Philippine Supreme Court Jurisprudence


Philippine Supreme Court Jurisprudence > Year 1921 > February 1921 Decisions > G.R. No. 15499 February 9, 1921 - TAYABAS LAND COMPANY v. SALOMON SHARRUF, ET AL.

041 Phil 382:




PHILIPPINE SUPREME COURT DECISIONS

EN BANC

[G.R. No. 15499. February 9, 1921. ]

THE TAYABAS LAND COMPANY, Plaintiff-Appellee, v. SALOMON SHARRUF, CANUTO BARTOLOME, sheriff of Tayabas, SALVADOR FARRE and FRANCISCO ALVAREZ, Defendants. SALOMON SHARRUF, Appellant.

Crossfield & O’Brien for Appellant.

Alfredo Chicote and Jose Arnaiz for Appellee.

SYLLABUS


1. JUDGMENT; EXECUTION AGAINST JUDGMENT CREDITOR; JUDGMENT NOT TO BE SOLD UPON EXECUTION. — A judgment for a sum of money is, as to the party entitled to payment, a credit; and as to the party who ought to pay the money a debt; and although it constitutes property in the sense necessary to make it liable to be taken for the payment of the judgment obtained in another action, nevertheless, being property which is incapable of manual delivery, it cannot be sold by the sheriff at public auction under section 457 of the Code of Civil Procedure.

2. EXECUTION; JUDGMENT; GARNISHMENT. — While a judgment cannot be sold upon execution, it may be "attached upon execution in like manner as upon writs of attachment" (sec. 450, Code of Civ. Proc.) , that is it must be reached by process of garnishment in the same way that debts and credits are attached under section 431 of the Code of Civil Procedure.

3. GARNISHMENT; NATURE OF PROCESS. — The proceeding by garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. By means of the citation the stranger becomes a forced intervenor; and the court, having acquired jurisdiction over him by means of the citation, requires him to pay his debt, not to his former creditor, but to the new creditor, who is creditor in the main litigation. It is merely a case of involuntary novation by the substitution of one creditor for another.

4. JUDGMENT; SATISFACTION OF JUDGMENT BY THIRD PERSON. — Any person indebted to another against whom an execution has been issued may pay the amount of his indebtedness, or so much thereof as may be necessary to satisfy the execution, to the officer holding the execution, or to the judgment creditor himself, thereby merging the credit in his own indebtedness and absolving himself pro tanto from his obligation to the execution debtor.


D E C I S I O N


STREET, J. :


On December 10, 1914, one Salvador Farre recovered a joint and several judgment against Salomon M. Sharruf and Farham M. Sharruf in the Court of First Instance of the city of Manila for the sum of P1,300, with legal interest from September 5, 1914, and with costs. This judgment having remained unsatisfied, an execution was upon April 3, 1916, issued thereon at the instance of the plaintiff.

Meanwhile on March 27, 1915, Salomon M. Sharruf had himself recovered a judgment, also in the Court of First Instance of the city of Manila, against the Tayabas Land Company and A. M. Ginainati, for the sum of P6,841.36, with interest and costs; and as there seems to have been no visible property belonging to Salomon M. Sharruf and Farham M. Sharruf subject to seizure by the sheriff to satisfy the execution in favor of Salvador Farre, it became important for Farre to subject the judgment in favor of Salomon M. Sharruf against the Tayabas Land Company and A. M. Ginainati to the payment of his own claim.

To this end process of garnishment (notificacion de embargo) was, on April 6, 1916, issued at the instance of Salvador Farre in aid of his execution against the Sharrufs and was on the same or succeeding day duly served upon the Tayabas Land Company. By this process the Tayabas Land Company was informed that levy had, by virtue of the execution aforesaid, been made upon all the property of S. M. Sharruf in the possession of said Tayabas Land Company and upon all debts owing by the latter to said Sharruf, and in particular upon all participation and interest of S. M. Sharruf in the judgment rendered in his favor in the action prosecuted by him against the Tayabas Land Company and others.

In pursuance of the levy thus effected upon the judgment in favor of Salomon M. Sharruf against the Tayabas Land Company, the sheriff of the city of Manila, as in ordinary cases of levy upon chattels or real property, proceeded upon April 15, 1916, to expose to sale all right, title, and interest of said Sharruf in the judgment aforesaid. At this sale Salvador Farre, the execution creditor himself, became the purchaser of the judgment in question for the sum of P200; but the Tayabas Land Company, with a legitimate view to its own protection, afterwards stepped in, and acting through Mr. Francisco Alvarez, as attorney and intermediary, purchased from Farre, on October 6, 1917, the judgment of Salomon M. Sharruf against itself, paying to Farre the full amount due him, to wit, the sum of P1,588.24.

At this point it should be stated that when levy of execution was made in the manner above stated, upon the judgment in favor of Sharruf against the Tayabas Land Company and others, the time allowed by law for an appeal in that case to the Supreme Court had not passed; and said cause was in fact subsequently appealed to the Supreme Court, where final judgment was rendered, affirming the decision of the lower court, on February 15, 1918.

It may also be stated that on April 4, 1916, Salomon M. Sharruf, by a public document, which was duly incorporated in the record in his case against the Tayabas Land Company Et. Al., sold and transferred unto O’Brien & Company, a corporation, his right, title, and interest in the judgment aforesaid to the extent necessary to satisfy a debt for P988.14, owing to O’Brien & Company, for merchandise purchased from said entity by Sharruf; and upon the same date Messrs. Crossfield & O’Brien, as attorneys, filed a memorandum of an attorney’s lien in their favor to the extent of 25 per cent of the amount of the judgment. These transactions, as will be seen, had the result of reducing in a considerable degree the apparent beneficial interest of Salomon M. Sharruf in the result of the litigation, but they do not affect the fundamentals of the case.

As a consequence of the facts above narrated the Tayabas Land Company supposes that the judgment obtained by Salomon M. Sharruf against it and A. M. Ginainati has been wholly satisfied, while Salomon M. Sharruf and those interested under him claim that the execution sale of the judgment in question was void and that as a consequence said judgment remains wholly unsatisfied. Proceeding upon this conception of the case, Messrs. Crossfield and O’Brien, as attorneys for the plaintiff in that action, procured an execution to be issued on August 30, 1918, upon said judgment for the entire amount of the recovery, including accrued interest and costs, less the sum of P13.21, which had been secured in a garnishment proceeding against one of the local banks.

Being thus menaced with the levy of an execution upon its property, the Tayabas Land Company instituted the present action in the Court of First Instance of the city of Manila, against Salomon M. Sharruf and others, including the sheriff of the Province of Tayabas, to obtain an order restraining the threatened levy of execution and perpetually enjoining all proceedings for the enforcement of the judgment against it. Upon hearing the cause the trial court, while recognizing the validity of the claims of O’Brien & Company and of Crossfield and O’Brien, held that all other interest in said judgment pertaining to Salomon M. Sharruf had passed by virtue of the execution sale to Salvador Farre and thence by transfer through Francisco Alvarez to the Tayabas Land Company. As a consequence the court declared the preliminary injunction perpetual. From said judgment Salomon M. Sharruf appealed to this court.

The principal question in the case relates to the validity of the proceedings whereby the judgment against the Tayabas Land Company and A. M. Ginainati in favor of Salomon M. Sharruf was, on April 15, 1916, exposed to sale by the sheriff under the execution issued in the action of Salvador Farre against the two Sharrufs; and we believe it will be conducive to clarity in the discussion for us to proceed at once to consider the manner in which, under the provisions of our Code of Civil Procedure, a judgment for a sum of money entered in favor of the plaintiff in one case can be reached and applied to the payment of a judgment in another case against the-party who occupies the position of creditor in the former.

In the first place, we have no hesitancy in saying that a judgment for a sum of money, that is, the interest of the plaintiff in such a judgment, is liable to execution. A judgment for a sum of money is, as to the party entitled to payment, a creditor and as to the party who ought to pay the money, a debt. Furthermore, the interest of the creditor in such a judgment is clearly property, though not capable of manual delivery. All of these elements of value — "debts," "credits," and "all other property not capable of manual delivery" — are expressly declared, in section 450 of the Code of Civil Procedure, to be liable to execution. It will be noted, however, that under the section just cited, debts, credits, and other property not capable of manual delivery are to be dealt with in a different manner from that prescribed in case of the execution of tangible property; for while tangible property is proceeded with by seizure and sale under execution, debts and credits are to be attached by the citation of the debtor. The provisions governing the execution of tangible property are found in sections 453 to 457, inclusive, of the Code of Civil Procedure; while the provisions prescribing the method of reaching debts and credits are found chiefly in the chapter relating to attachment, consisting principally of sections 431 to 436, inclusive, of the Code of Civil Procedure.

The proceeding thus indicated as proper, in order to subject a debt or credit is known in American civil procedure as the process of garnishment; and it may be truly said that garnishment is one of the simplest processes, and the least involved in technicalities, of any proceeding known to the law. It consists in the citation of some stranger to the litigation, who is debtor to one of the parties to the action. By this means such debtor stranger becomes a forced intervenor; and the court, having acquired jurisdiction over his person by means of the citation, requires him to pay his debt, not to his former creditor, but to the new creditor, who is creditor in the main litigation. It is merely a case of involuntary novation by the substitution of one creditor for another. Upon principle the remedy is a species of attachment or execution for reaching any property pertaining to a judgment debtor which may be found owing to such debtor by a third person.

The situation involved supposes the existence of at least three persons, to wit, a judgment creditor, a judgment debtor, and the garnishee, or person cited, who in turn is supposed to be indebted to the first debtor (i. e., Judgment debtor).

To proceed a little further with the barest details of the process of garnishment, we note that a citation issues from the court having jurisdiction of the principal litigation, notifiying the garnishee that the property and credits of the judgment debtor have been levied upon or attached in the hands of such garnishee, and enjoining him not to deliver, transfer, or otherwise dispose of any effects or credits belonging to that person, and requiring him furthermore to make a statement to the court of the property of the judgment debtor in his hands and of the debts owing by the garnishee to such debtor.

In cases where indebtedness is admitted, as not infrequently occurs, the payment of the money by the garnishee to the judgment creditor or into court, brings the proceeding to a close, so far as the garnishee is concerned; but if the garnishee fails to answer, or does not admit the indebtedness, he may be required to attend before the court in which the action is pending to be examined on oath respecting the same. Finally, if the liability of the garnishee is made manifest, the officer of the court may, under paragraph No. 3 of section 436 of the Code of Civil Procedure, collect the money and pay it to the person entitled.

The circumstance that garnishment has not been made the subject of independent treatment in our Code of Civil Procedure and that the rules relating thereto are only brought out inferentially in connection with the subject of attachment has undoubtedly contributed to obscure a matter which upon principle is simple enough. Additional light on the subject may, however, be acquired by referring to sections 476, 481, 482, and 486 of the Code of Civil Procedure, which treat of supplementary proceedings. It will be found that those proceedings are identical in principle with the proceeding for the citation of debtors explained in the chapter on attachment.

Enough has now been said to show clearly that the action of the sheriff in exposing to public sale the judgment which had been procured by Salomon M. Sharruf in the action against the Tayabas Land Company, Et Al., was wholly unauthorized, and said sale must be considered void. The proper step would have been for the court to require the Tayabas Land Company, after the judgment against it had become final, to pay into court, in the cause wherein Salvador Farre was plaintiff, a sufficient amount of money to satisfy Farre’s claim against Sharruf; and if the judgment against the Tayabas Land Company had been permitted to go to the stage of execution, the proceeds in the hands of the sheriff would have been applied, under the direction of the court, to the payment of Farre’s claim before any part would have been payable to Sharruf.

In dealing with the problems which have from time to time arisen in connection with garnishment proceedings, courts have sometimes been perplexed over the matter of protesting the garnishee from the danger of having to pay his debt twice; and it goes without saying that the procedure must be so adjusted as not to subject the garnishee to this risk. Otherwise it is a fatal obstacle to the garnishment. No such difficulty would arise in a case like this, where the two judgments are both of record in the same court, and where consequently that court has control over the process in both cases.

Our conclusion that the sale of the judgment in question under process of execution was void is supported by the decisions of the Supreme Court of California, construing the very section of the California Code of Civil Procedure from which section 450 of the Code of Civil Procedure of the Philippine Islands was taken. Thus, in McBride v. Fallon (65 Cal., 301, 303), the Supreme Court of that State said:jgc:chanrobles.com.ph

"After enumerating the kinds of property of a judgment debtor liable to execution, the Code provides that ’shares and interests in any corporation or company, and debts and credits . . . and all other property not capable of manual delivery, may be attached on execution in like manner as upon writs of attachment.

"Debts and credits and property not capable of manual delivery must be attached in the mode pointed out by subdivision 5, sec. 542.’" (Corresponding to section 431 of the Philippine Code of Civil Procedure.) "That is ’by leaving with the person owing the debt or having in possession or under his control such credits and other personal property, or with his agent, a copy of the writ, and a notice that the debts owing by him to the defendant, or the credits and other personal property’ in his possession or under his control, belonging to the defendant are attached in pursuance of such writ."cralaw virtua1aw library

"‘The fact that a debt is evidenced by a judgment does not, in our opinion, make it anything more or less than a debt, or more capable of manual delivery than it would be if not so evidenced. No provision is made for attaching or levying on evidences of debt. It is the debt itself which may be attached by writ of attachment, or on execution in like manner as upon writs of attachment.’ This we think to be the meaning of the Code, and the mode prescribed by it is exclusively . . ."cralaw virtua1aw library

In order to avoid misunderstanding, we wish to say that we make no question as to the propriety of the proceedings up to the time when the judgment in question was advertised and exposed to sale by the sheriff. The issuance of the execution and the service of the garnishment were appropriate; and the garnishment was effective for the purpose of preventing the garnishee, the Tayabas Land Company, from paying the judgment to Salomon M. Sharruf.

Moreover, the garnishment was effective for the purpose of conferring upon the Tayabas Land Company the right to pay off the judgment which Farre had obtained against Sharruf. This right is not only recognized in section 481 of the Code of Civil Procedure but also in subsection 3 of article 1210 of the Civil Code; and by satisfying Farre’s claim, regardless of the manner in which it was accomplished, the Tayabas Land Company absolved itself pro tanto from its indebtedness to Sharruf. It results that, although the judgment against the Tayabas Land Company has not yet been satisfied in full, said company is entitled to be credited with the sum of P1,588.24, paid by it, through Francisco Alvarez, to Farre on October 6, 1917, with interest.

In the view we take of the case it becomes unnecessary to consider at length the fact that Sharruf’s judgment against the Tayabas Land Company was appealed to the Supreme Court after the process of garnishment had been served on the company. Suffice it to say that this circumstance would at most merely postpone the realization of the results without defeating the garnishment.

Reflection upon this feature of the case, however, confirms the opinion that our lawmakers acted wisely in requiring that debts and credits should be executed by means of the process of garnishment rather than by exposing them to public sale. In the case before us a judgment for a large amount was sold for a merely nominal sum, and such would generally be the case at a sale under similar conditions. This cannot fail to be highly prejudicial to the debtor who is under immediate execution. The proceeding by garnishment, on the contract, enables all parties to realize their rights without unduly disturbing the position of any.

The judgment must be reversed, and the defendants will be absolved from the complaint. It is so ordered, without express pronouncement as to costs of either instance.

Mapa, C.J., Araullo, Malcolm, Avanceña and Villamor, JJ., concur.

Endnotes:



1. See Sharruf v. Tayabas Land Co., and Ginainati (37 Phil., 655).




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