PHILIPPINE NATIONAL BANK, PETITIONER, VS. NOAH’S ARK SUGAR REFINERY, ALBERTO T. LOOYUKO, JIMMY T. WILSON T. GO, RESPONDENTS.

The case at bar involves the
extraordinary situation in which a Regional Trial Judge — after receiving
notice of the final and executory judgment of the Court of Appeals in a special
civil action of certiorari in
which said Trial Judge was a respondent, and which judgment contained the
following disposition, viz.:

“In issuing the questioned Orders, We find the respondent Court to
have acted in grave abuse of discretion which justify holding null and void and
setting aside the Orders dated May 2 and July 4, 1990 of respondent Court, and
that a summary judgment be rendered forthwith in favor of the PNB against
Noah’s Ark Sugar Refinery, et al., as prayed for in petitioner’s Motion for
Summary Judgment.

SO ORDERED.”

—
proceeded to render judgment, not “in favor of the PNB against Noah’s Ark
Sugar Refinery, et al.,” but in favor of the latter and its co-­defendants. That judgment
has been appealed by PNB to this Court” on pure questions of law.”

No dispute exists about
the facts which gave rise to the controversy at bar.

In accordance with Act
No. 2137, the Warehouse Receipts Law, Noah’s Ark Sugar Refinery issued on
several dates warehouse receipts (quedans) as follows:

March 1, 1989, receipt No. 18062 covering sugar deposited by Rosa
Sy;

March 7, 1989, receipt No. 18080 covering sugar deposited by RNS
Merchandising (Rosa Ng Sy);

March 21, 1989, receipt No. 18081 covering sugar deposited by RNS
Merchandising;

March 31, 1989, receipt No. 18086 covering sugar deposited by St.
Therese Merchandising; and

April 1, 1989, receipt No.18087 covering sugar deposited by RNS
Merchandising.

The receipts are substantially in the form, and contain the
terms, prescribed for negotiable warehouse receipts by Section 2 of the law.

Subsequently, warehouse receipts Numbered 18080 and 18081
(covering sugar deposited by RNS Merchandising) were negotiated and indorsed to
Luis T. Ramos; and receipts Numbered 18086 (sugar of St. Therese
Merchandising), 18087 (sugar of RNS Merchandising) and 18062 (sugar of Rosa Sy)
were negotiated and indorsed to Cresencia K. Zoleta. Zoleta and Ramos then
used the quedans as security for loans obtained by them from the
Philippine National Bank (PNB) in the amounts of P23.5 million and P15.6
million, respectively. These quedans
they indorsed to the bank.

Both Zoleta and Ramos failed to pay their loans upon maturity on
January 9, 1990. Consequently on March
16, 1990, PNB wrote to Noah’s Ark Sugar Refinery (hereafter, simply Noah’s Ark)
demanding delivery of the sugar covered by the quedans indorsed to it by
Zoleta and Ramos. When Noah’s Ark
refused to comply with the demand, PNB filed with the Regional Trial Court of
Manila a verified complaint for “Specific Performance with Damages and
Application for Writ of Attachment” against Noah’s Ark, Alberto T. Looyuko,
Jimmy T. Go, and Wilson T. Go, the last three being identified as “the Sole
Proprietor, Managing Partner and Executive Vice President of Noah’s Ark **,
respectively.”

The Court, by Order dated June 28, 1990, denied the application
for preliminary attachment after conducting a hearing thereon. It denied as well the motion for
reconsideration thereafter filed by PNB, by Order dated August 22, 1990.

Noah’s Ark and its co-defendants then filed their responsive
pleading entitled “Answer with Counterclaim and Third Party Complaint,” dated
June 21, 1990 in which they claimed, inter alia, that they “are still
the legal owners of the subject quedans and the quantity of sugar represented
thereon,” a claim founded on the following averments, to wit:

“ * * In an agreement dated April 1, 1989, defendants agreed to
sell to Rosa Ng Sy of RNS Merchandising and Teresita Ng of St. Therese
Merchandising the total volume of sugar indicated in the quedans stored at
Noah’s Ark Sugar Refinery for a total consideration of P63,000,000.00, * * . The corresponding payments in the form of
checks issued by the vendees in favor of defendants were subsequently
dishonored by the drawee banks by reason of ‘payment stopped’ and ‘drawn
against insufficient funds,’ * *. Upon
proper notification to said vendees and plaintiff in due course, defendants
refused to deliver to vendees therein the quantity of sugar covered by subject
quedans.

“ **. Considering that the
vendees and first indorsers of subject quedans did not acquire ownership
thereof, the subsequent indorsers and plaintiff itself did not acquire a better
right of ownership than the original vendees/first indorsers.”

The defendants also adverted to PNB’s supposed awareness “that
subject quedans are not negotiable instruments within the purview of the Wareouse
Receipts Law but simply an internal guarantee of defendants in the sale of
their stocks of sugar. ** .”

The answer incorporated a third party complaint by Alberto
Looyuko, Jimmy T. Go and Wilsons T. Go (“doing business under the name and
style of Noah’s Ark Sugar Refinery”) against Rosa Ng Sy and Teresita Ng,
praying that the latter be ordered to deliver or return to them the quedans
(eventually indorsed to the PNB and now subject of this suit) and pay damages
and litigation expenses.

The answer of Rosa Ng Sy and Teresita Ng, dated September 6,
1990, was essentially to the effect that the transaction between them and Jimmy
T. Go concerning the quedans and the sugar thereby covered was “bogus
and simulated (being part of the latter’s) complex banking schemes and
financial maneuvers;” that that simulated transaction “was just a tolling
scheme to avoid VAT payment and other BIR assessments (considering that) as **
confidentially intimated (by said Jimmy Go) ** Noah’s Ark is under
sequestration by the PCGG,” and that the quedans “were in fact used by
Noah’s Ark Executive Director, Luis T. Ramos, and one Cresenciana K. Zoleta as
security for their loans from the bank ** ** (in the aggregate amount) of P39.1
million pesos.”

On January 31, 1991, PNB
filed a “Motion for Summary Judgment.” It asserted that “from the pleadings,
documents, and admissions on file, there is no genuine issue as to a material
fact proper for trial and that plaintiff is entitled as a matter of law, **
(to) a summary judgment.” It contended that the defenses set up by Noah’s Ark,
et. al. in their responsive pleading involve “purely questions of law” — i.e.,
(a) that the vendees of the sugar covered by the quedans in dispute never acquired title to the goods
because of their failure to pay the stipulated purchase price and hence,
ownership over the sugar was retained by Noah’s Ark, et al.; and (b) PNB’s
action is premature since as pledgee it failed to exercise the remedies
provided in the contract of pledge and the Civil Code. And it specified in no little detail the
admissions and documents on record demonstrating the absence of any genuine
factual issue. On these premises, it
prayed “that a summary judgment be rendered for plaintiff against the defendants
for the reliefs prayed for in the complaint,” these reliefs being:

“(a) to deliver to PNB 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; or alternatively, to pay plaintiff actual
damages in the amount of P39.1 Million exclusive of interest, penalties and
charges; and

(b) to pay plaintiff attorney’s fees,
litigation expenses and judicial costs estimated at no less than P1 Million;
(and) such other reliefs just and equitable under the premises”

An opposition to the motion was presented by defendants Noah’s
Ark, et al., dated March 4, 1991, asserting the existence of genuine issues, to
wit: whether or not the sale was ever
consummated considering that “the checks issued by the first indorsees in payment
of said quedans bounced,” and whether or not PNB acquired ownership over the quedans
considering that “it did not dispose (of) said quedans under Art. 2112 of the
Civil Code, as specifically reflected in the contract of pledge,” both
contentions allegedly being “material facts which has (sic) to be supported by
evidence.”

The third-party defendants (Rosa Ng Sy and Teresita Ng) also
opposed the motion for summary judgment insofar as concerned their counterclaim
in relation to the third-party complaint asserted against them.

On May 2, 1991, the Trial Court issued an Order denying the
motion for summary judgment on the ground that an “examination of the pleadings
and the record readily shows that there exists sharply conflicting claims among
the parties relative to the ownership of the sugar quedans as to whether or not
the subject quedans falls (sic) squarely within the coverage of the Warehouse
Receipts Law and whether or not the transaction between plaintiff and third
party defendants is governed by contract of pledge that would require
plaintiffs compliance with Art. 2112, Civil Code on pledge as regards the
disposition of the subject quedans.” PNB’s motion for reconsideration was
denied by Order dated July 4, 1991.

PNB thereupon filed a petition for certiorari with the
Court of Appeals, which was docketed as CA-G.R. SP No. 25938. This special civil action eventuated in a
Decision promulgated on December 13, 1991 by the Sixth Division of that Court,^[1]
nullifying and setting aside the challenged Orders of May 2, 1991 and July 4,
1991, and commanding that “summary judgment be rendered forthwith in favor of
the PNB against Noah’s Ark Sugar Refinery, et al., as prayed for in
petitioner’s Motion for Summary Judgment.” Said the Appellate Court:^[2]

“In issuing the questioned Orders, the respondent Court ruled that
‘questions of law should be resolved after and not before, the questions of
fact are properly litigated.’ A scrutiny of defendants’ affirmative defenses
does not show material questions of fact as to the alleged non­-payment of
purchase price by the vendees/first indorsers, and which non-­payment is not
disputed by PNB as it does not materially affect PNB’s title to the sugar stock
as holder of the negotiable quedans.

What is determinative of the propriety of summary judgment is not
the existence of conflicting claims from prior parties but whether from an
examination of the pleadings, depositions, admissions and documents on file,
the defenses as to the main issue do not tender material questions of fact (see
Garcia vs. Court of Appeals, 167 SCRA 815) or the issues thus tendered are in
fact sham, fictitious, contrived, set up in bad faith or so unsubstantial as
not to constitute genuine issues for trial. (See Vergara vs. Suelto, et al., 156 SCRA 753; Mercado, et al. vs. Court
of Appeals, 162 SCRA 75). The
questioned Orders themselves do not specify what material facts are in
issue. (See Sec. 4, Rule 34, Rules of
Court).

To require a trial notwithstanding pertinent allegations of the
pleadings and other facts appearing on record, would constitute a waste of time
and an injustice to the PNB whose rights to relief to which it is plainly
entitled would be further delayed to its prejudice.

In issuing the questioned Orders, We find the respondent Court to
have acted in grave abuse of discretion which justify holding null and void and
setting aside the Orders dated May 2 and July 4, 1990 of respondent Court, and that a summary judgment be rendered forthwith
in favor of the PNB against Noah’s Ark Sugar Refinery, et al., as prayed
for in petitioner’s Motion for Summary Judgment.

SO ORDERED.”

Noah’s Ark, et al. moved for reconsideration, but their motion
was denied by the Appellate Tribunal’s Resolution dated March 6, 1991.

The judgment became final. Entry of Judgment was made on May 26, 1992. Thereafter the case was remanded to the Court of origin.

On June 18, 1992, the Regional Trial Court rendered judgment, but
not in accordance with the aforesaid decision of the Court of Appeals. As stated in the opening paragraph of this
opinion, instead of a summary judgment “in favor of the PNB against Noah’s Ark
Sugar Refinery, et al., as prayed for in ** (PNB)’s Motion for Summary
Judgment,” the Trial Court’s verdict decreed the dismissal of “plaintiffs
complaint against defendants Noah’s Ark Sugar Refinery, Alberto T. Looyuko,
Jimmy Go and Wilson T. Go ** ** for lack of cause of action;” and dismissal as
well of the counterclaim pleaded by the latter against PNB, and of the
third-party complaint, and the third-party defendants’ counterclaim.

The Trial Court declared that if “the only material facts
established on the basis of the pleadings, documentary evidence on record,
admissions and stipulations during the hearing on PNB’s application for a writ
of preliminary attachment, are the facts as alleged by plaintiff and accepted
as established by the Court of Appeals, this Court will have no difficulty in
finding for plaintiff as prayed for in its motion for summary judgment. But are the facts alleged by plaintiff the
only material facts established on the bais of the pleadings, documentary
evidence on record, stipulations and admissions during the proceedings on the
application for a writ of preliminary attachment?” To this question the Trial
Court gave a negative answer, it being its view that other facts, “as alleged
by defendants ** (and) not disputed by PNB, have been likewise established.”

The Trial Court later denied PNB’s motion for reconsideration (by
Order dated September 4, 1992), evidently finding merit in the argument of
Noah’s Ark, et al., therein quoted, that “Certiorari as a mode of appeal
involves the review of judgment, award of a final order on the merits, while
the original action for certiorari and as a special civil action is
generally directed against an intelocutory order of the Court, prior to an
appeal from the judgment of the main case which in the case at bar is specific
performance ** .”

Hence, this appeal.

In CA-G.R. SP No. 25938 above mentioned, after an extensive
review of the entire record of the case before the Regional Trial Court
(including the admissions of Noah’s Ark, et al. and the parties’ stipulations
of fact), as well as the pleadings filed by the parties before it, the Court of
Appeals arrived at the conclusion that a summary judgment was proper since
“there was no substantial controversy on a(ny) material fact, the only issues
for the Court’s determination ** (being) purely ** questions of law, as
follows:

1) Whether or not the non-payment of the
purchase price for the sugar stock evidenced by the quedans, by the original
depositors/vendees (RNS Merchandising and St. Therese Merchandising) rendered
invalid the negotiation of said quedans by vendees/first indorsers to indorsers
(Ramos and Zoleta) and the subsequent negotiation of Ramos and Zoleta to PNB.

2) Whether or not PNB as indorsee/pledgee of
quedans was entitled to delivery of sugar stocks from the warehouseman, Noah’s
Ark.”

These legal questions
were disposed of by the Appellate Court as follows:

“The validity of the negotiation by RNS Merchandising and St.
Therese Merchandising to Ramos and Zoleta, and by the latter to PNB to secure a
loan cannot be impaired by the fact that the negotiation between Noah’s Ark and
RNS Merchandising and St. Therese Merchandising was made in breach of faith on
the part of the merchandising firms or by the fact that the owner (Noah’s Ark)
was deprived of the possession of the same by fraud, mistake or conversion of
the person to whom the warehouse receipt/quedan was subsequently negotiated if
(PNB) paid value therefor in good faith without notice of such breach of duty,
fraud, mistake or conversion. (See
Article 1518, New Civil Code). And the
creditor (PNB) whose debtor was the owner of the negotiable document of title
(warehouse receipt) shall be entitled to such aid from the court of appropriate
jurisdiction in attaching such document or in satisfying the claim by means as
is allowed by law or in equity in regard to property which cannot be readily
attached or levied upon by ordinary process. (See Art. 1520, New Civil Code). If the quedans were negotiable in form and duly indorsed to PNB (the
creditor), the delivery of the quedans to PNB makes the PNB the owner of the
property covered by said quedans and on deposit with Noah’s Ark, the warehouseman. (See Sy Cong Bieng & Co. vs Hongkong
& Shanghai Bank Corp., 56 Phil. 598).

In the case at bar, We found that the factual bases underlying the
defendants’ affirmative defenses (upon which PNB has moved for summary udgment)
are not disputed and have been stipulated by the parties and therefore do not
require presentation of evidence. PNB’s
right to enforce the obligation of Noah’s Ark as a warehouseman, to deliver the
sugar stock to PNB as holder of the quedans, does not depend on the outcome of
the third-party complaint because the validity of the negotiation transferring
title to the goods to PNB as holder of the quedans is not affected by any act
of RNS Merchandising and St. Therese Merchandising, in breach of trust, fraud
or conversion against Noah’s Ark.”

The Court considers the
Appellate Court’s conclusions of fact and law to be correct.

The Trial Judge’s
argument that the Appellate Court’s decision failed to take account of other
“material facts established on the basis of the pleadings, documentary evidence
on record, stipulations and admissions during the proceedings on the
application for a writ of preliminary attachment,” is quite transparently
specious. For the matters cited by His
Honor, as allegedly not examined by the Court of Appeals, were in fact duly
considered by the latter — i.e., that “the various postdated checks issued by
the buyers (RNS Merchandising and St. Therese Merchandising) in favor of Noah’s
Ark were dishonored when presented for payment ** (and hence) the buyers never
acquired title to the sugar evidenced by the quedans,”^[3] and that PNB “did not follow the procedure
stated in Article 2112 of the Civil Code.”^[4] In its decision, as just pointed out, the
Court of Appeals explicitly ruled that the “validity of the negotiation” of the
quedans to PNB “cannot be impaired by the fact that the negotiation
between Noah’s Ark and RNS Merchandising and St. Therese Merchandising was made
in breach of faith on the part of the merchandising firms or by the fact that
the owner (Noah’s Ark) was deprived of the possession of the same by fraud,
mistake or conversion ** .”^[5] It
also ruled that the quedans were negotiable documents and had been duly
negotiated to the PNB which thereby acquired the rights set out in Article 1513
of the Civil Code,”^[6]
viz.”

“(1) Such
title to the goods as the person negotiating the document to him had or had
ability to convey to a purchaser in good faith for value and also such title to
the goods as the person to whose order the goods were to be delivered by the
terms of the document had or had ability to convey to a purchaser in good faith
for value; and

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

The Court of Appeals
found correctly that the indications in the pleadings to the contrary
notwithstanding, no substantial triable issue of fact actually existed,
and that certain issues raised in answer, even if taken as established, would
not materially change the ultimate findings relative to the main claim.^[7]
Its decision is entirely in accord with this Court’s rulings regarding the
propriety of summary judgments invoked by the Appellate Tribunal; i.e., Vergara,
Sr. v. Suelto,^[8]
and Mercado v. Court of Appeals.^[9]
According to Vergara, for instance, “even if the answer does tender
issues — and therefore a judgment on the pleadings is not proper — a summary
judgment may still be rendered on the plaintiff’s motion if he can show to the
Court’s satisfaction that except as to the amount of damages, there is no
genuine issue as to any material fact,^[10] that
is to say, the issues thus tendered are not genuine, are in other words sham,
fictitious, contrived, set up in bad faith, patently unsubstantial.^[11]
The determination may be made by the Court on the basis of the pleadings, and
the depositions, admissions and affidavits that the movant may submit, as well
as those which the defendant may present in turn.^[12]“

In any event, the
conclusions of fact and law set out in the Appellate Court’s decision are
undeniably binding on all the parties to the case, the respondent
Regional Trial Judge included. Having
been rendered by a competent court within its jurisdiction, and having become
final and executory, the decision now operates as the immutable law among the
parties, the respondent Trial Judge included; it has become the law of the case
and may no longer, in subsequent proceedings, be altered or modified in any
way, much less reversed or set at naught, by the latter, or any other judge,
not even by the Supreme Court; it is an unalterable determination of the
propriety of a summary judgment in the action in question, and upon all the
issues therein raised or which could have been raised relative to the merits of
said action.^[13]

The Trial Judge may not evade compliance with the final judgment
of the Court of Appeals on the theory that the latter had acted only on a mere
interlocutory order (the order denying PNB’s motion for summary judgment),
while he had subsequently adjudged the the action for specific performance on
the merits. Quite obvious is that the
Court of Appeals had decided that a summary judgment was proper in said action
of specific performance, that this was in truth a determination of the merits
of the suit, that that decision had become final and executory, and that the
decision expressly commanded His Honor to render such a judgment. Under the circumstances, the latter’s duty
was clear and inescapable.

It was not within the Trial Judge’s competence or discretion to
take exception to, much less overturn, any of the factual or legal conclusions
laid down by the Court of Appeals in its verdict. He was as much bound thereby as the private parties
themselves. His only function was to
implement and carry out the Appellate Tribunal’s judgment. It was an act of supererogation, of
presumptuousness, on His Honor’s part to disregard the Court’s clear and
categorical command, and to dispose of the case in a manner diametrically
opposed thereto. In doing so, the Trial
Judge committed grave error which must forthwith be corrected.

WHEREFORE, the Trial Judge’s Decision in Civil Case No. 90­53023
dated June 18, 1992 is REVERSED and SET ASIDE and a new one rendered
conformably with the final and executory Decision of the Court of Appeals in
CA-G.R. SP No. 25938, ordering the private respondents, Noah’s Ark Sugar
Refinery, Alberto T. Looyuko, Jimmy T. Go and William T. Go, jointly and
severally:

a)  to deliver to the
petitioner Philippine National Bank, “the sugar stocks covered by the Warehouse
Receipts/Quedans which are now in the latter’s possession as holder for value
and in due course; or alternatively, to pay (said) plaintiff actual damages in
the amount of P39.1 Million,” with legal interest thereon from the filing of
the complaint until full payment; and

b)  to pay plaintiff
Philippine National Bank attorney’s fees, litigation expenses and judicial
costs hereby fixed at the amount of one hundred fifty thousand pesos (P150,000.00),
as well as the costs.

SO ORDERED.

Padilla, Regalado, Nocon, and Puno,
JJ., concur.

^[1]
Campos, J., Chairman, ponente; Aldecoa, Jr. and Mendoza, F., JJ,
concurring

^[2]
Italics supplied

^[3]
Rollo, p. 198 (RTC Decision, p. 7)

^[4]
Id., pp. 198-199 (RTC Decision, pp. 7-8)

^[5]
Id., p. 185 (CA Decision, p. 7)

^[6]
Id., pp. 183-185 (CA Decision, pp. 5-6); see also Sections 8 and 41,
Warehouse Receipts Law (Act No. 2137)

^[7]
SEE Londres v. National Life Insurance Co. of the Philippines, 94 Phil.
627, 629, cited in Feria, J. Civil Procedure, 1969 ed., p. 481, also
adverting to Miranda v. Malate Garage & Taxicab, 52 O.G. 5145;
Capital Insurance v. Eberly, 53 O.G. 63; Go Leting & Sons, et al. v.
Leyte Land Trans. Col, L-8887, May 28, 1958; and Philippine National Bank v.
Philippine Leather Co., L-10884, March 31, 1959

^[8]
156 SCRA 753, 760-762 (1987)

^[9]
162 SCRA 75, 83-85 (1988).

^[10]
Footnote No. 18 in text: “Sec. 1, Rule
34. N.B. A defendant may also move for summary judgment in his favor on the theory
that the plaintiffs complaint raises no genuine issue (Sec. 2, Rule 34).”

^[11]
Footnote No. 19 in text, citing cases

^[12]
Footnote No. 20 in text: “Sec. 3, Rule 34, Cadirao v. Estenzo,
132 SCRA 93, 100, supra.”

^[13]
SEE Sec. 49, Rule 39, Rules of Court; see also, Zarate v. Director of
Lands, 39 Phil. 749; Trinidad v. Roman Catholic Archbishop, 63 Phil.
913; People v. Pinuila, 103 Phil. 999; Rodriguez v. Director of
Prisons, 47 SCRA 157; Comilang v. Court of Appeals, 65 SCRA 79