After the execution of the contract, two (2) renter's keys were given to the renters — one to
Aguirre (for the petitioner) and the other to the Pugaos. A guard key remained in the
G.R. No. 90027 March 3, 1993
CA AGRO-INDUSTRIAL DEVELOPMENT CORP., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SECURITY BANK AND TRUST
COMPANY, respondents.
Dolorfino & Dominguez Law Offices for petitioner.
Danilo B. Banares for private respondent.
DAVIDE, JR., J.:
Is the contractual relation between a commercial bank and another party in a contract of rent
of a safety deposit box with respect to its contents placed by the latter one of bailor and bailee
or one of lessor and lessee?
This is the crux of the present controversy.
On 3 July 1979, petitioner (through its President, Sergio Aguirre) and the spouses Ramon and
Paula Pugao entered into an agreement whereby the former purchased from the latter two (2)
parcels of land for a consideration of P350,625.00. Of this amount, P75,725.00 was paid as
downpayment while the balance was covered by three (3) postdated checks. Among the terms
and conditions of the agreement embodied in a Memorandum of True and Actual Agreement
of Sale of Land were that the titles to the lots shall be transferred to the petitioner upon full
payment of the purchase price and that the owner's copies of the certificates of titles thereto,
Transfer Certificates of Title (TCT) Nos. 284655 and 292434, shall be deposited in a safety
deposit box of any bank. The same could be withdrawn only upon the joint signatures of a
representative of the petitioner and the Pugaos upon full payment of the purchase price.
Petitioner, through Sergio Aguirre, and the Pugaos then rented Safety Deposit Box No. 1448
of private respondent Security Bank and Trust Company, a domestic banking corporation
hereinafter referred to as the respondent Bank. For this purpose, both signed a contract of lease
(Exhibit "2") which contains, inter alia, the following conditions:
13. The bank is not a depositary of the contents of the safe and it has
neither the possession nor control of the same.
14. The bank has no interest whatsoever in said contents, except herein
expressly provided, and it assumes absolutely no liability in connection
therewith.1
possession of the respondent Bank. The safety deposit box has two (2) keyholes, one for the
guard key and the other for the renter's key, and can be opened only with the use of both keys.
Petitioner claims that the certificates of title were placed inside the said box.
Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner the two (2) lots
at a price of P225.00 per square meter which, as petitioner alleged in its complaint, translates
to a profit of P100.00 per square meter or a total of P280,500.00 for the entire property. Mrs.
Ramos demanded the execution of a deed of sale which necessarily entailed the production of
the certificates of title. In view thereof, Aguirre, accompanied by the Pugaos, then proceeded
to the respondent Bank on 4 October 1979 to open the safety deposit box and get the
certificates of title. However, when opened in the presence of the Bank's representative, the
box yielded no such certificates. Because of the delay in the reconstitution of the title, Mrs.
Ramos withdrew her earlier offer to purchase the lots; as a consequence thereof, the petitioner
allegedly failed to realize the expected profit of P280,500.00. Hence, the latter filed on 1
September 1980 a complaint2 for damages against the respondent Bank with the Court of First
Instance (now Regional Trial Court) of Pasig, Metro Manila which docketed the same as Civil
Case No. 38382.
In its Answer with Counterclaim,3 respondent Bank alleged that the petitioner has no cause of
action because of paragraphs 13 and 14 of the contract of lease (Exhibit "2"); corollarily, loss
of any of the items or articles contained in the box could not give rise to an action against it. It
then interposed a counterclaim for exemplary damages as well as attorney's fees in the amount
of P20,000.00. Petitioner subsequently filed an answer to the counterclaim. 4
In due course, the trial court, now designated as Branch 161 of the Regional Trial Court (RTC)
of Pasig, Metro Manila, rendered a decision5 adverse to the petitioner on 8 December 1986,
the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered
dismissing plaintiff's complaint.
On defendant's counterclaim, judgment is hereby rendered ordering
plaintiff to pay defendant the amount of FIVE THOUSAND (P5,000.00)
PESOS as attorney's fees.
With costs against plaintiff.6
The unfavorable verdict is based on the trial court's conclusion that under paragraphs 13 and
14 of the contract of lease, the Bank has no liability for the loss of the certificates of title. The
court declared that the said provisions are binding on the parties.
Its motion for reconsideration7 having been denied, petitioner appealed from the adverse
decision to the respondent Court of Appeals which docketed the appeal as CA-G.R. CV No.
15150. Petitioner urged the respondent Court to reverse the challenged decision because the
trial court erred in (a) absolving the respondent Bank from liability from the loss, (b) not
1
declaring as null and void, for being contrary to law, public order and public policy, the
provisions in the contract for lease of the safety deposit box absolving the Bank from any
liability for loss, (c) not concluding that in this jurisdiction, as well as under American
jurisprudence, the liability of the Bank is settled and (d) awarding attorney's fees to the Bank
and denying the petitioner's prayer for nominal and exemplary damages and attorney's fees.8
In its Decision promulgated on 4 July 1989,9 respondent Court affirmed the appealed decision
principally on the theory that the contract (Exhibit "2") executed by the petitioner and
respondent Bank is in the nature of a contract of lease by virtue of which the petitioner and its
co-renter were given control over the safety deposit box and its contents while the Bank
retained no right to open the said box because it had neither the possession nor control over it
and its contents. As such, the contract is governed by Article 1643 of the Civil Code 10 which
provides:
Art. 1643. In the lease of things, one of the parties binds himself to give to
another the enjoyment or use of a thing for a price certain, and for a period
which may be definite or indefinite. However, no lease for more than
ninety-nine years shall be valid.
It invoked Tolentino vs. Gonzales 11 — which held that the owner of the property
loses his control over the property leased during the period of the contract — and
Article 1975 of the Civil Code which provides:
Art. 1975. The depositary holding certificates, bonds, securities or
instruments which earn interest shall be bound to collect the latter when it
becomes due, and to take such steps as may be necessary in order that the
securities may preserve their value and the rights corresponding to them
according to law.
The above provision shall not apply to contracts for the rent of safety
deposit boxes.
and then concluded that "[c]learly, the defendant-appellee is not under any duty to
maintain the contents of the box. The stipulation absolving the defendant-appellee
from liability is in accordance with the nature of the contract of lease and cannot be
regarded as contrary to law, public order and public policy." 12 The appellate court
was quick to add, however, that under the contract of lease of the safety deposit box,
respondent Bank is not completely free from liability as it may still be made
answerable in case unauthorized persons enter into the vault area or when the rented
box is forced open. Thus, as expressly provided for in stipulation number 8 of the
contract in question:
8. The Bank shall use due diligence that no unauthorized person shall be
admitted to any rented safe and beyond this, the Bank will not be
responsible for the contents of any safe rented from it. 13
Its motion for reconsideration 14 having been denied in the respondent Court's Resolution of
28 August 1989, 15petitioner took this recourse under Rule 45 of the Rules of Court and urges
Us to review and set aside the respondent Court's ruling. Petitioner avers that both the
respondent Court and the trial court (a) did not properly and legally apply the correct law in
this case, (b) acted with grave abuse of discretion or in excess of jurisdiction amounting to
lack thereof and (c) set a precedent that is contrary to, or is a departure from precedents
adhered to and affirmed by decisions of this Court and precepts in American jurisprudence
adopted in the Philippines. It reiterates the arguments it had raised in its motion to reconsider
the trial court's decision, the brief submitted to the respondent Court and the motion to
reconsider the latter's decision. In a nutshell, petitioner maintains that regardless of
nomenclature, the contract for the rent of the safety deposit box (Exhibit "2") is actually a
contract of deposit governed by Title XII, Book IV of the Civil Code of the
Philippines. 16 Accordingly, it is claimed that the respondent Bank is liable for the loss of the
certificates of title pursuant to Article 1972 of the said Code which provides:
Art. 1972. The depositary is obliged to keep the thing safely and to return
it, when required, to the depositor, or to his heirs and successors, or to the
person who may have been designated in the contract. His responsibility,
with regard to the safekeeping and the loss of the thing, shall be governed
by the provisions of Title I of this Book.
If the deposit is gratuitous, this fact shall be taken into account in
determining the degree of care that the depositary must observe.
Petitioner then quotes a passage from American Jurisprudence 17 which is supposed
to expound on the prevailing rule in the United States, to wit:
The prevailing rule appears to be that where a safe-deposit company leases
a safe-deposit box or safe and the lessee takes possession of the box or
safe and places therein his securities or other valuables, the relation of
bailee and bail or is created between the parties to the transaction as to
such securities or other valuables; the fact that the
safe-deposit company does not know, and that it is not expected that it
shall know, the character or description of the property which is deposited
in such safe-deposit box or safe does not change that relation. That access
to the contents of the safe-deposit box can be had only by the use of a key
retained by the lessee ( whether it is the sole key or one to be used in
connection with one retained by the lessor) does not operate to alter the
foregoing rule. The argument that there is not, in such a case, a delivery of
exclusive possession and control to the deposit company, and that
therefore the situation is entirely different from that of ordinary bailment,
has been generally rejected by the courts, usually on the ground that as
possession must be either in the depositor or in the company, it should
reasonably be considered as in the latter rather than in the former, since
the company is, by the nature of the contract, given absolute control of
access to the property, and the depositor cannot gain access thereto
without the consent and active participation of the company. . . . (citations
omitted).
2
 and a segment from Words and Phrases 18 which states that a contract for the rental
of a bank safety deposit box in consideration of a fixed amount at stated periods is a
bailment for hire.
Petitioner further argues that conditions 13 and 14 of the questioned contract are contrary to
law and public policy and should be declared null and void. In support thereof, it cites Article
1306 of the Civil Code which provides that parties to a contract may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or public policy.
After the respondent Bank filed its comment, this Court gave due course to the petition and
required the parties to simultaneously submit their respective Memoranda.
The petition is partly meritorious.
We agree with the petitioner's contention that the contract for the rent of the safety deposit box
is not an ordinary contract of lease as defined in Article 1643 of the Civil Code. However, We
do not fully subscribe to its view that the same is a contract of deposit that is to be strictly
governed by the provisions in the Civil Code on deposit; 19 the contract in the case at bar is a
special kind of deposit. It cannot be characterized as an ordinary contract of lease under
Article 1643 because the full and absolute possession and control of the safety deposit box
was not given to the joint renters — the petitioner and the Pugaos. The guard key of the box
remained with the respondent Bank; without this key, neither of the renters could open the
box. On the other hand, the respondent Bank could not likewise open the box without the
renter's key. In this case, the said key had a duplicate which was made so that both renters
could have access to the box.
Hence, the authorities cited by the respondent Court 20 on this point do not apply. Neither
could Article 1975, also relied upon by the respondent Court, be invoked as an argument
against the deposit theory. Obviously, the first paragraph of such provision cannot apply to a
depositary of certificates, bonds, securities or instruments which earn interest if such
documents are kept in a rented safety deposit box. It is clear that the depositary cannot open
the box without the renter being present.
We observe, however, that the deposit theory itself does not altogether find unanimous support
even in American jurisprudence. We agree with the petitioner that under the latter, the
prevailing rule is that the relation between a bank renting out safe-deposit boxes and its
customer with respect to the contents of the box is that of a bail or and bailee, the bailment
being for hire and mutual benefit. 21 This is just the prevailing view because:
There is, however, some support for the view that the relationship in
question might be more properly characterized as that of landlord and
tenant, or lessor and lessee. It has also been suggested that it should be
characterized as that of licensor and licensee. The relation between a bank,
safe-deposit company, or storage company, and the renter of a safe-deposit
box therein, is often described as contractual, express or implied, oral or
written, in whole or in part. But there is apparently no jurisdiction in
which any rule other than that applicable to bailments governs questions
of the liability and rights of the parties in respect of loss of the contents of
safe-deposit boxes. 22 (citations omitted)
In the context of our laws which authorize banking institutions to rent out safety deposit
boxes, it is clear that in this jurisdiction, the prevailing rule in the United States has been
adopted. Section 72 of the General Banking Act 23pertinently provides:
Sec. 72. In addition to the operations specifically authorized elsewhere in
this Act, banking institutions other than building and loan associations
may perform the following services:
(a) Receive in custody funds, documents, and valuable
objects, and rent safety deposit boxes for the
safeguarding of such effects.
xxx xxx xxx
The banks shall perform the services permitted under subsections (a), (b)
and (c) of this section as depositories or as agents. . . . 24 (emphasis
supplied)
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. A contract of deposit may be entered into orally or in
writing 25 and, pursuant to Article 1306 of the Civil Code, the parties thereto may establish
such stipulations, clauses, terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order or public policy. The depositary's
responsibility for the safekeeping of the objects deposited in the case at bar is governed by
Title I, Book IV of the Civil Code. Accordingly, the 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. 26 In the absence of any stipulation prescribing the degree of diligence
required, that of a good father of a family is to be observed. 27 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. In the instant case, petitioner maintains that conditions 13 and 14 of the questioned
contract of lease of the safety deposit box, which read:
13. 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. 28
are void as they are contrary to law and public policy. We find Ourselves in
agreement with this proposition for indeed, said provisions are inconsistent with the
3
 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 ineffective. It has been said:
With respect to property deposited in a safe-deposit box by a customer of
a safe-deposit company, the parties, since the relation is a contractual one,
may by special contract define their respective duties or provide for
increasing or limiting the liability of the deposit company, provided such
contract is not in violation of law or public policy. It must clearly appear
that there actually was such a special contract, however, in order to vary
the ordinary obligations implied by law from the relationship of the
parties; liability of the deposit company will not be enlarged or restricted
by words of doubtful meaning. The company, in renting
safe-deposit boxes, cannot exempt itself from liability for loss of the
contents by its own fraud or negligence or that of its agents or servants,
and if a provision of the contract may be construed as an attempt to do so,
it will be held ineffective for the purpose. Although it has been held that
the lessor of a safe-deposit box cannot limit its liability for loss of the
contents thereof through its own negligence, the view has been taken that
such a lessor may limits its liability to some extent by agreement or
stipulation. 30 (citations omitted)
Thus, we reach the same conclusion which the Court of Appeals arrived at, that is, that the
petition should be dismissed, but on grounds quite different from those relied upon by the
Court of Appeals. In the instant case, the respondent Bank's exoneration cannot, contrary to
the holding of the Court of Appeals, be based on or proceed from a characterization of the
impugned contract as a contract of lease, but rather on the fact that no competent proof was
presented to show that respondent Bank was aware of the agreement between the petitioner
and the Pugaos 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
respondent Bank. This in turn flows from this Court's determination that the contract involved
was one of deposit. Since both the petitioner and the Pugaos agreed that each should have one
(1) renter's key, it was obvious that either of them could ask the Bank for access to the safety
deposit box and, with the use of such key and the Bank's own guard key, could open the said
box, without the other renter being present.
Since, however, the petitioner cannot be blamed for the filing of the complaint and no bad
faith on its part had been established, the trial court erred in condemning the petitioner to pay
the respondent Bank attorney's fees. To this extent, the Decision (dispositive portion) of public
respondent Court of Appeals must be modified.
WHEREFORE, the Petition for Review is partially GRANTED by deleting the award for
attorney's fees from the 4 July 1989 Decision of the respondent Court of Appeals in CA-G.R.
CV No. 15150. As modified, and subject to the pronouncement We made above on the nature
of the relationship between the parties in a contract of lease of safety deposit boxes, the
dispositive portion of the said Decision is hereby AFFIRMED and the instant Petition for
Review is otherwise DENIED for lack of merit.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 102970 May 13, 1993
LUZAN SIA, petitioner,
vs.
COURT OF APPEALS and SECURITY BANK and TRUST COMPANY, respondents.
Asuncion Law Offices for petitioner.
Cauton, Banares, Carpio & Associates for private respondent.
DAVIDE, JR., J.:
The Decision of public respondent Court of Appeals in CA-G.R. CV No. 26737, promulgated
on 21 August 1991,1reversing and setting aside the Decision, dated 19 February 1990, 2 of
Branch 47 of the Regional Trial Court (RTC) of Manila in Civil Case No. 87-42601, entitled
"LUZAN SIA vs. SECURITY BANK and TRUST CO.," is challenged in this petition for
review on certiorari under Rule 45 of the Rules Court.
Civil Case No. 87-42601 is an action for damages arising out of the destruction or loss of the
stamp collection of the plaintiff (petitioner herein) contained in Safety Deposit Box No. 54
which had been rented from the defendant pursuant to a contract denominated as a Lease
4
Agreement. 3 Judgment therein was rendered in favor of the dispositive portion of which
reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff and against the defendant, Security Bank & Trust
Company, ordering the defendant bank to pay the plaintiff the sum of —
a) Twenty Thousand Pesos (P20,000.00), Philippine Currency, as actual
damages;
b) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as
moral damages; and
c) Five Thousand Pesos (P5,000.00), Philippine Currency, as attorney's
fees and legal expenses.
The counterclaim set up by the defendant are hereby dismissed for lack of
merit.
No costs.
SO ORDERED.4
The antecedent facts of the present controversy are summarized by the public respondent in its
challenged decision as follows:
The plaintiff rented on March 22, 1985 the Safety Deposit Box No. 54 of
the defendant bank at its Binondo Branch located at the Fookien Times
Building, Soler St., Binondo, Manila wherein he placed his collection of
stamps. The said safety deposit box leased by the plaintiff was at the
bottom or at the lowest level of the safety deposit boxes of the defendant
bank at its aforesaid Binondo Branch.
During the floods that took place in 1985 and 1986, floodwater entered
into the defendant bank's premises, seeped into the safety deposit box
leased by the plaintiff and caused, according to the plaintiff, damage to his
stamps collection. The defendant bank rejected the plaintiff's claim for
compensation for his damaged stamps collection, so, the plaintiff
instituted an action for damages against the defendant bank.
The defendant bank denied liability for the damaged stamps collection of
the plaintiff on the basis of the "Rules and Regulations Governing the
Lease of Safe Deposit Boxes" (Exhs. "A-1", "1-A"), particularly
paragraphs 9 and 13, which reads (sic):
"9. The liability of the Bank by reason of the lease, is limited to the
exercise of the diligence to prevent the opening of the safe by any person
other than the Renter, his authorized agent or legal representative;
xxx xxx xxx
"13. The Bank is not a depository of the contents of the safe and it has
neither the possession nor the control of the same. The Bank has no
interest whatsoever in said contents, except as herein provided, and it
assumes absolutely no liability in connection therewith."
The defendant bank also contended that its contract with the plaintiff over
safety deposit box No. 54 was one of lease and not of deposit and,
therefore, governed by the lease agreement (Exhs. "A", "L") which should
be the applicable law; that the destruction of the plaintiff's stamps
collection was due to a calamity beyond obligation on its part to notify the
plaintiff about the floodwaters that inundated its premises at Binondo
branch which allegedly seeped into the safety deposit box leased to the
plaintiff.
The trial court then directed that an ocular inspection on (sic) the contents
of the safety deposit box be conducted, which was done on December 8,
1988 by its clerk of court in the presence of the parties and their counsels.
A report thereon was then submitted on December 12, 1988 (Records, p.
98-A) and confirmed in open court by both parties thru counsel during the
hearing on the same date (Ibid., p. 102) stating:
"That the Safety Box Deposit No. 54 was opened by
both plaintiff Luzan Sia and the Acting Branch
Manager Jimmy B. Ynion in the presence of the
undersigned, plaintiff's and defendant's counsel. Said
Safety Box when opened contains two albums of
different sizes and thickness, length and width and a
tin box with printed word 'Tai Ping Shiang Roast Pork
in pieces with Chinese designs and character."
Condition of the above-stated Items —
"Both albums are wet, moldy and badly damaged.
1. The first album measures 10 1/8 inches in length, 8 inches in width and
3/4 in thick. The leaves of the album are attached to every page and cannot
be lifted without destroying it, hence the stamps contained therein are no
longer visible.
5
 2. The second album measure 12 1/2 inches in length, 9 3/4 in width 1
inch thick. Some of its pages can still be lifted. The stamps therein can still
be distinguished but beyond restoration. Others have lost its original form.
3. The tin box is rusty inside. It contains an album with several pieces of
papers stuck up to the cover of the box. The condition of the album is the
second abovementioned album."5
13. The bank is not a depository of the contents of the Safe and it has
neither the possession nor the control of the same. The Bank has no
interest whatsoever in said contents, except as herein provided, and it
assumes absolutely no liability in connection therewith.
are valid since said stipulations are not contrary to law, morals, good customs, public order or
public policy; and

The SECURITY BANK AND TRUST COMPANY, hereinafter referred to as SBTC,
appealed the trial court's decision to the public respondent Court of Appeals. The appeal was
docketed as CA-G.R. CV No. 26737.
In urging the public respondent to reverse the decision of the trial court, SBTC contended that
the latter erred in (a) holding that the lease agreement is a contract of adhesion; (b) finding that
the defendant had failed to exercise the required diligence expected of a bank in maintaining
the safety deposit box; (c) awarding to the plaintiff actual damages in the amount of
P20,000.00, moral damages in the amount of P100,000.00 and attorney's fees and legal
expenses in the amount of P5,000.00; and (d) dismissing the counterclaim.
On 21 August 1991, the respondent promulgated its decision the dispositive portion of which
reads:
d) there is no concrete evidence to show that SBTC failed to exercise the required diligence in
maintaining the safety deposit box; what was proven was that the floods of 1985 and 1986,
which were beyond the control of SBTC, caused the damage to the stamp collection; said
floods were fortuitous events which SBTC should not be held liable for since it was not shown
to have participated in the aggravation of the damage to the stamp collection; on the contrary,
it offered its services to secure the assistance of an expert in order to save most of the stamps,
but the appellee refused; appellee must then bear the lose under the principle of "res perit
domino."
Unsuccessful in his bid to have the above decision reconsidered by the public
respondent, 7 petitioner filed the instant petition wherein he contends that:
I

WHEREFORE, the decision appealed from is hereby REVERSED and IT WAS A GRAVE ERROR OR AN ABUSE OF DISCRETION ON
instead the appellee's complaint is hereby DISMISSED. The appellant THE PART OF THE RESPONDENT COURT WHEN IT RULED THAT
bank's counterclaim is likewise DISMISSED. No costs.6 RESPONDENT SBTC DID NOT FAIL TO EXERCISE THE
REQUIRED DILIGENCE IN MAINTAINING THE SAFETY DEPOSIT
In reversing the trial court's decision and absolving SBTC from liability, the public respondent BOX OF THE PETITIONER CONSIDERING THAT SUBSTANTIAL
found and ruled that: EVIDENCE EXIST (sic) PROVING THE CONTRARY.

a) the fine print in the "Lease Agreement " (Exhibits "A" and "1" ) constitutes the terms and II
conditions of the contract of lease which the appellee (now petitioner) had voluntarily and
knowingly executed with SBTC; THE RESPONDENT COURT SERIOUSLY ERRED IN
EXCULPATING PRIVATE RESPONDENT FROM ANY LIABILITY
b) the contract entered into by the parties regarding Safe Deposit Box No. 54 was not a WHATSOEVER BY REASON OF THE PROVISIONS OF
contract of deposit wherein the bank became a depositary of the subject stamp collection; PARAGRAPHS 9 AND 13 OF THE AGREEMENT (EXHS. "A" AND
hence, as contended by SBTC, the provisions of Book IV, Title XII of the Civil Code on "A-1").
deposits do not apply;
III
c) The following provisions of the questioned lease agreement of the safety deposit box
limiting SBTC's liability: THE RESPONDENT COURT SERIOUSLY ERRED IN NOT
UPHOLDING THE AWARDS OF THE TRIAL COURT FOR ACTUAL
9. The liability of the bank by reason of the lease, is limited to the exercise AND MORAL DAMAGES, INCLUDING ATTORNEY'S FEES AND
of the diligence to prevent the opening of the Safe by any person other LEGAL EXPENSES, IN FAVOR OF THE PETITIONER.8
than the Renter, his authorized agent or legal representative.
We subsequently gave due course the petition and required both parties to submit their
xxx xxx xxx respective memoranda, which they complied with.9

6
Petitioner insists that the trial court correctly ruled that SBTC had failed "to exercise the
required diligence expected of a bank maintaining such safety deposit box . . . in the light of
the environmental circumstance of said safety deposit box after the floods of 1985 and 1986."
He argues that such a conclusion is supported by the evidence on record, to wit: SBTC was
fully cognizant of the exact location of the safety deposit box in question; it knew that the
premises were inundated by floodwaters in 1985 and 1986 and considering that the bank is
guarded twenty-four (24) hours a day , it is safe to conclude that it was also aware of the
inundation of the premises where the safety deposit box was located; despite such knowledge,
however, it never bothered to inform the petitioner of the flooding or take any appropriate
measures to insure the safety and good maintenance of the safety deposit box in question.
SBTC does not squarely dispute these facts; rather, it relies on the rule that findings of facts of
the Court of Appeals, when supported by substantial exidence, are not reviewable on appeal
by certiorari. 10
The foregoing rule is, of course, subject to certain exceptions such as when there exists a
disparity between the factual findings and conclusions of the Court of Appeals and the trial
court. 11 Such a disparity obtains in the present case.
As We see it, SBTC's theory, which was upheld by the public respondent, is that the "Lease
Agreement " covering Safe Deposit Box No. 54 (Exhibit "A and "1") is just that — a contract
of lease — and not a contract of deposit, and that paragraphs 9 and 13 thereof, which
expressly limit the bank's liability as follows:
9. The liability of the bank by reason of the lease, is limited to the exercise
of the diligence to prevent the opening of the Safe by any person other
than the Renter, his autliorized agent or legal representative;
xxx xxx xxx
13. The bank is not a depository of the contents of the Safe and it has
neither the possession nor the control of the same. The Bank has no
interest whatsoever said contents, except as herein provided, and it
assumes absolutely no liability in connection therewith. 12
are valid and binding upon the parties. In the challenged decision, the public respondent
further avers that even without such a limitation of liability, SBTC should still be absolved
from any responsibility for the damage sustained by the petitioner as it appears that such
damage was occasioned by a fortuitous event and that the respondent bank was free from any
participation in the aggravation of the injury.
We cannot accept this theory and ratiocination. Consequently, this Court finds the petition to
be impressed with merit.
In the recent case CA Agro-Industrial Development Corp. vs. Court of Appeals, 13 this Court
explicitly rejected the contention that a contract for the use of a safety deposit box is a contract
of lease governed by Title VII, Book IV of the Civil Code. Nor did We fully subscribe to the
view that it is a contract of deposit to be strictly governed by the Civil Code provision on
deposit; 14 it is, as We declared, a special kind of deposit. The prevailing rule in American
jurisprudence — 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 for
hire and mutual benefit 15 — has been adopted in this jurisdiction, thus:
In the context of our laws which authorize banking institutions to rent out
safety deposit boxes, it is clear that in this jurisdiction, the prevailing rule
in the United States has been adopted. Section 72 of the General Banking
Act [R.A. 337, as amended] pertinently provides:
"Sec. 72. In addition to the operations specifically authorized elsewhere in
this Act, banking institutions other than building and loan associations
may perform the following services:
(a) Receive in custody funds, documents, and valuable
objects, and rent safety deposit boxes for the
safequarding of such effects.
xxx xxx xxx
The banks shall perform the services permitted under subsections (a), (b)
and (c) of this section as depositories or as agents. . . ."(emphasis
supplied)
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. A contract of deposit may be entered into
orally or in writing (Art. 1969, Civil Code] and, pursuant to Article 1306
of the Civil Code, the parties thereto may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order or public
policy. The depositary's responsibility for the safekeeping of the objects
deposited in the case at bar is governed by Title I, Book IV of the Civil
Code. Accordingly, the 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 [Art. 1170, id.]. In the absence of any
stipulation prescribing the degree of diligence required, that of a good
father of a family is to be observed [Art. 1173, id.]. 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. In the instant case, petitioner
maintains that conditions 13 and l4 of the questioned contract of lease of
the safety deposit box, which read:
7
"13. The bank is 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 as herein
expressly provided, and it assumes absolutely no liability in connection
therewith."
are void as they are contrary to law and public policy. We find Ourselves
in agreement with this proposition for indeed, said provisions are
inconsistent with the respondent Bank's responsibility as a depositary
under Section 72 (a) of the General Banking Act. Both exempt the latter
from any liability except as contemplated in condition 8 thereof which
limits its duty to exercise reasonable diligence only with respect to who
shall be admitted to any rented safe, to wit:
"8. The Bank shall use due diligence that no
unauthorized person shall be admitted to any rented
safe and beyond this, the Bank will not be responsible
for the contents of any safe rented from it."
Furthermore condition 13 stands on a wrong premise and is contrary to the
actual practice of the Bank. It is not correct to assert that the Bank has
neither the possession nor control of the contents of the box since in fact,
the safety deposit box itself is located in its premises and is under its
absolute control; moreover, the respondent Bank keeps the guard key to
the said box. As stated earlier, renters cannot open their respective boxes
unless the Bank cooperates by presenting and using this guard key. Clearly
then, to the extent above stated, the foregoing conditions in the contract in
question are void and ineffective. It has been said:
"With respect to property deposited in a safe-deposit
box by a customer of a safe-deposit company, the
parties, since the relation is a contractual one, may by
special contract define their respective duties or
provide for increasing or limiting the liability of the
deposit company, provided such contract is not in
violation of law or public policy. It must clearly
appear that there actually was such a special contract,
however, in order to vary the ordinary obligations
implied by law from the relationship of the parties;
liability of the deposit company will not be enlarged
or restricted by words of doubtful meaning. The
company, in renting safe-deposit boxes, cannot
exempt itself from liability for loss of the contents by
its own fraud or negligence or that, of its agents or
servants, and if a provision of the contract may be
construed as an attempt to do so, it will be held
ineffective for the purpose. Although it has been held
that the lessor of a safe-deposit box cannot limit its
liability for loss of the contents thereof through its
own negligence, the view has been taken that such a
lessor may limit its liability to some extent by
agreement or stipulation ."[10 AM JUR 2d., 466].
(citations omitted) 16
It must be noted that conditions No. 13 and No. 14 in the Contract of Lease of Safety Deposit
Box in CA Agro-Industrial Development Corp. are strikingly similar to condition No. 13 in the
instant case. On the other hand, both condition No. 8 in CA Agro-Industrial Development
Corp. and condition No. 9 in the present case limit the scope of the exercise of due diligence
by the banks involved to merely seeing to it that only the renter, his authorized agent or his
legal representative should open or have access to the safety deposit box. In short, in all other
situations, it would seem that SBTC is not bound to exercise diligence of any kind at all.
Assayed in the light of Our aforementioned pronouncements in CA Agro-lndustrial
Development Corp., it is not at all difficult to conclude that both conditions No. 9 and No. 13
of the "Lease Agreement" covering the safety deposit box in question (Exhibits "A" and "1")
must be stricken down for being contrary to law and public policy as they are meant to exempt
SBTC from any liability for damage, loss or destruction of the contents of the safety deposit
box which may arise from its own or its agents' fraud, negligence or delay. Accordingly,
SBTC cannot take refuge under the said conditions.
Public respondent further postulates that SBTC cannot be held responsible for the destruction
or loss of the stamp collection because the flooding was a fortuitous event and there was no
showing of SBTC's participation in the aggravation of the loss or injury. It states:
Article 1174 of the Civil Code provides:
"Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when
the nature of the obligation requires the assumption of
risk, no person shall be responsible for those events
which could not be foreseen, or which, though
foreseen, were inevitable.'
In its dissertation of the phrase "caso fortuito" the Enciclopedia
Jurisdicada Española 17 says: "In a legal sense and, consequently, also in
relation to contracts, a "caso fortuito" prevents (sic) 18 the following
essential characteristics: (1) the cause of the unforeseen ands unexpected
occurrence, or of the failure of the debtor to comply with his obligation,
must be independent of the human will; (2) it must be impossible to
foresee the event which constitutes the "caso fortuito," or if it can be
foreseen, it must be impossible to avoid; (3) the occurrence must be such
as to render it impossible for one debtor to fulfill his obligation in a
normal manner; and (4) the obligor must be free from any participation in
the aggravation of the injury resulting to the creditor." (cited in
Servando vs. Phil., Steam Navigation Co., supra). 19
8
 Here, the unforeseen or unexpected inundating floods were independent of
the will of the appellant bank and the latter was not shown to have
participated in aggravating damage (sic) to the stamps collection of the
appellee. In fact, the appellant bank offered its services to secure the
assistance of an expert to save most of the then good stamps but the
appelle refused and let (sic) these recoverable stamps inside the safety
deposit box until they were ruined. 20

Both the law and authority cited are clear enough and require no further elucidation.
Unfortunately, however, the public respondent failed to consider that in the instant case, as
correctly held by the trial court, SBTC was guilty of negligence. The facts constituting
negligence are enumerated in the petition and have been summarized in thisponencia. SBTC's
negligence aggravated the injury or damage to the stamp collection. SBTC was aware of the
floods of 1985 and 1986; it also knew that the floodwaters inundated the room where Safe
Deposit Box No. 54 was located. In view thereof, it should have lost no time in notifying the
petitioner in order that the box could have been opened to retrieve the stamps, thus saving the
same from further deterioration and loss. In this respect, it failed to exercise the reasonable
care and prudence expected of a good father of a family, thereby becoming a party to the
aggravation of the injury or loss. Accordingly, the aforementioned fourth characteristic of a
fortuitous event is absent Article 1170 of the Civil Code, which reads:

Those who in the performance of their obligation are guilty of fraud,

negligence, or delay, and those who in any manner contravene the tenor
thereof, are liable for damages,

thus comes to the succor of the petitioner. The destruction or loss of the stamp collection
which was, in the language of the trial court, the "product of 27 years of patience and
diligence" 21 caused the petitioner pecuniary loss; hence, he must be compensated therefor.

We cannot, however, place Our imprimatur on the trial court's award of moral damages. Since
the relationship between the petitioner and SBTC is based on a contract, either of them may be
held liable for moral damages for breach thereof only if said party had acted fraudulently or in
bad faith. 22 There is here no proof of fraud or bad faith on the part of SBTC.

WHEREFORE, the instant petition is hereby GRANTED. The challenged Decision and
Resolution of the public respondent Court of Appeals of 21 August 1991 and 21 November
1991, respectively, in CA-G.R. CV No. 26737, are hereby SET ASIDE and the Decision of 19
February 1990 of Branch 47 of the Regional Trial Court of Manila in Civil Case No. 87-42601
is hereby REINSTATED in full, except as to the award of moral damages which is hereby set
aside.

Costs against the private respondent.

SO ORDERED.