SECOND DIVISION

[G.R. No. 144755. June 8, 2005.]

SPOUSES ELISEO F. ESTARES and ROSENDA P.

ESTARES, petitioners, vs. COURT OF APPEALS, HON.
DAMASO HERRERA as Presiding Judge of the RTC, Branch
24, Biñan, Laguna PROMINENT LENDING & CREDIT
CORPORATION, PROVINCIAL SHERIFF OF LAGUNA
and Sheriff IV ARNEL G. MAGAT, respondents.

DECISION

AUSTRIA-MARTINEZ, J  : p

Before us is a petition for certiorari and prohibition under Rule 65 of the

Rules of Court which assails the Decision 1 and Resolution of the Court of
Appeals dated April 17, 2000 and July 7, 2000, respectively, in CA-G.R. SP No.
56123. 
The factual background of the case is as follows:
On May 21, 1999, petitioner Spouses Eliseo F. Estares and Rosenda P.
Estares (Estares spouses for brevity) filed a complaint for "Damages and
Preliminary Prohibitory Injunction" against private respondent Prominent Lending
& Credit Corporation (PLCC) before the Regional Trial Court, Branch 24, Biñan,
Laguna, docketed as Civil Case No. B-5476. 2
They alleged that: on January 12, 1998, they obtained a loan from PLCC
for P800,000.00 secured by a real estate mortgage over a 363-square meter parcel
of land with improvements situated in the Municipality of Santa Rosa, Laguna,
covered by Transfer Certificate of Title (TCT) No. 99261; the promissory note and
the real estate mortgage were falsified because they affixed their signatures on two
blank documents; the monthly interest of 3.5% and 3% penalty on each delayed
monthly interest are different from the 18% interest per annum to which they
agreed to; for failure to pay their obligation despite repeated demands, PLCC filed
a petition for extrajudicial foreclosure with the Office of the Provincial Sheriff of
Laguna; and on June 8, 1999, the Sheriff sent a Notice of Extrajudicial Sale to the
Estares spouses. 
 Accordingly, the Estares spouses sought to declare as null and void the
promissory note and the real estate mortgage for not reflecting their true
agreement. In the interim, they prayed for a temporary restraining order (TRO)
and/or writ of preliminary injunction to enjoin PLCC from taking possession of
the mortgaged property and proceeding with the extrajudicial sale scheduled on
July 13, 1999 at 10:00 a.m. CIHAED

On June 30, 1999, the Estares spouses amended their complaint to include
the Register of Deeds of Laguna-Calamba Branch, the Provincial Sheriff of
Laguna and Sheriff IV Arnel G. Magat as party-defendants. 3
On July 12, 1999, the trial court issued a TRO in favor of the Estares
spouses. 4 The parties subsequently agreed to maintain the status quo until August
20, 1999. 5
On August 6, 1999, PLCC filed its Answer with Counterclaim alleging that
the Estares spouses were duly apprised of the terms and conditions of the loan,
including the rate of interest, penalties and other charges, in accordance with
the Truth in Lending Act or Republic Act No. 3765. It opposed the prayer for
restraining order on the ground that there is no factual and legal basis for its
issuance since the Estares spouses' fear of eviction is false. 6
At the hearing on the Estares spouses' application for a writ of preliminary
injunction, Rosenda P. Estares (Rosenda for brevity) testified that: the loan
proceeds of P637,000.00, received on January 12, 1998, was used in the
improvement and renovation of their boarding house; they did not question PLCC
in writing why they only received P637,000.00; when they received the Statement
of Account, they did not question the figures appearing therein; when they
received PLCC's demand letter, they went to the former's office not to question the
loan's terms and conditions but merely to request for extension of three months to
pay their obligation. They adduced in evidence the promissory note, real estate
mortgage, statement of account, petition for extrajudicial foreclosure and the
notice of extrajudicial sale. The Estares spouses then rested their case. 
In opposition to the application for a writ of preliminary injunction, PLCC
presented its manager, Rey Arambulo, who testified that the Estares spouses were
duly apprised of the terms and conditions of the loan, including the rate of interest,
penalties and other charges, in accordance with the Truth in Lending
Act or Republic Act No. 3765. It submitted the same evidence offered by the
Estares spouses, along with the latter's credit application, the credit investigation
report, the receipts PLCC issued, and the disclosure statement on the loan.
On August 18, 1999, the trial court denied the Estares spouses' application
for a writ of preliminary injunction, holding that the latter failed to establish the
facts necessary for an injunction to issue. 7
 On August 31, 1999, the Estares spouses filed a motion for
reconsideration. 8 During the hearing on the motion for reconsideration on
September 17, 1999, Eliseo P. Estares (Eliseo for brevity) moved that he be
allowed to testify on the circumstances of the loan but the trial court denied it. The
trial court deemed it best that he be presented during the trial on the merits. 9 On
October 1, 1999, the trial court denied the motion for reconsideration. 10
On December 7, 1999, the Estares spouses filed a petition for certiorari and
prohibition in the Court of Appeals ascribing grave abuse of discretion upon the
trial court in issuing the Orders dated August 18, 1999 and October 1, 1999 which
denied their prayer for a writ of preliminary injunction and motion for
reconsideration, respectively. 11
On December 14, 1999, without giving due course to the petition, the Court
of Appeals issued a Resolution requiring the PLCC to file its comment to the
petition. The action on the Estares spouses' application for a TRO and writ of
preliminary injunction was deferred and held in abeyance until after receipt of the
comment. 12
With no restraining order enjoining him, Sheriff Magat conducted an
auction sale on January 5, 2000, with PLCC as highest bidder for
P1,500,000.00. 13
In its Comment dated January 15, 2000, PLCC claimed that the trial court
did not commit grave abuse of discretion in denying the Estares spouses'
application for a writ of preliminary injunction since the latter failed to prove their
right to injunctive relief and the action sought to be enjoined has been rendered
moot by the auction sale conducted on January 5, 2000. 14
On April 17, 2000, the Court of Appeals dismissed the petition for lack of
merit, holding that the trial court did not abuse its discretion in denying the Estares
spouses' application for a writ of preliminary injunction since the latter failed to
prove the requisites for the issuance thereof. 15
The Estares spouses then moved for reconsideration of the April 17, 2000
decision. In addition, they prayed that the auction sale on January 5, 2000, as well
as the minutes of auction sale and certificate of sale, be declared null and void not
only because there was no publication of the notice of auction sale but the auction
sale preempted the Court of Appeals in the disposition of the case and was
conducted in defiance of the Resolution dated December 14, 1999. 16
On July 7, 2000, the Court of Appeals denied the Estares spouses' motion
for reconsideration. 17
On September 16, 2000, the Estares spouses filed the present petition
for certiorari and prohibition anchored on the following grounds:  TSHEIc
 I
THE COURT OF APPEALS ERRED IN NOT GRANTING A WRIT
OF PRELIMINARY INJUNCTION TO PREVENT RESPONDENTS
PLCC AND PROVINCIAL SHERIFF OF LAGUNA/SHERIFF
ARNEL MAGAT FROM FORECLOSING THE MORTGAGE AND
CONDUCTING THE AUCTION SALE OF PETITIONERS'
PROPERTY AND/OR IN UPHOLDING THE ORDER DATED
AUGUST 18, 1999 OF JUDGE DAMASO A. HERRERA, RTC-
BRANCH 24, LAGUNA.
II
THE COURT OF APPEALS ERRED IN NOT DECLARING AS
NULL AND VOID AND/OR SETTING ASIDE THE AUCTION SALE
OF THE PETITIONERS' HOUSE AND LOT CONDUCTED BY
SHERIFF ARNEL MAGAT ON JANUARY 5, 2000 FOR LACK OF
RE-PUBLICATION OF NOTICE OF EXTRA-JUDICIAL SALE, FOR
PRE-EMPTING THE COURT OF APPEALS IN DECIDING THE
CASE, AND FOR RENDERING THE PETITION IN CA-G.R. SP NO.
56123 MOOT AND ACADEMIC. 
III
THE COURT OF APPEALS ERRED IN NOT DECLARING DENIAL
OF DUE PROCESS TO OVERSEAS CONTRACT WORKER ELISEO
ESTARES WHEN JUDGE DAMASO A. HERRERA REFUSED TO
ALLOW HIM TO TESTIFY ON THE CIRCUMSTANCES OF THEIR
LOAN WITH PLCC. 18
Anent the first ground, the Estares spouses insist that they firmly
established their right to injunctive relief. They claim that the promissory note,
credit application, disbursement voucher, disclosure statement and real estate
mortgage are falsified; the promissory note is not reflective of the true amount of
the loan, as well as the term, interest and charges thereon; the P126,362.28
represent additional charges, not as part of the loan, that were not agreed upon
prior to or before the consummation of the loan; and the amount of the loan and
rate of interest stated in the falsified promissory note are fictitious or simulated. 
With respect to the second ground, they maintain that the auction sale
conducted on January 5, 2000 should be nullified because it lacked republication
of the notice of auction sale and it was conducted in violation of the Court of
Appeals' Resolution dated December 14, 1999 which enjoined the parties to
maintain the status quo pending the filing by the respondents of their Comment to
the petition. They argue that PLCC and Sheriff Magat preempted the Court of
Appeals from resolving their petition by conducting the auction sale on January 5,
2000. DcCHTa
 As to the third ground, they aver that Eliseo was denied due process when
the trial court refused to allow him to testify during the hearing on the motion for
reconsideration. They contend that Eliseo, an overseas contract worker, purposely
took leave from work in the Middle East to testify on the circumstances of the loan
and his testimony was material to clarify the matter of notarization of the real
estate mortgage and show that said document was falsified.
 
On October 2, 2000, the Court granted the TRO prayed for in the petition
and required the respondents to comment thereon. 19
In its Comment dated October 25, 2000, PLCC asserts that the petition
should be dismissed for being deficient on both procedural and substantive
aspects. 
As to the procedural aspect, PLCC posits that the petition is filed beyond
the sixty-day period required by the rules and therefore filed out of time. PLCC
further claims that the verification and certification of non-forum shopping are
both insufficient. The verification speaks of a "Pre-Trial Brief" while the
certification of non-forum shopping was executed only by Rosenda. 
As to the substance of the petition, PLCC argues that the Estares spouses
failed to establish their right to injunctive relief; the validity of the January 5, 2000
auction sale was brought only in the motion for reconsideration which is improper
because it is a factual issue best addressed to the trial court; Sheriff Magat did not
preempt the Court of Appeals in deciding CA-G.R. SP No. 56123 when he
conducted the auction sale on January 5, 2000 because the Resolution dated
December 14, 1999 of the said court did not suspend or restrain the sheriff from
conducting the foreclosure sale; Eliseo was not denied due process because he
sought to testify on factual matters in the hearing on their motion for
reconsideration which is improper as factual matters are best brought and proved
during the trial on the merits of the case. 
The Court gave due course to the petition and required the parties to submit
their respective memoranda 20 which they complied with. 21
Before ruling on the issues raised in the petition, it is necessary to dwell on
the procedural aspects of the case. 
From a reading of the grounds on which the instant petition
for certiorari and prohibition are based, it is readily apparent that the Estares
spouses are appealing a decision of the Court of Appeals by resorting to Rule 65,
when their remedy should be based on Rule 45 of the Rules of Court. A petition
for review under Rule 45 is not similar to a petition for certiorari under Rule 65. 
 Under Rule 45, decisions, final orders or resolutions of the Court of
Appeals in any case, i.e., regardless of the nature of the action or proceedings
involved, may be appealed to us by filing a petition for review on certiorari,
which would be but a continuation of the appellate process over the original
case. 22 In contrast, a special civil action under Rule 65 is an independent action
based on the specific grounds therein provided and proper only if there is no
appeal or any plain, speedy and adequate remedy in the ordinary course of
law. 23Thus, certiorari cannot be availed of as a substitute for the lost remedy of
an ordinary appeal. 24
By their own account, the Estares spouses received the Order dated July 7,
2000 denying their motion for reconsideration from the Court of Appeals on July
18, 2000. Instead of filing a petition for review with this Court within 15 days
thereof or until August 2, 2000, they filed this special civil action by registered
mail on September 16, 2000 or 60 days from receipt of the Order dated July 7,
2000. By then, they had already lost the remedy of appeal. By availing of a wrong
remedy, the instant petition should have merited outright dismissal.  HcaATE

Concerning the verification, we note that Rosenda stated therein that she
caused the preparation of the "foregoing Pre-Trial Brief" but we consider the same
as a slight error and honest mistake in the preparation of the petition. In any event,
the purpose of requiring a verification is simply to secure an assurance that the
allegations of the petition have been made in good faith; or are true and correct,
not merely speculative. 25 This requirement is simply a condition affecting the
form of pleadings, and noncompliance therewith does not necessarily render it
fatally defective. 26 Indeed, verification is only a formal, not a jurisdictional,
requirement. 27
With regard to the certification of non-forum shopping signed only by
Rosenda, the rule is that the certificate of non-forum shopping must be signed by
all the petitioners or plaintiffs in a case and the signing by only one of them is
insufficient because a lone signatory cannot be presumed to have personal
knowledge of the matters required to be stated in the attestation. 28
However, the Court has also stressed that the rules on forum shopping,
which were designed to promote and facilitate the orderly administration of
justice, should not be interpreted with such absolute literalness as to subvert its
own ultimate and legitimate objective which is simply to prohibit and penalize the
evils of forum shopping. 29 The fact that the rules on forum shopping require strict
compliance merely underscores its mandatory nature that it cannot be dispensed
with or its requirements altogether disregarded, but it does not thereby interdict
substantial compliance with its provisions under justifiable circumstances. 30
We find that the execution by Rosenda of the certificate of non-forum
shopping in behalf of her co-petitioner and husband, Eliseo, constitutes substantial
compliance with the Rules. After all they share a common interest in the property
involved since it is conjugal property, and the petition questioning the propriety of
the decision of the Court of Appeals originated from an action brought by the
spouses, and is clearly intended for the benefit of the conjugal partnership.
Considering that the husband was at that time an overseas contract worker
working in Algeria, whereas the petition was prepared in Sta. Rosa, Laguna, a
rigid application of the rules on forum shopping that would disauthorize the wife's
signing the certification in her behalf and that of her husband is too harsh and
clearly uncalled for. 31
In any event, we find that this petition must still be dismissed as the Court
of Appeals did not commit any grave abuse of discretion amounting to want or
excess of jurisdiction in dismissing the petition. 
Generally, injunction is a preservative remedy for the protection of
substantive rights or interests. It is not a cause of action in itself but merely a
provisional remedy, an adjunct to a main suit. The controlling reason for the
existence of the judicial power to issue the writ is that the court may thereby
prevent a threatened or continuous irremediable injury to some of the parties
before their claims can be thoroughly investigated and advisedly adjudicated. It is
to be resorted to only when there is a pressing necessity to avoid injurious
consequences which cannot be remedied under any standard of compensation. The
application of the writ rests upon an alleged existence of an emergency or of a
special reason for such an order before the case can be regularly heard, and the
essential conditions for granting such temporary injunctive relief are that the
complaint alleges facts which appear to be sufficient to constitute a cause of action
for injunction and that on the entire showing from both sides, it appears, in view of
all the circumstances, that the injunction is reasonably necessary to protect the
legal rights of plaintiff pending the litigation. 32
The Estares spouses had the burden in the trial court to establish the
following requirements for them to be entitled to injunctive relief: (a) the existence
of their right to be protected; and (b) that the acts against which the injunction is to
be directed are violative of such right. 33 To be entitled to an injunctive writ, the
petitioner must show, inter alia, the existence of a clear and unmistakable right
and an urgent and paramount necessity for the writ to prevent serious
damage. 34 Thus, an injunctive remedy may only be resorted to when there is a
pressing necessity to avoid injurious consequences which cannot be remedied
under any standard compensation. 35
In the present case, the Estares spouses failed to establish their right to
injunctive relief. They do not deny that they are indebted to PLCC but only
question the amount thereof. Their property is by their own choice encumbered by
a real estate mortgage. Upon the nonpayment of the loan, which was secured by
the mortgage, the mortgaged property is properly subject to a foreclosure sale.  cCHETI
 Rosenda's testimony sealed the fate of the necessity of the writ of
preliminary injunction. She admitted that: they did not question PLCC in writing
why they only received P637,000.00; they did not question the figures appearing
in the Statement of Account when they received it; and, when they received
PLCC's demand letter, they went to the former's office not to question the loan's
terms and conditions but merely to request for extension of three months to pay
their obligation. 36 She acknowledged that they only raised the alleged discrepancy
of the amount loaned and the amount received, as well as the blank documents
which they allegedly signed, after PLCC initiated the foreclosure proceedings. 37
It must be stressed that the assessment and evaluation of evidence in the
issuance of the writ of preliminary injunction involve findings of facts ordinarily
left to the trial court for its conclusive determination. 38 As such, a trial court's
decision to grant or to deny injunctive relief will not be set aside on appeal unless
the court abused its discretion. In granting or denying injunctive relief, a court
abuses its discretion when it lacks jurisdiction, fails to consider and make a record
of the factors relevant to its determination, relies on clearly erroneous factual
findings, considers clearly irrelevant or improper factors, clearly gives too much
weight to one factor, relies on erroneous conclusions of law or equity, or
misapplies its factual or legal conclusions. 39
In the present case, the Estares spouses clearly failed to prove that they
have a right protected and that the acts against which the writ is to be directed are
violative of said right. Hence, the Court of Appeals did not commit a grave abuse
of its discretion amounting to excess or lack of jurisdiction in dismissing
petitioners' petition for certiorari. 
 

There is likewise no merit to the claim that the Court of Appeals gravely
abused its discretion when it denied the prayer to nullify the auction sale held on
January 5, 2000 for lack of republication of the notice of auction sale and for
preempting the Court of Appeals in deciding the case and rendering the petition in
CA-G.R. SP No. 56123 moot and academic.
The absence of republication of the notice of auction sale is a factual matter
which by the weight of judicial precedents cannot be inquired into by this Court in
a petition for certiorari. It is best addressed to the attention of the trial court and
taken up in the trial of the case, necessitating presentation of evidence by both
parties. The propriety of the auction sale is a matter which the trial court is in the
best position to determine. For it is basic that certiorari under Rule 65 is a remedy
narrow in scope and inflexible in character. It is not a general utility tool in the
legal workshop. 40 It offers only a limited form of review. Its principal function is
to keep an inferior tribunal within its jurisdiction. 41 It can be invoked only for an
error of jurisdiction, that is, one where the act complained of was issued by the
court, officer or a quasi-judicial body without or in excess of jurisdiction, or with
grave abuse of discretion which is tantamount to lack or in excess of
jurisdiction, 42 not to be used for any other purpose, 43 such as to cure errors in
proceedings or to correct erroneous conclusions of law or fact. 44 Again suffice it
to say that the only issue settled here is the propriety of the non-issuance of a writ
of preliminary injunction pending the final outcome of the case.  aATCDI

As to petitioners' assertion that the Court of Appeals in its Resolution dated

December 14, 1999 impliedly directed the parties to maintain the status quo, we
deemed it worthy to quote in full the said Resolution, thus:
Without necessarily giving due course to the petition, the Court
requires the respondents to file their comment (not motion to dismiss)
within ten (10) days from notice, which may be treated as their Answer
should the petition be given due course.
Respondents are likewise ordered to show cause in the same
Comment why a temporary restraining order and writ of preliminary
injunction should not be issued.
The action of the petitioners' application for a temporary
restraining order and writ of preliminary injunction is deferred and held
in abeyance until after receipt of respondents' Comment. 45
Clearly, the Court of Appeals did not give due course to the petition but merely
required PLCC to comment thereon. The Court of Appeals did not enjoin the
conduct of the auction sale. In any case, the necessity for the issuance of the
writ of injunction has been found wanting.
Lastly, the Estares spouses' claim that Eliseo was denied due process when
the trial court refused to allow him to testify during hearing on the motion for
reconsideration deserves scant consideration. 
It must be remembered that a writ of preliminary injunction is generally
based solely on initial and incomplete evidence. The evidence submitted during
the hearing on an application for a writ of preliminary injunction is not conclusive
or complete for only a "sampling" is needed to give the trial court an idea of the
justification for the preliminary injunction pending the decision of the case on the
merits. 46
We note that it was the Estares spouses' choice to present only Rosenda to
testify on the circumstances of the loan at the hearing on their application for a
writ of preliminary injunction and they cannot assert that Eliseo should have been
accorded that opportunity during the hearing on the motion for reconsideration.
The essence of due process is found in the reasonable opportunity to be heard and
submit any evidence one may have in support of one's defense. What the law
proscribes is the lack of opportunity to be heard. 47 As long as a party is given the
opportunity to defend his interests in due course, he would have no reason to
complain, for it is this opportunity to be heard that makes up the essence of due
process. 48 Eliseo cannot complain that he was deprived of due process since he is
given the full opportunity to testify on the circumstances of the loan during the
trial of the main case. 49
All told, no grave abuse of discretion could therefore be imputed to the
Court of Appeals in dismissing petitioners' petition for certiorari with prohibition,
for lack of merit. 
WHEREFORE, the instant petition for certiorari and prohibition is
DISMISSED. The assailed Decision and Resolution of the Court of Appeals dated
April 17, 2000 and July 7, 2000, respectively, in CA-G.R. SP No. 56123 are
AFFIRMED in all respects. The temporary restraining order issued by this Court
is lifted. Costs against petitioners. HTAIcD

SO ORDERED.
Callejo, Sr., Tinga and Chico-Nazario, JJ., concur.
Puno, J., on official leave.
 (Spouses Estares v. Court of Appeals, G.R. No. 144755, [June 8, 2005], 498
|||

PHIL 640-659)

FIRST DIVISION

[G.R. No. 203240. March 18, 2015.]

NORTHERN ISLANDS, CO., INC., petitioner, vs. SPOUSES

DENNIS and CHERYLIN * GARCIA, doing business under
the name and style "Ecolamp Multi Resources",respondents.

DECISION

PERLAS-BERNABE, J  : p

Assailed in this petition for review on certiorari  1 are the Decision 2 dated

January 19, 2012 and the Resolution 3 dated August 24, 2012 of the Court of
Appeals (CA) in CA-G.R. SP No. 97448, ordering the Regional Trial Court of
Quezon City, Branch 215 (RTC) to appoint a commissioner to determine the value
of the attached properties of respondents Spouses Dennis and Cherylin Garcia
(respondents), and to discharge any excessive attachment found thereby. 
The Facts
 On September 23, 2005, petitioner Northern Islands Co., Inc. (petitioner)
filed a Complaint 4 with application for a writ of preliminary attachment, before
the RTC against respondents, docketed as Civil Case No. Q-05-53699 (Main
Case), which was subsequently amended 5 on October 25, 2005. 6 It alleged that:
(a) from March to July 2004, petitioner caused the delivery to respondents of
various appliances in the aggregate amount of P8,040,825.17; 7 (b) the goods were
transported, shipped, and delivered by Sulpicio Lines, Inc., and were accepted in
good order and condition by respondents' representatives; 8 (c) the parties agreed
that the goods delivered were payable within 120 days, and that the unpaid
amounts would earn interest at a rate of eighteen percent (18%) per annum; 9 (d)
however, the value of the goods were not paid by respondents despite repeated
demands; 10 and (e) respondents fraudulently asserted that petitioner had no proof
that they had indeed received the quantity of the subject goods. 11
In connection with the application for a writ of preliminary attachment,
petitioner posted a bond, through Visayan Surety and Insurance Corporation, in
the amount of P8,040,825.17. On November 7, 2005, the RTC issued the writ
sought for. 12
Instead of filing an answer, respondents filed on November 11, 2001, an
Urgent Motion for Extension of Time to File Proper Pleading and Motion for
Discovery (Production and Inspection) 13 (November 11, 2001 Motion), asking the
RTC to allow them to photocopy and personally examine the original invoices,
delivery cargo receipts, and bills of lading attached to the Amended Complaint,
claiming that they could not "come up with an intelligent answer" without being
presented with the originals of such documents. 14
Thereafter, or on January 11, 2006, respondents filed a Motion to Discharge
Excess Attachment, 15 alleging that the attachment previously ordered by the RTC
exceeded by P9,232,564.56 given that the estimated value of the attached
properties, including the garnished bank accounts, as assessed by their appraiser,
Gaudioso W. Lapaz (Lapaz), amounted to P17,273,409.73, while the attachment
bond is only in the amount of P8,040,825.17. 16 AIcECS

In an Order 17 dated February 28, 2006, the RTC denied the November 11,
2001 Motion (motion for extension), and, instead, directed respondents to file their
answer, which the latter complied with through the filing of their Answer Ad
Cautelam Ex Abudante with Compulsory Counterclaim 18 on April 3, 2006.
Despite this, respondents again filed a Motion for Leave of Court to File Motion
for Discovery (Production and Inspection) 19 (Motion for Discovery) on April 7,
2006. 20
The RTC Ruling
In an Order 21 dated June 21, 2006, the RTC, among others, denied the
Motion to Discharge Excess Attachment, finding that the appraisal made by Lapaz
was not reflective of the true valuation of the properties, adding too that the bond
posted by petitioner stands as sufficient security for whatever damages
respondents may sustain by reason of the attachment. 22
On the other hand, the RTC granted the Motion for Discovery in
accordance with Rule 27 of the Rules of Court,despite petitioner's claim that it did
not have the originals of the documents being sought. 23
However, no production or inspection was conducted on July 10, 2006 as
the RTC directed since respondents received the copy of the above order only on
July 11, 2006. 24
On July 25, 2006, respondents filed a Motion for Partial Reconsideration of
the Order dated June 21, 2006, specifically assailing the denial of their Motion to
Discharge Excess Attachment. In this relation, they prayed that the RTC refer to a
commissioner, pursuant to Rule 32 of the Rules of Court,the factual determination
of the total aggregate amount of respondents' attached properties so as to ascertain
if the attachment was excessive. Also, they prayed that the order for production
and inspection be modified and that petitioner be ordered to produce the original
documents anew for their inspection and copying. 25
The foregoing motion was, however, denied by the RTC in an
Order 26 dated August 23, 2006 for lack of merit. Thus, respondents elevated the
matter to the CA via petition for certiorari and mandamus, 27 docketed as CA-
G.R. SP No. 97448 (Certiorari Case). 
In the interim, the RTC rendered a Decision 28 dated September 21, 2011 in
the Main Case. Essentially, it dismissed petitioner's Amended Complaint due to
the absence of any evidence to prove that respondents had agreed to the pricing of
the subject goods. 29
The RTC's September 21, 2011 Decision was later appealed 30 by petitioner
before the CA on October 27, 2011. Finding that the Notice of Appeal was
seasonably filed, with the payment of the appropriate docket fees, the RTC, in an
Order 31 dated January 25, 2012, ordered the elevation of the entire records of the
Main Case to the CA. The appeal was then raffled to the CA's Eighth Division,
and docketed as CA-G.R. CV No. 98237. On the other hand, records do not show
that respondents filed any appeal. 32
The CA Ruling in the Certiorari Case
Meanwhile, the CA, in a Decision 33 dated January 19, 2012, partly granted
the certiorari petition of respondents, ordering the RTC to appoint a
commissioner as provided under Rule 32 of the Rules of Court as well as the
subsequent discharge of any excess attachment if so found therein, and, on the
other hand, denying respondents' Motion for Discovery. 34
 It held that: (a) on the issue of attachment, trial by commissioners under
Rule 32 of the Rules of Court was proper so that the parties may finally settle their
conflicting valuations; 35 and (b) on the matter of discovery, petitioner could not
be compelled to produce the originals sought by respondents for inspection since
they were not in the former's possession. 36
Aggrieved, petitioner filed a Motion for Partial Reconsideration 37 on
February 13, 2012 but was, however, denied in a Resolution 38 dated August 24,
2012, hence, the present petition.
The Issues Before the Court
The issues presented for the Court's resolution are: (a) whether the RTC
had lost jurisdiction over the matter of the preliminary attachment after petitioner
appealed the decision in the Main Case, and thereafter ordered the transmittal of
the records to the CA; and (b) whether the CA erred in ordering the appointment
of a commissioner and the subsequent discharge of any excess attachment found
by said commissioner.  DScTaC

The Court's Ruling

The petition is meritorious.
Section 9, Rule 41 of the Rules of Court provides that in appeals by notice
of appeal, the court loses jurisdiction over the case upon the perfection of the
appeals filed in due time and the expiration of the time to appeal of the other
parties.
In this case, petitioner had duly perfected its appeal of the RTC's September
21, 2011 Decision resolving the Main Case through the timely filing of its Notice
of Appeal dated October 27, 2011, together with the payment of the appropriate
docket fees. The RTC, in an Order 39 dated January 25, 2012, had actually
confirmed this fact, and thereby ordered the elevation of the entire records to the
CA. Meanwhile, records do not show that respondents filed any appeal, resulting
in the lapse of its own period to appeal therefrom. Thus, based on Section 9, Rule
41, it cannot be seriously doubted that the RTC had already lost jurisdiction over
the Main Case.
With the RTC's loss of jurisdiction over the Main Case necessarily comes
its loss of jurisdiction over all matters merely ancillary thereto. Thus, the propriety
of conducting a trial by commissioners in order to determine the excessiveness of
the subject preliminary attachment, being a mere ancillary matter to the Main
Case, is now mooted by its supervening appeal in CA-G.R. CV No. 98237.
Note that in Sps. Olib v. Judge Pastoral, 40 the Court, in view of the nature
of a preliminary attachment, definitively ruled that the attachment itself cannot be
the subject of a separate action independent of the principal action because the
attachment was only an incident of such action, viz.:
 Attachment is defined as a provisional remedy by which the
property of an adverse party is taken into legal custody, either at the
commencement of an action or at any time thereafter, as a security for
the satisfaction of any judgment that may be recovered by the plaintiff or
any proper party. 
It is an auxiliary remedy and cannot have an independent
existence apart from the main suit or claim instituted by the plaintiff
against the defendant. Being merely ancillary to a principal
proceeding, the attachment must fail if the suit itself cannot be
maintained as the purpose of the writ can no longer be justified.
The consequence is that where the main action is appealed, the
attachment which may have been issued as an incident of that action, is
also considered appealed and so also removed from the jurisdiction of
the court a quo. The attachment itself cannot be the subject of a
separate action independent of the principal action because the
attachment was only an incident of such action. 41 (Emphases
supplied)
That being said, it is now unnecessary to discuss the other issues raised
herein. In fine, the petition is granted and the assailed CA rulings are set aside.
WHEREFORE, the petition is GRANTED. The Decision dated January
19, 2012 and the Resolution dated August 24, 2012 of the Court of Appeals in
CA-G.R. SP No. 97448 are hereby SET ASIDE.
SO ORDERED.
 (Northern Islands, Co., Inc. v. Spouses Garcia, G.R. No. 203240, [March 18,
|||

2015])

THIRD DIVISION

[G.R. No. 203530. April 13, 2015]

LUZON DEVELOPMENT BANK, TOMAS CLEMENTE,

JR., and OSCAR RAMIREZ, petitioners, vs. ERLINDA
KRISHNAN, respondent.

DECISION

PERALTA, J  : p
 This is a Petition for Review on Certiorari under Rule 45 of the 1997
Rules of Civil Procedure praying for the annulment of the Decision 1 dated
March 27, 2012 and Resolution 2 dated September 11, 2012 of the Court of
Appeals (CA) in CA-G.R. SP No. 120664, which affirmed the Orders dated
September 24, 2010 and May 26, 2011, respectively, of Branch 30, Regional
Trial Court (RTC) — Manila. 
The factual antecedents, as found by the CA, are as follows:
Petitioners Luzon Development Bank, Tomas Clemente, and
Oscar Ramirez (hereafter petitioners) are the respondents in the
complaint for Collection of Sum of Money and Damages filed by
respondent Erlinda Khrishnan (hereafter respondent Erlinda) on
February 7, 2001. Respondent Erlinda claimed that she is a client of
respondent bank wherein she maintained several accounts including
time deposits. On several occasions, when respondent Erlinda
presented her Time Deposits Certificates amounting to P28,597,472.70
for payment because they have become due, petitioners refused to
honor them for the reason that they were fraudulent. Respondent
Erlinda likewise applied for a Preliminary Writ of Attachment which
the RTC granted on February 27, 2001.
By virtue of the writ, petitioner bank's accounts in BPI Family
Bank, Calamba, Laguna in the amount of P28,597,472.70 and its
account amounting to P49,000,000.00 in the Central Bank were
garnished.
On March 9, 2001, petitioners filed an urgent ex-parte Motion
to Recall Quash and/or Lift Attachment or Garnishment (in excess of
amounts in the writ). Respondent Erlinda opposed the motion.
On August 15, 2001, petitioners filed an Omnibus Motion
seeking the substitution of their garnished account with government
securities and the immediate resolution of their motion to discharge
attachment and setting the motion for hearing, which respondent
Erlinda opposed.
On May 22, 2002, the RTC resolved the pending incidents and
required the petitioners to justify their motion to discharge the
attachment. During pre-trial on May 23, 2002, respondents requested
additional time to file a supplemental motion to justify their earlier
motions which was granted and gave petitioners ten (10) days from
receipt within which to comment or opposed (sic) it.
On September 8, 2003, the RTC issued an order lifting the
attachment to which respondent Erlinda filed a motion for
reconsideration. Respondent Erlinda also filed a Motion for Inhibition.
On December 18, 2003, the RTC denied the motion for
reconsideration but granted the motion for inhibition. The said Order
was questioned by respondent Erlinda by way of Petition
for Certiorari before the 7th Division which rendered a decision on
November 15, 2006, the dispositive portion of which reads as
follows: 
aDSIHc

"WHEREFORE, the PETITION

FOR CERTIORARI is GRANTED.
THE ORDERS dated September 8, 2003, and
December 18, 2003 are NULLIFIED and SET ASIDE.
The private respondents, as defendants in Civil
Case No. 01-100046 entitled Erlinda C. Krishnan v.
Luzon Development Bank, et al., are ORDERED to file
a counterbond in accordance with Sec. 12, Rule 57,
1997 Rules of Civil Procedure, within 10 days from the
finality of this decision; otherwise, the REGIONAL
TRIAL COURT, BRANCH 36, in Manila shall
immediately reinstate the writ of attachment issued and
implemented in Civil Case No. 01-100046.
Costs of suit to be paid by the respondents.
SO ORDERED.
Petitioners' subsequent motion for reconsideration was denied.
Thereafter, their petition and motion for reconsideration before the
Supreme Court were likewise denied.
On May 09, 2008, respondent judge issued an Order directing
respondent Erlinda to file a new attachment bond in the amount of
P35,000,000.00 and petitioners to file a counterbond within ten days
from notice of the filing and approval of the bond of respondent
Erlinda. Petitioners moved for the reconsideration of the said Order
which respondent judge denied and granted a period of fifteen days for
respondent Erlinda to file an attachment bond.
Respondent Erlinda filed her attachment bond on June 25, 2009
in the amount of P35,000,000.00 through Visayan Surety and
Insurance Corporation which was approved by respondent on July 7,
2009. 
Meanwhile, on July 3, 2009, petitioners filed an Omnibus
Motion praying that a hearing be held to determine the sufficiency of
the attachment bond and they be allowed to deposit Certificates of
Title of real property, and the issuance of the writ of attachment be
held in abeyance.
On July 20, 2009, petitioners filed a motion for extension of
time to comply and/or file the appropriate pleading and to hold in
abeyance the reinstatement of the writ of attachment.
 On January 28, 2010, petitioners filed a motion to admit bank
property in lieu of counterbond which was opposed by respondent
Erlinda.
On September 24, 2010, respondent judge denied petitioners'
motion in the assailed Order. Their subsequent motion for
reconsideration was denied on May 26, 2011.
On June 27, 2011, respondent judge issued an Order reinstating
the Writ of Attachment dated March 1, 2001 for failure of petitioners
to file the required counterbond. Respondent judge also issued an
amended Reinstated Writ of Attachment directing respondent Sheriff
Oscar L. Rojas (hereafter respondent Sheriff) to attach the real estate
or personal properties of petitioners in the amount of P28,597,472.70.
On June 30, 2011, the sheriff served the Notice of Garnishment and
the Amended Reinstated Writ of Attachment.
On July 4, 2011, petitioners filed an urgent motion to recall,
suspend or hold in abeyance and re-examination of the amended
reinstated writ of preliminary attachment of June 27, 2011 which was
opposed by respondent Erlinda.
On July 19, 2011, respondent Sheriff issued a Sheriff's Partial
Report. Thereafter, petitioners filed this petition for certiorari . . . .
In a Decision dated March 27, 2012, the CA dismissed
petitioners' certiorari petition and affirmed the Orders of the RTC reinstating
the Writ of Attachment for failure of petitioners to file the required counter-
bond. The CA ruled that the RTC judge committed no grave abuse of
discretion in denying petitioners' motion to admit bank property in lieu of
counter-bond, thus, it held: ETHIDa

WHEREFORE, premises considered, the petition is

DISMISSED and accordingly, DENIED DUE COURSE. The Orders
dated September 24, 2010 and May 26, 2011 are hereby AFFIRMED.
SO ORDERED. 3
Petitioners filed a motion for reconsideration against said decision, but
the same was denied in a Resolution dated September 11, 2012.
Hence, petitioners filed this present petition raising the following
grounds:
IN THE FIRST ASSAILED ORDER THE HONORABLE
COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION WHEN IT MISCONSTRUED AND FAILED TO
RULE ON THE CORRECT LEGAL ISSUE PRESENTED IN THE
PETITION FOR CERTIORARI. 4
IN THE SECOND ASSAILED ORDER THE HONORABLE
COURT OF APPEALS AGAIN ACTED WITH GRAVE ABUSE OF
 DISCRETION WHEN IT FAILED TO PRESENT ANY LEGAL
BASIS FOR STATING THAT RULE 39 OF THE REVISED RULES
OF COURT DOES NOT APPLY. 5
Simply stated, the issue for our resolution is whether the CA erred in
affirming the RTC's decision which denied petitioners' motion praying that
bank property be deposited in lieu of cash or a counter-bond.
In their petition, petitioners contend that it has the option to deposit real
property, in lieu of cash or a counter-bond, to secure any contingent lien on its
property in the event respondent wins the case. They argue that Section 2 of
Rule 57 only mentions the term "deposit," thus, it cannot only be confined or
construed to refer to cash.
We rule in the negative.
Section 2, Rule 57 of the Rules of Court explicitly states that "[a]n order
of attachment may be issued either ex parte or upon motion with notice and
hearing by the court in which the action is pending, or by the Court of Appeals
or the Supreme Court, and must require the sheriff of the court to attach so
much of the property in the Philippines of the party against whom it is issued,
not exempt from execution, as may be sufficient to satisfy the applicant's
demand, unless such party makes deposit or gives a bond as hereinafter
provided in an amount equal to that fixed in the order, which may be the
amount sufficient to satisfy the applicant's demand or the value of the property
to be attached as stated by the applicant, exclusive of costs."
Section 5 of the same Rule likewise states that "[t]he sheriff enforcing
the writ shall without delay and with all reasonable diligence attach, to await
judgment and execution in the action, only so much of the property in the
Philippines of the party against whom the writ is issued, not exempt from
execution, as may be sufficient to satisfy the applicant's demand, unless the
former makes a deposit with the court from which the writ is issued, or
gives a counter-bond executed to the applicant, in an amount equal to the
bond fixed by the court in the order of attachment or to the value of the
property to be attached, exclusive of costs."
From the foregoing, it is evidently clear that once the writ of attachment
has been issued, the only remedy of the petitioners in lifting the same is
through a cash deposit or the filing of the counter-bond. Thus, the Court holds
that petitioner's argument that it has the option to deposit real property instead
of depositing cash or filing a counter-bond to discharge the attachment or stay
the implementation thereof is unmeritorious. 
In fact, in Security Pacific Assurance Corporation v. Tria-Infante, 6 we
held that one of the ways to secure the discharge of an attachment is for the
party whose property has been attached or a person appearing on his behalf, to
 post a counterbond or make the requisite cash deposit in an amount equal to
that fixed by the court in the order of attachment. 7
Apropos, the trial court aptly ruled that while it is true that the word
deposit cannot only be confined or construed to refer to cash, a broader
interpretation thereof is not justified in the present case for the reason that a
party seeking a stay of the attachment under Section 5 is required to make a
deposit in an amount equal to the bond fixed by the court in the order of
attachment or to the value of the property to be attached. The proximate
relation of the word "deposit" and "amount" is unmistakable in Section 5 of
Rule 57. Plainly, in construing said words, it can be safely concluded that
Section 5 requires the deposit of money as the word "amount" commonly
refers to or is regularly associated with a sum of money.
In Alcazar v. Arante, 8 we held that in construing words and phrases
used in a statute, the general rule is that, in the absence of legislative intent to
the contrary, they should be given their plain, ordinary and common usage
meaning. The words should be read and considered in their natural, ordinary,
commonly-accepted and most obvious signification, according to good and
approved usage and without resorting to forced or subtle construction. Words
are presumed to have been employed by the lawmaker in their ordinary and
common use and acceptation. 9 Thus, petitioners should not give a special or
technical interpretation to a word which is otherwise construed in its ordinary
sense by the law and broaden the signification of the term "deposit" to include
that of real properties.
WHEREFORE, premises considered, the instant petition is DENIED.
The Decision dated March 27, 2012 and Resolution dated September 11, 2012
of the Court of Appeals are hereby AFFIRMED.
SO ORDERED.
|||  (Luzon Development Bank v. Krishnan, G.R. No. 203530 , [April 13, 2015])

SECOND DIVISION

[G.R. No. 212025. July 1, 2015.]

EXCELLENT QUALITY APPAREL, INC., petitioner, vs.

VISAYAN SURETY & INSURANCE CORPORATION, and
FAR EASTERN SURETY & INSURANCE CO.,
INC.,respondents.

DECISION
MENDOZA, J  : p

The present case involves the wrongful attachment and release of the
petitioner's funds to the adverse party and its plight to recover the same. It
seems that when misfortune poured down from the skies, the petitioner
received a handful. The scales of justice, however, do not tilt based on chance;
rather on the proper application of law, jurisprudence and justice. 
This is a petition for review on certiorari seeking to reverse and set
aside the October 21, 2013 Decision 1 and the April 1, 2014 Resolution 2 of the
Court of Appeals (CA), in CA-G.R. CV No. 95421, which affirmed the January
15, 2010 3 and May 19, 2010 4 Orders of the Regional Trial Court of Manila,
Branch 32 (RTC), in Civil Case No. 04-108940.
The Facts
On March 26, 1996, petitioner Excellent Quality Apparel,
Inc. (petitioner), then represented by Max L.F. Ying (Ying), Vice-President for
Productions, and Alfiero R. Orden, Treasurer, entered into a contract with
Multi-Rich Builders (Multi-Rich), a single proprietorship, represented by
Wilson G. Chua, its President and General Manager, for the construction of a
garment factory within the Cavite Philippine Economic Zone
Authority (CPEZA). The duration of the project was for a maximum period of
five (5) months or 150 consecutive calendar days. Included in the contract was
an Arbitration Clause in case of dispute.
On November 27, 1996, the construction of the factory building was
completed.
On February 20, 1997, Win Multi-Rich Builders, Inc. (Win Multi-
Rich) was incorporated with the Securities and Exchange Commission (SEC).
On January 26, 2004, Win Multi-Rich filed a complaint for sum of
money and damages against petitioner and Ying before the RTC. 5 It also
prayed for the issuance of a writ of attachment, claiming that Ying was about
to abscond and that petitioner had an impending closure. AcICHD

Win Multi-Rich then secured the necessary bond in the amount of

P8,634,448.20 from respondent Visayan Surety and Insurance
Corporation (Visayan Surety). 6 In the Order, 7 dated February 2, 2004, the
RTC issued a writ of preliminary attachment in favor of Win Multi-Rich.
To prevent the enforcement of the writ of preliminary attachment on its
equipment and machinery, petitioner issued Equitable PCI Bank Check No.
160149, 8 dated February 16, 2004, in the amount of P8,634,448.20 payable to
the Clerk of Court of the RTC.
On February 19, 2004, petitioner filed its Omnibus Motion, 9 seeking to
discharge the attachment. Petitioner also questioned the jurisdiction of the RTC
due to the presence of the Arbitration Clause in the contract. It asserted that the
case should have been referred first to the Construction Industry Arbitration
Commission (CIAC) pursuant to Executive Order (E.O.) No. 1008.
The motion, however, was denied by the RTC in its Order, 10 dated
April 12, 2004, because the issues of the case could be resolved after a full-
blown trial.
On April 26, 2004, petitioner filed its Answer with Compulsory
Counterclaim 11 before the RTC. It denied the material allegation of the
complaint and sought the immediate lifting of the writ of attachment. It also
prayed that the bond filed by Win Multi-Rich to support its application for
attachment be held to satisfy petitioner's claim for damages due to the improper
issuance of such writ.
On April 29, 2004, the RTC issued another order 12 directing the deposit
of the garnished funds of petitioner to the cashier of the Clerk of Court of the
RTC.
Win Multi-Rich then filed a motion, 13 dated April 29, 2004, to release
petitioner's cash deposit to it. Notably, the motion was granted by the RTC in
the Order, 14 dated May 3, 2004. Subsequently, on May 7, 2004, Win Multi-
Rich posted Surety Bond No. 10198 15 issued by respondent Far Eastern Surety
and Insurance Co., Inc. (FESICO) for the amount of P9,000,000.00, to secure
the withdrawal of the cash deposited by petitioner. Thus, Win Multi-Rich was
able to receive the funds of petitioner even before the trial began.
On June 18, 2004, petitioner filed a petition for certiorari 16 under Rule
65 of the 1997 Rules of Civil Procedure before the CA. The petition sought to
annul and set aside the April 12, 2004 and April 29, 2004 Orders of the RTC.
Petitioner then filed its Supplemental Manifestation and Motion, 17 asserting
that its cash deposit with the RTC was turned over to Win Multi-Rich.
On March 14, 2006, the CA rendered a decision, 18 annulling the April
12, 2004 and April 29, 2004 Orders of the RTC. It ruled, however, that the
RTC had jurisdiction over the case inspite of the arbitration clause because it
was a suit for collection of sum of money. The dispositive portion of which
reads: 
IN LIGHT OF ALL THE FOREGOING, the instant petition is
hereby GRANTED. The Orders dated April 12, 2004 and April 29,
2004 of respondent judge are hereby ANNULLED and SET ASIDE.
Accordingly, the writ of preliminary injunction is hereby MADE
PERMANENT.
SO ORDERED. 19
Petitioner filed a motion for reconsideration arguing, among others, that
the CA decision failed to state an order to return the garnished amount of
P8,634,448.20, which was taken from its bank account and given to Win
Multi-Rich. In its Resolution, 20 dated October 11, 2006, the CA denied the
motion.
Aggrieved, petitioner elevated the matter to the Court by way of a
petition for review on certiorari under Rule 45, docketed as G.R. No. 175048.
On February 10, 2009, in G.R. No. 175048, the Court promulgated a
decision 21 in favor of petitioner and held: first, that Win Multi-Rich was not a
real party in interest; second, that the RTC should not have taken cognizance of
the collection suit because the presence of the arbitration clause vested
jurisdiction on the CIAC over all construction disputes between petitioner and
Multi-Rich; and lastly, that Win Multi-Rich could not retain the garnished
amount, as the RTC did not have jurisdiction to issue the questioned writ of
attachment and to order the release of the funds. The dispositive portion reads:
WHEREFORE, the petition is GRANTED. The Decision of the
Court of Appeals is hereby MODIFIED. Civil Case No. 04-108940 is
DISMISSED. Win Multi-Rich Builders, Inc. is ORDERED to return
the garnished amount of EIGHT MILLION SIX HUNDRED THIRTY
FOUR THOUSAND FOUR HUNDRED FORTY-EIGHT PESOS
AND TWENTY CENTAVOS (P8,634,448.20), which was turned
over by the Regional Trial Court, to petitioner with legal interest of 12
percent (12%) per annum upon finality of this Decision until payment.
SO ORDERED. 22
Win Multi-Rich filed a motion for reconsideration but it was denied by
the Court in its April 20, 2009 Resolution. 23 Pursuant to an entry of
judgment, 24 the Court's decision became final and executory on June 2, 2009.
On June 26, 2009, petitioner moved for execution thereof, praying for
the return of its cash deposit and, in the event of refusal of Win Multi-Rich to
comply, to hold Visayan Surety and FESICO liable under their respective
bonds. 25
Win Multi-Rich, Visayan Surety and FESICO were served with copies
of the motion for execution. 26 During the August 7, 2009 hearing on the
motion for execution, counsels for petitioner, Win Multi-Rich and FESICO
were present. 27 The hearing, however, was reset to September 16, 2009. On
the said date, Win Multi-Rich, Visayan Surety and FESICO were given fifteen
(15) days to submit their respective comments or oppositions to the motion for
execution. 28 TAIaHE

On October 15, 2009, Win Multi-Rich opposed the motion for

execution 29 because the cash deposit awarded to it by the RTC had been paid
to suppliers and the said amount was long overdue and demandable.
 The RTC granted the motion for execution in an Order, 30 dated October
19, 2009, and issued a writ of execution. 31 Visayan Surety and FESICO
separately moved for reconsideration of the RTC order.
The RTC Ruling
On January 15, 2010, the RTC issued the order, 32 granting the surety
respondents' motion for reconsideration and lifting its October 19, 2009 Order
insofar as it granted the motion for execution against Visayan Surety and
FESICO. The RTC absolved the surety respondents because petitioner did not
file a motion for judgment on the attachment bond before the finality of
judgment, thus, violating the surety respondents' right to due process. It further
held that the execution against the surety respondents would go beyond the
terms of the judgment sought to be executed considering that the Court
decision pertained to Win Multi-Rich only.
Petitioner moved for reconsideration, but its motion was denied by the
RTC in its May 19, 2010 Order. 33
Undaunted, petitioner appealed before the CA, arguing that there was no
violation of the right to due process because the liability of the surety
respondents were based on the bonds issued by them.
The CA Ruling
In the assailed decision, dated October 21, 2013, the CA found
petitioner's appeal without merit. Citing Section 20, Rule 57 of the 1997 Rules
of Civil Procedure (Section 20, Rule 57), the CA held that petitioner failed to
timely claim damages against the surety before the decision of the Court
became final and executory. It further stated that a court judgment could not
bind persons who were not parties to the action as the records showed that
Visayan Surety and FESICO were neither impleaded nor informed of the
proceedings before the Court in G.R. No. 175048. It was the view of the CA
that "[h]aving failed to observe very elementary rules of procedure which are
mandatory, [petitioner] caused its own predicament."
Petitioner filed a motion for reconsideration, but it was denied by the
CA in the assailed April 1, 2014 Resolution.
Hence, this present petition, anchored on the following
STATEMENT OF ISSUES
I
THE ASSAILED DECISION AND THE ASSAILED
RESOLUTION OF THE COURT OF APPEALS SHOULD BE
REVERSED AND SET ASIDE FOR BEING CONTRARY TO
LAW AND JURISPRUDENCE CONSIDERING THAT THE
RIGHT TO DUE PROCESS OF THE TWO SURETY
 COMPANIES WILL NOT BE VIOLATED IF EXECUTION OF
THE JUDGMENT AGAINST THEM IS ALLOWED. 
II
THE ASSAILED DECISION AND THE ASSAILED
RESOLUTION OF THE COURT OF APPEALS SHOULD BE
REVERSED AND SET ASIDE FOR BEING CONTRARY TO
LAW AND JURISPRUDENCE CONSIDERING THAT TO
ALLOW THE EXECUTION AGAINST THE TWO SURETY
COMPANIES WOULD GIVE FULL EFFECT TO THE TERMS
OF THE JUDGMENT.34
Petitioner contends that Visayan Surety and FESICO could be held
liable because the Court, in G.R. No. 175048, ruled that it cannot allow Win
Multi-Rich to retain the garnished amount turned over by the RTC, which had
no jurisdiction to issue the questioned writ of attachment. Petitioner argues that
if Win Multi-Rich fails or refuses to refund or return the cash deposit, then
Visayan Surety and FESICO must be held liable under their respective bonds.
Also, petitioner claims that the surety bond of FESICO is not covered by
Section 20, Rule 57 because it did not pertain to the writ of attachment itself,
but on the withdrawal of the cash deposit.
On October 3, 2014, Visayan Surety filed its Comment. 35 It asserted
that no application for damages was filed before the Court in G.R. No. 175048.
Thus, there was no occasion to direct the RTC to hear and decide the claim for
damages, which constituted a violation of its right to due process. Also,
Visayan Surety contended that Section 20, Rule 57 provided a mandatory rule
that an application for damages must be filed before the judgment becomes
final and executory.
On October 8, 2014, FESICO filed its Comment. 36 It averred that
petitioner failed to comply with Section 20, Rule 57 of the Rules of
Court because the hearing on the motion for execution was conducted after the
decision in G.R. No. 175048 had already become final and executory. It also
stated that petitioner failed to implead the surety respondents as parties in G.R.
No. 175048.
On January 26, 2015, petitioner filed its Consolidated Reply. 37 It
stressed that because the highest court of the land had directed the return of the
wrongfully garnished amount to petitioner, proceedings on the application
under Section 20, Rule 57, became no longer necessary.
The Court's Ruling
The petition is partly meritorious.
There was an application
for damages; but there
was no notice given to
Visayan Surety
By its nature, preliminary attachment, under Rule 57 of the Rules of
Court, "is an ancillary remedy applied for not for its own sake but to enable the
attaching party to realize upon relief sought and expected to be granted in the
main or principal action; it is a measure auxiliary or incidental to the main
action. As such, it is available during the pendency of the action which may be
resorted to by a litigant to preserve and protect certain rights and interests
therein pending rendition and for purposes of the ultimate effects, of a final
judgment in the case. 38 In addition, attachment is also availed of in order to
acquire jurisdiction over the action by actual or constructive seizure of the
property in those instances where personal or substituted service of summons
on the defendant cannot be effected." 39  cDHAES

The party applying for the order of attachment 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. 40 The purpose of an attachment bond is 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. 41
In this case, the attachment bond was issued by Visayan Surety in order
for Win Multi-Rich to secure the issuance of the writ of attachment. Hence,
any application for damages arising from the improper, irregular or excessive
attachment shall be governed by Section 20, Rule 57, which provides:
Sec. 20. Claim for damages on account of improper, irregular or
excessive attachment.
An application for damages on account of improper, irregular or
excessive attachment must be filed before the trial or before appeal is
perfected or before the judgment becomes executory, with due notice
to the attaching party and his surety or sureties, setting forth the facts
showing his right to damages and the amount thereof. Such damages
may be awarded only after proper hearing and shall be included in the
judgment on the main case.
If the judgment of the appellate court be favorable to the party against
whom the attachment was issued, he must claim damages sustained
during the pendency of the appeal by filing an application in the
appellate court, with notice to the party in whose favor the attachment
was issued or his surety or sureties, before the judgment of the
appellate court becomes executory. The appellate court may allow the
application to be heard and decided by the trial court.
Nothing herein contained shall prevent the party against whom the
attachment was issued from recovering in the same action the damages
 awarded to him from any property of the attaching party not exempt
from execution should the bond or deposit given by the latter be
insufficient or fail to fully satisfy the award. 
The history of Section 20, Rule 57 was discussed in Malayan
Insurance, Inc. v. Salas. 42 In that case, the Court explained that Section 20,
Rule 57 was a revised version of Section 20, Rule 59 of the 1940 Rules of
Court, which, in turn, was a consolidation of Sections 170, 177, 223, 272, and
439 of the Code of Civil Procedure regarding the damages recoverable in case
of wrongful issuance of the writs of preliminary injunction,
attachment, mandamus and replevin and the appointment of a receiver.
Thus, the current provision of Section 20, Rule 57 of the 1997 Rules of
Civil Procedure covers application for damages against improper attachment,
preliminary injunction, receivership, and replevin. 43 Consequently,
jurisprudence concerning application for damages against preliminary
injunction, receivership and replevin bonds can be equally applied in the
present case.
In a catena of cases, 44 the Court has cited the requisites under Section
20, Rule 57 in order to claim damages against the bond, as follows:
1. The application for damages must be filed in the same case where the
bond was issued;
2. Such application for damages must be filed before the entry of
judgment; and
3. After hearing with notice to the surety.
The first and second requisites, as stated above, relate to the application
for damages against the bond. An application for damages must be filed in the
same case where the bond was issued, either (a) before the trial or (b) before
the appeal is perfected or (c) before the judgment becomes executory. 45 The
usual procedure is to file an application for damages with due notice to the
other party and his sureties. The other method would be to incorporate the
application in the answer with compulsory counterclaim. 46
The purpose of requiring the application for damages to be filed in the
same proceeding is to avoid the multiplicity of suit and forum shopping. It is
also required to file the application against the bond before the finality of the
decision to prevent the alteration of the immutable judgment. 47
In Paramount Insurance Corp. v. CA, 48 the Court allowed an
application for damages incorporated in the answer with compulsory
counterclaim of the defendant therein. The sureties were properly notified of
the hearing and were given their day in court.
Conversely, in the recent case of Advent Capital and Finance Corp. v.
Young, 49 the application for damages against the bond was not allowed. The
respondent therein filed his omnibus motion claiming damages against surety
after the dismissal order issued by the trial court had attained finality. 
ASEcHI

In the present petition, the Court holds that petitioner sufficiently

incorporated an application for damages against the wrongful attachment in its
answer with compulsory counterclaim filed before the RTC. Petitioner alleged
that the issuance of the improper writ of attachment caused it actual damages in
the amount of at least P3,000,000.00. It added that the Equitable PCI Bank
Check No. 160149 it issued to the RTC Clerk of Court, to lift the improper writ
of attachment, should be returned to it. 50 Evidently, these allegations
constitute petitioner's application for damages arising from the wrongful
attachment, and the said application was timely filed as it was filed before the
finality of judgment.
The next requisite that must be satisfied by petitioner to hold Visayan
Surety liable would be that the judgment against the wrongful attachment was
promulgated after the hearing with notice to the surety. Certainly, the surety
must be given prior notice and an opportunity to be heard with respect to the
application for damages before the finality of the judgment. The Court rules
that petitioner did not satisfy this crucial element.
Section 20, Rule 57 specifically requires that the application for
damages against the wrongful attachment, whether filed before the trial court
or appellate court, must be with due notice to the attaching party and his surety
or sureties. Such damages may be awarded only after proper hearing and shall
be included in the judgment on the main case.
Due notice to the adverse party and its surety setting forth the facts
supporting the applicant's right to damages and the amount thereof under the
bond is indispensable. The surety should be given an opportunity to be heard as
to the reality or reasonableness of the damages resulting from the wrongful
issuance of the writ. In the absence of due notice to the surety, therefore, no
judgment for damages may be entered and executed against it. 51
In the old case of Visayan Surety and Insurance Corp. v. Pascual, 52 the
application for damages was made before the finality of judgment, but the
surety was not given due notice. The Court allowed such application under
Section 20, Rule 59 of the 1940 Rules of Court because there was no rule
which stated that the failure to give to the surety due notice of the application
for damages would release the surety from the obligation of the bond. 53
The case of Visayan Surety and Insurance Corp. v. Pascual, however,
was abandoned in the subsequent rulings of the Court because this was
contrary to the explicit provision of Section 20, Rule 57. 54
In People Surety and Insurance Co. v. CA, 55 the defendant therein filed
an application for damages during the trial but the surety was not notified. The
Court denied the application and stated that "it is now well settled that a court
has no jurisdiction to entertain any proceeding seeking to hold a surety liable
upon its bond, where the surety has not been given notice of the proceedings
for damages against the principal and the judgment holding the latter liable has
already become final." 56
In Plaridel Surety & Insurance Co. v. De Los Angeles, 57 a motion for
execution against the bond of the surety was filed after the finality of
judgment. The petitioner therein asserted that the motion for execution was a
sufficient notification to the surety of its application for damages. The Court
ruled, that "[t]his notification, however, which was made after almost a year
after the promulgation of the judgment by the Court of Appeals, did not cure
the tardiness of the claim upon the liability of the surety, which, by mandate of
the Rules, should have been included in the judgment." 58
In the present case, petitioner's answer with compulsory counterclaim,
which contained the application for damages, was not served on Visayan
Surety. 59 Also, a perusal of the records 60 revealed that Visayan Surety was
not furnished any copies of the pleadings, motions, processes, and judgments
concerned with the application for damages against the surety bond. Visayan
Surety was only notified of the application when the motion for execution was
filed by petitioner on June 29, 2009, after the judgment in G.R. No. 175048
had become final and executory on June 2, 2009.
Clearly, petitioner failed to comply with the requisites under Section 20,
Rule 57 because Visayan Surety was not given due notice on the application
for damages before the finality of judgment. The subsequent motion for
execution, which sought to implicate Visayan Surety, cannot alter the
immutable judgment anymore.
FESICO's bond is not
covered by Section 20,
Rule 57
While Visayan Surety could not be held liable under Section 20, Rule
57, the same cannot be said of FESICO. In the case at bench, to forestall the
enforcement of the writ of preliminary attachment, petitioner issued Equitable
PCI Bank Check No. 160149, dated February 16, 2004, in the amount of
P8,634,448.20 payable to the Clerk of Court of the RTC. Pursuant to the RTC
Order, dated April 29, 2004, the garnished funds of petitioner were deposited
to the cashier of the Clerk of Court of the RTC. The procedure to discharge the
writ of preliminary attachment is stated in Section 12, Rule 57, to wit:
Sec. 12. Discharge of attachment upon giving counterbond.
After a writ of attachment has been enforced, the party whose
property has been attached, or the person appearing on his behalf, may
 move for the discharge of the attachment wholly or in part on the
security given. The court shall, after due notice and hearing, order
the discharge of the attachment if the movant makes a cash
deposit, or files a counter-bond executed to the attaching party
with the clerk of the court where the application is made, in an
amount equal to that fixed by the court in the order of attachment,
exclusive of costs. But if the attachment is sought to be discharged
with respect to a particular property, the counter-bond shall be equal to
the value of that property as determined by the court. In either case,
the cash deposit or the counter-bond shall secure the payment of any
judgment that the attaching party may recover in the action. A notice
of the deposit shall forthwith be served on the attaching party. Upon
the discharge of an attachment in accordance with the provisions of
this section, the property attached, or the proceeds of any sale thereof,
shall be delivered to the party making the deposit or giving the
counter-bond, or to the person appearing on his behalf, the deposit or
counter-bond aforesaid standing in place of the property so released.
Should such counter-bond for any reason to 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. 
[Emphasis Supplied]
Win Multi-Rich, however, took a step further and filed a motion to
release petitioner's cash deposit to it. Immediately, the RTC granted the motion
and directed Win Multi-Rich to post a bond in favor of petitioner in the amount
of P9,000,000.00 to answer for the damages which the latter may sustain
should the court decide that Win Multi-Rich was not entitled to the relief
sought. Subsequently, Win Multi-Rich filed a surety bond of FESICO before
the RTC and was able to obtain the P8,634,448.20 cash deposit of petitioner,
even before the trial commenced.
Strictly speaking, the surety bond of FESICO is not covered by any of
the provisions in Rule 57 of the Rules of Court because, in the first place, Win
Multi-Rich should not have filed its motion to release the cash deposit of
petitioner and the RTC should not have granted the same. The release of the
cash deposit to the attaching party is anathema to the basic tenets of a
preliminary attachment.
The chief purpose of the remedy of attachment is to secure a contingent
lien on defendant's property until plaintiff can, by appropriate proceedings,
obtain a judgment and have such property applied to its satisfaction, or to make
some provision for unsecured debts in cases where the means of satisfaction
thereof are liable to be removed beyond the jurisdiction, or improperly
disposed of or concealed, or otherwise placed beyond the reach of
creditors. 61 The garnished funds or attached properties could only be released
to the attaching party after a judgment in his favor is obtained. Under no
circumstance, whatsoever, can the garnished funds or attached properties,
under the custody of the sheriff or the clerk of court, be released to the
attaching party before the promulgation of judgment.
Cash deposits and counterbonds posted by the defendant to lift the writ
of attachment is a security for the payment of any judgment that the attaching
party may obtain; they are, thus, mere replacements of the property previously
attached. 62 Accordingly, the P8,634,448.20 cash deposit of petitioner, as
replacement of the properties to be attached, should never have been released
to Win Multi-Rich.  cSaATC

Nevertheless, the Court must determine the nature of the surety bond of
FESICO. The cash deposit or the counter-bond was supposed to secure the
payment of any judgment that the attaching party may recover in the
action. 63 In this case, however, Win Multi-Rich was able to withdraw the cash
deposit and, in exchange, it posted a surety bond of FESICO in favor of
petitioner to answer for the damages that the latter may sustain. Corollarily, the
surety bond of FESICO substituted the cash deposit of petitioner as a security
for the judgment. Thus, to claim damages from the surety bond of FESICO,
Section 17, Rule 57 could be applied. It reads:
Sec. 17. Recovery upon the counter-bond.
When the judgment has become executory, the surety or
sureties on any counter-bond given pursuant to the provisions of this
Rule to secure the payment of the judgment shall become charged on
such counter-bond and bound to pay the judgment obligee upon
demand the amount due under the judgment, which amount may be
recovered from such surety or sureties after notice and summary
hearing in the same action.
From a reading of the above-quoted provision, it is evident that a surety
on a counter-bond given to secure the payment of a judgment becomes liable
for the payment of the amount due upon: (1) demand made upon the surety;
and (2) notice and summary hearing on the same action. 64 Noticeably, unlike
Section 20, Rule 57, which requires notice and hearing before the finality of
the judgment in an application for damages, Section 17, Rule 57 allows a party
to claim damages on the surety bond after the judgment has become
executory. 65
The question remains, in contrast to Section 20, why does Section 17
sanction the notice and hearing to the surety after the finality of judgment? The
answer lies in the kind of damages sought to be enforced against the bond.
Under Section 20, Rule 57, in relation to Section 4 therein, 66 the surety
bond shall answer for all the costs which may be adjudged to the adverse party
and all damages which he may sustain by reason of the attachment. In other
words, the damages sought to be enforced against the surety bond
are unliquidated. Necessarily, a notice and hearing before the finality of
judgment must be undertaken to properly determine the amount of damages
that was suffered by the defendant due to the improper attachment. These
damages to be imposed against the attaching party and his sureties are different
from the principal case, and must be included in the judgment.
On the other hand, under Section 17, Rule 57, in relation to Section 12
therein, the cash deposit or the counter-bond shall secure the payment of any
judgment that the attaching party may recover in the action. Stated differently,
the damages sought to be charged against the surety bond are liquidated. The
final judgment had already determined the amount to be awarded to the
winning litigant on the main action. Thus, there is nothing left to do but to
execute the judgment against the losing party, or in case of insufficiency,
against its sureties. 
Here, the Court is convinced that a demand against FESICO had been
made, and that it was given due notice and an opportunity to be heard on its
defense. First, petitioner filed a motion for execution on June 29, 2009, a copy
of which was furnished to FESICO; 67 second, petitioner filed a
manifestation, 68 dated July 13, 2009, that FESICO was duly served with the
said motion and notified of the hearing on August 7, 2009; third, during the
August 7, 2009 hearing on the motion for execution, the counsels for
petitioner, Win Multi-Rich and FESICO were all present; 69 fourth, in an
Order, dated September 16, 2009, FESICO was given fifteen (15) days to
submit its comment or opposition to the motion for execution; 70 and lastly,
FESICO filed its comment 71 on the motion on October 1, 2009. Based on the
foregoing, the requirements under Section 17, Rule 57 have been more than
satisfied.
Indeed, FESICO cannot escape liability on its surety bond issued in
favor of petitioner. The purpose of FESICO's bond was to secure the
withdrawal of the cash deposit and to answer any damages that would be
inflicted against petitioner in the course of the proceedings. 72 Also, the
undertaking 73 signed by FESICO stated that the duration of the effectivity of
the bond shall be from its approval by the court until the action is fully
decided, resolved or terminated.
FESICO cannot simply escape liability by invoking that it was not a
party in G.R. No. 175048. From the moment that FESICO issued Surety Bond
No. 10198 to Win Multi-Rich and the same was posted before the RTC, the
court has acquired jurisdiction over the surety, and the provisions of Sections
12 and 17 of Rule 57 became operational. Thus, the Court holds that FESICO
is solidarily liable under its surety bond with its principal Win Multi-Rich.
 On a final note, the Court reminds the bench and the bar that lawsuits,
unlike duels, are not to be won by a rapier's thrust. Technicality, when it
deserts its proper office as an aid to justice and becomes its great hindrance and
chief enemy, deserves scant consideration from courts. There should be no
vested rights in technicalities. 74
WHEREFORE, the petition is PARTIALLY GRANTED. The
October 21, 2013 Decision and the April 1, 2014 Resolution of the Court of
Appeals in CA-G.R. CV No. 95421 are AFFIRMED WITH
MODIFICATION. The Regional Trial Court of Manila, Branch 32 in Civil
Case No. 04-108940 is hereby ordered to proceed with the execution against
Far Eastern Surety & Insurance Co., Inc., to the extent of the amount of the
surety bond.
SO ORDERED.
 (Excellent Quality Apparel, Inc. v. Visayan Surety & Insurance Corp., G.R. No.
|||

212025 , [July 1, 2015])

THIRD DIVISION

[G.R. No. 181721. September 9, 2015.]

WATERCRAFT VENTURE CORPORATION, represented

by its Vice-President, ROSARIO E.
RAÑOA, petitioner, vs. ALFRED RAYMOND
WOLFE, respondent.

DECISION

PERALTA, J  : p

This is a petition for review on certiorari under Rule 45 of the Rules of

Court, seeking to reverse and set aside the Court of
Appeals (CA) Resolution 1 dated January 24, 2008 denying the motion for
reconsideration of its Decision 2 dated September 27, 2007 in CA-G.R. SP No.
97804.
The facts are as follows:
Petitioner Watercraft Venture Corporation (Watercraft) is engaged in
the business of building, repairing, storing and maintaining yachts, boats and
other pleasure crafts at the Subic Bay Freeport Zone, Subic, Zambales. In
connection with its operations and maintenance of boat storage facilities, it
charges a boat storage fee of Two Hundred Seventy-Two US Dollars
(US$272.00) per month with interest of 4% per month for unpaid charges.
Sometime in June 1997, Watercraft hired respondent Alfred Raymond
Wolfe (Wolfe), a British national and resident of Subic Bay Freeport Zone,
Zambales, as its Shipyard Manager.
During his employment, Wolfe stored the sailboat, Knotty Gull, within
Watercraft's boat storage facilities, but never paid for the storage fees. 
On March 7, 2002, Watercraft terminated the employment of Wolfe.
Sometime in June 2002, Wolfe pulled out his sailboat from Watercraft's
storage facilities after signing a Boat Pull-Out Clearance dated June 29, 2002
where he allegedly acknowledged the outstanding obligation of Sixteen
Thousand Three Hundred and Twenty-Four and 82/100 US Dollars
(US$16,324.82) representing unpaid boat storage fees for the period of June
1997 to June 2002. Despite repeated demands, he failed to pay the said
amount.
Thus, on July 7, 2005, Watercraft filed against Wolfe a Complaint for
Collection of Sum of Money with Damages with an Application for the
Issuance of a Writ of Preliminary Attachment. The case was docketed as Civil
Case No. 4534-MN, and raffled to Branch 170 3 of the Regional Trial
Court (RTC) of Malabon City.
In his Answer, Wolfe claimed he was hired as Service and Repair
Manager, instead of Shipyard Manager. He denied owing Watercraft the
amount of US$16,324.82 representing storage fees for the sailboat. He
explained that the sailboat was purchased in February 1998 as part of an
agreement between him and Watercraft's then General Manager, Barry Bailey,
and its President, Ricky Sandoval, for it to be repaired and used as training or
fill-in project for the staff, and to be sold later on. He added that pursuant to a
central Listing Agreement for the sale of the sailboat, he was appointed as
agent, placed in possession thereof and entitled to a ten percent (10%) sales
commission. He insisted that nowhere in the agreement was there a stipulation
that berthing and storage fees will be charged during the entire time that the
sailboat was in Watercraft's dockyard. Thus, he claimed to have been surprised
when he received five (5) invoices billing him for the said fees two (2) months
after his services were terminated. He pointed out that the complaint was an
offshoot of an illegal dismissal case he filed against Watercraft which had been
decided in his favor by the Labor Arbiter.
Meanwhile, finding Watercraft's ex-parte application for writ of
preliminary attachment sufficient in form and in substance pursuant to Section
1 of Rule 57 of the Rules of Court, the RTC granted the same in the Order
dated July 15, 2005, thus:
WHEREFORE, let a Writ of Preliminary Attachment be issued
accordingly in favor of the plaintiff, Watercraft Ventures Corporation
conditioned upon the filing of attachment bond in the amount of Three
Million Two Hundred Thirty-One Thousand Five Hundred and
Eighty-Nine and 25/100 Pesos (Php3,231,589.25) and the said writ
be served simultaneously with the summons, copies of the complaint,
application for attachment, applicant's affidavit and bond, and this
Order upon the defendant. HESIcT

SO ORDERED. 4
Pursuant to the Order dated July 15, 2005, the Writ of Attachment dated
August 3, 2005 and the Notice of Attachment dated August 5, 2005 were
issued, and Wolfe's two vehicles, a gray Mercedes Benz with plate number
XGJ 819 and a maroon Toyota Corolla with plate number TFW 110, were
levied upon.
On August 12, 2005, Wolfe's accounts at the Bank of the Philippine
Islands were also garnished.
By virtue of the Notice of Attachment and Levy dated September 5,
2005, a white Dodge pick-up truck with plate number XXL 111 was also
levied upon. However, a certain Jeremy Simpson filed a Motion for Leave of
Court to Intervene, claiming that he is the owner of the truck as shown by a
duly-notarized Deed of Sale executed on August 4, 2005, the Certificate of
Registration No. 3628665-1 and the Official Receipt No. 271839105.
On November 8, 2005, Wolfe filed a Motion to Discharge the Writ of
Attachment, arguing that Watercraft failed to show the existence of fraud and
that the mere failure to pay or perform an obligation does not amount to fraud.
He also claimed that he is not a flight risk for the following reasons: (1)
contrary to the claim that his Special Working Visa expired in April 2005, his
Special Subic Working Visa and Alien Certificate of Registration are valid
until April 25, 2007 and May 11, 2006, respectively; (2) he and his family have
been residing in the Philippines since 1997; (3) he is an existing stockholder
and officer of Wolfe Marine Corporation which is registered with the
Securities and Exchange Commission, and a consultant of "Sudeco/Ayala"
projects in Subic, a member of the Multipartite Committee for the new port
development in Subic, and the Subic Chamber of Commerce; and (4) he
intends to finish prosecuting his pending labor case against Watercraft. On
even date, Watercraft also filed a Motion for Preliminary Hearing of its
affirmative defenses of forum shopping, litis pendentia, and laches. 
 In an Order dated March 20, 2006, the RTC denied Wolfe's Motion to
Discharge Writ of Attachment and Motion for Preliminary Hearing for lack of
merit.
Wolfe filed a motion for reconsideration, but the RTC also denied it for
lack of merit in an Order dated November 10, 2006. Aggrieved, Wolfe filed a
petition for certioraribefore the CA.
The CA granted Wolfe's petition in a Decision dated September 27,
2007, the dispositive portion of which reads:
WHEREFORE, the Order dated March 20, 2006 and the
Order dated November 10, 2006 of respondent Judge are
hereby ANNULLED and SET ASIDE. Accordingly, the Writ of
Attachment issued on August 3, 2005, the Notice of Attachment dated
August 5, 2005 and the  Notice of Attachment and Levy dated
September 5, 2005 are hereby also declared NULL and VOID, and
private respondent is DIRECTED to return to their owners the
vehicles that were attached pursuant to the Writ.
SO ORDERED. 5
The CA ruled that the act of issuing the writ of preliminary
attachment ex-parte constitutes grave abuse of discretion on the part of the
RTC, thus:
. . . In  Cosiquien [v. Court of Appeals], the Supreme Court held that:
"Where a judge issues a fatally defective writ
of preliminary attachment based on an affidavit
which failed to allege the requisites prescribed for
the issuance of the writ of preliminary attachment,
renders the writ of preliminary attachment issued
against the property of the defendant fatally
defective. The judge issuing it is deemed to have
acted in excess of jurisdiction. In fact, the defect
cannot even be cured by amendment. Since the
attachment is a harsh and rigorous remedy which
exposed the debtor to humiliation and annoyance, the
rule authorizing its issuance must be strictly construed
in favor of defendant. It is the duty of the court before
issuing the writ to ensure that all the requisites of
the law have been complied with. Otherwise, a judge
acquires no jurisdiction to issue the writ." (emphasis
supplied) caITAC

In the instant case, the Affidavit of Merit executed by Rosario

E. Rañoa, Watercraft's Vice-President, failed to show fraudulent intent
on the part of Wolfe to defraud the company. It merely enumerated the
circumstances tending to show the alleged possibility of Wolfe's flight
from the country. And upon Wolfe's filing of the Motion to Discharge
the Writ, what the respondent Judge should have done was to
determine, through a hearing, whether the allegations of fraud were
true. As further held in Cosiquien:
"When a judge issues a writ of preliminary
attachment ex-parte, it is incumbent on him, upon
proper challenge of his order to determine whether
or not the same was improvidently issued. If the
party against whom the writ is prayed for squarely
controverts the allegation of fraud, it is incumbent
on the applicant to prove his allegation. The burden
of proving that there indeed was fraud lies with the
party making such allegation. This finds support in
Section 1, Rule 131 Rules of Court. In this
jurisdiction, fraud is never presumed." (Emphasis
supplied)
As correctly noted by Wolfe, although Sec. 1 of Rule 57 allows
a party to invoke fraud as a ground for the issuance of a writ of
attachment, the Rules require that in all averments of fraud, the
circumstances constituting fraud must be stated with particularity,
pursuant to Rule 8, Section 5. The Complaint merely stated, in
paragraph 23 thereof that "For failing to pay the use [of] facilities and
services — in the form of boat storage fees, the Defendant is clearly
guilty of fraud which entitles the Plaintiff to a Writ of Preliminary
Attachment upon the property of the Defendant as security for the
satisfaction of any judgment herein." This allegation does not
constitute fraud as contemplated by law, fraud being the "generic term
embracing all multifarious means which human ingenuity can devise,
and which are resorted to by one individual to secure an advantage
over another by false suggestions or by suppression of truth and
includes all surprise, trick, cunning, dissembling and any unfair way
by which another is cheated." In this instance, Wolfe's mere failure to
pay the boat storage fees does not necessarily amount to fraud, absent
any showing that such failure was due to [insidious] machinations and
intent on his part to defraud Watercraft of the amount due it. 
As to the allegation that Wolfe is a flight risk, thereby
warranting the issuance of the writ, the same lacks merit. The mere
fact that Wolfe is a British national does not automatically mean that
he would leave the country at will. As Wolfe avers, he and his family
had been staying in the Philippines since 1997, with his daughters
studying at a local school. He also claims to be an existing stockholder
and officer of Wolfe Marine Corporation, a SEC-registered
corporation, as well as a consultant of projects in the Subic Area, a
member of the Multipartite Committee for the new port development
in Subic, and a member of the Subic Chamber of Commerce. More
 importantly, Wolfe has a pending labor case against Watercraft — a
fact which the company glaringly failed to mention in its complaint —
which Wolfe claims to want to prosecute until its very end. The said
circumstances, as well as the existence of said labor case where Wolfe
stands not only to be vindicated for his alleged illegal dismissal, but
also to receive recompense, should have convinced the trial court that
Wolfe would not want to leave the country at will just because a suit
for the collection of the alleged unpaid boat storage fees has been filed
against him by Watercraft.
Neither should the fact that Wolfe's Special Working Visa
expired in April 2005 lead automatically to the conclusion that he
would leave the country. It is worth noting that all visas issued by the
government to foreigners staying in the Philippines have expiration
periods. These visas, however, may be renewed, subject to the
requirements of the law. In Wolfe's case, he indeed renewed his visa,
as shown by Special Working Visa No. 05-WV-0124P issued by the
Subic Bay Metropolitan Authority Visa Processing Office on April 25,
2005, and with validity of two (2) years therefrom. Moreover,
his  Alien Certificate of Registration was valid up to May 11, 2006.  cDHAES

Based on the foregoing, it is therefore clear that the writ was

improvidently issued. It is well to emphasize that "[T]he rules on the
issuance of a writ of attachment must be construed strictly against the
applicants. This stringency is required because the remedy of
attachment is harsh, extraordinary and summary in nature. If all the
requisites for the granting of the writ are not present, then the court
which issues it acts in excess of its jurisdiction. Thus, in this case,
Watercraft failed to meet all the requisites for the issuance of the writ.
Thus, in granting the same, respondent Judge acted with grave abuse
of discretion. 6
In a Resolution dated January 24, 2008, the CA denied Watercraft's
motion for reconsideration of its Decision, there being no new or significant
issues raised in the motion.
Dissatisfied with the CA Decision and Resolution, Watercraft filed this
petition for review on certiorari, raising these two issues:
I.
WHETHER THE EX-PARTE ISSUANCE OF THE PRELIMINARY
ATTACHMENT BY THE TRIAL COURT IN FAVOR OF THE
PETITIONER IS VALID.  TCAScE

II.
WHETHER THE ALLEGATIONS IN THE AFFIDAVIT OF MERIT
CONCERNING FRAUD ARE SUFFICIENT TO WARRANT THE
ISSUANCE OF A PRELIMINARY WRIT OF ATTACHMENT BY
THE TRIAL COURT IN FAVOR OF THE PETITIONER. 7
 Watercraft argues that the CA erred in holding that the RTC committed
grave abuse of discretion in issuing the writ of preliminary attachment, and in
finding that the affidavit of merit only enumerated circumstances tending to
show the possibility of Wolfe's flight from the country, but failed to show
fraudulent intent on his part to defraud the company.
Stressing that its application for such writ was anchored on two (2)
grounds under Section 1, 8 Rule 57, Watercraft insists that, contrary to the CA
ruling, its affidavit of merit sufficiently averred with particularity the
circumstances constituting fraud as a common element of said grounds.
Watercraft points out that its affidavit of merit shows that from 1997,
soon after Wolfe's employment as Shipyard Manager, up to 2002, when his
employment was terminated, or for a period of five (5) years, not once did he
pay the cost for the use of the company's boat storage facilities, despite
knowledge of obligation and obvious ability to pay by reason of his position.
Watercraft adds that its affidavit clearly stated that Wolfe, in an attempt
to avoid settling of his outstanding obligations to the company, signed a Boat
Pull-Out Clearance where he merely acknowledged but did not pay Sixteen
Thousand Three Hundred and Twenty-Four and 82/100 US Dollars
(US$16,324.82) representing unpaid boat storage fees for the period
commencing June 1997 to June 2002. It avers that the execution of such
clearance enabled Wolfe to pull out his boat from the company storage
facilities without payment of storage fees. 
Watercraft also faults the CA in finding no merit in its allegation that
Wolfe is a flight risk. It avers that he was supposed to stay and work in the
country for a limited period, and will eventually leave; that despite the fact that
his wife and children reside in the country, he can still leave with them
anytime; and that his work in the country will not prevent him from leaving,
thereby defeating the purpose of the action, especially since he had denied
responsibility for his outstanding obligations. It submits that the CA
overlooked paragraph 28 of its Complaint which alleged that "[i]n support of
the foregoing allegations and the prayer for the issuance of a Writ of
Preliminary Attachment in the instant case, the Plaintiff has attached hereto the
Affidavit of the Vice-President of the Plaintiff, MS. ROSARIO E. RAÑOA . . .
." 9
Watercraft asserts that it has sufficiently complied with the only
requisites for the issuance of the writ of preliminary attachment under Section
3, Rule 57 of the Rules of Court, i.e., affidavit of merit and bond of the
applicant. It posits that contrary to the CA ruling, there is no requirement that
evidence must first be offered before a court can grant such writ on the basis of
Section 1 (d) of Rule 57, and that the rules only require an affidavit showing
that the case is one of those mentioned in Section 1, Rule 57. It notes that
although a party is entitled to oppose an application for the issuance of the writ
or to move for the discharge thereof by controverting the allegations of fraud,
such rule does not apply when the same allegations constituting fraud are the
very facts disputed in the main action, as in this case.
Watercraft also points out the inconsistent stance of Wolfe with regard
to the ownership and possession of the sailboat. Contrary to Wolfe's Answer
that the purchase of the sailboat was made pursuant to a three (3)-way
partnership agreement between him and its General Manager and Executive
Vice-President, Barry Bailey, and its President, Ricky Sandoval, Watercraft
claims that he made a complete turnaround and exhibited acts of sole-
ownership by signing the Boat Pull-Out Clearance in order to retrieve the
sailboat. It argues that common sense and logic would dictate that he should
have invoked the existence of the partnership to answer the demand for
payment of the storage fees.
Watercraft contends that in order to pre-empt whatever action it may
decide to take with respect to the sailboat in relation to his liabilities, Wolfe
accomplished in no time the clearance that paved the way for its removal from
the company's premises without paying his outstanding obligations. It claims
that such act reveals a fraudulent intent to use the company storage facilities
without payment of storage fees, and constitutes unjust enrichment.
The petition lacks merit. 
cTDaEH

A writ of preliminary attachment is defined as a provisional remedy

issued upon order of the court where an action is pending to be levied upon the
property or properties of the defendant therein, the same to be held thereafter
by the sheriff as security for the satisfaction of whatever judgment that might
be secured in the said action by the attaching creditor against the
defendant. 10 However, it should be resorted to only when necessary and as a
last remedy because it exposes the debtor to humiliation and annoyance. 11 It
must be granted only on concrete and specific grounds and not merely on
general averments quoting the words of the rules. 12 Since attachment is harsh,
extraordinary, and summary in nature, 13 the rules on the application of a writ
of attachment must be strictly construed in favor of the defendant.
For the issuance of an ex-parte issuance of the preliminary attachment
to be valid, an affidavit of merit and an applicant's bond must be filed with the
court 14 in which the action is pending. Such bond executed to the adverse
party in the amount fixed by the court is subject to the conditions that the
applicant will pay: (1) all costs which may be adjudged to the adverse party;
and (2) all damages which such party may sustain by reason of the attachment,
if the court shall finally adjudge that the applicant was not entitled
thereto. 15 As to the requisite affidavit of merit, Section 3, 16 Rule 57 of
the Rules of Court states that an order of attachment shall be granted only
when it appears in the affidavit of the applicant, or of some other person who
personally knows the facts:
1. that a sufficient cause of action exists;
2. that the case is one of those mentioned in Section 1 17 hereof;
3. that there is no other sufficient security for the claim sought to be
enforced by the action; and
4. that the amount due to the applicant, or the value of the property the
possession of which he is entitled to recover, is as much as the
sum for which the order is granted above all legal counterclaims.
The mere filing of an affidavit reciting the facts required by Section 3,
Rule 57, however, is not enough to compel the judge to grant the writ of
preliminary attachment. Whether or not the affidavit sufficiently established
facts therein stated is a question to be determined by the court in the exercise of
its discretion. 18 "The sufficiency or insufficiency of an affidavit depends upon
the amount of credit given it by the judge, and its acceptance or rejection, upon
his sound discretion." 19 Thus, in reviewing the conflicting findings of the CA
and the RTC on the pivotal issue of whether or not Watercraft's affidavit of
merit sufficiently established facts which constitute as grounds upon which
attachment may be issued under Section 1 (a) 20 and (d), 21 Rule 57, the Court
will examine the Affidavit of Preliminary Attachment 22 of Rosario E. Rañoa,
its Vice-President, which reiterated the following allegations in its complaint to
substantiate the application for a writ of preliminary attachment:
xxx xxx xxx
4. Sometime in June 1997, the Defendant was hired as Watercraft's
Shipyard Manager.
5. Soon thereafter, the Defendant placed his sailboat, the Knotty
Gull, within the boat storage facilities of Watercraft for purposes of
storage and safekeeping. 
6. Despite having been employed by Watercraft, the Defendant was
not exempted from paying Watercraft boat storage fees for the use of
the said storage facilities.
7. By virtue of his then position and employment with Watercraft, the
Defendant was very much knowledgeable of the foregoing fact.
8. All throughout his employment with Watercraft, the Defendant used
the boat storage facilities of Watercraft for his Knotty Gull.
9. However, all throughout the said period of his employment, the
Defendant never paid the boat storage fees in favor of the Plaintiff.
10. The Defendant's contract of employment with Watercraft was
terminated on 07 March 2002.
11. [Sometime] thereafter, that is, in or about June 2002, the
Defendant pulled out the  Knotty Gull from the boat storage facilities
of Watercraft.
12. Instead of settling in full his outstanding obligations concerning
unpaid storage fees before pulling our the Knotty Gull, the Defendant
signed a Boat Pull-Out Clearance dated 29 June 2002 wherein he
merely acknowledged the then outstanding balance of Sixteen
Thousand Three Hundred and Twenty-four and 82/100 US Dollars
(US$16,324.82), representing unpaid boat storage fees for the period
commencing June 1997 to June 2002, that he owed Watercraft.
13. By reason of Defendant's mere accomplishment of the said Boat
Pull-Out Clearance with acknowledgment of his outstanding
obligation to Watercraft in unpaid boat storage fees, Mr. Franz
Urbanek, then the Shipyard Manager who replaced the Defendant,
contrary to company policy, rules and regulations, permitted the latter
to physically pull out his boat from the storage facilities of the Plaintiff
without paying any portion of his outstanding obligation in storage
fees.
14. Several demands were then made upon the Defendant for him to
settle his outstanding obligations to the Plaintiff in unpaid storage fees
but the same went unheeded.
15. As of 02 April 2005, the outstanding obligation of the Defendant to
the Plaintiff in unpaid boat storage fees stands at Three Million Two
Hundred Thirty-One Thousand Five Hundred and Eighty-Nine and
25/100 Pesos (Php3,231,589.25) inclusive of interest charges.
16. For failing to pay for the use [of] facilities and services — in the
form of boat storage facilities — duly enjoyed by him and for failing
and refusing to fulfill his promise to pay for the said boat storage fees,
the Defendant is clearly guilty of fraud which entitles the Plaintiff to
a Writ of Preliminary Attachment upon the property of the Defendant
as security for the satisfaction of any judgment in its favor in
accordance with the provisions of Paragraph (d), Section 1, Rule 57 of
the Rules of Court. cSaATC

17. The instant case clearly falls under the said provision of law.
18. Furthermore, lawful factual and legal grounds exist which show
that the Defendant may have departed or is about to depart the
country to defraud his creditorsthus rendering it imperative that a
Writ of Preliminary Attachment be issued in favor of the Plaintiff in
the instant case.
19. The possibility of flight on the part of the Defendant is heightened
by the existence of the following circumstances:
a. The Special Working Visa issued in favor of the
Defendant expired in April 2005;
 b. The Defendant is a British national who may easily
leave the country at will;
c. The Defendant has no real properties and visible,
permanent business or employment in the Philippines;
and
e. The house last known to have been occupied by the
Defendant is merely being rented by him.
20. All told, the Defendant is a very serious flight risk which fact will
certainly render for naught the capacity of the Plaintiff to recover in
the instant case. 23
After a careful perusal of the foregoing allegations, the Court agrees
with the CA that Watercraft failed to state with particularity the circumstances
constituting fraud, as required by Section 5, 24 Rule 8 of the Rules of Court,
and that Wolfe's mere failure to pay the boat storage fees does not necessarily
amount to fraud, absent any showing that such failure was due to insidious
machinations and intent on his part to defraud Watercraft of the amount due it.
In Liberty Insurance Corporation v. Court of Appeals, 25 the Court
explained that to constitute a ground for attachment in Section 1 (d), Rule 57 of
the Rules of Court, it must be shown that the debtor in contracting the debt or
incurring the obligation intended to defraud the creditor. A debt is fraudulently
contracted if at the time of contracting it, the debtor has a preconceived plan or
intention not to pay. "The fraud must relate to the execution of the agreement
and must have been the reason which induced the other party into giving
consent which he would not have otherwise given." 26
Fraudulent intent is not a physical entity, but a condition of the mind
beyond the reach of the senses, usually kept secret, very unlikely to be
confessed, and therefore, can only be proved by unguarded expressions,
conduct and circumstances. 27 Thus, 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. 28 The particulars
of such circumstances necessarily include the time, persons, places and specific
acts of fraud committed. 29 An affidavit which does not contain concrete and
specific grounds is inadequate to sustain the issuance of such writ. In fact, mere
general averments render the writ defective and the court that ordered its
issuance acted with grave abuse of discretion amounting to excess of
jurisdiction. 30
In this case, Watercraft's Affidavit of Preliminary Attachment does not
contain specific allegations of other factual circumstances to show that Wolfe,
at the time of contracting the obligation, had a preconceived plan or intention
not to pay. Neither can it be inferred from such affidavit the particulars of why
he was guilty of fraud in the performance of such obligation. To be specific,
Watercraft's following allegation is unsupported by any particular averment of
circumstances that will show why or how such inference or conclusion was
arrived at, to wit: "16. For failing to pay for the use [of] facilities and services
— in the form of boat storage facilities — duly enjoyed by him and for failing
and refusing to fulfill his promise to pay for the said boat storage fees, the
Defendant is clearly guilty of fraud . . . ." 31 It is not an allegation of essential
facts constituting Watercraft's causes of action, but a mere conclusion of law.
With respect to Section 1 (a), 32 Rule 57, the other ground invoked by
Watercraft for the issuance all the writ of preliminary attachment, the Court
finds no compelling reason to depart from the CA's exhaustive ruling to the
effect that such writ is unnecessary because Wolfe is not a flight risk, thus:
As to the allegation that Wolfe is a flight risk, thereby
warranting the issuance of the writ, the same lacks merit. The mere
fact that Wolfe is a British national does not automatically mean that
he would leave the country at will. As Wolfe avers, he and his family
had been staying in the Philippines since 1997, with his daughters
studying at a local school. He also claims to be an existing stockholder
and officer of Wolfe Marine Corporation, a SEC-registered
corporation, as well as a consultant of projects in the Subic Area, a
member of the Multipartite Committee for the new port development
in Subic, and a member of the Subic Chamber of Commerce. More
importantly, Wolfe has a pending labor case against Watercraft — a
fact which the company glaringly failed to mention in its complaint —
which Wolfe claims to want to prosecute until its very end. The said
circumstances, as well as the existence of said labor case where Wolfe
stands not only to be vindicated for his alleged illegal dismissal, but
also to receive recompense, should have convinced the trial court that
Wolfe would not want to leave the country at will just because a suit
for the collection of the alleged unpaid boat storage fees has been filed
against him by Watercraft. cHDAIS

Neither should the fact that Wolfe's Special Working Visa

expired in April 2005 lead automatically to the conclusion that he
would leave the country. It is worth noting that all visas issued by the
government to foreigner staying in the Philippines have expiration
periods. These visas, however, may be renewed, subject to the
requirements of the law. In Wolfe's case, he indeed renewed his visa,
as shown by Special Working Visa No. 05-WV-0124P issued by the
Subic Bay Metropolitan Authority Visa Processing Office on April 25,
2005, and with validity of two (2) years therefrom. Moreover,
his  Alien Certificate of Registration was valid up to May 11, 2006. 33
Meanwhile, Watercraft's reliance on Chuidian v. Sandiganbayan  34 is
misplaced. It is well settled that:
 . . . when the preliminary attachment is issued upon a ground
which is at the same time the applicant's cause of action; e.g., "an
action for money or property embezzled or fraudulently misapplied or
converted to his own use by a public officer, or an officer of a
corporation, or an attorney, factor, broker, agent, or clerk, in the course
of his employment as such, or by any other person in a fiduciary
capacity, or for a willful violation of duty," or "an action against a
party who has been guilty of fraud in contracting the debt or incurring
the obligation upon which the action is brought," the defendant is not
allowed to file a motion to dissolve the attachment under Section
13 of Rule 57 by offering to show the falsity of the factual
averments in the plaintiff's application and affidavits on which the
writ was based — and consequently that the writ based thereon
had been improperly or irregularly issued — the reason being that
the hearing on such a motion for dissolution of the writ would be
tantamount to a trial of the merits of the action. In other words, the
merits of the action would be ventilated at a mere hearing of a motion,
instead of at the regular trial. 35
Be that as it may, the foregoing rule is not applicable in this case
because when Wolfe filed a motion to dissolve the writ of preliminary
attachment, he did not offer to show the falsity of the factual averments in
Watercraft's application and affidavit on which the writ was based. Instead, he
sought the discharge of the writ on the ground that Watercraft failed to
particularly allege any circumstance amounting to fraud. No trial on the merits
of the action at a mere hearing of such motion will be had since only the
sufficiency of the factual averments in the application and affidavit of merit
will be examined in order to find out whether or not Wolfe was guilty of fraud
in contracting the debt or incurring the obligation upon which the action is
brought, or in the performance thereof.  EATCcI

Furthermore, the other ground upon which the writ of preliminary

attachment was issued by the RTC is not at the same time the applicant's cause
of action. Assumingarguendo that the RTC was correct in issuing such writ on
the ground that Watercraft's complaint involves an action for the recovery of a
specified amount of money or damages against a party, like Wolfe, who is
about to depart from the Philippines with intent to defraud his creditors, the
Court stresses that the circumstances 36 cited in support thereof are merely
allegations in support of its application for such writ. 37 Such circumstances,
however, are neither the core of Watercraft's complaint for collection of sum of
money and damages, nor one of its three (3) causes of action therein. 38
All told, the CA correctly ruled that Watercraft failed to meet one of the
requisites for the issuance of a writ of preliminary attachment, i.e., that the
case is one of those mentioned in Section 1 of Rule 57, and that the RTC
gravely abused its discretion in improvidently issuing such writ. Watercraft
 failed to particularly state in its affidavit of merit the circumstances
constituting intent to defraud creditors on the part of Wolfe in contracting or in
the performance of his purported obligation to pay boat storage fees, as well as
to establish that he is a flight risk. Indeed, if all the requisites for granting such
writ are not present, then the court which issues it acts in excess of its
jurisdiction. 39
WHEREFORE, premises considered, the petition is DENIED. The
Court of Appeals Decision dated September 27, 2007 and its Resolution dated
January 24, 2008 in CA-G.R. SP No. 97804, are AFFIRMED.
SO ORDERED.  DHITC

|||  (Watercraft Venture Corp. v. Wolfe, G.R. No. 181721, [September 9, 2015])

SECOND DIVISION

[G.R. No. 179257. November 23, 2015.]

UNITED ALLOY PHILIPPINES

CORPORATION, petitioner, vs. UNITED COCONUT
PLANTERS BANK [UCPB] and/or PHILIPPINE DEPOSIT
INSRURANCE CORPORATION [PDIC], JAKOB VAN DER
SLUIS and ROBERT T. CHUA, respondents.

DECISION

DEL CASTILLO, J  : p

"[T]he dismissal of the principal action . . . [carries] with it the denial,

disallowance or revocation of all reliefs ancillary to the main remedy sought in
that action." 1 
cDSAEI

Challenged in this Petition for Review on Certiorari 2 is the August 17,

2007 Decision 3 of the Court of Appeals, Cagayan de Oro City Station (CA
CDO) in CA-G.R. SP No. 67079 dismissing petitioner United Alloy
Philippines Corporation's (UniAlloy) Petition
for Certiorari and Mandamus filed therewith. In said Petition, UniAlloy sought
to nullify the Orders dated September 13 4 and 14, 5 2001 of the Regional Trial
Court (RTC), Branch 40, Cagayan de Oro City in Civil Case No. 2001-219 that
dismissed its Complaint for Annulment and/or Reformation of Contract and
Damages with Prayer for A Writ of Preliminary Injunction or Temporary
Restraining Order (TRO) 6 and ordered it to surrender the possession of the
disputed premises to respondent United Coconut Planters Bank (UCPB).
Factual Antecedents
UniAlloy is a domestic corporation engaged in the business of
manufacturing and trading on wholesale basis of alloy products, such as
ferrochrome, ferrosilicon and ferromanganese. It has its principal office and
business address at Phividec Industrial Area, Tagaloan, Misamis Oriental.
Respondent UCPB, on the other hand, is a banking corporation while
respondent Robert T. Chua (Chua) is one of its Vice-Presidents. Respondent
Jakob Van Der Sluis is a Dutch citizen and was the Chairman of UniAlloy.
Respondent Philippine Deposit Insurance Corporation is the assignee-in-
interest of UCPB as regards the loan account of UniAlloy. 
On September 10, 1999, UniAlloy and UCPB entered into a Lease
Purchase Agreement 7 (LPA) wherein UniAlloy leased from UCPB several
parcels of land with a total area of 156,372 square meters located in Barangay
Gracia, Tagoloan, Misamis Oriental. 8 The three-year lease commenced on
August 1, 1999 to run until July 31, 2002 for a monthly rent of P756,700.00.
The parties stipulated that upon the expiration of the lease, UniAlloy shall
purchase the leased properties for P300 million to be paid on staggered basis.
UniAlloy also obtained loans from UCPB.  SIcCTD

On August 27, 2001, however, UniAlloy filed the aforesaid

Complaint 9 against respondents. It claimed that, thru misrepresentation and
manipulation, respondent Jakob Van Der Sluis took full control of the
management and operation of UniAlloy; that respondents connived with one
another to obtain fictitious loans purportedly for UniAlloy as evidenced by
Promissory Note Nos. 8111-00-00110-6, 8111-00-20031-1, and 8111-01-
20005-6 for P6 million, US$10,000.00, and US$320,000.00, respectively; that
UCPB demanded payment of said loans; and, that UCPB unilaterally rescinded
the LPA. UniAlloy prayed that judgment be issued: (i) ordering the annulment
and/or reformation of the three Promissory Notes; (ii) nullifying UCPB's
unilateral rescission of the LPA; (iii) enjoining UCPB from taking possession
of the leased premises; and (iv) ordering respondents to jointly and severally
pay nominal and exemplary damages, as well as attorney's fees of P500,000.00
each. As ancillary relief, UniAlloy prayed for the issuance of a temporary
restraining order and/or writ of preliminary injunction.
On the same day, the Executive Judge of the RTC, Cagayan de Oro City
issued a 72-hour TRO directing UCPB to cease and desist from taking
possession of the disputed premises. 10 The following day, respondent Jakob
Van Der Sluis filed a Motion to Dismiss and Opposition to the Application for
Injunction or TRO 11 on the grounds of improper venue, forum-
shopping, 12 litis pendentia, and for being a harassment suit under the Interim
Rules of Procedure for Intra-Corporate Cases. He argued that the LPA
specifically provides that any legal action arising therefrom should be brought
exclusively in the proper courts of Makati City. The Complaint did not disclose
the pendency of Civil Case No. 2001-156 entitled "Ernesto Paraiso and
United Alloy Philippines Corporation v. Jakob Van Der Sluis" before Branch
40, as well as CA-G.R. SP No. 66240 entitled "Jakob Van Der Sluis v.
Honorable Epifanio T. Nacaya, et al." He further averred that what UniAlloy
sought to enjoin is already fait accompli. 
Respondents UCPB and Chua, on the other hand, filed a Motion to
Dismiss & Motion to Recall Temporary Restraining Order. 13 In addition to the
ground of improper venue, they raised the issue of lack of authority of the
person who verified the Complaint as no secretary's certificate or a board
resolution was attached thereto.
During the hearing on the writ of preliminary injunction on August 30,
2001, the RTC directed the parties to maintain the status quo by not disturbing
the possession of the present occupants of the properties in question pending
resolution of respondents' motions. aTcSID

On September 13, 2001, the RTC, acting as Special Commercial Court,

issued an Order 14 granting the motions to dismiss and ordering the dismissal
of the case on the grounds of improper venue, forum-shopping and for being a
harassment suit. The RTC held that venue was improperly laid considering that
the Promissory Notes sought to be annulled were issued pursuant to a Credit
Agreement which, in turn, stipulates that any legal action relating thereto shall
be initiated exclusively in the proper courts of Makati City. It also opined that
UniAlloy committed forum-shopping for failing to disclose in its certificate of
non-forum-shopping the pendency of Civil Case No. 2001-156 which involves
the same parties, the same transactions and the same essential facts and
circumstances. The cases, as ruled by the RTC, have also identical causes of
action, subject matter and issues. The dispositive portion of the September 13,
2001 Order reads:
ACCORDINGLY, finding meritorious that the venue is
improperly laid and the complain[an]t engaged in forum-shopping and
harassment of defendant Jakob Van der Sluis, this case is hereby
DISMISSED rendering the prayer for issuance of a writ of preliminary
injunction moot and academic, and ordering plaintiff to turn over
possession of the subject premises of the properties in question at
Barangay Gracia, Tagoloan, Misamis Oriental to defendant United
Coconut Planters Bank. 
SO ORDERED. 15
Upon UCPB's motion, the RTC issued another Order 16 dated
September 14, 2001 directing the issuance of a writ of execution to enforce its
September 13, 2001 Order. Accordingly, a Writ of Execution 17 was issued
directing the Sheriff to put UCPB in possession of the disputed premises. It
was satisfied on September 17, 2001. 18 The employees of UniAlloy were
evicted from the leased premises and UCPB's representatives were placed in
possession thereof.
On September 25, 2001, UniAlloy received copies of the RTC
Orders. 19 And on October 9, 2001, it filed with the Court of Appeals, Manila
Station (CA Manila) its petition in CA-G.R. SP No. 67079 attributing grave
abuse of discretion on the part of the court a quo in (i) dismissing its petition
on the grounds of improper venue, forum-shopping and harassment, (ii)
ordering the turnover of the property in question to UCPB after the dismissal of
the Complaint, and (iii) applying the Interim Rules of Procedure for Intra-
corporate Controversies.
On October 18, 2001, the CA Manila issued a TRO. After hearing, the
CA Manila issued a Resolution 20 dated February 18, 2002 granting UniAlloy's
ancillary prayer for the issuance of a writ of preliminary injunction upon
posting of a bond in the amount of P300,000.00.  CDHaET

UniAlloy posted the requisite bond.

However, no writ of preliminary injunction was actually issued by the
CA Manila because of this Court's March 18, 2002 Resolution 21 in G.R. No.
152238 restraining it from enforcing its February 18, 2002 Resolution. G.R.
No. 152238 is a Petition for Certiorari initiated by UCPB assailing said
Resolution of CA Manila. And, in deference to this Court, the CA Manila
refrained from taking further action in CA-G.R. SP No. 67079 until G.R. No.
152238 was resolved. 22
On January 28, 2005, this Court rendered its Decision 23 in G.R. No.
152238 finding no grave abuse of discretion on the part of the CA in issuing its
February 18, 2002 Resolution and, consequently, denying UCPB's petition.
Thereafter, and since this Court's Decision in G.R. No. 152238 attained
finality, UniAlloy filed with the CA Manila a Motion to Issue and Implement
Writ of Preliminary Mandatory Injunction. 24 In the meantime, the records of
CA-G.R. SP No. 67079 were forwarded to CA CDO pursuant to Republic Act
No. 8246. 25
On May 31, 2006, the CA CDO issued a Resolution 26 denying
UniAlloy's motion. It found that UniAlloy had lost its right to remain in
possession of the disputed premises because it defaulted in the payment of
lease rentals and it was duly served with a notice of extrajudicial termination of
the LPA. Said court also found that UniAlloy vacated the leased premises and
UCPB was already in actual physical possession thereof as of August 24, 2001,
or three days before UniAlloy filed its complaint with the RTC. Hence, it could
 no longer avail of the remedy of preliminary injunction to regain possession of
the disputed premises.
UniAlloy filed a Motion for Reconsideration, 27 which was denied in
the CA CDO's November 29, 2006 Resolution. 28  HASDcC

On August 17, 2007, the CA CDO issued the assailed Decision denying
UniAlloy's petition and affirming the RTC's questioned Orders. It opined inter
alia that UniAlloy erred in resorting to a Rule 65 petition because its proper
recourse should have been to appeal the questioned Orders of the RTC, viz.:
 
It is plain from the record, though, that Unialloy had lost its
right to appeal. The time to make use of that remedy is gone. It is
glaringly obvious that Unialloy resorted to this extraordinary remedy
of certiorari and mandamus as a substitute vehicle for securing a
review and reversal of the questioned order of dismissal which it had,
by its own fault, allowed to lapse into finality. Unfortunately, none of
the arguments and issues raised by Unialloy in its petition can
adequately brand the 13 September 2001 Order as void on its face for
being jurisdictionally flawed, nor mask the fact that it became final
and executory by Unialloy's failure to file an appeal on time. And so,
even if the assailed order of dismissal might arguably not have been
entirely free from some errors in substance, or lapses in procedure or
in findings of fact or of law, and which on that account could have
been reversed or modified on appeal, the indelible fact, however is that
it was never appealed. It had become final and executory. It is now
beyond the power of this Court to modify it. 29
Hence, this Petition raising the following issues for Our resolution:
1. Whether the Court of Appeals (Cagayan de Oro City) erred, or acted
without, or in excess of jurisdiction, or committed grave abuse of
discretion amounting to lack, or excess of jurisdiction in
DENYING United Alloy's Motion to Issue and Implement Writ
of Preliminary Mandatory Injunction in this case, DESPITE the
earlier resolution dated February 18, 2002 issued by the same
Court of Appeals (Manila) of coordinate and co-equal
jurisdiction which granted United Alloy's Motion for Issuance of
Preliminary Injunction upon bond of P300,000.00, and DESPITE
this Honorable Court's decision dated January 28, 2005 in
the certiorari case G.R. No. 152238 filed by UCPB to assail the
Court of Appeals's Resolution of February 18, 2002, which
decision sustained the said resolution of February 18, 2002, and
DENIED UCPB's petition in said G.R. No. 152238.  STaAcC
  As sub-issue — Whether the Court of Appeals (Cagayan de Oro City)
disregarded the rule that every court must take cognizance of
decisions the Supreme Court has rendered, because they are
proper subjects of mandatory judicial notice. The said decisions
more importantly, form part of the legal system, and failure of
any court to apply them shall constitute an abdication of its duty
to resolve a dispute in accordance with law and shall be a ground
for administrative action against an inferior court magistrate . . .
2. Whether . . . the Court of Appeals (Cagayan de Oro City) decided this
case in accord with law and the evidence, and so far departed
from the accepted and usual course of judicial proceedings as to
call for an exercise of the supervisory power of this Honorable
Court, and to entitle this petition to allowance and the review
sought in this case. 30
Issue
The basic issue to be resolved in this case is whether the CA CDO erred
in dismissing UniAlloy's Petition for Certiorari and Mandamus. For if the said
court did not commit an error then it would be pointless to determine whether
UniAlloy is entitled to a writ of preliminary injunction pursuant to CA Manila's
February 18, 2002 Resolution which was issued as a mere ancillary remedy in
said petition. 
Our Ruling
The Petition is devoid of merit.
Before delving on the focal issue, the Court shall first pass upon some
procedural matters.
UniAlloy availed of the proper remedy
in assailing the RTC's September 13,
2001 Order dismissing its Complaint.  EISCaD

In its Comment, 31 UCPB defends the CA CDO in denying due course

to UniAlloy's Petition for Certiorari and Mandamus. It posits that UniAlloy
should have filed with the RTC a Notice of Appeal from the Order dated
September 13, 2001 instead of a Rule 65 petition before the CA, Respondents
Jakob Van der Sluis and Chua echo UCPB's contention that UniAlloy resorted
to a wrong mode of remedy and that the dismissal of its complaint had become
final and executory which, in turn, rendered UniAlloy's Rule 65 petition before
the CA moot and academic. 32
In its Consolidated Reply, 33 UniAlloy counter-argues that it filed a
Rule 65 petition with the CA because the remedy of appeal is inadequate as the
RTC had already directed the issuance of a writ of execution and that the RTC
Orders are patently illegal.
UniAlloy availed of the correct remedy. Under Section 1 Rule 16 of
the Rules of Court,the following may be raised as grounds in a motion to
dismiss:
SECTION 1. Grounds. — Within the time for but before filing
the answer to the complaint or pleading asserting a claim, a motion to
dismiss may be made on any of the following grounds: 
(a) That the court has no jurisdiction over the person of the
defending party;
(b) That the court has no jurisdiction over the subject matter of
the claim;
(c) That venue is improperly laid;
(d) That the plaintiff has no legal capacity to sue;
(e) That there is another action pending between the same
parties for the same cause;
(f) That the cause of action is barred by a prior judgment or by
the statute of limitations;
(g) That the pleading asserting the claim states no cause of
action;
(h) That the claim or demand set forth in the plaintiff's pleading
has been paid, waived, abandoned, or otherwise extinguished;
(i) That the claim on which the action is founded is
unenforceable under the provisions of the statute of frauds; and
(j) That a condition precedent for filing the claim has not been
complied with.  EHCcIT

Except for cases falling under paragraphs (f), (h), or (i), the dismissal of
an action based on the above-enumerated grounds is without prejudice and
does not preclude the refiling of the same action. And, under Section 1 (g) of
Rule 41, 34 an order dismissing an action without prejudice is not appealable.
The proper remedy therefrom is a special civil action for certiorari under Rule
65. 35 But, if the reason for the dismissal is based on paragraphs (f), (h), or (i)
(i.e., res judicata, prescription, extinguishment of the claim or demand, and
unenforceability under the Statute of Frauds) the dismissal, under Section
5, 36 of Rule 16, is with prejudice and the remedy of the aggrieved party is to
appeal the order granting the motion to dismiss. 
Here, the dismissal of UniAlloy's Complaint was without prejudice. The
September 13, 2001 Order of the RTC dismissing UniAlloy's Complaint was
based on the grounds of improper venue, forum-shopping and for being a
harassment suit, which do not fall under paragraphs (f), (h), or (i) of Section 1,
Rule 16. Stated differently, none of the grounds for the dismissal of UniAlloy's
Complaint is included in Section 5 of Rule 16 of the Rules of Court. Hence,
since the dismissal of its Complaint was without prejudice, the remedy then
available to UniAlloy was a Rule 65 petition.
CA CDO did not err in affirming the
dismissal of UniAlloy's Complaint on
the grounds of improper venue, forum-
shopping and for being a harassment
suit.
The RTC was correct in dismissing UniAlloy's Complaint on the ground
of improper venue. In general, personal actions must be commenced and tried
(i) where the plaintiff or any of the principal plaintiffs resides, (ii) where the
defendant or any of the principal defendants resides, or (iii) in the case of a
non-resident defendant where he may be found, at the election of the
plaintiff. 37 Nevertheless, the parties may agree in writing to limit the venue of
future actions between them to a specified place. 38 aCTHDA

In the case at bench, paragraph 18 of the LPA expressly provides that

"[a]ny legal action arising out of or in connection with this Agreement shall be
brought exclusively in the proper courts of Makati City, Metro
Manila." 39 Hence, UniAlloy should have filed its complaint before the RTC of
Makati City, and not with the RTC of Cagayan de Oro City.
But to justify its choice of venue, UniAlloy insists that the subject
matter of its Complaint in Civil Case No. 2001-219 is not the LPA, but the
fictitious loans that purportedly matured on April 17, 2001. 40
UniAlloy's insistence lacks merit. Its Complaint unequivocally sought to
declare "as null and void the unilateral rescission made by defendant UCPB of
its subsisting Lease Purchase Agreement with [UniAlloy]." 41 What UCPB
unilaterally rescinded is the LPA and without it there can be no unilateral
rescission to speak of. Hence, the LPA is the subject matter or at least one of
the subject matters of the Complaint. Moreover, and to paraphrase the
aforecited paragraph 18 of the LPA, as long as the controversy arises out of or
is connected therewith, any legal action should be filed exclusively before the
proper courts of Makati City. Thus, even assuming that the LPA is not the
main subject matter, considering that what is being sought to be annulled is an
act connected and inseparably related thereto, the Complaint should have been
filed before the proper courts in Makati City. 
With regard forum-shopping, our review of the records of this case
revealed that UniAlloy did not disclose in the Verification/Certification of the
Complaint the pendency of Civil Case No. 2001-156 entitled "Ernesto Paraiso
 and United Alloy Philippines Corporation v. Jakob Van Der Sluis." The trial
court took judicial notice of its pendency as said case is also assigned and
pending before it. Thus, we adopt the following unrebutted finding of the RTC:
These two civil cases have identical causes of action or issues against
defendant Jakob Van Der Sluis for having misrepresented to plaintiff and its
stockholders that he can extend financial assistance in running the operation of
the corporation, such that on April 6, 2001 plaintiff adopted a Stockholders
Resolution making defendant Jakob chairman of the corporation for having the
financial capability to provide the financial needs of plaintiff and willing to
finance the operational needs thereof; that a Memorandum of Agreement was
subsequently entered between the parties whereby defendant Jakob obligated to
provide sufficient financial loan to plaintiff to make it profitable; that
defendant Jakob maliciously and willfully reneged [on] his financial
commitments to plaintiff prompting the stockholders to call his attention and
warned him of avoiding the said agreement; that defendant who had then
complete control of plaintiff's bank account with defendant UCPB, through
fraudulent machinations and manipulations, was able to maliciously convince
David C. Chua to pre-sign several checks; that defendant Jakob facilitated
several huge loans purportedly obtained by plaintiff which defendant himself
could not even account and did not even pay the debts of the corporation but
instead abused and maliciously manipulated plaintiff's account.  ACcTDS

 
Forum-shopping indeed exists in this case, for both actions involve the
same transactions and same essential facts and circumstances as well as
identical causes of action, subject matter and issues. . . . 42
The dismissal of UniAlloy's main
action carries with it the dissolution of
any ancillary relief previously granted
therein.
UniAlloy argues that the CA CDO erred in denying its petition
considering that this Court has already sustained with finality the CA Manila's
February 18, 2002 Resolution granting its prayer for the issuance of a writ of
preliminary mandatory injunction. 
The contention is non sequitur.
"Provisional remedies [also known as ancillary or auxiliary remedies],
are writs and processes available during the pendency of the action which may
be resorted to by a litigant to preserve and protect certain rights and interests
pending rendition, and for purposes of the ultimate effects, of a final judgment
in the case. They are provisional because they constitute temporary measures
availed of during the pendency of the action, and they are ancillary because
they are mere incidents in and are dependent upon the result of the main
action." 43 One of the provisional remedies provided in the Rules of Court is
preliminary injunction, which may be resorted to by a litigant at any stage of an
action or proceeding prior to the judgment or final order to compel a party or a
court, agency or a person to refrain from doing a particular act or
acts. 44 In Bacolod City Water District v. Hon. Labayen, 45 this Court
elucidated that the auxiliary remedy of preliminary injunction persists only
until it is dissolved or until the termination of the main action without the court
issuing a final injunction, viz.:
. . . Injunction is a judicial writ, process or proceeding whereby a party
is ordered to do or refrain from doing a certain act, It may be the main
action or merely a provisional remedy for and as an incident in the
main action.  aATEDS

The main action for injunction is distinct from the provisional

or ancillary remedy of preliminary injunction which cannot exist
except only as part or an incident of an independent action or
proceeding. As a matter of course, in an action for injunction, the
auxillary remedy of preliminary injunction, whether prohibitory or
mandatory, may issue. Under the law, the main action for injunction
seeks a judgment embodying a final injunction which is distinct from,
and should not be confused with, the provisional remedy of
preliminary injunction, the sole object of which is to preserve the
status quo until the merits can be heard. A preliminary injunction is
granted at any stage of an action or proceeding prior to the judgment
or final order. It persists until it is dissolved or until the termination of
the action without the court issuing a final injunction. 46
Based on the foregoing, it is indubitably clear that the August 17, 2007
Decision of CA CDO dismissing UniAlloy's Petition
for Certiorari and Mandamus effectively superseded the February 18, 2002
Resolution of the CA Manila granting UniAlloy's ancillary prayer for the
issuance of a writ of preliminary injunction. It wrote finis not only to the main
case but also to the ancillary relief of preliminary injunction issued in the main
case. 
For the same reason, there is no merit in UniAlloy's contention that the
RTC grievously erred in ordering it to turn over the possession of the subject
premises to UCPB considering that the latter never prayed for it. As borne out
by the records of the case, UCPB was already in actual possession of the
litigated premises prior to the filing of the Complaint on August 27, 2001. This
conforms with the finding of the CA CDO which pronounced that "an actual
turnover of the premises . . . was really effected on August 24, 2001, prior to
the institution of the complaint a quo." 47 UniAlloy was able to regain
possession of the disputed premises only by virtue of the RTC's 72-hour TRO.
With the issuance of the RTC's September 13, 2001 Order dismissing the
Complaint of UniAlloy, however, the RTC's 72-hour TRO and August 30,
2001 order to maintain status quo, which are mere incidents of the main action,
lost their efficacy. As discussed above, one of the inevitable consequences of
the dismissal of the main action is the dissolution of the ancillary relief granted
therein. Besides, the RTC issued the status quo order with the express caveat
that the same shall remain in force until it has resolved respondents' motions to
dismiss, which it subsequently granted. Consequently, UniAlloy has no more
bases to remain in possession of the disputed premises. It must, therefore,
restitute whatever it may have possessed by virtue of the dissolved provisional
remedy, even if the opposing party did not pray for it.  HcSaAD

The August 17, 2007 Decision neither

violated this Court's January 28, 2005
Decision in G.R. No. 152238 nor
contradicted the CA Manila's February
18, 2002 Resolution.
UniAlloy further argues that in denying its petition, CA CDO
contradicted the earlier Resolution of a coordinate court, the CA Manila, and
the January 28, 2005 Decision of this Court in G.R. No. 152238. It insists that
no court can interfere with the judgment, orders or decrees of another court of
concurrent or coordinate jurisdiction.
We are not persuaded.
True, under the doctrine of judicial stability or non-interference, "no
court can interfere by injunction with the judgments or orders of another court
of concurrent jurisdiction having the power to grant the relief sought by
injunction. The rationale for the rule is founded on the concept of jurisdiction:
a court that acquires jurisdiction over the case and renders judgment therein
has jurisdiction over its judgment, to the exclusion of all other coordinate
courts, for its execution and over all its incidents, and to control, in furtherance
of justice, the conduct of ministerial officers acting in connection with this
judgment." 48 But said doctrine is not applicable to this case. Here, the
proceeding in CA CDO is a continuation of the proceeding conducted in CA
Manila. There is only one case as what was resolved by CA CDO is the same
case, CA-G.R. SP No. 67079 earlier filed with and handled by CA Manila. It
was referred to CA CDO pursuant to Republic Act No. 8246 creating three
divisions of the CA each in Cebu and Cagayan de Oro. Section 5 thereof
provides: 
SECTION 5. Upon the effectivity of this Act, all pending
cases, except those which have been submitted for resolution, shall be
referred to the proper division of the Court of Appeals.
 In fine, CA CDO did not intrude into an order issued by another co-
equal court in a different case. Rather, it continued to hear the petition until its
termination after the CA Manila referred the same to it by virtue of a law.
The fact that said February 18, 2002 Resolution of CA Manila was
affirmed by this Court in its January 28, 2005 Decision in G.R No. 152238 is
likewise of no moment. Said Resolution of CA Manila only granted UniAlloy's
ancillary prayer for injunction relief: It did not touch on the issues of improper
venue, forum-shopping, and harassment. Thus, neither did this Court tackle
said issues in its January 28, 2005 Decision. In fact, this Court cautiously
limited its discussions on the propriety of the CA's directive temporarily
restraining the RTC from placing UCPB in possession of the disputed premises
and deliberately reserved to the CA the determination of whether the RTC
erred in dismissing the main case. Thus:  TIESCA

The dismissal of Civil Case No. 2001-219 on the grounds of

forum-shopping, improper venue and harassment — although raised,
too, by Unialloy in its Petition before the Court of Appeals — was not
passed upon in the assailed interlocutory CA Resolution. As a
consequence, it would be premature and improper for us to pass upon
the RTC's dismissal of the case. Hence, we shall limit our discussion
to the assailed Resolutions temporarily stopping the trial court's
turnover of the litigated property to petitioner. 49
WHEREFORE, the instant petition is hereby DENIED.
SO ORDERED.
 (United Alloy Phils. Corp. v. United Coconut Planters Bank, G.R. No. 179257,
|||

[November 23, 2015])

SECOND DIVISION

[G.R. No. 193821. November 23, 2015.]

PHIL-AIR CONDITIONING CENTER, petitioner, vs. RCJ

LINES and ROLANDO ABADILLA, JR., respondents.

DECISION

BRION, ** J  :p
 Phil-Air Conditioning Center (Phil-Air) filed this petition for review
on certiorari 1 to assail the September 15, 2010 decision 2 of the Court of
Appeals (CA) in CA-G.R. CV No. 85866. 
The CA affirmed the September 8, 2004 decision of the Regional Trial
Court (RTC), Branch 119 of Pasay City, dismissing Phil-Air's complaint for
sum of money with prayer for a writ of preliminary attachment. 3
Antecedents
On various dates between March 5, 1990, and August 29, 1990,
petitioner Phil-Air sold to respondent RCJ Lines four Carrier Paris 240 air-
conditioning units for buses (units). The units included compressors,
condensers, evaporators, switches, wiring, circuit boards, brackets, and
fittings. 4
The total purchases amounted to P1,240,000.00 as shown on a sales
invoice dated November 5, 1990. 5 RCJ Lines paid P400,000.00, leaving a
balance of P840,000.00. 6
RCJ Lines accepted the delivery of the units, which Phil-Air then
installed after they were inspected by RCJ Lines president Rolando Abadilla,
Sr. 7
Phil-Air allegedly performed regular maintenance checks on the units
pursuant to the one-year warranty on parts and labor. After some months from
installation, Phil-Air supposedly boosted the capacity of the units by upgrading
them to the Carrier Paris 280 model. 8 It also purportedly repaired the control
switch panel of one of the units for an additional cost of P60,000.00. 9
RCJ Lines issued three post-dated checks in favor of Phil-Air to partly
cover the unpaid balance:
Check No. Amount Post-dated
     
479759 Php244,998.00 February 28, 1992
479760 Php244,998.00 March 31, 1992
479761 Php244,998.00 April 30, 1992
  ––––––––––––– 
TOTAL Php734,994.00 
  ============ 
 
All the post-dated checks were dishonored when Phil-Air subsequently
presented them for payment. Check No. 479759 was returned because it was
drawn against insufficient funds, while Check Nos. 479760 and 479761 were
returned because payments were stopped. 10  TIADCc

Before presenting the third check for payment, Phil-Air sent a demand
letter 11 to Rolando Abadilla, Sr. on April 7, 1992, asking him to fund the post-
dated checks.
On July 17, 1996, Phil-Air demanded payment from Rolando Abadilla,
Jr., for the total amount of P734,994.00 plus interest, and attorney's fees
equivalent to 25% of the amount due. Phil-Air warned that it would take court
action if payment is not made within five days from demand. 12
In view of the failure of RCJ Lines to pay the balance despite demand,
Phil-Air filed on April 1, 1998 the complaint 13 for sum of money with prayer
for the issuance of a writ of preliminary attachment. 14 Phil-Air sought to
recover from RCJ Lines:
a) The total amount of P840,000.00 exclusive of interest for the unpaid
delivered air-conditioning units;
b) The amount of P60,000.00 for the unpaid repair services;
c) The total interest in the amount of P756,000.00 (P840,000.00 x 12%
x 7 years + P60,000.00 x 12% x 7 years);
d) The sum equivalent to 25% of the total amount due as attorney's fees,
plus P3,000.00 per court appearance; and
e) Costs of the suit.
In its answer with compulsory counterclaim, 15 RCJ Lines admitted that
it purchased the units in the total amount of P1,240,000.00 and that it had only
paid P400,000.00. It refused to pay the balance because Phil-Air allegedly
breached its warranty. 16
RCJ Lines averred that the units did not sufficiently cool the buses
despite repeated repairs. Phil-Air purportedly represented that the units were in
accord with RCJ Lines' cooling requirements as shown in Phil-Air's price
quotation 17 dated August 4, 1989. The price quotation provided that full
payment should be made upon the units' complete installation. Complete
installation, according to RCJ Lines, is equivalent to being in operational
condition.
As it turned out, the Carrier Paris 240 model was not suited to the 45 to
49-seater buses operated by RCJ Lines. The units, according to RCJ Lines,
were defective and did not attain full operational condition. 18
Further, RCJ Lines claimed that it was also entitled to be reimbursed for
costs and damages occasioned by the enforcement of the writ of attachment.
 RCJ Lines thus urged the RTC to order Phil-Air to pay (1) the
replacement costs of the units; (2) lost profits for nine days from April 22 to
April 30, 1999, resulting from the attachment of its two buses amounting to
P207,000.00; 19 and (3) P64,390.00 for the counter-bond premium, moral
damages, exemplary damages and attorney's fees.
The RTC Ruling
The RTC granted the application for the issuance of a writ of
preliminary attachment after Phil-Air posted an attachment bond in the amount
of P1,656,000.00. 20 Two buses of RCJ Lines were attached pursuant to the
writ dated December 18, 1998. 21 The writ was executed on April 21,
1999. 22 The attachment, however, was later lifted when the RTC granted RCJ
Lines' urgent motion to discharge the writ of attachment. 23 RCJ Lines posted a
counter-bond in the same amount as the attachment bond. 24
Ruling on the merits after trial, the RTC found that Phil-Air was guilty
of laches and estopped from pursuing its claim. It also sustained the allegation
that Phil-Air had breached its warranty.
The dispositive portion of the RTC judgment reads:
WHEREFORE, judgment is hereby rendered as follows:
A. Dismissing the complaint of plaintiff for lack of merit.
B. Directing the plaintiff to pay the defendants the amount of
P100,000.00 as attorney's fees as they were forced to
spend and hire a lawyer to litigate for seven (7) years in
this Court the unfounded and invalid cause of action of
plaintiff.
C. Directing the plaintiff to pay P82,274.00 as refund of the
premium . . . for defendant's counter-bond for the release
of the two buses which were attached per Writ of
Attachment of this Court.
D. Directing the plaintiff to pay P216,000.00 for the lost profits
of defendants for the attachment of their two buses as
there was no fraud in the transaction of the parties and
plaintiff had no sufficient cause of action for the issuance
of the writ of attachment.
E. Dismissing all other claims of defendants as stated in their
counter-claims.
F. Costs against plaintiff.
SO ORDERED. 25
The CA Ruling
The CA affirmed the RTC decision in toto. 26
 First, the CA held that Phil-Air's cause of action was barred by
laches. 27
The CA concluded that "Phil-Air's inaction on RCJ Lines' repeated
demands and inexplicable failure to comply with its obligations had certainly
led the latter to believe [Phil-Air] was no longer interested in pursuing any
claim" and that "[Phil-Air] had been conspicuously silent for so long a time
which is disturbingly unusual for one claiming to have been aggrieved by
another." 28 
AIDSTE

Second, the CA held that Phil-Air breached its warranty. The price

quotation supposedly warranted that the Carrier Paris 240 model was suitable
for 50-60-passenger coaches and especially recommended for operation in the
tropics. 29
The CA gave credence to the testimony of the country manager of
Carrier Refrigeration Philippines, Inc. (Carrier Philippines) who testified that
the Carrier Paris 240 model is suited for buses with a maximum seating
capacity of up to 35 persons; beyond that, the units would not function
properly. 30 The CA also found convincing the testimonies of two RCJ Lines
employees who testified that they experienced firsthand the inefficient cooling
of the Carrier Paris 240. 31
Relying on these testimonies, the CA found that the four units did not
meet the cooling requirements of RCJ Lines. 32
Third, the CA ordered Phil-Air to reimburse the premium on the
counter-bond amounting to P82,274.00 since the writ was improvidently
issued.
Fourth, the CA affirmed the finding of the RTC that RCJ Lines suffered
losses when the RTC attached two of its buses.
The RTC and the CA relied on the testimony of Rolando Abadilla, Jr.,
who claimed to be in charge of the daily operations of RCJ Lines. He testified
that they suffered losses for nine days as a result of the enforcement of the writ
of preliminary attachment. The lost profits purportedly amounted to
P227,280.00. To support this claim, RCJ Lines adduced as evidence the
summary of the daily cash collections 33 from the buses that were not attached,
on various dates in August and September 2000. 34
Finally, the CA sustained the award of attorney's fees for P100,000.00
in favor of RCJ lines for having been compelled to litigate.
The Petition
First, Phil-Air argues that the doctrine of laches is not applicable when
the action is filed within the prescriptive period. Laches, being a doctrine of
equity, should only be applied to fill a void in the law. 35
 Phil-Air asserts that it filed the complaint on April 1, 1998, or less than
eight years from the execution of the sales invoice dated November 5, 1990.
The complaint was thus filed within the ten-year prescriptive period for actions
based upon a written contract.
Second, Phil-Air denies that it breached its warranty.
It maintains that all the units were brand new and were accepted by RCJ
Lines in good, working, and operational condition. The units were inspected,
tested, and approved by then RCJ Lines president, Rolando Abadilla, Sr., as
proved by the delivery receipts in which he affixed his signature. 36
Phil-Air further avers that it was not notified of the alleged breach of
warranty. Assuming it breached its warranty, Phil-Air submits that the action to
enforce the warranty had already prescribed.
Third, Phil-Air rejects the CA's order that it must reimburse the
premium payment for the counter-bond and the alleged losses suffered by RCJ
Lines. The attachment bond should be answerable for damages, if any.
Respondent's Comment
RCJ Lines reiterates all the arguments it raised in its counterclaim. It
admits that it did not pay the balance of the purchase price. 37 It maintains,
however, that it was justified in doing so because Phil-Air breached its
warranty. It insists that Phil-Air was guilty of laches because it waited for eight
years to file the collection case. 38
Issues
Based on the foregoing, the Court resolves the following issues:
(1) Whether the claim of Phil-Air was barred by laches;
(2) Whether Phil-Air should reimburse RCJ Lines for the counter-bond
premium and its alleged unrealized profits;
(3) Whether RCJ Lines proved its alleged unrealized profits arising
from the enforcement of the preliminary writ of attachment; and
(4) Whether RCJ Lines proved that Phil-Air breached its warranty.
Our Ruling
We grant the petition.
Phil-Air's claim is not
barred by laches.
In general, there is no room to apply the concept of laches when the law
provides the period within which to enforce a claim or file an action in court.
Phil-Air's complaint for sum of money is based on a written contract of sale.
The ten-year prescriptive period under Article 1144 of the Civil Code thus
applies. 39 
AaCTcI

In the present case, both parties admit the existence and validity of the
contract of sale. They recognize that the price quotation dated August 4, 1989,
contained the terms and conditions of the sale contract. They also agree that the
price and description of the units were indicated on the sales invoice dated
November 5, 1990. The sales were in fact consummated on various dates
between March 5, 1990 and August 29, 1990, as proved by several delivery
receipts.
The Court therefore can resolve whether Phil-Air's action to enforce the
contract was timely filed even in the apparent absence of a formal or notarized
deed of sale. 40More significantly, Rolando Abadilla, Jr., admitted under oath
that the sale was in writing. 41
We note that Phil-Air filed the complaint with the RTC on April 1,
1998. Counting from the date of the sales invoice, or from the date of the
delivery receipts, or even from the date of the price quotation, it is clear that
the complaint was filed within the ten-year prescriptive period. Contrary to the
CA's ruling, laches does not apply.
Laches is defined as the failure or neglect for an unreasonable and
unexplained length of time, to do that which by exercising due diligence, could
or should have been done earlier; it is negligence or omission to assert a right
within a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it. 42
While the CA correctly held that prescription and estoppel by laches are
two different concepts, it failed to appreciate the marked distinctions between
the two concepts.
On the one hand, the question of laches is addressed to the sound
discretion of the court. 43 The court resolves whether the claimant asserted its
claim within a reasonable time and whether its failure to do so warrants the
presumption that it either has abandoned it or declined to assert it. The court
determines the claimant's intent to assert its claim based on its past actions or
lack of action. After all, what is invoked in instances where a party raises
laches as a defense is the equity jurisdiction of the court. 44
On the other hand, if the law gives the period within which to enforce a
claim or file an action in court, the court confirms whether the claim is asserted
or the action is filed in court within the prescriptive period. The court
determines the claimant's intent to assert its claim by simply measuring the
time elapsed from the proper reckoning point (e.g., the date of the written
contract) to the filing of the action or assertion of the claim.
 In sum, where the law provides the period within which to assert a claim
or file an action in court, the assertion of the claim or the filing of the action
in court at any time within the prescriptive period is generally deemed
reasonable, and thus, does not call for the application of laches. As we held in
one case, unless reasons of inequitable proportions are adduced, any imputed
delay within the prescriptive period is not delay in law that would bar relief. 45
In Agra, et al. v. Philippine National Bank, 46 we held that "[l]aches is
a recourse in equity [and] is applied only in the absence, never in
contravention, of statutory law. Thus, laches cannot, as a rule, abate a
collection suit filed within the prescriptive period mandated by the Civil
Code."
Agra involved an action for collection of a sum of money arising from
an unpaid loan. In resisting payment, the sureties invoked laches and
maintained that the creditor-bank with full knowledge of the deteriorating
financial condition of the principal debtor did not take steps to collect from the
latter while still solvent. The sureties thus argued that the creditor-bank's action
was barred by laches.
We found that the sureties failed to prove all the elements of laches,
namely:
(1) conduct on the part of the defendant or one under whom he claims,
giving rise to the situation of which complaint is made and for
which the complainant seeks a remedy;
(2) delay in asserting the complainant's right, the complainant having
had knowledge or notice of defendant's conduct and having been
afforded an opportunity to institute a suit;
(3) lack of knowledge or notice on the part of the defendant that the
complainant would assert the right on which he bases his claim;
and
(4) injury or prejudice to the defendant in the event relief is accorded to
the complainant, or the suit is not held barred. 47
Examining these elements, we found that only the first element was
present. There was no delay (second element) because the creditor-bank filed
the action within the ten-year prescriptive period. Since the claim was timely
filed, the defendants did not lack notice that the creditor-bank would assert its
claim (third element). Nor was the assertion of the right deemed injurious to
the defendants (fourth element); the creditor-bank could assert its claim at any
time within the prescriptive period.
The same conclusion holds true in the present case; not all the elements
of laches are present. To repeat, Phil-Air filed the complaint with the RTC on
April 1, 1998. The time elapsed from August 4, 1989 (the date of the price
quotation, which is the earliest possible reckoning point), is eight years and
eight months, well within the ten-year prescriptive period. There was simply no
delay (second element of laches) where Phil-Air can be said to have
negligently slept on its rights.
More significantly, there is no basis for laches as the facts of the present
case do not give rise to an inequitable situation that calls for the application of
equity and the principle of laches. 48 
EcTCAD

Phil-Air is not directly liable

for the counter-bond premium
and RCJ Lines' alleged
unrealized profits.
The CA and the RTC erred when it held Phil-Air directly liable for the
counter-bond premium and RCJ Lines' alleged unrealized profits. Granting that
RCJ Lines suffered losses, the judgment award should have been first executed
on the attachment bond. Only if the attachment bond is insufficient to cover the
judgment award can Phil-Air be held liable. 49
We explain below the purpose of a preliminary attachment, the
procedure in obtaining it, and the manner of having it lifted.
A writ of preliminary attachment is a provisional remedy issued by the
court where an action is pending to be levied upon the property or properties of
the defendant. The property is held by the sheriff as security for the satisfaction
of whatever judgment that might be secured by the attaching party against the
defendant. 50
The grant of the writ is conditioned not only on the finding of the court
that there exists a valid ground for its issuance. 51 The Rules also require the
applicant to post a bond.
Section 4 of Rule 57 of the Rules of Civil Procedure (Rules) provides
that "the party applying for the order must . . . 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 that may be
adjudged to the adverse party and all damages that he may sustain by
reason of the attachment, if the court shall finally adjudge that the
applicant was not entitled thereto."
The enforcement of the writ notwithstanding, the party whose property
is attached is afforded relief to have the attachment lifted.
There are various modes of discharging an attachment under Rule
57, viz.: (1) by depositing cash or posting a counter-bond under Section
12; 52 (2) by proving that the attachment bond was improperly or irregularly
issued or enforced, or that the bond is insufficient under Section 13; 53 (3) by
showing that the attachment is excessive under Section 13; and (4) by claiming
that the property is exempt from execution under Section 2. 54
RCJ Lines availed of the first mode by posting a counter-bond.
Under the first mode, the court will order the discharge of the
attachment after (1) the movant makes a cash deposit or posts a counter-bond
and (2) the court hears the motion to discharge the attachment with due notice
to the adverse party. 55
The amount of the cash deposit or counter-bond must be equal to that
fixed by the court in the order of attachment, exclusive of costs. The cash
deposit or counter-bond shall secure the payment of any judgment that the
attaching party may recover in the action. 56
The filing of a counter-bond to discharge the attachment applies when
there has already been a seizure of property by the sheriff and all that is
entailed is the presentation of a motion to the proper court, seeking approval of
a cash or surety bond in an amount equivalent to the value of the property
seized and the lifting of the attachment on the basis thereof. The counter-bond
stands in place of the property so released. 57
To be clear, the discharge of the attachment by depositing cash or
posting a counter-bond under Section 12 should not be confused with the
discharge sanctioned under Section 13. Section 13 speaks of discharge on the
ground that the writ was improperly or irregularly issued or enforced, or that
the attachment bond is insufficient, or that the attachment is excessive.
To reiterate, the discharge under Section 12 takes effect upon posting of
a counter-bond or depositing cash, and after hearing to determine the
sufficiency of the cash deposit or counter-bond. On the other hand, the
discharge under Section 13 takes effect only upon showing that the plaintiff's
attachment bond was improperly or irregularly issued, or that the bond is
insufficient. The discharge of the attachment under Section 13 must be made
only after hearing. 58
These differences notwithstanding, the discharge of the preliminary
attachment either through Section 12 or Section 13 has no effect on and does
not discharge the attachment bond. The dissolution of the preliminary
attachment does not result in the dissolution of the attachment bond.
Justice Narvasa, writing his separate opinion in one case, explained:
The dissolution of the preliminary attachment upon
security given [Section 12], or a showing of its irregular or improper
issuance [Section 13], does not of course operate to discharge the
sureties on plaintiff's own attachment bond. The reason is simple.
That bond is executed to the adverse party, . . . conditioned that the . . .
 (applicant) 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." Hence, until that determination is made, as to the
applicant's entitlement to the attachment, his bond must stand and
cannot be withdrawn. 59 [emphasis and underscoring supplied,
citations omitted]
In the present case, the RTC lifted the preliminary attachment after it
heard RCJ Lines' urgent motion to discharge attachment and the latter posted a
counter-bond. The RTC found that there was no fraud and Phil-Air had no
sufficient cause of action for the issuance of the writ of the attachment. As a
consequence, it ordered Phil-Air to refund the premium payment for the
counter-bond and the losses suffered by RCJ Lines resulting from the
enforcement of the writ. The CA affirmed the RTC ruling in toto.  HSAcaE

We reverse the CA and RTC rulings.

As discussed above, it is patent that under the Rules, the attachment
bond answers for all damages incurred by the party against whom the
attachment was issued. 60
Thus, Phil-Air cannot be held directly liable for the costs adjudged to
and the damages sustained by RCJ Lines because of the attachment. Section 4
of Rule 57 positively lays down the rule that the attachment bond 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."
The RTC, instead of declaring Phil-Air liable for the alleged unrealized
profits and counter-bond premium, should have ordered the execution of the
judgment award on the attachment bond. To impose direct liability to Phil-Air
would defeat the purpose of the attachment bond, which was not dissolved
despite the lifting of the writ of preliminary attachment.
The order to refund the counter-bond premium is likewise erroneous.
The premium payment may be deemed a cost incurred by RCJ Lines to lift the
attachment. Such cost may be charged against the attachment bond.
RCJ Lines failed to prove its
alleged unrealized profits.
In finding that RCJ Lines suffered damages because of the attachment,
the RTC and the CA gave complete credence to the testimony of Rolando
Abadilla, Jr. He claimed that RCJ Lines lost P216,000.00 in unrealized profits
for nine days when the buses were wrongfully seized.
To arrive at this amount, RCJ Lines alleged that a bus travelling from
Manila to Ilocos and vice versa earned an average daily income of P12,000.00.
To back this claim, RCJ Lines prepared a summary of the daily cash
collections of its nine buses on certain days of August and September 2000.
The summary of daily cash collections apparently prepared by one RCJ
Lines employee was in turn based on the reports of the dispatchers indicating
the number of passengers and the amount of fare collected on a particular trip.
Except for one bus which travelled round-trip on August 22-23, 2000, the daily
cash collections all pertained to the round-trip of eight buses on September 2-3,
2000.
These documents are insufficient to prove actual damages.
In Spouses Yu v. Ngo Yet Te, 61 we held that if the claim for actual
damages covers unrealized profits, the amount of unrealized profits must be
established and supported by independent evidence of the mean income of the
business undertaking interrupted by the illegal seizure. 
We explained in Spouses Yu that to merit an award of actual damages
arising from a wrongful attachment, the attachment defendant must prove, with
the best evidence obtainable, the fact of loss or injury suffered and the amount
thereof. Such loss or injury must be of the kind which is not only capable of
proof but must actually be proved with a reasonable degree of certainty. As to
its amount, the same must be measurable based on specific facts, and not on
guesswork or speculation. 62
Spouses Yu is on all fours with the present dispute because it also
involved a claim for actual damages arising from the illegal attachment of the
claimant's properties, one of which was a passenger bus.
The claimants in that case attempted to prove actual damages by
computing the daily average income of its bus operation based on the value of
three ticket stubs sold over five separate days. The claimants likewise cited
unused ticket stubs as proof of income foregone when the bus was wrongfully
seized.
We found the claimant's evidence insufficient to prove actual damages.
While we recognized that they suffered some damages, we held that "[b]y no
stretch of the imagination can we consider ticket sales for five days sufficient
evidence of the average daily income of the passenger bus, much less its mean
income. Not even the unrebutted testimony of [the claimant] can add credence
to such evidence for the testimony itself lacks corroboration." 63
Similarly, the evidence adduced by RCJ Lines to show actual damages
fell short of the required proof. Its average daily income cannot be derived
from the summary of daily cash collections from only two separate
occasions, i.e., August 22-23 and September 2-3, 2000. The data submitted is
too meager and insignificant to conclude that the buses were indeed earning an
average daily income of P12,000.00.
 More significant, the person who prepared the unsigned summary of
daily cash collections was not presented before the RTC to verify and explain
how she arrived at the computation. The dispatchers who prepared the
collection reports were likewise not presented; some of the reports were also
unsigned. While the summary was approved by Rolando Abadilla, Jr., his
testimony on the alleged unrealized profits was uncorroborated and self-
serving.
Nonetheless, we recognize that RCJ Lines suffered some form of
pecuniary loss when two of its buses were wrongfully seized, although the
amount cannot be determined with certainty.
We note that in its prayer for the issuance of the writ of preliminary
attachment, Phil-Air alleged that RCJ Lines was guilty of fraud in entering into
the sale transaction. A perusal of the record, however, would show that Phil-
Air failed to prove this bare assertion. This justifies an award of temperate or
moderate damages in the amount of Php50,000.00. 64  HESIcT

The allegation of breach

of express warranty was
not proved.
We are not convinced that Phil-Air breached its express warranty. RCJ
Lines had no right to recoupment in diminution of the price. 65
The Civil Code defines an express warranty as any affirmation of fact or
any promise by the seller relating to the thing if the natural tendency of such
affirmation or promise is to induce the buyer to purchase the same, and if the
buyer purchases the thing relying thereon. 66
The question whether there was a breach of warranty is factual.
Consequently, the Court should rely on the factual findings of the CA and
RTC, which are generally deemed binding and conclusive to the Court. More
so in a Rule 45 petition where only questions of law can be raised. Further,
factual findings of the RTC, when affirmed by the CA, are conclusive on the
Court when supported by the evidence on record. 67
The evidence on record does not support the findings of the CA and
RTC.
We emphasize that there are recognized cases where the Court can
disregard the factual findings of the RTC and CA. In these cases, the Court
draws its own conclusion based on the evidence on record. 68
In this case, Phil-Air denies that it breached its express warranty and
strongly argues that the CA and RTC completely ignored its evidence while it
sustained the bare allegations of Rolando Abadilla, Jr.
 We agree with Phil-Air. Our examination of the record reveals that the
RTC and CA manifestly overlooked certain relevant facts not disputed by the
parties which, if properly considered, would justify a different conclusion.
To prove that Phil-Air breached its express warranty, RCJ Lines
presented the following testimonial and documentary evidence:
1) Rolando Abadilla, Jr. who claimed that their employees reported the
defect of the units to him and to his late father. His late father
allegedly demanded Phil-Air to repair the defects. But despite
repeated verbal demands, Phil-Air purportedly failed to comply
with its one-year warranty on parts and labor.
2) Two RCJ Lines employees who claimed that they experienced
firsthand the inefficient cooling of the units.
3) The general manager of Carrier Philippines who testified that the
Carrier 240 model was not suitable for buses with a capacity of
more than 35 passengers, like those operated by RCJ Lines. 
4) Summary of expenses, sales invoices, provisional receipts, and
statements of accounts issued by other suppliers and shops (Car
Cool Philippines, Inc. and Sta. Rosa Motor Works, Inc.) engaged
by RCJ Lines during the period of warranty to repair the
defective units, amounting to P208,132.00.
5) Commercial invoice for the $68,780.00 US Dollars worth of new
units bought from another supplier after the lapse of warranty to
replace the units supplied by Phil-Air. 69
In defense, Phil-Air claimed that it regularly checked the units and that
during the effectivity of the one-year warranty, RCJ Lines never once
complained of defects; if there were defects, the latter should have demanded
Phil-Air to perform its warranty in writing; the reason it had no proof it made
repairs and delivered spare parts was precisely because it was not apprised of
any defect; and that the testimonies of the RCJ Lines witnesses were self-
serving. 70
The RTC noted that Phil-Air did not present evidence to rebut the
allegation of breach. 71 Phil-Air instead opposed the admission of the
documentary evidence of RCJ Lines for failing to comply with the best
evidence rule. 72
We hold that the evidence that RCJ Lines submitted failed to prove
breach of express warranty.
As to the testimonial evidence
 The testimonies of the RCJ Lines witnesses were self-serving and
uncorroborated.
The claim of Rolando Abadilla, Jr. that his late father verbally
communicated the defects of the units to Phil-Air was hearsay and not
admissible. 73 He admitted that he was not around when his father phoned Phil-
Air to demand the repair of the units. He likewise admitted that they did not
attempt to personally meet with nor send a letter to Phil-Air to demand the
repairs. 74
More tellingly, Rolando Abadilla, Jr. admitted that they issued the post-
dated checks to Phil-Air to cover the balance of the purchase price sometime in
1992, viz. —
Q. Mr. Witness is it not in this case that you personally issued three (3)
checks draws against the name Rolando Abadilla and Susan or
Rolando Abadilla, and this was some time in 1992?
A. Yes, Sir.
Q. And you confirm that these were all dated March 31, April 30 and
February 29, 1992?  caITAC

A. Yes, Sir.
Q. Despite your claim that these air-conditioning units were defective
and despite your claim that these air-conditioning units were not
repaired by plaintiff, hence you referred them for repair to other
companies who are not authorized, do you still affirm the fact
that you issued the postdated checks, the total of which is
exactly the balance of the purchase price as quoted in the
price quotation, yes or no? [emphasis supplied]
A. Yes, Sir. 75
xxx xxx xxx
We note that the alleged repairs made by Car Cool Philippines, Inc. and
Sta. Rosa Motor Works, Inc. started in 1991. 76 If RCJ Lines knew as early as
1991 that the units were defective and that Phil-Air refused to perform its
warranty despite repeated demands, we wonder why RCJ Lines still issued the
post-dated checks in 1992 to cover the balance of the purchase price.
The record also reveals that Car Cool Philippines, Inc. and Sta. Rosa
Motor Works, Inc. were not authorized by the Carrier brand to repair the units,
a fact not denied by Rolando Abadilla, Jr. 77 It was likewise established that
some of the parts/items purportedly provided by the other suppliers were
expressly excluded from the list of parts/items that Phil-Air was supposed to
supply, again, a fact admitted by Rolando Abadilla, Jr. 78 It was likewise
unclear that the repairs made by the other service providers were done on the
same buses on which the subject units were installed. 79
 We also find glaring the fact that RCJ Lines did not respond to the April
7, 1992 demand letter sent by Phil-Air, viz. —
Dear Mr. Abadilla,
I have been trying to get in touch with you and Junjun the past several
weeks but have been unsuccessful . . . The two checks that you used to
partly pay for the four units bus air conditions [sic] were all
dishonored by the bank [because they were drawn against insufficient
funds].
We are but a small company and our cash flow was adversely affected
by the return of the checks. . . . It would mean so much if you could
somehow help us replenished these checks. . . . We look forward to
hearing from you Respectfully, we remain.
Yours truly,
Ricardo Cokieng
If RCJ Lines was aware all along that the units were defective and that
Phil-Air refused to heed its verbal demands to make repairs, we do not
understand why it ignored Phil-Air's written demand to replenish the returned
checks. We also find it unthinkable that RCJ Lines would spend for parts and
services from other suppliers and providers, during the period of warranty,
without demanding first in writing that Phil-Air make good its express
warranty. 
In this regard, we note that the right of the buyer to the recoupment in
the diminution of the price under Article 1599 (1) should be read together with
Article 1586 of the Civil Code, 80 which provides that:
Art. 1586. In the absence of express or implied agreement of the
parties, acceptance of the goods by the buyer shall not discharge the
seller from liability in damages or other legal remedy for breach of any
promise or warranty in the contract of sale. But, if, after acceptance
of the goods, the buyer fails to give notice to the seller of the
breach in any promise of warranty within a reasonable time after
the buyer knows, or ought to know of such breach, the seller shall
not be liable therefor.
The obvious purpose of the notice is to protect the seller against belated
claims. If the seller is not duly notified, he is prevented from making prompt
investigation to determine the cause and extent of his
liability. 81 Consequently, he is barred from repairing or rectifying whatever
defects the goods sold had.
RCJ Lines failed to convince us that it notified Phil-Air of the breach of
warranty within a reasonable time. In truth, we are not convinced at all that it
had even notified Phil-Air. Although Article 1586 does not require that the
notice to the seller be in writing, we cannot accept the claim of Rolando
Abadilla, Jr. that his late father verbally notified Phil-Air of the defects,
without violating the rule on hearsay.
Also, the testimonies of the two RCJ Lines employees that they
experienced firsthand the insufficient cooling of the units were self-serving and
uncorroborated by a disinterested party.
Further, the reliance of the CA and the RTC on the testimony 82 of the
general manager of Carrier Philippines was misplaced and unwarranted. It
appears that the computation of the cooling efficiency of the Carrier 240 model
was merely theoretical, based only on the specifications of the model and not
on actual test, viz. —
Q: Have you seen RCJ Bus?
A: I did see.
xxx xxx xxx
Q: With respect to car aircon Paris 240 installed, have you seen this bus?
A: No, I did not.
Q: Mr. Witness, this case involves a particular product a brand of the
product that you did not try [sic] but specifically Paris 240. Have
you seen it personally, the four units installed? 
ICHDca

A: No I did not.

Q: Even one unit?
A: No Sir.
The meat of his testimony centered not on the subject units but on the
cooling capacity of the product that Carrier Philippines was then selling in the
market. In fact, he admitted that his role in the company had nothing to do with
repairs of air-conditioning units.
On this basis, we do not find his testimony conclusive as to the alleged
breach of express warranty. It was too tangential and speculative. We note that
he was not even presented as an expert witness. Even if we assume that the
computation of the cooling capacity of the Carrier 240 was accurate, RCJ Lines
still failed to prove that it duly and promptly informed Phil-Air of the alleged
breach.
On the documentary evidence
The pieces of documentary evidence submitted by RCJ Lines to prove
breach of express warranty failed to comply with the best evidence rule. It is
established on record that the sales invoices and provisional receipts issued by
the other suppliers and service providers were mere photocopies. 83 The
counsel of Phil-Air objected to the admission of the secondary evidence
 without proof that the originals were indeed lost. The counsel for RCJ Lines
requested that the evidence be conditionally accepted and marked, which the
trial court granted.
Nowhere on record, however, was it ever established that the originals
were later submitted. It was also not shown that the originals were indeed lost,
which could have justified the submission of secondary evidence. 84 The RTC
simply ignored this fact when it finally decided the case.
Conclusion
Based on the foregoing analysis, we find that RCJ Lines failed to prove
its allegation that Phil-Air breached its express warranty. RCJ Lines is thus
held liable to pay the balance of the purchase price plus interest and attorney's
fees. 85 RCJ Lines, however, is entitled to temperate damages as a result of the
wrongful attachment of its buses and to the refund of the premium payment for
the counter-bond.
WHEREFORE, in view of the foregoing, we hereby GRANT the
petition. The September 15, 2010 decision of the Court of Appeals in CA-G.R.
CV No. 85866 is REVERSED and SET ASIDE.
ACCORDINGLY, RCJ Lines is DIRECTED to pay:
1. Eight Hundred Forty Thousand Pesos (P840,000.00) representing the
unpaid balance of the purchase price; 
2. Interest of twelve percent (12%) per annum on the unpaid balance to
be computed from November 5, 1990 86 until June 30, 2013;
3. Interest of six percent (6%) per annum on the unpaid balance to be
computed from July 1, 2013, 87 until fully paid;
4. Attorney's fees in the fixed amount of P30,000.00. 88
The total amount to be recovered shall further be subject to the legal
interest rate of six percent (6 %) per annum from the finality of this decision
until fully paid. 89
The attachment bond posted by Phil-Air shall be levied upon to satisfy
the P50,000.00 temperate damages awarded to RCJ Lines and the P82,274.00
refund of the counter-bond premium.
SO ORDERED.
 (Phil-Air Conditioning Center v. RCJ Lines, G.R. No. 193821, [November 23,
|||

2015])

FIRST DIVISION
 [G.R. No. 184666. June 27, 2016.]

REPUBLIC OF THE PHILIPPINES, petitioner, vs. MEGA

PACIFIC eSOLUTIONS, INC., WILLY U. YU, BONNIE S.
YU, ENRIQUE T. TANSIPEK, ROSITA Y. TANSIPEK,
PEDRO O. TAN, JOHNSON W. FONG, BERNARD I. FONG,
and LAURIANO * A. BARRIOS, respondents.

DECISION

SERENO, C.J  : p

The instant case is an offshoot of this Court's Decision dated 13 January

2004 (2004 Decision) in a related case entitled Information Technology
Foundation of the Philippines v. Commission on Elections. 1
In the 2004 case, We declared void the automation contract executed by
respondent Mega Pacific eSolutions, Inc. (MPEI) and the Commission on
Elections (COMELEC) for the supply of automated counting machines
(ACMs) for the 2004 national elections.
The present case involves the attempt of petitioner Republic of the
Philippines to cause the attachment of the properties owned by respondent
MPEI, as well as by its incorporators and stockholders (individual respondents
in this case), in order to secure petitioner's interest and to ensure recovery of
the payments it made to respondents for the invalidated automation contract. 
At bench is a Rule 45 Petition assailing the Amended Decision dated 22
September 2008 (Amended Decision) issued by the Court of Appeals (CA) in
CA-G.R. SP No. 95988. 2In said Amended Decision, the CA directed the
remand of the case to the Regional Trial Court of Makati City, Branch 59
(RTC Makati) for the reception of evidence in relation to petitioner's
application for the issuance of a writ of preliminary attachment. The CA had
reconsidered and set aside its previous Decision dated 31 January 2008 (First
Decision) 3entitling petitioner to the issuance of said writ.
Summarized below are the relevant facts of the case, some of which
have already been discussed in this Court's 2004 Decision:
THE FACTS
Republic Act No. 8436 authorized the COMELEC to use an automated
election system for the May 1998 elections. However, the automated system
failed to materialize and votes were canvassed manually during the 1998 and
the 2001 elections.
 For the 2004 elections, the COMELEC again attempted to implement
the automated election system. For this purpose, it invited bidders to apply for
the procurement of supplies, equipment, and services. Respondent MPEI, as
lead company, purportedly formed a joint venture — known as the Mega
Pacific Consortium (MPC) — together with We Solv, SK C & C, ePLDT,
Election.com and Oracle. Subsequently, MPEI, on behalf of MPC, submitted
its bid proposal to COMELEC.
The COMELEC evaluated various bid offers and subsequently found
MPC and another company eligible to participate in the next phase of the
bidding process. 4 The two companies were referred to the Department of
Science and Technology (DOST) for technical evaluation. After due
assessment, the Bids and Awards Committee (BAC) recommended that the
project be awarded to MPC. The COMELEC favorably acted on the
recommendation and issued Resolution No. 6074, which awarded the
automation project to MPC.
Despite the award to MPC, the COMELEC and MPEI executed on 2
June 2003 the Automated Counting and Canvassing Project Contract
(automation contract) 5 for the aggregate amount of P1,248,949,088. MPEI
agreed to supply and deliver 1,991 units of ACMs and such other equipment
and materials necessary for the computerized electoral system in the 2004
elections. Pursuant to the automation contract, MPEI delivered 1,991 ACMs to
the COMELEC. The latter, for its part, made partial payments to MPEI in the
aggregate amount of P1.05 billion.
The full implementation of the automation contract was rendered
impossible by the fact that, after a painstaking legal battle, this Court in its
2004 Decision declared the contract null and void. 6 We held that the
COMELEC committed a clear violation of law and jurisprudence, as well as a
reckless disregard of its own bidding rules and procedure. In addition, the
COMELEC entered into the contract with inexplicable haste, and without
adequately checking and observing mandatory financial, technical, and legal
requirements. In a subsequent Resolution, We summarized the COMELEC's
grave abuse of discretion as having consisted of the following: 7  CAIHTE

1. By a formal Resolution, it awarded the project to "Mega Pacific

Consortium," an entity that had not participated in the bidding.
Despite this grant, Comelec entered into theactual Contract with
"Mega Pacific eSolutions, Inc." (MPEI), a company that joined
the bidding process but did not meet the eligibility requirements.
2. Comelec accepted and irregularly paid for MPEI's ACMs that
had failed the accuracy requirement of 99.9995 percent set up by
the Comelec bidding rules. Acknowledging that this rating could
have been too steep, the Court nonetheless noted that "the
essence of public bidding is violated by the practice of requiring
 very high standards or unrealistic specifications that cannot be
met, . . . only to water them down after the award is made. Such
scheme, which discourages the entry of bona fide bidders, is
in fact a sure indication of fraud in the bidding, designed to
eliminate fair competition."
3. The software program of the counting machines likewise failed to
detect previously downloaded precinct results and to prevent
them from being reentered. This failure, which has not been
corrected . . ., would have allowed unscrupulous persons to
repeatedly feed into the computers the results favorable to a
particular candidate, an act that would have translated into
massive election fraud by just a few key strokes.
4. Neither were the ACMs able to print audit trails without loss of data
— a mandatory requirement under Section 7 of Republic Act No.
8436. Audit trails would enable the Comelec to document the
identities of the ACM operators responsible for data entry and
downloading, as well as the times when the various data were
processed, in order to forestall fraud and to identify the
perpetrators. The absence of audit trails would have posed a
serious threat to free and credible elections.
5. Comelec failed to explain satisfactorily why it had ignored its own
bidding rules and requirements. It admitted that the software
program used to test the ACMs was merely a "demo" version,
and that the final one to be actually used in the elections was still
being developed. By awarding the Contract and irregularly
paying for the supply of the ACMs without having seen — much
less, evaluated — the final product being purchased, Comelec
desecrated the law on public bidding. It would have allowed the
winner to alter its bid substantially, without any public bidding. 
All in all, Comelec subverted the essence of public bidding: to
give the public an opportunity for fair competition and a clear basis for
a precise comparison of bids. 8(Emphasis supplied)
As a consequence of the nullification of the automation contract, We
directed the Office of the Ombudsman to determine the possible criminal
liability of persons responsible for the contract. 9 This Court likewise directed
the Office of the Solicitor General to protect the government from the ill
effects of the illegal disbursement of public funds in relation to the automation
contract. 10
After the declaration of nullity of the automation contract, the following
incidents transpired:
1. Private respondents in the 2004 case moved for reconsideration of the
2004 Decision, but the motion was denied by this Court in a
Resolution dated 17 February 2004 (2004 Resolution). 11
 2. The COMELEC filed a "Most Respectful Motion for Leave to Use
the Automated Counting Machines in the Custody of the
Commission on Elections for use in the 8 August 2005 Elections
in the Autonomous Region for Muslim Mindanao" dated 9
December 2004 (Motion for Leave to Use ACMs), which was
denied by this Court in its Resolution dated 15 June 2005 (2005
Resolution).
3. Atty. Romulo B. Macalintal (Macalintal) filed an "Omnibus Motion
for Leave of Court (1) to Reopen the Case; and (2) to Intervene
and Admit the Attached Petition in Intervention," which was
denied by this Court in its Resolution dated 22 August 2006
(2006 Resolution); and
4. Respondent MPEI filed a Complaint for Damages 12 (Complaint)
with the RTC Makati, from which the instant case arose.
The above-mentioned incidents are discussed in more detail below.
BACKGROUND PROCEEDINGS
Private respondents' Motion for
Reconsideration
Private respondents in the 2004 case moved for reconsideration of the
2004 Decision. Aside from reiterating the procedural and substantive
arguments they had raised, they also argued that the 2004 Decision had
exposed them to possible criminal prosecution. 13
This Court denied the motion in its 2004 Resolution and ruled that no
prejudgment had been made on private respondents' criminal liability. We
further ruled that although the 2004 Decision stated that the Ombudsman shall
"determine the criminal liability, if any, of the public officials (and conspiring
private individuals, if any) involved in the subject Resolution and Contract,"
We did not make any premature conclusion on any wrongdoing, but precisely
directed the Ombudsman to make that determination after conducting
appropriate proceedings and observing due process.  DETACa

Similarly, it appears from the record that several criminal and

administrative Complaints had indeed been filed with the Ombudsman in
relation to the declaration of nullity of the automation contract. 14 The
Complaints were filed against several public officials and the individual
respondents in this case. 15
In a Resolution issued on 28 June 2006, 16 the Ombudsman
recommended the filing of informations before the Sandiganbayan against
some of the public officials and the individual respondents 17 for violation of
Section 3 (e) of Republic Act No. 3019 (the Anti-Graft and Corrupt Practices
Act). However, on 27 September 2006, 18 upon reconsideration, the
Ombudsman reversed its earlier ruling in a Supplemental Resolution
(September Resolution), directing the dismissal of the criminal cases against
the public officials, as well as the individual respondents, for lack of probable
cause. 19
With this development, a Petition for Certiorari was filed with this
Court on 13 October 2006 and docketed as G.R. No. 174777. 20 In the Petition,
several individuals 21assailed the September Resolution of the Ombudsman
finding no probable cause to hold respondents criminally liable. The case
remains pending with this Court as of this date.
COMELEC's Motion for Leave to
Use ACMs in the ARMM Elections
The COMELEC filed a motion with this Court requesting permission to
use the 1,991 ACMs previously delivered by respondent MPEI, for the ARMM
elections, then slated to be held on 8 August 2005. In its motion, the
COMELEC claimed that automation of the ARMM elections was mandated
by Republic Act No. 9333, and since the government had no available funds to
finance the automation of those elections, the ACMs could be utilized for the
2005 elections.
This Court denied the Motion in Our 2005 Resolution. We ruled that
allowing the use of the ACMs would have the effect of illegally reversing and
subverting a final decision We had promulgated. We further ruled that the
COMELEC was asking for permission to do what it had precisely been
prohibited from doing under the 2004 Decision. This Court also ruled that the
grant of the motion would bar or jeopardize the recovery of government funds
paid to respondents. Considering that the COMELEC did not present any
evidence to prove that the defects had been addressed, We held that the use of
the ACMs and the software would expose the ARMM elections to the same
electoral ills pointed out in the 2004 Decision. 
Atty. Macalintal's Omnibus Motion
Atty. Romulo Macalintal sought to reopen the 2004 case in order that he
may be allowed to intervene as a taxpayer and citizen. His purpose for
intervening was to seek another testing of the ACMs with the ultimate
objective of allowing the COMELEC to use them, this time for the 2007
national elections.
This Court denied his motion in Our 2006 Resolution, ruling that Atty.
Macalintal failed to demonstrate that certain supervening events and legal
circumstances had transpired to justify the reliefs sought. We in fact found that,
after Our determination that the ACMs had failed to pass legally mandated
technical requirements in 2004, they were simply put in storage. The ACMs
had remained idle and unused since the last evaluation, at which they failed to
hurdle crucial tests. Consequently, We ruled that if the ACMs were not good
enough for the 2004 national elections or the 2005 ARMM elections, then
neither would they be good enough for the 2007 national elections, considering
that nothing was done to correct the flaws that had been previously
underscored in the 2004 Decision. We held that granting the motion would be
tantamount to rendering the 2004 Decision totally ineffective and nugatory.
Moreover, because of our categorical ruling that the whole bidding
process was void and fraudulent, the proposal to use the illegally procured,
demonstratively defective, and fraud-prone ACMs was rendered nonsensical.
Thus:
We stress once again that the Contract entered into by the
Comelec for the supply of the ACMs was declared VOID by the Court
in its Decision, because of clear violations of law and jurisprudence, as
well as the reckless disregard by the Commission of its own bidding
rules and procedure. In addition, the poll body entered into the
Contract with inexplicable haste, without adequately checking and
observing mandatory financial, technical and legal requirements. As
explained in our Decision. Comelec's gravely abusive acts consisted of
the following:
xxx xxx xxx
To muddle the issue, Comelec keeps on saying that the
"winning" bidder presented a lower price than the only other
bidder. It ignored the fact that the whole bidding process was
VOID and FRAUDULENT. How then could there have been a
"winning" bid? 22 (Emphasis supplied)
THE INSTANT CASE
Complaint for Damages filed by
respondents with the RTC Makati
and petitioner's Answer with
Counterclaim, with an application
for a writ of preliminary attachment,
from which the instant case arose
Upon the finality of the declaration of nullity of the automation contract,
respondent MPEI filed a Complaint for Damages before the RTC Makati,
arguing that, notwithstanding the nullification of the automation contract, the
COMELEC was still bound to pay the amount of P200,165,681.89. This
amount represented the difference between the value of the ACMs and the
support services delivered on one hand, and on the other, the payment
previously made by the COMELEC. 23  aDSIHc
 Petitioner filed its Answer with Counterclaim 24 and argued that
respondent MPEI could no longer recover the unpaid balance from the void
automation contract, since the payments made were illegal disbursements of
public funds. It contended that a null and void contract vests no rights and
creates no obligations, and thus produces no legal effect at all. Petitioner
further posited that respondent MPEI could not hinge its claim upon the
principles of unjust enrichment and quasi-contract, because such presume that
the acts by which the authors thereof become obligated to each other are
lawful, which was not the case herein. 25
By way of a counterclaim, petitioner demanded from respondents the
return of the payments made pursuant to the automation contract. 26 It argued
that individual respondents, being the incorporators of MPEI, likewise ought to
be impleaded and held accountable for MPEI's liabilities. The creation of MPC
was, after all, merely an ingenious scheme to feign eligibility to bid. 27
Pursuant to Section 1 (d) of Rule 57 of the Rules of Court, petitioner
prayed for the issuance of a writ of preliminary attachment against the
properties of MPEI and individual respondents. The application was grounded
upon the fraudulent misrepresentation of respondents as to their eligibility to
participate in the bidding for the COMELEC automation project and the failure
of the ACMs to comply with mandatory technical requirements. 28
Subsequently, the trial court denied the prayer for the issuance of a writ
of preliminary attachment, 29 ruling that there was an absence of factual
allegations as to how the fraud was actually committed.
The allegations of petitioner were found to be unreliable, as the latter
merely copied from the declarations of the Supreme Court in Information
Technology Foundation of the Phils. v. COMELEC the factual allegations of
MPEI's lack of qualification and noncompliance with bidding requirements.
The trial court further ruled that the allegations of fraud on the part of MPEI
were not supported by the COMELEC, the office in charge of conducting the
bidding for the election automation contract. It was likewise held that there was
no evidence that respondents harbored a preconceived plan not to comply with
the obligation; neither was there any evidence that MPEI's corporate fiction
was used to perpetrate fraud. Thus, it found no sufficient basis to pierce the
veil of corporate fiction or to cause the attachment of the properties owned by
individual respondents.
Petitioner moved to set aside the trial court's Order denying the writ of
attachment, 30 but its motion was denied. 31
Appeal before the CA and the First
Decision
 Aggrieved, petitioner filed an appeal with the CA, arguing that the trial
court had acted with grave abuse of discretion in denying the application for a
writ of attachment.
As mentioned earlier, the CA in its First Decision 32 reversed and set
aside the trial court's Orders and ruled that there was sufficient basis for the
issuance of a writ of attachment in favor of petitioner.
The appellate court explained that the averments of petitioner in support
of the latter's application actually reflected pertinent conclusions reached by
this Court in its 2004 Decision. It held that the trial court erred in disregarding
the following findings of fact, which remained unaltered and unreversed: (1)
COMELEC bidding rules provided that the eligibility and capacity of a bidder
may be proved through financial documents including, among others, audited
financial statements for the last three years; (2) MPEI was incorporated only on
27 February 2003, or 11 days prior to the bidding itself; (3) in an attempt to
disguise its ineligibility, MPEI participated in the bidding as lead company of
MPC, a putative consortium, and submitted the incorporation papers and
financial statements of the members of the consortium; and (4) no proof of the
joint venture agreement, consortium agreement, memorandum of agreement, or
business plan executed among the members of the purported consortium was
ever submitted to the COMELEC. 33
According to the CA, the foregoing were glaring indicia or badges of
fraud, which entitled petitioner to the issuance of the writ. It further ruled that
there was sufficient reason to pierce the corporate veil of MPEI. Thus, the CA
allowed the attachment of the properties belonging to both MPEI and
individual respondents. 34 The CA likewise ruled that even if the COMELEC
committed grave abuse of discretion in capriciously disregarding the rules on
public bidding, this should not preclude or deter petitioner from pursuing its
claim against respondents. After all, the State is not estopped by the mistake of
its officers and employees. 35 TIADCc

Respondents moved for reconsideration 36 of the First Decision of the

CA.
Motion for Reconsideration before
the CA and the Amended Decision
Upon review, the CA reconsidered its First Decision 37 and directed the
remand of the case to the RTC Makati for the reception of evidence of
allegations of fraud and to determine whether attachment should necessarily
issue. 38
The CA explained in its Amended Decision that respondents could not
be considered to have fostered a fraudulent intent to dishonor their obligation,
since they had delivered 1,991 units of ACMs. 39 It directed petitioner to
present proof of respondents' intent to defraud COMELEC during the
execution of the automation contract. 40 The CA likewise emphasized that the
Joint Affidavit submitted in support of petitioner's application for the writ
contained allegations that needed to be substantiated. 41 It added that proof
must likewise be adduced to verify the requisite fraud that would justify the
piercing of the corporate veil of respondent MPEI. 42
The CA further clarified that the 2004 Decision did not make a definite
finding as to the identities of the persons responsible for the illegal
disbursement or of those who participated in the fraudulent dealings. 43 It
instructed the trial court to consider, in its determination of whether the writ of
attachment should issue, the illegal, imprudent and hasty acts in awarding the
automation contract by the COMELEC. In particular, these acts consisted of:
(1) awarding the automation contract to MPC, an entity that did not participate
in the bidding; and (2) signing the actual automation contract with respondent
MPEI, the company that joined the bidding without meeting the eligibility
requirement. 44
Rule 45 Petition before Us
Consequently, petitioner filed the instant Rule 45 Petition, 45 arguing
that the CA erred in ordering the remand of the case to the trial court for the
reception of evidence to determine the presence of fraud. Petitioner contends
that this Court's 2004 Decision was sufficient proof of the fraud committed by
respondents in the execution of the voided automation contract. 46 Respondents
allegedly committed fraud by securing the automation contract, although MPEI
was not qualified to bid in the first place. 47 Their claim that the members of
MPC bound themselves to the automation contract was an indication of bad
faith as the contract was executed by MPEI alone. 48 Neither could they deny
that the software submitted during the bidding process was not the same one
that would be used on election day. 49 They could not dissociate themselves
from telltale signs such as purportedly supplying software that later turned out
to be non-existent. 50
In their respective Comments, respondents Willy Yu, Bonnie Yu,
Enrique Tansipek, and Rosita Tansipek counter 51 that this Court never ruled
that individual respondents were guilty of any fraud or bad faith in connection
with the automation contract, and that it was incumbent upon petitioner to
present evidence on the allegations of fraud to justify the issuance of the
writ. 52 They likewise argue that the 2004 Decision cannot be invoked against
them, since petitioner and MPEI were co-respondents in the 2004 case and not
adverse parties therein. 53 Respondents further contend that the allegations of
fraud are belied by their actual delivery of 1,991 units of ACMs to the
COMELEC, which they claim is proof that they never had any intention to
evade performance. 54
 They further allege that this Court, in its 2004 Decision, even
recognized that it had not found any wrongdoing on their part, and that the
Ombudsman had already made a determination that no probable cause existed
with respect to charges of violation of Anti-Graft and Corrupt Practices Act. 55
Echoing the other respondents' arguments on the lack of particularity in
the allegations of fraud, 56 respondents MPEI, Johnson Wong, Bernard Fong,
Pedro Tan, and Lauriano Barrios likewise argue that they were not parties to
the 2004 case; thus, the 2004 Decision thereon is not binding on
them. 57 Individual respondents likewise argue that the findings of fact in the
2004 Decision were not conclusive, 58 considering that eight (8) of the fifteen
(15) justices allegedly refused to go along with the factual findings as stated in
the majority opinion. 59 Thereafter, petitioner filed its Reply to the
Comments. 60
Based on the submissions of both parties, the following issues are
presented to this Court for resolution:
1. Whether petitioner has sufficiently established fraud on the part of
respondents to justify the issuance of a writ of preliminary
attachment in its favor; and
2. Whether a writ of preliminary attachment may be issued against the
properties of individual respondents, considering that they were
not parties to the 2004 case. AIDSTE

THE COURT'S RULING

The Petition is meritorious. A writ of preliminary attachment should
issue in favor of petitioner over the properties of respondents MPEI, Willy Yu
(Willy) and the remaining individual respondents, namely: Bonnie S. Yu
(Bonnie), Enrique T. Tansipek (Enrique), Rosita Y. Tansipek (Rosita), Pedro
O. Tan (Pedro), Johnson W. Fong (Johnson), Bernard I. Fong (Bernard), and
Lauriano Barrios (Lauriano). The bases for the writ are the following:
1. Fraud on the part of respondent MPEI was sufficiently established by
the factual findings of this Court in its 2004 Decision and
subsequent pronouncements.
2. A writ of preliminary attachment may issue over the properties of the
individual respondents using the doctrine of piercing the
corporate veil.
3. The factual findings of this Court that have become final cannot be
modified or altered, much less reversed, and are controlling in
the instant case.
4. The delivery of 1,991 units of ACMs does not negate fraud on the
part of respondents MPEI and Willy.
 5. Estoppel does not lie against the state when it acts to rectify mistakes,
errors or illegal acts of its officials and agents.
6. The findings of the Ombudsman are not controlling in the instant
case.
DISCUSSION
I.
Fraud on the part of respondent MPEI was sufficiently established by
the factual findings of this Court in the latter's 2004 Decision and
subsequent pronouncements.
Petitioner argues that the findings of this Court in the 2004 Decision
serve as sufficient basis to prove that, at the time of the execution of the
automation contract, there was fraud on the part of respondents that justified
the issuance of a writ of attachment. Respondents, however, argue the contrary.
They claim that fraud had not been sufficiently established by petitioner. 
We rule in favor of petitioner. Fraud on the part of respondents MPEI
and Willy, as well as of the other individual respondents — Bonnie, Enrique,
Rosita, Pedro, Johnson, Bernard, and Lauriano — has been established.
A writ of preliminary attachment is a provisional remedy issued upon
the order of the court where an action is pending. Through the writ, the
property or properties of the defendant may be levied upon and held thereafter
by the sheriff as security for the satisfaction of whatever judgment might be
secured by the attaching creditor against the defendant. 61 The provisional
remedy of attachment is available in order that the defendant may not dispose
of the property attached, and thus prevent the satisfaction of any judgment that
may be secured by the plaintiff from the former. 62
The purpose and function of an attachment or garnishment is twofold.
First, it seizes upon property of an alleged debtor in advance of final judgment
and holds it subject to appropriation, thereby preventing the loss or dissipation
of the property through fraud or other means. Second, it subjects the property
of the debtor to the payment of a creditor's claim, in those cases in which
personal service upon the debtor cannot be obtained. 63 This remedy is meant
to secure a contingent lien on the defendant's property until the plaintiff can, by
appropriate proceedings, obtain a judgment and have the property applied to its
satisfaction, or to make some provision for unsecured debts in cases in which
the means of satisfaction thereof are liable to be removed beyond the
jurisdiction, or improperly disposed of or concealed, or otherwise placed
beyond the reach of creditors. 64
Petitioner relied upon Section 1 (d), Rule 57 of the Rules of Court as
basis for its application for a writ of preliminary attachment. This provision
states:
 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:  AaCTcI

xxx xxx xxx

(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. (Emphasis supplied)
For a writ of preliminary attachment to issue under the above-quoted
rule, the applicant must sufficiently show the factual circumstances of the
alleged fraud. 65 In Metro, Inc. v. Lara's Gift and Decors, Inc., 66 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. . . . .
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.
(Emphasis supplied)
An amendment to the Rules of Court added the phrase "in the
performance thereof" to include within the scope of the grounds for issuance of
a writ of preliminary attachment those instances relating to fraud in the
performance of the obligation. 67
Fraud is a generic term that is used in various senses and assumes so
many different degrees and forms that courts are compelled to content
themselves with comparatively few general rules for its discovery and defeat.
For the same reason, the facts and circumstances peculiar to each case are
allowed to bear heavily on the conscience and judgment of the court or jury in
determining the presence or absence of fraud. In fact, the fertility of man's
invention in devising new schemes of fraud is so great that courts have always
declined to define it, thus, reserving for themselves the liberty to deal with it in
whatever form it may present itself. 68
 Fraud may be characterized as the voluntary execution of a wrongful act
or a wilful omission, while knowing and intending the effects that naturally and
necessarily arise from that act or omission. 69 In its general sense, fraud is
deemed to comprise anything calculated to deceive — including all acts and
omission and concealment involving a breach of legal or equitable duty, trust,
or confidence justly reposed — resulting in damage to or in undue advantage
over another. 70 Fraud is also described as embracing all multifarious means
that human ingenuity can device, and is resorted to for the purpose of securing
an advantage over another by false suggestions or by suppression of truth; and
it includes all surprise, trick, cunning, dissembling, and any other unfair way
by which another is cheated. 71
While fraud cannot be presumed, it need not be proved by direct
evidence and can well be inferred from attendant circumstances. 72 Fraud by its
nature is not a thing susceptible of ocular observation or readily demonstrable
physically; it must of necessity be proved in many cases by inferences from
circumstances shown to have been involved in the transaction in question. 73
In the case at bar, petitioner has sufficiently discharged the burden of
demonstrating the commission of fraud by respondent MPEI in the execution
of the automation contract in the two ways that were enumerated earlier and
discussed below:
A. Respondent MPEI had perpetrated a
scheme against petitioner to secure the
automation contract by using MPC as
supposed bidder and eventually succeeding
in signing the automation contract as
MPEI alone, an entity which was ineligible
to bid in the first place.
To avoid any confusion relevant to the basis of fraud, We quote herein
the pertinent portions of this Court's 2004 Decision with regard to the identity,
existence, and eligibility of MPC as bidder: 74
On the question of the identity and the existence of the real
bidder, respondents insist that, contrary to petitioners' allegations, the
bidder was not Mega Pacific eSolutions, Inc. (MPEI), which was
incorporated only on February 27, 2003, or 11 days prior to the
bidding itself. Rather, the bidder was Mega Pacific Consortium
(MPC), of which MPEI was but a part. As proof thereof, they point to
the March 7, 2003 letter of intent to bid, signed by the president of
MPEI allegedly for and on behalf of MPC. They also call attention to
the official receipt issued to MPC, acknowledging payment for the
bidding documents, as proof that it was the "consortium" that
participated in the bidding process.
 We do not agree. The March 7, 2003 letter, signed by only one
signatory — "Willy U. Yu, President, Mega Pacific eSolutions, Inc.,
(Lead Company/Proponent) For: Mega Pacific Consortium" — and
without any further proof, does not by itself prove the existence of the
consortium. It does not show that MPEI or its president have been duly
pre-authorized by the other members of the putative consortium to
represent them, to bid on their collective behalf and, more important,
to commit them jointly and severally to the bid undertakings. The
letter is purely self-serving and uncorroborated. 
Neither does an official receipt issued to MPC, acknowledging
payment for the bidding documents, constitute proof that it was the
purported consortium that participated in the bidding. Such receipts are
issued by cashiers without any legally sufficient inquiry as to the real
identity or existence of the supposed payor.
To assure itself properly of the due existence (as well as
eligibility and qualification) of the putative consortium, Comelec's
BAC should have examined the bidding documents submitted on
behalf of MPC. They would have easily discovered the following fatal
flaws.
xxx xxx xxx
The Eligibility Envelope was to contain  legal documents such
as articles of incorporation, . . . to establish the bidder's financial
capacity.
In the case of a consortium or joint venture desirous of
participating in the bidding, it goes without saying that the Eligibility
Envelope would necessarily have to include a copy of the joint venture
agreement, the consortium agreement or memorandum of agreement
— or a business plan or some other instrument of similar import —
establishing the due existence, composition and scope of such
aggrupation. Otherwise, how would Comelec know who it was dealing
with, and whether these parties are qualified and capable of
delivering the products and services being offered for bidding?
In the instant case, no such instrument was submitted to
Comelec during the bidding process. . . .
xxx xxx xxx
However, there is no sign whatsoever of any joint venture
agreement, consortium agreement, memorandum of agreement, or
business plan executed among the members of the purported
consortium.  SDHTEC

The only logical conclusion is that no such agreement was

ever submitted to the Comelec for its consideration, as part of the
bidding process.
 It thus follows that, prior the award of the Contract, there
was no documentary or other basis for Comelec to conclude that a
consortium had actually been formed amongst MPEI, SK C&C
and WeSolv, along with Election.com and ePLDT. Neither was
there anything to indicate the exact relationships between and among
these firms; their diverse roles, undertakings and prestations, if any,
relative to the prosecution of the project, the extent of their respective
investments (if any) in the supposed consortium or in the project; and
the precise nature and extent of their respective liabilities with respect
to the contract being offered for bidding. And apart from the self-
serving letter of March 7, 2003, there was not even any indication that
MPEI was the lead company duly authorized to act on behalf of the
others.
xxx xxx xxx
Hence, had the proponent MPEI been evaluated based
solely on its own experience, financial and operational track
record or lack thereof, it would surely not have qualified and
would have been immediately considered ineligible to bid, as
respondents readily admit.
xxx xxx xxx
At this juncture, one might ask: What, then, if there are four
MOAs instead of one or none at all? Isn't it enough that there are these
corporations coming together to carry out the automation project? Isn't
it true, as respondent aver, that nowhere in the RFP issued by Comelec
is it required that the members of the joint venture execute a single
written agreement to prove the existence of a joint venture. . . . 
xxx xxx xxx
The problem is not that there are four agreements instead of
only one. The problem is that Comelec never bothered to check. It
never based its decision on documents or other proof that would
concretely establish the existence of the claimed consortium or joint
venture or agglomeration.
xxx xxx xxx
True, copies of financial statements and incorporation papers
of the alleged "consortium" members were submitted. But these papers
did not establish the existence of a consortium, as they could have
been provided by the companies concerned for purposes other than to
prove that they were part of a consortium or joint venture.
xxx xxx xxx
In brief, despite the absence of competent proof as to the
existence and eligibility of the alleged consortium (MPC), its
capacity to deliver on the Contract, and the members' joint and
several liability therefor, Comelec nevertheless assumed that such
consortium existed and was eligible. It then went ahead and
considered the bid of MPC, to which the Contract was eventually
awarded, in gross violation of the former's own bidding rules and
procedures contained in its RFP. Therein lies Comelec's grave
abuse of discretion.
Sufficiency of the Four Agreements
Instead of one multilateral agreement executed by, and
effective and binding on, all the five "consortium members" — as
earlier claimed by Commissioner Tuason in open court — it turns out
that what was actually executed were four (4) separate and distinct
bilateral Agreements. Obviously, Comelec was furnished copies of
these Agreements only after the bidding process had been
terminated, as these were not included in the Eligibility
Documents. . . .
xxx xxx xxx
At this point, it must be stressed most vigorously that the
submission of the four bilateral Agreements to Comelec after the
end of the bidding process did nothing to eliminate the grave abuse
of discretion it had already committed on April 15, 2003.
Deficiencies Have Not Been "Cured"
In any event, it is also claimed that the automation Contract
awarded by Comelec incorporates all documents executed by the
"consortium" members, even if these documents are not referred to
therein. . . . 
AScHCD

xxx xxx xxx

Thus, it is argued that whatever perceived deficiencies there
were in the supplementary contracts — those entered into by MPEI
and the other members of the "consortium" as regards their joint and
several undertakings — have been cured. Better still, such deficiencies
have supposedly been prevented from arising as a result of the above-
quoted provisions, from which it can be immediately established that
each of the members of MPC assumes the same joint and several
liability as the other members.
The foregoing argument is unpersuasive. First, the contract
being referred to, entitled "The Automated Counting and
Canvassing Project Contract," is between Comelec and MPEI, not
the alleged consortium, MPC. To repeat, it is MPEI — not MPC
— that is a party to the Contract. Nowhere in that Contract is there
any mention of a consortium or joint venture, of members thereof,
much less of joint and several liability. Supposedly executed
sometime in May 2003, the Contract bears a notarization date of
June 30, 2003, and contains the signature of Willy U. Yu signing as
president of MPEI (not for and on behalf of MPC), along with that
of the Comelec chair. It provides in Section 3.2 that MPEI (not
MPC) is to supply the Equipment and perform the Services under
the Contract, in accordance with the appendices thereof; nothing
whatsoever is said about any consortium or joint venture or
partnership.
xxx xxx xxx
Eligibility of a Consortium Based on the Collective
Qualifications of Its Members
Respondents declare that, for purposes of assessing the
eligibility of the bidder, the members of MPC should be evaluated on a
collective basis. Therefore, they contend, the failure of MPEI to
submit financial statements (on account of its recent
incorporation) should not by itself disqualify MPC, since the other
members of the "consortium" could meet the criteria set out in the
RFP.
xxx xxx xxx
Unfortunately, this argument seems to assume that the
"collective" nature of the undertaking of the members of MPC, their
contribution of assets and sharing of risks, and the "community" of
their interest in the performance of the Contract entitle MPC to be
treated as a joint venture or consortium; and to be evaluated
accordingly on the basis of the members' collective qualifications
when, in fact, the evidence before the Court suggest otherwise. 
xxx xxx xxx
Going back to the instant case, it should be recalled that the
automation Contract with Comelec was not executed by the
"consortium" MPC — or by MPEI for and on behalf of MPC —
but by MPEI, period. The said Contract contains no mention
whatsoever of any consortium or members thereof. This fact alone
seems to contradict all the suppositions about a joint undertaking
that would normally apply to a joint venture or consortium: that it
is a commercial enterprise involving a community of interest, a
sharing of risks, profits and losses, and so on.
xxx xxx xxx
To the Court, this strange and beguiling arrangement of MPEI
with the other companies does not qualify them to be treated as a
consortium or joint venture, at least of the type that government
agencies like the Comelec should be dealing with. With more reason is
it unable to agree to the proposal to evaluate the members of MPC on a
collective basis. (Emphases supplied)
 These findings found their way into petitioner's application for a writ of
preliminary attachment, 75 in which it claimed the following as bases for fraud:
(1) respondents committed fraud by securing the election automation contract
and, in order to perpetrate the fraud, by misrepresenting the actual bidder as
MPC and MPEI as merely acting on MPC's behalf; (2) while knowing that
MPEI was not qualified to bid for the automation contract, respondents still
signed and executed the contract; and (3) respondents acted in bad faith when
they claimed that they had bound themselves to the automation contract,
because it was not executed by MPC — or by MPEI on MPC's behalf — but
by MPEI alone. 76
We agree with petitioner that respondent MPEI committed fraud by
securing the election automation contract; and, in order to perpetrate the fraud,
by misrepresenting that the actual bidder was MPC and not MPEI, which was
only acting on behalf of MPC. We likewise rule that respondent MPEI has
defrauded petitioner, since the former still executed the automation contract
despite knowing that it was not qualified to bid for the same.
The established facts surrounding the eligibility, qualification and
existence of MPC — and of MPEI for that matter — and the subsequent
execution of the automation contract with the latter, when all taken together,
constitute badges of fraud that We simply cannot ignore. MPC was considered
an illegitimate entity, because its existence as a joint venture had not been
established. Notably, the essential document/s that would have shown its
eligibility as a joint venture/consortium were not presented to the COMELEC
at the most opportune time, that is, during the qualification stage of the bidding
process. The concealment by respondent MPEI of the essential documents
showing its eligibility to bid as part a joint venture is too obvious to be missed.
How could it not have known that the very document showing MPC as a joint
venture should have been included in their eligibility envelope?  AcICHD

Likewise notable is the fact that these supposed agreements, allegedly

among the supposed consortium members, were belatedly provided to the
COMELEC after the bidding process had been terminated, these were not
included in the Eligibility Documents earlier submitted by MPC. Similarly, as
found by this Court, these documents did not prove any joint venture
agreement among the parties in the first place, but were actually individual
agreements executed by each member of the supposed consortium with
respondent MPEI.
More startling to the dispassionate mind is the incongruence between
the supposed actual bidder MPC, on one hand, and, on the other, respondent
MPEI, which executed the automation contract. Significantly, respondent
MPEI was not even eligible and qualified to bid in the first place; and yet, the
automation contract itself was executed and signed singly by respondent
MPEI, not on behalf of the purported bidder MPC, without any mention
whatsoever of the members of the supposed consortium.
From these established facts, We can surmise that in order to secure the
automation contract, respondent MPEI perpetrated a scheme against petitioner
by using MPC as supposed bidder and eventually succeeding in signing the
automation contract as MPEI alone. Worse, it was respondent MPEI alone, an
entity that was ineligible to bid in the first place, that eventually executed the
automation contract.
To a reasonable mind, the entire situation reeks of fraud, what with the
misrepresentation of identity and misrepresentation as to creditworthiness. It is
in these kinds of fraudulent instances, when the ability to abscond is greatest,
to which a writ of attachment is precisely responsive.
Further, the failure to attach the eligibility documents is tantamount to
failure on the part of respondent MPEI to disclose material facts. That omission
constitutes fraud.
Pursuant to Article 1339 of the Civil Code, 77 silence or concealment
does not, by itself, constitute fraud, unless there is a special duty to disclose
certain facts, or unless the communication should be made according to good
faith and the usages of commerce. 78
Fraud has been defined to include an inducement through insidious
machination. Insidious machination refers to a deceitful scheme or plot with an
evil or devious purpose. Deceit exists where the party, with intent to
deceive, conceals or omits to state material facts and, by reason of such
omission or concealment, the other party was induced to give consent that
would not otherwise have been given. 79
One form of inducement is covered within the scope of the crime of
estafa under Article 315, paragraph 2, of the Revised Penal Code, in which,
any person who defrauds another by using fictitious name, or falsely pretends
to possess power, influence, qualifications, property, credit, agency, business
or imaginary transactions, or by means of similar deceits executed prior to or
simultaneously with the commission of fraud is held criminally liable.
In Joson v. People, 80 this Court explained the element of defraudation by
means of deceit, by giving a definition of fraud and deceit, in this wise:
What needs to be determined therefore is whether or not the element of
defraudation by means of deceit has been established beyond
reasonable doubt.
In the case of People v. Menil, Jr., the Court has defined fraud
and deceit in this wise:
Fraud, in its general sense, is deemed to
comprise anything calculated to deceive, including all
 acts, omissions, and concealment involving a breach of
legal or equitable duty, trust, or confidence justly
reposed, resulting in damage to another, or by which an
undue and unconscientious advantage is taken of
another. It is a generic term embracing all multifarious
means which human ingenuity can devise, and which
are resorted to by one individual to secure an advantage
over another by false suggestions or by suppression of
truth and includes all surprise, trick, cunning,
dissembling and any unfair way by which another is
cheated. On the other hand, deceit is the false
representation of a matter of fact, whether by words
or conduct, by false or misleading allegations, or by
concealment of that which should have been
disclosed which deceives or is intended to deceive
another so that he shall act upon it to his legal
injury. (Emphases supplied)
For example, in People v. Comila, 81 both accused-appellants therein
represented themselves to the complaining witnesses to have the capacity to
send them to Italy for employment, even as they did not have the authority or
license for the purpose. It was such misrepresentation that induced the
complainants to part with their hard-earned money for placement and medical
fees. Both accused-appellants were criminally held liable for estafa.  TAIaHE

In American jurisprudence, fraud may be predicated on a false

introduction or identification. 82 In Union Co. v. Cobb, 83 the defendant therein
procured the merchandise by misrepresenting that she was Mrs. Taylor Ray
and at another time she was Mrs. Ben W. Chiles, and she forged their name on
charge slips as revealed by the exhibits of the plaintiff. The sale of the
merchandise was induced by these representations, resulting in injury to the
plaintiff.
In Raser v. Moomaw, 84 it was ruled that the essential elements
necessary to constitute actionable fraud and deceit were present in the
complaint. It was alleged that, to induce plaintiff to procure a loan, defendant
introduced him to a woman who was falsely represented to be Annie L.
Knowles of Seattle, Washington, the owner of the property, and that plaintiff
had no means of ascertaining her true identity. On the other hand, defendant
knew, or in the exercise of reasonable caution should have known, that she was
an impostor, and that plaintiff relied on the representations, induced his client
to make the loan, and had since been compelled to repay it. In the same case,
the Court ruled that false representations as to the identity of a person are
actionable, if made to induce another to act thereon, and such other does so act
thereon to his prejudice. 85
 In this case, analogous to the fraud and deceit exhibited in the
abovementioned circumstances, respondent MPEI had no excuse not to be
forthright with the documents showing MPC's eligibility to bid as a joint
venture. The Invitation to Bid, as quoted in our 2004 Decision, could not have
been any clearer when it stated that only bids from qualified entities, such as a
joint venture, would be entertained:  ICHDca

INVITATION TO APPLY FOR ELIGIBILITY AND TO BID

The Commission on Elections (COMELEC), pursuant to the
mandate of Republic Act Nos. 8189 and 8436, invites interested
offerors, vendors, suppliers or lessors to apply for eligibility and to bid
for the procurement by purchase, lease, lease with option to purchase,
or otherwise, supplies, equipment, materials and services needed for a
comprehensive Automated Election System, consisting of three (3)
phases: (a) registration/verification of voters, (b) automated counting
and consolidation of votes, and (c) electronic transmission of election
results, with an approved budget of TWO BILLION FIVE HUNDRED
MILLION (Php2,500,000,000) Pesos.
Only bids from the following entities shall be entertained:
xxx xxx xxx
d. Manufacturers, suppliers and/or distributors forming
themselves into a joint venture, i.e., a group of two (2) or more
manufacturers, suppliers and/or distributors that intend to be
jointly and severally responsible or liable for a particular contract,
provided that Filipino ownership thereof shall be at least sixty
percent (60%); and
e. Cooperatives duly registered with the Cooperatives
Development Authority. 86 (Emphases supplied)
No reasonable mind would argue that documents showing the very
existence of a joint venture need not be included in the bidding envelope
showing its existence, qualification, and eligibility to undertake the project,
considering that the purpose of prequalification in any public bidding is to
determine, at the earliest opportunity, the ability of the bidder to undertake the
project. 87
As found by this Court in its 2004 Decision, it appears that the
documents that were submitted after the bidding, which respondents claimed
would prove the existence of the relationship among the members of the
consortium, were actually separate agreements individually executed by the
supposed members with MPEI. We had ruled that these documents were highly
irregular, considering that each of the four different and separate bilateral
Agreements was valid and binding only between MPEI and the other
contracting party, leaving the other "consortium" members total strangers
thereto. Consequently, the other consortium members had nothing to do with
one another, as each one dealt only with MPEI. 88
Considering that they merely showed MPEI's individual agreements
with the other supposed members, these agreements confirm to our mind the
fraudulent intent on the part of respondent MPEI to deceive the relevant
officials about MPC. The intent was to cure the deficiency of the winning bid,
which intent miserably failed. Said this Court: 89
We are unconvinced, PBAC was guided by the rules,
regulations or guidelines existing before the bid proposals were
opened on November 10, 1989. The basic rule in public bidding is
that bids should be evaluated based on the required documents
submitted before and not after the opening of bids. Otherwise, the
foundation of a fair and competitive public bidding would be
defeated. Strict observance of the rules, regulations, and guidelines
of the bidding process is the only safeguard to a fair, honest and
competitive public bidding.
In underscoring the Court's strict application of the pertinent
rules, regulations and guidelines of the public bidding process, We
have ruled in C & C Commercial vs. Menor (L-28360, January 27,
1983, 120 SCRA 112), that Nawasa properly rejected a bid of C & C
Commercial to supply asbestos cement pressure which bid did not
include a tax clearance certificate as required by Administrative Order
No. 66 dated June 26, 1967. In Caltex (Phil.), Inc., et al. vs. Delgado
Brothers, Inc., et al., (96 Phil. 368, 375), We stressed that public
biddings are held for the protection of the public and the public should
be given the best possible advantages by means of open competition
among the bidders.
xxx xxx xxx
INTER TECHNICAL's failure to comply with what is
perceived to be an elementary and customary practice in a public
bidding process, that is, to enclose the Form of Bid in the original
and eight separate copies of the bidding documents submitted to
the bidding committee is fatal to its cause. All the four pre-qualified
bidders which include INTER TECHNICAL were subject to Rule IB
2.1 of the Implementing Rules and Regulations of P.D. 1594 in the
preparation of bids, bid bonds, and pre-qualification statement and
Rule IB 2.8 which states that the Form of Bid, among others, shall
form part of the contract. INTER TECHNICAL's explanation that its
bid form was inadvertently left in the office (p. 6, Memorandum for
Private Respondent, p. 355, Rollo) will not excuse compliance with
such a simple and basic requirement in the public bidding process
involving a multi-million project of the Government. There should be
strict application of the pertinent public bidding rules, otherwise
the essential requisites of fairness, good faith, and competitiveness
 in the public bidding process would be rendered meaningless.
(Emphases supplied) TCAScE

All these circumstances, taken together, reveal a scheme on the part of

respondent MPEI to perpetrate fraud against the government. The purpose of
the scheme was to ensure that MPEI, an entity that was ineligible to bid in the
first place, would eventually be awarded the contract. While respondent argues
that it was merely a passive participant in the bidding process, We cannot
ignore its cavalier disregard of its participation in the now voided automation
contract.
B. Fraud on the part of respondent MPEI
was further shown by the fact that despite
the failure of its ACMs to pass the tests
conducted by the DOST, respondent still
acceded to being awarded the automation
contract.
Another token of fraud is established by Our findings in relation to the
failure of the ACMs to pass the tests of the DOST. We quote herein the
pertinent portions of this Court's 2004 Decision in relation thereto:
After respondent "consortium" and the other bidder, TIM, had
submitted their respective bids on March 10, 2003, the Comelec's
BAC — through its Technical Working Group (TWG) and the DOST
— evaluated their technical proposals.
xxx xxx xxx
According to respondents, it was only after the TWG and the
DOST had conducted their separate tests and submitted their
respective reports that the BAC, on the basis of these reports
formulated its comments/recommendations on the bids of the
consortium and TIM.
The BAC, in its Report dated April 21, 2003, recommended
that the Phase II project involving the acquisition of automated
counting machines be awarded to MPEI. . . .
xxx xxx xxx
The BAC, however, also stated on page 4 of its
Report:  "Based on the 14 April 2003 report (Table 6) of the DOST,
it appears that both Mega-Pacific and TIM (Total Information
Management Corporation) failed to meet some of the requirements. .
. . 
xxx xxx xxx
Failure to Meet the Required Accuracy Rating
 The first of the key requirements was that the counting
machines were to have an accuracy rating of at least 99.9995
percent. The BAC Report indicates that both Mega Pacific and
TIM failed to meet this standard.
The key requirement of accuracy rating happens to be part
and parcel of the Comelec's Request for Proposal (RFP). . . .
xxx xxx xxx
. . . Whichever accuracy rating is the right standard — whether
99.995 or 99.9995 percent — the fact remains that the machines of the
so-called "consortium" failed to even reach the lesser of the two. On
this basis alone, it ought to have been disqualified and its bid rejected
outright.
At this point, the Court stresses that the essence of public
bidding is violated by the practice of requiring very high
standards or unrealistic specifications that cannot be met — like
the 99.9995 percent accuracy rating in this case — only to water
them down after the bid has been award. [sic] Such scheme, which
discourages the entry of prospective  bona fide bidders, is in fact a
sure indication of fraud in the bidding, designed to eliminate fair
competition. Certainly, if no bidder meets the mandatory
requirements, standards or specifications, then no award should
be made and a failed bidding declared.
xxx xxx xxx
Failure of Software to Detect Previously Downloaded Data
Furthermore, on page 6 of the BAC Report, it appears that
the "consortium" as well as TIM failed to meet another key
requirement — for the counting machine's software program to
be  able to detect previously downloaded precinct results and to
prevent these from being entered again into the counting machine.
This same deficiency on the part of both bidders reappears on page 7
of the BAC Report, as a result of the recurrence of their failure to meet
the said key requirement.
That the ability to detect previously downloaded data at
different canvassing or consolidation levels is deemed of utmost
importance can be seen from the fact that it is repeated three times in
the RFP. . . . .
Once again, though, Comelec chose to ignore this crucial
deficiency, which should have been a cause for the gravest
concern. . . . .
xxx xxx xxx
Inability to Print the Audit Trail
 But that grim prospect is not all. The BAC Report, on pages 6
and 7, indicate that the ACMs of both bidders were unable to print the
audit trail without any loss of data. In the case of MPC, the audit trail
system was "not yet incorporated" into its ACMs.  cTDaEH

xxx xxx xxx

Thus, the RFP on page 27 states that the ballot counting
machines and ballot counting software must print an audit trail of
all machine operations for documentation and verification
purposes. Furthermore, the audit trail must be stored on the internal
storage device and be available on demand for future printing and
verifying. On pages 30-31, the RFP also requires that
the city/municipal canvassing system software be able to print an
audit trail of the canvassing operations, including therein such data
as the date and time the canvassing program was started, the log-in of
the authorized users (the identity of the machine operators), the date
and time the canvass data were downloaded into the canvassing
system, and so on and so forth. On page 33 of the RFP, we find the
same audit trail requirement with respect to
theprovincial/district canvassing system software; and again on pages
35-36 thereof, the same audit trail requirement with respect to
the national canvassing system software.
xxx xxx xxx
The said provision which respondents have quoted several
times, provides that ACMs are to possess certain features divided into
two classes: those that the statute itself considers mandatory and other
features or capabilities that the law deems optional. Among those
considered mandatory are "provisions for audit trails"! . . . .
In brief, respondents cannot deny that the provision
requiring audit trails is indeed mandatory, considering the
wording of Section 7 of RA 8436. Neither can Respondent Comelec
deny that it has relied on the BAC Report, which indicates that the
machines or the software was deficient in that respect. And yet, the
Commission simply disregarded this shortcoming and awarded the
Contract to private respondent, thereby violating the very law it was
supposed to implement. 90 (Emphases supplied)
The above-mentioned findings were further echoed by this Court in its
2006 Resolution with a categorical conclusion that the bidding process was
void and fraudulent. 91
Again, these factual findings found their way into the application of
petitioner for a writ of preliminary attachment, 92 as it claimed that respondents
could not dissociate themselves from their telltale acts of supplying defective
machines and nonexistent software. 93 The latter offered no defense in relation
to these claims.
 We see no reason to deviate from our finding of fraud on the part of
respondent MPEI in the 2004 Decision and 2006 Resolution. Despite its failure
to meet the mandatory requirements set forth in the bidding procedure,
respondent still acceded to being awarded the contract. These circumstances
reveal its ploy to gain undue advantage over the other bidders in general, even
to the extent of cheating the government.
The word "bidding" in its comprehensive sense means making an offer
or an invitation to prospective contractors, whereby the government manifests
its intention to make proposals for the purpose of securing supplies, materials,
and equipment for official business or public use, or for public works or
repair. 94 Three principles involved in public bidding are as follows: (1) the
offer to the public; (2) an opportunity for competition, and (3) a basis for an
exact comparison of bids. A regulation of the matter, which excludes any of
these factors, destroys the distinctive character of the system and thwarts the
purpose of its adoption. 95 
cSaATC

In the instant case, We infer from the circumstances that respondent

MPEI welcomed and allowed the award of the automation contract, as it
executed the contract despite the full knowledge that it had not met the
mandatory requirements set forth in the RFP. Respondent acceded to and
benefitted from the watering down of these mandatory requirements, resulting
in undue advantage in its favor. The fact that there were numerous mandatory
requirements that were simply set aside to pave the way for the award of the
automation contract does not escape the attention of this Court. Respondent
MPEI, through respondent Willy, signed and executed the automation contract
with COMELEC. It is therefore preposterous for respondent argue that it was a
"passive participant" in the whole bidding process.
We reject the CA's denial of petitioner's plea for the ancillary remedy of
preliminary attachment, considering that the cumulative effect of the factual
findings of this Court establishes a sufficient basis to conclude that fraud had
attended the execution of the automation contract. Such fraud is deducible
from the 2004 Decision and further upheld in the 2006 Resolution. It was
incongruous, therefore, for the CA to have denied the application for a writ of
preliminary attachment, when the evidence on record was the same that was
used to demonstrate the propriety of the issuance of the writ of preliminary
attachment. This was the same evidence that We had already considered and
passed upon, and on which We based Our 2004 Decision to nullify the
automation contract. It would not be right for this Court to ignore these illegal
transactions, as to do so would be tantamount to abandoning its constitutional
duty of safeguarding public interest.
II.
Application of the piercing doctrine justifies the issuance
 of a writ of preliminary attachment over the properties
of the individual respondents.
Individual respondents argue that since they were not parties to the 2004
case, any factual findings or conclusions therein should not be binding upon
them. 96 Since they were strangers to that case, they are not bound by the
judgment rendered by this Court. 97 They claim that their fundamental right to
due process would be violated if their properties were to be attached for a
purported corporate debt on the basis of a court ruling in a case in which they
were not given the right or opportunity to be heard. 98
We cannot subscribe to this argument. In the first place, it could not be
reasonably expected that individual respondents would be impleaded in the
2004 case. As admitted by respondents, the issues resolved in the 2004
Decision were limited to the following: (1) whether to declare Resolution No.
6074 of the COMELEC null and void; (2) whether to enjoin the
implementation of any further contract that may have been entered into by
COMELEC with MPC or MPEI; and (3) whether to compel COMELEC to
conduct a rebidding of the project. To implead individual respondents then was
improper, considering that the automation contract was entered into by
respondent MPEI. This Court even acknowledged this fact by directing that the
liabilities of persons responsible for the nullity of the contract be determined in
another appropriate proceeding and by directing the OSG to undertake
measures to protect the interests of the government.
At any rate, individual respondents have been fully afforded the right to
due process by being impleaded and heard in the subsequent proceedings
before the courts a quo. Finally, they cannot argue violation of due process, as
respondent MPEI, of which they are incorporators/stockholders, remains
vulnerable to the piercing of its corporate veil.
A. There are red flags indicating that
MPEI was used to perpetrate the fraud
against petitioner, thus allowing the
piercing of its corporate veil.
Petitioner seeks the issuance of a writ of preliminary attachment over
the personal assets of the individual respondents, notwithstanding the doctrine
of separate juridical personality. 99 It invokes the use of the doctrine of
piercing the corporate veil, to which the canon of separate juridical personality
is vulnerable, as a way to reach the personal properties of the individual
respondents. Petitioner paints a picture of a sham corporation set up by all the
individual respondents for the purpose of securing the automation contract.
We agree with petitioner.
 Veil-piercing in fraud cases requires that the legal fiction of separate
juridical personality is used for fraudulent or wrongful ends. 100 For reasons
discussed below, We see red flags of fraudulent schemes in public
procurement, all of which were established in the 2004 Decision, the totality of
which strongly indicate that MPEI was a sham corporation formed merely for
the purpose of perpetrating a fraudulent scheme.  cHDAIS

The red flags are as follows: (1) overly narrow specifications; (2)
unjustified recommendations and unjustified winning bidders; (3) failure to
meet the terms of the contract; and (4) shell or fictitious company. We shall
discuss each in detail.
Overly Narrow Specifications
The World Bank's Fraud and Corruption Awareness Handbook: A
Handbook for Civil Servants Involved in Public Procurement, (Handbook)
identifies an assortment of fraud and corruption indicators and relevant
schemes in public procurement. 101 One of the schemes recognized by the
Handbook is rigged specifications:
Scheme: Rigged specifications. In a competitive market for goods
and services, any specifications that seem to be drafted in a way that
favors a particular company deserve closer scrutiny. For
example, specifications that are too narrow can be used to exclude
other qualified bidders or justify improper sole source awards. Unduly
vague or broad specifications can allow an unqualified bidder to
compete or justify fraudulent change orders after the contract is
awarded. Sometimes, project officials will go so far as to allow the
favored bidder to draft the specifications. 102
In Our 2004 Decision, We identified a red flag of rigged bidding in the
form of overly narrow specifications. As already discussed, the accuracy
requirement of 99.9995 percent was set up by COMELEC bidding rules. This
Court recognized that this rating was "too high and was a sure indication of
fraud in the bidding, designed to eliminate fair competition." 103 Indeed,
"the essence of public bidding is violated by the practice of requiring very high
standards or unrealistic specifications that cannot be met . . . only to water
them down after the bid has been award(ed)." 104
Unjustified Recommendations and
Unjustified Winning Bidders
Questionable evaluation in a Bid Evaluation Report (BER) is an
indicator of bid rigging. The Handbook expounds:
Questionable evaluation and unusual bid patterns may emerge in
the BER. After the completion of the evaluation process, the Bid
Evaluation Committee should present to the implementing agency
its BER, which describes the results and the process by which the
 BEC has evaluated the bids received. The BER may include a
number of indicators of bid rigging, e.g., questionable
disqualifications, and unusual bid patterns. 105
The Handbook lists unjustified recommendations and unjustified
winning bidders as red flags of a rigged bidding. 106
The red flags of questionable recommendation and unjustified awards
are raised in this case. As earlier discussed, the project was awarded to MPC,
which proved to be a nonentity. It was MPEI that actually participated in the
bidding process, but it was not qualified to be a bidder in the first place.
Moreover, its ACMs failed the accuracy requirement set by COMELEC. Yet,
MPC — the nonentity — obtained a favorable recommendation from the BAC,
and the automation contract was awarded to the former.
Failure to Meet Contract Terms
Failure to meet the terms of a contract is regarded as a fraud by the
Handbook:
Scheme: Failure to meet contract terms. Firms may deliberately fail to
comply with contract requirements. The contractor will attempt to
conceal such actions often by falsifying or forging supporting
documentation and bill for the work as if it were done in accordance
with specifications. In many cases, the contractors must bribe
inspection or project personnel to accept the substandard goods or
works, or supervision agents are coerced to approve substandard work.
. . . 107 
ISHCcT

As mentioned earlier, this Court already found the ACMs to be below

the standards set by the COMELEC. We reiterated their noncompliant status in
Our 2005 and 2006 Resolutions.
As early as 2005, when the COMELEC sought permission from this
Court to utilize the ACMs in the then scheduled ARMM elections, We
declared that the proposed use of the machines would expose the ARMM
elections to the same dangers of massive electoral fraud that would have been
inflicted by the projected automation of the 2004 national elections. We based
this pronouncement on the fact that the COMELEC failed to show that the
deficiencies had been cured. 108 Yet again, this Court in 2006 blocked
another attempt to use the ACMs, this time for the 2007 elections. We
reiterated that because the ACMs had merely remained idle and unused since
their last evaluation, in which they failed to hurdle the crucial tests, then their
defects and deficiencies could not have been cured by then. 109
Based on the foregoing, the ACMs delivered were plagued with defects
that made them fail the requirements set for the automation project.
Shell or fictitious company
 The Handbook regards a shell or fictitious company as a "serious red
flag," a concept that it elaborates upon:
Fictitious companies are by definition fraudulent and may also serve
as fronts for government officials. The typical scheme involves corrupt
government officials creating a fictitious company that will serve as a
"vehicle" to secure contract awards. Often, the fictitious — or ghost —
company will subcontract work to lower cost and sometimes
unqualified firms. The fictitious company may also utilize designated
losers as subcontractors to deliver the work, thus indicating collusion.
Shell companies have no significant assets, staff or operational
capacity. They pose a serious red flag as a bidder on public contracts,
because they often hide the interests of project or government officials,
concealing a conflict of interest and opportunities for money
laundering. Also, by definition, they have no experience. 110
MPEI qualifies as a shell or fictitious company. It was nonexistent at the
time of the invitation to bid; to be precise, it was incorporated only 11 days
before the bidding. It was a newly formed corporation and, as such, had no
track record to speak of.
Further, MPEI misrepresented itself in the bidding process as "lead
company" of the supposed joint venture. The misrepresentation appears to have
been an attempt to justify its lack of experience. As a new company, it was not
eligible to participate as a bidder. It could do so only by pretending that it was
acting as an agent of the putative consortium.
The timing of the incorporation of MPEI is particularly noteworthy. Its
close nexus to the date of the invitation to bid and the date of the bidding (11
days) provides a strong indicium of the intent to use the corporate vehicle for
fraudulent purposes. This proximity unmistakably indicates that the automation
contract served as motivation for the formation of MPEI: a corporation had to
be organized so it could participate in the bidding by claiming to be an agent of
a pretended joint venture.
The timing of the formation of MPEI did not escape the scrutiny of
Justice Angelina Sandoval-Gutierrez, who made this observation in her
Concurring Opinion in the 2004 Decision:
At this juncture, it bears stressing that MPEI was incorporated only
on  February 27, 2003 as evidenced by its Certificate of Incorporation.
This goes to show that from the time the COMELEC issued its
Invitation to Bid (January 28, 2003) and Request for
Proposal  (February 17, 2003) up to the time it convened the Pre-bid
Conference (February 18, 2003), MPEI was literally a non-existent
entity. It came into being only on February 27, 2003 or eleven (11)
days prior to the submission of its bid, i.e.,  March 10, 2003. This
poses a legal obstacle to its eligibility as a bidder. The Request for
 Proposal requires the bidder to submit financial documents that will
establish to the BAC's satisfaction its financial capability which
include:
(1)  audited financial statements of the Bidder's firm for
the last three (3) calendar years, stamped
"RECEIVED" by the appropriate government agency,
to show its capacity to finance the manufacture and
supply of Goods called for and a statement or record of
volumes of sales;
(2) Balance Sheet; CAacTH

(3) Income Statement; and

(4) Statement of Cash Flow.
As correctly pointed out by petitioners, how could MPEI comply with
the above requirement of audited financial statements for the last three
(3) calendar years if it came into existence only eleven (11) days prior
to the bidding?
To do away with such complication, MPEI asserts that it was MP
CONSORTIUM who submitted the bid on March 10, 2003. It pretends
compliance with the requirements by invoking the financial
capabilities and long time existence of the alleged members of the MP
CONSORTIUM, namely, Election.Com, WeSolv, SK CeC, ePLDT
and Oracle. It wants this Court to believe that it is MP CONSORTIUM
who was actually dealing with the COMELEC and that its (MPEI)
participation is merely that of a "lead company and proponent" of the
joint venture. This is hardly convincing. For one, the contract for the
supply and delivery of ACM was between COMELEC and MPEI, not
MP CONSORTIUM.  As a matter of fact, there cannot be found in the
contract any reference to the MP CONSORTIUM or any member
thereof for that matter. For another, the agreements among the alleged
members of MP CONSORTIUM do not show the existence of a joint-
venture agreement. Worse, MPEI cannot produce the agreement as to
the "joint and several liability" of the alleged members of the MP
CONSORTIUM as required by this Court in its Resolution dated
October 7, 2003. 111
Respondent MPEI was formed to
perpetrate the fraud against petitioner.
The totality of the red flags found in this case leads Us to the inevitable
conclusion that MPEI was nothing but a sham corporation formed for the
purpose of defrauding petitioner. Its ultimate objective was to secure the
P1,248,949,088 automation contract. The scheme was to put up a corporation
that would participate in the bid and enter into a contract with the COMELEC,
even if the former was not qualified or authorized to do so.
 Without the incorporation of MPEI, the defraudation of the government
would not have been possible. The formation of MPEI paved the way for its
participation in the bid, through its claim that it was an agent of a supposed
joint venture, its misrepresentations to secure the automation contract, its
misrepresentation at the time of the execution of the contract, its delivery of the
defective ACMs, and ultimately its acceptance of the benefits under the
automation contract.
The foregoing considered, veil-piercing is justified in this case.
We shall next consider the question of whose assets shall be reached by
the application of the piercing doctrine.
B. Because all the individual
respondents actively participated in the
perpetration of the fraud against petitioner,
their personal assets may be subject to a
writ of preliminary attachment by piercing
the corporate veil.
A corporation's privilege of being treated as an entity distinct and
separate from the stockholders is confined to legitimate uses, and is subject to
equitable limitations to prevent its being exercised for fraudulent, unfair, or
illegal purposes. 112 As early as the 19th century, it has been held that:  IAETDc

The general proposition that a corporation is to be regarded as a legal

entity, existing separate and apart from the natural persons composing
it, is not disputed; but that the statement is a mere fiction, existing only
in idea, is well understood, and not controverted by any one who
pretends to accurate knowledge on the subject. It has been introduced
for the convenience of the company in making contracts, in acquiring
property for corporate purposes, in suing and being sued, and to
preserve the limited liability of the stockholder by distinguishing
between the corporate debts and property of the company and of the
stockholders in their capacity as individuals. All fictions of law have
been introduced for the purpose of convenience, and to subserve
the ends of justice. It is in this sense that the maxim in fictione juris
subsistit aequitas is used, and the doctrine of fictions applied. But
when they are urged to an intent and purpose not within the
reason and policy of the fiction, they have always been disregarded
by the courts. Broom's, Legal Maxims 130. "It is a certain rule," says
Lord Mansfield, C.J., "that a fiction of law never be contradicted so as
to defeat the end for which it was invented, but for every other purpose
it may be contradicted." Johnson v. Smith, 2 Burr., 962. 113
The main effect of disregarding the corporate fiction is that stockholders
will be held personally liable for the acts and contracts of the corporation,
whose existence, at least for the purpose of the particular situation involved, is
ignored. 114
We have consistently held that when the notion of legal entity is used to
defeat public convenience, justify wrong, protect fraud, or defend crime, the
law will regard the corporation as an association of persons. 115 Thus,
considering that We find it justified to pierce the corporate veil in the case
before Us, MPEI must, perforce, be treated as a mere association of persons
whose assets are unshielded by corporate fiction. Such persons' individual
liability shall now be determined with respect to the matter at hand.
Contrary to respondent Willy's claims, his participation in the fraud is
clearly established by his unequivocal agreement to the execution of the
automation contract with the COMELEC, and his signature that appears on the
voided contract. As far back as in the 2004 Decision, his participation as a
signatory to the automation contract was already established:
The foregoing argument is unpersuasive. First, the contract
being referred to, entitled "The Automated Counting and Canvassing
Project Contract," is between Comelec and MPEI, not the alleged
consortium, MPC. To repeat, it is MPEI — not MPC — that is a party
to the Contract. Nowhere in that Contract is there any mention of a
consortium or joint venture, of members thereof, much less of joint
and several liability. Supposedly executed sometime in May 2003, the
Contract bears a notarization date of June 30, 2003,and contains the
signature of Willy U. Yu signing as president of MPEI (not for and
on behalf of MPC), along with that of the Comelec chair. It
provides in Section 3.2 that MPEI (not MPC) is to supply the
Equipment and perform the Services under the Contract, in accordance
with the appendices thereof; nothing whatsoever is said about any
consortium or joint venture or partnership. . . . (Emphasis supplied) 
That his signature appears on the automation contract means that he
agreed and acceded to its terms. 116 His participation in the fraud involves his
signing and executing the voided contract.
The execution of the automation contract with a non-eligible entity and
the subsequent award of the contract despite the failure to meet the mandatory
requirements were "badges of fraud" in the procurement process that should
have been recognized by the CA to justify the issuance of the writ of
preliminary attachment against the properties of respondent Willy.
With respect to the other individual respondents, petitioner, in its
Answer with Counterclaim, alleged:
30. Also, inasmuch as MPEI is in truth a mere shell corporation with
no real assets in its name, incorporated merely to feign eligibility for
the bidding of the automated contract when it in fact had none, to the
 great prejudice of the Republic,  plaintiff's individual incorporators
should likewise be made liable together with MPEI for the
automated contract amount paid to and received by the latter. The
following circumstances altogether manifest that the individual
incorporators merely cloaked themselves with the veil of corporate
fiction to perpetrate a fraud and to eschew liability therefor, thus:
xxx xxx xxx
f. From the time it was incorporated until today, MPEI has not
complied with the reportorial requirements of the
Securities and Exchange Commission;
g. Individual incorporators, acting fraudulently through
MPEI, and in violation of the bidding rules,
then subcontracted the automation contract to four
(4) other corporations, namely: WeSolve Corporation,
SK C&C, ePLDT and election.com, to comply with the
capital requirements, requisite five (5)-year corporate
standing and the technical qualifications of the Request
for Proposal;  DcHSEa

xxx xxx xxx 117

In response to petitioner's allegations, respondents Willy and Bonnie
stated in their Reply and Answer (Re: Answer with Counterclaim dated 28
June 2004): 118
3.3 As far as plaintiff MPEI and defendants-in-counterclaim
are concerned, they dealt with the COMELEC with full
transparency and in utmost good faith. All documents support its
eligibility to bid for the supply of the ACMs and their peripheral
services, were submitted to the COMELEC for its evaluation in full
transparency. Pertinently, neither plaintiff MPEI nor any of its
directors, stockholders, officers or employees had any participation in
the evaluation of the bids and eventual choice of the winning
bidder. 119
Respondents Johnson's and Bernard's denials were made in paragraphs
2.17 and 3.3 of their Answer with Counterclaim to the Republic's
Counterclaim, to wit: 120
2.17 The erroneous conclusion of fact and law in paragraph 30
(f) and (g) of the Republic's answer is denied, having been pleaded in
violation of the requirement, that only ultimate facts are to be stated in
the pleadings and they are falsehoods. The truth of the matter is that
there could not have been fraud, as these agreements were submitted to
the COMELEC for its evaluation and assessment, as to the
qualification of the Consortium as a bidder, a showing of transparency
in plaintiff's dealings with the Republic. 121
 3.3 As far as plaintiff MPEI and defendants-in-counterclaim
are concerned, they dealt with the COMELEC with full
transparency and in utmost good faith. All documents support its
eligibility to bid for the supply of the automated counting machines
and its peripheral services, were submitted to the COMELEC for its
evaluation in full transparency. Pertinently, the plaintiff or any of its
directors, stockholders, officers or employees had no participation in
the evaluation of the bids and eventual choice of the winning
bidder. 122
As regards Enrique and Rosita, the relevant paragraphs in the Answer
with Counterclaim to the Republic's Counterclaim 123 are quoted below:
2.17. The erroneous conclusion of fact and law in paragraph 30
(F) and (G) of the Republic's answer is denied, having been pleaded in
violation of the requirement, that only ultimate facts are to be stated in
the pleadings and they are falsehoods. The truth of the matter is that
there could not have been fraud, as these agreements were submitted to
the COMELEC for its evaluation and assessment, as to the
qualification of the Consortium as a bidder, a showing of transparency
in plaintiff's dealings with the Republic. 124
3.3. As far as the plaintiff and herein answering
defendants-in-counterclaim are concerned, they dealt with the
Commission on Elections with full transparency and in utmost
good faith. All documents in support of its eligibility to bid for the
supply of the automated counting machines and its peripheral services
were submitted to the Commission on Elections for its evaluation in
full transparency. Pertinently, the plaintiff or any of its directors,
stockholders, officers or employees had no participation in the
evaluation of the bids and eventual choice of the winning bidder. 125
Pedro and Laureano offer a similar defense in paragraph 3.3 of their
Reply and Answer with Counterclaim to the Republic's Counterclaim 126 dated
28 June 2004, which reads:
3.3. As far as plaintiff MPEI and defendants-in-counterclaim are
concerned, they dealt with the COMELEC with full transparency
and in utmost good faith. All documents support its eligibility to bid
for the supply of the ACMs and their peripheral services, were
submitted to the COMELEC for its evaluation in full transparency.
Pertinently, neither plaintiff MPEI nor any of its directors,
stockholders, officers or employees had any participation in the
evaluation of the bids and eventual choice of the winning bidder. 127
It can be seen from the above-quoted paragraphs that the individual
respondents never denied their participation in the questioned transactions of
MPEI, merely raising the defense of good faith and shifting the blame to the
COMELEC. The individual respondents have, in effect, admitted that they had
knowledge of and participation in the fraudulent subcontracting of the
automation contract to the four corporations.  SCaITA

It bears stressing that the remaining individual respondents, together

with respondent Willy, incorporated MPEI. As incorporators, they are expected
to be involved in the management of the corporation and they are charged with
the duty of care. This is one of the reasons for the requirement of ownership of
at least one share of stock by an incorporator:
The reason for this, as explained by the lawmakers, is to avoid
the confusion and/or ambiguities arising in a situation under the old
corporation law where there exists one set of incorporators who are
not even shareholders and another set of directors/incorporators
who must all be shareholders of the corporation. The people who
deal with said corporation at such an early stage are confused as to
who are the persons or group really authorized to act in behalf of the
corporation. (Proceedings of the Batasan Pambansa on the
Proposed Corporation Code). Another reason may be anchored on
the presumption that when an incorporator has pecuniary interest
in the corporation, no matter how minimal, he will be more
involved in the management of corporate affairs and to a greater
degree, be concerned with the welfare of the corporation. 128
As incorporators and businessmen about to embark on a new business
venture involving a sizeable capital (P300 million), the remaining individual
respondents should have known of Willy's scheme to perpetrate the fraud
against petitioner, especially because the objective was a billion peso
automation contract. Still, they proceeded with the illicit business venture.
It is clear to this Court that inequity would result if We do not attach
personal liability to all the individual respondents. With a definite finding that
MPEI was used to perpetrate the fraud against the government, it would be a
great injustice if the remaining individual respondents would enjoy the benefits
of incorporation despite a clear finding of abuse of the corporate vehicle.
Indeed, to allow the corporate fiction to remain intact would not subserve, but
instead subvert, the ends of justice. 
III.
The factual findings of this Court that have become final
cannot be modified or altered, much less reversed,
and are controlling in the instant case.
Respondents argue that the 2004 Decision did not resolve and could not
have resolved the factual issue of whether they had committed any fraud, as the
Supreme Court is not a trier of facts; and the 2004 case, being
a certiorari case, did not deal with questions of fact. 129
 Further, respondents argue that the findings of this Court ought to be
confined only to those issues actually raised and resolved in the 2004 case, in
accordance with the principle of conclusiveness of judgment. 130 They explain
that the issues resolved in the 2004 Decision were only limited to the
following: (1) whether to declare COMELEC Resolution No. 6074 null and
void; (2) whether to enjoin the implementation of any further contract that may
have been entered into by COMELEC with MPC or MPEI; and (3) whether to
compel COMELEC to conduct a rebidding of the project. 131
It is obvious that respondents are merely trying to escape the
implications or effects of the nullity of the automation contract that they had
executed. Section 1, Rule 65 of the Rules of Court, clearly sets forth the
instances when a petition for certiorari can be used as a proper remedy:
Section 1. Petition for certiorari. — When any tribunal, board or
officer exercising judicial or quasi-judicial functions has acted without
or in excess of its jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there is no appeal, or
any plain, speedy, and adequate remedy in the ordinary course of law,
a person aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that judgment be
rendered annulling or modifying the proceedings of such tribunal,
board or officer, and granting such incidental reliefs as law and justice
may require.
The term "grave abuse of discretion" has a specific meaning. An act of a
court or tribunal can only be considered to have been committed with grave
abuse of discretion when the act is done in a "capricious or whimsical exercise
of judgment as is equivalent to lack of jurisdiction." 132 The abuse of discretion
must be so patent and gross as to amount to an "evasion of a positive duty or to
a virtual refusal to perform a duty enjoined by law, or to act at all in
contemplation of law, as where the power is exercised in an arbitrary and
despotic manner by reason of passion and hostility." 133 Furthermore, the use
of a petition for certiorari is restricted only to "truly extraordinary cases
wherein the act of the lower court or quasi-judicial body is wholly
void." 134 From the foregoing definition, it is clear that the special civil action
of certiorari under Rule 65 can only strike down an act for having been done
with grave abuse of discretion if the petitioner could manifestly show that such
act was patent and gross. 135  aTHCSE

We had to ascertain from the evidence whether the COMELEC

committed grave abuse of discretion, and in the process, were justified in
making some factual findings. The conclusions derived from the factual
findings are inextricably intertwined with this Court's determination of grave
abuse of discretion. They have a direct bearing and are in fact necessary to
illustrate that the award of the automation contract was done hastily and in
direct violation of law. This Court has indeed made factual findings based on
the evidence presented before it; in turn, these factual findings constitute the
controlling legal rule between the parties that cannot be modified or amended
by any of them. This Court is bound to consider the factual findings made in
the 2004 Decision in order to declare that there is fraud for the purpose of
issuing the writ of preliminary attachment.
Respondents appear to have misunderstood the implications of the
principle of conclusiveness of judgment on their cause. Contrary to their
claims, the factual findings areconclusive and have been established as the
controlling legal rule in the instant case, on the basis of the principle of res
judicata — more particularly, the principle of conclusiveness of judgment.
This doctrine of res judicata which is set forth in Section 47 of Rule 39
of the Rules of Court 136 lays down two main rules, namely: (1) the judgment
or decree of a court of competent jurisdiction on the merits concludes the
litigation between the parties and their privies and constitutes a bar to a new
action or suit involving the same cause of action either before the same or any
other tribunal; and (2) any right, fact, or matter in issue directly adjudicated or
necessarily involved in the determination of an action before a competent court
in which a judgment or decree is rendered on the merits is conclusively settled
by the judgment therein and cannot again be litigated between the parties and
their privies whether or not the claims or demands, purposes, or subject matters
of the two suits are the same. 137
These two main rules mark the distinction between the principles
governing the two typical cases in which a judgment may operate as
evidence. 138 The first general rule stated above and corresponding to the
afore-quoted paragraph (b) of Section 47, Rule 39 of the Rules of Court, is
referred to as "bar by former judgment"; while the second general rule, which
is embodied in paragraph (c) of the same section and rule, is known as
"conclusiveness of judgment." 139  AHDacC

In Calalang v. Register of Deeds of Quezon City, 140 We discussed the

concept of conclusiveness of judgment as pertaining even to those
matters essentially connected with the subject of litigation in the first action.
This Court explained therein that the bar on re-litigation extends to those
questions necessarily implied in the final judgment, although no specific
finding may have been made in reference thereto, and although those matters
were directly referred to in the pleadings and were not actually or formally
presented. If the record of the former trial shows that the judgment could not
have been rendered without deciding a particular matter, it will be considered
as having settled that matter as to all future actions between the parties; and if a
judgment necessarily presupposes certain premises, they are as conclusive as
the judgment itself:
 The second concept — conclusiveness of judgment — states
that a fact or question which was in issue in a former suit and was
there judicially passed upon and determined by a court of
competent jurisdiction, is conclusively settled by the judgment
therein as far as the parties to that action and persons in privity
with them are concerned and cannot be again litigated in any
future action between such parties or their privies, in the same
court or any other court of concurrent jurisdiction on either the
same or different cause of action, while the judgment remains
unreversed by proper authority. It has been held that in order that a
judgment in one action can be conclusive as to a particular matter in
another action between the same parties or their privies, it is essential
that the issue be identical. If a particular point or question is in issue
in the second action, and the judgment will depend on the
determination of that particular point or question, a former
judgment between the same parties or their privies will be final
and conclusive in the second if that same point or question was in
issue and adjudicated in the first suit(Nabus v. Court of Appeals,
193 SCRA 732 [1991]). Identity of cause of action is not required but
merely identity of issue.
Justice Feliciano, in Smith Bell & Company (Phils.), Inc. v.
Court of Appeals (197 SCRA 201, 210 [1991]), reiterated Lopez v.
Reyes (76 SCRA 179 [1977]) in regard to the distinction between bar
by former judgment which bars the prosecution of a second action
upon the same claim, demand, or cause of action, and conclusiveness
of judgment which bars the relitigation of particular facts or issues in
another litigation between the same parties on a different claim or
cause of action. 
The general rule precluding the re-litigation
of material facts or questions which were in issue
and adjudicated in former action are commonly
applied to all matters essentially connected with the
subject matter of the litigation. Thus, it extends to
questions necessarily implied in the final judgment,
although no specific finding may have been made in
reference thereto and although such matters were
directly referred to in the pleadings and were not
actually or formally presented. Under this rule, if
the record of the former trial shows that the
judgment could not have been rendered without
deciding the particular matter, it will be considered
as having settled that matter as to all future actions
between the parties and if a judgment necessarily
presupposes certain premises, they are as conclusive
as the judgment itself. 141 (Emphases supplied)
 The foregoing disquisition finds application to the case at bar.
Undeniably, the present case is merely an adjunct of the 2004 case, in
which the automation contract was declared to be a nullity. Needless to say, the
2004 Decision has since become final. As earlier explained, this Court arrived
at several factual findings showing the illegality of the automation contract; in
turn, these findings were used as basis to justify the declaration of nullity.
A closer scrutiny of the 2004 Decision would reveal that the judgment
could not have been rendered without deciding particular factual matters in
relation to the following: (1) identity, existence and eligibility of MPC as a
bidder; (2) failure of the ACMs to pass DOST technical tests; and (3) remedial
measures undertaken by the COMELEC after the award of the automation
contract. Under the principle of conclusiveness of judgment, We are precluded
from re-litigating these facts, as these were essential to the question of nullity.
Otherwise stated, the judgment could not have been rendered without
necessarily deciding on the above-enumerated factual matters.
Thus, under the principle of conclusiveness of judgment, those material
facts became binding and conclusive on the parties, in this case MPEI and,
ultimately, the persons that comprised it. When a right or fact has been
judicially tried and determined by a court of competent jurisdiction, or when an
opportunity for that trial has been given, the judgment of the court — as long
as it remains unreversed — should be conclusive upon the parties and those
in privity with them. 142 Thus, the CA should not have required petitioner to
present further evidence of fraud on the part of respondent Willy and MPEI, as
it was already necessarily adjudged in the 2004 case.
To allow respondents to argue otherwise would be violative of the
principle of immutability of judgment. When a final judgment becomes
executory, it becomes immutable and unalterable and may no longer undergo
any modification, much less any reversal. 143 In Navarro v. Metropolitan Bank
& Trust Company  144 this Court explained that the underlying reason behind
this principle is to avoid delay in the administration of justice and to avoid
allowing judicial controversies to drag on indefinitely, viz.:  IDSEAH

No other procedural law principle is indeed more settled

than that once a judgment becomes final, it is no longer subject to
change, revision, amendment or reversal, except only for
correction of clerical errors, or the making of nunc pro
tunc  entries which cause no prejudice to any party, or where the
judgment itself is void. The underlying reason for the rule is two-fold:
(1) to avoid delay in the administration of justice and thus make
orderly the discharge of judicial business, and (2) to put judicial
controversies to an end, at the risk of occasional errors, inasmuch as
controversies cannot be allowed to drag on indefinitely and the rights
 and obligations of every litigant must not hang in suspense for an
indefinite period of time. As the Court declared in Yau v. Silverio,
Litigation must end and terminate sometime and
somewhere, and it is essential to an effective and
efficient administration of justice that, once a judgment
has become final, the winning party be, not through a
mere subterfuge, deprived of the fruits of the verdict.
Courts must therefore guard against any scheme
calculated to bring about that result. Constituted as they
are to put an end to controversies, courts should frown
upon any attempt to prolong them.
Indeed, just as a losing party has the right to file an appeal
within the prescribed period, the winning party also has the correlative
right to enjoy the finality of the resolution of his case by the execution
and satisfaction of the judgment. Any attempt to thwart this rigid rule
and deny the prevailing litigant his right to savor the fruit of his
victory must immediately be struck down. . . . . (Emphasis
supplied) 145
In the instant case, adherence to respondents' position would mean a
complete disregard of the factual findings We made in the 2004 Decision, and
would certainly be tantamount to reversing the same. This would invariably
cause further delay in the efforts to recover the amounts of government money
illegally disbursed to respondents back in 2004.
Next, respondents argue that the findings of fact in the 2004 Decision
are not conclusive 146 considering that eight (8) of the fifteen (15) justices of
this Court refused to go along with the factual findings as stated in the majority
opinion. 147 This argument fails to convince.  HCaDIS

Fourteen (14) Justices participated in the promulgation of the 2004

Decision. Out of the fourteen (14) Justices, three (3) Justices registered their
dissent, 148 and two (2) Justices wrote their Separate Opinions, each
recommending the dismissal of the Petition. 149 Of the nine (9) Justices who
voted to grant the Petition, four (4) joined the ponente in his disposition of the
case, 150 and two (2) Justices wrote Separate Concurring Opinions. 151 As to
the remaining two (2) Justices, one (1) Justice 152 merely concurred in the
result, while the other joined another Justice in her Separate Opinion. 153
Contrary to the allegations of respondents, an examination of the voting
shows that nine (9) Justices voted in favor of the majority opinion, without any
qualification regarding the factual findings made therein. In fact, the two (2)
Justices who wrote their own Concurring Opinions echoed the lack of
eligibility of MPC and the failure of the ACMs to pass the mandatory
requirements.
 Finally, respondents cannot argue that, from the line of questioning of
then Justice Leonardo A. Quisumbing during the oral arguments in the 2004
case, he did not agree with the factual findings of this Court. Oral arguments
before this Court are held precisely to test the soundness of each proponent's
contentions. The questions and statements propounded by Justices during such
an exercise are not to be construed as their definitive opinions. Neither are they
indicative of how a Justice shall vote on a particular issue; indeed, Justice
Quisumbing clearly states in the 2004 Decision that he concurs in the results.
At any rate, statements made by Our Members during oral arguments are
not stare decisis; what is conclusive are the decisions reached by the majority
of the Court. 
IV.
The delivery of 1,991 units of ACMs does not negate fraud
on the part of respondents Willy and MPEI.
The CA in its Amended Decision explained that respondents could not
be considered to have fostered a fraudulent intent to not honor their obligation,
since they delivered 1,991 units of ACMs. 154 In turn, respondents argue that
respondent MPEI had every intention of fulfilling its obligation, because it in
fact delivered the ACMs as required by the automation contract. 155
We disagree with the CA and respondents. The fact that the ACMs were
delivered cannot induce this Court to disregard the fraud respondent MPEI had
employed in securing the award of the automation contract, as established
above. Furthermore, they cannot cite the fact of delivery in their favor,
considering that the ACMs delivered were substandard and noncompliant with
the requirements initially set for the automation project.
In Our 2004 Decision, We already found the ACMs to be below the
standards set by the COMELEC. The noncompliant status of these ACMs was
reiterated by this Court in its 2005 and 2006 Resolutions. The CA therefore
gravely erred in considering the delivery of 1,991 ACMs as evidence of
respondents' willingness to perform the obligation (and thus, their lack of
fraud) considering that, as exhaustively discussed earlier, the ACMs delivered
were plagued with defects and failed to meet the requirements set for the
automation project.
Under Article 1233 of the New Civil Code, a debt shall not be
understood to have been paid, unless the thing or service in which the
obligation consists has been completely delivered or rendered. In this case,
respondents cannot be considered to have performed their obligation, because
the ACMs were defective.
 V.
Estoppel does not lie against the State when it acts to rectify
the mistakes, errors or illegal acts of its officials and agents.
Respondents claim that the 2004 Decision may not be invoked against
them, since the petitioner and the respondents were co-respondents and not
adverse parties in the 2004 case. Respondents further explain that since
petitioner and respondents were on the same side at the time, had the same
interest, and took the same position on the validity and regularity of the
automation contract, petitioner cannot now invoke the 2004 Decision against
thein. 156 
AHCETa

Contrary to respondents' contention, estoppel generally finds no

application against the State when it acts to rectify mistakes, errors,
irregularities, or illegal acts of its officials and agents, irrespective of rank. This
principle ensures the efficient conduct of the affairs of the State without any
hindrance to the implementation of laws and regulations by the government.
This holds true even if its agents' prior mistakes or illegal acts shackle
government operations and allow others — some by malice — to profit from
official error or misbehavior, and even if the rectification prejudices parties
who have meanwhile received benefit. 157 Indeed, in the 2004 Decision, this
Court even directed the Ombudsman to determine the possible criminal
liability of public officials and private persons responsible for the contract, and
the OSG to undertake measures to protect the government from the ill effects
of the illegal disbursement of public funds. 158
The equitable doctrine of estoppel for the prevention of injustice and is
for the protection of those who have been misled by that which on its face was
fair and whose character, as represented, parties to the deception will not, in
the interest of justice, be heard to deny. 159 It cannot therefore be utilized to
insulate from liability the very perpetrators of the injustice complained of.
VI.
The findings of the Office of the Ombudsman
are not controlling in the instant case.
Respondents further claim that this Court has recognized the fact that it
did not determine or adjudge any fraud that may have been committed by
individual respondents. Rather, it referred the matter to the Ombudsman for the
determination of criminal liability. 160 The Ombudsman in fact made its own
determination that there was no probable cause to hold individual respondents
criminally liable. 161
Respondents miss the point. The main issue in the instant case is
whether respondents are guilty of fraud in obtaining and executing the
automation contract, to justify the issuance of a writ of preliminary attachment
in petitioner's favor. Meanwhile, the issue relating to the proceedings before
the Ombudsman (and this Court in G.R. No. 174777) pertains to the finding of
lack of probable cause for the possible criminal liability of respondents under
the Anti-Graft and Corrupt Practices Act. 
The matter before Us involves petitioner's application for a writ of
preliminary attachment in relation to its recovery of the expended amount
under the voided contract, and not the determination of whether there is
probable cause to hold respondents liable for possible criminal liability due to
the nullification of the automation contract. Whether or not the Ombudsman
has found probable cause for possible criminal liability on the part of
respondents is not controlling in the instant case.
CONCLUSION
If the State is to be serious in its obligation to develop and implement
coordinated anti-corruption policies that promote proper management of public
affairs and public property, integrity, transparency and accountability, 162 it
needs to establish and promote effective practices aimed at the prevention of
corruption, 163 as well as strengthen our efforts at asset recovery. 164
As a signatory to the United Nations Convention Against Corruption
(UNCAC), 165 the Philippines acknowledges its obligation to establish
appropriate systems of procurement based on transparency, competition and
objective criteria in decision-making that are effective in preventing
corruption. 166 To promote transparency, and in line with the country's efforts
to curb corruption, it is useful to identify certain fraud indicators or "red flags"
that can point to corrupt activity. 167 This case — arguably the first to provide
palpable examples of what could be reasonably considered as "red flags" of
fraud and malfeasance in public procurement — is the Court's contribution to
the nation's continuing battle against corruption, in accordance with its
mandate to dispense justice and safeguard the public interest.  ScHADI

WHEREFORE, premises considered, the Petition is GRANTED. The

Amended Decision dated 22 September 2008 of the Court of Appeals in CA-
G.R. SP. No. 95988 is ANNULLED AND SET ASIDE. A new one is
entered DIRECTING the Regional Trial Court of Makati City, Branch 59,
to ISSUE in Civil Case No. 04-346, entitled Mega Pacific eSolutions, Inc. vs.
Republic of the Philippines, the Writ of Preliminary Attachment prayed for by
petitioner Republic of the Philippines against the properties of respondent
Mega Pacific eSolutions, Inc., and Willy U. Yu, Bonnie S. Yu, Enrique T.
Tansipek, Rosita Y. Tansipek, Pedro O. Tan, Johnson W. Fong, Bernard I.
Fong and Lauriano Barrios.
No costs.
SO ORDERED.
|||  (Republic v. Mega Pacific eSolutions, Inc., G.R. No. 184666, [June 27, 2016])

THIRD DIVISION

[G.R. No. 187922. September 21, 2016.]

MARPHIL EXPORT CORPORATION and IRENEO

LIM, petitioners, vs. ALLIED BANKING CORPORATION
substituted by PHILIPPINE NATIONAL BANK, respondent.

DECISION

JARDELEZA, J  : p

This is a petition 1 seeking to nullify the Court of Appeals' (CA) January

12, 2009 Decision 2 and May 12, 2009 Resolution 3 in CA-G.R. CV No.
89481. The CA modified 4 the April 23, 2007 Omnibus Decision 5 of Branch
61 of the Regional Trial Court (RTC), Makati City in the consolidated cases of
petition for declaratory relief filed by petitioner Marphil Export Corporation
(Marphil) against Allied Banking Corporation (Allied Bank), and the
complaint for collection of sum of money with application for writ of
attachment filed by Allied Bank against Marphil's surety, petitioner Ireneo Lim
(Lim). HTcADC

Facts
Marphil is a domestic company engaged in the exportation of cuttlefish,
cashew nuts and similar agricultural products. 6 To finance its purchase and
export of these products, Allied Bank granted Marphil a credit line from which
Marphil availed of several loans evidenced by promissory notes (PN). 7 These
loans were in the nature of advances to finance the exporter's working capital
requirements and export bills. 8 The loans were secured by three (3)
Continuing Guaranty or Continuing Surety (CG/CS) Agreements 9executed by
Lim, Lim Shiao Tong and Enrique Ching. 10 Apart from the CG/CS
Agreements, irrevocable letters of credits also served as collaterals for the
loans obtained to pay export bills. 11 In turn, Allied Bank required Marphil,
through its authorized signatories Lim and Rebecca Lim So, to execute a Letter
of Agreement 12 where they undertake to reimburse Allied Bank in the event
the export bills/drafts covering the letters of credit are refused by the drawee.
Upon negotiations of export bills/drafts that Allied Bank purchases from
Marphil, the amount of the face value of the letters of credit is credited in favor
of the latter. 13
The transaction involved in this petition is the export of cashew nuts to
Intan Trading Ltd. Hongkong (Intan) in Hong Kong. Upon application of Intan,
Nanyang Commercial Bank (Nanyang Bank), a bank based in China, issued
irrevocable letters of credit. These were Letter of Credit (L/C) No. 22518 and
L/C No. 21970, with Marphil as beneficiary and Allied Bank as correspondent
bank. 14 These covered two (2) separate purchase contracts/orders for cashew
nuts made by Intan.
The first order of cashew nuts was covered by L/C No. 22518. After the
first shipment was made, Marphil presented export documents including drafts
to Allied Bank. The latter credited Marphil's credit line the peso equivalent of
the face value of L/C No. 22518 in the amount of P1,986,702.70 and this
amount was deducted from the existing loans of Marphil. 15 There were no
problems encountered for the shipment covered by L/C No. 22518. It was the
second order covered by L/C No. 21970 that encountered problems.  CAIHTE

When Intan placed a second order for cashew nuts, Marphil availed
additional loans in their credit line evidenced by PN No. 0100-88-02463 16 (PN
No. 2463) for P500,000.00 and PN No. 0100-88-02730 17 (PN No. 2730) for
P500,000.00. Similar to the previous transaction, Intan applied for and opened
L/C No. 21970 with Nanyang Bank in the amount of US$185,000.00, with
Marphil as the beneficiary and Allied Bank as correspondent bank. 18 After
receiving the export documents including the draft issued by Marphil, Allied
Bank credited Marphil in the amount of P1,913,763.45, the peso value of the
amount in the letter of credit. 19
However, on July 2, 1988, Allied Bank informed Marphil that it
received a cable from Nanyang Bank noting some discrepancies in the shipping
documents. 20 On July 16, 1988, Allied Bank again informed Marphil that it
received another cable from Nanyang Bank still noting the discrepancies and
that Intan refused to accept the discrepancies. 21Consequently, Nanyang Bank
refused to reimburse Allied Bank the amount the latter had credited in
Marphil's credit line. In its debit memo, Allied Bank informed Marphil of the
dishonor of L/C No. 21970 and that it was reversing the earlier credit entry of
P1,913,763.45. 22 Lim was made to sign a blank promissory note, PN No.
0100-88-04202, 23 (PN No. 4202) on September 9, 1988 to
cover for the amount. 24 This was later filled up by Allied Bank in the amount
of P1,505,391.36.
On March 6, 1990, Marphil filed a Complaint 25 for declaratory relief
and damages against Allied Bank (Declaratory Relief Case) raffled to Branch
61 of RTC Makati. 26 In its Complaint, Marphil asked the court to declare PN
No. 4202 void, to declare as fully paid its other obligations to Allied Bank, and
to award it actual, moral and exemplary damages, and attorney's
fees.27 Marphil maintained that it had fully paid its account with Allied Bank,
and that PN No. 4202, which Lim executed on September 9, 1988, was void
for lack of consideration. Marphil alleged that it was constrained to send back
the shipment to the Philippines thereby incurring expenses and tremendous
business losses. It attributed bad faith to Allied Bank because the latter did
nothing to protect its interest; Allied Bank merely accepted Nanyang Bank's
position despite L/C No. 21970 being irrevocable, and Allied Bank allegedly
confirmed Nanyang Bank's revocation.  DETACa

On May 7, 1990, Allied Bank filed its Answer with Compulsory

Counterclaim and Petition for Writ of Preliminary Attachment. 28 Allied Bank
maintained that PN No. 4202 was supported by consideration, and denied that
Marphil has fully paid its obligation to it. As counterclaim, Allied bank sought
to collect on three (3) promissory notes, PN Nos. 2463, 2730 and 4202. 29
On September 14, 1990, Allied Bank filed a Complaint with Petition for
Writ of Preliminary Attachment 30 (Collection Case) against Lim and Lim
Shao Tong which was raffled to Branch 145 of RTC Makati. Allied Bank sued
there as sureties under the CG/CS Agreements for the loan obligations of
Marphil under three (3) promissory notes, PN Nos. 2463, 2730 and 4202, in
the total amount of P2,505,391,36. It also prayed for the issuance of a writ of
preliminary attachment on the ground that Lim was guilty of fraud in
contracting his obligations.
On February 7, 1992, Lim filed his Answer 31 in the Collection Case.
He raised as defense that Marphil had fully paid the loans covered by PN Nos.
2463, 2730, while PN No. 4202 is null and void. 32 He likewise maintained he
could not be held personally liable for the CG/CS Agreements because he
could not remember signing them. Lim claimed that the issuance of the writ of
preliminary attachment was improper because he never had any preconceived
intention not to pay his obligations with the bank. He had been transacting with
the bank for six (6) years and the gross value of the thirty-two (32) transactions
between them amounted to US$640,188.51. 33
On March 15, 1994, Branch 145 of RTC Makati granted ex parte the
prayer for preliminary attachment in the Collection Case. 34
On May 7, 1991, Allied Bank filed a Motion to Consolidate/Be
Accepted 35 with Branch 61 of RTC Makati, which was granted by Order dated
June 25, 1991. 36 The two civil cases were jointly heard before Branch 61 of
RTC Makati.
On April 23, 2007, the RTC rendered the Omnibus Decision. 37 The
RTC granted Marphil's complaint for declaratory relief, and declared PN No.
4202 void. However, it held Marphil and/or Ireneo Lim jointly and severally
liable for any balance due on their obligation under PN Nos. 2463 and 2730,
and additionally for the amount of P1,913,763.45 with interest rate fixed at
12% per annum until fully paid. 38
On May 9, 2007, petitioners filed a Notice of Appeal 39 with the RTC.
Allied Bank did not appeal the RTC decision. Records were then forwarded to
the CA, which began proceedings. 40  HEITAD

The CA rendered its Decision 41 on January 12, 2009 modifying the

RTC decision. The CA declared PN Nos. 2463 and 2730 fully paid, but held
petitioners liable for the amount of P1,913,763.45, the amount equal to the face
value of L/C No. 21970. 42
The CA found that Allied Bank is not directly liable for the
P1,913,763.45 under L/C No. 21970 because it was not a confirming bank and
did not undertake to assume the obligation of Nanyang Bank to Marphil as its
own. At most, it could only be a discounting bank which bought drafts under
the letter of credit. Following the ruling in Bank of America, NT & SA v. Court
of Appeals, 43 it held that Allied Bank, as the negotiating bank, has the ordinary
right of recourse against the exporter in the event of dishonor by the issuing
bank. A negotiating bank has a right of recourse against the issuing bank, and
until reimbursement is obtained, the drawer of the draft continues to assume a
contingent liability on the draft. That there is no assumption of direct
obligation is further affirmed by the terms of the Letter Agreement. The CA
also declared PN Nos. 2463 and 2730 as fully paid. The CA held that with
these payments, the only obligation left of Marphil was the amount of the
reversed credit of P1,913,763.45. On the writ of preliminary attachment, the
CA noted that petitioners did not file any motion to discharge it on the ground
of irregular issue. The CA found that no forum shopping existed because the
causes of actions for declaratory relief and collection suit are different. 44
In a Resolution 45 dated May 12, 2009, the CA denied petitioners
Motion for Partial Reconsideration 46 dated January 22, 2009.
Hence, this petition.
Meanwhile, Allied Bank and Philippine National Bank (PNB) jointly
filed a Motion for Substitution of Party with Notice of Change of
Address 47 on October 22, 2013 informing this Court that the Securities and
Exchange Commission approved a merger between Allied Bank and PNB,
with the latter as the surviving corporation. They prayed that Allied Bank be
dropped and substituted by PNB as party respondent in this petition. This was
granted by this Court in a Resolution 48 dated December 4, 2013.
Issues
The issues are as follows:
 I. Whether Allied Bank's debit memo on Marphil's credit line in the
amount of P1,913,763.45 is valid.
II. Whether the RTC and CA created a new obligation when it held
Marphil liable for the amount of P1,913,761.45.
III. Whether Allied Bank committed forum shopping in filing the
Collection Case.
IV. Whether the writ of preliminary attachment should be dissolved.
Ruling
We partly grant the petition.
At the outset, Allied Bank did not appeal from the decisions of the RTC
and CA respecting the nullification of PN No. 4202, and the extinguishment by
payment of PN Nos. 2730 and 2463. Allied Bank (now PNB) can thus no
longer seek their modification or reversal, but may only oppose the arguments
of petitioners on grounds consistent with the judgment of the RTC and
CA. 49 Bearing this in mind, we proceed to dispose of the issues.  aDSIHc

I. Validity of the debit memo

a. Allied Bank as correspondent bank in L/C No. 21970
Both the RTC and CA found that Allied Bank is not a confirming bank
which undertakes Nanyang Bank's obligation as issuing bank, but at most, buys
the drafts drawn by Marphil as exporter at a discount.
Marphil, however, argues that the RTC and CA erred in ruling that
Allied Bank is not a confirming bank. It insists that Allied Bank as
correspondent bank assumed the risk when it confirmed L/C No. 21970. It
invokes the ruling in Feati Bank & Trust Company v. Court of Appeals  50 on
the rule of strict compliance in letters of credit stating that "[a] correspondent
bank which departs from what has been stipulated under the letter of credit, as
when it accepts a faulty tender, acts on its own risks and it may not thereafter
be able to recover from the buyer or the issuing bank . . . ." 51 Thus, Marphil
claims that Allied Bank had no authority to debit the amount equivalent to the
face value of L/C No. 21970 since the latter is directly liable for it.
We affirm the RTC and CA's findings that Allied Bank did not act as
confirming bank in L/C No. 21970.
As noted by the CA, Feati is not in all fours with this case. The
correspondent bank in that case refused to negotiate the letter of credit
precisely because of the beneficiary's non-compliance with its terms. Here, it is
Nanyang Bank, the issuing bank, which refused to make payment on L/C No.
21970 because there was no strict compliance by Marphil. 52
 Further, while we said in Feati that a correspondent bank may be held
liable for accepting a faulty tender under the rule of strict compliance, its
liability is necessarily defined by the role it assumed under the terms of the
letter of credit. In order to consider a correspondent bank as a confirming bank,
it must have assumed a direct obligation to the seller as if it had issued the
letter of credit itself. 53 We said that "[i]f the [correspondent bank] was a
confirming bank, then a categorical declaration should have been stated in the
letter of credit that the [correspondent bank] is to honor all drafts drawn in
conformity with the letter of credit." 54 Thus, if we were to hold Allied Bank
liable to Marphil (which would result in a finding that the former's debit from
the latter's account is wrong) based on the rule of strict compliance, it must be
because Allied Bank acted as confirming bank under the language of L/C No.
21970.
In finding that Allied Bank, as correspondent bank, did not act as
confirming bank, the CA reviewed the instructions of Nanyang Bank to Allied
Bank in L/C No. 21970. It found that based on the instructions, there is nothing
to support Marphil's argument that Allied Bank undertook, as its own,
Nanyang Bank's obligations in the letter of credit:
In the case of [Bank of America], the functions assumed by a
correspondent bank are classified according to the obligations taken up
by it. In the case of a notifying bank, the correspondent bank assumes
no liability except to notify and/or transmit to the beneficiary the
existence of the L/C. A negotiating bank is a correspondent bank
which buys or discounts a draft under the L/C. Its liability is dependent
upon the stage of the negotiation. If before negotiation, it has no
liability with respect to the seller but after negotiation, a contractual
relationship will then prevail between the negotiating bank and the
seller. A confirming bank is a correspondent bank which assumes a
direct obligation to the seller and its liability is a primary one as if the
correspondent bank itself had issued the L/C.
In the instant case, the letter of Nanyang to Allied provided the
following instructions: 1) the negotiating bank is kindly requested to
forward all documents to Nanyang in one lot; 2) in reimbursement for
the negotiation(s), Nanyang shall remit cover to Allied upon receipt of
documents in compliance with the terms and conditions of the credit;
3) the drafts drawn must be marked "drawn under Nanyang
Commercial Bank"; and 4) to advise beneficiary.
From the above-instructions, it is clear that Allied did not
undertake to assume the obligation of Nanyang to Marphil is its own,
as if it had itself issued the L/C. At most, it can only be a discounting
bank which bought the drafts under the L/C. Following then the rules
laid down in the case of Bank of America, a negotiating bank has a
right of recourse against the issuing bank, and until reimbursement is
 obtained, the drawer of the draft continues to assume a contingent
liability thereon. . . . 55 
ATICcS

In this regard, this issue of whether Allied Bank confirmed L/C No.
21970 and assumed direct obligation on it is a question of fact that was
resolved by both RTC and CA in the negative. This Court is not a trier of facts
and does not normally undertake the re-examination of the evidence. 56 This is
especially true where the trial court's factual findings are adopted and affirmed
by the CA. 57 Factual findings of the trial court affirmed by the CA are final
and conclusive and may not be reviewed on appeal. 58 Here, there is no reason
to deviate from these findings of the RTC and CA.
In any event, we find that Allied Bank may seek reimbursement of the
amount credited to Marphil's account on an independent obligation it
undertook under the Letter Agreement.
b. Allied Bank's right to reimbursement under the Letter Agreement
To recall, Marphil and Allied Bank executed the Letter Agreement
dated June 24, 1988 the subject of which is the draft equivalent to the face
value of L/C No. 21970.
In the Letter Agreement, Marphil expressly bound itself to refund the
amount paid by Allied Bank in purchasing the export bill or draft, in case of its
dishonor by the drawee bank:
Purchase of the Draft shall be with recourse to me/us in the
event of non-payment for any reason whatsoever. Notice of dishonor,
non-acceptance, non-payment, protest and presentment for payment
are hereby waived.
xxx xxx xxx
If, for any reason, my/our Draft is not finally honored or retired
by the drawee, I/we hereby further undertake and bind
myself/ourselves to refund to you, on demand, the full amount of this
negotiation, together with the corresponding interest thereon as well as
your or your correspondent's charges and expenses thereon, if any; and
to compensate you fully for any damages that you might incur arising
out of any suit, action or proceedings, whether judicial or extra-judicial
that might be instituted by the buyer or importer on the ground of lack
of faithful performance of the contract between said buyer or importer
and myself/ourselves. Likewise, should my/our Draft be dishonored
for any cause whatsoever, I/we hereby authorize you, at your
discretion and without any responsibility on your part, to sell, or cause
to be sold, either publicly or privately, the underlying goods, wherever
they may be found, and, from the proceeds thereof, I/we hereby
empower you to collect all expenses incident thereof, together with
your commission, interest and other charges, as well as to reimburse
 yourself therefrom . . . the full amount of this negotiation, interest,
charges and other expenses thereon, returning to me/us only whatever
amount that may remain thereafter; and, should there be any
deficiency still in your favor, notwithstanding the sale made as herein
authorized, I/we likewise bind myself/ourselves to pay the said
deficiency to you upon demand. 59
The case of Velasquez v. Solidbank Corporation 60 is instructive as to
the nature of obligations arising from this form of undertaking. In that case, we
ruled that the obligation under a letter of undertaking, where the drawer
undertakes to pay the full amount of the draft in case of dishonor, is
independent from the liability under the sight draft. 61 The letter of undertaking
of this tenor is a separate contract the consideration for which is the promise to
pay the bank the value of the sight draft if it was dishonored for any
reason. 62 The liability provided is direct and primary, without need to
establish collateral facts such as the violation of the letter of credit connected to
it. 63 
ETHIDa

Similarly, the Letter of Agreement is a contract between Marphil and

Allied Bank where the latter agreed to purchase the draft and credit the former
its value on the undertaking that Allied Bank will be reimbursed in case the
draft is dishonored. This obligation is direct, and is independent, not only from
the obligation under the draft, but also from the obligation under L/C No. 2
1970. In this connection, the CA is incorrect to say that the Letter Agreement
bolsters the bank's claim that it did not undertake direct obligation under the
letter of credit. The Letter Agreement simply creates a separate obligation on
Marphil's part to refund the amount of the proceeds, in case of dishonor. 64 As
an independent obligation, Marphil is bound to fulfill this obligation to
reimburse Allied Bank.
However, a conflict arose because instead of waiting for Marphil's own
initiative to return the amount, Allied Bank on its own debited from the
former's credit line.
c. Allied Bank's right to debit Marphil's account
We now proceed to determine whether Allied Bank may unilaterally
debit the amount it credited to Marphil's account.
In the case of Associated Bank v. Tan, 65 we upheld the right of a
collecting bank to debit a client's account for the value of a dishonored check it
previously credited by virtue of the principle of legal compensation. Since the
relationship between banks and depositors has been held to be that of creditor
and debtor in a simple loan, legal compensation may take place when the
conditions in Article 1279 of the Civil Code are present: (1) that each one of
the obligors be bound principally, and that he be at the same time a principal
creditor of the other; (2) that both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind, and also of the same
quality if the latter has been stated; (3) that the two debts be due; (4) that they
be liquidated and demandable; and (5) that over neither of them there be any
retention or controversy, commenced by third persons and communicated in
due time to the debtor. 66
In this case, when Allied Bank credited the amount of P1,913,763.45 to
Marphil's account, it became the debtor of Marphil. However, once Nanyang
Bank dishonored the export documents and draft for L/C No. 21970, Marphil
became the debtor of Allied Bank for the amount by virtue of its obligation to
reimburse the bank under the Letter Agreement. This obligation consisting of
sum of money became demandable upon notice of the dishonor by Nanyang
Bank. Thus, legal compensation may take place between the two debts.
In Associated Bank, we nevertheless emphasized that while the bank has
the right to set off, the exercise of such right must be consistent with the
required degree of diligence from banks, i.e., highest degree of care. Thus, the
question that needs to be resolved now is whether Allied Bank properly
exercised its right to set off. 67
We rule that Allied Bank properly exercised its right to set off. Firstly,
having signed the Letter Agreement, Marphil expressly undertook that in case
of dishonor of the draft for the letter of the credit, it will refund to Allied Bank
whatever the latter has credited in its favor. This places Marphil on its guard
that the dishonor will create an obligation to refund the amount credited.
Secondly, prior to debiting the amount, Allied Bank informed Marphil twice of
Nanyang Bank's refusal to honor the tender of documents on L/C No. 21970.
Thirdly, it immediately informed Marphil that it was debiting the amount of the
dishonored draft from the credit line. TIADCc

Most importantly, the debiting of the account was not the proximate
cause of the loss to Marphil brought about by the reshipment of goods back to
Manila. The proximate cause of the loss is the subsequent dishonor of the
documents by Nanyang Bank, which came before the debiting of the account.
The P1,913,763.45 subject of the debit memo was already the costs incurred in
relation to the financing and shipping of the goods to Hong Kong, and do not
refer to the loss incurred when the goods were shipped back to Manila. Thus,
the debiting of Marphil's account did not result in additional losses for Marphil.
In sum, we affirm that Allied Bank is not a confirming bank under L/C
No. 21970. In any case, whether Allied Bank is directly liable as confirming
bank will not affect Marphil's obligation to reimburse Allied Bank the amount
of P1,913,763.45 because its liability to refund the amount arose under an
independent contract, i.e. the Letter Agreement. And while Allied Bank is the
debtor of Marphil for the amount it credited under the draft, the obligation
under the Letter Agreement made Allied Bank the creditor of Marphil for the
same amount. Being debtor and creditor of each other, Allied Bank was
entitled to legal compensation by debiting the amount, which did not result in
any loss to Marphil.
II. Obligation of P1,913,763.45 to Allied Bank
Marphil next argues that the RTC and CA erroneously held it liable to
Allied for P1,913,763.45 as a new obligation.
We rule that there is no new obligation created when both the RTC and
CA held petitioners liable for the P1,913,763.45. This was a prior and existing
obligation of Marphil separate from the amount covered by the draft under L/C
No. 21970. In filing the Declaratory Relief Case, Marphil asked the court not
only to determine the status of its obligations evidenced by PN Nos. 2463,
2730 and 4202, but also to determine the status of its existing loans with Allied
Bank, regardless of the counterclaim of the latter.
To recall, the arrangement between Marphil and Allied Bank is that
advances were made by the bank in the form of loans to finance the exportation
business of Marphil. When Allied Bank purchases the drafts for the letters of
credit from Marphil, it credits the amount to the latter's credit line and deducts
from the total amount of Marphil's existing loans from Allied Bank. This is
what Allied Bank did in this case; it credited to Marphil's account the amount
of P1,913,763.45 upon purchase of the draft. However, when L/C No. 21970
was dishonored by Nanyang Bank, it reversed the credit memo thereby leaving
the parties in their situation prior to the credit memo — that Marphil has
existing loan obligations arising from the advances made by Allied Bank.
Simply put, Marphil is liable for the amount of P1,913,763.45 because this is
the only amount not proven to be paid in the many loans obtained by Marphil
in the credit line.
The CA imposed the legal interest rate of twelve percent (12%) on this
loan obligation. Notably, the CA made no factual determination that the
amount of P1,913,763.45 was subject to any stipulated interest between the
parties. Likewise, Allied Bank neither claimed for the application of a
stipulated interest nor questioned the imposition of legal interest on the loan, as
it no longer appealed the decision. Considering this, we are constrained to
uphold that the amount of P1,913,763.45, as a loan obligation, is only subject
to the legal interest applicable as of the time of this decision. This is in line
with our ruling in Nacar v. Gallery Frames  68 that in the absence of a
stipulated interest, a loan obligation shall earn legal interest from the time of
default, i.e., from judicial or extrajudicial demand. 69
We, however, modify the rate of legal interest imposed by the CA also
in conformity with Nacar. The amount of P1,913,763.45 shall earn legal
interest at the rate of six percent (6%) per annum computed from the time of
judicial demand, i.e. from the date of the filing of the counterclaim in the
Declaratory Relief Case on May 7, 1990, until the date of finality of this
judgment. The total amount shall thereafter earn interest at the rate of six
percent (6%) per annum from such finality of judgment until its
satisfaction. 70 
cSEDTC

III.  Forum Shopping
Marphil argues that in determining that Allied Bank committed forum
shopping upon filing the Collection Case, the RTC and CA should have
considered the counterclaim filed in the Declaratory Relief Case, and not the
main petition itself. Marphil contends that Allied Bank is collecting on the
same three promissory notes in its counterclaim in the two cases.
Forum shopping exists "when a party repetitively avails of several
judicial remedies in different courts, simultaneously or successively, all
substantially founded on the same transactions and the same essential facts and
circumstances, and all raising substantially the same issues either pending in or
already resolved adversely by some other court." 71Forum shopping is
proscribed by the rules because of the vexation caused to the courts and
parties-litigants by the filing of similar cases to claim the same reliefs. 72 The
rule against forum shopping aims to avoid the grave evil that may result in the
rendition by two competent tribunals of two separate and contradictory
decisions. 73 Thus, any violation of the rule against forum shopping results in
the dismissal of a case, or can result in holding of direct contempt against the
actor. 74 
There is forum shopping when the elements of litis pendentia are
present, or when a final judgment in one case amounts to res judicata in the
other. 75 It must be shown that the following elements are present: (a) identity
of parties, or at least such parties representing the same interests in both
actions; (b) identity of rights asserted and reliefs prayed for, the relief being
founded on the same facts; and (c) the identity of the two preceding particulars,
such that any judgment rendered in the other action will, regardless of which
party is successful, amounts to res judicata in the action under
consideration. 76  AIDSTE

We rule that there is no forum shopping, albeit for a reason different

from that explained by the CA.
The CA concluded that there is no forum shopping because the cases
involve different causes of action: the first case is a petition for declaratory
relief while the second case is one of collection of sum of money. We find this
analysis too sweeping and erroneous. The CA failed to take into account that it
was Allied Bank who is being charged with violating the rule on forum
shopping. As such, the cause of action that should have been considered is the
counterclaim of Allied Bank in the Declaratory Relief Case, which is
essentially a collection suit against the principal debtor Marphil. Subsequently,
it also filed another Collection Case seeking to collect also on the surety Lim
under the same three (3) promissory notes. These cases are the actions that the
CA should have considered in deciding whether Allied Bank committed forum
shopping.
We rule that Allied Bank did not commit forum shopping when it
initiated the Collection Case against Lim despite the pendency of the
counterclaim in the Declaratory Relief Case, because there is no identity of
parties and cause of action.
In Gilat Satellite Networks, Ltd. v. United Coconut Planters Bank
General Insurance Co., Inc., 77 we explained that while a surety contract is
merely ancillary to a principal obligation, the surety's liability is direct, primary
and absolute. The surety's obligation is joint and solidary with that of the
principal, and he becomes liable for the debt and duty of the principal, even
without possessing a direct or personal interest in the principal obligation. As
such, a surety may be sued separately or together with principal. 78 We
emphasized this in Ong v. Philippine Commercial International Bank  79 where
we held that the right to collect payment from the surety exists independently
of its right to proceed directly against the principal debtor. 80 In fact, the
creditor bank may go against the surety alone without prior demand for
payment on the principal debtor. 81  SDAaTC

Here, the parties in the counterclaim in the Declaratory Relief Case are
Allied Bank, as creditor, and Marphil, as principal debtor. On the other hand,
the parties in the Collection Case are Allied Bank, as creditor, and Lim, as
surety. There is no identity of parties. Also, the causes of action pleaded are
different because the counterclaim in the Declaratory Relief Case involves
collection on the loan obligations, while Allied Bank in its complaint in the
Collection Case seeks to collect on the surety obligation of Lim under the
CG/CS Agreements. Another reason why forum shopping does not obtain here
is the circumstance that the two cases were subsequently consolidated, jointly
heard, and a single decision was rendered. Thus, the evil that the rule against
forum shopping avoids, and the vexation on the court and parties-litigant, are
wanting.
IV. Validity of the writ of preliminary attachment
In its application for a writ of preliminary attachment in the Collection
Case against the surety Lim, Allied Bank alleged:
25. Defendants in conspiracy with Marphil and with one
another, committed fraud in contracting the obligations upon
which the first, second and third causes of action are brought
(Sec. 1, par. (d) Rule 57, Rules of Court) when:
 a.) There is a preconceived intention not to pay their obligations
as further manifested by the premature and unjust filing
of a complaint by Marphil against the plaintiff in Civil
Case No. 90-640 before RTC, Makati, Branch 61;
b.) To induce plaintiff to grant the credit accommodation,
defendants and Marphil represented to the plaintiff that
they would present the proper and sufficient documents
to the issuing bank when in truth and in fact, there were
discrepancies noted in the documents presented to the
issuing bank by Marphil.
c.) Further, defendants and Marphil committed misrepresentation
in shipping the cashew nuts at a volume less than that
which was required by the foreign buyer. 82(Emphasis
supplied.)
Subsequently, Branch 145 of RTC Makati issued the writ of preliminary
attachment ex parte. When the case reached it, the CA summarily disposed of
the issue of the propriety of the writ by stating that petitioners did not file any
motion to discharge. However, the records show that Lim filed his Motion to
Discharge Attachment 83 dated May 20, 1994 before Branch 61 of RTC Makati
where Lim raised that no ground exists for the writ of attachment, making it
irregularly and improperly issued.
We grant the petition as to the dissolution of the writ of preliminary
attachment.
A writ of preliminary attachment is "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 might be secured in said
action by the attaching creditor against the defendant." 84 Section 1, Rule 57 of
the Revised Rules of Court provides for the grounds upon which the writ may
issue. For this case, it is grounded under Section 1(d) of Rule 57 of the Revised
Rules of Court: AaCTcI

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 may
be recovered in the following cases:
xxx xxx xxx
(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;
xxx xxx xxx
 Once issued, a writ of attachment may be dissolved or discharged on the
following grounds: (a) the debtor has posted a counter-bond or has made the
requisite cash deposit; (b) the attachment was improperly or irregularly issued
as where there is no ground for attachment, or the affidavit and/or bond filed
therefor are defective or insufficient: (c) the attachment is excessive, but the
discharge shall be limited to the excess; (d) the property attachment is exempt
from preliminary attachment; or (e) the judgment is rendered against the
attaching creditor. 85
In Ng Wee v. Tankiansee, 86 we explained that to justify the attachment
of the debtor's property under Section 1 (d) of Rule 57 of the Rules of Court,
the applicant must show that in incurring the obligation sued upon, fraud must
be the reason which induced the other party into giving its consent. In addition,
the particular acts constituting the fraud imputed to the defendant must be
alleged with specificity. We held:
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:
xxx xxx xxx
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
applicant must then be able to demonstrate that the debtor has intended
to defraud the creditor. In Liberty Insurance Corporation v. Court of
Appeals, 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."  acEHCD

In the instant case, petitioner's October 12, 2000 Affidavit 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, 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.
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.
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
perpetrated because established is the rule that fraud is never
presumed. 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. 87 (Citations omitted.)
We also reiterated in Ng Wee that the rules on the issuance of the writ of
preliminary attachment as a provisional remedy are strictly construed against
the applicant because it exposes the debtor to humiliation and
annoyance. 88 The applicant must show that all requisites are
present. 89 Otherwise, if issued on false or insufficient allegations, the court
acts in excess of its jurisdiction which must be corrected. 90  EcTCAD

In this case, the writ of preliminary attachment was improperly or

irregularly issued because there is no ground for the attachment.
To begin with, Allied Bank filed the application for the writ of
preliminary attachment in the Collection Case against Lim as surety. However,
the allegations of fraud refer to the execution of the promissory notes, and not
on the surety agreement. The application was bereft of any allegation as to
Lim's participation in the alleged conspiracy of fraud. Also, the writ of
preliminary attachment was granted in the Collection Case against Lim as
surety, yet there was no allegation on Lim's fraudulent intention in incurring its
obligation under the CG/CS Agreements. It cannot be inferred that Lim had, at
the time of contracting the obligation, the preconceived intention to renege on
his obligation under the CG/CS Agreements. Continuing guaranty and surety
agreements are normally required by a bank or financing company anticipating
to enter into a series of credit transactions with a particular principal
debtor. 91 This avoids a need to execute a separate surety contract or bond for
each financing or credit accommodation extended to the principal
debtor. 92 Here, the CG/CS Agreements were executed prior to the issuance of
L/C No. 21970, and were in force during other transactions including the one
involving L/C No. 22518 which encountered no problem. Thus, this
transaction cannot be singled out to justify that the surety agreement has been
contracted through fraud.
Moreover, the filing of the Declaratory Relief Case cannot be evidence
of a preconceived intention not to pay the surety's obligation because it was
filed by Marphil, and not Lim. In any case, the filing of the case is a legitimate
means resorted to by Marphil in seeking to clarify its existing obligations with
Allied Bank. If its intention was to renege on its obligations, it would not have
submitted itself to the jurisdiction of the court where it can be ordered to pay
any existing obligations. The allegation that petitioners made representations to
induce it to grant them a credit line is belied by the fact that it is only in the
transaction involving L/C No. 21970 where Allied Bank encountered
problems, because of Nanyang Bank's dishonor of the draft and documents.
Also, the allegation that petitioners committed misrepresentation in shipping
the cashew nuts at a volume less than that which was required by the foreign
buyer, relates to the sale between Marphil and Intan, and not to the loan
between Marphil and Allied Bank.
From the foregoing, Allied Bank was not able to sufficiently establish
the factual circumstances of the alleged fraud in contracting the obligation.
Thus, there being no ground for its issuance, the writ of preliminary attachment
should be dissolved.
WHEREFORE, the petition for review on certiorari is PARTLY
GRANTED. The January 12, 2009 Decision and May 12, 2009 Resolution of
the Court of Appeals are MODIFIED. Marphil Export Corporation and Ireneo
Lim are ordered to pay jointly and severally Allied Banking Corporation (now
Philippine National Bank) the principal amount of P1,913,763.45, with interest
at the rate of six percent (6%) per annum computed from May 7, 1990, until
the date of finality of this judgment. The total amount shall thereafter earn
interest at the rate of six percent (6%) per annum from the finality of judgment
 until its satisfaction. Let the writ of preliminary attachment issued against
Ireneo Lim's property be DISSOLVED.  SDHTEC

SO ORDERED.
 (Marphil Export Corp. v. Allied Banking Corp. , G.R. No. 187922, [September
|||

21, 2016])

SECOND DIVISION

[G.R. No. 195295. October 5, 2016.]

REPUBLIC OF THE
PHILIPPINES, petitioner, vs. SANDIGANBAYAN, FOURTH
DIVISION, FERDINAND "BONGBONG" R. MARCOS, JR.,
MA. IMELDA "IMEE" R. MARCOS-MANOTOC,
GREGORIO MA. ARANETA III, and IRENE R. MARCOS
ARANETA, respondents.

DECISION

LEONEN, J  : p

This resolves a Petition 1 for certiorari assailing the Sandiganbayan's

cancellation of a notice of lis pendens issued over property alleged to be ill-
gotten wealth of Former President Ferdinand E. Marcos (Former President
Marcos) and his associates. 
Respondents Ferdinand "Bongbong" R. Marcos, Jr. (Marcos, Jr.), Maria
Imelda R. Marcos (Imee), and Irene Marcos Araneta (Irene) appear to be the
registered owners of a parcel of land located in the Municipality of Cabuyao,
Laguna (Cabuyao property) and covered by Transfer Certificate of Title (TCT)
No. T-85026. 2
On July 16, 1987, petitioner Republic of the Philippines, through the
Presidential Commission on Good Government, filed before the
Sandiganbayan a Complaint for reversion, reconveyance, restitution,
accounting, and damages against Former President Marcos, Imelda R. Marcos,
their children, Marcos, Jr., Imee, and Irene, and their sons-in-law, Tomas
Manotoc and Gregorio Ma. Araneta III. 3 This case was docketed as Civil Case
No. 0002 (Civil Case). 4 The Complaint principally sought to recover ill-gotten
wealth acquired by the Marcoses during their incumbency as public officers in
active collaboration with their cronies, dummies, and close business
associates. 5
On April 23, 1990, petitioner filed its Third Amended Complaint dated
April 20, 1990, which was admitted by the Sandiganbayan (admitted
Complaint). 6
On June 1, 1994, the Presidential Commission on Good Government
caused the annotation of a notice of lis pendens on TCT No. T-85026 in
relation to the Civil Case, 7which reads: 
DHITCc

Entry No. 268288 — NOTICE OF LIS PENDENS — filed by

Commissioner Herminio A. Mendoza for and in behalf of the Republic
of the Philippines, entitled Republic of the Philippines versus
Ferdinand E. Marcos et al., in Civil Case No. 0002 for Reconveyance,
Reversion, Accounting, Restitution and Damages of Office of the
President, Presidential Commission on Good Government, filed in
Env. No. T-85026.
Date of Instrument — June 1, 1994
Date of Inscription — June 13, 1994 at 4:10 p.m.

(signed)
Dante A. Ariola
Register of Deeds 8
On June 13, 1994, the Register of Deeds of Cabuyao, Laguna, annotated
the notice of lis pendens on TCT No. T-85026. 9
Marcos, Jr. filed an Omnibus Motion 10 dated June 5, 1997 praying for
the cancellation of the notice of lis pendens and pointing out that the Cabuyao
property was not specifically mentioned in the original and amended
Complaints or their annexes. Marcos, Jr. also prayed that petitioner be directed
to immediately vacate the property, cease from further interfering with and
exercising ownership over it, and return it to him and the other registered
owners. 11
On July 15, 1997, petitioner filed a Motion for Leave to Admit Fourth
Amended Complaint, 12 with an attached Fourth Amended Complaint. 13 The
Fourth Amended Complaint was substantially identical to the admitted
Complaint, but with the amended annex List of Assets and Other Properties of
Ferdinand E. Marcos, Imelda R. Marcos and Immediate Family. 14 The list
specifically mentioned the Cabuyao property as one among the assets of the
Marcoses. 15
The Sandiganbayan denied the Motion to admit the Fourth Amended
Complaint:
 [F]or failure of the plaintiff-movant to comply with the provision of
Section 7, Rule 12 of the 1997 Rules of Civil Procedure which
provides:
"Section 7. Filing of amended pleadings. —
When any pleading is amended, a new copy of the
entire pleading, incorporating the amendments which
shall be indicated by appropriate marks, shall be filed."
and for further reason that the original complaint in this case was filed
with this Court on July 16, 1987 yet, or more than 11 years ago, and
this case has not even reached the pre-trial stage because not all of the
defendants have been served with summons. 16
Marcos, Jr. filed an Urgent Motion to Resolve dated July 29, 2002
seeking the immediate resolution of the Omnibus Motion. 17 Petitioner filed a
Comment/Opposition 18seeking an order of preliminary attachment over the
Cabuyao property. In the Resolution 19 dated January 11, 2010, the
Sandiganbayan ordered the cancellation of the annotation of lis pendens on
TCT No. T-85026. It directed petitioner to immediately cease from further
interfering with and exercising ownership over the Cabuyao property and to
return its possession and control to the Marcoses. 20 It held that because the
admitted Complaint did not specifically mention the Cabuyao property, the
Cabuyao property was not involved in the Civil Case; therefore, petitioner has
over the property no actionable claim that needs to be protected via a notice
of lis pendens. 21
On the writ of preliminary attachment, the Sandiganbayan held that
petitioner's allegations were insufficient to support an application for a writ of
attachment. 22 The Cabuyao property was never concealed, removed, or
disposed of by the Marcoses. 23 There was seemingly no particular exigency
warranting the attachment of the Cabuyao property, considering that the
petitioner had been in exclusive possession of the property for more than a
decade and yet it did not promptly move for the issuance of a writ of
preliminary attachment. 24
Petitioner's Motion for Reconsideration was denied in the
Resolution 25 dated December 1, 2010. Hence, this Petition 26 was filed.
In the Resolution 27 dated February 21, 2011, this Court issued a
temporary restraining order enjoining respondents from implementing the
assailed Sandiganbayan Resolutions in the Civil Case, and directed
respondents to comment.
Respondents Imelda R. Marcos, 28 Marcos, Jr., 29 and Gregorio Ma.
Araneta III and Irene 30 filed their respective Comments to the Petition. This
Court dispensed with the filing of the comment of respondent
Imee. 31 Petitioner filed its Replies 32 to respondents' Comments.
 Petitioner argues that the Cabuyao property forms part of the assets
alleged to have been unlawfully acquired by Former President Marcos and his
family during the Marcos regime. It is sought to be reconveyed in favor of
petitioner in the Civil Case and was, thus, properly subject of the notice of lis
pendens. Petitioner further argues that the allegations in the admitted
Complaint relate to all properties, real or personal, acquired by Former
President Marcos and his family during the Marcos regime. 33 The list of assets
and properties specified as forming part of the ill-gotten wealth of the
Marcoses is preceded by the words "include but are not limited" to those
already enumerated: 34
16. Among others, in furtherance of the plan and acting in the manner
referred to above, in unlawful concert with one another and with gross
abuse of power and authority, Defendants Ferdinand E. Marcos and
Imelda Marcos:  cEaSHC

xxx xxx xxx

(f) extorted, demanded and received improper
payments in the form of, among others, commissions,
bribes and kickbacks from persons and corporations
entering into contracts with the Government or its
agencies or instrumentalities for themselves, or for third
persons, permits, licenses or concessions which were
then required in order to engage in particular business
activities;
xxx xxx xxx
(i) engaged in other illegal and improper acts
and practices designed to defraud Plaintiff and the
Filipino people, or otherwise misappropriated and
converted to their own use, benefit and enrichment the
lawful patrimony and revenues of Plaintiff and the
Filipino people.
xxx xxx xxx
17. Among the assets acquired by Defendants in the manner above
described and discovered by the Commission in the exercise of its
official responsibilities are funds and other property listed in Annex
"A" hereof and made an integral part of the complaint.
18. Defendants, with the active collaboration of third persons who are
subject of separate suits, after acquiring ill-gotten wealth consisting of
funds and other property as mentioned above:
xxx xxx xxx
19. As an integral element of their above mentioned scheme, acting
upon the advice and retaining the service of prominent lawyers,
 bankers, accountants and other persons, Defendants employed
numerous stratagems, schemes, artifices and devices to prevent
disclosure, conceal and frustrate recovery of their ill-gotten wealth or
the manner by which it was acquired, including the use of (a) code
names or pseudonyms, (b) trustees, dummies, nominees or agents, (c)
societies and foundations organized in, among others, Liechtenstein,
and/or (d) layers of offshore companies and corporations in various
places such as Netherlands, Antilles, Panama, Hongkong and the
Virgin Islands:
20. The assets and other properties of defendants in the Philippines
include, but are not limited to the following:
xxx xxx xxx
(b) Real Properties
28. (a) The 1935 Constitution, as well as the 1973 Marcos-
promulgated Constitution, provides that the President shall not be
entitled to any emolument in addition to a fixed salary which shall be
neither increased nor diminished during the period for which he shall
have been elected. 
(b) All income received by Defendant Ferdinand E. Marcos during his
incumbency as President in excess of his salary constitutes illegal
income, having been acquired in violation of the provisions of a
Constitution which he himself caused to be ratified.
29. Defendants Imelda (Imee) R. Marcos-Manotoc, Tomas Manotoc,
Irene R. Marcos Araneta, Gregorio Ma. Araneta III, and Ferdinand R.
Marcos, Jr., actively collaborated, with Defendants Ferdinand E.
Marcos and Imelda R. Marcos among others, in confiscating and/or
unlawfully appropriating funds and other property, and in concealing
the same as described above. In addition, each of said Defendants,
either by taking undue advantage of their relationship with Defendants
Ferdinand E. Marcos and Imelda R. Marcos, or by reason of the
above-described active collaboration, unlawfully acquired or received
property, shares of stocks in corporations, illegal payments such as
commissions, bribes or kick-backs, and other forms of improper
privileges, income, revenues and benefits[.] 35
Moreover, petitioner claims that the grounds for cancelling a notice
of lis pendens are not present. 36
In any case, petitioner also insists that the amendment of the Complaint
to specifically include the Cabuyao property is a formal amendment that may
be done at any time. The Sandiganbayan should have been more liberal in
resolving the Motion to admit the Fourth Amended Complaint. 37 Additionally,
petitioner argues that the denial of a motion to admit an amended complaint is
an interlocutory one and cannot attain finality. 38
 As regards the entitlement to a writ of preliminary attachment, petitioner
argues that it has demonstrated entitlement to a writ of attachment over the
Cabuyao property. Sequestration is akin to preliminary attachment and is
among the other provisional remedies available to the Presidential Commission
on Good Government, which was essentially founded on urgency and necessity
to preserve ill-gotten wealth amassed during the Marcos regime. 39
The allegations in the admitted Complaint narrate in detail the manner
by which the Cabuyao property was amassed by the former dictator:
From the early years of his presidency, Defendant Ferdinand E.
Marcos took advantage of his powers as President all throughout the
period from September 21, 1972 to February [25,] 1986, he gravely
abused his powers under martial law and ruled as Dictator under the
1973 Marcos-promulgated Constitution. Defendant Ferdinand E.
Marcos, together with other Defendants, acting singly or collectively,
in unlawful concert with one another, and with the active collaboration
and participation of third persons who are subject of separate suits, in
flagrant breach of trust and of their fiduciary obligations as public
officers, with gross and scandalous abuse of right and power and in
brazen violation of the Constitution and laws of the Philippines,
embarked on a systematic plan to accumulate ill-gotten wealth[.]  CTIEac

xxx xxx xxx

. . . Defendants Imelda [Imee] R. Marcos-Manotoc, Tomas
Manotoc, Irene R. [Marcos]-Araneta, Gregorio Ma. Araneta III, and
Ferdinand [R.] Marcos, Jr. actively collaborated with Defendants
Ferdinand E. Marcos and Imelda R. Marcos, among others, in
confiscating and/or unlawfully appropriating funds and other property,
and in concealing the same as described above. . . . [E]ach of the
Defendants, either by taking undue advantage of their relationship with
Defendants Ferdinand E. Marcos and Imelda R. Marcos, or by reason
of the above-described active collaboration, unlawfully acquired or
received property, shares of stocks in corporations, illegal payments
such as commissions, bribes or kickbacks, and other forms of improper
privileges, income, revenues and benefits[.] 40
Petitioner asserts that the Cabuyao property covers a vast and valuable
25 hectares of prime lot. It is among the assets and properties acquired by the
Marcoses between 1972 and 1986. During the registration of the property,
respondents were minors who had no legitimate source of income. The
registration of the property in their names was obviously done to conceal the
truth that Former President Marcos was the true owner. Finally, the Cabuyao
property had been under the custody and administration of the Government
since 1986. Thus, respondents are guilty of laches for having accepted said
custody and administration for a long time. 41
 Respondents argue that the Petition should be dismissed outright for
procedural defects. 42 They stress that the denial of the Motion to Admit the
Fourth Amended Complaint has attained finality. 43 Further, the annotation of
the notice of lis pendens was improper as the Civil Case did not affect the
Cabuyao property. 44 The properties involved in the Civil Case were
enumerated in the Complaint and made no mention of the Cabuyao
property. 45 That the property is not part of the res in Civil Case No. 0002 is
apparent from petitioner's failure to adduce any evidence involving the
Cabuyao property during the trial of the case. 46
Additionally, respondents claim that the petitioner is not entitled to the
preliminary remedy of attachment, there being no factual allegations showing
the ground relied upon exists. 47
The Petition is granted.
I
Rule 13, Section 14 of the Rules of Court provides that a notice of lis
pendens may be cancelled only upon order of the court, after proper showing
that the notice is to molest the adverse party, or that it is not necessary to
protect the right of the party who caused it to be recorded:
RULE 13
Service and Filing of Pleadings and Other Papers
xxx xxx xxx
SEC. 14. Notice of Lis Pendens. — In an action affecting the
title or the right of possession of real property, the plaintiff and the
defendant, when affirmative relief is claimed in his answer, may
record in the office of the registry of deeds of the province in which
the property is situated a notice of the pendency of the action. Said
notice shall contain the names of the parties and the object of the
action or defense, and a description of the property in that province
affected thereby. Only from the time of filing such notice for record
shall a purchaser, or encumbrancer of the property affected thereby, be
deemed to have constructive notice of the pendency of the action, and
only of its pendency against the parties designated by their real
names. 
The notice of lis pendens hereinabove mentioned may be
cancelled only upon order of the court, after proper showing that the
notice is for the purpose of molesting the adverse party, or that it is
not necessary to protect the rights of the party who caused it to be
recorded. (Emphasis supplied)
Although the Sandiganbayan found that the notice is not for the purpose
of molesting the adverse party, it cancelled the notice of lis pendens as it was
not necessary to protect the right of petitioner:
 Significantly, while there may be nothing on record to show
that the notice of lis pendens was for the purpose of molesting the
defendants who are the registered owners of the subject property, the
record shows that plaintiff has no claim over the subject property that
needs to be protected. In fact, plaintiff does not have any actionable
right over the subject property because the same is not involved in the
instant case. Accordingly, considering that the notice of lis
pendens was erroneously annotated, its cancellation is in order. 48
The conclusion that the Cabuyao property is not involved in the Civil
Case is based on the belief that failure to specifically mention the property in
the amended Complaint automatically renders it beyond the scope of the Civil
Case.
Executive Order No. 14, which defines the jurisdiction over cases
involving the ill-gotten wealth of Former President Marcos and his family,
associates, dummies, agents, and nominees, specifically states that the
technical rules of procedure and evidence shall not be strictly applied to the
civil cases filed under it. Thus, this Court has emphasized this provision and
pointed out that strict adherence to technical rules will hamper the efforts of the
Presidential Commission on Good Government:
We note that the law governing the issues raised in this petition
calls for the setting aside of technical rules when necessary to achieve
the purposes behind the PCGG's creation.
It is to be reiterated that paragraph 2 of Section 3, of Executive
Order No. 14 reads:  SaCIDT

xxx xxx xxx

"The technical rules of procedure and evidence
shall not be strictly applied to the civil cases filed
hereunder."
Section 7 thereof also provides:
"SECTION 7. The provisions of this Executive
Order shall prevail over any and all laws, or parts
thereof, as regards the investigation, prosecution, and
trial of cases for violations of laws involving the
acquisition and accumulation of ill-gotten wealth as
mentioned in Executive Order Nos. 1 and 2."
A settled rule on construction is found in the case of Leveriza
v. Intermediate Appellate Court:
". . . that another basic principle of statutory
construction mandates that general legislation must give
way to special legislation on the same subject, and
generally be so interpreted as to embrace only cases in
 which the special provisions are not applicable, that a
specific statute prevails over a general statute and that
where two statutes are of equal theoretical application
to a particular case, the one designed therefor specially
should prevail.["]
On this score alone, the Sandiganbayan's rejection of the
petitioner's motion on the ground that dropping Campos, Jr. as
defendant in the civil case would amount to a violation of the Rules of
Court is based on shaky ground.
The Sandiganbayan's objections will hamper PCGG efforts in
this similar cases. 49
The admitted Complaint was filed to recover, for the Republic of the
Philippines, all the properties that were illegally acquired by the Marcoses
during their incumbency as public officers and that were manifestly out of
proportion to their salaries, other lawful income, and income from legitimately
acquired property. 50
The assailed Resolutions do not suggest that the Cabuyao property is not
part of the property illegally acquired by respondents. Thus, the conclusion that
the Cabuyao property is not affected by the Civil Case is based solely on an
inference from a procedural detail.
The present issue could have been averted had the Sandiganbayan
granted petitioner's Motion for Leave to Admit Fourth Amended Complaint.
Unfortunately, petitioner inexplicably neither filed a motion for reconsideration
to seek reversal of the Sandiganbayan's denial nor raised the issue in a petition
for certiorari. Nonetheless, an examination of the denial of the Motion to
admit the amended Complaint is necessary for a full and complete resolution of
the issues raised in this Petition. 
The Sandiganbayan Resolution dated September 2, 1998 reads:
In Civil Case No. 0002 (Republic vs. Ferdinand E. Marcos, et
al.), the Court resolved to deny the Motion for Leave to Admit Fourth
Amended Complaint, dated July 8, 1997, filed by plaintiff, through
counsel (with a copy of the Fourth Amended Complaint thereto
attached) for failure of the plaintiff-movant to comply with the
provision of Section 7, Rule 12 of the 1997 Rules of Civil
Procedure which provides:
"Section 7. Filing of amended pleadings. —
When any pleading is amended, a new copy of the
entire pleading, incorporating the amendments which
shall be indicated by appropriate marks, shall be filed."
and for further reason that the original complaint in this case was filed
with this Court on July 16, 1987 yet, or more than 11 years ago, and
 this case has not even reached the pre-trial stage because not all of the
defendants have been served with summons.
Considering the constitutional rights of the parties to a speedy
disposition of this case, and the necessity to expedite the resolution of
this case, the parties, through cou[n]sel, are ordered to appear and
attend a preliminary conference of this case to be held in this Court on
September 28, 1998, at 10:45 in the morning. 51 (Underscoring in the
original)
This Resolution is based on patent errors of both fact and law.
The Sandiganbayan's denial was primarily based on a purported failure
to comply with a requirement under Rule 10, Section 7 52 of the Rules of
Court, that amendments in a pleading be indicated by appropriate marks.
The procedural rule, which requires that amendments to a pleading be
indicated with appropriate marks, has for its purpose the convenience of the
Court and the parties. It allows the reader to be able to immediately see the
modifications. However, failure to use the appropriate markings for the
deletions and intercalations will not affect any substantive right. Certainly, its
absence cannot cause the denial of any substantive right. 53
The Sandiganbayan's view that a motion for leave to amend should be
denied on the basis of the rule on proper markings in an amended pleading
displays an utter lack of understanding of the function of this procedural rule.
More importantly, a reading of the Fourth Amended Complaint reveals
that the Sandiganbayan's observation was patently wrong. Petitioner did not
fail to comply with Rule 10, Section 7 of the Rules of Court. There were no
portions in the body of the Fourth Amended Complaint itself that needed to be
underscored or marked, considering that the text was identical to the text of the
admitted Complaint. Annex A to the Fourth Amended Complaint, the List of
Assets and Other Properties of Ferdinand E. Marcos, Imelda R. Marcos and
Immediate Family, reveals that it was amended to include the Cabuyao
property in the list of assets. That entry was underscored to reflect the
amendment.  cHECAS

This oversight is so palpable that it can reasonably be interpreted as

grave and inexcusable arbitrariness on the part of the Sandiganbayan. Had the
Sandiganbayan simply read the proposed amended pleading correctly, the
inordinate time and resources expended by both parties in this case would have
been avoided.
II
Rule 57, Section 1 of the Rules of Court allows for the attachment of the
property of the adverse party as security for any judgment that may be
recovered in the following cases, among others:
 RULE 57
Attachment
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:
xxx xxx xxx
(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 wilful 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[.]
The Sandiganbayan held that "the allegations in support of the grounds
for the issuance of a writ of preliminary attachment [were] couched in general
terms and devoid of particulars upon which [to] discern whether or not to issue
a writ." 54 In relation to Rule 57, Section 1 (b) of the Rules of Court, the
Sandiganbayan required specific allegations of circumstances as to how the
money or property was allegedly embezzled or fraudulently misapplied or
converted to their own use by the respondents. 55 As regards Section 1 (c), it
held that the Cabuyao property was never concealed, removed, or disposed of
by respondents since it remains registered in their names up to the
present, 56 and petitioner "was easily able to identify and locate the property by
the mere checking of its title with the Registry of Deeds of the Province of
Laguna." 57
The Sandiganbayan is mistaken. The allegations in the admitted
Complaint fall within Section 1 (b) and (c) of Rule 57. Given the peculiarities
of the Marcos cases, the allegations of Former President Marcos taking
advantage of his powers as President, gravely abusing his powers under martial
law, and embarking on a systematic plan to accumulate ill-gotten wealth
suffice to constitute the case as one under Rule 57. The allegation that the
Cabuyao property was registered under the names of respondents — minors at
the time of registration — is sufficient to allege that the Cabuyao property was
concealed, thus satisfying Rule 57, Section 1 (c) of the Rules of Court. 
The Sandiganbayan should have issued an order of preliminary
attachment considering that the requisites of the law — including that
of Executive Order No. 14 — have been substantially met, and that there is
factual basis for the issuance of the preliminary attachment. The
Sandiganbayan committed grave abuse of discretion in denying petitioner's
Motion for issuance of a writ of preliminary attachment.
Procedural rules are not mere technicalities that can be disregarded at
whim by the parties or by our courts. Neither should they be applied so
mechanically without any appreciation of their purpose and object.
Every part of our law — whether substantive or procedural — is the
outcome of reasonable deliberation. As the outcome of human agency, our
laws are to be interpreted and applied with meaning and purpose. The day that
our courts cease to breathe life to this fundamental principle is the day that we
erode the public's confidence in the ability of the law to render justice.
WHEREFORE, the Petition for Certiorari is GRANTED. The
assailed Resolutions dated January 11, 2010 and December 1, 2010, insofar as
they direct the cancellation of the notice of lis pendens,
are ANNULLED and SET ASIDE. The Register of Deeds of Cabuyao,
Laguna is ORDERED to re-annotate the notice of lis pendens on TCT No. T-
85026.
SO ORDERED.
Del Castillo and Mendoza, JJ., concur.
Velasco, Jr., * J., Please see dissenting opinion.
Brion, ** J., is on leave.
Separate Opinions
VELASCO, JR., J., dissenting:

I respectfully register my dissent.

I cannot agree with the conclusion made by the ponencia that the
Sandiganbayan committed grave abuse of discretion in cancelling the notice
of lis pendens over the subject property in Cabuyao, Laguna, covered by TCT
No. T-85026 (Cabuyao property).  AHDacC

The basic rule on lis pendens is found in Rule 13, Section 14 of

the Rules of Court, which provides:
Section 14. Notice of lis pendens. — In an action affecting
the title or the right of possession of real property, the plaintiff and
the defendant, when affirmative relief is claimed in his answer, may
record in the office of the registry of deeds of the province in which
the property is situated notice of the pendency of the action. . . .
The notice of lis pendens hereinabove mentioned may be
cancelled only upon order of the court, after proper showing that the
 notice is for the purpose of molesting the adverse party, or that it is not
necessary to protect the rights of the party who caused it to be
recorded. (24a, R-14)
As early as Diaz v. Perez, 1 this Court had already recognized that the
effect of an annotation of lis pendens is to:
. . . charge the stranger with notice of the particular litigations referred
to in the notice; and if the notice is effective, a third party who
acquires the property affected by the lis pendens takes subject to the
eventually of the litigations.
And its purpose is "to hold property within the jurisdiction and control
of the court pending determination of the controversy, thereby
preventing third persons from acquiring such interests therein as would
preclude giving effect to the judgment.
From a plain reading of the above-quoted provision, it can easily be
inferred that due to the burden imposed on the property by the notice of lis
pendens, the property subjected to the notice must be the very same property
covered by the main action. Otherwise, the notice of lis pendens would unduly
subject a property to a burden even if it is not involved in the pending
litigation. In fact, in Sps. Lim v. Vera Cruz, 2 the Court had already clarified
that "only the particular property subject of litigation is covered by the notice
of lis pendens." Conversely, properties not subject of litigation should not be
covered by a notice of lis pendens.
It goes without saying, therefore, that before a court can order the
annotation of a notice of lis pendens over a property subject of litigation, the
plaintiff must first show in the complaint the nexus between the nature of the
action, which must be an action involving title to or possession of real
property, on the one hand, and the real property sought to be annotated, on the
other. Absent such nexus, the annotation of lis pendens is not only ineffective
to protect the rights of the plaintiff, it also amounts to deprivation of property
without due process of law.
In the case here, there is no contest that the Cabuyao property was not
specifically included in the original Complaint up to the Third Amended
Complaint. The Cabuyao property was only specifically included in the Annex
to the Fourth Amended Complaint. It is also undisputed that the
Sandiganbayan denied the admission of the Fourth Amended Complaint, and
that the denial of the motion for leave to admit the Fourth Amended Complaint
was not questioned by the petitioner in the same or in another proceeding. In
fact, the following observation in the ponencia is very well taken: 
The foregoing issue could have been averted had the
Sandiganbayan granted petitioner's Motion for Leave to Admit Fourth
Amended Complaint. Unfortunately, petitioner inexplicably did not
 file a motion for reconsideration seeking reversal of the
Sandiganbayan's denial, and did not raise the issue in a petition
for certiorari.
The fact remains that the Fourth Amended Complaint was not duly
admitted by the Sandiganbayan, and such denial is no longer subject to review
by this Court. The ponencia, therefore, should have stopped at that
observation, and it need not have unduly addressed the issue of whether the
Fourth Amended Complaint should have been admitted by the Sandiganbayan.
That issue had been laid to rest when the petitioner did not file a motion for
reconsideration or a petition for certiorari against the order denying the motion
for leave. All the more, the present petition should not serve to revive an issue
the resolution of which had already long been rendered final. This Court cannot
rule on an issue which the petitioner chose not to elevate to this Court.
The ponencia, however, inexplicably delved into the issue of the
Sandiganbayan's reasons for denying the motion for leave, and even went on to
observe that the denial was a result of an oversight so palpable that it can
reasonably be interpreted as grave and inexcusable arbitrariness on the part of
the Sandiganbayan. 3 The ponencia only stopped short of annulling the denial
of the motion for leave.
To my mind, the ponencia's obiter on the issue of the propriety of the
denial of the motion for leave is incorrect. Such an issue is already beyond the
scope of review of the Court. The Court cannot, in the present case, resurrect
the issue, much less imply that the Sandiganbayan exceeded its jurisdiction in
denying the motion.
Instead, I believe a more rational ruling can be had if the Court were to
take judicial notice of the fact that the Fourth Amended Complaint was not, as
it remains, admitted. Hence, whatever the allegations there are in the Fourth
Amended Complaint, including the annexes therein, are considered not
pleaded. In effect, the Sandiganbayan did not acquire jurisdiction over
whatever issues or allegations were raised in the Fourth Amended Complaint,
except those that were also impleaded in the Third Amended Complaint.
Going back to the issue on the propriety of the issuance of the notice
of lis pendens over the Cabuyao property, I am of the view that the issue
should be resolved taking into mind that the Cabuyao property was not
specifically mentioned in the Complaint, as admitted by the Sandiganbayan.
The fact that the Cabuyao property was already included in the Fourth
Amended Complaint should have no bearing in the resolution of the issue,
except in highlighting the fact that the property was included in the unadmitted
Fourth Amended Complaint and not in the original Complaint, nor in the
admitted amended Complaints.  IDSEAH
 Absent any specific reference to the Cabuyao property in all the
admitted Complaints, the Sandiganbayan could not have acquired jurisdiction
over the subject property. It is a long-standing rule that a court can only acquire
jurisdiction over the res by: (1) by the seizure of the property under legal
process, whereby it is brought into actual custody of the law; or (2) as a result
of the institution of legal proceedings, in which the power of the court is
recognized and made effective. 4 In the present case for resolution, it is beyond
cavil that the Sandiganbayan did not acquire jurisdiction over the Cabuyao
property through the first mode. As to the second mode, it also cannot be said
that the plaintiff, herein petitioners, instituted legal proceedings over the
Cabuyao property, seeing as it were that no specific reference to the Cabuyao
property was mentioned in the complaint. The reasonable inference, therefore,
is that the Sandiganbayan did not acquire jurisdiction over the Cabuyao
property.
That being the case, there is no reason why the Sandiganbayan included
the Cabuyao property among those properties over which notices of lis
pendens were issued. Thus, while the Omnibus Motion dated June 5, 1997
prayed for the cancellation of the notice of lis pendens, the cancellation prayed
for should not be interpreted as the same cancellation referred to in Rule 14,
Sec. 13, par. 2 of the Rules of Court. 5 Instead, it should be interpreted as one
raising a question of propriety of issuance of a notice of lis pendens, for the
simple reason that the property was wrongfully subjected to the burden even if
it is not included in the present litigation. If a notice of lis pendens may be
cancelled when the annotation is not necessary to protect the title of the party
who caused it to be recorded, 6 with more reason should it be cancelled if the
property subjected to the notice is beyond the jurisdiction of the court.
Hence, I also cannot agree with the ponencia's ruling that Executive
Order No. 14 7 should be applied, and that technical rules of procedure and
evidence need not be applied strictly to the case here. 8 On the contrary, I find
that the provision in Executive Order No. 14 is not applicable to the case at bar,
because what is involved is a question of jurisdiction, and not technical rules
on procedure and evidence.
The only issue presented is whether a notice of lis pendens may be
annotated to the TCT covering the Cabuyao property despite the fact that the
Sandiganbayan did not acquire jurisdiction over the Cabuyao property. To me,
the only reasonable conclusion is that the Sandiganbayan did not acquire
jurisdiction over the Cabuyao property because of the failure to include the
property in the Complaint, as admitted, and consequently, no notice of lis
pendens may be annotated in its title, insofar as the present case is involved.
In so ruling, the Court is not in any way precluding the inclusion of the
Cabuyao property in further court proceedings. Neither is the Court making a
 determination of whether the Cabuyao property is ill-gotten or not, for the
precise reason that such a determination is premature. What the Court would,
in effect, uphold is the ruling that the notice of lis pendens must be cancelled,
for the sole reason that the Sandiganbayan, in Civil Case No. 0002, has not
acquired jurisdiction over the Cabuyao property. Therefore, the Sandiganbayan
exceeds its jurisdiction when it issues any order covering the Cabuyao
property. 
Given the foregoing, I find that the cancellation of the notice of lis
pendens over the Cabuyao property is proper.
I vote that the present Petition for Certiorari be DISMISSED for failing
to show grave abuse discretion amounting to lack or excess of jurisdiction on
the part of the respondent Sandiganbayan.
|||  (Republic v. Sandiganbayan, G.R. No. 195295, [October 5, 2016])

EN BANC

[G.R. No. 93262. November 29, 1991.]

DAVAO LIGHT & POWER CO., INC., petitioner, vs. THE

COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL
or QUEENSLAND TOURIST INN, and TEODORICO
ADARNA, respondents.

Breva & Breva Law Offices for petitioner.

Goc-Ong & Associates for private respondents.

SYLLABUS

1. REMEDIAL LAW; ACTIONS; JURISDICTION; HOW ACQUIRED. — An

action or proceeding is commenced by the filing of the complaint or other
initiatory pleading. By that act, the jurisdiction of the court over the subject matter
or nature of the action or proceeding is invoked or called into activity; and it is
thus that the court acquires jurisdiction over said subject matter or nature of the
action. And it is by that self-same act of the plaintiff (or petitioner) of filing the
complaint (or other appropriate pleading) — by which he signifies his submission
to the court's power and authority — that jurisdiction is acquired by the court over
his person. On the other hand, jurisdiction over the person of the defendant is
obtained, as above stated, by the service of summons or other coercive process
upon him or by his voluntary submission to the authority of the court.
2. ID.; PROVISIONAL REMEDIES; PRELIMINARY ATTACHMENT;
DEFINED. — A preliminary attachment may be defined, paraphrasing the Rules
of Court, as the provisional remedy in virtue of which a plaintiff or other proper
party may, at the commencement of the action or at any time thereafter, have the
property of the adverse party taken into the custody of the court as security for the
satisfaction of any judgment that may be recovered. It is a remedy which is purely
statutory in respect of which the law requires a strict construction of the provisions
granting it. Withal no principle, statutory or jurisprudential, prohibits its issuance
by any court before acquisition of jurisdiction over the person of the defendant.
3. ID.; ID.; ID.; PHRASE "AT THE COMMENCEMENT OF THE ACTION,"
CONSTRUED. — Rule 57 in fact speaks of the grant of the remedy "at the
commencement of the action or at any time thereafter." The phrase, "at the
commencement of the action," obviously refers to the date of the filing of the
complaint — which, as above pointed out, is the date that marks "the
commencement of the action;" and the reference plainly is to a time before
summons is served on the defendant, or even before summons issues.
4. ID.; ID.; ID.; WRIT MAY BE ISSUED EX-PARTE. — What the rule is saying
quite clearly is that after an action is properly commenced — by the filing of the
complaint and the payment of all requisite docket and other fees — the plaintiff
may apply for and obtain a writ of preliminary attachment upon fulfillment of the
pertinent requisites laid down by law, and that he may do so at any time, either
before or after service of summons on the defendant. And this indeed, has been the
immemorial practice sanctioned by the courts: for the plaintiff or other proper
party to incorporate the application for attachment in the complaint or other
appropriate pleading (counterclaim, cross-claim, third-party claim) and for the
Trial Court to issue the writ ex-parte at the commencement of the action if it finds
the application otherwise sufficient in form and substance.
5. ID.; ID.; ID.; HEARING ON APPLICATION THEREON, GENERALLY NOT
NECESSARY. — In Toledo v. Burgos this Court ruled that a hearing on a motion
or application for preliminary attachment is not generally necessary unless
otherwise directed by the Trial Court in its discretion. And in Filinvest Credit
Corporation v. Relova, the Court declared that "(n)othing in the Rules of Court
makes notice and hearing indispensable and mandatory requisites for the issuance
of a writ of attachment."
6. ID.; ID.; ID.; ID.; BASIS OF GRANT. — The only pre-requisite is that the
Court be satisfied, upon consideration of "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 . . . (Rule 57), that there
is no other sufficient security for the claim sought to be enforced by the action,
and that the amount due to the applicant, or the value of the property the
possession of which he is entitled to recover, is as much as the sum for which the
order (of attachment) is granted above all legal counterclaims." If the court be so
satisfied, the "order of attachment shall be granted," and the writ shall issue upon
the applicant's posting of a bond executed to the adverse party in an amount to be
fixed by the judge, not exceeding the plaintiff'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."
7. ID.; ID.; ID.; ID.; REASON. — In Mindanao Savings & Loan Association, Inc.
v. Court of Appeals, decided on April 18, 1989, decided on April 18, 1989, this
Court had occasion to emphasize the postulate that no hearing is required on an
application for preliminary attachment, with notice to the defendant, for the reason
that this "would defeat the objective of the remedy . . . (since the) time which such
a hearing would take, could be enough to enable the defendant to abscond or
dispose of his property before a writ of attachment issues." As observed by a
former member of this Court, such a procedure would warn absconding debtors-
defendants of the commencement of the suit against them and the probable seizure
of their properties, and thus give them the advantage of time to hide their assets,
leaving the creditor-plaintiff holding the proverbial empty bag; it would place the
creditor-applicant in danger of losing any security for a favorable judgment and
thus give him only an illusory victory.
8. ID.; ID.; ID.; HOW DISCHARGED. — There are two (2) ways of discharging
an attachment: first, by the posting of a counterbond; and second, by a showing of
its improper or irregular issuance.
9. ID.; ID.; ID.; ID.; BY COUNTERBOND. — The submission of a counterbond
is an efficacious mode of lifting an attachment already enforced against property,
or even of preventing its enforcement altogether. When property has already been
seized under attachment, the attachment may be discharged upon counterbond in
accordance with Section 12 of Rule 57. But even before actual levy on property,
seizure under attachment may be prevented also upon counterbond. The defendant
need not wait until his property is seized before seeking the discharge of the
attachment by a counterbond. This is made possible by Section 5 of Rule 57.
10. ID.; ID.; ID.; ID.; BY MOTION TO DISCHARGE ON GROUND THAT
THE SAME WAS IRREGULARLY OR IMPROPERLY ISSUED. — Aside from
the filing of a counterbond, a preliminary attachment may also be lifted or
discharged on the ground that it has been irregularly or improperly issued, in
accordance with Section 13 of Rule 57. Like the first, this second mode of lifting
an attachment may be resorted to even before any property has beer levied on.
Indeed, it may be availed of after property has been released from a levy on
attachment, as is made clear by said Section 13.
11. ID.; ID.; ID.; ID.; FIRST MODE SPEEDIER THAN THE SECOND. — The
filing of a counterbond is a speedier way of discharging the attachment writ
maliciously sought out by the attaching creditor instead of the other way, which, in
most instances . . . would require presentation of evidence in a fullblown trial on
the merits, and cannot easily be settled in a pending incident of the case.
12. ID.; ID.; ID.; MAY NOT BE DISSOLVED BY A SHOWING OF ITS
IRREGULAR OR IMPROPER ISSUANCE. — (a) When an attachment may not
be dissolved by a showing of its irregular or improper issuance:
". . . (W)hen the preliminary attachment is issued upon a ground which is at the
same time the applicant's cause of action e.g., 'an action for money or property
embezzled or fraudulently misapplied or converted to his own use by a public
officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk,
in the course of his employment as such, or by any other person in a fiduciary
capacity, or for a willful violation of duty.' (Sec. 1 [b], Rule 57), or 'an action
against a party who has been guilty of fraud in contracting the debt or incurring the
obligation upon which the action is brought' (Sec. 1 [d], Rule 57), 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 thereon had been improperly or irregularly issued (SEE Benitez v.
I.A.C., 154 SCRA 41) — the reason being that the hearing on such a motion for
dissolution of the writ would be tantamount to a trial of the merits of the action. In
other words, the merits of the action would be ventilated at a mere hearing of a
motion, instead of at the regular trial. Therefore, when the writ of attachment is of
this nature, the only way it can be dissolved is by a counterbond (G.B. Inc. v.
Sanchez, 98 Phil. 886)."
13. ID.; ID.; ID.; DISSOLUTION OF PRELIMINARY ATTACHMENT DOES
NOT DISCHARGE SURETIES ON BOND; REASON. — ". . . The dissolution of
the preliminary attachment upon security given, or a showing of its irregular or
improper issuance, does not of course operate to discharge the sureties on
plaintiff's own attachment bond. The reason is simple. That bond is 'executed to
the adverse party, . . . conditioned that the . . . (applicant) 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' (SEC. 4, Rule 57). Hence, until that determination is
made, as to the applicant's entitlement to the attachment, his bond must stand and
cannot be withdrawn."
 

DECISION
NARVASA, J  : p

Subject of the appellate proceedings at bar is the decision of the Court of Appeals
in CA-G.R. Sp. No. 1967 entitled "Queensland Hotel, Inc., etc. and Adarna v.
Davao Light & Power Co., Inc., promulgated on May 4, 1990. 1 That decision
nullified and set aside the writ of preliminary attachment issued by the Regional
Trial Court of Davao City 2 in Civil Case No. 19513-89 on application of the
plaintiff (Davao Light & Power Co.), before the service of summons on the
defendants (herein respondents Queensland Co., Inc. and Adarna).
Following is the chronology of the undisputed material facts culled from the
Appellate Tribunal's judgment of May 4, 1990.
1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao
Light) filed a verified complaint for recovery of a sum of money and damages
against Queensland Hotel, etc. and Teodorico Adarna (docketed as Civil Case No.
19613-89). The complaint contained an ex parte application for a writ of
preliminary attachment.
2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by
raffle, issued an Order granting the ex parte application and fixing the attachment
bond at P4,600,513.37.
3. On May 11, 1989 the attachment bond having been submitted by Davao Light,
the writ of attachment issued.
4. On May 12, 1989, the summons and a copy of the complaint, as well as the writ
of attachment and a copy of the attachment bond, were served on defendants
Queensland and Adarna; and pursuant to the writ, the sheriff seized properties
belonging to the latter.
 LibLex

5. On September 6, 1989, defendants Queensland and Adarna filed a motion to

discharge the attachment for lack of jurisdiction to issue the same because at the
time the order of attachment was promulgated (May 3, 1989) and the attachment
writ issued (May 11, 1989), the Trial Court had not yet acquired jurisdiction over
the cause and over the persons of the defendants.
6. On September 14, 1989, Davao Light filed an opposition to the motion to
discharge attachment.
7. On September 19, 1989, the Trial Court issued an Order denying the motion to
discharge.
This Order of September 19, 1989 was successfully challenged by Queensland and
Adarna in a special civil action of certiorari instituted by them in the Court of
Appeals. The Order was, as aforestated, annulled by the Court of Appeals in its
Decision of May 4, 1990. The Appellate Court's decision closed with the
following disposition:
 ". . . the Orders dated May 3, 1989 granting the issuance of a writ of
preliminary attachment, dated September 19, 1989 denying the motion
to discharge attachment; dated November 7, 1989 denying petitioner's
motion for reconsideration; as well as all other orders emanating
therefrom, specially the Writ of Attachment dated May 11, 1989 and
Notice of Levy on Preliminary Attachment dated May 11, 1989, are
hereby declared null and void and the attachment hereby ordered
DISCHARGED."
The Appellate Tribunal declared that —
". . .While it is true that a prayer for the issuance of a writ of preliminary
attachment may be included in the complaint, as is usually done, it is
likewise true that the Court does not acquire jurisdiction over the person
of the defendant until he in duly summoned or voluntarily appears, and
adding the phrase that it be issued 'ex parte' does not confer said
jurisdiction before actual summons had been made, nor retroact
jurisdiction upon summons being made. . . ."
It went on to say, citing Sievert v. Court of Appeals,  3 that "in a proceedings in
attachment," the "critical time which must be identified is . . . when the trial
court acquires authority under law to act coercively against the defendant or his
property . . .;" and that " critical time is the time of the vesting of jurisdiction in
the court over the person of the defendant in the main case."
Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao
Light seeks in the present appellate proceedings.  cdrep

The question is whether or not a writ of preliminary attachment may issue ex

parte against a defendant before acquisition of jurisdiction of the latter's person by
service of summons or his voluntary submission to the Court's authority.
The Court rules that the question must be answered in the affirmative and that
consequently, the petition for review will have to be granted.
It is incorrect to theorize that after an action or proceeding has been commenced
and jurisdiction over the person of the plaintiff has been vested in the court, but
before the acquisition of jurisdiction over the person of the defendant (either by
service of summons or his voluntary submission to the court's authority), nothing
can be validly done by the plaintiff or the court. It is wrong to assume that the
validity of acts done during this period should be dependent on, or held in
suspension until, the actual obtention of jurisdiction over the defendant's person.
The obtention by the court of jurisdiction over the person of the defendant is one
thing; quite another is the acquisition of jurisdiction over the person of the plaintiff
or over the subject-matter or nature of the action, or the res or object thereof.
An action or proceeding is commenced by the filing of the complaint or other
initiatory pleading. 4 By that act, the jurisdiction of the court over the subject
matter or nature of the action or proceeding is invoked or called into activity; 5 and
it is thus that the court acquires jurisdiction over said subject matter or nature of
the action. 6 And it is by that self-same act of the plaintiff (or petitioner) of filing
the complaint (or other appropriate pleading) — by which he signifies his
submission to the court's power and authority — that jurisdiction is acquired by
the court over his person. 7 On the other hand, jurisdiction over the person of the
defendant is obtained, as above stated, by the service of summons or other
coercive process upon him or by his voluntary submission to the authority of the
court. 8
The events that follow the filing of the complaint as a matter of routine are well
known. After the complaint is filed, summons issues to the defendant, the
summons is then transmitted to the sheriff, and finally, service of the summons is
effected on the defendant in any of the ways authorized by the Rules of Court.
There is thus ordinarily some appreciable interval of time between the day of the
filing of the complaint and the day of service of summons of the defendant.
During this period, different acts may be done by the plaintiff or by the Court,
which are of unquestionable validity and propriety. Among these, for example, are
the appointment of a guardian ad litem,  9 the grant of authority to the plaintiff to
prosecute the suit as a pauper litigant, 10 the amendment of the complaint by the
plaintiff as a matter of right without leave of court, 11 authorization by the Court
of service of summons by publication, 12 the dismissal of the action by the plaintiff
on mere notice. 13
This, too, is true with regard to the provisional remedies of preliminary
attachment, preliminary injunction, receivership or replevin. 14 They may be
validly and properly applied for and granted even before the defendant is
summoned or is heard from.  LibLex

A preliminary attachment may be defined, paraphrasing the Rules of Court, as the

provisional remedy in virtue of which a plaintiff or other proper party may, at the
commencement of the action or at any time thereafter, have the property of the
adverse party taken into the custody of the court as security for the satisfaction of
any judgment that may be recovered. 15 It is a remedy which is purely statutory in
respect of which the law requires a strict construction of the provisions granting
it. 16 Withal no principle, statutory or jurisprudential, prohibits its issuance by any
court before acquisition of jurisdiction over the person of the defendant.
Rule 57 in fact speaks of the grant of the remedy "at the commencement of the
action or at any time thereafter." 17 The phrase, "at the commencement of the
action," obviously refers to the date of the filing of the complaint — which, as
above pointed out, is the date that marks "the commencement of the action;" 18 and
the reference plainly is to a time before summons is served on the defendant, or
even before summons issues. What the rule is saying quite clearly is that after an
action is properly commenced — by the filing of the complaint and the payment of
all requisite docket and other fees — the plaintiff may apply for and obtain a writ
of preliminary attachment upon fulfillment of the pertinent requisites laid down by
law, and that he may do so at any time, either before or after service of summons
on the defendant. And this indeed, has been the immemorial practice sanctioned
by the courts: for the plaintiff or other proper party to incorporate the application
for attachment in the complaint or other appropriate pleading (counterclaim, cross-
claim, third-party claim) and for the Trial Court to issue the writ ex-parte at the
commencement of the action if it finds the application otherwise sufficient in form
and substance.
In Toledo v. Burgos,  19 this Court ruled that a hearing on a motion or application
for preliminary attachment is not generally necessary unless otherwise directed by
the Trial Court in its discretion. 20 And in Filinvest Credit Corporation v.
Relova,  21 the Court declared that "(n)othing in the Rules of Court makes notice
and hearing indispensable and mandatory requisites for the issuance of a writ of
attachment." The only pre-requisite is that the Court be satisfied, upon
consideration of "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 . . . (Rule 57), that there is no other sufficient
security for the claim sought to be enforced by the action, and that the amount due
to the applicant, or the value of the property the possession of which he is entitled
to recover, is as much as the sum for which the order (of attachment) is granted
above all legal counterclaims." 22 If the court be so satisfied, the "order of
attachment shall be granted," 23 and the writ shall issue upon the applicant's
posting of a bond executed to the adverse party in an amount to be fixed by the
judge, not exceeding the plaintiff'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." 24
 
In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on
April 18, 1989, 25 this Court had occasion to emphasize the postulate that no
hearing is required on an application for preliminary attachment, with notice to the
defendant, for the reason that this "would defeat the objective of the remedy . . .
(since the) time which such a hearing would take, could be enough to enable the
defendant to abscond or dispose of his property before a writ of attachment
issues." As observed by a former member of this Court, 26such a procedure would
warn absconding debtors-defendants of the commencement of the suit against
them and the probable seizure of their properties, and thus give them the
advantage of time to hide their assets, leaving the creditor-plaintiff holding the
proverbial empty bag; it would place the creditor-applicant in danger of losing any
security for a favorable judgment and thus give him only an illusory victory.  Cdpr
Withal, ample modes of recourse against a preliminary attachment are secured by
law to the defendant. The relative ease with which a preliminary attachment may
be obtained is matched and paralleled by the relative facility with which the
attachment may legitimately be prevented or frustrated. These modes of recourse
against preliminary attachments granted by Rule 57 were discussed at some length
by the separate opinion in Mindanao Savings & Loans Asso. Inc. v. C.A., supra.
That separate opinion stressed that there are two (2) ways of discharging an
attachment: first, by the posting of a counterbond; and second, by a showing of its
improper or irregular issuance.
1.0. The submission of a counterbond is an efficacious mode of lifting an
attachment already enforced against property, or even of preventing its
enforcement altogether.
1.1. When property has already been seized under attachment, the attachment may
be discharged upon counterbond in accordance with Section 12 of Rule 57.
'SECTION 12. Discharge of attachment upon giving counterbond. — At
any time after an order of attachment has been granted, the party whose
property has been attached or the person appearing in his behalf, may,
upon reasonable notice to the applicant, apply to the judge who granted
the order, or to the judge of the court in which the action is pending, for
an order discharging the attachment wholly or in part on the security
given . . . 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 . . .'
1.2. But even before actual levy on property, seizure under attachment may be
prevented also upon counterbond. The defendant need not wait until his property
is seized before seeking the discharge of the attachment by a counterbond. This is
made possible by Section 5 of Rule 57.
'SECTION 5. Manner of attaching property. — The officer executing
the order shall without delay attach, to await judgment and execution in
the action, all the properties of the party against whom the order is
issued in the province, not exempt from execution, or so much thereof as
may be sufficient to satisfy the applicant's demand, unless the former
makes a deposit with the clerk or judge of the court from which the
order issued, or gives a counter-bond executed to the applicant, in an
amount sufficient to satisfy such demand besides costs, or in an amount
equal to the value of the property which is about to be attached, to
secure payment to the applicant of any judgment which he may recover
in the action. . . .' (Emphasis supplied).
2.0. Aside from the filing of a counterbond, a preliminary attachment may also be
lifted or discharged on the ground that it has been irregularly or improperly issued,
in accordance with Section 13 of Rule 57. Like the first, this second mode of
lifting ar attachment may be resorted to even before any property has beer levied
on. Indeed, it may be availed of after property has been released from a levy on
attachment, as is made clear by said Section 13, viz.:   cdphil

'SECTION 13. Discharge of attachment for improper or irregular

issuance. — The party whose property has been attached may also, at
any time either BEFORE or AFTER the release of the attached
property, or before any attachment shall have been actually levied, upon
reasonable notice to the attaching creditor, apply to the judge who
granted the order, or to the judge of the court in which the action is
pending, for an order to discharge the attachment on the ground that the
same was improperly or irregularly issued. If the motion be made on
affidavits on the part of the party whose property has been attached, but
not otherwise, the attaching creditor may oppose the same by counter-
affidavits or other evidence in addition to that on which the attachment
was made. . . .' (Emphasis supplied).
This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987),
'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. Moreover, the filing of a
counterbond is a speedier way of discharging the attachment writ maliciously
sought out by the attaching creditor instead of the other way, which, in most
instances . . . would require presentation of evidence in a fullblown trial on the
merits, and cannot easily be settled in a pending incident of the case.'" 27
It may not be amiss to here reiterate other related principles dealt with
in Mindanao Savings & Loans Asso. Inc. v. C.A., supra.,  28 to wit:
(a) When an attachment may not be dissolved by a showing of its irregular or
improper issuance:
". . . (W)hen the preliminary attachment is issued upon a ground which
is at the same time the applicant's cause of action e.g., 'an action for
money or property embezzled or fraudulently misapplied or converted to
his own use by a public officer, or an officer of a corporation, or an
attorney, factor, broker, agent, or clerk, in the course of his employment
as such, or by any other person in a fiduciary capacity, or for a willful
violation of duty.' (Sec. 1 [b], Rule 57), or 'an action against a party who
has been guilty of fraud in contracting the debt or incurring the
obligation upon which the action is brought' (Sec. 1 [d], Rule 57), the
defendant is not allowed to file a motion to dissolve the attachment
under Section 13 of Rule 57 by offering to show the falsity of the factual
averments in the plaintiffs application and affidavits on which the writ
was based — and consequently that the writ based thereon had been
improperly or irregularly issued (SEE Benitez v. I.A.C., 154 SCRA 41)
— the reason being that the hearing on such a motion for dissolution of
 the writ would be tantamount to a trial of the merits of the action. In
other words, the merits of the action would be ventilated at a mere
hearing of a motion, instead of at the regular trial. Therefore, when the
writ of attachment is of this nature, the only way it can be dissolved is
by a counterbond (G.B. Inc. v. Sanchez, 98 Phil. 886)."
(b) Effect of the dissolution of a preliminary attachment on the plaintiff's
attachment bond:
". . . The dissolution of the preliminary attachment upon security given,
or a showing of its irregular or improper issuance, does not of course
operate to discharge the sureties on plaintiff's own attachment bond. The
reason is simple. That bond is 'executed to the adverse party, . . .
conditioned that the . . . (applicant) 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' (SEC. 4, Rule 57). Hence, until that
determination is made, as to the applicant's entitlement to the
attachment, his bond must stand and cannot be withdrawn."  LexLib

With respect to the other provisional remedies, i.e., preliminary injunction (Rule
58), receivership (Rule 59), replevin or delivery of personal property (Rule 60),
the rule is the same: they may also issue ex parte.  29
It goes without saying that whatever be the acts done by the Court prior to the
acquisition of jurisdiction over the person of the defendant, as above indicated —
issuance of summons, order of attachment and writ of attachment (and/or
appointment of guardian ad litem, or grant of authority to the plaintiff to prosecute
the suit as a pauper litigant, or amendment of the complaint by the plaintiff as a
matter of right without leave of court 30 — and however valid and proper they
might otherwise be, 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
and order for appointment of guardian ad litem, if any, as also explicitly directed
by Section 3, Rule 14 of the Rules of Court. Service of all such documents is
indispensable not only for the acquisition of jurisdiction over the person of the
defendant, but also upon considerations of fairness, to apprise the defendant of the
complaint against him, of the issuance of a writ of preliminary attachment and the
grounds therefor and thus accord him the opportunity to prevent attachment of his
property by the posting of a counterbond in an amount equal to the plaintiff's claim
in the complaint pursuant to Section 5 (or Section 12), Rule 57, or dissolving it by
causing dismissal of the complaint itself on any of the grounds set forth in Rule
16, or demonstrating the insufficiency of the applicant's affidavit or bond in
accordance with Section 13, Rule 57.
 
It was on account of the failure to comply with this fundamental requirement of
service of summons and the other documents above indicated that writs of
attachment issued by the Trial Court ex parte were struck down by this Court's
Third Division in two (2) cases, namely: Sievert v. Court of Appeals,  31 and BAC
Manufacturing and Sales Corporation v. Court of Appeals, et al.  32 In contrast to
the case at bar — where the summons and a copy of the complaint, as well as the
order and writ of attachment and the attachment bond were served on the
defendant — in Sievert, levy on attachment was attempted notwithstanding that
only the petition for issuance of the writ of preliminary attachment was served on
the defendant, without any prior or accompanying summons and copy of the
complaint; and in BAC Manufacturing and Sales Corporation, neither the
summons nor the order granting the preliminary attachment or the writ of
attachment itself was served on the defendant "before or at the time the levy was
made."
For the guidance of all concerned, the Court reiterates and reaffirms the
proposition that writs of attachment may properly issue ex parte provided that the
Court is satisfied that the relevant requisites therefor have been fulfilled by the
applicant, although it may, in its discretion, require prior hearing on the
application with notice to the defendant; but that levy on property pursuant to the
writ thus issued may not be validly effected unless preceded, or
contemporaneously accompanied by service on the defendant of summons, a copy
of the complaint (and of the appointment of guardian ad litem, if any), the
application for attachment (if not incorporated in but submitted separately from the
complaint), the order of attachment, and the plaintiff's attachment bond.
WHEREFORE, the petition is GRANTED; the challenged decision of the Court of
Appeals is hereby REVERSED, and the order and writ of attachment issued by
Hon. Milagros C. Nartatez, Presiding Judge of Branch 8, Regional Trial Court of
Davao City in Civil Case No. 19513-89 against Queensland Hotel or Motel or
Queensland Tourist Inn and Teodorico Adarna are hereby REINSTATED. Costs
against private respondents.
SO ORDERED.
 (Davao Light & Power Co., Inc. v. Court of Appeals, G.R. No. 93262,
|||

[November 29, 1991], 281 PHIL 386-403)

FIRST DIVISION
 [G.R. No. 175350. June 13, 2012.]

EQUITABLE BANKING
CORPORATION, petitioner, vs. SPECIAL STEEL PRODUCT
S, INC. and AUGUSTO L. PARDO, respondents.

DECISION

DEL CASTILLO, J  : p

A crossed check with the notation "account payee only" can only be
deposited in the named payee's account. It is gross negligence for a bank to
ignore this rule solely on the basis of a third party's oral representations of
having a good title thereto. 
Before the Court is a Petition for Review on Certiorari of the October
13, 2006 Decision of the Court of Appeals (CA) in CA-G.R. CV No. 62425.
The dispositive portion of the assailed Decision reads:
WHEREFORE, premises considered, the May 4, 1998 Decision
of the Regional Trial Court of Pasig City, Branch 168, in Civil Case No.
63561, is hereby AFFIRMED.
SO ORDERED. 1
Factual Antecedents
Respondent Special Steel Products, Inc. (SSPI) is a private domestic
corporation selling steel products. Its co-respondent Augusto L. Pardo (Pardo)
is SSPI's President and majority stockholder. 2
International Copra Export Corporation (Interco) is its regular
customer. 3
Jose Isidoro 4 Uy, alias Jolly Uy (Uy), is an Interco employee, in charge
of the purchasing department, and the son-in-law of its majority
stockholder. 5 
TAaEIc

Petitioner Equitable Banking Corporation (Equitable or bank) is a

private domestic corporation engaged in banking 6 and is the depository bank
of Interco and of Uy.
In 1991, SSPI sold welding electrodes to Interco, as evidenced by the
following sales invoices:
Sales Invoice No. 65042 dated February 14, 1991 for
P325,976.34 7
 Sales Invoice No. 65842 dated April 11, 1991 for P345,412.80 8
Sales Invoice No. 65843 dated April 11, 1991 for P313,845.84 9
The due dates for these invoices were March 16, 1991 (for the first sales
invoice) and May 11, 1991 (for the others). The invoices provided that Interco
would pay interest at the rate of 36% per annum in case of delay.
In payment for the above welding electrodes, Interco issued three
checks payable to the order of SSPI on July 10, 1991, 10 July 16, 1991, 11 and
July 29, 1991. 12 Each check was crossed with the notation "account payee
only" and was drawn against Equitable. The records do not identify the
signatory for these three checks, or explain how Uy, Interco's purchasing
officer, came into possession of these checks. 
The records only disclose that Uy presented each crossed check
to Equitable on the day of its issuance and claimed that he had good title
thereto. 13 He demanded the deposit of the checks in his personal accounts
in Equitable, Account No. 18841-2 and Account No. 03474-0. 14
Equitable acceded to Uy's demands on the assumption that Uy, as the
son-in-law of Interco's majority stockholder, 15 was acting pursuant to Interco's
orders. The bank also relied on Uy's status as a valued
client. 16 Thus, Equitable accepted the checks for deposit in Uy's personal
accounts 17 and stamped "ALL PRIOR ENDORSEMENT AND/OR LACK
OF ENDORSEMENT GUARANTEED" on their dorsal portion. 18 Uy
promptly withdrew the proceeds of the checks.
In October 1991, SSPI reminded Interco of the unpaid welding
electrodes, amounting to P985,234.98. 19 It reiterated its demand on January
14, 1992. 20 SSPI explained its immediate need for payment as it was
experiencing some financial crisis of its own. Interco replied that it had already
issued three checks payable to SSPI and drawn against Equitable. SSPI denied
receipt of these checks. 
HTDcCE

On August 6, 1992, SSPI requested information

from Equitable regarding the three checks. The bank refused to give any
information invoking the confidentiality of deposits. 21
The records do not disclose the circumstances surrounding Interco's and
SSPI's eventual discovery of Uy's scheme. Nevertheless, it was determined that
Uy, not SSPI, received the proceeds of the three checks that were payable to
SSPI. Thus, on June 30, 1993 (twenty-three months after the issuance of the
three checks), Interco finally paid the value of the three checks to SSPI, plus a
portion of the accrued interests. Interco refused to pay the entire accrued
interest of P767,345.64 on the ground that it was not responsible for the delay.
Thus, SSPI was unable to collect P437,040.35 (at the contracted rate of 36%
per annum) in interest income. 22
 SSPI and its president, Pardo, filed a complaint for damages with
application for a writ of preliminary attachment against Uy
and Equitable Bank. The complaint alleged that the three crossed checks, all
payable to the order of SSPI and with the notation "account payee only," could
be deposited and encashed by SSPI only. However, due to Uy's fraudulent
representations, and Equitable's indispensable connivance or gross negligence,
the restrictive nature of the checks was ignored and the checks were deposited
in Uy's account. Had the defendants not diverted the three checks in July 1991,
the plaintiffs could have used them in their business and earned money from
them. Thus, the plaintiffs prayed for an award of actual damages consisting of
the unrealized interest income from the proceeds of the checks for the two-year
period that the defendants withheld the proceeds from them (from July 1991 up
to June 1993). 23
In his personal capacity, Pardo claimed an award of P3 million as moral
damages from the defendants. He allegedly suffered hypertension, anxiety, and
sleepless nights for fear that the government would charge him for tax evasion
or money laundering. He maintained that defendants' actions amounted to
money laundering and that it unfairly implicated his company in the scheme.
As for his fear of tax evasion, Pardo explained that the Bureau of Internal
Revenue might notice a discrepancy between the financial reports of Interco
(which might have reported the checks as SSPI's income in 1991) and those of
SSPI (which reported the income only in 1993). Since Uy and Equitable were
responsible for Pardo's worries, they should compensate him jointly and
severally therefor. 24
SSPI and Pardo also prayed for exemplary damages and attorney's
fees. 25
In support of their application for preliminary attachment, the plaintiffs
alleged that the defendants are guilty of fraud in incurring the obligation upon
which the action was brought and that there is no sufficient security for the
claim sought to be enforced in this action. 26 
TCIDSa

The trial court granted plaintiffs' application. 27 It issued the writ of

preliminary attachment on September 20, 1993, 28 upon the filing of plaintiffs'
bond for P500,000.00. The sheriff served and implemented the writ against the
personal properties of both defendants. 29
Upon Equitable's motion and filing of a counter-bond, however, the trial
court eventually discharged the attachment 30 against it. 31
Equitable then argued for the dismissal of the complaint for lack of
cause of action. It maintained that interest income is due only when it is
expressly stipulated in writing. Since Equitable and SSPI did not enter into
any contract, Equitable is not liable for damages, in the form of unobtained
interest income, to SSPI. 32 Moreover, SSPI's acceptance of Interco's payment
on the sales invoices is a waiver or extinction of SSPI's cause of action based
on the three checks. 33
Equitable further argued that it is not liable to SSPI because it accepted
the three crossed checks in good faith. 34 Equitable averred that, due to Uy's
close relations with the drawer of the checks, the bank had basis to assume that
the drawer authorized Uy to countermand the original order stated in the check
(that it can only be deposited in the named payee's account). Since only Uy is
responsible for the fraudulent conversion of the checks, he should
reimburse Equitable for any amounts that it may be made liable to plaintiffs. 35
The bank counter-claimed that SSPI is liable to it in damages for the
wrongful and malicious attachment of Equitable's personal properties. The
bank maintained that SSPI knew that the allegation of fraud against the bank is
a falsehood. Further, the bank is financially capable to meet the plaintiffs'
claim should the latter receive a favorable judgment. SSPI was aware that the
preliminary attachment against the bank was unnecessary, and intended only to
humiliate or destroy the bank's reputation. 36
Meanwhile, Uy answered that the checks were negotiated to him; that
he is a holder for value of the checks and that he has a good title thereto. 37 He
did not, however, explain how he obtained the checks, from whom he obtained
his title, and the value for which he received them. During trial, Uy did not
present any evidence but adopted Equitable's evidence as his own.
Ruling of the Regional Trial Court 38
The RTC clarified that SSPI's cause of action against Uy
and Equitable is for quasi-delict. SSPI is not seeking to enforce payment on the
undelivered checks from the defendants, but to recover the damage that it
sustained from the wrongful non-delivery of the checks. 39  aSATHE

The crossed checks belonged solely to the payee named therein, SSPI.
Since SSPI did not authorize anyone to receive payment in its behalf, Uy
clearly had no title to the checks and Equitable had no right to accept the said
checks from Uy. Equitable was negligent in permitting Uy to deposit the
checks in his account without verifying Uy's right to endorse the crossed
checks. The court reiterated that banks have the duty to scrutinize the checks
deposited with it, for a determination of their genuineness and regularity. The
law holds banks to a high standard because banks hold themselves out to the
public as experts in the field. Thus, the trial court found Equitable's explanation
regarding Uy's close relations with the drawer unacceptable. 40
Uy's conversion of the checks and Equitable's negligence make them
liable to compensate SSPI for the actual damage it sustained. This damage
consists of the income that SSPI failed to realize during the delay. 41 The trial
court then equated this unrealized income with the interest income that SSPI
failed to collect from Interco. Thus, it ordered Uy and Equitable to pay, jointly
and severally, the amount of P437,040.35 to SSPI as actual damages. 42
It also ordered the defendants to pay exemplary damages of
P500,000.00, attorney's fees amounting to P200,000.00, as well as costs of
suit. 43
The trial court likewise found merit in Pardo's claim for moral damages.
It found that Pardo suffered anxiety, sleepless nights, and hypertension in fear
that he would face criminal prosecution. The trial court awarded Pardo the
amount of P3 million in moral damages. 44
The dispositive portion of the trial court's Decision reads:
WHEREFORE, judgment is hereby rendered in favor of
plaintiffs Special Steel Products, Inc., and Augusto L. Pardo and against
defendants Equitable Banking Corporation [and] Jose Isidoro Uy, alias
"Jolly Uy," ordering defendants to jointly and severally pay plaintiffs the
following:
1. P437,040.35 as actual damages;
2. P3,000,000.00 as moral damages to Augusto L. Pardo;  AcSHCD

3. P500,000.00 as exemplary damages;

4. P200,000.00 as attorney's fees; and
5. Costs of suit.
Defendant EBC's counterclaim is hereby DISMISSED for lack of
factual and legal basis.
Likewise, the crossclaim filed by defendant EBC against
defendant Jose Isidoro Uy and the crossclaim filed by defendant Jose
Isidoro Uy against defendant EBC are hereby DISMISSED for lack of
factual and legal basis.
SO ORDERED.
Pasig City, May 4, 1998. 45
The trial court denied Equitable's motion for reconsideration in its Order dated
November 19, 1998. 46
Only Equitable appealed to the CA, 47 reiterating its defenses below.
Appealed Ruling of the Court of Appeals 48
The appellate court found no merit in Equitable's appeal.
It affirmed the trial court's ruling that SSPI had a cause of action for
quasi-delict against Equitable. 49 The CA noted that the three checks presented
by Uy to Equitable were crossed checks, and strictly made payable to SSPI
only. This means that the checks could only be deposited in the account of the
named payee. 50 Thus, the CA found that Equitable had the responsibility of
ensuring that the crossed checks are deposited in SSPI's account
only. Equitable violated this duty when it allowed the deposit of the crossed
checks in Uy's account. 51
The CA found factual and legal basis to affirm the trial court's award of
moral damages in favor of Pardo. 52
It likewise affirmed the award of exemplary damages and attorney's fees
in favor of SSPI. 53 
IEaATD

Issues
1. Whether SSPI has a cause of action against Equitable for quasi-delict;
2. Whether SSPI can recover, as actual damages, the stipulated 36% per
annum interest from Equitable;
3. Whether speculative fears and imagined scenarios, which cause
sleepless nights, may be the basis for the award of moral damages; and
4. Whether the attachment of Equitable's personal properties was
wrongful.
Our Ruling
SSPI's cause of action
This case involves a complaint for damages based on quasi-delict. SSPI
asserts that it did not receive prompt payment from Interco in July 1991
because of Uy's wilful and illegal conversion of the checks payable to SSPI,
and of Equitable's gross negligence, which facilitated Uy's actions. The
combined actions of the defendants deprived SSPI of interest income on the
said moneys from July 1991 until June 1993. Thus, SSPI claims damages in
the form of interest income for the said period from the parties who wilfully or
negligently withheld its money from it. 
Equitable argues that SSPI cannot assert a right against the bank based
on the undelivered checks. 54 It cites provisions from the Negotiable
Instruments Law and the case of Development Bank of Rizal  v. Sima Wei 55 to
argue that a payee, who did not receive the check, cannot require the drawee
bank to pay it the sum stated on the checks.
Equitable's argument is misplaced and beside the point. SSPI's cause of
action is not based on the three checks. SSPI does not ask Equitable or Uy to
deliver to it the proceeds of the checks as the rightful payee. SSPI does not
assert a right based on the undelivered checks or for breach of contract.
Instead, it asserts a cause of action based on quasi-delict. A quasi-delict is an
act or omission, there being fault or negligence, which causes damage to
another. Quasi-delicts exist even without a contractual relation between the
parties. The courts below correctly ruled that SSPI has a cause of action for
quasi-delict against Equitable.
The checks that Interco issued in favor of SSPI were all crossed, made
payable to SSPI's order, and contained the notation "account payee only." This
creates a reasonable expectation that the payee alone would receive the
proceeds of the checks and that diversion of the checks would be averted. This
expectation arises from the accepted banking practice that crossed checks are
intended for deposit in the named payee's account only and no other. 56 At the
very least, the nature of crossed checks should place a bank on notice that it
should exercise more caution or expend more than a cursory inquiry, to
ascertain whether the payee on the check has authorized the holder to deposit
the same in a different account. It is well to remember that "[t]he banking
system has become an indispensable institution in the modern world and plays
a vital role in the economic life of every civilized society. Whether as mere
passive entities for the safe-keeping and saving of money or as active
instruments of business and commerce, banks have attained an [sic] ubiquitous
presence among the people, who have come to regard them with respect and
even gratitude and, above all, trust and confidence. In this connection, it is
important that banks should guard against injury attributable to negligence or
bad faith on its part. As repeatedly emphasized, since the banking business is
impressed with public interest, the trust and confidence of the public in it is of
paramount importance. Consequently, the highest degree of diligence is
expected, and high standards of integrity and performance are required of
it." 57 
DAEICc

Equitable did not observe the required degree of diligence expected of a

banking institution under the existing factual circumstances.
The fact that a person, other than the named payee of the crossed check,
was presenting it for deposit should have put the bank on guard. It should
have verified if the payee (SSPI) authorized the holder (Uy) to present the
same in its behalf, or indorsed it to him. Considering however, that the named
payee does not have an account with Equitable (hence, the latter has no
specimen signature of SSPI by which to judge the genuineness of its
indorsement to Uy), the bank knowingly assumed the risk of relying solely on
Uy's word that he had a good title to the three checks. Such misplaced reliance
on empty words is tantamount to gross negligence, which is the "absence of or
failure to exercise even slight care or diligence, or the entire absence of care,
evincing a thoughtless disregard of consequences without exerting any effort to
avoid them." 58
 Equitable contends that its knowledge that Uy is the son-in-law of the
majority stockholder of the drawer, Interco, made it safe to assume that the
drawer authorized Uy to countermand the order appearing on the check. In
other words, Equitable theorizes that Interco reconsidered its original order and
decided to give the proceeds of the checks to Uy. 59 That the bank arrived at
this conclusion without anything on the face of the checks to support it is
demonstrative of its lack of caution. It is troubling that Equitableproceeded
with the transaction based only on its knowledge that Uy had close relations
with Interco. The bank did not even make inquiries with the drawer, Interco
(whom the bank considered a "valued client"), to verify Uy's representation.
The banking system is placed in peril when bankers act out of blind faith and
empty promises, without requiring proof of the assertions and without making
the appropriate inquiries. Had it only exercised due diligence, Equitable could
have saved both Interco and the named payee, SSPI, from the trouble that the
bank's mislaid trust wrought for them. 
Equitable's pretension that there is nothing under the circumstances that
rendered Uy's title to the checks questionable is outrageous. These are crossed
checks, whose manner of discharge, in banking practice, is restrictive and
specific. Uy's name does not appear anywhere on the crossed
checks. Equitable, not knowing the named payee on the check, had no way of
verifying for itself the alleged genuineness of the indorsement to Uy. The
checks bear nothing on their face that supports the belief that the drawer gave
the checks to Uy. Uy's relationship to Interco's majority stockholder will not
justify disregarding what is clearly ordered on the checks.
Actual damages
For its role in the conversion of the checks, which deprived SSPI of the
use thereof, Equitable is solidarily liable with Uy to compensate SSPI for the
damages it suffered.
Among the compensable damages are actual damages, which
encompass the value of the loss sustained by the plaintiff, and the profits that
the plaintiff failed to obtain. 60Interest payments, which SSPI claims, fall under
the second category of actual damages. 
SSPI computed its claim for interest payments based on the interest rate
stipulated in its contract with Interco. It explained that the stipulated interest
rate is the actual interest income it had failed to obtain from Interco due to the
defendants' tortious conduct.
The Court finds the application of the stipulated interest rate erroneous.
SSPI did not recover interest payments at the stipulated rate from
Interco because it agreed that the delay was not Interco's fault, but that of the
defendants'. If that is the case, then Interco is not in delay (at least not after
issuance of the checks) and the stipulated interest payments in their contract
did not become operational. If Interco is not liable to pay for the 36% per
annum interest rate, then SSPI did not lose that income. SSPI cannot lose
something that it was not entitled to in the first place. Thus, SSPI's claim that it
was entitled to interest income at the rate stipulated in its contract with Interco,
as a measure of its actual damage, is fallacious.
More importantly, the provisions of a contract generally take effect only
among the parties, their assigns and heirs. 61 SSPI cannot invoke the
contractual stipulation on interest payments against Equitable because it is
neither a party to the contract, nor an assignee or an heir to the contracting
parties. 
EaHATD

Nevertheless, it is clear that defendants' actions deprived SSPI of the

present use of its money for a period of two years. SSPI is therefore entitled to
obtain from the tortfeasors the profits that it failed to obtain from July 1991 to
June 1993. SSPI should recover interest at the legal rate of 6% per
annum, 62 this being an award for damages based on quasi-delict and not for a
loan or forbearance of money.
Moral damages
Both the trial and appellate courts awarded Pardo P3 million in moral
damages. Pardo claimed that he was frightened, anguished, and seriously
anxious that the government would prosecute him for money laundering and
tax evasion because of defendants' actions. 63 In other words, he was worried
about the repercussions that defendants' actions would have on him.
Equitable argues that Pardo's fears are all imagined and should not be
compensated. The bank points out that none of Pardo's fears panned out. 64
Moral damages are recoverable only when they are the proximate result
of the defendant's wrongful act or omission. 65 Both the trial and appellate
courts found that Pardo indeed suffered as a result of the diversion of the three
checks. It does not matter that the things he was worried and anxious about did
not eventually materialize. It is rare for a person, who is beset with mounting
problems, to sift through his emotions and distinguish which fears or anxieties
he should or should not bother with. So long as the injured party's moral
sufferings are the result of the defendants' actions, he may recover moral
damages.  IEcaHS

The Court, however, finds the award of P3 million excessive. Moral

damages are given not to punish the defendant but only to give the plaintiff the
means to assuage his sufferings with diversions and recreation. 66 We find that
the award of P50,000.00 67 as moral damages is reasonable under the
circumstances.
Equitable to recover amounts from Uy
 Equitable then insists on the allowance of their cross-claim against Uy.
The bank argues that it was Uy who was enriched by the entire scheme and
should reimburse Equitable for whatever amounts the Court might order it to
pay in damages to SSPI. 68
Equitable is correct. There is unjust enrichment when (1) a person is
unjustly benefited, and (2) such benefit is derived at the expense of or with
damages to another. 69 In the instant case, the fraudulent scheme concocted by
Uy allowed him to improperly receive the proceeds of the three crossed checks
and enjoy the profits from these proceeds during the entire time that it was
withheld from SSPI. Equitable, through its gross negligence and mislaid trust
on Uy, became an unwitting instrument in Uy's scheme. Equitable's fault
renders it solidarily liable with Uy, insofar as respondents are concerned.
Nevertheless, as between Equitable and Uy, Equitable should be allowed to
recover from Uy whatever amounts Equitable may be made to pay under the
judgment. It is clear that Equitable did not profit in Uy's scheme.
Disallowing Equitable's cross-claim against Uy is tantamount to allowing Uy
to unjustly enrich himself at the expense of Equitable. For this reason, the
Court allows Equitable's cross-claim against Uy. 
Preliminary attachment
Equitable next assails as error the trial court's dismissal of its counter-
claim for wrongful preliminary attachment. It maintains that, contrary to SSPI's
allegation in its application for the writ, there is no showing whatsoever
that Equitable was guilty of fraud in allowing Uy to deposit the checks. Thus,
the trial court should not have issued the writ of preliminary attachment in
favor of SSPI. The wrongful attachment compelled Equitable to incur expenses
for a counter-bond, amounting to P30,204.26, and caused it to sustain damage,
amounting to P5 million, to its goodwill and business credit. 70
SSPI submitted the following affidavit in support of its application for a
writ of preliminary attachment:
I, Augusto L. Pardo, of legal age, under oath hereby depose and
declare:
1. I am one of the plaintiffs in the above-entitled case; the other
plaintiff is our family corporation, Special Steel Products, Inc., of which
I am the president and majority stockholder; I caused the preparation of
the foregoing Complaint, the allegations of which I have read, and which
I hereby affirm to be true and correct out of my own personal
knowledge;  ADEaHT

2. The corporation and I have a sufficient cause of action against

defendants Isidoro Uy alias Jolly Uy and Equitable Banking
Corporation, who are guilty of fraud in incurring the obligation upon
 which this action is brought, as particularly alleged in the Complaint,
which allegations I hereby adopt and reproduce herein;
3. There is no sufficient security for our claim in this action and
that the amount due us is as much as the sum for which the order is
granted above all legal counterclaims;
4. We are ready and able to put up a bond executed to the
defendants in an amount to be fixed by the Court[,] conditioned on the
payment of all costs[,] which may be adjudged to defendants[,] and all
damages[,] which they may sustain by reason of the attachment of the
court, should [the court] finally adjudge that we are not entitled
thereto. 71
The complaint (to which the supporting affidavit refers) cites the following
factual circumstances to justify SSPI's application: 
6. . . . Yet, notwithstanding the fact that SPECIAL STEEL did
not open an account with EQUITABLE BANK as already alleged, thru
its connivance with defendant UY in his fraudulent scheme to
defraud SPECIAL STEEL, or at least thru its gross
negligence EQUITABLE BANK consented to or allowed the opening of
Account No. 18841-2 at its head office and Account No. 03474-0 at its
Ermita Branch in the name of SPECIAL STEEL without the latter's
knowledge, let alone authority or consent, but obviously on the bases of
spurious or falsified documents submitted by UY or under his
authority, which documents EQUITABLE BANK did not bother to
verify or check their authenticity with SPECIALSTEEL. 72
xxx xxx xxx
9. On August 6, 1992, plaintiffs, thru counsel,
wrote EQUITABLE BANK about the fraudulent transactions involving
the aforesaid checks, which could not have been perpetrated without its
indispensable participation and cooperation, or gross negligence, and
therein solicited its cooperation in securing information as to the
anomalous and irregular opening of the false accounts maintained
in SPECIAL STEEL's name, but EQUITABLE BANK malevolently
shirking from its responsibility to prevent the further perpetration of
fraud, conveniently, albeit unjustifiably, invoked the confidentiality of
the deposits and refused to give any information, and accordingly
denied SPECIAL STEEL's valid request, thereby knowingly shielding
the identity of the ma[le]factors involved [in] the unlawful and
fraudulent transactions. 73 
aEHAIS

The above affidavit and the allegations of the complaint are bereft of specific
and definite allegations of fraud against Equitable that would justify the
attachment of its properties. In fact, SSPI admits its uncertainty
whether Equitable's participation in the transactions involved fraud or was a
result of its negligence. Despite such uncertainty with respect to Equitable's
participation, SSPI applied for and obtained a preliminary attachment
of Equitable's properties on the ground of fraud. We believe that such
preliminary attachment was wrongful. "[A] writ of preliminary attachment is
too harsh a provisional remedy to be issued based on mere abstractions of
fraud. Rather, the rules require that for the writ to issue, there must be
a recitation of clear and concrete factual circumstances manifesting that the
debtor practiced fraud upon the creditor at the time of the execution of their
agreement in that said debtor had a preconceived plan or intention not to pay
the creditor." 74 No proof was adduced tending to show that Equitable had a
preconceived plan not to pay SSPI or had knowingly participated in Uy's
scheme. 
That the plaintiffs eventually obtained a judgment in their favor does not
detract from the wrongfulness of the preliminary attachment. While "the
evidence warrants [a] judgment in favor of [the] applicant, the proofs may
nevertheless also establish that said applicant's proffered ground for attachment
was inexistent or specious, and hence, the writ should not have issued at all . . .
." 75
For such wrongful preliminary attachment, plaintiffs may be held liable
for damages. However, Equitable is entitled only to such damages as its
evidence would allow, 76 for the wrongfulness of an attachment does not
automatically warrant the award of damages. The debtor still has the burden of
proving the nature and extent of the injury that it suffered by reason of the
wrongful attachment. 77
The Court has gone over the records and found that Equitable has duly
proved its claim for, and is entitled to recover, actual damages. In order to lift
the wrongful attachment of Equitable's properties, the bank was compelled to
pay the total amount of P30,204.26 in premiums for a counter-
bond. 78 However, Equitable failed to prove that it sustained damage to its
"goodwill and business credit" in consequence of the alleged wrongful
attachment. There was no proof of Equitable's contention that respondents'
actions caused it public embarrassment and a bank run.  TASCEc

WHEREFORE, premises considered, the Petition is PARTIALLY

GRANTED. The assailed October 13, 2006 Decision of the Court of Appeals
in CA-G.R. CV No. 62425 is MODIFIED by:
1. REDUCING the award of actual damages to respondents to the rate
of 6% per annum of the value of the three checks from July 1991 to June
1993 or a period of twenty-three months;
2. REDUCING the award of moral damages in favor of Augusto L.
Pardo from P3,000,000.00 to P50,000.00; and
 3. REVERSING the dismissal of Equitable Banking Corporation's
cross-claim against Jose Isidoro Uy, alias Jolly Uy. Jolly Uy is
hereby ORDERED to REIMBURSE EquitableBanking Corporation the
amounts that the latter will pay to respondents.
Additionally, the Court hereby REVERSES the dismissal
of Equitable Banking Corporation's counterclaim for damages
against Special Steel Products, Inc. This
Court ORDERS Special Steel Products, Inc. to PAY Equitable Banking
Corporation actual damages in the total amount of P30,204.36, for the
wrongful preliminary attachment of its properties. 
The rest of the assailed Decision is AFFIRMED.
SO ORDERED.
 (Equitable Banking Corp. v. Special Steel Products, Inc., G.R. No. 175350, [June
|||

13, 2012], 687 PHIL 197-220)

THIRD DIVISION

[G.R. No. 63225. April 3, 1990.]

ELEAZAR V. ADLAWAN, petitioner, vs. HON. JUDGE
VALERIANO P. TOMOL, as Presiding Judge of Branch XI of
RTC-Cebu (formerly Branch XI, CFI-Cebu), Branch XXVII of
RTC-Cebu, with Station in Lapu-Lapu City (formerly Branch
XVI, CFI-Cebu, Presided over by former Judge Ceferino E.
Dulay), and ABOITIZ COMPANY, INC., respondents.

Pablo P. Garcia for petitioner.

Angara, Concepcion, Regala & Cruz for private respondent.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; EXECUTION UPON FINAL

JUDGMENT; PREVAILING PARTY, ENTITLED THERETO AS A MATTER
OF RIGHT. — There is no question that the order dated July 6, 1982 of
respondent Judge Valeriano P. Tomol, Jr. lifting and vacating the order granting
the writ of preliminary attachment is a valid order, issued while he had jurisdiction
over the case. The execution of aforesaid order of July 6, 1982 was stayed for a
period of fifteen (15) days on motion of the plaintiff to enable the latter to question
the propriety or impropriety of the same in the appellate court. Instead, plaintiff
filed a civil case for delivery of Personal Properties with Replevin and Damages
with another branch of the CFI of Cebu. Accordingly, having failed to appeal or
question the aforementioned order in the appellate court as originally manifested,
the same became final and executory. Section 1, Rule 39 of the Revised Rules of
Court provides: "Execution upon final judgment or orders. — Execution shall
issue upon a judgment or order that finally disposes of the action or proceeding.
Such execution shall issue as a matter of right upon the expiration of the period to
appeal therefrom if no appeal has been perfected." It is basic that once a judgment
becomes final, the prevailing party is entitled as a matter of right to a Writ of
Execution, and the issuance thereof is the Court's ministerial duty.
2. ID.; ID.; PRELIMINARY ATTACHMENT; NATURE AND PURPOSE. — "A
writ of preliminary attachment is 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 might be secured in said action by the attaching
creditor against the defendant." The provisional remedy of attachment is available
in order that the defendant may not dispose of his property attached, and thus
secure the satisfaction of any judgment that may be secured by plaintiff from
defendant. The purpose and function of an attachment or garnishment is two-fold.
First, it seizes upon property of an alleged debtor in advance of final judgment and
holds it subject to appropriation thus prevents the loss or dissipation of the
property by fraud or otherwise. Second, it subjects to the payment of a creditor's
claim property of the debtor in those cases where personal service cannot be
obtained upon the debtor. This remedy is to secure a contingent lien on defendant's
property until plaintiff can, by appropriate proceedings, obtain a judgment and
have such property applied to its satisfaction, or to make some provision for
unsecured debts in cases where the means of satisfaction thereof are liable to be
removed beyond the jurisdiction, or improperly disposed of or concealed, or
otherwise placed beyond the reach of creditors.
3. ID.; ID.; ID.; ANCILLARY TO AND DEPENDENT ON PRINCIPAL
PROCEEDING. — Attachment is an ancillary remedy. It is not sought for its own
sake but rather to enable the attaching party to realize upon relief sought and
expected to be granted in the main or principal action. The remedy of attachment
is adjunct to the main suit, therefore, it can have no independent existence apart
from a suit on a claim of the plaintiff against the defendant. In other words, an
attachment or garnishment is generally ancillary to, and dependent on, a principal
proceeding, either at law or in equity, which has for its purpose a determination of
the justice of a creditor's demand.
4. ID.; ID.; ID.; COURTS HAVE NO JURISDICTION TO ORDER THE
DELIVERY OF PERSONAL PROPERTY UNDER CUSTODIA LEGIS. — This
Court ruled that upon levy by attachment of the property in question by order of
the Court, said property fell into custodia legis of that court for purposes of that
civil case only. Any relief against such attachment and the execution and issuance
of a writ of possession that ensued subsequently could be disposed of only in that
case. More specifically, it was held that courts have no jurisdiction to order the
delivery of personal property (replevin) to the plaintiff if the property is under
attachment. Only courts having supervisory control or superior jurisdiction in the
premises, have the right to interfere with and change possession of property
in custodia legis. More recently, this Court ruled that the garnishment of property
to satisfy a writ of execution operates as an attachment and fastens upon the
property a lien by which the property is brought under the jurisdiction of the court
issuing the writ. It is brought into custodia legis under the sole control of such
court. During the life of the attachment, the attached property continues in the
custody of the law, the attaching officer being entitled to its possession and
liability for its safe keeping.
5. ID.; ID.; ID.; CEASED UPON WITHDRAWAL OF THE COMPLAINT. — It
is obvious that the writ of preliminary attachment issued is already dissolved and
rendered non-existent in view of the withdrawal of the complaint by Aboitiz and
Company, Inc. More importantly, even if the writ of attachment can be considered
independently of the main case, the same, having been improperly issued as found
by respondent Judge Tomol himself, is null and void and cannot be a justification
for holding petitioners' properties in custodia legis any longer. When Aboitiz and
Company, Inc. withdraws its complaint, the attachment ceased to have a leg to
stand on. The attached properties of petitioner Adlawan which are in the custody
of private respondent Aboitiz should be returned to petitioner. This is only proper
and equitable and in consonance with the rules and principles of law. The parties,
by the withdrawal of the complaint, should be placed in the same standing as they
were before the filing of the same.
6. ID.; JURISDICTION; ACQUIRED BY COURT OVER A PERSON
ALLEGING ANY NON-JURISDICTIONAL GROUNDS FOR DISMISSING
THE ACTION. — A reading of the Omnibus Motion filed by petitioner, then
defendant therein, would reveal that he not only questioned the jurisdiction of the
court but likewise alleged non-jurisdictional grounds for dismissing the replevin
case, such as the amount of the bond put up by Aboitiz & Co. as grossly
insufficient and that the same properties are involved both in the replevin case and
in the original collection case with preliminary attachment. Thus, in so doing, the
court acquired jurisdiction over him. In the case of Wang Laboratories, Inc. vs.
Mendoza this Court held: "Even though the defendant objects to the jurisdiction of
the court, if at the same time he alleges any non-jurisdictional ground for
dismissing the action, the court acquires jurisdiction over him."
7. ID.; THE RIGHT TO COME BEFORE THE COURT TO REDRESS A
GRIEVANCE OR RIGHT A WRONG SHOULD BE EXERCISED WITH
PRUDENCE AND GOOD FAITH. — The employment by counsel for private
respondent of dubious procedural maneuvers as what transpired in the case at bar
obviously to continue the wrongful and illegal possession and custody of
petitioner's properties even after the dissolution of the attachment is to say the
least, hardly commendable if not a form of "forum shopping", to seek the court
where he may possibly obtain favorable judgment. It may therefore be stated that
the right to come before the Courts to redress a grievance or right a wrong should
be exercised with prudence and good faith. In the case of Indianapolis v. Chase
National Bank, Trustee, 314 U.S. 69, it is opined that "Litigation is the pursuit of
practical ends, not a game of chess."

DECISION

FERNAN, C .J  : p

This is a special civil action for certiorari and mandamus seeking to annul: [a] the
Order dated December 20, 1982 of respondent Judge Valeriano P. Tomol, Branch
XI of CFI-Cebu, now Branch XI, RTC-Cebu, in Civil Case No. R-21761, entitled
"Aboitiz and Company, Inc. v. Adlawan, et al" denying the motion of the
defendant to require the Provincial Sheriff of Cebu to deliver to him the properties
seized by the Sheriff of Davao City and [b] the Order dated September 4, 1982 of
Judge Ceferino F. Dulay, Branch XVI of the Court of First Instance of Cebu, now
Branch XXVII, RTC-Cebu, Lapu-Lapu City, in Civil Case No. 619-L between the
same parties, denying for lack of merit petitioner's Omnibus Motion to reconsider,
dissolve and set aside the Writ of Seizure and Replevin.
The antecedent facts are as follows:
Petitioner Eleazar A. Adlawan, a private contractor, was awarded by the National
Irrigation Administration (NIA) and the Bureau of Public Highways (BPH)
contracts for the construction of various infrastructure projects of the government.
To perform his obligations thereunder, petitioner sought financial assistance and
support from private respondent Aboitiz and Company, Inc. For failure of
petitioner to pay the installments and amortizations, private respondent filed on
May 13, 1982 before the Court of First Instance of Cebu a complaint 1 for the
collection of a sum of money and damages including an ex-parte application for
the issuance of a writ of preliminary attachment against the property of petitioner
as defendant therein. The Executive Judge without notice and hearing issued an
order 2 on May 14, 1982 directing the issuance of a writ of preliminary attachment
against all the properties of petitioner, real and personal, upon the filing of an
attachment bond for Four Million Pesos. The case, docketed as Civil Case No. R-
21761 was raffled and later assigned to Branch XI of the Court of First Instance of
Cebu, presided by respondent Judge Valeriano P. Tomol. On May 26, 1982, writs
of preliminary attachment were issued addressed to the Sheriffs of Cebu, Davao
City, Quezon City, Davao del Sur and Davao del Norte, directing them to attach
the real and personal properties of petitioner within their respective jurisdictions.
On the strength of the writ of preliminary attachment, the bulk of petitioner's
property in Davao City was attached.
 
Subsequently, private respondent filed an Urgent Ex-parte Motion 3 asking the
court that it be allowed to take possession and custody of the attached properties to
protect its interest and to avoid any damage or deterioration considering that the
sheriff has no proper place to store or deposit said properties. This was granted by
respondent Judge on May 28, 1982 for being meritorious.
Meanwhile, petitioner before submitting an answer to the complaint, filed a
Motion for a Bill of Particulars 4 and to Set Aside the Ex-Parte Writ of Preliminary
Attachment 5 which was opposed by private respondent. Finding that the discharge
of the writ of attachment is unavoidable on the ground that it was issued ex-parte,
without notice and hearing, based principally on the alleged removal or disposition
by the defendants of their properties with intent to defraud the plaintiff, which
allegation was limited to a bare assertion and not persuasively substantial,
respondent Judge issued an Order 6 dated July 6, 1982, the dispositive portion of
which reads:
"Accordingly, the Order of May 14, 1982 granting the writ of
preliminary attachment is lifted and vacated. The writs issued on 26 May
1982, are dissolved and recalled and the properties levied and seized by
the Sheriffs of Cebu and Davao City are discharged and released.
"SO ORDERED." (Emphasis supplied)
In view of the foregoing, private respondent Aboitiz and Company, Inc. filed an
Urgent Ex-Parte Motion 7 dated July 7, 1982 praying for a stay of the July 6, 1982
Order dissolving the writ of preliminary attachment, thus maintaining the status
quo. Private respondent further prayed for the court to direct the sheriff of Davao
City to desist and or stop the enforcement or implementation of the order lifting
the attachment and to grant them fifteen (15) days to elevate the matter to the
Appellate Court. Consequently, respondent Judge Tomol issued on the same day
an Order 8 granting the motion prayed for by private respondent Aboitiz and
Company, Inc. Thus, the July 6, 1982 Order was stayed.
In the meantime, three (3) Deputy Sheriffs of Cebu implemented the Order lifting
the Writ of Attachment and were able to pull out some personal properties of
petitioner Adlawan. They were not able to take out all the attached properties in
view of the subsequent Order of respondent judge to stay its implementation.  LLjur

As petitioner's Motion for a Bill of Particulars was not immediately acted upon, he
was not able to file an answer or interpose any counterclaim. For this reason,
petitioner filed an Application for Award of Damages dated July 9, 1982 asking
for a reasonable rental on the attached heavy construction equipment, machineries
and other properties at the rate of P30,000.00 per day from the date of seizure until
said properties are actually returned to his possession and control. 9
Before the court a quo could act on the motions of petitioner Adlawan, and before
he could file an answer, his motion for a bill of particulars not having been acted
upon, private respondent Aboitiz and Company, Inc., filed on July 13, 1982 a
Notice of Dismissal or Withdrawal of Complaint 10 as a matter of right in
accordance with Section 1, Rule 17 of the Rules of Court. Respondent
Judge Tomol issued an Order 11 dated July 15, 1982, the dispositive portion of
which reads:
"Accordingly, the termination of this case upon the notice of dismissal
voluntarily filed by the plaintiff is hereby confirmed. For emphasis, all
orders of this Court issued prior to the filing of said notice of dismissal
are each and all rendered functus oficio. By the same token, all pending
incidents, particularly the defendant's motion for a bill of particulars and
their petition for damages against the Plaintiff's attachment bond, are
now beyond the competence of this Court to consider for being moot
and academic.
"SO ORDERED"
Petitioner Adlawan filed a Motion 12 dated July 28, 1982 praying for the issuance
of an order to the Provincial Sheriff of Cebu to implement and enforce the Order
of respondent Judge dated July 6, 1982 dissolving the writ of preliminary
attachment and to secure the delivery of the attached properties to the petitioner.
Respondent Judge issued an Order 13dated December 20, 1982 denying the Motion
in view of the institution by private respondent Aboitiz and Company, Inc. of a
civil case (No. 619-L) for delivery of Personal Properties with Replevin and
Damages before the Court of First Instance of Cebu, Branch XVI in Lapu-Lapu
City on July 13, 1982 and the filing of petitioner Adlawan of a case for damages
(Civil Case No. 22265) before the Court of First Instance of Cebu, Branch X, in
connection with the seizure of his properties under the writ of preliminary
attachment.
With regard to the replevin case filed by private respondent Aboitiz and Company,
Inc., the Court of First Instance of Cebu, Branch XVI, Lapu-Lapu City, issued an
Order 14 for the seizure and delivery of the properties described therein to the
private respondent. The seized properties were thus delivered to private respondent
by the Clerk of Court and Ex-officio Provincial Sheriff on July 24, 1982.
Petitioner filed an Omnibus Motion 15 dated July 17, 1982 to reconsider, dissolve
and set aside the Writ of Seizure and Replevin and to direct that the properties
seized be returned to petitioner as well as to dismiss the complaint. In support of
this motion, petitioner alleged, among others, that private respondent's office is
situated in Cebu City while petitioner is a resident of mainland Cebu, particularly
Minglanilla, therefore the Court of First Instance of Cebu stationed in Lapu-Lapu
should not accept the case. Furthermore, he alleged that the same personal
properties seized are in custodia legis by virtue of a writ of preliminary attachment
issued by the Court of First Instance of Cebu, Branch XI, presided by respondent
Judge Tomol. The Court of First Instance of Cebu, Branch XVI in Lapu-Lapu
City, presided by Judge Ceferino E. Dulay denied the Omnibus Motion for lack of
merit on September 4,1982. Petitioner Adlawan filed a Motion for
Reconsideration but the same was denied.
Hence, the present petition for certiorari and mandamus impleading respondent
Judge Valeriano P. Tomol as Presiding Judge of Branch XI of the Court of First
Instance of Cebu (now Branch XI, RTC-Cebu) and Branch XVI, CFI-Cebu
presided by Judge Ceferino E. Dulay in Lapu-Lapu City (now Branch XXVII of
RTC Cebu in Lapu-Lapu) and private respondent Aboitiz and Company, Inc.
The issues raised by petitioner Adlawan are the following, to wit:
"1) After the attachment of petitioner's properties was dissolved and
discharged because it was found by respondent Judge to be wrongful and
illegal, does it not constitute grave and manifest abuse of discretion on
the part of the same respondent judge TO REFUSE to implement his
own order for the return of the attached properties to petitioner simply
because private respondent suddenly dismissed its complaint?
"2) On the other hand, the court, after having deprived petitioner
possession and enjoyment of his properties, by reason of an attachment
which, subsequently, was dissolved and discharged, was it not the clear,
specific and inescapable duty of that same court, to order that said
properties be returned and restored to the possession and enjoyment of
petitioner?
"3) Are not the attached properties of petitioner under the custodia legis
of the attaching court — Branch XI, CFI-Cebu (now Branch XI, RTC-
Cebu) and, therefore, subject to its jurisdiction and control? If so, does it
not constitute grave and manifest abuse of discretion on the part of the
attaching court to literally wash his (sic) hands off any duty or
responsibility by considering himself (sic) as having been divested of
authority to deal with such properties?
"4) Did not the Lapu-Lapu Branch of CFI Cebu act, without or in excess
of his (sic) jurisdiction or, at least, with grave abuse of discretion, in
taking cognizance of the replevin case which involves properties already
in custodia legis of Branch XI of CFI-Cebu?
 "5) On the other hand, was it not the clear, specific and inescapable duty
of the Lapu-Lapu Branch of CFI-Cebu, to dismiss the replevin case and
dissolve the writ of replevin, not only because of the principle of
custodia legis but also because it was in clear violation of Adm. Order
No. 6 of this Honorable Supreme Court, which amends Adm. Orders No.
147 and 328 of the Department (now Ministry) of Justice?" 16
From the recital of facts may be gleaned a series of peculiar events and
circumstances requiring examination and looking into in order that justice and
equity may be subserved.
Petitioner's properties were attached on the strength of the writs of preliminary
attachment issued without notice and hearing by the executive judge. These
attached properties were given to the custody of private respondent, Aboitiz and
Company, Inc. Petitioner then filed a Motion to Dissolve the Writ of Attachment
which was granted by respondent Judge Tomol. Thus, petitioner was able to
recover some of his properties. But on the following day, this order was stayed by
the same respondent judge leaving the rest of petitioner's properties with private
respondent. Later, private respondent withdrew its complaint which was confirmed
by respondent Judge Tomol. Petitioner Adlawan filed a motion to have the rest of
his properties returned but respondent judge refused to act on said motion due to
cases filed by both parties in the different branches of the Court of First Instance
of Cebu relating to the same case.  LibLex

After a careful examination of the records of the case We rule in favor of

petitioner Adlawan.
There is no question that the order dated July 6, 1982 of respondent Judge
Valeriano P. Tomol, Jr. lifting and vacating the order granting the writ of
preliminary attachment is a valid order, issued while he had jurisdiction over the
case. The execution of aforesaid order of July 6, 1982 was stayed for a period of
fifteen (15) days on motion of the plaintiff to enable the latter to question the
propriety or impropriety of the same in the appellate court. Instead, plaintiff filed a
civil case for delivery of Personal Properties with Replevin and Damages with
another branch of the CFI of Cebu. Accordingly, having failed to appeal or
question the aforementioned order in the appellate court as originally manifested,
the same became final and executory.
 
Section 1, Rule 39 of the Revised Rules of Court provides:
"Execution upon final judgment or orders. — Execution shall issue upon
a judgment or order that finally disposes of the action or proceeding.
Such execution shall issue as a matter of right upon the expiration of the
period to appeal therefrom if no appeal has been perfected."
It is basic that once a judgment becomes final, the prevailing party is entitled as a
matter of right to a Writ of Execution, and the issuance thereof is the Court's
ministerial duty. 17
But as earlier stated, the reasons advanced by respondent Judge Tomol for denying
the enforcement of his order dated July 6, 1982 which lifted the writ of attachment
and the restoration of the seized properties to the defendant petitioner herein are:
[a] the filing by private respondent of Civil Case No. 619-L with Branch XVI of
CFI-Lapu-Lapu City for delivery of Personal Properties with Replevin and
Damages which as a consequence, the same properties involved in this case were
seized under a writ of replevin upon order of aforesaid court and [b] the filing by
petitioner of Civil Case No. 22265 before Branch X of the Court of First Instance
of Cebu, for damages.
Hence, the issues in this case center on the nature and purpose of the writ of
attachment.  llcd

"A writ of preliminary attachment is 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 might be secured in said action by the attaching creditor
against the defendant." 18
The provisional remedy of attachment is available in order that the defendant may
not dispose of his property attached, and thus secure the satisfaction of any
judgment that may be secured by plaintiff from defendant. 19 The purpose and
function of an attachment or garnishment is two-fold. First, it seizes upon property
of an alleged debtor in advance of final judgment and holds it subject to
appropriation thus prevents the loss or dissipation of the property by fraud or
otherwise. Second, it subjects to the payment of a creditor's claim property of the
debtor in those cases where personal service cannot be obtained upon the
debtor. 20 This remedy is to secure a contingent lien on defendant's property until
plaintiff can, by appropriate proceedings, obtain a judgment and have such
property applied to its satisfaction, or to make some provision for unsecured debts
in cases where the means of satisfaction thereof are liable to be removed beyond
the jurisdiction, or improperly disposed of or concealed, or otherwise placed
beyond the reach of creditors. 21
Attachment is an ancillary remedy. It is not sought for its own sake but rather to
enable the attaching party to realize upon relief sought and expected to be granted
in the main or principal action. 22
The remedy of attachment is adjunct to the main suit, therefore, it can have no
independent existence apart from a suit on a claim of the plaintiff against the
defendant. In other words, an attachment or garnishment is generally ancillary to,
and dependent on, a principal proceeding, either at law or in equity, which has for
its purpose a determination of the justice of a creditor's demand. 23
Thus, this Court ruled that upon levy by attachment of the property in question by
order of the Court, said property fell into custodia legis of that court for purposes
of that civil case only. Any relief against such attachment and the execution and
issuance of a writ of possession that ensued subsequently could be disposed of
only in that case. 24
More specifically, it was held that courts have no jurisdiction to order the delivery
of personal property (replevin) to the plaintiff if the property is under
attachment. 25 Only courts having supervisory control or superior jurisdiction in
the premises, have the right to interfere with and change possession of property
in custodia legis. 26
More recently, this Court ruled that the garnishment of property to satisfy a writ of
execution operates as an attachment and fastens upon the property a lien by which
the property is brought under the jurisdiction of the court issuing the writ. It is
brought into custodia legis under the sole control of such court. 27
During the life of the attachment, the attached property continues in the custody of
the law, the attaching officer being entitled to its possession and liability for its
safe keeping. 28
Based on the above-cited principles, it is obvious that the writ of preliminary
attachment issued is already dissolved and rendered non-existent in view of the
withdrawal of the complaint by Aboitiz and Company, Inc. More importantly,
even if the writ of attachment can be considered independently of the main case,
the same, having been improperly issued as found by respondent
Judge Tomol himself, is null and void and cannot be a justification for holding
petitioners' properties in custodia legis any longer.
To reiterate, an attachment is but an incident to a suit; and unless the suit can be
maintained, the attachment must fall.
When Aboitiz and Company, Inc. withdrew its complaint, the attachment ceased
to have a leg to stand on. The attached properties of petitioner Adlawan which are
in the custody of private respondent Aboitiz should be returned to petitioner. This
is only proper and equitable and in consonance with the rules and principles of
law. The parties, by the withdrawal of the complaint, should be placed in the same
standing as they were before the filing of the same.
Petitioner also questions the jurisdiction of the CFI of Cebu stationed in Lapu-
Lapu City to hear the replevin case filed by private respondent in view of the fact
that petitioner is a resident of Minglanilla, Cebu while private respondent's
principal place of business is in Cebu City. Obviously, the question posed by
petitioner is venue.
A reading of the Omnibus Motion filed by petitioner, then defendant therein,
would reveal that he not only questioned the jurisdiction of the court but likewise
alleged non-jurisdictional grounds for dismissing the replevin case, such as the
amount of the bond put up by Aboitiz & Co. as grossly insufficient and that the
same properties are involved both in the replevin case and in the original
collection case with preliminary attachment. Thus, in so doing, the court acquired
jurisdiction over him. In the case of Wang Laboratories, Inc. vs. Mendoza 29 this
Court held:  LLphil

"Even though the defendant objects to the jurisdiction of the court, if at

the same time he alleges any non-jurisdictional ground for dismissing
the action, the court acquires jurisdiction over him."
Furthermore, in the case of City of Cebu v. Consolacion, 30 We held that:
". . . any of the branches of the Court of First Instance of the Province of
Cebu, whether stationed in the city of the same name or in any of the
municipalities of the province, would be proper venue for its trial and
determination, it being admitted that the parties are residents of the
Province of Cebu . . ."
Finally, the employment by counsel for private respondent of dubious procedural
maneuvers as what transpired in the case at bar obviously to continue the wrongful
and illegal possession and custody of petitioner's properties even after the
dissolution of the attachment is to say the least, hardly commendable if not a form
of "forum shopping", to seek the court where he may possibly obtain favorable
judgment. 31
It may therefore be stated that the right to come before the Courts to redress a
grievance or right a wrong should be exercised with prudence and good faith. In
the case of Indianapolis v. Chase National Bank, Trustee, 314 U.S. 69, it is opined
that "Litigation is the pursuit of practical ends, not a game of chess."
WHEREFORE, in view of the foregoing, this Court rules that the attached
properties left in the custody of private respondent Aboitiz and Company, Inc. be
returned to petitioner Eleazar V. Adlawan without prejudice to the outcome of the
cases filed by both parties.
SO ORDERED.
|||  (Adlawan v. Tomol, G.R. No. 63225, [April 3, 1990], 262 PHIL 893-907)

SECOND DIVISION

[G.R. No. L-50378. September 30, 1982.]

 FILINVEST CREDIT CORPORATION, petitioner, vs. THE
HONORABLE JUDGE BENJAMIN RELOVA (In his
capacity as Presiding Judge of the Court of First Instance of
Manila, Branch XI) and ERNESTO SALAZAR, respondents.

Labaquis, Loyola & Angara Law Offices for petitioner. 

Cecilio D. Ignacio for respondents.

SYNOPSIS

In payment of a motor vehicle he purchased, Ernesto Salazar, herein

private respondent, executed a promissory note and a deed of chattel mortgage
over the subject property in favor of seller Rallye Motor Co., Inc.which
subsequently assigned all its rights, title and interest to the said note and
mortgage to Filinvest Credit Corporation, herein petitioner. Later,
petitioner Filinvest filed with the Court of First Instance a complaint against
Rallye and Salazar for collection with damages and preliminary writ of
attachment, alleging that defendants have committed fraud in securing the
obligation and are now avoiding payment of the same. For his defense,
respondent Salazar claimed that he was himself defrauded, because while he
signed the promissory note and chattel mortgage over the motor vehicle which
he bought from Rallye, the latter did not deliver to him the said personal
property and that Rallye has disappeared and can no longer be found. The then
presiding judge granted petitioner's ex-parte motion for a writ of attachment
which was implemented solely against respondent Salazar's property. Over a
year later, however, the now respondent judge,on motion of respondent
Salazar, ordered the dissolution and setting aside of the writ of preliminary
attachment and the return of the attached properties on a finding that Salazar
did not commit fraud in contracting his obligation.
On certiorari, the Supreme Court reversed and set aside the order of the
lower court holding that the failure of respondent Salazar to disclose the
material fact of non-delivery of the motor vehicle, there being a duty on his
part to reveal the same, constitutes fraud which justifies issuance of the writ of
attachment, hence respondent judge committed grave abuse of discretion in
dissolving and setting aside the subject writ.
Petition granted and decision reversed and set aside.

SYLLABUS
 1. REMEDIAL LAW; CIVIL PROCEDURE; PROVISIONAL RE-
MEDIES; ATTACHMENT; WRIT MAY BE ISSUED EX-PARTE. —
Nothing in the Rules of Court makes notice and hearing indispensable and
mandatory requisites for the issuance of a writ of attachment. The statement in
the case of Blue Green Waters, vs.Hon. Sundiam and Tan (79 SCRA 66) 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, give 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.
2. ID.; ID.; ID.; ID.; GROUND FOR DISCHARGE; IMPROPER AND
IRREGULAR ISSUANCE; FILING OF CASH DEPOSIT OR COUNTER-
BOND NOT REQUIRED. — A writ of attachment may be discharged without
the necessity of filing the cash deposit or counter-bond required by Section 12,
Rule 57. Section 13 of the same Rule grants an aggrieved party relief from
baseless and unjustifiable attachments procured, among others, upon false
allegations, without having to file any cash deposit or counter-bond.
3. ID.; ID.; ID.; ID.; CASE AT BAR. — In the instant case, the order of
attachment was granted upon the allegation of petitioner, as plaintiff in the
court below, that private respondent RALLYE, the defendants, had committed
"fraud in contracting the debt or incurring the obligation upon which the action
is brough," covered by Section 1(d), Rule 57. Subsequent to the issuance of the
attachment order on August 17, 1977, private respondent filed in the lower
court an "Urgent Motion for the Recall and Quashal of the Writ of Preliminary
Attachment on (his property)" dated December 11, 1971 precisely upon the
assertion that there was "absolutely no fraud on (his) part'' in contracting the
obligation sued upon by petitioner. Private respondent was in effect claiming
that petitioner's allegation of fraud was false, that hence there was ground for-
attachment, and that therefore the attachment order was "improperly or
irregularly issued." This Court has held that "(i)f the grounds upon which the
attachment was issued were not true . . . , the defendant has his remedy by
immediately presenting a motion for the dissolution of the same." (Hijos de I.
de la Rama vs. Sajo, 45 Phil. 703, 706). We find that private respondent's
Urgent Motion was filed under Section 13, Rule 57.
4. ID.; ID.; ID.; ID.; ID.; ID.; HEARING REQUIRED TO
DETERMINE DEFECT IN ISSUANCE OF WRIT. — The last sentence of
Section 13, Rule 57 indicates that a hearing must be conducted by the judge for
the purpose of determining whether or not there really was a defect in the
issuance of the attachment.
 5. ID.; ID.; ID.; ID.; ID.; ID.; ID.; BURDEN OF PROOF LIES IN THE
PARTY WITH AFFIRMATIVE ALLEGATIONS. — The question is:At this
hearing, on whom does the burden of proof lie? Under the circumstances of the
present case, We sustain the ruling of the court a quo in its questioned Order
dated February 2, 1979 that it should be the plaintiff (attaching creditor), who
should prove his allegation of fraud. This pronoucement finds support in the
first sentence of Section 1, Rule 13, which states that: "Each party must prove
his own affirmative allegations.'' The last part of the same provision also
provides that: "The burden of proof lies on the party who would be defeated if
no evidence were given on either side." It must be borne in mind that in this
jurisdiction, fraud is never presumed. FRAUS EST IDIOSA ET NON
PRAESUMENDA.. Indeed, private transactions are presumed to have been fair
and regular. (Rule 131, Section 5 [o]. Likewise, written contracts such as the
documents executed by the parties in the instant case, are presumed to have
been entered into for a sufficient consideration. (Rule 131, Section 5(r)).
6. CIVIL LAW; ARTICLE 1339 OF THE NEW CIVIL CODE;
FRAUD; FAILURE OF A PARTY TO DISCLOSE MATERIAL FACTS
WHERE HE IS DUTY-BOUND TO REVEAL THEM. — Respondent Salazar
had previously applied for financing assistance from petitioner FILINVEST as
shown in Exhibits "E" and "E-1" and his application was approved, thus he
negotiated for the acquisition of the motor vehicle in question from Rallye
Motors. Since he claimed that the motor vehicle was not delivered to him, then
he was duty-bound to reveal that to FILINVEST, it being ,material in inducing
the latter to accept the assignment of the promissory note and the chattel
mortgage. More than that, good faith as well as commercial usages or customs
require the disclosure of facts and circumstances which go into the very object
and consideration of the contractual obligation. We rule that the failure of
respondent Salazar to disclose the material fact of non-delivery of the motor
vehicle, there being a duty on his part to reveal them, constitutes fraud. (Article
1339, New Civil Code).

DECISION

GUERRERO, J  : p

This is a special civil action for certiorari, with prayer for restraining
order or preliminary injunction, filed by petitioner Filinvest Credit Corporation
seeking to annul the Orders issued by respondent Judge dated February 2, 1979
and April 4, 1979 in Civil Case No. 109900.
 As shown by the records, the antecedents of the instant Petition are as
follows:
On August 2, 1977, Filinvest Credit Corporation (hereinafter referred to
as FILINVEST) filed a complaint in the lower court against defendants Rallye
Motor CO., Inc. (hereinafter referred to as RALLYE) and Ernesto Salazar for
the collection of a sum of money with damages and preliminary writ of
attachment. From the allegations of the complaint, 1 it appears that in payment
of a motor vehicle described as: "One (1) Unit MAZDA DIESEL SCHOOL
BUS, Model: E4100, Serial No.: EXC43P-02356, Motor No.: Y-13676,"
Salazar executed a promissory note dated May 5, 1977 in favor of RALLYE
for the amount of P99,828.00. To secure the note, Salazar also executed in
favor of RALLYE a deed of chattel mortgage over the above described motor
vehicle. On May 7, 1977, RALLYE, for valuable consideration, assigned all its
rights, title and interest to the aforementioned note and mortgage
to FILINVEST. Thereafter, FILINVEST came to know that RALLYE had not
delivered the motor vehicle subject of the chattel mortgage to Salazar, "as the
said vehicle (had) been the subject of a sales agreement between the co-
defendants." Salazar defaulted in complying with the terms and conditions of
the aforesaid promissory note and chattel mortgage. RALLYE, as assignor who
guaranteed the validity of the obligation, also failed and refused to
pay FILINVEST despite demand. According to FILINVEST, the defendants
intentionally, fraudulently and with malice concealed from it the fact that there
was no vehicle delivered under the documents negotiated and assigned to it,
otherwise, it would not have accepted the negotiation and assignment of the
rights and interest covered by the promissory note and chattel mortgage.
Praying for a writ of preliminary attachment, FILINVEST submitted with its
complaint the affidavit of one Gil Mananghaya, pertinent portions of which
read thus: Cdpr

"That he is the Collection Manager, Automotive Division

of Filinvest Credit Corporation;
"That in the performance of his duties, he came to know of the
account of Ernesto Salazar, which is covered by a Promissory Note and
secured by a Chattel Mortgage, which documents together with all the
rights and interest thereto were assigned by Rallye Motor Co., Inc.;
"That for failure to pay a stipulated installment, and the fact that
the principal debtor, Ernesto Salazar, and the assignor, Rallye Motor
Co., Inc. concealed the fact that there was really no motor vehicle
mortgaged under the terms of the Promissory Note and the Chattel
Mortgage, the entire amount of the obligation stated in the Promissory
Note becomes due and demandable, which Ernesto Salazar and Rallye
Motor Co., Inc. failed and refused to pay, so much so that a sufficient
 cause of action really exists for FilinvestCredit Corporation to institute
the corresponding complaint against said person and entity;
"That the case is one of those mentioned in Section 1, Rule 57 of
the Rules of Court, particularly an action against parties who have been
guilty of a fraud in contracting the debt or incurring the obligation upon
which the action is brought;
"That there is no other sufficient security for the claim sought to
be enforced by the action, and that the amount due to the
applicant Filinvest Credit Corporation is as much as the sum for which
the order is granted above all legal counterclaims;
That this affidavit is executed for the purpose of securing a writ
of attachment from the court." 2
The specific provision adverted to in the above Affidavit is Section 1(d)
of Rule 57 which includes "an action against a party who has been guilty of
fraud in contracting the debt or incurring the obligation upon which the action
is brought, or in concealing or disposing of the property for the taking,
detention or conversion of which the action is brought" as one of the cases in
which a "plaintiff or any proper party may, at the commencement of the action
or at any time thereafter, have the property of the adverse party attached as
security for the satisfaction of any judgment that may be recovered."
Judge Jorge R. Coquia (now Justice of the Court of Appeals), then
presiding Judge of the lower court, granted the prayer for a writ of attachment
in an Order dated August 17, 1977 stating that:
"Finding the complaint sufficient in form and substance, and in
view of the sworn statement of Gil Mananghaya, Collection Manager of
the plaintiff that defendants have committed fraud in securing the
obligation and are now avoiding payment of the same, let a writ of
attachment issue upon the plaintiff's filing of a bond in the sum of
P97,000.00.
"In the meantime, let summons issue on the defendants." 3
More than a year later, in an Urgent Motion dated December 11,
1978, 4 defendant Salazar prayed that the writ of preliminary attachment
issued ex parte and implemented solely against his property be recalled and/or
quashed. He argued that when he signed the promissory note and chattel
mortgage on May 5, 1977 in favor of RALLYE, FILINVESTwas not yet his
creditor or obligee, therefore, he could not be said to have committed fraud
when he contracted the obligation on May 5, 1977. Salazar added that as the
motor vehicle which was the object of the chattel mortgage and the
consideration for the promissory note had admittedly not been delivered to him
by RALLYE, his repudiation of the loan and mortgage is more justifiable.
 FILINVEST filed an Opposition, but on February 2, 1979, the court a
quo, this time presided over by herein respondent Judge, ordered the
dissolution and setting aside of the writ of preliminary attachment issued on
August 17, 1977 and the return to defendant Salazar of all his properties
attached by the Sheriff by virtue of the said writ. In this Order, respondent
Judge explained that:
"When the incident was called for hearing, the Court announced
that, as a matter of procedure, when a motion to quash a writ of
preliminary attachment is filed, it is incumbent upon the plaintiff to
prove the truth of the allegations which were the basis for the issuance of
said writ. In this hearing, counsel for the plaintiff manifested that he was
not going to present evidence in support of the allegation of fraud. He
maintained that it should be the defendant who should prove the truth of
his allegation in the motion to dissolve the said writ. The Court
disagrees." 5
FILINVEST filed a Motion for Reconsideration of the above Order, and
was subsequently allowed to adduce evidence to prove that Salazar committed
fraud as alleged in the affidavit of Gil Mananghaya earlier quoted. This
notwithstanding, respondent Judge denied the Motion in an Order dated April
4, 1979 reasoning thus:  cdrep

"The plaintiff's evidence show that the defendant Rallye Motor

assigned to the former defendant Salazar's promissory note and chattel
mortgage by virtue of which plaintiff discounted the note. Defendant
Salazar refused to pay the plaintiff for the reason that Rallye Motor has
not delivered to Salazar the motor vehicle which he bought from Rallye.
It is the position of plaintiff that defendant Salazar was in conspiracy
with Rallye Motor in defrauding plaintiff.
"Ernesto Salazar, on his part complained that he was himself
defrauded, because while he signed a promissory note and chattel
mortgage over the motor vehicle which he bought from Rallye Motor,
Rullye Motor did not deliver to him the personal property he bought;
that the address and existence of Rallye Motor can no longer be found.
"While it is true that the plaintiff may have been defrauded in
this transaction, it having paid Rallye Motor the amount of the
promissory note, there is no evidence that Ernesto Salazar had connived
or in any way conspired with Rallye Motor in the assignment of the
promissory note to the plaintiff, because of which the plaintiff paid
Rallye Motor the amount of the promissory note. Defendant Ernesto
Salazar was himself a victim of fraud. Rallye Motor was the only party
which committed it." 6
From the above order denying reconsideration and ordering the sheriff
to return to Salazar the personal property attached by virtue of the writ of
preliminary attachment issued on August 17, 1977, FILINVEST filed the
instant Petition on April 19, 1979. On July 16, 1979,
petitioner FILINVEST also filed an Urgent Petition for Restraining
Order 7alleging, among others, that pending this certiorari proceeding in this
court, private respondent Salazar filed a Motion for Contempt of Court in the
court below directed against FILINVEST and four other persons allegedly for
their failure to obey the Order of respondent Judge dated April 4, 1979, which
Order is the subject of this Petition. On July 23, 1979, this Court issued a
temporary restraining order "enjoining respondent Judge or any person or
persons acting in his behalf from hearing private respondent's motion for
contempt in Civil Case No. 109900, entitled, 'Filinvest Credit Corporation,
Plaintiff, versus. The Rallye Motor Co., Inc., et al., Defendants' of the Court of
First Instance of Manila, Branch XI." 8
Petitioner FILINVEST in its MEMORANDUM contends that
respondent Judge erred:
(1) In dissolving the writ of preliminary attachment already
enforced by the Sheriff of Manila without Salazar's posting a counter-
replevin bond as required by Rule 57, Section 12; and
(2) In finding that there was no fraud on the part of Salazar,
despite evidence in abundance to show the fraud perpetrated by Salazar
at the very inception of the contract.
It is urged in petitioner's first assignment of error that the writ of
preliminary attachment having been validly and properly issued by the lower
court on August 17, 1977, the same may only be dissolved, quashed or recalled
by the posting of a counter-replevin bond under Section 12, Rule 57 of the
Revised Rules of Court which provides that:
"Section 12. Discharge of Attachment upon giving counter-
bond. — At any time after an order of attachment has been granted, the
party whose property has been attached, or the person appearing on his
behalf, may, upon reasonable notice to the applicant, apply to the judge
who granted the order, or to the judge of the court in which the action is
pending, for an order discharging the attachment wholly or in part on the
security given. The judge shall, after hearing, order the discharge of the
attachment if a cash deposit is made, or a counter-bond executed to the
attaching creditor is filed, on behalf of the adverse party, with the clerk
or judge of the court where the application is made, in an amount equal
to the value of the property attached as determined by the judge, to
secure the payment of any judgment that the attaching creditor may
recover in the action. . . . . "
Citing the above provision, petitioner contends that the court below
should not have issued the Orders dated February 2, 1979 and April 4, 1979 for
failure of private respondent Salazar to make a cash deposit or to file a counter-
bond.
On the other hand, private respondent counters that the subject writ of
preliminary attachment was improperly or irregularly issued in the first place,
in that it was issued ex parte without notice to him and without hearing.
We do not agree with the contention of private respondent. Nothing in
the Rules of Court makes notice and hearing indispensable and mandatory
requisites for the issuance of a writ of attachment. The statement in the case
of Blue Green Waters, Inc. vs. Hon. Sundiam and Tan 9 cited by private
respondent, to the effect that the order of attachment issued without notice to
therein petitioner Blue Green Waters, Inc. and without giving it a chance to
prove that it was not fraudulently disposing of its properties is irregular, gives
the wrong implication. As clarified in the separate opinion of Mr. Justice
Claudio Teehankee in the same cited case, 10 a writ of attachment may be
issued ex parte. Sections 3 and 4, Rule 57, merely require that an applicant for
an order of attachment file an affidavit and a bond: the affidavit to be executed
by the applicant himself or some other person who personally knows the facts
and to show that (1) there is a sufficient cause of action, (2) the case is one of
those mentioned in Section 1 of Rule 57, (3) there is no other sufficient
security for the claim sought to be enforced, and (4) the amount claimed in the
action is as much as the sum for which the order is granted above all legal
counterclaims; and the bond to be "executed to the adverse party in an amount
fixed by the judge, not exceeding the applicant's claim, conditioned that the
latter will pay all the costs which may be adjudged to the adverse party and all
damages which he may sustain by reason of the attachment, if the court shall
finally adjudge that the applicant was not entitled thereto."
We agree, however, with private respondents contention that a writ of
attachment may be discharged without the necessity of filing the cash deposit
or counter-bond required by Section 12, Rule 57, cited by petitioner. The
following provision of the same Rule allows it:
"Sec. 13. Discharge of attachment for improper or irregular
issuance. — The party whose property has been attached may also, at
any time either before or after the release of the attached property, or
before any attachment shall have been actually levied, upon reasonable
notice to the attaching creditor, apply to the judge who granted the order,
or to the judge of the court in which the action is pending, for an order
to discharge the attachment on the ground that the same was improperly
or irregularly issued. If the motion be made on affidavits on the part of
the party whose property has been attached; but not otherwise, the
attaching creditor may oppose the same by counter-affidavits or other
evidence in addition to that on which the attachment was made. After
hearing, the judge shall order the discharge of the attachment if it
 appears that it was improperly or irregularly issued and the defect is not
cured forthwith." (Italics supplied)
The foregoing provision grants an aggrieved party relief from baseless
and unjustifiable attachments procured, among others, upon false allegations,
without having to file any cash deposit or counter-bond. In the instant case, the
order of attachment was granted upon the allegation of petitioner, as plaintiff in
the court below, that private respondent RALLYE, the defendants, had
committed "fraud in contracting the debt or incurring the obligation upon
which the action is brought," covered by Section 1(d), Rule 57, earlier quoted.
Subsequent to the issuance of the attachment order on August 17, 1977, private
respondent filed in the lower court an "Urgent Motion for the Recall and
Quashal of the Writ of Preliminary Attachment on (his property)" dated
December 11, 1978 11 precisely upon the assertion that there was
"absolutely no fraud on (his) part" in contracting the obligation sued upon by
petitioner. Private respondent was in effect claiming that petitioner's allegation
of fraud was false, that hence there was no ground for attachment, and that
therefore the attachment order was "improperly or irregularly issued." This
Court was held that "(i)f the grounds upon which the attachment was issued
were not
true . . . , the defendant has his remedy by immediately presenting a motion for
the dissolution of the same." 12 We find that private respondent's
abovementioned Urgent Motion was filed under Section 13, Rule 57.
The last sentenced of the said provision, however, indicates that
a hearing must be conducted by the judge for the purpose of determining
whether or not there really was a defect in the issuance of the attachment. The
question is: At this hearing, on whom does the burden of proof lie? Under the
circumstances of the present case, We sustain the ruling of the court a quo in
its questioned Order dated February 2, 1979 that it should be the plaintiff
(attaching creditor), who should prove his allegation of fraud. This
pronouncement finds support in the first sentence of Section 1, Rule 131,
which states that: "Each party must prove his own affirmative allegations." The
last part of the same provision also provides that: "The burden of proof lies on
the party who would be defeated if no evidence were given on either side." It
must be borne in mind that in this jurisdiction, fraud is never presumed.
FRAUS EST IDIOSA ET NON PRAESUMENDA. 13 Indeed, private
transactions are presumed to have been fair and regular. 14 Likewise, written
contracts such as the documents executed by the parties in the instant case, are
presumed to have been entered into for a sufficient consideration. 15
In a similar case of Villongco, et al. vs. Hon. Panlilio, et al., 16 a writ of
preliminary attachment was issued ex parte in a case for damages on the
strength of the affidavit of therein petitioners to the effect that therein
respondents had concealed, removed or disposed of their properties, credits or
accounts collectible to defraud their creditors. Subsequently, the lower court
dissolved the writ of attachment. This was questioned in a certiorari proceeding
wherein this Court held, inter alia, that: LLpr

"The affidavit supporting the petition for the issuance of the

preliminary attachment may have been sufficient to justify the issuance
of the preliminary writ, but it cannot be considered as proof of the
allegations contained in the affidavit. The reason is obvious. The
allegations are mere conclusions of law, not statement of facts. No acts
of the defendants are ever mentioned in the affidavit to show or prove
the supposed concealment to defraud creditors. Said allegations are
affirmative allegations, which plaintiffs had the obligation to prove . . .
" 17
It appears from the records that both herein private parties did in fact
adduce evidence to support their respective claims. 18 Attached to the instant
Petition as its Annex "H" 19 is a Memorandum filed by herein
petitioner FILINVEST in the court below on March 20, 1979. After private
respondent filed his Comment to the Petition, 20 petitioner filed a
Reply 21 attaching another copy of the aforesaid Memorandum as Annex
"A". 22 In this case on February 28, 1979 and March 1, 1979, the plaintiff
(FILINVEST) presented in evidence documentary exhibits "marked Exhibit A,
A-1, B, B-1, B-2, B-3, B-4, C, C-1, D, E, F, G and G-1. The Memorandum
goes on to state that FILINVEST presented as its witness defendant Salazar
himself who testified that he signed Exhibits A, B, C, D, E and G; that he is a
holder of a master's degree in Business Administration and is himself a very
careful and prudent person; that he does not sign post-dated documents; that he
does not sign contracts which do not reflect the truth or which are irregular on
their face; that he intended to purchase a school bus from Rallye Motors Co.,
Inc. from whom he had already acquired one unit; that he had been dealing
with Abel Sahagun, manager of RALLYE, whom he had known for a long
time; that he intended to purchase the school bus on installment basis so he
applied for financing with the FILINVEST; that he knew his application was
approved; that with his experience as a business executive, he knew that under
a financing arrangement, upon approval of his application, when he signed
Exhibits A, B, C, D, E and G, the financing company (FILINVEST) would
release the proceeds of the loan to RALLYE and that he would be obligated to
pay the installments to FILINVEST; that he signed Exhibits A, B and C
simultaneously; that it was his wife who was always transacting business with
RALLYE and Abel Sahagun. 23
Without disputing the above summary of evidence, private respondent
Salazar states in his Comment that "the same evidence proferred by
(petitioner's) counsel was adopted by (private respondent) Ernesto Salazar
during the proceedings." 24
 According to the court a quo in its assailed order of April 4, 1979,
Ernesto Salazar "was himself defrauded because while he signed the
promissory note and the chattel mortgage over the vehicle which he bought
from Rallye Motors, RALLYE did not deliver to him the personal property he
bought." And since no fraud was committed by Salazar, the court accordingly
ordered the sheriff to return to Salazar the properties attached by virtue of the
writ of preliminary attachment issued on August 17, 1977.
We do not agree. Considering the claim of respondent Salazar that
Rallye Motors did not deliver the motor vehicle to him, it follows that the
Invoice, Exhibit "C", for the motor vehicle and the Receipt, Exhibit "G", for its
delivery and both signed by Salazar, Exhibits "C-1" and "G-1", were fictitious.
It also follows that the Promissory Note, Exhibit "A", to pay the price of the
undelivered vehicle was without consideration and therefore fake; the Chattel
Mortgage, Exhibit "B", over the non-existent vehicle was likewise a fraud; the
registration of the vehicle in the name of Salazar was a falsity and the
assignment of the promissory note by RALLYE with the conforme of
respondent Salazar in favor of petitioner over the undelivered motor vehicle
was fraudulent and a falsification.
 LLpr

Respondent Salazar, knowing that no motor vehicle was delivered to

him by RALLYE, executed and committed all the above acts as shown in the
exhibits enumerated above. He agreed and consented to the assignment by
RALLYE of the fictitious promissory note and the fraudulent chattel mortgage,
by affixing his signature thereto, in favor of petitioner FILINVEST, who, in the
ordinary course of business, relied on the regularity and validity of the
transaction. Respondent had previously applied for financing assistance from
petitioner FILINVEST as shown in Exhibits "E" and "E-1" and his application
was approved, thus he negotiated for the acquisition of the motor vehicle in
question from Rallye Motors. Since he claimed that the motor vehicle was not
delivered to him, then he was duty-bound to reveal that to FILINVEST, it
being material in inducing the latter to accept the assignment of the promissory
note and the chattel mortgage. More than that, good faith as well as
commercial usages or customs require the disclosure of facts and
circumstances which go into the very object and consideration of the
contractual obligation. We rule that the failure of respondent Salazar to
disclose the material fact of non-delivery of the motor vehicle, there being a
duty on his part to reveal them, constitutes fraud. (Article 1339, New Civil
Code).
We hold that the court a quo committed grave abuse of discretion in
dissolving and setting aside the writ of preliminary attachment issued on
August 17, 1977.
 WHEREFORE, IN VIEW OF THE FOREGOING, the appealed Orders
of the lower court dated February 2, 1979 and April 4, 1979 are hereby
REVERSED and SET ASIDE. The temporary restraining order issued by Us
on July 23, 1979 is hereby made permanent. No costs.
SO ORDERED.
 (Filinvest Credit Corp. v. Relova, G.R. No. L-50378, [September 30, 1982], 202
|||

PHIL 741-756)

SECOND DIVISION

[G.R. No. 92813. July 31, 1991.]

PEROXIDE PHILIPPINES CORPORATION, EASTMAN

CHEMICAL INDUSTRIES, INC., EDMUNDO O. MAPUA
and ROSE U. MAPUA, petitioners, vs. HON. COURT OF
APPEALS and BANK OF THE PHILIPPINE
ISLANDS, respondents.

Antonio P. Barredo for petitioners.

Padilla Law Office for private respondent.

SYLLABUS

1. REMEDIAL LAW; SPECIAL CIVIL ACTION; ATTACHMENT;

DISCHARGE THEREOF FOR IMPROPER OR IRREGULAR ISSUANCE;
REQUIRES PROPER HEARING. — It is true that petitioner's motion to
discharge was set for hearing with notice to BPI but it is likewise true that
counsel for the latter asked for an opportunity to file a written opposition and
for a hearing to which he asked that petitioner Edmund O. Mapua be
subpoenaed. Said counsel was allowed to file a written opposition which he
seasonably did, but Judge Pineda denied both the requested subpoena and
hearing and, instead, granted the discharge of the attachment. These are the
bases for BPI's plaint that it was denied due process. Now, it is undeniable that
when the attachment is challenged for having been illegally or improperly
issued, there must be a hearing with the burden of proof to sustain the writ
being on the attaching creditor. That hearing embraces not only the right to
present evidence but also a reasonable opportunity to know the claims of the
opposing parties and meet them. The right to submit arguments implies that
opportunity, otherwise the right would be a barren one. It means a fair and
open hearing. And, as provided by the aforecited Section 13 of Rule 57, the
attaching creditor should be allowed to oppose the application for the discharge
of the attachment by counter-affidavit or other evidence, in addition to that on
which the attachment was made.
2. ID.; ID.; ID.; EX PARTE DISCHARGE OR SUSPENSION
THEREOF IS A DISSERVICE TO THE ORDERLY ADMINISTRATION OF
JUSTICE. — We affirm the findings and conclusion of respondent court that
the order of Judge Acosta, dated May 29, 1986, suspending the writ of
attachment was in essence a lifting of said writ which order, having likewise
been issued ex parte and without notice and hearing in disregard of Section 13
of Rule 57, could not have resulted in the discharge of the attachment. Said
attachment continued unaffected by the so-called order of suspension and
could not have been deemed inefficacious until and only by reason of its
supposed restoration in the order of December 16, 1987 of Judge Gerona.
Under the facts of this case, the ex parte discharge or suspension of the
attachment is a disservice to the orderly administration of justice and nullifies
the underlying role and purpose of preliminary attachment in preserving the
rights of the parties pendente lite as an ancillary remedy.
3. ID.; ID.; ID.; TEMPORARY RESTRAINING ORDER ISSUED IN
RELATION THERETO; DEEMED EFFECTIVE ONLY FOR TWENTY
DAYS. — All incidents in AC-G.R. SP No. 05043 having been disposed of, it
follows that the temporary restraining order which had been expressly lifted in
the decision therein, and which was merely temporarily reinstated for purposes
of the motion for reconsideration that was ultimately denied, was also
necessarily lifted. Parenthetically, said temporary restraining order, not having
been supplanted by a writ of preliminary injunction, could not have had an
effectivity of more than twenty (20) days, and this limitation applies to
temporary restraining orders issued by the Court of Appeals.
4. ID.; ID.; ID.; BEING A MERE PROVISIONAL REMEDY, IT IS
ANCILLARY TO THE MAIN ACTION. — As correctly posited by BPI,
before the determination of the liability of Eastman and the Mapuas after trial
on the merits, the writ of preliminary attachment may properly issue. Even
assuming that when Eastman and the Mapuas asked for the lifting of the
attachment they presented evidence that they were guarantors and not sureties
of Peroxide, the trial court could not have admitted such evidence or ruled
upon that issue since the same could be entertained only after a full-blown trial
and not before then. Otherwise, we would have the procedural absurdity
wherein the trial court would be forced to decide in advance and preempt in an
auxiliary proceeding an issue which can and should be determined only in a
trial on the merits. The proceeding in the issuance of a writ of preliminary
attachment, as a mere provisional remedy, is ancillary to an action commenced
at or before the time when the attachment is sued out. Accordingly, the
attachment does not affect the decision of the case on the merits, the right to
recover judgment on the alleged indebtedness and the right to attach the
property of the debtor being entirely separate and distinct. As a rule, the
judgment in the main action neither changes the nature nor determines the
validity of the attachment. At any rate, whether said petitioners are guarantors
or sureties, there exists a valid cause of action against them and their properties
were properly attached on the basis of that indubitable circumstance. 
5. ID.; CIVIL PROCEDURE; PETITION FOR REVIEW ON
CERTIORARI; LIMITED TO ERROR OF JUDGMENT; CASE AT BAR. —
Petitioners bewail the fact that respondent court allegedly handled the certiorari
case, CA-G.R. SP No. 15672 now on appeal before us, as if it were a petition
for review on certiorari by passing upon what they submit should be
considered as errors of judgment and not errors of jurisdiction. From the
foregoing disquisition, however, it is readily apparent that the petition in said
case faults the orders of the trial court as tainted with grave abuse of discretion
equivalent to a jurisdictional flaw. The errors assigned necessarily involved a
discussion of erroneous conclusions and/or lack of factual bases much beyond
the pale of mere errors of judgment or misperception of evidence, and dwelt on
the improvident issuance of orders clearly arbitrary and oppressive for being in
defiance of the rules and devoid of justifying factual moorings. We cannot,
therefore, share the sentiments and stance of petitioners on this score.

DECISION

REGALADO, J  : p

Assailed in this petition for review on certiorari are the decision 1 of

respondent Court of Appeals, promulgated on September 4, 1989 in CA-G.R.
SP No. 15672, granting the petition for certiorari filed by private respondent,
and its resolution 2 of March 29, 1990 denying petitioners' motion for
reconsideration.
On December 6, 1982, herein private respondent Bank of the Philippine
Islands (BPI) sued herein petitioners Peroxide Philippines Corporation
(Peroxide), Eastman Chemical Industries, Inc. (Eastman), and the spouses
Edmund O. Mapua and Rose U. Mapua (Mapuas) in Civil Case No. 48849 of
the then Court of First Instance of Pasig, Metro Manila for the collection of an
indebtedness of Peroxide wherein Eastman and the Mapuas bound themselves
to be solidarily liable.
Upon the filing of said action, the trial court, then presided over by
Judge Gregorio G. Pineda, ordered the issuance of a writ of preliminary
attachment which was actually done on January 7, 1983 after BPI filed an
attachment bond in the amount of P32,700,000.00. Petitioners' properties were
accordingly attached by the sheriff.
On January 11, 1983, Eastman and the Mapuas moved to lift the
attachment, which motion was set for hearing on January 14, 1983. On said
date and on motion of BPI, it was granted up to January 17, 1983 to file a
written opposition to the motion to lift the writ of attachment. BPI also filed a
motion to set for hearing the said motion to lift attachment and its opposition
thereto.
However, on January 17, 1983, Judge Pineda issued two (2) orders, the
first, denying BPI's motion for a hearing, and, the second, lifting the writ of
attachment as prayed for by Eastman and the Mapuas. BPI filed a motion for
reconsideration but, consequent to the then judiciary reorganization, the case
was re-raffled and assigned to the sala of Judge Pastor Reyes.
On November 28, 1983, Judge Reyes issued an order with an explicit
finding that the attachment against the properties of Eastman and the Mapuas
was proper on the ground that they had disposed of their properties in fraud of
BPI. It also directed the sheriff to implement the writ of attachment upon the
finality of said order.
After a motion for partial reconsideration by BPI and some exchanges
between the parties, on December 17, 1984 the trial court, this time with Judge
Eficio B. Acosta presiding, issued an order granting BPI's motion for partial
reconsideration by finding, inter alia, that "(c)onsidering the lapse of more
than a year since the Order of November 28, 1983 and the nature and purpose
of attachment, the writ of attachment revived in the Order of November 28,
1983 and hereby re-affirmed may be executed and implemented immediately,"
and directing the sheriff to execute said writ which "is hereby declared
immediately executory." 3
Contending that said order of December 17, 1984 was rendered with
grave abuse of discretion amounting to lack of jurisdiction, petitioners sought
the annulment thereof in a petition for certiorari and prohibition in AC-G.R. SP
No. 05043 of the Intermediate Appellate Court, wherein a temporary
restraining order was issued. This restraining order was lifted when said court
rendered its decision in said case on March 14, 1986, 4 dismissing the petition
and holding, among others, that:  LibLex

"We find nothing wrong with the attachment of the properties of

PEROXIDE. Even were We to assume that the original petition for
attachment was defective for failure to specify the particular transactions
involved in the alleged 'alienation' of PEROXIDE's properties, the fact is
that the defect, if any, was cured by the other pleadings (like the
opposition or virtual amendment) filed by BANK. With such
 amendment, the specific properties concerned were distinctly
enumerated." 5
Petitioners then sought the review of said decision by this Court in G.R.
No. 74558, but no temporary restraining order was granted therein. In the
meantime, on May 29,1986, Judge Acosta issued an order 6 suspending the
writ of preliminary attachment in the aforesaid Civil Case No. 48849 pursuant
to an ex parte motion filed by herein petitioners.
Thereafter, in its resolution dated October 27, 1986, this Court denied
the aforesaid petition for review on certiorari "considering that the writ of
preliminary attachment issued was in accordance with law and applicable
jurisprudence." 7 Petitioners' motion for reconsideration was denied with
finality in our resolution of October 6, 1987. 8
Dissatisfied, petitioners again filed an urgent motion for clarification
submitting that the Court failed to pass upon two issues, namely: (1) whether
Eastman and the Mapuas were sureties or mere guarantors of Peroxide, and (2)
whether Rose U. Mapua was bound by the "Continuing Guarantee" executed
by her husband, Edmund O. Mapua. Acting upon said motion, on November
10, 1987 the Court resolved to deny the same for the reason, among others, that
the clarification sought regarding the propriety of the attachment of the
properties of Eastman and the Mapuas involves questions of fact. 9
On July 30, 1987, BPI filed a motion to order Bataan Pulp and Paper
Mills, Inc. (Bataan), jointly and severally with petitioners, to deliver to the
sheriff the cash dividends declared on the garnished shares of stock of said
petitioners with said paper company, and to cite for contempt the officers of
Bataan for releasing and/or paying the dividends to petitioners in disregard of
the notice of garnishment.
In an exhaustive order dated December 16, 1987, 10 the trial court, now
presided over by Judge Fernando L. Gerona, Jr. and wherein Civil Case No.
48849 was then pending, addressing all the issues raised by the parties, granted
BPI's motion for delivery of the dividends. Judge Gerona sustained the position
of BPI that dividends are but incidents or mere fruits of the shares of stock and
as such the attachment of the stock necessarily included the dividends declared
thereon if they were declared subsequent to the notice of garnishment.
He further held that the preliminary attachment, being a provisional
remedy, must necessarily become effective immediately upon the issuance
thereof and must continue to be effective even during the pendency of an
appeal from a judgment of the court which issued the said provisional remedy
and will only cease to have effect when the judgment is satisfied or the
attachment is discharged or vacated in some manner provided by law. The
motion to cite the officers of Bataan was, however, denied.  Cdpr
 Petitioners moved for reconsideration but the same was denied for the
reason that the order of May 29, 1986 of Judge Acosta was based on an ex
parte motion without reasonable notice, hence a patent nullity for lack of due
process. Accordingly, the aforesaid order of December 16, 1987 held that the
writ of attachment continued to be effective. 11
Petitioners thereafter filed a second motion for reconsideration which,
however, remained pending and unresolved when Judge Gerona inhibited
himself from further sitting in the case. Said case was then re-raffled to the sala
of Judge Jainal D. Rasul who required the parties to re-summarize their
respective positions upon the issue of the attachment.
Then, resolving the pending incidents before it, the court a quo issued
the disputed order of August 23, 1988, which states, inter alia that:
"THIS Court thru Judge Gerona had arrived at the correct conclusion
that the contempt charge against the Officers of the Garnishee
Corporation cannot be sustained, for the reason that they relied on the
Order of the Court thru Judge Acosta under date of May 29, 1986
suspending the Writ of Attachment and since said order was not then set
aside, there was no order or writ violated by said officers. It follows a
fortiori that the release of the cash dividends was valid, legal and not
contemptuous. Consequently, there is no reason to justify or deserve the
return of cash dividends prayed for by the plaintiff.
"Besides, the propriety of the attachment of the properties of the
defendant Eastman Chemical Industries, Inc., and defendant Mapua
Spouses should still be determined by this Court as a question of fact,
pursuant to the Supreme Court resolution dated November 23, 1987.
Meanwhile, it is only fair that the properties of the Eastman Chemical
Industries, Inc. and the defendants Mapua spouses should not, pending
such proper determination, be attached as to give life and meaning to the
Supreme Court resolution of November 23, 1987
"SO ORDERED." 12
BPI moved for the reconsideration of said order. Thereafter, it learned
that Bataan had again declared a cash dividend on its shares payable on or
before September 30, 1988. Furthermore, Bataan informed BPI that it would be
releasing to Eastman and Edmund O. Mapua the cash dividends on their shares
on September 23, 1988 on the strength of the older of the trial court of August
23, 1988.
Consequently, BPI filed an urgent ex parte motion on September 19,
1988 for the suspension of the effects of the trial court's order of August 23,
1988 in view of the pending motion for reconsideration it had filed against said
order. In an order likewise dated September 19, 1988, the trial court denied
BPI's motion for suspension of the order of August 23, 1988. 1 3
 BPI then filed a petition for certiorari in respondent court, docketed
therein as CA-G.R. SP No. 15672, invoking the following grounds:
1. The trial court acted with grave abuse of discretion in denying BPI's
urgent ex parte motion to suspend the order of August 23, 1988;
2. The order of September 19, 1988 renders moot and academic BPI's
pending motion for reconsideration;
3. The lower court erroneously held that the writ of attachment secured
by BPI had ceased to be valid and effective or had been suspended by
virtue of its orders of January 17, 1983 and May 29, 1986;
4. The trial court committed grave abuse of discretion when it nullified
the writ of attachment as against Eastman and the Mapuas;
5. There is no inconsistency between the resolution of the Supreme
Court dated October 27, 1986 and its subsequent resolution of
November 10, 1987;
6. The attachment can validly issue against the conjugal properties of the
Mapuas; and
7. The trial court disregarded the clear and unequivocal records of this
case when it issued its order of August 23, 1988. 14
Ruling on these issues, respondent Court of Appeals declared:
"WHEREFORE, the petition for certiorari is hereby GRANTED.
Judgment is hereby rendered as follows:
(a) Declaring the writ of preliminary attachment against the defendants
Eastman Chemical Industries, Inc. and the spouses, Edmund and Rose
Mapua valid and enforceable from the beginning, without prejudice to
determining the solidary liability of said defendants with defendant
Peroxide Philippines Corporation;
(b) Setting aside the Order of August 23, 1988 insofar as it decreed that
the cash dividends declared on the garnished shares of stocks (sic) of the
defendants with Bataan Pulp and Paper Mills, Inc. are not subject to
attachment;
(c) Ordering the defendants and the Bataan Pulp and Paper Mills, Inc.,
jointly and severally, to deliver to the sheriff the cash dividends as may
hereafter be declared and paid on the garnished shares of stock;
(d) Setting aside the Order of September 19, 1988.
With costs against private respondents.
SO ORDERED" 15
Their motion for reconsideration having been denied, petitioners are
once again before us on this spin-off facet of the same case, contending that
respondent court has departed from the accepted and usual course of judicial
proceedings.
1. As correctly formulated by respondent court, the threshold issue is the
validity of the attachment of the properties of Eastman and the Mapuas, from
which arises the correlative question of whether or not the disputed cash
dividends on the garnished shares of stock are likewise subject thereto.
Necessarily involved is the matter of the continuing validity of the writ or
whether or not the same was validly lifted and suspended by the lower court's
orders dated January 17, 1983 and May 29, 1986, respectively.
BPI asserts that the discharge is illegal and void because the order
lifting the same is violative of Section 13, Rule 57 of the Rules of Court which
requires, among others, a prior hearing before the judge may order the
discharge of the attachment upon proof adduced therein of the impropriety or
irregularity in the issuance of the writ and the defect is not cured forthwith. We
may mention in this regard that if the petition for the discharge of the writ
violates the requirements of the law, the trial judge does not acquire
jurisdiction to act thereon. 16
It is true that petitioner's motion to discharge was set for hearing with
notice to BPI but it is likewise true that counsel for the latter asked for an
opportunity to file a written opposition and for a hearing to which he asked that
petitioner Edmund O. Mapua be subpoenaed. Said counsel was allowed to file
a written opposition which he seasonably did, but Judge Pineda denied both the
requested subpoena and hearing and, instead, granted the discharge of the
attachment. These are the bases for BPI's plaint that it was denied due
process. 17
Now, it is undeniable that when the attachment is challenged for having
been illegally or improperly issued, there must be a hearing with the burden of
proof to sustain the writ being on the attaching creditor. 18 That hearing
embraces not only the right to present evidence but also a reasonable
opportunity to know the claims of the opposing parties and meet them. The
right to submit arguments implies that opportunity, otherwise the right would
be a barren one. It means a fair and open hearing. 19 And, as provided by the
aforecited Section 13 of Rule 57, the attaching creditor should be allowed to
oppose the application for the discharge of the attachment by counter-affidavit
or other evidence, in addition to that on which the attachment was made.
Respondent court was, therefore, correct in holding that, on the above-
stated premises, the attachment of the properties of Eastman and the Mapuas
remained valid from its issuance since the judgment had not been satisfied, nor
has the writ been validly discharged either by the filing of a counterbond or for
improper or irregular issuance.
 We likewise affirm the findings and conclusion of respondent court that
the order of Judge Acosta, dated May 29, 1986, suspending the writ of
attachment was in essence a lifting of said writ which order, having likewise
been issued ex parte and without notice and hearing in disregard of Section 13
of Rule 57, could not have resulted in the discharge of the attachment. Said
attachment continued unaffected by the so-called order or suspension and
could not have been deemed inefficacious until and only by reason of its
supposed restoration in the order of December 16, 1987 of Judge Gerona.
Under the facts of this case, the ex parte discharge or suspension of the
attachment is a disservice to the orderly administration of justice and nullifies
the underlying role and purpose of preliminary attachment in preserving the
rights of the parties pendente lite as an ancillary remedy.
 LexLib

We, therefore, sustain the position of BPI that the Court of Appeals, in
its judgment presently under challenge, did not err in upholding the continuing
and uninterrupted validity and enforceability of the writ of preliminary
attachment issued in Civil Case No. 48849 since the order of discharge and,
later, the order of suspension of the trial court were void and could not have
created the operational lacuna in its effectivity as claimed by petitioners.
Further, the cancellation of the annotations regarding the levy on attachment of
petitioners' properties, procured by the sheriff pursuant to the aforesaid invalid
orders, is likewise a nullity and another levy thereon is not required. We
observe, however, that the records do not disclose the lifting of the levy on the
Bataan shares of Eastman and the Mapuas and on their real properties in
Caloocan City.
2. Petitioners next call attention to the fact that when the order of Judge
Acosta of December 17, 1984, which directed the immediate execution and
implementation of the writ of attachment, was brought on a petition for
certiorari and prohibition to the Intermediate Appellate Court in AC-G.R. SP
No. 05043, said court issued a temporary restraining order.
They allege that although the restraining order was lifted by said
appellate court in its decision in the case on March 14, 1986, the same was
reinstated by the court "until further orders" in its order of April 24, 1986 in
connection with petitioners' motion for reconsideration therein. On May 14,
1986, respondent court denied the motion for reconsideration but, so
petitioners insist, "without, however, stating that it was lifting its restraining
order." When the case went on review to this Court in G.R. No. 74558, no
mention was made regarding said restraining order. Hence, petitioners assert,
the said restraining order had not been lifted, in effect arguing that the writ of
attachment cannot be implemented as a consequence.
This misleading argument is confuted by the records in AC-G.R. SP No.
05043. In its aforesaid resolution of April 24, 1986, the appellate court stated
that "(a)s of this date, April 23, 1986, the motion for reconsideration could not
be considered in view of the absence of the comment of the private
respondents." Hence, the court directed that "(i)n order to maintain the status
quo of the parties, . . . the restraining-order issued by us on December 28, 1984
is hereby revived and made effective until further orders." 20
Thereafter, finding no merit in the motion for reconsideration, the court
denied the same, declaring that "(w)ith this resolution, we find no need in
resolving the Urgent Motion to Reconsider and set aside Resolution of April
24, 1985 (sic, 1986) filed by the private respondent BPI and the other incidents
still pending resolution." 21
All incidents in AC-G.R. SP No. 05043 having been disposed of, it
follows that the temporary restraining order which had been expressly lifted in
the decision therein, and which was merely temporarily reinstated for purposes
of the motion for reconsideration that was ultimately denied, was also
necessarily lifted. Parenthetically, said temporary restraining order, not having
been supplanted by a writ of preliminary injunction, could not have had an
effectivity of more than twenty (20) days, 22 and this limitation applies to
temporary restraining orders issued by the Court of Appeals. 23
3. We reject petitioners' theory that the preliminary attachment is not
applicable to Eastman and the Mapuas. The writ was issued in Civil Case No.
48849 against the properties of all the petitioners herein. Eastman and the
Mapuas moved for the discharge of the attachment on the ground that they
were not disposing of their properties in fraud of creditors, but they did not
raise the issue of their liabilities as being allegedly those of mere guarantors.
They did so only when this Court resolved on October 27, 1986 that the writ of
preliminary attachment was issued in accordance with law and applicable
jurisprudence. 24
Also, what was considered in AC-G.R. SP No. 05043 and thereafter in
G.R. No. 74558 was the matter of the validity of the attachment against
Eastman and the Mapuas, considering that, even before the proceedings had
reached the Intermediate Appellate Court in AC-G.R. SP No. 05043, BPI no
longer had any attachment against Peroxide whose only remaining asset in
Bulacan had been levied upon and acquired by its other creditors when Judge
Pineda lifted the attachment obtained by BPI.  llcd

Petitioners seek to capitalize on a passage in the decision in AC-G.R. SP

No. 05043, hereinbefore quoted, where the appellate court stated that "(w)e
find nothing wrong with the attachment of the properties of PEROXIDE,"
without mentioning Eastman and the Mapuas. This was clearly in the nature
of peccata minuta, a plain case of harmless oversight, since the properties
referred to in the decision as having been alienated in fraud of BPI were
properties of Eastman and the Mapuas, not of Peroxide.
 In fact, as pointed out by private respondent, petitioners' own motion for
reconsideration of March 24, 1986 filed in said case specifically adverted to
that prefatory statement as being equivocal, with the following observation:
"Actually no properties of Peroxide had been attached. What were attached
were properties of Eastman and Rose Mapua." 25 Private respondent further
invites attention to the petition for certiorari in G.R. No. 74558, against the
decision in AC-G.R. SP No. 05043, wherein, assailing the aforequoted
statement therein, petitioners aver:
"As can be seen the paragraph begins with the holding that there is
nothing wrong with the attachment of properties of Peroxide. This
holding on its face is limited only to the upholding of attachment against
the properties of petitioner Peroxide. And yet the alienations mentioned
in the subsequent sentences do not refer to dispositions of properties of
Peroxide and by Peroxide. A cursory glance of records will show that
they refer to dispositions alleged to have been fraudulently made by
Eastman Chemical Industries, Inc. and Edmund Mapua. Relating this
point to the dispositive portion which in effect sustains the attachment
issued by the trial court not only against Peroxide, but also against
Eastman and Mapua spouses." 26
4. As earlier narrated, this Court denied the petition for review on
certiorari in G.R. No. 74558, and when petitioners persisted in seeking a
clarification as to the nature of the liability of Eastman and the Mapuas, the
Court denied the same on the ground that the clarification sought involves
questions of fact. As observed by respondent Court of Appeals, the aforesaid
ruling was erroneously construed by the lower court when it declared that the
properties of Eastman and the Mapuas should not, pending proper
determination, be attached. In doing so, the court below virtually lifted or
discharged the attachment even before its propriety had been determined.
We sustain respondent court's ratiocination in its decision under review
that when petitioners sought clarification from us regarding the propriety of the
attachment on the properties of Eastman and the Mapuas, and we said that this
involves a question of fact, what this means is that the court a quo should
determine the propriety or regularity thereof, and such determination can only
be had in appropriate proceedings conducted for that purpose. However, until
such attachment has been found to be improper and irregular, the attachment is
valid and subsisting.
Thus, as correctly posited by BPI, before the determination of the
liability of Eastman and the Mapuas after trial on the merits, the writ of
preliminary attachment may properly issue. Even assuming that when Eastman
and the Mapuas asked for the lifting of the attachment they presented evidence
that they were guarantors and not sureties of Peroxide, the trial court could not
have admitted such evidence or ruled upon that issue since the same could be
entertained only after a full-blown trial and not before then. 27Otherwise, we
would have the procedural absurdity wherein the trial court would be forced to
decide in advance and preempt in an auxiliary proceeding an issue which can
and should be determined only in a trial on the merits.
The proceeding in the issuance of a writ of preliminary attachment, as a
mere provisional remedy, is ancillary to an action commenced at or before the
time when the attachment is sued out. Accordingly the attachment does not
affect the decision of the case on the merits, the right to recover judgment on
the alleged indebtedness and the right to attach the property of the debtor being
entirely separate and distinct. As a rule, the judgment in the main action neither
changes the nature nor determines the validity of the attachment. 28 At any rate,
whether said petitioners are guarantors or sureties, there exists a valid cause of
action against them and their properties were properly attached on the basis of
that indubitable circumstance.
5. Petitioners bewail the fact that respondent court allegedly handled the
certiorari case, CA-G.R. SP No. 15672 now on appeal before us, as if it were a
petition for review on certiorari by passing upon what they submit should be
considered as errors of judgment and not errors of jurisdiction. From the
foregoing disquisition, however, it is readily apparent that the petition in said
case faults the orders of the trial court as tainted with grave abuse of discretion
equivalent to a jurisdictional flaw. The errors assigned necessarily involved a
discussion of erroneous conclusions and/or lack of factual bases much beyond
the pale of mere errors of judgment or misperception of evidence, and dwelt on
the improvident issuance of orders clearly arbitrary and oppressive for being in
defiance of the rules and devoid of justifying factual moorings. We cannot,
therefore, share the sentiments and stance of petitioners on this score. cdrep

Neither do we subscribe to petitioners' charge that respondent court

injudiciously gave due course to the aforesaid petition for certiorari without
requiring the prior filing and resolution of a motion for the reconsideration of
the questioned orders of the trial court. There are, admittedly, settled
exceptions to that requisite and which obtain in the present case. A motion for
reconsideration was correctly dispensed with by respondent court since the
questions raised in the certiorari proceeding had beer duly raised and passed
upon by the lower court. 29 Also, under the circumstances therein a motion for
reconsideration would serve no practical purpose since the trial judge had
already had the opportunity to consider and pass upon the questions elevated
on certiorari to respondent court. 30
FOR ALL THE FOREGOING CONSIDERATIONS, the petition at bar
is DENIED and the judgment of respondent Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
 (Peroxide Philippines Corp. v. Court of Appeals, G.R. No. 92813, [July 31,
|||

1991], 276 PHIL 980-996)

SECOND DIVISION

[G.R. No. 144740. August 31, 2005.]

SECURITY PACIFIC ASSURANCE

CORPORATION, petitioner, vs. THE HON. AMELIA TRIA-
INFANTE, In her official capacity as Presiding Judge,
Regional Trial Court, Branch 9, Manila; THE PEOPLE OF
THE PHILIPPINES, represented by Spouses REYNALDO
and ZENAIDA ANZURES; and REYNALDO R. BUAZON, In
his official capacity as Sheriff IV, Regional Trial Court,
Branch 9, Manila, respondents.

Simpliciano Law Office for petitioner.

Delos Santos Sanchez Law Offices for respondents.

SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; SURETYSHIP;
SURETY; DEFINED. — A surety is considered in law as being the same party as
the debtor in relation to whatever is adjudged touching the obligation of the latter,
and their liabilities are interwoven as to be inseparable.
2. ID.; ID.; ID.; DEFINED. — Suretyship is a contractual relation resulting
from an agreement whereby one person, the surety, engages to be answerable for
the debt, default or miscarriage of another, known as the principal. The surety's
obligation is not an original and direct one for the performance of his own act, but
merely accessory or collateral to the obligation contracted by the principal.
Nevertheless, although the contract of a surety is in essence secondary only to a
valid principal obligation, his liability to the creditor or promise of the principal is
said to be direct, primary and absolute; in other words, he is directly and equally
bound with the principal. The surety therefore becomes liable for the debt or duty
of another although he possesses no direct or personal interest over the obligations
nor does he receive any benefit therefrom.
3. REMEDIAL LAW; CIVIL PROCEDURE; PROVISIONAL
REMEDIES; PRELIMINARY ATTACHMENT; ATTACHMENT, HOW
DISCHARGED. — Under the Rules, there are two (2) ways to secure the
discharge of an attachment. First, the party whose property has been attached or a
person appearing on his behalf may post a security. Second, said party may show
that the order of attachment was improperly or irregularly issued. The first applies
in the instant case.
4. ID.; ID.; ID.; ID.; WRIT OF ATTACHMENT; NOT
AUTOMATICALLY DISCHARGED BY MERE POSTING OF A
COUNTERBOND; CASE AT BAR. — We are not unmindful of our ruling in the
case of Belisle Investment and Finance Co., Inc. v. State Investment House, Inc.,
where we held: ". . . [T]he Court of Appeals correctly ruled that the mere posting
of a counterbond does not automatically discharge the writ of attachment. It is
only after hearing and after the judge has ordered the discharge of the attachment
if a cash deposit is made or a counterbond is executed to the attaching creditor is
filed, that the writ of attachment is properly discharged under Section 12, Rule 57
of the Rules of Court." The ruling in Belisle, at first glance, would suggest an error
in the assailed ruling of the Court of Appeals because there was no specific
resolution discharging the attachment and approving the counter-bond. As above-
explained, however, consideration of our decision in G.R. No. 106214 in its
entirety will readily show that this Court has virtually discharged the attachment
after all the parties therein have been heard on the matter. On this score, we hew to
the pertinent ratiocination of the Court of Appeals as regards the heretofore cited
provision of Section 12, Rule 57 of the 1997 Rules of Civil Procedure, on the
discharge of attachment upon giving counter-bond: ". . . The filing of the counter-
attachment bond by petitioner Villaluz has discharged the attachment on the
properties and made the petitioner corporation liable on the counter-attachment
bond. This can be gleaned from the "DEFENDANT'S BOND FOR THE
DISSOLUTION OF ATTACHMENT," which states that Security Pacific
Assurance Corporation, as surety, in consideration of the dissolution of the said
attachment jointly and severally, binds itself with petitioner Villaluz for any
judgment that may be recovered by private respondent Anzures against petitioner
Villaluz. The contract of surety is only between petitioner Villaluz and petitioner
corporation. The petitioner corporation cannot escape liability by stating that a
court approval is needed before it can be made liable. This defense can only be
availed by petitioner corporation against petitioner Villaluz but not against third
persons who are not parties to the contract of surety. The petitioners hold
themselves out as jointly and severally liable without any conditions in the
counter-attachment bond. The petitioner corporation cannot impose requisites
before it can be made liable when the law clearly does not require such requisites
to be fulfilled."

DECISION
CHICO-NAZARIO, J  : p

Before Us is a petition for review on certiorari, assailing the Decision 1 and

Resolution 2 of the Court of Appeals in CA-G.R. SP No. 58147, dated 16 June
2000 and 22 August 2000, respectively. The said Decision and Resolution
declared that there was no grave abuse of discretion on the part of respondent
Judge in issuing the assailed order dated 31 March 2000, which was the subject in
CA-G.R. SP No. 58147. 
THE FACTS
The factual milieu of the instant case can be traced from this Court's
decision in G.R. No. 106214 promulgated on 05 September 1997.
On 26 August 1988, Reynaldo Anzures instituted a complaint against
Teresita Villaluz (Villaluz) for violation of Batas Pambansa Blg. 22. The criminal
information was brought before the Regional Trial Court, City of Manila, and
raffled off to Branch 9, then presided over by Judge Edilberto G. Sandoval,
docketed as Criminal Case No. 89-69257.
An Ex-Parte Motion for Preliminary Attachment 3 dated 06 March 1989
was filed by Reynaldo Anzures praying that pending the hearing on the merits of
the case, a Writ of Preliminary Attachment be issued ordering the sheriff to attach
the properties of Villaluz in accordance with the Rules.
On 03 July 1989, the trial court issued an Order 4 for the issuance of a writ
of preliminary attachment "upon complainant's posting of a bond which is hereby
fixed at P2,123,400.00 and the Court's approval of the same under the condition
prescribed by Sec. 4 of Rule 57 of the Rules of Court. . . ."
An attachment bond 5 was thereafter posted by Reynaldo Anzures and
approved by the court. Thereafter, the sheriff attached certain properties of
Villaluz, which were duly annotated on the corresponding certificates of title.
On 25 May 1990, the trial court rendered a Decision 6 on the case acquitting
Villaluz of the crime charged, but held her civilly liable. The dispositive portion of
the said decision is reproduced hereunder:
WHEREFORE, premises considered, judgment is hereby
rendered ACQUITTING the accused TERESITA E. VILLALUZ
with cost de oficio. As to the civil aspect of the case however, accused is
ordered to pay complainant Reynaldo Anzures the sum of TWO
MILLION ONE HUNDRED TWENTY THREE THOUSAND FOUR
HUNDRED (P2,123,400.00) PESOS with legal rate of interest from
December 18, 1987 until fully paid, the sum of P50,000.00 as attorney's
fees and the cost of suit. 7
 Villaluz interposed an appeal with the Court of Appeals, and on 30 April
1992, the latter rendered its Decision, 8 the dispositive portion of which partly
reads:
WHEREFORE, in CA-G.R. CV No. 28780, the Decision of the
Regional Trial Court of Manila, Branch 9, dated May 25, 1990, as to the
civil aspect of Criminal Case No. 89-69257, is hereby AFFIRMED, in
all respects. . . .
The case was elevated to the Supreme Court (G.R. No. 106214), and during
its pendency, Villaluz posted a counter-bond in the amount of P2,500,000.00
issued by petitioner Security Pacific Assurance Corporation. 9 Villaluz, on the
same date 10 of the counter-bond, filed an Urgent Motion to Discharge
Attachment. 11
On 05 September 1997, we promulgated our decision in G.R. No. 106214,
affirming in toto the decision of the Court of Appeals.
In view of the finality of this Court's decision in G.R. No. 106214, the
private complainant moved for execution of judgment before the trial court. 12
On 07 May 1999, the trial court, now presided over by respondent Judge,
issued a Writ of Execution. 13
Sheriff Reynaldo R. Buazon tried to serve the writ of execution upon
Villaluz, but the latter no longer resided in her given address. This being the case,
the sheriff sent a Notice of Garnishment upon petitioner at its office in Makati
City, by virtue of the counter-bond posted by Villaluz with said insurance
corporation in the amount of P2,500,000.00. As reported by the sheriff, petitioner
refused to assume its obligation on the counter-bond it posted for the discharge of
the attachment made by Villaluz. 14
Reynaldo Anzures, through the private prosecutor, filed a Motion to
Proceed with Garnishment, 15 which was opposed by petitioner 16 contending that
it should not be held liable on the counter-attachment bond.
The trial court, in its Order dated 31 March 2000, 17 granted the Motion to
Proceed with Garnishment. The sheriff issued a Follow-Up of
Garnishment 18 addressed to the President/General Manager of petitioner dated 03
April 2000. SAHEIc

On 07 April 2000, petitioner filed a Petition for Certiorari with Preliminary

Injunction and/or Temporary Restraining Order 19 with the Court of Appeals,
seeking the nullification of the trial court's order dated 31 March 2000 granting the
motion to proceed with garnishment. Villaluz was also named as petitioner. The
petitioners contended that the respondent Judge, in issuing the order dated 31
March 2000, and the sheriff committed grave abuse of discretion and grave errors
of law in proceeding against the petitioner corporation on its counter-attachment
bond, despite the fact that said bond was not approved by the Supreme Court, and
that the condition by which said bond was issued did not happen. 20
On 16 June 2000, the Court of Appeals rendered a Decision, 21 the
dispositive portion of which reads:
WHEREFORE, premises considered, the Court finds no grave
abuse of discretion on the part of respondent judge in issuing the
assailed order. Hence, the petition is dismissed.
A Motion for Reconsideration 22 was filed by petitioner, but was denied for
lack of merit by the Court of Appeals in its Resolution 23 dated 22 August 2000.
Undeterred, petitioner filed the instant petition under Rule 45 of the 1997
Rules of Civil Procedure, with Urgent Application for a Writ of Preliminary
Injunction and/or Temporary Restraining Order. 24
On 13 December 2000, this Court issued a Resolution 25 requiring the
private respondents to file their Comment to the Petition, which they did.
Petitioner was required to file its Reply 26 thereafter.
Meanwhile, on 17 January 2001, petitioner and the spouses Reynaldo and
Zenaida Anzures executed a Memorandum of Understanding (MOU). 27 In it, it
was stipulated that as of said date, the total amount garnished from petitioner had
amounted to P1,541,063.85, and so the remaining amount still sought to be
executed was P958,936.15. 28 Petitioner tendered and paid the amount of
P300,000.00 upon signing of the MOU, and the balance of P658,936.15 was to be
paid in installment at P100,000.00 at the end of each month from February 2001
up to July 2001. At the end of August 2001, the amount of P58,936.00 would have
to be paid. This would make the aggregate amount paid to the private respondents
P2,500,000.00. 29 There was, however, a proviso in the MOU which states that
"this contract shall not be construed as a waiver or abandonment of the appellate
review pending before the Supreme Court and that it will be subject to all such
interim orders and final outcome of said case."
On 13 August 2001, the instant petition was given due course, and the
parties were obliged to submit their respective Memoranda. 30
ISSUES
The petitioner raises the following issues for the resolution of this Court:
Main Issue — WHETHER OR NOT THE COURT OF
APPEALS COMMITTED REVERSIBLE ERROR IN AFFIRMING
THE 31 MARCH 2000 ORDER OF PUBLIC RESPONDENT JUDGE
WHICH ALLOWED EXECUTION ON THE COUNTER-BOND
ISSUED BY THE PETITIONER.
 Corollary Issues — (1) WHETHER OR NOT THE COURT OF
APPEALS CORRECTLY RULED THAT THE ATTACHMENT ON
THE PROPERTY OF VILLALUZ WAS DISCHARGED WITHOUT
NEED OF COURT APPROVAL OF THE COUNTER-BOND
POSTED; and (2) WHETHER OR NOT THE COURT OF APPEALS
CORRECTLY RULED THAT THE ATTACHMENT ON THE
PROPERTY OF VILLALUZ WAS DISCHARGED BY THE MERE
ACT OF POSTING THE COUNTER-BOND.
THE COURT'S RULING
Petitioner seeks to escape liability by contending, in the main, that the writ
of attachment which was earlier issued against the real properties of Villaluz was
not discharged. Since the writ was not discharged, then its liability did not accrue.
The alleged failure of this Court in G.R. No. 106214 to approve the counter-bond
and to cause the discharge of the attachment against Villaluz prevented the
happening of a condition upon which the counter-bond's issuance was premised,
such that petitioner should not be held liable thereon. 31
Petitioner further asserts that the agreement between it and Villaluz is not a
suretyship agreement in the sense that petitioner has become an additional debtor
in relation to private respondents. It is merely waiving its right of excussion 32 that
would ordinarily apply to counter-bond guarantors as originally contemplated in
Section 12, Rule 57 of the 1997 Rules.
In their Comment, 33 the private respondents assert that the filing of the
counter-bond by Villaluz had already ipso facto discharged the attachment on the
properties and made the petitioner liable on the bond. Upon acceptance of the
premium, there was already an express contract for surety between Villaluz and
petitioner in the amount of P2,500,000.00 to answer for any adverse
judgment/decision against Villaluz.
Petitioner filed a Reply 34 dated 09 May 2001 to private respondents'
Comment, admitting the binding effect of the bond as between the parties thereto.
What it did not subscribe to was the theory that the attachment was ipso facto or
automatically discharged by the mere filing of the bond in court. Such theory,
according to petitioner, has no foundation. Without an order of discharge of
attachment and approval of the bond, petitioner submits that its stipulated liability
on said bond, premised on their occurrence, could not possibly arise, for to hold
otherwise would be to trample upon the statutorily guaranteed right of the parties
to contractual autonomy.  HIEAcC

Based on the circumstances present in this case, we find no compelling

reason to reverse the ruling of the Court of Appeals.
 Over the years, in a number of cases, we have made certain
pronouncements about counter-bonds.
In Tijam v. Sibonghanoy, 35 as reiterated in Vanguard Assurance Corp. v.
Court of Appeals, 36 we held:
. . . [A]fter the judgment for the plaintiff has become executory
and the execution is 'returned unsatisfied,' as in this case, the liability of
the bond automatically attaches and, in failure of the surety to satisfy the
judgment against the defendant despite demand therefore, writ of
execution may issue against the surety to enforce the obligation of the
bond.
In Luzon Steel Corporation v. Sia, et al.: 37
. . . [C]ounterbonds posted to obtain the lifting of a writ of
attachment is due to these bonds being security for the payment of any
judgment that the attaching party may obtain; they are thus mere
replacements of the property formerly attached, and just as the latter
may be levied upon after final judgment in the case in order to realize
the amount adjudged, so is the liability of the countersureties
ascertainable after the judgment has become final. . . .
In Imperial Insurance, Inc. v. De Los Angeles, 38 we ruled:
. . . Section 17, Rule 57 of the Rules of Court cannot be
construed that an "execution against the debtor be first returned
unsatisfied even if the bond were a solidary one, for a procedural may
not amend the substantive law expressed in the Civil Code, and further
would nullify the express stipulation of the parties that the surety's
obligation should be solidary with that of the defendant.
In Philippine British Assurance Co., Inc. v. Intermediate Appellate
Court, 39 we further held that "the counterbond is intended to secure the payment
of 'any judgment' that the attaching creditor may recover in the action."
Petitioner does not deny that the contract between it and Villaluz is one of
surety. However, it points out that the kind of surety agreement between them is
one that merely waives its right of excussion. This cannot be so. The counter-bond
itself states that the parties jointly and severally bind themselves to secure the
payment of any judgment that the plaintiff may recover against the defendant in
the action. A surety is considered in law as being the same party as the debtor in
relation to whatever is adjudged touching the obligation of the latter, and their
liabilities are interwoven as to be inseparable. 40
Suretyship is a contractual relation resulting from an agreement whereby
one person, the surety, engages to be answerable for the debt, default or
miscarriage of another, known as the principal. The surety's obligation is not an
original and direct one for the performance of his own act, but merely accessory or
collateral to the obligation contracted by the principal. Nevertheless, although the
contract of a surety is in essence secondary only to a valid principal obligation, his
liability to the creditor or promise of the principal is said to be direct, primary and
absolute; in other words, he is directly and equally bound with the principal. The
surety therefore becomes liable for the debt or duty of another although he
possesses no direct or personal interest over the obligations nor does he receive
any benefit therefrom. 41
In view of the nature and purpose of a surety agreement, petitioner, thus, is
barred from disclaiming liability.
Petitioner's argument that the mere filing of a counter-bond in this case
cannot automatically discharge the attachment without first an order of discharge
and approval of the bond, is lame.
Under the Rules, there are two (2) ways to secure the discharge of an
attachment. First, the party whose property has been attached or a person
appearing on his behalf may post a security. Second, said party may show that the
order of attachment was improperly or irregularly issued. 42 The first applies in the
instant case. Section 12, Rule 57, 43 provides:
SEC. 12. Discharge of attachment upon giving counter-bond. —
After a writ of attachment has been enforced, the party whose property
has been attached, or the person appearing on his behalf, may move for
the discharge of the attachment wholly or in part on the security given.
The court shall, after due notice and hearing, order the discharge of the
attachment if the movant makes a cash deposit, or files a counter-bond
executed to the attaching party with the clerk of the court where the
application is made, in an amount equal to that fixed by the court in the
order of attachment, exclusive of costs. But if the attachment is sought to
be discharged with respect to a particular property, the counter-bond
shall be equal to the value of that property as determined by the court. In
either case, the cash deposit or the counter-bond shall secure the
payment of any judgment that the attaching party may recover in the
action. A notice of the deposit shall forthwith be served on the attaching
party. Upon the discharge of an attachment in accordance with the
provisions of this section, the property attached, or the proceeds of any
sale thereof, shall be delivered to the party making the deposit or giving
the counter-bond, or to the person appearing on his behalf, the deposit or
counter-bond aforesaid standing in place of the property so released.
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. 
It should be noted that in G.R. No. 106214, per our Resolution dated 15
January 1997, 44 we permitted Villaluz to file a counter-attachment bond. On 17
February 1997, 45 we required the private respondents to comment on the
sufficiency of the counter-bond posted by Villaluz.
It is quite palpable that the necessary steps in the discharge of an
attachment upon giving counter-bond have been taken. To require a specific order
for the discharge of the attachment when this Court, in our decision in G.R. No.
106214, had already declared that the petitioner is solidarily bound with Villaluz
would be mere surplusage. Thus:
During the pendency of this petition, a counter-attachment bond
was filed by petitioner Villaluz before this Court to discharge the
attachment earlier issued by the trial court. Said bond amounting to P2.5
million was furnished by Security Pacific Assurance, Corp. which
agreed to bind itself "jointly and severally" with petitioner for "any
judgment" that may be recovered by private respondent against the
former. 46
We are not unmindful of our ruling in the case of Belisle Investment and
Finance Co., Inc. v. State Investment House, Inc., 47 where we held:
. . . [T]he Court of Appeals correctly ruled that the mere posting
of a counterbond does not automatically discharge the writ of
attachment. It is only after hearing and after the judge has ordered the
discharge of the attachment if a cash deposit is made or a counterbond is
executed to the attaching creditor is filed, that the writ of attachment is
properly discharged under Section 12, Rule 57 of the Rules of Court.
The ruling in Belisle, at first glance, would suggest an error in the assailed
ruling of the Court of Appeals because there was no specific resolution
discharging the attachment and approving the counter-bond. As above-explained,
however, consideration of our decision in G.R. No. 106214 in its entirety will
readily show that this Court has virtually discharged the attachment after all the
parties therein have been heard on the matter.  aCcEHS

On this score, we hew to the pertinent ratiocination of the Court of Appeals

as regards the heretofore cited provision of Section 12, Rule 57 of the 1997 Rules
of Civil Procedure, on the discharge of attachment upon giving counter-bond:
. . . The filing of the counter-attachment bond by petitioner
Villaluz has discharged the attachment on the properties and made the
petitioner corporation liable on the counter-attachment bond. This can be
gleaned from the "DEFENDANT'S BOND FOR THE DISSOLUTION
OF ATTACHMENT", which states that Security Pacific Assurance
Corporation, as surety, in consideration of the dissolution of the said
attachment jointly and severally, binds itself with petitioner Villaluz for
any judgment that may be recovered by private respondent Anzures
against petitioner Villaluz.
 The contract of surety is only between petitioner Villaluz and
petitioner corporation. The petitioner corporation cannot escape liability
by stating that a court approval is needed before it can be made liable.
This defense can only be availed by petitioner corporation against
petitioner Villaluz but not against third persons who are not parties to
the contract of surety. The petitioners hold themselves out as jointly and
severally liable without any conditions in the counter-attachment
bond. The petitioner corporation cannot impose requisites before it
can be made liable when the law clearly does not require such
requisites to be fulfilled. 48 (Emphases supplied.)
Verily, a judgment must be read in its entirety, and it must be construed as a
whole so as to bring all of its parts into harmony as far as this can be done by fair
and reasonable interpretation and so as to give effect to every word and part, if
possible, and to effectuate the intention and purpose of the Court, consistent with
the provisions of the organic law. 49
Insurance companies are prone to invent excuses to avoid their just
obligation. 50 It seems that this statement very well fits the instant case. 
WHEREFORE, in view of all the foregoing, the Decision and Resolution of
the Court of Appeals dated 16 June 2000 and 22 August 2000, respectively, are
both AFFIRMED. Costs against petitioner.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.
 (Security Pacific Assurance Corp. v. Tria-Infante, G.R. No. 144740, [August 31,
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2005], 505 PHIL 609-624)