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# 87 CA Agro-Industrial Dev’t Corp. vs CA (1993)


Facts: CA Agro and Pugao entered into a contract of sale of land wherein for the consideration of Php
350K, the former would convey title of 2 parcels of land in favor of Pugao after full payment of the
consideration. A downpayment of Php 75K was made and for the balance, Pugao issued 3 postdated

CA Agro and Pugao agreed that the TCTs shall be placed in a safety deposit box at Security
Bank. The TCTs could only be withdrawn upon full payment of the purchase price. Security Bank and the
2 parties signed a contract of lease. Section 13 of the said contract stated that “the bank is not a
depositary of the contents of the safe and it has neither the possession nor control of the same.” While,
Section 14 of the contract stated that “the bank has no interest whatsoever in said contents, except herein
expressly provided, and it assumes absolutely no liability in connection therewith.” The safety deposit box
has two (2) keyholes, one for the guard key and the other for the renter's key, and can be opened only
with the use of both keys. CA Agro and Pugao where given each a copy of the renter’s key while the
guard key remained with the bank.

Before Pugao was able to pay the entire amount, Ramos offered to buy the 2 parcels of land at
Php 280K more than the consideration agreed between CA Agro and Pugao. Ramos demanded the
execution of a deed of sale which would entail the production of the TCTs. After conferring the situation to
Pugao, both CA Agro and Pugao went to Security Bank to withdraw the TCTs. In the presence of a bank
representative, they found that the safety deposit box empty.

Due to the delay in the reconstitution of the TCTs, Ramos withdrew her offer to buy the lots. CA
Agro then filed a complaint for damages against Security Bank for loss of profit amounting to Php 280 K.

The trial court dismissed the case on the ground that pursuant to the Section 13 and 14 of the
contract of lease loss of any of the items or articles contained in the box could not give rise to an action
against it.

The CA affirmed the dismissal.

Issue: WON the contract is a lease contract or a deposit contract and WON the bank shall be liable for
the lost of the contents in the safety deposit box

Held: The contract entered into is not a lease contract but a deposit contract. However, this is not
an ordinary deposit contract strictly governed by the provisions of the civil code.

It cannot be an ordinary contract of lease since the full and absolute possession of the safety
deposit box was not given to CA Agro and Pugao since the guard key remained in the possession of the
bank without which neither CA Agro nor Pugao could open the safety deposit box.

According to 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 bailor
and bailee, the bailment being for hire and mutual benefit. This rule is adopted in this jurisdiction as
embodied in Section 72 of General Banking Act. The said section provides “In addition to the operations
specifically authorized elsewhere in this Act, banking institutions other than building and loan associations
may perform the following services: (a) Receive in custody funds, documents, and valuable objects, and
rent safety deposit boxes for the safeguarding of such effects. . . . The banks shall perform the services

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permitted under subsections (a), (b) and (c) of this section as depositories or as agents. . . ." Note that the
primary function is still found within the parameters of a contract of deposit, i.e., the receiving in custody
of funds, documents and other valuable objects for safekeeping. The renting out of the safety deposit
boxes is not independent from, but related to or in conjunction with, this principal function.

The bank is not liable for the loss of the TCTs not because of Section 13 and 14 of the
contract but because CA Agro failed to show that that the bank was aware of the agreement between CA
Agro and Pugao to the effect that the certificates of title were withdrawable from the safety deposit box
only upon both parties' joint signatures, and that no evidence was submitted to reveal that the loss of the
certificates of title was due to the fraud or negligence of the bank.

The depositary’s responsibility is governed by the Civil Code. 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. In the absence of any stipulation prescribing the degree of diligence required, that of a good
father of a family is to be observed. Hence, any stipulation exempting the depositary from any liability
arising from the loss of the thing deposited on account of fraud, negligence or delay would be void for
being contrary to law and public policy.

The said provisions are inconsistent with the respondent Bank's responsibility as a depositary
under Section 72(a) of the General Banking Act. Both exempt the latter from any liability except as
contemplated in condition 8 thereof which limits its duty to exercise reasonable diligence only with respect
to who shall be admitted to any rented safe, to wit:

"8. The Bank shall use due diligence that no unauthorized person shall be admitted to any rented
safe and beyond this, the Bank will not be responsible for the contents of any safe rented from it." 29

Furthermore, condition 13 stands on a wrong premise and is contrary to the actual practice of the
Bank. It is not correct to assert that the Bank has neither the possession nor control of the contents of the
box since in fact, the safety deposit box itself is located in its premises and is under its absolute control;
moreover, the respondent Bank keeps the guard key to the said box. As stated earlier, renters cannot
open their respective boxes unless the Bank cooperates by presenting and using this guard key. Clearly
then, to the extent above stated, the foregoing conditions in the contract in question are void and

The company, in renting safe-deposit boxes, cannot exempt itself from liability for loss of the
contents by its own fraud or negligence or that of its agents or servants, and if a provision of the contract
may be construed as an attempt to do so, it will be held ineffective for the purpose. Although it has been
held that the lessor of a safe-deposit box cannot limit its liability for loss of the contents thereof through its
own negligence, the view has been taken that such a lessor may limit its liability to some extent by
agreement or stipulation.

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#88 YHT Realty Corporation v. CA



McLoughlin is an Australian businessman-philantrophist (respondent) who used to stay at the Sheraton

during his stay in the Philippines. He met Ms. Tan who convinced him to stay at the Tropicana Hotel
owned by YHT Realty (petitioner). Lopez was the manager, while Lainez and Payam were employees
who were in-charge of the custody of the keys for the safety deposit boxes at Tropicana.

McLoughlin rented a safety deposit box. The procedure observed by Tropicana was that the box can be
opened through the use of two keys where one was given to the guest while the other remained in the
possession of the hotel.

On several occasions, he realized that the some of the money and jewelries he kept in the safety deposit
box were missing. Finally, he confronted Lainez and Payam who admitted that Tan opened the safety
deposit box with the key assigned to him. Tan admitted that she had stolen McLoughlin’s key while he
was sleeping and was able to get the money from the safety deposit box. When the police didn’t arrive,
Lopez wrote a promissory note to pay the missing amount wherein Tan was made to sign. Lopez signed
as witness. McLoughlin insisted that the hotel must assume responsibility for the loss but the latter
refused relying on the “Undertaking for the Use of the Safety Deposit Box” where it stipulates that
Tropicana Hotel is released and held free from any loss in the its contents or use.

McLoughlin filed a complaint for damages against YHT Realty, Lopez, Lainez, Payam and Tan for the
loss of money. The RTC ruled in his favor and affirmed by the CA.

Issue: Whether a hotel may evade liability for the loss of items left with it for safekeeping by its guests by
having them execute written waivers holding the establishment free from blame for such loss in light of
Article 2003 which voids such waivers.


No. It is undeniable that without the acquiescence of the employees of Tropicana to the opening of the
safety deposit box, the loss of the money could and should have been avoided. Their contention that they
thought Tan was Mcloughlin’s wife will not exculpate YHT from liability. Mere close companionship or
intimacy is not enough to warrant such conclusion. If they exercised due diligence in taking care of
McLoughlin’s safety deposit box, they should have confronted him with his relationship with Tan
considering that the latter has been observed opening it a number of times in the early hours of the

The waiver is void as Article 2003 states 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...
shall be void”

Petition denied.

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