PNB vs. HON. MARCELINO L. SAYO, JR, NOAH'S ARK SUGAR G.R. No. G.R. No.

129918
REFINERY, ALBERTO T. LOOYUKO, JIMMY T. GO and WILSON T.
GO
Date July 9, 1998 Ponente DAVIDE, JR.
TOPIC IN SYLLABUS: Warehouse Receipts Law
SUMMARY: Noah's Ark Sugar Refinery issued Warehouse Receipts (Quedans) covering sugar deposited by Sy, RNS
Merchandising, and St. Therese Merchandising. These Warehouse Receipts were negotiated and endorsed to Ramos and to
Zoleta. Ramos and Zoleta then used the quedans as security for loan from the PNB. The quedans were endorsed by them to
PNB. Ramos and Zoleta failed to pay their loans upon maturity. Hence, PNB wrote to Noah's Ark demanding delivery of the sugar
stocks covered by the quedans endorsed to it by Zoleta and Ramos. Noah's Ark Sugar Refinery refused to comply with the demand
alleging ownership thereof. SC held that private respondents may enforce their warehouseman’s lien and that PNB is liable for
storage fees.

PROCEDURAL ANTECEDENTS:
In this special civil action for certiorari, actually the third dispute between the same private parties to have reached this Court,
petitioner asks us to annul the orders issued by the Regional Trial Court, Manila, Branch 45.

FACTS:
In accordance with the Warehouse Receipts Law, Noah's Ark Sugar Refinery issued on several dates Warehouse Receipts
(Quedans) covering sugar deposited by Rosa Sy, RNS Merchandising, and St. Therese Merchandising. The receipts are
substantially in the form, and contains the terms, prescribed for negotiable warehouse receipts by Section 2 of the law.

Subsequently, Warehouse Receipts were negotiated and endorsed to Luis T. Ramos and to Cresencia K. Zoleta. Ramos and
Zoleta then used the quedans as security for two loan agreements — one for P15.6 million and the other for P23.5 million —
obtained by them from the PNB. The aforementioned quedans were endorsed by them to PNB.

Ramos and Zoleta failed to pay their loans upon maturity. Hence, PNB wrote to Noah's Ark Sugar Refinery demanding delivery of
the sugar stocks covered by the quedans endorsed to it by Zoleta and Ramos. Noah's Ark Sugar Refinery refused to comply with
the demand alleging ownership thereof. It alleged that the owner of Noah’s Ark, Looyuko, entered into an agreement with RNS
and St. Therese Merchandising to sell the sugar indicated in the warehouse receipts stored in Noah for an amount of P63,000,000.
Checks were issued but they were dishonored for being drawn against insufficient funds. PNB filed with the RTC of Manila a
verified complaint for "Specific Performance with Damages and Application for Writ of Attachment" against Noah's Ark Sugar
Refinery, Alberto T. Looyuko, Jimmy T. Go and Wilson T. Go, the last three being identified as the sole proprietor, managing
partner, and Executive Vice President of Noah's Ark, respectively. RTC dismissed said complaint. MR denied.

On appeal to the SC via petition for review on certiorari, the Supreme Court ordered Noah’s Ark and its owner, Looyuko, to deliver
to PNB the sugar stocks covered by the warehouse receipts in controversy. However, Noah’s Ark filed an Omnibus Motion seeking
deferment of the judgment until it was heard on its warehouseman’s lien. RTC granted the order and evidence was received in
support thereof. RTC adjudged that there existed a valid lien in favor of Noah’s Ark, and accordingly, execution of the judgment
against Noah’s Ark should be stayed until the full amount of Noah’s lien shall have been satisfied. PNB then filed certiorari
proceedings before the Supreme Court. The SC held that while PNB was entitled to the sugar stocks as endorsee of the receipts,
delivery to it shall only be effected upon payment of the storage fees. The Supreme Court further ruled that imperative is the right
of the warehouseman to demand payment of his lien because he loses his lien upon goods by surrendering possession
thereof.RTC Judge Sayo, Jr. allowed a writ of execution in favor of Noah to collect on its warehouseman’s lien against PNB.
Hence, this certiorari proceeding before the Supreme Court.

ISSUES:
1. WON private respondents may enforce their warehouseman’s lien. YES.
2. WON PNB is liable for storage fees. YES.

RULING:
1. Under the Special Circumstances in This Case, Private Respondents May Enforce Their Warehouseman's Lien.
The remedies available to a warehouseman, such as private respondents, to enforce his warehouseman's lien are:
(1) To refuse to deliver the goods until his lien is satisfied, pursuant to Section 31 of the Warehouse Receipt Law;
(2) To sell the goods and apply the proceeds thereof to the value of the lien pursuant to Sections 33 and 34 of the Warehouse
Receipts Law; and
(3) By other means allowed by law to a creditor against his debtor, for the collection from the depositor of all charges and advances
which the depositor expressly or impliedly contracted with the warehouseman to pay under Section 32 of the Warehouse Receipt
Law; or such other remedies allowed by law for the enforcement of a lien against personal property under Section 35 of said law.
The third remedy is sought judicially by suing for the unpaid charges.
CAB: Initially, private respondents availed of the first remedy. While the most appropriate remedy for private respondents was an
action for collection, SC already recognized their right to have such charges and fees determined. The import of SC’s holding was
that private respondents were likewise entitled to a judgment on their warehouse charges and fees, and the eventual satisfaction
thereof, thereby avoiding having to file another action to recover these charges and fees, which would only have further delayed
the resolution of the respective claims of the parties, and as a corollary thereto, the indefinite deferment of the execution of the
judgment. Thus we note that petitioner, in fact, already acquiesced to the scheduled dates previously set for the hearing on private
respondents' warehouseman's charges. But, it would be premature to execute the order fixing the warehouseman's charges and
fees.

2. Petitioner is Liable for Storage Fees.

Petitioner insisted that it was a mere pledgee as the quedans were used to secure two loans it granted.
The SC agreed with this and held that the indorsement and delivery of the receipts by Ramos and Zoleta to PNB was not to convey
title to or ownership of the goods but to secure the loans by way of pledge. The indorsement of the receipts to perfect the pledge
merely constituted a symbolical or constructive delivery of the possession of the thing thus encumbered. The creditor, in a contract
of real security, like pledge, cannot appropriate without foreclosure the things given by way of pledge. Any stipulation to the
contrary is null and void for being pactum commissorio. The law requires foreclosure in order to allow a transfer of title of the goods
given by way of security from its pledgor, and before any such foreclosure, the pledgor, not the pledgee, is theowner of the goods.
S.M.A. CASE # 130
However, the SC held that the warehouseman nevertheless is entitled to his lien that attaches to the goods invokable against
anyone who claims a right of possession thereon.

The SC held that where a valid demand by the lawful holder of the receipts for the delivery of the goods is refused by the
warehouseman, despite the absence of a lawful excuse provided by the law itself, the warehouseman’s lien is thereafter
concomitantly lost. As to what the law deems a valid demand, Section 8 of the Warehouse Receipts Law enumerates what must
accompany a demand; while as regards the reasons which a warehouseman may invoke to legally refuse to effect delivery of the
goods covered by the quedans, these are:
(1) That the holder of the receipt does not satisfy the conditions prescribed in Section 8 of the Act. (See Sec. 8, Act No. 2137)
(2) That the warehouseman has legal title in himself on the goods, such title or right being derived directly or indirectly from a
transfer made by the depositor at the time of or subsequent to the deposit for storage, or from the warehouseman's lien. (Sec. 16,
Act No. 2137)
(3) That the warehouseman has legally set up the title or right of third persons as lawful defense for non-delivery of the goods
(4) That the warehouseman having a lien valid against the person demanding the goods refuses to deliver the goods to him until
the lien is satisfied. (Sec. 31 Act No. 2137)
(5) That the failure was not due to any fault on the part of the warehouseman, as by showing that, prior to demand for delivery and
refusal, the goods were stolen or destroyed by fire, flood, etc., without any negligence on his part, unless he has contracted so as
to be liable in such case, or that the goods have been taken by the mistake of a third person without the knowledge or implied
assent of the warehouseman, or some other justifiable ground for non-delivery.

The SC explained that regrettably, the factual settings do not sufficiently indicate whether the demand to obtain possession of the
goods complied with Sec. 8. The presumption, nevertheless, would be that the law was complied with. On the other hand, it would
appear that the refusal of Noah’s Ark to deliver the goods was not anchored on a valid excuse, i.e., non-satisfaction of the lien
over the goods, but on an adverse claim of ownership. Under the circumstances, this hardly qualified as a valid, legal excuse. The
loss of the lien, however, does not necessarily mean the extinguishment of the obligation to pay the warehousing fees and charges
which continues to be a personal liability of the owners, i.e., the pledgors, not the pledgee, in this case. But even as to the owners-
pledgors, the warehouseman fees and charges have ceased to accrue from the date of the rejection by Noah to heed the lawful
demand by PNB for the release of the goods. Hence, the time from which the fees and charges should be made payable is from
the time 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, in foreclosures, the buyer does not assume the obligations of the pledgor to his other
creditors even while such buyer acquires title over the goods less any existing preferred lien thereover.

G.R. No. 107243 September 1, 1993

PHILIPPINE NATIONAL BANK vs.NOAH'S ARK SUGAR REFINERY, ALBERTO T. LOOYUKO, JIMMY T. GO,
WILSON T. GO

NARVASA, C.J.:
cvflores

Short Version:

Facts:

Noah issued quedans to its vendees who in turn negotiated it to PNB. When PNB tried to demand the
sugar covered by the quedans, Noah refused because the check its vendees issued for the quedans were
dishonoured.

Held:
S.M.A. CASE # 130
Noah should deliver the quedans to PNB. The fact that Noah was not paid does not make the negotiation
to PNB invalid since PNB paid value in good faith.

Facts:

 In accordance with the Warehouse Receipts Law, Noah's Ark Sugar Refinery (Noah) issued on several
dates warehouse receipts (quedans) to Rosa Sy, RNS Merchandising (Rosa Ng Sy) and St. Therese
Merchandising
 RNS and St Therese Merchandising negotiated and indorsed its quedans to Luis T. Ramos and
Cresencia Zoleta
 Zoleta and Ramos then used the quedans as security for loans obtained by them from 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
 PNB wrote to Noah defendant demanding delivery of the sugar covered by the quedans
 Defendant Noah's Ark refused to comply with the demand
 PNB filed with the RTC 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, respectively."
 RTC denied the application for preliminary attachment
 Noah and its co-defendants claimed that they are still the legal owners of the quedans and the sugar
represented thereon because:
— the P63M check issued by Rosa Ng Sy of RNS and Teresita Ng of St. Therese Merchandising
for the quedans were dishonoured by reason of "payment stopped" and "drawn against
insufficient funds
— Since the vendees and first indorsers of quedans did not acquire ownership, the
subsequent indorsers and PNB did not acquire a better right of ownership than the original
vendees/first indorsers.
— That quedans are not negotiable instruments within the purview of the Warehouse
Receipts Law but simply an internal guarantee of defendants in the sale of their stocks of
sugar.
 Defendant noah also asked that the quedans be delivered or returned to them
 Rosa Ng Sy and Teresita Ng claims that the transaction between them and Noah was "bogus and
simulated complex banking schemes and financial maneuvers and that it was to avoid payment of
taxes considering that Noah is under sequestration by the PCGG
 PNB filed a "Motion for Summary Judgment and prayed for the delivery of the sugar stocks covered by
the Warehouse Receipts/Quedans which are now in the PNB’s possession as holder for value and in
due course; or alternatively, for payment of actual damages of P39.1M to pay plaintiff attorney's fees,
litigation expenses and judicial costs estimated at no less than P1M and such other reliefs just and
equitable under the premises.
 RTC denied the motion for summary judgment on the ground:
— that there exists conflicting claims among the parties relative to the ownership of the sugar
quedans as to whether or not the quedans falls within the coverage of the Warehouse
Receipt Law and whether or not the transaction between PNB and third party defendants
(Sy ans Ng) is governed by contract of pledge that would require PNB’s compliance with
Art. 2112, Civil Code as regards the disposition of the quedans
 PNB filed a petition for certiorari with the CA
 CA nullified RTC order and ordered that "summary judgment be rendered in favor of the PNB
 CA ruled that "questions of law should be resolved after and not before, the questions of fact.
 Noah moved for reconsideration, but their motion was denied by the CA
 RTC rendered judgment, but not in accordance with the decision of the CA since it dismissed PNB’s
complaint for lack of cause of action

Issue:

1. Whether the non-payment of the purchase price for the quedans by the original vendees rendered
invalid the negotiation by vendees/first indorsers to indorsers and the subsequent negotiation of
Ramos and Zoleta to PNB.
S.M.A. CASE # 130
2. Whether or not PNB as indorsee/ pledgee of quedans was entitled to delivery of sugar stocks from the
warehouseman, Noah's Ark."

Ruling:

1. The non-payment of the purchase price does not render the subsequent negotiation invalid. The
validity of the negotiation in favour of PNB cannot be impaired even if the negotiation between Noah
and its first vendees was in breach of faith on the part of the vendees or by the fact that Noah was
deprived of the possession of the same by fraud, mistake or conversion if PNB paid value in good faith
without notice of such breach of duty, fraud, mistake or conversion. (Article 1518, New Civil Code).

Art. 1518. The validity of the negotiation of a negotiable document of title is not impaired by the fact that
the negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that
the owner of the document was deprived of the possession of the same by loss, theft, fraud, accident,
mistake, duress, or conversion, if the person to whom the document was negotiated or a person to whom
the document was subsequently negotiated paid value therefor in good faith without notice of the breach
of duty, or loss, theft, fraud, accident, mistake, duress or conversion

In this case In the case at bar, We found that the factual bases underlying the defendant's affirmative
defenses (upon which PNB has moved for summary judgment) 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 an act of RNS Merchandising and St.
Therese Merchandising, in breach of trust, fraud or conversion against Noah's Ark

S.M.A. CASE # 130

G.R. No. 129918 Case Digest

G.R. No. 129918, July 9, 1998

PNB

vs Hon. Marcelino Sayo, Noahs Ark Sugar Refinery , Alberto Looyuko, Jimmy Go and Wilson Go

Facts:

Noahs Ark issued several warehouse reciepts covering sugar deposits by Rosa Sy, RNS Merchandising
and St. Therese Merchandising. Later, 4 of these receipts were negotiated to Luis Ramos and Cresencia
Zoleta. Ramos and Zoleta later used these receipts to secure a loan with PNB.

Ramos and Zoleta failed to pay the loan, so PNB is now demanding for the delivery of the sugar deposit
covered by the warehouse receipts. Noahs Ark refused to deliver such, and claims ownership over sugar
deposits. For such reason, PNB filed a complaint for specific performance with damages and writ of
attachment against Noahs Ark.

RTC Manila denied the writ of attachment.

Noahs Ark claim that in an agreement, defendants agreed to sell Rosa Sy of RNS Merchandising and
Teresita of St. Therese Merchandising the volume of sugar deposited for 63M. They also claim that the
vendees and first endorsers of the receipts did not acquire ownership, thus the subsequent endorsers did
not acquire a better right of ownership also.

Rosa Sy and Teresita Ng is saying that the transaction between them and defendants is a simulated sale,
thus they are not answerable in damages to him. PNB motion for summary judgment, thereupon filed a
Petition for Certiorari with CA.

CA ordered RTC to render a summary judgment in favor of PNB.

Trial court rendered judgment dismissing plaintiffs complaint against private respondents for lack of
cause of action and likewise dismissed private respondents counterclaim against PNB and of the Third-
Party Complaint and the Third-Party Defendants Counterclaim. On September 4, 1992, the trial court
denied PNBs Motion for Reconsideration.

S.M.A. CASE # 130

On June 9, 1992, the PNB filed an appeal from the RTC decision with the Supreme Court, G.R. No. 107243,
by way of a Petition for Review on Certiorari under Rule 45 of the Rules of Court.

Ruling:

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

(b) to pay plaintiff Philippine National Bank attorneys fees, litigation expenses and judicial costs hereby
fixed at the amount of One Hundred Fifty Thousand Pesos (P150,000.00) as well as the costs.

While PNB is entitled to the sugar stocks as endorsee of the receipts, delivery to it shall only be effected
upon payment of the storage fees. Because it is imperative to the right of the warehouse man to demand
payment of his lien.

S.M.A. CASE # 130