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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-7593 March 27, 1913

THE UNITED STATES,plaintiff-appellee,vs.OSE M. IGPUARA,defendant-appellant.

W. A. Kincaid, Thos. L. Hartigan, and Jose Robles Lahesa for appellant.

Office of the Solicitor-General Hare! for appellee.

ARELLANO, C.J.:

The defendant therein is chared !ith the cri"e of estafa, for havin s!indled #uana Montillaand Euenio $erauth out of P%,&'( Philippine currenc), !hich he had ta*e on deposit fro" thefor"er to be at the latter+s disposal. The docu"ent settin forth the obliation reads:

e hold at the disposal of Euenio $erauth the su" of t!o thousand four hundred and ninet)-eiht pesos P%,&'(, the balance fro" #uana Montilla+s suar. / 0loilo, #une %1, 2'22, / #ose0puara, for Ra"ire3 and Co.

The Court of 4irst 0nstance of 0loilo sentenced the defendant to t!o )ears of presidiocorreccional, to pa) #uana Montilla P%,&'( Philippine currenc), and in case of insolvenc) tosubsidiar) i"prison"ent at P%.56 per da), not to e7ceed one-third of the principal penalt), and

the costs.

The defendant appealed, allein as errors: 2 8oldin that the docu"ent e7ecuted b) hi" !asa certificate of deposit9 % holdin the e7istence of a deposit, !ithout precedent transfer ordeliver) of the P%,&'(9 and classif)in the facts in the case as the cri"e of estafa.

A deposit is constituted fro" the ti"e a person receives a thin belonin to another !iththe obliation of *eepin and returnin it. Art. 2;5(, Civil Code.

That the defendant received P%,&'( is a fact proven. The defendant dre! up a docu"entdeclarin that the) re"ained in his possession, !hich he could not have said had he not

received the". The) re"ained in his possession, surel) in no other sense than to ta*e care ofthe", for the! re"ainedhas no other purpose. The) re"ained in the defendant+s possession atthe disposal of $erauth9 but on Auust % of the sa"e )ear $erauth de"anded for hi" throuha notarial instru"ent restitution of the", and to date he has not restored the".

The appellant sa)s:


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Then, after averrin the true facts: 2 that a sales co""ission !as precedent9 % that thisco""ission !as settled !ith a balance of P%,&'( in favor of the principal, #uana Montilla9 and that this balance re"ained in the possession of the defendant, !ho dre! up an instru"entpa)able on de"and, he has dra!n t!o conclusions, both erroneous: =ne, that the instru"entdra!n up in the for" of a depositcertificate could be indorsed or neotiated li*e an) otherco""ercial instru"ent9 and the other, that the su" of P%,&'( re"ained in defendant+spossession as a loan.

0t is erroneous to assert that the certificate of depositin >uestion is neotiable li*e an) otherco""ercial instru"ent: 4irst, because ever) co""ercial instru"ent is not neotiable9 andsecond, because onl) instru"ents pa)able to order are neotiable. 8ence, this instru"ent notbein to order but to bearer, it is not neotiable.

0t is also erroneous to assert that su" of "one) set forth in said certificate is, accordin to it, inthe defendant+s possession as a loan. 0n a loan the lender trans"its to the borro!er the use ofthe thin lent, !hile in a deposit the use of the thin is not trans"itted, but "erel) possession forits custod) or safe-*eepin.

0n order that the depositar) "a) use or dispose oft he thins deposited, the depositor+s consentis re>uired, and then:

The rihts and obliations of the depositar) and of the depositor shall cease, and therules and provisions applicable to co""ercial loans, co""ission, or contract !hich too*the place of the deposit shall be observed. Art. 6', Code of Co""erce.

The defendant has sho!n no authori3ation !hatsoever or the consent of the depositar) for usinor disposin of the P%,&'(, !hich the certificate ac*no!ledes, or an) contract entered into !iththe depositor to convert the deposit into a loan, co""ission, or other contract.

That de"and !as not "ade for restitution of the su" deposited, !hich could have been clai"edon the sa"e or the ne7t da) after the certificate !as sined, does not operate aainst thedepositor, or sinif) an)thin e7cept the intention not to press it. 4ailure to clai" at once or dela)for so"eti"e in de"andin restitution of the thins deposited, !hich !as i""ediatel) due, doesnot i"pl) such per"ission to use the thin deposited as !ould convert the deposit into a loan.

Article &6( of the Code of Co""erce of 2(%', previous to the one no! in force, provided:

The depositar) of an a"ount of "one) cannot use the a"ount, and if he "a*es use of it,he shall be responsible for all da"aes that "a) accrue and shall respond to the

depositor for the leal interest on the a"ount.

hereupon the co""entators sa):

0n this case the deposit beco"es in fact a loan, as a ?ust punish"ent i"posed upon hi"!ho abuses the sacred nature of a deposit and as a "eans of preventin the desire ofain fro" leadin hi" into speculations that "a) be disastrous to the depositor, !ho is"uch better secured !hile the deposit e7ists !hen he onl) has a personal action forrecover).

Accordin to article 5&(, No. 5, of the Penal Code, those !ho to the pre?udice of anotherappropriate or abstract for their o!n use "one), oods, or other personal propert) !hichthe) "a) have received as a deposit, on co""ission, or for ad"inistration, or for an)other purpose !hich produces the obliation of deliverin it or returnin it, and den)


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havin received it, shall suffer the penalt) of the precedin article,< !hich punishes suchact as the cri"e of estafa. The correspondin article of the Penal Code of the Philippinesin 55, No. 5.

0n a decision of an appeal, @epte"ber %(, 2('5, the principle !as laid do!n that:


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The defendant therein is chared !ith the cri"e of estafa, for havin s!indled #uana Montilla andEuenio $erauth out of P%,&'( Philippine currenc), !hich he had ta*e on deposit fro" the for"er tobe at the latter+s disposal. The docu"ent settin forth the obliation reads:

e hold at the disposal of Euenio $erauth the su" of t!o thousand four hundred and ninet)-eihtpesos P%,&'(, the balance fro" #uana Montilla+s suar. / 0loilo, #une %1, 2'22, / #ose 0puara, for

Ra"ire3 and Co.

The Court of 4irst 0nstance of 0loilo sentenced the defendant to t!o )ears of presidio correccional, topa) #uana Montilla P%,&'( Philippine currenc), and in case of insolvenc) to subsidiar) i"prison"entat P%.56 per da), not to e7ceed one-third of the principal penalt), and the costs.

The defendant appealed, allein as errors: 2 8oldin that the docu"ent e7ecuted b) hi" !as acertificate of deposit9 % holdin the e7istence of a deposit, !ithout precedent transfer or deliver) ofthe P%,&'(9 and classif)in the facts in the case as the cri"e of estafa.

ISSUEMa) he use the thin depositedD

HELDN=.

RATIO

The appellant sa)s: uired, and then:

The rihts and obliations of the depositar) and of the depositor shall cease, and the rules and

provisions applicable to co""ercial loans, co""ission, or contract !hich too* the place of thedeposit shall be observed. Art. 6', Code of Co""erce.


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The defendant has sho!n no authori3ation !hatsoever or the consent of the depositar) for usin ordisposin of the P%,&'(, !hich the certificate ac*no!ledes, or an) contract entered into !ith thedepositor to convert the deposit into a loan, co""ission, or other contract.

That de"and !as not "ade for restitution of the su" deposited, !hich could have been clai"ed onthe sa"e or the ne7t da) after the certificate !as sined, does not operate aainst the depositor, orsinif) an)thin e7cept the intention not to press it. 4ailure to clai" at once or dela) for so"eti"e inde"andin restitution of the thins deposited, !hich !as i""ediatel) due, does not i"pl) suchper"ission to use the thin deposited as !ould convert the deposit into a loan.

Article &6( of the Code of Co""erce of 2(%', previous to the one no! in force, provided:

The depositar) of an a"ount of "one) cannot use the a"ount, and if he "a*es use of it, he shall beresponsible for all da"aes that "a) accrue and shall respond to the depositor for the leal interest

on the a"ount.

hereupon the co""entators sa):

0n this case the deposit beco"es in fact a loan, as a ?ust punish"ent i"posed upon hi" !ho abusesthe sacred nature of a deposit and as a "eans of preventin the desire of ain fro" leadin hi" intospeculations that "a) be disastrous to the depositor, !ho is "uch better secured !hile the deposite7ists !hen he onl) has a personal action for recover).

Accordin to article 5&(, No. 5, of the Penal Code, those !ho to the pre?udice of another appropriateor abstract for their o!n use "one), oods, or other personal propert) !hich the) "a) have receivedas a deposit, on co""ission, or for ad"inistration, or for an) other purpose !hich produces theobliation of deliverin it or returnin it, and den) havin received it, shall suffer the penalt) of theprecedin article,< !hich punishes such act as the cri"e of estafa. The correspondin article of thePenal Code of the Philippines in 55, No. 5.

0n a decision of an appeal, @epte"ber %(, 2('5, the principle !as laid do!n that:


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=n the contrar), it is entirel) probable that, after the departure of the defendant fro" ib"anan on@epte"ber %6, 2('(, t!o da)s after the uprisin of the civil uard in Nueva Caceres, the rice !assei3ed b) the revolutionalists and appropriated to their o!n uses.

0n this connection it !as held that failure to return the thin deposited !as not sufficient, but that it !asnecessar) to prove that the depositar) had appropriated it to hi"self or diverted the deposit to his o!n

or another+s benefit. 8e !as accused or refusin to restore, and it !as held that the code does notpenali3e refusal to restore but denial of havin received. @o "uch for the cri"e of o"ission9 no! !ithreference to the cri"e of co""ission, it !as not held in that decision that appropriation or diversion ofthe thin deposited !ould not constitute the cri"e of estafa.

0n the second of said decisions, the accused


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not actuall) deposited !ith the defendant C=MTR@T because bein cashcurrenc), it cannot b) la! be deposited !ith plaintiffs dollar account anddefendant+s onl) obliation is to return the sa"e to plaintiff upon de"and9

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5. =rderin defendant C=MTR@T to pa) plaintiff in the a"ount of P(,666.66 asda"aes in the concept of litiation e7penses and attorne)+s fees suffered b)plaintiff as a result of the failure of the defendant ban* to restore to his plaintiffsaccount the a"ount of .@. I2,666.66 and to return to hi" plaintiff the [email protected],666.66 cash left for safe*eepin.

Costs aainst defendant C=MTR@T.

@= =RERE. FRollo, pp. &;-&(.G

ndaunted, the ban* co"es to this Court pra)in that it be totall) absolved fro" an) liabilit) to

shornac*. The latter not havin appealed the Court of Appeals decision, the issues facin thisCourt are li"ited to the ban*+s liabilit) !ith reard to the first and second causes of action and itsliabilit) for da"aes.

2. e first consider the first cause of action, =n the dates "aterial to this case, Ri3ald)shornac* and his !ife, @hirle) Horospe, "aintained in C=MTR@T, Jue3on Cit) Branch, adollar savins account and a peso current account.

=n =ctober %;, 2';5, an application for a dollar draft !as acco"plished b) $irilio $. Harcia,Assistant Branch Manaer of C=MTR@T Jue3on Cit), pa)able to a certain eoviilda . i3onin the a"ount of I2,666.66. 0n the application, Harcia indicated that the a"ount !as to bechared to ollar @avins Acct. No. %5-&26', the savins account of the shornac*s9 the

chares for co""ission, docu"entar) sta"p ta7 and others totallin P2;.&1 !ere to be charedto Current Acct. No. %26&15-%', aain, the current account of the shornac*s. There !as noindication of the na"e of the purchaser of the dollar draft.

=n the sa"e date, =ctober %;,2';5, C=MTR@T, under the sinature of $irilio $. Harcia,issued a chec* pa)able to the order of eoviilda . i3on in the su" of @ I2,666 dra!n on theChase Manhattan Ban*, Ne! Kor*, !ith an indication that it !as to be chared to ollar @avinsAcct. No. %5-&26'.

hen shornac* noticed the !ithdra!al of @I2,666.66 fro" his account, he de"anded ane7planation fro" the ban*. 0n ans!er, C=MTR@T clai"ed that the peso value of the !ithdra!al!as iven to Att). Ernesto shornac*, #r., brother of Ri3ald), on =ctober %;, 2';5 !hen he

Ernesto encashed !ith C=MTR@T a cashier+s chec* for P(,&56.66 issued b) the ManilaBan*in Corporation pa)able to Ernesto.

pon consideration of the foreoin facts, this Court finds no reason to disturb the rulin of boththe trial court and the Appellate Court on the first cause of action. Petitioner "ust be held liablefor the unauthori3ed !ithdra!al of @I2,666.66 fro" private respondent+s dollar account.

0n its desperate atte"pt to ?ustif) its act of !ithdra!in fro" its depositor+s savins account, theban* has adopted inconsistent theories. 4irst, it still "aintains that the peso value of the a"ount!ithdra!n !as iven to Att). Ernesto shornac*, #r. !hen the latter encashed the Manilaban*Cashier+s Chec*. At the sa"e ti"e, the ban* clai"s that the !ithdra!al !as "ade pursuant to anaree"ent !here shornac* alleedl) authori3ed the ban* to !ithdra! fro" his dollar savins

account such a"ount !hich, !hen converted to pesos, !ould be needed to fund his peso current


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account. 0f indeed the peso e>uivalent of the a"ount !ithdra!n fro" the dollar account !ascredited to the peso current account, !h) did the ban* still have to pa) ErnestoD

At an) rate, both e7planations are unavailin. ith reard to the first e7planation, petitioner ban*has not sho!n ho! the transaction involvin the cashier+s chec* is related to the transactioninvolvin the dollar draft in favor of i3on financed b) the !ithdra!al fro" Ri3ald)+s dollaraccount. The t!o transactions appear entirel) independent of each other. Moreover, Ernestoshornac*, #r., possesses a personalit) distinct and separate fro" Ri3ald) shornac*. Pa)"ent"ade to Ernesto cannot be considered pa)"ent to Ri3ald).

As to the second e7planation, even if !e assu"e that there !as such an aree"ent, theevidence do not sho! that the !ithdra!al !as "ade pursuant to it. 0nstead, the record revealsthat the a"ount !ithdra!n !as used to finance a dollar draft in favor of eoviilda . i3on, andnot to fund the current account of the shornac*s. There is no proof !hatsoever that pesoCurrent Account No. %26-&15-%' !as ever credited !ith the peso e>uivalent of the @I2,666.66!ithdra!n on =ctober %;, 2';5 fro" ollar @avins Account No. %5-&26'.

%. As for the second cause of action, the co"plaint filed !ith the trial court alleed that onece"ber (, 2';5, shornac* entrusted to C=MTR@T, thru Harcia, @I,666.66cash popularl) *no!n as reenbac*s forsafe(eeping, and that the aree"ent !ase"bodied in a docu"ent, a cop) of !hich !as attached to and "ade part of the co"plaint. Thedocu"ent reads:

Ma*ati Cable Address:

Philippines


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0=$.HARC0A

0t !as also alleed in the co"plaint that despite de"ands, the ban* refused to return the "one).

0n its ans!er, C=MTR@T averred that the @I,666 !as credited to shornac*+s peso currentaccount at prevailin conversion rates.

0t "ust be e"phasi3ed that C=MTR@T did not den) specificall) under oath the authenticit) anddue e7ecution of the above instru"ent.

urin trial, it !as established that on ece"ber (, 2';5 shornac* indeed delivered to the ban*@ I,666 for safe*eepin. hen he re>uested the return of the "one) on Ma) 26, 2';1,C=MTR@T e7plained that the su" !as disposed of in this "anner: @I%,666.66 !as sold on

ece"ber %', 2';5 and the peso proceeds a"ountin to P2&,'%6.66 !ere deposited toshornac*+s current account per deposit slip acco"plished b) Harcia9 the re"ainin@I2,666.66 !as sold on 4ebruar) , 2';1 and the peso proceeds a"ountin to P(,56.66!ere deposited to his current account per deposit slip also acco"plished b) Harcia.

Aside fro" assertin that the @I,666.66 !as properl) credited to shornac*+s current accountat prevailin conversion rates, BP0 no! posits another round to defeat private respondent+sclai". 0t no! arues that the contract e"bodied in the docu"ent is the contract of depositu" asdefined in Article 2'1%, Ne! Civil Code, !hich ban*s do not enter into. The ban* allees thatHarcia e7ceeded his po!ers !hen he entered into the transaction. 8ence, it is clai"ed, the ban*cannot be liable under the contract, and the obliation is purel) personal to Harcia.

Before !e o into the nature of the contract entered into, an i"portant point !hich arises on thepleadins, "ust be considered.

The second cause of action is based on a docu"ent purportin to be sined b) C=MTR@T, acop) of !hich docu"ent !as attached to the co"plaint. 0n short, the second cause of action !asbased on an actionable docu"ent. 0t !as therefore incu"bent upon the ban* to specificall) den)under oath the due e7ecution of the docu"ent, as prescribed under Rule (, @ection (, if itdesired: 2 to >uestion the authorit) of Harcia to bind the corporation9 and % to den) itscapacit) to enter into such contract. F@ee, E.B. Merchant v. 0nternational Ban*in Corporation, 1Phil. 2& 2'61.G No s!orn ans!er den)in the due e7ecution of the docu"ent in >uestion, or>uestionin the authorit) of Harcia to bind the ban*, or den)in the ban*+s capacit) to enter intothe contract, !as ever filed. 8ence, the ban* is dee"ed to have ad"itted not onl) Harcia+sauthorit), but also the ban*+s po!er, to enter into the contract in >uestion.

0n the past, this Court had occasion to e7plain the reason behind this procedural re>uire"ent.

The reason for the rule enunciated in the foreoin authorities !ill, !e thin*, bereadil) appreciated. 0n dealin !ith corporations the public at lare is bound torel) to a lare e7tent upon out!ard appearances. 0f a "an is found actin for acorporation !ith the e7ternal indicia of authorit), an) person, not havin notice of!ant of authorit), "a) usuall) rel) upon those appearances9 and if it be foundthat the directors had per"itted the aent to e7ercise that authorit) and thereb)held hi" out as a person co"petent to bind the corporation, or had ac>uiesced ina contract and retained the benefit supposed to have been conferred b) it, thecorporation !ill be bound, not!ithstandin the actual authorit) "a) never havebeen ranted


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... hether a particular officer actuall) possesses the authorit) !hich he assu"esto e7ercise is fre>uentl) *no!n to ver) fe!, and the proof of it usuall) is notreadil) accessible to the straner !ho deals !ith the corporation on the faith ofthe ostensible authorit) e7ercised b) so"e of the corporate officers. 0t is thereforereasonable, in a case !here an officer of a corporation has "ade a contract in itsna"e, that the corporation should be re>uired, if it denies his authorit), to state

such defense in its ans!er. B) this "eans the plaintiff is apprised of the fact thatthe aent+s authorit) is contested9 and he is iven an opportunit) to adduceevidence sho!in either that the authorit) e7isted or that the contract !as ratifiedand approved. FRa"ire3 v. =rientalist Co. and 4ernande3, ( Phil. 1&, 1&5- 1&12'2(.G

Petitioner+s aru"ent "ust also be re?ected for another reason. The practical effect of absolvina corporation fro" liabilit) ever) ti"e an officer enters into a contract !hich is be)ond corporatepo!ers, even !ithout the proper alleation or proof that the corporation has not authori3ed norratified the officer+s act, is to cast corporations in so perfect a "old that transressions and!rons b) such artificial beins beco"e i"possible FBissell v. Michian @outhern and N.0.R. Cos%% N.K %5( 2(16.G uences, includin itsenforceabilit).

The docu"ent !hich e"bodies the contract states that the @I,666.66 !as received b) theban* for safe*eepin. The subse>uent acts of the parties also sho! that the intent of the parties!as reall) for the ban* to safel) *eep the dollars and to return it to shornac* at a later ti"e,

Thus, shornac* de"anded the return of the "one) on Ma) 26, 2';1, or over five "onths later.

The above arrane"ent is that contract defined under Article 2'1%, Ne! Civil Code, !hich reads:

Art. 2'1%. A deposit is constituted fro" the "o"ent a person receives a thinbelonin to another, !ith the obliation of safel) *eepin it and of returnin thesa"e. 0f the safe*eepin of the thin delivered is not the principal purpose of thecontract, there is no deposit but so"e other contract.

Note that the ob?ect of the contract bet!een shornac* and C=MTR@T !as forein e7chane.8ence, the transaction !as covered b) Central Ban* Circular No. %6, Restrictions on Hold and4orein E7chane Transactions, pro"ulated on ece"ber ', 2'&', !hich !as in force at the

ti"e the parties entered into the transaction involved in this case. The circular provides:

777 777 777

%. Transactionsin the assets described belo! and all dealins in the" of!hatever nature, includin, !here applicable their e7portation andi"portation, shall *OT be effected, e7cept !ith respect to deposit accountsincluded in sub-pararaphs b and c of this pararaph, !hen such depositaccounts are o!ned b) and in the na"e of, ban*s.

a An) and all assets, provided the) are held throuh, in, or !ithban*s or ban*in institutions located in the Philippines,includin "one!, chec*s, drafts, bullions ban* drafts, depositaccounts de"and, ti"e and savins, all debts, indebtedness or


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obliations, financial bro*ers and invest"ent houses, notes,debentures, stoc*s, bonds, coupons, ban* acceptances,"ortaes, pledes, liens or other rihts in the nature ofsecurit), e+pressed in foreign crrencies, or if pa)able abroad,irrespective of the currenc) in !hich the) are e7pressed, andbelonin to an) person, fir", partnership, association, branch

office, aenc), co"pan) or other unincorporated bod) orcorporation residin or located !ithin the Philippines9

b An) and all assets of the *inds included andor described insubpararaph a above, !hether or not held throuh, in, or !ithban*s or ban*in institutions, and e7istent !ithin the Philippines,!hich belon to an) person, fir", partnership, association, branchoffice, aenc), co"pan) or other unincorporated bod) orcorporation not residin or located !ithin the Philippines9

c An) and all assets e7istent !ithin the Philippines includin"one), chec*s, drafts, bullions, ban* drafts, all debts,

indebtedness or obliations, financial securities co""onl) dealt inb) ban*ers, bro*ers and invest"ent houses, notes, debentures,stoc*, bonds, coupons, ban* acceptances, "ortaes, pledes,liens or other rihts in the nature of securit) e7pressed in foreincurrencies, or if pa)able abroad, irrespective of the currenc) in!hich the) are e7pressed, and belonin to an) person, fir",partnership, association, branch office, aenc), co"pan) or otherunincorporated bod) or corporation residin or located !ithin thePhilippines.

777 777 777

&. aAll receipts of foreign e+change shall be sold dail! to theentral an(b)those authori3ed to deal in forein e7chane. All receipts of forein e7chane b)an) person, fir", partnership, association, branch office, aenc), co"pan) orother unincorporated bod) or corporation shall be sold to the authori3ed aents ofthe Central Ban* b) the recipients %ithin one bsiness da! follo%ing the receiptof sch foreign e+change. An) person, fir", partnership, association, branchoffice, aenc), co"pan) or other unincorporated bod) or corporation, residin orlocated !ithin the Philippines, !ho ac>uires on and after the date of this Circularforein e7chane shall not, unless licensed b) the Central Ban*, dispose of suchforein e7chane in !hole or in part, nor receive less than its full value, nor dela)ta*in o!nership thereof e7cept as such dela) is custo"ar)9 Provided, further,That !ithin one da) upon ta*in o!nership, or receivin pa)"ent, of forein

e7chane the afore"entioned persons and entities shall sell such foreine7chane to desinated aents of the Central Ban*.

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(. @trict observance of the provisions of this Circular is en?oined9 and an) person,fir" or corporation, forein or do"estic, !ho bein bound to the observancethereof, or of such other rules, reulations or directives as "a) hereafter beissued in i"ple"entation of this Circular, shall fail or refuse to co"pl) !ith, orabide b), or shall violate the sa"e, shall be sb/ect to the penal sanctionsproided in the entral an( Act.

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Pararaph & a above !as "odified b) @ection 1 of Central Ban* Circular No. %(2, Reulationson 4orein E7chane, pro"ulated on Nove"ber %1, 2'1' b) li"itin its coverae to Philippineresidents onl). @ection 1 provides:

@EC. 1. All receipts of forein e7chane b) an) residentperson, fir", co"pan) orcorporation shall be sold to authori3ed aents of the Central Ban* b) therecipients !ithin one business da) follo!in the receipt of such forein e7chane.An) residentperson, fir", co"pan) or corporation residing or located %ithin the#hilippines, !ho ac>uires forein e7chane shall not, unless authori3ed b) theCentral Ban*, dispose of such forein e7chane in !hole or in part, nor receiveless than its full value, nor dela) ta*in o!nership thereof e7cept as such dela) iscusto"ar)9 Provided, That, !ithin one business da) upon ta*in o!nership orreceivin pa)"ent of forein e7chane the afore"entioned persons and entitiesshall sell such forein e7chane to the authori3ed aents of the Central Ban*.

As earlier stated, the docu"ent and the subse>uent acts of the parties sho! that the) intendedthe ban* to safe*eep the forein e7chane, and return it later to shornac*, !ho alleed in hisco"plaint that he is a Philippine resident. The parties did not intended to sell the @ dollars to

the Central Ban* !ithin one business da) fro" receipt. =ther!ise, the contractof deposit"!ould never have been entered into at all.

@ince the "ere safe*eepin of the reenbac*s, !ithout sellin the" to the Central Ban* !ithinone business da) fro" receipt, is a transaction !hich is not authori3ed b) CB Circular No. %6, it"ust be considered as one !hich falls under the eneral class of prohibited transactions. 8ence,pursuant to Article 5 of the Civil Code, it is void, havin been e7ecuted aainst the provisions of a"andator)prohibitor) la!. More i"portantl), it affords neither of the parties a cause of actionaainst the other.


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C=RTE@, #:

+ac#&

Ri3ald) T. shornac* and his !ife "aintained in C=MTR@T a dollar savins account and a pesocurrent account. An application for a dollar drat !as acco"plished b) $irillo Harcia branch "anaer

of C=MTR@T pa)able to a certain eoviilda i3on. 0n the PP0Ction, Harcia indicated that thea"ount !as to be chared to the dolar savins account of the shornac*s. There !asa no indicationof the na"e of the purchaser of the dollar draft. Co"trust issued a chec* pa)able to the order ofi3on. hen shornac* noticed the !ithdra!al fro" his account, he de"anded an e7plainaiton fro"the ban*. 0n its ans!er, Co"trust clai"ed that the peso value of the !ithdra!al !as iven to Att).Ernesto shornac*, brother of Ri3ald). hen he encashed !ith C=MTR@T a cashiers chec* forP(&56 issued b) the "anila ban*in corporation pa)able to Ernesto.

I&&*$ hether the contract bet!een petitioner and respondent ban* is a depositD

H$% The docu"ent !hich e"bodies the contract states that the @I,666.66 !as received b) theban* for safe*eepin. The subse>uent acts of the parties also sho! that the intent of the parties !asreall) for the ban* to safel) *eep the dollars and to return it to shornac* at a later ti"e. Thus,

shornac* de"anded the return of the "one) on Ma) 26, 2';1, or over five "onths later.

The above arrane"ent is that contract defined under Article 2'1%, Ne! Civil Code, !hich reads:Art. 2'1%. A deposit is constituted fro" the "o"ent a person receives a thin belonin to another,!ith the obliation of safel) *eepin it and of returnin the sa"e. 0f the safe*eepin of the thindelivered is not the principal purpose of the contract, there is no deposit but so"e other contract.

/PI '&. IAC G.R. No. 912 +$4r*ar 21, 19926Post undercase diests,Co""ercial a!atMonda), 4ebruar) %;, %62%Posted b) @chi3ophrenic Mind

+ac#& @pouses Arthur $ivienne Canlas opened a ?oint

account inCo""ercial Ban* Trust Co"p CBTC !ithinitial deposit of P%,%56. Arthur Canlas had an e7istinseparate personal account in the sa"e branch. ponopenin the ?oint account, the ne! accountsQ tellerpulled out for" the ban*s files the old ande7istinsinature card of Arthur Canlas, for 0 andreference. B) "ista*e, she placed the old personal

account nu"ber of Arthur Canlas on the deposit slip forthe ne! ?oint chec*in account of the spouses so thatthe initial deposit of P%,%56 for the ?oint chec*inaccount !as "iscredited to Arthur+s personal account.The spouses subse>uentl) deposited other a"ounts intheir ?oint account.

As a conse>uence, t!o chec*s !ere dishonored !hichthe Canlas had issued aainst their ?oint account. The
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ban* !as unable to contract the spouses because of a!ron address.

@pouses Canlas filed a co"plaint for da"aes aainstCBTC in C40 Pa"pana. urin the pendenc) of thecase, the Ban* of the Philippine 0slands BP0 and CBTC!ere "ered. As the survivin corporation under the"erer aree"ent and under @ection (6 5 of theCorporation Code of the Philippines, BP0 too* over theprosecution and defense of an) pendin clai"s, actions

or proceedins b) and aainst CBTC.

RTC Pa"pana rendered a decision aainst BP0,orderin the" to pa) actual da"aes P5,666, "oralda"aes P66,666, and e7e"plar) da"aesP256,666. =n appeal, the 0AC deleted the actualda"aes and reduced the other a!ards/actualda"aes P56,666, "oral da"aes P56,666 ande7e"plar) da"aes P56,666.

I&&*$ hether or not BP0 is uilt) of ross neliencein the handlin of the spouses Canlas ban* account.

H$% KE@. 0AC decision "odified b) deletin the a!ardof e7e"plar) da"aes.

The ban* is not e7pected to be infallible but it "ust bearthe bla"e for not discoverin the "ista*e of its tellerdespite the established procedure re>uirin the papersand ban* boo*s to pass throuh a batter) of ban*personnel !hose dut) it is to chec* and counterchec*the" for possible errors. Apparentl), the officials and

e"plo)ees tas*ed to do that did not perfor" their duties!ith due care, as "a) be athered fro" the testi"on) of


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the ban*+s lone !itness, Antonio Enciso, !ho casuall)declared that


16/77

0t is established in this case that the plaintiff is the trustee of a charitable be>uest "ade for theconstruction of a leper hospital and that father Austin de la PeSa !as the dul) authori3edrepresentative of the plaintiff to receive the leac). The defendant is the ad"inistrator of theestate of 4ather e la PeSa.

0n the )ear 2('( the boo*s 4ather e la PeSa, as trustee, sho!ed that he had on hand as suchtrustee the su" of P1,1&2, collected b) hi" for the charitable purposes aforesaid. 0n the sa"e)ear he deposited in his personal account P2',666 in the 8on*on and @hanhai Ban* at 0loilo.@hortl) thereafter and durin the !ar of the revolution, 4ather e la PeSa !as arrested b) the"ilitar) authorities as a political prisoner, and !hile thus detained "ade an order on said ban* infavor of the nited @tates Ar") officer under !hose chare he then !as for the su" thusdeposited in said ban*. The arrest of 4ather e la PeSa and the confiscation of the funds in theban* !ere the result of the clai" of the "ilitar) authorities that he !as an insurent and that thefunds thus deposited had been collected b) hi" for revolutionar) purposes. The "one) !asta*en fro" the ban* b) the "ilitar) authorities b) virtue of such order, !as confiscated andturned over to the Hovern"ent.

hile there is considerable dispute in the case over the >uestion !hether the P1,1&2 of trust

funds !as included in the P2',666 deposited as aforesaid, nevertheless, a careful e7a"ination ofthe case leads us to the conclusion that said trust funds !ere a part of the funds deposited and!hich !ere re"oved and confiscated b) the "ilitar) authorities of the nited @tates.

That branch of the la! *no!n in Enland and A"erica as the la! of trusts had no e7actcounterpart in the Ro"an la! and has none under the @panish la!. 0n this ?urisdiction, therefore,4ather e la PeSa+s liabilit) is deter"ined b) those portions of the Civil Code !hich relate toobliations. Boo* &, Title 2.

Althouh the Civil Code states that


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The court, therefore, finds and declares that the "one) !hich is the sub?ect "atter of this action!as deposited b) 4ather e la PeSa in the 8on*on and @hanhai Ban*in Corporation of0loilo9 that said "one) !as forcibl) ta*en fro" the ban* b) the ar"ed forces of the nited @tatesdurin the !ar of the insurrection9 and that said 4ather e la PeSa !as not responsible for itsloss.

The ?ud"ent is therefore reversed, and it is decreed that the plaintiff shall ta*e nothin b) hisco"plaint.

Arellano, .J., Torres and arson, JJ., concr.

S$)ara#$ O)"!"o!&

TRENT, J., dissentin:

0 dissent. Technicall) spea*in, !hether 4ather e la PeSa !as a trustee or an aent of theplaintiff his boo*s sho!ed that in 2('( he had in his possession as trustee or aent the su" ofP1,1&2 belonin to the plaintiff as the head of the church. This "one) !as then clothed !ith allthe i""unities and protection !ith !hich the la! see*s to invest trust funds. But !hen e laPeSa "i7ed this trust fund !ith his o!n and deposited the !hole in the ban* tohispersonal account or credit, he b) this act sta"ped on the said fund his o!n private "ar*s andunclothed it of all the protection it had. 0f this "one) had been deposited in the na"e of e laPeSa as trustee or aent of the plaintiff, 0 thin* that it "a) be presu"ed that the "ilitar)authorities !ould not have confiscated it for the reason that the) !ere loo*in for insurent fundsonl). Aain, the plaintiff had no reason to suppose that e la PeSa !ould atte"pt to strip the fund

of its identit), nor had he said or done an)thin !hich tended to relieve e la PeSa fro" the lealreponsibilit) !hich pertains to the care and custod) of trust funds.

The @upre"e Court of the nited @tates in the nited @tate vs. Tho"as (% . @., ;, at pae&, said: uestion. Juestions of thischaracter are not usuall) overned b) statutor) la!. The la! is to be found in the ver) nature ofthe trust itself, and, as a eneral rule, the courts sa) !hat facts are necessar) to hold the trusteeas a debtor.

0f e la PeSa, after depositin the trust fund in his personal account, had used this "one) for

speculative purposes, such as the bu)in and sellin of suar or other products of the countr),thereb) beco"in a debtor, there !ould have been no doubt as to the liabilit) of his estate.


18/77

hether he used this "one) for that purpose the record is silent, but it !ill be noted that aconsiderable lenth of ti"e intervened fro" the ti"e of the deposit until the funds !ereconfiscated b) the "ilitar) authorities. 0n fact the record sho!s that e la PeSa deposited on#une %;, 2('(, P5,%5', on #une %( of that )ear P,%(6, and on Auust 5 of the sa"e )earP1,666. The record also sho!s that these funds !ere !ithdra!n and aain deposited all toetheron the %'th of Ma), 2'66, this last deposit a"ountin to P2(,';6. These facts stronl) indicate

that e la PeSa had as a "atter of fact been usin the "one) in violation of the trust i"posed inhi". la%ph45.net

0f the doctrine announced in the "a?orit) opinion be follo!ed in cases hereafter arisin in this?urisdiction trust funds !ill be placed in precarious condition. The position of the trustee !ill ceaseto be one of trust.


Manila

T80R 0$0@0=N

G.R. No. 9;;27 March 3, 1993

CA AGRO-INDUSTRIAL DE


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respondent Ban*. 4or this purpose, both sined a contract of lease E7hibit uare "eter !hich, as petitioner alleed in its co"plaint, translates to aprofit of P266.66 per s>uare "eter or a total of P%(6,566.66 for the entire propert). Mrs. Ra"osde"anded the e7ecution of a deed of sale !hich necessaril) entailed the production of thecertificates of title. 0n vie! thereof, Auirre, acco"panied b) the Puaos, then proceeded to therespondent Ban* on & =ctober 2';' to open the safet) deposit bo7 and et the certificates oftitle. 8o!ever, !hen opened in the presence of the Ban*+s representative, the bo7 )ielded nosuch certificates. Because of the dela) in the reconstitution of the title, Mrs. Ra"os !ithdre! herearlier offer to purchase the lots9 as a conse>uence thereof, the petitioner alleedl) failed toreali3e the e7pected profit of P%(6,566.66. 8ence, the latter filed on 2 @epte"ber 2'(6 aco"plaint2for da"aes aainst the respondent Ban* !ith the Court of 4irst 0nstance no! ReionalTrial Court of Pasi, Metro Manila !hich doc*eted the sa"e as Civil Case No. ((%.

0n its Ans!er !ith Counterclai", 3respondent Ban* alleed that the petitioner has no cause of actionbecause of pararaphs 2 and 2& of the contract of lease E7hibit

0n due course, the trial court, no! desinated as Branch 212 of the Reional Trial Court RTC ofPasi, Metro Manila, rendered a decision5adverse to the petitioner on ( ece"ber 2'(1, thedispositive portion of !hich reads:

8ERE4=RE, pre"ises considered, ?ud"ent is hereb) rendered dis"issinplaintiff+s co"plaint.

=n defendant+s counterclai", ?ud"ent is hereb) rendered orderin plaintiff topa) defendant the a"ount of 40$E T8=@AN P5,666.66 PE@=@ asattorne)+s fees.

ith costs aainst plaintiff.

The unfavorable verdict is based on the trial court+s conclusion that under pararaphs 2 and 2&of the contract of lease, the Ban* has no liabilit) for the loss of the certificates of title. The courtdeclared that the said provisions are bindin on the parties.

0ts "otion for reconsideration7havin been denied, petitioner appealed fro" the adverse decision tothe respondent Court of Appeals !hich doc*eted the appeal as CA-H.R. C$ No. 25256. Petitionerured the respondent Court to reverse the challened decision because the trial court erred in aabsolvin the respondent Ban* fro" liabilit) fro" the loss, b not declarin as null and void, for bein


20/77

contrar) to la!, public order and public polic), the provisions in the contract for lease of the safet)deposit bo7 absolvin the Ban* fro" an) liabilit) for loss, c not concludin that in this ?urisdiction, as!ell as under A"erican ?urisprudence, the liabilit) of the Ban* is settled and d a!ardin attorne)+sfees to the Ban* and den)in the petitioner+s pra)er for no"inal and e7e"plar) da"aes andattorne)+s fees.

0n its ecision pro"ulated on & #ul) 2'(', 9respondent Court affir"ed the appealed decisionprincipall) on the theor) that the contract E7hibit uestion:

(. The Ban* shall use due dilience that no unauthori3ed person shall bead"itted to an) rented safe and be)ond this, the Ban* !ill not be responsible forthe contents of an) safe rented fro" it. 13

0ts "otion for reconsideration 1>havin been denied in the respondent Court+s Resolution of %(Auust 2'(', 15petitioner too* this recourse under Rule &5 of the Rules of Court and ures s torevie! and set aside the respondent Court+s rulin. Petitioner avers that both the respondent Courtand the trial court a did not properl) and leall) appl) the correct la! in this case, b acted !ithrave abuse of discretion or in e7cess of ?urisdiction a"ountin to lac* thereof and c set a precedentthat is contrar) to, or is a departure fro" precedents adhered to and affir"ed b) decisions of thisCourt and precepts in A"erican ?urisprudence adopted in the Philippines. 0t reiterates the aru"ents ithad raised in its "otion to reconsider the trial court+s decision, the brief sub"itted to the respondentCourt and the "otion to reconsider the latter+s decision. 0n a nutshell, petitioner "aintains thatreardless of no"enclature, the contract for the rent of the safet) deposit bo7 E7hibit


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Art. 2';%. The depositar) is oblied to *eep the thin safel) and to return it, !henre>uired, to the depositor, or to his heirs and successors, or to the person !ho"a) have been desinated in the contract. 8is responsibilit), !ith reard to thesafe*eepin and the loss of the thin, shall be overned b) the provisions of Title0 of this Boo*.

0f the deposit is ratuitous, this fact shall be ta*en into account in deter"inin thederee of care that the depositar) "ust observe.

Petitioner then >uotes a passae fro" A"erican #urisprudence 17!hich is supposed toe7pound on the prevailin rule in the nited @tates, to !it:

The prevailin rule appears to be that !here a safe-deposit co"pan) leases asafe-deposit bo7 or safe and the lessee ta*es possession of the bo7 or safe andplaces therein his securities or other valuables, the relation of bailee and bail or iscreated bet!een the parties to the transaction as to such securities or othervaluables9 the fact that thesafe-deposit co"pan) does not *no!, and that it is not e7pected that it shall*no!, the character or description of the propert) !hich is deposited in such safe-deposit bo7 or safe does not chane that relation. That access to the contents ofthe safe-deposit bo7 can be had onl) b) the use of a *e) retained b) the lessee !hether it is the sole *e) or one to be used in connection !ith one retained b)the lessor does not operate to alter the foreoin rule. The aru"ent that there isnot, in such a case, a deliver) of e7clusive possession and control to the depositco"pan), and that therefore the situation is entirel) different fro" that of ordinar)bail"ent, has been enerall) re?ected b) the courts, usuall) on the round that aspossession "ust be either in the depositor or in the co"pan), it shouldreasonabl) be considered as in the latter rather than in the for"er, since theco"pan) is, b) the nature of the contract, iven absolute control of access to thepropert), and the depositor cannot ain access thereto !ithout the consent and

active participation of the co"pan). . . . citations o"itted.

and a se"ent fro" ords and Phrases 1!hich states that a contract for the rental of aban* safet) deposit bo7 in consideration of a fi7ed a"ount at stated periods is a bail"ent forhire.

Petitioner further arues that conditions 2 and 2& of the >uestioned contract are contrar) to la!and public polic) and should be declared null and void. 0n support thereof, it cites Article 261 ofthe Civil Code !hich provides that parties to a contract "a) establish such stipulations, clauses,ter"s and conditions as the) "a) dee" convenient, provided the) are not contrar) to la!,"orals, ood custo"s, public order or public polic).

After the respondent Ban* filed its co""ent, this Court ave due course to the petition andre>uired the parties to si"ultaneousl) sub"it their respective Me"oranda.

The petition is partl) "eritorious.

e aree !ith the petitioner+s contention that the contract for the rent of the safet) deposit bo7 isnot an ordinar) contract of lease as defined in Article 21& of the Civil Code. 8o!ever, e do notfull) subscribe to its vie! that the sa"e is a contract of deposit that is to be strictl) overned b)the provisions in the Civil Code on deposit9 19the contract in the case at bar is a special *ind ofdeposit. 0t cannot be characteri3ed as an ordinar) contract of lease under Article 21& because the fulland absolute possession and control of the safet) deposit bo7 !as not iven to the ?oint renters / thepetitioner and the Puaos. The uard *e) of the bo7 re"ained !ith the respondent Ban*9 !ithout this

*e), neither of the renters could open the bo7. =n the other hand, the respondent Ban* could not


22/77

li*e!ise open the bo7 !ithout the renter+s *e). 0n this case, the said *e) had a duplicate !hich !as"ade so that both renters could have access to the bo7.

8ence, the authorities cited b) the respondent Court 2;on this point do not appl). Neither couldArticle 2';5, also relied upon b) the respondent Court, be invo*ed as an aru"ent aainst thedeposit theor). =bviousl), the first pararaph of such provision cannot appl) to a depositar) of

certificates, bonds, securities or instru"ents !hich earn interest if such docu"ents are *ept in arented safet) deposit bo7. 0t is clear that the depositar) cannot open the bo7 !ithout the renter beinpresent.

e observe, ho!ever, that the deposit theor) itself does not altoether find unani"ous supporteven in A"erican ?urisprudence. e aree !ith the petitioner that under the latter, the prevailinrule is that the relation bet!een a ban* rentin out safe-deposit bo7es and its custo"er !ithrespect to the contents of the bo7 is that of a bail or and bailee, the bail"ent bein for hire and"utual benefit. 21This is ?ust the prevailin vie! because:

There is, ho!ever, so"e support for the vie! that the relationship in >uestion"iht be "ore properl) characteri3ed as that of landlord and tenant, or lessor

and lessee. 0t has also been suested that it should be characteri3ed as that oflicensor and licensee. The relation bet!een a ban*, safe-deposit co"pan), orstorae co"pan), and the renter of a safe-deposit bo7 therein, is often describedas contractual, e7press or i"plied, oral or !ritten, in !hole or in part. But there isapparentl) no ?urisdiction in !hich an) rule other than that applicable to bail"entsoverns >uestions of the liabilit) and rihts of the parties in respect of loss of thecontents of safe-deposit bo7es. 22citations o"itted

0n the conte7t of our la!s !hich authori3e ban*in institutions to rent out safet) deposit bo7es, itis clear that in this ?urisdiction, the prevailin rule in the nited @tates has been adopted. @ection;% of the Heneral Ban*in Act23pertinentl) provides:

@ec. ;%. 0n addition to the operations specificall) authori3ed else!here in this Act,ban*in institutions other than buildin and loan associations "a) perfor" thefollo!in services:

a Receive in custod) funds, docu"ents, and valuable ob?ects,and rent safet) deposit bo7es for the safeuardin of such effects.

777 777 777

The ban*s shall perfor" the services per"itted under subsections a, b and cof this section asdepositories or as aents. . . . 2>e"phasis supplied

Note that the pri"ar) function is still found !ithin the para"eters of a contract of deposit, i.e., thereceivin in custod) of funds, docu"ents and other valuable ob?ects for safe*eepin. The rentinout of the safet) deposit bo7es is not independent fro", but related to or in con?unction !ith, thisprincipal function. A contract of deposit "a) be entered into orall) or in !ritin 25and, pursuant toArticle 261 of the Civil Code, the parties thereto "a) establish such stipulations, clauses, ter"s andconditions as the) "a) dee" convenient, provided the) are not contrar) to la!, "orals, oodcusto"s, public order or public polic). The depositar)+s responsibilit) for the safe*eepin of theob?ects deposited in the case at bar is overned b) Title 0, Boo* 0$ of the Civil Code. Accordinl), thedepositar) !ould be liable if, in perfor"in its obliation, it is found uilt) of fraud, nelience, dela) orcontravention of the tenor of the aree"ent. 20n the absence of an) stipulation prescribin thederee of dilience re>uired, that of a ood father of a fa"il) is to be observed. 278ence, an)stipulation e7e"ptin the depositar) fro" an) liabilit) arisin fro" the loss of the thin deposited on

account of fraud, nelience or dela) !ould be void for bein contrar) to la! and public polic). 0n theinstant case, petitioner "aintains that conditions 2 and 2& of the >uestioned contract of lease of thesafet) deposit bo7, !hich read:


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2. The ban* is not a depositar) of the contents of the safe and it has neither thepossession nor control of the sa"e.

2&. The ban* has no interest !hatsoever in said contents, e7cept hereine7pressl) provided, and it assu"es absolutel) no liabilit) in connectionthere!ith. 2

are void as the) are contrar) to la! and public polic). e find =urselves in aree"ent!ith this proposition for indeed, said provisions are inconsistent !ith the respondentBan*+s responsibilit) as a depositar) under @ection ;%a of the Heneral Ban*in Act.Both e7e"pt the latter fro" an) liabilit) e7cept as conte"plated in condition ( thereof!hich li"its its dut) to e7ercise reasonable dilience onl) !ith respect to !ho shall bead"itted to an) rented safe, to !it:

(. The Ban* shall use due dilience that no unauthori3ed person shall bead"itted to an) rented safe and be)ond this, the Ban* !ill not be responsible forthe contents of an) safe rented fro" it. 29

4urther"ore, condition 2 stands on a !ron pre"ise and is contrar) to the actualpractice of the Ban*. 0t is not correct to assert that the Ban* has neither the possessionnor control of the contents of the bo7 since in fact, the safet) deposit bo7 itself is locatedin its pre"ises and is under its absolute control9 "oreover, the respondent Ban* *eepsthe uard *e) to the said bo7. As stated earlier, renters cannot open their respectivebo7es unless the Ban* cooperates b) presentin and usin this uard *e). Clearl) then,to the e7tent above stated, the foreoin conditions in the contract in >uestion are voidand ineffective. 0t has been said:

ith respect to propert) deposited in a safe-deposit bo7 b) a custo"er of a safe-deposit co"pan), the parties, since the relation is a contractual one, "a) b)special contract define their respective duties or provide for increasin or li"itinthe liabilit) of the deposit co"pan), provided such contract is not in violation ofla! or public polic). 0t "ust clearl) appear that there actuall) !as such a specialcontract, ho!ever, in order to var) the ordinar) obliations i"plied b) la! fro"the relationship of the parties9 liabilit) of the deposit co"pan) !ill not be enlaredor restricted b) !ords of doubtful "eanin. The co"pan), in rentinsafe-deposit bo7es, cannot e7e"pt itself fro" liabilit) for loss of the contents b)its o!n fraud or nelience or that of its aents or servants, and if a provision ofthe contract "a) be construed as an atte"pt to do so, it !ill be held ineffective forthe purpose. Althouh it has been held that the lessor of a safe-deposit bo7cannot li"it its liabilit) for loss of the contents thereof throuh its o!n nelience,the vie! has been ta*en that such a lessor "a) li"its its liabilit) to so"e e7tentb) aree"ent or stipulation. 3;citations o"itted

Thus, !e reach the sa"e conclusion !hich the Court of Appeals arrived at, that is, that thepetition should be dis"issed, but on rounds >uite different fro" those relied upon b) the Courtof Appeals. 0n the instant case, the respondent Ban*+s e7oneration cannot, contrar) to theholdin of the Court of Appeals, be based on or proceed fro" a characteri3ation of the i"punedcontract as a contract of lease, but rather on the fact that no co"petent proof !as presented tosho! that respondent Ban* !as a!are of the aree"ent bet!een the petitioner and the Puaosto the effect that the certificates of title !ere !ithdra!able fro" the safet) deposit bo7 onl) uponboth parties+ ?oint sinatures, and that no evidence !as sub"itted to reveal that the loss of thecertificates of title !as due to the fraud or nelience of the respondent Ban*. This in turn flo!sfro" this Court+s deter"ination that the contract involved !as one of deposit. @ince both thepetitioner and the Puaos areed that each should have one 2 renter+s *e), it !as obvious that

either of the" could as* the Ban* for access to the safet) deposit bo7 and, !ith the use of such


24/77

*e) and the Ban*+s o!n uard *e), could open the said bo7, !ithout the other renter beinpresent.

@ince, ho!ever, the petitioner cannot be bla"ed for the filin of the co"plaint and no bad faithon its part had been established, the trial court erred in conde"nin the petitioner to pa) therespondent Ban* attorne)+s fees. To this e7tent, the ecision dispositive portion of publicrespondent Court of Appeals "ust be "odified.

8ERE4=RE, the Petition for Revie! is partiall) HRANTE b) deletin the a!ard for attorne)+sfees fro" the & #ul) 2'(' ecision of the respondent Court of Appeals in CA-H.R. C$ No.25256. As "odified, and sub?ect to the pronounce"ent e "ade above on the nature of therelationship bet!een the parties in a contract of lease of safet) deposit bo7es, the dispositiveportion of the said ecision is hereb) A440RME and the instant Petition for Revie! is other!iseEN0E for lac* of "erit.

No pronounce"ent as to costs.

@= =RERE.

2eliciano, idin, Ro"ero and 8elo, JJ., concr.

Gtierre1, Jr., J., is on leae.

CA-Agro Industrial Devt Corp vs CA 219 SCRA 426Facts:

On July 3, 1979, petitioner (through its President- Sergio Aguirre and the Spouses !a"on and Paula

Pugao entered into an agree"ent #here$y the %or"er purchase t#o parcel o% lands %ro" the latter&

't #as paid o% do#npay"ent #hile the $alance #as coered $y there postdated chec)s& A"ong the

ter"s and conditions e"$odied in the agree"ent #ere the titles shall $e trans%erred to thepetitioner upon %ull pay"ent o% the price and the o#ner*s copies o% the certi%icate o% titles shall $e

deposited in a sa%ety deposit $o+ o% any $an)& Petitioner and the Pugaos then rented Sa%ety eposit

$o+ o% priate respondent Security an) and .rust /o"pany&

.herea%ter, a certain 0argarita !a"os o%%ered to $uy %ro" the petitioner& 0rs !a"os de"and the

e+ecution o% a deed o% sale #hich necessarily entailed the production o% the certi%icate o% titles& 'n

ie# thereo%, Aguirre, acco"panied $y the Pugaos, then proceed to the respondent an) to open

the sa%ety deposit $o+ and get the certi%icate o% titles& o#eer, #hen opened in the presence o%

the an)*s representatie, the $o+ yielded no such certi%icate& ecause o% the delay in the

reconstitution o% the title, 0rs !a"os #ithdre# her earlier o%%er to purchase&

ence this petition&

'ssue:

2hether or not the contract o% rent $et#een a co""ercial $an) and another party %or the use o%

sa%ety deposit $o+ can $e considered ali)e to a lessor-lessee relationship&

!uling:

.he petitioner is correct in "a)ing the contention that the contract %or the rent o% the deposit $o+

is not a ordinary contract o% lease as de%ined in Article 143 o% the /iil /ode& o#eer, the /ourt

do not really su$scri$e to its ie# that the sa"e is a contract o% deposit that is to $e strictly

goerned $y the proisions in /iil /ode on eposit5 the contract in the case at $ar is a special )ind


25/77

o% deposit& 't cannot $e characteri6ed as an ordinary contract o% lease under Article 143 $ecause

the %ull and a$solute possession and control o% the sa%ety deposit $o+ #as not gien to the oint

renters- the petitioner and the Pugaos& .he guard )ey o% the $o+ re"ained #ith the respondent

$an)5 #ithout this )ey, neither o% the renters could open the $o+& On the other hand, the

respondent $an) could not li)e#ise open the $o+ #ithout the renter*s )ey& .he /ourt %urther

assailed that the petitioner is correct in applying A"erican Jurisprudence& erein, the preailingie# is that the relation $et#een the a $an) renting out sa%e deposits $o+es and its custo"er #ith

respect to the contents o% the $o+ is that o% a $ail or8 and $ailee, the $ail"ent $eing %or hire and

"utual $ene%its& .hat preailing rule has $een adopted in Section 7 o% the eneral an)ing Act&

Section 7& 'n addition to the operations speci%ically authori6ed else#here in this Act, $an)ing

institutions other that $uilding and loan associations "ay per%or" the %ollo#ing serices:

(a !eceie in custody %unds, docu"ent and alua$le o$ects and rents sa%ety deposits ta+es %or the

sa%eguard o% such e%%ects&

+++ +++ +++

.he $an) shall per%or" the serices per"itted under su$sections (a ($ and (c o% this section asdepositories or as agents&


Manila

T80R 0$0@0=N

G.R. No. 1;297; Ma 13, 1993

LUAN SIA, petitioner,vs.COURT O+ APPEALS a!% SECURIT= /AN0 a!% TRUST COMPAN=, respondents.

Asncion La% Offices for petitioner.

aton, anares, arpio $ Associates for priate respondent.

DA


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8ERE4=RE, pre"ises considered, ?ud"ent is hereb) rendered in favor of theplaintiff and aainst the defendant, @ecurit) Ban* Trust Co"pan), orderin thedefendant ban* to pa) the plaintiff the su" of /

a T!ent) Thousand Pesos P%6,666.66, Philippine Currenc), as actual

da"aes9

b =ne 8undred Thousand Pesos P266,666.66, Philippine Currenc), as "oralda"aes9 and

c 4ive Thousand Pesos P5,666.66, Philippine Currenc), as attorne)+s fees andleal e7penses.

The counterclai" set up b) the defendant are hereb) dis"issed for lac* of "erit.

No costs.

@= =RERE.>

The antecedent facts of the present controvers) are su""ari3ed b) the public respondent in itschallened decision as follo!s:

The plaintiff rented on March %%, 2'(5 the @afet) eposit Bo7 No. 5& of thedefendant ban* at its Binondo Branch located at the 4oo*ien Ti"es Buildin,@oler @t., Binondo, Manila !herein he placed his collection of sta"ps. The saidsafet) deposit bo7 leased b) the plaintiff !as at the botto" or at the lo!est levelof the safet) deposit bo7es of the defendant ban* at its aforesaid BinondoBranch.

urin the floods that too* place in 2'(5 and 2'(1, flood!ater entered into thedefendant ban*+s pre"ises, seeped into the safet) deposit bo7 leased b) theplaintiff and caused, accordin to the plaintiff, da"ae to his sta"ps collection.The defendant ban* re?ected the plaintiff+s clai" for co"pensation for hisda"aed sta"ps collection, so, the plaintiff instituted an action for da"aesaainst the defendant ban*.

The defendant ban* denied liabilit) for the da"aed sta"ps collection of theplaintiff on the basis of the


27/77

The defendant ban* also contended that its contract !ith the plaintiff over safet)deposit bo7 No. 5& !as one of lease and not of deposit and, therefore, overnedb) the lease aree"ent E7hs. uired dilience e7pected of a ban* in "aintainin thesafet) deposit bo79 c a!ardin to the plaintiff actual da"aes in the a"ount of P%6,666.66,"oral da"aes in the a"ount of P266,666.66 and attorne)+s fees and leal e7penses in thea"ount of P5,666.669 and d dis"issin the counterclai".

=n %2 Auust 2''2, the respondent pro"ulated its decision the dispositive portion of !hich

reads:


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8ERE4=RE, the decision appealed fro" is hereb) RE$ER@E and insteadthe appellee+s co"plaint is hereb) 0@M0@@E. The appellant ban*+scounterclai" is li*e!ise 0@M0@@E. No costs.

0n reversin the trial court+s decision and absolvin @BTC fro" liabilit), the public respondent foundand ruled that:

a the fine print in the uestioned lease aree"ent of the safet) deposit bo7 li"itin

@BTC+s liabilit):

'. The liabilit) of the ban* b) reason of the lease, is li"ited to the e7ercise of thedilience to prevent the openin of the @afe b) an) person other than the Renter,his authori3ed aent or leal representative.

777 777 777

2. The ban* is not a depositor) of the contents of the @afe and it has neither thepossession nor the control of the sa"e. The Ban* has no interest !hatsoever insaid contents, e7cept as herein provided, and it assu"es absolutel) no liabilit) in

connection there!ith.

are valid since said stipulations are not contrar) to la!, "orals, ood custo"s, public order orpublic polic)9 and

d there is no concrete evidence to sho! that @BTC failed to e7ercise the re>uired dilience in"aintainin the safet) deposit bo79 !hat !as proven !as that the floods of 2'(5 and 2'(1, !hich!ere be)ond the control of @BTC, caused the da"ae to the sta"p collection9 said floods !erefortuitous events !hich @BTC should not be held liable for since it !as not sho!n to haveparticipated in the aravation of the da"ae to the sta"p collection9 on the contrar), it offeredits services to secure the assistance of an e7pert in order to save "ost of the sta"ps, but the

appellee refused9 appellee "ust then bear the lose under the principle of < res perit do"ino.9 Oc#o4$r , 1927

SIL


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that the t!o cases depend in part upon the sa"e facts, the cases !ere heard toether in the trialcourt and deter"ined in a sinle opinion. The sa"e course !ill accordinl) be follo!ed here.

0n the first case, i. e., that !hich @ilvestra Baron is plaintiff, the court ave ?ud"ent for her torecover of the defendant the su" of P5,%(.52, !ith costs. 4ro" this ?ud"ent both the plaintiff

and the defendant appealed.

0n the second case, i. e., that in !hich Huiller"o Baron, is plaintiff, the court ave ?ud"ent forhi" to recover of the defendant the su" of P5,;&.16, !ith costs, fro" !hich ?ud"ent both theplaintiff and the defendant also appealed. 0n the sa"e case the defendant interposed acounterclai" in !hich he as*ed credit for the su" of P%,(66 !hich he had advanced to theplaintiff Huiller"o Baron on various occasions. This credit !as ad"itted b) the plaintiff andallo!ed b) the trial court. But the defendant also interposed a cross-action aainst Huiller"oBaron in !hich the defendant clai"ed co"pensation for da"aes alleed to have Ben sufferedb) hi" b) reason of the alleed "alicious and false state"ents "ade b) the plaintiff aainst thedefendant in suin out an attach"ent aainst the defendant+s propert) soon after the institutionof the action. 0n the sa"e cross-action the defendant also souht co"pensation for da"aes

incident to the shuttin do!n of the defendant+s rice "ill for the period of one hundred sevent)da)s durin !hich the above-"entioned attach"ent !as in force. The trial ?ude disallo!edthese clai"s for da"aes, and fro" this feature of the decision the defendant appealed. e aretherefore confronted !ith five distinct appeals in this record.

Prior to #anuar) 2;, 2'%2, the defendant Pablo avid has been enaed in runnin a rice "ill inthe "unicipalit) of Maalan, in the Province of Pa"pana, a "ill !hich !as !ell patroni3ed b)the rice ro!ers of the vicinit) and al"ost constantl) runnin. =n the date stated a fire occurredthat destro)ed the "ill and its contents, and it !as so"e ti"e before the "ill could be rebuilt andput in operation aain. @ilvestra Baron, the plaintiff in the first of the actions before us, is an auntof the defendant9 !hile Huiller"o Baron, the plaintiff in the other action9 is his uncle. 0n the

"onths of March, April, and Ma), 2'%6, @ilvestra Baron placed a >uantit) of pala) in thedefendant+s "ill9 and this, in connection !ith so"e that she too* over fro" Huiller"o Baron,a"ounted to 2,62% cavans and %& *ilos. urin appro7i"atel) the sa"e period Huiller"o Baronplaced other 2,(15 cavans and & *ilos of pala) in the "ill. No co"pensation has ever beenreceived b) @ilvestra Baron upon account of the pala) delivered b) Huiller"o Baron, he hasreceived fro" the defendant advance"ents a"ountin to P%,(669 but apart fro" this he has notbeen co"pensated. Both the plaintiffs clai" that the pala) !hich !as delivered b) the" to thedefendant !as sold to the defendant9 !hile the defendant, on the other hand, clai"s that thepala) !as deposited sub?ect to future !ithdra!al b) the depositors or sub?ect to so"e future sale!hich !as never effected. 8e therefore supposes hi"self to be relieved fro" all responsibilit) b)virtue of the fire of #anuar) 2;, 2'%2, alread) "entioned.

The plaintiff further sa) that their pala) !as delivered to the defendant at his special re>uest,coupled !ith a pro"ise on his part to pa) for the sa"e at the hihest price per cavan at !hichpala) !ould sell durin the )ear 2'%69 and the) sa) that in Auust of that )ear the defendantpro"ised to pa) the" severall) the price of P(.&6 per cavan, !hich !as about the top of the"ar*et for the season, provided the) !ould !ait for pa)"ent until ece"ber. The trial ?udefound that no such pro"ise had been iven9 and the incredulit) of the court upon this pointsee"s to us to be ?ustified. A careful e7a"ination of the proof, ho!ever, leads us to theconclusion that the plaintiffs did, so"e ti"e in the earl) part of Auust, 2'%6, "a*e de"and uponthe defendant for a settle"ent, !hich he evaded or postponed leavin the e7act a"ount due tothe plaintiffs undeter"ined.

0t should be stated that the pala) in >uestion !as place b) the plaintiffs in the defendant+s "ill!ith the understandin that the defendant !as at libert) to convert it into rice and dispose of it at


35/77

his pleasure. The "ill !as activel) runnin durin the entire season, and as pala) !as dail)co"in in fro" "an) custo"ers and as rice !as bein constantl) shipped b) the defendant toManila, or other rice "ar*ets, it !as i"possible to *eep the plaintiffs+ pala) sereated. 0n factthe defendant ad"its that the plaintiffs+ pala) !as "i7ed !ith that of others. 0n vie! of the natureof the defendant+s activities and the !a) in !hich the pala) !as handled in the defendant+s "ill, itis >uite certain that all of the plaintiffs+ pala), !hich !as put in before #une 2, 2'%6, been "illedand disposed of lon prior to the fire of #anuar) 2;, 2'%2. 4urther"ore, the proof sho!s that!hen the fire occurred there could not have been "ore than about 16 cavans of pala) in the"ill, none of !hich b) an) reasonable probabilit) could have been an) part of the pala) deliveredb) the plaintiffs. Considerin the fact that the defendant had thus "illed and doubtless sold theplaintiffs+ pala) prior to the date of the fire, it result that he is bound to account for its value, andhis liabilit) !as not e7tinuished b) the occurence of the fire. 0n the briefs before us it see"s tohave been assu"ed b) the opposin attorne)s that in order for the plaintiffs to recover, it isnecessar) that the) should be able to establish that the plaintiffs+ pala) !as delivered in thecharacter of a sale, and that if, on the contrar), the defendant should prove that the deliver) !as"ade in the character of deposit, the defendant should be absolved. But the case does notdepend precisel) upon this e7plicit alternative9 for even supposin that the pala) "a) have been

delivered in the character of deposit, sub?ect to future sale or !ithdra!al at plaintiffs+ election,nevertheless if it !as understood that the defendant "iht "ill the pala) and he has in factappropriated it to his o!n use, he is of course bound to account for its value. nder article 2;1(of the Civil Code, !hen the depositor) has per"ission to "a*e use of the thin deposited, thecontract loses the character of "ere deposit and beco"es a loan or a co""odat"9 and ofcourse b) appropriatin the thin, the bailee beco"es responsible for its value. 0n this connection!e !holl) re?ect the defendant+s pretense that the pala) delivered b) the plaintiffs or an) part of it!as actuall) consu"ed in the fire of #anuar), 2'%2. Nor is the liabilit) of the defendant in an)!ise affected b) the circu"stance that, b) a custo" prevailin a"on rice "illers in this countr),persons placin pala) !ith the" !ithout special aree"ent as to price are at libert) to !ithdra! itlater, proper allo!ance bein "ade for storae and shrin*ae, a thin that is so"eti"es done,thouh rarel).

0n vie! of !hat has been said it beco"es necessar) to discover the price !hich the defendantshould be re>uired to pa) for the plaintiffs+ pala). pon this point the trial ?ude fi7ed upon P1.25per cavan9 and althouh !e are not e7actl) in aree"ent !ith hi" as to the propriet) of the"ethod b) !hich he arrived at this fiure, !e are nevertheless of the opinion that, all thinsconsidered, the result is appro7i"atel) correct. 0t appears that the price of pala) durin the"onths of April, Ma), and #une, 2'%6, had been e7cessivel) hih in the Philippine 0slands andeven prior to that period the Hovern"ent of the Philippine 0slands had been atte"ptin to holdthe price in chec* b) e7ecutive reulation. The hihest point !as touched in this season !asapparentl) about P(.56 per cavan, but the "ar*et bean to sa in Ma) or #une and presentl)entered upon a precipitate decline. As !e have alread) stated, the plaintiffs "ade de"and upon

the defendant for settle"ent in the earl) part of Auust9 and, so far as !e are able to ?ude fro"the proof, the price of P1.25 per cavan, fi7ed b) the trial court, is about the price at !hich thedefendant should be re>uired to settle as of that date. 0t !as the date of the de"and of theplaintiffs for settle"ent that deter"ined the price to be paid b) the defendant, and this is true!hether the pala) !as delivered in the character of sale !ith price undeter"ined or in thecharacter of deposit sub?ect to use b) the defendant. 0t results that the plaintiffs are respectivel)entitle to recover the value of the pala) !hich the) had placed !ith the defendant durin theperiod referred to, !ith interest fro" the date of the filin of their several co"plaints.

As alread) stated, the trial court found that at the ti"e of the fire there !ere about 16 cavans ofpala) in the "ill and that this pala) !as destro)ed. 8is 8onor assu"ed that this !as part of the

pala) delivered b) the plaintiffs, and he held that the defendant should be credited !ith saida"ount. 8is 8onor therefore deducted fro" the clai"s of the plaintiffs their respective


36/77

proportionate shares of this a"ount of pala). e are unable to see the propriet) of this feature ofthe decision. There !ere "an) custo"ers of the defendant+s rice "ill !ho had placed their pala)!ith the defendant under the sa"e conditions as the plaintiffs, and nothin can be "ore certainthan that the pala) !hich !as burned did not belon to the plaintiffs. That pala) !ithout a doubthad lon been sold and "ar*eted. The assin"ents of error of each of the plaintiffs-appellants in!hich this feature of the decision is attac*ed are therefore !ell ta*en9 and the appealed?ud"ents "ust be "odified b) eli"inatin the deductions !hich the trial court allo!ed fro" theplaintiffs+ clai"s.

The trial ?ude also allo!ed a deduction fro" the clai" of the plaintiff Huiller"o Baron of 21;cavans of pala), as indicated in E7hibit 2%, 2, 2&, and 21. This !as also erroneous. Thesee7hibits relate to transactions that occurred nearl) t!o )ears after the transactions !ith !hich !eare here concerned, and the) !ere offered in evidence "erel) to sho! the character ofsubse>uent transactions bet!een the parties, it appearin that at the ti"e said e7hibits ca"e intoe7istence the defendant had reconstructed his "ill and that business relations !ith Huiller"oBaron had been resu"ed. The transactions sho!n b) these e7hibits !hich relate to pala)!ithdra!n b) the plaintiff fro" the defendant+s "ill !ere not "ade the sub?ect of controvers) in

either the co"plaint or the cross-co"plaint of the defendant in the second case. The) thereforeshould not have been ta*en into account as a credit in favor of the defendant. @aid credit "usttherefore be li*e!ise of course be !ithout pre?udice to an) proper ad?ust"ent of the rihts of theparties !ith respect to these subse>uent transactions that the) have heretofore or "a) hereaftereffect.

The precedin discussion disposes of all vital contentions relative to the liabilit) of the defendantupon the causes of action stated in the co"plaints. e proceed therefore no! to consider the>uestion of the liabilit) of the plaintiff Huiller"o Baron upon the cross-co"plaint of Pablo avid incase R. H. No. %1'&'. 0n this cross-action the defendant see*, as the stated in the thirdpararaph of this opinion, to recover da"aes for the !ronful suin out of an attach"ent b) the

plaintiff and the lev) of the sa"e upon the defendant+s rice "ill. 0t appears that about t!o andone-half "onths after said action !as beun, the plaintiff, Huiller"o Baron, as*ed for anattach"ent to be issued aainst the propert) of the defendant9 and to procure the issuance ofsaid !rit the plaintiff "ade affidavit to the effect that the defendant !as disposin, or atte"ptinthe plaintiff. pon this affidavit an attach"ent !as issued as pra)ed, and on March %;, 2'%&, it!as levied upon the defendant+s rice "ill, and other propert), real and personal. 5a%ph4l.net

pon attachin the propert) the sheriff closed the "ill and placed it in the care of a deput).=perations !ere not resu"ed until @epte"ber 2, 2'%&, !hen the attach"ent !as dissolved b)an order of the court and the defendant !as per"itted to resu"e control. At the ti"e theattach"ent !as levied there !ere, in the bodea, "ore than %6,666 cavans of pala) belonin topersons !ho held receipts therefor9 and in order to et this rain a!a) fro" the sheriff, t!ent)-

four of the depositors found it necessar) to sub"it third-part) clai"s to the sheriff. hen theseclai"s !ere put in the sheriff notified the plaintiff that a bond in the a"ount of P56,666 "ust beiven, other!ise the rain !ould be released. The plaintiff, bein unable or un!illin to ive thisbond, the sheriff surrendered the pala) to the clai"ants9 but the attach"ent on the rice "ill !as"aintained until @epte"ber 2, as above stated, coverin a period of one hundred sevent) da)sdurin !hich the "ill !as idle. The round upon !hich the attach"ent !as based, as set forth inthe plaintiff+s affidavit !as that the defendant !as disposin or atte"ptin to dispose of hispropert) for the purpose of defraudin the plaintiff. That this alleation !as false is clearl)apparent, and not a !ord of proof has been sub"itted in support of the assertion. =n thecontrar), the defendant testified that at the ti"e this attach"ent !as secured he !as solvent andcould have paid his indebtedness to the plaintiff if ?ud"ent had been rendered aainst hi" in

ordinar) course. 8is financial conditions !as of course !ell *no!n to the plaintiff, !ho is hisuncle. The defendant also states that he had not conve)ed a!a) an) of his propert), nor had


37/77

intended to do so, for the purpose of defraudin the plaintiff. e have before us therefore a caseof a baseless attach"ent, rec*lessl) sued out upon a false affidavit and levied upon thedefendant+s propert) to his reat and needless da"ae. That the act of the plaintiff in suin outthe !rit !as !holl) un?ustifiable is perhaps also indicated in the circu"stance that the attach"ent!as finall) dissolved upon the "otion of the plaintiff hi"self.

The defendant testified that his "ill !as accusto"ed to clean fro" &66 to &56 cavans of pala)per da), producin %%5 cavans of rice of 5; *ilos each. The price chared for cleanin eachcavan rice !as 6 centavos. The defendant also stated that the e7pense of runnin the "ill perda) !as fro" P2( to P%5, and that the net profit per da) on the "ill !as "ore than P&6. As the"ill !as not accusto"ed to run on @unda)s and holida), !e esti"ate that the defendant lost theprofit that !ould have been earned on not less than one hundred fort) !or* da)s. 4iurin hisprofits at P&6 per da), !hich !ould appear to be a conservative esti"ate, the actual net lossresultin fro" his failure to operate the "ill durin the ti"e stated could not have been less thanP5,166. The reasonableness of these fiures is also indicated in the fact that the t!ent)-fourcusto"ers !ho intervened !ith third-part) clai"s too* out of the ca"arin %6,666 cavans of pala),practicall) all of !hich, in the ordinar) course of events, !ould have been "illed in this plant b)

the defendant. And of course other rain !ould have found its !a) to this "ill if it had re"ainedopen durin the one hundred fort) da)s !hen it !as closed.

But this is not all. hen the attach"ent !as dissolved and the "ill aain opened, the defendantfound that his custo"ers had beco"e scattered and could not be easil) otten bac*. @o slo!,indeed, !as his patronae in returnin that durin the re"ainder of the )ear 2'%& the defendant!as able to "ill scarcel) "ore than the rain belonin to hi"self and his brothers9 and evenafter the ne7t season opened "an) of his old custo"ers did not return. @everal of theseindividuals, testif)in as !itnesses in this case, stated that, o!in to the unpleasant e7perience!hich the) had in ettin bac* their rain fro" the sheriff to the "ill of the defendant, thouh the)had previousl) had "uch confidence in hi".

As aainst the defendant+s proof sho!in the facts above stated the plaintiff sub"itted noevidence !hatever. e are therefore constrained to hold that the defendant !as da"aed b) theattach"ent to the e7tent of P5,166, in profits lost b) the closure of the "ill, and to the e7tent ofP2,&66 for in?ur) to the ood-!ill of his business, "a*in a total of P;,666. 4or this a"ount thedefendant "ust recover ?ud"ent on his cross-co"plaint.

The trial court, in dis"issin the defendant+s cross-co"plaint for da"aes resultin fro" the!ronful suin out of the attach"ent, suested that the closure of the rice "ill !as a "ere actof the sheriff for !hich the plaintiff !as not responsible and that the defendant "iht have beenper"itted b) the sheriff to continue runnin the "ill if he had applied to the sheriff for per"issionto operate it. This sinular suestion !ill not bear a "o"ent+s criticis". 0t !as of course the dut)

of the sheriff, in lev)in the attach"ent, to ta*e the attached propert) into his possession, andthe closure of the "ill !as a natural, and even necessar), conse>uence of the attach"ent. 4orthe da"ae thus inflicted upon the defendant the plaintiff is undoubtedl) responsible.

=ne feature of the cross-co"plaint consist in the clai" of the defendant cross-co"plaint for thesu" of P%6,666 as da"aes caused to the defendant b) the false and alleed "aliciousstate"ents contained in the affidavit upon !hich the attach"ent !as procured. The additionalsu" of P5,666 is also clai"ed as e7e"plar) da"aes. 0t is clear that !ith respect to theseda"aes the cross-action cannot be "aintained, for the reason that the affidavit in >uestion !asused in course of a leal proceedin for the purpose of obtainin a leal re"ed), and it istherefore privileed. But thouh the affidavit is not actionable as a libelous publication, this fact in

no obstacle to the "aintenance of an action to recover the da"ae resultin fro" the lev) of theattach"ent.


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Before closin this opinion a !ord should be said upon the point raised in the first assin"ent oferror of Pablo avid as defendant in case R. H. No. %1'&'. 0n this connection it appears that thedeposition of Huiller"o Baron !as presented in court as evidence and !as ad"itted as ane7hibit, !ithout bein actuall) read to the court. 0t is supposed in the assin"ent of error no!under consideration that the deposition is not available as evidence to the plaintiff because it !asnot actuall) read out in court. This connection is not !ell founded. 0t is true that in section 1& ofthe Code of Civil Procedure it is said that a deposition, once ta*en, "a) be read b) either part)and !ill then be dee"ed the evidence of the part) readin it. The use of the !ord . *!$ 21, 2;;>6

PEOPLE O+ THE PHILIPPINES, appellee, vs. ?ILLIAM ONG LI a!%CHING DE MING @ RO/ERT TIU, appellants.

D E C I S I O N

PUNO, J.

the allowance of the privilege to withhold evidence that is demonstrably relevant in a criminal trial would cut deeply into the

guarantee of due process of law and gravely impair the basic function of the courts.F2G

Chief Justice Warren E. Burger

The case at bar involves the clash of t!o classic values - - - the needfor the @tate to stop cri"es and preserve the peace aainst the riht of anindividual to confront "aterial !itnesses to establish his innocence. 0n

balancin the t!o values, !e shall scrutini3e and set the para"eters that
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ouht to uide prosecution !hen to disclose the identit) of confidentialinfor"ers.

=n #ul) %;, 2''( accused illia" =n ) i and Chin e Min URobert Tiu !ere chared !ith violation of @ection 25, Article 000, in relation

to @ection %, Article 0, of Republic Act No. 1&%5, other!ise *no!n as Theanerous rus Act of 2';%, as a"ended. The 0nfor"ation F%Greads:

That on or about the 24thday of July, 1998 in ue!on City, "hili##ines, the said accused, cons#iring together, confederating

$ith and %utually hel#ing each other not ha&ing been authori!ed by la$ to sell, dis#ense, deli&er, trans#ort or distribute any

regulated drug, did then and there $illfully and unla$fully sell or offer for sale 980.50 grams of Methyl Amphetamine

Hydrochloride, which is a regulated drug.

C'(T)*)+ T' *W.

pon arrain"ent, the t!o % accused, !ho are Chinese nationals,

pled not uilt). The records do not sho! !hether the) had sufficient*no!lede of the Enlish lanuae. Their trial proceeded. 0n the course ofthe trial, the t!o % accused !ere iven the services of a Chineseinterpreter.

The prosecution, throuh the testi"on) of @P=2 Rodolfo @. Hon3ales,souht to establish that on #ul) %, 2''( at around 5:66 P.M., a confidentialinfor"ant C0 of the @pecial =perations ivision @=, PNP NarcoticsHroup, reported to Chief 0nspector Albert 0natius . 4erro about thealleed illicit dru activities of a certain illia" =n and an unidentifiedChinese "ale partner. After an evaluation of the confidential infor"ation,Chief 0nspector 4erro decided to conduct a bu)-bust operation. 8econstituted a tea" of eiht ( !ith Police 0nspector Medel N. Poe as tea"leader, @P=2 Hon3ales as poseur-bu)er and the rest as bac*-up support.

Accordin to @P=2 Hon3ales, the C0 called up the alleed pusher,placed an order for one 2 *ilo of shabu and areed to a P166,666.66consideration. The C0 li*e!ise areed to "eet !ith his contact on #ul) %&,2''( at 1th@treet corner Hil"ore Avenue, Ne! Manila, Jue3on Cit),bet!een &:66 and 5:66 A.M. The boodle "one) !as prepared consistin ofsi7 1 bundles of cut bond paper !ith a "ar*ed P2,666.66 peso bill on topof each bundle.

=n #ul) %&, %66& at :66 A.M., the C0 received a call fro" the drudealer chanin the "eetin ti"e bet!een %:66 and :66 P.M. on the sa"eda). The tea", toether !ith the C0, proceeded to the "eetin place andarrived there at around 2:6 P.M. The C0 rode !ith @P=2 Hon3ales. The)par*ed their car alon 1th@treet corner Hil"ore Avenue. The rest of thetea" posted the"selves at their bac* and their riht side.

A little !hile, accused =n approached their car. The C0 introduced hi"

to @P=2 Hon3ales !ho told accused =n in bro*en Taalo to et in thecar. hen =n in>uired about the "one) in pa)"ent of the shabu, @P=2
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Hon3ales sho!ed hi" the slihtl) opened plastic ba containin the boodle"one). @P=2 Hon3ales then de"anded to see the shabu. Accused =ne7cused hi"self, !ent out of the car, !al*ed a fe! steps and then !avedhis riht hand to so"ebod). hile accused =n !as !al*in bac* to the

car, @P=2 Hon3ales and the C0 sa! a reen To)ota Corolla co"in. TheCorolla par*ed in front of their car and a Chinese-loo*in "ale, lateridentified as accused Chin e Min U Robert Tiu alihted, approachedaccused =n and handed to hi" a ift-!rapped pac*ae. @P=2 Hon3alesopened it and inside !as one 2 sealed plastic ba !ith a !hite cr)stallinesubstance. After its inspection, accused =n de"anded for itspa)"ent. @P=2 Hon3ales ave to accused =n the boodle "one) placedin a . Bro!n plastic ba. Thereafter, @P=2 Hon3ales sinaled his bac*-up tea" b) turnin on the ha3ard lihts of the car. @P=2 Hon3ales hi"selfarrested accused =n !hile the C0 and the bac*-up aents arrested

accused e Min.

The officers brouht the t!o % accused to their office !here thecorrespondin boo*in sheets and arrest report !ere prepared. The plasticba containin the !hite cr)stalline substance !as referred to the PNPCri"e aborator) for e7a"ination. The t!o % accused !ere sub?ected to aph)sical and "ental e7a"ination as re>uired. The) !ere found to be freefro" an) e7ternal sins of trau"a.

Police 0nspector Hrace M. Eusta>uio, 4orensic Che"ist, PNP Cri"eaborator), testified that the speci"en she e7a"ined had a net !eiht of'(6.56 ra"s and "anifested positive results for "eth)l a"pheta"ineh)drochlorideFGor !hat is co""onl) *no!n as shabu, a reulated dru. 8ertesti"on) !as supported b) her Ph)sical @ciences Report. F&G

Appellants denied the stor) of the prosecution. Accused illia" =n, aChinese citi3en fro" the Peoples Republic of China, clai"ed that he ca"eto the Philippines in 2''; to loo* for a ?ob. pon the reco""endation of afriend, he !as able to !or* in a pancit canton factor) in Jue3on Cit). 0n#une 2''(, he stopped !or*in at the factor) and hunted for another?ob. T!o % !ee*s prior to his arrest, accused =n !as introduced b) hisfriend Lian in to =n @in for a possible ?ob as technician in a bihonfactor) o!ned b) =n @in.

=n #ul) %%, 2''(, =n @in called up and set a "eetin !ith accused=n at the Ta)u"an branch of #ollibee the ne7t da). hile !aitin at#ollibee, accused =n received a call fro" =n @in that he could notpersonall) "eet hi". 0nstead, his t!o % co-!or*ers !ould "eet accused=n as instructed. @ubse>uentl), t!o % "en ans!erin to =n @insdescription approached accused =n. 8e ?oined the" inside a )ello!car. hen the) reached a certain place, the driver reached for his cellular

phone and called up so"eone. After a brief conversation, the driver handedthe phone to hi". =n @in !as on the line and infor"ed hi" that the driver
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Credit Upto Warehouse

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