Case Summary (G.R. No. 215933)
Procedural Background and Lower Court Decisions
Maunlad Homes, Inc. initiated an unlawful detainer case against NPC, which was first decided by the Municipal Trial Court in Cities (MTCC), ordering NPC to vacate the disputed premises and pay damages. The Regional Trial Court (RTC) affirmed this ruling on May 18, 2010. The respondent moved for execution of judgment, which NPC opposed. After the sheriff attempted to levy NPC’s warehouse at Barangay Lagundi, Mexico, Pampanga, security guards prevented entry, prompting the RTC to issue a Break Open Order allowing forced entry. Subsequently, the sheriff levied and prepared for public auction seven units of transformer radiator fins, one power transformer, and angle bars located in the warehouse.
Petitioner PSALM's Claim of Ownership and Procedural Actions
PSALM filed a third-party claim under Section 16, Rule 39 of the Rules of Civil Procedure, asserting ownership of the levied properties based on the EPIRA Law. PSALM argued it was not a party to the unlawful detainer case and did not assume NPC’s obligations to Maunlad Homes, Inc. It moved for a Status Quo Order to nullify the levy and stop the sale, contending that the sheriff’s actions and RTC orders violated its property rights.
RTC’s Resolution on the Third-Party Claim and Subsequent Proceedings
The RTC denied PSALM’s motion and third-party claim after a summary hearing, emphasizing that determination of title with finality is outside the scope of execution proceedings. The court found that PSALM failed to present sufficient proof that the levied properties were among those officially transferred by the EPIRA Law, noting the need for formal documentation evidencing such transfer. Additionally, the court held that even under the EPIRA Law, the transfer of ownership was not automatic and required formal execution of documents. The sheriff was directed to proceed with the execution.
Legal Framework on Third-Party Claims Under Rule 39, Section 16
Section 16 of Rule 39 provides that if property levied on is claimed by a third party other than the judgment obligor, that person may file an affidavit of ownership or right to possession (terceria), which must be served on the levying officer and the judgment creditor. The levying officer is not obliged to retain the property unless the judgment creditor posts an indemnity bond. The third-party claimant may file a separate action to vindicate ownership or right to possession, independent from the execution proceedings. The sheriff’s duty is to levy only the property of the judgment debtor and not that of third parties.
Jurisprudential Principles on Execution and Ownership Claims
The Court reiterated the principle that execution of a judgment extends only to property unquestionably belonging to the judgment debtor. A third party not a party to the main case cannot be involuntarily bound by its judgment nor can one man’s goods be sold for another’s debts. The remedy for wrongful levy by the sheriff is to file an independent reinvidicatory action to recover possession or ownership. The court may, upon summary hearing, order the restoration of property to a rightful third party only when ownership or right of possession is clearly established.
The Court of Appeals’ Ruling and Rationale on the Appropriateness of Remedy
The Court of Appeals dismissed PSALM’s petition for certiorari, ruling that a petition for certiorari was an incorrect remedy to challenge the denial of a third-party claim under Section 16, Rule 39. It explained that PSALM does have a plain, speedy, and adequate remedy provided by law—namely, the filing of an independent action to assert ownership or right to possession of the levied property. Certiorari lies only where there is no other plain, speedy, and adequate remedy.
Supreme Court’s Affirmation of the Court of Appeals Decision
The Supreme Court affirmed the Court of Appeals’ decision, holding that PSALM’s recourse was a separate and independent action to vindicate its ownership rights over the levied properties. The Court emphasized the limited scope of the court’s power during execution, which is confined to determining whether the sheriff acted correctly in levying the property. Since PSALM failed to sufficiently prove ownership before the RTC and was not a party to the unlawful detainer case, the denial of its third-party claim did not warrant certiorari. The execution proceedings must continue.
Summary of the Remedies Available to Third-Party Claimants
The Court clarified that third-party claimants have two types of remedies und
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Case Syllabus (G.R. No. 215933)
Background and Procedural History
- The case involves PSALM (petitioner) seeking review of the Court of Appeals (CA) decisions dated July 30, 2012, and December 10, 2014, in CA-G.R. SP No. 118302.
- The dispute originated when respondent Maunlad Homes, Inc. filed an unlawful detainer case with damages against National Power Corporation (NPC) at the Municipal Trial Court in Cities (MTCC), Malolos City, Bulacan.
- MTCC ruled in favor of Maunlad Homes on October 26, 2009, ordering NPC to vacate the premises, pay monthly reasonable compensation, and attorney's fees.
- NPC appealed to the Regional Trial Court (RTC), which affirmed the MTCC decision on May 18, 2010.
- Maunlad Homes sought execution of judgment; NPC opposed but the RTC denied NPC’s motion for reconsideration and ordered execution.
- The sheriff attempted to levy NPC’s warehouse properties for execution pending appeal; however, PSALM, claiming ownership of the levied properties, filed a third-party claim.
- PSALM moved to nullify the levy and restore possession citing the Electric Power Industry Reform Act (EPIRA) which transferred certain NPC assets to PSALM.
- The RTC denied PSALM’s third-party claim and motion for status quo order, directing the sheriff to proceed with the execution.
- PSALM filed a certiorari petition with the CA contesting the RTC’s orders, which was dismissed for being an incorrect remedy.
- PSALM's motion for reconsideration was denied, prompting the present petition for review on certiorari before the Supreme Court.
Facts Concerning the Ownership and Transfer of Assets
- PSALM was established under Republic Act No. 9136 (EPIRA Law) and is the entity to which NPC’s generation assets, IPP contracts, real estate, and disposable assets were transferred.
- Upon effectivity of EPIRA on June 26, 2001, all NPC assets and liabilities were reportedly transferred to PSALM by operation of law.
- PSALM argued the levied properties were among NPC assets transferred to it; however, certain transfer documents evidencing ownership and possession were lacking.
- The transfer of ownership was not ipso jure; conditions precedent such as execution of documents were necessary per Section 1, Rule 21 of EPIRA’s Implementing Rules and Regulations.
- PSALM also contended that liabilities related to Maunlad Homes’ claim were not transferred to PSALM; thus, it cannot be held liable for the obligation in the unlawful detainer case.
Issues Presented
- Whether the Court of Appeals erred in dismissing PSALM’s petition for certiorari as an improper remedy despite PSALM’s filing of a third-party claim.
- Whether PSALM has established ownership of the levied properties sufficient to sustain the third-party claim.
- Whether PSALM, not being a party to the underlying unlawful detainer case nor obligated on the judgment, can be bound by the execution thereof.
- Whether the judgment creditor’s obligation was transferred to PSALM together with the NP Corporation’s assets.