RULE 60

PROVISIONAL REMEDIES – RULE 60 (REPLEVIN) CASES 1

REPLEVIN DEFINED

SECOND DIVISION

G.R. No. 169596 March 28, 2007

SUPERLINES TRANSPORTATION COMPANY, INC., Petitioner, vs.PHILIPPINE NATIONAL CONSTRUCTION COMPANY and PEDRO BALUBAL, Respondents

D E C I S I O N

CARPIO MORALES, J.:

Assailed via petition for review is the Court of Appeals’ Decision1 dated September 6, 2005 dismissing for lack of merit the appeal of petitioner Superlines Transportation Company, Inc. (petitioner), docketed as CA-G.R. CV No. 61144.

Petitioner is a corporation engaged in the business of providing public transportation. On December 13, 1990, one of its buses, while traveling north and approaching the Alabang northbound exit lane, swerved and crashed into the radio room of respondent Philippine National Construction Company (PNCC).

The incident was initially investigated by respondent PNCC’s toll way patrol, Sofronio Salvanera, and respondent Pedro Balubal (Balubal), then head of traffic control and security department of the South Luzon tollway.2 The bus3 was thereafter turned over to the Alabang Traffic Bureau for it to conduct its own investigation of the incident. Because of lack of adequate space, the bus was, on request of traffic investigator Pat. Cesar Lopera (Lopera), towed by the PNCC patrol to its compound where it was stored.4

Subsequently, petitioner made several requests for PNCC to release the bus, but respondent Balubal denied the same, despite petitioner’s undertaking to repair the damaged radio room. Respondent Balubal instead demanded the sum of P40,000.00, or a collateral with the same value, representing respondent PNCC’s estimate of the cost of reconstruction of the damaged radio room. By petitioner’s estimate, however, the damage amounted toP10,000.00 only.5

Petitioner thus filed a complaint for recovery of personal property (replevin) with damages6 against respondents PNCC and Balubal with the Regional Trial Court of Gumaca, Quezon, praying as follows:

x x x x

2. after trial on the issues, judgment be rendered –

a) adjudging that plaintiff has the right to the possession of subject personal property and awarding the material possession of said property to plaintiff as the sole and absolute owner thereof;

b) ordering defendants jointly and severally to pay the plaintiff the following:

(1) the sum of P500,000.00 representing unrealized income as of the date of the filing of the instant complaint and, thereafter, the sum of P7,500.00 daily until subject passenger bus shall have been delivered to and in actual material possession of plaintiff;

(2) the sum of P100,000.00 as and for attorney’s fees;

(3) the sum of P20,000.00 as litis expenses; and

(4) the cost of suit.7

In view of its inability to put up the bond for the issuance of a writ of replevin, petitioner opted to forego the same and just wait for the court’s final judgment.

In respondents’ Answer8 to the complaint, they claimed that they merely towed the bus to the PNCC compound for safekeeping pursuant to an order from the police authorities; that respondent Balubal did not

release the bus to petitioner in the absence of an order from the police authorities; that petitioner, in claiming the bus, failed to present the certificate of registration and official receipt of payment to establish ownership thereof; and that the bus subject of the complaint was not the same bus involved in the December 13, 1990 accident.

By way of Counterclaim, respondents prayed for the award of P40,326.54 in actual damages, P50,000.00 in exemplary damages, and P130,000.00 in attorney’s fees and litigation expenses.

By Decision of December 9, 1997, the trial court dismissed petitioner’s complaint. On respondents’ Counterclaim, it ordered petitioner to pay respondent PNCC the amount of P40,320.00 representing actual damages to the radio room.

Petitioner appealed to the Court of Appeals9 which held that the storage of the bus for safekeeping purposes partakes of the nature of a deposit, hence, custody or authority over it remained with Lopera who ordered its safekeeping; and that Lopera acted as respondent PNCC’s agent, hence, absent any instruction from him, respondent PNCC may not release the bus.

The appellate court thus concluded that the case should have been brought against the police authorities instead of respondents.

Hence, the present petition for review.

The petition is impressed with merit.

Before proceeding to the substantive issues raised in the petition, the Court resolves to dispose first the procedural issues raised by respondents in their Comment.10

Respondents contend that the petition raises only questions of fact and suffers from a procedural defect in that it failed to include "such material portions of the record as would support the petition" as required under Section 4, Rule 4511 of the Rules of Court, hence, it should be dismissed outright.

Contrary to respondents’ contention, the petition raises questions of law foremost of which is whether the owner of a personal property may initiate an action for replevin against a depositary and recover damages for illegal distraint.

In any event, while it is settled that this Court is not a trier of facts and does not, as a rule, undertake a re-examination of the evidence presented by the parties, a number of exceptions have nevertheless been recognized by the Court. These exceptions are enumerated in Insular Life Assurance Company, Ltd. v. Court of Appeals:12

It is a settled rule that in the exercise of the Supreme Court’s power of review, the Court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the CA are conclusive and binding on the Court. However, the Court had recognized several exceptions to this rule, to wit: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion. x x x (Italics in original; underscoring supplied; citations omitted)

As will be discussed below, number 11 of the foregoing enumeration applies in the present case.

Respecting the second procedural issue, as a rule, the failure of a petitioner to comply with any of the requirements under Section 4, Rule 45 of the Rules of Court regarding the contents of and the documents which should accompany the petition constitutes sufficient ground for its dismissal.13

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In the exercise of its equity jurisdiction, however, procedural lapses may be disregarded so that a case may be resolved on its merits. As held in Durban Apartments Corporation v. Catacutan:14

It is well to remember that this Court, in not a few cases, has consistently held that cases shall be determined on the merits, after full opportunity to all parties for ventilation of their causes and defense, rather than on technicality or some procedural imperfections. In so doing, the ends of justice would be better served. The dismissal of cases purely on technical grounds is frowned upon and the rules of procedure ought not be applied in a very rigid, technical sense, for they are adopted to help secure, not override, substantial justice, and thereby defeat their very ends. Indeed, rules of procedure are mere tools designed to expedite the resolution of cases and other matters pending in court. A strict and rigid application of the rules that would result in technicalities that tend to frustrate rather than promote justice must be avoided.

x x x x (Emphasis supplied; citations omitted)

The facts and circumstances attendant to the case dictate that, in the interest of substantial justice, this Court resolves it on the merits.

On to the substantive issues. Tillson v. Court of Appeals15 discusses the term replevin as follows:

The term replevin is popularly understood as "the return to or recovery by a person of goods or chattels claimed to be wrongfully taken or detained upon the person’s giving security to try the matter in court and return the goods if defeated in the action;" "the writ by or the common-law action in which goods and chattels are replevied," i.e., taken or gotten back by a writ for replevin;" and to replevy, means to recover possession by an action of replevin; to take possession of goods or chattels under a replevin order. Bouvier’s Law Dictionary defines replevin as "a form of action which lies to regain the possession of personal chattels which have been taken from the plaintiffunlawfully x x x, (or as) the writ by virtue of which the sheriff proceeds at once to take possession of the property therein described and transfer it to the plaintiff upon his giving pledges which are satisfactory to the sheriff to prove his title, or return the chattels taken if he fail so to do; the same authority states that the term, "to replevy" means " to re-deliver goods which have been distrained to the original possessor of them, on his giving pledges in an action of replevin." The term therefore may refer either to the action itself, for the recovery of personality, or the provisional remedy traditionally associated with it, by which possession of the property may be obtain[ed] by the plaintiff and retained during the pendency of the action. (Emphasis and underscoring supplied; citations omitted)

In a complaint for replevin, the claimant must convincingly show that he is either the owner or clearly entitled to the possession of the object sought to be recovered,16 and that the defendant, who is in actual or legal possession thereof, wrongfully detains the same.17

Petitioner’s ownership of the bus being admitted by respondents,18 consideration of whether respondents have been wrongfully detaining it is in order.

Following the conduct of an investigation of the accident, the bus was towed by respondents on the request of Lopera.19 It was thus not distrained or taken for a tax assessment or a fine pursuant to law, or seized under a writ of execution or preliminary attachment, or otherwise placed under custodia legis.

In upholding the dismissal of petitioner’s complaint, the Court of Appeals held that while "there is no law authorizing the impounding of a vehicle involved in an accident by the police authorities, x x x neither is there a law making the impounding of vehicles involved in accidents illegal." It added that "the Supreme Court is of the view that there is yet no clear-cut policy or rule on the matter."20 The appellate court is mistaken.

The Constitution grants the right against unreasonable seizures. Thus, Section 2, Article III provides:

The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized. (Underscoring supplied)

The seizure and impounding of petitioner’s bus, on Lopera’s request, were unquestionably violative of "the right to be let alone" by the authorities as guaranteed by the Constitution.21

The Court of Appeals’ reliance on Victory Liner, Inc. v. Bellosillo 22 to justify the impounding of vehicles involved in accidents by police authorities is misplaced. The Victory Liner case was an administrative case against a trial court judge. This Court explicitly declined to rule on the legality of such an order:

In the same vein, this administrative case is not the right forum to determine the issue of the legality of respondent’s order requiring VLI to post a cash bond for the release of its impounded vehicle. VLI should have raised that issue in the proper courts and not directly to us, and much less by way of an administrative case. x x x

x x x x

To allow VLI to raise that issue before us and obtain a ruling thereon directly from us through an administrative case would be to countenance a disregard of the established rules of procedure and of the hierarchy of courts. VLI would thus be able to evade compliance with the requirements inherent in the filing of a property petition, including the payment of docket fees. Hence, we shall shun from passing upon that issue in this case.23(Underscoring supplied)

This Court’s statement in Victory Liner on the lack of a "clear-cut policy" refers to the practice, rightly or wrongly, of trial court judges of issuing orders for the impounding of vehicles involved in accidents. It has no application to the instant case which involves the seizure and distraint implemented by respondents upon a verbal order by Lopera without the benefit or color of legality afforded by a court process, writ or order.

That a year after the incident the driver of the bus was criminally charged for reckless imprudence resulting to damage to property in which the bus could possibly be held as evidence does not affect the outcome of this case.24 As explained in Bagalihog v. Fernandez:25

It is true that property held as evidence in a criminal case cannot be replevied. But the rule applies only where the property is lawfully held, that is, seized in accordance with the rule against warrantless searches and seizures or its accepted exceptions. Property subject of litigation is not by that fact alone in custodia legis. As the Court said in Tamisin v. Odejar, 26 "A thing is in custodia legis when it is shown that it has been and is subjected to the official custody of a judicial executive officer in pursuance of his execution of a legal writ." Only when property is lawfullytaken by virtue of legal process is it considered in the custody of the law, and not otherwise. (Emphasis and underscoring supplied; italics in the original; citations omitted)

Petitioner’s prayer for recovery of possession of the bus is, in light of the foregoing discussion, thus in order.

As for petitioner’s claim for damages, the Court finds that it cannot pass upon the same without impleading Lopera and any other police officer responsible for ordering the seizure and distraint of the bus. The police authorities, through Lopera, having turned over the bus to respondents for safekeeping, a contract of deposit27 was perfected between them and respondents.

Petitioner’s failure to implead indispensable parties is not, of course, fatal to its cause of action, misjoinder or non-joinder of parties not being a ground for its dismissal.28 Domingo v. Scheer29 elucidates:

However, the non-joinder of indispensable parties is not a ground for the dismissal of an action. Parties may be added by order of the court on motion of the party or on its own initiative at any stage of the action and/or such times as are just. If the petitioner/plaintiff refuses to implead an indispensable party despite the order of the court, the latter may dismiss the complaint/petition for the petitioner/plaintiff’s failure to comply therefor. The remedy is to implead the non-party claimed to be indispensable. (Emphasis and underscoring supplied; citations omitted)

For petitioner to pursue its claim for damages then, it or the trial court motu proprio may implead as defendants the indispensable parties ─ Lopera and any other responsible police officers.

WHEREFORE, the assailed Court of Appeals Decision is REVERSED and SET ASIDE.

The prayer of petitioner, Superlines Transportation Company, Inc., for recovery of possession of personal property is GRANTED.


















The records of the case are REMANDED to the court of origin, the Regional Trial Court, Branch 62, Gumaca, Quezon, which is DIRECTED to REINSTATE petitioner’s complaint to its docket if petitioner is still interested to pursue its claim for damages and to act in accordance with the foregoing pronouncement of the Court.

SO ORDERED.

FOOTNOTES:11 Section 4, Rule 45 of the Rules of Court provides:

SEC. 4. Contents of petition. – The petition shall be filed in eighteen (18) copies, with the original copy intended for the court being indicated as such by the petitioner, and shall (a) state the full name of the appealing party as the petitioner and the adverse party as respondent, without impleading the lower courts or judges thereof either as petitioner or respondents; (b) indicate the material dates showing when notice of the judgment or final order or resolution subject thereof was received when a motion for new trial or reconsideration, if any, was filed and when notice of the denial thereof was received; 9c) set forth concisely a statement of the matters involved, and the reasons or arguments relied on for the allowance of the petition; (d) be accompanied by a clearly legible duplicate original, or a certified true copy of the judgment or final order or resolution certified by the clerk of court of the court a quo and the requisite number of plain copies thereof, and such material portions of the record as would support the petition; and (e) contain a sworn certification against forum shopping as provided in the last paragraph of section 2, Rule 42.

27 Article 1962 of the Civil Code provides:Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is not deposit but some other contract.

28 Section 11, Rule 3 of the Rules of Court provides:SEC. 11. Misjoinder and non-joinder of parties. – Neither misjoinder nor non-joinder of parties is a ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately.

NATURE OF THE PROCEEDINGS

THIRD DIVISION

G.R. No. 148132 January 28, 2008

SMART COMMUNICATIONS, INC., petitioner, vs.REGINA M. ASTORGA, respondent.

x---------------------------------------------------x

G.R. No. 151079 January 28, 2008

SMART COMMUNICATIONS, INC., petitioner, vs.REGINA M. ASTORGA, respondent.

x---------------------------------------------------x

G.R. No. 151372 January 28, 2008

REGINA M. ASTORGA, petitioner, vs.SMART COMMUNICATIONS, INC. and ANN MARGARET V. SANTIAGO, respondents.

D E C I S I O N

NACHURA, J.:

For the resolution of the Court are three consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. G.R. No. 148132 assails the February 28, 2000 Decision1 and the May 7, 2001 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372 question the June 11, 2001 Decision3and the December 18, 2001 Resolution4 in CA-G.R. SP. No. 57065.

Regina M. Astorga (Astorga) was employed by respondent Smart Communications, Incorporated (SMART) on May 8, 1997 as District Sales Manager of the Corporate Sales Marketing Group/ Fixed Services Division (CSMG/FSD). She was receiving a monthly salary of P33,650.00. As District Sales Manager, Astorga enjoyed additional benefits, namely, annual performance incentive equivalent to 30% of her annual gross salary, a group life and hospitalization insurance coverage, and a car plan in the amount of P455,000.00.5

In February 1998, SMART launched an organizational realignment to achieve more efficient operations. This was made known to the employees on February 27, 1998.6 Part of the reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered into a joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work, SMART abolished the CSMG/FSD, Astorga’s division.

To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would be recommended by SMART. SMART then conducted a performance evaluation of CSMG personnel and those who garnered the highest ratings were favorably recommended to SNMI. Astorga landed last in the performance evaluation, thus, she was not recommended by SMART. SMART, nonetheless, offered her a supervisory position in the Customer Care Department, but she refused the offer because the position carried lower salary rank and rate.

Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March 3, 1998, SMART issued a memorandum advising Astorga of the termination of her employment on ground of redundancy, effective April 3, 1998. Astorga received it on March 16, 1998.7

The termination of her employment prompted Astorga to file a Complaint8 for illegal dismissal, non-payment of salaries and other benefits with prayer for moral and exemplary damages against SMART and Ann Margaret V. Santiago (Santiago). She claimed that abolishing CSMG and, consequently, terminating her employment was illegal for it violated her right to security of tenure. She also posited that it was illegal for an employer, like SMART, to contract out services which will displace the employees, especially if the contractor is an in-house agency.9

SMART responded that there was valid termination. It argued that Astorga was dismissed by reason of redundancy, which is an authorized cause for termination of employment, and the dismissal was effected in accordance with the requirements of the Labor Code. The redundancy of Astorga’s position was the result of the abolition of CSMG and the creation of a specialized and more technically equipped SNMI, which is a valid and legitimate exercise of management prerogative.10

In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay the current market value of the Honda Civic Sedan which was given to her under the company’s car plan program, or to surrender the same to the company for proper disposition.11 Astorga, however, failed and refused to do either, thus prompting SMART to file a suit for replevin with the Regional Trial Court of Makati (RTC) on August 10, 1998. The case was docketed as Civil Case No. 98-1936 and was raffled to Branch 57.12

Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to state a cause of action; (iii) litis pendentia; and (iv) forum-shopping. Astorga posited that the regular courts have no jurisdiction over the complaint because the subject thereof pertains to a benefit arising from an employment contract; hence, jurisdiction over the same is vested in the labor tribunal and not in regular courts.13

Pending resolution of Astorga’s motion to dismiss the replevin case, the Labor Arbiter rendered a Decision14dated August 20, 1998, declaring Astorga’s dismissal from employment illegal. While recognizing SMART’s right to abolish any of its departments, the Labor Arbiter held that such right should be exercised in good faith and for causes beyond its control. The Arbiter found the abolition of CSMG done neither in good faith nor for causes beyond the control of SMART, but a ploy to terminate Astorga’s employment. The Arbiter also ruled that contracting out the functions performed by Astorga to an in-house agency like SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code.

Accordingly, the Labor Arbiter ordered:

WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to be illegal and unjust. [SMART and Santiago] are hereby ordered to:

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1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position, without loss of seniority rights and other privileges, with full backwages, inclusive of allowances and other benefits from the time of [her] dismissal to the date of reinstatement, which computed as of this date, are as follows:

(a) Astorga

BACKWAGES; (P33,650.00 x 4 months)

UNPAID SALARIES (February 15, 1998-April 3, 1998

February 15-28, 1998

March 1-31, [1998]

April 1-3, 1998

CAR MAINTENANCE ALLOWANCE(P2,000.00 x 4)

FUEL ALLOWANCE(300 liters/mo. x 4 mos. at P12.04/liter)

TOTAL

x x x x

3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and exemplary damages in the amount of P300,000.00. x x x

4. Jointly and severally pay 10% of the amount due as attorney’s fees.

SO ORDERED.15

Subsequently, on March 29, 1999, the RTC issued an Order16 denying Astorga’s motion to dismiss the replevin case. In so ruling, the RTC ratiocinated that:

Assessing the [submission] of the parties, the Court finds no merit in the motion to dismiss.

As correctly pointed out, this case is to enforce a right of possession over a company car assigned to the defendant under a car plan privilege arrangement. The car is registered in the name of the plaintiff. Recovery thereof via replevin suit is allowed by Rule 60 of the 1997 Rules of Civil Procedure, which is undoubtedly within the jurisdiction of the Regional Trial Court.

In the Complaint, plaintiff claims to be the owner of the company car and despite demand, defendant refused to return said car. This is clearly sufficient statement of plaintiff’s cause of action.

Neither is there forum shopping. The element of litis penden[t]ia does not appear to exist because the judgment in the labor dispute will not constitute res judicata to bar the filing of this case.

WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit.

SO ORDERED.17

Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999.18

Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28, 2000 Decision,19reversed the RTC ruling. Granting the petition and, consequently, dismissing the replevin case, the CA held that the case is intertwined with Astorga’s complaint for illegal dismissal; thus, it is the labor tribunal that has rightful jurisdiction over the complaint. SMART’s motion for reconsideration having been denied,20 it elevated the case to this Court, now docketed as G.R. No. 148132.

Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal dismissal case to the National Labor Relations Commission (NLRC). In its September 27, 1999 Decision,21 the NLRC sustained Astorga’s dismissal. Reversing the Labor Arbiter, the NLRC declared the abolition of CSMG and the creation of SNMI to do the

sales and marketing services for SMART a valid organizational action. It overruled the Labor Arbiter’s ruling that SNMI is an in-house agency, holding that it lacked legal basis. It also declared that contracting, subcontracting and streamlining of operations for the purpose of increasing efficiency are allowed under the law. The NLRC further found erroneous the Labor Arbiter’s disquisition that redundancy to be valid must be impelled by economic reasons, and upheld the redundancy measures undertaken by SMART.

The NLRC disposed, thus:

WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside. [Astorga] is further ordered to immediately return the company vehicle assigned to her. [Smart and Santiago] are hereby ordered to pay the final wages of [Astorga] after [she] had submitted the required supporting papers therefor.

SO ORDERED.22

Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, 1999.23

Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a Decision24 affirming with modification the resolutions of the NLRC. In gist, the CA agreed with the NLRC that the reorganization undertaken by SMART resulting in the abolition of CSMG was a legitimate exercise of management prerogative. It rejected Astorga’s posturing that her non-absorption into SNMI was tainted with bad faith. However, the CA found that SMART failed to comply with the mandatory one-month notice prior to the intended termination. Accordingly, the CA imposed a penalty equivalent to Astorga’s one-month salary for this non-compliance. The CA also set aside the NLRC’s order for the return of the company vehicle holding that this issue is not essentially a labor concern, but is civil in nature, and thus, within the competence of the regular court to decide. It added that the matter had not been fully ventilated before the NLRC, but in the regular court.

Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, of the Decision. On December 18, 2001, the CA resolved the motions, viz.:

WHEREFORE, [Astorga’s] motion for reconsideration is hereby PARTIALLY GRANTED. [Smart] is hereby ordered to pay [Astorga] her backwages from 15 February 1998 to 06 November 1998. [Smart’s] motion for reconsideration is outrightly DENIED.

SO ORDERED.25

Astorga and SMART came to us with their respective petitions for review assailing the CA ruling, docketed as G.R Nos. 151079 and 151372. On February 27, 2002, this Court ordered the consolidation of these petitions with G.R. No. 148132.26

In her Memorandum, Astorga argues:

I

THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGA’S DISMISSAL DESPITE THE FACT THAT HER DISMISSAL WAS EFFECTED IN CLEAR VIOLATION OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE, CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR HER DISMISSAL.

II

SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE APPEAL AS REQUIRED BY ARTICLE 223 OF THE LABOR CODE, ENTITLES ASTORGA TO HER SALARIES DURING THE PENDENCY OF THE APPEAL.

III

THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL COURT HAS NO JURISDICTION OVER THE COMPLAINT FOR RECOVERY OF A CAR WHICH ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.27















On the other hand, Smart in its Memoranda raises the following issues:

I

WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISION OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT SMART DID NOT COMPLY WITH THE NOTICE REQUIREMENTS PRIOR TO TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY.

II

WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT OF LABOR AND EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE REQUIREMENTS BEFORE TERMINATION.

III

WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR RELATIONS COMMISSION FINDS APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT ALL.28

IV

WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT THE REGIONAL TRIAL COURT DOES NOT HAVE JURISDICTION OVER THE COMPLAINT FOR REPLEVIN FILED BY SMART TO RECOVER ITS OWN COMPANY VEHICLE FROM A FORMER EMPLOYEE WHO WAS LEGALLY DISMISSED.

V

WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT THE SUBJECT OF THE REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A COMPANY CAR.

VI

WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT ASTORGA CAN NO LONGER BE CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE LABOR CODE.29

The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC of Makati City allegedly for lack of jurisdiction, which is the issue raised in G.R. No. 148132.

Replevin is an action whereby the owner or person entitled to repossession of goods or chattels may recover those goods or chattels from one who has wrongfully distrained or taken, or who wrongfully detains such goods or chattels. It is designed to permit one having right to possession to recover property in specie from one who has wrongfully taken or detained the property.30 The term may refer either to the action itself, for the recovery of personalty, or to the provisional remedy traditionally associated with it, by which possession of the property may be obtained by the plaintiff and retained during the pendency of the action.31

That the action commenced by SMART against Astorga in the RTC of Makati City was one for replevin hardly admits of doubt.

In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction, the CA made the following disquisition, viz.:

[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the employment package. We doubt that [SMART] would extend [to Astorga] the same car plan privilege were it not for her employment as district sales manager of the company. Furthermore, there is no civil contract for a loan between [Astorga] and [Smart]. Consequently, We find that the car plan privilege is a benefit arising out of employer-employee relationship. Thus, the claim for such falls squarely within the original and exclusive jurisdiction of the labor arbiters and the NLRC.32

We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully assumed jurisdiction over the suit and acted well within its discretion in denying Astorga’s motion to dismiss. SMART’s demand for payment of the market value of the car or, in the alternative, the surrender of the car, is not a labor, but a civil, dispute. It involves the relationship of debtor and creditor rather than employee-employer relations.33 As such, the dispute falls within the jurisdiction of the regular courts.

In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of the RTC over the replevin suit, explained:

Replevin is a possessory action, the gist of which is the right of possession in the plaintiff. The primary relief sought therein is the return of the property in specie wrongfully detained by another person. It is an ordinary statutory proceeding to adjudicate rights to the title or possession of personal property. The question of whether or not a party has the right of possession over the property involved and if so, whether or not the adverse party has wrongfully taken and detained said property as to require its return to plaintiff, is outside the pale of competence of a labor tribunal and beyond the field of specialization of Labor Arbiters.

x x x x

The labor dispute involved is not intertwined with the issue in the Replevin Case. The respective issues raised in each forum can be resolved independently on the other. In fact in 18 November 1986, the NLRC in the case before it had issued an Injunctive Writ enjoining the petitioners from blocking the free ingress and egress to the Vessel and ordering the petitioners to disembark and vacate. That aspect of the controversy is properly settled under the Labor Code. So also with petitioners’ right to picket. But the determination of the question of who has the better right to take possession of the Vessel and whether petitioners can deprive the Charterer, as the legal possessor of the Vessel, of that right to possess in addressed to the competence of Civil Courts.

In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of jurisdiction as laid down by pertinent laws.

The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered the dismissal of the replevin case for lack of jurisdiction.

Having resolved that issue, we proceed to rule on the validity of Astorga’s dismissal.

Astorga was terminated due to redundancy, which is one of the authorized causes for the dismissal of an employee. The nature of redundancy as an authorized cause for dismissal is explained in the leading case ofWiltshire File Co., Inc. v. National Labor Relations Commission,35 viz:

x x x redundancy in an employer’s personnel force necessarily or even ordinarily refers to duplication of work. That no other person was holding the same position that private respondent held prior to termination of his services does not show that his position had not become redundant. Indeed, in any well organized business enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of one person. We believe that redundancy, for purposes of the Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.










The characterization of an employee’s services as superfluous or no longer necessary and, therefore, properly terminable, is an exercise of business judgment on the part of the employer. The wisdom and soundness of such characterization or decision is not subject to discretionary review provided, of course, that a violation of law or arbitrary or malicious action is not shown.36

Astorga claims that the termination of her employment was illegal and tainted with bad faith. She asserts that the reorganization was done in order to get rid of her. But except for her barefaced allegation, no convincing evidence was offered to prove it. This Court finds it extremely difficult to believe that SMART would enter into a joint venture agreement with NTT, form SNMI and abolish CSMG/FSD simply for the sole purpose of easing out a particular employee, such as Astorga. Moreover, Astorga never denied that SMART offered her a supervisory position in the Customer Care Department, but she refused the offer because the position carried a lower salary rank and rate. If indeed SMART simply wanted to get rid of her, it would not have offered her a position in any department in the enterprise.

Astorga also states that the justification advanced by SMART is not true because there was no compelling economic reason for redundancy. But contrary to her claim, an employer is not precluded from adopting a new policy conducive to a more economical and effective management even if it is not experiencing economic reverses. Neither does the law require that the employer should suffer financial losses before he can terminate the services of the employee on the ground of redundancy. 37

We agree with the CA that the organizational realignment introduced by SMART, which culminated in the abolition of CSMG/FSD and termination of Astorga’s employment was an honest effort to make SMART’s sales and marketing departments more efficient and competitive. As the CA had taken pains to elucidate:

x x x a careful and assiduous review of the records will yield no other conclusion than that the reorganization undertaken by SMART is for no purpose other than its declared objective – as a labor and cost savings device. Indeed, this Court finds no fault in SMART’s decision to outsource the corporate sales market to SNMI in order to attain greater productivity. [Astorga] belonged to the Sales Marketing Group under the Fixed Services Division (CSMG/FSD), a distinct sales force of SMART in charge of selling SMART’s telecommunications services to the corporate market. SMART, to ensure it can respond quickly, efficiently and flexibly to its customer’s requirement, abolished CSMG/FSD and shortly thereafter assigned its functions to newly-created SNMI Multimedia Incorporated, a joint venture company of SMART and NTT of Japan, for the reason that CSMG/FSD does not have the necessary technical expertise required for the value added services. By transferring the duties of CSMG/FSD to SNMI, SMART has created a more competent and specialized organization to perform the work required for corporate accounts. It is also relieved SMART of all administrative costs – management, time and money-needed in maintaining the CSMG/FSD. The determination to outsource the duties of the CSMG/FSD to SNMI was, to Our mind, a sound business judgment based on relevant criteria and is therefore a legitimate exercise of management prerogative.

Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined towards the worker and upheld his cause in most of his conflicts with his employer. This favored treatment is consonant with the social justice policy of the Constitution. But while tilting the scales of justice in favor of workers, the fundamental law also guarantees the right of the employer to reasonable returns for his investment.38 In this light, we must acknowledge the prerogative of the employer to adopt such measures as will promote greater efficiency, reduce overhead costs and enhance prospects of economic gains, albeit always within the framework of existing laws. Accordingly, we sustain the reorganization and redundancy program undertaken by SMART.

However, as aptly found by the CA, SMART failed to comply with the mandated one (1) month notice prior to termination. The record is clear that Astorga received the notice of termination only on March 16, 199839 or less than a month prior to its effectivity on April 3, 1998. Likewise, the Department of Labor and Employment was notified of the redundancy program only on March 6, 1998.40

Article 283 of the Labor Code clearly provides:

Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or

cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof x x x.

SMART’s assertion that Astorga cannot complain of lack of notice because the organizational realignment was made known to all the employees as early as February 1998 fails to persuade. Astorga’s actual knowledge of the reorganization cannot replace the formal and written notice required by the law. In the written notice, the employees are informed of the specific date of the termination, at least a month prior to the effectivity of such termination, to give them sufficient time to find other suitable employment or to make whatever arrangements are needed to cushion the impact of termination. In this case, notwithstanding Astorga’s knowledge of the reorganization, she remained uncertain about the status of her employment until SMART gave her formal notice of termination. But such notice was received by Astorga barely two (2) weeks before the effective date of termination, a period very much shorter than that required by law.

Be that as it may, this procedural infirmity would not render the termination of Astorga’s employment illegal. The validity of termination can exist independently of the procedural infirmity of the dismissal.41 In DAP Corporation v. CA,42 we found the dismissal of the employees therein valid and for authorized cause even if the employer failed to comply with the notice requirement under Article 283 of the Labor Code. This Court upheld the dismissal, but held the employer liable for non-compliance with the procedural requirements.

The CA, therefore, committed no reversible error in sustaining Astorga’s dismissal and at the same time, awarding indemnity for violation of Astorga's statutory rights.

However, we find the need to modify, by increasing, the indemnity awarded by the CA to Astorga, as a sanction on SMART for non-compliance with the one-month mandatory notice requirement, in light of our ruling in Jaka Food Processing Corporation v. Pacot,43 viz.:

[I]f the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee, and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employer’s exercise of his management prerogative.

We deem it proper to increase the amount of the penalty on SMART to P50,000.00.

As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay equivalent to at least one (1) month salary or to at least one (1) month’s pay for every year of service, whichever is higher. The records show that Astorga’s length of service is less than a year. She is, therefore, also entitled to separation pay equivalent to one (1) month pay.

Finally, we note that Astorga claimed non-payment of wages from February 15, 1998. This assertion was never rebutted by SMART in the proceedings a quo. No proof of payment was presented by SMART to disprove the allegation. It is settled that in labor cases, the burden of proving payment of monetary claims rests on the employer.44 SMART failed to discharge the onus probandi. Accordingly, it must be held liable for Astorga’s salary from February 15, 1998 until the effective date of her termination, on April 3, 1998.

However, the award of backwages to Astorga by the CA should be deleted for lack of basis. Backwages is a relief given to an illegally dismissed employee. Thus, before backwages may be granted, there must be a finding of unjust or illegal dismissal from work.45 The Labor Arbiter ruled that Astorga was illegally dismissed. But on appeal, the NLRC reversed the Labor Arbiter’s ruling and categorically declared Astorga’s dismissal valid. This ruling was affirmed by the CA in its assailed Decision. Since Astorga’s dismissal is for an authorized cause, she is not entitled to backwages. The CA’s award of backwages is totally inconsistent with its finding of valid dismissal.

WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The February 28, 2000 Decision and the May 7, 2001 Resolution of the Court of Appeals in CA-G.R. SP. No. 53831 are SET ASIDE. The Regional Trial Court of Makati City, Branch 57












is DIRECTED to proceed with the trial of Civil Case No. 98-1936 and render its Decision with reasonable dispatch.

On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and 151372 are DENIED. The June 11, 2001 Decision and the December 18, 2001 Resolution in CA-G.R. SP. No. 57065, are AFFIRMEDwith MODIFICATION. Astorga is declared validly dismissed. However, SMART is ordered to pay AstorgaP50,000.00 as indemnity for its non-compliance with procedural due process, her separation pay equivalent to one (1) month pay, and her salary from February 15, 1998 until the effective date of her termination on April 3, 1998. The award of backwages is DELETED for lack of basis.

SO ORDERED.

SECOND DIVISION

G.R. No. 148980 September 21, 2007

PCI LEASING & FINANCE, INC., Petitioner, vs.SPOUSES GEORGE M. DAI and DIVINA DAI, Respondents.

D E C I S I O N

CARPIO MORALES, J.:

Respondents, spouses George and Divina Dai, obtained a loan on June 16, 1994 from petitioner, PCI Leasing and Finance, Inc., evidenced by a promissory note1 for the sum of P3,352,892 payable in monthly installments ofP152,265 starting on July 16, 1994. The proceeds of the loan partly financed the purchase by respondents of a vessel-fishing boat which was named "F/B Sea Doll." To secure the payment of the loan, respondents executed a chattel mortgage2 over the vessel in favor of petitioner.

Both the promissory note and the chattel mortgage provided that, in case of failure to pay the installments or interest due thereon, the entire amount remaining unpaid shall immediately become due and payable.3

Respondents failed to pay the second and third installments which fell due on August 16, 1994 and September 16, 1994, respectively, prompting petitioner to file on October 27, 1994 before the Regional Trial Court (RTC) of Cebu City a complaint for replevin and damages, docketed as Civil Case No. CEB-16691, praying that the trial court:

a) . . . issue a writ of replevin ordering the seizure of the vessel xxx complete with all its accessories and equipments [sic], together with the registration certificate and direct the delivery thereof to plaintiff in accordance with law and after due hearing, declare that plaintiff is entitled to the possession of the vessel and confirm its seizure and delivery to plaintiff;

b) In the event that manual delivery of the said vessel cannot be effected, . . . render judgment in favor of plaintiff and against defendants ordering them to pay the plaintiff, the sum of P3,502,095.00 plus interest and penalty thereon from October 12, 1994 until fully paid as provided in the Promissory Note [;]

c) In either case, . . . order defendants to pay jointly and severally the sum of P1,225,733.25 as attorney’s fees and liquidated damages, plus bonding fees and other expenses incurred in the seizure of the said vessel which will be proved during the trial.4 (Emphasis and underscoring supplied)

In their Answer, respondents claimed that, inter alia, the possession of the vessel including its registration certificate had been surrendered to petitioner before the filing of the complaint. Respondents thus prayed for the award of damages and attorney’s fees by way of Counterclaim.

Following the filing by respondents of their Answer, petitioner foreclosed the chattel mortgage and bought the vessel at the public auction conducted on January 13, 1995 for P2,000,000.5 A Certificate of Sale of the vessel in favor of petitioner was subsequently issued on January 16, 1995.

More than eight months later or on September 29, 1995, the Pre-trial of the case was conducted during which the following were defined as issues:

1. Whether or not [petitioner] is entitled to recover damages from the [respondents]; and

2. Whether or not [respondents] are entitled to recover damages in accordance with their counterclaim.6

By Decision7 of February 3, 1997, Branch 58 of the Cebu RTC resolved both issues in the negative in this wise:

The evidence further shows that defendants were not able to pay off their obligation to plaintiff due to the fact that their fishing area in Batanes and their boat were badly damaged. Defendants in fact informed plaintiff of their predicament by sending plaintiff a copy of a letter explaining such predicament (Exh. "2"). There was no bad faith on defendants’ part when they failed to comply with their obligation.

The Court is convinced that plaintiff is not entitled to recover from defendants attorney’s fees and liquidated damages in the sum of P1,225,733.25. "In determining whether a penalty clause is ‘iniquitous and unconscionable,’ a court may very well take into account the actual damages sustained by a creditor who has been compelled to sue the defaulting debtor x x x." (Pacific Mills, Inc. vs. Court of Appeals, G.R. No. 87182, February 17, 1992, 206 SCRA 317, 327) No substantial damage having been sustained by plaintiff as it already had in its possession the certificate of registration of the vessel and had in fact foreclosed the mortgage on said vessel, its claim for attorney’s fees and liquidated damages must fail.

On the second issue –

Defendants have not presented sufficient and convincing evidence to support their claim for moral and exemplary damages and attorney’s fees. Hence, said claim is hereby denied for lack of merit.8 (Emphasis and underscoring supplied)

Accordingly, the trial court dismissed the parties’ respective claims for damages and attorney’s fees. No appeal having been taken from the trial court’s decision, it became final and executory.

More than a year and a half following the promulgation by the trial court of its decision in Civil Case No. CEB-16691 or on August 26, 1998, petitioner filed a complaint9 for deficiency judgment and/or collection of sum of money before the Cebu RTC where it was docketed as Civil Case No. CEB-22585. In its complaint, petitioner alleged, inter alia, as follows:

x x x x

10. Subsequent to the aforesaid sale the outstanding obligation of defendants to the plaintiff, inclusive of interest, and net of its P2,000,000.00, representing the proceeds of the aforesaid sale of the mortgaged property is Philippine Pesos: Nine Hundred Sixty-One Thousand (P961,000.00) as of January 16, 1995 exclusive of cost of suit and collection expenses;

11. Payment of the aforesaid outstanding obligation representing the deficiency claims of the plaintiff arising from the said promissory note (Annex "A") is now long overdue but defendants failed and refused and still fail and refuse to pay the same despite demand from plaintiff;

12. It is expressly stipulated in the promissory note (Annex "A") that in case the same is referred to an attorney-at-law for collection defendants shall pay attorney’s fees in a sum equivalent to ten percent (10%) of the amount due and twenty-five percent (25%) of the total amount due as liquidated damages aside from expenses of collectionan[d] costs of suit which amount is equivalent to P336,350.00[.]

x x x x10 (Underscoring supplied)

Petitioner thus prayed that the court render judgment in its favor and against respondents, ordering them to pay.

1. The amount of P961,000.00 representing the outstanding obligation of the defendants to the plaintiff exclusive of interest, and net of the proceeds of the aforesaid sale of the mortgaged property plus interest from January 16, 1995;

2. The amount of P336,350.00 as attorney’s fees and liquidated damages;

http://www.lawphil.net/judjuris/juri2007/sep2007/gr_148980_2007.html#fnt10











3. The costs of suit and collection expenses.

x x x x11 (Underscoring supplied)

In their Answer12 to the complaint in Civil Case No. CEB-22585, respondents pleaded bar by prior judgment13 and Article 1484 of the Civil Code14 which provides:

Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee’s failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (Underscoring supplied)

By Decision of November 22, 1999, Branch 58 of the Cebu RTC, the same branch and presided by the same judge which decided Civil Case No. CEB-16691, dismissed Civil Case No. CEB-22585 in this wise:

It is . . . apparent that plaintiff’s present action for deficiency judgment is barred by the prior judgment in CEB-16691. The parties and the cause of action in CEB-16691 and the instant case are the same. Plaintiff’s prayer in CEB-16691 is in the alternative. Having availed of foreclosure of the chattel mortgage, plaintiff cannot anymore come to court again and avail of its second alternative prayer. The instant case should, therefore, be dismissed. (Section 1(f), Rule 16, 1997 Rules of Civil Procedure).

Parenthetically, let it be noted [that] in CEB-16691, plaintiff had foreclosed the mortgage and a certificate of sale was issued in its favor even before the pre-trial conference therein was conducted. Plaintiff did not make any move to amend the pre-trial order which limited the issues to be resolved therein to the damages claimed by the parties.15 (Emphasis and underscoring supplied)

On appeal, the Court of Appeals, by Decision16 dated March 12, 2001, brushed aside respondents’ invocation of Article 1484 of the Civil Code on the ground that the same applies only to a case of sale of [personal] property payable in installments which is secured by a chattel mortgage between the vendor and the vendee over the thing sold,17 citing Bicol Savings & Loan Association v. Guinhawa.18

The appellate court nevertheless affirmed the decision of the trial court on the ground of res judicata. Thus it held:

. . . [I]t is clear that appellant’s present claim for deficiency judgment is among those matters which could have been adjudged in CEB-16691. While that earlier case is for replevin and damages, the appellant during the pendency of that case had extrajudicially foreclosed the chattel mortgage and the Certificate of Sale had been issued to it by the Provincial Sheriff as the highest bidder. Appellant after realizing the amount of P2,000,000.00 from the proceeds of the foreclosure sale, could have prayed for a deficiency judgment in the same action as in fact it pursued its claim for attorney’s fees and liquidated damages therein, which claim was however, dismissed by the trial court. Appellant, however, did not press any demand for such deficiency judgment in said case and instead filed this present suit for deficiency judgment long after the trial court rendered judgment in the earlier case. It cannot, however, evade the application of res judicata by varying the form of its action herein since the causes of action in the first case and in the present suit are clearly identical[.] The same evidence which is necessary to sustain the second action would have been sufficient to authorize a recovery in the first, even if the forms or nature of the two actions are different. That appellant’s cause of action as such creditor-mortgagee of the defendant-appellees had already been fully determined and tried in the earlier case would have been sufficient to put an end to litigation of such claim or demand. The principle of res judicata is based on the salutary public policy against unnecessary multiplicity of suits. Indeed, it is to the interest of the public that there should be an end to litigation by the parties over a subject fully and fairly adjudicated, and an individual should not be vexed twice for the same cause.19 (Underscoring supplied)

Its Motion for Reconsideration20 having been denied by the appellate court,21 petitioner filed the present Petition for Review22 raising the issue of "whether or not a judgment in a replevin case and/or delivery of personal property would bar a subsequent action for deficiency judgment."23

For res jusdicata to apply, four requisites must be met: (1) the former judgment or order must be final; (2) it must be a judgment or an order on the merits; (3) it must have been rendered by a court having jurisdiction over the subject matter and the parties; and (4) there must be, between the first and second actions, identity of parties, of subject matter and cause of action.24

Petitioner denies the existence of identity of causes of action between the replevin case and the case for deficiency judgment or collection of sum of money, thus:

Being a preparatory action for the foreclosure of the mortgage, necessarily therefore, the claim of the petitioner (deficiency judgment) which is the subject of Civil Case No. CEB-22585 was not yet covered or an issue in the said civil case. The deficiency claim of the petitioner is only determined after the extrajudicial foreclosure.

In this connection, Section 9 of Rule 60 of the 1997 Rules of Civil Procedure categorically defines or limits the judgment or decision that may be rendered by the court in an action for replevin, thus:

Section 9. Judgment. – After trial of the issues, the court shall determine who has the right of possession to and the value of the property and shall render judgment in the alternative for the delivery thereof to the party entitled to the same, or for its value in case delivery can not be made and also for such damages as either party may prove, with costs.

Careful reading of the above-quoted procedural law would show that it does not authorize the court to render judgment on the deficiency after foreclosure.25 (Underscoring supplied)

Petitioner’s position fails.

Petitioner ignores the fact that it prayed in the replevin case that in the event manual delivery of the vessel could not be effected, the court "render judgment in its favor by ordering [herein respondents] to pay . . . the sum of P 3,502,095.00 plus interest and penalty thereon from October 12, 1994 until fully paid as provided in the Promissory Note."26

Since petitioner had extrajudicially foreclosed the chattel mortgage over the vessel even before the pre-trial of the case, it should have therein raised as issue during the pre-trial the award of a deficiency judgment. After all, the basis of its above-stated alternative prayer was the same as that of its prayer for replevin – the default of respondents in the payment of the monthly installments of their loan.27 But it did not.1âwphi1

Section 49 of Rule 39 of the 1964 Rules of Court, which governed petitioner’s complaint for replevin filed on October 27, 1994, and which Section is reproduced as Section 47 of the present Rules, reads:

SEC. 49. Effect of judgments or final orders. – The effect of a judgment or final order rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:

(a) In case of a judgment or final order against a specific thing, or in respect to the probate of a will, or the administration of the estate of a deceased person, or in respect to the personal, political, or legal condition or status of a particular person or his relationship to another, the judgment or final order is conclusive upon the title to the thing, the will or administration, or the condition, status or relationship of the person; however, the probate of a will or granting of letters of administration shall only be prima facie evidence of the death of the testator or intestate;

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity; and



















(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto. (Emphasis and underscoring supplied)

Paragraph (a) is the rule on res judicata in judgments in rem. Paragraph (b) is the rule on res judicata in judgments in personam. Paragraph (c) is the rule on conclusiveness of judgment.28

Petitioner contends that Section 9 of Rule 60 of the 1997 Rules of Court which reads:

Sec. 9. Judgment. – After trial of the issues, the court shall determine who has the right of possession to and the value of the property and shall render judgment in the alternative for the delivery thereof to the party entitled to the same, or for its value in case delivery cannot be made, and also for such damages as either party may prove, with costs, does not authorize the court to render judgment on the deficiency after foreclosure, citing BA Finance Corp. v. CA.29

But replevin is, as the above-cited BA Finance Corp. case holds, usually described as a mixed action.

Replevin, broadly understood, is both a form of principal remedy and of a provisional relief. It may refer either to the action itself, i.e., to regain the possession of personal chattels being wrongfully detained from the plaintiff by another, or to the provisional remedy that would allow the plaintiff to retain the thing during the pendency of the action and hold it pendente lite. The action is primarily possessory in nature and generally determines nothing more than the right of possession. Replevin is so usually described as a mixed action, being partly in rem and partly in personam – in rem insofar as the recovery of specific property is concerned, and in personam as regards to damages involved. As an "action in rem," the gist of the replevin action is the right of the plaintiff to obtain possession of specific personal property by reason of his being the owner or of his having a special interest therein. (Citations omitted, italics in the original, underscoring supplied)

Petitioner’s complaint for replevin was doubtless a mixed action – in rem with respect to its prayer for the recovery of the vessel, and in personam with respect to its claim for damages. And it was, with respect to its alternative prayer, clearly one in personam.

Following paragraph (b) of Section 49, Rule 39 of the 1964 Rules of Court, now 47 of Rule 39 of the present Rules, petitioner’s second complaint is unquestionably barred by res judicata.30

WHEREFORE, the petition is DENIED.

Costs against petitioner.

SO ORDERED.

FOOTNOTES:18 The Court held in this case:

x x x The conclusion x x x reached by the lower court was erroneous because in the case at bar, the obligation contracted by the principal debtor (Depositario) with a solidary co-maker (private respondent herein), was one of loan secured by a chattel mortgage, executed by the principal debtor, and not a sale where the price is payable on installments and where a chattel mortgage on the thing sold was constituted by the buyer and, further, the obligation to pay the installments having been guaranteed by another. (Underscoring supplied) G.R. No. 62415, August 20, 1990, 188 SCRA 642, 646. Vide CA rollo, p. 43.

27 Id. at 30-31. Vide Servicewide Specialists, Inc. v. Court of Appeals, 376 Phil. 602, 612 (1999): "When the mortgagee seeks a replevin in order to effect the eventual foreclosure of the mortgage, it is not only the existence of, but also the mortgagor’s default on, the chattel mortgage that, among other things, can properly uphold the right to replevy the property."28 Regalado, Remedial Law Compendium, Vol. I.

THIRD DIVISION

G.R. No. 165895 June 5, 2009

TERLYNGRACE RIVERA, Petitioner, vs.FLORENCIO L. VARGAS, Respondent.

D E C I S I O N

NACHURA, J.:

What is the effect of a writ of replevin that has been improperly served?

This is the sole issue to be resolved in this petition for review on certiorari seeking to set aside the Decision1 of the Court of Appeals (CA) dated November 18, 2003 in CA-G.R. SP No. 78529, as well as its October 20, 2004 Resolution,2 denying the petition for certiorari filed by petitioner Terlyngrace Rivera (Rivera).

The facts follow.

On February 24, 2003, respondent Florencio Vargas (Vargas) filed a complaint3 against petitioner and several John Does before Branch 02 of the Regional Trial Court (RTC) in Tuguegarao City, Cagayan, for the recovery of a 150 T/H rock crushing plant located in Sariaya, Quezon. In his complaint and affidavit,4 Vargas claims ownership of the said equipment, having purchased and imported the same directly from Hyun Dae Trading Co., in Seoul, South Korea, in December 1993.5 The equipment was allegedly entrusted to petitioner’s husband, Jan T. Rivera, who died sometime in late 2002, as caretaker of respondent’s construction aggregates business in Batangas. According to Vargas, petitioner failed to return the said equipment after her husband’s death despite his repeated demands, thus forcing him to resort to court action.6 The complaint was accompanied by a prayer for the issuance of a writ of replevin and the necessary bond amounting to P2,400,000.00.

Summons7 dated February 24, 2003 was served upon petitioner through her personal secretary on April 28, 2003 at her residence in Parañaque City. Interestingly, however, the writ of replevin8 was served upon and signed by a certain Joseph Rejumo, the security guard on duty in petitioner’s crushing plant in Sariaya, Quezon on April 29, 2003,9 contrary to the sheriff’s return10 stating that the writ was served upon Rivera.

On May 8, 2003, Rivera filed her answer, manifestation, and motion for the acceptance of petitioner’s redelivery bond.11 In her answer, petitioner countered that the rock-crushing plant was ceded in favor of her husband as his share following the dissolution of the partnership formed between Jan Rivera and respondent’s wife, Iluminada Vargas (Iluminada), on May 28, 1998, while the partnership’s second rock-crushing plant in Cagayan was ceded in favor of Iluminada.12 She further averred that from the time that the partnership was dissolved sometime in 2000 until Jan Rivera’s death in late 2002, it was petitioner’s husband who exercised ownership over the said equipment without any disturbance from respondent.13

On May 12, 2003, the RTC issued an Order14 disapproving petitioner’s redelivery bond application for failure to comply with the requirements under Sections 5 and 6 of Rule 60 of the Rules of Court.15 Without directly saying so, the RTC faulted petitioner for her failure to file the application for redelivery bond within five (5) days from the date of seizure as provided in the Rules of Court. Petitioner moved for reconsideration,16 but the same was also denied.17

Aggrieved, petitioner elevated the matter to the CA through a petition for certiorari under Rule 65. This, too, was denied for lack of merit.18 Petitioner moved for reconsideration,19 but it was also denied.20

Undaunted, petitioner now comes to us via this Rule 45 petition.

Petitioner argues that the RTC committed grave abuse of discretion in denying her counterbond on the ground that it was filed out of time. She contends that the mandatory five-day period did not even begin to run in this case due to the improper service of the writ of replevin, contrary to Section 4 of Rule 60.21

We find the petition meritorious.

Replevin is one of the most ancient actions known to law, taking its name from the object of its process.22 It originated in common law as a remedy against the wrongful exercise of the right of distress for rent23 and, according to some authorities, could only be maintained in such a case.24 But by the weight of authority, the remedy is not and never was restricted to cases of wrongful distress in the absence of any

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statutes relating to the subject, but is a proper remedy for any unlawful taking.25 "Replevied," used in its technical sense, means delivered to the owner,26 while the words "to replevy" means to recover possession by an action of replevin.27

Broadly understood in this jurisdiction, replevin is both a form of principal remedy and of provisional relief. It may refer either to the action itself, i.e., to regain the possession of personal chattels being wrongfully detained from the plaintiff by another, or to the provisional remedy that would allow the plaintiff to retain the thing during the pendency of the action and to hold it pendente lite.28 The action is primarily possessory in nature and generally determines nothing more than the right of possession.29

The law presumes that every possessor is a possessor in good faith.30 He is entitled to be respected and protected in his possession31 as if he were the true owner thereof until a competent court rules otherwise.32Before a final judgment, property cannot be seized unless by virtue of some provision of law.33 The Rules of Court, under Rule 60, authorizes such seizure in cases of replevin. However, a person seeking a remedy in an action for replevin must follow the course laid down in the statute, since the remedy is penal in nature.34 When no attempt is made to comply with the provisions of the law relating to seizure in this kind of action, the writ or order allowing the seizure is erroneous and may be set aside on motion35 by the adverse party. Be it noted, however, that a motion to quash the writ of replevin goes to the technical regularity of procedure, and not to the merits of the case36 in the principal action.

The process regarding the execution of the writ of replevin in Section 4 of Rule 60 is unambiguous: the sheriff, upon receipt of the writ of replevin and prior to the taking of the property, must serve a copy thereof to the adverse party (petitioner, in this case) together with the application, the affidavit of merit, and the replevin bond.37The reasons are simple, i.e., to provide proper notice to the adverse party that his property is being seized in accordance with the court’s order upon application by the other party, and ultimately to allow the adverse party to take the proper remedy consequent thereto.

Service of the writ upon the adverse party is mandatory in line with the constitutional guaranty on procedural due process and as safeguard against unreasonable searches and seizures.38 If the writ was not served upon the adverse party but was instead merely handed to a person who is neither an agent of the adverse party nor a person authorized to receive court processes on his behalf, the service thereof is erroneous and is, therefore, invalid, running afoul of the statutory and constitutional requirements. The service is likewise invalid if the writ of replevin was served without the required documents. Under these circumstances, no right to seize and to detain the property shall pass, the act of the sheriff being both unlawful and unconstitutional.1avvphi1

In the case at bar, petitioner avers that the writ of replevin was served upon the security guard where the rock-crushing plant to be seized was located.39 The signature of the receiving party indicates that the writ was received on April 29, 2003 by a certain Joseph Rejumo, the guard on duty in a plant in Sariaya, Quezon, where the property to be seized was located, and witnessed by Claudio Palatino, respondent’s caretaker.40 The sheriff’s return,41however, peremptorily states that both the writ of replevin and the summons were served upon Rivera. On May 8, 2003, or nine (9) days after the writ was served on the security guard, petitioner filed an answer to the complaint accompanied by a prayer for the approval of her redelivery bond. The RTC, however, denied the redelivery bond for having been filed beyond the five-day mandatory period prescribed in Sections 5 and 6 of Rule 60.42 But since the writ was invalidly served, petitioner is correct in contending that there is no reckoning point from which the mandatory five-day period shall commence to run.

The trial court is reminded that not only should the writ or order of replevin comply with all the requirements as to matters of form or contents prescribed by the Rules of Court.43 The writ must also satisfy proper service in order to be valid and effective: i.e. it should be directed to the officer who is authorized to serve it; and it should be served upon the person who not only has the possession or custody of the property involved but who is also a party or agent of a party to the action. Consequently, a trial court is deemed to have acted without or in excess of its jurisdiction with respect to the ancillary action of replevin if it seizes and detains a personalty on the basis of a writ that was improperly served, such as what happened in this case.

At the outset, petitioner’s proper remedy should have been to file a motion to quash the writ of replevin or a motion to vacate the order of seizure. Nevertheless, petitioner’s filing of an application for a redelivery bond, while not necessary, did not thereby waive her right to question the improper service. It now becomes imperative for the trial

court to restore the parties to their former positions by returning the seized property to petitioner and by discharging the replevin bond filed by respondent. The trial, with respect to the main action, shall continue. Respondent may, however, file a new application for replevin should he choose to do so.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, as well as its Resolution, in CA-G.R. SP No. 78529 is hereby SET ASIDE. The Regional Trial Court is hereby ordered to restore the parties to their former positions, discharge respondent’s replevin bond, and proceed with the trial of the main action with dispatch.

SO ORDERED.

FOOTNOTES:15 Secs. 5 and 6, Rule 60 of the Rules of Court, read:

SEC. 5. Return of property. – If the adverse party objects to the sufficiency of the applicant’s bond, or of the surety or sureties thereon, he cannot immediately require the return of the property, but if he does not so object, he may, at any time before the delivery of the property to the applicant, require the return thereof, by filing with the court where the action is pending a bond executed to the applicant, in double the value of the property as stated in the applicant’s affidavit for the delivery thereof to the applicant, if such delivery be adjudged, and for the payment of such sum to him as may be recovered against the adverse party, and by serving a copy of such bond on the applicant.SEC. 6. Disposition of property by sheriff. – If within five (5) days after the taking of the property by the sheriff, the adverse party does not object to the sufficiency of the bond, or of the surety or sureties thereon; or if the adverse party so objects and the court affirms its approval of the applicant’s bond or approves a new bond, or if the adverse party requires the return of the property but his bond is objected to and found insufficient and he does not forthwith file an approved bond, the property shall be delivered to the applicant. If for any reason the property is not delivered to the applicant, the sheriff must return it to the adverse party.

21 Sec. 4, Rule 60 of the Rules of Court, reads:SEC. 4. Duty of the sheriff. – Upon receiving such order, the sheriff must serve a copy thereof on the adverse party, together with a copy of the application, affidavit and bond, and must forthwith take the property, if it be in the possession of the adverse party, or his agent, and retain it in his custody. If the property or any part thereof be concealed in a building or enclosure, the sheriff must demand its delivery, and if it be not delivered, he must cause the building or enclosure to be broken open and take the property into his possession. After the sheriff has taken possession of the property as herein provided, he must keep it in a secure place and shall be responsible for its delivery to the party entitled thereto upon receiving his fees and necessary expenses for taking and keeping the same.

30 Art. 527 of the New Civil Code provides:Art. 527. Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof.

31 Art. 539 of the New Civil Code provides:Art. 539. Every possessor has a right to be respected in his possession; and should he be disturbed therein he shall be protected in or restored to said possession by the means established by the laws and the Rules of the Court.

38 Secs. 1 and 2, Art. III of the Constitution provides in full:Section 1. No person shall be deprived of life liberty or property without due process of law, nor shall any person be denied the equal protection of the laws.Section 2. The right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and witnesses he may produce, and particularly describing the place to be searched and the persons or things be seized. (Italics supplied.)

JURISDICTION

FIRST DIVISION

G.R. No. 166901 October 27, 2006

ASIAN TERMINALS, INC., petitioner, vs.

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HON. HELEN BAUTISTA-RICAFORT, Presiding Judge of RTC, Branch 260, Parañaque City; SAMUEL ROSETE, in his personal capacity and as attorney-in-fact and in representation of NOEL TABUELOG, proprietor of BEST PART ENTERPRISES; ERNESTO DE JESUS, President of EASTERN METROPOLITAN BUS CORP.; NORMA PONDEVIDA, proprietress of NSP TRANSPORTATION SERVICES; RENATO CLAROS, President of PRINCE BUS AND TRUCK PARTS, INC.; ERNESTO M. CHUA, President of EMC TRANSPORTATION, INC.; CECILIA T. SAULOG, proprietress of MANSOUR TRANSPORT SERVICES; JENELITA S. NAPARATE, proprietress of SANEI SOUGYO TRADING; RODOLFO J. MAGO, proprietor of DNS SHUTTLE SERVICES; and AMALIA C. EDAMURA, Proprietress of DAMLAR TRADING, respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari for the reversal of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 61562, affirming the Orders2 of the Regional Trial Court (RTC) of Parañaque City, Branch 260, in Civil Case No. 98-0435 for replevin and damages.

Section 1, Republic Act (RA) No. 8506, which took effect on February 22, 1998, provides that "it shall be unlawful for any person to import, cause the importation of, register, cause the registration of, use or operate any vehicle with its steering wheel right hand side thereof in any highway, street or road, whether private or public, or at the national or local x x x."

Noel Tabuelog, Ernesto de Jesus, Norma Pondevida, Renato Claros, Ernesto M. Chua, Cecilia T. Saulog, Jenelita S. Napárate, Rodolfo F. Mago, and Amalia C. Edamura are duly-licensed importers of vehicles. Sometime in April and May 1998, they imported 72 secondhand right-hand drive buses from Japan. When the shipment arrived at the South Harbor, Port of Manila, the District Collector of Customs impounded the vehicles and ordered them stored at the warehouse of the Asian Terminals, Inc. (ATI), a customs-bonded warehouse under the custody of the Aviation and Cargo Regional Division. Conformably with Section 2607 of the Tariff and Customs Code, the District Collector of Customs issued Warrants of Distraint3 against the shipment and set the sale at public auction on September 10, 1998.4

In the meantime, on October 28, 1998, the Secretary of Justice rendered Opinion No. 127,5 Series of 1998, stating that shipments of right hand wheel vehicles loaded and exported at the port of origin before February 22, 1998 were not covered by RA No. 8506 unless the same were loaded and imported after said date.

On November 11, 1998, the importers, through their Attorney-in-Fact Samuel N. Rosete, filed a complaint with the RTC of Parañaque City, against the Secretary of Finance, Customs Commissioner, and the Chief Executive of the Societe Generale de Surillee, for replevin with prayer for the issuance of a writ of preliminary and mandatory injunction and damages.

Plaintiffs averred, inter alia, that in accordance with the opinion of the Assistant Director of the Customs Legal Service and the Office of the Legal Affairs of the Department of Finance, the importation of right-hand drive vehicles are not prohibited under RA No. 8506 provided that conversion kits are included in the imported vehicles. As such, there was no factual and legal basis for the seizure of the shipment and the storage thereof at the ATI. The complaint contained the following prayer:

WHEREFORE, premises considered, it is most respectfully prayed before this Honorable Court that an Order be issued in the following tenor:

A. PRIOR TO HEARING:

1. A Writ of Replevin be issued upon the posting of a bond of PhP12,000,000.00 (double the value of the vehicles) executed in favor of defendants to answer for damages, and approved by this Court, directing the Sheriff or his deputies to forthwith take custody of the said vehicles which are in the possession and custody of the defendants or their agents at the Bureau of Customs Holding Area, located at South Harbor, Port Area, Manila City, and retain it in its custody;

B. AFTER HEARING:

1. To pay the sum of PhP6,000,000.00 if the Writ of Replevin cannot be implemented successfully plus interest until fully paid;

2. To pay compensatory damages of not less than PhP840,000.00 for unrealized profits, moral damages of not less [than] PhP1,000,000.00, exemplary damages of not less than PhP250,000.00, litigation and necessary expenses of not less than PhP500,000.00, attorney’s fees on a contingent basis, not less thanP1,000,000.00 actual damages if and when plaintiffs are legally obliged to pay storage fees;

3. Such other reliefs just and equitable under the premises.6

The RTC granted the application for a writ of replevin on a bond of P12,000,000.00.7

However, George Jeroes, the Chief of Customs Police and four (4) customs policemen prevented the Sheriff and the policemen assisting him from taking custody of the vehicles.8 He claimed that the District Collector of Customs had jurisdiction over the vehicles. On motion of the plaintiffs, the court issued an Order9 on November 23, 1998, directing the PNP Director to assist the Sheriff in implementing the writ it issued and to arrest anyone who would obstruct the implementation of its order. The Sheriff served a copy of the Order on ATI and succeeded in taking custody of the vehicles and signed a receipt therefor.10 The District Collector of Customs agreed to transfer the custody of the vehicles to the RTC, on the condition that the required taxes, dues, and other charges be paid. The Customs Commissioner approved the decision of the District Collector.11 Plaintiffs paid the requisite taxes, dues, and other charges amounting to P7,528,635.00. They were able to take possession of the vehicles over the objections of ATI.12

On November 27, 1998, the defendants, through the Office of the Solicitor General, filed an Omnibus Motion13, seeking the reconsideration of the RTC Order granting plaintiffs’ plea for a writ of replevin. It likewise prayed that the writ of replevin issued by the court be quashed on the ground that the RTC has no jurisdiction over the vehicles subject of seizure and detention before the Bureau of Customs. The OSG declared that the Bureau of Customs which had custody of the vehicles through ATI "had exclusive jurisdiction over said vehicles and on the issues of the seizure and detention thereof." The ATI filed a motion for the court to allow the vehicles to remain in its warehouse.14

On December 1, 1998, the ATI filed a Third-Party Claim15 over the shipment, alleging that it had a lien over the vehicles for accumulated and unpaid storage and arrastre charges, and wharfage dues amounting toP13,036,480.94. It prayed that the vehicles be returned and remain with it until payment of said dues. On December 9, 1998, ATI filed a Motion16 seeking to require plaintiffs (third-party defendants) to post a bond to insure payment of its claims against the plaintiffs, or to order the Sheriff to return possession of the vehicles to it.

Plaintiffs opposed the Third-Party Claim of ATI claiming that it failed to allege in its Affidavit of Third-Party Claim any factual and legal basis for its alleged lien and to present documentary evidence to prove the same. ATI has no cause of action against them for wharfage/arrastre services because there was no contract to cover said charges.17

Before the court could resolve the motions, plaintiffs filed a "Motion/Notice to Dismiss/Withdraw Complaint"18against the officials of the Bureau of Customs and Department of Finance, on the ground that said defendants had agreed to the implementation of the writ of replevin issued by the court on condition that plaintiffs pay the taxes, dues, and other charges on the importation amounting to P7,528,635.00 to the government and that plaintiffs had paid the said amount. The OSG opposed the motion, alleging that:

The instant Complaint states that the subject importation is legal. This is a matter which cannot be admitted by defendants simply because the law and the Opinion of the Secretary of Justice are crystal clear. Likewise, all the erroneous statements of law and legal conclusions stated therein cannot be hypothetically admitted.

3. Hence, it is imperative that the Omnibus Motion be resolved first prior to any other incident for the same delves on the very merits of the instant case.

4. The release of the imported right-hand drive buses by the Bureau of Customs cannot make the said importation legal; otherwise, said act will constitute a violation of R.A. No. 8506

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which declares illegal the act of importation of this type of vehicle.

5. The Bureau of Customs was constrained to release the subject vehicles on November 27, 1998 because of this Court’s Order dated November 23, 1998, the last paragraph of which states:

"Chief of PNP General Roberto Lastimoso is ordered to assist the Sheriff in the implementation of its order dated November 11, 1998 and to effect the arrest of persons who would obstruct the implementation of this court’s order."

The overwhelming number of PNP personnel who accompanied the sheriff (there were at least 20 police cars which swarmed over the area), pitied against only three (3) hapless Customs policemen, plus the threat to arrest anyone who would obstruct the implementation of the Order dated November 11, 1998 granting the application for a Writ of Replevin, left the Bureau of Customs with no choice but to allow the release of the subject vehicles.19

On January 13, 1999, ATI filed a Motion for Intervention and for Admission of its Complaint-in-Intervention, alleging that it had a lien on the vehicles to the extent of P13,820,150.93, representing accumulated storage and arrastre charges and wharfage dues. ATI prayed that its Complaint-in-Intervention be admitted, and that after due proceedings judgment be rendered in its favor, thus:

WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be rendered in this Complaint-in-Intervention ordering plaintiffs to pay intervenor:

a) the sum of PESOS THIRTEEN MILLION EIGHT HUNDRED TWENTY THOUSAND ONE HUNDRED FIFTY AND 93/100 (P13,820,150.93), plus legal interest from the date of the filing of this Complaint-in-Intervention.

b) the sum of PESOS ONE HUNDRED THOUSAND (P100,000.00) as and for attorney’s fees; and

c) costs of suit.20

Plaintiffs opposed the motion of ATI on the following grounds: (1) ATI failed to allege and present any contract covering the deposit/storage of the vehicles in its warehouse; (2) ATI has no legal interest over the matter in litigation; and (3) the adjudication of the rights of the parties may be delayed or prejudiced while those of ATI may be protected in a separate proceeding.21

The OSG opposed the motion of the plaintiffs and the notice to dismiss/withdraw the complaint, praying that the court resolve its pending motions.22

On April 27, 1999, the court issued an Order dismissing the complaint on the following grounds:

1. Plaintiffs themselves filed a Motion to Dismiss against Secretary of Finance and Commissioner of Customs.

2. This Court has no jurisdiction over the case. "The Court of Tax Appeals exercises exclusive appellate jurisdiction to review the ruling of the Commissioner in seizure and confiscation cases and that power is to the exclusion of the Court of First Instance which may not interfere with the Commissioner’s decisions x x x"

In view of the foregoing, let this case be as it is hereby ordered Dismissed.

SO ORDERED.23

The OSG filed a motion for reconsideration of the April 27, 1999 Order, and prayed that the court resolve the issue as to who is entitled to the possession of the vehicles as required by Sections 9 and 10, Rule 60 of the Rules of Court. For its part, ATI filed a motion for clarification of the order, alleging that the court failed to resolve its motion. It also pleaded for the court to admit its Complaint-in-Intervention and its motion seeking to require plaintiffs to post a bond to insure payment of its claims for wharfage/arrastre charges.24

On September 23, 1999, the RTC issued its Order dismissing the Complaint-in-Intervention, thus:

Before this Court are the following Motions:

1. Motion for Clarification, and

2. Motion for Reconsideration

The Complaint-in-Intervention of Intervenor - ATI is likewise dismissed, it being only an accessory to the principal case.

Plaintiff Samuel Rosete is hereby ordered to return the possession of the subject buses to Pedro Mendoza, in his capacity as Customs Commissioner of the Bureau of Customs.

SO ORDERED.25

ATI filed a motion for reconsideration, which the court denied on July 31, 2000. While it recognized the arguments of ATI, the court held that its rights could be fully protected in a separate proceeding. It declared that the subject buses were under custodia legis by virtue of the writ of replevin it had issued. However, due to the dismissal of the plaintiffs’ complaint, the subject buses have to be returned to the person who was in custody prior to the implementation of the writ. The motion for reconsideration filed by ATI and the opposition filed by plaintiffs were likewise denied.26

ATI filed a Petition for Certiorari under Rule 65 before the CA, assailing the RTC Orders dated April 27, 1999, September 23, 1999, and July 31, 2000. It raised the following questions:

WHETHER OR NOT THE LOWER COURT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT OUTRIGHTLY DISMISSED THE SUBJECT COMPLAINT FILED BY PRIVATE RESPONDENTS.

WHETHER OR NOT THE LOWER COURT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT DENIED THE MOTION FOR RECONSIDERATION FILED BY THE PETITIONER.

WHETHER OR NOT THE PUBLIC RESPONDENTS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT OUTRIGHTLY DISMISSED THE COMPLAINT-IN-INTERVENTION FILED BY PETITIONER.27

ATI averred that it filed its Complaint-in-Intervention before the RTC dismissing the complaint of private respondents. It pointed out that the dismissal of the main case does not necessarily result in the dismissal of its ancillary action because it has a legal interest in the matter in litigation, that is, it is so situated as to be adversely affected by the distribution or other disposition of the property in question. It thus behooved the court to have ordered respondents to post a bond following its third-party claim over the property for the collection of the wharfage and arrastre fees/charges.

On November 30, 2004, the CA rendered judgment dismissing the petition for lack of merit.28 The appellate court ruled that the RTC had no jurisdiction over the complaint filed by respondents. Under the Customs and Tarriff Code, the Collector of Customs sitting in seizure and forfeiture proceedings had the exclusive jurisdiction to hear and determine all questions relating on the seizure and forfeiture of dutiable goods. The RTC had no review powers over such proceedings; it is the Court of Tax Appeals under RA No. 1125. Since the RTC had no jurisdiction over the main case, it was also bereft of authority to hear the third-party claim or the complaint-in-intervention filed by ATI. Citing Saw v. Court of Appeals,29 the appellate court ruled that intervention was not an independent proceeding but merely an ancillary and supplemental one, which, in the nature of things, is subordinate to the main proceeding unless otherwise provided for by statute or by the Rules of Court. The general rule is that an intervention is limited to the field of litigation open to the original parties. The RTC had dismissed the main action; thus, there was no more principal proceeding in which petitioner ATI may intervene.

ATI filed a motion for reconsideration, which the CA denied through its January 28, 2005 Resolution.30

In the present petition, ATI (now petitioner) raises the following issues:














1. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN DISMISSING THE THIRD-PARTY CLAIM WHICH WAS CONVERTED INTO A COMPLAINT-IN-INTERVENTION BASED ON THE GROUND THAT IT IS ANCILLARY TO THE DISMISSED MAIN ACTION.

2. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN DISMISSING THE THIRD-PARTY CLAIM WHICH WAS CONVERTED INTO A COMPLAINT-IN-INTERVENTION BASED ON THE GROUND THAT THE COURT A QUO HAS NO JURISDICTION OVER THE PRINCIPAL ACTION.

3. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN DISMISSING THE COMPLAINT IN INTERVENTION ON THE BASIS OF THE RULING IN BARANGAY MATICTIC VS. ELBINIAS (148 SCRA 83).31

Citing Metropolitan Bank and Trust Company v. The Presiding Judge, RTC, Manila Branch 39,32 petitioner maintains that the dismissal of the original complaint filed by respondents cannot, in any way, result in the denial of its complaint-in-intervention. It posits that its consent as intervenor is necessary for the dismissal of the main action, and that the original parties cannot "isolate" it and agree, among themselves, to dismiss the complaint. Petitioner asserts that, even if the original complaint was properly dismissed, its complaint-in-intervention survives the original complaint and may proceed as long as the existence of an actual controversy had been established by the pleadings. It insists that the intervention has to be heard regardless of the disposition of the principal action.

Petitioner submits that even on the assumption that the lower court has no jurisdiction over the principal action, the third-party complaint may still be maintained.

Petitioner further contends that the appellate court erred in relying on Barangay Matictic v. Elbinias33 because in that case, the third-party-complaint was filed after the decision in the main case had already become final, whereas, in the present case, the third-party claim and third-party complaint before the RTC dismissed respondents’ action. Petitioner maintains that the Metropolitan case is thus applicable, and points out that the Court therein ruled that the complaint-in-intervention should be preserved regardless of the outcome of the original complaint.

For their part, respondents assert that the CA decision is in accord with the Rules of Court.

We are thus tasked to resolve the issue of whether the CA erred in dismissing the petition for certiorari of the petitioner.

The petition is denied for lack of merit.

We rule that the trial court acted in accordance with the Tariff and Customs Code (TCC) and the rulings of this Court when it issued the assailed Orders.

Section 602 of the TCC provides that the Bureau of Customs shall exercise exclusive jurisdiction over seized and forfeited cars. It is tasked to enforce tariff, and supervise and control customs law and all other laws, rules and regulations relating to the tariff and customs administration; and to supervise and control all import and export cargoes, loaded or stored in piers, terminal facilities, including container yards and freight stations, for the protection of government revenues. Under Section 2301 of the TCC, the Collector of Customs is empowered to make a seizure of cargoes and issue a receipt for the detention thereof:

SEC. 2301. Warrant for Detention of Property-Cash Bond. – Upon making any seizure, the Collector shall issue a warrant for the detention of the property; and if the owner or importer desires to secure the release of the property for legitimate use, the Collector shall, with the approval of the Commissioner of Customs, surrender it upon the filing of a cash bond, in an amount to be fixed by him, conditioned upon the payment of the appraised value of the article and/or any fine, expenses and costs which may be adjudged in the case: Provided, That such importation shall not be released under any bond when there is a prima facie evidence of fraud in the importation of the article: Provided further, That articles the importation of which is prohibited by law shall not be released under any circumstance whomsoever, Provided, finally, That nothing in this section shall be construed as relieving the owner or importer from any

criminal liability which may arise from any violation of law committed in connection with the importation of the article. (emphasis supplied)

Section 2530 of the TCC enumerates the properties subject of seizure and forfeiture:

Section 2530. Property Subject of Forfeiture Under Tariff and Customs Laws.— Any vehicle, vessel or aircraft, cargo, article and objects shall, under the following conditions be subject to forfeiture:

x x x x

(f) Any article the importation or exportation of which is effected or attempted contrary to law, or any article of prohibited importation or exportation, and all other articles which, in the opinion of the Collector, have been used, are or were entered to be used as instruments in the importation or exportation of the former.

As the Court ruled in Jao v. Court of Appeals,34 Regional Trial Courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings. It is the Collector of Customs, sitting in seizure and forfeiture proceedings, who has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The Regional Trial Courts are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus. The Court further explained:

It is likewise well-settled that the provisions of the Tariff and Customs Code and that of Republic Act No. 1125, as amended, otherwise known as "An Act Creating the Court of Tax Appeals," specify the proper fora and procedure for the ventilation of any legal objections or issues raised concerning these proceedings. Thus, actions of the Collector of Customs are appealable to the Commissioner of Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax Appeals and from there to the Court of Appeals.

The rule that Regional Trial Courts have no review powers over such proceedings is anchored upon the policy of placing no unnecessary hindrance on the government’s drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform.35

Thus, the RTC had no jurisdiction to take cognizance of the petition for replevin by respondents herein, issue the writ of replevin and order its enforcement. The Collector of Customs had already seized the vehicles and set the sale thereof at public auction. The RTC should have dismissed the petition for replevin at the outset. By granting the plea of respondents (plaintiffs below) for the seizure of the vehicles and the transfer of custody to the court, the RTC acted without jurisdiction over the action and the vehicles subject matter thereof. It bears stressing that the forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods and not against the owner. It is in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination of the legality of their importation. In this proceeding, it is, in legal contemplation, the property itself which commits the violation and is treated as the offender, without reference whatsoever to the character or conduct of the owner.36

In fine, the initial orders of the RTC granting the issuance of the writ of replevin and its implementation are void.37While it is true that the District Collector of Customs allowed the release of the vehicles and the transfer thereof to the custody of the RTC upon the payment by the private respondents of the required taxes, duties and charges, he did not thereby lose jurisdiction over the vehicles; neither did it vest jurisdiction on the RTC to take cognizance of and assume jurisdiction over the petition for replevin. As very well explained by the Office of the Solicitor General, the District Collector of Customs agreed to transfer the vehicles to the custody of the RTC since the latter had ordered the arrest of those who would obstruct the implementation of the writ. The District Collector of Customs had yet to resolve whether to order the vehicles forfeited in favor of the government, in light of the opinion of the Secretary of Justice that, under RA No. 8506, the importation was illegal.









The RTC cannot be faulted for dismissing petitioner’s complaint-in-intervention. Considering that it had no jurisdiction over respondents’ action and over the shipment subject of the complaint, all proceedings before it would be void.38 The RTC had no jurisdiction to take cognizance of the complaint-in-intervention and act thereon except to dismiss the same. Moreover, considering that intervention is merely ancillary and supplemental to the existing litigation and never an independent action,39 the dismissal of the principal action necessarily results in the dismissal of the complaint-in-intervention. Likewise, a court which has no jurisdiction over the principal action has no jurisdiction over a complaint-in-intervention. Intervention presupposes the pendency of a suit in a court of competent jurisdiction.40 Jurisdiction of intervention is governed by jurisdiction of the main action.41

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Court of Appeals Decision in CA-G.R. SP No. 61562 is AFFIRMED.

SO ORDERED.

SECTION 2

THIRD DIVISION

G.R. No. 61508 March 17, 1999

Citibank, N.A. (Formerly First National City Bank), petitioner, vs.The Honorable Court of Appeals and Douglas F. Anama, respondents.

PURISIMA, J.:

At bar is a special civil action for certiorari with prayer for a temporary restraining order faulting the Court of Appeals 1 with grave abuse of discretion for nullifying the lower court's order of seizure of mortgaged properties subject of a case for sum of money and replevin.

The facts leading to the institution of the case are as follows:

In considering for a loan obtained from Citibank, N.A. (formerly First National City Bank), the defendant (private respondent herein) Douglas Anama executed a promissory note, dated November 10, 1972, 2 to pay the plaintiff bank the sum of P418,000.00 in sixty (60) equal successive monthly installments of P8,722.25, starting on the 10th day of December 1972 and on the 10th of every month thereafter. The said Promissory Note stipulated further that:

(a) the loan is subject to interest at the rate of twelve percent (12%) per annum;

(b) the promissory note and the entire amount therein stated shall become immediately due and payable without notice or demand upon —

(aa) default in the payment of any installment of principal or interest at the time when the same is due;

(bb) the occurrence of any change in the condition and affairs of the defendant, which in the opinion of the plaintiff shall increase its credit risk;

(c) the defendant agrees to pay all costs, expenses, handling and insurance charges incurred in the granting of the loan;

(d) in case the services of a lawyer is made necessary for collection, defendant shall be liable for attorney's fees of at least ten percent (10%) of the total amount due. 3

To secure payment of the loan, private respondent Anama also constituted a Chattel Mortgage of even date in favor of petitioner, on various machineries and equipment located at No. 1302 Epifanio delos Santos Avenue, Quezon City, under the following terms and conditions:

(a) The machineries and equipment subject of the mortgage, stand as security for defendant's account.

(b) All replacement, substitutions, additions, increases and accretions to the properties mortgaged shall also be subject to the mortgage.

(c) The defendant appoints the plaintiff as his attorney-in-fact with authority to enter the premises of the defendant and take actual possession of the mortgaged chattels without any court order, to sell said property to any party.

(d) All expenses in carrying into effect the stipulations therein shall be for the account of the defendant and shall form part of the amount of the obligation secured by the mortgage.

(e) In case the plaintiff institutes proceedings for the foreclosure of the mortgage, the plaintiff shall be entitled to the appointment of a receiver without a bond.

(f) In case of default, the defendant shall be liable for attorney's fees and cost of collection in the sum equal to twenty-five (25%) of the total amount of the indebtedness outstanding and unpaid. 4

On November 25, 1974, for failure and refusal of the private respondent to pay the monthly installment due under the said promissory note since January 1974, despite repeated demands, petitioner filed a verified complaint against private respondent Anama for the collection of his unpaid balance of P405,820.52 on the said promissory note, for the delivery and possession of the chattels covered by the Chattel Mortgage preparatory to the foreclosure thereof as provided under Section 14 of the Chattel Mortgage Law, docketed as Civil Case No. 95991 before the then Court of First Instance of Manila.

On February 20, 1975, the defendant Anama submitted his Answer with Counterclaim, denying the material averments of the complaint, and averring inter alia (1) that the remedy of replevin was improper and the writ of seizure should be vacated; (2) that he signed the promissory note for P418,000.00 without receiving from plaintiff Citibank any amount, and was even required to pay the first installment on the supposed loan in December 1974; (3) that the understanding between him and the Citibank was for the latter to release to him the entire loan applied for prior to and during the execution of his promissory note, but Citibank did not do so and, instead, delayed the release of any amount on the loan even after the execution of the promissory note thereby disrupting his timetable of plans and causing him damages; (4) that the amount released by Citibank to him up to the present was not the amount stated in the promissory note, and his alleged default in paying the installment on the loan was due to the delay in releasing the full amount of the loan as agreed upon; (5) that the macheniries and equipment described in the chattel mortgage executed by him are really worth more than P1,000,000.00 but he merely acceded to the valuation thereof by Citibank in said document because of the latter's representation that the same was necessary to speed up the granting of the loan applied for by him; (6) that the properties covered by said chattel mortgage are real properties installed in a more or less permanent nature at his (defendant's) premises in Quezon City, as admitted by Citibank in said mortgage document; (7) that the mortgage contract itself stipulated that the manner and procedure for affecting the sale or redemption of the mortgage properties, if made extrajudicial, shall be governed by Act No. 1508 and other pertinent laws which all pertain to real properties; and (8) that because of the filing of this complaint without valid grounds therefor, he suffered damages and incurred attorney's fees; the defendant, now private respondent, averred.

On December 2, 1974, the trial court upon proof of default of the private respondent in the payment of the said loan, issued an Order of Replevin over the macheneries and equipment covered by the Chattel Mortgage.

However, despite the issuance of the said order of seizure of subject chattels, actual delivery of possession thereof to petitioner did not take place because negotiations for an amicable settlement between the parties were encouraged by the trial court.

On March 24, 1975, a pre-trial conference was held and the lower court issued an order for joint management by the petitioner and the private respondent of the latter's business for ten (10) days, after which the former would appointed receiver for the said business.

On April 1, 1975, the petitioner took over private respondent's business as receiver. When further proposals to settle the case amicably failed, the lower court proceeded to try the case on the merits.

On January 29, 1977, petitioner presented a Motion for the Issuance of an Alias Writ of Seizure, ordering the sheriff to seize the properties involved and dispose of them in accordance with the Revised Rules of Court. The lower court then gave private respondent five (5) days to oppose the said motion and on February 22, 1977, he sent in his






opposition thereto on the grounds: (1) that Citibank's P400,000 replevin bond to answer for damages was grossly inadequate because the market value of the properties involved is P1,710,000 and their replacement cost is P2,342,300.00 per the appraisal report of the Appraisal and Research Corp.; (2) that he was never in default to justify the seizure; (3) that the Civil Case No. 18071 of the Court of First Instance, entitled Hernandes vs.Anama, et al., which, according to Citibank, supposedly increased its credit risk in the alleged obligation, had already been dismissed as against him and the case terminated with the dismissal of the complaint against the remaining defendant, First National City Bank, by the Court in its orders of January 12, 1977 and February 7, 1977; (4) that his (defendant's) supposed obligations with Citibank were fully secured and his mortgaged properties are more than sufficient to secure payment thereof; and (5) that the writ of seizure if issued would stop his business operations and contracts and expose him to lawsuits from customers, and also dislocate his employees and their families entirely dependent thereon for their livelihood.

On February 28, 1977, acting on the said Motion and private respondent's opposition, the trial court issued an Order granting the Motion for Alias Writ of Seizure, ruling thus:

WHEREFORE, the motion for alias writ of seizure is hereby granted. At any rate, this Order gives another opportunity for defendant and the intervenor who claims to be a part owner to file a counterbond under Sec. 60 of Rules of Court. 5

Private respondent moved for reconsideration of the aforesaid order but the same was denied by the Resolution of March 18, 1977, to wit:

In view of the foregoing, the motion for reconsideration is hereby denied.

At any rate, as already stated, the defendant has still a remedy available which is to file a bond executed to the plaintiff in double the value of the properties as stated in the plaintiff's affidavit. The Court at this instance therefore has no authority to stop or suspended the writ of seizure already ordered. 6

Accordingly, by virtue of the Alias writ of Seizure, petitioner took possession of the mortgaged chattels of private respondent. As a consequence, the sheriff seized subject properties, dismantled and removed them from the premises where they were installed, delivered them to petitioner's possession on March 17, 18 and 19, 1977 and advertised them for sale at public auction scheduled on March 22, 1977.

On March 21, 1977, private respondent filed with the Court of Appeals a Petition for Certiorari and Prohibition 7with Injunction to set aside and annul the questioned resolution of the trial court on the ground that they were issued "in excess of jurisdiction and with grave abuse of discretion" because of the "lack of evidence and clear cut right to possession of First National City Bank (herein petitioner)" top the machineries subject of the Chattel Mortgage.

On July 30, 1982, finding that the trial court acted with grave abuse of discretion amounting to excess of lack of jurisdiction in issuing the assailed resolutions, the Court of Appeals granted petition, holding that the provision of the Rules of Court on Replevin and Receivership have not been complied with, in that (1) there was no Affidavit of Merit accompanying the Complaint for Replevin; (2) the bond posted by Citibank was insufficient; and (3) there was non-compliance with the requirement of a receiver's bond and oath of office. The decretal portion of the assailed decision of the Court of Appeals, reads:

WHEREFORE, the petition is granted. The questioned resolutions issues by the respondent judge in Civil Case No. 95991, dated February 28, 1977 and March 18, 1977, together with the writs and processes emanating or deriving therefrom, are hereby declare null and void ab initio.

The respondent ex-officio sheriff of Quezon City and the respondent First National City Bank are hereby ordered to return all the machineries and equipment with their accessories seized, dismantled and hauled, to their original and respective places and position in the shop flooring of the petitioner's premises where these articles were, before they were dismounted, seized and hauled at their own expense. The said respondents are further ordered

to cause the repair of the concrete foundations destroyed by them including the repair of the electrical wiring and facilities affected during the seizure, dismanting and hauling.

The writ of preliminary injunction heretofore in effect is hereby made permanent. Costs against the private respondents.

SO ORDERED 8

Therefrom, Citibank came to this Court via its present petition for certiorari, ascribing grave abuse of discretion to the Court of Appeals and assigning as errors, that:

I

THE RESPONDENT COURT ERRED IN PRACTICALLY AND IN EFFECT RENDERING JUDGMENT ON THE MERITS AGAINST THE HEREIN PETITIONER BY ORDERING THE RETURN OF THE MACHINERIES AND EQUIPMENT AND ITS ACCESSORIES TO THEIR ORIGINAL AND RESPECTIVE PLACES AND POSITIONS.

II

THE RESPONDENT COURT ERRED IN FINDING THAT THE COMPLAINT OF THE PETITIONER DID NOT COMPLY WITH THE PROVISIONS OF SEC. 2, RULE 60 OF THE RULES OF COURT.

III

THAT THE RESPONDENT COURT ERRED IN FINDING THAT THE BOND POSTED BY THE PETITIONER IS QUESTIONABLE AND/OR INSUFFICIENT.

IV

THE RESPONDENT COURT ERRED IN FINDING THAT THE PETITIONER DID NOT COMPLY WITH THE PROVISIONS OF SEC. 5, RULE 59 BY FAILING TO POST A RECEIVER'S BOND.

V

THE RESPONDENT ERRED IN FINDING THAT THE HON. JORGE R. COQUIA ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN DEALING WITH THE SITUATION.

I

Anent the first assigned error, petitioner contends that the Court of Appeals, by nullifying the writ of seizure issued below, in effect, rendered judgment on the merits and adjudged private respondent Anama as the person lawfully entitled to the possession of the properties subject of the replevin suit. It is theorized that the same cannot be done, as the case before the court below was yet at trial stage and lower court still had to determine whether or not private respondent was in fact in default in the payment of his obligation to petitioner Citibank, which default would warrant the seizure of subject machineries and equipment.

The contention is untenable. A judgment is on the merits when it determines the rights and liabilities of the parties on the basis of the disclosed facts, irrespective of formal technical or dilatory objections, and it is not necessary that there should have been a trial. 9 The assailed decision of the Court of Appeals did not make any adjudication on the rights and liabilities between Citibank and Douglas Anama. There was no finding yet of the fact of default. The decision only ruled on the propriety of the issuance of the writ of seizure by the trial court. As worded by the respondent court itself, "the main issues to be resolved are whether there was lack or excess of jurisdiction, or grave abuse of discretion, in the issuance of the orders in question, and there is no appeal nor


any plain, speedy, and adequate remedy in the ordinary course of law." 10

In resolving the issue posed by the petition, the Court of Appeals limited its disposition to a determination of whether or not the assailed order of seizure was issued in accordance with law, that is, whether the provisions of the Rules of Court on delivery of personal property or replevin as a provisional remedy were followed. The Court of Appeals relied on Ruled 60 of the Rules of Court, which prescribed the procedure for the recovery of possession of personal property, which Rule, provides:

Sec. 2. Affidavit and Bond. — Upon applying or such order the plaintiff must show by his own affidavit or that of some other person who personally knows the facts:

(a) That the plaintiff is the owner of the property claimed particularly describing it, or is entitled to the possession thereof;

(b) That the property is wrongfully detained by the defendant, alleging the cause of detention thereof according to his best of knowledge, information and belief;

(c) That it has nor been taken for a tax assessment or fine pursuant to law, or seized under an execution, or an attachment against the property of the plaintiff, or is so seized, that is exempt from such seizure; and

(d) The actual value of the property.

The plaintiff must also give a bond, executed to the defendant in double of the value of the property as stated in the affidavit aforementioned, for the property to the defendant of such sum as he may recover from the plaintiff in the action.

The Court of Appeals did not pass upon the issue of who, as between Douglas Anama and Citibank, is entitled to the possession of subject machineries, as asserted by the latter. When it ordered the restoration of the said machineries to Douglas Anama (now the private respondent), it merely defendant to the possession of his properties, since there was a finding that the issuance of the writ was not in accordance with the specific rules of the Rules of Court.

II

In its second assignment of errors, petitioner theorizes that the Court of Appeals erred in finding that it did not comply with Section 2, Rule 60 of the Rules of Court requiring the replevin plaintiff to attach an affidavit of merit to the compliant.

Petitioner maintains that although there was no affidavit of merit accompanying its complaint, there was nonetheless substantial compliance with the said rule as all that is required to be alleged in the affidavit of merit was set forth in its verified complaint. Petitioner argues further that assuming arguendo that there was non-compliance with the affidavit of merit requirement, such defense can no longer be availed of by private respondent Anama as it was not alleged in his Answer and was only belatedly interposed in his Reply to the Petitioner's Comment on the Petitioner for Certiorari before the Court of Appeals.

Petitioner is correct insofar as it contends that substantial compliance with the affidavit requirement may be permissible. There is substantial compliance with the rule requiring that an affidavit of merit to support the complaint for replevin if the complaint itself contains a statements of every fact required to be stated in the affidavit of merit and the complaint is verified like an affidavit. On the matter of replevin, Justice Vicente Francisco's Comment on the Rules of Court, states:

Although the better practice is to keep the affidavit and pleading separate, if plaintiff's pleading contains

a statement of every fact which the statute requires to be shown in the affidavits, and the pleading is verified by affidavit covering every statement therein, this will be sufficient without a separate affidavit; but in no event can the pleading supply the absence of the affidavit unless all that the affidavit is required to contain is embodied in the pleading, and the pleading is verified in the form required in the case of a separate affidavit. (77 CJS 65 cited in Francisco, Rules of Court of the Philippines, Vol. IV-A, p. 383)

And similarly, in the case of an attachment which likewise requires an affidavit of merit, the Court held that the absence of an affidavit of merit is not fatal where the petition itself, which is under oath, recites the circumstances or facts constitutive of the grounds for the petition. 11

The facts that must be set forth in the affidavit of merit are (1) that plaintiff owns the property particularly describing the same, or that he is entitled to its possession; (2) wrongful detention by defendants of said property; (3) that the property is not taken by virtue of a tax assessment or fine pursuant to law or seized under execution or attachment or, if it is so seized, that it is exempt from seizure; and the, (4) the actual value of the property. 12

But, as correctly taken note of by the Court of Appeals, petitioner's complaint does not allege all the facts that should be set forth in an affidavit of merit. Although the complaint alleges that petitioner is entitled to the possession of subject properties by virtue of the chattel mortgage executed by the private respondent, upon the latter's default on its obligation, and the defendant's alleged "wrongful detention" of the same, the said complaint does not state that subject properties were not taken by virtue of a tax assessment or fine imposed pursuant to law or seized under execution or attachment or, if they were so seized, that they are exempt from such seizure.

Then too, petitioner stated the value of subject properties at a "probable value of P200,000.00, more or less". Pertinent rules require that the affidavit of merit should state the actual value of the property subject of a replevin suit and not just its probable value. Actual value (or actual market value) means "the price which an article would command in the ordinary course of business, that is to say, when offered for sale by one willing to sell, but not under compulsion to sell and purchased by another who is willing to buy, but under no obligation to purchase it".13 Petitioner alleged that the machineries and equipment involved are valued at P200,000.00 while respondent denies the same, claiming that per the appraisal report, the market value of the said properties is P1,710,000.00 and their replacement cost is P2,342,300.00. Petitioner's assertion is belied by the fact that upon taking possession of the aforesaid properties, it insured the same for P610,593.74 and P450,000.00, separately. It bears stressing that the actual value of the properties subject of a replevin is required to be in the affidavit because such actual value will be the basis of the replevin bond required to be posted by the plaintiff. Therefore, when the petitioner failed to declare the actual value of the machineries and equipment subject of the replevin suit, there was non-compliance with Section 2, Rule 60 of the Revised Rules of Court.

It should be noted, however, that the private respondent interposed the defense of lack of affidavit of merit only in his Reply to the Comment of Citibank on the Petition for Certiorari which respondent filed with the Court of Appeals. Section 2, Rule 9 of the Revised Rules of Court, provides:

Sec. 2. Defenses and objections not pleaded deemed waived — Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived; except the failure to state a cause of action which may be alleged in later pleading, . . . .

This Rule has been revised and amended, as follows:

Sec. 1. Defenses and objection not pleaded. — Defenses and objections not pleaded in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim.


Thus, although respondent's defense of lack of affidavit of merit is meritorious, procedurally, such a defense is no longer available for failure to plead the same in the Answer as required by the omnibus motion rule.

III

Petitioner also faults the Court of Appeals for finding that the bond posted by the petitioner is questionable and/or insufficient. It is averred that, in compliance with Section 2, Rule 60 requiring the replevin plaintiff to post a bond in double the value of the properties involved, it filed a bond in the amount P400,000.00 which is twice the amount of P200,000.00 declared in its complaint.

The Court reiterates its findings on the second assignment of errors, particularly on the issue of the actual of subject properties as against their probable value. Private respondent, at the onset, has put into issues the value of the said properties. In the Special Defenses contained in his Answer, private respondent averred:

That while defendant admits that he executed a Chattel Mortgage in favor of plaintiff, he vigorously denies that the machineries covered therein are worth P200,000.00. The fact is that plaintiff knew fully well that said chattels are worth no less than P1,000,000.00, said defendant having acceded to said valuation upon plaintiff's representation that it would be necessary to speed up the granting of the loan.

As here was a disagreement on the valuation of the properties in the first place, proper determination of the value of the bond to be posted by the plaintiff cannot be sufficiently arrived at. Though the rules specifically require that the needed bond be double the value of the properties, since plaintiff merely denominated a probable value of P200,000.00 and failed to aver the properties' actual value, which is claimed to be much greater than that declared by plaintiff, the amount of P400,000.00 would indeed be insufficient as found by the Court of Appeals. The Rules of Court requires the plaintiff to "give a bond, executed to the defendant in double the value of the property as stated in the affidavit . . . ." Hence, the bond should be double the actual value of the properties involved. In this case, what was posted was merely an amount which was double the probable value as declared by the plaintiff and, therefore, inadequate should there be a finding that the actual value is actually far greater than P200,000.00. Since the valuation made by the petitioner has been disputed by the respondent, the lower court should have determined first the actual value of the properties. It was thus as error for the said court to approve the bond, which was based merely on the probable value of the properties.

It should be noted that a replevin bond is intended to indemnify the defendant against any loss that he may suffer by reason of its being compelled to surrender the possession of the disputed property pending trial of the action. 14 The same may also be answerable for damages if any when judgment is rendered in favor of the defendant or the party against whom a writ of replevin was issued and such judgment includes the return of the property to him. 15 Thus, the requirement that the bond be double the actual value of the properties litigated upon. Such is the case because the bond will answer for the actual loss to the plaintiff, which corresponds to the value of the properties sought to be recovered and for damages, if any.

Petitioner also maintains that, assuming for the sake of argument that its replevin bond was grossly inadequate or insufficient, the recourse of the respondent should be to post a counterbound or a redelivery bond as provided under Section 5 of Rule 60.

Sec. 5 and 6, Rule 60 of the Rules of Court, read:

Sec. 5. Return of property. — If the defendant objects to the sufficient of the plaintiff's bond, or of the surety or sureties thereon, he cannot require the return of the property as in this section provided; but if he does not so object, he may, at any time before the delivery of the property to the plaintiff, if such delivery be adjudge, and for the payment of such sum to him as may be recovered against the defendant, and by serving a copy of such bond on the plaintiff or his attorney.

Sec. 6. Disposition of property by officer. — If within five (5) days after the taking of the property by the

officer, the defendant does not object to the sufficiecy of the bond, or of the surety or sureties thereon, or require the return of the property as provided in the last preceding section; or if the defendant so objects, and the plaintiff's first or new bond is approved; or if the defendant so require, and his bond is object to and found insufficient and he does not forthwith file an approved bond, the property shall be delivered to the plaintiff, the officer must return it to the defendant.

The Court held in a prior case 16 that the remedies provided under Section 5, Rule 60, are alternative remedies. ". . . If a defendant in a replevin action wishes to have the property taken by the sheriff restored to him, he should, within five days from such taking, (1) post a counter-bond in double the value of said property, and (2) serve plaintiff with a copy thereof, both requirements as well as compliance therewith within the five-day period mentioned — being mandatory." 17 This course of action is available to the defendant for as long as he does not object to the sufficiency of the plaintiff's bond.

Conformably, a defendant in a replevin suit may demand the return of possession of the property replevined by filing a redelivery bond executed to the plaintiff in double the value of the property as stated in the plaintiff's affidavit within the period specified in Section 5 and 6.

Alternatively, "the defendant may object to the sufficiency of the plaintiff's bond, or of the surety or sureties thereon;" but if he does so, "he cannot require the return of the property" by posting a counter-bond pursuant to Section 5 and 6. 18

In the case under consideration, the private respondent did not opt to cause redelivery of the properties to him by filing a counter-bond precisely because he objected to the sufficiency of the bond posted by plaintiff. Therefore, he need not file a counter-bond or redelivery bond. When such objection was not given due course in the court below — when, instead of requiring the plaintiff to post a new bond, the court approved the bond in the amount of P400,000.00, claimed by respondent to be insufficient, and ordered the seizure of the properties — recourse to a petition for certiorari before the Court of Appeals assailing such order is proper under the circumstances.

IV

As its fourth assignment of errors, petitioner contends that the Court of Appeals made an error of judgment in finding that the petitioner did not comply with the provisions of Section 5, Rule 59 by failing to post a receiver's bond. Petitioner contends that although it is in agreement with the Court of Appeals that a receiver's bond is separate and distinct from a replevin bond, under the circumstances it was not required to file a receiver's bond because it did not assume receivership over the properties. It is further argued that assuming that it did assume receivership, the Chattel Mortgage expressly provides, that:

In case the MORTGAGEE institutes proceedings, judicially or otherwise, for the foreclosure of this Chattel Mortgage, or to enforce any of its rights hereunder, the MORTGAGEE shall be entitled as a matter of right to the appointment of a receiver, without bond, of the mortgaged properties and of such properties, real or personal, claims and rights of the MORTGAGOR as shall be necessary or proper to enable the said receiver to property control and dispose of the mortgaged properties. 19

The order of the trial court dated March 24, 1975 provided, among others, that the properties shall be under joint management for a period of ten days, after which period "the bank, by virtue of the stipulations under the chattel mortgage, becomes the Receiver to perform all the obligations as such Receiver" and "in the event that the bank decides not to take over the receivership, the joint management continues." 20

From the evidence on record, it is palpably clear that petitioner Citibank did, in fact, assume receivership. A letter21 dated April 1, 1975 sent by petitioner to the private respondent, reads:

Anama Engineering Service Group

114 R. Lagmay Street

San Juan, Rizal


Attention: Mr. Douglas Anama

Gentlemen:

Pursuant to the Court order, we have decided to take over your machine shop as Receiver.

We are hereby appointing Mr. Artemio T. Gonzales as our representative.

Petitioner cannot therefore deny that nine days after the trial court issued the order of receivership, it informed he private respondent that it would, as it did, assume receivership.

The Court of Appeals found that the requirements of Section 5, Rule 59 on receivership were not complied with by the petitioner, particularly the filing or posting of a bond and the taking of an oath.

It should be noted that under the old Rules of Court which was in effect at the time this case was still at trial stage, a bond for the appointment of a receiver was not generally required of the applicant, except when the application was ex parte. 22 Therefore, petitioner was not absolutely required to file a bond. Besides, as stipulated in the chattel mortgage contract between the parties, petitioner, as the mortgagee, is entitled to the appointment of a receiver without a bond.

However, the Court of Appeals was right in finding a defect in such assumption of receiver in that the requirement of taking an oath has not been complied with Section 5, Rule 59, states:

Sec. 5. Oath and bond of receiver. — Before entering upon his duties, the receiver must be sworn to perform them faithfully, and must file a bond, executed to such person and in such sum as the court or judge may direct, to the effect that he will faithfully discharge the duties of receiver in the action and obey the orders of the court therein.

Consequently, the trail court erred in allowing the petitioner to assume receivership over the machine shop of private respondent without requiring the appointed receiver to take an oath.

V

In light of the foregoing, the answer to the fifth assignment of errors is in the negative. For erroneously issuing thealias writ of seizure without inquiring into the sufficiency of the replevin bond and for allowing petitioner to assume receivership without the requisite oath, the Court of Appeals aptly held that the trial court acted with grave abuse of discretion in dealing with situation.

Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the plaintiff. 23 This is because a possessor has every right to respected in its possession and may not be deprived of it without due process. 24

As enunciated by this Court in the case of Filinvest Credit Corporation vs. Court of Appeals, 25

The reason why the law does not allow the creditor to possess himself of the mortgaged property with violence and against the will of the debtor is to be found in the fact that the creditor's right of possession is conditioned upon the fact of default, and the existence of this fact may naturally be the subject of controversy. The debtor, for instance, may claim in good faith, and rightly or wrongly, that the debt is paid, or that for some other reason the alleged default is nonexistent. His possession in this situation is as fully entitled to protection as that of any other person, and in the language of Article 446 of the Civil Code, he must be respected therein. To allow the creditor to seized the property against the will of the debtor would make the former to a certain extent both judge and executioner in his own cause — a thing which is inadmissible in the absence of unequivocal agreement in the contract itself or express provision to the effect in the statute.

WHEREFORE, for lack of merit, the petition is hereby DISMISSED. No pronouncement as to costs.

SO ORDERED.

THIRD DIVISION

G.R. No. 110048 November 19, 1999

SERVICEWIDE SPECIALISTS, INC., petitioner, vs.COURT OF APPEALS, HILDA TEE, & ALBERTO M. VILLAFRANCA, respondents.

PURISIMA, J.:

This is a petition for review on certiorari under Rule 45 of Decision of the Court of Appeals 1 in CA-G.R. CV No. 19571, affirming the judgment of the Regional Trial Court of Manila, Branch XX, dismissing Civil Case No. 84-25763 for replevin and damages.

The litigation involves a motor vehicle, a Colt Galant, 4-door Sedan automobile, with Motor No. 2E-08927, Serial No. A112A-5297, Model No. 1976.

The appellate court culled the facts that matter as follows: 2

On May 14, 1976, Leticia L. Laus of Quezon City purchased on credit a Colt Galant . . . from Fortune Motors (Phils.) Corporation. On the same date, she executed a promissory note for the amount of P56,028.00, inclusive of interest at 12% per annum, payable within a period of 48 months starting August, 1976 at a monthly installment of P1,167.25 due and demandable on the 17th day of each month (Exhibit "A", pp. 144, Orig. Records,). It was agreed upon, among others, that in case of default in the payment of any installment the total principal sum, together with the interest, shall become immediately due and payable (Exhibit "A"; p. 144, Orig. Records). As a security for the promissory note, a chattel mortgage was constituted over the said motor vehicle (Exhibit "B", ibid.), with a deed of assignment incorporated therein such that the credit and mortgage rights were assigned by Fortune Motors Corp. in favor of Filinvest Credit Corporation with the consent of the mortgagor-debtor Leticia Laus (Exhibits "B-1" and "B-2", p. 147, ibid.). The vehicle was then registered in the name of Leticia L. Laus with the chattel mortgage annotated on said certificate. (Exhibit "H"; p. 154, ibid.)

On September 25, 1978, Filinvest Credit Corporation in turn assigned the credit in favor of Servicewide Specialists, Inc. (Servicewide, for brevity) transferring unto the latter all its rights under the promissory note and the chattel mortgage (Exhibit "B-3", p. 149, ibid.) with the corresponding notice of assignment sent to the registered car owner (Exhibit "C"; p. 150, ibid.).

On April 18, 1977, Leticia Laus failed to pay the monthly installments for that month. The installments for the succeeding 17 months were not likewise fully paid, hence on September 25, 1978, pursuant to the provisions of the promissory note, Servicewide demanded payment of the entire outstanding balance of P46,775.24 inclusive of interests (Exhibits "D" and "E"; pp. 151-152, ibid.). Despite said formal demand, Leticia Laus failed to pay all the monthly installments due until July 18, 1980.

On July 25, 1984, Servicewide sent a statement of account to Leticia Laus and demanded payment of the amount of P86,613.32 representing the outstanding balance plus interests up to July 25, 1985, attorney's fees, liquidated damages, estimated repossession expense, and bonding fee (Exhibit "F"; p. 153, ibid.)


As a result of the failure of Leticia Laus to settle her obligation, or at least to surrender possession of the motor vehicle for the purpose of foreclosure, Servicewide instituted a complaint for replevin, impleading Hilda Tee and John Dee in whose custody the vehicle was believed to be at the time of the filing of the suit.

In its complaint, plaintiff alleged that it had superior lien over the mortgaged vehicle; that it is lawfully entitled to the possession of the same together with all its accessories and equipments; (sic) that Hilda Tee was wrongfully detaining the motor vehicle for the purpose of defeating its mortgage lien; and that a sufficient bond had been filed in court. (Complaint with Annexes, pp. 1-13, ibid.). On July 30, 1984, the court approved the replevin bond (p. 20, ibid.)

On August 1, 1984, Alberto Villafranca filed a third party claim contending that he is the absolute owner of the subject motor vehicle duly evidenced by the Bureau of Land Transportation's Certificate of Registration issued in his name on June 22, 1984; that he acquired the said mother vehicle from a certain Remedios D. Yang under a Deed of Sale dated May 16, 1984; that he acquired the same free from all lien and emcumbrances; and that on July 30, 1984, the said automobile was taken from his residence by Deputy Sheriff Bernardo Bernabe pursuant to the seizure order issued by the court a quo.

Upon motion of the plaintiff below, Alberto Villafranca was substituted as defendant. Summons was served upon him. (pp. 55-56, ibid).

On March 20, 1985, Alberto Villafranca moved for the dismissal of the complaint on the ground that there is another action pending between the same parties before the Regional Trial Court of Makati, Branch 140, docketed as Civil Case No. 8310, involving the seizure of subject motor vehicle and the indemnity bond posted by Servicewide (Motion to Dismiss with Annexes; pp. 57-110, ibid.) On March 28, 1985, the court granted the aforesaid motion (p. 122, ibid.), but subsequently the order of dismissal was reconsidered and set aside (pp. 135-136, ibid.). For failure to file his Answer as required by the court a quo, Alberto Villafranca was declared in default and plaintiff's evidence was received ex parte.

On December 27, 1985, the lower court rendered a decision dismissing the complaint for insufficiency of evidence. Its motion for reconsideration of said decision having been denied, . . . .

In its appeal to the Court of Appeals, petitioner theorized that a suit for replevin aimed at the foreclosure of a chattel is an action quasi in rem, and does not require the inclusion of the principal obligor in the Complaint. However, the appellate court affirmed the decision of the lower Court; ratiocinating, thus:

A cursory reading, however, of the Promissory Note dated May 14, 1976 in favor of Fortune Motors (Phils.) Corp. in the sum of P56,028.00 (Annex "A" of Complaint, p. 7, Original Records) and the Chattel Mortgage of the same date (Annex "B" of Complaint; pp. 8-9, ibid.) will disclose that the maker and mortgagor respectively are one and the same person: Leticia Laus. In fact, plaintiff-appellant admits in paragraphs (sic) nos. 2 and 3 of its Complaint that the aforesaid public documents (Annexes "A" and "B" thereof) were executed by Leticia Laus, who, for reasons not explained, was never impleaded. In the case under consideration, plaintiff-appellant's main case is for judicial foreclosure of the chattel mortgage against Hilda Tee and John Doe who was later substituted by appellee Alberto Villafranca. But as there is no privity of contract, not even a causal link, between plaintiff-appellant Servicewide Specialists, Inc. and defendant-appellee Alberto Villafranca, the court a quo committed no reversible error when it dismissed the case for insufficiency of evidence against Hilda

Tee and Alberto Villafranca since the evidence adduced pointed to Leticia Laus as the party liable for the obligation sued upon (p. 2, RTC Decision). 3

Petitioner presented a Motion for Reconsideration but in its Resolution 4 of May 10, 1993, the Court of Appeals denied the same, taking notice of another case "pending between the same parties . . . relating to the very chattel mortgage of the motor vehicle in litigation."

Hence, the present petition for review on certiorari under Rule 45. Essentially, the sole issue here is: Whether or not a case for replevin may be pursued against the defendant, Alberto Villafranca, without impleading the absconding debtor-mortgagor?

Rule 60 of the Revised Rules of Court requires that an applicant for replevin must show that he "is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof." 5 Where the right of the plaintiff to the possession of the specified property is so conceded or evident, the action need only be maintained against him who so possesses the property. In rem action est per quam rem nostram quae ab alio possidetur petimus, et semper adversus eum est qui rem possidet. 6

Citing Northern Motors, Inc. vs. Herrera, 7 the Court said in the case of BA Finance (which is of similar import with the present case):

There can be no question that persons having a special right of property in the goods the recovery of which is sought, such as a chattel mortgagee, may maintain an action for replevin therefor. Where the mortgage authorizes the mortgagee to take possession of the property on default, he may maintain an action to recover possession of the mortgaged chattels from the mortgagor or from any person in whose hands he may find them. 8

Thus, in default of the mortgagor, the mortgagee is thereby constituted as attorney-in-fact of the mortgagor, enabling such mortgagee to act for and in behalf of the owner. That the defendant is not privy to the chattel mortgage should be inconsequential. By the fact that the object of replevin is traced to his possession, one properly can be a defendant in an action for replevin. It is here assumed that the plaintiff's right to possess the thing is not or cannot be disputed. 9 (Emphasis supplied)

However, in case the right of possession on the part of the plaintiff, or his authority to claim such possession or that of his principal, is put to great doubt (a contending party may contest the legal bases for plaintiffs cause of action or an adverse and independent claim of ownership or right of possession may be raised by that party), it could become essential to have other persons involved and impleaded for a complete determination and resolution of the controversy. 10 In the case under scrutiny, it is not disputed that there is an adverse and independent claim of ownership by the respondent as evinced by the existence of a pending case before the Court of Appeals involving subject motor vehicle between the same parties herein. 11 Its resolution is a factual matter, the province of which properly lies in the lower Court and not in the Supreme Court, in the guise of a petition for review on certiorari. For it is basic that under Rule 45, this Court only entertains questions of law, and rare are the exceptions and the present case does not appear to be one of them.

In a suit for replevin, a clear right of possession must be established. (Emphasis supplied) A foreclosure under a chattel mortgage may properly be commenced only once there is default on the part of the mortgagor of his obligation secured by the mortgage. The replevin in this case has been resorted to in order to pave the way for the foreclosure of what is covered by the chattel mortgage. The conditions essential for such foreclosure would be to show, firstly, the existence of the chattel mortgage and, secondly, the default of the mortgagor. These requirements must be shown because the validity of the plaintiffs exercise of the right of foreclosure is inevitably dependent thereon. 12

Since the mortgagee's right of possession is conditioned upon the actual fact of default which itself may be controverted, the inclusion of other parties, like the debtor or the mortgagor himself, may be required in order to allow a full and conclusive determination of the case. When the mortgagee seeks a replevin in order to effect the eventual foreclosure of the mortgage, it is not only the existence of, but also the mortgagor's default on, the chattel mortgage that, among other things, can properly uphold the right to replevy the property. The burden to establish a valid justification for such action lies with the plaintiff. An adverse possessor, who is not the mortgagor, cannot just be deprived of his possession, let alone be bound by the terms of the chattel mortgage contract, simply because the mortgagee brings up an action for replevin. 13


Leticia Laus, being an indispensable party, should have been impleaded in the complaint for replevin and damages. An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had. The party's interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties that his legal presence as a party to the proceeding is an absolute necessity. In his absence, there cannot be a resolution of the dispute of the parties before the Court which is effective, complete, or equitable.

Conversely, a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not necessarily be prejudiced by a judgment which does complete justice to the parties in Court. He is not indispensable if his presence would merely complete relief between him and those already parties to the action or will simply avoid multiple litigation. 14 Without the presence of indispensable parties to a suit or proceeding, a judgment of a Court cannot attain real finality. 15

That petitioner could not locate the mortgagor, Leticia Laus, is no excuse for resorting to a procedural short-cut. It could have properly availed of substituted service of summons under the Revised Rules of Court. 16 If it deemed such a mode to be unavailing, it could have proceeded in accordance with Section 14 of the same Rule. 17Indeed, petitioner had other proper remedies, it could have resorted to but failed to avail of. For instance, it could have properly impleaded the mortgagor. Such failure is fatal to petitioner's cause.

With the foregoing disquisition and conclusion, the other issues raised by petitioner need not be passed upon.

WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals in CA-G.R. CV No. 19571 AFFIRMED. No pronouncement as to costs.

SO ORDERED.

FIRST DIVISION

G.R. No. 160191 June 8, 2006

TWIN ACE HOLDINGS CORPORATION, Petitioner, vs.RUFINA AND COMPANY, Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

From the records, it appears that on 3 December 1991, Twin Ace Holdings Corporation (Twin Ace) filed a Complaint1 for recovery of possession of personal property, permanent injunction and damages with prayer for the issuance of a writ of replevin, temporary restraining order and a writ of preliminary injunction against Rufina and Company (Rufina).

As alleged in the complaint, Twin Ace is a private domestic corporation engaged in the manufacture of rhum, wines and liquor under the name and style "Tanduay Distillers." It has registered its mark of ownership of its bottles with the Bureau of Patent, Trademarks and Technology Transfer under Republic Act No. 623. In the conduct of its business, it sells its products to the public excluding the bottles. It makes substantial investments in brand new bottles which it buys from glass factories and which they use for about five times in order to recover the cost of acquisition. Twin Ace thus retrieves its used empty bottles, washes and uses them over and over again as containers for its products.

On the other hand, Rufina is engaged in the production, extraction, fermentation and manufacture of patis and other food seasonings and is engaged in the buying and selling of all kinds of foods, merchandise and products for domestic use or for export to other countries. In producing patis and other food seasonings, Rufina uses as containers bottles owned by Twin Ace without any authority or permission from the latter. In the process, Rufina is unduly benefited from the use of the bottles.

Upon the posting of Twin Ace of the required bond, the Regional Trial Court (RTC) of Manila, Branch 26, issued an Order dated 5 February 1992 granting the application for the issuance of a writ of replevin.2 Upon the implementation of the said writ, Deputy Sheriff

Amado P. Sevilla was able to seize a total of 26,241 empty bottles marked "TANDUAY DISTILLERY, INC.,"3 at the address of Rufina.

In its Answer with counter-application for a Writ of Preliminary Injunction, Rufina claimed that the marked bottles it used as containers for its products were purchased from junk dealers; hence, it became the owner thereof.

After hearing, the trial court rendered its decision dated 20 May 1995 the dispositive portion of which states:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of the defendant as follows:

a) dismissing the complaint for lack of merit;

b) dissolving the order of replevin;

c) ordering the plaintiff to return 26,241 bottles to the defendant in the place where the bottles were seized at the expense of the plaintiff within 48 hours from receipt hereof;

d) ordering the plaintiff to pay the defendant the sum of P100,000.00 as actual damages sustained by the latter to be taken from the replevin bond;

e) ordering the plaintiff to pay the defendant the sum of P1,000,000.00 as damages for besmirched reputation;

f) ordering the plaintiff to pay the sum of P100,00.00 as nominal damages;

g) ordering the plaintiff to pay the defendant the sum of P50,000.00 as attorney’s fee; and

h) ordering the plaintiff to pay the cost of the suit.4

Twin Ace appealed to the Court of Appeals. On 27 September 2002, the appellate court rendered its decision5modifying the decision of the trial court as follows:

WHEREFORE, in view of all the foregoing, the appealed decision dated May 20, 1995 of Branch 26, Regional Trial Court, Manila, in Civil Case No. 92-59862 is MODIFIED, in that the award of damages, except nominal damages, and attorney’s fees is DELETED for lack of legal and factual basis. The award of nominal damages is reduced toP50,000.00. In all other respects, the assailed decision is AFFIRMED.

Costs against plaintiff-appellant.6

A motion for reconsideration dated 19 October 20027 filed by Twin Ace was denied in a resolution of the Court of Appeals dated 29 September 2003.8 Hence, this Petition for Review.

For resolution are the following issues:

I.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT RUFINA IS NOT COVERED WITHIN THE EXEMPTION PROVIDED BY SECTION 6 OF R.A. 623, AS AMENDED BY R.A. 5700.

II.

THE HONORABLE COURT OF APPEALS ERRED IN AWARDING NOMINAL DAMAGES AGAINST PETITIONER TWIN ACE CONSIDERING THAT IT WAS THE ONE WHOSE RIGHTS HAVE BEEN VIOLATED OR INVADED BY RESPONDENT RUFINA.

III.

THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONER AS OWNER OF THE SUBJECT BOTTLES IS ENTITLED TO COMPENSATION FOR ITS UNAUTHORIZED USE BY RESPONDENT RUFINA.9











Pertinent provision of Republic Act No. 623,10 as amended by Republic Act No. 5700,11 is quoted hereunder for clarity:

Sec. 2. It shall be unlawful for any person, without the written consent of the manufacturer, bottler, or seller, who has successfully registered the marks of ownership in accordance with the provisions of the next preceding section, to fill such bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators, or other similar containers so marked or stamped, for the purpose of sale, or to sell, dispose of, buy or traffic in, or wantonly destroy the same, whether filled or not to use the same for drinking vessels or glasses or drain pipes, foundation pipes, for any other purpose than that registered by the manufacturer, bottler or seller. Any violation of this section shall be punished by a fine of not more than one thousand pesos or imprisonment of not more than one year or both.

Sec. 3. The use by any person other than the registered manufacturer, bottler or seller, without written permission of the latter of any such bottle, cask, barrel, keg, box, steel cylinders, tanks, flasks, accumulators, or other similar containers, or the possession thereof without written permission of the manufacturer, by any junk dealer or dealer in casks, barrels, kegs, boxes, steel cylinders, tanks, flasks, accumulators, or other similar containers, the same being duly marked or stamped and registered as herein provided, shall give rise to a prima facie presumption that such use or possession is unlawful.12

Sec. 4. The criminal action provided in this Act shall in no way affect any civil action to which the registered manufacturer, bottler, or seller, may be entitled by law or contract.

Sec. 5. No action shall be brought under this Act against any person to whom the registered manufacturer, bottler, or seller, has transferred by way of sale, any of the containers herein referred to, but the sale of the beverage contained in the said containers shall not include the sale of the containers unless specifically so provided.

Sec. 6. The provisions of this Act shall not be interpreted as prohibiting the use of bottles as containers for "sisi," "bagoong," "patis," and similar native products.13

In sum, Twin Ace asserts that the provision under the law affords protection only to small scale producers/manufacturers who do not have the capacity to buy new bottles for use in their products and cannot extend to Rufina which had unequivocably admitted in its Answer14 and affirmed in the decision of the trial court that it is engaged, on a large scale basis, in the production and manufacture of food seasonings.

For its part, Rufina counters that the law did not really distinguish between large scale manufacturers and small time producers.

The petition is not meritorious.

The earlier case of Twin Ace Holdings Corporation v. Court of Appeals,15 applies to the present petition. In said case, Twin Ace filed a Complaint for Replevin against Lorenzana Food Corporation to recover three hundred eighty thousand bottles allegedly owned by Twin Ace but detained and used by Lorenzana Food Corporation as containers for its native products without its express permission, in violation of the law. In that case, this Court acknowledged that the exemption under the law is unqualified as the law did not make a distinction that it only applies to small scale industries but not to large scale manufacturers. Thus, even if the court in said case held that the exemption is primarily meant to give protection to small scale industries, it did not qualify that the protection therein was intended and limited only to such. The Court held:

Petitioner itself alleges that respondent LORENZANA uses the subject 350 ml., 375 ml. and 750 ml. bottles as containers for processed foods and other related products such as patis, toyo, bagoong, vinegar and other food seasonings. Hence, Sec. 6 squarely applies in private respondent’s favor. Obviously, the contention of TWIN ACE that the exemption refers only to criminal liability but not to civil liability is without merit. It is inconceivable that an act specifically allowed by law, in other words legal, can be the subject of injunctive relief and damages. Besides, the interpretation offered by petitioner defeats the very purpose for which the exemption was provided.

Republic Act No. 623, "An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and Other Similar Containers," as amended by RA No. 5700, was meant to protect the intellectual property rights of the registrants of the containers and prevent unfair trade practices and fraud on the public. However, the exemption granted in Sec. 6 thereof was deemed extremely necessary

to provide assistance and incentive to the backyard, cottage and small-scale manufacturers of indigenous native products such as patis, sisi and toyo who do not have the capital to buy brand new bottles as containers nor afford to pass the added cost to the majority of poor Filipinos who use the products as their daily condiments or viands. If the contention of petitioner is accepted, i.e., to construe the exemption as to apply to criminal liability only but not to civil liability, the very purpose for which the exemption was granted will be defeated. None of the small-scale manufacturers of the indigenous native products protected would possibly wish to use the registered bottles if they are vulnerable to civil suits. The effect is a virtual elimination of the clear and unqualified exemption embodied in Sec. 6. It is worthy to note that House Bill No. 20585 was completely rejected because it sought to expressly and directly eliminate that which petitioner indirectly proposes to do with this petition.16 (Emphasis supplied.)

It is worth noting that Lorenzana Food Corporation which prevailed in the case filed by Twin Ace against it is certainly not a small scale industry. Just like Rufina, Lorenzana Food Corporation also manufactures and exports processed foods and other related products, e.g., patis, toyo, bagoong, vinegar and other food seasonings.

It is a basic rule in statutory construction that when the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. As has been our consistent ruling, where the law speaks in clear and categorical language, there is no occasion for interpretation; there is only room for application.17

Notably, attempts to amend the protection afforded by Section 6 of Republic Act No. 623, by giving protection only to small scale manufacturers or those with a capitalization of five hundred thousand pesos or less (P500,000.00), through then House Bill No. 20585,18 and subsequently through House Bill No. 30400,19 proved unsuccessful as the amendment proposed in both Bills was never passed.

In view of these considerations, we find and so hold that the exemption contained in Section 6 of Rep. Act No. 623 applies to all manufacturers of sisi, bagoong, patis and similar native products without distinction or qualification as to whether they are small, medium or large scale.

On the issue of nominal damages, Article 2222 of the Civil Code20 states that the court may award nominal damages in every obligation arising from any source enumerated in Article 1157,21 or in every other case where any property right has been invaded.22 Nominal damages are given in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.23 In another case,24 this Court held that when plaintiff suffers some species of injury not enough to warrant an award of actual damages, the court may award nominal damages. Considering the foregoing, we find that the award of nominal damages to Rufina in the amount of fifty thousand pesos (P50,000.00) is reasonable, warranted and justified.

As to the third issue, Rule 60, Section 2(a), of the Revised Rules of Court mandates that a party praying for the recovery of possession of personal property must show by his own affidavit or that of some other person who personally knows the facts that he is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof.25 It must be borne in mind that replevin is a possessory action the gist of which focuses on the right of possession that, in turn, is dependent on a legal basis that, not infrequently, looks to the ownership of the object sought to be replevied.26 Wrongful detention by the defendant of the properties sought in an action for replevin must be satisfactorily established. If only a mechanistic averment thereof is offered, the writ should not be issued.27 In this case, Twin Ace has not shown that it is entitled to the possession of the bottles in question and consequently there is thus no basis for the demand by it of due compensation. As stated by the court in the earlier case of Twin Ace Holdings Corporation v. Court of Appeals28 :

Petitioner cannot seek refuge in Sec. 5 of RA No. 623 to support its claim of continuing ownership over the subject bottles. In United States v. Manuel [7 Phil. 221 (1906)] we held that since the purchaser at his discretion could either retain or return the bottles, the transaction must be regarded as a sale of the bottles when the purchaser actually exercised that discretion and decided not to return them to the vendor. We also take judicial notice of the standard practice today that the cost of the container is included in the selling price of the product such that the buyer of liquor or any such product from any store is not required to return the bottle nor is the liquor placed in a plastic container that possession of the bottle is retained by the store.

WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the decision dated 27 September 2002 and resolution





















dated 29 September 2003, in CA-G.R. CV No. 52852, both of the Court of Appeals are Affirmed.

SO ORDERED.

FOOTNOTES:10 AN ACT TO REGULATE THE USE OF DULY STAMPED OR MARKED BOTTLES, BOXES, CASKS, KEGS, BARRELS AND OTHER SIMILAR CONTAINERS.11 AN ACT AMENDING CERTAIN SECTIONS OF REPUBLIC ACT NUMBERED SIX HUNDRED TWENTY-THREE AS TO INCLUDE THE CONTAINERS OF COMPRESSED GASES WITHIN THE PURVIEW OF THE SAID ACT.12 Republic Act No. 5700.13 Republic Act No. 623.14 "7. That with respect to paragraph 9, it admits that it produces patis on a large scale at its big factory in 290 C. Arellano Street, Malabon, Metro Manila and that it distributes the same to supermarkets and big grocery stores and exports the same but denies the rest of the allegations of the paragraph; x x x. (Rollo, p. 111.)18 "An Act Prohibiting The Use of Duly Registered and Marked Containers Of Liquor, Wines and Spirits As Containers For "Sisi", "Bagoong", "Patis" and Similar Native Products Amending for the Purpose Republic Act No. Six Hundred Twenty-Three, As Amended, And Increasing Penalty For Violation Therefor." (Records, Vol. I, pp. 259-260.)19 "An Act Prohibiting The Use of Duly Registered and Marked Containers for any purpose other than that registered amending for the purpose of Republic Act Numbered Six Hundred Twenty-Three, As Amended, and Increasing The Penalty For Violation Therefor." (Records, Vol. I, p. 262).20 Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in Article 1157, or in every case where any property right has been invaded.21 Art. 1157. Obligations arise from:

(1) Law;(2) Contracts;(3) Quasi-contracts;(4) Acts or omissions punished by law; and(5) Quasi-delicts.

25 Sec. 1. Application. – A party praying for the recovery of possession of personal property may, at the commencement of the action or at any time before answer, apply for an order for the delivery of such property to him, in the manner hereinafter provided.

Sec. 2. Affidavit and bond. – The applicant must show by his own affidavit or that of some other person who personally knows the facts:(a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof;(b) That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof according to the best of his knowledge, information, and belief; x x x. (Rule 60, REPLEVIN, Revised Rules of Court.).

SECOND DIVISION

G.R. No. 111107 January 10, 1997

LOEONARDO A. PAAT, in his capacity as Officer-in-Charge (OIC), Regional Executive Director (RED), Region 2 and JOVITO LAYUGAN, JR., in his capacity as Community Environment and Natural Resources Officer (CENRO), both of the Department of Environment and Natural Resources (DENR), petitioners, vs.COURT OF APPEALS, HON. RICARDO A. BACULI in his capacity as Presiding Judge of Branch 2, Regional Trial Court at Tuguegarao, Cagayan, and SPOUSES BIENVENIDO and VICTORIA DE GUZMAN, respondents.

TORRES, JR., J.:

Without violating the principle of exhaustion of administrative remedies, may an action for replevin prosper to recover a movable property which is the subject matter of an administrative forfeiture proceeding in the Department of Environment and Natural Resources pursuant to Section 68-A of P.D. 705, as amended, entitled The Revised Forestry Code of the Philippines?

Are the Secretary of DENR and his representatives empowered to confiscate and forfeit conveyances used in transporting illegal forest products in favor of the government?

These are two fundamental questions presented before us for our resolution.

The controversy on hand had its incipiency on May 19, 1989 when the truck of private respondent Victoria de Guzman while on its way to Bulacan from San Jose, Baggao, Cagayan, was seized by the Department of Environment and Natural Resources (DENR, for brevity) personnel in Aritao, Nueva Vizcaya because the driver could not produce the required documents for the forest products found concealed in the truck. Petitioner Jovito Layugan, the Community Environment and Natural Resources Officer (CENRO) in Aritao, Cagayan, issued on May 23, 1989 an order of confiscation of the truck and gave the owner thereof fifteen (15) days within which to submit an explanation why the truck should not be forfeited. Private respondents, however, failed to submit the required explanation. On June 22, 1989, 1 Regional Executive Director Rogelio Baggayan of DENR sustained petitioner Layugan's action of confiscation and ordered the forfeiture of the truck invoking Section 68-A of Presidential Decree No. 705 as amended by Executive Order No. 277. Private respondents filed a letter of reconsideration dated June 28, 1989 of the June 22, 1989 order of Executive Director Baggayan, which was, however, denied in a subsequent order of July 12, 1989. 2 Subsequently, the case was brought by the petitioners to the Secretary of DENR pursuant to private respondents' statement in their letter dated June 28, 1989 that in case their letter for reconsideration would be denied then "this letter should be considered as an appeal to the Secretary." 3 Pending resolution however of the appeal, a suit for replevin, docketed as Civil Case 4031, was filed by the private respondents against petitioner Layugan and Executive Director Baggayan 4 with the Regional Trial Court, Branch 2 of Cagayan, 5 which issued a writ ordering the return of the truck to private respondents. 6 Petitioner Layugan and Executive Director Baggayan filed a motion to dismiss with the trial court contending, inter alia, that private respondents had no cause of action for their failure to exhaust administrative remedies. The trial court denied the motion to dismiss in an order dated December 28, 1989. 7 Their motion for reconsideration having been likewise denied, a petition for certiorari was filed by the petitioners with the respondent Court of Appeals which sustained the trial court's order ruling that the question involved is purely a legal question. 8 Hence, this present petition, 9with prayer for temporary restraining order and/or preliminary injunction, seeking to reverse the decision of the respondent Court of Appeals was filed by the petitioners on September 9, 1993. By virtue of the Resolution dated September 27, 1993, 10 the prayer for the issuance of temporary restraining order of petitioners was granted by this Court.

Invoking the doctrine of exhaustion of administrative remedies, petitioners aver that the trial court could not legally entertain the suit for replevin because the truck was under administrative seizure proceedings pursuant to Section 68-A of P.D. 705, as amended by E.O. 277. Private respondents, on the other hand, would seek to avoid the operation of this principle asserting that the instant case falls within the exception of the doctrine upon the justification that (1) due process was violated because they were not given the chance to be heard, and (2) the seizure and forfeiture was unlawful on the grounds: (a) that the Secretary of DENR and his representatives have no authority to confiscate and forfeit conveyances utilized in transporting illegal forest products, and (b) that the truck as admitted by petitioners was not used in the commission of the crime.

Upon a thorough and delicate scrutiny of the records and relevant jurisprudence on the matter, we are of the opinion that the plea of petitioners for reversal is in order.

This Court in a long line of cases has consistently held that before a party is allowed to seek the intervention of the court, it is a pre-condition that he should have availed of all the means of administrative processes afforded him. Hence, if a remedy within the administrative machinery can still be resorted to by giving the administrative officer concerned every opportunity to decide on a matter that comes within his jurisdiction then such remedy should be exhausted first before court's judicial power can be sought, The premature invocation of court's intervention is fatal to one's cause of action. 11 Accordingly, absent any finding of waiver or estoppel the case is susceptible of dismissal for lack of cause ofaction. 12 This doctrine of exhaustion of administrative remedies was not without its practical and legal reasons, for one thing, availment of administrative remedy entails lesser expenses and provides for a speedier disposition of controversies. It is no less true to state that the courts of justice for reasons of comity and convenience will shy away from a dispute until the system of administrative redress has been completed and complied with so as to give the administrative agency concerned every opportunity to correct its error and to dispose of the












case. However, we are not amiss to reiterate that the principle of exhaustion of administrative remedies as tested by a battery of cases is not an ironclad rule. This doctrine is a relative one and its flexibility is called upon by the peculiarity and uniqueness of the factual and circumstantial settings of a case. Hence, it is disregarded (1) when there is a violation of due process, 13 (2) when the issue involved is purely a legal question, 14 (3) when the administrative action is patently illegal amounting to lack or excess of jurisdiction, 15 (4) when there is estoppel on the part of the administrative agency concerned, 16 (5) when there is irreparable injury, 17 (6) when the respondent is a department secretary whose acts as an alter ego of the President bears the implied and assumed approval of the latter, 18 (7) when to require exhaustion of administrative remedies would be unreasonable, 19 (8) when it would amount to a nullification of a claim, 20 (9) when the subject matter is a private land in land case proceedings, 21(10) when the rule does not provide a plain, speedy and adequate remedy, and (11) when there are circumstances indicating the urgency of judicial intervention. 22

In the case at bar, there is no question that the controversy was pending before the Secretary of DENR when it was forwarded to him following the denial by the petitioners of the motion for reconsideration of private respondents through the order of July 12, 1989. In their letter of reconsideration dated June 28, 1989, 23 private respondents clearly recognize the presence of an administrative forum to which they seek to avail, as they did avail, in the resolution of their case. The letter, reads, thus:

xxx xxx xxx

If this motion for reconsideration does not merit your favorable action, then this letter should be considered as an appeal to theSecretary. 24

It was easy to perceive then that the private respondents looked up to the Secretary for the review and disposition of their case. By appealing to him, they acknowledged the existence of an adequate and plain remedy still available and open to them in the ordinary course of the law. Thus, they cannot now, without violating the principle of exhaustion of administrative remedies, seek court's intervention by filing an action for replevin for the grant of their relief during the pendency of an administrative proceedings.

Moreover, it is important to point out that the enforcement of forestry laws, rules and regulations and the protection, development and management of forest lands fall within the primary and special responsibilities of the Department of Environment and Natural Resources. By the very nature of its function, the DENR should be given a free hand unperturbed by judicial intrusion to determine a controversy which is well within its jurisdiction. The assumption by the trial court, therefore, of the replevin suit filed by private respondents constitutes an unjustified encroachment into the domain of the administrative agency's prerogative. The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself the authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence. 25 In Felipe Ismael, Jr. and Co. vs. Deputy Executive Secretary, 26 which was reiterated in the recent case of Concerned Officials of MWSS vs. Vasquez, 27this Court held:

Thus, while the administration grapples with the complex and multifarious problems caused by unbriddled exploitation of these resources, the judiciary will stand clear. A long line of cases establish the basic rule that the courts will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies.

To sustain the claim of private respondents would in effect bring the instant controversy beyond the pale of the principle of exhaustion of administrative remedies and fall within the ambit of excepted cases heretofore stated. However, considering the circumstances prevailing in this case, we can not but rule out these assertions of private respondents to be without merit. First, they argued that there was violation of due process because they did not receive the May 23, 1989 order of confiscation of petitioner Layugan. This contention has no leg to stand on. Due process does not necessarily mean or require a hearing, but simply an opportunity or right to be heard. 28 One may be heard, not solely by verbal presentation but also, and perhaps many times more creditably and practicable than oral argument, through pleadings. 29 In administrative proceedings moreover, technical rules of procedure and evidence are not strictly applied; administrative process

cannot be fully equated with due process in its strict judicial sense. 30 Indeed, deprivation of due process cannot be successfully invoked where a party was given the chance to be heard on his motion for reconsideration, 31 as in the instant case, when private respondents were undisputedly given the opportunity to present their side when they filed a letter of reconsideration dated June 28, 1989 which was, however, denied in an order of July 12, 1989 of Executive Director Baggayan, In Navarro III vs.Damasco, 32 we ruled that :

The essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek a reconsideration of the action or ruling complained of. A formal or trial type hearing is not at all times and in all instances essential. The requirements are satisfied when the parties are afforded fair and reasonable opportunity to explain their side of the controversy at hand. What is frowned upon is the absolute lack of notice or hearing.

Second, private respondents imputed the patent illegality of seizure and forfeiture of the truck because the administrative officers of the DENR allegedly have no power to perform these acts under the law. They insisted that only the court is authorized to confiscate and forfeit conveyances used in transporting illegal forest products as can be gleaned from the second paragraph of Section 68 of P.D. 705, as amended by E.O. 277. The pertinent provision reads as follows:

Sec. 68. . . .

xxx xxx xxx

The court shall further order the confiscation in favor of the government of the timber or any forest products cut, gathered, collected, removed, or possessed, as well as the machinery, equipments,implements and tools illegaly [sic] used in the area where the timber or forest products are found. (Emphasis ours)

A reading, however, of the law persuades us not to go along with private respondents' thinking not only because the aforequoted provision apparently does not mention nor include "conveyances" that can be the subject of confiscation by the courts, but to a large extent, due to the fact that private respondents' interpretation of the subject provision unduly restricts the clear intention of the law and inevitably reduces the other provision of Section 68-A, which is quoted herein below:

Sec. 68-A. Administrative Authority of the Department or His Duly Authorized Representative To Order Confiscation. In all cases of violation of this Code or other forest laws, rules and regulations, the Department Head or his duly authorized representative, may order the confiscation of any forest products illegally cut, gathered, removed, or possessed or abandoned, and all conveyances used either by land, water or air in the commission of the offense and to dispose of the same in accordance with pertinent laws, regulations and policies on the matter. (Emphasis ours)

It is, thus, clear from the foregoing provision that the Secretary and his duly authorized representatives are given the authority to confiscate and forfeit any conveyances utilized in violating the Code or other forest laws, rules and regulations. The phrase "to dispose of the same" is broad enough to cover the act of forfeiting conveyances in favor of the government. The only limitation is that it should be made "in accordance with pertinent laws, regulations or policies on the matter." In the construction of statutes, it must be read in such a way as to give effect to the purpose projected in the statute. 33 Statutes should be construed in the light of the object to be achieved and the evil or mischief to be suppressed, and they should be given such construction as will advance the object, suppress the mischief, and secure the benefits intended. 34 In this wise, the observation of the Solicitor General is significant, thus:

But precisely because of the need to make forestry laws "more responsive to present situations and realities" and in view of the "urgency to conserve the remaining resources of the country," that the government opted to add Section 68-A. This amendatory provision is an administrative remedy totally separate and distinct from criminal


proceedings. More than anything else, it is intended to supplant the inadequacies that characterize enforcement of forestry laws through criminal actions. The preamble of EO 277-the law that added Section 68-A to PD 705-is most revealing:

"WHEREAS, there is an urgency to conserve the remaining forest resources of the country for the benefit and welfare of the present and future generations of Filipinos;

WHEREAS, our forest resources may be effectively conserved and protected through the vigilant enforcement and implementation of our forestry laws, rules and regulations;

WHEREAS, the implementation of our forestry laws suffers from technical difficulties, due to certain inadequacies in the penal provisions of the Revised Forestry Code of the Philippines; and

WHEREAS, to overcome this difficulties, there is a need to penalize certain acts more responsive to present situations and realities;"

It is interesting to note that Section 68-A is a new provision authorizing the DENR to confiscate, not only "conveyances," but forest products as well. On the other hand, confiscation of forest products by the "court" in a criminal action has long been provided for in Section 68. If as private respondents insist, the power on confiscation cannot be exercised except only through the court under Section 68, then Section 68-A would have no Purpose at all. Simply put, Section 68-A would not have provided any solution to the problem perceived in EO 277, supra. 35

Private respondents, likewise, contend that the seizure was illegal because the petitioners themselves admitted in the Order dated July 12, 1989 of Executive Director Baggayan that the truck of private respondents was not used in the commission of the crime. This order, a copy of which was given to and received by the counsel of private respondents, reads in part, viz.:

. . . while it is true that the truck of your client was not used by her in the commission of the crime, we uphold your claim that the truck owner is not liable for the crime and in no case could a criminal case be filed against her as provided under Article 309 and 310 of the Revised Penal Code. . . 36

We observed that private respondents misread the content of the aforestated order and obviously misinterpreted the intention of petitioners. What is contemplated by the petitioners when they stated that the truck "was not used in the commission of the crime" is that it was not used in the commission of the crime of theft, hence, in no case can a criminal action be filed against the owner thereof for violation of Article 309 and 310 of the Revised Penal Code. Petitioners did not eliminate the possibility that the truck was being used in the commission of another crime, that is, the breach of Section 68 of P.D. 705 as amended by E.O. 277. In the same order of July 12, 1989, petitioners pointed out:

. . . However, under Section 68 of P.D. 705 as amended and further amended by Executive Order No. 277 specifically provides for the confiscation of the conveyance used in the transport of forest products not covered by the required legal documents. She may not have been involved in the cutting and gathering of the product in question but the fact that she accepted the goods for a fee or fare the same is therefor liable. . . 37

Private respondents, however, contended that there is no crime defined and punishable under Section 68 other than qualified theft, so that, when petitioners admitted in the July 12, 1989 order that private respondents could not be charged for theft as provided for under Articles 309 and 310 of the Revised Penal Code, then necessarily private respondents could not have committed an act constituting a crime under Section 68. We disagree. For clarity, the provision of Section 68 of P.D. 705 before its amendment by E.O. 277 and the provision of Section 1 of E.O. No. 277 amending the aforementioned Section 68 are reproduced herein, thus:

Sec. 68. Cutting, gathering and/or collecting timber or other products without license. — Any person who shall cut, gather, collect, or remove timber or other forest products from any forest land, or timber from alienable and disposable public lands, or from private lands, without any authority under a license agreement, lease, license or permit, shall be guilty of qualified theft as defined and punished under Articles 309 and 310 of the Revised Penal Code . . . (Emphasis ours; Section 68, P.D. 705 before its amendment by E.O. 277)

Sec. 1. Section 68 of Presidential Decree No. 705, as amended, is hereby amended to read as follows:

Sec. 68. Cutting, gathering and/or collecting timber or other forest products without license. — Any person who shall cut, gather, collect, remove timber or other forest products from any forest land, or timber from alienable or disposable public land, or from private land, without any authority, or possess timber or other forest products without the legal documents as required under existing forest laws and regulations, shall bepunished with the penalties imposed under Articles 309 and 310 of the Revised Penal Code . . . (Emphasis ours; Section 1, E.O. No. 277 amending Section 68, P.D. 705 as amended)

With the introduction of Executive Order No. 277 amending Section 68 of P.D. 705, the act of cutting, gathering, collecting, removing, or possessing forest products without authority constitutes a distinct offense independent now from the crime of theft under Articles 309 and 310 of the Revised Penal Code, but the penalty to be imposed is that provided for under Article 309 and 310 of the Revised Penal Code. This is clear from the language of Executive Order No. 277 when it eliminated the phrase "shall be guilty of qualified theft as defined and punished under Articles 309 and 310 of the Revised Penal Code" and inserted the words "shall be punished with the penalties imposed under Article 309 and 310 of the Revised Penal Code". When the statute is clear and explicit, there is hardly room for any extended court ratiocination or rationalization of the law. 38

From the foregoing disquisition, it is clear that a suit for replevin can not be sustained against the petitioners for the subject truck taken and retained by them for administrative forfeiture proceedings in pursuant to Section 68-A of the P.D. 705, as amended. Dismissal of the replevin suit for lack of cause of action in view of the private respondents' failure to exhaust administrative remedies should have been the proper course of action by the lower court instead of assuming jurisdiction over the case and consequently issuing the writ ordering the return of the truck. Exhaustion of the remedies in the administrative forum, being a condition precedent prior to one's recourse to the courts and more importantly, being an element of private respondents' right of action, is too significant to be waylaid by the lower court.

It is worth stressing at this point, that a suit for replevin is founded solely on the claim that the defendant wrongfully withholds the property sought to be recovered. It lies to recover possession of personal chattels that are unlawfully detained. 39 "To detain" is defined as to mean "to hold or keep in custody," 40 and it has been held that there is tortious taking whenever there is an unlawful meddling with the property, or an exercise or claim of dominion over it, without any pretense of authority or right; this, without manual seizing of the property is sufficient. 41 Under the Rules of Court, it is indispensable in replevin proceeding that the plaintiff must show by his own affidavit that he is entitled to the possession of property, that the property is


wrongfully detained by the defendant, alleging the cause of detention, that the same has not been taken for tax assessment, or seized under execution, or attachment, or if so seized, that it is exempt from such seizure, and the actual value of the property. 42 Private respondents miserably failed to convince this Court that a wrongful detention of the subject truck obtains in the instant case. It should be noted that the truck was seized by the petitioners because it was transporting forest products without the required permit of the DENR in manifest contravention of Section 68 of P.D. 705 as amended by E.O 277. Section 68-A of P.D. 705, as amended, unquestionably warrants the confiscation as well as the disposition by the Secretary of DENR or his duly authorized representatives of the conveyances used in violating the provision of forestry laws. Evidently, the continued possession or detention of the truck by the petitioners for administrative forfeiture proceeding is legally permissible, hence, no wrongful detention exists in the case at bar.

Moreover, the suit for replevin is never intended as a procedural tool to question the orders of confiscation and forfeiture issued by the DENR in pursuance to the authority given under P.D. 705, as amended. Section 8 of the said law is explicit that actions taken by the Director of the Bureau of Forest Development concerning the enforcement of the provisions of the said law are subject to review by the Secretary of DENR and that courts may not review the decisions of the Secretary except through a special civil action for certiorari or prohibition. It reads:

Sec. 8. REVIEW — All actions and decisions of the Director are subject to review, motu propio or upon appeal of any person aggrieved thereby, by the Department Head whose decision shall be final and executory after the lapse of thirty (30) days from the receipt of the aggrieved party of said decision, unless appealed to the President in accordance with Executive Order No. 19, Series of 1966. The Decision of the Department Head may not be reviewed by the courts except through a special civil action for certiorari or prohibition.

WHEREFORE, the Petition is GRANTED; the Decision of the respondent Court of Appeals dated October 16, 1991 and its Resolution dated July 14, 1992 are hereby SET ASIDE AND REVERSED; the Restraining Order promulgated on September 27, 1993 is hereby made permanent; and the Secretary of DENR is directed to resolve the controversy with utmost dispatch.

SO ORDERED.

SECOND DIVISION

G.R. No. 93540 December 13, 1999

FULGENCIO S. FACTORAN, JR., Secretary, Department of Environment and Natural Resources, VICENTE A. ROBLES and NESTOR GAPUZAN, petitioners, vs.COURT OF APPEALS (Third Division), Hon. BENIGNO T. DAYAW, as, Judge, Regional Trial Court of Quezon City, Branch 80, JESUS SY and LILY FRANCISCO UY, respondents.

DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision and Resolution of the Court of Appeals dated March 30, 1990 and May 18, 1990, respectively, dismissing petitioners' charge that Honorable Benigno T. Dayaw, Presiding Judge of Branch 80 of the Regional Trial Court (RTC) of Quezon City, committed grave abuse of discretion in ordering them to deliver to private respondents the six-wheeler truck and its cargo, some 4,000 board feet of narra lumber which were confiscated by the Department of Environment and Natural Resources (DENR) and forfeited in favor of the government. 1

The antecedent facts:

On August 9, 1988, two (2) police officers of the Marikina Police Station, Sub-Station III, intercepted a six-wheeler truck, with Plate No. NJT-881, carrying 4,000 board feet of narra lumber as it was cruising along the Marcos Highway. They apprehended the truck driver, private respondent Jesus Sy, and brought the truck and its cargo to the Personnel Investigation Committee/Special Actions and Investigation

Division (PIC/SAID) of the DENR Office in Quezon City. There, petitioner Atty. Vecente Robies of the PIC/SAID investigated them, and discovered the following discrepancies in the documentaion of the narra lumber: 2

a. What were declared in the documents (Certificate of Timber Origin, Auxiliary Invoices and various Certifications) were narra flitches, while the cargo of the truck consisted of narra lumber;

b. As appearing in the documents, the Plate Numbers of the truck supposed to carry the forest products bear the numbers BAX-404, PEC-492 OR NSN-267, while the Plate Number of the truck apprehended is NVT-881;

c. Considering that the cargo is lumber, the transport should have been accompanied by a Certificate of Lumber Origin, scale sheet of said lumber and not by a Certificate of Timber Origin, which merely covers only transport of logs and flitches;

d. The log Sale Purchase Agreement presented is between DSM Golden Cup International as the seller and Bonamy Enterprises as the buyer/consignee and not with Lily Francisco Lumber and Hardware. 3

which are in violation of Bureau of Forestry Development (BFD) Circular No. 10. The said BFD Circular requires possession or transportation of lumber to be supported by the following documents: (1) Certificate of Lumber Origin (CLO) which shall be issued only be the District Forester, or in his absence, the Assistant District Forester; (2) Sales Invoice; (3) Delivery Receipt; and (4) Tally Sheets. 4 Such omission is punishable under Sec. 68 of Presidential Decree (P.D.) No. 705 otherwise known as the Revised Forestry Code. 5 Thus, petitioner Atty. Robles issued a temporary seizure order and seizure receipt for the narra lumber and the six-wheeler truck. 6

On January 20, 1989, petitioner Fulgencio S. Factoran, then Secretary of Environment and Natural Resources (hereinafter referred to as petitioner Secretary) issued an order for the confiscation of the narra lumber and the six- wheeler truck. 7

Private respondents neither asked for reconsideration of nor appealed, the said order to the Office of the President. Consequently, the confiscated narra lumber and six-wheeler truck were forfeited in favor of the government. They were subsequently advertised to be sold at public auction on March 20, 1989. 8

On March 17, 1989, private respondents filed a complaint with prayer for the issuance of writs of replevin and preliminary injunction and/or temporary restraining order for the recovery of the confiscated lumber and six-wheeler truck, and to enjoin the planned auction sale of the subject narra lumber, respectively. 9 Said complaint was docketed as Civil Case No. Q-89-2045 and raffled to Branch 80 of the RTC of Quezon City.

On the same day, the trial court issued an Order directing petitioners to desist from proceeding with the planned auction sale and setting the hearing for the issuance of the writ of preliminary injunction on March 27, 1989. 10

On March 20, 1989, the scheduled date of the auction sale, private respondents filed an Ex-Parte Motion for Release and Return of Goods and Documents (Replevin) supported by an Affidavit for Issuance of Writ of Replevin and Preliminary Injunction and a Replevin Bond in the amount of P180,000.00. 11 The trial court granted the writ of replevin on the same day and directed the petitioners "to deliver the . . . [n]arra lumber, original documents and truck with plate no. NJT 881 to the custody of the plaintiffs and/or their representative . . . . 12

On March 22, 1989, the trial court issued a writ of seizure. However, petitioners refused to comply therewith. 13David G. Brodett, Sheriff of Branch 80 of the RTC of Quezon City (hereinafter referred to as the Sheriff) reported that petitioners prevented him from removing the subject properties from the DENR Compound and transferring them to the Mobil Unit Compound of the Quezon City Police Force. To avoid any unwarranted confrontation between them, he just agreed to a constructive possession of the properties in question. 14

In the afternoon of the same day, petitioners filed a Manifestation stating their intention to file a counterbond under Rule 60 of the Rules


of Court to stay the execution of the writ of seizure and to post a cash bond in the amount of P180,000.00. But the trial court did not oblige petitioners for they failed to serve a copy of the Manifestation on private respondents. Petitioners then immediately made the required service and tendered the cash counterbond in the amount of P180,000.00, but it was refused, petitioners' Manifestation having already been set for hearing on March 30, 1989. 15

On March 27, 1989, petitioners made another attempt to post a counterbond which was, however, denied for the same reason. 16

On the same day, private respondents filed a motion to declare petitioners in contempt for disobeying the writ of seizure. 17 The trial court gave petitioners twenty-four (24) hours to answer the motion. Hearing thereon was scheduled on March 30, 1989.

However, on March 29, 1989, petitioners filed with the Court of Appeals a Petition for Certiorari, Prohibition and/or Mandamus to annul the Orders of the trial court dated March 20, 1989 and March 27, 1989. 18

On March 30, 1989, the Court of Appeals granted petitioners temporary relief in the form of a temporary restraining order (TRO).

On September 11, 1989, the Court of Appeals converted the TRO into a writ of preliminary injunction upon filing by petitioners of a bond in the amount of P180,000.00. 19

However, on March 30, 1990, the Court of Appeals lifted the writ of preliminary injunction and dismissed the petition. It declared that as the complaint for replevin filed by private respondents complied with the requirements of an affidavit and bond under Secs. 1 and 2 of Rule 60 of the Revised Rules of court, issuance of the writ of replevin was mandatory. 20

As for the contempt charges against petitioners, the Court of Appeals believed the same were sufficiently based on a written charge by private respondents and the report submitted by the Sheriff. 21

On April 25, 1990, petitioners filed a motion for reconsideration of the foregoing decision. However, that motion was denied by the Court of Appeals in its Resolution dated May 18, 1990. 22

Hence this petition.

On the one hand, petitioners contend, thus:

(1) Confiscated lumber cannot be subject of replevin. 23

(2) Petitioners not compelled to criminally prosecute private respondents but may opt only to confiscate lumber. 24

(3) Private respondent charged criminally in court. 25 and

(4) Writ of Replevin issued in contravention of PD #605. 26

On the other hand, private respondents argue that:

(1) The respondent Judge had jurisdiction to take cognizance of the complaint for recovery of personal property and, therefore, had jurisdiction to issue the necessary orders in connection therewith. 27

(2) The issuance of the order for the delivery of personal property upon application, affidavit and filing of replevin bond by the plaintiff is mandatory and not discretionary, hence, no abuse of discretion can be committed by the trial court in the issuance thereof. 28

(3) The Order of March 20, 1989 was in accordance with Section 4, Rule 60 of the Rules of Court and is, therefore, valid. 29

(4) The private respondents have not been proven to have violated Section 68 of the Revised Forestry Code. 30

(5) The petitioners do not have the authority to keep private respondents' property for an indefinite period, more so, to dispose of the same without notice and hearing or without due process. 31

(6) Contrary to the allegation of petitioners, no formal investigation was conducted by the PIC with respect to the subject lumber in thiscase. 32

(7) The alleged Order dated January 20, 1989 of the petitioner Secretary Fulgencio Factoran, Jr. of the DENR is not valid and does not make the issuance of the order of replevin illegal. 33 and

(8) The subject properties were not in custody of the law and may be replevied. 34

At the outset we observe that herein respondents never appealed the confiscation order of petitioner Secretary to the Office of the President as provided for in Sec. 8 of P.D. No. 705 which reads:

All actions and decisions of the Director are subject to review, motu propio or upon appeal of any person aggrieved thereby, by the Department Head whose decision shall be final and executory after the lapse of thirty (30) days from receipt by the aggrieved party of said decision unless appealed to the President . . . . The decision of the Department Head may not be reviewed by the courts except through a special civil action for certiorari and prohibition.

The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of law, comity and convenience, should not entertain suits unless the available administrative remedies have first been resorted to and the proper authorities have been given an appropriate opportunity to act and correct their alleged errors, if any, committed in the administrative forum. 35 As to the application of this doctrine in cases involving violations of P.D. No. 705, our ruling in Paat v. Court of Appeals, is apropos:

Moreover, it is important to point out that the enforcement of forestry laws, rules and regulations and the protection, development and management of forest lands fall within the primary and special responsibilities of the Department of Environment and Natural Resources. By the very nature of its function, the DENR should be given a free hand unperturbed by judicial intrusion to determine a controversy which is well within its jurisdiction. The assumption by the trial court, therefore, of the replevin suit filed by the private respondents constitutes an encroachment into the domain of the administrative agency's prerogative. The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself the authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence. In Felipe Ismael, Jr. and Co. vs. Deputy Executive Secretary, which was reiterated in the recent case of Concerned Officials of MWSS vs. Vasquez, this Court held:

Thus, while the administration grapples with the complex and multifarious problems caused by unbridled exploitation of these resources, the judiciary will stand clear. A long line of cases establish the basic rule that the courts will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies. 36

However, petitioners did not file a motion to dismiss based on the ground of non-exhaustion of administrative remedies. Thus, it is deemed waived. 37

Nonetheless, the petition is impressed with merit.

First. A writ of replevin does not just issue as a matter of course upon the applicant's filing of a bond and affidavit, as the Court of Appeals has wrongly put it. The mere filing of an affidavit, sans allegations therein


that satisfy the requirements of Sec. 2, Rule 60 of the Revised Rules of Court, cannot justify the issuance of a writ of replevin. Said provision reads:

Affidavit and bond. — Upon applying for such order the plaintiff must show by his own affidavit or that of some other person who personally knows the facts:

(a) That the plaintiff is the owner of the property claimed, particularly describing it, or entitled to the possession thereof;

(b) That the property is wrongfully detained by the defendant, alleging the cause of detention thereof to his best knowledge, information, and belief;

(c) That it has not been taken for a tax assessment or fine pursuant to law, or seized under an execution, or an attachment against the property of the plaintiff, or, if so seized, that it is exempt from such seizure; and

(d) The actual value of the property.

xxx xxx xxx

Wrongful detention by the defendant of the properties sought in an action for replevin must be satisfactorily established. If only a mechanistic averment thereof is offered, the writ should not be issued.

In the case at bar, the subject narra lumber and six-wheeler truck were confiscated by petitioner Secretary pursuant to Section 68-A of P.D. No. 705, as amended by Executive Order (E.O.) No. 277, to wit:

Sec. 68-A. Administrative Authority of the Department Head or His Duly Authorized Representative to Order Confiscation. — In all cases of violations of this Code or other forest laws, rules and regulations, the Department Head or his duly authorized representative, may order the confiscation of any forest products illegally cut, gathered, removed, or possessed or abandoned, and all conveyances used either by land, water,or air in the commission of the offense and to dispose of the same in accordance with pertinent laws, regulations or policies on the matter. 38

As the petitioner Secretary's administrative authority to confiscate is clearly provided by law, the taking of the subject properties is not wrongful and does not warrant the issuance of a writ of replevin prayed for by private respondents.

Second. Issuance of the confiscation order by petitioner Secretary was a valid exercise of his power under Sec. 68-A of P.D. No. 705. By virtue of said order, the narra lumber and six-wheeler truck of private respondents were held in custodia legis and hence, beyond the reach of replevin.

Property lawfully taken by virtue of legal process is deemed to be in custodia legis. 39 When a thing is in official custody of a judicial or executive officer in pursuance of his execution of a legal writ, replevin will not lie to recover it. 40 Otherwise, there would be interference with the possession before the function of law had been performed as to the process under which the property was taken. 41 So basic is this doctrine that it found inclusion in the 1997 amendments introduced to the Rules of Civil Procedure. Thus, Sec. 2(c), Rule 60 of the 1997 Rules of Civil Procedure provides that:

Affidavit and bond. — Upon applying for such order the plaintiff must show by his own affidavit or that of some other person who personally knows the facts:

xxx xxx xxx

(c) That the property has not been distrained or taken for a tax assessment or fine pursuant to law, or seized under a writ of execution, or preliminary attachment or otherwise placed under custodia legis, or if so seized, that it is exempt from such seizure or custody; . . .

xxx xxx xxx. 42

Third. Petitioner Secretary's authority to confiscate forest products under Sec. 68-A of P.D. No. 705 is distinct from and independent of the confiscation of forest products in a criminal action provided for in Section 68 of P.D. No. 705. Thus, in Paat, we held that:

. . . precisely because of the need to make forestry laws "more responsive to present situations and realities" and in view of the "urgency to conserve the remaining resources of the country," that the government opted to add Section 68-A. This amendatory provision is an administrative remedy totally separate and distinct from criminal proceedings. . . . . The preamble of EO 277 that added Section 68-A to PD 705- is most revealing:

WHEREAS, there is an urgency to conserve the remaining forest resources of the country for the benefit and welfare of the present and future generations of Filipinos;

WHEREAS, our forest resources may be effectively conserved and protected through the vigilant enforcement and implementation of our forestry laws, rules and regulations;

WHEREAS, the implementation of our forestry laws suffers from technical difficulties, due to certain inadequacies in the Penal provisions of the Revised Forestry Code of the Philippines; and

WHEREAS, to overcome this [sic] difficulties, there is a need to penalize certain acts more responsive to present situations and realities;

It is interesting to note that Section 68-A is a new provision authorizing the DENR to confiscate, not only "conveyances" but forest products as well. On the other hand, confiscation of forest products by the "court" in a criminal action has long been provided for in Section 68. If as private respondents insist, the power of confiscation cannot be exercised except only through the court under Section 68, then Section 68-A would have no purpose at all. Simply put, Section 68-A would not have provided any solution to the problem perceived in EO 277, . . . . 43

Sec. 68-A was added precisely to supplant the inadequacies and supplement criminal enforcement of forestry laws.

Fourth. Sec. 80 of P.D. No. 705 which requires delivery of the seized forest products within six (6) hours from the time of the seizure to the appropriate official designated by law to conduct preliminary investigations applies only to criminal prosecutions provided for in Sec. 68, and not to administrative confiscation provided for in Section 68-A.

Sec. 80 of P.D. No. 705 provides:

Sec. 80. Arrest; Institution of criminal actions. — A forest officer or employee of the Bureau shall arrest even without a warrant any person who has committed or is committing in his presence any of the offenses defined in this Chapter. He shall also seize and confiscate, in favor of the Government, the tools and equipment used in committing the offense, and the forest products cut, gathered or taken by the offender in the process of committing the offense. The arresting officer or employee shall thereafter deliver within six (6) hours from the time of arrest and seizure, the offender and the confiscated forest products, tools and equipment to, and file the proper complaint with, the appropriate official designated by law to conduct preliminary investigations and file informations in court.


xxx xxx xxx

The title of Sec. 80 — "Arrest; Institution of Criminal Actions" — bespeaks this intendment of the law. The fact, too, that Secs. 68 and 80 were co-existing prior to the introduction of Sec. 68-A, proves that Sec. 80 applies to the criminal prosecutions subject of Sec. 68 and not to the administrative confiscation subject of Sec. 68-A. Sec. 68-A, therefore, should not be interpreted in relation to Sec. 80 as to require that criminal charges be filed with and seized forest products be immediately delivered to, the fiscal in case of administrative confiscation, for this renders nugatory the purpose sought to be achieved thereby. Statutes should always be construed in the light of the object to be achieved and the evil or mischief to be suppressed, and they should be given such interpretation as will advance the object, suppress the mischief, and secure the benefits intended. 44

Fifth. Nothing in the records supports private respondents' allegation that their right to due process was violated as no investigation was conducted prior to the confiscation of their properties.

On the contrary, by private respondents' own admission, private respondent Sy who drove the six-wheeler truck was properly investigated by petitioner Atty. Robles at the PIC/SAID Office of the DENR. Thereafter, private respondent Sy and his witnesses were given full opportunity to explain the deficiencies in the documents. 45Private respondents categorically stated that they made a "continuous and almost daily follow-up and plea . . . with the PIC for the return of the truck and lumber . . . ." 46 Finally in a letter dated December 30, 1989, private respondent Lily Francisco Uy requested petitioner Secretary for "immediate resolution and release of the impounded narra sawn lumber." 47

Undoubtedly, private respondents were afforded an opportunity to be heard before the order of confiscation was issued. There was no formal or trial type hearing but the same is not, in all instances, essential in administrative proceedings. It is settled that due process is satisfied when the parties are afforded fair and reasonable opportunity to explain their side of the controversy or an opportunity to move for a reconsideration of the action or ruling complained of. 48

Moreover, respondents claim that the order of confiscation was antedated and not the product of the investigation supposedly conducted by the PIC of the DENR. However, they proffer no proof to support that allegation. On the other hand, there is the legal presumption that official duty has been regularly performed. The presumption of regularity in the performance of official duties is even particularly strong with respect to administrative agencies like the DENR which are vested with quasi-judicial powers in enforcing the laws affecting their respective fields of activity, the proper regulation of which requires of them such technical mastery of all relevant conditions obtaining in the nation. 49

Finally. The writ of seizure and the writ of replevin were issued by the trial court in grave abuse of its discretion. Thus, disobedience thereto cannot constitute indirect contempt of court which presupposes that the court order thereby violated was valid and legal. Without a lawful order having been issued, no contempt of court could be committed. 50

WHEREFORE, the instant petition is hereby GRANTED. The Decision of the Court of Appeals dated March 30, 1990 and its Resolution dated May 18, 1990 in CA-G.R. SP No. 17194 are hereby SET ASIDE and REVERSED. Respondent Presiding Judge Benigno T. Dayaw, of the Regional Trial Court of Quezon City, is PERMANENTLY ENJOINED from enforcing the Orders dated March 20, 1989 and March 22, 1989 in Civil Case No. Q-89-2045, or if said orders have already been enforced, the said respondent Judge is directed to render judgment of forfeiture on the replevin bond filed by private respondents. Finally, the said respondent Judge is PERMANENTLY ENJOINED from further acting on the Motion for Contempt filed by private respondents against the petitioners.

Costs against private respondents.

SO ORDERED.

SUPERLINES vs. PNCC – go to replevin defined (1st case)

SECTION 3

THIRD DIVISION

G.R. No. 137705 August 22, 2000

SERG'S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs.PCI LEASING AND FINANCE, INC., respondent.

D E C I S I O N

PANGANIBAN, J.:

After agreeing to a contract stipulating that a real or immovable property be considered as personal or movable, a party is estopped from subsequently claiming otherwise. Hence, such property is a proper subject of a writ of replevin obtained by the other contracting party.

The Case

Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision1 of the Court of Appeals (CA)2 in CA-GR SP No. 47332 and its February 26, 1999 Resolution3 denying reconsideration. The decretal portion of the CA Decision reads as follows:

"WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is hereby LIFTED."4

In its February 18, 1998 Order,5 the Regional Trial Court (RTC) of Quezon City (Branch 218)6 issued a Writ of Seizure.7 The March 18, 1998 Resolution8 denied petitioners’ Motion for Special Protective Order, praying that the deputy sheriff be enjoined "from seizing immobilized or other real properties in (petitioners’) factory in Cainta, Rizal and to return to their original place whatever immobilized machineries or equipments he may have removed."9

The Facts

The undisputed facts are summarized by the Court of Appeals as follows:10

"On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI Leasing" for short) filed with the RTC-QC a complaint for [a] sum of money (Annex ‘E’), with an application for a writ of replevin docketed as Civil Case No. Q-98-33500.

"On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ of replevin (Annex ‘B’) directing its sheriff to seize and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of the necessary expenses.

"On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioner’s factory, seized one machinery with [the] word that he [would] return for the other machineries.

"On March 25, 1998, petitioners filed a motion for special protective order (Annex ‘C’), invoking the power of the court to control the conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of the writ of replevin.

"This motion was opposed by PCI Leasing (Annex ‘F’), on the ground that the properties [were] still personal and therefore still subject to seizure and a writ of replevin.

"In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as defined in Article 415 of the Civil Code, the parties’ agreement to the contrary notwithstanding. They argued that to give effect to the agreement would be prejudicial to innocent third parties. They further stated that PCI Leasing [was] estopped from treating these machineries as personal because the contracts in which the alleged agreement [were] embodied [were] totally sham and farcical.

"On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining properties. He was able to take two more, but was prevented by the workers from taking the rest.

"On April 7, 1998, they went to [the CA] via an original action for certiorari."

http://www.lawphil.net/judjuris/juri2000/aug2000/gr_137705_2000.html#fnt10











Ruling of the Court of Appeals

Citing the Agreement of the parties, the appellate court held that the subject machines were personal property, and that they had only been leased, not owned, by petitioners. It also ruled that the "words of the contract are clear and leave no doubt upon the true intention of the contracting parties." Observing that Petitioner Goquiolay was an experienced businessman who was "not unfamiliar with the ways of the trade," it ruled that he "should have realized the import of the document he signed." The CA further held:

"Furthermore, to accord merit to this petition would be to preempt the trial court in ruling upon the case below, since the merits of the whole matter are laid down before us via a petition whose sole purpose is to inquire upon the existence of a grave abuse of discretion on the part of the [RTC] in issuing the assailed Order and Resolution. The issues raised herein are proper subjects of a full-blown trial, necessitating presentation of evidence by both parties. The contract is being enforced by one, and [its] validity is attacked by the other – a matter x x x which respondent court is in the best position to determine."

Hence, this Petition.11

The Issues

In their Memorandum, petitioners submit the following issues for our consideration:

"A. Whether or not the machineries purchased and imported by SERG’S became real property by virtue of immobilization.

B. Whether or not the contract between the parties is a loan or a lease."12

In the main, the Court will resolve whether the said machines are personal, not immovable, property which may be a proper subject of a writ of replevin. As a preliminary matter, the Court will also address briefly the procedural points raised by respondent.

The Court’s Ruling

The Petition is not meritorious.

Preliminary Matter: Procedural Questions

Respondent contends that the Petition failed to indicate expressly whether it was being filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that the Petition erroneously impleaded Judge Hilario Laqui as respondent.

There is no question that the present recourse is under Rule 45. This conclusion finds support in the very title of the Petition, which is "Petition for Review on Certiorari."13

While Judge Laqui should not have been impleaded as a respondent,14 substantial justice requires that such lapse by itself should not warrant the dismissal of the present Petition. In this light, the Court deems it proper to remove, motu proprio, the name of Judge Laqui from the caption of the present case.

Main Issue: Nature of the Subject Machinery

Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ issued by the RTC, because they were in fact real property. Serious policy considerations, they argue, militate against a contrary characterization.

Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only.15 Section 3 thereof reads:

"SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an order and the corresponding writ of replevin describing the personal property alleged to be wrongfully detained and requiring the sheriff forthwith to take such property into his custody."

On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows:

"ART. 415. The following are immovable property:

x x x x x x x x x

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;

x x x x x x x x x"

In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners in the factory built on their own land. Indisputably, they were essential and principal elements of their chocolate-making industry. Hence, although each of them was movable or personal property on its own, all of them have become "immobilized by destination because they are essential and principal elements in the industry."16 In that sense, petitioners are correct in arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of the Civil Code.17

Be that as it may, we disagree with the submission of the petitioners that the said machines are not proper subjects of the Writ of Seizure.

The Court has held that contracting parties may validly stipulate that a real property be considered as personal.18After agreeing to such stipulation, they are consequently estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any material fact found therein.

Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to treat a house as a personal property because it had been made the subject of a chattel mortgage. The Court ruled:

"x x x. Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise."

Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills20 also held that the machinery used in a factory and essential to the industry, as in the present case, was a proper subject of a writ of replevin because it was treated as personal property in a contract. Pertinent portions of the Court’s ruling are reproduced hereunder:

"x x x. If a house of strong materials, like what was involved in the above Tumalad case, may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage."

In the present case, the Lease Agreement clearly provides that the machines in question are to be considered as personal property. Specifically, Section 12.1 of the Agreement reads as follows:21

"12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the PROPERTY or any part thereof may now be, or hereafter become, in any manner affixed or attached to or embedded in, or permanently resting upon, real property or any building thereon, or attached in any manner to what is permanent."

Clearly then, petitioners are estopped from denying the characterization of the subject machines as personal property. Under the circumstances, they are proper subjects of the Writ of Seizure.

It should be stressed, however, that our holding -- that the machines should be deemed personal property pursuant to the Lease Agreement – is good only insofar as the contracting parties are concerned.22 Hence, while the parties are bound by the Agreement, third persons acting in good faith are not affected by its stipulation characterizing the subject machinery as personal.23 In any event, there is no showing that any specific third party would be adversely affected.

Validity of the Lease Agreement

In their Memorandum, petitioners contend that the Agreement is a loan and not a lease.24 Submitting documents supposedly showing that they
















own the subject machines, petitioners also argue in their Petition that the Agreement suffers from "intrinsic ambiguity which places in serious doubt the intention of the parties and the validity of the lease agreement itself."25 In their Reply to respondent’s Comment, they further allege that the Agreement is invalid.26

These arguments are unconvincing. The validity and the nature of the contract are the lis mota of the civil action pending before the RTC. A resolution of these questions, therefore, is effectively a resolution of the merits of the case. Hence, they should be threshed out in the trial, not in the proceedings involving the issuance of the Writ of Seizure.

Indeed, in La Tondeña Distillers v. CA,27 the Court explained that the policy under Rule 60 was that questions involving title to the subject property – questions which petitioners are now raising -- should be determined in the trial. In that case, the Court noted that the remedy of defendants under Rule 60 was either to post a counter-bond or to question the sufficiency of the plaintiff’s bond. They were not allowed, however, to invoke the title to the subject property. The Court ruled:

"In other words, the law does not allow the defendant to file a motion to dissolve or discharge the writ of seizure (or delivery) on ground of insufficiency of the complaint or of the grounds relied upon therefor, as in proceedings on preliminary attachment or injunction, and thereby put at issue the matter of the title or right of possession over the specific chattel being replevied, the policy apparently being that said matter should be ventilated and determined only at the trial on the merits."28

Besides, these questions require a determination of facts and a presentation of evidence, both of which have no place in a petition for certiorari in the CA under Rule 65 or in a petition for review in this Court under Rule 45.29

Reliance on the Lease Agreement

It should be pointed out that the Court in this case may rely on the Lease Agreement, for nothing on record shows that it has been nullified or annulled. In fact, petitioners assailed it first only in the RTC proceedings, which had ironically been instituted by respondent. Accordingly, it must be presumed valid and binding as the law between the parties.

Makati Leasing and Finance Corporation30 is also instructive on this point. In that case, the Deed of Chattel Mortgage, which characterized the subject machinery as personal property, was also assailed because respondent had allegedly been required "to sign a printed form of chattel mortgage which was in a blank form at the time of signing." The Court rejected the argument and relied on the Deed, ruling as follows:

"x x x. Moreover, even granting that the charge is true, such fact alone does not render a contract void ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court. There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. x x x"

Alleged Injustice Committed on the Part of Petitioners

Petitioners contend that "if the Court allows these machineries to be seized, then its workers would be out of work and thrown into the streets."31 They also allege that the seizure would nullify all efforts to rehabilitate the corporation.

Petitioners’ arguments do not preclude the implementation of the Writ.1âwphi1 As earlier discussed, law and jurisprudence support its propriety. Verily, the above-mentioned consequences, if they come true, should not be blamed on this Court, but on the petitioners for failing to avail themselves of the remedy under Section 5 of Rule 60, which allows the filing of a counter-bond. The provision states:

"SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the applicant’s bond, or of the surety or sureties thereon, he cannot immediately require the return of the property, but if he does not so object, he may, at any time before the delivery of the property to the applicant, require the return thereof, by filing with the court where the action is pending a bond executed to the applicant, in double the value of the property as stated in the applicant’s affidavit for the delivery thereof to the applicant, if such delivery be adjudged, and for the payment of such sum to him as may be recovered against the adverse party, and by serving a copy bond on the applicant."

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs against petitioners.

SO ORDERED.

SECTION 4

RIVERA VS. VARGAS – go to nature of proceedings case

FIRST DIVISION

A.M. No. P-00-1391 September 28, 2001(Formerly AM OCA IPI-98-506-P)

LIBRADA D. TORRES, complainant, vs.NELSON C. CABESUELA, Sheriff III, Metropolitan Trial Court, Branch 9, Manila, respondent.

R E S O L U T I O N

KAPUNAN, J.:

On July 3, 1998, this Court received from the Deputy Ombudsman for the Military the complete records of OMB-1-97-0659 entitled "Librada D. Torres versus Senior Inspector Elmer Beltejar, SPO1 Alfredo Caday, PO3 Armando Francisco, PO3 Randy Beltran, all members of the Philippine National Police Station, San Antonio, Nueva Ecija and Sheriff Nelson C. Cabesuela of the Metropolitan Trial Court (MeTC), Branch 9, Manila" for violation of Section 3(e) of Republic Act No. 30191 (Anti-Graft and Corrupt Practices Act) relative to Civil Case No. 151528-CV of the MeTC, Branch 9, Manila docket.

It appears from the records that complainant Torres executed an affidavit-complaint dated December 20, 1996 alleging that she is one of the owners of San Antonio High School in San Antonio, Nueva Ecija. Said school is the owner of a Mitsubishi Pajero mortgaged to Philam Savings Bank, Inc. The school failed to pay its obligation so the bank filed a complaint for replevin and damages. On September 6, 1996, Judge Amelia A. Fabros of MeTC, Branch 9, Manila, granted the bank's prayer for a writ of replevin. Consequently, a writ of replevin addressed to respondent sheriff was issued. On December 2, 1996, said vehicle was taken from complainant's residence by the members of the PNP, San Antonio, Nueva Ecija, named herein. Later on, complainant filed a motion to amend the complaint to include herein sheriff as respondent in the complaint since it was by virtue of the "Sheriffs Deputization" issued by respondent that respondent police officers were able to "implement" the writ.

Respondent sheriff filed a motion to dismiss alleging that after Judge Fabros came out with the writ of seizure, he issued the "Sheriffs Deputization" addressed to the Chief of Police of San Antonio, Nueva Ecija requesting for assistance in the implementation of said writ. According to him, he "deputized" the police officers only after he attempted to implement the writ and found the vehicle at a local motorshop undergoing repairs. Because of this, he opted to "constructively seize" the vehicle by serving copies of the complaint, summons and bond to complainant and a certain Ignacio Gonzales.

Complainant filed her opposition and/or comment thereto contending that the act of the respondent in deputizing the police officers in implementing the writ of seizure did not find support in law and in the Rules of Court. She stated that respondent usurped the powers of Judge Fabros.

On September 26, 1997, the motion to dismiss was denied.

On November 20, 1997, the Deputy Ombudsman for the Military issued a resolution recommending the filing of an information for violation of Section 3(e) of RA No. 3019 against the police officers and herein respondent but dismissing the case for violation of R.A. No. 6713 and Article 177 of the Revised Penal Code. The same resolution likewise directed that a copy of the resolution be furnished the Supreme Court thru the Court Administrator for administrative proceedings against herein respondent.

On February 12, 1999, the Court Administrator required herein respondent to comment on the affidavit-complaint and amended complaint.

In his comment, respondent claimed that he issued the "Sheriff's Deputization" in good faith although he admitted that his act was unlawful. He contended that his only purpose for issuing the same was to seek the assistance of the Chief of Police of Nueva Ecija because he was not familiar with the place and for said Chief of Police to seize the









vehicle. Moreover, he opined that complainant was a very powerful and influential person as shown by her ability to remove the vehicle from the motorshop without seeking the permission of the court.

On July 3, 2000, the Court issued a resolution directing the docketing of the case as a regular administrative proceeding and requiring the parties to manifest if they are willing to submit the case as the basis of the pleadings already filed. Only respondent sheriff filed a manifestation. Complainant's silence was considered as a conforme to the submission of the case for resolution on the basis of the pleadings thus filed.

In his report, the Court Administrator found the complaint meritorious and recommended that a fine of P5,000.00 be imposed upon the respondent, viz:

The act of respondent in issuing the Sheriff s Deputization is without legal basis.

First, respondent should have known that under Administrative Circular No. 12 (5) it is provided that "No sheriff or deputy sheriff shall execute a court writ outside his territorial jurisdiction without first notifying in writing and seeking the assistance of, the sheriff of the place where the execution shall take place".

Respondent's act of implementing the writ in Nueva Ecija when his territorial jurisdiction is confined only to Manila is a clear violation of the law. The proper recourse would have been to seek the assistance of the sheriff of Nueva Ecija rather than deputizing the police officer of said place.

Furthermore, in Tordesillas vs. Basco (108 SCRA 551,556) it was held that under Sections 3 and 4 of Rule 60 of the Rules of Court, it is the personal duty and responsibility of the sheriff to personally implement the writ and it constitutes serious misconduct and gross negligence for a sheriff to delegate his primary role in implementing a writ of seizure. Respondent's absence during the seizure of the subject vehicle by the police officers falls squarely within this prohibition for which he should be held liable.

We agree with the Court Administrator and hereby adopt his findings and recommendation.

Sheriffs are ministerial officers. Their office is to execute all writs returnable to the court, unless another is appointed, by special order of the court, for the purpose.2

As a ministerial officer, respondent sheriff should have known that it was his duty, in the absence of instructions, to faithfully perform what was incumbent upon him to do. Administrative Circular No. 12 was promulgated in order to streamline the service and execution of court writs and processes in the reorganized courts under Batas Pambansa Blg. 129 and to better serve the public good and facilitate the administration of justice. Paragraph 5 of said Circular is clear and self-explanatory. "No sheriff or deputy sheriff shall execute a court writ outside his territorial jurisdiction without first notifying in writing, and seeking the assistance of the sheriff of the place where the execution shall take place." Accordingly, as sheriff of the MeTC, Branch 9 of the City of Manila, respondent sheriff should have notified in writing, and should have sought the assistance of, the sheriff of San Antonio, Nueva Ecija, to enforce the subject writ instead of unlawfully deputizing the Chief of Police of San Antonio, Nueva Ecija.

Officers of the court and all court personnel are exhorted to be vigilant in the execution of the law. Sheriffs, as agents of the law, are therefore called upon to discharge their duties with due care and utmost diligence. They cannot afford to err in serving court writs and processes and in implementing court orders lest they undermine the integrity of their office and the efficient administration of justice.3

WHEREFORE, respondent NELSON C. CABESUELA is hereby found GUlLTY of abuse of authority and isORDERED to pay a FINE in the amount of FIVE THOUSAND PESOS (P5,000.00) with a stern warning that a repetition of similar acts in the future shall be dealt with more severely.1âwphi1.nêt

SO ORDERED.

THIRD DIVISION

A.M. No. P-98-1283 May 9, 2000(formerly OCA IPI No. 96-140-P)

JOHNNY GOMEZ and MAR GUIDOTE for SABINO S. RAMOS, complainants,vs.RODOLFO A. CONCEPCION, Deputy Sheriff, Regional Trial Court, Branch 28, Cabanatuan City,respondent.

VITUG, J.:

This administrative case originated from a letter, dated 10 April 1996, sent by Johnny Gomez and Mar Guidote, both of Radio Veritas, relative to the complaint of Sabino S. Ramos against Rodolfo A. Concepcion, Deputy Sheriff of the Regional Trial Court, Branch 28, of Cabanatuan City.

It would appear that on 10 March 1996, Sabino Ramos, while driving his owner-type jeep, figured in a vehicular accident. The vehicle was bumped by a passenger jeepney, with Plate No. DLZ-588, causing damage to the jeep of Ramos and injuries to the passengers. The offending vehicle, the passenger jeepney, turned out to be under the custody of respondent Sheriff. When required to comment on the complaint, he averred that the passenger jeepney was carnapped in front of his residence on 10 March 1996, between 12:00 p.m. to 1:00 p.m., which incident he immediately reported to the Philippine National Police of Cabanatuan City.

On 21 April 1997, the Court resolved, among other things, to dispense with the filing of a reply by complainant to the comment; instead, it referred the case on 30 July 1997 to Executive Judge Federico B. Fajardo, Jr., of the Regional Trial Court of Cabanatuan City for investigation, report and recommendation.

In his report, dated 30 April 1998, the Investigating Judge informed the Court that complainant Ramos had repeatedly failed to appear in his sala despite having been notified of the scheduled hearings. At one time, a relative of complainant appeared before Judge Fajardo to inform the latter that the complainant was indisposed, his feet being in cast which prevented him from travelling all the way to Cabanatuan City. Complainant was directed to submit a medical certificate but he failed to comply. The Investigating Judge recommended the dismissal of the complaint, additionally noting that the sworn statements of Sabino Ramos and Edna Ramos had failed to mention any possible personal gain on the part of respondent Sheriff in the use of the passenger jeepney.

In its resolution, dated 20 July 1998, the Court referred the report of the Investigating Judge to the Office of the Court Administrator ("OCA") for evaluation, report and recommendation. The case was docketed as a regular administrative matter in another resolution of 02 December 1998, and the parties were required to manifest whether they would submit the case for resolution on the basis of the records before the Court. For failure of the parties to comply therewith, the Court, in its 24 November 1999 resolution, resolved to dispense with the required manifestation.

In the memorandum submitted by OCA, through DCA Bernardo T. Ponferrada, in compliance with the Court's resolution of 20 July 1998, the OCA recommended that respondent Sheriff be meted the penalty of two (2) months suspension without pay, the period of which should not be chargeable against his accumulated leave, with a warning that a repetition of the same or any other act calling for disciplinary action will be dealt with severely. The OCA observed:

While we conform with the opinion of the investigating judge that there is no evidence to substantiate the allegation that respondent sheriff leased the passenger jeepney in question (Plate No. DLZ-588) to a third party for personal gain and that complainant Sabino Ramos clearly manifested his lack of interest to prosecute this case, we beg to disagree with the recommendation to dismiss the case on these grounds alone.

It is an undisputed fact that the aforesaid vehicle was under the custody of the law as shown by the respondent's report to the PNP of Cabanatuan City, when he stated that, "between the hour of 12:00 high noon and 1:00 P.M., 10 March 1996, the Passenger Type Jeep with Plate No. DLZ-588, which was placed under his custody and parked in front his residence at Sapiandante this City, was lost.


The undersigned cannot find a valid explanation why the passenger jeepney under custodia legisshould be placed infront of respondent's residence without taking into account the problem of safety and security. He unduly exposed the jeep to undesirable elements, making it an "easy prey" for thieves and carnappers.

Sec. 4, Rule 60 of the Rules of Court provides: . . . When the officer has taken property as herein provided, he must keep it in a secure place and shall be responsible for it and ultimately deliver it to the party entitled thereto upon receiving his fees and necessary expenses for taking and keeping the same.

Evidently, the respondent was remiss in the performance of his official duty and responsibility to safely secure the property in his custody until its delivery to the party entitled to it, as mandated by the rules. The vehicle could have been deposited in the premises of the court where it is secured, or, at any other place where the required security is provided for and available. For after all, the respondent should have known that his office could have charged the party entitled to it, allowable fees for storage, necessary in safely keeping the property in custodia legis.

But, for reasons only known to the respondent, he breached his official duty and responsibility making him answerable for the consequences of his lapses.

The conduct and behavior of everyone connected with an office charged with the dispensation of justice, from the presiding judge to the sheriff, should be circumscribed with the heavy burden of responsibility. This is especially true of sheriffs (Cunanan vs. Tuazon, A.M. No. P-93-776, Oct. 7, 1994). As a sheriff, the respondent is bound to discharge his duties with prudence, caution and attention which careful men usually exercise in the management of their affairs (Evangelista vs. Penserga, 242 SCRA 702). 1

The Court agrees with the above findings and recommendations of the OCA.

In Gacho vs. Fuentes, Jr.,2 the Court has said, now here reiterated, that proceedings in administrative cases against public officers and employees should not be made to depend on the whims and caprices of complainants who, verily, are to be deemed mere witnesses therein. Once the Court has taken cognizance of an administrative case, a complaint can not be withdrawn on just the "say-so" of the complainant. The apparent lack of interest of herein complainant to pursue the matter will not be enough to warrant the dismissal of the case since the records on hand could amply show the culpability of respondent for which he should be held administratively liable. Sheriffs play an important role in the administration of justice, and being agents of the law and the courts, high standards are expected of them.3 Respondent Sheriff did not proffer any explanation for parking the vehicle in his custody in front of his residence instead of having it stored in a secure place.4 Respondent Sheriff has clearly been remiss in the performance of his assigned task.

WHEREFORE, respondent Rodolfo A. Concepcion is found guilty of dereliction of duty and is hereby SUSPENDED for two (2) months, without pay, with a warning that the commission of similar acts in the future shall be dealt with most severely by this Court.

SO ORDERED.

SECOND DIVISION

A.M. No. P-07-2384 June 18, 2008

KENNETH HAO, complainant, vs.ABE C. ANDRES, Sheriff IV, Regional Trial Court, Branch 16, Davao City, respondent.

RESOLUTION

QUISUMBING, J.:

Before us is an administrative complaint for gross neglect of duty, grave abuse of authority (oppression) and violation of Republic Act No. 30191 filed by complainant Kenneth Hao against respondent Abe C.

Andres, Sheriff IV of the Regional Trial Court (RTC) of Davao City, Branch 16.

The antecedent facts are as follows:

Complainant Hao is one of the defendants in a civil case for replevin docketed as Civil Case No. 31, 127-20052entitled "Zenaida Silver, doing trade and business under the name and style ZHS Commercial v. Loreto Hao, Atty. Amado Cantos, Kenneth Hao and John Does," pending before the RTC of Davao City, Branch 16.

On October 17, 2005, Judge Renato A. Fuentes3 issued an Order of Seizure4 against 22 motor vehicles allegedly owned by the complainant. On the strength of the said order, Andres was able to seize two of the subject motor vehicles on October 17, 2005; four on October 18, 2005, and another three on October 19, 2005, or a total of nine motor vehicles.5

In his Affidavit-Complaint6 against Andres before the Office of the Court Administrator (OCA), Hao alleged that Andres gave undue advantage to Zenaida Silver in the implementation of the order and that Andres seized the nine motor vehicles in an oppressive manner. Hao also averred that Andres was accompanied by unidentified armed personnel on board a military vehicle which was excessive since there were no resistance from them. Hao also discovered that the compound where the seized motor vehicles were placed is actually owned by Silver.7

On October 21, 2005, in view of the approval of the complainant’s counter-replevin bond, Judge Emmanuel C. Carpio8 ordered Andres to immediately cease and desist from further implementing the order of seizure, and to return the seized motor vehicles including its accessories to their lawful owners.9

However, on October 24, 2005, eight of the nine seized motor vehicles were reported missing. In his report,10Andres stated that he was shocked to find that the motor vehicles were already missing when he inspected it on October 22, 2005. He narrated that on October 21, 2005, PO3 Rodrigo Despe, one of the policemen guarding the subject motor vehicles, reported to him that a certain "Nonoy" entered the compound and caused the duplication of the vehicles’ keys.11 But Andres claimed the motor vehicles were still intact when he inspected it on October 21, 2005.

Subsequently, Hao reported that three of the carnapped vehicles were recovered by the police.12 He then accused Andres of conspiring and conniving with Atty. Oswaldo Macadangdang (Silver’s counsel) and the policemen in the carnapping of the motor vehicles. Hao also accused Andres of concealing the depository receipts from them and pointed out that the depository receipts show that Silver and Atty. Macadangdang were the ones who chose the policemen who will guard the motor vehicles.

In his Comment13 dated March 3, 2006, Andres vehemently denied violating Rep. Act No. 3019 and committing gross neglect of duty.

Andres denied implementing the Order of Seizure in an oppressive manner. He said he took the vehicles because they were the specific vehicles ordered to be seized after checking their engine and chassis numbers. Andres likewise denied that he was accompanied by military personnel in the implementation of the order. He claimed that he was merely escorted by policemen pursuant to the directive of Police Senior Supt. Catalino S. Cuy, Chief of the Davao City Police Office. Andres also maintained that no form of harassment or oppression was committed during the implementation of the order, claiming that the presence of the policemen was only for the purpose of preserving peace and order, considering there were 22 motor vehicles specified in the Order of Seizure. Andres added that he exercised no discretion in the selection of the policemen who assisted in the implementation of the order, much less of those who will guard the seized motor vehicles.

Andres disputed the allegation that he neglected his duty to safeguard the seized vehicles by pointing out that he placed all the motor vehicles under police watch. He added that the policemen had control of the compound where the seized motor vehicles were kept.

Andres likewise contended that after the unauthorized duplication of the vehicles’ keys was reported to him, he immediately advised the policemen on duty to watch the motor vehicles closely.14 He negated the speculations that he was involved in the disappearance of the seized motor vehicles as he claims to be the one who reported the incident to the court and the police.

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As to the allegation of undisclosed depository receipts, Andres maintained that he never denied the existence of the depository receipts. He said the existence of the depository receipts was immediately made known on the same day that the subject motor vehicles were discovered missing. He even used the same in the filing of the carnapping case against Silver and her co-conspirators.

Finally, Andres insisted that the guarding of properties under custodia legis by policemen is not prohibited, but is even adopted by the court. Hence, he prays that he be held not liable for the loss of the vehicles and that he be relieved of his duty to return the vehicles.15

After the OCA recommended that the matter be investigated, we referred the case to Executive Judge Renato A. Fuentes for investigation, report and recommendation.16

In his Investigation Report17 dated September 21, 2006, Judge Fuentes found Andres guilty of serious negligence in the custody of the nine motor vehicles. He recommended that Andres be suspended from office.

Judge Fuentes found numerous irregularities in the implementation of the writ of replevin/order of seizure, to wit: (1) at the time of the implementation of the writ, Andres knew that the vehicles to be seized were not in the names of any of the parties to the case; (2) one vehicle was taken without the knowledge of its owner, a certain Junard Escudero; (3) Andres allowed Atty. Macadangdang to get a keymaster to duplicate the vehicles’ keys in order to take one motor vehicle; and (4) Andres admitted that prior to the implementation of the writ of seizure, he consulted Silver and Atty. Macadangdang regarding the implementation of the writ and was accompanied by the latter in the course of the implementation. Judge Fuentes observed that the motor vehicles were speedily seized without strictly observing fairness and regularity in its implementation.18

Anent the safekeeping of the seized motor vehicles, Judge Fuentes pointed out several instances where Andres lacked due diligence to wit: (1) the seized motor vehicles were placed in a compound surrounded by an insufficiently locked see-through fence; (2) three motor vehicles were left outside the compound; (3) Andres turned over the key of the gate to the policemen guarding the motor vehicles; (4) Andres does not even know the full name of the owner of the compound, who was merely known to him as "Gloria"; (5) except for PO3 Despe and SPO4 Nelson Salcedo, the identities of the other policemen tapped to guard the compound were unknown to Andres; (6) Andres also admitted that he only stayed at least one hour each day from October 19-21, 2005 during his visits to the compound; and (7) even after it was reported to him that a certain "Nonoy" entered the compound and duplicated the keys of the motor vehicles, he did not exert his best effort to look for that "Nonoy" and to confiscate the duplicated keys.19

Judge Fuentes also observed that Andres appeared to be more or less accommodating to Silver and her counsel but hostile and uncooperative to the complainant. He pointed out that Andres depended solely on Silver in the selection of the policemen who would guard the seized motor vehicles. He added that even the depository receipts were not turned over to the defendants/third-party claimants in the replevin case but were in fact concealed from them. Andres also gave inconsistent testimonies as to whether he has in his possession the depository receipts.20

The OCA disagreed with the observations of Judge Fuentes. It recommended that Andres be held liable only for simple neglect of duty and be suspended for one (1) month and one (1) day.21

We adopt the recommendation of the investigating judge.

Being an officer of the court, Andres must be aware that there are well-defined steps provided in the Rules of Court regarding the proper implementation of a writ of replevin and/or an order of seizure. The Rules, likewise, is explicit on the duty of the sheriff in its implementation. To recapitulate what should be common knowledge to sheriffs, the pertinent provisions of Rule 60, of the Rules of Court are quoted hereunder:

SEC. 4. Duty of the sheriff.–Upon receiving such order, the sheriff must serve a copy thereof on the adverse party, together with a copy of the application, affidavit and bond, and must forthwith take the property, if it be in the possession of the adverse party, or his agent, and retain it in his custody. If the property or any part thereof be concealed in a building or enclosure, the sheriff must demand its delivery, and if it be not delivered, he must cause the building or enclosure to be broken open and take the property

into his possession. After the sheriff has taken possession of the property as herein provided, he must keep it in a secure place and shall be responsible for its delivery to the party entitled thereto upon receiving his fees and necessary expenses for taking and keeping the same.(Emphasis supplied.)

SEC. 6. Disposition of property by sheriff.–If within five (5) days after the taking of the property by the sheriff, the adverse party does not object to the sufficiency of the bond, or of the surety or sureties thereon; or if the adverse party so objects and the court affirms its approval of the applicant’s bond or approves a new bond, or if the adverse party requires the return of the property but his bond is objected to and found insufficient and he does not forthwith file an approved bond, the property shall be delivered to the applicant. If for any reason the property is not delivered to the applicant, the sheriff must return it to the adverse party. (Emphasis supplied.)

First, the rules provide that property seized under a writ of replevin is not to be delivered immediately to the plaintiff.22 In accordance with the said rules, Andres should have waited no less than five days in order to give the complainant an opportunity to object to the sufficiency of the bond or of the surety or sureties thereon, or require the return of the seized motor vehicles by filing a counter-bond. This, he failed to do.

Records show that Andres took possession of two of the subject motor vehicles on October 17, 2005, four on October 18, 2005, and another three on October 19, 2005. Simultaneously, as evidenced by the depository receipts, on October 18, 2005, Silver received from Andres six of the seized motor vehicles, and three more motor vehicles on October 19, 2005. Consequently, there is no question that Silver was already in possession of the nine seized vehicles immediately after seizure, or no more than three days after the taking of the vehicles. Thus, Andres committed a clear violation of Section 6, Rule 60 of the Rules of Court with regard to the proper disposal of the property.

It matters not that Silver was in possession of the seized vehicles merely for safekeeping as stated in the depository receipts. The rule is clear that the property seized should not be immediately delivered to the plaintiff, and the sheriff must retain custody of the seized property for at least five days.23 Hence, the act of Andres in delivering the seized vehicles immediately after seizure to Silver for whatever purpose, without observing the five-day requirement finds no legal justification.

In Pardo v. Velasco,24 this Court held that

…Respondent as an officer of the Court is charged with certain ministerial duties which must be performed faithfully to the letter. Every provision in the Revised Rules of Court has a specific reason or objective. In this case, the purpose of the five (5) days is to give a chance to the defendant to object to the sufficiency of the bond or the surety or sureties thereon or require the return of the property by filing a counterbond.…25 (Emphasis supplied.)

In Sebastian v. Valino,26 this Court reiterated that

Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the plaintiff. The sheriff must retain it in his custody for five days and he shall return it to the defendant, if the latter, as in the instant case, requires its return and files a counterbond.…27 (Emphasis supplied.)

Likewise, Andres’ claim that he had no knowledge that the compound is owned by Silver fails to convince us. Regardless of who actually owns the compound, the fact remains that Andres delivered the vehicles to Silver prematurely. It violates the rule requiring him to safekeep the vehicles in his custody.28 The alleged lack of facility to store the seized vehicles is unacceptable considering that he should have deposited the same in a bonded warehouse. If this was not feasible, he should have sought prior authorization from the court issuing the writ before delivering the vehicles to Silver.

Second, it must be stressed that from the moment an order of delivery in replevin is executed by taking possession of the property specified therein, such property is in custodia legis. As legal custodian, it is Andres’ duty to safekeep the seized motor vehicles. Hence, when he passed his duty to safeguard the motor vehicles to Silver, he committed a clear neglect of duty.
















Third, we are appalled that even after PO3 Despe reported the unauthorized duplication of the vehicles’ keys, Andres failed to take extra precautionary measures to ensure the safety of the vehicles. It is obvious that the vehicles were put at risk by the unauthorized duplication of the keys of the vehicles. Neither did he immediately report the incident to the police or to the court. The loss of the motor vehicles could have been prevented if Andres immediately asked the court for an order to transfer the vehicles to another secured place as soon as he discovered the unauthorized duplication. Under these circumstances, even an ordinary prudent man would have exercised extra diligence. His warning to the policemen to closely watch the vehicles was insufficient. Andres cannot toss back to Silver or to the policemen the responsibility for the loss of the motor vehicles since he remains chiefly responsible for their safekeeping as legal custodian thereof. Indeed, Andres’ failure to take the necessary precaution and proper monitoring of the vehicles to ensure its safety constitutes plain negligence.

Fourth, despite the cease and desist order, Andres failed to return the motor vehicles to their lawful owners. Instead of returning the motor vehicles immediately as directed, he opted to write Silver and demand that she put up an indemnity bond to secure the third-party claims. Consequently, due to his delay, the eventual loss of the motor vehicles rendered the order to return the seized vehicles ineffectual to the prejudice of the complaining owners.

It must be stressed that as court custodian, it was Andres’ responsibility to ensure that the motor vehicles were safely kept and that the same were readily available upon order of the court or demand of the parties concerned. Specifically, sheriffs, being ranking officers of the court and agents of the law, must discharge their duties with great care and diligence. In serving and implementing court writs, as well as processes and orders of the court, they cannot afford to err without affecting adversely the proper dispensation of justice. Sheriffs play an important role in the administration of justice and as agents of the law, high standards of performance are expected of them.29 Hence, his failure to return the motor vehicles at the time when its return was still feasible constitutes another instance of neglect of duty.

Fifth, as found by the OCA, we agree that Andres also disregarded the provisions of Rule 14130 of the Rules of Court with regard to payment of expenses.

Under Section 9,31 Rule 141 of the Rules of Court, the procedure for the execution of writs and other processes are: First, the sheriff must make an estimate of the expenses to be incurred by him; Second, he must obtain court approval for such estimated expenses; Third, the approved estimated expenses shall be deposited by the interested party with the Clerk of Court and ex officio sheriff; Fourth, the Clerk of Court shall disburse the amount to the executing sheriff; and Fifth, the executing sheriff shall liquidate his expenses within the same period for rendering a return on the writ.

In this case, no estimate of sheriff’s expenses was submitted to the court by Andres. Without approval of the court, he also allowed Silver to pay directly to the policemen the expenses for the safeguarding of the motor vehicles including their meals.32 Obviously, this practice departed from the accepted procedure provided in the Rules of Court.

In view of the foregoing, there is no doubt that Andres failed to live up to the standards required of his position. The number of instances that Andres strayed from the regular course observed in the proper implementation of the orders of the court cannot be countenanced. Thus, taking into account the numerous times he was found negligent and careless of his duties coupled with his utter disregard of legal procedures, he cannot be considered guilty merely of simple negligence. His acts constitute gross negligence.

As we have previously ruled:

…Gross negligence refers to negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally, with a conscious indifference to consequences in so far as other persons may be affected. It is the omission of that care which even inattentive and thoughtless men never fail to take on their own property.…33 (Emphasis supplied.)

…Gross neglect, on the other hand, is such neglect from the gravity of the case, or the frequency of instances, becomes so serious in its character as to endanger or threaten the public welfare. The term does not necessarily include willful neglect or intentional official wrongdoing.34(Emphasis supplied.)

Good faith on the part of Andres, or lack of it, in proceeding to properly execute his mandate would be of no moment, for he is chargeable with the knowledge that being an officer of the court tasked therefor, it behooves him to make due compliance. He is expected to live up to the exacting standards of his office and his conduct must at all times be characterized by rectitude and forthrightness, and so above suspicion and mistrust as well.35 Thus, an act of gross neglect resulting in loss of properties in custodia legis ruins the confidence lodged by the parties to a suit or the citizenry in our judicial process. Those responsible for such act or omission cannot escape the disciplinary power of this Court.

Anent the allegation of grave abuse of authority (oppression), we likewise agree with the observations of the investigating judge. Records show that Andres started enforcing the writ of replevin/order of seizure on the same day that the order of seizure was issued. He also admitted that he took the vehicles of persons who are not parties to the replevin case.36 He further admitted that he took one vehicle belonging to a certain Junard Escudero without the latter’s knowledge and even caused the duplication of its keys in order that it may be taken by Andres.37 Certainly, these are indications that Andres enforced the order of seizure with undue haste and without giving the complainant prior notice or reasonable time to deliver the motor vehicles. Hence, Andres is guilty of grave abuse of authority (oppression).

When a writ is placed in the hands of a sheriff, it is his duty, in the absence of any instructions to the contrary, to proceed with reasonable celerity and promptness to execute it according to its mandate. However, the prompt implementation of an order of seizure is called for only in instances where there is no question regarding the right of the plaintiff to the property.38 Where there is such a question, the prudent recourse for Andres is to desist from executing the order and convey the information to his judge and to the plaintiff.

True, sheriffs must comply with their mandated ministerial duty to implement writs promptly and expeditiously, but equally true is the principle that sheriffs by the nature of their functions must at all times conduct themselves with propriety and decorum and act above suspicion. There must be no room for anyone to conjecture that sheriffs and deputy sheriffs as officers of the court have conspired with any of the parties to a case to obtain a favorable judgment or immediate execution. The sheriff is at the front line as representative of the judiciary and by his act he may build or destroy the institution.39

However, as to the charge of graft and corruption, it must be stressed that the same is criminal in nature, thus, the resolution thereof cannot be threshed out in the instant administrative proceeding. We also take note that there is a pending criminal case for carnapping against Andres;40 hence, with more reason that we cannot rule on the allegation of graft and corruption as it may preempt the court in its resolution of the said case.

We come to the matter of penalties. The imposable penalty for gross neglect of duty is dismissal. While the penalty imposable for grave abuse of authority (oppression) is suspension for six (6) months one (1) day to one (1) year.41 Section 55, Rule IV, of the Uniform Rules on Administrative Cases in the Civil Service provides that if the respondent is found guilty of two or more charges or counts, the penalty to be imposed should be that corresponding to the most serious charge or count and the rest shall be considered as aggravating circumstances.

In the instant case, the penalty for the more serious offense which is dismissal should be imposed on Andres. However, following Sections 5342 and 54,43 Rule IV of the Uniform Rules on Administrative Cases in the Civil Service, we have to consider that Andres is a first-time offender; hence, a lighter penalty than dismissal from the service would suffice. Consequently, instead of imposing the penalty of dismissal, the penalty of suspension from office for one (1) year without pay is proper for gross neglect of duty, and another six (6) months should be added for the aggravating circumstance of grave abuse of authority (oppression).

WHEREFORE, the Court finds Abe C. Andres, Sheriff IV, RTC of Davao City, Branch 16, GUILTY of gross neglect of duty and grave abuse of authority (oppression) and is SUSPENDED for one (1) year and six (6) months without pay. He is also hereby WARNED that a repetition of the same or similar offenses in the future shall be dealt with more severely.

SO ORDERED.

FOOTNOTES:31 SEC. 9. Sheriffs and other persons serving processes.—

x x x xIn addition to the fees hereinabove fixed, the party requesting the process of any court, preliminary, incidental, or final, shall

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pay the sheriff’s expenses in serving or executing the process, or safeguarding the property, levied upon, attached or seized, including kilometrage for each kilometer of travel, guards’ fees, warehousing and similar charges, in an amount estimated by the sheriff, subject to the approval of the court. Upon approval of said estimated expenses, the interested party shall deposit such amount with the clerk of court and ex officio sheriff, who shall disburse the same to the deputy sheriff assigned to effect the process, subject to liquidation within the same period for rendering a return on the process. Any unspent amount shall be refunded to the party making the deposit. A full report shall be submitted by the deputy sheriff assigned with his return, and the sheriff’s expenses shall be taxed as costs against the judgment debtor.

SECTION 5

CITIBANK NA VS. CA – GO TO SECTION 2

SECOND DIVISION

A.M. No. P-04-1920 August 17, 2007

SPOUSES NORMANDY and RUTH BAUTISTA, Complainants, vs.ERNESTO L. SULA, Sheriff IV, Regional Trial Court, Branch 98, Quezon City, Respondent.

D E C I S I O N

CARPIO, J.:

The Facts

On 6 December 2003, Ruth B. Bautista (Ruth) borrowed P300,000 from Ceniza C. Glor (Glor). The loan, payable in three months, bore a monthly interest of five percent. The three-month period commenced on 6 December 2003 and expired on 6 March 2004. To secure the loan, Ruth executed a chattel mortgage over her Honda CRV in favor of Glor.1

Upon maturity of the loan, Glor repeatedly demanded payment from Ruth. Despite the repeated demands, Ruth refused to pay her debt, or surrender possession of the vehicle.2 Thus, on 6 May 2004, Glor filed with the Regional Trial Court, Branch 98, Quezon City (trial court), a civil case3 for judicial foreclosure of chattel mortgage with prayer for the issuance of a writ of replevin.

Thereafter, the trial court issued a writ of replevin4 dated 14 May 2004 directing Ernesto L. Sula (respondent), Sheriff IV of the trial court, to take possession of the vehicle and keep it in his custody:

WHEREAS, plaintiff Ceniza C. Glor, in the above-entitled case, having filed an application with this Court praying for the seizure and delivery to Ceniza C. Glor of the property, more particularly described hereafter, and having filed the affidavit required by the Rules of Court and executed to the defendant a bond in the sum of EIGHT HUNDRED THOUSAND PESOS ONLY (P800,000.00).

You are hereby ordered to take immediate possession of the following property which is now detained by the defendant, to wit:

MAKE & TYPE : Honda CRV (Station Wagon)

MOTOR NO. : PEWD7P100308

CHASSIS NO. : PADRD1830WV000347

PLATE NO. : HRS-555

FILE NO. : 1320-00000161749

and to keep the said property in your possession for five (5) days. At the expiration of the said period, you shall deliver, subject to the provisions of Sections 5, 6 and 7 of Rule 60 of the Rules of Court, to the plaintiff the said property, provided that your legal fees and all the necessary expenses are fully paid.

Respondent enforced the writ on 17 May 2004.5 On 20 May 2004, spouses Normandy R. Bautista and Ruth B. Bautista (complainants) filed with the trial court an urgent motion6 for the return of the vehicle

and submission of counter-bond. On 21 May 2004, complainants filed a motion7 to withdraw the urgent motion, attaching thereto an omnibus motion8 for entry of appearance, urgent setting of hearing, and redelivery of the vehicle to them. Pursuant to Section 5 of Rule 60, complainants required the return of the vehicle to them by filing a counter-bond and serving Glor a copy of the counter-bond.9

Because the trial court failed to approve complainants’ counter-bond within the five-day period provided in Section 6 of Rule 60, Glor, in a letter10 dated 24 May 2004, asked respondent to deliver the vehicle to her. In a letter11dated 26 May 2004, complainants asked respondent not to deliver the vehicle to Glor because (1) pursuant to Section 5, they had required the return of the vehicle to them and filed the corresponding counter-bond; (2) the vehicle’s delivery to Glor was not justified under Section 6; and (3) there was no order from the trial court directing the delivery to Glor. In a letter12 dated 26 May 2004, Glor reiterated her demand on respondent to deliver the vehicle to her; otherwise, she would be constrained to pursue legal actions against him.

On 26 May 2004, complainants alleged that respondent approached them in the Quezon City Hall of Justice building asking them to wait for him by the benches at the back of the second floor. There, respondent told them that he was willing to ignore Glor’s request in exchange for P20,000. With a little hesitation, they offered himP3,000 and promised to give the balance on the following day. Respondent agreed and immediately received theP3,000. On the next day, however, complainants did not give the balance. They asked respondent if he could give them more time to raise the money. Respondent was irked by this. Complainants alleged that:

At 4:50 P.M. he came to us at the designated place and while we were reading his Sheriff’s Manifestation, he said he had not eaten lunch yet because in his words "dahil sa paggawa ko ng Manifestation at sama ng loob dahil ako ang naipit dito sa kaso nyo, si judge kasi ang bagal mag-release ng order. Kakasuhan na ko sa Ombudsman ngplaintiff." Trying to clarify what he meant about this, we ask [sic] him what we on our part need [sic] to do so that the property will be ensured that its [sic] under the custody of the court or "custodia legis" until such time that the Honorable Court could resolve our motion. However we were totally surprised when he said that "Nasa sa inyo yan pero yun kasing kabila talagang desidido na makuha ang property, kung makapagbigay kayo ng kahit Twenty (20) Thousand sa akin magagawan natin yan ng paraan na di makuha ng plaintiff, yun ay kung gusto nyo lang, kasi pag napunta yan sa kanila baka di nyo na makita yan".

[With] those words from Sheriff IV Ernesto L. Sula it became clear to us that he was asking money to favor us in the disposition of the property, I replied that the only cash we have [sic] at the time was only Three (3) Thousand Pesos and ask [sic] him if he could accept it for the meantime and that we will come up with the balance on the following morning. He said "Cge pero siguraduhin nyo lang maibigay nyo ang balanse bukas ng maaga kasi meron din akong bibigyan para safe din ako. Ganito kasi dito kailangan may nakakaalam na mas mataas para may proteksiyon tayo." At this point I asked my wife, Ruth B. Bautista what she thought about it and she said its [sic] up to me and thereafter I gestured to give him the Three (3) Thousand Pesos which he said "Isimple mo lang ang abot para walang makapansin" and I simply slipped the money in his hand and after he received the money put his hand immediately in his pocket. x x x

[O]n the following day 27th May 2004 at 8:10 A.M. We met him at the benches at the back of the 3rd floor of the Justice Hall Bldg. We immediately apologized and told him that we failed to borrow money for the balance of our agreement and ask [sic] if he could wait until at [sic] Friday 29th May 2004 to come up with the balance of our agreement because it might take some time before we can raise it. x x x He answered that "Medyo mahirap pala kayong kausap" and left us.13

On 27 May 2004, respondent filed a sheriff’s manifestation asking the trial court’s guidance on whether he should deliver the vehicle to Glor or keep it in custodia legis:

[T]his Manifestation is respectfully filed before the Honorable Court, in order that he maybe [sic] guided on whether he should release the vehicle as demanded by plaintiff or hold its release until such time that the Motions and Counter[-]bond filed by defendants is [sic] resolved as requested by the defendant.14

Without waiting for the trial court’s instructions regarding the vehicle, respondent filed his sheriff’s return on 28 May 2004 stating that he had already delivered the vehicle to Glor:

[O]n May 27, 2004, after the expiration of the five (5) days [sic] period and in the absence of any Court Order/s, undersigned turned-over the

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possession of the motor vehicle to the Plaintiff as per Court/Sheriff’s Receipt hereto attached.15

On 31 May 2004, complainants alleged that they went to the trial court to check on the vehicle and to look for respondent. There, respondent admitted to them that he had already delivered the vehicle to Glor — he acted on his own discretion. Complainants asked respondent how much he received from Glor and why he did not give them a chance to fulfill their agreement. He just said "pasensiyahan na lang tayo."16

On 2 and 7 June 2004, complainants filed with the Office of the Ombudsman and the Office of the Court Administrator (OCA), respectively, a joint affidavit-complaint17 against respondent. Since the acts complained of were related to respondent’s functions as an officer of the court, the Office of the Ombudsman, in its 1st Indorsement18 dated 20 July 2004, referred the matter to the OCA.

In his comment19 dated 4 August 2004, respondent prayed that the instant case be dismissed because:

1. Complainants’ accusations against him were malicious and unfounded. They filed the instant case against him because they "amassed so much anxiety and wrath against respondent to the point of even telling telltales." They felt aggrieved because of the vehicle’s delivery to Glor and its subsequent foreclosure.

2. He was only guided by the orders of the court and, in their absence, by the Rules of Court particularly Rule 60. Under Section 6 of the said Rule, the vehicle’s delivery to Glor followed as a matter of course because she posted a bond which was approved by the court. On the other hand, up to the time of the delivery, complainants’ counter-bond had not been approved by the court.

3. Complainants’ accusation that he asked for P20,000 was incredulous and a total lie. He never dealt clandestinely with complainants, much less demanded money from them. He did not personally know Glor, nor was he acquainted with complainants.

4. Complainants had no evidence to support their accusation. If it were true that he asked and received money from them, it would have been easy for them to entrap him, yet, they did not do so.

5. He enjoyed the presumption of regularity in the performance of his duties.

In their comment20 to respondent’s comment dated 4 August 2004, complainants prayed that respondent be preventively suspended pending the investigation of the case. They alleged that they had a witness who was willing to testify on the circumstances surrounding respondent’s demand and receipt of the money from them. However, the witness did not want to testify unless respondent was placed under preventive suspension because she was afraid that her testimony would endanger her means of livelihood inside the Hall of Justice building.

The Office of the Court Administrator’sReport and Recommendations

In its memorandum21 dated 14 October 2004, the OCA found that respondent erred when he released the vehicle to Glor without waiting for the trial court’s instructions on who had a better right over the vehicle. The OCA recommended that the case be re-docketed as a regular administrative matter and that respondent be held liable for grave abuse of authority and fined P4,000. The OCA recommended that the charges for violation of the Anti-Graft and Corrupt Practices Act, gross ignorance of the law, and conduct prejudicial to the best interest of the service be dismissed for insufficiency of evidence.

In a Resolution22 dated 8 December 2004, the Court ordered the re-docketing of the case as a regular administrative matter and, in a Resolution23 dated 16 March 2005, the Court required the parties to manifest if they were willing to submit the case for decision based on the pleadings already filed.

Complainants filed a motion24 for further investigation and preventive suspension of respondent pending the investigation of the case. They prayed that the case be referred to the Executive Judge of the Regional Trial Court, Quezon City, for investigation. They also prayed that

respondent be placed under preventive suspension to allow their witness to testify without fear of being harassed by respondent.

The Court noted complainants’ motion for further investigation and preventive suspension and referred the case to the OCA for investigation, report, and recommendation.25 In an Order26 dated 24 August 2005, the OCA set the case for investigation on 15 and 16 September 2005. In the investigation, only respondent appeared.27 The complainants filed a manifestation and motion28 dated 10 September 2005 stating that although they were willing to participate in the investigation, they could not convince their witness to testify unless respondent was preventively suspended.

In a letter29 dated 20 September 2005, the OCA returned the rollo of the case together with complainants’ manifestation and motion to the Court for further instructions. In a Resolution30 dated 10 October 2005, the Court noted the said letter and referred the same to the OCA for report and recommendation. Accordingly, the OCA set the case for investigation on 23 and 24 August 2006.31 Again, only respondent appeared in the investigation. The complainants reiterated their claim that they could not participate in the investigation unless respondent was preventively suspended.32

In its Report33 dated 13 September 2006, the OCA recommended that (1) the motion to preventively suspend respondent be denied; (2) the previous recommendation imposing a fine of P4,000 on respondent for grave abuse of authority be adopted; and (3) the charges for violation of the Anti-Graft and Corrupt Practices Act, gross ignorance of the law, and conduct prejudicial to the best interest of the service be dismissed for insufficiency of evidence.

The Court’s Ruling

The Court finds respondent liable for simple misconduct.

On the Charge of Violation of theAnti-Graft and Corrupt Practices Act,Gross Ignorance of the Law, andConduct Prejudicial to the Best Interest of the Service

Complainants bear the burden of proving, by substantial evidence, the allegations in the complaint. "Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion."34

In the instant case, complainants failed to substantiate the allegation that respondent violated the Anti-Graft and Corrupt Practices Act. Aside from their bare allegation that respondent demanded and received money from them, complainants did not present any substantial evidence to support the charge. The only pieces of evidence they offered were (1) respondent’s admission in his reply that he approached complainants in the Hall of Justice building and (2) a witness who could testify on respondent’s alleged acts of demanding and receiving money from the complainants:

From the very words of the respondent Sheriff himself (page 5 of his Reply), he admitted to have [sic]APPROACHED US when he furnished us a copy of his Manifestation x x x. Why then did the respondent Sheriff approached [sic] us when his Manifestation is addressed and concerns only the Court? To put to rest that this is just a bare allegation, a third person is willing to present herself to the investigation of this Honorable Office to testify to the truth of the circumstances of the said incident which she personally witnessedbut which [sic] we could not reveal her identity at the moment upon her own request because the said person makes her living in the hallway of the Hall of Justice of Quezon City.35

Complainants, however, never appeared in any of the investigations, nor presented their witness. The fact that respondent approached complainants in the Hall of Justice building is not enough basis for this Court to conclude that respondent demanded and received money from them. On complainants’ witness, the OCA found that "[t]he alleged fear from harassment of the complainants’ unnamed witness [precluding her] to testify against the respondent unless the latter is suspended from office is purely speculative."36 Complainants failed to present the quantum of evidence required to hold respondent liable.

There is also no sufficient evidence to prove that respondent is guilty of gross ignorance of the law and conduct prejudicial to the best interest of the service. As the OCA correctly held, "[t]he charges for Gross Ignorance of the Law and Conduct Prejudicial to the Best Interest of the Service must likewise fail, for insufficiency of evidence; if there was any fault by herein respondent, it was his overzealousness to perform his duty."37

























On the Charge of Simple Misconduct

The Court, however, finds respondent liable for simple misconduct. Simple misconduct has been defined as an unacceptable behavior that transgresses the established rules of conduct for public officers.38 It is an unlawful behavior.39 "Misconduct in office is any unlawful behavior by a public officer in relation to the duties of his office, willful in character. It generally means wrongful, improper, unlawful conduct motivated by a premeditated, obstinate, or intentional purpose although it may not necessarily imply corruption or criminal intent."40

The OCA found that respondent erred when he delivered the vehicle to Glor without waiting for the trial court’s instructions on the matter:

In this case, plaintiff/applicant had posted a replevin bond duly approved by the court. Nevertheless, one of the elements upon which the property subject of replevin may be delivered to the plaintiff/applicant is lacking. There appears to be no court order issued yet for the release of the aforementioned property to the plaintiff/applicant.The order dated 12 May 2004 issued by the court only directed respondent to take into his custody the subject motor vehicle. Further, respondent filed a manifestation seeking guidance from the court on the disposal of the seized property. Hence, respondent’s justification that the release of the seized property to the plaintiff/applicant follows as a matter of course because the applicant/plaintiff had already filed a replevin bond to answer for any damage that may be suffered by complainants may not be given weight.

It must be stressed that the prerogatives of Sheriffs do not give them any discretion to determine who among the parties is entitled to possession of the subject property. The appropriate course of action should have been for respondent to wait for the instructions of the court as to whom he will release the property since he had already asked for its guidance through his Manifestation which was submitted to the court virtually at the close of office hours on 26 May 2004. Yet the following morning, he suddenly decided to release the car to the plaintiff without waiting for any court order on the matter. Such apparent haste raised questions on his actions and leaves doubts as to his intent or interest in the case.

Moreover, under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the plaintiff. This is because a possessor has every right to be respected in its possession and may not be deprived of it without due process.

The purpose of the five (5) day period in Section 6, Rule 60 is to give defendants in a replevin case a chance to require the return of the property by filing a counter[-]bond. Considering that there was no court order to release the property to the applicant/plaintiff and the complainants were able to require the return of the property and file their counter[-]bond within the five (5) day period required by the Rules, respondent should have been more circumspect in releasing the property to the plaintiff/applicant. By hastily deciding to release the seized property to the plaintiff/applicant without waiting for the court’s order, respondent patently abused his authority. (Emphasis ours)

Indeed, respondent went beyond the call of his duties when he delivered the vehicle to Glor. The writ of replevin issued by the trial court specifically stated that the vehicle shall be delivered to Glor subject to the provisions of Sections 5 and 6 of Rule 60. Yet, respondent opted to ignore these provisions.

Good faith on respondent’s part, or lack of it, would be of no moment for he is chargeable with the knowledge that being an officer of the court, his duty is to comply with the Rules.41 Sections 5 and 6 of Rule 60 provide that:

SEC. 5. Return of property. — If the adverse party objects to the sufficiency of the applicant’s bond, or of the surety or sureties thereon, he cannot immediately require the return of the property, but if he does not so object,he may, at any time before the delivery of the property to the applicant, require the return thereof, by filing with the court where the action is pending a bond executed to the applicant, in double the value of the property as stated in the applicant’s affidavit for the delivery thereof to the applicant, if such delivery be adjudged, and for the payment of such sum to him as may be recovered against the adverse party, and by serving a copy of such bond on the applicant.

SEC. 6. Disposition of property by sheriff. — If within five (5) days after the taking of the property by the sheriff, the adverse party does not object to the sufficiency of the bond, or of the surety or sureties thereon; or if the adverse party so objects and the court affirms

its approval of the applicant’s bond or approves a new bond, or if the adverse party requires the return of the property but his bond is objected to and found insufficient and he does not forthwith file an approved bond, the property shall be delivered to the applicant. If for any reason the property is not delivered to the applicant, the sheriff must return it to the adverse party. (Emphasis ours)

Under Section 5, complainants may require the return of the vehicle by (1) posting a counter-bond in double the value of the vehicle and (2) serving Glor with a copy of the counter-bond. Both requirements must be complied with before the vehicle is delivered to Glor. Put differently:

If a defendant in a replevin action wishes to have the property taken by the sheriff restored to him, he should within five days from such taking, (1) post a counter-bond in double the value of said property, and (2) serve plaintiff with a copy thereof, both requirements — as well as compliance therewith within the five-day period mentioned — being mandatory. x x x

Conformably, a defendant in a replevin suit may demand the return of possession of the property replevined by filing a redelivery bond executed to the plaintiff in double the value of the property as stated in the plaintiff’s affidavit within the period specified in Sections 5 and 6.42

Under Section 6, the vehicle shall be delivered to Glor only under the following instances:

1. If within five days after the taking of the vehicle, complainants do not object to the sufficiency of the bond or of the surety or sureties thereon;

2. If within five days after the taking of the vehicle, complainants object to the sufficiency of the bond and the trial court affirms its approval of Glor’s bond or approves a new bond; or

3. If within five days after the taking of the vehicle, complainants require the return of the vehicle and their bond is objected to and found insufficient and they do not forthwith file an approved bond.

In the instant case, complainants duly complied with all of the requirements under Sections 5 and 6 for the return of the vehicle. Respondent took possession of the vehicle on 17 May 2004. On 20 May 2004, complainants filed their urgent motion for the return of the vehicle and submission of counter-bond and, on 21 May 2004, they filed a motion to withdraw the urgent motion and change the same with an omnibus motion. Both the urgent motion and the omnibus motion were filed before the delivery of the vehicle to Glor and before the expiration of the five-day period. Later, the trial court approved complainants’ counter-bond. Thus, respondent committed an irregularity when he hastily delivered the vehicle to Glor.

Under the Rules of Court, the sheriff should not immediately deliver the property seized under a writ of replevin to the plaintiff. This is because defendants have every right to be respected in their possession and may not be deprived of it without due process.43 The purpose of the five-day period in Section 6 is to give defendants in a replevin case a chance to require the return of the property by filing a counter-bond. In Pardo v. Velasco,44 this Court held that:

Respondent as an officer of the Court is charged with certain ministerial duties which must be performed faithfully to the letter. Every provision in the Revised Rules of Court has a specific reason or objective. In this case, the purpose of the five (5) days is to give a chance to the defendant to object to the sufficiency of the bond or the surety or sureties thereon or require the return of the property by filing a counter[-]bond.

In Sebastian v. Valino,45 this Court held that:

Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the plaintiff . The sheriff must retain it in his custody for five days and he shall return it to the defendant, if the latter, as in the instant case, requires its return and files a counter[-]bond (Sec. 4, Rule 60, Revised Rules of Court). (Emphasis ours)

The prerogatives of sheriffs do not include the discretion to determine who among the parties is entitled to the possession of the property. Even when placed in a difficult situation, they are not called to exercise their own discretion. In Cruz v. Villar,46 the Court agreed with the OCA’s observations:











The nature of their functions is essentially ministerial. Their prerogatives do not give them any discretion to determine who among the parties is entitled to possession of the subject properties. The appropriate course of action should have been for respondents to inform their judge of the situation by way of a partial Sheriff’s Return and wait for instructions on the proper procedure to be observed. These respondents failed to do.

Similarly, in Mamanteo v. Magumun,47 this Court held that:

[T]he novelty of his predicament did not call for him to use his discretion x x x without waiting for instructions from his judge. A sheriff’s prerogative does not give him the liberty to determine who among the parties is entitled to the possession of the attached property.

Respondent’s act of filing the manifestation seeking the trial court’s guidance virtually at the close of office hours on 26 May 2004 then delivering the vehicle to Glor in the morning of 27 May 2004 is highly questionable. As the OCA held:

[R]espondent filed a Manifestation seeking guidance from the court on the disposal of the seized property. Hence, respondent’s justification that the release of the seized property to plaintiff/applicant follows as a matter of course because the applicant/plaintiff had already filed a replevin bond to answer for any damage that may be suffered by complainants may not be given weight.

The appropriate course of action should have been for respondent to wait for the instructions of the court as to whom he will release the property since he had already asked for its guidance through his Manifestation which was submitted to the court virtually at the close of office hours on 26 May 2004. Yet the following morning, he suddenly decided to release the car to the plaintiff without waiting for any court order on the matter. Such apparent haste raised questions on his action and leaves doubts as to his intent or interest in the case.1avvphi1

Since respondent had filed a manifestation seeking the trial court’s guidance, the most appropriate course of action should have been for him to wait for the trial court’s instructions on what he should do with the vehicle. Assuming that the issue may have been too technical for respondent to decide on the spot, it would have been prudent for him to let the trial court decide on the matter. However, he was overzealous and delivered the vehicle to Glor without even giving the trial court a chance to act on his manifestation. His unusual zeal and precipitate decision to give possession of the vehicle to Glor effectively destroyed the presumption of regularity in the performance of his duties.48 "While the expeditious and efficient execution of court orders and writs is commendable, it should not, under any circumstances, be done by departing from the Rules governing the same."49

Respondent should execute the directives of the trial court strictly "in accordance with the letter thereof and without any deviation therefrom."50 As an officer of the court, he should follow the provisions of the Rules to the letter especially when the law is clear.

When, as in this case, the law is clear, respondent owes it to himself and to the public he serves to adhere to its dictates. The failure to do so exposes the wrongdoer to administrative sanctions. When the inefficiency of an officer of the court springs from a failure to consider so basic and elemental a rule, a law or a principle in the discharge of his duties, he is either too incompetent and undeserving of the position and title he holds or is too vicious that the oversight or omission was deliberately done in bad faith or with grave abuse of authority.51

Section 52(B)(2)52 of the Revised Uniform Rules on Administrative Cases in the Civil Service53 classifies simple misconduct as a less grave offense punishable by suspension of one month and one day to six months for the first offense. Having been in the service for more than 26 years,54 respondent cannot wrongly interpret basic rules without appearing grossly incompetent or having acted in bad faith.

WHEREFORE, we find respondent Ernesto L. Sula, Sheriff IV, Regional Trial Court, Branch 98, Quezon City,GUILTY of SIMPLE MISCONDUCT. Accordingly, we SUSPEND him for six months without pay and STERNLY WARN him that a repetition of the same or similar acts shall be dealt with more severely.

SO ORDERED.

RIVERA VS. VARGAS – GO TO NATURE OF PROCEEDINGS CASES

SECTION 6

CITIBANK NA VS. CA – GO TO SECTION 2

BAUTISTA VS. SULA – GO TO SECTION 5

FIRST DIVISION

A.M. No. P-05-1942 January 17, 2005

ALIBSAR ADOMA, complainant, vs.ROMEO GATCHECO, Sheriff III, and Eugenio Taguba, Process Server, of Branches 1 and 2, respectively, of the Municipal Trial Court in Cities of Santiago City, respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

The instant administrative complaint filed against respondents for violation of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) and conduct unbecoming a court employee, arose from the execution of a writ of replevin in Adoma v. Spouses Edmundo Andres and Luzviminda Andres, docketed as Civil Case No. 1404-1-669, for recovery of possession of motor vehicle with prayer for the issuance of a writ of replevin before Branch 1 of the Municipal Trial Court in Cities (MTCC) of Santiago City, presided by Judge Ruben Plata.

Complainant Alibsar Adoma claimed that on August 16, 2003 a writ of replevin1 for the recovery of an L-300 van was issued in his favor. On the same day, respondent sheriff Romeo Gatcheco implemented the writ. He was accompanied by respondent Eugenio Taguba, a process server of Branch 2 of MTCC, Santiago City, who volunteered to assist respondent sheriff. After the two respondents seized the vehicle, they demanded payment of P8,000.00, allegedly promised by complainant but the latter was able to give only P1,000.00 and another P1,000.00 the following day.2

The writ of replevin stated that the vehicle will be delivered to complainant after 5 days from the implementation thereof. With the vehicle still undelivered on the 7th day, complainant threatened to file an administrative case against respondent sheriff. Finally, on August 29, 2003, the latter was forced to release the vehicle to complainant. Respondents, however, continued to demand P6,000.00, hence complainant filed the instant administrative case.3

Respondents, on the other hand, denied soliciting and receiving any amount from the complainant. Respondent sheriff admitted, however, that complainant promised to give him P10,000.00 if the vehicle will be sold.4

On September 10, 2003, the Court referred the instant administrative complaint to Judge Fe Albano Madrid, Executive Judge, Regional Trial Court, Santiago City, Isabela, for investigation, report and recommendation.5

In her investigation report, Judge Madrid found the testimony of complainant which was corroborated by two witnesses, to be more credible. She refused to believe the claim of respondent sheriff that he did not release the vehicle to complainant after 5 days from the implementation of the writ on August 16, 2003, because he was awaiting instructions from Judge Plata. However, she found that respondent sheriff did not actually demand money for the implementation of the writ because it was complainant who promised to give money in exchange for the implementation of the writ of replevin. Nevertheless, she concluded that respondent sheriff is guilty of misconduct considering that he accepted partial payment and insisted on its full payment.

As to respondent Taguba, Judge Madrid recommended that he be reprimanded for trying to abet the misconduct of respondent sheriff.

Upon receipt of the report of Judge Madrid, the Court referred the case to the Office of the Court Administrator (OCA) for evaluation, report and recommendation.6

In its Memorandum dated June 4, 2004, the OCA affirmed the investigating Judge’s report. It recommended that respondent sheriff be fined in the amount of P5,000.00 for conduct unbecoming a court employee and that respondent Taguba be reprimanded for trying to abet the misconduct of a fellow employee of another court.

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On July 5, 2004, the Court required the parties to manifest whether they are willing to submit the case for resolution based on the pleadings filed. However, to date, the parties have yet to file their manifestation. Hence, we are constrained to dispense the filing of such manifestation.

The Court agrees with the findings of the investigating Judge and the OCA that respondents received the amount of P2,000.00 and that they demanded the payment of an additional P6,000.00 from complainant. The testimony of complainant before the investigating Judge is worthy of belief because the same was not only candid and direct but also corroborated by two witnesses who attested to the veracity of complainant’s accusations. The writ of replevin has been implemented and the vehicle is now in complainant’s possession.

Under Section 9, Rule 141 of the Rules of Court, the procedure for the execution of writs and other processes are:first, the sheriff must make an estimate of the expenses to be incurred by him; second, he must obtain court approval for such estimated expenses; third, the approved estimated expenses shall be deposited by the interested party with the Clerk of Court and ex-oficio sheriff; fourth, the Clerk of Court shall disburse the amount to the executing sheriff; and fifth, the executing sheriff shall liquidate his expenses within the same period for rendering a return on the writ. Any amount received by the sheriff in excess of the lawful fees allowed by the Rules of Court is an unlawful exaction which renders him liable for grave misconduct and gross dishonesty.71awphi1.nét

In the instant case, respondent sheriff totally disregarded the aforecited procedure. He failed to make and submit estimate of the sheriff’s expenses. The amounts received and demanded by him are therefore unauthorized fees. His acts of accepting and soliciting said monetary considerations make him liable not only for conduct unbecoming a court employee but also for grave misconduct and dishonesty.

As correctly found by the OCA, respondent sheriff deliberately failed to place complainant in possession of the vehicle after five days from the implementation of the writ because the latter failed to give the whole amount he promised. Since the adverse party did not object to the complainant’s bond nor posted a redelivery bond to recover possession of the vehicle taken under the writ of replevin, respondent sheriff is under obligation to deliver the van to complainant. However, it took respondent sheriff 13 days before he released the vehicle to complainant, a clear violation of Section 6, Rule 60 of the 1997 Revised Rules of Civil Procedure which provides –

SEC. 6. Disposition of property by sheriff.—If within five (5) days after the taking of the property by the sheriff, the adverse party does not object to the sufficiency of the bond, or of the surety or sureties thereon; or if the adverse party so objects and the court affirms its approval of the applicant’s bond or approves a new bond, or if the adverse party requires the return of the property but his bond is objected to and found insufficient and he does not forthwith file an approved bond, the property shall be delivered to the applicant. If for any reason the property is not delivered to the applicant, the sheriff must return it to the adverse party. (6a)

In Apuyan, Jr. v. Sta Isabel ,8 citing Alvarez, Jr. v. Martin ,9 a sheriff was similarly found guilty of grave misconduct, dishonesty and conduct grossly prejudicial to the best interest of the service for receiving and soliciting money from the complainant and for deliberately ignoring the rules for the implementation of a writ of attachment, thus –

Furthermore, respondent’s act of demanding money and receiving P1,500.00 from the complainant for the lunch and merienda of the policemen who will accompany him in executing the decision of the Court is a clear violation of section 9, Rule 141. The Rules require the sheriff to estimate his expenses in the execution of the decision. The prevailing party will then deposit the said amount to the Clerk of Court who will disburse the amount to the sheriff, subject to liquidation. Any unspent amount will have to be returned to the prevailing party. In this case, no estimate of sheriff’s expenses was submitted to the court by respondent. In fact, the money which respondent deputy sheriff had demanded and received from complainant was not among those prescribed and authorized by the Rules of Court. This Court has ruled that any amount received by the sheriff in excess of the lawful fees allowed by the Rules of Court is an unlawful exaction and renders him liable for grave misconduct and gross dishonesty.

Finally, the procedure for execution of a final judgment is the same as that in carrying out a writ of preliminary attachment, as set forth in Rule 141 of the Rules of Court…

…

Clearly, in this case, respondent not only utterly failed to live up to the high ethical standards required of a sheriff, but also, he totally ignored Section 9, Rule 141 of the Rules of Court. Respondent failed to demonstrate that he followed the procedure laid down by Rule 141.

The OCA’s recommendation that respondent be found guilty of grave misconduct, dishonesty and conduct grossly prejudicial to the best interest of the service is firmly supported by the records of this case.

Section 52, Rule IV of the Uniform Rules on Administrative Cases in the Civil Service (Resolution No. 991936, effective September 27, 1999), provides –

Section 52. Classification of Offenses. - Administrative offenses with corresponding penalties are classified into grave, less grave or light, depending on their gravity or depravity and effects on the government service.

A. The following are grave offenses with their corresponding penalties:

1. Dishonesty

1st Offense – Dismissal

…

3. Grave Misconduct

1st Offense – Dismissal

…

20. Conduct prejudicial to the best interest of the service

1st offense – Suspension (6 mos. 1 day to 1 year)

2nd offense – Dismissal

The imposable penalty for commission of the first offense of grave misconduct and dishonesty is dismissal. In the cases of Apuyan, Jr. v. Sta Isabel,10 and Albello v. Galvez ,11 however, the fact that the respondent sheriffs were first time offenders was considered a mitigating circumstance, hence they were meted the penalty of 1 year suspension instead of dismissal. Accordingly, since this is respondent sheriff’s first offense, the penalty of 1 year suspension will suffice.

With respect to respondent Taguba, we find the sanction of reprimand too light a penalty for his transgression. Although it was not him who deliberately delayed the delivery of the vehicle to force complainant to yield to the sheriff’s demand, and that complainant did not point to him as the one who received the amount of P2,000.00, respondent Taguba assisted respondent sheriff in soliciting money from complainant. Note that respondent Taguba is a process server of another branch of the MTCC of Santiago City but he volunteered to aid respondent sheriff in the implementation of the writ. He not only demanded P8,000.00 from complainant after the implementation of the writ but also tagged along with respondent sheriff when the latter tried to exact P6,000.00 from complainant before the vehicle was released to the latter. Furthermore, respondent Taguba had been previously suspended for 1 month in Albano-Madrid v. Apolonio ,12 for simple misconduct in playing cards with other court personnel inside the Judge’s chambers during office hours. Indeed, reprimand is not commensurate to his incorrigible conduct. Under the circumstances, the penalty of 6 months suspension is appropriate.

At the grassroots of our judicial machinery, sheriffs are indispensably in close contact with the litigants, hence, their conduct should be geared towards maintaining the prestige and integrity of the court, for the image of a court of justice is necessarily mirrored in the conduct, official or otherwise, of the men and women who work thereat, from the judge to the least and lowest of its personnel; hence, it becomes the imperative sacred duty of each and everyone in the court to maintain its good name and standing as a temple of justice.13

WHEREFORE, in view of all the foregoing, respondent Romeo Gatcheco, Sheriff III, Municipal Trial Court in Cities, Branch 1, Santiago City is found GUILTY of Grave Misconduct, Dishonesty and Conduct Grossly Prejudicial to the Best Interest of the Service and is SUSPENDED for one (1) year, without pay. Respondent Eugenio Taguba, Process Server, Municipal Trial Court in Cities, Branch 2, Santiago City is found GUILTY of Conduct Prejudicial to the Best



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Interest of the Service and is SUSPENDED for six (6) months without pay.

Respondents are warned that a repetition of the same or any other act of infraction in the future shall be dealt with most severely.

SO ORDERED.

SECTION 9

THIRD DIVISION

G.R. No. 164521 December 18, 2008

ALLANDALE SPORTSLINE, INC., AND MELBAROSE R. SASOT, petitioners, vs.THE GOOD DEVELOPMENT CORPORATION, respondent.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the May 15, 2003 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 59475 which dismissed the petition of Allandale Sportsline, Inc. and Melbarose R. Sasot from the January 13, 1998 Decision2 of the Regional Trial Court (RTC) of Pasig City, Branch 158 in Civil Case No. 61053; and the June 12, 2004 CA Resolution3 which denied petitioners’ motion for reconsideration.

The relevant facts are as follows:

Allandale Sportsline, Inc. (ASI) obtained a loan of P204,000.00 from The Good Development Corp. (GDC) under a Promissory Note signed by Melbarose R. Sasot (Melbarose) and Allandale R. Sasot (Allandale), President and Vice-President, respectively, of ASI, with Theresa L. Manipon (Manipon) as one of three co-makers.4 The Promissory Note provides that the loan is payable in daily equal installments of P2,000.00 with interest at the rate of 26.002% per annum. In case of default in the payment of any installment, the entire balance of the obligation shall become immediately due and payable, and subject to liquidated penalty/ collection charge equivalent to 2% of the principal.5

To provide additional security, ASI and Melbarose executed in favor of GDC a Deed of Mortgage6 in which they acceded that:

xxxx should the MORTGAGORS fail to comply with any of the terms of the promissory note and this mortgage contract, the MORTGAGEE shall automatically have the absolute right without need of prior notice or demand to forthwith judicially or extrajudicially foreclose this mortgage and proceed against all or any of the mortgaged rights, interests and properties for the full satisfaction of the MORTGAGORS' entire obligation to the MORTGAGEE and, in such event, the MORTGAGORS shall be further liable to the MORTGAGEE in the same judicial or extrajudicial foreclosure proceedings for payment of attorney's fees in an amount equivalent to twenty five (25%) per cent of the unpaid indebtedness but in no case less that Five hundred pesos (500.00); liquidated damages in an amount equivalent to twenty-five (25%) percent of said outstanding obligation and all the expenses and costs incidental to the above proceeding xxx.7 (Emphasis supplied)

The properties subject of the mortgage are itemized in an inventory attached to the deed. They include: List A -- all the merchandise and stocks in trade found in the commercial establishment owned by ASI and Melbarose at #514 M.V. delos Santos St., Sampaloc, Manila, valued at P100,000.00; List B -- all the furniture, fixtures, appliances, equipment and other personal property found in said business establishment, valued at P3,500.00; and List C -- one Toyota Corona 2DR. HT. with Motor No. 18R-1474348, valued at P40,000.00 and one Toyota Corolla 4DR. SDN with Motor No. 4K-5872110, valued at P35,000.00.8

On June 24, 1991, GDC demanded that Melbarose pay the unpaid account of P179,000.00 or surrender the mortgaged chattels within five days from notice.9

When no payment was made, GDC filed with the RTC a Complaint10 for Replevin and/or Sum of Money with Damages against ASI, Melbarose,

Manipon, Florante Edrino and John Doe.11 It is significant that plaintiff GDC prayed for alternative reliefs, to wit:

WHEREFORE, for all the foregoing it is most respectfully prayed of this Honorable Court that:

1. A Writ of Replevin be issued ordering the seizure of the above described chattels or personal property with all the accessories or equipments and directing their transfer to Plaintiff for the purposes of foreclosure &/or transfer in accordance with the law to satisfy Defendants' obligation in favor of Plaintiff; and

2. After due notice and trial:

a. to enforce said seizure and Plaintiff's right over aforedescribed chattels and/or personal property; and

b. to order Defendants to pay Plaintiff jointly and severally the sum of P43,750.00 as and for attorney's fees and the sum equivalent to 25% of the obligation as and for liquidated damages, plus other expenses of litigation and costs of suit.

On the Alternative Cause of Action, in the event that manual delivery of said chattels or personal property cannot be obtained for some reason or another, to render judgment ordering Defendants to pay plaintiff, jointly and severally as follows:

1. The sum of P175,000.00 plus interest thereon at 26.002% per annum from date of maturity until said sum shall have been fully paid.

2. The sum of P43,750.00 as and for Attorney's fees, the sum equivalent to 25% of the obligation as and for liquidated damages, such other expenses of litigation and costs of suit.12

The RTC issued a Writ of Replevin,13 and by virtue thereof, the Sheriff seized and delivered to GDC only one unit of Toyota Corona with Motor No. 18R-1474348 and two appliances.14

On December 2, 1991, GDC filed an Amended Complaint to include in its application for replevin the items under List A.15 After admitting the Amended Complaint, the RTC issued an Alias Writ of Replevin16 over the items in List A, and, by virtue thereof, the Sheriff seized and delivered to GDC the assorted items enumerated therein.17

It appears that a Second Alias Writ of Replevin18 was issued over one unit Toyota Corolla with Motor No. 4K-5872110, but the records do not indicate that the Sheriff made a return on the writ.

Meanwhile, ASI and Melbarose filed their Answer with Counterclaim.19 They claimed that their loan obligation to GDC was only for P200,000.00, and after deducting P18,000.00, which amount was retained by GDC as advanced interest payment, and P29,000.00, which represents payments made from June 4, 1991 to July 8, 1991, their unpaid obligation was only P171,000.00;20 that they repeatedly tendered payment of this amount, but GDC rejected their efforts for no valid reason; that the unreasonable refusal of GDC to accept their tender of payment relieved them of their loan obligation;21 that its Complaint being obviously without merit, GDC should be held liable to them for damages.22

Manipon filed a separate Answer in which she did not deny the authenticity of her signature on the Promissory Note, but argued that she did not knowingly or voluntarily sign the instrument as a co-maker, for at that time she was under the impression that the instrument she was signing was her own loan application with GDC.23

In its Pre-Trial Order dated May 22, 1992, the RTC identified only these issues: (a) whether GDC was entitled to collect P175,000.00, as well as the interests, attorney's fees and other expenses and costs; (b) whether ASI and Melbarose made a valid tender of payment; (c) whether Manipon was a real party-in-interest; and (d) whether the prevailing party was entitled to damages.24

However, it is significant that at the trial that ensued, GDC disclosed that after it obtained possession of the properties subject of the writs of replevin, it caused the auction sale of some of them and realized proceeds amounting to P78,750.00.

http://www.lawphil.net/judjuris/juri2008/dec2008/gr_164521_2008.html#fnt24

























While there is no certificate of sale in the records of the case, respondent's witness Leonila Buenviaje testified thus:

ATTY. MAMARIL:

x x x x

Q - In this case, Miss witness, you were able to seize by way of a writ of replevin some properties of the defendants. What did you do with these properties?

A - It was being sold by auction sale.

Q - Could you tell this Honorable Court if the auction sale pushed through?

A - Yes, sir.

Q - How much were you able to realize from the auction sale?

x x x x

A - We had pulled amounting to P55,050.00. The Karaoke – P3,200.00; the t.v. - P500.00; and athletic uniforms amounting to P20,000.00.

Q - So, all in all how much could that be?

x x x x

A - More than P78,000.00. I think P78,750.00.25

On cross-examination, the same witness further described the auction sale:

ATTY. QUINONES:

x x x x

Q - Are you sure that these has been sold already, Miss Buenviaje?

A - Yes, sir.

Q - When was it sold?

A - I forgot the exact date.

Q - Do you have any document that those items were already sold?

A - We have a certificate of sale from the Sheriff.

x x x x

Q - And the car Toyota Corona was also seized and sold?

A - Yes, sir.

Q - And in turn you were able to sell it to a third party?

A - Yes, sir.

Q - And that car was sold already in the amount of P56,000.00, is that correct?

A - P55,000.00.26

Moreover, GDC presented to the RTC a Statement of Account dated August 24, 1992, which indicated that the total outstanding balance of the loan obligation of ASI and Melbarose was reduced to P191,111.82 after the proceeds of the auction sale conducted on June 19, 1992 in the amount of P78,750.00 was deducted from the earlier balance of P266,126.17.27

The RTC rendered a Decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, judgment is rendered in favor of the plaintiff Good Development Corporation against defendants Melbarose Sasot, Allandale Sportsline Inc., and Ma. Theresa Manipon ordering them to pay the plaintiff jointly and severally the amount of P269,611.82 plus legal interest thereon effective to date until the full amount is fully paid, and 25% of the total amount due as liquidated damages.

SO ORDERED.28 (Emphasis supplied)

ASI, Sasot and Manipon appealed to the CA, which rendered the Decision assailed herein, to wit:

WHEREFORE, premises considered, the instant appeal is DENIED. The assailed decision of the RTC of Pasig City, Branch 158 in Civil Case No. 61053 is hereby AFFIRMED.

SO ORDERED. 29

Their Motion for Reconsideration was also denied by the CA.30

Only ASI and Sasot (petitioners) took the present recourse, raising the following issues:

I. Whether or not petitioners’ check payment of Php171,000.00, PCIB Check No. 851688, to cover the total balance of their loan to respondent, became a valid tender of payment by virtue of the respondent’s acceptance thereof;

II. Whether or not the "parol evidence rule" applies on the promissory note in question when the co-makers thereon are total strangers to one another;

III. Whether or not petitioners are entitled to the return of their properties pursuant to Section 9, Rule 60 of the Rules of Court.

IV. Whether or not there is legal basis in the award of liquidated damages. 31

The second issue deserves scant consideration for lack of basis. Manipon did not join in the petition. Hence, the finding of the RTC, as affirmed by the CA, that she was a co-maker of Promissory Note and a real party-in-interest is already final and conclusive. Petitioners cannot now question this finding by raising the defense that Manipon signed the promissory note without knowledge of the nature of her liability under the instrument. Such defense is personal to Manipon and cannot be invoked by petitioners, unless it is shown that their interests are so interwoven with

and dependent on Manipon’s as to be inseparable.32 However, in their pleadings, petitioners do not deny the authenticity and due execution of the Promissory Note, whereas Manipon has maintained that said instrument was not duly executed; hence, their defenses are clearly separate and distinct.

Only three issues are left to be resolved.

Anent the first issue, petitioners contend that they were relieved of their obligation to pay GDC (respondent) when they made several attempts to tender payment but respondent refused to accept them without any valid reason. Petitioners claim that the first tender of payment was made on July 3, 1991 when petitioner Sasot sent respondent a PCIB check postdated October 31, 1991 in the amount of P171,000.00.33 Respondent rejected the check, citing that the amount was insufficient for, as of July 4, 1991, the balance of the principal loan was P175,000.00, notP171,000.00; and its maturity was September 13, 1991, not October 31, 1991.34

On October 15, 1997, petitioners tendered payment of P171,000.00 in cash,35 but respondent refused to accept it due to the insufficiency of the amount.36 Instead, respondent sent petitioners a Statement of Account dated October 29, 1991, indicating that as of October 15, 1991 the total balance due was P228,071.61.37

On October 29, 1991, petitioners tendered cash payment of P174,986.96,38 but respondent still refused to accept it for insufficiency of the amount.39

















The question then is whether petitioners’ tender of payment and respondent’s refusal thereof discharged petitioners from their obligation.

Tender of payment, without more, produces no effect; rather, tender of payment must be followed by a valid consignation in order to produce the effect of payment and extinguish an obligation.40

Tender of payment is but a preparatory act to consignation. It is the manifestation by the debtor of a desire to comply with or pay an obligation. If refused without just cause, the tender of payment will discharge the debtor of the obligation to pay but only after a valid consignation of the sum due shall have been made with the proper court.41

Consignation is the deposit of the proper amount with a judicial authority, before whom the debtor must establish compliance with the following mandatory requirements: (1) there was a debt due; (2) the consignation of the obligation had been made because the creditor to whom tender of payment was made refused to accept it, or because he was absent or incapacitated, or because several persons claim to be entitled to receive the amount due, or because the title to the obligation has been lost; (3) previous notice of the consignation had been given to the person interested in the performance of the obligation; (4) the amount due was placed at the disposal of the court; and (5) after the consignation had been made, the person interested was notified thereof. Failure to prove any of these requirements is enough ground to render a consignation ineffective.42

Petitioners did not allege or prove that after their tender of payment was refused by respondents, they attempted or pursued consignation of the payment with the proper court. Their tender of payment not having been followed by a valid consignation, it produced no effect whatsoever, least of all the extinguishment of the loan obligation. Therefore, the first issue of the validity or invalidity of their tender of payment is completely moot and academic, for either way the discussion will go, it will lead to no other conclusion but that, without an accompanying valid consignation, the tender of payment did not result in the payment and extinguishment of the loan obligation. The Court cannot take cognizance of such a purely hypothetical issue.43

The third and fourth issues are interrelated because their resolution depends on the nature of the remedy which respondent actually adopted.

As emphasized at the outset, the reliefs respondent prayed for in its Complaint and Amended Complaint are in the alternative: delivery of the mortgaged properties preparatory to foreclosure or payment of the unpaid loan.44

Moreover, after respondent acquired possession of the mortgaged properties through the writs of replevin, it caused the auction sale of assorted sports outfits, one unit Sansio Karaoke, one unit Sony T.V. Set and one unit Toyota Corona, and earned proceeds amounting to P78,750.00.45 While it appears that respondent failed to obtain the other personal properties covered by the Deed of Mortgage and the writs of replevin, there is no doubt that it had effectively elected the remedy of extra-judicial foreclosure of the mortgage security over the remedy of collection of the unpaid loan.

The RTC was aware that respondent had elected one remedy. In its Decision, it cited the fact that some of the mortgaged properties which were delivered to respondent by means of the Writs of Replevin had been sold on auction, and acknowledged that the proceeds from said auction sale should be deducted from the loan account of petitioners. The RTC noted:

The seized pieces of personal properties by virtue of the writ of replevin and alias writ of replevin were sold in an auction sale where [respondent] realized P78,750.00 from the sale.46

x x x x

[Respondent] realized P78,500.00[sic] from the auction sale of the seized personal property by virtue of the writ of replevin. The amount realized from the auction sale is clearly insufficient to cover the unpaid balance, interest, attorney’s fees, costs of the suit and other expenses incidental to litigation. This amount was deducted from the [petitioners’] total obligation in the amount of P269,111.82 [sic] resulting in the net total obligation of P191,111.82 as of August 24, 1992.47 (Emphasis supplied)

Yet, it is curious that in the dispositive portion of its Decision, the RTC granted respondent the remedy of collection of sum of money. The dispositive portion of the RTC Decision is reproduced below for emphasis:

WHEREFORE, in view of the foregoing, judgment is rendered in favor of the [respondent] Good Development Corporation against [petitioners] Melbarose Sasot, Allandale Sportsline Inc., and Ma. Theresa Manipon ordering them to pay the [respondent] jointly and severally the amount of P269,611.82 [sic] plus legal interest thereon effective to date until the full amount is fully paid, and 25% of the total amount due as liquidated damages.

SO ORDERED.

Not only is there no more reference to the conduct of the auction sale of the mortgaged properties, there is also no longer any acknowledgment that the proceeds earned from the auction sale should be deducted from the total unpaid loan.

This is a glaring error.

In Bachrach Motor Co., Inc. v. Icarangal,48 the Court held that the remedies available to any mortgage creditor are alternative, not cumulative or successive,49 viz.:

For non-payment of a note secured by mortgage, the creditor has a single cause of action against the debtor. This single cause of action consists in the recovery of the credit with execution of the security. In other words, the creditor in his action may make two demands, the payment of the debt and the foreclosure of his mortgage. But both demands arise from the same cause, the non-payment of the debt, and for that reason, they constitute a single cause of action. Though the debt and the mortgage constitute separate agreements, the latter is subsidiary to the former, and both refer to one and the same obligation. Consequently, there exists only one cause of action for a single breach of that obligation. Plaintiff, then, by applying the rules above stated, cannot split up his single cause of action by filing a complaint for payment of the debt, and thereafter another complaint for foreclosure of the mortgage. If he does so, the filing of the first complaint will bar the subsequent complaint. By allowing the creditor to file two separate complaints simultaneously or successively, one to recover his credit and another to foreclose his mortgage, we will, in effect, be authorizing him plural redress for a single breach of contract at so much cost to the courts and with so much vexation and oppression to the debtor. (Emphasis supplied)

By causing the auction sale of the mortgaged properties, respondent effectively adopted and pursued the remedy of extra-judicial foreclosure,50 using the writ of replevin as a tool to get hold of the mortgaged properties.51 As emphasized in Bachrach, one effect of respondent’s election of the remedy of extra-judicial foreclosure is its waiver of the remedy of collection of the unpaid loan.

Therefore, there was no more legal basis for the RTC to grant respondent the relief of collecting from petitioners "the amount of Php269,611.82 [sic] plus legal interest thereon effective to date until the full amount is fully paid," nor for the CA to affirm it.

However, another effect of its election of the remedy of extra-judicial foreclosure is that whatever deficiency remains after applying the proceeds of the auction sale to the total loan obligation may still be recovered by respondent.52

But to recover any deficiency after foreclosure, the rule is that a mortgage creditor must institute an independent civil action.53 However, in PCI Leasing & Finance, Inc. v. Dai54 the Court held that the claim should at least be included in the pre-trial brief. In said case, the mortgage-creditor had foreclosed on the mortgaged properties and sold the same at public auction during the trial on the action for damages with replevin. After judgment on the replevin case was rendered, the mortgage-creditor filed another case, this time for the deficiency amount. The Court dismissed the second case on the ground of res judicata, noting that:

Petitioner ignores the fact that it prayed in the replevin case that in the event manual delivery of the vessel could not be effected, the court "render judgment in its favor by ordering [herein respondents] to pay x x x the sum of P3,502,095.00

















plus interest and penalty thereon from October 12, 1994 until fully paid as provided in the Promissory Note."

Since petitioner had extrajudicially foreclosed the chattel mortgage over the vessel even before the pre-trial of the case, it should have therein raised as issue during the pre-trial the award of a deficiency judgment. After all, the basis of its above-stated alternative prayer was the same as that of its prayer for replevin – the default of respondents in the payment of the monthly installments of their loan. But it did not. (Emphasis supplied)

The question in the present case therefore is whether respondent instituted the proper action for the deficiency amount or raised its claim at the pre-trial.

An examination of the Complaint and Amended Complaint reveals that respondent did not allege any deficiency account. Nor did it raise the matter in its Pre-Trial Brief.55 This is only to be expected because the auction sale of the properties was apparently conducted on June 19, 1992, long after it filed its Complaint/Amended Complaint and Pre-trial Brief.

However, the Court notes that evidence on the deficiency amount was duly presented by respondent and examined by petitioners. Respondent’s employee Leonila Buenviaje testified that the proceeds respondent earned from the auction sale of the mortgaged properties amounted to only P78,750.00.56 Another employee, Grace Borja, testified that after applying the proceeds of P78,750 to the unpaid account of petitioners, there remained a deficiency of P91,111.82.57 Documentary evidence of the deficiency amount was also presented in the form of the August 24, 1992 Statement of Account marked Exhibits "F-1" and "F-2."58 Thus, an independent action to recover the deficiency will merely entail the presentation of the same evidence of the same claim, in the process taxing the time and resources of the parties and the courts.59 Therefore, in the higher interest of justice and equity, the Court takes it upon itself to grant the claim of respondent to the deficiency amount of P191,111.82, as stated in its August 24, 1992 Statement of Account.

Yet another effect of the election by respondent of the remedy of extra-judicial foreclosure is the inapplicability of Section 9, Rule 60 of the Rules of Court, which states:

Section 9. Judgment. – After trial of the issues, the court shall determine who has the right of possession to and the value of the property and shall render judgment in the alternative for the delivery thereof to the party entitled to the same, or for its value in case delivery can not be made and also for such damages as either party may prove, with costs.

As already discussed, the properties of petitioners which were seized by virtue of the Writs of Replevin were extra-judicially foreclosed and sold at public auction by respondent in the exercise of its absolute right under the contract entered into by the parties, without need of prior notice or demand to forthwith judicially or extra-judicially foreclose this mortgage and proceed against all or any of the mortgaged rights, interests and properties for the full satisfaction of the mortgagors' entire obligation to the mortgagee.

Finally, under the same Deed of Mortgage, it is provided that in case of default, petitioners shall be liable for liquidated penalty/collection charge in the amount equivalent to "twenty-five (25%) percent of said outstanding obligation." It being settled that petitioners defaulted on their loan obligation to respondent, the former are liable for liquidated damages.

WHEREFORE, the Court PARTLY GRANTS the petition and MODIFIES the May 15, 2003 Decision and June 12, 2004 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 59475, as follows:

1. The award in the January 13, 1998 Decision of the Regional Trial Court of Pasig City, Branch 158 in Civil Case No. 61053, in favor of respondent, in "the amount of Php269,611.82 plus legal interest thereon effective to date until the full amount is fully paid" is DELETED;

2. Respondent The Golden Development Corporation is AWARDED P191,111.82 as the deficiency amount subject to legal interest effective September 12, 1997 up to the date of full payment;

3. Respondent is AWARDED 25% of the deficiency amount as liquidated damages.

The claim of petitioners Allandale Sportsline, Inc. and Melbarose R. Sasot to recover properties subject of the writs of replevin is DENIED.

No costs.






RULE 60

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Transcript of RULE 60