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Republic of the Philippines

SECOND DIVISION

G.R. No. 179419 January 12, 2011

DURBAN APARTMENTS CORPORATION, doing business under the name and style of City Garden Hotel,
Petitioner,
vs.
PIONEER INSURANCE AND SURETY CORPORATION, Respondent.

DECISION

NACHURA, J.:

For review is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 86869, which affirmed the decision2 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
₱1,175,000.00; 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 ₱1,163,250.00 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 ₱1,163,250.00 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 ₱1,163,250.00 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 ₱100,000.00 as attorney’s fees
plus ₱3,000.00 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 ₱1,045,750.00; 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 ₱1,163,250.00 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

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 ₱1,163,250.00 with legal interest thereon from
July 22, 2003 until the obligation is fully paid and attorney’s fees and litigation expenses amounting to ₱120,000.00.

SO ORDERED.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

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 ₱120,000.00; 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 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 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:

xxxx

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 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.

xxxx

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

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 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

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 1avvphi1

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 ₱120,000.00.
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 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 or when the court deems it just and equitable.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
₱120,000.00 to ₱60,000.00 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 ₱60,000.00. Costs against
petitioner.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

DIOSDADO M. PERALTA ROBERTO A. ABAD

JOSE CATRAL MENDOZA

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
Chairperson, Second Division

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

Footnotes

1 Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate Justices Rosalinda Asuncion-
Vicente and Enrico A. Lanzanas, concurring; rollo, pp. 93-109.

2 Penned by Pairing Judge Rommel O. Baybay; id. at 33-35.

3 Id. at 94-101.

4 Id. at 35.

5 Id. at 108.

6 Titan Construction Corporation v. Uni-Field Enterprises, Inc., G.R. No. 153874, March 7, 2007, 517 SCRA
180, 186; Sigaya v. Mayuga, 504 Phil. 600, 611 (2005).

7 See Child Learning Center, Inc. v. Tagorio, 512 Phil. 618, 623 (2005); Ilao-Quianay v. Mapile, 510 Phil. 736,
744-745 (2005).

8 RULES OF COURT, Rule 18, Sec. 3:

SEC. 3. Notice of pre-trial.—The notice of pre-trial shall be served on counsel, or on the party who has
no counsel. The counsel served with such notice is charged with the duty of notifying the party
represented by him.

9 Development Bank of the Phils. v. CA, 251 Phil. 390, 392-395 (1989). (Citations omitted.)

10 See SSS v. Hon. Chaves, 483 Phil. 292, 302 (2004).

11 Rollo, p. 105.

12 Bank of the Philippine Islands v. Casa Montessori International, G.R. Nos. 149454 & 149507, May 28,
2004, 430 SCRA 261, 296.

13 CIVIL CODE, Art. 2208, par. 2.

14 CIVIL CODE, Art. 2208, par. 11.

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