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G.R. No. 143772 DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, -versusPRUDENTIAL BANK, Respondent Development Bank of the Philippines (DBP) assails in this petition for review on certiorari under Rule 45 of the Rules of Court the December 14, 1999 decision[1] and the June 8, 2000 resolution of the Court of Appeals in CA-G.R. CV No. 45783. The challenged decision dismissed DBP’s appeal and affirmed the February 12, 1991 decision of the Regional Trial Court of Makati, Branch 137 in Civil Case No. 88-931 in toto, while the impugned resolution denied DBP’s motion for reconsideration for being pro forma. In 1973, Lirag Textile Mills, Inc. (Litex) opened an irrevocable commercial letter of credit with respondent Prudential Bank for US$498,000. This was in connection with its importation of 5,000 spindles for spinning machinery with drawing frame, simplex fly frame, ring spinning frame and various accessories, spare parts and tool gauge. These were released to Litex under covering “trust receipts” it executed in favor of Prudential Bank. Litex installed and used the items in its textile mill located in Montalban, Rizal.

Prudential Bank’s claim. On September 28, 1994, Prudential Bank provided DBP the requested documents. Two months later, Prudential Bank followed up the status of its claim. In a letter dated December 3, 1984, DBP informed Prudential Bank that its claim had been referred to DBP’s legal department and instructed Prudential Bank to get in touch with its chief legal counsel. There being no concrete action on DBP’s part, Prudential Bank, in a letter dated July 30, 1985, made a final demand on DBP for the turn-over of the contested articles or the payment of their value. Without the knowledge of Prudential Bank, however, DBP sold the Litex textile mill, as well as the machineries and equipments therein, to Lyon Textile Mills, Inc. (Lyon) on June 8, 1987. Since its demands remained unheeded, Prudential Bank filed a complaint for a sum of money with damages against DBP with the Regional Trial Court of Makati, Branch 137, on May 24, 1988. The complaint was docketed as Civil Case No. 88-931. On February 12, 1991, the trial court decided[2] in favor of Prudential Bank. Applying the provisions of PD 115, otherwise known as the “Trust Receipts Law,” it ruled: When PRUDENTIAL BANK released possession of the subject properties, over which it holds absolute title to LITEX upon the latter’s execution of the trust receipts, the latter was bound to hold said properties in trust for the former, and (a) to sell or otherwise dispose of the same and to turn over to PRUDENTIAL BANK the amount still owing; or (b) to return the goods if unsold. Since LITEX was allowed to sell the properties being claimed by PRUDENTIAL BANK, all the more was it authorized to mortgage the same, provided of course LITEX turns over to PRUDENTIAL BANK all amounts owing. When DBP, well aware of the status of the properties, acquired the same in the public auction, it was bound by the terms of the trust receipts of which LITEX was the entrustee. Simply stated, DBP held no better right than LITEX, and is thus bound to turn over whatever amount was due PRUDENTIAL BANK. Being a trustee ex maleficio of PRUDENTIAL BANK, DBP is necessarily liable therefor. In fact, DBP may well be considered as an agent of LITEX when the former sold the properties being claimed by PRUDENTIAL BANK, with the corresponding responsibility to turn over the proceeds of the same to PRUDENTIAL BANK.[3] (Citations omitted) The dispositive portion of the decision read: WHEREFORE, judgment is hereby rendered ordering defendant DEVELOPMENT BANK OF THE PHILIPPINES to pay plaintiff PRUDENTIAL BANK: a) P3,261,834.00, as actual damages, with interest thereon computed from 10 August 1985 until the entire amount shall have been fully paid; b) c) P50,000.00 as exemplary damages; and 10% of the total amount due as and for attorney’s fees.

On October 10, 1980, DBP granted a foreign currency loan in the amount of US$4,807,551 to Litex. To secure the loan, Litex executed real estate and chattel mortgages on its plant site in Montalban, Rizal, including the buildings and other improvements, machineries and equipments there. Among the machineries and equipments mortgaged in favor of DBP were the articles covered by the “trust receipts.”

Sometime in June 1982, Prudential Bank learned about DBP’s plan for the overall rehabilitation of Litex. In a July 14, 1982 letter, Prudential Bank notified DBP of its claim over the various items covered by the “trust receipts” which had been installe d and used by Litex in the textile mill. Prudential Bank informed DBP that it was the absolute and juridical owner of the said items and they were thus not part of the mortgaged assets that could be legally ceded to DBP. For the failure of Litex to pay its obligation, DBP extra-judicially foreclosed on the real estate and chattel mortgages, including the articles claimed by Prudential Bank. During the foreclosure sale held on April 19, 1983, DBP acquired the foreclosed properties as the highest bidder. Subsequently, DBP caused to be published in the September 2, 1984 issue of the Times Journal an invitation to bid in the public sale to be held on September 10, 1984. It called on interested parties to submit bids for the sale of the textile mill formerly owned by Litex, the land on which it was built, as well as the machineries and equipments therein. Learning of the intended public auction, Prudential Bank wrote a letter dated September 6, 1984 to DBP reasserting its claim over the items covered by “trust receipts” in its name and advising DBP not to include them in the auction. It also demanded the turn-over of the articles or alternatively, the payment of their value. An exchange of correspondences ensued between Prudential Bank and DBP. In reply to Prudential Bank’s September 6, 1984 letter, DBP requested documents to enable it to evaluate

SO ORDERED. Aggrieved, DBP filed an appeal with the Court of Appeals. However, the appellate court dismissed the appeal and affirmed the decision of the trial court in toto. It applied the provisions of PD 115 and held that ownership over the contested articles belonged to Prudential Bank as entrustor, not to Litex. Consequently, even if Litex mortgaged the items to DBP and the latter foreclosed on such mortgage, DBP was duty-bound to turn

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over the proceeds to Prudential Bank, being the party that advanced the payment for them. On DBP’s argument that the disputed articles were not proper objects of a trust receipt agreement, the Court of Appeals ruled that the items were part of the trust agreement entered into by and between Prudential Bank and Litex. Since the agreement was not contrary to law, morals, public policy, customs and good order, it was binding on the parties. Moreover, the appellate court found that DBP was not a mortgagee in good faith. It also upheld the finding of the trial court that DBP was a trustee ex maleficio of Prudential Bank over the articles covered by the “trust receipts.” DBP filed a motion for reconsideration but the appellate court denied it for being pro forma. Hence, this petition. Trust receipt transactions are governed by the provisions of PD 115 which defines such a transaction as follows: Section 4. What constitutes a trust receipt transaction. – A trust receipt transaction, within the meaning of this Decree, is any transaction by and between a person referred to in this Decree as the entruster, and another person referred to in this Decree as entrustee, whereby the entruster, who owns or holds absolute title or security interests over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latter’s execution and delivery to the entruster of a signed document called a “trust receipt” wherein the entrustee binds himself to hold the designated goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods, documents or instruments themselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt, or for other purposes substantially equivalent to any of the following: 1. In the case of goods or documents, (a) to sell the goods or procure their sale; or (b) to manufacture or process the goods with the purpose of ultimate sale: Provided, That, in the case of goods delivered under trust receipt for the purpose of manufacturing or processing before its ultimate sale, the entruster shall retain its title over the goods whether in its original or processed form until the entrustee has complied fully with his obligation under the trust receipt; or (c) to load, unload, ship or tranship or otherwise deal with them in a manner preliminary or necessary to their sale; or 2. In the case of instruments, (a) to sell or procure their sale or exchange; or (b) to deliver them to a principal; or (c) to effect the consummation of some transactions involving delivery to a depository or register; or (d) to effect their presentation, collection or renewal. xxx xxx xxx

selling or otherwise disposing of them and (2) to turn over to the entruster either the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt, or the goods, documents or instruments themselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt. In the case of goods, they may also be released for other purposes substantially equivalent to (a) their sale or the procurement of their sale; or (b) their manufacture or processing with the purpose of ultimate sale, in which case the entruster retains his title over the said goods whether in their original or processed form until the entrustee has complied fully with his obligation under the trust receipt; or (c) the loading, unloading, shipment or transshipment or otherwise dealing with them in a manner preliminary or necessary to their sale.[4] Thus, in a trust receipt transaction, the release of the goods to the entrustee, on his execution of a trust receipt, is essentially for the purpose of their sale or is necessarily connected with their ultimate or subsequent sale. Here, Litex was not engaged in the business of selling spinning machinery, its accessories and spare parts but in manufacturing and producing textile and various kinds of fabric. The articles were not released to Litex to be sold. Nor was the transfer of possession intended to be a preliminary step for the said goods to be ultimately or subsequently sold. Instead, the contemporaneous and subsequent acts of both Litex and Prudential Bank showed that the imported articles were released to Litex to be installed in its textile mill and used in its business. DBP itself was aware of this. To support its assertion that the contested articles were excluded from goods that could be covered by a trust receipt, it contended: First. That the chattels in controversy were procured by DBP’s mortgagor Lirag Textile Mills (“LITEX”) for the exclusive use of its textile mills. They were not procured (a) to sell or otherwise procure their sale; (b) to manufacture or process the goods with the purpose of ultimate sale.[5] (emphasis supplied) Hence, the transactions between Litex and Prudential Bank were allegedly not trust receipt transactions within the meaning of PD 115. It follows that, contrary to the decisions of the trial court and the appellate court, the transactions were not governed by the Trust Receipts Law. We disagree. The various agreements between Prudential Bank and Litex commonly denominated as “trust receipts” were valid. As the Court of Appeals correctly ruled, their provisions did not contravene the law, morals, good customs, public order or public policy. The agreements uniformly provided: Received, upon the Trust hereinafter mentioned from the PRUDENTIAL BANK (hereinafter referred to as BANK) the following goods and merchandise, the property of said BANK specified in the bill of lading as follows: Amount of Bill Description of Security Marks & Nos. Vessel

In a trust receipt transaction, the goods are released by the entruster (who owns or holds absolute title or security interests over the said goods) to the entrustee on the latter’s execution and delivery to the entruster of a trust receipt. The trust receipt evidences the absolute title or security interest of the entruster over the goods. As a consequence of the release of the goods and the execution of the trust receipt, a two-fold obligation is imposed on the entrustee, namely: (1) to hold the designated goods, documents or instruments in trust for the purpose of

[8] There being no valid mortgage.[12] DBP merely stepped into the shoes of Litex as trustee of the imported articles with an obligation to pay their value or to return them on Prudential Bank’s demand. in Criminal Case No. This Court is. CV No.[15] DBP’s assertion that both the trial and appellate courts failed to address the issue of prescription is of no moment. In support of Asiatrust’s credit investigation. contrary to DBP’s claim. are binding and conclusive on this Court and generally will not be reviewed on appeal.3 and in consideration thereof. CR No. 2003 Decision[1] and July 25. xxx xxx x x x[6] (Emphasis supplied) attempt to prevent Prudential Bank from asserting its rights. when adopted and confirmed by the CA. Without acting on Prudential Bank’s plea. 1997. 2006 Resolution of the Court of Appeals (CA) in CA-G. none of the established exceptions finds application here. The trial court found that this chain of events showed DBP’s fraudulent On May 30. 1997. Application and Agreement for Irrevocable L/C. Petitioner was then required to sign several documents. DBP included the contested articles among the properties it sold to Lyon in June.[9] Thus. While it was allowed to sell the items. Inc. Litex could not transfer a right that it did not have over the disputed items. and in the absence thereof. NG Vs PEOPLE OF THE PHILIPPINES. In particular. Smart.R. 1988. 1983 where it was declared as the highest bidder. It smacked of bad faith. 1999 decision and June 8. Article 2085 (3) further mandates that the person constituting the pledge or mortgage must have the free disposal of his property. the petition is hereby DENIED. DECISION This is a Petition for Review on Certiorari under Rule 45 seeking to reverse and set aside the August 29. On the matter of actual damages adjudged by the trial court and affirmed by the Court of Appeals. Litex had neither absolute ownership. is not correct. The spring cannot rise higher than its source. paragraph 1(b) of the Revised Penal Code (RPC) in relation to Section 3 of Presidential Decree No.[10] No one can transfer a right to another greater than what he himself has. However. which affirmed the Decision[2] of the Regional Trial Court (RTC). Article 2085 (2) of the Civil Code requires that. Branch 95 in Quezon City. 45783 are AFFIRMED. Their inclusion in the mortgage was void[7]and had no legal effect. in the series of communications between them. 1982. 25525. (2) the list of projects wherein he was commissioned by the said telecommunication companies to build several steel towers. The December 14. Corollarily. Prudential Bank’s cause of action had prescribed as it should be reckoned from October 10. there could also be no valid foreclosure or valid auction sale. the last demand letter sent by Prudential Bank was dated July 30. then engaged in the business of building and fabricating telecommunication towers under the trade name “Capitol Blacksmith and Builders.[13] The rule is that factual findings of the trial court. DBP became a trustee ex maleficio. that he be legally authorized for the purpose. Thus.[4] and Promissory Notes. Q-99-85133 for Estafa under Article 315. it is essential that the pledgor or mortgagor should be the absolute owner of the thing pledged or mortgaged. the grant of attorney’s fees was proper. or otherwise. the day the mortgage was registered. DBP could not be considered either as a mortgagee or as a purchaser in good faith.[16]Hence. the appellate court agreed with the trial court that the requirements for the award thereof had been sufficiently established. free disposal nor the authority to freely dispose of the articles. DBP wants this Court to review the evidence presented during the trial and to reverse the factual findings of the trial court. Thereafter. Due to the award of exemplary damages. petitioner Anthony Ng. among which are the Credit Line Agreement.R. the four-year prescriptive period which DBP insists should be counted from the registration of the mortgage was interrupted when Prudential Bank wrote the extra-judicial demands for the turn over of the articles or their value.[5] . (PD) 115 or the Trust Receipts Law. By its failure to pay or return them despite Prudential Bank’s repeated demands and by selling them to Lyon without Prudential Bank’s knowledge and conformity. it ignored the latter’s demand. pledge. The Facts Sometime in the early part of 1997. Asiatrust approved petitioner’s loan application. With regard to the imposition of exemplary damages. Litex had no authority to dispose of them or any part thereof or their proceeds through conditional sale. not a trier of facts and it is not its function to analyze or weigh evidence anew.[3] The articles were owned by Prudential Bank and they were only held by Litex in trust.[14] While there are recognized exceptions to this rule. included the disputed articles in the mortgage foreclosure and caused their sale in a public auction held on April 19.[11] Nemo dat quod non habet. 1988 and this was received by DBP the following day. 1987. pledge or any other means. the award of exemplary damages was in order. the two (2) aforementioned Trust Receipt Agreements did not bear any maturity dates as they were left unfilled or in blank by Asiatrust. Prudential Bank’s entitlement to compensatory damages was likewise amply proven. if not deceit. Though the Promissory Notes matured on September 18. Litex could not have subjected them to a chattel mortgage. The written extra-judicial demand by the creditor interrupted the prescription of action. and (3) the collectible amounts he has with the said companies. in a contract of pledge or mortgage. Trust Receipt Agreements. DBP gave Prudential Bank the false impression that its claim was still being evaluated.000. however. (Asiatrust).000 with Asiatrust Development Bank. I/We hereby agree to hold said goods in trust for the BANK and as its property with liberty to sell the same for its account but without authority to make any other disposition whatsoever of the said goods or any part thereof (or the proceeds thereof) either by way of conditional sale. under Article 1146 (1) of the Civil Code.” applied for a credit line of PhP 3. DBP could not acquire a right greater than what its predecessor-in-interest had. 1980. and Infocom. Hence. petitioner voluntarily submitted the following documents: (1) the contracts he had with Islacom. It was also shown that DBP was aware of Prudential Bank’s claim as early as July. Thus. WHEREFORE. 2000 resolution of the Court of Appeals in CA-G. Prudential Bank’s right to enforce its action had not yet prescribed when it filed the complaint on May 24. Its claim that. --ANTHONY L.

Anthony L. PD 115 or the Trust Receipts Law. Girlie C. 1963 remained. however. namely: Isabel. as defined and penalized under Art. 577198. 2001. The parties thereafter held a series of conferences to work out the problem and to determine a way for petitioner to pay his debts. on September 12. Asiatrust did not violate Republic . However. (2) the Trust Receipt Agreement corresponding to Letter of Credit No. thus. Linga.650. (3) unfortunately for petitioner. he failed to pay his loan to Asiatrust. and Tongonan. As petitioner realized difficulty in collecting from his client Islacom. Linga thereafter reported to Asiatrust that he found that approximately 97% of the subject goods of the Trust Receipts were “sold-out and that only 3 % of the goods pertaining to PN No. Smart Communications. efforts towards a settlement failed to be reached. and Infocom. or to return the said chemicals if unsold. were not deposited as the Compromise Agreement did not push through.00. and is hereby sentenced to suffer the indeterminate penalty of from six (6) years. Remedial Account Officer Ma. par. 1964 were both contracts of adhesion. since the stipulations found in the documents were prepared by Asiatrust in fine print. The remaining checks. petitioner pleaded not guilty to the charges.4 After petitioner received the goods. 315.5 million with the obligation to hold the said chemicals in trust as property of the entruster with the right to sell the same for cash and to remit the proceeds thereof to the entruster. were held.1999 until the amount is fully paid. 1(b) of the RPC in relation to Sec. an Information for Estafa. bound by the provisions of the Letters of Credit and Trust Receipts. the amount of Two Million. 549002. CONTRARY TO LAW.” Asiatrust then endorsed petitioner’s account to its Account Management Division for the possible restructuring of his loan. Thefallo of the Decision reads as follows: WHEREFORE. contrary to his aforesaid obligation under the trust receipt agreement with intent to defraud did then and there misappropriated. 2000 Ruling of the Trial Court After trial on the merits. During the pendency of the abovementioned case. eight (8) months. Philippines. The said Information reads: That on or about the 30th day of May 1997. 1963 and the Trust Receipt Agreement corresponding to Letter of Credit No.[6] thus debunking Asiatrust’s claim of fraud and bad faith against him. Upon arraignment. Panabo. petitioner even attempted to settle his obligations as evidenced by the two United Coconut Planters Bank Checks[7] he issued in favor of Asiatrust.971. was filed with the RTC. unlawfully. Davao. finding petitioner guilty of the crime of Estafa. (4) prior to the Islacom problem.650. but said petitioner once in possession of the same. Girlie C. petitioner argued that: (1) the loan was granted as his working capital and that the Trust Receipt Agreements he signed with Asiatrust were merely preconditions for the grant and approval of his loan. but Asiatrust was aware of petitioner’s receivables which were more than sufficient to cover the obligation as shown in the various Project Listings with Islacom. It said that it was clear that Asiatrust had furnished petitioner with a Statement of Account enumerating therein the precise figures of the outstanding balance. to the damage and prejudice of the said Ma. tried to comply by issuing two or three checks. Daniel Yap. which he failed to pay along with the computation of other fees and charges. misapplied and converted the said amount to his own personal use and benefit and despite repeated demands made upon him. to twenty (20) years of reclusion temporal maximum. he had been faithfully paying his obligation to Asiatrust as shown in Official Receipt Nos. minimum. a full-blown trial ensued. the trial court held that petitioner could not simply argue that the contracts he had entered into with Asiatrust were void as they were contracts of adhesion. The petitioner is further ordered to return to the Asiatrust Development Bank Inc.971. judgment is hereby rendered finding the petitioner. Thereafter. Ng GUILTY beyond reasonable doubt for the crime of Estafa defined in and penalized by Article 315. said petitioner refused and failed and still refuses and fails to make good of his obligation. 565558. 549001. in Quezon City. therefore. rendered a Decision. Philippine Currency. 577199. the RTC. Girlie C.000 with Islacom was not yet paid since there was a squabble as to the real ownership of the latter’s company. On March 16. consisting of chemicals and metal plates from his suppliers.00) with legal rate of interest computed from the filing of the information on September 21. Leyte. One of the requirements of the Compromise Agreement was for petitioner In rendering its Decision. For his defense. Asiatrust then conducted a surprise ocular inspection of petitioner’s business through Villarva S. Bernardez by entering into a Trust Receipt Agreement with said complainant whereby said petitioner as entrustee received in trust from the said complainant various chemicals in the total sum of P4. did then and there willfully. his contract worth PhP 18. in good faith. on May 29.8 million out of the PhP 2. paragraph 1(b) of the Revised Penal Code in relation to Section 3 of Presidential Decree 115. and twenty one (21) days of prision mayor. IT IS SO ORDERED. Consequently. Asiatrust’s representative appraiser. the above-named petitioner. which were deposited and made good. otherwise known as the Trust Receipts Law. It reasoned that petitioner is presumed to have read and understood and is. Petitioner. Afterward. he utilized them to fabricate the communication towers ordered from him by his clients which were installed in three project sites. Bernardez in the amount of P2. and (6) he had already paid PhP 1. and 594986.971 million he owed as per Statement of Account dated January 26. 1999. as the minimum penalty. Nine Hundred Seventy One and Six Hundred Fifty Pesos (P2. conferences between petitioner and Asiatrust’s Remedial Account Officer. Bernardez filed a Complaint-Affidavit before the Office of the City Prosecutor of Quezon City. and feloniously defraud Ma. 3. a Compromise Agreement was drafted by Asiatrust. as the maximum penalty. 1999.000. (5) during the pendency of this case. to issue six (6) postdated checks.

It is a well-recognized principle that factual findings of the trial court are entitled to great weight and respect by this Court. the CA stated that the mere query as to the whereabouts of the goods and/or money is tantamount to a demand. 2002. and the constitutional right of petitioner to be informed of the nature and cause of his accusations is not violated. Since petitioner transacted with the same employees for the issuance of the subject Trust Receipts. In the case at bar. since the information clearly set forth the essential elements of the crime charged. However. to the prejudice of another. Branch 95 dated May 29. petitioner knew that the complainant Bernardez and the other co-witnesses are all employees of Asiatrust and that she is suing in behalf of the bank. such as: (1) when the conclusion is a finding grounded entirely on speculations. According to the CA.[8] As to the alleged error in the appreciation of facts by the trial court. In his Appellant’s Brief dated March 25. (3) in not considering the material facts which if taken into account would have resulted in his acquittal. 315. (2) the inferences made are manifestly mistaken. or other property x x x. 1(b) of the RPC in relation to PD 115. more so when they are affirmed by the appellate court. Ruling of the Appellate Court Petitioner then elevated the case to the CA by filing a Notice of Appeal on August 6. 3765 (Truth in Lending Act). 315. petitioner was charged with Estafa under Art. namely: xxx b. money. The prosecution failed to adduce evidence beyond a reasonable doubt to satisfy the 2nd essential element that there was misappropriation or conversion of subject money or property by petitioner. being the entrustee stated in the Trust Receipts issued by Asiatrust. the instant appeal is DENIED. goods. the foregoing considered. the rule is not without exceptions. and prejudice of the RTC against petitioner. 2001.[10] Especially in criminal cases where the accused stands to lose his liberty by virtue of his conviction. 2001 is AFFIRMED.—Any person who shall defraud another by any of the means mentioned hereinbelow x x x 1. The absence of a demand (4th essential element) on petitioner necessarily results to the dismissal of the criminal case. or any other personal property received by the offender in trust or on commission. The state was unable to prove the 3rd essential element of the crime that the alleged misappropriation or conversion is to the prejudice of the real offended property. he cannot feign ignorance that Asiatrust is not the offended party in the instant case. After the receipt of the CA Decision. the trial court declared that petitioner. he is obliged to return the goods in the event of nonsale or upon demand of the entruster. 315. The decision of the Regional Trial Court of Quezon City. The CA further stated that the change in the name of the complainant will not prejudice and alter the fact that petitioner was being charged with the crime of Estafa in relation to the Trust Receipts Law. surmises. par. the CA stated that it was undisputed that petitioner entered into a trust receipt agreement with Asiatrust and he failed to pay the bank his obligation when it became due. petitioner moved for its reconsideration. By misappropriating or converting. 2. 3. The CA held that during the course of the trial. the CA rendered a Decision affirming that of the RTC. goods. With regard to the failure of the RTC to consider the fact that petitioner’s outstanding receivables are sufficient to cover his indebtedness and that no written demand was made upon him hence his obligation has not yet become due and demandable.[11] .[9] Essentially. (2) in making a finding of facts not in accord with that actually proved in the trial and/or by the evidence provided. In his Memorandum. With unfaithfulness or abuse of confidence. is thus obliged to hold the goods in trust for the entruster and shall dispose of them strictly in accordance with the terms and conditions of the trust receipts. the fact that petitioner acted without malice or fraud in entering into the transactions has no bearing. The Court’s Ruling We find the petition to be meritorious. since the offense is punished asmalum prohibitum regardless of the existence of intent or malice. On August 29. petitioner filed this Petition for Review on Certiorari. hostility. the fallo of which reads: Concerning the alleged bias. petitioner argued that the court a quo erred: (1) in changing the name of the offended party without the benefit of an amendment of the Information which violates his right to be informed of the nature and cause of accusation against him. Swindling (estafa). and prejudiced against him. which was denied by the CA in its Resolution dated July 25.5 Act No. Finally. or for administration. otherwise. and (5) in considering the prosecution’s evidence which did not prove the guilt of petitioner beyond reasonable doubt. 2003. 1(b) of the RPC in relation to PD 115. he evidently violated the Trust Receipts Law. and conjectures. 2006. a. Thereafter. the CA said that petitioner failed to present any substantial proof to support the aforementioned allegations against the RTC. The RPC defines Estafa as: ART. the issues raised by petitioner can be summed up into one—whether or not petitioner is liable for Estafa under Art. the mere failure to deliver the proceeds of the sale or the goods if not sold constitutes the criminal offense. par. or by denying having received such money. hostile. WHEREFORE. (4) in being biased. or under any other obligation involving the duty to make delivery of or to return the same. even though such obligation be totally or partially guaranteed by a bond. failing thus. the Court must be satisfied that the factual findings and conclusions of the lower courts leading to his conviction must satisfy the standard of proof beyond reasonable doubt. he raised the following issues: Issues: 1. and (4) the judgment is based on misapprehension of facts or premised on the absence of evidence on record. SO ORDERED. (3) there is grave abuse of discretion.

13 of PD 115. reveals that the transaction between petitioner and Asiatrust is not a trust receipt transaction but one of simple loan. steel communication towers. As stressed in Samo v. the State. not to sell them. while the second refers to the merchandise received under the obligation to “return” it (devolvera) to the owner. does not constitute a trust receipt transaction and is outside the purview and coverage of this Decree.[13] A violation of any of these undertakings constitutes Estafa defined under Art. or (c) to load. or (b) to deliver them to a principal. in enacting the law. as collateral. sought to find a way to assist importers and merchants in their financing in order to encourage commerce in the Philippines. out of the materials received. American Jurisprudence demonstrates that trust receipt transactions always refer to a method of “financing importations or financing sales. unload. paragraph one (b) of Act Numbered Three thousand eight hundred and fifteen. which is defined as Section 4. What constitutes a trust receipts transaction.—A trust receipt transaction. Estafa can also be committed in what is called a “trust receipt transaction” under PD 115.) A thorough examination of the facts obtaining in the instant case. In these contracts. however. and Infocom.6 Based on the definition above. Smart. Following the precept of the law. People. who owns or holds absolute title or security interests over specified goods. documents or instruments. goods or other personal property is received by the offender in trust or on commission. as amended. who owns or holds absolute title or security interests over certain specified goods. otherwise known as the Revised Penal Code.[16] Regardless of whether the transaction is foreign or domestic. documents or instruments.”[15] The principle is of course not limited in its application to financing importations. Similarly. punishable under the provisions of Article Three hundred fifteen. and who may not be able to acquire credit except through utilization. or (c) to effect the consummation of some transactions involving delivery to a depository or register. documents or instruments themselves if they are unsold or not otherwise disposed of. or under any obligation involving the duty to make delivery of or to return it. In other words. (2) that there be misappropriation or conversion of such money or property by the offender. retaining title or other interest as security for the payment of the purchase price. he was commissioned to build. a trust receipt transaction is one where the entrustee has the obligation to deliver to the entruster the price of the sale. and another person referred to in this Decree as entrustee. has. documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods. in accordance with the terms and conditions specified in the trust receipt. Penalty Clause. in the case of goods delivered under trust receipt for the purpose of manufacturing or processing before its ultimate sale. releases the subject goods to the possession of the entrustee. releases the same to the possession of the entrustee upon the latter’s execution and delivery to the entruster of a signed document called a “trust receipt” wherein the entrustee binds himself to hold the designated goods. documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods. or (d) to effect their presentation. such transactions affect situations wherein the entruster. and (4) there is demand by the offended party to the offender. 315. documents or instruments. general property rights in such goods. to return the merchandise to the entruster. as against the buyer. two obligations in a trust receipt transaction: the first refers to money received under the obligation involving the duty to turn it over (entregarla) to the owner of the merchandise sold. whereby the entruster. ship or transship or otherwise deal with them in a manner preliminary or necessary to their sale. In the case of instruments: (a) to sell or procure their sale or exchange. viz: Section 13. or denial on his part of such receipt. documents or instruments if they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa. . or for administration. or (b) to manufacture or process the goods with the purpose of ultimate sale: Provided. since the principle is equally applicable to domestic transactions. PD 115 Does Not Apply It must be remembered that petitioner was transparent to Asiatrust from the very beginning that the subject goods were not being held for sale but were to be used for the fabrication of steel communication towers in accordance with his contracts with Islacom.—The failure of an entrustee to turn over the proceeds of the sale of the goods. 1(b) of the RPC. documents or instruments for profit who. as provided in Sec. or if the merchandise is not sold.” Obviously. within the meaning of this Decree. x x x (Emphasis supplied. at the outset of transaction. the entruster shall retain its title over the goods whether in its original or processed form until the entrustee has complied full with his obligation under the trust receipt. documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods. or who sells the same to the buyer on credit. collection or renewal. That.[12] Likewise. or 2. it is important to note that the transactions discussed in relation to trust receipts mainly involved sales. The true nature of a trust receipt transaction can be found in the “whereas” clause of PD 115 which states that a trust receipt is to be utilized “as a convenient business device to assist importers and merchants solve their financing problems.[14] a trust receipt is considered a security transaction intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise. There are. the essential elements of Estafa are: (1) that money. (3) that such misappropriation or conversion or denial is to the prejudice of another. documents or instruments by a person in the business of selling goods. The sale of good. is any transaction by and between a person referred to in this Decree as the entruster. par. The release of such goods to the entrustee is conditioned upon his execution and delivery to the entruster of a trust receipt wherein the former binds himself to hold the specific goods. of the merchandise imported or purchased. documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods. or for other purposes substantially equivalent to any of the following: 1. In the case of goods or documents: (a) to sell the goods or procure their sale. therefore.

” Since Asiatrust knew that petitioner was neither an importer nor retail dealer. CA. Thus. To misappropriate for one’s own use includes not only conversion to one’s personal advantage. under the Trust Receipt Agreement itself. the goods received by petitioner were not held in .) Clearly. Similarly. the evidence reveals that petitioner experienced difficulties in collecting payments from his clients for the communication towers. They were also not intended for sale and neither did petitioner have the duty to return them. Considering that the goods in this case were never intended for sale but for use in the fabrication of steel communication towers. the only way for the obligation to mature was for Asiatrust to demand from petitioner to pay the obligation. which was based only on his presumption and not any actual personal knowledge. Goods Were Not Received in Trust The first element of Estafa under Art. To emphasize. No Misappropriation of Goods or Proceeds The second element of Estafa requires that there be misappropriation or conversion of such money or property by the offender. Petitioner is correct. should not have been used by the trial court to prove that the goods have in fact been sold. or for administration. But as we already discussed. because his liability for the amount of the goods subject of the trust receipts arises and becomes due only upon receipt of the proceeds of the sale and not prior to the receipt of the full price of the goods. They were only intended for use in the fabrication of steel communication towers. in his testimony. What is more. petitioner is not liable for Estafa because Sec. At the very least. In applying the provisions of PD 115. But for reasons known only to the trial court. his obligation to turn over the same to Asiatrust never arose. it should have known that the said agreement could not possibly apply to petitioner. Moreover. or denial on his part of such receipt. of the merchandise imported or purchased. Thus. no date of maturity was stipulated.”[17] trust. Linga showed that he had no real personal knowledge or proof of the fact that the goods were indeed sold. which it never did. who stated that the goods have been sold by petitioner and that only 3% of the goods remained in the warehouse where it was previously stored. The real intent of the parties was simply to enter into a simple loan agreement. the trial court relied on the Memorandum of Asiatrust’s appraiser. par. it could only show that the goods were not in the warehouse. we held in State Investment House v. this Court finds that petitioner’s liability is only limited to the satisfaction of his obligation from the loan. an action which in ordinary banking transactions would be noted as highly irregular. The provision left blank by Asiatrust is as follows: x x x and in consideration thereof. absent proof that the proceeds have been actually and fully received by petitioner. 1(b). the Trust Receipts Law was created to “to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise. et al. He did not notify petitioner about the inspection nor did he talk to or inquire with petitioner regarding the whereabouts of the subject goods. that is already sold? A Yes. 1(b) of the RPC requires that the money.000.7 documents or instruments with the obligation to turn over to the entruster the proceeds to the extent of the amount owing to the entruster or the goods. Hence.” The trust receipt entered into between Asiatrust and petitioner states: In case of sale I/we agree to hand the proceeds as soon as received to the BANK to apply against the relative acceptance (as described above) and for the payment of any other indebtedness of mine/ours to ASIATRUST DEVELOPMENT BANK. Having established the inapplicability of PD 115. This is the very essence of Estafa under Art.[19] (Emphasis supplied. petitioner was only obligated to turn over the proceeds as soon as he received payment. goods or other personal property must be received by the offender in trust or on commission. and who may not be able to acquire credit except through utilization. or under any other obligation involving the duty to make delivery of. par. as collateral. the latter did not give weight to the testimony of Linga when he testified that he merely presumed that the goods were sold. this Court finds that petitioner is not liable for Estafa both under the RPC and PD 115. but also every attempt to dispose of the property of another without a right. the trial court erred in ruling that the agreement is a trust receipt transaction. in other words. Neither did he confirm with petitioner if the subject goods were in fact sold. assuming arguendo that the provisions of PD 115 apply.[18] Petitioner argues that there was no misappropriation or conversion on his part. I/we hereby agree to hold said goods in Trust for the said Bank and as its property with liberty to sell the same for its account within ________ days from the date of execution of the Trust Receipt x x x[20] In fact.500. which payments during the period from September 1997 to July 1998 total approximately PhP 1. You presumed that. or to return it. Linga. viz: COURT (to the witness) Q So. The words “convert” and “misappropriated” connote an act of using or disposing of another’s property as if it were one’s own. your Honor Undoubtedly. the Memorandum of Linga. or of devoting it to a purpose or use different from that agreed upon. when the goods were not there anymore. Despite this fact. that the entruster is entitled “only to the proceeds derived from the sale of goods released under a trust receipt to the entrustee. Therefore. 315. 315. petitioner endeavored to pay his indebtedness to Asiatrust. Asiatrust purposely left the space designated for the date blank. However. documents or instruments themselves if they are unsold. 13 of PD 115 provides that an entrustee is only liable for Estafa when he fails “to turn over the proceeds of the sale of the goods x x x covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt x x x in accordance with the terms of the trust receipt.

Petitioner informed Asiatrust that he was having extreme difficulties in collecting from Islacom the full contracted price of the towers. docketed as Civil Case No. Branch 19. 2003 affirming the RTC Decision dated May 29. Petitioner ANTHONY L. Percival G. on March 30. Before granting petitioner the credit line. Petitioner corporation put . 4998 with respondent bank. the CA Decision dated August 29. 2004 LANDL & COMPANY (PHIL. At issue in this petition for review on certiorari is whether or not. New York. as aforementioned. 1(b) of the RPC in relation to the pertinent provision of PD 115 or the Trust Receipts Law.. Being a bank. Such proof should convince and satisfy the reason and conscience of those who are to act upon it that the accused is in fact guilty. U. and is prone to misinterpretation x x x. respondent. par. Lucente before the Regional Trial Court of Cebu City. 315. which acknowledged the full payment of the obligation of the petitioner and the successful mediation between the parties. par. the prosecution failed to prove beyond reasonable doubt that petitioner was guilty of Estafa under Art. PERCIVAL G.733. in the amount of US$19. since petitioner did not withhold the fact that they were to be used to fabricate steel communication towers to Asiatrust. At this point. Mariano[22] that while the principle does not connote absolute certainty. his liability should only be civil in nature. Esquivas. in this instant case. This Court also takes judicial notice of the fact that petitioner has fully paid his obligation to Asiatrust.S.8 Again. attorney-in-fact of the Board of Asiatrust. Thus. we deem it unnecessary to discuss and rule upon the other issues raised in the appeal.77. In fine. failed to rebut the constitutional innocence of petitioner and thus the latter should be acquitted. the undisputed facts of this case are as follows: Respondent Metropolitan Bank and Trust Company (Metrobank) filed a complaint for sum of money against Landl and Company (Phil.) INC. Respondent alleged that petitioner corporation is engaged in the business of selling imported welding rods and alloys. It is a wellestablished principle that person is presumed innocent until proved guilty. Court of Appeals is very apt. the ruling of this Court in Colinares v. While petitioner admits to his civil liability to Asiatrust. The resort to this scheme leaves poor and hapless borrowers at the mercy of banks. Without stating the maturity dates. thus: The practice of banks of making borrowers sign trust receipts to facilitate collection of loans and place them under the threats of criminal prosecution should they be unable to pay it may be unjust and inequitable. On June 17. METROPOLITAN BANK & TRUST COMPANY. The prosecution. Asiatrust was informed at the time of petitioner’s application for the loan that the payment for the loan would be derived from the collectibles of his clients. 315. thus precluding Asiatrust from claiming any damage. As correctly appreciated by the Court of Appeals. an entruster which had taken actual and juridical possession of the goods covered by the trust receipt may subsequently avail of the right to demand from the entrustee the deficiency of the amount covered by the trust receipt. NG is hereby ACQUITTED of the charge of violation of Art. This is evidenced by Asiatrust’s Affidavit of Desistance[21] acknowledging full payment of the loan. LLABAN and MANUEL P. filed their Joint Motion for Leave to File and Admit Attached Affidavit of Desistance to qualify the Affidavit of Desistance executed by Felino H. From the foregoing considerations. the duty of petitioner to remit the proceeds of the goods has not yet arisen since he has yet to receive proceeds of the goods. Islacom. Given that the acceptance of payment by Asiatrust necessarily extinguished petitioner’s obligation. Asiatrust conducted an investigation. which was equivalent to P218.A. making the claim for damage and prejudice of Asiatrust baseless and unfounded. in a trust receipt transaction. the maturity dates. Jr. it.92 in Philippine currency at the time the transaction was consummated. then there is no longer any obligation on petitioner’s part to speak of. along with petitioner. No. 1(b) of the RPC in relation to the pertinent provision of PD 115. Inc. we held in People v. that is. no malice or abuse of confidence and misappropriation occurred in this instance due to Asiatrust’s knowledge of the facts. Reasonable Doubt Exists In the final analysis. Asiatrust’s intention became more evident when.606.R. Asiatrust acted inappropriately when it left such a sensitive bank instrument with a void circumstance on an elementary but vital feature of each and every loan transaction. Asiatrust was aware that petitioner was not engaged in selling the subject goods and that petitioner will use them for the fabrication and installation of communication towers. Asiatrust also knew that the capacity of petitioner to pay for his loan also hinges upon the latter’s receivables from Islacom. 1983. 159622 July 30. it was impossible for petitioner to determine when the loan will be due. thus. he nevertheless does not have criminal liability. 1983.[23] Such is the situation in this case. it also makes the Court wonder as to why Asiatrust decided to leave the provisions for the maturity dates in the Trust Receipt agreements in blank. as can be gleaned from the records of this case. Moreover. since those dates are elemental part of the loan. Furthermore. 2001 is SET ASIDE. 2009. Hence. there was no abuse of confidence to speak of nor was there any intention to convert the subject goods for another purpose. vs. which showed that petitioner fabricated and installed communication towers for well-known communication companies to be installed at designated project sites. (Landl) and its directors. CEB-4895. and Infocom where he had ongoing and future projects for fabrication and installation of steel communication towers and not from the sale of said goods. if not reprehensible. Llaban and Manuel P. Again. ----G. it means the degree of proof which produces moral certainty in an unprejudiced mind of the culpability of the accused. petitioners.) Inc. Such agreements are contracts of adhesion which borrowers have no option but to sign lest their loan be disapproved.. The letter of credit was opened to purchase various welding rods and electrodes from Perma Alloys. his guilt must be shown by proof beyond reasonable doubt. it opened Commercial Letter of Credit No.. But then. To overcome the presumption. petitioner could not be said to have misappropriated or converted the proceeds of the transaction since he has not yet received the proceeds from his client. Smart.. LUCENTE. WHEREFORE. Thus. as evidenced by a ProForma Invoice dated March 10.

as of April 17.000. after trial on the merits. the maturity date of the trust receipt. 1986 until [the] obligation is fully paid. On September 24. 1984. II. To secure the indebtedness of petitioner corporation. petitioner corporation took possession and custody thereof. Llaban and Manuel P. respondent bank required the execution of a Trust Receipt in an amount equivalent to the letter of credit. (2) to pay the interest at the rate of 19% per annum to be reckoned from April 18.1 Petitioners appealed to the Court of Appeals. and may. or the Trust Receipts Law. Lucente to execute a Continuing Suretyship Agreement to the extent of P400. documents or instruments. They contend. respondent bank instituted the instant case to collect the said deficiency.9 up a marginal deposit of P50. (4) to pay the sum equivalent to 10% per annum of the total amount due collectible by way of Attorney's Fees. foregoing premises considered. and the entruster in possession of the goods. After petitioners failed to do so. and either personally served on the entrustee or sent by post-paid ordinary mail to the entrustee's last known business address. (5) to pay Litigation Expenses of P3. raising the issues of: (1) whether or not respondent bank has the right to recover any deficiency after it has retained possession of and subsequently effected a public auction sale of the goods covered by the trust receipt.00. respondent bank required petitioners Percival G. The proceeds of any such sale. The entruster may cancel the trust and take possession of the goods. 1983.00 as and for litigation expenses and costs of the suit. Judgment is hereby rendered in favor of the plaintiff and against the defendant by (1) ordering the defendant to pay jointly and severally to the plaintiff the sum of P292. If the goods remained unsold. 1986. on or after default. 1997. THE HONORABLE COURT OF APPEALS GROSSLY ERRED IN AFFIRMING THE TRIAL COURT'S PATENTLY ERRONEOUS AWARD OF PRINCIPAL OBLIGATION. As an additional security. (c) to the satisfaction of the entrustee's indebtedness to the entruster. at a public sale. and as a condition for the approval of petitioner corporation's application for the opening of the commercial letter of credit. in the presence of representatives of the petitioners and respondent bank.The entruster shall be entitled to the proceeds from the sale of the goods. become a purchaser. . INTEREST.00 to respondent bank as the highest bidder.3 The instant petition is partly meritorious. 115. The entrustee shall receive any surplus but shall be liable to the entruster for any deficiency. keeping and storing the goods. (2) whether or not respondent bank is entitled to the amount of P3.000. which reads: Sec. whether public or private. if any. the Court of Appeals rendered a decision affirming in toto the decision of the trial court. in favor of respondent bank. documents or instruments may. On November 23. and the entruster may.000. or to the return of the goods. petitioner corporation had the further obligation to return them to respondent bank on or before November 23. AND PENALTY AGAINST THE PETITIONERS. respondent bank demanded that petitioners. SO ORDERED.00 from the proceeds of a separate clean loan. On July 24. The proceeds of the auction sale were insufficient to completely satisfy petitioners' outstanding obligation to respondent bank. 1985.414. shall be applied (a) to the payment of the expenses thereof. petitioner corporation defaulted in the payment of its obligation to respondent bank and failed to turn over the goods to the latter. The goods were sold for P30. Rights of the entruster. petitioners turned over the subject goods to the respondent bank. documents or instruments subject of the trust or of the proceeds realized therefrom at any time upon default or failure of the entrustee to comply with any of the terms and conditions of the trust receipt or any other agreement between the entruster and the entrustee. (3) to pay service charge at the rate of 2% per annum starting April 18. documents or instruments in case of non-sale. notwithstanding the application of the time deposit account of petitioner Lucente. excluding interest. There is no question that petitioners failed to pay their outstanding obligation to respondent bank.000. 1983. The resolution of the first assigned error hinges on the proper interpretation of Section 7 of Presidential Decree No. as entrustees.000.172. documents or instruments at public or private sale. ATTORNEY'S FEES. Upon arrival of the goods in the Philippines. the trial court rendered a decision. On July 31. 1986. documents or instruments released under a trust receipt to the entrustee to the extent of the amount owing to the entruster or as appears in the trust receipt. (b) to the payment of the expenses of re-taking. Petitioner Lucente also executed a Deed of Assignment in the amount of P35. Notice of sale shall be deemed sufficiently given if in writing. 7. On March 31. respondent bank opened an irrevocable letter of credit for the petitioner corporation. that when the entrustee fails to settle his principal . this petition for review on the following assignment of errors: I. and (6) to pay penalty charge of 12% per annum.00 and to pay the cost of the suit. THE HONORABLE COURT OF APPEALS GROSSLY ERRED IN AFFIRMING THE TRIAL COURT'S RULING THAT RESPONDENT HAD THE RIGHT TO CLAIM THE DEFICIENCY FROM PETITIONERS NOTWITHSTANDING THE FACT THAT THE GOODS COVERED BY THE TRUST RECEIPT WERE FULLY TURNED OVER TO RESPONDENT. 2003.00 in favor of respondent bank to cover the amount of petitioner corporation's obligation to the bank. respondent bank demanded that petitioners pay the remaining balance of their obligation. 1984. the goods were sold at public auction. not less than five days after serving or sending of such notice.23 representing the defendant's obligation. with the right to sell the goods and the obligation to turn over to respondent bank the proceeds of the sale. give notice to the entrustee of the intention to sell. turn over the goods subject of the trust receipt. however. On February 13. sell the goods. and to the enforcement of all other rights conferred on him in the trust receipt provided such are not contrary to the provisions of this Decree. the dispositive portion of which reads: WHEREFORE. and (3) whether or not respondent bank is entitled to the award of attorney's fees. Upon compliance with these requisites. on the condition that petitioner corporation would hold the goods in trust for respondent bank.2 Hence. Accordingly.

Gregorio G. further. give at least five (5) days' previous notice to the ENTRUSTEE of its intention to sell the goods/documents/instruments at public or private sale. it may become a purchaser." The trust receipt between respondent bank and petitioner corporation contains the following relevant clauses: The BANK/ENTRUSTER may. said possession by itself cannot be considered payment of the loan secured thereby. in any case. give notice to the entrustee of the intention to sell. More specifically. whether public or private. In Philippine National Bank v. Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. at a public sale. the purpose of which is to serve as security for a loan. is a security agreement. The right of repossession and subsequent sale at public auction which were availed of by respondent bank were rights available upon default.7 The second paragraph of Section 7 provides a statutory remedy available to an entruster in the event of default or failure of the entrustee to comply with any of the terms and conditions of the trust receipt or any other agreement between the entruster and the entrustee. The prevalent use of trust receipts. sell the goods. The proceeds of any such sale. This is definitely not the case. The entrustee shall receive any surplus but shall be liable to the entruster for any deficiency. the repossession of the machinery and equipment in question was merely to secure the payment of TCC's loan obligation and not for the purpose of transferring ownership thereof to PNB in satisfaction of said loan. Petitioners argue that these two remedies are so distinct that the availment of one necessarily bars the availment of the other. and Provided. shall be applied (a) to the payment of the expenses thereof.5 we ruled: A letter of credit-trust receipt arrangement is endowed with its own distinctive features and characteristics. (b) to the payment of the expenses of retaking. the danger of their misuse and/or misappropriation of the goods or proceeds realized from the sale of goods. The initial repossession by the bank of the goods subject of the trust receipt did not result in the full satisfaction of the petitioners' loan obligation.6 The Trust Receipts Law was enacted to safeguard commercial transactions and to offer an additional layer of security to the lending bank. documents or instruments held in trust for entruster banks. in Abad v. Thus. A trust receipt. and the BANK/ENTRUSTER having taken repossession of the goods/documents/instruments object hereof may. and which were conferred by statute and reinforced by the contract between the parties..8 The afore-cited stipulations in the trust receipt are a near-exact reproduction of the second paragraph of Section 7 of the Trust Receipts Law. Payment would legally result only after PNB had foreclosed on said securities. documents or instruments at public or private sale. documents or instruments subject of the trust or of the proceeds realized therefrom at any time". documents or instruments. documents or instruments may. Pineda and Tayabas Cement Company. x x x. x x x No act or omission on the part of the BANK/ENTRUSTER shall be deemed and considered a waiver of any of its rights hereunder or under any related letters of credit. become a purchaser. Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales. at any time. and only at its option. keeping and storing the goods/documents/instruments. drafts or other documents unless such waiver is expressly made in writing over the signature of the BANK/ENTRUSTER. A trust receipt is inextricably linked with the primary agreement between the parties. In other words. in which case. that the proceeds of any such sale. shall be applied: (a) to the payment of the expenses thereof. cancel this trust and take possession of the goods/documents/instruments subject hereof or of the proceeds realized therefrom wherever they may then be found. sold the same and applied the proceeds thereof to TCC's loan obligation. the actual return of all the unsold goods completely extinguished petitioners' liability.9 we had occasion to rule: PNB's possession of the subject machinery and equipment being precisely as a form of security for the advances given to TCC under the Letter of Credit. keeping and storing the goods. the entruster now acquires the ownership of the goods which the entrustee failed to sell. or (2) cancel the trust and take possession of the goods. . and a security feature which is in the covering trust receipt. on or after default. not less than five days after serving or sending of such notice. for the purpose of selling the same at a private sale or at public auction. whether public or private. Inc. (c) to the satisfaction of the entrustee's indebtedness to the entruster. we have emphasized that a trust receipt agreement is merely a collateral agreement. be liable to the BANK/ENTRUSTER for any deficiency. on or after default. Under that set-up. Hon. Time and again. Petitioners assert that. Trust receipts are indispensable contracts in international and domestic business transactions. upon default or failure of the ENTRUSTEE to comply with any of the terms and conditions of this Trust Receipt or of any other agreement between the BANK/ENTRUSTER and the ENTRUSTEE. the transaction involves a loan feature represented by the letter of credit. therefore. Thus. the entruster "may cancel the trust and take possession of the goods. Neither can said repossession amount to dacion en pago. Petitioners are apparently laboring under the mistaken impression that the full turn-over of the goods suffices to divest them of their obligation to repay the principal amount of their loan obligation. pursuant to which a bank acquires a "security interest" in the goods. (c) to the satisfaction of all of the ENTRUSTEE's indebtedness to the BANK/ENTRUSTER. (b) to the payment of the expenses of retaking. It secures an indebtedness and there can be no such thing as security interest that secures no obligation.4 Petitioners' argument is bereft of merit. and may. a bank extends a loan covered by the letter of credit. Provided.10 loan. The law further provides that "the entruster in possession of the goods. Thus. in which case he is entitled to the deficiency. Mere possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself. at which public sale. under this second remedy. that the ENTRUSTEE shall receive any surplus thereof but shall. the entruster does not acquire ownership of the goods. with the trust receipt as security for the loan. the entruster may choose between two separate and alternative remedies: (1) the return of the goods covered by the trust receipt. when respondent bank availed of the remedy of demanding the return of the goods. and the entruster may. As aforesaid. and the need for regulation of trust receipt transactions to safeguard the rights and enforce the obligations of the parties involved are the main thrusts of the Trust Receipts Law. Court of Appeals.

733. should be set off against his debt. the bank pays no interest on the marginal deposit. The goods the VINTOLAS had purchased through IBAA financing remain their own property and they hold it at their own risk.16 and (2) 12% penalty per annum. the marginal deposit requirement for letters of credit has been discontinued. Rather. the proceeds of the auction sale were insufficient to satisfy entirely petitioner corporation's indebtedness to the respondent bank. that the P30.000. just to give consistency with the purpose of the trust receipt of giving a stronger security for the loan obtained by the importer. documents or instruments to secure performance of some obligations of the entrustee or of some third persons to the entruster and includes title. 1993. for if it were so. It secures an indebtedness and there can be no such thing as security interest that secures no obligation. Civil Code).414.00 proceeds of the auction sale on July 31. the amount of petitioner Lucente's Deed of Assignment. as per respondent's Statement of Past Due Trust Receipt dated December 1. 1280. x x x" Since the IBAA is not the factual owner of the goods. it is a question of law. Consequently. No showing was made. however. that there has been an error in the computation of the total amount of petitioners' indebtedness to respondent bank. thus: The marginal deposit requirement is a Central Bank measure to cut off excess currency liquidity which would create inflationary pressure. Respondent bank was .)12 Respondent bank's repossession of the properties and subsequent sale of the goods were completely in accordance with its statutory and contractual rights upon default of petitioner corporation. was reduced to P192. In the case at bar. would thus be P211.92. "x x x for the bank has previously extended a loan which the L/C represents to the importer. As a matter of fact. they are absolutely relieved of their obligation to pay their loan because of their inability to dispose of the goods.. the VINTOLAS cannot justifiably claim that because they have surrendered the goods to IBAA and subsequently deposited them in the custody of the court.92 as of June 14. which it cannot do.23 as of April 17. The second paragraph of Section 7 expressly provides that the entrustee shall be liable to the entruster for any deficiency after the proceeds of the sale have been applied to the payment of the expenses of the sale.23.000. The trust receipt arrangement did not convert the IBAA into an investor. in the 1987 case of Vintola v. (Citations omitted. To consider the bank as the true owner from the inception of the transaction would be to disregard the loan feature thereof. except in those cases where the applicant for a letter of credit is not known to the bank or does not maintain a good credit standing therein. The initial amount of the trust receipt of P218. and is thus a matter properly brought for our determination. The fact that they were unable to sell the seashells in question does not affect IBAA's right to recover the advances it had made under the Letter of Credit.11 we struck down the position of the petitionerspouses that their obligation to the entruster bank had been extinguished when they relinquished possession of the goods in question. also earns interest on the money it loaned to the importer. Neither was the amount of P50. it was but an artificial expedient. deducted from the loan. collected based on the outstanding principal obligation plus unpaid Contrary to the allegations of the VINTOLAS. which amount was applied by respondent bank to petitioners' obligation. As defined in our laws: (h) Security Interest means a property interest in goods. in keeping with the terms of the trust receipt.265.e. It would be onerous to compute interest and other charges on the face value of the letter of credit which the bank issued. xxx xxx xxx thus well within its rights to institute the instant case to collect the deficiency. he may set up compensation as regards what the creditor owes the principal debtor. and the satisfaction of the entrustee's indebtedness to the entruster. Thus: A trust receipt… is a security agreement. represented by respondent bank to be P292. the application of legal principles for the computation of the amount owed to respondent bank.172. representing the marginal deposit made by petitioner corporation.00. the bank is made to appear as the owner. i.11 no dacion en pago was ever accomplished. We find. more of a legal fiction than fact. the latter remained a lender and creditor. underscoring supplied)10 Indeed.758. It is a collateral security given by the debtor. without first crediting or setting off the marginal deposit which the importer paid to the bank. the importer should be the real owner of the goods. and by that loan. as in this case). it could dispose of the goods in any manner it wants.14 This amount presumably includes the application of P35. IBAA did not become the real owner of the goods. 1984. It is only fair then that the importer's marginal deposit (if one was made. unlike an ordinary bank deposit which earns interest in the bank. Insular Bank of Asia and America. this is completely contrary to prevailing jurisprudence allowing the deduction of the marginal deposit. the payment of the expenses of re-taking. Although respondent bank contends that the error of computation is a question of fact which is beyond the power of this Court to review. (Citations omitted. keeping and storing the goods. and is supposed to be returned to him upon his compliance with his secured obligation. whenever such title is in substance taken or retained for security only. pursuant to which a bank acquires a "security interest" in the goods. documents or instruments. Although Abad is only a surety. Although respondent bank contends that the marginal deposit should not be deducted from the principal obligation. To this principal amount must be imposed the following charges: (1) 19% interest per annum. Compensation is proper and should take place by operation of law because the requisites in Article 1279 of the Civil Code are present and should extinguish both debts to the concurrent amount (Art. It was merely the holder of a security title for the advances it had made to the VINTOLAS. however. 1986. apart from being able to use said deposit for its own purposes. If under the trust receipt. the bank.13 the total amount of petitioners' indebtedness in this case is not a question of fact. 1985 was ever applied to the loan. Civil Code).00. whether or not expressed to be absolute. TOMCO (Art. for while the importer earns no interest on his marginal deposit. 1290. The first issue involves the amount of indebtedness prior to the imposition of interest and penalty charges.15 The net amount of the obligation.

The Continuing Suretyship Agreement expressly states the nature of the liability of Lucente and Llaban: The liability of the SURETY shall be solidary. It only accepts sugar as security for payment of its crop loans and later on pursuant to an understanding with the sugar planters. rather than 10% of the total amount due.952. The service charge at the rate of 2% per annum beginning April 18. although according to the defendant-appellee. First. In the year 1948. This is admitted by the appellant as shown by the allegations in its complaint filed before the trial court and also in the brief for appellant filed before us.758. Lucente and Llaban's contention that they are not solidarily liable with petitioner corporation is untenable. sometime in 1943. A perusal of the records reveals that the trial court and the Court of Appeals erred in imposing service charges upon the petitioners. 2003 is AFFIRMED with MODIFICATIONS. Finally. Sometime in February 1942.000.20 WHEREFORE. because one of the essential elements of the contract of sale. and expenses that may be incurred in collecting the credit. Mrs. We agree with the trial court that at the time of the loss of the sugar during the war. The only remedy given to the mortgagee or pledgee is to have said property sold at public auction and the proceeds of the sale applied to the payment of the obligation secured by the mortgage or pledge. CV No. direct and immediate and not contingent upon the bank's pursuit of whatever remedies the BANK have [sic] against the Borrower or the securities or liens the BANK may possess and the SURETY will at any time. old Civil Code. as administrator of the Instate Estate of Pedro Rodriguez. 1986. There is no basis for compounding the interest annually. DECISION . 1986. sometime in 1943. the loss of said sugar should be borne by the plaintiff-appellant. pay to the BANK with or withour demand upon the Borrower. the mortgagee or pledgee cannot become the owner of or convert and appropriate to himself the property mortgaged or pledged (Article 1859. The sugar was given only as a security for the payment of the crop loan. and expenses in collecting the principal amount. the instant petition is PARTIALLY GRANTED.000. again in keeping with the wording of the trust receipt. Under the theory and claim that sometime in February 1942. for nothing was said about it. under the Civil Code. It had never been sold to the bank so as to make the latter owner thereof. SO ORDERED. Accordingly. Martinez is now appealing from that decision. the administratrix of the estate asked the bank to release the sugar so that it could be sold at a good price which was about P25 per picul in order to avoid its possible loss due to the invasion. first.12 interest.75 representing the value of said sugar was lost. interest due on the principal obligation. to proceed against any one of the solidary debtors or some or all of them simultaneously. The amount owed to respondent bank is the amount of the principal. All three petitioners thus share the solidary obligation in favor of respondent bank. the sugar covered by the quedan or quedans was lost while in the warehouse of the Bogo-Medellin Milling Co. what was the price? We do not know. MONTEMAYOR. 1986.] JOSE R. consideration was not present. it sells said sugar for them. deceased. Costs against petitioners. the present action was brought against the defendant bank to recover said amount. Martinez. said sugar still belonged to the estate of Pedro Rodriguez.17 It appearing that petitioners have paid the interest and penalty charges until April 17. (2) interest at the rate of 19% per annum and penalty at the rate of 12% per annum reckoned from April 18. 1986. attorney's fees. late administratrix of the estate upon request of the defendant bank through its Cebu branch.R. he contends that the endorsement and delivery of the quedan or quedans to the bank transferred the ownership of the sugar to said bank so that as G.: As of February 1942. Defendant-Appellee. and consequently. the estate of Pedro Rodriguez was indebted to the defendant Philippine National Bank in the amount of P22. namely. as the trial court and Court of Appeals have done. Amparo R. the Court of First Instance of Manila dismissed the complaint on the ground that the transfer of the quedan or quedans representing the sugar in the warehouse of the Bogo-Medellin Milling Co. any of the instruments of indebtedness or other obligation hereby guaranteed by the SURETY.44 which represented the balance of the crop loan obtained by the estate upon its 1941-1942 sugar cane crop.23 representing petitioners' net obligation as of April 17. As cosignatories of the Continuing Suretyship Agreement. and (4) litigation expenses in the amount of P3. Said property continues to belong to the mortgagor or pledgor. which is given the right. to pay the principal sum in the amount of not more than P400. Article 2088. where the sugar was stored covering 2. MARTINEZ. If the sugar was sold. petitioners are ordered to pay respondent bank the following: (1) P211. only one quedan covering 1. when the invasion of the Province of Cebu by the Japanese Armed Forces was imminent. upon the insistence of and pressure brought to bear by the bank. September 21.128. 1953. L-4080. endorsed and delivered to the said bank two (2) quedans according to plaintiff-appellant issued by the Bogo-Medellin Milling Co. Administrator Jose R.R. 1986 is deleted. to the bank did not transfer ownership of the Sugar.18 Solidary liability is one of the primary characteristics of a surety contract. or the planters find buyers and direct them to the bank.11 piculs of sugar belonging to the estate. During the last Pacific war. premises considered.19 and the Continuing Suretyship Agreement expressly stipulates the solidary nature of Lucente and Llaban's liability. the trial court and the Court of Appeals erred in computing attorney's fees equivalent to 10% per annum. the bank by its charter is not authorized to engage in the business of buying and selling sugar. inter alia. attorney's fees. 58193 dated February 13. the indebtedness of the estate including interest was paid to the bank. The position and claim of plaintiff-appellant is rather inconsistent and confusing. interest.00. No. Moreover.04 piculs of sugar was endorsed and delivered. but that the bank refused the request and as a result the amount of P54. whether due or not due. This amount would be unconscionable. (3) attorney's fees equivalent to 10% of the total amount due and collectible. according to the appellant. According to law. J.00. Plaintiff-Appellant. they bound themselves.198. The decision of the Court of Appeals in CA-G. new Civil Code). No such stipulation is found in the trust receipt. the reckoning date for the computation of the foregoing charges must be April 18. The transaction could not have been a sale. Second. After trial.071. PHILIPPINE NATIONAL BANK. vs.

the authorities cited are not directly applicable. said sugar could have been sold at the rate of P25 a picul or a total of P54. 35. 42 Phil. the endorsee or transferee of a warehouse receipt or quedan should be regarded as the owner of the goods covered by it.' It therefore seems clear that.198. the bank became and remained the owner of the five quedans Nos. and that since the loan has been entirely liquidated in 1948. In view of the foregoing. Padilla. and that if the property covered by the quedans or warehouse receipts is lost without the fault or negligence of the mortgagee or pledgee or the transferee or endorsee of the warehouse receipt or quedan. It is further contended in this appeal that the defendantappellee failed to exercise due care for the preservation of the sugar. the bank should return to appellant the amount of the loan it improperly collected in 1948..952. Bengzon..952. To hold otherwise would defeat one of the principal purposes of the Act.. we hold that where a warehouse receipt or quedan is transferred or endorsed to a creditor only to secure the payment of a loan or debt.11 piculs of sugar covered by two quedans indorsed and delivered to the bank by the administratrix of the estate of the . 427). there is evidence to show that the request for release was not made to the bank itself but directly to the official of the warehouse. estate of Pedro Rodriguez was still the owner thereof. which the bank surrendered to the firm. perhaps due to the unsettled and chaotic conditions then obtaining by reason of the enemy occupation.952. 413. a position that runs counter to the first theory of transfer of ownership to the bank. the bank through its officials offered the sugar for sale but that there were no buyers. particularly section 41 thereof. We take it that by endorsing the quedan. this question was not raised in the court below. Reyes. But plaintiffappellant in the next breath contends that had the bank released the sugar in February 1942. the holder of a warehouse receipt or quedan is considered the owner of the goods covered by it. which were formerly secured by the three quedans Nos. as to the legal title to the property covered by a warehouse receipt. mortgagor or pledgor. In the first place.44 and the interest then accrued. 33. one or two of them who will dissent from the majority view sought to cure and remedy this apparent inconsistency in the claim of appellant and sustain the theory that the endorsement of the quedan made the bank the owner of the sugar resulting in the payment of the loan. and that the loss was due to its negligence as a result of which the appellee incurred the loss. when the Cebu branch of the defendant was closed.e.13 owner. 36. this for the simple reason that the transaction involved is not a sale but only a mortgage or pledge. Bautista Angelo and Labrador. 70). In connection with the claim that had the bank released the sugar sometime in February. this claim is inconsistent with the very theory of plaintiff-appellant that the sugar far from being sold to the bank was merely given as security for the payment of the crop loan. 1942. In those cases this court held that for purposes of facilitating commercial transaction. . Tuason.75. it is clear that at the time the sugar in question was lost sometime during the war. a pledgee is on the same footing as a vendee except that the former is under the obligation of surrendering his title upon the payment of the debt secured. That would mean that plaintiff's account with the bank has been entirely liquidated and their contractual relations ended. we are quoting a portion of the decisions of this court in two of these cases cited which are typical. the balance to have been retained by plaintiff. then the whole expected sales price of P54. the decision appealed from is hereby affirmed. 57. JJ. 47 Phil. C. 1919. In other words. 41. even if he were the owner of the goods. In conclusion.75. the transferee or endorsee does not automatically become the owner of the goods covered by the warehouse receipt or quedan but he merely retains the right to keep and with the consent of the owner to sell them so as to satisfy the obligation from the proceeds of the sale. In the second place. as such owner. it is a fact that the sugar was lost in the possession of the warehouse selected by the appellant to which it had originally delivered and stored it. so that now. In the second place. In the first place. we hold that in January. including the three notes of P18.J. that they were in form negotiable. reference was made to the Warehouse Receipts Law. he may not take possession and dispose of the goods without the consent of the endorsee or transferee of the quedan or warehouse receipt. i. representing the value of 2. concur. and for causes beyond the bank's control. 30. This second theory presupposes that despite the endorsement of the quedan. 1942. to furnish a basis for commercial credit. when requested by the plaintiff. and as regards third persons. From all this. In support of the theory of transfer of ownership of the sugar to the bank by virtue of the endorsement of the quedan. from which the amount of the loan and interest could have been deducted. It is obvious that where the transaction involved in the transfer of a warehouse receipt or quedan is not a sale but pledge or security. defendant was supposed to have sold the sugar to the bank for the amount of the outstanding loan of P22. namely. Jugo. .75. suffering the loss of the amount of the loan and interest. Plaintiff's complaint failed to make any allegation regarding negligence in the preservation of this sugar. that in some cases the endorsee of a quedan may sell the goods and apply the proceeds of the sale to the payment of the debt.. In the course of the discussion of this case among the members of the Tribunal. plaintiff still retained ownership of the sugar. and 42. and that the bank was not aware of any such request." (Bank of the Philippine Islands vs. Section 53 provides that within the meaning of the Act 'to "purchase" includes to take as mortgagee or pledgee' and "purchaser" includes mortgagee and pledgee. Separate Opinions PARAS. as regards the endorser or transferor. ". with costs. the transferee or endorsee does not become the owner of the goods but that he may only have the property sold and then satisfy the obligation from the proceeds of the sale. vs. "As to the first cause of action. and several cases decided by this court are cited." (Philippine Trust Co. the amount of the present claim. To make clear the view of this court in said cases.128. the Bogo-Medellin Milling Co.75 should now be paid by the bank to appellant. Herridge. it was legally entitled to the possession and control of the property therein described at the time the insolvency petition was filed and had a right to sell it and apply the proceeds of the sale to its promissory notes.952. National Bank. and that. and 39. then said goods are to be regarded as lost on account of the real owner. the bank. but that before April 9.000 each. plaintiff could have sold it for P54. 38. the war. dissenting: The plaintiff seeks to recover from the defendant Philippine National Bank the sum of P54. the bank should suffer the loss of the sugar on the principle that "a thing perishes for its owner".

) The relation of a pledgor of a warehouse receipt. indeed stated that the only question that arises is whether the indorsement of the warehouse receipts transferred the ownership of the sugar to the defendant bank. covering sugar deposited by Rosa Sy. in his capacity as Presiding Judge of the Regional Trial Court of Manila (Branch 45). actually the third dispute between the same private parties to have reached this Court. In dismissing the plaintiff's action. that if it did. which should return to the plaintiff P22. (c) March 21. (b) March 7. JR.. NOAH’S ARK SUGAR REFINERY.128. but the former may reacquire said ownership upon payment of the repurchase price.75 (actual value of the sugar) and the amount of said payment. The vendor a retro actually transfers the ownership of the property sold to the vendee. GO and WILSON T. covering sugar deposited by RNS Merchandising. But if the loss should occur after the repurchase price has been paid but before the property sold a retro is actually reconveyed. as if the latter had contracted directly with the person to whom the negotiable receipt has been duly negotiated. without however being liable for the difference between P54. Philippine Trust Co. the loss should be for the account of the estate of the deceased Pedro Rodriguez. 498.44.952. the Warehouse Receipts Law. otherwise known as the Warehouse Receipts Law. The applicable legal provision is section 41 of Act No. the loss of the sugar should be for the account of the defendant bank. 42 Phil. Bank of the Philippine Islands vs. duly indorsed and delivered to the pledgee. 46 Phil. 2137. Receipt No. Manila. as the indorsement and delivery were effected merely to secure the payment of an indebtedness.: In this special civil action for certiorari. 18086. while the second order[4] denied. 18087. MARCELINO L. therefore. and to prevent the debtor from disposing of it without the knowledge and consent of the defendant bank. Philippine National Bank. vs. is substantially analogous to the relation of a vendor and vendee. 18080.. petitioner’s motion for reconsideration of the first order and urgent motion to lift garnishment..." This provision plainly states that a person to whom a negotiable receipt (such as the sugar quedans in question) has been duly negotiated acquires title to the goods covered by the receipt. A person to whom a negotiable receipt has been duly negotiated acquires thereby: "(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for value. covering sugar deposited by St. 41. Therese Merchandising. as follows: In accordance with Act No.128. with the logical result that the loss of the article should be borne by the defendant bank. 1989. but if it did not. the defendant bank refused to credit the plaintiff with the value of the sugar lost. SAYO. the vendee naturally has to bear the loss. Hongkong & Shanghai Bank. covering sugar deposited by RNS Merchandising (Rosa Ng Sy). the vendee is bound to return to the vendor only the repurchase price paid. with finality. Receipt No.. and . 1989. vs. respondents. 2137. DECISION DAVIDE.14 deceased Pedro Rodriguez to secure the indebtedness of the latter in the amount of P22. (Sy Cong Bieng vs. 1989.44. the defendant bank to whom the two quedans in question have been indorsed and delivered.R. The first order[3] granted private respondents’ motion for execution to satisfy their warehouseman’s lien against petitioner. Receipt No. that said sugar was lost during the war. The factual antecedents until the commencement of G. the bank should suffer the loss.. and also such title to the goods as the depositor or person to whose order the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchaser in good faith for value. Roman vs. 1942. 18062. The fact that the quedans were indorsed and delivered as a security for the payment of an indebtedness did not prevent the bank from acquiring ownership. Section 41 of Act No. LOOYUKO. petitioner. Inc. HON. 119231 were summarized in our decision therein. Branch 45. and (e) April 1. In my opinion. 2137 had already been construed by this court in the sense that ownership passes to the indorsee. The appealed judgment should therefore be reversed and the defendant bank sentenced to pay to the plaintiff the sum of P22. the sugar was in deposit at the Bogo-Medellin Sugar Co.chanroblesvirtualawlibrary -----PHILIPPINE NATIONAL BANK. 56 Phil. or as to the indorsement and delivery of said quedans to the defendant bank The Court of First Instance of Manila which decided against the plaintiff and held that the defendant bank is not liable for the loss of the sugar in question. the trial court held that the indorsement of the quedans to the defendant bank did not carry with it the transfer of ownership of the sugar. GO. 90-53023 by the Regional Trial Court. ALBERTO T. and. The receipts are substantially in the form. (d) March 31. If the property sold a retro is lost before being repurchased. 57. that the indebtedness of P22. Receipt No. Herridge. 18081. and not the value of the property. as well as the possession of the goods through the warehouseman. It is alleged that when the two quedans were indorsed and delivered to the defendant bank in or about January. the amount of the indebtedness of the estate of the deceased Pedro Rodriguez which had already been paid in 1948. "(b) The direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the receipt as fully as if the warehouseman had contracted directly with him. covering sugar deposited by St. There is no question as to the existence of the sugar covered by the two quedans. with right of repurchase. which reads as follows: "SEC.128. Asia Banking Corporation. to facilitate the sale of the sugar. Noah’s Ark Sugar Refinery issued on several dates. 47 Phil. 1989.. notwithstanding demands. and private respondents’ motion for partial reconsideration. JR.. the following Warehouse Receipts (Quedans): (a) March 1. Rights of person to whom a receipt has been negotiated. 405.128. The plaintiff has appealed. with the vendor having nothing to repurchase. Receipt No.44. 438. thereby acquired the ownership of the sugar covered by said quedans. since the only effect of the transfer was that the debtor could reacquire said ownership upon payment of his obligation. J. Therese Merchandising.[1] petitioner asks us to annul the orders[2] of 15 April 1997 and 14 July 1997 issued in Civil Case No.44 was liquidated in 1948 by the estate of the deceased Pedro Rodriguez and that. JIMMY T. Consequently. No. 1989. although the quedans are indorsed and delivered merely as a security.

set up in bad faith or so unsubstantial as not to constitute genuine issues for trial. 1990. and Receipts Nos. 1991. et al. and Executive Vice President of Noah’s Ark. defendants agreed to sell to Rosa Ng Sy of RNS Merchandising and Teresita Ng of St. Reconsideration therefor was likewise denied. Luis T. Rule 34. 1990 of respondent Court. is reversed and set aside and a new one rendered conformably with the final and executory decision of the Court of Appeals in CA-G. Go. on the other. Jimmy T. Warehouse Receipts Nos.5 million – obtained by them from the Philippine National Bank. 1991.000. 1993. ordering the . contrived. On January 31. Ramos and Zoleta then used the quedans as security for two loan agreements – one for P15. Go. the PNB filed an appeal from the RTC decision with the Supreme Court.’ A scrutiny of defendant’s affirmative defenses does not show material questions of fact as to the alleged nonpayment of purchase price by the vendees/first endorsers. by way of a Petition for Review onCertiorari under Rule 45 of the Rules of Court. On May 2. 10. 156 SCRA 753. Looyuko. Go. G. SP No. (See Vergara vs. On June 9. Suelto. the Court of Appeals nullified and set aside the orders of May 2 and July 4. and Jimmy T. the Philippine National Bank wrote to Noah’s Ark Sugar Refinery demanding delivery of the sugar stocks covered by the quedans endorsed to it by Zoleta and Ramos. defendants refused to deliver to vendees therein the quantity of sugar covered by the subject quedans. In issuing the questioned Orders. 4. Ramos. 1990. et al. 18080 and 18081 were negotiated and endorsed to Luis T. managing partner. 1991.” On December 13. (See Sec. 1992. Alberto T. 162 SCRA 75). 1990.” The Answer incorporated a Third-Party Complaint by Alberto T. Subsequently. docketed as CA-G. would constitute a waste of time and an injustice to the PNB whose rights to relief to which it is plainly entitled would be further delayed to its prejudice. SP No. depositions. Zoleta failed to pay their loans upon maturity on January 9. praying that the latter be ordered to deliver or return to them the quedans (previously endorsed to PNB and the subject of the suit) and pay damages and litigation expenses. 1990 of the Regional Trial Court and ordered the trial court to render summary judgment in favor of the PNB. denied the Application for Preliminary Attachment. Go and Wilson T. the trial court rendered judgment dismissing plaintiff’s complaint against private respondents for lack of cause of action and likewise dismissed private respondent’s counterclaim against PNB and of the Third-Party Complaint and the Third-Party Defendant’s Counterclaim. one of avoidance. This Court rendered judgment on September 1. fictitious. dated June 18.R. 107243. Mercado. the Regional Trial Court issued an order denying the Motion for Summary Judgment. prescribed for negotiable warehouse receipts by Section 2 of the law. the Philippine National Bank filed a Motion for Summary Judgment in favor of the plaintiff as against the defendants for the reliefs prayed for in the complaint. the defenses as to the main issue do not tender material questions of fact (see Garcia vs. Ramos and Cresencia K. Respondent Judge Benito C. the last three being identified as the sole proprietor. Therese Merchandising the total volume of sugar indicated in the quedans stored at Noah’s Ark Sugar Refinery for a total consideration ofP63. No. respectively. Consequently. and which nonpayment is not disputed by PNB as it does not materially affect PNB’s title to the sugar stocks as holder of the negotiable quedans. 1992.. 1989. is essentially to the effect that the transaction between them.6 million and the other for P23. 9053023. On June 18. Pertinent portions of the decision of the Court of Appeals read: “In issuing the questioned Orders. 18086. on the one hand. 1992. for which reason the Philippine National Bank filed with the Regional Trial Court of Manila a verified complaint for “Specific Performance with Damages and Application for Writ of Attachment” against Noah’s Ark Sugar Refinery. The aforementioned quedans were endorsed by them to the Philippine National Bank. and that a summary judgment be rendered forthwith in favor of the PNB against Noah’s Ark Sugar Refinery. Looyuko. 18087 and 18062 were negotiated and endorsed to Cresencia K. Court of Appeals.R.15 contains the terms. Jimmy T. Zoleta.. the subsequent endorsers and plaintiff itself did not acquire a better right of ownership than the original vendees/first endorsers. et al. Noah’s Ark Sugar Refinery refused to comply with the demand alleging ownership thereof. admissions and documents on file. 1992. they are not answerable in damages to him. the trial court denied PNB’s Motion for Reconsideration. The Answer of Rosa Ng Sy and Teresita Ng. doing business under the trade name and style Noah’s Ark Sugar Refinery against Rosa Ng Sy and Teresita Ng. 1991. To require a trial notwithstanding pertinent allegations of the pleadings and other facts appearing on the record. 25938 on December 13. On September 4. Court of Appeals. the respondent Court ruled that ‘questions of law should be resolved after and not before. the Philippine National Bank filed a Petition for Certiorari with the Court of Appeals.’ *** Upon proper notification to said vendees and plaintiff in due course. dated September 6. the dispositive portion of which reads: “WHEREFORE. and thus. 167 SCRA 815) or the issues thus tendered are in fact sham. 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. Rules of Court). concerning the quedans and the sugar stocks covered by them was merely a simulated one being part of the latter’s complex banking schemes and financial maneuvers. *** The corresponding payments in the form of checks issued by the vendees in favor of defendants were subsequently dishonored by the drawee banks by reason of ‘payment stopped’ and ‘drawn against insufficient funds. vs. [sic] The questioned Orders themselves do not specify what material facts are in issue. Go and Wilson T. *** In an agreement dated April 1. [to] whose sala the case was raffled. Se.000. We find the respondent Court to have acted in grave abuse of discretion which justify holding null and void and setting aside the Orders dated May 2 and July 4. *** Considering that the vendees and first endorsers of subject quedans did not acquire ownership thereof. Jr. Thereupon.. the trial judge’s decision in Civil Case No. as prayed for in petitioner’s Motion for Summary Judgment.R. averring as they did that: “9.00. the questions of fact are properly litigated. on March 16. 25938. Noah’s Ark and its co-defendants filed an Answer with Counterclaim and Third-Party Complaint in which they claimed that they [were] the owners of the subject quedans and the sugar represented therein.

A Supplemental/Second Motion for Reconsideration with leave of court was filed by private respondents on November 8. SO ORDERED. Go and Wilson T. THE NOVEMBER 9. 1994. AND (2) ARE BARRED FOREVER BY PRIVATE RESPONDENTS’ FAILURE TO INTERPOSE THEM IN THEIR ANSWER.R. II RESPONDENT RTC IS WITHOUT JURISDICTION TO HEAR PRIVATE RESPONDENTS’ OMNIBUS MOTION.00) as well as the costs. we held against herein petitioner as to these issues and concluded: In view of the foregoing. 1994 and March 1. 107243. AND FAILURE TO APPEAL FROM THE JUNE 18. therefore. ‘the sugar stocks covered by the Warehouse Receipts/Quedans which are now in the latter’s possession as holder for value and in due course. 1992 SUPREME COURT DECISION IN G. 1995 AND ALL PROCEEDINGS TAKEN BY THE RTC THEREAFTER. 25938.R. this court hereby finds that there exists in favor of the defendants a valid warehouseman’s lien under Section 27 of Republic Act 2137 and accordingly.[5] Unsatisfied with the trial court’s order of 1 March 1995. 107243.R. 1995.R. On February 28. 1995. 1994 RESOLUTION DENYING PRIVATE RESPONDENTS’ ‘MOTION FOR CLARIFICATION OF DECISION’ IN G. the Philippine National Bank filed a Manifestation with Urgent Motion to Nullify Court Proceedings. litigation expenses and judicial costs hereby fixed at the amount of One Hundred Fifty Thousand Pesos (P150. did not preclude private respondents’ unqualified right to establish its claim to recover storage fees which is recognized under . private respondents moved for reconsideration of this decision. No. dated December 20. Alberto T. 1995: “WHEREFORE. private respondents’ claim for lien was heard and evidence was received in support thereof. THE CLAIMS SET FORTH IN SAID MOTION: (1) WERE ALREADY REJECTED BY THE SUPREME COURT IN ITS MARCH 9. 1994. we fail to see any taint of abuse of discretion on the part of the public respondent in issuing the questioned orders which recognized the legitimate right of Noah’s Ark.” In our decision of 18 April 1996 in G. because. (2) A WRIT OF PROHIBITION TO PREVENT RESPONDENT RTC FROM FURTHER PROCEEDING WITH CIVIL CASE NO. On the other hand. NO. III RESPONDENT RTC’S ONLY JURISDICTION IS TO ISSUE THE WRIT TO EXECUTE THE SUPREME COURT DECISION. on August 22. We denied private respondent’s motion on January 10. herein petitioner filed with us G. 90-53023 AND COMMITTING OTHER ACTS VIOLATIVE OF THE SUPREME COURT DECISION IN G. AND (3) A WRIT OF MANDAMUS TO COMPEL RESPONDENT RTC TO ISSUE THE WRIT TO EXECUTE THE SUPREME COURT JUDGMENT IN FAVOR OF PNB. We. 119231. No.’ with legal interest thereon from the filing of the complaint until full payment. the rule may be simplified thus: While the PNB is entitled to the stocks of sugar as the endorsee of the quedans. to recover storage fees before it would release to the PNB sugar stocks covered by the five (5) Warehouse Receipts. 25938.R. the trial court issued the following order on March 1. 1995. 90-52023. the Philippine National Bank filed a Motion for the Issuance of a Writ of Execution and an Opposition to the Omnibus Motion filed by private respondents. In adjudication thereof. 1994 and set reception of evidence on their claim for warehouseman’s lien. the warehouseman loses his lien upon goods by surrendering possession thereof. jointly and severally: (a) to deliver to the petitioner Philippine National Bank. which was affirmed in toto by this Court and which became unalterable upon becoming final and executory. to pay (said) plaintiff actual damages in the amount of P39. in accordance with Section 29 of the Warehouse Receipts Law. Private respondents filed a Motion Seeking Clarification of the Decision. SP No. after being declared as warehouseman. Looyuko. In fine. NO. 1991 COURT OF APPEALS [sic] DECISION IN CA-G. 119231. 1993. 1992 DECISION IN CIVIL CASE NO.R. RESPONDENT RTC’S MINISTERIAL AND MANDATORY DUTY IS TO ISSUE THE WRIT OF EXECUTION TO IMPLEMENT THE DECRETAL PORTION OF SAID SUPREME COURT DECISION. The resolution of the PNB’s Motion for Execution was ordered deferred until the determination of private respondents’ claim. dated December 13. 1993 is precisely that set out in the final and executory decision of the Court of Appeals in CA-G. The trial court thereafter gave both parties five (5) days to file respective memoranda. Go. Our resolution. and (b) to pay plaintiff Philippine National Bank attorney’s fees.16 private respondents Noah’s Ark Sugar Refinery. Imperative is the right of the warehouseman to demand payment of his lien at this juncture. Jimmy T. THUS. contending: “I PNB’S RIGHT TO A WRIT OF EXECUTION IS SUPPORTED BY TWO FINAL AND EXECUTORY DECISIONS: THE DECEMBER 13. SP NO. or alternatively. delivery to it shall be effected only upon payment of the storage fees. the lien may be lost where the warehouseman surrenders the possession of the goods without requiring payment of his lien. dated March 9. AND. dated September 1. 1994. The trial court granted private respondents’ Omnibus Motion on December 20.1 million. In other words. 1993.” Private respondents thereupon filed before the trial court an Omnibus Motion seeking among others the deferment of the proceedings until private respondents [were] heard on their claim for warehouseman’s lien. because a warehouseman’s lien is possessory in nature. On February 21. 1994 AND THE ORDER DATED FEBRUARY 7. uphold and sustain the validity of the assailed orders of public respondent. On September 29.000. PNB IS ENTITLED TO: (1) A WRIT OF CERTIORARI TO ANNUL THE RTC RESOLUTION DATED DECEMBER 20. We denied this motion in this manner: “It bears stressing that the relief granted in this Court’s decision of September 1. 107243. 1991. 1993. NO. execution of the judgment is hereby ordered stayed and/or precluded until the full amount of defendants’ lien on the sugar stocks covered by the five (5) quedans subject of this action shall have been satisfied conformably with the provisions of Section 31 of Republic Act 2137.R.

3. would amount to only P300 Thousand Pesos. was intended to guide the parties in the subsequent disposition of the case to its final end. the decisions of both the Supreme Court and of the former Presiding Judge of the trial court do not contain a specific determination and/or computation of warehouseman’s lien. and (b) private respondents should instead file a separate action to prove the amount of its claim as warehouseman. to include the true and standard industry rates on sugar storage fees. 1995 for the 86. the same.1 Million in favor of PNB. SP No. respectively. the court a quo ruled in this wise: “Accordingly. and (b) There is no legal basis for execution of defendants’ lien as warehouseman unless and until PNB compels the delivery of the sugar stocks. the Sheriff levied on execution several properties of PNB. pointing out that the dispositive portion of the court a quo’s Order dated 1 March 1995 failed to state the amount for which execution may be granted and.27 The court a quo. 1991.06 because the same has been waived for not having been raised earlier as either counterclaim or defense against PNB.50. PNB countered private respondents’ argument. this time presided by herein public respondent. the same is hereby GRANTED.341. a Notice of Garnishment dated 23 April 1997 on fund deposits of PNB was served upon the Bangko Sentral ng Pilipinas. 119231 was denied. as held by the Supreme Court. let a writ of execution issue for the amount of P662.999) square meters.50 in spite of the fact that it had not yet been served with the Order of the court a quo dated 15 April 1997. 25938. not being registered.00 in attorney’s fees.595. including legal interest and P150. Hon.25 PNB opposed said Motion on the following grounds: (a) The lien claimed by Noah’s Ark in the unbelievable amount of P734. the same could not be the subject of execution. granted private respondents’ Motion for Execution. In its questioned Order dated 15 April 1997 (Annex “A”). (2) Assuming said lien has not been waived. We certainly did not foreclose private respondents’ inherent right as warehouseman to collect storage fees and preservation expenses as stipulated on the face of each of the Warehouse Receipts and as provided for in the Warehouse Receipts Law (R. “WHEREFORE.24 Pursuant to the abovementioned Supreme Court Decision.28 On 23 April 1997.R.” (Emphasis supplied. is already barred by prescription and/or laches.R. The petition in this case summarizes these as follows: 3. 2137). (6) In all respects. restrict such right. No. 119231 became final and executory.1 Million.30 On 28 April 1997. premises considered and finding merit in the defendants’ motion for execution of their claim for lien as warehouseman. .[6] Petitioner’s motion to reconsider the decision in G. who innocently acquired the sugar quedans through assignment of credit. being in order and with sufficient basis..) 3. PNB was immediately served with a Writ of Execution for the amount of P662. oppressive and unconscionable. the computation of accrued storage fees and preservation charges presented in evidence by the defendants. 3. Photocopies of the Notice of Levy and the Notice of Garnishment are attached hereto as Annexes “K” and “L”.341. 2137. in accordance with the above disposition. dated December 13.548. After the decision in G.17 Republic Act No.R. A photocopy of said Motion for Execution is attached hereto as Annex “I”. petitioner filed a Motion for Reconsideration with Urgent Prayer for Quashal of Writ of Execution dated 15 April 1997. (3) Assuming further that said lien has not been waived nor barred.26 In their Reply to Opposition dated 18 January 1997. in CA-G. This Court consequently rejects PNB’s claim of no sugar no lien.595. private respondents filed a Motion for Execution of Defendants’ Lien as Warehouseman dated 27 November 1996. xxx xxx xxx SO ORDERED.A. thus. a Notice of Levy dated 24 April 1997 on a parcel of land with an area of Ninety-Nine Thousand Nine Hundred Ninety-Nine (99.29 Nevertheless. Our Resolution’s reference to the decision by the Court of Appeals. shall result in the sum of about Three Hundred Thousand Pesos only.356. Secondly.595. various incidents took place before the trial court in Civil Case No. 3.31 In its Motion for Reconsideration. the same should be granted. 3. since it is undisputed that the amount of the accrued storage fees is substantially in excess of the alternative award of P39. thus requiring first and foremost a fair hearing of PNB’s evidence. Accordingly. which if computed at such standard rate of thirty centavos per kilogram per month. (4) There is no evidence on record which would support and sustain the claim of P734.611.000. in the amount ofP734. PNB thus filed an Urgent Motion dated 23 April 1997 seeking the deferment of the enforcement of the Writ of Execution. In its Rejoinder dated 7 February 1997.341. dated December 13. A photocopy of the Writ of Execution is attached hereto as Annex “J”. (5) Said claim if executed would constitute unjust enrichment to the serious prejudice of PNB and indirectly the Philippine Government. 23205 in the name of PNB.06 is illusory. 90-53023. petitioner prayed for the following reliefs: “1. which PNB is however entitled to be credited x x x. Petitioner’s Motion was based on the following grounds: (1) Noah’s Ark is not entitled to a warehouseman’s lien in the humongous amount of P734. private respondents pointed out that a lien existed in their favor. without however waiving or abandoning its (PNB’s) legal positions/contentions herein abovementioned. covered by Transfer Certificate of Title No. No. still there was no complaint ever filed in court to effectively commence this entirely new cause of action.548. 3. which storage fees if computed correctly in accordance with standard sugar industry rates.341. bags of sugar. was served upon the Register of Deeds of Pasay City.06 as of January 31. Marcelino L.06 which is excessive. 3. PNB be allowed in the meantime to exercise its basic right to present evidence in order to prove the above allegations especially the true and reasonable storage fees which may be deducted from PNB’s judgment award of P39.41 50 kg. Sayo Jr.611. Neither did the Court of Appeals’ decision.595. Firstly. 1991.

petitioners filed this petition. EVEN ASSUMING ARGUENDO THAT THE COURT A QUO HAD AUTHORITY TO GRANT PRIVATE RESPONDENTS’ MOTION FOR EXECUTION.341. 3. as PNB was not given a fair opportunity to present its evidence on the matter of the warehouseman’s lien. In support of its pleading.06. the final Writ of Execution likewise dated April 15.32 Private respondents filed an Opposition with Motion for Partial Reconsideration dated 8 May 1997. 3. (5) The attendant circumstances. alleging as grounds therefor.32. If no specific award is stated in the dispositive portion. respondent Judge issued the second Order (Annex “B”).375. PUBLIC RESPONDENT JUDGE’S GRAVE ABUSE OF DISCRETION BECOMES MORE PATENT AFTER A CLOSE PERUSAL OF THE QUESTIONED ORDER DATED 14 JULY 1997. depriving petitioner of its inherent substantive and procedural rights. 1995. and (iii) Motion for the Issuance of a Writ of Execution in favor of PNB.7 The court a quo misquoted and misinterpreted the Supreme Court Decision dated 18 April 1997. 4.18 “2. 3. must perforce be set aside and the execution proceedings against PNB be permanently stayed.06 representing private respondents’ alleged warehouseman’s lien. AND EXCESSIVE AMOUNT OF P734. 1997. 4.” A photocopy of petitioner’s Motion for Reconsideration with Urgent Prayer for Quashal of Writ of Execution is attached hereto and made integral part hereof as Annex “M”. 3. the questioned part of the dispositive portion of which states: “WHEREFORE.1 The court a quo had no authority to issue a writ of execution in favor of private respondents as there was no final and executory judgment ripe for execution.5 PNB has sufficient evidence to show that the astronomical amount claimed by private respondents is very much in excess of the industry rate for storage fees and preservation expenses. private respondents’ Motion for Partial Reconsideration sought additional and continuing storage fees over and above what the court a quo had already unjustly awarded. Still discontented with the excessive and staggering amount awarded to them by the court a quo.35 On 14 July 1997. were tainted with fraud and absence of due process. B.32. private respondents’ claims are mere paper liens which cannot be the subject of execution. The execution proceedings already commenced by said sheriffs be nullified at whatever stage of accomplishment. “3. 4.595.595. premises considered. 3. (4) Private respondents failed to prove the existence of the sugar stocks in Noah’s Ark’s warehouses. all orders prescinding thereform.472. a writ of execution supplying an amount not included in the dispositive portion of the decision being executed is null and void. 4. xxx xxx xxx “The Order of this Court dated April 15. 1997 granting the Motion for Execution by defendant Noah’s Ark be set aside. petitioner also filed an Urgent Motion to Lift Garnishment of PNB Funds with Bangko Sentral ng Pilipinas. petitioner raised the following: (1) Private respondents failed to pay the appropriate docket fees either for its principal claim or for its additional claim. (3) It is the dispositive portion of the decision which shall be controlling in any execution proceeding. PNB filed its Reply with Opposition (To Defendants’ Opposition with Partial Motion for Reconsideration). 1997 and undated “Urgent Motion to Lift Garnishment of PNB Funds With Bangko Sentral ng Pilipinas” filed on May 6.341.424. Thus. 4. (2) The amount awarded by the court a quo was grossly and manifestly unreasonable. “SO ORDERED. C.1 Private respondents prayed for the further amount of P227. 1997 and the corresponding Garnishment all stand firm. THE COURT A QUO ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION WHEN IT ISSUED A WRIT OF EXECUTION IN FAVOR OF DEFENDANTS FOR THE AMOUNT OF P734. The Order dated April 15.3 The manner in which the court a quo awarded storage fees in favor of private respondents and ordered the execution of said award was arbitrary and capricious.”[7] Aggrieved thereby.595. particularly Judge Se’s Order of 1 March 1995 onwards. UNCONSCIONABLE.6 The court a quo resolved a significant and consequential matter entirely relying on documents submitted by private respondents totally disregarding clearly contrary evidence submitted by PNB.00 in storage fees from 1 February 1995 until 15 April 1997. including the questioned Order dated 15 April 1997. together with all its related Motions are all DENIED with finality for lack of merit.00 as daily storage fees after 15 April 1997 until the total amount of the storage fees is satisfied. . containing therein the following motions: (i) Supplemental Motion for Reconsideration.4 There is no basis for the court a quo’s award of P734. 1997. as said claims for warehouseman’s lien were not at all mentioned in their answer to petitioner’s Complaint. 3. the plaintiff Philippine National Bank’s subject “Motion for Reconsideration With Urgent Prayer for Quashal of Writ of Execution” dated April 28.33 On 19 May 1997.34 On 6 May 1997.06 IN FAVOR OF PRIVATE RESPONDENTS. and oppressive. Thus. excessive.341. (ii) Motion to Strike out the Testimony of Noah’s Ark’s Accountant Last February 21. 4. A photocopy of private respondents’ Opposition with Motion for Partial Reconsideration dated 8 May 1997 is attached hereto as Annex “N”. the date of the questioned Order granting their Motion for Execution.2 Public respondent judge patently exceeded the scope of his authority in making a determination of the amount of storage fees due private respondents in a mere interlocutory order resolving private respondents’ Motion for Execution.2 In the same manner. THE COURT A QUO ACTED WITH GRAVE ABUSE OF DISCRETION IN AWARDING THE HIGHLY UNREASONABLE. the following: A. 4. private respondents prayed for a continuing amount of P345.

xxx[13] Since it was deprived of a fair opportunity to present its evidence on the warehouseman’s lien due Noah’s Ark. petitioner underscores the conflicting views of Judge Benito C. who attended a previously scheduled hearing in Pampanga. The earlier resolution set private respondents’ reception of evidence for hearing to prove their warehouseman’s lien and. 107243.595. In fact.R. 119231 merely affirmed the trial court’s resolutions of 20 December 1994 and 1 March 1995. 1987-88)[17] of the Sugar Regulatory Administration requiring sugar mill companies to submit reports at week’s end to prevent the issuance of warehouse receipts not covered by actual inventory. Petitioner further characterized as highly irregular the trial court’s final determination of such lien in a mere interlocutory order without explanation. to date. v.R. 119231 by ruling that the Refining Contract under which the subject sugar stock was produced bound the parties. and required its full satisfaction by petitioner prior to the execution of the judgment in G. it having been denied by Rosa Ng Sy..11 Public respondent judge failed to consider PNB’s arguments in support of its Urgent Motion to Lift Garnishment. appear to be legal basis for their claim for fees and expenses covered during the period from the time of the issuance of the five (5) quedans until demand for their delivery was made by [petitioner] prior to the institution of the present action. Sayo. Petitioner therefore questioned the propriety of the computation of the warehouseman’s lien in the assailed order of 15 April 1997.[8] In arguing its cause. otherwise.356. 18 (s.06 as shown in their Exhibits “1” to “11”. in disregard of Noah’s Ark’s certified reports that it did not have sufficient sugar stock to cover the quantity specified in the subject quedans. (2) Noah’s Ark’s reports[16] for 1990-94 showing that it did not have sufficient sugar stock to cover the quantity specified in the subject quedans.06 unacceptable.”[11] At the same hearing.[10] where we held that a writ of execution should conform to the dispositive portion to be executed. 4.9 Private respondents’ claim for warehouseman’s lien is in the nature of a compulsory counterclaim which should have been included in private respondents’ answer to the Complaint. petitioner reiterated that neither this Court’s decision nor the trial court’s resolutions specified any amount for the warehouseman’s lien. Se. petitioner was virtually deprived of its right to cross-examine the witness. the trial court relied solely on the Annual Synopsis of Production & Performance Date/Annual Compendium of Performance by Philippine Sugar Refineries from 1989 to 1994. as such should or could have been done only by way of a judgment on the merits. In the resolution[12] of 1 March 1995. either in the bodies or dispositive portions thereof. bags. the trial court could not have properly based its computation of the warehouseman’s lien on . however. instead of granting a postponement. 4. Petitioner. the Refining Contract never existed. 107243. [Petitioner] should not be made to shoulder the warehousing fees and expenses after the demand was made. Jr. 4. Judge Marcelino L. Petitioner likewise reasoned that a writ of execution was proper only to implement a final and executory decision. No. petitioner’s urgent motion to nullify the court proceedings remains unresolved. Inc. bags. (3) Circular Letter No. petitioner explained that this Court’s decision in G. Between the two. thus: In connection with [private respondents’] claim for payment of warehousing fees and expenses. 4. Petitioner then cited the cases of Edward v. Private respondents failed to include said claim in their answer either as a counterclaim or as an alternative defense to PNB’s Complaint.490 50kg. narrating that the trial court proceeded with the hearing notwithstanding the urgent motion for postponement of petitioner’s counsel of record.R. comment on or object to the offer of evidence and present countervailing evidence. E.R. According to petitioner. specifying the amount. Petitioner likewise emphasized that the hearing of 21 February 1995 was marred by procedural infirmities. however.10 Private respondents’ claim is likewise lost by virtue of a specific provision of the Warehouse Receipts Law and barred by prescription and laches. THE COURT A QUO ACTED WITH GRAVE ABUSE OF DISCRETION IN NOT HOLDING THAT PRIVATE RESPONDENTS HAVE LONG WAIVED THEIR RIGHT TO CLAIM ANY WAREHOUSEMAN’S LIEN. this Court cannot accept [private respondents’] pretense that they are entitled to storage fees and preservation expenses in the amount of P734. deferred petitioner’s motion for execution of the summary judgment rendered in petitioner’s favor in G. petitioner urged.8 Private respondents raised the matter of their entitlement to a warehouseman’s lien for storage fees and preservation expenses for the first time only during the execution proceedings of the Decision in favor of PNB. Judge Se found private respondents’ claim for warehouse lien in the amount of P734. Jr. and (4) an affidavit of petitioner’s assistant vice president[18] alleging that Noah’s Ark’s daily storage fee of P4/bag exceeded the prevailing industry rate.[9] and Ex-Bataan Veterans Security Agency. and his successor. thus. National Labor Relations Commission. Under said circumstances. PUBLIC RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION IN REFUSING TO LIFT THE ORDER OF GARNISHMENT OF THE FUNDS OF PNB WITH THE BANGKO SENTRAL NG PILIPINAS. Arce.41 50kg. petitioner’s lawyer-representative was sent to confirm the allegations in said motion. which was not present in the instant case. petitioner submitted the following documents: (1) an affidavit of petitioner’s credit investigator[14] and his report[15] indicating that Noah’s Ark only had 1. No.341. who heard and tried almost the entire proceedings.. the trial court admitted all the documentary evidence offered by private respondents and ordered the filing of the parties’ respective memoranda. who issued the assailed orders. No.595. Hence. execution becomes void if in excess of and beyond the original judgment.341. where we ruled that the only portion of the decision which could be the subject of execution was that decreed in the dispositive part. the latter should have been accorded greater evidentiary weight. pending determination thereof. of sugar in its warehouse. and not 86. To petitioner’s dismay. The subsequent resolution recognized the existence of a valid warehouseman’s lien without. Petitioner then argued that the trial court’s second assailed order of 14 July 1997 misinterpreted our decision in G. To stress its point. laid stress on the fact that in the questioned order of 14 July 1997. moreover. However. the trial court allowed the continuance of the hearing on the basis that there was “nothing sensitive about [the presentation of private respondents’ evidence]. There would.19 D. No.

On 8 August 1997. In fact.R. No. i. 107243 and G. and continue to incur. 119231.000.06.341. 119231. we required respondents to comment on the petition and issued a temporary restraining order enjoining the trial court from implementing its orders of 15 April and 14 July 1997. Anent the trial court’s jurisdiction to determine the warehouseman’s lien. No. in the execution of a money judgment. No. They underscored that CA-G. the error could only have been in the wisdom of its findings and not of jurisdiction. the execution of the judgment in favor of petitioner was stayed until the latter’s full payment of the lien.595. In their comment. citing Article 1149[20] of the New Civil Code.341. incurred. moreover. and the petition raised factual issues which had long been resolved in the decision in G. and that the validity of said documents had been recognized by this Court in our decision in G. Private respondents even attached a copy of the transcript of stenographic notes[22] to their comment. in which case. if at all proper. 22 against Rosa Ng Sy and Teresita Ng. was contradicted by petitioner’s 1996 Audited Financial Statement indicating that petitioner’s assets amounted to billions of pesos. 22. with an estimated market value of P6. This claim.e. petitioner was represented by counsel who failed to object to the presentation and offer of their evidence consisting of the five quedans. Private respondents.R. No. and denied having waived their warehouseman’s lien.R. No. Petitioner maintained that a separate trial was necessary to settle the issue of the warehouseman’s lien due Noah’s Ark. private respondents asserted. which provided that the sheriff must levy on all the property of the judgment debtor. This resolution was then affirmed by this Court in our decision in G. private respondents were barred from claiming the warehouseman’s lien due to their refusal to deliver the goods upon petitioner’s demand. said evidence was even considered by the trial court when petitioner sought a reconsideration of the first assailed order of 15 April 1997. SP No.R. Finally. No. private respondents’ failure to raise said claim should have been deemed a waiver thereof. and the computation resulting in the amount of P734. Petitioner likewise insisted that under Section 29[19] of the Warehouse Receipts Law. that . private respondents accused petitioner of coming to court with unclean hands. the resolution of 1 March 1995 declared that they were entitled to a warehouseman’s lien. it was stated that the garnishment could not be enforced since petitioner’s deposits with the Bangko Sentral ng Pilipinas consisted solely of legal reserves which were exempt from garnishment. the proper remedy of petitioner should have been an appeal and certiorari did not lie. Even assuming the trial court erred. 119231. No.000. Further. Private respondents also raised the issue of res judicata as a bar to the instant petition. having been resolved in G. private respondents argued that any ambiguity in the decision could be resolved by referring to the entire record of the case. excluding those exempt from execution. Sy was eventually convicted of two counts of violation of BP Blg. expenses for the storage and preservation of the sugar stock. Likewise. and not a final judgment or decision. Petitioner further raised that private respondents failed to timely assert their claim within the five-year prescriptive period. and contended that the garnishment was contrary to Section 103[21] of the Bangko Sentral ng Pilipinas Law (Republic Act No. petitioner questioned the trial court’s refusal to lift the garnishment order considering that the levy on its real property. and the orders assailed here were issued merely to implement said resolution. thereby rendering the instant petition moot and academic. No. Private respondents then debunked the claim that petitioner was denied due process. As said claim was a separate cause of action which should have been raised in private respondents’ answer with counterclaim to petitioner’s complaint.R. was sufficient to satisfy the judgment award. 25938. No. Nonetheless. petitioner advocated that resort to the remedy of certiorari was proper since the assailed orders were interlocutory. having raised the issue for the first time only during the execution proceedings of this Court’s decision in G. Private respondents next pointed to the fact that they consistently claimed that they had not been paid for storing the sugar stock.000 was in excess of the warehouseman’s lien. 119231. Private respondents further claimed that the garnishment order was proper. G. 119231 which had become final and executory. only that it was rendered ineffective. Petitioner therefore suffered no damage from said garnishment. full payment of their lien was a pre-requisite to their obligation to release and deliver the sugar stock to petitioner. 107243. Accordingly.R. Finally. while the storage fe es stipulated in the Refining Contract had the approval of the Sugar Regulatory Authority. In a letter[24] received by the sheriff from the Bangko Sentral ng Pilipinas.000. Private respondents then questioned petitioner’s failure to oppose or rebut the evidence they presented and bewailed its belated attempts to present contrary evidence through its pleadings. Refining Contracts with petitioner and other quedan holders. No.. under the Warehouse Receipts Law. for which reason. considering its prevailing market value of P6.R. an issue already raised and rejected by this Court in G. Private respondents likewise deemed immaterial petitioner’s argument that the writ of execution issued against its real property in Pasay City was sufficient.R.[23] even after the decision had become final. private respondents first sought the lifting of the temporary restraining order. 119231. specifically citing its misrepresentation that the award of the warehouseman’s lien would result in the collapse of its business.R.20 the Refining Contract. 119231. among other documents. 119231 all sustained their claim for a warehouseman’s lien. claiming that petitioner could no longer seek a stay of the execution of this Court’s decision in G.”[25] In reply. Petitioner further asserted that Noah’s Ark could no longer recover its lien. In refuting petitioner’s argument that no writ of execution could issue in absence of a specific amount in the dispositive portion of this Court’s decision in G. which prompted them to file criminal charges of estafa and violation of Batas Pambansa (BP) Blg.000.R. and its 1996 Annual Report to its stockholders where petitioner declared that the pending legal actions arising from their normal course of business “will not materially affect the Group’s financial position. No.000. 7653). private respondents maintained that such had already been established.595.06 to satisfy their warehouseman’s lien was in accordance with the stipulations provided in the quedans and the corresponding Refining Contracts. Private respondents next alleged that the award of P734.R. and invoked Rule 39 of the 1997 Rules of Civil Procedure. In that February hearing. thus further precluding any claim of denial of due process. the March resolution was already final and unappealable.

Petitioner likewise noted that the other refining contracts[27] presented by private respondents to show similar storage fees were executed between the years 1996 and 1997. we summarized the positions of the parties on these issues.A. Thus. no mutually acceptable solution was reached.[29] Private respondents likewise admitted that during the pendency of the case. No. formulated its computation of the lien.e. Concretely. 2137? (3) Is [petitioner] liable for storage fees (a) from the issuance of the quedans in 1989 to Rosa Sy. counsel for petitioner submitted that the trial court had no authority to issue the writ of execution or if it had. The arguments on the fourth issue. 119231 merely sustained the trial court’s order of 20 December 1994 granting the Noah’s Ark Omnibus Motion and setting the reception of evidence on its claims for storage fees. several years after 1989.595. The petition was set for oral argument on 24 November 1997 where the parties addressed the following issues we formulated for them to discuss: (1) Is this special civil action the appropriate remedy? (2) Has the trial court the authority to issue a writ of execution on Noah’s Ark’s claims for storage fees considering that this Court in G. petitioner advocated that any determination by the court of the existence and amount of the warehouseman’s lien due should be arrived at using the test of reasonableness. 119231. Rosa Ng Sy. No. thus: Expectedly. No. said contracts were not even attached to the quedans when negotiated. A. in the alternative. 2137 and directing that the execution of the judgment in favor of PNB be stayed and/or precluded until the full amount of Noah’s Ark’s lien is satisfied conformably with Section 31 of R. and not even the doctrine of res judicata could bar this petition as the element of a final and executory judgment was lacking. On the second issue. They eventually agreed that petitioner’s liability for the warehouseman’s lien should be reckoned from the time it stepped into the shoes of the original depositors. the issues pertained to the amount and enforceability of said lien based on the arbitrary manner the amount was determined by the trial court. petitioner concluded. without specifying a corresponding amount. On the third issue. Finally.341. 90-53023) against Noah’s Ark for the latter’s failure to comply with [petitioner’s] demand for the delivery of the sugar? (4) Did respondent Judge commit grave abuse of discretion as charged?[28] In our resolution of 24 November 1997. they could have enforced their lien through the foreclosure of the goods or the filing of an ordinary civil action. In their respective memoranda. otherwise private respondents would not have filed an opposition and motion for partial reconsideration[26] two years later. contended that the trial court’s authority to issue the questioned writ of execution is derived from the decision in G. Counsel for petitioner stressed that the trial court indeed committed a grave abuse of discretion. Should the refining contracts in turn be declared void.R. respondent Noah’s Ark’s claim was that it was the owner of the sugar covered by the quedans. citing Section 9(b). No. petitioner should be allowed to exercise its option as a judgment obligor to specify which of its properties may be levied upon.06 as warehouseman’s lien or storage fees. A careful perusal of the first assailed order shows that the trial court not only granted the motion for execution. while respondents’ counsel insisted that no grave abuse of discretion was committed by the trial court. counsel for petitioner while presupposing that PNB may be held to answer for storage fees. private respondents could not claim that the more recent and increased rates where those which prevailed in 1989. up to their assignment by endorsees Ramos and Zoleta to [petitioner] for their loan.21 it was virtually deprived of its constitutional right to due process was a valid issue to raise in the instant petition. This Special Civil Action is an Appropriate Remedy. as what was resolved there was private respondents’ mere entitlement to a warehouseman’s lien. Petitioner likewise disputed the claim that the resolution of 1 March 1995 was final and executory. the parties reiterated or otherwise buttressed the arguments raised in their previous pleadings and during the oral arguments on 24 November 1997. No. Rule 39 of the 1997 Rules of Civil Procedure. i. or (b) after [petitioner] has filed an action for specific performance and damages (Civil Case No.R. and of 1 March 1995 finding that there existed in favor of Noah’s Ark a warehouseman’s lien under Section 27 of R. especially on the formulated issues. that the order of execution was not final. petitioner asserted that in the event that this Court should uphold the trial court’s determination of the amou nt of the warehouseman’s lien. we required the parties to simultaneously submit their respective memoranda within 30 days or. On the other hand. counsel for respondents maintained that petitioner PNB disregarded the hierarchy of courts as it bypassed the Court of Appeals when it filed the instant petition before this Court. In the instant petition. Counsel for respondent. on the other hand. counsel for petitioner submitted that certiorari under Rule 65 of the Rules of Court is the proper remedy and not an ordinary appeal. In fact. Therese Merchandising and RNS Merchandising. We shall take up the formulated issues in seriatim. and that their validity was repudiated by a supposed party thereto. who claimed that the contract was simulated. Instead. 119231 which decision allegedly provided for ample or sufficient parameters for the computation of the storage fees. contended that the same should start from the time the endorsees of the sugar quedans defaulted in their payments. respondents’ counsel pointed out that PNB’s liability should start from the issuance of the quedans in 1989. St. 1990 because before that. hinge on the parties’ arguments for or against the first three issues. . The petition is meritorious. it denied PNB due process when it held PNB liable for the astronomical amount of P734. they failed to avail of their options as a warehouseman. but also appreciated the evidence in the determination of the warehouseman’s lien. On the other hand.R. Notwithstanding efforts exerted by the parties.A. a compromise agreement should a settlement be achieved.R.[30] In our resolution of 24 November 1997. thus void pursuant to Article 1345 of the New Civil Code. they sought to execute this Court’s judgment in G. Petitioner further argued that the refining contracts private respondents invoked could not bind the former since it was not a party thereto. No.. among others. Petitioner claimed to have been deprived of this option when the trial court issued the garnishment and levy orders. 119231. contending. Petitioner also contended that the issues raised in this petition were not resolved in G.

such as private respondents. and as a corollary thereto. It is wellsettled that the availability of an appeal does not foreclose recourse to the extraordinary remedies of certiorari or prohibition where appeal is not adequate. Old Civil Code [Art.22 and adopted an offsetting of the parties’ claims. in a contract of real security. However. thus: Zoleta and Ramos then used the quedans as security for loans obtained by them from the Philippine National Bank (PNB) as security for loans obtained by them in the amounts of P23.6 million. InPhilippine National Bank v.[43] and before any such foreclosure. to the pledgor (Art. No.[42] The law requires foreclosure in order to allow a transfer of title of the good given by way of security from its pledgor. The import of our holding in G. No. C. 90-53023.R. the order as in the nature of a final order for it left nothing else to be resolved thereafter. is null and void.[44] we said: The delivery of the palay being merely by way of security. to enforce his warehouseman’s lien are: (1)To refuse to deliver the goods until his lien is satisfied. The third remedy is sought judicially by suing for the unpaid charges. not the pledgee. The remedies available to a warehouseman. and that if the property covered by the quedans or warehouse receipts is lost without the fault or negligence of the mortgagee or pledgee or the transferee or endorsee of the warehouse receipt or quedan. in fact.[33] and we entertain direct resort to us in cases where special and important reasons or exceptional and compelling circumstances justify the same. pursuant to Section 31 of the Warehouse Receipt Law. 2112. petitioner was not precluded from availing of the extraordinary remedy of certiorari under Rule 65 of the Rules of Court. Atendido.[35] Initially. Thus we note that petitioner. thus the propriety of this special civil action is beyond question.R. Philippine National Bank[38] becomes relevant: In conclusion. according to law. 107243. As hereafter shown.[37] As such. and (3) By other means allowed by law to a creditor against his debtor.[36] In our decision in G. 119231. the indefinite deferment of the execution of the judgment in G. mandamus. a pledgee cannot become the owner of. mortgagor or pledgor. The indorsement of the warehouse receipts (quedans). then said goods are to be regarded as lost on account of the real owner. 119231 was that private respondents were likewise entitled to a judgment on their warehouse charges and fees. petitioner’s remedy was to appealtherefrom. Private Respondents May Enforce Their Warehouseman’s Lien in Civil Case No. respectively. No. This Court has original jurisdiction. or such other remedies allowed by law for the enforcement of a lien against personal property under Section 35 of said law. While the most appropriate remedy for private respondents was an action for collection. concurrent with that of Regional Trial Courts and the Court of Appeals. this for the simple reason that the transaction involved is not a sale but only a mortgage or pledge. it follows that by the nature of the transaction its ownership remains with the pledgor subject only to foreclosure in case of non-fulfillment of the obligation. Old Civil Code . (2) To sell the goods and apply the proceeds thereof to the value of the lien pursuant to Sections 33 and 34 of the Warehouse Receipts Law. private respondents availed of the first remedy. No. quo warranto and habeas corpus. already acquiesced to the scheduled dates previously set for the hearing on private respondents’ warehouseman’s charges. New Civil Code]).[34] These reasons and circumstances are present here. Martinez v. This is the essence of this contract. Petitioner insisted. Under the Special Circumstances in This Case. we upheld this contention of petitioner. we hold that where a warehouse receipt or quedan is transferred or endorsed to a creditor only to secure the payment of a loan or debt.R. for the collection from the depositor of all charges and advances which the depositor expressly or impliedly contracted with the warehouseman to pay under Section 32 of the Warehouse Receipt Law.[32] Petitioner assailed the challenged orders as having been issued without or in excess of jurisdiction or with grave abuse of discretion and alleged that it had no other plain. speedy and sufficient.R. like pledge. and the eventual satisfaction thereof. cannot appropriate without foreclosure the things given by way of pledge. speedy and adequate remedy in the ordinary course of law. No. for.[31] Nevertheless. that it was a mere pledgee as the quedanswere used to secure two loans it granted. nor appropriate to himself. which would only have further delayed the resolution of the respective claims of the parties. thereby avoiding having to file another action to recover these charges and fees. over petitions for certiorari. 119231. B. By this we mean that if the obligation is not paid upon maturity the most that the pledgee can do is to sell the property and apply the proceeds to the payment of the obligation and to return the balance. We confirmed petitioner’s liability for storage fees in G.R. the pledgor. 1872. 90-53023. Hence. we already recognized their right to have such charges and fees determined in Civil Case No. However. termed pactum commissorio. Ineluctably.[39] merely constituted a symbolical or constructive delivery of the possession of the thing thus encumbered. to perfect the pledge. No. both in its petition and during the oral arguments on 24 November 1997. Petitioner is Liable for Storage Fees.[40] The creditor. in G. 107243. The indorsement and delivery of the warehouse receipts (quedans) by Ramos and Zoleta to petitioner was not to convey “title” to or ownership of the goods but to secure (by way of pledge) the loans granted to Ramos and Zoleta by petitioner. is the owner of the goods. in turn. or equally beneficial. private respondents. petitioner’s status as to the quedans must first be clearly defined and delineated to be able to determine the extent of its liability. 107243 before the trial court. These quedans they indorsed to the bank. the thing given in pledge (Article 1859. However.5 million and P15.R. when petitioner moved to execute the judgment in G. the transferee or endorsee does not automatically become the owner of the goods covered by the warehouse receipt or quedan but he merely retains the right to keep and with the consent of the owner to sell them so as to satisfy the obligation from the proceeds of the sale. as will be shown below. these claims were not unfounded. it would be premature to execute the order fixing the warehouseman’s charges and fees. moved to have the warehouse charges and fees due them determined and thereafter sought to collect these from petitioners. if any.[41] Any stipulation to the contrary. prohibition.

in which case. i. SECTION 29. Simply put. Act No. Private respondents justified their refusal to deliver the goods. to the bank does not alter the situation. in which case. In case the warehouseman refuses or fails to deliver the goods in compliance with a demand by the holder or depositor so accompanied. or from the warehouseman’s lien. is entitled to the warehouseman’s lien that attaches to the goods invokable against anyone who claims a right of possession thereon. the purpose of such endorsement being merely to transfer the juridical possession of the property to the pledgees and to forestall any possible disposition thereof on the part of the pledgor. Act No. 2137) (2) That the warehouseman has legal title in himself on the goods. 18. The loss of the warehouseman’s lien. (a) By surrendering possession thereof. would be that the law was complied with. these are: (1) That the holder of the receipt does not satisfy the conditions prescribed in Section 8 of the Act. (Sec. while as regards the reasons which a warehouseman may invoke to legally refuse to effect delivery of the goods covered by the quedans. an acknowledgment that they have been delivered.e. the warehouseman shall be excused from liability for refusing to deliver the goods. non-satisfaction of the warehouseman’s lien over the goods. the warehouseman may.. as by showing that. 29 and 31 of the Warehouse Receipts Law now come to fore. SECTION 31. with such indorsements as would be necessary for the negotiation of the receipt. Act No. or some other justifiable ground for non-delivery. (See Sec. nevertheless. is bound to deliver the goods upon a demand made either by the holder of a receipt for the goods or by the depositor. the warehouseman’s lien is thereafter concomitantly lost. 2137). either to the depositor or person claiming under him or to the adverse claimant. Section 8 enumerates what must accompany a demand. – A warehouseman. or as an original suit. Obligation of warehousemen to deliver. however. if such demand is accompanied with: (a) An offer to satisfy warehouseman’s lien. 2137). Act No. As to what the law deems a valid demand. despite the absence of a lawful excuse provided by the statute itself. 119231 of petitioner’s petition to nullify the trial court’s order of 01 March 1995 (b) An offer to surrender the receipt. 2137). nevertheless. and (c) A readiness and willingness to sign. Act No. by claiming that they “are still the legal owners of the subject quedans and the quantity of sugar represented therein. not the pledgee. it would appear that the refusal of private respondents to deliver the goods was not anchored on a valid excuse. unless he has contracted so as to be liable in such case. this hardly qualified as a valid. require all known claimants to interplead (Sec. 2137). The next issue to resolve is the duration of time the right of petitioner over the goods may be held subject to the warehouseman’s lien. by or on behalf of the person lawfully entitled to a right of property of or possession in the goods. 17. 36. But even as to the owners-pledgors. prior to demand for delivery and refusal. Act No. rather than breached. the pledgors. from a transfer made by the depositor at the time of or subsequent to the deposit for storage. 2137).” Under the circumstances. or have been lawfully sold or disposed of because of their perishable or hazardous nature. 2088. (Sec. in this case. (b) Where the warehouseman had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods (Sec. but on an adverse claim of ownership. The presumption. – A warehouseman loses his lien upon goods. Upon the other hand. How the lien may be lost. the warehouseman fees and charges have ceased to accrue from the date of the rejection by Noah’s Ark to heed the lawful demand by petitioner for the release of the goods. flood. The warehouseman. when the goods are delivered. not to make such delivery (Sec. 2137) (5) That the failure was not due to any fault on the part of the warehouseman. No. if such signature is requested by the warehouseman. 16. or that the goods have been taken by the mistake of a third person without the knowledge or implied assent of the warehouseman. either as a defense to an action brought against him for nondelivery of the goods. 31. 10. where a valid demand by the lawful holder of the quedans for the delivery of the goods is refused by the warehouseman.R. legal excuse.J. Sections 8. Warehouseman need not deliver until lien is satisfied. such title or right being derived directly or indirectly . as follows: SECTION 8. 90-53023. does not necessarily mean the extinguishment of the obligation to pay the warehousing fees and charges which continues to be a personal liability of the owners. The finality of our denial in G. New Civil Code])… The fact that the warehouse receipt covering palay was delivered..e. and (c) Where the goods have already been lawfully sold to third persons to satisfy a warehouseman’s lien. They provide. or (b) By refusing to deliver the goods when a demand is made with which he is bound to comply under the provisions of this Act.23 [Art. 10. whichever is appropriate. Act No. by petitioner. if negotiable. – A warehouseman having a lien valid against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied. (Sec. without any negligence on his part. until the warehouseman has had a reasonable time to ascertain the validity of the adverse claims or to bring legal proceedings to compel all claimants to interplead (Sec. (4) That the warehouseman having a lien valid against the person demanding the goods refuses to deliver the goods to him until the lien is satisfied. 8.. This is true notwithstanding the provisions of the Warehouse Receipt Law. Act No. 2137) (3) That the warehouseman has legally set up the title or right of third persons as lawful defense for non-delivery of the goods as follows: (a) Where the warehouseman has been requested. the burden shall be upon the warehouseman to establish the existence of a lawful excuse for such refusal. as stated in their Answer with Counterclaim and Third-Party Complaint in Civil Case No. 532)[45] Regrettably. (67 C. the goods were stolen or destroyed by fire. etc. i. endorsed in blank. the factual settings do not sufficiently indicate whether the demand to obtain possession of the goods complied with Section 8 of the law. in the absence of some lawful excuse provided by this Act.

In light of the above. the trial court should have allowed a hearing on the matter. however. COMMERCIAL LAW. JR. the immediate execution only served to further strengthen our perception of undue and unwarranted haste on the part of respondent court in resolving the issue of the warehouseman’s lien in favor of private respondents. This was a serious allegation. Respondent Judge Committed Grave Abuse of Discretion.24 confirms the warehouseman’s lien. to file its comment thereto. and the trial court thereafter ruled. We do not hesitate to say that any tilt of the scales of justice. WAREHOUSE RECEIPTS LAW. but could not have adequately substituted for a fullblown opportunity to present its evidence. ALBERTO T. however. Likewise. leads us to conclude that petitioner’s right to fully present its case was rendered nugatory. much less. PRES. SE. petitioner. vs.respondents. No. JUDGE BENITO C. upon a judgment or order that disposes of the action or proceeding upon the expiration of the period to appeal therefrom if no appeal has been duly perfected.R. Noah’s Ark maintained a sufficient inventory to cover the volume of sugar specified in thequedans. nevertheless. no matter how slight. plaintiff [petitioner] is given five (5) days. object to. does it show that petitioner was afforded an opportunity to comment on. inclusive of submarkings. Section 1 of Rule 39 of the Rules of Court explicitly provides that execution shall issue as a matter of right. private respondents’ offer of exhibits. and on that score alone.[48] Nowhere in the transcript of stenographic notes. and said court is DIRECTED to conduct further proceedings in said case: (1) to allow petitioner to present its evidence on the matter of the warehouseman’s lien. JJ.[47] D. petitioner immediately moved to nullify the proceedings conducted during that hearing. SYLLABUS 1. it cannot be said that petitioner’s filing of subsequent pleadings. concur. Verily. when coupled with the fact that the motion to postpone the hearing filed by petitioner’s counsel was not unreasonable. as part of the testimony of Benigno Bautista. to wit: Court: Order. INCLUDING THE UNQUALIFIED . disclosing that the latter failed to maintain a sufficient inventory to satisfy the sugar stock covered by the subject quedans. results in the full satisfaction of the loan liabilities to the pledgee of the pledgors. During the final hearing of the case. there is no showing that a motion for execution pending appeal was filed and that a special order was issued by respondent court. It is thus evident to us that there was undue and unwarranted haste on the part of respondent court to rule in favor of private respondents. should be confined to the fees and charges as of the date in March 1990 when Noah’s Ark refused to heed PNB’s demand for delivery of the sugar stocks and in no event beyond the value of the credit in favor of the pledgee (since it is basic that. after the set-off of the money judgment in its favor in G. where it attached its affidavits and documents to contest the warehouseman’s lien. from receipt of defendants’ [private respondents’] memorandum. but only on motion with due notice to the adverse party. was sufficient to fully satisfy the requirements of due process. SO ORDERED. Moreover. the buyer does not assume the obligations of the pledgor to his other creditors even while such buyer acquires title over the goods less any existing preferred lien thereover). LOOYUKO. it might incidentally be mentioned. specifying any order or written agreement to that effect. for the relevant period. Execution pending appeal is. and Quisumbing. including the notices of levy and garnishment. Costs against private respondents. THE UNCONDITIONAL PRESENTMENT OF THE RECEIPTS FOR PAYMENT CARRIED WITH IT THE ADMISSIONS OF THE EXISTENCE AND VALIDITY OF THE TERMS. especially in light of the magnitude of the claims sought. ---PHILIPPINE NATIONAL BANK. the petition is GRANTED. It is interesting to note that among the evidence petitioner wanted to present were reports obtained from Noah’s Ark. Branch 45..[46] The foreclosure of the thing pledged. Vitug. the defendant [private respondents] is given five (5) days from today to file its memorandum. RTC. This. Bellosillo. We hold that the trial court deprived petitioner of due process in rendering the challenged order of 15 April 1996 without giving petitioner an opportunity to present its evidence.[49] without.. then petitioner should not be made to pay for storage and preservation expenses for non-existent goods. WHEREFORE. 45. only “upon good reasons shown in a special order. SO ORDERED. allowed in Section 2 thereof. (2) to compute the petitioner’s warehouseman’s lien in light of the foregoing observations. Thereafter the same shall be deemed submitted for decision. private respondents commenced and concluded their presentation of evidence as to the matter of the existence of and amount owing due to their warehouseman’s lien. JIMMY T. It was likewise grave abuse of discretion on the part of respondent court to order immediate execution of the 15 April 1997 order. The subsequent pleadings were filed only to show that petitioner had evidence to refute the claims of private respondents or that the latter were not entitled thereto. but its motion was ignored and never resolved by the trial court. and (3) to determine whether. The challenged orders of 15 April and 14 July 1997. CONDITIONS AND STIPULATIONS WRITTEN ON THE FACE OF THE WAREHOUSE RECEIPTS. of the Regional Trial Court of Manila. BR. Likewise do we refuse to give credence to private respondents’ allegation that the parties agreed that petitioner’s presentation of evidence would be submitted on the basis of affidavits. HON. 90-53023 are REVERSED and SET ASIDE. Panganiban. more importantly. With the admission of Exhibits “1” to “11”. 107243. MANILA. and petitioner’s net liability. however. or even present its evidence on the matter in dispute. in foreclosures. in Civil Case No. NOAH’S ARK SUGAR REFINERY. GO and WILSON T. on motion. Their exhibits were duly marked and offered. such lien. evokes suspicion and erodes a litigant’s faith and hope in seeking recourse before courts of law. however. given the exorbitant amounts involved.” Here. We ruled earlier that said order was in the nature of a final order fixing the amount of the warehouseman’s charges and fees. GO. we need not rule anymore on the fourth formulated issue. If it turns out to be true that the stock of sugar Noah’s Ark had in possession was below the quantities specified in the quedans. In fact.

Noah’s Ark Sugar Refinery refused to comply with the demand alleging ownership thereof. The aforementioned quedans were endorsed by them to the Philippine National Bank.’ *** Upon proper notification to said vendees and plaintiff in due course. ID. delivery to it shall be effected only upon payment of the storage fees. the warehouseman loses his lien upon goods by surrendering possession thereof.00. ID. dated December 13. 1995. denied the Application for Preliminary Attachment. 1989. covering sugar deposited by RNS Merchandising (Rosa Ng Sy). CASE AT BAR. on March 16. 1989. APPEARANCES OF COUNSEL The source of conflict herein is the question as to whether the Philippine National Bank should pay storage fees for sugar stocks covered by five (5) Warehouse Receipts stored in the warehouse of private respondents in the face of the Court of Appeals’ decision (affirmed by the Supreme Court) declaring the Philippine National Bank as the owner of the said sugar stocks and ordering their delivery to the said bank. it can be said that the issue is: Can the warehouseman enforce his warehouseman’s lien before delivering the sugar stocks as ordered by the Court of Appeals or need he file a separate action to enforce payment of storage fees? The herein petition seeks to annul: (1) the Resolution of respondent Judge Benito C. Warehouse Receipts Nos.000. the lien may be lost where the warehouseman surrenders the possession of the goods without requiring payment of his lien. Looyuko. 18081.A. Receipt No. -Petitioner is in estoppel in disclaiming liability for the payment of storage fees due the private respondents as warehouseman while claiming to be entitled to the sugar stocks covered by the subject Warehouse Receipts on the basis of which it anchors its claim for payment or delivery of the sugar stocks. Therese Merchandising the total volume of sugar indicated in the quedans stored at Noah’s Ark Sugar Refinery for a total consideration of P63. in Civil Case No. and Receipts Nos.. 1994. covering sugar deposited by St. 90-53023. 1990. and (2) the Resolution of the said respondent Judge. 18080. Receipt No. dated December 20. “1 . because. Ramos and Cresencia K. and (e) April 1. prescribed for negotiable warehouse receipts by Section 2 of the law. Se. Branch 45. for which reason the Philippine National Bank filed with the Regional Trial Court of Manila a verified complaint for “Specific Performance with Damages and Application for Writ of Attachment” against Noah’s Ark Sugar Refinery. and a Writ of Mandamus to compel respondent RTC Judge to issue a Writ of Execution in accordance with the said executory Supreme Court decision. Luis T. Noah’s Ark and its co-defendants filed an Answer with Counterclaim and Third-Party Complaint in which they claimed that they are the owners of the subject quedans and the sugar represented therein. be in effect held in abeyance until the full amount of the warehouseman’s lien on the sugar stocks covered by five (5)quedans subject of the action shall have been satisfied conformably with the provisions of Section 31 of Republic Act 2137. (c) March 21.6 million and the other for P23. Therese Merchandising. covering sugar deposited by RNS Merchandising. Therese Merchandising. conditions and stipulations written on the face of the Warehouse Receipts. Reconsideration therefor was likewise denied. *** Considering that the vendees and first endorsers of subject quedans did not acquire ownership thereof. in accordance with Section 29 of the Warehouse Receipts Law. 1989. in whose sala the case was raffled. for storage fees and preservation expenses over sugar stocks covered by five (5) Warehouse Receipts which is in the nature of a warehouseman’s lien. WAREHOUSEMAN’S LIEN. except order the execution of the Supreme Court judgment. THE FACTS In accordance with Act No. 2137) carried with it the admission of the existence and validity of the terms. respectively.one for P15.25 RECOGNITION OF THE PAYMENT OF WAREHOUSEMAN’S LIEN FOR STORAGE FEES AND PRESERVATION EXPENSES. Receipt No. Noah’s Ark Sugar Refinery issued on several dates.obtained by them from the Philippine National Bank. 1991. Ramos and Zoleta then used the quedans as security for two loan agreements . 1989. 18086. From the same facts but on a different perspective. 90-53023. Jr. the Philippine National Bank wrote to Noah’s Ark Sugar Refinery demanding delivery of the sugar stocks covered by the quedans endorsed to it by Zoleta and Ramos. In other words. Receipt No. because a warehouseman’s lien is possessory in nature. 18080 and 18081 were negotiated and endorsed to Luis T.. POSSESSORY IN NATURE. defendants agreed to sell to Rosa Ng Sy of RNS Merchandising and Teresita Ng of St. including the unqualified recognition of the payment of warehouseman’s lien for storage fees and preservation expenses. The receipts are substantially in the form. Jimmy T. managing partner. . 18086.*** In an agreement dated April 1. Se. The unconditional presentment of the receipts by the petitioner for payment against private respondents on the strength of the provisions of the Warehouse Receipts Law (R.5 million . Zoleta. Respondent Judge Benito C. covering sugar deposited by St. Ramos. 2. Go and Wilson T. Zoleta failed to pay their loans upon maturity on January 9. of the Regional Trial Court of Manila. Go. (d)March 31. and Executive Vice President of Noah’s Ark. the last three being identified as the sole proprietor. Also prayed for by the petition is a Writ of Prohibition to require respondent RTC Judge to desist from further proceeding with Civil Case No. and contains the terms. the following Warehouse Receipts (Quedans): (a) March 1.While the PNB is entitled to the stocks of sugar as the endorsee of the quedans. Petitioner may not now retrieve the sugar stocks without paying the lien due private respondents as warehouseman.. authorizing reception of evidence to establish the claim of respondents Noah’s Ark Sugar Refinery. 2137. et al. 10. (b) March 7. 1989. Imperative is the right of the warehouseman to demand payment of his lien at this juncture. covering sugar deposited by Rosa Sy. Alberto T.000. the Warehouse Receipts Law. 18087 and 18062 were negotiated and endorsed to Cresencia K. the subsequent endorsers and plaintiff itself did not acquire a better right of ownership than the original vendees/first endorsers. 18087. 1989. Subsequently. declaring the validity of private respondents’ warehouseman’s lien under Section 27 of Republic Act No 2137 and ordering that execution of the Court of Appeals’ decision.. averring as they did that: “9. *** The corresponding payments in the form of checks issued by the vendees in favor of defendants were subsequently dishonored by the drawee banks by reason of ‘payment stopped’ and ‘drawn against insufficient funds. ID. Jr. dated March 1. Receipt No. 18062. Consequently. defendants refused to deliver to vendees therein the quantity of sugar covered by the subject quedans.. 1990.

. et al. On January 31. 1993. 1992. the PNB filed an appeal from the RTC decision with the Supreme Court. on August 22. On June 18. Go. To require a trial notwithstanding pertinent allegations of the pleadings and other facts appearing on the record. 1994. the Philippine National Bank filed a Motion for the Issuance of a Writ of Execution and an Opposition to the Omnibus Motion filed by private respondents. dated September 1. Rules of Court). . Go and Wilson T. 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. the Philippine National Bank filed a Motion for Summary Judgment in favor of the plaintiff as against the defendants for the reliefs prayed for in the complaint. 156 SCRA 753. We find the respondent Court to have acted in grave abuse of discretion which justify holding null and void and setting aside the Orders dated May 2 and July 4.”3 On September 29. 25938.’ with legal interest thereon from the filing of the complaint until full payment. praying that the latter be ordered to deliver or return to them the quedans (previously endorsed to PNB and the subject of the suit) and pay damages and litigation expenses. fictitious. Go. Looyuko. vs. 25938 on December 13. would constitute a waste of time and an injustice to the PNB whose rights to relief to which it is plainly entitled would be further delayed to its prejudice.00) as well as the costs. 1991. 1995. the respondent Court ruled that ‘questions of law should be resolved after and not before. The trial court granted private respondents’ Omnibus Motion on December 20. Thereupon. Jimmy T. Looyuko. doing business under the trade name and style Noah’s Ark Sugar Refinery against Rosa Ng Sy and Teresita Ng.1 million. depositions. A Supplemental/Second Motion for Reconsideration with leave of court was filed by private respondents on November 8. 1992. the Court of Appeals nullified and set aside the orders of May 2 and July 4. is essentially to the effect that the transaction between them. or alternatively. On June 9. which was affirmed in toto by this Court and which became unalterable upon becoming final and executory. We denied private respondents’ motion on January 10. et al. 1993 is precisely that set out in the final and executory decision of the Court of Appeals in CA-G. No. and thus. Go.R SP. 107243. Mercado. the defenses as to the main issue do not tender material questions of fact (see Garcia vs. private respondents moved for reconsideration of this decision. jointly and severally: (a) to deliver to the petitioner Philippine National Bank. the Regional Trial Court issued an order denying the Motion for Summary Judgment. to pay (said) plaintiff actual damages in the amount of P39. they are not answerable in damages to him. 1991. the trial court rendered judgment dismissing plaintiffs complaint against private respondents for lack of cause of action and likewise dismissed private respondents’ counterclaim against PNB and of the Third-Party Complaint and the Third-Party Defendant’s Counterclaim. G. on the other. “4 Private respondents thereupon filed before the trial court an Omnibus Motion seeking among others the deferment of the proceedings until private respondents are heard on their claim for warehouseman’s lien. Court of Appeals. . Private respondents filed a Motion Seeking Clarification of the Decision. 1993. is reversed and set aside and a new one rendered conformably with the final and executory decision of the Court of Appeals in CA-G. 1992. Go and Wilson T. and that a summary judgment be rendered forthwith in favor of the PNB against Noah’s Ark Sugar Refinery. Jimmy T. Pertinent portions of the decision of the Court of Appeals read: “In issuing the questioned Orders. In issuing the questioned Orders. SO ORDERED. On February 21. This Court rendered judgment on September 1. 1993.26 The Answer incorporated a Third-Party Complaint by Alberto T. On September 4. 1994 and set reception of evidence on their claim for warehouseman’s lien.“2 On December 13.R. dated December 13. Alberto T. On the other hand. Rule 34. 1990 of respondent Court. 1991.R. 1994. SP No. (See Vergara vs. 4. ‘the sugar stocks covered by the Warehouse Receipts/ Quedans which are now in the latter’s possession as holder for value and in due course. 1992. the questions of fact are properly litigated. litigation expenses and judicial costs hereby fixed at the amount of One Hundred Fifty Thousand Pesos (P150. ordering the private respondents Noah’s Ark Sugar Refinery. 1993. SP. and (b) to pay plaintiff Philippine National Bank attorney’s fees. 1990 of the Regional Trial Court and ordered the trial court to render summary judgment in favor of the PNB. the Philippine National Bank filed a Petition for Certiorari with the Court of Appeals. No. concerning the quedans and the sugar stocks covered by them was merely a simulated one being part of the latter’s complex banking schemes and financial maneuvers. The Answer of Rosa Ng Sy and Teresita Ng. dated September 6. The trial court thereafter gave both parties five (5) days to file respective memoranda. 9053023.000. by way of a Petition for Review on Certiorari under Rule 45 of the Rules of Court. 167 SCRA 815) or the issues thus tendered are in fact sham. Court of Appeals. 162 SCRA 75). docketed as CA-G.’ A scrutiny of defendant’s affirmative defenses does not show material questions of fact as to the alleged nonpayment of purchase price by the vendees/first endorsers. the dispositive portion of which reads: “WHEREFORE. private respondents’ claim for lien was heard and evidence was received in support thereof. The resolution of the PNB’s Motion for Execution was ordered deferred until the determination of private respondents’ claim. 1991. No.. et al. admissions and documents on file. 1990. Suelto. on the one hand. as prayed for in petitioner’s Motion for Summary Judgment. 25938. set up in bad faith or so unsubstantial as not to constitute genuine issues for trial.R. On May 2. contrived. The questioned Orders themselves do not specify what material facts are in issue. the trial court denied PNB’s Motion for Reconsideration. We denied this motion in this manner: “It bears stressing that the relief granted in this Court’s decision of September 1. the trial judge’s decision in Civil Case No. and which nonpayment is not disputed by PNB as it does not materially affect PNB’s title to the sugar stocks as holder of the negotiable quedans. 1991. and Jimmy T. one of avoidance. (See Sec. dated June 18.

this court hereby finds that there exists in favor of the defendants a valid warehouseman’s lien under Section 27 of Republic Act 2137 and accordingly. THUS. Petitioner’s submission is on a technicality. 1992 RTC DECISION IN CIVIL CASE NO. dated December 13. the Philippine National Bank filed the herein petition to seek the nullification of the above-assailed orders of respondent judge. Of considerable relevance is the pertinent stipulation in the subject Warehouse Receipts which provides for respondent Noah’s Ark’s right to impose and collect warehouseman’s lien: “Storage of the refined sugar quantities mentioned herein shall be free up to one (1) week from the date of the quedans covering said sugar and thereafter. 25938 and did not make any finding on the matter of the warehouseman’ s lien. 1994. 90-52023 III RESPONDENT RTC’S ONLY JURISDICTION IS TO ISSUE THE WRIT TO EXECUTE THE SUPREME COURT DECISION. 25938. dated September 1. They further contend that our resolution.R. If they were still the owners. RESPONDENT RTC’S MINISTERIAL AND MANDATORY DUTY IS TO ISSUE THE WRIT OF EXECUTION TO IMPLEMENT THE DECRETAL PORTION OF SAID SUPREME COURT DECISION II RESPONDENT RTC IS WITHOUT JURISDICTION TO HEAR PRIVATE RESPONDENTS’ OMNIBUS MOTION. On the other hand. SP. 107243. AND FAILURE TO APPEAL FROM THE JUNE 18. there was no point in taking up the issue of warehouseman’s lien since the matter of ownership was as yet being determined. 1994 of the motion seeking clarification of our decision. 107243.R NO. dated June 18. wherein we affirmed in full and adopted the Court of Appeals’ earlier decision. we could not contemplate the matter of warehouseman’s lien because the issue to be finally resolved then was the claim of private respondents for retaining ownership of the stocks of sugar covered by the endorsed quedans. 1993. storage fees shall be charged in accordance with the Refining Contract under which the refined sugar covered by this Quedan was produced. In adjudication thereof. NO.R. “5 Consequently. which denied Noah’s Ark’s motion for clarification of our decision.G. 90-53023 AND COMMITTING OTHER ACTS VIOLATIVE OF THE SUPREME COURT DECISION IN G. execution of the judgment is hereby ordered stayed and/ or precluded until the full amount of defendants’ lien on the sugar stocks covered by the five (5) quedans subject of this action shall have been satisfied conformably with the provisions of Section 31 of Republic Act 2137. 1994. private respondents maintain that they could not have claimed the right to a warehouseman’ s lien in their Answer to the complaint before the trial court as it would have been inconsistent with their stand that they claim ownership of the stocks covered by the quedans since the checks issued for payment thereof were dishonored. Petitioner asseverates that the denial by this Court on March 9. 1991. SP. dated December 13. We are not persuaded by the petitioner’s argument that our said resolution carried with it the denial of the warehouseman’s lien over the sugar stocks covered by the subject Warehouse Receipts. the issuance of the Warehouse Receipts not being disputed by the private respondents.R.27 On February 28. Zoleta and Luis T. 1991. 1992. 1991 COURT OF APPEALS DECISION IN CA-G. AND (3) A WRIT OF MANDAMUS TO COMPEL RESPONDENT RTC TO ISSUE THE WRIT TO EXECUTE THE SUPREME COURT JUDGMENT IN FAVOR OF PNB” The issues presented before us in this petition revolve around the legality of the questioned orders of respondent judge.R. (2) A WRIT OF PROHIBITION TO PREVENT RESPONDENT RTC FROM FURTHER PROCEEDING WITH CIVIL CASE NO. issued as they were after we had denied with finality private respondents’ contention that the PNB could not compel them to deliver the stocks of sugar in their warehouse covered by the endorsed quedans or pay the value of the said stocks of sugar. AND (2) ARE BARRED FOREVER BY PRIVATE RESPONDENTS’ FAILURE TO INTERPOSE THEM IN THEIR ANSWER. the propriety of summary judgment which was then assailed by private respondents. 1994 RESOLUTION DENYING PRIVATE RESPONDENTS’ ‘MOTION FOR CLARIFICATION OF DECISION’ IN . PNB IS ENTITLED TO: (1) A WRIT OF CERTIORARI TO ANNUL THE RTC RESOLUTION DATED DECEMBER 20. We in effect further affirmed the finding that Noah’s Ark is a warehouseman which was obliged to deliver the sugar stocks covered by the Warehouse Receipts pledged by Cresencia K. considering the circumstances obtaining before the trial court. that is. datedSeptember 1. 1994 AND THE ORDER DATED FEBRUARY 7. 1995AND ALL PROCEEDINGS TAKEN BY THE RTC THEREAFTER. We have simply resolved and upheld in our decision. NO.R. We find for private respondents on the foregoing issue and so the petition necessarily must fail. 1992 SUPREME COURT DECISION IN G. that private respondents have lost their right to recover warehouseman’s lien on the sugar stocks covered by the five (5) Warehouse Receipts for the reason that they failed to set up said claim in their Answer before the trial court and that private respondents did not appeal from the decision in this regard. it would have been absurd for them to ask payment for storage fees and preservation expenses. “6 . 1993. 1995: “WHEREFORE. NO. has foreclosed private respondents’ right to enforce their warehouseman’s lien for storage fees and preservation expenses under the Warehouse Receipts Act. In disposing of the private respondents’ motion for clarification. we ruled therein that. No. of the Court of Appeals (6th Division) in CA-G. the Philippine National Bank filed a Manifestation with Urgent Motion to Nullify Court Proceedings. dated March 9. in CA-G. 1995. THE NOVEMBER 9. a summary judgment in favor of PNB was proper. We have carefully examined our resolution. Ramos to the petitioner pursuant to the pertinent provisions of Republic Act 2137. 1993. SP. dated March 9. as our resolution merely affirmed and adopted the earlier decision. No. THE CLAIMS SET FORTH IN SAID MOTION: (1) WERE ALREADY REJECTED BY THE SUPREME COURT IN ITS MARCH 9. AND. The PNB submits that: “I PNB’s RIGHT TO A WRIT OF EXECUTION IS SUPPORTED BY TWO FINAL AND EXECUTORY DECISIONS: THE DECEMBER 13. dated September 1. Stated otherwise. 25938. Neither could storage fees be due then while no one has been declared the owner of the sugar stocks in question. 107243. the trial court issued the following order on March 1. denying their motion for clarification did not preclude their right to claim their warehouseman’s lien under Sections 27 and 31 of Republic Act 2137. In effect.

” Petitioner is in estoppel in disclaiming liability for the payment of storage fees due the private respondents as warehouseman while claiming to be entitled to the sugar stocks covered by the subject Warehouse Receipts on the basis of which it anchors its claim for payment or delivery of the sugar stocks. JJ. law and equity dictate the payment of the warehouseman’ s lien pursuant to Sections 27 and 31 of the Warehouse Receipts Law (R. but the warehouseman. Zoleta for a loan of P39. the goods under storage may not be delivered until said lien is satisfied. and Kapunan. 1995. in accordance with Section 29 of the Warehouse Receipts Law. Petitioner may not now retrieve the sugar stocks without paying the lien due private respondents as warehouseman. WHEREFORE. xxx xxx xxx Warehouse Receipts. 25938. uphold and sustain the validity of the assailed orders of public respondent. Ramos and Cresencia K. by the Court of Appeals on December 13. . weighing coopering and other charges and expenses in relation to such goods. the rule may be simplified thus: While the PNB is entitled to the stocks of sugar as the endorsee of the quedans. We. 1993. . interest. also for all reasonable charges and expenses for notice. Padilla (Chairman). dated December 20. in CA-G. insurance.A warehouseman having a lien valid against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied. after being declared as warehouseman. 1159.A. Therese Merchandising. it cannot disclaim liability for the payment of the storage fees stipulated therein.R. SO ORDERED. and for sale of the goods where default has been made in satisfying the warehouseman’s lien. No. the decision having been affirmed by us on December 1. validity and genuineness of the Warehouse Receipts on which it anchors its claim for payment against private respondents. In view of the foregoing. hereby dismissed for lack of merit. the receipts must be respected by authority of Article 1159 of the Civil Code. storage fees are chargeable. a warehouseman shall have lien on goods deposited or on the proceeds thereof in his hands. dated December 13. the lien may be lost where the warehouseman surrenders the possession of the goods without requiring payment of his lien. 1994 and March 1. SP. including the unqualified recognition of the payment of warehouseman’s lien for storage fees and preservation expenses. Warehouseman need not deliver until lien is satisfied. concur.. In other words. therefore. 2137).A.. “SECTION 31. to wit: “ART. private respondents cannot legally be deprived of their right to enforce their claim for warehouseman’s lien. therefore. the petition should be. SECTION 31. SP. As contracts. Bellosillo. 1991. Even in the absence of such a provision.A warehouseman having a lien valid against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied. because. the warehouseman loses his lien upon goods by surrendering possession thereof.” After being declared not the owner. Petitioner anchors its claim against private respondents on the five (5) Warehouse Receipts issued by the latter to third-party defendants Rosa Ng Sy of RNS Merchandising and Teresita Ng of St. delivery to it shall be effected only upon payment of the storage fees. Pursuant to Section 31 which we quote hereunder. The questioned orders issued by public respondent judge are affirmed. we fail to see any taint of abuse of discretion on the part of the public respondent in issuing the questioned orders which recognized the legitimate right of Noah’s Ark. labor. Jr. The unconditional presentment of the receipts by the petitioner for payment against private respondents on the strength of the provisions of the Warehouse Receipts Law (R.1 Million. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. did not preclude private respondents’ unqualified right to establish its claim to recover storage fees which is recognized under Republic Act No. In fine. Warehouseman need not deliver until lien is satisfied. 2137. conditions and stipulations written on the face of the . Neither did the Court of Appeals’ decision. that. dated March 9. . transportation. was intended to guide the parties in the subsequent disposition of the case to its final end.28 It is not disputed. dated December 13. which found their way to petitioner after they were negotiated to them by Luis T. 2137). for reasonable storage fees and preservation expenses. because a warehouseman’s lien is possessory in nature. and advertisement of sale.” Considering that petitioner does not deny the existence. also for all lawful claims for money advanced. 25938. 1994.Subject to the provisions of section thirty. Imperative is the right of the warehouseman to demand payment of his lien at this juncture.A. to recover storage fees before it would release to the PNB sugar stocks covered by the five (5) Warehouse Receipts. We certainly did not foreclose private respondents’ inherent right as warehouseman to collect storage fees and preservation expenses as stipulated n the face of each of the Warehouse Receipts and as provided for in the Warehouse Receipts Law (R. for all lawful charges for storage and preservation of the goods. 1991. Our Resolution’s reference to the decision by the Court of Appeals. under the subject Warehouse Receipts provision.R. 2137) carried with it the admission of the existence and validity of the terms. What claims are included in the warehouseman’s lien. Vitug. No. petitioner PNB is legally bound to stand by the express terms and conditions on the face of the Warehouse Receipts as to the payment of storage fees. restrict such right. 1991 in CA-G. Costs against the petitioner. to wit: “SECTION 27. Accordingly. as it is. Our resolution.

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