ARCHINET INTERNATIONAL, G.R. No. 183753
INC. and SEOKWHAN HAHN,
Petitioners, Present:
Ynares-Santiago, J. (Chairperson),
- versus - Chico-Nazario,
Velasco, Jr.,
Nachura, and
Peralta, JJ.
BECCO PHILIPPINES, INC. and
BECCOMAX PROPERTY AND Promulgated:
DEVELOPMENT CORP.,
Respondents. June 19, 2009
x
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x
YNARES-SANTIAGO, J.:
Assailed in this petition for review on certiorari is the January 25,
2008 Decision[1]
of the Court of Appeals in CA-G.R. SP No. 96030 which set aside the
The
facts are as follows:
Respondent Beccomax was the owner and developer
of The Infinity Tower, later renamed as The Stamford Court-Salcedo,
On July 25, 1997, Becco and Archinet entered
into contract for the construction of the interior portions of 24 floors of The
Infinity Tower. Subsequently, they entered
into another contract for the supply and provision of materials to be used in the
interior portions, and additional works on the lobby, the 6th Floor
common areas, and the penthouse. By
March 2000, the construction of The Infinity Tower was completed.
However, respondents allegedly failed to make
timely payments despite demands. Thus, petitioners
filed on June 21, 2002 a complaint[3]
for breach of contract, sum of money and damages with an application ex-parte
for a writ of preliminary attachment/garnishment. The case was raffled to Branch 56 of the
Petitioners alleged that as a result of Becco’s
delayed payments, Archinet suffered delays in settling its own obligations,
incurred higher interest charges and exchange rate costs in its bank financing
arrangements, manpower employment, overhead, purchases from suppliers,
transportation and shipping costs and charges.[4]
Petitioners also contended that respondents
are liable for the costs of additional construction works on The Infinity Tower,
as well as the contract price for the designs and drawings for respondents’ another
condominium project known as Uptown 21.
On July 17, 2002, the trial court ordered the
issuance of a writ of preliminary attachment against the properties of respondents
after petitioners posted an injunctive bond in the amount of Php33,781,741.17.[5]
On July 24, 2002, the trial court issued a writ
of attachment.[6] Consequently, 10 condominium units of the
Stamford Court-Salcedo were attached, namely unit nos. 2701 to 2707 and 2801 to
2803, which are under the name of Beccomax and covered by CCT Nos. 74067 to
74076.
On May 24, 2006,[7]
the trial court found in favor of petitioners and awarded them a total sum of
Php56,697,741.92 representing various money claims. Respondents filed a motion for
reconsideration on June 23, 2006.
Meanwhile, on June 9, 2006, petitioners filed a
Motion for Discretionary Execution[8]
pursuant to Section 2 (a), Rule 39 of the Rules of Court. Petitioners alleged that there are good
reasons which warrant execution pending appeal, to wit: a) respondents’
President, Chan Shik Kim, is a fugitive from justice and has not returned to
the
On July 10, 2006, the trial court issued an
Omnibus Order[9]
denying the motion for reconsideration filed by respondents while granting
discretionary execution prayed for by petitioners, to wit:
In view thereof, and coupled with
the failure of the said defendant to present any proof that it has already
recovered from such a shaky business operation, it can safely be concluded that
indeed it is in “imminent danger of insolvency”.
Surely, such fact of the dissolution
of defendant Becco Philippines, Inc. on October 31, 2002, while the instant
case was still pending, and the other defendant Beccomax Property and
Development Corporation’s being in imminent danger of insolvency will serve as
good reasons which would warrant the issuance of this Special Order directing
the execution of the decision of this Court dated May 24, 2006 even before the
expiration of the period of appeal.
x x x x
One of the good reasons to be stated
in a special order on which the Court, in its discretion, may order execution
even before the judgment has become executory and before appeal has been
perfected is where the judgment debtor is in imminent danger of insolvency
(Santos vs. Mojica, L-24266, Jan. 24, 1969) or is actually insolvent (Padilla,
et al. vs. CA, et al., L-31569, Sept. 28, 1973).
WHEREFORE, premises considered, the
Court rules as follows:
1.
Denying defendants’ [herein respondents] motion for
reconsideration of the decision of this Court dated May 24, 2006, for lack of
merit; and
2.
Ordering the execution of the aforesaid Court’s
decision dated May 24, 2006, pending appeal; and
3.
Directing the issuance of the corresponding Writ of
Execution to enforce the decision against the properties of the defendants.
SO ORDERED.[10]
Respondents appealed[11]
the May 24, 2006 Decision of the RTC of
On July 27, 2006, respondents’ personal
properties were auctioned where petitioners and Mr. Jong Woo Chung emerged as
the highest bidders for the total amount of Php103,620.00.[13]
On August 31, 2006, another auction sale
was held where 12 condominium units under the name of Beccomax and covered by
CCT Nos. 74069, 74071, 74072, 74076 to 74079, 74085, 74086, 74090, 74092, and
74093 were sold to petitioners as the highest bidders for the total amount of
Php18,600,000.00.[14] The Sheriff issued in favor of petitioners a
Certificate of Sale[15]
dated
In an Order dated August 18, 2006,[16]
the trial court denied respondents’ motion
for partial reconsideration of the July 10, 2006 Omnibus Order allowing
discretionary execution.
On September 8, 2006, respondents filed a
petition for certiorari with application for a temporary restraining
order and/or writ of preliminary injunction[17]
before the Court of Appeals assailing the July 10, 2006 and August 18, 2006
Orders of the trial court which granted discretionary execution and denied respondents’
motion for partial reconsideration, respectively. The case was docketed as CA-G.R. SP No.
96030.
Pending resolution of the aforementioned case,
the Sheriff conducted another auction sale of respondents’ personal properties
on September 15, 2006 where petitioners were the highest bidders for the amount
of Php1,257,500.00.[18] On even date, the Court of Appeals issued a
temporary restraining order[19]
holding in abeyance the effects of the August 31, 2006 sale and setting aside
the September 15, 2006 auction sale.
On
Petitioners subsequently filed three (3)
motions for early resolution[22]
and two (2) motions[23]
to resolve respondents’ application for injunction with the Court of Appeals,
but to no avail.
Meanwhile, on
On October 22, 2007, the trial court granted petitioners’
motion.[25] Respondents moved for reconsideration but was
denied in an order dated November 19, 2007.
At the same time, the trial court directed the issuance of new titles in
the name of Archinet.[26] Accordingly, the Register of Deeds of Makati
City cancelled the CCTs under the name of Beccomax and issued new ones in lieu
thereof in the name of Archinet.
On
On January 25, 2008, the Court of Appeals
rendered the assailed decision admitting respondents’ supplemental petition and
finding that the trial court committed grave abuse of discretion amounting to lack
or excess of jurisdiction. Meanwhile,
respondents’ motion for contempt was denied.
The Court of Appeals found no good reasons to
justify discretionary execution and that the existing preliminary attachment on
10 of respondents’ condominium units sufficed as security for the satisfaction
of a judgment in favor of Archinet, viz:
We disagree that the grounds relied
upon by the RTC constitute “good reasons” for discretionary execution to issue.
“Good reasons” has been held to
consist of compelling circumstances justifying the immediate execution lest
judgment becomes illusory. Such reasons
must constitute superior circumstances demanding urgency which will outweigh
the injury or damages should the losing party secure a reversal of the
judgment. The rules do not specify the
“good reasons” to justify execution pending appeal, thus, it is the discretion
of the court to determine what may be considered as such.
A review of the evidence on record
convinces this Court that the case at bar does not demonstrate superior
circumstances demanding urgency.
We agree with the petitioners
[herein respondents] that the preliminary attachment on their 10 condominium
units obviate the supposed compelling circumstance of petitioners’ alleged
financial uncertainty and even impending insolvency which may render
ineffectual any judgment favorable to private respondents [herein petitioners].
x x x x
Consequently, the existence of a
preliminary attachment, the validity and effectivity of which is not challenged
in this case, provides private respondents the necessary security for the
satisfaction of any favorable judgment.
We, thus, find no urgency in immediate execution pending appeal in this
case based on petitioner Becco’s state of liquidation/dissolution and petitioner
Beccomax’s financial condition as a “material uncertainty.”[29]
The Court of Appeals also noted that on January
5, 2005, the Board of Directors of Becco issued a Resolution withdrawing its “Application for Liquidation Proceedings
and/or Notice of Cessation of Operations.”[30]
Further, the Court of Appeals held that the
orders allowing execution pending appeal were issued without jurisdiction and
are therefore void. It ruled that the
October 22, 1997 and
WHEREFORE, the petition for
certiorari is GRANTED. The Orders dated
July 10, 2006, August 18, 2006, October 22, 2007 and November 19, 2007, of the
Regional Trial Court of Makati City are hereby declared NULL AND VOID for
having been rendered in excess of jurisdiction.
Accordingly, these Orders, the execution sales conducted pursuant
thereto and the transfer of the subject condominium titles are hereby SET
ASIDE. The Register of Deeds of Makati
is, thus, ORDERED to:
1)
CANCEL Condominium Certificate of Title Nos.
104939, 104940, 104941, 104942, 104943, 104944, 104945, 104946, 104947, 104948,
104949, and 104950 in the names of Archinet International, Inc. and Seokwhan
Hahn; and,
2)
REINSTATE Condominium Certificate of Title Nos. 74069,
74071, 74072, 74076, 74077, 74078, 74079, 74085, 74086, 74090, 74092, and 74093
in the name of Beccomax Property and Development Corporation.
SO ORDERED.[32]
Petitioners’ motion for reconsideration was
denied, hence, this petition.
Petitioners argue that the existing preliminary
attachment on 10 condominium units is not enough to satisfy any judgment in its
favor, and that there are good reasons for execution pending appeal because Becco
is in liquidation and Beccomax is in imminent danger of insolvency.
On the other hand, respondents maintain that any judgment in favor of petitioners is secured by the preliminary attachment, and that there are no good and justifiable reasons to allow execution pending appeal as the alleged imminence of insolvency is not supported by facts.
The issues for resolution are: 1) whether the
trial court committed grave abuse of discretion in allowing execution pending
appeal in Civil Case No. 02-722; and 2) whether the trial court gravely abused
its discretion in allowing the issuance of new CCTs in favor of petitioners.
The petition is partially meritorious.
Grave abuse of discretion exists where an act
is performed with a capricious or whimsical exercise of judgment equivalent to
lack of jurisdiction. The abuse of
discretion must be patent and gross as to amount to an evasion of positive duty
or to a virtual refusal to perform a duty enjoined by law, or to act at all in
contemplation of law, as where the power is exercised in an arbitrary and
despotic manner by reason of passion or personal hostility.[33]
In the instant case, the trial court acted
within its discretion in granting petitioners’ motion for discretionary
execution on grounds that Becco is in dissolution and Beccomax is in imminent
danger of insolvency.
Section 2 (a), Rule 39 of the Rules of Court
allows execution pending appeal, as follows:
Discretionary Execution. –
(a) Execution
of a judgment or a final order pending appeal. –On motion of the prevailing
party with notice to the adverse party filed in the trial court while it has
jurisdiction over the case and is in possession of either the original record
or the record on appeal, as the case may be, at the time of the filing of such
motion, said court may, in its discretion, order execution of a judgment or
final order even before the expiration of the period to appeal.
After the trial court has lost
jurisdiction, the motion for execution pending appeal may be filed in the
appellate court.
Discretionary execution may only
issue upon good reasons to be stated in a special order after due hearing.
In Manacop v. Equitable Banking Corporation,[34] we held that discretionary
execution of appealed judgments may be allowed upon concurrence of the
following requisites: (a) there must be a motion by the prevailing party with
notice to the adverse party; (b) there must be a good reason for execution
pending appeal; and (c) the good reason must be stated in a special order.[35]
Good reasons consist of compelling
circumstances justifying immediate execution lest judgment becomes illusory, or
the prevailing party after the lapse of time be unable to enjoy it, considering
the tactics of the adverse party who may have apparently no cause but to delay.
Such reasons must constitute superior
circumstances demanding urgency which will outweigh the injury or damages
should the losing party secure a reversal of the judgment.[36] Execution of a judgment pending appeal is an
exception to the general rule that only a final judgment may be executed. Thus, the existence of “good reasons” is
essential for it is what confers discretionary power on a court to issue a writ
of execution pending appeal.[37]
The records show that petitioners submitted documentary
evidence in support of its prayer for discretionary execution. Petitioners submitted a warrant of arrest[38]
against Chan Shik Kim, President of Becco and Beccomax, to prove that the
latter has not returned to the country since October 25, 2002; a Director’s
Certificate[39]
dated October 7, 2002, showing that Becco’s Board of Directors authorized its dissolution
effective October 31, 2002; and certified machine copies from the Securities and
Exchange Commission (SEC) of Reports of Independent Auditors with accompanying
audited financial statements[40]
of Becco and Beccomax to demonstrate that the former is in a state of
liquidation while the latter is in imminent danger of insolvency.
It was on the basis of the foregoing facts and
evidence that the trial court issued the order granting execution pending
appeal. Notably, respondents in their
Comment/Opposition failed to refute the evidence submitted by petitioners. Except for the bare allegation that they “are never in imminent danger of becoming
insolvent,”[41]
respondents did not present any proof to controvert petitioners’ claims.
The October 7, 2002 Director’s Certificate as
well as the Report of Independent Auditors prepared by Sycip Gorres Velayo
& Co. (SGV) clearly state that Becco shortened its corporate term effective
Without qualifying
our opinion, we draw attention to Note 1 to the financial statements. The Company sustained net losses of Php64.8
million and Php65.2 million for the years ended December 31, 2004 and 2003, and
as of those dates, the Company’s deficit amounted to Php988.4 million and
Php845.7 million, respectively. These
conditions, along with matters as set forth in Note 1, indicate the existence
of a material uncertainty, which may cast significant doubt about the Company’s
ability to continue as a going concern.[43]
In finding that the trial court gravely abused
its discretion, the Court of Appeals relied on a Secretary’s Certificate[44]
which certifies that Becco’s Board of
Directors resolved on January 5, 2005 to withdraw its “Application for Liquidation Proceedings and/or Notice of Cessation
of Operations.” However, respondents
did not present the Secretary’s Certificate at the time the motion for discretionary
execution was pending before the trial court. Notwithstanding the import to their case, respondents
submitted it only when they filed a Memorandum[45]
before the Court of Appeals on
It is noteworthy that the Secretary’s
Certificate was executed on
Nonetheless, even assuming arguendo that
the foregoing documents were submitted to the trial court, we sustain the trial
court’s finding that there are good reasons for execution pending appeal. The withdrawal of the application for
liquidation and notice of cessation of operations on
The Company has suffered substantial
operating losses for the years ended December 31, 2004 and 2003 and has a net
liability of P2.12 billion as of December 31, 2004. In addition, the Company has defaulted on its
interest payment obligations since 1998.
In 1999, the Company ceased construction activities of its own project,
the ‘Uptown 21 (Uptown)’ (the Project), due to severe pressure on cash flows
(see Note 4).[48]
Likewise, the Owner’s Agreement proves only the
existence of a business arrangement but not that Beccomax has recovered from millions
in net losses and deficits during the years 2003 and 2004 – conditions which,
according to SGV, “indicate the existence of a material uncertainty which
may cast significant doubt about the Company’s ability to continue as a going
concern.”[49]
It is well to remember that respondents never
refuted the veracity of the Report of Independent Auditors and the audited
financial statements or the accuracy of the figures contained therein. Hence, to our mind, the said documents
constitute sufficient basis for the trial court to conclude that both
respondents are in imminent danger of insolvency.
The Court of Appeals cited Flexo
Manufacturing Corporation v. Columbus Foods, Incorporated[50] where we held that
when there are two or more defendants and one is not insolvent, the insolvency
of a co-defendant is not a good reason to justify execution pending appeal if
their liability under the judgment is either subsidiary or solidary.[51] However, our ruling in Flexo finds no
application here where both respondents are shown to be in imminent danger of
insolvency.
It bears stressing that imminent danger of
insolvency of the defeated party has been held to be a good reason to justify
discretionary execution. In Philippine
Bank of Communications v. Court of Appeals,[52]
we enumerated circumstances that would constitute good reasons under the
Rules, as follows:
A long line of jurisprudence
indicates what constitute good reasons as contemplated by the Rules, the following
being merely representative of the same:
1. When in an intestate proceeding which
has been pending for almost 29 years, one group of heirs has not yet received
the inheritance due them when the others have already received theirs, or are
about to do so (Borja vs. Encarnacion, 89 Phil. 239 (1951);
2. The advanced age of the prevailing
party (Borja vs. Court of Appeals, 196 SCRA 847 [1991]; De Leon vs. Soriano,
supra);
3. When the defeated party is in
imminent danger of insolvency (Hacienda Navarro vs. Sabrador, 65 Phil. 536
[1938]; Lao vs. Mencias, 21 SCRA 1021 [1967]; Santos vs. Mojica, 26 SCRA 607
[1969]; City of Manila vs. Court of Appeals, 72 SCRA 98 [1976]; De los Reyes
vs. Capulong, 122 SCRA 631 [1983]; PVTA vs. Lucero, 125 SCRA 337 [1983]);
4. When the appeal is dilatory and the
losing party intends to incumber and/or dispose of the property subject of the case during the pendency of
the appeal in order to defraud or
deprive the plaintiff of proprietary rights and defeat the ends of justice (Home
Insurance Company vs. Court of Appeals,
184 SCRA 318 [1990]; and
5. Deterioration of commodities subject to
litigation (Federation of United Namarco Distributors, Inc. vs. National
Marketing Corp., 4 SCRA 867 [1962]).[53]
The above ruling was reiterated in Philippine
Nails and Wires Corporation v. Malayan Insurance Company, Inc.[54] where we stated that execution
pending appeal may only be allowed upon a showing of good reasons, such as
impending insolvency of the adverse party.[55]
From the foregoing, it is clear that the trial
court adhered to jurisprudential pronouncements of this Court. Therefore, in the absence of any showing of
grave abuse of discretion, we find no cogent reason to set aside the order
granting discretionary execution.
In any event, execution pending appeal does not
bar the continuance of the appeal on the merits[56]
and respondents are not left without relief in the event of reversal of the
judgment against it. Section 5, Rule 39
of the Rules of Court specifically provides that where the executed judgment is
reversed totally or partially, or annulled, on appeal or otherwise, the trial
court may, on motion, issue such orders of restitution or reparation of damages
as equity and justice may warrant under the circumstances.
Having ruled on the validity of the order for
discretionary execution, we now turn to the October 22, 1997 and November 19,
1997 Orders of the trial court which paved the way for the issuance of new
titles to the 12 condominium units in favor of petitioners.
We agree with the Court of Appeals that the
foregoing orders are void, not because they were issued in furtherance of the
order for discretionary execution but for an entirely different reason.
In Padilla, Jr. v. Philippine Producers’
Cooperative Marketing Association, Inc.,[57]
we categorically declared that in implementing the involuntary transfer of
title of real property levied and sold on execution, it is not enough for the
executing party to file a motion with the court which rendered judgment. The proper course of action is to file a
petition in court, rather than merely move, for the issuance of new titles.[58] In so ruling, we cited Sections 75 and 107 of
Presidential Decree No. 1529,[59]
which provide:
Section
75. Application for new
certificate upon expiration of redemption period. Upon the expiration of the time, if any,
allowed by law for redemption after registered land has been sold on execution
taken or sold for the enforcement of a lien of any description, except a
mortgage lien, the purchaser at such sale or anyone claiming under him may
petition the court for the entry of a new certificate of title to him.
Before
the entry of a new certificate of title, the registered owner may pursue all
legal and equitable remedies to impeach or annul such proceedings.
x
x x x
Section
107. Surrender of withheld duplicate certificates. Where it is
necessary to issue a new certificate of title pursuant to any involuntary
instrument which divests the title of the registered owner against his consent
or where a voluntary instrument cannot be registered by reason of the refusal
or failure of the holder to surrender the owner's duplicate certificate of
title, the party in interest may file a petition in court to compel surrender
of the same to the Register of Deeds. The court, after hearing, may order the
registered owner or any person withholding the duplicate certificate to
surrender the same, and direct the entry of a new certificate or memorandum
upon such surrender. If the person withholding the duplicate certificate is not
amenable to the process of the court, or if not any reason the outstanding
owner's duplicate certificate cannot be delivered, the court may order the
annulment of the same as well as the issuance of a new certificate of title in
lieu thereof. Such new certificate and all duplicates thereof shall contain a
memorandum of the annulment of the outstanding duplicate.
The above law provides for due process to a
registered landowner and prevents the fraudulent or mistaken conveyance of
land, the value of which may exceed the judgment obligation.[60] Thus, while there are good reasons justifying
an execution pending appeal, the trial court erred in ordering the cancellation
of CCTs and ordering the issuance of new titles by mere motion. The proper course of action was to file a
petition in court. At any rate, as in
the case of Padilla, Jr., we note that petitioners can still file the
proper petition for the issuance of new titles in its name.[61]
WHEREFORE, the petition is PARTIALLY GRANTED.
The
SO ORDERED.
CONSUELO
YNARES-SANTIAGO
Associate Justice
WE CONCUR:
MINITA V. CHICO-NAZARIO
Associate Justice
PRESBITERO J. VELASCO, JR. ANTONIO
EDUARDO B. NACHURA
Associate Justice
Associate Justice
DIOSDADO M. PERALTA
Associate Justice
ATTESTATION
I attest that the conclusions in the above decision were
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution
and the Division Chairperson’s Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
REYNATO
S. PUNO
Chief Justice
[1] Rollo, pp. 729-746. Penned by Associate Justice Noel S. Tijam and concurred in by Associate Justices Martin S. Villarama, Jr. and Sesinando E. Villon.
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17] CA Records, pp. 6-31.
[18] Rollo, p. 438.
[19]
[20]
[21] CA Records, p. 706.
[22]
[23]
[24] Rollo, pp. 666-670.
[25]
[26]
[27] CA Records, pp. 802-807.
[28]
[29] Rollo, pp. 739-741.
[30]
[31]
[32]
[33] Casent Realty & Development Corporation v. Premiere Development Bank, G.R. No. 163902, January 27, 2006, 480 SCRA 426, 434.
[34] G.R. No. 162814-17, August 25, 2005, 468 SCRA 256.
[35]
[36] Villamor
v. National Power Corporation, G.R.
No. 146735, October 25, 2004, 441 SCRA 329, 342.
[37] Intramuros Tennis Club v. Philippine Tourism Authority, 395 Phil. 278, 295-296 (2000).
[38] Rollo, p. 274.
[39]
[40]
[41]
[42]
[43]
[44]
[45] CA Records, pp. 549-625.
[46]
[47] Danzas Intercontinental, Inc. v. Daguman, G.R. No. 154368, April 15, 2005, 456 SCRA 382, 394-395.
[48] Rollo, p. 281.
[49] Supra note 43.
[50] G.R. No. 164857, April 11, 2005, 455 SCRA 272.
[51]
[52] G.R. No. 126158, September 23, 1997, 279 SCRA 364.
[53]
[54] G.R. No. 143933, February 14, 2003, 397 SCRA 431.
[55]
[56] Legaspi v. Ong, G.R. No. 141311, May 26, 2005, 459 SCRA 122, 145.
[57] G.R. No. 141256, July 15, 2005, 463 SCRA 480.
[58]
[59] AMENDING AND CODIFYING THE LAWS RELATIVE TO
REGISTRATION OF PROPERTY AND FOR OTHER PURPOSES.
[60] Supra note 57 at 488.
[61]