RULE 39
negotiated for a take-out loan with IBA-Finance
G.R. No. 175339 December 16,
2008
PREMIERE DEVELOPMENT BANK, petitioner,
vs.
ALFREDO C. FLORES, in his Capacity as
Presiding Judge of Regional Trial Court of
Pasig City, Branch 167, ARIZONA
TRANSPORT CORPORATION and PANACOR
MARKETING CORPORATION, respondents.
DECISION
TINGA, J.:
This is a Rule 45 petition for review1 of the Court
of Appeals’ decision2 in CA-G.R. SP No. 92908
which affirmed the Regional Trial Court’s (RTC’s)
orders3 granting respondent corporations’
motion for execution of the Court’s 14 April 2004
decision in G.R. No. 1593524 and
5
denying petitioner Premiere Development
Bank’s motion for reconsideration, as well as the
appellate court’s resolution6 denying Premiere
Development Bank’s motion for reconsideration.
The factual antecedents of the case, as found by
the Court in G.R. No. 159352, are as follows:
The undisputed facts show that on or about
October 1994, Panacor Marketing Corporation
(Panacor for brevity), a newly-formed
corporation, acquired an exclusive
distributorship of products manufactured by
Colgate Palmolive Philippines, Inc. (Colgate for
short). To meet the capital requirements of the
exclusive distributorship, which required an initial
inventory level of P7.5 million, Panacor applied
for a loan of P4.1 million with Premiere
Development Bank. After an extensive study of
Panacor’s creditworthiness, Premiere Bank
rejected the loan application and suggested that
its affiliate company, Arizona Transport
Corporation (Arizona for short), should instead
apply for the loan on condition that the proceeds
thereof shall be made available to Panacor.
Eventually, Panacor was granted a P4.1 million
credit line as evidenced by a Credit Line
Agreement. As suggested, Arizona, which was
an existing loan client, applied for and was
granted a loan of P6.1 million, P3.4 million of
which would be used to pay-off its existing loan
accounts and the remaining P2.7 million as
credit line of Panacor. As security for the P6.1
million loan, Arizona, represented by its Chief
Executive Officer Pedro Panaligan and spouses
Pedro and Marietta Panaligan in their personal
capacities, executed a Real Estate Mortgage
against a parcel of land covered by TCT No.
T-3475 as per Entry No. 49507 dated October 2,
1995.
Since the P2.7 million released by Premiere
Bank fell short of the P4.1 million credit line
which was previously approved, Panacor
Corporation (hereinafter referred to as
IBA-Finance) in the sum of P10 million, P7.5
million of which will be released outright in order
to take-out the loan from Premiere Bank and the
balance of P2.5 million (to complete the needed
capital of P4.1 million with Colgate) to be
released after the cancellation by Premiere of
the collateral mortgage on the property covered
by TCT No. T-3475. Pursuant to the said
take-out agreement, IBA-Finance was
authorized to pay Premiere Bank the prior
existing loan obligations of Arizona in an amount
not to exceed P6 million.
On October 5, 1995, Iba-Finance sent a letter to
Ms. Arlene R. Martillano, officer-in-charge of
Premiere Bank’s San Juan Branch, informing her
of the approved loan in favor of Panacor and
Arizona, and requesting for the release of TCT
No. T-3475. Martillano, after reading the letter,
affixed her signature of conformity thereto and
sent the original copy to Premiere Bank’s legal
office. x x x
On October 12, 1995, Premiere Bank sent a
letter-reply to [IBA]-Finance, informing the latter
of its refusal to turn over the requested
documents on the ground that Arizona had
existing unpaid loan obligations and that it was
the bank’s policy to require full payment of all
outstanding loan obligations prior to the release
of mortgage documents. Thereafter, Premiere
Bank issued to IBA-Finance a Final Statement of
Account showing Arizona’s total loan
indebtedness. On October 19, 1995, Panacor
and Arizona executed in favor of IBA-Finance a
promissory note in the amount of P7.5 million.
Thereafter, IBA-Finance paid to Premiere Bank
the amount of P6,235,754.79, representing the
full outstanding loan account of Arizona. Despite
such payment, Premiere Bank still refused to
release the requested mortgage documents
specifically, the owner’s duplicate copy of TCT
No. T-3475.
On November 2, 1995, Panacor requested
IBA-Finance for the immediate approval and
release of the remaining P2.5 million loan to
meet the required monthly purchases from
Colgate. IBA-Finance explained however, that
the processing of the P2.5 million loan
application was conditioned, among others, on
the submission of the owner’s duplicate copy of
TCT No. 3475 and the cancellation by Premiere
Bank of Arizona’s mortgage. Occasioned by
Premiere Bank’s adamant refusal to release the
mortgage cancellation document, Panacor failed
to generate the required capital to meet its
distribution and sales targets. On December 7,
1995, Colgate informed Panacor of its decision
to terminate their distribution agreement.
On March 13, 1996, Panacor and Arizona filed a
complaint for specific performance and damages
against Premiere Bank before the Regional Trial
Court of Pasig City, docketed as Civil Case No.
65577.
On June 11, 1996, IBA-Finance filed a
complaint-in-intervention praying that judgment
be rendered ordering Premiere Bank to pay
damages in its favor.
On May 26, 1998, the trial court rendered a
decision in favor of Panacor and IBA-Finance,
the decretal portion of which reads: x x x
Premiere Bank appealed to the Court of Appeals
contending that the trial court erred in
finding, inter alia, that it had maliciously
downgraded the credit-line of Panacor from P4.1
million to P2.7 million.
In the meantime, a compromise agreement was
entered into between IBA-Finance and Premiere
Bank whereby the latter agreed to return without
interest the amount of P6,235,754.79 which
IBA-Finance earlier remitted to Premiere Bank to
pay off the unpaid loans of Arizona. On March 11,
1999, the compromise agreement was
approved.
On June 18, 2003, a decision was rendered by
the Court of Appeals which affirmed with
modification the decision of the trial court, the
dispositive portion of which reads:7 x x x
Incidentally, respondent corporations received a
notice of sheriff’s sale during the pendency of
G.R. No. 159352. Respondent corporations
were able to secure an injunction from the RTC
but it was set aside by the Court of Appeals in a
decision dated 20 August 2004.8 The appellate
court denied respondent corporations’ motion for
reconsideration in a resolution dated 5
November 2004.9
The Court, in a resolution dated 16 February
2005, did not give due course to the petition for
review of respondent corporations as it did not
find any reversible error in the decision of the
appellate court.10 After the Court had denied with
finality the motion for reconsideration,11 the
mortgaged property was purchased by Premiere
Development Bank at the foreclosure sale held
on 19 September 2005 for P6,600,000.00.12
Respondent corporations filed a motion for
execution dated 25 August 200513 asking for the
issuance of a writ of execution of our decision in
G.R. No. 159352 where we
awarded P800,000.00 as damages in their
favor.14 The RTC granted the writ of execution
sought. The Court of Appeals affirmed the order.
Hence, the present petition for review.
The only question before us is the propriety of
the grant of the writ of execution by the RTC.
Premiere Development Bank argues that the
lower courts should have applied the principles
of compensation or set-off as the foreclosure of
the mortgaged property does not preclude it from
filing an action to recover any deficiency from
respondent corporations’ loan. It allegedly did
not file an action to recover the loan deficiency
from respondent corporations because of the
pending Civil Case No. MC03-2202 filed by
respondent corporations before the RTC of
Mandaluyong City entitled Arizona Transport
Corp. v. Premiere Development Bank. That case
puts into issue the validity of Premiere
Development Bank’s monetary claim against
respondent corporations and the subsequent
foreclosure sale of the mortgaged property.
Premiere Development Bank allegedly had
wanted to wait for the resolution of the civil case
before it would file its deficiency claims against
respondent corporations. Moreover, the
execution of our decision in G.R. No. 159352
would allegedly be iniquitous and unfair since
respondent corporations are already in the
process of winding up.15
The Court finds the petition unmeritorious.
A judgment becomes "final and executory" by
operation of law. In such a situation, the
prevailing party is entitled to a writ of execution,
and issuance thereof is a ministerial duty of the
court.16 This policy is clearly and emphatically
embodied in Rule 39, Section 1 of the Rules of
Court, to wit:
SECTION 1. Execution upon judgments or final
orders. ― Execution shall issue as a matter of
right, on motion, upon a judgment or order that
disposes of the action or proceeding upon the
expiration of the period to appeal therefrom if no
appeal has been duly perfected.
If the appeal has been duly perfected and finally
resolved, the execution may forthwith be applied
for in the court of origin, on motion of the
judgment obligee, submitting therewith certified
true copies of the judgment or judgments or final
order or orders sought to be enforced and of the
entry thereof, with notice to the adverse party.
The appellate court may, on motion in the same
case, when the interest of justice so requires,
direct the court of origin to issue the writ of
execution. (Emphasis supplied.)
Jurisprudentially, the Court has recognized
certain exceptions to the rule as where in cases
of special and exceptional nature it becomes
imperative in the higher interest of justice to
direct the suspension of its execution; whenever
it is necessary to accomplish the aims of justice;
or when certain facts and circumstances
transpired after the judgment became final which
could render the execution of the judgment
unjust.17
None of these exceptions avails to stay the
execution of this Court’s decision in G.R. No.
159352. Premiere Development Bank has failed
to show how injustice would exist in executing
the judgment other than the allegation that
respondent corporations are in the process of
winding up. Indeed, no new circumstance
transpired after our judgment had become final
that would render the execution unjust.
The Court cannot give due course to Premiere
Development Bank’s claim of compensation or
set-off on account of the pending Civil Case No.
MC03-2202 before the RTC of Mandaluyong
City. For compensation to apply, among other
requisites, the two debts must be liquidated and
demandable already.18
A distinction must be made between a debt and
a mere claim. A debt is an amount actually
ascertained. It is a claim which has been formally
passed upon by the courts or quasi-judicial
bodies to which it can in law be submitted and
has been declared to be a debt. A claim, on the
other hand, is a debt in embryo. It is mere
evidence of a debt and must pass thru the
process prescribed by law before it develops into
what is properly called a debt.19 Absent,
however, any such categorical admission by an
obligor or final adjudication, no legal
compensation or off-set can take place. Unless
admitted by a debtor himself, the conclusion that
he is in truth indebted to another cannot be
definitely and finally pronounced, no matter how
convinced he may be from the examination of
the pertinent records of the validity of that
conclusion the indebtedness must be one that is
admitted by the alleged debtor or pronounced by
final judgment of a competent court.20 At best,
what Premiere Development Bank has against
respondent corporations is just a claim, not a
debt. At worst, it is a speculative claim.
The alleged deficiency claims of Premiere
Development Bank should have been raised as
a compulsory counterclaim before the RTC of
Mandaluyong City where Civil Case No.
MC03-2202 is pending. Under Section 7, Rule 6
of the 1997 Rules of Civil Procedure, a
counterclaim is compulsory when its object
"arises out of or is necessarily connected with
the transaction or occurrence constituting the
subject matter of the opposing party’s claim and
does not require for its adjudication the presence
of third parties of whom the court cannot acquire
jurisdiction". In Quintanilla v. CA21 and reiterated
in Alday v. FGU Insurance Corporation,22 the
"compelling test of compulsoriness"
characterizes a counterclaim as compulsory if
there should exist a "logical relationship"
between the main claim and the counterclaim.
There exists such a relationship when
conducting separate trials of the respective
claims of the parties would entail substantial
duplication of time and effort by the parties and
the court; when the multiple claims involve the
same factual and legal issues; or when the
claims are offshoots of the same basic
controversy between the parties. Clearly, the
recovery of Premiere Development Bank’s
alleged deficiency claims is contingent upon the
case filed by respondent corporations; thus,
conducting separate trials thereon will result in a
substantial duplication of the time and effort of
the court and the parties.
The fear of Premiere Development Bank that
they would have difficulty collecting its alleged
loan deficiencies from respondent corporations
since they were already involuntarily dissolved
due to their failure to file reportorial requirements
with the Securities and Exchange Commission is
neither here nor there. In any event, the law
specifically allows a trustee to manage the
affairs of the corporation in liquidation, and the
dissolution of the corporation would not serve as
an effective bar to the enforcement of rights for
or against it.
As early as 1939,23 this Court held that, although
the time during which the corporation, through its
own officers, may conduct the liquidation of its
assets and sue and be sued as a corporation is
limited to three years from the time the period of
dissolution commences, there is no time limit
within which the trustees must complete a
liquidation placed in their hands. What is
provided in Section 12224 of the Corporation
Code is that the conveyance to the trustees must
be made within the three-year period. But it may
be found impossible to complete the work of
liquidation within the three-year period or to
reduce disputed claims to judgment. The
trustees to whom the corporate assets have
been conveyed pursuant to the authority of
Section 122 may sue and be sued as such in all
matters connected with the liquidation.
Furthermore, Section 145 of the Corporation
Code clearly provides that "no right or remedy in
favor of or against any corporation, its
stockholders, members, directors, trustees, or
officers, nor any liability incurred by any such
corporation, stockholders, members, directors,
trustees, or officers, shall be removed or
impaired either by the subsequent dissolution of
said corporation." Even if no trustee is appointed
or designated during the three-year period of the
liquidation of the corporation, the Court has held
that the board of directors may be permitted to
complete the corporate liquidation by continuing
as "trustees" by legal implication.25 Therefore, no
injustice would arise even if the Court does not
stay the execution of G.R. 159352.
Although it is commendable for Premiere
Development Bank in offering to deposit with the
RTC the P800,000.00 as an alternative prayer,
the Court cannot allow it to defeat or subvert the
right of respondent corporations to have the final
and executory decision in G.R. No. 159352
executed. The offer to deposit cannot suspend
the execution of this Court’s decision for this
cannot be deemed as consignation.
Consignation is the act of depositing the thing
due with the court or judicial authorities
whenever the creditor cannot accept or refuses
to accept payment, and it generally requires a
prior tender of payment. In this case, it is
Premiere Development Bank, the judgment
debtor, who refused to pay respondent
corporations P800,000.00 and not the other way
around. Neither could such offer to make a
deposit with the RTC provide a ground for this
Court to issue an injunctive relief in this case.
WHEREFORE, the petition for review is DENIED.
The decision of the Court of Appeals in CA-G.R.
SP No. 92908 is AFFIRMED.
SO ORDERED.
A.M. No. P-04-1857. March 16, 2005
MERLINDA L. DAGOOC, Complainant,
vs.
ROBERTO A. ERLINA, Sheriff IV, RTC,
Branch 40, Tandag, Surigao del
Sur, Respondents.
RESOLUTION
CORONA, J.:
This is a complaint for misconduct and ignorance
of the law filed by Merlinda L. Dagooc of
Diatagon, Lianga, Surigao del Sur, against
deputy sheriff Roberto A. Erlina of the Regional
Trial Court, Branch 40, Tandag, Surigao del Sur.
Complainant alleged that she was the plaintiff in
Civil Case No. L-695 before the Regional Trial
Court, Branch 28, Diatagon, Lianga, Surigao del
Sur. The court rendered judgment by
compromise agreement which immediately
became final and executory. Complainant
moved for the execution of the decision and, on
February 28, 2002, a writ of execution was
issued which was endorsed to respondent
deputy sheriff Erlina for execution. The
defendants, however, could not pay the money
judgment. Instead of levying on the properties of
the defendants to satisfy the judgment, however,
sheriff Erlina asked them to execute promissory
notes in favor of complainant which he asked the
latter to collect from the defendants.
Complainant further alleged that respondent
sheriff indicated in his return of service that
defendants were insolvent. But upon verification
with the assessor’s office of Tandag, Surigao del
Sur, complainant discovered that defendants
owned real properties, as evidenced by the real
property field appraisal and assessment sheet.
In his comment, respondent sheriff averred that
he served a copy of the writ of execution on the
defendants but they could not pay the money
judgment despite repeated demands. So he
went to the residence of the defendants to levy
on some of their personal properties but he
found them to be exempt from execution
pursuant to Section 13, Rule 39 of the Rules of
Court. He then went to the office of the provincial
assessor to verify if the defendants owned real
properties which he could levy on. He alleged
that he was given a certification that there was
none. So he made a return of service stating that
defendants were insolvent. He denied calling up
complainant for her to collect defendant’s
payment by means of promissory notes. But he
advised her to secure an alias writ of execution
so he could eventually go after defendants’ real
properties in Tandag, Surigao del Sur.
We referred the complaint to the Office of the
Court Administrator (OCA) for review, evaluation
and recommendation. The OCA found the
complaint meritorious and respondent sheriff
guilty of misconduct and gross ignorance of the
law. It recommended that respondent be fined
₱5,000, with a warning that the commission of a
similar act in the future shall be dealt with more
severely.
We find it strange and highly unusual, to say the
least, that respondent sheriff did not know his
duties and functions under Section 9, Rule 39 of
the Revised Rules of Court which clearly states
how the execution of money judgments should
be made.
Section 9. Execution of judgments for money,
how enforced. – (a) Immediate payment on
demand. – The officer shall enforce an execution
of a judgment for money by demanding from the
judgment obligor the immediate payment of the
full amount stated in the writ of execution and all
lawful fees. The judgment obligor shall pay in
cash, certified bank check payable to the
judgment obligee, or any other form of
payment acceptable to the latter, the amount
of the judgment debt under proper receipt
directly to the judgment obligee or his authorized
representative if present at the time of payment.
The lawful fees shall be handed under proper
receipt to the executing sheriff who shall turn
over the said amount within the same day to the
clerk of court of the court that issued the writ.
(emphasis ours)
The law mandates that in the execution of a
money judgment, the judgment debtor shall pay
either in cash, certified bank check payable to
the judgment obligee, or any other form of
payment acceptable to the latter. Nowhere does
the law mention promissory notes as a form of
payment. The only exception is when such form
of payment is acceptable to the judgment debtor.
But it was obviously not acceptable to
complainant, otherwise she would not have filed
this case against respondent sheriff. In fact, she
objected to it because the promissory notes of
the defendants did not satisfy the money
judgment in her favor.
If the judgment debtor cannot pay all or part of
the obligation in cash, certified bank check or
other mode of payment acceptable to the
judgment obligee, the money judgment shall be
satisfied by levying on the properties of the
judgment debtor. Thus,
Section 9(b) Satisfaction by levy. – If the
judgment obligor cannot pay all or part of the
obligation in cash, certified bank check or other
mode of payment acceptable to the judgment
obligee, the officer shall levy upon the properties
of the judgment obligor of every kind and nature
whatsoever which may be disposed of for value
and not otherwise exempt from execution giving
the latter the option to immediately choose which
property or part thereof may be levied upon,
sufficient to satisfy the judgment. If the judgment
obligor does not exercise the option, the officer
shall first levy on the personal properties, if any,
and then on the real properties if the personal
properties are insufficient to answer for the
judgment.
x x x x x x x x x1
Levy is defined as the act or acts by which an
officer of the law and court sets apart or
appropriates a part or the whole of the loser’s
(judgment debtor’s) property for the purpose of
eventually conducting an execution sale to the
end that the writ of execution may be satisfied,
and the judgment debt, paid.2 However, not all of
the judgment debtor’s properties may be levied
upon because the law exempts some of them
from execution.3 But the right of exemption from
execution is a personal privilege granted to the
judgment debtor and, as such, it must be
claimed not by the sheriff but by the judgment
debtor himself at the time of the levy or within a
reasonable period thereafter.4
Respondent sheriff not only failed to levy on the
properties of the judgment debtor when they
could not pay the money judgment in cash but
also claimed the exemption for them. His
conduct blatantly manifested his incompetence
and ineptitude in discharging his functions.
Moreover, respondent sheriff was seriously
remiss in his duties when he stated in his return
of service that the defendants were insolvent
without first diligently verifying such fact. As it
turned out, the defendants had real properties he
could have levied on to satisfy the money
judgment.
But even assuming that the
defendants/judgment debtors were insolvent,
respondent sheriff should have garnished their
salaries (being paid employees) to enforce the
judgment in the subject case as provided for in
Section 9(c), Rule 39 of the Revised Rules of
Court.
(c) Garnishment of debts and credits. – The
officer may levy on debts due the judgment
obligor and other credits, including bank
deposits, financial interests, royalties,
commissions and other personal property not
capable of manual delivery in the possession or
control of third parties. Levy shall be made by
serving notice upon the person owing such debts
or having in his possession or control such
credits to which the judgment obligor is entitled.
The garnishment shall cover only such amount
as will satisfy the judgment and all lawful fees.
Either to desperately cover his tracks after it was
pointed out to him that the defendants were not
insolvent at all or out of sheer ignorance of the
law, respondent sheriff advised complainant to
file a motion for the issuance of an alias writ of
execution allegedly so that he could levy on the
properties of the defendants. But there was no
need for an alias writ of execution for him to levy
on the real properties of the defendants. The life
of the writ was for five years and the judgment of
the court had not yet been fully satisfied. Section
14, Rule 39 of the Revised Rules of Court states
that:
Section 14. Return of writ of execution. – The
writ of execution shall be returnable to the court
issuing it immediately after the judgment has
been satisfied in part or in full. If the judgment
cannot be satisfied in full within thirty (30) days
after his receipt of the writ, the officer shall report
to the court and state the reason therefor. Such
writ shall continue in effect during the period
within which the judgment may be enforced
by motion. The officer shall make a report to the
court every thirty (30) days on the proceedings
taken thereon until the judgment is satisfied in
full, or its effectivity expires. x x x (emphasis
ours)
Sheriffs, as public officers, are repositories of
public trust and are under obligation to perform
the duties of their office honestly, faithfully and to
the best of their ability. They are bound to use
utmost skill and diligence in the performance of
their official duties particularly where the rights of
individuals may be jeopardized by their
neglect.5Here, we find respondent sheriff utterly
wanting in zeal and dedication. He was highly
incompetent, downright inefficient and grossly
ignorant of the law when he did not faithfully
execute the writ of execution to the prejudice of
complainant.
Considering that respondent sheriff’s primary
duty was the execution of the writ strictly
according to its terms, there was apparently
more than mere "harmless" ignorance involved
here, which makes us wonder about the very
lame and docile penalty of ₱5,000 being
recommended by the OCA. Applying Rule 4,
Section 52 B(2) of the Revised Uniform Rules on
Administrative Cases in the Civil Service, we find
respondent guilty of inefficiency and
incompetence in the performance of his official
duties and suspend him from the service for one
(1) year.
WHEREFORE, in view of the foregoing, we find
respondent sheriff ROBERTO A. ERLINA of the
Regional Trial Court, Branch 40, Tandag,
Surigao del Sur, GUILTY of inefficiency and
incompetence in the performance of his official
duties. He is hereby SUSPENDED from the
service for one (1) year and WARNED that the
commission of a similar act in the future shall be
dealt with more severely.
SO ORDERED.
G.R. No. 81552 May 28, 1990
DIONISIO FIESTAN and JUANITA
ARCONADO, petitioners
vs.
COURT OF APPEALS; DEVELOPMENT BANK
OF THE PHILIPPINES, LAOAG CITY BRANCH;
PHILIPPINE NATIONAL BANK, VIGAN
BRANCH, ILOCOS SUR, FRANCISCO PERIA
and REGISTER OF DEEDS OF ILOCOS
SUR, respondents.
Pedro Singson Reyes for petitioners.
The Chief Legal Counsel for PNB.
Public Assistance Office for Francisco Peria.
Ruben O. Fruto, Bonifacio M. Abad and David C.
Frez for DBP Laoag Branch.
FERNAN, C.J.:
In this petition for review on certiorari, petitioners
spouses Dionisio Fiestan and Juanita Arconada
owners of a parcel of land (Lot No. 2B) situated
in Ilocos Sur covered by TCT T-13218 which
they mortgaged to the Development Bank of the
Philippines (DBP) as security for their
P22,400.00 loan, seek the reversal of the
decision of the Court of Appeals 1 dated June 5,
1987 affirming the dismissal of their complaint
filed against the Development Bank of the
Philippines, Laoag City Branch, Philippine
National Bank, Vigan Branch, Ilocos Sur,
Francisco Peria and the Register of Deeds of
Ilocos Sur, for annulment of sale, mortgage, and
cancellation of transfer certificates of title.
Records show that Lot No. 2-B was acquired by
the DBP as the highest bidder at a public auction
sale on August 6, 1979 after it was extrajudicially
foreclosed by the DBP in accordance with Act
No. 3135, as amended by Act No. 4118, for
failure of petitioners to pay their mortgage
indebtedness. A certificate of sale was
subsequently issued by the Provincial Sheriff of
Ilocos Sur on the same day and the same was
registered on September 28, 1979 in the Office
of the Register of Deeds of Ilocos Sur. Earlier, or
on September 26, 1979, petitioners executed a
Deed of Sale in favor of DBP which was likewise
registered on September 28, 1979.
Upon failure of petitioners to redeem the
property within the one (1) year period which
expired on September 28, 1980, petitioners' TCT
T-13218 over Lot No. 2-B was cancelled by the
Register of Deeds and in lieu thereof TCT
T-19077 was issued to the DBP upon
presentation of a duly executed affidavit of
consolidation of ownership.
On April 13,1982, the DBP sold the lot to
Francisco Peria in a Deed of Absolute Sale and
the same was registered on April 15, 1982 in the
Office of the Register of Deeds of Ilocos Sur.
Subsequently, the DBP's title over the lot was
cancelled and in lieu thereof TCT T-19229 was
issued to Francisco Peria.
After title over said lot was issued in his name,
Francisco Peria secured a tax declaration for
said lot and accordingly paid the taxes due
thereon. He thereafter mortgaged said lot to the
PNB Vigan Branch as security for his loan of
P115,000.00 as required by the bank to increase
his original loan from P49,000.00 to P66,000.00
until it finally reached the approved amount of
P115,000.00. Since petitioners were still in
possession of Lot No. 2-B, the Provincial Sheriff
ordered them to vacate the premises.
On the other hand, petitioners filed on August 23,
1982 a complaint for annulment of sale,
mortgage and cancellation of transfer certificates
of title against the DBP-Laoag City, PNB Vigan
Branch, Ilocos Sur, Francisco Peria and the
Register of Deeds of Ilocos Sur, docketed as
Civil Case No. 3447-V before the Regional Trial
Court of Vigan, Ilocos Sur.
After trial, the RTC of Vigan, Ilocos Sur, Branch
20, rendered its decision 2 on November 14,
1983 dismissing the complaint, declaring therein,
as valid the extrajudicial foreclosure sale of the
mortgaged property in favor of the DBP as
highest bidder in the public auction sale held on
August 6, 1979, and its subsequent sale by DBP
to Francisco Peria as well as the real estate
mortgage constituted thereon in favor of PNB
Vigan as security for the P115,000.00 loan of
Francisco Peria.
The Court of Appeals affirmed the decision of the
RTC of Vigan, Ilocos Sur on June 20, 1987.
The motion for reconsideration having been
denied 3 on January 19, 1988, petitioners filed
the instant petition for review on certiorari with
this Court. Petitioners seek to annul the
extrajudicial foreclosure sale of the mortgaged
property on August 6, 1979 in favor of the
Development Bank of the Philippines (DBP) on
the ground that it was conducted by the
Provincial Sheriff of Ilocos Sur without first
effecting a levy on said property before selling
the same at the public auction sale. Petitioners
thus maintained that the extrajudicial foreclosure
sale being null and void by virtue of lack of a
valid levy, the certificate of sale issued by the
Provincial Sheriff cannot transfer ownership over
the lot in question to the DBP and consequently
the deed of sale executed by the DBP in favor of
Francisco Peria and the real estate mortgage
constituted thereon by the latter in favor of PNB
Vigan Branch are likewise null and void.
The Court finds these contentions untenable.
The formalities of a levy, as an essential
requisite of a valid execution sale under Section
15 of Rule 39 and a valid attachment lien under
Rule 57 of the Rules of Court, are not basic
requirements before an extrajudicially foreclosed
property can be sold at public auction. At the
outset, distinction should be made of the three
different kinds of sales under the law, namely: an
ordinary execution sale, a judicial foreclosure
sale, and an extrajudicial foreclosure sale,
because a different set of law applies to each
class of sale mentioned. An ordinary execution
sale is governed by the pertinent provisions of
Rule 39 of the Rules of Court. Rule 68 of the
Rules of Court applies in cases of judicial
foreclosure sale. On the other hand, Act No.
3135, as amended by Act No. 4118 otherwise
known as "An Act to Regulate the Sale of
Property under Special Powers Inserted in or
Annexed to Real Estate Mortgages" applies in
cases of extrajudicial foreclosure sale.
The case at bar, as the facts disclose, involves
an extrajudicial foreclosure sale. The public
auction sale conducted on August 6, 1979 by the
Provincial Sheriff of Ilocos Sur refers to the
"sale" mentioned in Section 1 of Act No. 3135,
as amended, which was made pursuant to a
special power inserted in or attached to a real
estate mortgage made as security for the
payment of money or the fulfillment of any other
obligation. It must be noted that in the mortgage
contract, petitioners, as mortgagor, had
appointed private respondent DBP, for the
purpose of extrajudicial foreclosure, "as his
attorney-in-fact to sell the property mortgaged
under Act No. 3135, as amended, to sign all
documents and perform any act requisite and
necessary to accomplish said purpose .... In
case of foreclosure, the Mortgagor hereby
consents to the appointment of the mortgagee or
any of its employees as receiver, without any
bond, to take charge of the mortgaged property
at once, and to hold possession of the same ... 4
There is no justifiable basis, therefore, to apply
by analogy the provisions of Rule 39 of the Rules
of Court on ordinary execution sale, particularly
Section 15 thereof as well as the jurisprudence
under said provision, to an extrajudicial
foreclosure sale conducted under the provisions
of Act No. 3135, as amended. Act No. 3135, as
amended, being a special law governing
extrajudicial foreclosure proceedings, the same
must govern as against the provisions on
ordinary execution sale under Rule 39 of the
Rules of Court.
In that sense, the case of Aparri vs. Court Of
Appeals, 13 SCRA 611 (1965), cited by
petitioners, must be distinguished from the
instant case. On the question of what should be
done in the event the highest bid made for the
property at the extrajudicial foreclosure sale is in
excess of the mortgage debt, this Court applied
the rule and practice in a judicial foreclosure sale
to an extrajudicial foreclosure sale in a similar
case considering that the governing provisions
of law as mandated by Section 6 of Act No. 3135,
as amended, specifically Sections 29, 30 and 34
of Rule 39 of the Rules of Court (previously
Sections 464, 465 and 466 of the Code of Civil
Procedure) are silent on the matter. The said
ruling cannot, however, be construed as the
legal basis for applying the requirement of a levy
under Section 15 of Rule 39 of the Rules of
Court before an extrajudicially foreclosed
property can be sold at public auction when
none is expressly required under Act No. 3135,
as amended.
Levy, as understood under Section 15, Rule 39
of the Rules of Court in relation to execution of
money judgments, has been defined by this
Court as the act whereby a sheriff sets apart or
appropriates for the purpose of satisfying the
command of the writ, a part or the whole of the
judgment-debtor's property. 5
In extrajudicial foreclosure of mortgage, the
property sought to be foreclosed need not be
identified or set apart by the sheriff from the
whole mass of property of the mortgagor for the
purpose of satisfying the mortgage indebtedness.
For, the essence of a contract of mortgage
indebtedness is that a property has been
identified or set apart from the mass of the
property of the debtor-mortgagor as security for
the payment of money or the fulfillment of an
obligation to answer the amount of indebtedness,
in case of default of payment. By virtue of the
special power inserted or attached to the
mortgage contract, the mortgagor has
authorized the mortgagee-creditor or any other
person authorized to act for him to sell said
property in accordance with the formalities
required under Act No. 3135, as amended.
The Court finds that the formalities prescribed
under Sections 2, 3 and 4 of Act No. 3135, as
amended, were substantially complied with in
the instant case. Records show that the notices
of sale were posted by the Provincial Sheriff of
Ilocos Sur and the same were published in Ilocos
Times, a newspaper of general circulation in the
province of Ilocos Sur, setting the date of the
auction sale on August 6, 1979 at 10:00 a.m. in
the Office of the Sheriff, Vigan, Ilocos Sur. 6
The nullity of the extrajudicial foreclosure sale in
the instant case is further sought by petitioners
on the ground that the DBP cannot acquire by
purchase the mortgaged property at the public
auction sale by virtue of par. (2) of Article 1491
and par. (7) of Article 1409 of the Civil Code
which prohibits agents from acquiring by
purchase, even at a public or judicial auction
either in person or through the mediation of
another, the property whose administration or
sale may have been entrusted to them unless
the consent of the principal has been given.
The contention is erroneous.
The prohibition mandated by par. (2) of Article
1491 in relation to Article 1409 of the Civil Code
does not apply in the instant case where the sale
of the property in dispute was made under a
special power inserted in or attached to the real
estate mortgage pursuant to Act No. 3135, as
amended. It is a familiar rule of statutory
construction that, as between a specific statute
and general statute, the former must prevail
since it evinces the legislative intent more clearly
than a general statute does. 7 The Civil Code
(R.A. 386) is of general character while Act No.
3135, as amended, is a special enactment and
therefore the latter must prevail. 8
Under Act No. 3135, as amended, a
mortgagee-creditor is allowed to participate in
the bidding and purchase under the same
conditions as any other bidder, as in the case at
bar, thus:
Section 5. At any sale, the creditor, trustee, or
other person authorized to act for the creditor,
may participate in the bidding and purchase
under the same conditions as any other bidder,
unless the contrary has been expressly provided
in the mortgage or trust deed under which the
sale is made.
In other words, Section 5 of Act No. 3135, as
amended, creates and is designed to create an
exception to the general rule that a mortgagee or
trustee in a mortgage or deed of trust which
contains a power of sale on default may not
become the purchaser, either directly or through
the agency of a third person, at a sale which he
himself makes under the power. Under such an
exception, the title of the mortgagee-creditor
over the property cannot be impeached or
defeated on the ground that the mortgagee
cannot be a purchaser at his own sale.
Needless to state, the power to foreclose is not
an ordinary agency that contemplates
exclusively the representation of the principal by
the agent but is primarily an authority conferred
upon the mortgagee for the latter's own
protection. It is an ancillary stipulation supported
by the same cause or consideration for the
mortgage and forms an essential and
inseparable part of that bilateral
agreement. 9 Even in the absence of statutory
provision, there is authority to hold that a
mortgagee may purchase at a sale under his
mortgage to protect his own interest or to avoid a
loss to himself by a sale to a third person at a
price below the mortgage debt. 10 The express
mandate of Section 5 of Act No. 3135, as
amended, amply protects the interest of the
mortgagee in this jurisdiction.
WHEREFORE, in view of the foregoing, the
petition is DENIED for lack of merit and the
decision of the Court of Appeals dated June 20,
1987 is hereby AFFIRMED. No cost.
SO ORDERED.
G.R. No. 107282 March 16, 1994
THE MANILA REMNANT CO., INC., petitioner,
vs.
HON. COURT OF APPEALS, AND SPS.
OSCAR C. VENTANILLA AND CARMEN
GLORIA DIAZ, respondents.
Tabalingcos & Associates Law Office for
petitioner.
Oscar C. Ventanilla, Jr. and Augusto Garmaitan
for private respondents.
CRUZ, J.:
The present petition is an offshoot of our
decision in Manila Remnant Co., Inc., (MRCI) v.
Court of Appeals, promulgated on November 22,
1990.
That case involved parcels of land in Quezon
City which were owned by petitioner MRCI and
became the subject of its agreement with A.U.
Valencia and Co., Inc., (AUVCI) by virtue of
which the latter was to act as the petitioner's
agent in the development and sale of the
property. For a stipulated fee, AUVCI was to
convert the lands into a subdivision, manage the
sale of the lots, execute contracts and issue
official receipts to the lot buyers. At the time of
the agreement, the president of both MRCI and
AUVCI was Artemio U. Valencia.
Pursuant to the above agreement, AUVCI
executed two contracts to sell dated March 3,
1970, covering Lots 1 and 2, Block 17, in favor of
spouses Oscar C. Ventanilla and Carmen Gloria
Diaz for the combined contract price of
P66,571.00, payable monthly in ten years. After
ten days and without the knowledge of the
Ventanilla couple, Valencia, as president of
MRCI, resold the same parcels to Carlos
Crisostomo, one of his sales agents, without any
consideration. Upon orders of Valencia, the
monthly payments of the Ventanillas were
remitted to the MRCI as payments of Crisostomo,
for which receipts were issued in his name. The
receipts were kept by Valencia without the
knowledge of the Ventanillas and Crisostomo.
The Ventanillas continued paying their monthly
installments.
On May 30, 1973, MRCI informed AUVCI that it
was terminating their agreement because of
discrepancies discovered in the latter's
collections and remittances. On June 6, 1973,
Valencia was removed by the board of directors
of MRCI as its president.
On November 21, 1978, the Ventanilla spouses,
having learned of the supposed sale of their lots
to Crisostomo, commenced an action for specific
performance, annulment of deeds, and damages
against Manila Remnant Co., Inc., A.U. Valencia
and Co., Inc., and Carlos Crisostomo. It was
docketed as Civil Case No. 26411 in the Court of
First Instance of Quezon City, Branch
7-B.
On November 17, 1980, the trial court rendered
a decision declaring the contracts to sell in favor
of the Ventanillas valid and subsisting, and
annulling the contract to sell in favor of
Crisostomo. It ordered the MRCI to execute an
absolute deed of sale in favor of the Ventanillas,
free from all liens and encumbrances. Damages
and attorney's fees in the total amount of
P210,000.00 were also awarded to the
Ventanillas for which the MRCI, AUVCI, and
Crisostomo were held solidarily liable.
The lower court ruled further that if for any
reason the transfer of the lots could not be
effected, the defendants would be solidarily
liable to the Ventanillas for reimbursement of the
sum of P73,122.35, representing the amount
paid for the two lots, and legal interest thereon
from March 1970, plus the decreed damages
and attorney's fees. Valencia was also held
liable to MRCI for moral and exemplary
damages and attorney's fees.
From this decision, separate appeals were filed
by Valencia and MRCI. The appellate court,
however, sustained the trial court in toto.
MRCI then filed before this Court a petition
for certiorari to review the portion of the decision
of the Court of Appeals upholding the solidary
liability of MRCI, AUVCI and Carlos Crisostomo
for the payment of moral and exemplary
damages and attorney's fees to the Ventanillas.
On November 22, 1990, this Court affirmed the
decision by the Court of Appeals and declared
the judgment of the trial court immediately
executory.
The Present Case
On January 25, 1991, the spouses Ventanilla
filed with the trial court a motion for the issuance
of a writ of execution in Civil Case No. 26411.
The writ was issued on May 3, 1991, and served
upon MRCI on May 9, 1991.
In a manifestation and motion filed by MRCI with
the trial court on May 24, 1991, the petitioner
alleged that the subject properties could not be
delivered to the Ventanillas because they had
already been sold to Samuel Marquez on
February 7, 1990, while their petition was
pending in this Court. Nevertheless, MRCI
offered to reimburse the amount paid by the
respondents, including legal interest plus the
aforestated damages. MRCI also prayed that its
tender of payment be accepted and all
garnishments on their accounts lifted.
The Ventanillas accepted the amount of
P210,000.00 as damages and attorney's fees
but opposed the reimbursement offered by MRCI
in lieu of the execution of the absolute deed of
sale. They contended that the alleged sale to
Samuel Marquez was void, fraudulent, and in
contempt of court and that no claim of ownership
over the properties in question had ever been
made by Marquez.
On July 19, 1991, Judge Elsie Ligot-Telan
issued the following order:
To ensure that there is enough amount to cover
the value of the lots involved if transfer thereof to
plaintiff may no longer be effected, pending
litigation of said issue, the garnishment made by
the Sheriff upon the bank account of Manila
Remnant may be lifted only upon the deposit to
the Court of the amount of P500,000.00 in cash.
MRCI then filed a manifestation and motion for
reconsideration praying that it be ordered to
reimburse the Ventanillas in the amount of
P263,074.10 and that the garnishment of its
bank deposit be lifted. This motion was denied
by the trial court in its order dated September 30,
1991. A second manifestation and motion filed
by MRCI was denied on December 18, 1991.
The trial court also required MRCI to show cause
why it should not be cited for contempt for
disobedience of its judgment.
These orders were questioned by MRCI in a
petition for certiorari before the respondent court
on the ground that they were issued with grave
abuse of discretion.
The Court of Appeals ruled that the contract to
sell in favor of Marquez did not constitute a legal
impediment to the immediate execution of the
judgment. Furthermore, the cash bond fixed by
the trial court for the lifting of the garnishment
was fair and reasonable because the value of
the lot in question had increased considerably.
The appellate court also set aside the
show-cause order and held that the trial court
should have proceeded under Section 10, Rule
39 of the Rules of Court and not Section 9
thereof.1
In the petition now before us, it is submitted that
the trial court and the Court of Appeals
committed certain reversible errors to the
prejudice of MRCI.
The petitioner contends that the trial court may
not enforce it garnishment order after the
monetary judgment for damages had already
been satisfied and the amount for
reimbursement had already been deposited with
the sheriff. Garnishment as a remedy is intended
to secure the payment of a judgment debt when
a well-founded belief exists that the erring party
will abscond or deliberately render the execution
of the judgment nugatory. As there is no such
situation in this case, there is no need for a
garnishment order.
It is also averred that the trial court gravely
abused its discretion when it arbitrarily fixed the
amount of the cash bond for the lifting of the
garnishment order at P500,000.00.
MRCI further maintains that the sale to Samuel
Marquez was valid and constitutes a legal
impediment to the execution of the absolute
deed of sale to the Ventanillas. At the time of the
sale to Marquez, the issue of the validity of the
sale to the Ventanillas had not yet been resolved.
Furthermore, there was no specific injunction
against the petitioner re-selling the property.
Lastly, the petitioner insists that Marquez was a
buyer in good faith and had a right to rely on the
recitals in the certificate of title. The subject
matter of the controversy having passed to an
innocent purchaser for value, the respondent
court erred in ordering the execution of the
absolute deed of sale in favor of the Ventanillas.
For their part, the respondents argue that the
validity of the sale to them had already been
established even while the previous petition was
still pending resolution. That petition only
questioned the solidary liability of MRCI to the
Ventanillas. The portion of the decision ordering
the MRCI to execute an absolute deed of sale in
favor of the Ventanillas became final and
executory when the petitioner failed to appeal it
to the Supreme Court. There was no need then
for an order enjoining the petitioner from
re-selling the property in litigation.
They also point to the unusual lack of interest of
Marquez in protecting and asserting his right to
the disputed property, a clear indication that the
alleged sale to him was merely a ploy of the
petitioner to evade the execution of the absolute
deed of sale in their favor.
The petition must fail.
The validity of the contract to sell in favor of the
Ventanilla spouses is not disputed by the parties.
Even in the previous petition, the recognition of
that contract was not assigned as error of either
the trial court or appellate court. The fact that the
MRCI did not question the legality of the award
for damages to the Ventanillas also shows that it
even then already acknowledged the validity of
the contract to sell in favor of the private
respondents.
On top of all this, there are other circumstances
that cast suspicion on the validity, not to say the
very existence, of the contract with Marquez.
First, the contract to sell in favor of Marquez was
entered into after the lapse of almost ten years
from the rendition of the judgment of the trial
court upholding the sale to the Ventanillas.
Second, the petitioner did not invoke the contract
with Marquez during the hearing on the motion
for the issuance of the writ of execution filed by
the private respondents. It disclosed the contract
only after the writ of execution had been served
upon it.
Third, in its manifestation and motion dated
December 21, 1990, the petitioner said it was
ready to deliver the titles to the Ventanillas
provided that their counterclaims against private
respondents were paid or offset first. There was
no mention of the contract to sell with Marquez
on February 7, 1990.
Fourth, Marquez has not intervened in any of
these proceedings to assert and protect his
rights to the subject property as an alleged
purchaser in good faith.
At any rate, even if it be assumed that the
contract to sell in favor of Marquez is valid, it
cannot prevail over the final and executory
judgment ordering MRCI to execute an absolute
deed of sale in favor of the Ventanillas. No less
importantly, the records do not show that
Marquez has already paid the supposed balance
amounting to P616,000.00 of the original price of
over P800,000.00.2
The Court notes that the petitioner stands to
benefit more from the supposed contract with
Marquez than from the contract with the
Ventanillas with the agreed price of only
P66,571.00. Even if it paid the P210,000.00
damages to the private respondents as decreed
by the trial court, the petitioner would still earn
more profit if the Marquez contract were to be
sustained.
We come now to the order of the trial court
requiring the posting of the sum of P500,000.00
for the lifting of its garnishment order.
While the petitioners have readily complied with
the order of the trial court for the payment of
damages to the Ventanillas, they have, however,
refused to execute the absolute deed of sale. It
was for the purpose of ensuring their compliance
with this portion of the judgment that the trial
court issued the garnishment order which by its
term could be lifted only upon the filling of a cash
bond of P500,000.00.
The petitioner questions the propriety of this
order on the ground that it has already partially
complied with the judgment and that it has
always expressed its willingness to reimburse
the amount paid by the respondents. It says that
there is no need for a garnishment order
because it is willing to reimburse the Ventanillas
in lieu of execution of the absolute deed of sale.
The alternative judgment of reimbursement is
applicable only if the conveyance of the lots is
not possible, but it has not been shown that
there is an obstacle to such conveyance. As the
main obligation of the petitioner is to execute the
absolute deed of sale in favor of the Ventanillas,
its unjustified refusal to do so warranted the
issuance of the garnishment order.
Garnishment is a species of attachment for
reaching credits belonging to the judgment
debtor and owing to him from a stranger to the
litigation.3 It is an attachment by means of which
the plaintiff seeks to subject to his claim property
of the defendant in the hands of a third person or
money owed by such third person or garnishee
to the defendant.4The rules on attachment also
apply to garnishment proceedings.
A garnishment order shall be lifted if it
established that:
(a) the party whose accounts have been
garnished has posted a counterbond or has
made the requisite cash deposit;5
(b) the order was improperly or irregularly
issued6 as where there is no ground for
garnishment7 or the affidavit and/or bond filed
therefor are defective or insufficient;8
(c) the property attached is exempt from
execution, hence exempt from preliminary
attachment9 or
(d) the judgment is rendered against the
attaching or garnishing creditor.10
Partial execution of the judgment is not included
in the above enumeration of the legal grounds
for the discharge of a garnishment order. Neither
does the petitioner's willingness to reimburse
render the garnishment order unnecessary. As
for the counterbond, the lower court did not err
when it fixed the same at P500,000.00. As
correctly pointed out by the respondent court,
that amount corresponds to the current fair
market value of the property in litigation and was
a reasonable basis for determining the amount
of the counterbond.
Regarding the refusal of the petitioner to execute
the absolute deed of sale, Section 10 of Rule 39
of the Rules of Court reads as follows:
Sec. 10. Judgment for specific act; vesting title
— If a judgment directs a party to execute a
conveyance of land, or to deliver deeds or other
documents, or to perform any other specific act,
and the party fails to comply within the time
specified, the court may direct the act to be done
at the cost of the disobedient party by some
other person appointed by the court and the act
when so done shall have like effect as if done by
the party. If real or personal property is within the
Philippines, the court in lieu of directing a
conveyance thereof may enter judgment
divesting the title of any party and vesting it in
others and such judgment shall have the force
and effect of a conveyance executed in due form
of law.
Against the unjustified refusal of the petitioner to
accept payment of the balance of the contract
price, the remedy of the respondents is
consignation, conformably to the following
provisions of the Civil Code:
Art. 1256. If the creditor to whom tender of
payment has been made refuses without just
cause to accept it, the debtor shall be released
from responsibility by the consignation of the
thing or sum due. . .
Art. 1258. Consignation shall be made by
depositing the things due at the disposal of the
judicial authority, before whom the tender of
payment shall be proved, in a proper case, and
the announcement of the consignation in other
cases.
The consignation having been made, the
interested parties shall also be notified thereof.
Art. 1260. Once the consignation has been duly
made, the debtor may ask the judge to order the
cancellation of the obligation.
Accordingly, upon consignation by the
Ventanillas of the sum due, the trial court may
enter judgment canceling the title of the
petitioner over the property and transferring the
same to the respondents. This judgment shall
have the same force and effect as conveyance
duly executed in accordance with the
requirements of the law.
In sum, we find that:
1. No legal impediment exists to the execution,
either by the petitioner or the trial court, of an
absolute deed of sale of the subject property in
favor of the respondent Ventanillas; and
2. The lower court did not abuse its discretion
when it required the posting of a P500,000.00
cash bond for the lifting of the garnishment
order.
WHEREFORE, the petition is DENIED and the
challenged decision of the Court of Appeals is
AFFIRMED in toto, with costs against the
petitioner. It is so ordered.
Davide, Jr., Bellosillo, Quiason and Kapunan, JJ.,
concur.
G.R. No. L-53998 May 31, 1989
SPOUSES ENRICO MALONZO and AVELINA
MALONZO, BARBARA BROWN, and
BONIFACIA MONZON, petitioners,
vs.
HON. HERMINIO MARIANO, Judge, CFI,
Manila, Br. IV, BANCO FILIPINO SAVINGS
AND MORTGAGE BANK and THE CITY
SHERIFF OF MANILA, respondents.
Benjamin B. Bernardino & Associates for
petitioners.
Bienvenido A. Tan, Jr. for Banco Filipino Savings
and Mortgage Bank.
NARVASA, J.:
The principal issue raised in the special civil
action of prohibition at bar is whether or not a
writ of possession issued by a Court of First
Instance (Regional Trial Court) in accordance
with Act 3135, to give possession of property
sold at an extrajudicial foreclosure sale to the
purchaser thereof, may be enforced against
persons other than the mortgagor
The property in question consists of two (2)
parcels of land and the apartment and
commercial building thereon standing, located at
R. Magsaysay Boulevard, Sta. Mesa, Manila. A
mortgage was constituted over this property by
its owner then, Universal Ventures, Inc., in favor
of Banco Filipino Mortgage & Savings Bank, as
security for the payment of a loan of
P350,000.00. 1 The mortgage deed authorized
the extra-judicial foreclosure of the property in
the event of default in the repayment of the loan.
It was later amended to extend to and cover an
additional and total consolidated loan of
P400,000.00. 2 Universal Ventures, Inc. failed to
repay the loan. Consequently, Banco Filipino
caused the extra-judicial foreclosure of the
property by the City Sheriff of Manila. The
foreclosure sale took place in due course; the
mortgaged property was struck off to the bank,
as highest bidder, and the bank registered the
sheriff's certificate of sale with the Register of
Deeds of Manila and on July 27, 1976 obtained a
certificate of title in its name, numbered 122496,
in lieu of that of the mortgagor, which was
accordingly cancelled. 3
On the same day that title was issued to it,
Banco Filipino filed a petition for a writ of
possession with the Court of First Instance of
Manila.4 The petition recited the foregoing facts
and the additional circumstances that (1) the
mortgagor, Universal Ventures, Inc., had failed
to redeem the property within the one-year
period allowed by law, and (2) the mortgagor
was still in possession of the property, as well as
certain other persons claiming rights under said
mortgagor although said rights had not been
recorded in the Register of Deeds, and prayed
—
. . . that after due notice and hearing, ... (the)
Court forthwith issue in accordance with Section
7 of Act No. 3135, as amended by Act No. 4118,
a writ of possession of the property in favor of
the petitioner and against the respondent and all
persons claiming under it, to vacate the
premises ... covered by and embraced in (the
mortgagor's title,) Transfer Certificate of Title No.
67992 of the Register of Deeds of Manila.
Among the persons named in the petition as
"claiming (rights) under" Universal Ventures, Inc.,
were petitioners Avelina Malonzo, Barbara
Brown, and Bonifacia Monzon. 5 The petition
contained a "Notification" addressed to the Clerk
of Court to set the hearing thereon on July 30,
1976 at 9:00 o'clock in the morning; and copies
were served on the Universal Ventures, Inc. and
the persons alleged to be claiming rights under
it. 6
After hearings were had on the petition, Judge
Herminio Mariano issued the order now assailed,
under date of September 20, 1979, the
dispositive portion whereof reads as follows:7
WHEREFORE, let the corresponding Writ of
Possession be issued directing the Sheriff of
Manila or his duly authorized representative to
place the herein petitioner in actual possession
of the foreclosed properties described in
Transfer Certificate of Title No. 67992 and to
eject therefrom the herein respondent, its
officers, agents and other persons claiming
under said respondent.
The writ of possession issued on March 4, 1980
and on the strength thereof, the Sheriff of Manila
attempted to evict the persons in occupancy of
the property. 8
Three of the persons sought to be evicted,
Enrico Malonzo, husband of Avelina Malonzo,
Barbara Brown, and Bonifacia Monzon, filed suit
against Banco Filipino and the City Sheriff in the
same Court of First Instance of Manila seeking to
perpetually restrain the enforcement of the writ
of possession against them, and to recover
damages resulting from the defendants' attempts
to enforce it. 9 The action was docketed as Civil
Case No. 132075. In their complaint, they
alleged that they were occupying their respective
premises in the foreclosed property "by virtue of
a verbal lease contract with Universal Ventures,
lnc.," that "there being no ejectment case filed
against them neither were they made a party to
the Petition for Writ of Possession of
defendant BANCO FILIPINO ..." they were
entitled to remain in possession and could not be
ousted under the writ of possession; moreover,
"under Presidential Decree No. 20 and Batas
Pambansa Blg. 25, transfer of ownership
whether by virtue of sale or mortgage will not be
a ground for ejectment."
Fourteen (14) days later, these same persons —
Enrico Malonzo, Barbara Brown and Bonifacia
Monzon — and Enrico's wife, Avelina Malonzo,
instituted a second action, this time, a special
civil action for prohibition, commenced in this
Court by petition dated June 6, 1980. Named
respondents were the same defendants in Civil
Case No. 132075 — Banco Filipino and the City
Sheriff of Manila — as well as Judge Mariano,
who had issued the writ of possession. The
petition recited substantially the same facts as
those set out in the complaint in Civil Case No.
132075, and submitted the same thesis, that
they could not be evicted from the
premises "there being no ejectment case filed
against them neither were they made a party to
the petition for writ of possessioned filed by
respondent Bank," and "under Presidential
Decree No. 20 and further reiterated in Batas
Pambansa Bilang 25, transfer of ownership
whether by virtue of sale or mortgage will not be
a ground for ejectment ... . "
Section 7 of Act 3135, as amended by Act 4118,
grants to the purchaser at an extra-judicial
foreclosure sale, an absolute right to possession
of the property sold during the one-year period of
redemption and a fortiori after the lapse of said
period without any redemption being
made.10 Possession may be obtained under a
writ which may be applied for ex parte. Section 7
reads as follows:
SEC. 7. In any sale made under the provisions of
this Act, the purchaser may petition the Court of
First Instance of the province or place where the
property or any part thereof is situated, to give
him possession thereof during the redemption
period, furnishing bond in an amount equivalent
to the use of the property for a period of twelve
months, to indemnify the debtor in case it be
shown that the sale was made without violating
the mortgage or without complying with the
requirements of this Act. Such petition shall be
made under oath and filed in form of an ex
parte motion in the registration or cadastral
proceedings if the property is registered, or in
special proceedings in the case of property
registered under the Mortgage Law or under
section one hundred and ninety-four of the
Administrative Code or of any other real property
encumbered with a mortgage duly registered in
the office of any register of deeds in accordance
with any existing law, and in each case the clerk
of the court shall, upon the filing of such petition,
collect the fees specified in paragraph eleven of
section one hundred and fourteen of Act
Numbered Four hundred and ninety-six, as
amended by Act Numbered Twenty-eight
hundred and sixty-six, and the court shall, upon
approval of the bond, order that a writ of
possession issue, addressed to the sheriff of the
province in which the property is situated, who
shall execute said order immediately.
There being no dispute about the fact that no
redemption had been made within one (1) year
from registration of the extrajudicial foreclosure
sale, there can be no question about the
absolute right of Banco Filipino, as purchaser, to
a writ of possession, 11 or stated otherwise, the
ministerial duty of the Court to issue the
writ, 12 upon mere motion, without need of
instituting a separate action for the
13
purpose . The question is whether or not that
writ of possession which — is the final process to
carry out or consummate the extra-judicial
foreclosure of the mortgage — may be enforced
by the sheriff against persons other than the
mortgagor who are in occupancy of the
foreclosed property. To this question this Court
has already had occasion to give an affirmative
answer, grounded particularly on the provisions
of Section 35, Rule 39 of the Rules of Court
which are inter alia suppletory to act 3135. 14
Under section 6 of Act No. 3135 and Sections 29
to 31 and Section 35 Rule 39 of the Revised
Rules of Court, in case of an extra-judicial
foreclosure of a real estate mortgage, the
possession of the property sold may be given to
the purchaser by the sheriff after the period of
redemption had expired, unless a third person is
actually holding the property adversely to the
mortgagor. An ordinary action for the recovery of
possession is not necessary. There is no law in
this jurisdiction whereby the purchaser at a
sheriffs sale of real property is obliged to bring a
separate and independent suit for possession
after the one year period for redemption has
expired and after he has obtained the sheriffs
final certificate of sale. (Tan Soo Huat vs.
Ongwico 63 Phil. 746, 749). The same rule was
followed in a judicial foreclosure of mortgage and
in an execution sale (Rivera vs. Court of First
Instance of Nueva Ecija, 61 Phil. 201 and
Republic vs. Nable, L-4979, April 30, 1952). If
the court can issue a writ of possession during
the period of redemption there is no reason why
it should not also have the same power after the
expiration of that period.15
The petitioners cannot be deemed third parties
"actually holding the property adversely" to the
mortgagor. They derive their rights to the
possession of the property exclusively from the
mortgagor, in virtue of verbal agreements of
lease. They derive their rights to the possession
of the property exclusively from the mortgagor, in
virtue of verbal agreements of lease. They were
lessees at the time that the property occupied by
them was mortgaged by their lessor to
respondent Banco Filipino. And of that mortgage
they were charged with constructive knowledge
upon its registration in the Registry of Property, if
they did not indeed, actually know of it. The right
pertaining to them in this situation was that of
being notified of the application for a writ of
possession and of being accorded an
opportunity at a hearing to oppose the same, as
by showing that they were "actually holding the
property adversely" to the mortgagor. That right
was duly accorded to them. They were served
with copies of the motion or petition for issuance
of the writ of possession and had ample
opportunity to oppose the same, to persuade the
Court that the writ should not issue or be
executed against them. The proceedings
showed that, by their own assertions, they were
not holding the property adversely to the
mortgagor, but were exercising rights under,
derived from, said mortgagor, who was their
lessor. Upon the cessation of their lessor's rights
over the property, their own also ceased. The
writ of possession was therefore properly
enforceable against them.
The situation is not significantly different from
that contemplated by Section 49 (b) of Rule 39,
declaring a final and executory judgment or
order conclusive and hence enforceable not only
against the parties but also "their successors in
interest by title subsequent to the
commencement of the action or special
proceeding." Pursuant to this provision, a
judgment in personam directing a party to deliver
possession of property to another is binding not
only against the former but also against his
successors in interest by title subsequent to the
commencement of the action, i.e., those whose
possessory rights are derived from him, 16 e.g.,
lessees, possessors by tolerance, assignees. As
regards the latter, it is not required that a
separate action be instituted against them to
litigate the issue of possession; due process is
satisfied by holding a hearing, with notice to
them, on the nature of their possession, and
thereafter denying or acceding to the
enforcement of a writ of possession against
them as the findings at said hearing shall
warrant. 17
WHEREFORE, the petition is DISMISSED for
lack of merit, and the case is remanded to the
Court a quo with instructions to forthwith issue in
favor of respondent bank an alias writ of
possession enforceable against the petitioners
or their successors in interest, and all other
persons claiming under, or not otherwise actually
holding the property adversely to, the mortgagor,
Universal Ventures, Inc. Costs against
petitioners.
SO ORDERED.
G.R. No. 174042 July 9, 2008
CITY OF NAGA, as represented by Mayor
Jesse M. Robredo, Petitioner,
vs.
HON. ELVI JOHN S. ASUNCION, as ponente
and chairman, HON. JUSTICES JOSE C.
MENDOZA and ARTURO G. TAYAG, as
members, 12th DIVISION, COURT OF
APPEALS, HON. JUDGE FILEMON
MONTENEGRO, Presiding Judge, Regional
Trial Court, Branch 26, Naga City; ATTY.
JESUS MAMPO, Clerk of Court, RTC, Branch
26, Naga City, SHERIFF JORGE B. LOPEZ,
RTC, Branch 26, Naga City, THE HEIRS OF
JOSE MARIANO and HELEN S. MARIANO
represented by DANILO DAVID S. MARIANO,
MARY THERESE IRENE S. MARIANO, MA.
CATALINA SOPHIA S. MARIANO, JOSE
MARIO S. MARIANO, MA. LEONOR S.
MARIANO, MACARIO S. MARIANO and
ERLINDA
MARIANO-VILLANUEVA, Respondents.
DECISION
QUISUMBING, J.:
This petition for certiorari and prohibition under
Rule 65 of the Rules of Court seeks the reversal
of the Resolution1dated August 16, 2006 of the
Court of Appeals in CA-G.R. SP No. 90547
which denied the Application for a Writ of
Preliminary Prohibitory Injunction2 filed by
petitioner.
Challenged as well is the Order3 dated August
17, 2006 of the Regional Trial Court (RTC) of
Naga City, Branch 26 in Civil Case No. RTC
2005-0030 for unlawful detainer which granted
respondents’ Motion to Issue Writ of
Execution4 filed on August 16, 2005 and denied
petitioner’s Motion for Inhibition5 filed on June 27,
2005. Concomitantly, the processes issued to
enforce said Order are equally assailed, namely:
the Writ of Execution Pending Appeal6 dated
August 22, 2006; the Notice to Vacate7 dated
August 23, 2006; and the Notice of
Garnishment8 dated August 23, 2006.
The facts as culled from the rollo of this petition
and from the averments of the parties to this
petition are as follows:
Macario A. Mariano and Jose A. Gimenez were
the registered owners of a 229,301-square meter
land covered by Transfer Certificate of Title (TCT)
No. 6719 located in Naga City. The land was
subdivided into several lots and sold as part of
City Heights Subdivision (CHS).
In a Letter10 dated July 3, 1954, the officers of
CHS offered to construct the Naga City Hall on a
two (2)-hectare lot within the premises of the
subdivision. Said lot was to be designated as an
open space for public purpose and donated to
petitioner in accordance with the rules and
regulations of the National Urban Planning
Commission. By Resolution No. 7511 dated July
12, 1954, the Municipal Board of Naga City
(Municipal Board) asked CHS to increase the
area of the land to four (4) hectares. Accordingly,
CHS amended its offer to five (5) hectares.
On August 11, 1954, the Municipal Board
adopted Resolution No. 8912 accepting CHS’
amended offer. Mariano and Gimenez thereafter
delivered possession of the lots described as
Blocks 25 and 26 to the City Government of
Naga (city government). Eventually, the contract
for the construction of the city hall was awarded
by the Bureau of Public Works through public
bidding to Francisco O. Sabaria, a local
contractor. This prompted Mariano and Gimenez
to demand the return of the parcels of land from
petitioner. On assurance, however, of then Naga
City Mayor Monico Imperial that petitioner will
buy the lots instead, Mariano and Gimenez
allowed the city government to continue in
possession of the land.
On September 17, 1959, Mariano wrote a
letter13 to Mayor Imperial inquiring on the status
of the latter’s proposal for the city government to
buy the lots instead. Then, through a
note14 dated May 14, 1968, Mariano directed
Atty. Eusebio Lopez, Jr., CHS’ General Manager,
to disregard the proposed donation of lots and
insist on Mayor Imperial’s offer for the city
government to purchase them.
On December 2, 1971, Macario A. Mariano died.
Meanwhile, the city government continued in
possession of the lots, and constructed the Naga
City Hall on Block 25 and the public market on
Block 26. It also conveyed to other government
offices15 portions of the land which at present,
house the National Bureau of Investigation (NBI),
Land Transportation Office, and Hall of Justice,
among others.
In a Letter16 dated September 3, 2003, Danilo D.
Mariano, as administrator and representative of
the heirs of Macario A. Mariano, demanded from
petitioner the return of Blocks 25 and 26 to CHS.
Alas, to no avail.
Thus, on February 12, 2004, respondent filed a
Complaint17 for unlawful detainer against
petitioner before the Municipal Trial Court (MTC)
of Naga City, Branch 1. In a Decision18 dated
February 14, 2005 of the MTC in Civil Case No.
12334, the MTC dismissed the case for lack of
jurisdiction. It ruled that the city’s claim of
ownership over the lots posed an issue not
cognizable in an unlawful detainer case.
On appeal, the RTC reversed the court a quo by
Decision19 dated June 20, 2005 in Civil Case No.
RTC 2005-0030. It directed petitioner to
surrender physical possession of the lots to
respondents with forfeiture of all the
improvements, and to pay ₱2,500,000.00
monthly as reasonable compensation for the use
and occupation of the land; ₱587,159.60 as
attorney’s fees; and the costs of suit.
On June 27, 2005, petitioner filed a Motion for
Inhibition against Presiding RTC Judge Filemon
B. Montenegro for alleged bias and partiality.
Then, petitioner moved for reconsideration/new
trial of the June 20, 2005 Decision. On July 15,
2005, the RTC denied both motions.
On July 22, 2005, petitioner filed a Petition for
Review with Very Urgent Motion/Application for
Temporary Restraining Order and Writ of
Preliminary Prohibitory Injunction20 with the
Court of Appeals. Respondents thereafter filed a
Motion to Issue Writ of Execution.
On October 13, 2005, respondents manifested
that they will not seek execution against the NBI,
City Hall and Hall of Justice in case the writ of
preliminary injunction is denied. On August 16,
2006, the appellate court issued the challenged
Resolution, the decretal portion of which reads:
WHEREFORE, based on the foregoing premises,
and in the absence of any immediate threat of
grave and irreparable injury, petitioner’s prayer
for issuance of a writ of preliminary injunction is
hereby DENIED. Petitioner had already filed its
Memorandum. Hence, the private respondents
are given fifteen (15) days from notice within
which to submit their Memorandum.
SO ORDERED.21
On August 17, 2006, the RTC issued the
assailed Order, thus:
WHEREFORE, let the corresponding Writ of
Execution Pending Appeal be issued in this case
immediately pursuant to Sec. 21, Rule 70.
However, in view of the MANIFESTATION of
plaintiffs dated October 13, 2005 that they will
not take possession of the land and building
where the City Hall, Hall of Justice and National
Bureau of Investigation are located while this
case is still pending before the Court of Appeals,
this writ of execution shall be subject to the
above-cited exception.
The Sangguniang [Panlungsod] of Naga City is
hereby directed to immediately appropriate the
necessary amount of [₱]2,500,000.00 per month
representing the unpaid rentals reckoned from
November 30, 2003 up to the present from its
UNAPPROPRIATED FUNDS to satisfy the claim
of the plaintiffs, subject to the existing
accounting and auditing rules and regulations.
SO ORDERED.22
Consequently, Clerk of Court Atty. Jesus Mampo
issued a writ of execution pending appeal.
Sheriff Jorge B. Lopez on the other hand, served
a notice to vacate on respondents, and a notice
of garnishment on Land Bank, Naga City
Branch.
Hence, this petition for certiorari and prohibition.
On August 28, 2006, we issued a Temporary
Restraining Order23 to maintain the status
quo pending resolution of the petition.
Petitioner raises the following issues for our
consideration:
I.
WHETHER OR NOT PETITIONER
CAN VALIDLY AVAIL OF THE
EXTRAORDINARY WRITS OF
CERTIORARI AND PROHIBITION
IN ASSAILING THE
CHALLENGED RESOLUTION,
ORDERS AND NOTICES.
II.
WHETHER OR NOT PETITIONER
IS GUILTY OF
FORUM-SHOPPING.
III.
WHETHER OR NOT PUBLIC
RESPONDENT JUDGE
COMMITTED GRAVE ABUSE OF
DISCRETION IN ALLOWING THE
IMMEDIATE EXECUTION OF ITS
JUDGMENT
NOTWITHSTANDING THE
CATASTROPHIC
CONSEQUENCES IT WILL BEAR
ON THE DELIVERY OF BASIC
GOVERNMENTAL SERVICES TO
THE GOOD CITIZENS OF NAGA
CITY; THE INCONCLUSIVENESS
OF PRIVATE RESPONDENTS’
TITLE AND CLAIM OF
POSSESSION OVER THE
SUBJECT PROPERTY; AND THE
IMPUTATION OF BIAS AND
PARTIALITY AGAINST PUBLIC
RESPONDENT JUDGE.
IV.
WHETHER OR NOT PUBLIC
RESPONDENTS JUDGE
FILEMON B. MONTENEGRO,
ATTY. JESUS MAMPO AND
SHERIFF JORGE B. LOPEZ
EXCEEDED THEIR AUTHORITY
AND/OR COMMITTED GRAVE
ABUSE OF DISCRETION IN
TRYING TO EVICT PETITIONER
AND VARIOUS DEPARTMENTS
AND OFFICES THEREOF FROM
THE SUBJECT PROPERTY.
V.
WHETHER OR NOT PUBLIC
RESPONDENT JUDGE FILEMON
B. MONTENEGRO EXCEEDED
HIS JURISDICTION AND/OR
COMMITTED GRAVE ABUSE OF
DISCRETION IN DIRECTING
PETITIONER TO PAY PRIVATE
RESPONDENTS MONTHLY
RENTALS OF ABOUT
[₱]81,500,000.00.
VI.
WHETHER OR NOT THE ORDER
DIRECTING PETITIONER TO
PAY PRIVATE RESPONDENT
MONTHLY RENTALS
[DISREGARDED] THE
HONORABLE COURT’S
ADMINISTRATIVE CIRCULAR NO.
10-2000 AND THE LAW AND THE
JURISPRUDENCE CITED
THEREIN.
VII.
WHETHER OR NOT PUBLIC
RESPONDENTS JUDGE
FILEMON B. MONTENEGRO,
ATTY. JESUS MAMPO AND
SHERIFF JORGE B. LOPEZ
EXCEEDED THEIR AUTHORITY
AND/OR COMMITTED GRAVE
ABUSE OF DISCRETION IN
CAUSING THE GARNISHMENT
OF PETITIONER’S ACCOUNT
WITH LAND BANK OF THE
PHILIPPINES.
VIII.
WHETHER OR NOT THE
HONORABLE COURT OF
APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION
AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN
DENYING THE PETITIONER’S
APPLICATION FOR WRIT OF
PRELIMINARY PROHIBITORY
INJUNCTION.24
The pertinent issues, in our view, are as follows:
(1) whether petitioner availed of the proper
remedy to contest the disputed order, resolution,
and notices; (2) whether petitioner was guilty of
forum-shopping in filing the instant petition
pending the petition for review before the Court
of Appeals; (3) whether RTC Judge Montenegro
committed grave abuse of discretion in granting
execution pending appeal; and (4) whether the
Court of Appeals committed grave abuse of
discretion in denying petitioner’s application for a
writ of preliminary injunction.
Petitioner City of Naga ascribes grave abuse of
discretion on Judge Montenegro for allowing
execution pending appeal and for refusing to
inhibit himself from the proceedings. It contends
that its claim of ownership over the lots
behooved the RTC of jurisdiction to try the illegal
detainer case. Granting arguendo that the RTC
had jurisdiction and its judgment was
immediately executory, petitioner insists that the
circumstances in the case at bar warranted
against it. For one, the people of Naga would be
deprived of access to basic social services even
before respondents’ right to possess the land
has been conclusively established. The City of
Naga assails the validity of the order of
execution issued by the court inasmuch as it
excluded the NBI, City Hall and Hall of Justice
from its coverage; ordered garnishment of
government funds; and directed
the Sangguniang Panlungsod to appropriate
money in violation of the Supreme Court
Administrative Circular No. 10-2000.25 Petitioner
likewise claims that Atty. Jesus Mampo and
Sheriff Jorge B. Lopez acted with manifest
abuse when they issued the writ of execution
pending appeal, and served notice to vacate and
notice of garnishment, respectively.
Finally, petitioner imputes grave abuse of
discretion on the Court of Appeals for denying its
application for a writ of preliminary injunction.
The appellate tribunal struck down petitioner’s
application pending resolution by the RTC of
respondent’s motion to execute its June 20,
2005 Decision. Also, it found no merit in
petitioner’s claim that grave and irreparable
injury will result to the City of Naga by the
implementation of said decision. Nevertheless, it
excused the NBI, Naga City Hall and Hall of
Justice from execution.
For their part, respondents (Marianos) call for
the dismissal of the instant petition on the
ground of forum-shopping. They aver that the
petition for review in the Court of Appeals and
the present petition are but similar attempts to
stop the immediate enforcement of the June 20,
2005 RTC Decision. They add that the court a
quo merely acted in obedience to the provisions
of Section 2126 of Rule 70 of the Rules of Court
when it ordered execution. Thus, the writ of
execution, notice to vacate and notice of
garnishment are also valid as incidents of the
August 17, 2006 RTC Order. Respondents
agree with the appellate court that there is no
immediate threat of grave and irreparable injury
to petitioner. In any case, the Marianos suggest
that petitioner just seek reparation for damages
should the appellate court reverse the RTC.
Lastly, respondents allege that the court a
quo correctly ruled on the merits despite its
finding that the MTC erroneously dismissed the
unlawful detainer case for lack of jurisdiction.
The MTC based its decision on the affidavits and
position papers submitted by the parties.
The petition is partly meritorious.
In the interest of justice, we decided to give due
course to the petition for certiorari and
prohibition concerning the August 17, 2006
Order of the RTC. As a rule, petitions for the
issuance of such extraordinary writs against an
RTC should be filed with the Court of Appeals. A
direct invocation of this Court’s original
jurisdiction to issue these writs should be
allowed only when there are special and
important reasons therefor, clearly and
specifically set out in the petition.27 Under the
present circumstance however, we agree to take
cognizance of this case as an exception to the
principle of hierarchy of courts.28 For while it has
been held by this Court that a motion for
reconsideration is a condition sine qua non for
the grant of a writ of certiorari, nevertheless such
requirement may be dispensed with where there
is an urgent necessity for the resolution of the
question and any further delay would prejudice
the interests of the Government.29 Such is the
situation in the case at bar.
Thus, we find no merit in respondents’
contention that petitioner erred in its choice of
remedy before this Court. Under Section 1(c)
and (f),30 Rule 41 of the Rules of Court, no
appeal may be taken from an interlocutory order
and an order of execution, respectively. An
interlocutory order is one which does not dispose
of the case completely but leaves something to
be decided upon.31 Such is the nature of an
order granting or denying an application for
preliminary injunction; hence, not
appealable.32 The proper remedy, as petitioner
did in this case, is to file a petition for certiorari
and/or prohibition under Rule 65.
Nor can we agree that petitioner was guilty of
forum-shopping. Under the Same Objective
Standard enunciated in the case of First
Philippine International Bank v. Court of
Appeals,33 the filing by a party of two apparently
different actions, but with the same objective,
constitutes forum- shopping.34 Here, the special
civil action of certiorari before us is an
independent action. The ultimate purpose of
such action is to keep the inferior tribunal within
the bounds of its jurisdiction or relieve parties
from arbitrary acts of the court.35 In contrast, the
petition for review before the Court of Appeals
under Rule 42 involves an evaluation of the case
on the merits. Clearly, petitioner did not commit
forum-shopping.
Now, we shall proceed to resolve the
contentious issues in this case.
Section 21, Rule 70 of the Rules of Court is
pertinent:
SEC. 21. Immediate execution on appeal to
Court of Appeals or Supreme Court. – The
judgment of the Regional Trial Court against the
defendant shall be immediately executory,
without prejudice to a further appeal that may be
taken therefrom.
Thus, the judgment of the RTC against the
defendant in an ejectment case is immediately
executory. Unlike Section 19,36 Rule 70 of the
Rules, Section 21 does not provide a means to
prevent execution; hence, the court’s duty to
order such execution is practically
37
ministerial. Section 21 of Rule 70 presupposes
that the defendant in a forcible entry or unlawful
detainer case is unsatisfied with the judgment of
the RTC and decides to appeal to a superior
court. It authorizes the RTC to immediately issue
a writ of execution without prejudice to the
appeal taking its due course. Nevertheless, it
should be stressed that the appellate court may
stay the said writ should circumstances so
require.38
Petitioner herein invokes seasonably the
exceptions to immediate execution of judgments
in ejectment cases cited in Hualam Construction
and Dev’t. Corp. v. Court of
Appeals39 and Laurel v. Abalos,40 thus:
Where supervening events (occurring
subsequent to the judgment) bring about a
material change in the situation of the parties
which makes the execution inequitable, or where
there is no compelling urgency for the execution
because it is not justified by the prevailing
circumstances, the court may stay immediate
execution of the judgment.41
Noteworthy, the foregoing exceptions were
made in reference to Section 8,42 Rule 70 of the
old Rules of Court which has been substantially
reproduced as Section 19, Rule 70 of the 1997
Rules of Civil Procedure. Therefore, even if the
appealing defendant was not able to file a
supersedeas bond, and make periodic deposits
to the appellate court, immediate execution of
the MTC decision is not proper where the
circumstances of the case fall under any of the
above-mentioned exceptions. Yet, Section 21,
Rule 70 of the Rules does not provide for a
procedure to avert immediate execution of an
RTC decision.
This is not to say that the losing defendant in an
ejectment case is without recourse to avoid
immediate execution of the RTC decision. The
defendant may, as in this case, appeal said
judgment to the Court of Appeals and therein
apply for a writ of preliminary injunction. Thus, as
held in Benedicto v. Court of Appeals,43 even if
RTC judgments in unlawful detainer cases are
immediately executory, preliminary injunction
may still be granted.44
In the present case, the Court of Appeals denied
petitioner’s application for a writ of preliminary
injunction because the RTC has yet to rule on
respondents’ Motion to Issue Writ of Execution.
Significantly, however, it also made a finding that
said application was without merit. On this score,
we are unable to agree with the appellate court.
A writ of preliminary injunction is available to
prevent threatened or continuous irremediable
injury to parties before their claims can be
thoroughly studied and adjudicated. Its sole
objective is to preserve the status quo until the
merits of the case can be heard fully.45 Status
quo is the last actual, peaceable and
uncontested situation which precedes a
controversy.46
As a rule, the issuance of a preliminary injunction
rests entirely within the discretion of the court
taking cognizance of the case and will not be
interfered with, except in cases of manifest
abuse.47 Grave abuse of discretion implies a
capricious and whimsical exercise of judgment
tantamount to lack or excess of jurisdiction. The
exercise of power must have been done in an
arbitrary or a despotic manner by reason of
passion or personal hostility. It must have been
so patent and gross as to amount to an evasion
of positive duty or a virtual refusal to perform the
duty enjoined or to act at all in contemplation of
law.48
Considering the circumstances in this case, we
find that the Court of Appeals abused its
discretion when it denied petitioner’s application
for a writ of preliminary injunction because of the
pendency of respondents’ Motion to Issue Writ of
Execution with the RTC, but ruled on the merits
of the application at the same time. At most, the
appellate court should have deferred resolution
on the application until the RTC has decided on
the motion for execution pending appeal.
Moreover, nothing in the rules allow a qualified
execution pending appeal that would have
justified the exclusion of the NBI, City Hall and
Hall of Justice from the effects of the writ.
In any case, we have ploughed through the
records of this case and we are convinced of the
pressing need for a writ of preliminary injunction.
Be it noted that for a writ of preliminary injunction
to be issued, the Rules of Court do not require
that the act complained of be in clear violation of
the rights of the applicant. Indeed, what the
Rules require is that the act complained of
be probably in violation of the rights of the
applicant. Under the Rules, probability is enough
basis for injunction to issue as a provisional
remedy. This situation is different from injunction
as a main action where one needs to
establish absolute certainty as basis for a final
and permanent injunction.491avvphi1
Thus, we have stressed the foregoing distinction
to justify the issuance of a writ of preliminary
injunction in actions for unlawful detainer:
...Where the action, therefore, is one of illegal
detainer, as distinguished from one of forcible
entry, and the right of the plaintiff to recover the
premises is seriously placed in issue in a proper
judicial proceeding, it is more equitable and just
and less productive of confusion and
disturbance of physical possession, with all its
concomitant inconvenience and expenses. For
the Court in which the issue of legal possession,
whether involving ownership or not, is brought to
restrain, should a petition for preliminary
injunction be filed with it, the effects of any order
or decision in the unlawful detainer case in order
to await the final judgment in the more
substantive case involving legal possession or
ownership. It is only where there has been
forcible entry that as a matter of public policy the
right to physical possession should be
immediately set at rest in favor of the prior
possession regardless of the fact that the other
party might ultimately be found to have superior
claim to the premises involved, thereby to
discourage any attempt to recover possession
thru force, strategy or stealth and without
resorting to the courts.50
Needless to reiterate, grave and irreparable
injury will be inflicted on the City of Naga by the
immediate execution of the June 20, 2005 RTC
Decision. Foremost, as pointed out by petitioner,
the people of Naga would be deprived of access
to basic social services. It should not be
forgotten that the land subject of the ejectment
case houses government offices which perform
important functions vital to the orderly operation
of the local government. As regards the
garnishment of Naga City’s account with the
Land Bank, the rule is and has always been that
all government funds deposited in official
depositary of the Philippine Government by any
of its agencies or instrumentalities, whether by
general or special deposit, remain government
funds. Hence, they may not be subject to
garnishment or levy, in the absence of
corresponding appropriation as required by
law.51 For this reason, we hold that the Notice of
Garnishment dated August 23, 2006 is void.
Anent Judge Montenegro’s refusal to recuse
himself from the proceedings, we find no grave
abuse of discretion. We have held time and
again that inhibition must be for just and valid
causes. The mere imputation of bias and
partiality is not enough ground for judges to
inhibit, especially when the charge is without
sufficient basis. This Court has to be shown acts
or conduct clearly indicative of arbitrariness or
prejudice before it can brand concerned judges
with the stigma of bias and partiality. Bare
allegations of partiality will not suffice "in the
absence of clear and convincing evidence to
overcome the presumption that the judge will
undertake his noble role to dispense justice
according to law and evidence without fear and
favor.52 The Resolution53 of the Court En Banc
dated June 27, 2006 which dismissed the
complaint filed by Mayor Jesse Robredo against
Judge Montenegro served to negate petitioner’s
allegations. Nevertheless, when the ground
sought for the judge’s inhibition is not among
those enumerated in Section 1,54 Rule 137 of the
Rules of Court, a judge may, in the exercise of
his sound discretion, disqualify himself from
sitting in a case, for just or valid reasons.
Similarly, in our view, the charge of grave abuse
of discretion against Clerk of Court Atty. Jesus
Mampo and Sheriff Jorge B. Lopez cannot
prosper. When Judge Montenegro issued the
order directing the issuance of a writ of execution,
Atty. Jesus Mampo was left with no choice but to
issue the writ. Such was his ministerial duty in
accordance with Section 4,55 Rule 136 of the
Rules of Court.56 In the same vein, when the writ
was placed in the hands of Sheriff Lopez, it was
his duty, in the absence of instructions to the
contrary, to proceed with reasonable celerity and
promptness to implement it in accordance with
its mandate. It is elementary that a sheriff’s duty
in the execution of the writ is purely ministerial;
he is to execute the order of the court strictly to
the letter. He has no discretion whether to
execute the judgment or not. The rule may
appear harsh, but such is the rule we have to
observe.57
WHEREFORE, the instant petition is PARTLY
GRANTED, and it is hereby ORDERED that:
(A) The Resolution dated August 16, 2006 of the
Court of Appeals in CA-G.R. SP No. 90547
is REVERSEDand SET ASIDE. The Court of
Appeals is ORDERED to issue a writ of
preliminary injunction to restrain the execution of
the Decision dated June 20, 2005 of the
Regional Trial Court, Branch 26, Naga City
pending resolution of the petition for review
before it;
(B) The Writ of Execution Pending Appeal dated
August 22, 2006, Notice to Vacate dated August
23, 2006, and the Notice of Garnishment dated
August 23, 2006 are SET ASIDE.
Lastly, the Court of Appeals is
hereby ENJOINED to resolve the pending
petition for review before it, CA-G.R. SP No.
90547, without further delay, in a manner not
inconsistent with this Decision.
SO ORDERED.
G.R. No. 143312. August 12, 2005
RICARDO S. SILVERIO, JR., ESSES
DEVELOPMENT CORPORATION, and
TRI-STAR FARMS, INC.,Petitioners,
vs.
FILIPINO BUSINESS CONSULTANTS,
INC., Respondent.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review of the Order of
the Regional Trial Court, Fourth Judicial Region,
Branch XI, Balayan, Batangas ("RTC Balayan")
dated 26 May 2000.1 The order suspended the
enforcement of the writ of possession that the
RTC Balayan had previously issued in favor of
petitioners Ricardo S. Silverio, Jr. ("Silverio, Jr."),
Esses Development Corporation ("Esses") and
Tri-Star Farms, Inc. ("Tri-Star"). Filipino
Business Consultants, Inc. ("FBCI"), now Filipino
Vastland Company, Inc. sought to suspend the
writ of possession on the ground of a
supervening event. FBCI claimed that it had just
acquired all the stocks of Esses and Tri-Star. As
the new owner of Esses and Tri-Star, FBCI
asserted its right of possession to the disputed
property. Petitioners Silverio, Jr., Esses and
Tri-Star question the RTC Balayan’s suspension
of the writ of possession and its jurisdiction to
hold hearings on the supervening event.
The Antecedent Facts
The parties are wrangling over possession of a
62 hectare-land in Calatagan, Batangas
("Calatagan Property"). Silverio, Jr. is the
President of Esses and Tri-Star. Esses and
Tri-Star were in possession of the Calatagan
Property, covered by TCT No. T-55200 and
registered in the names of Esses and Tri-Star.
On 22 September 1995, Esses and Tri-Star
executed a Deed of Sale with Assumption of
Mortgage in favor of FBCI. Esses and Tri-Star
failed to redeem the Calatagan Property.
On 27 May 1997, FBCI filed a Petition for
Consolidation of Title of the Calatagan Property
with the RTC Balayan.2
FBCI obtained a judgment by default.
Subsequently, TCT No. T-55200 in the names of
Esses and Tri-Star was cancelled and TCT No.
T-77656 was issued in FBCI’s name. On 20 April
1998, the RTC Balayan issued a writ of
possession in FBCI’s favor. FBCI then entered
the Calatagan Property.
When Silverio, Jr., Esses and Tri-Star learned of
the judgment by default and writ of possession,
they filed a petition for relief from judgment and
the recall of the writ of possession. Silverio, Jr.,
Esses and Tri-Star alleged that the judgment by
default is void because the RTC Balayan did not
acquire jurisdiction over them. FBCI allegedly
forged the service of summons on them.
On 28 December 1998, the RTC Balayan
nullified and set aside the judgment by default
and the writ of possession. The RTC Balayan
found that the summons and the complaint were
not served on Silverio, Jr., Esses and Tri-Star.
The RTC Balayan directed the service of
summons anew on Silverio, Jr., Esses and
Tri-Star.
The RTC Balayan denied FBCI’s motion for
reconsideration of the order. FBCI then filed a
petition for certiorari with the Court of Appeals
questioning the RTC Balayan’s 28 December
1998 Order.3 On 28 April 2000, the Court of
Appeals denied FBCI’s petition. The Court of
Appeals also denied FBCI’s motion for
reconsideration. On 13 August 2001, the
Supreme Court denied FBCI’s petition.
On 14 April 1999, the RTC Balayan modified its
28 December 1998 Order by upholding FBCI’s
possession of the Calatagan Property. The RTC
Balayan ruled that FBCI could not be deprived of
possession of the Calatagan Property because
FBCI made substantial improvements on it.
Possession could revert to Silverio, Jr., Esses
and Tri-Star only if they reimburse FBCI. The
RTC Balayan gave Silverio, Jr., Esses and
Tri-Star 15 days to file their responsive
pleadings.
Silverio, Jr., Esses and Tri-Star moved for the
partial reconsideration of the 14 April 1999 Order.
Silverio, Jr., Esses and Tri-Star argued that
since the judgment by default was nullified, they
should be restored to their possession of the
Calatagan Property. FBCI did not file any
opposition to the motion.
On 9 November 1999, the RTC Balayan
reversed its 14 April 1999 Order by holding that
Silverio, Jr., Esses and Tri-Star had no duty to
reimburse FBCI. The RTC Balayan pointed out
that FBCI offered no evidence to substantiate its
claim for expenses. The 9 November 1999 Order
also restored possession of the Calatagan
Property to Silverio, Jr., Esses and Tri-Star
pursuant to Rule 39, Section 5 of the 1997 Rules
of Civil Procedure. This provision provides for
restitution in case of reversal of an executed
judgment. On 7 January 2000, the RTC Balayan
denied FBCI’s motion for reconsideration.
On 8 May 2000, the RTC Balayan issued the writ
of possession to Silverio, Jr., Esses and Tri-Star.
On 12 May 2000, FBCI filed with the RTC
Balayan a Manifestation and Motion to Recall
Writ of Possession on the ground that the
decision of the Court of Appeals in CA-G.R. SP
No. 56924 was not yet final and FBCI’s motion
for reconsideration was still pending. The RTC
Balayan set the hearing on 26 May 2000.
On 23 May 2000, FBCI filed with the RTC
Balayan an Urgent Ex-Parte Motion to Suspend
Enforcement of Writ of Possession. FBCI
pointed out that it is now the new owner of Esses
and Tri-Star having purchased the "substantial
and controlling shares of stocks"4 of the two
corporations.
On the 26 May 2000 hearing, FBCI reiterated its
claim of a supervening event, its ownership of
Esses and Tri-Star. FBCI informed the RTC
Balayan that a new board of directors for Esses
and Tri-Star had been convened following the
resignation of the members of the board of
directors. The previous actions of the former
board of directors have been abandoned and the
services of Atty. Vicente B. Chuidian, the
counsel of petitioners Silverio, Jr., Esses and
Tri-Star, have been terminated.
On the same day, the RTC Balayan issued the
order suspending the writ of possession it had
earlier issued to Silverio, Jr., Esses and Tri-Star.
The RTC Balayan reasoned that it would violate
the law on forum shopping if it executed the writ
while FBCI’s motion for reconsideration of the
Court of Appeals’ decision and urgent motion to
suspend the issuance of the writ of possession
remained pending with the Court of Appeals.
The RTC Balayan noted that because of FBCI’s
strong resistance, Silverio, Jr., Esses and
Tri-Star have still to take possession of the
Calatagan Property. More than ten days had
already passed from the time that the RTC
Balayan had issued the writ of possession. FBCI
had barricaded the Calatagan Property,
threatening bloodshed if possession will be
taken away from it. The RTC Balayan believed
that if it would not restrain Silverio, Jr., Esses
and Tri-Star from taking possession of the
Calatagan Property, a violent confrontation
between the parties might erupt as reported in
the Tempo newspaper in its 26 May 2000 issue.
Without issuing a restraining order, the RTC
Balayan suspended the writ by requesting the
counsel of Silverio, Jr., Esses and Tri-Star to
allow the court to study the voluminous records
of the case, which are to be presented at the
hearing on 16 June 2000. The hearing would
determine the existence of a supervening event.
On 15 June 2000, the RTC Balayan issued an
Order cancelling the 16 June 2000 hearing so
that the Court of Appeals could resolve the issue
regarding the existence of a supervening event.
However, the RTC Balayan declared that the
suspension of the writ of possession would be
lifted on 17 June 2000.
On 8 August 2000, Silverio, Jr., Esses and
Tri-Star filed a complaint for annulment of
contracts with damages with the Regional Trial
Court of Las Piñas City, Branch 275 ("RTC Las
Piñas").5
Issues
Silverio, Jr., Esses and Tri-Star argue that:
I exception as rule." And respondent’s reliance
An ex parte motion cannot legally constitute an
initiatory basis for the RTC Balayan to conduct
additional hearings in order to validate certain
new allegations. Neither can said ex
parte motion be the basis for the suspension of a
writ of possession being implemented.
II
When the RTC Balayan suspended the writ of
possession, it was barred from hearing
intra-corporate disputes. And though Congress
has now amended our law on the matter, the
RTC still cannot proceed because of due
process and res judicata reasons.
III
A final and executory judgment cannot be
enjoined except by an appropriate petition for
relief, a direct attack in another action or a
collateral act in another action.
IV
Respondent FBCI is asking for a suspension of
the writ of possession while at the same time
threatening violence if the writ of possession
were to be implemented. The RTC Balayan had
no lawful basis to suspend the writ under these
admitted circumstances.
V dismissed on the ground of forum shopping;
Respondent has not directly answered
petitioners’ legal theory. The petition is founded
on admitted facts upon which relief is sought
under Rule 45. Respondent has altered these
facts – presenting its so called
"counterstatements of facts and issues" – which
involve questions of fact that are still litis
pendentia at the RTC Balayan. And which even
involve an attempt to vary res judicata.
VI
Contrary to respondent’s claims, that the RTC
order of 15 June 2000 has rendered this case
"moot and academic" – quite on the contrary –
said order calls upon the Supreme Court to
decide whether or not, the RTC Balayan may
continue to conduct its hearings on suspending
the writ of possession.
VII
Respondent’s theory that an order suspending a
writ of possession is interlocutory in nature, and
therefore inappealable, is not supported by
jurisprudence.
VIII
Respondent’s views on when suspending a writ
of execution is appropriate – would "make the
on Flores vs. CA, et al. is totally misplaced. In
the Flores case, the party being dispossessed
was a judgment creditor, who was admitted by
the adverse party to be the owner.
IX
The question of jus possessionis on the
Calatagan Property is already res judicata while
the question of jus possidendi is still under litis
pendentia. For that reason, respondent has lost
all his legal options in retaining the property
procured under a "faked service" of summons.
X
Respondents arguments in his 11-06-01 Memo –
on (a) "forum shopping", (b) "petitioners’ lack of
capacity to sue", (c) "service of summons
already served" (d) "no intra-corporate dispute"
and (e) "the relief herein preempted by events" –
are ratiocinations of miniscule weight, meriting
only the slightest comment.6
FBCI raises the following issues:
1. Whether the present case has been rendered
moot and academic by the Order of the RTC
Balayan dated 15 June 2000 and the filing of an
action with the Regional Trial Court of Las Piñas
City;
2. Whether the present appeal should be
3. Whether the RTC Balayan had the authority to
suspend enforcement of the writ of possession
and to conduct hearings on a new set of facts;
4. Whether the present case involves an
intra-corporate controversy;
5. Whether appeal by certiorari under Rule 45 is
the proper remedy under the given facts of the
case.7
The Ruling of the Court
The petition has merit.
Procedural Issues
Before resolving the threshold issue, which is the
existence of a supervening event, we first
address the following procedural issues: (1)
whether appeal is the proper remedy against an
order suspending the execution of a writ of
possession; (2) whether the issue of possession
was mooted by the 15 June 2000 Order of the
RTC Balayan; and (3) whether the filing of a civil
case with the RTC Las Piñas constitutes forum
shopping.
First, interlocutory orders are those that
determine incidental matters that do not touch on
the merits of the case or put an end to the
proceedings.8 The proper remedy to question an
improvident interlocutory order is a petition
for certiorari under Rule 65, not Rule 45.9 A
petition for review under Rule 45 is the proper
mode of redress to question final judgments.10
An order staying the execution of the writ of
possession is an interlocutory order.11 Clearly,
this order cannot be appealed. A petition
for certiorari was therefore the correct remedy.
Moreover, Silverio, Jr., Esses and Tri-Star
pointed out that the RTC Balayan acted on
an ex-parte motion to suspend the writ of
possession, which is a litigious matter, without
complying with the rules on notice and hearing.
Silverio, Jr., Esses and Tri-Star also assail the
RTC Balayan’s impending move to accept
FBCI’s evidence on its subsequent ownership of
Esses and Tri-Star. In effect, Silverio, Jr., Esses
and Tri-Star accuse the RTC Balayan of acting
without or in excess of jurisdiction or with grave
abuse of discretion, which is within the ambit
of certiorari.
However, in the exercise of our judicial discretion,
we will treat the appeal as a petition under Rule
65.12 Technical rules must be suspended
whenever the purposes of justice warrant it, such
as in this case where substantial and important
issues await resolution.
Second, the RTC Balayan’s 15 June 2000 Order
lifting the suspension of the writ of possession
was issued to correct its action on
FBCI’s ex-parte motion, which did not have the
required notice and hearing. This issue has thus
become a fait accompli. However, while the 15
June 2000 Order is supposed to have mooted
the suspension of the execution of the writ of
possession by lifting the suspension on 17 June
2000, Silverio, Jr., Esses and Tri-Star claim that
the writ has not been executed in their favor.
Thus, the issues in this petition are far from
being moot. Also, the existence of a supervening
event is another issue that must be resolved
since the RTC Balayan had instead submitted to
the "higher courts" the resolution of this issue.
Third, Silverio, Jr., Esses and Tri-Star are not
guilty of forum shopping for filing another action
against FBCI with the RTC Las Piñas during the
pendency of this case with the RTC Balayan.
Forum shopping consists of filing multiple suits
involving the same parties for the same cause of
action, either simultaneously or successively, to
obtain a favorable judgment.13
The parties and cause of action in the present
case before the RTC Balayan and in the case
before the RTC Las Piñas are different. The
present case was filed by FBCI against Silverio,
Jr., Esses and Tri-Star for the consolidation of
title over the Calatagan Property. On the other
hand, the case before the RTC Las Piñas was
filed by Silverio, Jr., Esses and Tri-Star against
FBCI and other defendants for the annulment of
contract with damages, tort and culpa
aquiliana (civil fraud).
In its complaint before the RTC Las Piñas,
Silverio, Jr., Esses and Tri-Star informed the
court that there is a pending case with the RTC
Balayan over the Calatagan Property.14 Silverio,
Jr., Esses and Tri-Star made it clear in the
complaint that the case before the RTC Las
Piñas will focus on the Makati Tuscany property
and any reference to the Calatagan Property is
"meant to serve only as proof or evidence of the
plan, system, scheme, habit, etc., lurking behind
defendants’ interlocking acts constituting
interlocking tort and interlocking fraud."15 Clearly,
FBCI’s claim of forum shopping against Silverio,
Jr., Esses and Tri-Star has no basis.
No Supervening Event in this Case
FBCI took possession of the Calatagan Property
after the RTC Balayan rendered a judgment by
default in FBCI’s favor. The judgment by default
was nullified after the RTC Balayan found out
that the service of summons on Silverio, Jr.,
Esses and Tri-Star was procured fraudulently.
The RTC Balayan thus recalled the writ of
possession it had issued to FBCI. Silverio, Jr.,
Esses and Tri-Star were served anew with
summons. The RTC Balayan restored
possession of the Calatagan Property to Silverio,
Jr., Esses and Tri-Star as restitution resulting
from the annulment of the judgment by default.
The order restoring possession of the Calatagan
Property to Silverio, Jr., Esses and Tri-Star has
attained finality. This case then proceeded to
pre-trial.
FBCI has resisted the enforcement of the writ of
possession by barricading the Calatagan
Property and threatening violence if its
possession of the property is taken away from it.
To avoid bloodshed, as FBCI also claimed that
Silverio, Jr. had armed civilians threatening to
shoot FBCI’s representatives,16 the RTC
Balayan momentarily suspended the execution
of the writ. The RTC Balayan also had to rule on
FBCI’s claim of a supervening event that would
allegedly make the execution of the writ
absurd,17 as FBCI alleges it now owns the
controlling interest in Esses and Tri-Star. The
RTC Balayan lifted the suspension of the writ but
it cancelled the hearings on the supervening
event to give way to the Court of Appeals’ action
on this issue. The RTC Balayan decided to await
the appellate court’s resolution because it did not
want to violate the rule against forum shopping.
Silverio, Jr., Esses and Tri-Star argue that the
RTC Balayan has no power to conduct hearings
on the supervening event because res
judicata has set in on the issue. They also
contend that the supervening event is an
intra-corporate controversy that is within the
jurisdiction of the Securities and Exchange
Commission, not the trial court. Silverio, Jr.,
Esses and Tri-Star point out that despite the
lifting of the suspension RTC Balayan has still to
execute the writ of possession in their favor. On
the other hand, FBCI maintains that its
acquisition of Esses and Tri-Star is a
supervening event, which the RTC Balayan
could hear and is sufficient ground to stay the
execution of the writ of possession.
We rule in favor of Silverio, Jr., Esses and
Tri-Star.
The court may stay immediate execution of a
judgment when supervening events, occurring
subsequent to the judgment, bring about a
material change in the situation of the parties.18
To justify the stay of immediate execution, the
supervening events must have a direct effect on
the matter already litigated and settled.19 Or, the
supervening events must create a substantial
change in the rights or relations of the parties
which would render execution of a final judgment
unjust, impossible or inequitable making it
imperative to stay immediate execution in the
interest of justice.20
In this case, there is no judgment on the merits,
only a judgment on a technicality. Even then, the
judgment of default rendered in FBCI’s favor was
voided because the RTC Balayan did not
acquire jurisdiction over Silverio, Jr., Esses and
Tri-Star due to a fraudulent service of summons.
The case for consolidation of title, from which
this petition stemmed, is in fact still being
litigated before the RTC Balayan.
The issuance of the writ of possession in favor of
Silverio, Jr., Esses and Tri-Star is also not a
judgment on the merits.21 A writ of possession is
an order whereby the sheriff is commanded to
place a person in possession of real or personal
property. 22 The issuance of the writ of
possession to Silverio, Jr., Esses and Tri-Star is
but an order of restitution – a consequence of
the nullification of the judgment by default. The
order of restitution placed the parties in the
situation prior to the RTC Balayan’s rendition of
the void judgment by default. Title to the
Calatagan Property is still in the names of Esses
and Tri-Star. Possession of the Calatagan
Property must revert to Esses and Tri-Star as
legal owners of the property.
However, with the reinstitution of the case for
consolidation of title with the RTC Balayan,
possession of the Calatagan Property is now
subject to the outcome of the case. Nonetheless,
while this case is still under litigation – it is only in
the pre-trial stage – Esses and Tri-Star in whose
names the Calatagan Property is titled and in
whose favor the order of restitution was issued,
are the ones entitled to possession of the
property.
We do not agree with Silverio, Jr., Esses and
Tri-Star’s assertion that the RTC Balayan has no
power to conduct a hearing on the existence of a
supervening event because of res judicata. Res
judicata does not set in where the court is
without jurisdiction over the subject or person,
and therefore, the judgment is a nullity23 such as
the judgment by default in this case. The order
that voided the judgment by default and the
order of restitution merely recognized the nullity
of the judgment by default. The orders did not
adjudicate on the merits of the case. Since res
judicata had not set in, the case was tried anew
upon the proper service of summons on Silverio,
Jr., Esses and Tri-Star.
Moreover, it is the court issuing the writ of
possession that has control and supervision over
its processes.24 The RTC Balayan can therefore
hear the evidence on the existence of a
supervening event, provided the subject matter
is within the jurisdiction of the court, as this could
affect the execution of the writ of possession.
We are, therefore, dismayed with the RTC
Balayan’s referral of the existence of the
supervening event to the "higher courts." Courts
must not shirk from their duty to rule on an issue.
The duty of the appellate or higher courts is to
review the findings and rulings of the lower
courts, not to issue advisories. Courts must
execute its processes and should not succumb
to threats by any of the parties to resort to
violence in case of such enforcement. Had the
RTC Balayan immediately passed upon FBCI’s
allegation of a supervening event, it would have
been apparent that this claim is without merit.
The RTC Balayan should have then enforced
posthaste the writ of possession in Silverio, Jr.,
Esses and Tri-Star’s favor.
FBCI’s acquisition of the "substantial and
controlling shares of stocks"25 of Esses and
Tri-Star does not create a substantial change in
the rights or relations of the parties that would
entitle FBCI to possession of the Calatagan
Property, a corporate property of Esses and
Tri-Star. Esses and Tri-Star, just like FBCI, are
corporations. A corporation has a personality Farms, Inc. through their representative, Ricardo
distinct from that of its stockholders. As early as S. Silverio, Jr. No costs.
the case of Stockholders of F. Guanzon and
Sons, Inc. v. Register of Deeds of Manila,26 SO ORDERED.
the Court explained the principle of separate
juridical personality in this wise:

A corporation is a juridical person distinct from

the members composing it. Properties registered
in the name of the corporation are owned by it as
an entity separate and distinct from its members.
While shares of stock constitute personal
property, they do not represent property of the
corporation. The corporation has property of its
own which consists chiefly of real estate (Nelson
v. Owen, 113 Ala., 372, 21 So. 75; Morrow v.
Gould, 145 Iowa 1, 123 N.W. 743). A share of
stock only typifies an aliquot part of the
corporation's property, or the right to share in its
proceeds to that extent when distributed
according to law and equity (Hall & Faley v.
Alabama Terminal, 173 Ala 398, 56 So., 235),
but its holder is not the owner of any part of the
capital of the corporation (Bradley v. Bauder, 36
Ohio St., 28). Nor is he entitled to the possession
of any definite portion of its property or assets
(Gottfried v. Miller, 104 U.S., 521; Jones v. Davis,
35 Ohio St., 474). The stockholder is not a
co-owner or tenant in common of the corporate
property (Harton v. Hohnston, 166 Ala., 317, 51
So., 992).

Thus, FBCI’s alleged controlling shareholdings

in Esses and Tri-Star merely represent a
proportionate or aliquot interest in the properties
of the two corporations. Such controlling
shareholdings do not vest FBCI with any legal
right or title to any of Esses and Tri-Star’s
corporate properties. As a stockholder, FBCI has
an interest in Esses and Tri-Star’s corporate
properties that is only equitable or beneficial in
nature. Even assuming that FBCI is the
controlling shareholder of Esses and Tri-Star, it
does not legally make it the owner of the
Calatagan Property, which is legally owned by
Esses and Tri-Star as distinct juridical persons.
As such, FBCI is not entitled to the possession of
any definite portion of the Calatagan Property or
any of Esses and Tri-Star’s properties or assets.
FBCI is not a co-owner or tenant in common of
the Calatagan Property or any of Esses and
Tri-Star’s corporate properties.

We see no reason why the execution of the writ

of possession has been long delayed.
Possession of the Calatagan Property must be
restored to Esses and Tri-Star through their
representative, Silverio, Jr. There is no proof on
record that Silverio, Jr. has ceased to be the
representative of Esses and Tri-Star in this case.

WHEREFORE, we GRANT the petition. The

Regional Trial Court, Branch XI, Balayan,
Batangas is ordered to immediately execute the
writ of possession in Civil Case No. 3356 in favor
of Esses Development Corporation and Tri-Star