ALBINO JOSEF, PETITIONER, VS. OTELIO SANTOS, RESPONDENT.

Josef versus Santos

The Case

This is a petition for review on certiorari brought by Albino Josef against Otelio Santos, arising from a judgment for collection of a sum of money. Otelio Santos had sued Albino Josef to collect the unpaid price of shoe materials bought on credit, and obtained a judgment in his favor. When Santos moved to execute that judgment, the sheriff levied on and sold at public auction certain personal properties and a parcel of land in Marikina City. Albino Josef protested that the personal properties belonged to his children and that the land was his family home, exempt from execution. The case matters because the Supreme Court uses it to define the duty of a trial court when a judgment debtor raises the family home exemption, and to lay down the procedure that court and creditor must follow before a family home may be touched.

Procedural History

The Regional Trial Court of Marikina City, Branch 272, after trial, found Albino Josef liable to Otelio Santos in the amount of 404,836 pesos and 50 centavos, with interest at 12 percent per annum reckoned from January 9, 1995 until full payment. Josef appealed to the Court of Appeals, which affirmed the trial court's decision in full. Josef then brought a petition for review on certiorari to the Supreme Court, but that petition was dismissed in a Resolution dated February 18, 2002, and the judgment became final and executory on May 21, 2002.

On February 17, 2003, Santos moved for the issuance of a writ of execution. Josef opposed the motion, claiming insolvency, claiming that the house and lot where he resided was his family home, and claiming that the household furniture and appliances belonged to his children. On July 16, 2003, the trial court granted the motion and ordered a writ of execution issued. The writ was issued on August 20, 2003 and enforced the next day. Personal properties were auctioned on August 29, 2003, and the real property covered by Transfer Certificate of Title Number N-105280 was sold at public auction on October 28, 2003, with Santos as the winning bidder. A Certificate of Sale dated November 6, 2003 was issued in his favor.

On November 5, 2003, Josef filed an original petition for certiorari with the Court of Appeals, questioning the levy and sale. The Court of Appeals dismissed the petition on November 17, 2003 for his failure to file a prior motion for reconsideration of the July 16, 2003 Order, and for his failure to indicate the timeliness of the petition's filing. It denied his motion for reconsideration on May 7, 2004. Josef then came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

Otelio Santos sued Albino Josef for the price of shoe materials which Josef bought on credit from him on various dates in 1994. After trial, the Regional Trial Court of Marikina City rendered judgment against Josef for 404,836 pesos and 50 centavos with interest. The Court of Appeals affirmed, and the Supreme Court dismissed Josef's petition for review, so the judgment became final and executory in May 2002.

In February 2003, Santos moved for execution. Josef opposed, alleging that he was insolvent, that the house and lot where he and his children resided was his family home and therefore exempt, and that the household furniture and appliances levied upon belonged to his children Jasmin Josef and Jean Josef Isidro. The trial court, without inquiring into these allegations, granted the motion in its Order of July 16, 2003, treating the issuance of a writ of execution as its ministerial duty.

The writ issued in August 2003. The sheriff sold personal properties at auction that same month, and in October 2003 sold the real property covered by Transfer Certificate of Title Number N-105280 to Santos as the highest bidder. Josef alleged that the real property was worth 8 million pesos but was sold for only 848,448 pesos and 64 centavos, and that the sale was conducted without complying with the notice and posting requirements.

Issues

• Whether or not the levy and sale of the personal belongings of the petitioner's children, and the attachment and sale at public auction of his family home to satisfy the judgment in favor of the respondent, is legal.
• Whether or not the dismissal of the petitioner's petition for certiorari by the Court of Appeals is justified under the circumstances.

Applicable Provisions

Article 153 of the Family Code provides:

The family home is deemed constituted on a house and lot from the time it is occupied as a family residence. From the time of its constitution and so long as any of its beneficiaries actually resides therein, the family home continues to be such and is exempt from execution, forced sale or attachment except as hereinafter provided and to the extent of the value allowed by law.

This is the core provision: the family home is constituted by occupation, not by any judicial or extrajudicial act, and it is exempt from execution.

Article 155 of the Family Code provides:

The family home shall be exempt from execution, forced sale or attachment except: (1) For non-payment of taxes; (2) For debts incurred prior to the constitution of the family home; (3) For debts secured by mortgages on the premises before or after such constitution; and (4) For debts due to laborers, mechanics, architects, builders, materialmen and others who have rendered service or furnished material for the construction of the building.

The trial court was required to determine whether Josef's obligation to Santos fell under any of these exceptions.

Article 160 of the Family Code provides:

When a creditor whose claim is not among those mentioned in Article 155 obtains a judgment in his favor, and he has reasonable grounds to believe that the family home is actually worth more than the maximum amount fixed in Article 157, he may apply to the court which rendered the judgment for an order directing the sale of the property under execution. The court shall so order if it finds that the actual value of the family home exceeds the maximum amount allowed by law as of the time of its constitution. If the increased actual value exceeds the maximum allowed in Article 157 and results from subsequent voluntary improvements introduced by the person or persons constituting the family home, by the owner or owners of the property, or by any of the beneficiaries, the same rule and procedure shall apply. At the execution sale, no bid below the value allowed for a family home shall be considered. The proceeds shall be applied first to the amount mentioned in Article 157, and then to the liabilities under the judgment and the costs. The excess, if any, shall be delivered to the judgment debtor.

This is the route a creditor must take: he must first obtain an order for the sale of the family home, and no bid below the value allowed by law may be considered.

Article 157 of the Family Code provides:

The actual value of the family home shall not exceed, at the time of its constitution, the amount of Three hundred thousand pesos in urban areas, and Two hundred thousand pesos in rural areas, or such amounts as may hereafter be fixed by law.

This fixes the value ceiling that determines how much of the family home is protected and how the proceeds of any sale are applied.

Section 13 of Rule 39 of the Rules of Court provides:

Except as otherwise expressly provided by law, the following property, and no other, shall be exempt from execution: (a) The judgment obligor's family home as provided by law, or the homestead in which he resides, and land necessarily used in connection therewith; (b) Ordinary tools and implements personally used by him in his trade, employment, or livelihood; (e) Household furniture and utensils necessary for housekeeping, and used for that purpose by the judgment obligor and his family, such as the judgment obligor may select, of a value not exceeding one hundred thousand pesos.

This provision governs the exemption of the personal properties, including the household furniture and appliances claimed by Josef's children.

Ruling

On the first issue, the Court ruled that the levy and sale were illegal. The trial court's July 16, 2003 Order was void because it ignored Josef's allegations in his opposition, which were material and relevant to the resolution of the motion for execution. The Court held that the trial court should have made an earnest determination of the truth of the claim that the house and lot was a duly constituted family home. It laid down the procedure the trial court should have observed: first, determine if the obligation falls under any of the exceptions in Article 155; second, inquire into the veracity of the claim by ocular inspection, examination of the title, interview of community members, photographs, affidavits, or a solemn examination of the petitioner and his witnesses, with the respondent given the opportunity to cross-examine and present contrary evidence; and third, if the property is found to be a family home, determine whether the obligation was contracted before or after the effectivity of the Family Code, whether the spouse is still alive and who the beneficiaries are, whether the petitioner has more than one residence, and its actual location and value for purposes of Articles 157 and 160. The Court stressed that the family home is a real right which is gratuitous, inalienable and free from attachment, and that it is the sanctuary of the family as a basic social institution.

The Court also held that the trial court failed to inquire into the personal properties, whether they were exempt from execution or whether they belonged to Josef or to someone else. Being void, the July 16, 2003 Order conferred no right on Santos, and any writ of execution based on it was likewise void. The Court acknowledged its earlier rulings that the exemption must be claimed before the sale, but distinguished this case because Josef claimed the exemption soon after the motion for execution was filed, giving notice to the court and to Santos.

On the second issue, the Court held that although Josef's resort to certiorari in the Court of Appeals was belated and without the requisite motion for reconsideration, the gravity of the issue, involving matters that strike at the very heart of the basic social institution the State is bound to preserve and protect, as well as the constitutional right to abode, required that all procedural infirmities take a back seat to the substantive questions.

Doctrine

A family home is deemed constituted on a house and lot from the time it is occupied as a family residence, and it is exempt from execution, forced sale or attachment except for the four exceptions in Article 155 of the Family Code. When a judgment debtor raises the family home exemption, the trial court may not treat the issuance of a writ of execution as a purely ministerial act; it must conduct a solemn inquiry into the nature of the property, following the procedure laid down in this case, and its failure to do so renders its order void. A creditor whose claim is not among the Article 155 exceptions must proceed under Article 160, obtaining an order for the sale of the family home, and no bid below the value allowed by law may be considered. The exemption must be claimed at the time of the levy or within a reasonable period thereafter, and a claim made soon after the motion for execution is filed is timely. Procedural lapses may be excused where the substantive issue touches the preservation of the family as a basic social institution and the constitutional right to abode.

Disposition

The Supreme Court granted the petition, reversed and set aside the Court of Appeals Resolutions, declared void the July 16, 2003 Order and the writs of execution and all acts and titles proceeding from them, directed the trial court to conduct a solemn inquiry into whether the real property is Josef's family home and into the ownership of the other properties levied upon, directed Santos to hold the properties or their proceeds in trust pending that inquiry, and directed the trial court to resolve the civil case within sixty days.

Remember This

Memorize this line: the family home is deemed constituted from the time it is occupied as a family residence, and the trial court's failure to inquire into a timely claim of exemption renders its order of execution void. Examiners use this case to test the procedure a court must follow before levying on a family home, and the rule that procedural defects yield to the protection of the family as a basic social institution.