Philippine Bank of Communications vs. The Court of Appeals

Execution pending appeal is the exception, not the rule, and may be granted only upon "good reasons" constituting superior circumstances demanding urgency that outweigh the injury or damages should the losing party secure a reversal of the judgment. Financial distress or threatened litigation against a corporate party does not per se constitute good reason for discretionary execution, and a writ of execution must conform substantially to every essential particular of the judgment it seeks to enforce.

Petitioner Philippine Bank of Communications (PBCom) is a commercial bank. Private respondent Falcon Garments Corporation (Falcon) maintained a current account with PBCom's BMA Quezon City Branch and later obtained a loan from the bank. The dispute arose from Falcon's allegations of unauthorized withdrawals from its account, which led to litigation between the depositor and the bank. The applicable rule governing execution pending appeal was Section 2, Rule 39 of the former Rules of Court, which permitted discretionary execution "upon good reasons to be stated in a special order."

Sometime in 1989, private respondent Falcon Garments Corporation (Falcon) opened Current Account No. 25-00640-7 at the BMA Quezon City Branch of petitioner Philippine Bank of Communications (PBCom). On November 27, 1992, Falcon obtained a loan from PBCom in the principal sum of P4,700,000.00 with interest at 17% per annum and penalty at 12% per annum in case of default. Falcon failed to pay its loan on due date and went into default in December 1993.

On February 9, 1995, Falcon filed a complaint with the Regional Trial Court of Quezon City against PBCom, docketed as Civil Case No. Q-95-22625 and raffled to Branch 78, presided over by Judge Percival Mandap-Lopez. The complaint prayed for restoration to Falcon's current account of alleged unauthorized withdrawals totaling P12,729,092.78 made from 1990 to 1992, plus interest, damages, and attorney's fees. In its answer, PBCom denied liability and interposed a compulsory counterclaim for P4,700,000.00 plus stipulated interest and penalty, damages, and attorney's fees.

On January 2, 1996, the trial court rendered a decision against PBCom, ordering it to restore immediately to Falcon's Current Account No. 25-00640-7 the sum of P12,729,092.78 plus interest at 12% per annum from the filing of the complaint, to operate the account in accordance with Falcon's board of directors' instructions, and to pay P500,000.00 as exemplary damages, P500,000.00 as attorney's fees, and P200,000.00 as litigation expenses. Falcon was ordered to pay PBCom its loan of P4,700,000.00 plus interest at 12% per annum from the filing of the complaint.

PBCom seasonably filed a notice of appeal, while Falcon filed a Motion for Execution Pending Appeal dated February 7, 1996. Before Branch 78 could resolve the motion, Judge Lopez inhibited himself and the case was re-raffled to Branch 101, presided over by Judge Pedro T. Santiago. Falcon filed an Ex-Parte Manifestation and Motion dated May 7, 1996, claiming that with its strained relations with PBCom, it was no longer practicable to bank with petitioner, and prayed that the money judgment be not restored to its current account but instead be directly paid to it. On the very same day, Judge Santiago granted the motion and authorized the issuance of a writ of execution pending appeal, directing PBCom to immediately pay Falcon the sum of P12,729,092.78 with 12% interest per annum, with Falcon's obligation to PBCom likewise paid in the amount of P4,700,000.00 with interest, upon Falcon's bond of P5,000,000.00.

The writ was issued on May 14, 1996, and served upon PBCom on May 16, 1996. PBCom sought the intercession of the Court of Appeals, which issued a writ of preliminary injunction on June 4, 1996. On September 13, 1996, the Court of Appeals upheld the validity of the writ of execution pending appeal and dissolved the preliminary injunction. On the same day, Falcon obtained an alias writ of execution which was served upon petitioner that same afternoon. PBCom alleged that private respondents, with about 30 people, brandished the questioned writ and decision, coercing, forcing, and intimidating personnel of PBCom's Ayala Branch, Makati City, resulting in the unlawful taking of about P1.7 million, and that private respondents threatened to go to PBCom's other branches to "get" in full the balance of the money judgment still on appeal.

In justifying the discretionary execution, Judge Santiago relied on two public documents attached to Falcon's Reply: a complaint in a collection and replevin case filed by Solid Bank Corporation against Falcon, and a police blotter. The trial court observed that Falcon was being sued for non-payment of its loan with Solidbank, that checks issued by Falcon to Solidbank bounced for insufficient funds, that written demands carried threats of criminal action for violation of Batas Pambansa Blg. 22, and that Solidbank had seized Falcon's machineries, office, and factory equipments. The trial court concluded that Falcon's survival "hangs on the balance" and that its "only hope for survival and arresting threats of civil and criminal cases, is the immediate execution of the judgment."

• Grave Abuse of Discretion: Petitioner argued that the Court of Appeals committed grave abuse of discretion in affirming Judge Santiago's order granting execution pending appeal, considering that good reasons did not exist for the issuance of a writ of execution pending appeal under Section 2, Rule 39 of the Rules of Court.
• Illegal Implementation: Petitioner averred that private respondents illegally and unlawfully implemented the writ of execution pending appeal on September 13, 1996, using an expired writ and an order of the Court of Appeals promulgated only at 10 a.m. of that day, of which petitioner had not yet received a copy and which was not yet final.
• Harassment and Intimidation: Petitioner alleged that private respondents, with about 30 people, brandished the questioned writ and decision, coercing, forcing, and intimidating personnel of petitioner's Ayala Branch, resulting in the unlawful taking of about P1.7 million, and threatened to go to petitioner's other branches to "get" in full the balance of the money judgment still on appeal.

• Good Reasons Exist: Private respondent Falcon argued that good reasons justified execution pending appeal, claiming that its survival depended on immediate execution of the judgment, given its financial distress, the Solidbank collection case against it, threats of criminal prosecution, and the seizure of its machineries and equipment.
• Readiness to Pay Counterclaim: Falcon emphasized its readiness to pay PBCom's counterclaim of P4,700,000.00 by deducting the same from its principal account, which it argued supported the grant of execution pending appeal.

• Good Reasons for Execution Pending Appeal: Whether the Court of Appeals committed grave abuse of discretion in affirming the trial court's order granting execution pending appeal despite the absence of good reasons under Section 2, Rule 39 of the Rules of Court.
• Conformity of the Writ to the Judgment: Whether the writ of execution pending appeal, which directed immediate payment to Falcon rather than restoration of funds to its current account, improperly varied the terms of the January 2, 1996 judgment.

• Good Reasons for Execution Pending Appeal: No. The reasons relied upon by the trial court—Falcon's financial distress, the Solidbank collection case, and threats of criminal prosecution—were not compelling and did not constitute good reasons for discretionary execution pending appeal. The survival of a juridical entity is not on the same plane as human life, and the danger of extinction of a corporation will not per se justify discretionary execution absent other good reasons such as impending insolvency of the adverse party or a patently dilatory appeal.
• Conformity of the Writ to the Judgment: No. The May 7, 1996 order of execution deliberately modified and failed to conform to the dispositive portion of the January 2, 1996 decision. The judgment ordered restoration of funds to Falcon's current account, while the execution order directed immediate payment directly to Falcon. A writ of execution must conform substantially to every essential particular of the judgment; an execution order that varies the tenor of the judgment or exceeds its terms is a nullity.

• Good Reasons for Execution Pending Appeal: The Court held that discretionary execution is permissible only when good reasons exist for immediately executing the judgment before finality. Good reasons consist of compelling circumstances justifying immediate execution lest the judgment becomes illusory, or the prevailing party may after the lapse of time become unable to enjoy it, considering the tactics of the adverse party who may apparently have no case except to delay. The Court enumerated representative instances of good reasons from jurisprudence: (1) an intestate proceeding pending for almost 29 years where one group of heirs has not yet received their inheritance; (2) the advanced age of the prevailing party; (3) when the defeated party is in imminent danger of insolvency; (4) when the appeal is dilatory and the losing party intends to encumber or dispose of the property subject of the case to defraud the plaintiff; and (5) deterioration of commodities subject of litigation. The Court found that Falcon's situation—being a juridical entity in financial distress facing civil or criminal suits—could not be likened to a natural person who may be ill or of advanced age. Even the danger of extinction of the corporation will not per se justify discretionary execution unless there are showings of other good reasons. The Court further noted that only one case was actually filed against Falcon (the Solidbank collection case), while the other cases were merely "impending." Citing Aquino vs. Santiago, the Court stated that it is not for the trial judge to determine the merit of a decision he rendered, as this is the role of the appellate court; hence, the trial court cannot rule that an appeal is patently dilatory as a basis for finding good reason to grant execution pending appeal. The Court reiterated the doctrine from David vs. Court of Appeals and Roxas vs. Court of Appeals that execution pending appeal is the exception, and the reasons allowing execution must constitute superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment.

• Conformity of the Writ to the Judgment: The Court observed that the May 7, 1996 order directed petitioner to "immediately pay" Falcon the sum of P12,729,092.78, whereas the January 2, 1996 decision ordered petitioner to "restore immediately" the amount to Falcon's current account and to operate the account in accordance with the instructions of Falcon's board of directors. The Court found a "whale of distinction" between the two orders: if the amount were credited to the current account, release of any amount could be made only upon proper resolution of Falcon's board of directors; but the execution order directed immediate payment which could be used or misused with or without proper instructions of the board. The Court held that a writ of execution must conform substantially to every essential particular of the judgment promulgated, citing GSIS vs. Court of Appeals, Foremost Farms, Inc. vs. Dept. of Labor and Employment, Gamboa's, Inc. vs. Court of Appeals, and Villoria vs. Piccio. An order of execution which varies the tenor of the judgment or exceeds the terms thereof is a nullity. The Court also noted that the harassment complained of by petitioner would not have happened had the trial court issued a writ that faithfully conformed to the judgment, and that it would have been unnecessary to deputize anyone other than the sheriff to enforce the writ had the current account merely been credited.

• Execution Pending Appeal as Exception — Execution of a judgment should not be had until and unless it has become final and executory. Execution pending appeal is the exception, permissible only when good reasons exist. The reasons allowing execution must constitute superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment. The Court applied this doctrine in finding that Falcon's financial distress and threatened litigation did not constitute superior circumstances warranting immediate execution.

• Good Reasons for Discretionary Execution — Good reasons consist of compelling circumstances justifying immediate execution lest the judgment becomes illusory, or the prevailing party may after the lapse of time become unable to enjoy it. Representative instances include: (1) an intestate proceeding pending for almost 29 years where one group of heirs has not yet received their inheritance; (2) the advanced age of the prevailing party; (3) when the defeated party is in imminent danger of insolvency; (4) when the appeal is dilatory and the losing party intends to encumber or dispose of the property subject of the case to defraud the plaintiff; and (5) deterioration of commodities subject of litigation. The Court held that financial distress of a corporate party and threats of impending litigation do not constitute good reasons.

• Conformity of Writ of Execution to Judgment — A writ of execution must conform substantially to every essential particular of the judgment promulgated. Execution which is not in harmony with the judgment is bereft of validity. An order of execution which varies the tenor of the judgment or exceeds the terms thereof is a nullity. The Court applied this doctrine in nullifying the execution order that directed immediate payment to Falcon instead of restoration of funds to its current account.

• "Execution pending appeal in accordance with Section 2 of Rule 39 is, of course, the exception. Normally, execution of a judgment should not be had until and unless it has become final and executory." — This passage, quoted from David vs. Court of Appeals and Roxas vs. Court of Appeals, articulates the fundamental principle that execution pending appeal is the exception rather than the rule, and was central to the Court's finding that the trial court abused its discretion.

• "The reasons allowing execution must constitute superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment." — This formulation from Roxas vs. Court of Appeals defines the standard for what constitutes "good reasons" for discretionary execution, requiring a balancing of urgency against potential injury to the losing party.

• "It is a well-settled general principle that a writ of execution must conform substantially to every essential particular of the judgment promulgated. Execution which is not in harmony with the judgment is bereft of validity." — This passage states the doctrine that a writ of execution must conform to the judgment it enforces, and was the basis for nullifying the execution order that directed payment directly to Falcon rather than restoration to its current account.

• David vs. Court of Appeals, G.R. No. 126556, July 28, 1997 — Cited as recent reiteration of the doctrine that execution pending appeal is the exception, quoting Roxas vs. Court of Appeals on the standard for good reasons.

• Roxas vs. Court of Appeals, 157 SCRA 370 (1988) — Controlling precedent defining the standard that reasons allowing execution must constitute superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment.

• Aquino vs. Santiago, 161 SCRA 570 (1988) — Cited for the principle that it is not for the trial judge to determine the merit of a decision he rendered, as this is the role of the appellate court; hence, the trial court cannot rely on the dilatory character of an appeal as a basis for granting execution pending appeal.

• GSIS vs. Court of Appeals, 218 SCRA 233 (1993) — Cited for the principle that a writ of execution must conform particularly to that ordained or decreed in the dispositive portion of the decision.

• Foremost Farms, Inc. vs. Dept. of Labor and Employment, 251 SCRA 123 (1995) — Cited for the principle that an order of execution which varies the tenor of the judgment or exceeds the terms thereof is a nullity.

• Gamboa's, Inc. vs. Court of Appeals, 72 SCRA 131 (1976) — Cited for the principle that an execution order varying the tenor of the judgment is a nullity.

• Villoria vs. Piccio, 95 Phil. 802 (1954) — Cited for the principle that an execution order which varies the tenor of the judgment or exceeds the terms thereof is a nullity.

• Borja vs. Encarnacion, 89 Phil 239 (1951) — Cited as representative of good reasons for execution pending appeal: an intestate proceeding pending for almost 29 years where one group of heirs has not yet received their inheritance.

• Borja vs. Court of Appeals, 196 SCRA 847 (1991) — Cited as representative of good reasons: the advanced age of the prevailing party.

• Hacienda Navarro vs. Sabrador, 65 Phil. 536 (1938) — Cited as representative of good reasons: when the defeated party is in imminent danger of insolvency.

• Lao vs. Mencias, 21 SCRA 1021 (1967) — Cited as representative of good reasons: when the defeated party is in imminent danger of insolvency.

• Santos vs. Mojica, 26 SCRA 607 (1969) — Cited as representative of good reasons: when the defeated party is in imminent danger of insolvency.

• City of Manila vs. Court of Appeals, 72 SCRA 98 (1976) — Cited as representative of good reasons: when the defeated party is in imminent danger of insolvency.

• De los Reyes vs. Capulong, 122 SCRA 631 (1983) — Cited as representative of good reasons: when the defeated party is in imminent danger of insolvency.

• PVTA vs. Lucero, 125 SCRA (1983) — Cited as representative of good reasons: when the defeated party is in imminent danger of insolvency.

• Home Insurance Company vs. Court of Appeals, 184 SCRA 318 (1990) — Cited as representative of good reasons: when the appeal is dilatory and the losing party intends to encumber or dispose of the property subject of the case to defraud the plaintiff.

• Federation of United Namarco Distributors, Inc. vs. National Marketing Corp., 4 SCRA 867 (1962) — Cited as representative of good reasons: deterioration of commodities subject of litigation.

• Section 2, Rule 39, Rules of Court (former) — The provision governing execution pending appeal, which provided that on motion of the prevailing party with notice to the adverse party, the court may, in its discretion, order execution to issue even before the expiration of the time to appeal, upon good reasons to be stated in a special order. The Court applied this provision in determining that the trial court's stated reasons did not constitute good reasons for discretionary execution.

• Section 2, Paragraph (a), Rule 39, 1997 Rules of Civil Procedure — The successor provision continuing the same doctrine that discretionary execution is permissible only when good reasons exist. The Court noted that this provision allows the appellate court to appreciate the dilatory intent of an appeal as an additional good reason in upholding an order for execution pending appeal.

• Batas Pambansa Blg. 22 — Referenced in the trial court's order as the basis for threatened criminal action against Falcon and/or its officers by Solidbank for bounced checks, which the trial court considered in finding good reasons for execution pending appeal.

Narvasa, C.J., Romero, Francisco and Panganiban, JJ., concurred.