G.R. No. 156448 - Spouses Andrada vs. Pilhino Sales Corp.

On December 28, 1990, Pilhino Sales Corporation ("Pilhino") initiated a suit against Jose Andrada, Jr. and his wife, Maxima, in the RTC of Davao City (Civil Case No. 20,489-90) to recover a principal sum along with interest and incidental charges.
Pursuant to Pilhino’s application, the RTC issued a writ of preliminary attachment against a Hino truck and a Fuso truck, both owned by Jose Andrada, Jr.
The attachment measures were later lifted when Jose Andrada, Jr. filed a counter-attachment bond, although the bond premium was not paid, prompting Pilhino to pursue action against the properties.

The sheriff seized the Hino truck and sold it at a public auction, with Pilhino emerging as the highest bidder.
Complicating the sale, the Hino truck was already registered in the name of petitioner Moises Andrada, owing to an earlier, undisclosed sale by Jose Andrada, Jr.
Subsequent to the sale, Moises Andrada mortgaged the Hino truck to BA Finance Corporation to secure his financial obligations.
BA Finance later sued Moises Andrada for failing to pay the loan, cementing the dispute over the truck's title and encumbrances.

Pilhino instituted Civil Case No. 21,898-93 in the RTC in Davao City seeking the annulment of:

The deed of sale between Jose Andrada, Jr. and Moises Andrada;
The chattel mortgage involving the Hino truck between Moises Andrada and BA Finance;
The deed of conveyance executed in favor of Jose Andrada, Sr. involving a hard-top jeep; and
The certificate of registration of the Hino truck in the name of Moises Andrada, as well as the corresponding mortgage registration.

They had acquired the Hino truck in good faith, free from any lien or encumbrance prior to its seizure.
The attachment had already been lifted at the time of sale, leaving the petitioners with recourse to pursue claims only against the counter-attachment bond.

BA Finance maintained that it had no knowledge of the material allegations by Pilhino and stressed the validity of the mortgage as security for a valid obligation.
The RTC rendered a partial judgment on March 21, 1994 based on compromise agreements between Pilhino and the Andradas, disposing of claims by the other parties.
A subsequent RTC decision on March 25, 1998, dismissed the counterclaims of spouses Moises and Clemencia Andrada and other related parties, basing its decision partly on a finding that the sale of the Hino truck from Jose Andrada, Jr. to Moises Andrada was simulated.

Spouses Moises and Clemencia Andrada appealed the RTC decision inasmuch as it dismissed their counterclaim, declared the deed of sale simulated, and approved the compromise agreement.
The Court of Appeals (CA) on December 13, 2001, affirmed the RTC decision with the modification that the sale of the Hino truck was declared valid, albeit subject to BA Finance’s rights as mortgagee and highest bidder.
The petitioners (Spouses Moises and Clemencia Andrada) subsequently filed a petition for review on certiorari before the Supreme Court, raising issues regarding Pilhino’s liability for damages from the levy on execution and its alleged bad faith during the seizure of the Hino truck.

Whether Pilhino should be held liable for the damages sustained by the petitioners as a result of the levy on execution upon the Hino truck in Civil Case No. 20,489-90.

Whether Pilhino acted in bad faith when it proceeded with the levy on execution upon the Hino truck that belonged to Moises Andrada.
Whether Pilhino’s conduct, in light of the procedural and factual background (including the simulated sale and subsequent mortgage), meets the requirements for establishing abuse of rights.