Escovilla, Jr. vs. Court of Appeals

The Court held that the power of a court in executing a judgment extends only over properties unquestionably belonging to the judgment debtor. Where a third party claims ownership of levied property, the proper remedy is a separate and independent action, such as prohibition, to vindicate such claim; the completion of the auction sale does not render the action moot because the liability of the judgment creditor and the sheriff to the rightful owner persists.

Cuison Engineering and Machinery Co., Inc. obtained a final and executory money judgment against Del Rosario and Sons Logging Enterprises, Inc. in Civil Case No. 13699. A writ of execution was issued. Deputy Sheriff Alfonso Escovilla, Jr. levied upon an electric welding machine, and Deputy Sheriff Cecilio M. Meris levied upon a motor launch named "Pixie Boy No. 5." Third-party claims were filed by Sibagat Timber Corporation over the welding machine and by Conchita del Rosario over the motor launch, asserting ownership. Despite these claims and a subsequent action for prohibition filed by the third-party claimants, the sheriffs, upon motion of Cuison Engineering and with an indemnity bond, proceeded to sell the motor launch at public auction.

• In Civil Case No. 13699, a final and executory judgment was rendered in favor of petitioner Cuison Engineering against Del Rosario and Sons Logging Enterprises, Inc.
• A writ of execution was issued. Deputy Sheriff Alfonso Escovilla, Jr. levied on one electric welding machine on January 26, 1985. Sibagat Timber Corporation filed a third-party claim.
• Deputy Sheriff Cecilio M. Meris levied on the motor launch "Pixie Boy No. 5" on February 7, 1985. Conchita del Rosario filed a third-party claim on February 8, 1985.
• An indemnity bond was approved for del Rosario's claim. The sheriffs set an auction sale for February 14, 1985.
• On February 5, 1985, Sibagat Timber Corp. filed an action for prohibition with preliminary injunction (Special Civil Case No. 454) in the RTC Butuan City. Del Rosario later joined as petitioner.
• The Butuan RTC issued a temporary restraining order, but the sale was rescheduled. On March 6, 1985, the Davao RTC (in Civil Case No. 13699) ordered the sheriff to proceed with the auction sale.
• The auction sale of the motor launch was conducted on March 27, 1985, despite orders from the Butuan RTC to desist.
• The Butuan RTC found the properties belonged to the third-party claimants, not the judgment debtor. It held the sheriffs and Cuison Engineering liable for damages and nullified the auction sale.

• Petitioners argued that the action for prohibition had become moot and academic because the acts sought to be enjoined (the auction sale) were already accomplished when the petition was heard.
• They contended that the RTC Butuan City, a coordinate court, could not restrain or interfere with the orders of the RTC Davao City.

• Respondents maintained they were the true owners of the levied properties, a finding supported by evidence.
• They argued that the separate action for prohibition was the proper remedy to vindicate their third-party claims under the Rules of Court.
• They asserted that the judgment creditor, by posting an indemnity bond, assumed liability for the sheriff's actions.

• Procedural Issues: Whether the action for prohibition was rendered moot by the completion of the auction sale.
• Substantive Issues: Whether the levied properties belonged to the judgment debtor or to the third-party claimants; whether the sheriffs and the judgment creditor are liable for damages for levying on properties not belonging to the judgment debtor.

• Procedural: The Court ruled that the action for prohibition was not moot. The completion of the sale did not extinguish the liability of the judgment creditor and the sheriff to the true owners of the property. The separate action was the proper forum to resolve the ownership claim.
• Substantive: The Court affirmed the findings that the properties belonged to the third-party claimants. The power of execution extends only over property of the judgment debtor. The sheriffs acted beyond their authority, and the judgment creditor, having provided an indemnity bond, became responsible for the wrongful levy and sale. The Court upheld the award of damages.

• Power of Court in Execution of Judgments — A court's authority in executing a judgment is limited to properties unquestionably belonging to the judgment debtor. If a sheriff levies on property belonging to a third party, he acts beyond the scope of his authority.
• Third-Party Claim and Separate Action — When a third party claims property levied upon on execution, the proper remedy is a separate and independent action (such as prohibition or replevin) to adjudicate ownership. The pendency or outcome of such an action does not depend on whether the execution sale has already occurred.
• Liability of Judgment Creditor Upon Indemnity Bond — When a judgment creditor files an indemnity bond to allow a sheriff to proceed with a levy despite a third-party claim, the creditor assumes direction and control of the sheriff's actions and becomes liable for any resulting trespass or damages to the true owner.

• "The power of the court in the execution of judgments extends only over properties unquestionably belonging to the judgment debtor." — This passage encapsulates the fundamental limitation on execution proceedings central to the Court's ruling.
• "If a third party claim is filed, the sheriff is not bound to proceed with the levy of the property unless he is given by the judgment creditor an indemnity bond against the claim. The judgment creditor, by giving an indemnity bond, assumes the direction and control of the sheriff's action... and becomes... responsible for the continuance of the wrongful possession and for the sale and conversion of the goods..." — This quote explains the legal consequence of posting an indemnity bond, which was pivotal in holding Cuison Engineering liable.

• Bayer Philippines, Inc. v. Agana (63 SCRA 355 [1975]) — Cited for the principle that a court issuing a writ of execution enforces its authority only over properties of the judgment debtor, and a third party's claim should be the subject of a separate action.
• Rivera v. Florendo (144 SCRA 643 [1986]) — Cited for the rule that the primary purpose of a preliminary injunction is to preserve the status quo and that a court should not use an injunction to transfer disputed property from one party's possession to another.
• Traders Royal Bank v. Intermediate Appellate Court (133 SCRA 141 [1984]) — Cited to address the issue of coordinate jurisdiction. The Court noted that the rule prohibiting courts from interfering with each other's judgments generally applies where no third-party claimant is involved, and its purpose is to avoid conflict between courts.

• Section 17, Rule 39 of the Rules of Court — Impliedly invoked as the procedural sanction for the separate action filed by the third-party claimants to vindicate their rights over the levied property.