Villarin vs. Munasque

A sheriff's failure to first demand immediate payment of a money judgment before levying real property does not invalidate the levy where the judgment obligor, through counsel, admits inability to pay in cash and agrees to the levy, and thereafter exercises the option to choose which properties may be levied upon; the procedural lapse is waived or rendered moot. A claim of overlevy is a factual matter that must be established by competent evidence, and photocopies of appraisal reports are inadmissible absent proof of unavailability of the originals.

Petitioners Pablito T. Villarin and P.R. Builders Developers & Managers, Inc. were the judgment obligors under a compromise agreement approved by the RTC of Makati City, while respondent Coronado P. Munasque was the judgment obligee. Intra Strata Assurance Corp. had been a co-defendant but was released when the real estate mortgages securing the obligation were assigned to respondent. The enforcement of the money judgment is governed by Section 9, Rule 39 of the 1997 Rules of Civil Procedure, which prescribes the sheriff's demand for immediate payment, the judgment obligor's option to choose property for levy, and the order of levy on personal and real properties.

Respondent Coronado P. Munasque filed a complaint for collection of sum of money against petitioners Pablito T. Villarin and P.R. Builders Developers & Managers, Inc., and Intra Strata Assurance Corp. before the RTC of Makati City, Branch 58. Before an answer could be filed, the parties entered into a compromise agreement dated July 20, 2002, in which petitioners acknowledged a joint and solidary obligation to respondent in the amount of ₱15 million, with monthly interest of ₱450,000 from October 18, 2001 until full payment, and promised to pay the whole amount within ninety days. To guarantee payment, all real estate mortgages executed by petitioners in favor of Intra Strata were assigned to respondent; Intra Strata was released from its obligation, and the complaint against it was dismissed. The RTC approved the compromise agreement on August 2, 2002.

Petitioners paid only ₱250,000 of their total obligation. On October 23, 2002, respondent filed a motion for execution, which the RTC granted; the writ of execution issued on October 29, 2002. The next day, Deputy Sheriff Antonio Q. Mendoza issued a notice of levy and caused it to be annotated on thirty-four transfer certificates of title in petitioners' names with the Register of Deeds of Tanauan City. On the same day, another notice of levy was issued against all rights and interests of petitioners over a parcel covered by a tax declaration in Villarin's name, for recording with the city assessor of Tagaytay City. On November 5, 2002, a third notice of levy was issued against eleven properties covered by transfer certificates of title in petitioners' names.

On November 8, 2002, Deputy Sheriff Mendoza issued a Notice of Deputy Sheriff's Sale on Execution, registered it with the Office of the City Assessor of Tagaytay and the Register of Deeds of Tanauan City, and posted it for twenty days in three public places each in Tanauan, Tagaytay, and Makati. After raffle by the clerk of court, the notice was published in a newspaper of national circulation on November 20 and 27, 2002. On November 14, 2002, the law firm of Oben Ventura Abola entered its appearance as collaborating counsel and sent a letter dated November 13, 2002 to respondent's counsel and Deputy Sheriff Mendoza, complaining of procedural lapses in the enforcement of the writ: no personal demand for payment before levy, no opportunity to choose properties, and failure to levy first on personal properties. The letter identified eight parcels of land in Tanauan City whose combined value was alleged to be sufficient to cover the ₱15 million claim and requested that the notice of levy be corrected. On November 19, 2002, petitioners filed a motion to recall the notice of levy and cancel the scheduled sale on the same grounds.

Respondent opposed the motion, contending that the day before the levy, petitioners' counsel, Atty. Salamero, informed respondent's counsel that petitioners did not have the money to pay even one month's interest, and that she agreed to the immediate levy of petitioners' real properties on condition that the auction sale be scheduled after November 20, 2002; petitioners' accountant, Florita B. Santos, allegedly made similar representations. Respondent also alleged that petitioners' specification of the eight parcels constituted a waiver of the need for prior demand and prior levy on personal properties. The RTC reset the auction sale from December 16, 2002 to January 16, 2003, and on January 7, 2003 denied petitioners' motion to recall the levy and cancel the sale. On January 16, 2003, Deputy Sheriff Mendoza conducted the auction sale at the main entrance lobby of Makati City Hall. The minutes of auction sale, signed by counsels for both parties, showed that only respondent's representative participated in the bidding; all the real properties were sold one after another with separate prices for each bid, and the individual bid prices for the forty-four lots totaled ₱19,546,000. Respondent paid the deputy sheriff's fees and was issued a certificate of sale on execution.

On January 30, 2003, petitioners filed an omnibus motion to reconsider the January 7, 2003 Order, to declare null and void and recall the notices of levy and sale and the auction sale, and to inhibit the presiding judge, alleging lack of factual or legal basis and loss of faith in the judge. Judge Dumayas inhibited himself on February 20, 2003, and the case was re-raffled to Branch 148, presided by Judge Oscar B. Pimentel. The RTC later concluded that the properties had been sold in bulk, while the Court of Appeals found that the minutes of auction sale and the certificate of sale on execution showed the properties were sold individually, with separate descriptions, transfer certificate numbers, and bid prices, and that petitioners, who were represented at the sale, did not object to the manner of sale.

• Prior Demand Under Section 9, Rule 39: Petitioners contended that Deputy Sheriff Mendoza failed to comply with Section 9, Rule 39 of the Rules of Court by not first making a personal demand on petitioners for immediate payment of the full amount stated in the writ and all lawful fees before levying on the 44 parcels of land.
• Option to Choose Property: Petitioners argued that the deputy sheriff failed to give them the option to immediately choose which property or part thereof sufficient to satisfy the judgment may be levied upon.
• No Waiver by Admissions: Petitioners maintained that the admissions of Atty. Salamero and Santos did not amount to a waiver of their right to prior demand, and that the deputy sheriff should have made the demand on petitioners themselves to verify those admissions.
• Letter as Exercise of Right: Petitioners asserted that their November 13, 2002 letter did not constitute a waiver or automatic correction of procedural defects; it was written precisely to exercise their right to choose the properties to be levied upon and to save whatever rights they still had.
• Bulk Sale: Petitioners questioned the Court of Appeals' finding that the 44 parcels were sold separately, claiming it had no factual or evidentiary basis; the minutes of auction sale allegedly contained only an enumeration of titles, with bid prices left blank and later filled in by handwriting, indicating a bulk sale.
• Overlevy: Petitioners alleged that the Court of Appeals erred in disregarding documents showing the fair market value of the levied properties at ₱1,187,212,000.00, far exceeding the ₱15 million judgment debt, and that an overlevy was perpetrated through noncompliance with Section 9, Rule 39.
• Grave Abuse of Discretion: Petitioners claimed the Court of Appeals committed grave abuse of discretion in failing to consider their evidence on the fair market value of the levied properties.

• Waiver of Prior Demand: Respondent agreed with the Court of Appeals that petitioners waived the requirement of demand for immediate payment by assenting, through counsel, to the auction sale scheduled after November 20, 2002.
• Letter Cured Lapses: Respondent asserted that petitioners' November 13, 2002 letter indicated their choice of specific properties to be levied upon and unwittingly cured the procedural lapses in the enforcement of the writ.
• Factual Questions Improper: Respondent argued that the allegations of bulk sale and disregard of evidence on market value were primarily questions of fact, improper in a petition for review on certiorari.
• Individual Sale: Respondent maintained that official documents such as the minutes of auction sale and the certificate of sale on execution showed the properties were sold individually.
• Market Value Evidence: Respondent added that the market value of the properties was indicated by the RTC in its January 7, 2003 Order, based on tax declarations he submitted for evaluation.

• Prior Demand and Option: Whether the failure of the deputy sheriff to first demand of the judgment obligor payment of the judgment debt before levying real properties, without allowing the obligor to exercise the option to choose which properties may be levied upon, and without first levying on personal properties, constituted a fatal procedural defect resulting in the nullity of the levy and the subsequent execution sale.
• Overlevy and Grave Abuse of Discretion: Whether the Court of Appeals committed grave abuse of discretion in failing to consider petitioners' evidence on the fair market value of the levied properties, and whether there was overlevy.
• Manner of Sale: Whether the 44 parcels of land were sold in bulk rather than separately or individually as required by law.

• Prior Demand and Option: No. The failure to first demand immediate payment did not nullify the levy, because petitioners' counsel admitted inability to pay in cash, petitioners agreed to the levy, and they thereafter exercised their option to choose the properties to be levied upon.
• Overlevy and Grave Abuse of Discretion: No. The claim of overlevy is factual and not reviewable under Rule 45 absent exceptions; petitioners failed to prove overlevy by competent evidence, and no grave abuse of discretion was shown.
• Manner of Sale: No. The minutes of auction sale and certificate of sale on execution showed the properties were sold individually, and the presumption of regular performance of official duty applied.

• Prior Demand and Option: Section 9, Rule 39 requires the sheriff to first demand immediate payment of the full amount in cash, certified bank check, or other acceptable mode. Only if the judgment obligor cannot pay may the officer levy, giving the obligor the option to choose which property or part thereof may be levied upon; if the obligor does not exercise the option, the officer levies personal properties first, then real properties. Here, Deputy Sheriff Mendoza did not first demand payment. However, the records showed that petitioners never disputed their counsel's admissions that they had no funds to pay even one month's interest and that they agreed to the levy so long as the auction sale would not be scheduled earlier than November 20, 2002. These admissions gave the deputy sheriff reasonable basis to forego prior demand and proceed to levy. Counsel is expected to know the case and the client's financial affairs. Since petitioners had agreed to the levy on real properties, requiring a cash demand and prior levy on personal properties would be pointless. Further, in their November 13, 2002 letter, petitioners complained of procedural defects but also exercised their right to choose which properties may be levied upon; they did not offer cash or personal properties, but offered eight parcels of land and requested correction of the notice of levy. Their motion to recall the notice of levy sought cancellation and a new levy limited to those eight parcels. By these acts, petitioners overlooked the procedural lapses, acceded to execution by levy, and effectively exercised their option. The Court cited Seven Brothers Shipping Corp. vs. Oriental Assurance Corp., which in turn cited Torres vs. Cabling, for the rule that a sheriff is not required to give the judgment debtor time to raise cash, and that rules should be liberally interpreted in meritorious cases. Thus, the failure to demand immediate payment did not nullify the levy.
• Overlevy and Grave Abuse of Discretion: The question of overlevy is essentially factual, requiring determination of the fair market value of the levied properties and the amount of property levied. Factual matters are beyond Rule 45 review absent meritorious circumstances, none of which were present. The overlevy claim was first raised in the motion to recall the notice of levy, but that motion was not supported by affidavits or papers; the supporting documents were attached only to petitioners' reply. These were mere photocopies of two appraisal reports, a Maybank memorandum, and a safekeeping agreement. Under the Rules, photocopies are secondary evidence admissible only when the originals are unavailable, which was not shown. The appraisal reports did not clearly identify the properties by lot or transfer certificate number; the first report covered a property not levied upon, and the second lacked titles or plans and rested on unsubstantiated assumptions. The safekeeping agreement stated values but had no supporting documents, and it was uncertain whether the loan pushed through. The original loan was secured by a mortgage over TCT No. T-89829, a guarantee payment bond, and mortgage redemption insurance, and the mortgage did not indicate the property's value. The compromise agreement's reference to mortgages over real properties did not prove that they were the same eight parcels. The burden was on petitioners to prove overlevy, and their evidence was insufficient. Thus, no overlevy was established, and no grave abuse of discretion was shown.
• Manner of Sale: The minutes of auction sale and the certificate of sale on execution indicated that the properties were sold individually, with separate descriptions, transfer certificate numbers, and bid prices. The legal presumption that official duty has been regularly performed applied, especially because petitioners were represented during the auction sale and neither objected to the sale nor claimed immediately thereafter that the properties were sold in bulk. The Court of Appeals therefore did not err in disregarding petitioners' evidence and in upholding the individual sale.

• Execution of money judgments under Section 9, Rule 39 — The sheriff must first demand immediate payment of the full amount stated in the writ and lawful fees. If the judgment obligor cannot pay in cash, certified bank check, or other acceptable mode, the obligor has the option to choose which property or part thereof may be levied upon. If the obligor does not exercise the option, the sheriff levies personal properties first, then real properties if personal properties are insufficient. In this case, the failure to make the prior demand did not invalidate the levy because the obligor's admissions and agreement to the levy, followed by the exercise of the option to choose properties, rendered the demand unnecessary or waived.
• Waiver or estoppel as to procedural defects in execution — A judgment obligor may waive or be deemed to have waived procedural irregularities in the enforcement of a writ of execution through conduct inconsistent with insisting on those defects. Here, petitioners complained of procedural lapses but simultaneously offered eight parcels of land for levy and moved to limit the levy to those parcels, which amounted to acceding to the levy and exercising their option to choose properties.
• Overlevy as a factual issue and burden of proof — A claim that the sheriff levied more property than necessary to satisfy the judgment is factual and must be proven by competent evidence. The burden rests on the party claiming overlevy. In this case, petitioners failed to prove the fair market value of the levied properties and that the levy exceeded the judgment debt.
• Original document rule and secondary evidence — Photocopies of documents are secondary evidence and are admissible only when the originals are unavailable, such as when lost or destroyed or cannot otherwise be produced in court. The Court applied this rule to reject photocopies of appraisal reports and other documents offered to prove overlevy.
• Presumption of regularity of official duty — Official acts, including those of a sheriff in conducting an auction sale, are presumed to have been regularly performed. The presumption applied to the minutes of auction sale and certificate of sale on execution, especially where the parties were represented and made no objection during or immediately after the sale.
• Liberal interpretation of the Rules of Court — While the Rules should be conscientiously observed, they may be interpreted liberally in meritorious cases to secure and not frustrate justice. The Court relied on this principle in excusing the deputy sheriff's failure to make a prior demand where the judgment obligor had admitted inability to pay and had agreed to the levy.
• Rule 45 review limited to questions of law — A petition for review on certiorari under Rule 45 generally raises only questions of law. Factual findings of the Court of Appeals are conclusive absent the recognized exceptions, none of which applied to the overlevy and bulk-sale issues.

• "By such acts, petitioners may be said to have overlooked the procedural lapses, acceded to the execution by levy, and effectively exercised their right to choose which of their properties may be levied on." — This passage states the ratio for the waiver and option ruling: despite the procedural lapses, petitioners' conduct amounted to acceptance of the levy and exercise of their statutory option.
• "The burden is on petitioners to prove their claim of overlevy but the evidence they presented is woefully insufficient. Consequently, they failed to overcome the burden of proof." — This passage fixes the burden of proof on the party claiming overlevy and explains why the factual challenge failed.
• "The photocopies are secondary evidence which are admissible only when the original documents are unavailable, as when they had been lost or destroyed or cannot otherwise be produced in court." — This passage states the evidentiary rule applied to reject the photocopied appraisal reports and other documents offered to prove overlevy.
• "a sheriff is not required to give the judgment debtor some time to raise cash [since] if time be given, the property may be placed in danger of being lost or absconded." — Quoted from Torres vs. Cabling, this passage supports the Court's liberal approach to the sheriff's failure to make a prior demand where the judgment obligor had no funds and the assets could be lost.

• Seven Brothers Shipping Corp. vs. Oriental Assurance Corp., 439 Phil. 663 (2002) — The Court cited this case to support the ruling that a sheriff may be justified in levying on properties without first demanding cash payment where the judgment debtor has no funds and the assets may be lost or absconded, and that the Rules may be liberally interpreted in meritorious cases.
• Torres vs. Cabling, 341 Phil. 325 (1997) — Cited in Seven Brothers for the rule that a sheriff is not required to give the judgment debtor time to raise cash, since delay may place the property in danger of being lost or absconded.
• Equitable PCI Bank, Inc. vs. Bellones, A.M. No. P-05-1973, 18 March 2005, 453 SCRA 598 — Cited for the procedure under Section 9, Rule 39 of the Rules of Court regarding execution of judgments for money.
• Ramos, et al. vs. Pepsi-Cola Bottling Co. of the Phils., et al., 125 Phil. 701 (1967) — Cited for the exceptions to the rule that factual findings are not reviewable in a Rule 45 petition, including grave abuse of discretion, misapprehension of facts, and conflicting findings.

• Section 9, Rule 39, 1997 Rules of Civil Procedure — Governs execution of judgments for money. Subsection (a) requires the officer to demand immediate payment of the full amount and lawful fees. Subsection (b) allows satisfaction by levy if the obligor cannot pay, gives the obligor the option to choose which property may be levied upon, and requires levy on personal properties first if the option is not exercised. The Court applied this provision but held that the failure to make the prior demand did not nullify the levy under the circumstances.
• Article 6, New Civil Code — Provides that rights may be waived unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a third person with a right recognized by law. The Court of Appeals cited this provision in noting that waiver of the personal demand for immediate payment is allowed; the Supreme Court relied on petitioners' conduct as amounting to a waiver or acceptance of the levy.
• Section 3, Rule 15, Rules of Court — Requires a motion to state the relief sought and the grounds upon which it is based, and to be accompanied by supporting affidavits and other papers when required by the Rules or necessary to prove the facts alleged. The Court applied this to the motion to recall the notice of levy, which raised overlevy without supporting papers.
• Rule 130, Sections 3 and 5, Rules of Court — Section 3 states the original document rule; Section 5 governs secondary evidence and allows it only when the original is unavailable. The Court applied these provisions to reject photocopies of appraisal reports and other documents offered to prove overlevy.
• Rule 45, Rules of Court — Governs petitions for review on certiorari, which may raise only questions of law. The Court applied this to decline review of the factual issues of overlevy and bulk sale, absent the recognized exceptions.

• Leonardo A. Quisumbing (Chairperson)
• Conchita Carpio Morales
• Presbitero J. Velasco, Jr.
• Arturo D. Brion