MACONDRAY & CO., INC., PLAINTIFF AND APPELLANT, VS. PEDRO COLETO, DEFENDANT AND APPELLEE. ISABEL COLETO DE ORTIZ, INTERVENOR, MACONDRAY & CO., INC., ET AL., CROSS-DEFENDANTS.

Macondray and Company versus Coleto

The Case

This is a civil action brought by Macondray and Company against Pedro Coleto, with Isabel Coleto de Ortiz, as administratrix of the intestate estate of her deceased mother, intervening. The plaintiff prays that it be declared the owner of certain real properties described in its complaint, that the defendant, whom it accuses of illegal possession, be evicted, and that he pay damages. The defendant resists on the ground that the properties were sold to the plaintiff at a void auction sale. The case matters because it fixes two enduring rules: an execution sale of real property must be held in the province where the property lies, and a conjugal partnership dissolved by death is not bound by a personal debt contracted by the surviving spouse afterward.

Procedural History

The action was commenced in the Court of First Instance. That court rendered judgment declaring the auction sale of the properties by Mamerto Labita null and void, and further declaring that the properties belong pro indiviso to the defendant Pedro Coleto and to the intestate estate of his deceased wife, Pancracia Parrucho. The plaintiff appealed from that judgment. The case reached the Supreme Court on appeal, and the Supreme Court affirmed the judgment appealed from, with costs against the appellant.

Facts

On September 19, 1927, Pedro Coleto constituted a mortgage on a Chrysler car in favor of Macondray and Company to secure several promissory notes amounting to 2,600 pesos, representing the balance of the price of the car he had bought from the plaintiff. Some notes went unpaid, so the plaintiff foreclosed the mortgage; the car was attached and sold at public auction to the plaintiff for 1,000 pesos. A balance remained. On September 10, 1928, the plaintiff sued in the Court of First Instance of Cebu to recover that balance, and the defendant was ordered to pay 1,800 pesos with interest at twelve per cent from May 3, 1928, plus 180 pesos and 80 centavos as attorney's fees and collection expenses.

On September 2, 1928, a writ of execution issued to the provincial sheriff of Surigao. Because the defendant Pedro Coleto was himself the provincial sheriff of Surigao, the Court of First Instance of Cebu appointed Mamerto Labita special sheriff to carry out the execution. Acting under the writ, Labita attached the real properties in question as the defendant's properties and sold them to the plaintiff, the highest bidder, at public auction held in Cebu. The properties, however, were situated in the Province of Surigao, and copies of the notice of sale were never posted anywhere in the municipality of Surigao.

The properties, valued at 25,000 pesos more or less, were sold to the plaintiff for only 2,300 pesos for lack of another higher bidder. It also appeared that the properties belonged to the conjugal partnership of Pedro Coleto and his wife Pancracia Parrucho, who bore children during the marriage. The wife died, dissolving the conjugal partnership and opening intestate proceedings, and the debt for which the properties were sold was contracted by Pedro Coleto after her death. Her estate intervened in the case.

Issues

• Whether or not the auction sale of the real properties by special sheriff Mamerto Labita, held in Cebu although the properties were situated in Surigao, is null and void.
• Whether or not the failure to post copies of the notice of sale anywhere in the municipality of Surigao renders the sale void.
• Whether or not the sale is void as to one half of the properties because they belonged pro indiviso to the conjugal partnership and the intestate estate of the deceased wife.

Applicable Provisions

The decision applies the settled rule on the place of sale of real property under execution, which it quotes from Corpus Juris:

Sale in another county or judicial district. Except where otherwise provided by statute, the sale of real property must be had in the county where it is situated, and this applies to sales by a United States marshal. It is well settled that a sale in one county or judicial district, of property located in another county or district, is at least voidable, and in many cases it has been held to be absolutely void, and open to collateral attack. If land is located in two counties or districts, the sale is valid as to the part within the county or district where it is sold but is void as to the remainder. Where a new county has been created but has not been organized, a sale of land in the new county may be made in the mother county.

The Court adopts this doctrine although our law is silent on the place of execution sales, reasoning that the sale must be made by the sheriff, whose territorial jurisdiction is the province of his appointment.

Ruling

On the first issue, the Court holds the sale null and void. The irregularity of selling in Cebu properties situated in Surigao is sufficient by itself. The Court reasons that the sheriff is appointed for each province, which defines his territorial jurisdiction, and the sheriff of one province cannot act as such in another. Labita acted as sheriff of Surigao in lieu of the sheriff who could not act because he was the execution debtor; in the same manner that the sheriff of Surigao could not sell in Cebu properties located in Surigao, Labita could not sell these properties in Cebu. The Court adds the purpose behind the rule: a public auction aims to obtain the best price, and a sale in a distant island defeats that purpose, since those in Surigao interested in the properties would have to travel to Cebu, which might dissuade them from bidding.

On the second issue, the Court finds another irregularity producing the same effect. Copies of the notice of sale were not posted anywhere in the municipality of Surigao. Even granting that copies were sent to the municipal president for posting, the notice was in fact never posted in Surigao as required by law. The Court notes that properties valued at 25,000 pesos were sold for only 2,300 pesos, and this great difference constitutes an injustice to the defendant which the law precisely seeks to avoid by prescribing the procedure for execution sales.

On the third issue, the Court holds the claim founded. The properties belonged to the conjugal partnership of the spouses. The debt for which they were sold was contracted by Pedro Coleto after the death of his wife, whose intestate proceedings are pending and whose estate is the intervenor. The wife's death dissolved the conjugal partnership, and thenceforth the personal indebtedness contracted by Pedro Coleto should not be imputed to it. The sale is therefore void as to one half of the properties.

Doctrine

First, an execution sale of real property must be held in the province where the property is situated, for the sale must be made by the sheriff appointed for that province, whose territorial jurisdiction cannot extend beyond it. A sale held elsewhere is void.

Second, the requirements for posting notice of sale are mandatory; failure to post the notice in the municipality where the property lies vitiates the sale, especially where the price obtained is grossly disproportionate to the value of the property.

Third, upon the death of a spouse the conjugal partnership is dissolved, and a personal debt contracted by the surviving spouse thereafter cannot be charged against the partnership or the share of the deceased spouse's estate.

Disposition

The Supreme Court affirmed the judgment appealed from, declaring the auction sale null and void and the properties owned pro indiviso by Pedro Coleto and the intestate estate of his deceased wife, with costs against the appellant.

Remember This

Memorize this line: an execution sale of real property held outside the province where the property lies is void, because the sheriff's territorial jurisdiction ends at the provincial boundary. Examiners use this case to test the place of execution sales, the mandatory posting of notice, and the rule that a surviving spouse's post-dissolution debt does not bind the conjugal partnership.