NATIONAL WATERWORKS AND SEWERAGE AUTHORITY, PETITIONER, VS. HON. ALFREDO CATOLICO, PRESIDING JUDGE, CFI-MISAMIS OCCIDENTAL, BRANCH I, PROVINCE OF MISAMIS OCCIDENTAL; SEBASTIAN L…

National Waterworks and Sewerage Authority versus Catolico

The Case

This is the case of National Waterworks and Sewerage Authority versus Catolico, decided in April 1967. The National Waterworks and Sewerage Authority, which I will call the Authority, asks the Supreme Court to set aside an order of the Court of First Instance of Misamis Occidental directing immediate execution of its judgment in favor of the Province of Misamis Occidental, which I will call the Province, while the Authority's appeal is pending. The case matters because it settles two things every reviewee must know: that a decision may be executed even before the judgment debtor receives notice of it, and that the right to stay execution by posting a supersedeas bond is not a matter of right but of sound judicial discretion. It also applies the settled rule that the portion of Republic Act Number 1383 making the Authority the owner of all local waterworks systems is unconstitutional.

Procedural History

The Province sued the Authority in the Court of First Instance of Misamis Occidental to recover possession, administration, operation and control of the Misamis Waterworks System and the Orquieta Waterworks System. Judge Alfredo Catolico rendered judgment on April 30, 1963, declaring the Province the absolute owner of the systems and ordering their return, a refund, an accounting, damages and attorney's fees. The Province moved for execution on May 8, 1963. On May 25, 1963, Judge Catolico denied the Authority's request for postponement, overruled its opposition, and granted the motion. A writ of execution issued two days later and was complied with on May 28, 1963, as to possession only. The Authority then filed an urgent motion to post a supersedeas bond to stay execution pending appeal. Judge Arturo B. Santos, sitting while Judge Catolico was on leave, denied it on July 2, 1963, and a second writ issued on July 5, 1963. The Authority came to the Supreme Court by petition for certiorari with preliminary injunction, docketed as one case, while its appeal from the judgment itself was docketed as a separate case. The Court resolved both together.

Facts

Since 1956 the Authority had taken over and operated the two waterworks systems of the Province, acting in pursuance of Republic Act Number 1383. On July 13, 1960, the Province sued to recover them. On April 30, 1963, the trial court ruled for the Province, declaring it the absolute owner and ordering the Authority to return the systems, to refund 13,855 pesos and 44 centavos delivered when the Authority took over, to render an accounting of income since April 1956 or pay 7,823 pesos and 76 centavos monthly as the average monthly income, and to pay 50,000 pesos as temperate, punitive and exemplary damages, plus 5,000 pesos in attorney's fees, and costs.

On May 3, 1963, copy of the decision was sent by registered mail to the Authority's counsel in Manila. The Province filed its motion for execution on May 8, and counsel received copy of that motion on May 13. On May 14 counsel prepared an opposition on the ground that he had not yet received copy of the decision, and on May 24 the Authority telegraphed a request to postpone the hearing. On May 25 the court denied the postponement, overruled the opposition, and granted execution. The writ issued on May 27 and was complied with on May 28 as to possession, administration, operation and control, which were turned over to the Province; the money judgment remained unsatisfied for lack of funds in the Authority's offices in Misamis Occidental.

The Authority then sought permission to post a supersedeas bond to stay execution pending appeal, and supplemented the motion, arguing that the damages from delay could be fully compensated. The court denied the motion after receiving the Authority's evidence. A second writ issued, addressed to the City Sheriff of Manila. Hence the petition for certiorari and the appeal.

Issues

• Whether or not the trial court gravely abused its discretion in ordering execution of its decision pending appeal before the Authority had received notice of the decision.
• Whether or not the Authority was entitled, as a matter of right, to stay execution pending appeal upon the filing of a supersedeas bond.
• Whether or not the appeal from the decision could prosper as regards the ownership, possession, administration and control of the systems, the refund, and the accounting.
• Whether or not the awards of 50,000 pesos in temperate and exemplary damages and 5,000 pesos in attorney's fees were justified.

Applicable Provisions

The Court cites Rule 39, Sections 2 and 3, of the Rules of Court, effective January 1, 1964, on execution pending appeal and the supersedeas bond:

Section 2. Execution pending appeal. — The court may, in its discretion, order execution to issue even before the expiration of the time to appeal, upon good reasons to be stated in a special order. If a record on appeal is filed thereafter, the motion for execution pending appeal may be granted by the appellate court.

This provision is the source of the trial court's power to order execution pending appeal, and it is discretionary, not mandatory.

Section 3. Stay of execution. — The filing of a record on appeal or the filing of a notice of appeal shall stay the execution of the judgment or order appealed from, except that the court may, in its discretion, order execution pending appeal upon good reasons stated in a special order. The judgment debtor may, however, stay the execution of the judgment or order by filing a supersedeas bond.

This provision shows that the stay upon a supersedeas bond is likewise addressed to the court's discretion, which is the core of the Court's ruling.

Ruling

On the first issue, the Court found no merit in the claim that execution was premature. There is no legal provision barring execution of a decision not yet final before notice is served on the judgment debtor. Copy of the decision had been mailed on May 3, 1963, and in the ordinary course of events counsel should have received it long before the May 25 hearing. The motion for execution was received on May 13, the Authority's representative in Misamis Occidental had telegraphed the decision to the Authority, that representative was present at the hearing, and the written opposition was prepared on May 14. The Authority had an opportunity to object and did object.

On the second issue, the Court held that although execution pending appeal may be suspended upon the filing of a supersedeas bond, the judgment debtor is not entitled to suspension as a matter of right; the court is merely empowered to order it in the exercise of its sound judgment or discretion. Since the unconstitutionality of the feature of Republic Act Number 1383 making the Authority the owner of all local waterworks systems is settled, the appeal on ownership, possession, administration and control could not possibly prosper and could merely have a dilatory effect. The trial court was therefore justified in refusing to suspend execution despite the offer of a bond.

On the third issue, the Court held that the appeal had no leg to stand on as regards title, possession, administration and control of the systems, the obligation to refund the funds seized from the treasury of the systems, and the duty to account for their earnings.

On the fourth issue, the Court held that the trial court was not justified in awarding 50,000 pesos as exemplary and temperate damages and 5,000 pesos as attorney's fees, because the Authority took over the systems in compliance with Republic Act Number 1383, which it was entitled to assume to be constitutional. In other words, it had acted in good faith.

Doctrine

First, execution pending appeal is discretionary with the trial court, and there is no legal provision barring execution of a decision not yet final before notice thereof is served on the judgment debtor. Second, the judgment debtor is not entitled to a stay of execution upon the filing of a supersedeas bond as a matter of right; the court is merely empowered to order the stay in the exercise of its sound judgment or discretion. Third, the portion of Republic Act Number 1383 making the Authority the owner of all local waterworks systems is unconstitutional as a taking of private property without just compensation and without due process of law, so an appeal on ownership can only be dilatory. Fourth, a public officer or entity acting in good faith in compliance with a statute it was entitled to assume constitutional is not liable for temperate or exemplary damages or attorney's fees.

Disposition

The petition for certiorari was denied and the complaint therein dismissed, with costs against the Authority, and the decision appealed from was affirmed in all other respects, with the elimination of the awards for temperate and exemplary damages and attorney's fees.

Remember This

Memorize this line: a supersedeas bond does not stay execution as a matter of right, for the court is merely empowered to order the stay in its sound discretion. Examiners use this case to test execution pending appeal, the discretionary nature of the supersedeas bond, and the settled unconstitutionality of Republic Act Number 1383 on local waterworks ownership.