On July 27, 1940, Francisco de Borja and his wife filed their petition
G.R. No. L-48080 August 31, 1942
JOSE DE BORJA vs. SERVILLANO PLATON and FRANCISCO
DE BORJA
Petitioner seeks the setting aside of an order of preliminary attachment
issued on November 6, 1940, and reiterated on January 13, 1941, by
the respondent Judge of the Court of First Instance against petitioner's
properties.
On August 12, 1936, petitioner brought a civil action in the Court of
First Instance of Rizal against Hermogena Romero, Francisco de
Borja, Josefa Tangco and Crisanto de Borja to annul a second sale by
Francisco de Borja to Hermogena Romero, of a large estate known as
the Hacienda Jalajala, and to recover damages in the amount of
P25,000. On August 29, 1936, Francisco de Borja and his wife Josefa
Tangco filed an answer with three counterclaims, and on September
29, 1936, they presented two more counterclaims. Trial began
September 30, 1936. Under date of August 4, 1937, defendants
Francisco de Borja, Josefa Tangco and Crisanto de Borja submitted
their amended answer, consisting of a general denial, special defenses,
and five counterclaims and cross-complaints. In these causes for
counter-claim and cross-complaint, it was alleged that plaintiff, being
a son of defendants Francisco de Borja and Josefa Tangco, had been
entrusted with the administration of the extensive interests of his
parents, but had been unfaithful to his trust. Said defendants, therefore,
prayed, inter alia, that the spouses Borja and Tangco be declared
owners of the Hacienda Jalajala in question; that plaintiff be required
to render an accounting of the products of said hacienda that he had
received and to pay said spouses at least P100,000 illegally retained by
him; that plaintiff be ordered to account for the proceed of rice and
bran and to pay at least P700,000 unlawfully retained by him; that
plaintiff be made to deliver P20,000 which he had collected from a
debtor of said spouses; that plaintiff be likewise ordered to pay another
sum of P9,034 collected by him from the same debtor; and that
plaintiff be required to turn over to defendants Francisco de Borja and
Josefa Tangco the amount of P40,000 collected by him as indemnity of
an insurance policy on property belonging to said spouses.
for preliminary attachment to cover their third, fourth, and fifth,
grounds for cross-complaint, involving a total of P69,035. In said
motion, the defendants Borja and wife stated that they did not include
the first and second causes for cross-complaint because the visible
property of plaintiff that could then be attached was only worth about
P2,000. On August 21, 1940, plaintiff presented an amended answer
setting up a counterclaim against defendants Borja and wife in the sum
of P99,175.46.
The order for preliminary attachment is questioned upon several
grounds, among which are: (1) that no writ of attachment can be
issued in favor of a defendant who presents a counterclaim; (2) and the
defendants' affidavit was fatally defective.
On the first point, we believe a writ of preliminary attachment may be
issued in favor of a defendant who sets up a counterclaim. For the
purpose of the protection afforded by such attachment, it is immaterial
whether the defendants Borja and wife simply presented a
counterclaim or brought a separate civil action against Jose de Borja,
plaintiff in the previous case and petitioner herein. To lay down a
subtle distinction would be to sanction that formalism and that
technicality which are discountenanced by the modern laws of
procedure for the sake of speedy and substantial justice. In the present
case we see no reason why the order of the trial court should be
disturbed, this question being a matter within its discretion and we find
no grave abuse of that discretion.
As to be the second objection of petitioner, his counsel strenuously
advances the theory that the affidavit attached to the petition for a writ
of preliminary attachment was fatally defective because it failed to
allege that "the amount due to the plaintiff is as much as the sum for
which the order is granted above all legal counterclaims" as required
in section 426, Code of Civil Procedure and section 3, Rule 59, Rules
of Court. Petitioner contends that his counterclaim against that of
Francisco de Borja and wife being P99,175.46 whereas the latter's
counterclaim totalled only P69,035, the omission of the allegation
referred to is a serious defect. The trial court found, however, that the
counterclaim of Francisco de Borja and wife exceed those of the
petitioner Jose de Borja. It should be borne in mind that the aggregate
counterclaims of Francisco de Borja and wife amounted to P869,000,
which exceeds petitioner's counterclaim by P769,000 in round figures.
Moreover, as the trial court had before it the evidence adduce by both
sides, the petition for a writ of preliminary attachment having been
filed four years after the trial had begun, we presume that the lower
court, having in mind such evidence, ordered the attachment
accordingly. The order appealed from is hereby affirmed, with costs
against the petitioner. So ordered.
G.R. No. 155504 June 26, 2009
PROFESSIONAL VIDEO, INC., vs. TECHNICAL EDUCATION
AND SKILLS DEVELOPMENT AUTHORITY,
We resolve the petition filed by Professional Video, Inc. (PROVI) 1 to
annul and set aside the Decision2 of the Court of Appeals (CA) in CA-
G.R. SP No. 67599, and its subsequent Order denying PROVI’s
motion for reconsideration.3The assailed CA decision nullified:
a. the Order4 dated July 16, 2001 of the Regional Trial Court (RTC),
Pasig City, in Civil Case No. 68527, directing the
attachment/garnishment of the properties of respondent Technical
Education and Skills Development Authority (TESDA) amounting to
Thirty Five Million Pesos (₱35,000,000.00); and
b. the RTC’s August 24, 2001 Order5 denying respondent TESDA’s
motion to discharge/quash writ of attachment.
THE FACTUAL BACKGROUND
PROVI is an entity engaged in the sale of high technology equipment,
information technology products and broadcast devices, including the
supply of plastic card printing and security facilities.
TESDA is an instrumentality of the government established under
Republic Act (R.A.) No. 7796 (the TESDA Act of 1994) and attached
to the Department of Labor and Employment (DOLE) to "develop and
establish a national system of skills standardization, testing, and
certification in the country."6 To fulfill this mandate, it sought to issue
security-printed certification and/or identification polyvinyl (PVC)
cards to trainees who have passed the certification process.
TESDA’s Pre-Qualification Bids Award Committee (PBAC)
conducted two (2) public biddings on June 25, 1999 and July 22, 1999
for the printing and encoding of PVC cards. A failure of bidding
resulted in both instances since only two (2) bidders – PROVI and
Sirex Phils. Corp. – submitted proposals.
Due to the failed bidding, the PBAC recommended that TESDA enter
into a negotiated contract with PROVI. On December 29, 1999,
TESDA and PROVI signed and executed their "Contract Agreement
Project: PVC ID Card Issuance" (the Contract Agreement) for the
provision of goods and services in the printing and encoding of PVC
cards.7 Under this Contract Agreement, PROVI was to provide
TESDA with the system and equipment compliant with the
specifications defined in the Technical Proposal. In return, TESDA
would pay PROVI the amount of Thirty-Nine Million Four Hundred
and Seventy-Five Thousand Pesos (₱39,475,000) within fifteen (15)
days after TESDA’s acceptance of the contracted goods and services.
On August 24, 2000, TESDA and PROVI executed an "Addendum to
the Contract Agreement Project: PVC ID Card Issuance"
(Addendum),8 whose terms bound PROVI to deliver one hundred
percent (100%) of the enumerated supplies to TESDA consisting of
five hundred thousand (500,000) pieces of security foil; five (5) pieces
of security die with TESDA seal; five hundred thousand (500,000)
pieces of pre-printed and customized identification cards; one hundred
thousand (100,000) pieces of scannable answer sheets; and five
hundred thousand (500,000) customized TESDA holographic
laminate. In addition, PROVI would install and maintain the following
equipment: one (1) unit of Micropoise, two (2) units of card printer,
three (3) units of flatbed scanner, one (1) unit of OMR scanner, one (1)
unit of Server, and seven (7) units of personal computer.
TESDA in turn undertook to pay PROVI thirty percent (30%) of the
total cost of the supplies within thirty (30) days after receipt and
acceptance of the contracted supplies, with the balance payable within
thirty (30) days after the initial payment.
According to PROVI, it delivered the following items to TESDA on
the dates indicated:
PROVI further alleged that out of TESDA’s liability of
₱39,475,000.00, TESDA paid PROVI only ₱3,739,500.00, leaving an
outstanding balance of ₱35,735,500.00, as evidenced by PROVI’s
Statement of Account.9 Despite the two demand letters dated March 8
and April 27, 2001 that PROVI sent TESDA, 10 the outstanding balance
remained unpaid.
On July 11, 2001, PROVI filed with the RTC a complaint for sum of
money with damages against TESDA. PROVI additionally prayed for
the issuance of a writ of preliminary attachment/garnishment against
TESDA. The case was docketed as Civil Case No. 68527. In an Order
dated July 16, 2001, the RTC granted PROVI’s prayer and issued a
writ of preliminary attachment against the properties of TESDA not
exempt from execution in the amount of ₱35,000,000.00.11
TESDA responded on July 24, 2001 by filing a Motion to
Discharge/Quash the Writ of Attachment, arguing mainly that public
funds cannot be the subject of garnishment.12 The RTC denied
TESDA’s motion, and subsequently ordered the manager of the Land
Bank of the Philippines to produce TESDA’s bank statement for the
garnishment of the covered amount.13
Faced with these rulings, TESDA filed a Petition for Certiorari with
the CA to question the RTC orders, imputing grave abuse of discretion
amounting to lack or excess of jurisdiction on the trial court for
issuing a writ of preliminary attachment against TESDA’s public
funds.14
The CA set aside the RTC’s orders after finding that: (a) TESDA’s
funds are public in nature and, therefore, exempt from garnishment;
and (b) TESDA’s purchase of the PVC cards was a necessary incident
of its governmental function; consequently, it ruled that there was no
legal basis for the issuance of a writ of preliminary
attachment/garnishment.15 The CA subsequently denied PROVI’s
motion for reconsideration;16 hence, the present petition.
THE PETITION
The petition submits to this Court the single issue of whether or not
the writ of attachment against TESDA and its funds, to cover PROVI’s
claim against TESDA, is valid. The issue involves a pure question of
law and requires us to determine whether the CA was correct in ruling
that the RTC gravely abused its discretion in issuing a writ of
attachment against TESDA.
PROVI argues that the CA should have dismissed TESDA’s petition
for certiorari as the RTC did not commit any grave abuse of discretion
when it issued the Orders dated July 16, 2001 and August 24, 2001.
According to PROVI, the RTC correctly found that when TESDA
entered into a purely commercial contract with PROVI, TESDA went
to the level of an ordinary private citizen and could no longer use the
defense of state immunity from suit. PROVI further contends that it
has alleged sufficient ultimate facts in the affidavit it submitted to
support its application for a writ of preliminary attachment. Lastly,
PROVI maintains that sufficient basis existed for the RTC’s grant of
the writ of preliminary attachment, since TESDA fraudulently
misapplied or embezzled the money earmarked for the payment of the
contracted supplies and services, as evidenced by the Certification as
to Availability of Funds.
TESDA claims that it entered the Contract Agreement and Addendum
in the performance of its governmental function to develop and
establish a national system of skills standardization, testing, and
certification; in the performance of this governmental function,
TESDA is immune from suit. Even assuming that it had impliedly
consented to be sued by entering into a contract with PROVI, TESDA
posits that the RTC still did not have the power to garnish or attach its
funds since these are public funds. Lastly, TESDA points out that
PROVI failed to comply with the elements for the valid issuance of a
writ of preliminary attachment, as set forth in Section 1, Rule 57 of the
1997 Rules of Civil Procedure.
THE COURT’S RULING
We find, as the CA did, that the RTC’s questioned order involved a
gross misreading of the law and jurisprudence amounting to action in
excess of its jurisdiction. Hence, we resolve to DENY PROVI’s
petition for lack of merit.
TESDA is an instrumentality of the government undertaking
governmental functions.
R.A. No. 7796 created the Technical Education and Skills
Development Authority or TESDA under the declared "policy of the
State to provide relevant, accessible, high quality and efficient
technical education and skills development in support of the
development of high quality Filipino middle-level manpower
responsive to and in accordance with Philippine development goals
and priorities."17 TESDA replaced and absorbed the National
Manpower and Youth Council, the Bureau of Technical and Vocational
Education and the personnel and functions pertaining to technical-
vocational education in the regional offices of the Department of
Education, Culture and Sports and the apprenticeship program of the
Bureau of Local Employment of the DOLE. 18 Thus, TESDA is an
unincorporated instrumentality of the government operating under its
own charter.
Among others, TESDA is empowered to: approve trade skills
standards and trade tests as established and conducted by private
industries; establish and administer a system of accreditation of both
public and private institutions; establish, develop and support the
institutions' trainors' training and/or programs; exact reasonable fees
and charges for such tests and trainings conducted, and retain such
earnings for its own use, subject to guidelines promulgated by the
Authority; and perform such other duties and functions necessary to
carry out the provisions of the Act, consistent with the purposes of the
creation of TESDA.19
Within TESDA’s structure, as provided by R.A. No. 7769, is a Skills
Standards and Certification Office expressly tasked, among others, to
develop and establish a national system of skills standardization,
testing and certification in the country; and to conduct research and
development on various occupational areas in order to recommend
policies, rules and regulations for effective and efficient skills
standardization, testing and certification system in the country.20 The
law likewise mandates that "[T]here shall be national occupational
skills standards to be established by TESDA-accredited industry
committees. The TESDA shall develop and implement a certification
and accreditation program in which private groups and trade
associations are accredited to conduct approved trade tests, and the
local government units to promote such trade testing activities in their
respective areas in accordance with the guidelines to be set by the
TESDA. The Secretary of Labor and Employment shall determine the
occupational trades for mandatory certification. All certificates relating
to the national trade skills testing and certification system shall be
issued by the TESDA through its Secretariat."21
All these measures are undertaken pursuant to the constitutional
command that "[T]he State affirms labor as a primary social economic
force," and shall "protect the rights of workers and promote their
welfare";22 that "[T]he State shall protect and promote the right of all
citizens to quality education at all levels, and shall take appropriate
steps to make such education accessible to all";23 in order "to afford
protection to labor" and "promote full employment and equality of
employment opportunities for all."24
Under these terms, both constitutional and statutory, we do not believe
that the role and status of TESDA can seriously be contested: it is an
unincorporated instrumentality of the government, directly attached to
the DOLE through the participation of the Secretary of Labor as its
Chairman, for the performance of governmental functions – i.e., the
handling of formal and non-formal education and training, and skills
development. As an unincorporated instrumentality operating under a
specific charter, it is equipped with both express and implied powers, 25
and all State immunities fully apply to it.26
TESDA, as an agency of the State, cannot be sued without its consent.
The rule that a state may not be sued without its consent is embodied
in Section 3, Article XVI of the 1987 Constitution and has been an
established principle that antedates this Constitution. 27 It is as well a
universally recognized principle of international law that exempts a
state and its organs from the jurisdiction of another state. 28The
principle is based on the very essence of sovereignty, and on the
practical ground that there can be no legal right as against the authority
that makes the law on which the right depends.29 It also rests on
reasons of public policy — that public service would be hindered, and
the public endangered, if the sovereign authority could be subjected to
law suits at the instance of every citizen and, consequently, controlled
in the uses and dispositions of the means required for the proper
administration of the government.30
The proscribed suit that the state immunity principle covers takes on
various forms, namely: a suit against the Republic by name; a suit
against an unincorporated government agency; a suit against a
government agency covered by a charter with respect to the agency’s
performance of governmental functions; and a suit that on its face is
against a government officer, but where the ultimate liability will fall
on the government. In the present case, the writ of attachment was
issued against a government agency covered by its own charter. As
discussed above, TESDA performs governmental functions, and the
issuance of certifications is a task within its function of developing
and establishing a system of skills standardization, testing, and
certification in the country. From the perspective of this function, the
core reason for the existence of state immunity applies – i.e., the
public policy reason that the performance of governmental function
cannot be hindered or delayed by suits, nor can these suits control the
use and disposition of the means for the performance of governmental
functions. In Providence Washington Insurance Co. v. Republic of the
Philippines,31 we said:
[A] continued adherence to the doctrine of non-suability is not to be
deplored for as against the inconvenience that may be caused private
parties, the loss of governmental efficiency and the obstacle to the
performance of its multifarious functions are far greater if such a
fundamental principle were abandoned and the availability of judicial
remedy were not thus restricted. With the well known propensity on
the part of our people to go to court, at the least provocation, the loss
of time and energy required to defend against law suits, in the absence
of such a basic principle that constitutes such an effective obstacle,
could very well be imagined.
PROVI argues that TESDA can be sued because it has effectively
waived its immunity when it entered into a contract with PROVI for a
commercial purpose. According to PROVI, since the purpose of its
contract with TESDA is to provide identification PVC cards with
security seal which TESDA will thereafter sell to TESDA trainees,
TESDA thereby engages in commercial transactions not incidental to
its governmental functions.
TESDA’s response to this position is to point out that it is not engaged
in business, and there is nothing in the records to show that its
purchase of the PVC cards from PROVI is for a business purpose.
While TESDA admits that it will charge the trainees with a fee for the
PVC cards, it claims that this fee is only to recover their costs and is
not intended for profit.
We agree with TESDA. As the appellate court found, the PVC cards
purchased by TESDA from PROVI are meant to properly identify the
trainees who passed TESDA’s National Skills Certification Program –
the program that immediately serves TESDA’s mandated function of
developing and establishing a national system of skills standardization,
testing, and certification in the country.32 Aside from the express
mention of this function in R.A. No. 7796, the details of this function
are provided under DOLE Administrative Order No. 157, S. 1992, as
supplemented by Department Order Nos. 3 thru 3-F, S. 1994 and
Department Order No. 13, S. 1994.33
Admittedly, the certification and classification of trainees may be
undertaken in ways other than the issuance of identification cards, as
the RTC stated in its assailed Order.34 How the mandated certification
is to be done, however, lies within the discretion of TESDA as an
incident of its mandated function, and is a properly delegated authority
that this Court cannot inquire into, unless its exercise is attended by
grave abuse of discretion.
That TESDA sells the PVC cards to its trainees for a fee does not
characterize the transaction as industrial or business; the sale,
expressly authorized by the TESDA Act,35 cannot be considered
separately from TESDA’s general governmental functions, as they are
undertaken in the discharge of these functions. Along this line of
reasoning, we held in Mobil Philippines v. Customs Arrastre
Services:36
Now, the fact that a non-corporate government entity performs a
function proprietary in nature does not necessarily result in its being
suable. If said non-governmental function is undertaken as an incident
to its governmental function, there is no waiver thereby of the
sovereign immunity from suit extended to such government entity.
TESDA’s funds are public in character, hence exempt from attachment
or garnishment.
Even assuming that TESDA entered into a proprietary contract with
PROVI and thereby gave its implied consent to be sued, TESDA’s
funds are still public in nature and, thus, cannot be the valid subject of
a writ of garnishment or attachment. Under Section 33 of the TESDA
Act, the TESDA budget for the implementation of the Act shall be
included in the annual General Appropriation Act; hence, TESDA
funds, being sourced from the Treasury, are moneys belonging to the
government, or any of its departments, in the hands of public
officials.37 We specifically spoke of the limits in dealing with this fund
in Republic v. Villasor38 when we said:
This fundamental postulate underlying the 1935 Constitution is now
made explicit in the revised charter. It is therein expressly provided,
‘The State may not be sued without its consent.’ A corollary, both
dictated by logic and sound sense, from such a basic concept, is that
public funds cannot be the object of garnishment proceedings even if
the consent to be sued had been previously granted and the state
liability adjudged. Thus in the recent case of Commissioner of Public
Highways vs. San Diego, such a well-settled doctrine was restated in
the opinion of Justice Teehankee:
The universal rule that where the State gives its consent to be sued by
private parties either by general or special law, it may limit claimant's
action 'only up to the completion of proceedings anterior to the stage
of execution' and that the power of the Courts ends when the judgment
is rendered, since government funds and properties may not be seized
under writs of execution or garnishment to satisfy such judgments, is
based on obvious considerations of public policy. Disbursements of
public funds must be covered by the corresponding appropriation as
required by law. The functions and public services rendered by the
State cannot be allowed to be paralyzed or disrupted by the diversion
of public funds from their legitimate and specific objects, as
appropriated by law. [Emphasis supplied.]
We reiterated this doctrine in Traders Royal Bank v. Intermediate
Appellate Court,39 where we said:
The NMPC’s implied consent to be sued notwithstanding, the trial
court did not have the power to garnish NMPC deposits to answer for
any eventual judgment against it. Being public funds, the deposits are
not within the reach of any garnishment or attachment proceedings.
[Emphasis supplied.]
As pointed out by TESDA in its Memorandum, 40 the garnished funds
constitute TESDA’s lifeblood – in government parlance, its MOOE41 –
whose withholding via a writ of attachment, even on a temporary
basis, would paralyze TESDA’s functions and services. As well, these
funds also include TESDA’s Personal Services funds from which
salaries of TESDA personnel are sourced. Again and for obvious
reasons, the release of these funds cannot be delayed.
PROVI has not shown that it is entitled to the writ of attachment.
Even without the benefit of any immunity from suit, the attachment of
TESDA funds should not have been granted, as PROVI failed to prove
that TESDA "fraudulently misapplied or converted funds allocated
under the Certificate as to Availability of Funds." Section 1, Rule 57 of
the Rules of Court sets forth the grounds for issuance of a writ of
preliminary attachment, as follows:
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:
(a) In an action for recovery of a specified amount of money or
damages, other than moral and exemplary, on a cause of action
arising from law, contract, quasi-contract, delict or quasi-delict
 against a party who is about to depart from the Philippines with
intent to defraud his creditors;
(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;
(c) In an action to recover the possession of property unjustly or
fraudulently taken, detained or converted, when the property or
any part thereof, has been concealed, removed or disposed of to
prevent its being found or taken by the applicant or an authorized
person;
(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;
(e) In an action against a party who has removed or disposed of
his property, or is about to do so, with intent to defraud his
creditors;
(f) In an action against a party who does not reside and is not
found in the Philippines, or on whom summons may be served by
publication. [Emphasis supplied.]
Jurisprudence teaches us that the rule on the issuance of a writ of
attachment must be construed strictly in favor of the defendant.
Attachment, a harsh remedy, must be issued only on concrete and
specific grounds and not on general averments merely quoting the
words of the pertinent rules.42 Thus, the applicant’s affidavit must
contain statements clearly showing that the ground relied upon for the
attachment exists.
Section 1(b), Rule 57 of the Rules of Court, that PROVI relied upon,
applies only where money or property has been embezzled or
converted by a public officer, an officer of a corporation, or some
other person who took advantage of his fiduciary position or who
willfully violated his duty.
PROVI, in this case, never entrusted any money or property to
TESDA. While the Contract Agreement is supported by a Certificate
as to Availability of Funds (Certificate) issued by the Chief of
TESDA’s Accounting Division, this Certificate does not automatically
confer ownership over the funds to PROVI. Absent any actual
disbursement, these funds form part of TESDA’s public funds, and
TESDA’s failure to pay PROVI the amount stated in the Certificate
cannot be construed as an act of fraudulent misapplication or
embezzlement. In this regard, Section 86 of Presidential Decree No.
1445 (The Accounting Code) provides:
Section 86. Certificate showing appropriation to meet contract. –
Except in a case of a contract for personal service, for supplies for
current consumption or to be carried in stock not exceeding the
estimated consumption for three months, or banking transactions of
government-owned or controlled banks, no contract involving the
expenditure of public funds by any government agency shall be
entered into or authorized unless the proper accounting official or the
agency concerned shall have certified to the officer entering into the
obligation that funds have been duly appropriated for the purpose and
that the amount necessary to cover the proposed contract for the
current fiscal year is available for expenditure on account thereof,
subject to verification by the auditor concerned. The certification
signed by the proper accounting official and the auditor who verified
it, shall be attached to and become an integral part of the proposed
contract, and the sum so certified shall not thereafter be available for
expenditure for any other purpose until the obligation of the
government agency concerned under the contract is fully extinguished.
[Emphasis supplied.]
By law, therefore, the amount stated in the Certification should be
intact and remains devoted to its purpose since its original
appropriation. PROVI can rebut the presumption that necessarily
arises from the cited provision only by evidence to the contrary. No
such evidence has been adduced.
Section 1 (d), Rule 57 of the Rules of Court applies where a party is
guilty of fraud in contracting a debt or incurring an obligation, or in
concealing or disposing of the property for the taking, detention or
conversion of which the action is brought. In Wee v. Tankiansee, 43 we
held that for a writ of attachment to issue under this Rule, the
applicant 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. The affidavit, being the foundation of the writ, must
contain particulars showing how the imputed fraud was committed for
the court to decide whether or not to issue the writ. To reiterate, a writ
of attachment can only be granted on concrete and specific grounds
and not on general averments merely quoting the words of the rules.44
The affidavit filed by PROVI through Elmer Ramiro, its President and
Chief Executive Officer, only contained a general allegation that
TESDA had fraudulent misapplied or converted the amount of
₱10,975,000.00 that was allotted to it. Clearly, we cannot infer any
finding of fraud from PROVI’s vague assertion, and the CA correctly
ruled that the lower court acted with grave abuse of discretion in
granting the writ of attachment despite want of any valid ground for its
issuance.1avvphi1
For all these reasons, we support the appellate court’s conclusion that
no valid ground exists to support the grant of the writ of attachment
against TESDA. The CA’s annulment and setting aside of the Orders
of the RTC were therefore fully in order.
WHEREFORE, premises considered, we hereby DENY the petition
filed by petitioner Professional Video, Inc., and AFFIRM the Court of
Appeals’ Decision dated July 23, 2002, and Resolution of September
27, 2002, in CA-G.R. SP No. 67599. Costs against the petitioner. SO
ORDERED
G.R. No. 104405 May 13, 1993
LIBERTY INSURANCE CORPORATION, vs. THE
HONORABLE COURT OF APPEALS, HON. NAPOLEON K.
FLOJO, Presiding Judge of Branch II, RTC Manila; ATILLA
ARKIN, the CITY SHERIFF OF MANILA, the REGISTER OF
DEEDS OF MANILA and the REGISTER OF DEEDS OF
MAKATI, METRO MANILA,
This is a petition for review on certiorari seeking to set aside and to
declare null and void the decision dated September 17, 1991 of the
respondent Court of Appeals dismissing petitioner's petition for review
and its resolution dated February 7, 1992 denying petitioner's Motion
for Reconsideration.
On May 4, 1988 Jose H. Imperial Organizations, Pty., thru Atty. Jose
H. Imperial entered into an agreement with Coca-Cola Bottlers
Philippines to promote two concerts featuring a group known as
"Earth, Wind and Fire" on June 12 and 13, 1988 with Coca-Cola
sponsoring the concerts and the former promoting the same.
To ensure compliance with the terms of the agreement, Coca-Cola
required Imperial Organizations to put up a performance bond.
Petitioner Liberty Insurance, upon application of Imperial
Organization put up the performance bond in the amount of Three
Million Pesos (P3,000,000.00), the principal condition of which was to
"fully and faithfully guarantee the terms and conditions" of the
agreement dated May 24, 1988 entered into between Coca-Cola and
Imperial Organizations. More particularly, the bond was to guarantee
the return to Coca-Cola of "whatever portion of the cash sponsorship
and cash advances to be made by Coca-Cola to finance the holding of
the concerts on the dates aforesaid . . . ." (Rollo, pp. 37)
In turn, and as a condition for the issuance of said performance bond,
petitioner required Imperial Organizations, Jose H. Imperial, Atilla
Arkin, and Carmen Madlangbayan to execute an indemnity agreement
in its favor to indemnify it for any and all damages including
attorney's fees which the petitioner may incur by reason of the
issuance of the bond.
It appears that while the concerts took place, Imperial Organizations
and private respondents failed to comply with their obligations to Coca
Cola, as a result of which petitioner became liable upon its
performance bond paying Coca-Cola Three Million Pesos. Petitioner,
demanded reimbursement from Imperial, Arkin And Madlangbayan
based on their indemnity bond but to no avail.
On August 7, 1988 petitioner filed with the Regional Trial Court,
National Capital Region, Branch 2, Manila a complaint for damages
with application for the issuance of a writ of preliminary attachment
against private respondents.
On September 20, 1988, the Trial Court thru the Hon. Rosario A. de
Leon, issued an order allowing the issuance of the writ, stating that.:
. . . There could have been fraud committed by the defendants
Arkin and Madlangbayan in promising to give as security or
collateral to their Indemnity Agreement, which caused the
plaintiff to release the security bond, when as it turned out,
the Transfer Certificate of Title of a parcel of land supposedly
issued by the Register of Deeds of Rizal turned out to be fake,
as the true land title number was issued over a different parcel
of land issued in the name of a person other than defendant
Madlangbayan, while defendant Atilla Arkin delivered an
official receipt in the name of a third party but which vehicle
was allegedly sold to him free from lien and encumbrance,
when it turned out that the car was heavily mortgaged to a
third party, . . . .
The conclusion of fraud is inevitable in view of the above
circumstances, for any (sic) rate fraud is a state of mind that
maybe inferred from the circumstances extant in the case
(Republic vs. Gonzales, 13 SCRA 633).
In addition to the fact that these representations/promises of
Arkin and Madlangbayan were made prior to the release of
the bond (the bond by then had already been executed), it can
still be said that this fraud existed when the obligation was
contracted in line with Sec. 1, par (d), Rule 57, which reads:
An attachment may issue in an action against a party who has
been guilty of fraud in contracting or incurring the obligation
upon which the action is brought.
A debt is fraudulently contracted if at the time of contracting
it, the debtor entertained an intention not to pay, or an
intention not to keep a collateral agreement regarding the
disposition of a property purchased on credit. (Francisco,
Rules of Court, Second [1985] Edition, p. 21) . . . (Rollo, pp.
38-39)
On May 10, 1989 respondent Arkin filed a motion to Quash/ Recall
Writ of Attachment. On October 19, 1989, the trial court, this time
presided by respondent judge Napoleon K. Flojo, denied the motion,
reasoning out as follows:
Defendant Atilla Arkin posits that no ground existed for the issuance
of the preliminary attachment because he was not guilty of fraud in
incurring the obligation under the indemnity agreement.
The Court granted the prayer for a writ of preliminary attachment
after a finding of fraud from the evidence adduced by the parties.
This conclusion was supported by substantial evidence. There is no
cogent reason from the arguments posed by the movant to warrant
and/or recall of the writ.
Furthermore, the complaint invokes another ground for the grant of
the writ and that is, "in an action against a party who has removed
be (sic) disposed of his property, or is about to do so, with the intent
to defraud his creditors," . . ., evidenced by three conveyances or
disposals of properties by defendant Atilla Arkin though made
before the institution of the action, is a circumstance tending to
show fraudulent conveyance with intent to defraud his creditors.
Especially so, when the payment of herein claim which the action is
brought is not secured by any mortgage or pledge of real (sic)
personal property and plaintiff had no other sufficient security for
the enforcement of the claim. (Rollo, p. 58; emphasis supplied).
After more than a year, or on December 14, 1990, Arkin filed a
Motion for Reconsideration of the aforementioned order of denial.
On March 6, 1991, respondent judge reversed his earlier ruling and
instead issued two orders, (1) granting Arkin's Motion for
Reconsideration and directing the lifting of the writ of preliminary
attachment earlier issued, and (2) ordering the deputy sheriff assigned
to said court to immediately discharge or lift said writ. The first order,
among other things, states:
The Court, presided at the time by Judge Rosalio De Leon, found that
the defendant has been guilty of fraud in inveigling the plaintiff to
issue the surety bond by offering false collaterals. The ground relied
upon by the Court to issue the attachment was based on Section 1 (d)
of Rule 57 of the Rules of Court , which states: "Sec. 1. Grounds upon
which attachment may issue. — A plaintiff or any party may, at the
commencement of the action or at anytime 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: (d) In
action (sic) against a party who has been guilty of fraud in contracting
the obligation upon which the action is brought, . . . ."
To constitute a ground for attachment, fraud should be committed
prior to or simultaneous with the birth of the obligation sued upon,
which in this case is the May 30, 1988 surety bond.
A close examination of the evidence on record shows that the delivery
of the fake collaterals were made to Eduardo Cunanan on June 1,
1988, or two (2) days after the issuance by the plaintiff of the surety
bond. Thus, the offering of the fake Transfer Certificate of Title and
encumbered Mercedes Benz car was not prior to or simultaneous with
the execution of the Surety Bond. Such being the case, the offer of the
collaterals were not the cause which induced the plaintiff to issue the
surety bond. It is therefore clear that the issuance of the surety bond on
May 30, 1988 was not based on the alleged fraud of the defendant
Arkin offering the fake collaterals.
With regards (sic) to the allegations that the defendant Arkin has
removed or disposed of his property, with intent to defraud his
creditors, suffice it to say that (when) the law authorizes the issuance
of a writ preliminary attachment (it) should be construed in favor of
the defendant and before issuing an Order to that effect, the judge
should require that all the requisites prescribed by law be complied
(with), without which a judge acquires no jurisdiction to issue the writ.
Furthermore, allegations that debtors were removing or disposing
some of the properties with intent to defraud creditors must be
specific.
In the present case the plaintiff did not prove the intent of defendant
Arkin to defraud creditors. Aside From the fact that the alleged
dispositions were made long prior to the filing of the case, the alleged
dispositions were made of conjugal partnership property which were
then the subjects of partition between Arkin and his estranged
wife. . . . (Rollo, pp. 42-43).
Aggrieved, petitioner filed a special civil action for certiorari with
respondent Court of Appeals to set aside the above orders of
respondent judge.
Respondent court dismissed the petition on the ground that the filing
of the said petition was premature considering that there was yet a
remedy available in the ordinary course of law, i.e., filing a motion for
reconsideration of the challenged orders. Hence, this petition with the
following assignment of errors:
I. A MOTION FOR RECONSIDERATION IS NOT ALWAYS A
CONDITION PRECEDENT TO THE FILING OF A SPECIAL
CIVIL ACTION FOR CERTIORARI, AS THERE IS NO APPEAL
OR ANY PLAIN, SPEEDY AND ADEQUATE REMEDY IN
THE ORDINARY COURSE OF LAW AVAILABLE TO HEREIN
PETITIONER;
II. RESPONDENT HONORABLE COURT OF APPEALS ERRED
IN UPHOLDING THE DISSOLUTION OF THE WRIT OF
PRELIMINARY ATTACHMENT ON THE BASIS OF SECTION
13, RULE 57, OF THE RULES OF THE COURT SUPPORTED
(SIC) BY ANY EVIDENCE;
III. RESPONDENT COURT OF APPEALS COMMITTED GRAVE
ERROR OF LAW IN CONCLUDING THAT HEREIN
PETITIONER FAILED TO RAISE AS AN ISSUE THE
DELAYED FILING OF PRIVATE RESPONDENT'S MOTION
FOR RECONSIDERATION DATED DECEMBER 14, 1990, IN
PETITIONER'S OPPOSITION THERETO.
IV. THE APPREHENSION OF THE HEREIN PETITIONER
REGARDING THE PROPENSITY OF PRIVATE
RESPONDENT TO DISPOSE OF HIS PROPERTIES IN
 FRAUD OF HIS CREDITORS TURNED OUT TO BE TRUE
AND CORRECT. (Rollo, pp. 24-26, 30).
In brief, the questions posited by the instant petition may be
consolidated into two issues, namely:
1) Whether or not the writ of preliminary attachment in question was
properly or regularly issued and 2) Whether or not petitioner's failure
to file a motion for reconsideration of the questioned orders of the
court a quo bars the filing of a special civil action for certiorari before
the respondent court.
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,
Section 1 (d) of Rule 57 authorizes the plaintiff or any proper party to
have the property of the adverse party attached as security for the
satisfaction of any judgment that may be recovered therein. Thus: Rule
57, Sec. 1. Grounds upon which attachment may
issue (d): In an action against a party who has been guilty of a fraud of
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;
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 [1965]).
Here, it has been established that all the collaterals given by the
respondent Arkin as security for the bond were either fraudulent or
heavily encumbered. Records show that Transfer Certificate of Title
No. 300011 supposedly issued by the Register of Deeds of Rizal
covering a parcel of land with an area of 25,750 square meters located
at Muntinlupa, Las Piñas, M.M. and registered in the name of Carmen
Madlangbayan, used as one of the collaterals, turned out to be fake and
spurious as the genuine TCT No. 300011 of the Office of the Register
of Deeds of Rizal covers a parcel of land located in
Angono, Rizal with an area of 514 square meters registered in the
name of persons other than respondents Imperial, Arkin, and
Madlangbayan. Likewise, the supposed lien-free motor vehicle offered
as collateral turned out to be heavily mortgaged and was even
disposed of without informing petitioner. Furthermore, it has also been
proven that subsequent to the issuance of the May 30, 1988 surety
bond, respondent Arkin started disposing of his other properties. Prior
to the filing of the complaint, respondent not only had sold the motor
vehicle given as collateral but that his two other condominium units
were also alienated in favor of a company of which respondent Arkin
is the president. All these circumstances unerringly point to the
devious scheme of respondent Arkin to defraud petitioner.
It is therefore clear that fraud was present when private respondent,
among others, entered into an indemnity agreement with petitioner.
The actuations of respondent Arkin indubitably lead to the conclusion
that he never entertained the idea of fulfilling his obligations under the
agreement and was bent on defrauding petitioner from the very
beginning.
Under the circumstances, we perceive no impropriety or irregularity in
the issuance of the writ of attachment especially so where petitioner
has fully complied with the requirements for the issuance thereof.
On the contrary, what we see as having been attended by irregularity is
the assailed order of respondent judge lifting the writ of attachment
based on grounds which are contradicted by the evidence on record. It
is a fact that respondent Arkin gave fake land titles as collaterals and
even disposed of real properties in his obvious attempt to defraud
petitioner. And yet, respondent judge concluded that petitioner's
allegation that respondent Arkin's fraudulent alienation of his
properties has no foundation in fact. This is plain absurdity. As
respondent judge himself noted in his earlier order denying respondent
Arkin's motion to quash writ of attachment, the latter's three (3)
conveyances, "though made before the institution of the action, is a
circumstance tending to show fraudulent conveyance with intent to
defraud his creditors. Especially so, when the payment of herein claim
upon which the action is brought is not secured by any mortgage or
pledge of real (or) personal property and plaintiff had no other
sufficient security for the enforcement of the claim" (Rollo, p. 58).
Such being the case, respondent Arkin's claim that the writ of
attachment has been irregularly issued should not have merited serious
consideration by respondent judge.
Be that as it may, the instant case being "an action against a party who
has been guilty of fraud in contracting the obligation upon which the
action is brought", respondent Arkin is not allowed to file a motion to
dissolve the attachment on the ground that the writ has been
improperly or irregularly issued. As we held in Mindanao Savings and
Loan Assoc. vs. Court of Appeals (172 SCRA 480 [1989]): 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 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
plaintiff's application and affidavits on which the writ was based and
consequently that the writ based therein had been improperly, or
irregularly, issued — the reason being that the hearing on such motion
for dissolution of the writ would be tantamount to a trial on the merits.
In other words, the merits of the action would be ventilated at a mere
hearing of a motion, instead of the regular trial. Therefore, when the
writ of attachment is of this nature, the only way it can be dissolved is
by a counterbond.
Petitioner next contends that motion for reconsideration need not at all
times be resorted to before a special civil action for certiorari may be
instituted before respondent court.
Ordinarily, certiorari will not lie unless an inferior court, through a
motion for reconsideration, had been given an opportunity to correct
the imputed errors. However, this rule admits of exceptions such as 1)
when the issue raised is one purely, of law; 2) where public interest is
involved; 3) in cases of urgency (Quirino vs. Grospe, 169 SCRA 702
[1989]); or 4) where special circumstances warrant immediate or more
direct action (People vs. Dacudao, 170 SCRA 489 [1989]).
In the case at bar, petitioner's failure to file a motion for
reconsideration in the trial court before commencing certiorari
proceedings in the Court of Appeals is not fatal considering the
existence of special circumstances that warrant immediate and more
direct action (Saldaña vs. CA, 190 SCRA 396 [1990]).
The indecent haste with which respondent Arkin had been disposing of
his properties demonstrates the imperative need for a more adequate
relief requiring an immediate and more direct action. There was an
urgency which caused the present case to fall under one of the
exceptions thereby allowing petitioner to file a petition for certiorari
without the need of first filing a motion for reconsideration.
Filing a motion for reconsideration would have served no useful
purpose nor can it be considered a plain, speedy and adequate remedy
since the order directing the sheriff to discharge or lift the writ of
attachment was issued on the same day the order granting the quashal
was made. It would not have automatically forestalled Arkin from
further disposing of his properties. It is rather disturbing how
respondent judge, after ruling in his order of October 19, 1989,
denying respondent's motion to quash, that the trial court's finding of
fraud in incurring the obligation under the indemnity agreement was
supported by substantial evidence, would, in his order of March 6,
1991 granting the motion for reconsideration, based on the same
substantial evidence supporting a finding of fraud, later reverse
himself and declare that "the plaintiff (petitioner herein) did not prove
the intent of defendant Arkin to defraud creditors."
Through the order for the "immediate" lifting of the writ, respondent
Judge, in one swift stroke, completely subverted the valid order of
attachment issued after a finding of fraud, which finding he himself
has declared as supported by substantial evidence. We hold that
respondent judge in issuing the contested orders has acted
capriciously, whimsically and arbitrarily and with grave abuse of
discretion amounting to lack or in excess of jurisdiction correctible by
the special writ of certiorari.
WHEREFORE, the petition is GRANTED. The assailed order of
respondent judge dated March 6, 1991 is SET ASIDE and the order
dated October 19, 1989 is hereby REINSTATED. Costs against private
respondent. SO ORDERED.
G.R. No. L-23237 November 14, 1925
WALTER E. OLSEN & CO., vs.
WALTER E. OLSEN,
This is an appeal taken by the defendant from a judgment of the Court
of First Instance of Manila, sentencing him to pay plaintiff corporation
the sum of P66,207.62 with legal interest thereon at the rate of 6 per
cent per annum from February 1, 1923, the date of the filing of the
complaint, until full payment and the costs, and dismissing the cross-
complaint and counterclaim set up by him.
As ground of his appeal, the defendant assigns four errors as
committed by the trial court, to wit: (1) The holding that the
defendant-appellant contracted fraudulently the debt which the
plaintiff-appellee seeks to recover in its complaint; (2) its failure to set
aside the writ of preliminary attachment issued by it ex parte; (3) the
fact of it not having absolved the defendant from the complaint of the
plaintiff corporation and of not having given judgment for the
defendant and against the plaintiff for the amount of his counterclaim,
after deducing the debt due from him to the plaintiff corporation in the
sum of P66,207.62; and (4) its action in denying the motion for new
trial of the defendant.
As the first two supposed errors are intimately connected with each
other, we will discuss them jointly.
The first question that arises is whether or not an order denying a
motion for the annulment of a preliminary attachment may be
reviewed through an appeal.
The preliminary attachment is an auxiliary remedy the granting of
which lies within the sound discretion of the judge taking cognizance
of the principal case upon whose existence it depends. The order of the
judge denying a motion for the annulment of a writ of preliminary
attachment, being of an incidental or interlocutory and auxiliary
character, cannot be the subject of an appeal independently from the
principal case, because our procedural law now in force authorizes an
appeal only from a final judgement which gives an end to the
litigation. (Section 143, Act No. 190: 3 C. J., 549 par. 389.) This lack
of ordinary remedy through an appeal does not mean, however, that
any excess a lower court may commit in the exercise of its jurisdiction
is without remedy; because there are the especial remedies, such as
certiorari, for the purpose. (Leung Ben vs. O'Brien, 38 Phil., 182.)
While it is true that an order denying a motion for the annulment of a
preliminary attachment is not subject to review through an appeal
independently from the principal case, it not consisting a final order,
yet when the writ of preliminary attachment becomes final by virtue of
a final judgment rendered in the principal case, said writ is subject to
review jointly with the judgment rendered in the principal case
through an ordinary appeal. The appellate court has the power to
revoke or confirm said order, in like manner as a judgment on the
merits; because it is a ruling to which an exception may be taken, and
therefore is subject to review in an appeal by bill of exceptions. (Secs.
141-143, Act No. 190.) The fact that section 441 of the Code of Civil
Procedure does not provide any remedy against the granting or denial
of a motion for the annulment of a writ of preliminary attachment,
except in case of excess of jurisdiction, does not confer upon said
order a final and irrevocable character, taking it out from the general
provisions as to appeal and review, for a special provision is necessary
for that purpose.
Having arrived at the conclusion that an order denying a motion for
the annulment of a preliminary attachment may be reviewed in an
appeal taken from a final judgment rendered in the principal case, in
which said order was entered as an auxiliary remedy, we will now turn
to consider the question whether or not the trial court committed error
in denying the motion for the annulment of the preliminary attachment
levied upon the property of the defendant-appellant.
It is admitted by the defendant-appellant that he is indebted to the
plaintiff-appellee corporation in the sum of P66,207.62, but denies that
he has contracted said debt fraudulently.
The evidence shows that the defendant-appellant was president-
treasurer and general manager of the plaintiff-appellee corporation and
exercised direct and almost exclusive supervision over its function,
funds and books of account until about the month of August, 1921.
During that time he has been taking money of the corporation without
being duly authorized to do so either by the board of directors or by
the by-laws, the money taken by him having amounted to the
considerable sum of P66,207.62. Of this sum, P19,000 was invested in
the purchase of the house and lot now under attachment in this case,
and P50,000 in the purchase of 500 shares of stock of Prising at the
price of P100 per share for himself and Marker. A few days afterwards
he began to sell the ordinary shares of the corporation for P430 each.
The defendant-appellant attempted to justify his conduct, alleging that
the withdrawal of the funds of the corporation for his personal use was
made in his current account with said corporation, in whose treasury
he deposited his own money and the certificates of title of his shares,
as well as of his estate, and that at the first meeting of the
stockholders, which took place on February 1, 1919, a statement of his
account with a debit balance was submitted and approved.
Having, as he had, absolute and almost exclusive control over the
function of the corporation and its funds by virtue of his triple capacity
as president, treasurer and general manager, the defendant-appellant
should have been more scrupulous in the application of the funds of
said corporation to his own use. As a trustee of said corporation, it was
his duty to see by all legal means possible that the interests of the
stockholders were protected, and should not abuse the extraordinary
opportunity which his triple position offered him to dispose of the
funds of the corporation. Ordinary delicacy required that in the
disposition of the funds of the corporation for his personal use, he
should be very careful, so as to do it in such a way as would be
compatible with the interest of the stockholders and his fiduciary
character. And let it not also be said that he did every thing openly and
with the security of his shares of stock, because as he could dispose of
the funds of the corporation so he could dispose of his won shares and
with greater freedom. And let it not also be said that other officers of
the corporation, such as the vice-president, the secretary and other
chiefs and employees, were doing the same thing, because that does
not show but that his bad example had spread among his subordinates
and all believed themselves with the same right as their chief to
dispose of the funds of the corporation for their personal use, although
it were merely by way of loan, without any security of whatever kind
of course. The approval of his account at the first meeting of the
stockholders cannot be considered as a justification of his conduct, nor
does it remove every suspicion of bad faith, because the corporation
was constituted exclusively by the defendant-appellant himself and his
cospeculator, Marker, and nothing else could be expected from it. As
to the debt he owed to the corporation, Walter E. Olsen was in effect a
lender and a borrower at the same time. The conduct of the defendant-
appellant in connection with the funds of the corporation he
represented was more than an irregularity; and while it is not
sufficiently serious to constitute a criminal fraud, it is undoubtedly a
fraud of a civil character, because it is an abuse of confidence to the
damage of the corporation and its stockholders, and constitutes one of
the grounds enumerated in section 424, in connection with section
412, of the Code of Civil Procedure for the issuance of a preliminary
attachment, and the order of the Court of First Instance of Manila,
denying the motion for the annulment of the injunction in question, is
in accordance with law. lawph!1.net
As to the counterclaim set up by the defendant-appellant, we have
nothing to add to the considerations of the trial court which we make
ours.
For the foregoing, and no error having been found in the judgment
appealed from, the same is hereby affirmed, with the costs against the
defendant-appellant. So ordered.
G.R. No. 171124 February 13, 2008
ALEJANDRO NG WEE, vs. MANUEL TANKIANSEE
Before the Court is a petition for review on certiorari under Rule 45 of
the Rules of Court assailing the September 14, 2005 Decision1 of the
Court of Appeals (CA) in CA-G.R. SP No. 90130 and its January 6,
2006 Resolution2denying the motion for reconsideration thereof.
The facts are undisputed. Petitioner Alejandro Ng Wee, a valued client
of Westmont Bank (now United Overseas Bank), made several money
placements totaling P210,595,991.62 with the bank's affiliate,
Westmont Investment Corporation (Wincorp), a domestic entity
engaged in the business of an investment house with the authority and
license to extend credit.3
Sometime in February 2000, petitioner received disturbing news on
Wincorp's financial condition prompting him to inquire about and
investigate the company's operations and transactions with its
borrowers. He then discovered that the company extended a loan equal
to his total money placement to a corporation [Power Merge] with a
subscribed capital of only P37.5M. This credit facility originated from
another loan of about P1.5B extended by Wincorp to another
corporation [Hottick Holdings]. When the latter defaulted in its
obligation, Wincorp instituted a case against it and its surety.
Settlement was, however, reached in which Hottick's president, Luis
Juan L. Virata (Virata), assumed the obligation of the surety.4
Under the scheme agreed upon by Wincorp and Hottick's president,
petitioner's money placements were transferred without his knowledge
and consent to the loan account of Power Merge through an agreement
that virtually freed the latter of any liability. Allegedly, through the
false representations of Wincorp and its officers and directors,
petitioner was enticed to roll over his placements so that Wincorp
could loan the same to Virata/Power Merge.5
Finding that Virata purportedly used Power Merge as a conduit and
connived with Wincorp's officers and directors to fraudulently obtain
for his benefit without any intention of paying the said placements,
petitioner instituted, on October 19, 2000, Civil Case No. 00-99006
for damages with the Regional Trial Court (RTC) of Manila. 6 One of
the defendants impleaded in the complaint is herein respondent
Manuel Tankiansee, Vice-Chairman and Director of Wincorp.7
On October 26, 2000, on the basis of the allegations in the complaint
and the October 12, 2000 Affidavit 8 of petitioner, the trial court
ordered the issuance of a writ of preliminary attachment against the
properties not exempt from execution of all the defendants in the civil
case subject, among others, to petitioner's filing of a P50M-bond.9The
writ was, consequently, issued on November 6, 2000.10
Arguing that the writ was improperly issued and that the bond
furnished was grossly insufficient, respondent, on December 22, 2000,
moved for the discharge of the attachment.11 The other defendants
likewise filed similar motions.12 On October 23, 2001, the RTC, in an
Omnibus Order,13 denied all the motions for the discharge of the
attachment. The defendants, including respondent herein, filed their
respective motions for reconsideration14 but the trial court denied the
same on October 14, 2002.15
Incidentally, while respondent opted not to question anymore the said
orders, his co-defendants, Virata and UEM-MARA Philippines
Corporation (UEM-MARA), assailed the same via certiorari under
Rule 65 before the CA [docketed as CA-G.R. SP No. 74610]. The
appellate court, however, denied the certiorari petition on August 21,
2003,16 and the motion for reconsideration thereof on March 16,
2004.17 In a petition for review on certiorari before this Court, in G.R.
No. 162928, we denied the petition and affirmed the CA rulings on
May 19, 2004 for Virata's and UEM-MARA's failure to sufficiently
show that the appellate court committed any reversible error.18 We
subsequently denied the petition with finality on August 23, 2004.19
On September 30, 2004, respondent filed before the trial court another
Motion to Discharge Attachment,20 re-pleading the grounds he raised
in his first motion but raising the following additional grounds: (1) that
he was not present in Wincorp's board meetings approving the
questionable transactions;21 and (2) that he could not have connived
with Wincorp and the other defendants because he and Pearlbank
Securities, Inc., in which he is a major stockholder, filed cases against
the company as they were also victimized by its fraudulent schemes.22
Ruling that the grounds raised were already passed upon by it in the
previous orders affirmed by the CA and this Court, and that the
additional grounds were respondent's affirmative defenses that
properly pertained to the merits of the case, the trial court denied the
motion in its January 6, 2005 Order.23
24
With the denial of its motion for reconsideration, respondent filed a
certiorari petition before the CA docketed as CA-G.R. SP No. 90130.
On September 14, 2005, the appellate court rendered the assailed
Decision25 reversing and setting aside the aforementioned orders of the
trial court and lifting the November 6, 2000 Writ of Preliminary
Attachment26 to the extent that it concerned respondent's properties.
Petitioner moved for the reconsideration of the said ruling, but the CA
denied the same in its January 6, 2006 Resolution.27
Thus, petitioner filed the instant petition on the following grounds:
A. IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF
APPEALS SHOULD NOT HAVE GIVEN DUE COURSE TO
THE PETITION FOR CERTIORARI FILED BY
RESPONDENT, SINCE IT MERELY RAISED ERRORS IN
JUDGMENT, WHICH, UNDER PREVAILING
JURISPRUDENCE, ARE NOT THE PROPER SUBJECTS OF A
WRIT OF CERTIORARI.
B. MOREOVER, IT IS RESPECTFULLY SUBMITTED THAT
THE COURT OF APPEALS COMMITTED SERIOUS LEGAL
ERROR IN RESOLVING FAVORABLY THE GROUNDS
ALLEGED BY RESPONDENT IN HIS PETITION AND (SIC)
LIFTING THE WRIT OF PRELIMINARY ATTACHMENT,
SINCE THESE GROUNDS ALREADY RELATE TO THE
MERITS OF CIVIL CASE NO. 00-99006 WHICH, UNDER
PREVAILING JURISPRUDENCE, CANNOT BE USED AS
BASIS (SIC) FOR DISCHARGING A WRIT OF
PRELIMINARY ATTACHMENT.
C. LIKEWISE, IT IS RESPECTFULLY SUBMITTED THAT THE
COURT OF APPEALS ERRED IN SUSTAINING THE
ERRORS IN JUDGMENT ALLEGED BY RESPONDENT, NOT
ONLY BECAUSE THESE ARE BELIED BY THE VERY
DOCUMENTS HE SUBMITTED AS PROOF OF SUCH
ERRORS, BUT ALSO BECAUSE THESE HAD EARLIER
BEEN RESOLVED WITH FINALITY BY THE LOWER
COURT.28
For his part, respondent counters, among others, that the general and
sweeping allegation of fraud against respondent in petitioner's
affidavit-respondent as an officer and director of Wincorp allegedly
connived with the other defendants to defraud petitioner-is not
sufficient basis for the trial court to order the attachment of
respondent's properties. Nowhere in the said affidavit does petitioner
mention the name of respondent and any specific act committed by the
latter to defraud the former. A writ of attachment can only be granted
on concrete and specific grounds and not on general averments
quoting perfunctorily the words of the Rules. Connivance cannot also
be based on mere association but must be particularly alleged and
established as a fact. Respondent further contends that the trial court,
in resolving the Motion to Discharge Attachment, need not actually
delve into the merits of the case. All that the court has to examine are
the allegations in the complaint and the supporting affidavit. Petitioner
cannot also rely on the decisions of the appellate court in CA-G.R. SP
No. 74610 and this Court in G.R. No. 162928 to support his claim
because respondent is not a party to the said cases.29
We agree with respondent's contentions and deny the petition.
In the case at bench, the basis of petitioner's application for the
issuance of the writ of preliminary attachment against the properties of
respondent is Section 1(d) of Rule 57 of the Rules of Court which
pertinently reads:
Section 1. Grounds upon which attachment may issue.-At the
commencement of the action or at any time before entry of
judgment, a plaintiff or any proper party may have the property of
the adverse party attached as security for the satisfaction of any
judgment that may be recovered in the following cases:
(d) In an action against a party who has been guilty of a fraud in
contracting the debt or incurring the obligation upon which the
action is brought, or in the performance thereof.
For a writ of attachment to issue under this rule, the applicant 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.30 The
applicant must then be able to demonstrate that the debtor has intended
to defraud the creditor.31 In Liberty Insurance Corporation v. Court of
Appeals,32 we explained as follows:
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.33
In the instant case, petitioner's October 12, 2000 Affidavit 34 is bereft of
any factual statement that respondent committed a fraud. The affidavit
narrated only the alleged fraudulent transaction between Wincorp and
Virata and/or Power Merge, which, by the way, explains why this
Court, in G.R. No. 162928, affirmed the writ of attachment issued
against the latter. As to the participation of respondent in the said
transaction, the affidavit merely states that respondent, an officer and
director of Wincorp, connived with the other defendants in the civil
case to defraud petitioner of his money placements. No other factual
averment or circumstance details how respondent committed a fraud
or how he connived with the other defendants to commit a fraud in the
transaction sued upon. In other words, petitioner has not shown any
specific act or deed to support the allegation that respondent is guilty
of fraud.
The affidavit, being the foundation of the writ, 35 must contain such
particulars as to how the fraud imputed to respondent was committed
for the court to decide whether or not to issue the writ. 36 Absent any
statement of other factual circumstances to show that respondent, at
the time of contracting the obligation, had a preconceived plan or
intention not to pay, or without any showing of how respondent
committed the alleged fraud, the general averment in the affidavit that
respondent is an officer and director of Wincorp who allegedly
connived with the other defendants to commit a fraud, is insufficient to
support the issuance of a writ of preliminary attachment. 37 In the
application for the writ under the said ground, compelling is the need
to give a hint about what constituted the fraud and how it was
perpetrated38 because established is the rule that fraud is never
presumed.39 Verily, the mere fact that respondent is an officer and
director of the company does not necessarily give rise to the inference
that he committed a fraud or that he connived with the other
defendants to commit a fraud. While under certain circumstances,
courts may treat a corporation as a mere aggroupment of persons, to
whom liability will directly attach, this is only done when the
wrongdoing has been clearly and convincingly established.40
Let it be stressed that the provisional remedy of preliminary
attachment is harsh and rigorous for it exposes the debtor to
humiliation and annoyance.41 The rules governing its issuance are,
therefore, strictly construed against the applicant,42 such that if the
requisites for its grant are not shown to be all present, the court shall
refrain from issuing it, for, otherwise, the court which issues it acts in
excess of its jurisdiction.43 Likewise, the writ should not be abused to
cause unnecessary prejudice. If it is wrongfully issued on the basis of
false or insufficient allegations, it should at once be corrected.44
Considering, therefore, that, in this case, petitioner has not fully
satisfied the legal obligation to show the specific acts constitutive of
the alleged fraud committed by respondent, the trial court acted in
excess of its jurisdiction when it issued the writ of preliminary
attachment against the properties of respondent.
We are not unmindful of the rule enunciated in G.B. Inc., etc. v.
Sanchez, et al.,45 that
[t]he merits of the main action are not triable in a motion to
discharge an attachment otherwise an applicant for the dissolution
 could force a trial of the merits of the case on his motion.46
However, the principle finds no application here because petitioner has
not yet fulfilled the requirements set by the Rules of Court for the
issuance of the writ against the properties of respondent. 47 The evil
sought to be prevented by the said ruling will not arise, because the
propriety or impropriety of the issuance of the writ in this case can be
determined by simply reading the complaint and the affidavit in
support of the application.
Furthermore, our ruling in G.R. No. 162928, to the effect that the writ
of attachment is properly issued insofar as it concerns the properties of
Virata and UEM-MARA, does not affect respondent herein, for, as
correctly ruled by the CA, respondent is "never a party thereto." 48
Also, he is not in the same situation as Virata and UEM-MARA since,
as aforesaid, while petitioner's affidavit detailed the alleged fraudulent
scheme perpetrated by Virata and/or Power Merge, only a general
allegation of fraud was made against respondent.
We state, in closing, that our ruling herein deals only with the writ of
preliminary attachment issued against the properties of respondent-it
does not concern the other parties in the civil case, nor affect the trial
court's resolution on the merits of the aforesaid civil case.
WHEREFORE, premises considered, the petition is DENIED. The
September 14, 2005 Decision and the January 6, 2006 Resolution of
the Court of Appeals in CA-G.R. SP No. 90130 are AFFIRMED.
G.R. No. 123358 February 1, 2000
FCY CONSTRUCTION GROUP, INC., and FRANCIS C. YU vs.
THE COURT OF APPEALS, THE HON. JOSE C. DE LA
RAMA, Presiding Judge, Branch 139, Regional Trial Court,
NCJR, Makati City, Metro-Manila, and LEY CONSTRUCTION
AND DEVELOPMENT CORPORATION
On June 29, 1993, private respondent Ley Construction and
Development Corporation filed a Complaint for collection of a sum of
money with application for preliminary attachment against petitioner
FCY Construction Group, Inc. and Francis C. Yu with the Makati
Regional Trial Court which was docketed as Civil Case No. 93-2112.
Private respondent alleged that it had a joint venture agreement with
petitioner FCY Construction Group, Inc. (wherein petitioner Francis
C. Yu served as President) over the Tandang Sora Commonwealth
Flyover government project, for which it had provided funds and
construction materials. The Complaint was filed in order to compel
petitioners to pay its half share in the collections received in the
project as well as those yet to be received therein. In support of its
application for a writ of attachment, private respondent alleged that
petitioners were guilty of fraud in incurring the obligation and had
fraudulently misapplied or converted the money paid them, to which it
had an equal share.
On July 6, 1993, following an ex-parte hearing, the lower court issued
an Order for the issuance of a writ of preliminary attachment,
conditioned upon the filing of a P7,000,000.00 attachment bond.
Petitioners moved for the lifting of the writ of preliminary attachment
on the following grounds: (1) the attachment was heard, issued and
implemented even before service of summons upon them; (2) failure
of the attaching officer to serve a copy of the affidavit of merit upon
them; and (3) that there was no fraud in incurring the obligation. As an
alternative prayer in their Motion, petitioners prayed that the
attachment be limited to their receivables with the Department of
Public Works and Highways. This alternative prayer was later
withdrawn by petitioners in a Manifestation and Motion.
On May 25, 1994, the lower court issued another Order denying
petitioners' Motion to Lift Attachment.1 It, however, reduced and
confined the attachment to receivables due petitioners from the
Tandang Sora Commonwealth Flyover project.
Subsequently, petitioners filed a Motion for Reconsideration2 as well
as an Omnibus Motion for Leave to file Amended Answer and/or to
delete Francis C. Yu as party-defendant.3
With the denial of both Motions by the lower court on September 4,
1994,4 petitioners filed a Petition for Certioraribefore the Court of
Appeals on September 16, 1994.5 The Petition was, however, denied
on July 31, 1995;6 so was petitioners' Motion for Reconsideration.7
Hence, the instant Petition.
It is evident that the questioned writ of attachment was anchored upon
Section 1(d), Rule 57 of the Revised Rules of Court, to wit —
Sec. 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:
(d)In an action against a party who has been guilty of a 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;
Petitioners, however, insist that the writ of preliminary attachment was
irregularly issued inasmuch as there was no evidence of fraud in
incurring the obligations sued upon.
In support of their stand, petitioners alleged that private respondent's
principal witness admitted that it was the Department of Public Works
and Highways (DPWH) that induced it to deliver materials and cash
for the Tandang Sora Commonwealth Flyover project, to wit —
COURT:Now . . . as of January 5, 1993 you delivered to him
(referring to defendant FCY corporation) in cash and in kind
amounting to Fifteen Million Pesos (P15,000,000,00), now why
did you keep on delivering cash and materials to him if you were
not paid a single centavo?
A cursory reading of the above-cited testimony, however, readily
shows that said reassurance from the DPWH officials came, not at the
inception of the obligation or contract, but during its performance. On
the other hand, the fraud of which petitioners are accused of and which
was the basis for the issuance of the questioned attachment, is fraud
alleged to have been committed upon contracting the obligation sued
upon. Thus, petitioners' argument that "the inducement was the mouth-
watering temptation of a DPWH promise of a "new project after the
Tandang Sora Flyover project will be finished" is clearly off-tangent as
such inducement, if any, came not at the inception of the obligation.
Similarly, petitioners' arguments that it was private respondent who
admittedly prepared the letter embodying the alleged joint venture
agreement9 and had petitioner Francis Yu sign it must fail. The written
agreement referred to was signed by petitioner Francis Yu only on
January 5, 1993, long after the project had commenced. Thus, it was
only a written confirmation of an arrangement that had already been
existing and operational. Similarly then, such written confirmation did
not occur at the inception of the obligation sued upon.
In Liberty Insurance Corporation vs. Court Appeals,10 this Court,
discussing Section 1(d), Rule 57, cautioned as follows —
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).
From the foregoing, therefore, the alleged inducement by the DPWH
officials upon private respondent as well as the circumstances
surrounding the execution of the joint venture agreement, both appear
immaterial as they were not committed upon contracting the obligation
sued upon but occurred long after the obligation has been established.
The fact that petitioners have paid a substantial amount of money to
private respondent cannot save the day for them either. As per their
own accounting, such payments were for accounts payable for labor
supplied, construction materials and cash advances.11 It is not denied
that no payment of profits has been given to private respondent, which
is precisely what it issuing for.
Finally, considering that the writ of preliminary attachment has been
issued on account of allegations of fraud in contracting the obligation
upon which the action is brought petitioners' efforts to have the writ of
preliminary attachment dissolved on the ground that it was improperly
or irregularly issued is in vain. Indeed, in Liberty Insurance
Corporation, supra, which cited Mindanao Savings and Loan Assoc.
vs. Court of Appeals (172 SCRA 480), we ruled —
. . ., 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 against a party who has been guilty of fraud in
contracting the debtor 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 therein had been improperly or
irregularly issued — the reason being that the hearing on such
motion for dissolution of the writ would be tantamount to a trial
on the merits. In other words, the merits of the action would be
ventilated at a mere hearing of a motion; instead of the regular
trial. Therefore, when the writ of attachment is of this nature, the
only way it can be dissolved is by a counterbond.
We now come to the issue of whether or not petitioner Francis Yu
should remain as party-defendant. Petitioners argue that since the
transactions were corporation to corporation only, petitioner Francis
Yu should be dropped as party-defendant considering the hornbook
law that corporate personality is a shield against personal liability of
its officers. We agree that petitioner Francis Yu cannot be made liable
in his individual capacity if he indeed entered into and signed the
contract in his official capacity as President, in the absence of
stipulation to that effect, due to the personality of the corporation
being separate and distinct from the persons composing it. 12 However,
while we agree that petitioner Francis Yu cannot be held solidarily
liable with petitioner corporation merely because he is the President
thereof and was involved in the transactions with private corporation,
we also note that there exists instances when corporate officers may be
held personally liable for corporate acts. Such exceptions were
outlined in Tramat Mercantile, Inc. vs. Court of Appeals,13 as follows
—
Personal liability of a corporate director, trustee or officer along
(although not necessarily) with the corporation may so validly
attach, as a rule, only when —
1. He assents (a) to a patently unlawful act of the corporation, or (b)
for bad faith or gross negligence in directing its affairs, or (c) for
conflict of interest, resulting in damages to the corporation, its
stockholders or other persons;
2. He consents to the issuance of watered down stocks or who,
having knowledge thereof, does not forthwith file with the
corporate secretary his written objection thereto;
3. He agrees to hold himself personally and solidarily liable with the
corporation; or
4. He is made, by a specific provision of law, to personally answer
for his corporate action.
The attendance of these circumstances, however, cannot be determined
at this stage and should properly be threshed out during the trial on the
merits. Stated differently, whether or not petitioner Francis Yu should
be held personally and solidarily liable with petitioner corporation is a
matter that should be left to the trial court's discretion, dependent as it
is on evidence during trial.
WHEREFORE, in view of the foregoing, the instant Petition is hereby
DISMISSED. No pronouncement as to costs. SO ORDERED.
G.R. No. 171741 November 27, 2009
METRO, INC. and SPOUSES FREDERICK JUAN and LIZA
JUAN vs.
LARA'S GIFTS AND DECORS, INC., LUIS VILLAFUERTE,
JR. and LARA MARIA R. VILLAFUERTE
The Case
This is a petition for review 1 of the 29 September 2004 Decision 2 and
2 March 2006 Resolution3 of the Court of Appeals in CA-G.R. SP No.
79475. In its 29 September 2004 Decision, the Court of Appeals
granted the petition for certiorari of respondents Lara’s Gifts and
Decors, Inc., Luis Villafuerte, Jr., and Lara Maria R. Villafuerte
(respondents). In its 2 March 2006 Resolution, the Court of Appeals
denied the motion for reconsideration of petitioners Metro, Inc.,
Frederick Juan and Liza Juan (petitioners).
The Facts
Lara’s Gifts and Decors Inc. (LGD) and Metro, Inc. are corporations
engaged in the business of manufacturing, producing, selling and
exporting handicrafts. Luis Villafuerte, Jr. and Lara Maria R.
Villafuerte are the president and vice-president of LGD respectively.
Frederick Juan and Liza Juan are the principal officers of Metro, Inc.
Sometime in 2001, petitioners and respondents agreed that
respondents would endorse to petitioners purchase orders received by
respondents from their buyers in the United States of America in
exchange for a 15% commission, to be shared equally by respondents
and James R. Paddon (JRP), LGD’s agent. The terms of the agreement
were later embodied in an e-mail labeled as the "2001 Agreement."4
In May 2003, respondents filed with the Regional Trial Court, Branch
197, Las Piñas City (trial court) a complaint against petitioners for
sum of money and damages with a prayer for the issuance of a writ of
preliminary attachment. Subsequently, respondents filed an amended
complaint5 and alleged that, as of July 2002, petitioners defrauded
them in the amount of $521,841.62. Respondents also prayed for
₱1,000,000 as moral damages, ₱1,000,000 as exemplary damages and
10% of the judgment award as attorney’s fees. Respondents also
prayed for the issuance of a writ of preliminary attachment.
In its 23 June 2003 Order, 6 the trial court granted respondents’ prayer
and issued the writ of attachment against the properties and assets of
petitioners. The 23 June 2003 Order provides:
WHEREFORE, let a Writ of Preliminary Attachment issue against the
properties and assets of Defendant METRO, INC. and against the
properties and assets of Defendant SPOUSES FREDERICK AND
LIZA JUAN not exempt from execution, as may be sufficient to
satisfy the applicants’ demand of US$521,841.62 US Dollars or its
equivalent in Pesos upon actual attachment, which is about ₱27
Million, unless such Defendants make a deposit or give a bond in an
amount equal to ₱27 Million to satisfy the applicants’ demand
exclusive of costs, upon posting by the Plaintiffs of a Bond for
Preliminary Attachment in the amount of twenty five million pesos
(₱25,000,000.00), subject to the approval of this Court. SO
ORDERED.7
On 26 June 2003, petitioners filed a motion to discharge the writ of
attachment. Petitioners argued that the writ of attachment should be
discharged on the following grounds: (1) that the 2001 agreement was
not a valid contract because it did not show that there was a meeting of
the minds between the parties; (2) assuming that the 2001 agreement
was a valid contract, the same was inadmissible because respondents
failed to authenticate it in accordance with the Rules on Electronic
Evidence; (3) that respondents failed to substantiate their allegations
of fraud with specific acts or deeds showing how petitioners defrauded
them; and (4) that respondents failed to establish that the unpaid
commissions were already due and demandable.
After considering the arguments of the parties, the trial court granted
petitioners’ motion and lifted the writ of attachment. The 12 August
2003 Order8 of the trial court provides:
Premises considered, after having taken a second hard look at the
Order dated June 23, 2003 granting plaintiff’s application for the
issuance of a writ of preliminary attachment, the Court holds that the
issuance of a writ of preliminary attachment in this case is not
justified.
WHEREFORE, the writ of preliminary attachment issued in the
instant case is hereby ordered immediately discharged and/or lifted.
SO ORDERED.9
Respondents filed a motion for reconsideration. In its 10 September
2003 Order, the trial court denied the motion.
Respondents filed a petition for certiorari before the Court of Appeals.
Respondents alleged that the trial court gravely abused its discretion
when it ordered the discharge of the writ of attachment without
requiring petitioners to post a counter-bond.
In its 29 September 2004 Decision, the Court of Appeals granted
respondents’ petition. The 29 September 2004 Decision provides:
WHEREFORE, finding merit in the petition, We GRANT the same.
The assailed Orders are hereby ANNULLED and SET ASIDE.
However, the issued Writ of Preliminary Attachment may be ordered
discharged upon the filing by the private respondents of the proper
counter-bond pursuant to Section 12, Rule 57 of the Rules of Civil
Procedure. SO ORDERED.10
Petitioners filed a motion for reconsideration. In its 2 March 2006
Resolution, the Court of Appeals denied the motion. Hence, this
petition.
The 12 August 2003 Order of the Trial Court
According to the trial court, respondents failed to sufficiently show
that petitioners were guilty of fraud either in incurring the obligation
upon which the action was brought, or in the performance thereof. The
trial court found no proof that petitioners were motivated by malice in
entering into the 2001 agreement. The trial court also declared that
petitioners’ failure to fully comply with their obligation, absent other
facts or circumstances to indicate evil intent, does not automatically
amount to fraud. Consequently, the trial court ordered the discharge of
the writ of attachment for lack of evidence of fraud.
The 29 September 2004 Decision of the Court of Appeals
According to the Court Appeals, the trial court gravely abused its
discretion when it ordered the discharge of the writ of attachment
without requiring petitioners to post a counter-bond. The Court of
Appeals said that when the writ of attachment is issued upon a ground
which is at the same time also the applicant’s cause of action, courts
are precluded from hearing the motion for dissolution of the writ when
such hearing would necessarily force a trial on the merits of a case on
a mere motion.11 The Court of Appeals pointed out that, in this case,
fraud was not only alleged as the ground for the issuance of the writ of
attachment, but was actually the core of respondents’ complaint. The
Court of Appeals declared that the only way that the writ of attachment
can be discharged is by posting a counter-bond in accordance with
Section 12,12 Rule 57 of the Rules of Court.
The Issue
Petitioners raise the question of whether the writ of attachment issued
by the trial court was improperly issued such that it may be discharged
without the filing of a counter-bond.
The Ruling of the Court
The petition has no merit.
Petitioners contend that the writ of attachment was improperly issued
because respondents’ amended complaint failed to allege specific acts
or circumstances constitutive of fraud. Petitioners insist that the
improperly issued writ of attachment may be discharged without the
necessity of filing a counter-bond. Petitioners also argue that
respondents failed to show that the writ of attachment was issued upon
a ground which is at the same time also respondents’ cause of action.
Petitioners maintain that respondents’ amended complaint was not an
action based on fraud but was a simple case for collection of sum of
money plus damages.
On the other hand, respondents argue that the Court of Appeals did not
err in ruling that the writ of attachment can only be discharged by
filing a counter-bond. According to respondents, petitioners cannot
avail of Section 13,13 Rule 57 of the Rules of Court to have the
attachment set aside because the ground for the issuance of the writ of
attachment is also the basis of respondents’ amended complaint.
Respondents assert that the amended complaint is a complaint for
damages for the breach of obligation and acts of fraud committed by
petitioners.1 a vv p h i 1
In this case, the basis of respondents’ application for the issuance of a
writ of preliminary attachment is Section 1(d), Rule 57 of the Rules of
Court which provides:
SEC. 1. Grounds upon which attachment may issue. — At the
commencement of the action or at any time before entry of judgment,
a plaintiff or any proper party may have the property of the adverse
party attached as security for the satisfaction of any judgment that
maybe recovered in the following cases: x x x
(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 the performance thereof; x x x
In Liberty Insurance Corporation v. Court of Appeals,14 we explained:
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.15
The applicant for a writ of 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.16
In their amended complaint, respondents alleged the following in
support of their prayer for a writ of preliminary attachment:
5. Sometime in early 2001, defendant Frederick Juan approached
plaintiff spouses and asked them to help defendants’ export business.
Defendants enticed plaintiffs to enter into a business deal. He
proposed to plaintiff spouses the following:
a. That plaintiffs transfer and endorse to defendant Metro some of
the Purchase Orders (PO’s) they will receive from their US
buyers;
b. That defendants will sell exclusively and "only thru" plaintiffs
for their US buyer;
6. After several discussions on the matter and further inducement on
the part of defendant spouses, plaintiff spouses agreed. Thus, on April
21, 2001, defendant spouses confirmed and finalized the agreement in
a letter-document entitled "2001 Agreement" they emailed to plaintiff
spouses, a copy of which is hereto attached as Annex "A".
20. Defendants are guilty of fraud committed both at the inception of
the agreement and in the performance of the obligation. Through
machinations and schemes, defendants successfully enticed plaintiffs
to enter into the 2001 Agreement. In order to secure plaintiffs’ full
trust in them and lure plaintiffs to endorse more POs and increase the
volume of the orders, defendants during the early part, remitted to
plaintiffs shares under the Agreement.
21. However, soon thereafter, just when the orders increased and the
amount involved likewise increased, defendants suddenly, without any
justifiable reasons and in pure bad faith and fraud, abandoned their
contractual obligations to remit to plaintiffs their shares. And worse,
defendants transacted directly with plaintiffs’ foreign buyer to the
latter’s exclusion and damage. Clearly, defendants planned everything
from the beginning, employed ploy and machinations to defraud
plaintiffs, and consequently take from them a valuable client.
22. Defendants are likewise guilty of fraud by violating the trust and
confidence reposed upon them by plaintiffs. Defendants received the
proceeds of plaintiffs’ LCs with the clear obligation of remitting 15%
thereof to the plaintiffs. Their refusal and failure to remit the said
amount despite demand constitutes a breach of trust amounting to
malice and fraud.17
We rule that respondents’ allegation that petitioners undertook to sell
exclusively and only through JRP/LGD for Target Stores Corporation
but that petitioners transacted directly with respondents’ foreign buyer
is sufficient allegation of fraud to support their application for a writ of
preliminary attachment. Since the writ of preliminary attachment was
properly issued, the only way it can be dissolved is by filing a counter-
bond in accordance with Section 12, Rule 57 of the Rules of Court.
Moreover, the reliance of the Court of Appeals in the cases of
Chuidian v. Sandiganbayan,18 FCY Construction Group, Inc. v. Court
of Appeals,19 and Liberty Insurance Corporation v. Court of Appeals20
is proper. The rule that "when the writ of attachment is issued upon a
ground which is at the same time the applicant’s cause of action, the
only other way the writ can be lifted or dissolved is by a counter-
bond"21 is applicable in this case. It is clear that in respondents’
amended complaint of fraud is not only alleged as a ground for the
issuance of the writ of preliminary attachment, but it is also the core of
respondents’ complaint. The fear of the Court of Appeals that
petitioners could force a trial on the merits of the case on the strength
of a mere motion to dissolve the attachment has a basis.
WHEREFORE, we DENY the petition. We AFFIRM the 29
September 2004 Decision and 2 March 2006 Resolution of the Court
of Appeals in CA-G.R. SP No. 79475. SO ORDERED.
G.R. No. 170674 August 24, 2009
FOUNDATION SPECIALISTS, INC. Vs. BETONVAL READY
CONCRETE, INC. and STRONGHOLD INSURANCE CO., INC.
On separate dates, petitioner Foundation Specialists, Inc. (FSI) and
respondent Betonval Ready Concrete, Inc. (Betonval) executed three
contracts1 for the delivery of ready mixed concrete by Betonval to FSI.
The basic stipulations were: (a) for FSI to supply the cement to be
made into ready mixed concrete; (b) for FSI to pay Betonval within
seven days after presentation of the invoices plus 30% interest p.a. in
case of overdue payments and (c) a credit limit of ₱600,000 for FSI.
Betonval delivered the ready mixed concrete pursuant to the contracts
but FSI failed to pay its outstanding balances starting January 1992.
As an accommodation to FSI, Betonval extended the seven day credit
period to 45 days.2
On September 1, 1992, Betonval demanded from FSI its balance of
₱2,349,460.3 Betonval informed FSI that further defaults would leave
it no other choice but to impose the stipulated interest for late
payments and take appropriate legal action to protect its interest.4
While maintaining that it was still verifying the correctness of
Betonval’s claims, FSI sent Betonval a proposed schedule of payments
devised with a liability for late payments fixed at 24% p.a.5
Thereafter, FSI paid Betonval according to the terms of its proposed
schedule of payments. It was able to reduce its debt to ₱1,114,203.34
as of July 1993, inclusive of the 24% annual interest computed from
the due date of the invoices.6 Nevertheless, it failed to fully settle its
obligation.
Betonval thereafter filed an action for sum of money and damages in
the Regional Trial Court (RTC).7 It also applied for the issuance of a
writ of preliminary attachment alleging that FSI employed fraud when
it contracted with Betonval and that it was disposing of its assets in
fraud of its creditors.
FSI denied Betonval’s allegations and moved for the dismissal of the
complaint. The amount claimed was allegedly not due and demandable
because they were still reconciling their respective records. FSI also
filed a counterclaim and prayed for actual damages, alleging that its
other projects were delayed when Betonval attached its properties and
garnished its bank accounts. It likewise prayed for moral and
exemplary damages and attorney’s fees.
The RTC issued a writ of preliminary attachment and approved the
₱500,000 bond of respondent Stronghold Insurance Co., Inc.
(Stronghold). FSI filed a counterbond of ₱500,000 thereby discharging
the writ of preliminary attachment, except with respect to FSI’s
excavator, crawler crane and Isuzu pick-up truck, which remained in
custodia legis.8 An additional counterbond of ₱350,000 lifted the
garnishment of FSI’s receivables from the Department of Public
Works and Highways.
9
On January 29, 1999, the RTC ruled for Betonval. However, it
awarded ₱200,000 compensatory damages to FSI on the ground that
the attachment of its properties was improper.10
FSI and Stronghold separately filed motions for reconsideration while
Betonval filed a motion for clarification and reconsideration. In an
order dated May 19, 1999, the RTC denied the motions for
reconsideration of Betonval and Stronghold. However, the January 29,
1999 decision was modified in that the award of actual or
compensatory damages to FSI was increased to ₱1.5 million.11
All parties appealed to the Court of Appeals (CA). However, only the
respective appeals of Betonval and Stronghold were given due course
because FSI’s appeal was dismissed for nonpayment of the appellate
docket fees.12
In its appeal, Betonval assailed the award of actual damages as well as
the imposition of legal interest at only 12%, instead of 24% as agreed
on. Stronghold, on the other hand, averred that the attachment was
proper.
In its decision13 dated January 20, 2005, the CA upheld the May 19,
1999 RTC order with modification. The CA held that FSI should pay
Betonval the value of unpaid ready mixed concrete at 24% p.a. interest
plus legal interest at 12%. The CA, however, reduced the award to FSI
of actual and compensatory damages, thus:
WHEREFORE, premises considered, the appealed Order dated May
19, 1999 is MODIFIED as follows: (a) to increase the rate of interest
imposable on the P1,114,203.34 awarded to appellant Betonval from
12% to 24% per annum, with the aggregate sum to further earn an
annual interest rate of 12% from the finality of this decision, until full
payment; (b) to reduce the award of actual damages in favor of
appellee from P1,500,000.00 to P200,000.00; (c) to hold both
appellants jointly and severally liable to pay said amount; and (d) to
hold appellant Betonval liable for whatever appellant surety may be
held liable under the attachment bond. The rest is AFFIRMED in
toto.
FSI’s motion for reconsideration was denied.14
In this petition for review on certiorari,15 FSI prays for the following:
a. decrease the rate of imposable interest on the ₱1,114,203.34
award to Betonval, from 12% to 6% p.a.from date of judicial
demand or filing of the complaint until the full amount is paid;
b. deduct [from the award to Betonval] the cost or value of unused
cement based on [its] invoice stating 1,307.45 bags computed at
the prevailing price;
c. award actual and compensatory damages at ₱3,242,771.29;
d. hold Betonval and Stronghold jointly and severally liable to pay
such actual and compensatory damages;
e. hold Betonval liable for whatever Stronghold may be held liable
under the attachment bond and
f. affirm in toto the rest of the order.16
The petition has no merit.
Betonval’s Complaint was not Premature
FSI argues that Betonval’s complaint was prematurely filed. There was
allegedly a need to reconcile accounts, particularly with respect to the
value of the unused cement supplied by FSI, totaling 2,801.2 bags 17
which supposedly should have been deducted from FSI’s outstanding
obligation. FSI’s repeated requests for reconciliation of accounts were
allegedly not heeded by Betonval’s representatives.
FSI’s contention is untenable. It neither alleged any discrepancies in
nor objected to the accounts within a reasonable time. 18 As held by the
RTC, FSI was deemed to have admitted the truth and correctness of
the entries in the invoices since:
[N]o attempts were made to reconcile [FSI’s] own record with
[Betonval] until after the filing of the complaint, inspite of claims in
[FSI’s] Answer about its significance, and despite having had plenty
of opportunity to do so from the time of receipt of the invoices or
demand letters from [Betonval]. [FSI’s] excuse that it was
impractical to reconcile accounts during the middle of
transactions is defeated by the absence of any showing on record
that a formal request to reconcile was issued to [Betonval] despite
the completion of deliveries or [FSI’s] discovery of the alleged
discrepancies, as well as its failure to initiate any meeting with
[Betonval], including one which the parties were directed to hold
for that purpose by the Court. Since [FSI] failed to prove the
correctness of its entries against those in [Betonval’s] invoices, its
record is self-serving. xxx (emphasis supplied)
In view of FSI’s failure to dispute this finding of the RTC because of
its failure to perfect its appeal, FSI is now estopped from raising this
issue. There is no cogent reason to depart from the RTC’s
finding.1avvphi1
Undaunted, FSI retracts. Instead of claiming the balance of the unused
cement as reflected in its records, it now bases its claim on the
invoices of Betonval. FSI relies on the RTC’s statement in the May
19, 1999 order:
Still it can claim the cost of the balance of unused cement based on
[Betonval’s] invoices, notwithstanding its admission of the obligation
in the letter, as it neither expressed nor implied any intent to waive that
claim by said admission.
FSI contends that this declaration has become final and executory and
must be implemented in the name of substantial justice. Betonval,
however, avers that that the issue on the alleged unused cement was
never raised as an affirmative defense in its answer or in its motion for
reconsideration to the January 29, 1999 decision. Neither was this
issue raised in the CA. Hence, FSI must not be allowed to broach it for
the first time in this Court. Betonval is correct.
It is well-settled that issues not raised in the trial court may not be
raised for the first time on appeal. Furthermore, defenses and
objections not pleaded either in a motion to dismiss or in the answer
are deemed waived.19
More importantly, the portion of a decision that becomes the subject of
an execution is that ordained or decreed in the dispositive portion.20 In
this case, there was no award in favor of FSI of the value of the
balance of the unused cement as reflected in the invoices.
The Applicable Interest Rate is 24% p.a.
There is no dispute that FSI and Betonval stipulated the payment of a
30% p.a. interest in case of overdue payments. There is likewise no
doubt that FSI failed to pay Betonval on time.
FSI acknowledged its indebtedness to Betonval in the principal
amount of ₱1,114,203.34. However, FSI opposed the CA’s imposition
of a 24% p.a. interest on the award to Betonval allegedly because: (a)
the grant to FSI of a 45-day credit extension novated the contracts
insofar as FSI’s obligation to pay any interest was concerned; (b)
Betonval waived its right to enforce the payment of the 30% p.a.
interest when it granted FSI a new credit term and (c) Betonval’s
prayer for a 24% p.a. interest instead of 30%, resulted in a situation
where, in effect, no interest rate was supposedly stipulated, thus
necessitating the imposition only of the legal interest rate of 6% p.a.
from judicial demand.
FSI’s contentions have no merit.
Novation is one of the modes of extinguishing an obligation. 21 It is
done by the substitution or change of the obligation by a subsequent
one which extinguishes the first, either by changing the object or
principal conditions, or by substituting the person of the debtor, or by
subrogating a third person in the rights of the creditor.22 Novation may:
[E]ither be extinctive or modificatory, much being dependent on the
nature of the change and the intention of the parties. Extinctive
novation is never presumed; there must be an express intention to
novate; in cases where it is implied, the acts of the parties must
clearly demonstrate their intent to dissolve the old obligation as
the moving consideration for the emergence of the new one.
Implied novation necessitates that the incompatibility between the old
and new obligation be total on every point such that the old obligation
is completely superceded by the new one. The test of incompatibility
is whether they can stand together, each one having an independent
existence; if they cannot and are irreconcilable, the subsequent
obligation would also extinguish the first.
An extinctive novation would thus have the twin effects of, first,
extinguishing an existing obligation and, second, creating a new one in
its stead. This kind of novation presupposes a confluence of four
essential requisites: (1) a previous valid obligation, (2) an agreement
of all parties concerned to a new contract, (3) the extinguishment of
the old obligation, and (4) the birth of a valid new obligation.
Novation is merely modificatory where the change brought about by
any subsequent agreement is merely incidental to the main obligation
(e.g., a change in interest rates or an extension of time to pay; in this
instance, the new agreement will not have the effect of extinguishing
the first but would merely supplement it or supplant some but not all
of its provisions.)23
The obligation to pay a sum of money is not novated by an instrument
that expressly recognizes the old, changes only the terms of payment,
adds other obligations not incompatible with the old ones or the new
contract merely supplements the old one.24
The grant by Betonval to FSI of a 45-day credit extension did not
novate the contracts so as to extinguish the latter. There was no
incompatibility between them. There was no intention by the parties to
supersede the obligations under the contracts. In fact, the intention of
the 45-day credit extension was precisely to revive the old obligation
after the original period expired with the obligation unfulfilled. The
grant of a 45-day credit period merely modified the contracts by
extending the period within which FSI was allowed to settle its
obligation. Since the contracts remained the source of FSI’s obligation
to Betonval, the stipulation to pay 30% p.a. interest likewise remained.
Obviously, the extension given to FSI was triggered by its own
request, to help it through its financial difficulties. FSI would now
want to take advantage of that generous accommodation by claiming
that its liability for interest was extinguished by its creditor’s
benevolence.
Neither did Betonval waive the stipulated interest rate of 30% p.a., as
FSI erroneously claims. A waiver is a voluntary and intentional
relinquishment or abandonment of a known legal right or privilege.25 A
waiver must be couched in clear and unequivocal terms which leave
no doubt as to the intention of a party to give up a right or benefit
which legally pertains to him.26 FSI did not adduce proof that a valid
waiver was made by Betonval. FSI’s claim is therefore baseless.
Parties are bound by the express stipulations of their contract as well
as by what is required by the nature of the obligation in keeping with
good faith, usage and law.27 Corollarily, if parties to a contract
expressly provide for a particular rate of interest, then that interest
shall be applied.28
It is clear that Betonval and FSI agreed on the payment of interest. It is
beyond comprehension how Betonval’s prayer for a 24% interest on
FSI’s balance could have resulted in a situation as if no interest rate
had been agreed upon. Besides, FSI’s proposed schedule of payments
(September 3, 1992),29 referring to Betonval’s statement of account,30
contained computations of FSI’s arrears and billings with 24% p.a.
interest.
There can be no other conclusion but that Betonval had reduced the
imposable interest rate from 30% to 24% p.a. and this reduced interest
rate was accepted, albeit impliedly, by FSI when it proposed a new
schedule of payments and, in fact, actually made payments to Betonval
with 24% p.a. interest. By its own actions, therefore, FSI is estopped
from questioning the imposable rate of interest.
We likewise hold that the imposition of a 12% p.a. interest on the intention not to pay (or not to comply with the obligation) must be
award to Betonval (in addition to the 24% p.a. interest) in the assailed present.
judgment is proper. When the judgment of the court awarding a sum of
Petitioner is not Entitled to the Amount of Actual Damages Prayed
money becomes final and executory, the rate of legal interest shall be
For
12% p.a. from such finality until its satisfaction, this interim period
being deemed to be by then an equivalent to a forbearance of credit.31 In its bid for a bigger award for actual damages it allegedly suffered
from the wrongful attachment of its properties, FSI enumerates the
There was Improper Attachment of FSI’s Properties
standby costs of equipment35 and manpower standby costs36 it
Betonval’s application for the issuance of the writ of preliminary allegedly lost. We cannot grant FSI’s prayer. FSI did not pursue its
attachment was based on Section 1(d) and (e), Rule 57 of the Rules of appeal to the CA as shown by its failure to pay the appellate docket
Court.32 However, the CA affirmed the RTC’s factual findings that fees. It is well-settled that a party who does not appeal from the
there was improper attachment of FSI’s properties. In debunking FSI’s decision may not obtain any affirmative relief from the appellate court
claim for actual damages, respondents insist that the attachment was other than what he has obtained from the lower court whose decision
proper and that Betonval was able to sufficiently prove the existence is brought up on appeal.37
of the grounds for attachment. However, these are factual matters that
WHEREFORE, the petition is hereby DENIED. Costs against
have been duly passed upon by the RTC and the CA and which are
petitioner. SO ORDERED.
inappropriate in a petition for review.
Moreover, we agree with the RTC and the CA that FSI’s properties
were improperly attached. Betonval was not able to sufficiently show
the factual circumstances of the alleged fraud because fraudulent
intent cannot be inferred from FSI’s mere nonpayment of the debt or
failure to comply with its obligation. In Ng Wee v. Tankiansee,33 we
held that the applicant must be able to demonstrate that the debtor
intended to defraud the creditor. Furthermore:
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.34
In other words, mere failure to pay its debt is, of and by itself, not G.R. No. L-35990 June 17, 1981
enough to justify an attachment of the debtor’s properties. A fraudulent
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, vs. COTABATO
BUS COMPANY, INC.
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.
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 —
a) EVEN AN IMPORTANT FACT, ESTABLISHED BY
DOCUMENTARY EVIDENCE AND NOT DENIED BY
RESPONDENT, IS MENTIONED ONLY AS A "CLAIM" OF
PETITIONER COMPANY;
b) 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;
c) 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 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.
G.R. No. L-67715 July 11, 1986
WILLIAM ALAIN MIAILHE and THE HON. FELIX V.
BARBERS, in his capacity as Presiding Judge, RTC of Manila,
Branch XXXIII, vs. ELAINE M. DE LENCQUESAING and
HERVE DE LENCQUESAING,
This petition is an appeal by certiorari from the Decision of the
Intermediate Appellate Court in AC-G.R. SP. No. 01914 which
declared null-and void, the Order of the Hon. Judge Felix V. Barbers,
issued in Civil Case No. 83-16829, dated April 14, 1983, granting
petitioner's application for the issuance of a writ of preliminary
attachment and the Order dated September 13, 1983 denying
respondent's motion to lift said attachment.
The pertinent facts that gave rise to the instant petition are as follows:
Petitioner William Alain Miailhe, his sisters Monique Miailhe Sichere,
Elaine Miailhe de Lencquesaing and their mother, Madame Victoria D.
Miailhe are co-owners of several registered real properties located in
Metro Manila. By common consent of the said co-owners, petitioner
William Alain has been administering said properties since 1960. As
Madame Victoria D. Miailhe, her daughter Monique and son William
Alain (herein petitioner) failed to secure an out-of court partition
thereof due to the unwillingness or opposition of respondent Elaine,
they filed in the Court of First Instance of Manila (now Regional Trial
Court) an action for Partition, which was docketed as Civil Case No.
105774 and assigned to Branch . . . thereof, presided over by Judge
Pedro Ramirez. Among the issues presented in the partition case was
the matter of petitioner's account as administrator of the properties
sought to be partitioned. But while the said administrator's account
was still being examined, respondent Elaine filed a motion praying
that the sum of P203,167.36 which allegedly appeared as a cash
balance in her favor as of December 31, 1982, be ordered delivered to
her by petitioner William Alain. Against the opposition of petitioner
and the other co-owners, Judge Pedro Ramirez granted the motion in
his Order dated December 19, 1983 which order is now the subject of
a certiorari proceeding in the Intermediate Appellate Court under AC-
G.R. No. SP-03070.
Meanwhile however, and more specifically on February 28, 1983,
respondent Elaine filed a criminal complaint for estafa against
petitioner William Alain, with the office of the City Fiscal of Manila,
alleging in her supporting affidavit that on the face of the very account
submitted by him as Administrator, he had misappropriated
considerable amounts, which should have been turned over to her as
her share in the net rentals of the common properties. Two days after
filing the complaint, respondent flew back to Paris, the City of her
residence. Likewise, a few days after the filing of the criminal
complaint, an extensive news item about it appeared prominently in
the Bulletin Today, March 4, 1983 issue, stating substantially that
Alain Miailhe, a consul of the Philippines in the Republic of France,
had been charged with Estafa of several million pesos by his own
sister with the office of the City Fiscal of Manila.
On April 12, 1983, petitioner Alain filed a verified complaint against
respondent Elaine, for Damages in the amount of P2,000,000.00 and
attorney's fees of P250,000.00 allegedly sustained by him by reason of
the filing by respondent (then defendant) of a criminal complaint for
estafa, solely for the purpose of embarrassing petitioner (then plaintiff)
and besmirching his honor and reputation as a private person and as an
Honorary Consul of the Republic of the Philippine's in the City of
Bordeaux, France. Petitioner further charged respondent with having
caused the publication in the March 4, 1983 issue of the Bulletin
Today, of a libelous news item. In his verified complaint, petitioner
prayed for the issuance of a writ of preliminary attachment of the
properties of respondent consisting of 1/6 undivided interests in
certain real properties in the City of Manila on the ground that
"respondent-defendant is a non-resident of the Philippines", pursuant
to paragraph (f), Section 1, Rule 57, in relation to Section 17, Rule 14
of the Revised Rules of Court.
This case for Damages was docketed as Civil Case No. 83-16829 of
the Regional Trial Court of Manila, Branch XXXIII presided over by
the Honorable Felix V. Barbers.
On April 14, 1983, Judge Barbers granted petitioner's application for
preliminary attachment upon a bond to be filed by petitioner in the
amount of P2,000,000.00. Petitioner filed said bond and upon its
approval, the Writ of Preliminary Attachment was issued on April 18,
1983 which was served on the Deputy Clerk of Court of Branch XXX
before whom the action for Partition was pending.
On May 17, 1983, respondent thru counsel filed a motion to lift or
dissolve the writ of attachment on the ground that the complaint did
not comply with the provisions of Sec. 3 of Rule 57, Rules of Court
and that petitioner's claim was for unliquidated damages. The motion
to lift attachment having been denied, respondent filed with the
Intermediate Appellate Court a special action for certiorari under AC-
G.R. SP No. 01914 alleging that Judge Barbers had acted with grave
abuse of discretion in the premises. On April 4, 1984, the IAC issued
its now assailed Decision declaring null and void the aforesaid Writ of
preliminary attachment. Petitioner filed a motion for the
reconsideration of the Decision but it was denied hence, this present
petition which was given due course in the Resolution of this Court
dated February 6, 1985.
We find the petition meritless. The most important issue raised by
petitioner is whether or not the Intermediate Appellate Court erred in
construing Section 1 par. (f) Rule 57 of the Rules of Court to be
applicable only in case the claim of the plaintiff is for liquidated
damages (and therefore not where he seeks to recover unliquidated
damages arising from a crime or tort).
In its now assailed decision, the IAC stated — We find, therefore, and
so hold that respondent court had exceeded its jurisdiction in issuing
the writ of attachment on a claim based on an action for damages
arising from delict and quasi delict the amount of which is uncertain
and had not been reduced to judgment just because the defendant is
not a resident of the Philippines. Because of the uncertainty of the
amount of plaintiff's claim it cannot be said that said claim is over and
above all legal counterclaims that defendant may have against
plaintiff, one of the indispensable requirements for the issuance of a
writ of attachment which should be stated in the affidavit of applicant
as required in Sec. 3 of Rule 57 or alleged in the verified complaint of
plaintiff. The attachment issued in the case was therefore null and
void.
We agree. Section 1 of Rule 57 of the Rules of Court provides — SEC.
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:
a. In an action for the recovery of money or damages on a cause of
action arising fromcontract, express or implied, against a party
who is about to depart from the Philippines with intent to defraud
his creditors;
b. In 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;
c. In an action to recover the possession of personal property
unjustly detained, when the property, or any part thereof, has been
concealed. removed, or disposed of to prevent its being found or
taken by the applicant or an officer;
d. In an action against a party who has been guilty of a 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;
e. In an action against a party who has removed or disposed of his
property, or is about to do so, with intent to defraud his creditors;
f. n an action against a party who resides out of the Philippines, or
on whom summons may be served by publication. (emphasis
supplied)
While it is true that from the aforequoted provision attachment may
issue "in an action against a party who resides out of the Philippines,
" irrespective of the nature of the action or suit, and while it is also
true that in the case of Cu Unjieng, et al vs. Albert, 58 Phil. 495, it was
held that "each of the six grounds treated ante is independent of the
others," still it is imperative that the amount sought be liquidated.
In view of the foregoing, the Decision appealed from is hereby
AFFIRMED. SO ORDERED.
G.R. No. 75466 December 19, 1988
ANTONIO TOLEDO, vs. HON. JOSE P. BURGOS, Presiding
Judge of Branch XXV of the Regional Trial Court of Cebu, Region
VII, and PERCY CASTRO
This is a petition for certiorari and mandamus with a prayer for the
issuance of a writ of preliminary prohibitory injunction, questioning
the respondent judge's denial of petitioner's "Application for Issuance
of a Writ of Preliminary Attachment" and the latter's subsequent
"Motion for Reconsideration", in his orders dated 6 June 1986 and 23
June 1986, respectively.
As can be gleaned from the parties' memoranda, the following material
facts have been established: A complaint for Delivery of Personal
Property was commenced by petitioner on 14 June 1985 against
respondent Castro but was subsequently denied. In connection
therewith, a writ of Replevin was applied for. Petitioner's subsequent
reconsideration having been likewise denied, he went to the then
Intermediate Appellate Court on certiorari. The latter Court denied the
same on 30 April 1986. *
Subsequently, on 14 May 1986, petitioner applied for the issuance of a
writ of preliminary attachment with the Court below, and which was
requested by the former's counsel for it to be considered in the
morning of 6 June 1986 "With or without the attendance of counsel
and without oral arguments" (p. 28, Rollo). In said application, it was
alleged that respondent Castro, among others, "has removed and has
deposed (sic) or is about to depose (sic) of her property with intent to
defraud the herein plaintiff" (p. 24, Rollo). To support such allegation,
an affidavit of one Rudolfo Inot (p. 29, Rollo) was attached to the
application to prove that respondent Castro and her spouse insistently
offered to sell to him two (2) motor vehicles. Castro submitted her
written opposition thereto on 4 June 1986 (p. 57, Rollo). On the
hearing of 6 June 1986, neither petitioner nor his counsel appeared.
Being present then, Castro assailed the allegations in the affidavit of
Mr. Inot. She likewise argued that petitioner had to prove by
overwhelming evidence his allegation that she was about to dispose of
her properties in fraud of creditors, and that mere affidavits would not
suffice. On the same date, respondent judge denied the application.
On 17 June 1986, petitioner moved to reconsider the above denial.
Once more, counsel for petitioner requested that the consideration of
said motion be scheduled in the morning session of 23 June 1986
"without need of argument or appearance of counsel" (p. 35, Rollo).
But like before, petitioner and his counsel failed to appear. On said
date, respondent Castro manifested that the two (2) vehicles, alleged to
have been offered for sale by her, were needed in her retail
merchandising business, thus, had no intention of disposing of them.
The respondent judge then issued another order dated 23 June 1986
denying petitioner's motion. Hence, this present petition was filed on
12 August 1986.
In a minute resolution dated 25 August 1986 (p. 90, Rollo), this Court
denied the instant petition for being without merit. And after
respondent Castro had filed her answer and petitioner his motion for
reconsideration, this Court reconsidered the aforesaid resolution in a
subsequent one dated 5 January 1987 (p. 94, Rollo) and ordered the
parties to submit their respective memoranda.
The sole issue in this case concerns the propriety of the respondent
judge's denial of petitioner's application for a writ of attachment. In
branding the denial as improper, petitioner accuses respondent judge
of having made it "with undue haste and without proper notice of
hearing" and with disregard of the "(strong) evidence in support of the
application". (Petition, p. 8, Rollo)
We disagree With the petitioner's accusations. Contrary to his claims,
the respondent judge acted well within his powers and in the highest
regard for justice. Respondent judge acted correctly in denying
petitioner's "Application for Issuance of a Writ of Preliminary
attachment". There was no need for him to, as against petitioner's
claim, set a hearing on the said application. This is because the
issuance of a writ of preliminary attachment may be made by the
Court ex parte. As We held in the case of Filinvest Credit Corporation
vs. Relova, 117 SCRA 420, and reiterated in Belisle Investment and
Finance Co., Inc. vs. State Investment House, Inc., 151 SCRA 630:
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 Blue Green Waters, Inc. vs. Hon. Sundiam and
Tan 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, a writ of attachment may be issued
ex parte.
And even if said notice is indeed necessary, petitioner can only blame
himself for failing to attend the scheduled hearing of 6 June 1986. This
is because it was he, through his counsel, who requested that the
application be set for consideration and approval by the Court on the
said date. It was, therefore, his duty to be present in Court on that date.
Inasmuch as a writ of preliminary attachment may be issued without
hearing, the judge before whom the application is made has full
discretion in considering the supporting evidence proffered by the
applicant. And in dealing with the affidavit of Mr. Inot, the respondent
judge was empowered to decide whether or not such should be given
credit. As We enunciated in the early case of La Grande vs. Samson
(58 Phil. 578); "the sufficiency or insufficiency of an affidavit depends
upon the amount of credit given to it by the judge, and its acceptance
of rejection upon his sound discretion."
It is unfortunate that counsel for petitioner, in his motion for
reconsideration dated 13 October 1986, has made a hasty accusation
against the Honorable Judge Jose Burgos, the public respondent, as
having "shown manifest partiality towards private respondents,
making statements and actions which clearly intimate that the private
respondents would win the case handsdown This is indeed
unfortunate, improper and an affront to the dignity of the judiciary."
(p. 79, Rollo). We do not find any cogent and valid ground in the
records of this case which justify such a grave imputation upon a
member of the Bench. Counsel for petitioner is hereby reminded of his
duties to the Court. And the attorney's duty of prime importance is to
observe and maintain the respect due the courts of justice and judicial
officers (Rule 138, Sec. 20(b); Rheem of the Phil. vs. Ferrer, 60 SCRA
234). His arguments, written or oral, should be gracious to both the
court and opposing counsel and be of such words as may be properly
addressed by one gentleman to another (National Surety Co. v. Jarvis,
278 US 610 (1928).
WHEREFORE, premises considered, this petition is hereby DENIED
with costs against petitioner. SO ORDERED.
G.R. No. 166759 November 25, 2009
SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO
TORRES and SOLAR RESOURCES, INC. Vs. NICANOR
SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI
NORMEL SATSATIN and NIKKI NORLIN SATSATIN,
This is a petition for review on certiorari assailing the Decision1 dated
November 23, 2004 of the Court of Appeals (CA) in CA-G.R. SP No.
83595, and its Resolution2 dated January 18, 2005, denying
petitioners’ motion for reconsideration.
The factual and procedural antecedents are as follows:
The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and
Mario Torres (Mario) each own adjacent 20,000 square meters track of
land situated at Barrio Lankaan, Dasmariñas, Cavite, covered by
Transfer Certificate of Title (TCT) Nos. 251267, 3 251266,4 and
251265,5 respectively.
Sometime in 1997, Nicanor Satsatin (Nicanor) asked petitioners’
mother, Agripina Aledia, if she wanted to sell their lands. After
consultation with her daughters, daughter-in-law, and grandchildren,
Agripina agreed to sell the properties. Petitioners, thus, authorized
Nicanor, through a Special Power of Attorney, to negotiate for the sale
of the properties.6
Sometime in 1999, Nicanor offered to sell the properties to Solar
Resources, Inc. (Solar). Solar allegedly agreed to purchase the three
parcels of land, together with the 10,000-square-meter property owned
by a certain Rustica Aledia, for ₱35,000,000.00. Petitioners alleged
that Nicanor was supposed to remit to them the total amount of
₱28,000,000.00 or ₱9,333,333.00 each to Sofia, Fructosa, and the
heirs of Mario.
Petitioners claimed that Solar has already paid the entire purchase
price of ₱35,000,000.00 to Nicanor in Thirty-Two (32) post-dated
checks which the latter encashed/deposited on their respective due
dates. Petitioners added that they also learned that during the period
from January 2000 to April 2002, Nicanor allegedly acquired a house
and lot at Vista Grande BF Resort Village, Las Piñas City and a car,
which he registered in the names of his unemployed children, Nikki
Normel Satsatin and Nikki Norlin Satsatin. However, notwithstanding
the receipt of the entire payment for the subject property, Nicanor only
remitted the total amount of ₱9,000,000.00, leaving an unremitted
balance of ₱19,000,000.00. Despite repeated verbal and written
demands, Nicanor failed to remit to them the balance of
₱19,000,000.00.
Consequently, on October 25, 2002, petitioners filed before the
regional trial court (RTC) a Complaint 7 for sum of money and
damages, against Nicanor, Ermilinda Satsatin, Nikki Normel Satsatin,
and Nikki Norlin Satsatin. The case was docketed as Civil Case No.
2694-02, and raffled to RTC, Branch 90, Dasmariñas, Cavite.
On October 30, 2002, petitioners filed an Ex-Parte Motion for the
Issuance of a Writ of Attachment, 8 alleging among other things: that
respondents are about to depart the Philippines; that they have
properties, real and personal in Metro Manila and in the nearby
provinces; that the amount due them is P19,000,000.00 above all other
claims; that there is no other sufficient security for the claim sought to
be enforced; and that they are willing to post a bond fixed by the court
to answer for all costs which may be adjudged to the respondents and
all damages which respondents may sustain by reason of the
attachment prayed for, if it shall be finally adjudged that petitioners
are not entitled thereto.
On October 30, 2002, the trial court issued an Order9 directing the
petitioners to post a bond in the amount of ₱7,000,000.00 before the
court issues the writ of attachment, the dispositive portion of which
reads as follows:
WHEREFORE, premises considered, and finding the present
complaint and motion sufficient in form and substance, this Court
hereby directs the herein plaintiffs to post a bond, pursuant to Section
3, Rule 57 of the 1997 Rules of Civil Procedure, in the amount of
Seven Million Pesos (P7,000,000.00), before the Writ of Attachment
issues.10
On November 15, 2002, petitioners filed a Motion for Deputation of
Sheriff,11 informing the court that they have already filed an
attachment bond. They also prayed that a sheriff be deputized to serve
the writ of attachment that would be issued by the court.
In the Order12 dated November 15, 2002, the RTC granted the above
motion and deputized the sheriff, together with police security
assistance, to serve the writ of attachment.
Thereafter, the RTC issued a Writ of Attachment13 dated November 15,
2002, directing the sheriff to attach the estate, real or personal, of the
respondents, the decretal portion of which reads:
WE, THEREFORE, command you to attach the estate, real or
personal, not exempt from execution, of the said defendants, in your
province, to the value of said demands, and that you safely keep the
same according to the said Rule, unless the defendants give security to
pay such judgment as may be recovered on the said action, in the
manner provided by the said Rule, provided that your legal fees and all
necessary expenses are fully paid.
You shall return this writ with your proceedings indorsed hereon
within twenty (20) days from the date of receipt hereof.
GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day
of November, 2002, at Imus for Dasmariñas, Cavite, Philippines.14
On November 19, 2002, a copy of the writ of attachment was served
upon the respondents. On the same date, the sheriff levied the real and
personal properties of the respondent, including household appliances,
cars, and a parcel of land located at Las Piñas, Manila.15
On November 21, 2002, summons, together with a copy of the
complaint, was served upon the respondents.16
On November 29, 2002, respondents filed their Answer.17
On the same day respondents filed their answer, they also filed a
Motion to Discharge Writ of Attachment18anchored on the following
grounds: the bond was issued before the issuance of the writ of
attachment; the writ of attachment was issued before the summons was
received by the respondents; the sheriff did not serve copies of the
application for attachment, order of attachment, plaintiffs’ affidavit,
and attachment bond, to the respondents; the sheriff did not submit a
sheriff’s return in violation of the Rules; and the grounds cited for the
issuance of the writ are baseless and devoid of merit. In the alternative,
respondents offered to post a counter-bond for the lifting of the writ of
attachment.19
On March 11, 2003, after the parties filed their respective pleadings,
the RTC issued an Order20 denying the motion, but at the same time,
directing the respondents to file a counter-bond, to wit:
WHEREFORE, premises considered, after the pertinent pleadings of
the parties have been taken into account, the herein defendants are
hereby directed to file a counter-bond executed to the attaching party,
in the amount of Seven Million Pesos (₱7,000,000.00), to secure the
payment of any judgment that the attaching party may recover in the
action, with notice on the attaching party, whereas, the Motion to
Discharge Writ of Attachment is DENIED.
Thereafter, respondents filed a motion for reconsideration and/or
motion for clarification of the above order. On April 3, 2003, the RTC
issued another Order22 which reads:
In view of the Urgent Motion For Reconsideration And/Or Motion For
Clarification of the Order of this Court dated March 11, 2003, denying
their Motion to Discharge Writ of Attachment filed by the defendants
through counsel Atty. Franco L. Loyola, the Motion to Discharge Writ
of Attachment is denied until after the defendants have posted the
counter-bond in the amount of Seven Million Pesos (₱7,000,000.00).
The defendants, once again, is directed to file their counter-bond of
Seven Million Pesos (₱7,000,000.00), if it so desires, in order to
discharge the Writ of Attachment.
On December 15, 2003, respondents filed an Urgent Motion to Lift/Set
Aside Order Dated March [11], 2003,23 which the RTC denied in an
Order24 of even date, the dispositive portion of which reads:
WHEREFORE, premises considered, defendants’ Urgent Motion to
Lift/Set Aside Order Dated March 23, 2003 (With Manifestation to
Dissolve Writ of Attachment) is hereby DENIED for lack of Merit.
Respondents filed an Urgent Motion for Reconsideration,25 but it was
denied in the Order26 dated March 3, 2004.
Aggrieved, respondents filed before the CA a Petition for Certiorari,
Mandamus and Prohibition with Preliminary Injunction and
Temporary Restraining Order27 under Rule 65 of the Rules of Court,
docketed as CA-G.R. SP No. 83595, anchored on the following
grounds:
1. public respondents committed grave abuse of discretion
amounting to lack of or in excess of jurisdiction in failing to
notice that the lower court has no jurisdiction over the person and
subject matter of the complaint when the subject Writ of
Attachment was issued;
2. public respondents committed grave abuse of discretion
amounting to lack of or in excess of jurisdiction in granting the
issuance of the Writ of Attachment despite non-compliance with
the formal requisites for the issuance of the bond and the Writ of
Attachment.28
Respondents argued that the subject writ was improper and irregular
having been issued and enforced without the lower court acquiring
jurisdiction over the persons of the respondents. They maintained that
the writ of attachment was implemented without serving upon them
the summons together with the complaint. They also argued that the
bond issued in favor of the petitioners was defective, because the
bonding company failed to obtain the proper clearance that it can
transact business with the RTC of Dasmariñas, Cavite. They added
that the various clearances which were issued in favor of the bonding
company were applicable only in the courts of the cities of Pasay,
Pasig, Manila, and Makati, but not in the RTC, Imus, Cavite.29
On November 23, 2003, the CA rendered the assailed Decision in
favor of the respondents, finding grave abuse of discretion amounting
to lack of or in excess of jurisdiction on the part of the RTC in issuing
the Orders dated December 15, 2003 and March 3, 2004. The decretal
portion of the Decision reads:
WHEREFORE, the instant petition is hereby GRANTED.
Accordingly, the assailed Orders are hereby nullified and set aside.
The levy on the properties of the petitioners pursuant to the Writ of
Attachment issued by the lower court is hereby LIFTED.
SO ORDERED.30
Petitioners filed a Motion for Reconsideration, 31 but it was denied in
the Resolution32 dated January 18, 2005.
Hence, this petition assigning the following errors:
1) THE HONORABLE COURT OF APPEALS ERRED IN
ORDERING THE LIFTING OF THE WRIT OF ATTACHMENT
PURSUANT TO SECTION 13, RULE 57 OF THE REVISED
RULES OF CIVIL PROCEDURE.
2) THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT PUBLIC RESPONDENT COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OF OR IN EXCESS OF JURISDICTION IN GRANTING THE
WRIT OF ATTACHMENT DESPITE THE BOND BEING
INSUFFICIENT AND HAVING BEEN IMPROPERLY ISSUED.
3) THE HONORABLE COURT OF APPEALS ERRED IN NOT
DISMISSING THE PETITION BY REASON OF ESTOPPEL,
LACHES AND PRESCRIPTION AND IN HOLDING THAT
THE WRIT OF ATTACHMENT WAS IMPROPERLY AND
IRREGULARLY ENFORCED IN VIOLATION OF SECTION 5,
RULE 57 OF THE REVISED RULES OF COURT.
4) THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE PRINCIPLE OF ESTOPPEL WILL NOT
LIE AGAINST RESPONDENTS.
Petitioners maintain that in the case at bar, as in the case of FCY
Construction Group, Inc. v. Court of Appeals, 33the only way the
subject writ of attachment can be dissolved is by a counter-bond. They
claim that the respondents are not allowed to file a motion to dissolve
the attachment under Section 13, Rule 57 of the Rules of Court.
Otherwise, the hearing on the motion for the dissolution of the writ
would be tantamount to a trial on the merits, considering that the writ
of preliminary attachment was issued upon a ground which is, at the
same time, the applicant’s cause of action.
Petitioners insist that the determination of the existence of grounds to
discharge a writ of attachment rests in the sound discretion of the
lower court. They argue that the Certification34 issued by the Office of
the Administrator and the Certifications35 issued by the clerks of court
of the RTCs of Dasmariñas and Imus, Cavite, would show that the
bonds offered by Western Guaranty Corporation, the bonding
company which issued the bond, may be accepted by the RTCs of
Dasmariñas and Imus, Cavite, and that the said bonding company has
no pending liability with the government.
Petitioners contend that respondents are barred by estoppel, laches,
and prescription from questioning the orders of the RTC issuing the
writ of attachment. They also maintain that the issue whether there
was impropriety or irregularity in the issuance of the orders is moot
and academic, considering that the attachment bond questioned by the
respondent had already expired on November 14, 2003 and petitioners
have renewed the attachment bond covering the period from
November 14, 2003 to November 14, 2004, and further renewed to
cover the period of November 14, 2004 to November 14, 2005.
The petition is bereft of 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.36
In the case at bar, the CA correctly found that there was grave abuse of
discretion amounting to lack of or in excess of jurisdiction on the part
of the trial court in approving the bond posted by petitioners despite
the fact that not all the requisites for its approval were complied with.
In accepting a surety bond, it is necessary that all the requisites for its
approval are met; otherwise, the bond should be rejected.37
Every bond should be accompanied by a clearance from the Supreme
Court showing that the company concerned is qualified to transact
business which is valid only for thirty (30) days from the date of its
issuance.38 However, it is apparent that the Certification 39 issued by the
Office of the Court Administrator (OCA) at the time the bond was
issued would clearly show that the bonds offered by Western Guaranty
Corporation may be accepted only in the RTCs of the cities of Makati,
Pasay, and Pasig. Therefore, the surety bond issued by the bonding
company should not have been accepted by the RTC of Dasmariñas,
Branch 90, since the certification secured by the bonding company
from the OCA at the time of the issuance of the bond certified that it
may only be accepted in the above-mentioned cities. Thus, the trial
court acted with grave abuse of discretion amounting to lack of or in
excess of jurisdiction when it issued the writ of attachment founded on
the said bond.
Moreover, in provisional remedies, particularly that of preliminary
attachment, the distinction between the issuance and the
implementation of the writ of attachment is of utmost importance to
the validity of the writ. The distinction is indispensably necessary to
determine when jurisdiction over the person of the defendant should
be acquired in order to validly implement the writ of attachment upon
his person.
This Court has long put to rest the issue of when jurisdiction over the
person of the defendant should be acquired in cases where a party
resorts to provisional remedies. A party to a suit may, at any time after
filing the complaint, avail of the provisional remedies under the Rules
of Court. Specifically, Rule 57 on preliminary attachment speaks of
the grant of the remedy "at the commencement of the action or at any
time before entry of judgment."40 This phrase refers to the date of the
filing of the complaint, which is the moment that marks "the
commencement of the action." The reference plainly is to a time
before summons is served on the defendant, or even before summons
issues.41
In Davao Light & Power Co., Inc. v. Court of Appeals, 42 this Court
clarified the actual time when jurisdiction should be had:
It goes without saying that whatever be the acts done by the Court
prior to the acquisition of jurisdiction over the person of defendant x x
x issuance of summons, order of attachment and writ of attachment
x x x these do not and cannot bind and affect the defendant until
and unless jurisdiction over his person is eventually obtained by the
court, either by service on him of summons or other coercive process
or his voluntary submission to the court’s authority. Hence, when the
sheriff or other proper officer commences implementation of the writ
of attachment, it is essential that he serve on the defendant not only a
copy of the applicant’s affidavit and attachment bond, and of the order
of attachment, as explicitly required by Section 5 of Rule 57, but also
the summons addressed to said defendant as well as a copy of the
complaint.
In Cuartero v. Court of Appeals,43 this Court held that the grant of the
provisional remedy of attachment involves three stages: first, the court
issues the order granting the application; second, the writ of
attachment issues pursuant to the order granting the writ; and third, the
writ is implemented. For the initial two stages, it is not necessary that
jurisdiction over the person of the defendant be first obtained.
However, once the implementation of the writ commences, the court
must have acquired jurisdiction over the defendant, for without such
jurisdiction, the court has no power and authority to act in any manner
against the defendant. Any order issuing from the Court will not bind
the defendant.44
Thus, it is indispensable not only for the acquisition of jurisdiction
over the person of the defendant, but also upon consideration of
fairness, to apprise the defendant of the complaint against him and the
issuance of a writ of preliminary attachment and the grounds therefor
that prior or contemporaneously to the serving of the writ of
attachment, service of summons, together with a copy of the
complaint, the application for attachment, the applicant’s affidavit and
bond, and the order must be served upon him.
In the instant case, assuming arguendo that the trial court validly
issued the writ of attachment on November 15, 2002, which was
implemented on November 19, 2002, it is to be noted that the
summons, together with a copy of the complaint, was served only on
November 21, 2002.
At the time the trial court issued the writ of attachment on November
15, 2002, it can validly to do so since the motion for its issuance can
be filed "at the commencement of the action or at any time before
entry of judgment." However, at the time the writ was implemented,
the trial court has not acquired jurisdiction over the persons of the
respondent since no summons was yet served upon them. The proper
officer should have previously or simultaneously with the
implementation of the writ of attachment, served a copy of the
summons upon the respondents in order for the trial court to have
acquired jurisdiction upon them and for the writ to have binding effect.
Consequently, even if the writ of attachment was validly issued, it was
improperly or irregularly enforced and, therefore, cannot bind and
affect the respondents.
Moreover, although there is truth in the petitioners’ contention that an
attachment may not be dissolved by a showing of its irregular or
improper issuance if it is upon a ground which is at the same time the
applicant’s cause of action in the main case, since an anomalous
situation would result if the issues of the main case would be
ventilated and resolved in a mere hearing of a motion. However, the
same is not applicable in the case bar. It is clear from the respondents’
pleadings that the grounds on which they base the lifting of the writ of
attachment are the irregularities in its issuance and in the service of the
writ; not petitioners’ cause of action.1avvphi1
Further, petitioners’ contention that respondents are barred by
estoppel, laches, and prescription from questioning the orders of the
RTC issuing the writ of attachment and that the issue has become moot
and academic by the renewal of the attachment bond covering after its
expiration, is devoid of merit. As correctly held by the CA:
There are two ways of discharging the attachment. First, to file a
counter-bond in accordance with Section 12 of Rule 57. Second[,] [t]o
quash the attachment on the ground that it was irregularly or
improvidently issued, as provided for in Section 13 of the same rule.
Whether the attachment was discharged by either of the two ways
indicated in the law, the attachment debtor cannot be deemed to have
waived any defect in the issuance of the attachment writ by simply
availing himself of one way of discharging the attachment writ,
instead of the other. The filing of a counter-bond is merely a speedier
way of discharging the attachment writ instead of the other way.45
Moreover, again assuming arguendo that the writ of attachment was
validly issued, although the trial court later acquired jurisdiction over
the respondents by service of the summons upon them, such belated
service of summons on respondents cannot be deemed to have cured
the fatal defect in the enforcement of the writ. The trial court cannot
enforce such a coercive process on respondents without first obtaining
jurisdiction over their person. The preliminary writ of attachment must
be served after or simultaneous with the service of summons on the
defendant whether by personal service, substituted service or by
publication as warranted by the circumstances of the case. The
subsequent service of summons does not confer a retroactive
acquisition of jurisdiction over her person because the law does not
allow for retroactivity of a belated service.46
WHEREFORE, premises considered, the petition is DENIED. The
Decision and Resolution of the Court of Appeals dated November 23,
2004 and January 18, 2005, respectively, in CA-G.R. SP No. 83595
are AFFIRMED. SO ORDERED.
G.R. No. 115678 February 23, 2001
PHILIPPINES BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS and BERNARDINO
VILLANUEVA, respondents.
x ---------------------------------------- x
G.R. No. 119723 February 23, 2001
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS and FILIPINAS TEXTILE MILLS,
INC., respondents.
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. 32863 1 and the other
against its March 31, 1995 Decision in CA-G.R. SP No. 32762. 2 Both
Decisions set aside and nullified the August 11, 1993 Order 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.
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, 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.1âwphi1.nêt
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 consolidated5 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 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."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 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:
(b) In an action for money or property embezzled or fraudulently
misapplied or converted to his us 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;
(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;
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.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:
i. 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;
ii. I have read and understood its contents which are true and correct
of my own knowledge;
iii. There exist(s) sufficient cause of action against the defendants in
the instant case;
iv. 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
subparagraphs "b" and "d" of said section;
v. 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,8 as follows –
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 debtor's inability to pay or to comply with
the obligations.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 petitioner's 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, petitioner's Motion for Attachment fails to meet the
standard set in D.P. Lub Oil Marketing Center, Inc. v. Nicolas,10 in
applications for attachment. In the said case, this Court cautioned –
The petitioner's prayer for a writ of preliminary attachment hinges
on the allegations in paragraph 16 of the complaint and paragraph
4 of the affidavit of Daniel Pe which are couched in general terms
devoid of particulars of time, persons and places to support
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 the private respondents the writ having been issued ex
parte. A writ of attachment can only be granted on concrete and
specific grounds and not on general averments merely quoting the
words of the rules.
As was frowned upon in D.P. Lub Oil Marketing Center, Inc.,11 not
only was petitioner's application defective for having merely given
general averments; what is worse, there was no hearing to afford
private respondents an opportunity to ventilate their side, in
accordance with due process, in order to determine the truthfulness of
the allegations of petitioner. As already mentioned, private respondents
claimed that substantial payments were made on the proceeds of the
trust receipts sued upon. They also refuted the allegations of fraud,
embezzlement and misappropriation by averring that private
respondent Filipinas Textile Mills could not have done these as it had
ceased its operations starting in June of 1984 due to workers' strike.
These are matters which should have been addressed in a preliminary
hearing to guide the lower court to a judicious exercise of its discretion
regarding the attachment prayed for. On this score, respondent Court
of Appeals was correct in setting aside the issued writ of preliminary
attachment.
Time and again, we have held that the 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.12
WHEREFORE, for the foregoing reasons, the instant petitions are
DENIED. The decision of the Court of Appeals in CA-G.R. SP No.
32863 and CA-G.R. SP No. 32762 are AFFIRMED. No
pronouncement as to costs.1âwphi1.nêt SO ORDERED.
G.R. No. 167741 July 12, 2007
REPUBLIC OF THE PHILIPPINES,vs.MAJ. GEN. CARLOS
FLORES GARCIA, CLARITA DEPAKAKIBO GARCIA, IAN
CARL DEPAKAKIBO GARCIA, JUAN PAULO DEPAKAKIBO
GARCIA, TIMOTHY DEPAKAKIBO GARCIA and THE
SANDIGANBAYAN (FOURTH DIVISION),
This petition for certiorari1 assails the January 14, 2005 and March 2,
2005 resolutions2 of the Fourth Division of the Sandiganbayan in Civil
Case No. 0193 entitled Republic of the Philippines v. Maj. Gen.
Carlos Flores Garcia, Clarita Depakakibo Garcia, Ian Carl
Depakakibo Garcia, Juan Paulo Depakakibo Garcia and Timothy
Mark Depakakibo Garcia.
Civil Case No. 0193 was a petition for forfeiture of unlawfully
acquired properties, with a verified urgent ex-parte application for the
issuance of a writ of preliminary attachment, filed by the Republic of
the Philippines against Maj. Gen. Carlos F. Garcia, his wife 3 and
children4 in the Sandiganbayan on October 27, 2004. In praying for the
issuance of a writ of preliminary attachment, the Republic maintained
that, as a sovereign political entity, it was exempt from filing the
required attachment bond.
On October 29, 2004, the Sandiganbayan issued a resolution ordering
the issuance of a writ of preliminary attachment against the properties
of the Garcias upon the filing by the Republic of a ₱1 million
attachment bond.5On November 2, 2004, the Republic posted the
required attachment bond to avoid any delay in the issuance of the writ
as well as to promptly protect and secure its claim.
On December 7, 2004, the Republic filed a motion for partial
reconsideration of the October 29, 2004 resolution claiming that it was
exempt from filing an attachment bond and praying for the release
thereof.
In a resolution dated January 14, 2005, the Sandiganbayan ruled that
there was nothing in the Rules of Court that exempted the Republic
from filing an attachment bond. It reexamined Tolentino v. Carlos6
which was invoked by the Republic to justify its claimed exemption.
That case was decided under the old Code of Civil Procedure enacted
more than a century ago.
The Sandiganbayan denied the Republic’s motion. Reconsideration
was also denied in a resolution dated March 2, 2005.
As already stated, these two resolutions (January 14, 2005 and March
2, 2005) are the subject of the present petition.
Did the Sandiganbayan commit grave abuse of discretion when it
rejected the Republic’s claim of exemption from the filing of an
attachment bond? Yes.
Sections 3 and 4, Rule 57 of the Rules of Court provide:
Sec. 3. Affidavit and bond required. – An order of attachment shall be
granted only when it appears by the affidavit of the applicant, or of
some other person who personally knows the facts, that a sufficient
cause of action exists, that the case is one of those mentioned in
section 1 hereof, that there is no other sufficient security for the claim
sought to be enforced by the action, and that the amount due to
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 affidavit, and the bond
required by the next succeeding section, must be duly filed with
the court before the order issues.
Sec. 4. Condition of applicant’s bond. – The party applying for the
order must thereafter give a bond executed to the adverse party in
the amount fixed by the court in its order granting the issuance of
the writ, 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. (emphasis supplied)
Under these provisions, before a writ of attachment may issue, a bond
must first be filed to answer for all costs which may be adjudged to the
adverse party and for the damages he may sustain by reason of the
attachment. However, this rule does not cover the State. In Tolentino,7
this Court declared that the State as represented by the government is
exempt from filing an attachment bond on the theory that it is always
solvent.
2. Section 427 of the Code of Civil Procedure provides that before the
issuance of a writ of attachment, the applicant therefor or any person
in his name, should file a bond in favor of the defendant for an amount
not less than ₱400 nor more than the amount of the claim, answerable
for damages in case it is shown that the attachment was obtained
illegally or without sufficient cause; but in the case at bar the one
who applied for and obtained the attachment is the
Commonwealth of the Philippines, as plaintiff, and under the
theory that the State is always solvent it was not bound to post the
required bond and the respondent judge did not exceed his
jurisdiction in exempting it from such requirement. x x x8 (emphasis
supplied)
In other words, the issuance of a writ of preliminary attachment is
conditioned on the filing of a bond unless the applicant is the State.
Where the State is the applicant, the filing of the attachment bond is
excused.9
The attachment bond is contingent on and answerable for all costs
which may be adjudged to the adverse party and all damages which he
may sustain by reason of the attachment should the court finally rule
that the applicant is not entitled to the writ of attachment. Thus, it is a
security for the payment of the costs and damages to which the
adverse party may be entitled in case there is a subsequent finding that
the applicant is not entitled to the writ. The Republic of the Philippines
need not give this security as it is presumed to be always solvent and
able to meet its obligations.
The Sandiganbayan thus erred when it disregarded the foregoing
presumption and instead ruled that the Republic should file an
attachment bond. The error was not simply an error of judgment but
grave abuse of discretion.
There is grave abuse of discretion when an act is done contrary to the
Constitution, the law or jurisprudence.10Here, the Sandiganbayan’s
January 14, 2005 resolution was clearly contrary to Tolentino.
Worse, the Sandiganbayan transgressed the Constitution and arrogated
upon itself a power that it did not by law possess. All courts must take
their bearings from the decisions and rulings of this Court. Tolentino
has not been superseded or reversed. Thus, it is existing jurisprudence
and continues to form an important part of our legal system. 11
Surprisingly, the Sandiganbayan declared that Tolentino "need(ed) to
be carefully reexamined in the light of the changes that the rule on
attachment ha(d) undergone through the years."12 According to the
court a quo:
[Tolentino] was decided by the Supreme Court employing the old
Code of Civil Procedure (Act No. 190) which was enacted by the
Philippine Commission on August 7, 1901 or more than a century ago.
That was then, this is now. The provisions of the old Code of Civil
Procedure governing attachment have been substantially modified in
the subsequent Rules of Court. In fact, Rule 57 of the present 1997
Rules of Civil Procedure is an expanded modification of the provisions
of the old Code of Civil Procedure governing attachment. Unlike the
old Code of Civil Procedure, the present 1997 Rules of Civil
Procedure is noticeably explicit in its requirement that the party
applying for an order of attachment should file a bond.
On this, Article VIII, Section 4(3) of the Constitution provides:
(3) Cases or matters heard by a division shall be decided or resolved
with the concurrence of majority of the Members who actually took
part in the deliberations on the issues in the case and voted thereon,
and in no case without the concurrence of at least three of such
Members. When the required number is not obtained, the case shall be
decided en banc; Provided, that no doctrine or principle of law laid
down by the court in a decision rendered en banc or in division
may be modified or reversed except by the court sitting en banc.
(emphasis supplied)
The Constitution mandates that only this Court sitting en banc may
modify or reverse a doctrine or principle of law laid down by the
Court in a decision rendered en banc or in division. Any court, the
Sandiganbayan included, which renders a decision in violation of this
constitutional precept exceeds its jurisdiction.
Therefore, the Sandiganbayan could not have validly "reexamined,"
much less reversed, Tolentino. By doing something it could not validly
do, the Sandiganbayan acted ultra vires and committed grave abuse of
discretion.
The fact was, the revisions of the Rules of Court on attachment,
particularly those pertaining to the filing of an attachment bond, did
not quash Tolentino.
Tolentino applied Sec. 247 of Act No. 190 which provided:
Sec. 247. Obligation for damages in case of attachment. – Before the
order is made, the party applying for it, or some person on his
behalf, must execute to the defendant an obligation in an amount
to be fixed by the judge, or justice of the peace, and with sufficient
surety to be approved by him, which obligation shall be for a sum not
less than two hundred dollars, and not exceeding the amount claimed
by the plaintiff, that the plaintiff will pay all the costs which may be
adjudged to the defendant, and all damages which he may sustain by
reason of the attachment, if the same shall finally be adjudged to have
been wrongful or without sufficient cause. (emphasis supplied)
Contrary to the pronouncement of the Sandiganbayan, Section 247 of
Act No. 190 explicitly required the execution of an attachment bond
before a writ of preliminary attachment could be issued.
The relevant provisions of Act No. 190 on attachment were later
substantially adopted as Sections 313 and 4, Rule 59 of the 1940 Rules
of Court.
Sec. 3. Order issued only when affidavit and bond filed. – An order of
attachment shall be granted only when it is made to appear by the
affidavit of the plaintiff, or of some other person who personally
knows the facts, that the case is one of those mentioned in section 1
hereof, that there is no other sufficient security for the claim sought to
be enforced by the action, and that the amount due to the plaintiff, or
the value of the property which he is entitled to recover possession of,
is as much as the sum for which the order is granted above all legal
counterclaims; which affidavit, and the bond required by the next
succeeding section, must be duly filed with the clerk or judge of
the court before the order issues. (emphasis supplied)
Sec. 4. Bond required from plaintiff. – The party applying for the order
must give a bond executed to the defendant in an amount to be fixed
by the judge, not exceeding the plaintiff’s claim, that the plaintiff will
pay all the costs which may be adjudged to the defendant and all
damages which he may sustain by reason of the attachment, if the
court shall finally adjudge that the plaintiff was not entitled thereto.
And with the promulgation of the 1964 Rules of Court, the rules on
attachment were renumbered as Rule 57, remaining substantially the
same:
Sec. 3. Affidavit and bond required. – An order of attachment shall be
granted only when it appears by the affidavit of the applicant, or of
some other person who personally knows the facts, that a sufficient
cause of action exists, that the case is one of those mentioned in
section 1 hereof, that there is no other sufficient security for the claim
sought to be enforced by the action, and that the amount due to
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 affidavit, and the bond
required by the next succeeding section, must be duly filed with
the clerk or judge of the court before the order issues. (emphasis
supplied)
Sec. 4. Condition of applicant’s bond. – The party applying for the
order must thereafter give a bond executed to the adverse party in an
amount to be 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.
Clearly, the filing of an attachment bond before the issuance of a writ
of preliminary attachment was expressly required under the relevant
provisions of both the 1940 and 1964 Rules of Court.
Commentaries on Sections 3 and 4 of the 1964 Rules of Court
uniformly cited Tolentino. They stated that the government is exempt
from filing an attachment bond14 and that the State need not file an
attachment bond.15
Where the Republic of the Philippines as a party to an action asks for a
writ of attachment against the properties of a defendant, it need not
furnish a bond. This is so because the State is presumed to be
solvent.16
When plaintiff is the Republic of the Philippines, it need not file a
bond when it applies for a preliminary attachment. This is on the
premise that the State is solvent.17
And then again, we note the significant fact that Sections 3 and 4, Rule
57 of the 1964 Rules of Court were substantially incorporated as
Sections 3 and 4, Rule 57 of the present (1997) Rules of Court. 18 There
is thus no reason why the Republic should be made to file an
attachment bond.1avvphi1
In fact, in Spouses Badillo v. Hon. Tayag,19 a fairly recent case, this
Court declared that, when the State litigates, it is not required to put up
a bond for damages or even an appeal bond because it is presumed to
be solvent. In other words, the State is not required to file a bond
because it is capable of paying its obligations.20
The pronouncement in Spouses Badillo applies in this case even if
Spouses Badillo involved the filing of a supersedeas bond. The
pronouncement that the State "is not required to put up a bond for
damages or even an appeal bond" is general enough to encompass
attachment bonds. Moreover, the purpose of an attachment bond (to
answer for all costs and damages which the adverse party may sustain
by reason of the attachment if the court finally rules that the applicant
is not entitled to the writ) and a supersedeas bond (to answer for
damages to the winning party in case the appeal is found frivolous) is
essentially the same.1awphil.zw+
In filing forfeiture cases against erring public officials and employees,
the Office of the Ombudsman performs the State’s sovereign functions
of enforcing laws, guarding and protecting the integrity of the public
service and addressing the problem of corruption in the bureaucracy.
The filing of an application for the issuance of a writ of preliminary
attachment is a necessary incident in forfeiture cases. It is needed to
protect the interest of the government and to prevent the removal,
concealment and disposition of properties in the hands of
unscrupulous public officers. Otherwise, even if the government
subsequently wins the case, it will be left holding an empty bag.
Accordingly, the petition is hereby GRANTED. The January 14, 2005
and March 2, 2005 resolutions of the Sandiganbayan are REVERSED
and SET ASIDE. The Republic of the Philippines is declared exempt
from the payment or filing of an attachment bond for the issuance of a
writ of preliminary attachment issued in Civil Case No. 0193. The
Sandiganbayan is hereby ordered to release the ₱1,000,000 bond
posted by the Republic of the Philippines to the Office of the
Ombudsman.
G.R. No. L-7717 April 27, 1956
G.B., INC., ETC., vs. THE HONORABLE JUDGE CONRADO V.
SANCHEZ, ET AL.,
Petitioner herein G.B. Inc. is the Trustee of Juan Luna Subdivision Inc.
Allison Gibbs is the President of the petitioner and manager of Juan
Luna Subdivision, Inc. Before December 31, 1953, herein respondent
Juan T. Chuidian and Allison Gibbs were partners of the law firm
"Gibbs, Gibbs, Chuidian and Quasha", the retaining counsel of Juan
Luna Subdivision, Inc. On June 18, 1948, a loan of P40,000 was
granted by Juan Luna Subdivision, Inc. to respondent Chuidian, and an
"Agreement to sell" was executed on that date whereby respondent
Chuidian acknowledge the receipt of said amount for which he agreed
and promised to transfer within 60 days to Juan Luna Subdivision, Inc.
the land which he bought from one Florence Shuster the loan thus
obtained. On June 19, 1948, respondent Chuidian addressed a letter to
Juan Luna Subdivision, Inc. indicating his intention to secure a loan
from the Rehabilitation Finance Corporation with which to pay his
debt to Juan Luna Subdivision, Inc. On May 5, 1953, in his letter to
Juan Luna Subdivision, Inc. respondent Chuidian acknowledged his
indebtedness of P53,817.72, representing balance of principal and
interest. Instead of conveying the land bought from Florence Shuster
to Juan Luna Subdivision, Inc. respondent Chuidian sold the same to
Elenita Hernandez for P25,000 in order to pay his wife's gambling
death. On December 1, 1953, Allison Gibbs and respondent Chuidian
ceased to be law partners. On March 4, 1954, the petitioner filed a
complaint against respondent Chuidian in the Court of First Instance
of Manila, Civil Case No. 22183, for the collection of his indebtedness
based on his "Agreement to Sell". At the commencement of the action,
the petitioner asked for the issuance ex-parte of a writ of preliminary
attachment which as granted by the court upon the filing by the
petitioner of a bond of P57,000. On March 12, 1954, respondent
Chuidian filed a "Motion to Discharge Attachment" based on the
ground that said attachment was improperly issued, to which the
petitioner filed an opposition on March 16, 1954. On March 31, 1954,
the petition filed an urgent motion praying that respondent Chuidian's
"Motion to Discharge Attachment" be denied or that it be granted after
the filing of a counter bound or that the hearing of said "Motion to
Discharge Attachment" be held after respondent Chuidian shall have
filed an answer to the complaint. The respondent Judge of the Court of
First Instance of Manila denied petitioner's urgent motion and set the
hearing of the "Motion to Discharge Attachment" on April 3, 1954.
Such hearing was held on April 3 and 6, 1954. When the hearing in the
afternoon of April 6 and was about to end, counsel for petitioner
requested that the latter be given a chance to present an absent witness,
which the court denied on the ground that it had previously warned the
parties that will witnesses should be presented on said date.
On April 22, 1954, the respondent Judge issued an order granting
respondent Chuidian's "Motion to Discharge Attachment" under
section 13 of Rule 59 of the Rules of Court. A motion for
reconsideration having been denied, the petitioner filed the present
petition for certiorari with preliminary injunction. On May 4, 1954,
this Court issued the preliminary injunction prayed for, restraining the
respondent Judge and the sheriff of the City of Manila from enforcing
the order of April 22, 1945, discharging the writ of attachment.
The grounds advanced by the petitioner for the issuance of the writ of
attachment were (a) respondent Chuidian converted to his own use the
land which he bought in a fiduciary capacity for Juan Luna
Subdivision, Inc.; (b) that respondent Chuidian is guilty of fraud in
contracting his indebtedness and incurring the obligations upon which
the action is brought; and (c) that respondent Chuidian has removed or
disposed of his property or is about to do so with intent to defraud his
creditor. the petitioner also points out that in addition to the grounds
set forth in the motion for the issuance of an ex parte writ of
preliminary attachment, other grounds contained in the allegations of
the complaint were made a part of said ex parte motion by reference.
Attached to the "Motion to Discharge Attachment" filed by the
respondent Chuidian, was an affidavit contradicting the grounds
alleged by the petitioner. Respondent Chuidian herein stresses the fact
that while the writ of attachment was obtained by petitioner ex parte,
its discharge was ordered by the respondent Judge after extended
hearings and the submission of memoranda.
Stripped of non-essentials, the petitioner argues that respondent
Chuidian converted to his own use the land which he brought in the
fiduciary for Juan Luna Subdivision, Inc., or at least is guilty of fraud
in contracting his indebtedness and incurring the obligation upon
which the action in Civil Case No. 22138 is brought reliance being
placed on the "Agreement to Sell" executed by respondent Chuidian
on June 18, 1948, and the letter written by him to Juan Luna
Subdivision, Inc., on June 19, 1948, herein above already referred to.
Respondent Chuidian in his testimony during the hearing of his
"Motion to Discharge Attachment" alleged that said "Agreement to
Sell" did not express the true intentions of the parties; that all the
papers relied upon by the petitioner were mere formalities to avoid
criticisms of the monitory stockholders of Juan Luna Subdivision,
Inc., conceived by Allison Gibbs; that the real and true intention of the
parties was that the money would be advanced by Allison Gibbs to
respondent Chuidian and the former would pay the Juan Luna
Subdivision, Inc.
Petitioner also alleges that if it had been allowed to present its absent
witness, Elenita Hernandez, the following facts would have been
proven: (1) that Chuidian's wife's indebtedness to Elenita Hernandez
was contracted before the "Agreement to Sell"; (2) that such
indebtedness has been outstanding for some time before such date
(June 18, 1948); and (3) that the "Agreement to Sell" dated June 18,
1948 and letter on June 19, 1948, were executed with the preconceived
intention of not complying with them. It is therefore obvious that, in
order to determine whether or not respondent Chuidian converted to
his own use the land which he bought in a fiduciary capacity for the
Juan Luna Subdivision, Inc., or was guilty of fraud in contracting his
debt and incurring the obligations upon which the action is brought,
considering that respondent Chuidian has alleged that the "Agreement
to Sell" executed by him and other papers relief upon by the petitioner,
did not express the real intentions of the parties; and considering that
the grounds invoked by the petitioner for the issuance of the writ
attachment form the very basis of its complaint in Civil Case No.
22138,a trial of the merits, after answer shall have been filed by
respondent Chuidian, was necessary. In this case the hearings of the
"Motion to Discharge" were held before the issues have been joined
(respondent Chuidian not having as yet filed his answer to the
complaint), and the order of the respondent Judge discharging the
attachment would have the effect of deciding or prejudging the main
action. "The merits of the main action are not triable in a motion to
discharge an attachment otherwise an applicant for the dissolution
could force a trial of the merits of the case on his motion." (4 Am. Jur.,
Sec. 635, 934.) The petitioner's case is rather strengthened by the fact
that it was not given an opportunity to present an absent material
witness, in the person of Elenita Hernandez.
In holding that there was no fraud on the part of respondent Chuidian,
the respondent Judge held as follows: "It must be borne in mind that
defendant did not pocket the money — no money passed hands with
that conveyance to Elenita Hernandez. The conveyance was in the
form of a dacion en pago. Defendant was practically driven to the wall
the family name must be reserved. If defendant received actually that
sum of P25,000 consideration for the conveyance, perhaps there may
yet be reason for branding defendant as a fraud. But such was not the
case.' It is evident, however, that the fact that respondent Chuidian did
not pocked the money paid for the conveyance by Elenita Hernandez,
is immaterial, inasmuch as the petitioner was deprived of the same
amount of P25,000, assuming that under its complaint respondent
Chuidian was in fact indebted to the petitioner in the manner stated in
said complaint.
We are, therefore, of the opinion that, from what has been said, in a
view of the return of the sheriff showing financial instability on the
part of respondent Chuidian, the most that the respondent Judge could
have done in his favor — to which the petitioner has expressed its
agreement — was to discharge the attachment in question upon the
filing upon respondent Chuidian of a counter bond in the sum of
P57,000, under section 12 of Rule 59 of the Rules of Court. This
would have accomplished respondent Chuidian's purpose of
preserving his property and family name, at the same time giving the
petitioner security for any judgment that it may obtain against him. We
are constrained to hold the respondent Judge acted with grave abuse of
discretion.Wherefore, the order of the respondent Judge dated
April 22, 1954, is hereby set aside, and the writ of preliminary
attachment issued on March 4, 1954 maintained. So ordered with
costs against respondent Juan T. Chuidian.
G.R. NO. 123638 June 15, 2005
INSULAR SAVINGS BANK, Petitioner, vs. COURT OF
APPEALS, JUDGE OMAR U. AMIN, in his capacity as Presiding
Judge of Branch 135 of the Regional Trial Court of Makati, and
FAR EAST BANK AND TRUST COMPANY, Respondents.
Thru this appeal via a petition for review on certiorari under Rule 45
of the Rules of Court, petitioner Insular Savings Bank seeks to set
aside the D E C I S I O N 1 dated October 9, 1995 of the Court of
Appeals in CA-G.R. SP No. 34876 and its resolution dated January
24, 1996,2 denying petitioner’s motion for reconsideration.
The assailed decision of October 9, 1995 cleared the Regional Trial
Court (RTC) at Makati, Branch 135, of committing, as petitioner
alleged, grave abuse of discretion in denying petitioner’s motion to
discharge attachment by counter-bond in Civil Case No. 92-145, while
the equally assailed resolution of January 24, 1996 denied petitioner’s
motion for reconsideration.
The undisputed facts are summarized in the appellate court’s decision3
under review, as follows:
"On December 11, 1991, respondent Bank [Far East Bank and Trust
Company] instituted Arbitration Case No. 91-069 against petitioner
[Insular Savings Bank] before the Arbitration Committee of the
Philippine Clearing House Corporation [PCHC]. The dispute between
the parties involved three [unfunded] checks with a total value of
₱25,200,000.00. The checks were drawn against respondent Bank and
were presented by petitioner for clearing. As respondent Bank returned
the checks beyond the reglementary period, [but after petitioner’s
account with PCHC was credited with the amount of P25,200,000.00]
petitioner refused to refund the money to respondent Bank. While the
dispute was pending arbitration, on January 17, 1992, respondent
Bank instituted Civil Case No. 92-145 in the Regional Trial Court of
Makati and prayed for the issuance of a writ of preliminary
attachment. On January 22, 1992, Branch 133 of the Regional Trial
Court of Makati issued an Order granting the application for
preliminary attachment upon posting by respondent Bank of an
attachment bond in the amount of ₱6,000,000.00. On January 27,
1992, Branch 133 of the Regional Trial Court of Makati issued a writ
of preliminary attachment for the amount of ₱25,200,000.00. During
the hearing on February 11, 1992 before the Arbitration Committee of
the Philippine Clearing House Corporation, petitioner and respondent
Bank agreed to temporarily divide between them the disputed amount
of ₱25,200,000.00 while the dispute has not yet been resolved. As a
result, the sum of ₱12,600,000.00 is in the possession of respondent
Bank. On March 9, 1994, petitioner filed a motion to discharge
attachment by counter-bond in the amount of ₱12,600,000.00. On
June 13, 1994, respondent Judge issued the first assailed order
denying the motion. On June 27, 1994, petitioner filed a motion for
reconsideration which was denied in the second assailed order
dated July 20, 1994" (Emphasis and words in bracket added).
From the order denying its motion to discharge attachment by counter-
bond, petitioner went to the Court of Appeals on a petition for
certiorari thereat docketed as CA-G.R. SP No. 34876, ascribing on the
trial court the commission of grave abuse of discretion amounting to
lack of jurisdiction.
While acknowledging that "[R]espondent Judge may have erred in his
Order of June 13, 1994 that the counter-bond should be in the amount
of ₱27,237,700.00", in that he erroneously factored in, in arriving at
such amount, unliquidated claim items, such as actual and exemplary
damages, legal interest, attorney’s fees and expenses of litigation, the
CA, in the herein assailed decision dated October 9, 1995,
nonetheless denied due course to and dismissed the petition. For,
according to the appellate court, the RTC’s order may be defended by,
among others, the provision of Section 12 of Rule 57 of the Rules of
Court, infra. The CA added that, assuming that the RTC erred on the
matter of computing the amount of the discharging counter-bond, its
error does not amount to grave abuse of discretion.
With its motion for reconsideration having been similarly denied,
petitioner is now with us, faulting the appellate court, as follows:
1. THE COURT OF APPEALS ERRED IN NOT RULING THAT
THE PRINCIPAL AMOUNT CLAIMED BY RESPONDENT
BANK SHOULD BE THE BASIS FOR COMPUTING THE
AMOUNT OF THE COUNTER-BOND, FOR THE
PRELIMINARY ATTACHMENT WAS ISSUED FOR THE SAID
AMOUNT ONLY.
2. THE COURT OF APPEALS ERRED IN NOT RULING THAT
THE ARGUMENT THAT THE AMOUNT OF THE COUNTER-
BOND SHOULD BE BASED ON THE VALUE OF THE
PROPERTY ATTACHED CANNOT BE RAISED FOR THE
FIRST TIME IN THE COURT OF APPEALS.
3. THE COURT OF APPEALS ERRED IN RULING THAT THE
AMOUNT OF THE COUNTER-BOND SHOULD BE BASED
ON THE VALUE OF THE PROPERTY ATTACHED EVEN IF
IT WILL RESULT IN MAKING THE AMOUNT OF THE
COUNTER-BOND EXCEED THE AMOUNT FOR WHICH
PRELIMINARY ATTACHMENT WAS ISSUED."
Simply put, the issue is whether or not the CA erred in not ruling that
the trial court committed grave abuse of discretion in denying
petitioner’s motion to discharge attachment by counter-bond in the
amount of ₱12,600,000.00.
Says the trial court in its Order of June 13, 1994: "xxx (T)he counter-
bond posted by [petitioner] Insular Savings Bank should include the
unsecured portion of [respondent’s] claim of ₱12,600,000.00 as agreed
by means of arbitration between [respondent] and [petitioner]; Actual
damages at 25% percent per annum of unsecured amount of claim
from October 21, 1991 in the amount of ₱7,827,500.00; Legal interest
of 12% percent per annum from October 21, 1991 in the amount of
₱3,805,200.00; Exemplary damages in the amount of ₱2,000,000.00;
and attorney’s fees and expenses of litigation in the amount of
₱1,000,000.00 with a total amount of ₱27,237,700.00 (Adlawan vs.
Tomol, 184 SCRA 31 (1990)".
Petitioner, on the other hand, argues that the starting point in
computing the amount of counter-bond is the amount of the
respondent’s demand or claim only, in this case ₱25,200,000.00,
excluding contingent expenses and unliquidated amount of damages.
And since there was a mutual agreement between the parties to
temporarily, but equally, divide between themselves the said amount
pending and subject to the final outcome of the arbitration, the amount
of ₱12,600,000.00 should, so petitioner argues, be the basis for
computing the amount of the counter-bond.
The Court rules for the petitioner. The then pertinent provision of Rule
57 (Preliminary Attachment) of the Rules of Court under which the
appellate court issued its assailed decision and resolution, provides as
follows:
"SEC. 12. Discharge of attachment upon giving counter-bond. – At
any time after an order of attachment has been granted, the party
whose property has been attached, . . . may upon reasonable notice to
the applicant, apply to the judge who granted the order or to the judge
of the court 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. x x x . Should such counter-bond for any reason be
found to be, or become insufficient, and the party furnishing the same
fail to file an additional counter-bond, the attaching party may apply
for a new order of attachment"4 (Emphasis supplied).4
As may be noted, the amount of the counter-attachment bond is, under
the terms of the aforequoted Section 12, to be measured against the
value of the attached property, as determined by the judge to secure
the payment of any judgment that the attaching creditor may recover
in the action. Albeit not explicitly stated in the same section and
without necessarily diminishing the sound discretion of the issuing
judge on matters of bond approval, there can be no serious objection,
in turn, to the proposition that the attached property - and logically the
counter-bond necessary to discharge the lien on such property - should
as much as possible correspond in value to, or approximately match
the attaching creditor’s principal claim. Else, excessive attachment,
which ought to be avoided at all times, shall ensue. As we held in
Asuncion vs. Court of Appeals:5
"We, however, find the counter-attachment bond in the amount of
P301,935.41 required of the private respondent by the trial court as
rather excessive under the circumstances. Considering that the
principal amounts claimed by the petitioner . . . total only
P185,685.00, and that he had posted a bond of only P80,000.00 for the
issuance of the writ of preliminary attachment, we deem it reasonable
to lower the amount of the counter-attachment bond to be posted by
the private respondent . . . to the sum of P185,685.00."
The following excerpts from Herrera, REMEDIAL LAW, Vol. VII, 1997
ed., p. 61, citing retired Justice Jose Y. Feria, drive home the same
point articulated in Asuncion:
"The sheriff is required to attach only so much of the property of the
party against whom the order is issued as may be sufficient to satisfy
the applicant’s demand, the amount of which is stated in the order,
unless a deposit is made or a counter-bond is given equal to said
amount. However, if the value of the property to be attached is less
than the amount of the demand, the amount of the applicant’s bond
may be equal to the value of said property, and the amount of the
adverse party’s deposit or counter-bond may be equal to the covered by the counter-bond.
applicant’s bond. The writ of preliminary attachment is issued upon
With the view we take of this case, the trial court, in requiring
approval of the requisite bond". (Emphasis supplied).1avvphi1.net
petitioner to post a counter-bond in the amount of ₱27,237,700.00,
Turning to the case at bar, the records show that the principal claim of
obviously glossed over one certain fundamental. We refer to the fact
respondent, as plaintiff a quo, is in the amount of ₱25,200,000.00,6
that the attachment respondent applied for and the corresponding writ
representing the three (3) unfunded checks drawn against, and
issued was only for the amount of ₱25.2 Million. Respondent, it bears
presented for clearing to, respondent bank. Jurisprudence teaches that
to stress, did not pray for attachment on its other claims, contingent
a writ of attachment cannot be issued for moral and exemplary
and unliquidated as they were. Then, too, the attaching writ rightly
damages, and other unliquidated or contingent claim.7
excluded such claims. While the records do not indicate, let alone
The order of attachment dated January 22, 1992 fixed the bond to be provide a clear answer as to the actual value of the property levied
posted by respondent, as applicant, at ₱6,000,000.00. The writ of upon, it may reasonably be assumed that it is equal to respondent’s
attachment issued on January 27, 1992, in turn, expressly indicated principal claim. Be that as it may, it was simply unjust for the trial
that petitioner is justly indebted to respondent in the amount of court to base the amount of the counter-bond on a figure beyond the
₱25,200,000.00.8 On February 11, 1992, before the Arbitration ₱25,200,000.00 threshold, as later reduced to ₱12,600,200.00.
Committee of the Philippine Clearing House Corporation, petitioner
The trial court, therefore, committed grave abuse of discretion when it
and respondent, however, agreed to equally divide between
denied petitioner’s motion to discharge attachment by counter-bond in
themselves, albeit on a temporary basis, the disputed amount of
the amount of ₱12,600,000.00, an amount more than double the
₱25,200,000.00, subject to the outcome of the arbitration proceedings.
attachment bond required of, and given by, respondent. As a necessary
Thus, the release by petitioner of the amount of ₱12,600,000.00 to
consequence, the Court of Appeals committed reversible error when it
respondent. On March 7, 1994, petitioner filed a motion to discharge
dismissed petitioner’s recourse thereto in CA-G.R. SP No. 34876.
attachment by counter-bond in the amount of ₱12,600,000.009 which,
to petitioner, is the extent that respondent may actually be prejudiced It bears to stress, as a final consideration, that the certiorari
in the event its basic complaint for recovery of money against proceedings before the appellate court and the denial of the motion to
petitioner prospers. discharge attachment subject of such proceedings, transpired under the
old rules on preliminary attachment which has since been revised. 10
As things stood, therefore, respondent’s principal claim against
And unlike the former Section 12 of Rule 57 of the Rules of Court
petitioner immediately prior to the filing of the motion to discharge
where the value of the property attached shall be the defining measure
attachment has effectively been pruned down to ₱12,600,000.00. The
in the computation of the discharging counter-attachment bond, the
trial court was fully aware of this reality. Accordingly, it should have
present less stringent Section 12 of Rule 57 provides that the court
allowed a total discharge of the attachment on a counter-bond based on
shall order the discharge of attachment if the movant "makes a cash
the reduced claim of respondent. If a portion of the claim is already
deposit, or files a counter-bond . . . in an amount equal to that fixed by
secured, we see no justifiable reason why such portion should still be
the court in the order of attachment, exclusive of costs." Not being in
subject of counter-bond. It may be that a counter-bond is intended to
the nature of a penal statute, the Rules of Court cannot be given
secure the payment of any judgment that the attaching party may
retroactive effect.11
recover in the main action. Simple common sense, if not consideration
of fair play, however, dictates that a part of a possible judgment that This disposition should be taken in the light of then Section 12, Rule
has veritably been preemptively satisfied or secured need not be 57 of the Rules of Court.
WHEREFORE, the instant petition is GRANTED. Accordingly, the
assailed decision and resolution of the Courts of Appeals are hereby
REVERSED and SET ASIDE, along with the orders dated June 13,
1994 and July 20, 1994 of the Regional Trial Court at Makati, Branch
135, in Civil Case No. 92-145 insofar they denied petitioner’s motion
to discharge attachment by counter-bond in the amount of
₱12,600,000.00, and a new one entered GRANTING such motion
upon the reposting of the same counter-bond. SO ORDERED.
G.R. No. 130223 August 19, 2009
RURAL BANK OF STA. BARBARA [PANGASINAN], INC vs.
THE MANILA MISSION OF THE CHURCH OF JESUS
CHRIST OF LATTER DAY SAINTS, INC.,
This is a Petition for Review on Certiorari under Rule 45 of the Rules
of Court seeking to set aside the Decision 1dated 29 July 1997 of the
Court of Appeals in CA-G.R. SP No. 41042 affirming the Orders dated
9 October 1995 and 27 February 1996 of the Regional Trial Court
(RTC), Branch 43, of Dagupan City, in Civil Case No. D-10583.
Spouses Tomas and Maria Soliven (spouses Soliven) were the
registered owners, under Transfer Certificate of Title (TCT) No. T-
125213, of a parcel of land located in Barangay Maninding, Sta.
Barbara, Pangasinan (subject property). On 18 May 1992, the spouses
Soliven sold the subject property to respondent Manila Mission of the
Church of Jesus Christ of Latter Day Saints, Inc. (Manila Mission).
However, it was only on 28 April 1994 when TCT No. T-125213 in the
name of the spouses Soliven was cancelled, and TCT No. 195616 was
issued in the name of respondent.
In the meantime, on 15 April 1993, petitioner Rural Bank of Sta.
Barbara (Pangasinan), Inc. filed with the RTC a Complaint against the
spouses Soliven for a sum of money, docketed as Civil Case No. D-
10583. The Complaint of petitioner included a prayer for the issuance
of a Writ of Preliminary Attachment.
In an Order dated 7 May 1993, the RTC ordered the issuance of the
Writ of Attachment petitioner prayed for, to wit:
WHEREFORE, let a Writ of Attachment be issued against all the
properties of [Spouses Soliven] not exempt from execution or so much
thereof as may be sufficient to satisfy the [herein petitioner’s]
principal claim of ₱338,000.00 upon filing of [petitioner’s] bond in the
amount of ₱100,000.00.2
Upon the filing by petitioner of the required bond, the RTC issued the
Writ of Attachment on 21 May 1993. Acting on the authority of said
Writ, Sheriff Reynaldo C. Daray attached the subject property, which
was then still covered by TCT No. T-125213 in the name of the
spouses Soliven. The Writ of Attachment was annotated on TCT No.
T-125213 on 24 May 1993. Thus, when TCT No. T-125213 of the
spouses Soliven was cancelled and TCT No. 195616 of petitioner was
issued on 28 April 1994, the annotation on the Writ of Attachment was
carried from the former to the latter.
While Civil Case No. D-10583 was still pending before the RTC,
respondent executed an Affidavit claiming title and ownership over the
subject property, and requested the Ex-Officio Provincial and City
Sheriff to release the said property from attachment. The Sheriff,
however, advised respondent to file a motion directly with the RTC.
On 16 March 1995, respondent filed with the RTC, in Civil Case No.
D-10583, a Motion to Release Property from Attachment, to which
petitioner, in turn, filed an Opposition. After hearing, the RTC issued
an Order on 9 October 1995 discharging the subject property from
attachment. The RTC decreed in said Order:
WHEREFORE, the Court hereby directs the Ex-Officio Provincial
Sheriff of Pangasinan and City Sheriff of Dagupan to discharge and
release the subject land from attachment and orders the notice of
attachment on T.C.T. No. 195616 of the Register of Deeds of
Pangasinan be cancelled.3
Petitioner filed a Motion for Reconsideration of the 9 October 1995
Order of the RTC, arguing that it had a better right over the subject
property and that the filing by respondent with the RTC, in Civil Case
No. D-10583, of a Motion to Release Property from Attachment, was
the improper remedy. In an Order dated 27 February 1996, the RTC
denied the Motion for Reconsideration of petitioner for lack of merit.
On 12 April 1997, petitioner filed a Petition for Certiorari with this
Court, alleging that the RTC committed grave abuse of discretion,
amounting to lack or excess of jurisdiction, in canceling the Writ of
Attachment and ordering the release of the subject property. The
Petition was docketed as G.R. No. 124343. In a Resolution dated 27
May 1997, this Court referred the case to the Court of Appeals for
appropriate action.
The Court of Appeals docketed the Petition for Certiorari as CA-G.R.
SP No. 41042. On 29 July 1997, the Court of Appeals issued the
assailed Decision dismissing the Petition.
Hence, petitioner again comes before this Court via the present
Petition for Review, contending that the Court of Appeals erred in not
finding grave abuse of discretion on the part of the RTC when the
latter directed the release of the subject property from attachment.
Petitioner insists that it has a better right to the subject property
considering that: (1) the attachment of the subject property in favor of
petitioner was made prior to the registration of the sale of the same
property to respondent; and (2) respondent availed itself of the wrong
remedy in filing with the RTC, in Civil Case No. D-10583, a Motion
to Release Property from Attachment. We shall discuss ahead the
second ground for the instant Petition, a matter of procedure, since its
outcome will determine whether we still need to address the first
ground, on the substantive rights of the parties to the subject property.
Propriety of the Motion to Release Property from Attachment
According to petitioner, the Motion to Release Property from
Attachment filed by respondent before the RTC, in Civil Case No. D-
10583, is not the proper remedy under Section 14, Rule 57 of the
Rules of Court,4 which provides:
SEC. 14. Proceedings where property claimed by third person.—If the
property attached is claimed by any person other than the party against
whom attachment had been issued or his agent, and such person makes
an affidavit of his title thereto, or right to the possession thereof,
stating the grounds of such right or title, and serves such affidavit
upon the sheriff while the latter has possession of the attached
property, and a copy thereof upon the attaching party, the sheriff shall
not be bound to keep the property under attachment, unless the
attaching party or his agent, on demand of the sheriff, shall file a bond
approved by the court to indemnify the third-party claimant in a sum
not less than the value of the property levied upon. In case of
disagreement as to such value, the same shall be decided by the court
issuing the writ of attachment. No claim for damages for the taking or
keeping of the property may be enforced against the bond unless the
action therefor is filed within one hundred twenty (120) days from the
date of the filing of the bond.
The sheriff shall not be liable for damages for the taking or keeping of
such property, to any such third-party claimant, if such bond shall be
filed. Nothing herein contained shall prevent such claimant or any
third person from vindicating his claim to the property, or prevent the
attaching party from claiming damages against a third-party claimant
who filed a frivolous or plainly spurious claim, in the same or a
separate action.
When the writ of attachment is issued in favor of the Republic of the
Philippines, or any officer duly representing it, the filing of such bond
shall not be required, and in case the sheriff is sued for damages as a
result of the attachment, he shall be represented by the Solicitor
General, and if held liable therefor, the actual damages adjudged by
the court shall be paid by the National Treasurer out of the funds to be
appropriated for the purpose.
Petitioner argues that, pursuant to the aforequoted section, the remedy
of a third person claiming to be the owner of an attached property are
limited to the following: (1) filing with the Sheriff a third-party claim,
in the form of an affidavit, per the first paragraph of Section 14; (2)
intervening in the main action, with prior leave of court, per the
second paragraph of Section 14, which allows a third person to
vindicate his/her claim to the attached property in the "same x x x
action"; and (3) filing a separate and independent action, per the
second paragraph of Section 14, which allows a third person to
vindicate his/her claim to the attached property in a "separate action."
Respondent explains that it tried to pursue the first remedy, i.e., filing
a third-party claim with the Sheriff. Respondent did file an Affidavit of
Title and Ownership with the Sheriff, but said officer advised
respondent to file a motion directly with the RTC in the main case.
Respondent heeded the Sheriff’s advice by filing with the RTC, in
Civil Case No. D-10583, a Motion to Release Property from
Attachment. The Court of Appeals recognized and allowed said
Motion, construing the same as an invocation by respondent of the
power of control and supervision of the RTC over its officers, which
includes the Sheriff.
We agree with the Court of Appeals on this score. The filing by
respondent of the Motion to Release Property from Attachment was
made on the advice of the Sheriff upon whom respondent served its
Affidavit of Title and Ownership. Respondent should not be faulted
for merely heeding the Sheriff’s advice. Apparently, the Sheriff,
instead of acting upon the third-party claim of respondent on his own,
would rather have some direction from the RTC. Indeed, the Sheriff is
an officer of the RTC and may be directed by the said court to allow
the third-party claim of respondent. Therefore, the filing of the Motion
in question can be deemed as a mere continuation of the third-party
claim of respondent, in the form of its Affidavit of Title and
Ownership, served upon the Sheriff, in accord with the first paragraph
of Section 14, Rule 57 of the Rules of Court.
Alternatively, we may also consider the Motion to Release Property
from Attachment, filed by respondent before the RTC, as a Motion for
Intervention in Civil Case No. D-10583, pursuant to the second
paragraph of Section 14, Rule 56, in relation to Rule 19 of the Rules of
Court. Respondent, to vindicate its claim to the subject property, may
intervene in the same case, i.e., Civil Case No. D-10583, instituted by
petitioner against the spouses Soliven, in which the said property was
attached. Respondent has the personality to intervene, as it "is so
situated as to be adversely affected by a distribution or other
disposition of property in the custody of the court or of an officer
thereof."5 The RTC, in acting upon and granting the Motion to Release
Property from Attachment in its Order dated 9 October 1995, is
deemed to have allowed respondent to intervene in Civil Case No. D-
10583.
Moreover, it may do petitioner well to remember that rules of
procedure are merely tools designed to facilitate the attainment of
justice. They were conceived and promulgated to effectively aid the
court in the dispensation of justice. Courts are not slaves to or robots
of technical rules, shorn of judicial discretion. In rendering justice,
courts have always been, as they ought to be, conscientiously guided
by the norm that on the balance, technicalities take a backseat to
substantive rights, and not the other way around. Thus, if the
application of the Rules would tend to frustrate rather than promote
justice, it is always within the power of the Court to suspend the rules,
or except a particular case from its operation.6 Hence, even if the
Motion to Release Property from Attachment does not strictly comply
with Section 14, Rule 56 of the Rules of Court, the RTC may still
allow and act upon said Motion to render substantive justice.
This leads us to the substantive issue in this case, on which between
the two transactions should be given priority: the previous yet
unregistered sale of the subject property by the spouses Soliven to
respondent, or the subsequent but duly annotated attachment of the
same property by petitioner.
Previous yet unregistered sale versus subsequent but duly annotated
attachment
Petitioner does not dispute the allegation of respondent that the subject
property was sold by the spouses Soliven to respondent on 18 May
1992, before petitioner instituted Civil Case No. D-10583 against the
spouses Soliven on 15 April 1993; the RTC ordered the issuance of the
Writ of Attachment on 7 May 1993; and the attachment of the subject
property pursuant to the Writ on 27 May 1993.
Neither did petitioner offer evidence to counter the following
documents presented by respondent establishing the fact of the sale of
the subject property to the latter by the spouses Soliven: (1) the
notarized Deed of Sale dated 18 May 1992; (2) BPI Manager’s Check
No. 010685 dated 8 May 1992 in the sum of ₱42,500.00 to represent
the tender of payment of capital gains tax; (3) BIR Official Receipt
No. 0431320 dated 18 May 1992 of BPI Check No. 010625 for the
payment of the sum of ₱8,5000.00; and (4) a letter dated 11 August
1992 of Manila Mission’s former counsel, Lim Duran & Associates, to
the Revenue District Officer, District 7, Bureau of Internal Revenue,
relative to its request for the "reconsideration/condonation" of the
assessment of the capital gains tax on its purchase of the subject
property.
Petitioner, however, invokes jurisprudence wherein this Court in a
number of instances allegedly upheld a subsequent but duly annotated
attachment, as opposed to a previous yet unregistered sale of the same
property. Petitioner particularly calls our attention to the following
paragraph in Ruiz, Sr. v. Court of Appeals7:
[I]n case of a conflict between a vendee and an attaching creditor, an
attaching creditor who registers the order of attachment and the sale of
the property to him as the highest bidder acquires a valid title to the
property, as against a vendee who had previously bought the same
property from the registered owner but who failed to register his deed
of sale. This is because registration is the operative act that binds or
affects the land insofar as third persons are concerned. It is upon
registration that there is notice to the whole world.
In the more recent case Valdevieso v. Damalerio, 8 we have expounded
on our foregoing pronouncement in Ruiz.
On 5 December 1995, therein petitioner Bernardo Valdevieso
(Valdevieso) bought a parcel of land from spouses Lorenzo and
Elenita Uy (spouses Uy), the registered owners thereof. On 19 April
1996, therein respondents, spouses Candelario and Aurea Damalerio
(spouses Damalario), filed a Complaint against the spouses Uy for a
sum of money before the RTC of General Santos City. On 23 April
1996, the RTC issued a Writ of Preliminary Attachment by virtue of
which the subject parcel of land was levied. The levy was duly
recorded in the Register of Deeds, and annotated on the TCT of the
spouses Uy over the subject parcel of land. It was only on 6 June 1996
that the TCT in the name of the spouses Uy was cancelled, and a new
one issued in the name of Valdevieso. As in the case at bar, the
annotation on the attachment was carried over to Valdevieso’s TCT.
Valdevieso filed a third-party claim before the RTC seeking to annul
the attachment. In a resolution, the RTC ruled in Valdevieso’s favor,
but the Court of Appeals reversed said RTC resolution. On appeal, we
adjudged:
The sole issue in this case is whether or not a registered writ of
attachment on the land is a superior lien over that of an earlier
unregistered deed of sale.
xxxx
The settled rule is that levy on attachment, duly registered, takes
preference over a prior unregistered sale. This result is a necessary
consequence of the fact that the property involved was duly covered
by the Torrens system which works under the fundamental principle
that registration is the operative act which gives validity to the transfer
or creates a lien upon the land.
The preference created by the levy on attachment is not diminished
even by the subsequent registration of the prior sale. This is so because
an attachment is a proceeding in rem. It is against the particular
property, enforceable against the whole world. The attaching creditor
acquires a specific lien on the attached property which nothing can
subsequently destroy except the very dissolution of the attachment or
levy itself. Such a proceeding, in effect, means that the property
attached is an indebted thing and a virtual condemnation of it to pay
the owner’s debt. The lien continues until the debt is paid, or sale is
had under execution issued on the judgment, or until the judgment is
satisfied, or the attachment discharged or vacated in some manner
provided by law.
Thus, in the registry, the attachment in favor of respondents appeared
in the nature of a real lien when petitioner had his purchase recorded.
The effect of the notation of said lien was to subject and subordinate
the right of petitioner, as purchaser, to the lien. Petitioner acquired
ownership of the land only from the date of the recording of his title in
the register, and the right of ownership which he inscribed was not
absolute but a limited right, subject to a prior registered lien of
respondents, a right which is preferred and superior to that of
petitioner.9
It is settled, therefore, that a duly registered levy on attachment takes
preference over a prior unregistered sale.
Nonetheless, respondent argues that there is a special circumstance in
the case at bar, which should be deemed a constructive registration of
the sale of the subject property in its favor, preceding the attachment
of the same property by petitioner.
Knowledge of previous yet unregistered sale
In Ruiz, the very case cited by petitioner, we made a qualification of
the general rule that a duly annotated attachment is superior to an
unregistered prior sale. In fact, we resolved Ruiz in favor of the vendee
in the unregistered prior sale, because knowledge of the unregistered
sale by the attaching creditor is deemed equivalent to registration. We
explained in Ruiz:
But where a party has knowledge of a prior existing interest which is
unregistered at that time he acquired a right to the same land, his
knowledge of that prior unregistered interest has the effect of
registration as to him. Knowledge of an unregistered sale is equivalent
to registration. As held in Fernandez v. Court of Appeals [189 SCRA
780 (1990)],
Section 50 of Act No. 496 (now Sec. 51 of P.D. 1529), provides that
the registration of the deed is the operative act to bind or affect the
land insofar as third persons are concerned. But where the party has
knowledge of a prior existing interest which is unregistered at the time
he acquired a right to the same land, his knowledge of that prior
unregistered interest has the effect of registration as to him. The
torrens system cannot be used as a shield for the commission of fraud
(Gustillo v. Maravilla, 48 Phil. 442). As far as private respondent
Zenaida Angeles and her husband Justiniano are concerned, the non-
registration of the affidavit admitting their sale of a portion of 110
square meters of the subject land to petitioners cannot be invoked as a
defense because (K)nowledge of an unregistered sale is equivalent to
registration (Winkleman v. Veluz, 43 Phil. 604).
This knowledge of the conveyance to Honorato Hong can not be
denied. The records disclose that after the sale, private respondent was
able to introduce improvements on the land such as a concrete two-
door commercial building, a concrete fence around the property,
concrete floor of the whole area and G.I. roofing. Acts of ownership
and possession were exercised by the private respondent over the land.
By these overt acts, it can not therefore be gainsaid that petitioner was
not aware that private respondent had a prior existing interest over the
land.10
In the case at bar, respondent averred in its Motion to Release Property
from Attachment that the construction of a church edifice on the
subject property was about to be finished at the time the Writ of
Preliminary Attachment was implemented on 24 May 1993, and that
the construction of the church was actually completed by mid-1993.
Respondent asserts that since petitioner did not deny these allegations,
much less adduce evidence to the contrary, then the latter tacitly
recognized the construction of the church.
Petitioner contends, on the other hand, that respondent failed to
present evidence to prove the fact that a church had already been
constructed on the subject property by the time the said property was
attached, thus, constituting notice to petitioner of the claim or right of
respondent to the same.lawph!1
Was there, at the time of the attachment, knowledge on the part of
petitioner Rural Bank of the interest of respondent Manila Mission on
the subject property?
If the allegation of respondent Manila Mission anent the building of
the chapel even before the issuance of the writ of attachment is true,
this case would be similar to Ruiz where the vendee of the subject
property was able to introduce improvements. However, respondent
Manila Mission presented no evidence of the building of the chapel
other than its bare allegation thereof. More importantly, even assuming
for the sake of argument that the chapel was indeed being built at the
time of the attachment of the property, we cannot simply apply Ruiz
and conclude that this confirms knowledge of a previous conveyance
of the property at that time. In Ruiz, the attaching party was the wife
of the vendor of the subject property, whom she sued for support. It
was thus very probable that she knew of the sale of the property to the
vendee therein, considering that the vendee had already introduced Nevertheless, respondent Manila Mission would not be left without
improvements thereon. In the case at bar, there is no special remedy. It could file a counter-bond pursuant to Section 12, Rule 57 11
relationship between petitioner Rural Bank and the spouses Soliven of the Rules of Court in order to discharge the attachment. If
sufficient to charge the former with an implied knowledge of the state respondent Manila Mission fails to do the same and the property ends
of the latter’s properties. Unlike in the sale of real property, an up being subjected to execution, respondent can redeem the property
attaching creditor is not expected to inspect the property being and seek reimbursement from the spouses Soliven.
attached, as it is the sheriff who does the actual act of attaching the
WHEREFORE, the instant Petition for Review on Certiorari is hereby
property.
GRANTED. The Decision dated 29 July 1997 of the Court of Appeals
Neither did respondent Manila Mission present any evidence of in CA-G.R. SP No. 41042 affirming the Orders of the Regional Trial
knowledge on the part of petitioner Rural Bank of the prior existing Court of Dagupan City dated 9 October 1995 and 27 February 1996
interest of the former at the time of the attachment. Respondent Manila issued in Civil Case No. D-10583 is hereby REVERSED and SET
Mission merely argues that there was a tacit recognition on the part of ASIDE. No pronouncement as to costs. SO ORDERED.
petitioner Rural Bank of the construction of the chapel when the latter
did not deny this allegation in its Opposition to the Motion to
Discharge Property from Attachment.
The Motion, however, merely mentions the construction of the chapel
and does not charge petitioner Rural Bank with knowledge of the
construction. There was, therefore, nothing to deny on the part of
petitioner Rural Bank, as the mere existence of such construction at
that time would not affect the right of petitioner Rural Bank to its lien
over the subject property. Also, the mention in the Motion of the
construction of the chapel would have the effect of being a notice of
an adverse third-party claim only at the time of such Motion. Since
such notice, which was deemed in Ruiz as constructive registration of
the sale, was effected only after the attachment of the subject property,
it could not affect the validity of the attachment lien.
In sum, our decisions in Ruiz v. Court of Appeals and Valdevieso v.
Damalerio oblige us to rule that the duly registered levy on attachment
by petitioner Rural Bank takes preference over the prior but then
unregistered sale of respondent Manila Mission. There was likewise
no evidence of knowledge on the part of petitioner Rural Bank of any
third-party interest in the subject property at the time of the
attachment. We are, therefore, constrained to grant the instant Petition
for Review and nullify the Orders of the RTC discharging the subject
property from attachment.