G.R. No. 204971 April 10, 2019
CONGRESS OF INDEPENDENT ORGANIZATION-ASSOCIATES LABOR UNIONS (CIO-ALU), Petitioner vs. COURT OF APPEALS AND THE METROPOLITAN BANK AND TRUST COMPANY, Respondents

FACTS

Petitioner CIO-ALU, a labor union representing workers of San Carlos Milling Company, Inc. (SCMCI), secured favorable final judgments for money claims against SCMCI. During execution, the sheriff levied upon various properties within the SCMCI compound. Respondent Metropolitan Bank and Trust Company (MBTC) filed a third-party claim, asserting ownership over the levied properties. MBTC presented a Certificate of Sale showing it acquired the properties as the highest bidder in a foreclosure sale conducted in December 1999 due to SCMCI’s loan default under a Mortgage Trust Indenture.
The Executive Labor Arbiter initially granted MBTC’s claim and suspended the auction. Subsequently, upon CIO-ALU’s motion, the Arbiter allowed the union to post an indemnity bond to proceed with the sale of properties not covered by MBTC’s claim. However, the sheriff later proceeded to sell properties that MBTC claimed to own. MBTC challenged this via a petition for certiorari with the Court of Appeals. The CA ruled in favor of MBTC, annulling the NLRC resolutions that allowed the execution sale, finding that the Labor Arbiter and NLRC committed grave abuse of discretion.

ISSUE

Whether the Court of Appeals correctly annulled the NLRC resolutions that permitted the execution sale of properties claimed by MBTC.

RULING

Yes, the Supreme Court affirmed the CA’s decision. The core legal principle is that a third-party claim in execution proceedings is the proper remedy when a stranger to the case asserts ownership over levied property. The Labor Arbiter and the NLRC committed grave abuse of discretion by disregarding MBTC’s documented evidence of ownership acquired through a prior foreclosure sale. The Certificate of Sale presented by MBTC established a prima facie superior right to the properties.
The posting of an indemnity bond by the judgment creditor (CIO-ALU) under the NLRC Rules is intended to protect the sheriff from liability, but it does not automatically empower the sheriff to sell properties with a disputed ownership claim. The bond does not adjudicate ownership; it merely shifts liability. The proper course of action for the sheriff, after a third-party claim is filed and a bond is posted, is to proceed only if the properties are unquestionably owned by the judgment debtor. Here, given MBTC’s clear evidence, the Labor Arbiter’s initial order suspending the sale was correct, and his subsequent orders allowing the sale of the claimed properties constituted a capricious and whimsical exercise of judgment. The CA correctly exercised its certiorari jurisdiction to correct this grave abuse, as the NLRC acted without or in excess of its jurisdiction. The execution process cannot be used to divest a third party of its ownership rights without due process.