered, the Decision of the Court of Appeals dated 19 October Rene Diokno for petitioner.
1995 is hereby AFFIRMED. Petitioners are directed, jointly and severally, to pay private respondent the
following amounts: F.E. Evangelista & Glecerio T. Orsolino for respondent Central Bank of the Philippines.

(1) US$2,000.00 and AUS$4,500.00 or their peso equivalent at the time of Feliciano C. Tumale, Pacifico T. Torres and Antonio B. Periquet for respondent Overseas
payment; Bank of Manila.

(2) P308,880.80, representing the peso value for the air fares from Sydney to Josefina G. Salonga for all other respondents.
Manila and back for a total of eleven (11) trips;

(3) One-half of P336,207.05 or P168,103.52 representing payment to Tropicana

Copacabana Apartment Hotel; DECISION
(4) One-half of P152,683.57 or P76,341.785 representing payment to Echelon
Tower;

(5) One-half of P179,863.20 or P89,931.60 for the taxi or transportation expense
from McLoughlin's residence to Sydney Airport and from MIA to the
hotel here in Manila, for the eleven (11) trips;
(6) One-half of P7,801.94 or P3,900.97 representing Meralco power expenses;
(7) One-half of P356,400.00 or P178,200.00 representing expenses for food and
maintenance;
(8) P50,000.00 for moral damages;
(9) P10,000.00 as exemplary damages; and
CONCEPCION, JR., J p:
Petition for mandamus and prohibition, with preliminary injunction, that seeks the establishment of
joint and solidary liability to the amount of Three Hundred Fifty Thousand Pesos, with interest, against
respondent Central Bank of the Philippines and Overseas Bank of Manila and its stockholders, on the
alleged failure of the Overseas Bank of Manila to return the time deposits made by petitioner and
assigned to him, on the ground that respondent Central Bank failed in its duty to exercise strict
supervision over respondent Overseas Bank of Manila to protect depositors and the general
public. 1 Petitioner also prays that both respondent banks be ordered to execute the proper and
necessary documents to constitute all properties listed in Annex "7" of the Answer of respondent Central
Bank of the Philippines in G.R. No. L-29352, entitled "Emerito M. Ramos, et al. vs. Central Bank of the
Philippines," into a trust fund in favor of petitioner and all other depositors of respondent Overseas Bank
of Manila. It is also prayed that the respondents be prohibited permanently from honoring,
implementing, or doing any act predicated upon the validity or efficacy of the deeds of mortgage,
assignment, and/or conveyance or transfer of whatever nature of the properties listed in Annex "7" of
the Answer of respondent Central Bank in G.R. No. 29352. 2 cdtai
A sought for ex-parte preliminary injunction against both respondent banks was not given by this Court.
Undisputed pertinent facts are:
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. 3 Concepcion Maneja also made a time deposit, for one year with 6-1/2% interest, on March 6,
1967, of Two Hundred Thousand Pesos (P200,000.00) with the same respondent Overseas Bank of
Manila. 4
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. 5
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. 6
Respondent Central Bank admits that it is charged with the duty of administering the banking system of
the Republic and it exercises supervision over all doing business in the Philippines, but denies the
petitioner's allegation that the Central Bark 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. Respondent Central Bank 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. 7
Respondent Central Bank also denied that it is guarantor of the permanent solvency of any banking
institution as claimed by petitioner. It claims that neither the law nor sound banking supervision requires
respondent Central Bank to advertise or represent to the public any remedial measures it may impose
upon chronic delinquent banks as such action may inevitably result to panic or bank "runs". In the years
1966-1967, there were no findings to declare the respondent Overseas Bank of Manila as insolvent. 8
Respondent Central Bank likewise denied 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. 9
Respondent Central Bank avers 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 acquire through the use of depositors'
money, including that of the petitioner and Concepcion Maneja. 10
In G.R. No. L-29352, entitled "Emerito M. Ramos, et al. vs. Central Bank of the Philippines," a case was
filed by the petitioner Ramos, wherein respondent Overseas Bank of Manila sought to prevent
respondent Central Bank from closing, declaring the former insolvent, and liquidating its assets.
Petitioner Manuel Serrano in this case, filed on September 6, 1968, a motion to intervene in G.R. No. L-
29352, on the ground that Serrano had a real and legal interest as depositor of the Overseas Bank of
Manila in the matter in litigation in that case. Respondent Central Bank in G.R. No. L-29352 opposed
petitioner Manuel Serrano's motion to intervene in that case, on the ground that his claim as depositor
of the Overseas Bank of Manila should properly be ventilated in the Court of First Instance, and if this
Court were to allow Serrano to intervene as depositor in G.R. No. L-29352, thousands of other
depositors would follow and thus cause an avalanche of cases in this Court. In the resolution dated
October 4, 1968, this Court denied Serrano's, motion to intervene. The contents of said motion to
intervene are substantially the same as those of the present petition. 11
This Court rendered decision in G.R. No. L-29352 on October 4, 1971, which became final and executory
on March 3, 1972, favorable to the respondent Overseas Bank of Manila, with the dispositive portion to
wit: Cdpr
WHEREFORE, the writs prayed for in the petition are hereby granted and
respondent Central Bank's resolution Nos. 1263, 1290 and 1333 (that prohibit
the Overseas Bank of Manila to participate in clearing, direct the suspension of
its operation, and ordering the liquidation of said bank) are hereby annulled
and set aside; and said respondent Central Bank of the Philippines is directed to
comply with its obligations under the Voting Trust Agreement, and to desist
from taking action in violation therefor. Costs against respondent Central Bank
of the Philippines." 12
Because of the above decision, petitioner in this case filed a motion for judgment in this case, praying
for a decision on the merits, 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; 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. 13
By the very nature of the claims and causes of action against respondents, they in reality are recovery of
time deposits plus interest from respondent Overseas Bank of Manila, and 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 when
respondent Central Bank required the other respondent to increase its collaterals for its overdrafts and
emergency loans, said collaterals allegedly acquired through the use of depositors money. 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. Claims of these nature are not
proper in actions for mandamus and prohibition as 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.
Furthermore, both parties overlooked one fundamental principle in the nature of bank deposits when
the petitioner claimed that there should be created a constructive trust in his favor when the respondent
Overseas Bank of Manila increased its collaterals in favor of respondent Central Bank for the former's
overdrafts and emergency loans, since these collaterals were acquired by the use of depositors'
money. LexLib
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. 14Current 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 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.

WHEREFORE, the petition is dismissed for lack of merit, with costs against petitioner.
SO ORDERED.
Antonio, Abad Santos, JJ., concur.
Separate Opinions
AQUINO, J., concurring:
I concur in the result. The petitioner prayed that the Central Bank be ordered to pay his time deposits of
P350,000, plus interests, which he could not recover from the distressed Overseas Bank of Manila, and
to declare all the assets assigned or mortgaged by that bank and the Ramos group to the Central Bank
as trust properties for the benefit of the petitioner and other depositors. LibLex
The petitioner has no causes of action against the Central Bank to obtain those reliefs. They cannot be
granted in petitioner's instant original actions in this Court for mandamus and prohibition. It is not the
Central Bank's ministerial duty to pay petitioner's time deposits or to hold the mortgaged properties in
trust for the depositors of the Overseas Bank of Manila. The petitioner has no cause of action for
prohibition, a remedy usually available against any tribunal, board, corporation or person exercising
judicial or ministerial functions.
Since the Overseas Bank of Manila was found to be insolvent and the Superintendent of Banks was
ordered to take over its assets preparatory to its liquidation under section 29 of Republic Act No. 265 (p.
197, Rollo, Manifestation of September 19, 1973), petitioner's remedy is to file his claim in the liquidation
proceeding (Central Bank vs. Morfe, L-38427, March 12, 1975, 63 SCRA 114; Hernandez vs. Rural Bank of
Lucena, Inc., L-29791, January 10, 1978, 81 SCRA 75).
Barredo, J., concurs.
||| (Serrano v. Central Bank of the Philippines, G.R. No. L-30511, [February 14, 1980], 185 PHIL 54-62)
SECOND DIVISION
[G.R. No. 60033. April 4, 1984.]
TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and TERESITA
SANTOS, petitioners, vs. THE CITY FISCAL OF MANILA, HON. JOSE B.
FLAMINIANO, ASST. CITY FISCAL FELIZARDO N. LOTA and CLEMENT
DAVID, respondents.
Feliciano C. Tumale for petitioners.
Asuncion, Gomez & de Leon for private respondents.
The Solicitor General for respondents.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; SIMPLE LOAN; FAILURE OF BANK TO RETURN THE
AMOUNT DEPOSITED, NOT A CASE OF ESTAFA. — When private respondent David invested his
money on time and savings deposits with the aforesaid bank, the contract that was perfected was a
contract of simple loan or mutuum and not a contract of deposit governed by the provisions concerning
simple loan (Article 1980, Civil Code). Hence, the relationship between the private respondent and the
Nation Savings and Loan Association is that of creditor and debtor; consequently, the ownership of the
amount deposited was transmitted to the Bank upon the perfection of the contract and it can make use
of the amount deposited for its banking operations, such as to pay interests on deposits and to pay
withdrawals. While the Bank has the obligation to return the amount deposited, it has, however, no
obligation to return or deliver the same money that was deposited. And, the failure of the Bank to return
the amount deposited will not constitute estafa through misappropriation punishable under Article 315,
par. 1(b) of the Revised Penal Code, but it will only give rise to civil liability over which the public
respondents have no jurisdiction.
2. ID.; ID.; ID.; OBLIGATION OF BANK UNDER ORIGINAL TIME AND SAVINGS DEPOSIT IN CASE AT
BAR DEEMED NOVATED. — But even granting that the failure of the bank to pay the time and savings
deposits of private respondent David would constitute a violation of paragraph 1(b) of Article 315 of the
Revised Penal Code, nevertheless any incipient criminal liability was deemed avoided, because when the
aforesaid bank was placed under receivership by the Central Bank, petitioners Guingona and Martin
assumed the obligation of the bank to private respondent David, thereby resulting in the novation of the
original contractual obligation arising from deposit into a contract of loan and converting the original
trust relation between the bank and private respondent David into an ordinary debtor-creditor relation
between the petitioners and private respondent. Consequently, the failure of the bank or petitioners
Guingona and Martin to pay the deposits of private respondent would not constitute a breach of trust
but would merely be a failure to pay the obligation as a debtor.
3. ID.; ID.; NOVATION; EFFECTS; MAY PREVENT RISE OF CRIMINAL LIABILITY; CASE AT BAR. — While
it is true that novation does not extinguish criminal liability, it may however, prevent the rise of criminal
liability as long as it occurs prior to the filing of the criminal information in court. (Gonzales vs. Serrano (
25 SCRA 64, 69 [1968]; Ong vs. Court of Appeals, L-058476, 124 SCRA 578, 580-581 [1983]; People vs.
Nery, 10 SCRA 244 [1964]. In the case at bar, there is no dispute that petitioners Guingona and Martin
executed a promissory note on June 17, 1981 assuming the obligation of the bank to private respondent
David; while the criminal complaint for estafa was filed on December 23, 1981 with the Office of the City
Fiscal. Hence, it is clear that novation occurred long before the filing of the criminal complaint with the
Office of the City Fiscal.
4. REMEDIAL LAW; CRIMINAL PROCEDURE; AS A RULE CRIMINAL PROSECUTION MAY NOT BE
SUBJECT OF PROHIBITION AND INJUNCTION; EXCEPTION; CASE AT BAR. — Considering that the
liability of the petitioners is purely civil in nature and that there is no clear showing that they engaged in
foreign exchange transactions, We hold that the public respondents acted without jurisdiction when
they investigated the charges against the petitioners. Consequently, public respondents should be
restrained from further proceeding with the criminal case for to allow the case to continue, even if the
petitioners could have appealed to the Ministry of Justice, would work great injustice to petitioners and
would render meaningless the proper administration of justice.
DECISION
MAKASIAR, J p:
This is a petition for prohibition and injunction with a prayer for the immediate issuance of restraining
order and/or writ of preliminary injunction filed by petitioners on March 26, 1982.
On March 31, 1982, by virtue of a court resolution issued by this Court on the same date, a temporary
restraining order was duly issued ordering the respondents, their officers, agents, representatives
and/or person or persons acting upon their (respondents') orders or in their place or stead to refrain from
proceeding with the preliminary investigation in Case No. 81-31938 of the Office of the City Fiscal of
Manila (pp. 47-48, rec.). On January 24, 1983, private respondent Clement David filed a motion to lift
restraining order which was denied in the resolution of this Court dated May 18, 1983.
As can be gleaned from the above, the instant petition seeks to prohibit public respondents from
proceeding with the preliminary investigation of I.S. No. 81-31938, in which petitioners were charged by
private respondent Clement David, with estafa and violation of Central Bank Circular No. 364 and
related regulations regarding foreign exchange transactions principally, on the ground of lack of
jurisdiction in that the allegations of the charged, as well as the testimony of private respondent's
principal witness and the evidence through said witness, showed that petitioners' obligation is civil in
nature.
For purposes of brevity, We hereby adopt the antecedent facts narrated by the Solicitor General in its
Comment dated June 28, 1982, as follows:
"On December 23, 1981, private respondent David filed I.S. No. 81-31938 in the
Office of the City Fiscal of Manila, which case was assigned to respondent Lota
for preliminary investigation (Petition, p. 8).
"In I.S. No. 81-31938, David charged petitioners (together with one Robert
Marshall and the following directors of the Nation Savings and Loan
Association, Inc., namely Homero Gonzales, Juan Merino, Flavio Macasaet,
Victor Gomez, Jr., Perfecto Mañalac, Jaime V. Paz, Paulino B. Dionisio, and one
John Doe) with estafa and violation of Central Bank Circular No. 364 and
related Central Bank regulations on foreign exchange transactions, allegedly
committed as follows (Petition, Annex 'A'):
"'From March 20, 1979 to March, 1981, David invested with the
Nation Savings and Loan Association, (hereinafter called NSLA) the
sum of P1,145,546.20 on time deposits, P13,531.94 on savings
account deposits (jointly with his sister, Denise Kuhne),
US$10,000.00 on time deposit, US$15,000.00 under a receipt and
guarantee of payment and US$50,000.00 under a receipt dated June
8, 1980 (all jointly with Denise Kuhne), that David was induced into
making the aforestated investments by Robert Marshall, an
Australian national who was allegedly a close associate of petitioner
Guingona Jr., then NSLA President, petitioner Martin, then NSLA
Executive Vice-President and petitioner Santos, then NSLA General
Manager; that on March 21, 1981 NSLA was placed under
receivership by the Central Bank, so that David filed claims
therewith for his investments and those of his sister; that on July 22,
1981 David received a report from the Central Bank that only
P305,821.92 of those investments were entered in the records of
NSLA; that, therefore, the respondents in I.S. No. 81-31938
misappropriated the balance of the investments, at the same time
violating Central Bank Circular No. 364 and related Central Bank
regulations on foreign exchange transactions; that after demands,
petitioner Guingona Jr. paid only P200,000.00, thereby reducing the
amounts misappropriated to P959,078.14 and US$75,000.00.
"Petitioners, Martin and Santos, filed a joint counter-affidavit (Petition, Annex
'B') in which they stated the following:
"'That Martin became President of NSLA in March 1978 (after the
resignation of Guingona, Jr.) and served as such until October 30,
1980, while Santos was General Manager up to November 1980;
that because NSLA was urgently in need of funds and at David's
insistence, his investments were treated as special accounts with
interests above the legal rate, and recorded in separate confidential
documents only a portion of which were to be reported because he
did not want the Australian government to tax his total earnings
(nor) to know his total investments; that all transactions with David
were recorded except the sum of US$15,000.00 which was a
personal loan of Santos; that David's check for US$50,000.00 was
cleared through Guingona, Jr.'s dollar account because NSLA did
not have one, that a draft of US$30,000.00 was placed in the name
of one Paz Roces because of a pending transaction with her; that the
Philippine Deposit Insurance Corporation had already reimbursed
David within the legal limits; that majority of the stockholders of
NSLA had filed Special Proceedings No. 82-1695 in the Court of First
Instance to contest its (NSLA's) closure; that after NSLA was placed
under receivership, Martin executed a promissory note in David's
favor and caused the transfer to him of a nine and one half (9 1/2)
carat diamond ring with a net value of P510,000.00; and, that the
liabilities of NSLA to David were civil in nature.'
"Petitioner, Guingona, Jr., in his counter-affidavit (Petition, Annex 'C') stated
the following:
"'That he had no hand whatsoever in the transactions between
David and NSLA since he (Guingona Jr.) had resigned as NSLA
president in March 1978, or prior to those transactions; that he
assumed a portion of the liabilities of NSLA to David because of the
latter's insistence that he placed his investments with NSLA because
of his faith in Guingona, Jr.; that in a Promissory Note dated June 17,
1981 (Petition, Annex "D") he (Guingona, Jr.) bound himself to pay
David the sums of P668.307.01 and US$37,500.00 in stated
installments; that he (Guingona, Jr.) secured payment of those
amounts with second mortgages over two (2) parcels of land under a
deed of Second Real Estate Mortgage (Petition, Annex" E") in which
it was provided that the mortgage over one (1) parcel shall be
cancelled upon payment of one half of the obligation to David; that
he (Guingona, Jr.) paid P200,000.00 and tendered another
P300,000.00 which David refused to accept, hence, he (Guingona,
Jr.) filed Civil Case No. Q-33865 in the Court of First Instance of Rizal
at Quezon City, to effect the release of the mortgage over one (1) of
the two parcels of land conveyed to David under second mortgages.'
"At the inception of the preliminary investigation before respondent Lota,
petitioners moved to dismiss the charges against them for lack of jurisdiction
because David's claims allegedly comprised a purely civil obligation which was
itself novated. Fiscal Lota denied the motion to dismiss (Petition, p. 8)
 "But, after the presentation of David's principal witness, petitioners filed the
instant petition because: (a) the production of the Promissory Notes, Banker's
Acceptance, Certificates of Time Deposits and Savings Account allegedly
showed that the transactions between David and NSLA were simple loans, i.e.,
civil obligations on the part of NSLA which were novated when Guingona, Jr.
and Martin assumed them; and (b) David's principal witness allegedly testified
that the duplicate originals of the aforesaid instruments of indebtedness were
all on file with NSLA, contrary to David's claim that some of his investments
were not recorded (Petition, pp. 8-9).
"Petitioners alleged that they did not exhaust available administrative
remedies because to do so would be futile (Petition, p. 9)" [pp. 153-157, rec.]
As correctly pointed out by the Solicitor General, the sole issue for resolution is whether public
respondents acted without jurisdiction when they investigated the charges (estafa and violation of CB
Circular No. 364 and related regulations regarding foreign exchange transactions) subject matter of I.S.
No. 81-31938.
There is merit in the contention of the petitioners that their liability is civil in nature and therefore,
public respondents have no jurisdiction over the charge of estafa. prLL
A casual perusal of the December 23, 1981 affidavit-complaint filed in the Office of the City Fiscal of
Manila by private respondent David against petitioners Teofisto Guingona, Jr., Antonio I. Martin and
Teresita G. Santos, together with one Robert Marshall and the other directors of the Nation Savings and
Loan Association, will show that from March 20, 1979 to March, 1981, private respondent David,
together with his sister, Denise Kuhne, invested with the Nation Savings and Loan Association the sum
of P1,145,546.20 on time deposits covered by Bankers Acceptances and Certificates of Time Deposits
and the sum of P13,531.94 on savings account deposits covered by passbook nos. 6-632 and 29-742, or a
total of P1,159,078.14 (pp. 15-16, rec.). It appears further that private respondent David, together with
his sister, made investments in the aforesaid bank in the amount of US$75,000.00 (p. 17, rec.).
Moreover, the records reveal that when the aforesaid bank was placed under receivership on March 21,
1981, petitioners Guingona and Martin, upon the request of private respondent David, assumed the
obligation of the bank to private respondent David by executing on June 17, 1981 a joint promissory note
in favor of private respondent acknowledging an indebtedness of P1,336,614.02 and US$75,000.00 (p.
80, rec.). This promissory note was based on the statement of account as of June 30, 1981 prepared by
the private respondent (p. 81, rec.). The amount of indebtedness assumed appears to be bigger than the
original claim because of the added interest and the inclusion of other deposits of private respondent's
sister in the amount of P116,613.20.
Thereafter, or on July 17, 1981, petitioners Guingona and Martin agreed to divide the said indebtedness,
and petitioner Guingona executed another promissory note antedated to June 17, 1981 whereby he
personally acknowledged an indebtedness of P668,307.01 (1/2 of P1,336,614.02) and US$37,500.00 (1/2
of US$75,000.00) in favor of private respondent (p. 25, rec.). The aforesaid promissory notes were
executed as a result of deposits made by Clement David and Denise Kuhne with the Nation Savings and
Loan Association.
Furthermore, the various pleadings and documents filed by private respondent David before this Court
indisputably show that he has indeed invested his money on time and savings deposits with the Nation
Savings and Loan Association.
It must be pointed out that when private respondent David invested his money on time and savings
deposits with the aforesaid bank, the contract that was perfected was a contract of simple loan
or mutuum and not a contract of deposit. Thus, Article 1980 of the New Civil Code provides that:
"Article 1980. Fixed, savings, and current deposits of money in banks and
similar institutions shall be governed by the provisions concerning simple loan."
In the case of Central Bank of the Philippines vs. Morfe (63 SCRA 114, 119 [1975], We said:
"It should be noted that fixed, savings, and current deposits of money in banks
and similar institutions are not true deposits. They are considered simple loans
and, as such, are not preferred credits (Art. 1980 Civil Code: In re Liquidation of
Mercantile Bank of China: Tan Tiong Tick vs. American Apothecaries Co., 65
Phil. 414; Pacific Coast Biscuit Co. vs. Chinese Grocers Association, 65 Phil. 375;
Fletcher American National Bank vs. Ang Cheng Lian, 65 Phil. 385; Pacific
Commercial Co. vs. American Apothecaries Co., 65 Phil. 429; Gopoco Grocery
vs. Pacific Coast Biscuit Co., 65 Phil. 443)."
This Court also declared in the recent case of Serrano vs. Central Bank of the Philippines (96 SCRA 96,
102 [1980]) that: prLL
"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
(Art. 1980, Civil Code; Gullas vs. Phil. National Bank, 62 Phil. 519). 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 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 depository's failure to return the
subject matter of the deposit" (emphasis supplied).
Hence, the relationship between the private respondent and the Nation Savings and Loan Association is
that of creditor and debtor; consequently, the ownership of the amount deposited was transmitted to
the Bank upon the perfection of the contract and it can make use of the amount deposited for its
banking operations, such as to pay interests on deposits and to pay withdrawals. While the Bank has the
obligation to return the amount deposited, it has, however, no obligation to return or deliver the same
money that was deposited. And, the failure of the Bank to return the amount deposited will not
constitute estafa through misappropriation punishable under Article 315, par. 1(b) of the Revised Penal
Code, but it will only give rise to civil liability over which the public respondents have no jurisdiction.
WE have already laid down the rule that:
"In order that a person can be convicted under the above-quoted provision, it
must be proven that he has the obligation to deliver or return the same money,
goods or personal property that he received. Petitioners had no such obligation
to return the same money, i.e., the bills or coins, which they received from
private respondents. This is so because as clearly stated in criminal complaints,
the related civil complaints and the supporting sworn statements, the sums of
money that petitioners received were loans.
"The nature of simple loan is defined in Articles 1933 and 1953 of the Civil Code.
"'Art. 1933. — By the contract of loan, one of the parties delivers to
another, either something not consumable so that the latter may
use the same for a certain time and return it, in which case the
contract is called a commodatum; or money or other consumable
thing, upon the condition that the same amount of the same kind and
quality shall be paid in which case the contract is simply called a loan
or mutuum.
"'Commodatum is essentially gratuitous.
 "'Simple loan may be gratuitous or with a stipulation to pay interest.
"'In commodatum the bailor retains the ownership of the thing
loaned, while in simple loan, ownership passes to the borrower.
"'Art. 1953. — A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay
to the creditor an equal amount of the same kind and quality.'
"It can be readily noted from the above quoted provisions that in simple loan
(mutuum), as contrasted to commodatum, the borrower acquires ownership of the
money, goods or personal property borrowed. Being the owner, the borrower can
dispose of the thing borrowed (Article 248, Civil Code) and his act will not be
considered misappropriation thereof" (Yam vs. Malik, 94 SCRA 30, 34 [1979];
emphasis supplied).
But even granting that the failure of the bank to pay the time and savings deposits of private respondent
David would constitute a violation of paragraph 1(b) of Article 315 of the Revised Penal Code,
nevertheless any incipient criminal liability was deemed avoided, because when the aforesaid bank was
placed under receivership by the Central Bank, petitioners Guingona and Martin assumed the obligation
of the bank to private respondent David, thereby resulting in the novation of the original contractual
obligation arising from deposit into a contract of loan and converting the original trust relation between
the bank and private respondent David into an ordinary debtor-creditor relation between the petitioners
and private respondent. Consequently, the failure of the bank or petitioners Guingona and Martin to pay
the deposits of private respondent would not constitute a breach of trust but would merely be a failure
to pay the obligation as a debtor.
Moreover, while it is true that novation does not extinguish criminal liability, it may however, prevent
the rise of criminal liability as long as it occurs prior to the filing of the criminal information in court.
Thus, in Gonzales vs. Serrano ( 25 SCRA 64, 69 [1968]) We held that: LexLib
"As pointed out in People vs. Nery, novation prior to the filing of the criminal
information — as in the case at bar — may convert the relation between the
parties into an ordinary creditor-debtor relation, and place the complainant in
estoppel to insist on the original transaction or 'cast doubt on the true nature'
thereof."
Again, in the latest case of Ong vs. Court of Appeals (L-58476, 124 SCRA 578, 580-581 [1983]), this Court
reiterated the ruling in People vs. Nery ( 10 SCRA 244 [1964]), declaring that:
"The novation theory may perhaps apply prior to the filing of the criminal
information in court by the state prosecutors because up to that time the
original trust relation may be converted by the parties into an ordinary creditor-
debtor situation, thereby placing the complainant in estoppel to insist on the
original trust. But after the justice authorities have taken cognizance of the
crime and instituted action in court, the offended party may no longer divest
the prosecution of its power to exact the criminal liability, as distinguished from
the civil. The crime being an offense against the state, only the latter can
renounce it (People vs. Gervacio, 54 Off. Gaz. 2898; People vs. Velasco, 42 Phil.
76; U.S. vs. Montañes, 8 Phil. 620).
"It may be observed in this regard that novation is not one of the means
recognized by the Penal Code whereby criminal liability can be extinguished;
hence, the role of novation may only be to either prevent the rise of criminal
liability or to cast doubt on the true nature of the original basic transaction,
whether or not it was such that its breach would not give rise to penal
responsibility, as when money loaned is made to appear as a deposit, or other
similar disguise is resorted to (cf. Abeto vs. People, 90 Phil. 581; U.S. vs.
Villareal, 27 Phil. 481)."
In the case at bar, there is no dispute that petitioners Guingona and Martin executed a promissory note
on June 17, 1981 assuming the obligation of the bank to private respondent David; while the criminal
complaint for estafa was filed on December 23, 1981 with the Office of the City Fiscal. Hence, it is clear
that novation occurred long before the filing of the criminal complaint with the Office of the City Fiscal.
Consequently, as aforestated, any incipient criminal liability would be avoided but there will still be a
civil liability on the part of petitioners Guingona and Martin to pay the assumed obligation.
Petitioners herein were likewise charged with violation of Section 3 of Central Bank Circular No. 364 and
other related regulations regarding foreign exchange transactions by accepting foreign currency deposit
in the amount of US$75,000.00 without authority from the Central Bank. They contend however, that
the US dollars intended by respondent David for deposit were all converted into Philippine currency
before acceptance and deposit into Nation Savings and Loan Association. LLphil
Petitioners' contention is worthy of belief for the following reasons:
1. It appears from the records that when respondent David was about to make a deposit of bank draft
issued in his name in the amount of US$50,000.00 with the Nation Savings and Loan Association, the
same had to be cleared first and converted into Philippine currency. Accordingly, the bank draft was
endorsed by respondent David to petitioner Guingona, who in turn deposited it to his dollar account
with the Security Bank and Trust Company. Petitioner Guingona merely accommodated the request of
the Nation Savings and Loan Association in order to clear the bank draft through his dollar account
because the bank did not have a dollar account. Immediately after the bank draft was cleared, petitioner
Guingona authorized Nation Savings and Loan Association to withdraw the same in order to be utilized
by the bank for its operations.
2. It is safe to assume that the U.S. dollars were converted first into Philippine pesos before they were
accepted and deposited in Nation Savings and Loan Association, because the bank is presumed to have
followed the ordinary course of the business which is to accept deposits in Philippine currency only, and
that the transaction was regular and fair, in the absence of a clear and convincing evidence to the
contrary (see paragraphs p and q, Sec. 5, Rule 131, Rules of Court).
3. Respondent David has not denied the aforesaid contention of herein petitioners despite the fact that
it was raised in petitioners' reply filed on May 7, 1982 to private respondent's comment and in the July
27, 1982 reply to public respondents' comment and reiterated in petitioners' memorandum filed on
October 30, 1982, thereby adding more support to the conclusion that the US$75,000.00 were really
converted into Philippine currency before they were accepted and deposited into Nation Savings and
Loan Association. Considering that this might adversely affect his case, respondent David should have
promptly denied petitioners' allegation.
In conclusion, considering that the liability of the petitioners is purely civil in nature and that there is no
clear showing that they engaged in foreign exchange transactions, We hold that the public respondents
acted without jurisdiction when they investigated the charges against the petitioners. Consequently,
public respondents should be restrained from further proceeding with the criminal case for to allow the
case to continue, even if the petitioners could have appealed to the Ministry of Justice, would work
great injustice to petitioners and would render meaningless the proper administration of justice.
While as a rule, the prosecution in a criminal offense cannot be the subject of prohibition and injunction,
this court has recognized the resort to the extraordinary writs of prohibition and injunction in extreme
cases, thus:
 "On the issue of whether a writ of injunction can restrain the proceedings in
Criminal Case No. 3140, the general rule is that 'ordinarily, criminal prosecution
may not be blocked by court prohibition or injunction.' Exceptions, however,
are allowed in the following instances:
"'1. for the orderly administration of justice;
DECISION
"'2. to prevent the use of the strong arm of the law in an oppressive
and vindictive manner;
"'3. to avoid multiplicity of actions;
"'4. to afford adequate protection to constitutional rights;
"'5. in proper cases, because the statute relied upon is
unconstitutional or was held invalid'" (Primicias vs. Municipality of
Urdaneta, Pangasinan, 93 SCRA 462, 469-470 [1979]; citing Ramos
vs. Torres, 25 SCRA 557 [1968]; and Hernandez vs. Albano, 19 SCRA
95, 96 [1967]).
Likewise, in Lopez vs. The City Judge, et al. (18 SCRA 616, 621-622 [1966]), We held that: cdll
"The writs of certiorari and prohibition, as extraordinary legal remedies, are in
the ultimate analysis, intended to annul void proceedings; to prevent the
unlawful and oppressive exercise of legal authority and to provide for a fair and
orderly administration of justice. Thus, in Yu Kong Eng vs. Trinidad, 47 Phil.
385, We took cognizance of a petition for certiorari and prohibition although
the accused in the case could have appealed in due time from the order
complained of, our action in the premises being based on the public welfare
and the advancement of public policy, In Dimayuga vs. Fajardo, 43 Phil. 304,
We also admitted a petition to restrain the prosecution of certain chiropractors
although, if convicted, they could have appealed. We gave due course to their
petition for the orderly administration of justice and to avoid possible
oppression by the strong arm of the law. And in Arevalo vs. Nepomuceno, 63
Phil. 627, the petition for certiorari challenging the trial court's action admitting
an amended information was sustained despite the availability of appeal at the
proper time."
WHEREFORE, THE PETITION IS HEREBY GRANTED; THE TEMPORARY RESTRAINING ORDER
PREVIOUSLY ISSUED IS MADE PERMANENT. COSTS AGAINST THE PRIVATE RESPONDENT.
SO ORDERED.
Concepcion, Jr., Guerrero, De Castro and Escolin JJ ., concur.
Aquino, J ., took no part.
Abad Santos, J ., concurs in the result.
||| (Guingona, Jr. v. City Fiscal of Manila, G.R. No. 60033, [April 4, 1984], 213 PHIL 516-529)
THIRD DIVISION
[G.R. Nos. 173654-765. August 28, 2008.]
PEOPLE OF THE PHILIPPINES, petitioners,vs.TERESITA PUIG and ROMEO
PORRAS, respondent.
CHICO-NAZARIO, J p:
This is a Petition for Review under Rule 45 of the Revised Rules of Court with petitioner
People of the Philippines, represented by the Office of the Solicitor General, praying for the
reversal of the Orders dated 30 January 2006 and 9 June 2006 of the Regional Trial Court (RTC) of
the 6th Judicial Region, Branch 68, Dumangas, Iloilo, dismissing the 112 cases of Qualified Theft
filed against respondents Teresita Puig and Romeo Porras, and denying petitioner's Motion for
Reconsideration, in Criminal Cases No. 05-3054 to 05-3165. IDAaCc
The following are the factual antecedents:
On 7 November 2005, the Iloilo Provincial Prosecutor's Office filed before Branch 68 of
the RTC in Dumangas, Iloilo, 112 cases of Qualified Theft against respondents Teresita Puig (Puig)
and Romeo Porras (Porras) who were the Cashier and Bookkeeper, respectively, of private
complainant Rural Bank of Pototan, Inc. The cases were docketed as Criminal Cases No. 05-3054 to
05-3165.
The allegations in the Informations 1 filed before the RTC were uniform and pro-
forma, except for the amounts, date and time of commission, to wit:
INFORMATION
That on or about the 1st day of August, 2002, in the Municipality
of Pototan, Province of Iloilo, Philippines, and within the jurisdiction of this
Honorable Court, above-named [respondents],conspiring, confederating,
and helping one another, with grave abuse of confidence,being
the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc.,Pototan,
Iloilo, without the knowledge and/or consent of the management of the
Bank and with intent of gain, did then and there willfully, unlawfully and
feloniously take, steal and carry away the sum of FIFTEEN THOUSAND
PESOS (P15,000.00),Philippine Currency, to the damage and prejudice of
the said bank in the aforesaid amount.
After perusing the Informations in these cases, the trial court did not find the existence
of probable cause that would have necessitated the issuance of a warrant of arrest based on the
following grounds:
(1) the element of 'taking without the consent of the owners' was missing on
the ground that it is the depositors-clients, and not the Bank, which
filed the complaint in these cases, who are the owners of the money
allegedly taken by respondents and hence, are the real parties-in-
interest; and
(2) the Informations are bereft of the phrase alleging "dependence,
guardianship or vigilance between the respondents and the
offended party that would have created a high degree of
confidence between them which the respondents could have
abused." ADECcI
It added that allowing the 112 cases for Qualified Theft filed against the respondents to push
through would be violative of the right of the respondents under Section 14 (2), Article III of
the 1987 Constitution which states that in all criminal prosecutions, the accused shall enjoy the
right to be informed of the nature and cause of the accusation against him. Following Section 6,
Rule 112 of the Revised Rules of Criminal Procedure, the RTC dismissed the cases on 30 January
2006 and refused to issue a warrant of arrest against Puig and Porras.
A Motion for Reconsideration 2 was filed on 17 April 2006, by the petitioner.
On 9 June 2006, an Order 3 denying petitioner's Motion for Reconsideration was issued
by the RTC, finding as follows:
Accordingly, the prosecution's Motion for Reconsideration should
be, as it hereby, DENIED. The Order dated January 30, 2006 STANDS in all
respects.
Petitioner went directly to this Court via Petition for Review on Certiorari under Rule 45,
raising the sole legal issue of:
WHETHER OR NOT THE 112 INFORMATIONS FOR QUALIFIED
THEFT SUFFICIENTLY ALLEGE THE ELEMENT OF TAKING WITHOUT THE
CONSENT OF THE OWNER, AND THE QUALIFYING CIRCUMSTANCE OF
GRAVE ABUSE OF CONFIDENCE.
Petitioner prays that judgment be rendered annulling and setting aside the Orders
dated 30 January 2006 and 9 June 2006 issued by the trial court, and that it be directed to proceed
with Criminal Cases No. 05-3054 to 05-3165.
Petitioner explains that under Article 1980 of the New Civil Code, "fixed, savings, and
current deposits of money in banks and similar institutions shall be governed by the provisions
concerning simple loans." Corollary thereto, Article 1953 of the same Code provides that "a person
who receives a loan of money or any other fungible thing acquires the ownership thereof, and is
bound to pay to the creditor an equal amount of the same kind and quality." Thus, it posits that the
depositors who place their money with the bank are considered creditors of the bank. The bank
acquires ownership of the money deposited by its clients, making the money taken by respondents
as belonging to the bank. aSEHDA
Petitioner also insists that the Informations sufficiently allege all the elements of the
crime of qualified theft, citing that a perusal of the Informations will show that they specifically
allege that the respondents were the Cashier and Bookkeeper of the Rural Bank of Pototan,
Inc.,respectively, and that they took various amounts of money with grave abuse of confidence,
and without the knowledge and consent of the bank, to the damage and prejudice of the bank.
Parenthetically, respondents raise procedural issues. They challenge the petition on the
ground that a Petition for Review on Certiorari via Rule 45 is the wrong mode of appeal because a
finding of probable cause for the issuance of a warrant of arrest presupposes evaluation of facts
and circumstances, which is not proper under said Rule.
Respondents further claim that the Department of Justice (DOJ),through the Secretary
of Justice, is the principal party to file a Petition for Review on Certiorari, considering that the
incident was indorsed by the DOJ. HECTaA
We find merit in the petition.
The dismissal by the RTC of the criminal cases was allegedly due to insufficiency of the
Informations and, therefore, because of this defect, there is no basis for the existence of probable
cause which will justify the issuance of the warrant of arrest. Petitioner assails the dismissal
contending that the Informations for Qualified Theft sufficiently state facts which constitute (a)
the qualifying circumstance of grave abuse of confidence; and (b) the element of taking, with intent
to gain and without the consent of the owner, which is the Bank.
In determining the existence of probable cause to issue a warrant of arrest, the RTC
judge found the allegations in the Information inadequate. He ruled that the Information failed to
state facts constituting the qualifying circumstance of grave abuse of confidence and the element
of taking without the consent of the owner,since the owner of the money is not the Bank, but the
depositors therein. He also cites People v. Koc Song, 4 in which this Court held:
There must be allegation in the information and proof of a
relation, by reason of dependence, guardianship or vigilance, between the
respondents and the offended party that has created a high degree of
confidence between them, which the respondents abused.
At this point, it needs stressing that the RTC Judge based his conclusion that there was no probable
cause simply on the insufficiency of the allegations in the Informations concerning the facts
constitutive of the elements of the offense charged. This, therefore, makes the issue of sufficiency of
the allegations in the Informations the focal point of discussion.
Qualified Theft, as defined and punished under Article 310 of the Revised Penal Code, is
committed as follows,viz.:
ART. 310. Qualified Theft.— The crime of theft shall be punished
by the penalties next higher by two degrees than those respectively
specified in the next preceding article, if committed by a domestic
servant, or with grave abuse of confidence, or if the property stolen is motor
vehicle, mail matter or large cattle or consists of coconuts taken from the
premises of a plantation, fish taken from a fishpond or fishery or if property
is taken on the occasion of fire, earthquake, typhoon, volcanic eruption, or
any other calamity, vehicular accident or civil disturbance. (Emphasis
supplied.) HcaDIA
Theft, as defined in Article 308 of the Revised Penal Code, requires the physical taking
of another's property without violence or intimidation against persons or force upon things. The
elements of the crime under this Article are:
1. Intent to gain;
2. Unlawful taking;
3. Personal property belonging to another;
4. Absence of violence or intimidation against persons or force
upon things.
To fall under the crime of Qualified Theft, the following elements must concur:
1. Taking of personal property;
2. That the said property belongs to another;
3. That the said taking be done with intent to gain;
4. That it be done without the owner's consent;
5. That it be accomplished without the use of violence or
intimidation against persons, nor of force upon things;
6. That it be done with grave abuse of confidence.
 On the sufficiency of the Information, Section 6, Rule 110 of the Rules of Court
requires, inter alia, that the information must state the acts or omissions complained of as
constitutive of the offense.
On the manner of how the Information should be worded, Section 9, Rule 110 of the
Rules of Court, is enlightening:
Section 9. Cause of the accusation.— The acts or omissions
complained of as constituting the offense and the qualifying and
aggravating circumstances must be stated in ordinary and concise language
and not necessarily in the language used in the statute but in terms sufficient
to enable a person of common understanding to know what offense is being
charged as well as its qualifying and aggravating circumstances and for the
court to pronounce judgment.
It is evident that the Information need not use the exact language of the statute in
alleging the acts or omissions complained of as constituting the offense. The test is whether it
enables a person of common understanding to know the charge against him, and the court to
render judgment properly. 5
The portion of the Information relevant to this discussion reads: HcTSDa
[A]bove-named [respondents],conspiring, confederating, and
helping one another, with grave abuse of confidence, being the Cashier and
Bookkeeper of the Rural Bank of Pototan, Inc.,Pototan, Iloilo, without the
knowledge and/or consent of the management of the Bank ....
It is beyond doubt that tellers, Cashiers, Bookkeepers and other employees of a Bank
who come into possession of the monies deposited therein enjoy the confidence reposed in them
by their employer. Banks, on the other hand, where monies are deposited, are considered the
owners thereof. This is very clear not only from the express provisions of the law, but from
established jurisprudence. The relationship between banks and depositors has been held to be
that of creditor and debtor. Articles 1953 and 1980 of the New Civil Code, as appropriately pointed
out by petitioner, provide as follows:
Article 1953. A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay to the
creditor an equal amount of the same kind and quality.
Article 1980. Fixed, savings, and current deposits of money in
banks and similar institutions shall be governed by the provisions concerning
loan.
In a long line of cases involving Qualified Theft, this Court has firmly established the
nature of possession by the Bank of the money deposits therein, and the duties being performed
by its employees who have custody of the money or have come into possession of it. The Court has
consistently considered the allegations in the Information that such employees acted with grave
abuse of confidence, to the damage and prejudice of the Bank, without particularly referring to it
as owner of the money deposits, as sufficient to make out a case of Qualified Theft. For a graphic
illustration, we cite Roque v. People, 6 where the accused teller was convicted for Qualified Theft
based on this Information:
That on or about the 16th day of November, 1989, in the
municipality of Floridablanca, province of Pampanga, Philippines and within
the jurisdiction of his Honorable Court, the above-named accused
ASUNCION GALANG ROQUE, being then employed as teller of the Basa Air
Base Savings and Loan Association Inc. (BABSLA) with office address at
Basa Air Base, Floridablanca, Pampanga, and as such was authorized and
reposed with the responsibility to receive and collect capital contributions
from its member/contributors of said corporation, and having collected and
received in her capacity as teller of the BABSLA the sum of TEN THOUSAND
PESOS (P10,000.00),said accused, with intent of gain, with grave abuse of
confidence and without the knowledge and consent of said
corporation, did then and there willfully, unlawfully and feloniously take,
steal and carry away the amount of P10,000.00, Philippine currency, by
making it appear that a certain depositor by the name of Antonio Salazar
withdrew from his Savings Account No. 1359, when in truth and in fact said
Antonio Salazar did not withdr[a]w the said amount of P10,000.00 to the
damage and prejudice of BABSLA in the total amount of P10,000.00,
Philippine currency. aEcHCD
In convicting the therein appellant, the Court held that:
[S]ince the teller occupies a position of confidence, and the bank
places money in the teller's possession due to the confidence reposed on the
teller, the felony of qualified theft would be committed. 7
Also in People v. Sison, 8 the Branch Operations Officer was convicted of the crime of
Qualified Theft based on the Information as herein cited:
That in or about and during the period compressed between
January 24, 1992 and February 13, 1992, both dates inclusive, in the City of
Manila, Philippines, the said accused did then and there wilfully, unlawfully
and feloniously, with intent of gain and without the knowledge and consent
of the owner thereof, take, steal and carry away the following, to wit:
Cash money amounting to P6,000,000.00 in different
denominations belonging to the PHILIPPINE COMMERCIAL
INTERNATIONAL BANK (PCIBank for brevity),Luneta Branch, Manila
represented by its Branch Manager, HELEN U. FARGAS, to the damage and
prejudice of the said owner in the aforesaid amount of P6,000,000.00,
Philippine Currency.
That in the commission of the said offense, herein accused acted
with grave abuse of confidence and unfaithfulness, he being the Branch
Operation Officer of the said complainant and as such he had free access to
the place where the said amount of money was kept.
The judgment of conviction elaborated thus:
The crime perpetuated by appellant against his employer, the
Philippine Commercial and Industrial Bank (PCIB),is Qualified Theft.
Appellant could not have committed the crime had he not been holding the
position of Luneta Branch Operation Officer which gave him not only sole
access to the bank vault ....The management of the PCIB reposed its trust
and confidence in the appellant as its Luneta Branch Operation Officer, and
it was this trust and confidence which he exploited to enrich himself to the
damage and prejudice of PCIB .... 9 cCTAIE
From another end, People v. Locson, 10 in addition to People v. Sison, described the
nature of possession by the Bank. The money in this case was in the possession of the defendant
as receiving teller of the bank, and the possession of the defendant was the possession of the
Bank. The Court held therein that when the defendant, with grave abuse of confidence, removed
the money and appropriated it to his own use without the consent of the Bank, there was taking as
contemplated in the crime of Qualified Theft. 11
Conspicuously, in all of the foregoing cases, where the Informations merely alleged the
positions of the respondents; that the crime was committed with grave abuse of confidence, with
intent to gain and without the knowledge and consent of the Bank, without necessarily stating the SO ORDERED.
phrase being assiduously insisted upon by respondents, "of a relation by reason of dependence,
guardianship or vigilance, between the respondents and the offended party that has created a Ynares-Santiago, Austria-Martinez, Reyes and Leonardo-de Castro, * JJ.,
high degree of confidence between them, which respondents abused," 12 and without employing ||| (People v. Puig, G.R. Nos. 173654-765, [August 28, 2008], 585 PHIL 555-568)
the word "owner" in lieu of the "Bank" were considered to have satisfied the test of sufficiency of
allegations.
As regards the respondents who were employed as Cashier and Bookkeeper of the
Bank in this case, there is even no reason to quibble on the allegation in the Informations that they
acted with grave abuse of confidence. In fact, the Information which alleged grave abuse of
confidence by accused herein is even more precise, as this is exactly the requirement of the law in
qualifying the crime of Theft.
In summary, the Bank acquires ownership of the money deposited by its clients; and the
employees of the Bank, who are entrusted with the possession of money of the Bank due to the
confidence reposed in them, occupy positions of confidence. The Informations, therefore,
sufficiently allege all the essential elements constituting the crime of Qualified Theft.
On the theory of the defense that the DOJ is the principal party who may file the instant
petition, the ruling inMobilia Products, Inc. v. Hajime Umezawa 13 is instructive. The Court thus
enunciated: CacTIE
In a criminal case in which the offended party is the State, the
interest of the private complainant or the offended party is limited to the
civil liability arising therefrom. Hence, if a criminal case is dismissed by the
trial court or if there is an acquittal, a reconsideration of the order of
dismissal or acquittal may be undertaken, whenever legally feasible, insofar
as the criminal aspect thereof is concerned and may be made only by the
public prosecutor; or in the case of an appeal, by the State only, through the
OSG. ....
On the alleged wrong mode of appeal by petitioner, suffice it to state that the rule is
well-settled that in appeals by certiorari under Rule 45 of the Rules of Court, only errors of law may
be raised, 14 and herein petitioner certainly raised a question of law.
As an aside, even if we go beyond the allegations of the Informations in these cases, a
closer look at the records of the preliminary investigation conducted will show that, indeed,
probable cause exists for the indictment of herein respondents. Pursuant to Section 6, Rule 112 of
the Rules of Court, the judge shall issue a warrant of arrest only upon a finding of probable cause
after personally evaluating the resolution of the prosecutor and its supporting evidence. Soliven v.
Makasiar, 15 as reiterated in Allado v. Driokno, 16 explained that probable cause for the issuance
of a warrant of arrest is the existence of such facts and circumstances that would lead a reasonably
discreet and prudent person to believe that an offense has been committed by the person sought
to be arrested. 17The records reasonably indicate that the respondents may have, indeed,
committed the offense charged.
Before closing, let it be stated that while it is truly imperative upon the fiscal or the
judge, as the case may be, to relieve the respondents from the pain of going through a trial once it
is ascertained that no probable cause exists to form a sufficient belief as to the guilt of the
respondents, conversely, it is also equally imperative upon the judge to proceed with the case
upon a showing that there is a prima facie case against the respondents.
WHEREFORE, premises considered, the Petition for Review on Certiorari is hereby
GRANTED. The Orders dated 30 January 2006 and 9 June 2006 of the RTC dismissing Criminal
Cases No. 05-3054 to 05-3165 are REVERSED and SET ASIDE. Let the corresponding Warrants of
Arrest issue against herein respondents TERESITA PUIG and ROMEO PORRAS. The RTC Judge of
Branch 68, in Dumangas, Iloilo, is directed to proceed with the trial of Criminal Cases No. 05-3054
to 05-3165, inclusive, with reasonable dispatch. No pronouncement as to costs. CDEaAI