G.R. No.
L-34548 November 29, 1988 take the necessary steps for the protection of its
RIZAL COMMERCIAL BANKING
CORPORATION, petitioner,
vs.
THE HONORABLE PACIFICO P. DE CASTRO
and PHILIPPINE VIRGINIA TOBACCO
ADMINISTRATION, respondents
CORTES, J.:
The crux of the instant controversy dwells on the
liability of a bank for releasing its depositor's funds
upon orders of the court, pursuant to a writ of
garnishment. If in compliance with the court order,
the bank delivered the garnished amount to the
sheriff, who in turn delivered it to the judgment
creditor, but subsequently, the order of the court
directing payment was set aside by the same
judge, should the bank be held solidarily liable with
the judgment creditor to its depositor for
reimbursement of the garnished funds? The Court
does not think so.
In Civil Case No. Q-12785 of the Court of First
Instance of Rizal, Quezon City Branch IX entitled
"Badoc Planters, Inc. versus Philippine Virginia
Tobacco Administration, et al.," which was an
action for recovery of unpaid tobacco deliveries, an
Order (Partial Judgment) was issued on January
15, 1970 by the Hon. Lourdes P. San Diego, then
Presiding Judge, ordering the defendants therein
to pay jointly and severally, the plaintiff Badoc
Planters, Inc. (hereinafter referred to as "BADOC")
within 48 hours the aggregate amount of
P206,916.76, with legal interests thereon.
On January 26,1970, BADOC filed an Urgent Ex-
Parte Motion for a Writ of Execution of the said
Partial Judgment which was granted on the same
day by the herein respondent judge who acted in
place of the Hon. Judge San Diego who had just
been elevated as a Justice of the Court of Appeals.
Accordingly, the Branch Clerk of Court on the very
same day, issued a Writ of Execution addressed to
Special Sheriff Faustino Rigor, who then issued a
Notice of Garnishment addressed to the General
Manager and/or Cashier of Rizal Commercial
Banking Corporation (hereinafter referred to as
RCBC), the petitioner in this case, requesting a
reply within five (5) days to said garnishment as to
any property which the Philippine Virginia Tobacco
Administration (hereinafter referred to as "PVTA")
might have in the possession or control of
petitioner or of any debts owing by the petitioner
to said defendant. Upon receipt of such Notice,
RCBC notified PVTA thereof to enable the PVTA to
1 Prov Rem. Cases Batch 2
own interest [Record on Appeal, p. 36]
Upon an Urgent Ex-Parte Motion dated January 27,
1970 filed by BADOC, the respondent Judge issued
an Order granting the Ex-Parte Motion and
directing the herein petitioner "to deliver in check
the amount garnished to Sheriff Faustino Rigor and
Sheriff Rigor in turn is ordered to cash the check
and deliver the amount to the plaintiff's
representative and/or counsel on record." [Record
on Appeal, p. 20; Rollo, p. 5.] In compliance with
said Order, petitioner delivered to Sheriff Rigor a
certified check in the sum of P 206,916.76.
Respondent PVTA filed a Motion for
Reconsideration dated February 26,1970 which
was granted in an Order dated April 6,1970,
setting aside the Orders of Execution and of
Payment and the Writ of Execution and ordering
petitioner and BADOC "to restore, jointly and
severally, the account of PVTA with the said bank
in the same condition and state it was before the
issuance of the aforesaid Orders by reimbursing
the PVTA of the amount of P 206, 916.76 with
interests at the legal rate from January 27, 1970
until fully paid to the account of the PVTA This is
without prejudice to the right of plaintiff to move
for the execution of the partial judgment pending
appeal in case the motion for reconsideration is
denied and appeal is taken from the said partial
judgment." [Record on Appeal, p. 58]
The Motion for Reconsideration of the said Order
of April 6, 1970 filed by herein petitioner was
denied in the Order of respondent judge dated
June 10, 1970 and on June 19, 1970, which was
within the period for perfecting an appeal, the
herein petitioner filed a Notice of Appeal to the
Court of Appeals from the said Orders.
This case was then certified by the Court of
Appeals to this Honorable Court, involving as it
does purely questions of law.
The petitioner raises two principal queries in the
instant case: 1) Whether or not PVTA funds are
public funds not subject to garnishment; and 2)
Whether or not the respondent Judge correctly
ordered the herein petitioner to reimburse the
amount paid to the Special Sheriff by virtue of the
execution issued pursuant to the Order/Partial
Judgment dated January 15, 1970.
The record reveals that on February 2, 1970,
private respondent PVTA filed a Motion for
Reconsideration of the Order/ Partial Judgment of
January 15, 1970. This was granted and the
aforementioned Partial Judgment was set aside.
The case was set for hearings on November 4, 9
and 11, 1970 [Rollo, pp. 205-207.] However, in
view of the failure of plaintiff BADOC to appear on
the said dates, the lower court ordered the
dismissal of the case against PVTA for failure to
prosecute [Rollo, p. 208.]
It must be noted that the Order of respondent
Judge dated April 6, 1970 directing the plaintiff to
reimburse PVTA t e amount of P206,916.76 with
interests became final as to said plaintiff who failed
to even file a motion for reconsideration, much
less to appeal from the said Order. Consequently,
the order to restore the account of PVTA with
RCBC in the same condition and state it was before
the issuance of the questioned orders must be
upheld as to the plaintiff, BADOC.
However, the questioned Order of April 6, 1970
must be set aside insofar as it ordered the
petitioner RCBC, jointly and severally with BADOC,
to reimburse PVTA.
The petitioner merely obeyed a mandatory
directive from the respondent Judge dated January
27, 1970, ordering petitioner 94 "to deliver in
check the amount garnished to Sheriff Faustino
Rigor and Sheriff Rigor is in turn ordered to cash
the check and deliver the amount to the plaintiffs
representative and/or counsel on record." [Record
on Appeal, p. 20.]
PVTA however claims that the manner in which the
bank complied with the Sheriffs Notice of
Garnishment indicated breach of trust and
dereliction of duty on the part of the bank as
custodian of government funds. It insistently urges
that the premature delivery of the garnished
amount by RCBC to the special sheriff even in the
absence of a demand to deliver made by the latter,
before the expiration of the five-day period given
to reply to the Notice of Garnishment, without any
reply having been given thereto nor any prior
authorization from its depositor, PVTA and even if
the court's order of January 27, 1970 did not
require the bank to immediately deliver the
garnished amount constitutes such lack of
prudence as to make it answerable jointly and
severally with the plaintiff for the wrongful release
of the money from the deposit of the PVTA. The
respondent Judge in his controverted Order
sustained such contention and blamed RCBC for
the supposed "hasty release of the amount from
the deposit of the PVTA without giving PVTA a
chance to take proper steps by informing it of the
action being taken against its deposit, thereby
observing with prudence the five-day period given
to it by the sheriff." [Rollo, p. 81.]
Such allegations must be rejected for lack of merit.
In the first place, it should be pointed out that
RCBC did not deliver the amount on the strength
solely of a Notice of Garnishment; rather, the
release of the funds was made pursuant to the
2 Prov Rem. Cases Batch 2
aforesaid Order of January 27, 1970. While the
Notice of Garnishment dated January 26, 1970
contained no demand of payment as it was a mere
request for petitioner to withold any funds of the
PVTA then in its possession, the Order of January
27, 1970 categorically required the delivery in
check of the amount garnished to the special
sheriff, Faustino Rigor.
In the second place, the bank had already filed a
reply to the Notice of Garnishment stating that it
had in its custody funds belonging to the PVTA,
which, in fact was the basis of the plaintiff in filing
a motion to secure delivery of the garnished
amount to the sheriff. [See Rollo, p. 93.]
Lastly, the bank, upon the receipt of the Notice of
Garnishment, duly informed PVTA thereof to
enable the latter to take the necessary steps for
the protection of its own interest [Record on
Appeal, p. 36]
It is important to stress, at this juncture, that there
was nothing irregular in the delivery of the funds
of PVTA by check to the sheriff, whose custody is
equivalent to the custody of the court, he being a
court officer. The order of the court dated January
27, 1970 was composed of two parts, requiring: 1)
RCBC to deliver in check the amount garnished to
the designated sheriff and 2) the sheriff in turn to
cash the check and deliver the amount to the
plaintiffs representative and/or counsel on record.
It must be noted that in delivering the garnished
amount in check to the sheriff, the RCBC did not
thereby make any payment, for the law mandates
that delivery of a check does not produce the
effect of payment until it has been cashed. [Article
1249, Civil Code.]
Moreover, by virtue of the order of garnishment,
the same was placed in custodia legis and
therefore, from that time on, RCBC was holding
the funds subject to the orders of the court a quo.
That the sheriff, upon delivery of the check to him
by RCBC encashed it and turned over the proceeds
thereof to the plaintiff was no longer the concern
of RCBC as the responsibility over the garnished
funds passed to the court. Thus, no breach of trust
or dereliction of duty can be attributed to RCBC in
delivering its depositor's funds pursuant to a court
order which was merely in the exercise of its
power of control over such funds.
... The garnishment of property to
satisfy a writ of execution operates
as an attachment and fastens upon
the property a lien by which the
property is brought under the
jurisdiction of the court issuing the
writ. It is brought into custodia
legis, under the sole control of such
 court [De Leon v. Salvador, G.R.
Nos. L-30871 and L-31603,
December 28,1970, 36 SCRA 567,
574.]
The respondent judge however, censured the
petitioner for having released the funds "simply on
the strength of the Order of the court which. far
from ordering an immediate release of the amount
involved, merely serves as a standing authority to
make the release at the proper time as prescribed
by the rules." [Rollo, p. 81.]
This argument deserves no serious consideration.
As stated earlier, the order directing the bank to
deliver the amount to the sheriff was distinct and
separate from the order directing the sheriff to
encash the said check. The bank had no choice but
to comply with the order demanding delivery of
the garnished amount in check. The very tenor of
the order called for immediate compliance
therewith. On the other hand, the bank cannot be
held liable for the subsequent encashment of the
check as this was upon order of the court in the
exercise of its power of control over the funds
placed in custodia legis by virtue of the
garnishment.
In a recent decision [Engineering Construction
Inc., v. National Power Corporation, G.R. No. L-
34589, June 29, 1988] penned by the now Chief
Justice Marcelo Fernan, this Court absolved a
garnishee from any liability for prompt compliance
with its order for the delivery of the garnished
funds. The rationale behind such ruling deserves
emphasis in the present case:
But while partial restitution is
warranted in favor of NPC, we find
that the Appellate Court erred in not
absolving MERALCO, the garnishee,
from its obligations to NPC with
respect to the payment of ECI of P
1,114,543.23, thus in effect
subjecting MERALCO to double
liability. MERALCO should not have
been faulted for its prompt
obedience to a writ of garnishment.
Unless there are compelling reasons
such as: a defect on the face of the
writ or actual knowledge on the part
of the garnishee of lack of
entitlement on the part of the
garnisher, it is not incumbent upon
the garnishee to inquire or to judge
for itself whether or not the order
for the advance execution of a
judgment is valid.
Section 8, Rule 57 of the Rules of
Court provides:
3 Prov Rem. Cases Batch 2
Effect of attachment of debts and credits.All
persons having in their possession or under their
control any credits or other similar personal
property belonging to the party against whom
attachment is issued, or owing any debts to the
same, all the time of service upon them of a copy
of the order of attachment and notice as provided
in the last preceding section, shall be liable to the
applicant for the amount of such credits, debts or
other property, until the attachment be
discharged, or any judgment recovered by him be
satisfied, unless such property be delivered or
transferred, or such debts be paid, to the clerk,
sheriff or other proper officer of the court issuing
the attachment.
Garnishment is considered as a
specie of attachment for reaching
credits belonging to the judgment
debtor and owing to him from a
stranger to the litigation. Under the
above-cited rule, the garnishee [the
third person] is obliged to deliver
the credits, etc. to the proper officer
issuing the writ and "the law
exempts from liability the person
having in his possession or under
his control any credits or other
personal property belonging to the
defendant, ..., if such property be
delivered or transferred, ..., to the
clerk, sheriff, or other officer of the
court in which the action is pending.
[3 Moran, Comments on the Rules
of Court 34 (1970 ed.)]
Applying the foregoing to the case at bar,
MERALCO, as garnishee, after having been
judicially compelled to pay the amount of the
judgment represented by funds in its possession
belonging to the judgment debtor or NPC, should
be released from all responsibilities over such
amount after delivery thereof to the sheriff. The
reason for the rule is self-evident. To expose
garnishees to risks for obeying court orders and
processes would only undermine the
administration of justice. [Emphasis supplied.]
The aforequoted ruling thus bolsters RCBC's stand
that its immediate compliance with the lower
court's order should not have been met with the
harsh penalty of joint and several liability. Nor can
its liability to reimburse PVTA of the amount
delivered in check be premised upon the
subsequent declaration of nullity of the order of
delivery. As correctly pointed out by the petitioner:
xxx xxx xxx
 That the respondent Judge, after his
Order was enforced, saw fit to recall
said Order and decree its nullity,
should not prejudice one who
dutifully abided by it, the
presumption being that judicial
orders are valid and issued in the
regular performance of the duties of
the Court" [Section 5(m) Rule 131,
Revised Rules of Court]. This should
operate with greater force in
relation to the herein petitioner
which, not being a party in the
case, was just called upon to
perform an act in accordance with a
judicial flat. A contrary view will
invite disrespect for the majesty of
the law and induce reluctance in
complying with judicial orders out of
fear that said orders might be
subsequently invalidated and
thereby expose one to suffer some
penalty or prejudice for obeying the
same. And this is what will happen
were the controversial orders to be
sustained. We need not underscore
the danger of this as a precedent.
xxx xxx xxx
[ Brief for the Petitioner, Rollo, p.
212; Emphasis supplied.]
From the foregoing, it may be concluded that the
charge of breach of trust and/or dereliction of duty
as well as lack of prudence in effecting the
immediate payment of the garnished amount is
totally unfounded. Upon receipt of the Notice of
Garnishment, RCBC duly informed PVTA thereof to
enable the latter to take the necessary steps for its
protection. However, right on the very next day
after its receipt of such notice, RCBC was already
served with the Order requiring delivery of the
garnished amount. Confronted as it was with a
mandatory directive, disobedience to which
exposed it to a contempt order, it had no choice
but to comply.
The respondent Judge nevertheless held that the
liability of RCBC for the reimbursement of the
garnished amount is predicated on the ruling of
the Supreme Court in the case of Commissioner of
Public Highways v. Hon. San Diego [G.R. No. L-
30098, February 18, 1970, 31 SCRA 616] which he
found practically on all fours with the case at bar.
The Court disagrees.
The said case which reiterated the rule in Republic
v. Palacio [G.R. No. L-20322, May 29, 1968, 23
SCRA 899] that government funds and properties
may not be seized under writs of execution or
4 Prov Rem. Cases Batch 2
garnishment to satisfy such judgment is definitely
distinguishable from the case at bar.
In the Commissioner of Public Highways case
[supra], the bank which precipitately allowed the
garnishment and delivery of the funds failed to
inform its depositor thereof, charged as it was with
knowledge of the nullity of the writ of execution
and notice of garnishment against government
funds. In the aforementioned case, the funds
involved belonged to the Bureau of Public
Highways, which being an arm of the executive
branch of the government, has no personality of
its own separate from the National Government.
The funds involved were government funds
covered by the rule on exemption from execution.
This brings us to the first issue raised by the
petitioner: Are the PVTA funds public funds
exempt from garnishment? The Court holds that
they are not.
Republic Act No. 2265 created the PVTA as an
ordinary corporation with all the attributes of a
corporate entity subject to the provisions of the
Corporation Law. Hence, it possesses the power
"to sue and be sued" and "to acquire and hold
such assets and incur such liabilities resulting
directly from operations authorized by the
provisions of this Act or as essential to the proper
conduct of such operations." [Section 3, Republic
Act No. 2265.]
Among the specific powers vested in the PVTA are:
1) to buy Virginia tobacco grown in the Philippines
for resale to local bona fide tobacco manufacturers
and leaf tobacco dealers [Section 4(b), R.A. No.
2265]; 2) to contracts of any kind as may be
necessary or incidental to the attainment of its
purpose with any person, firm or corporation, with
the Government of the Philippines or with any
foreign government, subject to existing laws
[Section 4(h), R.A. No. 22651; and 3) generally, to
exercise all the powers of a corporation under the
Corporation Law, insofar as they are not
inconsistent with the provisions of this Act [Section
4(k), R.A. No. 2265.]
From the foregoing, it is clear that PVTA has been
endowed with a personality distinct and separate
from the government which owns and controls it.
Accordingly, this Court has heretofore declared
that the funds of the PVTA can be garnished since
"funds of public corporation which can sue and be
sued were not exempt from garnishment"
[Philippine National Bank v. Pabalan, G.R. No. L-
33112, June 15, 1978, 83 SCRA 595, 598.]
In National Shipyards and Steel Corp. v. CIR [G.R.
No. L-17874, August 31, 1964, 8 SCRA 781], this
Court held that the allegation to the effect that the
funds of the NASSCO are public funds of the
government and that as such, the same may not
be garnished, attached or levied upon is untenable
for, as a government-owned or controlled
corporation, it has a personality of its own, distinct
and separate from that of the government. This
court has likewise ruled that other govemment-
owned and controlled corporations like National
Coal Company, the National Waterworks and
Sewerage Authority (NAWASA), the National
Coconut Corporation (NACOCO) the National Rice
and Corn Corporation (NARIC) and the Price
Stabilization Council (PRISCO) which possess
attributes similar to those of the PVTA are clothed
with personalities of their own, separate and
distinct from that of the government [National Coal
Company v. Collector of Internal Revenue, 46 Phil.
583 (1924); Bacani and Matoto v. National
Coconut Corporation et al., 100 Phil. 471 (1956);
Reotan v. National Rice & Corn Corporation, G.R.
No. L-16223, February 27, 1962, 4 SCRA 418.] The
rationale in vesting it with a separate personality is
not difficult to find. It is well-settled that when the
government enters into commercial business, it
abandons its sovereign capacity and is to be
treated like any other corporation [Manila Hotel
Employees' Association v. Manila Hotel Co. and
CIR, 73 Phil. 734 (1941).]
Accordingly, as emphatically expressed by this
Court in a 1978 decision, "garnishment was the
appropriate remedy for the prevailing party which
could proceed against the funds of a corporate
entity even if owned or controlled by the
government" inasmuch as "by engaging in a
particular business thru the instrumentality of a
corporation, the government divests itself pro hac
vice of its sovereign character, so as to render the
corporation subject to the rules of law governing
private corporations" [Philippine National Bank v.
CIR, G.R No. L-32667, January 31, 1978, 81 SCRA
314, 319.]
Furthermore, in the case of PVTA, the law has
expressly allowed it funds to answer for various
obligations, including the one sought to be
enforced by plaintiff BADOC in this case (i.e. for
unpaid deliveries of tobacco). Republic Act No.
4155, which discounted the erstwhile support
given by the Central Bank to PVTA, established in
lieu thereof a "Tobacco Fund" to be collected from
the proceeds of fifty per centum of the tariff or
taxes of imported leaf tobacco and also fifty per
centum of the specific taxes on locally
manufactured Virginia type cigarettes.
Section 5 of Republic Act No. 4155 provides that
this fund shall be expended for the support or
payment of:
5 Prov Rem. Cases Batch 2
1. Indebtedness of the Philippine
Virginia Tobacco Administration and
the former Agricultural Credit and
Cooperative Financing
Administration to FACOMAS and
farmers and planters regarding
Virginia tobacco transactions in
previous years;
2. Indebtedness of the Philippine
Virginia Tobacco Administration and
the former Agricultural Credit and
Cooperative Financing
Administration to the Central Bank
in gradual amounts regarding
Virginia tobacco transactions in
previous years;
3. Continuation of the Philippine
Virginia Tobacco Administration
support and subsidy operations
including the purchase of locally
grown and produced Virginia leaf
tobacco, at the present support and
subsidy prices, its procurement,
redrying, handling, warehousing
and disposal thereof, and the
redrying plants trading within the
purview of their contracts;
4. Operational, office and field
expenses, and the establishment of
the Tobacco Research and Grading
Institute. [Emphasis supplied.]
Inasmuch as the Tobacco Fund, a special fund,
was by law, earmarked specifically to answer
obligations incurred by PVTA in connection with its
proprietary and commercial operations authorized
under the law, it follows that said funds may be
proceeded against by ordinary judicial processes
such as execution and garnishment. If such funds
cannot be executed upon or garnished pursuant to
a judgment sustaining the liability of the PVTA to
answer for its obligations, then the purpose of the
law in creating the PVTA would be defeated. For it
was declared to be a national policy, with respect
to the local Virginia tobacco industry, to encourage
the production of local Virginia tobacco of the
qualities needed and in quantities marketable in
both domestic and foreign markets, to establish
this industry on an efficient and economic basis,
and to create a climate conducive to local cigarette
manufacture of the qualities desired by the
consuming public, blending imported and native
Virginia leaf tobacco to improve the quality of
locally manufactured cigarettes [Section 1,
Republic Act No. 4155.]
The Commissioner of Public Highways case is thus
distinguishable from the case at bar. In said case,
the Philippine National Bank (PNB) as custodian of
funds belonging to the Bureau of Public Highways,
an agency of the government, was chargeable with
knowledge of the exemption of such government
funds from execution and garnishment pursuant to
the elementary precept that public funds cannot be
disbursed without the appropriation required by
law. On the other hand, the same cannot hold true
for RCBC as the funds entrusted to its custody,
which belong to a public corporation, are in the
nature of private funds insofar as their
susceptibility to garnishment is concerned. Hence,
RCBC cannot be charged with lack of prudence for
immediately complying with the order to deliver
the garnished amount. Since the funds in its
custody are precisely meant for the payment of
lawfully-incurred obligations, RCBC cannot
rightfully resist a court order to enforce payment
of such obligations. That such court order
subsequently turned out to have been erroneously
issued should not operate to the detriment of one
who complied with its clear order.
Finally, it is contended that RCBC was bound to
inquire into the legality and propriety of the Writ of
Execution and Notice of Garnishment issued
against the funds of the PVTA deposited with said
bank. But the bank was in no position to question
the legality of the garnishment since it was not
even a party to the case. As correctly pointed out
by the petitioner, it had neither the personality nor
the interest to assail or controvert the orders of
respondent Judge. It had no choice but to obey
the same inasmuch as it had no standing at all to
impugn the validity of the partial judgment
rendered in favor of the plaintiff or of the
processes issued in execution of such judgment.
RCBC cannot therefore be compelled to make
restitution solidarily with the plaintiff BADOC.
Plaintiff BADOC alone was responsible for the
issuance of the Writ of Execution and Order of
Payment and so, the plaintiff alone should bear the
consequences of a subsequent annulment of such
court orders; hence, only the plaintiff can be
ordered to restore the account of the PVTA.
WHEREFORE, the petition is hereby granted and
the petitioner is ABSOLVED from any liability to
respondent PVTA for reimbursement of the funds
garnished. The questioned Order of the
respondent Judge ordering the petitioner, jointly
and severally with BADOC, to restore the account
of PVTA are modified accordingly.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ.,
concur.
6 Prov Rem. Cases Batch 2
G.R. No. L-60887 November 13, 1991
PERLA COMPANIA DE SEGUROS, INC.,
petitioner,
vs.
HON. JOSE R. RAMOLETE, PRIMITIVA Y.
PALMES, HONORATO BORBON, SR., OFFICE
OF THE PROVINCIAL SHERIFF, PROVINCE
OF CEBU, respondents.
Hector L. Fernandez for petitioner.
Domingo Quibranza and Vicente A. Quibranza for
private respondents.
FELICIANO, J.:p
The present Petition for Certiorari seeks to annul:
(a) the Order dated 6 August 1979 1 which
ordered the Provincial Sheriff to garnish the third-
party liability insurance policy issued by petitioner
Perla Compania de Seguros, Inc. ("Perla") in favor
of Nelia Enriquez, judgment debtor in Civil Case
No. R-15391; (b) the Order dated 24 October 1979
2 which denied the motion for reconsideration of
the 6 August 1979 Order; and (c) the Order dated
8 April 1980 3 which ordered the issuance of an
alias writ of garnishment against petitioner.
In the afternoon of 1 June 1976, a Cimarron PUJ
owned and registered in the name of Nelia
Enriquez, and driven by Cosme Casas, was
travelling from Cebu City to Danao City. While
passing through Liloan, Cebu, the Cimarron PUJ
collided with a private jeep owned by the late
Calixto Palmes (husband of private respondent
Primitiva Palmes) who was then driving the private
jeep. The impact of the collision was such that the
private jeep was flung away to a distance of about
thirty (30) feet and then fell on its right side
pinning down Calixto Palmes. He died as a result
of cardio-respiratory arrest due to a crushed chest.
4 The accident also caused physical injuries on the
part of Adeudatus Borbon who was then only two
(2) years old.
On 25 June 1976, private respondents Primitiva
Palmes (widow of Calixto Palmes) and Honorato
Borbon, Sr. (father of minor Adeudatus Borbon)
filed a complaint 5 against Cosme Casas and Nelia
Enriquez (assisted by her husband Leonardo
Enriquez) before the then Court of First Instance of
Cebu, Branch 3, claiming actual, moral, nominal
and exemplary damages as a result of the
accident.
The claim of private respondent Honorato Borbon,
Sr., being distinct and separate from that of co-
plaintiff Primitiva Palmes, and the amount thereof
falling properly within the jurisdiction of the
inferior court, respondent Judge Jose R. Ramolete
ordered the Borbon claim excluded from the
complaint, without prejudice to its being filed with
the proper inferior court.
On 4 April 1977, the Court of First Instance
rendered a Decision 6 in favor of private
respondent Primitiva Palmes, ordering common
carrier Nelia Enriquez to pay her P10,000.00 as
moral damages, P12,000.00 as compensatory
damages for the death of Calixto Palmes,
P3,000.00 as exemplary damages, P5,000.00 as
actual damages, and P1,000.00 as attorney's fees.
The judgment of the trial court became final and
executory and a writ of execution was thereafter
issued. The writ of execution was, however,
returned unsatisfied. Consequently, the judgment
debtor Nelia Enriquez was summoned before the
trial court for examination on 23 July 1979. She
declared under oath that the Cimarron PUJ
registered in her name was covered by a third-
party liability insurance policy issued by petitioner
Perla.
Thus, on 31 July 1979, private respondent Palmes
filed a motion for garnishment 7 praying that an
order of garnishment be issued against the
insurance policy issued by petitioner in favor of the
judgment debtor. On 6 August 1979, respondent
Judge issued an Order 8 directing the Provincial
Sheriff or his deputy to garnish the third-party
liability insurance policy.
Petitioner then appeared before the trial court and
moved for reconsideration of the 6 August 1979
Order and for quashal of the writ of garnishment,
9 alleging that the writ was void on the ground
that it (Perla) was not a party to the case and that
jurisdiction over its person had never been
acquired by the trial court by service of summons
or by any process. The trial court denied
petitioner's motion.10 An Order for issuance of an
alias writ of garnishment was subsequently issued
on 8 April 1980. 11
More than two (2) years later, the present Petition
for Certiorari and Prohibition was filed with this
Court on 25 June 1982 alleging grave abuse of
discretion on the part of respondent Judge
Ramolete in ordering garnishment of the third-
party liability insurance contract issued by
petitioner Perla in favor of the judgment debtor,
Nelia Enriquez. The Petition should have been
dismissed forthwith for having been filed way out
7 Prov Rem. Cases Batch 2
of time but, for reasons which do not appear on
the record, was nonetheless entertained.
In this Petition, petitioner Perla reiterates its
contention that its insurance contract cannot be
subjected to garnishment or execution to satisfy
the judgment in Civil Case No. R-15391 because
petitioner was not a party to the case and the trial
court did not acquire jurisdiction over petitioner's
person. Perla further argues that the writ of
garnishment had been issued solely on the basis of
the testimony of the judgment debtor during the
examination on 23 July 1979 to the effect that the
Cimarron PUJ was covered by a third-party liability
insurance issued by Perla, without granting it the
opportunity to set up any defenses which it may
have under the insurance contract; and that the
proceedings taken against petitioner are contrary
to the procedure laid down in Economic Insurance
Company, Inc. v. Torres, et al., 12 which held that
under Rule 39, Section 45, the Court "may only
authorize" the judgment creditor to institute an
action against a third person who holds property
belonging to the judgment debtor.
We find no grave abuse of discretion or act in
excess of or without jurisdiction on the part of
respondent Judge Ramolete in ordering the
garnishment of the judgment debtor's third-party
liability insurance.
Garnishment has been defined as a species of
attachment for reaching any property or credits
pertaining or payable to a judgment debtor. 13 In
legal contemplation, it is a forced novation by the
substitution of creditors: 14 the judgment debtor,
who is the original creditor of the garnishee is,
through service of the writ of garnishment,
substituted by the judgment creditor who thereby
becomes creditor of the garnishee. Garnishment
has also been described as a warning to a person
having in his possession property or credits of the
judgment debtor, not to pay the money or deliver
the property to the latter, but rather to appear and
answer the plaintiff's suit. 15
In order that the trial court may validly acquire
jurisdiction to bind the person of the garnishee, it
is not necessary that summons be served upon
him. The garnishee need not be impleaded as a
party to the case. All that is necessary for the trial
court lawfully to bind the person of the garnishee
or any person who has in his possession credits
belonging to the judgment debtor is service upon
him of the writ of garnishment.
The Rules of Court themselves do not require that
the garnishee be served with summons or
impleaded in the case in order to make him liable.
Rule 39, Section 15 provides:
 Sec. 15. Execution of money
judgments. The officer must
enforce an execution of a money
judgment by levying on all the
property, real or personal of every
name and nature whatsoever, and
which may be disposed of for value,
of the judgment debtor not exempt
from execution . . .
Real property, stocks, shares, debts,
credits, and other personal
property, or any interest in either
real or personal property, may be
levied on in like manner and with
like effect as under a writ of
attachment. (Emphasis supplied).
Rule 57, Section 7(e) in turn reads:
Sec. 7. Attachment of real and
personal property; recording
thereof. Properties shall be
attached by the officer executing
the order in the following manner:
xxx xxx xxx
(e) Debts and credits, and other
personal property not capable of
manual delivery, by leaving with the
person owing such debts, or having
his possession or under his control
such credits or other personal
property, or with his agent, a copy
of the order, and notice that the
debts owing by him to the party
against whom attachment is issued,
and the credits and other personal
property in his possession, or under
his control, belonging to said party,
are attached in pursuance of such
order;
xxx xxx xxx
(Emphasis supplied)
Through service of the writ of garnishment, the
garnishee becomes a "virtual party" to, or a
"forced intervenor" in, the case and the trial court
thereby acquires jurisdiction to bind him to
compliance with all orders and processes of the
trial court with a view to the complete satisfaction
of the judgment of the court. In Bautista v.
Barredo, 16 the Court, through Mr. Justice
Bautista Angelo, held:
While it is true that defendant Jose
M. Barredo was not a party in Civil
Case No. 1636 when it was
instituted by appellant against the
Philippine Ready Mix Concrete
Company, Inc., however,
jurisdiction was acquired over him
8 Prov Rem. Cases Batch 2
by the court and he became a
virtual party to the case when, after
final judgment was rendered in said
case against the company, the
sheriff served upon him a writ of
garnishment in behalf of appellant.
Thus, as held by this Court in the
case of Tayabas Land Company vs.
Sharruf, 41 Phil. 382, the
proceeding by garnishment is a
species of attachment for reaching
credits belonging to the judgment
debtor and owing to him from a
stranger to the litigation. By means
of the citation, the stranger
becomes a forced intervenor; and
the court, having acquired
jurisdiction over him by means of
the citation, requires him to pay his
debt, not to his former creditor, but
to the new creditor, who is creditor
in the main litigation. (Emphasis
supplied).
In Rizal Commercial Banking Corporation v. De
Castro, 17 the Court stressed that the asset or
credit garnished is thereupon subjected to a
specific lien:
The garnishment of property to
satisfy a writ of execution operates
as an attachment and fastens upon
the property a lien by which the
property is brought under the
jurisdiction of the court issuing the
writ. It is brought into custodia
legis, under the sole control of such
court. 18 (Emphasis supplied)
In the present case, there can be no doubt,
therefore, that the trial court actually acquired
jurisdiction over petitioner Perla when it was
served with the writ of garnishment of the third-
party liability insurance policy it had issued in favor
of judgment debtor Nelia Enriquez. Perla cannot
successfully evade liability thereon by such a
contention.
Every interest which the judgment debtor may
have in property may be subjected to execution.19
In the instant case, the judgment debtor Nelia
Enriquez clearly had an interest in the proceeds of
the third-party liability insurance contract. In a
third-party liability insurance contract, the insurer
assumes the obligation of paying the injured third
party to whom the insured is liable. 20 The insurer
becomes liable as soon as the liability of the
insured to the injured third person attaches. Prior
payment by the insured to the injured third person
is not necessary in order that the obligation of the
insurer may arise. From the moment that the
insured became liable to the third person, the
insured acquired an interest in the insurance
contract, which interest may be garnished like any
other credit. 21
Petitioner also contends that in order that it may
be held liable under the third-party liability
insurance, a separate action should have been
commenced by private respondents to establish
petitioner's liability. Petitioner invokes Economic
Insurance Company, Inc. vs. Torres, 22 which
stated:
It is clear from Section 45, Rule 39
that if a persons alleged to have
property of the judgment debtor or
to be indebted to him claims an
interest in the property adverse to
him or denies the debt, the court
may only authorize the judgment
creditor to institute an action
against such person for the
recovery of such interest or debt.
Said section does not authorize the
court to make a finding that the
third person has in his possession
property belonging to the judgment
debtor or is indebted to him and to
order said third person to pay the
amount to the judgment creditor.
It has been held that the only
power of the court in proceedings
supplemental to execution is to
niake an order authorizing the
creditor to sue in the proper court
to recover an indebtedness due to
the judgment debtor. The court has
no jurisdiction to try summarily the
question whether the third party
served with notice of execution and
levy is indebted to defendant when
such indebtedness is denied. To
make an order in relation to
property which the garnishee
claimed to own in his own right,
requiring its application in
satisfaction of judgment of another,
would be to deprive the garnishee
of property upon summary
proceeding and without due process
of law. (Emphasis supplied)
But reliance by petitioner on the case of Economic
Insurance Company, Inc. v. Torres (supra) is
misplaced. The Court there held that a separate
action needs to be commenced when the
garnishee "claims an interest in the property
adverse to him (judgment debtor) or denies the
9 Prov Rem. Cases Batch 2
debt." In the instant case, petitioner Perla did not
deny before the trial court that it had indeed
issued a third-party liability insurance policy in
favor of the judgment debtor. Petitioner moreover
refrained from setting up any substantive defense
which it might have against the insured-judgment
debtor. The only ground asserted by petitioner in
its "Motion for Reconsideration of the Order dated
August 6, 1979 and to Quash Notice of
Garnishment" was lack of jurisdiction of the trial
court for failure to implead it in the case by serving
it with summons. Accordingly, Rule 39, Section 45
of the Rules of Court is not applicable in the
instant case, and we see no need to require a
separate action against Perla: a writ of
garnishment suffices to hold petitioner answerable
to the judgment creditor. If Perla had any
substantive defenses against the judgment debtor,
it is properly deemed to have waived them by
laches.
WHEREFORE, the Petition for Certiorari and
Prohibition is hereby DISMISSED for having been
filed out of time and for lack of merit. The assailed
Orders of the trial court are hereby AFFIRMED.
Costs against petitioner. This Decision is
immediately executory.
SO ORDERED.
Narvasa, CJ., Cruz, Grio-Aquino and Medialdea,
JJ., concur.
G.R. No. L-35990 June 17, 1981
ABOITIZ & COMPANY, INC., HONORABLE
VICENTE N. CUSI JR., Judge of the Court of
First Instance of Davao, and the
PROVINCIAL SHERIFF OF DAVAO DEL SUR,
petitioners,
vs.
COTABATO BUS COMPANY, INC., respondent.
DE CASTRO, J.:
The instant petition stemmed from Civil Case No.
7329 of the Court of First Instance of Davao
(Branch 1) in which a writ of preliminary
attachment was issued ex-parte by the Court on
the strength of an affidavit of merit attached to the
verified complaint filed by petitioner herein, Aboitiz
& Co., Inc., on November 2, 1971, as plaintiff in
said case, for the collection of money in the sum of
P 155,739.41, which defendant therein, the
respondent in the instant case, Cotabato Bus Co.,
owed the said petitioner.
By virtue of the writ of preliminary attachment, the
provincial sheriff attached personal properties of
the defendant bus company consisting of some
buses, machinery and equipment. The ground for
the issuance of the writ is, as alleged in the
complaint and the affidavit of merit executed by
the Assistant Manager of petitioner, that the
defendant "has removed or disposed of its
properties or assets, or is about to do so, with
intent to defraud its creditors."
Respondent company filed in the lower court an
"Urgent Motion to Dissolve or Quash Writ of
Attachment" to which was attached an affidavit
executed by its Assistant Manager, Baldovino
Lagbao, alleging among other things that "the
Cotabato Bus Company has not been selling or
disposing of its properties, neither does it intend to
do so, much less to defraud its creditors; that also
the Cotabato Bus Company, Inc. has been
acquiring and buying more assets". An opposition
and a supplemental opposition were filed to the
urgent motion. The lower court denied the motion
stating in its Order that "the testimony of
Baldovino Lagbao, witness for the defendant,
corroborates the facts in the plaintiff's affidavit
instead of disproving or showing them to be
untrue."
A motion for reconsideration was filed by the
defendant bus company but the lower court denied
it. Hence, the defendant went to the Court of
Appeals on a petition for certiorari alleging grave
abuse of discretion on the part of herein
respondent Judge, Hon. Vicente R. Cusi Jr. On
giving due course to the petition, the Court of
Appeals issued a restraining order restraining the
trial court from enforcing further the writ of
attachment and from proceeding with the hearing
of Civil Case No. 7329. In its decision promulgated
on October 3, 1971, the Court of Appeals declared
"null and void the order/writ of attachment dated
November 3, 1971 and the orders of December 2,
1971, as well as that of December 11, 1971,
ordered the release of the attached properties, and
made the restraining order originally issued
permanent.
10 Prov Rem. Cases Batch 2
The present recourse is an appeal by certiorari
from the decision of the Court of Appeals reversing
the assailed orders of the Court of First Instance of
Davao, (Branch I), petitioner assigning against the
lower court the following errors:
ERROR I
THE COURT OF APPEALS ERRED IN HASTILY AND
PERFUNCTORILY RENDERING, ON OCTOBER 3,
1971, A DECISION WITHOUT CONSIDERING
MOST OF THE EVIDENCE SUCH THAT
l) EVEN AN IMPORTANT FACT, ESTABLISHED BY
DOCUMENTARY EVIDENCE AND NOT DENIED BY
RESPONDENT, IS MENTIONED ONLY AS A "CLAIM"
OF PETITIONER COMPANY;
2) THE DECISION CONTAINS NO DISCUSSION
AND APPRECIATION OF THE FACTS AS PROVED,
ASSEMBLED AND PRESENTED BY PETITIONER
COMPANY SHOWING IN THEIR TOTALITY
THAT RESPONDENT HAS REMOVED, DIVERTED
OR DISPOSED OF ITS BANK DEPOSITS, INCOME
AND OTHER LIQUID ASSETS WITH INTENT TO
DEFRAUD ITS CREDITORS, ESPECIALLY ITS
UNSECURED SUPPLIERS;
3) THE DECISION IGNORES THE SIGNIFICANCE
OF THE REFUSAL OF RESPONDENT TO PERMIT,
UNDER REP. ACT NO. 1405, THE METROPOLITAN
BANK & TRUST CO. TO BRING, IN COMPLIANCE
WITH A subpoena DUCES TECUM TO THE TRIAL
COURT ALL THE RECORDS OF RESPONDENT'S
DEPOSITS AND WITHDRAWALS UNDER ITS
CURRENT AND SAVINGS ACCOUNTS (NOW NIL)
FOR EXAMINATION BY PETITIONER COMPANY
FOR THE PURPOSE OF SHOWING DIRECTLY THE
REMOVAL, DIVERSION OR DISPOSAL OF
RESPONDENT'S DEPOSITS AND INCOME WITH
INTENT TO DEFRAUD ITS CREDITORS.
ERROR II
THE COURT OF APPEALS ERRED IN NOT
APPRECIATING THE FACTS THAT RESPONDENT'S
BANK DEPOSITS ARE NIL AS PROOF WHICH -
TOGETHER WITH RESPONDENT'S ADMISSION OF
AN INCOME OF FROM P10,000.00 to P 14,000.00
A DAY AND THE EVIDENCE THAT IT CANNOT
PRODUCE P 634.00 WITHOUT USING A PERSONAL
CHECK OF ITS PRESIDENT AND MAJORITY
STOCKHOLDER, AND OTHER EVIDENCE SHOWS
THE REMOVAL OR CHANNELING OF ITS INCOME
TO THE LATTER.
ERROR III
THE COURT OF APPEALS ERRED IN NOT
APPRECIATING THE RESCUE AND REMOVAL BY
RESPONDENT OF FIVE ATTACHED BUSES,
DURING THE DEPENDENCY OF ITS MOTION TO
DISSOLVE THE ATTACHMENT IN THE, TRIAL
COURT, AS A FURTHER ACT OF REMOVAL OF
PROPERTIES BY RESPONDENT WITH INTENT TO
DEFRAUD PETITIONER COMPANY, FOR WHOSE
BENEFIT SAID BUSES HAD BEEN ATTACHED.
The questions raised are mainly, if not solely,
factual revolving on whether respondent bus
company has in fact removed its properties, or is
about to do so, in fraud of its creditors. This being
so, the findings of the Court of Appeals on said
issues of facts are generally considered conclusive
and final, and should no longer be disturbed.
However, We gave due course to the petition
because it raises also a legal question of whether
the writ of attachment was properly issued upon a
showing that defendant is on the verge of
insolvency and may no longer satisfy its just debts
without issuing the writ. This may be inferred from
the emphasis laid by petitioner on the fact that
even for the measly amount of P 634.00 payment
thereof was made with a personal check of the
respondent company's president and majority
stockholder, and its debts to several creditors,
including secured ones like the DBP, have
remained unpaid, despite its supposed daily
income of an average of P 12,000.00, as declared
by its assistant manager, Baldovino Lagbao. 1
Going forthwith to this question of whether
insolvency, which petitioners in effect claims to
have been proven by the evidence, particularly by
company's bank account which has been reduced
to nil, may be a ground for the issuance of a writ
of attachment, the respondent Court of Appeals
correctly took its position in the negative on the
strength of the explicit ruling of this Court in Max
Chamorro & Co. vs. Philippine Ready Mix Concrete
Company, Inc. and Hon. Manuel P. Barcelona. 2
Petitioner, however, disclaims any intention of
advancing the theory that insolvency is a ground
for the issuance of a writ of attachment , 3 and
insists that its evidence -is intended to prove his
assertion that respondent company has disposed,
or is about to dispose, of its properties, in fraud of
its creditors. Aside from the reference petitioner
had made to respondent company's "nil" bank
account, as if to show removal of company's funds,
petitioner also cited the alleged non-payment of its
11 Prov Rem. Cases Batch 2
other creditors, including secured creditors like the
DBP to which all its buses have been mortgaged,
despite its daily income averaging P12,000.00, and
the rescue and removal of five attached buses.
It is an undisputed fact that, as averred by
petitioner itself, the several buses attached are
nearly junks. However, upon permission by the
sheriff, five of them were repaired, but they were
substituted with five buses which were also in the
same condition as the five repaired ones before
the repair. This cannot be the removal intended as
ground for the issuance of a writ of attachment
under section 1 (e), Rule 57, of the Rules of Court.
The repair of the five buses was evidently
motivated by a desire to serve the interest of the
riding public, clearly not to defraud its creditors, as
there is no showing that they were not put on the
run after their repairs, as was the obvious purpose
of their substitution to be placed in running
condition.
Moreover, as the buses were mortgaged to the
DBP, their removal or disposal as alleged by
petitioner to provide the basis for its prayer for the
issuance of a writ of attachment should be very
remote, if not nil. If removal of the buses had in
fact been committed, which seems to exist only in
petitioner's apprehensive imagination, the DBP
should not have failed to take proper court action,
both civil and criminal, which apparently has not
been done.
The dwindling of respondent's bank account
despite its daily income of from P10,000.00 to
P14,000.00 is easily explained by its having to
meet heavy operating expenses, which include
salaries and wages of employees and workers. If,
indeed the income of the company were
sufficiently profitable, it should not allow its buses
to fall into disuse by lack of repairs. It should also
maintain a good credit standing with its suppliers
of equipment, and other needs of the company to
keep its business a going concern. Petitioner is
only one of the suppliers.
It is, indeed, extremely hard to remove the buses,
machinery and other equipments which
respondent company have to own and keep to be
able to engage and continue in the operation of its
transportation business. The sale or other form of
disposition of any of this kind of property is not
difficult of detection or discovery, and strangely,
petitioner, has adduced no proof of any sale or
transfer of any of them, which should have been
easily obtainable.
In the main, therefore, We find that the
respondent Court of Appeals has not committed
any reversible error, much less grave abuse of
discretion, except that the restraining order issued
by it should not have included restraining the trial
court from hearing the case, altogether.
Accordingly, the instant petition is hereby denied,
but the trial court is hereby ordered to immediately
proceed with the hearing of Civil Case No. 7329
and decide it in accordance with the law and the
evidence. No special pronouncement as to costs.
SO ORDERED.
Barredo (Chairman), Guerrero *, and Abad Santos,
JJ., concur.
Aquino, J., concurs in the result.
Concepcion Jr., J., took no part.
[G.R. No. 115678. February 23, 2001]
PHILIPPINE BANK OF COMMUNICATIONS,
petitioner, vs. HON. COURT OF APPEALS and
BERNARDINO VILLANUEVA, respondents.
[G.R. No. 119723. February 23, 2001]
PHILIPPINE BANK OF COMMUNICATIONS,
vs. HON. COURT OF APPEALS and FILIPINAS
TEXTILE MILLS, INC
DECISION
YNARES-SANTIAGO, J.:
Before us are consolidated petitions for review
both filed by Philippine Bank of Communications;
one against the May 24, 1994 Decision of
respondent Court of Appeals in CA-G.R. SP No.
32863i[1] and the other against its March 31, 1995
Decision in CA-G.R. SP No. 32762.ii[2] Both
Decisions set aside and nullified the August 11,
1993 Orderiii[3] of the Regional Trial Court of
Manila, Branch 7, granting the issuance of a writ of
preliminary attachment in Civil Case No. 91-56711.
12 Prov Rem. Cases Batch 2
The case commenced with the filing by petitioner,
on April 8, 1991, of a Complaint against private
respondent Bernardino Villanueva, private
respondent Filipinas Textile Mills and one Sochi
Villanueva (now deceased) before the Regional
Trial Court of Manila. In the said Complaint,
petitioner sought the payment of P2,244,926.30
representing the proceeds or value of various
textile goods, the purchase of which was covered
by irrevocable letters of credit and trust receipts
executed by petitioner with private respondent
Filipinas Textile Mills as obligor; which, in turn,
were covered by surety agreements executed by
private respondent Bernardino Villanueva and
Sochi Villanueva. In their Answer, private
respondents admitted the existence of the surety
agreements and trust receipts but countered that
they had already made payments on the amount
demanded and that the interest and other charges
imposed by petitioner were onerous.
On May 31, 1993, petitioner filed a Motion for
Attachment,iv[4] contending that violation of the
trust receipts law constitutes estafa, thus providing
ground for the issuance of a writ of preliminary
attachment; specifically under paragraphs b and d,
Section 1, Rule 57 of the Revised Rules of Court.
Petitioner further claimed that attachment was
necessary since private respondents were
disposing of their properties to its detriment as a
creditor. Finally, petitioner offered to post a bond
for the issuance of such writ of attachment.
The Motion was duly opposed by private
respondents and, after the filing of a Reply thereto
by petitioner, the lower court issued its August 11,
1993 Order for the issuance of a writ of
preliminary attachment, conditioned upon the filing
of an attachment bond. Following the denial of the
Motion for Reconsideration filed by private
respondent Filipinas Textile Mills, both private
respondents filed separate petitions for certiorari
before respondent Court assailing the order
granting the writ of preliminary attachment.
Both petitions were granted, albeit on different
grounds. In CA-G.R. SP No. 32762, respondent
Court of Appeals ruled that the lower court was
guilty of grave abuse of discretion in not
conducting a hearing on the application for a writ
of preliminary attachment and not requiring
petitioner to substantiate its allegations of fraud,
embezzlement or misappropriation. On the other
hand, in CA-G.R. SP No. 32863, respondent Court
of Appeals found that the grounds cited by
petitioner in its Motion do not provide sufficient
basis for the issuance of a writ of preliminary
attachment, they being mere general averments.
Respondent Court of Appeals held that neither
embezzlement, misappropriation nor incipient
fraud may be presumed; they must be established
in order for a writ of preliminary attachment to
issue.
Hence, the instant consolidatedv[5] petitions
charging that respondent Court of Appeals erred in
1. Holding that there was no sufficient basis for the
issuance of the writ of preliminary attachment in
spite of the allegations of fraud, embezzlement
and misappropriation of the proceeds or goods
entrusted to the private respondents;
2. Disregarding the fact that that the failure of
FTMI and Villanueva to remit the proceeds or
return the goods entrusted, in violation of private
respondents fiduciary duty as entrustee, constitute
embezzlement or misappropriation which is a valid
ground for the issuance of a writ of preliminary
attachment.vi[6]
We find no merit in the instant petitions.
To begin with, we are in accord with respondent
Court of Appeals in CA-G.R. SP No. 32863 that the
Motion for Attachment filed by petitioner and its
supporting affidavit did not sufficiently establish
the grounds relied upon in applying for the writ of
preliminary attachment.
The Motion for Attachment of petitioner states that
1. The instant case is based on the failure of
defendants as entrustee to pay or remit the
proceeds of the goods entrusted by plaintiff to
defendant as evidenced by the trust receipts
(Annexes B, C and D of the complaint), nor to
return the goods entrusted thereto, in violation of
their fiduciary duty as agent or entrustee;
2. Under Section 13 of P.D. 115, as amended,
violation of the trust receipt law constitute(s)
estafa (fraud and/or deceit) punishable under
Article 315 par. 1[b] of the Revised Penal Code;
3. On account of the foregoing, there exist(s)
valid ground for the issuance of a writ of
preliminary attachment under Section 1 of Rule 57
of the Revised Rules of Court particularly under
sub-paragraphs b and d, i.e. for embezzlement or
fraudulent misapplication or conversion of money
(proceeds) or property (goods entrusted) by an
13 Prov Rem. Cases Batch 2
agent (entrustee) in violation of his fiduciary duty
as such, and against a party who has been guilty
of fraud in contracting or incurring the debt or
obligation;
4. The issuance of a writ of preliminary
attachment is likewise urgently necessary as there
exist(s) no sufficient security for the satisfaction of
any judgment that may be rendered against the
defendants as the latter appears to have disposed
of their properties to the detriment of the creditors
like the herein plaintiff;
5. Herein plaintiff is willing to post a bond in
the amount fixed by this Honorable Court as a
condition to the issuance of a writ of preliminary
attachment against the properties of the
defendants.
Section 1(b) and (d), Rule 57 of the then
controlling Revised Rules of Court, provides, to wit
SECTION 1. Grounds upon which attachment may
issue. A plaintiff or any proper party may, at the
commencement of the action or at any time
thereafter, have the property of the adverse party
attached as security for the satisfaction of any
judgment that may be recovered in the following
cases:
xxx xxx xxx
(b) In an action for money or property
embezzled or fraudulently misapplied or converted
to his use by a public officer, or an officer of a
corporation, or an attorney, factor, broker, agent
or clerk, in the course of his employment as such,
or by any other person in a fiduciary capacity, or
for a willful violation of duty;
xxx xxx xxx
(d) In an action against a party who has been
guilty of fraud in contracting the debt or incurring
the obligation upon which the action is brought, or
in concealing or disposing of the property for the
taking, detention or conversion of which the action
is brought;
xxx xxx xxx
While the Motion refers to the transaction
complained of as involving trust receipts, the
violation of the terms of which is qualified by law
as constituting estafa, it does not follow that a writ
of attachment can and should automatically issue.
Petitioner cannot merely cite Section 1(b) and (d),
Rule 57, of the Revised Rules of Court, as mere
reproduction of the rules, without more, cannot
serve as good ground for issuing a writ of
attachment. An order of attachment cannot be
issued on a general averment, such as one
ceremoniously quoting from a pertinent rule.vii[7]
The supporting Affidavit is even less instructive. It
merely states, as follows --
I, DOMINGO S. AURE, of legal age, married, with
address at No. 214-216 Juan Luna Street, Binondo,
Manila, after having been sworn in accordance
with law, do hereby depose and say, THAT:
1. I am the Assistant Manager for Central
Collection Units Acquired Assets Section of the
plaintiff, Philippine Bank of Communications, and
as such I have caused the preparation of the
above motion for issuance of a writ of preliminary
attachment;
2. I have read and understood its contents
which are true and correct of my own knowledge;
3. There exist(s) sufficient cause of action
against the defendants in the instant case;
4. The instant case is one of those mentioned
in Section 1 of Rule 57 of the Revised Rules of
Court wherein a writ of preliminary attachment
may be issued against the defendants, particularly
sub-paragraphs b and d of said section;
5. There is no other sufficient security for the
claim sought to be enforced by the instant case
and the amount due to herein plaintiff or the value
of the property sought to be recovered is as much
as the sum for which the order for attachment is
granted, above all legal counterclaims.
Again, it lacks particulars upon which the court can
discern whether or not a writ of attachment should
issue.
Petitioner cannot insist that its allegation that
private respondents failed to remit the proceeds of
the sale of the entrusted goods nor to return the
same is sufficient for attachment to issue. We note
that petitioner anchors its application upon Section
1(d), Rule 57. This particular provision was
adequately explained in Liberty Insurance
Corporation v. Court of Appeals,viii[8] as follows
14 Prov Rem. Cases Batch 2
To sustain an attachment on this ground, it must
be shown that the debtor in contracting the debt
or incurring the obligation intended to defraud the
creditor. The fraud must relate to the execution of
the agreement and must have been the reason
which induced the other party into giving consent
which he would not have otherwise given. To
constitute a ground for attachment in Section 1
(d), Rule 57 of the Rules of Court, fraud should be
committed upon contracting the obligation sued
upon. A debt is fraudulently contracted if at
the time of contracting it the debtor has a
preconceived plan or intention not to pay, as
it is in this case. Fraud is a state of mind and need
not be proved by direct evidence but may be
inferred from the circumstances attendant in each
case (Republic v. Gonzales, 13 SCRA 633).
(Emphasis ours)
We find an absence of factual allegations as to
how the fraud alleged by petitioner was
committed. As correctly held by respondent Court
of Appeals, such fraudulent intent not to honor the
admitted obligation cannot be inferred from the
debtors inability to pay or to comply with the
obligations.ix[9] On the other hand, as stressed,
above, fraud may be gleaned from a preconceived
plan or intention not to pay. This does not appear
to be so in the case at bar. In fact, it is alleged by
private respondents that out of the total
P419,613.96 covered by the subject trust receipts,
the amount of P400,000.00 had already been paid,
leaving only P19,613.96 as balance. Hence,
regardless of the arguments regarding penalty and
interest, it can hardly be said that private
respondents harbored a preconceived plan or
intention not to pay petitioner.
The Court of Appeals was correct, therefore, in its
finding in CA-G.R. SP No. 32863 that neither
petitioners Motion or its supporting Affidavit
provides sufficient basis for the issuance of the
writ of attachment prayed for.
We also agree with respondent Court of Appeals in
CA-G.R. SP No. 32762 that the lower court should
have conducted a hearing and required private
petitioner to substantiate its allegations of fraud,
embezzlement and misappropriation.
To reiterate, petitioners Motion for Attachment fails
to meet the standard set forth in D.P. Lub Oil
Marketing Center, Inc. v. Nicolas,x[10] in
applications for attachment. In the said case, this
Court cautioned --
The petitioners prayer for a writ of preliminary SO ORDERED.
attachment hinges on the allegations in paragraph
16 of the complaint and paragraph 4 of the Davide, Jr., C.J., (Chairman), Puno, Kapunan, and
affidavit of Daniel Pe which are couched in general Pardo, JJ., concur.
terms devoid of particulars of time, persons and
places to support such a serious assertion that
defendants are disposing of their properties in
fraud of creditors. There is thus the necessity of
giving to the private respondents an opportunity to
ventilate their side in a hearing, in accordance with
due process, in order to determine the truthfulness
of the allegations. But no hearing was afforded to
G.R. No. L-28297 March 30, 1970
the private respondents the writ having been
issued ex parte. A writ of attachment can only be
ELPIDIO JAVELLANA, v. D. O. PLAZA
granted on concrete and specific grounds and not
ENTERPRISES, INC.
on general averments merely quoting the words of
the rules.
REYES, J.B.L., J.:
As was frowned upon in D.P. Lub Oil Marketing
Direct appeal, on points of law, from an order of
Center, Inc.,xi[11] not only was petitioners
the Court of First Instance of Manila, in its Civil
application defective for having merely given
Case No. 46762, modifying an earlier decision for
general averments; what is worse, there was no
the plaintiff by reducing the rate of interest on the
hearing to afford private respondents an
sum adjudged, and also the attorney's fees; and
opportunity to ventilate their side, in accordance
by ordering the plaintiff to pay damages to the
with due process, in order to determine the
defendant on account of a preliminary attachment
truthfulness of the allegations of petitioner. As
obtained by the former upon the latter's
already mentioned, private respondents claimed
counterclaim.chanroblesvirtualawlibrarychanrobles
that substantial payments were made on the
virtual law library
proceeds of the trust receipts sued upon. They
also refuted the allegations of fraud,
embezzlement and misappropriation by averring The complaint in the aforesaid civil case was for
that private respondent Filipinas Textile Mills could collection of the sum of P43,017.32 representing
not have done these as it had ceased its balance due on purchases of wire ropes, tractors
operations starting in June of 1984 due to workers and diesel parts made by the defendant-appellee,
strike. These are matters which should have been D. O. Plaza Enterprises, Inc., from the plaintiff-
addressed in a preliminary hearing to guide the appellant, Elpidio Javellana. The complaint prayed
lower court to a judicious exercise of its discretion that the defendant be ordered to pay the said sum
regarding the attachment prayed for. On this of P43,017.32, with legal interest, plus attorney's
score, respondent Court of Appeals was correct in fees in the sum of P5,000.00; it also prayed for a
setting aside the issued writ of preliminary writ of preliminary
attachment. attachment.chanroblesvirtualawlibrarychanrobles
virtual law library
Time and again, we have held that the rules on the
issuance of a writ of attachment must be Upon plaintiff's putting up a bond, the trial court,
construed strictly against the applicants. This on 15 April 1961, issued a writ of attachment. On
stringency is required because the remedy of 20 May 1961, the defendant moved to discharge
attachment is harsh, extraordinary and summary in the attachment on the ground that it was
nature. If all the requisites for the granting of the improperly issued. The motion was
writ are not present, then the court which issues it denied.chanroblesvirtualawlibrarychanrobles virtual
acts in excess of its jurisdiction.xii[12] law library

WHEREFORE, for the foregoing reasons, the On 7 November 1961, the defendant filed its
instant petitions are DENIED. The decision of the answer and counter-claimed for damages arising
Court of Appeals in CA-G.R. SP No. 32863 and CA- from the attachment. The plaintiff answered and
G.R. SP No. 32762 are AFFIRMED. No interposed a counterclaim to the
pronouncement as to costs. counterclaim.chanroblesvirtualawlibrarychanrobles
virtual law library
15 Prov Rem. Cases Batch 2
After some years, or on 27 April 1966, the
defendant moved for the dissolution of the
preliminary attachment. Upon its filing a
counterbond, the court, on 7 May 1966, dissolved
the
attachment.chanroblesvirtualawlibrarychanrobles
virtual law library
On 3 November 1966, the plaintiff filed a motion to
admit his amended complaint, which the court
granted on 12 November 1966. In this amended
complaint, the plaintiff averred that of the sum of
P43,017.32 alleged in the original complaint, the
defendant has paid P3,900.00, thereby leaving a
balance of P39,117.32 unpaid, but that, as
indicated by invoices, defendant's purchases were
payable within thirty (30) days and were to bear
interest of 12% per annum plus 25% attorney's
fees. The amended complaint accordingly prayed
for the increased amounts. Defendant did not
answer this amended
complaint.chanroblesvirtualawlibrarychanrobles
virtual law library
After trial, the court, on 15 June 1967, rendered
judgment. It found the following facts:
.... During the period from 23 July 1959 to 30 July
1960, defendant, in a series of transactions,
purchased from plaintiff wire ropes, tractors and
diesel spare parts, (in) payment for which he
issued several checks amounting to P43,017.32,
which, when presented to the bank, were
dishonored for lack of funds. Defendant
substituted these checks with another set of
checks for the same amount, but again, the same
were dishonored for lack of funds, as evidenced by
Exhibits A to M, except for one check in the
amount of P3,900.00 as evidenced by Exhibit C.
Thus, the principal obligation was reduced to
P39,117.32. At the time of the issuance of the said
checks, the defendant never informed plaintiff that
it had funds to back them up. Plaintiff made
demands to defendant for payment, but defendant
pleaded for time and liberalization of payment,
which was rejected by the plaintiff. The
transactions in question were covered by invoices
listed in Exhibit P, a sample of which is evidenced
by Exhibit C, wherein said transactions were for
30-day term, 12% interest per annum to be
charged from date of invoice, and 25% attorney's
fees in case of
litigation.chanroblesvirtualawlibrarychanrobles
virtual law library
16 Prov Rem. Cases Batch 2
The defendant claims that there were other
transactions between plaintiff and defendant
involving the amount of P196,828.58; that it had
no intention not to pay the checks it issued upon
presentment; and that it suffered damages in the
amount of P14,800.00 by reason of the
attachment.chanroblesvirtualawlibrarychanrobles
virtual law library
xxx xxx xxxchanrobles virtual law library
The counterclaim for damages arising from the
attachment is without merit. The defendant was
manifestly in bad faith when it issued two sets of
bouncing checks. Hence, the attachment was not
improper, contrary to defendant's claim.
The dispositive portion of the decision decreed:
WHEREFORE, judgment is hereby rendered for the
plaintiff and against the defendant, ordering the
latter to pay the former the sum of P39,117.32
with interest at 12% per annum from 14 April
1961, the date of the filing of the original
complaint, until final payment, plus 25% of the
principal indebtedness as attorney's fees and costs
of suit.chanroblesvirtualawlibrarychanrobles virtual
law library
The counterclaim as well as the counterclaim to
the counter claim are hereby dismissed for lack of
merit.
On 28 June 1967, the defendant moved to
reconsider. Over the objection of the plaintiff, the
court issued an order dated 10 August 1967, now
the subject of the present appeal, modifying the
previous decision, in the manner following:
WHEREFORE, the dispositive part of the decision
rendered in this case is hereby modified as
follows:chanrobles virtual law library
(a) By ordering the defendant to pay plaintiff the
sum of P39,117.20 plus the legal interest therein
from the filing of the complaint until the amount is
fully paid.chanroblesvirtualawlibrarychanrobles
virtual law library
(b) Ordering the plaintiff to pay defendant the sum
of P16,190.00, the amount of damages suffered by
the defendant on account of the preliminary
attachment of the defendant; andchanrobles
virtual law library
(c) By ordering the defendant to pay P5,000.00 as
attorney's
fees.chanroblesvirtualawlibrarychanrobles virtual
law library
Without pronouncement as to costs.
Plaintiff-appellant assigns the following errors: the
reduction of the attorney's fees, the reduction of
the interest, and the grant to the defendant of
damages arising from the
attachment.chanroblesvirtualawlibrarychanrobles
virtual law library
The first two assigned errors are well taken. The
court a quo reduced the interest stated in its
previous decision from 12% to mere legal interest
and the attorney's fees from 25% to P5,000.00 on
the basis of estoppel, the ground therefor being
that the reduced amounts were those alleged,
hence admitted, by the plaintiff in his original
complaint. This was error. The original complaint
was not formally offered in evidence. Having been
amended, the original complaint lost its character
as a judicial admission, which would have required
no proof, and became merely an extrajudicial
admission, the admissibility of which, as evidence,
requires its formal offer.
Pleadings superseded or amended disappear from
the record as judicial admissions. However, any
statement contained therein may be considered as
an extrajudicial admission, and as such, in order
that the court may take it into consideration, it
should offered formality in evidence. (5 Moran 58,
citing Lucido v. Calupitan, 27 Phil. 148; Bastida v.
Menzi, 58 Phil. 188.)chanrobles virtual law library
Where amended pleadings have been filed,
allegations in the original pleadings can have no
effect, unless formally offered in evidence. (Jones
on Evidence, Sec. 273.)
Since the record does not show that the complaint
(marked as Exhibit 115) was admitted in evidence,
there is no proof of estoppel on the part of the
plaintiff on his allegations in the complaint. Not
only this, but since the stipulation for 12% interest
on balance due and the 25% counsel fees appear
on the invoices themselves, appellee Plaza
Enterprises cannot fairly claim that it was deceived
or misled by the pleadings of appellant. Even
more, the original plea for P5,000.00 as attorney's
fees is only contained in the prayer of the original
complaint, and it is a well established rule that the
prayer for relief, although part of the complaint, is
17 Prov Rem. Cases Batch 2
no part of the cause of action and does not give
character, the plaintiff being entitled to as much
relief as the facts warrant (Rosales vs. Reyes, 25
Phil. 495; Aguilar vs. Rubiato, 40 Phil.
470).chanroblesvirtualawlibrarychanrobles virtual
law library
But the appellant's last assigned error is without
merit. Although the defendant was found to be in
bad faith in issuing two (2) sets of bouncing
checks in payment for its indebtedness, such bad
faith was not related to his having incurred the
obligation in favor of the plaintiff but to
defendant's failure to perform said obligation.
There was, therefore, no ground for the plaintiff to
attach the defendant's properties on the ground of
fraud. That the plaintiff acted in good faith in
securing attachment does not relieve him from the
damages that the defendant sustained by reason
of the attachment because he, the plaintiff, was, in
the first place, not entitled to attachments, the
element of malice was unnecessary (3 Moran,
Rules of Court,
19).chanroblesvirtualawlibrarychanrobles virtual
law library
FOR THE FOREGOING REASONS, the appealed
order is hereby reversed insofar as it reduced the
amount of attorney's fees and the interest on the
principal sum adjudged in the original decision
dated 15 June 1967; but the order is affirmed in all
other respects. No costs.
Concepcion, C.J., Dizon, Makalintal, Zaldivar,
Castro, Fernando, Teehankee, Barredo and
Villamor, JJ., concur.
G.R. No. 181721, September 09, 2015
WATERCRAFT VENTURE CORPORATION,
REPRESENTED BY ITS VICE-PRESIDENT,
ROSARIO E. RAOA
vs. ALFRED RAYMOND WOLFE
This is a petition for review on certiorari under
Rule 45 of the Rules of Court, seeking to reverse
and set aside the Court of Appeals (CA)
Resolution1 dated January 24, 2008 denying the
motion for reconsideration of its Decision2 dated
September 27, 2007 in CA-G.R. SP No. 97804.
The facts are as
follows:chanRoblesvirtualLawlibrary
Petitioner Watercraft Venture Corporation
(Watercraft) is engaged in the business of building,
repairing, storing and maintaining yachts, boats
and other pleasure crafts at the Subic Bay Freeport
Zone, Subic, Zambales. In connection with its
operations and maintenance of boat storage
facilities, it charges a boat storage fee of Two
Hundred Seventy-Two US Dollars (US$272.00) per
month with interest of 4% per month for unpaid
charges.
Sometime in June 1997, Watercraft hired
respondent Alfred Raymond Wolfe (Wolfe), a
British national and resident of Subic Bay Freeport
Zone, Zambales, as its Shipyard Manager.
During his empolyment, Wolfe stored the sailboat,
Knotty Gull, within Watercraft1 s boat storage
facilities, but never paid for the storage fees.
On March 7, 2002, Watercraft terminated the
employment of Wolfe.
Sometime in June 2002, Wolfe pulled out his
sailboat from Watercraft's storage facilities after
signing a Boat Pull-Out Clearance dated June 29,
2002 where he allegedly acknowledged the
outstanding obligation of Sixteen Thousand Three
Hundred and Twenty-Four and 82/100 US Dollars
(US$16,324.82) representing unpaid boat storage
fees for the period of June 1997 to June 2002.
Despite repeated demands, he failed to pay the
said amount.
Thus, on July 7, 2005, Watercraft filed against
Wolfe a Complaint for Collection of Sum of Money
with Damages with an Application for the Issuance
of a Writ of Preliminary Attachment. The case was
docketed as Civil Case No. 4534-MN, and raffled to
Branch 1703 of the Regional Trial Court (RTC) of
Malabon City.
In his Answer, Wolfe claimed he was hired as
Service and Repair Manager, instead of Shipyard
Manager. He denied owing Watercraft the amount
of US$16,324.82 representing storage fees for the
sailboat. He explained that the sailboat was
purchased in February 1998 as part of an
agreement between him and Watercraft1 s then
General Manager, Barry Bailey, and its President,
18 Prov Rem. Cases Batch 2
Ricky Sandoval, for it to be repaired and used as
training or fill-in project for the staff, and to be
sold later on. He added that pursuant to a central
Listing Agreement for the sale of the sailboat, he
was appointed as agent, placed in possession
thereof and entitled to a ten percent (10%) sales
commission. He insisted that nowhere in the
agreement was there a stipulation that berthing
and storage fees will be charged during the entire
time that the sailboat was in Watercraft's
dockyard. Thus, he claimed to have been surprised
when he received five (5) invoices billing him for
the said fees two (2) months after his services
were terminated. Fie pointed out that the
complaint was an offshoot of an illegal dismissal
case he filed against Watercraft which had been
decided in his favor by the Labor Arbiter.
Meanwhile, finding Watercraft's ex-parte
application for writ of preliminary attachment
sufficient in form and in substance pursuant to
Section 1 of Rule 57 of the Rules of Court, the RTC
granted the same in the Order dated July 15,
2005, thus:
WHEREFORE, let a Writ of Preliminary Attachment
be issued accordingly in favor of the plaintiff,
Watercraft Ventures Corporation conditioned upon
the filing of attachment bond in the amount of
Three Million Two Hundred Thirty-One
Thousand Five Hundred and Eighty-Nine and
25/100 Pesos (Php3,231,589.25) and the said
writ be served simultaneously with the summons,
copies of the complaint, application for
attachment, applicant's affidavit and bond, and this
Order upon the defendant.
SO ORDERED.4
Pursuant to the Order dated July 15, 2005, the
Writ of Attachment dated August 3, 2005 and the
Notice of Attachment dated August 5, 2005 were
issued, and Wolfe's two vehicles, a gray Mercedes
Benz with plate number XGJ 819 and a maroon
Toyota Corolla with plate number TFW 110, were
levied upon.
On August 12, 2005, Wolfe's accounts at the Bank
of the Philippine Islands were also garnished.
By virtue of the Notice of Attachment and Levy
dated September 5, 2005, a white Dodge pick-up
truck with plate number XXL 111 was also levied
upon. However, a certain Jeremy Simpson filed a
Motion for Leave of Court to Intervene, claiming
that he is the owner of the truck as shown by a
duly-notarized Deed of Sale executed on August 4,
2005, the Certificate of Registration No. 3628665-1
and the Official Receipt No. 271839105.
On November 8, 2005, Wolfe filed a Motion to
Discharge the Writ of Attachment, arguing that
Watercraft failed to show the existence of fraud
and that the mere failure to pay or perform an
obligation does not amount to fraud. Me also
claimed that he is not a flight risk for the following
reasons: (1) contrary to the claim that his Special
Working Visa expired in April 2005, his Special
Subic Working Visa and Alien Certificate of
Registration are valid until April 25, 2007 and May
11, 2006, respectively; (2) he and his family have
been residing in the Philippines since 1997; (3) he
is an existing stockholder and officer of Wolfe
Marine Corporation which is registered with the
Securities and Exchange Commission, and a
consultant of "Sudeco/Ayala" projects in Subic, a
member of the Multipartite Committee for the new
port development in Subic, and the Subic Chamber
of Commerce; and (4) he intends to finish
prosecuting his pending labor case against
Watercraft. On even date, Watercraft also filed a
Motion for Preliminary Hearing of its affirmative
defenses of forum shopping, litis pendentia, and
laches.
In an Order dated March 20, 2006, the RTC denied
Wolfe's Motion to Discharge Writ of Attachment
and Motion for Preliminary Hearing for lack of
merit.
Wolfe filed a motion for reconsideration, but the
RTC also denied it for lack of merit in an Order
dated November 10, 2006. Aggrieved, Wolfe filed a
petition for certiorari before the CA.
The CA granted Wolfe's petition in a Decision
dated September 2007, the dispositive portion of
which reads:
WHEREFORE, the Order dated March 20, 2006
and the Order dated November 10, 2006 of
respondent Judge are hereby ANNULLED and
SET ASIDE. Accordingly, the Writ of Attachment
issued on August 3, 2005, the Notice of
Attachment dated August 5, 2005 and the Notice
of Attachment and Levy dated September 5, 2005
are hereby also declared NULL and VOID, and
private respondent is DIRECTED to return to their
owners the vehicles that were attached pursuant
to the Writ.
SO ORDERED.5
19 Prov Rem. Cases Batch 2
The CA ruled that the act of issuing the writ of
preliminary attachment ex-parte constitutes grave
abuse of discretion on the part of the RTC, thus:
x x x In Cosiquien [v. Court of Appeals], the
Supreme Court held that:
"Where a judge issues a fatally defective
writ of preliminary attachment based on an
affidavit which failed to allege the requisites
prescribed for the issuance of the writ of
preliminary attachment, renders the writ of
preliminary attachment issued against the
property of the defendant fatally defective.
The judge issuing it is deemed to have acted
in excess of jurisdiction. In fact, the defect
cannot even be cured by amendment. Since the
attachment is a harsh and rigorous remedy which
exposed the debtor to humiliation and annoyance,
the rule authorizing its issuance must be strictly
construed in favor of defendant. It is the duty of
the court before issuing the Avrit to ensure
that all the requisites of the law have been
complied with. Otherwise, a judge acquires
no jurisdiction to issue the writ." (emphasis
supplied)
In the instant case, the Affidavit of Merit executed
by Rosario E. Raoa, Watercraft's Vice-President,
failed to show fraudulent intent on the part of
Wolfe to defraud the company. It merely
enumerated the circumstances tending to show
the alleged possibility of Wolfe's flight from the
country. And upon Wolfe's filing of the Motion to
Discharge the Writ, what the respondent Judge
should have done was to determine, through a
hearing, whether the allegations of fraud were
true. As further held in Cosiquien:
"When a judge issues a writ of preliminary
attachment ex-parte, it is incumbent on him,
upon proper challenge of his order to
determine whether or not the same was
improvidently issued. If the party against
whom the writ is prayed for squarely
controverts the allegation of fraud, it is
incumbent on the applicant to prove his
allegation. The burden of proving that there
indeed was fraud lies with the party making
such allegation. This finds support in Section 1,
Rule 131 Rules of Court. In this jurisdiction,
fraud is never presumed." (Emphasis supplied)
As correctly noted by Wolfe, although Sec. 1 of
Rule 57 allows a party to invoke fraud as a ground
for the issuance of a writ of attachment, the Rules
require that in all averments of fraud, the
circumstances constituting fraud must be stated
with particularity, pursuant to Rule 8, Section 5.
The Complaint merely stated, in paragraph 23
thereof that "For failing to pay the use [of]
facilities and services in the form of boat storage
fees, the Defendant is clearly guilty of fraud which
entitles the Plaintiff to a Writ of Preliminary
Attachment upon the property of the Defendant as
security for the satisfaction of any judgment
herein." This allegation does not constitute fraud
as contemplated by law, fraud being the "generic
term embracing all multifarious means which
human ingenuity can devise, and which are
resorted to by one individual to secure an
advantage over another by false suggestions or by
suppression of truth and includes all surprise, trick,
cunning, dissembling and any unfair way by which
another is cheated." In this instance, Wolfe's mere
failure to pay the boat storage fees does not
necessarily amount to fraud, absent any showing
that such failure was due to [insidious]
machinations and intent on his part to defraud
Watercraft of the amount due it.
As to the allegation that Wolfe is a flight risk,
thereby warranting the issuance of the writ, the
same lacks merit. The mere fact that Wolfe is a
British national does not automatically mean that
he would leave the country at will. As Wolfe avers,
he and his family had been staying in the
Philippines since 1997, with his daughters studying
at a local school. He also claims to be an existing
stockholder and officer of Wolfe Marine
Corporation, a SEC-registered corporation, as well
as a consultant of projects in the Subic Area, a
member of the Multipartite Committee for the new
port development in Subic, and a member of the
Subic Chamber of Commerce. More importantly,
Wolfe has a pending labor case against Watercraft
- a fact which the company glaringly failed to
mention in its complaint - which Wolfe claims to
want to prosecute until its very end. The said
circumstances, as well as the existence of said
labor case where Wolfe stands not only to be
vindicated for his alleged illegal dismissal, but also
to receive recompense, should have convinced the
trial court that Wolfe would not want to leave the
country at will just because a suit for the collection
of the alleged unpaid boat storage fees has been
filed against him by Watercraft.
Neither should the fact that Wolfe's Special
Working Visa expired in April 2005 lead
automatically to the conclusion that he would leave
the country. It is worth noting that all visas issued
by the government to foreigners staying in the
Philippines have expiration periods. These visas,
however, may be renewed, subject to the
20 Prov Rem. Cases Batch 2
requirements of the law. In Wolfe's case, he
indeed renewed his visa, as shown by Special
Working Visa No. 05-WV-0124P issued by the
Subic Bay Metropolitan Authority Visa Processing
Office on April 25, 2005, and with validity of two
(2) years therefrom. Moreover, his Alien Certificate
of Registration was valid up to May 11, 2006.
Based on the foregoing, it is therefore clear that
the writ was improvidently issued. It is well to
emphasize that "[T]he rules on the issuance of a
writ of attachment must be construed strictly
against the applicants. This stringency is required
because the remedy of attachment is harsh,
extraordinary and summary in nature. If all the
requisites for the granting of the writ are not
present, then the court which issues it acts in
excess of its jurisdiction. Thus, in this case,
Watercraft failed to meet all the requisites for the
issuance of the writ. Thus, in granting the same,
respondent Judge acted with grave abuse of
discretion.6
In a Resolution dated January 24, 2008, the CA
denied Watercraft's motion for reconsideration of
its Decision, there being no new or significant
issues raised in the motion.
Dissatisfied with the CA Decision and Resolution,
Watercraft filed this petition for review on
certiorari, raising these two issues:
I.
WHETHER THE EX-PARTE ISSUANCE OF THE
PRELIMINARY ATTACHMENT BY THE TRIAL
COURT IN FAVOR OF THE PETITIONER IS VALID.
II.
WHETHER THE ALLEGATIONS IN THE AFFIDAVIT
OF MERIT CONCERNING FRAUD ARE SUFFICIENT
TO WARRANT THE ISSUANCE OF A PRELIMINARY
WRIT OF ATTACHMENT BY THE TRIAL COURT IN
FAVOR OF THE PETITIONER.7
Watercraft argues that the CA erred in holding that
the RTC committed grave abuse of discretion in
issuing the writ of preliminary attachment, and in
finding that the affidavit of merit only enumerated
circumstances tending to show the possibility of
Wolfe's flight from the country, but failed to show
fraudulent intent on his part to defraud the
company.
Stressing that its application for such writ was
anchored on two (2) grounds under Section 1,8
Rule 57, Watercraft insists that, contrary to the CA
ruling, its affidavit of merit sufficiently averred with
particularity the circumstances constituting fraud
as a common element of said grounds.
Watercraft points out that its affidavit of merit
shows that from 1997, soon after Wolfe's
employment as Shipyard Manager, up to 2002,
when his employment was terminated, or for a
period of five (5) years, not once did he pay the
cost for the use of the company's boat storage
facilities, despite knowledge of obligation and
obvious ability to pay by reason of his position.
Watercraft adds that its affidavit clearly stated that
Wolfe, in an attempt to avoid settling of his
outstanding obligations to the company, signed a
Boat Pull-Out Clearance where he merely
acknowledged but did not pay Sixteen Thousand
Three Hundred and Twenty-Four and 82/100 US
Dollars (US$16,324.82) representing unpaid boat
storage fees for the period commencing June 1997
to June 2002. It avers that the execution of such
clearance enabled Wolfe to pull out his boat from
the company storage facilities without payment of
storage fees.
Watercraft also faults the CA in finding no merit in
its allegation that Wolfe is a flight risk. It avers
that he was supposed to stay and work in the
country for a limited period, and will eventually
leave; that despite the fact that his wife and
children reside in the country, he can still leave
with them anytime; and that his work in the
country will not prevent him from leaving, thereby
defeating the purpose of the action, especially
since he had denied responsibility for his
outstanding obligations. It submits that the CA
overlooked paragraph 28 of its Complaint which
alleged that "[i]n support of the foregoing
allegations and the prayer for the issuance of a
Writ of Preliminary Attachment in the instant case,
the Plaintiff has attached hereto the Affidavit of
the Vice-President of the Plaintiff, MS. ROSARIO E.
RANOA x x x."9
Watercraft asserts that it has sufficiently complied
with the only requisites for the issuance of the writ
of preliminary attachment under Section 3, Rule 57
of the Rules of Court, i.e., affidavit of merit and
bond of the applicant. It posits that contrary to the
CA ruling, there is no requirement that evidence
must first be offered before a court can grant such
writ on the basis of Section 1 (d) of Rule 57, and
that the rules only require an affidavit showing
that the case is one of those mentioned in Section
1, Rule 57. It notes that although a party is
21 Prov Rem. Cases Batch 2
entitled to oppose an application for the issuance
of the writ or to move for the discharge thereof by
controverting the allegations of fraud, such rule
does not apply when the same allegations
constituting fraud are the very facts disputed in
the main action, as in this case.
Watercraft also points out the inconsistent stance
of Wolfe with regard to the ownership and
possession of the sailboat. Contrary to Wolfe's
Answer that the purchase of the sailboat was
made pursuant to a three (3)-way partnership
agreement between him and its General Manager
and Executive Vice-President, Barry Bailey, and its
President, Ricky Sandoval, Watercraft claims that
he made a complete turnaround and exhibited acts
of sole-ownership by signing the Boat Pull-Out
Clearance in order to retrieve the sailboat. It
argues that common sense and logic would dictate
that he should have invoked the existence of the
partnership to answer the demand for payment of
the storage fees.
Watercraft contends that in order to pre-empt
whatever action it may decide to take with respect
to the sailboat in relation to his liabilities, Wolfe
accomplished in no time the clearance that paved
the way for its removal from the company's
premises without paying his outstanding
obligations. It claims that such act reveals a
fraudulent intent to use the company storage
facilities without payment of storage fees, and
constitutes unjust enrichment.
The petition lacks merit.
A writ of preliminary attachment is defined as a
provisional remedy issued upon order of the court
where an action is pending to be levied upon the
property or properties of the defendant therein,
the same to be held thereafter by the sheriff as
security for the satisfaction of whatever judgment
that might be secured in the said action by the
attaching creditor against the defendant.10
However, it should be resorted to only when
necessary and as a last remedy because it exposes
the debtor to humiliation and annoyance.11 It must
be granted only on concrete and specific grounds
and not merely on general averments quoting the
words of the rules.12 Since attachment is harsh,
extraordinary, and summary in nature,13 the rules
on the application of a writ of attachment must be
strictly construed in favor of the defendant.
For the issuance of an ex-parte issuance of the
preliminary attachment to be valid, an affidavit of
merit and an applicant's bond must be filed with
the court14 in which the action is pending. Such
bond executed to the adverse party in the amount
fixed by the court is subject to the conditions that
the applicant will pay: (1) all costs which may be
adjudged to the adverse party; and (2) all
damages which such party may sustain by reason
of the attachment, if the court shall finally adjudge
that the applicant was not entitled thereto.15 As to
the requisite affidavit of merit, Section 3,16 Rule 57
of the Rules of Court states that an order of
attachment shall be granted only when it appears
in the affidavit of the applicant, or of some other
person who personally knows the facts:
that a sufficient cause of action
exists;ChanRoblesVirtualawlibrary
that the case is one of those mentioned in Section
117 hereof;ChanRoblesVirtualawlibrary
that there is no other sufficient security for the
claim sought to be enforced by the action; and
that the amount due to the applicant, or the value
of the property the possession of which he is
entitled to recover, is as much as the sum for
which the order is granted above all legal
counterclaims.
The mere filing of an affidavit reciting the facts
required by Section 3, Rule 57, however, is not
enough to compel the judge to grant the writ of
preliminary attachment. Whether or not the
affidavit sufficiently established facts therein stated
is a question to be determined by the court in the
exercise of its discretion.18 "The sufficiency or
insufficiency of an affidavit depends upon the
amount of credit given it by the judge, and its
acceptance or rejection, upon his sound
discretion."19 Thus, in reviewing the conflicting
findings of the CA and the RTC on the pivotal issue
of whether or not Watercraft's affidavit of merit
sufficiently established facts which constitute as
grounds upon which attachment may be issued
under Section 1 (a)20 and (d),21 Rule 57, the Court
will examine the Affidavit of Preliminary
Attachment22 of Rosario E. Raoa, its Vice-
President, which reiterated the following
allegations in its complaint to substantiate the
application for a writ of preliminary attachment:
x x x x
4. Sometime in June 1997, the Defendant was
hired as Watercraft's Shipyard Manager.
22 Prov Rem. Cases Batch 2
5. Soon thereafter, the Defendant placed his
sailboat, the Knotty Gull, within the boat storage
facilities of Watercraft for purposes of storage and
safekeeping.
6. Despite having been employed by Watercraft,
the Defendant was not exempted from paying
Watercraft boat storage fees for the use of the
said storage facilities.
7. By virtue of his then position and employment
with Watercraft, the Defendant was very much
knowledgeable of the foregoing fact.
8. All throughout his employment with Watercraft,
the Defendant used the boat storage facilities of
Watercraft for his Knotty Gull.
9. However, all throughout the said period of his
employment, the Defendant never paid the boat
storage fees in favor of the Plaintiff.
10. The Defendant's contract of employment with
Watercraft was terminated on 07 March 2002.
11. [Sometime] thereafter, that is, in or about
June 2002, the Defendant pulled out the Knotty
Gull from the boat storage facilities of Watercraft.
12. Instead of settling in full his outstanding
obligations concerning unpaid storage fees before
pulling our the Knotty Gull, the Defendant signed a
Boat Pull-Out Clearance dated 29 June 2002
wherein he merely acknowledged the then
outstanding balance of Sixteen Thousand Three
Hundred and Twenty-four and 82/100 US Dollars
(US$16,324.82), representing unpaid boat storage
fees for the period commencing June 1997 to June
2002, that he owed Watercraft.
13. By reason of Defendant's mere
accomplishment of the said Boat Pull-Out
Clearance with acknowledgment of his outstanding
obligation to Watercraft in unpaid boat storage
fees, Mr. Franz Urbanek, then the Shipyard
Manager who replaced the Defendant, contrary to
company policy, rules and regulations, permitted
the latter to physically pull out his boat from the
storage facilities of the Plaintiff without paying any
portion of his outstanding obligation in storage
fees.
14. Several demands were then made upon the
Defendant for him to settle his outstanding
obligations to the Plaintiff in unpaid storage fees
but the same went unheeded.
15. As of 02 April 2005, the outstanding obligation
of the Defendant to the Plaintiff in unpaid boat
storage fees stands at Three Million Two Hundred
Thirty-One Thousand Five Hundred and Eighty-
Nine and 25/100 Pesos (Php3,231,589.25)
inclusive of interest charges.
16. For failing to pay for the use [of] facilities and
servicesin the form of boat storage facilities
duly enjoyed by him and for failing and refusing to
fulfill his promise to pay for the said boat storage
fees, the Defendant is clearly guilty of fraud which
entitles the Plaintiff to a Writ of Preliminary
Attachment upon the property of the Defendant as
security for the satisfaction of any judgment in its
favor in accordance with the provisions of
Paragraph (d), Section 1, Rule 57 of the Rules of
Court.
17. The instant case clearly falls under the said
provision of law.
18. Furthermore, lawful factual and legal grounds
exist which show that the Defendant may have
departed or is about to depart the country to
defraud his creditors thus rendering it
imperative that a Writ of Preliminary Attachment
be issued in favor of the Plaintiff in the instant
case.
19. The possibility of flight on the part of the
Defendant is heightened by the existence of the
following circumstances:
a. The Special Working Visa issued in favor of the
Defendant expired in April
2005;ChanRoblesVirtualawlibrary
b. The Defendant is a British national who may
easily leave the country at
will;ChanRoblesVirtualawlibrary
c. The Defendant has no real properties and
visible, permanent business or employment in the
Philippines; and
e. The house last known to have been occupied by
the Defendant is merely being rented by him.
20. All told, the Defendant is a very serious flight
risk which fact will certainly render for naught the
capacity of the Plaintiff to recover in the instant
case.23
After a careful perusal of the foregoing;
allegations, the Court agrees with the CA that
23 Prov Rem. Cases Batch 2
Watercraft failed to state with particularity the
circumstances constituting fraud, as required by
Section 5,24 Rule 8 of the Rules of Court, and that
Wolfe's mere failure to pay the boat storage fees
does not necessarily amount to fraud, absent any
showing that such failure was due to insidious
machinations and intent on his part to defraud
Watercraft of the amount due it.
In Liberty Insurance Corporation v. Court of
Appeals,25 the Court explained that to constitute a
ground for attachment in Section 1(d), Rule 57 of
the Rules of Court, it must be shown that the
debtor in contracting the debt or incurring the
obligation intended to defraud the creditor. A debt
is fraudulently contracted if at the time of
contracting it, the debtor has a preconceived plan
or intention not to pay. "The fraud must relate to
the execution of the agreement and must have
been the reason which induced the other party
into giving consent which he would not have
otherwise given."26
Fraudulent intent is not a physical entity, but a
condition of the mind beyond the reach of the
senses, usually kept secret, very unlikely to be
confessed, and therefore, can only be proved by
unguarded expressions, conduct and
circumstances. Thus, the applicant for a writ of
27
preliminary attachment must sufficiently show the
factual circumstances of the alleged fraud because
fraudulent intent cannot be inferred from the
debtor's mere non-payment of the debt or failure
to comply with his obligation.28 The particulars of
such circumstances necessarily include the time,
persons, places and specific acts of fraud
committed.29 An affidavit which does not contain
concrete and specific grounds is inadequate to
sustain the issuance of such writ. In fact, mere
general averments render the writ defective and
the court that ordered its issuance acted with
grave abuse of discretion amounting to excess of
jurisdiction.30
In this case, Watercraft's Affidavit of Preliminary
Attachment does not contain specific allegations of
other factual circumstances to show that Wolfe, at
the time of contracting the obligation, had a
preconceived plan or intention not to pay. Neither
can it be inferred from such affidavit the
particulars of why he was guilty of fraud in the
performance of such obligation. To be specific,
Watercraft's following allegation is unsupported by
any particular averment of circumstances that will
show why or how such inference or conclusion was
arrived at, to wit: "16. For failing to pay for the use
[of] facilities and services - in the form of boat
storage facilities - duly enjoyed by him and for
failing and refusing to fulfill his promise to pay for
the said boat storage fees, the Defendant is clearly
guilty of fraud x x x."31 It is not an allegation of
essential facts constituting Watercraft's causes of
action, but a mere conclusion of law.
With respect to Section 1 (a),32 Rule 57, the other
ground invoked by Watercraft for the issuance of
the writ of preliminary attachment, the Court finds
no compelling reason to depart from the CA's
exhaustive ruling to the effect that such writ is
unnecessary because Wolfe is not a flight risk,
thus:
As to the allegation that Wolfe is a (light risk,
thereby warranting the issuance of the writ, the
same lacks merit. The mere fact that Wolfe is a
British national does not automatically mean that
he would leave the country at will. As Wolfe avers,
he and his family had been staying in the
Philippines since 1997, with his daughters studying
at a local school. He also claims to be an existing
stockholder and officer of Wolfe Marine
Corporation, a SEC - registered corporation, as well
as a consultant of projects in the Subic Area, a
member of the Multipartite Committee for the new
port development in Subic, and a member of the
Subic Chamber of Commerce. More importantly,
Wolfe has a pending labor case against Watercraft
- a fact which the company glaringly failed to
mention in its complaint - which Wolfe claims to
want to prosecute until its very end. The said
circumstances, as well as the existence of said
labor case where Wolfe stands not only to be
vindicated for his alleged illegal dismissal, but also
to receive recompense, should have convinced the
trial court that Wolfe would not want to leave the
country at will just because a suit for the collection
of the alleged unpaid boat storage fees has been
filed against him by Watercraft.
Neither should the fact that Wolfe's Special
Working Visa expired in April 2005 lead
automatically to the conclusion that he would leave
the country. It is worth noting that all visas issued
by the government to foreigner staying in the
Philippines have expiration periods. These visas,
however, may be renewed, subject to the
requirements of the law. In Wolfe's case, he
indeed renewed his visa, as shown by Special
Working Visa No. 05-WV-0124P issued by the
Subic Bay Metropolitan Authority Visa Processing
Office on April 25, 2005, and with validity of two
24 Prov Rem. Cases Batch 2
(2) years therefrom. Moreover, his Alien Certificate
of Registration was valid up to May 11, 2006.33
Meanwhile, Watercraft's reliance on Chuidian v.
Sandiganbayan34 is displaced. It is well settled
that:
x x x when the preliminary attachment is
issued upon a ground which is at the same
time the applicant's cause of action; e.g., "an
action for money or property embezzled or
fraudulently misapplied or converted to his own
use by a public officer, or an officer of a
corporation, or an attorney, factor, broker, agent,
or clerk, in the course of his employment as such,
or by any other person in a fiduciary capacity, or
for a willful violation of duty," or "an action against
a party who has been guilty of fraud in contracting
the debt or incurring the obligation upon which the
action is brought," the defendant is not
allowed to file a motion to dissolve the
attachment under Section 13 of Rule 57 by
offering to show the falsity of the factual
averments in the plaintiffs application and
affidavits on which the writ was based - and
consequently that the writ based thereon
had been improperly or irregularly issued -
the reason being that the hearing on such a
motion for dissolution of the writ would be
tantamount to a trial of the merits of the
action. In other words, the merits of the action
would be ventilated at a mere hearing of a motion,
instead of at the regular trial.35
Be that as it may, the foregoing rule is not
applicable in this case because when Wolfe filed a
motion to dissolve the writ of preliminary
attachment, he did not offer to show the falsity of
the factual averments in Watercraft's application
and affidavit on which the writ was based. Instead,
he sought the discharge of the writ on the ground
that Watercraft failed to particularly allege any
circumstance amounting to fraud. No trial on the
merits of the action at a mere hearing of such
motion will be had since only the sufficiency of the
factual averments in the application and affidavit
of merit will be examined in order to find out
whether or not Wolfe was guilty of fraud in
contracting the debt or incurring the obligation
upon which the action is brought, or in the
performance thereof.
Furthermore, the other ground upon which the writ
of preliminary attachment was issued by the RTC is
not at the same time the applicant's cause of
action. Assuming arguendo that the RTC was
correct in issuing such writ on the ground that
Watercraft's complaint involves an action for the
recovery of a specified amount of money or
damages against a party, like Wolfe, who is about
to depart from the Philippines with intent to
defraud his creditors, the Court stresses that the
circumstances36 cited in support thereof are merely
allegations in support of its application for such
writ.37 Such circumstances, however, are neither
the core of Watercraft's complaint for collection of
sum of money and damages, nor one of its three
(3) causes of action therein.38
All told, the CA correctly ruled that Watercraft
failed to meet one of the requisites for the
issuance of a writ of preliminary attachment, i.e.,
that the case is one of those mentioned in Section
1 of Rule 57, and that the RTC gravely abused its
discretion in improvidently issuing such writ.
Watercraft failed to particularly state in its affidavit
of merit the circumstances constituting intent to
defraud creditors on the part of Wolfe in
contracting or in the performance of his purported
obligation to pay boat storage fees, as well as to
establish that he is a flight risk. Indeed, if all the
requisites for granting such writ are not present,
then the court which issues it acts in excess of its
jurisdiction.39chanroblesvirtuallawlibrary
WHEREFORE, premises considered, the petition is
DENIED. The Court of Appeals Decision dated
September 27, 2007 and its Resolution dated
January 24, 2008 in CA-G.R. SP No. 97804, are
AFFIRMED.
SO ORDERED.chanroblesvirtuallawlibrary
Velasco, Jr., (Chairperson), Villarama, Jr., Perez,*
and Jardeleza, JJ., concur.
G.R. No. L-50378 September 30, 1982
FILINVEST CREDIT CORPORATION, petitioner,
vs.
THE HONORABLE JUDGE BENJAMIN RELOVA
(In his capacity as Presiding Judge of the
Court of First Instance of Manila, Branch XI)
and ERNESTO SALAZAR, respondents.
25 Prov Rem. Cases Batch 2
GUERRERO, J.:
This is a special civil action for certiorari, with
prayer for restraining order or preliminary
injunction, filed by petitioner Filinvest Credit
Corporation seeking to annul the Orders issued by
respondent Judge dated February 2, 1979 and
April 4, 1979 in Civil Case No. 109900.
As shown by the records, the antecedents of the
instant Petition are as follows:
On August 2, 1977, Filinvest Credit Corporation
(hereinafter referred to as FILINVEST) filed a
complaint in the lower court against defendants
Rallye Motor Co., Inc. (hereinafter referred to as
RALLYE) and Emesto Salazar for the collection of a
sum of money with damages and preliminary writ
of attachment. From the allegations of the
complaint, 1 it appears that in payment of a motor
vehicle described as: "One (1) Unit MAZDA DIESEL
SCHOOL BUS, Model: E4100, Serial No.: EXC43P-
02356, Motor No.: Y-13676," Salazar executed a
promissory note dated May 5, 1977 in favor of
RALLYE for the amount of P99,828.00. To secure
the note, Salazar also executed in favor of RALLYE
a deed of chattel mortgage over the above
described motor vehicle. On May 7, 1977, RALLYE,
for valuable consideration, assigned all its rights,
title and interest to the aforementioned note and
mortgage to FILINVEST. Thereafter, FILINVEST
came to know that RALLYE had not delivered the
motor vehicle subject of the chattel mortgage to
Salazar, "as the said vehicle (had) been the subject
of a sales agreement between the codefendants."
Salazar defaulted in complying with the terms and
conditions of the aforesaid promissory note and
chattel mortgage. RALLYE, as assignor who
guaranteed the validity of the obligation, also
failed and refused to pay FILINVEST despite
demand. According to FILINVEST, the defendants
intentionally, fraudulently and with malice
concealed from it the fact that there was no
vehicle delivered under the documents negotiated
and assigned to it, otherwise, it would not have
accepted the negotiation and assignment of the
rights and interest covered by the promissory note
and chattel mortgage. Praying for a writ of
preliminary attachment, FILINVEST submitted with
its complaint the affidavit of one Gil Mananghaya,
pertinent portions of which read thus:
That he is the Collection Manager, Automotive
Division of Filinvest Credit Corporation;
That in the performance of his duties, he came to
know of the account of Ernesto Salazar, which is
covered by a Promissory Note and secured by a
Chattel Mortgage, which documents together with
all the rights and interest thereto were assigned by
Rallye Motor Co., Inc.;
That for failure to pay a stipulated installment, and
the fact that the principal debtor, Ernesto Salazar,
and the assignor, Rallye Motor Co., Inc. concealed
the fact that there was really no motor vehicle
mortgaged under the terms of the Promissory Note
and the Chattel Mortgage, the entire amount of
the obligation stated in the Promissory Note
becomes due and demandable, which Ernesto
Salazar and Rallye Motor Co., Inc. failed and
refused to pay, so much so that a sufficient cause
of action really exists for Filinvest Credit
Corporation to institute the corresponding
complaint against said person and entity;
That the case is one of those mentioned in Section
1, Rule 57 of his Rules of Court, particularly an
action against parties who have been guilty of a
fraud in contracting the debt or incurring the
obligation upon which the action is brought;
That there is no other sufficient security for the
claim sought to be enforced by the action, and
that the amount due to the applicant Filinvest
Credit Corporation is as much as the sum for which
the order is granted above all legal counterclaims;
That this affidavit is executed for the purpose of
securing a writ of attachment from the court. 2
The specific provision adverted to in the above
Affidavit is Section 1(d) of Rule 57 which includes
"an action against a party who has been guilty of
fraud in contracting the debt or incurring the
obligation upon which the action is brought, or in
concealing or disposing of the property for the
taking, detention or conversion of which the action
is brought" as one of the cases in which a "plaintiff
or any proper party may, at the commencement of
the action or at any time thereafter, have the
property of the adverse party attached as security
for the satisfaction of any judgment that may be
recovered."
Judge Jorge R. Coquia (now Justice of the Court of
Appeals), then presiding Judge of the lower court,
granted the prayer for a writ of attachment in an
Order dated August 17, 1977 stating that:
26 Prov Rem. Cases Batch 2
Finding the complaint sufficient in
form and substance, and in view of
the sworn statement of Gil
Mananghaya, Collection Manager of
the plaintiff that defendants have
committed fraud in securing the
obligation and are now avoiding
payment of the same, let a writ of
attachment issue upon the plaintiff's
filing of a bond in the sum of
P97,000.00.
In the meantime, let summons issue
on the defendants. 3
More than a year later, in an Urgent Motion dated
December 11, 1978, 4 defendant Salazar prayed
that the writ of preliminary attachment issued ex
parte and implemented solely against his property
be recalled and/or quashed. He argued that when
he signed the promissory note and chattel
mortgage on May 5, 1977 in favor of RALLYE,
FILINVEST was hot vet his creditor or obligee,
therefore, he could not be said to have committed
fraud when he contracted the obligation on May 5,
1977. Salazar added that as the motor vehicle
which was the object of the chattel mortgage and
the consideration for the promissory note had
admittedly not been delivered to him by RALLYE,
his repudiation of the loan and mortgage is more
justifiable.
FILINVEST filed an Opposition, but on February 2,
1979, the court a quo, this time presided over by
herein respondent Judge, ordered the dissolution
and setting aside of the writ of preliminary
attachment issued on August 17, 1977 and the
return to defendant Salazar of all his properties
attached by the Sheriff by virtue of the said writ.
In this Order, respondent Judge explained that:
When the incident was called for
hearing, the Court announced that,
as a matter of procedure, when a
motion to quash a writ of
preliminary attachment is filed, it is
incumbent upon the plaintiff to
prove the truth of the allegations
which were the basis for the
issuance of said writ. In this
hearing, counsel for the plaintiff
manifested that he was not going to
present evidence in support of the
allegation of fraud. He maintained
that it should be the defendant who
 should prove the truth of his
allegation in the motion to dissolve
the said writ. The Court disagrees. 5
FILINVEST filed a Motion for Reconsideration of
the above Order, and was subsequently allowed to
adduce evidence to prove that Salazar committed
fraud as alleged in the affidavit of Gil Mananghaya
earlier quoted. This notwithstanding, respondent
Judge denied the Motion in an Order dated April 4,
1979 reasoning thus:
The plaintiff's evidence show that the defendant
Rallye Motor assigned to the former defendant
Salazar's promissory note and chattel mortgage by
virtue of which plaintiff discounted the note.
Defendant Salazar refused to pay the plaintiff for
the reason that Rallye Motor has not delivered to
Salazar the motor vehicle which he bought from
Rallye. It is the position of plaintiff that defendant
Salazar was in conspiracy with Rallye Motor in
defrauding plaintiff.
Ernesto Salazar, on his part complained that he
was himself defrauded, because while he signed a
promissory note and chattel mortgage over the
motor vehicle which he bought from Rallye Motor,
Rallye Motor did not deliver to him the personal
property he bought; that the address and
existence of Rallye Motor can no longer be found.
While it is true that the plaintiff may have been
defrauded in this transaction, it having paid Rallye
Motor the amount of the promissory note, there is
no evidence that Ernesto Salazar had connived or
in any way conspired with Rallye Motor in the
assignment of the promissory note to the plaintiff,
because of which the plaintiff paid Rallye Motor the
amount of the promissory note. Defendant Ernesto
Salazar was himself a victim of fraud. Rallye Motor
was the only party which committed it. 6
From the above order denying reconsideration and
ordering the sheriff to return to Salazar the
personal property attached by virtue of the writ of
preliminary attachment issued on August 17, 1977,
FILINVEST filed the instant Petition on April 19,
1979. On July 16, 1979, petitioner FILINVEST also
filed an Urgent Petition for Restraining Order 7
alleging, among others, that pending this certiorari
proceeding in this court, private respondent
Salazar filed a Motion for Contempt of Court in the
court below directed against FILINVEST and four
other persons allegedly for their failure to obey the
Order of respondent Judge dated April 4, 1979,
27 Prov Rem. Cases Batch 2
which Order is the subject of this Petition. On July
23, 1979, this Court issued a temporary restraining
order "enjoining respondent Judge or any person
or persons acting in his behalf from hearing private
respondent's motion for contempt in Civil Case No.
109900, entitled, 'Filinvest Credit Corporation,
Plaintiff, versus The Rallye Motor Co., Inc., et al.,
Defendants' of the Court of First Instance of
Manila, Branch XI. " 8
Petitioner FILINVEST in its MEMORANDUM
contends that respondent Judge erred:
(1) In dissolving the writ of
preliminary attachment already
enforced by the Sheriff of Manila
without Salazar's posting a counter-
replevin bond as required by Rule
57, Section 12; and
(2) In finding that there was no
fraud on the part of Salazar, despite
evidence in abundance to show the
fraud perpetrated by Salazar at the
very inception of the contract.
It is urged in petitioner's first assignment of error
that the writ of preliminary attachment having
been validly and properly issued by the lower court
on August 17, 1977, the same may only be
dissolved, quashed or recalled by the posting of a
counter-replevin bond under Section 12, Rule 57 of
the Revised Rules of Court which provides that:
Section 12. Discharge of Attachment
upon, gluing counterbond.At any
time after an order of attachment
has been granted, the party whose
property has been attached, or the
person appearing on his behalf,
may, upon reasonable notice to the
applicant, apply to the judge who
granted the order, or to the judge
of the court, in which the action is
pending, for an order discharging
the attachment wholly or in part on
the security given. The judge shall,
after hearing, order the discharge of
the attachment if a cash deposit is
made, or a counter-bond executed
to the attaching creditor is filed, on
behalf of the adverse party, with
the clerk or judge of the court
where the application is made, in an
amount equal to the value of the
 property attached as determined by
the judge, to secure the payment of
any judgment that the attaching
creditor may recover in the action.
...
Citing the above provision, petitioner contends that
the court below should not have issued the Orders
dated February 2, 1979 and April 4, 1979 for
failure of private respondent Salazar to make a
cash deposit or to file a counter-bond.
On the other hand, private respondent counters
that the subject writ of preliminary attachment was
improperly or irregularly issued in the first place, in
that it was issued ex parte without notice to him
and without hearing.
We do not agree with the contention of private
respondent. Nothing in the Rules of Court makes
notice and hearing indispensable and mandatory
requisites for the issuance of a writ of attachment.
The statement in the case of Blue Green Waters,
Inc. vs. Hon. Sundiam and Tan 9 cited by private
respondent, to the effect that the order of
attachment issued without notice to therein
petitioner Blue Green Waters, Inc. and without
giving it a chance to prove that it was not
fraudulently disposing of its properties is irregular,
gives the wrong implication. As clarified in the
separate opinion of Mr. Justice Claudio Teehankee
in the same cited case, 10 a writ of attachment
may be issued ex parte. Sections 3 and 4, Rule 57,
merely require that an applicant for an order of
attachment file an affidavit and a bond: the
affidavit to be executed by the applicant himself or
some other person who personally knows the facts
and to show that (1) there is a sufficient cause of
action, (2) the case is one of those mentioned in
Section 1 of Rule 57, (3) there is no other
sufficient security for the claim sought to be
enforced, and (4) the amount claimed in the action
is as much as the sum for which the order is
granted above all legal counterclaims; and the
bond to be "executed to the adverse party in an
amount fixed by the judge, not exceeding the
applicant's claim, conditioned that the latter will
pay all the costs which may be adjudged to the
adverse party and all damages which he may
sustain by reason of the attachment, if the court
shall finally adjudge that the applicant was not
entitled thereto."
We agree, however, with private respondents
contention that a writ of attachment may be
28 Prov Rem. Cases Batch 2
discharged without the necessity of filing the cash
deposit or counter-bond required by Section 12,
Rule 57, cited by petitioner. The following
provision of the same Rule allows it:
Sec. 13. Discharge of attachment
for improper or irregular issuance.
The party whose property has been
attached may also, at any time
either before or after the release of
the attached property, or before any
attachment shall have been actually
levied, upon reasonable notice to
the attaching creditor, apply to the
judge who granted the order, or to
the judge of the court in which the
action is pending, for an order to
discharge the attachment on the
ground that the same was
improperly or irregularly issued. If
the motion be made on affidavits on
the part of the party whose
property has been attached, but not
otherwise, the attaching creditor
may oppose the same by counter-
affidavits or other evidence in
addition to that on which the
attachment was made. After
hearing, the judge shall order the
discharge of the attachment if it
appears that it was improperly or
irregularly issued and the defect is
not cured forthwith."(Emphasis
supplied)
The foregoing provision grants an aggrieved party
relief from baseless and unjustifiable attachments
procured, among others, upon false allegations,
without having to file any cash deposit or counter-
bond. In the instant case the order of attachment
was granted upon the allegation of petitioner, as
plaintiff in the court below, that private respondent
RALLYE, the defendants, had committed "fraud in
contracting the debt or incurring the obligation
upon which the action is brought," covered by
Section i(d), Rule 57, earlier quoted. Subsequent
to the issuance of the attachment order on August
17, 1977, private respondent filed in the lower
court an "Urgent Motion for the Recall and Quashal
of the Writ of Preliminary Attachment on (his
property)" dated December 11, 1978 11 precisely
upon the assertion that there was "absolutely no
fraud on (his) part" in contracting the obligation
sued upon by petitioner. Private respondent was in
effect claiming that petitioner's allegation of fraud
was false, that hence there was no ground for
attachment, and that therefore the attachment
order was "improperly or irregularly issued." This
Court was held that "(i)f the grounds upon which
the attachment was issued were not true ..., the
defendant has his remedy by immediately
presenting a motion for the dissolution of the
same. 12 We find that private respondent's
abovementioned Urgent Motion was filed under
option 13, Rule 57.
The last sentence of the said provision, however,
indicates that a hearing must be conducted by the
judge for the purpose of determining whether or
not there reality was a defect in the issuance of
the attachment. The question is: At this hearing,
on whom does the burden of proof lie? Under the
circumstances of the present case, We sustain the
ruling of the court a quo in its questioned Order
dated February 2, 1979 that it should be the
plaintiff (attaching creditor), who should prove his
allegation of fraud. This pronouncement finds
support in the first sentence of Section 1, Rule
131, which states that: "Each party must prove his
own affirmative allegations." The last part of the
same provision also provides that: "The burden of
proof lies on the party who would be defeated if
no evidence were given on either side." It must be
brne in mind that in this jurisdiction, fraud is
never presumed. FRAUS EST IdIOS ET NON
PRAESUMENDA. 13 Indeed, private transactions are
presumed to have been fair and regular. 14
Likewise, written contracts such as the documents
executed by the parties in the instant case, are
presumed to have been entered into for a
sufficient consideration. 15
In a similar case of Villongco, et al., vs. Hon.
Panlilio, et al., 16 a writ of preliminary attachment
was issued ex parte in a case for damages on the
strength of the affidavit of therein petitioners to
the effect that therein respondents had concealed,
removed or disposed of their properties, credits or
accounts collectible to defraud their creditors.
Subsequently, the lower court dissolved the writ of
attachment. This was questioned in a certiorari
proceeding wherein this Court held, inter alia, that:
The affidavit supporting the petition
for the issuance of the preliminary
attachment may have been
sufficient to justify the issuance of
the preliminary writ, but it cannot
be considered as proof of the
allegations contained in the
29 Prov Rem. Cases Batch 2
affidavit. The reason is obvious. The
allegations are mere conclusions of
law, not statement of facts. No acts
of the defendants are ever
mentioned in the affidavit to show
or prove the supposed concealment
to defraud creditors. Said
allegations are affirmative
allegations, which plaintiffs had the
obligation to prove ... 17
It appears from the records that both herein
private parties did in fact adduce evidence to
support their respective claims. 18 Attached to the
instant Petition as its Annex "H" 19 is a
Memorandum filed by herein petitioner FILINVEST
in the court below on March 20, 1979. After private
respondent filed his Comment to the Petition, 20
petitioner filed a Reply 21 ,attaching another copy
of the aforesaid Memorandum as Annex "A" 22 In
this case on February 28, 1979 and March 1, 1979,
the plaintiff (FILINVEST) presented in evidence
documentary exhibits "marked Exhibit A, A- I, B, B-
1, B-2, B-3, B-4, C, C-1, D, E, F, G and G-1. The
Memorandum goes on to state that FILINVEST
presented as its witness defendant Salazar himself
who testified that he signed Exhibits A, B, C, D, E
and G; that he is a holder of a master's degree in
Business Administration and is himself a very
careful and prudent person; that he does not sign
post-dated documents; that he does not sign
contracts which do not reflect the truth or which
are irregular on their face, that he intended to
purchase a school bus from Rallye Motors Co., Inc.
from whom he had already acquired one unit; that
he had been dealing with Abel Sahagun, manager
of RALLYE, whom he had known for a long time
that he intended to purchase the school bus on
installment basis so he applied for financing with
the FILINVEST; that he knew his application was
approved; that with his experience as a business
executive, he knew that under a financing
arrangement, upon approval of his application,
when he signed Exhibits A, B, C, D, E and G, the
financing company (FILINVEST) would release the
proceeds of the loan to RALLYE and that he would
be obligated to pay the installments to FILINVEST;
that he signed Exhibits A, B and C simultaneously;
that it was his wife who was always transacting
business with RALLYE and Abel Sahagun. 23
Without disputing the above summary of evidence,
private respondent Salazar states in his Comment
that "the same evidence proferred by (petitioner's)
counsel was adopted by (private respondent)
Ernesto Salazar during the proceedings. 24
According to the court a quo in its assailed order of
April 4, 1979, Emesto Salazar "was himself
defrauded because while he signed the promissory
note and the chattel mortgage over the vehicle
which he bought from Rallye Motors, RALLYE did
not deliver to him the personal property he
bought." And since no fraud was committed by
Salazar, the court accordingly ordered the sheriff
to return to Salazar the properties attached by
virtue of the writ of preliminary attachment issued
on August 17, 1977.
We do not agree. Considering the claim of
respondent Salazar that Rallye Motors did not
deliver the motor vehicle to him, it follows that the
Invoice, Exhibit "C", for the motor vehicle and the
Receipt, Exhibit "G", for its delivery and both
signed by Salazar, Exhibits "C-1 " and "G-1", were
fictitious. It also follows that the Promissory Note,
Exhibit "A", to pay the price of the undelivered
vehicle was without consideration and therefore
fake; the Chattel Mortgage, Exhibit "B", over the
non-existent vehicle was likewise a fraud; the
registration of the vehicle in the name of Salazar
was a falsity and the assignment of the promissory
note by RALLYE with the conforme of respondent
Salazar in favor of petitioner over the undelivered
motor vehicle was fraudulent and a falsification.
the contractual obligation. We rule that the failure
of respondent Salazar to disclose the material fact
of non-delivery of the motor vehicle, there being a
duty on his part to reveal them, constitutes fraud.
(Article 1339, New Civil Code).
We hold that the court a quo committed grave
abuse of discretion in dissolving and setting aside
the writ of preliminary attachment issued on
August 17, 1977.
WHEREFORE, IN VIEW OF THE FOREGOING, the
appealed Orders of the lower court dated February
2, 1979 and April 4, 1979 are hereby REVERSED
and SET ASIDE. The temporary restraining order
issued by Us on July 23, 1979 is hereby made
permanent. No costs.
Petition granted.
SO ORDERED.
Barredo (Chairman), Aquino, Concepcion, Jr., Santos,
De Castro and Escolin, JJ., concur.

Respondent Salazar, knowing that no motor

vehicle was delivered to him by RALLYE, executed
and committed all the above acts as shown the
exhibits enumerated above. He agreed and
consented to the assignment by RALLYE of the
fictitious promissory note and the fraudulent
chattel mortgage, affixing his signature thereto, in
favor of petitioner FILINVEST who, in the ordinary
course of business, relied on the regularity and
validity of the transaction. Respondent had
previously applied for financing assistance from
petitioner FILINVEST as shown in Exhibits "E " and
"E-1 " and his application was approved, thus he
negotiated for the acquisition of the motor vehicle
in question from Rallye Motors. Since he claimed
that the motor vehicle was not delivered to him,
then he was duty-bound to reveal that to
FILINVEST, it being material in inducing the latter
to accept the assignment of the promissory note
and the chattel mortgage. More than that, good
faith as well as commercial usages or customs
require the disclosure of facts and circumstances
which go into the very object and consideration of

30 Prov Rem. Cases Batch 2