CA Agro-Industrial Development Corporation v. CA (1993)
Security Bank alleged that Agro-Industrial had no cause of action because their
Petitioner: CA Agro-Industrial Development Corp.
Respondents: CA and Security Bank and Trust Company
Concept: Voluntary deposit; Obligation to safekeep
Doctrine: made a distinction whether safekeeping by banks should be governed by
lease or by deposits. Answer: safekeeping in the case is a special kind of
deposit. (see issue1 below) This case provides that banking institutions who receive
in custody funds, documents, and valuable objects, and rent safety deposit boxes for
safeguarding of such effects are depositaries. The primary function is still found within
the parameters of a contract of deposit. The renting out of the safety deposit boxes is
not independent from, but related to this principal function. Stipulations exempting a
depositary from liability in case of loss are contrary to law and public policy.
FACTS:
1. CA Agro-Industrial Development Corporation, through its President Aguirre,
purchased from Sps. Pugao 2 parcels of land for P350,000; P75,725 was given
as downpayment
2. They agreed that the titles to the lots shall be transferred to Agro-Industrial upon
full payment of the purchase price
3. In the meantime, the Certificates of Title was to be deposited in a safety deposit
box which the parties rented from Security Bank
- They [Aguirre and Pugaos] agreed that the titles could be withdrawn only
upon the joint signatures of Aguirre and the Pugaos upon full payment of the
purchase price
4. They entered into a contract of lease of the safety deposit box with Security
Bank. Among the conditions of their contract were as follows:
- 8. The Bank shall use due diligence that no unauthorized person shall
be admitted to any rented safe and beyond this, the Bank will not be
responsible for the contents of any safe rented from it
- 13. 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 and it
assumes absolutely no liability in connection therewith
5. 2 renters keys were given to the lessees1 to Aguirre and 1 to the spouses
and a guard key remained in the possession of the bank
- The safety deposit box can only be opened using both renters key and
guard key
- The certificates of title were then placed in said box
6. A certain Mrs. Ramos offered to buy from Aguirre the 2 lots. She demanded the
execution of a deed of sale which required the production of the certificates of
title deposited in the bank
- And so, Aguirre and Pugaos went to the bank to withdraw the certificate of
titles but when the deposit box was opened, they were not there.
- Because of the delay in the reconstitution of title, Mrs. Ramos withdrew her
offer to purchase the lots
- Agro-Industrial is no claiming they failed to realize the expected profit of
P280,500
7. Agro-Industrial filed a complaint for damages against Security Bank
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8.
agreement [refer to par.4 13&14] provided that loss of any of the items or articles
contained in the box could not give rise to an action against it
RTC: Ruled in favor of Security Bank
- Under the contract of lease, the bank has no liability for loss of the certificates of
title
CA: Affirmed RTC
- The contract is in the nature of a contract of lease by virtue of which Agro-
Industrial and its co-renter were given control over the safety deposit box and its
contents while the bank retained no right to open the said box because it had
neither the possession nor control over it and its contents
- Tolentino v. Gonzales: The owner of the property loses his control over the
property leased during the period of the contract. The depositary in said case is
not under any duty to maintain the contents of the box
o Citing Art. 1975 CC, which provides: The depositary holding certificates,
bonds, securities or instruments which earn interest shall be bound to collect
the latter when it becomes due, and to take such steps as may be necessary
in order that the securities may preserve their value and the rights
corresponding to them according to law. The above provision shall not apply
to contracts for the rent of safety deposit boxes.
- Security Banks liability is limited to exercising due diligence in ensuring that no
unauthorized person shall be admitted to any rented safe, as provided in their
agreement [par.4 8]
- Awarded attorneys fees
9. Agro-Industrial filed the instant petition, arguing:
- Contract for the rent of the safety deposit box is actually a contract of deposit
and the bank is liable for the loss of the certificates of title pursuant to Art.
1972 CC
o Art. 1972 CC: The depositary is obliged to keep the thing safely and to
return it, when required, to the depositor, or to his heirs and successors,
or to the person who may have been designated in the contract
- Cited American Jurisprudence:
o Where a safe-deposit company leases a safe-deposit box or safe and
the lessee takes possession of the box or safe and places therein his
securities or other valuables, the relation of bailee and bailor is created
between the parties to the transaction as to such securities or other
valuables
o That access to the contents of the safe-deposit box can be had only by
the use of a key retained by the lessee (whether it is the sole key or one
to be used in connection with one retained by the lessor) does not
operate to alter the foregoing rule
o The argument that there is not, in such a case, a delivery of exclusive
possession and control to the deposit company has been generally
rejected since the company is given absolute control of access to the
property, and the depositor cannot gain access thereto without consent
and active participation of the company
- The conditions in their agreement with the bank are contrary to law and
public policy and should be declared null and void
 o Hence, any stipulation exempting the depositary from any liability arising
ISSUES: from the loss of the thing deposited on account of fraud, negligence or
1. Whether the contract for rent of a safety deposit box is a contract of lease or delay would be void for being contrary to law and public policy
deposit (deposit, but special) - It is not correct to assert that the bank has neither the possession nor control
2. WON the stipulation that the bank should not be held liable for any loss is valid of the contents of the box since the said box itself is located in its premises
(NO) and under its absolute control. Moreover, the guard key is in the possession
3. WON the bank should be held liable for the loss (NO) of the bank and the renters cannot open the box without the same.
- Plus they actually stipulated in their agreement condition 8, where the Bank
RATIO: states that it would exercise due diligence to prevent unauthorized
1. The contract is a special kind of deposit. withdrawals or access to the thing
- The questioned contract is not an ordinary contract of lease
o It cannot be characterized as an ordinary lease contract because the 3. No. The bank cannot be held liable for the loss.
full and absolute possession and control of the safety deposit box - No competent proof was presented by Agro-Industrial that the bank was
was not given to the renters. aware of the agreement between Agro-Industrial and the Pugaos to the
o The guard key of the box remained with the bank and without this key, effect that the certificates of title can be withdrawn only upon joint signatures
neither of the renters could open the box of the parties
o The bank could not likewise open the box without the renters key - No evidence was submitted to reveal that the loss was due to fraud or
- Neither could Art. 1975 (cited by the CA in its decision) be invoked as an negligence of the bank
argument against the deposit theory because clearly, the first paragraph of
such provision cannot apply to a depositary of certificates, bonds, securities, DISPOSITIVE: Petition for review partially granted by deleting award of attorneys
or instruments which earn interest if such documents are kept in a rented fees because Agro clearly had no bad faith in filing the case.
safety deposit box which the depositary cannot open without the renter being
present.
- It cannot be considered as an ordinary contract of deposit as the absolute
control and possession over the thing deposited is not given to the
depositary
- However, we adopt the prevailing rule in the US that banks who rent out
safety deposit boxes are depositaries
o Sec. 72 of the General Banking Act 23 provides that banking
institutions who receive in custody funds, documents, and valuable
objects, and rent safety deposit boxes for safeguarding of such effects
are depositaries
o The primary function is still found within the parameters of a contract of
deposit
o The renting out of the safety deposit boxes is not independent from, but
related to this principal function

2. No. Such is contrary to law and public policy

- A contract of deposit may be entered into orally or in writing and parties
thereto may establish such stipulations they may deem convenient provided
they are not contrary to law, morals, good customs, public order or public
policy
- The responsibility of the depositary is governed by Title I, Book IV CC
(Obligations and Contracts)
o Accordingly, the depositary would be liable if, in performing its
obligation, it is found guilty of fraud, negligence, delay or contravention
of the tenor of the agreement
o In the absence of any stipulation prescribing the degree of diligence
required, that of a good father of a family is to be observed

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