G.R. No.

L-66826 August 19, 1988

BANK OF THE PHILIPPINE ISLANDS, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT and ZSHORNACK respondents.
CORTES, J.:
The original parties to this case were Rizaldy T. Zshornack and the Commercial Bank and Trust Company of the Philippines [hereafter
referred to as "COMTRUST."] In 1980, the Bank of the Philippine Islands (hereafter referred to as BPI absorbed COMTRUST through a
corporate merger, and was substituted as party to the case.
Rizaldy Zshornack initiated proceedings on June 28,1976 by filing in the Court of First Instance of Rizal — Caloocan City a complaint
against COMTRUST alleging four causes of action. Except for the third cause of action, the CFI ruled in favor of Zshornack. The bank
appealed to the Intermediate Appellate Court which modified the CFI decision absolving the bank from liability on the fourth cause of
action. The pertinent portions of the judgment, as modified, read:
IN VIEW OF THE FOREGOING, the Court renders judgment as follows:
1. Ordering the defendant COMTRUST to restore to the dollar savings account of plaintiff (No. 25-4109) the amount
of U.S $1,000.00 as of October 27, 1975 to earn interest together with the remaining balance of the said account at
the rate fixed by the bank for dollar deposits under Central Bank Circular 343;
2. Ordering defendant COMTRUST to return to the plaintiff the amount of U.S. $3,000.00 immediately upon the
finality of this decision, without interest for the reason that the said amount was merely held in custody for
safekeeping, but was not actually deposited with the defendant COMTRUST because being cash currency, it cannot
by law be deposited with plaintiffs dollar account and defendant's only obligation is to return the same to plaintiff
upon demand;
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5. Ordering defendant COMTRUST to pay plaintiff in the amount of P8,000.00 as damages in the concept of litigation
expenses and attorney's fees suffered by plaintiff as a result of the failure of the defendant bank to restore to his
(plaintiffs) account the amount of U.S. $1,000.00 and to return to him (plaintiff) the U.S. $3,000.00 cash left for
safekeeping.
Costs against defendant COMTRUST.
SO ORDERED. [Rollo, pp. 47-48.]
Undaunted, the bank comes to this Court praying that it be totally absolved from any liability to Zshornack. The latter not having
appealed the Court of Appeals decision, the issues facing this Court are limited to the bank's liability with regard to the first and
second causes of action and its liability for damages.
1. We first consider the first cause of action, On the dates material to this case, Rizaldy Zshornack and his wife, Shirley Gorospe,
maintained in COMTRUST, Quezon City Branch, a dollar savings account and a peso current account.
On October 27, 1975, an application for a dollar draft was accomplished by Virgilio V. Garcia, Assistant Branch Manager of COMTRUST
Quezon City, payable to a certain Leovigilda D. Dizon in the amount of $1,000.00. In the application, Garcia indicated that the amount
was to be charged to Dollar Savings Acct. No. 25-4109, the savings account of the Zshornacks; the charges for commission,
documentary stamp tax and others totalling P17.46 were to be charged to Current Acct. No. 210465-29, again, the current account of
the Zshornacks. There was no indication of the name of the purchaser of the dollar draft.
On the same date, October 27,1975, COMTRUST, under the signature of Virgilio V. Garcia, issued a check payable to the order of
Leovigilda D. Dizon in the sum of US $1,000 drawn on the Chase Manhattan Bank, New York, with an indication that it was to be
charged to Dollar Savings Acct. No. 25-4109.
When Zshornack noticed the withdrawal of US$1,000.00 from his account, he demanded an explanation from the bank. In answer,
COMTRUST claimed that the peso value of the withdrawal was given to Atty. Ernesto Zshornack, Jr., brother of Rizaldy, on October 27,
1975 when he (Ernesto) encashed with COMTRUST a cashier's check for P8,450.00 issued by the Manila Banking Corporation payable
to Ernesto.
Upon consideration of the foregoing facts, this Court finds no reason to disturb the ruling of both the trial court and the Appellate
Court on the first cause of action. Petitioner must be held liable for the unauthorized withdrawal of US$1,000.00 from private
respondent's dollar account.
In its desperate attempt to justify its act of withdrawing from its depositor's savings account, the bank has adopted inconsistent
theories. First, it still maintains that the peso value of the amount withdrawn was given to Atty. Ernesto Zshornack, Jr. when the latter
encashed the Manilabank Cashier's Check. At the same time, the bank claims that the withdrawal was made pursuant to an
agreement where Zshornack allegedly authorized the bank to withdraw from his dollar savings account such amount which, when
converted to pesos, would be needed to fund his peso current account. If indeed the peso equivalent of the amount withdrawn from
the dollar account was credited to the peso current account, why did the bank still have to pay Ernesto?
At any rate, both explanations are unavailing. With regard to the first explanation, petitioner bank has not shown how the transaction
involving the cashier's check is related to the transaction involving the dollar draft in favor of Dizon financed by the withdrawal from

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Rizaldy's dollar account. The two transactions appear entirely independent of each other. Moreover, Ernesto Zshornack, Jr., possesses
a personality distinct and separate from Rizaldy Zshornack. Payment made to Ernesto cannot be considered payment to Rizaldy.
As to the second explanation, even if we assume that there was such an agreement, the evidence do not show that the withdrawal
was made pursuant to it. Instead, the record reveals that the amount withdrawn was used to finance a dollar draft in favor of
Leovigilda D. Dizon, and not to fund the current account of the Zshornacks. There is no proof whatsoever that peso Current Account
No. 210-465-29 was ever credited with the peso equivalent of the US$1,000.00 withdrawn on October 27, 1975 from Dollar Savings
Account No. 25-4109.
2. As for the second cause of action, the complaint filed with the trial court alleged that on December 8, 1975, Zshornack entrusted to
COMTRUST, thru Garcia, US $3,000.00 cash (popularly known as greenbacks) for safekeeping, and that the agreement was embodied
in a document, a copy of which was attached to and made part of the complaint. The document reads:
Makati Cable Address:
Philippines "COMTRUST"
COMMERCIAL BANK AND TRUST COMPANY
of the Philippines
Quezon City Branch
December 8, 1975
MR. RIZALDY T. ZSHORNACK
&/OR MRS SHIRLEY E. ZSHORNACK
Sir/Madam:
We acknowledged (sic) having received from you today the sum of US DOLLARS: THREE THOUSAND ONLY
(US$3,000.00) for safekeeping.
Received by:
(Sgd.) VIRGILIO V. GARCIA
It was also alleged in the complaint that despite demands, the bank refused to return the money.
In its answer, COMTRUST averred that the US$3,000 was credited to Zshornack's peso current account at prevailing conversion rates.
It must be emphasized that COMTRUST did not deny specifically under oath the authenticity and due execution of the above
instrument.
During trial, it was established that on December 8, 1975 Zshornack indeed delivered to the bank US $3,000 for safekeeping. When he
requested the return of the money on May 10, 1976, COMTRUST explained that the sum was disposed of in this manner: US$2,000.00
was sold on December 29, 1975 and the peso proceeds amounting to P14,920.00 were deposited to Zshornack's current account per
deposit slip accomplished by Garcia; the remaining US$1,000.00 was sold on February 3, 1976 and the peso proceeds amounting to
P8,350.00 were deposited to his current account per deposit slip also accomplished by Garcia.
Aside from asserting that the US$3,000.00 was properly credited to Zshornack's current account at prevailing conversion rates, BPI
now posits another ground to defeat private respondent's claim. It now argues that the contract embodied in the document is the
contract of depositum (as defined in Article 1962, New Civil Code), which banks do not enter into. The bank alleges that Garcia
exceeded his powers when he entered into the transaction. Hence, it is claimed, the bank cannot be liable under the contract, and the
obligation is purely personal to Garcia.
Before we go into the nature of the contract entered into, an important point which arises on the pleadings, must be considered.
The second cause of action is based on a document purporting to be signed by COMTRUST, a copy of which document was attached
to the complaint. In short, the second cause of action was based on an actionable document. It was therefore incumbent upon the
bank to specifically deny under oath the due execution of the document, as prescribed under Rule 8, Section 8, if it desired: (1) to
question the authority of Garcia to bind the corporation; and (2) to deny its capacity to enter into such contract. [See, E.B. Merchant v.
International Banking Corporation, 6 Phil. 314 (1906).] No sworn answer denying the due execution of the document in question, or
questioning the authority of Garcia to bind the bank, or denying the bank's capacity to enter into the contract, was ever filed. Hence,
the bank is deemed to have admitted not only Garcia's authority, but also the bank's power, to enter into the contract in question.
In the past, this Court had occasion to explain the reason behind this procedural requirement.
The reason for the rule enunciated in the foregoing authorities will, we think, be readily appreciated. In dealing with
corporations the public at large is bound to rely to a large extent upon outward appearances. If a man is found
acting for a corporation with the external indicia of authority, any person, not having notice of want of authority,
may usually rely upon those appearances; and if it be found that the directors had permitted the agent to exercise
that authority and thereby held him out as a person competent to bind the corporation, or had acquiesced in a
contract and retained the benefit supposed to have been conferred by it, the corporation will be bound,
notwithstanding the actual authority may never have been granted
... Whether a particular officer actually possesses the authority which he assumes to exercise is frequently known to
very few, and the proof of it usually is not readily accessible to the stranger who deals with the corporation on the
faith of the ostensible authority exercised by some of the corporate officers. It is therefore reasonable, in a case
where an officer of a corporation has made a contract in its name, that the corporation should be required, if it
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 denies his authority, to state such defense in its answer. By this means the plaintiff is apprised of the fact that the
agent's authority is contested; and he is given an opportunity to adduce evidence showing either that the authority
existed or that the contract was ratified and approved. [Ramirez v. Orientalist Co. and Fernandez, 38 Phil. 634, 645-
646 (1918).]
Petitioner's argument must also be rejected for another reason. The practical effect of absolving a corporation from liability every
time an officer enters into a contract which is beyond corporate powers, even without the proper allegation or proof that the
corporation has not authorized nor ratified the officer's act, is to cast corporations in so perfect a mold that transgressions and
wrongs by such artificial beings become impossible [Bissell v. Michigan Southern and N.I.R. Cos 22 N.Y 258 (1860).] "To say that a
corporation has no right to do unauthorized acts is only to put forth a very plain truism but to say that such bodies have no power or
capacity to err is to impute to them an excellence which does not belong to any created existence with which we are acquainted. The
distinction between power and right is no more to be lost sight of in respect to artificial than in respect to natural persons." [Ibid.]
Having determined that Garcia's act of entering into the contract binds the corporation, we now determine the correct nature of the
contract, and its legal consequences, including its enforceability.
The document which embodies the contract states that the US$3,000.00 was received by the bank for safekeeping. The subsequent
acts of the parties also show that the intent of the parties was really for the bank to safely keep the dollars and to return it to
Zshornack at a later time, Thus, Zshornack demanded the return of the money on May 10, 1976, or over five months later.
The above arrangement is that contract defined under Article 1962, New Civil Code, which reads:
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 of 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.
Note that the object of the contract between Zshornack and COMTRUST was foreign exchange. Hence, the transaction was covered by
Central Bank Circular No. 20, Restrictions on Gold and Foreign Exchange Transactions, promulgated on December 9, 1949, which was
in force at the time the parties entered into the transaction involved in this case. The circular provides:
xxx xxx xxx
2. Transactions in the assets described below and all dealings in them of whatever nature, including, where
applicable their exportation and importation, shall NOT be effected, except with respect to deposit accounts
included in sub-paragraphs (b) and (c) of this paragraph, when such deposit accounts are owned by and in the name
of, banks.
(a) Any and all assets, provided they are held through, in, or with banks or banking institutions
located in the Philippines, including money, checks, drafts, bullions bank drafts, deposit accounts
(demand, time and savings), all debts, indebtedness or obligations, financial brokers and
investment houses, notes, debentures, stocks, bonds, coupons, bank acceptances, mortgages,
pledges, liens or other rights in the nature of security, expressed in foreign currencies, or if payable
abroad, irrespective of the currency in which they are expressed, and belonging to any person,
firm, partnership, association, branch office, agency, company or other unincorporated body or
corporation residing or located within the Philippines;
(b) Any and all assets of the kinds included and/or described in subparagraph (a) above, whether
or not held through, in, or with banks or banking institutions, and existent within the Philippines,
which belong to any person, firm, partnership, association, branch office, agency, company or
other unincorporated body or corporation not residing or located within the Philippines;
(c) Any and all assets existent within the Philippines including money, checks, drafts, bullions, bank
drafts, all debts, indebtedness or obligations, financial securities commonly dealt in by bankers,
brokers and investment houses, notes, debentures, stock, bonds, coupons, bank acceptances,
mortgages, pledges, liens or other rights in the nature of security expressed in foreign currencies,
or if payable abroad, irrespective of the currency in which they are expressed, and belonging to
any person, firm, partnership, association, branch office, agency, company or other
unincorporated body or corporation residing or located within the Philippines.
xxx xxx xxx
4. (a) All receipts of foreign exchange shall be sold daily to the Central Bank by those authorized to deal in foreign
exchange. All receipts of foreign exchange by any person, firm, partnership, association, branch office, agency,
company or other unincorporated body or corporation shall be sold to the authorized agents of the Central Bank by
the recipients within one business day following the receipt of such foreign exchange. Any person, firm, partnership,
association, branch office, agency, company or other unincorporated body or corporation, residing or located within
the Philippines, who acquires on and after the date of this Circular foreign exchange shall not, unless licensed by the
Central Bank, dispose of such foreign exchange in whole or in part, nor receive less than its full value, nor delay
taking ownership thereof except as such delay is customary; Provided, further, That within one day upon taking

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 ownership, or receiving payment, of foreign exchange the aforementioned persons and entities shall sell such
foreign exchange to designated agents of the Central Bank.
xxx xxx xxx
8. Strict observance of the provisions of this Circular is enjoined; and any person, firm or corporation, foreign or
domestic, who being bound to the observance thereof, or of such other rules, regulations or directives as may
hereafter be issued in implementation of this Circular, shall fail or refuse to comply with, or abide by, or shall violate
the same, shall be subject to the penal sanctions provided in the Central Bank Act.
xxx xxx xxx
Paragraph 4 (a) above was modified by Section 6 of Central Bank Circular No. 281, Regulations on Foreign Exchange, promulgated on
November 26, 1969 by limiting its coverage to Philippine residents only. Section 6 provides:
SEC. 6. All receipts of foreign exchange by any resident person, firm, company or corporation shall be sold to
authorized agents of the Central Bank by the recipients within one business day following the receipt of such foreign
exchange. Any resident person, firm, company or corporation residing or located within the Philippines, who
acquires foreign exchange shall not, unless authorized by the Central Bank, dispose of such foreign exchange in
whole or in part, nor receive less than its full value, nor delay taking ownership thereof except as such delay is
customary; Provided, That, within one business day upon taking ownership or receiving payment of foreign
exchange the aforementioned persons and entities shall sell such foreign exchange to the authorized agents of the
Central Bank.
As earlier stated, the document and the subsequent acts of the parties show that they intended the bank to safekeep the foreign
exchange, and return it later to Zshornack, who alleged in his complaint that he is a Philippine resident. The parties did not intended
to sell the US dollars to the Central Bank within one business day from receipt. Otherwise, the contract of depositum would never
have been entered into at all.
Since the mere safekeeping of the greenbacks, without selling them to the Central Bank within one business day from receipt, is a
transaction which is not authorized by CB Circular No. 20, it must be considered as one which falls under the general class of
prohibited transactions. Hence, pursuant to Article 5 of the Civil Code, it is void, having been executed against the provisions of a
mandatory/prohibitory law. More importantly, it affords neither of the parties a cause of action against the other. "When the nullity
proceeds from the illegality of the cause or object of the contract, and the act constitutes a criminal offense, both parties being in pari
delicto, they shall have no cause of action against each other. . ." [Art. 1411, New Civil Code.] The only remedy is one on behalf of the
State to prosecute the parties for violating the law.
We thus rule that Zshornack cannot recover under the second cause of action.
3. Lastly, we find the P8,000.00 awarded by the courts a quo as damages in the concept of litigation expenses and attorney's fees to
be reasonable. The award is sustained.
WHEREFORE, the decision appealed from is hereby MODIFIED. Petitioner is ordered to restore to the dollar savings account of private
respondent the amount of US$1,000.00 as of October 27, 1975 to earn interest at the rate fixed by the bank for dollar savings
deposits. Petitioner is further ordered to pay private respondent the amount of P8,000.00 as damages. The other causes of action of
private respondent are ordered dismissed.
SO ORDERED.

G.R. No. L-6913 November 21, 1913

THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,
vs.
GREGORIO DE LA PEÑA, administrator of the estate of Father Agustin de la Peña, defendant-appellant.
MORELAND, J.:
This is an appeal by the defendant from a judgment of the Court of First Instance of Iloilo, awarding to the plaintiff the sum of P6,641,
with interest at the legal rate from the beginning of the action.
It is established in this case that the plaintiff is the trustee of a charitable bequest made for the construction of a leper hospital and
that father Agustin de la Peña was the duly authorized representative of the plaintiff to receive the legacy. The defendant is the
administrator of the estate of Father De la Peña.
In the year 1898 the books Father De la Peña, as trustee, showed that he had on hand as such trustee the sum of P6,641, collected by
him for the charitable purposes aforesaid. In the same year he deposited in his personal account P19,000 in the Hongkong and
Shanghai Bank at Iloilo. Shortly thereafter and during the war of the revolution, Father De la Peña was arrested by the military
authorities as a political prisoner, and while thus detained made an order on said bank in favor of the United States Army officer under
whose charge he then was for the sum thus deposited in said bank. The arrest of Father De la Peña and the confiscation of the funds
in the bank were the result of the claim of the military authorities that he was an insurgent and that the funds thus deposited had

4
been collected by him for revolutionary purposes. The money was taken from the bank by the military authorities by virtue of such
order, was confiscated and turned over to the Government.
While there is considerable dispute in the case over the question whether the P6,641 of trust funds was included in the P19,000
deposited as aforesaid, nevertheless, a careful examination of the case leads us to the conclusion that said trust funds were a part of
the funds deposited and which were removed and confiscated by the military authorities of the United States.
That branch of the law known in England and America as the law of trusts had no exact counterpart in the Roman law and has none
under the Spanish law. In this jurisdiction, therefore, Father De la Peña's liability is determined by those portions of the Civil Code
which relate to obligations. (Book 4, Title 1.)
Although the Civil Code states that "a person obliged to give something is also bound to preserve it with the diligence pertaining to a
good father of a family" (art. 1094), it also provides, following the principle of the Roman law, major casus est, cui humana infirmitas
resistere non potest, that "no one shall be liable for events which could not be foreseen, or which having been foreseen were
inevitable, with the exception of the cases expressly mentioned in the law or those in which the obligation so declares." (Art. 1105.)
By placing the money in the bank and mixing it with his personal funds De la Peña did not thereby assume an obligation different from
that under which he would have lain if such deposit had not been made, nor did he thereby make himself liable to repay the money at
all hazards. If the had been forcibly taken from his pocket or from his house by the military forces of one of the combatants during a
state of war, it is clear that under the provisions of the Civil Code he would have been exempt from responsibility. The fact that he
placed the trust fund in the bank in his personal account does not add to his responsibility. Such deposit did not make him a debtor
who must respond at all hazards.
We do not enter into a discussion for the purpose of determining whether he acted more or less negligently by depositing the money
in the bank than he would if he had left it in his home; or whether he was more or less negligent by depositing the money in his
personal account than he would have been if he had deposited it in a separate account as trustee. We regard such discussion as
substantially fruitless, inasmuch as the precise question is not one of negligence. There was no law prohibiting him from depositing it
as he did and there was no law which changed his responsibility be reason of the deposit. While it may be true that one who is under
obligation to do or give a thing is in duty bound, when he sees events approaching the results of which will be dangerous to his trust,
to take all reasonable means and measures to escape or, if unavoidable, to temper the effects of those events, we do not feel
constrained to hold that, in choosing between two means equally legal, he is culpably negligent in selecting one whereas he would not
have been if he had selected the other.
The court, therefore, finds and declares that the money which is the subject matter of this action was deposited by Father De la Peña
in the Hongkong and Shanghai Banking Corporation of Iloilo; that said money was forcibly taken from the bank by the armed forces of
the United States during the war of the insurrection; and that said Father De la Peña was not responsible for its loss.
The judgment is therefore reversed, and it is decreed that the plaintiff shall take nothing by his complaint.

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 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
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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.
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
6
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, 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

7
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 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
brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes
advised relative to the care and vigilance of their effects.
Plainly, from the facts found by the lower courts, the insured See deposited his vehicle for 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

8
delivery, when he handed over to Justimbaste the keys to his vehicle, which Justimbaste received with the obligation of safely keeping
and returning it. Ultimately, petitioner is liable for the loss of See’s vehicle.
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 evidence on record.
We disagree.
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 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, the insurer of See, and subrogated to the latter’s right, to litigate and incur
expenses. However, we reduce the award of ₱120,000.00 to ₱60,000.00 in view of the simplicity of the issues involved in this case.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 86869 is AFFIRMED with the
MODIFICATION that the award of attorney’s fees is reduced to ₱60,000.00. Costs against petitioner.
SO ORDERED.

G.R. No. 126780 February 17, 2005

YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA PAYAM, petitioners,
vs.
THE COURT OF APPEALS and MAURICE McLOUGHLIN, respondents.
DECISION
TINGA, J.:
The primary question of interest before this Court is the only legal issue in the case: It is whether a hotel may evade liability for the
loss of items left with it for safekeeping by its guests, by having these guests execute written waivers holding the establishment or its
employees free from blame for such loss in light of Article 2003 of the Civil Code which voids such waivers.
Before this Court is a Rule 45 petition for review of the Decision1 dated 19 October 1995 of the Court of Appeals which affirmed
the Decision2 dated 16 December 1991 of the Regional Trial Court (RTC), Branch 13, of Manila, finding YHT Realty Corporation,
Brunhilda Mata-Tan (Tan), Erlinda Lainez (Lainez) and Anicia Payam (Payam) jointly and solidarily liable for damages in an action filed
by Maurice McLoughlin (McLoughlin) for the loss of his American and Australian dollars deposited in the safety deposit box of
Tropicana Copacabana Apartment Hotel, owned and operated by YHT Realty Corporation.
The factual backdrop of the case follow.
Private respondent McLoughlin, an Australian businessman-philanthropist, used to stay at Sheraton Hotel during his trips to the
Philippines prior to 1984 when he met Tan. Tan befriended McLoughlin by showing him around, introducing him to important people,
accompanying him in visiting impoverished street children and assisting him in buying gifts for the children and in distributing the
same to charitable institutions for poor children. Tan convinced McLoughlin to transfer from Sheraton Hotel to Tropicana where
Lainez, Payam and Danilo Lopez were employed. Lopez served as manager of the hotel while Lainez and Payam had custody of the
keys for the safety deposit boxes of Tropicana. Tan took care of McLoughlin's booking at the Tropicana where he started staying
during his trips to the Philippines from December 1984 to September 1987.3
On 30 October 1987, McLoughlin arrived from Australia and registered with Tropicana. He rented a safety deposit box as it was his
practice to rent a safety deposit box every time he registered at Tropicana in previous trips. As a tourist, McLoughlin was aware of the
procedure observed by Tropicana relative to its safety deposit boxes. The safety deposit box could only be opened through the use of
two keys, one of which is given to the registered guest, and the other remaining in the possession of the management of the hotel.
When a registered guest wished to open his safety deposit box, he alone could personally request the management who then would
assign one of its employees to accompany the guest and assist him in opening the safety deposit box with the two keys.4
McLoughlin allegedly placed the following in his safety deposit box: Fifteen Thousand US Dollars (US$15,000.00) which he placed in
two envelopes, one envelope containing Ten Thousand US Dollars (US$10,000.00) and the other envelope Five Thousand US Dollars
(US$5,000.00); Ten Thousand Australian Dollars (AUS$10,000.00) which he also placed in another envelope; two (2) other envelopes
containing letters and credit cards; two (2) bankbooks; and a checkbook, arranged side by side inside the safety deposit box.5
On 12 December 1987, before leaving for a brief trip to Hongkong, McLoughlin opened his safety deposit box with his key and with
the key of the management and took therefrom the envelope containing Five Thousand US Dollars (US$5,000.00), the envelope
containing Ten Thousand Australian Dollars (AUS$10,000.00), his passports and his credit cards.6 McLoughlin left the other items in
the box as he did not check out of his room at the Tropicana during his short visit to Hongkong. When he arrived in Hongkong, he
opened the envelope which contained Five Thousand US Dollars (US$5,000.00) and discovered upon counting that only Three
Thousand US Dollars (US$3,000.00) were enclosed therein.7 Since he had no idea whether somebody else had tampered with his
safety deposit box, he thought that it was just a result of bad accounting since he did not spend anything from that envelope.8
After returning to Manila, he checked out of Tropicana on 18 December 1987 and left for Australia. When he arrived in Australia, he
discovered that the envelope with Ten Thousand US Dollars (US$10,000.00) was short of Five Thousand US Dollars (US$5,000). He also
9
noticed that the jewelry which he bought in Hongkong and stored in the safety deposit box upon his return to Tropicana was likewise
missing, except for a diamond bracelet.9
When McLoughlin came back to the Philippines on 4 April 1988, he asked Lainez if some money and/or jewelry which he had lost were
found and returned to her or to the management. However, Lainez told him that no one in the hotel found such things and none were
turned over to the management. He again registered at Tropicana and rented a safety deposit box. He placed therein one (1)
envelope containing Fifteen Thousand US Dollars (US$15,000.00), another envelope containing Ten Thousand Australian Dollars
(AUS$10,000.00) and other envelopes containing his traveling papers/documents. On 16 April 1988, McLoughlin requested Lainez and
Payam to open his safety deposit box. He noticed that in the envelope containing Fifteen Thousand US Dollars (US$15,000.00), Two
Thousand US Dollars (US$2,000.00) were missing and in the envelope previously containing Ten Thousand Australian Dollars
(AUS$10,000.00), Four Thousand Five Hundred Australian Dollars (AUS$4,500.00) were missing.10
When McLoughlin discovered the loss, he immediately confronted Lainez and Payam who admitted that Tan opened the safety
deposit box with the key assigned to him.11 McLoughlin went up to his room where Tan was staying and confronted her. Tan admitted
that she had stolen McLoughlin's key and was able to open the safety deposit box with the assistance of Lopez, Payam and
Lainez.12 Lopez also told McLoughlin that Tan stole the key assigned to McLoughlin while the latter was asleep.13
McLoughlin requested the management for an investigation of the incident. Lopez got in touch with Tan and arranged for a meeting
with the police and McLoughlin. When the police did not arrive, Lopez and Tan went to the room of McLoughlin at Tropicana and
thereat, Lopez wrote on a piece of paper a promissory note dated 21 April 1988. The promissory note reads as follows:
I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and US$2,000.00 or its equivalent in Philippine currency on or
before May 5, 1988.14
Lopez requested Tan to sign the promissory note which the latter did and Lopez also signed as a witness. Despite the execution of
promissory note by Tan, McLoughlin insisted that it must be the hotel who must assume responsibility for the loss he suffered.
However, Lopez refused to accept the responsibility relying on the conditions for renting the safety deposit box entitled "Undertaking
For the Use Of Safety Deposit Box,"15 specifically paragraphs (2) and (4) thereof, to wit:
2. To release and hold free and blameless TROPICANA APARTMENT HOTEL from any liability arising from any loss in the contents
and/or use of the said deposit box for any cause whatsoever, including but not limited to the presentation or use thereof by any other
person should the key be lost;
...
4. To return the key and execute the RELEASE in favor of TROPICANA APARTMENT HOTEL upon giving up the use of the box.16
On 17 May 1988, McLoughlin went back to Australia and he consulted his lawyers as to the validity of the abovementioned
stipulations. They opined that the stipulations are void for being violative of universal hotel practices and customs. His lawyers
prepared a letter dated 30 May 1988 which was signed by McLoughlin and sent to President Corazon Aquino.17 The Office of the
President referred the letter to the Department of Justice (DOJ) which forwarded the same to the Western Police District (WPD).18
After receiving a copy of the indorsement in Australia, McLoughlin came to the Philippines and registered again as a hotel guest of
Tropicana. McLoughlin went to Malacaňang to follow up on his letter but he was instructed to go to the DOJ. The DOJ directed him to
proceed to the WPD for documentation. But McLoughlin went back to Australia as he had an urgent business matter to attend to.
For several times, McLoughlin left for Australia to attend to his business and came back to the Philippines to follow up on his letter to
the President but he failed to obtain any concrete assistance.19
McLoughlin left again for Australia and upon his return to the Philippines on 25 August 1989 to pursue his claims against petitioners,
the WPD conducted an investigation which resulted in the preparation of an affidavit which was forwarded to the Manila City Fiscal's
Office. Said affidavit became the basis of preliminary investigation. However, McLoughlin left again for Australia without receiving the
notice of the hearing on 24 November 1989. Thus, the case at the Fiscal's Office was dismissed for failure to prosecute. Mcloughlin
requested the reinstatement of the criminal charge for theft. In the meantime, McLoughlin and his lawyers wrote letters of demand to
those having responsibility to pay the damage. Then he left again for Australia.
Upon his return on 22 October 1990, he registered at the Echelon Towers at Malate, Manila. Meetings were held between
McLoughlin and his lawyer which resulted to the filing of a complaint for damages on 3 December 1990 against YHT Realty
Corporation, Lopez, Lainez, Payam and Tan (defendants) for the loss of McLoughlin's money which was discovered on 16 April 1988.
After filing the complaint, McLoughlin left again for Australia to attend to an urgent business matter. Tan and Lopez, however, were
not served with summons, and trial proceeded with only Lainez, Payam and YHT Realty Corporation as defendants.
After defendants had filed their Pre-Trial Brief admitting that they had previously allowed and assisted Tan to open the safety deposit
box, McLoughlin filed an Amended/Supplemental Complaint20 dated 10 June 1991 which included another incident of loss of money
and jewelry in the safety deposit box rented by McLoughlin in the same hotel which took place prior to 16 April 1988.21 The trial court
admitted the Amended/Supplemental Complaint.
During the trial of the case, McLoughlin had been in and out of the country to attend to urgent business in Australia, and while staying
in the Philippines to attend the hearing, he incurred expenses for hotel bills, airfare and other transportation expenses, long distance
calls to Australia, Meralco power expenses, and expenses for food and maintenance, among others.22
After trial, the RTC of Manila rendered judgment in favor of McLoughlin, the dispositive portion of which reads:

10
WHEREFORE, above premises considered, judgment is hereby rendered by this Court in favor of plaintiff and against the defendants,
to wit:
1. Ordering defendants, jointly and severally, to pay plaintiff the sum of US$11,400.00 or its equivalent in Philippine Currency
of ₱342,000.00, more or less, and the sum of AUS$4,500.00 or its equivalent in Philippine Currency of ₱99,000.00, or a total
of ₱441,000.00, more or less, with 12% interest from April 16 1988 until said amount has been paid to plaintiff (Item 1,
Exhibit CC);
2. Ordering defendants, jointly and severally to pay plaintiff the sum of ₱3,674,238.00 as actual and consequential damages
arising from the loss of his Australian and American dollars and jewelries complained against and in prosecuting his claim and
rights administratively and judicially (Items II, III, IV, V, VI, VII, VIII, and IX, Exh. "CC");
3. Ordering defendants, jointly and severally, to pay plaintiff the sum of ₱500,000.00 as moral damages (Item X, Exh. "CC");
4. Ordering defendants, jointly and severally, to pay plaintiff the sum of ₱350,000.00 as exemplary damages (Item XI, Exh.
"CC");
5. And ordering defendants, jointly and severally, to pay litigation expenses in the sum of ₱200,000.00 (Item XII, Exh. "CC");
6. Ordering defendants, jointly and severally, to pay plaintiff the sum of ₱200,000.00 as attorney's fees, and a fee of
₱3,000.00 for every appearance; and
7. Plus costs of suit.
SO ORDERED.23
The trial court found that McLoughlin's allegations as to the fact of loss and as to the amount of money he lost were sufficiently
shown by his direct and straightforward manner of testifying in court and found him to be credible and worthy of belief as it was
established that McLoughlin's money, kept in Tropicana's safety deposit box, was taken by Tan without McLoughlin's consent. The
taking was effected through the use of the master key which was in the possession of the management. Payam and Lainez allowed
Tan to use the master key without authority from McLoughlin. The trial court added that if McLoughlin had not lost his dollars, he
would not have gone through the trouble and personal inconvenience of seeking aid and assistance from the Office of the President,
DOJ, police authorities and the City Fiscal's Office in his desire to recover his losses from the hotel management and Tan.24
As regards the loss of Seven Thousand US Dollars (US$7,000.00) and jewelry worth approximately One Thousand Two Hundred US
Dollars (US$1,200.00) which allegedly occurred during his stay at Tropicana previous to 4 April 1988, no claim was made by
McLoughlin for such losses in his complaint dated 21 November 1990 because he was not sure how they were lost and who the
responsible persons were. But considering the admission of the defendants in their pre-trial brief that on three previous occasions
they allowed Tan to open the box, the trial court opined that it was logical and reasonable to presume that his personal assets
consisting of Seven Thousand US Dollars (US$7,000.00) and jewelry were taken by Tan from the safety deposit box without
McLoughlin's consent through the cooperation of Payam and Lainez.25
The trial court also found that defendants acted with gross negligence in the performance and exercise of their duties and obligations
as innkeepers and were therefore liable to answer for the losses incurred by McLoughlin.26
Moreover, the trial court ruled that paragraphs (2) and (4) of the "Undertaking For The Use Of Safety Deposit Box" are not valid for
being contrary to the express mandate of Article 2003 of the New Civil Code and against public policy.27 Thus, there being fraud or
wanton conduct on the part of defendants, they should be responsible for all damages which may be attributed to the non-
performance of their contractual obligations.28
The Court of Appeals affirmed the disquisitions made by the lower court except as to the amount of damages awarded. The decretal
text of the appellate court's decision reads:
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED but modified as follows:
The appellants are directed jointly and severally to pay the plaintiff/appellee the following amounts:
1) ₱153,200.00 representing the peso equivalent of US$2,000.00 and AUS$4,500.00;
2) ₱308,880.80, representing the peso value for the air fares from Sidney [sic] to Manila and back for a total of eleven (11)
trips;
3) One-half of ₱336,207.05 or ₱168,103.52 representing payment to Tropicana Apartment Hotel;
4) One-half of ₱152,683.57 or ₱76,341.785 representing payment to Echelon Tower;
5) One-half of ₱179,863.20 or ₱89,931.60 for the taxi xxx transportation from the residence to Sidney [sic] Airport and from
MIA to the hotel here in Manila, for the eleven (11) trips;
6) One-half of ₱7,801.94 or ₱3,900.97 representing Meralco power expenses;
7) One-half of ₱356,400.00 or ₱178,000.00 representing expenses for food and maintenance;
8) ₱50,000.00 for moral damages;
9) ₱10,000.00 as exemplary damages; and
10) ₱200,000 representing attorney's fees.
With costs.
SO ORDERED.29
Unperturbed, YHT Realty Corporation, Lainez and Payam went to this Court in this appeal by certiorari.

11
Petitioners submit for resolution by this Court the following issues: (a) whether the appellate court's conclusion on the alleged prior
existence and subsequent loss of the subject money and jewelry is supported by the evidence on record; (b) whether the finding of
gross negligence on the part of petitioners in the performance of their duties as innkeepers is supported by the evidence on record; (c)
whether the "Undertaking For The Use of Safety Deposit Box" admittedly executed by private respondent is null and void; and (d)
whether the damages awarded to private respondent, as well as the amounts thereof, are proper under the circumstances.30
The petition is devoid of merit.
It is worthy of note that the thrust of Rule 45 is the resolution only of questions of law and any peripheral factual question addressed
to this Court is beyond the bounds of this mode of review.
Petitioners point out that the evidence on record is insufficient to prove the fact of prior existence of the dollars and the jewelry which
had been lost while deposited in the safety deposit boxes of Tropicana, the basis of the trial court and the appellate court being the
sole testimony of McLoughlin as to the contents thereof. Likewise, petitioners dispute the finding of gross negligence on their part as
not supported by the evidence on record.
We are not persuaded.l^vvphi1.net We adhere to the findings of the trial court as affirmed by the appellate court that the fact of loss
was established by the credible testimony in open court by McLoughlin. Such findings are factual and therefore beyond the ambit of
the present petition.1awphi1.nét
The trial court had the occasion to observe the demeanor of McLoughlin while testifying which reflected the veracity of the facts
testified to by him. On this score, we give full credence to the appreciation of testimonial evidence by the trial court especially if what
is at issue is the credibility of the witness. The oft-repeated principle is that where the credibility of a witness is an issue, the
established rule is that great respect is accorded to the evaluation of the credibility of witnesses by the trial court.31 The trial court is in
the best position to assess the credibility of witnesses and their testimonies because of its unique opportunity to observe the
witnesses firsthand and note their demeanor, conduct and attitude under grilling examination.32
We are also not impressed by petitioners' argument that the finding of gross negligence by the lower court as affirmed by the
appellate court is not supported by evidence. The evidence reveals that two keys are required to open the safety deposit boxes of
Tropicana. One key is assigned to the guest while the other remains in the possession of the management. If the guest desires to open
his safety deposit box, he must request the management for the other key to open the same. In other words, the guest alone cannot
open the safety deposit box without the assistance of the management or its employees. With more reason that access to the safety
deposit box should be denied if the one requesting for the opening of the safety deposit box is a stranger. Thus, in case of loss of any
item deposited in the safety deposit box, it is inevitable to conclude that the management had at least a hand in the consummation of
the taking, unless the reason for the loss is force majeure.
Noteworthy is the fact that Payam and Lainez, who were employees of Tropicana, had custody of the master key of the management
when the loss took place. In fact, they even admitted that they assisted Tan on three separate occasions in opening McLoughlin's
safety deposit box.33 This only proves that Tropicana had prior knowledge that a person aside from the registered guest had access to
the safety deposit box. Yet the management failed to notify McLoughlin of the incident and waited for him to discover the taking
before it disclosed the matter to him. Therefore, Tropicana should be held responsible for the damage suffered by McLoughlin by
reason of the negligence of its employees.
The management should have guarded against the occurrence of this incident considering that Payam admitted in open court that she
assisted Tan three times in opening the safety deposit box of McLoughlin at around 6:30 A.M. to 7:30 A.M. while the latter was still
asleep.34 In light of the circumstances surrounding this case, it is undeniable that without the acquiescence of the employees of
Tropicana to the opening of the safety deposit box, the loss of McLoughlin's money could and should have been avoided.
The management contends, however, that McLoughlin, by his act, made its employees believe that Tan was his spouse for she was
always with him most of the time. The evidence on record, however, is bereft of any showing that McLoughlin introduced Tan to the
management as his wife. Such an inference from the act of McLoughlin will not exculpate the petitioners from liability in the absence
of any showing that he made the management believe that Tan was his wife or was duly authorized to have access to the safety
deposit box. Mere close companionship and intimacy are not enough to warrant such conclusion considering that what is involved in
the instant case is the very safety of McLoughlin's deposit. If only petitioners exercised due diligence in taking care of McLoughlin's
safety deposit box, they should have confronted him as to his relationship with Tan considering that the latter had been observed
opening McLoughlin's safety deposit box a number of times at the early hours of the morning. Tan's acts should have prompted the
management to investigate her relationship with McLoughlin. Then, petitioners would have exercised due diligence required of them.
Failure to do so warrants the conclusion that the management had been remiss in complying with the obligations imposed upon
hotel-keepers under the law.
Under Article 1170 of the New Civil Code, those who, in the performance of their obligations, are guilty of negligence, are liable for
damages. As to who shall bear the burden of paying damages, Article 2180, paragraph (4) of the same Code provides that the owners
and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the
branches in which the latter are employed or on the occasion of their functions. Also, this Court has ruled that if an employee is found
negligent, it is presumed that the employer was negligent in selecting and/or supervising him for it is hard for the victim to prove the
negligence of such employer.35 Thus, given the fact that the loss of McLoughlin's money was consummated through the negligence of

12
Tropicana's employees in allowing Tan to open the safety deposit box without the guest's consent, both the assisting employees and
YHT Realty Corporation itself, as owner and operator of Tropicana, should be held solidarily liable pursuant to Article 2193.36
The issue of whether the "Undertaking For The Use of Safety Deposit Box" executed by McLoughlin is tainted with nullity presents a
legal question appropriate for resolution in this petition. Notably, both the trial court and the appellate court found the same to be
null and void. We find no reason to reverse their common conclusion. Article 2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles
brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in
Articles 1998 to 200137 is suppressed or diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply to situations such as that
presented in this case. The hotel business like the common carrier's business is imbued with public interest. Catering to the public,
hotelkeepers are bound to provide not only lodging for hotel guests and security to their persons and belongings. The twin duty
constitutes the essence of the business. The law in turn does not allow such duty to the public to be negated or diluted by any
contrary stipulation in so-called "undertakings" that ordinarily appear in prepared forms imposed by hotel keepers on guests for their
signature.
In an early case,38 the Court of Appeals through its then Presiding Justice (later Associate Justice of the Court) Jose P. Bengzon, ruled
that to hold hotelkeepers or innkeeper liable for the effects of their guests, it is not necessary that they be actually delivered to the
innkeepers or their employees. It is enough that such effects are within the hotel or inn.39 With greater reason should the liability of
the hotelkeeper be enforced when the missing items are taken without the guest's knowledge and consent from a safety deposit box
provided by the hotel itself, as in this case.
Paragraphs (2) and (4) of the "undertaking" manifestly contravene Article 2003 of the New Civil Code for they allow Tropicana to be
released from liability arising from any loss in the contents and/or use of the safety deposit box for any cause whatsoever.40 Evidently,
the undertaking was intended to bar any claim against Tropicana for any loss of the contents of the safety deposit box whether or not
negligence was incurred by Tropicana or its employees. The New Civil Code is explicit that the responsibility of the hotel-keeper shall
extend to loss of, or injury to, the personal property of the guests even if caused by servants or employees of the keepers of hotels or
inns as well as by strangers, except as it may proceed from any force majeure.41 It is the loss through force majeure that may spare the
hotel-keeper from liability. In the case at bar, there is no showing that the act of the thief or robber was done with the use of arms or
through an irresistible force to qualify the same as force majeure.42
Petitioners likewise anchor their defense on Article 200243 which exempts the hotel-keeper from liability if the loss is due to the acts of
his guest, his family, or visitors. Even a cursory reading of the provision would lead us to reject petitioners' contention. The
justification they raise would render nugatory the public interest sought to be protected by the provision. What if the negligence of
the employer or its employees facilitated the consummation of a crime committed by the registered guest's relatives or visitor?
Should the law exculpate the hotel from liability since the loss was due to the act of the visitor of the registered guest of the hotel?
Hence, this provision presupposes that the hotel-keeper is not guilty of concurrent negligence or has not contributed in any degree to
the occurrence of the loss. A depositary is not responsible for the loss of goods by theft, unless his actionable negligence contributes
to the loss.44
In the case at bar, the responsibility of securing the safety deposit box was shared not only by the guest himself but also by the
management since two keys are necessary to open the safety deposit box. Without the assistance of hotel employees, the loss would
not have occurred. Thus, Tropicana was guilty of concurrent negligence in allowing Tan, who was not the registered guest, to open the
safety deposit box of McLoughlin, even assuming that the latter was also guilty of negligence in allowing another person to use his key.
To rule otherwise would result in undermining the safety of the safety deposit boxes in hotels for the management will be given
imprimatur to allow any person, under the pretense of being a family member or a visitor of the guest, to have access to the safety
deposit box without fear of any liability that will attach thereafter in case such person turns out to be a complete stranger. This will
allow the hotel to evade responsibility for any liability incurred by its employees in conspiracy with the guest's relatives and visitors.
Petitioners contend that McLoughlin's case was mounted on the theory of contract, but the trial court and the appellate court upheld
the grant of the claims of the latter on the basis of tort.45 There is nothing anomalous in how the lower courts decided the controversy
for this Court has pronounced a jurisprudential rule that tort liability can exist even if there are already contractual relations. The act
that breaks the contract may also be tort.46
As to damages awarded to McLoughlin, we see no reason to modify the amounts awarded by the appellate court for the same were
based on facts and law. It is within the province of lower courts to settle factual issues such as the proper amount of damages
awarded and such finding is binding upon this Court especially if sufficiently proven by evidence and not unconscionable or excessive.
Thus, the appellate court correctly awarded McLoughlin Two Thousand US Dollars (US$2,000.00) and Four Thousand Five Hundred
Australian dollars (AUS$4,500.00) or their peso equivalent at the time of payment,47 being the amounts duly proven by evidence.48 The
alleged loss that took place prior to 16 April 1988 was not considered since the amounts alleged to have been taken were not
sufficiently established by evidence. The appellate court also correctly awarded the sum of ₱308,880.80, representing the peso value
for the air fares from Sydney to Manila and back for a total of eleven (11) trips;49 one-half of ₱336,207.05 or ₱168,103.52 representing
payment to Tropicana;50 one-half of ₱152,683.57 or ₱76,341.785 representing payment to Echelon Tower;51 one-half of ₱179,863.20
or ₱89,931.60 for the taxi or transportation expenses from McLoughlin's residence to Sydney Airport and from MIA to the hotel here
13
in Manila, for the eleven (11) trips;52 one-half of ₱7,801.94 or ₱3,900.97 representing Meralco power expenses;53 one-half of
₱356,400.00 or ₱178,000.00 representing expenses for food and maintenance.54
The amount of ₱50,000.00 for moral damages is reasonable. Although trial courts are given discretion to determine the amount of
moral damages, the appellate court may modify or change the amount awarded when it is palpably and scandalously
excessive.l^vvphi1.net Moral damages are not intended to enrich a complainant at the expense of a defendant.l^vvphi1.net They are
awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he
has undergone, by reason of defendants' culpable action.55
The awards of ₱10,000.00 as exemplary damages and ₱200,000.00 representing attorney's fees are likewise sustained.
WHEREFORE, foregoing premises considered, the Decision of the Court of Appeals dated 19 October 1995 is hereby AFFIRMED.
Petitioners are directed, jointly and severally, to pay private respondent the following amounts:
(1) US$2,000.00 and AUS$4,500.00 or their peso equivalent at the time of payment;
(2) ₱308,880.80, representing the peso value for the air fares from Sydney to Manila and back for a total of eleven (11) trips;
(3) One-half of ₱336,207.05 or ₱168,103.52 representing payment to Tropicana Copacabana Apartment Hotel;
(4) One-half of ₱152,683.57 or ₱76,341.785 representing payment to Echelon Tower;
(5) One-half of ₱179,863.20 or ₱89,931.60 for the taxi or transportation expense from McLoughlin's residence to Sydney
Airport and from MIA to the hotel here in Manila, for the eleven (11) trips;
(6) One-half of ₱7,801.94 or ₱3,900.97 representing Meralco power expenses;
(7) One-half of ₱356,400.00 or ₱178,200.00 representing expenses for food and maintenance;
(8) ₱50,000.00 for moral damages;
(9) ₱10,000.00 as exemplary damages; and
(10) ₱200,000 representing attorney's fees.
With costs.
SO ORDERED.

[G.R. No. 119231. April 18, 1996]

PHILIPPINE NATIONAL BANK, petitioner, vs. HON. PRES. JUDGE BENITO C. SE, JR., RTC, BR. 45, MANILA; NOAHS ARK SUGAR REFINERY;
ALBERTO T. LOOYUKO, JIMMY T. GO and WILSON T. GO, respondents.
SYLLABUS
1. COMMERCIAL LAW; WAREHOUSE RECEIPTS LAW; THE UNCONDITIONAL PRESENTMENT OF THE RECEIPTS FOR PAYMENT CARRIED
WITH IT THE ADMISSIONS OF THE EXISTENCE AND VALIDITY OF THE TERMS, CONDITIONS AND STIPULATIONS WRITTEN ON THE
FACE OF THE WAREHOUSE RECEIPTS, INCLUDING THE UNQUALIFIED RECOGNITION OF THE PAYMENT OF WAREHOUSEMANS
LIEN FOR STORAGE FEES AND PRESERVATION EXPENSES; CASE AT BAR. - Petitioner is in estoppel in disclaiming liability for the
payment of storage fees due the private respondents as warehouseman while claiming to be entitled to the sugar stocks covered
by the subject Warehouse Receipts on the basis of which it anchors its claim for payment or delivery of the sugar stocks. The
unconditional presentment of the receipts by the petitioner for payment against private respondents on the strength of the
provisions of the Warehouse Receipts Law (R.A. 2137) carried with it the admission of the existence and validity of the terms,
conditions and stipulations written on the face of the Warehouse Receipts, including the unqualified recognition of the payment
of warehousemans lien for storage fees and preservation expenses. Petitioner may not now retrieve the sugar stocks without
paying the lien due private respondents as warehouseman.
2. ID.; ID.; ID.; WAREHOUSEMANS LIEN; POSSESSORY IN NATURE. - 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.
APPEARANCES OF COUNSEL
Rolan A. Nieto for petitioner.
Madella & Cruz Law Offices for private respondents.
DECISION
HERMOSISIMA, JR., J.:
The source of conflict herein is the question as to whether the Philippine National Bank should pay storage fees for sugar stocks
covered by five (5) Warehouse Receipts stored in the warehouse of private respondents in the face of the Court of Appeals decision
(affirmed by the Supreme Court) declaring the Philippine National Bank as the owner of the said sugar stocks and ordering their
delivery to the said bank. From the same facts but on a different perspective, it can be said that the issue is: Can the warehouseman

14
enforce his warehousemans lien before delivering the sugar stocks as ordered by the Court of Appeals or need he file a separate
action to enforce payment of storage fees?
The herein petition seeks to annul: (1) the Resolution of respondent Judge Benito C. Se, Jr. of the Regional Trial Court of Manila,
Branch 45, dated December 20, 1994, in Civil Case No. 90-53023, authorizing reception of evidence to establish the claim of
respondents Noahs Ark Sugar Refinery, et al., for storage fees and preservation expenses over sugar stocks covered by
five (5) Warehouse Receipts which is in the nature of a warehousemans lien; and (2) the Resolution of the said respondent Judge,
dated March 1, 1995, declaring the validity of private respondents warehousemans lien under Section 27 of Republic Act No 2137 and
ordering that execution of the Court of Appeals decision, dated December 13, 1991, be in effect held in abeyance until the full amount
of the warehousemans lien on the sugar stocks covered by five (5) quedans subject of the action shall have been satisfied conformably
with the provisions of Section 31 of Republic Act 2137.
Also prayed for by the petition is a Writ of Prohibition to require respondent RTC Judge to desist from further proceeding with
Civil Case No. 90-53023, except order the execution of the Supreme Court judgment; and a Writ of Mandamus to compel respondent
RTC Judge to issue a Writ of Execution in accordance with the said executory Supreme Court decision.
THE FACTS
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, Receipt No. 18062, covering sugar deposited by Rosa Sy; (b) March 7, 1989,
Receipt No. 18080, covering sugar deposited by RNS Merchandising (Rosa Ng Sy); (c) March 21, 1989, Receipt No. 18081, covering
sugar deposited by St. Therese Merchandising; (d)March 31, 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 receipts are
substantially in the form, and contains the terms, prescribed for negotiable warehouse receipts by Section 2 of the law.
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 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.
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 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., in 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
are 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 ArkSugar 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. 1
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.
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
15
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). 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.2
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.3
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. SP No. 25938, dated December 13, 1991, which was affirmed in toto by this Court and which
became unalterable upon becoming final and executory. 4
Private respondents thereupon filed before the trial court an Omnibus Motion seeking among others the deferment of the
proceedings until private respondents are 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
Consequently, the Philippine National Bank filed the herein petition to seek the nullification of the above-assailed orders of
respondent judge.
The PNB submits that:
16
I
PNBs RIGHT TO A WRIT OF EXECUTION IS SUPPORTED BY TWO FINAL AND EXECUTORY DECISIONS: THE DECEMBER 13, 1991 COURT
OF APPEALS 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 RTC 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
The issues presented before us in this petition revolve around the legality of the questioned orders of respondent judge, issued
as they were after we had denied with finality private respondents contention that the PNB could not compel them to deliver the
stocks of sugar in their warehouse covered by the endorsed quedans or pay the value of the said stocks of sugar.
Petitioners submission is on a technicality, that is, that private respondents have lost their right to recover warehousemans lien
on the sugar stocks covered by the five (5) Warehouse Receipts for the reason that they failed to set up said claim in their Answer
before the trial court and that private respondents did not appeal from the decision in this regard, dated June 18, 1992. Petitioner
asseverates that the denial by this Court on March 9, 1994 of the motion seeking clarification of our decision, dated September 1,
1993, has foreclosed private respondents right to enforce their warehousemans lien for storage fees and preservation expenses under
the Warehouse Receipts Act.
On the other hand, private respondents maintain that they could not have claimed the right to a warehouseman s lien in their
Answer to the complaint before the trial court as it would have been inconsistent with their stand that they claim ownership of the
stocks covered by the quedans since the checks issued for payment thereof were dishonored. If they were still the owners, it would
have been absurd for them to ask payment for storage fees and preservation expenses. They further contend that our resolution,
dated March 9, 1994, denying their motion for clarification did not preclude their right to claim their warehousemans lien under
Sections 27 and 31 of Republic Act 2137, as our resolution merely affirmed and adopted the earlier decision, dated December 13,
1991, of the Court of Appeals (6th Division) in CA-G.R. SP. No. 25938 and did not make any finding on the matter of the
warehouseman s lien.
We find for private respondents on the foregoing issue and so the petition necessarily must fail.
We have carefully examined our resolution, dated March 9, 1994, which denied Noahs Arks motion for clarification of our
decision, dated September 1, 1993, wherein we affirmed in full and adopted the Court of Appeals earlier decision, dated December 13,
1991, in CA-G.R. SP. No. 25938. We are not persuaded by the petitioners argument that our said resolution carried with it the denial
of the warehousemans lien over the sugar stocks covered by the subject Warehouse Receipts. We have simply resolved and upheld in
our decision, dated September 1, 1993, the propriety of summary judgment which was then assailed by private respondents. In effect,
we ruled therein that, considering the circumstances obtaining before the trial court, the issuance of the Warehouse Receipts not
being disputed by the private respondents, a summary judgment in favor of PNB was proper. We in effect further affirmed the finding
that Noahs Ark is a warehouseman which was obliged to deliver the sugar stocks covered by the Warehouse Receipts pledged by
Cresencia K. Zoleta and Luis T. Ramos to the petitioner pursuant to the pertinent provisions of Republic Act 2137.
In disposing of the private respondents motion for clarification, we could not contemplate the matter of warehousemans lien
because the issue to be finally resolved then was the claim of private respondents for retaining ownership of the stocks of sugar
covered by the endorsed quedans. Stated otherwise, there was no point in taking up the issue of warehousemans lien since the
matter of ownership was as yet being determined. Neither could storage fees be due then while no one has been declared the owner
of the sugar stocks in question.
Of considerable relevance is the pertinent stipulation in the subject Warehouse Receipts which provides for respondent
Noahs Arks right to impose and collect warehousemans lien:
Storage of the refined sugar quantities mentioned herein shall be free up to one (1) week from the date of the quedans covering said
sugar and thereafter, storage fees shall be charged in accordance with the Refining Contract under which the refined sugar covered by
this Quedan was produced. 6
It is not disputed, therefore, that, under the subject Warehouse Receipts provision, storage fees are chargeable.

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 Petitioner anchors its claim against private respondents on the five (5) Warehouse Receipts issued by the latter to third-party
defendants Rosa Ng Sy of RNS Merchandising and Teresita Ng of St. Therese Merchandising, which found their way to petitioner after
they were negotiated to them by Luis T. Ramos and Cresencia K. Zoleta for a loan of P39.1 Million. Accordingly, petitioner PNB is
legally bound to stand by the express terms and conditions on the face of the Warehouse Receipts as to the payment of storage fees.
Even in the absence of such a provision, law and equity dictate the payment of the warehouseman s lien pursuant to Sections 27 and
31 of the Warehouse Receipts Law (R.A. 2137), to wit:
SECTION 27. What claims are included in the warehousemans lien. - Subject to the provisions of section thirty, a warehouseman shall
have lien on goods deposited or on the proceeds thereof in his hands, for all lawful charges for storage and preservation of the goods;
also for all lawful claims for money advanced, interest, insurance, transportation, labor, weighing coopering and other charges and
expenses in relation to such goods; also for all reasonable charges and expenses for notice, and advertisement of sale, and for sale of
the goods where default has been made in satisfying the warehousemans lien.
xxx xxx xxx
SECTION 31. Warehouseman need not deliver until lien is satisfied. - A warehouseman having a lien valid against the person
demanding the goods may refuse to deliver the goods to him until the lien is satisfied.
After being declared not the owner, but the warehouseman, by the Court of Appeals on December 13, 1991 in CA-G.R. SP. No.
25938, the decision having been affirmed by us on December 1, 1993, private respondents cannot legally be deprived of their right to
enforce their claim for warehousemans lien, for reasonable storage fees and preservation expenses. Pursuant to Section 31 which we
quote hereunder, the goods under storage may not be delivered until said lien is satisfied.
SECTION 31. Warehouseman need not deliver until lien is satisfied. - A warehouseman having a lien valid against the person
demanding the goods may refuse to deliver the goods to him until the lien is satisfied.
Considering that petitioner does not deny the existence, validity and genuineness of the Warehouse Receipts on which it
anchors its claim for payment against private respondents, it cannot disclaim liability for the payment of the storage fees stipulated
therein. As contracts, the receipts must be respected by authority of Article 1159 of the Civil Code, to wit:
ART. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in
good faith.
Petitioner is in estoppel in disclaiming liability for the payment of storage fees due the private respondents as warehouseman
while claiming to be entitled to the sugar stocks covered by the subject Warehouse Receipts on the basis of which it anchors its claim
for payment or delivery of the sugar stocks. The unconditional presentment of the receipts by the petitioner for payment against
private respondents on the strength of the provisions of the Warehouse Receipts Law (R.A. 2137) carried with it the admission of the
existence and validity of the terms, conditions and stipulations written on the face of the Warehouse Receipts, including the
unqualified recognition of the payment of warehousemans lien for storage fees and preservation expenses. Petitioner may not now
retrieve the sugar stocks without paying the lien due private respondents as warehouseman.
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.
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 n the face of each of the
Warehouse Receipts and as provided for in the Warehouse Receipts Law (R.A. 2137).
WHEREFORE, the petition should be, as it is, hereby dismissed for lack of merit. The questioned orders issued by public
respondent judge are affirmed.
Costs against the petitioner.
SO ORDERED.

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