GR 142983; (November, 2014) (Digest)
G.R. No. 142983 . November 26, 2014.
SOLIDBANK CORPORATION, Petitioner, vs. GOYU & SONS, INC., GO SONG HIAP, BETTY CHIU SUK YING, NG CHING KWOK, YEUNG SHUK HING, AND THEIR RESPECTIVE SPOUSES, and MALAYAN INSURANCE COMPANY, INC., Respondents. RIZAL COMMERCIAL BANKING CORPORATION, Respondent (Intervenor).
FACTS
1. Respondent Goyu & Sons, Inc. (GOYU) incurred various loan obligations to petitioner Solidbank Corporation (SOLIDBANK), with individual respondents acting as guarantors.
2. As additional security, GOYU obtained fire insurance policies from respondent Malayan Insurance Company, Inc. (MICO). On January 10, 1992, and February 11, 1992, GOYU endorsed two of these policies (Nos. F-114-07402 and F-114-07525) in favor of SOLIDBANK.
3. On April 27, 1992, a fire gutted GOYU’s building. GOYU filed a claim with MICO, which was denied. Respondent-intervenor Rizal Commercial Banking Corporation (RCBC), another creditor of GOYU, also filed a claim for the same insurance proceeds, asserting its rights as a mortgagee.
4. On April 6, 1993, GOYU filed a complaint for specific performance and damages against MICO and RCBC (Civil Case No. 93-65442, RTC Manila, Branch 3). The RTC ordered the insurance proceeds (₱50,505,594.60) deposited with the court (custodia legis).
5. Meanwhile, SOLIDBANK filed a separate collection case against GOYU, the individual guarantors, and MICO (Civil Case No. 92-62749, RTC Manila, Branch 14).
6. In Civil Case No. 93-65442, the Supreme Court, in a final Decision dated April 20, 1998 (G.R. Nos. 128833, 128834, 128866), ordered the Clerk of Court to release the deposited insurance proceeds to RCBC, recognizing RCBC’s preferential right as first mortgagee.
7. However, during the pendency of the appeal in Civil Case No. 93-65442, SOLIDBANK, in its separate case (Civil Case No. 92-62749), obtained a writ of execution and, on January 24, 1997, garnished and withdrew the very same insurance proceeds (₱50,505,594.60) that were in custodia legis in Branch 3.
8. RCBC and GOYU moved to quash the writ of execution in Civil Case No. 92-62749, arguing the funds were in custodia legis and SOLIDBANK was not a party to the case where the funds were deposited. The RTC (Branch 14) denied the motions.
9. On appeal (CA-G.R. CV No. 51894), the Court of Appeals reversed the RTC and ordered SOLIDBANK to restitute the withdrawn amount with legal interest. SOLIDBANK’s motion for reconsideration was denied. SOLIDBANK elevated the case to the Supreme Court via a Petition for Review on Certiorari.
ISSUE
Whether the Court of Appeals erred in ordering SOLIDBANK to restitute the amount it garnished and withdrew from the insurance proceeds deposited in custodia legis in a different case (Civil Case No. 93-65442) where SOLIDBANK was not a party.
RULING
The Supreme Court DENIED the petition and AFFIRMED the Resolutions of the Court of Appeals.
1. Property in Custodia Legis is Immune from Garnishment: The insurance proceeds deposited with Branch 3 (Civil Case No. 93-65442) were in custodia legis—in the custody of the law. Property lawfully in the custody of a court through its officer cannot be seized or interfered with through garnishment, attachment, or execution by another court without the custody court’s permission. This principle preserves judicial authority and order and prevents conflict between co-equal courts.
2. SOLIDBANK’s Garnishment was Improper: SOLIDBANK, not being a party in Civil Case No. 93-65442, had no right to unilaterally levy upon the funds held by Branch 3. The proper procedure was to seek relief from Branch 3, the court having custody of the property. SOLIDBANK’s act of garnishing the funds through its own case (Civil Case No. 92-62749, Branch 14) was a violation of the custodia legis doctrine.
3. SOLIDBANK’s Claim of Preference is Irrelevant: SOLIDBANK’s argument that it had a preferred claim over the insurance proceeds as an endorseree is immaterial to the procedural issue of improper garnishment. The determination of the rightful claimant of the funds was the province of Branch 3 in Civil Case No. 93-65442. The Supreme Court’s final Decision in that case had already adjudged RCBC as the rightful claimant entitled to the proceeds.
4. Restitution is Proper: Since the garnishment and withdrawal were void for violating the custodia legis rule, SOLIDBANK acquired no right to the funds. The Court of Appeals correctly ordered SOLIDBANK to restitute the amount with legal interest to the custody of the court (Branch 3) for proper disposition in accordance with the final Supreme Court Decision awarding it to RCBC.
DISPOSITIVE PORTION:
WHEREFORE, the present Petition for Review on Certiorari under Rule 45 of the Rules of Court is DENIED for lack of merit. The Resolutions of the Court of Appeals dated June 23, 1997 and April 28, 2000 in CA-G.R. CV No. 51894 are hereby AFFIRMED.