PHILIPPINE NATIONAL BANK, PETITIONER, VS. HON. COURT OF APPEALS, HON. JUDGE JOB MADAYAG, IN HIS OFFICIAL CAPACITY AS THE PAIRING/PRESIDING JUDGE OF THE REGIONAL TRIAL COURT IN M…

The main issue
in this petition for certiorari is the question of what would constitute “good reasons” to
justify execution of judgment pending appeal, under Section 2, Rule 39 of the
Revised Rules of Court.

The facts of the case
are stated in the Court of Appeals’ decision as follows:

In an original complaint for replevin
with damages (CC No. 13579, RTC, Makati) which was
amended upon proper motion, Milagros Ong Siy (Siy for short), a buy and
sell dealer of steel sheets and plates and other metal products, under the
business name, Bignay Trading, sought the collection from the Philippine National Bank (PNB for
short) the costs of about 80 tons of steel sheets and plates which were allegedly owned by her, plus compensatory moral and
exemplary damages, attorney ‘s fees
and the costs of the suit.  The steel sheets had disappeared from the PNB’s
DMC-MAN Division Compound at Bicutan, Muntinlupa, Taguig, Metro Manila
after they were confiscated and impounded from Siy,
by a joint Police-CIS detail without any search warrant or writ of
seizure on suspicion that they were stolen and which the CIS authorities
subsequently turned over to the PNB compound until their disappearance.

On June 3, 1988,
now retired Hon. Jose L. Coscolluela rendered
judgment, the decretal portion of which reads:

“WHEREFORE, judgment is hereby rendered in favor of plaintiff
and against defendant as follows:

(1) Ordering defendant to pay to plaintiff the sum of
P4,094,820.75, Philippine Currency, representing actual expenses and loses
suffered by the latter, as above enumerated, with interest thereon at 12% per
annum, computed from the date of the filing of this case in this Court up to
the time the said amount is fully paid;

(2) Ordering defendant to pay to plaintiff moral damages which this
Court assesses in the sum of P2,000,000.00, Philippine Currency;

(3) Ordering defendant to pay to plaintiff the sum of P300,000.00
as attorney’s fees; and

(4) Ordering defendant to pay plaintiff the sum of P21,290.00 as
filing fees, and the costs of the suit.

No award for exemplary damage claimed by plaintiff is granted for
lack of sufficient basis therefor.

Defendant PNB’s counterclaim is hereby
dismissed, for lack of merit.

SO ORDERED.” (p. 183, Rollo)

The PNB received
copy of the decision on June 8, 1988 and filed notice of appeal on June 9,
1988.  On
June 13, 1988, Siy filed a “Motion for Execution”
with the trial court, alleging
that she would redeem her foreclosed residential house and lot from the Bank of
the Philippine Islands (BPI) and she
depended on the proceeds of the decision of June 3, 1988 as fund source for the redemption.  Judge Coscolluela
who was scheduled to retire on June 28, 1988, referred the case to
the pairing judge, Hon. Job B. Madayag.

On July 11, 1988,
Judge Madayag issued a “Special Order” granting Siy’s motion upon a bond of P6,416,020.75, thus:

“WHEREFORE,
plaintiff’s Motion For Immediate Execution is granted; and she is hereby
ordered to post a bond in the sum of SIX MILLION FOUR HUNDRED SIXTEEN
THOUSAND TWENTY PESOS AND SEVENTY-FIVE CENTAVOS (P6,416,020.75) with sufficient sureties, upon the approval of which a writ of execution pending appeal shall be issued to effect execution of the judgment dated
June 3, 1988 of this Court.

“SO ORDERED.” (p.
184, Rollo)

Upon denial of its
motion for reconsideration, PNB filed a petition for certiorari with
prayer for preliminary injunction and/or
restraining order docketed as CA G.R. SP No. 15234, seeking the annulment of the July 11, 1988 – Special Order, as
well as the corresponding writ of execution, dated July 28, 1988. 
The Court of Appeals issued a temporary restraining order against July 11, 1988 Special Order.  Upon the lapse of 20 days, the sheriff caused
a “Notice of Levy and Sale of Execution of Personal Properties” and scheduled the auction sale on August 29,
1988.

In the meantime, on August
26, 1988, the Assets Privatization
Trust or APT (created pursuant to Proclamation No. 50) filed with the trial court an
“Urgent Motion Ex-Parte for Deferment of
Execution Pending Resolution of Third Party Claim”.  The trial court granted the motion in its
order dated August 26, 1988
and directed deferment of the auction sale until the resolution of the third
party claim.

On motion of the PNB, the Court of Appeals restrained the Sheriff
from enforcing the “Notice of Levy and Execution”, effective only for
10 days from August 29, 1988.

On September 8, 1988,
the Court of Appeals gave due course to PNB’s
petition (CA-G.R. SP No. 15234).  On September 26, 1988, it issued a writ
of preliminary injunction upon a “Bank Guarantee” in lieu of
P6,416,020.75 bond earlier ordered posted by the Court of Appeals.

Meanwhile, Siy had filed on September 5, 1988, a petition for certiorari
and/or prohibition with preliminary injunction and/or restraining order (CA
G.R. No. 15494) praying that the trial judge and PNB be enjoined from
proceeding in Civil Case 13579 and/or enforcing its order dated August 26,
1988, or acting on the APT Motion and that the said August 26, 1988 Order be
declared null and void.

The Court of Appeals consolidated both petitions and on November 16, 1988, ruled as follows:

“PREMISES CONSIDERED, (1) in CA-G.R. SP No. 15234, the Special
Order dated July 11, 1988 is hereby AFFIRMED only insofar as the Philippine
National Bank was ordered to pay Milagros Ong Siy the sums of:

 (a) P4,094,820.75,
Philippine Currency, representing actual expenses and losses suffered by the
latter, as above enumerated, with interest thereon at 12% per annum, computed
from the date of the filing of this
case in the respondent court up to the time the said amount is fully paid; and

(b) P21,200.00 as filing fees and the costs of suit.

and (2)
the Petition in CA-G.R. SP No.
15494 is DENIED DUE COURSE and is hereby DISMISSED.

The writ of preliminary injunction issued by
this Court on September 26, 1988
is hereby partially lifted and
is in effect only in regard to enjoining the respondent court and the
sheriff concerned from enforcing
the directives in the said July
11, 1988 Special Order ordering the PNB to
pay Milagros Ong Siy moral damages and
attorney’s fees.

The Partial Execution Pending Appeal ordained by this Court is,
however, subject to the proceedings
before the respondent court on the matter of APT’S third party claim which is within its jurisdiction.  The “Bank Guarantee” set up by the
PNB is ordered CANCELLED.

The record relating to the
matter of APT’s third
party claim is returned to the respondent court for further proceedings
thereon.

x x x.”
(pp. 199-200, Rollo)

PNB now seeks reversal of the Court of Appeals’ decision in
CA-G.R. SP No. 15234, affirming
with modifications the Special Order, dated July 11, 1988.

Under Section 2, Rule 39 of the Revised Rules of Court, “x x x the court may, in its discretion, order execution to
issue even before expiration of the time to appeal, upon good reasons to be
stated in a special order x x x.”

As to the concept of “good reasons,” the Court of
Appeals^[1]
stated:

“The rule x x x
does not enumerate or give examples of what may be considered as good reasons
to justify such an execution.  The matter
is addressed to the sound
discretion of the trial court.  It
involves the exercise of that power of the trial court to determine questions arising in the trial of the case to which
no strict law is applied, but
which from their nature and circumstances of the case, are controlled by the
personal judgment of the court.  If in the mind of the court, taking
into consideration the
facts and circumstances surrounding the case, good reasons exist, the exercise
of the power to issue immediate execution
of the judgment shall not be disturbed by the appellate court for the latter
should not substitute its way of thinking for that of
the trial court, otherwise, the discretionary power given to the trial court
would have no meaning.  Interference by
the appellate court with the discretion lodged in the trial court is proper
only in case of grave abuse or in case conditions have so far changed since the issuance of the order as to necessitate the intervention of the
appellate court to protect the
interests of the parties against contingencies which were not or could have not
been contemplated by the trial judge at the time of the issuance of the
order.  In the determination that there
exist good reasons to warrant such execution pending appeal, the facts and
circumstances which impelled the trial court to act as it did and its own
assessment of the equities are entitled to considerable weight, for the
issuance of the order of immediate execution is within its sound discretion
(Padilla vs. CA, 53 SCRA 168).” (p. 191, Rollo)

On the basis of the foregoing statements, We agree with the Court
of Appeals that redemption of Siy’s foreclosed house and lot to prevent consolidation
of title thereon by the Bank of
the Philippine Islands, successful bidder, by utilizing the
proceeds of the decision in Civil Case
No. 13579, constitutes “good
reasons” for allowing execution
of judgment pending appeal.

The Court of Appeals took note of the documentary and testimonial
evidence presented in Civil Case No. 13579, thus:

“(Siy) x x x in
claiming for actual and moral damages therein
had presented evidence that in view of
her failure to get the return of
her investment in the impounded
and subsequently lost steel sheets, she was not able to pay her mortgage
obligation of P2,333,775.63 with the Bank of the Philippine Islands as a consequence of which the Bank extrajudicially
foreclosed her house and lot which were offered by her as collaterals for said loan (Exh.
“J”), and subsequently purchased the said collaterals in a public auction
thereof.  Siy
had also presented evidence that before the foreclosure of her properties by
the Bank, she had to borrow money from Mrs. Monica Ramirez, who had a dollar
account with the Bank and which she pledged to the Bank, to pay the
interest on her loans:  P20,000.00 on July 16, 1985 (Exh.
“X”), P15,500.00 on August
20, 1985 (Exh. “L”), P7,500.00
on March 2, 1987 (Exh. “M”),
P8,500,00 on January
2, 1987 (Exh. “N”), P9,900.00 on June 1,
1986 (Exh. “O”), P6,750.00 on May 4, 1987 (Exh.
“P”), and P7,600.00 on April 1, 1987 (Exh.
“Q”).  Also, she was made the
respondent in a collection case filed by Concepcion
C. Limon for she was cited to appear before Barangay
Captain Carlos M. Gozon on October
1, 1986 (Exh. “S”), for which her Counsel, Atty. Pio Canta had to write a reply letter dated September 11,
1986, requesting Ms. Limon’s counsel to give her more time to settle the
obligation, considering that she was paying interest on the said loan from Ms.
Limon.

There are proofs of the foreclosure of the said house and lot, the
registration of the corresponding
certificate of sale and the expiration of the redemption period.  Siy had submitted
to the respondent court
certified true copy of TCT Nos. T-101839 and T-101840 of Caloocan
City covering her said foreclosed properties containing the inscription of the
date of Sheriff’s sale at the
bank thereof (Annexes “A” and “B” to Siy’s
opposition to PNB’s motion for reconsideration filed
before respondent court).  Attached to
the rollo of this case before this Court (p. 217) is
the letter of Atty. Dencio B. Bargas dated July 25,
1988 to Atty. Loreto C. Buduan, counsel for Siy at that time, stating in brief that several extensions
had been granted her to redeem her foreclosed properties with information that
the BPI would not accede to any further extension of the redemption period.

In the hearing on June 21,
1988 on her motion for immediate execution pending appeal, said
Atty. Bargas appeared and manifested to the
respondent court that the said redemption period
expired on February 15, 1988,
and that they had already prepared
the corresponding document of consolidation of title.

In regard to the petitioner’s allegation that the private
respondent’s failure to pay her loan on the said mortgaged property, which led
to the foreclosed (sic) thereof, was due to her own fault for she entered into
multimillion transactions with the SMC and PNOC in September and October, 1985, the respondent court pointed out that the
true cause of her financial bind was, as clearly stated in the June 3, 1988
decision, her failure to get the return on her investments on the impounded and
subsequently lost steel sheets.” (pp. 191-193, Rollo)

The Court of Appeals likewise properly upheld the trial court’s
observation that Siy’s immediate need of funds (which
she lacks) to redeem her foreclosed properties constitutes “good
reasons”, or an instance
“where the lapse of time would make the ultimate judgment
ineffective”, in the sense that “if no execution pending appeal would
be granted
and the case dragged on until
the appellate courts finally affirm the respondent court’s June
3, 1988 judgment, the appellate courts’ judgment would have become ineffective
because long before same could be rendered, the private respondent could have had already lost her right to redeem her properties, and the
titles to the said properties have already been consolidation (sic) in the mortgagee, the purchase price thereof would be much, much more, considering the inevitable increase in the value of real
property.” (See p. 193, Rollo)

The foregoing is also tied in closely with the issue of insolvency raised as a
defense by Siy, and which the Court of Appeals
correctly upheld, i.e., insolvency
being “the inability or lack of means to pay one’s debts or the condition
of a person who is unable to pay his debts as they fall due (Munion v. Vic Corporation, May 28, 1959, 59 O.G. 9683 citing Dewey v. St. Albanos
Trust CO., 48 Am. Rep. 803) x x x,”
in view of Siy’s inability to pay the interest on her loan
and the principal when it fell due resulting
in the foreclosure of the collaterals thereof. 
(Ibid)

ACCORDINGLY, the petition is hereby DISMISSED and the
decision of the Court of Appeals is AFFIRMED in all respects.  The
Temporary Restraining Order issued on January
9, 1989 is hereby LIFTED.  No Costs.

SO ORDERED.

Narvasa, (Chairman), Cruz, Gancayco, and Grino-Aquino, JJ., concur.

^[1] Ponente, Gloria C. Paras,
Associate Justice, Court of Appeals