Philippine Nails and Wires Corporation vs. Malayan Insurance Company, Inc.

A trial court has no authority to determine whether an appeal is dilatory or frivolous as a ground for execution pending appeal; that prerogative belongs exclusively to the appellate court, and the mere posting of a bond is not a good reason for discretionary execution. An appellate court likewise may not rule on an issue, such as the validity of a default order, that was not raised in the proceeding before it.

Philippine Nails and Wires Corporation held Marine Cargo Policy No. LP-0001-08287 and Endorsement No. LP-0001-91399 issued by Malayan Insurance Company, Inc. The dispute concerned the insurer’s contractual liability for lost or undelivered steel billets. The procedural backdrop includes Section 2 of Rule 39 of the pre-1997 Rules of Court and Section 2(a) of Rule 39 of the 1997 Rules, which allow discretionary execution pending appeal upon good reasons stated in a special order, as well as SC Circular No. 1-88 and SC Revised Circular No. 28-91 governing material dates and non-forum shopping.

On July 28, 1993, Philippine Nails and Wires Corporation filed a complaint against Malayan Insurance Company, Inc. in the Regional Trial Court of Pasig City, Branch 163, docketed as Civil Case No. 63445. The complaint sought recovery of the insurer’s contractual liability under Marine Cargo Policy No. LP-0001-08287 and Endorsement No. LP-0001-91399, specifically the sum of P2,698,637.00 representing the insured value of 377.168 metric tons of Prime Newly Hot Rolled Steel Billets that were lost or undelivered, plus attorney’s fees and costs.

Malayan responded with a motion to dismiss dated August 10, 1993, on grounds of failure to state a cause of action and improper venue. Philippine Nails opposed the motion on August 16, 1993, and Malayan rejoined on August 26, 1993. On September 8, 1993, Philippine Nails moved to admit an amended complaint, which the RTC granted on September 17, 1993. In an order dated October 1, 1993, the RTC denied Malayan’s motion to dismiss. On October 18, 1993, Malayan filed a motion for extension of time to file an answer, purportedly because of the pending motion to dismiss. The RTC granted the motion in its October 21, 1993 order and gave Malayan a non-extendible period of ten days from receipt of the order to file its answer. On the theory that Malayan’s period to file a responsive pleading had expired, Philippine Nails sought to have Malayan declared in default. The RTC agreed and declared Malayan in default in an order dated November 5, 1993. Reception of Philippine Nails’ evidence ex parte followed on November 9, 1993.

Malayan filed its answer on November 10, 1993. A week later, Malayan instituted a petition for prohibition before the Court of Appeals, docketed as CA-G.R. SP No. 32614, asking that Philippine Nails’ complaint be dismissed on the ground of improper venue. In a resolution dated November 19, 1993, the CA denied the petition for failure to attach an affidavit of non-forum shopping; Malayan’s motion for reconsideration was likewise denied on February 28, 1994. In the meantime, Philippine Nails filed an ex-parte motion to expunge from the records Malayan’s answer with compulsory counterclaim dated November 11, 1993; the RTC granted the motion on November 12, 1993.

On December 10, 1993, the RTC rendered judgment for Philippine Nails. Malayan filed a notice of appeal on January 10, 1994. Earlier, on January 6, 1994, Philippine Nails moved for execution of the judgment pending appeal, which Malayan opposed on January 11, 1994. The RTC issued the assailed order dated February 4, 1994, granting execution pending appeal, and issued the writ of execution pending appeal on February 22, 1994. Upon Philippine Nails’ filing of the surety bond on February 21, 1994, as required in the February 4, 1994 order, the branch sheriff served a notice of garnishment on Malayan’s bank on February 22, 1994.

On February 23, 1994, Malayan filed a petition for certiorari before the CA, docketed as CA-G.R. SP No. 33387. On March 2, 1994, it filed with the RTC a motion to stay execution and to approve a supersedeas bond, which remained pending. On March 7, 1994, the CA issued a temporary restraining order enjoining Philippine Nails and the RTC from implementing the February 4, 1994 order. The CA later found that Malayan received the October 21, 1993 order on November 9, 1993, and that this date allowed it to file an answer only on November 9, 1993, beyond the October 31, 1993 deadline set by the RTC. It also noted that Malayan had raised the improvident declaration of default in CA-G.R. CV No. 45547.

• Dilatory Appeal as Good Reason: Petitioner contended that respondent’s alleged dilatory tactics and purely dilatory appeal were sufficient good reasons to grant execution pending appeal, especially coupled with the filing of a bond.
• Propriety of Certiorari Instead of Supersedeas Bond: Petitioner argued that respondent erred in filing a special civil action for certiorari instead of a supersedeas bond to stay execution of the judgment.
• Default Order: Petitioner claimed the CA erred in holding that the RTC improvidently declared respondent in default because the issue was not raised in CA-GR SP No. 33387, had already been raised and resolved in CA-GR CV No. 45547, and that ruling had become final since it was not raised in G.R. No. 138084.
• Non-Forum Shopping and Material Dates: Petitioner contended the CA erred in not outrightly dismissing respondent’s Petition in CA-GR SP No. 33387 for failure to attach an affidavit of non-forum shopping and a statement of material dates showing timely filing as required by SC Circular No. 1-88 and SC Revised Circular No. 28-91.

• Execution Pending Appeal: Respondent argued that the CA correctly struck down the Writ of Execution pending appeal because petitioner showed no proof that respondent’s appeal would derail implementation of the RTC judgment, the RTC had no authority to rule on whether the appeal was dilatory, and the filing of a supersedeas bond per se did not authorize execution pending appeal.
• Default: Respondent contended that it received the October 21, 1993 Order of the RTC giving it ten days to file an answer only on November 9, 1993; by that time, the RTC had already declared it in default in an Order dated November 5, 1993, which it received on November 19, 1993. It admitted that it had raised the improvident declaration of default in CA-GR CV No. 45547.

• Execution Pending Appeal: Whether the CA erred in annulling the RTC’s February 4, 1994 Special Order allowing execution pending appeal despite the alleged existence of good reasons and the filing of a bond.
• Order of Default: Whether the CA erred in ruling that the RTC improvidently declared respondent in default, considering that the issue was not raised in CA-GR SP No. 33387 and had already been resolved in CA-GR CV No. 45547.
• Non-Forum Shopping and Material Dates: Whether the CA erred in not dismissing respondent’s Petition in CA-GR SP No. 33387 for failure to attach an affidavit of non-forum shopping and a statement of material dates showing timely filing.

• Execution Pending Appeal: No. The CA correctly annulled the February 4, 1994 RTC Order. A trial court has no authority to determine whether an appeal is dilatory or frivolous; that prerogative belongs to the appellate court, and the mere posting of a bond is not a good reason for discretionary execution.
• Order of Default: Yes. The CA improperly ruled on the validity of the default order because respondent did not challenge that order in CA-GR SP No. 33387; the issue was not raised below and had already been resolved in CA-GR CV No. 45547.
• Non-Forum Shopping and Material Dates: No. The CA did not err in not dismissing the petition. The failure to state material dates was a waivable procedural lapse not timely raised, and respondent did not violate the rule against forum shopping because the appeal and certiorari petition had different causes of action and reliefs.

• Execution Pending Appeal: Under Section 2, Rule 39 of the pre-1997 Rules of Court, the trial court may, upon good reasons stated in a special order, order execution before expiration of the time to appeal. Section 2(a), Rule 39 of the 1997 Rules similarly allows discretionary execution pending appeal upon good reasons stated in a special order after due hearing, while the trial court has jurisdiction and possession of the record. Jurisprudence, however, limits this discretion. In Philippine Bank of Communications vs. Court of Appeals, the Court explained that execution pending appeal may be allowed only upon a showing of good reasons, such as impending insolvency of the adverse party or the patently dilatory intent of the appeal. If the reason is dilatory intent, only the appellate court, not the trial court, can appreciate it. The trial court cannot pass upon the merit of its own decision or declare that an appeal is dilatory. BF Corporation vs. EDSA Shangri-la Hotel reiterated this rule. International School vs. Court of Appeals, citing Ong vs. Court of Appeals, upheld the appellate court’s authority to determine whether an appeal is frivolous and dilatory; a trial court has no power to order execution pending appeal on that ground. The mere filing of a bond is not a good reason; a combination of circumstances is the dominant consideration, and the bond is merely an additional factor for the protection of the defendant’s creditor. The CA also did not err in giving due course to certiorari despite the availability of appeal and a supersedeas bond, because certiorari lies against an order granting execution pending appeal where it is not founded on good reasons, and appeal is not a speedy and adequate remedy to relieve the losing party from the immediate effects of an improvident execution. Diesel Construction Company, Inc. vs. Jollibee Food Corporation stressed that execution before finality must be founded on good reasons consisting of exceptional circumstances of such urgency as to outweigh the injury or damage the losing party may suffer if the appealed judgment is reversed. Thus, the CA committed no reversible error in annulling the February 4, 1994 RTC Order.
• Order of Default: The CA improperly ruled on the correctness of the RTC’s November 5, 1993 default order because respondent, as petitioner in CA-GR SP No. 33387, sought only to nullify the February 4, 1994 order authorizing execution pending appeal. Respondent did not challenge the default order in that proceeding. The issue had already been resolved by the Seventh Division of the CA in CA-GR CV No. 45547, which held that defendant had until October 28, 1993 (having received summons on the Amended Complaint on October 13, 1993) or October 31, 1993 (under the October 21, 1993 Order giving ten days to file an answer) to file its Answer; it filed only on November 11, 1993, beyond the prescribed period. Counsel should have filed a motion for extension or leave to admit answer, or a motion to set aside the order of default. Because it did not, the lower court did not have the chance to set aside the default, and defendant failed to regain standing. Under Rule 18, Section 2 of the Revised Rules of Court, a party in default is not entitled to notice of subsequent proceedings or to take part in the proceedings. The lower court neither gravely abused its discretion nor committed error when the belatedly filed Answer was expunged. Doctrinally settled is the rule that issues not raised below cannot be pleaded for the first time on appeal; points of law, theories, issues, and arguments not adequately brought to the attention of the lower court ordinarily will not be considered by a reviewing court, as basic considerations of due process impel this rule.
• Non-Forum Shopping and Material Dates: Petitioner never raised the alleged deficiencies in its March 1, 1994 Comment on Petition for Certiorari with Opposition to Prayer for Issuance of Writ of Preliminary Injunction, filed with the CA on March 3, 1994, nor in its motion for reconsideration of the March 31, 2000 CA Decision. It raised them only after receiving an adverse decision. The Petition before the CA was in fact filed within the prescribed period. The failure to state material dates was therefore merely a procedural lapse that could be waived by the other party’s failure to raise the matter at the proper time. On forum shopping, the test is whether the elements of litis pendentia are present, or whether a final judgment in one case will amount to res judicata in another. International School vs. Court of Appeals held that forum shopping is present when in two or more pending cases there is identity of parties, rights or causes of action, and reliefs sought. While there was identity of parties in the appeal and in the petition for certiorari, the causes of action and reliefs sought were different. In its appeal, respondent assailed the merits of the RTC’s December 10, 1993 Judgment; in its certiorari petition, it merely challenged the RTC Order allowing execution pending appeal. The merits of the main case are not to be determined in a petition questioning execution pending appeal and vice versa. Thus, respondent did not violate the rule on non-forum shopping.

• Trial Court Cannot Rule on Dilatory or Frivolous Appeal for Execution Pending Appeal — A trial court has no authority to pass upon whether an appeal is dilatory or frivolous. That determination belongs exclusively to the appellate court, because the trial court cannot review its own judgment. In this case, the RTC’s reliance on respondent’s alleged dilatory tactics as a good reason for execution pending appeal was invalid; only the CA could appreciate such intent.
• Good Reasons for Discretionary Execution Pending Appeal — Execution pending appeal requires good reasons stated in a special order. Good reason imports exceptional circumstances of such urgency as to outweigh the injury or damage the losing party may suffer if the appealed judgment is reversed. The mere posting of a bond is not a good reason; a combination of circumstances is the dominant consideration, and the bond is merely an additional factor for the protection of the defendant’s creditor.
• Certiorari as Remedy Against Improvident Execution Pending Appeal — Certiorari lies against an order granting execution pending appeal where the order is not founded on good reasons. Appeal is not a speedy and adequate remedy to relieve the losing party from the immediate effects of an improvident execution pending appeal.
• Issues Not Raised Below Cannot Be Raised for the First Time on Appeal — Points of law, theories, issues, and arguments not adequately brought to the attention of the lower court ordinarily will not be considered by a reviewing court. Basic considerations of due process impel this rule. The CA therefore improperly ruled on the default order, which respondent did not challenge in CA-GR SP No. 33387.
• Waiver of Procedural Lapses — The failure to state material dates in a petition may be waived by the opposing party’s failure to raise the matter at the proper time. In this case, petitioner raised the omission only after receiving an adverse CA decision, so the lapse was deemed waived.
• Forum Shopping Test — Forum shopping is present when in two or more pending cases there is identity of parties, rights or causes of action, and reliefs sought. The test is whether the elements of litis pendentia are present or whether a final judgment in one case will amount to res judicata in another. No forum shopping exists where one petition questions an order granting execution pending appeal and a regular appeal questions the decision on the merits, because the causes of action and reliefs are different.

• "A trial court has no authority to pass upon the issue of whether an appeal is dilatory or frivolous. For it to do so would constitute a review of its own judgment and a mockery of the appellate process. Only the court reviewing the appeal may rule on that question." — This passage states the ratio decidendi on execution pending appeal: the trial court cannot determine whether an appeal is dilatory or frivolous, as that power belongs to the appellate court.
• "Only an appellate court can appreciate the dilatory intent of an appeal as an additional good reason in upholding an order for execution pending appeal which may have been issued by the trial court for other good reasons, or in cases where the motion for execution pending appeal is filed with the appellate court in accordance with Section 2, paragraph (a), Rule 39 of the 1997 Rules of Court." — This excerpt defines the exclusive appellate authority to appreciate dilatory intent, a rule relied upon to affirm the annulment of the RTC’s execution pending appeal.
• "Doctrinally settled is the rule that issues not raised below cannot be pleaded for the first time on appeal." — This is the controlling procedural rule that led the Supreme Court to reverse the CA’s ruling on the default order.
• "Forum-shopping is present when in the two or more cases pending there is identity of parties, rights or causes of action and reliefs sought." — This is the canonical formulation of the forum-shopping test applied to hold that respondent did not violate the rule on non-forum shopping.

• Philippine Bank of Communications vs. Court of Appeals, 279 SCRA 364 (1997) — Explained that execution pending appeal may be allowed only upon good reasons, such as impending insolvency or patently dilatory appeal; if the reason is dilatory intent, only the appellate court can appreciate it.
• BF Corporation vs. EDSA Shangri-la Hotel, 294 SCRA 109 (1998) — Reiterated that the trial court cannot rule on the dilatory intent of an appeal; also held that certiorari lies against an order granting execution pending appeal not founded on good reasons, and appeal is not a speedy and adequate remedy.
• International School vs. Court of Appeals, 309 SCRA 474 (1999) — Upheld the appellate court’s authority to pass upon whether an appeal is frivolous and dilatory; also held no forum shopping where one petition questions execution pending appeal and a regular appeal questions the merits.
• Ong vs. Court of Appeals, 203 SCRA 38 (1991) — Cited in International School for the authority of the appellate court to determine whether an appeal is frivolous and dilatory.
• Diesel Construction Company, Inc. vs. Jollibee Food Corporation, 323 SCRA 844 (2000) — Stressed that execution before finality must be founded on good reasons consisting of exceptional circumstances of such urgency as to outweigh the injury or damage to the losing party if the appealed judgment is reversed.
• Manlayaon vs. Sunga, 208 SCRA 436 — Cited in CA-GR CV No. 45547 for the rule that a party in default is not entitled to notice of subsequent proceedings or to take part in the proceedings.
• Mendoza vs. Court of Appeals, 274 SCRA 527 (1997) — Cited for the rule that issues not raised below cannot be raised for the first time on appeal; basic considerations of due process impel the rule.
• Spouses Tirona vs. Alejo, G.R. No. 129313 (2001) — Cited for the test of forum shopping: whether the elements of litis pendentia are present or whether a final judgment in one case will amount to res judicata in another.
• Roxas vs. Court of Appeals, 157 SCRA 370 (1988) — Cited for the rule that the mere filing of a bond by the successful party is not a good reason for ordering execution pending appeal.

• Section 2, Rule 39, pre-1997 Rules of Court — Provided that on motion of the prevailing party with notice, the court may, in its discretion, order execution before expiration of the time to appeal upon good reasons stated in a special order. The RTC invoked this provision, but its stated reason—respondent’s alleged dilatory appeal—was not a valid basis for the trial court to act upon.
• Section 2(a), Rule 39, 1997 Rules of Civil Procedure — Allows discretionary execution pending appeal upon good reasons stated in a special order after due hearing, while the trial court has jurisdiction and possession of the record. The Court noted this provision as the present counterpart but maintained that the trial court cannot rely on the dilatory intent of an appeal.
• Section 2, Rule 18, Revised Rules of Court — Provided that a party in default shall not be entitled to notice of subsequent proceedings or to take part in the proceedings. This was cited in CA-GR CV No. 45547 to uphold the default and the expungement of the belated answer.
• SC Circular No. 1-88 — Required a verified statement of material dates showing that the petition was filed within the prescribed period. The Court held that failure to comply was a procedural lapse that could be waived when not timely raised.
• SC Revised Circular No. 28-91 — Required an affidavit of non-forum shopping. The Court held that respondent did not violate the rule because the appeal and certiorari petition involved different causes of action and reliefs.
• Rule 45, Rules of Court — The petition before the Supreme Court was filed as a Petition for Review on Certiorari under Rule 45.

Puno (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.