Case Digest: CA Agro-Industrial Development Corp. v. CA, G.R. No. 90027, March 3, 1993

Commercial Law | Safety Deposit Box

Facts: 

• CA Agro-Industrial Development Corp. through its President, Sergio Aguirre, entered into an agreement with the spouses Ramon and Paula Pugao to purchase two parcels of land for P350,625.00.
• The agreement included terms that titles to the lots would be transferred upon full payment, and certificates of title would be deposited in a safety deposit box at Security Bank.
• Petitioner and the Pugaos rented Safety Deposit Box No. 1448 at Security Bank, governed by a contract of lease stating the bank's non-liability for the contents:
• 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.
• Two renter's keys were issued—one to Aguirre and the other to the Pugaos—while a guard key remained with the bank.
• Petitioner claimed the certificates of title were placed inside the box.
• When petitioner needed the certificates to sell the lots, they found the box empty.
• Due to the delay in reconstituting the title, a potential buyer withdrew their offer, causing petitioner to lose an expected profit of P280,500.00.
• Petitioner filed a complaint for damages against Security Bank.
• Security Bank denied liability based on the lease contract's provisions.
• RTC-Pasig: Dismissed petitioner's complaint, ruling in favor of Security Bank.
• Court of Appeals: Affirmed the trial court's decision, stating the lease contract absolved the bank from liability.

Issue: 

• Whether 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. 

Held:

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;  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. 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. 

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 23 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 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 

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  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. 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. 

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 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.

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.