G.R. No. 84497 November 6, 1989
ALFONSO ESCOVILLA, JR., CECILIO M. MERIS and CUISON ENGINEERING and MACHINERY CO., INC., petitioners, vs. THE HON. COURT OF APPEALS, SIBAGAT TIMBER CORPORATION and CONCHITA DEL ROSARIO, respondents.

FACTS

This case originated from a final and executory money judgment in Civil Case No. 13699 in favor of Cuison Engineering against del Rosario and Sons Logging. To execute this judgment, Deputy Sheriffs Alfonso Escovilla, Jr. and Cecilio Meris levied upon an electric welding machine and a motor launch named “Pixie Boy No. 5.” Third-party claims were promptly filed by Sibagat Timber Corporation and Conchita del Rosario, respectively, asserting ownership over these properties. Despite these claims and the filing of a separate prohibition case (Special Civil Case No. 454) in the Butuan RTC to challenge the levy, the sheriffs, upon motion by the judgment creditor Cuison, proceeded with the auction sale of the motor launch pursuant to an order from the Davao RTC, which had rendered the original money judgment. The Butuan RTC subsequently ruled in favor of the third-party claimants, declaring the sale void and ordering the return of the properties and the payment of damages. The Court of Appeals affirmed this decision with modifications.

ISSUE

The primary issue is whether the sheriffs and the judgment creditor are liable for damages for proceeding with the execution sale despite third-party claims, and whether the Butuan RTC could validly restrain the execution proceedings ordered by the co-equal Davao RTC.

RULING

The Supreme Court affirmed the liability. The legal logic is anchored on the rules governing third-party claims in execution. When a third party asserts ownership over property levied upon, the sheriff is not obliged to proceed unless the judgment creditor posts an indemnity bond. By posting this bond and directing the sheriff to continue, the judgment creditor assumes control and becomes principally liable for any damages resulting from a wrongful levy. Here, Cuison, the judgment creditor, posted a bond and directed the sheriffs to proceed, making it responsible to the true owners for the wrongful execution. The sheriffs were also found liable for misleading the Davao court about the ownership. Regarding the jurisdictional conflict, the Court clarified that the general rule against one court interfering with a co-equal court’s processes yields when a third-party claim is involved. The purpose is to avoid conflict, but a separate action by a third-party claimant, like the prohibition case in Butuan, is precisely the proper remedy to adjudicate ownership claims against the execution. Thus, the Butuan RTC acted within its authority in issuing injunctive relief to protect the rights of the third-party claimants who were not parties to the original suit in Davao.