G.R. No. 183018 ; August 3, 2011
ADVENT CAPITAL AND FINANCE CORPORATION, Petitioner, vs. ROLAND YOUNG, Respondent.

FACTS

Petitioner Advent Capital and Finance Corporation (Advent) filed a petition for corporate rehabilitation with the Regional Trial Court (RTC) of Makati, Branch 142 (rehabilitation court) on July 16, 2001. On August 27, 2001, the rehabilitation court issued a Stay Order staying the enforcement of all claims against Advent. Respondent Roland Young (Young), Advent’s former president, filed a comment in the rehabilitation proceedings claiming employee benefits. The rehabilitation court approved Advent’s rehabilitation plan on November 6, 2002, which included a 1996 Mercedes Benz (the subject car) in Advent’s asset inventory, though it remained in Young’s possession.
Due to Young’s refusal to return the car, Advent filed a replevin suit (Civil Case No. 03-776) before the RTC of Makati, Branch 147 (trial court) on July 8, 2003. After Advent posted a replevin bond, the trial court issued a Writ of Seizure. Young turned over the car to Advent, which then delivered it to the rehabilitation receiver. Young filed an Answer with a counterclaim, asserting a right to purchase the car under a company car plan and to offset its value with his retirement benefits.
On April 28, 2005, the trial court dismissed the replevin case without prejudice for Advent’s failure to prosecute. It also dismissed Young’s counterclaim for lack of jurisdiction, ruling it was properly within the rehabilitation court’s jurisdiction. Young filed a motion for partial reconsideration regarding his counterclaim and an omnibus motion praying for the return of the car and damages to be charged against the replevin bond.
On March 24, 2006, the trial court denied Young’s motion for partial reconsideration. It held that the dismissal of the main replevin case had become final as Advent did not appeal, and it suspended resolution on the return of the car, reasoning that Advent’s established ownership included a right to possession and Young had yet to prove his right before the rehabilitation court. On July 5, 2006, the trial court denied Young’s motion to resolve his omnibus motion, reiterating its prior ruling.
Young filed a petition for certiorari and mandamus with the Court of Appeals (CA). The CA set aside the trial court’s orders and directed Advent to return the seized vehicle to Young, holding that the dismissal of the replevin case rendered the ancillary writ of seizure functus officio, and the parties should be restored to their pre-suit status since no adjudication on the merits occurred. Advent’s motion for reconsideration was denied.

ISSUE

Whether the Court of Appeals erred in ordering the return of the seized vehicle to respondent Young upon the dismissal of the replevin case for failure to prosecute.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Court of Appeals’ decision.
The Court held that when a replevin case is dismissed without a judgment on the merits, the provisional writ of seizure issued therein becomes functus officio. The parties must be restored to their respective positions prior to the filing of the suit. Since the trial court dismissed the main action for failure to prosecute without resolving the issue of who had a better right of possession, Advent’s retention of the vehicle based solely on the dissolved writ was improper. The ruling in Olympia International, Inc. v. Court of Appeals is controlling: the dismissal of the main case carries with the dissolution of the ancillary writ of replevin.
The Court rejected Advent’s argument that the Stay Order from the rehabilitation court barred the return of the car. The replevin case was an action to enforce Advent’s claim against Young for the recovery of property, not a claim against Advent. The Stay Order enjoins claims against the debtor (Advent), not claims by the debtor. Therefore, the order did not prohibit the trial court from ordering the return of the vehicle to Young as a consequence of the dismissal of Advent’s own lawsuit.
Furthermore, the Court clarified that the trial court’s dismissal of Young’s counterclaim for lack of jurisdiction did not equate to an adjudication in Advent’s favor regarding possession. Young’s claim to the car, based on his employment benefits, was severed from the replevin action and was for the rehabilitation court to resolve. In the meantime, the car, having been seized under a writ that was dissolved, must be returned to Young, from whom it was taken. The determination of ultimate ownership or possession is separate from the ministerial duty to restore possession upon the dismissal of the replevin suit.
Finally, the Court noted that Young’s claim for damages against the replevin bond remained pending and should be resolved by the trial court in accordance with Section 10, Rule 60 of the Rules of Court.