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G.R. No.

L-66826 August 19, 1988 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.
BANK OF THE PHILIPPINE ISLANDS, petitioner,
No. 25-4109, the savings account of the Zshornacks; the charges for commission, documentary stamp tax
vs.
and others totalling P17.46 were to be charged to Current Acct. No. 210465-29, again, the current account
THE INTERMEDIATE APPELLATE COURT and ZSHORNACK respondents.
of the Zshornacks. There was no indication of the name of the purchaser of the dollar draft.

CORTES, J.:
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,
The original parties to this case were Rizaldy T. Zshornack and the Commercial Bank and Trust Company of New York, with an indication that it was to be charged to Dollar Savings Acct. No. 25-4109.
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
When Zshornack noticed the withdrawal of US$1,000.00 from his account, he demanded an explanation
case.
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
Rizaldy Zshornack initiated proceedings on June 28,1976 by filing in the Court of First Instance of Rizal COMTRUST a cashier's check for P8,450.00 issued by the Manila Banking Corporation payable to Ernesto.
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
Upon consideration of the foregoing facts, this Court finds no reason to disturb the ruling of both the trial
modified the CFI decision absolving the bank from liability on the fourth cause of action. The pertinent
court and the Appellate Court on the first cause of action. Petitioner must be held liable for the unauthorized
portions of the judgment, as modified, read:
withdrawal of US$1,000.00 from private respondent's dollar account.

IN VIEW OF THE FOREGOING, the Court renders judgment as follows:


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
1. Ordering the defendant COMTRUST to restore to the dollar savings account of plaintiff to Atty. Ernesto Zshornack, Jr. when the latter encashed the Manilabank Cashier's Check. At the same time,
(No. 25-4109) the amount of U.S $1,000.00 as of October 27, 1975 to earn interest together the bank claims that the withdrawal was made pursuant to an agreement where Zshornack allegedly
with the remaining balance of the said account at the rate fixed by the bank for dollar authorized the bank to withdraw from his dollar savings account such amount which, when converted to
deposits under Central Bank Circular 343; 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?
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 At any rate, both explanations are unavailing. With regard to the first explanation, petitioner bank has not
the defendant COMTRUST because being cash currency, it cannot by law be deposited shown how the transaction involving the cashier's check is related to the transaction involving the dollar
with plaintiffs dollar account and defendant's only obligation is to return the same to draft in favor of Dizon financed by the withdrawal from Rizaldy's dollar account. The two transactions appear
plaintiff upon demand; 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.
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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
5. Ordering defendant COMTRUST to pay plaintiff in the amount of P8,000.00 as damages
used to finance a dollar draft in favor of Leovigilda D. Dizon, and not to fund the current account of the
in the concept of litigation expenses and attorney's fees suffered by plaintiff as a result of
Zshornacks. There is no proof whatsoever that peso Current Account No. 210-465-29 was ever credited with
the failure of the defendant bank to restore to his (plaintiffs) account the amount of U.S.
the peso equivalent of the US$1,000.00 withdrawn on October 27, 1975 from Dollar Savings Account No.
$1,000.00 and to return to him (plaintiff) the U.S. $3,000.00 cash left for safekeeping.
25-4109.

Costs against defendant COMTRUST.


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)
SO ORDERED. [Rollo, pp. 47-48.] 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:
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 Makati Cable Address:
bank's liability with regard to the first and second causes of action and its liability for damages.
Philippines "COMTRUST"
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
COMMERCIAL BANK AND TRUST COMPANY
current account.
of the Philippines 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
Quezon City Branch December 8, 1975
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
MR. RIZALDY T. ZSHORNACK 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
&/OR MRS SHIRLEY E. ZSHORNACK
authority may never have been granted

Sir/Madam:
... 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
We acknowledged (sic) having received from you today the sum of US to the stranger who deals with the corporation on the faith of the ostensible authority
DOLLARS: THREE THOUSAND ONLY (US$3,000.00) for safekeeping. 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 denies his authority, to state such defense in its answer. By this means the
Received by:(Sgd.) VIRGILIO V. GARCIA
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
It was also alleged in the complaint that despite demands, the bank refused to return the money. contract was ratified and approved. [Ramirez v. Orientalist Co. and Fernandez, 38 Phil.
634, 645- 646 (1918).]
In its answer, COMTRUST averred that the US$3,000 was credited to Zshornack's peso current account at
prevailing conversion rates. 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
It must be emphasized that COMTRUST did not deny specifically under oath the authenticity and due
execution of the above instrument. 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
During trial, it was established that on December 8, 1975 Zshornack indeed delivered to the bank US $3,000 capacity to err is to impute to them an excellence which does not belong to any created existence with which
for safekeeping. When he requested the return of the money on May 10, 1976, COMTRUST explained that we are acquainted. The distinction between power and right is no more to be lost sight of in respect to artificial
the sum was disposed of in this manner: US$2,000.00 was sold on December 29, 1975 and the peso proceeds than in respect to natural persons." [Ibid.]
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. 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.

Aside from asserting that the US$3,000.00 was properly credited to Zshornack's current account at
The document which embodies the contract states that the US$3,000.00 was received by the bank for
prevailing conversion rates, BPI now posits another ground to defeat private respondent's claim. It now
safekeeping. The subsequent acts of the parties also show that the intent of the parties was really for the
argues that the contract embodied in the document is the contract of depositum (as defined in Article 1962,
bank to safely keep the dollars and to return it to Zshornack at a later time, Thus, Zshornack demanded the
New Civil Code), which banks do not enter into. The bank alleges that Garcia exceeded his powers when he
return of the money on May 10, 1976, or over five months later.
entered into the transaction. Hence, it is claimed, the bank cannot be liable under the contract, and the
obligation is purely personal to Garcia.
The above arrangement is that contract defined under Article 1962, New Civil Code, which reads:
Before we go into the nature of the contract entered into, an important point which arises on the pleadings,
must be considered. 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
The second cause of action is based on a document purporting to be signed by COMTRUST, a copy of which
deposit but some other contract.
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 Note that the object of the contract between Zshornack and COMTRUST was foreign exchange. Hence, the
bind the corporation; and (2) to deny its capacity to enter into such contract. [See, E.B. Merchant v. transaction was covered by Central Bank Circular No. 20, Restrictions on Gold and Foreign Exchange
International Banking Corporation, 6 Phil. 314 (1906).] No sworn answer denying the due execution of the Transactions, promulgated on December 9, 1949, which was in force at the time the parties entered into the
document in question, or questioning the authority of Garcia to bind the bank, or denying the bank's capacity transaction involved in this case. The circular provides:
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.
xxx xxx xxx

In the past, this Court had occasion to explain the reason behind this procedural requirement.
2. Transactions in the assets described below and all dealings in them of whatever nature, other rules, regulations or directives as may hereafter be issued in implementation of this
including, where applicable their exportation and importation, shall NOT be effected, Circular, shall fail or refuse to comply with, or abide by, or shall violate the same, shall
except with respect to deposit accounts included in sub-paragraphs (b) and (c) of this be subject to the penal sanctions provided in the Central Bank Act.
paragraph, when such deposit accounts are owned by and in the name of, banks.
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(a) Any and all assets, provided they are held through, in, or with banks
or banking institutions located in the Philippines, including money,
Paragraph 4 (a) above was modified by Section 6 of Central Bank Circular No. 281, Regulations on Foreign
checks, drafts, bullions bank drafts, deposit accounts (demand, time
Exchange, promulgated on November 26, 1969 by limiting its coverage to Philippine residents only. Section
and savings), all debts, indebtedness or obligations, financial brokers
6 provides:
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, SEC. 6. All receipts of foreign exchange by any resident person, firm, company or
irrespective of the currency in which they are expressed, and belonging corporation shall be sold to authorized agents of the Central Bank by the recipients within
to any person, firm, partnership, association, branch office, agency, one business day following the receipt of such foreign exchange. Any resident person, firm,
company or other unincorporated body or corporation residing or company or corporation residing or located within the Philippines, who acquires foreign
located within the Philippines; 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
(b) Any and all assets of the kinds included and/or described in
day upon taking ownership or receiving payment of foreign exchange the aforementioned
subparagraph (a) above, whether or not held through, in, or with banks
persons and entities shall sell such foreign exchange to the authorized agents of the
or banking institutions, and existent within the Philippines, which
Central Bank.
belong to any person, firm, partnership, association, branch office,
agency, company or other unincorporated body or corporation not
residing or located within the Philippines; 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
(c) Any and all assets existent within the Philippines including money,
business day from receipt. Otherwise, the contract of depositum would never have been entered into at all.
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, Since the mere safekeeping of the greenbacks, without selling them to the Central Bank within one business
bank acceptances, mortgages, pledges, liens or other rights in the day from receipt, is a transaction which is not authorized by CB Circular No. 20, it must be considered as
nature of security expressed in foreign currencies, or if payable abroad, one which falls under the general class of prohibited transactions. Hence, pursuant to Article 5 of the Civil
irrespective of the currency in which they are expressed, and belonging Code, it is void, having been executed against the provisions of a mandatory/prohibitory law. More
to any person, firm, partnership, association, branch office, agency, importantly, it affords neither of the parties a cause of action against the other. "When the nullity proceeds
company or other unincorporated body or corporation residing or from the illegality of the cause or object of the contract, and the act constitutes a criminal offense, both
located within the Philippines. 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.
xxx xxx xxx
We thus rule that Zshornack cannot recover under the second cause of action.
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, 3. Lastly, we find the P8,000.00 awarded by the courts a quo as damages in the concept of litigation expenses
firm, partnership, association, branch office, agency, company or other unincorporated and attorney's fees to be reasonable. The award is sustained.
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
WHEREFORE, the decision appealed from is hereby MODIFIED. Petitioner is ordered to restore to the dollar
person, firm, partnership, association, branch office, agency, company or other
savings account of private respondent the amount of US$1,000.00 as of October 27, 1975 to earn interest at
unincorporated body or corporation, residing or located within the Philippines, who
the rate fixed by the bank for dollar savings deposits. Petitioner is further ordered to pay private respondent
acquires on and after the date of this Circular foreign exchange shall not, unless licensed
the amount of P8,000.00 as damages. The other causes of action of private respondent are ordered dismissed.
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 ownership, or receiving payment, of SO ORDERED.
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
Republic of the Philippines and indorsed to Cresencia K. Zoleta. Zoleta and Ramos then used the quedans as security for loans obtained
SUPREME COURT by them from the Philippine National Bank (PNB) in the amounts of P23.5 million and P15.6 million,
Manila respectively. These quedans they indorsed to the bank.

SECOND DIVISION Both Zoleta and Ramos failed to pay their loans upon maturity on January 9, 1990. Consequently on March
16, 1990, PNB wrote to Noah's Ark Sugar Refinery (hereafter, simply Noah's Ark) demanding delivery of the
sugar covered by the quedans indorsed to it by Zoleta and Ramos. When Noah's Ark refused to comply with
the demand, PNB filed with the Regional Trial Court of Manila a verified complaint for "Specific Performance
G.R. No. 107243 September 1, 1993
with Damages and Application for Writ of Attachment" against Noah's Ark, Alberto T. Looyuko, Jimmy T. Go,
PHILIPPINE NATIONAL BANK, petitioner, and Wilson T. Go, the last three being identified as "the Sole Proprietor, Managing Partner and Executive
vs. Vice President of Noah's Ark, respectively."
NOAH'S ARK SUGAR REFINERY, ALBERTO T. LOOYUKO, JIMMY T. GO, WILSON T. GO, respondents.
The Court, by Order dated June 28, 1990, denied the application for preliminary attachment after conducting
Santiago, Jr. Vida, Corpuz & Associates for petitioner. a hearing thereon. It denied as well the motion for reconsideration thereafter filed by PNB, by Order dated
August 22, 1990.
Tomas P. Madella Jr. for respondents.
Noah's Ark and its co-defendants then filed their responsive pleading entitled "Answer with Counterclaim
and Third Party Complaint," dated June 21, 1990 in which they claimed, inter alia, that they "are still the
legal owners of the subject quedans and the quantity of sugar represented thereon," a claim founded on the
NARVASA, C.J.: following averments, to wit:

The case at bar involves extraordinary situation in which a Regional Trial . . . In an agreement dated April 1, 1989, defendants agreed to sell to Rosa Ng Sy of RNS Merchandising and
Judge after receiving notice to the final and executory judgment of the Court of Appeals in a special civil Teresita Ng of St. Therese Merchandising the total volume of sugar indicated in the quedans stored at Noah's
action of certiorari in which said Trial Judge was a respondent, and which judgment contained the following Ark Sugar Refinery for a total consideration of P63,000,000.00, . . . The corresponding payments in the form
disposition, viz.: 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
In issuing the questioned Orders, We find the respondent Court to have acted in grave abuse of discretion vendees and plaintiff in due course, defendants refused to deliver to vendees therein the quantity of sugar
which justify holding null and void and setting aside the Orders date May 2 and July 4, 1990 of respondent covered by subject quedans.
Court, and that a summary judgment be rendered forthwith in favor of the PNB against Noah's Ark Sugar
Refinery, et al., as prayed for in petitioner's Motion for Summary Judgment. . . . Considering that the vendees and first indorsers of subject quedans did not acquire ownership thereof,
the subsequent indorsers and plaintiff itself did not acquire a better right of ownership than the original
SO ORDERED. vendees/first indorsers.
proceeded to render judgment, not "in favor of the PNB against Noah's Ark Sugar Refinery, et al.," but in The defendants also adverted to PNB's supposed awareness "that subject quedans are not negotiable
favor of the latter and its co-defendants. That judgment has been appealed by PNB to this Court "on pure instruments within the purview of the Warehouse Receipts Law but simply an internal guarantee of
questions of law." defendants in the sale of their stocks of sugar. . . ."
No dispute exists about the facts which gave rise to the controversy at bar. The answer incorporated a third party complaint by Alberto Looyuko, Jimmy T. Go and Wilson T. Go ("doing
business under the name and style of Noah's Ark Sugar Refinery") against Rosa Ng Sy and Teresita Ng,
In accordance with Act No. 2137, the Warehouse Receipts Law, Noah's Ark Sugar Refinery issued on several
praying that the latter be ordered to deliver or return to them the quedans (eventually indorsed to the PNB
dates warehouse receipts (quedans) as follows:
and now subject of this suit) and pay damages and litigation expenses.
March 1, 1989, receipt No. 18062 covering sugar deposited by Rosa Sy;
The answer of Rosa Ng Sy and Teresita Ng, dated September 6, 1990, was essentially to the effect that the
March 7, 1989, receipt No. 18080 covering sugar deposited by RNS Merchandising (Rosa Ng Sy); transaction between them and Jimmy T. Go concerning the quedans and the sugar thereby covered was
"bogus and simulated (being part of the latter's) complex banking schemes and financial maneuvers;" that
March 21, 1989, receipt No. 18081 covering sugar deposited by RNS Merchandising; the simulated transaction "was just a tolling scheme to
avoid VAT payment and other BIR assessments (considering that) as . . . confidentially intimated (by said
March 31, 1989, receipt No. 18086 covering sugar deposited by St. Therese Merchandising; and Jimmy Go) . . . Noah's Ark is under sequestration by the PCGG," and that the quedans "were in fact used by
Noah's Ark Executive Director, Luis T. Ramos, and one Cresenciana K. Zoleta as security for their loans from
April 1, 1989, receipt No. 18087 covering sugar deposited by RNS Merchandising. the bank . . . . (in the aggregate amount) of P39.1 million pesos."
The receipts are substantially in the form, and contain the terms, prescribed for negotiable warehouse On January 31, 1991, PNB filed a "Motion for Summary Judgment." It asserted that "from the pleadings,
receipts by Section 2 of the law. documents, and admissions on file, there is no genuine issue as to a material fact proper for trial and that
plaintiff is entitled as a matter of law, . . . (to) a summary judgment." It contended that the defenses set up
Subsequently, warehouse receipts Numbered 18080 and 18081 (covering sugar deposited by RNS
by Noah's Ark, et al. in their responsive pleading involve purely questions of law i.e., (a) that the vendees
Merchandising) were negotiated and indorsed to Luis T. Ramos; and receipts Numbered 18086 (sugar of St.
of the sugar covered by the quedans in dispute never acquired title to the goods because of their failure to
Therese Merchandising), 18087 (sugar of RNS Merchandising) and 18062 (sugar of Rosa Sy) were negotiated
pay the stipulated purchase price and hence, ownership over the sugar was retained by Noah's Ark, et al.; In issuing the questioned Orders, We find the respondent Court to have acted in grave abuse of discretion
and (b) PNB's action is premature since as pledgee it failed to exercise the remedies provided in the contract which justify holding null and void and setting aside the Orders dated May 2 and July 4, 1990 of respondent
of pledge and the Civil Code. And it specified in no little detail the admissions and documents on record Court, and that a summary judgment be rendered forthwith in favor of the PNB against Noah's Ark Sugar
demonstrating the absence of any genuine factual issue. On these premises, it prayed "that a summary Refinery, et al., as prayed for in the petitioner's Motion for Summary Judgment.
judgment be rendered for plaintiff against the defendants for the reliefs prayed for in the complaint," these
reliefs being: SO ORDERED.

(a) to deliver to PNB the sugar stocks covered by the Warehouse Receipts/Quedans which are now in the Noah's Ark, et al. moved for reconsideration, but their motion was denied by the Appellate Tribunal's
latter's possession as holder for value and in due course; or alternatively, to pay plaintiff actual damages in Resolution dated March 6, 1991.
the amount of P39.1 Million exclusive of interest, penalties and charges; and
The judgment became final. Entry of Judgment was made on May 26, 1992. Thereafter the case was
(b) to pay plaintiff attorney's fees, litigation expenses and judicial costs estimated at no less than P1 Million; remanded to the Court of origin.
(and) such other reliefs just and equitable under the premises.
On June 18, 1992, the Regional Trial Court rendered judgment, but not in accordance with the aforesaid
An opposition to the motion was presented by defendants Noah's Ark, et al., dated March 4, 1991, asserting decision of the Court of Appeals. As stated in the opening paragraph of this opinion, instead of a summary
the existence of genuine issues, to wit: whether or not the sale was ever consummated considering that "the judgment "in favor of the PNB against Noah's Ark Sugar Refinery, et al., as prayed for in . . . (PNB)'s Motion
checks issued by the first indorsees in payment of said quedans bounced," and whether or not PNB acquired for Summary Judgment," the Trial Court's verdict decreed the dismissal of "plaintiff's complaint against
ownership over the quedans considering that "it did not dispose (of) said quedans under Art. 2112 of the defendants Noah's Ark Sugar Refinery, Alberto T. Looyuko, Jimmy Go and Wilson T. Go . . . . for lack of cause
Civil Code, as specifically reflected in the contract of pledge," both contentions allegedly being "material facts of action;" and dismissal as well of the counterclaim pleaded by the latter against PNB, and of the third-party
which has (sic) to be supported by evidence." complaint, and the third-party defendant's counterclaim.

The third-party defendants (Rosa Ng Sy and Teresita Ng) also opposed the motion for summary judgment The Trial Court declared that if "the only material facts established on the basis of the pleadings,
insofar as concerned their counterclaim in relation to the third-party complaint asserted against them. documentary evidence on record, admissions and stipulations during the hearing on PNB's application for a
writ of preliminary attachment, are the facts as alleged by plaintiff and accepted as established by the Court
On May 2, 1991, the Trial Court issued an Order denying the motion for summary judgment on the ground of Appeals, this Court will have no difficulty in finding for plaintiff as prayed for in its motion for summary
that an "examination of the pleadings and the record readily shows that there exists sharply conflicting judgment. But are the facts alleged by plaintiff the only material facts established on the basis of the
claims among the parties relative to the ownership of the sugar quedans as to whether or not the subject pleadings, documentary evidence on record, stipulations and admissions during the proceedings on the
quedans falls (sic) squarely within the coverage of the Warehouse Receipt Law and whether or not the application for a writ of preliminary attachment?" To this question the Trial Court gave a negative answer, it
transaction between plaintiff and third party defendants is governed by contract of pledge that would require being its view that other facts, "as alleged by defendants . . . (and) not disputed by PNB, have been likewise
plaintiff's compliance with Art. 2112, Civil Code on pledge as regards the disposition of the subjects quedans." established."
PNB's for reconsideration was denied by Order dated July 4, 1991.
The Trial Court later denied PNB's motion for reconsideration (by Order dated September 4, 1992), evidently
PNB thereupon filed a petition for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP finding merit in the argument of Noah's Ark, et al., therein quoted, that "Certiorari as a mode of appeal
No. 25938. This special civil action eventuated in a Decision promulgated on December 13, 1991 by the Sixth involves the review of judgment, award of final order on the merits, while the original action for certiorari and
Division of that Court, 1 nullifying and setting aside the challenged Orders of May 2, 1991 and July 4, 1991, as a special civil action is generally directed against an interlocutory order of the Court, prior to an appeal
and commanding that "summary judgment be rendered forthwith in favor of the PNB against Noah's Ark from the judgment of the main case which in the case at bar is specific performance . . ."
Sugar Refinery, et al., as prayed for in petitioner's Motion for Summary Judgment." Said the Appellate Court:2
Hence, this appeal.
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 In CA-G.R. SP No. 25938 above mentioned, after an extensive review of the entire record of the case before
does not show material questions of facts as to the alleged non-payment of purchase price by the the Regional Trial Court (including the admissions of Noah's Ark, et al. and the parties' stipulations of fact),
vendees/first indorsers, and which non-payment is not disputed by PNB as it does not materially affect PNB's as well as the pleadings filed by the parties before it, the Court of Appeals arrived at the conclusion that a
title to the sugar stock as holder of the negotiable quedans. summary judgment was proper since "there was no substantial controversy on a(ny) material fact, the only
issues for the Court's
What is determinative of the propriety of summary judgment is not the existence of conflicting claims for determination . . . (being) purely . . . questions of law, as follows:
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 1) Whether or not the non-payment of the purchase price for the sugar stock evidenced by the quedans, by
167 SCRA 815) or the issues thus tendered are in fact sham, fictitious, contrived, set up in bad faith or so the original depositors/ vendees (RNS Merchandising and St. Therese Merchandising) rendered invalid the
unsubstantial as not to constitute genuine issues for trial. (See Vergara vs. Suelto, et al., 156 SCRA 753; negotiation of said quedans by vendees/first indorsers to indorsers (Ramos and Zoleta) and the subsequent
Mercado, et al. vs. Court of Appeals, 162 SCRA 75). The questioned Orders themselves do not specify what negotiation of Ramos and Zoleta to PNB.
material facts are in issue. (See Sec. 4, Rule 34, Rules of Court).
2) Whether or not PNB as indorsee/ pledgee of quedans was entitled to delivery of sugar stocks from the
To require a trial notwithstanding pertinent allegations of the pleadings and other facts appearing on record, warehouseman, Noah's Ark."
would constitute a waste of time and an injustice to the PNB whose rights to relief to which it is plainly
These legal questions were disposed of by the Appellate Court as follows:
entitled would be further delayed to its prejudice.
The validity of the negotiation by RNS Merchandising and St. Therese Merchandising to Ramos and Zoleta, fact," 10 that is to say, the issues thus tendered are not genuine, are in other words sham, fictitious, contrived,
and by the latter to PNB to secure a loan cannot be impaired by the fact that the negotiation between Noah's set up in bad faith, patently unsubstantial. 11 The determination may be made by the Court on the basis of
Ark and RNS Merchandising and St. Therese Merchandising was in breach of faith on the part of the the pleadings, and the depositions, admissions and affidavits that the movant may submit, as well as those
merchandising firms or by the fact that the owner (Noah's Ark) was deprived of the possession of the same which the defendant may present in turn."12
by fraud, mistake or conversion of the person to whom the warehouse receipt/quedan was subsequently
negotiated if (PNB) paid value therefor in good faith without notice of such breach of duty, fraud, mistake or In any event, the conclusions of fact and law set out in the Appellate Court's decision are undeniably binding
conversion. (See Article 1518, New Civil Code). And the creditor (PNB) whose debtor was the owner of the on all the parties to the case, the respondent Regional Trial Judge included. Having been rendered by a
negotiable document of title (warehouse receipt) shall be entitled to such aid from the court of appropriate competent court within its jurisdiction, and having become final and executory, the decision now operates
jurisdiction attaching such document or in satisfying the claim by means as is allowed by law or in equity in as the immutable law among the parties, the respondent Trial Judge included; it has become the law of the
regard to property which cannot be readily attached or levied upon by ordinary process. (See Art. 1520, New case and may no longer, in subsequent proceedings, be altered or modified in any way, much less reversed
Civil Code). If the quedans were negotiable in form and duly indorsed to PNB (the creditor), the delivery of or set at naught, by the latter, or any other judge, not even by the Supreme Court; it is an unalterable
the quedans to PNB makes the PNB the owner of the property covered by said quedans and on deposit with determination of the propriety of a summary judgment in the action in question, and upon all the issues
Noah's Ark, the warehouseman. (See Sy Cong Bieng & Co. vs. Hongkong & Shanghai Bank Corp., 56 Phil. therein raised or which could have been raised relative to the merits of said action.13
598).
The Trial Judge may not evade compliance with the final judgment of the Court of Appeals on the theory that
In the case at bar, We found that the factual bases underlying the defendant's affirmative defenses (upon the latter had acted only on a mere interlocutory order (the order denying PNB's motion for summary
which PNB has moved for summary judgment) are not disputed and have been stipulated by the parties and judgment), while he had subsequently adjudged the action for specific performance on the merits. Quite
therefore do not require presentation of evidence. PNB's right to enforce the obligation of Noah's Ark as a obvious is that the Court of Appeals had decided that a summary judgment was proper in said action of
warehouseman, to deliver the sugar stock to PNB as holder of the quedans, does not depend on the outcome specific performance, that this was in truth a determination of the merits of the suit, that that decision had
of the third-party complaint because the validity of the negotiation transferring title to the goods to PNB as become final and executory, and that the decision expressly commanded His Honor to render such a
holder of the quedans is not affected by an act of RNS Merchandising and St. Therese Merchandising, in judgment. Under the circumstances, the latter's duty was clear and inescapable.
breach of trust, fraud or conversion against Noah's Ark.
It was not within the Trial Judge's competence or discretion to take exception to, much less overturn, any of
The Court considers the Appellate Court's conclusions of fact and law to be correct. the factual or legal conclusions laid down by the Court of Appeals in its verdict. He was as much bound
thereby as the private parties themselves. His only function was to implement and carry out the Appellate
The Trial Judge's argument that the Appellate Court's decision failed to take account of other "material facts Tribunal's judgment. It was an act of supererogation, of presumptuousness, on His Honor's part to disregard
established on the basis of the pleadings, documentary evidence on record, stipulations and admissions the Court's clear and categorical command, and to dispose of the case in a manner diametrically opposed
during the proceedings on the application for a writ of preliminary attachment," is quite transparently thereto. In doing so, the Trial Judge committed grave error which must forthwith be corrected.
specious. For the matters cited by His Honor, as allegedly not examined by the Court of Appeals, were in fact
duly considered by the latter i.e., that "the various postdated checks issued by the buyers (RNS WHEREFORE, the Trial Judge's Decision in Civil Case No. 90-53023 dated June 18, 1992 is REVERSED
Merchandising and St. Therese Merchandising) in favor of Noah's Ark were dishonored when presented for and SET ASIDE and a new one rendered conformably with the final and executory Decision of the Court of
payment . . (and hence) the buyers never acquired title to the sugar evidenced by the quedans," 3 and that Appeals in CA-G.R. SP No. 25938, ordering the private respondents, Noah's Ark Sugar Refinery, Alberto T.
PNB "did not follow the procedure stated in Article 2112 of the Civil Code." 4 In its decision, as just pointed Looyuko, Jimmy T. Go and William T. Go, jointly and severally:
out, the Court of Appeals explicitly ruled that the "validity of the negotiation" of the quedans to PNB" cannot
a) to deliver to the petitioner Philippine National Bank, "the sugar stocks covered by the Warehouse
be impaired by the fact that the negotiation between Noah's Ark and RNS Merchandising and St. Therese
Receipts/Quedans which are now in the latter's possession as holder for value and in due course; or
Merchandising was made in breach of faith on the part of the merchandising firms or by the fact that the
alternatively, to pay (said) plaintiff actual damages in the amount of P39.1 Million," with legal interest thereon
owner (Noah's Ark) was deprived of the possession of the same by fraud, mistake or conversion . . ." 5 It also
from the filing of the complaint until full payment; and
ruled that the quedans were negotiable documents and had been duly negotiated to the PNB which thereby
acquired the rights set out in Article 1513 of the Civil Code," 6 viz.:" b) to pay plaintiff Philippine National Bank attorney's fees, litigation expenses and judicial costs hereby fixed
at the amount of one hundred fifty thousand pesos (150,000.00), as well as the costs.
(1) Such title to the goods as the person negotiating the documents to him had or had ability to convey to a
purchaser in good faith for value and also such title to the goods as the person to whose order the goods SO ORDERED.
were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith
for value; and Padilla, Regalado, Nocon and Puno, JJ., concur.

(2) The direct obligation of the bailee issuing the document to hold possession of the goods for him according
to the terms of the document as fully as if such bailee had contracted directly with him.

The Court of Appeals found correctly that the indications in the pleadings to the contrary notwithstanding,
no substantial triable issue of fact actually existed, and that certain issues raised in answer, even if taken
as established, would not materially change the ultimate findings relative to the main claim. 7 Its decision is
entirely in accord with this Court's rulings regarding the propriety of summary judgments invoked by the
Appellate Tribunal, i.e., Vergara, Sr. v. Suelto, 8 and Mercado v. Court of Appeals. 9 According to Vergara, for
instance, "even if the answer does tender issues and therefore a judgment on the pleadings is not proper
a summary judgment may still be rendered on the plaintiff's motion if he can show to the Court's
satisfaction that "except as to the amount of damages, there is no genuine issue as to any material
Republic of the Philippines accompanied by the Pugaos, then proceeded to the respondent Bank on 4 October 1979 to open the safety
SUPREME COURT deposit box and get the certificates of title. However, when opened in the presence of the Bank's
Manila representative, the box yielded no such certificates. Because of the delay in the reconstitution of the title,
Mrs. Ramos withdrew her earlier offer to purchase the lots; as a consequence thereof, the petitioner allegedly
THIRD DIVISION failed to realize the expected profit of P280,500.00. Hence, the latter filed on 1 September 1980 a
complaint2 for damages against the respondent Bank with the Court of First Instance (now Regional Trial
Court) of Pasig, Metro Manila which docketed the same as Civil Case No. 38382.
G.R. No. 90027 March 3, 1993
In its Answer with Counterclaim,3 respondent Bank alleged that the petitioner has no cause of action because
CA AGRO-INDUSTRIAL DEVELOPMENT CORP., petitioner, of paragraphs 13 and 14 of the contract of lease (Exhibit "2"); corollarily, loss of any of the items or articles
vs. contained in the box could not give rise to an action against it. It then interposed a counterclaim for
THE HONORABLE COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, respondents. exemplary damages as well as attorney's fees in the amount of P20,000.00. Petitioner subsequently filed an
answer to the counterclaim.4
Dolorfino & Dominguez Law Offices for petitioner.
In due course, the trial court, now designated as Branch 161 of the Regional Trial Court (RTC) of Pasig, Metro
Danilo B. Banares for private respondent. Manila, rendered a decision5 adverse to the petitioner on 8 December 1986, the dispositive portion of which
reads:

WHEREFORE, premises considered, judgment is hereby rendered dismissing plaintiff's complaint.


DAVIDE, JR., J.:
On defendant's counterclaim, judgment is hereby rendered ordering plaintiff to pay defendant the amount of
Is the contractual relation between a commercial bank and another party in a contract of rent of a safety FIVE THOUSAND (P5,000.00) PESOS as attorney's fees.
deposit box with respect to its contents placed by the latter one of bailor and bailee or one of lessor and
lessee? With costs against plaintiff.6

This is the crux of the present controversy. The unfavorable verdict is based on the trial court's conclusion that under paragraphs 13 and 14 of the
contract of lease, the Bank has no liability for the loss of the certificates of title. The court declared that the
On 3 July 1979, petitioner (through its President, Sergio Aguirre) and the spouses Ramon and Paula Pugao said provisions are binding on the parties.
entered into an agreement whereby the former purchased from the latter two (2) parcels of land for a
consideration of P350,625.00. Of this amount, P75,725.00 was paid as downpayment while the balance was Its motion for reconsideration7 having been denied, petitioner appealed from the adverse decision to the
covered by three (3) postdated checks. Among the terms and conditions of the agreement embodied in a respondent Court of Appeals which docketed the appeal as CA-G.R. CV No. 15150. Petitioner urged the
Memorandum of True and Actual Agreement of Sale of Land were that the titles to the lots shall be transferred respondent Court to reverse the challenged decision because the trial court erred in (a) absolving the
to the petitioner upon full payment of the purchase price and that the owner's copies of the certificates of respondent Bank from liability from the loss, (b) not declaring as null and void, for being contrary to law,
titles thereto, Transfer Certificates of Title (TCT) Nos. 284655 and 292434, shall be deposited in a safety public order and public policy, the provisions in the contract for lease of the safety deposit box absolving the
deposit box of any bank. The same could be withdrawn only upon the joint signatures of a representative of Bank from any liability for loss, (c) not concluding that in this jurisdiction, as well as under American
the petitioner and the Pugaos upon full payment of the purchase price. Petitioner, through Sergio Aguirre, jurisprudence, the liability of the Bank is settled and (d) awarding attorney's fees to the Bank and denying
and the Pugaos then rented Safety Deposit Box No. 1448 of private respondent Security Bank and Trust the petitioner's prayer for nominal and exemplary damages and attorney's fees.8
Company, a domestic banking corporation hereinafter referred to as the respondent Bank. For this purpose,
both signed a contract of lease (Exhibit "2") which contains, inter alia, the following conditions: In its Decision promulgated on 4 July 1989,9 respondent Court affirmed the appealed decision principally on
the theory that the contract (Exhibit "2") executed by the petitioner and respondent Bank is in the nature of
13. The bank is not a depositary of the contents of the safe and it has neither the possession nor control of a contract of lease by virtue of which the petitioner and its co-renter were given control over the safety deposit
the same. box and its contents while the Bank retained no right to open the said box because it had neither the
possession nor control over it and its contents. As such, the contract is governed by Article 1643 of the Civil
14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it assumes Code 10 which provides:
absolutely no liability in connection therewith.1
Art. 1643. In the lease of things, one of the parties binds himself to give to another the enjoyment or use of
After the execution of the contract, two (2) renter's keys were given to the renters one to Aguirre (for the a thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more
petitioner) and the other to the Pugaos. A guard key remained in the possession of the respondent Bank. The than ninety-nine years shall be valid.
safety deposit box has two (2) keyholes, one for the guard key and the other for the renter's key, and can be
opened only with the use of both keys. Petitioner claims that the certificates of title were placed inside the It invoked Tolentino vs. Gonzales 11 which held that the owner of the property loses his control over the
said box. property leased during the period of the contract and Article 1975 of the Civil Code which provides:

Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner the two (2) lots at a price of Art. 1975. The depositary holding certificates, bonds, securities or instruments which earn interest shall be
P225.00 per square meter which, as petitioner alleged in its complaint, translates to a profit of P100.00 per bound to collect the latter when it becomes due, and to take such steps as may be necessary in order that
square meter or a total of P280,500.00 for the entire property. Mrs. Ramos demanded the execution of a deed the securities may preserve their value and the rights corresponding to them according to law.
of sale which necessarily entailed the production of the certificates of title. In view thereof, Aguirre,
The above provision shall not apply to contracts for the rent of safety deposit boxes.
and then concluded that "[c]learly, the defendant-appellee is not under any duty to maintain the contents of Petitioner further argues that conditions 13 and 14 of the questioned contract are contrary to law and public
the box. The stipulation absolving the defendant-appellee from liability is in accordance with the nature of policy and should be declared null and void. In support thereof, it cites Article 1306 of the Civil Code which
the contract of lease and cannot be regarded as contrary to law, public order and public policy." 12 The provides that parties to a contract may establish such stipulations, clauses, terms and conditions as they
appellate court was quick to add, however, that under the contract of lease of the safety deposit box, may deem convenient, provided they are not contrary to law, morals, good customs, public order or public
respondent Bank is not completely free from liability as it may still be made answerable in case unauthorized policy.
persons enter into the vault area or when the rented box is forced open. Thus, as expressly provided for in
stipulation number 8 of the contract in question: After the respondent Bank filed its comment, this Court gave due course to the petition and required the
parties to simultaneously submit their respective Memoranda.
8. The Bank shall use due diligence that no unauthorized person shall be admitted to any rented safe and
beyond this, the Bank will not be responsible for the contents of any safe rented from it. 13 The petition is partly meritorious.

Its motion for reconsideration 14 having been denied in the respondent Court's Resolution of 28 August We agree with the petitioner's contention that the contract for the rent of the safety deposit box is not an
1989, 15petitioner took this recourse under Rule 45 of the Rules of Court and urges Us to review and set ordinary contract of lease as defined in Article 1643 of the Civil Code. However, We do not fully subscribe to
aside the respondent Court's ruling. Petitioner avers that both the respondent Court and the trial court (a) its view that the same is a contract of deposit that is to be strictly governed by the provisions in the Civil
did not properly and legally apply the correct law in this case, (b) acted with grave abuse of discretion or in Code on deposit; 19 the contract in the case at bar is a special kind of deposit. It cannot be characterized as
excess of jurisdiction amounting to lack thereof and (c) set a precedent that is contrary to, or is a departure an ordinary contract of lease under Article 1643 because the full and absolute possession and control of the
from precedents adhered to and affirmed by decisions of this Court and precepts in American jurisprudence safety deposit box was not given to the joint renters the petitioner and the Pugaos. The guard key of the
adopted in the Philippines. It reiterates the arguments it had raised in its motion to reconsider the trial box remained with the respondent Bank; without this key, neither of the renters could open the box. On the
court's decision, the brief submitted to the respondent Court and the motion to reconsider the latter's other hand, the respondent Bank could not likewise open the box without the renter's key. In this case, the
decision. In a nutshell, petitioner maintains that regardless of nomenclature, the contract for the rent of the said key had a duplicate which was made so that both renters could have access to the box.
safety deposit box (Exhibit "2") is actually a contract of deposit governed by Title XII, Book IV of the Civil
Hence, the authorities cited by the respondent Court 20 on this point do not apply. Neither could Article 1975,
Code of the
also relied upon by the respondent Court, be invoked as an argument against the deposit theory. Obviously,
Philippines. 16 Accordingly, it is claimed that the respondent Bank is liable for the loss of the certificates of
the first paragraph of such provision cannot apply to a depositary of certificates, bonds, securities or
title pursuant to Article 1972 of the said Code which provides:
instruments which earn interest if such documents are kept in a rented safety deposit box. It is clear that
Art. 1972. The depositary is obliged to keep the thing safely and to return it, when required, to the depositor, the depositary cannot open the box without the renter being present.
or to his heirs and successors, or to the person who may have been designated in the contract. His
We observe, however, that the deposit theory itself does not altogether find unanimous support even in
responsibility, with regard to the safekeeping and the loss of the thing, shall be governed by the provisions
American jurisprudence. We agree with the petitioner that under the latter, the prevailing rule is that the
of Title I of this Book.
relation between a bank renting out safe-deposit boxes and its customer with respect to the contents of the
If the deposit is gratuitous, this fact shall be taken into account in determining the degree of care that the box is that of a bail or and bailee, the bailment being for hire and mutual benefit. 21 This is just the prevailing
depositary must observe. view because:

Petitioner then quotes a passage from American Jurisprudence 17 which is supposed to expound on the There is, however, some support for the view that the relationship in question might be more properly
prevailing rule in the United States, to wit: characterized as that of landlord and tenant, or lessor and lessee. It has also been suggested that it should
be characterized as that of licensor and licensee. The relation between a bank, safe-deposit company, or
The prevailing rule appears to be that where a safe-deposit company leases a safe-deposit box or safe and storage company, and the renter of a safe-deposit box therein, is often described as contractual, express or
the lessee takes possession of the box or safe and places therein his securities or other valuables, the relation implied, oral or written, in whole or in part. But there is apparently no jurisdiction in which any rule other
of bailee and bail or is created between the parties to the transaction as to such securities or other valuables; than that applicable to bailments governs questions of the liability and rights of the parties in respect of loss
the fact that the of the contents of safe-deposit boxes. 22 (citations omitted)
safe-deposit company does not know, and that it is not expected that it shall know, the character or
description of the property which is deposited in such safe-deposit box or safe does not change that relation. In the context of our laws which authorize banking institutions to rent out safety deposit boxes, it is clear
That access to the contents of the safe-deposit box can be had only by the use of a key retained by the lessee that in this jurisdiction, the prevailing rule in the United States has been adopted. Section 72 of the General
( whether it is the sole key or one to be used in connection with one retained by the lessor) does not operate Banking Act 23pertinently provides:
to alter the foregoing rule. The argument that there is not, in such a case, a delivery of exclusive possession
Sec. 72. In addition to the operations specifically authorized elsewhere in this Act, banking institutions other
and control to the deposit company, and that therefore the situation is entirely different from that of ordinary
than building and loan associations may perform the following services:
bailment, has been generally rejected by the courts, usually on the ground that as possession must be either
in the depositor or in the company, it should reasonably be considered as in the latter rather than in the (a) Receive in custody funds, documents, and valuable objects, and rent safety deposit boxes for the
former, since the company is, by the nature of the contract, given absolute control of access to the property, safeguarding of such effects.
and the depositor cannot gain access thereto without the consent and active participation of the company. .
. . (citations omitted). xxx xxx xxx

and a segment from Words and Phrases 18 which states that a contract for the rental of a bank safety deposit The banks shall perform the services permitted under subsections (a), (b) and (c) of this section
box in consideration of a fixed amount at stated periods is a bailment for hire. as depositories or as agents. . . . 24 (emphasis supplied)
Note that the primary function is still found within the parameters of a contract of deposit, i.e., the receiving loss of the certificates of title was due to the fraud or negligence of the respondent Bank. This in turn flows
in custody of funds, documents and other valuable objects for safekeeping. The renting out of the safety from this Court's determination that the contract involved was one of deposit. Since both the petitioner and
deposit boxes is not independent from, but related to or in conjunction with, this principal function. A the Pugaos agreed that each should have one (1) renter's key, it was obvious that either of them could ask
contract of deposit may be entered into orally or in writing 25 and, pursuant to Article 1306 of the Civil Code, the Bank for access to the safety deposit box and, with the use of such key and the Bank's own guard key,
the parties thereto may establish such stipulations, clauses, terms and conditions as they may deem could open the said box, without the other renter being present.
convenient, provided they are not contrary to law, morals, good customs, public order or public policy. The
depositary's responsibility for the safekeeping of the objects deposited in the case at bar is governed by Title Since, however, the petitioner cannot be blamed for the filing of the complaint and no bad faith on its part
I, Book IV of the Civil Code. Accordingly, the depositary would be liable if, in performing its obligation, it is had been established, the trial court erred in condemning the petitioner to pay the respondent Bank
found guilty of fraud, negligence, delay or contravention of the tenor of the agreement. 26 In the absence of attorney's fees. To this extent, the Decision (dispositive portion) of public respondent Court of Appeals must
any stipulation prescribing the degree of diligence required, that of a good father of a family is to be be modified.
observed. 27 Hence, any stipulation exempting the depositary from any liability arising from the loss of the
WHEREFORE, the Petition for Review is partially GRANTED by deleting the award for attorney's fees from
thing deposited on account of fraud, negligence or delay would be void for being contrary to law and public
the 4 July 1989 Decision of the respondent Court of Appeals in CA-G.R. CV No. 15150. As modified, and
policy. In the instant case, petitioner maintains that conditions 13 and 14 of the questioned contract of lease
subject to the pronouncement We made above on the nature of the relationship between the parties in a
of the safety deposit box, which read:
contract of lease of safety deposit boxes, the dispositive portion of the said Decision is hereby AFFIRMED
13. The bank is not a depositary of the contents of the safe and it has neither the possession nor control of and the instant Petition for Review is otherwise DENIED for lack of merit.
the same.
No pronouncement as to costs.
14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it assumes
SO ORDERED.
absolutely no liability in connection therewith. 28

are void as they are contrary to law and public policy. We find Ourselves in agreement with this proposition
for indeed, said provisions are inconsistent with the respondent Bank's responsibility as a depositary under
Section 72(a) of the General Banking Act. Both exempt the latter from any liability except as contemplated
in condition 8 thereof which limits its duty to exercise reasonable diligence only with respect to who shall be
admitted to any rented safe, to wit:

8. The Bank shall use due diligence that no unauthorized person shall be admitted to any rented safe and
beyond this, the Bank will not be responsible for the contents of any safe rented from it. 29

Furthermore, condition 13 stands on a wrong premise and is contrary to the actual practice of the Bank. It
is not correct to assert that the Bank has neither the possession nor control of the contents of the box since
in fact, the safety deposit box itself is located in its premises and is under its absolute control; moreover, the
respondent Bank keeps the guard key to the said box. As stated earlier, renters cannot open their respective
boxes unless the Bank cooperates by presenting and using this guard key. Clearly then, to the extent above
stated, the foregoing conditions in the contract in question are void and ineffective. It has been said:

With respect to property deposited in a safe-deposit box by a customer of a safe-deposit company, the parties,
since the relation is a contractual one, may by special contract define their respective duties or provide for
increasing or limiting the liability of the deposit company, provided such contract is not in violation of law or
public policy. It must clearly appear that there actually was such a special contract, however, in order to
vary the ordinary obligations implied by law from the relationship of the parties; liability of the deposit
company will not be enlarged or restricted by words of doubtful meaning. The company, in renting
safe-deposit boxes, cannot exempt itself from liability for loss of the contents by its own fraud or negligence
or that of its agents or servants, and if a provision of the contract may be construed as an attempt to do so,
it will be held ineffective for the purpose. Although it has been held that the lessor of a safe-deposit box
cannot limit its liability for loss of the contents thereof through its own negligence, the view has been taken
that such a lessor may limits its liability to some extent by agreement or stipulation. 30 (citations omitted)

Thus, we reach the same conclusion which the Court of Appeals arrived at, that is, that the petition should
be dismissed, but on grounds quite different from those relied upon by the Court of Appeals. In the instant
case, the respondent Bank's exoneration cannot, contrary to the holding of the Court of Appeals, be based
on or proceed from a characterization of the impugned contract as a contract of lease, but rather on the fact
that no competent proof was presented to show that respondent Bank was aware of the agreement between
the petitioner and the Pugaos to the effect that the certificates of title were withdrawable from the safety
deposit box only upon both parties' joint signatures, and that no evidence was submitted to reveal that the
FIRST DIVISION sugar stocks as ordered by the Court of Appeals or need he file a separate action to enforce
payment of storage fees?
[G.R. No. 119231. April 18, 1996]
The herein petition seeks to annul: (1) the Resolution of respondent Judge Benito C. Se, Jr. of
PHILIPPINE NATIONAL BANK, petitioner, vs. HON. PRES. JUDGE BENITO C. SE, the Regional Trial Court of Manila, Branch 45, dated December 20, 1994, in Civil Case No. 90-
JR., RTC, BR. 45, MANILA; NOAHS ARK SUGAR REFINERY; ALBERTO T. LOOYUKO, 53023, authorizing reception of evidence to establish the claim of respondents Noahs Ark Sugar
JIMMY T. GO and WILSON T. GO, respondents. 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
SYLLABUS
Resolution of the said respondent Judge, dated March 1, 1995, declaring the validity of private
1. COMMERCIAL LAW; WAREHOUSE RECEIPTS LAW; THE UNCONDITIONAL respondents warehousemans lien under Section 27 of Republic Act No 2137 and ordering that
PRESENTMENT OF THE RECEIPTS FOR PAYMENT CARRIED WITH IT THE ADMISSIONS execution of the Court of Appeals decision, dated December 13, 1991, be in effect held in
OF THE EXISTENCE AND VALIDITY OF THE TERMS, CONDITIONS AND STIPULATIONS abeyance until the full amount of the warehousemans lien on the sugar stocks covered by
WRITTEN ON THE FACE OF THE WAREHOUSE RECEIPTS, INCLUDING THE UNQUALIFIED five (5) quedans subject of the action shall have been satisfied conformably with the provisions
RECOGNITION OF THE PAYMENT OF WAREHOUSEMANS LIEN FOR STORAGE FEES AND of Section 31 of Republic Act 2137.
PRESERVATION EXPENSES; CASE AT BAR. - Petitioner is in estoppel in disclaiming liability
Also prayed for by the petition is a Writ of Prohibition to require respondent RTC Judge to desist
for the payment of storage fees due the private respondents as warehouseman while claiming to
from further proceeding with Civil Case No. 90-53023, except order the execution of the Supreme
be entitled to the sugar stocks covered by the subject Warehouse Receipts on the basis of which
Court judgment; and a Writ of Mandamus to compel respondent RTC Judge to issue a Writ of
it anchors its claim for payment or delivery of the sugar stocks. The unconditional presentment
Execution in accordance with the said executory Supreme Court decision.
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 THE FACTS
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 In accordance with Act No. 2137, the Warehouse Receipts Law, Noahs Ark Sugar Refinery issued
lien for storage fees and preservation expenses. Petitioner may not now retrieve the sugar stocks on several dates, the following Warehouse Receipts (Quedans): (a) March 1, 1989, Receipt No.
without paying the lien due private respondents as warehouseman. 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,
2. ID.; ID.; ID.; WAREHOUSEMANS LIEN; POSSESSORY IN NATURE. - While the PNB is covering sugar deposited by St. Therese Merchandising; (d)March 31, 1989, Receipt No. 18086,
entitled to the stocks of sugar as the endorsee of the quedans, delivery to it shall be effected only covering sugar deposited by St. Therese Merchandising; and (e) April 1, 1989, Receipt No. 18087,
upon payment of the storage fees. Imperative is the right of the warehouseman to demand covering sugar deposited by RNS Merchandising. The receipts are substantially in the form, and
payment of his lien at this juncture, because, in accordance with Section 29 of the Warehouse contains the terms, prescribed for negotiable warehouse receipts by Section 2 of the law.
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 Subsequently, Warehouse Receipts Nos. 18080 and 18081 were negotiated and endorsed to Luis
goods without requiring payment of his lien, because a warehousemans lien is possessory in T. Ramos; and Receipts Nos. 18086, 18087 and 18062 were negotiated and endorsed to
nature. 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
APPEARANCES OF COUNSEL Philippine National Bank. The aforementioned quedans were endorsed by them to the Philippine
National Bank.
Rolan A. Nieto for petitioner.
Luis T. Ramos and Cresencia K. Zoleta failed to pay their loans upon maturity on January 9,
Madella & Cruz Law Offices for private respondents.
1990. Consequently, on March 16, 1990, the Philippine National Bank wrote to Noahs Ark Sugar
DECISION 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
HERMOSISIMA, JR., J.: 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
The source of conflict herein is the question as to whether the Philippine National Bank should
Attachment against Noahs Ark Sugar Refinery, Alberto T. Looyuko, Jimmy T. Go and Wilson T.
pay storage fees for sugar stocks covered by five (5) Warehouse Receipts stored in the warehouse
Go, the last three being identified as the sole proprietor, managing partner, and Executive Vice
of private respondents in the face of the Court of Appeals decision (affirmed by the Supreme
President of Noahs Ark, respectively.
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 Respondent Judge Benito C. Se, Jr., in whose sala the case was raffled, denied the Application
that the issue is: Can the warehouseman enforce his warehousemans lien before delivering the for Preliminary Attachment. Reconsideration therefor was likewise denied.
Noahs Ark and its co-defendants filed an Answer with Counterclaim and Third-Party Complaint issues for trial. (See Vergara vs. Suelto, et al., 156 SCRA 753; Mercado, et al. vs. Court of Appeals,
in which they claimed that they are the owners of the subject quedans and the sugar represented 162 SCRA 75). The questioned Orders themselves do not specify what material facts are in issue.
therein, averring as they did that: (See Sec. 4, Rule 34, Rules of Court).

9.*** In an agreement dated April 1, 1989, defendants agreed to sell to Rosa Ng Sy of RNS To require a trial notwithstanding pertinent allegations of the pleadings and other facts appearing
Merchandising and Teresita Ng of St. Therese Merchandising the total volume of sugar indicated on the record, would constitute a waste of time and an injustice to the PNB whose rights to relief
in the quedans stored at Noahs Ark Sugar Refinery for a total consideration of P63,000,000.00, to which it is plainly entitled would be further delayed to its prejudice.

*** The corresponding payments in the form of checks issued by the vendees in favor of In issuing the questioned Orders, We find the respondent Court to have acted in grave abuse of
defendants were subsequently dishonored by the drawee banks by reason of payment stopped discretion which justify holding null and void and setting aside the Orders dated May 2 and July
and drawn against insufficient funds, 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
*** Upon proper notification to said vendees and plaintiff in due course, defendants refused to Judgment.2
deliver to vendees therein the quantity of sugar covered by the subject quedans.
On December 13, 1991, the Court of Appeals nullified and set aside the orders of May 2 and July
10. *** Considering that the vendees and first endorsers of subject quedans did not acquire 4, 1990 of the Regional Trial Court and ordered the trial court to render summary judgment in
ownership thereof, the subsequent endorsers and plaintiff itself did not acquire a better right of favor of the PNB. On June 18, 1992, the trial court rendered judgment dismissing plaintiffs
ownership than the original vendees/first endorsers. 1 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
The Answer incorporated a Third-Party Complaint by Alberto T. Looyuko, Jimmy T. Go and
Defendants Counterclaim. On September 4, 1992, the trial court denied PNBs Motion for
Wilson T. Go, doing business under the trade name and style Noahs Ark Sugar Refinery against
Reconsideration.
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 On June 9, 1992, the PNB filed an appeal from the RTC decision with the Supreme Court, G.R.
expenses. 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:
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, WHEREFORE, the trial judges decision in Civil Case No. 90-53023, dated June 18, 1992, is
on the other, concerning the quedans and the sugar stocks covered by them was merely a reversed and set aside and a new one rendered conformably with the final and executory decision
simulated one being part of the latters complex banking schemes and financial maneuvers, and of the Court of Appeals in CA-G.R SP. No. 25938, ordering the private respondents Noahs Ark Sugar
thus, they are not answerable in damages to him. Refinery, Alberto T. Looyuko, Jimmy T. Go and Wilson T. Go, jointly and severally:
On January 31, 1991, the Philippine National Bank filed a Motion for Summary Judgment in (a) to deliver to the petitioner Philippine National Bank, the sugar stocks covered by the Warehouse
favor of the plaintiff as against the defendants for the reliefs prayed for in the complaint. 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
On May 2, 1991, the Regional Trial Court issued an order denying the Motion for Summary
interest thereon from the filing of the complaint until full payment; and
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. (b) to pay plaintiff Philippine National Bank attorneys fees, litigation expenses and judicial costs
Pertinent portions of the decision of the Court of Appeals read: hereby fixed at the amount of One Hundred Fifty Thousand Pesos (P150,000.00) as well as the
costs.
In issuing the questioned Orders, the respondent Court ruled that questions of law should be
SO ORDERED.3
resolved after and not before, the questions of fact are properly litigated. A scrutiny of defendants
affirmative defenses does not show material questions of fact as to the alleged nonpayment of On September 29, 1993, private respondents moved for reconsideration of this decision. A
purchase price by the vendees/first endorsers, and which nonpayment is not disputed by PNB as Supplemental/Second Motion for Reconsideration with leave of court was filed by private
it does not materially affect PNBs title to the sugar stocks as holder of the negotiable quedans. respondents on November 8, 1993. We denied private respondents motion on January 10, 1994.
.
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, Private respondents filed a Motion Seeking Clarification of the Decision, dated September 1,
admissions and documents on file, the defenses as to the main issue do not tender material 1993. We denied this motion in this manner:
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
It bears stressing that the relief granted in this Courts decision of September 1, 1993 is precisely RESPONDENT RTCS ONLY JURISDICTION IS TO ISSUE THE WRIT TO EXECUTE THE SUPREME
that set out in the final and executory decision of the Court of Appeals in CA-G.R. SP No. 25938, COURT DECISION. THUS, PNB IS ENTITLED TO: (1) A WRIT OF CERTIORARI TO ANNUL THE RTC
dated December 13, 1991, which was affirmed in toto by this Court and which became unalterable RESOLUTION DATED DECEMBER 20, 1994 AND THE ORDER DATED FEBRUARY 7, 1995 AND
upon becoming final and executory. 4 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
Private respondents thereupon filed before the trial court an Omnibus Motion seeking among COMMITTING OTHER ACTS VIOLATIVE OF THE SUPREME COURT DECISION IN G.R. NO. 107243;
others the deferment of the proceedings until private respondents are heard on their claim for AND (3) A WRIT OF MANDAMUS TO COMPEL RESPONDENT RTC TO ISSUE THE WRIT TO
warehousemans lien. On the other hand, on August 22, 1994, the Philippine National Bank filed EXECUTE THE SUPREME COURT JUDGMENT IN FAVOR OF PNB
a Motion for the Issuance of a Writ of Execution and an Opposition to the Omnibus Motion filed
by private respondents. 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
The trial court granted private respondents Omnibus Motion on December 20, 1994 and set respondents contention that the PNB could not compel them to deliver the stocks of sugar in
reception of evidence on their claim for warehousemans lien. The resolution of the PNBs Motion their warehouse covered by the endorsed quedans or pay the value of the said stocks of sugar.
for Execution was ordered deferred until the determination of private respondents claim.
Petitioners submission is on a technicality, that is, that private respondents have lost their right
On February 21, 1995, private respondents claim for lien was heard and evidence was received to recover warehousemans lien on the sugar stocks covered by the five (5) Warehouse Receipts
in support thereof. The trial court thereafter gave both parties five (5) days to file respective for the reason that they failed to set up said claim in their Answer before the trial court and that
memoranda. 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
On February 28, 1995, the Philippine National Bank filed a Manifestation with Urgent Motion to
clarification of our decision, dated September 1, 1993, has foreclosed private respondents right
Nullify Court Proceedings. In adjudication thereof, the trial court issued the following order
to enforce their warehousemans lien for storage fees and preservation expenses under the
on March 1, 1995:
Warehouse Receipts Act.
WHEREFORE, this court hereby finds that there exists in favor of the defendants a valid
On the other hand, private respondents maintain that they could not have claimed the right to
warehousemans lien under Section 27 of Republic Act 2137 and accordingly, execution of the
a warehouseman s lien in their Answer to the complaint before the trial court as it would have
judgment is hereby ordered stayed and/ or precluded until the full amount of defendants lien on
been inconsistent with their stand that they claim ownership of the stocks covered by the
the sugar stocks covered by the five (5) quedans subject of this action shall have been satisfied
quedans since the checks issued for payment thereof were dishonored. If they were still the
conformably with the provisions of Section 31 of Republic Act 2137. 5
owners, it would have been absurd for them to ask payment for storage fees and preservation
Consequently, the Philippine National Bank filed the herein petition to seek the nullification of expenses. They further contend that our resolution, dated March 9, 1994, denying their motion
the above-assailed orders of respondent judge. 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
The PNB submits that: 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.
I
We find for private respondents on the foregoing issue and so the petition necessarily must fail.
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; We have carefully examined our resolution, dated March 9, 1994, which denied Noahs Arks
AND, THE NOVEMBER 9, 1992 SUPREME COURT DECISION IN G.R NO. 107243. RESPONDENT motion for clarification of our decision, dated September 1, 1993, wherein we affirmed in full and
RTCS MINISTERIAL AND MANDATORY DUTY IS TO ISSUE THE WRIT OF EXECUTION TO adopted the Court of Appeals earlier decision, dated December 13, 1991, in CA-G.R. SP. No.
IMPLEMENT THE DECRETAL PORTION OF SAID SUPREME COURT DECISION 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
II
Receipts. We have simply resolved and upheld in our decision, dated September 1, 1993, the
RESPONDENT RTC IS WITHOUT JURISDICTION TO HEAR PRIVATE RESPONDENTS OMNIBUS propriety of summary judgment which was then assailed by private respondents. In effect, we
MOTION. THE CLAIMS SET FORTH IN SAID MOTION: (1) WERE ALREADY REJECTED BY THE ruled therein that, considering the circumstances obtaining before the trial court, the issuance
SUPREME COURT IN ITS MARCH 9, 1994 RESOLUTION DENYING PRIVATE RESPONDENTS of the Warehouse Receipts not being disputed by the private respondents, a summary judgment
MOTION FOR CLARIFICATION OF DECISION IN .G.R. NO. 107243; AND (2) ARE BARRED FOREVER in favor of PNB was proper. We in effect further affirmed the finding that Noahs Ark is a
BY PRIVATE RESPONDENTS FAILURE TO INTERPOSE THEM IN THEIR ANSWER, AND FAILURE warehouseman which was obliged to deliver the sugar stocks covered by the Warehouse Receipts
TO APPEAL FROM THE JUNE 18, 1992 RTC DECISION IN CIVIL CASE NO. 90-52023 pledged by Cresencia K. Zoleta and Luis T. Ramos to the petitioner pursuant to the pertinent
provisions of Republic Act 2137.
III
In disposing of the private respondents motion for clarification, we could not contemplate the Considering that petitioner does not deny the existence, validity and genuineness of the
matter of warehousemans lien because the issue to be finally resolved then was the claim of Warehouse Receipts on which it anchors its claim for payment against private respondents, it
private respondents for retaining ownership of the stocks of sugar covered by the endorsed cannot disclaim liability for the payment of the storage fees stipulated therein. As contracts, the
quedans. Stated otherwise, there was no point in taking up the issue of warehousemans lien receipts must be respected by authority of Article 1159 of the Civil Code, to wit:
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. ART. 1159. Obligations arising from contracts have the force of law between the contracting parties
and should be complied with in good faith.
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: 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
Storage of the refined sugar quantities mentioned herein shall be free up to one (1) week from the subject Warehouse Receipts on the basis of which it anchors its claim for payment or delivery of
date of the quedans covering said sugar and thereafter, storage fees shall be charged in the sugar stocks. The unconditional presentment of the receipts by the petitioner for payment
accordance with the Refining Contract under which the refined sugar covered by this Quedan was against private respondents on the strength of the provisions of the Warehouse Receipts Law
produced. 6 (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
It is not disputed, therefore, that, under the subject Warehouse Receipts provision, storage fees recognition of the payment of warehousemans lien for storage fees and preservation expenses.
are chargeable. Petitioner may not now retrieve the sugar stocks without paying the lien due private respondents
as warehouseman.
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 In view of the foregoing, the rule may be simplified thus: While the PNB is entitled to the stocks
of St. Therese Merchandising, which found their way to petitioner after they were negotiated to of sugar as the endorsee of the quedans, delivery to it shall be effected only upon payment of the
them by Luis T. Ramos and Cresencia K. Zoleta for a loan of P39.1 Million. Accordingly, petitioner storage fees.
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 Imperative is the right of the warehouseman to demand payment of his lien at this juncture,
equity dictate the payment of the warehouseman s lien pursuant to Sections 27 and 31 of the because, in accordance with Section 29 of the Warehouse Receipts Law, the warehouseman loses
Warehouse Receipts Law (R.A. 2137), to wit: 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
SECTION 27. What claims are included in the warehousemans lien. - Subject to the provisions of his lien, because a warehousemans lien is possessory in nature.
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 We, therefore, uphold and sustain the validity of the assailed orders of public respondent,
for money advanced, interest, insurance, transportation, labor, weighing coopering and other dated December 20, 1994 and March 1, 1995.
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 In fine, we fail to see any taint of abuse of discretion on the part of the public respondent in
satisfying the warehousemans lien. 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
xxx xxx xxx 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
SECTION 31. Warehouseman need not deliver until lien is satisfied. - A warehouseman having a is recognized under Republic Act No. 2137. Neither did the Court of Appeals decision,
lien valid against the person demanding the goods may refuse to deliver the goods to him until the dated December 13, 1991, restrict such right.
lien is satisfied.
Our Resolutions reference to the decision by the Court of Appeals, dated December 13, 1991, in
After being declared not the owner, but the warehouseman, by the Court of Appeals on December CA-G.R. SP. No. 25938, was intended to guide the parties in the subsequent disposition of the
13, 1991 in CA-G.R. SP. No. 25938, the decision having been affirmed by us on December 1, case to its final end. We certainly did not foreclose private respondents inherent right as
1993, private respondents cannot legally be deprived of their right to enforce their claim for warehouseman to collect storage fees and preservation expenses as stipulated n the face of each
warehousemans lien, for reasonable storage fees and preservation expenses. Pursuant to Section of the Warehouse Receipts and as provided for in the Warehouse Receipts Law (R.A. 2137).
31 which we quote hereunder, the goods under storage may not be delivered until said lien is
satisfied. WHEREFORE, the petition should be, as it is, hereby dismissed for lack of merit. The questioned
orders issued by public respondent judge are affirmed.
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 Costs against the petitioner. SO ORDERED.
lien is satisfied.