G.R. No. L-4794

WARNER, BARNES & CO., plaintiffs-appellees, vs. ROMAN AND CIRILO JAUCIAN, defendants-appellants.

February 16, 1909

FACTS:
Warner, Barnes & Co. (plaintiffs) obtained a judgment on September 17, 1906, against Roman and Cirilo Jaucian (defendants) for P61,500 plus interest and P1,500 in attorney’s fees, with an order for the sale of mortgaged property in case of non-payment. The defendants appealed this judgment to the Supreme Court. While the appeal was pending, the plaintiffs petitioned the lower court for execution, leading the court to order the defendants to file a P20,000 bond to suspend the sale, which they did.

On February 18, 1908, the Supreme Court affirmed the lower court’s judgment (9 Phil. Rep. 503), and a certified copy was received by the lower court. The clerk notified the parties by mail. On March 14, 1908, the clerk issued an order of execution against the defendants. Subsequently, the mortgaged property was sold at public auction on April 10, 1908.

The plaintiffs then petitioned the court to approve the auction sale. The defendants, however, moved to annul the sale, raising two main arguments:
1. The order of execution was issued improperly: without a specific request from the plaintiff or an explicit court order for the sale, and prematurely, before the prescribed time for execution.
2. The auction sale did not comply with Article 127 of the Mortgage Law, as the property was sold at a price (P13,960) significantly lower than the upset price stipulated in the mortgage deed for each lot and disproportionate to its real value.

On April 20, 1908, the lower court denied the defendants’ motion and approved the sale. The defendants appealed this order.

ISSUE:
1. Was the order of execution and the subsequent sale of the mortgaged property valid, despite the defendants’ claims of procedural irregularities regarding its issuance (lack of explicit court order or plaintiff’s request, and prematurity)?
2. Is the auction sale valid even if the property was sold below the stipulated “upset price” in the mortgage deed, allegedly in violation of Article 127 of the Mortgage Law?

RULING:
The Supreme Court affirmed the lower court’s order approving the sale, with costs against the appellants.

1. On the procedural irregularities of the execution: The Court held that the execution was valid. The original judgment, which had been affirmed by the Supreme Court and made final, expressly ordered the payment of the debt and the sale of the mortgaged property upon non-payment. Once the judgment was affirmed and the parties notified (on February 18, 1908), the process for its enforcement should commence. The Court found that the plaintiff creditor had previously sought execution, the parties were notified of the final decision, and the judge, being informed, ordered its execution. Even if the clerk did not explicitly record a new judicial decree for execution, the original judgment’s terms, now final, effectively served as such. Furthermore, Section 257 of the Code of Civil Procedure does not require a prior requisition to proceed with the sale; notification to the debtor (who failed to pay between February 18 and April 9, 1908) is sufficient. The lack of a separate recorded judicial decree for the execution order does not nullify the sale as it is equivalent to a confirmation of the statements in the final judgment.

2. On the alleged violation of the stipulated “upset price” and Article 127 of the Mortgage Law: The Court ruled that the sale was valid. It first clarified that the amounts stated in the mortgage deed for each lot were not fixed as upset prices under Article 127 of the Mortgage Law; they merely indicated the extent of each lot’s responsibility, with subsidiary liability. More importantly, the Court held that the Code of Civil Procedure (Sections 256-261, in connection with 443-463), which governs judicial sales, repealed the former Ley de Enjuiciamiento Civil and, consequently, Articles 127 and 128 of the Mortgage Law regarding upset prices. The current law does not require the fixing of prices at judicial sales; property is to be sold to the highest bidder. Contractual stipulations, even if they include an upset price, cannot override the procedural rules established by law, which aim to protect public order and interest (Article 1255 of the Civil Code allows agreements not contravening law). Therefore, the sale without a fixed upset price, to the highest bidder, was in accordance with the law then in force and caused no damage to the appellants.