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PHILIPPINE NATIONAL BANK v. NOAH’S ARK SUGAR REFINERY

FACTS:

The case revolves around a dispute involving warehouse receipts for sugar stocks issued by Noah's Ark Sugar Refinery. Some of these receipts were indorsed and negotiated to Luis T. Ramos and Cresencia K. Zoleta, who used them as collateral for loans from the Philippine National Bank (PNB). When Ramos and Zoleta failed to repay their loans, PNB demanded the delivery of the sugar covered by the warehouse receipts. Noah's Ark refused, prompting PNB to file a complaint for specific performance and damages against Noah's Ark and its co-defendants.

PNB sought summary judgment, arguing that there were no genuine factual issues and that it was entitled to judgment as a matter of law. PNB claimed that the defendants' defenses were purely legal questions and presented admissions and documents on record to support its position. Noah's Ark and the other defendants opposed the motion, asserting the existence of genuine factual issues regarding the consummation of the sale and PNB's acquisition of ownership over the warehouse receipts. Third-party defendants Rosa Ng Sy and Teresita Ng also opposed the motion in relation to their counterclaim.

The trial court denied PNB's motion for summary judgment, citing conflicting claims among the parties regarding ownership of the warehouse receipts and whether the transaction was governed by a contract of pledge. PNB's motion for reconsideration was likewise denied. As a result, PNB filed a petition for certiorari with the Court of Appeals, which nullified the trial court's orders and directed the entry of summary judgment in favor of PNB.

ISSUES:

  1. Whether the non-payment of the purchase price for the sugar stock rendered the negotiation of the quedans invalid.

  2. Whether PNB, as indorsee/pledgee of the quedans, was entitled to delivery of the sugar stocks from Noah's Ark.

  3. Whether PNB's right to enforce the obligation of Noah's Ark as a warehouseman to deliver the sugar stock is affected by the third-party complaint.

  4. Whether PNB's negotiation of the quedans in good faith without notice of any breach of duty, fraud, mistake or conversion affects its ownership of the property covered by the quedans.

  5. Whether or not the Trial Judge had the authority to disregard the clear and categorical command of the Court of Appeals' final and executory decision.

  6. Whether or not the Trial Judge committed grave error in disposing of the case contrary to the Court of Appeals' decision.

RULING:

  1. The Court of Appeals held that there was no substantial controversy on any material fact and that the only issues for determination were questions of law. The Appellate Court ruled that the non-payment of the purchase price did not render the negotiation of the quedans invalid. It also held that PNB, as the indorsee/pledgee of the quedans, was entitled to the delivery of the sugar stocks.

  2. PNB's right to enforce the obligation of Noah's Ark as a warehouseman to deliver the sugar stock is not affected by the outcome of the third-party complaint.

  3. PNB's negotiation of the quedans in good faith without notice of any breach of duty, fraud, mistake or conversion makes PNB the owner of the property covered by the quedans.

  4. The Trial Judge's decision is reversed and set aside. A new decision is rendered in accordance with the final and executory decision of the Court of Appeals. The private respondents are ordered to deliver the sugar stocks to the petitioner or alternatively pay actual damages. They are also ordered to pay attorney's fees, litigation expenses, and judicial costs.

PRINCIPLES:

  • The validity of the negotiation of the quedans cannot be impaired by the fact that the negotiation was made in breach of faith or that the owner was deprived of possession due to fraud, mistake, or conversion.

  • Summary judgment is proper when there is no substantial controversy on any material fact and the issues for determination are purely questions of law.

  • Article 1518 of the New Civil Code establishes that if a negotiable document of title, such as a warehouse receipt or quedan, is negotiated to a creditor in good faith without notice of any breach of duty, fraud, mistake, or conversion, the creditor becomes the owner of the property covered by the document.

  • Article 1520 of the New Civil Code provides that the creditor whose debtor was the owner of a negotiable document of title is entitled to aid from the court in attaching the document or satisfying the claim, similar to how aid is granted for property that cannot be readily attached or levied upon by ordinary process.

  • Once a decision of a competent court within its jurisdiction becomes final and executory, it operates as the immutable law among the parties and may not be altered or modified in any way, even by subsequent judges or the Supreme Court. This principle is known as the law of the case.

  • The Trial Judge is bound by the factual and legal conclusions laid down by the Court of Appeals in its final and executory decision.

  • The Trial Judge's duty is to implement and carry out the Appellate Tribunal's judgment, and not to take exception or overturn any of its findings.

  • It is an act of grave error for the Trial Judge to disregard the clear and categorical command of the Court of Appeals and dispose of the case in a manner contrary to its decision.