G.R. No. 87140 . September 7, 1989.
NATIONAL POWER CORPORATION, petitioner, vs. HON. ARSENIO M. GONONG, Judge, RTC, Manila, Br. 8, DOMINADOR B. ADRIANO, Deputy Sheriff, ALLIED CONTROL & ELECTRIC CORPORATION, and PHILIPPINE NATIONAL BANK, respondents.

FACTS

Allied Control and Electric Corporation (ACEC) obtained a final money judgment against Batong Buhay Gold Mines, Inc. (BBGMI). To satisfy the judgment, ACEC filed an “Ex-Parte Motion for Examination of Debtor of Judgment Debtor,” alleging that the National Power Corporation (NPC) was indebted to BBGMI. The trial court granted the motion and examined an NPC official, Ariel Vinoya. His testimony revealed an arrangement where BBGMI financed the construction of a power transmission line for its exclusive use, with NPC agreeing to reimburse the cost by crediting 25% of BBGMI’s monthly power bills until fully paid. After BBGMI ceased operations, a computational balance remained, but Vinoya initially testified this was not a debt due to BBGMI but a balance of its advances for the line’s construction.
Despite this denial, the respondent judge issued an Order directing NPC to pay ACEC’s judgment from this alleged credit and ordered the garnishment of NPC’s bank deposits. NPC filed a Manifestation, arguing the court had no jurisdiction over it as a non-party and that it held no property or receivable belonging to BBGMI, as the reimbursement arrangement was contingent upon BBGMI’s continued power consumption and full amortization, which did not occur.

ISSUE

Whether the respondent judge acted with grave abuse of discretion in issuing the garnishment order against NPC, a third party alleged to be a debtor of the judgment debtor, based on a summary hearing.

RULING

Yes. The Supreme Court granted the petition for certiorari, nullified the garnishment order, and made permanent the restraining order. The Court emphasized the procedural rules governing execution against a third party. Under Section 45, Rule 39 of the Rules of Court, a judgment creditor may examine a person suspected of having property of or being indebted to the judgment debtor. However, if the person (the garnishee) denies the indebtedness, as NPC did through its official’s testimony and subsequent pleading, the court cannot summarily compel payment. The proper remedy under Section 46 is for the judgment creditor to institute a separate action against the alleged garnishee to establish the liability.
The respondent judge gravely abused his discretion by ordering garnishment despite NPC’s denial of indebtedness. The alleged credit was not a clear debt due to BBGMI but represented an unamortized balance under a contingent reimbursement agreement tied to BBGMI’s power consumption, which ended when it ceased operations. To garnish funds under these circumstances, where the garnishee’s liability is seriously disputed, would deprive it of property without due process. The Court confirmed that ACEC’s remedy was to file a separate action against NPC to prove the alleged obligation, not to secure payment through a summary proceeding. The Court also ordered ACEC to return the garnished amount to NPC with interest.