G.R. No. 56620 - Filipinas Mills, Inc. vs. Dayrit

On December 15, 1975, petitioners Filipinas Mills, Inc., Buenaventura Tan, and Virginia Dumlao-Tan obtained a loan from Citizens Bank and Trust Company (CBTC) amounting to P70,000.00, with interest at 14% per annum.
The loan was evidenced by a promissory note, with repayment required on or before March 16, 1976.
Petitioners failed to pay the loan despite repeated demands.

After CBTC’s obligations were acquired by Associated Citizens Bank (ACB) through an Agreement of Merger, ACB filed a complaint for collection before the Court of First Instance of Manila.
Petitioners were given notice but did not appear at the pre-trial and trial scheduled for July 11, 1980, resulting in their default.
The trial court ruled in favor of ACB on August 26, 1980, ordering petitioners to pay the principal, interest from March 16, 1976, attorney’s fees of P3,000.00, and costs of suit.
A writ of execution was issued on January 13, 1981, followed by the levy on petitioners’ personal properties on February 10, 1981.

On February 10, 1981, the Deputy Sheriff executed the levy on petitioners’ personal properties.
Petitioners directed the Deputy Sheriff, on February 10, 1981, in writing to levy first on their shares of stocks at ACB before proceeding to other assets.
On February 16, 1981, a notice of garnishment was issued covering a wide range of petitioners’ properties, including their shares of stocks.
A notice of sale on execution of petitioners’ personal properties was issued on February 23, 1981, but notably, their shares of stocks were excluded from the sale list.
On March 4, 1981, petitioners filed an urgent motion to cancel the scheduled auction sale, raising two primary arguments:

Their right to direct the levy and sale order of their shares of stocks, based on Section 21, Rule 39 of the Rules of Court and the decision in People v. Hernandez.
The alleged non-compliance of the notice of public auction with the required publication protocols.

Section 21, Rule 39 applies exclusively to an execution sale rather than to a levy.
The People v. Hernandez ruling applies only where the judgment creditor lacks legal justification in accepting the attachment of other assets.
The shares of stocks should not be included in the sale or levied upon first, as this is prohibited under Section 24 of the General Banking Act.

The trial court, on March 31, 1981, issued an order denying petitioners’ motion.
A subsequent notice of sale was issued on April 8, 1981, setting a new auction date of April 22, 1981.
On April 20, 1981, a temporary restraining order was issued enjoining the enforcement of the March 31 order and halting the auction sale.

Whether the trial court abused its discretion by denying petitioners’ motion to direct the order of the levy and sale of their shares of stocks.

The central issue is whether Section 21, Rule 39 of the Rules of Court, as interpreted in People v. Hernandez, extends the right of a judgment debtor to also direct the levy (attachment) of their assets before the public auction.
Whether the exclusion of petitioners’ shares of stocks from the initial notice of sale was proper, especially given petitioners’ directive to levy those shares first.

Whether the prohibition contained in Section 24 of the General Banking Act, as argued by ACB, prohibits the inclusion of petitioners’ shares of stocks in the execution sale.
Whether the “specific” and “general” exceptions embedded in Section 24 allow for the shares to be sold, particularly if acquired by ACB in the public auction under the proper circumstances.