G.R. No. L-5963; May 20, 1953
THE LEYTE-SAMAR SALES CO., and RAYMUNDO TOMASSI, petitioners, vs. SULPICIO V. CEA, in his capacity as Judge of the Court of First Instance of Leyte and OLEGARIO LASTRILLA, respondents.

FACTS

In Civil Case No. 193 of the Court of First Instance of Leyte, petitioners Leyte-Samar Sales Co. (LESSCO) and Raymundo Tomassi obtained a judgment for damages against defendants Far Eastern Lumber & Commercial Co. (FELCO, an unregistered partnership), Arnold Hall, Fred Brown, and Jean Roxas. The judgment became final. To satisfy the judgment, the sheriff sold at public auction on June 9, 1951, certain properties of the defendants to Roberto Dorfe and Pepito Asturias for P8,100. Prior to this sale, on September 29, 1949, respondent Olegario Lastrilla had purchased all the shares and interests of defendant Fred Brown in FELCO. After the auction, Lastrilla filed a motion in the same civil case claiming ownership of 17% of the partnership (representing Brown’s shares) and requesting the sheriff to retain a corresponding portion of the auction proceeds for him. Over the petitioners’ objection, the respondent judge issued orders granting Lastrilla’s motion, declaring him entitled to 17% of the properties sold (and later, the proceeds), and directing the sheriff to deliver 17% of the auction proceeds to Lastrilla. Petitioners sought relief via certiorari, arguing these orders were null and void for lack of jurisdiction, as they were issued without notifying indispensable parties like the purchasers (Dorfe and Asturias) and the other judgment debtors.

ISSUE

Whether the respondent judge acted in excess or without jurisdiction in issuing orders recognizing Lastrilla’s claim to a portion of the auction proceeds and directing payment to him, despite the lack of notice to and participation of indispensable parties.

RULING

Yes. The Supreme Court held that the respondent judge’s orders were null and void for having been issued in excess or want of jurisdiction. The Court ruled that Lastrilla, as a partner (by purchase of Brown’s shares) in the judgment debtor partnership FELCO, was not a creditor entitled to the proceeds of the execution sale. His proper remedy, if his shares were wrongfully included in the auction, was to claim the property itself under Section 15, Rule 39, not the proceeds. More critically, the proceedings on Lastrilla’s motion lacked indispensable parties who were not notified and given a chance to be heard: the purchasers at the auction (Dorfe and Asturias) and the other judgment debtors (Hall and Roxas). Their interests were directly affected, as the purchasers might contest Lastrilla’s claim or the validity of his purchase, and the debtors might object to reducing the satisfaction of the judgment. A court cannot validly adjudicate matters without indispensable parties. Since the orders were a patent nullity for lack of jurisdiction, the defense of petitioners’ failure to appeal on time was unavailing. The preliminary injunction was made permanent, and all orders directing delivery of 17% of the proceeds to Lastrilla were declared null and void. Costs were taxed against Lastrilla.