Case Summary (G.R. No. 193371)
Petitioner and Respondent Relationship
Petitioner and respondent entered into a construction contract (7 August 1996) for the construction of a 20-storey building (Lansbergh Place) for P165,000,000.00. Petitioner later executed a Deed of Real Estate Mortgage in favor of respondent over the two bare lots that became the Torre Venezia site, as securities for unpaid obligations.
Arbitral Award and Writ of Execution
Respondent secured a CIAC Final Award (19 December 2005) ordering petitioner to pay P91,084,206.43 (plus interest) and arbitration costs; the award became final and executory on 28 October 2008. While the award was on appeal, CIAC issued a writ of execution (2 May 2006) directing enforcement of the award and costs; Sheriff Villegas was designated to enforce the writ.
Execution Steps Taken by the Sheriff
Sheriff Villegas reported attempted service of the writ on petitioner’s officers (allegedly refused) and service on petitioner’s counsel, and also reported service of garnishment notices on several banks and subsequent levies on sixteen condominium units of Lansbergh Place and on the two parcels covered by TCT Nos. N-164112 and N-164113. An auction proceeded and the properties were sold to respondent for P110,504,888.05, with Certificate of Sale issued in respondent’s favor.
Antecedent Motions and Appeals
Petitioner filed a Motion to Set Aside Execution Sale and a Motion for Reconsideration before the CIAC asserting numerous procedural irregularities and gross inadequacy of price; both motions were denied. Petitioner then appealed to the Court of Appeals, which dismissed the petition. Petitioner advanced assignments of error challenging the validity of the execution sale on the grounds of irregular Levy procedure, gross inadequacy of the sale price, and alleged failure of the highest bidder to pay in full.
Petition-in-Intervention: Third-Party Purchasers’ Claims
Multiple condominium unit buyers intervened, asserting they had executed Deeds of Absolute Sale and had possession but were not issued condominium titles. They contend they were not notified of the execution sale and therefore join in assailing its validity under applicable rules (including Act 3135), and they maintain that issuance of writ of possession would unjustly deprive them of property rights.
Applicable Law and Constitutional Framework
Because the decision at issue was rendered in 2016, the 1987 Philippine Constitution provides the constitutional framework. The controlling procedural rules include the Revised Rules of Court governing execution of money judgments, specifically Section 9, Rule 39 (requiring demand for immediate payment and prescribing the order of levy), and statutory provisions referenced by the parties (including Act 3135 as raised by intervenors). Established jurisprudence on levy and execution sales is also applied.
Legal Principle on Levy and Execution Sales
The Court reiterated the foundational principle that a lawful levy is a prerequisite to a valid execution sale: an execution sale not preceded by a proper levy is void and the purchaser acquires no title. Proper levy requires a valid demand for immediate payment of the full amount stated in the writ and lawful fees, and the execution officer must follow the statutory order of levy (personal property first, then real property if personal property is insufficient).
Deficiencies in Sheriff’s Report and Service
The Court found material deficiencies in the Sheriff’s Report/Return: the report failed to specify the name of the officer who allegedly refused service, the circumstances of the refusal, and the date of attempted service. The ambiguity undermines the presumption of regularity ordinarily accorded to an officer’s official acts. The report’s vague, abstract statements could not sustain a finding of proper demand or service.
Prematurity of Levy and Failure to Provide Opportunity for Payment
The Court emphasized that the writ was served on petitioner’s counsel on 9 May 2006 — the same day the levy occurred — which, in the Court’s view, precluded a genuine opportunity for petitioner to make immediate payment. Section 9, Rule 39 contemplates that the judgment obligor be given a real chance to effect immediate payment by cash or certified check before a levy on real property is conducted. The sheriff’s contemporaneous service and levy rendered the demand illusory.
Improper Sequence of Garnishment and Levy
Although the Sheriff’s Return stated that garnishment notices were served on banks on 5 May 2006 before the 9 May 2006 levy, the Court examined the bank responses and observed that several banks were still validating accounts and many responses were dated after 9 May 2006. Only a minority clearly stated non-existence of accounts, and those replies were issued after the levy. The sequence and timing showed that petitioner was effectively deprived of having personal properties or bank accounts garnished or levied prior to resorting to real property levies, contrary to the Rules.
Conclusion on Validity of Levy and Execution Sale
Given the defective service, lack of a valid demand, and premature levy on real property without adequate prior garnishment or levy on personal property, the Court concluded there was no proper levy. Because a valid levy is indispensable, the execution sale was held void; consequently, the purchaser (respondent) acquired no title to the properties sold.
Decision Not to Reach Other Alleged Irregularities
Although petitioner and intervenors raised multiple additional irregularities and questioned gross inadequacy o
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Citation and Procedural Posture
- Reported at 801 Phil. 793, Third Division; G.R. No. 193371; Decision dated December 05, 2016; original received by the Office on December 16, 2016 at 11:00 a.m.
- Petition for review on certiorari assails the Decision dated 27 April 2010 and the Resolution dated 11 August 2010 of the Court of Appeals in CA-G.R. S.P. No. 111895.
- The assailed CA rulings effectively affirmed the Orders dated 28 October 2009 and 7 December 2009 of the Construction Industry Arbitration Commission (CIAC) denying petitioner’s Motion to Set Aside Execution Sale and Motion for Reconsideration.
- The petition reached the Supreme Court, where Associate Justice Perez penned the Decision. Velasco, Jr. (Chairperson), Peralta, Del Castillo (designated member), and Jardeleza, JJ., concurred.
Parties, Contract and Arbitration Origin
- Petitioner: 24-K Property Ventures, Inc.
- Respondent: Young Builders Corporation.
- The dispute originated from a Construction Contract dated 7 August 1996 under which respondent undertook to construct a 20-storey office/residential building known as Lansbergh Place in Tomas Morato, Quezon City, for the price of P165,000,000.00.
- Respondent filed a Request for Arbitration/Adjudication with the CIAC, docketed as CIAC Case No. 32-1999, seeking collection of sums due under the construction contract.
Factual Background — Mortgage, Torre Venezia and CIAC Award
- During the Asian Financial Crisis, the petitioner incurred arrearages; respondent refused to continue construction unless securities were issued for unpaid obligations.
- Petitioner executed in respondent’s favor a Deed of Real Estate Mortgage over two parcels covered by TCT No. N-164112 and No. N-164113; at the time of the mortgage the lots were bare and without improvements.
- Petitioner later commenced construction of another condominium project on those two parcels titled Torre Venezia, a 27-storey building with 302 condominium units.
- On 19 December 2005, the CIAC rendered a Final Award ordering petitioner to pay respondent P91,084,206.43, with interest of 6% per annum from the date of the final award, and 12% per annum from the date the award became final and executory until fully paid.
- The award became final and executory on 28 October 2008.
Writ of Execution, Levy and Sale — Sheriff’s Acts and Timeline
- While the case was on appeal, the CIAC, upon respondent’s motion, issued a writ of execution dated 2 May 2006 for P91,084,206.43 and arbitration costs of P1,208,801.81; Sheriff Villamor R. Villegas of RTC Makati was designated to enforce it.
- Sheriff Villegas reported diligent efforts to serve the writ upon petitioner’s officers, who allegedly refused to acknowledge receipt; he then served the writ and letter of request for compliance on petitioner’s counsel, who acknowledged receipt.
- Notices of garnishment were served on several banks: Banco de Oro Universal Bank (Equitable PCI Bank referenced in excerpts), Philippine National Bank, Metropolitan Bank and Trust Company, United Coconut Planters Bank, and East West Banking Corporation.
- Sheriff Villegas levied on petitioner’s real properties, including sixteen condominium units of Lansbergh Place and the two parcels covered by TCT No. N-164112 and No. N-164113 (the Torre Venezia lots).
- Notice of Garnishment was purportedly served on 5 May 2006; the levy on real properties was effected on 9 May 2006.
- A public auction proceeded despite petitioner’s Manifestation with Motion to Suspend Enforcement of Notice of Sale and Re-computation of Award, resulting in sale of the subject properties to respondent for P110,504,888.05 and issuance of a Certificate of Sale in respondent’s favor.
Antecedent Proceedings and Motions
- Petitioner filed a Motion to Set Aside Execution Sale, alleging violations of the Rules of Court and gross inadequacy of sale price; CIAC denied the motion and denied the Motion for Reconsideration.
- Petitioner elevated the matter to the Court of Appeals, arguing: (a) grave abuse of discretion by CIAC in upholding the execution sale; (b) erroneous application of presumption of regular performance of official duties and laches; (c) improper conditioning of nullification on filing of an administrative case against the sheriff; and (d) that gross inadequacy of sale price together with numerous procedural violations warranted annulment.
- The Court of Appeals dismissed the petition, prompting the present petition for review on certiorari.
Issues Raised in the Petition
- First Assignment of Error: Whether the CA erred in affirming CIAC’s denial of petitioner’s Motion to Se