Republic of the Philippines For the third cause of action, plaintiff's case is predicated upon the facts following: On

SUPREME COURT November 27, 1961, Dupro (Philippines), Inc. imported from the United States 18 cases of
Manila auto parts shipped on board the SS "Pioneer Ming". This vessel arrived in Manila on
December 28, 1961. The shipment was discharged into the custody of the Manila Port
EN BANC Service. One case of that shipment was pilfered of its contents. Loss was occasioned to
plaintiff.
G.R. No. L-26700 May 15, 1969
The fourth cause of action refers to a shipment of 15 cases black umbrella cloth imported by
MALAYAN INSURANCE CO., INC., plaintiff-appellee, Chua Luan and Co., Inc. from Japan on September 7, 1962, per SS "Narra" which arrived in
vs. Manila on September 15, 1962. The shipment was discharged into the custody of the Manila
MANILA PORT SERVICE and MANILA RAILROAD CO., defendants-appellants. Port Service. It turned out, however, that two cases of the shipment were pilfered of
contents resulting in loss to the consignee.
San Juan, Africa and Benedicto for plaintiff-appellee.
Corporate Legal Counsel D. F. Macaranas and Jose P. Guzman for defendants-appellants. Having paid for the losses to the different importers upon covering insurance policies,
plaintiff became the subrogee of the consignees.
SANCHEZ, J.:
1. It is now futile for defendants to pass on liability to the carriers which are not parties to
this action. Paragraph 7 of the Stipulation of Facts will stop them. It reads: "VII. That the
In a suit for recovery of money arising out of short delivery and pilferage of goods — which
goods were discharged complete into the custody of the defendant." Not that the stipulation
came into the Philippines under four importations — while in the possession of the Manila
stands alone. Defendants in their brief 2 categorically state that the opinion of the lower
Port Service, judgment was rendered by the City Court of Manila against defendants. The
court "that the shipments in question were discharged into the custody of the defendant
latter appealed. In the Court of First Instance of Manila, the case came up for decision upon
Manila Port Service complete with respect to quantity, is not disputed."
a stipulation of facts. 1 Judgment was thereafter rendered sentencing defendants to pay
plaintiff "the sum of P1,447.51 with legal interest thereon from the date the complaint was
filed on December 28, 1962, until full payment is made, plus the sum of P200 by way of But defendants argue that the fact that the shipments were received by defendant Manila
attorney's fees" and the costs. Port Service complete, does not mean that the goods were received in "good order".
Defendants miss the point. This is immaterial. Because plaintiff's claim is for short delivery
and pilferage. 3
Defendants appealed on points of law.

Consequently, liability cannot be shifted to the carriers.

On December 31, 1961, the "Pioneer Ming" arrived at the imported from the United States
a shipment of 343 cartons and two crates of electrical surface raceways and fittings. This was
placed on board the SS "Pioneer Ming". On December 31, 1961, the "Pioneer Ming" arrived
at the port of Manila and discharged the shipment into the custody of the Manila Port
Service. One carton was pilfered of its contents while six cartons were not delivered.
Plaintiff's loss arising therefrom is the subject of the first cause of action.
On November 29, 1961, Brunette Shoe Factory imported from the United States three cases
upper leather carried on board the same SS "Pioneer Ming" in that same voyage. SS "Pioneer
Ming" discharged the cargo into the custody of the Manila Port Service. The leather delivered
was short of 111-¾ square feet. This is covered by plaintiff's second cause of action.
2. Seizing upon the trial court's finding that there is "no proof that said shortages or damages
with respect to the said goods were due to the negligence of the defendant, Manila Port
Service", 4 defendants now put forth disclaimer of liability.
We start with the presumption in Article 1265 of the Civil Code that whenever "the thing is
lost in the possession of the debtor, it shall be presumed that the loss was due to his fault,
unless there is proof to the contrary." As early as 1907, this Court held that under Article
1183 of the Spanish Civil Code (Article 1265 of the new Code), "the burden of explanation of
the loss rested upon the depositary and under article 1769 [of the Spanish Civil Code — now

1|Page
Article 1981 of the new Civil Code], the fault is presumed to be his." 5 It has been said that
the legal relationship created between the consignee and the arrastre operator "is
sufficiently akin to that existing between the consignee or owner of shipped goods and the
common carrier or that between a depositor and the warehouseman." 6 And, as custodian of
the goods discharged from the vessel, it is the duty of the arrastre operator to take good
care of the goods and turn them over to the party entitled to their possession. 7 It would
seem quite elementary that since the care to be used in the safekeeping of the goods rests
peculiarly within the knowledge of the Manila Port Service, it is incumbent upon said
defendant to prove that the losses were not due to its negligence or that of its employees.
Because there is no proof that the losses occurred either without defendants' fault or by
reason of caso fortuito, defendants are liable. 8
3. Nor will defendants escape liability by pleading that no claim was filed within 15 days from
"the date of discharge of the last package from the carrying vessel", 9 a condition precedent
to recovery, as set forth in the said Section 15 of the Management Contract. It is correct to
say that there is no proof of the date of discharge of each of the four shipments. But then,
there is no necessity for such proof. There is the fact that provisional claims on each of the
shipments were filed well within the 15-day period following the arrival of each of the
vessels. Naturally, those claims were presented within 15 days from the date of delivery. The
sufficiency of these provisional claims is not challenged. And although the provisional claims
do not specify the value of the goods lost and were not accompanied by supporting papers,
the jurisprudence is that such claims substantially fulfill the requirement. 10
4. Defendants' next point is that they are not liable for the sum P1,447.51 adjudged in the
decision below. They say that their admission in paragraph VI of the Stipulation of Facts was
delimited by the words "if any" recoverable.11lawphi1.ñetParagraph VI of the Stipulation of
Facts reads:
VI. That the value of the alleged claims recoverable, if any, by the plaintiff from the
defendants is as follows:
1. P355.00 — First cause of action
2. P66.92 — Second cause of action
3. P25.59 — Third cause of action
4. P1,000.00 — Fourth cause of action.
2|Page
Since the value of each claim is admitted and considering that plaintiff is entitled thereto as
earlier expressed in this opinion and upon the terms of the stipulation just quoted, the lower
court was correct in sentencing defendants to pay the total amount therein stated. 12
5. Defendants next question the award of legal interest from the date the complaint was
filed until full payment is made. 13 They also object to the award of attorneys' fees. 14
Interest upon an obligation which calls for the payment of money, absent a stipulation, is the
legal rate. Such interest normally is allowable from the date of demand, judicial or
extrajudicial. 15 The trial court opted for judicial demand as the starting point.
But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be recovered
upon unliquidated claims or damages, except when the demand can be established with
reasonable certainty." And as was held by this Court in Rivera vs. Perez, L-6998, February 29,
1956, if the suit were for damages, "unliquidated and not known until definitely ascertained,
assessed and determined by the courts after proof (Montilla v. Corporacion de P. P.
Agustinos, 25 Phil. 447; Lichauco v. Guzman, 38 Phil. 302)", then, interest "should be from
the date of the decision."
Defendants are correct in that Article 2213 of the Civil Code and the ruling in Rivera vs.
Perez should govern the present case. The total of plaintiff's unliquidated claim for the value
of the undelivered goods, as set forth in its complaint, amounted to P3,947.20. This demand
was not established in its totality. It was not definitely ascertained. Indeed, plaintiff settled
for an amount (P1,447.51) very much less than that demanded — in fact less than fifty
percent (50%) of the claim. This amount of P1,447.51 was not known until definitely agreed
upon in the stipulation of facts. Said stipulation was entered into in lieu of proof. These are
the facts which place the present case within the coverage of the rule set forth in Article
2213 of the Civil Code and elaborated in Rivera vs. Perez. For which reason, interest should
start from the date of the decision.
No reason exists why we should disturb the award of attorneys' fees. The court's authority
to grant such attorneys' fees is well within the compass of Article 2208(11) of the Civil Code
providing that attorneys' fees may be recovered in "any other case where the court deems
it just and equitable."
FOR THE REASONS GIVEN, the judgment under review is hereby modified in the sense that
the amount of P1,447.51 shall bear legal interest from the date of the decision below. Thus
modified, the judgment under review is affirmed in all other respects.
 13
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Capistrano, Teehankee and Barredo, JJ., Appellants' brief, p. 23.
concur.
Concepcion, C.J., and Castro, J., are on leave. 14
Appellants' brief, p. 24.

Footnotes 15
V Tolentino, Civil Code of the Philippines, 1959 ed., p 552, citing cases.

1
Civil Case 55461, entitled "Malayan Insurance Company, Inc., Plaintiff, versus
Manila Port Service and Manila Railroad Company, Defendants."

2
At p. 20.

3
Complaint, R.A., pp. 3, 5, 6, 7.

4
Appellants' brief, p. 17.

5
Palacio vs. Sudario, 7 Phil. 275, 276.

6
Northern Motors, Inc. vs. Prince Line, 107 Phil. 253, 258.

7
Macondray & Co., Inc. vs. Delgado Bros., Inc., 107 Phil. 779, 782. See also: Section
21 of the Warehouse Receipts Law. which reads:

SECTION 21. Liability for care of goods. — A warehouseman shall be liable for any
loss or injury to the goods caused by his failure to exercise such care in regard to
them as a reasonably careful owner of similar goods would exercise, but he shall
not be liable, in the absence of an agreement to the contrary, for any loss or injury
to the goods which could not have been avoided by the exercise of such care.

8
Article 1734, Civil Code.

9
Appellants' brief, p. 10.

10
Atlantic Mutual Insurance Company vs. Manila Port Service, 16 SCRA 698, 700.

11
Appellants' brief. p. 22.

12
Section 2, Rule 30, Revised Rules of Court.

3|Page
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 179419 January 12, 2011
DURBAN APARTMENTS CORPORATION, doing business under the name and style of City
Garden Hotel,Petitioner,
vs.
PIONEER INSURANCE AND SURETY CORPORATION, Respondent.
DECISION
NACHURA, J.:
For review is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 86869, which
affirmed the decision2 of the Regional Trial Court (RTC), Branch 66, Makati City, in Civil Case
No. 03-857, holding petitioner Durban Apartments Corporation solely liable to respondent
Pioneer Insurance and Surety Corporation for the loss of Jeffrey See’s (See’s) vehicle.
The facts, as found by the CA, are simple.
On July 22, 2003, [respondent] Pioneer Insurance and Surety Corporation x x x, by right of
subrogation, filed [with the RTC of Makati City] a Complaint for Recovery of Damages against
[petitioner] Durban Apartments Corporation, doing business under the name and style of
City Garden Hotel, and [defendant before the RTC] Vicente Justimbaste x x x. [Respondent
averred] that: it is the insurer for loss and damage of Jeffrey S. See’s [the insured’s] 2001
Suzuki Grand Vitara x x x with Plate No. XBH-510 under Policy No. MC-CV-HO-01-0003846-
00-D in the amount of ₱1,175,000.00; on April 30, 2002, See arrived and checked in at the
City Garden Hotel in Makati corner Kalayaan Avenues, Makati City before midnight, and its
parking attendant, defendant x x x Justimbaste got the key to said Vitara from See to park
it[. O]n May 1, 2002, at about 1:00 o’clock in the morning, See was awakened in his room by
[a] telephone call from the Hotel Chief Security Officer who informed him that his Vitara was
carnapped while it was parked unattended at the parking area of Equitable PCI Bank along
Makati Avenue between the hours of 12:00 [a.m.] and 1:00 [a.m.]; See went to see the Hotel
Chief Security Officer, thereafter reported the incident to the Operations Division of the
Makati City Police Anti-Carnapping Unit, and a flash alarm was issued; the Makati City Police
4|Page
Anti-Carnapping Unit investigated Hotel Security Officer, Ernesto T. Horlador, Jr. x x x and
defendant x x x Justimbaste; See gave his Sinumpaang Salaysay to the police investigator,
and filed a Complaint Sheet with the PNP Traffic Management Group in Camp Crame,
Quezon City; the Vitara has not yet been recovered since July 23, 2002 as evidenced by a
Certification of Non- Recovery issued by the PNP TMG; it paid the ₱1,163,250.00 money
claim of See and mortgagee ABN AMRO Savings Bank, Inc. as indemnity for the loss of the
Vitara; the Vitara was lost due to the negligence of [petitioner] Durban Apartments and
[defendant] Justimbaste because it was discovered during the investigation that this was the
second time that a similar incident of carnapping happened in the valet parking service of
[petitioner] Durban Apartments and no necessary precautions were taken to prevent its
repetition; [petitioner] Durban Apartments was wanting in due diligence in the selection and
supervision of its employees particularly defendant x x x Justimbaste; and defendant x x x
Justimbaste and [petitioner] Durban Apartments failed and refused to pay its valid, just, and
lawful claim despite written demands.
Upon service of Summons, [petitioner] Durban Apartments and [defendant] Justimbaste
filed their Answer with Compulsory Counterclaim alleging that: See did not check in at its
hotel, on the contrary, he was a guest of a certain Ching Montero x x x; defendant x x x
Justimbaste did not get the ignition key of See’s Vitara, on the contrary, it was See who
requested a parking attendant to park the Vitara at any available parking space, and it was
parked at the Equitable Bank parking area, which was within See’s view, while he and
Montero were waiting in front of the hotel; they made a written denial of the demand of
[respondent] Pioneer Insurance for want of legal basis; valet parking services are provided
by the hotel for the convenience of its customers looking for a parking space near the hotel
premises; it is a special privilege that it gave to Montero and See; it does not include
responsibility for any losses or damages to motor vehicles and its accessories in the parking
area; and the same holds true even if it was See himself who parked his Vitara within the
premises of the hotel as evidenced by the valet parking customer’s claim stub issued to him;
the carnapper was able to open the Vitara without using the key given earlier to the parking
attendant and subsequently turned over to See after the Vitara was stolen; defendant x x x
Justimbaste saw the Vitara speeding away from the place where it was parked; he tried to
run after it, and blocked its possible path but to no avail; and See was duly and immediately
informed of the carnapping of his Vitara; the matter was reported to the nearest police
precinct; and defendant x x x Justimbaste, and Horlador submitted themselves to police
investigation.
During the pre-trial conference on November 28, 2003, counsel for [respondent] Pioneer
Insurance was present. Atty. Monina Lee x x x, counsel of record of [petitioner] Durban
Apartments and Justimbaste was absent, instead, a certain Atty. Nestor Mejia appeared for
[petitioner] Durban Apartments and Justimbaste, but did not file their pre-trial brief.
On November 5, 2004, the lower court granted the motion of [respondent] Pioneer
Insurance, despite the opposition of [petitioner] Durban Apartments and Justimbaste, and
allowed [respondent] Pioneer Insurance to present its evidence ex parte before the Branch
Clerk of Court.
See testified that: on April 30, 2002, at about 11:30 in the evening, he drove his Vitara and
stopped in front of City Garden Hotel in Makati Avenue, Makati City; a parking attendant,
whom he had later known to be defendant x x x Justimbaste, approached and asked for his
ignition key, told him that the latter would park the Vitara for him in front of the hotel, and
issued him a valet parking customer’s claim stub; he and Montero, thereafter, checked in at
the said hotel; on May 1, 2002, at around 1:00 in the morning, the Hotel Security Officer
whom he later knew to be Horlador called his attention to the fact that his Vitara was
carnapped while it was parked at the parking lot of Equitable PCI Bank which is in front of
the hotel; his Vitara was insured with [respondent] Pioneer Insurance; he together with
Horlador and defendant x x x Justimbaste went to Precinct 19 of the Makati City Police to
report the carnapping incident, and a police officer came accompanied them to the Anti-
Carnapping Unit of the said station for investigation, taking of their sworn statements, and
flashing of a voice alarm; he likewise reported the said incident in PNP TMG in Camp Crame
where another alarm was issued; he filed his claim with [respondent] Pioneer Insurance, and
a representative of the latter, who is also an adjuster of Vesper Insurance Adjusters-
Appraisers [Vesper], investigated the incident; and [respondent] Pioneer Insurance required
him to sign a Release of Claim and Subrogation Receipt, and finally paid him the sum of
₱1,163,250.00 for his claim.
Ricardo F. Red testified that: he is a claims evaluator of [petitioner] Pioneer Insurance tasked,
among others, with the receipt of claims and documents from the insured, investigation of
the said claim, inspection of damages, taking of pictures of insured unit, and monitoring of
the processing of the claim until its payment; he monitored the processing of See’s claim
when the latter reported the incident to [respondent] Pioneer Insurance; [respondent]
Pioneer Insurance assigned the case to Vesper who verified See’s report, conducted an
investigation, obtained the necessary documents for the processing of the claim, and
tendered a settlement check to See; they evaluated the case upon receipt of the subrogation
documents and the adjuster’s report, and eventually recommended for its settlement for
the sum of ₱1,163,250.00 which was accepted by See; the matter was referred and
forwarded to their counsel, R.B. Sarajan & Associates, who prepared and sent demand letters
to [petitioner] Durban Apartments and [defendant] Justimbaste, who did not pay
[respondent] Pioneer Insurance notwithstanding their receipt of the demand letters; and the
services of R.B. Sarajan & Associates were engaged, for ₱100,000.00 as attorney’s fees plus
₱3,000.00 per court appearance, to prosecute the claims of [respondent] Pioneer Insurance
against [petitioner] Durban Apartments and Justimbaste before the lower court.
5|Page
Ferdinand Cacnio testified that: he is an adjuster of Vesper; [respondent] Pioneer Insurance
assigned to Vesper the investigation of See’s case, and he was the one actually assigned to
investigate it; he conducted his investigation of the matter by interviewing See, going to the
City Garden Hotel, required subrogation documents from See, and verified the authenticity
of the same; he learned that it is the standard procedure of the said hotel as regards its valet
parking service to assist their guests as soon as they get to the lobby entrance, park the cars
for their guests, and place the ignition keys in their safety key box; considering that the hotel
has only twelve (12) available parking slots, it has an agreement with Equitable PCI Bank
permitting the hotel to use the parking space of the bank at night; he also learned that a
Hyundai Starex van was carnapped at the said place barely a month before the occurrence
of this incident because Liberty Insurance assigned the said incident to Vespers, and
Horlador and defendant x x x Justimbaste admitted the occurrence of the same in their
sworn statements before the Anti-Carnapping Unit of the Makati City Police; upon
verification with the PNP TMG [Unit] in Camp Crame, he learned that See’s Vitara has not
yet been recovered; upon evaluation, Vesper recommended to [respondent] Pioneer
Insurance to settle See’s claim for ₱1,045,750.00; See contested the recommendation of
Vesper by reasoning out that the 10% depreciation should not be applied in this case
considering the fact that the Vitara was used for barely eight (8) months prior to its loss; and
[respondent] Pioneer Insurance acceded to See’s contention, tendered the sum of
₱1,163,250.00 as settlement, the former accepted it, and signed a release of claim and
subrogation receipt.
The lower court denied the Motion to Admit Pre-Trial Brief and Motion for Reconsideration
field by [petitioner] Durban Apartments and Justimbaste in its Orders dated May 4, 2005 and
October 20, 2005, respectively, for being devoid of merit.3
Thereafter, on January 27, 2006, the RTC rendered a decision, disposing, as follows:
WHEREFORE, judgment is hereby rendered ordering [petitioner Durban Apartments
Corporation] to pay [respondent Pioneer Insurance and Surety Corporation] the sum of
₱1,163,250.00 with legal interest thereon from July 22, 2003 until the obligation is fully paid
and attorney’s fees and litigation expenses amounting to ₱120,000.00.
SO ORDERED.4
On appeal, the appellate court affirmed the decision of the trial court, viz.:
WHEREFORE, premises considered, the Decision dated January 27, 2006 of the RTC, Branch
66, Makati City in Civil Case No. 03-857 is hereby AFFIRMED insofar as it holds [petitioner]
Durban Apartments Corporation solely liable to [respondent] Pioneer Insurance and Surety
Corporation for the loss of Jeffrey See’s Suzuki Grand Vitara.
SO ORDERED.5
Hence, this recourse by petitioner.
The issues for our resolution are:
1. Whether the lower courts erred in declaring petitioner as in default for failure to
appear at the pre-trial conference and to file a pre-trial brief;
2. Corollary thereto, whether the trial court correctly allowed respondent to
present evidence ex-parte;
3. Whether petitioner is liable to respondent for attorney’s fees in the amount of
₱120,000.00; and
4. Ultimately, whether petitioner is liable to respondent for the loss of See’s vehicle.
The petition must fail.
We are in complete accord with the common ruling of the lower courts that petitioner was
in default for failure to appear at the pre-trial conference and to file a pre-trial brief, and
thus, correctly allowed respondent to present evidence ex-parte. Likewise, the lower courts
did not err in holding petitioner liable for the loss of See’s vehicle.
Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially
when affirmed by the appellate court, are accorded the highest degree of respect and are
considered conclusive between the parties.6 A review of such findings by this Court is not
warranted except upon a showing of highly meritorious circumstances, such as: (1) when the
findings of a trial court are grounded entirely on speculation, surmises, or conjectures; (2)
when a lower court’s inference from its factual findings is manifestly mistaken, absurd, or
impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when
the findings of the appellate court go beyond the issues of the case, or fail to notice certain
relevant facts which, if properly considered, will justify a different conclusion; (5) when there
is a misappreciation of facts; (6) when the findings of fact are conclusions without mention
of the specific evidence on which they are based, are premised on the absence of evidence,
6|Page
or are contradicted by evidence on record.7 None of the foregoing exceptions permitting a
reversal of the assailed decision exists in this instance.
Petitioner urges us, however, that "strong [and] compelling reason[s]" such as the
prevention of miscarriage of justice warrant a suspension of the rules and excuse its and its
counsel’s non-appearance during the pre-trial conference and their failure to file a pre-trial
brief.
We are not persuaded.
Rule 18 of the Rules of Court leaves no room for equivocation; appearance of parties and
their counsel at the pre-trial conference, along with the filing of a corresponding pre-trial
brief, is mandatory, nay, their duty. Thus, Section 4 and Section 6 thereof provide:
SEC. 4. Appearance of parties.–It shall be the duty of the parties and their counsel to appear
at the pre-trial. The non-appearance of a party may be excused only if a valid cause is shown
therefor or if a representative shall appear in his behalf fully authorized in writing to enter
into an amicable settlement, to submit to alternative modes of dispute resolution, and to
enter into stipulations or admissions of facts and documents.
SEC. 6. Pre-trial brief.–The parties shall file with the court and serve on the adverse party, in
such manner as shall ensure their receipt thereof at least three (3) days before the date of
the pre-trial, their respective pre-trial briefs which shall contain, among others:
xxxx
Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-
trial.
Contrary to the foregoing rules, petitioner and its counsel of record were not present at the
scheduled pre-trial conference. Worse, they did not file a pre-trial brief. Their non-
appearance cannot be excused as Section 4, in relation to Section 6, allows only two
exceptions: (1) a valid excuse; and (2) appearance of a representative on behalf of a party
who is fully authorized in writing to enter into an amicable settlement, to submit to
alternative modes of dispute resolution, and to enter into stipulations or admissions of facts
and documents.
Petitioner is adamant and harps on the fact that November 28, 2003 was merely the first
scheduled date for the pre-trial conference, and a certain Atty. Mejia appeared on its behalf.
However, its assertion is belied by its own admission that, on said date, this Atty. Mejia "did
not have in his possession the Special Power of Attorney issued by petitioner’s Board of
Directors."
As pointed out by the CA, petitioner, through Atty. Lee, received the notice of pre-trial on
October 27, 2003, thirty-two (32) days prior to the scheduled conference. In that span of
time, Atty. Lee, who was charged with the duty of notifying petitioner of the scheduled pre-
trial conference,8 petitioner, and Atty. Mejia should have discussed which lawyer would
appear at the pre-trial conference with petitioner, armed with the appropriate authority
therefor. Sadly, petitioner failed to comply with not just one rule; it also did not proffer a
reason why it likewise failed to file a pre-trial brief. In all, petitioner has not shown any
persuasive reason why it should be exempt from abiding by the rules.
The appearance of Atty. Mejia at the pre-trial conference, without a pre-trial brief and with
only his bare allegation that he is counsel for petitioner, was correctly rejected by the trial
court. Accordingly, the trial court, as affirmed by the appellate court, did not err in allowing
respondent to present evidence ex-parte.
Former Chief Justice Andres R. Narvasa’s words continue to resonate, thus:
Everyone knows that a pre-trial in civil actions is mandatory, and has been so since January
1, 1964. Yet to this day its place in the scheme of things is not fully appreciated, and it
receives but perfunctory treatment in many courts. Some courts consider it a mere
technicality, serving no useful purpose save perhaps, occasionally to furnish ground for non-
suiting the plaintiff, or declaring a defendant in default, or, wistfully, to bring about a
compromise. The pre-trial device is not thus put to full use. Hence, it has failed in the main
to accomplish the chief objective for it: the simplification, abbreviation and expedition of the
trial, if not indeed its dispensation. This is a great pity, because the objective is attainable,
and with not much difficulty, if the device were more intelligently and extensively handled.
xxxx
Consistently with the mandatory character of the pre-trial, the Rules oblige not only the
lawyers but the parties as well to appear for this purpose before the Court, and when a party
"fails to appear at a pre-trial conference (he) may be non-suited or considered as in default."
The obligation "to appear" denotes not simply the personal appearance, or the mere physical
presentation by a party of one’s self, but connotes as importantly, preparedness to go into
the different subject assigned by law to a pre-trial. And in those instances where a party may
not himself be present at the pre-trial, and another person substitutes for him, or his lawyer
7|Page
undertakes to appear not only as an attorney but in substitution of the client’s person, it is
imperative for that representative of the lawyer to have "special authority" to make such
substantive agreements as only the client otherwise has capacity to make. That "special
authority" should ordinarily be in writing or at the very least be "duly established by evidence
other than the self-serving assertion of counsel (or the proclaimed representative) himself."
Without that special authority, the lawyer or representative cannot be deemed capacitated
to appear in place of the party; hence, it will be considered that the latter has failed to put
in an appearance at all, and he [must] therefore "be non-suited or considered as in default,"
notwithstanding his lawyer’s or delegate’s presence.9
We are not unmindful that defendant’s (petitioner’s) preclusion from presenting evidence
during trial does not automatically result in a judgment in favor of plaintiff (respondent). The
plaintiff must still substantiate the allegations in its complaint. 10 Otherwise, it would be
inutile to continue with the plaintiff’s presentation of evidence each time the defendant is
declared in default.
In this case, respondent substantiated the allegations in its complaint, i.e., a contract of
necessary deposit existed between the insured See and petitioner. On this score, we find no
error in the following disquisition of the appellate court:
[The] records also reveal that upon arrival at the City Garden Hotel, See gave notice to the
doorman and parking attendant of the said hotel, x x x Justimbaste, about his Vitara when
he entrusted its ignition key to the latter. x x x Justimbaste issued a valet parking customer
claim stub to See, parked the Vitara at the Equitable PCI Bank parking area, and placed the
ignition key inside a safety key box while See proceeded to the hotel lobby to check in. The
Equitable PCI Bank parking area became an annex of City Garden Hotel when the
management of the said bank allowed the parking of the vehicles of hotel guests thereat in
the evening after banking hours.11
Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit and a
necessary deposit made by persons in hotels or inns:
Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to
another, with the obligation of safely keeping it and returning the same. If the safekeeping
of the thing delivered is not the principal purpose of the contract, there is no deposit but
some other contract.
Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be regarded as
necessary.1avvphi1 The keepers of hotels or inns shall be responsible for them as
depositaries, provided that notice was given to them, or to their employees, of the effects ANTONIO T. CARPIO
brought by the guests and that, on the part of the latter, they take the precautions which Associate Justice
said hotel-keepers or their substitutes advised relative to the care and vigilance of their Chairperson
effects.
DIOSDADO M. PERALTA ROBERTO A. ABAD
Plainly, from the facts found by the lower courts, the insured See deposited his vehicle for Associate Justice Associate Justice
safekeeping with petitioner, through the latter’s employee, Justimbaste. In turn, Justimbaste
issued a claim stub to See. Thus, the contract of deposit was perfected from See’s delivery,
JOSE CATRAL MENDOZA
when he handed over to Justimbaste the keys to his vehicle, which Justimbaste received with
Associate Justice
the obligation of safely keeping and returning it. Ultimately, petitioner is liable for the loss of
See’s vehicle.
ATTESTATION
Lastly, petitioner assails the lower courts’ award of attorney’s fees to respondent in the
amount of ₱120,000.00. Petitioner claims that the award is not substantiated by the I attest that the conclusions in the above Decision had been reached in consultation before
evidence on record. the case was assigned to the writer of the opinion of the Court’s Division.

We disagree. ANTONIO T. CARPIO

Associate Justice
Chairperson, Second Division
While it is a sound policy not to set a premium on the right to litigate, 12 we find that
respondent is entitled to reasonable attorney’s fees. Attorney’s fees may be awarded when
a party is compelled to litigate or incur expenses to protect its interest,13 or when the court CERTIFICATION
deems it just and equitable.14 In this case, petitioner refused to answer for the loss of See’s
vehicle, which was deposited with it for safekeeping. This refusal constrained respondent, Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's
the insurer of See, and subrogated to the latter’s right, to litigate and incur expenses. Attestation, I certify that the conclusions in the above Decision had been reached in
However, we reduce the award of ₱120,000.00 to ₱60,000.00 in view of the simplicity of the consultation before the case was assigned to the writer of the opinion of the Court’s Division.
issues involved in this case.
RENATO C. CORONA
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. Chief Justice
86869 is AFFIRMED with the MODIFICATION that the award of attorney’s fees is reduced to
₱60,000.00. Costs against petitioner.

SO ORDERED.
Footnotes
ANTONIO EDUARDO B. NACHURA
1
Associate Justice Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate
Justices Rosalinda Asuncion-Vicente and Enrico A. Lanzanas, concurring; rollo, pp.
WE CONCUR: 93-109.

2
Penned by Pairing Judge Rommel O. Baybay; id. at 33-35.

8|Page
 3
Id. at 94-101. PHILIPPINE NATIONAL BANK, petitioner, vs. HON. MARCELINO L. SAYO, JR., in his capacity as
Presiding Judge of the Regional Trial Court of Manila (Branch 45), NOAHS ARK
4
Id. at 35. SUGAR REFINERY, ALBERTO T. LOOYUKO, JIMMY T. GO and WILSON T.
GO, respondents.
5
Id. at 108.
DECISION
6
Titan Construction Corporation v. Uni-Field Enterprises, Inc., G.R. No. 153874, DAVIDE, JR., J.:
March 7, 2007, 517 SCRA 180, 186; Sigaya v. Mayuga, 504 Phil. 600, 611 (2005).

7
In this special civil action for certiorari, actually the third dispute between the same
See Child Learning Center, Inc. v. Tagorio, 512 Phil. 618, 623 (2005); Ilao-Quianay private parties to have reached this Court,[1] petitioner asks us to annul the orders[2] of 15
v. Mapile, 510 Phil. 736, 744-745 (2005). April 1997 and 14 July 1997 issued in Civil Case No. 90-53023 by the Regional Trial Court,
Manila, Branch 45. The first order[3] granted private respondents motion for execution to
8
RULES OF COURT, Rule 18, Sec. 3: satisfy their warehousemans lien against petitioner, while the second order[4] denied, with
finality, petitioners motion for reconsideration of the first order and urgent motion to lift
SEC. 3. Notice of pre-trial.—The notice of pre-trial shall be served on garnishment, and private respondents motion for partial reconsideration.
counsel, or on the party who has no counsel. The counsel served with such
notice is charged with the duty of notifying the party represented by him. The factual antecedents until the commencement of G.R. No. 119231 were
summarized in our decision therein, as follows:
9
Development Bank of the Phils. v. CA, 251 Phil. 390, 392-395 (1989). (Citations
omitted.) In accordance with Act No. 2137, the Warehouse Receipts Law, Noahs Ark Sugar Refinery
issued on several dates, the following Warehouse Receipts (Quedans): (a) March 1, 1989,
10 Receipt No. 18062, covering sugar deposited by Rosa Sy; (b) March 7, 1989, Receipt No.
See SSS v. Hon. Chaves, 483 Phil. 292, 302 (2004).
18080, covering sugar deposited by RNS Merchandising (Rosa Ng Sy); (c) March 21, 1989,
11
Receipt No. 18081, covering sugar deposited by St. Therese Merchandising; (d) March 31,
Rollo, p. 105. 1989, Receipt No. 18086, covering sugar deposited by St. Therese Merchandising; and (e)
April 1, 1989, Receipt No. 18087, covering sugar deposited by RNS Merchandising. The
12
Bank of the Philippine Islands v. Casa Montessori International, G.R. Nos. 149454 receipts are substantially in the form, and contains the terms, prescribed for negotiable
& 149507, May 28, 2004, 430 SCRA 261, 296. warehouse receipts by Section 2 of the law.

13
CIVIL CODE, Art. 2208, par. 2. Subsequently, Warehouse Receipts Nos. 18080 and 18081 were negotiated and endorsed to
Luis T. Ramos, and Receipts Nos. 18086, 18087 and 18062 were negotiated and endorsed to
14
CIVIL CODE, Art. 2208, par. 11. Cresencia K. Zoleta. Ramos and Zoleta then used the quedans as security for two loan
agreements one for P15.6 million and the other for P23.5 million obtained by them from the
Philippine National Bank. The aforementioned quedans were endorsed by them to the
Philippine National Bank.
FIRST DIVISION
Luis T. Ramos and Cresencia K. Zoleta failed to pay their loans upon maturity on January 9,
1990. Consequently, on March 16, 1990, the Philippine National Bank wrote to Noahs Ark
Sugar Refinery demanding delivery of the sugar stocks covered by the quedans endorsed to
[G.R. No. 129918. July 9, 1998]
9|Page
it by Zoleta and Ramos. Noahs Ark Sugar Refinery refused to comply with the demand
alleging ownership thereof, for which reason the Philippine National Bank filed with the
Regional Trial Court of Manila a verified complaint for Specific Performance with Damages
and Application for Writ of Attachment against Noahs Ark Sugar Refinery, Alberto T. Looyuko,
Jimmy T. Go and Wilson T. Go, the last three being identified as the sole proprietor, managing
partner, and Executive Vice President of Noahs Ark, respectively.
Respondent Judge Benito C. Se, Jr., [to] whose sala the case was raffled, denied the
Application for Preliminary Attachment. Reconsideration therefor was likewise denied.
Noahs Ark and its co-defendants filed an Answer with Counterclaim and Third-Party
Complaint in which they claimed that they [were] the owners of the subject quedans and
the sugar represented therein, averring as they did that:
9. *** In an agreement dated April 1, 1989, defendants agreed to sell to Rosa Ng Sy of RNS
Merchandising and Teresita Ng of St. Therese Merchandising the total volume of sugar
indicated in the quedans stored at Noahs Ark Sugar Refinery for a total consideration
of P63,000,000.00, *** The corresponding payments in the form of checks issued by the
vendees in favor of defendants were subsequently dishonored by the drawee banks by
reason of payment stopped and drawn against insufficient funds, *** Upon proper
notification to said vendees and plaintiff in due course, defendants refused to deliver to
vendees therein the quantity of sugar covered by the subject quedans.
10. *** Considering that the vendees and first endorsers of subject quedans did not acquire
ownership thereof, the subsequent endorsers and plaintiff itself did not acquire a better
right of ownership than the original vendees/first endorsers.
The Answer incorporated a Third-Party Complaint by Alberto T. Looyuko, Jimmy T. Go and
Wilson T. Go, doing business under the trade name and style Noahs Ark Sugar Refinery
against Rosa Ng Sy and Teresita Ng, praying that the latter be ordered to deliver or return to
them the quedans (previously endorsed to PNB and the subject of the suit) and pay damages
and litigation expenses.
The Answer of Rosa Ng Sy and Teresita Ng, dated September 6, 1990, one of avoidance, is
essentially to the effect that the transaction between them, on the one hand, and Jimmy T.
Go, on the other, concerning the quedans and the sugar stocks covered by them was merely
a simulated one being part of the latters complex banking schemes and financial maneuvers,
and thus, they are not answerable in damages to him.
10 | P a g e
On January 31, 1991, the Philippine National Bank filed a Motion for Summary Judgment in
favor of the plaintiff as against the defendants for the reliefs prayed for in the complaint.
On May 2, 1991, the Regional Trial Court issued an order denying the Motion for Summary
Judgment. Thereupon, the Philippine National Bank filed a Petition for Certiorari with the
Court of Appeals, docketed as CA-G.R. SP No. 25938 on December 13, 1991.
Pertinent portions of the decision of the Court of Appeals read:
In issuing the questioned Orders, the respondent Court ruled that questions of law should
be resolved after and not before, the questions of fact are properly litigated. A scrutiny of
defendants affirmative defenses does not show material questions of fact as to the alleged
nonpayment of purchase price by the vendees/first endorsers, and which nonpayment is not
disputed by PNB as it does not materially affect PNBs title to the sugar stocks as holder of
the negotiable quedans.
What is determinative of the propriety of summary judgment is not the existence of
conflicting claims from prior parties but whether from an examination of the pleadings,
depositions, admissions and documents on file, the defenses as to the main issue do not
tender material questions of fact (see Garcia vs. Court of Appeals, 167 SCRA 815) or the
issues thus tendered are in fact sham, fictitious, contrived, set up in bad faith or so
unsubstantial as not to constitute genuine issues for trial. (See Vergara vs. Suelto, et al., 156
SCRA 753; Mercado, et al. vs. Court of Appeals, 162 SCRA 75). [sic] The questioned Orders
themselves do not specify what material facts are in issue. (See Sec. 4, Rule 34, Rules of
Court).
To require a trial notwithstanding pertinent allegations of the pleadings and other facts
appearing on the record, would constitute a waste of time and an injustice to the PNB whose
rights to relief to which it is plainly entitled would be further delayed to its prejudice.
In issuing the questioned Orders, We find the respondent Court to have acted in grave abuse
of discretion which justify holding null and void and setting aside the Orders dated May 2
and July 4, 1990 of respondent Court, and that a summary judgment be rendered forthwith
in favor of the PNB against Noahs Ark Sugar Refinery, et al., as prayed for in petitioners
Motion for Summary Judgment.
On December 13, 1991, the Court of Appeals nullified and set aside the orders of May 2 and
July 4, 1990 of the Regional Trial Court and ordered the trial court to render summary
judgment in favor of the PNB. On June 18, 1992, the trial court rendered judgment dismissing
plaintiffs complaint against private respondents for lack of cause of action and likewise
dismissed private respondents counterclaim against PNB and of the Third-Party Complaint
and the Third-Party Defendants Counterclaim. On September 4, 1992, the trial court denied
PNBs Motion for Reconsideration.
On June 9, 1992, the PNB filed an appeal from the RTC decision with the Supreme Court, G.R.
No. 107243, by way of a Petition for Review on Certiorari under Rule 45 of the Rules of
Court. This Court rendered judgment on September 1, 1993, the dispositive portion of which
reads:
WHEREFORE, the trial judges decision in Civil Case No. 90-53023, dated June 18, 1992, is
reversed and set aside and a new one rendered conformably with the final and executory
decision of the Court of Appeals in CA-G.R. SP No. 25938, ordering the private respondents
Noahs Ark Sugar Refinery, Alberto T. Looyuko, Jimmy T. Go and Wilson T. Go, jointly and
severally:
(a) to deliver to the petitioner Philippine National Bank, the sugar stocks covered by the
Warehouse Receipts/Quedans which are now in the latters possession as holder for value
and in due course; or alternatively, to pay (said) plaintiff actual damages in the amount
of P39.1 million, with legal interest thereon from the filing of the complaint until full
payment; and
(b) to pay plaintiff Philippine National Bank attorneys fees, litigation expenses and judicial
costs hereby fixed at the amount of One Hundred Fifty Thousand Pesos (P150,000.00) as
well as the costs.
SO ORDERED.
On September 29, 1993, private respondents moved for reconsideration of this decision. A
Supplemental/Second Motion for Reconsideration with leave of court was filed by private
respondents on November 8, 1993. We denied private respondents motion on January 10,
1994.
Private respondents filed a Motion Seeking Clarification of the Decision, dated September 1,
1993. We denied this motion in this manner:
It bears stressing that the relief granted in this Courts decision of September 1, 1993 is
precisely that set out in the final and executory decision of the Court of Appeals in CA-G.R.
11 | P a g e
SP No. 25938, dated December 13, 1991, which was affirmed in toto by this Court and which
became unalterable upon becoming final and executory.
Private respondents thereupon filed before the trial court an Omnibus Motion seeking
among others the deferment of the proceedings until private respondents [were] heard on
their claim for warehousemans lien. On the other hand, on August 22, 1994, the Philippine
National Bank filed a Motion for the Issuance of a Writ of Execution and an Opposition to the
Omnibus Motion filed by private respondents.
The trial court granted private respondents Omnibus Motion on December 20, 1994 and set
reception of evidence on their claim for warehousemans lien. The resolution of the PNBs
Motion for Execution was ordered deferred until the determination of private respondents
claim.
On February 21, 1995, private respondents claim for lien was heard and evidence was
received in support thereof. The trial court thereafter gave both parties five (5) days to file
respective memoranda.
On February 28, 1995, the Philippine National Bank filed a Manifestation with Urgent Motion
to Nullify Court Proceedings. In adjudication thereof, the trial court issued the following
order on March 1, 1995:
WHEREFORE, this court hereby finds that there exists in favor of the defendants a valid
warehousemans lien under Section 27 of Republic Act 2137 and accordingly, execution of
the judgment is hereby ordered stayed and/or precluded until the full amount of defendants
lien on the sugar stocks covered by the five (5) quedans subject of this action shall have been
satisfied conformably with the provisions of Section 31 of Republic Act 2137.[5]
Unsatisfied with the trial courts order of 1 March 1995, herein petitioner filed with us
G.R. No. 119231, contending:
I
PNBS RIGHT TO A WRIT OF EXECUTION IS SUPPORTED BY TWO FINAL AND
EXECUTORY DECISIONS: THE DECEMBER 13, 1991 COURT OF APPEALS [sic]
DECISION IN CA-G.R. SP NO. 25938; AND, THE NOVEMBER 9, 1992 SUPREME
COURT DECISION IN G.R. NO. 107243. RESPONDENT RTCS MINISTERIAL AND
MANDATORY DUTY IS TO ISSUE THE WRIT OF EXECUTION TO IMPLEMENT THE
DECRETAL PORTION OF SAID SUPREME COURT DECISION.
II
RESPONDENT RTC IS WITHOUT JURISDICTION TO HEAR PRIVATE
RESPONDENTS OMNIBUS MOTION. THE CLAIMS SET FORTH IN SAID MOTION:
(1) WERE ALREADY REJECTED BY THE SUPREME COURT IN ITS MARCH 9, 1994
RESOLUTION DENYING PRIVATE RESPONDENTS MOTION FOR CLARIFICATION
OF DECISION IN G.R. NO. 107243; AND (2) ARE BARRED FOREVER BY PRIVATE
RESPONDENTS FAILURE TO INTERPOSE THEM IN THEIR ANSWER, AND
FAILURE TO APPEAL FROM THE JUNE 18, 1992 DECISION IN CIVIL CASE NO.
90-52023.
III
RESPONDENT RTCS ONLY JURISDICTION IS TO ISSUE THE WRIT TO EXECUTE
THE SUPREME COURT DECISION. THUS, PNB IS ENTITLED TO: (1) A WRIT
OF CERTIORARI TO ANNUL THE RTC RESOLUTION DATED DECEMBER 20, 1994
AND THE ORDER DATED FEBRUARY 7, 1995 AND ALL PROCEEDINGS TAKEN BY
THE RTC THEREAFTER; (2) A WRIT OF PROHIBITION TO PREVENT RESPONDENT
RTC FROM FURTHER PROCEEDING WITH CIVIL CASE NO. 90-53023 AND
COMMITTING OTHER ACTS VIOLATIVE OF THE SUPREME COURT DECISION IN
G.R. NO. 107243; AND (3) A WRIT OF MANDAMUS TO COMPEL RESPONDENT
RTC TO ISSUE THE WRIT TO EXECUTE THE SUPREME COURT JUDGMENT IN
FAVOR OF PNB.
In our decision of 18 April 1996 in G.R. No. 119231, we held against herein petitioner
as to these issues and concluded:
In view of the foregoing, the rule may be simplified thus: While the PNB is entitled to the
stocks of sugar as the endorsee of the quedans, delivery to it shall be effected only upon
payment of the storage fees.
Imperative is the right of the warehouseman to demand payment of his lien at this juncture,
because, in accordance with Section 29 of the Warehouse Receipts Law, the warehouseman
loses his lien upon goods by surrendering possession thereof. In other words, the lien may
be lost where the warehouseman surrenders the possession of the goods without requiring
payment of his lien, because a warehousemans lien is possessory in nature.
We, therefore, uphold and sustain the validity of the assailed orders of public respondent,
dated December 20, 1994 and March 1, 1995.
12 | P a g e
In fine, we fail to see any taint of abuse of discretion on the part of the public respondent in
issuing the questioned orders which recognized the legitimate right of Noahs Ark, after being
declared as warehouseman, to recover storage fees before it would release to the PNB sugar
stocks covered by the five (5) Warehouse Receipts. Our resolution, dated March 9, 1994, did
not preclude private respondents unqualified right to establish its claim to recover storage
fees which is recognized under Republic Act No. 2137. Neither did the Court of Appeals
decision, dated December 13, 1991, restrict such right.
Our Resolutions reference to the decision by the Court of Appeals, dated December 13,
1991, in CA-G.R. SP No. 25938, was intended to guide the parties in the subsequent
disposition of the case to its final end. We certainly did not foreclose private respondents
inherent right as warehouseman to collect storage fees and preservation expenses as
stipulated on the face of each of the Warehouse Receipts and as provided for in the
Warehouse Receipts Law (R.A. 2137).[6]
Petitioners motion to reconsider the decision in G.R. No. 119231 was denied.
After the decision in G.R. No. 119231 became final and executory, various incidents
took place before the trial court in Civil Case No. 90-53023. The petition in this case
summarizes these as follows:
3.24 Pursuant to the abovementioned Supreme Court Decision, private respondents filed a
Motion for Execution of Defendants Lien as Warehouseman dated 27 November 1996. A
photocopy of said Motion for Execution is attached hereto as Annex I.
3.25 PNB opposed said Motion on the following grounds:
(a) The lien claimed by Noahs Ark in the unbelievable amount
of P734,341,595.06 is illusory; and
(b) There is no legal basis for execution of defendants lien as warehouseman
unless and until PNB compels the delivery of the sugar stocks.
3.26 In their Reply to Opposition dated 18 January 1997, private respondents pointed out
that a lien existed in their favor, as held by the Supreme Court. In its Rejoinder dated 7
February 1997, PNB countered private respondents argument, pointing out that the
dispositive portion of the court a quos Order dated 1 March 1995 failed to state the amount
for which execution may be granted and, thus, the same could not be the subject of
execution; and (b) private respondents should instead file a separate action to prove the
amount of its claim as warehouseman.
3.27 The court a quo, this time presided by herein public respondent, Hon. Marcelino L. Sayo
Jr., granted private respondents Motion for Execution. In its questioned Order dated 15 April
1997 (Annex A), the court a quo ruled in this wise:
Accordingly, the computation of accrued storage fees and preservation charges presented
in evidence by the defendants, in the amount of P734,341,595.06 as of January 31, 1995 for
the 86,356.41 50 kg. bags of sugar, being in order and with sufficient basis, the same should
be granted. This Court consequently rejects PNBs claim of no sugar no lien, since it is
undisputed that the amount of the accrued storage fees is substantially in excess of the
alternative award of P39.1 Million in favor of PNB, including legal interest and P150,000.00
in attorneys fees, which PNB is however entitled to be credited x x x.
xxxxxxxxx
WHEREFORE, premises considered and finding merit in the defendants motion for execution
of their claim for lien as warehouseman, the same is hereby GRANTED. Accordingly, let a writ
of execution issue for the amount of P662,548,611.50, in accordance with the above
disposition.
SO ORDERED. (Emphasis supplied.)
3.28 On 23 April 1997, PNB was immediately served with a Writ of Execution for the amount
of P662,548,611.50 in spite of the fact that it had not yet been served with the Order of the
court a quo dated 15 April 1997. PNB thus filed an Urgent Motion dated 23 April 1997
seeking the deferment of the enforcement of the Writ of Execution. A photocopy of the Writ
of Execution is attached hereto as Annex J.
3.29 Nevertheless, the Sheriff levied on execution several properties of PNB. Firstly, a Notice
of Levy dated 24 April 1997 on a parcel of land with an area of Ninety-Nine Thousand Nine
Hundred Ninety-Nine (99,999) square meters, covered by Transfer Certificate of Title No.
23205 in the name of PNB, was served upon the Register of Deeds of Pasay City. Secondly, a
Notice of Garnishment dated 23 April 1997 on fund deposits of PNB was served upon the
Bangko Sentral ng Pilipinas. Photocopies of the Notice of Levy and the Notice of Garnishment
are attached hereto as Annexes K and L, respectively.
13 | P a g e
3.30 On 28 April 1997, petitioner filed a Motion for Reconsideration with Urgent Prayer for
Quashal of Writ of Execution dated 15 April 1997. Petitioners Motion was based on the
following grounds:
(1) Noahs Ark is not entitled to a warehousemans lien in the humongous amount
of P734,341,595.06 because the same has been waived for not having been
raised earlier as either counterclaim or defense against PNB;
(2) Assuming said lien has not been waived, the same, not being registered, is
already barred by prescription and/or laches;
(3) Assuming further that said lien has not been waived nor barred, still there was
no complaint ever filed in court to effectively commence this entirely new
cause of action;
(4) There is no evidence on record which would support and sustain the claim
of P734,341,595.06 which is excessive, oppressive and unconscionable;
(5) Said claim if executed would constitute unjust enrichment to the serious
prejudice of PNB and indirectly the Philippine Government, who innocently
acquired the sugar quedans through assignment of credit;
(6) In all respects, the decisions of both the Supreme Court and of the former
Presiding Judge of the trial court do not contain a specific determination
and/or computation of warehousemans lien, thus requiring first and
foremost a fair hearing of PNBs evidence, to include the true and standard
industry rates on sugar storage fees, which if computed at such standard
rate of thirty centavos per kilogram per month, shall result in the sum of
about Three Hundred Thousand Pesos only.
3.31 In its Motion for Reconsideration, petitioner prayed for the following reliefs:
1. PNB be allowed in the meantime to exercise its basic right to present evidence in order to
prove the above allegations especially the true and reasonable storage fees which may be
deducted from PNBs judgment award of P39.1 Million, which storage fees if computed
correctly in accordance with standard sugar industry rates, would amount to only P300
Thousand Pesos, without however waiving or abandoning its (PNBs) legal
positions/contentions herein abovementioned.
2. The Order dated April 15, 1997 granting the Motion for Execution by defendant Noahs Ark
be set aside.
3. The execution proceedings already commenced by said sheriffs be nullified at whatever
stage of accomplishment.
A photocopy of petitioners Motion for Reconsideration with Urgent Prayer for Quashal of
Writ of Execution is attached hereto and made integral part hereof as Annex M.
3.32 Private respondents filed an Opposition with Motion for Partial Reconsideration dated
8 May 1997. Still discontented with the excessive and staggering amount awarded to them
by the court a quo, private respondents Motion for Partial Reconsideration sought additional
and continuing storage fees over and above what the court a quo had already unjustly
awarded. A photocopy of private respondents Opposition with Motion for Partial
Reconsideration dated 8 May 1997 is attached hereto as Annex N.
3.32.1 Private respondents prayed for the further amount of P227,375,472.00 in storage
fees from 1 February 1995 until 15 April 1997, the date of the questioned Order granting
their Motion for Execution.
3.32.2 In the same manner, private respondents prayed for a continuing amount
of P345,424.00 as daily storage fees after 15 April 1997 until the total amount of the storage
fees is satisfied.
3.33 On 19 May 1997, PNB filed its Reply with Opposition (To Defendants Opposition with
Partial Motion for Reconsideration), containing therein the following motions: (i)
Supplemental Motion for Reconsideration; (ii) Motion to Strike out the Testimony of Noahs
Arks Accountant Last February 21, 1995; and (iii) Motion for the Issuance of a Writ of
Execution in favor of PNB. In support of its pleading, petitioner raised the following:
(1) Private respondents failed to pay the appropriate docket fees either for its
principal claim or for its additional claim, as said claims for warehousemans
lien were not at all mentioned in their answer to petitioners Complaint;
(2) The amount awarded by the court a quo was grossly and manifestly
unreasonable, excessive, and oppressive;
(3) It is the dispositive portion of the decision which shall be controlling in any
execution proceeding. If no specific award is stated in the dispositive
14 | P a g e
portion, a writ of execution supplying an amount not included in the
dispositive portion of the decision being executed is null and void;
(4) Private respondents failed to prove the existence of the sugar stocks in Noahs
Arks warehouses. Thus, private respondents claims are mere paper liens
which cannot be the subject of execution;
(5) The attendant circumstances, particularly Judge Ses Order of 1 March 1995
onwards, were tainted with fraud and absence of due process, as PNB was
not given a fair opportunity to present its evidence on the matter of the
warehousemans lien. Thus, all orders prescinding thereform, including the
questioned Order dated 15 April 1997, must perforce be set aside and the
execution proceedings against PNB be permanently stayed.
3.34 On 6 May 1997, petitioner also filed an Urgent Motion to Lift Garnishment of PNB Funds
with Bangko Sentral ng Pilipinas.
3.35 On 14 July 1997, respondent Judge issued the second Order (Annex B), the questioned
part of the dispositive portion of which states:
WHEREFORE, premises considered, the plaintiff Philippine National Banks subject Motion for
Reconsideration With Urgent Prayer for Quashal of Writ of Execution dated April 28, 1997
and undated Urgent Motion to Lift Garnishment of PNB Funds With Bangko Sentral ng
Pilipinas filed on May 6, 1997, together with all its related Motions are all DENIED with finality
for lack of merit.
xxxxxxxxx
The Order of this Court dated April 15, 1997, the final Writ of Execution likewise dated April
15, 1997 and the corresponding Garnishment all stand firm.
SO ORDERED.[7]
Aggrieved thereby, petitioners filed this petition, alleging as grounds therefor, the
following:
A. THE COURT A QUO ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION OR
WITH GRAVE ABUSE OF DISCRETION WHEN IT ISSUED A WRIT OF EXECUTION IN
FAVOR OF DEFENDANTS FOR THE AMOUNT OF P734,341,595.06.
 4.1 The court a quo had no authority to issue a writ of execution in favor of private
respondents as there was no final and executory judgment ripe for execution.
4.2 Public respondent judge patently exceeded the scope of his authority in making a
determination of the amount of storage fees due private respondents in a mere
interlocutory order resolving private respondents Motion for Execution.
4.3 The manner in which the court a quo awarded storage fees in favor of private
respondents and ordered the execution of said award was arbitrary and capricious,
depriving petitioner of its inherent substantive and procedural rights.
B. EVEN ASSUMING ARGUENDO THAT THE COURT A QUO HAD AUTHORITY TO
GRANT PRIVATE RESPONDENTS MOTION FOR EXECUTION, THE COURT A
QUO ACTED WITH GRAVE ABUSE OF DISCRETION IN AWARDING THE HIGHLY
UNREASONABLE, UNCONSCIONABLE, AND EXCESSIVE AMOUNT
OF P734,341,595.06 IN FAVOR OF PRIVATE RESPONDENTS.
4.4 There is no basis for the court a quos award of P734,341,595.06 representing
private respondents alleged warehousemans lien.
4.5 PNB has sufficient evidence to show that the astronomical amount claimed by
private respondents is very much in excess of the industry rate for storage fees and
preservation expenses.
C. PUBLIC RESPONDENT JUDGES GRAVE ABUSE OF DISCRETION BECOMES MORE
PATENT AFTER A CLOSE PERUSAL OF THE QUESTIONED ORDER DATED 14 JULY
1997.
4.6 The court a quo resolved a significant and consequential matter entirely relying on
documents submitted by private respondents totally disregarding clearly contrary
evidence submitted by PNB.
4.7 The court a quo misquoted and misinterpreted the Supreme Court Decision dated
18 April 1997.
D. THE COURT A QUO ACTED WITH GRAVE ABUSE OF DISCRETION IN NOT
HOLDING THAT PRIVATE RESPONDENTS HAVE LONG WAIVED THEIR RIGHT TO
CLAIM ANY WAREHOUSEMANS LIEN.
15 | P a g e
4.8 Private respondents raised the matter of their entitlement to a warehousemans lien
for storage fees and preservation expenses for the first time only during the execution
proceedings of the Decision in favor of PNB.
4.9 Private respondents claim for warehousemans lien is in the nature of a compulsory
counterclaim which should have been included in private respondents answer to the
Complaint. Private respondents failed to include said claim in their answer either as a
counterclaim or as an alternative defense to PNBs Complaint.
4.10 Private respondents claim is likewise lost by virtue of a specific provision of the
Warehouse Receipts Law and barred by prescription and laches.
E. PUBLIC RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION IN
REFUSING TO LIFT THE ORDER OF GARNISHMENT OF THE FUNDS OF PNB WITH
THE BANGKO SENTRAL NG PILIPINAS.
4.11 Public respondent judge failed to consider PNBs arguments in support of its Urgent
Motion to Lift Garnishment.[8]
In arguing its cause, petitioner explained that this Courts decision in G.R. No. 119231
merely affirmed the trial courts resolutions of 20 December 1994 and 1 March 1995. The
earlier resolution set private respondents reception of evidence for hearing to prove their
warehousemans lien and, pending determination thereof, deferred petitioners motion for
execution of the summary judgment rendered in petitioners favor in G.R. No. 107243. The
subsequent resolution recognized the existence of a valid warehousemans lien without,
however, specifying the amount, and required its full satisfaction by petitioner prior to the
execution of the judgment in G.R. No. 107243.
Under said circumstances, petitioner reiterated that neither this Courts decision nor
the trial courts resolutions specified any amount for the warehousemans lien, either in the
bodies or dispositive portions thereof. Petitioner therefore questioned the propriety of the
computation of the warehousemans lien in the assailed order of 15 April 1997.
Petitioner further characterized as highly irregular the trial courts final determination
of such lien in a mere interlocutory order without explanation, as such should or could have
been done only by way of a judgment on the merits. Petitioner likewise reasoned that a writ
of execution was proper only to implement a final and executory decision, which was not
present in the instant case. Petitioner then cited the cases of Edward v. Arce, where we ruled
that the only portion of the decision which could be the subject of execution was that
decreed in the dispositive part,[9] and Ex-Bataan Veterans Security Agency, Inc. v. National
Labor Relations Commission,[10] where we held that a writ of execution should conform to
the dispositive portion to be executed, otherwise, execution becomes void if in excess of and
beyond the original judgment.
Petitioner likewise emphasized that the hearing of 21 February 1995 was marred by
procedural infirmities, narrating that the trial court proceeded with the hearing
notwithstanding the urgent motion for postponement of petitioners counsel of record, who
attended a previously scheduled hearing in Pampanga. However, petitioners lawyer-
representative was sent to confirm the allegations in said motion. To petitioners dismay,
instead of granting a postponement, the trial court allowed the continuance of the hearing
on the basis that there was nothing sensitive about [the presentation of private respondents
evidence].[11] At the same hearing, the trial court admitted all the documentary evidence
offered by private respondents and ordered the filing of the parties respective memoranda.
Hence, petitioner was virtually deprived of its right to cross-examine the witness, comment
on or object to the offer of evidence and present countervailing evidence. In fact, to date,
petitioners urgent motion to nullify the court proceedings remains unresolved.
To stress its point, petitioner underscores the conflicting views of Judge Benito C. Se,
Jr., who heard and tried almost the entire proceedings, and his successor, Judge Marcelino
L. Sayo, Jr., who issued the assailed orders. In the resolution[12] of 1 March 1995, Judge Se
found private respondents claim for warehouse lien in the amount of P734,341,595.06
unacceptable, thus:
In connection with [private respondents] claim for payment of warehousing fees and
expenses, this Court cannot accept [private respondents] pretense that they are entitled to
storage fees and preservation expenses in the amount of P734,341,595.06 as shown in their
Exhibits 1 to 11. There would, however, appear to be legal basis for their claim for fees and
expenses covered during the period from the time of the issuance of the five (5) quedans
until demand for their delivery was made by [petitioner] prior to the institution of the
present action. [Petitioner] should not be made to shoulder the warehousing fees and
expenses after the demand was made. xxx[13]
Since it was deprived of a fair opportunity to present its evidence on the
warehousemans lien due Noahs Ark, petitioner submitted the following documents: (1) an
affidavit of petitioners credit investigator[14] and his report[15] indicating that Noahs Ark only
had 1,490 50kg. bags, and not 86,356.41 50kg. bags, of sugar in its warehouse; (2) Noahs
Arks reports[16] for 1990-94 showing that it did not have sufficient sugar stock to cover the
quantity specified in the subject quedans; (3) Circular Letter No. 18 (s. 1987-88)[17] of the
Sugar Regulatory Administration requiring sugar mill companies to submit reports at weeks
end to prevent the issuance of warehouse receipts not covered by actual inventory; and (4)
16 | P a g e
an affidavit of petitioners assistant vice president[18] alleging that Noahs Arks daily storage
fee of P4/bag exceeded the prevailing industry rate.
Petitioner, moreover, laid stress on the fact that in the questioned order of 14 July
1997, the trial court relied solely on the Annual Synopsis of Production & Performance
Date/Annual Compendium of Performance by Philippine Sugar Refineries from 1989 to 1994,
in disregard of Noahs Arks certified reports that it did not have sufficient sugar stock to cover
the quantity specified in the subject quedans.Between the two, petitioner urged, the latter
should have been accorded greater evidentiary weight.
Petitioner then argued that the trial courts second assailed order of 14 July 1997
misinterpreted our decision in G.R. No. 119231 by ruling that the Refining Contract under
which the subject sugar stock was produced bound the parties. According to petitioner, the
Refining Contract never existed, it having been denied by Rosa Ng Sy; thus, the trial court
could not have properly based its computation of the warehousemans lien on the Refining
Contract. Petitioner maintained that a separate trial was necessary to settle the issue of the
warehousemans lien due Noahs Ark, if at all proper.
Petitioner further asserted that Noahs Ark could no longer recover its lien, having
raised the issue for the first time only during the execution proceedings of this Courts
decision in G.R. No. 107243. As said claim was a separate cause of action which should have
been raised in private respondents answer with counterclaim to petitioners complaint,
private respondents failure to raise said claim should have been deemed a waiver thereof.
Petitioner likewise insisted that under Section 29[19] of the Warehouse Receipts Law,
private respondents were barred from claiming the warehousemans lien due to their refusal
to deliver the goods upon petitioners demand. Petitioner further raised that private
respondents failed to timely assert their claim within the five-year prescriptive period, citing
Article 1149[20] of the New Civil Code.
Finally, petitioner questioned the trial courts refusal to lift the garnishment order
considering that the levy on its real property, with an estimated market value
of P6,000,000,000, was sufficient to satisfy the judgment award; and contended that the
garnishment was contrary to Section 103[21] of the Bangko Sentral ng Pilipinas Law (Republic
Act No. 7653).
On 8 August 1997, we required respondents to comment on the petition and issued a
temporary restraining order enjoining the trial court from implementing its orders of 15 April
and 14 July 1997.
In their comment, private respondents first sought the lifting of the temporary
restraining order, claiming that petitioner could no longer seek a stay of the execution of this
Courts decision in G.R. No. 119231 which had become final and executory; and the petition
raised factual issues which had long been resolved in the decision in G.R. No. 119231,
thereby rendering the instant petition moot and academic. They underscored that CA-G.R.
No. SP No. 25938, G.R. No. 107243 and G.R. No. 119231 all sustained their claim for a
warehousemans lien, while the storage fees stipulated in the Refining Contract had the
approval of the Sugar Regulatory Authority. Likewise, under the Warehouse Receipts Law,
full payment of their lien was a pre-requisite to their obligation to release and deliver the
sugar stock to petitioner.
Anent the trial courts jurisdiction to determine the warehousemans lien, private
respondents maintained that such had already been established. Accordingly, the resolution
of 1 March 1995 declared that they were entitled to a warehousemans lien, for which
reason, the execution of the judgment in favor of petitioner was stayed until the latters full
payment of the lien. This resolution was then affirmed by this Court in our decision in G.R.
No. 119231. Even assuming the trial court erred, the error could only have been in the
wisdom of its findings and not of jurisdiction, in which case, the proper remedy of petitioner
should have been an appeal and certiorari did not lie.
Private respondents also raised the issue of res judicata as a bar to the instant
petition, i.e., the March resolution was already final and unappealable, having been resolved
in G.R. No. 119231, and the orders assailed here were issued merely to implement said
resolution.
Private respondents then debunked the claim that petitioner was denied due process.
In that February hearing, petitioner was represented by counsel who failed to object to the
presentation and offer of their evidence consisting of the five quedans, Refining Contracts
with petitioner and other quedan holders, and the computation resulting in the amount
of P734,341,595.06, among other documents. Private respondents even attached a copy of
the transcript of stenographic notes[22] to their comment. In refuting petitioners argument
that no writ of execution could issue in absence of a specific amount in the dispositive
portion of this Courts decision in G.R. No. 119231, private respondents argued that any
ambiguity in the decision could be resolved by referring to the entire record of the
case,[23] even after the decision had become final.
Private respondents next alleged that the award of P734,341,595.06 to satisfy their
warehousemans lien was in accordance with the stipulations provided in the quedans and
the corresponding Refining Contracts, and that the validity of said documents had been
recognized by this Court in our decision in G.R. No. 119231. Private respondents then
questioned petitioners failure to oppose or rebut the evidence they presented and bewailed
its belated attempts to present contrary evidence through its pleadings. Nonetheless, said
evidence was even considered by the trial court when petitioner sought a reconsideration
of the first assailed order of 15 April 1997, thus further precluding any claim of denial of due
process.
17 | P a g e
Private respondents next pointed to the fact that they consistently claimed that they
had not been paid for storing the sugar stock, which prompted them to file criminal charges
of estafa and violation of Batas Pambansa (BP) Blg. 22 against Rosa Ng Sy and Teresita Ng. In
fact, Sy was eventually convicted of two counts of violation of BP Blg. 22. Private
respondents, moreover, incurred, and continue to incur, expenses for the storage and
preservation of the sugar stock; and denied having waived their warehousemans lien, an
issue already raised and rejected by this Court in G.R. No. 119231.
Private respondents further claimed that the garnishment order was proper, only that
it was rendered ineffective. In a letter[24] received by the sheriff from the Bangko Sentral ng
Pilipinas, it was stated that the garnishment could not be enforced since petitioners deposits
with the Bangko Sentral ng Pilipinas consisted solely of legal reserves which were exempt
from garnishment. Petitioner therefore suffered no damage from said garnishment. Private
respondents likewise deemed immaterial petitioners argument that the writ of execution
issued against its real property in Pasay City was sufficient, considering its prevailing market
value of P6,000,000,000 was in excess of the warehousemans lien; and invoked Rule 39 of
the 1997 Rules of Civil Procedure, which provided that the sheriff must levy on all the
property of the judgment debtor, excluding those exempt from execution, in the execution
of a money judgment.
Finally, private respondents accused petitioner of coming to court with unclean hands,
specifically citing its misrepresentation that the award of the warehousemans lien would
result in the collapse of its business. This claim, private respondents asserted, was
contradicted by petitioners 1996 Audited Financial Statement indicating that petitioners
assets amounted to billions of pesos, and its 1996 Annual Report to its stockholders where
petitioner declared that the pending legal actions arising from their normal course of
business will not materially affect the Groups financial position.[25]
In reply, petitioner advocated that resort to the remedy of certiorari was proper since
the assailed orders were interlocutory, and not a final judgment or decision. Further, that it
was virtually deprived of its constitutional right to due process was a valid issue to raise in
the instant petition; and not even the doctrine of res judicata could bar this petition as the
element of a final and executory judgment was lacking.Petitioner likewise disputed the claim
that the resolution of 1 March 1995 was final and executory, otherwise private respondents
would not have filed an opposition and motion for partial reconsideration[26]two years
later. Petitioner also contended that the issues raised in this petition were not resolved in
G.R. No. 119231, as what was resolved there was private respondents mere entitlement to
a warehousemans lien, without specifying a corresponding amount. In the instant petition,
the issues pertained to the amount and enforceability of said lien based on the arbitrary
manner the amount was determined by the trial court.
 Petitioner further argued that the refining contracts private respondents invoked could
not bind the former since it was not a party thereto. In fact, said contracts were not even
attached to the quedans when negotiated; and that their validity was repudiated by a
supposed party thereto, Rosa Ng Sy, who claimed that the contract was simulated, thus void
pursuant to Article 1345 of the New Civil Code. Should the refining contracts in turn be
declared void, petitioner advocated that any determination by the court of the existence and
amount of the warehousemans lien due should be arrived at using the test of
reasonableness. Petitioner likewise noted that the other refining contracts[27] presented by
private respondents to show similar storage fees were executed between the years 1996
and 1997, several years after 1989. Thus, petitioner concluded, private respondents could
not claim that the more recent and increased rates where those which prevailed in 1989.
Finally, petitioner asserted that in the event that this Court should uphold the trial
courts determination of the amount of the warehousemans lien, petitioner should be
allowed to exercise its option as a judgment obligor to specify which of its properties may be
levied upon, citing Section 9(b), Rule 39 of the 1997 Rules of Civil Procedure. Petitioner
claimed to have been deprived of this option when the trial court issued the garnishment
and levy orders.
The petition was set for oral argument on 24 November 1997 where the parties
addressed the following issues we formulated for them to discuss:
(1) Is this special civil action the appropriate remedy?
(2) Has the trial court the authority to issue a writ of execution on Noahs Arks claims for
storage fees considering that this Court in G.R. No. 119231 merely sustained the trial courts
order of 20 December 1994 granting the Noahs Ark Omnibus Motion and setting the
reception of evidence on its claims for storage fees, and of 1 March 1995 finding that there
existed in favor of Noahs Ark a warehousemans lien under Section 27 of R.A. No. 2137 and
directing that the execution of the judgment in favor of PNB be stayed and/or precluded
until the full amount of Noahs Arks lien is satisfied conformably with Section 31 of R.A. No.
2137?
(3) Is [petitioner] liable for storage fees (a) from the issuance of the quedans in 1989 to Rosa
Sy, St. Therese Merchandising and RNS Merchandising, up to their assignment by endorsees
Ramos and Zoleta to [petitioner] for their loan; or (b) after [petitioner] has filed an action for
specific performance and damages (Civil Case No. 90-53023) against Noahs Ark for the
latters failure to comply with [petitioners] demand for the delivery of the sugar?
(4) Did respondent Judge commit grave abuse of discretion as charged?[28]
18 | P a g e
In our resolution of 24 November 1997, we summarized the positions of the parties on
these issues, thus:
Expectedly, counsel for petitioner submitted that certiorari under Rule 65 of the Rules of
Court is the proper remedy and not an ordinary appeal, contending, among others, that the
order of execution was not final. On the other hand, counsel for respondents maintained
that petitioner PNB disregarded the hierarchy of courts as it bypassed the Court of Appeals
when it filed the instant petition before this Court.
On the second issue, counsel for petitioner submitted that the trial court had no authority
to issue the writ of execution or if it had, it denied PNB due process when it held PNB liable
for the astronomical amount of P734,341,595.06 as warehousemans lien or storage
fees. Counsel for respondent, on the other hand, contended that the trial courts authority
to issue the questioned writ of execution is derived from the decision in G.R. No. 119231
which decision allegedly provided for ample or sufficient parameters for the computation of
the storage fees.
On the third issue, counsel for petitioner while presupposing that PNB may be held to answer
for storage fees, contended that the same should start from the time the endorsees of the
sugar quedans defaulted in their payments, i.e., 1990 because before that, respondent
Noahs Arks claim was that it was the owner of the sugar covered by the quedans. On the
other hand, respondents counsel pointed out that PNBs liability should start from the
issuance of the quedans in 1989.
The arguments on the fourth issue, hinge on the parties arguments for or against the first
three issues. Counsel for petitioner stressed that the trial court indeed committed a grave
abuse of discretion, while respondents counsel insisted that no grave abuse of discretion
was committed by the trial court.[29]
Private respondents likewise admitted that during the pendency of the case, they failed
to avail of their options as a warehouseman. Concretely, they could have enforced their lien
through the foreclosure of the goods or the filing of an ordinary civil action. Instead, they
sought to execute this Courts judgment in G.R. No. 119231. They eventually agreed that
petitioners liability for the warehousemans lien should be reckoned from the time it stepped
into the shoes of the original depositors.[30]
In our resolution of 24 November 1997, we required the parties to simultaneously
submit their respective memoranda within 30 days or, in the alternative, a compromise
agreement should a settlement be achieved. Notwithstanding efforts exerted by the parties,
no mutually acceptable solution was reached.
 In their respective memoranda, the parties reiterated or otherwise buttressed the
arguments raised in their previous pleadings and during the oral arguments on 24 November
1997, especially on the formulated issues.
The petition is meritorious.
We shall take up the formulated issues in seriatim.
A. This Special Civil Action is an Appropriate Remedy.
A careful perusal of the first assailed order shows that the trial court not only granted
the motion for execution, but also appreciated the evidence in the determination of the
warehousemans lien; formulated its computation of the lien; and adopted an offsetting of
the parties claims. Ineluctably, the order as in the nature of a final order for it left nothing
else to be resolved thereafter. Hence, petitioners remedy was
to appeal therefrom.[31] Nevertheless, petitioner was not precluded from availing of the
extraordinary remedy of certiorari under Rule 65 of the Rules of Court. It is well-settled that
the availability of an appeal does not foreclose recourse to the extraordinary remedies
of certiorari or prohibition where appeal is not adequate, or equally beneficial, speedy and
sufficient.[32]
Petitioner assailed the challenged orders as having been issued without or in excess of
jurisdiction or with grave abuse of discretion and alleged that it had no other plain, speedy
and adequate remedy in the ordinary course of law. As hereafter shown, these claims were
not unfounded, thus the propriety of this special civil action is beyond question.
This Court has original jurisdiction, concurrent with that of Regional Trial Courts and
the Court of Appeals, over petitions for certiorari, prohibition, mandamus, quo
warranto and habeas corpus,[33] and we entertain direct resort to us in cases where special
and important reasons or exceptional and compelling circumstances justify the
same.[34] These reasons and circumstances are present here.
B. Under the Special Circumstances in This Case, Private Respondents May Enforce
Their Warehousemans Lien in Civil Case No. 90-53023.
The remedies available to a warehouseman, such as private respondents, to enforce
his warehousemans lien are:
(1)To refuse to deliver the goods until his lien is satisfied, pursuant to Section 31
of the Warehouse Receipt Law;
(2) To sell the goods and apply the proceeds thereof to the value of the lien
pursuant to Sections 33 and 34 of the Warehouse Receipts Law; and
19 | P a g e
(3) By other means allowed by law to a creditor against his debtor, for the
collection from the depositor of all charges and advances which the depositor
expressly or impliedly contracted with the warehouseman to pay under
Section 32 of the Warehouse Receipt Law; or such other remedies allowed by
law for the enforcement of a lien against personal property under Section 35
of said law. The third remedy is sought judicially by suing for the unpaid
charges.[35]
Initially, private respondents availed of the first remedy. However, when petitioner
moved to execute the judgment in G.R. No. 107243 before the trial court, private
respondents, in turn, moved to have the warehouse charges and fees due them determined
and thereafter sought to collect these from petitioners. While the most appropriate remedy
for private respondents was an action for collection, in G.R. No. 119231, we
already recognized their right to have such charges and fees determined in Civil Case No. 90-
53023. The import of our holding in G.R. No. 119231 was that private respondents were
likewise entitled to a judgment on their warehouse charges and fees, and the eventual
satisfaction thereof, thereby avoiding having to file another action to recover these charges
and fees, which would only have further delayed the resolution of the respective claims of
the parties, and as a corollary thereto, the indefinite deferment of the execution of the
judgment in G.R. No. 107243. Thus we note that petitioner, in fact, already acquiesced to
the scheduled dates previously set for the hearing on private respondents warehousemans
charges.
However, as will be shown below, it would be premature to execute the order fixing
the warehousemans charges and fees.
C. Petitioner is Liable for Storage Fees.
We confirmed petitioners liability for storage fees in G.R. No. 119231. However,
petitioners status as to the quedans must first be clearly defined and delineated to be able
to determine the extent of its liability.
Petitioner insisted, both in its petition and during the oral arguments on 24 November
1997, that it was a mere pledgee as the quedans were used to secure two loans it
granted.[36] In our decision in G.R. No. 107243, we upheld this contention of petitioner, thus:
Zoleta and Ramos then used the quedans as security for loans obtained by them from
the Philippine National Bank (PNB) as security for loans obtained by them in the
amounts of P23.5 million and P15.6 million, respectively. These quedans they indorsed
to the bank.[37]
As such, Martinez v. Philippine National Bank[38] becomes relevant:
In conclusion, we hold that where a warehouse receipt or quedan is transferred or endorsed
to a creditor only to secure the payment of a loan or debt, the transferee or endorsee does
not automatically become the owner of the goods covered by the warehouse receipt or
quedan but he merely retains the right to keep and with the consent of the owner to sell
them so as to satisfy the obligation from the proceeds of the sale, this for the simple reason
that the transaction involved is not a sale but only a mortgage or pledge, and that if the
property covered by the quedans or warehouse receipts is lost without the fault or
negligence of the mortgagee or pledgee or the transferee or endorsee of the warehouse
receipt or quedan, then said goods are to be regarded as lost on account of the real owner,
mortgagor or pledgor.
The next issue to resolve is the duration of time the right of petitioner over the goods
may be held subject to the warehousemans lien.
Sections 8, 29 and 31 of the Warehouse Receipts Law now come to fore. They provide,
as follows:
SECTION 8. Obligation of warehousemen to deliver. A warehouseman, in the absence of
some lawful excuse provided by this Act, is bound to deliver the goods upon a demand made
either by the holder of a receipt for the goods or by the depositor, if such demand is
accompanied with:

The indorsement and delivery of the warehouse receipts (quedans) by Ramos and (a) An offer to satisfy warehousemans lien;
Zoleta to petitioner was not to convey title to or ownership of the goods but to secure (by
way of pledge) the loans granted to Ramos and Zoleta by petitioner. The indorsement of the (b) An offer to surrender the receipt, if negotiable, with such indorsements
warehouse receipts (quedans), to perfect the pledge,[39] merely constituted a symbolical or as would be necessary for the negotiation of the receipt; and
constructive delivery of the possession of the thing thus encumbered.[40]
(c) A readiness and willingness to sign, when the goods are delivered, an
The creditor, in a contract of real security, like pledge, cannot appropriate without
acknowledgment that they have been delivered, if such signature
foreclosure the things given by way of pledge.[41] Any stipulation to the contrary,
is requested by the warehouseman.
termed pactum commissorio, is null and void.[42] The law requires foreclosure in order to
allow a transfer of title of the good given by way of security from its pledgor,[43] and before
In case the warehouseman refuses or fails to deliver the goods in compliance with a demand
any such foreclosure, the pledgor, not the pledgee, is the owner of the goods. In Philippine
by the holder or depositor so accompanied, the burden shall be upon the warehouseman to
National Bank v. Atendido,[44] we said:
establish the existence of a lawful excuse for such refusal.
The delivery of the palay being merely by way of security, it follows that by the nature of the
SECTION 29. How the lien may be lost. A warehouseman loses his lien upon goods;
transaction its ownership remains with the pledgor subject only to foreclosure in case of
non-fulfillment of the obligation. By this we mean that if the obligation is not paid upon
maturity the most that the pledgee can do is to sell the property and apply the proceeds to (a) By surrendering possession thereof, or
the payment of the obligation and to return the balance, if any, to the pledgor (Art. 1872,
Old Civil Code [Art. 2112, New Civil Code]). This is the essence of this contract, for, according (b) By refusing to deliver the goods when a demand is made with which he is
to law, a pledgee cannot become the owner of, nor appropriate to himself, the thing given bound to comply under the provisions of this Act.
in pledge (Article 1859, Old Civil Code [Art. 2088, New Civil Code]) The fact that the
warehouse receipt covering palay was delivered, endorsed in blank, to the bank does not SECTION 31. Warehouseman need not deliver until lien is satisfied. A warehouseman having
alter the situation, the purpose of such endorsement being merely to transfer the juridical a lien valid against the person demanding the goods may refuse to deliver the goods to him
possession of the property to the pledgees and to forestall any possible disposition thereof until the lien is satisfied.
on the part of the pledgor. This is true notwithstanding the provisions of the
Warehouse Receipt Law. Simply put, where a valid demand by the lawful holder of the quedans for the delivery
of the goods is refused by the warehouseman, despite the absence of a lawful excuse
The warehouseman, nevertheless, is entitled to the warehousemans lien that attaches provided by the statute itself, the warehousemans lien is thereafter concomitantly lost. As
to the goods invokable against anyone who claims a right of possession thereon. to what the law deems a valid demand, Section 8 enumerates what must accompany a

20 | P a g e
demand; while as regards the reasons which a warehouseman may invoke to legally refuse
to effect delivery of the goods covered by the quedans, these are:
(1) That the holder of the receipt does not satisfy the conditions prescribed in
Section 8 of the Act. (See Sec. 8, Act No. 2137)
(2) That the warehouseman has legal title in himself on the goods, such title or
right being derived directly or indirectly from a transfer made by the depositor at the
time of or subsequent to the deposit for storage, or from the warehousemans
lien. (Sec. 16, Act No. 2137)
(3) That the warehouseman has legally set up the title or right of third persons as
lawful defense for non-delivery of the goods as follows:
(a) Where the warehouseman has been requested, by or on behalf of the person lawfully
entitled to a right of property of or possession in the goods, not to make such delivery (Sec.
10, Act No. 2137), in which case, the warehouseman may, either as a defense to an action
brought against him for nondelivery of the goods, or as an original suit, whichever is
appropriate, require all known claimants to interplead (Sec. 17, Act No. 2137);
(b) Where the warehouseman had information that the delivery about to be made was to
one not lawfully entitled to the possession of the goods (Sec. 10, Act No. 2137), in which
case, the warehouseman shall be excused from liability for refusing to deliver the goods,
either to the depositor or person claiming under him or to the adverse claimant, until the
warehouseman has had a reasonable time to ascertain the validity of the adverse claims or
to bring legal proceedings to compel all claimants to interplead (Sec. 18, Act No. 2137); and
(c) Where the goods have already been lawfully sold to third persons to satisfy a
warehousemans lien, or have been lawfully sold or disposed of because of their perishable
or hazardous nature. (Sec. 36, Act No. 2137).
(4) That the warehouseman having a lien valid against the person demanding the goods
refuses to deliver the goods to him until the lien is satisfied. (Sec. 31, Act No. 2137)
(5) That the failure was not due to any fault on the part of the warehouseman, as by showing
that, prior to demand for delivery and refusal, the goods were stolen or destroyed by fire,
flood, etc., without any negligence on his part, unless he has contracted so as to be liable in
such case, or that the goods have been taken by the mistake of a third person without the
21 | P a g e
knowledge or implied assent of the warehouseman, or some other justifiable ground for
non-delivery. (67 C.J. 532)[45]
Regrettably, the factual settings do not sufficiently indicate whether the demand to
obtain possession of the goods complied with Section 8 of the law. The presumption,
nevertheless, would be that the law was complied with, rather than breached, by
petitioner. Upon the other hand, it would appear that the refusal of private respondents to
deliver the goods was not anchored on a valid excuse, i.e., non-satisfaction of the
warehousemans lien over the goods, but on an adverse claim of ownership. Private
respondents justified their refusal to deliver the goods, as stated in their Answer with
Counterclaim and Third-Party Complaint in Civil Case No. 90-53023, by claiming that they are
still the legal owners of the subject quedans and the quantity of sugar represented
therein. Under the circumstances, this hardly qualified as a valid, legal excuse. The loss of
the warehousemans lien, however, does not necessarily mean the extinguishment of the
obligation to pay the warehousing fees and charges which continues to be a personal liability
of the owners, i.e., the pledgors, not the pledgee, in this case. But even as to the owners-
pledgors, the warehouseman fees and charges have ceased to accrue from the date of the
rejection by Noahs Ark to heed the lawful demand by petitioner for the release of the goods.
The finality of our denial in G.R. No. 119231 of petitioners petition to nullify the trial
courts order of 01 March 1995 confirms the warehousemans lien; however, such lien,
nevertheless, should be confined to the fees and charges as of the date in March 1990 when
Noahs Ark refused to heed PNBs demand for delivery of the sugar stocks and in no event
beyond the value of the credit in favor of the pledgee (since it is basic that, in foreclosures,
the buyer does not assume the obligations of the pledgor to his other creditors even while
such buyer acquires title over the goods less any existing preferred lien thereover).[46] The
foreclosure of the thing pledged, it might incidentally be mentioned, results in the full
satisfaction of the loan liabilities to the pledgee of the pledgors.[47]
D. Respondent Judge Committed Grave Abuse of Discretion.
We hold that the trial court deprived petitioner of due process in rendering the
challenged order of 15 April 1996 without giving petitioner an opportunity to present its
evidence. During the final hearing of the case, private respondents commenced and
concluded their presentation of evidence as to the matter of the existence of and amount
owing due to their warehousemans lien. Their exhibits were duly marked and offered, and
the trial court thereafter ruled, to wit:
Court: Order.
With the admission of Exhibits 1 to 11, inclusive of submarkings, as part of the testimony of
Benigno Bautista, the defendant [private respondents] is given five (5) days from today to
file its memorandum.Likewise, plaintiff [petitioner] is given five (5) days, from receipt of
defendants [private respondents] memorandum, to file its comment thereto. Thereafter the
same shall be deemed submitted for decision.
SO ORDERED.[48]
Nowhere in the transcript of stenographic notes, however, does it show that petitioner
was afforded an opportunity to comment on, much less, object to, private respondents offer
of exhibits, or even present its evidence on the matter in dispute. In fact, petitioner
immediately moved to nullify the proceedings conducted during that hearing, but its motion
was ignored and never resolved by the trial court.Moreover, it cannot be said that
petitioners filing of subsequent pleadings, where it attached its affidavits and documents to
contest the warehousemans lien, was sufficient to fully satisfy the requirements of due
process. The subsequent pleadings were filed only to show that petitioner had evidence to
refute the claims of private respondents or that the latter were not entitled thereto, but
could not have adequately substituted for a full-blown opportunity to present its evidence,
given the exorbitant amounts involved. This, when coupled with the fact that the motion to
postpone the hearing filed by petitioners counsel was not unreasonable, leads us to conclude
that petitioners right to fully present its case was rendered nugatory. It is thus evident to us
that there was undue and unwarranted haste on the part of respondent court to rule in favor
of private respondents. We do not hesitate to say that any tilt of the scales of justice, no
matter how slight, evokes suspicion and erodes a litigants faith and hope in seeking recourse
before courts of law.
Likewise do we refuse to give credence to private respondents allegation that the
parties agreed that petitioners presentation of evidence would be submitted on the basis of
affidavits,[49] without, however, specifying any order or written agreement to that effect.
It is interesting to note that among the evidence petitioner wanted to present were
reports obtained from Noahs Ark, disclosing that the latter failed to maintain a sufficient
inventory to satisfy the sugar stock covered by the subject quedans. This was a serious
allegation, and on that score alone, the trial court should have allowed a hearing on the
matter, especially in light of the magnitude of the claims sought. If it turns out to be true
that the stock of sugar Noahs Ark had in possession was below the quantities specified in
the quedans, then petitioner should not be made to pay for storage and preservation
expenses for non-existent goods.
It was likewise grave abuse of discretion on the part of respondent court to order
immediate execution of the 15 April 1997 order. We ruled earlier that said order was in the
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nature of a final order fixing the amount of the warehousemans charges and fees, and
petitioners net liability, after the set-off of the money judgment in its favor in G.R. No.
107243. Section 1 of Rule 39 of the Rules of Court explicitly provides that execution shall
issue as a matter of right, on motion, upon a judgment or order that disposes of the action
or proceeding upon the expiration of the period to appeal therefrom if no appeal has been
duly perfected. Execution pending appeal is, however, allowed in Section 2 thereof, but only
on motion with due notice to the adverse party, more importantly, only upon good reasons
shown in a special order. Here, there is no showing that a motion for execution pending
appeal was filed and that a special order was issued by respondent court. Verily, the
immediate execution only served to further strengthen our perception of undue and
unwarranted haste on the part of respondent court in resolving the issue of the
warehousemans lien in favor of private respondents.
In light of the above, we need not rule anymore on the fourth formulated issue.
WHEREFORE, the petition is GRANTED. The challenged orders of 15 April and 14 July
1997, including the notices of levy and garnishment, of the Regional Trial Court of Manila,
Branch 45, in Civil Case No. 90-53023 are REVERSED and SET ASIDE, and said court is
DIRECTED to conduct further proceedings in said case:
(1) to allow petitioner to present its evidence on the matter of
the warehousemans lien;
(2) to compute the petitioners warehousemans lien in light of the foregoing
observations; and
(3) to determine whether, for the relevant period, Noahs Ark maintained a
sufficient inventory to cover the volume of sugar specified in the quedans.
Costs against private respondents.
SO ORDERED.
Bellosillo, Vitug, Panganiban, and Quisumbing, JJ., concur.
[1]
The first was G.R. No. 107243, 1 September 1993, entitled Philippine National Bank v.
Noahs Ark Sugar Refinery, Alberto Looyuko, Jimmy T. Go and Wilson T. Go, 226 SCRA 36
[1993]; while the second was G.R. No. 119231, 18 April 1996, entitled Philippine National
Bank v. Hon. Pres. Judge Benito C. Se, Jr., RTC, Branch 45, Manila; Noahs Ark Sugar Refinery;
Alberto T. Looyuko, Jimmy T. Go and Wilson T. Go, 256 SCRA 380 [1996].
[2] [29]
Per Judge Marcelino L. Sayo, Jr. Rollo, 438-439.
[3] [30]
Annex A of Petition; Rollo, 57-63. TSN, 24 November 1997, 106-107.
[4] [31]
Annex B of Petition; Rollo, 64-68. See Meneses v. Court of Appeals, 237 SCRA 484, 492 [1994].
[5]
Supra note 2 at 384-389. [32]
[6] Gavieres v. Falcis, 193 SCRA 649, 657-658 [1991] citing PNB v. Puno, 170 SCRA 229
Id., at 394-395.
[7] [1989]; Echauz v. Court of Appeals, 199 SCRA 381, 386-387 [1991], citing Jaca v. Davao
Rollo, 22-27.
[8]
Rollo, 28-29. Lumber Co., 113 SCRA 107 [1982]; Hualam Construction and Development Corp. v. Court of
[9] Appeals, 214 SCRA 612, 628 [1992]; Ruiz v. Court of Appeals, 220 SCRA 490, 500 [1993];
98 Phil. 688, 692 [1956].
[10] Rodriguez v. Court of Appeals, 245 SCRA 150, 152 [1995].
250 SCRA 418, 427 [1995].
[11]
TSN, 21 February 1995, 4. [33]
Sec. 5(1), Article VIII of the Constitution, in relation to Secs. 9(1) and 21(1) of B.P. Blg. 129.
[12]
Rollo, 88-92.
[34]
[13]
Resolution, p. 2; Rollo, 89. People v. Cuaresma, 172 SCRA 415, 423-424 [1989]; Defensor-Santiago v. Vasquez, 217
[14]
Annex O of Petition; Rollo, 169-170. SCRA 633, 651-652 [1993]; Manalo v. Gloria, 236 SCRA 130, 138-139 [1994].
[15]
Annex P of Petition; Rollo, 171. [35]
See 3 Teodorico C. Martin, Commentaries and Jurisprudence on the Philippine
[16]
Annexes R - R-16; Rollo, 174-190. Commercial Laws 581-587 (1989 ed.) (hereinafter 3 Martin).
[17]
Annex Q of Petition; Rollo, 172. [36]
Petition, 8; TSN, 24 November 1997, 26.
[18]
Annexes S and T of Petition; Rollo, 191, 192-195. [37]
226 SCRA 36, 39 [1993].
[19]
Section 29. How the lien may be lost. - A warehouseman loses his lien upon goods: (a) By [38]
93 Phil. 765, 770-771 [1953]. See also Philippine National Bank v. Atendido, 94 Phil. 254,
surrendering possession thereof, or (b) By refusing to deliver the goods when a demand is 258 [1954]; and Warner, Barnes, & Co. Ltd. v. Flores, 1 SCRA 881, 885-886 [1961].
made with which he is bound to comply under the provisions of this Act.
[39]
[20]
Art. 2095, New Civil Code.
Article 1149. All other actions whose periods are not fixed in this Code or in other laws [40]
First Camden National Bank & Trust Co. v. J.R. Watkins Co., D.C. Pa 36 F. Supp. P. 416.
must be brought within five years from the time the right of action accrues.
[41]
[21]
Lao v. Court of Appeals, G.R. No. 115307, 8 July 1997; Development Bank of the
Section 103. Exemption from Attachment and Other Purposes. - Deposits maintained by Philippines v. Court of Appeals, G.R. No. 118342, 5 January 1998.
banks with the Bangko Sentral as part of their reserve requirements shall be exempt from
[42]
attachment, garnishments, or any other order or process of any court, government agency Art. 2088, Civil Code.
[43]
or any other administrative body issued to satisfy the claim of a party other than the Art. 2112, Civil Code.
[44]
Government, or its political subdivisions or instrumentalities. 94 Phil. 254, 257-258 [1954].
[45]
[22]
3 Martin, at 553-554.
Annex 11 of Comment; Rollo, 290-314.
[46]
[23]
The rules on concurrence and preference of credits under the Civil Code would be
Citing Filinvest Credit Corp. v. Court of Appeals, 226 SCRA 257 [1993]; and Republic v. de inapplicable until there arises a judicial settlement of the property of an insolvent in favor of
los Angeles, 41 SCRA 422 [1977]. all creditors.
[24]
Annex 21 of Comment; Rollo, 395-396. [47]
Article 2115, Civil Code provides: The sale of the things pledged shall extinguish the
[25]
Philippine National Bank, 1996 Annual Report, 19; Annex 1 of Comment; Rollo, 279. principal obligation, whether or not the proceeds of the sale are equal to the amount of the
principal obligation, interest and expenses in a proper case. If the amount of the sale is more
[26]
Annex N of Petition; Rollo, 144-168. than the said amount, the debtor shall not be entitled to the excess, unless it is otherwise
[27]
Annexes 16 -19 of Comment; Rollo, 377-393. agreed. If the price of the sale is less, neither shall the creditor be entitled to recover the
[28]
Rollo, 438-439. deficiency, notwithstanding any stipulation to the contrary.(n)

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[48]
TSN, 21 February 1995, 25.
[49]
TSN, 24 November 1997, 64.
.

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