Yau vs. Veloso

A judgment debtor's beneficial interest in property — even if not yet registered in his name at the time of the levy — may be validly levied upon, and a successful appeal by one solidary co-debtor that reduces the judgment award benefits non-appealing solidary co-debtors, since the judgment can only be sustained upon the liability of the one who appeals and the liability of the other co-judgment debtors depends solely on whether the appellant is liable.

Esteban Yau filed a complaint on March 28, 1984 in the RTC of Cebu City, Branch 6, against Philippine Underwriters Finance Corporation (Philfinance) and members of its board of directors, including Ricardo C. Silverio, Sr., for recovery of the value of a promissory note and damages. Yau had purchased from Philfinance a promissory note purporting to have been issued by the Philippine Shares Corporation, with Philfinance undertaking to return his investment of ₱1,600,000 plus earnings; the checks issued by Philfinance were dishonored for insufficiency of funds, and the Philippine Shares Corporation denied issuing the promissory note. Silverio Sr.'s wife, Beatriz S. Silverio, died without leaving a will on October 7, 1987, and intestate proceedings for the settlement of her estate were filed before the RTC of Makati City, Branch 57. The execution of the judgment in Civil Case No. CEB-2058 became entangled with the estate proceedings of the spouses Silverio, with incidents reaching the Supreme Court at least four times over nearly four decades.

Esteban Yau filed a complaint on March 28, 1984 in the RTC of Cebu City, Branch 6, docketed as Civil Case No. CEB-2058, against Philippine Underwriters Finance Corporation (Philfinance) and members of its board of directors, including Ricardo C. Silverio, Sr., for recovery of the value of a promissory note and damages. Yau alleged that he purchased from Philfinance a promissory note purporting to have been issued by the Philippine Shares Corporation, with Philfinance undertaking to return his investment of ₱1,600,000 plus earnings of ₱29,866.67 on March 24, 1981. Philfinance issued three checks maturing on that date, but they were dishonored for insufficiency of funds, and the Philippine Shares Corporation denied having issued the promissory note. On March 27, 1991, the trial court rendered judgment in favor of Yau, ordering the defendants jointly and severally liable for the principal, lost income of ₱10,397,494.03, moral damages of ₱100,000, exemplary damages of ₱50,000, attorney's fees of ₱137,207.28, litigation expenses of ₱44,018.33, and costs.

Silverio Sr. and co-defendant Macapagal's notice of appeal was dismissed for failure to pay docket fees, and the dismissal became final on December 26, 1991, with entry of judgment on April 21, 1992. On July 31, 1992, the trial court ordered execution, and on September 17, 1992, issued the corresponding writ. In December 1992, the defendants' bank deposits were garnished, and the judgment was partially satisfied through the sale of Silverio Sr.'s Manila Golf and Country Club share, which was levied on December 7, 1992 and sold at public auction on December 29, 1992 to Yau as the highest bidder at ₱2 million. However, that share was already subject to prior levies pursuant to writs of preliminary attachment obtained by Manila Banking Corporation from other branches of the RTC of Makati City. The dispute over that levy reached the Supreme Court, which ruled in 2002 that the levy and sale of the golf club share could not be given effect because the share was already in the custodia legis of another court.

Meanwhile, on October 31, 2000, the CA rendered a Decision in CA-G.R. CV No. 33496 (the appeal of Philfinance and Carlos), deleting the award of lost income and imposing 12% legal interest on the principal from the filing of the complaint, with the decision becoming final on March 21, 2001. Sometime in 2001, the sheriff found that Silverio Sr. was a co-owner of three houses in Forbes Park and Bel-Air Village, Makati City — the Cambridge, Intsia, and Bel-Air properties — covered by TCT Nos. (147129)-137156, (436750)-137155, and (337033)-137154. On March 21, 2001, the sheriff served a Notice of Levy on the Cambridge property. An auction sale was held on July 26, 2001, where Yau was declared the highest bidder at ₱11,443,219.64, and on August 6, 2001, the sheriff issued the corresponding Certificate of Sale. The Notice of Levy expressly limited the levy to all the rights, participation, claim, shares, and interests which Silverio Sr. had in the three parcels, and referenced the May 27, 1993 decision of the RTC of Makati City, Branch 143, in Civil Case No. 17467, which declared the registered owners (Silverio Sr.'s illegitimate children) as mere trustees for the benefit of the conjugal partnership of Silverio Sr. and the late Beatriz S. Silverio, and directed reconveyance of the properties to Silverio Sr. and Beatriz's estate.

On December 7, 2001, Silverio Sr. filed an omnibus motion praying that the levy, notice of auction sale, and certificate of sale be declared void, contending that the writ of execution had become functus officio. The trial court denied the motion on March 20, 2002, and the denial was affirmed by the Supreme Court in G.R. No. 158848 on February 4, 2008, which held that execution could still proceed because the running of the five-year period was suspended during the pendency of the recourse filed by Silverio Sr. and Macapagal. Meanwhile, in the intestate proceedings for Beatriz's estate, the intestate court issued an Omnibus Order on October 31, 2006 allowing the sale of the Makati properties to partially settle the estate. Pursuant to that order, Silverio Jr. executed a Deed of Absolute Sale over the Intsia property in favor of Citrine Holdings, Inc. on October 16, 2007, and sold the Cambridge property to Stardust Holdings Corporation on October 10, 2007, and later to Monica F. Ocampo, with the deed notarized on October 8, 2010.

On September 20, 2010, Silverio Jr., claiming capacity as administrator of Beatriz's estate, filed a Motion to Discharge Levy and Cancel Certificate of Sale, arguing that the levy was made in excess of the sheriff's authority, that the properties were not registered in Silverio Sr.'s name, that the judgment had been reduced by the October 2000 CA Decision, and that the Cambridge property was part of Beatriz's estate. On November 25, 2010, Judge Veloso issued the first assailed order granting the Motion to Discharge, setting aside the July 13, 2010 Order and nullifying the levy over the three Makati properties and the auction sale of the Cambridge property. On December 6, 2010, Judge Veloso issued the second assailed Omnibus Order directing the sheriff to submit a report on full satisfaction and to continue implementing the writ. On December 16, 2011, Judge Veloso issued the third assailed order denying Yau's motion for reconsideration. Yau's counsel later manifested that Silverio Sr. died on December 11, 2016, and Yau died on July 18, 2018, with Yau's heirs substituted as petitioners.

• Direct Resort to Supreme Court: Petitioner argued that the assailed orders were issued arbitrarily and capriciously in violation of the Supreme Court's rulings in G.R. Nos. 166624 and 158848, that there was no plain, speedy, and adequate remedy in another forum since any resort to the CA would still be subject to review by the Supreme Court, and that unless the levy and sale were reinstated, the original judgment could not be fully satisfied, causing irreparable damage.
• Finality of Levy and Sale: Petitioner maintained that the validity of the levy on the Makati properties and the consequent sale of the Cambridge property had been settled with finality by the Supreme Court's rulings in G.R. No. 166624 and G.R. No. 158848, leaving Judge Veloso no other duty but to comply.
• Silverio Sr.'s Leviable Interest: Petitioner argued that the March 20, 2002 Order issued by Judge Caminade upheld the effectivity and validity of the levy upon a finding that Silverio Sr. owned, in full or in part, "certain rights, interests and participations in and over the properties," which findings were incontrovertible.
• Due Process Violation: Petitioner contended that Judge Veloso acted arbitrarily in allowing the lifting of the levy and cancellation of the sale to proceed without notice, resulting in the sale of the Cambridge property by Silverio Jr. and the issuance of a new certificate of title before Yau could file a motion for reconsideration.
• Limited Scope of Levy: Petitioner argued that the levy and sale extended only to Silverio Sr.'s share in the Makati properties and therefore could not affect any interest held by Silverio Jr. as heir or administrator of Beatriz's estate.
• Loss of Standing by Silverio Jr.: Petitioner asseverated that Silverio Jr. had lost all standing to intervene because the intestate court had cancelled the sale to Ocampo and declared Silverio Sr. administrator of Beatriz's estate.
• Non-Satisfaction of Judgment: Petitioner averred that the original judgment had not been fully satisfied despite the garnishment of bank deposits and the sale of the golf club share, because the golf club share was subject to an attachment by another creditor and was not registrable in Yau's name.

• Non-Controlling Nature of G.R. No. 158848: Silverio Sr. argued that the ruling in G.R. No. 158848 was not controlling as regards the validity of the levy and sale, since the issue therein was the enforceability of the original judgment after the lapse of the five-year period, not the validity of the levy and sale itself.
• Benefit of Reduced Award: Silverio Sr. echoed Silverio Jr.'s argument that the reduction of the original judgment award pursuant to the October 2000 CA Decision benefited him, rendering the levy and sale of the million-peso Makati properties doubtful.
• Overlevy and Unjust Enrichment: Silverio Jr. argued that the levy on the Makati properties amounted to overlevy and unjust enrichment, and was made in violation of the Rules of Court on execution.
• Violation of Hierarchy of Courts: Silverio Jr. contended that Yau's petition for certiorari was an improper remedy and a violation of the hierarchy of courts.
• Authority to Encumber: Silverio Jr. argued that at the time of the issuance of the assailed orders, he had authority to encumber the Cambridge property, as no final order reversing his designation as administrator or enjoining the sale had been issued.

• Certiorari Jurisdiction: Whether Yau's direct invocation of the Supreme Court's certiorari jurisdiction is justified.
• Standing: Whether Silverio Jr. has standing to question the levy and sale of the Makati properties.
• Effect of Reduced Award: Whether the reduction of the judgment award pursuant to the October 2000 CA Decision benefits Silverio Sr.
• Satisfaction of Judgment: Whether the judgment award has already been satisfied as against Silverio Sr.
• Leviable Interest: Whether Silverio Sr. had a leviable interest in the Makati properties at the time they were levied upon.
• Effect of Death: Whether the levy and sale can still be given effect even after Silverio Sr.'s alleged demise.

• Certiorari Jurisdiction: Yes. Direct resort to the Supreme Court was justified given the nearly forty-year pendency of the case, its multiple elevations to the Court, and the interest of justice in providing definitive relief.
• Standing: No. Silverio Jr. had no right to intervene in the execution proceeding, having already disposed of the estate's interest in the Cambridge and Intsia properties prior to the rendition of the November 2010 Order, and the levy being limited to Silverio Sr.'s share only.
• Effect of Reduced Award: Yes. The reduction of the judgment award pursuant to the October 2000 CA Decision benefits Silverio Sr. as a solidary co-debtor, because the judgment can only be sustained upon the liability of the appealing party and the liability of the other co-debtors depends solely on whether the appellant is liable.
• Satisfaction of Judgment: No. The judgment had not been satisfied as against Silverio Sr., because the levy and sale of his golf club share could not be given effect, having been placed in the custodia legis of another court, as held in the law of the case.
• Leviable Interest: Yes. Silverio Sr. had a leviable interest in the Makati properties at the time of the levy, pursuant to the May 27, 1993 decision of the Makati City RTC and the June 5, 2000 Deed of Conveyance, which were expressly referenced in the Notice of Levy.
• Effect of Death: Yes. The levy and sale, having been completed in 2001, may be implemented even after Silverio Sr.'s death, and the judgment need not be entered as a claim in his estate proceedings.

• Certiorari Jurisdiction: The assailed orders were interlocutory in nature, directing the sheriff to continue execution, and could only be assailed through a petition for certiorari upon allegation of grave abuse of discretion. While the doctrine of hierarchy of courts generally requires that original actions for certiorari be filed with the CA, exceptions exist when demanded by the broader interest of justice, when the challenged orders were patent nullities, or when analogous exceptional and compelling circumstances call for immediate and direct handling. Civil Case No. CEB-2058 had been pending since 1984, execution had been pending since 1991, and incidents had already reached the Supreme Court three times. Justice demanded that the Court take cognizance to put an end to the controversy and resolve a matter that had been dragging on for more than twenty years, especially since a final judgment promulgated by the Court was involved.

• Standing: While a non-party may be given standing to invoke a trial court's supervisory powers over execution proceedings to correct erroneous levies, Silverio Jr. had no right to intervene for two reasons. First, he derived his standing from his alleged appointment as administrator of Beatriz's estate, but he had already disposed of the estate's interest in the Intsia and Cambridge properties prior to the November 2010 Order — selling the Intsia property to Citrine Holdings on October 16, 2007, and the Cambridge property twice, first to Stardust Holdings on October 10, 2007, and then to Ocampo, with the deed notarized on October 8, 2010. By the time Judge Veloso issued the assailed order, the estate had already lost its interest in the Cambridge property through the very sales executed by Silverio Jr. in the same capacity from which he claimed standing. Second, the levy and sale pertained only to Silverio Sr.'s share in the Makati properties, without affecting Beatriz's share, as expressly stated in the Notice of Levy.

• Effect of Reduced Award: As a general rule, a judgment becomes final as against a party who does not appeal. The reversal of a judgment on appeal is binding only on the parties in the appealed case and does not inure to the benefit of those who did not join the appeal. An exception exists where the judgment cannot be reversed as to the party appealing without affecting the rights of his co-debtor, or where the rights and liabilities of the parties appealing are so interwoven and dependent on each other as to be inseparable. Given the solidary nature of Silverio Sr.'s liability, the Court applied the exception: a successful appeal by one solidary co-debtor benefits the other co-debtors, because to rule otherwise would create the absurd situation where a co-defendant primarily liable would be charged a lesser amount than its co-defendant. Silverio Sr. was therefore solidarily liable to Yau in the reduced amount of ₱1,600,000 plus legal interest from the filing of the complaint on March 28, 1984.

• Satisfaction of Judgment: Silverio Jr. argued that the levy and sale were unnecessary given the earlier garnishment of bank deposits and the sale of the golf club share worth at least ₱100 million. However, the Supreme Court had already ruled in Yau vs. The Manila Banking Corporation that the garnishment of the golf club share could not be given effect because the share was already in the custodia legis of another trial court by virtue of a prior attachment. This ruling constituted the law of the case in Civil Case No. CEB-2058. The trial court gravely erred in taking Silverio Jr.'s allegations at face value and concluding that the sheriff had already sold the golf club share, without considering that the garnishment could not be given effect.

• Leviable Interest: Under Rule 39, Section 12 of the Rules of Court, a levy on execution creates a lien over the right, title, and interest of the judgment obligor in the property at the time of the levy. The "beneficial interest" test from Reyes vs. Grey asks whether the judgment debtor holds such a beneficial interest in the property that he can sell or otherwise dispose of it for value. The Notice of Levy expressly referenced the May 27, 1993 decision of the Makati City RTC in Civil Case No. 17467, which declared Silverio Sr.'s illegitimate children as mere trustees of the Makati properties for the benefit of the conjugal partnership of Silverio Sr. and Beatriz, and directed reconveyance. The June 5, 2000 Deed of Conveyance, executed by the Clerk of Court as trustee pursuant to court order, transferred and conveyed all rights, title, interest, claims, and participation in the properties to Silverio Sr. and the intestate estate of Beatriz. The intestate court's October 31, 2006 Omnibus Order likewise recognized the properties as part of the conjugal partnership. Judge Veloso's conclusion that Silverio Sr. lacked a leviable interest was based solely on the non-attachment of the cited decisions to the Notice of Levy and the fact that the properties were not registered in Silverio Sr.'s name, ignoring the detailed references in the Notice of Levy, the Deed of Conveyance in the rollo, and the March 20, 2002 order of her predecessor. The presumption of regularity in the performance of the sheriff's duties further supported the validity of the levy.

• Effect of Death: An execution sale may proceed even if the judgment debtor dies after the levy. Under Section 7(c) of Rule 39, if the judgment debtor dies after execution is actually levied upon any of his property, the same may be sold for the satisfaction of the judgment. In the present case, the levy and sale were both completed in 2001, almost fifteen years prior to Silverio Sr.'s purported demise. The already-completed levy could be implemented until full satisfaction of the judgment award even after Silverio Sr.'s passing. However, since Silverio Sr.'s liability had been reduced in accordance with the October 2000 CA Decision, the Court invoked its plenary judicial power over execution proceedings to nullify the July 26, 2001 auction sale and the August 6, 2001 Certificate of Sale for being based on an amount in excess of Silverio Sr.'s base liability of ₱1,600,000 plus interest, and directed the trial court to conduct a new auction sale.

• Beneficial Interest Test — The test for whether property may be levied on execution is whether the judgment debtor holds such a beneficial interest in the property that he can sell or otherwise dispose of it for value. If he does, the property is subject to execution. The Court applied this test to find that Silverio Sr. had a leviable interest in the Makati properties, even though they were not yet registered in his name, because the May 27, 1993 decision and the June 5, 2000 Deed of Conveyance had declared his illegitimate children as trustees and conveyed the properties to him and Beatriz's estate.

• Exception to the Rule on Finality of Judgment Against Non-Appealing Parties — As a general rule, a reversal of judgment on appeal is binding only on the parties in the appealed case and does not inure to the benefit of non-appealing parties. An exception exists where the judgment cannot be reversed as to the party appealing without affecting the rights of his co-debtor, or where the rights and liabilities of the parties appealing are so interwoven and dependent on each other as to be inseparable. The Court applied this exception to extend the benefit of the October 2000 CA Decision — which deleted the award of lost income — to Silverio Sr., a non-appealing solidary co-debtor, because the judgment could only be sustained upon the liability of the appealing parties and the liability of the other co-debtors depended solely on whether the appellants were liable.

• Law of the Case — Whatever is once irrevocably established as the controlling legal rule of decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case. The Court held that its ruling in Yau vs. The Manila Banking Corporation — that the garnishment of Silverio Sr.'s golf club share could not be given effect because it was in the custodia legis of another court — constituted the law of the case, binding on the trial court in subsequent proceedings.

• Presumption of Regularity in Performance of Official Duties — Reports, returns, notices, and other documents prepared by sheriffs enjoy a presumption of regularity, which may only be overturned by clear and convincing evidence. The Court applied this presumption to uphold the validity of the Notice of Levy, noting that while Judge Veloso was prudent to doubt the propriety of the levy due to the apparent non-attachment of decisions, the detailed references to those decisions in the Notice of Levy should have prompted verification rather than immediate conclusion of irregularity.

• Execution After Death of Judgment Debtor — Under Section 7(c) of Rule 39 of the Rules of Court, if the judgment debtor dies after execution is actually levied upon any of his property, the same may be sold for the satisfaction of the judgment. The Court held that the levy and sale, having been completed in 2001, could be implemented even after Silverio Sr.'s purported death in 2016, and the judgment need not be entered as a claim in his estate proceedings.

• Exceptions to the Doctrine of Hierarchy of Courts — Direct recourse to the Supreme Court's original certiorari jurisdiction may be allowed when dictated by public welfare, demanded by the broader interest of justice, when the challenged orders are patent nullities, or when analogous exceptional and compelling circumstances justify immediate handling. The Court excused Yau's violation of the hierarchy of courts given the nearly forty-year pendency of the case, its multiple elevations to the Court, and the interest of justice in providing definitive relief.

• "the reversal of the judgment on appeal is binding only on the parties in the appealed case and does not affect or inure to the benefit of those who did not join or were not made parties to the appeal. An exception to the rule exists, however, where a judgment cannot be reversed as to the party appealing without affecting the rights of his co-debtor, or where the rights and liabilities of the parties appealing are so interwoven and dependent on each other as to be inseparable, in which case a reversal as to one operates as a reversal as to all." — This passage articulates the ratio decidendi on the effect of a successful appeal by one solidary co-debtor on non-appealing co-debtors, establishing the exception based on communality of interest.

• "We think the real test, as to whether or not property can be attached and sold upon execution is — does the judgment debtor hold such a beneficial interest in such property that he can sell or otherwise dispose of it for value? If he does, then the property is subject to execution and payment of his debts." — This is the canonical formulation of the beneficial interest test, originally from Reyes vs. Grey, applied by the Court to determine whether Silverio Sr. had a leviable interest in the Makati properties despite their not being registered in his name.

• "Had the levy been made before the death of the judgment debtor, the sale on execution could have been carried to completion in accordance with Section 7(c) of Rule 39 which provides that in case the judgment debtor dies after execution is actually levied upon any of his property, the same may be sold for the satisfaction of the judgment." — This passage states the rule governing execution sales after the death of the judgment debtor, applied to hold that the completed levy could be implemented even after Silverio Sr.'s passing.

• "Justice demands that this Court take cognizance of this case to put an end to the controversy and resolve the matter which has been dragging on for more than twenty (20) years. Moreover, in light of the fact that what is involved is a final judgment promulgated by this Court, it is but proper for petitioner to call upon its original jurisdiction and seek final clarification." — This passage, quoted from Dy vs. Judge Bibat-Palamos and adopted in the present case, articulates the rationale for excusing violation of the hierarchy of courts doctrine in exceptional circumstances.

• Yau vs. The Manila Banking Corporation, 433 Phil. 701 (2002) — Controlling precedent (law of the case). The Court held that the levy and sale of Silverio Sr.'s Manila Golf share could not be given effect because the share was already in the custodia legis of another trial court. This ruling was applied in the present case to establish that the judgment had not been satisfied through the golf club share.

• Yau vs. Silverio, Sr., 567 Phil. 493 (2008) — Controlling precedent. The Court held that execution against Silverio Sr. could still proceed despite the lapse of the five-year reglementary period because the running of the period was suspended during the pendency of the recourse filed by Silverio Sr. and Macapagal. Referenced as part of the procedural history and to establish that the trial court was bound to continue implementing the writ.

• Reyes vs. Grey — Foundational precedent establishing the "beneficial interest" test for determining whether property may be levied on execution. The Court applied this test to find that Silverio Sr. had a leviable interest in the Makati properties.

• Sps. Bulaong vs. Gonzales, 672 Phil. 315 (2011) — Followed. The Court cited this case for the principle that every interest the judgment debtor may have in property may be subjected to levy on execution, and for the rule that a levy creates a lien over the right, title, and interest of the judgment obligor at the time of the levy.

• Dy vs. Judge Bibat-Palamos, et al., 717 Phil. 776 (2013) — Followed. The Court adopted its reasoning allowing direct resort to the Supreme Court's certiorari jurisdiction on the ground of special and important reasons, including the broader interest of justice and the need to put an end to a protracted controversy.

• Silverio, Sr. vs. Silverio, Jr., et al., 741 Phil. 377 (2014) — Followed. The Court relied on factual findings in this case establishing that Silverio Jr. had already sold the Intsia and Cambridge properties, undermining his standing to intervene in the execution proceedings.

• Py Eng Chong vs. Judge Herrera, 162 Phil. 183 (1976) — Followed. Cited for the rule that an execution sale may proceed even if the judgment debtor dies after the levy, pursuant to Section 7(c) of Rule 39.

• Ibatan vs. Judge Melicor, 266 Phil. 653 (1990) — Followed. Applied the rule that properties levied upon before the death of the judgment debtor may be sold for satisfaction of the money judgment, and that subsequent writs do not affect the validity of the first writ and levy.

• Rule 39, Section 12, Rules of Court — Provides that a levy on execution creates a lien in favor of the judgment obligee over the right, title, and interest of the judgment obligor in the property at the time of the levy, subject to existing liens and encumbrances. The Court applied this provision to hold that Silverio Sr.'s beneficial interest in the Makati properties, though not yet registered in his name, was subject to levy.

• Rule 39, Section 7(c), Rules of Court — Provides that in case the judgment debtor dies after execution is actually levied upon any of his property, the same may be sold for the satisfaction of the judgment. The Court applied this provision to hold that the levy completed in 2001 could be implemented even after Silverio Sr.'s death in 2016.

• Rule 41, Section 1(e), Rules of Court — Interlocutory orders may be assailed through a petition for certiorari upon allegation of grave abuse of discretion amounting to lack or excess of jurisdiction. The Court applied this rule to characterize the assailed orders as interlocutory execution orders properly challenged via certiorari.

• Section 80, Property Registration Decree (PD 1529) — Referenced in the April 29, 1997 Order of the RTC of Makati City, Branch 143, appointing the Clerk of Court as trustee to execute the deed of reconveyance of the Makati properties to Silverio Sr. and Beatriz's estate. This provision formed part of the legal basis for Silverio Sr.'s leviable interest.

Caguioa (Chairperson), Inting, Dimaampao, and Singh, JJ., concurred.