HEIRS OF SANTIAGO C. DIVINAGRACIA VS. HON. J. CEDRICK O. RUIZ, PRESIDING JUDGE, BRANCH 39, REGIONAL TRIAL COURT, ILOILO CITY; GERRY D. SUMACULUB, AS CLERK OF COURT OF THE REGIONAL TRIAL COURT; BOMBO RADYO HOLDINGS, INC., AND ROGELIO M. FLORETE, SR. (G.R. NO. 172508, 12 JANUARY 2011, PERALTA, J.)SUBJECTS: INTRA-CORPORATE DISPUTE; MORAL AND EXEMPLARY DAMAGES NOT EXECUTORY PENDING APPEAL. (BRIEF TITLE: HEIRS OF DIVINIGRACIA VS. JUDGE RUIZ ET AL.)

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                        DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari,^[1][1] under Rule 45 of the Rules of Court, seeking to set aside the October 5, 2005 Decision^[2][2] and April 21, 2006 Resolution^[3][3] of the Court of Appeals (CA) in CA-G.R. SP No. 86435. Said CA Decision dismissed the petition for certiorari seeking the nullification of the September 8, 2004 Resolution and September 15, 2004 Writ of Execution, respectively issued by the Presiding Judge and Clerk of Court of Branch 39 of the Regional Trial Court (RTC) of Iloilo City in Corporate Case No. 00-26557.

The facts of the case are as follows:

On February 25, 1999, Santiago Divinagracia (Divinagracia), in his capacity as a stockholder, filed a derivative suit on behalf of People’s Broadcasting Service Incorporated (PBS) assailing a management contract entered into by PBS and Bombo Radyo Holdings Incorporated (Bombo Radyo) and Rogelio Florete, Sr. (Florete).  Said suit was docketed as SEC Case No. IEO-99-00084.  In response to the derivative suit, Bombo Radyo and Florete filed a counterclaim against Divinagracia claiming that the suit filed by him was unfounded and intended only to harass and molest them.

Pursuant to Section 5.2^[4][4] of Republic Act No. 8799, the derivative suit was transferred to Branch 39 of the RTC of Iloilo City sitting as a special commercial court. The derivative suit was then re-docketed as Corporate Case No. 00-26557 and governed by the Interim Rules of Procedure Governing Intra-Corporate Controversies. During the pendency of the case, however, Divinagracia died and was, thus, substituted by his heirs.

On July 28, 2004, the RTC rendered a Decision^[5][5] dismissing the derivative suit filed by Divinagracia and granting the counterclaims of Bombo Radyo and Florete, to wit:

WHEREFORE, in view of the foregoing disquisitions, the instant petition ought to be, as it is hereby DISMISSED for lack of merit.

The Counterclaim of respondents Bombo Radyo Holdings, Inc. (BRHI) and Rogelio Florete Sr. is given due course and granted and the Heirs of Santiago Divinagracia, namely:

NAME                                     RESIDENCE

1.       Ma. Elena R. Divinagracia 23 Delgado St., Iloilo City

2.       Elsa R. Divinagracia                       1^st Street, Paradise Village Banilad,

    Cebu City

3.       Ruth Marie R. Divinagracia            Unit 4-C, Torre de Salcedo St.,

     Legaspi Village, Makati City

4.       Liane Grace R. Divinagracia           23 Delgado St., Iloilo City

5.       Ricardo R. Divinagracia                 16 Fajardo St., Jaro, Iloilo City

6.       Ma. Fe Emily R. Divinagracia         23 Delgado St., Iloilo City

are hereby ordered, jointly and severally, to pay each of the respondents Bombo Radyo Holdings, Inc. and Rogelio Florete Sr. the following, to wit:

1.                  The sum of Five Hundred Thousand Pesos (P500,000.00) as moral damages;

2.                  The sum of Two Hundred Thousand Pesos as and for exemplary damages;

3.                  The sum of One Hundred Thousand Pesos as and for attorney’s fees; and

4.                  The costs of suit.

SO ORDERED.^[6][6]

          On August 11, 2004, the Heirs of Divinagracia filed a Notice of Appeal^[7][7] with the RTC.

On August 12, 2004, Bombo Radyo and Florete filed with the RTC a Motion for Immediate Execution.^[8][8] The same was granted by the RTC in a Resolution^[9][9] dated September 8, 2004. Accordingly, on September 15, 2005, the RTC Clerk of Court issued a Writ of Execution.^[10][10]

Aggrieved by the issuance of the Writ of Execution, the Heirs of Divinagracia filed a petition for certiorari^[11][11] with the CA. They argued that the issuance of the writ of execution by the RTC was improper, considering that they had already appealed the decision to the CA.  Also, the Heirs of Divinagracia contended that the RTC erred in granting the writ of execution for a counterclaim consisting of moral damages, exemplary damages and attorneys fees despite the fact that said damages under the counterclaim consisted of an ordinary action and was not an intra-corporate controversy.^[12][12]

On October 5, 2005, the CA issued a Decision dismissing the petition for certiorari, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DISMISSING the petition filed in this case and AFFIRMING the assailed resolution issued by the respondent judge on September 8, 2004 in Corporate Case No. 00-26557.

SO ORDERED.^[13][13]

The CA ruled that Section 4 of Rule 1 of the Interim Rules of Procedure for Intra-Corporate Controversies was very explicit in providing that “all decisions rendered in intra-corporate controversies shall be immediately executory.”  Thus, the CA held that the RTC did not err when it granted Bombo Radyo and Florete’s motion for immediate execution on the grant of moral damages, exemplary damages and attorney’s fees. Furthermore, the CA also ruled that since the Heirs of Divinagracia had already filed a notice of appeal, such act barred them from availing of the remedy of certiorari.

The Heirs of Divinagracia filed a Motion for Reconsideration,^[14][14] which was, however, denied by the CA in a Resolution^[15][15] dated April 21, 2006.

Hence, herein petition, with the Heirs of Divinagracia raising the following issues for this Court’s consideration, to wit:

I.

THE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE TRIAL COURT’S ORDER ALLOWING IMMEDIATE EXECUTION SINCE SAID ORDER CLASHES WITH THE SUPPLETORY APPLICATION OF THE RULES OF COURT PROVIDED FOR IN SECTION 2, RULE 1 OF THE INTERIM RULES, AND DISREGARDS RELEVANT JURISPRUDENCE REGARDING THE EXECUTION OF COUNTERCLAIMS UNDER THE RULES OF COURT.

II.

THE COURT OF APPEALS GRAVELY ERRED IN FAILING TO RULE THAT THE TRIAL COURT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT DISREGARDED PERTINENT AND WELL-ENTRENCHED JURISPRUDENCE STATING THAT A SEPARATE PETITION FOR CERTIORARI MAY PROSPER WHERE THE APPEAL DOES NOT APPEAR TO BE A PLAIN, SPEEDY AND ADEQUATE REMEDY UNDER LAW.

III.

THE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO RULE THAT THE PRESENT PETITION FOR CERTIORARI WAS PROPER AND JUSTIFIED BECAUSE IT WAS MEANT TO PREVENT: (A) IRREPARABLE DAMAGE AND INJURY TO PETITIONER HEIRS FROM THE TRIAL COURT JUDGE’S CAPRICIOUS, ARBITRARY, AND WHIMSICAL EXERCISE OF HIS JUDGMENT; (B) THE DANGER OF CLEAR FAILURE OF JUSTICE; AND (C) BECAUSE THEIR APPEAL IS INADEQUATE TO RELIEVE THEM FROM THE INJURIOUS EFFECTS OF THE TRIAL COURT’S JUDGMENT.

IV.

THE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO RULE THAT IT WAS GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION FOR THE TRIAL COURT TO INSIST UPON THE EXECUTION OF A MANIFESTLY UNUST AWARD OF MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES.

V.

THE HONORABLE COURT OF APPEALS FAILED TO APPRECIATE THAT THE TRIAL COURT, IN ALLOWING THE IMMEDIATE EXECUTION OF THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES AGAINST THE PROPERTIES OF THE PETITIONER HEIRS, BLATANTLY DISREGARDED THE PROVISIONS OF THE CIVIL CODE ON SUCCESSION AND RULE 88 OF THE RULES OF COURT ON PAYMENT OF DEBTS OF THE ESTATE.^[16][16]

The petition is meritorious.

At the crux of the controversy is the determination of whether or not moral damages, exemplary damages, and attorney’s fees, awarded as a result of a counterclaim in an intra-corporate case, are immediately executory despite the pendency of the appeal in the main case.

The issue is not novel as the same has been resolved in another petition filed before this Court by the Heirs of Divinagracia in G.R No. 172023.

G.R. No. 172023

          The controversy therein originated from Corporate Case No. 02-27050, which involved a Petition for Mandamus and Nullification of Delinquency Call and Issuance of Unsubscribed Shares filed by Divinagracia who claimed he was a stockholder of CBS Development Corporation, Inc. (CBSDC). Said action was also filed before the same RTC of the present petition.

          In G.R. No. 172023, Divinagracia, as a stockholder of CBSDC, opposed a proposal to authorize Florete, in his capacity as President of CBSDC, to mortgage all, or substantially all, of CBSDC’s real properties to secure a loan obtained by Newsounds Broadcasting Network, Inc., Consolidated Broadcasting System, and People’s Broadcasting Services, Inc. However, majority of the stockholders approved the grant of authority to Florete and the Board. As a result, Divinagracia, as a dissenting stockholder wrote a letter exercising his appraisal right under Section 81 of the Corporation Code. CBSDC’s Board of Directors approved Divinagracia’s exercise of his appraisal right.

          Thereafter, Divinagracia surrendered his stock certificates.  The Board, however, deferred action on Divinagracia’s request, an act to which Divinagracia protested to. Later, the corporate secretary informed Divinagracia that his shares were declared delinquent and that they were to be sold in public auction.

          Consequently, on February 6, 2002, Divinagracia filed before the RTC of Iloilo a Petition for Mandamus and Nullification of Delinquency Call and Issuance of Unsubscribed Shares.

          On February 12, 2002, the public auction pushed through and the shares of Divinagracia were sold to Diamel Incorporated (Diamel) as the highest bidder.

          CBSDC and Diamel filed their answer to Divinagracia’s petition at the same time interposing their compulsory counterclaim. Divinagracia, however, died and was substituted by his heirs.

          The RTC ruled in favor of CBSDC and Diamel, and granted their compulsory counterclaim. Consequently, the Heirs of Divinagracia were ordered by the RTC to pay exemplary damages and attorney’s fees to CBSDC and Diamel. The Heirs of Divinagracia filed a Notice of Appeal.

Thereafter, CBSDC and Diamel filed a Motion for Immediate Execution which was granted by the RTC.   This prompted the Heirs of Divinagracia to file a petition for certiorari before the CA, which was docketed as CA-G.R. CEB SP No. 00040.  In said petition, the Heirs of Divinagracia questioned the immediate execution of the grant of exemplary damages and attorney’s fees, despite their having already filed a Notice of Appeal.

          In a Decision dated October 6, 2005, the CA dismissed the petition filed by the Heirs of Divinagracia holding that Section 4, Rule 1 of the Interim Rules of Procedure for Intra-Corporate Controversies provides that “all decisions rendered in intra-corporate controversies shall immediately be executory.”  The Heirs of Divinagracia then appealed to this Court where the case was docketed as G.R. No. 172023.

          On July 7, 2010, this Court’s Second Division rendered a Decision^[17][17] ruling in favor of the Heirs of Divinagracia, the pertinent portions of which are hereby reproduced to wit:

From the filing of the intra-corporate dispute on 6 February 2002 until the promulgation of the challenged Court of Appeals’ decision and resolution on 6 December 2005 and 22 February 2006, respectively, the governing rule, specifically Section 4, Rule 1 of the Interim Rules, provided that:

All decisions and orders issued under these Rules shall immediately be executory. No appeal or petition taken therefrom shall stay the enforcement or implementation of the decision or order, unless restrained by an appellate court. Interlocutory orders shall not be subject to appeal.

On 19 September 2006, while the present case remained pending before this Court, the Court en banc issued a Resolution in A.M. No. 01-2-04-SC titled “Re: Amendment of Section 4, Rule 1 of the Interim Rules of Procedure Governing Intra-Corporate Controversies by Clarifying that Decisions Issued Pursuant to Said Rule are Immediately Executory Except the Awards for Moral Damages, Exemplary Damages and Attorney’s Fees, if any.” The Court resolved to amend specifically Section 4, Rule 1 of the Interim Rules, to wit:

Acting on the Resolution dated September 5, 2006 of the Committee on the Revision of Rules of Court, the Court Resolved to AMEND Section 4, Rule 1 of The Interim Rules of Procedure Governing Intra-Corporate Controversies as follows:

x x x

SEC. 4. Executory nature of decisions and orders.— All decisions and orders issued under these Rules shall immediately be executory EXCEPT THE AWARDS FOR MORAL DAMAGES, EXEMPLARY DAMAGES AND ATTORNEY’S FEES, IF ANY. No appeal or petition taken therefrom shall stay the enforcement or implementation of the decision or order, unless restrained by an appellate court. Interlocutory orders shall not be subject to appeal.

The amended provision expressly exempts awards for moral damages, exemplary damages, and attorney’s fees from the rule that decisions and orders in cases covered by the Interim Rules are immediately executory. As can be gleaned from the title of A.M. No. 01-2-04-SC, the amendment of Section 4, Rule 1 of the Interim Rules was crafted precisely to clarify the previous rule that decisions on intra-corporate disputes are immediately executory, by specifically providing for an exception. Thus, the prevailing rule now categorically provides that awards for moral damages, exemplary damages, and attorney’s fees in intra-corporate controversies are not immediately executory.

Indisputably, the amendment of Section 4, Rule 1 of the Interim Rules is procedural in character. Well-settled is the rule that procedural laws are construed to be applicable to actions pending and undetermined at the time of their passage, and are deemed retroactive in that sense and to that extent. Procedural laws do not fall under the general rule against retroactive operation of statutes. Further, the retroactive application of procedural laws does not violate any personal rights because no vested right has yet attached or arisen from them. Clearly, the amended Section 4, Rule 1 of the Interim Rules must be applied retroactively to the present case. Therefore, the trial court’s award of exemplary damages and attorney’s fees in favor of private respondents is not immediately executory.^[18][18]

          Based on the foregoing disquisitions, the conclusion is certain in that the award of moral damages, exemplary damages and attorney’s fees, awarded as an incident to an intra-corporate case, are exempt from the rule on immediate execution.

          This Court is not unmindful of the fact that the Heirs of Divinagracia also argued in herein petition that the grant of moral damages, exemplary damages and attorney’s fees was without basis.  This Court is, however, not inclined to grant such relief in view of the fact that records show that the Heirs of Divinagracia had already filed a Notice of Appeal to Civil Case No. 26557 which questioned the dismissal of the derivative suit filed by Divinagracia. The determination of the propriety of the grant of damages must, therefore, be determined in the main case and not in herein petition which assails the propriety of the grant of the writ of execution by the RTC as held by this Court in Radio Communications of the Philippines, Inc. v. Lantin,^[19][19] to wit:

x x x  The execution of any award for moral and exemplary damages is dependent on the outcome of the main case. Unlike actual damages for which the petitioners may clearly be held liable if they breach a specific contract and the amounts of which are fixed and certain, liabilities with respect to moral and exemplary damages, as well as the exact amounts, remain uncertain and indefinite pending resolution by the Intermediate Appellate Court and eventually the Supreme Court. The existence of the factual bases of these types of damages and their causal relation to the petitioners’ act will have to be determined in the light of the assignment of errors on appeal. It is possible that the petitioners, after all, while liable for actual damages may not be liable for moral and exemplary damages. Or as in some cases elevated to the Supreme Court, the awards may be reduced.^[20][20]

          WHEREFORE, premises considered, the petition is GRANTED.  The October 5, 2005 Decision and April 21, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 86435 are hereby REVERSED and SET ASIDE.

SO ORDERED.

                                                          DIOSDADO M. PERALTA

                                                                   Associate Justice

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

Chairperson

ANTONIO EDUARDO B. NACHURA                 ROBERTO A. ABAD                       

                  Associate Justice                                         Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                ANTONIO T. CARPIO

                                                  Associate Justice

                                                Second Division, Chairperson

CERTIFICATION

          Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                                   RENATO C. CORONA

                                                                             Chief Justice 

DURBAN APARTMENTS DOING BUSINESS UNDER THE NAME AND STYLE OF CITY GARDEN HOTEL VS. PIONEER INSURANCE AND SURETY CORPORATION (G.R. NO. 179419, 12 JANUARY 2011, NACHURA, J.) SUBJECTS: ABSENCE DURING PRE-TRIAL; FAILURE TO FILE PRE-TRIAL BRIEF. (BRIEF TITLE: DURBAN APARTMENTS VS. PIONEER INSURANCE.)

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DECISION

NACHURA, J.:

          For review is the Decision^[1][1] of the Court of Appeals (CA) in CA-G.R. CV No. 86869, which affirmed the decision^[2][2] of the Regional Trial Court (RTC), Branch 66, Makati City, in Civil Case No. 03-857, holding petitioner Durban Apartments Corporation solely liable to respondent Pioneer Insurance and Surety Corporation for the loss of Jeffrey See’s (See’s) vehicle.

          The facts, as found by the CA, are simple.

          On July 22, 2003, [respondent] Pioneer Insurance and Surety Corporation x x x, by right of subrogation, filed [with the RTC of Makati City] a Complaint for Recovery of Damages against [petitioner] Durban Apartments Corporation, doing business under the name and style of City Garden  Hotel, and [defendant before the RTC] Vicente Justimbaste x x x.  [Respondent averred] that: it is the insurer for loss and damage of Jeffrey S. See’s [the insured’s] 2001 Suzuki Grand Vitara x x x with Plate No. XBH-510 under Policy No. MC-CV-HO-01-0003846-00-D in the amount of P1,175,000.00; on April 30, 2002, See arrived and checked in at the City Garden Hotel in Makati corner Kalayaan Avenues, Makati City before midnight, and its parking attendant, defendant x x x Justimbaste got the key to said Vitara from See to park it[.  O]n May 1, 2002, at about 1:00 o’clock in the morning, See was awakened in his room by [a]  telephone call from the Hotel Chief Security Officer who informed him that his Vitara was carnapped while it was parked unattended at the parking area of Equitable PCI Bank along Makati Avenue between the hours of 12:00 [a.m.] and 1:00 [a.m.]; See went to see the Hotel Chief Security Officer, thereafter reported the incident to the Operations Division of the Makati City Police Anti-Carnapping Unit, and a flash alarm was issued; the Makati City Police Anti-Carnapping Unit investigated Hotel Security Officer, Ernesto T. Horlador, Jr. x x x and defendant x x x Justimbaste; See gave his Sinumpaang Salaysay to the police investigator, and filed a Complaint Sheet with the PNP Traffic Management Group in Camp Crame, Quezon City; the Vitara has not yet been recovered since July 23, 2002 as evidenced by a Certification of Non- Recovery issued by the PNP TMG; it paid the P1,163,250.00 money claim of See and mortgagee ABN AMRO Savings Bank, Inc. as indemnity for the loss of the Vitara; the Vitara was lost due to the negligence of [petitioner] Durban Apartments and [defendant] Justimbaste because it was discovered during the investigation that this was the second time that a similar incident of carnapping happened in the valet parking service of [petitioner] Durban Apartments and no necessary precautions were taken to prevent its repetition; [petitioner] Durban Apartments was wanting in due diligence in the selection and supervision of its employees particularly defendant  x x x Justimbaste; and defendant x x x Justimbaste and [petitioner] Durban Apartments failed and refused to pay its valid, just, and lawful claim despite written demands.

            Upon service of Summons, [petitioner] Durban Apartments and [defendant] Justimbaste filed their Answer with Compulsory Counterclaim alleging that: See did not check in at its hotel, on the contrary, he was a guest of a certain Ching Montero x x x; defendant x x x Justimbaste did not get the ignition key of See’s Vitara, on the contrary, it was See who requested a parking attendant to park the Vitara at any available parking space, and it was parked at the Equitable Bank parking area, which was within See’s view, while he and Montero were waiting in front of the hotel; they made a written denial of the demand of [respondent] Pioneer Insurance for want of legal basis; valet parking services are provided by the hotel for the convenience of its customers looking for a parking space near the hotel premises; it is a special privilege that it gave to Montero and See; it does not include responsibility for any losses or damages to motor vehicles and its accessories in the parking area; and the same holds true even if it was See himself who parked his Vitara within the premises of the hotel as evidenced by the valet parking customer’s claim stub issued to him; the carnapper was able to open the Vitara without using the key given earlier to the parking attendant and subsequently turned over to See after the Vitara was stolen; defendant x x x Justimbaste saw the Vitara speeding away from the place where it was parked; he tried to run after it, and blocked its possible path but to no avail; and See was duly and immediately informed of the carnapping of his Vitara; the matter was reported to the nearest police precinct; and defendant x x x Justimbaste, and Horlador submitted themselves to police investigation.

            During the pre-trial conference on November 28, 2003, counsel for [respondent] Pioneer Insurance was present. Atty. Monina Lee x x x, counsel of record of [petitioner] Durban Apartments and Justimbaste was absent, instead, a certain Atty. Nestor Mejia appeared for [petitioner] Durban Apartments and Justimbaste, but did not file their pre-trial brief.

            On November 5, 2004, the lower court granted the motion of [respondent] Pioneer Insurance, despite the opposition of [petitioner] Durban Apartments and Justimbaste, and allowed [respondent] Pioneer Insurance to present its evidence ex parte before the Branch Clerk of Court.

            See testified that: on April 30, 2002, at about 11:30 in the evening, he drove his Vitara and stopped in front of City Garden Hotel in Makati Avenue, Makati City; a parking attendant, whom he had later known to be defendant x x x Justimbaste, approached and asked for his ignition key, told him that the latter would park the Vitara for him in front of the hotel, and issued him a valet parking customer’s claim stub; he and Montero, thereafter, checked in at the said hotel; on May 1, 2002, at around 1:00 in the morning, the Hotel Security Officer whom he later knew to be Horlador called his attention to the fact that his Vitara was carnapped while it was parked at the parking lot of Equitable PCI Bank which is in front of the hotel; his Vitara was insured with [respondent] Pioneer Insurance; he together with Horlador and defendant x x x Justimbaste went to Precinct 19 of the Makati City Police to report the carnapping incident, and a police officer came accompanied them to the Anti-Carnapping Unit of the said station for investigation, taking of their sworn statements, and flashing of a voice alarm; he likewise reported the said incident in PNP TMG in Camp Crame where another alarm was issued; he filed his claim with [respondent] Pioneer Insurance, and a representative of the latter, who is also an adjuster of Vesper Insurance Adjusters-Appraisers [Vesper], investigated the incident; and [respondent] Pioneer Insurance required him to sign a Release of Claim and Subrogation Receipt, and finally paid him the sum of P1,163,250.00 for his claim.

            Ricardo F. Red testified that: he is a claims evaluator of [petitioner] Pioneer Insurance tasked, among others, with the receipt of claims and documents from the insured, investigation of the said claim, inspection of damages, taking of pictures of insured unit, and monitoring of the processing of the claim until its payment; he monitored the processing of See’s claim when the latter reported the incident to [respondent] Pioneer Insurance; [respondent] Pioneer Insurance assigned the case to Vesper who verified See’s report, conducted an investigation, obtained the necessary documents for the processing of the claim, and tendered a settlement check to See; they evaluated the case upon receipt of the subrogation documents and the adjuster’s report, and eventually recommended for its settlement for the sum of P1,163,250.00 which was accepted by See; the matter was referred and forwarded to their counsel, R.B. Sarajan & Associates, who prepared and sent demand letters to [petitioner] Durban Apartments and [defendant] Justimbaste, who did not pay [respondent] Pioneer Insurance notwithstanding their receipt of the demand letters; and the services of R.B. Sarajan & Associates were engaged, for P100,000.00 as attorney’s fees plus P3,000.00 per court appearance, to prosecute the claims of [respondent] Pioneer Insurance against [petitioner] Durban Apartments and Justimbaste before the lower court.

            Ferdinand Cacnio testified that: he is an adjuster of Vesper; [respondent] Pioneer Insurance assigned to Vesper the investigation of See’s case, and he was the one actually assigned to investigate it; he conducted his investigation of the matter by interviewing See, going to the City Garden Hotel, required subrogation documents from See, and verified the authenticity of the same; he learned that it is the standard procedure of the said hotel as regards its valet parking service to assist their guests as soon as they get to the lobby entrance, park the cars for their guests, and place the ignition keys in their safety key box; considering that the hotel has only twelve (12) available parking slots, it has an agreement with Equitable PCI Bank permitting the hotel to use the parking space of the bank at night; he also learned that a Hyundai Starex van was carnapped at the said place barely a month before the occurrence of this incident because Liberty Insurance assigned the said incident to Vespers, and Horlador and defendant x x x Justimbaste admitted the occurrence of the same in their sworn statements before the Anti-Carnapping Unit of the Makati City Police; upon verification with the PNP TMG [Unit] in Camp Crame, he learned that See’s Vitara has not yet been recovered; upon evaluation, Vesper recommended to [respondent] Pioneer Insurance to settle See’s claim for P1,045,750.00; See contested the recommendation of Vesper by reasoning out that the 10% depreciation should not be applied in this case considering the fact that the Vitara was used for barely eight (8) months prior to its loss; and [respondent] Pioneer Insurance acceded to See’s contention, tendered the sum of P1,163,250.00 as settlement, the former accepted it, and signed a release of claim and subrogation receipt.

            The lower court denied the Motion to Admit Pre-Trial Brief and Motion for Reconsideration field by [petitioner] Durban Apartments and Justimbaste in its Orders dated May 4, 2005 and October 20, 2005, respectively, for being devoid of merit.^[3][3]

          Thereafter, on January 27, 2006, the RTC rendered a decision, disposing, as follows:

            WHEREFORE, judgment is hereby rendered ordering [petitioner Durban Apartments Corporation] to pay [respondent Pioneer Insurance and Surety Corporation] the sum of P1,163,250.00 with legal interest thereon from July 22, 2003 until the obligation is fully paid and attorney’s fees and litigation expenses amounting to P120,000.00.

            SO ORDERED.^[4][4]

          On appeal, the appellate court affirmed the decision of the trial court, viz.:

          WHEREFORE, premises considered, the Decision dated January 27, 2006 of the RTC, Branch 66, Makati City in Civil Case No. 03-857 is hereby AFFIRMED insofar as it holds [petitioner] Durban Apartments Corporation solely liable to [respondent] Pioneer Insurance and Surety Corporation for the loss of Jeffrey See’s Suzuki Grand Vitara.

            SO ORDERED.^[5][5]

          Hence, this recourse by petitioner.

The issues for our resolution are:

          1.       Whether the lower courts erred in declaring petitioner as in default for failure to appear at the pre-trial conference and to file a pre-trial brief;

          2.       Corollary thereto, whether the trial court correctly allowed respondent to present evidence ex-parte;

          3.       Whether petitioner is liable to respondent for attorney’s fees in the amount of P120,000.00; and

          4.       Ultimately, whether petitioner is liable to respondent for the loss of See’s vehicle.

          The petition must fail.

          We are in complete accord with the common ruling of the lower courts that petitioner was in default for failure to appear at the pre-trial conference and to file a pre-trial brief, and thus, correctly allowed respondent to present evidence ex-parte. Likewise, the lower courts did not err in holding petitioner liable for the loss of See’s vehicle.

          Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties.^[6][6] A review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on speculation, surmises, or conjectures; (2) when a lower court’s inference from its factual findings is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the issues of the case, or fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; (5) when there is a misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific evidence on which they are based, are premised on the absence of evidence, or are contradicted by evidence on record.^[7][7] None of the foregoing exceptions permitting a reversal of the assailed decision exists in this instance.

          Petitioner urges us, however, that “strong [and] compelling reason[s]” such as the prevention of miscarriage of justice warrant a suspension of the rules and excuse its and its counsel’s non-appearance during the pre-trial conference and their failure to file a pre-trial brief.

          We are not persuaded.

          Rule 18 of the Rules of Court leaves no room for equivocation; appearance of parties and their counsel at the pre-trial conference, along with the filing of a corresponding pre-trial brief, is mandatory, nay, their duty. Thus, Section 4 and Section 6 thereof provide:

            SEC. 4.  Appearance of parties.–It shall be the duty of the parties and their counsel to appear at the pre-trial. The non-appearance of a party may be excused only if a valid cause is shown therefor or if a representative shall appear in his behalf fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and documents.

            SEC. 6.  Pre-trial brief.–The parties shall file with the court and serve on the adverse party, in such manner as shall ensure their receipt thereof at least three (3) days before the date of the pre-trial, their respective pre-trial briefs which shall contain, among others:

            x x x x

            Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-trial.

          Contrary to the foregoing rules, petitioner and its counsel of record were not present at the scheduled pre-trial conference. Worse, they did not file a pre-trial brief. Their non-appearance cannot be excused as Section 4, in relation to Section 6, allows only two exceptions: (1) a valid excuse; and (2) appearance of a representative on behalf of a party who is fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and documents.

          Petitioner is adamant and harps on the fact that November 28, 2003 was merely the first scheduled date for the pre-trial conference, and a certain Atty. Mejia appeared on its behalf. However, its assertion is belied by its own admission that, on said date, this Atty. Mejia “did not have in his possession the Special Power of Attorney issued by petitioner’s Board of Directors.”

          As pointed out by the CA, petitioner, through Atty. Lee, received the notice of pre-trial on October 27, 2003, thirty-two (32) days prior to the scheduled conference. In that span of time, Atty. Lee, who was charged with the duty of notifying petitioner of the scheduled pre-trial conference,^[8][8] petitioner, and Atty. Mejia should have discussed which lawyer would appear at the pre-trial conference with petitioner, armed with the appropriate authority therefor. Sadly, petitioner failed to comply with not just one rule; it also did not proffer a reason why it likewise failed to file a pre-trial brief. In all, petitioner has not shown any persuasive reason why it should be exempt from abiding by the rules.

          The appearance of Atty. Mejia at the pre-trial conference, without a pre-trial brief and with only his bare allegation that he is counsel for petitioner, was correctly rejected by the trial court. Accordingly, the trial court, as affirmed by the appellate court, did not err in allowing respondent to present evidence ex-parte.

          Former Chief Justice Andres R. Narvasa’s words continue to resonate, thus:

            Everyone knows that a pre-trial in civil actions is mandatory, and has been so since January 1, 1964. Yet to this day its place in the scheme of things is not fully appreciated, and it receives but perfunctory treatment in many courts. Some courts consider it a mere technicality, serving no useful purpose save perhaps, occasionally to furnish ground for non-suiting the plaintiff, or declaring a defendant in default, or, wistfully, to bring about a compromise. The pre-trial device is not thus put to full use. Hence, it has failed in the main to accomplish the chief objective for it: the simplification, abbreviation and expedition of the trial, if not indeed its dispensation. This is a great pity, because the objective is attainable, and with not much difficulty, if the device were more intelligently and extensively handled.

            x x x x

Consistently with the mandatory character of the pre-trial, the Rules oblige not only the lawyers but the parties as well to appear for this purpose before the Court, and when a party “fails to appear at a pre-trial conference (he) may be non-suited or considered as in default.” The obligation “to appear” denotes not simply the personal appearance, or the mere physical presentation by a party of one’s self, but connotes as importantly, preparedness to go into the different subject assigned by law to a pre-trial. And in those instances where a party may not himself be present at the pre-trial, and another person substitutes for him, or his lawyer undertakes to appear not only as an attorney but in substitution of the client’s person, it is imperative for that representative of the lawyer to have “special authority” to make such substantive agreements as only the client otherwise has capacity to make. That “special authority” should ordinarily be in writing or at the very least be “duly established by evidence other than the self-serving assertion of counsel (or the proclaimed representative) himself.” Without that special authority, the lawyer or representative cannot be deemed capacitated to appear in place of the party; hence, it will be considered that the latter has failed to put in an appearance at all, and he [must] therefore “be non-suited or considered as in default,” notwithstanding his lawyer’s or delegate’s presence.^[9][9]

          We are not unmindful that defendant’s (petitioner’s) preclusion from presenting evidence during trial does not automatically result in a judgment in favor of plaintiff (respondent). The plaintiff must still substantiate the allegations in its complaint.^[10][10] Otherwise, it would be inutile to continue with the plaintiff’s presentation of evidence each time the defendant is declared in default.

          In this case, respondent substantiated the allegations in its complaint, i.e., a contract of necessary deposit existed between the insured See and petitioner. On this score, we find no error in the following disquisition of the appellate court:

[The] records also reveal that upon arrival at the City Garden Hotel, See gave notice to the doorman and parking attendant of the said hotel, x x x Justimbaste, about his Vitara when he entrusted its ignition key to the latter. x x x Justimbaste issued a valet parking customer claim stub to See, parked the Vitara at the Equitable PCI Bank parking area, and placed the ignition key inside a safety key box while See proceeded to the hotel lobby to check in. The Equitable PCI Bank parking area became an annex of City Garden Hotel when the management of the said bank allowed the parking of the vehicles of hotel guests thereat in the evening after banking hours.^[11][11]

          Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit and a necessary deposit made by persons in hotels or inns:

Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and returning the same. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract.

            Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects.

          Plainly, from the facts found by the lower courts, the insured See deposited his vehicle for safekeeping with petitioner, through the latter’s employee, Justimbaste. In turn, Justimbaste issued a claim stub to See. Thus, the contract of deposit was perfected from See’s delivery, when he handed over to Justimbaste the keys to his vehicle, which Justimbaste received with the obligation of safely keeping and returning it. Ultimately, petitioner is liable for the loss of See’s vehicle.

Lastly, petitioner assails the lower courts’ award of attorney’s fees to respondent in the amount of P120,000.00. Petitioner claims that the award is not substantiated by the evidence on record.

We disagree.

While it is a sound policy not to set a premium on the right to litigate,^[12][12] we find that respondent is entitled to reasonable attorney’s fees. Attorney’s fees may be awarded when a party is compelled to litigate or incur expenses to protect its interest,^[13][13] or when the court deems it just and equitable.^[14][14] In this case, petitioner refused to answer for the loss of See’s vehicle, which was deposited with it for safekeeping. This refusal constrained respondent, the insurer of See, and subrogated to the latter’s right, to litigate and incur expenses. However, we reduce the award of P120,000.00 to P60,000.00 in view of the simplicity of the issues involved in this case.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 86869 is AFFIRMED with the MODIFICATION that the award of attorney’s fees is reduced to P60,000.00. Costs against petitioner.

SO ORDERED.

                                      ANTONIO EDUARDO B. NACHURA

                                      Associate Justice

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

Chairperson

JOSE CATRAL MENDOZA

Associate Justice

A T T E S T A T I O N

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                 ANTONIO T. CARPIO

                                      Associate Justice

                                      Chairperson, Second Division

C E R T I F I C A T I O N

          Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                      RENATO C. CORONA

                                      Chief Justice