YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA PAYAM v.

CA and MAURICE McLOUGHLIN

Doctrine: Under the law, 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
responsibility of the former as set forth in Articles 1998 to 2001 is suppressed or diminished shall be void. (Art. 2003, NCC).

Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely. The hotel business like the
common carrier’s business is imbued with public interest. Catering to the public, hotel-keepers 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.

Summary: Foreigner rented an SDB and placed valuables there, some of which he lost. He wanted to hold the hotel liable
but it cited the Undertaking that the foreigner signed or executed, which said that the hotel shall not be held liable for
such losses. Now, the foreigner is contesting these provisions of the Undertaking. The Court favored him since the
Undertaking for the Use of Safety Deposit Box executed by respondent violated NCC 2003.

Facts:
 McLoughlin is an Australian businessman-philanthropist who usually visits the Philippines used to stay at Sheraton
Hotel during his trips to the Philippines prior to 1984 when he met Tan. Tan befriended McLoughlin by showing him
around, introducing him to important people, accompanying him in visiting impoverished street children and
assisting him in buying gifts for the children and in distributing the same to charitable institutions for poor children.
Tan convinced McLoughlin to transfer from Sheraton Hotel to Tropicana where Lainez, Payam and Danilo Lopez
were employed. Lopez served as manager of the hotel while Lainez and Payam had custody of the keys for the
safety deposit boxes of Tropicana. Tan took care of McLoughlins booking at the Tropicana where he started
staying during his trips to the Philippines from December 1984 to September 1987.
 When McLoughlin arrived from Australia, he registered with Tropicana and rented an Safety Deposit Box (SDB) as
it was his practice to rent such every time he registered at Tropicana in previous trips.
 SDB procedure—The SDB could only be opened using two keys—one given to the registered guest, and the other
in the possession of hotel management. When the guest wants to open the SDB, only he can personally request
the management, and an employee would accompany the guest to assist in opening the SDB with the two keys.
 He allegedly had 3 envelopes (US $10k; US $5k; AUS $10k), 2 envelopes containing letters and credit cards, 2 bank
books, and a checkbook in his SDB. Before leaving for a brief trip, he opened his SDB to get some items. He found
that one envelope contained only USD $3k. He checked out of Tropicana upon returning to Manila, and he
eventually discovered that an envelope was short of $5k. Some jewelry he bought went missing. When he
inquired about this, he did not receive a favorable response.
 He registered again in Tropicana, and placed in the SDB three envelopes (US $15k; AUS $10k; documents).
 Twelve days later, he noticed that the USD envelope lacked $2k, while the AUSD envelope lacked AUS $4.5k.
When he confronted Lainez and Payam, they admitted that it was Tan who opened the SDB, who admitted
stealing his key.
 Lopez wrote a promissory note—I promise to pay Mr. Maurice McLoughlin the amount of AUS$4k and US$2k or its
equivalent in Philippine currency on or before May 5, 1988. Lopez requested Tan to sign the promissory note and
Lopez also signed as a witness. Despite the execution of promissory note by Tan, 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 SDB (Undertaking For The Use of Safety Deposit Box):
- To release and hold free and blameless the hotel from any liability arising from any loss in the contents and/or
use of the SDB for any cause whatsoever, including but not limited to the presentation or use thereof by any
other person should the key be lost
- To return the key and execute the release in favor of the hotel upon giving up the use of the SDB
 McLoughlin consulted his lawyers in Australia, and they said that the stipulations are void for being violative of
universal hotel practices and customs. His lawyers prepared a letter, and sent it to President Corazon Aquino. The
matter was eventually referred to the Western Police District. Eventually, a complaint for damages was filed
against YHT Realty Corporation, Lopez, Lainez, Payam and Tan for the loss of money, but trial proceeded without
Lopez and Tan. During the trial, McLoughlin had been in and out of the country to attend to urgent business in
Australia, and while staying in the Philippines to attend the hearing, he incurred various expenses; hence, the SC
award.
 The RTC rendered judgment in favor of McLoughlin. It found that defendants acted with gross negligence in the
performance and exercise of their duties and obligations as innkeepers and were therefore liable to answer for
the losses incurred by McLoughlin. It ruled that the aforementioned provisions of the Undertaking are not valid for
being contrary to the express mandate of NCC 2003 and against public policy. Thus, there being fraud or wanton
conduct on the part of defendants, they should be responsible for all damages which may be attributed to the
non-performance of their contractual obligations. CA affirmed RTC, except as to the amount of damages
awarded
Issue:
WON the Undertaking for the Use of Safety Deposit Box executed by McLoughlin is null and void.
Held: YES

The issue of whether the Undertaking For The Use of Safety Deposit Box executed by McLoughlin is tainted with nullity
presents a legal question appropriate for resolution in this petition. Notably, both the trial court and the appellate court
found the same to be null and void. We find no reason to reverse their common conclusion. Article 2003 is controlling, thus:

Art. 2003. 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 responsibility of
the former as set forth in Articles 1998 to 2001[37] is suppressed or diminished shall be void.

Article 2003 was incorporated as an expression of public policy. The hotel business like the common carrier’s business is
imbued with public interest. The twin duty constitutes the essence of the business: hotelkeepers are bound to provide not
only lodging for hotel guests and security to their persons and belongings. The law 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, it was held that it is not necessary that the guests’ effects be actually delivered to the innkeepers or their
employees, as it is enough that such effects are within the hotel. With greater reason should the liability of the hotelkeeper
be enforced when the items are taken without the guest’s knowledge and consent from an SDB provided by the hotel
itself.

Paragraphs (2) and (4) of the “undertaking” manifestly contravene Article 2003. The undertaking was intended to bar any
claim against Tropicana for any loss of the contents of the SDB, WON negligence was incurred by Tropicana or its
employees. The NCC is explicit that the responsibility of the hotelkeeper 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 any force majeure. In this case, the thief (Tan) employed no use of arms or an irresistible
force to qualify as force majeure, so the hotel is not exempted from liability.

Petitioners likewise anchor their defense on Article 2002, to which SC does not adhere. The justification would render
nugatory the public interest sought to be protected. 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 hotelkeeper 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 guests relatives and visitors.

Petitioners contend that McLoughlins 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.[45] 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.

Discussion on Torts refer to full text