April 2005 - Philippine Supreme Court Decisions/Resolutions
G.R. No. 164857 - Flexo Marketing Corporation v. Columbus Foods, Incorporated, et al.
[G.R. NO. 164857. April 11, 2005]
FLEXO MANUFACTURING CORPORATION, Petitioners, v. COLUMBUS FOODS, INCORPORATED and PACIFIC MEAT COMPANY, INCORPORATED, Respondents.
D E C I S I O N
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing the decision dated November 20, 2003,1 of the Court of Appeals in CA-G.R. SP No. 75642, which annulled and set aside the order dated February 19, 2003,2 of the Regional Trial Court of Caloocan City, Branch 131 granting petitioner's motion for execution pending appeal, and its resolution dated July 27, 20043 denying reconsideration thereof.
The facts are as follows:
On February 6, 2002, Flexo Manufacturing Corporation (Flexo) filed a complaint4 against Columbus Foods Incorporated (Columbus) and Pacific Meat Company Incorporated (Pacific) for sum of money with preliminary attachment. Flexo alleged that on August 27, 1999 and September 28, 1999, it executed Contract Nos. 6150 and 6288 with Columbus for the manufacture of 48 million and 6 million foil pouches, respectively.
Flexo made partial deliveries which were paid by Pacific. Subsequently, Flexo demanded the payment of manufactured but undelivered foil pouches amounting to P2,957,270.00 but both respondents denied any liability. Thus, the complaint where Flexo sought for the payment of the foil pouches valued at P2,957,270.00 with 24% interest per annum from April 2000 until fully paid, as well as 25% of the obligation as attorney's fees and cost of suit.
In their answer with counterclaim,5 respondents claimed that Flexo had no cause of action against them. They alleged that the two contracts executed by them were general agreements subject to specific instructions and confirmation to be relayed periodically to Flexo. On March 31, 2000, they informed Flexo to deliver all outstanding orders by April 14, 2000. Since the latter was unable to deliver the outstanding orders on time, respondents argued that they had been relieved from the obligation.
After trial, the Regional Trial Court of Caloocan City, Branch 131, rendered judgment,6 to wit:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants Columbus Foods, Inc. and Pacific Meat Co., Inc., ordering them:
1. To pay solidarily to the plaintiff the principal obligation of P2,957,270.00, with interest thereon at the rate of 24% per annum starting July 26, 2001 until the same is fully paid;
2. To pay solidarily the amount equivalent to 25% of the principal obligation, or P739,317.50, as attorney's fees and liquidated damages; andcralawlibrary
3. To pay the cost of suit.
On December 27, 2002, Columbus and Pacific appealed to the Court of Appeals. On the same day, Flexo filed a motion for execution pending appeal8 which the trial court granted considering the deteriorating condition of the pouches and the insolvency of Columbus as valid grounds for execution.
Aggrieved, respondents filed a Petition for Certiorari9 with the Court of Appeals which granted the petition and set aside the order of the RTC of Caloocan City dated February 19, 2003.
The Court of Appeals held that no good reasons or superior circumstances demanding urgency justified the grant of the motion for execution pending appeal.10 It noted that when the complaint was filed, the foil pouches which had a shelf life of six months, had already deteriorated. In effect, the foil pouches had become unfit and there is no more right to be protected by the execution pending appeal.11 Furthermore, Columbus' alleged insolvency was not duly established. Notwithstanding, it observed that Flexo could still collect from Pacific as the latter was a solidary debtor.
Flexo filed the instant petition12 after denial of its motion for reconsideration.
The principal issue to be resolved is whether good reasons exist to justify the grant of execution pending appeal.
Flexo maintains that the deteriorating condition of the foil pouches, the insolvent state of Columbus, and the posting of bond were good reasons to warrant execution pending appeal. It avers that the Court of Appeals erroneously held that the foil pouches had already become unfit at the time the complaint was filed and thus, there was no right to be protected by the execution pending appeal. It insists that the evidence on record proves that Columbus is insolvent. Lastly, the five million pesos (P5,000,000.00) bond it posted was sufficient to answer for the money garnished on execution pending appeal from Pacific.
The petition lacks merit.
As a general rule, the execution of a judgment should not be had until and unless the judgment has become final and executory, i.e., the period of appeal has lapsed without an appeal having been taken, or appeal having been taken, the appeal has been resolved and the records of the case have been returned to the court of origin, in which event, execution "shall issue as a matter of right." Execution pending appeal in accordance with Section 2 of Rule 39 of the Rules of Court is, therefore, the exception.13
Execution pending appeal requires the observance of the following requisites: (a) there must be a motion therefor by the prevailing party; (b) there must be a good reason for issuing the writ of execution; and (c) the good reason must be stated in a special order.14
Since the execution of a judgment pending appeal is an exception to the general rule, the existence of "good reasons" is essential.15 "Good reasons" has been held to consist of compelling circumstances justifying the immediate execution lest judgment becomes illusory. Such reasons must constitute superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment.16 The rules do not specify the "good reasons" to justify execution pending appeal, thus, it is the discretion of the court to determine what may be considered as such.
In the instant case, the first demand letter for the undelivered goods was sent on June 6, 2000. Therefore, it can be assumed that the foil pouches have been processed prior to this date. Since the lifetime of the product is one year after which they start to deteriorate,17 the foil pouches had deteriorated when Flexo filed the complaint on February 6, 2002. When the trial court promulgated its decision on December 11, 2002, two and a half years had already elapsed. As such, the foil pouches were over and beyond its shelf life and unfit to be utilized.
In Yasuda v. Court of Appeals,18 we discussed cases where the court granted execution pending appeal on the ground of deteriorating goods, to wit:
In Federation of United Namarco Distributors, Inc. v. National Marketing Corp., this Court sustained the good reasons stated by the trial court in its order, namely: that the goods subject matter of the judgment will deteriorate during the pendency of the appeal; and that a slight deterioration of said goods will be sufficient to impair their market value as first-hand goods; hence, keeping them in storage pending petitioner's appeal will render the judgment in favor of respondents ineffectual, as respondents' interest in the goods is not that of consuming, but of marketing, them.
In the case of Bell Carpets International Trading Corp. v. Court of Appeals, a writ of execution pending appeal was likewise allowed on the ground that "the finished goods [yarn] that were attached easily deteriorate and go out of fashion insofar as the shades and colors are concerned, thus making them unsaleable, and their continued storage will only make them dirty and further depreciate their value.
In the present case, petitioner, in his Motion for Execution Pending Appeal, cites as a ground for its allowance, the deteriorating condition of the vessel, M/V "Valiant". He claims that the vessel has been left to rot at the pier and without a crew to guard it. It is in grave danger of losing its value. The vessel, practically abandoned, is exposed to the varied elements of nature, such as rains and storms, not to mention human elements such as invasion or robbery. The defendants, in their Opposition to petitioner's Motion for Execution Pending Appeal, failed to controvert these allegations. In our view the grounds raised by petitioner are good reasons to allow execution pending appeal.
The aforementioned cases involved compelling circumstances where the party had an urgent need for execution pending appeal. On the other hand, the case at bar does not demonstrate superior circumstances demanding urgency. In fact, the time for urgency had already lapsed even before the case was filed.
Regarding the state of insolvency of Columbus, the case of Philippine National Bank v. Puno,19 held:
While this Court in several cases has held that insolvency of the judgment debtor or imminent danger thereof is a good reason for discretionary execution, otherwise to await a final and executory judgment may not only diminish but may nullify all chances for recovery on execution from said judgment debtor, We are constrained to rule otherwise in this particular case. In the aforecited cases, there was either only one defeated party or judgment debtor who was, however, insolvent or there were several such parties but all were insolvent, hence the aforesaid rationale for discretionary execution was present. In the case at bar, it is undisputed that, assuming MMIC is insolvent, its co-defendant PNB is not. It cannot, therefore, be plausibly assumed that the judgment might become illusory; if MMIC cannot satisfy the judgment, PNB will answer for it. It will be observed that, under the dispositive portion of the judgment hereinbefore quoted, the liability of PNB is either subsidiary or solidary.
Thus, when there are two or more defendants and one is not insolvent, the insolvency of a co-defendant is not a good reason to justify execution pending appeal if their liability under the judgment is either subsidiary or solidary. In this case, Pacific was adjudged to be solidarily liable with Columbus. Therefore, the latter is not the only party that may be answerable to Flexo. Its insolvency does not amount to a good reason to grant exectution pending appeal.
Contrary to the claim of Flexo, the posting of a bond will not justify execution pending appeal. The rule is now settled that the mere filing of a bond by the successful party is not a good reason for ordering execution pending appeal, as "a combination of circumstances is the dominant consideration which impels the grant of immediate execution, the requirement of a bond is imposed merely as an additional factor, no doubt for the protection of the defendant's creditor."20 Otherwise, execution pending appeal could be obtained through the mere filing of such a bond.21
We disagree with the averments of Flexo that the failure of Columbus to file a supersedeas bond to stay execution pending appeal was a fatal omission. In the case of International School, Inc. (Manila) v. Court of Appeals,22 we addressed this issue, as follows:
Thus, we held therein, and we so reiterate for purposes of the case at bar, that certiorari lies against an order granting execution pending appeal where the same is not founded upon good reasons. Also, the fact that the losing party had appealed from the judgment does not bar the certiorari action filed in respondent court as the appeal could not be an adequate remedy from such premature execution.
That petitioner could have resorted to a supersedeas bond to prevent execution pending appeal, as suggested by the two lower courts, is not to be held against him. The filing of such bond does not entitle him to the suspension of execution as a matter of right. It cannot, therefore, be categorically considered as a plain, speedy and adequate remedy. Hence, no rule requires a losing party so circumstanced to adopt such remedy in lieu or before availment of other remedial options at hand.
Furthermore, a rational interpretation of Section 3, Rule 39 should be that the requirement for a supersedeas bond presupposes that the case presents a presumptively valid occasion for discretionary execution. Otherwise, even if no good reason exists to warrant advance execution, the prevailing party could unjustly compel the losing party to post a supersedeas bond through the simple expedient of filing a motion for, and the trial court improvidently granting, a writ of execution pending appeal although the situation is violative of Section 2, Rule 39. This could not have been the intendment of the rule, hence we give our imprimatur to the propriety of petitioner's action for certiorari in respondent court.
It is not intended obviously that execution pending appeal shall issue as a matter of course. Good reasons, special, important, pressing reasons must exist to justify it; otherwise, instead of an instrument of solicitude and justice, it may well become a tool of oppression and inequity.23 In the present case, there was no good reason for the trial court to grant the motion for execution pending appeal. Absent any such good reason, the special order of execution must be struck down for having been issued with grave abuse of discretion.24
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals dated November 20, 2003 in CA-G.R. SP No. 75642 and its resolution dated July 27, 2004 denying reconsideration thereof, are AFFIRMED.
Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.
1 Rollo, pp. 10-17; penned by Associate Justice Elvi John S. Asuncion, with Associate Justices Renato C. Dacudao and Lucas P. Bersamin concurring.
2 Rollo, pp. 93-95; penned by Judge Antonio J. Fineza.
3 Id. at 19.
4 Id. at 51-57.
5 Id. at 64-68.
6 Id. at 75-84; penned by Judge Antonio J. Fineza.
7 Id. at 84.
8 Id. at 85-87.
9 Id. at 96-124.
10 Id. at 15.
11 Id. at 15.
12 Id. at 24-50.
13 Fortune Guarantee & Ins. Corp. v. Court of Appeals, 428 Phil. 783, 795 (2002).
15 City of Iligan v. Principal Management Group, Inc., G.R. No. 145260, 31 July 2003, 407 SCRA 554, 561.
16 Corona International, Inc. v. Court of Appeals, G.R. No. 127851, 18 October 2000, 343 SCRA 512, 518.
17 Rollo, p. 185.
18 386 Phil. 594, 605-606 (2000).
19 G.R. No. 76018, 10 February 1989, 170 SCRA 229, 236.
20 International School, Inc. (Manila) v. Court of Appeals, 368 Phil. 791, 803 (1999).
21 BF Corporation v. Edsa Shangri-la Hotel, 355 Phil. 541, 548 (1998).
22 See note 20, pp. 799-800, citing Valencia v. Court of Appeals, G.R. No. 89431, 25 April 1990, 184 SCRA 561, 569-570.
23 See note 18, p. 605, citing Ong v. Court of Appeals, G.R. No. 92241, 17 October 1991, 203 SCRA 38, 43.
24 See note 14.