JOSE ANTILLON, RECEIVER, PLAINTIFF AND APPELLEE, VS. THE ASIATIC, PETROLEUM COMPANY (P. I.), LTD., THE PROVINCIAL SHERIFF OF TAYABAS, THE SHERIFF OF THE CITY OF MANILA, AND THE …

Antillon versus Asiatic Petroleum Company

The Case

This is an appeal from an order of the Court of First Instance of Tayabas requiring the Asiatic Petroleum Company, Ltd., to pay into the hands of Jose Antillon, the receiver of the Orlanes and Banaag Transportation Company, Inc., the sum of 6,619.30 pesos, being the amount which the company bid for certain properties of the corporation sold at an execution sale. The receiver sued the petroleum company and the sheriffs to annul a writ of execution and the sale held under it, on the ground that the properties of the corporation were in the custody of the court, in custodia legis, and therefore could not be seized. The case matters because it draws the line between equity and technicality: a court of equity will not, on appeal, undo execution proceedings that were never themselves appealed, even where the result gives one creditor an advantage over the rest.

Procedural History

The litigation began in the Court of First Instance of Tayabas, where the Asiatic Petroleum Company filed a creditor's bill against the Orlanes and Banaag Transportation Company, Inc. A receiver was appointed, seventeen creditors intervened, and judgment was rendered on October 26, 1931, ordering payment of the claims. Later orders directed the sale of mortgaged automobiles and other properties to satisfy the judgment. The transportation company excepted to these amendatory orders, and the case went up to the Supreme Court, which affirmed the judgment and the amendatory orders.

A writ of execution was then issued in favor of the petroleum company. The company and the receiver sought an injunction from the Supreme Court to restrain the sheriffs from enforcing it, and the petition was dismissed for lack of merit. The receiver then filed a separate action in the Court of First Instance of Tayabas to annul the writ and the sale. The trial court confirmed the sales but required the petroleum company, as purchaser, to deliver to the receiver in cash the amount of its bid. From that order the petroleum company appealed to the Supreme Court.

Facts

On July 2, 1931, the Asiatic Petroleum Company filed a petition in the nature of a creditor's bill in equity against the Orlanes and Banaag Transportation Company, Inc., a public utility indebted to it and to various other creditors. It alleged that the corporation was in imminent danger of insolvency but could pay its creditors in full if it continued as a going concern, and it prayed for the appointment of a receiver. The court appointed the Philippine Trust Company as receiver with wide powers and enjoined the creditors from attaching property or suing the corporation or the receiver without the court's permission.

Seventeen creditors intervened, and on October 26, 1931, judgment was rendered adjudicating their claims and ordering the corporation and the receiver to pay them. When more than thirty days passed without payment, the court, on motion of the petroleum company and other creditors, directed the receiver to sell at public sale eighteen automobiles covered by a mortgage in favor of the petroleum company, and to pay that company the amount of the judgment from the proceeds. Other mortgaged properties were ordered sold in favor of their respective mortgagees. These amendatory orders were affirmed on appeal.

A writ of execution was issued in favor of the petroleum company, and the sheriffs proceeded to sell properties of the corporation. The petroleum company was the highest bidder, its bid being 6,619.30 pesos, apparently credited on its judgment. The receiver then brought this action to annul the writ and the sale, insisting that the property was in custodia legis, in the hands and possession of the receiver, and that giving effect to the writ would leave the other creditors unpaid. The trial court confirmed the sales but ordered the petroleum company to pay its bid in cash to the receiver, reserving to it the right to recover the sum from the corporation by execution of judgment.

Issues

• Whether or not the trial court erred in requiring the Asiatic Petroleum Company, as purchaser at the execution sale, to pay the amount of its bid in cash to the receiver.
• Whether or not the equities of the other creditors may be considered on this appeal, where the receiver did not appeal and did not question the validity of the sheriff's sale.

Applicable Provisions

No statutory provision is quoted or construed in the decision. The governing principle is the equitable rule on custody of property in litigation, which the Court states in its own words:

The essential ground of the petition being that the property of the corporation which is in custodia legis cannot be seized on a writ of execution.

This principle, invoked by the receiver, is the foundation of his action to annul the writ and the sale, and it bears on the case because the Court holds that whatever its force, the point cannot be reviewed on this appeal.

Ruling

On the first issue, the Court held that the trial court erred. The first execution, issued on October 4, 1932, and amended on October 19, 1932, was based on the judgment of October 26, 1931, and, like any other writ of execution, was issued for the benefit of the judgment creditor. The Court could find no legal basis for depriving the petroleum company of the benefit of those orders and requiring it to pay its bid in cash and institute a new suit for reimbursement. The Court reasoned that if the judgment in favor of the petroleum company was reduced by the amount of its bid, there is no consideration upon which it may be required to pay the amount of its bid a second time; and if the judgment was not so reduced and the bid is paid in cash to the receiver, the execution sale deprives the corporation of its property without compensation, for it still remains liable for the full amount of the judgment.

On the second issue, the Court acknowledged that there was much force in the argument that the proceeding was originally in the nature of an equitable proceeding for the protection not only of the petroleum company but of all the creditors, and that it is inequitable that the petroleum company should have acquired an advantage over the others. But the Court held that the erroneous orders, if such there were, which brought about these results cannot be reviewed on this appeal, because the receiver has not appealed and does not question now the validity of the sheriff's sale to the petroleum company.

Doctrine

A writ of execution issued in favor of a judgment creditor is for that creditor's benefit, and a purchaser at the execution sale who bids and has the bid credited on the judgment cannot be compelled to pay the amount of the bid a second time in cash to a receiver. To require it would either exact a double payment or deprive the judgment debtor of its property without compensation while it remains liable for the full judgment.

The equitable argument that one creditor should not gain an advantage over the others in a receivership is not reviewable on appeal where the receiver did not appeal and does not question the validity of the sale. The custody of property in litigation, in custodia legis, is a real ground for resisting execution, but it must be raised and preserved by the party aggrieved; it cannot be supplied by the appellate court on an appeal taken by the other side.

Disposition

The decision appealed from was reversed, with directions to dismiss the complaint, without special pronouncement as to costs. Justices Malcolm and Villa-Real dissented, on the ground that the equitable aspects of the case required that the assets be applied to the claims of all the creditors and not to the claim of one of them.

Remember This

The single line worth memorizing is that a purchaser at an execution sale whose bid was credited on the judgment cannot be made to pay that bid again in cash to the receiver, and the equities of the other creditors cannot be reviewed where the receiver did not appeal. Examiners use this case to test the interplay of equity and technicality in receivership and execution proceedings, and to test whether a candidate knows that a point not appealed is a point waived.