City of Manila V CA

11/9/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 072
98 SUPREME COURT REPORTS ANNOTATED

City of Manila vs. Court of Appeals
*
No. L-35253. July 26, 1976.
CITY OF MANILA, petitioner, vs. COURT OF APPEALS and

METROPOLITAN THEATER COMPANY, respondents.
Appeals; Execution; The “ good reasons” mentioned by the statute for

execution pending appeal are addressed to the discretion of the court.—
Even though the element that gives validity to an execution pending appeal
is the existence of good reasons in support thereof, the statute, nevertheless,
does not determine, enumerate, or give examples of what may be considered
good reasons to justify execution. What these good reasons are must,
therefore, necessarily be addressed to the discretion of the court.
Same; Same; Judges; In exercise of a judge’s discretion, the judge must
be free to act in accordance with his own conscience and by a sense of
justice and equity.—Inasmuch as the issuance of the writ of execution
depends on the discretion of the trial court, such issuance must necessarily
be controlled by the judgment of the judge in accordance with his own
conscience and by a sense of justice and equity, free from the control of
another’s judgment or conscience. It must be so for discretion implies the
absence of a hard and fast rule.
Same; Same; Trial court retains discretion to order immediate
execution even if supersedeas bond filed by defeated party, but there must be
compelling and special reasons therefor.—The trial court retains its
discretion to issue an order of immediate execution pending appeal even
when the losing party posts a supersedeas bond to stay execution. It is
necessary, however, in order that the trial court may disregard the
supersedeas bond, that there be special and compelling reasons justifying
immediate execution.
Same; Same; Insolvency of defeated party a good and special reason
for execution pending appeal.—It cannot be gainsaid that the insolvency of
a defeated party, where it has been clearly shown, is a good and special
reason for execution pending appeal.
Same; Same; In addition to defeated party’s insolvency, danger of
forfeiture by winning party of its valuable lots through foreclosure of
creditors of defeated party, is a good reason for immediate execution
pending appeal.—Compounding the company’s insolvency and as a result
http://www.central.com.ph/sfsreader/session/00000166f7072e0fb2f5fe62003600fb002c009e/t/?o=False 1/18
of its failure to pay its obligations, is the risk of forfeiture of the City’s
valuable lots. x x x The fact that the Company entertained
________________
* FIRST DIVISION.
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VOL. 72, JULY 26, 1976 99
said tenuous belief cannot negate the mortgagee’s right to foreclose

whenever it so desires. Neither can such belief serve as a guaranty that the
mortgagee will not foreclose nor will it bar foreclosure should it desire to.
The fact is that because the mortgagee has a right to foreclose whenever it
so chooses, the City runs the risk of losing its property given as security. As
between the City that would lose incalculably more and the Company which
would lose practically nothing in case of foreclosure, the City must take
more pains in avoiding the foreclosure.
Same; Same; Winning party’s posting of bond may be deemed a special
reason for execution pending appeal.—From what has been said, it is thus
clear that the Court of Appeals erred in not considering the City’s posting a
bond as a good and special reason to justify execution pending appeal.
Same; Same; To prevent wastage of income so that more of it can be
channelled to payment of indebtedness is a good and special reason for
execution pending appeal.—The third ground given by the trial court in the
special order of execution is that the expenses of administering the building
would be very much less if the City of Manila were in possession of the
building. The reason is that the City will not have to pay directors’ fees,
officers’ salaries, salaries and wages of employees, and legal and audit fees,
since the City of Manila has already the necessary facilities, personnel and
employees to maintain and administer the building. x x x We do think that
under the facts, circumstances and equities in the instant case, to prevent
such wastage of income so that considerably more of the income can be
channelled to the payment of the indebtedness is a compelling reason to
justify immediate execution.
PETITION for certiorari from the decision of the Court of Appeals.
The facts are stated in the opinion of the Court.

B. T. Dayaw, S. M. Santiago, Jr. & Associates for petitioner.
Jalandoni, Jamir Associates for respondent Company.
CASTRO, C.J.:
This is an appeal by way of certiorari from the decision of the Court

of Appeals dated June 20, 1972 in GR-SP-00707-R, annulling the
special order of execution of September 30, 1971 and the writ-issue-
order of December 29, 1971 in civil cases 78845 and 79907 of the
Court of First Instance of Manila. This
100

Court resolved to consider this appeal as a special civil action.

The petitioner City of Manila (hereinafter referred to as the City),
commenced on July 2, 1968 an action for unlawful detainer against
the private respondent Metropolitan Theater Company (Company,
for short) in civil case 172062 of the City Court of Manila, which,
after due hearing, dismissed the case. From this dismissal the City
appealed on December 16, 1969 to the Court of First Instance of
Manila where the case was docketed as civil case 78845.
On January 9, 1929 the City and the Company entered into an
agreement whereby for and in consideration of P1.00 the former
sold, assigned and transferred to the latter three parcels of land with
a total area of 8,343.40 square meters; that the building which the
Company would construct thereon would be principally devoted to
theatrical performances; that the Company was authorized to borrow
money and mortgage the property as security; that upon completion
of the theater, the Company would reconvey to the City the lots and
building, subject to such encumbrances as might have been imposed
thereon in connection with the construction of the building; that the
City after the reconveyance to it of the property, would execute a
contract of lease of the same property in favor of the Company for a
period of 99 years at a yearly rental of P100 and the Company
would pay annually the necessary amount to meet the obligations
contracted for the construction of the building until they are fully
paid; and that upon the termination of the lease; the Company would
return to the City the leased premises and the building.
The Company had borrowed as of December 10, 1931 the total
amount of P700,000 from the El Hogar Filipino, secured by a
mortgage over the parcels of land involved in the agreement
between the City and the Company.
On December 10, 1931 the City and the Company entered into
and executed a contract whereby the latter, for and in consideration
of P1.00, re-sold, re-assigned, re-transferred and re-conveyed to the
former the parcels of land together with the theater building
constructed thereon. Pursuant to the agreement the City
subsequently leased the same to the Company.
Ravaged during the last World War, the Metropolitan Theater
Building could no longer be devoted to theatrical performances.
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VOL. 72, JULY 26, 1976 101

The City then notified the Company of the termination of the

contract and demanded that the latter vacate and turn over the
premises to the former. The Company refused to do so; the City then
filed an ejectment suit.
On March 19, 1970, during the pre-trial of civil case 78845, the
presiding judge of Branch XXIII of the Court of First Instance of
Manila suggested to the City the filing of another complaint to
recover possession of the land and building involved in the unlawful
detainer case.
On May 29, 1970 the City filed a complaint for rescission of
contract with receivership, docketed as civil case 79947, which the
City asked in an ex parte motion to be consolidated with the
appealed case 78845. On June 1, 1975 the trial court approved the
consolidation.
After a joint trial of the appealed case and civil case 79947, the
Court of First Instance of Manila rendered on August 5, 1971 its
decision declaring, among others, that the City is entitled to recover
from the Company the possession of the Metropolitan Theater
Building and the three lots on which it was constructed, and ordering
the Company to deliver the possession thereof to the City.
On August 9, 1971 the City filed a motion for execution of the
decision based on Section 8 of Rule 70 of the Rules of Court relative
to judgment in illegal detainer and forcible entry cases. On August
20, 1971 the Company filed its opposition to the said motion,
contending that the consolidated actions had become an accion
publiciana which could not be the subject of a motion for immediate
execution under Section 8 of Rule 70 of the Rules of Court.
On August 23, 1971 the Company filed its notice of appeal and
cash bond, and on August 25, 1971 its record on appeal.
On September 1, 1971 the City filed an amended motion for
execution, reiterating its ground for execution pending appeal under
Section 8, Rule 70 of the Rules of Court, and adding another ground,
which is the alleged “dilatory tactics and insolvency” of the
Company, under Section 2 of Rule 39 of the Rules of Court. On
September 24, 1971 the Company filed its opposition to the
amended motion, denying the allegation that it is insolvent and that
its appeal was intended merely to delay, and praying that, in the
event that the trial court should favorably consider the execution
pending appeal under Rule 39 of the Rules of Court, it be allowed to
post a supersedeas bond to
102

stay the execution under Section 3 of said Rule 39. On September

30, 1971 the trial court issued a special order for the execution of its
judgment dated August 5, 1971, upon the filing by the City of a
bond in the amount of P30,000, pursuant to the provisions of Section
2 of Rule 39 of the Rules of Court.
On October 4, 1971 the Company filed an urgent motion for
reconsideration, contending that the City had no valid ground for
execution pending appeal under Section 2 of Rule 39 of the Rules of
Court, and reiterating its offer to post a suspersedeas bond.
On December 29, 1971 the trial court issued an order denying the
motion for reconsideration, approving the bond filed by the City, and
directing the implementation of the execution order of September
30, 1971.
The Company then filed on January 6, 1972 with the respondent
Court of Appeals a special civil action for certiorari and prohibition,
docketed as GR-00707-R, for the annulment of the special order of
execution dated September 30, 1971 and the writ-issue-order of
December 29, 1971. The respondent Court, in its resolution dated
January 11, 1972, granted ex parte the writ of preliminary injunction
applied for by the Company to stay the enforcement of the orders
complained of, upon the filing of a P2,000 bond, and required the
City to answer the petition.
The City moved to have the writ of injunction dissolved, pointing
out that the bond was insufficient and that the act sought to be
restrained had already become fait accompli. The motion was
denied; the City then filed its answer.
The respondent Court rendered its decision on June 20, 1972
granting the writ of certiorari and prohibition, setting aside the
special order of execution of September 30, 1971 and the writ-issue-
order dated December 29, 1971 of the trial court, and made
permanent the preliminary injunction theretofore issued. From the
said judgment, the City interposed this appeal (which this Court has
considered as a special civil action), claiming that the respondent
Court of Appeals erred in disturbing the findings of fact of the trial
court which are supported by substantial evidence and substituting
therefor its own conclusions which are based on speculations,
surmises and conjectures, or which are manifestly mistaken or
absurd; and that the respondent Court used the office of the writ of
certiorari and prohibition to set aside the findings of fact and
conclusions made by the trial court in the exercise of its jurisdiction.
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VOL. 72, JULY 26, 1976 103
In its answer, the Company contends that the review sought must
hinge solely on whether or not the Court of Appeals has committed
errors of jurisdiction or grave abuse of discretion, as distinguished
from mere errors of judgment; that the first ground relied upon in the
petition raises a question of fact inasmuch as it seeks a review of the
findings of fact of the Court of Appeals; and that the second ground
is devoid of merit since the Court of Appeals is vested by law with
jurisdiction to issue writs of certiorari and prohibition in aid of its
appellate jurisdiction and can review the order of execution of the
trial court pending appeal. It likewise refuted the arguments adduced
by the petitioner in support of the errors allegedly committed by the
respondent Court, and prayed for the dismissal of the petition.
The cardinal issue in this case is whether or not the respondent
Court of Appeals committed grave abuse of discretion when it set
aside the special order of execution issued by the trial court pending
appeal. The petitioner’s complaint that the Court of Appeals made
use of the writ of certiorari to set aside the order of execution would
hardly require discussion, for it is settled that it can do so provided
the trial
1
court committed a grave abuse of discretion in issuing the
order.
Section 2 of Rule 39 of the Rules of Court which enumerates the
conditions in order that a judgment may be executed before the
expiration of the time to appeal is hereunder quoted:
“On motion of the prevailing party with notice to the adverse party the court
may, in its discretion, order execution to issue before the expiration of the
time to appeal, upon good reasons to be stated in a special order. If a record
on appeal is filed thereafter, the motion and the special order shall be
included therein.”
Of the three conditions required (to wit: (a) there must be a motion
by the prevailing party with notice to the adverse party; (b) there
must be good reasons for issuing execution; and (c) the good reasons
must be stated in a special order), only the existence of good reasons
is disputed.
Even though the element that gives validity to an execution
pending appeal is the existence of good reasons in support thereof,
the statute, nevertheless, does not determine,
________________
1 Go Lea Chu vs. Gonzales, L-23687, February 26, 1968, 22 SCRA 766.
104

enumerate, or give examples of what may be considered good

reasons to justify execution. What these good reasons are must,
therefore, necessarily be addressed to the discretion of the court.
Inasmuch as the issuance of the writ of execution depends on the
discretion of the trial court, such issuance must necessarily be
controlled by the judgment of the judge in accordance with his own
conscience and by a sense of justice and equity, free from the control
of another’s judgment or conscience. It must be so for discretion
implies the absence of a hard and fast rule. This Court has said that
discretion is the power exercised by a court to determine questions
arising in the trial of a case to which no strict law is applicable, but
which from their nature and the circumstances of the case, are
2
controlled by the personal judgment of the court. It is the power
which the law confers on public officials to act officially under
certain circumstances in accordance with their own judgment or
3
conscience.
The discretion given by statute to issue execution pending appeal
is not however unconfined, vagrant, absolute, and arbitrary. Rather,
it is sound discretion, for the court may grant such execution only
when there are good reasons therefore, and which are to be stated in
a special order. If in the mind of the court, taking into consideration
the facts and circumstances surrounding the case, good reasons
exist, the exercise of the power to issue immediate execution of the4
judgment cannot be considered as grave abuse of discretion.
Provided there are good reasons for execution according to the
judgment of the trial judge, such judgment should generally not be
interfered with, modified, controlled, or inquired into by the
appellate court; the latter should generally not substitute its way of
thinking for that of the trial court, otherwise, the discretionary power
given to the trial court would have no meaning. The appellate court
may, however, interfere with that discretion lodged in the trial court
5
only in case of grave abuse
________________
2 Lamb vs. Phipps, 22 Phil. 456, 489 (1912); Gregorio Araneta, Inc. vs. Rodas, 81
Phil. 506, 508 (1948).
3 Lamb vs. Phipps, loc. cit.
4 Scherer vs. Quicho, October 26, 1962, 59 O.G. 4226 (1962).
5 Padilla vs. Court of Appeals, L-31569, Sept. 28, 1973, 53 SCRA 168, 175. See
also Astraquillo vs. Javier, L-20034, Jan. 30, 1965, 13 SCRA 125, 130, citing Calvo
vs. Gutierrez, 4 Phil. 203; Case vs. Metropole Hotel, 5 Phil. 49; Gamay vs. Gutierrez
David, 48 Phil. 768;
105
VOL. 72, JULY 26, 1976 105
or in case conditions have so far changed since the issuance of the

order as to necessitate the intervention of the appellate court to
protect the interests of the parties against contingencies which were
not or could have not been contemplated by the trial judge at the
6
time of the issuance of the order.
The trial court retains its discretion to issue an order of
immediate execution pending appeal even when the losing party
7
posts a supersedeas bond to stay execution. It is necessary, however,
in order that the trial court may disregard the supersedeas bond, that
there be special and compelling reasons justifying immediate
8
execution. In the case before us where the Company offered to post
a supersedeas bond to stay immediate execution, the basic issue
raised can be resolved by determining whether there are good,
special and compelling reasons justifying the questioned order of
execution. In such determination, the facts and circumstances which
impelled the court to act as it did and its own assessment of the
equities are entitled to considerable weight, for the issuance
9
of the
order of immediate execution is within its sound discretion.
1. The first ground given by the trial court to justify immediate
execution contains three concatenated special reasons, namely, the
Company’s insolvency, the risk of forfeiture of the City’s lots, and
the prodigal, if not anomalous, wastage of the rental income of the
Theater Building: Said the trial court:
________________
Buenaventura vs. Pena, 78 Phil. 795; Ong Sit vs. Piccio, 78 Phil. 785; Naredo vs.
Yatco, 80 Phil. 220; Federation of United Namarco Distributors vs. National
Marketing Corp., et al. and Namarco Marketing Corp. vs. Tan, et al., L-17819 and L-
16678, March 31, 1962; Ledesma vs. Teodoro, 98 Phil. 232, 236 (1956).
6 Calvo vs. Gutierrez, 4 Phil. 203 (1905); Naredo vs. Yatco, 80 Phil. 220, 223
(1948).
7 Sec. 3, Rule 39, Rules of Court; National Waterworks and Sewerage Authority
vs. Catolico, L-21705, April 27, 1967, 19 SCRA 980, 984; De Leon vs. Soriano, 95
Phil. 806 (1954); Rodriguez vs. Court of Appeals, 105 Phil. 777, 782 (1959).
8 Rodriguez vs. Court of Appeals, 105 Phil. 777, 782 (1959); De Leon vs. Soriano,
95 Phil. 806,813 (1954).
9 Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 175-
176.
106

“It is not disputed that the four (4) parcels of land on which the
Metropolitan Theater Building was constructed are owned by plaintiff City
of Manila; that said parcels of land with a total area of 8,343.40 square
meters covered by Transfer Certificates of Title Nos. 368, 36813, 7138 and
36818 were mortgaged on December 10,1931 in favor of El Hogar Filipino
to answer for a principal indebtedness of P700,000.00 which was used for
the construction of the Metropolitan Theater building now object of this
case between the plaintiff and the defendant. After the building was severely
damaged by the last war, the defendant Metropolitan Theater Company did
not pay to El Hogar Filipino the annual amortizations provided for in the
mortgage contract. Defendant has not even paid in full the annual interests
due on the loan. The balance sheet of the defendant shows that as of June
30, 1968 the indebtedness to the El Hogar Filipino was P721,547.82 (Exh.
R). The income from the Metropolitan Theater Building derived from the
rents collected by the defendant from the various tenants for the years 1966-
67 averaged P104,342.00 a year (Exh. C-2). Of this income only P49,045.92
was paid to El Hogar Filipino. The rest of the income was disbursed for
overhead expenses including the directors’ fees, officers’ salaries, salaries
and wages of employees, legal and audit fees, maintenance and repair (Exh.
R-1, sheet 2, Exh. R-2, sheet 4). There are no prospects that the
indebtedness to El Hogar Filipino can ever be paid if the defendant
continues possessing the Metropolitan Theater Building as it has done for
the past 26 years. At any time if chooses to, El Hogar Filipino may exercise
its right to foreclose the mortgage because of defendant’s failure to pay the
annual amortizations on the mortgage loan. It is not right, fair or just that
defendant Metropolitan Theater Company should be allowed to continue
possessing the property in litigation during the pendency of this case on
appeal when the highly valuable parcels of land on which the building in
dispute is constructed belongs to the plaintiff City of Manila, which lands
run the risk of being foreclosed at any time by the mortgagee El Hogar
Filipino because of defendant’s failure to pay the annual amortizations
agreed upon in the mortgage contract..
“The City of Manila has made it of record that it is willing to pay the
mortgage debt to El Hogar Filipino. It has to do so to prevent a very
valuable property from being foreclosed. The City of Manila is in a very
much better financial position than the defendant to pay the mortgage
obligation. The fact that El Hogar Filipino has not chosen up to now to
exercise its right of foreclosure does not change the fact that there is danger
of foreclosure and that El Hogar Filipino may exercise its right to do so at
any time. If El Hogar Filipino forecloses the mortgage, the City of Manila
loses four (4) parcels of valuable property containing a ‘total area of
8,343.40 square meters. The defendant does not stand to lose much because
according to its managing director all the income that it derives from the
building is
107
VOL. 72, JULY 26, 1976 107
eaten up by administration expenses, maintenance expenses, salaries of

officers and employees, partial payment of interests to El Hogar Filipino and
other necessary expenses. The City of Manila is entitled in justice and
equity to the immediate possession of the property in litigation so it can take
steps to protect its interests on the building and the land and to prevent
further damage.
“It has been held that when judgment is in favor of the plaintiff it may be
executed immediately to prevent further damage to him caused by the loss
of his possession (Sumintac vs. Court, 74 Phil. 445).”
In the decision complained of, the Court of Appeals discarded the

first ground relied upon by the trial court, to wit, that the Company
is insolvent. Said the Court of Appeals:
“From the evidence of respondent City of Manila that the income of the
Metropolitan Theater Building for the years 1966-67 averaged P104,342.00
a year and of that income only P49,045.92 was paid to El Hogar Filipino,
and that as of June 30, 1968, the indebtedness to the latter was P721,547.82,
respondent court expressed the view that ‘There are no prospects that the
indebtedness to El Hogar Filipino can ever be paid if the defendant
(Metropolitan Theater Company) continues possessing the Metropolitan
Theater Building x x x. At any time it chooses to, El Hogar Filipino may
exercise its right to foreclose the mortgage because of defendant’s failure to
pay the annual amortizations of the mortgage loan.’
“Be that as it may, it does not clearly show the insolvency of the
Metropolitan Theater Company. It may have the means, other than the
income from the theater building, with which to meet its financial
obligations.”
If the facts from which the trial court inferred the Company’s
insolvency were only those recited by the Court of Appeals in the
aforequoted paragraphs then we cannot but agree with the appellate
court that the insolvency of the Company has not been clearly
shown. But the Court of Appeals has omitted, and consequently
failed to appreciate, many other facts recited in the special order of
execution, which clearly show that the Company is insolvent. It
omitted and disregarded the fact that the Company could not even
pay in full the annual interest due on the mortgage for 26 years, as a
consequence10of which the original loan of P700,000 had increased to
P721,547.82 It
________________
10 Amended Answer of City in CA-G.R. SP-00707-R, p. 4; Record, p. 60.
108

likewise omitted and failed to consider other factors appearing in the

other portions of the record, to wit, that the balance sheet of the
Company shows a total deficit of P1,261,851 as of December 31,
11
1967, as against the book value of its capital of only P77,419.58;
that the Company has incurred in arrears in monthly dues and
penalties that ran up to P439,019.11 from February 1967 to June
12
1968, inclusive; that, as stated by the trial court, “There are no
prospects that the indebtedness to El Hogar Filipino can ever be paid
if the Defendant continues possessing the Metropolitan Theater
Building as it has done for the past 26 years after the last war.”
The Company, however, contends that the trial court has not
categorically found that the Company is insolvent. This contention
cannot be accorded credit inasmuch as the insolvency of a party may
13
be inferred from a number of circumstances on record. If
insolvency is the inability or the lack of means to pay one’s debt, or
the condition of a person who is unable to pay his debts as they fall
14
due, then there is no doubt that the Company is insolvent for it has
been unable to pay not only the amortizations on the principal but
also the full interests on the loan as they fell due, and that it is not in
a position to pay the mortgage debt.
The Court of Appeals, however, not only disregard the facts on
record when it stated that the insolvency of the Company has not
been clearly shown, but also aggravated its error when it conjectured
that the Company “may have means, other than the income from the
theater building, with which to meet its financial obligations.” The
mere possibility that the Company may have means to pay its
obligations cannot outweigh the facts on record that clearly show
that the Company is insolvent. The Court of Appeals, in setting
aside the conclusion of the trial court on this matter of the
Company’s insolvency, which, as has been shown, is based on the
facts on record, and substituting therefor its conjecture, committed
grave abuse of discretion, for “the findings of fact of the lower court
cannot be disregarded
________________
11 Ibid.
12 Ibid.
13 Astraquillo vs. Javier, L-20034, January 30, 1965, 13 SCRA 125, 132.
14 Munion vs. Vic Corporation, May 28, 1959, 59 O.G. 9683, 9687, citing Dewey
vs. St. Albans Trust Co., 48 Am. Rep. 803.
109
VOL. 72, JULY 26, 1976 109

15
except in the absence of substantial evidence to support it.” This
Court has likewise said that “it is a fair statement of the governing
principle to say that the appellate function is exhausted when there is
found to be a rational basis for the result reached by the trial
16
court.”
It cannot be gainsaid that the insolvency of a defeated party,
where it has been clearly shown, is a good and special reason for
17
execution pending appeal.
Compounding the Company’s insolvency and as a result of its
failure to pay its obligations, is the risk of forfeiture of the City’s
valuable lots. The parcels of land on which the Metropolitan Theater
Building was constructed are the City’s property, and that the
Company, by agreement with the City, mortgaged these lots in favor
of the El Hogar Filipino to answer for the principal indebtedness of
P700,000 used for the construction of the Metropolitan Theater
Building. Inasmuch as the Company has failed for 26 years after
World War II to pay in full even the interests on the indebtedness, let
alone the amortizations on the principal, the El Hogar Filipino has
the right to foreclose the mortgage. Should the mortgage be
foreclosed the City will lose its three parcels of land with a total area
of 8,343.40 square meters, but the Company, on the contrary, will
not stand to lose much, for the money it spent in the construction of
the Theater was borrowed from the mortgagee, and the income it
derives from the building, according to the Company’s managing
director, is totally eaten up by administration expenses, maintenance
expenses, salaries of officers and employees, sundry expenses and
partial payments of the interest on the loan.
The Court of Appeals, however, rejected this ground, stating that
the danger of foreclosure; according to the belief of the Company, is
very remote. It said:
“The Metropolitan Theater Company entertained a strong belief that the

danger that El Hogar Filipino might foreclose on the property ‘is very
remote,’ and cited the fact that it ‘has not even been ever hinted.’ ”
________________
15 De la Cruz vs. Dollete, L-17932, May 30, 1962, 5 SCRA 257, 261.
16 Jose vs. Santos, L-25510, October 30, 1970, 35 SCRA 538, 548, citing Corliss
vs. Manila Railroad Company, 27 SCRA 674, 678 (1969).
17 Astraquillo vs. Javier, L-20034, January 30, 1965, 13 SCRA 125, 131; Padilla
vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168.
110
The fact that the Company entertained said tenuous belief cannot
negate the mortgagee’s right to foreclose whenever it so desires.
Neither can such belief serve as a guaranty that the mortgagee will
not foreclose nor will it bar foreclosure should it desire to. The fact
is that because the mortgagee has a right to foreclose whenever it so
chooses, the City runs the risk of losing its property given as
security. As between the City that would lose incalculably more and
the Company which would lose practically nothing in case of
foreclosure, the City must take more pains in avoiding the
foreclosure.
2. The second ground given by the trial court to justify
immediate execution is the City’s having put up a bond of P30,000
to answer for the return of the property and damages in the event
that it be finally adjudicated on appeal that the Company is entitled
to the possession of the property. The Court of Appeals did not
likewise consider this as a good reason for execution pending appeal
on the ground that the action is not for a sum18
of money and that in
the case of Rodriguez vs. Court of Appeals the filing of the bond
was not by itself considered a good reason, for the dilatory nature of
the appeal was also considered by this Court.
It is true that in Rodriguez vs. Court of Appeals, this Court
considered, besides the filing of the supersedeas bond, the dilatory
nature of the appeal. That does not mean, however, that the filing of
the supersedeas bond alone or the dilatory nature of the appeal
alone, is not in itself a good and special reason for execution
pending appeal. In the very same case relied upon by the Court of
Appeals, this Court approvingly quoted Moran, thus:
“The element that gives validity to an order of execution is the existence of

the good reasons if they may be found distinctly somewhere in the record.
In this connection, it has been held that the filing of bond by the successful
party is a good reason for ordering execution. That the appeal is being
taken for purposes of delay is also a good reason. (Rodriguez v. Court of
19
Appeals, 105 Phil. 777, 780-781).”
20
In Hacienda Navarra, Inc. vs. Labrador the filing of a bond
________________
18 105 Phil. 777, 780-781.

19 Comments on the Rules of Court, Vol. I, pp. 539-540, 1957 edition.
20 65 Phil. 536.
111
VOL. 72, JULY 26, 1976 111

alone was considered a good and special reason for ordering

execution pending appeal. Said this Court:
“The filing of the bond required by the respondent judge in the order sought
to be annulled constitutes a special ground authorizing the court to issue a
writ of execution pending appeal, in conformity with the provisions of
section 144 of the Code of Civil Procedure.”
21
In People’s Bank vs. San Jose this Court also held that the filing of
a bond by the prevailing party is a good and special reason for
22
ordering execution pending appeal.
The Court of Appeals also expressed the fear that should the trial
court’s judgment be reversed on appeal the damages that may arise
from its execution pending appeal may not be fully compensated,
without however stating the nature of the said damages. Will said
damages not be the fair and reasonable value of the use and
occupation of the property or the amount of rentals received by the
Company from the building? Is the P30,000 bond not sufficient for
said rentals? If it is insufficient, should the Court of Appeals not
have ordered the amount to be increased?
From what has been said, it is thus clear that the Court of
Appeals erred in not considering the City’s posting a bond as a good
and special reason to justify execution pending appeal.
3. The third ground given by the trial court in the special order of
execution is that the expenses of administering the building would
be very much less if the City of Manila were in possession of the
building. The reason is that the City will not have to pay directors’
fees, officers’ salaries, salaries and wages of employees, and legal
and audit fees, since the City of Manila has already the necessary
facilities, personnel and employees to maintain and administer the
building. This ground was rejected, the Court of Appeals saying that
“we cannot bring ourselves to believe that it is justifiable reason for
the immediate execution of the judgment of a respondent court
Moreover it is speculative, without any proof whatsoever.”
It will be noted that the Court of Appeals did not doubt the fact
that more than one-half of the average yearly income of the building
is spent for directors’ and employees’ salaries, fees and services. Out
of the yearly income of P104,342 only P49,045.92 was paid to El
Hogar Filipino. In the appreciation of the trial
________________
21 96 Phil. 895.
22 See Rodriguez vs. Court of Appeals, 105 Phil. 777, 781.
112

judge, although he did not explicitly say so, such expenses were a
wastage of the income, for if it were not so, why did the trial court
say that “There are no prospects that the indebtedness to El Hogar
Filipino can ever be paid if the defendant continues possessing the
Metropolitan Theater Building as it has done for the past 26 years
after the last war”? The Court of Appeals hesitated to say whether to
prevent this wastage was a good reason for execution pending
appeal.
We do think that under the facts, circumstances and equities in
the instant case, to prevent such wastage of income so that
considerably more of the income can be channelled to the payment
of the indebtedness is a compelling reason to justify immediate
execution.
Pursuant to the contract between the City and the Company, the
latter, in the words of the Court of Appeals, “is obliged to pay
annually the necessary amount to meet the obligations contracted for
the construction of the building until they are fully paid.” It appears
that the Company’s income from the building is the only source of
what it pays to the El Hogar Filipino, for in its memorandum, the
Company says that it is the duty of the petitioner to repair the
building so that it could “generate enough income to cover fully the
amortizations due to El Hogar Filipino as they fell due.” Ordinary
diligence and prudence dictate that whatever income is derived from
the theater should be primarily and principally devoted to the
payment of the indebtedness. The wastage of the income will
ultimately result in non-payment of the indebtedness, and this will
be to the prejudice and damage of the City which must pay the
obligation or the outstanding balance thereof, if it does not want to
lose its lots which were mortgaged. If the present possessor cannot
channel such income to the payment of the indebtedness, should not
the City which ultimately has to pay the indebtedness if the
Company fails to pay it not be given an opportunity to do so? Would
it be equitable to allow the present possessor to waste the income,
and let the City ultimately suffer tremendous damages on account of
such waste?
The Company, to support the decision of the Court of Appeals,
likewise contends that the refusal of the trial court to accept the
supersedeas bond to stop execution is sufficient to taint the order of
execution with arbitrariness and constitutes grave abuse of
discretion.
We do not think so. It is well settled that even upon the filing of
the supersedeas bond, the losing party is not entitled as a
113
VOL. 72, JULY 26, 1976 113
matter of right to a suspension of the execution. Section 3 of Rule 39

of the Rules of Court merely empowers the Court to order such
23
suspension in the exercise of its sound discretion. The acceptance
and approval of a supersedeas bond to stay execution lies within the
24
discretion of the court. Hence, the trial court may disregard the
supersedeas bond and order immediate execution provided there are
special and compelling reasons justifying execution, which reasons
25
obtain in this case.
Another reason given to support the decision complained of is
that execution pending appeal cannot be justified because the
supposed right of the City to immediate repossession of the property
to prevent further loss caused by dispossession is the core of the
controversy and the merit of such claim is under appeal. Anent this
matter suffice it to say that in determining whether execution should
be stayed or not, the merits of a case, which should not be
determined in advance of the appeal, are of no moment Thus this
26
Court said in Mapua vs. David that:
“The reason by petitioner to maintain that the stay granted by the respondent
court is a grave abuse of discretion is the merits of their own case. They
allege that defendant has absolutely no right to possession and has,
therefore, no defense whatsoever. But the merits of the case should not be
determined at this state of the proceedings in advance of the appeal taken by
both parties from the judgment rendered by respondent court in the principal
case.”
In conclusion, all the reasons given by the trial court in ordering the
execution of its order pending appeal, despite the Company’s offer
to file a supersedeas bond to stay execution, are compelling enough
27
to warrant immediate execution.
If the same cogent reasons are considered in the light of the fact
that the Metropolitan Theater building is no longer devoted to the
primary purpose for which it was intended, that is, to theatrical
performances, they would outweight the security offered by the
supersedeas bond which was rejected by the trial court.
________________
23 National Waterworks and Sewerage Authority vs. Catolico, L-21705, April 27,
1967,19 SCRA 980.
24 Rodriguez vs. Court of Appeals, 105 Phil. 777, 782.
25 Rodriguez vs. Court of Appeals, 105 Phil. 777, 782; De Leon vs. Soriano, 95
Phil. 806, 813.
26 77 Phil. 131, quoted in 2 Francisco, Civil Procedure, 1966, p. 615.
27 See De Leon vs. Soriano, 95 Phil. 806, 817.
114

We hold that the Court of Appeals, in substituting its judgment for

the statutory discretion soundly and judiciously exercised by the trial
court in issuing the questioned Special Order of Execution, acted
with grave abuse of discretion.
ACCORDINGLY, the decision of the Court of Appeals dated
June 20, 1972 in G.R. SP-00707-R is set aside, and the order of the
trial court of December 29, 1971 directing the implementation of its
execution order of September 30, 1971, is maintained, with costs
against the Company.
Teehankee, Makasiar, Muñoz Palma and Martin, JJ., concur.
Decision set aside, and order maintained.
Notes.—The writ of execution is not the proper resort for the

payment of the debt of the deceased in connection with a money
judgment that became final or for the payment of debts and expenses
of administration. (Paredes vs. Moya, 61 SCRA 526).
Courts have jurisdiction to entertain motions to quash previously
issued writs of execution because they have the inherent power, for
the advancement of the cause of justice, to correct the errors of their
ministerial officers and to control their own processes. (Sandico, Sr.
vs. Piguing, 42 SCRA 322).
Courts have the duty to dismiss a suit which has all the earmarks
of a subterfuge that was resorted to for the purpose of frustrating the
execution of a judgment in an unfair labor controversy. (Cosmos
Foundry Shop Workers Union vs. Lo Bu 63 SCRA 313).
The trial court should give the defeated defendant reasonable
time to make a deposit in order to stay execution pending appeal of
an ejectment case. (Sanchez vs. Zosa, 68 SCRA 171).
The execution of a judgment with a term cannot be neutralized
by means of an action to enjoin the enforcement of a judgment. (Uy
Tina vs. Avila, 20 SCRA 37).
The rule that the winning party over ownership of land entitled
him to execution to recover possession thereof from the losing party
even in the absence of a prayer therefore in the complaint holds true
only when the matter of possession is not otherwise litigated
separately from that of ownership. Thus, where party is legally in
possession of the property either with the consent of the owner or
through some legal means, the declaration of ownership in the action
for reconveyance does not
115
VOL. 72, JULY 26, 1976 115
Centeno vs. Workmen’s Compensation Commission
justify the issuance of a writ of possession even if the possessor fails

to pay the rents. (Roman Catholic Archbishop vs. De la Cruz; 30
SCRA 881).
All government funds deposited with the Philippine National
Bank by any agency or instrumentality of the government, whether
by way of general or special deposit, remain government funds and
may not be subject to garnishment or levy. (Commissioner of Public
Highways vs. San Diego, 31 SCRA 616).
——o0o——
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11/9/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 072

98 SUPREME COURT REPORTS ANNOTATED

CITY OF MANILA, petitioner, vs. COURT OF APPEALS and

Appeals; Execution; The “ good reasons” mentioned by the statute for

VOL. 72, JULY 26, 1976 99

City of Manila vs. Court of Appeals

said tenuous belief cannot negate the mortgagee’s right to foreclose

PETITION for certiorari from the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

This is an appeal by way of certiorari from the decision of the Court

100 SUPREME COURT REPORTS ANNOTATED

Court resolved to consider this appeal as a special civil action.

VOL. 72, JULY 26, 1976 101

The City then notiﬁed the Company of the termination of the

102 SUPREME COURT REPORTS ANNOTATED

stay the execution under Section 3 of said Rule 39. On September

VOL. 72, JULY 26, 1976 103

City of Manila vs. Court of Appeals

104 SUPREME COURT REPORTS ANNOTATED

enumerate, or give examples of what may be considered good

VOL. 72, JULY 26, 1976 105

City of Manila vs. Court of Appeals

or in case conditions have so far changed since the issuance of the

106 SUPREME COURT REPORTS ANNOTATED

VOL. 72, JULY 26, 1976 107

eaten up by administration expenses, maintenance expenses, salaries of

In the decision complained of, the Court of Appeals discarded the

10 Amended Answer of City in CA-G.R. SP-00707-R, p. 4; Record, p. 60.

108 SUPREME COURT REPORTS ANNOTATED

likewise omitted and failed to consider other factors appearing in the

VOL. 72, JULY 26, 1976 109

City of Manila vs. Court of Appeals

“The Metropolitan Theater Company entertained a strong belief that the

110 SUPREME COURT REPORTS ANNOTATED

City of Manila vs. Court of Appeals

“The element that gives validity to an order of execution is the existence of

18 105 Phil. 777, 780-781.

VOL. 72, JULY 26, 1976 111

alone was considered a good and special reason for ordering

112 SUPREME COURT REPORTS ANNOTATED

City of Manila vs. Court of Appeals

VOL. 72, JULY 26, 1976 113

City of Manila vs. Court of Appeals

matter of right to a suspension of the execution. Section 3 of Rule 39

114 SUPREME COURT REPORTS ANNOTATED

We hold that the Court of Appeals, in substituting its judgment for

Teehankee, Makasiar, Muñoz Palma and Martin, JJ., concur.

Decision set aside, and order maintained.

Notes.—The writ of execution is not the proper resort for the

VOL. 72, JULY 26, 1976 115

Centeno vs. Workmen’s Compensation Commission

justify the issuance of a writ of possession even if the possessor fails

© Copyright 2018 Central Book Supply, Inc. All rights reserved.

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