Andrada v. Pilhino Sales Corp.
G.R. No. 156448 (February 23, 2011)
Facts:
On December 28, 1990, Pilhino Sales Corporation (Pilhino) filed a lawsuit against Jose Andrada, Jr. and his wife, Maxima, in the Regional Trial Court (RTC) of Davao City to recover a principal sum of P240,863.00, along with interest and incidental charges (Civil Case No. 20,489-90). The RTC issued a writ of preliminary attachment, which was executed against two trucks owned by Jose Andrada, Jr. However, the attachment was lifted after Jose posted a counter-attachment bond.
The RTC eventually ruled against Jose and Maxima, prompting Pilhino to enforce the writ of execution against the Andradas' properties instead of claiming against the counter-attachment bond, as the bond's premium had not been paid. The sheriff seized a Hino truck and sold it at a public auction, with Pilhino as the highest bidder. However, the transfer of the Hino truck to Pilhino was complicated by the fact that it had been sold to Moises Andrada, who had mortgaged it to BA Finance Corporation (BA Finance).
BA Finance subsequently sued Moises for non-payment of the loan (Civil Case No. 5117). After a favorable decision for BA Finance, a writ of execution was issued, leading to the sheriff seizing the Hino truck from Pilhino and selling it at auction, with BA Finance as the highest bidder.
In response, Pilhino filed an action in the RTC against various parties, including the Andradas and BA Finance, seeking to annul the sale of the Hino truck from Jose to Moises, the chattel mortgage between Moises and BA Finance, and the registration of the truck in Moises's name. This case was docketed as Civil Case No. 21,898-93.
Only Moises and his wife filed a responsive pleading. A compromise agreement was reached between Pilhino and Jose Andrada, Jr., leading to a partial judgment. Further proceedings continued only against Moises and BA Finance. Moises and his wife claimed they acquired the Hino truck free from any lien or encumbrance and that their acquisition was made in good faith after the preliminary attachment was lifted. BA Finance argued it had no knowledge of the allegations in Pilhino's complaint and insisted the mortgage was valid.
On March 25, 1998, the RTC dismissed the case against Moises and Clemencia Andrada, Jose Andrada, Sr., and BA Finance, citing the compromise agreement and the good faith of the parties involved. The Andradas appealed the decision, contesting the dismissal of their counterclaim and the declaration that their sale of the Hino truck was simulated.
Legal Issues:
- Should Pilhino be held liable for damages sustained by the petitioners due to the levy on execution upon the Hino truck?
- Was Pilhino guilty of bad faith in proceeding with the levy on execution?
Arguments:
Petitioners' Argument: The petitioners contended that Pilhino acted in bad faith, causing them damages by levying the Hino truck, which they claimed to have acquired in good faith and free from any encumbrance. They invoked Article 21 of the Civil Code, which addresses abuse of rights, arguing that Pilhino's actions were contrary to morals and public policy.
Respondent's Argument (Pilhino): Pilhino maintained that it acted in good faith, believing that the sale of the Hino truck to Moises was a scheme to evade obligations. The Court of Appeals (CA) found no basis for the claim of damages, concluding that the actions taken did not constitute a legal injury or wrong.
Court's Decision and Legal Reasoning:
The Supreme Court denied the petition for review, affirming the CA's decision. The Court emphasized that the appeal raised factual issues rather than legal questions, which is not permissible under Rule 45 of the Rules of Court. The Court reiterated that it does not re-examine evidence and that the findings of fact by the CA are conclusive.
The Court also addressed the elements of abuse of rights, concluding that the petitioners failed to establish that Pilhino acted in bad faith. The CA's determination that Pilhino believed the sale was a means for Jose to evade his obligations was upheld. Consequently, the petitioners' claim for damages was denied.
Regarding the request for attorney's fees, the Court ruled that the petitioners were not entitled to such fees as the element of bad faith necessary for recovery under Article 2208 of the Civil Code was not established.
Significant Legal Principles Established:
- The distinction between questions of law and questions of fact in appeals under Rule 45.
- The elements of "abuse of rights" as defined in the Civil Code, requiring a legal right exercised in bad faith with the intent to injure another.
- The principle that attorney's fees are not automatically granted and require factual, legal, and equitable justification.