State Investment House, Inc. vs. Court of Appeals

A writ of execution extends only to properties unquestionably belonging to the judgment debtor; the NLRC has no jurisdiction over properties already owned by third persons, and an execution sale covering such properties is void. Additionally, a rehabilitation court cannot order the implementation of a certificate of sale that has been judicially annulled, as its authority over liquidation does not include the power to reverse or disregard final court orders concerning ownership.

Philippine Blooming Mills, Inc. (PBM) ceased operations in 1981 due to severe business losses. It filed a petition for suspension of payments with the Securities and Exchange Commission (SEC), which placed PBM under rehabilitation receivership in 1982. Thousands of PBM employees separately filed illegal dismissal and money claims with the National Labor Relations Commission (NLRC). In several cases, the NLRC awarded monetary benefits to the workers. While the SEC was determining the proper settlement of all claims in the rehabilitation proceedings, the NLRC issued a writ of execution to satisfy one set of labor awards and scheduled an auction sale of PBM properties. Creditors SIHI and PNB (whose assets had been transferred to the national government through the Asset Privatization Trust) claimed that the properties to be sold already belonged to them by virtue of prior foreclosure sales.

• PBM’s Insolvency and the Labor Claims: PBM ceased operations in 1981 and filed a petition for suspension of payments with the SEC. In 1982, the SEC placed PBM under rehabilitation receivership. Two groups of employees filed complaints for illegal dismissal and money claims with the NLRC. In NCR Case No. 3-1250-83, the Labor Arbiter and the NLRC awarded monetary benefits but denied separation pay; this ruling was affirmed by the Supreme Court in G.R. No. 79202. In NCR Case No. 9-3296-84, involving 2,081 employees, Labor Arbiter Hermogenes rendered a decision on May 28, 1987 that included separation pay. The NLRC affirmed that decision on November 9, 1987, and a writ of execution was issued on November 13, 1987. Deputy Sheriff Silvino Santos issued a Notice of Levy and Sale and set the public auction for November 23, 1987.

• SIHI’s Foreclosure and Ownership: On July 20, 1983, SIHI filed a complaint for foreclosure of mortgage against PBM, Four Seas Trading Corporation, and Alfredo Ching (Civil Case No. 49997, RTC Pasig). The RTC granted partial summary judgment and ordered the sale of the mortgaged properties. SIHI purchased the real and personal properties at a public auction on November 9 and 10, 1987 and obtained certificates of sale. Upon learning of the NLRC sheriff’s scheduled sale of properties at the PBM Compound in Balintawak, Quezon City, SIHI sought and obtained from the RTC a temporary restraining order on November 20, 1987, enjoining the auction. Sheriff Santos ignored the order and proceeded with the sale. The RTC subsequently declared the certificate of sale dated November 23, 1987 null and void and held the sheriff in contempt. This contempt ruling was affirmed by the Court of Appeals and, in G.R. No. 85242, by the Supreme Court.

• PNB/APT’s Ownership: PNB extrajudicially foreclosed mortgages on PBM’s real and personal properties in 1983. At the public auction, PNB acquired seven lots, seven buildings, and numerous machineries and equipment for a total bid of over P102 million. Pursuant to Proclamation No. 50 and Administrative Order No. 14, PNB transferred these assets to the national government through the Asset Privatization Trust (APT) on June 5, 1987. The APT sold some of the machineries and equipment to Phoenix Iron and Steel Corporation and other entities. Before the November 23, 1987 auction, PNB filed a third-party claim with the NLRC asserting ownership over the properties subject to levy.

• The NLRC Auction Sale to Asibar: Despite the injunction and third-party claims, Sheriff Santos conducted the auction on November 23, 1987. Respondent Alfredo Asibar was the highest bidder for the properties located at the PBM Compound in Pasig, Metro Manila, with a bid of P5,950,000.00. A certificate of sale was issued to him on the same day. Between November 24 and 28, 1987, persons acting on behalf of the laborers hauled and removed personal properties from the compound.

• The SEC Break-Open Order: In its Resolution of November 21, 1988 in G.R. Nos. 79202 and 80580, the Supreme Court referred the matter of clarifying the scope of its injunction against the sale of PBM properties to the SEC. On February 9, 1989, the SEC ruled that the injunction “does not cover properties already sold before May 2, 1988 or more particularly, the certificate of sale on November 23, 1987 in NLRC Case No. NCR-9-3296-84.” On May 26, 1989, the SEC granted the laborers’ urgent motion and issued a break-open order to implement the certificate of sale covering properties at the PBM Compound in Balintawak, Quezon City, and Manggahan, Pasig. SIHI challenged this order, but the Court of Appeals affirmed it.

• The Asibar-PISCOR Deed of Sale: On February 10, 1988, Asibar executed a Deed of Sale in favor of Phoenix Iron and Steel Corporation (PISCOR) covering machineries and equipment located in buildings at the PBM Compound in Pasig. The purchase price of P9,500,000.00 was payable in installments, with a P4,000,000.00 balance due fourteen days from the dismissal of Civil Case No. 18426. Asibar later filed a complaint for collection of the balance plus damages (Civil Case No. 56806, RTC Pasig). PISCOR moved to dismiss for lack of cause of action, arguing that the condition — final dismissal of Civil Case No. 18426 — had not been satisfied. The RTC denied the motion and the Court of Appeals dismissed PISCOR’s certiorari petition as moot in light of the Makati RTC’s dismissal of Civil Case No. 18426.

• The Makati RTC’s Factual Finding on Identity of Properties: In Civil Case No. 18426, the Makati RTC dismissed APT’s complaint to annul the auction sale. It found that APT failed to prove that the properties sold to PNB in 1983 were the same as those sold to Asibar in 1987. The trial court assumed the existence of two separate PBM compounds — one in Rosario and one in Manggahan — and concluded that APT’s evidence did not show that the chattels PNB acquired were located in the same buildings that were sold to Asibar.

• Validity of the SEC Break-Open Order (SIHI, G.R. No. 89767): SIHI argued that the SEC’s break-open order effectively reversed the Supreme Court’s ruling in G.R. No. 85242, which had upheld the nullification of the November 23, 1987 certificate of sale. SIHI further contended that allowing the SEC to seize the disputed properties to satisfy the workers’ judgment violated SIHI’s right to due process and improperly gave the laborers an undue preference over other creditors, contrary to the Court’s directive to course all claims through SEC liquidation proceedings.

• Voidness of the Auction Sale (APT, G.R. No. 96056): APT maintained that the auction sale conducted by Sheriff Santos was void because the properties levied on execution had already been acquired by PNB through extrajudicial foreclosure in 1983 and subsequently transferred to the national government. APT argued that the Court of Appeals gravely abused its discretion in not finding that the properties foreclosed by PNB and sold to the government were the very same ones auctioned to Asibar. APT presented certificates of sale and deed of transfer detailing the buildings and machineries, and contended that Sheriff Santos described the same buildings in the certificate of sale issued to Asibar.

• Prematurity and Lack of Cause of Action (PISCOR, G.R. No. 96437): PISCOR asserted that Asibar’s complaint for collection of the balance of the purchase price stated no cause of action. Under the Deed of Sale, the balance became due only upon the dismissal of Civil Case No. 18426. PISCOR claimed that the dismissal referred to had to be final and executory, and since the Makati RTC decision dismissing Civil Case No. 18426 was still under appeal, Asibar had no demandable right. PISCOR also argued that the Court of Appeals erred in dismissing its certiorari petition as moot and academic.

• Authority of the SEC (Laborers/Asibar): Respondents argued that the SEC was acting within its delegated authority from the Supreme Court when it clarified the injunction and issued the break-open order. They pointed to the Court’s November 21, 1988 Resolution, which referred the clarification of the scope of the injunction to the SEC, and the February 9, 1989 Order, which explicitly stated that the November 23, 1987 certificate of sale was not covered by the injunction.

• Superiority of Laborers’ Lien (Asibar in G.R. No. 96056): Asibar contended that the workers’ lien on PBM properties attached as early as 1981 and enjoys preference over the mortgage lien of PNB. He invoked Article 110 of the Labor Code and the doctrine that police power allows workers’ separation pay claims to prevail over the non-impairment clause, arguing that he acquired rights superior to those of APT.

• No Identity of Properties (Asibar): Asibar supported the trial court’s finding that the properties sold by PNB and those sold by Sheriff Santos were not identical. He maintained that the government failed to present competent evidence linking the properties acquired by PNB to those sold at the NLRC auction.

• Validity of the SEC Break-Open Order (G.R. No. 89767): Whether the SEC may validly order the implementation of a certificate of sale that a competent civil court had previously declared null and void, and whether such order violates the rule that all claims and execution must be processed within the rehabilitation proceedings.

• Identity of Properties and Voidness of the NLRC Auction Sale (G.R. No. 96056): Whether the Court of Appeals committed grave abuse of discretion in affirming the trial court’s finding that the properties sold to Asibar were not the same as those previously acquired by PNB and transferred to the government, and whether the auction sale conducted by the NLRC sheriff over properties no longer owned by the judgment debtor is void.

• Mootness and Cause of Action in Asibar’s Collection Suit (G.R. No. 96437): Whether the Court of Appeals erred in dismissing PISCOR’s petition as moot and academic based on the non-final dismissal of Civil Case No. 18426, and whether the complaint states a cause of action for collection of the balance of the purchase price.

• Jurisdiction of the NLRC over Third-Party Properties (Common to G.R. Nos. 89767 and 96056): Whether the NLRC may execute a money judgment against properties that, at the time of levy, belonged to persons other than the judgment debtor.

• Validity of the SEC Break-Open Order (G.R. No. 89767): The SEC had no authority to order the implementation of a certificate of sale that the RTC of Pasig, in Civil Case No. 49997, had already declared null and void — a declaration the Supreme Court itself affirmed in G.R. No. 85242. While the SEC has jurisdiction over PBM properties in the course of rehabilitation, that jurisdiction does not extend to reversing or disregarding final court orders concerning ownership. The break-open order was thus null and void.

• Identity of Properties and Voidness of the NLRC Auction Sale (G.R. No. 96056): The trial court’s finding that there was no identity between the properties sold to PNB/APT and those sold to Asibar was patently erroneous and amounted to grave abuse of discretion. Official certifications and maps proved there was only one PBM compound in Pasig, straddling Barangays Rosario and Manggahan; the trial court’s inference of two separate industrial complexes was speculative and unsupported by the record. The evidence showed that at least nine buildings and the chattels inside them, previously acquired by PNB, were included in the lots sold to Asibar. Since the NLRC has jurisdiction only over properties unquestionably belonging to the judgment debtor, the auction sale of properties already owned by PNB and the government was void. The certificate of sale issued to Asibar was cancelled.

• Mootness and Cause of Action (G.R. No. 96437): Considering the ruling in G.R. No. 96056 that the underlying auction sale to Asibar was void, Asibar never acquired valid title to the properties he purported to sell to PISCOR. Consequently, the deed of sale had no legal basis, and Asibar’s complaint for collection of the balance must be dismissed. The petition in G.R. No. 96437 was declared moot and academic; the RTC of Pasig was ordered to dismiss Civil Case No. 56806.

• Jurisdiction of the NLRC over Third-Party Properties: The power of a court or quasi-judicial body to execute a judgment extends only to properties unquestionably owned by the judgment debtor. Properties belonging to third persons are beyond the reach of execution. The NLRC, therefore, had no jurisdiction to levy upon properties already owned by SIHI and the national government. The sheriff’s sale of such properties was a nullity.

• Execution Limited to Properties of the Judgment Debtor — A court or tribunal executing a money judgment may levy and sell only properties unquestionably belonging to the judgment debtor. If a property is owned by a third party, the NLRC has no jurisdiction over it; any sale is void. This rule, codified in Section 15, Rule 39 of the Revised Rules of Court, is anchored on the principle that the power to execute does not extend to property not belonging to the debtor. (See Consolidated Bank and Trust Corp. v. Court of Appeals, 193 SCRA 158 [1991]; Bayer Philippines, Inc. v. Agana, 63 SCRA 355 [1975].)

• Rehabilitation Court Cannot Override Final Court Orders — The SEC, acting as a rehabilitation and liquidation court, may not issue orders that have the effect of reversing or setting aside final judicial determinations of ownership rendered by civil courts. Its jurisdiction to administer the debtor’s properties does not include the authority to implement a certificate of sale that a competent court has annulled.

• Factual Findings of the Court of Appeals — Exceptions — While the factual findings of the Court of Appeals are generally binding on the Supreme Court, this rule admits of exceptions, including when the findings are not supported by the record, are glaringly erroneous, or are grounded entirely on speculation, surmise, or conjecture. The trial court’s assumption of two PBM compounds without evidentiary basis and its consequent finding of non-identity of properties fell squarely within these exceptions.

• “The power of the Court in the execution of its judgment extends only over properties belonging to the judgment debtor. … For under the law and existing jurisprudence, plaintiff, as an innocent mortgagee and purchaser for value, acquires good and valid titles to the properties in question.”

• “True, the SEC pursuant to our Resolution in the other related PBM cases has jurisdiction over all properties of the PBM which should be distributed among valid claimants including the private respondents in the liquidation proceedings. Such jurisdiction, however, does not include the power to reverse and set aside our own resolutions. It cannot issue a ‘break-open order’ arbitrarily and to the prejudice of third persons seize PBM properties which were earlier in the lawful possession of third persons.”

• “Any execution of the NLRC decision awarding benefits to the PBM workers and any disposition of PBM properties arising from the NLRC awards must be referred to the Securities and Exchange Commission. … Any attempt to execute on properties not belonging to PBM is properly a concern of civil courts and not of the NLRC. Either way, the action of the petitioner sheriff is premature or improper.”

• Consolidated Bank and Trust Corporation v. Court of Appeals, 193 SCRA 158 (1991) — Applied as controlling authority for the rule that a court may only levy upon properties unquestionably owned by the judgment debtor.
• Bayer Philippines, Inc. v. Agana, 63 SCRA 355 (1975) — Cited for the same principle.
• Philippine Blooming Mills Co., Inc. v. NLRC, G.R. No. 71318 (January 20, 1986) — Invoked as the law of the case that labor claims must be submitted to the SEC for determination of preference in the course of rehabilitation.
• Chan v. Court of Appeals, 33 SCRA 737 (1970); Baniqued v. Court of Appeals, 127 SCRA 596 (1984); and others — Cited to enumerate the exceptions to the rule that factual findings of the Court of Appeals are conclusive on the Supreme Court.

• Section 15, Rule 39, Revised Rules of Court — This provision governs the execution of money judgments and was cited for the principle that the trial court has the competence to identify and secure only properties belonging to the judgment debtor. The Court relied on this rule to emphasize that the NLRC sheriff’s levy on properties owned by third parties was invalid.

Narvasa, C.J., Melencio-Herrera, Cruz, Paras, Feliciano, Bidin, Griño-Aquino, Medialdea, Regalado, Davide, Jr., Romero, and Nocon, JJ., concurred. Justice Padilla took no part.