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EN BANC

G.R. No. L-17384            October 31, 1961

NESTOR RIGOR VDA. DE QUIAMBAO, ET AL. Petitioners, vs. MANILA MOTOR COMPANY, INC., and the HON. COURT OF APPEALS, Respondents.

Manuel Y. Macias for petitioners.
Ozaeta, Gibbs and Ozaeta for respondents.

REYES, J.B.L., J.:

This petition for certiorari brings to this Court for review the decision of the Court of Appeals in its CA-G.R. No. 17031-R, reversing that of the Court of First Instance of Manila and dismissing petitioners' complaint.chanroblesvirtualawlibrarychanrobles virtual law library

The facts are not in dispute. On March 7, 1940, Gaudencio R. Quiambao, deceased husband of petitioner Nestora Rigor Vda. de Quiambao and father of the other petitioners, bought from respondent Manila Motor Company, Inc. one (1) Studebaker car on the installment plan. Upon default in the payment of a number of installments, respondent company sued Gaudencio Quiambao in Civil Case No. 58084 of the Court of First Instance of Manila. On December 4, 1940, judgment was entered in said case, awarding in favor of the plaintiff the sum of P3,054.32, with interest thereon at 12% per annum, and P300.00 attorney's fees.chanroblesvirtualawlibrarychanrobles virtual law library

On July 14, 1941, the court issued a writ of execution directed to the Provincial Sheriff of Tarlac, who thereupon levied on and attached two parcels of land covered by Transfer Certificate of Title No. 18390 of the Office of the Register of Deeds for Tarlac. On August 27, 1941, Attorney Felix P. David, then counsel for the Manila Motor Company, accompanied by the sheriff, personally apprised Gaudencio Quiambao of the levy. The latter pleaded to have the execution sale suspended and begged for time within which to satisfy the judgment debt, proposing that in the meanwhile, he would surrender to the company the Studebaker car. This proposition was accepted, accordingly, Gaudencio Quiambao delivered the car to the company, and Attorney David issued a receipt therefor that reads:

Received from Mr. Gaudencio Quiambao, Studebaker President Sedan License No. 45-368 pending settlement of the judgment in Civil Case No. 58043 CFI Manila rendered in favor of Manila Motor Company.

On October 16, 1941, Gaudencio Quiambao remitted to the company, on account of the judgment, the sum of P500.00; he, however, failed to make further payments, thus leaving a balance still unsettled of P1,952.47, with interest thereon at 12% per annum from March 6, 1940.chanroblesvirtualawlibrarychanrobles virtual law library

In the meantime, the Pacific war broke out, and when the Japanese forces occupied the country shortly thereafter, the invaders seized all the assets of the Manila Motor Company, Inc., as enemy property.chanroblesvirtualawlibrarychanrobles virtual law library

After the war, the company filed with the Philippine War Damage Commission, among other things, a claim for its mortgage lien on the car of Gaudencio Quiambao and was awarded the sum of P780.47, P409.75 of which amount had already been paid.chanroblesvirtualawlibrarychanrobles virtual law library

On October 12, 1949, the company addressed a letter to Gaudencio Quiambao asking him to fill a blank form relative to the lost car. Quiambao having since died, his widow, Nestora Rigor Vda. de Quiambao, returned the form with the statement that the questioned car was surrendered to the company for storage. On May 18, 1953, a demand was made on the widow to settle the deceased's unpaid accounts, but in view of her refusal, the company urged the Provincial Sheriff of Tarlac to carry out the pre-war writ of execution issued in Civil Case No. 58043. Although the records of that case had been lost during the war, and have not been reconstituted, a copy of said writ of execution kept on file by the provincial sheriff was saved. Accordingly, the latter advertised for sale at public auction the properties levied upon. Notified of the sheriff's action, the heirs of the deceased Quiambao filed this suit to annul and set aside the writ of execution and to recover damages. Judgment was rendered by the Court of First Instance of Manila in favor of plaintiffs-petitioners, but on appeal to the Court of Appeals, the decision was reversed and another entered dismissing the complaint. Hence, this appeal by writ of certiorari.chanroblesvirtualawlibrarychanrobles virtual law library

Briefly, the issues are:chanrobles virtual law library

(a) Did the delivery of the Studebaker car to respondent company produce the effect of rescinding or annulling the contract of sale between the company and the deceased Gaudencio Quiambao and of barring the former from executing its pre-war judgment in Civil Case No. 58043?chanrobles virtual law library

(b) Did the payment to respondent company and the latter's acceptance of war damage compensation for the lost car amount to a foreclosure of the mortgage covenated in its favor? andchanrobles virtual law library

(c) Was the pre-war judgment already prescribed taking into account the moratorium laws?chanrobles virtual law library

Anent the first issue, petitioners, citing the case of H.E. Heacock Company vs. Buntal Manufacturing Company, et al., 66 Phil. 245-246, maintain that the "taking of the automobile by respondent company from Gaudencio Quiambao ... amounted to a waiver of said company's right to execute its judgment in Civil Case No. 58043 and clearly constituted a cancellation or rescission of the sale," which, under the first paragraph of Article 1454-A of the old Civil Code¹, then applicable, bars any further claim for unpaid installments. There is no merit in this claim. Unlike situation that arose in the H.E. Heacock Company case wherein the vendor demanded the return of the thing sold and thereby indicated an unequivocal desire on its part to rescind its contract with the vendee, here it was the buyer (deceased Gaudencio Quiambao) who offered, indeed pleaded, to surrender his car only in order that he might given more time within which to satisfy the judgment debt, and suspend the impending execution sale of the properties levied upon. The very receipt issued then by the company, and accepted without objection by the deceased (Gaudencio Quiambao), indicated that the car was received "pending settlement of the judgment in Civil Case No. 58043." Other circumstances that militate against petitioners' theory of rescission or annulment of the contract of sale and waiver of the judgment of debt and, conversely, strengthen the proposition that the delivery of the car to respondent company was merely to postpone the satisfaction of the judgment amount, are that the deceased still paid the further sum of P500.00 on account of his indebtedness about two months after the car was surrendered, and that despite respondent company's acceptance of the car, the company made repeated demands against the petitioners to settle the deceased's unpaid accounts.chanroblesvirtualawlibrarychanrobles virtual law library

Since respondent company did not receive the car for the purpose of appropriating the same, but merely as security for the ultimate satisfaction of its judgment credit, the situation under consideration could not have amounted to a foreclosure of the chattel mortgage as petitioners imply.chanroblesvirtualawlibrarychanrobles virtual law library

Petitioners next argue that "the payment of war damage compensation to respondent company . . . produced the same and equal legal effect as formal foreclosure," and in view of the second paragraph of Article 1454-A² of the Spanish Civil Code, the latter is now precluded from claiming unpaid installments. We do not agree. Having been the party who was last in possession of the lost car, the company was well within its rights, or better still, under obligation, to protect the interest of the car owner, as well as its own, by claiming, as it did, the corresponding war damage compensation for the car. Such action of the company can not reasonably be construed as a constriction of its rights under the pre-war judgment.chanroblesvirtualawlibrarychanrobles virtual law library

Furthermore, in Manila Motor Company, Inc. vs. Fernandez, 52 Off. Gaz. No. 16, 6883, 6885, we held:

. . . At any rate, it is the actual sale of the mortgaged chattel in accordance with section 14 of Act No. 1508 that would bar the creditor (who chooses to foreclose) from recovering any unpaid balance (Pacific Commercial Company vs. De la Rama, 72 Phil. 380).

But perhaps the best reason why respondent company may not be construed as having rescinded or cancelled the contract of sale or foreclosed the mortgage on the automobile in question is precisely because it brought suit for specific performance, and won, in the pre-war Civil Case No. 58043.chanroblesvirtualawlibrarychanrobles virtual law library

There is likewise no merit in the contention that the pre-war judgment had already prescribed. Said judgment was entered on December 4, 1940, and on July 14, 1941, a writ of execution was issued. Respondent company took no further step to enforce the judgment until May 19, 1954, on which date, respondent scheduled two (2) parcels of land owned by the petitioners for sale at public auction pursuant to the writ of July 14, 1941. From the entry of the judgment to May 19, 1954, a period of 13 years, 5 months and 15 days had elapsed. From this term we must deduct the period covered by the debt moratorium under Executive Order No. 32 (which applied to all debts payable within the Philippines), from the time the order took effect on March 10, 1945, until it was partially lifted by Republic Act No. 342 on July 26, 1948.chanroblesvirtualawlibrarychanrobles virtual law library

Deducting the period during which Executive Order No. 32 was in force, which is 3 years, 4 months and 16 days, from 13 years, 5 months and 15 days, the period covered from the entry of the pre-war judgment to the time respondent company attempted to sell the levied properties at auction, there is still left a period of 10 years and 29 days. But as held in Talens vs. Chuakay & Co., G.R. No. L-10127, June 30, 1958, this Court may take judicial notice of the fact that regular courts in Luzon were closed for months during the early part of the Japanese occupation until they were reconstituted by order of the Chairman of the Executive Commission on January 30, 1942.³ This interruption in the functions of the courts has also been held to interrupt the running of the prescriptive period (see also Palma vs. Celda, 81 Phil. 416). That being the case, respondent company could not be barred by prescription from proceeding with the execution sale pursuant to the levy and writ of execution issued under the pre-war judgment, considering that even the minimum period of from December 8, 1941, the outbreak of the Pacific War to January 30, 1942 is already a term of one (1) month and 23 days.chanroblesvirtualawlibrarychanrobles virtual law library

Petitioners raised the issue whether or not the pre-war writ of execution and levy may still be enforced by sale of the levied property after the lapse of the five-year period within which a judgment may be executed by motion. On this point, this Court has held:

We are of the opinion that a valid execution issued and levy made within the period provided by law may be enforced by a sale thereafter. . . . The sale of the property by the sheriff and the application of the proceeds are simply the carrying out of the writ of execution and levy which when issued were valid. This rests upon the principle that the levy is the essential act by which the property is set apart for the satisfaction of the judgment and taken into custody of the law, and that after it has been taken from the defendant, his interest is limited to its application to the judgment, irrespective of the time when it may be sold (Southern Cal. L. Co. vs. Hotel Co., 94 Cal. 217, 222). (Government of P.I. vs. Echaus, 71 Phil. 318)..

The case of Ansaldo vs. Fidelity and Surety Company of the Philippine Islands, G.R. No. L-2378, April 27, 1951, invoked by the petitioners, is not in point, for there the judgment creditor attempted to carry out the writ of execution 10 years after entry of judgment. As correctly observed by the appellate court below, both cited cases -

. . . affirm the fundamental principles that a valid judgment may be enforced by motion within five years after its entry, and by action after the lapse of said period but before the same shall have been barred by any statute of limitations, and that a valid execution issued and levy made within the five-year period after entry of the judgment may be enforced by sale of the property levied upon thereafter, provided the sale is made within ten years after the entry of the judgment.

The petitioners should, however, be credited the amount of P409.75 which the respondent Manila Motor Company actually received from the Philippine War Damage Commission on account of the car of Gaudencio Quiambao that had been seized from it by the enemy occupant during the war. This should reduce the principal amount still due the respondent from the petitioners to the sum of P1,542.72.chanroblesvirtualawlibrarychanrobles virtual law library

IN VIEW OF ALL THE FOREGOING, the judgment of the Court of Appeals appealed from is affirmed, with costs against petitioners.chanroblesvirtualawlibrarychanrobles virtual law library

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Paredes, Dizon and De Leon, JJ., concur.
Barrera, J., took no part.

Endnotes:

¹ The provision reads:chanrobles virtual law library

"In a contract for the sale of personal property payable in installments, failure to pay two or more installments shall confer upon the vendor the right to cancel the sale or foreclose the mortgage if one has been given on the property, without reimbursement to the purchaser of the installments already paid, if there be an agreement to this effect."chanrobles virtual law library

² The paragraph reads:chanrobles virtual law library

"However, if the vendor has chosen to foreclose the mortgage he shall have no further action against the purchaser for the recovery of any unpaid balance owning by the same, and any agreement to the contrary shall be null and void."chanrobles virtual law library

³ In Alcantara vs. Chico, 49 O.G. 150, the Court of Appeals estimated that in Bulacan, courts were not opened for nearly five (5) months.