2nd batch of Case Digests(Deposit to Security)Credit Transactions Under Atty. Cong

DepositDOCTRINE: Obligation not to make use of a thing deposited unless expressly authorized. When there is permission to make use of the thing, the contract becomes either loan or bailment.ANGEL JAVELLANA,plaintiff-appellee,vs.JOSE LIM, ET AL.,defendants-appellants.FACTS:Jose, Ceverino and Domingo Lim, defendants, executed a document in favor of Angel Javellana, plaintiff-appellee, wherein it states that:

they, defendants, have received, as a deposit, without interest, money from plaintiff-appellee and agreed upon a date when they will return the money. Upon the stipulated due date, defendants asked for an extension to pay and binding themselves to pay 15% interest per annum on the amount of their indebtedness, to which the plaintiff-appellee acceded.

The defendants were not able to pay the full amount of their indebtedness notwithstanding the request made by plaintiff-appellee. As they were able to pay P1,000,on May 15, 1900 while the plaintiff incurred damages amounting to P830 since Jaunary 20, 1898.

The lower court ruled in favor of plaintiff-appellee for the recovery of the amount of P5,714.44. While a motion for new trial was granted.

ISSUE: Whether the agreement entered into by the parties is one of loan or of deposit?

HELD: The document executed was a contract of loan. The court affirmed the trial courts decision and favoredJavellana, and directed the defendants to pay the debt and interest.Moreover, for the reason above set forth it may, as a matter of course, be inferred that there was no renewal of the contract deposited converted into a loan, because, as has already been stated, the defendants received said amount by virtue of real loan contract under the name of a deposit, since the so-called bailees were forthwith authorized to dispose of the amount deposited. This they have done, as has been clearly shown.Where money, consisting of coins of legal tender, is deposited with a person and the latter is authorized by the depositor to use and dispose of the same, the agreement is not a contract of deposit, but a loan. A subsequent agreement between the parties as to interest on the amount said to have been deposited, because the same could not be returned at the time fixed therefor, does not constitute a renewal of an agreement of deposit, but it is the best evidence that the original contract entered into between therein was for a loan under the guise of a deposit. In this case, the appleants were lawfully authorized to make use of the amount deposited, which they have done. Jose Lim came to the plaintiff to be able to ask for an extension of payment since he have used the amount deposited to him, with the condition that 15% interest shall we included in the contract.The law provides:Article 1767 of the Civil Code provides that The depository cannot make use of the thing deposited without the express permission of the depositor.Otherwise he shall be liable for losses and damages.Article 1768 also provides that When the depository has permission to make use of the thing deposited, the contract loses the character of a deposit and becomes a loan or bailment.The permission shall not be presumed, and its existence must be proven.

Aniceta Palacio v. DionisioSudario, G.R. No. 2908 Facts:The plaintiff made an arrangement for the pasturing of eighty-one head of cattle, in return for which she has to give one-half of the calves that might be born and was to pay the defendant one-half peso for each calf branded. On demand for the whole, forty-eight head of cattle were afterwards returned to her and this action is brought to recover the remaining thirty-three. It is claimed that the thirty-three cows either died of disease or were drowned in a flood. The defendant's witnesses swore that of the cows that perished, six died from overfeeding, and they failed to make clear the happening of any flood sufficient to destroy the others.

Issue: Whether or not defendant should be held liable for the loss of the 33 cows.

Held: If we consider the contract as one of deposit, then under article 1183 of the Civil Code, the burden of explanation of the loss rested upon the depositary and under article 1769 the fault is presumed to be his. The defendant has not succeeded in showing that the loss occurred either without fault on his part or by reason ofcasofortuito.If, however, the contract be not one strictly of deposit but one according to a local custom for the pasturing of cattle, the obligations of the parties remain the same.The judgment of the lower court holding defendant liable was affirmed.

Atty. DionisioCalibo v. Court of Appeals, G.R. No. 120528

FACTS: On January 25, 1979, plaintiff-appellee [herein petitioner] Pablo U. Abella purchased an MF 210 agricultural tractor which he used in his farm in Dagohoy, Bohol.

Sometimes in October or November 1985, Pablo Abella's son, Mike abella rented for residential purpose the house of defendant-appellant Dionosio R. Calibo, Jr., in Tagbilaran City.In October 1986, Pablo Abella pulled out his aforementioned tractor from his farm in Dagohoy, Bohol, and left it in the safekeeping of his son, Mike Abella, in Tagbilaran City. Mike kept the tractor in the garage of the house he was leasing from Calibo.

Since he started renting Calibo's house, Mike had been religiously paying the monthly rentals therefor, but beginning November of 1986, he stopped doing so. The following month, Calibo learned that Mike had never paid the charges for electric and water consumption in the leased premises which the latter was duty-bound to shoulder. Thus, Calibo confronted Mike about his rental arrears and the unpaid electric and water bills. During this confrontation, Mike informed Calibo that he (Mike) would be staying in the leased property only until the end of December 1986. Mike also assured Calibo that he would be settling his account with the latter, offering the tractor as security. Mike even asked Calibo to help him find a buyer for the tractor so he could sooner pay his outstanding obligation.

In January 1987 when a new tenant moved into the house formerly leased to Mike, Calibo had the tractor moved to the garage of his father's house, also in Tagbilaran City.

Apprehensive over Mike's unsettled account, Calibo visited him in his Cebu City address in January, February and March, 1987 and tried to collect payment. On all three occasions, Calibo was unable to talk to Mike as the latter was reportedly out of town. On his third trip to Cebu City, Calibo left word with the occupants of the Abella residence thereat that there was a prospective buyer for the tractor. The following week, Mike saw Calibo in Tagbilaran City to inquire about the possible tractor buyer. The sale, however, did not push through as the buyer did not come back anymore. When again confronted with his outstanding obligation, Mike reassured Calibo that the tractor would stand as a guarantee for its payment. That was the last time Calibo saw or heard from Mike.

After a long while, or on November 22, 1988, Mike's father, Pablo Abella, came to Tagbilaran City to claim and take possession of the tractor. Calibo, however, informed Pablo that Mike left the tractor with him as security for the payment of Mike's obligation to him. Pablo offered to write Mike a check for P2,000.00 in payment of Mike's unpaid lease rentals, in addition to issuing postdated checks to cover the unpaid electric and water bills the correctness of which Pablo said he still had to verify with Mike. Calibo told Pablo that he would accept the P2,000.00-check only if the latter would execute a promissory note in his favor to cover the amount of the unpaid electric and water bills. Pablo was not amenable to this proposal. The two of them having failed to come to an agreement, Pablo left and went back to Cebu City, unsuccessful in his attempt to take possession of the tractor."

On November 25, 1988, private respondent instituted an action for replevin, claiming ownership of the tractor and seeking to recover possession thereof from petitioner. As adverted to above, the trial court ruled in favor of private respondent; so did the Court of Appeals when petitioner appealed.The Court of Appeals sustained the ruling of the trial court that Mike Abella could not have validly pledged the subject tractor to petitioner since he was not the owner thereof, nor was he authorized by its owner to pledge the tractor.

ISSUE: Is it a valid deposit?HELD: NO.

RATIO

Essentially, petitioner claims that the tractor in question was validly pledged to him by private respondent's son Mike Abella to answer for the latter's monetary obligations to petitioner. In the alternative, petitioner asserts that the tractor was left with him, in the concept of an innkeeper, on deposit and that he may validly hold on thereto until Mike Abella pays his obligations.

There is likewise no valid deposit in this case. In a contract of deposit, a person receives an object belonging to another with the obligation of safely keeping it and of returning the same.5 Petitioner himself states that he received the tractor not to safely keep it but as a form of security for the payment of Mike Abella's obligations. There is no deposit where the principal purpose for receiving the object is not safekeeping.

Consequently, petitioner had no right to refuse delivery of the tractor to its lawful owner. On the other hand, private respondent, as owner, had every right to seek to repossess the tractor, including the institution of the instant action for replevin.

Petitioner maintains that even if Mike Abella were not the owner of the tractor, a principal-agent relationship may be implied between Mike Abella and private respondent. He contends that the latter failed to repudiate the alleged agency, knowing that his son is acting on his behalf without authority when he pledged the tractor to petitioner. Petitioner argues that, under Article 1911 of the Civil Code, private respondent is bound by the pledge, even if it were beyond the authority of his son to pledge the tractor, since he allowed his son to act as though he had full powers.On the other hand, private respondent asserts that respondent court had correctly ruled on the matter.In a contract of pledge, the creditor is given the right to retain his debtor's movable property in his possession, or in that of a third person to whom it has been delivered, until the debt is paid. For the contract to be valid, it is necessary that: (1) the pledge is constituted to secure the fulfillment of a principal obligation; (2) the pledgor be the absolute owner of the thing pledged; and (3) the person constituting the pledge has the free disposal of his property, and in the absence thereof, that he be legally authorized for the purpose.2As found by the trial court and affirmed by respondent court, the pledgor in this case, Mike Abella, was not the absolute owner of the tractor that was allegedly pledged to petitioner. The tractor was owned by his father, private respondent, who left the equipment with him for safekeeping. Clearly, the second requisite for a valid pledge, that the pledgor be the absolute owner of the property, is absent in this case. Hence, there is no valid pledge."He who is not the owner or proprietor of the property pledged or mortgaged to guarantee the fulfillment of a principal obligation, cannot legally constitute such a guaranty as may validly bind the property in favor of his creditor, and the pledgee or mortgagee in such a case acquires no right whatsoever in the property pledged or mortgaged."3There also does not appear to be any agency in this case. We agree with the Court of Appeals that:"As indicated in Article 1869, for an agency relationship to be deemed as implied, the principal must know that another person is acting on his behalf without authority. Here, appellee categorically stated that the only purpose for his leaving the subject tractor in the care and custody of Mike Abella was for safekeeping, and definitely not for him to pledge or alienate the same. If it were true that Mike pledged appeellee's tractor to appellant, then Mike was acting not only without appellee's authority but without the latter's knowledge as well.Article 1911, on the other hand, mandates that the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. Again, in view of appellee's lack of knowledge of Mike's pledging the tractor without any authority from him, it stands to reason that the former could not have allowed the latter to pledge the tractor as if he had full powers to do so."

Bank of the Philippine Islands v. Hon. Court of Appeals and Eastern Plywood and Lim, G.R. No. 104612 / 232 SCRA302, 10 May 1994;

FactsPrivate respondents held at least one and/or joint account with CBTC. A joint checking and account was opened by Lim and Mariano Velasco in the amount of Php120,000, which funds deposited came from the and/or joint account of private respondents. Various amounts were later deposited or withdrawn from the and account of Lim & Velasco. Velasco died, and at the time of his death the outstanding balance of the and account was Php662,522.87. By virtue of an indemnity undertaking executed by Lim, one-half of this amount was provisionally transferred to one the accounts of Eastern with CBTC.

Eastern obtained a loan of Php73,000 from CBTC, for which loan Eastern issued PNs payable on demand at the order of CBTC. Eastern also signed a hold-out agreement which provided that Eastern and Lim conferred upon CBTC sufficient power to retain the account balance of the and account (current account of Lim and Velasco) and to apply same for the purpose of liquidating the load of Php73,000 in respect of the principal and/or interest. In the meantime, a case for the settlement of Velascos estate was filed in the RTC of Pasig. The RTC granted the claim of the estate from the and account of Lim and Velasco and allowed the heirs to withdraw the amount of Php331,261.44. When CBTC merged with BPI, the latter filed a complaint against Lim and Eastern demanding the payment of the loan. Lim and Eastern filed a counterclaim against BPI for the return of the balance in the disputed account subject of the holdout agreement; the balance of which and account was permitted by BPI to be withdrawn by the heirs of Velasco.

IssueIs BPI still liable to the private respondents on the and account subject of the holdout agreement after its withdrawal by the heirs of Velasco?

HeldYes. The award of Php331,264.44 in favor of private respondents shall bear interest at the rate of 12% per annum from the filing of the counterclaim.

RatioThe counterclaim of private respondents for the return of the Php331,261.44 was equivalent to a demand that they be allowed to withdraw their deposit with the bank. Article 1980 of the Civil Code provides that fixed, savings, current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan.In Serrano v. Central Bank, bank deposits are in the nature of irregular deposits; they are really loans because they earn interest. The relationship then between a depositor and a bank is one of creditor and debtor. The deposit under the questioned and account was an ordinary bank deposit; hence, it was payable on demand of the depositor.

The account was proven and established to belong to Eastern even it was deposited in the names of Lim and Velasco. As the real creditor of the BPI, Eastern had the right to withdraw it or to demand payment thereof. BPI cannot be relieved of its duty to pay Eastern simply because it already allowed the heirs of Velasco to withdraw the whole balance of the account. The petitioner should have not allowed such withdrawal because it had admitted in the holdout agreement the questioned ownership of the money deposited in the account. As early as May 12 1979, CBTC was notified by the corporate secretary of Eastern that the deposit in the and account of Lim and Velasco was being claimed by them and that one-half was being claimed by the heirs of Velasco.

Moreover, the order of the RTC of Pasig merely authorized the heirs of Velasco to withdraw the account. BPI was not specifically ordered to release the account to the said heirs; hence, it was under no judicial compulsion to do so. The authorization given to the heirs of Velasco cannot be construed as a final determination or adjudication that the account belonged to Velasco. When the ownership of a particular property is disputed, the determination by a probate court of whether that property is included in the estate of a deceased is merely provisional in character and cannot be the subject of execution. Because the ownership of the deposit remained undetermined, BPI, as the debtor, had no right to pay to persons other than those in whose favor the obligation was constituted or whose right or authority to receive payment is indisputable. The payment of the money deposited with BPI that will extinguish its obligation to the creditor-depositor is payment to the person of the creditor or to one authorized by him or by the law to receive it. The payment of BPI to the heirs of Velasco even if done in good faith did not extinguish its obligation to the true depositor, Eastern.

Bank of the Philippine Islands v. Intermediate Appellate Court, G.R. No. L-66826

Facts:Rizaldy T. Zshornack and his wife maintained in COMTRUST a dollar savings account and a peso current account. An application for a dollar drat was accomplished by Virgillo Garcia branch manager of COMTRUST payable to a certain LeovigildaDizon. In the application, Garcia indicated that the amount was to be charged to the dollar savings account of the Zshornacks. There was no indication of the name of the purchaser of the dollar draft. Comtrust issued a check payable to the order of Dizon. When Zshornack noticed the withdrawal from his account, he demanded an explanation from the bank. In its answer, Comtrust claimed that the peso value of the withdrawal was given to Atty. Ernesto Zshornack, brother of Rizaldy when he encashed with COMTRUST a cashiers check for P8450 issued by the manila banking corporation payable to Ernesto.

Issue: Whether the contract between petitioner and respondent bank is a deposit?

Held: 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.

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

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

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

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

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

Ruling:Yes.The contract in the case at bar is a special kind of deposit. It cannot be characterized as an ordinary contract of lease under Article 1643 because the full and absolute possession and control of the safety deposit box was not given to the joint renters the petitioner and Pugaos.American Jurisprudence:The prevailing rule is that the relation between a bank renting out safe-deposit boxes and its customer with respect to the contents of the box is that of a bail or bailee, the bailment being for hire and mutual benefit.Our provisions on safety deposit boxes are governed by Section 72 (a) of the General Banking Act, and this primary function is still found within the parameters of a contract of deposit like the receiving in custody of funds, documents and other valuable objects for safekeeping. The renting out of the safety deposit boxes is not independent from, but related to or in conjunction with, this principal function. Thus, depositarys liability is governed by our civil code rules on obligation and contracts, and thus the SBTC would be liable if, in performing its obligation, it is found guilty of fraud, negligence, delay or contravention of the tenor of the agreement.

Consolidated Terminals, Inc. v. Artex Development Co., Inc., G.R. No. L-25748 / 63SCRA 46, 10 March 1975;Jose O. Sia v. People of the Philippines, G.R. No. L-30896 / 121 SCRA 661, 28 April1983;

LUA KIAN V. MANILA RAILROAD COMPANYG.R. No. L-23033 / 19 SCRA 5, 5 January 1967

FACTS:Manila Port Service, the arrastre operator, is a subsidiary of defendant Manila Railroad Company.

MPS received in Jan. 1960 shipments of Carnation evaporated milk for two consignees, Lua Kian and Cebu United. According to their respective bills of lading, Luan Kian was supposed to receive 2,000 cases but only received 1,829 (171 short of 2,000) while Cebu United was supposed to receive 3,000 cases but received 3,171. The excess 171 cases were marked "Cebu United".

Accordingly this situation placed the defendant arrastre operator in a dilemma, for should it deliver them to Lua Kian the goods could be claimed by the consignee Cebu United Enterprises whose markings they bore, and should it deliver according to markings, to Cebu United Enterprises, it might be sued by the consignee, Lua Kian whose bill of lading indicated that it should receive 171 cases more.The Management Contract even exempts exempts the arrastre operator from responsibility for misdelivery or non-delivery due to improper or insufficient marking.

ISSUE: Is MPS liable for the short-delivery to Lua Kian?

HELD: Yes. The legal relationship between an arrastre operator and the consignee is akin to that of a depositor and warehouseman. As custodian of the goods discharged from the vessel, it was defendant arrastre operator's duty, like that of any ordinary depositary, to take good care of the goods and to turn them over to the party entitled to their possession.Under this particular set of circumstances, said defendant should have withheld delivery because of the discrepancy between the bill of lading and the markings and conducted its own investigation, not unlike that under Section 18 of the Warehouse Receipts Law, or called upon the parties, to interplead, such as in a case under Section 17 of the same law, in order to determine the rightful owner of the goods.Notwithstanding Section 12 of the Management Contract exempting the arrastre from liability, the court cannot excuse the defendant from liability because the bill of lading showed that only 3,000 cases were consigned to Cebu United Enterprises. The fact that the excess of 171 cases were marked for Cebu United Enterprises and that the consignment to Lua Kian was 171 cases less than the 2,000 in the bill of lading, should have been sufficient reason for the MPS to withhold the goods pending determination of their rightful ownership.

DOCTRINE: Intention of the Parties in the contract shall prevailMANUEL GARCIA GAVIERES,plaintiff-appellant,vs.T.H. PARDO DE TAVERA,defendant-appellee.FACTS:Don Manuel Gavieres, successor in interest of the deceased Dona Ignacia de Gorricho, and Don Trinidad H. Pardo de Tavera, heirs of Don Felix de Tavera. Ignacia and Felix executed a contract which provides:Received of SeoritaIgnacia de Gorricho the sum of 3,000 pesos, gold (3,000 pesos), as a deposit payable on two months' notice in advance, with interest at 6 per cent per annum with an hypothecation of the goods now owned by me or which may be owned hereafter, as security of the payment.In witness whereof I sign in Binondo, January 31, 1859.lawphil.netFELIX PARDO DE TAVERA.

The plaintiff filed a collection of balance which amounted to P1,434.75 from the original P3,000. The CFI-Tondofavored the defendants.

Contention of the Manuel The contract executed was a contract of deposit as it was provided in the said written agreement of the parties.

Contention of Trinidad - (1) The contract was a loan and it is the intention of the parties that should be followed. (2) The prescription applicable to loans has extinguished the right of action.

ISSUE:Whether or not the contract executed is a contract of loan or deposit.

RULING:Contract of loan. This is based on the examination of the agreement and intention of the parties.

The obligation of the depositary to pay interest at the rate of 6 per cent to the depositor suffices to cause the obligation to be considered as a loan and makes it likewise evident that it was the intention of the parties that the depositary should have the right to make use of the amount deposited, since it was stimulated that the amount could be collected after notice of two months in advance. Such being the case, the contract lost the character of a deposit and acquired that of a loan.

Prescription has extinguished the contract of loan as provided in the old Civil Code.

All personal actions, such as those which arise from a contract of loan, cease to have legal effect after twenty years according to the former law and after fifteen years according to the Civil Code now in force.He who by laches in the exercise of his rights has caused a failure of proof has no right to complain if the court does not apply the strict rules of evidence which are applicable in ordinary cases, and admits to a certain extent the presumption to which the conduct of the interest party himself naturally gives rise.There were absence of lack of evidence to other claims that would favorGavieres. The document dated Jan 8, 1869, executed by Felix Garcia (husband of Ignacia) provides for the acknowledgment for the receipt of 1,224 pesos from Felix de Tavera as balance from the sum of P2,000.

Manuel M. Serrano v. Central Bank of the Philippines, G.R. No. L-30511

Facts: Petitioner made a time deposit, for one year with 6% interest, of One Hundred Fifty Thousand Pesos (P150,000.00) with the respondent Overseas Bank of Manila. Concepcion Maneja also made a time deposit, for one year with 6-% interest, on March 6, 1967, of Two Hundred Thousand Pesos (P200,000.00) with the same respondent Overseas Bank of Manila. On August 31, 1968, Concepcion Maneja, married to Felixberto M. Serrano, assigned and conveyed to petitioner Manuel M. Serrano, her time deposit of P200,000.00 with respondent Overseas Bank of Manila. 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. In the case of Ramos vs. Central Bank of the Philippines,petitioner Manuel Serrano filed on September 6, 1968, a motion to intervene 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. This was denied 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, thousands of other depositors would follow and thus cause an avalanche of cases in this Court.Issue: Whether or not plaintiff is entitled to the relief sought.Held: This case isfor the 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 said emergency loans, said collaterals allegedly acquired through the use of depositors money.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.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. 14 Current and savings deposit 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 he respondent Bank to honor the time deposit is failure to pay s obligation as a debtor and not a breach of trust arising from depositary's failure to return the subject matter of the deposit.Petition is dismissed.

PaulinoGullas v. Philippine National Bank, G.R. No. L-43191

FACTS:The parties to the case are PaulinoGullas and the Philippine National Bank. The first named is a member of the Philippine Bar, resident in the City of Cebu. The second named is a banking corporation with a branch in the same city. Attorney Gullas has had a current account with the bank.

It appears from the record that on August 2, 1933, the Treasurer of the United States for the United States Veterans Bureau issued a Warrant in the amount of $361, payable to the order of Francisco SabectoriaBacos. PaulinoGullas and Pedro Lopez signed as endorsers of this check. Thereupon it was cashed by the Philippine National Bank. Subsequently the treasury warrant was dishonored by the Insular Treasurer.

At that time the outstanding balance of Attorney Gullas on the books of the bank was P509. Against this balance he had issued certain cheeks which could not be paid when the money was sequestered by the On August 20, 1933, Attorney Gullas left his residence for Manila.

The bank on learning of the dishonor of the treasury warrant sent notices by mail to Mr. Gullas which could not be delivered to him at that time because he was in Manila. In the bank's letter of August 21, 1933, addressed to Messrs. PaulinoGulla and Pedro Lopez, they were informed that the United States Treasury warrant No. 20175 in the name of Francisco SabectoriaBacos for $361 or P722, the payment for which had been received has been returned by our Manila office with the notation that the payment of his check has been stopped by the Insular Treasurer. "In view of this therefore we have applied the outstanding balances of your current accounts with us to the part payment of the foregoing check", namely, Mr. PaulinoGullas P509. On the return of Attorney Gullas to Cebu on August 31, 1933, notice of dishonor was received and the unpaid balance of the United States Treasury warrant was immediately paid by him.

As a consequence of these happenings, two occurrences transpired which inconvenienced Attorney Gullas. In the first place, as above indicated, checks including one for his insurance were not paid because of the lack of funds standing to his credit in the bank. In the second place, periodicals in the vicinity gave prominence to the news to the great mortification of Gullas.

A variety of incidental questions have been suggested on the record which it can be taken for granted as having been adversely disposed of in this opinion.

ISSUE: Does the Philippine National Bank have the right to apply a deposit to the debt of depositor to the bank?HELD: Generally YES. However, in this case, NO.

RATIO

The Civil Code contains provisions regarding compensation (set off) and deposit. (Articles 1195 et seq., 1758 et seq. The portions of Philippine law provide that compensation shall take place when two persons are reciprocally creditor and debtor of each other (Civil Code, article 1195). In his connection, it has been held that the relation existing between a depositor and a bank is that of creditor and debtor. (Fulton Iron Works Co. vs. China Banking Corporation [1933], 59 Phil., 59.)

As a general rule, a bank has a right of set off of the deposits in its hands for the payment of any indebtedness to it on the part of a depositor. In Louisiana, however, a civil law jurisdiction, the rule is denied, and it is held that a bank has no right, without an order from or special assent of the depositor to retain out of his deposit an amount sufficient to meet his indebtedness. The basis of the Louisiana doctrine is the theory of confidential contracts arising from irregular deposits, e. g., the deposit of money with a banker. With freedom of selection and after full preference to the minority rule as more in harmony with modern banking practice.

Starting, therefore, from the premise that the Philippine National Bank had with respect to the deposit of Gullas a right of set off, we next consider if that remedy was enforced properly. 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 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.) The decision cited represents the minority doctrine, for on principle it would seem that notice is not necessary to a maker because the right is based on the doctrine that the relationship is that of creditor and debtor. 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.

Agreeable to the foregoing, the errors assigned by the parties will in the main be overruled, with the result that the judgment of the trial court will be modified by sentencing the defendant to pay the plaintiff the sum of P250, and the costs of both instances.

Ramon Aboitizv.Oquinena& Co. and Oquinena&Co.Ltd.- G.R. No. 12407 / 39 Phil 926, 22 July 1919 -

FactsJuan de Aldecoa maintained mercantile relations with Oquiena. When Aldecoa died, Anastacio de Aldecoa was appointed administrator of the formers estate. At that time Anastacio was also the Cebu manager of Oquiena. Anastacio committed suicide, thus Aboitiz was appointed as administrator of Juans estate in place of Anastacio.

For the first cause of action, plaintiff sought to recover from defendants the sum of Php9,011.58 with interest at the rate 8% per annum beginning on Feb. 13, 1913; and for the second cause of action, the sum of Php5,000 with legal interest from Feb. 5, 1915, the time the complaint was filed.

At the death of Juan, Anastacio collected from the New York Life Insurance the sum of Php9,011.58 which Anastacio deposited with, and was receipted by, Oquiena& Co. .

After the death of Juan I. de Aldecoa, his business employees in Surigao continued said commercial relations with the Oquiena& Co. in Cebu, whereby there resulted a balance, in favor of Jose I. de Aldecoa, of P2,312.79, and not P5,000 as is alleged in the complaint.

The court rendered a judgment against defendant Oquiena& Co. in favor of the petitioner, and absolved defendant Oquiena& Co. Ltd.

Both defendants appealed the decision of the trial court.

IssueDid the trial court err when it- overruled the demurrer interposed to the amended complaint? - pronounced judgment against Oquiena& Co., a company already dissolved, and absolved Oquiena& Co. Ltd., the successor and assignee of the former?

HeldNo/Yes.

RatioThe demurrer was based on the ground that the facts alleged in the complaint did not constitute a cause of action in regard to the payment of the sum of Php9,011.58. It is said that, if this was in the hands of the defendants as a deposit, the plaintiff cannot withdraw it without a judicial order, inasmuch as in the receipt no fixed time was given. The document was in fact embodying a deposit, according to its terms, without a fixed time. But exactly for being such, the sum deposited may be withdrawn at any time.

According to its by-laws, Oquiena& Co. ought to have bee dissolved ob July 30, 1912. However, in accordance with the said by-laws this date was extended to July 1, 1913. On April 14, 1914, the creditors and shareholders of the Oquiena& Co. began to organize a company called Oquiena& Co. Ltd. and was transferred with all the assets and business of Oquiena& Co. In the articles of co-partnership, it was made to appear that Oquiena& Co. Ltd. had assumed all the obligations of Oquiena& Co.; and that it appeared at its own request as defendant in this case and appealed in order to assume all the obligations of Oquiena& Co. In fact and in law, Oquiena& Co. had not existed since the organization of Oquiena& Co. Ltd. and there was no reason why the former should be declared liable instead of Oquiena& Co. Ltd. to which had passed all said obligations and rights and by which all were assumed in good faith.

Ramon Gonzales v. Go Tiong, G.R. No. L-11776FACTS: Go Tiong owned a rice mill and warehouse, located at Mabini, Urdaneta, Pangasinan. He obtained a license of a bonded businessman with Luzon Surety Co., with conditions he failed to fulfill. The warehouse and palay deposited therein were insured with the Alliance Surety and Insurance Company. Ramon Gonzales deposited palay to Go Tiong even before he got the license who later demanded the value of his deposits. But Go Tiong failed to give him his value until fire burned down the warehouse, with sacks in excess of that was authorized under his license. The receipts issued to Gonzales were ordinary receipts and not the warehouse receipts as defined by Warehouse receipts act. Plaintiff filed their claims with the Bureau of Commerce and with the proceeds of the insurance policy, BOC paid off some claims. Plaintiffs counsel withdrew the claims, because according to court nothing came from plaintiff's efforts to have his claim paid, inconsistent with what Go Tiong claimed that it was denied. Gonzales filed claims both against Gonzales and Luzon Surety, and renewed his claim with BOC. Gonzales and Go Tiong entered into a contract of amicable settlement to the effect that upon the settlement of all accounts, but upon failure to comply, Gonzales prosecuted his court action. Court ruled in favor of Gonzales. Hence, this appeal.ISSUE: Is the plaintiffs claim covered by the Civil Law, and not Bonded Warehouse Act for the reason that, Go Tiong issued to plaintiff were ordinary receipts, not the warehouse receipts contemplated by the Warehouse Receipts Law, and because the deposits of palay of plaintiff were gratuitous?RULING: Consequently, any deposit made with him as a bonded warehouseman must necessarily be governed by the provisions of Act No. 3893. Though it is desirable that receipts issued by a bonded warehouseman should conform to the provisions of the Warehouse Receipts Law, said provisions are not mandatory and indispensable in the sense that if they fell short of the requirements of the Warehouse Receipts Act, then the commodities delivered for storage become ordinary deposits and will not be governed by the provisions of the Bonded Warehouse Act. As the trial court well observed, as far as Go Tiong was concerned, the fact that the receipts issued by him were not "quedans" is no valid ground for defense because he was the principal obligor. Furthermore, as found by the trial court, Go Tiong had repeatedly promised plaintiff to issue to him "quedans" and had assured him that he should not worry; and that Go Tiong was in the habit of issuing ordinary receipts (not "quedans") to his depositors. Considering the fact, as already stated, that prior to the burning of the warehouse, plaintiff demanded the payment of the value of his palay from Go Tiong on two occasions but was put off without any valid reason, it is illogical and unreasonable to hold that the presumption of negligence in case of this kind is rebutted by the bailee by simply proving that the property bailed was destroyed by an ordinary fire which broke out on the bailee's own premises, without regard to the care exercised by the latter to prevent the fire, or to save the property after the commencement of the fire. Besides, as observed by the trial court, the defendant violated the terms of his license by accepting for deposit palay in excess of the limit authorized by his license, which fact must have increased the risk. Appealed decision affirmed.

Sesbreno vs CAGR No. 89252. May 24, 1993

Facts:Raul Sesbreno made a money market placement in the amount of P300, 000 with the Philippine Underwriters Finance Corporation (Philfinance), with a term of 32 days. Philfinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note, the Certificate of Securities Delivery Receipt indicating the sale of the note with notation that said security was in the custody of Pilipinas Bank, and postdated checks drawn against the Insular bank of Asia and America for P305, 533.33 payable on March 31, 1981. The checks were dishonored for having been drawn against insufficient funds.Pilipinas Bank never released the note, nor any instrument related thereto, to Sesbreno but Sesbreno learned that the security was issued April 10, 1980, maturing on April 6, 1981, has the face value of P2, 300, 833.33 with Philfinance as payee and Delta Motors as maker, and was stamped non-negotiable on its face. As Sesbreno was unable to collect his investment and interest thereon, he filed an action for damages against Delta Motors and Pilipinas Bank.RTC: Dismissed the complaintCA: Affirmed

Issue:Whether or not Philfinance remains liable to petitioner under the terms of assignment made by Philfinance to petitioner.

Ruling:Yes.Petitioner notified Delta of his rights as assignee after compensation had taken place by operation of law because the offsetting instruments had both reached maturity. It is firmly settled doctrine that the rights of an assignee are not only greater than the rights of the assignor, since the assignee is merely substituted in the place of the assignor and that the assignee acquires right subject to equities.The record is bare of any indication that Philfinance had itself notified Delta of assignment to petitioner, the court is compelled to uphold the defense of compensation raised by private respondent Delta. Philfinance remains liable to petitioner under the terms of the assignment made by Philfinance to petitioner.

Notes:Money market1. It is a market dealing in standardized short-term credit instruments (involving large amounts) where lenders and borrowers do not deal directly with each other by through a middle man or dealer in open market in a money transaction, the investor is a lender who loans his money to a borrower through a middleman or dealer.

Roman Catholic Bishop of Jaro v. Gregorio De La Pena, G.R. No. L-6913 / 26 Phil 144,21 November 1913;Romeo delos Santos v. Tan Khey, G.R. No. 26695-R / 58 OG 7693, 30 July 1962;

SILVESTRA BARON V. PABLO DAVIDG.R. Nos. L-26948 and L-26949 October 8, 1927

FACTS:The defendant owns a rice mill, which was well patronized by the rice growers of the vicinity.

On January 17, 1921, a fire occurred that destroyed the mill and its contents, and it was some time before the mill could be rebuilt and put in operation again.

Silvestra Baron (P1) and Guillermo Baron (P2) each filed an action for the recovery of the value of their palay (P5,238 and P5,734, respectively) from the defendant, and alleged that: the cavans of palay have been sold by both plaintiffs to the David in the year 1920 and the palay was delivered to him at his special request, with a promise of compensation at the highest price per cavan.

David claims that the palay was deposited subject to future withdrawal by the depositors or to some future sale, which was never effected. He also contended that in order for the plaintiffs to recover, it is necessary that they should be able to establish that the plaintiffs' palay was delivered in the character of a sale, and that if, on the contrary, the defendant should prove that the delivery was made in the character of deposit, the defendant should be absolved.

ISSUE: WON there was deposit.

HELD: NO. Art. 1978 states that when the depositary has permission to use the thing deposited, the contract loses the concept of a deposit and becomes a loan or commodatum, except where safekeeping is still the principal purpose of the contract. The permission shall not be presumed, and its existence must be proved.

When the palay in question was placed by the plaintiffs in the defendant's mill there was the understanding that the defendant was at liberty to convert it into rice and dispose of it at his pleasure. The mill was actively running during the entire season, and as palay was daily coming in from many customers and as rice was being constantly shipped by the defendant to Manila, or other rice markets, it was impossible to keep the plaintiffs' palay segregated. In fact the defendant admits that the plaintiffs' palay was mixed with that of others.

It is quite certain that all of the plaintiffs' palay, which was put in before June 1, 1920, been milled and disposed of long prior to the fire of January 17, 1921. Furthermore, the proof shows that when the fire occurred there could not have been more than about 360 cavans of palay in the mill, none of which by any reasonable probability could have been any part of the palay delivered by the plaintiffs.

The defendant then is bound to account for the value of the subject palay, and his liability was not extinguished by the occurence of the fire.

Dissenting:

Johns dissented to the weight given by the court on the perjured statements of David than those against the proofs of two elderly individuals as to the price of the palay and who reposed their trust and confidence to their nephew.

DOCTRINE: General concept of letters of credit trust receipt. A contract of security and that the lender is only the lender of a security title from advances made by the borrower.SPOUSES TIRSO I. VINTOLA and LORETO DY VINTOLA,defendants-appellants,vs.INSULAR BANK OF ASIA AND AMERICA,plaintiff-appellee.FACTS:Spouses Vintola (VINTOLAS) appliedfor and were granted adomestic letter ofcredit by the Insular Bank ofAsia and America (IBAA). The Letter ofCredit authorized the bank to negotiate for their account drafts drawn by their supplier, one Stalin Tan, on Dax Kin International for the purchase of puka and olive seashells. VINTOLAS received from Stalin Tan the puka and olive shells and executed a Trust Receipt agreement with IBAA. Under that Agreement, the VINTOLAS agreedto hold the goods in trust for IBAA as the "latter's property with liberty tosell the same for its account, and"incase of sale" to turn overthe proceeds. Having defaulted on their obligation,IBAA demanded payment from the VINTOLAS.

The VINTOLAS, who were unable todispose of the shells, responded byoffering to return the goods. IBAA refused to accept the merchandise, anddue to the continued refusalof the VINTOLAS to make good their undertaking, IBAA chargedthem with Estafa for having misappropriated, misapplied and converted for their own personal use and benefit the aforesaid goods.

The trial court acquitted theVINTOLAS of the offense charged as they turned over the seashells to the custody of the trial court to disproved the claim of misappropriation. IBAA commenced a civil action to recover the value of the goods. At first court dismissed the case holding that the complaint was barred by the judgment of acquittal in the criminal but was granted through reconsideration. The CFI-Cebu certified the case to the SC as the issue involves a question of law.

Contention of Vintolas:

(1) The obligation to IBAA has been extinguished since they were unable to dispose the seashells and they have relinguished possession thereof to IBAA, as owner of the goods, by depositing them to court.(2) The acquittal from the estafa case, also extinguishes civil liability since the IBAA did not reserved their right to enforce a separate civil action.

ISSUE :

Whether or not the Vintolas can return the goods/ merchandise to IBAA as payment for the trust receipt?

RULINGS :

NO. The return or non disposal of the thing secured by the letter of credit dies not extinguish the liability of the borrower to pay. The court affirmed the ruling of CFI-Cebu that favored the payment of 72,982.27 plus 14% interest.

A letter of credit-trust receipt arrangement is endowedwith its own distinctive features and characteristics. Under that set-up, a bank extends aloan covered by the Letter ofCredit, with thetrust receipt as a security for the loan. In other words, the transaction involvesa loan feature represented by the letter of credit, anda security feature which is inthe covering trust receipt.

A trust receipt, therefore, is a security agreement, pursuant towhich a bank acquires a "security interest" in the goods. "It secures anindebtedness and there can be nosuch thing as security interest that secures no obligation.

DEFINITION:"Security Interest" means a property interest in goods, documents or instruments to secure performance of some obligations of the entrustee or of some third persons to the entruster and includes title, whether or not expressed to be absolute, whenever such title is in substance taken or retained for security only.As elucidated inSamo vs. People"a trust receipt is considered as a security transaction intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral of the merchandise imported or purchased."The trust receipt arrangement did not convert the IBAA into an investor; the latter remained a lender and creditor. IBAA was merely the holder of a security title for the advances in made to Vintolas. The property acquired shall remain to be owned by the Vintolas and should be disposed on their own risk. The IBAA is not the factual owner of the goods, the VINTOLAS cannot justifiably claim that because they have surrendered the goods to IBAA and subsequently deposited them in the custody of the court, they are absolutely relieved of their obligation to pay their loan because of their inability to dispose of the goods. The fact that they were unable to sell the seashells in question does not affect IBAA's right to recover the advances it had made under the Letter of Credit.

Triple-V Food Services, Inc. v. Filipino Merchants Insurance Company, Inc., G.R. No.160544Facts: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.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.The RTC issued its judgment in favor of the plaintiff (FMICI) and against the defendant Triple V (herein petitioner). On appeal, petitioner contended 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. The Court of Appeals dismissed petitioner's appeal and affirmed the appealed decision of the trial court.

Issue: Whether or not petitioner should be held liable for the loss of De Asis' car.

Held: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.alaw 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.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.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.

United States v. Jose M. Igpuara, G.R. No. L-7593

FACTS: That the defendant received P2,498 is a fact proven. The defendant drew up a document declaring that they remained in his possession, which he could not have said had he not received them. They remained in his possession, surely in no other sense than to take care of them, for they remained has no other purpose. They remained in the defendant's possession at the disposal of Veraguth; but on August 23 of the same year Veraguth demanded for him through a notarial instrument restitution of them, and to date he has not restored them.

The defendant therein is charged with the crime of estafa, for having swindled Juana Montilla and Eugenio Veraguth out of P2,498 Philippine currency, which he had take on deposit from the former to be at the latter's disposal. The document setting forth the obligation reads: We hold at the disposal of Eugenio Veraguth the sum of two thousand four hundred and ninety-eight pesos (P2,498), the balance from Juana Montilla's sugar. Iloilo, June 26, 1911, Jose Igpuara, for Ramirez and Co.

The Court of First Instance of Iloilo sentenced the defendant to two years of presidio correccional, to pay Juana Montilla P2,498 Philippine currency, and in case of insolvency to subsidiary imprisonment at P2.50 per day, not to exceed one-third of the principal penalty, and the costs.

The defendant appealed, alleging as errors: (1) Holding that the document executed by him was a certificate of deposit; (2) holding the existence of a deposit, without precedent transfer or delivery of the P2,498; and (3) classifying the facts in the case as the crime of estafa.

ISSUE: May he use the thing deposited?HELD: NO.

RATIO

The appellant says: "Juana Montilla's agent voluntarily accepted the sum of P2,498 in an instrument payable on demand, and as no attempt was made to cash it until August 23, 1911, he could indorse and negotiate it like any other commercial instrument. There is no doubt that if Veraguth accepted the receipt for P2,498 it was because at that time he agreed with the defendant to consider the operation of sale on commission closed, leaving the collection of said sum until later, which sum remained as a loan payable upon presentation of the receipt."

Then, after averring the true facts: (1) that a sales commission was precedent; (2) that this commission was settled with a balance of P2,498 in favor of the principal, Juana Montilla; and (3) that this balance remained in the possession of the defendant, who drew up an instrument payable on demand, he has drawn two conclusions, both erroneous: One, that the instrument drawn up in the form of a deposit certificate could be indorsed or negotiated like any other commercial instrument; and the other, that the sum of P2,498 remained in defendant's possession as a loan.

It is also erroneous to assert that sum of money set forth in said certificate is, according to it, in the defendant's possession as a loan. In a loan the lender transmits to the borrower the use of the thing lent, while in a deposit the use of the thing is not transmitted, but merely possession for its custody or safe-keeping.

In order that the depositary may use or dispose of the things deposited, the depositor's consent is required, and then: The rights and obligations of the depositary and of the depositor shall cease, and the rules and provisions applicable to commercial loans, commission, or contract which took the place of the deposit shall be observed. (Art. 309, Code of Commerce.)

The defendant has shown no authorization whatsoever or the consent of the depositary for using or disposing of the P2,498, which the certificate acknowledges, or any contract entered into with the depositor to convert the deposit into a loan, commission, or other contract.

That demand was not made for restitution of the sum deposited, which could have been claimed on the same or the next day after the certificate was signed, does not operate against the depositor, or signify anything except the intention not to press it. Failure to claim at once or delay for sometime in demanding restitution of the things deposited, which was immediately due, does not imply such permission to use the thing deposited as would convert the deposit into a loan.

Article 408 of the Code of Commerce of 1829, previous to the one now in force, provided: The depositary of an amount of money cannot use the amount, and if he makes use of it, he shall be responsible for all damages that may accrue and shall respond to the depositor for the legal interest on the amount.

Whereupon the commentators say: In this case the deposit becomes in fact a loan, as a just punishment imposed upon him who abuses the sacred nature of a deposit and as a means of preventing the desire of gain from leading him into speculations that may be disastrous to the depositor, who is much better secured while the deposit exists when he only has a personal action for recovery.

According to article 548, No. 5, of the Penal Code, those who to the prejudice of another appropriate or abstract for their own use money, goods, or other personal property which they may have received as a deposit, on commission, or for administration, or for any other purpose which produces the obligation of delivering it or returning it, and deny having received it, shall suffer the penalty of the preceding article," which punishes such act as the crime of estafa. The corresponding article of the Penal Code of the Philippines in 535, No. 5. In a decision of an appeal, September 28, 1895, the principle was laid down that: "Since he commits the crime of estafa under article 548 of the Penal Code of Spain who to another's detriment appropriates to himself or abstracts money or goods received on commission for delivery, the court rightly applied this article to the appellant, who, to the manifest detriment of the owner or owners of the securities, since he has not restored them, willfully and wrongfully disposed of them by appropriating them to himself or at least diverting them from the purpose to which he was charged to devote them." It is unquestionable that in no sense did the P2,498 which he willfully and wrongfully disposed of to the detriments of his principal, Juana Montilla, and of the depositor, Eugenio Veraguth, belong to the defendant. Likewise erroneous is the construction apparently at tempted to be given to two decisions of this Supreme Court (U. S. vs. Dominguez, 2 Phil. Rep., 580, and U. S. vs. Morales and Morco, 15 Phil. Rep., 236) as implying that what constitutes estafa is not the disposal of money deposited, but denial of having received same. In the first of said cases there was no evidence that the defendant had appropriated the grain deposited in his possession. On the contrary, it is entirely probable that, after the departure of the defendant from Libmanan on September 20, 1898, two days after the uprising of the civil guard in Nueva Caceres, the rice was seized by the revolutionalists and appropriated to their own uses.In this connection it was held that failure to return the thing deposited was not sufficient, but that it was necessary to prove that the depositary had appropriated it to himself or diverted the deposit to his own or another's benefit. He was accused or refusing to restore, and it was held that the code does not penalize refusal to restore but denial of having received. So much for the crime of omission; now with reference to the crime of commission, it was not held in that decision that appropriation or diversion of the thing deposited would not constitute the crime of estafa. In the second of said decisions, the accused "kept none of the proceeds of the sales. Those, such as they were, he turned over to the owner;" and there being no proof of the appropriation, the agent could not be found guilty of the crime of estafa.

YHT Realty Corporationv.Court of Appeals, G.R. No. 126780- 451 SCRA 638, 17February 2005 -

FactsMcLoughlin was an Australian businessman-philanthropist who met a certain Bhrunilda Mata Tan and befriended him. Tan convinced McLoughlin to transfer from Sheraton Hotel and stay at Tropicana Hotel during trips to the Philippines. Petitioners Lainez, as manager, Payam and Danilo Lopez, had the custody of the keys for the safety deposit boxes, were all employees at Tropicana. McLoughlin started staying at said Tropicana Hotel and registered therein from December 1984 to 1987. On October 30, 1987, McLoughlin arrived from Australia and registered with Tropicana. He rented a safety deposit box which could only be opened through the use of 2 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.

When McLoughlin went for a trip in Hong Kong and without checking out the hotel, he left some US and Australian dollars in the safety deposit box. Upon his return, he went back to Australia; there he noticed that some USD5000 and jewelry he bought from Hong Kong were missing. When he came back to the Philippines, again registered and rented a safety deposit box with Tropicana, placing therein some USD15000, AUD10000 and some important documents. He requested to open the safety deposit box, but he found out that USD2000, and AUD4500 were missing. He confronted Lainez and Payam; they told him that Tan was able to open the safety deposit box. Tan admitted to the said actuation and added that she was assisted by Lainez, Lopez and Payam. Lopez wrote a PN and requested Tan to sign it, which the latter did. Despite the execution of the PN, McLoughlin insisted that it must be the hotel who must assume responsibility for the loss he suffered. However, Lopez refused to accept the responsibility relying on the conditions for renting the deposit box, which held free and blameless Tropicana for any loss in the contents of the safety deposit box.

IssueMay a hotel 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?

Held No. Petitioners were directed, jointly and severally, to pay private respondent.RatioFor the main issue:

Article 2003 provides that 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 reasonability of the former as set for the in articles 1998 to 2001 is suppressed or diminished shall be void. The hotel business like the common carrier's business is imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only lodging for hotel guests and security to their persons and belongings. The twin duty constitutes the essence of the business. The law in turn does not allow such duty to the public to be negated or diluted by any contrary stipulation in so-called "undertakings" that ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature.

In an early case, to hold hotel-keepers or innkeepers 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. With greater reason should the liability of the hotelkeeper be enforced when the missing items are taken without the guests knowledge and consent from a safety deposit box provided by the hotel itself. The undertaking manifestly contravened Article 2003 of the Civil Code it allowed Tropicana to be released from liability arising from any loss in the contents of the safety deposit box for any cause whatsoever.Evidently, the undertaking was intended to bar any claim against Tropicana for any loss of the contents of the safety deposit box whether or not negligence was incurred by Tropicana or its employees. 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 anyforce majeure.It is the loss throughforce 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 asforce majeure_________________________________________________________

(for the benefit of all - Supplemental reasoning of the Court)

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 isforce 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.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.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.

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 theowners and managersof an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. Also, this Court has ruled that if an employee is found negligent, it is presumed that the employer was negligent in selecting and/or supervising him for it is hard for the victim to prove the negligence of such employer.Thus, given the fact that the loss of McLoughlin's money was consummated through the negligence of Tropicana's employees in allowing Tan to open the safety deposit box without the guest's consent, both the assisting employees and YHT Realty Corporation itself, as owner and operator of Tropicana, should be held solidarily liable pursuant to Article 2193.

Petitioners likewise anchor their defense on Article 2002which 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.

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.

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.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.

General Bonded Warehouse and Warehouse ReceiptsAlfredo N. Cruz v. Jose M. Valero, G.R. No. L-2826 / 89 Phil 260, 11 June 1951;

American Foreign Banking Corporation vs J.R. HerridgeGR No. 21005. December 20, 1924

Facts:The debtor, U. de Poli, a licensed public warehouseman, issued warehouse receipt No. A-48 commonly known as a quedan, for the 560 bales of tobacco, which was particularly described as Cagayan tabaco en rama with specified marks thereon. The receipt was indorsed in blank by the person in whose favor it was issued and delivered to a bank as security for an overdraft. The indorser became insolvent and the bank presented its claim for the delivery of the tobacco called for in the warehouse receipt. It was then found that the tobacco had come from Isabella and not from Cagayan, and the banks claim was disputed by the other creditors of the insolvent on the ground, among others, that the tobacco claimed, being Isabella tobacco, was not correctly described in the warehouse receipt and that therefore, the receipt was ineffective as against the general creditors.

Issue:Whether the use of the word Cagayan instead of Isabella in describing the tobacco in the quedan renders it null and void.

Ruling:No.The identity of the tobacco was fully established by the evidence. The intention of the parties to the transaction must prevail against the relatively unimportant technical objection to the sufficiency of the description of the tobacco, and that the warehouse receipt in question, with its indorsement and delivery, constitute a sufficient transfer of the title to the tobacco in favor or the bank.

Bank of the Philippines Islands v. J.R. Herridge, G.R. Nos. L-21000, 21002-04 and21006 / 47 Phil 57, 20 December 1924;Commissioner of Internal Revenue v. Hawaiian-Philippines Company, G.R. No. L-16315/ 11 SCRA 256, 30 May 1964;

CONSOLIDATED TERMINALS, INC. v. ARTEX DEVELOPMENT CO., INC.G.R. No. L-25748. March 10, 1975

SynopsisAs operator of a customs bonded warehouse at Port Area, Manila, plaintiff-appellant received on deposit in behalf of the consignee 193 bales of cotton. Subsequently, defendant-appellee obtained delivery of the bales allegedly by virtue of a forged permit to deliver imported goods issued by the Bureau of Customs. Plaintiff-defendant then commenced a replevin suit against defendant-appellee, which was later amended into an action for damages. Defendant-appellee moved for dismissal and the lower court dismissed the complainant for lack of cause of action. Forthwith, plaintiff-appellant appealed to the Supreme Court, contending that as warehouseman it was entitled to the repossession of the merchandise and that defendant-appellee acted wrongfully in depriving it of possession by presenting a falsified delivery permit

FACTS: CTI was the operator of a customs bonded warehouse located at Port Area, Manila. It received on deposit one hundred ninety-three (193) bales of high density compressed raw cotton valued at P99,609.76. It was understood that CTI would keep the cotton in behalf of Luzon Brokerage Corporation until the consignee thereof, Paramount Textile Mills, Inc., had opened the corresponding letter of credit in favor of shipper, Adolph Hanslik Cotton of Corpus Christi, Texas.

Allegedly by virtue of a forged permit to deliver imported goods, purportedly issued by the Bureau of Customs, Artex was able to obtain delivery of the bales of cotton on November 5 and 6, 1964 after paying CTI P15,000 as storage and handling charges. At the time the merchandise was released to Artex, the letter of credit had not yet been opened and the customs duties and taxes due on the shipment had not been paid.

CTI in this appeal contends that, as warehouseman, it was entitled to the possession of the bales of cotton; that Artex acted wrongfully in depriving CTI of the possession of the merchandise because Artex presented a falsified delivery permit, and that Artex should pay damages to CTI.

ISSUE: Can CTI recover from Artex?

HELD: No.

CTI was only a WHman. He was already paid by Artex of its handling and warehousing services. It was not the owner of the cotton so it could not be entitled to claim the value of the shipment.

In other words, on the basis of the allegations of the amended complaint, the lower court could not render a valid judgment in accordance with the prayer thereof. It could not render such valid judgment because the amended complaint did not unequivocally allege what right of CTI was violated by Artex, or, to use the familiar language of adjective law, what delict or wrong was committed by Artex against CTI which would justify the latter in recovering the value of bales of cotton even if it was not the owner thereof.

DMG Incorporated v. Consolidated Terminals Inc., G.R. No. 34331-R / 8 CA Rep. 678,30 October 1965;Felisa Roman v. Asia Banking Corporation, G.R. No. L-17825 / 46 Phil 705, 26 June1922;Jose P. Martinez v. Philippine National Bank, G.R. No. L-4080 / 93 Phil 756, 21September 1953;

Liberata Antonio Estradav.Court of Agrarian Relations- G.R. Nos. L-17481 and L-17537-59 / 2 SCRA 986, 15 August 1961 -

(Full case maiksilang)These cases are now before this Court on the petition flied by the petitioners under date of June 10, 1961, asking that the manager of the Moncada Bonded Warehouse and respondent Faustino F. Galvan be declared in contempt of court and punished accordingly.

It appears that, upon motion, this Court, on January 6, 1961, issued a resolution of the following tenor:

In cases L-17481 and L-17537 to 17559 (Liberata Antonio Estrada, et al. vs. Court of Agrarian Relations and Faustino Galvan), considering the motion, and opposition thereto, that the owner or manager of the Moncada Bonded Warehouse be ordered to release and give to petitioners-appellants the remaining deposits 10% of the net produce of the first crop minus P300.00 and 15% of the net produce of the second crop minus P200.00, the COURT RESOLVED to grant the motion without prejudice to subsequent accounting.

That on April 12, 1961, this Court, passing upon motion filed by the petitioners in which they alleged that the manager of the Moncada Bonded Warehouse had refused to comply with the above resolution unless "the original of the receipts of palay deposits be presented and surrendered to him," issued another resolution which provides:

In cases L-17537 to 17559 (Liberata Antonio Estrada, et al. vs. Court of Agrarian Relations, et al.), considering the petitioner's motion dated March 18, 1961, and the respondents' opposition thereto, THE COURT RESOLVED to order respondent Faustino Galvan to surrender the original of the receipts of the palay deposits to the manager or owner of the Moncada Bonded Warehouse, MoncadaTarlac.

That the manager of the Moncada Bonded Warehouse and respondent Faustino F. Galvan were duly served with notice of the above resolutions, and that notwithstanding such service of notice and in spite of repeated demands, the manager of the Moncada Bonded Warehouse and respondent Faustino F. Galvan refused and still refuse to comply with the above orders of this Court, the former, for the reason that petitioners could not surrender to him the original of the warehouse receipts issued for the palay in question, and the latter, because, as he alleged in his answer to the motion for contempt, he could not locate any more said receipts "as they were scattered, misplaced, destroyed or lost when the contents of the Office of said respondent-appellee, Faustino F. Galvan, in the Galvan-Cabrera Building in Ylaya Street, Manila, were being desperately evacuated therefrom during the fire which burned the Divisoria market and said Galvan-Cabrera Building in Ylaya Street, Manila, in the latter part of May, 1961."

The excuses respectively offered by the manager of the Moncada Bonded Warehouse and respondent Faustino F. Galvan are not without some merits. The former unquestionably had the right to protect the interest of the bonded warehouse of which he was manager, as the warehouse receipts issued for the palay in question might have been for the value in favor of innocent third parties; and the latter, or Faustino F. Galvan, might have in fact lost said warehouse receipts in the manner above stated, for his allegation to the effect in his answer to petitioners' motion for contempt until now has not been contradicted.

Such incidents, however, do not constitute a valid excuse to evade compliance with the order of this Court that the palay in question be delivered to the petitioners, and, considering that the petitioners, according to the manifestation filed by their counsel under date of August 3, 1961, are in dire need of said palay for their subsistence, our order must be carried out in the meantime that this cases have not been finally decided in order to ameliorate the precarious situation in which said petitioners find themselves.

WHEREFORE, it is hereby ordered that the manager or the owner of the Moncada Bonded Warehouse in Moncada, Tarlac, and respondent Faustino F. Galvan release and deliver to the petitioners the portion still remaining to be delivered to them or their shares in the palay involved in these cases, i.e.,(a) 10% of the net produce of the first crops minus P300.00; and(b) 15% of the net produce of the second crops minus P200.00;which was ordered deposited in said warehouse by the trial court, upon the issuance by said petitioners, or their duly authorized representative, of the corresponding receipts, without the necessity of producing and surrendering the original of the warehouse receipts issued therefore. It is so ordered.Lua Kian v. Manila Railroad Company, G.R. No. L-23033 / 19 SCRA 5, 5 January 1967;Philippine National Bank v. Hon. Benito C. Se, G.R. No. 119231 / 256 SCRA 380, 18April 1996;Philippine National Bank v. Hon. Marcelino L. Sayo, Jr., G.R. No. 129918 / 292 SCRA202, 9 July 1998;Philippine National Bank v. LaureanoAtendido, G.R. No. L-6342 / 94 Phil 255, 26January 1954;

PNB V. NOAHS ARK SUGAR REFINERYG.R. No. 107243 / 226 SCRA 36. 1 September 1993

FACTS:P