Case Digest: Tanongon v. Samson, G.R. No. 140889, May 9, 2002

Labor Law | Appeal 

• Felicidad Samson, Casiano A. Osin, Alberto Belbes and Luisito Venus were among the employees of Cayco Marine Service engaged in the business of hauling oil.
• Respondents filed a case against Cayco for various labor violations.
• LA: Dismissed the complaint for lack of merit.
• NLRC: Ruled in favor of respondents, ordering payment of separation pay, backwages, and leave pay.
• Labor arbiter issued a writ of execution against the company's property, including a motor tanker.
• Dorotea Tanongon filed a third-party claim asserting ownership of the motor tanker acquired after the NLRC decision for and in consideration of P1,100,000.00.
• LA: Dismissed Tanongon's claim, suspecting it was to defraud the respondents as judgment creditors.
• NLRC: Reversed on two grounds and lifted the Writ of Execution previously imposed on the subject vessel and restrained its sale.
• The power of the NLRC sheriff to execute judgments extended only to properties unquestionably belonging to the judgment debtor. 
• Alienations of property in the fraud of creditors would give rise only to rescissible contracts. 
• CA: Supported respondents' claims, stating Tanongon should have been cautious before acquiring the property and that the NLRC had the authority to enforce its decision.
• No judicial rescission was required to determine the legitimacy of the sale between Cayco and Tanongon. The sale was seen as dubious and executed to evade the execution of the NLRC's decision.

WoN a third-party claim of ownership on a levied property should not necessarily prevent execution. NO 

First Issue:

Good Faith of Petitioner

There is sufficient basis to affirm the CA finding that petitioner was a buyer in bad faith. The judgment favoring respondents against CAYCO and Olizon (for back wages, separation pay and service incentive leave pay) was rendered on July 18, 1996, and affirmed by the Second Division of this Court via its January 15, 1997 Resolution. The Writ of Execution was issued by the labor arbiter on July 24, 1997. The sale of the levied tanker, however, was made only on July 29, 1997.

Hence, the CA correctly ruled that the act of Olizon was a "cavalier attempt to evade payment of the judgment debt." She obviously got word of the issuance of the Writ and disposed of the tanker to prevent its sale on execution. Despite knowledge of these antecedents, petitioner bought the tanker barely ten days before it was levied upon on August 8, 1997.

It is not only the proximity in time that supports this finding. Under Article 1387 of the Civil Code, alienations by onerous title are presumed to be fraudulent when done by persons against whom some judgment has been rendered or some writ of attachment issued in any instance. We stress that in the present case, the Writ of Attachment has been issued, the levy already made and, as will later be discussed, the property still in the name of Olizon and CAYCO.

It is also more than coincidental that the purchase price for the tanker was P1,100,000.00, while Olizon's judgment debt to respondents amounted to P1,192,422.55.

A purchaser in good faith or an innocent purchaser for value is one who buys property and pays a full and fair price for it at the time of the purchase or before any notice of some other person's claim on or interest in it. We emphasize that one cannot close one's eyes to facts that should put a reasonable person on guard and still claim to have acted in good faith. Petitioner should have inquired whether Olizon had other unsettled obligations and encumbrances that could burden the subject property. Any person engaged in business would be wary of buying from a company that is closing shop, because it may be dissipating its assets to defraud its creditors.

Equally important, factual findings of the CA are given much weight when supported by substantial evidence. Petitioner has not given us any sufficient or cogent reason to reverse the appellate court.

Second Issue:

Necessity of Judicial Rescission

The NLRC ruled that the subject tanker could not be levied upon and sold on execution for two reasons: (1) the sheriff was acting outside his authority when he levied on properties that were not unquestionably owned by the judgment debtor; and (2) the sale of the tanker appeared to have been made to defraud creditors and, therefore, judicial rescission was required.

The CA held, in overruling the NLRC, that the Commission possessed, under Article 224 (a and b), powers necessary to implement and enforce the latter's final judgments, decisions, orders and awards. The appellate court ruled further that the disputed contract was not merely rescissible; it was simulated or fictitious and, thus, void ab initio.

We agree with the Court of Appeals. A third-party claim on a levied property does not automatically prevent execution. Under Rule 39 of the Revised Rules of Court, execution is a remedy afforded by law for the enforcement of a judgment, its object being to obtain satisfaction of the decision on which the writ is issued. In executing a money judgment against the property of the obligor, the sheriff shall levy on all properties belonging to the judgment debtor as is amply sufficient to satisfy the decision and the costs; and shall sell the same, paying to the judgment creditor as much of the proceeds as will satisfy the amount of the debt and costs.18 Sheriffs who levy upon properties other than those of the judgment debtors are acting beyond the limits of their authority.

When a third-party claim is filed, the sheriff is not bound to proceed with the levy of the property unless the judgment creditor or the latter's agent posts an indemnity bond against the claim. Where the bond is filed, the remedy of the third-party claimant is to file an independent reivindicatory action against the judgment creditor or the purchaser of the property at public auction. The NLRC should not have automatically lifted the levy and restrained execution, just because a third-party claim had been filed.

Further, judicial rescission is not necessary in the case at bar. The NLRC lifted the levy on the subject property, ruling that its sheriff could execute its judgments only on properties "unquestionably belonging to the judgment debtor." It observed that the Certificate of Ownership over the disputed vessel was in the name of the third-party claimant, herein petitioner.

Petitioner's claim of ownership over the disputed tanker is not supported by the evidence on record. The Maritime Industry Authority (Marina) administrator wrote the parties in two separate letters, which said that the registration of the disputed vessel under petitioner's name had not been effected, and that the Certificates of Ownership and Vessel Registry covering the motor tanker M/T Petron 7-C had not been released. The reasons were Marina's receipt of the Entry of Judgment issued by the Supreme Court on April 29, 1997, and the Notice of Levy/Sale on Execution of Personal Property covering the subject vessel. Under Article 573 of the Code of Commerce, the acquisition of a vessel must appear on a written instrument, which shall not produce any effect with respect to third persons if not inscribed in the Registry of Vessels. Insofar as third persons like herein respondents were concerned, the ownership of the disputed vessel remained with Olizon and CAYCO; thus, the CA correctly held that the NLRC could proceed with the levy and the sale on execution.

Third Issue:

Equal Protection of the Law

Petitioner protests that the CA gave undue importance to respondent laborers by invoking the protection of labor mandated by Article II, Section 18 of the 1987 Constitution, and Articles 4 and 221 of the Labor Code. Claiming violation of her right to equal protection of the law, she argues that she deserves social justice, as held by this Court in Guido v. Rural Progress Administration23 and Cabatan v. Court of Appeals24 which ruled that capital, too, was entitled to protection.

The contention of petitioner is untenable. She cannot be given the mantle granted to capital or management, because she does not appear to be connected in any way to the ownership or the management of CAYCO or Olizon. She is impleaded here merely as the alleged buyer of the M/T Petron 7-C. If this contention is an admission that she is a dummy for CAYCO or Olizon, then the charge of a fictitious sale to defraud judgment creditors becomes even more evident and credible.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

SO ORDERED.