ORIX METRO LEASING AND FINANCE CORPORATION, Petitioner, vs. CARDLINE INC., MARY C. CALUBAD, SONY N. CALUBAD, and NG BENG SHENG, Respondents.
FACTS
Cardline Inc. leased machines from Orix Metro Leasing, with its principal stockholders acting as sureties. Cardline defaulted, leading Orix to file a complaint for replevin and sum of money. The Regional Trial Court (RTC) declared the respondents in default, rendered judgment in Orix’s favor, and ordered payment of the outstanding obligation of P9,369,657.00, with the proviso that this amount represented the balance “after the recovery or sale of the [machines].” This judgment became final and executory. Orix recovered the leased machines and subsequently moved for a writ of execution to collect the monetary award.
The respondents filed a petition for prohibition before the Court of Appeals (CA) to challenge the execution. They argued that their obligation had been fully satisfied because the market value of the returned machines and a security deposit exceeded the debt. The CA granted the petition, annulling the RTC’s order of execution. It ruled that under the lease agreements, the recovery of the machines and the deposit constituted full satisfaction of the judgment debt, making execution unnecessary.
ISSUE
Whether the Court of Appeals erred in annulling the writ of execution and ruling that the judgment obligation had been fully satisfied by the return of the leased properties and the security deposit.
RULING
The Supreme Court granted the petition, reversed the CA, and reinstated the RTC’s order of execution. The Court held that the CA erred in its interpretation. The final and executory RTC judgment clearly ordered the respondents to pay the sum of P9,369,657.00, or the balance remaining after the recovery or sale of the machines. This language explicitly contemplates a scenario where the value of the recovered property is applied to reduce the debt, but it does not automatically declare the debt extinguished. The judgment itself mandates a determination of any deficiency.
The CA improperly pre-empted this accounting process by unilaterally declaring the obligation satisfied based on its own valuation of the machines and deposit, a factual matter not established in the execution proceedings. Execution must conform to the judgment decree. Since the judgment ordered payment of a specific amount or its balance after recovery/sale, the proper course was for the RTC to execute the judgment to ascertain the actual deficiency, if any, through the processes outlined in the Rules of Court. The CA’s annulment of the writ of execution was therefore a grave abuse of discretion, as it altered the terms of the final judgment. The individual respondents’ liability as sureties was also solidary, as stipulated in their agreements.
