G.R. No.

175727, March 06, 2019
LORENZO SHIPPING CORPORATION, PETITIONER, v.
FLORENCIO O. VILLARIN AND FIRST CARGOMASTERS
CORPORATION, CEBU ARRASTRE & STEVEDORING SERVICES
CORPORATION AND GUERRERO G. DAJAO, RESPONDENTS.
G.R. No. 178713, March 06, 2019
LORENZO SHIPPING CORPORATLON, PETITIONER,
FLORENCIO O. VILLARIN, RESPONDENTS.
DECISION
REYES, A., JR., J.:
nominal defendant; to include a prayer for a writ of preliminary
attachment against CASSCOR and Dajao; and to include a
prayer for mandatory injunction against LSC. The case was
docketed as Civil Case No. CEB-25283 and raffled to Branch 5 of
the RTC of Cebu City. A writ of preliminary attachment was
thereafter issued by the RTC against CASSCOR and Dajao on
June 21, 2000.10
v.
CASSCOR and Dajao filed their Answer on June 27, 2000, while
LSC filed its Answer on August 27, 2001. However, on
September 22, 2003, Villarin, et al. filed a Second Amended
Complaint. The case was then re-raffled to Branch 6 of the RTC
of Cebu City.11

These are consolidated petitions for review on certiorari under
Rule 45 of the Revised Rules of Court assailing the rulings of the
Court of Appeals (CA) in CA-G.R. SP No. 86333, which sustained
the Orders dated . May 11, 20041 and June 16, 20042 issued by
the Regional Trial Court (RTC) of Cebu City, Branch 6, in Civil
Case No. CEB-25283; and in CA-G.R. CEB SP No. 01855, which
reversed the Orders dated March 9, 20063 and May 30, 20064
issued by the RTC of Cebu City, Branch 20 in the same case.
Civil Case No. CEB-25283 is a suit for specific performance,
accounting, and damages, with prayer for writs of preliminary
mandatory injunction and preliminary attachment, filed before
the RTC of Cebu City.
The Facts
On January 26, 2004, Villarin, et al. filed a motion for issuance
of a writ of preliminary attachment. On May 11, 2004, Judge
Anacleto Caminade (Judge Caminade) of RTC Branch 6 granted
the motion and ordered the issuance of a writ of preliminary
attachment upon the posting by Villarin, et al. of a Php
150,000.00 bond. On May 17, 2004, LSC filed a Motion for
Clarification/Reconsideration, arguing that it cannot be
subjected to the attachment writ. However, before the court
can act on LSC's Motion for Clarification/Reconsideration, a
Notice of Garnishment was served on LSC on May 20, 2004,
prompting it to file a motion to post a counter-bond. On June 1,
2004, Judge Caminade issued an order granting LSC's motion to
post a counter-bond. Hence, LSC and CASSCOR both posted
counter-bonds worth Php 150,000.00 each, resulting in the
discharge of the writ of attachment.12

Lorenzo Shipping Corporation (LSC) is a domestic corporation
which operates interisland shipping vessels in the Philippines.
On the other hand, Cebu Arrastre and Stevedoring Services
Corporation (CASSCOR) provides arrastre and stevedoring
services for LSC's ships calling at the Port of Cebu under a Cargo
Handling Contract dated March 8, 1997.5
On February 20, 1997, Guerrero G. Dajao (Dajao), as President
and General Manager of CASSCOR, entered into a
Memorandum of Agreement (MOA) with Serafin Cabanlit
(Cabanlit) and Florencio Villarin (Villarin).6
Under the MOA, Villarin and Cabanlit undertook to operate and
manage the arrastre and stevedoring operations of CASSCOR
with respect to LSC's vessels. CASSCOR was entitled to 5% of
the proceeds of the operation, while Dajao was entitled to a 2%
royalty. 10% was allocated for taxes, wages and other
necessary expenses; and another 10% was earmarked for the
share of the Philippine Ports Authority.7 Villarin and Cabanlit
alleged that the rest of the proceeds, amounting to 73%, were
due to them.8
On June 16, 2004, Judge Caminade, ruling on LSC's Motion for
Clarification/Reconsideration, issued an Order13 clarifying that
the writ of attachment issued under the Order dated May 11,
2004 is directed at all the defendants, including LSC. The
pertinent portion of the order states that:
It is the opinion of the Court as already stated that all the
defendants including the defendant-movant appear to be guilty
of fraud in the performance of the obligation. It is not true that
the plaintiffs and defendant-movant have no contract. Plaintiff
has contract with the shipping corporation in view of the fact
that the defendant shipping corporation is a beneficiary of the
services of plaintiffs as alleged in the contract between
plaintiffs and other defendants. The rule on privity of contract
applies.14
Aggrieved, LSC filed a petition for certiorari with the CA
claiming that Judge Caminade committed grave abuse of
discretion in subjecting LSC to the attachment writ since it had
no contract or juridical relation with Villarin and the other
plaintiffs. LSC further argued that it cannot be subjected to the
attachment writ because it was only impleaded as a nominal
party.

The Attachment Case
Alleging failure on the part of CASSCOR and Dajao to remit their
shares from July 1999 onwards, Villarin, Cabanlit, and FCC
(Villarin, et al.) filed a Complaint for specific performance and
accounting against CASSCOR and Dajao.9 The Complaint was
subsequently amended on June 20, 2000 to implead LSC as a
Judge Caminade subsequently inhibited himself from the case,
which was then re-raffled to RTC Branch 20.
The Deposit Case
On November 23, 2004, Villarin, et al. filed a Verified Motion to
Require Defendant LSC to Deposit in Court Money Held in
Trust.15 To support the motion, Villarin, et al. presented an
audit report16 and a letter17 dated January 5, 2004 from LSC
Vice-President for Finance Julita' Valeros (Valeros) which
contains a statement from LSC's external auditor stating that
the unpaid account of LSC to CASSCOR amounts to Php
10,297,499.59.
On August 12, 2005, Judge Bienvenido R. Saniel, Jr. (Judge
Saniel) of RTC Branch 20 issued an Order18 (Order to Deposit)
granting the November 23, 2004 motion, which reads as
follows:
When this case was called today, Atty. Bernardito Florido and
Atty. Florencio Villarin agreed and jointly manifested that the
money requested to be deposited in the plaintiffs' motion shall
be deposited in court under the joint account/name of the
plaintiffs and defendant Cebu Arrastre and Stevedoring
Services Corporation. No one shall withdraw the money
without the knowledge and conformity of the other, and the
approval of the court.
Accordingly, the verified motion to require defendant Lorenzo
Shipping Corporation to deposit in court the money held in
trust is hereby granted. Defendant [LSC] is directed to deposit
the amount of Php10,297,499.59 with the Clerk of Court of this
Court in the joint account/name of the plaintiffs and Cebu
Arrastre and Stevedoring Services Corporation, the same to be
withdrawn only with the knowledge and conformity of the said
parties and the approval of the court.
SO ORDERED.19
The Order noted that the counsels for Villarin, et al. and
CASSCOR and Dajao have subsequently agreed and jointly
manifested that the money requested to be deposited will be
so deposited in court.
On September 6, 2005, Villarin, et al. moved for the issuance of
a writ of execution to enforce Judge Saniel's Order to Deposit.
On the other hand, LSC moved for reconsideration of the Order
to Deposit on October 4, 2005.20
On March 9, 2006, Judge Saniel issued an Order21 granting
LSC's motion for reconsideration and denying Villarin's motion
for execution. The pertinent portions of the order are as
follows:
The motion to require the deposit was concurred in, with
condition, by defendant Cebu Arrastre and Stevedoring
Services Corporation (CASSCOR). The apparent purpose of the
plaintiffs in securing the deposit of the above-mentioned
amount is to have an assurance that the money - which the
plaintiff claims to be owing from defendant Lorenzo Shipping
and payable to CASSCOR- will be available for payment to the
prevailing party when this case shall be finally terminated or
disposed of. The court has noted however that earlier the court
had issued a writ of preliminary attachment but the same was
discharged when the defendants put up a counterbond of
P300,000.00. In approving the counterbond, the court had
thereby determined that the counterbond was sufficient to
protect the interests of the plaintiff. To still require the deposit
of the amount in court would be unnecessary and oppressive.
Besides, whether or not there is privity of contract between the
plaintiffs and Lorenzo Shipping is an issue that is yet to be
determined and resolved in this case.
WHEREFORE, without needing to discuss the other matters and
arguments raised in the motion for reconsideration and other
pleadings of the parties, the court resolves to reconsider, as it
does hereby reconsider and set aside, the order of August 12,
2005.
The plaintiffs motion for issuance of a writ of execution to
enforce the 12 August 2005 order is hereby denied.22
Villarin, et al. moved for reconsideration but was denied. In
denying the motion, the trial court noted that the grant of LSC
and CASSCOR's motions to post counterbond was not
questioned by the plaintiffs and that the issue of LSC's liability
to Villarin, et al. is still in dispute. It also held that the Order to
Deposit has no basis in the Rules of Court.23
Aggrieved, Villarin, et al. filed a petition for certiorari with the
CA (the Deposit Case), asserting that Judge Saniel committed
grave abuse of discretion in granting LSC's motion for
reconsideration. They raised the following contentions in their
petition: (1) the Order to Deposit is sanctioned by Rule 135,
Section 6, which authorizes courts to issue writs and processes
to carry their jurisdiction into effect; (2) the Php 300,000.00
counterbond is insufficient to protect their interest; and (3) the
letter dated January 5, 2004 amounts to an admission of
liability on the part of LSC.24
Rulings of the CA
CA Ruling in the Deposit Case
On September 7, 2006, the CA rendered its Decision25 in favor
of Villarin, et al., thusly:
WHEREFORE. in view of the foregoing premises, judgment is
hereby rendered by us GRANTING the petition filed in this case,
ANNULLING and SETTING ASIDE, as they are hereby annulled
and set aside, the Orders elated March 9, 2006 and May 30,
2006 of the respondent judge and REINSTATING his Order
elated August 12, 2005. Further, the respondent judge is
hereby ordered to ENFORCE his Order dated August 12, 2005
which requires the deposit in court the amount of P10, 297,
499.59.
SO ORDERED.26
The CA ruled that Judge Saniel committed grave abuse of
discretion in granting LSC's motion on the ground that the
counterbond was sufficient to protect the interests of the
plaintiffs. Taking the Valeros letter as a judicial admission on
the part of CASSCOR and Dajao, the appellate court concluded
that the Php 300,000.00 counterbond would not suffice to
secure a liability of more than Php 10,000,000.00. The
appellate court also upheld Villarin, et al.'s contention
regarding the grounding of the Order to Deposit in Rule 135,
Section 6. Finally, it ruled that the Order to Deposit does not
amount to a prejudgment of the case because the deposited
amount remains in the control of the court as a measure to
ensure that LSC will not unjustly benefit from the funds to the
prejudice of whoever may be ultimately declared entitled
thereto.
LSC filed a motion for reconsideration which was denied by the
appellate court in a Resolution27 dated May 30, 2006.
Aggrieved, LSC filed a petition for review on certiorari28 with
this Court which was docketed as G.R. No. 175727.
CA Ruling in the Attachment Case
On April 24, 2007, the CA rendered its Decision29 in favor of
Villarin, et al., disposing thus:
WHEREFORE, the present petition is hereby DISMISSED for
want of merit.
SO ORDERED.30
The CA, in upholding the trial court, ruled that the complaint
contained averments which allege fraud on the part of all the
defendants, including LSC. As regards LSC's assertion of the
absence of privity of contract, the CA ruled that LSC is a
beneficiary of the contract between Villarin and CASSCOR; and
that Section 1(d) of Rule 57 does not require the existence of a
contractual obligation. Citing Sta. Ines Melale Forest Products
Corporation v. Macaraig,31 the CA noted that Section 1(d) also
contemplates other sources of obligation, such as law, crime, or
quasi-delict, without stating the precise nature of the
obligation involved in the case at bar. The CA further held that
the admission cited by LSC in its petition was not an admission
of the absence of privity of contract between LSC and Villarin
but is instead an admission by Villarin that LSC has payables to
FCC.
LSC sought reconsideration of the decision but was denied by
the CA in its Resolution32 dated July 6, 2007. LSC thus filed a
petition for review on certiorari33 with this Court, docketed as
G.R. No. 178713. In a Resolution34 dated September 16, 2009,
the Com1ordered the consolidation of G.R. No. 178713 with
G.R. No. 175727. Thereafter, the parties were directed to file
their respective memoranda.
The Issues
G.R. No. 178713
LSC ascribes the following error to the appellate court in G.R.
No. 178713:
THE CA SERIOUSLY ERRED IN AFFIRMING THE ORDER OF THE
COURT A QUO IN EXTENDING THE WRIT OF PRELIMINARY
ATTACHMENT AS TO INCLUDE LSC, WHICH WAS MERELY
DESCRIBED AS A NOMINAL DEFENDANT, BY CHARGING IT AS
GUILTY OF FRAUD IN CONTRACTING THE OBLIGATION, WHEN
THE APPLICATION FOR THE WRIT OF PRELIMINARY
ATTACHMENT WAS ONLY DIRECTED TO CO-DEFENDANTS
CASSCOR AND DAJAO.35
According to LSC, the Order dated May 11, 2004 subjecting it to
the attachment writ contravenes jurisprudence which requires
the writ to contain concrete and specific grounds to justify the
attachment. LSC also points out that the CA did not uphold the
trial court's finding with regard to privity of contract; instead it
held that an existing contractual relation is not a requirement
for the issuance of an attachment writ, without specifying the
nature of the obligation of LSC to Villarin. LSC further asserts
that the allegations in Villarin, et al.'s complaint cited by the CA
are not badges of fraud but legal justifications for LSC's refusal
to pay Villarin directly. LSC faults the CA for subjecting it to the
attachment writ on the basis of the general prayer for relief
despite its impleader in the case as a mere nominal party.
Lastly, LSC points out that the trial court had already issued a
writ of attachment on June 21, 2000, making the writ of
attachment issued under the Order dated May 11, 2004 a
superfluity.
G.R. No. 175727
LSC ascribes the following errors to the appellate court in G.R.
No. 175727:
THE CA SERIOUSLY ERRED IN REVERSING THE ORDERS OF THE
COURT A QUO AND ORDERING THE IMPLEMENTATION OF THE
ORDER DATED AUGUST 12, 2005 REQUIRING LSC, A NOMINAL
DEFENDANT AT THAT, TO DEPOSIT TO COURT THE AMOUNT OF
PHP 10,297,499.59 UNDER THE JOINT ACCOUNT OF CASSCOR
AND VILLARIN, ET AL. FOR THE FOLLOWING REASONS, NAMELY:
THE ORDER DATED AUGUST 12, 2005, IF ENFORCED, IS
TANTAMOUNT TO A PREJUDGMENT OF THE MAIN CASE AS
AGAINST LSC.
AFTER TWO (2) WRITS OF ATTACHMENT ISSUED AND
COUNTERBONDS POSTED, REQUIIUNG LSC TO DEPOSIT ITS
MONEY IN COURT IS AN OVERKILL AS IT IS TANTAMOUNT TO A
THIRD WRIT OF ATTACHMENT.
THE ORDER TO DEPOSIT IS NOT SANCTIONED BY THE RULES ON
THE PROVISIONAL REMEDIES.
THE THEORY OF VILLARIN, ET AL. THAT THE MONEY IS HELD IN
TRUST IS A LEGAL CONCLUSION WHICH NEEDS TO BE
THRESHED OUT IN THE DECISION OF THE MAIN CASE AND
CANNOT BE PASSED UPON AS A MERE INCIDENCE OF THE CASE.
THERE IS NO TRUST, EXPRESS OR IMPLIED, CREATED UNDER
THE FACTS OF THE CASE.
THE ORDER TO DEPOSIT IS OVER AND ABOVE THE RELIEFS IN
THE COMPLAINT AND IS OUTSIDE THE JURISDICTION OF THE
COURT A QUO DUE TO NON-PAYMENT OF DOCKET FEES
THEREFOR.
LSC, BEING A NOMINAL DEFENDANT AS DESCRIBED BY
VILLARIN, ET AL., CANNOT BE BURDENED MORE THAN THE
PRINCIPAL DEFENDANTS WHICH IS THE DAJAO GROUP.
THE ORDER SOUGHT TO BE ENFORCED AGAINST LSC IS IN THE
NATURE OF A MANDATORY INJUNCTION AND THE VILLARIN
AND DAJAO GROUPS MISERABLY FAILED TO PROVE THEIR
ENTITLEMENT THERETO.
IN LEGAL CONTEMPLATION, NO ADMISSION WAS MADE BY LSC
THAT IT OWES DAJAO OR CASSCOR THE AMOUNT OF PHP
10,297,499.59. DEFINITELY, LSC DID NOT ADMIT ANY LIABILITY
TO VILLARIN, ET AL.36
LSC insists that the Order to Deposit amounts to a prejudgment
of the case, a third attachment writ, and a mandatory
injunction, since it would be compelled to turn over control of
the amount deposited. It also claims that the fixing of the
amount of the deposit at Php 10,297,499.59 is misleading
because it fails to take possible counterclaims and cross-claims
into account. LSC likewise assails the CA's application of Rule
135, Section 6 to the case, asserting that there is neither basis
nor need for the Order to Deposit because the rules on
preliminary attachment adequately govern the case at bar. In
the same vein, it submits that the listing of provisional
remedies in Rules 57 to 61 of the Revised Rules of Court is
exclusive. It also contends that the trial court had no
jurisdiction to issue the Order to Deposit in the amount of more
than Php 10,000,000.00 considering that Villarin, et al. only
paid Php 300,000.00 in docket fees. It also maintains that it
could not be subjected to the Order to Deposit since it was
originally impleaded as a mere nominal party. Finally, LSC
challenges the appellate court's acceptance of the Valeros
letter as a judicial admission of its liability to CASSCOR.
Ruling of the Court
Both petitions are meritorious.
G.R. No. 178713
The CA, in upholding the trial court's order in favor of Villarin,
et al., ruled that all the defendants, including LSC, are guilty of
fraud in the performance of their obligation. The courts a quo
anchored the issuance the writ of preliminary attachment
prayed for on Sections 1(b) and 1(d) of Rule 57 of the Rules of
Court, which state:
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: x x
x court shall refrain from issuing it, for, otherwise, the court
(b) In an action for money or property embezzled or
fraudulently misapplied or converted to his own use by a public
officer, or an officer of a corporation, or an attorney, factor,
broker, agent, or clerk, in the course of his employment as
such, or by any other person in a fiduciary capacity, or for a
willful violation of duty;
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;
The Court does not agree.
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.37 It is
governed by Rule 57 of the Revised Rules of Court.
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 preventing
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.38
In Ng Wee v. Tankiansee,39 the Court, interpreting Section
1(d), ruled that:
To sustain an attachment [under this section], 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.40
(Underscoring Ours)
The Court, speaking through Associate Justice Antonio Eduardo
B. Nachura, reiterated the long-standing doctrine that "[t]he
provisional remedy of preliminary attachment is harsh and
rigorous for it exposes the debtor to humiliation and
annoyance. The rules governing its issuance are, therefore,
strictly construed against the applicant, such that if the
requisites for its grant are not shown to be all present, the
which issues it acts in excess of its jurisdiction."41 This standard
of construction of the rules on preliminary attachment is
reiterated in the. 2015 case of Watercraft Venture Corporation
v. Wolfe.42
Tested against these jurisprudential standards, the CA's
decision upholding Judge Caminade's Order dated June 16,
2004 against LSC must be reversed.
It must be borne in mind that Villarin's action is for specific
performance. The main thrust of his complaint is to compel
Dajao and CASSCOR to observe the provisions of the MOA. All
the other remedies sought by the complaint are merely
ancillary to this primary relief. The MOA, therefore, is the
obligation upon which Villarin's action is brought; hence the
obligation sought to be upheld in this case is ex contractu.
Pertinently, Article 1311 of the New Civil Code provides that
"[c]ontracts take effect only between the parties, their assigns
and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature,
or by stipulation or by provision of law." In the case at bar, the
MOA was entered into by Dajao (as CASSCOR President) on one
hand, and Villarin, et al. on the other. LSC cannot be guilty of
fraud within the contemplation of Section 1(d), Rule 57 of the
Rules of Court because it did not enter into any agreement or
contract with Villarin. In the absence of any assignment of
rights to LSC, the MOA can only bind the parties thereto. Not
being a party to the MOA, LSC cannot be subjected to an
attachment writ on the basis of Section 1(d).
Villarin admits that he has no express or written contract with
LSC. He nevertheless asserts in his Memorandum the existence
of an implied trust relation among himself, LSC, and CASSCOR.
He alleges in the Second Amended Complaint that LSC was
aware of the arrangement under the MOA for CASSCOR to
subcontract its LSC arrastre operations to Villarin.43 He asserts
that the relation between them was "a business relation that
requires them to repose trust and confidence in each other and
exercise a corresponding degree of fairness and good faith
pursuant to an existing quasi-contract or implied contract
created by law."44 He then denominates this relation as an
implied constructive trust, where LSC holds 73% of the amount
payable to CASSCOR in trust for payment to him.
At this point, the Court emphasizes that it cannot make an
authoritative characterization of the juridical relation between
LSC and Villarin, so as to not preempt any ruling of the RTC
Branch 20 in Cebu City in the main controversy. Be that as it
may, the Court shall make an initial determination herein if
only to resolve the issue on the propriety of the issuance of
provisional remedies by the trial court.
In this regard, the Court cannot sustain the finding a quo that
constructive trust relation obtains in this case.
A constructive trust is "a trust not created by any words, either
expressly or impliedly, evincing a direct intention to create a
trust but by the construction of equity in order to satisfy the
demands of justice and prevent unjust enrichment. It does not
arise by agreement or intention but by operation of law against
one who, by fraud, duress, or abuse of confidence obtains or
holds the legal right to property which he ought not, in equity
and good conscience, to hold."45
In the case at bar, it appears that LSC has a legal justification for
refusing to yield to Villarin's demands, based on the law on
privity of contract. Thus, it cannot be said that LSC is
withholding payment for fraudulent reasons. Nevertheless,
assuming without conceding that a constructive trust relation
does exist in this case, it has already been held in Philippine
National Bank v. CA46 that, "in a constructive trust, there is
neither a promise nor any fiduciary relation to speak of and the
so-called trustee neither accepts any trust nor intends holding
the property for the beneficiary."47 This takes the case out of
the purview of Section l(b), since there would be no fiduciary
relation between LSC and Villarin.
The appellate court's reliance on the ruling in Sta. Ines48 is
misplaced. In that case, the Court found that a juridical relation
between the attachment plaintiff and the attachment
defendant was created by virtue of the attachment defendant's
cutting of logs within the attachment plaintiffs timber license
area, which amounted to a wrongful act committed by the
former causing damage to the latter. The Court then held that
the term "creditors" as used in Rule 57 should be construed
broadly to contemplate all classes of creditors regardless of the
source of obligation. In other words, a juridical tie is still
required, which is not present in the case at bar between
Villarin and LSC. LSC's refusal to directly remit its payables to
Villarin cannot be considered wrongful, because LSC contracted
only with CASSCOR and not with Villarin; and such refusal is
justified by the legal principle of privity of contract.
G.R. No. 175727
The pivotal issue in this petition is the propriety of the issuance
of the Order to Deposit.
Deposit as a provisional remedy
While deposit may not be included in the provisional remedies
stated in Rules 57 to 61 of the Rules of Court, this does not
mean, however, that its concept as a provisional remedy is
nonexistent. As correctly pointed out by the appellate court,
Rule 135 gives courts wide latitude in employing means to carry
their jurisdiction into effect. Thus, this Court has upheld deposit
orders issued by trial courts in cases involving actions for
partition,49 recovery of possession,50 and even annulment of
contract. In The Province of Bataan v. Hon. Villafuerte, Jr.,51
the Court sustained an escrow order over the lease rentals of
the subject properties therein pending the resolution of the
main action for annulment of sale and reconveyance; while in
Reyes v. Lim,52 the Court upheld an order to deposit the down
payment for the purchase price of a parcel of land after the
buyer sought the rescission of the contract to sell.
Based on jurisprudence, a deposit order is an extraordinary
provisional remedy whereby money or other property is placed
in custodia legis to ensure restitution to whichever party is
declared entitled thereto after court proceedings. It is
extraordinary because its basis is not found in Rules 57 to 61 of
the Rules of Court on Provisional Remedies but rather, under
Sections 5(g) and 6 of Rule 135 of the same Rules53 pertaining
to the inherent power of every court "[t]o amend and control
its process and orders so as to make them conformable to law
and justice;" as well as to issue "all auxiliary writs, processes
and other means necessary" to carry its jurisdiction into effect.
To elucidate further, provisional deposit orders can be seen as
falling under two general categories. In the first category, the
demandability of the money or other property to be deposited
is not, or cannot - because of the nature of the relief sought -
be contested by the party-depositor. In the second category,
the party-depositor regularly receives money or other property
from a non-party during the pendency of the case, and the
court deems it proper to place such money or other property in
custodia legis pending final determination of the party truly
entitled to the same.
The cases of Eternal Gardens Memorial Parks Corp. v. First
Special Cases Division, Intermediate Appellate Court54 and
Reyes v. Lim55 fall under the first category. Eternal Gardens
involved an interpleader case where the plaintiff-buyer
(Eternal), who was seeking to compel the litigation of the two
conflicting claims to the property in question, refused to
comply with an order to deposit in custodia legis the
installment payments for the disputed property. In upholding
the provisional deposit order, the Court ruled that Eternal's
disavowal of interest in the disputed property, and the deposit
of such disputed money or property with the court, are
essential elements of an interpleader suit.56 Thus, Eternal was
ordered to deposit the installment payments with the trial
court. In Reyes, the Court upheld a provisional deposit order
covering the down payment for a parcel of land pending the
resolution of the case for annulment of contract, viz.:
[S]ince Reyes is demanding to rescind the Contract to Sell, he
cannot refuse to deposit the P10 million down payment in
court. Such deposit will ensure restitution of the P10 million to
its rightful owner. Lim, on the other hand, has nothing to
refund, as he has not received anything under the Contract to
Sell.57
In both Eternal Gardens and Reyes, the nature of the relief
sought precluded the depositor-party from contesting the
demandability of the amounts sought to be deposited. Stated
differently, the depositor-parties effectively resigned their
respective interests over the amounts deposited. The most
equitable solution to prevent unjust enrichment in such cases,
therefore, is a provisional deposit order, so that the amount
deposited may easily be turned over to whoever would be
adjudged properly entitled thereto.
The second category of cases involve provisional deposit orders
covering sums regularly received from non-parties to the case
by the depositor-party during the pendency of the proceedings.
These are turned over to the custody of the court since the
entitlement of the depositor-party thereto remains disputed,
and to ensure the timely transfer of such sums to whoever
would be adjudged properly entitled thereto. In Go v.
Go,58Bustamante v. CA,59 and Province of Bataan,60 the Court
upheld the trial court's order directing the depositor-parties
therein, who regularly received rental payments from the
lessees of the disputed properties, to deposit such rental
payments with the court pending the resolution of the issue of
ownership of the disputed properties.
A common thread running through these cases is the existence
of an agreement or a juridical tie, which either binds the
depositor-party and the party to be benefited by the deposit;
or forms the basis for the regular receipt of payments by the
depositor-party. In Eternal Gardens, Eternal had a contract of
sale with one of the interpleading parties; while in Reyes, Reyes
had a contact to sell with Lim; and in Go, Bustamante, and
Province of Bataan, the regular payments received by the
depositor-parties are based on lease agreements.
Jurisprudence on provisional deposit orders as applied to the
case at bar
Shorn of the minor details, the case at bar involves a situation
where the creditor seeks to attach properties of his debtor's
debtor, without establishing a juridical link between the two
debts. The question arises: can the provisional remedy of
deposit, as established under the Rules of Court and
jurisprudence, be availed of in such a situation? To answer this
query, the Court now determines if the case at bar falls under
any of the two categories established by the jurisprudence on
provisional deposit orders.
The principal relief sought in respondent's complaint is for
specific performance to compel CASSCOR and Dajao to observe
the provisions of the MOA. The deposit order was applied for
by Villarin, et al. and directed at LSC as the depositor-party,
with Villarin, et al. as the beneficiary of the deposit order.
Essentially, the situation involves two contracts: the cargo
handling contract between LSC and CASSCOR, and the MOA
between Dajao (as CASSCOR President) and Villarin, et al. -
which is the contract sought to be enforced by Villarin, et al. It
must be pointed out however, that LSC is not a party to the
MOA entered into by Dajao and Villarin, et al. As such, the
deposit order cannot be directed at LSC since it is not privy to
the contract sought to be enforced. To do so would violate the
civil law principle that a contract can only bind the parties who
entered into it, and it cannot favor or prejudice a third person,
even if he is aware of such contract and has acted with
knowledge thereof.61
Furthermore, the nature of the relief sought in the case at bar
does not preclude the depositor-party, i.e., LSC, from
contesting the demandability of the amount deposited. In a
specific performance case, the defendant can put in issue the
existence of any liability on her part to the plaintiff. In contrast,
in provisional deposit orders of the first category, the
depositor-party does not, or is precluded, from contesting the
demandability of the money or property sought to be
deposited - a situation which presumes some resignation of
interest in the money or property deposited on the part of the
depositor-party. Here, LSC does not resign any interest in favor
ofVillarin, et al.; but instead asserts that it has no liability
whatsoever, there being no juridical tie between them.
Moreover, even assuming arguendo that LSC did concede the
existence of any liability on its part in favor of CASSCOR or
Villarin, et al., the demandability of the amount covered by the
deposit order against LSC is still in dispute since LSC has its own
claims against CASSCOR.62 Such claims can possibly
compensate for whatever amounts CASSCOR may be entitled
to receive from LSC under their contract, which in turn, may be
sought from CASSCOR by Villarin, et al. Clearly, the case at bar
cannot be subsumed under the first category of provisional
deposit orders.
The second category of provisional deposit cases is likewise
inapplicable. The amount covered by the deposit order against
LSC comes from its own account and is not regularly received
from non-parties to the case. There is no regular flow of
incoming amounts from non-parties which must be properly
received and kept in custodia legis in favor of the party who will
ultimately be adjudged entitled thereto. Furthermore, it has
already been established that the actual liability of LSC to
CASSCOR is still in dispute.
At this juncture, it would not be amiss to reiterate that LSC has
no juridical tie or agreement with Villarin, et al. which would
suffice as basis for the issuance· of a deposit order against the
former in favor of the latter.
It is therefore clear from the foregoing disquisition that a
provisional deposit order, while available under our procedural
law, cannot be granted in this case; the factual and legal
circumstances herein being inconsistent with the parameters
established by jurisprudence.
The Court concludes by enjoining courts from indiscriminately
resorting to deposit orders when the remedy of preliminary
attachment is not available. The Court reiterates our
pronouncement in Province of Bataan,63 that the provisional
remedy of deposit is a "fair response to the exigencies and
equities of the situation", when the factual circumstances of
the case call for its application. Thus, when there is no juridical
tie between the obligee-plaintiff and the beneficiary of the
services he has rendered; and the obligor-defendant failed to
set up a cross-claim to connect the two parties with whom it
had separate contracts, a deposit order would only amount to a
circumvention of the rules on preliminary attachment and an
unjust imposition on the alleged beneficiary who is not a party
to the contract sought to be enforced.
WHEREFORE, premises considered, the Court hereby rules as
follows:
1. In G.R. No. 175727:
The petition is GRANTED.
The Decision dated September 7, 2006 and the Resolution
dated November 28, 2006 of the Court of Appeals in CA-G.R.
CEB-SP No. 01855 are hereby REVERSED and SET ASIDE.
The Orders dated March 9, 2006 and May 30, 2006 issued by
Judge Bienvenido R. Saniel, Jr. in Civil Case No. CEB-25283 are
hereby REINSTATED.
The Regional Trial Court of Cebu City is ordered to return any
and all amounts deposited to it by petitioner Lorenzo Shipping
Corporation pursuant to the aforesaid Decision and Resolution
in CA-G.R. CEB-SP No. 01855.
2. In G.R. No. 178713:
The petition is GRANTED.
The Decision dated April 24, 2007 and the Resolution dated July
6, 2007 of the Court of Appeals in CA-G.R. SP No. 86333 are
hereby REVERSED and SET ASIDE.
The Order dated June 16, 2004 issued by Judge Anacleto
Caminade in Civil Case No. CEB-25283; and the writ of
attachment issued thereunder, are hereby ANNULLED and SET
ASIDE insofar as it pertains to petitioner Lorenzo Shipping
Corporation.
The counter-bond posted by Lorenzo Shipping Corporation in
connection with the aforesaid writ of attachment is ordered
returned.
3. The Regional Trial Court of Cebu City is hereby ordered to try
the merits of Civil Case No. CEB-25283 with utmost dispatch.
SO ORDERED.
G.R. No. 185734, July 03, 2013
ALFREDO C. LIM, JR., Petitioner, v. SPOUSES TITO S. LAZARO
AND CARMEN T. LAZARO, Respondents.
RESOLUTION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the July 10,
2008 Decision2 and December 18, 2008 Resolution3 of the
Court of Appeals (CA) in CA-G.R. SP No. 100270, affirming the
March 29, 2007 Order4 of the Regional Trial Court of Quezon
City, Branch 223 (RTC), which lifted the writ of preliminary
attachment issued in favor of petitioner Alfredo C. Lim, Jr. (Lim,
Jr.).
The Facts
On August 22, 2005, Lim, Jr. filed a complaint5 for sum of
money with prayer for the issuance of a writ of preliminary
attachment before the RTC, seeking to recover from
respondents-spouses Tito S. Lazaro and Carmen T. Lazaro (Sps.
Lazaro) the sum of P2,160,000.00, which represented the
amounts stated in several dishonored checks issued by the
latter to the former, as well as interests, attorney’s fees, and
costs. The RTC granted the writ of preliminary attachment
application6 and upon the posting of the required
P2,160,000.00 bond,7 issued the corresponding writ on
October 14, 2005.8 In this accord, three (3) parcels of land
situated in Bulacan, covered by Transfer Certificates of Title
(TCT) Nos. T-64940, T-64939, and T-86369 (subject TCTs),
registered in the names of Sps. Lazaro, were levied upon.9
In their Answer with Counterclaim,10 Sps. Lazaro averred,
among others, that Lim, Jr. had no cause of action against them
since: (a) Colim Merchandise (Colim), and not Lim, Jr., was the
payee of the fifteen (15) Metrobank checks; and (b) the PNB
and Real Bank checks were not drawn by them, but by Virgilio
Arcinas and Elizabeth Ramos, respectively. While they admit
their indebtedness to Colim, Sps. Lazaro alleged that the same
had already been substantially reduced on account of previous
payments which were apparently misapplied. In this regard,
they sought for an accounting and reconciliation of records to
determine the actual amount due. They likewise argued that no
fraud should be imputed against them as the aforesaid checks
issued to Colim were merely intended as a form of collateral.11
Hinged on the same grounds, Sps. Lazaro equally opposed the
issuance of a writ of preliminary attachment.12
Nonetheless, on September 22, 2006, the parties entered into a
Compromise Agreement13 whereby Sps. Lazaro agreed to pay
Lim, Jr. the amount of P2,351,064.80 on an installment basis,
following a schedule of payments covering the period from
September 2006 until October 2013, under the following terms,
among others: (a) that should the financial condition of Sps.
Lazaro improve, the monthly installments shall be increased in
order to hasten the full payment of the entire obligation;14 and
(b) that Sps. Lazaro’s failure to pay any installment due or the
dishonor of any of the postdated checks delivered in payment
thereof shall make the whole obligation immediately due and
demandable.
The aforesaid compromise agreement was approved by the
RTC in its October 31, 2006 Decision15 and January 5, 2007
Amended Decision.16
Subsequently, Sps. Lazaro filed an Omnibus Motion,17 seeking
to lift the writ of preliminary attachment annotated on the
subject TCTs, which the RTC granted on March 29, 2007.18 It
ruled that a writ of preliminary attachment is a mere
provisional or ancillary remedy, resorted to by a litigant to
protect and preserve certain rights and interests pending final
judgment. Considering that the case had already been
considered closed and terminated by the rendition of the
January 5, 2007 Amended Decision on the basis of the
September 22, 2006 compromise agreement, the writ of
preliminary attachment should be lifted and quashed.
Consequently, it ordered the Registry of Deeds of Bulacan to
cancel the writ’s annotation on the subject TCTs.
Lim, Jr. filed a motion for reconsideration19 which was,
however, denied on July 26, 2007,20 prompting him to file a
petition for certiorari21 before the CA.
The CA Ruling
On July 10, 2008, the CA rendered the assailed decision,22
finding no grave abuse of discretion on the RTC’s part. It
observed that a writ of preliminary attachment may only be
issued at the commencement of the action or at any time
before entry of judgment. Thus, since the principal cause of
action had already been declared closed and terminated by the
RTC, the provisional or ancillary remedy of preliminary
attachment would have no leg to stand on, necessitating its
discharge.23
Aggrieved, Lim, Jr. moved for reconsideration24 which was
likewise denied by the CA in its December 18, 2008
Resolution.25
Hence, the instant petition.
The Issue Before the Court
The sole issue in this case is whether or not the writ of
preliminary attachment was properly lifted.
The Court’s Ruling
The petition is meritorious.
By its nature, preliminary attachment, under Rule 57 of the
Rules of Court (Rule 57), is an ancillary remedy applied for not
for its own sake but to enable the attaching party to realize
upon the 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 its pendency which
may be resorted to by a litigant to preserve and protect certain
rights and interests during the interim, awaiting the ultimate
effects of a final judgment in the case.26 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.27
In this relation, while the provisions of Rule 57 are silent on the
length of time within which an attachment lien shall continue
to subsist after the rendition of a final judgment, jurisprudence
dictates that the said lien continues until the debt is paid, or
the sale is had under execution issued on the judgment or until
the judgment is satisfied, or the attachment discharged or
vacated in the same manner provided by law.28
Applying these principles, the Court finds that the discharge of
the writ of preliminary attachment against the properties of
Sps. Lazaro was improper.
Records indicate that while the parties have entered into a
compromise agreement which had already been approved by
the RTC in its January 5, 2007 Amended Decision, the
obligations thereunder have yet to be fully complied with –
particularly, the payment of the total compromise amount of
P2,351,064.80. Hence, given that the foregoing debt remains
unpaid, the attachment of Sps. Lazaro’s properties should have
continued to subsist.
In Chemphil Export & Import Corporation v. CA,29 the Court
pronounced that a writ of attachment is not extinguished by
the execution of a compromise agreement between the
parties, viz:cralavvonlinelawlibrary
Did the compromise agreement between Antonio Garcia and
the consortium discharge the latter’s attachment lien over the
disputed shares?

CEIC argues that a writ of attachment is a mere auxiliary
remedy which, upon the dismissal of the case, dies a natural
death. Thus, when the consortium entered into a compromise
agreement, which resulted in the termination of their case, the
disputed shares were released from garnishment.
We disagree. To subscribe to CEIC’s contentions would be to
totally disregard the concept and purpose of a preliminary
attachment.
xxxx
The case at bench admits of peculiar character in the sense that
it involves a compromise agreement. Nonetheless, x x x. The
parties to the compromise agreement should not be deprived
of the protection provided by an attachment lien especially in
an instance where one reneges on his obligations under the
agreement, as in the case at bench, where Antonio Garcia
failed to hold up his own end of the deal, so to speak.
xxxx
If we were to rule otherwise, we would in effect create a back
door by which a debtor can easily escape his creditors.
Consequently, we would be faced with an anomalous situation
where a debtor, in order to buy time to dispose of his
properties, would enter into a compromise agreement he has
no intention of honoring in the first place. The purpose of the
provisional remedy of attachment would thus be lost. It would
become, in analogy, a declawed and toothless tiger. (Emphasis
and underscoring supplied; citations omitted)
In fine, the Court holds that the writ of preliminary attachment
subject of this case should be restored and its annotation
revived in the subject TCTs, re-vesting unto Lim, Jr. his
preferential lien over the properties covered by the same as it
were before the cancellation of the said writ. Lest it be
misunderstood, the lien or security obtained by an attachment
even before judgment, is in the nature of a vested interest
which affords specific security for the satisfaction of the debt
put in suit.30 Verily, the lifting of the attachment lien would be
tantamount to an abdication of Lim, Jr.’s rights over Sps.
Lazaro’s properties which the Court, absent any justifiable
ground therefor, cannot allow.
WHEREFORE, the petition is GRANTED. The July 10, 2008
Decision and the December 18, 2008 Resolution of the Court of
Appeals in CA-G.R. SP No. 100270 are REVERSED and SET ASIDE,
and the March 29, 2007 Order of the Regional Trial Court of
Quezon City, Branch 223 is NULLIFIED. Accordingly, the trial
court is directed to RESTORE the attachment lien over Transfer
Certificates of Title Nos. T-64940, T-64939, and T-86369, in
favor of petitioner Alfredo C. Lim, Jr.
SO ORDERED.
G.R. No. 81541 October 4, 1989
PEOPLE OF THE PHILIPPINES, Petitioner, vs. THE REGIONAL
TRIAL COURT OF MANILA, Presided by HON. JUDGE RICARTE M.
TOGONON and APOLINARIO BATACLAN, JULIA BATACLAN,
FRANCISCO SAGUILAYAN, ZENAIDA P. BATACLAN, FRANCISCA
BATACLAN, NAPOLEON BATACLAN, LILIBETH BATACLAN and
ELEAZAR BATACLAN, Respondents.
F.A. Miano Law Office for respondents.
SARMIENTO, J.:
Pedro Caragao, complainant in Criminal Case No. 87-53321 of
the Regional Trial Court of Manila, National Capital Judicial
Region, Branch 22, presided over by the respondent judge, for
falsification of public document, invoking the name of the
"People of the Philippines," petitions the Court for the review
on certiorari, under Rule 45 of the Revised Rules of Court, of
two orders of the respondent trial court, dated July 17, 1987
and August 26, 1987. The first order granted the defense
motion to quash the information while the second denied the
motion for reconsideration of the first
order.chanroblesvirtualawlibrary chanrobles virtual law library
The controversy arose from the following facts: chanrobles
virtual law library
On September 20, 1980, the private respondents sold several
parcels of land located in Dasmarinas, Cavite, in favor of
Ricardo Silverio. These parcels were at that time registered in
the names of the private respondents. One of the parcels,
covered by Transfer Certificate of Title No. T-110942 of the
Registry of Deeds for the province of Cavite, is the subject
matter of a litigation between the private respondents and
Pedro Caragao and his co-owners for reconveyance and
cancellation of title and damages docketed as Civil Case No. TG-
493 before Branch XVIII of the Regional Trial Court of Cavite in
Tagaytay City.chanroblesvirtualawlibrarychanrobles virtual law
library
Pedro Caragao then caused the annotation of a notice of lis
pendens at the back of the original of the Transfer Certificate of
Title (T.C.T.) of the parcel of land under litigation, on file in the
Register of Deeds for the province of Cavite, without the
knowledge of the private respondents. Hence, the owners'
(private respondents') copy of the title in question did not bear
any annotation of such notice of lis pendens. chanrobles virtual
law library
When the private respondents sold the two parcels of land to
Silverio, including the one under litigation for reconveyance
between Caragao and the private respondents, they warranted
that the properties are "free from all liens and encumbrances
whatsoever." Thus the Deed of Sale states:
2. That for and in consideration of the sum of TWELVE MILLION
SEVEN HUNDRED SIXTEEN THOUSAND AND NINE HUNDRED
TEN PESOS (P12,716,910.00), Philippine Currency, to be paid by
the VENDEE-MORTGAGOR to the VENDOR-MORTGAGEE as
specified hereunder, the latter, by these presents, do hereby
SELL, TRANSFER and CONVEY unto the VENDEE-MORTGAGOR,
its heirs, assigns and successors-in-interests the above-
described two (2) parcels of land, together with all the
improvements thereon, free from all liens and encumbrances
whatsoever. 1 (Emphasis supplied.)
On the basis of this express warranty vis-a-vis the notice of lis
pendens duly annotated at the back of the original of the
Transfer Certificate of Title (T.C.T.-110942) on file in the
Registry of Deeds for the Province of Cavite, Assistant Fiscal
Napoleon V. Dilao of the City of Manila filed an information for
"Falsification of Public Document" against the private
respondents. The information reads in part:
That on or about the 20th day of September 1980 in the City of
Manila, Philippines, the said accused, conspiring and
confederating together and helping one another, being then
private persons and with intent to cause damage to public
interest, did then and there wilfully, unlawfully and feloniously
commit acts of falsification on a public document, in the
following manner, to wit: by then and there making it appear
that a parcel of agricultural land situated at Malinta,
Dasmarinas, Cavite identified as Lot No. 3877-A-1 and now by
TCT No. T-110942 is free from all liens and encumbrances,
which is subject of a Deed of Sale With Mortgage signed and
executed in favor of one Ricardo Silverio which was subscribed
and sworn to before Notary Public Carolina L. De Guzman and
entered in his (sic) Notarial Registry As Doc. No. 89, Page 11,
Book No. 111, Series of 1980, and therefore a public document,
by making it appear that the said parcel of agricultural land is
"FREE FROM ALL LIENS AND ENCUMBRANCES", when in truth
and in fact, it is not, as the accused fully well knew that the
subject parcel of land is subject of litigation in Civil Case No. TG-
493 in the Regional Trial Court, Branch XVIII of Tagaytay City for
reconveyance and/or cancellation of title and damages, as
evidenced by the "Notice of Lis Pendens" at the back of said
TCT No. T-11 0942 under Entry No. 71086 dated August 9, 1980
and acts (sic) of inscription is (on) August 11, 1980, to the
damage and prejudice of public
interest.chanroblesvirtualawlibrary chanrobles virtual law
library
Contrary to law. 2chanrobles virtual law library
Before arraignment, the private respondents, accused in the
respondent trial court, filed, under date of June 17, 1987, a
"Motion To Quash" the information, on the ground that the
facts charged do not constitute an offense [Par. (a), Sec. 3, Rule
117, Revised Rules of Court]. They contended "that a notice of
lis pendens is not a lien or an encumbrance within the
contemplation of the law much less of the parties." 3
Moreover, the "(a)ccused were not summoned by the Register
of Deeds concerning the alleged notice of lis pendens" 4
despite the fact that all the parcels of land were, at the time of
the sale to Silverio, registered in the names of the private
respondents, accused in the court below. 5 chanrobles virtual
law library
The respondents aver that, without their knowledge, Pedro
Caragao had caused the annotation of the notice of lis pendens
at the back of the original copy of the T.C.T. of the land under
litigation 6 in the Register of Deeds for the province of Cavite.
They stress that their (owner's) copy of the T.C.T. in question is
"clean" - it did not bear any annotation of notice of lis pendens.
They assure that prior to the sale, the accused did not
mortgage or otherwise encumber the said property as security
for the payment of any obligation. They claim that at the time
of the sale on September 20, 1980, the accused believed that
the properties being sold, including the one under litigation,
were indeed free from all liens and encumbrances as they
really were. 7
The court a quo, in an order dated July 17, 1987, sustained the
private respondents' Motion to Quash and dismissed the case
ruling that a notice of lis pendens is not a lien or encumbrance.
The court said:
The motion to quash is well-taken. A notice of lis pendens is not
a lien or encumbrance under our civil law. It is a mere
cautionary notice to prospective buyers of certain property that
said property is under litigation, and that any sale made thereof
shall be subject to the result of such litigation. It imposes no
obligation on the owner, but on the prospective
buyer.chanroblesvirtualawlibrary chanrobles virtual law library
It is to be noted, also, that the clause is merely a formal
statement in sales contained in notarized documents inserted
by the drafter of the deed even without any actual statement
by the vendor. 8
Only on August 7,1987, 9 after the issuance of the order
granting the Motion to Quash, did Pedro Caragao file his
opposition. In a nutshell, he contended that the notice of lis
pendens is the evidence of the lien or encumbrance on the
subject property, and not the lien or encumbrance itself
charged in the information.chanroblesvirtualawlibrary
chanrobles virtual law library
On August 12, 1987, Pedro Caragao moved for reconsideration
of the July 17, 1987 order of quashal arguing that:
a) The Notice Of Lis Pendens Is Not The Lien Or Encumbrance
Charged In The INFORMATION, But Merely An Evidence Of Such
Lien Or Encumbrance.chanroblesvirtualawlibrary chanrobles
virtual law library
b) The Information is clear and clear cut that The Lien Or
Encumbrance Being Charged Is The Fact That "The Subject
Parcel of Land is Subject of LITIGATION in Civil Case No. TG-
493...as EVIDENCED by the Notice of Lis
Pendens ...chanroblesvirtualawlibrary chanrobles virtual law
library
c) Litigation is both an encumbrance and lien on the property
being litigated.chanroblesvirtualawlibrary chanrobles virtual
law library

d) Ignorance of the law excuses no
one.chanroblesvirtualawlibrary chanrobles virtual law library
e) Damage to a third person is NOT an element in falsification
of public document. 10chanrobles virtual law library
The lower court in an order dated August 26,1987, denied the
private prosecutor's motion for reconsideration, hence, this
petition.chanroblesvirtualawlibrary chanrobles virtual law
library
Before us now, the petitioner assigns the following errors:
Ichanrobles virtual law library
RESPONDENT TRIAL COURT ERRED AND COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION
WHEN IT RULED THAT THE NOTICE OF LIS PENDENS
ANNOTATED AT THE BACK OF TCT NO. T-110942 IS THE VERY
LIEN OR INCUMBRANCE (sic) CHARGED IN THE INFORMATION,
WHEN IN FACT, SAID ANNOTATION IS MERELY AN EVIDENCE OF
PENDING LITIGATION AND IT IS THE PROPERTY'S STATUS OF
BEING A LITIGATED PROPERTY THAT IS THE LIEN OR
ENCUMBRANCE CHARGED IN THE
INFORMATION.chanroblesvirtualawlibrarychanrobles virtual
law library
IIchanrobles virtual law library
RESPONDENT TRIAL COURT ERRED AND COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION
WHEN IT DISMISSED THE SUBJECT CRIMINAL CASE FOR
FALSIFICATION OF PUBLIC DOCUMENT ON THE GROUND THAT
"FACTS CHARGED DO NOT CONSTITUTE AN OFFENSE."
BECAUSE THE TRIAL JUDGE SUBSTITUTED THE PLAIN RECITALS
OF THE INFORMATION AND DOCUMENTARY EVIDENCE
SUPPORTING SUCH RECITALS WITH HIS ERRONEOUS OPINION
AND INAPPLICABLE AND IRRELEVANT DOCTRINES.
11chanrobles virtual law library
Even, if we disregard the semantics of the private prosecutor's
first submission, it has no merit
nonetheless.chanroblesvirtualawlibrary chanrobles virtual law
library
Central to the controversy in this case is the issue as to whether
or not a notice of lis pendens is a lien or encumbrance within
the contemplation of criminal law, in particular, the crime of
falsification of public document. If so, then the private
respondents would have committed falsification because they
stated in paragraph 2 of the deed of sale they executed in favor
of Ricardo Silverio, that the real properties they sold were "free
from all liens and encumbrances" although a notice of lis
pendens is annotated at the back of the T.C.T. of one
parcel.chanroblesvirtualawlibrary chanrobles virtual law library
The meaning, nature, recording, and effects of a notice of lis
pendens are clearly stated in the Revised Rules of Court, Rule
14, Section 24, thus:
SEC. 24. Notice of lis pendens. - In an action affecting the title
or the right of possession of real property, the plaintiff, at the
time of filing the complaint, and the defendant, at the time of
filing his answer, when affirmative relief is claimed in such
answer, or at any time afterwards, may record in the office of
the registrar of deeds of the province in which the property is
situated a notice of the pendency of the action, containing the
names of the parties and the object of the action or defense,
and a description of the property in that province affected
thereby. From the time only of filing such notice for record shall
a purchaser, or incumbrancer of the property affected thereby,
be deemed to have constructive notice of the pendency of the
action, and only of its pendency against 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 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.
Lis pendens is a Latin term which literally means a pending suit
l2 or a pending litigation while a notice of lis pendens is an
announcement to the whole world that a particular real
property is in litigation, serving as a warning that one who
acquires an interest over the said property does so at his own
risk, or that he gambles on the result of the litigation over the
said property. 13 It is but a signal to the intending buyer or
mortgagee to take care or beware and to investigate the
prospect or non-prospect of the litigation succeeding before he
forks down his money.chanroblesvirtualawlibrary chanrobles
virtual law library
Notice of lis pendens has been conceived and, more often than
not, availed of, to protect the real rights of the registrant while
the case involving such rights is pending resolution or decision.
With the notice of lis pendens duly recorded, and remains
uncancelled, he could rest secure that he would not lose the
property or any part of it during the
litigation.chanroblesvirtualawlibrary chanrobles virtual law
library
[T]he doctrine of lis pendens is founded upon reason of public
policy and necessity, the purpose of which is to keep the
subject matter of the litigation within the power of the Court
until the judgment or the decree shall have been entered;
otherwise, by successive alienations pending the litigation, its
judgment or decree shall be rendered abortive and impossible
of execution. 14chanrobles virtual law library
The lower court is therefore correct in ruling that a notice of lis
pendens being a mere cautionary notice to a prospective buyer
or mortgagee of a parcel of land under litigation, then it
imposes no obligation on the owner, but on the prospective
buyer. It cannot conceivably be the "lien or encumbrance"
contemplated by law.chanroblesvirtualawlibrary chanrobles
virtual law library
On the other hand, a "lien" is a charge on property usually for
the payment of some debt or obligation. 15A "lien" is a
qualified right or a proprietary interest, which may be exercised
over the property of another. It is a right which the law gives to
have a debt satisfied out of a particular thing. 16 It signifies a
legal claim or charge on property, either real or personal, as a
collateral or security for the payment of some debt or
obligation.chanroblesvirtualawlibrarychanrobles virtual law
library
Similarly, an "encumbrance is a burden upon land, depreciative
of its value, such as a lien, easement, or servitude, which,
though adverse to (the) interest of (the) landowner, does not
conflict with his conveyance of (the) land in fee." 17 chanrobles
virtual law library
The following are considered encumbrances: A claim, lien,
charge, or liability attached to and binding real property; e.g., a
mortgage, judgment lien, lease, security interest, easement or
right of way, accrued and unpaid taxes. 18 A lien is already an
existing burden or charge on the property while a notice of lis
pendens, as the very term connotes, is only a notice or warning
that a claim or possible charge on the property is pending
determination by the court.
Consequently, the effect of a notice of lis pendens is not to
establish an actual lien on the property affected. All that it does
is to give notice to third persons and to the whole world that
any interest they may acquire in the property pending litigation
will be subject to the eventuality or result of the suit. It follows
to reason, therefore, that the mere failure to state in a public
document, as a notarized deed of sale, the existence of a notice
of lis pendens does not constitute falsification of a public
document under Article 172 of the Revised Penal Code. This is
specially true in the case at bar because the notice of lis
pendens is annotated only at the back of the original of the
T.C.T. in the Registry of Deeds; it does not appear at the back of
the owner's copy of the same T.C.T.chanroblesvirtualawlibrary
chanrobles virtual law library
The petitioner has taken the semantic stance that the notice of
lis pendens is not the lien or encumbrance charged in the
information but that it is merely an evidence of such litigation.
In sum, the petitioner claims that the status of being a litigated
property is the very lien or encumbrance that is charged in the
information.chanroblesvirtualawlibrary chanrobles virtual law
library
The petitioner's sophistry stretches the legal meaning of lien
and encumbrance too far to be tenable. Be that as it may, not
all claims against a property can be considered a lien within the
contemplation of law. First, such claims must be in satisfaction
of some debt or performance of an act under a contract.
Second, the legal right to enforce such payment or
performance of an act be anchored on an existing or
demandable obligation and not merely dependent upon the
result of a pending litigation where the claims of the parties are
not yet finally determined. Such claims in a pending litigation
only ripen to a "lien within the contemplation of law when
there is already a valid judgment rendered because then it
becomes a judgment or judicial lien.chanroblesvirtualawlibrary
chanrobles virtual law library
The fact that the property is contested or under litigation does
not necessarily give rise to the conclusion that the complainant
or petitioner has a better legal right than the respondents so as
to enable the former to enforce a lien thereon. That is exactly
the reason for a notice of lis pendens - to warn those who may
subsequently deal with the property to take cognizance of the
conflicting rights between the
parties.chanroblesvirtualawlibrary chanrobles virtual law library
In fine, a notice of lis pendens, or a pending litigation, or the
fact that the property is under litigation is not within the
purview of what is legally considered a lien or encumbrance.
The term notice of lis pendens is a distinct concept, as
differentiated from the term lien or encumbrance. The trial
court, therefore, committed no reversible error in granting the
private respondents' Motion to Quash, and thereby dismissing
the information against them.chanroblesvirtualawlibrary
chanrobles virtual law library
The issue raised by the Solicitor General and the private
respondents that there is a patent lack of authority on the
private prosecution to file this petition or even to move for
reconsideration of the lower court's order granting the Motion
to Quash is well-taken. But there is no need to dwell on that
point further considering that the foregoing disquisition,
without more, sufficiently disposes of the
petition.chanroblesvirtualawlibrary chanrobles virtual law
library
WHEREFORE, finding no reversible error committed by
respondent court, the petition is hereby DISMISSED, and the
two challenged orders, dated July 17,1987 and August 26,1987,
are AFFIRMED.chanroblesvirtualawlibrary chanrobles virtual
law library
Costs against the petitioner.chanroblesvirtualawlibrary
chanrobles virtual law library
SO ORDERED.
G.R. No. 193572, April 04, 2018
TSUNEISHI HEAVY INDUSTRIES (CEBU), INC., Petitioner, v. MIS
MARITIME CORPORATION, Respondent.
DECISION
JARDELEZA, J.:
This is a petition for review on certiorari1 under Rule 45 of the
Rules of Court filed by petitioner Tsuneishi Heavy Industries
(Cebu), Inc. (Tsuneishi) challenging the Decision2 of the Court
of Appeals (CA) in CA-G.R. CEB-SP No. 03956 dated October 7,
2009 and its Resolution3 dated August 26, 2010. The CA
Decision reversed three Orders of Branch 7 of the Regional Trial
Court (RTC), Cebu City dated April 15, 2008, July 7, 2008, and
December 11, 2008, respectively.4 The Resolution denied
Tsuneishi's motion for reconsideration.
Respondent MIS Maritime Corporation (MIS) contracted
Tsuneishi to dry dock and repair its vessel M/T MIS-1 through
an Agreement dated March 22, 2006.5 On March 23, 2006, the
vessel dry docked in Tsuneishi's shipyard. Tsuneishi rendered
the required services. However, about a month later and while
the vessel was still dry docked, Tsuneishi conducted an engine
test on M/T MIS-1. The vessel's engine emitted smoke. The
parties eventually discovered that this was caused by a burnt
crank journal. The crankpin also showed hairline cracks due to
defective lubrication or deterioration. Tsuneishi insists that the
damage was not its fault while MIS insists on the contrary.
Nevertheless, as an act of good will, Tsuneishi paid for the
vessel's new engine crankshaft, crankpin, and main bearings.6
Tsuneishi billed MIS the amount of US$318,571.50 for payment
of its repair and dry docking services. MIS refused to pay this
amount. Instead, it demanded that Tsuneishi pay
US$471,462.60 as payment for the income that the vessel lost
in the six months that it was not operational and dry docked at
Tsuneishi's shipyard. It also asked that its claim be set off
against the amount billed by Tsuneishi. MIS further insisted
that after the set off, Tsuneishi still had the obligation to pay it
the amount of US$152,891.10.7 Tsuneishi rejected MIS'
demands. It delivered the vessel to MIS in September 2006.8
On November 6, 2006, MIS signed an Agreement for Final
Price.9 However, despite repeated demands, MIS refused to
pay Tsuneishi the amount billed under their contract.
Tsuneishi claims that MIS also caused M/T White Cattleya, a
vessel owned by Cattleya Shipping Panama S.A. (Cattleya
Shipping), to stop its payment for the services Tsuneishi
rendered for the repair and dry docking of the vessel.10
MIS argued that it lost revenues because of the engine damage
in its vessel. This damage occurred while the vessel was dry
docked and being serviced at Tsuneishi's yard. MIS insisted that
since this arose out of Tsuneishi's negligence, it should pay for
MIS' lost income. Tsuneishi offered to pay 50% of the amount
demanded but MIS refused any partial payment.11
On April 10, 2008, Tsuneishi filed a complaint12 against MIS
before the RTC. This complaint stated that it is invoking the
admiralty jurisdiction of the RTC to enforce a maritime lien
under Section 21 of the Ship Mortgage Decree of 197813 (Ship
Mortgage Decree). It also alleged as a cause of action MIS'
unjustified refusal to pay the amount it owes Tsuneishi under
their contract. The complaint included a prayer for the issuance
of arrest order/writ of preliminary attachment. To support this
prayer, the complaint alleged that Section 21 of the Ship
Mortgage Decree as well as Rule 57 of the Rules of Court on
attachment authorize the issuance of an order of arrest of
vessel and/or writ of preliminary attachment.14
In particular, Tsuneishi argued that Section 21 of the Ship
Mortgage Decree provides for a maritime lien in favor of any
person who furnishes repair or provides use of a dry dock for a
vessel. Section 21 states that this may be enforced through an
action in rem. Further, Tsuneishi and MIS' contract granted
Tsuneishi the right to take possession, control and custody of
the vessel in case of default of payment. Paragraph 9 of this
contract further states that Tsuneishi may dispose of the vessel
and apply the proceeds to the unpaid repair bill.15
Finally, Tsuneishi's complaint alleges that there are sufficient
grounds for the issuance of a writ of preliminary attachment. In
particular, it claims that MIS is guilty of fraud in the
performance of its obligation. The complaint states:
40. x x x Under the factual milieu, it is wrongful for defendant
MIS Maritime to take undue advantage of an unfortunate
occurrence by withholding payment of what is justly due to
plaintiff under law and contract. Defendant MIS Maritime knew
or ought to have known that its claim for lost revenues was
unliquidated and could not be set-off or legally compensated
against the dry-docking and repair bill which was liquidated and
already fixed and acknowledged by the parties.
41. Defendant CATTLEYA SHIPPING'S actions and actuations in
performing its obligation were clearly fraudulent because,
firstly, it had no business getting involved as far as the M/T
MIS-1 incident was concerned; secondly, no incident of any sort
occurred when its vessel M/T WHITE CATTLEYA was dry docked
and repaired. It had no claim against the plaintiff. Yet, it
(defendant Cattleya Shipping) allowed itself to be used by
defendant MIS Maritime when it willfully and unlawfully
stopped paying plaintiff, and conspired to make good
defendant MIS Maritime's threat to "withhold payment of any
and all billings that you (plaintiff) may have against our fleet of
vessels which include those registered under Cattleya Shipping
Panama S.A. (MT White Cattleya) x x x.16
Tsuneishi also filed the Affidavit17 of its employee Lionel T.
Bitera (Bitera Affidavit), in accordance with the requirement for
the issuance of a writ of preliminary attachment under Rule 57
of the Rules of Court. The Bitera Affidavit stated that Tsuneishi
performed dry docking and repair services for M/T MIS-1 and
M/T White Cattleya. It also alleged that after Tsuneishi
performed all the services required, MIS and Cattleya refused
to pay their obligation. According to the Bitera Affidavit, this
refusal to pay constitutes fraud because:
d. The breach of the obligation was willful. In the case of M/T
MIS-1 no single installment payment was made despite the fact
that the vessel was accepted fully dry docked and with a brand
new engine crankshaft installed by the yard free of charge to
the Owner. MIS Maritime Corporation was blaming the yard for
the damage sustained by the engine crank shaft on 25 April
2006 when the engine was started in preparation for sea trial.
When the incident happened the drydocking had already been
completed and the vessel was already in anchorage position for
sea trial under the management and supervisory control of the
Master and engineers of the vessel. Besides, the incident was
not due to the fault of the yard. It was eventually traced to
dirty lube oil or defective main engine lubricating oil which was
the lookout and responsibility of the vessel's engineers.
xxxx
e. The action taken by MIS Maritime Corporation in setting off
its drydocking obligation against their claim for alleged lost
revenues was unilaterally done, and without legal and factual
basis for while, on one hand, the drydocking bill was for a fixed
and agreed amount, the claim of MIS Maritime for lost
revenues, on the other hand, was not liquidated as it was for a
gross amount, x x x
f. Cattleya Shipping for its part had nothing to do with the dry
docking of M/T MIS-1. There was no incident whatsoever
during the dry docking of its vessel M/T WHITE CATTLEYA. In
fact, after this vessel was satisfactorily dry docked and
delivered to its Owner (Cattleya Shipping) the latter started
paying the monthly installments without any complaint
whatsoever, x x x18
The RTC issued a writ of preliminary attachment in an Order19
dated April 15, 2008 (First Order) without hearing.
Consequently, MIS' condominium units located in the financial
district of Makati, cash deposits with various banks, charter hire
receivables from Shell amounting to P26.6 Million and MT MIS-
1 were attached.20
MIS filed a motion to discharge the attachment.21 The RTC
denied this motion in an Order[22 dated July 7, 2008 (Second
Order). MIS filed a motion for reconsideration which the RTC
also denied in an Order23 dated December 11, 2008 (Third
Order).
MIS then filed a special civil action for certiorari24 before the
CA assailing the three Orders. MIS argued that the RTC acted
with grave abuse of discretion when it ordered the issuance of
a preliminary writ of attachment and denied MIS' motion to
discharge and motion for reconsideration.
The CA ruled in favor of MIS. It reversed the three assailed
Orders after finding that the RTC acted with grave abuse of
discretion in issuing the writ of preliminary attachment.25
According to the CA, the Bitera Affidavit lacked the required
allegation that MIS has no sufficient security for Tsuneishi's
claim. In fact, the CA held that the evidence on record shows
that MIS has sufficient properties to cover the claim. It also
relied on jurisprudence stating that when an affidavit does not
contain the allegations required under the rules for the
issuance of a writ of attachment and the court nevertheless
issues the writ, the RTC is deemed to have acted with grave
abuse of discretion. Consequently, the writ of preliminary
attachment is fatally defective.26 The CA further highlighted
that a writ of preliminary attachment is a harsh and rigorous
remedy. Thus, the rules must be strictly construed. Courts have
the duty to ensure that all the requisites are complied with.27
The CA also found that the RTC ordered the issuance of the writ
of preliminary attachment despite Tsuneishi's failure to prove
the presence of fraud. It held that the bare and
unsubstantiated allegation in the Bitera Affidavit that MIS
willfully refused to pay its obligation is not sufficient to
establish prima facie fraud. The CA emphasized that a debtor's
mere inability to pay is not fraud. Moreover, Tsuneishi's
allegations of fraud were general. Thus, they failed to comply
with the requirement in the Rules of Court that in averments of
fraud, the circumstances constituting it must be alleged with
particularity. The CA added that while notice and hearing are
not required for the issuance of a writ of preliminary
attachment, it may become necessary in instances where the
applicant makes grave accusations based on grounds alleged in
general terms. The CA also found that Tsuneishi failed to
comply with the requirement that the affidavit must state that
MIS has no other sufficient security to cover the amount of its
obligation.28
The CA disposed of the case, thus:
WHEREFORE, the petition is GRANTED. The three (3) Orders
dated April 15, 2008, July 7, 2008 and December 11, 2008,
respectively, of the Regional Trial Court, Branch 7, Cebu City, in
Civil Case No. CEB-34250, are ANNULLED and SET ASIDE.29
(Emphasis in the original, citations omitted.)
Tsuneishi filed this petition for review on certiorari under Rule
45 of the Rules of Court challenging the CA's ruling. Tsuneishi
pleads that this case involves a novel question of law. It argues
that while Section 21 of the Ship Mortgage Decree grants it a
maritime lien, the law itself, unfortunately, does not provide
for the procedure for its enforcement. It posits that to give
meaning to this maritime lien, this Court must rule that the
procedure for its enforcement is Rule 57 of the Rules of Court
on the issuance of the writ of preliminary attachment. Thus, it
proposes that aside from the identified grounds for the
issuance of a writ of preliminary attachment in the Rules of
Court, the maritime character of this action should be
considered as another basis to issue the writ.30
To support its application for the issuance of a writ of
preliminary attachment, Tsuneishi also invokes a provision in its
contract with MIS which states that:
In case of default, either in payment or in violation of the
warranties stated in Section 11, by the Owner, the Owner
hereby appoints the Contractor as its duly authorized attorney
in fact with full power and authority to take possession,
control, and custody of the said Subject Vessel and / or any of
the Subject Vessel's accessories and equipment, or other assets
of the Owner, without resorting to court action; and that the
Owner hereby empowers the Contractor to take custody of the
same until the obligation of the Owner to the Contractor is fully
paid and settled to the satisfaction of the Contractor. x x x31
(Underscoring omitted.)
It insists that the writ of preliminary attachment must be issued
so as to give effect to this provision in the contract.
Tsuneishi also disputes the CA's finding that it Failed to show
fraud in MIS' performance of its obligation. It opines that MIS'
failure to comply with its obligation does not arise from a mere
inability to pay. If that were the case, then the CA would be
correct in saying that MIS committed no fraud. However, MIS'
breach of its obligation in this case amounts to a gross
unwillingness to pay amounting to fraud.32
Tsuneishi adds that the CA erred in holding that the RTC acted
with grave abuse of discretion when it failed to conduct a
hearing prior to the issuance of the writ of preliminary
attachment. It insisted that the Rules of Court, as well as
jurisprudence, does not require a hearing prior to issuance.33
Finally, Tsuneishi disagrees with the ruling of the CA that it did
not comply with the requirements under the rules because the
Bitera Affidavit did not state that MIS has no other sufficient
security. This was already stated in Tsuneishi's complaint filed
before the RTC. Thus, the rules should be applied liberally in
favor of rendering justice.34
In its comment,35 MIS challenges Tsuneishi's argument that its
petition raises a novel question of law. According to MIS, the
issue in this case is simple. A reading of Tsuneishi's complaint
shows that it prayed for the issuance of a writ of preliminary
attachment under Rule 57 of the Rules of Court or arrest of
vessel to enforce its maritime lien under the Ship Mortgage
Decree.36 Thus, Tsuneishi knew from the start that a remedy
exists for the enforcement of its maritime lien—through an
arrest of vessel under the Ship Mortgage Decree. However, the
RTC itself characterized the complaint as a collection of sum of
money with prayer for the issuance of a writ of preliminary
attachment. Thus, what it issued was a writ of preliminary
attachment. Unfortunately for Tsuneishi, the CA reversed the
RTC because it found that the element of fraud was not duly
established. Thus, there was no ground for the issuance of a
writ of preliminary attachment.37
MIS insists that Tsuneishi is raising this alleged novel question
of law for the first time before this Court in an attempt to skirt
the issue that it failed to sufficiently establish that MIS acted
with fraud in the performance of its obligation. MIS contends
that fraud cannot be inferred from a debtor's mere inability to
pay. There is no distinction between inability and a refusal to
pay where the refusal is based on its claim that Tsuneishi
damaged its vessel. According to MIS, its vessel arrived at
Tsuneishi's shipyard on its own power. Its engine incurred
damage while it was under Tsuneishi's custody. Thus, Tsuneishi
is presumed negligent.38
MIS further highlights that Tsuneishi completed the dry docking
in April 2006. It was during this time that the damage in the
vessel's engine was discovered. The vessel was turned over to
MIS only in September 2006. Thus, it had lost a significant
amount of revenue during the period that it was off-hire.
Because of this, it demanded payment from Tsuneishi which
the latter rejected.39
Hence, MIS argues that this is not a situation where, after
Tsuneishi rendered services, MIS simply absconded. MIS has
the right to demand for the indemnification of its lost revenue
due to Tsuneishi's negligence.[40
MIS further adds that the CA correctly held that there was no
statement in the Bitera Affidavit that MIS had no adequate
security to cover the amount being demanded by Tsuneishi.
Tsuneishi cannot validly argue that this allegation is found in its
complaint and that this should be deemed compliance with the
requirement under Rule 57.41
Further, in its motion to discharge the preliminary attachment,
MIS presented proof that it has the financial capacity to pay
any liability arising from Tsuneishi's claims. In fact, there was an
excessive levy of MIS' properties. This is proof in itself that MIS
has adequate security to cover Tsuneishi's claims. Finally, MIS
agrees with the CA that the RTC should have conducted a
hearing. While it is true that a hearing is not required by the
Rules of Court, jurisprudence provides that a hearing is
necessary where the allegations in the complaint and the
affidavit are mere general averments. Further, where a motion
to discharge directly contests the allegation in the complaint
and affidavit, the applicant has the burden of proving its claims
of fraud.42
There are two central questions presented for the Court to
resolve, namely: (1) whether a maritime lien under Section 21
of the Ship Mortgage Decree may be enforced through a writ of
preliminary attachment under Rule 57 of the Rules of Court;
and (2) whether the CA correctly ruled that Tsuneishi failed to
comply with the requirements for the issuance of a writ of
preliminary injunction.
We deny the petition.
I
We begin by classifying the legal concepts of lien, maritime lien
and the provisional remedy of preliminary attachment.
A lien is a "legal claim or charge on property, either real or
personal, as a collateral or security for the payment of some
debt or obligation."43 It attaches to a property by operation of
law and once attached, it follows the property until it is
discharged. What it does is to give the party in whose favor the
lien exists the right to have a debt satisfied out of a particular
thing. It is a legal claim or charge on the property which
functions as a collateral or security for the payment of the
obligation.44
Section 21 of the Ship Mortgage Decree establishes a lien. It
states:
Sec. 21. Maritime Lien for Necessaries; Persons entitled to such
Lien. – Any person furnishing repairs, supplies, towage, use of
dry dock or marine railway, or other necessaries to any vessel,
whether foreign or domestic, upon the order of the owner of
such vessel, or of a person authorized by the owner, shall have
a maritime lien on the vessel, which may be enforced by suit in
rem and it shall be necessary to allege or prove that credit was
given to the vessel.
In practical terms, this means that the holder of the lien has the
right to bring an action to seek the sale of the vessel and the
application of the proceeds of this sale to the outstanding
obligation. Through this lien, a person who furnishes repair,
supplies, towage, use of dry dock or marine railway, or other
necessaries to any vessel, in accordance with the requirements
under Section 21, is able to obtain security for the payment of
the obligation to him.
A party who has a lien in his or her favor has a remedy in law to
hold the property liable for the payment of the obligation. A
lienholder has the remedy of filing an action in court for the
enforcement of the lien. In such action, a lienholder must
establish that the obligation and the corresponding lien exist
before he or she can demand that the property subject to the
lien be sold for the payment of the obligation. Thus, a lien
functions as a form of security for an obligation.
Liens, as in the case of a maritime lien, arise in accordance with
the provision of particular laws providing for their creation,
such as the Ship Mortgage Decree which clearly states that
certain persons who provide services or materials can possess a
lien over a vessel. The Rules of Court also provide for a
provisional remedy which effectively operates as a lien. This is
found in Rule 57 which governs the procedure for the issuance
of a writ of preliminary attachment.
A writ of preliminary attachment is a provisional remedy issued
by a court where an action is pending. In simple terms, a writ of
preliminary attachment allows the levy of a property which
shall then be held by the sheriff. This property will stand as
security for the satisfaction of the judgment that the court may
render in favor of the attaching party. In Republic v. Mega
Pacific eSolutions (Republic),45 we explained that the purpose
of a writ of preliminary attachment 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. 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 arc liable to be
removed beyond the jurisdiction, or improperly disposed of or
concealed, or otherwise placed beyond the reach of
creditors.46 (Citations omitted, emphasis supplied. Italics in the
original.)
As we said, a writ of preliminary attachment effectively
functions as a lien. This is crucial to resolving Tsuneishi's alleged
novel question of law in this case. Tsuneishi is correct that the
Ship Mortgage Decree does not provide for the specific
procedure through which a maritime lien can be enforced. Its
error is in insisting that a maritime lien can only be
operationalized by granting a writ of preliminary attachment
under Rule 57 of the Rules of Court. Tsuneishi argues that the
existence of a maritime lien should be considered as another
ground for the issuance of a writ of preliminary attachment
under the Rules of Court.
Tsuneishi's argument is rooted on a faulty understanding of a
lien and a writ of preliminary attachment. As we said, a
maritime lien exists in accordance with the provision of the
Ship Mortgage Decree. It is enforced by filing a proceeding in
court. When a maritime lien exists, this means that the party in
whose favor the lien was established may ask the court to
enforce it by ordering the sale of the subject property and using
the proceeds to settle the obligation.
On the other hand, a writ of preliminary attachment is issued
precisely to create a lien. When a party moves for its issuance,
the party is effectively asking the court to attach a property and
hold it liable for any judgment that the court may render in his
or her favor. This is similar to what a lien does. It functions as a
security for the payment of an obligation. In Quasha Asperilla
Ancheta Valmonte Peña & Marcos v. Juan,47 we held:
An attachment proceeding is for the purpose of creating a lien
on the property to serve as security for the payment of the
creditors' claim. Hence, where a lien already exists, as in this
case a maritime lien, the same is already equivalent to an
attachment. x x x48
To be clear, we repeat that when a lien already exists, this is
already equivalent to an attachment. This is where Tsuneishi's
argument fails. Clearly, because it claims a maritime lien in
accordance with the Ship Mortgage Decree, all Tsuneishi had to
do is to file a proper action in court for its enforcement. The
issuance of a writ of preliminary attachment on the pretext that
it is the only means to enforce a maritime lien is superfluous.
The reason that the Ship Mortgage Decree does not provide for
a detailed procedure for the enforcement of a maritime lien is
because it is not necessary. Section 21 already provides for the
simple procedure—file an action in rem before the court.
To our mind, this alleged novel question of law is a mere device
to remedy the error committed by Tsuneishi in the proceedings
before the trial court regarding the issuance of a writ of
preliminary attachment. We note that the attachment before
the trial court extended to other properties other than the lien
itself, such as bank accounts and real property. Clearly, what
was prayed for in the proceedings below was not an
attachment for the enforcement of a maritime lien but an
attachment, plain and simple.
II
Tsuneishi's underlying difficulty is whether it succeeded in
proving that it complied with the requirements lor the issuance
of a writ of preliminary attachment. This is the only true
question before us. In particular, we must determine whether
the Bitera Affidavit stated that MIS lacked sufficient properties
to cover the obligation and whether MIS acted with fraud in
refusing to pay.
At the onset, we note that these questions dwell on whether
there was sufficient evidence to prove that Tsuneishi complied
with the requirements for the issuance of a writ of preliminary
attachment. Sufficiency of evidence is a question of fact which
this Court cannot review in a Rule 45 petition. We are not a
trier of fact.
Nevertheless, we have examined the record before us and we
agree with the factual findings of the CA.
The record clearly shows that the Bitera Affidavit does not state
that MIS has no other sufficient security for the claim sought to
be enforced. This is a requirement under Section 3, Rule 57 of
the Rules of Court. We cannot agree with Tsuneishi's insistence
that this allegation need not be stated in the affidavit since it
was already found in the complaint. The rules are clear and
unequivocal. There is no basis for Tsuneishi's position. Nor is it
entitled to the liberal application of the rules. Not only has
Tsuneishi failed to justify its omission to include this allegation,
the facts also do not warrant the setting aside of technical
rules. Further, rules governing the issuance of a writ of
preliminary attachment are strictly construed.
We also agree with the CA's factual finding that MIS did not act
with fraud in refusing to pay the obligation. We emphasize that
when fraud is invoked as a ground for the issuance of a writ of
preliminary attachment under Rule 57 of the Rules of Court,
there must be evidence clearly showing the factual
circumstances of the alleged fraud.49 Fraud cannot be
presumed from a party's mere failure to comply with his or her
obligation. Moreover, the Rules of Court require that in all
averments of fraud, the circumstances constituting it must be
stated with particularity.50
In Republic, we defined fraud as:
[A]s 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. 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. 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.51 (Citations omitted.)
By way of example, in Metro, Inc. v. Lara's Gifts and Decors,
Inc.,52 we ruled that the factual circumstances surrounding the
parties' transaction clearly showed fraud. In this case, the
petitioners entered into an agreement with respondents where
the respondents agreed that they will endorse their purchase
orders from their foreign buyers to the petitioners in order to
help the latter's export business. The petitioners initially
promised that they will transact only with the respondents and
never directly contact respondents' foreign buyers. To convince
respondents that they should trust the petitioners, petitioners
even initially remitted shares to the respondents in accordance
with their agreement. However, as soon as there was a
noticeable increase in the volume of purchase orders from
respondents' foreign buyers, petitioners abandoned their
contractual obligation to respondents and directly transacted
with respondents' foreign buyers. We found in this case that
the respondents' allegation (that the petitioners undertook to
sell exclusively through respondents but then transacted
directly with respondents' foreign buyer) is sufficient allegation
of fraud to support the issuance of a writ of preliminary
attachment.53
In contrast, in PCL Industries Manufacturing Corporation v.
Court of Appeals,54 we found no fraud that would warrant the
issuance of a writ of preliminary attachment. In that case,
petitioner purchased printing ink materials from the private
respondent. However, petitioner found that the materials
delivered were defective and thus refused to pay its obligation
under the sales contract. Private respondent insisted that
petitioner's refusal to pay after the materials were delivered to
it amounted to fraud. We disagreed. We emphasized our
repeated and consistent ruling that the mere fact of failure to
pay after the obligation to do so has become due and despite
several demands is not enough to warrant the issuance of a
writ of preliminary attachment.55
An examination of the Bitera Affidavit reveals that it failed to
allege the existence of fraud with sufficient specificity. The
affidavit merely states that MIS refused to pay its obligation
because it demanded a set off between its obligation to
Tsuneishi and Tsuneishi's liability for MIS' losses caused by the
delay in the turn-over of the vessel. The affidavit insists that
this demand for set off was not legally possible. Clearly, there is
nothing in the affidavit that even approximates any act of fraud
which MIS committed in the performance of its obligation. MIS'
position was clear: Tsuneishi caused the damage in the vessel's
engine which delayed its trip and should thus be liable for its
losses. There is no showing that MIS performed any act to
deceive or defraud Tsuneishi.
In Watercraft Venture Corporation v. Wolfe,56 we ruled that an
affidavit which does not contain concrete and specific grounds
showing fraud is inadequate to sustain the issuance of the writ
of preliminary attachment.57
Moreover, the record tells a different story.
The record shows that Tsuneishi released the vessel in
September 2006. MIS signed the Agreement of the Final Price
only in November 2006. Thus, Tsuneishi's claim that MIS' act of
signing the document and making it believe that MIS will pay
the amount stated is the fraudulent act which induced it to
release the vessel cannot stand. Tsuneishi agreed to release the
vessel even before MIS signed the document. It was thus not
the act which induced Tsuneishi to turn over the vessel.
Further, Tsuneishi is well aware of MIS' claims. It appears from
the record, and as admitted by MIS in its pleadings, that the
reason for its refusal to pay is its claim that its obligation should
be set off against Tsuneishi's liability for the losses that MIS
incurred for the unwarranted delay in the turn-over of the
vessel. MIS insists that Tsuneishi is liable for the damage on the
vessel. This is not an act of fraud. It is not an intentional act or a
willful omission calculated to deceive and injure Tsuneishi. MIS
is asserting a claim which it believes it has the right to do so
under the law. Whether MIS' position is legally tenable is a
different matter. It is an issue fit for the court to decide.
Notably, MIS filed this as a counterclaim in the case pending
before the RTC.58 Whether MIS is legally correct should be
threshed out there.
Even assuming that MIS is wrong in refusing to pay Tsuneishi,
this is nevertheless not the fraud contemplated in Section 1(d),
Rule 57 of the Rules of Court. Civil law grants Tsuneishi various
remedies in the event that the trial court rules in its favor such
as the payment of the obligation, damages and legal interest.
The issuance of a writ of preliminary attachment is not one of
those remedies.
There is a reason why a writ of preliminary attachment is
available only in specific cases enumerated under Section 1 of
Rule 57. As it entails interfering with property prior to a
determination of actual liability, it is issued with great caution
and only when warranted by the circumstances. As we said in
Ng Wee v. Tankiansee,59 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.60
Moreover, we highlight that this petition for review on
certiorari arose out of a Decision of the CA in a Rule 65 petition.
In cases like this, this Court's duty is only to ascertain whether
the CA was correct in ruling that the RTC acted with grave
abuse of discretion amounting to lack or excess of jurisdiction.
Jurisprudence has consistently held that a court that issues a
writ of preliminary attachment when the requisites are not
present acts in excess of its jurisdiction.61 In Philippine Bank of
Communications v. Court of Appeals,62 we highlighted:
Time and again, we have held that the rules on the issuance of
a writ of attachment must be construed strictly against the
applicants. This stringency is required because the remedy of
attachment is harsh, extraordinary and summary in nature. If all
the requisites for the granting of the writ are not present, then
the court which issues it acts in excess of its jurisdiction.63
(Citation omitted.)
In accordance with consistent jurisprudence, we must thus
affirm the ruling of the CA that the RTC, in issuing a writ of
preliminary attachment when the requisites under the Rules of
Court were clearly not present, acted with grave abuse of
discretion.
WHEREFORE, in view of the foregoing, the petition is DENIED.
The Decision of the Court of Appeals dated October 7, 2009 and
its Resolution dated August 26, 2010 are AFFIRMED.
SO ORDERED.
G.R. No. L-49140 November 19, 1982
QUASHA ASPERILLA ANCHETA VALMONTE PEÑA & MARCOS,
petitioner,
vs.
THE HONORABLE CELESTINO P. JUAN, FILIPINAS CARRIERS,
INC., represented by its President, FEDERICO TABORA, JR.,
APOLLO KOKIN TRADING CO., LTD., et al., respondents.
Quasha, Asperilla, Ancheta, Valmonte, Peña and Marcos Law
Offices for petitioner.
Antonio V. Raquiza & Assoc. for respondent Eugene A. Tan.
DE CASTRO, J.:
In this petition for certiorari and prohibition with preliminary
injunction, petitioner seeks the annulment of the order of
respondent Judge of the Court of First Instance of Manila in
Civil Case No. 105048 dated August 25, 1978 which approved
the sale of the subject cargo and prays instead that the writ of
preliminary attachment over the same property issued by Hon.
Gregorio Pineda of the Court of First Instance of Rizal in Civil
Case No. 28710 be allowed to remain in force.
It appears that on October 22, 1976, respondent Filipinas
Carriers, hereinafter referred to as Filcar, filed a complaint for
sum of money, enforcement of lien and damages with the
Court of First Instance of Manila, and the same was assigned to
Branch X, which was presided by respondent Judge, against AB
Charles Thorburn & Co., through its receiver Sjoegren and
Winstrand; Estero Shipping and Trading; Bank of Melli of Iran,
Jeddah Branch; Perstorp AB; Skogshgarnas Industries; Ekman
and Company AB; and Abdullah Baroom. In the complaint
which was docketed as Civil Case No. 105048, Filcar alleged
that it is the disponent owner of a vessel, MV San Vicente,
which was duly registered with the Republic of the Philippines;
that on April 2, 1976, defendant Carles Thorburn & Co.
chartered said vessel by time charter for two or three months
for a voyage from Sweden to Jeddah, Saudi Arabia at three
thousand two hundred US dollars (US $3,200.00) a day, that
Abdullah Baroom was impleaded as defendant for being the
agent of Charles Thorburn & Co. at Jeddah and Sjoegren and
Winstrand of Sweden for being the receiver of Charles
Thorburn & Co.; that the vessel left Sweden with construction
materials as cargoes belonging to the following shippers and
consignees, namely, defendants Bank of Melli of Iran, Jeddah
Branch; the National Commercial Bank, Jeddah Branch;
Perstorp AB of Perstorp, Sweden; Skogshgarnas Industries of
Sweden; Ekman and Company of Sweden; that after the second
month, Charles Thorburn failed to pay the daily hire, that the
vessel has been in Jeddah since May 19, 1976 and is now in
international waters; that in view of Thorburn's failure to pay
the charter hire, it had struck a lien through the vessel's
captain; that the charter party has expired but the vessel has
not yet discharged the cargoes due to inadequate port facilities
and failure of the shippers, consignees and charterer to pay the
charter hire; that Filcar demanded from Charles Thorburn the
payment of the charter hire but Thorburn failed to pay and
instead declared bankruptcy and is now under receivership in
Sweden; that on demand, Baroom, the agent of Thorburn in
Jeddah, and the consignees and shippers refused to pay; that
consequently, Filcar was forced to exercise its lien on the
cargoes consistent with Clause 18 of the Charter Party, notice
of which was sent to defendants. The plaintiff thus prayed,
among others, that the defendants pay the daily charter hire
from the time they were in arrears until payment is made and
that the Court allow the sale of the cargoes to satisfy its claims.
On November 25, 1976, Sierra Madre Wood Industries, Inc.,
hereinafter called Sierra Madre, the alleged owner, end-user
and operator of MV San Vicente filed a motion to intervene in
the Court of First Instance of Manila (Civil Case No. 105048) for
the purpose of enforcing its lien over the cargo, claiming that it
had chartered the vessel to Filcar for six months renewable
every six months at agreed charter hire fee (US $825,000.00
per year). Respondent Judge allowed the intervention of Sierra
Madre as plaintiff-intervenor.
On December 2, 1976, Filcar filed an extra-parte motion to sell
the goods subject of lien, alleging among others, that the MV
San Vicente had arrived in the Philippines, and was due for dry-
docking and needed urgent repairs; and that the goods subject
of its lien were in danger of deteriorating and losing their
market value and if the goods were not sold immediately, the
plaintiff would have to pay a staggering amount for
warehousing so that the value of the goods would not even be
enough to pay for warehousing expenses.
Thereafter, respondent Judge conducted hearings in Civil Case
No. 105048 and an ocular inspection of the vessel. On April 18,
1977, respondent Judge, convinced that the vessel as well as
the cargoes were in a very bad condition, issued an order, the
dispositive portion of which reads:
WHEREFORE, in view of all the above and due to the condition
of the vessel and/or its cargo, while we are not convinced as
asserted that Section 17, Rule 14 and 15 of the Rules of Court,
do not apply, for we still believe that one of the four modes of
service must at least be observed, yet on the ground of
extreme necessity, this Court believes that somehow,
somebody must act boldly in order to protect the interest of
parties and of the owner of the vessel which is believed to be
the government of the Philippines. On the ground of extreme
necessity and partly by virtue of the provisions of Rule 57,
Section 1 1, the cargo on board the MV San Vicente, is ordered
sold privately, so that the vessel may immediately be sent for
drydock, subject to the following conditions:
l. That the negotiations for the sale of the cargo shall be the
sole responsibility of plaintiff Filcar subject to the supervision
by this Court and the intervention of plaintiff-intervenor, the
Sierra Madre Wood Industries, Inc.;
2. That the Court and the plaintiff-intervenor be fully informed
regarding the progress of the negotiations and that the sale
shall not be finalized without first securing the approval of this
Court is to the selling price;
3. The proceeds of the sale shall be deposited with a banking
institution as approved by this Court and shall be disposed of
only upon order of this Court, subject to the first lien of
plaintiff-intervenor; and
4. Defendant AB Charles Thorburn & Co., etc. shall be notified
of the Order of this Court together with a copy of the amended
complaint and the complaint in intervention, thru the
Department of Foreign Affairs, and the Philippine Embassy at
Jeddah, Saudi Arabia. Proof of Service shall be submitted to this
Court. After such time afforded the defendant, in order to
enable them to answer or appear in this Court or make any
claim whatsoever, and still they fail to make any manifestation,
hearing of this case shall resume regarding the final disposition
of the proceeds to all concerned.
On June 27, 1977, respondent Judge approved tentatively the
sale of the cargo to Bengzon's Industries. This Order was
followed by another dated July 19, 1977, approving the Deed of
Absolute Sale of the cargo. 1
On August 15, 1977, petitioner law firm filed with respondent
Judge a special appearance for defendant Ahmed Baroom
contesting the Court's jurisdiction over Baroom's person and
property and a Motion to Dismiss on the ground that the Court
had not acquired jurisdiction over Baroom's 'person or property
aboard the MV San Vicente. 2
On August 29, 1977, respondent Judge issued an Order
directing petitioner law firm to show on or before September
20, 1977 a written authorization signed by its client, Baroom,
"since the latter is a foreigner". 3
On November 15, 1977, petitioner, as Baroom's counsel, filed
an answer with compulsory counterclaim, claiming that
defendant Baroom is not an agent of Charles Thorburn since
the cargoes belong to him, and denying the validity of plaintiff's
lien over the cargo. Petitioner reiterates the defense that
plaintiff's action being in personam involving defendant who is
not a resident within the territorial jurisdiction of the Court,
and there is no showing in the records that the provisions of
Section 17, Rule 14 in relation to Section 1, Rule 57, of the
Rules of Court have been complied with to convert the action in
rem, the Court had no jurisdiction over the case. Baroom,
through petitioner, prayed that plaintiff be directed to deliver
the cargoes to Jeddah, pay damages corresponding to the full
value of the goods and to the lost income and profits he could
have realized had plaintiff delivered the cargo to him. Baroom,
likewise, filed a cross-claim against Sierra Madre, plaintiff-
intervenor.
On January 23, 1978, petitioner filed with respondent Judge a
manifestation and motion that it be "allowed to withdraw from
this case and charging lien be recorded against the properties
of Mr. Baroom now aboard MV San Vicente for unpaid
professional fees and reimbursement expenses. " 4
Thereafter, on February 17, 1978, petitioner filed before the
Court of First Instance of Rizal a complaint with a prayer for a
writ of preliminary attachment for the recovery of professional
fees and reimbursement of expenses against Baroom whom it
alleged to have represented in Civil Case No. 105048, CFI,
Manila. The case was docketed as Civil Case No. 28710 and the
same was assigned to Branch XXI presided over by Judge
Gregorio C. Pineda.
By virtue of the order dated February 28, 1978 issued by Judge
Pineda in the new case, petitioner obtained a writ of
preliminary attachment against Baroom's alleged cargoes
which is the subject matter in Civil Case No. 105048.
Meanwhile, in Civil Case No. 105048, on August 2, 1978,
respondent Judge gave Attys. Quasha and Valmonte ten (10)
days from receipt of order within which to explain why they
should not be held in contempt of court for filing a case
entitled "Quasha Asperilla Ancheta Valmonte Peña and Marcos
vs. AlSayed Abdullah Mohammed Baroom" docketed as Civil
Case No. 28710 in the Court of First Instance of Rizal, Branch
XXI, where they obtained a writ of preliminary attachment over
the cargoes, which they knew to be subject matter of Civil Case
No. 105048 pending before his sala." 5 A compliance with said
order was filed on August 24, 1978, with petitioner alleging
that their cause of action against Baroom was for payment of
professional fees and reimbursement of expenses while Case
No. 105048 before Judge Juan was for alleged unpaid charter
hire fees.
On August 25, 1978, respondent Judge issued an order
approving the sale of the cargo in question to Apollo Kokin
Trading Co., Ltd. In accordance with the earlier order of April
28, 1977, respondent Judge directed the deposit of the sale
proceeds with a banking institution to be approved by the
Court and its disposition only on orders of the Court. 6
On September 8, 1978, Filcar filed with the Court of First
Instance of Rizal an urgent omnibus motion to be allowed to
appear and to dismiss the case and to lift the writ of
preliminary attachment and set aside the order to auction the
cargo, attaching thereto the order of respondent Judge dated
August 25, 1978, approving the sale in favor of Apollo Kokin
Trading Co., Ltd. of the subject cargo, the proceeds of which
after deducting all expenses shall be deposited with the court.
Thus, petitioner, on October 23, 1978, filed before this Court
the instant petition. Petitioner assails the order of August 25,
1978, not the earlier order of April 28, 1977 approving the sale
in favor of Apollo Kokin Trading Co., Ltd. of the questioned
cargo for having been issued in grave abuse of discretion
considering that subject cargo was allegedly earlier attached by
the Court of First Instance of Rizal.
Without giving due course to the petition and pending the filing
of comments by respondents, this Court issued on October 24,
1978 a temporary restraining order,
enjoining respondents to immediately cease and desist from
taking, unloading, transferring, conveying, transporting or
disposing of the cargoes or any part thereof aboard the MC San
Vicente and Dong Myung, * or from taking the cargoes away,
subject matter of Civil Case No. 105048 entitled 'Filipinas
Carriers, Inc. vs. AB Charles Thorburn & Co., et al.' of the Court
of First Instance of Manila, Branch X." 7
On October 30, 1978, petitioner filed a manifestation and
motion informing this Court that notwithstanding the
restraining order, the MV Don Myung, with the cargo aboard
left surreptitiously at midnight of October 24, 1978 without the
assistance of any pilot in violation of Harbor rules. The goods
were then allegedly sold for US $220,200.43 under irrevocable
letters of credit issued by the Fuji Bank of Osaka, Japan.
Petitioner, thus, prayed that several persons, namely, Mr.
Federico Tabora, Jr., President of Filipinas Carriers, Inc., Mr.
Gregorio Gatchalian, allegedly operations manager of the
American Steamship Agencies, Inc. being the agent
representing the MV Dong Myung, Lt. JG Godofredo Orcullo of
the Operations Center and Seaman 1st Class Avelino Lontoc of
the Philippine Coast Guard be cited for contempt.
In the meanwhile, a compromise agreement dated October 16,
1978 and filed on November 2, 1978 wherein Filcar assigned its
interests and rights in the proceeds of the sale of the subject
cargoes to Sierra Madre which the latter accepted was
approved by the respondent court in its decision of November
3, 1978. An amended petition was thus filed in this Court
impleading Sierra Madre as partly respondent in his case with
prayer that a writ of garnishment be issued on the proceeds of
the sale of the cargoes which are in the possession of Sierra
Madre, and an order be issued directing Sierra Madre and all
those to whom such proceeds may subsequently be reassigned
to deliver to petitioner such portion of the proceeds of the sale
as would satisfy the attorney's lien in the interest of justice.
Coming back to the omnibus motion of Filcar for the lifting of
the preliminary attachment issued by the Court of First
Instance of Rizal, the said court on December 7, 1978 dismissed
petitioner's case and lifted the preliminary attachment issued
therein. Upon motion for reconsideration dated April 7, 1979,
the said preliminary attachment was reinstated by the Court of
First Instance of Rizal in its order dated July 5, 1979. 8
After several pleading were filed in this Court, We gave due
course to the petition. 9
Petitioner contends that respondent court did not acquire
jurisdiction neither over any of the defendants as they have not
voluntarily submitted themselves to the jurisdiction of
respondent court, nor over the res, since there had been no
seizure of the property under a legal process, as by a writ of
attachment or other process of similar effect. The instant case
is allegedly neither a proceeding in rem as would place the
property under its potential power citing the leading case of
Banco Español v. Palanca 10 which held:
Jurisdiction over the property which is the subject of litigation
may result either from a seizure of the property under legal
process, whereby it is brought into the actual custody of the
law, or it may result from the institution of legal proceedings
wherein under special provisions of law, the power of the court
over the property is recognized and made effective. In the
latter case the property, though at all times within the potential
power of the court, may never be taken into actual custody at
all. An illustration of the jurisdiction acquired by actual seizure
is found in attachment proceedings, where the property is
seized at the beginning of the action, or some subsequent stage
of its progress and held to abide the final event of the litigation.
An illustration of what we term potential jurisdiction over the
res is found in the proceeding to register the title of land under
our system for the registration of land. Here the court, without
taking actual physical control over the property assumes, at the
instance of some person claiming to be the owner, to exercise a
jurisdiction in rem over the property and to adjudicate the title
in favor of the petitioner against all the world.
Claiming that it was the Court of First Instance of Pasig that first
acquired jurisdiction over the res to the exclusion of
respondent court, petitioner insists that the latter court's act is
undue interference which cannot be countenanced.
There is no pretense that respondent court has jurisdiction
over the cause of action. It is much too obvious to merit a fuller
discussion. Suffice it to say that an action based upon an oral
contract of transportation of goods by water is an action in
admiralty which comes under the original and exclusive
jurisdiction of the Court of First Instance irrespective of the
value of the cargo. 11
As to the person of Baroom, it is to be conceded that at the
initial stage of the proceeding in the Court of First Instance of
Manila prior to the issuance of the order of April 28, 1977
directing the sale of the property and petitioner's firing of
various pleadings, said court did not have jurisdiction over
Baroom. Baroom was a non-resident alien and he was beyond
the reach of the court's legal processes. But since the action is
brought principally for the enforcement of maritime lien
against the property of defendants who failed to pay the
charter hire fee, and therefore the same is in the nature and
character of a proceeding quasi in rem, jurisdiction over
defendant Baroom is not essential. An action quasi in rem has
been defined as "an action between parties where the direct
object is to reach and dispose of property owned by them or of
some interest therein." As such the properties allegedly owned
by him are primarily made liable. In elucidating the
characteristic of a proceeding where a non-resident defendant
fails to appear, this Court in the aforecited leading case of
Banco Español Filipino v. Palanca said:
If however, the defendant is a non-resident and, remaining
beyond the range of the personal process of the court, refuses
to come in voluntarily, the court never acquires jurisdiction
over the person at all. Here the property itself is in fact the sole
thing which is impleaded and is the responsible object which is
the subject of the exercise of judicial power. It follows that the
jurisdiction of the court in such case is based exclusively on the
power which, under the law, it possesses over the property;
and any discussion relative to the jurisdiction of the court over
the person of the defendant is entirely apart from the case.
The foregoing ruling was applied in Mabanag vs. Ganimore: 12
As a general rule, when the defendant is not residing and is not
found in the Philippines, the Philippine courts cannot try any
case against him because of impossibility of acquiring
jurisdiction over his person, unless he voluntarily appears in
court. But when the action ... is intended to seize or dispose of
any property, real or personal, of the defendant, located in the
Philippines, it may validly be tried by the Philippine courts, for
then, they have jurisdiction over the res, i.e. ... the property of
the defendant, and their jurisdiction over the person of the
non-resident is not essential ... . (Citing I Moran's Comments on
the Rules of Court, 2d Ed., 105).
At any rate, defendant Baroom filed later, aside from a motion
to dismiss, an answer with counterclaim praying that plaintiff
be directed to deliver the cargoes of defendant Baroom to
Jeddah and to pay damages, etc. and a cross-claim against
Sierra Madre, thereby abandoning any question on jurisdiction
over the person and submitting himself to the jurisdiction of
the court. In Tenchavez vs. Escaño, 13 this Court quoted with
approval the ruling in Merchant's Heat and Light Co. vs. Clow &
Sons, 204 U. S. 286, 51 Law Ed. 488:
We assume that the defendant lost no rights by pleading to the
merits, as required, after saving its rights. Harkness vs. Hyde, 98
U.S. 476, 25 L. ed. 237; Southern P. Co. vs. Denton, 146 U.S.
202, 36 L. ed. 943, 13 Sup. Ct. Rep. 44. But by setting up its
counterclaim the defendant became a plaintiff in its turn,
invoked the jurisdiction of the court in same action, and, by
invoking submitted to it. It is true that the counterclaim seems
to have arisen wholly out of the same transaction that the
plaintiff sued upon, and so to have been in recoupment rather
than in set-off proper. But, even at common law, since the
doctrine has been developed, as demand in recoupment is
recognized as a cross demand, as distinguished from a defense.
Therefore, although there has been a difference of opinion as
to whether a defendant, by pleading it, is concluded by the
judgment from bringing a subsequent suit for the residue of his
claim, a judgment in his favor being impossible at common law,
the authorities agree that he is not concluded by the judgment
if he does not plead his cross demand, and that whether he
shall do so or not is left wholly to his choice. Davis vs. Hedges,
L.R. 6 Q.B. 687; Mondel vs. Steel, 8 Mees & W. 858, 872;
O'Connor vs. Varney, 10 Gray, 231. This single fact shows that
the defendant, if he elects to sue upon his claim in the action
against him, assumes the position of an actor and must take
the consequence. The right to do so is of modern growth, and is
merely a convenience that saves bringing another suit, not a
necessity of the defense.
In the aforecited case, the Court explains that the rule is such
because "it cannot look with favor upon a party adopting not
merely inconsistent, but actually contradictory; positions in one
and the same suit, claiming that a court has no jurisdiction to
render judgment against it, but has such jurisdiction to give a
decision its favor. 14
It may be noted that if the defendant voluntarily appears, the
action becomes as to him a personal action and is conducted as
such. Even then, the court does not lose its jurisdiction over the
res, assuming that it has indeed jurisdiction over the res. The
res still remains under its control and disposition.
As regards jurisdiction over the res, We hold that respondent
acquires jurisdiction over it. Where a property is burdened by a
lien, a writ of attachment is no longer necessary in order that
jurisdiction over the property may be obtained by the court. In
the same cited case by petitioner, in the Banco Español case, it
was clarified:
In an ordinary attachment proceeding, if the defendant is not
personally served, the preliminary seizure is to be considered
necessary in order to confer jurisdiction upon the court. In this
case the lien on the property is acquired by seizure; and the
purpose of the proceeding is to subject the property to that
lien. If a lien already exists, whether created by mortgage,
contract, or statute, the preliminary seizure is not necessary,
and the court proceeds to enforce such lien in the manner
provided by law precisely as though the property had been
seized upon attachment. (Roller v. Holly, 176 U.S. 398, 405; 44
L. ed. 520).
The reason for the rule is obvious. An attachment proceeding is
for the purpose of creating a lien on the property to serve as
security for the payment of the creditors' claim. Hence, where
a lien already exists, as in this case a maritime lien, the same is
already equivalent to an attachment. Moreover, since the
property subject of the action for the enforcement of the
maritime liens was already in the possession of private
respondent, there is no need for seizure for the court to obtain
jurisdiction over the rest.
Where a party in actual possession of the res subject to the lien
is before the court, the res is within the jurisdiction of the court
for the enforcement of the lien A suit may be maintained to
foreclose a lien on property within the jurisdiction of the court,
although some interest or claim therein is held by a non-
resident. 15
The other argument posed by petitioner to challenge
respondents' right over the property is that there is no privity
of contract between Baroom and respondents. It avers that
Baroom is not merely the agent of Thorburn but himself the
owner of some of the cargoes and whose contract to ship the
same is with sub-charterer Thorburn. It avers further that
neither Thorburn could attach a lien on the property since
Baroom had allegedly paid fully for the shipment even before
the vessel sailed, as evidenced by the clean freight pre-paid
bills of lading.
Claiming right over the cargo to answer for the unpaid
professional fees, petitioner submits to this Court the required
written authority from Baroom claiming that due to snag in
communication and unreliability of the mailing system it did
not receive the documents from its client on time.
The foregoing entails determination of facts. It would be highly
irregular if this Court would have to resolve those questions,
this Court not being a trier of facts. The several documents
mentioned by petitioner and attached to its pleadings before
this Court were never presented before the lower court. After
Baroom had abandoned his defense which created the
presumption that he had no defense, that he is not the owner
of the cargo, petitioner should have pursued the same
argument before respondent court in claiming the alleged
professional fee. This is in accordance with Article 1177 of the
New Civil Code which provides:
Art. 1177. The creditors having pursued the property in
possession of the debtor to satisfy their claims may exercise all
the rights and bring all the actions of the latter for the same
purpose, save those which are inherent in his person, they may
also impugn the acts which the debtor may have done to
defraud them.
Indeed, petitioner should have maintained its action in
respondent's court. After all, a court which has in its
possession, control or equivalent dominion, property or funds
involved in litigation may exercise exclusive jurisdiction over
such property or funds to determine the rights therein, such as
questions respecting the title, possession or control,
management and disposition thereof and another court of
concurrent or coordinate jurisdiction cannot interfere with such
possession or control. 16 The rights to be determined by said
court necessarily include the attorney's fees due to the lawyers
who represented the parties. Significantly, the lower court
which undoubtedly has in its favor the presumption of
regularity and which was never restrained by this Court from
proceeding with the ease issued an order dated January 25,
1979 17 making the following findings of fact:
1. Thorburn fails to pay the freight so that respondent Filcar
had the right to impose its lien on the cargo including sub-
freights.
Paragraph 16 of the time charter contract provides:
That the owners shall have a lien upon all cargoes and all sub-
freights for any amounts due under this Charter including
General Average contributions and the charterers to have a lien
on the ship for all monies paid in advance and not earned, and
any'overpaid hire or excess deposit to be returned at once.
Charterers will not suffer nor permit to be continued, any lien
or encumbrance incurred by them or their agents, which might
have priority over the title and interest of the owners of the
vessel.
2. Thorburn executed a liner term contract with Baroom who
was playing the double role of agent of said Thorburn and
agent of three consignee banks in Jeddah.
3. Baroom appealed to Filcar to be its agent, but when it was
discovered that he was the agent of Charles Thorburn and the
three (3) consignee banks, the application was rejected due to
conflict of interest.
4. The pre-paid freight representation of Baroom is false
because the condition of the L/C issued by the 3 consignee
banks provides a C/F arrangement which means payment of
the goods, insurance and freight can only be made upon
physical delivery of the goods in Jeddah.
5. Baroom intervened in the case (before respondent court)
using the Quasha law office. He later withdrew upon knowing
he has no defense. In fact, he did not even give Quasha written
authority to appear for him as his lawyer.
6. The court of respondent Judge "has jurisdiction over the
person of defendant and subject cargo of the vessel.
7. The Quasha law office is not entitled to any claim for
attorney's lien
Prescinding from the foregoing, We find no abuse of discretion
in issuing the questioned order of August 25, 1978, and
therefore the instant petition should be dismissed. It could not
be claimed that the act of respondent Judge in issuing the said
order amounts to interference with the writ of attachment
dated February 28, 1978 issued by Judge Pineda, for by the
time the said writ was issued, respondent Judge had already
control and disposition of the case. The order of August 25,
1978 was but an implementation of the earlier order of April
28, 1977 directing the sale of the cargoes on the ground of
extreme necessity as the cargoes as found by respondent Judge
upon ocular inspection were in danger of deteriorating and
losing their market value and the vessel was also in danger of
sinking. By then, respondent Judge had also issued the order
dated July 19, 1977 approving a Deed of Sale of subject
cargoes.
It should be noted that at the time petitioner filed the action
before Judge Pineda, it has already submitted itself to the
jurisdiction of respondent court and in fact its "charging lien"
which is the same cause of action before Judge Pineda was still
pending before respondent court. Pending also before
respondent Judge were petitioner's answer with counterclaim,
cross claim, motion to dismiss and motion to withdraw from
the case.
Petitioner may not enforce its attorney's lien, which accordingly
is based on Section 37 of Rule 138 which provides:
Sec. 37. Attorney's lien.— An attorney shall have a lien upon
the funds, documents and papers of his client which have
lawfully come into his possession and may retain the same until
his lawful fees and disbursements have been paid and may
apply such funds to the satisfaction thereof. He shall also have
a lien to the same extent upon all judgments for the payment
of money, and executions issued in pursuance of such
judgments, which he has secured in a litigation of his client,
from and after the time when he shall have caused a
statement's of his claim of such lien to be entered upon the
records of the court rendering such judgment, or issuing such
execution, and shad have caused written notice thereof to be
delivered to his client and to the adverse party; and he shall
have the same right and power over such judgments and
executions as his client would have to enforce his lien and
secure the payment of his just fees and disbursements.
Based on the foregoing provision, the liens for attorney's fees
and expenses apply only on the funds or documents of clients
which lawfully come to the possession of the counsel (called
retaining lien) and to all judgments secured by the counsel
(called charging lien). In his manifestation and motion before
respondent Judge, petitioner is claiming for his charging lien
But it should be noted that at the time of its filing, the orders of
April 27, 1977 ordering the sale of the cargoes and July 19,
1977 approving the Deed of Sale of cargoes were already in
existence and both were in fact in favor of private respondent.
It is curious to note that petitioner never questioned said
orders on appeal or by a special civil action. Petitioner's client
in fact even abandoned its case. Hence, having no favorable
judgment that could be anticipated, the charging lien has no leg
to stand on. Perhaps because it was aware of its predicament
that petitioner filed an independent action for recovery of its
professional fees and for reimbursement of expenses which
would have been proper, except that the ownership of the
property sought to be attached was questionable and the same
was already sold by respondent court. But just as We had said
before, petitioner should have filed its claim for professional
fees in respondent's court for said court has the exclusive
jurisdiction to determine the real owner of the cargoes. We
hasten to add, however, that the action should not be for a
charging lien, but a simple complaint in intervention for
recovery of professional services and reimbursement of
expenses, thus avoiding multiplicity of suits.
On October 24, 1978, We issued a temporary restraining order
enjoining the disposition or unloading of the cargoes. It turned
out, however, that before the said order could be served upon
the private respondents, all the cargoes subject of the petition
had been loaded into the M.V. Dong Myung, of which this
Court has no jurisdiction being a foreign vessel. When the
vessel sailed and the cargoes eventually sold, everything
became fait accompli and the case before Us moot and
academic.
Petitioner prays for the garnishment of the proceeds, but to
allow the same, there must first be a determination of the
ownership of the cargo. Again, We say We are not in a position
to do so. Petitioner failed to file motion for reconsideration of
the order of August 25, 1978 approving the sale of the cargo,
and it abandoned its own case before respondent Judge. The
result of its negligence in allowing considerable period to lapse
before claiming right over the cargo, and resorting to injunctive
relief must be borne by it. Petitioner is not entitled to any relief
and the instant petition must be dismissed. We shall also
dismiss petitioner's charge of contempt against respondent
since as We said before, before the temporary restraining or
order could be served everything was already fait accompli .
Likewise, We also dismiss the respondents' charge against
petitioner for direct contempt for allegedly omitting material
facts vital to the fun appreciation of this Court. In De Midgely
vs. Ferandos, 18 this Court ruled that such tactic is generally
tolerated because understandably lawyers are apt to slant the
presentation of their clients' case so that they would have
favorable judgments. "Courts are not deceived by the
exaggerations and distortions in a counsel's lopsided
submission of his client's case especially where, as in this case,
the alert opposing counsel calls the court's attention to that
fact. "
Indeed, "contempt of court presupposes a contumacious
attitude, a flouting of arrogant belligerence, a defiance of the
court. 19 It is an offense against the authority and dignity of the
court.
WHEREFORE, the petition is hereby dismissed.
SO ORDERED.
G.R. No. 184666, June 27, 2016
REPUBLIC OF THE PHILIPPINES, Petitioner, v. 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.:
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.1chanrobleslaw
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. 95988.2 In 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)3 entitling 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:
chanRoblesvirtualLawlibrary
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
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 the actual Contract
with "Mega Pacific eSolutions, Inc." (MPEI), a company that
joined the bidding process but did not meet the eligibility
requirements.
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, x x x 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."
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 x x x, 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.
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.
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.10chanrobleslaw
After the declaration of nullity of the automation contract, the
following incidents transpired:ChanRoblesVirtualawlibrary
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).11chanrobleslaw
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).
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 cralawlawlibrary
Respondent MPEI filed a Complaint for Damages12 (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.13chanrobleslaw

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.
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.15chanrobleslaw
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 respondents17 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.19chanrobleslaw
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 individuals21 assailed 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:ChanRoblesVirtualawlibrary
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:
chanRoblesvirtualLawlibraryx x x x
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.23chanrobleslaw
Petitioner filed its Answer with Counterclaim24 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.25cralawredchanrobleslaw
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.27chanrobleslaw
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.28chanrobleslaw
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.31chanrobleslaw
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 Decision32 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.33chanrobleslaw
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.35chanrobleslaw
Respondents moved for reconsideration36 of the First Decision
of the CA.
Motion for Reconsideration before the CA and the Amended
Decision
Upon review, the CA reconsidered its First Decision37 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.38chanrobleslaw
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.42chanrobleslaw
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.44chanrobleslaw
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.50chanrobleslaw
In their respective Comments, respondents Willy Yu, Bonnie Yu,
Enrique Tansipek, and Rosita Tansipek counter51 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.54chanrobleslaw
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.55chanrobleslaw
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.60chanrobleslaw
Based on the submissions of both parties, the following issues
are presented to this Court for resolution:
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 cralawlawlibrary
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.
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:
Fraud on the part of respondent MPEI was sufficiently
established by the factual findings of this Court in its 2004
Decision and subsequent pronouncements.
A writ of preliminary attachment may issue over the properties
of the individual respondents using the doctrine of piercing the
corporate veil.
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.
The delivery of 1,991 units of ACMs does not negate fraud on
the part of respondents MPEI and Willy.
Estoppel does not lie against the state when it acts to rectify
mistakes, errors or illegal acts of its officials and agents.
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.62chanrobleslaw
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.64chanrobleslaw
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:ChanRoblesVirtualawlibrary
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:
chanRoblesvirtualLawlibrary
xxxx
(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:ChanRoblesVirtualawlibrary
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. x x x.
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.67chanrobleslaw
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.68chanrobleslaw
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.71chanrobleslaw
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.73chanrobleslaw
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:
chanRoblesvirtualLawlibraryA. 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.
xxxx
The Eligibility Envelope was to contain legal documents such as
articles of incorporation, x x x 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. x x x
xxxx
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.
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.
xxxx
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.
xxxx
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. x x x
xxxx
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.
xxxx
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.
xxxx
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
Comclec'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. x x x
xxxx
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. x x x
xxxx
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.
xxxx
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.
xxxx
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.
xxxx
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.
xxxx
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.76chanrobleslaw
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?
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.78chanrobleslaw
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.79chanrobleslaw
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:ChanRoblesVirtualawlibrary
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:ChanRoblesVirtualawlibrary
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.
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.85chanrobleslaw
In this case, analogous to the fraud and deceit exhibited in the
above-mentioned 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:ChanRoblesVirtualawlibrary
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
offerers, 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:
xxxx
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 cralawlawlibrary
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.87chanrobleslaw
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.88chanrobleslaw
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.
xxxx
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)
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:ChanRoblesVirtualawlibrary
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.
xxxx
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 BAG, in its Report dated April 21, 2003, recommended that
the Phase II project involving the acquisition of automated
counting machines be awarded to MPEI. x x x
xxxx
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. x x x
xxxx
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). x x x
xxxx
x x x Whichever accuracy rating is the right standard —
whether 99.995 or 99.9995 percent — the fact remains that the
machines of the so-called "consort him" 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.
xxxx
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. x x x.
Once again, though, Comelec chose to ignore this crucial
deficiency, which should have been a cause for the gravest
concern. x x x.
xxxx
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.
xxxx
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 the provincial/district canvassing
system software; and again on pages 35-36 thereof, the same
audit trail requirement with respect to the national canvassing
system software.
xxxx
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"! x x x.
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.91chanrobleslaw
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.95chanrobleslaw
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.98chanrobleslaw
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.
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:ChanRoblesVirtualawlibrary
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.102chanroblesvirtuallawlibrary
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)."104chanrobleslaw
Unjustified Recommendations and Unjustified Winning Bidders
Questionable evaluation in a Bid Evaluation Report (BER) is an
indicator of bid rigging. The Handbook
expounds:ChanRoblesVirtualawlibrary
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.105chanroblesvirtuallawlibrary
The Handbook lists unjustified recommendations and
unjustified winning bidders as red flags of a rigged
bidding.106chanrobleslaw
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:ChanRoblesVirtualawlibrary
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. x x
x107chanroblesvirtuallawlibrary
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.109chanrobleslaw
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:ChanRoblesVirtualawlibrary
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.110chanroblesvirtuallawlibrary
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:ChanRoblesVirtualawlibrary
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:ChanRoblesVirtualawlibrary
(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;
(3) Income Statement; and cralawlawlibrary
(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 fad, 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,
2003.111chanroblesvirtuallawlibrary
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:ChanRoblesVirtualawlibrary
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, 962.113chanroblesvirtuallawlibrary
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.114chanrobleslaw
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:ChanRoblesVirtualawlibrary
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. x x x
(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:ChanRoblesVirtualawlibrary
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, plaintiffs
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:
chanRoblesvirtualLawlibraryx x x x
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;
x x x x117chanroblesvirtuallawlibrary
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.119chanroblesvirtuallawlibrary
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
arc 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 plaintiffs
dealings with the Republic.121chanrobleslaw
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.122chanroblesvirtuallawlibrary
As regards Enrique and Rosita, the relevant paragraphs in the
Answer with Counterclaim to the Republic's Counterclaim123
are quoted below:ChanRoblesVirtualawlibrary
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 plaintiffs
dealings with the Republic.124chanrobleslaw
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.125chanroblesvirtuallawlibrary
Pedro and Laureano offer a similar defense in paragraph 3.3 of
their Reply and Answer with Counterclaim to the Republic's
Counterclaim126 dated 28 June 2004, which
reads:ChanRoblesVirtualawlibrary
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.127chanroblesvirtuallawlibrary
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.
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:ChanRoblesVirtualawlibrary
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.128chanroblesvirtuallawlibrary
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.129chanrobleslaw
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.131chanrobleslaw
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:ChanRoblesVirtualawlibrary
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.135chanrobleslaw
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 are conclusive 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 Court136 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.137chanrobleslaw
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."139chanrobleslaw
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:ChanRoblesVirtualawlibrary
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 Fcliciano, 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
Company144 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.:ChanRoblesVirtualawlibrary
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. x x x. (Emphasis
supplied)145chanroblesvirtuallawlibrary
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 conclusive146 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.
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)
Justice152 merely concurred in the result, while the other
joined another Justice in her Separate
Opinion.153chanrobleslaw
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.155chanrobleslaw
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 them.156chanrobleslaw
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.158chanrobleslaw
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.161chanrobleslaw
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.164chanrobleslaw
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.
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.chanRoblesvirtualLawlibrary
G.R. No. 181721, September 09, 2015
WATERCRAFT VENTURE CORPORATION, REPRESENTED BY ITS
VICE-PRESIDENT, ROSARIO E. RAÑOA, Petitioner, v. ALFRED
RAYMOND WOLFE, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court, seeking to reverse and set aside the Court of
Appeals (CA) Resolution1 dated January 24, 2008 denying the
motion for reconsideration of its Decision2 dated September
27, 2007 in CA-G.R. SP No. 97804.
The facts are as follows:chanRoblesvirtualLawlibrary
Petitioner Watercraft Venture Corporation (Watercraft) is
engaged in the business of building, repairing, storing and
maintaining yachts, boats and other pleasure crafts at the Subic
Bay Freeport Zone, Subic, Zambales. In connection with its
operations and maintenance of boat storage facilities, it
charges a boat storage fee of Two Hundred Seventy-Two US
Dollars (US$272.00) per month with interest of 4% per month
for unpaid charges.
Sometime in June 1997, Watercraft hired respondent Alfred
Raymond Wolfe (Wolfe), a British national and resident of Subic
Bay Freeport Zone, Zambales, as its Shipyard Manager.
During his empolyment, Wolfe stored the sailboat, Knotty Gull,
within Watercraft1 s boat storage facilities, but never paid for
the storage fees.
On March 7, 2002, Watercraft terminated the employment of
Wolfe.
Sometime in June 2002, Wolfe pulled out his sailboat from
Watercraft's storage facilities after signing a Boat Pull-Out
Clearance dated June 29, 2002 where he allegedly
acknowledged the outstanding obligation of Sixteen Thousand
Three Hundred and Twenty-Four and 82/100 US Dollars
(US$16,324.82) representing unpaid boat storage fees for the
period of June 1997 to June 2002. Despite repeated demands,
he failed to pay the said amount.
Thus, on July 7, 2005, Watercraft filed against Wolfe a
Complaint for Collection of Sum of Money with Damages with
an Application for the Issuance of a Writ of Preliminary
Attachment. The case was docketed as Civil Case No. 4534-MN,
and raffled to Branch 1703 of the Regional Trial Court (RTC) of
Malabon City.
In his Answer, Wolfe claimed he was hired as Service and
Repair Manager, instead of Shipyard Manager. He denied
owing Watercraft the amount of US$16,324.82 representing
storage fees for the sailboat. He explained that the sailboat was
purchased in February 1998 as part of an agreement between
him and Watercraft1 s then General Manager, Barry Bailey, and
its President, Ricky Sandoval, for it to be repaired and used as
training or fill-in project for the staff, and to be sold later on. He
added that pursuant to a central Listing Agreement for the sale
of the sailboat, he was appointed as agent, placed in possession
thereof and entitled to a ten percent (10%) sales commission.
He insisted that nowhere in the agreement was there a
stipulation that berthing and storage fees will be charged
during the entire time that the sailboat was in Watercraft's
dockyard. Thus, he claimed to have been surprised when he
received five (5) invoices billing him for the said fees two (2)
months after his services were terminated. Fie pointed out that
the complaint was an offshoot of an illegal dismissal case he
filed against Watercraft which had been decided in his favor by
the Labor Arbiter.
Meanwhile, finding Watercraft's ex-parte application for writ of
preliminary attachment sufficient in form and in substance
pursuant to Section 1 of Rule 57 of the Rules of Court, the RTC
granted the same in the Order dated July 15, 2005, thus:
WHEREFORE, let a Writ of Preliminary Attachment be issued
accordingly in favor of the plaintiff, Watercraft Ventures
Corporation conditioned upon the filing of attachment bond in
the amount of Three Million Two Hundred Thirty-One
Thousand Five Hundred and Eighty-Nine and 25/100 Pesos
(Php3,231,589.25) and the said writ be served simultaneously
with the summons, copies of the complaint, application for
attachment, applicant's affidavit and bond, and this Order upon
the defendant.
SO ORDERED.4
Pursuant to the Order dated July 15, 2005, the Writ of
Attachment dated August 3, 2005 and the Notice of
Attachment dated August 5, 2005 were issued, and Wolfe's two
vehicles, a gray Mercedes Benz with plate number XGJ 819 and
a maroon Toyota Corolla with plate number TFW 110, were
levied upon.
On August 12, 2005, Wolfe's accounts at the Bank of the
Philippine Islands were also garnished.
By virtue of the Notice of Attachment and Levy dated
September 5, 2005, a white Dodge pick-up truck with plate
number XXL 111 was also levied upon. However, a certain
Jeremy Simpson filed a Motion for Leave of Court to Intervene,
claiming that he is the owner of the truck as shown by a duly-
notarized Deed of Sale executed on August 4, 2005, the
Certificate of Registration No. 3628665-1 and the Official
Receipt No. 271839105.
On November 8, 2005, Wolfe filed a Motion to Discharge the
Writ of Attachment, arguing that Watercraft failed to show the
existence of fraud and that the mere failure to pay or perform
an obligation does not amount to fraud. Me also claimed that
he is not a flight risk for the following reasons: (1) contrary to
the claim that his Special Working Visa expired in April 2005, his
Special Subic Working Visa and Alien Certificate of Registration
are valid until April 25, 2007 and May 11, 2006, respectively; (2)
he and his family have been residing in the Philippines since
1997; (3) he is an existing stockholder and officer of Wolfe
Marine Corporation which is registered with the Securities and
Exchange Commission, and a consultant of "Sudeco/Ayala"
projects in Subic, a member of the Multipartite Committee for
the new port development in Subic, and the Subic Chamber of
Commerce; and (4) he intends to finish prosecuting his pending
labor case against Watercraft. On even date, Watercraft also
filed a Motion for Preliminary Hearing of its affirmative
defenses of forum shopping, litis pendentia, and laches.
In an Order dated March 20, 2006, the RTC denied Wolfe's
Motion to Discharge Writ of Attachment and Motion for
Preliminary Hearing for lack of merit.
Wolfe filed a motion for reconsideration, but the RTC also
denied it for lack of merit in an Order dated November 10,
2006. Aggrieved, Wolfe filed a petition for certiorari before the
CA.
The CA granted Wolfe's petition in a Decision dated September
2007, the dispositive portion of which reads:
WHEREFORE, the Order dated March 20, 2006 and the Order
dated November 10, 2006 of respondent Judge are hereby
ANNULLED and SET ASIDE. Accordingly, the Writ of Attachment
issued on August 3, 2005, the Notice of Attachment dated
August 5, 2005 and the Notice of Attachment and Levy dated
September 5, 2005 are hereby also declared NULL and VOID,
and private respondent is DIRECTED to return to their owners
the vehicles that were attached pursuant to the Writ.
SO ORDERED.5
The CA ruled that the act of issuing the writ of preliminary
attachment ex-parte constitutes grave abuse of discretion on
the part of the RTC, thus:
x x x In Cosiquien [v. Court of Appeals], the Supreme Court held
that:
"Where a judge issues a fatally defective writ of preliminary
attachment based on an affidavit which failed to allege the
requisites prescribed for the issuance of the writ of preliminary
attachment, renders the writ of preliminary attachment issued
against the property of the defendant fatally defective. The
judge issuing it is deemed to have acted in excess of
jurisdiction. In fact, the defect cannot even be cured by
amendment. Since the attachment is a harsh and rigorous
remedy which exposed the debtor to humiliation and
annoyance, the rule authorizing its issuance must be strictly
construed in favor of defendant. It is the duty of the court
before issuing the Avrit to ensure that all the requisites of the
law have been complied with. Otherwise, a judge acquires no
jurisdiction to issue the writ." (emphasis supplied)
In the instant case, the Affidavit of Merit executed by Rosario E.
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.
Based on the foregoing, it is therefore clear that the writ was
improvidently issued. It is well to emphasize that "[T]he rules
on the issuance of a writ of attachment must be construed
strictly against the applicants. This stringency is required
because the remedy of attachment is harsh, extraordinary and
summary in nature. If all the requisites for the granting of the
writ are not present, then the court which issues it acts in
excess of its jurisdiction. Thus, in this case, Watercraft failed to
meet all the requisites for the issuance of the writ. Thus, in
granting the same, respondent Judge acted with grave abuse of
discretion.6
In a Resolution dated January 24, 2008, the CA denied
Watercraft's motion for reconsideration of its Decision, there
being no new or significant issues raised in the motion.
Dissatisfied with the CA Decision and Resolution, Watercraft
filed this petition for review on certiorari, raising these two
issues:
I.
WHETHER THE EX-PARTE ISSUANCE OF THE PRELIMINARY
ATTACHMENT BY THE TRIAL COURT IN FAVOR OF THE
PETITIONER IS VALID.
II.
WHETHER THE ALLEGATIONS IN THE AFFIDAVIT OF MERIT
CONCERNING FRAUD ARE SUFFICIENT TO WARRANT THE
ISSUANCE OF A PRELIMINARY WRIT OF ATTACHMENT BY THE
TRIAL COURT IN FAVOR OF THE PETITIONER.7
Watercraft argues that the CA erred in holding that the RTC
committed grave abuse of discretion in issuing the writ of
preliminary attachment, and in finding that the affidavit of
merit only enumerated circumstances tending to show the
possibility of Wolfe's flight from the country, but failed to show
fraudulent intent on his part to defraud the company.
Stressing that its application for such writ was anchored on two
(2) grounds under Section 1,8 Rule 57, Watercraft insists that,
contrary to the CA ruling, its affidavit of merit sufficiently
averred with particularity the circumstances constituting fraud
as a common element of said grounds.
Watercraft points out that its affidavit of merit shows that from
1997, soon after Wolfe's employment as Shipyard Manager, up
to 2002, when his employment was terminated, or for a period
of five (5) years, not once did he pay the cost for the use of the
company's boat storage facilities, despite knowledge of
obligation and obvious ability to pay by reason of his position.
Watercraft adds that its affidavit clearly stated that Wolfe, in an
attempt to avoid settling of his outstanding obligations to the
company, signed a Boat Pull-Out Clearance where he merely
acknowledged but did not pay Sixteen Thousand Three
Hundred and Twenty-Four and 82/100 US Dollars
(US$16,324.82) representing unpaid boat storage fees for the
period commencing June 1997 to June 2002. It avers that the
execution of such clearance enabled Wolfe to pull out his boat
from the company storage facilities without payment of
storage fees.
Watercraft also faults the CA in finding no merit in its allegation
that Wolfe is a flight risk. It avers that he was supposed to stay
and work in the country for a limited period, and will eventually
leave; that despite the fact that his wife and children reside in
the country, he can still leave with them anytime; and that his
work in the country will not prevent him from leaving, thereby
defeating the purpose of the action, especially since he had
denied responsibility for his outstanding obligations. It submits
that the CA overlooked paragraph 28 of its Complaint which
alleged that "[i]n support of the foregoing allegations and the
prayer for the issuance of a Writ of Preliminary Attachment in
the instant case, the Plaintiff has attached hereto the Affidavit
of the Vice-President of the Plaintiff, MS. ROSARIO E. RANOA x
x x."9
Watercraft asserts that it has sufficiently complied with the
only requisites for the issuance of the writ of preliminary
attachment under Section 3, Rule 57 of the Rules of Court, i.e.,
affidavit of merit and bond of the applicant. It posits that
contrary to the CA ruling, there is no requirement that evidence
must first be offered before a court can grant such writ on the
basis of Section 1 (d) of Rule 57, and that the rules only require
an affidavit showing that the case is one of those mentioned in
Section 1, Rule 57. It notes that although a party is entitled to
oppose an application for the issuance of the writ or to move
for the discharge thereof by controverting the allegations of
fraud, such rule does not apply when the same allegations
constituting fraud are the very facts disputed in the main
action, as in this case.
Watercraft also points out the inconsistent stance of Wolfe
with regard to the ownership and possession of the sailboat.
Contrary to Wolfe's Answer that the purchase of the sailboat
was made pursuant to a three (3)-way partnership agreement
between him and its General Manager and Executive Vice-
President, Barry Bailey, and its President, Ricky Sandoval,
Watercraft claims that he made a complete turnaround and
exhibited acts of sole-ownership by signing the Boat Pull-Out
Clearance in order to retrieve the sailboat. It argues that
common sense and logic would dictate that he should have
invoked the existence of the partnership to answer the demand
for payment of the storage fees.
Watercraft contends that in order to pre-empt whatever action
it may decide to take with respect to the sailboat in relation to
his liabilities, Wolfe accomplished in no time the clearance that
paved the way for its removal from the company's premises
without paying his outstanding obligations. It claims that such
act reveals a fraudulent intent to use the company storage
facilities without payment of storage fees, and constitutes
unjust enrichment.
The petition lacks merit.
A writ of preliminary attachment is defined as a provisional
remedy issued upon order of the court where an action is
pending to be levied upon the property or properties of the
defendant therein, the same to be held thereafter by the sheriff
as security for the satisfaction of whatever judgment that might
be secured in the said action by the attaching creditor against
the defendant.10 However, it should be resorted to only when
necessary and as a last remedy because it exposes the debtor
to humiliation and annoyance.11 It must be granted only on
concrete and specific grounds and not merely on general
averments quoting the words of the rules.12 Since attachment
is harsh, extraordinary, and summary in nature,13 the rules on
the application of a writ of attachment must be strictly
construed in favor of the defendant.
For the issuance of an ex-parte issuance of the preliminary
attachment to be valid, an affidavit of merit and an applicant's
bond must be filed with the court14 in which the action is
pending. Such bond executed to the adverse party in the
amount fixed by the court is subject to the conditions that the
applicant will pay: (1) all costs which may be adjudged to the
adverse party; and (2) all damages which such party may
sustain by reason of the attachment, if the court shall finally
adjudge that the applicant was not entitled thereto.15 As to
the requisite affidavit of merit, Section 3,16 Rule 57 of the
Rules of Court states that an order of attachment shall be
granted only when it appears in the affidavit of the applicant,
or of some other person who personally knows the facts:
that a sufficient cause of action
exists;ChanRoblesVirtualawlibrary
that the case is one of those mentioned in Section 117
hereof;ChanRoblesVirtualawlibrary
that there is no other sufficient security for the claim sought to
be enforced by the action; and
that the amount due to the applicant, or the value of the
property the possession of which he is entitled to recover, is as
much as the sum for which the order is granted above all legal
counterclaims.
The mere filing of an affidavit reciting the facts required by
Section 3, Rule 57, however, is not enough to compel the judge
to grant the writ of preliminary attachment. Whether or not
the affidavit sufficiently established facts therein stated is a
question to be determined by the court in the exercise of its
discretion.18 "The sufficiency or insufficiency of an affidavit
depends upon the amount of credit given it by the judge, and
its acceptance or rejection, upon his sound discretion."19 Thus,
in reviewing the conflicting findings of the CA and the RTC on
the pivotal issue of whether or not Watercraft's affidavit of
merit sufficiently established facts which constitute as grounds
upon which attachment may be issued under Section 1 (a)20
and (d),21 Rule 57, the Court will examine the Affidavit of
Preliminary Attachment22 of Rosario E. Rañoa, its Vice-
President, which reiterated the following allegations in its
complaint to substantiate the application for a writ of
preliminary attachment:
xxxx
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.
17. The instant case clearly falls under the said provision of law.
18. Furthermore, lawful factual and legal grounds exist which
show that the Defendant may have departed or is about to
depart the country to defraud his creditors thus rendering it
imperative that a Writ of Preliminary Attachment be issued in
favor of the Plaintiff in the instant case.
19. The possibility of flight on the part of the Defendant is
heightened by the existence of the following circumstances:
a. The Special Working Visa issued in favor of the Defendant
expired in April 2005;ChanRoblesVirtualawlibrary
b. The Defendant is a British national who may easily leave the
country at will;ChanRoblesVirtualawlibrary
c. The Defendant has no real properties and visible, permanent
business or employment in the Philippines; and
e. The house last known to have been occupied by the
Defendant is merely being rented by him.
20. All told, the Defendant is a very serious flight risk which fact
will certainly render for naught the capacity of the Plaintiff to
recover in the instant case.23
After a careful perusal of the foregoing; allegations, the Court
agrees with the CA that 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 x x x."31 It is not an allegation of essential facts
constituting Watercraft's causes of action, but a mere
conclusion of law.
With respect to Section 1 (a),32 Rule 57, the other ground
invoked by Watercraft for the issuance of the writ of
preliminary attachment, the Court finds no compelling reason
to depart from the CA's exhaustive ruling to the effect that such
writ is unnecessary because Wolfe is not a flight risk, thus:
As to the allegation that Wolfe is a (light risk, thereby
warranting the issuance of the writ, the same lacks merit. The
mere fact that Wolfe is a British national does not automatically
mean that he would leave the country at will. As Wolfe avers,
he and his family had been staying in the Philippines since
1997, with his daughters studying at a local school. He also
claims to be an existing stockholder and officer of Wolfe
Marine Corporation, a SEC - registered corporation, as well as a
consultant of projects in the Subic Area, a member of the
Multipartite Committee for the new port development in Subic,
and a member of the Subic Chamber of Commerce. More
importantly, Wolfe has a pending labor case against Watercraft
- a fact which the company glaringly failed to mention in its
complaint - which Wolfe claims to want to prosecute until its
very end. The said circumstances, as well as the existence of
said labor case where Wolfe stands not only to be vindicated
for his alleged illegal dismissal, but also to receive recompense,
should have convinced the trial court that Wolfe would not
want to leave the country at will just because a suit for the
collection of the alleged unpaid boat storage fees has been
filed against him by Watercraft.
Neither should the fact that Wolfe's Special Working Visa
expired in April 2005 lead automatically to the conclusion that
he would leave the country. It is worth noting that all visas
issued by the government to foreigner staying in the
Philippines have expiration periods. These visas, however, may
be renewed, subject to the requirements of the law. In Wolfe's
case, he indeed renewed his visa, as shown by Special Working
Visa No. 05-WV-0124P issued by the Subic Bay Metropolitan
Authority Visa Processing Office on April 25, 2005, and with
validity of two (2) years therefrom. Moreover, his Alien
Certificate of Registration was valid up to May 11, 2006.33
Meanwhile, Watercraft's reliance on Chuidian v.
Sandiganbayan34 is displaced. It is well settled that:
x x x when the preliminary attachment is issued upon a ground
which is at the same time the applicant's cause of action; e.g.,
"an action for money or property embezzled or fraudulently
misapplied or converted to his own use by a public officer, or
an officer of a corporation, or an attorney, factor, broker,
agent, or clerk, in the course of his employment as such, or by
any other person in a fiduciary capacity, or for a willful violation
of duty," or "an action against a party who has been guilty of
fraud in contracting the debt or incurring the obligation upon
which the action is brought," the defendant is not allowed to
file a motion to dissolve the attachment under Section 13 of
Rule 57 by offering to show the falsity of the factual averments
in the plaintiffs application and affidavits on which the writ was
based - and consequently that the writ based thereon had been
improperly or irregularly issued - the reason being that the
hearing on such a motion for dissolution of the writ would be
tantamount to a trial of the merits of the action. In other
words, the merits of the action would be ventilated at a mere
hearing of a motion, instead of at the regular trial.35
Be that as it may, the foregoing rule is not applicable in this
case because when Wolfe filed a motion to dissolve the writ of
preliminary attachment, he did not offer to show the falsity of
the factual averments in Watercraft's application and affidavit
on which the writ was based. Instead, he sought the discharge
of the writ on the ground that Watercraft failed to particularly
allege any circumstance amounting to fraud. No trial on the
merits of the action at a mere hearing of such motion will be
had since only the sufficiency of the factual averments in the
application and affidavit of merit will be examined in order to
find out whether or not Wolfe was guilty of fraud in contracting
the debt or incurring the obligation upon which the action is
brought, or in the performance thereof.
Furthermore, the other ground upon which the writ of
preliminary attachment was issued by the RTC is not at the
same time the applicant's cause of action. Assuming arguendo
that the RTC was correct in issuing such writ on the ground that
Watercraft's complaint involves an action for the recovery of a
specified amount of money or damages against a party, like
Wolfe, who is about to depart from the Philippines with intent
to defraud his creditors, the Court stresses that the
circumstances36 cited in support thereof are merely allegations
in support of its application for such writ.37 Such
circumstances, however, are neither the core of Watercraft's
complaint for collection of sum of money and damages, nor
one of its three (3) causes of action therein.38
All told, the CA correctly ruled that Watercraft failed to meet
one of the requisites for the issuance of a writ of preliminary
attachment, i.e., that the case is one of those mentioned in
Section 1 of Rule 57, and that the RTC gravely abused its
discretion in improvidently issuing such writ. Watercraft failed
to particularly state in its affidavit of merit the circumstances
constituting intent to defraud creditors on the part of Wolfe in
contracting or in the performance of his purported obligation
to pay boat storage fees, as well as to establish that he is a
flight risk. Indeed, if all the requisites for granting such writ are
not present, then the court which issues it acts in excess of its
jurisdiction.39chanroblesvirtuallawlibrary
WHEREFORE, premises considered, the petition is DENIED. The
Court of Appeals Decision dated September 27, 2007 and its
Resolution dated January 24, 2008 in CA-G.R. SP No. 97804, are
AFFIRMED.
SO ORDERED.chanroblesvirtuallawlibrary
G.R. No. 219345, January 30, 2017

SECURITY BANK CORPORATION, Petitioner, v. GREAT WALL
COMMERCIAL PRESS COMPANY, INC., ALFREDO BURIEL
ATIENZA, FREDINO CHENG ATIENZA AND SPS. FREDERICK
CHENG ATIENZA AND MONICA CU ATIENZA, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and
set aside the December 12, 2014 Decision1 and June 26, 2015
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
131714, which lifted the writ of preliminary attachment issued
by the Regional Trial Court, Branch 59, Makati City (RTC), in
Civil Case No. 13-570, in favor of petitioner Security Bank
Corporation (Security Bank).
The Antecedents
On May 15, 2013, Security Bank filed a Complaint for Sum of
Money (with Application for Issuance of a Writ of Preliminary
Attachment)3 against respondents Great Wall Commercial
Press Company, Inc. (Great Wall) and its sureties, Alfredo Buriel
Atienza, Fredino Cheng Atienza, and Spouses Frederick Cheng
Atienza and Monica Cu Atienza (respondents), before the RTC.
The complaint sought to recover from respondents their unpaid
obligations under a credit facility covered by several trust
receipts and surety agreements, as well as interests, attorney's
fees and costs. Security Bank argued that in spite of the lapse of
the maturity date of the obligations from December 11, 2012
to May 7, 2013, respondents failed to pay their obligations. The
total principal amount sought was P10,000,000.00. On May 31,
2013, after due hearing, the RTC granted the application for a
writ of preliminary attachment of Security Bank, which then
posted a bond in the amount of P10,000,000.00.
On June 3, 2013, respondents filed their Motion to Lift Writ of
Preliminary Attachment Ad Cautelam,4 claiming that the writ
was issued with grave abuse of discretion based on the
following grounds: (1) Security Bank's allegations in its
application did not show a prima facie basis therefor; (2) the
application and the accompanying affidavits failed to allege at
least one circumstance which would show fraudulent intent on
their part; and (3) the general imputation of fraud was
contradicted by their efforts to secure an approval for a loan
restructure.5
The RTC Orders
In its Order,6 dated July 4, 2013, the RTC denied respondents'
motion to lift, explaining that the Credit Agreement7 and the
Continuing Suretyship Agreement8 contained provisions on
representations and warranties; that the said representations
and warranties were the very reasons why Security Bank
decided to extend the loan; that respondents executed various
trust receipt agreements but did not pay or return the goods
covered by the trust receipts in violation thereof; that they
failed to explain why the goods subject of the trust receipts
were not returned and the proceeds of sale thereof remitted;
and that it was clear that respondents committed fraud in the
performance of the obligation.9
Respondents filed a motion for reconsideration, but it was
denied by the RTC in its Order,10 dated August 12, 2013.
Dissatisfied, respondents filed a petition for certiorari before
the CA seeking to reverse and set aside the RTC orders denying
their motion to lift the writ of preliminary attachment issued.
The CA Ruling
In its assailed decision, dated December 12, 2014, the CA lifted
the writ of preliminary attachment. The appellate court
explained that the allegations of Security Bank were insufficient
to warrant the provisional remedy of preliminary attachment. It
pointed out that fraudulent intent could not be inferred from a
debtor's inability to pay or comply with its obligations. The CA
opined that the non-return of the proceeds of the sale and/or
the goods subject of the trust receipts did not, by itself,
constitute fraud and that, at most, these were only averments
for the award of damages once substantiated by competent
evidence. It also stressed that respondents' act of offering a
repayment proposal negated the allegation of fraud. The CA
held that fraud must be present at the time of contracting the
obligation, not thereafter, and that the rules on the issuance of
a writ of attachment must be construed strictly against the
applicant. It disposed the case in this wise:
WHEREFORE, for the foregoing reasons, the instant petition is
GRANTED. Accordingly, the attachment over any property of
petitioners by the writ of preliminary attachment is ordered
LIFTED effective upon the finality of this Decision. No costs.
SO ORDERED.11
Security Bank moved for reconsideration but its motion was
denied by the CA in its assailed resolution, dated June 26, 2015.
Hence, this petition raising the lone
ISSUE
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
NULLIFYING THE WRIT OF PRELIMINARY ATTACHMENT ISSUED
BY THE TRIAL COURT.12
Security Bank argues that there are sufficient factual and legal
bases to justify the issuance of the writ of preliminary
attachment. It claims that it was misled by respondents, who
employed fraud in contracting their obligation, as they made
the bank believe that they had the capacity to pay; that
respondents also committed fraud in the performance of their
obligation when they failed to turn over the goods subject of
the trust receipt agreements,13 or remit the proceeds thereof
despite demands; and that these were not mere allegations in
the complaint but facts that were testified to by its witness and
supported by written documents.

Security Bank added that respondents' effort to settle their
outstanding obligation was just a subterfuge to conceal their
real intention of not honoring their commitment and to delay
any legal action that the bank would take against them; that
respondents submitted a repayment proposal through a letter,
dated January 23, 2013, knowing fully well that they were
already in default; that they requested a meeting to discuss
their proposal but they failed to show up and meet with the
bank's representative; and that respondents did not submit any
supporting documents to back up their repayment proposal.
In their Comment,14 respondents countered that there was
insufficient basis for the issuance of the writ of preliminary
attachment against them; that the mere failure to pay their
obligation was not an act of fraud; that the application for the
issuance of the writ of preliminary attachment, the affidavit of
merit and judicial affidavit merely cited general allegations of
fraud and Security Bank failed to sufficiently show the factual
circumstances constituting fraud. Moreover, respondents
claimed that they did not commit fraud because they were
earnestly negotiating with Security Bank for a loan
restructuring as shown by their Letter,15 dated January 23,
2013, and email correspondences.
In its Reply,16 Security Bank stressed that respondents misled
them on their financial capacity and ability to pay their
obligations. It emphasized that there were specific allegations
in its complaint and its witness testified that respondents
committed fraud, specifically their failure to comply with the
trust receipt agreements, that they would turn over the goods
covered by the trust receipt agreements or the proceeds
thereof to Security Bank.
The Court's Ruling
The Court finds merit in the petition.
Preliminary Attachment
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. 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.17
In this case, Security Bank relied on Section 1 (d), Rule 57 of the
Rules of Court as basis of its application for a writ of
preliminary attachment. It reads:
RULE 57
Preliminary 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
(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
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. It is settled that fraudulent
intent cannot be inferred from the debtor's mere non-payment
of the debt or failure to comply with his obligation.18
While fraud cannot be presumed, it need not be proved by
direct evidence and can well be inferred from attendant
circumstances. 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.19
The allegations of Security Bank in support of its application for
a writ of preliminary attachment are as follow:
15. During the negotiation for the approval of the loan
application/ renewal of Respondents the latter through Alfredo
Buriel Atienza, Fredino Cheng Atienza and Sps. Frederick Cheng
Atienza and Monica Cu Atienza, assured SBC that the loan
obligation covered by the several Trust Receipts shall be paid in
full on or before its maturity date pursuant to the terms and
conditions of the aforesaid trust receipts. However,
Respondents as well as the sureties failed to pay the aforesaid
obligation.
16. In addition, the assurance to pay in full the obligation is
further solidified by the warranty of solvency provisions of the
Credit Agreement, the pertinent portion of which states that:
"5. Representations at Warranties. - The Borrower further
represents and warrants that xxxe) The maintenance of the
Credit Facility is premised on the Borrower's continued ability
to service its obligations to its creditors. Accordingly, the
Borrower hereby warrants that while any of the Credit
Obligations remain unpaid, the Borrower shall at all times have
sufficient liquid assets to meet operating requirements and pay
all its/his debts as they fall due. Failure of the Borrower to pay
any maturing interest, principal or other charges under the
Credit Facility shall be conclusive evidence of violation of this
warranty."
17. To allay whatever fear or apprehension of herein plaintiff
on the commitment of Respondents to honor its obligations,
defendants-sureties likewise executed a "Continuing Suretyship
Agreement.
18. Under paragraph 3 of the said Suretyship Agreement, it is
provided that:
"3. Liability of the Surety - The liability of the Surety is solidary,
direct and immediate and not contingent upon the pursuit by
SBC of whatever remedies it may have against the Borrower or
the collateral/liens it may possess. If any of the Guaranteed
Obligations is not paid or performed on due date (at stated
maturity or by acceleration), or upon the occurrence of any of
the events of default under Section 5 hereof and/or under the
Credit Instruments, the Surety shall without need for any
notice, demand or any other act or deed, immediately and
automatically become liable therefor and the Surety shall pay
and perform the same."
19. Thus, in the light of the representation made by
Respondents Commercial Press Co, Inc., Alfredo Buriel Atienza,
Fredino Cheng Atienza and Sps. Frederick Cheng Atienza and
Monica Cu Atienza that the loan shall be paid in full on or
before maturity, coupled by the warranty of solvency
embodied in the Credit Agreement as well as the execution of
the Continuing Suretyship Agreement, the loan application was
eventually approved.
20. Needless to say that without said representations and
warranties, including the Continuing Suretyship Agreement, the
plaintiff would not have approved and granted the credit
facility to Respondents. It is thus clear that Respondents,
Alfredo Buriel Atienza, Fredino Cheng Atienza and Sps.
Frederick Cheng Atienza and Monica Cu Atienza, misled SBC
and employed fraud in contracting said obligation.
21. Respondents, through its Vice President Fredino Cheng
Atienza, likewise executed various Trust Receipt Agreements
with the plaintiff whereby it bound itself under the following
provision:
"2. In consideration of the delivery to the Entrustee of the
possession of the Goods/Documents, the Entrustee hereby
agrees and undertakes, in accordance with the provisions of
the Presidential Decree No. 115; (i) to hold in trust for the Bank
the Goods/Documents; (ii) to sell the Goods for cash only for
the account and benefit of the Bank, and without authority to
make any other disposition of the Goods/Documents or any
part thereof, or to create a lien thereon; (iii) to turn over to the
Bank, without need of demand, the proceeds of the sale of the
Goods to the extent of the amount of obligation specified
above (the "Obligation"), including the interest thereon, and
other amounts owing by the Entrustee to the Bank under this
Trust Receipt, on or before the maturity date above-mentioned
(the "Maturity Date"); or (iv) to return, on or before Maturity
Date, without need of demand and at the Entrustee's expense,
the Goods/Documents to the Bank, in the event of non-sale of
the Goods."
Despite the above covenants, defendants failed to pay nor
return the goods subject of the Trust Receipt Agreements.
22. Knowing fully well that they are already in default,
Respondents and defendants sureties submitted a repayment
proposal through their letter dated January 23, 2013. Through
their lawyer, they likewise requested the bank for a meeting to
discuss their proposal. However, as it turned out, the proposed
repayment proposal for their loan was only intended to delay
legal action against them. They failed to meet with the Bank's
representative and neither did they submit supporting
documents to back up their repayment proposal.20
To support its allegation of fraud, Security Bank attached the
Affidavit21 of German Vincent Pulgar IV (Pulgar), the Manager
of the Remedial Management Division of the said bank. He
detailed how respondents represented to Security Bank that
they would pay the loans upon their maturity date. Pulgar
added that respondents signed the Credit Agreement which
contained the Warranty of Solvency and several Trust Receipt
Agreements in favor of Security Bank. The said trust receipts
were attached to the complaint which stated that respondents
were obligated to turn over to Security Bank the proceeds of
the sale of the good or to return the goods. The several
demand letters sent by Security Bank to respondents, which
were unheeded, were likewise attached to the complaint.
These pieces of evidence were presented by Security Bank
during the hearing of the application for the issuance of a writ
of preliminary attachment in the RTC.
After a judicious study of the records, the Court finds that
Security Bank was able to substantiate its factual allegation of
fraud, particularly, the violation of the trust receipt
agreements, to warrant the issuance of the writ of preliminary
attachment.
There were violations of the
trust receipts agreements
While the Court agrees that mere violations of the warranties
and representations contained in the credit agreement and the
continuing suretyship agreement do not constitute fraud under
Section 1(d) of Rule 57 of the Rules of Court, the same cannot
be said with respect to the violation of the trust receipts
agreements.
A trust receipt transaction is one where the entrustee has the
obligation to deliver to the entruster the price of the sale, or if
the merchandise is not sold, to return the merchandise to the
entruster. There are, therefore, two obligations in a trust
receipt transaction: the first refers to money received under
the obligation involving the duty to turn it over (entregarla) to
the owner of the merchandise sold, while the second refers to
the merchandise received under the obligation to "return" it
(devolvera) to the owner.22 The obligations under the trust
receipts are governed by a special law, Presidential Decree
(P.D.) No. 115, and non-compliance have particular legal
consequences.
Failure of the entrustee to turn over the proceeds of the sale of
the goods, covered by the trust receipt to the entruster or to
return said goods if they were not disposed of in accordance
with the terms of the trust receipt shall be punishable as estafa
under Article 315 (1) of the Revised Penal Code, without need
of proving intent to defraud.23 The offense punished under
P.D. No. 115 is in the nature of malum prohibitum. Mere failure
to deliver the proceeds of the sale or the goods, if not sold,
constitutes a criminal offense that causes prejudice not only to
another, but more to the public interest.24
The present case, however, only deals with the civil fraud in the
non-compliance with the trust receipts to warrant the issuance
of a writ of preliminary attached. A fortiori, in a civil case
involving a trust receipt, the entrustee's failure to comply with
its obligations under the trust receipt constitute as civil fraud
provided that it is alleged, and substantiated with specificity, in
the complaint, its attachments and supporting evidence.
Security Bank's complaint stated that Great Wall, through its
Vice President Fredino Cheng Atienza, executed various trust
receipt agreements in relation to its loan transactions. The trust
receipts stated that in consideration of the delivery to the
entrustee (Great Wall) of the possession of the goods, it
obligates itself to hold in trust for the bank the goods, to sell
the goods for the benefit of the bank, to turn over the proceeds
of the sale to the bank, and to return the goods to the bank in
the event of non-sale. By signing the trust receipt agreements,
respondents fully acknowledged the consequences under the
law once they failed to abide by their obligations therein. The
said trust receipt agreements were attached to the complaint.
Upon the maturity date, however, respondents failed to deliver
the proceeds of the sale to Security Bank or to return the goods
in case of non-sale. Security Bank sent a final demand letter to
respondents, which was also attached to the complaint, but it
was unheeded. Curiously, in their letter, dated January 23,
2013, respondents did not explain their reason for non-
compliance with their obligations under the trust receipts;
rather, they simply stated that Great Wall was having a sudden
drop of its income. Such unsubstantiated excuse cannot
vindicate respondents from their failure to fulfill their duties
under the trust receipts.
In addition, Security Bank attached Pulgar's affidavit, which
substantiated its allegation that respondents failed to comply
with its obligations under the trust receipts. During the hearing
before the RTC, Security Bank presented him and his judicial
affidavit. Regarding the trust receipts, he testified:
Q: Do you have any other basis in saying that you have grounds
for attachment?
A: Yes, defendants not only failed to pay but they also failed to
return the goods covered by the Trust Receipt.
Q: What do you mean by failure to return the goods?
A: They executed several TRs where they obligated to turn over
the proceeds of sale of goods or pay the value thereof or return
the goods themselves if they are unable to pay.
Q: What happened in this case?
A: Defendants failed to pay the value of the goods covered by
the TRs and they likewise failed to return the goods without
any explanation. Hence, obviously they misappropriated the
proceeds of the sale of goods.25
The Court is of the view that Security Bank's allegations of
violation of the trust receipts in its complaint was specific and
sufficient to assert fraud on the part of respondents. These
allegations were duly substantiated by the attachments thereto
and the testimony of Security Bank's witness.
The case of Philippine Bank of
Communications v. Court of
Appeals is inapplicable
The CA cited Philippine Bank of Communications v. Court of
Appeals26 (PBCom) to bolster its argument that fraudulent
intent cannot be inferred from a debtor's inability to pay or
comply with its obligations and that there must be proof of a
preconceived plan not to pay.27
At face value, PBCom and the present case may show a
semblance of similarity. Thus, the CA cannot be faulted for
relying on the said case. A closer scrutiny of these two cases,
however, shows that their similarity is more apparent than real.
In PBCom, the applicant for the writ of preliminary attachment
simply stated in its motion that the defendant therein failed to
remit the proceeds or return the goods subject of the trust
receipt and attached an ambiguous affidavit stating that the
case was covered by Sections 1(b) and (d) of Rule 57. Obviously,
these allegations and attachments are too general and vague to
prove that the defendant committed fraud. Likewise, there was
no hearing conducted in the RTC before it granted the issuance
of the writ of preliminary attachment. Thus, the Court had no
option but to lift the said writ.
In contrast, the complaint in the present case explained in
detail the factual circumstances surrounding the execution of
the trust receipts, its contents and the subsequent violation
thereof. Security Bank attached supporting annexes and
presented its witness during the hearing in the RTC to
substantiate the specific violation of trust receipts by
respondents. Security Bank took great lengths to explain the
contents of the trust receipt and show that respondents
expressed their conformity to it. When the obligation became
due, respondents did not satisfactorily explain the non-
compliance of their obligations, and, despite a final demand,
they did not fulfill their obligations under the trust receipts.
Clearly, PBCom is inapplicable in the present case.
Fraud in the performance of
the obligation must be
considered
The CA stated in the assailed decision that under Section 1(d) of
Rule 57, fraud must only be present at the time of contracting
the obligation, and not thereafter. Hence, the CA did not
consider the allegation of fraud - that respondents offered a
repayment proposal but questionably failed to attend the
meeting with Security Bank regarding the said proposal -
because these acts were done after contracting the obligation.
In this regard, the CA erred.
Previously, Section 1(d), Rule 57 of the 1964 Rules of Court
provided that a writ of preliminary attachment may be issued
"[i]n 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 xxx" Thus, the fraud that justified the issuance
of a writ of preliminary attachment then was only fraud
committed in contracting an obligation (dolo casuante).28
When the 1997 Rules of Civil Procedure was issued by the
Court, Section 1(d) of Rule 57 conspicuously included the
phrase "in the performance thereof." Hence, the fraud
committed in the performance of the obligation (dolo
incidente) was included as a ground for the issuance of a writ of
preliminary attachment.29
This significant change in Section 1(d) of Rule 57 was
recognized recently in Republic v. Mega Pacific eSolutions,
Inc.30 The Court stated therein that "[a]n 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."
Accordingly, the alleged fraud committed by respondents in the
performance of their obligation should have been considered
by the CA. Security Bank detailed in its complaint that
respondents, knowing fully well that they were in default,
submitted a Repayment Proposal.31 Then, they requested for a
meeting with the bank to discuss their proposal. For unknown
reasons, they did not meet the representatives of the Security
Bank.
Respondents even attached to its Motion to Lift Writ of
Preliminary Attachment Ad Cautelam32 the correspondence
they had with Security Bank, which revealed that they did not
meet the representatives of the latter despite providing a
specific date to discuss the proposed repayment scheme.
Respondents merely offered lame excuses to justify their
absence in the arranged meeting and, ultimately, they failed to
clarify the non-compliance with their commitments. Such acts
bared that respondents were not sincere in paying their
obligation despite their maturity, substantiating the allegations
of fraud in the performance thereof.
These circumstances of the fraud committed by respondents in
the performance of their obligation undoubtedly support the
issuance of a writ of preliminary attachment in favor of Security
Bank.
Final Note
While the Court finds that Security Bank has substantiated its
allegation of fraud against respondents to warrant the issuance
of writ or preliminary attachment, this finding should not in any
manner affect the merits of the principal case. The writ of
preliminary attachment is only a provisional remedy, which is
not a cause of action in itself but is merely adjunct to a main
suit.33
WHEREFORE, the December 12, 2014 Decision and the June 26,
2015 Resolution of the Court of Appeals in CA-G.R. SP No.
131714 are REVERSED and SET ASIDE. The issuance of the writ
of preliminary attachment by the Regional Trial Court, Branch
59, Makati City, in Civil Case No. 13-570, pursuant to its May
31, 2013 Order, is upheld.
SO ORDERED.
[G.R. NO. 147970 : March 31, 2006]
PCL Industries Manufacturing Corporation, Petitioner, v. The
COURT OF APPEALS and ASA Color & Chemical Industries, Inc.,
Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
This resolves the petition for certiorari seeking the reversal of
the Decision1 of the Court of Appeals (CA) promulgated on
February 21, 2001, which affirmed the Decision of the Regional
Trial Court (RTC) of Quezon City, Branch 226; and the CA
Resolution dated May 9, 2001 denying petitioner's motion for
reconsideration.
The antecedent facts are as follows:
On October 10, 1995, private respondent filed a complaint with
the RTC for Sum of Money with Preliminary Attachment against
herein petitioner. Private respondent claims that during the
period from January 18, 1994 to April 14, 1994, petitioner
purchased and received from it various printing ink materials
with a total value of P504,906.00, payable within 30 days from
the respective dates of invoices; and that petitioner, in bad
faith, failed to comply with the terms of the sale and failed to
pay its obligations despite repeated verbal and written
demands.
Petitioner was served with summons together with the Writ of
Preliminary Attachment on October 20, 1995. On October 23,
1995, petitioner filed a Motion to Dissolve and/or Discharge
Writ of Preliminary Attachment. On November 20, 1995, the
trial court issued an Order denying petitioner's motion to
dissolve the writ of preliminary attachment. Petitioner's motion
for reconsideration of said order was also denied per Order
dated January 2, 1996. Petitioner no longer elevated to the
higher courts the matter of the propriety of the issuance of the
writ of preliminary attachment.
In the meantime, on October 30, 1995, petitioner filed its
Answer with Counterclaim. Petitioner claims that the various
printing ink materials delivered to it by private respondent
were defective and sometime in August, October, and
November of 1993, they have returned ink materials to private
respondent as shown by several Transmittal Slips.
Nevertheless, petitioner admits that it continued to buy ink
materials from private respondent in 1994 despite having
rejected ink materials delivered by private respondent in 1993.
Petitioner, however, insists that the ink materials delivered by
private respondent in 1994 were also defective and they made
known their complaints to Frankie, the authorized
representative of private respondent. In a letter dated June 30,
1995, petitioner informed private respondent that it had been
complaining to its (private respondent's) representative about
the quality of the ink materials but nothing was done to solve
the matter. Private respondent replied through a letter dated
July 16, 1995, that it was giving petitioner the option to return
the products delivered, "sealed and unused" within one week
from receipt of said letter or pay the full amount of its
obligation. Petitioner answered in a letter dated September 26,
1995, that private respondent should pick up at its plant the
remaining unused defective ink materials, and requested to
meet with private respondent to thresh out the matter. No
meeting was ever held. Petitioner further claims that it suffered
damages in the amount of P1,592,794.50 because its
customers rejected the finished plastic products it delivered,
complaining of the bad smell, which, according to petitioner,
was caused by the defective ink materials supplied by private
respondent.
After trial on the merits, the trial court rendered its Decision
dated January 8, 1999, the dispositive portion of which reads
thus:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiff. Defendant PCL Industries
Manufacturing Corporation is hereby ordered to pay plaintiff:
1) P504,906.00 plus 20% interest per annum from April 1994
until fully paid;
2) 25% of the above amount as and for attorney's fees;
andcralawlibrary
3) cost of suit.
The counterclaim of defendant is hereby dismissed for
insufficiency of evidence.
SO ORDERED.2
The RTC Decision was appealed by herein petitioner to the CA.
On February 21, 2001, the CA promulgated its Decision
affirming the RTC judgment. The CA held that there was
sufficient evidence to prove that herein petitioner had the
intention of defrauding private respondent when it contracted
the obligation because it agreed to pay within 30 days from the
date of purchase but once the merchandise was in its
possession, it refused to pay. Furthermore, the CA ruled that
the issue on the propriety of the issuance of the writ of
preliminary attachment should be laid to rest since petitioner
no longer questioned the trial court's orders before the higher
courts.
As to the alleged defect of the ink delivered by private
respondent, both the trial court and the CA found that the
evidence presented by petitioner was insufficient to prove that
it was indeed the ink from private respondent which caused the
unwanted smell in petitioner's finished plastic products. The
trial court's analysis of the evidence led it to the following
conclusions, to wit:
[D]efendant presented transmittal receipts, which allegedly
represent the items returned by defendant [herein petitioner]
to plaintiff [herein respondent].
xxx
A closer look at these three transmittal receipts would readily
show that they are all for deliveries made in 1993, whereas the
items admittedly received by defendant and listed in paragraph
2 of the Complaint are all delivered and dated from January 18,
1994 to April 14, 1994.
The items, therefore, returned for being defective and
communicated by defendant to plaintiff are for those printing
ink materials delivered in 1993 and these are not the items left
unpaid and in issue in this present Complaint.
There is no other proof of demand made by defendant to
plaintiff corporation as to communicate to plaintiff any defect
in the printing ink materials delivered in 1994 except the
demand letter (Exhibit "42") which is dated September 26,
1995.
As admitted by defendant's witness, Eleno Cayabyab, the
demands made by Mr. Jovencio Lim to plaintiff had been oral or
verbal only and made only on two occasions. In fact said
witness cannot remember exactly when these oral demands
were made by Mr. Jovencio Lim, x x x
xxx
As regards the testimony of defendant's witness Jovencio Lim
that defendant's end-users returned the plastic packaging
materials to defendant and defendant had to reimburse its
clients of the amount paid by them and defendant allegedly
suffered damages, defendant failed to present sufficient
evidence of this allegation. x x x3
Affirming the foregoing findings of the trial court, the CA
further noted that:
As may be observed, as early as January 31, 1994, the appellant
[herein petitioner] had received complaints from its customers
about the alleged unwanted smell of their plastic products.
However, no steps were taken to investigate which of its
several suppliers delivered the defective ink and, if indeed, the
appellee's ink materials were the cause of the smell, no
immediate communications were sent to the latter. On the
contrary, it (appellant) continued to place orders and receive
deliveries from the appellee. Worse, the appellant failed to
convincingly show that the appellant stopped using the subject
ink materials upon notice of its customers of the alleged
unwanted smell of the products. Conversely, the appellant
continued using the same in their production of plastic
materials which would only show that the cause of the alleged
stinking smell cannot be attributed to the subject ink materials
used. The appellant tried to convince us that the subject ink
materials were the same ink delivered by the appellee and used
in the products that were returned because of the unwanted
smell. However, its evidence fails to impress us.
There is no indication that the plasticized pouches printed by
the defendant-appellant and returned by its customers were
printed with the use of the paint delivered by the plaintiff-
appellee. The former's evidence on this point are either self-
serving or unreliable, or totally unworthy of credence, as
shown by the following:
1) The "work process" forms contain the names of two (2) or
three (3) suppliers, as shown by the following:
Exh. "12" - STOCK/ASA
"13" - SIMCOR/ASA
"14" - SIMCOR/ASA
"15" - SIMCOR/ASA
"16" - SYNPAC/ASA
"17" - SYNPAC/ASA
"18" - SYNPAC/ASA
"19" - SYNPAC/ASA
"20" - SYNPAC/ASA/CDI
"21" - SYNPAC/ASA
This is an indication that the supplier of the obnoxious paint
materials has not been properly identified or pinpointed.
2) The "Memorandum" to the appellant's Production
Department from its Records/Receiving Section is an internal
memo that does not indicate which of their several suppliers
delivered the "inferior quality of ink". No witness from the
appellant's Production Department was presented to attest
that the ink supplied by the appellee was found defective. Not
even the person who prepared the said "Work Process" sheets
was presented to explain the entries thereon.
3) Exhibits "30", "31" and "32" are supposedly memos from
Frank F. Tanos of the Omega Manufacturing (one of the
appellant's customers), alleging that they have rejected certain
printed materials due to "unwanted smell". Again, these
memos do not indicate the source of such unwanted smell. In
any case, the memos were respectively dated June 15, 1994,
July 15, 1994 and March 30, 1995 - - which dates are too far
away from the deliveries made by the appellee.
4) The defendant-appellant made returns of ink products to the
appellee much earlier on August 3, 1993, August 6, 1993,
October 13, 1993 and November 3, 1993 as shown by the
delivery receipts/return slips of such dates. According to the
appellee, these were samples that were really returnable if not
acceptable. This explanation appears to be plausible, since the
quantity involved appears to be unusually low, compared to
the questioned and unpaid deliveries. At any rate, no similar
delivery receipts or return slips were presented to show that
the subject ink materials were indeed rejected and returned by
the appellant to the appellee. On the contrary, the appellant
admits that they still have them in their possession for the
reason that they were not picked up by the appellee's
representative. Such reasoning appears to be shallow and
unworthy of credence. For if the materials were indeed not
picked up within a reasonable time by the appellee's
representative, the appellant should have taken steps to return
them; otherwise they will be held liable for the value thereof.
5) The defendant-appellant never made any written or formal
complaint about the alleged inferior quality ink and no steps
were taken to demand restitution or rectification.
Its letter dated June 30, 1995 was the first time it made a
communication to the appellee about the alleged inferior
quality of the ink delivered by the latter. This letter was its
answer to the appellee's letter of demand for payment.
Obviously, the appellant's letter was written to serve as an
excuse for its failure to pay for its contractual obligations. In
any case, as a reaction to such letter, the appellee dared the
appellant to return the materials within one week, through its
letter of July 16, 1995. Obviously, no such return was made.4
(Emphasis supplied)cralawlibrary
Petitioner then filed the present Petition for Review on
Certiorarion the following grounds:
I.
THE RESPONDENT COURT OF APPEALS ACTED WITH GRAVE
ABUSE OF DISCRETION IN ISSUING A WRIT OF PRELIMINARY
ATTACHMENT EX PARTE WITHOUT ANY LEGAL BASIS AND ON
GROUNDS NOT AUTHORIZED UNDER RULE 57 OF THE RULES OF
COURT
II.
THE RESPONDENT COURT OF APPEALS ACTED WITH GRAVE
ABUSE OF DISCRETION AS ITS JUDGMENT WAS BASED ON A
MISAPPREHENSION OF FACTS AND ITS FINDINGS ARE NOT
SUPPORTED BY THE EVIDENCE EXTANT IN THE RECORDS OF
THIS CASE
III.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION IN NOT REVERSING THE RULING OF THE
TRIAL COURT 5
First of all, although the petition states that it is one for
certiorari under Rule 65 of the Rules of Court as it imputes
grave abuse of discretion committed by the CA, the Court shall
treat the petition as one for review on certiorari under Rule 45,
considering that it was filed within the reglementary period for
filing a Petition for Review on Certiorari and the issues and
arguments raised basically seek the review of the CA judgment.
Secondly, it should be pointed out that petitioner mistakenly
stated that it was the CA that issued the writ of preliminary
attachment. Said writ was issued by the trial court. On appeal,
the CA merely upheld the trial court's order, ruling that the
applicant's (herein private respondent's) affidavit was sufficient
basis for the issuance of the writ because it stated that
petitioner had the intention of defrauding private respondent
by agreeing to pay its purchases within 30 days but then
refused to pay the same once in possession of the
merchandise.
The Court, however, finds the issuance of the Writ of
Preliminary Attachment to be improper. In Philippine Bank of
Communications v. Court
of Appeals,6 the Court held thus:
Petitioner cannot insist that its allegation that private
respondents failed to remit the proceeds of the sale of the
entrusted goods nor to return the same is sufficient for
attachment to issue. We note that petitioner anchors its
application upon Section 1(d), Rule 57. This particular provision
was adequately explained in Liberty Insurance Corporation v.
Court of Appeals, as follows'
To sustain an attachment on this ground, it must be shown that
the debtor in contracting the debt or incurring the obligation
intended to defraud the creditor. The fraud must relate to the
execution of the agreement and must have been the reason
which induced the other party into giving consent which he
would not have otherwise given. To constitute a ground for
attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud
should be committed upon contracting the obligation sued
upon. A debt is fraudulently contracted if at the time of
contracting it the debtor has a preconceived plan or intention
not to pay, as it is in this case. Fraud is a state of mind and need
not be proved by direct evidence but may be inferred from the
circumstances attendant in each case (Republic v. Gonzales, 13
SCRA 633). (Emphasis ours)
We find an absence of factual allegations as to how the fraud
alleged by petitioner was committed. As correctly held by
respondent Court of Appeals, such fraudulent intent not to
honor the admitted obligation cannot be inferred from the
debtor's inability to pay or to comply with the obligations.7
(Emphasis supplied)cralawlibrary
More recently, in Philippine National Construction Corporation
v. Dy,8 the Court ruled that the following allegations in an
affidavit to support the application for a Writ of Preliminary
Attachment is insufficient, to wit:
Radstock grounded its application for a Writ of Preliminary
Attachment on Section 1 (d) and (e) of Rule 57 of the Rules of
Court which provides:
SECTION 1. Grounds upon which attachment may issue. - A
plaintiff or any proper party may, at the commencement of the
action or at any time thereafter, have the property of the
adverse party attached as security for the satisfaction of any
judgment that may be recovered in the following cases:
...
(d) In an action against a party who has been guilty of fraud in
contracting the debt or incurring the obligation upon which the
action is brought, or in the performance thereof;
(e) In an action against a party who has removed or disposed of
his property, or is about to do so, with intent to defraud his
creditors;
...
In support of these grounds, the affidavit of merit alleged the
following:
3. Despite repeated demands and periodic statements of
accounts sent to PNCC for the settlement of the credit
obligation Yen 5.46 Billion, its interests and penalties within
three (3) days from demand in writing, and in the case of credit
obligation for P20,000,000 which PNCC had agreed to
punctually liquidate the said advances to its subsidiary, PNCC
failed to pay and honor its obligations herein stated.
xxx
5. That PNCC knowing that it is bankrupt and that it does not
have enough assets to meet its existing obligations is now
offering for sale its assets as shown in the reports published in
newspapers of general circulation.
6. That the above series of acts as enumerated in paragraphs 3,
4 and 5[,] Marubeni believes, constitute fraud on the part of
PNCC in contracting the obligations mentioned herein and will
surely prejudice its creditors.
xxx
We do not see how the above allegations, even on the
assumption they are all true, can be considered as falling within
sub-paragraphs (d) and (e). The first three assert, in essence,
that PNCC has failed to pay its debt and is offering for sale its
assets knowing that it does not have enough to pay its
obligations. As previously held, fraudulent intent cannot be
inferred from a debtor's inability to pay or comply with
obligations. Also, the fact that PNCC has insufficient assets to
cover its obligations is no indication of fraud even if PNCC
attempts to sell them because it is quite possible that PNCC
was entering into a bona fide good faith sale where at least fair
market value for the assets will be received. In such a situation,
Marubeni would not be in a worse position than before as the
assets will still be there but just liquidated. Also, that the
Financial Statements do not reflect the loan obligation cannot
be construed as a scheme to defraud creditors.
As to the last two paragraphs, these merely stated that while
PNCC continued to receive revenues from toll charges and
other loan obligations the debt to Marubeni remained unpaid.
Again, no fraud can be deduced from these acts. While these
may be sufficient averments to be awarded damages once
substantiated by competent evidence and for which a writ of
execution will issue, they are not sufficient to obtain the harsh
provisional remedy of preliminary attachment which requires
more than mere deliberate failure to pay a debt. (Emphasis
supplied)cralawlibrary
Similarly, in this case, the bare allegations in the applicant's
affidavit, to wit:
6. PCL Industries Manufacturing Corporation, after receiving
the above printing ink materials acted in bad faith when it
failed to comply with the terms and conditions of the sale
thereby prejudicing the interest of Asa Color & Chemical
Industries, Inc.
xxx
10. Defendant [herein petitioner] was guilty of fraud in
contracting the obligation when he [sic] agreed to pay the
purchases within 30 days from date of purchases but once in
possession of the merchandise, refused to pay his just and valid
obligation thereby using the capital of plaintiff [herein private
respondent] to the latter's prejudices [sic].9
are insufficient to prove that petitioner was guilty of fraud in
contracting the debt or incurring the obligation. The affidavit
does not contain statements of other factual circumstances to
show that petitioner, at the time of contracting the obligation,
had a preconceived plan or intention not to pay. Verily, in this
case, the mere fact that petitioner failed to pay its purchases
upon falling due and despite several demands made by private
respondent, is not enough to warrant the issuance of the harsh
provisional remedy of preliminary attachment.
However, with regard to the other issues raised in this petition,
the Court finds the same unmeritorious.
This Court reiterated in Child Learning Center, Inc. v. Tagario,10
the well-settled rule that:
Generally, factual findings of the trial court, affirmed by the
Court of Appeals, are final and conclusive and may not be
reviewed on appeal. The established exceptions are: (1) when
the inference made is manifestly mistaken, absurd or
impossible; (2) when there is grave abuse of discretion; (3)
when the findings are grounded entirely on speculations,
surmises or conjectures; (4) when the judgment of the Court of
Appeals is based on misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when the Court of Appeals, in
making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and
appellee; (7) when the findings of fact are conclusions without
citation of specific evidence on which they are based; (8) when
the Court of Appeals manifestly overlooked certain relevant
facts not disputed by the parties and which, if properly
considered, would justify a different conclusion; and (9) when
the findings of fact of the Court of Appeals are premised on the
absence of evidence and are contradicted by the evidence on
record. (Emphasis supplied)cralawlibrary
Petitioner insists that the CA should have given weight to its
evidence, i.e., the work processes (Exhibits "12" to "21"), which
supposedly proved that respondent ASA supplied the ink that
caused the unpleasant smell of petitioner's finished products.
Petitioner argues that the CA erred in concluding that the work
processes failed to prove that the defective ink definitely came
from respondent because said documents showed not only the
name of respondent ASA Color as supplier, but also the names
of several other suppliers. Petitioner now tries to explain that
the other names of suppliers appearing on the work processes
were suppliers of plastic materials, so the only supplier of ink
appearing on said documents is respondent ASA. It is further
pointed out that, as testified by Jovencio Lim (Lim), petitioner's
President, during the period covered by the Work Processes,
they had only two suppliers of ink, CDI Sakada and respondent
ASA Color.
The Court subjected the records of this case to close scrutiny,
but found that petitioner's allegation that the CA judgment is
based on misapprehension of facts, is absolutely unfounded.
There is no testimonial evidence whatsoever to support
petitioner's belated explanation that the other names of
suppliers appearing on the work processes are suppliers of
plastic materials and not ink. Moreover, petitioner's witnesses
contradict each other. Lim claims that during the period
covered by the work processes, they had only 2 suppliers of ink,
namely, CDI Sakada and ASA Color.11 On the other hand,
contrary to Lim's claim, Victor Montañez, petitioner's Head of
the Accounting Department, testified that at that time, they
had three or four suppliers of ink materials.12 The work
process form dated April 29, 1994 marked as Exhibit "20" also
listed the suppliers as "SYNPAC/ASA/ CDI," and the colors used
as "Brown-ASA" and "Yellow-CDI." Hence, petitioner's own
evidence reveals that there were at least two suppliers of ink
for that batch of production, as Lim has stated that both ASA
and CDI are suppliers of ink materials.13 Hence, the CA was
correct in ruling that petitioner's evidence failed to prove that it
was indeed respondent ASA Color who supplied the defective
ink.
Having failed to prove that the ink materials delivered by
respondent were defective, petitioner does not have any basis
for claiming the right to return and not pay for the materials it
purchased from respondent. It is, therefore, no longer
necessary to discuss whether it was the obligation of
respondent to pick-up the ink from petitioner's warehouse.
Petitioner is likewise wrong in assuming that the CA totally
disregarded the testimony of Frank Tanos (Tanos) who
withdrew his testimony on February 24, 1998, or almost a year
after testifying that petitioner's plastic products were rejected
by customers due to the bad smell of paint. The CA made no
ruling on the admissibility of Tanos' testimony. The appellate
court merely stated that the memos (Exhibits "30" - "32") from
said witness also do not prove the source of the unwanted
smell. Thus, the CA obviously considered Tanos' testimony and
the documents he identified for whatever they were worth, but
still found them unconvincing to prove petitioner's claim that it
was respondent who delivered defective ink materials.
Clearly, the findings of fact of both the trial court and the CA, as
quoted above, are strongly rooted on testimonial and
documentary evidence submitted by both parties. This case
evidently does not fall under any of the enumerated exceptions
to the general rule that factual findings of the trial court,
affirmed by the CA, are final and conclusive and may not be
reviewed on appeal.
IN VIEW OF THE FOREGOING, the petition is partly GRANTED.
Insofar as the issuance of the Writ of Attachment is concerned,
the Court finds the same improper, hence, the attachment over
any property of petitioner by the writ of preliminary
attachment is ordered LIFTED effective upon the finality of this
Decision. In all other respects, the Decision of the Court of
Appeals dated February 21, 2001 and its Resolution dated May
9, 2001 are AFFIRMED.
SO ORDERED.
[G.R. No. 93262. November 29, 1991.]
DAVAO LIGHT & POWER CO., INC., Petitioner, v. 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."cralaw virtua1aw library
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."cralaw
virtua1aw library
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 been 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:jgc:chanrobles.com.ph
". . . (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)."cralaw
virtua1aw library
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 plaintiffs
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.:
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 en 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.chanrobles.com:cralaw:red
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:jgc:chanrobles.com.ph
". . . 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."cralaw virtua1aw library
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. . . ."cralaw virtua1aw library
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."cralaw virtua1aw library
Reversal of this Decision of the Court of Appeals of May 4, 1990
is what Davao Light seeks in the present appellate
proceedings.chanrobles virtual lawlibrary
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.chanrobles.com:cralaw:red
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, 26 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.chanrobles virtual
lawlibrary
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 been 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.:chanrobles virtual lawlibrary
‘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:chanrob1es virtual 1aw library
(a) When an attachment may not be dissolved by a showing of
its irregular or improper issuance:jgc:chanrobles.com.ph
". . . (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)."cralaw
virtua1aw library
(b) Effect of the dissolution of a preliminary attachment on the
plaintiffs attachment bond:jgc:chanrobles.com.ph
". . . 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 plaintiffs 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." cralawnad
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’
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."cralaw
virtua1aw library
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.
G.R. No. 218232, July 24, 2018
RAMON "BONG" B. REVILLA, JR., Petitioner, v.
SANDIGANBAYAN (FIRST DIVISION) AND PEOPLE OF THE
PHILIPPINES, Respondents.
G.R. No. 218235
RICHARD A. CAMBE, Petitioner, v. SANDIGANBAYAN (FIRST
DIVISION), PEOPLE OF THE PHILIPPINES, AND OFFICE OF THE
OMBUDSMAN, Respondents.

G.R. No. 218266
JANET LIM NAPOLES, Petitioner, v. SANDIGANBAYAN (FIRST
DIVISION), CONCHITA CARPIO MORALES, IN HER CAPACITY AS
OMBUDSMAN, AND PEOPLE OF THE PHILIPPINES, Respondents.
G.R. No. 218903
PEOPLE OF THE PHILIPPINES, Petitioner, v. SANDIGANBAYAN
(FIRST DIVISION), RAMON "BONG" B. REVILLA, JR., AND
RICHARD A. CAMBE, Respondents.
G.R. No. 219162
RAMON "BONG" B. REVILLA, JR., Petitioner, v.
SANDIGANBAYAN (FIRST DIVISION) AND PEOPLE OF THE
PHILIPPINES, Respondents.
DECISION
CARPIO, J.:
The Case
The petitions for certiorari1 in G.R. Nos. 218232, 218235, and
218266, filed by petitioners Ramon "Bong" B. Revilla, Jr.
(Revilla), Richard A. Cambe (Cambe), and Janet Lim Napoles
(Napoles), respectively, assail the Resolution2 dated 1
December 2014 of the Sandiganbayan denying them bail and
the Resolution3 dated 26 March 2015 denying their motion for
reconsideration in Criminal Case No. SB-14-CRM-0240.
In G.R. No. 218903, the Office of the Ombudsman assails the
Resolution4 dated 4 September 2014 of the Sandiganbayan
denying the prosecution's motion to transfer the place of
detention of Revilla and Cambe, and the Resolution5 dated 20
May 2015 denying the motion for reconsideration. In G.R. No.
219162, Revilla assails the Resolution6 dated 5 February 2015
of the Sandiganbayan granting the prosecution's motion for the
issuance of a writ of preliminary attachment and the
Resolution7 dated 28 May 2015 denying his motion for
reconsideration.
The Facts
The cases before us stemmed from the Information dated 5
June 2014 filed by the Office of the Ombudsman in the
Sandiganbayan charging petitioners Revilla, Cambe, and
Napoles, among others, with the crime of Plunder, defined and
penalized under Section 2 of Republic Act No. (RA) 7080, as
amended. The Amended Information8 reads:
In 2006 to 2010, or thereabout, in the Philippines, and within
this Honorable Court's jurisdiction, above-named accused
RAMON "BONG" BAUTISTA REVILLA, JR., then a Philippine
Senator and RICHARD ABDON CAMBE, then DIRECTOR III at the
Office of Senator Revilla, Jr., both public officers, committing
the offense in relation to their respective offices, conspiring
with one another and with JANET LIM NAPOLES, RONALD JOHN
B. LIM, and JOHN RAYMUND S. DE ASIS, did then and there
willfully, unlawfully, and criminally amass, accumulate and/or
acquire ill-gotten wealth amounting to at least TWO HUNDRED
TWENTY FOUR MILLION FIVE HUNDRED TWELVE THOUSAND
FIVE HUNDRED PESOS (Php224,512,500.00), through a
combination or series of overt criminal acts, as follows:
a) by repeatedly receiving from NAPOLES and/or her
representatives LIM, DE ASIS, and others, kickbacks or
commissions under the following circumstances: before, during
and/or after the project identification, NAPOLES gave, and
REVILLA, JR. and/or CAMBE received, a percentage of the cost
of a project to be funded from REVILLA, JR.'s Priority
Development Assistance Fund (PDAF), in consideration of
REVILLA, JR.'s endorsement, directly or through CAMBE, to the
appropriate government agencies, of NAPOLES' non-
government organizations which became the recipients and/or
target implementors of REVILLA, JR.'s PDAF projects, which
duly-funded projects turned out to be ghosts or fictitious, thus
enabling NAPOLES to misappropriate the PDAF proceeds for
her personal gain;
b) by taking undue advantage, on several occasions, of their
official positions, authority, relationships, connections, and
influence to unjustly enrich themselves at the expense and to
the damage and prejudice, of the Filipino people and the
Republic of the Philippines.
CONTRARY TO LAW.9
Upon arraignment, Napoles and Cambe pleaded not guilty to
the charge against them, while petitioner Revilla refused to
enter any plea; thus, the Sandiganbayan entered a plea of not
guilty in his behalf pursuant to Section 1(c), Rule 116 of the
Rules of Court.10
In a Resolution11 dated 19 June 2014, the Sandiganbayan
issued warrants of arrest against Revilla, Cambe, and Napoles.
On the same day, Revilla voluntarily surrendered to the
Philippine National Police (PNP) and filed a Motion to Elect
Detention Facilities Ad Cautelam12 praying for his detention at
the PNP Custodial Center in Camp Crame. On 20 June 2014,
Cambe also voluntarily surrendered to the Sandiganbayan and
filed an Urgent Motion to Commit Accused to Criminal
Investigation and Detection Group (CIDG)13 pending trial of the
case.
In two separate Resolutions14 both dated 20 June 2014, the
Sandiganbayan ordered the turn over of Revilla and Cambe to
the PNP CIDG, Camp Crame, Quezon City for detention at its
PNP Custodial Center Barracks.
G.R. Nos. 218232, 218235 and 218266
Revilla filed a Petition for Bail Ad Cautelam dated 20 June 2014;
Cambe filed an Application for Bail15 dated 23 June 2014; and
Napoles filed a Joint Petition for Bail dated 25 June 2014,
together with co-accused Ronald John Lim (Lim) and John
Raymund De Asis (De Asis).16
Thereafter, the Sandiganbayan conducted the bail hearings for MAMFI/ SDPFFI
Revilla, Cambe, and Napoles. 10 million
17,250,000.00
During the bail hearings, the prosecution presented nine June 24, 2008
witnesses, namely: Commission on Audit (COA) Assistant July 3, 2008
Commissioner in the Special Services Sector Susan P. Garcia; 3. ROCS-08-05660
Department of Budget and Management (DBM) Directors 15 million
Carmencita N. Delantar and Lorenzo C. Drapete; the NABCOR
whistleblowers Benhur K. Luy (Luy), Merlina P. Suñas (Suñas), MAMFI
Marina C. Sula (Sula), and Mary Arlene Joyce B. Baltazar 7,750,000.00
(Baltazar); National Bureau of Investigation (NBI) Special July 23, 2008
Investigator III Joey I. Narciso (Narciso); and Anti-Money 4. D-08-9558
Laundering Council (AMLC) Bank Officer II Atty. Leigh Vhon 40 million
Santos (Santos). TLRC
SDPFFI
The Sandiganbayan summarized the prosecution's evidence as 17 million
follows: Dec. 5, 2008
From 2007 to 2009, accused Revilla was allocated and utilized 5. ROCS-08-09789
[Priority Development Assistance Fund (PDAF)] in the total 40 million
amount of P517,000,000.00, covered by twelve (12) [Special TLRC
Allotment Release Orders (SAROs)], for livelihood and SDPFFI
agricultural projects. He named the [Technology Livelihood 2 million
Resource Center (TLRC), National Agri-Business Corporation 18 million
(NABCOR), and National Livelihood Development Corporation Dec. 12, 2008
(NLDC)] to be the [implementing agencies (IAs)], and endorsed Dec. 15, 2008
five (5) of Napoles' [non-governmental organization (NGOs)], 6. G-09-07065
i.e., [Agri & Economic Program for Farmers Foundation, Inc. 80 million
(AEPFFI), Philippine Social Development Foundation, Inc. NLDC
(PSDFI), Masaganang Ani Para sa Magsasaka Foundation, Inc. AEPFFI
(MAMFI), Social Development Program for Farmers and
Foundation, Inc. (SDPFFI), and Agricultura Para Sa Magbubukid APMFI
Foundation, Inc. (APMFI),] as project partners. Of the 12 SAROs, 9 million
Luy identified six (6) SAROs in his Summary of Rebates, showing 9 million
how he came up with the supposed P224,512,500.00 2 million
rebates/commissions/kickbacks mentioned in the Information. 12 million
The six (6) SAROs with their corresponding amounts, 8 million
beneficiary NGOs, IAs, and the amount of commissions Oct. 6, 2009
received by Revilla, through Cambe, mentioned in Luy's Oct. 6, 2009
Summary are shown in the table below: Oct. 6, 2009
Oct. 22, 2009
TABLE A Oct. 22, 2009
TOTAL
SARO Php 265 million
Amount
(Php) Php119,500,000.00
IA
NGO Other commissions without corresponding SARO numbers
Rebates Received lifted from Luy's Summary are shown hereunder.
(Php)
Date Received TABLE B
1. ROCS-07-05486
25 million Date Received
TLRC IA/Particulars
AEPFFI Rebates Received
7.5 million (Php)
March 27, 2007 April 6, 2006 PDAF-DA 2006 5 million June 6, 2006 DA - 2006 5
2. ROCS-08-05254 million April 12, 2007 DA - 50 M 9.5 million April 19, 2007
65 million PDAF-DA 50 M and TLRC 50 M 2007 3 million August 2, 2007 2
NABCOR million August 10, 2007 3 million October 16, 2007 PDAF 82 M
5 million October 25, 2007 PDAF 82 M 2 million November 15,
2007 PDAF DA and TLRC 82 M 2007 project 5 million November
23, 2007 PDAF 82 M project 3.5 million December 21, 2007
PDAF 82 M project 10 million December 26, 2007 PDAF 82 M
project 10.5 million May 9, 2008 PDAF 80 M 5 million October
24, 2008 PDAF 50 M 3 million March 17, 2010 28,512,500.00
April 28, 2010 5 million TOTAL Php105,012,500.00
Total Rebates Received Table A + Table B Php224,512,500.00
Accused Revilla's commissions represented 50% of the project
cost, 25% percent of which was released by accused Napoles
upon showing that the DBM already received accused Revilla's
endorsement letter with project listings. The other 25% was
released upon issuance of the SARO. On the other hand,
accused Cambe's share was 5% of the project cost.
But there were instances that, prior to the issuance of the
SARO and preempting its release, accused Revilla advanced
money from accused Napoles. There were also times that his
share was given to him in tranches until the full amount was
paid. Thus, there appear entries in Luy's Summary of Rebates
without corresponding SARO numbers, and in amounts less
than 25% or 50% of the amount of the SARO. Accused Cambe
got his commission either together with that of accused Revilla
or separately. To acknowledge receipt of the rebates for
himself or that for accused Revilla, accused Napoles' office had
accused Cambe sign JLN vouchers which, however, were
already shredded upon the instruction of accused Napoles.
Upon release of the SARO, documents like letters signed by
accused Revilla indorsing accused Napoles' NGO, MOAs signed
by accused Cambe, project proposal, and foundation profile,
were submitted to the IA.
Subsequently, the IA, after deducting a 3% management fee,
released a check in the name of the NGO endorsed by accused
Revilla. Accused Napoles had either the president of the payee
NGO or anybody from his trusted employees receive the check.
Accused Napoles' representative signed the IA voucher and, in
return, issued a receipt to the IA in the name of the foundation.
The check was then deposited to the account of the payee
foundation. After it was cleared, accused Napoles had her
trusted employees withdraw the proceeds of the check. The
money was brought to accused Napoles, usually to her office at
2502 Discovery Center, and was disposed of at her will or upon
her instruction. Part of the proceeds was used to pay the
commissions of accused Revilla and Cambe. Some were kept at
the office vault or was brought to her condo unit at 18D Pacific
Plaza. Accused Napoles' share was pegged at 32% and 40%,
depending on the IA, and she used it to buy dollars and to
acquire properties in the Philippines and abroad. She also made
deposits in a foreign account to support her daughter Jean and
accused Napoles' brother Reynald Lim in the US.
To make it appear that there were implementations of the
projects for which accused Revilla's PDAFs were intended, the
NGOs submitted liquidation documents such as official receipts,
delivery receipts, accomplishment reports, which were all fake,
and lists of beneficiaries which were just fabricated having only
signed by Napoles' employees, children, household helpers,
drivers, and security guards. The receipts were issued by bogus
suppliers which were likewise owned or controlled by accused
Napoles.17
On the other hand, the defense presented Atty. Desiderio A.
Pagui (Pagui), a lawyer and retired document examiner of the
NBI, as expert witness. In his Report No. 09-10-2013, attached
to his Judicial Affidavit dated 12 November 2014 and adopted
as his direct testimony, Pagui stated that upon comparison of
Revilla's purported signatures on the photocopies of the PDAF
documents and the standard documents bearing Revilla's
authentic signature, the purported signatures are not authentic
and affixed by Revilla. Pagui examined the originals and
photocopies of the PDAF documents in open court using a
magnifying glass, and he maintained that the purported
signatures are not authentic and affixed by Revilla. Pagui
likewise testified that he also examined the photocopies of
documents with signatures of Cambe and his findings were
embodied in Report No. 10-11-2013.
On cross-examination, Pagui testified that during his stint as
document examiner in the NBI, it would take them an average
of one or two days to examine a signature, their findings would
be reviewed by the majority of the examiners present in the
Questioned Document Division of the NBI, and it was the NBI's
policy not to examine photocopies of documents as safety
precaution. He, however, believed that an examination of the
photocopies can now be made since there are already clear
copies. He confirmed that it took him three months after the
submission of the specimen signature and questioned signature
to finish his Report, while it took him only a few minutes to
make a conclusion that the photocopies are faithful
reproduction of the original. Pagui was paid a professional fee
of P200,000.00 for examining the signatures of Revilla and
Cambe.
Cambe dispensed with the presentation of his witness, Fabian
S. Fabian, supervisor of the Records Section of the Philippine
Airlines after the parties stipulated on the authenticity and due
execution of the Certification he issued and the Passenger
Manifest for Flight Nos. PR 102 and PR 103. Napoles likewise
dispensed with the testimony of Joel M. de Guzman,
representative of the Bureau of Immigration, after the parties
stipulated on the authenticity and due execution of her
immigration records. Both Cambe and Napoles adopted the
direct examination of Pagui.
The Sandiganbayan thereafter admitted all the documentary
exhibits of Revilla, Cambe, and Napoles except for Exhibits 273
to 277 of Revilla for lack of sponsorship. Revilla made a tender
of excluded exhibits and rested his case. Cambe and Napoles
also rested their case relative to their application for bail.
In a Resolution dated 1 December 2014,18 the Sandiganbayan
denied the separate applications for bail filed by Revilla,
Cambe, and Napoles. The Sandiganbayan held that the
prosecution duly established with strong evidence that Revilla,
Cambe, and Napoles, in conspiracy with one another,
committed the crime of plunder defined and penalized under
RA 7080; thus, they are not entitled to the constitutional right
to bail.
In a Resolution dated 26 March 2015,19 the Sandiganbayan
denied for lack of merit: (a) Napoles' Motion for
Reconsideration dated 17 December 2014; (b) Revilla's
Omnibus Motion: (1) for Reconsideration, and (2) To Adduce
Additional Evidence dated 17 December 2014; and (c) Cambe's:
(1) Motion for Reconsideration dated 15 December 2014, and
(2) Motion to Adduce Additional Evidence and Request for
Subpoena embodied in his Reply dated 28 January 2015.
Thus, Revilla, Cambe, and Napoles filed their separate petitions
for certiorari assailing the Resolutions of the Sandiganbayan
before this Court. The petition filed by Revilla is docketed as
G.R. No. 218232, the petition filed by Cambe is docketed as
G.R. No. 218235, and the petition filed by Napoles is docketed
as G.R. No. 218266.
On 21 December 2016, Revilla filed a Motion to Withdraw20
the Petition for Certiorari he filed before this Court alleging that
"[c]onsidering, however, that the presentation of prosecution
evidence in the Plunder Case below will already commence on
12 January 2017, and that trial will be conducted every
Thursday thereafter, petitioner will avail of the remedies
available to him in said proceedings once the insufficiency of
the evidence against him is established."21
G.R. No. 218903
Meanwhile, on 14 July 2014, the Office of the Ombudsman,
through the Office of the Special Prosecutor, filed a Motion to
Transfer the Place of Detention of Accused22 Revilla, Cambe,
and Napoles to the Bureau of Jail Management and Penology
(BJMP) facility in Camp Bagong Diwa or other similar facilities of
the BJMP. The motion states that the PNP Custodial Center is
not a detention facility within the supervision of BJMP under
RA 6975 and their continued detention in a non-BJMP facility
affords them special treatment. In a Manifestation dated 4
August 2014, the prosecution alleged that the Sandiganbayan
ordered the detention of Napoles in the BJMP facility in Camp
Bagong Diwa; thus, as for Napoles, the motion of the
prosecution became moot.
In his Opposition23 dated 26 July 2014, Revilla alleged that his
detention in the PNP Custodial Center is in accord with the
Rules and upon a valid resolution of the Sandiganbayan. On 6
August 2014, Cambe also filed his Opposition24 to the Motion
to Transfer the place of his detention.
In a Resolution25 dated 4 September 2014, the Sandiganbayan
denied the motion for failure to advance justifiable grounds for
Revilla and Cambe's transfer. The Sandiganbayan held that
detention in facilities other than a jail is sanctioned in our
jurisdiction and there is no law mandating that detention
prisoners shall only be detained in a jail supervised by the
BJMP. The Sandiganbayan also found that it was not shown
that Revilla and Cambe were granted benefits above the
standards set for other detention prisoners.
The prosecution moved for reconsideration of the
Sandiganbayan Resolution, while Revilla and Cambe filed their
separate Opposition to the motion for reconsideration.
In a Manifestation (Re: Unauthorized Movement of Accused
Revilla on 14 February 2015) with Motion (For the Issuance of
an Order Directing the Concerned PNP Officials to Explain)26
dated 27 February 2015, the prosecution alleged that Revilla
was allowed to attend the birthday celebration of Juan Ponce
Enrile in the PNP General Hospital under the guise of a medical
emergency on 14 February 2015, bolstering its argument that
Revilla's detention in the PNP Custodial Center is improper.
In his Comment27 to the Manifestation, PDDG Leonardo A.
Espina alleged that he directed the CIDG to investigate the
incident, and he approved the recommendations of the CIDG to
file an administrative case for Grave Misconduct and violation
of PNPHSS 2012 Manual of Operations, and criminal case
against PSUPT Eulogio Lovello R. Fabro (Fabro), PSINSP Celina
D. Tapaoan (Tapaoan), and PO2 Jaydie Pelagio upon finding
that Fabro and Tapaoan connived to facilitate the visit of Revilla
to Enrile and tried to cover it up by requesting the attending
physician PCINSP Duds Raymond Santos to change his
statement.
In a Resolution28 dated 20 May 2015, the Sandiganbayan
denied the motion for reconsideration of the prosecution for
lack of merit. The Sandiganbayan did not consider as sufficient
reason the reported unauthorized visit of Revilla to the hospital
room of Enrile to justify his transfer to Camp Bagong Diwa,
since the concerned PNP officials have already been
admonished for failure to comply with the Sandiganbayan's
Order.
Thus, the Office of the Ombudsman, through the Office of the
Special Prosecutor, filed a petition for certiorari before us
assailing the Sandiganbayan Resolutions dated 4 September
2014 and 20 May 2015. This petition is docketed as G.R. No.
218903.
G.R. No. 219162
On 27 October 2014, the Office of the Ombudsman, through
the Office of the Special Prosecutor, filed an Ex Parte Motion
for Issuance of Writ of Preliminary Attachment/Gamishment29
against the monies and properties of Revilla to serve as security
for the satisfaction of the amount of P224,512,500.00 alleged
as ill-gotten wealth, in the event that a judgment is rendered
against him for plunder. The motion states that there is an
imminent need for the issuance of the ex parte writ to prevent
the disappearance of Revilla's monies and properties found to
be prima facie unlawfully acquired, considering that the AMLC
reported that many investment and bank accounts of Revilla
were "tenninated immediately before and after the PDAF
scandal circulated in [the] media,"30 and Revilla himself
publicly confinned that he closed several bank accounts when
the PDAF scam was exposed. The details of the monies and
properties sought to be attached were attached as Annex "B-
Motion" in the prosecution's motion.
On 14 November 2014, Revilla filed an Opposition31 to the
prosecution's motion, arguing that the factual basis for the
issuance of the writ is yet to be proven, and that the issuance
of the writ would unduly preempt the proceedings in his bail
application.
On 28 January 2015, the prosecution filed an Urgent Motion to
Resolve Ex Parte Motion for Issuance of Writ of Preliminary
Attachment/Garnishment,32 alleging that the safeguarding of
Revilla's properties has become even more necessary after the
Sandiganbayan denied Revilla's bail application and ruled that
there is strong evidence of his guilt.
In a Resolution33 dated 5 February 2015, the Sandiganbayan
granted the prosecution's motion upon finding of its sufficiency
both in form and substance. The Sandiganbayan held that the
issuance of a writ of preliminary attachment is properly
anchored on Sections I and 2 of Rule 57, and Sections 1 and 2
(b) and (c) of Rule 127 of the Rules of Court. Thus, the
Sandiganbayan issued a Writ of Attachment directed to the
Acting Chief, Sheriff and Security Services of the
Sandiganbayan. On 10 July 2015, the Sandiganbayan granted
the prosecution's amendatory motion and issued an Alias Writ
of Preliminary Attachment, which included the properties
under the known aliases or other names of Revilla and his
spouse, Lani Mercado.34
Revilla filed a motion for reconsideration, which the
Sandiganbayan denied in a Resolution35 dated 28 May 2015.
The Sandiganbayan held that the writ of preliminary
attachment is not the penalty of forfeiture envisioned under
Section 2 of RA 7080, contrary to Revilla's argument. The
Sandiganbayan further elucidated that the issuance of the writ
is an ancillary remedy which can be availed of during the
pendency of the criminal case of plunder, and it is not
necessary to await the final resolution of the bail petition
before it can be issued.
Thus, Revilla filed a petition for certiorari before us assailing the
Sandiganbayan Resolutions dated 5 February 2015 and 28 May
2015. This petition is docketed as G.R. No. 219162.
In a Resolution36 dated 4 August 2015, the Court En Banc
resolved to consolidate G.R. No. 219162 (Ramon "Bong" Revilla,
Jr. v. Sandiganbayan [First Division]) and People of the
Philippines); G.R. No. 218232 (Ramon "Bong" Revilla, Jr. v.
Sandiganbayan [First Division] and People of the Philippines);
G.R. No. 218235 (Richard A. Cambe v. Sandiganbayan [First
Division], People of the Philippines, and Office of the
Ombudsman); G.R. No. 218266 (Janet Lim Napoles v.
Sandiganbayan [First Division], Hon. Conchita Carpio Morales,
in her capacity as Ombudsman, and People of the Philippines);
and G.R. No. 218903 (People of the Philippines v.
Sandiganbayan [First Division], Ramon "Bong" Bautista Revilla,
Jr. and Richard A. Cambe).
In a Resolution37 dated 21 February 2017, the Court En Banc
resolved to note the compliance dated 10 February 2017 filed
by the counsel of Revilla informing the Court that Revilla's
Motion to Withdraw dated 14 December 2016 pertains only to
the petition in G.R. No. 218232.
The Issues
In G.R. No. 218232, Revilla raises the following issue for
resolution:
The Sandiganbayan committed grave abuse of discretion
amounting to lack or excess of jurisdiction in denying
petitioner's application for admission to bail despite the fact
that the evidence on record do not show a clear and strong
evidence of his guilt [for] the crime of plunder.38
In G.R. No. 218235, Cambe argues that the Sandiganbayan
committed grave abuse of discretion amounting to lack or
excess of jurisdiction in issuing the assailed resolutions:
A. The denial of petitioner's application for bail was based on
Criminal Procedure 1900 (General Order No. 58), which
requires a much lower quantum of proof to deny bail (i.e.,
proof of guilt is evident or presumption of guilt is strong), and
not on Section 13, Article III of the 1987 Philippine Constitution,
which requires proof that "evidence of guilt is strong."
B. The denial of petitioner's motion for reconsideration was
based on the concept of "totality of evidence" which is
applicable in Writ of Arnparo cases only.
C. Even assuming that "proof evident," "presumption great," or
proof that "the presumption of guilt is strong" are the tests to
determine whether petitioner may be granted or denied bail,
the assailed resolutions were based on mere presumptions and
inferences.39
In G.R. No. 218266, Napoles alleged that the Sandiganbayan
committed grave abuse of discretion in ruling:
A. that the prosecution was able to prove with strong evidence
that [Revilla] and [Cambe] conspired with [Napoles], in
amassing, accumulating, and acquiring ill-gotten wealth. Thus,
their petition for bail should be denied.
B. that the hard disk, disbursement ledger and the summary of
rebates are reliable and with integrity.
C. [that] the testimonies of the witnesses and the documents
they [submitted are credible].
D. [that] x x x that the evidence of the prosecution prove[s]
plunder.40
In G.R. No. 218903, the Office of the Ombudsman, through the
Office of the Special Prosecutor, alleged that the
Sandiganbayan committed grave abuse of discretion amounting
to lack and/or excess of jurisdiction:
A. when it substituted its own judgment and refused to apply
the clear mandate of [RA 6975].
B. when it denied the transfer of private respondents to a
BJMP-operated facility despite the absence of cogent reasons
to justify their detention in a facility other than that prescribed
by law.
C. when it refused to recognize that the continued detention of
private respondents at Camp Crame affords them special
treatment and subjects them to different rules and
procedures.41
In G.R. No. 219162, Revilla alleged that the Sandiganbayan
committed grave abuse of discretion amounting to lack or
excess of jurisdiction in granting the State's Ex-Parte Motion for
the issuance of a writ of preliminary attachment considering
that:
A. the issuance of the assailed writ is erroneous and premature.
The plunder law does not allow the issuance of a writ of
preliminary attachment, as it amounts to a prejudgment and
violates petitioner's constitutional rights to presumption of
innocence and due process; and
B. there is neither legal nor factual basis for the issuance of the
writ of preliminary attachment or garnishment.42
The Ruling of the Court
G.R. Nos. 218232, 218235, and 218266
At the outset, we note that Revilla withdrew his petition before
the Court assailing the Resolution of the Sandiganbayan
denying him bail. In withdrawing his petition, he stated "[he]
will avail of the remedies available to him in [the plunder case
before the Sandiganbayan] once the insufficiency of the
evidence against him is established."43 Accordingly, we no
longer find it necessary to rule upon the issues raised by Revilla
in his petition in G.R. No. 218232.
Now, we proceed to determine whether or not the
Sandiganbayan committed grave abuse of discretion amounting
to lack or excess of jurisdiction in denying bail to Cambe and
Napoles, who are charged with the crime of plunder, after
finding strong evidence of their guilt.
Judicial discretion, by its very nature, involves the exercise of
the judge's individual opinion and the law has wisely provided
that its exercise be guided by well-known rules which, while
allowing the judge rational latitude for the operation of his own
individual views, prevent them from getting out of control.44
We have held that discretion is guided by: first, the applicable
provisions of the Constitution and the statutes; second, by the
rules which this Court may promulgate; and third, by those
principles of equity and justice that are deemed to be part of
the laws of the land.45 The discretion of the court, once
exercised, cannot be reviewed by certiorari nor controlled by
mandamus save in instances where such discretion has been so
exercised in an arbitrary or capricious manner.46
Section 13, Article III of the 1987 Constitution provides that:
All persons, except those charged with offenses punishable by
reclusion perpetua when evidence of guilt is strong, shall,
before conviction, be bailable by sufficient sureties, or be
released on recognizance as may be provided by law. The right
to bail shall not be impaired even when the privilege of the writ
of habeas corpus is suspended. Excessive bail shall not be
required. (Emphasis supplied)
Rule 114 of the Rules of Court emphasizes that offenses
punishable by death, reclusion perpetua or life imprisonment
are non-bailable when the evidence of guilt is strong:
Sec. 7. Capital offense or an offinse punishable by reclusion
perpetua or life imprisonment, not bailable. - No person
charged with a capital offense, or an offense punishable by
reclusion perpetua or life imprisonment, shall be admitted to
bail when evidence of guilt is strong, regardless of the stage of
the criminal prosecution. (Emphasis supplied)
The grant or denial of bail in an offense punishable by reclusion
perpetua, such as plunder, hinges on the issue of whether or
not the evidence of guilt of the accused is strong. This requires
the conduct of bail hearings where the prosecution has the
burden of showing that the evidence of guilt is strong,47
subject to the right of the defense to cross-examine witnesses
and introduce evidence in its own rebuttal.48 The court is to
conduct only a summary hearing, or such brief and speedy
method of receiving and considering the evidence of guilt as is
practicable and consistent with the purpose of the hearing
which is merely to determine the weight of evidence for
purposes of bail.49
The order granting or refusing bail which shall thereafter be
issued must contain a summary of the evidence for the
prosecution.50 The summary of the evidence shows that the
evidence presented during the prior hearing is formally
recognized as having been presented and most importantly,
considered.51 The summary of the evidence is the basis for the
judge's exercising his judicial discretion.52 Only after weighing
the pieces of evidence as contained in the summary will the
judge formulate his own conclusion as to whether the evidence
of guilt against the accused is strong based on his discretion.53
Thus, judicial discretion is not unbridled but must be supported
by a finding of the facts relied upon to form an opinion on the
issue before the court.54 It must be exercised regularly, legally
and within the confines of procedural due process, that is, after
evaluation of the evidence submitted by the prosecution.55
Any order issued in the absence thereof is not a product of
sound judicial discretion but of whim, caprice, and outright
arbitrariness.56
In the present case, we find that the Sandiganbayan did not
abuse its discretion amounting to lack or excess of jurisdiction
when it denied bail to Cambe and Napoles, upon a finding of
strong evidence that they committed the crime of plunder in
conspiracy with one another.
Plunder, defined and penalized under Section 257 of RA 7080,
as amended, has the following elements: (a) that the offender
is a public officer, who acts by himself or in connivance with
members of his family, relatives by affinity or consanguinity,
business associates, subordinates or other persons; (b) that he
amasses, accumulates or acquires ill-gotten wealth through a
combination or series of overt or criminal acts described in
Section 1(d)58 hereof; and (c) that the aggregate amount or
total value of the ill-gotten wealth amassed, accumulated or
acquired is at least Fifty Million Pesos (P50,000,000.00).

In finding that there is strong evidence that petitioners Revilla,
Cambe, and Napoles committed the crime of plunder, the
Sandiganbayan held that:
THE FIRST ELEMENT. Accused Revilla and Cambe were public
officers at the time material to this case, accused Revilla being
a member of the Senate of the Philippines, and accused Cambe
being Revilla's Chief of Staff/Political Officer/Director III as
appearing on the face of the documents on record. Accused
Napoles is a private individual charged in conspiracy with
accused Revilla and Cambe. As provided in Section 2 of RA
7080, "[a]ny person who participated with the said public
officer in the commission of an offense contributing to the
crime of plunder shall likewise be punished for such offense."
THE SECOND ELEMENT. x x x.
xxxx
The separate and individual acts of accused Revilla, Cambe and
Napoles convincingly appear to have facilitated the amassing,
accumulation, and acquisition of ill-gotten wealth by accused
Revilla. It is immaterial whether or not the prosecution has
presented evidence that accused Cambe and Napoles by
themselves have likewise amassed, accumulated, or acquired
ill-gotten wealth in the amount of at least P50 Million each. It is
sufficient that the prosecution has established that accused
Revilla and accused Cambe have conspired with one another,
and with accused Napoles in the accumulation or acquisition of
ill-gotten wealth of at least P50 million.
The Court is persuaded that the prosecution has presented
compelling evidence that accused Revilla amassed,
accumulated or acquired ill-gotten wealth by repeatedly
receiving from accused Napoles or her representatives or
agents, money, through accused Cambe, and in those several
occasions, accused Revilla and/or Cambe made use of his or
their official position, authority, connections, and influence.
This was established by the testimonies of the witnesses and
the documents they testified to which, at this stage of the
proceedings, [have] remained unrebutted, and thus, given full
faith and credence by the Court.
From 2006 to 2009, accused Revilla was earmarked PDAF from
the national budget. He had no physical and direct possession
of the fund. However, as the fund was allocated to his office, he
alone could trigger its release, after accomplishment of the
necessary documentary requirements. All he had to do, and
which he actually did, was to request its release from then
President Gloria Macapagal-Arroyo (PGMA) or from the DBM
accompanied by a list of projects and endorsement naming a
certain implementing agency on the DBM's menu as project
implementor. Finding everything to be in order, the DBM
processed accused Revilla's request, approved it, and
eventually released the SARO. Accused Revilla was informed of
this release. After the SARO, the DBM issued the NCA to cover
the cash requirements of the IA authorized under the SARO.
The DBM issued Notice of Cash Allocation Issued (NCAI) to the
Bureau of Treasury. In tranches, the IA issued checks to the
NGOs. The NGOs were paid in full of the project cost upon
submission of liquidation reports with supporting documents,
such as delivery receipts, purchase orders and list of
beneficiaries, with corresponding signatures.
xxxx
It is well to note that accused Revilla's endorsement consisted
of two phases. The first phase consisted of letters addressed to
PGMA or the DBM requesting for the release of the PDAF, with
attached list of priority projects. Itemized in the list were the
location, name and amount of the project as well as the IA he
desired to implement the project. The second phase consisted
of letters to the IAs subsequent to the issuance of the SARO,
this time, endorsing Napoles' NGOs to the IAs as the latter's
project partners.
The endorsement letters and other documents submitted to
the IAs show that accused Revilla's participation did not just
stop at initiating the release of his PDAF, but extended to the
implementation stage of his identified projects. He sent
communications to the IAs appointing and authorizing accused
Cambe to monitor, follow up, or assist in the implementation of
the projects, and "to sign in his behalf all other documents
needed to smooth the process." Accused Cambe, for accused
Revilla, conformed to the project activities and project profiles
prepared by the NGOs. He likewise signed on the tripartite
MOAs with the representatives of the IA and the NGO
concerned. Also, accused Cambe, by himself or for accused
Revilla, signed liquidation documents such as
accomplishment/terminal reports, reports of disbursement
(fund utilization), inspection and acceptance reports.
xxxx
Accused Revilla could not have possibly drawn money from his
PDAF allocation directly to himself. He had to do it through
channels or conduits to camouflage the flow with a semblance
of legitimacy. Here lies the indispensable participation of
accused Napoles. Like accused Revilla, accused Napoles stayed
at the background, using other people as her tentacles to fulfill
her part of the conspiracy. Although accused Napoles' signature
does not appear in any of these documents, evidence abounds
to support that she was the brains behind the vital link of the
conspiracy. Luy, Suñas, Sula and Baltazar, who once worked for
accused Napoles, consistently declared that they moved and
acted upon the instruction of Napoles, from the creation of
fake NGOs to the diversion of the proceeds of the PDAF.
Accused Napoles engineered the creation of the NGOs through
which the proceeds of accused Revilla's PDAF were funneled.
Evidence discloses that the NGOs were illicitly established for
some dishonest purpose. Their presidents and incorporators
either have working or personal relations to accused Napoles,
or unknown to her, or fictitious. The addresses of the NGOs
were either the location of her property or that of her
employees whom she made presidents, or otherwise
inexistent. The lists of beneficiaries were bogus, and this was
confirmed by the COA during its own investigation where it was
found that either there were no projects implemented or there THE THIRD ELEMENT. Of the Php224,512,500.00 alleged in the
were no such names of beneficiaries that existed. Information to have been plundered by accused Revilla and/or
Cambe, the prosecution has so far strongly proven the amount
Accused Napoles' connection to and control of the NGOs are of P103,000,000.00 broken down below. This is the total
made evident by the bank transactions of the NGOs. Records of amount received by accused Cambe for Revilla, to which Luy,
bank transactions of these NGOs reveal, as testified to by Sula and Suñas have testified to their personal knowledge. In
witness Santos from the AMLC, that the accounts of these other words, Luy, Sula or Suñas either directly handed the
NGOs with the Land bank and Metrobank were only temporary money to accused Cambe, or they saw accused Napoles, or any
repository of funds and that the withdrawal from the accounts one of them, give the money to accused Cambe. Thus:
of the NGOs had to be confirmed first with accused Napoles Date
nothwithstanding that the accounts were not under her name. Amount
It is well to note that the bank accounts of these NGOs were April 6, 2006
opened by the named presidents using JLN Corp. identification Php 5,000,000.00
cards. These circumstances are consistent to the testimonies of June 6, 2006
accused Luy, Sula, Suñas and Baltazar that as soon as the check 5,000,000.00
of the PDAF proceeds were encashed, accused Napoles March 27, 2007
directed them or any of her trusted employees to withdraw the 7,500,000.00
same. At this stage, the Court sees no basis to doubt the strong April 12, 2007
evidence against accused Napoles. 9,500,000.00
April 19, 2007
Accused Revilla managed to remain incognito in reaping 3,000,000.00
benefits from the illegal scheme with the help and cooperation August 10, 2007
of accused Cambe. Concededly, there are no direct proofs that 3,000,000.00
accused Revilla received commissions/rebates out of the 2008
proceeds of his PDAF routed to accused Napoles, but the 10,000,000.00
circumstances persuasively attest that accused Revilla on
several occasions, received money from the illegitimate deals 5,000,000.00
involving his PDAF, through accused Cambe. Also, accused October 6, 2009
Cambe profited from the same transactions so far computed at 9,000,000.00
P13,935,000.00. October 6, 2009
9,000,000.00
There are solid reasons to infer that accused Cambe acted on October 6, 2009
behalf of accused Revilla and with the latter's imprimatur, and 2,000.000.00
that accused Revilla effectively clothed accused Cambe with full October 22, 2009
authority. Consider these: (1) accused Cambe worked for 12,000,000.00
Revilla in the Senate; (2) accused Revilla designated accused October 22, 2009
Cambe to follow up, supervise and act on his behalf for the 8,000,000.00
implementation of the projects, and to sign necessary March 2010
documents; (3) accused Cambe, representing accused Revilla or 15,000,000.00
Revilla's office, signed the MOAs and other documents used to Total
support the issuance of the checks from the IA to accused Php103,000,000.0059
Napoles' NGOs to supposedly finance the projects out of (Emphasis supplied)
accused Revilla's PDAF. Accused Cambe likewise signed Thus, the Sandiganbayan exercised its judicial discretion within
liquidation documents such as accomplishment reports; (4) Luy, the bounds of the Constitution, law, rules, and jurisprudence
Suñas, and Sula forthrightly and positively identified Cambe to after appreciating and evaluating the evidence submitted by
have received from them or from accused Napoles the the parties.
commissions/rebates of accused Revilla; (5) the said witnesses
likewise candidly testified that accused Cambe also personally During the bail hearings, both parties were afforded
got his own commission either from them or from accused opportunities to offer their evidence. The prosecution
Napoles; (6) Luy had recorded the commissions/rebates per his presented nine witnesses and documentary evidence to prove
testimony, and as shown by his disbursement ledgers and the strong evidence of guilt of the accused. The defense
Summary of Rebates. These points may rest heavily on the likewise introduced evidence in its own rebuttal and cross-
credibility of the witnesses. But, as discussed, the Court, in the examined the witnesses presented by the prosecution. Only
meantime, saw no cogent justification to invalidate their after both parties rested their case that the Sandiganbayan
testimonies. issued its Resolution, which contains the summary of the
prosecution's evidence. The summary of the prosecution's
xxxx evidence shows the basis for the Sandiganbayan's discretion to
deny bail to Cambe and Napoles.
In finding strong evidence of guilt against Cambe, the
Sandiganbayan considered the PDAF documents and the
whistleblowers' testimonies in finding that Cambe received, for
Revilla, the total amount of P103,000,000.00, in return for
Revilla's endorsement of the NGOs of Napoles as the recipients
of Revilla's PDAF. It gave weight to Luy's summary of rebates
and disbursement ledgers containing Cambe's receipt of
money, which Luy obtained from his hard drive. The
Sandiganbayan likewise admitted Narciso as expert witness,
who attested to the integrity of Luy's hard drive and the files in
it.
In finding strong evidence of guilt against Napoles, the
Sandiganbayan considered the AMLC Report, as attested by
witness Santos, stating that Napoles controlled the NGOs,
which were the recipients of Revilla's PDAF. The Sandiganbayan
found that the circumstances stated in the AMLC Report,
particularly that the bank accounts of these NGOs were opened
by the named presidents using JLN Corp. IDs, these accounts
are temporary repository of funds, and the withdrawal from
these accounts had to be confirmed first with Napoles, are
consistent with the whistleblowers' testimonies that they were
named presidents of Napoles' NGOs and they withdrew large
amounts of cash from the NGOs' bank accounts upon
instruction of Napoles. The Sandiganbayan also took note of
the COA report, as confirmed by the testimony of Garcia, that
Revilla's PDAF projects failed to comply with the law, Napoles'
NGOs were fake, no projects were implemented and the
suppliers selected to supply the NGOs were questionable.
Accordingly, there is no basis for the allegation of Cambe that
the Sandiganbayan Resolutions were based on mere
presumptions and inferences. On the other hand, the
Sandiganbayan considered the entire record of evidence in
finding strong evidence of guilt.
For purposes of bail, we held in People v. Cabral60 that: "[b]y
judicial discretion, the law mandates the determination of
whether proof is evident or the presumption of guilt is strong.
'Proof evident' or 'Evident proof' in this connection has been
held to mean clear, strong evidence which leads a well-guarded
dispassionate judgment to the conclusion that the offense has
been committed as charged, that accused is the guilty agent,
and that he will probably be punished capitally if the law is
administered. 'Presumption great' exists when the
circumstances testified to are such that the inference of guilt
naturally to be drawn therefrom is strong, clear, and convincing
to an unbiased judgment and excludes all reasonable
probability of any other conclusion."61 The weight of evidence
necessary for bail purposes is not proof beyond reasonable
doubt, but strong evidence of guilt, or "proof evident," or
"presumption great." A finding of "proof evident" or
"presumption great" is not inconsistent with the determination
of strong evidence of guilt, contrary to Cambe's argument.
Cambe further alleged that the Sandiganbayan gravely abused
its discretion in relying on the concept of totality of evidence,
which only applies in writ of amparo cases. To support this
argument, Cambe's previous counsel cited Razon, Jr. v.
Tagitis.62
We specifically held in Razon that the: "unique situations that
call for the issuance of the writ [of amparo], as well as the
considerations and measures necessary to address these
situations, may not at all be the same as the standard measures
and procedures in ordinary court actions and proceedings."63
Thus, the case of Razon should not have been applied in this
case. On the other hand, as we held in People v. Cabral: "[e]ven
though there is a reasonable doubt as to the guilt of accused, if
on an examination of the entire record the presumption is
great that accused is guilty of a capital offense, bail should be
refused."64 Accordingly, an examination of the entire record -
totality of evidence - is necessary to determine whether there
is strong evidence of guilt, for purposes of granting or denying
bail to the accused.
In their separate petitions before us, Cambe and Napoles
attempt to individually refute each evidence presented by the
prosecution. In his petition, Cambe alleges that there was even
no evidence that: (1) he is a public officer; and (2) he and
Napoles also amassed, accumulated or acquired ill-gotten
wealth of at least P50,000,000.00. Napoles, on the other hand,
argues that there was no direct evidence that Revilla amassed
illgotten wealth. In addition, Napoles argues that: (1) the
whistleblowers' testimonies lack credibility and are hearsay
because of their admission that they never saw Revilla talk with
Napoles about their alleged agreement; (2) the AMLC report is
multiple hearsay; and (3) the hard disk, disbursement ledger,
and summary of rebates are not reliable because Narciso is not
an expert witness, and the entries in the disbursement ledger
are hearsay. In short, Cambe and Napoles question the
conclusions of the Sandiganbayan insofar as its appreciation of
the facts is concerned.
Generally, the factual findings of the Sandiganbayan are
binding upon the Court.65 However, this general rule is subject
to some exceptions, among them: (1) when the conclusion is a
finding grounded entirely on speculation, surmise and
conjectures; (2) the inference made is manifestly mistaken; (3)
there is a grave abuse of discretion; (4) the judgment is based
on misapprehension of facts; (5) said findings of facts are
conclusions without citation of specific evidence on which they
are based; and (6) the findings of fact of the Sandiganbayan are
premised on the absence of evidence on record.66
We will not set aside the factual findings of the Sandiganbayan,
absent any showing that the Sandiganbayan exercised its
discretion out of whim, caprice, and outright arbitrariness
amounting to grave abuse of discretion.
In any event, Cambe is estopped from claiming that he is not a
public officer. Cambe himself admitted in his Application for
Bail that "while accused Cambe is a public officer, he did not act
by himself or in connivance with members of his family x x
x."67 Furthermore, such is a factual finding of the
Sandiganbayan, which is binding before us.
Also, there is no need to prove that Cambe and Napoles
likewise amassed, accumulated or acquired ill-gotten wealth of
at least P50,000,000.00 or that Revilla talked with Napoles
about their alleged agreement. The charge against them is
conspiracy to commit plunder.
In Estrada v. Sandiganbayan,68 we held that "the gravamen of
the conspiracy charge, therefore, is not that each accused
agreed to receive protection money from illegal gambling, that
each misappropriated a portion of the tobacco excise tax, that
each accused ordered the GSIS and SSS to purchase shares of
Belle Corporation and receive commissions from such sale, nor
that each unjustly enriched himself from commissions, gifts and
kickbacks; rather, it is that each of them, by their individual
acts, agreed to participate, directly or indirectly, in the
amassing, accumulation and acquisition of ill-gotten wealth of
and/or for [petitioner Estrada]."69 Also, proof of the
agreement need not rest on direct evidence, as the agreement
itself may be inferred from the conduct of the parties disclosing
a common understanding among them with respect to the
commission of the offense.70 It is not necessary to show that
two or more persons met together and entered into an explicit
agreement setting out the details of an unlawful scheme or the
details by which an illegal objective is to be carried out.71 Thus,
in Guy v. People of the Philippines,72 we held that conspiracy
was properly appreciated by the Sandiganbayan because even
though there was no direct proof that petitioners agreed to
cause injury to the government and give unwarranted benefits
to a certain corporation, their individual acts when taken
together as a whole showed that they were acting in concert
and cooperating to achieve the same unlawful objective. The
conspiracy to commit plunder need not even be proved beyond
reasonable doubt, but only for purposes of determining
whether bail shall be granted.
Moreover, in giving credence to the testimonies of the
prosecution witnesses, we held that the trial court's the
Sandiganbayan's assessment of the credibility of a witness is
entitled to great weight, sometimes even with finality.73 This
Court will not interfere with that assessment, absent any
indication that the lower court has overlooked some material
facts or gravely abused its discretion.74 Minor and insignificant
inconsistencies in the testimony tend to bolster, rather than
weaken, the credibility of witnesses, for they show that the
testimony is not contrived or rehearsed.75 Moreover, the
testimony of a witness must be considered in its entirety and
not merely in its truncated parts.76 Similarly, we held that "the
credibility of the expert witness and the evaluation of his
testimony is left to the discretion of the trial court whose ruling
thereupon is not reviewable in the absence of an abuse of that
discretion."77
As for the weight given by the Sandiganbayan to
whistleblowers' testimonies, expert's testimony, AMLC report,
the hard disk, disbursement ledger and summary of rebates,
we emphasize that for purposes of bail, the court does not try
the merits or enter into any inquiry as to the weight that ought
to be given to the evidence against the accused, nor will it
speculate on the outcome of the trial or on what further
evidence may be offered therein.78The course of inquiry may
be left to the discretion of the court which may confine itself to
receiving such evidence as has reference to substantial matters,
avoiding unnecessary thoroughness in the examination and
cross-examination.79
Grave abuse of discretion implies a capricious and whimsical
exercise of judgment tantamount to lack or excess of
jurisdiction.80 The abuse of discretion must be so patent and
gross as to amount to an evasion of a positive duty or 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 or
hostility.81
We find that the Sandiganbayan was far from abusive of its
discretion. On the contrary, its findings were based on the
evidence extant in the records. In its appreciation and
evaluation of the evidence against Cambe and Napoles, the
Sandiganbayan did not commit grave abuse of discretion in
finding that the prosecution established strong evidence of
their guilt.
G.R. No. 218903
We find that the Sandiganbayan did not commit grave abuse of
discretion amounting to lack and/or excess of jurisdiction when
it denied the prosecution's motion to transfer the detention of
Revilla and Cambe from the PNP Custodial Center to a BJMP-
operated facility.
The Rules of Court provide that an arrest is the taking of a
person into custody in order that he may be bound to answer
for the commission of an offense.82 An arrest is made by an
actual restraint of a person to be arrested, or by his submission
to the custody of the person making the arrest.83 Section 24 of
RA 6975, or An Act Establishing The Philippine National Police
Under A Reorganized Department of the Interior and Local
Government, and for Other Purposes, provides that: "The
Philippine National Police (PNP) shall have the following powers
and functions: x x x (e) Detain an arrested person for a period
not beyond what is prescribed by law, informing the person so
detained of all his rights under the Constitution; x x x." The
Revised PNP Police Operational Procedures Manual provides
that: "any person arrested due to the commission of a crime/s
can be detained/admitted in the PNP Detention/Custodial
Center."84 As defined in the Revised PNP Police Operational
Procedures Manual,85 a detention/Custodial Center is an
institution secured by the PNP Units concerned for the purpose
of providing short term custody of [a] detention prisoner
thereby affording his safety and preventing escape while
awaiting the court's disposition of the case or his transfer to
the appropriate penal institution.
In the present case, both Revilla and Cambe voluntarily
surrendered to the Sandiganbayan upon the issuance of the
warrants of arrest against them, albeit with motion to elect the
detention facilities in the PNP Custodial Center. Upon their
voluntary surrender, they are deemed arrested and taken into
custody. The Sandiganbayan thereafter allowed both Revilla
and Cambe to be detained in the PNP Custodial Center
barracks. Under the Rules of Court, the court, such as the
Sandiganbayan in the present case, shall exercise supervision
over all persons in custody for the purpose of eliminating
unnecessary detention.86
When by law jurisdiction is conferred on a court, all auxiliary
writs, processes and other means necessary to carry it into
effect may be employed by such court; and if the procedure to
be followed in the exercise of such jurisdiction is not specifically
pointed out by law or by these rules, any suitable process or
mode of proceeding may be adopted which appears
comfortable to the spirit of the said law or rules.87 Accordingly,
the Sandiganbayan acted within its jurisdiction and did not
abuse its discretion in ordering the commitment of Revilla and
Cambe in the PNP Custodial Center.
Clearly, Section 24 of RA 6975 vests authority in the PNP to
detain arrested persons such as Revilla and Cambe, and the
Revised PNP Police Operational Procedures Manual includes
the PNP Detention/Custodial Center as an institution where any
person arrested due to the commission of a crime/s can be
detained/admitted.
The prosecution, however, anchors its motion to transfer the
detention of Revilla and Cambe on Section 3, Rule 113 of the
Rules of Court and Section 63 of RA 6975. Section 3, Rule 113 of
the Rules of Court provides that: "It shall be the duty of the
officer executing the warrant to arrest the accused and to
deliver him to the nearest police station or jail without
unnecessary delay." On the other hand, Section 63 of RA 6975
provides:
SECTION 63. Establishment of District, City or Municipal Jail.
There shall be established and maintained in every district, city
and municipality a secured, clean, adequately equipped and
sanitary jail for the custody and safekeeping of city and
municipal prisoners, any fugitive from justice, or person
detained awaiting investigation or trial and/or transfer to the
national penitentiary, and/or violent mentally ill person who
endangers himself or the safety of others, duly certified as such
by the proper medical or health officer, pending the transfer to
a medical institution.
The municipal or city jail service shall preferably be headed by a
graduate of a four (4) year course in psychology, psychiatry,
sociology, nursing, social work or criminology who shall assist in
the immediate rehabilitation of individuals or detention of
prisoners. Great care must be exercised so that the human
rights of [these] prisoners are respected and protected, and
their spiritual and physical well-being are properly and
promptly attended to.
However, both Section 3 of Rule 113 and Section 63 of RA 6975
are inapplicable in the present case. It must be noted that
Revilla and Cambe voluntarily surrendered to the
Sandiganbayan, and there is no opportunity for the arresting
officer to execute the warrants of arrest against them.
Moreover, the said rule merely refers to the duty of the
arresting officer to deliver the arrested person to the nearest
police station or jail. The rule did not state about the duty "to
detain" the arrested person to the nearest police station or jail.
There is nothing in the rule referring to the place of detention
of the arrested person.
In the same manner, there is nothing in Section 63 of RA 6975
which expressly mandates and limits the place of detention in
BJMP-controlled facilities. On the other hand, it merely
provides that: "there shall be established and maintained in
every district, city and municipality a secured, clean,
adequately equipped and sanitary jail x x x." When the
language of the law is clear and explicit, there is no room for
interpretation, only application.
Section 61 of the same law states that the BJMP shall exercise
supervision and control over all city and municipal jails, while
the provincial jails shall be supervised and controlled by the
provincial government within its jurisdiction.88 Evidently, a
provincial jail is a place of detention not within the supervision
and control of the BJMP. From the law itself, there are places of
detention for the accused, which are not within the control and
supervision of the BJMP.
Thus, to argue, as the prosecution did, that Revilla and Cambe's
detention in the PNP Custodial Center afforded them special
treatment because it is not a jail supervised by the BJMP would
be similar to saying that detention of an accused in a provincial
jail supervised by the provincial government would afford such
accused special treatment.
Aside from its bare statements, the prosecution did not
advance compelling reasons to justify the transfer of detention
of Revilla and Cambe. The prosecution likewise failed to
substantiate its allegation of special treatment towards Revilla.
As the Sandiganbayan properly held:
The prosecution failed to advance compelling and reasonable
grounds to justify the transfer of accused Revilla and Cambe
from the PNP Custodial Center, Camp Crame, to a BJMP
controlled jail. Since their detention at the PNP Custodial
Center on June 20, 2014, the conditions of their confinement
have not been altered by circumstances that would frustrate
the very purpose of their detention. Both accused have
submitted themselves to the Court when required. No concrete
incidents have been cited by the prosecution to establish that
their continued detention in Camp Crame is no longer viable,
and that the better part of discretion is to transfer them to a
BJMP controlled jail. The prosecution does not articulate what
is in a BJMP facility that the PNP Custodial Center lacks, or vice
versa, which will make a difference in the administration of
justice.
Before the Court is simply a general proposition that the
accused should be confined in a BJMP controlled detention
facility based on some rules, which the Court have previously
discussed to be unacceptable, backed up by an unsubstantiated
generic declaration that the PNP Custodial Center affords them
special treatment not extended to all other detention prisoners
under BJMP control. To the prosecution, this is a violation of
the constitutional right to equal protection of the other
detention prisoners, like Atty. Reyes, who is now detained in a
BJMP facility.
But, the Court is not convinced. To agree with the prosecution
on the matter of special treatment is to accept a general notion
that the public officers in a BJMP facility are more circumspect
in the handling of detention prisoners than in a non-BJMP
facility, like the PNP Custodial Center. Verily, the "special
treatment," e.g., wedding anniversary celebration of Senator
Jinggoy Estrada claimed by the prosecution, does not go with
the place. It has even nothing to do with accused Revilla and
Cambe. "Special treatment" is a judgment call by the people
concerned in the place. For no matter which detention place
will accused Revilla and Cambe be confined if the people
controlling that place would extend them privileges not usually
given to other detention prisoners, there would always be that
dreaded "special treatment." Thus, special treatment can be
addressed by ensuring that the people around the accused in
their present detention facility will deter from giving them
exceptional benefits, through a firm implementation of policies
and measures, and the imposition of sanctions for non-
compliance. The "special treatment" cannot be remedied by
transferring the accused to another detention facility. The
transfer must be reasonably justified.
The Court solicitously agrees that it is the fact of detention and
not the place of detention that is important. x x x.89
In its Resolution dated 20 May 2015, the Sandiganbayan stated
that it so took into account, considering the circumstances of
the accused, the security conditions of the place, and its
proximity to the court.90 With these factors, the
Sandiganbayan viewed that the PNP Custodial Center would be
able to secure the accused and ensure their attendance at trial,
at a reasonable cost to the government. Absent any showing of
grave abuse of discretion, the factual findings of the
Sandiganbayan are binding upon the Court. We affirm the
order of the Sandiganbayan directing the PNP-CIDG "to keep
the accused in its custody at the aforesaid barracks (PNP
Custodial Center Barracks) and not allow the accused to be
moved, removed, or relocated until further orders from the
court."91
G.R. No. 219162
We find that the Sandiganbayan did not commit grave abuse of
discretion amounting to lack or excess of jurisdiction in
ordering the issuance of the writ of preliminary attachment
against Revilla's monies and properties.
Presidential Decree No. 1606, as amended by RA 10660,
provides that the Sandiganbayan has jurisdiction to jointly
determine in the same proceeding the criminal action and the
corresponding civil action for the recovery of civil liability,
considering that the filing of the criminal action before the
Sandiganbayan is deemed to necessarily carry with it the filing
of the civil action.92 The same law provides that the Rules of
Court promulgated by the Supreme Court shall apply to all
cases and proceedings filed with the Sandiganbayan.93 The
Rules of Court state that the provisional remedies in civil
actions, insofar as they are applicable, may be availed of in
connection with the civil action deemed instituted with the
criminal action.94
The grounds for the issuance of the writ of preliminary
attachment have been provided in Rule 57 and Rule 127 of the
Rules of Court. Rule 127 states that the provisional remedy of
attachment on the property of the accused may be availed of
to serve as security for the satisfaction of any judgment that
may be recovered from the accused when the criminal action is
based on a claim for money or property embezzled or
fraudulently misapplied or converted to the use of the accused
who is a public officer, in the course of his employment as such,
or when the accused has concealed, removed or disposed of his
property or is about to do so.95 Similarly, Rule 57 provides that
attachment may issue: "x x x (b) in an action for money or
property embezzled or fraudulently misapplied or converted to
his own use by a public officer x x x; (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;
x x x."96
It is indispensable for the writ of preliminary attachment to
issue that there exists a prima facie factual foundation for the
attachment of properties, and an adequate and fair
opportunity to contest it and endeavor to cause its negation or
nullification.97 Considering the harsh and rigorous nature of a
writ of preliminary attachment, the court must ensure that all
the requisites of the law have been complied with; otherwise,
the court which issues it acts in excess of its jurisdiction.98
Thus, for the ex-parte issuance of a writ of preliminary
attachment to be valid, an affidavit of merit and an applicant's
bond must be filed with the court in which the action is
pending.99 For the affidavit of merit, Section 3 of the same rule
states that: "[a]n order of attachment shall be granted only
when it is made to appear by the affidavit of the applicant or
some other person who personally knows of the facts that a
sufficient cause of action exists, that the case is one of those
mentioned in Section 1 hereof, that there is no sufficient
security for the claim sought to be enforced by the action, and
that the amount due to applicant or the value of the property
the possession of which he is entitled to recover is as much as
the sum for which the order is granted above all legal
counterclaims." The mere filing of an affidavit reciting the facts
required by Section 3, however, is not enough to compel the
judge to grant the writ of preliminary attachment.100 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.101 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.102 On
the requirement of a bond, when the State is the applicant, the
filing of the attachment bond is excused.103
We find that the Sandiganbayan acted within its jurisdiction
since all the requisites for the issuance of a writ of preliminary
attachment have been complied with.
Revilla, while still a public officer, is charged with plunder,
committed by amassing, accumulating, and acquiring ill-gotten
wealth, through a combination or series of overt or criminal
acts, as follows:
1) Through misappropriation, conversion, misuse, or
malversation of public funds or raids on the public treasury;
2) By receiving, directly or indirectly, any commission, gift,
share, percentage, kickbacks or any other form of pecuniary
benefit from any person and/or entity in connection with any
government contract or project or by reason of the office or
position of the public officer concerned;
3) By the illegal or fraudulent conveyance or disposition of
assets belonging to the National Government or any of its
subdivisions, agencies or instrumentalities or government-
owned or -controlled corporations and their subsidiaries;
4) By obtaining, receiving or accepting directly or indirectly any
shares of stock, equity or any other form of interest or
participation including promise of future employment in any
business enterprise or undertaking;
5) By establishing agricultural, industrial or commercial
monopolies or other combinations and/or implementation of
decrees and orders intended to benefit particular persons or
special interests; or
6) By taking undue advantage of official position, authority,
relationship, connection or influence to unjustly enrich himself
or themselves at the expense and to the damage and prejudice
of the Filipino people and the Republic of the Philippines.104
(Emphasis supplied)
Clearly, the crime of plunder is based on a claim for public
funds or property misappropriated, converted, misused, or
malversed by the accused who is a public officer, in the course
of his employment as such. The filing of the criminal action for
plunder, which is within the jurisdiction of the
Sandiganbayan,105 is deemed to necessarily carry with it the
filing of the civil action. Accordingly, the writ of preliminary
attachment is an available provisional remedy in the criminal
action for plunder.
In its Motion, the prosecution alleged that: "[Revilla] converted
for his own use or caused to be converted for the use by
unauthorized persons the sum of Php515,740,000.00 worth of
public funds sourced from his PDAF through 'ghost'
projects."106 In Cambe v. Office of the Ombudsman,107 we
agreed with the Ombudsman's finding of probable cause
against Revilla and held that for purposes of arriving at a
finding of probable cause, "only facts sufficient to support a
prima facie case against the [accused] are required, not
absolute certainty." Thus, we held that the prosecution's
evidence established a prima facie case for plunder against
Revilla:
Taking together all of the above-stated pieces of evidence, the
COA and FIO reports tend to prima facie establish that
irregularities had indeed attended the disbursement of Sen.
Revilla's PDAF and that he had a hand in such anomalous
releases, being the head of Office which unquestionably
exercised operational control thereof. As the Ombudsman
correctly observed, "[t]he PDAF was allocated to him by virtue
of his position as a Senator, and therefore he exercise[d]
control in the selection of his priority projects and programs.
He indorsed [Napoles'] NGOs in consideration for the
remittance of kickbacks and commissions from Napoles.
Compounded by the fact that the PDAF-funded projects turned
out to be 'ghost projects', and that the rest of the PDAF
allocation went into the pockets of Napoles and her cohorts,
[there is probable cause to show that] Revilla thus unjustly
enriched himself at the expense and to the damage and
prejudice of the Filipino people and the Republic of the
Philippines." Hence, he should stand trial for violation of
Section 3(e) of RA 3019. For the same reasons, it is apparent
that ill-gotten wealth in the amount of at least P50,000,000.00
(i.e., P224,512,500.00) were amassed, accumulated or acquired
through a combination or series of overt acts stated in Section
1 of the Plunder Law. Therefore, Sen. Revilla should likewise
stand trial for Plunder.108 (Emphasis supplied)
Thus, contrary to Revilla's insinuations, there exists a prima
facie factual foundation for the attachment of his monies and
properties.
Furthermore, in its Resolution dated 1 December 2014 denying
bail to Revilla, the Sandiganbayan held that the prosecution
duly established with strong evidence that Revilla, Cambe, and
Napoles, in conspiracy with one another, committed the crime
of plunder. The finding of strong evidence for purposes of bail
is a greater quantum of proof required than prima facie factual
foundation for the attachment of properties. Thus, the
Sandiganbayan properly exercised its discretion in issuing the
writ of preliminary attachment upon appreciating and
evaluating the evidence against Revilla.
Moreover, the Affidavit of Merit attached to the Motion and
executed by graft investigators of Revilla's PDAF likewise
established that (1) a sufficient cause of action exists for the
issuance of a writ of preliminary attachment; (2) the case is one
of those mentioned in Sections 57 and 127 of the Rules of
Court, and (3) that Revilla has no visible sufficient security in
the event that judgment is rendered against him. The
sufficiency of the affidavit depends upon the amount of credit
given by the Sandiganbayan, and its acceptance, upon its sound
discretion. We refuse to interfere in its exercise of discretion,
absent any showing that the Sandiganbayan gravely abused its
discretion.
Even assuming that plunder is not based on a claim for public
funds or property misappropriated, converted, misused or
malversed by the public officer, the prosecution nevertheless
alleged that Revilla has concealed, removed, or disposed of his
property, or is about to do so, which is another ground for the
issuance of the writ of preliminary attachment. The AMLC
report, attached to the Motion, states that many investment
and bank accounts of Revilla were "terminated immediately
before and after the PDAF scandal circulated in [the] media,"
and Revilla himself publicly confirmed that he closed several
bank accounts when the PDAF scam was exposed. Revilla failed
to rebut these allegations with any evidence.
Considering that the requirements for its issuance have been
complied with, the issuance of the writ of preliminary
attachment by the Sandiganbayan is in order.
Contrary to Revilla's allegation, a writ of preliminary
attachment may issue even without a hearing. Section 2, Rule
57 of the Rules of Court 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. x x x."
In Davao Light & Power Co., Inc. v. Court of Appeals,109 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."110 In the
same case, 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."111
Moreover, there is an obvious need to avoid alerting suspected
possessors of "ill-gotten" wealth and thereby cause that
disappearance or loss of property precisely sought to be
prevented.112 In any case, Revilla was given an adequate and
fair opportunity to contest its issuance.
Also, contrary to Revilla's allegation, there is no need for a final
judgment of ill-gotten wealth, and a preliminary attachment is
entirely different from the penalty of forfeiture imposed upon
the final judgment of conviction under Section 2 of RA 7080. By
its nature, a preliminary attachment is an ancillary remedy
applied for not for its own sake but to enable the attaching
party to realize upon the relief sought and expected to be
granted in the main or principal action; it is a measure auxiliary
or incidental to the main action.113 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
during the interim, awaiting the ultimate effects of a final
judgment in the case.114 The remedy of attachment is
provisional and temporary, designed for particular exigencies,
attended by no character of permanency or finality, and always
subject to the control of the issuing court.115
On the other hand, Section 2 of RA 7080 requires that upon
conviction, the court shall declare any and all ill-gotten wealth
and their interests and other incomes and assets including the
properties and shares of stock derived from the deposit or
investment thereof forfeited in favor of the State. The State
may avail of the provisional remedy of attachment to secure
the preservation of these unexplained wealth and income, in
the event that a judgment of conviction and forfeiture is
rendered. The filing of an application for the issuance of a writ
of preliminary attachment is a necessary incident in forfeiture
cases.116 It is needed to protect the interest of the
government and to prevent the removal, concealment, and
disposition of properties in the hands of unscrupulous public
officers.117 Otherwise, even if the government subsequently
wins the case, it will be left holding an empty bag.118
This Decision does not touch upon the guilt or innocence of any
of the petitioners.
WHEREFORE, we DISMISS the petitions for lack of merit and
AFFIRM the assailed Resolutions of the Sandiganbayan.
SO ORDERED.
G.R. No. 84481 April 18, 1989
MINDANAO SAVINGS & LOAN ASSOCIATION, INC. (formerly
Davao Savings & Loan Association) & FRANCISCO VILLAMOR,
Petitioners, vs. HON. COURT OF APPEALS, POLY R. MERCADO,
and JUAN P. MERCADO, Respondents.
Villarica, Tiongco & Caboverde Law Office for
petitioners.chanrobles virtual law library
A B C Law Offices for private respondents.
GRIÑO-AQUINO, J.:
On September 10, 1986, private respondents filed in the
Regional Trial Court of Davao City, a complaint against
defendants D.S. Homes, Inc., and its directors, Laurentino G.
Cuevas, Saturnino R. Petalcorin, Engr. Uldarico D. Dumdum,
Aurora P. De Leon, Ramon D. Basa, Francisco D. Villamor,
Richard F. Magallanes, Geronimo S. Palermo Felicisima V.
Ramos and Eugenio M. De los Santos (hereinafter referred to as
D.S. Homes, et al.) for "Rescission of Contract and Damages"
with a prayer for the issuance of a writ of preliminary
attachment, docketed as Civil Case No.
18263.chanroblesvirtualawlibrary chanrobles virtual law library
On September 28, 1986, Judge Dinopol issued an order
granting ex parte the application for a writ of preliminary
attachment.chanroblesvirtualawlibrary chanrobles virtual law
library
On September 22, 1986, the private respondents amended
their complaint and on October 10, 1986, filed a second
amended complaint impleading as additional defendants
herein petitioners Davao Savings & Loan Association, Inc. and
its president, Francisco Villamor, but dropping Eugenio M. De
los Santos.chanroblesvirtualawlibrary chanrobles virtual law
library
On November 5, 1986, Judge Dinopol issued ex parte an
amended order of attachment against all the defendants
named in the second amended complaint, including the
petitioners but excluding Eugenio C. de los
Santos.chanroblesvirtualawlibrary chanrobles virtual law library
D. S. Homes. Inc., et al. and the Davao Savings & Loan
Association (later renamed Mindanao Savings & Loan
Association, Inc. or "MSLA") and Francisco Villamor filed
separate motions to quash the writ of attachment. When their
motions were denied by the Court, D.S. Homes, Inc., et al.
offered a counterbond in the amount of Pl,752,861.41 per
certificate issued by the Land Bank of the Philippines, a banking
partner of petitioner MSLA The lower court accepted the Land
Bank Certificate of . Deposit for Pl,752,861.41 as counterbond
and lifted the writ of preliminary attachment on June 5, 1987
(Annex V)chanrobles virtual law library
On July 29, 1987, MSLA and Villamor filed in the Court of
Appeals a petition for certiorari (Annex A) to annul the order of
attachment and the denial of their motion to quash the same
(CA-G.R. SP No. 12467). The petitioners alleged that the trial
court acted in excess of its jurisdiction in issuing the ex parte
orders of preliminary attachment and in denying their motion
to quash the writ of attachment, D.S. Homes, Inc., et al. did not
join them.chanroblesvirtualawlibrary chanrobles virtual law
library
On May 5, 1988, the Court of Appeals dismissed the petition for
certiorari and remanded the records of Civil Case No. 18263 to
the Regional Trial Court of Davao City, Branch 13, for
expeditious proceedings. It held:
Objections against the writ may no longer be invoked once a
counterbond is filed for its lifting or
dissolution.chanroblesvirtualawlibrary chanrobles virtual law
library
The grounds invoked for the issuance of the writ form the core
of the complaint and it is right away obvious that a trial on the
merits was necessary. The merits of a main action are not
triable in a motion to discharge an attachment otherwise an
applicant for dissolution could force a trial on the merits on his
motion (4 Am. Jur., Sec. 635, 934, cited in G.G. Inc. vs. Sanchez,
et al., 98 Phil. 886, 890, 891). (Annex B, p. 185, Rollo.)
Dissatisfied, the petitioners appealed to this
Court.chanroblesvirtualawlibrary chanrobles virtual law library
A careful consideration of the petition for review fails to yield
any novel legal questions for this Court to
resolve.chanroblesvirtualawlibrary chanrobles virtual law
library
The only requisites for the issuance of a writ of preliminary
attachment under Section 3, Rule 57 of the Rules of Court are
the affidavit and bond of the applicant.
SEC. 3. Affidavit and bond required .- An order of attachment
shall be granted only when it is made to appear by the affidavit
of the applicant, or of some other person who personally
knows the facts, that a sufficient cause of action exists that the
case is one of those mentioned in section 1 hereof, that there is
no other sufficient security for the claim sought to be enforced
by the action, and that the amount due to 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 affidavit, and the bond
required by the next succeeding section must be duly filed with
the clerk or judge of the court before the order issues.
No notice to the adverse party or hearing of the application is
required. As a matter of fact a hearing would defeat the
purpose of this provisional remedy. 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. Nevertheless, while no hearing is required
by the Rules of Court for the issuance of an attachment (Belisle
Investment & Finance Co., Inc. vs. State Investment House, Inc.,
72927, June 30, 1987; Filinvest Credit Corp. vs. Relova, 11 7
SCRA 420), a motion to quash the writ may not be granted
without "reasonable notice to the applicant" and only "after
hearing" (Secs. 12 and 13, Rule 57, Rules of
Court).chanroblesvirtualawlibrary chanrobles virtual law library
The Court of Appeals did not err in holding that objections to
the impropriety or irregularity of the writ of attachment "may
no longer be invoked once a counterbond is filed," when the
ground for the issuance of the writ forms the core of the
complaint.chanroblesvirtualawlibrary chanrobles virtual law
library
Indeed, after the defendant has obtained the discharge of the
writ of attachment by filing a counterbond under Section 12,
Rule 57 of the Rules of Court, he may not file another motion
under Section 13, Rule 57 to quash the writ for impropriety or
irregularity in issuing it.chanroblesvirtualawlibrary chanrobles
virtual law library
The reason is simple. The writ had already been quashed by
filing a counterbond, hence, another motion to quash it would
be pointless. Moreover, as the Court of Appeals correctly
observed, when the ground for the issuance of the writ is also
the core of the complaint, the question of whether the plaintiff
was entitled to the writ can only be determined after, not
before, a full-blown trial on the merits of the case. This accords
with our ruling G.B. Inc. vs. Sanchez, 98 Phil. 886 that: "The
merits of a main action are not triable in a motion to discharge
an attachment, otherwise an applicant for the dissolution could
force a trial on the merits of the case on this motion."
chanrobles virtual law library
May the defendant, after procuring the dissolution of the
attachment by filing a counterbond, ask for the cancellation of
the counterbond on the ground that the order of attachment
was improperly issued? That question was answered by this
Court when it ruled in Uy Kimpang vs. Javier, 65 Phil. 170, that
"the obligors in the bond are absolutely liable for the amount
of any judgment that the plaintiff may recover in the action
without reference to the question of whether the attachment
was rightfully or wrongfully issued."
The liability of the surety on the counterbond subsists until the
Court shall have finally absolved the defendant from the
plaintiff s claims. Only then may the counterbond be released.
The same rule applies to the plaintiffs attachment bond. "The
liability of the surety on the bond subsists because the final
reckoning is when the Court shall finally adjudge that the
attaching creditor was not entitled to the issuance of the
attachment writ," (Calderon vs. Intermediate Appellate Court,
155 SCRA 531.) chanrobles virtual law library
WHEREFORE, finding no reversible error in the decision of the
Court of Appeals in CA-G.R. SP No. 12467, the petition for
review is denied for lack of merit with costs against the
petitioners.chanroblesvirtualawlibrary chanrobles virtual law
library
SO ORDERED.
G.R. No. 107303 February 21, 1994
EMMANUEL C. OÑATE and ECON HOLDINGS CORPORATION,
Petitioners, v. HON. ZUES C. ABROGAR, as Presiding Judge of
Branch 150 of the Regional Trial Court of Makati, and SUN LIFE
ASSURANCE COMPANY OF CANADA, Respondents.
G.R. No. 107491 February 21, 1994
BRUNNER DEVELOPMENT CORPORATION, Petitioner, v. HON.
ZUES C. ABROGAR, as Presiding Judge of Branch 150 of the
Regional Trial Court of Makati, and SUN LIFE ASSURANCE
COMPANY OF CANADA, Respondents.
Florante A. Bautista for petitioner in G.R. No.
107303.chanrobles virtual law library
Andin & Andin Law Offices for Brunner Development
Corporation.chanrobles virtual law library
Quasha, Asperilla, Ancheta, Pena & Nolasco for Sun Life
Assurance Company of Canada.
NOCON, J.:
These are separate petitions for certiorari with a prayer for
temporary restraining order filed by Emmanuel C. Oñate and
Econ Holdings Corporation (in G.R. No. 107303), and Brunner
Development Corporation (in G.R. No. 107491), both of which
assail several orders issued by respondent Judge Zues C.
Abrogar in Civil Case No. 91-
3506.chanroblesvirtualawlibrarychanrobles virtual law library
The pertinent facts are as follows: On December 23, 1991,
respondent Sun Life Assurance Company of Canada (Sun Life,
for brevity) filed a complaint for a sum of money with a prayer
for the immediate issuance of a writ of attachment against
petitioners, and Noel L. Diño, which was docketed as Civil Case
No. 91-3506 and raffled to Branch 150 of the RTC Makati,
presided over by respondent Judge. The following day,
December 24, 1991, respondent Judge issued an order granting
the issuance of a writ of attachment, and the writ was actually
issued on December 27,
1991.chanroblesvirtualawlibrarychanrobles virtual law library
On January 3, 1992, upon Sun Life's ex-parte motion, the trial
court amended the writ of attachment to reflect the alleged
amount of the indebtedness. That same day, Deputy Sheriff
Arturo C. Flores, accompanied by a representative of Sun Life,
attempted to serve summons and a copy of the amended writ
of attachment upon petitioners at their known office address at
108 Aguirre St., Makati but was not able to do so since there
was no responsible officer to receive the same. 1 Nonetheless,
Sheriff Flores proceeded, over a period of several days, to serve
notices of garnishment upon several commercial banks and
financial institutions, and levied on attachment a condominium
unit and a real property belonging to petitioner
Oñate.chanroblesvirtualawlibrarychanrobles virtual law library
Summons was eventually served upon petitioners on January 9,
1992, while defendant Diño was served with summons on
January 16, 1992.chanroblesvirtualawlibrarychanrobles virtual
law library
On January 21, 1992, petitioners filed an "Urgent Motion to
Discharge/Dissolve Writ of Attachment." That same day, Sun
Life filed an ex-parte motion to examine the books of accounts
and ledgers of petitioner Brunner Development Corporation
(Brunner, for brevity) at the Urban Bank, Legaspi Village
Branch, and to obtain copies thereof, which motion was
granted by respondent Judge. The examination of said account
took place on January 23, 1992. Petitioners filed a motion to
nullify the proceedings taken thereat since they were not
present.chanroblesvirtualawlibrarychanrobles virtual law
library
On January 30, 1992, petitioners and their co-defendants filed a
memorandum in support of the motion to discharge
attachment. Also on that same day, Sun Life filed another
motion for examination of bank accounts, this time seeking the
examination of Account No. 0041-0277-03 with the Bank of
Philippine Islands (BPI) - which, incidentally, petitioners claim
not to be owned by them - and the records of Philippine
National Bank (PNB) with regard to checks payable to Brunner.
Sun Life asked the court to order both banks to comply with the
notice of garnishment.chanroblesvirtualawlibrarychanrobles
virtual law library
On February 6, 1992, respondent Judge issued an order (1)
denying petitioners' and the co-defendants' motion to
discharge the amended writ of attachment, (2) approving Sun
Life's additional attachment, (3) granting Sun Life's motion to
examine the BPI account, and (4) denying petitioners' motion
to nullify the proceedings of January 23,
1992.chanroblesvirtualawlibrarychanrobles virtual law library
On March 12, 1992, petitioners filed a motion for
reconsideration of the February 6, 1992 order. On September
6, 1992, respondent Judge denied the motion for
reconsideration.chanroblesvirtualawlibrarychanrobles virtual
law library
Hence, the instant petitions. Petitioners' basic argument is that
respondent Judge had acted with grave abuse of discretion
amounting to lack or in excess of jurisdiction in (1) issuing ex
parte the original and amended writs of preliminary
attachment and the corresponding notices of garnishment and
levy on attachment since the trial court had not yet acquired
jurisdiction over them; and (2) allowing the examination of the
bank records though no notice was given to
them.chanroblesvirtualawlibrarychanrobles virtual law library
We find both petitions
unmeritorious.chanroblesvirtualawlibrarychanrobles virtual law
library
Petitioners initially argue that respondent Judge erred in
granting Sun Life's prayer for a writ of preliminary attachment
on the ground that the trial court had not acquired jurisdiction
over them. This argument is clearly unavailing since it is well-
settled that a writ of preliminary attachment may be validly
applied for and granted even before the defendant is
summoned or is heard from. 2 The rationale behind this rule
was stated by the Court in this wise:
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 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.chanroblesvirtualawlibrarychanrobles
virtual law library
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
abovepointed out, its 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. 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.
3chanrobles virtual law library
Petitioners then contended that the writ should have been
discharged since the ground on which it was issued - fraud in
contracting the obligation - was not present. This cannot be
considered a ground for lifting the writ since this delves into
the very complaint of the Sun Life. As this Court stated in
Cuatro v. Court of Appeals: 4
Moreover, an attachment may not be dissolved by a showing of
its irregular or improper issuance if it is upon a ground which is
at the same time the applicant's cause of action in the main
case since an anomalous situation would result if the issues of
the main case would be ventilated and resolved in a mere
hearing of the motion (Davao Light and Power Co., Inc. vs.
Court of Appeals, supra, The Consolidated Bank and Trust Corp.
(Solidbank) vs. Court of Appeals, 197 SCRA 663
[1991]).chanroblesvirtualawlibrarychanrobles virtual law library
In the present case, one of the allegation in petitioner's
complaint below is that the defendant spouses induced the
plaintiff to grant the loan by issuing postdated checks to cover
the installment payments and a separate set of postdated
checks for payment of the stipulated interest (Annex "B"). The
issue of fraud, then, is clearly within the competence of the
lower court in the main action. 5chanrobles virtual law library
The fact that a criminal complaint for estafa filed by Sun Life
against the petitioners was dismissed by the Provincial
Prosecutor of Rizal for Makati on April 21, 1992 and was upheld
by the Provincial Prosecutor on July 13, 1992 is of no moment
since the same can be indicative only of the absence of criminal
liability, but not of civil liability. Besides, Sun Life had elevated
the case for review to the Department of Justice, where the
case is presently pending.chanroblesvirtualawlibrarychanrobles
virtual law library
Finally, petitioners argue that the enforcement of the writ was
invalid since it undisputedly preceded the actual service of
summons by six days at most. Petitioners cite the decisions in
Sievert vs. Court of Appeals, et al. 6 and BAC Manufacturing
and Sales Corp. vs. Court of Appeals, et al., 7 wherein this Court
held that enforcement of the writ of attachment can not bind
the defendant in view of the failure of the trial court to acquire
jurisdiction over the defendant through either summons or his
voluntary appearance.chanroblesvirtualawlibrarychanrobles
virtual law library

We do not agree entirely with petitioners. True, this Court had
held in a recent decision that the enforcement of writ of
attachment may not validly be effected until and unless
proceeded or contemporaneously accompanied by service of
summons. 8chanrobles virtual law library
But we must distinguish the case at bar from the Sievert and
BAC Manufacturing cases. In those two cases, summons was
never served upon the defendants. The plaintiffs therein did
not even attempt to cause service of summons upon the
defendants, right up to the time the cases went up to this
Court. This is not true in the case at bar. The records reveal that
Sheriff Flores and Sun Life did attempt a contemporaneous
service of both summons and the writ of attachment on
January 3, 1992, but we stymied by the absence of a
responsible officer in petitioners' offices. Note is taken of the
fact that petitioners Oñate and Econ Holdings admitted in their
answer 9 that the offices of both Brunner Development
Corporation and Econ Holdings were located at the same
address and that petitioner Oñate is the President of Econ
Holdings while petitioner Diño is the President of Brunner
Development Corporation as well as a stockholder and director
of Econ Holdings.chanroblesvirtualawlibrarychanrobles virtual
law library
Thus, an exception to the established rule on the enforcement
of the writ of attachment can be made where a previous
attempt to serve the summons and the writ of attachment
failed due to factors beyond the control of either the plaintiff or
the process server, provided that such service is effected within
a reasonable period
thereafter.chanroblesvirtualawlibrarychanrobles virtual law
library
Several reasons can be given for the exception. First, there is a
possibility that a defendant, having been alerted of plaintiffs
action by the attempted service of summons and the writ of
attachment, would put his properties beyond the reach of the
plaintiff while the latter is trying to serve the summons and the
writ anew. By the time the plaintiff may have caused the
service of summons and the writ, there might not be any
property of the defendant left to
attach.chanroblesvirtualawlibrarychanrobles virtual law library
Second, the court eventually acquired jurisdiction over the
petitioners six days later. To nullify the notices of garnishment
issued prior thereto would again open the possibility that
petitioners would transfer the garnished monies while Sun Life
applied for new notices of
garnishment.chanroblesvirtualawlibrarychanrobles virtual law
library
Third, the ease by which a writ of attachment can be obtained
is counter-balanced by the ease by which the same can be
discharged: the defendant can either make a cash deposit or
post a counter-bond equivalent to the value of the property
attached. 10 The petitioners herein tried to have the writ of
attachment discharged by posting a counter-bond, the same
was denied by respondent Judge on the ground that the
amount of the counter-bond was less than that of Sun Life's
bond.
II.chanroblesvirtualawlibrarychanrobles virtual law library
Petitioners' second ground assail the acts of respondent Judge
in allowing the examination of Urban Banks' records and in
ordering that the examination of the bank records of BPI and
PNB as invalid since no notice of said examinations were ever
given them. Sun Life grounded its requests for the examination
of the bank accounts on Section 10, Rule 57 of the Rules of
Court, which provided, to wit:
Sec. 10. Examination of party whose property is attached and
persons indebted to him or controlling his property; delivery of
property to officer. - Any person owing debts to the party
whose property is attached or having in his possession or under
his control any credit or other personal property belonging to
such party, may be required to attend before the court in which
the action is pending, or before a commissioner appointed by
the court and be examined on oath respecting the same. The
party whose property is attached may also be required to
attend for the purpose of giving information respecting his
property, and may be examined on oath. The court may, after
such examination, order personal property capable of manual
delivery belonging to him, in the possession of the person so
required to attend before the court, to be delivered to the clerk
or court, sheriff, or other proper officer on such terms as may
be just, having reference to any lien thereon or claim against
the same, to await the judgment in the action.
It is clear from the foregoing provision that notice need only be
given to the garnishee, but the person who is holding property
or credits belonging to the defendant. The provision does not
require that notice be furnished the defendant himself, except
when there is a need to examine said defendant "for the
purpose of giving information respecting his
property.chanroblesvirtualawlibrarychanrobles virtual law
library
Furthermore, Section 10 Rule 57 is not incompatible with
Republic Act No. 1405, as amended, "An Act Prohibiting
Disclosure or Inquiry Into, Deposits With Any Banking
Institution and Providing Penalty Therefore," for Section 2
therefore provides an exception "in cases where the money
deposited or invested is the subject matter of the
litigation."chanrobles virtual law library
The examination of the bank records is not a fishing expedition,
but rather a method by which Sun Life could trace the proceeds
of the check it paid to
petitioners.chanroblesvirtualawlibrarychanrobles virtual law
library
WHEREFORE, the instant petitions are hereby DISMISSED. The
temporary restraining order issued on June 28, 1993 is hereby
lifted.chanroblesvirtualawlibrarychanrobles virtual law library
SO ORDERED.
G.R. No. L-252 March 30, 1946
TRANQUILINO CALO and DOROTEO SAN JOSE Petitioners, vs.
ARSENIO C. ROLDAN, Judge of First Instance of Laguna, REGINO
RELOVA and TEODULA BARTOLOME, Respondents.
Zosimo D. Tanalega for petitioners.
Estanislao A. Fernandez for respondents Relova and Bartolome.
No appearance for respondent Judge.
FERIA, J.:
This is a petition for writ of certiorari against the respondent
Judge Arsenio C. Roldan of the Court First Instance of Laguna,
on the ground that the latter has exceeded his jurisdiction or
acted with grave abuse of discretion in appointing a receiver of
certain lands and their fruits which, according to the
complainant filed by the other respondents, as plaintiffs,
against petitioners, as defendants, in case No. 7951, were in
the actual possession of and belong to said
plaintiffs.chanroblesvirtualawlibrary chanrobles virtual law
library
The complaint filed by plaintiffs and respondents against
defendants and petitioners in the Court of First Instance of
Laguna reads as follows:
1. That the plaintiffs and the defendants are all of legal age,
Filipino citizens, and residents of Pila, Laguna; the plaintiffs are
husband and wife..chanroblesvirtualawlibrary chanrobles
virtual law library
2. That the plaintiff spouses are the owners and the possessors
of the following described parcels of land, to wit:.
xxx xxx x x xchanrobles virtual law library
3. That parcel No. (a) described above is now an unplanted rice
land and parcel No. (b) described in the complaint is a coconut
land, both under the possession of the
plaintiffs..chanroblesvirtualawlibrary chanrobles virtual law
library
4. That the defendants, without any legal right whatsoever and
in connivance with each other, through the use of force,
stealth, threats and intimidation, intend or are intending to
enter and work or harvest whatever existing fruits may now be
found in the lands above-mentioned in violation of plaintiff's in
this case ineffectual..chanroblesvirtualawlibrary chanrobles
virtual law library
5. That unless defendants are barred, restrained, enjoined, and
prohibited from entering or harvesting the lands or working
therein through ex-parte injunction, the plaintiffs will suffer
injustice, damages and irreparable injury to their great
prejudice..chanroblesvirtualawlibrary chanrobles virtual law
library
6. That the plaintiffs are offering a bond in their application for
ex-parte injunction in the amount of P2,000, subject to the
approval of this Hon. Court, which bond is attached hereto
marked as Annex A and made an integral part of this
complaint..chanroblesvirtualawlibrary chanrobles virtual law
library
7. That on or about June 26, 1945, the defendants, through
force, destroyed and took away the madre-cacao fencer, and
barbed wires built on the northwestern portion of the land
designated as parcel No. (b) of this complaint to the damage
and prejudice of the plaintiffs in the amount of at least
P200..chanroblesvirtualawlibrary chanrobles virtual law library
Wherefore, it is respectfully prayed:.chanroblesvirtualawlibrary
chanrobles virtual law library
(a) That the accompanying bond in the amount of P2,000 be
approved; chanrobles virtual law library
(b) That a writ of preliminary injunction be issued ex-parte
immediately restraining, enjoining and prohibiting the
defendants, their agents, servants, representatives, attorneys,
and, (or) other persons acting for and in their behalf, from
entering in, interfering with and/or in any wise taking any
participation in the harvest of the lands belonging to the
plaintiffs; or in any wise working the lands above-described;
chanrobles virtual law library
(c) That judgment be rendered, after due hearing, declaring the
preliminary injunction final;.chanroblesvirtualawlibrary
chanrobles virtual law library
(d) That the defendants be condemned jointly and severally to
pay the plaintiffs the sum of P200 as damages;
and.chanroblesvirtualawlibrary chanrobles virtual law library
(e) That plaintiffs be given such other and further relief just and
equitable with costs of suit to the defendants.
The defendants filed an opposition dated August 8, 1945, to the
issuance of the writ of preliminary injunction prayed for in the
above-quoted complaint, on the ground that they are owners
of the lands and have been in actual possession thereof since
the year 1925; and their answer to the complaint filed on
August 14, 1945, they reiterate that they are the owners and
were then in actual possession of said property, and that the
plaintiffs have never been in possession
thereof.chanroblesvirtualawlibrary chanrobles virtual law
library
The hearing of the petition for preliminary injunction was held
on August 9, 1945, at which evidence was introduced by both
parties. After the hearing, Judge Rilloraza, then presiding over
the Court of First Instance of Laguna, denied the petition on the
ground that the defendants were in actual possession of said
lands. A motion for reconsideration was filed by plaintiffs on
August 20, 1945, but said motion had not yet, up to the hearing
of the present case, been decided either by Judge Rilloraza,
who was assigned to another court, or by the respondent
judge.chanroblesvirtualawlibrary chanrobles virtual law library
The plaintiffs (respondents) filed on September 4, 1945, a reply
to defendants' answer in which, among others, they reiterate
their allegation in the complaint that they are possessors in
good faith of the properties in
question.chanroblesvirtualawlibrary chanrobles virtual law
library
And on December 17, plaintiffs filed an urgent petition ex-parte
praying that plaintiffs' motion for reconsideration of the order
denying their petition for preliminary injunction be granted and
or for the appointment of a receiver of the properties
described in the complaint, on the ground that (a) the plaintiffs
have an interest in the properties in question, and the fruits
thereof were in danger of being lost unless a receiver was
appointed; and that (b) the appointment of a receiver was the
most convenient and feasible means of preserving,
administering and or disposing of the properties in litigation
which included their fruits. Respondents Judge Roldan, on the
same date, December 17, 1945, decided that the court would
consider the motion for reconsideration in due time, and
granted the petition for appointment of and appointed a
receiver in the case.chanroblesvirtualawlibrary chanrobles
virtual law library
The question to be determined in the present special civil
action of certiorari is, whether or not the respondent judge
acted in excess of his jurisdiction or with grave abuse of
discretion in issuing the order appointing a receiver in the case
No. 7951 of the Court of First Instance of Laguna; for it is
evident that there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of the law against the
said order, which is an incidental or interlocutory
one.chanroblesvirtualawlibrary chanrobles virtual law library
It is a truism in legal procedure that what determines the
nature of an action filed in the courts are the facts alleged in
the complaint as constituting the cause of the action. The facts
averred as a defense in the defendant's answer do not and can
not determine or change the nature of the plaintiff's action.
The theory adopted by the plaintiff in his complaint is one
thing, and that of the defendant in his answer is another. The
plaintiff has to establish or prove his theory or cause of action
in order to obtain the remedy he prays for; and the defendant
his theory, if necessary, in order to defeat the claim or action of
the plaintiff..chanroblesvirtualawlibrary chanrobles virtual law
library
According to the complaint filed in the said case No. 7951, the
plaintiff's action is one of ordinary injunction, for the plaintiffs
allege that they are the owners of the lands therein described,
and were in actual possession thereof, and that "the
defendants without any legal right whatever and in connivance
with each other, through the use of force, stealth, threat and
intimidation, intend or are intending to enter and work or
harvest whatever existing fruits may be found in the lands
above mentioned in violation of plaintiffs' proprietary rights
thereto;" and prays "that the defendants, their agents,
servants, representatives, and other persons acting for or in
their behalf, be restrained, enjoined and prohibited from
entering in, interfering with, or in any way taking any
participation in the harvest of the lands above describe
belonging to the plaintiffs." chanrobles virtual law library
That this is the nature of plaintiffs' action corroborated by the
fact that they petitioned in the same complaint for a
preliminary prohibitory injunction, which was denied by the
court in its order dated August 17, 1945, and that the plaintiffs,
in their motion for reconsideration of said order filed on August
20 of the same year, and in their urgent petition dated
December 17, moving the court to grant said motion for
reconsideration, reiterated that they were actual possessors of
the land in question.chanroblesvirtualawlibrary chanrobles
virtual law library
The fact that plaintiffs, in their reply dated September 4, after
reiterating their allegation or claim that they are the owners in
fee simple and possessors in good faith of the properties in
question, pray that they be declared the owners in fee simple,
has not changed the nature of the action alleged in the
complaint or added a new cause of action thereto; because the
allegations in plaintiffs' reply were in answer to defendants'
defenses, and the nature of plaintiffs' cause of action, as set
forth in their complaint, was not and could not be amended or
changed by the reply, which plaintiffs had the right to present
as a matter of course. A plaintiff can not, after defendant's
answer, amend his complaint by changing the cause of action
or adding a new one without previously obtaining leave of
court (section 2, Rule 17)..chanroblesvirtualawlibrary
chanrobles virtual law library
Respondents' contention in paragraph I of their answer that the
action filed by them against petitioners in the case No. 7951 of
the Court of First Instance of Laguna is not only for injunction,
but also to quiet title over the two parcels of land described in
the complaint, is untenable for the reasons stated in the
previous paragraph. Besides, an equitable action to quiet title,
in order to prevent harrassment by continued assertion of
adverse title, or to protect the plaintiff's legal title and
possession, may be filed in courts of equity (and our courts are
also of equity), only where no other remedy at law exists or
where the legal remedy invokable would not afford adequate
remedy (32 Cyc., 1306, 1307). In the present case wherein
plaintiffs alleged that they are the owners and were in actual
possession of the lands described in the complaint and their
fruits, the action of injunction filed by them is the proper and
adequate remedy in law, for a judgment in favor of plaintiffs
would quiet their title to said lands..chanroblesvirtualawlibrary
chanrobles virtual law library
The provisional remedies denominated attachment,
preliminary injunction, receivership, and delivery of personal
property, provided in Rules 59, 60, 61, and 62 of the Rules of
Court, respectively, are remedies to which parties litigant may
resort for the preservation or protection of their rights or
interest, and for no other purpose, during the pendency of the
principal action. If an action, by its nature, does not require
such protection or preservation, said remedies can not be
applied for and granted. To each kind of action or actions a
proper provisional remedy is provided for by law. The Rules of
Court clearly specify the case in which they may be properly
granted. .chanroblesvirtualawlibrary chanrobles virtual law
library
Attachment may be issued only in the case or actions
specifically stated in section 1, Rule 59, in order that the
defendant may not dispose of his property attached, and thus
secure the satisfaction of any judgment that may be recovered
by plaintiff from defendant. For that reason a property subject
of litigation between the parties, or claimed by plaintiff as his,
can not be attached upon motion of the same
plaintiff..chanroblesvirtualawlibrary chanrobles virtual law
library
The special remedy of preliminary prohibitory injunction lies
when the plaintiff's principal action is an ordinary action of
injunction, that is, when the relief demanded in the plaintiff's
complaint consists in restraining the commission or
continuance of the act complained of, either perpetually or for
a limited period, and the other conditions required by section 3
of Rule 60 are present. The purpose of this provisional remedy
is to preserve the status quo of the things subject of the action
or the relation between the parties, in order to protect the
rights of the plaintiff respecting the subject of the action during
the pendency of the suit. Because, otherwise or if no
preliminary prohibition injunction were issued, the defendant
may, before final judgment, do or continue the doing of the act
which the plaintiff asks the court to restrain, and thus make
ineffectual the final judgment rendered afterwards granting the
relief sought by the plaintiff. But, as this court has repeatedly
held, a writ of preliminary injunction should not be granted to
take the property out of the possession of one party to place it
in the hands of another whose title has not been clearly
established..chanroblesvirtualawlibrary chanrobles virtual law
library
A receiver may be appointed to take charge of personal or real
property which is the subject of an ordinary civil action, when it
appears that the party applying for the appointment of a
receiver has an interest in the property or fund which is the
subject of the action or litigation, and that such property or
fund is in danger of being lost, removed or materially injured
unless a receiver is appointed to guard and preserve it (section
1 [b], Rule 61); or when it appears that the appointment of a
receiver is the most convenient and feasible means of
preserving, administering or disposing of the property in
litigation (section 1 [e] of said Rule). The property or fund must,
therefore be in litigation according to the allegations of the
complaint, and the object of appointing a receiver is to secure
and preserve the property or thing in controversy pending the
litigation. Of course, if it is not in litigation and is in actual
possession of the plaintiff, the latter can not apply for and
obtain the appointment of a receiver thereof, for there would
be no reason for such appointment.chanroblesvirtualawlibrary
chanrobles virtual law library
Delivery of personal property as a provisional remedy consists
in the delivery, by order of the court, of a personal property by
the defendant to the plaintiff, who shall give a bond to assure
the return thereof or the payment of damages to the
defendant in the plaintiff's action to recover possession of the
same property fails, in order to protect the plaintiff's right of
possession of said property, or prevent the defendant from
damaging, destroying or disposing of the same during the
pendency of the suit.chanroblesvirtualawlibrary chanrobles
virtual law library
Undoubtedly, according to law, the provisional remedy proper
to plaintiffs' action of injunction is a preliminary prohibitory
injunction, if plaintiff's theory, as set forth in the complaint,
that he is the owner and in actual possession of the premises is
correct. But as the lower court found at the hearing of the said
petition for preliminary injunction that the defendants were in
possession of the lands, the lower court acted in accordance
with law in denying the petition, although their motion for
reconsideration, which was still pending at the time the
petition in the present case was heard in this court, plaintiffs
insist that they are in actual possession of the lands and,
therefore, of the fruits thereof.chanroblesvirtualawlibrary
chanrobles virtual law library
From the foregoing it appears evident that the respondent
judge acted in excess of his jurisdiction in appointing a receiver
in case No. 7951 of the Court of First Instance of Laguna.
Appointment of a receiver is not proper or does not lie in an
action of injunction such as the one filed by the plaintiff. The
petition for appointment of a receiver filed by the plaintiffs
(Exhibit I of the petition) is based on the ground that it is the
most convenient and feasible means of preserving,
administering and disposing of the properties in litigation; and
according to plaintiffs' theory or allegations in their complaint,
neither the lands nor the palay harvested therein, are in
litigation. The litigation or issue raised by plaintiffs in their
complaint is not the ownership or possession of the lands and
their fruits. It is whether or not defendants intend or were
intending to enter or work or harvest whatever existing fruits
could then be found in the lands described in the complaint,
alleged to be the exclusive property and in the actual
possession of the plaintiffs. It is a matter not only of law but of
plain common sense that a plaintiff will not and legally can not
ask for the appointment or receiver of property which he
alleges to belong to him and to be actually in his possession.
For the owner and possessor of a property is more interested
than persons in preserving and administering
it.chanroblesvirtualawlibrary chanrobles virtual law library
Besides, even if the plaintiffs had amended their complaint and
alleged that the lands and palay harvested therein are being
claimed by the defendants, and consequently the ownership
and possession thereof were in litigation, it appearing that the
defendants (now petitioners) were in possession of the lands
and had planted the crop or palay harvested therein, as alleged
in paragraph 6 (a) and (b) of the petition filed in this court and
not denied by the respondent in paragraph 2 of his answer, the
respondent judge would have acted in excess of his jurisdiction
or with a grave abuse of discretion in appointing a receiver
thereof. Because relief by way of receivership is equitable in
nature, and a court of equity will not ordinarily appoint a
receiver where the rights of the parties depend on the
determination of adverse claims of legal title to real property
and one party is in possession (53 C. J., p. 26). The present case
falls within this rule..chanroblesvirtualawlibrary chanrobles
virtual law library
In the case of Mendoza vs. Arellano and B. de Arellano, this
court said:
Appointments of receivers of real estate in cases of this kind lie
largely in the sound discretion of the court, and where the
effect of such an appointment is to take real estate out of the
possession of the defendant before the final adjudication of the
rights of the parties, the appointment should be made only in
extreme cases and on a clear showing of necessity therefor in
order to save the plaintiff from grave and irremediable loss or
damage. (34 Cyc., 51, and cases there cited.) No such showing
has been made in this case as would justify us in interfering
with the exercise by trial judge of his discretion in denying the
application for receiver. (36 Phil., 59, 63, 64.).
Although the petition is silent on the matter, as the
respondents in their answer allege that the Court of First
Instance of Laguna has appointed a receiver in another case
No. 7989 of said court, instituted by the respondents Relova
against Roberto Calo and his brothers and sisters, children of
Sofia de Oca and Tranquilino Calo (petitioner in this case), and
submitted copy of the complaint filed by the plaintiffs (now
respondents) in case No. 7989 (Exhibit 9 of the respondents'
answer), we may properly express and do hereby express here
our opinion, in order to avoid multiplicity of suits, that as the
cause of action alleged in the in the complaint filed by the
respondents Relova in the other case is substantially the same
as the cause of action averred in the complaint filed in the
present case, the order of the Court of First Instance of Laguna
appointing a receiver in said case No. 7989 was issued in excess
of its jurisdiction, and is therefore null and
void.chanroblesvirtualawlibrary chanrobles virtual law library
In view of all the foregoing, we hold that the respondent Judge
Arsenio C. Roldan of the Court of First Instance of Laguna has
exceeded his jurisdiction in appointing a receiver in the present
case, and therefore the order of said respondent judge
appointing the receiver, as well as all other orders and
proceedings of the court presided over by said judge in
connection with the receivership, are null and
void.chanroblesvirtualawlibrary chanrobles virtual law library
As to the petitioners' petition that respondents Relova be
punished for contempt of court for having disobeyed the
injunction issued by this court against the respondents
requiring them to desist and refrain from enforcing the order of
receivership and entering the palay therein, it appearing from
the evidence in the record that the palay was harvested by the
receiver and not by said respondents, the petition for contempt
of court is denied. So ordered, with costs against the
respondents.
[G.R. No. 102448. August 5, 1992.]
RICARDO CUARTERO, Petitioner, v. COURT OF APPEALS,
ROBERTO EVANGELISTA and FELICIA EVANGELISTA,
Respondents.
Abesamis, Medialdea & Abesamis for Petitioner.
Eufrenio Law Offices for Private Respondent.
SYLLABUS
1. REMEDIAL LAW; PROVISIONAL REMEDIES; WRIT OF
PRELIMINARY ATTACHMENT; DEFINED. — 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 might be secured in said
action by the attaching creditor against the defendant
(Adlawan v. Tomol, 184 SCRA 31 [1990] citing Virata v. Aquino,
53 SCRA 30-31 [1973]).
2. ID.; ID.; ID.; REQUISITES FOR THE ISSUANCE THEREOF. —
Under Section 3, Rule 57 of the Rules of Court, the only
requisites for the issuance of the writ are the affidavit and bond
of the applicant. As has been expressly ruled in BF Homes, Inc.
v. Court of Appeals, 190 SCRA 262 {1990), citing Mindanao
Savings and Loan Association, Inc. v. Court of Appeals, 172
SCRA 480 (1989), no notice to the adverse party or hearing of
the application is required inasmuch as the time which the
hearing will take could be enough to enable the defendant to
abscond or dispose of his property before a writ of attachment
issues. In such a case, a hearing would render nugatory the
purpose of this provisional remedy. The ruling remains good
law. There is, thus, no merit in the private respondents’ claim
of violation of their constitutionally guaranteed right to due
process.
3. ID.; ID.; ID.; CAN BE APPLIED FOR AND GRANTED AT THE
COMMENCEMENT OF THE ACTION OR AT ANY TIME. — The
writ of preliminary attachment can be applied for and granted
at the commencement of the action or at any time thereafter
(Section 1, Rule 57, Rules of Court). In Davao Light and Power
Co., Inc. v. Court of Appeals, (G.R. No. 93262, November 29,
1991), the phrase "at the commencement of the action" is
interpreted as referring to the date of the filing of the
complaint which is a time before summons is served on the
defendant or even before summons issues. The court added
that —." . . after an action is properly commenced — by filing of
the complaint and the payment of all requisite docket and
other fees — the plaintiff may apply and obtain a writ of
preliminary attachment upon the 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 (counter-claim, 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."cralaw virtua1aw
library
4. ID.; ID.; ID.; CANNOT BIND AND AFFECT THE DEFENDANT
UNTIL JURISDICTION OVER HIS PERSON IS EVENTUALLY
OBTAINED. — The Court also pointed out that: ". . . 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 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 the 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." It is clear from our pronouncements that a writ
of preliminary attachment may issue even before summons is
served upon the defendant. However, we have likewise ruled
that the writ cannot bind and affect the defendant until
jurisdiction over his person is eventually obtained. Therefore, it
is required that when the proper officer commences
implementation of the writ of attachment, service of summons
should be simultaneously made.
5. ID.; ID.; ID.; STAGES IN GRANTING THEREOF. — It must be
emphasized that the grant of the provisional remedy of
attachment practically involves three stages: first, the court
issues the order granting the application; second, the writ of
attachment issues pursuant to the order granting the writ; and
third, the writ is implemented. For the initial two stages, it is
not necessary that jurisdiction over the person of the
defendant should first be obtained. However, once the
implementation commences, it is required that the court must
have acquired jurisdiction over the defendant for without such
jurisdiction, the court has no power and authority to act in any
manner against the defendant. Any order issuing from the
Court will not bind the defendant.
6. ID.; ID.; ID.; MAY BE ISSUED EX PARTE PROVIDED SUMMONS
AND COPY OF THE COMPLAINT WERE SIMULTANEOUSLY
SERVED. — In Sievert v. Court of Appeals, 168 SCRA 692 (1988),
cited by the Court Of Appeals in its questioned decision, the
writ of attachment issued ex-parte was struck down because
when the writ of attachment was being implemented, no
jurisdiction over the person of the defendant had as yet been
obtained. The court had failed to serve the summons to the
defendant. The circumstances in Sievert are different from
those in the case at bar. When the writ of attachment was
served on the spouses Evangelista, the summons and copy of
the complaint were also simultaneously served. It is
appropriate to reiterate this Court’s exposition in the Davao
Light and Power case cited earlier, to wit: ". . . writs of
attachment may properly issue ex-parte provided that the
Court is satisfied that the relevant requisites therefore 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."cralaw virtua1aw library
7. ID.; ID.; ID.; QUESTION AS TO WHETHER A PROPER GROUND
EXISTED FOR THE ISSUANCE THEREOF; MUST BE DETERMINED
IN AN APPROPRIATE PROCEEDING. — The question as to
whether a proper ground existed for the issuance of the writ is
a question of fact the determination of which can only be had
in appropriate proceedings conducted for the purpose
(Peroxide Philippines Corporation v. Court of Appeals, 199 SCRA
882 [1991]). It must be noted that the spouses Evangelista’s
motion to discharge the writ of preliminary attachment was
denied by the lower court for lack of merit. There is no showing
that there was an abuse of discretion on the part of the lower
court in denying the motion. Moreover, an attachment may not
be dissolved by a showing of its irregular or improper issuance
if it is upon a ground which is at the same time the applicant’s
cause of action in the main case since an anomalous situation
would result if the issues of the main case would be ventilated
and resolved in a mere hearing of a motion (Davao Light and
Power Co., Inc. v. Court of Appeals, supra, The Consolidated
Bank and Trust Corp. (Solidbank) v. Court of Appeals, 197 SCRA
663 [1991]).
DECISION
GUTIERREZ, JR., J.:
This is a petition for review on certiorari seeking to annul the
decision of the Court of Appeals promulgated on June 27, 1991
as well as the subsequent resolution dated October 22, 1991
denying the motion for reconsideration in CA-G.R. SP No. 23199
entitled "Spouses Roberto and Felicia Evangelista v. Honorable
Cesar C. Peralejo, Presiding Judge Regional Trial Court of
Quezon City, Branch 98, and Ricardo Cuartero," which nullified
the orders of the trial court dated August 24, 1990 and October
4, 1990 and cancelled the writ of preliminary attachment issued
on September 19, 1990.
Following are the series of events giving rise to the present
controversy.
On August 20, 1990, petitioner Ricardo Cuartero filed a
complaint before the Regional Trial Court of Quezon City
against the private respondents, Evangelista spouses, for a sum
of money plus damages with a prayer for the issuance of a writ
of preliminary attachment. The complaint was docketed as Civil
Case No. Q-90-6471.
On August 24, 1990, the lower court issued an order granting
ex-parte the petitioner’s prayer for the issuance of a writ of
preliminary attachment.
On September 19, 1990, the writ of preliminary attachment
was issued pursuant to the trial court’s order dated August 24,
1990. On the same day, the summons for the spouses
Evangelista was likewise prepared.
The following day, that is, on September 20, 1990, a copy of the
writ of preliminary attachment, the order dated August 24,
1990, the summons and the complaint were all simultaneously
served upon the private respondents at their residence.
Immediately thereafter, Deputy Sheriff Ernesto L. Sula levied,
attached and pulled out the properties in compliance with the
court’s directive to attach all the properties of private
respondents not exempt from execution, or so much thereof as
may be sufficient to satisfy the petitioner’s principal claim in
the amount of P2,171,794.91.
Subsequently, the spouses Evangelista filed a motion to set
aside the order dated August 24, 1990 and discharge the writ of
preliminary attachment for having been, irregularly and
improperly issued. On October 4, 1990, the lower court denied
the motion for lack of merit.cralawnad
Private respondents, then, filed a special civil action for
certiorari with the Court of Appeals questioning the orders of
the lower court dated August 24, 1990 and October 4, 1990
with a prayer for a restraining order or writ of preliminary
injunction to enjoin the judge from taking further proceedings
below.
In a Resolution dated October 31, 1990, the Court of Appeals
resolved not to grant the prayer for restraining order or writ of
preliminary injunction, there being no clear showing that the
spouses Evangelista were entitled thereto.
On June 27, 1991, the Court of Appeals granted the petition for
certiorari and rendered the questioned decision. The motion
for reconsideration filed by herein petitioner Cuartero was
denied for lack of merit in a resolution dated October 22, 1991.
Hence, the present recourse to this Court.
The petitioner raises the following assignment of
errors:chanrob1es virtual 1aw library
I
THE COURT OF APPEALS ERRED AND COMMITTED A GRAVE
ABUSE OF DISCRETION, AMOUNTING TO LACK OF
JURISDICTION WHEN IT HELD THAT THE REGIONAL TRIAL
COURT DID NOT ACQUIRE JURISDICTION OVER RESPONDENT
SPOUSES.
II
THE COURT OF APPEALS ERRED AND ACTED WITH GRAVE
ABUSE OF DISCRETION WHEN IT HELD THAT THE REGIONAL
TRIAL COURT COULD NOT VALIDLY ISSUE THE SUBJECT WRIT OF
PRELIMINARY ATTACHMENT WHICH IS AN ANCILLARY REMEDY.
(Rollo, p. 13)
The Court of Appeals’ decision is grounded on its finding that
the trial court did not acquire any jurisdiction over the person
of the defendants (private respondents herein). It declared
that:jgc:chanrobles.com.ph
". . . the want of jurisdiction of the trial court to proceed in the
main case as well as the ancillary remedy of attachment is quite
clear. It is not disputed that neither service of summons with a
copy of the complaint nor voluntary appearance of petitioners
was had in this case before the trial court issued the assailed
order dated August 24, 1990, as well as the writ of preliminary
attachment dated September 19, 1990. This is reversible error
and must be corrected on certiorari." (Rollo, p. 24).
The appellate tribunal relied on the case of Sievert v. Court of
Appeals, 168 SCRA 692 (1988) in arriving at the foregoing
conclusion. It stated that:chanroblesvirtualawlibrary
"Valid service of summons and a copy of the complaint vest
jurisdiction in the court over the defendant both for the
purpose of the main case and for purposes of the ancillary
remedy of attachment and a court which has not acquired
jurisdiction over the person of defendant, cannot bind the
defendant whether in the main case or in any ancillary
proceeding such as attachment proceedings (Sievert v. Court of
Appeals, 168 SCRA 692)." (Rollo, p. 24)
The private respondents, in their comment, adopted and
reiterated the aforementioned ruling of the Court of Appeals.
They added that aside from the want of jurisdiction, no proper
ground also existed for the issuance of the writ of preliminary
attachment. They stress that the fraud in contracting the debt
or incurring the obligation upon which the action is brought
which comprises a ground for attachment must have already
been intended at the inception of the contract. According to
them, there was no intent to defraud the petitioner when the
postdated checks were issued inasmuch as the latter was aware
that the same were not yet funded and that they were issued
only for purposes of creating an evidence to prove a pre-
existing obligation.
Another point which the private respondents raised in their
comment is the alleged violation of their constitutionally
guaranteed right to due process when the writ was issued
without notice and hearing.
In the later case of Davao Light and Power Co., Inc. v. Court of
Appeals, G.R. No. 93262, November 29, 1991, we had occasion
to deal with certain misconceptions which may have arisen
from our Sievert ruling. The question which was resolved in the
Davao Light case is whether or not a writ of preliminary
attachment may issue ex-parte against a defendant before the
court acquires jurisdiction over the latter’s person by service of
summons or his voluntary submission to the court’s authority.
The Court answered in the affirmative. This should have
clarified the matter but apparently another ruling is necessary.
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 might be
secured in said action by the attaching creditor against the
defendant (Adlawan v. Tomol, 184 SCRA 31 [1990] citing Virata
v. Aquino, 53 SCRA 30-31 [1973]).
Under section 3, Rule 57 of the Rules of Court, the only
requisites for the issuance of the writ are the affidavit and bond
of the applicant. As has been expressly ruled in BF Homes, Inc.
v. Court of Appeals, 190 SCRA 262 (1990), citing Mindanao
Savings and Loan Association, Inc. v. Court of Appeals, 172
SCRA 480 (1989), no notice to the adverse party or hearing of
the application is required inasmuch as the time which the
hearing will take could be enough to enable the defendant to
abscond or dispose of his property before a writ of attachment
issues. In such a case, a hearing would render nugatory the
purpose of this provisional remedy. The ruling remains good
law. There is, thus, no merit in the private respondents’ claim
of violation of their constitutionally guaranteed right to due
process.chanrobles lawlibrary : rednad
The writ of preliminary attachment can be applied for and
granted at the commencement of the action or at any time
thereafter (Section 1, Rule 57, Rules of Court). In Davao Light
and Power, Co. Inc. v. Court of Appeals, supra, the phrase "at
the commencement of the action" is interpreted as referring to
the date of the filing of the complaint which is a time before
summons is served on the defendant or even before summons
issues. The Court added that —
". . . after an action is properly commenced — by filing of the
complaint and the payment of all requisite docket and other
fees — the plaintiff may apply and obtain a writ of preliminary
attachment upon the 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 (counter-claim, crossclaim, 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."cralaw virtua1aw
library
The Court also pointed out that:jgc:chanrobles.com.ph
". . . 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 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 the period should be dependent on, to 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."cralaw virtua1aw library
It is clear from our pronouncements that a writ of preliminary
attachment may issue even before summons is served upon the
defendant. However, we have likewise ruled that the writ
cannot bind and affect the defendant until jurisdiction over his
person is eventually obtained. Therefore, it is required that
when the proper officer commences implementation of the
writ of attachment, service of summons should be
simultaneously made.
It must be emphasized that the grant of the provisional remedy
of attachment practically involves three stages: first, the court
issues the order granting the application; second, the writ of
attachment issues pursuant to the order granting the writ; and
third, the writ is implemented. For the initial two stages, it is
not necessary that jurisdiction over the person of the
defendant should first be obtained. However, once the
implementation commences, it is required that the court must
have acquired jurisdiction over the defendant for without such
jurisdiction, the court has no power and authority to act in any
manner against the defendant. Any order issuing from the
Court will not bind the defendant.
In Sievert v. Court of Appeals, supra, cited by the Court of
Appeals in its questioned decision, the writ of attachment
issued ex-parte was struck down because when the writ of
attachment was being implemented, no jurisdiction over the
person of the defendant had as yet been obtained. The court
had failed to serve the summons to the
defendant.chanrobles.com : virtual law library
The circumstances in Sievert are different from those in the
case at bar. When the writ of attachment was served on the
spouses Evangelista, the summons and copy of the complaint
were also simultaneously served.
It is appropriate to reiterate this Court’s exposition in the
Davao Light and Power case cited earlier, to
wit:jgc:chanrobles.com.ph
". . . writs of attachment may properly issue ex-parte provided
that the Court is satisfied that the relevant requisites therefore
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."cralaw virtua1aw library
The question as to whether a proper ground existed for the
issuance of the writ is a question of fact the determination of
which can only be had in appropriate proceedings conducted
for the purpose (Peroxide Philippines Corporation v. Court of
Appeals, 199 SCRA 882 [1991]). It must be noted that the
spouses Evangelista’s motion to discharge the writ of
preliminary attachment was denied by the lower court for lack
of merit. There is no showing that there was an abuse of
discretion on the part of the lower court in denying the motion.
Moreover, an attachment may not be dissolved by a showing of
its irregular or improper issuance if it is upon a ground which is
at the same time the applicant’s cause of action in the main
case since an anomalous situation would result if the issues of
the main case would be ventilated and resolved in a mere
hearing of a motion (Davao Light and Power Co., Inc. v. Court of
Appeals, supra, The Consolidated Bank and Trust Corp.
(Solidbank) v. Court of Appeals, 197 SCRA 663 [1991]).
In the present case, one of the allegations in petitioner’s
complaint below is that the defendant spouses induced the
plaintiff to grant the loan by issuing postdated checks to cover
the installment payments and a separate set of postdated
checks for payment of the stipulated interest (Annex "B"). The
issue of fraud, then , is clearly within the competence of the
lower court in the main action.
WHEREFORE, premises considered, the Court hereby GRANTS
the petition. The challenged decision of the Court of Appeals is
REVERSED, and the order and writ of attachment issued by
Hon. Cesar C. Peralejo, Presiding Judge of Branch 98, Regional
Trial Court of Quezon City against spouses Evangelista are
hereby REINSTATED. No pronouncement as to costs.chanrobles
lawlibrary : rednad
SO ORDERED.
[G.R. No. 55381. March 26, 1984.]
SPOUSES JULIETA SALGADO and JOSE SALGADO, Petitioners, v.
HON. COURT OF APPEALS and PHILIPPINE COMMERCIAL &
INDUSTRIAL BANK, Respondents.
Reyes & Reyes Law Office, for Petitioners.
San Juan Africa, Gonzales & San Agustin Law Office for Private
Respondent.
SYLLABUS
1. REMEDIAL LAW; PROVISIONAL REMEDIES; ATTACHMENT;
PURPOSE. — 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 (7 C.J.S. 190).
2. ID.; ID.; ID.; REQUISITES FOR ISSUANCE SHALL NOT ISSUE
WHERE DEBTS SUFFICIENTLY SECURED; REASON. — The
grounds upon which attachment may issue are set forth in
Section 1, Rule 57 of the Rules of Court. But quite apart from
the grounds stated therein, it is further provided in Section 3 of
Rule 57 that "an order of attachment shall be granted only
when it is made to appear by the affidavit of the applicant or
some other person who personally knows the facts, that . . .
there is no other sufficient security for the claim sought to be
enforced by the action." The reason for the rule prohibiting
attachment where indebtedness was already secured is to
prevent the secured creditors from attaching additional
property and thus tying up more of the debtor’s property than
was necessary to secure the indebtedness (Blankenship v.
Myers, 54 P. 2d 314, 316; 97 Idaho 356 [1975]). Thus, to sustain
an order of attachment, "it is incumbent upon plaintiff to
establish either of these two facts, to wit: (a) that the
obligation had not been secured originally, or (b) that, if
secured at its beginning, the security later became valueless."
(Giandini v. Ramirez, 54 Pacific Reporter [2d] 91-92).
3. ID.; ID.; ID.; DISCHARGE THEREOF, WHEN PROPER. — Section
13, Rule 57 of the Rules of Court authorizes the discharge of an
attachment where the same had been improperly or irregularly
issued. In National Coconut Corporation v. Hon. Potenciano
Pecson, 90 Phil. 809, this Court ruled that when the facts or
some of them, stated in the plaintiff’s affidavit, are shown by
the defendant to be untrue, the writ of attachment may be
considered as improperly or irregularly issued.
4. ID.; ID.; ID.; ISSUANCE THEREOF STRICTLY CONSTRUED IN
FAVOR OF DEFENDANT. — Since attachment is a harsh and
rigorous remedy which exposes the debtor to humiliation and
annoyance, the rule authorizing its issuance must be strictly
construed in favor of the defendant. It should not be abused as
to cause unnecessary prejudice. It is the duty of the court
before issuing the writ to ensure that all the requisites of the
law has been complied with (Guzman v. Catolico, 65 Phil. 257;
Salas v. Adil, 90 SCRA 125).
AQUINO, J., dissenting:chanrob1es virtual 1aw library
1. REMEDIAL LAW; PROVISIONAL REMEDY; ATTACHMENT; MAY
ISSUE EVEN IF DEBT IS SECURED; CASE AT BAR. — A writ of
attachment may be validly issued although the debt sued upon
is secured by mortgages where such mortgages covered not
only the debt sued upon but also the debtors’ other
obligations; where the debtors failed to assign to the creditor
bank their sugar proceeds which they had given as security for
their loan; and where the writ is supported by a sufficient bond.
DECISION
ESCOLIN, J.:
This is a petition for review filed by the spouses Jose Salgado
and Julieta Salgado to set aside the resolution of the then Court
of Appeals in CA-G.R. No. SP-09407-R, dated September 18,
1980, which authorized the issuance of a writ of attachment
against the property of said petitioners.
The pertinent facts that gave rise to this petition are as follows:
On May 8, 1978, the Philippine Commercial and Industrial Bank,
hereinafter referred to as the Bank, filed an action against
petitioners, docketed as Civil Case No. 29392 of the then Court
of First Instance of Rizal, to recover on a promissory note in the
amount of P1,510,905.96, inclusive of interest and other bank
charges. In its verified complaint, the Bank further prayed for
the issuance of a writ of attachment. As grounds therefor it
alleged that petitioners had fraudulently misappropriated
and/or converted to their own personal use and benefit the
sugar proceeds given as security for the payment of the
indebtedness; that petitioners are guilty of fraud in contracting
their obligation and have concealed, removed or disposed of
the properties mortgaged or assigned to the plaintiff, or are
concealing, removing or disposing or about to do so, with
intent to defraud their creditor; that the obligation sought to
be enforced is genuine and, therefore, a sufficient cause of
action exists; and that there is no sufficient security for the
claim sought to be enforced by the action. Attached to the
complaint was the affidavit of Mrs. Helen Osias, Senior Branch
Credit Division Manager of the Bank, wherein she stated,
among others, "that there is no sufficient security for the claim
sought to be enforced by this action."cralaw virtua1aw library
On May 9, 1978, the trial court issued an order granting the
Bank’s prayer for preliminary attachment upon a bond in the
sum of P1,510,905.96. Upon the filing of said bond, the Deputy
Provincial Sheriff levied upon several parcels of land of
petitioners situated in the province of Negros Occidental.
On September 15, 1978, petitioners Salgado moved to quash
the writ of attachment on the ground that respondent Bank
made fraudulent misrepresentation in securing the writ by
deleting the words "R E M" or "Real Estate Mortgage" from the
xerox copy of the promissory note attached to the complaint,
thereby "making it appear that the note was unsecured when
in truth and in fact it was fully secured by a series of valid and
existing real estate mortgages duly registered and annotated in
the titles of the affected real properties in favor of the plaintiff
Bank." In the same motion, petitioners stressed the lack of
factual basis of the Bank’s claim as to their alleged fraudulent
misappropriation or conversion of the sugar proceeds given as
security for their obligation.
After due hearing, the trial court issued an order dated January
31, 1979 granting petitioners’ motion and lifting the writ of
attachment previously issued.
Upon denial of its motion for reconsideration the Bank went to
the Court of Appeals on a petition for certiorari to annul the
order of the trial court lifting the writ of attachment.cralawnad
On November 29, 1979, the respondent Court of Appeals,
finding that the order of the trial court was not arbitrarily
issued, dismissed the petition for lack of merit.
However, on motion of the Bank, the respondent Court
reconsidered its decision of November 29, 1979 and issued the
questioned resolution dated September 18, 1980, which
authorized the issuance of a writ of attachment.
Hence, the present recourse.
We find the petition impressed with merit, 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. 1
The grounds upon which attachment may issue are set forth in
Section 1, Rule 57 of the Rules of Court. But quite apart from
the grounds stated therein, it is further provided in Section 3 of
Rule 57 that "an order of attachment shall be granted only
when it is made to appear by the affidavit of the applicant or
some other person who personally knows the facts, that . . .
there is no other sufficient security for the claim sought to be
enforced by the action."cralaw virtua1aw library
The reason for the rule prohibiting attachment where
indebtedness was already secured is to prevent the secured
creditors from attaching additional property and thus tying up
more of the debtor’s property than was necessary to secure the
indebtedness. 2 Thus, to sustain an order of attachment, "it is
incumbent upon plaintiff to establish either of these two facts,
to wit: (a) that the obligation had not been secured originally,
or (b) that, if secured at its beginning, the security later became
valueless." 3
In the instant case, the allegation in the affidavit of the Bank’s
Credit Division Manager, Mrs. Helen Osias, to the effect that
"there is no sufficient security for the claim sought to be
enforced by this action" has been shown to be false. It is
undisputed that the note sued upon "is fully secured by a series
of valid and existing real estate mortgages duly registered and
annotated in the titles of the affected real property in favor of
the plaintiff Bank."cralaw virtua1aw library
Section 13, Rule 57 of the Rules of Court authorizes the
discharge of an attachment where the same had been
improperly or irregularly issued. In National Coconut
Corporation v. Hon. Potenciano Pecson, 4 this Court ruled that
when the facts or some of them, stated in the plaintiff’s
affidavit, are shown by the defendant to be untrue, the writ of
attachment may be considered as improperly or irregularly
issued.
Since attachment is a harsh and rigorous remedy which exposes
the debtor to humiliation and annoyance, the rule authorizing
its issuance must be strictly construed in favor of the
defendant. It should not be abused as to cause unnecessary
prejudice. It is the duty of the court before issuing the writ to
ensure that all the requisites of the law has been complied
with.
Accordingly, the resolution of the respondent Court of Appeals,
now the Intermediate Appellate Court, dated September 18,
1980, is hereby set aside. No costs.
SO ORDERED.
G.R. No. L-4296 February 25, 1952
NATIONAL COCONUT CORPORATION, Petitioner, vs. THE
HONORABLE POTENCIANO PECSON, Judge of the Court of First
Instance of Manila and FRANCISCO SYCIP, Respondents.
First Assistant Corporate Counsel Federico Alikpala for
petitioner.
I.C. Monsod for appellant.
BAUTISTA ANGELO, J.:
This petition seeks to annul the order of the respondent Judge
which denies the motion to discharge the preliminary
attachment issued in Civil Case No. 2293 of the Court of First
Instance of Manila.chanroblesvirtualawlibrary chanrobles
virtual law library
On April 17, 1947, Francisco Sycip filed a complaint for the
recovery of a sum of money against the herein petitioner in the
Court of First Instance of Manila, which was docketed as civil
case No. 2293. On September 4, 1950, Francisco Sycip filed an
ex parte petition praying for the issuance of a writ of
preliminary attachment and alleging as ground that the herein
petitioner "has disposed of and is in the process of disposing its
properties with intent to defraud its creditors", and setting
forth in support thereof the fact that the herein petitioner "has
advertised in the Manila Chronicles of June 10, 1950, one
complete oil mill" and that according to newspaper reports,
certain government officials were advocating the dissolution of
the petitioning corporation. On September 6, 1950, the
respondent Judge issued the writ of preliminary attachment
prayed for.chanroblesvirtualawlibrary chanrobles virtual law
library
Upon being informed of the issuance of said writ, the herein
petitioner on September 13, 1950, filed a motion to discharge
the attachment thereto an affidavit of its Officer-in-Charge who
alleged therein that the ground upon which Francisco Sycip
secured the issuance of the writ was false; that the purpose of
the advertised sale of petitioner's oil mill was to prevent its
being deteriorated; that the sale was never consummated for
lack of satisfactory bid; and that in view of the fact that the
ground upon which the attachment was issued was based on
mere newspaper reports, the same was improperly issued and
should be discharged. This motion was denied on September
10,1950.chanroblesvirtualawlibrary chanrobles virtual law
library
On September 29, 1950, the herein petitioner filed a motion for
reconsideration pointing out that under paragraph (e), Sec. 1,
Rule 59 of the Rules of Court, it is not enough that "the
defendant has removed of disposed of his property or is about
to do so", but it is an essential requisite "that such removal or
disposition or intended removal or disposition be made with
intent to defraud his creditors", and that, the alleged intention
to defraud on the part of the petitioner having been properly
controverted, the petitioning corporation should at least be
given an opportunity to prove the absence of such intention in
a preliminary hearing. This motion was again denied, hence this
petition for certiorari.chanroblesvirtualawlibrary chanrobles
virtual law library
Petitioner now contends that the respondent Judge in so
declining to discharge the writ of preliminary attachment or at
least to allow the herein petitioner to prove at a preliminary
hearing its want of intent to defraud, committed a grave abuse
of discretion, for in doing so he disregarded the law and
precedents on the matter.chanroblesvirtualawlibrary
chanrobles virtual law library
There is merit in this contention. Section 13, Rule 59 of the
Rules of Court authorizes the discharge of the attachment on
the ground that the same was improperly or irregularly issued,
and it has been held that "when the facts, or some of them,
stated in the plaintiff's affidavit, are shown by the defendant to
be untrue" the writ of attachment may be considered as
improperly or irregularly issued (Hijos de I. de La Rama vs. Sajo,
45 Phil., 703; Baron vs. David, 51 Phil. 1, as cited in II Moran,
Comments on the Rules of Court, p. 38). Here it has been
shown that the alleged intent to defraud is not true for it
appears that the only property that the petitioner intends to
sell or dispose of has been advertised for sale not to defraud its
creditors but merely to save it from deterioration. This fact is
not disputed. The mere fact that the sale was advertised is
proof of the absence of such intention. And aside from this
property, none other has been pointed out which petitioner
has intended to sell with the same
intention.chanroblesvirtualawlibrary chanrobles virtual law
library
Assuming that this fact is controverted, or that there is doubt
as to which of the affidavits of the parties should be given
credence, still the petitioner has the right to introduce evidence
in support of its claim. Petitioner evinced its desire to avail
itself of this right when it asked the court that it be given an
opportunity to prove the absence of its intention to defraud.
But the lower court denied it this right and merely relied on the
affidavit of respondent Francisco Sycip. We find this to be an
abuse of discretion.
Attachment; Motion to Dissolve. - When a motion is made to
dissolve an attachment on the ground that the affidavit upon
which the writ was granted is false, the defendant is entitled to
introduce evidence of such falsity (Miller, Sloss and Scott v.
Jones, 9 Phil. 648).
Wherefore, the order of the respondent Judge dated
September 20, 1950, denying the petitioner's motion to
discharge the preliminary attachment issued herein is hereby
set aside.chanroblesvirtualawlibrary chanrobles virtual law
library
It is ordered that this case be remanded to the court of origin
so that evidence may be presented in support of said
petitioner's motion to discharge the attachment, with costs
against Francisco Sycip.
G.R. No. L-45720 December 29, 1937
VENTURA GUZMAN, Petitioner, vs. ALFREDO CATOLICO and
SIMEON RAMOS, Judge of First Instance of Isabela,
Respondents.
Arnaldo J. Guzman for the petitioner.
Alfredo Catolico in his own behalf.
No appearance for respondent Judge.
VILLA-REAL, J.: chanrobles virtual law library
This is a petition filed by Ventura Guzman, praying this court,
after proper proceedings, to render judgment declaring illegal
and void and setting aside the writ of preliminary attachment
issued by the respondent judge, Honorable Simeon Ramos, as
judge of the Court of First Instance of Isabela, and ordering the
dissolution thereof.chanroblesvirtualawlibrary chanrobles
virtual law library
The pertinent facts necessary for the resolution of the legal
question raised in the present case are as follows:chanrobles
virtual law library
On March 8, 1937, the respondent Alfredo Catolico brought an
action against the herein petitioner Ventura Guzman in the
Court of First Instance of Isabela, for the recovery from the
latter of the amount of his fees for services rendered by him as
attorney, praying, at the same time, for the issuance of a writ of
preliminary attachment against all of the properties
adjudicated to said petitioner in special proceedings No. 179 of
said court. As grounds for the issuance of said writ of
preliminary attachment, he alleged: "That the herein defendant
is trying to sell and dispose of the properties adjudicated to
him, with intention to defraud his creditors, particularly the
herein plaintiff, thereby rendering illusory the judgment that
may be rendered against him, inasmuch as he has no other
properties outside the same to answer for the fees the court
may fix in favor of the plaintiff, this case being one of those
mentioned by the Code of Civil Procedure warranting the
issuance of a writ of preliminary attachment" (paragraph 8 of
the complaint there appears the following affidavits: "I, Alfredo
Catolico, of age, married and resident of Tuguegarao, Cagayan,
after being duly sworn, declare: That I am the same plaintiff in
this case; that I have prepared and read the same (complaint)
and that all the allegations thereof are certain and true, to the
best of knowledge and belief."chanrobles virtual law library
In view of the said complaint and affidavit, the respondent
judge, on March 10, 1937, issued an order granting the petition
and ordering the issuance of a writ of preliminary attachment,
after the filing of the corresponding bond by the
plaintiff.chanroblesvirtualawlibrary chanrobles virtual law
library
On April 15, 1937, said defendant Ventura Guzman filed a
motion for the cancellation of said writ of preliminary
attachment on the ground that it had been improperly,
irregularly and illegally issued, there being no allegation, either
in the complaint or in the affidavit solemnizing it, that there is
no other sufficient security for the claim sought to be enforced
by the action; that the amount due to the plaintiff, above the
legal set-off and counterclaim, is as much as the sum of which
the preliminary attachment has been granted, and that the
affidavit of the plaintiff is base in mere information and
belief.chanroblesvirtualawlibrary chanrobles virtual law library
Said motion was denied by the respondent judge in an order of
July 10, 1937.chanroblesvirtualawlibrary chanrobles virtual law
library
The only question to be decided in this case is whether or not
the requisites prescribed by law for the issuance of a writ of
preliminary attachment have been complied
with.chanroblesvirtualawlibrary chanrobles virtual law library
Section 426 of the Code of the Civil Procedure provides that "A
judge or justice of the peace shall grant an order of attachment
when it is made to appear to the judge or justice of the peace
by the affidavit of the plaintiff, or of some other person who
knows the facts, that a sufficient cause of action exists, and that
the case is one of those mentioned in section four hundred and
twenty-four, and that there is no other sufficient security for
the claim sought to be enforced by the action, and that the
amount due to the plaintiff above all legal set-offs or
counterclaims is as much as the sum for which the order is
granted."chanrobles virtual law library
The petitioner, in attacking the legality and validity of the writ
of preliminary attachment, which is the subject matter of this
petition, relies on the alleged lack of an allegation in the
complaint or in the affidavit to the effect "that there is no
sufficient security for the claim sought to be enforced by the
action and that the amount alleged to be due to the plaintiff
above all legal set-offs and counterclaims is as much as the sum
for which the writ has been granted", and on the fact that the
affidavit is based on mere information and belief of the
plaintiff.chanroblesvirtualawlibrary chanrobles virtual law
library
With respect to the last requisites just stated above, the
affidavit is not defective because in it the therein plaintiff and
herein respondent Alfredo Catolico states "that all the
allegations thereof are certain and true, to the best of my
knowledge and belief", and not that they are so according to
his information and belief.chanroblesvirtualawlibrary
chanrobles virtual law library
As to the other two requisites, there is no allegation, either in
the complaint or in affidavit solemnizing it, to the effect that
there is no other sufficient security for the claim which the
plaintiff seeks to enforce by his action, and that the amount
due him from the defendant, above all legal set-offs and
counterclaims, is as much as the sum for which the writ of
preliminary attachment has been granted. Now then, does the
omission of these two requisites constitute a defect preventing
a judge of the Court of First Instance from issuing a writ of
preliminary attachment?chanrobles virtual law library
Attachment is a juridical institution which has for its purpose to
secure the outcome of the trial, that is, the satisfaction of the
pecuniary obligation really contracted by a person or believed
to have been contracted by him, either by virtue of a civil
obligation emanating from contract or law, or by virtue of some
crime or misdemeanor that he might have committed, and the
writ issued, granting it, is executed by attaching and safely
keeping all the movable property of the defendant, or so much
thereof as may be sufficient to satisfy the plaintiff's demands
(sec. 428, Act No. 190), or by filing a copy of said writ with the
register of deeds for the province in which the real property is
situated, whether standing upon the records in the name of the
defendant or not appearing at all upon the record, which
constitutes a limitation of ownership or the right to enjoy or
dispose of a thing without further limitations than those
established by law (art. 348, Civil Code), since the owner of the
property attached cannot dispose of the same free of all liens
and encumbrances. The law authorizing the issuance of a writ
of preliminary attachment should, therefore, be construed
strictly in favor of the judge should require that all the
requisites prescribed by law be complied with, without which a
judge acquires no jurisdiction to issue the writ. If he does so in
spite of noncompliance with said requisites, he acts in excess of
his jurisdiction and with the writ so issued by him will be null
and void.
The jurisdiction of attachment proceedings being a special one,
it cannot be legitimately exercised unless the attaching creditor
pursues substantially the essential requirements of the statute,
and the court can act only under the special power limited by
the statute and according to the forms of procedures it
prescribes. . . . (6 C. J., 88, paragraph 121.)chanrobles virtual
law library
Where the statutes requires the affidavit to show that
defendant is indebted to plaintiff in an amount specified, or
that the latter is entitled to recover such an amount, over and
above all legal payments, set-offs, or counterclaims,
compliance with this requirement is essential to confer
jurisdiction to issue the writ. (6 C. J., 132,
paragraph 201.)chanrobles virtual law library
An affidavit is fatally defective where it fails to comply, at least
substantially, with a statutory requirement that is shall state
that the indebtedness for which the action is brought has not
been secured by any mortgage or lien upon real or personal
property, or any pledge of personal property, or, if so secured,
that the security has become valueless. . . . (6 C. J., 146,
paragraph 231.)
For the foregoing consideration, this court is of the opinion and
so holds that failure to allege in a complaint or in the affidavit
solemnizing it, or in a separate one, the requisites prescribed
by section 426 of the Code of Civil Procedure for the issuance
of a writ of preliminary attachment that there is no other
sufficient security for the claim sought to be enforced by the
action, and that the amount due to the plaintiff above all legal
set-offs or counterclaims is as much as the sum for which the
order is sought, renders a writ of preliminary attachments
issued against the property of a defendant fatally defective,
and the judge issuing it acts in excess of his
jurisdiction.chanroblesvirtualawlibrary chanrobles virtual law
library
Wherefore, the writ of certiorari applied for is granted, and the
writ of preliminary attachment issued by the respondent judge
in civil case No. 1460 of the Court of First Instance of Isabela,
wherein the herein respondent Alfredo Catolico is plaintiff and
the herein petitioner Ventura Guzman is defendant, is declared
null and void, with costs to respondent Alfredo Catolico. So
ordered.
G.R. No. 192159, January 25, 2017
COMMUNICATION AND INFORMATION SYSTEMS
CORPORATION, Petitioner, v. MARK SENSING AUSTRALIA PTY.
LTD., MARK SENSING PHILIPPINES, INC. AND OFELIA B. CAJIGAL,
Respondent.
DECISION
JARDELEZA, J.:
This is a petition for review on certiorari1 seeking to set aside
the Decision2 dated November 25, 2009 and Resolution3 dated
April 23, 2010 of the Court of Appeals (CA) in CA-G.R. SP No.
110511. The question is whether courts may approve an
attachment bond which has been reinsured as to the excess of
the issuer's statutory retention limit.
I CA later reversed the RTC and ordered that the additional
Petitioner Communication and Information Systems
Corporation (CISC) and respondent Mark Sensing Australia Pty.
Ltd. (MSAPL) entered into a Memorandum of Agreement4
(MOA) dated March 1, 2002 whereby MSAPL appointed CISC as
"the exclusive AGENT of [MSAPL] to PCSO during the [lifetime]
of the recently concluded Memorandum of Agreement entered
into between [MSAPL], PCSO and other parties." The recent
agreement referred to in the MOA is the thermal paper and bet
slip supply contract (the Supply Contract) between the
Philippine Charity Sweepstakes Office (PCSO), MSAPL, and
three other suppliers, namely Lamco Paper Products Company,
Inc. (Lamco Paper), Consolidated Paper Products, Inc.
(Consolidated Paper) and Trojan Computer Forms
Manufacturing Corporation (Trojan Computer Forms).5 As
consideration for CISC's services, MSAPL agreed to pay CISC a
commission of 24.5% of future gross sales to PCSO, exclusive of
duties and taxes, for six years.6
After initially complying with its obligation under the MOA,
MSAPL stopped remitting commissions to CISC during the
second quarter of 2004. MSAPL justified its action by claiming
that Carolina de Jesus, President of CISC, violated her authority
when she negotiated the Supply Contract with PCSO and three
of MSAPL's competitors. According to MSAPL, it lost almost
one-half of its business with PCSO because the Supply Contract
provided that MSAPL's business with PCSO shall be limited to
the latter's Luzon operations, with MSAPL supplying 70% of
thermal rolls and 50% of bet slips. MSAPL pointed out that it
used to have a Build Operate Transfer (BOT) Agreement with
PCSO where it undertook to build a thermal paper and bet slip
manufacturing facility to supply all requirements of PCSO.
However, PCSO unilaterally cancelled the BOT Agreement and
granted supply contracts to Lamco Paper, Consolidated Paper
and Trojan Computer Forms, which ultimately resulted in
litigation between the parties.7 The suit was eventually settled
when PCSO, MSAPL, and the three other suppliers entered into
the Supply Contract, which was submitted and approved by the
Regional Trial Court (RTC), Branch 224 of Quezon City, as a
compromise agreement.8 MSAPL felt shortchanged by CISC's
efforts and thus decided to withhold payment of commissions.
As a result of MSAPL's refusal to pay, CISC filed a complaint
before the RTC in Quezon City for specific performance against
MSAPL, Mark Sensing Philippines, Inc. (MSPI), Atty. Ofelia
Cajigal, and PCSO.9 CISC prayed that private respondents be
ordered to comply with its obligations under the MOA. It also
asked the RTC to issue a writ of preliminary mandatory
injunction and/or writ of attachment.10 The RTC denied CISC's
prayer for mandatory injunctive relief but ordered the PCSO to
hold the amount being contested until the final determination
of the case.11 It later reversed itself, holding that its
jurisdiction is limited to the amount stated in the complaint and
therefore had no jurisdiction to order PCSO to withhold
payments in excess of such amount.12 This order of reversal
became the subject of a separate petition for certiorari filed by
CISC before the CA, docketed as CA-G.R. SP No. 96620.13 The
docket fees shall constitute a lien on the judgment.14
On September 10, 2007, the RTC granted CISC's application for
issuance of a writ of preliminary attachment, stating that "the
non-payment of the agreed commission constitutes fraud on
the part of the defendant MSAPL in their performance of their
obligation to the plaintiff."15 The RTC found that MSAPL is a
foreign corporation based in Australia, and its Philippine
subsidiary, MSPI, has no other asset except for its collectibles
from PCSO. Thus, the RTC concluded that CISC may be left
without any security if ever MSAPL is found liable.16 But the
RTC limited the attachment to P4,861,312.00, which is the
amount stated in the complaint, instead of the amount sought
to be attached by CISC, i.e., P113,197,309.10.17 The RTC
explained that it "will have to await the Supreme Court
judgment over the issue of whether [it] has jurisdiction on the
amounts in the excess of the amount prayed for by the plaintiff
in their complaint" since MSAPL appealed the adverse
judgment in CA-G.R. SP No. 96620 to us.18 We later denied
MSAPL's petition for review assailing the CA Decision in CA-G.R.
SP No. 96620 (subsequently docketed as G.R. No. 179073) in a
Resolution dated November 12, 2007.19 It became final and
executory on March 25, 2008.20
In view of this development, CISC moved to amend the order of
attachment to include unpaid commissions in excess of the
amount stated in the complaint. On December 22, 2008, the
RTC granted CISC's motion and issued a new writ of preliminary
attachment.21 On April 13, 2009, the RTC, acting on the partial
motions for reconsideration by both CISC and MSAPL, modified
the amount covered by the writ to reflect the correct amount
prayed for by CISC in its previous motion to amend the
attachment order conditioned upon the latter's payment of
additional docket fees. It also denied MSAPL's opposition to the
attachment order for lack of merit.22 On July 2, 2009, the RTC
modified its order insofar as it allowed CISC to pay docket fees
within a reasonable time.23
On July 8, 2009, CISC posted a bond in the amount of
P113,197,309.10 through Plaridel Surety and Insurance
Company (Plaridel) in favor ofMSAPL, which the RTC approved
on the same date.24 Two days later, MSAPL filed a motion to
determine the sufficiency of the bond because of questions
regarding the financial capacity of Plaridel.25 But before the
RTC could act on this motion, MSAPL, apparently getting hold
of Plaridel's latest financial statements, moved to recall and set
aside the approval of the attachment bond on the ground that
Plaridel had no capacity to underwrite the bond pursuant to
Section 215 of the old Insurance Code26 because its net worth
was only P214,820,566.00 and could therefore only underwrite
up to P42,964,113.20.27 On September 4, 2009, the RTC
denied MSAPL's motion, finding that although Plaridel cannot
underwrite the bond by itself, the amount covered by the
attachment bond "was likewise reinsured to sixteen other
insurance companies."28 However, "for the best interest of
both parties," the RTC ordered Plaridel to submit proof that the
amount of P95,819,770.91 was reinsured. Plaridel submitted its
compliance on September 11, 2009, attaching therein the
reinsurance contracts.29
On September 18, 2009, MSAPL, MSPI and Atty. Ofelia Cajigal30
filed a petition for certiorari before the CA, docketed as CA-G.R.
SP No. 110511, assailing the Orders of the RTC dated April 13,
2009, July 2, 2009, July 8, 2009, and September 4, 2009. In its
now-assailed Decision elated November 25, 2009, the CA
granted the petition.31 It concluded that the petition for
certiorari was filed on time because MSAPL did not abandon
their right to impugn the evidence submitted in the application
for the writ of preliminary attachment, because they filed a
motion to determine the sufficiency of the bond. On the merits,
it held that the RTC exceeded its authority when it "ordered the
issuance of the writ [of preliminary attachment] despite a
dearth of evidence to clearly establish [CISC's] entitlement
thereto, let alone the latter's failure to comply with all
requirements therefor."32 Noting that the posting of the
attachment bond is a jurisdictional requirement, the CA
concluded that since Plaridel's capacity for single risk coverage
is limited to 20% of its net worth, or P57,866,599.80, the RTC
"should have set aside the second writ outright for non-
compliance with Sections 3 and 4 of Rule 57."33
After the CA perfunctorily denied CISC's motion for
reconsideration on April 23, 2010,34 it filed this petition for
review on certiorari.
II
CISC argues that the CA erred in giving due course to the
petition insofar as it challenged the Orders dated April 13,
2009, July 2, 2009, and July 8, 2009 because the reglementary
period to challenge these Orders already lapsed by the time
private respondents filed their petition for certiorari below.35
In response, MSAPL contends that since they continued to
assail the additional attachment from the time it was first
issued, the 60-day period should be counted from the final
denial of their challenge to the additional attachment, which
was on September 4, 2009.36
MSAPL's theory is similar to that proffered by one of the parties
in the case of San Juan, Jr. v. Cruz.37 The petitioner therein
filed second and third motions for reconsideration from an
interlocutory order by the trial court. When he filed the
petition for certiorari with the CA, he counted the 60-day
reglementary period from the notice of denial of his third
motion for reconsideration. He argued that since there is no
rule prohibiting the filing of a second or third motion for
reconsideration of an interlocutory order, the 60-day period
should be counted from the notice of denial of the last motion
for reconsideration. In resolving the question of when the
reglementary period for filing a petition for certiorari shall be
counted, we held that the "60-day period shall be reckoned
from the trial court's denial of his first motion for
reconsideration, otherwise indefinite delays will ensue."38
Applying the rule in San Juan, MSAPL's challenge to the order
dated April 13, 2009 was clearly time-barred. The 60-day
reglementary period for challenging the RTC's issuance of the
amended writ of attachment should be counted from April 27,
2009,39 the date when MSAPL received a copy of the April 13,
2009 Order denying MSAPL's motion for reconsideration of the
December 22, 2008 Order which granted CISC's motion to
amend the writ of preliminary attachment. The CA, however,
considered MSAPL's act of filing a motion to determine the
sufficiency of the bond as a definitive indication that private
respondents have not "abandoned their right to impugn the
evidence submitted in the application for the second writ."40
This is erroneous for two reasons: first, MSAPL's motion never
impugned the propriety and factual bases of the RTC's issuance
of the amended writ of attachment; and second, even if it did,
the motion would be considered as a second motion for
reconsideration, which could not have stayed the reglementary
period within which to file a petition for certiorari assailing an
interlocutory order. We emphasize that the provisions on
reglementary periods are strictly applied, indispensable as they
are to the prevention of needless delays, and are necessary to
the orderly and speedy discharge of judicial business. The
timeliness of filing a petition for certiorari is mandatory and
jurisdictional, and should not be trifled with.41
Meanwhile, the Orders dated July 2, 2009 and July 8, 2009
resolved incidental issues with respect to the issuance of the
amended writ of attachment, namely: (1) when the additional
docket fees should be paid; and (2) the approval of the
attachment bond. As regards the first incidental issue, the RTC
allowed CISC to pay the additional docket fees "within a
reasonable time but in no case beyond its applicable
prescriptive or reglementary period."42 MSAPL, instead of filing
a motion for reconsideration of the July 2, 2009 Order, elected
to file a motion to compel CISC to pay the required docket fees
on August 14, 2009.43 Evidently, MSAPL already recognized the
validity of the July 2, 2009 Order and sought CISC's compliance
with the Order. Notably, the motion remained pending before
the RTC when MSAPL filed its petition for certiorari with the CA.
We find that the petition for certiorari, insofar as it questions
the alleged non-payment of docket fees, was prematurely filed
because the RTC has yet to rule on this issue. A petition for
certiorari may be resorted to only when there is no plain,
speedy, and adequate remedy in the ordinary course of law.44
It is not up to parties to preempt the trial court's action on their
motions. Absent any showing of unreasonable delay on the
part of the RTC-and there is none here, considering the short
period between the filing of the motion and the petition for
certiorari, as well as the various incidents pending a quo-
MSAPL's recourse to theCA was premature. The more
appropriate remedy for MSAPL would have been to move for
the RTC to resolve its pending motion instead of precipitately
raising this matter in its petition for certiorari.45
This leaves the July 8, 2009 Order which approved the
attachment bond Plaridel submitted. It was directly challenged
by MSAPL when the latter tiled a motion to determine the
sufficiency of the bond because of questions regarding
Plaridel's financial capacity. Before the RTC could act on the
motion, however, MSAPL filed an urgent motion to recall and
set aside the approval of the attachment bond, dated July 21,
2009,46 on the ground that the attachment bond underwritten
by Plaridel exceeded its retention limit under the Insurance
Code. The RTC resolved these two motions jointly in its
September 4, 2009 Order, holding that Section 215 allows
insurance companies to insure a single risk in excess of
retention limits provided that the excess amount is ceded to
reinsurers, and consequently affirming its approval of the
attachment bond. In turn, the September 4, 2009 Order
became the anchor of MSAPL's petition for certiorari. Although
not captioned as "motions tor reconsideration," the twin
motions filed by MSAPL directly challenged the approval of the
attachment bond, and the September 4, 2009 Order was the
second time the RTC passed upon the issue concerning the
sufficiency of the bond. Therefore, the petition for certiorari
filed by MSAPL on September 18, 2009, insofar as it assailed
both the July 8, 2009 and September 4, 2009 Orders, was
timely filed.
III
We now resolve the sole substantive issue before us: whether
the RTC committed grave abuse of discretion when it approved
the attachment bond whose face amount exceeded the
retention limit of the surety.
Section 215 of the old Insurance Code,47 the law in force at the
time Plaridel issued the attachment bond, limits the amount of
risk that insurance companies can retain to a maximum of 20%
of its net worth. However, in computing the retention limit,
risks that have been ceded to authorized reinsurers are ipso
jure deducted.48 In mathematical terms, the amount of
retained risk is computed by deducting ceded/reinsured risk
from insurable risk.49 If the resulting amount is below 20% of
the insurer's net worth, then the retention limit is not
breached. In this case, both the RTC and CA determined that,
based on Plaridel's financial statement that was attached to its
certificate of authority issued by the Insurance Commission, its
net worth is P289,332,999.00.50 Plaridel's retention limit is
therefore P57,866,599.80, which is below the Pl13,197,309.10
face value of the attachment bond. However, it only retained
an insurable risk of P17,377,938.19 because the remaining
amount of P98,819,770.91 was ceded to 16 other insurance
companies.51 Thus, the risk retained by Plaridel is actually P40
Million below its maximum retention limit. Therefore, the
approval of the attachment bond by the RTC was in order.
Contrary to MSAPL's contention that the RTC acted with grave
abuse of discretion, we find that the RTC not only correctly
applied the law but also acted judiciously when it required
Plaridel to submit proof of its reinsurance contracts after
MSAPL questioned Plaridel's capacity to underwrite the
attachment bond. Apparently, MSAPL failed to appreciate that
by dividing the risk through reinsurance, Plaridel's attachment
bond actually became more reliable-as it is no longer
dependent on the financial stability of one company-and,
therefore, more beneficial to MSAPL.
In cancelling Plaridel's insurance bond, the CA also found that
because the reinsurance contracts were issued in favor of
Plaridel, and not MSAPL, these failed to comply with the
requirement of Section 4, Rule 57 of the Rules of Court
requiring the bond to be executed to the adverse party.52 This
led the CA to conclude that "the bond has been improperly and
insufficiently posted."53 We reverse the CA and so hold that
the reinsurance contracts were correctly issued in favor of
Plaridel. A contract of reinsurance is one by which an insurer
(the "direct insurer" or "cedant") procures a third person (the
"reinsurer") to insure him against loss or liability by reason of
such original insurance.54 It is a separate and distinct
arrangement from the original contract of insurance, whose
contracted risk is insured in the reinsurance agreement.55 The
reinsurer's contractual relationship is with the direct insurer,
not the original insured, and the latter has no interest in and is
generally not privy to the contract of reinsurance.56 Put simply,
reinsurance is the "insurance of an insurance."57
By its nature, reinsurance contracts are issued in favor of the
direct insurer because the subject of such contracts is the direct
insurer's risk-in this case, Plaridel's contingent liability to
MSAPL and not the risk assumed under the original policy.58
The requirement under Section 4, Rule 57 of the Rules of Court
that the applicant's bond be executed to the adverse party
necessarily pertains only to the attachment bond itself and not
to any underlying reinsurance contract. With or without
reinsurance, the obligation of the surety to the party against
whom the writ of attachment is issued remains the same.
WHEREFORE, the petition is GRANTED. The Decision dated
November 25, 2009 and Resolution dated April 23, 2010 of the
Court of Appeals in CA-G.R. SP No. 110511 are SET ASIDE.
SO ORDERED.
G.R. No. 203530, April 13, 2015
LUZON DEVELOPMENT BANK, TOMAS CLEMENTE, JR., AND
OSCAR RAMIREZ, Petitioners, v. ERLINDA KRISHNAN,
Respondent.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the
1997 Rules of Civil Procedure praying for the annulment of the
Decision1 dated March 27, 2012 and Resolution2 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:chanroblesvirtuallawlibrary
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:chanroblesvirtuallawlibrary
"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 Sheriffs Partial
Report. Thereafter, petitioners filed this petition for certiorari x
x x.
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:chanroblesvirtuallawlibrary
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.3cralawlawlibrary
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:chanroblesvirtuallawlibrary
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 FIONORABLE 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.5cralawlawlibrary
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.cralawred
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.chanroblesvirtuallawlibrary
[G.R. NO. 158407 : January 17, 2005]
FILOMENA DOMAGAS, Petitioner, v. VIVIAN LAYNO JENSEN,
Respondent.
DECISION
CALLEJO, SR., J.:
This is a Petition for Review on Certiorari, under Rule 45 of the
Rules of Court, of the Decision1 of the Court of Appeals (CA) in
CA-G.R. CV No. 73995, which affirmed the Decision2 of the
Regional Trial Court (RTC) of Dagupan City, Branch 44, in Civil
Case No. 2000-0244-D, which declared null and void the
decision of the Municipal Trial Court (MTC) of Calasiao,
Pangasinan in Civil Case No. 879.3
The antecedent facts follow.
On February 19, 1999, petitioner Filomena Domagas filed a
complaint for forcible entry against respondent Vivian Jensen
before the MTC of Calasiao, Pangasinan. The petitioner alleged
in her complaint that she was the registered owner of a parcel
of land covered by Original Certificate of Title (OCT) No. P-
30980, situated in Barangay Buenlag, Calasiao, Pangasinan, and
with an area of 827 square meters. On January 9, 1999 the
respondent, by means of force, strategy and stealth, gained
entry into the petitioner's property by excavating a portion
thereof and thereafter constructing a fence thereon. As such,
the petitioner was deprived of a 68-square meter portion of her
property along the boundary line. The petitioner prayed that,
after due proceedings, judgment be rendered in her favor,
thus:
3. And, after trial, judgment be rendered:
a) DECLARING the writ of Preliminary Mandatory Injunction and
Writ of Preliminary Injunction permanent;
b) ORDERING defendant, his representatives, agents and
persons acting under her, to vacate the portion of the property
of the plaintiff occupied by them and to desist from entering,
excavating and constructing in the said property of the plaintiff
described in paragraph 2 hereof and/or from disturbing the
peaceful ownership and possession of the plaintiff over the said
land, pending the final resolution of the instant action;
c) ORDERING defendant to pay reasonable rental at FIVE
THOUSAND (P5,000.00) PESOS per month from January 9, 1999
up to the time she finally vacates and removes all constructions
made by her in the property of the plaintiff and up to the time
she finally restores the said property in the condition before
her illegal entry, excavation and construction in the property of
the plaintiff;
d) ORDERING defendant to pay actual damages in the amount
of TWENTY THOUSAND (P20,000.00) PESOS; moral damages in
the amount of TWENTY THOUSAND (P20,000.00) PESOS;
attorney's fees of THIRTY THOUSAND (P30,000.00) PESOS in
retainer's fee and ONE THOUSAND FIVE HUNDRED (P1,500.00)
PESOS per court appearance fee; exemplary damages in the
amount of TWENTY THOUSAND (P20,000.00) PESOS, and, costs.
Plaintiff further prays for other reliefs and remedies just and
equitable in the premises.4
The case was docketed as Civil Case No. 879. The summons and
the complaint were not served on the respondent because the
latter was apparently out of the country. This was relayed to
the Sheriff by her (the respondent's) brother, Oscar Layno, who
was then in the respondent's house at No. 572 Barangay
Buenlag, Calasiao, Pangasinan. The Sheriff left the summons
and complaint with Oscar Layno, who received the same.5
Nonetheless, on May 17, 1999, the court rendered judgment
ordering the respondent and all persons occupying the
property for and in the latter's behalf to vacate the disputed
area and to pay monthly rentals therefor, including actual
damages, attorney's fees, and exemplary damages. The fallo of
the decision reads:
1) Ordering the defendant, her representatives, agents and
persons acting under her, to vacate the 68-square meters
which she encroached upon;
2) Ordering the defendant to pay a monthly rental of P1,000.00
to the plaintiff;
3) To pay plaintiff actual damages of P20,000.00; attorney's
fees of P15,000.00 and exemplary damages in the amount of
P20,000.00 plus the costs.
SO ORDERED.6
The respondent failed to appeal the decision. Consequently, a
writ of execution was issued on September 27, 1999.
On August 16, 2000, the respondent filed a complaint against
the petitioner before the RTC of Dagupan City for the
annulment of the decision of the MTC in Civil Case No. 879, on
the ground that due to the Sheriff's failure to serve the
complaint and summons on her because she was in Oslo,
Norway, the MTC never acquired jurisdiction over her person.
The respondent alleged therein that the service of the
complaint and summons through substituted service on her
brother, Oscar Layno, was improper because of the following:
(a) when the complaint in Civil Case No. 879 was filed, she was
not a resident of Barangay Buenlag, Calasiao, Pangasinan, but
of Oslo, Norway, and although she owned the house where
Oscar Layno received the summons and the complaint, she had
then leased it to Eduardo Gonzales; (b) she was in Oslo,
Norway, at the time the summons and the complaint were
served; (c) her brother, Oscar Layno, was merely visiting her
house in Barangay Buenlag and was not a resident nor an
occupant thereof when he received the complaint and
summons; and (d) Oscar Layno was never authorized to receive
the summons and the complaint for and in her behalf.7
The respondent further alleged that the MTC had no
jurisdiction over the subject matter of the complaint in Civil
Case No. 879 because the petitioner, the plaintiff therein, failed
to show prior possession of the property. She further claimed
that the alleged forcible entry was simply based on the result of
the survey conducted by Geodetic Engineer Leonardo de Vera
showing that the property of the respondent encroached on
that of the petitioner.
The respondent filed a Manifestation dated August 31, 2000,
and appended thereto the following: (a) a copy8 of her
passport showing that she left the country on February 17,
1999; (b) a copy9 of the Contract of Lease dated November 24,
1997, executed by her and Eduardo D. Gonzales over her house
for a period of three (3) years or until November 24, 2000; (c)
her affidavit10 stating, inter alia, that she owned the house at
Barangay Buenlag, Calasiao, Pangasinan, which she leased to
Eduardo Gonzales; that she was married to Jarl Jensen, a citizen
of Norway, on August 23, 1987 and had resided in Norway with
her husband since 1993; that she arrived in the Philippines on
December 31, 1998, but left on February 17, 1999; she
returned to the Philippines on July 30, 2000 and learned, only
then, of the complaint against her and the decision of the MTC
in Civil Case No. 879; her brother Oscar Layno was not a
resident of the house at Barangay Buenlag; and that she never
received the complaint and summons in said case; (d) the
affidavit11 of Oscar Layno declaring that sometime in April
1999, he was in the respondent's house to collect rentals from
Eduardo Gonzales; that the Sheriff arrived and served him with
a copy of the summons and the complaint in Civil Case No. 879;
and that he never informed the respondent of his receipt of the
said summons and complaint; (e) an affidavit12 of Eduardo
Gonzales stating that he leased the house of the respondent
and resided thereat; the respondent was not a resident of the
said house although he (Gonzales) allowed the respondent to
occupy a room therein whenever she returned to the
Philippines as a balikbayan; and that Oscar Layno was not
residing therein but only collected the rentals.
In her answer to the complaint, the petitioner alleged that the
respondent was a resident of Barangay Buenlag, Calasiao,
Pangasinan and was the owner of the subject premises where
Oscar Layno was when the Sheriff served the summons and
complaint; that the service of the complaint and summons by
substituted service on the respondent, the defendant in Civil
Case No. 879, was proper since her brother Oscar Layno, a
resident and registered voter of Barangay. Buenlag, Calasiao,
Pangasinan, received the complaint and summons for and in
her behalf.
The petitioner appended the following to her answer: (a) a
copy13 of the Deed of Absolute Sale executed by Jose Layno in
her favor, dated August 26, 1992, showing that the respondent
was a resident of Barangay Buenlag, Calasiao, Pangasinan; (b) a
Real Estate Mortgage14 executed by the respondent, dated
February 9, 1999 showing that she was a resident of Barangay
Buenlag, Calasiao, Pangasinan; (c) the Joint Affidavit15 of
Vicenta Peralta and Orlando Macalanda, both residents of
Barangay Buenlag, Calasiao, Pangasinan, declaring that the
respondent and her brother Oscar Layno were their neighbors;
that the respondent and her brother had been residents of
Barangay Buenlag since their childhood; that although the
respondent left the country on several occasions, she returned
to the Philippines and resided in her house at No. 572 located
in the said barangay; and (d) the Voter's Registration Record16
of Oscar Layno, approved on June 15, 1997.
After due proceedings, the trial court rendered a decision in
favor of the respondent. The dispositive portion reads:
WHEREFORE, judgment is rendered in favor of plaintiff Vivian
Layno Jensen and against defendant Filomena Domagas, as
follows:
1. The Decision of the Municipal Trial Court of Calasiao,
Pangasinan in Civil Case No. 879, entitled Filomena Domagas v.
Vivian Layno Jensen is declared null and void, for lack of
jurisdiction over the person of the plaintiff and the subject
matter.
2. Defendant Filomena Domagas is ordered to pay plaintiff, the
following:
A.) Actual damages, representing litigation expenses in the
amount of P50,000.00;
b.) Attorney's fees in the amount of P50,000.00;
c.) Moral Damages in the amount of P50,000.00;
d.) Exemplary Damages in the amount of P50,000.00;
andcralawlibrary
e.) Costs of suit.
SO ORDERED.17
The trial court declared that there was no valid service of the
complaint and summons on the respondent, the defendant in
Civil Case No. 879, considering that she left the Philippines on
February 17, 1999 for Oslo, Norway, and her brother Oscar
Layno was never authorized to receive the said complaint and
summons for and in her behalf.
The petitioner appealed the decision to the CA which, on May
6, 2003, rendered judgment affirming the appealed decision
with modifications. The CA ruled that the complaint in Civil
Case No. 879 was one for ejectment, which is an action quasi in
rem. The appellate court ruled that since the defendant therein
was temporarily out of the country, the summons and the
complaint should have been served via extraterritorial service
under Section 15 in relation to Section 16, Rule 14 of the Rules
of Court, which likewise requires prior leave of court.
Considering that there was no prior leave of court and none of
the modes of service prescribed by the Rules of Court was
followed by the petitioner, the CA concluded that there was
really no valid service of summons and complaint upon the
respondent, the defendant in Civil Case No. 879.
Hence, the present petition.
The petitioner assails the decision of the CA, alleging that the
appellate court erred in holding that the respondent's
complaint for ejectment is an action quasi in rem. The
petitioner insists that the complaint for forcible entry is an
action in personam; therefore, substituted service of the
summons and complaint on the respondent, in accordance with
Section 7, Rule 14 of the Rules of Court, is valid. The petitioner,
likewise, asserts that Oscar Layno is a resident and a registered
voter of Barangay Buenlag, Calasiao, Pangasinan; hence, the
service of the complaint and summons on the respondent
through him is valid.
The respondent, on the other hand, asserts that the action for
forcible entry filed against her was an action quasi in rem, and
that the applicable provision of the Rules of Court is Section 15
of Rule 14, which calls for extraterritorial service of summons.
The sole issue is whether or not there was a valid service of the
summons and complaint in Civil Case No. 879 on the
respondent herein who was the defendant in the said case. The
resolution of the matter is anchored on the issue of whether or
not the action of the petitioner in the MTC against the
respondent herein is an action in personam or quasi in rem.
The ruling of the CA that the petitioner's complaint for forcible
entry of the petitioner against the respondent in Civil Case No.
879 is an action quasi in rem, is erroneous. The action of the
petitioner for forcible entry is a real action and one in
personam.
The settled rule is that the aim and object of an action
determine its character.18 Whether a proceeding is in rem, or
in personam, or quasi in rem for that matter, is determined by
its nature and purpose, and by these only.19 A proceeding in
personam is a proceeding to enforce personal rights and
obligations brought against the person and is based on the
jurisdiction of the person, although it may involve his right to,
or the exercise of ownership of, specific property, or seek to
compel him to control or dispose of it in accordance with the
mandate of the court.20 The purpose of a proceeding in
personam is to impose, through the judgment of a court, some
responsibility or liability directly upon the person of the
defendant.21 Of this character are suits to compel a defendant
to specifically perform some act or actions to fasten a
pecuniary liability on him.22 An action in personam is said to be
one which has for its object a judgment against the person, as
distinguished from a judgment against the propriety to
determine its state. It has been held that an action in personam
is a proceeding to enforce personal rights or obligations; such
action is brought against the person. As far as suits for
injunctive relief are concerned, it is well-settled that it is an
injunctive act in personam.23 In Combs v. Combs,24 the
appellate court held that proceedings to enforce personal
rights and obligations and in which personal judgments are
rendered adjusting the rights and obligations between the
affected parties is in personam. Actions for recovery of real
property are in personam.25
On the other hand, a proceeding quasi in rem is one brought
against persons seeking to subject the property of such persons
to the discharge of the claims assailed.26 In an action quasi in
rem, an individual is named as defendant and the purpose of
the proceeding is to subject his interests therein to the
obligation or loan burdening the property.27 Actions quasi in
rem deal with the status, ownership or liability of a particular
property but which are intended to operate on these questions
only as between the particular parties to the proceedings and
not to ascertain or cut off the rights or interests of all possible
claimants. The judgments therein are binding only upon the
parties who joined in the action.28
Section 1, Rule 70 of the Rules of Court provides:
Section 1. Who may institute proceedings, and when. - Subject
to the provisions of the next succeeding section, a person
deprived of the possession of any land or building in force,
intimidation, threat, strategy, or stealth, or a lessor, vendor,
vendee, or other person against whom the possession of any
land or building is unlawfully withheld after the expiration or
termination of the right to hold possession by virtue of any
contract, express or implied, or the legal representatives or
assigns of any such lessor, vendor, vendee, or other person,
may, at any time within one (1) year after such unlawful
deprivation or withholding of possession, bring an action in the
proper Municipal Trial Court against the person or persons
unlawfully withholding or depriving of possession, or any
person or persons claiming under them, for the restitution of
such possession, together with damages and costs.
Under Section 15, Rule 70 of the said Rule, the plaintiff may be
granted a writ of preliminary prohibition or mandatory
injunction:
Sec. 15. Preliminary Injunction. - The court may grant
preliminary injunction, in accordance with the provisions of
Rule 58 hereof, to prevent the defendant from committing
further acts of dispossession against the plaintiff.
A possessor deprived of his possession through forcible entry
or unlawful detainer may, within five (5) days from the filing of
the complaint, present a motion in the action for forcible entry
or unlawful detainer for the issuance of a writ of preliminary
mandatory injunction to restore him in his possession. The
court shall decide the motion within thirty (30) days from the
filing thereof.
If, after due proceedings, the trial court finds for the plaintiff, it
shall then render judgment in his or her favor, thus:
Sec. 17. Judgment. - If, after trial, the court finds that the
allegations of the complaint are true, it shall render judgment
in favor of the plaintiff for the restitution of the premises, the
sum justly due as arrears of rent or as reasonable
compensation for the use and occupation of the premises,
attorney's fees and costs. If it finds that said allegations are not
true, it shall render judgment for the defendant to recover his
costs. If a counterclaim is established, the court shall render
judgment for the sum found in arrears from either party and
award costs as justice requires.
From the aforementioned provisions of the Rules of Court and
by its very nature and purpose, an action for unlawful detainer
or forcible entry is a real action and in personam because the
plaintiff seeks to enforce a personal obligation or liability on the
defendant under Article 539 of the New Civil Code,29 for the
latter to vacate the property subject of the action, restore
physical possession thereof to the plaintiff, and pay actual
damages by way of reasonable compensation for his use or
occupation of the property.30
As gleaned from the averments of the petitioner's complaint in
the MTC, she sought a writ of a preliminary injunction from the
MTC and prayed that the said writ be made permanent. Under
its decision, the MTC ordered the defendant therein (the
respondent in this case), to vacate the property and pay a
"monthly rental" of P1,000.00 to the plaintiff therein (the
petitioner in this case).
On the issue of whether the respondent was validly served with
the summons and complaint by the Sheriff on April 5, 1999, the
petitioner asserts that since her action of forcible entry against
the respondent in Civil Case No. 879 was in personam,
summons may be served on the respondent, by substituted
service, through her brother, Oscar Layno, in accordance with
Section 7, Rule 14 of the Rules of Court. The petitioner avers
that Oscar Layno, a person of suitable age and discretion, was
residing in the house of the respondent on April 5, 1999. She
avers that the fact that the house was leased to and occupied
by Eduardo Gonzales was of no moment. Moreover, the Sheriff
is presumed to have performed his duty of properly serving the
summons on the respondent by substituted service.
The contention of the petitioner has no merit.
In Asiavest Limited v. Court of Appeals, 31 the Court had the
occasion to state:
In an action in personam, jurisdiction over the person of the
defendant is necessary for the court to validly try and decide
the case. Jurisdiction over the person of a resident defendant
who does not voluntarily appear in court can be acquired by
personal service of summons as provided under Section 7, Rule
14 of the Rules of Court. If he cannot be personally served with
summons within a reasonable time, substituted service may be
made in accordance with Section 8 of said Rule. If he is
temporarily out of the country, any of the following modes of
service may be resorted to: (a) substituted service set forth in
Section 8; (2) personal service outside the country, with leave
of court; (3) service by publication, also with leave of court; or
(4) any other manner the court may deem sufficient.32
Thus, any judgment of the court which has no jurisdiction over
the person of the defendant is null and void.33
In the present case, the records show that the respondent,
before and after his marriage to Jarl Jensen on August 23, 1987,
remained a resident of Barangay Buenlag, Calasiao, Pangasinan.
This can be gleaned from the Deed of Absolute Sale dated
August 26, 1992 in which she declared that she was a resident
of said barangay. Moreover, in the Real Estate Mortgage
Contract dated February 9, 1999, ten days before the complaint
in Civil Case No. 879 was filed, the petitioner categorically
stated that she was a Filipino and a resident of Barangay
Buenlag, Calasiao, Pangasinan. Considering that the respondent
was in Oslo, Norway, having left the Philippines on February 17,
1999, the summons and complaint in Civil Case No. 879 may
only be validly served on her through substituted service under
Section 7, Rule 14 of the Rules of Court, which reads:
SEC. 7. Substituted service. - If, for justifiable causes, the
defendant cannot be served within a reasonable time as
provided in the preceding section, service may be effected (a)
by leaving copies of the summons at the defendant's residence
with some person of suitable age and discretion then residing
therein, or (b) by leaving the copies at defendant's office or
regular place of business with some competent person in
charge thereof.
Strict compliance with the mode of service is required in order
that the court may acquire jurisdiction over the person of the
defendant.34 The statutory requirement of substituted service
must be followed faithfully and strictly and any substituted
service other than that authorized by the statute is rendered
ineffective.35 As the Court held in Hamilton v. Levy :36
'The pertinent facts and circumstances attendant to the service
of summons must be stated in the proof of service or Officer's
Return; otherwise, any substituted service made in lieu of
personal service cannot be upheld. This is necessary because
substituted service is in derogation of the usual method of
service. It is a method extraordinary in character and hence
may be used only as prescribed and in the circumstances
authorized by statute. Here, no such explanation was made.
Failure to faithfully, strictly, and fully comply with the
requirements of substituted service renders said service
ineffective.37
In Keister v. Narcereo,38 the Court held that the term "dwelling
house" or "residence" are generally held to refer to the time of
service; hence, it is not sufficient to leave the summons at the
former's dwelling house, residence or place of abode, as the
case may be. Dwelling house or residence refers to the place
where the person named in the summons is living at the time
when the service is made, even though he may be temporarily
out of the country at the time. It is, thus, the service of the
summons intended for the defendant that must be left with the
person of suitable age and discretion residing in the house of
the defendant. Compliance with the rules regarding the service
of summons is as much important as the issue of due process
as of jurisdiction.39
The Return of Service filed by Sheriff Eduardo J. Abulencia on
the service of summons reads:
Respectfully returned to the court of origin the herein
summons and enclosures in the above-entitled case, the
undersigned caused the service on April 5, 1999.
Defendant Vivian Layno Jensen is out of the country as per
information from her brother Oscar Layno, however, copy of
summons and enclosures was received by her brother Oscar
Layno on April 5, 1999 as evidenced by his signature appearing
in the original summons.
Calasiao, Pangasinan, April 6, 1999.
(Sgd.)
EDUARDO J. ABULENCIA
Junior Process Server40
As gleaned from the said return, there is no showing that as of
April 5, 1999, the house where the Sheriff found Oscar Layno
was the latter's residence or that of the respondent herein.
Neither is there any showing that the Sheriff tried to ascertain
where the residence of the respondent was on the said date. It
turned out that the occupant of the house was a lessor,
Eduardo Gonzales, and that Oscar Layno was in the premises
only to collect the rentals from him. The service of the
summons on a person at a place where he was a visitor is not
considered to have been left at the residence or place or
abode, where he has another place at which he ordinarily stays
and to which he intends to return.41
The Voter's Registration Record of Oscar Layno dated June 15,
1997 wherein he declared that he was a resident of No. 572
Barangay Buenlag, Calasiao, Pangasinan, as well as the Joint
Affidavit of Vicenta Peralta and Orlando Macasalda cannot
prevail over the Contract of Lease the respondent had executed
in favor of Eduardo Gonzales showing that the latter had
resided and occupied the house of the respondent as lessee
since November 24, 1997, and the affidavit of Eduardo
Gonzales that Oscar Layno was not residing in the said house
on April 5, 1999.
In sum, then, the respondent was not validly served with
summons and the complaint in Civil Case No. 879 on April 5,
1999, by substituted service. Hence, the MTC failed to acquire
jurisdiction over the person of the respondent; as such, the
decision of the MTC in Civil Case No. 879 is null and void.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for
lack of merit. No costs.
SO ORDERED.
[G.R. NO. 177598 : October 17, 2008]
ROBERT SAN PEDRO, Petitioner, v. WILLY ONG and NORMITA
CABALLES, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under
Rule 45 of the Revised Rules of Court, filed by petitioner Robert
San Pedro (San Pedro), seeking to reverse and set aside the
Decision1 of the Court of Appeals dated 29 December 2006 and
its Resolution2 dated 13 April 2007 in CA-G.R. CV No. 79399. In
its assailed Decision, the Court of Appeals reversed the
Decision3 dated 21 February 2003 of the Regional Trial Court
(RTC) of Malolos, Bulacan, Branch 19, in Civil Case No. 515-M-
99, declaring, inter alia, that the deeds of real estate mortgage
constituted on the subject properties are null and void; while,
in its assailed Resolution, the appellate court denied San
Pedro's Motion for Reconsideration.
The factual and procedural antecedents of this case are as
follows:
On 3 April 1996, San Pedro purchased from the spouses
Guillermo Narciso and Brigida Santiago (spouses Narciso) two
parcels of land (subject properties) covered by Transfer
Certificates of Title TCTs No. T-82381 and No. T-82382 of the
Registry of Deeds of Bulacan, with areas of about 200 square
meters and 150 square meters, respectively. San Pedro bought
the subject properties for P35,000.00, as evidenced by Deeds of
Sale executed in his favor by the spouses Narciso on 8 April
1996.4
In order to transfer in his name the TCTs covering the subject
properties, and upon the spouses Narciso's recommendation,
San Pedro hired the services of Adora Dela Peña (Dela Peña)
who is known to be very familiar with the intricacies of real
property transfers.5
After sometime, San Pedro inquired with the Registry of Deeds
of Bulacan as to the status of his application for the issuance in
his name of new TCTs for the subject properties. He was
surprised to find out, however, that the subject properties
were still registered in the names of the Narciso spouses and
were mortgaged to Willy Ong (Ong).6
According to the annotation stamped at the back of TCTs No. T-
82381 and No. T-82382, the spouses Narciso, on 23 July 1998,
executed Special Powers of Attorney (SPAs) authorizing Dela
Peña to mortgage the subject properties to Ong. The SPAs were
procured by Dela Peña from the spouses Narciso with the help
of one Rufino Landayan, a tricycle driver who accompanied
Dela Peña to the spouses Narciso's residence. San Pedro found
out that it was Normita Caballes (Caballes), Ong's agent, who
caused the registration of the mortgages with the Registry of
Deeds of Bulacan and the annotation thereof on the TCTs of
the spouses Narciso.7
In order to free the subject properties from the said
encumbrances, San Pedro filed with the RTC on 7 May 1999 a
Petition for Nullification of Mortgage with Damages against the
spouses Narciso, Dela Peña, Landayan, Ong, and Caballes,
docketed as Civil Case No. 515-M-99.
On 14 May 1991, the RTC issued summons to spouses Narciso,
Dela Peña, Landayan, Ong, and Caballes, directing them to file
their Answers to San Pedro's Petition in Civil Case No. 515-M-
99. On the same day, the Sheriff served the summons on all
concerned as evidenced by the Sheriff's Return,8 which reads:
SERVICE RETURN
THIS IS TO CERTIFY that on 14th day of May 1999, the
undersigned served a copies (sic) of Summons in connection in
(sic) the above-entitled case accompanying (sic) by the
Complaints with annexes attached thereto upon defendants, at
their given address, to wit:
Spouses Brigida Santiago &
Guillermo Narciso
- highest bidder but the TCTs of the subject properties were not
thru their son Jaime Narciso/
Received & sign
Adora Dela Peña
- After the Pre-Trial Conference, trial on the merits ensued.
thru her sister-in-law/
Received but refused to sign
Rufino Landayan
- signature on a certain document. While Dela Peña and Caballes'
thru his son Christopher
Landayan/received & sign
Normita Caballes &
Willy Ong
- for Brigida Santiago, Dela Peña asked Landayan to sign the
thru Paul Caballes son of
Normita Caballes/received
& sign
The original copy of Summons is, therefore, respectfully
returned DULY SERVED.
While the spouses Narciso, Landayan, Ong, and Caballes
separately filed their Answers in accordance with the
summons, thereby voluntarily submitting themselves to the
jurisdiction of the RTC, Dela Peña failed to do so and she was,
thus, declared by the RTC to be in default.
In their Answer,9 the spouses Narciso admitted to selling the
subject properties to San Pedro, and denied authorizing the
mortgage of the same to Ong. Their signatures on the SPAs
were fraudulently secured by Dela Peña who misrepresented to
them that such document was necessary to facilitate the
transfer of the TCTs of the subject properties to San Pedro. The
spouses Narciso denied that they participated in or benefited
from the loan obligation obtained by Dela Peña from Ong.
For their part, Caballes and Ong raised in their Joint Answer10
the defense of mortgagee-in-good-faith. They claimed that they
both relied in good faith on the SPAs granting Dela Peña the
authority to mortgage the subject properties since there was
nothing on the face thereof which would have raised their
suspicion as to the authenticity of the document. Ong alleged
that the subject properties were used by Dela Peña as collateral
for the loan, amounting to P170,000.00, which she obtained
from Ong. Since the said loan obligation already became due
and demandable, Ong sought the foreclosure of the subject
properties. During the auction sale, Ong emerged as the
yet transferred to his name.
Landayan, in his Answer,11 denied any participation in the
procurement of the SPAs or in the mortgage of the subject
properties, except that he was hired by Dela Peña to bring her
to the spouses Narciso's residence at the time the alleged SPAs
were fraudulently procured.
During the trial, San Pedro presented Landayan to testify in his
favor. According to Landayan, he came to know Dela Peña
when the latter hired his tricycle. Landayan took Dela Peña and
a woman, whom he identified as Caballes' sister, to the
residence of the spouses Narciso to secure Guillermo Narciso's
sister were inside the spouses Narciso's house, Caballes was
waiting for them outside in a white car. After a few minutes,
Dela Peña and Caballes' sister came out, and together with
Caballes, they visited and inspected the subject properties;
after which, Dela Peña and Caballes' sister proceeded to a
restaurant to try and secure Brigida Santiago's signature on the
document they carried. After somebody signed the document
same as witness, to which he obliged.12
San Pedro himself took the witness stand. He testified that he
bought the subject properties from the spouses Narciso for
P35,000.00. After the execution of the Deeds of Sale and
payment of the purchase price to the spouses Narciso,
possession of the subject properties were turned over to him.
San Pedro started to build his dream house on the subject
properties, spending about P2,000,000.00 thereon, only to find
out later on that the subject properties on which his house was
built was encumbered by Dela Peña to Ong on the strength of
the SPAs executed by the spouses Narciso in Dela Peña's favor.
When San Pedro confronted the spouses Narciso about the
mortgages, they denied authorizing the same.13
San Pedro's sister, Luz San Pedro Tominago (Tominago),
narrated before the RTC that on 31 March 1991, she filed a
complaint against Dela Peña before the Philippine National
Police (PNP) Station in Balagtas, Bulacan for the latter's failure
to effect the transfer of the TCTs of the subject properties in
San Pedro's name, as she was obliged to do. Tominago filed the
complaint on behalf of San Pedro, who was working abroad.14
Finally, a document examiner and handwriting expert from the
National Bureau of Investigation (NBI) was also presented as a
witness for San Pedro. He confirmed that the signature of
Guillermo Narciso on one of the SPAs was forged, while the
signatures of his wife Brigida Santiago on both SPAs were
spurious.15
After San Pedro presented his evidence, Ong and Caballes filed
a demurrer to evidence, questioning the lack of jurisdiction of
the RTC over the person of Dela Peña. Since Dela Peña was an
indispensable party in the case, they claimed that no final
determination of the same could be arrived at without the said
court acquiring jurisdiction over Dela Peña.16
In an Order dated 24 August 2001, the RTC denied the
demurrer to evidence filed by Ong and Caballes. Hence, trial
proceeded with the presentation of evidence by the defense.
Ong testified for the defense that Caballes informed him that
she knew of two parcels of land in Bulacan that were being
offered as collaterals for a loan. When Ong expressed interest
in the subject properties, Caballes showed him copies of the
SPA executed by the spouses Narciso in favor of Dela Peña. Ong
then instructed Caballes to verify with the Registry of Deeds
whether the spouses Narciso were the real owners of the
subject properties and whether their TCTs were clean. Caballes
returned with certified true copies of the TCTs which were in
the names of the spouses Narciso and bore no encumbrances.
Satisfied with the documents, Ong agreed to release the
amount of P170,000.00 as loan, secured by the subject
properties. Ong admitted that he was not able to personally
talk to Dela Peña or to the spouses Narciso. All negotiations
pertaining to the loan and mortgages were transacted through
Caballes.17
Caballes also offered her testimony, in which she stated that
she came to know Dela Peña because the latter was looking for
someone who can grant her a loan with the subject properties
as collateral. Dela Peña was armed with the SPAs from the
spouses Narciso authorizing her to mortgage the subject
properties. After Caballes examined the documents, she
proceeded to the Registry of Deeds of Bulacan to verify the
status and ownership of the subject properties. After she found
out that the TCTs were in the name of the spouses Narciso and
were clean, Caballes went to Ong who released the money for
the loan. Dela Peña issued nine post-dated checks to Ong as
payment for her loan obligation. All nine checks were
dishonored by the drawee bank when presented for payment
because Dela Peña's account was already closed. Ong, thus,
instituted before the Municipal Trial Court (MTC) of Balagtas,
Bulacan, a case against Dela Peña for violation of Batas
Pambansa Blg. 22.18
On 21 February 2003, the RTC rendered a Decision in Civil Case
No. 515-M-99, declaring null and void the mortgages
constituted over the subject properties in Ong's favor.
According to the court a quo, Ong and Caballes failed to
exercise reasonable degree of diligence before they entered
into mortgage contracts with Dela Peña, who was not the
registered owner of the properties being mortgaged and was
only purportedly authorized by the registered owners thereof.
The RTC, thus, ruled:
WHEREFORE, judgment is hereby rendered as follows:
1. Declaring [San Pedro] the legal and rightful owner of the two
(2) parcels of land subject of this litigation, covered by TCT No.
T-82381 and TCT No. 82382 presently in the name of [the
spouses Narciso].
2. Adjudging the sale by [the spouses Narciso] to [San Pedro],
legal, valid, subsisting and in all respect enforceable.
3. Resolving to declare the Special Power[s] of Attorney
constituted in favor of [Dela Peña] null and void.
4. Declaring the Deeds of Mortgage purportedly executed by
[Dela Peña] as Attorney-in-fact of [the spouses Narciso], in
favor of [Ong] constituted in [sic] TCT No. T-82381 and TCT No.
82382 void ab initio.
5. Ordering the Registry of Deeds for the Province of Bulacan to
cancel the recordings of mortgages in favor of Ong constituted
in [sic] TCT No. 82381 and TCT No. 82382 as well as any
annotation of foreclosure proceedings if there are any by
[Ong].
6. Ordering [Ong] to return to [San Pedro] the owner's
duplicate copy of TCT No. 82381 and TCT No. 82382 which are
presently in his possession.
7. Ordering [Dela Peña] to pay [Ong] the sum of P245,000.00
plus legal interest from September, 1998 until the whole
obligation is fully extinguished.
All other claims, counterclaims and cross claims are ordered
denied for lack of merit.19
Without filing any Motion for Reconsideration before the RTC,
Ong and Caballes appealed the adverse RTC Decision to the
Court of Appeals, assigning as error the lack of jurisdiction of
the RTC over the person of Dela Peña which rendered all the
proceedings held before said court fatally defective. Their
appeal was docketed as CA-G.R. CV No. 79399.
In a Decision20 dated 29 December 2006, the Court of Appeals
granted the appeal of Ong and Caballes, and accordingly
reversed the RTC Decision dated 21 February 2003. The
appellate court justified its reversal of the ruling of the RTC on
its finding that the service of summons on Dela Peña was
invalid; thus, the RTC did not acquire jurisdiction over her
person. The substituted service of summons employed by the
Sheriff was ineffective for failure to comply with the statutory
requirements before such mode of service could be resorted
to. The Sheriff in the present case used substituted service
without even showing that Dela Peña could not be served
personally with the summons within reasonable time. Since
Dela Peña was an indispensable party to the controversy,
without her no final determination of the case can be had.
Thus, the dispositive portion of the assailed Court of Appeals
Decision reads:
WHEREFORE, all the above premises considered, the Decision,
dated February 21, 2003, of the Regional Trial Court of Malolos,
Bulacan, Branch 19, is hereby set aside for want of jurisdiction.
The instant case is hereby remanded to the court a quo for
appropriate proceedings. No costs.21
The Motion for Reconsideration filed by San Pedro was denied
by the Court of Appeals in its Resolution22 dated 13 April 2007
for the issues raised therein were already sufficiently threshed
out in its Decision.
San Pedro is now before this Court assailing the adverse
decision rendered by the Court of Appeals.23 For the resolution
of this Court are the following issues:
I.
WHETHER OR NOT THE RTC HAS JURISDICTION TO HEAR AND
DECIDE THE CASE FILED BY SAN PEDRO.
II.
WHETHER OR NOT DE LA PEÑA IS AN INDISPENSABLE PARTY TO
THE CASE.
III.
WHETHER OR NOT ONG WAS MORTGAGEE-IN-GOOD FAITH.
Vital to the resolution of the present controversy are the
questions on whether there was a valid service of summons
upon Dela Peña; and if there was none, whether the improper
service of summons on Dela Peña invalidates the entire
proceedings before the court a quo.
Summons is a writ by which the defendant is notified of the
action brought against him. Service of such writ is the means by
which the court may acquire jurisdiction over his person. Any
judgment without such service in the absence of a valid waiver
is null and void.24
To provide perspective, it is crucial to determine first whether
the action is in personam, in rem, or quasi in rem because the
rules on service of summons under Rule 14 of the Revised Rules
of Court apply according to the nature of the action.25
In the case at bar, Civil Case No. 515-M-99, instituted by San
Pedro, is anchored on his claim that he is the real and rightful
owner of the subject properties, thus, no one else has the right
to mortgage them. The real estate mortgages constituted on
the subject properties in favor of Ong, annotated on their TCTs,
are encumbrances on said properties, which may be considered
a cloud on San Pedro's title thereto.
Such cloud may be removed or San Pedro's title quieted under
Article 476 of the Civil Code, which reads:
Art. 476. Whenever there is a cloud on title to real property or
any interest therein, by reason of any instrument, record,
claim, encumbrance or proceeding which is apparently valid or
effective but is in truth and in fact invalid, ineffective, voidable,
or unenforceable, and may be prejudicial to said title, an action
may be brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being
cast upon title to real property or any interest therein.
(Emphasis ours.)
San Pedro alleged in his Petition in Civil Case No. 515-M-99 that
the mortgages in favor of Ong may, at first, appear valid and
effective, but are actually invalid or voidable for having been
made without the knowledge and authority of the spouses
Narciso, the registered owners of the subject properties and
San Pedro's predecessors-in-interest. In asking the cancellation
of the mortgages on the TCTs of the subject properties, San
Pedro was ultimately asking the RTC to remove a cloud on his
title to the same. It is, thus, irrefragable that Civil Case No. 515-
M-99 is an action for quieting of title.
Significantly, suits to quiet title are characterized as
proceedings quasi in rem. Technically, they are neither in rem
nor in personam. In an action quasi in rem, an individual is
named as defendant. However, unlike suits in rem, a quasi in
rem judgment is conclusive only between the parties. A
proceeding quasi in rem is one brought against persons seeking
to subject the property of such persons to the discharge of the
claims assailed.26
In an action quasi in rem, an individual is named as defendant
and the purpose of the proceeding is to subject his interests
therein to the obligation or loan burdening the property.
Actions quasi in rem deal with the status, ownership or liability
of a particular property but which are intended to operate on
these questions only as between the particular parties to the
proceedings and not to ascertain or cut off the rights or
interests of all possible claimants. The judgments therein are
binding only upon the parties who joined in the action.27
According to Section 6, Rule 14 of the Revised Rules of Court,
summons on the defendant in actions in personam must be
served by handing a copy thereof to the defendant in person,
or, if he refuses to receive it, by tendering it to him.28
Meanwhile, in actions in rem or quasi in rem, jurisdiction over
the person of the defendant is not a prerequisite to confer
jurisdiction on the court provided that the court acquires
jurisdiction over the res, although summons must be served
upon the defendant in order to satisfy the due process
requirements.29
In Alba v. Court of Appeals, 30 the Court further elucidated
that:
In an action in personam, jurisdiction over the person of the
defendant is necessary for the court to validly try and decide
the case. In a proceeding in rem or quasi in rem, jurisdiction
over the person of the defendant is not a prerequisite to confer
jurisdiction on the court, provided that the latter has
jurisdiction over the res. Jurisdiction over the res is acquired
either (a) by the seizure of the property under legal process,
whereby it is brought into actual custody of the law; or (b) as a
result of the institution of legal proceedings, in which the
power of the court is recognized and made effective. The
service of summons or notice to the defendant is not for the
purpose of vesting the court with jurisdiction but merely for
satisfying the due process requirements. (Emphasis supplied.)
Given that Civil Case No. 515-M-99 is a an action for quieting of
title, settled to be quasi in rem, the RTC was not required to
acquire jurisdiction over the persons of the defendants, it being
sufficient for the said court to acquire jurisdiction over the
subject matter of the case. By San Pedro's institution of Civil
Case No. 515-M-99, the RTC already acquired jurisdiction over
the subject properties - the res. Therefore, the service of
summons to the defendants in said case, including Dela Peña,
did not affect the jurisdiction of the RTC to hear and decide
Civil Case No. 515-M-99, and did not invalidate the proceedings
held therein on the basis of jurisdiction.
Admittedly, there was a defect in the service of the summons
on Dela Peña. The Sheriff immediately resorted to substituted
service of summons on Dela Peña without attempting first to
effect personal service within reasonable time. The Sheriff's
Return31 merely stated that he served a copy of the summons
on Dela Peña's sister-in-law who refused to sign the same.
Personal service of summons is preferred to substitute service.
Only if the former cannot be made promptly can the process
server resort to the latter. Moreover, the proof of service of
summons must (a) indicate the impossibility of service of
summons within a reasonable time; (b) specify the efforts
exerted to locate the defendant; and (c) state that the
summons was served upon a person of sufficient age and
discretion who is residing in the address, or who is in charge of
the office or regular place of business, of the defendant. It is
likewise required that the pertinent facts proving these
circumstances be stated in the proof of service or in the
officer's return. The failure to comply faithfully, strictly and fully
with all the foregoing requirements of substituted service
renders the service of summons ineffective.32 Indisputably, the
Sheriff did not comply with any of the foregoing requirements,
thus, rendering his service of summons on Dela Peña invalid.
Nonetheless, the improper service of summons on Dela Peña
did not void the proceedings conducted by the RTC in Civil Case
No. 515-M-99, for lack of jurisdiction. As the Court has
underscored herein, in quasi in rem proceedings, the court
need not acquire jurisdiction over the persons of the
defendants, for as long as it has acquired jurisdiction over the
res. The defect in the service of summons merely infringed Dela
Peña's right to due process that precluded the RTC from
rendering a valid judgment with respect to her personal
liability. And since Dela Peña's right to due process is personal
and pertains to her alone, it could not be invoked by her other
co-defendants in Civil Case No. 515-M-99 so as to escape the
judgment of liability against them.
Contrary to the pronouncement of the Court of Appeals, Dela
Peña was not an indispensable party to this case, without
whom, no final conclusion of the case can be arrived at.
The Court defined indispensable party in Philippine National
Bank v. Heirs of Estanislao Militar and Deogracias Militar, 33 as
follows:
An indispensable party is one whose interest will be affected by
the court's action in the litigation, and without whom no final
determination of the case can be had. The party's interest in
the subject matter of the suit and in the relief sought are so
inextricably intertwined with the other parties' (sic) that his
legal presence as a party to the proceeding is an absolute
necessity. In his absence there cannot be a resolution of the
dispute of the parties before the court which is effective,
complete, or equitable.
Conversely, a party is not indispensable to the suit if his interest
in the controversy or subject matter is distinct and divisible
from the interest of the other parties and will not necessarily
be prejudiced by a judgment which does complete justice to
the parties in court. He is not indispensable if his presence
would merely permit complete relief between him and those
already parties to the action or will simply avoid multiple
litigation. (Emphasis supplied.)
Evidently, Dela Peña does not fall within the definition of an
indispensable party. As the Court has explained, Civil Case No.
515-M-99 is an action for quieting of title, intended to remove
any cloud upon San Pedro's title to the subject properties. The
real estate mortgages in favor of Ong annotated on the TCTs of
the subject properties constitute the cloud to be removed.
Thus, the crux of the controversy is the title of San Pedro to the
subject properties vis - à-vis that of Ong, for the determination
of which, Dela Peña's participation is not an absolute necessity.
The judgment of the RTC upholding San Pedro's title to the
subject properties over Ong's, or even if it were the other way
around, would not have affected Dela Peña, because Dela Peña
never claimed title to the subject properties; she only
misrepresented that she had authority to mortgage the same
on behalf of the registered owners, namely, the spouses
Narciso. After she successfully, albeit, fraudulently, obtained
the loan using the subject properties as mortgage, her interest
in the same had ended. She may have perpetrated fraud for
which she may be held liable but, clearly, these may be
established in a separate and subsequent case. Her presence in
the proceedings before the RTC would have only permitted
complete relief since the said court could have already
determined therein her liability for the damages she had
caused to any of the parties, but it does not make her presence
indispensable.
San Pedro's title proved to be superior to that of Ong's. The
subject properties were sold to him prior to the mortgage of
the same to Ong. The spouses Narciso, registered owners of
the subject properties, admitted the sale thereof to San Pedro
and denied giving any authority to Dela Peña to mortgage the
said properties. An expert witness affirmed that the signature
of Guillermo Narciso on one of the purported SPAs in favor of
Dela Peña was forged, while the signatures of his wife Brigida
Santiago on both SPAs were spurious. Ong and Caballes cannot
even point out any defect in San Pedro's title to the subject
properties. Ong can only assert better right to the same as
allegedly a mortgagee in good faith.
However, the well-entrenched legal principle in our
jurisprudence requires a higher degree of diligence to be
exercised by the mortgagee when he is not directly dealing
with the registered owner of real property. As the Court
enunciated in Abad v. Guimba34 :
While one who buys from the registered owner does not need
to look behind the certificate of title, one who buys from one
who is not the registered owner is expected to examine not
only the certificate of title but all factual circumstances
necessary for [one] to determine if there are any flaws in the
title of the transferor, or in [the] capacity to transfer the land.
Although the instant case does not involve a sale but only a
mortgage, the same rule applies inasmuch as the law itself
includes a mortgagee in the term "purchaser."
The Court has stressed time and again that every person
dealing with an agent is put upon inquiry, and must discover
upon his peril the authority of the agent, and this is especially
true where the act of the agent is of unusual nature. If a person
makes no inquiry, he is chargeable with knowledge of the
agent's authority, and his ignorance of that authority will not
be any excuse.35
In the more recent case of Bank of Commerce v. San Pablo,
Jr.,36 the Court elucidated:
The Bank of Commerce clearly failed to observe the required
degree of caution in ascertaining the genuineness and extent of
the authority of Santos to mortgage the subject property. It
should not have simply relied on the face of the documents
submitted by Santos, as its undertaking to lend a considerable
amount of money required of it a greater degree of diligence.
That the person applying for the loan is other than the
registered owner of the real property being mortgaged should
have already raised a red flag and which should have induced
the Bank of Commerce to make inquiries into and confirm
Santos' authority to mortgage the Spouses San Pablo's
property. A person who deliberately ignores a significant fact
that could create suspicion in an otherwise reasonable person
is not an innocent purchaser for value (Emphasis ours.)
Considering Ong's undue haste in granting the loan without
inquiring into the ownership of the subject properties being
mortgaged, as well as the authority of the supposed agent to
constitute the mortgages on behalf of the owners, he cannot
be considered a mortgagee-in-good-faith. Ong's averment that
he exercised prudence in the loan-mortgage transaction is
debunked by his own admission that he merely relied on
Caballes' representations thereon, without personally meeting
or speaking with Dela Peña, the supposed agent, or the spouses
Narciso, the registered owners of the subject properties.
Although he instructed Caballes to check the TCTs of the
subject properties, he did not bother to personally meet Dela
Peña and ascertain the genuineness and authenticity of the
latter's authority to mortgage the same on behalf of the
spouses Narciso especially considering that the one mortgaging
the property is not the registered owner.
The real estate mortgages constituted on the subject properties
based on false and fraudulent SPAs are void ab initio. In Veloso
and Rosales v. La Urbana,37 the Court ruled that forged powers
of attorney are without force and effect and, thus, nullified the
mortgage constituted on the strength thereof:
In view of the forgoing facts, the court held that pursuant to
Article 1714 of the Civil Code and under the Torrens Act in force
in this jurisdiction, the forged powers of attorney prepared by
Del Mar were without force and effect and that the registration
of the mortgages constituted by virtue thereof were likewise
null and void and without force and effect, and that they could
not in any way prejudice the rights of the plaintiff as the
registered owner of her participations in the properties in
question.
Consequently, the foreclosure proceedings on the mortgaged
properties are likewise void ab initio. Since Ong cannot be
deemed a mortgagee-in-good-faith nor an innocent purchaser
for value of the subject properties at the auction sale thereof,
his claim to the said properties cannot prevail over that of San
Pedro. The Court's ruling, however, is without prejudice to the
right of Ong to proceed against those who perpetrated the
fraud to his prejudice.
WHEREFORE, in view of the foregoing, the instant Petition is
GRANTED. The Decision dated 29 December 2006 rendered by
the Court of Appeals in CA-G.R. CV No. 79399 is REVERSED and
SET ASIDE. The Decision dated 21 February 2003 of the
Regional Trial Court of Malolos, Bulacan, Branch 19, in Civil
Case No. 515-M-99, is hereby REINSTATED with the
modification that the portion ordering Adora Dela Peña to pay
Willy G. Ong the sum of P245,000.00 plus legal interest, is
DELETED.
SO ORDERED.
[G.R. NO. 175587 : September 21, 2007]
PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner, v.
JOSEPH ANTHONY M. ALEJANDRO, Respondent.
DECISION
YNARES-SANTIAGO, J.:
This Petition for Review assails the May 31, 2006 Decision1 of
the Court of Appeals in CA-G.R. CV No. 78200 affirming the
August 30, 2000 Decision2 of the Regional Trial Court of
Makati, which granted respondent Joseph Anthony M.
Alejandro's claim for damages arising from petitioner Philippine
Commercial International Bank's (PCIB) invalid garnishment of
respondent's deposits.
On October 23, 1997, petitioner filed against respondent a
complaint3 for sum of money with prayer for the issuance of a
writ of preliminary attachment. Said complaint alleged that on
September 10, 1997, respondent, a resident of Hong Kong,
executed in favor of petitioner a promissory note obligating
himself to pay P249,828,588.90 plus interest. In view of the
fluctuations in the foreign exchange rates which resulted in the
insufficiency of the deposits assigned by respondent as security
for the loan, petitioner requested the latter to put up additional
security for the loan. Respondent, however, sought a
reconsideration of said request pointing out petitioner's alleged
mishandling of his account due to its failure to carry out his
instruction to close his account as early as April 1997, when the
prevailing rate of exchange of the US Dollar to Japanese yen
was US$1.00:JPY127.50.4 It appears that the amount of
P249,828,588.90 was the consolidated amount of a series of
yen loans granted by petitioner to respondent during the
months of February and April 1997.5
In praying for the issuance of a writ of preliminary attachment
under Section 1 paragraphs (e) and (f) of Rule 57 of the Rules of
Court, petitioner alleged that (1) respondent fraudulently
withdrew his unassigned deposits notwithstanding his verbal
promise to PCIB Assistant Vice President Corazon B.
Nepomuceno not to withdraw the same prior to their
assignment as security for the loan; and (2) that respondent is
not a resident of the Philippines. The application for the
issuance of a writ was supported with the affidavit of
Nepomuceno.6
On October 24, 1997, the trial court granted the application
and issued the writ ex parte7 after petitioner posted a bond in
the amount of P18,798,734.69, issued by Prudential Guarantee
& Assurance Inc., under Bond No. HO-46764-97. On the same
date, the bank deposits of respondent with Rizal Commercial
Banking Corporation (RCBC) were garnished. On October 27,
1997, respondent, through counsel, filed a manifestation
informing the court that he is voluntarily submitting to its
jurisdiction.8
Subsequently, respondent filed a motion to quash9 the writ
contending that the withdrawal of his unassigned deposits was
not fraudulent as it was approved by petitioner. He also alleged
that petitioner knew that he maintains a permanent residence
at Calle Victoria, Ciudad Regina, Batasan Hills, Quezon City, and
an office address in Makati City at the Law Firm Romulo
Mabanta Buenaventura Sayoc & De los Angeles, 10 where he is
a partner. In both addresses, petitioner regularly
communicated with him through its representatives.
Respondent added that he is the managing partner of the Hong
Kong branch of said Law Firm; that his stay in Hong Kong is only
temporary; and that he frequently travels back to the
Philippines.
On December 24, 1997, the trial court issued an order quashing
the writ and holding that the withdrawal of respondent's
unassigned deposits was not intended to defraud petitioner. It
also found that the representatives of petitioner personally
transacted with respondent through his home address in
Quezon City and/or his office in Makati City. It thus concluded
that petitioner misrepresented and suppressed the facts
regarding respondent's residence considering that it has
personal and official knowledge that for purposes of service of
summons, respondent's residence and office addresses are
located in the Philippines. The dispositive portion of the court's
decision is as follows:
WHEREFORE, the URGENT MOTION TO QUASH, being
meritorious, is hereby GRANTED, and the ORDER of 24 October
1997 is hereby RECONSIDERED and SET ASIDE and the WRIT OF
attachment of the same is hereby DISCHARGED.
SO ORDERED.11
With the denial12 of petitioner's motion for reconsideration, it
elevated the case to the Court of Appeals (CA-G.R. SP No.
50748) via a petition for certiorari . On May 10, 1999, the
petition was dismissed for failure to prove that the trial court
abused its discretion in issuing the aforesaid order.13 Petitioner
filed a motion for reconsideration but was denied on October
28, 1999.14 On petition with this Court, the case was dismissed
for late filing in a minute resolution (G.R. No. 140605) dated
January 19, 2000.15 Petitioner filed a motion for
reconsideration but was likewise denied with finality on March
6, 2000.16
Meanwhile, on May 20, 1998, respondent filed a claim for
damages in the amount of P25 Million17 on the attachment
bond (posted by Prudential Guarantee & Assurance, Inc., under
JCL(4) No. 01081, Bond No. HO-46764-97) on account of the
wrongful garnishment of his deposits. He presented evidence
showing that his P150,000.00 RCBC check payable to his
counsel as attorney's fees, was dishonored by reason of the
garnishment of his deposits. He also testified that he is a
graduate of the Ateneo de Manila University in 1982 with a
double degree of Economics and Management Engineering and
of the University of the Philippines in 1987 with the degree of
Bachelor of Laws. Respondent likewise presented witnesses to
prove that he is a well known lawyer in the business
community both in the Philippines and in Hong Kong.18 For its
part, the lone witness presented by petitioner was
Nepomuceno who claimed that she acted in good faith in
alleging that respondent is a resident of Hong Kong.19
On August 30, 2000, the trial court awarded damages to
respondent in the amount of P25 Million without specifying the
basis thereof, thus:
WHEREFORE, premises above considered, and defendant
having duly established his claim in the amount of
P25,000,000.00, judgment is hereby rendered ordering
Prudential Guarantee & [Assurance] Co., which is solidarily
liable with plaintiff to pay defendant the full amount of bond
under Prudential Guarantee & Assurance, Inc. JCL(4) No. 01081,
[Bond No. HO-46764-97], dated 24 October 1997 in the amount
of P18,798,734.69. And, considering that the amount of the
bond is insufficient to fully satisfy the award for damages,
plaintiff is hereby ordered to pay defendant the amount of
P6,201,265.31.
SO ORDERED.20
The trial court denied petitioner's motion for reconsideration
on October 24, 2000.21
Petitioner elevated the case to the Court of Appeals which
affirmed the findings of the trial court. It held that in claiming
that respondent was not a resident of the Philippines,
petitioner cannot be said to have been in good faith
considering that its knowledge of respondent's Philippine
residence and office address goes into the very issue of the trial
court's jurisdiction which would have been defective had
respondent not voluntarily appeared before it.
The Court of Appeals, however, reduced the amount of
damages awarded to petitioner and specified their basis. The
dispositive portion of the decision of the Court of Appeals
states:
WHEREFORE, the appeal is PARTIALLY GRANTED and the
decision appealed from is hereby MODIFIED. The award of
damages in the amount of P25,000,000.00 is deleted. In lieu
thereof, Prudential Guarantee & [Assurance, Inc.], which is
solidarily liable with appellant [herein petitioner], is ORDERED
to pay appellee [herein respondent] P2,000,000.00 as nominal
damages; P5,000,000.00 as moral damages; and P1,000,000.00
as attorney's fees, to be satisfied against the attachment bond
under Prudential Guarantee & Assurance, Inc. JCL (4) No.
01081.
SO ORDERED.22
Both parties moved for reconsideration. On November 21,
2006, the Court of Appeals denied petitioner's motion for
reconsideration but granted that of respondent's by ordering
petitioner to pay additional P5Million as exemplary damages.23
Hence, the instant petition.
At the outset, it must be noted that the ruling of the trial court
that petitioner is not entitled to a writ of attachment because
respondent is a resident of the Philippines and that his act of
withdrawing his deposits with petitioner was without intent to
defraud, can no longer be passed upon by this Court. More
importantly, the conclusions of the court that petitioner bank
misrepresented that respondent was residing out of the
Philippines and suppressed the fact that respondent has a
permanent residence in Metro Manila where he may be served
with summons, are now beyond the power of this Court to
review having been the subject of a final and executory order.
Said findings were sustained by the Court of Appeals in CA-G.R.
SP No. 50784 and by this Court in G.R. No. 140605. The rule on
conclusiveness of judgment, which obtains under the premises,
precludes the relitigation of a particular fact or issue in another
action between the same parties even if based on a different
claim or cause of action. The judgment in the prior action
operates as estoppel as to those matters in issue or points
controverted, upon the determination of which the finding or
judgment was rendered. The previous judgment is conclusive in
the second case, as to those matters actually and directly
controverted and determined.24 Hence, the issues of
misrepresentation by petitioner and the residence of
respondent for purposes of service of summons can no longer
be questioned by petitioner in this case.
The core issue for resolution is whether petitioner bank is liable
for damages for the improper issuance of the writ of
attachment against respondent.
We rule in the affirmative.
Notwithstanding the final judgment that petitioner is guilty of
misrepresentation and suppression of a material fact, the latter
contends that it acted in good faith. Petitioner also contends
that even if respondent is considered a resident of the
Philippines, attachment is still proper under Section 1,
paragraph (f), Rule 57 of the Rules of Court since he
(respondent) is a resident who is temporarily out of the
Philippines upon whom service of summons may be effected by
publication.
Petitioner's contentions are without merit.
While the final order of the trial court which quashed the writ
did not categorically use the word "bad faith" in characterizing
the representations of petitioner, the tenor of said order
evidently considers the latter to have acted in bad faith by
resorting to a deliberate strategy to mislead the court. Thus'
In the hearings of the motion, and oral arguments of counsels
before the Court, it appears that plaintiff BANK through its
contracting officers Vice President Corazon B. Nepomuceno and
Executive Vice President Jose Ramon F. Revilla, personally
transacted with defendant mainly through defendant's
permanent residence in METRO-MANILA, either in defendant's
home address in Quezon City or his main business address at
the Romulo Mabanta Buenaventura Sayoc & Delos Angeles in
MAKATI and while at times follow ups were made through
defendant's temporary home and business addresses in
Hongkong. It is therefore clear that plaintiff could not deny
their personal and official knowledge that defendant's
permanent and official residence for purposes of service of
summons is in the Philippines. In fact, this finding is further
confirmed by the letter of Mr. JOHN GOKONGWEI, JR.
Chairman, Executive Committee of plaintiff BANK, in his letter
dated 6 October 1997 on the subject loan to defendant of the
same law firm was addressed to the ROMULO LAW FIRM in
MAKATI.
[Anent the] second ground of attachment x x x [t]he Court finds
that the amount withdrawn was not part of defendant's peso
deposits assigned with the bank to secure the loan and as proof
that the withdrawal was not intended to defraud plaintiff as
creditor is that plaintiff approved and allowed said withdrawals.
It is even noted that when the Court granted the prayer for
attachment it was mainly on the first ground under Section 1(f)
of Rule 57 of the 1997 Rules of Civil Procedure, that defendant
resides out of the Philippines.
On the above findings, it is obvious that plaintiff already knew
from the beginning the deficiency of its second ground for
attachment [i.e.,] disposing properties with intent to defraud
his creditors, and therefore plaintiff had to resort to this
misrepresentation that defendant was residing out of the
Philippines and suppressed the fact that defendant's
permanent residence is in METRO MANILA where he could be
served with summons.
On the above findings, and mainly on the misrepresentations
made by plaintiff on the grounds for the issuance of the
attachment in the verified complaint, the Court concludes that
defendant has duly proven its grounds in the MOTION and that
plaintiff is not entitled to the attachment.25
Petitioner is therefore barred by the principle of conclusiveness
of judgment from again invoking good faith in the application
for the issuance of the writ. Similarly, in the case of Hanil
Development Co., Ltd. v. Court of Appeals,26 the Court
debunked the claim of good faith by a party who maliciously
sought the issuance of a writ of attachment, the bad faith of
said party having been previously determined in a final decision
which voided the assailed writ. Thus'
Apropos the Application for Judgment on the Attachment
Bond, Escobar claims in its petition that the award of attorney's
fees and injunction bond premium in favor of Hanil is [contrary]
to law and jurisprudence. It contends that no malice or bad
faith may be imputed to it in procuring the writ.
Escobar's protestation is now too late in the day. The question
of the illegality of the attachment and Escobar's bad faith in
obtaining it has long been settled in one of the earlier incidents
of this case. The Court of Appeals, in its decision rendered on
February 3, 1983 in C.A.-G.R. No. SP-14512, voided the
challenged writ, having been issued with grave abuse of
discretion. Escobar's bad faith in procuring the writ cannot be
doubted. Its Petition for the Issuance of Preliminary
Attachment made such damning allegations that: Hanil was
already able to secure a complete release of its final collection
from the MPWH; it has moved out some of its heavy
equipments for unknown destination, and it may leave the
country anytime. Worse, its Ex Parte Motion to Resolve Petition
alleged that "after personal verification by (Escobar) of (Hanil's)
equipment in Cagayan de Oro City, it appears that the
equipments were no longer existing from their compound." All
these allegations of Escobar were found to be totally baseless
and untrue.
Even assuming that the trial court did not make a categorical
pronouncement of misrepresentation and suppression of
material facts on the part of petitioner, the factual backdrop of
this case does not support petitioner's claim of good faith. The
facts and circumstances omitted are highly material and
relevant to the grant or denial of writ of attachment applied
for.
Finally, there is no merit in petitioner's contention that
respondent can be considered a resident who is temporarily
out of the Philippines upon whom service of summons may be
effected by publication, and therefore qualifies as among those
against whom a writ of attachment may be issued under
Section 1, paragraph (f), Rule 57 of the Rules of Court which
provides:
(f) In an action against a party x x x on whom summons may be
served by publication.
In so arguing, petitioner attempts to give the impression that
although it erroneously invoked the ground that respondent
does not reside in the Philippines, it should not be made to pay
damages because it is in fact entitled to a writ of attachment
had it invoked the proper ground under Rule 57. However,
even on this alternative ground, petitioner is still not entitled to
the issuance of a writ of attachment.
The circumstances under which a writ of preliminary
attachment may be issued are set forth in Section 1, Rule 57 of
the Rules of Court, to wit:
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:

(a) In an action for the recovery of a specified amount of money
or damages, other than moral and exemplary, on a cause of
action arising from law, contract, quasi-contract, delict or
quasi-delict against a party who is about to depart from the
Philippines with intent to defraud his creditors;
(b) In an action for money or property embezzled or
fraudulently misapplied or converted to his own use by a public
officer, or an officer of a corporation or an attorney, factor,
broker, agent, or clerk, in the course of his employment as
such, or by any other person in a fiduciary capacity, or for a
willful violation of duty;
(c) In an action to recover the possession of personal property
unjustly or fraudulently taken, detained, or converted, when
the property, or any part thereof, has been concealed,
removed, or disposed of to prevent its being found or taken by
the applicant or an authorized person;
(d) In an action against a party who has been guilty of a fraud in
contracting the debt or incurring the obligation upon which the
action is brought, or in the performance thereof;
(e) In an action against a party who has removed or disposed of
his property, or is about to do so, with intent to defraud his
creditors;
(f) In an action against a party who resides out of the
Philippines, or on whom summons may be served by
publication.
The purposes of preliminary attachment are: (1) to seize the
property of the debtor in advance of final judgment and to hold
it for purposes of satisfying said judgment, as in the grounds
stated in paragraphs (a) to (e) of Section 1, Rule 57 of the Rules
of Court; or (2) 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, as in paragraph (f) of the same
provision.27
Corollarily, in actions in personam, such as the instant case for
collection of sum of money,28 summons must be served by
personal or substituted service, otherwise the court will not
acquire jurisdiction over the defendant. In case the defendant
does not reside and is not found in the Philippines (and hence
personal and substituted service cannot be effected), the
remedy of the plaintiff in order for the court to acquire
jurisdiction to try the case is to convert the action into a
proceeding in rem or quasi in rem by attaching the property of
the defendant.29 Thus, in order to acquire jurisdiction in
actions in personam where defendant resides out of and is not
found in the Philippines, it becomes a matter of course for the
court to convert the action into a proceeding in rem or quasi in
rem by attaching the defendant's property. The service of
summons in this case (which may be by publication coupled
with the sending by registered mail of the copy of the summons
and the court order to the last known address of the
defendant), is no longer for the purpose of acquiring
jurisdiction but for compliance with the requirements of due
process.30
However, where the defendant is a resident who is temporarily
out of the Philippines, attachment of his/her property in an
action in personam, is not always necessary in order for the
court to acquire jurisdiction to hear the case.
Section 16, Rule 14 of the Rules of Court reads:
Sec. 16. Residents temporarily out of the Philippines. - When an
action is commenced against a defendant who ordinarily
resides within the Philippines, but who is temporarily out of it,
service may, by leave of court, be also effected out of the
Philippines, as under the preceding section.
The preceding section referred to in the above provision is
Section 15 which provides for extraterritorial service - (a)
personal service out of the Philippines, (b) publication coupled
with the sending by registered mail of the copy of the summons
and the court order to the last known address of the
defendant; or (c) in any other manner which the court may
deem sufficient.
In Montalban v. Maximo,31 however, the Court held that
substituted service of summons (under the present Section 7,
Rule 14 of the Rules of Court) is the normal mode of service of
summons that will confer jurisdiction on the court over the
person of residents temporarily out of the Philippines.
Meaning, service of summons may be effected by (a) leaving
copies of the summons at the defendant's residence with some
person of suitable discretion residing therein, or (b) by leaving
copies at the defendant's office or regular place of business
with some competent person in charge thereof.32 Hence, the
court may acquire jurisdiction over an action in personam by
mere substituted service without need of attaching the
property of the defendant.
The rationale in providing for substituted service as the normal
mode of service for residents temporarily out of the
Philippines, was expounded in Montalban v. Maximo,33 in this
wise:
A man temporarily absent from this country leaves a definite
place of residence, a dwelling where he lives, a local base, so to
speak, to which any inquiry about him may be directed and
where he is bound to return. Where one temporarily absents
himself, he leaves his affairs in the hands of one who may be
reasonably expected to act in his place and stead; to do all that
is necessary to protect his interests; and to communicate with
him from time to time any incident of importance that may
affect him or his business or his affairs. It is usual for such a
man to leave at his home or with his business associates
information as to where he may be contacted in the event a
question that affects him crops up.
Thus, in actions in personam against residents temporarily out
of the Philippines, the court need not always attach the
defendant's property in order to have authority to try the case.
Where the plaintiff seeks to attach the defendant's property
and to resort to the concomitant service of summons by
publication, the same must be with prior leave, precisely
because, if the sole purpose of the attachment is for the court
to acquire jurisdiction, the latter must determine whether from
the allegations in the complaint, substituted service (to persons
of suitable discretion at the defendant's residence or to a
competent person in charge of his office or regular place of
business) will suffice, or whether there is a need to attach the
property of the defendant and resort to service of summons by
publication in order for the court to acquire jurisdiction over
the case and to comply with the requirements of due process.
In the instant case, it must be stressed that the writ was issued
by the trial court mainly on the representation of petitioner
that respondent is not a resident of the Philippines.34
Obviously, the trial court's issuance of the writ was for the sole
purpose of acquiring jurisdiction to hear and decide the case.
Had the allegations in the complaint disclosed that respondent
has a residence in Quezon City and an office in Makati City, the
trial court, if only for the purpose of acquiring jurisdiction,
could have served summons by substituted service on the said
addresses, instead of attaching the property of the defendant.
The rules on the application of a writ of attachment must be
strictly construed in favor of the defendant. For attachment is
harsh, extraordinary, and summary in nature; it is a rigorous
remedy which exposes the debtor to humiliation and
annoyance.35 It should be resorted to only when necessary and
as a last remedy.
It is clear from the foregoing that even on the allegation that
respondent is a resident temporarily out of the Philippines,
petitioner is still not entitled to a writ of attachment because
the trial court could acquire jurisdiction over the case by
substituted service instead of attaching the property of the
defendant. The misrepresentation of petitioner that
respondent does not reside in the Philippines and its omission
of his local addresses was thus a deliberate move to ensure
that the application for the writ will be granted.
In light of the foregoing, the Court of Appeals properly
sustained the finding of the trial court that petitioner is liable
for damages for the wrongful issuance of a writ of attachment
against respondent.
Anent the actual damages, the Court of Appeals is correct in
not awarding the same inasmuch as the respondent failed to
establish the amount garnished by petitioner. It is a well settled
rule that one who has been injured by a wrongful attachment
can recover damages for the actual loss resulting therefrom.
But for such losses to be recoverable, they must constitute
actual damages duly established by competent proofs, which
are, however, wanting in the present case.36
Nevertheless, nominal damages may be awarded to a plaintiff
whose right has been violated or invaded by the defendant, for
the purpose of vindicating or recognizing that right, and not for
indemnifying the plaintiff for any loss suffered by him. Its award
is thus not for the purpose of indemnification for a loss but for
the recognition and vindication of a right. Indeed, nominal
damages are damages in name only and not in fact.37 They are
recoverable where some injury has been done but the
pecuniary value of the damage is not shown by evidence and
are thus subject to the discretion of the court according to the
circumstances of the case.38
In this case, the award of nominal damages is proper
considering that the right of respondent to use his money has
been violated by its garnishment. The amount of nominal
damages must, however, be reduced from P2 million to
P50,000.00 considering the short period of 2 months during
which the writ was in effect as well as the lack of evidence as to
the amount garnished.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Likewise, the award of attorney's fees is proper when a party is
compelled to incur expenses to lift a wrongfully issued writ of
attachment. The basis of the award thereof is also the amount
of money garnished, and the length of time respondents have
been deprived of the use of their money by reason of the
wrongful attachment.39 It may also be based upon (1) the
amount and the character of the services rendered; (2) the
labor, time and trouble involved; (3) the nature and importance
of the litigation and business in which the services were
rendered; (4) the responsibility imposed; (5) the amount of
money and the value of the property affected by the
controversy or involved in the employment; (6) the skill and the
experience called for in the performance of the services; (7) the
professional character and the social standing of the attorney;
(8) the results secured, it being a recognized rule that an
attorney may properly charge a much larger fee when it is
contingent than when it is not.40
All the aforementioned weighed, and considering the short
period of time it took to have the writ lifted, the favorable
decisions of the courts below, the absence of evidence as to
the professional character and the social standing of the
attorney handling the case and the amount garnished, the
award of attorney's fees should be fixed not at P1 Million, but
only at P200,000.00.
The courts below correctly awarded moral damages on account
of petitioner's misrepresentation and bad faith; however, we
find the award in the amount of P5 Million excessive. Moral
damages are to be fixed upon the discretion of the court taking
into consideration the educational, social and financial standing
of the parties.41 Moral damages are not intended to enrich a
complainant at the expense of a defendant.42 They are
awarded only to enable the injured party to obtain means,
diversion or amusements that will serve to obviate the moral
suffering he has undergone, by reason of petitioner's culpable
action. Moral damages must be commensurate with the loss or
injury suffered. Hence, the award of moral damages is reduced
to P500,000.00.
Considering petitioner's bad faith in securing the writ of
attachment, we sustain the award of exemplary damages by
way of example or correction for public good. This should deter
parties in litigations from resorting to baseless and
preposterous allegations to obtain writs of attachments. While
as a general rule, the liability on the attachment bond is limited
to actual (or in some cases, temperate or nominal) damages,
exemplary damages may be recovered where the attachment
was established to be maliciously sued out.43 Nevertheless, the
award of exemplary damages in this case should be reduced
from P5M to P500,000.00.
Finally, contrary to the claim of petitioner, the instant case for
damages by reason of the invalid issuance of the writ, survives
the dismissal of the main case for sum of money. Suffice it to
state that the claim for damages arising from such wrongful
attachment may arise and be decided separately from the
merits of the main action.44
WHEREFORE, the petition is PARTIALLY GRANTED. The May 31,
2006 Decision of the Court of Appeals in CA-G.R. CV No. 78200
is AFFIRMED with MODIFICATIONS. As modified, petitioner
Philippine Commercial International Bank is ordered to pay
respondent Joseph Anthony M. Alejandro the following
amounts: P50,000.00 as nominal damages, P200,000.00 as
attorney's fees; and P500,000.00 as moral damages, and
P500,000.00 as exemplary damages, to be satisfied against the
attachment bond issued by Prudential Guarantee & Assurance
Inc.,45 under JCL (4) No. 01081, Bond No. HO-46764-97.
No pronouncement as to costs.
SO ORDERED.
[G.R. NO. 166759 : November 25, 2009]
SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES
and SOLAR RESOURCES, INC., Petitioners, v. NICANOR
SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL
SATSATIN and NIKKI NORLIN SATSATIN, Respondents.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari assailing the
Decision1 dated November 23, 2004 of the Court of Appeals
(CA) in CA-G.R. SP No. 83595, and its Resolution2 dated January
18, 2005, denying petitioners' motion for reconsideration.
The factual and procedural antecedents are as follows:
The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and
Mario Torres (Mario) each own adjacent 20,000 square meters
track of land situated at Barrio Lankaan, Dasmariñas, Cavite,
covered by Transfer Certificate of Title (TCT) Nos. 251267,3
251266,4 and 251265,5 respectively.
Sometime in 1997, Nicanor Satsatin (Nicanor) asked
petitioners' mother, Agripina Aledia, if she wanted to sell their
lands. After consultation with her daughters, daughter-in-law,
and grandchildren, Agripina agreed to sell the properties.
Petitioners, thus, authorized Nicanor, through a Special Power
of Attorney, to negotiate for the sale of the properties.6
Sometime in 1999, Nicanor offered to sell the properties to
Solar Resources, Inc. (Solar). Solar allegedly agreed to purchase
the three parcels of land, together with the 10,000-square-
meter property owned by a certain Rustica Aledia, for
P35,000,000.00. Petitioners alleged that Nicanor was supposed
to remit to them the total amount of P28,000,000.00 or
P9,333,333.00 each to Sofia, Fructosa, and the heirs of Mario.
Petitioners claimed that Solar has already paid the entire
purchase price of P35,000,000.00 to Nicanor in Thirty-Two (32)
post-dated checks which the latter encashed/deposited on
their respective due dates. Petitioners added that they also
learned that during the period from January 2000 to April 2002,
Nicanor allegedly acquired a house and lot at Vista Grande BF
Resort Village, Las Piñas City and a car, which he registered in
the names of his unemployed children, Nikki Normel Satsatin
and Nikki Norlin Satsatin. However, notwithstanding the receipt
of the entire payment for the subject property, Nicanor only
remitted the total amount of P9,000,000.00, leaving an
unremitted balance of P19,000,000.00. Despite repeated verbal
and written demands, Nicanor failed to remit to them the
balance of P19,000,000.00.
Consequently, on October 25, 2002, petitioners filed before the
regional trial court (RTC) a Complaint7 for sum of money and
damages, against Nicanor, Ermilinda Satsatin, Nikki Normel
Satsatin, and Nikki Norlin Satsatin. The case was docketed as
Civil Case No. 2694-02, and raffled to RTC, Branch 90,
Dasmariñas, Cavite.
On October 30, 2002, petitioners filed an Ex-Parte Motion for
the Issuance of a Writ of Attachment,8 alleging among other
things: that respondents are about to depart the Philippines;
that they have properties, real and personal in Metro Manila
and in the nearby provinces; that the amount due them is
P19,000,000.00 above all other claims; that there is no other
sufficient security for the claim sought to be enforced; and that
they are willing to post a bond fixed by the court to answer for
all costs which may be adjudged to the respondents and all
damages which respondents may sustain by reason of the
attachment prayed for, if it shall be finally adjudged that
petitioners are not entitled thereto.
On October 30, 2002, the trial court issued an Order9 directing
the petitioners to post a bond in the amount of P7,000,000.00
before the court issues the writ of attachment, the dispositive
portion of which reads as follows:
WHEREFORE, premises considered, and finding the present
complaint and motion sufficient in form and substance, this
Court hereby directs the herein plaintiffs to post a bond,
pursuant to Section 3, Rule 57 of the 1997 Rules of Civil
Procedure, in the amount of Seven Million Pesos
(P7,000,000.00), before the Writ of Attachment issues.10
On November 15, 2002, petitioners filed a Motion for
Deputation of Sheriff,11 informing the court that they have
already filed an attachment bond. They also prayed that a
sheriff be deputized to serve the writ of attachment that would
be issued by the court.
In the Order12 dated November 15, 2002, the RTC granted the
above motion and deputized the sheriff, together with police
security assistance, to serve the writ of attachment.
Thereafter, the RTC issued a Writ of Attachment13 dated
November 15, 2002, directing the sheriff to attach the estate,
real or personal, of the respondents, the decretal portion of
which reads:
WE, THEREFORE, command you to attach the estate, real or
personal, not exempt from execution, of the said defendants, in
your province, to the value of said demands, and that you
safely keep the same according to the said Rule, unless the
defendants give security to pay such judgment as may be
recovered on the said action, in the manner provided by the
said Rule, provided that your legal fees and all necessary
expenses are fully paid.
You shall return this writ with your proceedings indorsed
hereon within twenty (20) days from the date of receipt hereof.
GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day
of November, 2002, at Imus for Dasmariñas, Cavite,
Philippines.14
On November 19, 2002, a copy of the writ of attachment was
served upon the respondents. On the same date, the sheriff
levied the real and personal properties of the respondent,
including household appliances, cars, and a parcel of land
located at Las Piñas, Manila.15
On November 21, 2002, summons, together with a copy of the
complaint, was served upon the respondents.16
On November 29, 2002, respondents filed their Answer.17
On the same day respondents filed their answer, they also filed
a Motion to Discharge Writ of Attachment18 anchored on the
following grounds: the bond was issued before the issuance of
the writ of attachment; the writ of attachment was issued
before the summons was received by the respondents; the
sheriff did not serve copies of the application for attachment,
order of attachment, plaintiffs' affidavit, and attachment bond,
to the respondents; the sheriff did not submit a sheriff's return
in violation of the Rules; and the grounds cited for the issuance
of the writ are baseless and devoid of merit. In the alternative,
respondents offered to post a counter-bond for the lifting of
the writ of attachment.19
On March 11, 2003, after the parties filed their respective
pleadings, the RTC issued an Order20 denying the motion, but
at the same time, directing the respondents to file a counter-
bond, to wit:
WHEREFORE, premises considered, after the pertinent
pleadings of the parties have been taken into account, the
herein defendants are hereby directed to file a counter-bond
executed to the attaching party, in the amount of Seven Million
Pesos (P7,000,000.00), to secure the payment of any judgment
that the attaching party may recover in the action, with notice
on the attaching party, whereas, the Motion to Discharge Writ
of Attachment is DENIED.
SO ORDERED.21
Thereafter, respondents filed a motion for reconsideration
and/or motion for clarification of the above order. On April 3,
2003, the RTC issued another Order22 which reads:
In view of the Urgent Motion For Reconsideration And/Or
Motion For Clarification of the Order of this Court dated March
11, 2003, denying their Motion to Discharge Writ of
Attachment filed by the defendants through counsel Atty.
Franco L. Loyola, the Motion to Discharge Writ of Attachment is
denied until after the defendants have posted the counter-
bond in the amount of Seven Million Pesos (P7,000,000.00).
The defendants, once again, is directed to file their counter-
bond of Seven Million Pesos (P7,000,000.00), if it so desires, in
order to discharge the Writ of Attachment.
SO ORDERED.
On December 15, 2003, respondents filed an Urgent Motion to
Lift/Set Aside Order Dated March [11], 2003,23 which the RTC
denied in an Order24 of even date, the dispositive portion of
which reads:
WHEREFORE, premises considered, defendants' Urgent Motion
to Lift/Set Aside Order Dated March 23, 2003 (With
Manifestation to Dissolve Writ of Attachment) is hereby
DENIED for lack of Merit.
SO ORDERED.
Respondents filed an Urgent Motion for Reconsideration,25 but
it was denied in the Order26 dated March 3, 2004.
Aggrieved, respondents filed before the CA a Petition for
Certiorari, Mandamus and Prohibition with Preliminary
Injunction and Temporary Restraining Order27 under Rule 65 of
the Rules of Court, docketed as CA-G.R. SP No. 83595, anchored
on the following grounds:
(1) public respondents committed grave abuse of discretion
amounting to lack of or in excess of jurisdiction in failing to
notice that the lower court has no jurisdiction over the person
and subject matter of the complaint when the subject Writ of
Attachment was issued;
(2) public respondents committed grave abuse of discretion
amounting to lack of or in excess of jurisdiction in granting the
issuance of the Writ of Attachment despite non-compliance
with the formal requisites for the issuance of the bond and the
Writ of Attachment.28
Respondents argued that the subject writ was improper and
irregular having been issued and enforced without the lower
court acquiring jurisdiction over the persons of the
respondents. They maintained that the writ of attachment was
implemented without serving upon them the summons
together with the complaint. They also argued that the bond
issued in favor of the petitioners was defective, because the
bonding company failed to obtain the proper clearance that it
can transact business with the RTC of Dasmariñas, Cavite. They
added that the various clearances which were issued in favor of
the bonding company were applicable only in the courts of the
cities of Pasay, Pasig, Manila, and Makati, but not in the RTC,
Imus, Cavite.29
On November 23, 2003, the CA rendered the assailed Decision
in favor of the respondents, finding grave abuse of discretion
amounting to lack of or in excess of jurisdiction on the part of
the RTC in issuing the Orders dated December 15, 2003 and
March 3, 2004. The decretal portion of the Decision reads:
WHEREFORE, the instant petition is hereby GRANTED.
Accordingly, the assailed Orders are hereby nullified and set
aside. The levy on the properties of the petitioners pursuant to
the Writ of Attachment issued by the lower court is hereby
LIFTED.
SO ORDERED.30
Petitioners filed a Motion for Reconsideration,31 but it was
denied in the Resolution32 dated January 18, 2005.
Hence, this petition assigning the following errors:
I.
THE HONORABLE COURT OF APPEALS ERRED IN ORDERING THE
LIFTING OF THE WRIT OF ATTACHMENT PURSUANT TO SECTION
13, RULE 57 OF THE REVISED RULES OF CIVIL PROCEDURE.
II.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF
JURISDICTION IN GRANTING THE WRIT OF ATTACHMENT
DESPITE THE BOND BEING INSUFFICIENT AND HAVING BEEN
IMPROPERLY ISSUED.
III.
THE HONORABLE COURT OF APPEALS ERRED IN NOT
DISMISSING THE PETITION BY REASON OF ESTOPPEL, LACHES
AND PRESCRIPTION AND IN HOLDING THAT THE WRIT OF
ATTACHMENT WAS IMPROPERLY AND IRREGULARLY ENFORCED
IN VIOLATION OF SECTION 5, RULE 57 OF THE REVISED RULES
OF COURT.
IV.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
THE PRINCIPLE OF ESTOPPEL WILL NOT LIE AGAINST
RESPONDENTS.
Petitioners maintain that in the case at bar, as in the case of
FCY Construction Group, Inc. v. Court of Appeals,33 the only
way the subject writ of attachment can be dissolved is by a
counter-bond. They claim that the respondents are not allowed
to file a motion to dissolve the attachment under Section 13,
Rule 57 of the Rules of Court. Otherwise, the hearing on the
motion for the dissolution of the writ would be tantamount to
a trial on the merits, considering that the writ of preliminary
attachment was issued upon a ground which is, at the same
time, the applicant's cause of action.
Petitioners insist that the determination of the existence of
grounds to discharge a writ of attachment rests in the sound
discretion of the lower court. They argue that the
Certification34 issued by the Office of the Administrator and
the Certifications35 issued by the clerks of court of the RTCs of
Dasmariñas and Imus, Cavite, would show that the bonds
offered by Western Guaranty Corporation, the bonding
company which issued the bond, may be accepted by the RTCs
of Dasmariñas and Imus, Cavite, and that the said bonding
company has no pending liability with the government.
Petitioners contend that respondents are barred by estoppel,
laches, and prescription from questioning the orders of the RTC
issuing the writ of attachment. They also maintain that the
issue whether there was impropriety or irregularity in the
issuance of the orders is moot and academic, considering that
the attachment bond questioned by the respondent had
already expired on November 14, 2003 and petitioners have
renewed the attachment bond covering the period from
November 14, 2003 to November 14, 2004, and further
renewed to cover the period of November 14, 2004 to
November 14, 2005.
The petition is bereft of merit.
A writ of preliminary attachment is defined as a provisional
remedy issued upon order of the court where an action is
pending to be levied upon the property or properties of the
defendant therein, the same to be held thereafter by the sheriff
as security for the satisfaction of whatever judgment that might
be secured in the said action by the attaching creditor against
the defendant.36
In the case at bar, the CA correctly found that there was grave
abuse of discretion amounting to lack of or in excess of
jurisdiction on the part of the trial court in approving the bond
posted by petitioners despite the fact that not all the requisites
for its approval were complied with. In accepting a surety bond,
it is necessary that all the requisites for its approval are met;
otherwise, the bond should be rejected.37
Every bond should be accompanied by a clearance from the
Supreme Court showing that the company concerned is
qualified to transact business which is valid only for thirty (30)
days from the date of its issuance.38 However, it is apparent
that the Certification39 issued by the Office of the Court
Administrator (OCA) at the time the bond was issued would
clearly show that the bonds offered by Western Guaranty
Corporation may be accepted only in the RTCs of the cities of
Makati, Pasay, and Pasig. Therefore, the surety bond issued by
the bonding company should not have been accepted by the
RTC of Dasmariñas, Branch 90, since the certification secured
by the bonding company from the OCA at the time of the
issuance of the bond certified that it may only be accepted in
the above-mentioned cities. Thus, the trial court acted with
grave abuse of discretion amounting to lack of or in excess of
jurisdiction when it issued the writ of attachment founded on
the said bond.
Moreover, in provisional remedies, particularly that of
preliminary attachment, the distinction between the issuance
and the implementation of the writ of attachment is of utmost
importance to the validity of the writ. The distinction is
indispensably necessary to determine when jurisdiction over
the person of the defendant should be acquired in order to
validly implement the writ of attachment upon his person.
This Court has long put to rest the issue of when jurisdiction
over the person of the defendant should be acquired in cases
where a party resorts to provisional remedies. A party to a suit
may, at any time after filing the complaint, avail of the
provisional remedies under the Rules of Court. Specifically, Rule
57 on preliminary attachment speaks of the grant of the
remedy "at the commencement of the action or at any time
before entry of judgment."40 This phrase refers to the date of
the filing of the complaint, which is the moment that marks
"the commencement of the action." The reference plainly is to
a time before summons is served on the defendant, or even
before summons issues.41
In Davao Light & Power Co., Inc. v. Court of Appeals,42 this
Court clarified the actual time when jurisdiction should be had:
It goes without saying that whatever be the acts done by the
Court prior to the acquisition of jurisdiction over the person of
defendant x x x issuance of summons, order of attachment and
writ of attachment x x x these do not and cannot bind and
affect the defendant until and unless jurisdiction over his
person is eventually obtained by the court,either by service on
him of summons or other coercive process or his voluntary
submission to the court's authority. Hence, when the sheriff or
other proper officer commences implementation of the writ of
attachment, it is essential that he serve on the defendant not
only a copy of the applicant's affidavit and attachment bond,
and of the order of attachment, as explicitly required by Section
5 of Rule 57, but also the summons addressed to said
defendant as well as a copy of the complaint x x x. (Emphasis
supplied.)
In Cuartero v. Court of Appeals,43 this Court held that the grant
of the provisional remedy of attachment involves three stages:
first, the court issues the order granting the application;
second, the writ of attachment issues pursuant to the order
granting the writ; and third, the writ is implemented.For the
initial two stages, it is not necessary that jurisdiction over the
person of the defendant be first obtained. However, once the
implementation of the writ commences, the court must have
acquired jurisdiction over the defendant, for without such
jurisdiction, the court has no power and authority to act in any
manner against the defendant. Any order issuing from the
Court will not bind the defendant.44
Thus, it is indispensable not only for the acquisition of
jurisdiction over the person of the defendant, but also upon
consideration of fairness, to apprise the defendant of the
complaint against him and the issuance of a writ of preliminary
attachment and the grounds therefor that prior or
contemporaneously to the serving of the writ of attachment,
service of summons, together with a copy of the complaint, the
application for attachment, the applicant's affidavit and bond,
and the order must be served upon him.
In the instant case, assuming arguendo that the trial court
validly issued the writ of attachment on November 15, 2002,
which was implemented on November 19, 2002, it is to be
noted that the summons, together with a copy of the
complaint, was served only on November 21, 2002.
At the time the trial court issued the writ of attachment on
November 15, 2002, it can validly to do so since the motion for
its issuance can be filed "at the commencement of the action or
at any time before entry of judgment." However, at the time
the writ was implemented, the trial court has not acquired
jurisdiction over the persons of the respondent since no
summons was yet served upon them. The proper officer should
have previously or simultaneously with the implementation of
the writ of attachment, served a copy of the summons upon
the respondents in order for the trial court to have acquired
jurisdiction upon them and for the writ to have binding effect.
Consequently, even if the writ of attachment was validly issued,
it was improperly or irregularly enforced and, therefore, cannot
bind and affect the respondents.
Moreover, although there is truth in the petitioners' contention
that an attachment may not be dissolved by a showing of its
irregular or improper issuance if it is upon a ground which is at
the same time the applicant's cause of action in the main case,
since an anomalous situation would result if the issues of the
main case would be ventilated and resolved in a mere hearing
of a motion. However, the same is not applicable in the case
bar. It is clear from the respondents' pleadings that the grounds
on which they base the lifting of the writ of attachment are the
irregularities in its issuance and in the service of the writ; not
petitioners' cause of action.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Further, petitioners' contention that respondents are barred by
estoppel, laches, and prescription from questioning the orders
of the RTC issuing the writ of attachment and that the issue has
become moot and academic by the renewal of the attachment
bond covering after its expiration, is devoid of merit. As
correctly held by the CA:
There are two ways of discharging the attachment. First, to file
a counter-bond in accordance with Section 12 of Rule 57.
Second[,] [t]o quash the attachment on the ground that it was
irregularly or improvidently issued, as provided for in Section
13 of the same rule. Whether the attachment was discharged
by either of the two ways indicated in the law, the attachment
debtor cannot be deemed to have waived any defect in the
issuance of the attachment writ by simply availing himself of
one way of discharging the attachment writ, instead of the
other. The filing of a counter-bond is merely a speedier way of
discharging the attachment writ instead of the other way.45
Moreover, again assuming arguendo that the writ of
attachment was validly issued, although the trial court later
acquired jurisdiction over the respondents by service of the
summons upon them, such belated service of summons on
respondents cannot be deemed to have cured the fatal defect
in the enforcement of the writ. The trial court cannot enforce
such a coercive process on respondents without first obtaining
jurisdiction over their person. The preliminary writ of
attachment must be served after or simultaneous with the
service of summons on the defendant whether by personal
service, substituted service or by publication as warranted by
the circumstances of the case. The subsequent service of
summons does not confer a retroactive acquisition of
jurisdiction over her person because the law does not allow for
retroactivity of a belated service.46
WHEREFORE, premises considered, the petition is DENIED. The
Decision and Resolution of the Court of Appeals dated
November 23, 2004 and January 18, 2005, respectively, in CA-
G.R. SP No. 83595 are AFFIRMED.
SO ORDERED.
[G.R. NO. 190144 - August 1, 2012]
BANK OF THE PHILIPPINE ISLANDS, Petitioner, v. CARLITO LEE,
Respondent.
DECISION
PERLAS-BERNABE, J.:
In this Petition for Review on Certiorari1 under Rule 45 of the
Rules of Court, petitioner Bank of the Philippine Islands (BPI)
seeks to reverse and set aside the February 11, 2009 Decision2
and October 29, 2009 Resolution3 of the Court of Appeals (CA)
in CA-G.R. No. 87911 which annulled the March 1, 20043 and
September 16, 20044 Orders of the Regional Trial Court (RTC)
of Makati City, Branch 61 and instead, entered a new one
directing the RTC to issue a writ of execution and/or enforce
garnishment against the bank deposit of Trendline Resources &
Commodities Exponent, Inc. (Trendline) and Leonarda Buelva
(Buelva) with the defunct Citytrust Banking Corporation
(Citytrust), now merged with BPI.
The Facts
On April 26, 1988, respondent Carlito Lee (Lee) filed a
complaint for sum of money with damages and application for
the issuance of a writ of attachment against Trendline and
Buelva (collectively called "defendants") before the RTC,
docketed as Civil Case No. 88-702, seeking to recover his total
investment in the amount of P5.8 million. Lee alleged that he
was enticed to invest his money with Trendline upon Buelva s
misrepresentation that she was its duly licensed investment
consultant or commodity saleswoman. His investments,
however, were lost without any explanation from the
defendants.
On May 4, 1988, the RTC issued a writ of preliminary
attachment whereby the Check-O-Matic Savings Accounts of
Trendline with Citytrust Banking Corporation, Ayala Branch, in
the total amount of P700,962.10 were garnished.
Subsequently, the RTC rendered a decision on August 8, 1989
finding defendants jointly and severally liable to Lee for the full
amount of his investment plus legal interest, attorney s fees
and costs of suit. The defendants appealed the RTC decision to
the CA, docketed as CA-G.R. CV No. 23166.
Meanwhile, on April 13, 1994, Citytrust filed before the RTC an
Urgent Motion and Manifestation5 seeking a ruling on
defendants' request to release the amount of P591,748.99 out
of the garnished amount for the purpose of paying Trendline s
tax obligations. Having been denied for lack of jurisdiction,
Trendline filed a similar motion6 with the CA which the latter
denied for failure to prove that defendants had no other assets
to answer for its tax obligations.
On October 4, 1996, Citytrust and BPI merged, with the latter
as the surviving corporation. The Articles of Merger provide,
among others, that "all liabilities and obligations of Citytrust
shall be transferred to and become the liabilities and
obligations of BPI in the same manner as if the BPI had itself
incurred such liabilities or obligations."7ςrνll
On December 22, 1998, the CA denied the appeal in CA-G.R. CV
No. 23166 and affirmed in toto the decision of the RTC, which
had become final and executory on January 24, 1999.
Hence, Lee filed a Motion for Execution8 before the RTC on July
29, 1999, which was granted. Upon issuance of the
corresponding writ, he sought the release of the garnished
deposits of Trendline. When the writ was implemented,
however, BPI Manager Samuel Mendoza, Jr. denied having
possession, control and custody of any deposits or properties
belonging to defendants, prompting Lee to seek the production
of their records of accounts with BPI. However, on the
manifestation of BPI that it cannot locate the defendants' bank
records with Citytrust, the RTC denied the motion on
September 6, 2002.
On December 16, 2002, Lee filed a Motion for Execution and/or
Enforcement of Garnishment9 before the RTC seeking to
enforce against BPI the garnishment of Trendline s deposit in
the amount of P700,962.10 and other deposits it may have had
with Citytrust. The RTC denied the motion for dearth of
evidence showing that BPI took over the subject accounts from
Citytrust and the fact that BPI was not a party to the case. Lee s
motion for reconsideration was likewise denied.10ςrνll
Lee elevated the matter to the CA on a petition for certiorari .
In its February 11, 2009 Decision, the CA annulled the
questioned orders, finding grave abuse of discretion on the part
of the RTC in denying Lee s motion to enforce the garnishment
against Trendline s attached bank deposits with Citytrust, which
have been transferred to BPI by virtue of their merger. It found
BPI liable to deliver to the RTC the garnished bank deposit of
Trendline in the amount of P700,962.10, which Citytrust
withheld pursuant to the RTC's previously-issued writ of
attachment.
The CA refused to give credence to BPI s defense that it can no
longer locate Trendline s bank records with the defunct
Citytrust, as its existence was supported by evidence and by the
latter's admission. Neither did it consider BPI a stranger to the
case, holding it to have become a party in-interest upon the
approval by the Securities and Exchange Commission (SEC) of
the parties Articles of Merger. BPI s Motion for
Reconsideration11 was denied in the CA's October 29, 2009
Resolution.
The Issuesςηαñrοblεš νιr†υαl lαω lιbrαrÿ
In this petition, BPI ascribes the following errors to the
CA:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
A.
THE HONORABLE COURT OF APPEALS ERRED IN NOT
DISMISSING CA-G.R. SP No. 87911, THE PETITION FOR
CERTIORARI UNDER RULE 65 OF THE REVISED RULES OF COURT,
FILED BY RESPONDENT CARLITO LEE BEING AN IMPROPER
REMEDY.
B.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT
PETITIONER BPI BECAME PARTY-IN-INTEREST IN THE CASE
FILED BY RESPONDENT CARLITO LEE UPON THE APPROVAL BY
THE SECURITIES AND EXCHANGE COMMISSION OF ITS MERGER
WITH CITYTRUST BANKING CORPORATION.
C.
THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING
THAT THE MOTION FOR EXECUTION AND/OR ENFORCEMENT
OF GARNISHMENT IS NOT THE APPROPRIATE REMEDY IN THE
EVENT THERE IS A THIRD PARTY INVOLVED DURING THE
EXECUTION PROCESS OF A FINAL AND EXECUTORY JUDGMENT.
D.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT
PETITIONER BPI SHOULD BE HELD ACCOUNTABLE FOR THE
AMOUNT OF PHP700,962.10.12ςrνll
chanrobles virtual law library
The Ruling of the Courtςηαñrοblεš νιr†υαl lαω
lιbrαrÿ
Section 1, Rule 41 of the Revised Rules of Court
provides:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
SECTION 1. Subject of appeal. - x x x
No appeal may be taken from:ςrαlαω
xxx
(b) An interlocutory order;
xxx
In any of the foregoing circumstances, the aggrieved party may
file an appropriate special civil action as provided in Rule
65.13ςrνll
chanrobles virtual law library
A punctilious examination of the records will reveal that Lee
had previously sought the execution of the final and executory
decision of the RTC dated August 8, 1989 which was granted
and had resulted in the issuance of the corresponding writ of
execution. However, having garnished the deposits of Trendline
with Citytrust in the amount of P 700,962.10 by virtue of a writ
of preliminary attachment, Lee filed anew a Motion for
Execution and/or Enforcement of Garnishment before the RTC
on December 16, 2002. While the RTC denied the motion in its
March 1, 2004 Order, the denial was clearly with respect only
to the enforcement of the garnishment, to
wit:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Acting on the Motion for Execution and/or Enforcement of
Garnishment filed by plaintiff Carlito Lee, and there being no
evidence shown that the accounts subject of the motion were
taken over by the Bank of the Philippine Islands from Citytrust
Bank and considering further that Bank of Philippine Islands is
not a party to this case, the instant Motion is DENIED for lack of
merit.
SO ORDERED.14ςrνll
chanrobles virtual law library
Consequently, the foregoing Order merely involved the
implementation of a writ of execution, hence, interlocutory in
nature. An interlocutory order is one that does not finally
dispose of the case, and does not end the court's task of
adjudicating the parties contentions and determining their
rights and liabilities as regards each other, but obviously
indicates that other things remain to be done.15ςrνll
Conformably with the provisions of Section 1, Rule 41 of the
Revised Rules of Court above-quoted, the remedy from such
interlocutory order is certiorari under Rule 65. Thus, contrary to
the contention of BPI, the CA did not err in assuming
jurisdiction over the petition for certiorari .
BPI likewise insists that the CA erred in considering it a party to
the case by virtue of its merger with Citytrust, the garnishee of
defendants' deposits.ςηαñrοblεš νιr†υαl lαω
lιbrαrÿ
The Court is not convinced.
chanrobles virtual law library
Section 5, Rule 65 of the Revised Rules of Court requires that
persons interested in sustaining the proceedings in court must
be impleaded as private respondents. Upon the merger of
Citytrust and BPI, with the latter as the surviving corporation,
and with all the liabilities and obligations of Citytrust
transferred to BPI as if it had incurred the same, BPI
undoubtedly became a party interested in sustaining the
proceedings, as it stands to be prejudiced by the outcome of
the case.
It is a settled rule that upon service of the writ of garnishment,
the garnishee becomes a "virtual party" or "forced intervenor"
to the case and the trial court thereby acquires jurisdiction to
bind the garnishee to comply with its orders and processes. In
Perla Compania de Seguros, Inc. v. Ramolete,16 the Court
ruled:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
In order that the trial court may validly acquire jurisdiction to
bind the person of the garnishee, it is not necessary that
summons be served upon him. The garnishee need not be
impleaded as a party to the case. All that is necessary for the
trial court lawfully to bind the person of the garnishee or any
person who has in his possession credits belonging to the
judgment debtor is service upon him of the writ of
garnishment.
The Rules of Court themselves do not require that the
garnishee be served with summons or impleaded in the case in
order to make him liable.
xxxx
Through the service of the writ of garnishment, the garnishee
becomes a "virtual party" to, or a "forced intervenor" in, the
case and the trial court thereby acquires jurisdiction to bind
him to compliance with all orders and processes of the trial
court with a view to the complete satisfaction of the judgment
of the court.17ςrνll
chanrobles virtual law library
Citytrust, therefore, upon service of the notice of garnishment
and its acknowledgment that it was in possession of
defendants' deposit accounts in its letter-reply dated June 28,
1988, became a "virtual party" to or a "forced intervenor" in
the civil case. As such, it became bound by the orders and
processes issued by the trial court despite not having been
properly impleaded therein. Consequently, by virtue of its
merger with BPI on October 4, 1996, BPI, as the surviving
corporation, effectively became the garnishee, thus the "virtual
party" to the civil case.
Corollarily, it should be emphasized that a merger of two
corporations produces, among others, the following
effects:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
1. The constituent corporations shall become a single
corporation which, in case of merger, shall be the surviving
corporation designated in the plan of merger; and in case of
consolidation, shall be the consolidated corporation designated
in the plan of consolidation;
2. The separate existence of the constituent corporation shall
cease, except that of the surviving or the consolidated
corporation;
3. The surviving or the consolidated corporation shall possess
all the rights, privileges, immunities and powers and shall be
subject to all the duties and liabilities of a corporation
organized under this Code;
4. The surviving or the consolidated corporation shall
thereupon and thereafter possess all the rights, privileges,
immunities and franchises of each of the constituent
corporations; and all property, real or personal, and all
receivables due on whatever account, including subscriptions
to shares and other choses in action, and all and every other
interest of, or belonging to, or due to each constituent
corporation, shall be deemed transferred to and vested in such
surviving or consolidated corporation without further act or
deed; andcralawlibrary
5. The surviving or consolidated corporation shall be
responsible and liable for all the liabilities and obligations of
each of the constituent corporations in the same manner as if
such surviving or consolidated corporation had itself incurred
such liabilities or obligations; and any pending claim, action or
proceeding brought by or against any of such constituent
corporations may be prosecuted by or against the surviving or
consolidated corporation. The rights of creditors or liens upon
the property of any of such constituent corporations shall not
be impaired by such merger or consolidation.18 (Underscoring
supplied)cralawlibrary
chanrobles virtual law library
In sum, although Citytrust was dissolved, no winding up of its
affairs or liquidation of its assets, privileges, powers and
liabilities took place. As the surviving corporation, BPI simply
continued the combined businesses of the two banks and
absorbed all the rights, privileges, assets, liabilities and
obligations of Citytrust, including the latter s obligation over
the garnished deposits of the defendants.
Adopting another tack, BPI claims that Lee should have instead
availed himself of the remedy provided under Section 43, Rule
39 of the Revised Rules of Court because he is a third party to
the case who denies possession of the property.ςηαñrοblεš
νιr†υαl lαω lιbrαrÿ
The argument is specious.
Section 43, Rule 39 of the Revised Rules of Court
states:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
SECTION 43. Proceedings when indebtedness denied or
another person claims the property. If it appears that a person
or corporation, alleged to have property of the judgment
obligor or to be indebted to him, claims an interest in the
property adverse to him or denies the debt, the court may
authorize, by an order made to that effect, the judgment oblige
to institute an action against such person or corporation for the
recovery of such interest or debt, forbid a transfer or other
disposition of such interest or debt within one hundred twenty
(120) days from notice of the order, and may punish
disobedience of such order as for contempt. Such order may be
modified or vacated at any time by the court which issued it, or
by the court in which the action is brought, upon such terms as
may be just. (Underscoring supplied).
chanrobles virtual law library
The institution of a separate action against a garnishee
contemplates a situation where the garnishee (third person)
"claims an interest in the property adverse to him (judgment
debtor) or denies the debt."19 Neither of these situations
exists in this case. The garnishee does not claim any interest in
the deposit accounts of the defendants, nor does it deny the
existence of the deposit accounts. In fact, Citytrust admitted in
its letter dated June 28, 1988 that it is in possession of the
deposit accounts.
Considering the foregoing disquisitions, BPI's liability for the
garnished deposits of defendants has been clearly established.
Garnishment has been defined as a specie of attachment for
reaching credits belonging to the judgment debtor and owing
to him from a stranger to the litigation.20 A writ of attachment
is substantially a writ of execution except that it emanates at
the beginning, instead of at the termination, of a suit. It places
the attached properties in custodia legis, obtaining pendente
lite a lien until the judgment of the proper tribunal on the
plaintiff s claim is established, when the lien becomes effective
as of the date of the levy.21ςrνll
By virtue of the writ of garnishment, the deposits of the
defendants with Citytrust were placed in custodia legis of the
court. From that time onwards, their deposits were under the
sole control of the RTC and Citytrust holds them subject to its
orders until such time that the attachment or garnishment is
discharged, or the judgment in favor of Lee is satisfied or the
credit or deposit is delivered to the proper officer of the
court.22 Thus, Citytrust, and thereafter BPI, which
automatically assumed the former s liabilities and obligations
upon the approval of their Articles of Merger, is obliged to keep
the deposit intact and to deliver the same to the proper officer
upon order of the court.
However, the RTC is not permitted to dissolve or discharge a
preliminary attachment or garnishment except on grounds
specifically provided23 in the Revised Rules of Court, namely,24
(a) the debtor has posted a counter-bond or has made the
requisite cash deposit;25 (b) the attachment was improperly or
irregularly issued26 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;27 (d) the property
attachment is exempt from preliminary attachment;28 or (e)
the judgment is rendered against the attaching
creditor.29ςrνll
Evidently, the loss of bank records of a garnished deposit is not
a ground for the dissolution of garnishment. Consequently, the
obligation to satisfy the writ stands.
Moreover, BPI cannot avoid the obligation attached to the writ
of garnishment by claiming that the fund was not transferred to
it, in light of the Articles of Merger which provides that "all
liabilities and obligations of Citytrust shall be transferred to and
become the liabilities and obligations of BPI in the same
manner as if the BPI had itself incurred such liabilities or
obligations, and in order that the rights and interest of
creditors of Citytrust or liens upon the property of Citytrust
shall not be impaired by merger."30ςrνll
Indubitably, BPI IS liable to deliver the fund subject of the writ
of garnishment.
With regard to the amount of the garnished fund, the Court
concurs with the finding of the CA that the total amount of
garnished deposit of Trendline as of January 27, 1994 is
P700,962.10,31 extant in its motion for partial lifting of the writ
of preliminary attachment32 and which amount, as correctly
observed by the CA, remains undisputed33 throughout the
proceedings relative to this case.
WHEREFORE, the instant petition is DENIED and the assailed
February 11, 2009 Decision and October 29, 2009 Resolution of
the Court of Appeals are AFFIRMED.
SO ORDERED.
[G.R. No. 92813. July 31, 1991.]
PEROXIDE PHILIPPINES CORPORATION, EASTMAN CHEMICAL
INDUSTRIES, INC., EDMUNDO O. MAPUA and ROSE U. MAPUA,
Petitioners, v. 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.:

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:chanrobles.com:cralaw:red
"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.chanrobles virtual lawlibrary
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:jgc:chanrobles.com.ph
"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. 13
BPI then filed a petition for certiorari in respondent court,
docketed therein as CA-G.R. SP No. 15672, invoking the
following grounds:chanrob1es virtual 1aw library
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:jgc:chanrobles.com.ph
"WHEREFORE, the petition for certiorari is hereby GRANTED.
Judgment is hereby rendered as follows:chanrob1es virtual 1aw
library
(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.cralawnad
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.chanrobles lawlibrary : rednad
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:jgc:chanrobles.com.ph
"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. 27 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. 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.chanrobles virtual lawlibrary
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 been 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.
[G.R. No. L-15709. October 19, 1960.]
In the matter of petition for prohibition of DAMASO CAJEFE.
CEClLIO CAJEFE, ETC., ET AL., Petitioners, v. THE HON. FIDEL
FERNANDEZ, Judge, Court of First Instance, Catbalogan, Samar,
MARIANO COJUANGCO, and the PROVINCIAL SHERIFF,
Respondents.
Fermin B. Quejada, for Petitioners.
Lope C. Quimbo for Respondent.
SYLLABUS
1. SURETY AND GUARANTY; NOTICE; EXECUTION ISSUED
WITHOUT NOTICE OF SURETY; NULL AND VOID. — The writ of
execution against petitioners’ counterbond (given to dissolve a
writ of prel. injunction) is null and void for having been issued
without notice to defendants’ sureties and after the judgment
on out notice to defendants’ sureties and after the judgment
on the merits had already became final and executory (Alliance
Insurance & Surety Co., Inc. v. Piccio, et al,. 105 Phil., 1196).
2. ID.; JUDGMENT AGAINST COUNTER BOND IN INJUNCTION;
DAMAGES AWARDED WITHOUT NOTICE TO SURETY
UNENFORCEABLE AGAINST BOND. — Pursuant to section 9,
Rule 60, in relation to section 20 Rule 50, of the Rules of Court,
where plaintiff’s claim for damages had already been awarded
in the main decision without notice to the surety and the
decision had already become final and executory, said claim
can no longer be pressed against the surety, because to hold
the surety liable, notice to it should be given either before the
trial or, at the latest, before entry of final judgment, so that an
award for damages against it may be included in said final
judgment.
3. ID.; ID.; ID.; EXECUTION SALE NULL AND VOID; CASE AT BAR.
— The writ of execution against the surety’s bond being null
and void, the execution sale conducted by the Provincial Sheriff
pursuant thereto is also completely null and void and should be
set aside.
4. PLEADING AND PRACTICE; AVERMENTS NOT CAPTION OF
PLEADINGS CONTROL; WHEN PROHIBITION MAY PROHIBITION
MAY BE CONSIDERED CERTIORARI. — Although prohibition is a
preventive and not a corrective remedy, it does not mean that
no affirmative relief may be given to the petitioner in this case,
because it is not the title or caption of a pleading, but the
substance and averments thereof, that is controlling; so that
when the petition for prohibition, as in the instant case, makes
out a petition for certiorari, the same (prohibition) may be
considered as a petition for certiorari.
5. ID.; VERIFICATION, SUFFICIENCY OF; COMPLAINT SIGNED BY
ATTORNEY. — It is only when the person verifying is other than
the attorney who signs the pleading that the affiant must state
that the allegations thereof are true of his own knowledge, but
when the complaint is signed by the attorney, the latter’s oath
couched in the usual form "subscribed and sworn to before me,
etc." is substantial compliance with the Rules of Court.
(Arambulo v. Perez, 78 Phil., 387.)
DECISION
REYES, J.B.L., J.:
On June 10, 1957, Mariano Cojuangco filed a complaint for
forcible entry against Eugenio Bardaje. Cecilio Cajefe, and
Damasino Cajefe in the Justice of the Peace Court of Santa Rita,
Samar, involving a parcel of land situated in the municipality.
During the pendency of the case, plaintiff prayed for the
issuance of a writ of preliminary plaintiff prayed for the
issuance of a writ of preliminary injunction to be placed in the
possession of the premises, and upon his filing of a bond in the
amount of P600, the motion was granted. Defendants,
however, filed a counterbond in the sum of P1,200, with
Bernardo Orosa and Feliciana Bardaje as bondsmen.
Thereupon, the writ of preliminary injunction was lifted, and
defendants remained in the possession of the land in question.
On September 26, 1957, judgment was rendered by the justice
of the peace court in favor of plaintiff, ordering defendants to
restore to him possession of the land in dispute and to pay him
P300 actual damages and P100 attorney’s fees. Defendants
appealed to the Court of the First Instance. No motion for
immediate execution of inferior court or in the court of first
instance, so that defendants continued to possess the land in
question pending the appeal.
On February 19, 1958, the Court of First Instance of Samar
rendered judgment in the case, declaring plaintiff to be the
lawful possessor of the land in question, and condemning the
defendants to vacate same and pay plaintiff damages of P90 for
the year 1956, P360 for the year 1957, and P90 for every
quarter thereafter until delivery of the land in dispute to
plaintiff is effected. Defendants received copy of the decision
on February 23, 1958, and they interposed no appeal.
The judgment having become final and executory, plaintiff, on
July 12, 1958, moved for the execution thereof, and an order of
execution was accordingly issued. Because the provincial sheriff
could not find sufficient properties of the defendants to satisfy
the judgment for damages and costs. plaintiff filed a petition ex
parte for an order of execution against the counterbond posted
by the defendants in order to lift the writ of preliminary
injunction issued in the inferior court, which petition the court
granted. Notified of the order of execution against the bond,
defendants moved for the reconsideration thereof on the
ground that the same was null and void for having been issued
without notice to them and without giving them their day in
court, and that furthermore, said bond was good only for the
lifting on the writ of preliminary injunction in the justice of the
peace court but not for the purpose of satisfying the award of
damages to plaintiff in the court of first instance.
Reconsideration having been denied, defendants filed a
petition in the court of first instance. Reconsideration having
been denied, defendants filed a petition for certiorari before
this Court (G.R. No. L-14831), but for one reason or another,
the petition was dismissed for lack of merit. In the meantime,
the provincial sheriff, acting on the order of execution,
advertised for sale at public auction on July 28, 1959 the real
properties posted by defendant’s bondsmen to secure the
bond in question. To enjoin the sale, defendants and their
bondsmen filed with this Court the present petition for
prohibition. It appears, though, that four days after the petition
was filed and before the submission of respondents’ answer,
the sale sought to be enjoined had already taken place on the
date set, July 28, 1959.
We find that the writ of execution against petitioners’
counterbond is null and void for having been issued without
notice to defendants’ sureties and after the judgment on the
merits had already become final and executory.
The present case falls squarely within the doctrine laid by this
Court in the case of Alliance Insurance & Surety Co., v. Hon.
Edmundo S. Piccio, Et Al., 105 Phil., 1196. There, a writ of
preliminary injunction was issued by the Court of First Instance
pendente lite in a case for recovery of possession of property
and damages, which writ was dissolved upon defendants’ filing
a counterbond. After trial the court rendered judgment
ordering defendants to deliver possession of the property in
question to plaintiff and to pay the latter the amount of P8,416
as damages. The Court of Appeals affirmed the judgment in
toto. After the case was remanded to the court of origin,
plaintiff moved for execution. The writ was, however, returned
unsatisfied because defendants had no properties with which
to satisfy the judgment. Whereupon, plaintiff filed a motion for
the issuance of an alias writ of execution against the surety on
the defendant’s counterbond to lift the writ of preliminary
injunction issued in the trial court, and the motion was granted.
On petition for certiorari to this Court by the surety, we held,
after reviewing all the cases previously decided by us on the
matter, that, where plaintiff’s claim for damages had already
been awarded in the main decision without notice the surety
and the decision had already become final and executory, said
claim can no longer be pressed against the surety, because to
hold the surety liable, notice to it should be given either before
the trial or, at the latest, before entry of final judgment, so that
an award for damages against it may be included in said final
judgment, pursuant to section 9, Rule 60, in relation to section
20, Rule 59, of the Rules of Court, to wit:jgc:chanrobles.com.ph
"Sec. 9. Judgment to include damages against party and
sureties. — Upon the trial the amount of damages to be
awarded to the plaintiff, or to the defendant, as the case may
be, upon the bond of the other party, shall be claimed,
ascertained, and awarded under the same procedure as
prescribed in section 20 of Rule 59." (Rule 60, Injunction).
"Sec. 20. Claim for damages on plaintiff’s bond on account of
illegal attachment. — If the judgment on the action be in favor
of the defendant, he may recover, upon the bond given by the
plaintiff, awarded only upon application and after proper
hearing, and shall be included in the final judgment. The
application must be filed before the trial or, in the discretion of
the court, before entry of the final judgment, with due notice
to the plaintiff and his surety or sureties, setting forth the facts
showing his right to damages and the amount thereof.
Damages sustained during the pendency of the appellate court
be favorable to him, by filing an application therewith, with
notice to the plaintiff and his surety or sureties, and the
appellate court may allow the application to be heard and
decided by the trial court." (Rule 59, Attachment.)
It has been argued that the reference to section 20 of Rule 59
does not apply to counterbonds posted to lift preliminary
injunctions already issued, for the reason that the sureties in
such counterbonds are aware from the very first of the
existence of a claim for damages, and that the rule applicable
to such counterbonds is not section 20 but section 17 of Rule
59. We do not believe such a distinction is warranted in the
case of injunctions, since the express terms of section 9 of Rule
60, already quoted, "the amount of damages to be awarded to
the plaintiff for to the defendant . . . upon the bond of the
other party," are broad enough to cover both kinds of bonds ,
whether posted to obtain the issuance of a preliminary writ of
injunction or filed to secure its dissolution; and Rule 59 makes
section 20 thereof applicable to either. To apply the terms of
section 20, Rule 59 only to bonds posted to obtain writs of
injunction would leave vague and uncertain the procedure for
assessing damages against the sureties in counter bonds for the
dissolution of such writ. This Court has already settled the
procedure to be followed in proceeding against bonds in Del
Rosario v. Nava, 95 Phil., 637; 50 Off. Gaz. (9) 4189.
The fact that the surety in an injunction counterbond is aware
that damages are being claimed against his principal. While
sureties in a bond to obtain a writ of injunction do not know
whether the enjoined party will or will not claim damages
subsequently, is not substantial enough to warrant a distinction
in treatment, since mere allegation of damages is not proof
thereof. Even if the counterbondsmen know that the party who
originally obtained the dissolved injunction is claiming
damages, the truth and extent of such damages remain
dependent upon subsequent proof, and the counterbondsmen
are certainly entitled to be notified and heard on the question
before final judgment against them is rendered; nor do we see
any justification why the uncertainty of a counterbondsman’s
liability should be prolonged beyond the entry of the judgment
that the finally settles the responsibility of his principal.
The diverse rule in section 17 of Rule 59 for counterbonds
posted to obtain the lifting of a writ of attachment any 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. This situation does not obtain in the case of injunction
counterbonds, since the sureties in the latter case merely
undertake "to pay all damages that the plaintiff may suffer by
reason of continuance . . of acts complained of" (Rule 60,
section 6) and not to secure payment of the judgment
recovered. 1
We, therefore, hold that the court below acted without
jurisdiction in issuing a writ of execution against the sureties of
defendants in this case on their counterbond to lift the writ of
preliminary injunction in the justice of the peace court, for lack
of notice to and hearing of said sureties, and after the
judgment in the case had long become final and executory. And
as the writ of execution against the bond is null and void, the
execution sale conducted by the provincial sheriff pursuant
thereto is also completely null and void and should be set
aside.
Respondents claim, however, that prohibition is not the proper
remedy in this case, the public auction sale sought to be
enjoined having been already accomplished, prohibition being
available only to prevent, not to correct, an act or proceeding.
Although prohibition is, indeed, a preventive and not a
corrective remedy, it does not mean, however, that no
affirmative relief may be given petitioners in this case. For it is
not the title or caption of a pleading, but the substance and
substance and averments thereof, that is controlling, and this
Court has held time and again that in the interest of the justice,
although a petition for mandamus if the facts alleged make out
a case for the issuance of the writ, 2 or, conversely, a petition
for mandamus may be considered one for certiorari 3 .
Similarly, the present petition, which makes out a petition for
certiorari to annul the writ of execution in question and the
public auction sale conducted pursuant thereto, may be
considered as such to justify the issuance of the writ of
certiorari for the nullification and setting aside of said writ of
execution and sale.
As for respondent’s claim that the present petition is fatally
defective because it is not properly verified, that is, counsel
who verified the petition did not swear that is, counsel who
verified the petition did not swear that the contents thereof are
true of his own knowledge but only "to the best of his
knowledge and belief" ; the claim is untenable because it is only
when the person verifying is other than the attorney who signs
the pleading that the affiant must state that the allegations
thereof are true of his knowledge, but when the complain is
substantial compliance with the rules. 4 Besides, it has been
held that where the affiant swears that the contents of the
complaints "are true to the best of his knowledge, information
and belief" 5 or "to the best of his knowledge and belief," 6
verification is sufficient.
Wherefore, the writ of execution and public auction sale
complained of in this petition are declared null and void and
hereby set aside, with costs against respondent Mariano
Cojuangco.

[G.R. No. L-21450. April 15, 1968.]
SERAFIN TIJAM, ET AL., Plaintiffs-Appellees, v. MAGDALENO
SIBONGHANOY ALIAS GAVINO SIBONGHANOY, ET AL.,
Defendants, MANILA SURETY AND FIDELITY CO., INC. (CEBU
BRANCH) bonding Company and defendant-appellant.
Velasco Law Office for Appellant.
F . S. Urot and G . A. Uriarte for Appellees.
SYLLABUS
1. REMEDIAL LAW; COURTS; JURISDICTION; PARTY GUILTY OF
LACHES MAY NOT INVOKE LACK OF JURISDICTION ON APPEAL
AS IN INSTANT CASE. — It is undisputed fact that the action
commenced by appellees in the Court of First Instance of Cebu
against the Sibonghanoy spouses was for the recovery of the
sum of P1,908.00 only — an amount within the original
exclusive jurisdiction of inferior courts in accordance with the
provisions of the Judiciary Act of 1948 which had taken effect
about a month prior to the date when the action was
commenced. True also is the rule that jurisdiction over the
subject matter is conferred upon the courts exclusively by law,
and as the lack of it affects the very authority of the court to
take cognizance of the case, the objection may be raised at any
stage of the proceedings. However, considering the facts and
circumstances of the present case, We are of the opinion that
the Surety is now barred by laches from invoking this plea at
this late hour for the purpose of annulling everything done
heretofore in the case with its active participation.
2. ID.; ESTOPPEL; DIFFERENT WAYS A PARTY MAY BE BARRED
FROM RAISING QUESTION. — A party may be estopped or
barred from raising a question in different ways and for
different reasons. Thus we speak of estoppel in pais, of
estoppel by deed or by record, and of estoppel by laches.
3. ID.; LACHES; DEFINITION. — Laches, in a general sense, is
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.chanroblesvirtuallawlibrary
4. ID.; ID.; BASIS. — The doctrine of laches or of "stale
demands" is based upon grounds of public policy which
requires, for the peace of society, the discouragement of stale
claims and, unlike the statute of limitations, is not a mere
question of time but is principally a question of the inequity or
unfairness of permitting a right or claim to be enforced or
asserted.
5. ID.; ID.; INSTANCES WHEN PARTY MAY BE ESTOPPED FROM
INVOKING QUESTION OF JURISDICTION. — A party cannot
invoke the jurisdiction of a court to secure affirmative relief
against his opponent and, after obtaining or failing to obtain
such relief, repudiate or question that same jurisdiction. The
question whether the court had jurisdiction either of the
subject matter of the action or of the parties was not important
in such cases because the party is barred from such conduct
not because the judgment or order of the court is valid and
conclusive as an adjudication, but for the reason that such a
practice cannot be tolerated — obviously for reasons of public
policy.
6. ID.; ID.; FAILURE TO RAISE QUESTION OF JURISDICTION AT
AN EARLIER STAGE BARS PARTY FROM QUESTIONING IT LATER.
— Where from the time the Surety became a quasi-party on
July 31, 1948, it could have raised the question of the lack of
jurisdiction of the Court of First Instance of Cebu by reason of
the sum of money involved which was within the original
exclusive jurisdiction of inferior courts but failed to do so and
instead, at several stages of the proceedings in the court a quo
as well as in the Court of Appeals, it invoked the jurisdiction of
said courts to obtain affirmative relief and submitted its case
for a final adjudication on the merits, and it was only after an
adverse decision was rendered by the Court of Appeals that it
finally raised said question of jurisdiction, to sanction such
conduct on its part would in effect be declaring as useless all
the proceedings had in the present case since it was
commenced on July 19, 1948 and compel the judgment
creditors to go up their Calvary once more. The inequity and
unfairness of this is not only patent but revolting.
DECISION
DIZON, J.:
On July 19, 1948 — barely one month after the effectivity of
Republic Act No. 296 known as the Judiciary Act of 1948 — the
spouses Serafin Tijam and Felicitas Tagalog commenced Civil
Case No. R-660 in the Court of First Instance of Cebu against
the spouses Magdaleno Sibonghanoy and Lucia Baguio to
recover from them the sum of P1,908.00, with legal interest
thereon from the date of the filing of the complaint until the
whole obligation is paid, plus costs. As prayed for in the
complaint, a writ of attachment was issued by the court against
defendants’ properties, but the same was soon dissolved upon
the filing of a counter-bond by defendants and the Manila
Surety and Fidelity Co., Inc. hereinafter referred to as the
Surety, on the 31st of the same month.
After being duly served with summons the defendants filed
their answer in which, after making some admissions and
denials of the material averments of the complaint, they
interposed a counterclaim. This counterclaim was answered by
the plaintiffs.
After trial upon the issues thus joined, the Court rendered
judgment in favor of the plaintiffs and, after the same had
become final and executory, upon motion of the latter, the
Court issued a writ of execution against the defendants. The
writ having been returned unsatisfied, the plaintiffs moved for
the issuance of a writ of execution against the Surety’s bond
(Rec. on Appeal pp. 46-49), against which the Surety filed a
written opposition (Id. pp. 49) upon two grounds, namely, (1)
Failure to prosecute and (2) Absence of a demand upon the
Surety for the payment of the amount due under the judgment.
Upon these grounds the Surety prayed the Court not only to
deny the motion for execution against its counter-bond but
also the following affirmative relief : "to relieve the herein
bonding company of its liability, if any, under the bond in
question" (Id. p. 54) The Court denied this motion on the
ground solely that no previous demand had been made on the
Surety for the satisfaction of the judgment. Thereafter the
necessary demand was made, and upon failure of the Surety to
satisfy the judgment, the plaintiffs filed a second motion for
execution against the counter-bond. On the date set for the
hearing thereon, the Court, upon motion of the Surety’s
counsel, granted the latter a period of five days within which to
answer the motion. Upon its failure to file such answer, the
Court granted the motion for execution and the corresponding
writ was issued.
Subsequently, the Surety moved to quash the writ on the
ground that the same was issued without the required
summary hearing provided for in Section 17 of Rule 59 of the
Rules of Court. As the Court denied the motion, the Surety
appealed to the Court of Appeals from such order of denial and
from the one denying its motion for reconsideration (Id. p. 97).
Its record on appeal was then printed as required by the Rules,
and in due time it filed its brief raising therein no other
question but the ones covered by the following assignment of
errors:jgc:chanrobles.com.ph
"I. That the Honorable Court a quo erred in issuing its order
dated November 2, 1957, by holding the incident as submitted
for resolution, without a summary hearing and compliance with
the other mandatory requirements provided for in Section 17,
Rule 59 of the Rules of Court.
"II. That the Honorable Court a quo erred in ordering the
issuance of execution against the herein bonding company-
appellant.
"III. That the Honorable Court a quo erred in denying the
motion to quash the writ of execution filed by the herein
bonding company- appellant as well as its subsequent motion
for reconsideration, and/or in not quashing or setting aside the
writ of execution."cralaw virtua1aw library
Not one of the assignment of errors — it is obvious — raises
the question of lack of jurisdiction, neither directly nor
indirectly.chanroblesvirtual|awlibrary
Although the appellees failed to file their brief, the Court of
Appeals, on December 11, 1962, decided the case affirming the
orders appealed from.
On January 8, 1963 — five days after the Surety received notice
of the decision, it filed a motion asking for extension of time
within which to file a motion for reconsideration. The Court of
Appeals granted the motion in its resolution of January 10 of
the same year. Two days later the Surety filed a pleading
entitled MOTION TO DISMISS, alleging substantially that
appellees’ action was filed in the Court of First Instance of Cebu
on July 19, 1948 for the recovery of the sum of P1,908.00 only;
that a month before that date Republic Act No. 296, otherwise
known as the Judiciary Act of 1948, had already become
effective, Section 88 of which placed within the original
exclusive jurisdiction of inferior courts all civil actions where
the value of the subject-matter or the amount of the demand
does not exceed P2,000.00, exclusive of interest and costs; that
the Court of First Instance therefore had no jurisdiction to try
and decide the case. Upon these premises the Surety’s motion
prayed the Court of Appeals to set aside its decision and to
dismiss the case. By resolution of January 16, 1963 the Court of
Appeals required the appellees to answer the motion to
dismiss, but they failed to do so. Whereupon, on May 20 of the
same year, the Court resolved to set aside its decision and to
certify the case to Us. The pertinent portions of its resolution
read as follows:jgc:chanrobles.com.ph
"It would indeed appear from the record that the action at bar,
which is a suit for collection of money in the sum of exactly
P1,908.00 exclusive of interest, was originally instituted in the
Court of First Instance of Cebu on July 19, 1948. But about a
month prior to the filing of the complaint, more specifically on
June 17, 1948, the Judiciary Act of 1948 took effect, depriving
the Court of First Instance of original jurisdiction over cases in
which the demand, exclusive of interest, is not more than
P2,000.00 (Secs. 44[c] and 86[b], R.A. No. 296.).
"We believe, therefore, that the point raised in appellant’s
motion is an important one which merits serious consideration.
As stated, the complaint was filed on July 19, 1948. This case
therefore has been pending now for almost 15 years, and
throughout the entire proceeding appellant never raised the
question of jurisdiction until after receipt of this Court’s
adverse decision.
"There are three cases decided by the Honorable Supreme
Court which may be worthy of consideration in connection with
this case, namely: Tyson Tan, Et. Al. v. Filipinas Compañia de
Seguros, Et Al., G. R. No. L-10096, March 23, 1956; Pindañgan
Agricultural Co., Inc. v. Jose P. Dans, etc., Et Al., G. R. No. L-
14591, September 26, 1962; and Alfredo Montelibano, Et. Al. v.
Bacolod-Murcia Milling Co., Inc., G. R. No. L-15092, September
29, 1962, wherein the Honorable Supreme Court frowned upon
the ‘undesirable practice’ of appellants submitting their case
for decision and then accepting the judgment, if favorable, but
attacking it for lack of jurisdiction when adverse.
"Considering, however, that the Supreme Court has the
‘exclusive’ appellate jurisdiction over ‘all cases in which the
jurisdiction of any inferior court is in issue’ (Sec. 1, Par. 3[3],
Judiciary Act of 1948, as amended), we have no choice but to
certify, as we hereby do certify; this case to the Supreme Court.
"ACCORDINGLY, pursuant to Section 31 of the Judiciary Act of
1948 as amended, let the record of this case be forwarded to
the Supreme Court."cralaw virtua1aw library
It is an undisputed fact that the action commenced by
appellees in the Court of First Instance of Cebu against the
Sibonghanoy spouses was for the recovery of the sum of
P1,908.00 only — an amount within the original exclusive
jurisdiction of inferior courts in accordance with the provisions
of the Judiciary Act of 1948 which had taken effect about a
month prior to the date when the action was commenced. True
also is the rule that jurisdiction over the subject-matter is
conferred upon the courts exclusively by law, and as the lack of
it affects the very authority of the court to take cognizance of
the case, the objection may be raised at any stage of the
proceedings. However, considering the facts and circumstances
of the present case — which shall forthwith be set forth — We
are of the opinion that the Surety is now barred by laches from
invoking this plea at this late hour for the purpose of annulling
everything done heretofore in the case with its active
participation. As already stated, the action was commenced in
the Court of First Instance of Cebu on July 19, 1948, that is,
almost fifteen years before the Surety filed its motion to
dismiss on January 12, 1963 raising the question of lack of
jurisdiction for the first time.
It must be remembered that although the action, originally,
was exclusively against the Sibonghanoy spouses, the Surety
became a quasi-party therein since July 31, 1948 when it filed a
counter-bond for the dissolution of the writ of attachment
issued by the court of origin (Record on Appeal, pp. 15-19).
Since then, it acquired certain rights and assumed specific
obligations in connection with the pending case, in accordance
with Sections 12 and 17, Rule 57, Rules of Court (Bautista v.
Joaquin, 46 Phil. 885; Kimpang & Co. v. Javier, 65 Phil. 170).
Upon the filing of the first motion for execution against the
counter-bond the Surety not only filed a written opposition
thereto praying for its denial but also asked for an additional
affirmative relief — that it be relieved of its liability under the
counter-bond upon the grounds relied upon in support of its
opposition — lack of jurisdiction of the court a quo not being
one of them.chanrobles virtual lawlibrary
Then, at the hearing on the second motion for execution
against the counter-bond, the Surety appeared, through
counsel, to ask for time within which to file an answer or
opposition thereto. This motion was granted, but instead of
such answer or opposition, the Surety filed the motion to
dismiss mentioned heretofore.
A party may be estopped or barred from raising a question in
different ways and for different reasons. Thus we speak of
estoppel in pais, of estoppel by deed or by record, and of
estoppel by laches.
Laches, in a general sense, is 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.
The doctrine of laches or of "stale demands" is based upon
grounds of public policy which requires, for the peace of
society, the discouragement of stale claims and, unlike the
statute of limitations, is not a mere question of time but is
principally a question of the inequity or unfairness of permitting
a right or claim to be enforced or asserted.
It has been held that a party cannot invoke the jurisdiction of a
court to secure affirmative relief against his opponent and,
after obtaining or failing to obtain such relief, repudiate or
question that same jurisdiction (Dean v. Dean, 136 Or. 694, 86
A.L.R. 79). In the case just cited, by way of explaining the rule, it
was further said that the question whether the court had
jurisdiction either of the subject-matter of the action or of the
parties was not important in such cases because the party is
barred from such conduct not because the judgment or order
of the court is valid and conclusive as an adjudication, but for
the reason that such a practice cannot be tolerated —
obviously for reasons of public policy.
Furthermore, it has also been held that after voluntarily
submitting a cause and encountering an adverse decision on
the merits, it is too late for the loser to question the jurisdiction
or power of the court (Pease v. Rathbun-Jones etc. 243 U.S.
273, 61 L. Ed. 715, 37 S. Ct. 283; St. Louis etc. v. McBride, 141
U.S. 127, 35 L. Ed. 659). And in Littleton v. Burgess, 16 Wyo. 58,
the Court said that it is not right for a party who has affirmed
and invoked the jurisdiction of a court in a particular matter to
secure an affirmative relief, to afterwards deny that same
jurisdiction to escape a penalty.
Upon this same principle is what We said in the three cases
mentioned in the resolution of the Court of Appeals of May 20,
1963 (supra) — to the effect that we frown upon the
"undesirable practice" of a party submitting his case for
decision and then accepting the judgment, only if favorable,
and attacking it for lack of jurisdiction, when adverse — as well
as in Pindañgan etc. v. Dans Et. Al., G. R. L-14591, September
26, 1962; Montelibano Et. Al. v. Bacolod-Murcia Milling Co.,
Inc., G. R. L-15092; Young Men Labor Union etc. v. the Court of
Industrial Relations Et. Al., G. R. L-20307, Feb. 26, 1965, and
Mejia v. Lucas, 100 Phil. p. 277.
The facts of this case show that from the time the Surety
became a quasi-party on July 31, 1948, it could have raised the
question of the lack of jurisdiction of the Court of First Instance
of Cebu to take cognizance of the present action by reason of
the sum of money involved which, according to the law then in
force, was within the original exclusive jurisdiction of inferior
courts. It failed to do so. Instead, at several stages of the
proceedings in the court a quo as well as in the Court of
Appeals, it invoked the jurisdiction of said courts to obtain
affirmative relief and submitted its case for a final adjudication
on the merits. It was only after an adverse decision was
rendered by the Court of Appeals that it finally woke up to raise
the question of jurisdiction. Were We to sanction such conduct
on its part, We would in effect be declaring as useless all the
proceedings had in the present case since it was commenced
on July 19, 1948 and compel the judgment creditors to go up
their Calvary once more. The inequity and unfairness of this is
not only patent but revolting.
Coming now to the merits of the appeal: after going over the
entire record, We have become persuaded that We can do
nothing better than to quote in toto, with approval the decision
rendered by the Court of Appeals on December 11, 1962 as
follows:jgc:chanrobles.com.ph
"In Civil Case No. R-660 of the Court of First Instance of Cebu,
which was a suit for collection of a sum of money, a writ of
attachment was issued against defendants’ properties. The
attachment, however, was subsequently discharged under
Section 12 of Rule 59 upon the filing by defendants of a bond
subscribed by Manila Surety & Fidelity Co., Inc. "After trial,
judgment was rendered in favor of plaintiffs.
"The writ of execution against defendants having been
returned totally unsatisfied, plaintiffs moved, under Section 17
of Rule 59, for issuance of writ of execution against Manila
Surety & Fidelity Co., Inc. to enforce the obligation of the bond.
But the motion was, upon the surety’s opposition, denied on
the ground that there was ‘no showing that a demand had
been made by the plaintiffs to the bonding company for
payment of the amount due under the judgment’(Record on
Appeal, p. 60).
"Hence, plaintiffs made the necessary demand upon the surety
for satisfaction of the judgment, and upon the latter’s failure to
pay the amount due, plaintiffs again filed a motion dated
October 31, 1957, for issuance of writ of execution against the
surety, with notice of hearing on November 2, 1957. On
October 31, 1957, the surety received copy of said motion and
notice of hearing.chanroblesvirtuallawlibrary
"It appears that when the motion was called on November 2,
1957, the surety’s counsel asked that he be given time within
which to answer the motion, and so an order was issued in
open court, as follows:chanrob1es virtual 1aw library
‘As prayed for, Atty. Jose P. Soberano, Jr. counsel for the Manila
Surety & Fidelity Co., Inc., Cebu Branch, is given until
Wednesday, November 6, 1957, to file his answer to the
motion for the issuance of a writ of execution dated October
30, 1957 of the plaintiffs, after which this incident shall be
deemed submitted for resolution.
‘SO ORDERED
[G.R. No. 72005. May 29, 1987.]
PHILIPPINE BRITISH ASSURANCE CO., INC., Petitioner, v. THE
HONORABLE INTERMEDIATE APPELLATE COURT, SYCWIN
COATING & WIRES, INC., and DOMINADOR CACPAL, Chief
Deputy Sheriff of Manila, Respondents.
DECISION
GANCAYCO, J.:
This is a Petition for Review on Certiorari of the Resolution
dated September 12, 1985 of the Intermediate Appellate Court
in AC-G.R. No. CR-05409 1 granting private respondent’s
motion for execution pending appeal and ordering the issuance
of the corresponding writ of execution on the counterbond to
lift attachment filed by petitioner. The focal issue that emerges
is whether an order of execution pending appeal of a judgment
maybe enforced on the said bond. In the Resolution of
September 25, 1985 2 this Court as prayed for, without
necessarily giving due course to the petition, issued a
temporary restraining order enjoining the respondents from
enforcing the order complaint of.
The records disclose that private respondent Sycwin Coating &
Wires, Inc., filed a complaint for collection of a sum of money
against Varian Industrial Corporation before the Regional Trial
Court of Quezon City. During the pendency of the suit, private
respondent succeeded in attaching some of the properties of
Varian Industrial Corporation upon the posting of a
supersedeas bond. 3 The latter in turn posted a counterbond in
the sum of P1,400,000.00 4 thru petitioner Philippine British
Assurance Co., Inc., so the attached properties were released.
On December 28, 1984, the trial court rendered a Decision, the
dispositive portion of which reads:jgc:chanrobles.com.ph
"WHEREFORE, plaintiff’s Motion for Summary Judgment is
hereby GRANTED, and judgment is rendered in favor of the
plaintiff and against the defendant Varian Industrial
Corporation, and the latter is hereby ordered:chanrob1es
virtual 1aw library
1. To pay plaintiff the amount of P1,401,468.00, the principal
obligation with 12% interest per annum from the date of
default until fully paid;
2. To pay plaintiff 5% of the principal obligation as liquidated
damages;
3. To pay plaintiff P30,000.00 as exemplary damages;
4. To pay plaintiff 15% of P1,401,468.00, the principal
obligation, as and for attorney’s fees; and

5. To pay the costs of suit.
Accordingly, the counterclaim of the defendant is hereby
DISMISSED for lack of merit.
SO ORDERED." 5
Varian Industrial Corporation appealed the decision to the
respondent Court. Sycwin then filed a petition for execution
pending appeal against the properties of Varian in respondent
Court. Varian was required to file its comment but none was
filed. In the Resolution of July 5, 1985, respondent Court
ordered the execution pending appeal as prayed for. 6
However, the writ of execution was returned unsatisfied as
Varian failed to deliver the previously attached personal
properties upon demand. In a Petition dated August 13, 1985
filed with respondent Court Sycwin prayed that the surety
(herein petitioner) be ordered to pay the value of its bond. 7 In
compliance with the Resolution of August 23, 1985 of the
respondent Court herein petitioner filed its comment. 8 In the
Resolution of September 12, 1985, 9 the respondent Court
granted the petition. Hence this action.chanrobles.com.ph :
virtual law library
It is the submission of private respondent Sycwin that without a
previous motion for reconsideration of the questioned
resolution, certiorari would not lie. While as a general rule a
motion for reconsideration has been considered a condition
sine qua non for the granting of a writ of certiorari, this rule
does not apply when special circumstances warrant immediate
or more direct action. 10 It has been held further that a motion
for reconsideration may be dispensed with in cases like this
where execution had been ordered and the need for relief was
extremely urgent. 11
The counterbond provides:jgc:chanrobles.com.ph
"WHEREAS, in the above-entitled case pending in the Regional
Trial Court, National Capital Judicial Region, Branch LXXXV
Quezon City, an order of Attachment was issued against
abovenamed Defendant;
WHEREAS, the Defendant, for the purpose of lifting and/or
dissolving the order of attachment issued against them in the
above-entitled case, have offered to file a counterbond in the
sum of PESOS ONE MILLION FOUR HUNDRED THOUSAND ONLY
P1,400,000.00), Philippine Currency, as provided for in Section
5 Rule 57 of the Revised Rules of Court.
NOW, THEREFORE, we, VARIAN INDUSTRIAL CORPORATION, as
Principal and the PHILIPPINE BRITISH ASSURANCE COMPANY,
INC., a corporation duly organized and existing under and by
virtue of the laws of the Philippines, as Surety in consideration
of the above and of the lifting or dissolution of the order of
attachment, hereby jointly and severally, bind ourselves in
favor of the above Plaintiff in the sum of PESOS ONE MILLION
FOUR HUNDRED THOUSAND ONLY (P1,400,000.00), Philippine
Currency, under the condition that in case the Plaintiff recovers
judgment in the action, and Defendant will, on demand, re-
deliver the attached property so released to the Officer of the
Court and the same shall be applied to the payment of the
judgment, or in default thereof, the defendant and Surety will,
on demand, pay to the Plaintiff the full value of the property
released.
EXECUTED at Manila, Philippines, this 28th day of June, 1984."
12
Sections 5, 12, and 17 of Rule 57 of the Revised Rules of Court
also provide:chanrob1es virtual 1aw library
SEC. 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. The officer shall also
forthwith serve a copy of the applicant’s affidavit and bond,
and of the order of attachment, on the adverse party, if he be
found within the province.
SEC. 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 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. Upon the filing of such counter-bond,
copy thereof shall forthwith be served on the attaching creditor
or his lawyer. 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 counterbond
aforesaid standing in place of the property so released. Should
such counterbond for any reason be found to be, or become,
insufficient, and the party furnishing the same fail to file an
additional counterbond, the attaching creditor may apply for a
new order of attachment.
SEC. 17. When execution returned unsatisfied, recovery had
upon bond. — If the execution be returned unsatisfied in whole
or in part, 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 counterbond and
bound to pay to the judgment creditor 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. (Emphasis supplied.)
Under Sections 5 and 12, Rule 57 above reproduced it is
provided that the counterbond is intended to secure the
payment of "any judgment" that the attaching creditor may
recover in the action. Under Section 17 of same rule it provides
that when "the execution be returned unsatisfied in whole or in
part" it is only then that "payment of the judgment shall
become charged on such counterbond." chanrobles virtual
lawlibrary
The counterbond was issued in accordance with the provisions
of Section 5, Rule 57 of the Rules of Court as provided in the
second paragraph aforecited which is deemed reproduced as
part of the counterbond. In the third paragraph it is also
stipulated that the counterbond is to be "applied for the
payment of the judgment." Neither the rules nor the provisions
of the counterbond limited its application to a final and
executory judgment. Indeed, it is specified that it applies to the
payment of any judgment that maybe recovered by plaintiff.
Thus, the only logical conclusion is that an execution of any
judgment including one pending appeal if returned unsatisfied
maybe charged against such a counterbond.
It is well recognized rule that where the law does not
distinguish, courts should not distinguish. Ubi lex non distinguit
nec nos distinguere debemos. 13 The rule, founded on logic, is
a corollary of the principle that general words and phrases in a
statute should ordinarily be accorded their natural and general
significance. 14 The rule requires that a general term or phrase
should not be reduced into parts and one part distinguished
from the other so as to justify its exclusion from the operation
of the law. 15 In other words, there should be no distinction in
the application of a statute where none is indicated. 16 For
courts are not authorized to distinguish where the law makes
no distinction. They should instead administer the law not as
they think it ought to be but as they find it and without regard
to consequences. 17
A corollary of the principle is the rule that where the law does
not make any exception, courts may not except something
therefrom, unless there is compelling reason apparent in the
law to justify it. 18 Thus where a statute grants a person
against whom possession of "any land" is unlawfully withheld
the right to bring an action for unlawful detainer, this Court
held that the phrase "any land" includes all kinds of land,
whether agricultural, residential, or mineral. 19 Since the law in
this case does not make any distinction nor intended to make
any exception, when it speaks of "any judgment" which maybe
charged against the counterbond, it should be interpreted to
refer not only to a final and executory judgment in the case but
also a judgment pending appeal.
All that is required is that the conditions provided for by law
are complied with, as outlined in the case of Towers Assurance
Corporation v. Ororama Supermart, 20
"Under Section 17, in order that the judgment creditor might
recover from the surety on the counterbond, it is necessary (1)
that the execution be first issued against the principal debtor
and that such execution was returned unsatisfied in whole or in
part; (2) that the creditor make a demand upon the surety for
the satisfaction of the judgment, and (3) that the surety be
given notice and a summary hearing on the same action as to
his liability for the judgment under his counterbond."cralaw
virtua1aw library
The rule therefore, is that the counterbond to lift attachment
that is issued in accordance with the provisions of Section 5,
Rule 57, of the Rules of Court, shall be charged with the
payment of any judgment that is returned unsatisfied. It covers
not only a final and executory judgment but also the execution
of a judgment pending appeal.chanrobles.com.ph : virtual law
library
WHEREFORE, the petition is hereby DISMISSED for lack of merit
and the restraining order issued on September 25, 1985 is
hereby dissolved with costs against petitioner.
SO ORDERED.
[G.R. NO. 144740 : August 31, 2005]
SECURITY PACIFIC ASSURANCE CORPORATION, Petitioners, v.
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.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari, assailing the
Decision1 and Resolution2 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 Attachment3 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 Order4 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 bond5 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 Decision6 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 date10 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
petitioner16 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 Garnishment18 addressed to the
President/General Manager of petitioner dated 03 April 2000.
On 07 April 2000, petitioner filed a Petition for Certiorari with
Preliminary Injunction and/or Temporary Restraining Order19
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 Reconsideration22 was filed by petitioner, but
was denied for lack of merit by the Court of Appeals in its
Resolution23 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 Resolution25
requiring the private respondents to file their Comment to the
Petition, which they did. Petitioner was required to file its
Reply26 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
excussion32 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 Reply34 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.
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 Coporation 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.

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.
[G.R. No. 74696. November 11, 1987.]
JOSE D. CALDERON, Petitioner, v. THE INTERMEDIATE
APPELLATE COURT, GEORGE SCHULZE, GEORGE SCHULZE, JR.,
ANTONIO C. AMOR, MANUEL A. MOZO, and VICTOR M. NALUZ,
Respondents.
[G.R. No. 73916. November 11, 1987.]
FIRST INTEGRATED BONDING AND INSURANCE COMPANY, INC.,
Petitioner, v. THE INTERMEDIATE APPELLATE COURT, GEORGE
SCHULZE, ANTONIO C. AMOR, MANUEL A. MOZO and VICTOR
M. NALUZ, Respondents.
SYLLABUS
1. REMEDIAL LAW; ATTACHMENT BOND: LIABILITY EXTENDS TO
MORAL AND EXEMPLARY DAMAGES IN CASE ATTACHMENT
WAS MALICIOUSLY SUED OUT AND ESTABLISHED TO BE SO. —
While as a general rule, the liability on the attachment bond is
limited to actual damages, moral and exemplary damages may
be recovered where the attachment was alleged to be
maliciously sued out and established to be so. (Lazatin v. Twano
et al, L-12736, July 31, 1961). Well settled is the rule that the
factual findings of the trial court are entitled to great weight
and respect on appeal, especially when established by
unrebutted testimonial and documentary evidence, as in this
case.
2. ID.; ID.; NOT RENDERED VOID UPON FILING OF THE
COUNTERBOUND; DISABILITY OF ATTACHMENT, DEFINED. —
While Section 12, Rule 57 of the Rules of Court provides that
upon the filing of a counterbond, the attachment is discharged
or dissolved, nowhere is it provided that the attachment bond
is rendered void and ineffective upon the filing of counterbond.
The liability of the attachment bond is defined in Section 4, Rule
57 of the Rules of Court. It is clear from the above provision
that the responsibility of the surety arises "if the court shall
finally adjudge that the plaintiff was not entitled thereto." In
Rocco v. Meads, 96 Phil. Reports 884, we held that the liability
attaches if the plaintiff is not entitled to the attachment
because the requirements entitling him to the writ are wanting,
or if the plaintiff has no right to the attachment because the
facts stated in his affidavit, or some of them, are untrue. It is,
therefore, evident that upon the dismissal of an attachment
wrongfully issued, the surety is liable for damages as a direct
result of said attachment.
3. ID.; ID.; LIABILITY OF SURETY SUBSISTS UNTIL FINALLY
RECKONED BY THE COURT THAT THE CREDITOR WAS NOT
ENTITLED TO ISSUANCE OF THE ATTACHMENT WRIT. —
Whether the attachment was discharged by either of the two
(2) ways indicated in the law, i.e., by filing a counterbond or by
showing that the order of attachment was improperly or
irregularly issued, the liability of the surety on the attachment
bond subsists because the final reckoning is when "the Court
shall finally adjudge that the attaching creditor was not
entitled" to the issuance of the attachment writ in the first
place. 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 like in the present case,
would require presentation of evidence in a fullblown trial on
the merits and cannot easily be settled in a pending incident of
the case.
4. CIVIL LAW; DAMAGES; AWARD BEING EXCESSIVE ORDERED
REDUCED. — We believe, however, that in the light of the
factual situation in this case, the damages awarded by the
Intermediate Appellate Court are rather excessive. They must
be reduced.
DECISION
PARAS, J.:
For review on certiorari is respondent appellate Court’s
decision 1 in AC-G.R. No. 01420, which affirmed the Regional
Trial Court’s decision 2 appealed from holding the plaintiff Jose
D. Calderon (petitioner herein) and his bondsman the
Integrated Bonding and Insurance Company, Inc., jointly and
severally liable to pay defendants (private respondents herein),
damages caused by the filing by Calderon of the allegedly
unwarranted suit and the wrongful and malicious attachment
of private respondents properties.
The facts of the case are briefly as follows:chanrob1es virtual
1aw library
On November 2, 1976, petitioner Calderon purchased from the
private respondents the following: the Luzon Brokerage
Corporation (LBC, for brevity) and its five (5) affiliate
companies, namely — Luzon Air Freight, Inc., Luzon Port
Terminals Services, Inc., Luzon (GS) Warehousing Corporation,
GS Industrial Management Corporation, and GS Luzon Trucking
Corporation. Twenty one (21) days thereafter or on November
23, 1976, the Bureau of Customs suspended the operations of
LBC for failure to pay the amount of P1,475,840.00
representing customs taxes and duties incurred prior to the
execution of the sale. In order to lift the suspension, Calderon
paid the sum of P606,430.00 to the Bureau of Customs.
On October 27, 1977, Calderon filed a complaint against private
respondents to recover said amount of P1,475,840.00, with
damages by reason of breach of warranty. In the same
complaint, the petitioner prayed for a preliminary attachment,
alleging: that private respondents had deliberately and willfully
concealed from his knowledge such staggering liability of the
LBC for the purpose of misleading him into buying the six
aforesaid companies; and that private respondent Schulze is
about to depart from the Philippines in order to defraud his
creditors.
To support the petition for preliminary attachment, the
petitioner posted a surety bond of P1,475,840.00. on October
28, 1977, the trial court issued a writ of preliminary
attachment, whereupon properties of the private respondents
were attached and their bank deposits were garnished.
On November 10, 1977, petitioner Calderon filed an amended
complaint, alleging that while the liabilities of LBC are reflected
in its books, the aforesaid amount was fraudulently withdrawn
and misappropriated by private respondent Schulze. (pp. 7-18,
Rollo).
On the other hand, private respondents claimed: that the
amount of P1,475,840.00 due to the Bureau of Customs
represents the duties and taxes payable out of the advanced
payments made by LBC’s client, Philippine Refining Company
(PRC, for brevity) in August, September and October, 1976, and
in the first and second weeks of November 1976, after
Calderon himself had taken control of the management of LBC
(Exhibit A); that these deposit payments were properly
recorded in the books of the corporation and existing as part of
the corporate funds; that from the first week of June, 1976 up
to October 30, 1976, private respondent Schulze fully disclosed
and explained to Calderon that these customer’s advanced
deposit payments (including those of the PRC) are to be paid to
the Bureau of Customs when their corresponding customs
taxes and duties become due; that during this phase of the
negotiation, Calderon and his representatives inspected and
studied the corporate books and records at will and learned the
daily operations and management of LBC; that the petitioner
did not pay out of his own pocket but out of the LBC funds the
said amount of P606,430.30 demanded by the Bureau of
Customs, as evidenced by a manager’s check No. FEBTC 25092
(Exhibits 9, 10, 11 & 38) and another facility negotiated with
the Insular Bank of Asia and America (Exhibit K-2); and that
private respondents are setting up a counterclaim for actual,
moral and exemplary damages as well as attorney’s fees, as a
consequence of the filing of the baseless suit and the wrongful
and malicious attachment of their properties. (pp. 217-221,
Rollo)
On November 17, 1977, private respondents filed a counter-
bond, whereupon the trial court issued an order directing the
sheriff to return all real and personal properties already levied
upon and to lift the notices of garnishment issued in connection
with the said attachment (Annex B, p. 42, Rollo).
After trial, the trial court dismissed the complaint, holding
Calderon and his surety First Integrated Bonding and Insurance
Co., Inc., jointly and severally liable to pay the damages prayed
for by the private respondents.
Said decision was affirmed on appeal, although slightly
modified in the sense that the award of moral and exemplary
damages in favor of private respondents Schulze and Amor was
reduced. The dispositive portion of the judgment of affirmance
and modification reads:jgc:chanrobles.com.ph
"WHEREFORE, the judgment of the lower court is modified as
follows:chanrob1es virtual 1aw library
To defendant-appellee George Schulze:chanrob1es virtual 1aw
library
P650,000.00 as moral damages and

P200,000.00 as exemplary damages.
To defendant-appellee Antonio C. Amor:chanrob1es virtual
1aw library
P150,000.00 as moral damages and
P30,000.00 as exemplary damages.
"All other dispositions in the judgment appealed from,
including the dismissal of the amended complaint, are hereby
affirmed in toto.
"SO ORDERED."cralaw virtua1aw library
In his petition, petitioner Calderon asserts, among other things,
that the court below erred:chanrob1es virtual 1aw library
I
IN HOLDING THAT THE PETITIONER FAILED TO ESTABLISH HIS
CLAIMS.
II
IN HOLDING THAT THE PRELIMINARY ATTACHMENT HAD BEEN
WRONGFULLY AND MALICIOUSLY SUED OUT.
III
IN HOLDING THAT THE PETITIONER IS LIABLE NOT ONLY FOR
ACTUAL DAMAGES BUT MORAL AND EXEMPLARY DAMAGES AS
WELL.
On the other hand, petitioner Insurance Company raises the
following issues:chanrob1es virtual 1aw library
I
WHETHER OR NOT THE PETITIONER SURETY IS LIABLE FOR
DAMAGES ON ITS CONTRACTED SURETYSHIP
NOTWITHSTANDING THE DISSOLUTION OF THE WRIT OF
PRELIMINARY ATTACHMENT, AS A CONSEQUENCE OF THE
FILING OF THE DEFENDANT’S COUNTER-BOND, WHEREBY
LEVIED PROPERTIES WERE ORDERED BY THE COURT RETURNED
TO PRIVATE RESPONDENTS AND THE NOTICES OF
GARNISHMENT ISSUED IN CONNECTION THEREWITH ORDERED
LIFTED.
II
WHETHER OR NOT THE SUBSEQUENT FILING BY PRIVATE
RESPONDENTS OF A COUNTER-BOND TO DISCHARGE THE WRIT
OF PRELIMINARY ATTACHMENT CONSTITUTE A WAIVER ON
ANY DEFECT IN THE ISSUANCE OF THE ATTACHMENT WRIT.
III
WHETHER OR NOT A SURETY IS A GUARANTOR OF THE
EXISTENCE OF A GOOD CAUSE OF ACTION IN THE COMPLAINT.
The petition is devoid of merit.
Whether or not the amount of P1,475,840.00 was duly
disclosed as an outstanding liability of LBC or was
misappropriated by private respondent Schulze is purely a
factual issue. That Calderon was clearly in bad faith when he
asked for the attachment is indicated by the fact that he failed
to appear in court to support his charge of misappropriation by
Schulze, and in effect, preventing his being cross-examined, no
document on the charges was presented by him.
What the Appellate Court found in this regard need not be
further elaborated upon. The Appellate Court ruled:chanrobles
lawlibrary : rednad
". . . The record shows that appellant Calderon failed to
produce any evidence in support of his sworn charge that
appellee Schulze had deliberately and willfully concealed the
liabilities of Luzon Brokerage Corporation. Neither did appellant
Calderon prove his sworn charges that appellee Schulze had
maliciously and fraudulently withdrawn and misappropriated
the amount of P1,475,840.00 and that all the defendants had
maliciously and fraudulently concealed and withheld from him
this alleged liability of Luzon Brokerage Corporation in breach
of the contract-warranty that said corporation had no
obligations or liabilities except those appearing in the books
and records of the said corporation. Indeed, appellant Calderon
never appeared in the trial court to substantiate the charges in
his verified complaints and in his affidavit to support his
petition for the issuance of a writ of attachment. He distanced
himself from the appellees and avoided cross-examination
regarding his sworn allegations. . . .
". . . But even though appellant Calderon failed to prove his
serious charges of fraud, malice and bad faith, the appellees
took it upon themselves to show that they did not conceal or
withhold from appellant’s knowledge the deposits made by
Philippine Refining Co., Inc. with Luzon Brokerage Corporation
and that they did not withdraw and misappropriate the
deposits made by Philippine Refining Co., Inc. with Luzon
Brokerage Corporation.
"The books and records of Luzon Brokerage Corporation on
which the Financial Statement of Luzon Brokerage Corporation,
as of October 31, 1976 was prepared by the auditing firm
retained by appellant Calderon himself (Exhibit 1), disclose that
the liabilities of Luzon Brokerage Corporation in the total
amount of P4,574,498.32 appear under the heading ‘Customers
Deposit’ (Exhibit 1-A) this amount includes the deposit of
Philippine Refining Co., Inc. in the sum of P1,475,840.00.

"But appellant Calderon contends that this financial statement
was dated February 4, 1977 (see Exhibit 1-C). There is nothing
commendable in this argument because the bases of the
financial statement were the books, records and documents of
Luzon Brokerage Corporation for the period ending October 31,
1976, which were all turned over to and examined by appellant
Calderon and his executive, legal and financial staffs. There is
also no merit in the contention of appellant Calderon that the
appellees have tampered the books of Luzon Brokerage
Corporation because there is no proof to back this charge, let
alone the fact that appellant Calderon did not even present the
said books to support his charge.
"As stated above, the amount of customers’ deposits in the
sum of P4,574,498.32 includes the deposits of Philippine
Refining Co., Inc. (Exhibits 46-A, 46-B, 46-C, 46-D, 46-E:, 46-F,
46-G, 46-H, 46-I, 46-J, t.s.n. July 23, 1980, pp. 12-13, 14-15).
The amounts deposited by Philippine Refining Co., Inc. on
various dates with Luzon Brokerage Corporation made before
the execution of the sale were all entered in three other
corporate books of Luzon Brokerage Corporation namely, the
Cash Receipts Register (Exhibits 39-A-1 to 39-K-1 and 39-A-1-B
to 39-K-1-B), the Journal Vouchers (Exhibits 42 to 46 and 42-A
to 45-A), and the Customer’s Deposit Ledger (Exhibit 46-A to
46-J) . . .
Thus, the claim of appellant Calderon that the deposits made
by Philippine Refining Co., Inc. with Luzon Brokerage
Corporation of P406,430.00 on August 24, 1976 (Exhibit N),
P53,640.00 on October 13, 1976 (Exhibit O), P406,430.00 on
September 8, 1976 (Exhibit P), P199,508.00 on September 24,
1976 (Exhibit Q), P52,738.00 on October 22, 1976 (Exhibit R),
and P264,436.00 on October 7, 1976 (Exhibit S) were not
entered in the books of Luzon Brokerage Corporation, is
completely without merit. . . . (pp. 85-87, Rollo)
It is evident from the foregoing that the attachment was
maliciously sued out and that as already pointed out Schulze
was not in bad faith.
While as a general rule, the liability on the attachment bond is
limited to actual damages, moral and exemplary damages may
be recovered where the attachment was alleged to be
maliciously sued out and established to be so. (Lazatin v. Twano
et al, L-12736, July 31, 1961).
In the instant case, the issues of wrongful and malicious suing
out of the writ of preliminary attachment were joined not only
in private respondents motion to discharge the attachment but
also in their answer to the amended complaint (p. 38, Rollo).
The trial court observed that the books and records of Luzon
Brokerage Corporation disclose that the liabilities of the said
corporation in the total amount of P4,574,498.32 appear under
the heading "Customs Deposit" (Exhibit 1-A) and this amount
includes the deposit of Philippine Refining Co., Inc. in the sum
of P1,475,840.00 (p. 26, Rollo). On the other hand, plaintiff
never appeared in court, and failed to produce any evidence to
substantiate his charges (p. 26, Rollo).chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
Well settled is the rule that the factual findings of the trial court
are entitled to great weight and respect on appeal, especially
when established by unrebutted testimonial and documentary
evidence, as in this case.
Anent the petition of the surety, We say the
following:chanrob1es virtual 1aw library
Specifically, petitioner surety contends that the dissolution of
the attachment extinguishes its obligation under the bond, for
the basis of its liability, which is wrongful attachment, no longer
exists, the attachment bond having been rendered void and
ineffective, by virtue of Section 12, Rule 57 of the Rules of
Court. (p. 5, Petition).
While Section 12, Rule 57 of the Rules of Court provides that
upon the filing of a counterbond, the attachment is discharged
or dissolved, nowhere is it provided that the attachment bond
is rendered void and ineffective upon the filing of counterbond.
The liability of the attachment bond is defined in Section 4, Rule
57 of the Rules of Court, as follows:jgc:chanrobles.com.ph
"Sec. 4. Condition of applicant’s bond. The party applying for
the order must give a bond executed to the adverse party in an
amount to be fixed by the judge, not exceeding the applicant s
claim, conditioned that the latter will pay all the costs which
may be adjudged to the adverse party and all damages which
he may sustain by reason of the attachment, if the court shall
finally adjudge that the applicant was not entitled
thereto."cralaw virtua1aw library
It is clear from the above provision that the responsibility of the
surety arises "if the court shall finally adjudge that the plaintiff
was not entitled thereto." In Rocco v. Meads, 96 Phil. Reports
884, we held that the liability attaches if the plaintiff is not
entitled to the attachment because the requirements entitling
him to the writ are wanting, or if the plaintiff has no right to the
attachment because the facts stated in his affidavit, or some of
them, are untrue. It is, therefore, evident that upon the
dismissal of an attachment wrongfully issued, the surety is
liable for damages as a direct result of said attachment.
Equally untenable is the Surety’s contention that by filing a
counterbond, private respondents waived any defect or flaw in
the issuance of the attachment writ, for they could have
sought, without need of filing any counterbond, the discharge
of the attachment if the same was improperly or irregularly
issued, as provided in Section 13, Rule 57 of the Rules of Court.
Whether the attachment was discharged by either of the two
(2) ways indicated in the law, i.e., by filing a counterbond or by
showing that the order of attachment was improperly or
irregularly issued, the liability of the surety on the attachment
bond subsists because the final reckoning is when "the Court
shall finally adjudge that the attaching creditor was not
entitled" to the issuance of the attachment writ in the first
place. 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 like in the present case,
would require presentation of evidence in a fullblown trial on
the merits and cannot easily be settled in a pending incident of
the case.
We believe, however, that in the light of the factual situation in
this case, the damages awarded by the Intermediate Appellate
Court are rather excessive. They must be reduced.chanrobles
law library : red
WHEREFORE, the judgment of said Appellate Court is hereby
modified as follows: Both petitioner Calderon and petitioner
First Integrated Bonding and Insurance Company, Inc. are
hereby ordered to give jointly and severally:chanrob1es virtual
1aw library
1. Respondent George Schulze, P250,000.00 as moral damages
and P50,000.00 as exemplary damages; and
2. Respondent Antonio C. Amor, P50,000.00 as moral damages
and P10,000.00 as exemplary damages.
The rest of the judgment of the Intermediate Appellate Court is
hereby AFFIRMED.
SO ORDERED.
G.R. No. 158997 October 6, 2008
FORT BONIFACIO DEVELOPMENT CORPORATION petitioner,
vs.
YLLAS LENDING CORPORATION and JOSE S. LAURAYA, in his
official capacity as President, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari1 of the Orders issued
on 7 March 20032 and 3 July 20033 by Branch 59 of the
Regional Trial Court of Makati City (trial court) in Civil Case No.
01-1452. The trial court's orders dismissed Fort Bonifacio
Development Corporation's (FBDC) third party claim and
denied FBDC's Motion to Intervene and Admit Complaint in
Intervention.
The Facts
On 24 April 1998, FBDC executed a lease contract in favor of
Tirreno, Inc. (Tirreno) over a unit at the Entertainment Center -
Phase 1 of the Bonifacio Global City in Taguig, Metro Manila.
The parties had the lease contract notarized on the day of its
execution. Tirreno used the leased premises for Savoia
Ristorante and La Strega Bar.
Two provisions in the lease contract are pertinent to the
present case: Section 20, which is about the consequences in
case of default of the lessee, and Section 22, which is about the
lien on the properties of the lease. The pertinent portion of
Section 20 reads:
Section 20. Default of the Lessee
20.1 The LESSEE shall be deemed to be in default within the
meaning of this Contract in case:
(i) The LESSEE fails to fully pay on time any rental, utility and
service charge or other financial obligation of the LESSEE under
this Contract;
xxx
20.2 Without prejudice to any of the rights of the LESSOR under
this Contract, in case of default of the LESSEE, the lessor shall
have the right to:
(i) Terminate this Contract immediately upon written notice to
the LESSEE, without need of any judicial action or declaration;
xxx
Section 22, on the other hand, reads:
Section 22. Lien on the Properties of the Lessee
Upon the termination of this Contract or the expiration of the
Lease Period without the rentals, charges and/or damages, if
any, being fully paid or settled, the LESSOR shall have the right
to retain possession of the properties of the LESSEE used or
situated in the Leased Premises and the LESSEE hereby
authorizes the LESSOR to offset the prevailing value thereof as
appraised by the LESSOR against any unpaid rentals, charges
and/or damages. If the LESSOR does not want to use said
properties, it may instead sell the same to third parties and
apply the proceeds thereof against any unpaid rentals, charges
and/or damages.
Tirreno began to default in its lease payments in 1999. By July
2000, Tirreno was already in arrears by P5,027,337.91. FBDC
and Tirreno entered into a settlement agreement on 8 August
2000. Despite the execution of the settlement agreement,
FBDC found need to send Tirreno a written notice of
termination dated 19 September 2000 due to Tirreno's alleged
failure to settle its outstanding obligations. On 29 September
2000, FBDC entered and occupied the leased premises. FBDC
also appropriated the equipment and properties left by Tirreno
pursuant to Section 22 of their Contract of Lease as partial
payment for Tirreno's outstanding obligations. Tirreno filed an
action for forcible entry against FBDC before the Municipal Trial
Court of Taguig. Tirreno also filed a complaint for specific
performance with a prayer for the issuance of a temporary
restraining order and/or a writ of preliminary injunction against
FBDC before the Regional Trial Court (RTC) of Pasig City. The
RTC of Pasig City dismissed Tirreno's complaint for forum-
shopping.
On 4 March 2002, Yllas Lending Corporation and Jose S.
Lauraya, in his official capacity as President, (respondents)
caused the sheriff of Branch 59 of the trial court to serve an
alias writ of seizure against FBDC. On the same day, FBDC
served on the sheriff an affidavit of title and third party claim.
FBDC found out that on 27 September 2001, respondents filed
a complaint for Foreclosure of Chattel Mortgage with Replevin,
docketed as Civil Case No. 01-1452, against Tirreno, Eloisa
Poblete Todaro (Eloisa), and Antonio D. Todaro (Antonio), in
their personal and individual capacities, and in Eloisa's official
capacity as President. In their complaint, respondents alleged
that they lent a total of P1.5 million to Tirreno, Eloisa, and
Antonio. On 9 November 2000, Tirreno, Eloisa and Antonio
executed a Deed of Chattel Mortgage in favor of respondents
as security for the loan. The following properties are covered
by the Chattel Mortgage:
a. Furniture, Fixtures and Equipment of Savoia Ristorante and
La Strega Bar, a restaurant owned and managed by [Tirreno],
inclusive of the leasehold right of [Tirreno] over its rented
building where [the] same is presently located.
b. Goodwill over the aforesaid restaurant, including its business
name, business sign, logo, and any and all interest therein.
c. Eighteen (18) items of paintings made by Florentine Master,
Gino Tili, which are fixtures in the above-named restaurant.
The details and descriptions of the above items are specified in
Annex "A" which is hereto attached and forms as an integral
part of this Chattel Mortgage instrument.4
In the Deed of Chattel Mortgage, Tirreno, Eloisa, and Antonio
made the following warranties to respondents:
1. WARRANTIES: The MORTGAGOR hereby declares and
warrants that:
a. The MORTGAGOR is the absolute owner of the above named
properties subject of this mortgage, free from all liens and
encumbrances.
b. There exist no transaction or documents affecting the same
previously presented for, and/or pending transaction.5
Despite FBDC's service upon him of an affidavit of title and third
party claim, the sheriff proceeded with the seizure of certain
items from FBDC's premises. The sheriff's partial return
indicated the seizure of the following items from FBDC:
A. FIXTURES
(2) - Smaller Murano Chandeliers
(1) - Main Murano Chandelier
B. EQUIPMENT
(13) - Uni-Air Split Type 2HP Air Cond.
(2) - Uni-Air Split Type 1HP Air Cond.
(3) - Uni-Air Window Type 2HP Air Cond.
(56) - Chairs
(1) - Table
(2) - boxes - Kitchen equipments [sic]6
The sheriff delivered the seized properties to respondents.
FBDC questioned the propriety of the seizure and delivery of
the properties to respondents without an indemnity bond
before the trial court. FBDC argued that when respondents and
Tirreno entered into the chattel mortgage agreement on 9
November 2000, Tirreno no longer owned the mortgaged
properties as FBDC already enforced its lien on 29 September
2000.
In ruling on FBDC's motion for leave to intervene and to admit
complaint in intervention, the trial court stated the facts as
follows:
Before this Court are two pending incidents, to wit: 1) [FBDC's]
Third-Party Claim over the properties of [Tirreno] which were
seized and delivered by the sheriff of this Court to
[respondents]; and 2) FBDC's Motion to Intervene and to Admit
Complaint in Intervention.
Third party claimant, FBDC, anchors its claim over the subject
properties on Sections 20.2(i) and 22 of the Contract of Lease
executed by [FBDC] with Tirreno. Pursuant to said Contract of
Lease, FBDC took possession of the leased premises and
proceeded to sell to third parties the properties found therein
and appropriated the proceeds thereof to pay the unpaid lease
rentals of [Tirreno].
FBDC, likewise filed a Motion to Admit its Complaint-in-
Intervention.
In Opposition to the third-party claim and the motion to
intervene, [respondents] posit that the basis of [FBDC's] third
party claim being anchored on the aforesaid Contract [of] Lease
is baseless. [Respondents] contend that the stipulation of the
contract of lease partakes of a pledge which is void under
Article 2088 of the Civil Code for being pactum commissorium.
xxx
By reason of the failure of [Tirreno] to pay its lease rental and
fees due in the amount of P5,027,337.91, after having notified
[Tirreno] of the termination of the lease, x x x FBDC took
possession of [Tirreno.'s] properties found in the premises and
sold those which were not of use to it. Meanwhile,
[respondents], as mortgagee of said properties, filed an action
for foreclosure of the chattel mortgage with replevin and
caused the seizure of the same properties which [FBDC] took
and appropriated in payment of [Tirreno's] unpaid lease
rentals.7
The Ruling of the Trial Court
In its order dated 7 March 2003, the trial court stated that the
present case raises the questions of who has a better right over
the properties of Tirreno and whether FBDC has a right to
intervene in respondents' complaint for foreclosure of chattel
mortgage.
In deciding against FBDC, the trial court declared that Section
22 of the lease contract between FBDC and Tirreno is void
under Article 2088 of the Civil Code.8 The trial court stated that
Section 22 of the lease contract pledges the properties found in
the leased premises as security for the payment of the unpaid
rentals. Moreover, Section 22 provides for the automatic
appropriation of the properties owned by Tirreno in the event
of its default in the payment of monthly rentals to FBDC. Since
Section 22 is void, it cannot vest title of ownership over the
seized properties. Therefore, FBDC cannot assert that its right is
superior to respondents, who are the mortgagees of the
disputed properties.
The trial court quoted from Bayer Phils. v. Agana9 to justify its
ruling that FBDC should have filed a separate complaint against
respondents instead of filing a motion to intervene. The trial
court quoted from Bayer as follows:
In other words, construing Section 17 of Rule 39 of the Revised
Rules of Court (now Section 16 of the 1997 Rules on Civil
Procedure), the rights of third-party claimants over certain
properties levied upon by the sheriff to satisfy the judgment
may not be taken up in the case where such claims are
presented but in a separate and independent action instituted
by the claimants.10
The dispositive portion of the trial court's decision reads:
WHEREFORE, premises considered, [FBDC's] Third Party Claim
is hereby DISMISSED. Likewise, the Motion to Intervene and
Admit Complaint in Intervention is DENIED.11
FBDC filed a motion for reconsideration on 9 May 2003. The
trial court denied FBDC's motion for reconsideration in an order
dated 3 July 2003. FBDC filed the present petition before this
Court to review pure questions of law.
The Issues
FBDC alleges that the trial court erred in the following:
1. Dismissing FBDC's third party claim upon the trial court's
erroneous interpretation that FBDC has no right of ownership
over the subject properties because Section 22 of the contract
of lease is void for being a pledge and a pactum commissorium;
2. Denying FBDC intervention on the ground that its proper
remedy as third party claimant over the subject properties is to
file a separate action; and
3. Depriving FBDC of its properties without due process of law
when the trial court erroneously dismissed FBDC's third party
claim, denied FBDC's intervention, and did not require the
posting of an indemnity bond for FBDC's protection.12
The Ruling of the Court
The petition has merit.
Taking of Lessee's Properties
without Judicial Intervention
We reproduce Section 22 of the Lease Contract below for easy
reference:
Section 22. Lien on the Properties of the Lessee
Upon the termination of this Contract or the expiration of the
Lease Period without the rentals, charges and/or damages, if
any, being fully paid or settled, the LESSOR shall have the right
to retain possession of the properties of the LESSEE used or
situated in the Leased Premises and the LESSEE hereby
authorizes the LESSOR to offset the prevailing value thereof as
appraised by the LESSOR against any unpaid rentals, charges
and/or damages. If the LESSOR does not want to use said
properties, it may instead sell the same to third parties and
apply the proceeds thereof against any unpaid rentals, charges
and/or damages.
Respondents, as well as the trial court, contend that Section 22
constitutes a pactum commissorium, a void stipulation in a
pledge contract. FBDC, on the other hand, states that Section
22 is merely a dacion en pago.
Articles 2085 and 2093 of the Civil Code enumerate the
requisites essential to a contract of pledge: (1) the pledge is
constituted to secure the fulfillment of a principal obligation;
(2) the pledgor is the absolute owner of the thing pledged; (3)
the persons constituting the pledge have the free disposal of
their property or have legal authorization for the purpose; and
(4) the thing pledged is placed in the possession of the creditor,
or of a third person by common agreement. Article 2088 of the
Civil Code prohibits the creditor from appropriating or
disposing the things pledged, and any contrary stipulation is
void.
On the other hand, Article 1245 of the Civil Code defines dacion
en pago, or dation in payment, as the alienation of property to
the creditor in satisfaction of a debt in money. Dacion en pago
is governed by the law on sales. Philippine National Bank v.
Pineda13 held that dation in payment requires delivery and
transmission of ownership of a thing owned by the debtor to
the creditor as an accepted equivalent of the performance of
the obligation. There is no dation in payment when there is no
transfer of ownership in the creditor's favor, as when the
possession of the thing is merely given to the creditor by way of
security.
Section 22, as worded, gives FBDC a means to collect payment
from Tirreno in case of termination of the lease contract or the
expiration of the lease period and there are unpaid rentals,
charges, or damages. The existence of a contract of pledge,
however, does not arise just because FBDC has means of
collecting past due rent from Tirreno other than direct
payment. The trial court concluded that Section 22 constitutes
a pledge because of the presence of the first three requisites of
a pledge: Tirreno's properties in the leased premises secure
Tirreno's lease payments; Tirreno is the absolute owner of the
said properties; and the persons representing Tirreno have
legal authority to constitute the pledge. However, the fourth
requisite, that the thing pledged is placed in the possession of
the creditor, is absent. There is non-compliance with the fourth
requisite even if Tirreno's personal properties are found in
FBDC's real property. Tirreno's personal properties are in
FBDC's real property because of the Contract of Lease, which
gives Tirreno possession of the personal properties. Since
Section 22 is not a contract of pledge, there is no pactum
commissorium.
FBDC admits that it took Tirreno's properties from the leased
premises without judicial intervention after terminating the
Contract of Lease in accordance with Section 20.2. FBDC further
justifies its action by stating that Section 22 is a forfeiture
clause in the Contract of Lease and that Section 22 gives FBDC a
remedy against Tirreno's failure to comply with its obligations.
FBDC claims that Section 22 authorizes FBDC to take whatever
properties that Tirreno left to pay off Tirreno's obligations.
We agree with FBDC.
A lease contract may be terminated without judicial
intervention. Consing v. Jamandre upheld the validity of a
contractually-stipulated termination clause:
This stipulation is in the nature of a resolutory condition, for
upon the exercise by the [lessor] of his right to take possession
of the leased property, the contract is deemed terminated. This
kind of contractual stipulation is not illegal, there being nothing
in the law proscribing such kind of agreement.
xxx
Judicial permission to cancel the agreement was not, therefore
necessary because of the express stipulation in the contract of
[lease] that the [lessor], in case of failure of the [lessee] to
comply with the terms and conditions thereof, can take-over
the possession of the leased premises, thereby cancelling the
contract of sub-lease. Resort to judicial action is necessary only
in the absence of a special provision granting the power of
cancellation.14
A lease contract may contain a forfeiture clause. Country
Bankers Insurance Corp. v. Court of Appeals upheld the validity
of a forfeiture clause as follows:
A provision which calls for the forfeiture of the remaining
deposit still in the possession of the lessor, without prejudice to
any other obligation still owing, in the event of the termination
or cancellation of the agreement by reason of the lessee's
violation of any of the terms and conditions of the agreement is
a penal clause that may be validly entered into. A penal clause
is an accessory obligation which the parties attach to a principal
obligation for the purpose of insuring the performance thereof
by imposing on the debtor a special prestation (generally
consisting in the payment of a sum of money) in case the
obligation is not fulfilled or is irregularly or inadequately
fulfilled.15
In Country Bankers, we allowed the forfeiture of the lessee's
advance deposit of lease payment. Such a deposit may also be
construed as a guarantee of payment, and thus answerable for
any unpaid rent or charges still outstanding at any termination
of the lease.
In the same manner, we allow FBDC's forfeiture of Tirreno's
properties in the leased premises. By agreement between FBDC
and Tirreno, the properties are answerable for any unpaid rent
or charges at any termination of the lease. Such agreement is
not contrary to law, morals, good customs, or public policy.
Forfeiture of the properties is the only security that FBDC may
apply in case of Tirreno's default in its obligations.
Intervention versus Separate Action
Respondents posit that the right to intervene, although
permissible, is not an absolute right. Respondents agree with
the trial court's ruling that FBDC's proper remedy is not
intervention but the filing of a separate action. Moreover,
respondents allege that FBDC was accorded by the trial court of
the opportunity to defend its claim of ownership in court
through pleadings and hearings set for the purpose. FBDC, on
the other hand, insists that a third party claimant may vindicate
his rights over properties taken in an action for replevin by
intervening in the replevin action itself.
We agree with FBDC.
Both the trial court and respondents relied on our ruling in
Bayer Phils. v. Agana16 to justify their opposition to FBDC's
intervention and to insist on FBDC's filing of a separate action.
In Bayer, we declared that the rights of third party claimants
over certain properties levied upon by the sheriff to satisfy the
judgment may not be taken up in the case where such claims
are presented, but in a separate and independent action
instituted by the claimants. However, both respondents and
the trial court overlooked the circumstances behind the ruling
in Bayer, which makes the Bayer ruling inapplicable to the
present case. The third party in Bayer filed his claim during
execution; in the present case, FBDC filed for intervention
during the trial.
The timing of the filing of the third party claim is important
because the timing determines the remedies that a third party
is allowed to file. A third party claimant under Section 16 of
Rule 39 (Execution, Satisfaction and Effect of Judgments)17 of
the 1997 Rules of Civil Procedure may vindicate his claim to the
property in a separate action, because intervention is no longer
allowed as judgment has already been rendered. A third party
claimant under Section 14 of Rule 57 (Preliminary
Attachment)18 of the 1997 Rules of Civil Procedure, on the
other hand, may vindicate his claim to the property by
intervention because he has a legal interest in the matter in
litigation.19
We allow FBDC's intervention in the present case because FBDC
satisfied the requirements of Section 1, Rule 19 (Intervention)
of the 1997 Rules of Civil Procedure, which reads as follows:
Section 1. Who may intervene. - A person who has a legal
interest in the matter in litigation, or in the success of either of
the parties, or an interest against both, or is so situated as to
be adversely affected by a distribution or other disposition of
property in the custody of the court or of an officer thereof
may, with leave of court, be allowed to intervene in the action.
The court shall consider whether or not the intervention will
unduly delay or prejudice the adjudication of the rights of the
original parties, and whether or not the intervenor's rights may
be fully protected in a separate proceeding.
Although intervention is not mandatory, nothing in the Rules
proscribes intervention. The trial court's objection against
FBDC's intervention has been set aside by our ruling that
Section 22 of the lease contract is not pactum commissorium.
Indeed, contrary to respondents' contentions, we ruled in BA
Finance Corporation v. Court of Appeals that where the
mortgagee's right to the possession of the specific property is
evident, the action need only be maintained against the
possessor of the property. However, where the mortgagee's
right to possession is put to great doubt, as when a contending
party might contest the legal bases for mortgagee's cause of
action or an adverse and independent claim of ownership or
right of possession is raised by the contending party, it could
become essential to have other persons involved and
accordingly impleaded for a complete determination and
resolution of the controversy. Thus:
A chattel mortgagee, unlike a pledgee, need not be in, nor
entitled to, the possession of the property, unless and until the
mortgagor defaults and the mortgagee thereupon seeks to
foreclose thereon. Since the mortgagee's right of possession is
conditioned upon the actual default which itself may be
controverted, the inclusion of other parties, like the debtor or
the mortgagor himself, may be required in order to allow a full
and conclusive determination of the case. When the mortgagee
seeks a replevin in order to effect the eventual foreclosure of
the mortgage, it is not only the existence of, but also the
mortgagor's default on, the chattel mortgage that, among
other things, can properly uphold the right to replevy the
property. The burden to establish a valid justification for that
action lies with the plaintiff [-mortgagee]. An adverse
possessor, who is not the mortgagor, cannot just be deprived
of his possession, let alone be bound by the terms of the
chattel mortgage contract, simply because the mortgagee
brings up an action for replevin.20 (Emphasis added)
FBDC exercised its lien to Tirreno's properties even before
respondents and Tirreno executed their Deed of Chattel
Mortgage. FBDC is adversely affected by the disposition of the
properties seized by the sheriff. Moreover, FBDC's intervention
in the present case will result in a complete adjudication of the
issues brought about by Tirreno's creation of multiple liens on
the same properties and subsequent default in its obligations.
Sheriff's Indemnity Bond
FBDC laments the failure of the trial court to require
respondents to file an indemnity bond for FBDC's protection.
The trial court, on the other hand, did not mention the
indemnity bond in its Orders dated 7 March 2003 and 3 July
2003.
Pursuant to Section 14 of Rule 57, the sheriff is not obligated to
turn over to respondents the properties subject of this case in
view of respondents' failure to file a bond. The bond in Section
14 of Rule 57 (proceedings where property is claimed by third
person) is different from the bond in Section 3 of the same rule
(affidavit and bond). Under Section 14 of Rule 57, the purpose
of the bond is to indemnify the sheriff against any claim by the
intervenor to the property seized or for damages arising from
such seizure, which the sheriff was making and for which the
sheriff was directly responsible to the third party. Section 3,
Rule 57, on the other hand, refers to the attachment bond to
assure the return of defendant's personal property or the
payment of damages to the defendant if the plaintiff's action to
recover possession of the same property fails, in order to
protect the plaintiff's right of possession of said property, or
prevent the defendant from destroying the same during the
pendency of the suit.
Because of the absence of the indemnity bond in the present
case, FBDC may also hold the sheriff for damages for the taking
or keeping of the properties seized from FBDC.
WHEREFORE, we GRANT the petition. We SET ASIDE the Orders
dated 7 March 2003 and 3 July 2003 of Branch 59 of the
Regional Trial Court of Makati City in Civil Case No. 01-1452
dismissing Fort Bonifacio Development Corporation's Third
Party Claim and denying Fort Bonifacio Development
Corporation's Motion to Intervene and Admit Complaint in
Intervention. We REINSTATE Fort Bonifacio Development
Corporation's Third Party Claim and GRANT its Motion to
Intervene and Admit Complaint in Intervention. Fort Bonifacio
Development Corporation may hold the Sheriff liable for the
seizure and delivery of the properties subject of this case
because of the lack of an indemnity bond.
SO ORDERED.
[G.R. NO. 165987 : March 31, 2006]
JOSHUA S. ALFELOR and MARIA KATRINA S. ALFELOR,
Petitioners, v. JOSEFINA M. HALASAN, and THE COURT OF
APPEALS, Respondents.
DECISION
CALLEJO, SR., J.:
This is a Petition for Review on Certiorari seeking to nullify the
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 74757,
as well as the Resolution2 dated June 28, 2004 denying the
motion for reconsideration thereof.
On January 30, 1998, the children and heirs of the late spouses
Telesforo and Cecilia Alfelor filed a Complaint for Partition3
before the Regional Trial Court (RTC) of Davao City. Among the
plaintiffs were Teresita Sorongon and her two children, Joshua
and Maria Katrina, who claimed to be the surviving spouse of
Jose Alfelor, one of the children of the deceased Alfelor
Spouses. The case, docketed as Civil Case No. 26,047-98, was
raffled to Branch 17 of said court.
On October 20, 1998, respondent Josefina H. Halasan filed a
Motion for Intervention,4 alleging as follows:
1. That she has legal interest in the matter of litigation in the
above-entitled case for partition between plaintiffs and
defendants;
2. That she is the surviving spouse and primary compulsory heir
of Jose K. Alfelor, one of the children and compulsory heirs of
Telesforo I. Alfelor whose intestate estate is subject to herein
special proceedings for partition;
3. That herein intervenor had not received even a single
centavo from the share of her late husband Jose K. Alfelor to
the intestate estate of Telesforo K. Alfelor.
WHEREFORE, movant prays that she be allowed to intervene in
this case and to submit attached Answer in Intervention.5
Josefina attached to said motion her Answer in Intervention,6
claiming that she was the surviving spouse of Jose. Thus, the
alleged second marriage to Teresita was void ab initio for
having been contracted during the subsistence of a previous
marriage. Josefina further alleged that Joshua and Maria
Katrina were not her husband's children. Josefina prayed,
among others, for the appointment of a special administrator
to take charge of the estate. Josefina attached to her pleading a
copy of the marriage contract7 which indicated that she and
Jose were married on February 1, 1956.
Since petitioners opposed the motion, the judge set the motion
for hearing. Josefina presented the marriage contract as well as
the Reply-in - Intervention8 filed by the heirs of the deceased,
where Teresita declared that she knew "of the previous
marriage of the late Jose K. Alfelor with that of the herein
intervenor" on February 1, 1956.9 However, Josefina did not
appear in court.
Teresita testified before the RTC on February 13, 2002.10 She
narrated that she and the deceased were married in civil rites
at Tagum City, Davao Province on February 12, 1966, and that
they were subsequently married in religious rites at the
Assumption Church on April 30, 1966. Among those listed as
secondary sponsors were Josefina's own relatives'Atty.
Margarito Halasan, her brother, and Valentino Halasan, her
father.11 While she did not know Josefina personally, she knew
that her husband had been previously married to Josefina and
that the two did not live together as husband and wife. She
knew that Josefina left Jose in 1959. Jose's relatives consented
to her (Teresita's) marriage with Jose because there had been
no news of Josefina for almost ten years. In fact, a few months
after the marriage, Josefina disappeared, and Jose even looked
for her in Cebu, Bohol, and Manila. Despite his efforts, Jose
failed to locate Josefina and her whereabouts remained
unknown.
Teresita further revealed that Jose told her that he did not have
his marriage to Josefina annulled because he believed in good
faith that he had the right to remarry, not having seen her for
more than seven years. This opinion was shared by Jose's sister
who was a judge. Teresita also declared that she met Josefina
in 2001, and that the latter narrated that she had been married
three times, was now happily married to an Englishman and
residing in the United States.
On September 13, 2002, Judge Renato A. Fuentes issued an
Order12 denying the motion and dismissed her complaint,
ruling that respondent was not able to prove her claim. The
trial court pointed out that the intervenor failed to appear to
testify in court to substantiate her claim. Moreover, no witness
was presented to identify the marriage contract as to the
existence of an original copy of the document or any public
officer who had custody thereof. According to the court, the
determinative factor in this case was the good faith of Teresita
in contracting the second marriage with the late Jose Alfelor, as
she had no knowledge that Jose had been previously married.
Thus, the evidence of the intervenor did not satisfy the
quantum of proof required to allow the intervention. Citing
Sarmiento v. Court of Appeals,13 the RTC ruled that while
Josefina submitted a machine copy of the marriage contract,
the lack of its identification and the accompanying testimony
on its execution and ceremonial manifestation or formalities
required by law could not be equated to proof of its validity
and legality.
The trial court likewise declared that Teresita and her children,
Joshua and Maria Katrina, were the legal and legitimate heirs of
the late Jose K. Alfelor, considering that the latter referred to
them as his children in his Statement of Assets and Liabilities,
among others. Moreover, the oppositor did not present
evidence to dispute the same. The dispositive portion of the
Order reads:
WHEREFORE, finding the evidence of intervenor, Josephina (sic)
Halasan through counsel, not sufficient to prove a
preponderance of evidence and compliance with the basic rules
of evidence to proved (sic) the competent and relevant issues
of the complaint-in-intervention, as legal heir of the deceased
Jose K. Alfelor, the complaint (sic) of intervention is ordered
dismiss (sic) with cost[s] de oficio.
On the other hand, finding the evidence by Teresita Sorongon
Aleflor, oppositor through counsel sufficient to proved (sic) the
requirement of the Rules of Evidence, in accordance with duly
supporting and prevailing jurisprudence, oppositor, Teresita
Sorongon Alfelor and her children, Joshua S. Alfelor and Maria
Katrina S. Alfelor, are declared legal and legitimate Heirs of the
late Jose K. Alfelor, for all purposes, to entitled (sic) them, in
the intestate estate of the latter in accordance to (sic) law, of
all properties in his name and/or maybe entitled to any testate
or intestate proceedings of his predecessor - [in]-interest, and
to receive such inheritance, they are legally entitled, along with
the other heirs, as the case maybe (sic).13
Josefina filed a Motion for Reconsideration,15 insisting that
under Section 4, Rule 129 of the Revised Rules of Court, an
admission need not be proved. She pointed out that Teresita
admitted in her Reply in Intervention dated February 22, 1999
that she (Teresita) knew of Jose's previous marriage to her.
Teresita also admitted in her testimony that she knew of the
previous marriage.16 Since the existence of the first marriage
was proven in accordance with the basic rules of evidence,
pursuant to paragraph 4, Article 80 of the New Civil Code, the
second marriage was void from the beginning. Moreover,
contrary to the ruling of the trial court, Article 83 of the Civil
Code provides that the person entitled to claim good faith is
the "spouse present" (thus, the deceased Jose and not
Teresita). Josefina concluded that if the validity of the second
marriage were to be upheld, and at the same time admit the
existence of the second marriage, an absurd situation would
arise: the late Jose Alfelor would then be survived by two
legitimate spouses.
The trial court denied the motion in its Order17 dated October
30, 2002.
Aggrieved, Josefina filed a Petition for Certiorari under Rule 65
before the CA, alleging that the RTC acted with grave abuse of
discretion amounting to lack or in excess of jurisdiction in
declaring that she failed to prove the fact of her marriage to
Jose, in considering the bigamous marriage valid and declaring
the second wife as legal heir of the deceased. Josefina also
stressed that Articles 80 and 83 of the New Civil Code provide
for a presumption of law that any subsequent marriage is null
and void. She insisted that no evidence was presented to prove
that she had been absent for seven consecutive years before
the second marriage.
In their comment, Teresita and her children countered that
anyone who claims to be the legal wife must show proof
thereof. They pointed out that Josefina failed to present any of
the following to prove the fact of the previous marriage: the
testimony of a witness to the matrimony, the couple's public
and open cohabitation as husband and wife after the alleged
wedding; the birth and the baptismal certificates of children
during such union, and other subsequent documents
mentioning such union. Regarding Teresita's alleged admission
of the first marriage in her Reply in Intervention dated February
22, 1999, petitioners claim that it was mere hearsay, without
probative value, as she heard of the alleged prior marriage of
decedent Jose Alfelor to Josefina only from other persons, not
based on her own personal knowledge. They also pointed out
that Josefina did not dispute the fact of having left and
abandoned Jose after their alleged marriage in 1956, and only
appeared for the first time in 1988 during the filing of the case
for partition of the latter's share in his parents' estate. They
further pointed out that Josefina does not even use the
surname of the deceased Alfelor. Contrary to the allegations of
Josefina, paragraph 2, Article 83 of the Civil Code, now Article
41 of the Family Code, is applicable. Moreover, her inaction all
this time brought to question her claim that she had not been
heard of for more than seven years.
In its Decision dated November 5, 2003, the CA reversed the
ruling of the trial court. It held that Teresita had already
admitted (both verbally and in writing) that Josefina had been
married to the deceased, and under Section 4, Rule 129 of the
Revised Rules of Evidence, a judicial admission no longer
requires proof. Consequently, there was no need to prove and
establish the fact that Josefa was married to the decedent.
Citing Santiago v. De los Santos,18 the appellate court ruled
that an admission made in a pleading cannot be controverted
by the party making such admission, and is conclusive as to
such party; and all contrary or inconsistent proofs submitted by
the party who made the admission should be ignored whether
objection is interposed by the other party or not. The CA
concluded that the trial court thus gravely abused its discretion
in ordering the dismissal of Josefina's Complaint-in-
Intervention. The dispositive portion of the decision reads:
WHEREFORE, foregoing premises considered, the assailed
orders, having been issued with grave abuse of discretion are
hereby ANNULLED and SET ASIDE. Resultantly, the Regional
Trial Court, Branch 17, Davao City, is ordered to admit
petitioner's complaint in intervention and to forthwith conduct
the proper proceeding with dispatch. No costs.
SO ORDERED.19
Thus, Joshua and Maria Katrina Alfelor filed the instant petition,
assailing the ruling of the appellate court.
Petitioners limit the issue to the determination of whether or
not the CA erred in ordering the admission of private
respondent's intervention in S.P. Civil Case No. 26,047-98. They
insist that in setting aside the Orders of the trial court, dated
September 13, 2002 and October 30, 2002, the CA completely
disregarded the hearsay rule. They aver that while Section 4 of
Rule 129 of the Revised Rules of Evidence provides that an
admission does not require proof, such admission may be
contradicted by showing that it was made through palpable
mistake. Moreover, Teresita's statement in the Reply-in-
Intervention dated February 22, 1999, admitting knowledge of
the alleged first marriage, is without probative value for being
hearsay.
Private respondent, for her part, reiterates that the matters
involved in this case fall under Section 4, Rule 129 of the
Revised Rules of Evidence, and thus qualify as a judicial
admission which does not require proof. Consequently, the CA
did not commit any palpable error when it ruled in her favor.
Petitioners counter that while Teresita initially admitted
knowledge of Jose's previous marriage to private respondent in
the said Reply-in - Intervention, Teresita also testified during
the hearing, for the purpose, that the matter was merely "told"
to her by the latter, and thus should be considered hearsay.
They also point out that private respondent failed to appear
and substantiate her Complaint-in-Intervention before the RTC,
and only submitted a machine copy of a purported marriage
contract with the deceased Jose Alfelor.
The issue in this case is whether or not the first wife of a
decedent, a fact admitted by the other party who claims to be
the second wife, should be allowed to intervene in an action for
partition involving the share of the deceased "husband" in the
estate of his parents.
The petition is dismissed.
The fact of the matter is that Teresita Alfelor and her co-heirs,
petitioners herein, admitted the existence of the first marriage
in their Reply - in-Intervention filed in the RTC, to wit:
1.1. Plaintiff Teresita S. Alfelor admits knowledge of the
previous marriage of the late Jose K. Alfelor, with that of the
herein intervenor were married on February 1, 1956;20
Likewise, when called to testify, Teresita admitted several times
that she knew that her late husband had been previously
married to another. To the Court's mind, this admission
constitutes a "deliberate, clear and unequivocal" statement;
made as it was in the course of judicial proceedings, such
statement qualifies as a judicial admission.21 A party who
judicially admits a fact cannot later challenge that fact as
judicial admissions are a waiver of proof;22 production of
evidence is dispensed with.23 A judicial admission also
removes an admitted fact from the field of controversy.24
Consequently, an admission made in the pleadings cannot be
controverted by the party making such admission and are
conclusive as to such party, and all proofs to the contrary or
inconsistent therewith should be ignored, whether objection is
interposed by the party or not.25 The allegations, statements
or admissions contained in a pleading are conclusive as against
the pleader. A party cannot subsequently take a position
contrary of or inconsistent with what was pleaded.26
On the matter of the propriety of allowing her motion for
intervention, the pertinent provision of the Revised Rules of
Court is Section 1, Rule 19, which provides:
SEC. 1. Who may intervene. - A person who has a legal interest
in the matter in litigation, or in the success of either of the
parties, or an interest against both, or is so situated as to be
adversely affected by a distribution or other disposition of
property in the custody of the court or of an officer thereof
may, with leave of court, be allowed to intervene in the action.
The court shall consider whether or not the intervention will
unduly delay or prejudice the adjudication of the rights of the
original parties, and whether or not the intervenor's rights may
be fully protected in a separate proceeding.
Under this Rule, intervention shall be allowed when a person
has (1) a legal interest in the matter in litigation; (2) or in the
success of any of the parties; (3) or an interest against the
parties; (4) or when he is so situated as to be adversely affected
by a distribution or disposition of property in the custody of the
court or an officer thereof.27 Intervention is "a proceeding in a
suit or action by which a third person is permitted by the court
to make himself a party, either joining plaintiff in claiming what
is sought by the complaint, or uniting with defendant in
resisting the claims of plaintiff, or demanding something
adversely to both of them; the act or proceeding by which a
third person becomes a party in a suit pending between others;
the admission, by leave of court, of a person not an original
party to pending legal proceedings, by which such person
becomes a party thereto for the protection of some right of
interest alleged by him to be affected by such proceedings."28
Considering this admission of Teresita, petitioners' mother, the
Court rules that respondent Josefina Halasan sufficiently
established her right to intervene in the partition case. She has
shown that she has legal interest in the matter in litigation. As
the Court ruled in Nordic Asia Ltd. v. Court of Appeals:29
x x x [T]he interest which entitles a person to intervene in a suit
between other parties must be in the matter in litigation and of
such direct and immediate character that the intervenor will
either gain or lose by direct legal operation and effect of the
judgment. Otherwise, if persons not parties to the action were
allowed to intervene, proceedings would become unnecessarily
complicated, expensive and interminable. And this would be
against the policy of the law. The words "an interest in the
subject" means a direct interest in the cause of action as
pleaded, one that would put the intervenor in a legal position
to litigate a fact alleged in the complaint without the
establishment of which plaintiff could not recover.30
In Uy v. Court of Appeals,31 the Court allowed petitioners (who
claimed to be the surviving legal spouse and the legitimate
child of the decedent) to intervene in the intestate proceedings
even after the parties had already submitted a compromise
agreement involving the properties of the decedent, upon
which the intestate court had issued a writ of execution. In
setting aside the compromise agreement, the Court held that
petitioners were indispensable parties and that "in the interest
of adjudicating the whole controversy, petitioners' inclusion in
the action for partition, given the circumstances, not only is
preferable but rightly essential in the proper disposition of the
case."32
Contrary to petitioners' argument, the case of Sarmiento v.
Court of Appeals33 is not in point, as the Court therein did not
discuss the propriety of allowing a motion for intervention, but
resolved the validity of a marriage. In relying on the merits of
the complaint for partition, the Court ultimately determined
the legitimacy of one of the petitioners therein and her
entitlement to a share in the subject properties.
CONSIDERING THE FOREGOING, the Decision of the Court of
Appeals in CA-G.R. SP No. 74757 is AFFIRMED. The Regional
Trial Court, Branch 17, Davao City, is ORDERED to admit
respondent Josefina Halasan's Complaint-in-Intervention and
forthwith conduct the proper proceedings with dispatch.
SO ORDERED.
G.R. No. 230103, August 27, 2020
MARTIN ROBERTO G. TIROL, PETITIONER, V. SOL NOLASCO,
RESPONDENT.
DECISION
CAGUIOA, J.:
Before the Court is a Petition for Review on Certiorari1
(Petition) under Rule 45 of the Rules of Court filed by petitioner
Martin Roberto G. Tirol (petitioner Martin) assailing the
Decision2 dated April 27, 2016 and Resolution3 dated February
23, 2017 of the Court of Appeals4 (CA) in CA-G.R. SP No.
133784. The CA Decision granted the petition for certiorari filed
by respondent Sol Nolasco (respondent Sol), annulled as well as
set aside the Omnibus Resolution5 dated June 27, 2013 and
Order6 dated October 27, 2013 issued by the Regional Trial
Court of Quezon City, Branch 218 (RTC-218), in Sp. Proc. No. Q-
02-46559, and granted respondent Sol's Motion for
Intervention and to admit Claim-in-Intervention (Motion for
Intervention). The CA Resolution denied petitioner Martin's
motion for reconsideration.
The Facts and Antecedent Proceedings
The CA Decision narrates the factual antecedents as follows:
On October 10, 1991, Gloria Tirol [(Gloria) died testate]. She
was survived by her husband Roberto Tirol, Sr. [(Roberto Sr.)]
and their six children namely: Ruth Tirol-Jarantilla [(Ruth)],
Cecilia Tirol-Javelosa [(Cecilia)], [Ma. Lourdes] Tirol [(Marilou)],
Ciriaco Tirol [(Ciriaco)], Anna Maria Tirol [(Anna)] and Roberto
Tirol, Jr. [(Roberto Jr.)]. On April 16, 1995, Roberto Jr. died
intestate, and was survived by his four children from his
marriage with Cecilia Geronimo, namely [petitioner] Martin,
Zharina,7 Francis and Daniel. At the time of his death, Roberto
Jr.'s marriage with his wife had been annulled.
On January 8, 2002, Roberto Sr. died testate and was survived
by his remaining children Ruth, Cecilia, Marilou, Ciriaco and
Anna and his four grandchildren from Roberto Jr.
On April 2, 2002, [petitioner] Martin, Cecilia and Ciriaco x x x
filed before x x x [RTC-218] a petition to probate the wills of
Gloria and Roberto Sr. x x x Ruth and [Marilou] later joined as
intervenors. x x x [RTC-218] admitted to probate the respective
wills of Gloria and Roberto Sr. and designated [petitioner]
Martin as the Administrator of their estate[s].
On February 25, 2011, [respondent Sol] filed a [Motion for
Intervention] stating that she has a legal interest in the estate
of Gloria and Roberto Sr. because she is the surviving spouse of
Roberto Jr. having married him on July 15, 1994. [Respondent
Sol] alleged that the late Roberto Jr., being one of the children
of Gloria and Roberto Sr., is entitled to at least 1/7 of the estate
of his late mother and as the surviving spouse, she is entitled to
that portion belonging to Roberto Jr. which is equivalent to the
legitime of the legitimate children of the decedent. According
to [her], she is considered a compulsory heir pursuant to Article
887 of the Civil Code and has an interest or claim in the estate
of her late husband.
[Petitioner] Martin, the son of the late Roberto Jr., who was
appointed as the Administrator, opposed [respondent Sol's]
motion for intervention and so did [Anna, Marilou, Ruth and
Cecilia]. [The oppositors] mainly argued that [respondent Sol]
has no legal interest in the probate of the wills of Gloria and
Roberto Sr. and could not represent Roberto Jr., not being a
blood relative. [The oppositors] also refused to recognize
[respondent Sol] as the legal wife of Roberto Jr.
[On March 15, 2011, respondent Sol filed a motion for
intervention8 in the intestate settlement of Roberto Jr.'s estate
proceedings ("In the Matter of the Intestate Estate of Roberto
Lorca Tirol, Ma. Zharina Rita Geronimo Tirol, petitioner"
docketed as Spec. Proc. No. Q-95-25497) pending before the
Regional Trial Court of Quezon City, Branch 101 (RTC-101). x x x
RTC-101 granted the motion to intervene filed by respondent
Sol in its Order9 dated May 8, 2012. Apparently, Zharina has
been appointed as Administratrix in the intestate estate of
Roberto Jr.10
On June 27, 2013, x x x [RTC-218] issued the x x x Omnibus
[Resolution] denying, among others, the motion to intervene
filed by [respondent Sol], x x x [RTC-218] stated that
[respondent Sol] has no legal interest in the case. [The
pertinent dispositive portion of the said Omnibus Resolution
states: ChanRoblesVirtualawlibrary
WHEREFORE, the court hereby resolves to: x x x x

7) DENY the Motion for Intervention and to Admit Attached
Claim-in-Intervention;
xxxx
SO ORDERED.11
[Respondent Sol] filed a Motion for Reconsideration but was
denied in the other x x x Order dated October 27,
2013.12cralawlawlibrary
Respondent Sol filed with the CA a petition for certiorari
questioning the Omnibus Resolution dated June 27, 2013 of
RTC-218, which denied her motion for intervention, and the
Order dated October 27, 2013, which denied her motion for
reconsideration. Petitioner Martin filed an opposition.
Ruling of the CA
The CA, in its Decision dated April 27, 2016, found respondent
Sol's certiorari petition to be meritorious.13 The CA stated that
respondent Sol should be allowed to intervene because she is
the widow of Roberto Jr. and has an interest or claim in her
husband's estate, which consists, in part, of the latter's share in
the estate of his deceased mother Gloria, and the extent or
value of the share of Roberto Jr. has not yet been
determined.14 The CA clarified that respondent Sol does not
anchor her motion for intervention on her status as daughter-
in-law but rather as an heir of Roberto Jr.15 The dispositive
portion of the CA Decision states: ChanRoblesVirtualawlibrary
WHEREFORE, the petition is GRANTED. The assailed Resolutions
dated June 27, 2013 and October 27, 2013, issued by Branch
218 of the Regional Trial Court of Quezon City, are hereby
ANNULLED and SET ASIDE. Said Court is ORDERED to GRANT
Petitioner's [(respondent Sol's)] Motion for Intervention and to
Admit Claim-in-Intervention.
SO ORDERED.16cralawlawlibrary
Petitioner Martin filed a motion for reconsideration wherein he
argued, among others, that the intervention sought by
respondent Sol should not be granted because any interest she
may allegedly have in the estate of her alleged husband,
Roberto Jr., can be fully ventilated in Spec. Proc. No. Q-95-
25497, which involves the judicial settlement of Roberto Jr.'s
estate, and her motion for intervention therein has been
granted by RTC-101.17 The CA denied petitioner Martin's
motion for reconsideration in its Resolution dated February 23,
2017. The CA, however, did not traverse the said argument of
petitioner Martin.
Hence the present Petition. Respondent Sol filed her
Comment/Opposition18 dated June 28, 2018.
The Issues
The Petition states the following issues19 to be resolved:
1.
Whether the CA erred in finding merit to respondent Sol's
argument that, as widow of Roberto Jr., she is a compulsory
heir of Gloria and Roberto Sr. under Article 887 of the Civil
Code.
2.
Whether the CA erred in failing to consider whether
respondent Sol's alleged rights and interests over the estate of
Roberto Jr. may be fully protected in Spec. Proc. No. Q-95-
25497, which directly involves said estate.
3.
Whether the CA erred in not giving due consideration that
respondent Sol's intervention in Spec. Proc. No. Q-02-46559
will undo 14 years' worth of resolved incidents in said case and
further delay the proceedings therein.
4.
Whether the CA erred in applying Alfelor v. Halasan20 and Uy
v. Court of Appeals.21
The Court's Ruling
The Petition is meritorious.
The Court will resolve the second issue ahead of the others. A
resolution by the Court that respondent Sol's right or interest, if
any, in the estate of Roberto Jr. is fully protected in Spec. Proc.
No. Q-95-25497 will render the resolution of the other issues
irrelevant.
Petitioner Martin argues that respondent Sol's rights and
interests, if any, can be fully protected in Spec. Proc. No. Q-95-
25497 pending before RTC-101 (settlement of Roberto Jr.'s
estate proceeding), which directly involves the settlement of
Roberto Jr.'s intestate estate, and it is in that proceeding where
she can directly litigate her claims as the alleged heir of
Roberto Jr.22 Thus, her intervention in Sp. Proc. No. Q-02-
46559 pending before RTC-218 (probate proceeding), which
involves the wills of Gloria and Roberto Sr., is completely
unnecessary and superfluous.23
It appears that petitioner Martin has been appointed as
Administrator of the testate estates of Gloria and Roberto Sr. in
the probate proceeding24 and Zharina has been designated as
Administratrix of the intestate estate of Roberto Jr.25
The CA allowed respondent Sol's intervention in the probate
proceeding "because she is the widow of Roberto Jr. and,
therefore, has an interest or claim in the estate of her
husband[, which,] consists, in part, of the latter's share in the
estate of his deceased mother, Gloria, and since the extent or
value of the share of Roberto Jr. has not yet been determined,
[respondent Sol] should be allowed to participate in the
proceedings."26
It will be recalled that Roberto Jr. died on April 16, 1995, or
after his mother's death on October 10, 1991, but before his
father's death on January 8, 2002.27 When Gloria died,
Roberto Jr. would have inherited from her as a compulsory heir
by virtue of Article 887(1) of the Civil Code, which states:
ChanRoblesVirtualawlibrary
ART. 887. The following are compulsory heirs:
(1) Legitimate children and descendants, with respect to their
legitimate parents and ascendants;
(2) In default of the foregoing, legitimate parents and
ascendants, with respect to their legitimate children and
descendants;
(3) The widow or widower;
(4) Acknowledged natural children, and natural children by
legal fiction;
(5) Other illegitimate children referred to in Article 287. x x x x
(807a).
As far as respondent Sol is concerned, she would inherit from
Roberto Jr. pursuant to Article 887(3) and part of his estate
would be his share in the estate of her mother, Gloria.
Respondent Sol could not inherit from the estate of Roberto Sr.
because Roberto Jr. predeceased Roberto Sr., his father, and
the children of Roberto Jr. would succeed by right of
representation from their grandfather pursuant to Article 972
of the Civil Code, which provides, in part: "The right of
representation takes place in the direct descending line, but
never in the ascending [line]." Moreover, respondent Sol is not
related by blood, but only by affinity, to Roberto Sr.
It should also be noted that the claim of respondent Sol as
surviving spouse of Roberto Jr. is disputed. The validity of
respondent Sol's marriage to Roberto Jr. is in issue. In her
Claim-in-Intervention, respondent Sol attached a Certificate of
Marriage28 between her and Roberto Jr. which was celebrated
in La Castellana, Negros Occidental on July 15, 1994. On the
other hand, petitioner Martin, in his Opposition to respondent
Sol's Motion for Intervention, questioned the validity of the
marriage of respondent Sol to his father, Roberto Jr., on the
ground that it is bigamous because of respondent Sol's pre-
existing marriage to another man, which had not been nullified
before her marriage to Roberto Jr. on July 15, 1994, and as
proof thereof, petitioner Martin attached a Marriage Certificate
showing that on May 15, 1985 respondent Sol married a certain
Raul I. Cimagla at a civil wedding in Branch 3, Municipal Trial
Court of Davao City.29
Given the pendency of these two special proceedings and the
presence of an issue on the validity of her claim as an heir of
Roberto Jr., is the intervention of respondent Sol in the probate
proceeding proper?
Section 1, Rule 19 of the Amended Rules of Civil Procedure30
provides: ChanRoblesVirtualawlibrary
Section 1. Who may intervene. - A person who has a legal
interest in the matter in litigation, or in the success of either of
the parties, or an interest against both, or is so situated as to
be adversely affected by a distribution or other disposition of
property in the custody of the court or of an officer thereof
may, with leave of court, be allowed to intervene in the action.
The court shall consider whether or not the intervention will
unduly delay or prejudice the adjudication of the rights of the
original parties, and whether or not the intervenor's rights may
be fully protected in a separate proceeding. (1)
The Court in Ongco v. Dalisay31 described intervention as a
remedy, as follows: ChanRoblesVirtualawlibrary
Intervention is a remedy by which a third party, not originally
impleaded in the proceedings, becomes a litigant therein for a
certain purpose: to enable the third party to protect or
preserve a right or interest that may be affected by those
proceedings. This remedy, however, is not a right. The rules on
intervention are set forth clearly in Rule 19 of the Rules of
Court xxx.
xxxx
It can be readily seen that intervention is not a matter of right,
but is left to the trial court's sound discretion. The trial court
must not only determine if the requisite legal interest is
present, but also take into consideration the delay and the
consequent prejudice to the original parties that the
intervention will cause. Both requirements must concur, as the
first requirement on legal interest is not more important than
the second requirement that no delay and prejudice should
result. To help ensure that delay does not result from the
granting of a motion to intervene, the Rules also explicitly say
that intervention may be allowed only before rendition of
judgment by the trial court.32cralawlawlibrary
Given the existence of the settlement of Roberto Jr.'s estate
proceeding, the question has to be resolved in the negative.
In the settlement of a deceased's estate, Section 1, Rule 73 of
the Rules of Court provides: "The court first taking cognizance
of the settlement of the estate of a decedent, shall exercise
jurisdiction to the exclusion of all other courts."
Given the exclusivity of jurisdiction granted to the court first
taking cognizance of the settlement of a decedent's estate,
RTC-101 has the exclusive jurisdiction over the intestate estate
of Roberto Jr. while RTC-218 has exclusive jurisdiction over the
testate estates of Gloria and Roberto Sr. Thus, only RTC-101,
the court where the settlement of Roberto Jr.'s estate
proceeding is pending, has jurisdiction to determine who the
heirs of Roberto Jr. are.
Section 1, Rule 90 of the Rules of Court provides when and to
whom the residue of the decedent's estate is distributed, and
how a controversy as to who are the lawful heirs of the
decedent is resolved, to wit: ChanRoblesVirtualawlibrary
Section 1. When order for distribution of residue made. - When
the debts, funeral charges, and expenses of administration, the
allowance to the widow, and inheritance tax, if any, chargeable
to the estate in accordance with law, have been paid, the court,
on the application of the executor or administrator, or of a
person interested in the estate, and after hearing upon notice,
shall assign the residue of the estate to the persons entitled to
the same, naming them and the proportions, or parts, to which
each is entitled, and such persons may demand and recover
their respective shares from the executor or administrator, or
any other person having the same in his possession. If there is a
controversy before the court as to who are the lawful heirs of
the deceased person or as to the distributive shares to which
each person is entitled under the law, the controversy shall be
heard and decided as in ordinary cases.
No distribution shall be allowed until the payment of the
obligations above-mentioned has been made or provided for,
unless the distributees, or any of them, give a bond, in a sum to
be fixed by the court, conditioned for the payment of said
obligations within such time as the court directs.
The court which has jurisdiction to hear and decide any
controversy as to who are the lawful heirs of Roberto Jr. or as
to the distributive shares to which each is entitled under the
law is undoubtedly RTC-101 because it is the court which has
first taken cognizance of the settlement of the intestate estate
of Roberto Jr.
RTC-218, where the probate proceeding is pending, cannot rule
on the issue of who are the heirs of Roberto Jr. even if the
share of Roberto Jr. in the estates of Gloria and Roberto Sr. is to
be determined therein. The probate court must yield to the
determination by the Roberto Jr.'s estate settlement court of
the latter's heirs. This is to avoid confusing and conflicting
dispositions of a decedent's estate by co-equal courts.33
As to protection and preservation of the share of Roberto Jr.'s
share in the testate estates of Gloria and Roberto Sr., the same
is now the look out of the administrator of his estate and it
appears, as noted above, that Zharina has been designated as
the Administratrix of Roberto Jr.'s estate by RTC-101. Section 2,
Rule 87 of the Rules of Court provides: "For the recovery or
protection of the property or rights of the deceased, an
executor or administrator may bring or defend, in the right of
the deceased, actions for causes which survive." Thus, the
intervention of respondent Sol in the probate proceeding will
be superfluous because she has an available remedy in the
settlement of Roberto Jr.'s estate proceeding to question any
action of the administrator therein which is detrimental to the
said estate.
Since intervention is not a matter of right but depends on the
sound discretion of the court, respondent Sol's intervention in
the probate proceeding is unnecessary because her right or
interest in the estate of Roberto Jr. can be fully protected in a
separate proceeding - namely, the settlement of Roberto Jr.'s
estate proceeding pending before RTC-101. The second
parameter to be considered in granting of intervention under
Section 1, Rule 19 - whether the intervenor's right may not be
fully protected in a separate proceeding — is wanting in the
instant case.
Another reason in disallowing the intervention of respondent
Sol in the probate proceeding is the legal precept that an
independent controversy cannot be injected into a suit by
intervention, viz.:
x x x In general, an independent controversy cannot be injected
into a suit by intervention, hence, such intervention will not be
allowed where it would enlarge the issues in the action and
expand the scope of the remedies. It is not proper where there
are certain facts giving the intervenor's case an aspect peculiar
to himself and differentiating it clearly from that of the original
parties; the proper course is for the would-be intervenor to
litigate his claim in a separate suit. Intervention is not intended
to change the nature and character of the action itself, or to
stop or delay the placid operation of the machinery of the trial.
The remedy of intervention is not proper where it will have the
effect of retarding the principal suit or delaying the trial of the
action.34
The issue as to whether respondent Sol is a lawful heir of
Roberto Jr. will definitely enlarge the issues in the probate
proceeding and involve determination of facts peculiar only to
her, which have nothing to do with the original parties. The
other heirs of Gloria and Roberto Sr. are not interested in who
are the lawful heirs of Roberto Jr. The respective shares of such
other heirs in the estates of Gloria and Roberto Sr. will in no
way be affected by who are declared as the lawful heirs of
Roberto Jr. in the proceeding for the settlement of his estate.
With this extraneous issue being injected into the probate
proceeding, the first parameter that has to be considered
whether to allow an intervention under Section 1, Rule 19 - no
undue delay or prejudice in the adjudication of the rights of the
original parties - is not met. Thus, the intervention of
respondent Sol in the probate proceeding should be denied.
Given the foregoing, the resolution of the other issues becomes
surplusage.
WHEREFORE, the Petition is hereby GRANTED. Accordingly, the
Decision dated April 27, 2016 and Resolution dated February
23, 2017 of the Court of Appeals in CA-G.R. SP No. 133784 are
REVERSED and SET ASIDE. The Motion for Intervention and
Claim-in-Intervention of respondent Sol Nolasco in Sp. Proc. No.
Q-02-46559 pending before the Regional Trial Court of Quezon
City, Branch 218 are DENIED.
SO ORDERED.
[G.R. No. L-61042. April 15, 1987.]
HECTOR L. ONG, Petitioner, v. MARILYN TATING AND ROBERT
TATING, ET AL., Respondents.
DECISION
NARVASA, J.:
The issue in this case concerns the jurisdiction of an inferior
Court to take cognizance of a motion impugning the sheriff’s
authority to execute a final judgment in an ejectment case -
which commands payment of rentals in arrears — against
personalty claimed as theirs by persons formerly residing in the
leased premises together with the evicted defendant-lessee.
An action of desahucio was instituted in the City Court of
Quezon City by petitioner Ong against his lessee, Evangeline
Roces. 1 This in time culminated in a judgment by the Court of
First Instance (Branch XVIII) 2 disposing of the case as
follows:jgc:chanrobles.com.ph
"WHEREFORE, premises considered, the judgment of the City
Court is set aside and in lieu thereof judgment is rendered
ordering defendant Evangeline Roces and all persons claiming
under her to vacate plaintiff’s premises located at 169-D,
Tolentino St., San Francisco del Monte, Quezon City; to pay
rentals in arrears in the sum of P10,920.00 as of September
1978 and P260.00 a month from October 1978 until the
premises are vacated with interest at 12% per annum;
P1,000.00 as attorney’s fees and the costs." 3
The decision became final and executory, no appeal having
been taken therefrom; and in due course, the records of the
case were remanded to the City Court.
On Ong’s application, the City Court directed execution of the
judgment. Accordingly, the sheriff cleared the premises of its
occupants, which included Anacleto Tating (Evangeline’s
stepfather and lawyer), Marilyn Tating (Anacleto’s wife), and
Robert Tating. 4
The sheriff also levied on certain chattels found in the place: a
"Citizen" stereo set; a "Sanyo" television set; a "Frigidaire"
refrigerator; and a "Hitachi" electric desk fan. Marilyn and
Robert Tating sought to retrieve these appliances from the
sheriff, alleging that the articles belonged to them and not to
the lessee, Evangeline Roces. 5 To this end, Robert filed with
the sheriff a "Third Party Claim" dated September 13, 1979 as
regards the "Citizen" stereo set; and Marilyn, a similar claim
with respect to the other chattels. 6 When these proved
unavailing, they filed with the City Court identical applications
dated September 17, 1979, entitled "Urgent Motion for
Suspension of Sheriff Sale and for Release of Properties
Wrongfully Levied Upon on Execution," in which they set out
their respective titles to the goods and prayed that the
execution sale thereof scheduled on September 19, 1979 be
abated and that, after hearing, said goods be released to them
as the true and lawful owners thereof. 7
To neutralize the Tatings’ moves, and so that the execution sale
might proceed as scheduled, Ong posted two (2) surety bonds 8
to indemnify the sheriff for any liability for damages. 9 But by
Order dated September 19, 1979 the City Court restrained the
sale and set the Tatings’ motions for hearing. 10
What Ong did was to present an "Omnibus Opposition, etc."
dated October 2, 1979, 11 contending that the Tatings’ motions
should have been filed with the Court of First Instance since it
was the latter’s decision which was being executed; and that, in
any event, the Tatings’ remedy was "to file an action for
damages against the indemnity bonds after the auction sale."
He also theorized that —
". . . Atty. Tating, and the third party claimants having stayed in
the premises and having enjoyed the same should be required
to pay the back rentals, attorney’s fees and sheriff’s and legal
expenses . . . (and should not) escape by avoiding paying any
amount as stated in the judgment . . . ." 12
Ong later filed a "Motion to Inhibit" dated January 9, 1980,
which the City Court denied by Order dated January 23, 1980.
The Court also directed Ong’s counsel to explain certain
apparently contumacious statements in the motion. The Order
reads as follows:jgc:chanrobles.com.ph
"O R D E R
"Considering the Motion to Inhibit filed by the plaintiff, dated
January 9, 1980, and the Manifestation filed by the third party
claimants, Marilyn Tating and Robert Tating, dated January 16,
1980, this Court finds the motion without merit and hereby
resolves to deny it.
"Furthermore, Atty. Manuel E. Yuzon, counsel for the plaintiff,
is hereby ordered to explain in writing within ten (10) days
from notice hereof why he should not be cited for indirect
contempt of court for stating in his Motion to Inhibit that if this
Court ‘proceeds to hear and resolve the third-party claims, it is
foregone conclusion that the third-party claimants will surely
win and the plaintiff will lose,’ thereby casting aspersions on
the integrity of this Court and degrading the administration of
justice.
"In the meantime, let the continuation of the hearing of the
motion for suspension of sheriff’s sale etc. be set for February
11, 1980, at 9:00 o’clock in the morning.
SO ORDERED." 13
Ong promptly initiated proceedings to negate this Order. He
filed with the Court of First Instance on February 7, 1980 a
petition for certiorari and prohibition, with application for
preliminary injunction. 14 Acting thereon, the Court (Branch IX)
promulgated an Order dated April 2, 1980 directing the
maintenance of the status quo and commanding that the City
Court refrain "from hearing and deciding the third party claims
and the urgent motion for suspension of Sheriff’s Sale, etc. until
the resolution of the injunction . . ." 15 It afterwards rendered a
decision, dated December 15, 1981, 16 pertinently reading as
follows:jgc:chanrobles.com.ph
"The issue in this petition boils down to this — Should the third-
party claims be heard and decided by the lower court.
"While it is true that the respondents Marilyn and Robert
Tating were not parties in the ejectment case because the lease
was between the petitioner and Evangeline Roces, they stayed
with her and the decision of the appellate court covered them
as it ordered ‘Evangeline Roces and all persons claiming under
her to vacate plaintiff’s premises’ . . . Besides, the procedure
followed by said private respondents in vindicating their rights
over the four (4) levied appliances is not the one sanctioned by
law for they should have filed a separate and independent
action making parties the deputy sheriff and the petitioner and
making them responsible for the execution (Santos Et. Al., v.
Hon. Mojica, L-19618, Feb. 28, 1964).
"WHEREUPON, premises considered, the petitioner Hector L.
Ong is entitled to relief. The decision of Branch XVIII of the CFI-
Quezon City which is final and executory, stands.
"The preliminary injunction issued on April 2, 1980 is hereby
ordered permanent." 17
The Tatings appealed to the Court of Appeals by "a petition for
review filed . . . on March 1, 1982." 18 In its decision,
promulgated on June 23, 1982, after due proceedings, 19 the
Court of Appeals expressed puzzlement why the matter of the
execution and related incidents were passed upon by the lower
court, when the only issue was the correctness of the City
Judge’s refusal to inhibit himself. 20 It dismissed the petition,
and sent the case back to the City Court for further
proceedings." Said the Court:jgc:chanrobles.com.ph
"It is a puzzle to Us why the hearing went out of bounds.
Instead of determining merely the propriety of the order of
denial of the motion to inhibit, the parties and the Court of
First Instance . . . went into the merits of the propriety of the
execution of the decision of the City Court, the auction sale of
the appliances claimed by the Tatings, the levy, the third party
claim, the indemnity bond, and the motion to suspend the sale
and the filing of the sheriff’s bondmatters which are proper
only to be treated in a separate proceeding.
"From the records, We see that if at all the matter of execution
of the decision . . . (etc.) were mentioned, it was merely to give
a background of the motion to inhibit Judge Laquio, Jr. from
proceeding to take further participation in the incident of the
execution, . . . and the incidents stemming therefrom.
"The propriety of the denial of the motion to inhibit was lost in
the maze of the irrelevant facts and incidents taken during the
hearing of this case in the court below.
"A thorough review of the decision of the Court of First
Instance . . . Branch IX, in this certiorari case shows that the
Presiding Judge . . . erroneously treated the pleadings before it
in Civil Case No. 29245. Thus, We are constrained to set the
same aside and remand the case to the City Court presided
over by Judge Laquio, Jr. for further proceedings. Principally,
We rule the denial of the motion for Judge Laquio, Jr. to inhibit
himself from the ejectment case No. 28309, Quezon City Court,
was well taken. The petition assailing the order of denial which
is the main issue in Civil Case No. 29245 is without merit. . . ."
21
Ong is now before this Court, praying for the reversal of the
decision of the Court of Appeals, and the perpetual inhibition of
the City Judge "from further hearing and deciding the (Tatings’)
third-party claims." 22
It will not do to dismiss the petition as the IAC did by declaring
that the only issue involved is the propriety of the City Judge’s
denial of the motion for his inhibition, and pronouncing the
denial to be correct. Not only is such a limitation of the issues
disputed by Ong, but the resolution of the single point would
leave unanswered several other nagging questions. The
opportunity to resolve those questions having been presented,
the Court will do precisely that, to the end that the controversy
may be expeditiously laid to rest.
Three theories are advocated by Ong, namely:chanrob1es
virtual 1aw library
1. From the decision of the Court of First Instance (Branch IX)
on his petition for certiorari and prohibition, the Tatings’
remedy was appeal (by writ of error), not a petition for review,
to the Court of Appeals.]
2. The City Court lost jurisdiction to hear and determine the
Tatings’ third-party claims upon the filing by him (Ong) of the
bonds prescribed by Section 17, Rule 39, the purpose of which
is precisely to hold the sheriff free from liability for damages for
proceeding with the execution sale despite said third-party
claims.
3. Corollarily, the Tatings’ remedy was to file a separate suit to
recover against said bonds posted by Ong, whatever damages
might be suffered by them by reason of the effectuation of the
execution sale. 23
Ong is correct in arguing that the mode of appeal to the Court
of Appeals available to the Tatings from the adverse judgment
of the CFI in the action of certiorari and prohibition instituted
by him, was not by "petition for review" under Section 22 of
B.P. Blg. 129, 24 but an ordinary appeal (by writ of error) under
Rule 41, Rules of Court and Section 39, of B.P. Blg. 129 (also,
Section 20 of the Interim Rules) A "petition for review" is the
correct mode of appeal from a judgment rendered by a CFI
(RTC) in the exercise of appellate jurisdiction, i.e., when it
decides a case appealed to it from the inferior court. In such a
case, the appeal is not a matter of right, its acceptance being
discretionary on the Court of Appeals, which "may give it due
course only when the petition shows prima facie that the lower
court has committed an error of fact or law that will warrant a
reversal or modification of the decision or judgment sought to
be reviewed." On the other hand, when a CFI (RTC) adjudicates
a case in the exercise of its original jurisdiction, the correct
mode of elevating the judgment to the Court of Appeals is by
ordinary appeal, or appeal by writ of error, involving merely the
filing of a notice of appeal — except only if the appeal is taken
in special proceedings and other cases wherein multiple
appeals are allowed under the law, in which event the filing of
a record on appeal is additionally required. 25 Of course, when
the appeal would involve purely questions of law or any of the
other cases (except criminal cases as stated hereunder)
specified in Section 5(2), Article X of the Constitution, 26 it
should be taken to the Supreme Court by petition for review on
certiorari in accordance with Rules 42 and 45 of the Rules of
Court. 27 However, in criminal cases in which the penalty
imposed is death or life imprisonment, the appeal to the
Supreme Court is by ordinary appeal on both questions of fact
and law. In cases where the death penalty is imposed, there is
an automatic review by the Supreme Court. (Sec. 3 of the 1985
Rules on Criminal Procedure).
The mode by which the Tatings thus brought up to the Court of
Appeals the adverse judgment of the CFI — i.e., by petition for
review — was erroneous. This aspect of the case apparently
escaped the Appellate Court’s attention; it did not treat of it at
all. This is however of no moment. The need of finally resolve
this case makes this defect inconsequential. In any event, the
defect has been waived, no issue concerning it having been
raised in the proceedings before the Court of Appeals. 28
Ong’s second contention — that the posting by him of a bond
to indemnify the sheriff for damages for proceeding with an
execution sale despite the existence of third-party claims on
the property levied on (pursuant to Section 17, Rule 39) caused
the Trial Court to lose jurisdiction to deal with the third-party
claimants’ plea for relief against what they deemed to be an act
of trespass by the sheriff — is incorrect.
Certain it is that the Trial Court has plenary jurisdiction over the
proceedings for the enforcement of its judgments. It has
undeniable competence to act on motions for execution
(whether execution be a matter of right or discretionary upon
the Court), issue and quash writs, determine if property is
exempt from execution, or fix the value of property claimed by
third persons so that a bond equal to such value may be posted
by a judgment creditor to indemnify the sheriff against liability
for damages, resolve questions involving redemption, examine
the judgment debtor and his debtors, and otherwise perform
such other acts as may be necessary or incidental to the
carrying out of its decisions. It may and should exercise control
and supervision over the sheriff and other court officers and
employees taking part in the execution proceedings, and
correct them in the event that they should err in the discharge
of their functions.
Now, it is axiomatic that money judgments are enforceable
only against property unquestionably belonging to the
judgment debtor. One man’s goods shall not be sold for
another man’s debts, as the saying goes. 29 Therefore, the
sheriff acts properly only when he subjects to execution
property undeniably belonging to the judgment debtor. But to
the extent that he levies on assets of a third person, in which
the judgment debtor has no interest, to that extent he acts as a
trespasser, and to that extent he is amenable to control and
correction by the Court. 30
When the sheriff thus seizes property of a third person in which
the judgment debtor holds no right or interest, and so incurs in
error, the supervisory power of the Court which has authorized
execution may be invoked by the third person. Upon due
application by the third person, and after summary hearing, the
Court may command that the property be released from the
mistaken levy and restored to the rightful owner or possessor.
What the Court can do in these instances however is limited to
a determination of whether the sheriff has acted rightly or
wrongly in the performance of his duties in the execution of the
judgment, more specifically, if he has indeed taken hold of
property not belonging to the judgment debtor. The Court does
not and cannot pass upon the question of title to the property,
with any character of finality. It can treat of that matter only in
so far as may be necessary to decide if the Sheriff has acted
correctly or not. 31 The Court can require the sheriff to restore
the property to the claimant’s possession if warranted by the
evidence. If the claimant’s proofs do not however persuade the
Court of his title or right of possession thereof, the claim will of
course be denied.
This remedy is not that of intervention, which is dealt with in
Rule 12 of the Rules of Court, and may be availed of only before
or during trial not thereafter, and certainly not when judgment
is executory. It is rather simply an invocation of the Court’s
power of supervision and control over the actuations of its
officers and employees to the end that it be assured that these
conform to the law. 32
Independently of the recourse just indicated, and even before
or without availment thereof, the person who claims that his
property has been wrongfully seized by resort to the remedy
known as terceria set out in Section 17, Rule 39 of the Rules of
Court, viz:jgc:chanrobles.com.ph
"SEC. 17. Proceedings where property claimed by third person.
— If property levied on be claimed by any other person than
the judgment debtor or his agent, and such person make an
affidavit of his title thereto or right to the possession thereof,
stating the grounds of such right or title, and serve the same
upon the officer making the levy, and a copy thereof upon the
judgment creditor, the officer shall not be bound to keep the
property, unless such judgment creditor or his agent, on
demand of the officer, indemnify the officer against such claim
by a bond in a sum not greater than the value of the property
levied on. In case of disagreement as to such value, the same
shall be determined by the court issuing the writ of execution.
The officer is not liable for damages, for the taking or keeping
of the property, to any third-party claimant unless a claim is
made by the latter and unless an action for damages is brought
by him against the officer within one hundred twenty (120)
days from the date of the filing of the bond. But nothing herein
contained shall prevent such claimant or any third person from
vindicating his claim to the property by any proper action.
x x x
The remedies just mentioned are without prejudice to "any
proper action" that a third-party claimant may deem suitable,
to vindicate "his claim to the property." Such a "proper action,"
in the context of Section 17 of Rule 39, has been held to refer
to an action distinct and separate from that in which the
judgment is being enforced.
Such a "proper action" is, quite obviously, entirely distinct from
the explicitly described in Section 17 of Rule 39, i.e., "an action
for damages . . . brought (by a third-party claimant) . . . against
the officer within one hundred twenty (120) days from the date
of the filing of the bond . . . for the taking or keeping of the
property" subject of the terceria. Quite obviously, too, this
"proper action" would have for its object the recovery of the
possession of the property seized by the sheriff, as well as
damages resulting from the allegedly wrongful seizure and
detention thereof despite the third-party claim; and it may be
brought against the sheriff, of course, and such other parties as
may be alleged to have colluded with the sheriff in the
supposedly wrongful execution proceedings, such as the
judgment creditor himself. And such a "proper action," as
above pointed out, is and should be an entirety separate and
distinct action from that in which execution has issued, if
instituted by a stranger to the latter suit. 33
". . . (C)onstruing Section 17 of Rule 39 of the Revised Rules of
Court, the rights of third-party claimant over certain properties
levied upon by the sheriff to satisfy the judgment should not be
decided in the action where the third-party claims have been
presented, but in the separate action instituted by the
claimants.
"This is evident from the very nature of the proceedings. In
Herald Publishing, supra, We intimated that the levy by the
sheriff of a property by virtue of a writ of attachment may be
considered as made under authority of the court only when the
property levied upon unquestionably belongs to the defendant.
If he attaches properties other than those of the defendant, he
acts beyond the limits of his authority. Otherwise stated, the
court issuing a writ of execution is supposed to enforce its
authority only over properties of the judgment debtor, and
should a third party appear to claim the property levied upon
by the sheriff, the procedure laid down by the Rules is that such
claim should be the subject of a separate and independent
action.
"As we explained in the Quebral case (Quebral v. Garduno, 67
Phil., 316), since the third-party claimant is not one of the
parties to the action, she could not strictly speaking, appeal
from the order denying her claim, but should file a separate
reivindicatory action against the execution creditor or the
purchaser of her property after the sale at public auction, or a
complaint for damages against the bond filed by the judgment
creditor in favor of the sheriff.
"We reiterated this in Potenciano v. Dineros, Et. Al. (97 Phil.
196; Agricultural Credit Administration v. Lasam, 28 SCRA 1098)
when We ruled that ‘such reivindicatory action is reserved to
the third-party claimant by Section 15 of Rule 39 despite
disapproval of his claim by the court itself (Planas v. Madrigal,
94 Phil. 754, Lara v. Bayona, G.R. No. L-7920, decided May 10,
1955).’ This rule is dictated by reasons of convenience, as
‘intervention is more likely to inject confusion into the issues
between the parties in the case . . . with which the third-party
claimant has nothing to do and thereby retard instead of
facilitate the prompt dispatch of the controversy which is the
underlying objective of the rules of pleading and practice’
(Herald Publishing, supra, p. 101). Besides, intervention may
not be permitted after trial has been concluded and a final
judgment rendered in the case." 34
In such separate action, the court may issue a writ of
preliminary injunction against the sheriff enjoining him from
proceeding with the execution sale. 34-A
Upon the other hand, if the claim of impropriety on the part of
the sheriff in the execution proceedings is made by a party to
the action, not a stranger thereto, any relief therefrom may be
applied for with, and obtained from, only the executing court;
and this is true even if a new party has been impleaded in the
suit. 35
In any case, Ong’s claim that the filing of the judgment
creditor’s bond operated to divest the Court of jurisdiction to
control and supervise the conduct of the execution sale must
be rejected. That bond had absolutely no effect on the Court’s
jurisdiction. It was merely "equivalent to the personal
interference of the indemnitor and his bondsmen in the course
of the proceeding by directing or requesting the sheriff to hold
and sell the goods as if they were the property of the
defendants in attachment. In doing this they (the indemnitor
and his bondsmen) assume the direction and control of the
sheriff’s future action so far as it constitutes a trespass; and
they become to that extent the principals and he their agent in
the transaction. This makes them responsible for the
continuance of the wrongful possession and for the sale and
conversion of the goods; in other words, for all the real
damages which plaintiff sustains (Lovejoy v. Murray, 70 U.S.
129)." 36
Ong’s third theory — that the Tatings’ remedy in the event of
the denial of their application for relief by the Trial Court is a
separate action for recovery of possession of the goods by
them claimed plus damages for wrongful detention — is correct
and should be sustained, in line with the doctrine in Bayer,
supra, 37 and the other cases which followed it. 38
As regards the matter of the inhibition of the City Court Judge,
the incident has been correctly determined by the Court of
Appeals. No proper ground exists to disqualify His Honor from
continuing to act in Civil Case No. 28309.
One last issue remains, and that is, whether the Tatings, who
were living with Evangeline Roces in the premises leased by the
latter from Ong, are liable for the payment of rentals in arrears
jointly or solidarily with said Evangeline Roces. They are not.
They were never impleaded as parties and never served with
summons in the suit for ejectment initiated by Ong against
Evangeline Roces. The Court therefore never acquired
jurisdiction over them. And while the judgment against
Evangeline Roces, in so far as it decrees her ouster from the
leased premises, may be enforced not only against her but also
against "any person or persons claiming under" her, 39 that
judgment, in so far as it directs payment of money by way of
arrearages in rents, is not binding on the Tatings and definitely
not enforceable against them.
WHEREFORE, the petition is dismissed for lack of merit. The
case shall be remanded to the Metropolitan Trial Court at
Quezon City which shall forthwith resolve the Tatings’ pending
motions in Civil Case No. 28309, consistently with the principles
herein set forth. Costs against petitioner.
SO ORDERED.
G.R. No. 204222, July 04, 2016
NEPTUNE METAL SCRAP RECYCLING, INC., Petitioner, v.
MANILA ELECTRIC COMPANY AND THE PEOPLE OF THE
PHILIPPINES, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari challenging the
March 20, 2012 and October 19, 2012 resolutions1 of the Court
of Appeals (CA) in CA-G.R. SP No. 119642. The CA denied the
motion for leave to intervene and to admit the comment-in-
intervention filed by Neptune Metal Scrap Recycling, Inc.
(Neptune) due to lack of legal interest to intervene and late
filing of the intervention.
THE FACTS
Neptune traces its roots to the criminal case filed against
Rolando Flores (Flores) and Jhannery Hupa (Hupa) (the
accused). On August 10, 2010, the accused were driving a
trailer truck with a container van towards the Manila
International Container Port when men from the Criminal
Investigation and Detection Group flagged them down on
suspicion that they were illegally transporting electric power
transmission scrap copper wires owned by the Manila Electric
Company (Meralco). The police seized the truck with its
contents and detained the accused.
The accused were charged before the Regional Trial Court (RTC)
of Malabon with theft of electric power transmission lines and
materials under Section 3 of Republic Act (RA) No. 7832.2 The
case was docketed as Criminal Case No. 10-1419.
The accused filed a motion to quash the information alleging
that the facts charged in the information do not constitute an
offense.
Neptune filed its entry of special appearance with motion for
leave to permit the inspection, examination, and
photographing of the seized container van (entry with motion).
Neptune argued that it owned the contents of the container
van, specifically, the thirteen (13) bundles of scrap copper wires
worth around Eight Million Pesos (P8,000,000.00). Neptune
presented several documents to prove its claim of
ownership.3chanrobleslaw
The RTC granted Neptune's motion and ordered the inspection
of the container van and its contents. A second inspection was
done to allow Meralco's representatives to inspect the same.
Neptune continued to participate in the RTC proceedings. It
filed several pleadings before the RTC such as: (a) a
manifestation on the results of the first inspection; (b) a motion
to deposit the keys to the container van with the court; (c) a
supplement to the motion to deposit the keys; (d) a
memorandum of authorities on "birch cliff copper"; (e) a
manifestation on the results of the second inspection; (f) a
motion for the release of the goods; and (g) the comment to
Meralco's compliance.4 Neptune also took part in the
clarificatory hearing on the inspection.
On January 3, 2011, the RTC ordered the quashal of the
information.5 The RTC noted that no Meralco power
transmission scrap copper wires were found in the container
van during the two ocular inspections. The RTC also ordered
the return of the keys and the container van to Neptune.
Neptune recovered three remaining bundles of scrap copper
wires.
Meralco filed a motion for reconsideration which the RTC
denied. Meralco then filed a petition for certiorari before the
CA asking to reinstate the information; it did not include
Neptune as a party. Thus, Neptune filed a motion for leave to
intervene and to admit its comment-in-intervention. Meralco
opposed this motion claiming that the subject matter of the
offense, i.e., the electric power transmission scrap copper
wires, is different from the birch cliff copper wires claimed by
Neptune.
The CA denied Neptune's motion for leave to intervene. The CA
ruled that: (a) Neptune failed to demonstrate its legal interest
on the subject matter in litigation; (b) the intervention will
unduly delay or prejudice the case; and (c) Neptune failed to
timely file a motion for intervention before the RTC and to
directly and actively participate in the RTC proceedings. The CA
added that Neptune may vindicate its rights in a separate
action.
The CA also denied Neptune's motion for reconsideration;
hence, this petition.
THE PARTIES' ARGUMENTS
In its petition, Neptune argues that it has legal interest over the
subject matter in litigation - the scrap copper birch cliff found in
the container van; in fact, it was persistent in asserting its right
of ownership even before the RTC. If the RTC's order is
reversed, Neptune stands to lose the three recovered bundles
of copper scrap worth approximately P2,000,000.00 because
Articles 25 and 45 of the Revised Penal Code (RPC) provide for
the forfeiture of the instruments and proceeds of an offense in
favor of the government. Neptune adds that the owner of a
property subject of the litigation has a right to intervene.
Neptune also argues that the intervention would not delay the
adjudication of the parties' rights, and in fact would facilitate
the administration of justice in determining whether the
accused are liable for the crime charged.
Neptune stresses that its entry with motion was effectively a
motion for intervention timely filed before the RTC. The RTC, it
adds, also recognized Neptune's intervention by allowing it to
participate in the proceedings by filing numerous pleadings and
appearing in court hearing.
Assuming that the motion for intervention was belatedly filed,
Neptune argues, the CA should still have allowed Neptune's
intervention. As a general rule, intervention is allowed only
before or during a trial. However, in several cases, the Court
has allowed intervention even after rendition of judgment if
the facts and merits of the case warrant it.6chanrobleslaw
In its comment,7 the Office of the Solicitor General (OSG),
representing the People of the Philippines, argues: first, that
Neptune's petition raises questions of fact which are not
allowed in a Rule 45 petition. The issue of whether Neptune
complied with the requirements for intervention requires the
Court to scrutinize the evidence.
Second, the OSG insists, that Neptune has no legal interest to
justify the intervention for three reasons: (1) Neptune has no
legal interest in the subject matter of the case. The subject
matter in the present case is the transmission copper wires
owned by Meralco, not the birch cliff copper wires claimed by
Neptune. (2) Neptune has no interest in the success of either
party or against both parties because it cannot be prejudiced
by a court's finding of guilt of the accused. (3) Neptune cannot
be adversely affected by the distribution or disposition of the
property in the court's custody. The OSG notes that the
container van is not in the court's custody as it has not yet been
offered in evidence.
Third, the OSG argues that the motion for intervention was
belatedly filed. It emphasizes that Neptune filed only an entry
with special appearance, not a motion for intervention, before
the RTC. The entry of special appearance could not be
considered a motion for intervention because it had no
pleading-in-intervention attached to it as required under
Section 19 of the Rules of Court (Rules). The motion for leave to
permit inspection, examination, and photographing of the
seized container van does not constitute a pleading-in-
intervention. Thus, the RTC gravely abused its discretion when
it took cognizance of Neptune's motions and pleadings despite
the absence of personality to take part in the proceedings.
In its reply,8 Neptune reiterates its arguments and adds that
the legal question raised in the petition is whether the entry
and its accompanying motion were effectively a motion for
intervention under Rule 19 of the Rules. Even assuming that the
petition raises a pure question of fact, the Court may still take
cognizance of the case as it falls under the two exceptions: (a)
the CA's findings of fact are conclusions without citation of
specific evidence; and (b) the CA's findings of fact are premised
on the supposed absence of evidence and contradicted by the
evidence on record.
Neptune also clarifies that the transmission wires claimed by
Meralco are part of the scrap copper wires claimed by
Neptune. In fact, the RTC found no Meralco property inside the
container van. Meralco also failed to present any evidence to
show that it owns the copper wires.
THE COURT'S RULING
We find the petition meritorious.
The issue before the Court is whether the CA erred in denying
Neptune's motion for intervention.
Intervention is a remedy by which a third party, who is not
originally impleaded in a proceeding, becomes a litigant for
purposes of protecting his or her right or interest that may be
affected by the proceedings.9 Intervention is not an absolute
right but may be granted by the court when the movant shows
facts which satisfy the requirements of the statute authorizing
intervention.10 The allowance or disallowance of a motion to
intervene is within the sound discretion of the
court.11chanrobleslaw
Section 1, Rule 19 of the Rules provides that a court may allow
intervention (a) if the movant has legal interest or is otherwise
qualified, and (b) if the intervention will not unduly delay or
prejudice the adjudication of rights of the original parties and if
the intervenor's rights may not be protected in a separate
proceeding.12 Both requirements must concur.
Section 2, Rule 19 of the Rules requires a movant to file the
motion for intervention before the RTC's rendition of judgment
and to attach a pleading-in-intervention.13 The court may allow
intervention after rendition of judgment if the movant is an
indispensable party.14chanrobleslaw
With these procedural rules as guidelines, we examine, first,
whether Neptune has a legal interest to intervene in the
present case. Is Neptune's ownership of the allegedly stolen
items sufficient to grant intervention?
A movant for intervention must have legal interest either (i) in
the matter in litigation, (ii) in the success of either of the
parties, or (iii) against both parties.15 The movant may also
intervene if he or she is (iv) so situated as to be adversely
affected by a distribution or other disposition of property in the
court's custody.16 Legal interest is present when the intervenor
will either gain or lose as a direct effect of the judgment.17 The
legal interest must be actual and material, direct, and
immediate.18 In a theft case, the subject matter in litigation is
the item alleged to have been stolen.19chanrobleslaw
In the present case, Neptune argues that it has a legal interest
in the subject matter in litigation, particularly, the scrap copper
wires in the container van. The RTC found Neptune to be the
owner of the contents of the container van; hence, it released
these contents to Neptune. The RTC also noted that no Meralco
transmission wires were found in the container van during the
two ocular inspections. Thus, the RTC quashed the information
against the accused.
As the owner of the scrap copper wires, Neptune undoubtedly
has legal interest in the subject matter in litigation. The CA's
reversal of the RTC's quashal of the information would
necessarily require Neptune to return the bundles of copper
wire it had recovered. Undoubtedly, Neptune, as the owner,
has a legal interest in the subject matter in litigation before the
CA.
Second, we determine whether Neptune's intervention would
unduly delay or prejudice the adjudication of the rights of the
accused and of the State. We also consider whether Neptune's,
rights may be protected in a separate proceeding.
In one case,20 the Court effectively placed the burden on the
oppositors to argue that the intervention would delay the
proceedings and that the intervenor's rights would not be
protected in a separate case. The Court noted that the
oppositors focused their arguments on the intervenor's lack of
legal interest such that they failed to allege or present any
evidence to meet the second requirement in granting
intervention.21 Thus, the Court has no basis to rule that the
intervention will delay the adjudication of rights of the original
parties.22 Too, the intervention is more beneficial and
convenient for petitioners and the courts as it will avoid
multiplicity of suits and clogging of the court
dockets.23chanrobleslaw
Similarly, in the present case, the OSG failed to allege or
present any evidence showing that Neptune's intervention Will
delay the proceedings and that Neptune may protect its rights
in a separate case.
Additionally, allowing Neptune's intervention is even beneficial
to the courts in ascertaining whether theft indeed occurred.
The information filed before the RTC alleges that the accused
committed theft against Meralco. Lack of owner's consent is an
essential element of the crime of theft. Neptune's intervention
will assist the CA in ascertaining the owner of the scrap copper
wires - whether Meralco or Neptune - and in determining
whether the rightful owner gave its consent to the accused's
act of taking the scrap copper wires. It should be stressed, too,
that granting the intervention would reduce the suits filed in
court.
Third, we verify whether Neptune timely filed its intervention.
As we noted above, a would-be intervenor must file the motion
for intervention before the RTC renders its judgment.
In the present case, Neptune filed a motion denominated as
"motion for intervention" only before the CA or only after the
RTC had rendered its judgment. Neptune argues that the entry
with motion it filed with the RTC is tantamount to a motion for
intervention. The OSG, on the other hand, argues that the entry
with motion cannot constitute as a motion for intervention
because it lacked the pleading-in-intervention required by the
Rules.
We rule in Neptune's favor and hold that the entry with motion
effectively constitutes a motion for intervention.
The rules on intervention are procedural rules, which are mere
tools designed to expedite the resolution of cases pending in
court.24 Courts can avoid a strict and rigid application of these
rules if such application would result in technicalities that tend
to frustrate rather than promote substantial
justice.25cralawredchanrobleslaw
In the present case, Neptune only filed a special appearance
with a motion to inspect the container van before the RTC. At
that time, Neptune was still uncertain whether it owned or it
had legal interest over the container van's contents. After the
inspection, however, it ascertained that it indeed owned the
scrap copper wires and thus continued to participate in the
case. Notably, the RTC allowed Neptune to appear, file
pleadings, and represent itself in the court proceedings. All
these amount to intervention as contemplated under the rules.
The lack of a pleading-in-intervention attached to the entry
with motion is justified by Neptune's initial uncertainty as to
the ownership of the container van's contents. After the ocular
inspections, we note that Neptune filed manifestations,
motions, and comment before the RTC to disprove Meralco's
alleged ownership and to reclaim the scrap copper wires. These
pleadings were accepted and considered by the RTC in
rendering its decision.
Undeniably, the RTC allowed Neptune to intervene in the case
via the entry with motion, albeit without filing a motion
specifically denominated as a "motion for intervention." Thus,
Neptune complied with the requirement of filing an
intervention prior to the RTC's rendition of judgment.
All told, the CA erred when it denied Neptune's motion for
intervention on the grounds that it lacked legal interest to
intervene and that it filed the intervention beyond the
prescribed period.
WHEREFORE, we hereby GRANT the petition. The March 20,
2012 and October 19, 2012 resolutions of the Court of Appeals
in CA-G.R. SP No. 119642 are hereby REVERSED and SET ASIDE.
SO ORDERED.chanRoblesvirtualLawlibrary
G.R. No. L-45848 November 9,1977
TOWERS ASSURANCE CORPORATION, Petitioner, vs. ORORAMA We hold that the lower court acted with grave abuse of
SUPERMART, ITS OWNER-PROPRIETOR, SEE HONG and JUDGE discretion in issuing a writ of execution against the surety
BENJAMIN K. GOROSPE, Presiding Judge, Court of First Instance without first giving it an opportunity to be heard as required in
of Misamis Oriental, Branch I, Respondents. Rule 57 of tie Rules of Court which provides:

Benjamin Tabique & Zosimo T. Vasalla for petitioner.chanrobles SEC. 17. When execution returned unsatisfied, recovery had
virtual law library upon bound. - If the execution be returned unsatisfied in whole
or in part, the surety or sureties on any counterbound given
Rodrigo F. Lim, Jr. for private respondent. pursuant to the provisions of this rule to secure the payment of
the judgment shall become charged on such counterbound,
AQUINO, J.:chanrobles virtual law library and bound to pay to the judgment creditor upon demand, the
amount due under the judgment, which amount may be
This case is about the liability of a surety in a counterbond for recovered from such surety or sureties after notice and
the lifting of a writ of preliminary summary hearing in the same action.
attachment.chanroblesvirtualawlibrarychanrobles virtual law
library Under section 17, in order that the judgment creditor might
recover from the surety on the counterbond, it is necessary (1)
On February 17, 1976 See Hong, the proprietor of Ororama that execution be first issued against the principal debtor and
Supermart in Cagayan de Oro City, sued the spouses Ernesto that such execution was returned unsatisfied in whole or in
Ong and Conching Ong in the Court of First Instance of Misamis part; (2) that the creditor made a demand upon the surety for
Oriental for the collection of the sum of P 58,400 plus litigation the satisfaction of the judgment, and (3) that the surety be
expenses and attorney's fees (Civil Case No. given notice and a summary hearing in the same action as to
4930).chanroblesvirtualawlibrarychanrobles virtual law library his liability for the judgment under his
counterbond.chanroblesvirtualawlibrarychanrobles virtual law
See Hong asked for a writ of preliminary attachment. On March library
5, 1976, the lower court issued an order of attachment. The
deputy sheriff attached the properties of the Ong spouses in The first requisite mentioned above is not applicable to this
Valencia, Bukidnon and in Cagayan de Oro case because Towers Assurance Corporation assumed a
City.chanroblesvirtualawlibrarychanrobles virtual law library solidary liability for the satisfaction of the judgment. A surety is
not entitled to the exhaustion of the properties of the principal
To lift the attachment, the Ong spouses filed on March 11, 1976 debtor (Art. 2959, Civil Code; Luzon Steel Corporation vs. Sia, L-
a counterbond in 'the amount of P 58,400 with Towers 26449, May 15, 1969, 28 SCRA 58,
Assurance Corporation as surety. In that undertaking, the Ong 63).chanroblesvirtualawlibrarychanrobles virtual law library
spouses and Towers Assurance Corporation bound themselves
to pay solidarity to See Hong the sum of P But certainly, the surety is entitled to be heard before an
58,400.chanroblesvirtualawlibrarychanrobles virtual law library execution can be issued against him since he is not a party in
the case involving his principal. Notice and hearing constitute
On March 24, 1976 the Ong spouses filed an answer with a the essence of procedural due process. (Martinez vs. Villacete
counterclaim. For non-appearance at the pre- trial, the Ong 116 Phil. 326; Insurance & Surety Co., Inc. vs. Hon. Piccio, 105
spouses were declared in Phil. 1192, 1200, Luzon Surety Co., Inc. vs. Beson, L-26865-66,
default.chanroblesvirtualawlibrarychanrobles virtual law library January 30. 1970. 31 SCRA
313).chanroblesvirtualawlibrarychanrobles virtual law library
On October 25, 1976, the lower court rendered a decision,
ordering not only the Ong spouses but also their surety, Towers WHEREFORE, the order and writ of execution, insofar as they
Assurance Corporation, to pay solidarily to See Hong the sum of concern Towers Corporation, are set aside. The lower court is
P 58,400. The court also ordered the Ong spouses to pay P directed to conduct a summary hearing on the surety's liability
10,000 as litigation expenses and attorney's on its counterbound. No
fees.chanroblesvirtualawlibrarychanrobles virtual law library costs.chanroblesvirtualawlibrarychanrobles virtual law library

Ernesto Ong manifested that he did not want to appeal. On SO ORDERED.

March 8, 1977, Ororama Supermart filed a motion for
execution. The lower court granted that motion. The writ of
execution was issued on March 14 against the judgment [G.R. No. 81120. August 20, 1990.]
debtors and their surety. On March 29, 1977, Towers Assurance
Corporation filed the instant petition for certiorari where it SPS. OSCAR T. OLIB and ROBERTA R. OLIB, Petitioners, v. HON.
assails the decision and writ of EDELWINA C. PASTORAL, Judge of the Regional Trial Court of
execution.chanroblesvirtualawlibrarychanrobles virtual law Agusan del Norte and Butuan City, Branch III and CORAZON M.
library NAVIA, Respondents.
Carlito B. Yebes, for Petitioners.
Wenceslao B. Rosales for Respondents.
SYLLABUS
1. REMEDIAL LAW; PROVISIONAL REMEDY; ATTACHMENT;
DEFINITION OF. — 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.
2. ID.; ID.; ID.; ANCILLARY TO A PRINCIPAL PROCEEDING. —
Attachment 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.
3. ID.; ID.; ID.; ID.; CONSIDERED APPEALED WHERE MAIN
ACTION IS APPEALED. — Where the petitioners moved for the
discharge of the writ of preliminary attachment by the
respondent court on the basis of the judgment in their favor . . .
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 case independent of the principal
action because the attachment was only an incident of such
action.
4. ID.; ID.; ID.; EFFECT OF NONPAYMENT OF BOND. — Coming
now to the argument that the attachment was automatically
lifted because of the non-payment of the premium on the
attachment bond, the Court feels it is time again to correct a
common misimpression. The rule is that the bond is not
deemed extinguished by reason alone of such non-payment.
5. ID.; ID.; ID.; DISCHARGED ONLY WHEN JUDGMENT HAS
BECOME FINAL AND EXECUTORY. — Finally, on the correct
interpretation of Rule 57, Section 19, of the Rules of Court, we
hold that the order of attachment is considered discharged only
where the judgment has already become final and executory
and not when it is still on appeal. The obvious reason is that,
except in a few specified cases, execution pending appeal is not
allowed.
DECISION
CRUZ, J.:
This case could have been remanded to the Court of Appeals,
which has concurrent jurisdiction with this Court in petitions for
certiorari against the regional trial courts under Rule 65 of the
Rules of Court. We have decided to retain and rule on it
directly, however, so we can emphasize the important
doctrines we shall here affirm.
On November 13, 1981, Corazon M. Navia sued the spouses
Oscar and Roberta Olib, petitioners herein, for dissolution of
their partnership and other reliefs, with a prayer for the
issuance of a writ of a preliminary attachment. 1 The writ was
granted on November 10, 1983, resulting in the attachment of
six parcels of land belonging to the petitioners, along with
stocks of merchandise in their bodega. 2 The writ was amended
on December 14, 1983, to release the merchandise. Two years
later, on May 16, 1985, the petitioners filed a motion to
discharge the preliminary attachment on the ground that the
attachment bond executed for one year from November 1983
had already lapsed. 3 This was accompanied by a certification
from the bonding company that the bond had not been
renewed and the corresponding payment for extension had not
been made. 4
On February 25, 1986, Judge Miguel S. Rallos of the Regional
Trial Court of Agusan del Norte and Butuan City rendered
judgment for the petitioners and sentenced the private
respondent to pay them actual, moral and exemplary damages,
plus attorney’s fees and litigation expenses. 5 On April 16,
1986, Navia perfected her appeal from the challenged
judgment, and the records of the case were elevated to the
Court of Appeals on January 25, 1988. 6
Although the trial court found in the text of the decision that
the private respondent was not entitled to the issuance of the
writ of preliminary attachment, no mention was made of the
said writ in the dispositive portion. As a result, the annotation
of the preliminary attachment on the certificates/titles of the
attached lands was maintained and could not be canceled.
On July 20, 1987, the petitioners moved for the discharge of the
writ of preliminary attachment by the respondent court on the
basis of the judgment in their favor. Navia filed an opposition,
contending that as she had perfected her appeal to the Court of
Appeals, the trial court no longer had any jurisdiction over the
case. The private respondent cited Rule 41, Section 9, of the
Rules of Court, reading as follows:chanrob1es virtual 1aw
library
When appeal deemed perfected; effect thereof. — If the notice
of appeal, the appeal bond and the record on appeal have been
filed in due time, the appeal is deemed perfected upon the
approval of the record on appeal and of the appeal bond other
than a cash bond, and thereafter the trial court loses its
jurisdiction over the case, except to issue orders for the
protection and preservation of the rights of the parties which
do not involve any matter litigated by the appeal, to approve
compromises offered by the parties prior to the transmittal of
the record on appeal to the appellate court, and to permit the
prosecution of pauper’s appeals.

On August 24, 1987, Judge Edelwina C. Pastoral, who had
succeeded Judge Rallos, denied the motion on the ground
invoked in the opposition and declared:chanrob1es virtual 1aw
library
Settled is the rule that the trial court loses its jurisdiction over
the record and over the subject of the case once an appeal in
the case has been perfected. The exception to this rule refers
to the orders of the Court to protect and preserve the rights of
the parties which do not involve any matter litigated by appeal
(Section 9, Rule 41 of the Rules of Court). The writ of
preliminary attachment was earlier granted as a security for the
satisfaction of the judgment, the latter being now the subject
of the appeal. To grant defendant’s motion at this juncture is to
disturb and not to preserve the rights of the parties. It is the
stand of this Court that the status quo of the parties shall be
maintained for it cannot predetermine the posture which the
appellate court will adopt, either to affirm, modify or reverse
the questioned decision of this Court.
The petitioners moved for reconsideration, invoking the case of
Galang v. Endencia, 7 where this Court held:chanrobles virtual
lawlibrary
The levy in attachment of the properties of the defendant upon
the allegation that he is about to dispose of the same to
defraud his creditors is one which is intended for the protection
and preservation of the rights of the plaintiff and which in no
way involves any matter litigated by the defendant’s appeal.
And as the respondent court had jurisdiction to issue the writ
of attachment, its errors, if any, committed in the appreciation
of the probative value of the facts stated in the petition for the
writ do not affect its jurisdiction but merely the exercise of such
jurisdiction. We need not belabor here the rule that what
makes up jurisdiction is the authority to act in a particular case
and not the correctness of the action taken thereon. Without
such authority, as determined by law, the court cannot act, or if
it does, its actuations are null and void; but where the authority
exists, all orders and decisions of the court rendered in the
exercise thereof and within its limits are valid even if they were
erroneous.
They argued that if the court a quo could issue a writ of
attachment after the appeal had been perfected, then it could a
fortiori discharge such a writ, especially where, as in the case at
bar, the movants were the prevailing parties.
Later, somewhat inconsistently, the petitioners also contended
that there was really no more need for an order discharging the
attachment as this followed by operation of Rule 57, Section
19, of the Rules of Court. Such discharge was the immediate
and automatic effect of any judgment in favor of the party
whose property had been attached, thus:chanrob1es virtual
1aw library
SEC. 19. Disposition of attached property where judgment is for
party against whom attachment is issued. — If judgment be
rendered against the attaching creditor, all the proceeds of
sales and money collected or received by the sheriff, clerk, or
other proper officer under the order of attachment, and all
property attached remaining in any such officer’s hands, shall
be delivered to the party against whom attachment was issued,
and the order of attachment discharged.
The motion having been denied, the petitioners sought
reconsideration a second time, insisting that (a) the attachment
had been automatically discharged under Rule 57, Section 19;
and (b) the attachment bond had already lapsed for non-
payment of the premiums. They were rebuffed again. They
then came before this Court, contending that the respondent
court committed grave abuse of discretion in denying their
motion.
We hold that it did not.
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. 8
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. 9 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.cralawnad
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 case independent of the principal
action because the attachment was only an incident of such
action.
We held in Olsen v. Olsen: 10
The preliminary attachment is an auxiliary remedy the granting
of which lies within the sound discretion of the judge taking
cognizance of the principal case upon whose existence it
depends. The order of the judge denying a motion for the
annulment of a writ of preliminary attachment, being of an
incidental or interlocutory and auxiliary character, cannot be
the subject of an appeal independently from the principal case,
because our procedural law now in force authorizes an appeal
only from a final judgment which gives an end to the litigation.
(Section 143, Act 190; 3 C.J., 549, par. 389.)
x x x
While it is true that an order denying a motion for the
annulment of a preliminary attachment is not subject to review
through an appeal independently from the principal case, it is
not constituting a final order, yet when the writ of preliminary
attachment becomes final by virtue of a final judgment
rendered in the principal case, said writ is subject to review
jointly with the judgment rendered in the principal case
through an ordinary appeal.
It is also worth noting, as an appropriate observation on the
impropriety of the remedy employed by the petitioners in this
case, that, in Jopillo v. Court of Appeals, 11 this Court
observed:chanrob1es virtual 1aw library
. . . even assuming that the trial court committed an error in
denying the motion to discharge the writ of attachment the
error (if it is an error at all) is an error in judgment which
cannot be corrected through the extraordinary remedy of
certiorari but by an ordinary appeal at the proper time.
Coming now to the argument that the attachment was
automatically lifted because of the non-payment of the
premium on the attachment bond, the Court feels it is time
again to correct a common misimpression. The rule is that the
bond is not deemed extinguished by reason alone of such non-
payment. The Court made this clear in Luzon Surety Co. v.
Quebrar, 12 where it declared:chanrob1es virtual 1aw library
To allow the defendants-appellants to evade their liability
under the Indemnity Agreements by non-payment of the
premiums would ultimately lead to giving the administrator the
power to diminish or reduce and altogether nullify his liability
under the Administrator’s Bonds. As already stated, this is
contrary to the intent and purpose of the law in providing for
the administrator’s bonds for the protection of the creditors,
heirs, legatees, and the estate.
x x x 1. ATTACHMENT; DAMAGES ON ACCOUNT OF ITS WRONGFUL
Lastly, in Manila Surety and Fidelity Co., Inc. v. Villarama (107
Phil. 891), it was held that "the one-year period mentioned
therein refers not to the duration or lifetime of the bond, but
merely to the payment of premiums, and, consequently, does
not affect at all the effectivity or efficacy of such bond. But such
non-payment alone of the premiums for the succeeding
years . . . does not necessarily extinguish or terminate the
effectivity of the counter-bond in the absence of an express
stipulation in the contract making such non-payment of
premiums a cause for the extinguishment or termination of the
undertaking.chanrobles.com:cralaw:red
These principles are applicable to other kinds of bonds,
including the attachment bond in the case at bar. On this bond,
the respondent court correctly observed:chanrob1es virtual
1aw library
. . . a cursory examination of the bond for levy on attachment
executed between herein plaintiff Corazon M. Navia and the
branch manager of the First Continental Assurance Co., Inc.
(Rollo, pp. 347-348) discloses no stipulation that the surety
company will terminate the bond for non-payment of the
premium. This minor matter on non-payment of premiums of
the bond pertains to the contracting parties to resolve. 13
Finally, on the correct interpretation of Rule 57, Section 19, of
the Rules of Court, we hold that the order of attachment is
considered discharged only where the judgment has already
become final and executory and not when it is still on appeal.
The obvious reason is that, except in a few specified cases,
execution pending appeal is not allowed. 14
WHEREFORE, the petition is DISMISSED, with costs against the
petitioners. The petitioners may, if they see fit, move for the
lifting of the writ of preliminary attachment in the Court of
Appeals, to which that ancillary remedy is deemed elevated
along with the principal action.
SO ORDERED.
[G.R. No. L-5268. February 23, 1953.]
GREGORIO CRUZ, Petitioner, v. MANILA SURETY & FIDELITY CO.,
INC., CONCEPCION YNCIONG, assisted by her husband
Florentino de Leon, FILEMON LEONARDO and ANDREA
YNCIONG, Respondents.
Manaloto & Llamanzares for Petitioner.
De Santos & Herrera for Respondents.
SYLLABUS
ISSUANCE, MUST BE CLAIMED IN THE SAME ACTION. — The
claim or damages on account of the issuance of writ of
attachment, injunction, receivership, or replevin should be
presented in the same action wherein said writ was issued, in
order that the damages may be included in the final judgment
of the case. It can not be the subject of a separate action.
(Japco v. City of Manila, 48 Phil., 851, 855, citing Santos v. Moir,
36 Phil., 350; Somes v. Crossfield, 9 Phil., 16; Macatansay v.
Municipality of San Juan, 9 Phil., 19). The philosophy of the
ruling seems to be that the court which had acted on the
provisional remedy which occasioned the damages has the
exclusive jurisdiction to assess them because of its control of
the case. And when the action in which the writ of attachment
was issued is still open and has not been dismissed by the court
despite the lapse of years, the right to damages is not entirely
lost. He may still press his claim before the court which had
issued the attachment.
2. ID.; ID.; POSSESSION IN GOOD FAITH. — Ownership of land is
one thing, and ownership of the improvements thereon is
another. Although the attachment creditor is declared the
owner of the land, the attachment debtor may prove, with his
claim for damages, that he has made the improvements in
good faith.
DECISION
BAUTISTA ANGELO, J.:
This is a petition for review of a decision of the Court of
Appeals dated October 31, 1951, which reverses a judgment
rendered by the Court of First Instance of Rizal according to
petitioner an indemnity in the amount of P2,750.
This case stems from an action for forcible entry instituted by
Concepcion and Andrea Enciong and Filemon Leonardo in the
Justice of the Peace Court of Parañaque, Rizal, against Gregorio
Cruz, docketed as civil case No. 12, wherein they obtained the
issuance of a writ of preliminary injunction upon filing a bond in
the amount of P3,000. The bond was posted by Manila Surety
& Fidelity Co., Inc. After the issuance of the writ, the plaintiffs
took possession of the property in litigation and harvested the
palay standing thereon. Later, the writ was lifted when the
defendant put up a counter bond in the amount of P6,000. The
land was returned but after the palay had been harvested.
In the meantime, Gregorio Cruz, the defendant, filed in the
Court of First Instance of Rizal an action for certiorari assailing
the proceedings had in the forcible entry case then pending in
the Justice of the Peace Court of Parañaque, Rizal, which
resulted adversely to the plaintiffs therein in that the court
declared all the proceedings null and void for lack of
jurisdiction.
Five months thereafter, or on July 21, 1947, Gregorio Cruz
initiated in the same Court of First Instance of Rizal an action
for damages against the same persons who succeeded in
dispossessing him of the property in the forcible entry case
wherein for the first time he averred having incurred losses in
the total sum of P2,950 not only because of his dispossession of
the property in litigation but also because of the consequential
damages he has suffered as a result of the institution of the
forcible entry case against him. In this case the bonding
company was made a party defendant.
On October 28, 1947, the defendants filed a motion to dismiss
contending, among other grounds, that this action for damages
has no legal basis because the same was not included in the
judgment rendered in the certiorari case as required by the
Rules of Court (Rule 60, section 9; Rule 59, section 20). This
motion having been denied, the defendants filed their answer
wherein they reiterated the same special defense. And on
November 25, 1947, the court rendered decision ordering the
defendants to pay to the plaintiff the sum of P2,750 as
damages and to pay the costs. But when the case was taken to
the Court of Appeals, this decision was reversed and the
defendants were absolved from the complaint. Hence this
petition for review.
One of the grounds on which the Court of Appeals has
predicated its ruling that petitioner-appellant has no cause of
action against respondents-appellees to recover the damages
which he has allegedly sustained as a result of the issuance of
the writ of preliminary injunction by the justice of the peace
court of Parañaque, Rizal, is the failure of said petitioner-
appellant to press his claim for damages in the forcible entry
case wherein the writ was issued as expressly required by
section 9, Rule 60 of the Rules of Court, in connection with
section 20, Rule 59. Because of such failure, the Court of
Appeals says, the petitioner-appellant is now barred from
instituting the present action. This ruling is now assigned as
error.
We find this ruling of the Court of Appeals correct. This is in line
not only with the Rules of Court (section 20, Rule 59 and
section 9, Rule 60), but also with well-known jurisprudence on
the matter. Thus, it has been held that "A claim for damages
suffered by reason of the issuance of a preliminary injunction
must be presented in the principal action, and judgment
therefor must be included in the final judgment of the case.
The remedy is exclusive and by failing to file a motion for the
determination of the damages on time and while the judgment
is still under the control of the court, the claimant loses his
right to such damages" (Casimiro Japco v. The City of Manila, 48
Phil., 851, 855; citing Santos v. Moir, 36 Phil., 350; Somes v.
Crossfield, 9 Phil., 13; Macatansay v. Municipality of San Juan
de Bocboc, 9 Phil., 19).
The procedure for the recovery of damages on account of the
issuance of writ of attachment, injunction, receivership, and
replevin proceedings, as interpreted in the cases adverted to,
requires that the claim for damages should be presented in the
same action which gave rise to the special proceeding in order
that it may be included in the final judgment of the case, and it
cannot be the subject of a separate action. The philosophy of
the ruling seems to be that the court that had acted on the
special proceeding which occasioned the damages has the
exclusive jurisdiction to assess them because of its control of
the case. This ruling is sound and tends to avoid multiplicity of
action.
We believe, however, that the action of petitioner-appellant is
not entirely lost it appearing from the record that the forcible
entry case pending in the justice of the peace court of
Parañaque, Rizal, is still open and has not been dismissed by
the court in the certiorari case. The only import of the decision
in the latter case is to declare the proceedings of the justice of
the peace court in connection with the issuance of preliminary
injunction null and void for having been issued in excess of its
jurisdiction but it did not throw the case out of court. Petitioner
herein may still press his claim for damages before that court.
We notice that the Court of Appeals has likewise ruled that
petitioner herein has no right to claim for damages for the loss
of the palay standing on the land in dispute on the sole premise
that he is not the lawful owner of the land as proven in
registration cases No. 2011, No. 4, and No. 3, wherein the
ownership of the land was litigated. But, as counsel for
petitioner well says, the ownership of the land is one thing, and
the ownership of the improvements is another. The record
does not seem to justify any finding relative to the
improvements because the evidence presented seems to have
been limited to the ownership of the land. Petitioner may have
made the improvements in good faith although he may not be
the lawful owner of the land. The claim of petitioner that this
matter has not been properly threshed out does not seem to
be without reason or justification. We are, therefore,
constrained to hold that the finding to the effect that petitioner
has no right to claim for damages has no basis in the evidence.
The decision of the Court of Appeals is hereby affirmed in so far
as it holds that petitioner has no right to institute the present
action for damages, but is reversed in all other respects,
without prejudice on the part of petitioner to presenting his
claim for damages in the forcible entry case pending in the
justice of the peace court of Parañaque, Rizal, and without
pronouncement as to costs.
[G.R. No. L-6436. June 30, 1954.]
OFRECINO T. SANTOS, Petitioner, v. THE COURT OF APPEALS, ET
AL., Respondents.
Amado A. Mundo for Petitioner.
Teodulo M. Cruz for respondent Philippine Reconstruction
Corporation, Inc.
SYLLABUS
1. CERTIORARI; DOES NOT LIE WITHIN WHEN THERE IS REMEDY
OF APPEAL. — Certiorari will not lie when the remedy of appeal
is available.
2. ATTACHMENT; DAMAGES; RECOVERY IN SEPARATE ACTION.
— The rule that recovery of damages are sought not because
the writ of attachment was illegally or wrongful issued by the
court, but because said writ was caused to be levied upon the
property of the plaintiff which was not a party in the case
where the attachment was issued.
DECISION
PARAS, C.J. :
On May 20, 1950, Ofrecino T. Santos (hereinafter to be referred
to as petitioner) filed in the Court of First Instance of Cotabato
an action for the recovery of the sum of P1,628 against Teodulo
M. Cruz and Valentin C. Garcia (Civil Case No. 241). The
petitioner secured a writ of preliminary attachment which was
levied upon a tractor which, though believed by the petitioner
to belong to the defendants in Civil Case No. 241, in fact was
owned by the Philippine Reconstruction Corporation Inc.
(hereinafter to be referred to as respondent), which in due
time filed a third party claim. The petitioner filed an amended
complaint including the respondent as a defendant, but upon
motion filed by Teodulo M. Cruz and Valentin C. Garcia, Civil
Case No. 241 was dismissed by the Court of First Instance of
Cotabato for lack of jurisdiction, the amount involved being less
than P2,000. The petitioner filed a similar action in the Justice
of the Peace Court of Buayan, Cotabato, against the
respondent as sole defendant, wherein the petitioner was
awarded the sum of P1,638.10, with interest and costs, but this
decision is still the subject matter of a pending certiorari
proceeding in the Court of First Instance of Cotabato instituted
by the Respondent.
On May 9, 1951, the respondent filed in the Court of First
Instance of Manila Civil Case No. 13778 against the petitioner,
for damages resulting from the levy of its tractor under the writ
of attachment issued in Civil Case No. 241. Paragraphs III and
VII of the respondent’s complaint in Civil Case No. 13778 read
as follows:chanrob1es virtual 1aw library
"III
"That on or about the month of September, 1950 and in
connection with the execution of a preliminary writ of
attachment secured by the herein defendant Ofrecino T. Santos
in Civil Case No. 241 of the Court of First Instance of Cotabato
entitled Ofrecino T. Santos, plaintiff v. Teodulo M. Cruz and
Valentin C. Garcia, Defendants, the above- named defendants
conspiring, confabulating and conniving with one another
procured and caused to be attached a certain Caterpillar D-8
tractor of herein plaintiff who was not a party in said case and
that defendants herein fully knowing that the said tractor does
not belong to any of the defendants Teodulo M. Cruz and
Valentin C. Garcia in said Civil Case No. 241 of the Court of First
Instance of Cotabato;
"VII
"That due to the said wrongful and malicious attachment levied
by the herein defendants on plaintiffs’ tractor and their
subsequent refusal to release the same from attachment as
above stated plaintiff was consequently forced to violate its
contractual undertaking with a certain Mr. Tomas Gonzales as
stated in the sworn third party claim so that it was compelled
to pay a liquidated damages in the sum of Three Thousand
Pesos (P3,000) aside from having lost a sure income from rent
on said tractor in the sum of One Thousand Five Hundred Pesos
(P1,500);"
The other necessary details are recited as follows in the
decision of the Court of Appeals 1 promulgated on October 30,
1952 in CA-G.R. No. 9925-R, Ofrecino T. Santos, Petitioner, v.
Philippine Reconstruction Corporation, Inc., and the Honorable
Demetrio B. Encarnacion, Judge, Branch I, Court of First
Instance of Manila, respondents:jgc:chanrobles.com.ph
"On June 10, 1951, petitioner (defendant in Civil Case No.
13778 of Manila) was duly summoned to answer the complaint
filed in said Civil Case. A motion to dismiss, filed by defendant’s
counsel, was received on June 23, 1951, in the Court of First
Instance of Manila. On the other hand, counsel for plaintiff
Philippine Reconstruction Corporation (now respondent) filed
on July 12, 1951, an ex-parte motion, praying that defendant
Ofrecino T. Santos was declared in default on the ground that
his motion to dismiss does not contain a notice for hearing as
provided in Rule 26 of the Rules of Court, and therefore not a
valid one. Copy of said order was received by defendant’s
counsel on August 2, 1951. On August 26th, plaintiffs counsel
moved that the aforesaid Civil Case No. 13778 be set for
hearing. In his turn, counsel for defendant Ofrecino T. Santos
filed on September 1st a petition praying that the order of
default dated July 23rd be set aside; that his motion to dismiss
be given due course, either by sustaining or denying the same;
and that if denied, defendant be allowed to file his answer.
"By virtue of an order dated February 12, 1952, the case was
set for hearing on February 28th, and on the following day
decision was rendered in favor of the plaintiff and against the
defendants, ordering the later to pay the sum of P4,500 with
legal rate of interest from the date of the filing of the complaint
and to further pay the sum of P1,000.00 as attorney’s fees and
costs of the suit. A copy of this decision was on March 7, 1952,
sent by registered mail to Ofrecino T. Santos’ counsel who
received the same in March 17th. Consequently, on April 5,
1952, defendant Ofrecino T. Santos, thru his counsel, moved
for the reconsideration of the aforesaid decision, to which
motion counsel for the plaintiff filed his opposition on April 20,
1952. On June 11, 1952, said motion for reconsideration was
denied.
"Ofrecino T. Santos now comes before us as petitioner, alleging
that the respondent court committed a grave abuse of
discretion when, as defendant in the aforesaid Civil Case No.
13778, he was arbitrarily declared in default; and when it
declared his motion to dismiss not a valid one. Petitioner
further claims that the respondent court again committed a
grave abuse of discretion when, instead of acting upon his
petition (Annex ’A’) for relief from the order of default, it set
the case for hearing and proceeded to hear plaintiff’s evidence
and rendered a decision. It is also alleged by petitioner that the
Court of First Instance of Manila acted without jurisdiction, the
cause of action in Civil Case No. 13778 having arisen from a
supposed wrongful attachment ordered by the Court of First
Instance of Cotabato in Civil Case No. 241, and for that reason,
that the latter court has exclusive jurisdiction to determine
whether its legal processes are wrongful or not; and even
granting that the Court of First Instance of Manila had proper
jurisdiction, the particular cause of action in said Civil Case No.
13778 is banned by the decision of the Justice of the Peace
Court of Buayan, Cotabato."cralaw virtua1aw library
From the decision of the Court of Appeals dismissing his
petition for certiorari, the petitioner has interposed the present
appeal by way of certiorari, assigning the following alleged
errors:jgc:chanrobles.com.ph
"1. The Court of Appeals erred in finding the motion to dismiss
dated June 19, 1951 in Civil Case No. 13778 of Manila as no
motion at all.
"2. The Court of Appeals erred in sustaining the ruling of the
Court of First Instance of Manila that Ofrecino T. Santos was in
default in Civil Case No. 13778.
"3. The Court of Appeals erred in finding that the petition for
relief from order dated August 23, 1951 was ’impliedly
overruled when the respondent court set Civil Case No. 13778
for hearing, received plaintiff’s evidence and finally rendered
decision therein.’
"4. The Court of Appeals erred in holding Ofrecino T. Santos
under estoppel to raise the ’issue of jurisdiction.’
"5. The Court of Appeals erred in sustaining a decision that was
null and void, emanating as it did from a court which had no
jurisdiction to try Civil Case No. 13778."cralaw virtua1aw library
Without deciding whether the petitioner’s motion to dismiss
filed in Civil Case No. 13778 was a mere scrap of paper for lack
of notice of hearing, it is clear that he could and should have
appealed from the decision on the merits rendered therein by
the Court of First Instance of Manila, of which he was duly
notified, raising in said appeal the propriety of the ruling of
default against him, the failure of the trial court to expressly
dispose of his petition for relief, and the principal question of
jurisdiction. It is elementary that certiorari will not lie where
the remedy of appeal is available.
On the issue of jurisdiction, it is to be recalled that, when
respondent’s tractor was levied upon, it was not a party in Civil
Case No. 241, and although an amended complaint was filed,
no new writ of attachment was issued so as to cover
respondent’s properties. It is also significant that Civil Case No.
241 was dismissed by the Court of First Instance of Cotabato
for lack of jurisdiction. We have no hesitancy in declaring that
the Court of First Instance of Manila correctly took cognizance
of Civil Case No. 13778, because the respondent sought
damages, not on the allegation that the writ of attachment was
illegally or wrongfully issued by the Court of First Instance of
Cotabato in Civil Case No. 241, but on theory that said writ was
caused by the petitioner to be levied upon the tractor of the
respondent which was not a party defendant. The filing of the
amended complaint did not cure the defect, since the seizure
continued to be in virtue of the original writ, none having been
issued under the amended complaint.
The petitioner is invoking the following pronouncement in our
decision in Cruz v. Manila Surety & Fidelity Co., Inc., Et Al., 49
Off. Gaz. (3) 964; 92 Phil. 699:jgc:chanrobles.com.ph
"The procedure for recovery of damages on account of the
issuance of a writ of attachment, injunction, receivership, and
replevin proceedings, as interpreted in the cases adverted to,
requires that the claim for damages should be presented in the
same action which gave rise to the special proceeding in order
that it may be included in the final judgment of the case, and it
cannot be the subject of a separate action. The philosophy of
the ruling seems to be that the court that had acted on the
special proceeding which occasioned the damages has the
exclusive jurisdiction to assess them because of its control of
the case. This ruling is sound and tends to avoid multiplicity of
action."cralaw virtua1aw library
The citation is not controlling, for the reason that, apart from
the circumstance that, as already stated, the respondent has
never claimed that the writ of attachment was wrongfully
issued in Civil Case No. 241, it appears that the latter case was
dismissed for lack of jurisdiction, and no claim for damages
could therefore properly have been presented in said case,
because the Court of First Instance of Cotabato, thus lacking
jurisdiction, was in fact prevented from rendering any final
judgment therein which could include such damages.
Avoidance of multiplicity of suite presupposes the competence
of the court in the first or earlier case.
Wherefore, the appealed decision is affirmed, and it is so
ordered with costs against the petitioner.
G.R. No. 158622, January 27, 2016
SPOUSES ROBERT ALAN L. AND NANCY LEE LIMSO, Petitioners,
v. PHILIPPINE NATIONAL BANK AND THE REGISTER OF DEEDS
OF DAVAO CITY, Respondents.
G.R. NO. 169441
DAVAO SUNRISE INVESTMENT AND DEVELOPMENT
CORPORATION AND SPOUSES ROBERT ALAN AND NANCY
LIMSO, Petitioners, v. HON. JESUS V. QUITAIN, IN HIS CAPACITY
AS PRESIDING JUDGE OF REGIONAL TRIAL COURT, DAVAO CITY,
BRANCH 15 AND PHILIPPINE NATIONAL BANK, Respondents.
G.R. NO. 172958
DAVAO SUNRISE INVESTMENT AND DEVELOPMENT
CORPORATION REPRESENTED BY ITS PRESIDENT ROBERT ALAN
L. LIMSO, AND SPOUSES ROBERT ALAN AND NANCY LEE LIMSO,
Petitioners, v. HON. JESUS V. QUITAIN, IN HIS CAPACITY AS
PRESIDING JUDGE OF REGIONAL TRIAL COURT, DAVAO CITY,
BRANCH 15 AND PHILIPPINE NATIONAL BANK, Respondents.
G.R. NO. 173194
PHILIPPINE NATIONAL BANK, Petitioner, v. DAVAO SUNRISE
INVESTMENT AND DEVELOPMENT CORPORATION AND
SPOUSES ROBERT ALAN LIMSO AND NANCY LEE LIMSO,
Respondents.
G.R. NO. 196958
PHILIPPINE NATIONAL BANK, Petitioner, v. DAVAO SUNRISE
INVESTMENT AND DEVELOPMENT CORPORATION AND
SPOUSES ROBERT ALAN L. LIMSO AND NANCY LEE LIMSO,
Respondent.
G.R. NO. 197120
DAVAO SUNRISE INVESTMENT AND DEVELOPMENT
CORPORATION AND SPOUSES ROBERT ALAN AND NANCY LEE
LIMSO, Petitioners, v. PHILIPPINE NATIONAL BANK,
Respondent.
G.R. NO. 205463
IN THE MATTER OF THE PETITION EX-PARTE FOR THE ISSUANCE
OF THE WRIT OF POSSESSION UNDER LRC RECORD NO. 12973,
18031 AND LRC RECORD NO. 317, PHILIPPINE NATIONAL BANK,
DECISION
LEONEN, J.:
There is no mutuality of contract when the interest rate in a
loan agreement is set at the sole discretion of one party. Nor is
there any mutuality when there is no reasonable means by
which the other party can determine the applicable interest
rate. These types of interest rates stipulated in the loan
agreement are null and void. However, the nullity of the
stipulated interest rate does not automatically nullify the
provision requiring payment of interest. Certainly, it does not
nullify the obligation to pay the principal loan obligation.
These consolidated cases arose from three related actions filed
before the trial courts of Davao City.
In 1993, Spouses Robert Alan L. Limso and Nancy Lee Limso
(Spouses Limso)1 and Davao Sunrise Investment and
Development Corporation (Davao Sunrise) took out a loan
secured by real estate mortgages from Philippine National
Bank.2
The loan was in the total amount of P700 million, divided into
two (2) kinds of loan accommodations: a revolving credit line of
P300 million, and a seven-year long-term loan of P400 million.3
To secure the loan, real estate mortgages were constituted on
four (4) parcels of land registered with the Registry of Deeds of
Davao City.4 The parcels of land covered by TCT Nos. T-147820,
T-151138, and T-147821 were registered in the name of Davao
Sunrise, while the parcel of land covered by TCT No. T-140122
was registered in the name of Spouses Limso.5
In 1995, Spouses Limso sold the parcel of land covered by TCT
No. T-140122 to Davao Sunrise.6
Spouses Limso and Davao Sunrise had difficulty in paying their
loan. In 1999, they requested that their loan be restructured.
After negotiations, Spouses Limso, Davao Sunrise, and
Philippine National Bank executed a Conversion, Restructuring
and Extension Agreement.7

The principal obligation in the restructured agreement totalled
P1.067 billion. This included P217.15 million unpaid interest.8
The restructured loan was divided into two (2) parts. Loan I was
for the principal amount of P5 83.18 million, while Loan II was
for the principal amount of P483.78 million.9 The restructured
loan was secured by the same real estate mortgage over four
(4) parcels of land in the original loan agreement. All the
properties were registered in the name of Davao Sunrise.10
The terms of the restructured loan agreement state:
SECTION 1. TERMS OF THE CONVERSION,
RESTRUCTURING AND EXTENSION
1.01 The Conversion/Restructuring/Extension. Upon
compliance by the Borrowers with the conditions precedent
provided herein, the Obligations shall be converted,
restructured and/or its term extended effective January 1, 1999
(the "Effectivity Date") in the form of term loans (the "Loans")
as follows:
chanRoblesvirtualLawlibrary
(a) The Credit Line portion of the Obligations is hereby
converted and restructured into a Seven-Year Long Term Loan
(the "Loan I") in the principal amount of P583.18 Million;
(b) The original term of the Loan is hereby extended for
another four (4) years (from September 1, 2001 to December
31, 2005), and interest portion of the Obligations (including the
interest accruing on the Credit Line and Loan up to December
31, 1998 estimated at P49.83 Million) are hereby capitalized.
Accordingly, both the Loan and Interest portions of the
Obligations are hereby consolidated into a Term Loan (the
"Loan II") in the aggregate principal amount of P483.78 Million;
SECTION 2. TERMS OF LOAN I
2.01 Amount of Loan I. Loan I shall be in the principal amount
not exceeding PESOS: FIVE HUNDRED EIGHTY THREE MILLION
ONE HUNDRED EIGHTY THOUSAND (P583,180,000.00).
2.02 Promissory Note. Loan I shall be evidenced by a
promissory note (the "Note I") to be issued by the Borrowers in
favor of the Bank in form and substance satisfactory to the
Bank.
2.03 Principal Repayment. The Borrowers agree to repay Loan I
within a period of seven (7) years (inclusive of a one (1) year
grace period) in monthly amortizations with the first
amortization to commence on January 2000 and a balloon
payment on or before the end of the 7th year on December
2005.
2.04 Interest, (a) The Borrowers agree to pay the Bank interest
on Loan I from the Effective Date, until the date of full payment
thereof at the rate per annum to be set by the Bank. The
interest rate shall be reset by the Bank every month.
(b) The interest provided in clause (a) above shall be payable
monthly in arrears to commence on January, 1999.
SECTION 3. TERMS OF LOAN II
3.01 Amount of Loan II. Loan II shall be in the principal amount
not exceeding PESOS: FOUR HUNDRED EIGHTY THREE MILLION
SEVEN HUNDRED EIGHTY THOUSAND (P483,780,00.00).
3.02 Promissory Note. Loan II shall be evidenced by a
promissory note (the "Note II") to be issued by the Borrowers
in favor of the Bank in form and substance satisfactory to the
Bank.
3.03 Principal Repayment. The Borrowers agree to repay Loan II
within a period of seven (7) years (inclusive of a one (1) year
grace period) in monthly amortizations with the first
amortization to commence on January 2000 and a balloon
payment on or before December 2005.
3.04 Interest, (a) The Borrowers agree to pay the Bank interest
on Loan II from the Effective Date, until the date of full
payment thereof at the rate per annum to be set by the Bank.
The interest rate shall be reset by the Bank every month.
(b) The interest provided in clause (a) above shall be payable
monthly in arrears to commence on January 1999.11 (Emphasis
provided)
Spouses Limso and Davao Sunrise executed promissory notes,
both dated January 5, 1999, in Philippine National Bank's favor.
The promissory notes bore the amounts of P583,183,333.34
and P483,811,798.93.12 The promissory note for Loan II
includes interest charges because one of the preambular
clauses of the Conversion, Restructuring and Extension
Agreement states that:
WHEREAS, the Borrowers acknowledge that they have
outstanding obligations (the "Obligations") with the Bank
broken down as follows:
(i) Credit Line - P583.18 Million (as of September 30, 1998);
(ii) Loan - P266.67 Million (as of September 30, 1998); and
(iii) Interest - P217.15 Million (as of December 31, 1998)
[.]13ChanRoblesVirtualawlibrary
Spouses Limso and Davao Sunrise encountered financial
difficulties. Despite the restructuring of their loan, they were
still unable to pay.14 Philippine National Bank sent demand
letters. Still, Spouses Limso and Davao Sunrise failed to pay.15
On August 21, 2000, Philippine National Bank filed a Petition for
Extrajudicial Foreclosure of Real Estate Mortgage before the
Sheriff's Office in Davao City.16 The Notice of Foreclosure was
published. The bank allegedly complied with all the other legal
requirements under Act No. 3135.17 The auction sale was held
on October 26, 2000. Ball Park Realty Corporation, through its
representative Samson G. To, submitted its bid in the amount
of P1,521,045,331.49.18 Philippine National Bank's bid was in
the amount of P1,521,055,331.49. Thus, it was declared the
highest bidder.19
After the foreclosure sale, but before the Sheriff could issue the
Provisional Certificate of Sale,20 Spouses Limso and Davao
Sunrise filed a Complaint for Reformation or Annulment of
contract against Philippine National Bank, Arty. Marilou D.
Aldevera, in her capacity as Ex-Officio Provincial Sheriff of
Davao City, and the Register of Deeds of Davao City.21 The
Complaint was filed on October 30, 2000, raffled to Branch 17
of the Regional Trial Court of Davao City, and docketed as Civil
Case No. 28,170-2000.22 It prayed for:
[the] declaration of nullity of unilateral imposition and
increases of interest rates, crediting of illegal interests collected
to [Spouses Limso and Davao Sunrise's] account; elimination of
all uncollected illegal interests; reimposition of new interest
rates at 12% per annum only from date of filing of Complaint,
total elimination of penalties; elimination also of attorney's
fees or its reduction; declaration of nullity of auction sale and
the foreclosure proceedings; reduction of both loan accounts;
reformation or annulment of contract, reconveyance, damages
and injunction and restraining order.23
Immediately after the Complaint was filed, the Executive
Judge24 of the Regional Trial Court of Davao City issued a 72-
hour restraining order preventing Philippine National Bank
from taking possession and selling the foreclosed
properties.25cralawred
Spouses Limso subsequently filed an amended Complaint.26
The prayer in the amended Complaint stated:
PRAYER
WHEREFORE, it is respectfully prayed that judgment issue in
favor of plaintiffs and against the defendants:
ON THE TEMPORARY
RESTRAINING ORDER
1. That, upon the filing of the above-entitled case, a
TEMPORARY RESTRAINING ORDER be maintained enjoining the
defendants from executing the provisional Certificate of Sale
and final Deed of Absolute Sale; confirmation of such sale;
taking immediate possession thereof and from selling to third
parties those properties covered by TCT Nos. T-147820, T-
147821/T-246386 and T-247012 and its improvements nor to
mortgage or pledge the same prior to the final outcome of the
above-entitled case, including other additional acts of
foreclosure;.
2. That, plaintiffs' application for the issuance of the [Writ of
Preliminary Injunction] be concluded within the 20 days
lifetime period of the [Temporary Restraining Order], and
AFTER TRIAL ON THE MERITS
3. To declare the injunction as final;
4. Declaring that the unilateral increases of interest rates
imposed by the defendant bank over and above the stipulated
interest rates provided for in the Promissory Notes, be also
considered as null and void and thereafter lowering the same
to 12% per annum only, from the date of the filing of the
Complaint;
5. Declaring also that all illegally imposed interest rates and
penalty charges be considered eliminated and/or deducted
from any account balance of plaintiffs;
6. Declaring also either the complete elimination of attorney's
fees, or in the alternative, reducing the same to P500,000.00
only;
7. Declaring the reduction of the loan account balance to
P827,012,149.50 only;
8. That subsequent thereto, ordering a complete reformation
of the loan agreement and Real Estate Mortgage which will
now embody the lawful terms and conditions adjudicated by
this Honorable Court, or in the alternative, ordering its
annulment, as may be warranted under the provision of Article
1359 of the New Civil Code;
9. Ordering the defendant Register of Deeds to refrain from
issuing a new title in favor of third parties, and to execute the
necessary documents necessary for the reconveyance of the
properties now covered by TCT Nos. T-147820, T-147821, T-
246386 and T-247012 from the defendant bank in favor of the
plaintiffs upon payment of the recomputed loan accounts;
10. Ordering also the defendant bank to pay to the plaintiffs
the sum of at least P500,000.00 representing business losses
and loss of income by the later [sic] arising from the
improvident and premature institution of extrajudicial
foreclosure proceedings against the plaintiffs;
11. Ordering again the defendant bank to pay to the plaintiffs
the sum of P400,000.00 as attorney's fees and the additional
sum of P100,000.00 for expenses incident to litigation; and
12. To pay the costs and for such other reliefs just and proper
under the circumstances.27 (Underscoring in the original)
Through the Order28 dated November 20, 2000, Branch 17 of
the Regional Trial Court of Davao City denied Spouses Limso's
application for the issuance of a writ of preliminary
injunction.29
Spouses Limso moved for reconsideration. On December 4,
2000, Branch 17 of the Regional Trial Court of Davao City set
aside its November 20, 2000 Order and issued a writ of
preliminary injunction.30

Philippine National Bank then moved for reconsideration of the
trial court's December 4, 2000 Order. The bank's Motion was
denied on December 21, 2000. Hence, Philippine National Bank
filed before the Court of Appeals a Petition for Certiorari
assailing the December 4, 2000 and December 21, 2000 Orders
of the trial court. This was docketed as CA G.R. SP. No.
63351.31
In the meantime, Branch 17 continued with the trial of the
Complaint for Reformation or Annulment of Contract with
Damages.32
On January 10, 2002, the Court of Appeals issued the
Decision33 in CA G.R. SP. No. 63351 setting aside and annulling
the Orders dated December 4, 2000 and December 21, 2000
and dissolving the writ of preliminary injunction.34
Spouses Limso and Davao Sunrise moved for reconsideration of
the Court of Appeals' January 2, 2002 Resolution in CA G.R. SP
No. 63351 but the motion was denied.35 They then filed a
Petition for Review on Certiorari before this court.36 Their
Petition was docketed as G.R. No. 152812, which was denied on
procedural grounds.37
In view of the dissolution of the writ of preliminary injunction,
Acting Clerk of Court and Ex-officio Provincial Sheriff Rosemarie
T. Cabaguio issued the Sheriff's Provisional Certificate of Sale
dated February 4, 2002 in the amount of P1,521,055,331.49.38
However, the Sheriff's Provisional Certificate of Sale39 did not
state the applicable redemption period and the redemption
price payable by the mortgagor or redemptioner.40cralawred
On the same date, Philippine National Bank presented the
Sheriff's Provisional Certificate of Sale to the Register of Deeds
of Davao City in order that the title to the foreclosed properties
could be consolidated and registered in Philippine National
Bank's name. The presentation was recorded in the Primary
Entry Book of Davao City's Registry of Deeds under Act No. 496
and entered as Entry Nos. 4762 to 4765.41
On February 5, 2002, the registration of the Certificate of Sale
was elevated en consulta by Atty. Florenda T. Patriarca (Atty.
Patriarca) , Acting Register of Deeds of Davao City, to the Land
Registration Authority in Manila. This was docketed as Consulta
No. 3405.42
Acting on the consulta, the Land Registration Authority issued
the Resolution dated May 21, 2002, which states:43
"WHEREFORE, in view of the foregoing, the Sheriff's Provisional
Certificate of Sale dated February 4, 2002 is registrable on TCT
Nos. T-147820, T-147386, T-247012 provided all other
registration requirements are complied with."44
Meanwhile, on March 25, 2002, the Spouses Limso filed a
Petition for Declaratory Relief with Prayer for Temporary
Restraining Order/Injunction on March 25, 2002 against
Philippine National Bank, Atty. Rosemarie T. Cabaguio, in her
capacity as Ex-Officio Provincial Sheriff, and the Register of
Deeds of Davao City (Petition for Declaratory Relief). The
Sheriff's Provisional Certificate of Sale allegedly did not state
any redemption price and period for redemption. This case was
raffled to Branch 14 of the Regional Trial Court of Davao City
and docketed as Civil Case No. 29,036-2002.45
The Petition for Declaratory Relief was filed while the
Complaint for Reformation or Annulment with Damages was
still pending before Branch 17 of the Regional Trial Court of
Davao City.
Spouses Limso subsequently filed an Amended Petition for
Declaratory Relief, alleging:
6. That Petitioners with the continuing crisis and the unstable
interest rates imposed by respondent PNB admittedly failed to
pay their loan, the demand letters were sent to both debtors-
mortgagors separately, one addressed to the Petitioners and
another addressed to DSIDC, the last of which was dated April
12, 2000 xxx;
7. That on August 21, 200(0), respondent PNB filed a Petition
for Extrajudicial Foreclosure of the mortgaged properties
against the petitioners-mortgagors-debtors and DSIDC;
8. That on October 26, 2000, the mortgaged properties were
auctioned with the respondent PNB as the highest bidder;
9. That on February 4, 2002, a Sheriff's Provisional Certificate of
Sale was issued by respondent Sheriff who certified xxxx
10. That the said Sheriff's Provisional Certificate of Sale did not
contain a provision usually contained in a regular Sheriff's
Provisional Certificate of Sale as regards the period of
redemption and the redemption price to be raised within the
ONE (1) YEAR redemption period in accordance with Act 3135,
under which same law the extrajudicial petition for sale was
conducted as mentioned in the Certificate;
11. That the Sheriff's Provisional Certificate of Sale has not yet
been registered with the office of respondent Register of Deeds
yet; that petitioners and DSIDC are still in actual possession of
the subject properties;
12. That sometime in the middle part of year 2000, Republic
Act No. 8791 otherwise known as General Banking Laws of
2000 was approved and finally passed on April 12, 2000 and
took effect sometime thereafter;
13. That among the provisions of the said law particularly,
Section 47 dealt with Foreclosure of Real Estate Mortgage,
quoted verbatim hereunder as follows:
chanRoblesvirtualLawlibrary
"Sec. 47. Foreclosure of Real Estate Mortgage. - In the event of
foreclosure, whether judicially or extra-judicially, or any
mortgage on real estate which is security for any loan or other
credit accommodation granted, the mortgagor or debtor whose
real property has been sold for the full or partial payment of his
obligation shall have the right within one year after the sale of
the real estate, to redeem the property by paying the amount
due under the mortgage deed, with interest thereon at rate
specified in the mortgage, and all the costs and expenses
incurred by the bank or institution from the sale and custody of
said property less the income derived therefrom. However, the
purchaser at the auction sale concerned whether in a judicial or
extra-judicial foreclosure shall have the right to enter upon and
take possession of such property immediately after the date of
the confirmation of the auction sale and administer the same in
accordance with law. Any petition in court to enjoin or restrain
the conduct of foreclosure proceedings instituted pursuant to
this provision shall be given due course only upon the filing by
the petitioner of a bond in an amount fixed by the court
conditioned that he will pay all the damages which the bank
may suffer by the enjoining or the restraint of the foreclosure
proceeding.
Notwithstanding Act 3135, juridical persons whose property is
being sold pursuant to an extrajudicial foreclosure, shall have
the right to redeem the property in accordance with this
provision until, but not after, the registration of the certificate
of foreclosure sale with the applicable Register of Deeds which
in no case shall be more than three (3) months after
foreclosure, whichever is earlier. Owners of property that has
been sold in a foreclosure sale prior to the effectivity of this Act
shall retain their redemption rights until their expiration."
14. That it is clear and evident that the absence of provisions as
to redemption period and price in the Sheriff's Provisional
Certificate of Sale issued by respondent Sheriff, that
respondent PNB and Sheriff intended to apply the provisions of
Section 47 of Republic Act No. 8791 which reduced the period
of redemption of a juridical person whose property is being
sold pursuant to an extrajudicial foreclosure sale until but not
after the registration of the Certificate of Sale with the
applicable Register of Deeds which in no case shall be more
than three (3) months after foreclosure, whichever is earlier;
15. That Petitioners in this subject mortgage are Natural
Persons who are principal mortgagors-debtors and at the same
time registered owners of some properties at the time of the
mortgage;
16. That the provisions of Republic Act No. 8791 do not make
mention nor exceptions to this situation where the Real Estate
Mortgage is executed by both Juridical and Natural Persons;
hence, the need to file this instant case of Declaratory Relief
under Rule 63 of the Revised Rules of Court of the Philippines;
....
PRAYER
WHEREFORE, it is respectfully prayed that judgment in favor of
petitioners and against the respondent-PNB;
1. That upon the filing of the above-entitled case, a
TEMPORARY RESTRAINING INJUNCTION be issued immediately
ordering a status quo, enjoining the Register of Deeds and
defendant-PNB from registering the subject Provisional
Certificate of Sale from consolidating the title of the property
covered by Transfer Certificate of Title Nos. T-147820, T-
147821, T-246386, T-24712 and Land Improvement, Etc.
2. That petitioners' application of the issuance of the Writ of
Preliminary Injunctions be considered and granted within 20
days lifetime period of the TRO.
AFTER TRIAL ON THE MERITS
3. To declare the injunction as final;
4. Ordering the Register of Deeds to refrain from registering the
Sheriff's Certificate of Sale and further from consolidating the
titles of the said properties in its name and offering to sell the
same to interested buyers during the pendency of the above
entitled case, while setting the date of hearing on the propriety
of the issuance of such Writ of Preliminary Injunction.
ON THE MAIN CASE
5. To declare the petitioners' right as principal
mortgagors/owner jointly with a juridical person to redeem
within a period of 1 year the properties foreclosed by
respondent PNB still protected and covered by Act 3135.
6. To declare the provisions on Foreclosure of Real Estate
Mortgage under Republic Act 8791 or General Banking Laws of
2000 discriminating and therefore unconstitutional.
OTHER RELIEFS AND REMEDIES are likewise prayed for.46
Branch 14 of the Regional Trial Court of Davao City issued a
temporary restraining order47 on April 10, 2002. This
temporary restraining order enjoined the Register of Deeds
from registering the Sheriff's Provisional Certificate of Sale.48
The temporary restraining order was issued without first
hearing the parties to the case. Hence, the temporary
restraining order was recalled by the same trial court in the
Order49 dated April 16, 2002.
During the hearing for the issuance of a temporary restraining
order in the Petition for Declaratory Relief, Spouses Limso
presented several exhibits, which included: Philippine National
Bank's demand letter dated April 12, 2000; Philippine National
Bank's letter to the Acting Register of Deeds of Davao City
dated February 4, 2002 requesting the immediate registration
of the Sheriff's Provisional Certificate of Sale; and the Notice of
Foreclosure dated September 5, 2000.50
Counsel for Philippine National Bank objected to the purpose of
the presentation of the exhibits and argued that since Spouses
Limso were Davao Sunrise's co-debtors, they "were notified as
a matter of formality[.]"51
On May 3, 2002, Branch 14 granted the prayer for the issuance
of the writ of preliminary injunction enjoining the registration
of the Sheriff's Provisional Certificate of Sale.52

Branch 14 reasoned as follows:
This Court finds no merit in the claims advanced by private
respondent Bank for the following reasons:
1. That the primary ground why the Court of Appeals dissolved
the preliminary injunction granted by Branch 17 of this Court
was because the ground upon which the same was issued was
based on a pleading which was not verified;
2. That Civil Case No. 28,170-2000 and Civil Case No. 29,036-
2002 while involving substantially the same parties, the same
do not involved [sic] the same issues as the former involves
nullity of unilateral imposition and increases of interest rates,
etc. nullity of foreclosure proceedings, reduction of both loan
accounts, reformation or annulment of contract, reconveyance
and damages, whereas the issues raised in the instant petition
before this Court is the right and duty of the petitioners under
the last paragraph of Sec. 47, Republic Act No. 8791 and
whether the said section of said law is applicable to the
petitioners considering that the mortgage contract was
executed when Act No. 3135 was the controlling law and was in
fact made part of the contract;
3. That the petition, contrary to the claim of private respondent
Bank, clearly states a cause of action; and
4. That since petitioners are parties to the mortgage contract
they, therefore, have locus standi to file the instant petition.
If Section 7 of Republic Act 8791 were made to apply to the
petitioners, the latter would have a shorter period of three (3)
months to exercise the right of redemption after the
registration of the Certificate of Sale, hence, the registration of
the Sheriff's Provisional Certificate of Sale would cause great
and irreparable injury to them as their rights to the properties
sold at public auction would be lost forever if the registration of
the same is not enjoined.53ChanRoblesVirtualawlibrary
Spouses Limso posted an injunction bond that was approved by
the trial court in the Order dated May 6, 2002. Thus, the writ of
preliminary prohibitory injunction was issued.54
Philippine National Bank moved for reconsideration of the
Orders dated May 3, 2002 and May 6, 2002.55
Around this time, Judge William M. Layague (Judge Layague),
Presiding Judge of Branch 14, was on leave.56 Philippine
National Bank's Motion for Reconsideration was granted by the
Pairing Judge, Judge Jesus V. Quitain (Judge Quitain),57 and the
writ of preliminary prohibitory injunction was dissolved in the
Order dated May 23, 2002.58
On May 30, 2002, Philippine National Bank's lawyers went to
the Register of Deeds of Davao City "to inquire on the status of
the registration of the Sheriff's Provisional Certificate of
Sale."59
Philippine National Bank's lawyers were informed that the
documents they needed "could not be found and that the
person in charge thereof, Deputy Register of Deeds Jorlyn
Paralisan, was absent."60
Philippine National Bank contacted Jorlyn Paralisan at her
residence. She informed Philippine National Bank that the
documents they were looking for were all inside Atty.
Patriarca's office.61
Subsequently, Atty. Patriarca informed the representatives of
Philippine National Bank that the Register of Deeds "would not
honor certified copies of [Land Registration Authority]
resolutions even if an official copy of the [Land Registration
Authority] Resolution was already received by that Office
through mail."62
On May 31, 2002, Philippine National Bank's representatives
returned to the Register of Deeds of Davao City and learned
that Atty. Patriarca, the Acting Register of Deeds, had not
affixed her signature, which was necessary to complete the
registration of the Sheriff's Certificate of Sale.63
Subsequently, Judge Layague reinstated the writ of preliminary
prohibitory injunction in the Order64 dated June 24, 2002.
Aggrieved, Philippine National Bank filed before the Court of
Appeals a Petition for Certiorari, Prohibition and Mandamus
with Prayer for Temporary Restraining Order and Writ of
Preliminary Injunction, both Prohibitory and Mandatory,
docketed as CA G.R. SP No. 71527. The Petition assailed the
June 24, 2002 Order of Branch 14 of the Regional Trial Court,
which reinstated the writ of preliminary prohibitory
injunction.65
On July 3, 2002, Philippine National Bank inspected the titles
and found that correction fluid had been applied over Atty.
Patriarca's signature on the titles.66
Also on July 3, 2002, Philippine National Bank filed before the
Regional Trial Court of Davao City a Petition for Issuance of the
Writ of Possession under Act No. 3135, as amended, and
Section 47 of Republic Act No. 8791.67 This was docketed as
Other Case No. 124-2002 and raffled to Branch 15 of the
Regional Trial Court of Davao City, presided by Judge Quitain.68
Davao Sunrise filed a Motion to Expunge and/or Dismiss
Petition for Issuance of Writ of Possession dated July 12,
2002.69 In the Motion to Expunge, Davao Sunrise pointed out
that Branch 1470 (in the Petition for Declaratory Relief
docketed as Civil Case No. 29,036-2002) issued a writ of
preliminary injunction "enjoining the Provincial Sheriff, the
Register of Deeds of Davao City[,] and [Philippine National
Bank] from registering the Sheriff's Provisional Certificate of
Sale and, if registered, enjoining [Philippine National Bank] to
refrain from consolidating the title of the said property in its
name and/or offering to sell the same to interested buyers
during the pendency of the case."71
On July 18, 2002, Spouses Limso filed a Motion to Intervene72
in Other Case No. 124-2002.73
In the Resolution dated August 13, 2002, the Court of Appeals
granted the temporary restraining order prayed for by
Philippine National Bank (in CA G.R. SP No. 71527) enjoining
the implementation of Judge Layague's Orders dated May 3,
2002 and June 24, 2002. These Orders pertained to the writ of
preliminary injunction enjoining the registration of the Sheriff's
Provisional Certificate of Sale.74
Spouses Limso filed a Motion for Reconsideration with Prayers
for the Dissolution of Temporary Restraining Order and to Post
Counter Bond.75
The Court of Appeals granted Philippine National Bank's
Petition for Certiorari in the Decision76 dated December 11,
2002. The dispositive portion of the Decision states:
WHEREFORE, premises considered, the writ prayed for in the
herein petition is GRANTED and the assailed Orders of
respondent judge dated May 3 and June 24, 2002 granting the
writ of preliminary injunction are SET ASIDE. Civil Case No.
29,036-2002 is hereby ordered DISMISSED and respondent
Register of Deeds of Davao City is hereby ordered to register
petitioner PNB's Sheriff's Provisional Certificate of Sale and
cause its annotation on TCTNos. T-147820, T-147821, T-246386
andT-247012.77
Spouses Limso filed a Motion to Reconsider Decision and To
Call Case For Hearing on Oral Argument, which was opposed by
Philippine National Bank.78 Oral arguments were conducted on
March 19, 2003.79
On June 10, 2003, the Court of Appeals denied Spouses Limso's
Motion for Reconsideration.80
Spouses Limso then filed a Petition for Review on Certiorari81
before this court, questioning the Decision in CA G.R. SP No.
71527, which ordered the Register of Deeds to register the
Sheriff's Provisional Certificate of Sale. This was docketed as
G.R. No. 158622.82
With regard to the Complaint for Reformation or Annulment of
Contract with Damages, Branch 17 of the Regional Trial Court
of Davao City promulgated its Decision83 on June 19, 2002.
Branch 17 ruled in favor of Spouses Limso and Davao Sunrise. It
found the interest rate provisions in the loan agreement to be
unreasonable and unjust because the imposable interest rates
were to be solely determined by Philippine National Bank. The
arbitrary imposition of interest rates also had the effect of
increasing the total loan obligation of Spouses Limso and Davao
Sunrise to an amount that would be beyond their capacity to
pay.84
The dispositive portion of the Decision in the Complaint for
Reformation or Annulment with Damages states:
WHEREFORE, finding the evidence of plaintiffs corporation
through counsel, more than sufficient, to constitute a
preponderance to prove the various unilateral impositions of
increased interest rates by defendant bank, such usurious,
unreasonable, arbitrary, unilateral imposition of interest rates,
are declared, null and void.
Accordingly, decision is issued in favor of the defendant bank,
in a reduced amount based on the following:
The amount of One Hundred Twenty Seven Million, One
Hundred Fifty Thousand (P127,150,000.00) Pesos, representing
illegal interest rate, the amount of One Hundred Seventy Six
Million, Ninety Eight Thousand, Forty Five and 95/100
(P176,098,045.95) Pesos, representing illegal penalty charges
and the amount of One Hundred Thirty Six Million, Nine
Hundred Thousand, Nine Hundred Twenty Eight and 85/100
(P136,900,928.85) Pesos, as unreasonable 10% Attorney's fees
or in the total amount of Four Hundred Forty Million, One
Hundred Forty Eight Thousand, Nine Hundred Seventy Four and
79/100 (P440,148,974.79) Pesos, are declared null and void,
rescending [sic] and/or altering the loan agreement of parties,
on the ground of fraud, collusion, mutual mistake, breach of
trust, misconduct, resulting to gross inadequacy of
consideration, in favor of plaintiffs corporation, whose total
reduced and remaining principal loan obligation with defendant
bank, shall only be the amount of Eight Hundred Eighty Two
Million, Twelve Thousand, One Hundred Forty Nine and 50/100
(P882,012,149.50) Pesos, as outstanding remaining loan
obligation of plaintiffs corporation, with defendant bank, to be
deducted from the total payments so far paid by plaintiffs
corporation with defendant bank as already stated in this
decision.
That thereafter, the above-amount as ordered reduced, shall
earn an interest of 12% per annum, the lawful rate of interest
that should legitimately be imposed by defendant bank to the
outstanding remaining reduced principal loan obligation of
plaintiffs corporation.
Notwithstanding, defendant bank, is entitled to a reduced
Attorney's fees of Five Hundred Thousand (P500,000.00) Pesos,
as a reasonable Attorney's fees, subject to subsequent
pronouncement as to the real status of defendant bank, on
whether or not, said institution is now a private agency or still a
government instrumentality in its capacity to be entitled or not
of the said Attorney's fees.
The prayer of defendant bank for award of moral damages and
exemplary damages, are denied, for lack of factual and legal
basis.
SO ORDERED.85 (Emphasis in the original)
Philippine National Bank moved for reconsideration of the
Decision, while Spouses Limso and Davao Sunrise filed a Motion
for partial clarification of the Decision.86
Branch 17 of the Regional Trial Court of Davao City
subsequently issued the Order87 dated August 13, 2002
clarifying the correct amount of Spouses Limso and Davao
Sunrise's obligation, thus:
WHEREFORE, finding the motion for reconsideration of
defendant bank through counsel, to the decision of the court,
grossly bereft of merit, merely a reiteration and rehash of the
arguments already set forth during the hearing, including
therein matters not proved during the trial on the merits, and
considered admitted, is denied.
To provide a clarification of the decision of this court, relative
to plaintiffs motion for partial clarification with comment of
defendant bank through counsel, the correct remaining balance
of plaintiffs account with defendant bank, pursuant to the
decision of this court, in pages 17 and 18, dated June 19, 2002,
is Two Hundred Five Million Eighty Four Thousand Six Hundred
Eighty Two Pesos & 61/100 (P205,084,682.61), as above-
clarified.
SO ORDERED.88ChanRoblesVirtualawlibrary
Philippine National Bank appealed the Decision and Order in
the Complaint for Reconstruction or Annulment with Damages
by filing a Notice of Appeal on August 16, 2002.89 The Notice of
Appeal was approved by the trial court in the Order dated
September 25, 2002.90 The appeal was docketed as CA-G.R. CV
No. 79732.91
On August 20, 2002,92 Spouses Limso and Davao Sunrise filed,
in Other Case No. 124-2002 (Petition for Issuance of Writ of
Possession), a Motion to Inhibit the Presiding Judge (referring
to Judge Quitain, before whom the Petition for Issuance of Writ
of Possession was pending) because his wife, Gladys Isla
Quitain, was a long-time Philippine National Bank employee
who had retired.93 Spouses Limso and Davao Sunrise also
heard rumors that Gladys Isla Quitain had been serving as
consultant for Philippine National Bank even after
retirement.94 Davao Sunrise also filed a Motion to Expunge
and/or Dismiss Petition and argued that the person who signed
for Philippine National Bank was not authorized because no
Board Resolution was attached to the Verification and
Certification against Forum Shopping.
In the Order95 dated March 21, 2003, Judge Quitain denied
three motions:
(1) The Motion to Intervene filed by Spouses Robert Alan Limso
and Nancy Limso;
(2) The Motion to Expunge and/or Dismiss Petition for the
Issuance of Writ of Possession filed by Davao Sunrise
Investment and Development Corporation; and
(3) The Motion for Voluntary Inhibition filed by Davao Sunrise
Investment and Development
Corporation.96ChanRoblesVirtualawlibrary
Judge Quitain denied the Motion to Inhibit on the ground that
the allegations against him were mere suspicions and
conjectures.97 The Motion to Intervene was denied on the
ground that Spouses Limso have no interest in the case, not
being the owners of the property.98
The Motion to Expunge and/or Dismiss filed by Davao Sunrise
was also denied for lack of merit. Judge Quitain ruled that "PNB
Vice President Leopoldo is clearly clothed with authority to
represent and sign in behalf of the petitioner [referring to
Philippine National Bank] as shown by the Verification and
Certification of the said petition as well as the Secretary's
Certificate."99
Spouses Limso and Davao Sunrise filed a Motion for
Reconsideration100 of the Order dated March 21, 2003. Judge
Quitain denied the Motion for Reconsideration in an Order
dated September 1, 2003, only with regard to the Motion to
Intervene and Motion for Voluntary Inhibition. The Motion to
Expunge and/or Dismiss was not mentioned in the September
1,2003 Order.101
Spouses Limso and Davao Sunrise questioned the denial of the
Motion for Inhibition by filing a Petition for Certiorari before
the Court of Appeals on September 26, 2003. This was
docketed as CA G.R. SP No. 79500.102 Spouses Limso and
Davao Sunrise subsequently filed a Supplemental Petition for
Certiorari before the Court of Appeals on October 3, 2003.103
In the meantime, Other Case No. 124-2002 (Petition for
Issuance of Writ of Possession) was set for an ex-parte hearing
on October 10, 2003.104
However, on October 8, 2003, the Court of Appeals granted the
prayer for the issuance of a temporary restraining order in CA
G.R. SP No. 79500 "enjoining public respondent Judge Quitain
from proceeding with Other Case No. 124-2002 for a period of
sixty (60) days from receipt by respondents thereof."105
The temporary restraining order was effective from October 10,
2003 to December 9, 2003.106
On December 12, 2003, Judge Quitain issued the Order
allowing Philippine National Bank to present evidence ex-parte
on December 18, 2003 despite the pendency of other incidents
to be resolved.107
Spouses Limso and Davao Sunrise filed an Urgent Motion for
Cancellation of the December 18, 2003 hearing due to the
pendency of CA G.R. SPNo. 79500.108
Judge Quitain reset the hearing for Other Case No. 124-2002 to
January 23, 2004. The hearing was subsequently reset to
January 30, 2004. In the January 30, 2004 hearing, Judge
Quitain heard the arguments of parties regarding the Urgent
Motion to Cancel Hearing.109
In the Order dated March 12, 2004, Judge Quitain "resolved the
pending Urgent Motion to Cancel Hearing and [Davao Sunrise's]
Motion to Re-schedule Newly Scheduled Hearing Date."110
The March 12, 2004 Order also stated that "the Spouses Limso
have no right to intervene because they are no longer owners
of the subject foreclosed property."111
Spouses Limso treated the March 12, 2004 Order as a denial of
their Motion for Reconsideration regarding their Motion to
Intervene. Thus, they, together with Davao Sunrise, filed a
Petition for Certiorari before the Court of Appeals, which was
docketed as CA G.R. SP No. 84279.112
CA G.R. SP No. 84279 was denied by the Court of Appeals in the
Decision113 dated September 20, 2004.
Spouses Limso and Davao Sunrise filed a Motion for
Reconsideration114 dated September 13, 2004, which was
denied in the Resolution115 dated July 8, 2005.
Spouses Limso and Davao Sunrise then filed a Petition for
Review on Certiorari dated July 26, 2005 before this court. This
was docketed as G.R. No. 168947.116
Despite the pendency of Spouses Limso and Davao Sunrise's
Motion for Reconsideration of the Order denying Davao
Sunrise's Motion to Expunge and/or Dismiss, Philippine
National Bank filed a Motion for Reception of Evidence and/or
Resume Hearing dated March 30, 2004 in Other Case No. 124-
2002.117
Judge Quitain granted the Motion "and set the hearing for
reception of petitioner's evidence on 06 April 2004 at 2:00
p.m."118
Spouses Limso and Davao Sunrise filed an Extremely Urgent
Manifestation and Motion dated April 5, 2004. They prayed for
the cancellation of the hearing for the reason that the March
12, 2004 Order was not yet final and that Davao Sunrise had a
pending Motion for Reconsideration of the Order denying its
Motion to Expunge and/or Dismiss.119
Judge Quitain cancelled the April 6, 2004 hearing due to the
Manifestation and Motion filed by Spouses Limso and Davao
Sunrise.120
Spouses Limso filed a Motion for Reconsideration of the March
12, 2004 Order because it addressed issues other than those
raised in the Motion for Intervention.121
On April 20, 2004, Judge Quitain issued the Order and reset the
case for hearing to May 7, 2004, even though the Motion for
Reconsideration of the Order denying the Motion to Expunge
and/or Dismiss had not been acted upon.122
During the May 7, 2004 hearing, counsel for Spouses Limso and
Davao Sunrise pointed out to Judge Quitain the pendency of
the Motion for Reconsideration of the Order denying the
Motion to Expunge and/or Dismiss.123
Judge Quitain issued the Order dated July 5, 2004 denying
Spouses Limso and Davao Sunrise's Motion for Reconsideration
to the March 12, 2004 Order (referring to the denial of Spouses
Limso's Motion to Intervene). Judge Quitain also set hearing
dates on August 4 and 5, 2004 for the reception of Philippine
National Bank's evidence. Once again, the hearings were
scheduled even though the Motion to Expunge and/or Dismiss
had yet to be resolved.124
Davao Sunrise then filed a Motion to Transfer Case or in the
Alternative to Dismiss the Same on July 30, 2004. Davao Sunrise
reiterated the arguments in its Motion to Expunge and/or
Dismiss.125
Subsequently, Spouses Limso and Davao Sunrise filed an
Extremely Urgent Manifestation and Motion dated August 3,
2004 asking that the hearings scheduled for August 4 and 5,
2004 be cancelled, considering that Davao Sunrise's Motion to
Dismiss/Expunge the Petition was still unresolved.126
On August 4, 2004, Judge Quitain took cognizance of the
Extremely Urgent Manifestation and Motion dated August 3,
2004 and a Very Urgent Motion for Intervention filed by a third
party. Thus, Judge Quitain cancelled the hearings scheduled on
August 4 and 5, 2004, reset the hearing to August 11, 2004, and
"impressed upon the parties that he would be able to resolve
all pending incidents by that time."127
Spouses Limso and Davao Sunrise alleged that the pending
incidents were hastily acted upon by Judge Quitain, as follows:
[O]n 11 August 2004, at around 11:45 a.m., petitioners' counsel
was furnished a copy of public respondent's Order allegedly
dated 06 August 2004 which declared as submitted for
resolution the following incidents, to wit: (a) petitioner DSIDC's
Motion to Transfer the Case to Branch 17; (b) Petitioner
DSIDC's Motion to Postpone Hearing; (c) Motion for
Intervention filed by a certain Karlan Lou Ong; (d) petitioners'
(DSIDC and Spouses Limso) Extremely Urgent Manifestation
and Motion; and (e) Petitioner DSIDC's Manifestation.
. . . And then, at around 2:10 p.m. of the same day, 11 August
2004, when petitioners' counsel was already in court for the
said hearing, he was furnished by a staff of public respondent
Judge Quitain a copy of an Order dated 11 August 2004 and
consisting of two (2) pages, the dispositive portion of which
reads as follows:
"WHEREFOREM(sic), the Court hereby resolves the following
motions: 1) DSIDC's motion to transfer case to Branch 17 or
dismiss the same is denied for lack of merit. 2) DSIDC's (sic)
motion to postpone the hearing is denied for lack of merit. 3)
The motion of Karla Ong to intervene is denied for lack of
merit. 4) The August 5 manifestation of DSIDC is noted."128
(Emphasis in the original)
Spouses Limso and Davao Sunrise also claimed that the Order
dated August 11, 2004 was done hastily so that Philippine
National Bank would be able to present its evidence without
objection.129
Spouses Limso and Davao Sunrise alleged that the August 11,
2004 Order contained factual findings not supported by the
record. When counsel for Spouses Limso and Davao Sunrise
pointed out the errors, Judge Quitain acknowledged the
mistake and reset the August 11, 2004 hearing to August 27,
2004.130
Because of Judge Quitain's actions, Spouses Limso and Davao
Sunrise filed a Motion for Compulsory Disqualification on the
ground that Judge Quitain was biased in Philippine National
Bank's favor.131
In the Order132 dated March 10, 2005, Judge Quitain denied
the Motion for Compulsory Disqualification.
Spouses Limso and Davao Sunrise moved for reconsideration of
the March 10, 2005 Order, while Philippine National Bank filed
an Opposition to the Motion for Reconsideration.133
The August 11, 2004 Order also denied Davao Sunrise's Motion
to Transfer Case to Branch 17 or Dismiss the Same. Since the
Motion to Transfer is a rehash of Davao Sunrise's Motion to
Expunge and/or Dismiss Petition, the denial of the Motion to
Transfer is tantamount to the denial of Davao Sunrise's Motion
to Expunge and/or Dismiss.134 The August 11, 2004 Order did
not specifically state that Spouses Limso and Davao Sunrise's
Motion for Reconsideration dated March 28, 2003 was denied,
but since the issues raised in the Motion to Reconsideration
were also raised in the Motion to Expunge, the August 11, 2004
Order also effectively denied the Motion for
Reconsideration.135
Thus, Spouses Limso and Davao Sunrise filed a Petition136 for
Certiorari before the Court of Appeals, which was docketed as
CA G.R. SP No. 85847.137 Spouses Limso and Davao Sunrise
assailed the March 21, 2003 Order denying Davao Sunrise's
Motion to Expunge and/or Dismiss Petition for Issuance of Writ
of Possession, as well as the August 11, 2004 Order denying
Davao Sunrise's Motion to Dismiss.138
On September 1, 2004, the Court of Appeals promulgated its
Decision139 in CA G.R. No. 79500140 denying Spouses Limso
and Davao Sunrise's Petition, which assailed Judge Quitain's
denial of their Motion to Inhibit.141 The Court of Appeals ruled
that Judge Quitain's reversal of Judge Layague's Orders "may
constitute an error of judgment . . . but it is not necessarily an
evidence of bias and partiality."142
Spouses Limso and Davao Sunrise moved for reconsideration
on September 23, 2004. The Motion was denied in the
Resolution143 dated August 11, 2005.144
While the cases between Spouses Limso, Davao Sunrise, and
Philippine National Bank were pending, Philippine National
Bank, through counsel, filed administrative145 and criminal
complaints146 against Atty. Patriarca.
The administrative case against Atty. Patriarca was docketed as
Administrative Case No. 02-13.147
In the Resolution148 dated January 12, 2005, the Land
Registration Authority found Atty. Patriarca guilty of grave
misconduct and dismissed her from the service.149 Included in
the Resolution are the following pronouncements:
The registration of these documents became complete when
respondent affixed her signature below these annotations.
Whatever information belatedly gathered thereafter relative to
the circumstances as to the registrability of these documents,
respondent cannot unilaterally take judicial notice thereof and
proceed to lift at her whims and caprices what has already
been officially in force and effective, by erasing thereon her
signature. With her years of experience in the Registry, not to
mention her being a lawyer, respondent should have taken the
appropriate steps in filing a query to this Authority regarding
the matter or should have consulted Section 117 of PD 1529 in
relation to Section 12 of Rule 43. The deplorable act of
Respondent was fraught with partiality to favor the DSIDC and
Sps. Limso.150
Atty. Asteria E. Cruzabra (Atty. Cruzabra) replaced Atty.
Patriarca as Register of Deeds of Davao City.151 Philippine
National Bank wrote a letter to Atty. Cruzabra, arguing "that
the Sheriff's Provisional Certificate of Sale was already validly
registered[,]"152 and the unauthorized application of
correction fluid153 to cover the original signature of the Acting
Register of Deeds "did not deprive the Bank of its rights under
the registered documents."154
Meanwhile, on February 10, 2005, as CA-G.R. CV No. 79732,
which was an appeal from Civil Case No. 28,170-2000 (Petition
for Reformation and Annulment of Contract with Damages),
was still pending, Philippine National Bank filed the following
applications before the Court of Appeals Nineteenth
Division:155
Application to Hold Davao Sunrise Investment and
Development Corporation, the Spouses Robert Alan L. Limso
and Nancy Lee Limso and Wellington Insurance Company, Inc.
Jointly and Severally liable for Damages on the Injunction Bond;
and
Application for the Appointment of PNB as Receiver[.]156
Spouses Limso and Davao Sunrise filed their opposition to
Philippine National Bank's application on March 29, 2005.157
Philippine National Bank filed its Reply to the Opposition on
May 5, 2005.158
On March 2, 2006, the Court of Appeals denied Philippine
National Bank's applications, reasoning that:
It is a settled rule that the procedure for claiming damages on
account of an injunction wrongfully issued shall be the same as
that prescribed in Section 20 of Rule 57 of the Revised Rules of
Court. Section 20 provides:
chanRoblesvirtualLawlibrary
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
obligee or 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 obligee not exempt from execution should the bond
or deposit given by the latter be insufficient or fail to fully
satisfy the award.
Records show that when this Court annulled the RTC's order of
injunction, Davao Sunrise thereafter elevated the matter to the
Supreme Court. On July 24, 2002, the Supreme Court denied its
petition for having been filed out of time and an Entry of
Judgment was issued on Sept. 11, 2002.
PNB's instant application however was filed only on February
17, 2005 and/or in the course of its appeal on the main case -
about two (2) years and five (5) months after the judgment
annulling the injunction order attained finality.
Clearly, despite that it already obtained a favorable judgment
on the injunction matter, PNB failed to file (before the court a
quo) an application for damages against the bond before
judgment was rendered in the main case by the court a quo.
Thus, even for this reason alone, Davao Sunrise and its
bondsman are relieved of further liability thereunder.159
(Citations omitted)
The Court of Appeals also denied Philippine National Bank's
application to be appointed as receiver for failure to fulfill the
requirements to be appointed as receiver and for failure to
prove the grounds for receivership.160 It discussed that to
appoint Philippine National Bank as receiver would violate the
rule that "neither party to a litigation should be appointed as
receiver without the consent of the other because a receiver
should be a person indifferent to the parties and should be
impartial and disinterested."161 The Court of Appeals noted
that Philippine National Bank was not an impartial and
disinterested party, and Davao Sunrise objected to Philippine
National Bank's appointment as receiver.162
In addition, Rule 59, Section l(a)163 of the 1997 Rules of Court
requires that the "property or fund involved is in danger of
being lost, removed, or materially injured." The Court of
Appeals found that the properties involved were "not in danger
of being lost, removed[,] or materially injured."164 Further,
Philippine National Bank's application was premature since the
loan agreement was still pending appeal and "a receiver should
not be appointed to deprive a party who is in possession of the
property in litigation."165
The dispositive portion of the Court of Appeals Resolution166
states:
WHEREFORE, above premises considered, the Philippine
National Bank's Application to Hold Davao Sunrise Investment
and Development Corporation, the Spouses Robert Alan L.
Limso and Nancy Lee Limso and Wellington Insurance
Company, Inc. Jointly and Severally Liable for Damages on the
Injunction Bond and its Application for the Appointment of PNB
as Receiver are hereby both DENIED. And, for the reasons
above set forth, the Plaintiff-Appellees' Motion to Dismiss is
likewise DENIED.
With the filing of the Appellants' and the Appellees' respective
Brief(s), this case is considered SUBMITTED for Decision and
ORDERED re-raffled to another justice for study and report.
SO ORDERED.167ChanRoblesVirtualawlibrary
Philippine National Bank filed a Motion for Reconsideration on
March 28, 2006, which was denied in the Resolution168 dated
May 26, 2006.169
Thus, on July 21, 2006, Philippine National Bank filed before
this court a Petition for Review170 on Certiorari questioning
the Court of Appeals' denial of its applications.171 This was
docketed as G.R. No. 173194.172
On February 16, 2007, Philippine National Bank's Ex-Parte
Petition for Issuance of a Writ of Possession docketed as Other
Case No. 124-200 was dismissed173 based on the following
grounds:
(1) For purposes of the issuance of the writ of possession,
Petitioner should complete the entire process in extrajudicial
foreclosure ...
(2) The records disclose the [sic] contrary to petitioner's claim,
the Certificate of Sale covering the subject properties has not
been registered with the Registry of Deeds of Davao City as the
Court finds no annotation thereof. As such, the sale is not
considered perfected to entitled petitioner to the writ of
possession as a matter of rights
[sic].174ChanRoblesVirtualawlibrary
Philippine National Bank filed a Motion for Reconsideration
with Motion for Evidentiary Hearing.175
Acting on the Motion for Reconsideration, the trial court
required the Registry of Deeds to comment on the matter.176
The trial court eventually denied the Motion for
Reconsideration.177
Philippine National Bank appealed the trial court Decision
dismissing the Petition for Issuance of a Writ of Possession by
filing a Rule 41 Petition before the Court of Appeals, which was
docketed as CA-G.R. CV No. 01464-MIN.178
Meanwhile, when CA-G.R. CV No. 79732 was re-raffled,179 it
was re-docketed as CA-G.R. CVNo. 79732-MIN.180
In CA-G.R. CV No. 79732-MIN, the Court of Appeals resolved
the issue of "whether or not there has been mutuality between
the parties, based on their essential equality, on the subject
imposition of interest rates on plaintiffs-appellees' loan
obligation, i.e., the original loan and the restructured loan."181
On August 13, 2009, the Court of Appeals promulgated its
Decision182 in CA-G.R. CV No. 79732-MIN. It held that there
was no mutuality between the parties because the interest
rates were unilaterally determined and imposed by Philippine
National Bank.183
The Court of Appeals further explained that the contracts
between Spouses Limso and Davao Sunrise, on one hand, and
Philippine National Bank, on the other, did not specify the
applicable interest rates. The contracts merely stated the
interest rate to be "at a rate per annum that is determined by
the bank[;]"184 "at the rate that is determined by the Bank to
be the Bank's prime rate in effect at the Date of
Drawdown[;]"185 and "at the rate per annum to be set by the
Bank. The interest rate shall be reset by the Bank every
month."186 In addition, the interest rate would depend on the
prime rate, which was "to be determined by the bank[.]"187 It
was also discussed that:
But it even gets worse. After appellant bank had unilaterally
determined the imposable interest on plaintiffs-appellees loans
and after the latter had been notified thereof, appellant bank
unilaterally increased the interest rates. Further aggravating
the matter, appellant bank did not increase the interest rate
only once but on numerous occasions. Appellant bank
unilaterally and arbitrarily increased the already arbitrarily
imposed interest rate within intervals of only seven (7) days
and/or one (1) month.
....
The interests imposed under the Conversion, Restructuring and
Extension Agreement, is not a valid imposition. DSIDC and
Spouses Limso have no choice except to assent to the
conditions therein as they are heavily indebted to PNB. In fact,
the possibility of the foreclosure of their mortgage securities is
right in their doorsteps. Thus it cannot be considered
"contracts'" between the parties, as the borrower's
participation thereat has been reduced to an unreasonable
alternative that is to "take it or leave it." It has been used by
PNB to raise interest rates to levels which have enslaved
appellees or have led to a hemorrhaging of the latter's assets.
Hence, for being an exploitation of the weaker party, the
borrower, the alleged letter-contracts should also be struck
down for being violative of the principle of mutuality of
contracts under Article 1308.188 (Emphasis in the original)
Thus, the Court of Appeals nullified the interest rates imposed
by Philippine National Bank:
We reiterate that since the unilateral imposition of rates of
interest by appellant bank is not only violative of the principle
of mutuality of contracts, but also were found to be
unconscionable, iniquitous and unreasonable, it is as if there
was no express contract thereon. Thus, the interest provisions
on the (a) revolving credit line in the amount of three hundred
(300) million pesos, (b) seven-year long term loan in the
amount of four hundred (400) million pesos; and (c)
Conversions, Restructuring and Extension Agreement, Real
Estate Mortgage, promissory notes, and all other loan
documents executed contemporaneous with or subsequent to
the execution of the said agreements are hereby declared null
and void.
Such being the case, We apply the ruling of the Supreme Court
in the case of United Coconut Planters Bank vs. Spouses Samuel
and Odette Beluso which stated:
"We see, however, sufficient basis to impose a 12% legal
interest in favor of petitioner in the case at bar, as what we
have voided is merely the stipulated rate of interest and not
the stipulation that the loan shall earn interest."189 (Citation
omitted)
As to the trial court's reduction of the penalty charges and
attorney's fees, the Court of Appeals affirmed the trial court's
ruling and stated that Article 1229190 of the Civil Code allows
for the reduction of penalty charges that are
unconscionable.191 The Court of Appeals discussed that:
The penalties imposed by PNB are clearly unconscionable. Any
doubt as to this fact can be removed by simply glancing at the
penalties charged by defendant-appellant which . . . already
amounted to an incredibly huge amount of P176,098,045.94
despite payments that already exceeded the amount of the
loan as of 1998.
With respect to attorney's fees, the Supreme Court had
consistently and invariably ruled that even with the presence of
an agreement between the parties, the court may nevertheless
reduce attorney's fees though fixed in the contract when the
amount thereof appears to be unconscionable or
unreasonable. Again, the fact that the attorney's fees imposed
by PNB are unconscionable and unreasonable can clearly be
seen. The attorney's fees imposed similarly points to an
incredibly huge sum of P136,900,928.85 as of October 30,
2000. Therefore, its reduction in the assailed decision is well-
grounded.192 (Citation omitted)
The dispositive portion of the Court of Appeals Decision states:
WHEREFORE, the assailed Decision dated June 19, 2002 and
Order dated August 13, 2002 of the Regional Trial Court of
Davao City, Branch 17 in Civil Case No. 28,170-2000 declaring
the unilateral imposition of interest rates by defendant-
appellant PNB as null and void appealed from are AFFIRMED
with the MODIFICATION that the obligation of plaintiffs-
appellees arising from the Loan and Revolving Credit Line and
subsequent Conversion, Restructuring and Extension
Agreement as Loan I and Loan II shall earn interest at the legal
rate of twelve percent (12%) per annum computed from
September 1, 1993, until fully paid and satisfied.
SO ORDERED.193 (Emphasis in the original)
Philippine National Bank moved for reconsideration on
September 3, 2009,194 arguing that the interest rates were
"mutually agreed upon[;]"195 that Spouses Limso and Davao
Sunrise "never questioned the . . . interest rates[;]"196 and that
they "acknowledged the total amount of their debt (inclusive of
loan principal and accrued interest) to [Philippine National
Bank] in the Conversion, Restructuring and Extension
Agreement which restructured their obligation to [Philippine
National Bank] in the amount of P1.067 Billion[.]"197
Spouses Limso and Davao Sunrise moved for partial
reconsideration on September 9, 2009,198 pointing, out that
their obligation to Philippine National Bank was only
P205,084,682.61, as stated in the trial court's Order dated
August 13, 2002 in Civil Case No. 28,170-2000.199
Both Motions were denied by the Court of Appeals in the
Resolution200 dated May 18, 2011.
The Court of Appeals held that Philippine National Bank's
Motion for Reconsideration raised issues that were a mere
rehash of the issues already ruled upon.201
With regard to Spouses Limso and Davao Sunrise's Motion for
Partial Reconsideration, the Court of Appeals ruled that:
Since the appellees did not appeal from the decision of the
lower court, they are not entitled to any award of affirmative
relief. It is well settled that an appellee who has not himself
appealed cannot obtain from the appellate court any
affirmative relief other than those granted in the decision of
the court below. The appellee can only advance any argument
that he may deem necessary to defeat the appellant's claim or
to uphold the decision that is being disputed. . . . Thus, the
lower court's finding that the appellees have an unpaid
obligation with PNB, and not the other way around, should
stand. It bears stressing that appellees even acknowledged
their outstanding indebtedness with the PNB when they filed
their "Urgent Motion for Execution Pending Appeal" of the
August 13, 2002 Order of the lower court decreeing that
appellees' remaining obligation with PNB is P205,084,682.61.
They cannot now claim that PNB is the one indebted to them in
the amount of P15,915,588.89.202
Philippine National Bank filed a Petition for Review on
Certiorari203 assailing the Decision in CA-G.R. CV No. 79732-
MIN. Philippine National Bank argues that there was mutuality
of contracts between the parties, and that the interest rates
imposed were valid in view of the escalation clauses in their
contract.204 Philippine National Bank's Petition for Review was
docketed as G.R. No. 196958.205
Spouses Limso and Davao Sunrise also filed a Petition for
Review206 on Certiorari questioning the ruling of the Court of
Appeals in CA-G.R. CV No. 79732-MIN that their outstanding
obligation was P803,185,411.11.207 Spouses Limso and Davao
Sunrise argue that they "made overpayments in the amount of
P15,915,588.89."208 This was docketed as G.R. No. 197120.209
On January 21, 2013, the Court of Appeals dismissed Philippine
National Bank's appeal docketed as CA-G.R. CV No. 01464-MIN
(referring to the Petition for the Issuance of a Writ of
Possession) on the ground that Philippine National Bank availed
itself of the wrong remedy.210 What the Philippine National
Bank should have filed was a "petition for review under Rule 45
and not an appeal under Rule 41[.]"211
On March 15, 2013, the Philippine National Bank filed a Petition
for Review on Certiorari212 before this court, assailing the
dismissal of its appeal before the Court of Appeals and praying
that the Decision of the trial court — that the Sheriffs
Provisional Certificate of Sale was not signed by the Register of
Deeds and was not registered — be reversed and set aside. The
Petition was docketed as G.R. No. 205463.213
G.R. No. 158622 was filed on July 1, 2003;214 G.R. No. 169441
was filed on September 14, 2005;215 G.R. No. 172958 was filed
on June 26, 2006;216 G.R. No. 173194 was filed on July 21,
2006;217 G.R. No. 196958 was filed on June 17, 2011;218 G.R.
No. 197120 was filed on June 22, 2011;219 and G.R. No.
205463 was filed on March 15, 2013.220
Docket
Number
Original Case
Assailed Order/Decision
G.R. No. 158622
Petition for Declaratory Relief with Prayer for the Issuance of
Preliminary Injunction and Application for Temporary
Restraining Order221
Court of Appeals Decision dated December 11, 2002 dismissing
the Petition for Certiorari filed by Philippine National Bank. The
Petition for Certiorari questioned the issuance of a writ of
preliminary injunction in favor of Spouses Limso and Davao
Sunrise.222
G.R. No.169441
Ex-Parte Petition223 for Issuance of Writ of Possession under
Act No. 3135 filed by Philippine National Bank, praying that it
be granted possession over four (4) parcels of land owned by
Davao Sunrise
Court of Appeals Decision dated September 1, 2004 and
Resolution dated August 11, 2005.224
Spouses Limso and Davao Sunrise filed a Motion to Inhibit
Judge Quitain, which was denied by Judge Quitain. Thus,
Spouses Limso and Davao Sunrise questioned the denial of
their Motion before the Court of Appeals.225
G.R. No. 172958
Ex-Parte Petition226 for" Issuance of the Writ of Possession
under Act No. 3135 filed by Philippine National Bank, praying
that it be granted possession over four (4) parcels of land
owned by Davao Sunrise
Court of Appeals Decision227 dated September 1, 2005 and
Resolution228 dated May 26, 2006.
The Petition for Certiorari and Prohibition filed by Spouses
Limso and Davao Sunrise assailed two Orders of Judge Quitain,
which denied their Motion to Expunge and/or Dismiss Petition
for Issuance of Writ of Possession.229
G.R. No. 173194
Petition for Reformation or Annulment of Contract with
Damages filed by Spouses Limso and Davao Sunrise230
Court of Appeals Resolution231 dated March 2, 2006, which
denied Philippine National Bank's (1) Application to Hold
[Spouses Limso and Davao Sunrise] and the Surety Bond
Company Jointly and Severally Liable for Damages on the
Injunction Bond, and (2) Application for the Appointment of
[Philippine National Bank] as Receiver.
Also assailed was the Court of Appeals Resolution232 dated
May 26, 2006, which denied the Motion for Reconsideration
filed by Philippine National Bank.
G.R. No. 196958
Petition for Reformation or Annulment of Contract with
Damages filed by Davao Sunrise and Spouses Limso233
Court of Appeals Decision234 dated August 13, 2009 and Court
of Appeals Resolution235 dated May 18, 2011 docketed as CA-
G.R. CV No. 79732-Min.
The decision dated August 13, 2009 affirmed with modification
the decision of the trial court in Civil Case No. 28,170-2000.236
The Resolution dated May 18,2011 in CA-G.R. CV No. 79732-
Min denied the Motion for Reconsideration filed by Philippine
National Bank and also denied the Motion for Partial
Reconsideration filed by Spouses Limso and Davao Sunrise.237
The Rule 41 appeal was filed by Philippine National Bank.238
G.R. No. 197120
Petition239 for Reformation or Annulment of Contract with
Damages filed by Spouses Limso and Davao Sunrise
Court of Appeals Decision240 dated August 13, 2009 and Court
of Appeals Resolution241dated May 18, 2011.
Spouses Limso and Davao Sunrise assailed the portion of the
Court of Appeals Decision stating that their outstanding
obligation was P803,185,411.11.242
G.R. No. 205463
Ex-Parte Petition for Issuance of the Writ of Possession under
Act No. 3135 filed by Philippine National Bank, praying that it
be granted possession over four parcels of land owned by
Davao Sunrise243
Court of Appeals Decision244 dated January 21, 2013
dismissing the appeal under Rule 41 filed by Philippine National
Bank for being the wrong remedy
In the Manifestation and Motion245 dated May 26, 2006,
Davao Sunrise prayed that it be allowed to withdraw G.R. No.
169441 since the issues in the Petition had become moot and
academic.
In the Resolution246 dated August 7, 2006, this court
consolidated G.R. Nos. 172958, 173194, and 169441, with G.R.
No. 158622 as the lowest-numbered case.
Davao Sunrise's Manifestation and Motion dated May 26, 2006,
which prayed that it be allowed to withdraw G.R. No. 169441,
was granted in the Resolution247 dated October 16, 2006.
Thus, G.R. No. 169441 was deemed closed and terminated as of
October 16, 2006.248
In the Resolution249 dated March 7, 2007 in G.R. No. 173194,
this court required respondents Spouses Limso and Davao
Sunrise to file their comment.
In the Resolution250 dated July 4, 2011, G.R. No. 197120 was
consolidated with G.R. No. 196958.
On May 17, 2012, counsel for Spouses Limso and Davao Sunrise
notified this court of the death of Robert Alan L. Limso.251
On October 9, 2013, Spouses Limso and Davao Sunrise filed a
Motion to Withdraw Petitions in G.R. Nos. 172958, 169441 and
158622.252 Davao Sunrise and Spouses Limso, through
counsel, explained that G.R. No. 169441 had been mooted by
Judge Quitain's voluntary inhibition from hearing and deciding
Other Case No. 124-2002.253
After Judge Quitain had inhibited, Other Case No. 124-2002 was
re-raffled to Branch 16 of the Regional Trial Court of Davao
City.254 Other Case No. 124-2002 was dismissed in the
Order255 dated February 16, 2007. Since Other Case No. 124-
2002 was dismissed, G.R. No. 172958 was mooted as well.256
With regard to G.R. No. 158622, counsel for Spouses Limso and
Davao Sunrise explained:
It is clear, however, that the ruling of the Regional Trial Court of
Davao City in Civil Case No. 28,170-2000 and the Court of
Appeals in CA G.R. No. 79732 already rendered Civil Case No.
29,036-2002 moot and academic. Under the premises, there is
no need for this Honorable Court to rule on the propriety of the
dismissal of the said action for Declaratory Relief as the loan
agreements — from which the entire case stemmed — had
already been declared NULL AND VOID.257 (Emphasis in the
original)

In the Resolution258 dated March 12, 2014, this court granted
the Motion to Withdraw Petitions with regard to G.R. Nos.
172958 and 158622. The prayer for the withdrawal of G.R. No.
169441 was noted without action since G.R. No. 169441 was
deemed closed and terminated in this court's Resolution dated
October 16, 2006.259
On April 2, 2014, Spouses Limso and Davao Sunrise filed an
"Omnibus Motion for Leave [1] To Intervene; [2] To File/ Admit
Herein Attached Comment-in-Intervention; and [3] To
Consolidate Cases"260 in G.R. No. 205463.
Spouses Limso and Davao Sunrise argue that they were allowed
to participate in Other Case No. 124-2002, and that Philippine
National Bank was in bad faith when it did not furnish Nancy
Limso and Davao Sunrise copies of the Petition for Review it
had filed.261
In the Resolution262 dated April 2, 2014, this court gave due
course to the Petition and required the parties to submit their
memoranda.
On April 15, 2014, Spouses Limso and Davao Sunrise filed a
Motion to Dismiss the Petition in G.R. No. 173194 on the
ground that the issues raised by Philippine National Bank are
moot and academic. Spouses Limso and Davao Sunrise also
reiterated that Philippine National Bank availed of the wrong
remedy.263
In the Resolution264 dated July 9, 2014, this court
recommended the consolidation of G.R. No. 205463 with G.R.
Nos. 158622, 169441, 172958, 173194, 196958, and 197120.
In the Resolution265 dated October 13, 2014, this court noted
and granted the Omnibus Motion for Leave to Intervene filed
by counsel for Nancy Limso and Davao Sunrise.266 This court
also noted the memoranda filed by counsel for Philippine
National Bank, the Office of the Solicitor General, and counsel
for Spouses Limso and Davao Sunrise.267
The remaining issues for resolution are those raised in G.R. Nos.
173194, 196958, 197120, and 205463, which are:
First, whether the Philippine National Bank's Petition for
Review on Certiorari in G.R. No. 173194 is the wrong remedy to
assail the March 2, 2006 Court of Appeals Resolution,268 which
denied Philippine National Bank's (1) Application to Hold
[Spouses Limso and Davao Sunrise ] and the Surety Bond
Company Jointly and Severally Liable for Damages on the
Injunction Bond, and (2) Application for the Appointment of
[Philippine National Bank] as Receiver;
Second, whether Philippine National Bank committed forum
shopping when it filed an ex-parte Petition for the Issuance of a
Writ of Possession and an Application to be Appointed as
Receiver;
Third, whether the Court of Appeals erred in ruling that the
interest rates imposed by Philippine National Bank were
usurious and unconscionable;
Fourth, whether the Conversion, Restructuring and Extension
Agreement executed in 1999 novated the original Loan and
Credit Agreement executed in 1993;
Fifth, whether the Court of Appeals erred in dismissing the
appeal under Rule 41 filed by Philippine National Bank, which
assailed the Court of Appeals Decision dated January 21, 2013
in CA-G.R. CV No. 01464-MIN, for being the wrong remedy;
Sixth, whether the Sheriff's Provisional Certificate of Sale
should be considered registered in view of the entry made by
the Register of Deeds in the Primary Entry Book; and
Lastly, whether Philippine National Bank is entitled to a writ of
possession.
I
The Petition for Review in G.R. No. 173194 should be denied.
The Petition docketed as G.R. No. 173194, filed by Philippine
National Bank, questions the Court of Appeals Resolutions in
CA-G.R. CV No. 79732-MIN dated March 2, 2006 and May 26,
2006, which denied Philippine National Bank's applications for
damages on the injunction bond and to be appointed as
receiver.269
The assailed Resolutions in G.R. No. 173194 are interlocutory
orders and are not appealable.
Rule 41, Section 1270 of the Rules of Court provides:
SECTION 1. Subject of Appeal. — An appeal may be taken from
a judgment or final order that completely disposes of the case,
or of a particular matter therein when declared by these Rules
to be appealable.
No appeal may be taken from:
....
(b) An interlocutory order;
....
In any of the foregoing circumstances, the aggrieved party may
file an appropriate special civil action as provided in Rule 65.
In addition, Rule 45, Section 1 of the Rules of Court provides:
SECTION 1. Filing of Petition with Supreme Court. — A party
desiring to appeal by certiorari from a judgment, final order or
resolution of the Court of Appeals, the Sandiganbayan, the
Court of Tax Appeals, the Regional Trial Court or other courts,
whenever authorized by law, may file with the Supreme Court a
verified petition for review on certiorari[.] (Emphasis supplied)
The difference between an interlocutory order and a final order
was discussed in United Overseas Bank v. Judge Ros:271
The word interlocutory refers to something intervening
between the commencement and the end of the suit which
decides some point or matter but is not a final decision of the
whole controversy. This Court had the occasion to distinguish a
final order or resolution from an interlocutory one in the case
of Investments, Inc. v. Court of Appeals, thus:
chanRoblesvirtualLawlibrary
x x x A "final" judgment or order is one that finally disposes of a
case, leaving nothing more to be done by the Court in respect
thereto, e.g., an adjudication on the merits which, on the basis
of the evidence presented on the trial, declares categorically
what the rights and obligations of the parties are and which
party is in the right; or a judgment or order that dismisses an
action on the ground, for instance, of res judicata or
prescription. Once rendered, the task of the Court is ended, as
far as deciding the controversy or determining the rights and
liabilities of the litigants is concerned. Nothing more remains to
be done by the Court except to await the parties' next move
(which among others, may consist of the filing of a motion for
new trial or reconsideration, or the taking of an appeal) and
ultimately, of course, to cause the execution of the judgment
once it becomes "final" or, to use the established and more
distinctive term, "final and executory."
xxx xxx xxx
Conversely, an order that does not finally dispose of the case,
and does not end the Court's task of adjudicating the parties'
contentions and determining their rights and liabilities as
regards each other, but obviously indicates that other things
remain to be done by the Court, is "interlocutory" e.g., an order
denying motion to dismiss under Rule 16 of the Rules, or
granting of motion on extension of time to file a pleading, or
authorizing amendment thereof, or granting or denying
applications for postponement, or production or inspection of
documents or things, etc. Unlike a "final" judgment or order,
which is appealable, as above pointed out, an "interlocutory"
order may not be questioned on appeal except only as part of
an appeal that may eventually be taken from the final
judgment rendered in the case.272 (Citations omitted)
The Resolutions denying Philippine National Bank's applications
were interlocutory orders since the Resolutions did not dispose
of the merits of the main case.
CA-G.R. CV No. 79732-MIN originated from Civil Case No.
28,170-2000, which involved the issues regarding the interest
rates imposed by Philippine National Bank. Hence, the denial of
Philippine National Bank's applications did not determine the
issues on the interest rates imposed by Philippine National
Bank.
The proper remedy for Philippine National Bank would have
been to file a petition for certiorari under Rule 65 or, in the
alternative, to await the outcome of the main case and file an
appeal, raising the denial of its applications as an assignment of
error.
In any case, we continue to resolve the arguments raised in
G.R. No. 173194.
Philippine National Bank argues in its Petition for Review
docketed as G.R. No. 173194 that its application to hold the
injunction bond liable for damages was filed on time. It points
out that the phrase "before the judgment becomes executory"
found in Section 20273 of Rule 57 refers to the judgment in the
main case, which, in this case, refers to CA-G.R. CV No.
79732.274
Philippine National Bank also argues that the Court of Appeals
erred in denying its application to be appointed as receiver
because although the Sheriff's Provisional Certificate of Sale
was not registered, the Certificate of Sale "provides the basis
for [Philippine National Bank] to claim ownership over the
foreclosed properties."275 As the highest bidder, Philippine
National Bank had the right to receive the rental income of the
foreclosed properties.276
Spouses Limso and Davao Sunrise filed their Comment,277
countering that the Court of Appeals did not err in denying
Philippine National Bank's applications to hold the injunction
bond liable for damages and to be appointed as receiver.278
They cite San Beda College v. Social Security System,279 where
this court ruled that "the claim for damages for wrongful
issuance of injunction must be filed before the finality of the
decree dissolving the questioned writ."280
They highlight Philippine National Bank's admission that the
writ of preliminary injunction was dissolved in January 2002,
and that^the Decision281 dissolving the writ attained finality
on September 11, 2002.282
Spouses Limso and Davao Sunrise further point out that while
CA-G.R. CV No. 79732 was still pending before the Court of
Appeals, "the decree dissolving the questioned Writ of
Preliminary Injunction had already become final."283 Thus,
Philippine National Bank filed its application out of time.284
They argue that in any case, Philippine National Bank cannot
claim damages on the injunction bond since it was unable to
secure a judgment in its favor in Civil Case No. 28,170-2000.285
They further argue that the Court of Appeals was correct in
denying Philippine National Bank's application to be appointed
as receiver on the ground that Philippine National Bank is a
party to the case and hence, it cannot be appointed as
receiver.286
Spouses Limso and Davao Sunrise then allege that Philippine
National Bank is guilty of forum shopping. They argue that
Philippine National Bank's ex-parte Petition for the issuance of
a writ of possession, docketed as Other Case No. 124-2002, and
the application to be appointed as receiver have the same
purpose: to obtain possession of the properties.287

Philippine National Bank, through counsel, filed its Reply,
countering that San Beda College was decided when the 1964
Rules of Court was still in effect.288 It argues that the cited
case is no longer applicable because the 1964 Rules was
superseded by the 1997 Rules of Civil Procedure.289 The
applicable case is Hanil Development Co., Ltd. v. Intermediate
Appellate Court290 where this court ruled that "the judgment
against the attachment bond could be included in the final
judgment of the main case."291
Philippine National Bank also argued that under the 1997 Rules
of Civil Procedure, the applicant for damages does not have to
be the winning party.292
Philippine National Bank further argues that it did not commit
forum shopping since "there is no identity of parties between
CA G.R. CV No. 79732 ... and Other Case No. 124-2002."293 The
causes of action and reliefs sought in the two cases are
different.294 It points out that its application to be appointed
as receiver is a provisional remedy under Rule 59 of the 1997
Rules of Civil Procedure, while its prayer for the issuance of a
writ of possession in Other Case No. 124-2002 is based on its
right to possess the properties involved.295
We rule that the Court of Appeals properly denied Philippine
National Bank's application to hold the injunction bond liable
for damages and be appointed as receiver. We also rule that no
forum shopping was committed by Philippine National Bank.
However, the Court of Appeals erred in ruling that Philippine
National Bank filed its application to hold the injunction bond
liable for damages out of time.
The Court of Appeals, in its Resolution dated March 2, 2006,
explained:
Records show that when this Court annulled the RTC's order of
injunction, Davao Sunrise thereafter elevated the matter to the
Supreme Court. On July 24, 2002, the Supreme Court denied its
petition for having been filed out of time and an Entry of
Judgment was issued on Sept[ember] 11,2002.
PNB's instant application however was filed only on February
17, 2005 and/or in the course of its appeal on the main case -
about two (2) years and five (5) months after the judgment
annulling the injunction order attained finality.
Clearly, despite that it already obtained a favorable judgment
on the injunction matter, PNB failed to file (before the court a
quo) an application for damages against the bond before
judgment was rendered in the main case by the court a quo.
Thus, even for this reason alone, Davao Sunrise and its
bondsman are relieved of further liability thereunder.296
(Citations omitted)
The Petition referred to by the Court of Appeals in the quoted
Resolution was docketed as G.R. No. 152812 and was entitled
Davao Sunrise Investment and Development Corporation, et al.
v. Court of Appeals, et al.297 G.R. No. 152812 originated from
CA G.R. SP No. 63351.298 CA G.R. SP No. 63351 was a Petition
for Certiorari filed by Philippine National Bank, which
questioned the issuance of a writ of preliminary injunction in
Civil Case No. 28,170-2000.299
In the Decision300 dated January 10, 2002, the Court of
Appeals granted Philippine National Bank's Petition for
Certiorari and held that:
In the case at bar, respondents' claim to a right to preliminary
injunction based on PNB's purported unilateral imposition of
interest rates and subsequent increases thereof, is not a right
warranting the issuance of an injunction to halt the foreclosure
proceedings. On the contrary, it is petitioner bank which has
proven its right to foreclose respondents' mortgaged
properties, especially since respondents have admitted their
indebtedness to PNB and merely questioning the interest rates
imposed by the bank. . . .
....
Above all, the core and ultimate issue raised in the main case
below is the interest stipulation in the loan agreements
between the petitioner and private respondents, the validity of
which is still to be determined by the lower court. Injunctive
relief cannot be made to rest on the assumption that said
interest stipulation is void as it would preempt the merits of
the main case.
WHEREFORE, premises considered, the assailed Orders of
respondent judge dated December 4 and 21, 2000 are hereby
ANNULLED and SET ASIDE, and the Order dated November 20,
2000 denying private respondents prayer for the issuance of a
writ of preliminary injunction is REINSTATED.
SO ORDERED.301ChanRoblesVirtualawlibrary
Spouses Limso and Davao Sunrise assailed the Decision in CA-
G.R. SP No. 63351 and filed before this court a Petition for
Review, docketed as GR. No. 152812. However, the Petition for
Review was denied in the Resolution302 dated July 24, 2002 for
being filed out of time, and Entry of Judgment303 was made on
September 11, 2002.
The issuance of the writ of preliminary injunction in Civil Case
No. 28,170-2000 was an interlocutory order, and was properly
questioned by Philippine National Bank through a Petition for
Certiorari.
However, the Court of Appeals erred in ruling that Philippine
National Bank's application was filed out of time.
Section 20 of Rule 57 of the Rules of Civil Procedure provides:
SECTION 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 judgment referred to in Section 20 of Rule 57 should mean
the judgment in the main case. In Carlos v. Sandoval:304
Section 20 essentially allows the application to be filed at any
time before the judgment becomes executory. It should be filed
in the same case that is the main action, and cannot be
instituted separately. It should be filed with the court having
jurisdiction over the case at the time of the application. The
remedy provided by law is exclusive and by failing to file a
motion for the determination of the damages on time and
while the judgment is still under the control of the court, the
claimant loses his right to damages.305 (Citations omitted)
In this case, Philippine National Bank filed its application306
during the pendency of the appeal before the Court of Appeals.
The application was dated January 12, 2005,307 while the
appeal in the main case, docketed as CA-G.R. CV No. 79732-
MIN, was decided on August 13, 2009.308 Hence, Philippine
National Bank's application to hold the injunction bond liable
for damages was filed on time.
The Court of Appeals properly denied Philippine National
Bank's application to be appointed as a receiver.
Rule 59, Section 1 provides the grounds when a receiver may
be appointed:
SECTION 1. Appointment of Receiver. — Upon a verified
application, one or more receivers of the property subject of
the action or proceeding may be appointed by the court where
the action is pending, or by the Court of Appeals or by the
Supreme Court, or a member thereof, in the following cases:
(a)
When it appears from the verified application, and such other
proof as the court may require, that the party applying for the
appointment of a receiver has an interest in the property or
fund which is the subject of the action or proceeding, and that
such property or fund is in danger of being lost, removed, or
materially injured unless a receiver be appointed to administer
and preserve it;
(b)
When it appears in an action by the mortgagee for the
foreclosure of a mortgage that the property is in danger of
being wasted or dissipated or materially injured, and that its
value is probably insufficient to discharge the mortgage debt,
or that the parties have so stipulated in the contract of
mortgage;
(c)
After judgment, to preserve the property during the pendency
of an appeal, or to dispose of it according to the judgment, or
to aid execution when the execution has been returned
unsatisfied or the judgment obligor refuses to apply his
property in satisfaction of the judgment, or otherwise to carry
the judgment into effect;
(d)
Whenever in other cases it appears that the appointment of a
receiver is the most convenient and feasible means of
preserving, administering, or disposing of the property in
litigation.
During the pendency of an appeal, the appellate court may
allow an application for the appointment of a receiver to be
filed in and decided by the court of origin and the receiver
appointed to be subject to the control of said court.
In Commodities Storage & Ice Plant Corporation v. Court of
Appeals:309
The general rule is that neither party to a litigation should be
appointed as receiver without the consent of the other because
a receiver should be a person indifferent to the parties and
should be impartial and disinterested. The receiver is not the
representative of any of the parties but of all of them to the
end that their interests may be equally protected with the least
possible inconvenience and expense.310 (Citations omitted)
The Court of Appeals cited Spouses Limso and Davao Sunrise's
objection to Philippine National Bank's application to be
appointed as receiver as one of the grounds why the
application should fail.311
Also, the Court of Appeals found that the mortgaged properties
of Spouses Limso and Davao Sunrise were earning
approximately P12,000,000.00 per month. This proves that the
properties were being administered properly and did not
require the appointment of a receiver. Also, to appoint
Philippine National Bank as receiver would be premature since
the trial court's Decision was pending appeal.312
Philippine National Bank did not commit forum shopping when
it filed an ex-parte Petition for the issuance of a writ of
possession and an application for appointment as receiver.
The elements of forum shopping are:
(a) identity of parties, or at least such parties as represent the
same interests in both actions;
(b) identity of rights asserted and relief 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, amount to res judicata in the action under
consideration.313 (Citation omitted)
There is no identity of parties because the party to the Petition
for Issuance of Writ of Possession is Philippine National Bank
only, while there are two parties to application for
appointment as receiver: Philippine National Bank on one hand,
and Spouses Limso and Davao Sunrise on the other.
The causes of action are also different. In the Petition for
Issuance of Writ of Possession, Philippine National Bank prays
that it be granted a writ of possession over the foreclosed
properties because it is the winning bidder in the foreclosure
sale.314 On the other hand, Philippine National Bank's
application to be appointed as receiver is for the purpose of
preserving these properties pending the resolution of CA-G.R.
CV No. 79732.315 While the issuance of a writ of possession or
the appointment as receiver would have the same result of
granting possession of the foreclosed properties to Philippine
National Bank, Philippine National Bank's right to possess these
properties as the winning bidder in the foreclosure sale is
different from its interest as creditor to preserve these
properties.
II
There is no mutuality of contracts when the determination or
imposition of interest rates is at the sole discretion of a party to
the contract. Further, escalation clauses in contracts are void
when they allow the creditor to unilaterally adjust the interest
rates without the consent of the debtor.
The Petitions docketed as G.R. Nos. 196958 and 197120 assail
the Decision in CA-G.R. CV No. 79732-MIN.316
Philippine National Bank argues that the principle of mutuality
of contracts was not violated because Spouses Limso and
Davao Sunrise were notified as to the applicable interest rates,
and their consent was obtained before the effectivity of the
agreement.317 There was no unilateral imposition of interest
rates since the rates were dependent on the prevailing market
rates.318
Philippine National Bank also argues that Spouses Limso and
Davao Sunrise were regularly informed by Philippine National
Bank of the interest rates imposed on their loan, as shown by
Robert Alan L. Limso's signatures on the letters sent by
Philippine National Bank.319
Philippine National Bank further argues that loan agreements
with escalation clauses, by their nature, "would not indicate the
exact rate of interest applicable to a loan precisely because it is
made to depend by the parties to external factors such as
market indicators and/or government regulations affecting the
cost of money."320
Philippine National Bank cites Solidbank Corp., (now
Metropolitan Bank and Trust Company) v. Permanent Homes,
Incorporated,321 where this court held that "contracts with
escalation clause do not violate the principle of mutuality of
contracts."322
Philippine National Bank contends that the Conversion,
Restructuring and Extension Agreement novated the previous
contracts with Spouses Limso and Davao Sunrise. In addition,
the alleged infirmities in the previous contracts were set aside
upon the execution of the Conversion, Restructuring and
Extension Agreement.323
On the other hand, Spouses Limso and Davao Sunrise argue
that the Court of Appeals did not err in ruling that the interest
rates were imposed unilaterally. Spouses Limso and Davao
Sunrise allege that the interest rates were not stipulated in
writing, in violation of Article 1956 of the Civil Code.324 Also,
the Court of Appeals did not err in reducing the penalties and
attorney's fees since Article 2227 of the Civil Code states:325
Article 2227. Liquidated damages, whether intended as an
indemnity or a penalty, shall be equitably reduced if they are
iniquitous or unconscionable.
Spouses Limso and Davao Sunrise add that the letters sent by
Philippine National Bank to Davao Sunrise were not
agreements but mere notices that the interest rates were
increased by Philippine National Bank.326 Moreover, the
letters were received by Davao Sunrise's employees who were
not authorized to receive such letters.327 Some of the letters
did not even appear to have been received by anyone at all.328
Spouses Limso and Davao Sunrise allege that Philippine
National Bank admitted that the penalties stated in the
agreements were in the nature of liquidated damages.329
Nevertheless, Spouses Limso and Davao Sunrise question the
Court of Appeals' ruling insofar as it held that their remaining
obligation to Philippine National Bank is P803,185,411.11 as of
September 1, 2008. According to Spouses Limso and Davao
Sunrise, they have overpaid Philippine National Bank in the
amount of P15,915,588.89.330
Philippine National Bank counters that Davao Sunrise and
Spouses Limso's promissory notes had a provision stating:
[T]he rate of interest shall be set at the start of every Interest
Period. For this purpose, I/We agree that the rate of interest
herein stipulated may be increased or decreased for the
subsequent Interest Periods, with PRIOR NOTICE TO THE
BORROWER in the event of changes in the interest rate
prescribed by law or the Monetary Board of Central Bank of the
Philippines or in the Bank's overall cost of funds. I/We hereby
agree that IN THE EVENT I/WE ARE NOT AGREEABLE TO THE
INTEREST RATE FIXED FOR ANY INTEREST PERIOD, I/WE HAVE
THE OPTION TO PREPAY THE LOAN OR CREDIT FACILITY
WITHOUT PENALTY within ten (10) calendar days from the
Interest Setting Date.331 (Emphasis in the original)
As to the letters sent by Philippine National Bank, these letters
were received by the Chief Finance Officer, Chairman, and
President of Davao Sunrise. In addition, assuming that the
employees who allegedly received the letters were not
authorized to do so, the unauthorized acts were ratified by
Spouses Limso and Davao Sunrise when they used the proceeds
of the loan.332
We rule that there was no mutuality of contract between the
parties since the interest rates imposed were based on the sole
discretion of Philippine National Bank.333 Further, the
escalation clauses in the real estate mortgage "[did] not specify
a fixed or base interest[.]"334 Thus, the interest rates are
invalid.
The principle of mutuality of contracts is stated in Article 1308
of the Civil Code as follows:
Article 1308. The contract must bind both contracting parties;
its validity or compliance cannot be left to the will of one of
them.
The importance of the principle of mutuality of contracts was
discussed in Juico v. China Banking Corporation:335
The binding effect of any agreement between parties to a
contract is premised on two settled principles: (1) that any
obligation arising from contract has the force of law between
the parties; and (2) that there must be mutuality between the
parties based on their essential equality. Any contract which
appears to be heavily weighed in favor of one of the parties so
as to lead to an unconscionable result is void. Any stipulation
regarding the validity or compliance of the contract which is
left solely to the will of one of the parties, is likewise,
invalid.336 (Citation omitted)
When there is no mutuality between the parties to a contract,
it means that the parties were not on equal footing when the
terms of the contract were negotiated. Thus, the principle of
mutuality of contracts dictates that a contract must be
rendered void when the execution of its terms is skewed in
favor of one party.337
The Court of Appeals also noted that since the interest rates
imposed were at the sole discretion of Philippine National
Bank, and that Spouses Limso and Davao Sunrise were merely
notified when there were changes in the interest rates,
Philippine National Bank violated the principle of mutuality of
contracts.338 The Court of Appeals ruled that:
We cannot subscribe to appellant bank's allegation that
plaintiffs-appellees agreed to these interest rates by receiving
various letters from PNB. Those letters cannot be construed as
agreements as a simple reading of those letters would show
that they are mere notices informing plaintiffs-appellees that
the bank, through its top management, had already imposed
interest rates on their loan. The uniform wordings of the said
letters go this way:
chanRoblesvirtualLawlibrary
This refers to your existing credit facility in the principal
amount of P850.0 MM granted by the Philippine National Bank
by and under the terms and conditions of that Credit
Agreement dated 12.2.97 (Renewal of Credit Facility).
We wish to advise you that the top management has approved
an interest rate of 20.756% which will be used in computing the
interest due on your existing peso and redenominated
availments against the credit facility for the period July 20 to
August 19, 1998.
If you are amenable to this arrangement, please signify your
conformity on the space provided below and return to us the
original copy of the document. If we receive no written
objection by the end of 10 days from date of receipt of this
letter, we will take it to mean that you agree to the new
interest rate we quote. On the other hand, if you disagree with
the quoted rate, you will have to pay the loan in full within the
same ten-day period otherwise, the entire loan will be
considered due and demandable.339 (Citation omitted)
The contents of the letter quoted by the Court of Appeals show
that there was no room for negotiation among Philippine
National Bank, Spouses Limso, and Davao Sunrise when it came
to the applicable interest rate. Since there was no room for
negotiations between the parties with regard to the increases
of the rates of interest, the principle of mutuality of contracts
was violated. There was no meeting of the minds between
Spouses Limso, Davao Sunrise, and Philippine National Bank
because the increases in the interest rates were imposed on
them unilaterally.
Meeting of the minds between parties to a contract is
manifested when the elements of a valid contract are all
present.340 Article 1318 of the Civil Code provides:
Article 1318. There is no contract unless the following
requisites concur:
chanRoblesvirtualLawlibrary
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
When one of the elements is wanting, no contract can be
perfected.341In this case, no consent was given by Spouses
Limso and Davao Sunrise as to the increase in the interest
rates. Consequently, the increases in the interest rates are not
valid.
Even the promissory notes contained provisions granting
Philippine National Bank the sole discretion to set the interest
rate:
[Promissory Note] NO. 0015138516350115 . ..
. . . I/We, jointly and severally, promise to pay to the order of
the Philippine National Bank (the 'Bank') at its office in cm recto
avenue davao city [sic], Philippines, the sum of PHILIPPINE
PESOS: 583.183.333.34 (P583383.333.34) together with
interest thereon for the current Interest Period at a rate of to
be set by mzt. [management]. Interest Period shall mean the
period commencing on the date hereof and having a duration
not exceeding monthly (____ ) days and each similar period
thereafter commencing upon the expiry of the immediately
preceding Interest Period. The rate of interest shall be set at
the start of every Interest Period. For this purpose, I/We agree
that the rate of interest herein stipulated may be increased or
decreased for the subsequent Interest Periods, with prior
notice to the Borrower in the event of changes in interest rate
prescribed by law or the Monetary Board of the Central Bank of
the Philippines, or in the Bank's overall cost of funds. I/We
hereby agree that in the event I/We are not agreeable to the
interest rate fixed for any Interest Period, I/we shall have the
option to prepay the loan or credit facility without penalty
within ten (10) calendar days from the Interest Setting
Date.342ChanRoblesVirtualawlibrary
Promissory Note No. 0015138516350116343 contained the
same provisions, differing only as to the amount of the
obligation.
Assuming that Davao Sunrise and Spouses Limso agreed to the
increase in interest rates, the interest rates are still null and
void for being unreasonable.344
This court has held that while the Usury Law was suspended by
Central Bank Circular No. 905, Series of 1982, unconscionable
interest rates may be declared illegal.345 The suspension of the
Usury Law did not give creditors an unbridled right to impose
arbitrary interest rates. To determine whether an interest rate
is unconscionable, we are guided by the following
pronouncement:
In determining whether the rate of interest is unconscionable,
the mechanical application of pre-established floors would be
wanting. The lowest rates that have previously been considered
unconscionable need not be an impenetrable minimum. What
is more crucial is a consideration of the parties' contexts.
Moreover, interest rates must be appreciated in light of the
fundamental nature of interest as compensation to the creditor
for money lent to another, which he or she could otherwise
have used for his or her own purposes at the time it was lent. It
is not the default vehicle for predatory gain. As such, interest
need only be reasonable. It ought not be a supine mechanism
for the creditor's unjust enrichment at the expense of
another.346
A reading of the interest provisions in the original agreement
and the Conversion, Restructuring and Extension Agreement
shows that the interest rates imposed by Philippine National
Bank were usurious and unconscionable.
In the original credit and loan agreements executed in 1993,
the interest provisions provide:
CREDIT AGREEMENT
....
1.04 Interest on Availments. (a) The Borrowers agree to pay
interest on each availment from date of each availment up to,
but not including the date of full payment thereof at a rate per
annum that is determined by the Bank to be equivalent to the
Bank's prime rate less 1.0% in effect as of the date of the
relevant Availment, subject to quarterly review and to
maintenance of deposits with ADB of at least 5% of the amount
availed in its savings and current account. Non compliance of
ADB requirement shall subject the credit line to regular interest
rate which is the prime rate plus applicable spread.347
LOAN AGREEMENT
1.03 Interest, (a) The Borrowers hereby agree to pay interest
on the loan from the date of Drawdown up to Repayment Date
at the rate that is determined by the Bank to be the Bank's
prime rate in effect at the Date of Drawdown less 1.0% and
which shall be reset every 90 days to coincide with interest
payments.
(b) The determination by the Bank of the amount of interest
due and payable hereunder shall be conclusive and binding on
the borrower in the absence of manifest error in the
computation.348 (Emphasis supplied, underscoring in the
original)
In the Conversion, Restructuring and Extension Agreement, the
interest provisions state:
SECTION 2. TERMS OF LOAN I
....
2.04 Interest, (a) The Borrowers agree to pay the Bank interest
on Loan I from the Effective Date, until the date of full payment
thereof at the rate per annum to be set by the Bank. The
interest rate shall be reset by the Bank every month.
....
SECTION 3. TERMS OF LOAN II
....
3.04 Interest, (a) The Borrowers agree to pay the Bank interest
on Loan II from the Effective Date, until the date of full
payment thereof at the rate per annum to be set by the Bank.
The interest rate shall be reset by the Bank every month.349
(Emphasis supplied, underscoring in the original)
From the terms of the loan agreements, there was no way for
Spouses Limso and Davao Sunrise to determine the interest
rate imposed on their loan because it was always at the
discretion of Philippine National Bank.
Nor could Spouses Limso and Davao Sunrise determine the
exact amount of their obligation because of the frequent
changes in the interest rates imposed.
As found by the Court of Appeals, the loan agreements merely
stated that interest rates would be imposed. However, the
specific interest rates were not stipulated, and the subsequent
increases in the interest rates were all at the discretion of
Philippine National Bank.350
Also invalid are the escalation clauses in the real estate
mortgage and promissory notes. The escalation clause in the
real estate mortgage states:
"(k) INCREASE OF INTEREST RATE:
"The rate of interest charged on the obligation secured by this
mortgage as well as the interest on the amount which may
have been advanced by the mortgagee, in accordance with the
provisions hereof shall be subject during the life of this contract
to A such an increase within the rate allowed by law, as the
Board of Directors of the MORTGAGEE may prescribe for its
debtors."351
The escalation clause in the promissory notes352 states:
For this purpose, I/We agree that the rate of interest herein
stipulated may be increased or decreased for the subsequent
Interest Periods, with prior notice to the Borrower in the event
of changes in interest rate prescribed by law or the Monetary
Board or the Central Bank of the Philippines, or in the Bank's
overall cost of funds.353
Banco Filipino Savings and Mortgage Bank v. Judge Navarro354
defined an escalation clause as "one which the contract fixes a
base price but contains a provision that in the event of
specified cost increases, the seller or contractor may raise the
price up to a fixed percentage of the base."355
This court has held that escalation clauses are not always void
since they serve "to maintain fiscal stability and to retain the
value of money in long term contracts."356 However:
[A]n escalation clause "which grants the creditor an unbridled
right to adjust the interest independently and upwardly,
completely depriving the debtor of the right to assent to an
important modification in the agreement" is void. A stipulation
of such nature violates the principle of mutuality of contracts.
Thus, this Court has previously nullified the unilateral
determination and imposition by creditor banks of increases in
the rate of interest provided in loan contracts.
. . . [W]e hold that the escalation clause is ... void because it
grants respondent the power to impose an increased rate of
interest without a written notice to petitioners and their
written consent. Respondent's monthly telephone calls to
petitioners advising them of the prevailing interest rates would
not suffice. A detailed billing statement based on the new
imposed interest with corresponding computation of the total
debt should have been provided by the respondent to enable
petitioners to make an informed decision. An appropriate form
must also be signed by the petitioners to indicate their
conformity to the new rates. Compliance with these requisites
is essential to preserve the mutuality of contracts. For indeed,
one-sided impositions do not have the force of law between
the parties, because such impositions are not based on the
parties' essential equality.357 (Citations omitted)
The interest rate provisions in Philippine National Bank's loan
agreements and real estate mortgage contracts have been
nullified by this court in several cases. Even the escalation
clauses in Philippine National Bank's contracts were noted to
be violative of the principle of mutuality of contracts.358
The original loan agreement in this case was executed in 1993.
Prior to the execution of the original loan agreement, this court
promulgated a Decision in 1991 ruling that "the unilateral
action of the [Philippine National Bank] in increasing the
interest rate on the private respondent's loan, violated the
mutuality of contracts ordained in Article 1308 of the Civil
Code[.]"359
In Philippine National Bank v. Court of Appeals360 the interest
rate provisions were nullified because these allowed Philippine
National Bank to unilaterally increase the interest rate.361 The
nullified interest rate provisions were worded as follows:
"The Credit Agreement provided inter alia, that —
'(a) The BANK reserves the right to increase the interest rate
within the limits allowed by law at any time depending on
whatever policy it may adopt in the future: Provided, that the
interest rate on this accommodation shall be correspondingly
decreased in the event that the applicable maximum interest is
reduced by law or by the Monetary Board. In either case, the
adjustment in the interest rate agreed upon shall take effect on
the effectivity date of the increase or decrease in the maximum
interest rate.'
"The Promissory Note, in turn, authorized the PNB to raise the
rate of interest, at any time without notice, beyond the
stipulated rate of 12% but only 'within the limits allowed by
law.'
The Real Estate Mortgage contract likewise provided that —
'(k) INCREASE OF INTEREST RATE: The rate of interest charged
on the obligation secured by this mortgage as well as the
interest on the amount which may have been advanced by the
MORTGAGEE, in accordance with the provision hereof, shall be
subject during the life of this contract to such an increase
within the rate allowed by law, as the Board of Directors of the
MORTGAGEE may prescribe for its debtors.'362
This court explained that:
Similarly, contract changes must be made with the consent of
the contracting parties. The minds of all the parties must meet
as to the proposed modification, especially when it affects an
important aspect of the agreement. In the case of loan
contracts, it cannot be gainsaid that the rate of interest is
always a vital component, for it can make or break a capital
venture. Thus, any change must be mutually agreed upon,
otherwise, it is bereft of any binding effect.363
In a subsequent case364 also involving Philippine National
Bank, this court likewise nullified the interest rate provisions of
Philippine National Bank and discussed:
In this case no attempt was made by PNB to secure the
conformity of private respondents to the successive increases
in the interest rate. Private respondents' assent to the
increases cannot be implied from their lack of response to the
letters sent by PNB, informing them of the increases. For as
stated in one case, no one receiving a proposal to change a
contract is obliged to answer the proposal.365 (Citation
omitted)
However, only the interest rate imposed is nullified; hence, it is
deemed not written in the contract. The agreement on
payment of interest on the principal loan obligation remains. It
is a basic rule that a contract is the law between contracting
parties.366 In the original loan agreement and the Conversion,
Restructuring and Extension Agreement, Spouses Limso and
Davao Sunrise agreed to pay interest on the loan they obtained
from Philippine National Bank. Such obligation was not nullified
by this court. Thus, their obligation to pay interest in their loan
obligation subsists.367
Spouses Abella v. Spouses Abella368 involved a simple loan
with an agreement to pay interest. Unfortunately, the
applicable interest rate was not stipulated by the parties. This
court discussed that in cases where the parties fail to specify
the applicable interest rate, the legal rate of interest applies.
This court also discussed that the applicable legal rate of
interest shall be the prevailing rate at the time when the
agreement was entered into:369
This is so because interest in this respect is used as a surrogate
for the parties' intent, as expressed as of the time of the
execution of their contract. In this sense, the legal rate of
interest is an affirmation of the contracting parties' intent; that
is, by their contract's silence on a specific rate, the then
prevailing legal rate of interest shall be the cost of borrowing
money. This rate, which by their contract the parties have
settled on, is deemed to persist regardless of shifts in the legal
rate of interest. Stated otherwise, the legal rate of interest,
when applied as conventional interest, shall always be the legal
rate at the time the agreement was executed and shall not be
susceptible to shifts in rate.370
Further, Spouses Abella cited Article 2212371 of the Civil Code
and the ruling in Nacar v. Gallery Frames372 which both state
that "interest due shall itself earn legal interest from the time it
is judicially demanded:"373
[T]he interest due on conventional interest shall be at the rate
of 12% per annum from [date of judicial demand] to June 30,
2013. Thereafter, or starting July 1, 2013, this shall be at the
rate of 6% per annum.374
In this case, the Conversion, Restructuring and Extension
Agreement was executed on January 28, 1999. Thus, the
applicable interest rate on the principal loan obligation
(conventional interest) is at 12% per annum. With regard to the
interest due on the conventional interest, judicial demand was
made on August 21, 2000 when Philippine National Bank filed a
Petition375 for Extrajudicial Foreclosure of Real Estate
Mortgage.376 Thus, from August 21, 2000 to June 30, 2013, the
interest rate on conventional interest shall be at 12%. From July
1, 2013 until full payment, the applicable interest rate on
conventional interest shall be at 6%.
III
The Conversion, Restructuring and Extension Agreement
novated the original agreement executed in 1993. However,
the nullified interest rate provisions in the original loan
agreement cannot be deemed as having been legitimized,
ratified, or set aside.
Philippine National Bank argues that the Conversion,
Restructuring and Extension Agreement novated the original
loan agreement and that the novation effectively set aside the
infirmities in the original loan agreement.377
The Civil Code provides that:
Article 1292. In order that an obligation may be extinguished by
another which substitutes the same, it is imperative that it be
so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other.
Novation has been defined as:
Novation may either be express, when the new obligation
declares in unequivocal terms that the old obligation is
extinguished, or implied, when the new obligation is on every
point incompatible with the old one. The test of incompatibility
lies on whether the two obligations can stand together, each
one with its own independent existence.
For novation, as a mode of extinguishing or modifying an
obligation, to apply, the following requisites must concur:
1) There must be a previous valid obligation.
2) The parties concerned must agree to a new contract.
3) The old contract must be extinguished.
4) There must be a valid new contract.378 (Citations omitted)
The original Credit Agreement379 was executed on September
1, 1993,380 while the Conversion, Restructuring and Extension
Agreement381 was executed on January 28, 1999.382
Pertinent portions of the Conversion, Restructuring and
Extension Agreement state:
WITNESSETH: That -
....
WHEREAS, the Borrowers [referring to DSIDC and spouses
Limso] acknowledge that they have outstanding obligations
(the "Obligations") with the Bank broken down as follows:
(i ) Credit Line - P583.18 Million (as of September 30, 1998);
(i i) Loan - P266.67 Million (as of September 30, 1998); and
(i i i) Interest -P217.15 Million (as of December 31, 1998);
WHEREAS, at the request of the Borrowers, the Bank has
approved (a) the conversion and restructuring of the Credit
Line portion of the Obligations into a term loan, (b) the
extension of the term of the Loan for another four (4) years, (c)
the capitalization on accrued interest (up to December
31,1998) on the Obligations, (d) the waiver of the penalties
charges (if any) accruing on the Obligations, and (e) the partial
release of chattel mortgage on stock inventories, subject to the
terms and conditions hereinafter set forth;
....
SECTION 2. TERMS OF LOAN I
2.01 Amount of Loan I. Loan I shall be in the principal amount
not exceeding PESOS: FIVE HUNDRED EIGHTY THREE MILLION
ONE HUNDRED EIGHTY THOUSAND (P583,180,000.00)
....
SECTION 3. TERMS OF LOAN II
3.01 Amount of Loan II. Loan II shall be in the principal amount
not exceeding PESOS: FOUR HUNDRED EIGHTY THREE MILLION
SEVEN HUNDRED EIGHTY THOUSAND (P483,780,000.00).383
In this case, the previous valid obligation of Spouses Limso and
Davao Sunrise was the payment of a loan in the total amount of
P700 million, plus interest.
Upon the request of Spouses Limso and Davao Sunrise,
Philippine National Bank agreed to restructure the original loan
agreement.384
Philippine National Bank summarized the Conversion,
Restructuring and Extension Agreement as follows:
(a) The conversion of the Revolving Credit Line into a Term
Loan in the principal amount of 583.18 Million and
denominated as "Loan I".
(b) The Extension for another four (4) years of the original long
term loan (from 01 September 2001 to 31 December 2005);
(c) The capitalization of the accrued interest on both the
Revolving Credit Line and the Long Term Loan up to 31
December 1998;
(d) The consolidation of the accrued interest and the
outstanding obligation of the original Long Term Loan to form
"Loan 2" with the total principal amount of P483.82 Million;
(e) Waiver of penalty charges;
(f) Partial release of chattel mortgage on the stock inventories;
(g) Both "Loan I" and "Loan II" were made payable within seven
(7) years in monthly amortization and a balloon payment on or
before December 2005.385
When the loan agreement was restructured, the principal
obligation of Spouses Limso and Davao Sunrise became P1.067
billion.
The Conversion, Restructuring and Extension Agreement
novated the original credit agreement because the principal
obligation itself changed.
Important provisions of the original agreement were altered.
For example, the penalty charges were waived and the terms of
payment were extended.
Further, the preambular clauses of the Conversion,
Restructuring and Extension Agreement show that Spouses
Limso and Davao Sunrise sought to change the terms of the
original agreement and that they themselves acknowledged
their obligation to be P1.067 billion. They are now estopped
from claiming that their obligation should be based on the
original agreement when it was through their own actions that
the loan was restructured.
Thus, the Court of Appeals in CA-G.R. CV No. 79732-MIN erred
in not declaring that the Conversion, Restructuring and
Extension Agreement novated the original agreement and in
computing Spouses Limso and Davao Sunrise's obligation based
on the original agreement.
Since the Conversion, Restructuring and Extension Agreement
novated the original credit agreement, we modify the Court of
Appeals Decision in that the outstanding obligation of Spouses
Limso and Davao Sunrise should be computed on the basis of
the Conversion, Restructuring and Extension Agreement.
In the Court of Appeals Decision dated August 13, 2009:
Computing the interest at 12% per annum on the principal
amount of 700 Million Pesos, the interest should be 84 Million
Pesos per annum. Multiplying 84 Million Pesos by 15 years
from September 1, 1993 to September 1, 2008, the interest for
the 15-year period would be One Billion Two Hundred Sixty
Million Pesos (P1,260,000,000.00). Then, by adding the interest
of P1,260,000,000.00 to the principal amount of 700 Million
Pesos, the total obligation of plaintiffs-appellees would be One
Billion Nine Hundred Sixty Million Pesos (P1,960,000,000.00) by
September 1, 2008. And since plaintiffs-appellees has paid a
total amount of One Billion One Hundred Fifty Six Million Eight
Hundred Fourteen Thousand Five Hundred Eighty Eight Pesos
and 89/100 (P1,156,814,588.89) to appellant PNB as of
December 5, 1998, as per PNB's official computation of
payments per official receipts, then, plaintiffs-appellees would
still have an outstanding balance of about Eight Hundred Three
Million One Hundred Eighty Five Thousand Four Hundred
Eleven and 11/100 Pesos (P 803,185,411.11) as of September 1,
2008. The amount of P 803,185,411.11 will earn interest at the
legal rate of 12% per annum from September 1, 2008 until fully
paid.
....chanrobleslaw
WHEREFORE, the assailed Decision dated June 19, 2002 and
Order dated August 13, 2002 of the Regional Trial Court of
Davao City, Branch 17 in Civil Case No. 28,170-2000 declaring
the unilateral imposition of interest rates by defendant-
appellant PNB as null and void appealed from are AFFIRMED
with the MODIFICATION that the obligation of plaintiffs-
appellees arising from the Loan and Revolving Credit Line and
subsequent Conversion, Restructuring and Extension
Agreement as Loan I and Loan II shall earn interest at the legal
rate of twelve percent (12%) per annum computed from
September 1, 1993, until fully paid and satisfied.
SO ORDERED.386
Notably, in the body of the Court of Appeals Decision, Spouses
Limso and Davao Sunrise's obligation was computed on the
basis of the original loan agreement, while in the dispositive
portion, the Court of Appeals cited both the original loan
agreement and the Conversion, Restructuring and Extension
Agreement.
The general rule is that:
Where there is a conflict between the dispositive part and the
opinion of the court contained in the text or body of the
decision, the former must prevail over the latter on the theory
that the dispositive portion is the final order, while the opinion
is merely a statement ordering nothing.387 (Citation omitted)
To avoid confusion, we also rule that the interest rate
provisions and the escalation clauses in the Conversion,
Restructuring and Extension Agreement are nullified insofar as
they allow Philippine National Bank to unilaterally determine
and increase the imposable interest rates.
Article 1409388 of the Civil Code provides that void contracts
cannot be ratified. Hence, the void interest rate provisions in
the original loan agreement could not have been ratified by the
execution of the Conversion, Restructuring and Extension
Agreement.
IV
The proper remedy to assail a decision on pure questions of law
is to file a petition for review on certiorari under Rule 45, not
an appeal under Rule 41 of the 1997 Rules of Civil Procedure.
One of the issues raised by Philippine National Bank in G.R. No.
205463 is the dismissal of its appeal under Rule 41 by the Court
of Appeals in its Decision dated January 21, 2013.389
Philippine National Bank, through counsel, argues that Rule 41
is the proper remedy because its Petition raises questions of
fact and of law.390 For example, the issue of whether there is
an annotation of encumbrance on the titles of the mortgaged
properties is a question of fact.391
Denying Philippine National Bank's appeal under Rule 41, the
Court of Appeals stated that:
[Philippine National Bank] simply takes issue against the
conclusions made by the court a quo which pertains to the
matter of whether mere entry in the Primary Entry Book, sans
the signature of the registrar, already completes registration. It
does not question the weight and probative value of the fact
that the signature of Atty. Patriarcha [sic] was previously
entered in the records then revoked by her. What PNB seeks,
therefore, is a review of the decision of the court a quo
dismissing its petition, without delving into the weight of the
evidence, but on the correctness of the court a quo's
conclusions based on the evidence presented before it. This is
clearly a question of law.
....
To the mind of this Court, PNB seeks to harp repeatedly on the
issue of the court a quo's failure to consider that the certificate
of sale has been duly registered on February 4, 2002 upon mere
entry in the Primary Entry Book, even without the signature of
the then register of deeds. Though couched in different
creative presentations, all the errors assigned by PNB point to
one vital question: What completes registration? To answer it,
this Court is not asked to calibrate the evidence presented, or
gauge the truth or falsity, but to apply the appropriate law to
the situation. This is clearly a question of law.392 (Emphasis in
the original)
In Land Bank of the Philippines v. Yatco Agricultural
Enterprises,393 this court; discussed the difference between
questions of law and questions of fact:
As a general rule, the Court's jurisdiction in a Rule 45 petition is
limited to the review of pure questions of law. A question of
law arises when the doubt or difference exists as to what the
law is on a certain state of facts. Negatively put, Rule 45 does
not allow the review of questions of fact. A question of fact
exists when the doubt or difference arises as to the truth or
falsity of the alleged facts.
The test in determining whether a question is one of law or of
fact is "whether the appellate court can determine the issue
raised without reviewing or evaluating the evidence, in which
case, it is a question of law[.]" Any question that invites
calibration of the whole evidence, as well as their relation to
each other and to the whole, is a question of fact and thus
proscribed in a Rule 45 petition.394 (Citations omitted)
Based on the foregoing, there was no error on the part of the
Court of Appeals when it dismissed Philippine National Bank's
Petition for being the wrong remedy. Indeed, Philippine
National Bank was not questioning the probative value of the
evidence. Instead, it was questioning the conclusion of the trial
court that registration had not been perfected based on the
evidence presented.
V
The registration of the Sheriffs Provisional Certificate of Sale
was completed.
Philippine National Bank argues that the registration was
completed, and restates the doctrine in National Housing
Authority v. Basa, Jr., et al.:395
Once the Certificate of Sale is entered in the Primary Book of
Entry of the Registry of Deeds with the registrant having paid
all the required fees and accomplished all that is required of
him under the law to cause registration, the registration is
complete.396
Philippine National Bank further argues that "[t]he records of
all the transactions are recorded in the Primary Entry Book and
the annotation on the titles of the transaction do not control
registration. It is the recording in the Primary Entry Book which
controls registration."397
Philippine National Bank adds that though the annotation of a
certificate of sale at the back of the certificates of title is
immaterial in the perfection of registration, the evidence shows
that the Certificate of Sale was annotated.398
Philippine National Bank alleges that registration was
completed because Atty. Patriarca, the Register of Deeds at
that time, affixed her signature but would later erase it.399
Philippine National Bank cites Atty. Cruzabra's Comment, which
alleges that the Sheriffs Provisional Certificate of Sale and other
documents relative to the sale were registered in the Primary
Entry Book of the Registry of Deeds of Davao City.400 The
Comment also states that:
3. The Sheriffs Provisional Certificate of Sale was annotated at
the back of the aforementioned titles but it does not bear the
signature of the former Registrar of Deeds. Noted however is
that the portion below the annotation of the Provisional
Sheriffs [sic] Certificate of Sale there appears to be erasures
("snowpake"), and [Atty. Cruzabra] is not in a position to
conclude as to the circumstances [relative to said erasures], for
lack of personal knowledge as to what transpired at that
time.401 (Citation omitted)
Philippine National Bank also cites the Decision in
Administrative Case No. 02-13 dated January 12, 2005, which
was the case against Atty. Patriarca for Grave Misconduct and
Conduct Unbecoming of a Public Official. In the Decision, the
Land Registration Authority found that:
Respondent herein likewise admits that she finally signed the
PNB transaction annotated on the subject titles when she was
informed that the motion for reconsideration was denied by
this Authority, but she subsequently erased her signature when
she subsequently found out that an appeal was filed by the
Limso spouses.
....
The registration of these documents became complete when
respondent affixed her signature below these annotations.
Whatever information belatedly gathered thereafter relative to
the circumstances as to the registrability of these documents,
respondent can not unilaterally take judicial notice thereof and
proceed to lift at her whims and caprices what has already
been officially in force and effective, by erasing thereon her
signature.402
In addition, Philippine National Bank argues that the erasure of
Atty. Patriarca's signature using correction fluid could not have
revoked, cancelled, or annulled the registration since under
Section 108 of Presidential Decree 1529, only a court order can
revoke registration.403
Philippine National Bank alleges that it has complied with the
requirements under Section 7 of Act No. 3135 and Section 47 of
Republic Act No. 8791.404 Thus, it is entitled to a writ of
possession.405
The Office of the Solicitor General filed its Comment,406
quoting the dispositive portion of the Land Registration
Authority's Consulta No. 3405 dated May 21, 2002:407
WHEREFORE, in view of the foregoing, the Sheriff's Provisional
Certificate of Sale dated February 04, 2002 is registerable on
TCT Nos. T-147820, T-147386, and T-247012, provided all other
registration requirements are complied with.408 (Emphasis
supplied)
The Office of the Solicitor General also quotes the dispositive
portion of the Land Registration Authority's Resolution in the
Motion for Reconsideration:409
WHEREFORE, in view of the foregoing[J the Sheriff's Provisional
Certificate of Sale dated February 4, 2002 is registrable on TCT
Nos. T-147820, T-147821, T-147386 and T-247012, provided all
other registration requirements are complied with.410
(Emphasis supplied)
The Office of the Solicitor General then cites National Housing
Authority and Autocorp Group and Autographies, Inc. v. Court
of Appeals411 and discusses that when all the requirements for
registration of annotation has been complied with, it is
ministerial upon the Register of Deeds to register the
annotation.412 The Register of Deeds is not authorized "to
make an appraisal of proofs outside of the documents sought
to be registered."413
For the Office of the Solicitor General, the Register of Deeds'
refusal to affix the annotation on the foreclosed properties'
titles "should not preclude the completion of the registration of
any applicant who has complied with the requirements of the
law to register its right or interest in registered lands."414
Spouses Limso and Davao Sunrise, as intervenors-oppositors,
filed a Memorandum.415 They cite Section 117416 of
Presidential Decree No. 1529417 and argue that registration of
the Certificate of Sale in the Primary Entry Book is a preliminary
step in registration.418 Since Philippine National Bank
withdrew the documents it submitted to the Register of Deeds
of Davao City, the Sheriff's Provisional Certificate of Sale was
not registered.419
Further, Philippine National Bank's argument that "entry ... in
the Primary Entry Book is equivalent to registration"420 is not
in accordance with Section 56421 of Presidential Decree No.
1529.422 Moreover, "[t]he signature of the Register of Deeds is
crucial to the completeness of the registration process."423
Spouses Limso and Davao Sunrise posit that Philippine National
Bank admitted that the Certificate of Sale is not registered in
various hearings.424 These admissions are judicial admissions
that should be binding on Philippine National Bank.425
Spouses Limso and Davao Sunrise allege that during the oral
arguments held on March 19, 2003 at the Court of Appeals in
CA G.R. SP No. 71527, counsel for Philippine National Bank
stated:426
ATTY. [BENILDA A.] TEJADA:
Yes, we can show the documents which we are going to file
your Honors.
We would like to state also your Honors the fact of why no
registration was ever made in this case. Counsel forgot to
mention that the fact of no registration is simply because the
Register of Deeds refused to register our Certificate of Sale. We
have a pending case against them Sir before the LRA and
before the Ombudsman fore [sic] refusal to register our
Certificate of Sale. Now, we have filed this case because inspite
[sic] of the fact the Register of Deeds addressed a consulta to
the Land Registration Authority on the registerity of the
Certificate of Sale your Honors [,] [i]t was at their instance that
there was a consulta.
And then, the Land Registration Authority has already rendered
its opinion that the document is registrable. Despite that your
Honors, the document has never been registered. So that was
the subject of our case against them. We do not understand
the intransigencies we do not understand the refusal.427
In addition, the Court of Appeals correctly dismissed Philippine
National Bank's appeal because the issue raised involved a
question of law, specifically "whether or not mere entry in the
Primary Entry Book is considered as registration of the subject
Certificate of Sale."428
Section 56 of Presidential Decree No. 1529 states:
SECTION 56. Primary Entry Book; Fees; Certified Copies. — Each
Register of Deeds shall keep a primary entry book in which,
upon payment of the entry fee, he shall enter, in the order of
their reception, all instruments including copies of writs and
processes filed with him relating to registered land. He shall, as
a preliminary process in registration, note in such book the
date, hour and minute of reception of all instruments, in the
order in which they were received. They shall be regarded as
registered from the time so noted, and the memorandum of
each instrument, when made on the certificate of title to which
it refers, shall bear the same date: Provided, that the national
government as well as the provincial and city governments shall
be exempt from the payment of such fees in advance in order
to be entitled to entry and registration. (Emphasis supplied)
In this case, Philippine National Bank filed the Sheriffs
Provisional Certificate of Sale, which was duly approved by the
Executive Judge, before the Registry of Deeds of Davao City.
Entries were made in the Primary Entry Book. Hence, the
Sheriffs Provisional Certificate of Sale should be considered
registered.
Autocorp Group and Autographies, Inc. involved an
extrajudicial foreclosure of mortgaged property and the
registration of a Sheriffs Certificate of Sale. Autocorp sought
the issuance of a writ of injunction "to prevent the register of
deeds from registering the subject certificate of sale[.]"429
This court explained that a Sheriffs Certificate of Sale is an
involuntary instrument and that a writ of injunction will no
longer lie because of the following reasons:
[F]or the registration of an involuntary instrument, the law
does not require the presentation of the owner's duplicate
certificate of title and considers the annotation of such
instrument upon the entry book, as sufficient to affect the real
estate to which it relates.
...
....
It is a ministerial duty on the part of the Register of Deeds to
annotate the instrument on the certificate of sale after a valid
entry in the primary entry book. P.D. No. 1524 provides:
chanRoblesvirtualLawlibrary
SEC. 63. Foreclosure of Mortgage. — x x x
(b) If the mortgage was foreclosed extrajudicially, a certificate
of sale executed by the officer who conducted the sale shall be
filed with the Register of Deeds who shall make a brief
memorandum thereof on the certificate of title.
In fine, petitioner's prayer for the issuance of a writ of
injunction, to prevent the register of deeds from registering the
subject certificate of sale, had been rendered moot and
academic by the valid entry of the instrument in the primary
entry book. Such entry is equivalent to registration.430
(Emphasis supplied, citation omitted)
Based on the records of this case, the Sheriffs Certificate of Sale
filed by Philippine National Bank was already recorded in the
Primary Entry Book.
The refusal of the Register of Deeds to annotate the
registration on the titles of the properties should not affect
Philippine National Bank's right to possess the properties.
As to the argument that Philippine National Bank admitted in
open court that the Certificate of Sale was not registered, it is
evident from Spouses Limso and Davao Sunrise's Memorandum
that Philippine National Bank immediately explained that the
non-registration was due to the Register of Deeds' refusal.
Thus, the alleged non-registration was not due to Philippine
National Bank's fault.
It appears on record that Philippine National Bank already
complied with the requirements for registration. Thus, there
was no reason for the Register of Deeds to persistently refuse
the registration of the Certificate of Sale.
At any rate, the Land Registration Authority stated in its
Resolution in Administrative Case No. 02-13 that Atty. Patriarca
herself admitted that she already affixed her signature on the
annotation at the back of the certificate of titles, and that she
subsequently erased her signature.431 This finding of fact in
the administrative case supports the argument of Philippine
National Bank and the opinion of the Office of the Solicitor
General that the Certificate of Sale should be considered
registered.
With regard to the issue of whether Philippine National Bank is
entitled to a writ of possession, the trial court in Other Case No.
124-2002 denied the application for the writ of possession and
explained:
Portion of Sec. 47 of RANo. 8791 is quoted:
chanRoblesvirtualLawlibrary
xxx the purchaser at the auction sale concerned whether in a
judicial or extra-judicial foreclosure shall have the right to enter
upon and take possession of such property immediately after
the date of the confirmation of the auction sale and administer
the same in accordance with law xxx.
From the quoted provision, one can readily conclude that
before the sale is confirmed, it is not considered final or
perfected to entitle the purchaser at the auction sale to the
writ of possession as a matter of right....
In extra-judicial foreclosure, there is technically no
confirmation of the auction sale in the manner provided for by
Sec. 7 of Rule 68. The process though involves an application,
preparation of the notice of extra-judicial sale, the extra-judicial
foreclosure sale, issuance of the certificate of sale, approval of
the Executive Judge or in the latter's absence, the Vice-
Executive Judge and the registration of the certificate of sale
with the Register of Deeds.
While it may be true that as found by the CA in the case earlier
cited that DSIDC had only until January 24, 2001 to redeem its
properties and that the registration of the certificate of
foreclosure sale is no longer relevant in the reckoning of the
redemption period, for purposes of the issuance of the writ of
possession, petitioner to this Court's belief should complete the
entire process in extra-judicial foreclosure. Otherwise the sale
may not be considered perfected and the application for writ of
possession may be denied.
The records disclose that contrary to petitioner's claim, the
Certificate of Sale covering the subject properties has not been
registered with the Registry of Deeds of Davao City as the Court
finds no annotation thereof. As such, the sale is not considered
perfected to entitle petitioner to the writ of possession as a
matter of right.
Accordingly, for reason stated, the petition is DISMISSED. With
the dismissal of the petition, PNB's Motion for Reception and
Admission of PNB's Ex-parte Testimonial and Documentary
Evidence is DENIED.
SO ORDERED.432
However, Philippine National Bank is applying for the writ of
possession on the ground that it is the winning bidder during
the auction sale, and not because it consolidated titles in its
name. As such, the applicable provisions of law are Section 47
of Republic Act No. 8791433 and Section 7 of Act No. 3135.434
Section 47 of Republic Act No. 8791 provides:
SECTION 47. Foreclosure of Real Estate Mortgage. — In the
event of foreclosure, whether judicially or extrajudicially, of any
mortgage on real estate which is security for any loan or other
credit accommodation granted, the mortgagor or debtor whose
real property has been sold for the full or partial payment of his
obligation shall have the right within one year after the sale of
the real estate, to redeem the property by paying the amount
due under the mortgage deed, with interest thereon at the rate
specified in the mortgage, and all the costs and expenses
incurred by the bank or institution from the sale and custody of
said property less the income derived therefrom. However, the
purchaser at the auction sale concerned whether in a judicial or
extrajudicial foreclosure shall have the right to enter upon and
take possession of such property immediately after the date of
the confirmation of the auction sale and administer the same in
accordance with law. Any petition in court to enjoin or restrain
the conduct of foreclosure proceedings instituted pursuant to
this provision shall be given due course only upon the filing by
the petitioner of a bond in an amount fixed by the court
conditioned that he will pay all the damages which the bank
may suffer by the enjoining or the restraint of the foreclosure
proceeding.
Notwithstanding Act 3135, juridical persons whose property is
being sold pursuant to an extrajudicial foreclosure, shall have
the right to redeem the property in accordance with this
provision until, but not after, the registration of the certificate
of foreclosure sale with the applicable Register of Deeds which
in no case shall be more than three (3) months after
foreclosure, whichever is earlier. Owners of property that has
been sold in a foreclosure sale prior to the effectivity of this Act
shall retain their redemption rights until their expiration.
(Emphasis supplied)
Section 7 of Act No. 3135 provides:
SECTION 7. In any sale made under the provisions of this Act,
the purchaser may petition the Court of First Instance of the
province or place where the property or any part thereof is
situated, to give him possession thereof during the redemption
period, furnishing bond in an amount equivalent to the use of
the property for a period of twelve months, to indemnify the
debtor in case it be shown that the sale was made without
violating the mortgage or without complying with the
requirements of this Act. Such petition shall be made under
oath and filed in form of an ex parte motion in the registration
or cadastral proceedings if the property is registered, or in
special proceedings in the case of property registered under
the Mortgage Law or under section one hundred and ninety-
four of the Administrative Code, or of any other real property
encumbered with a mortgage duly registered in the office of
any register of deeds in accordance with any existing law, and
in each case the clerk of the court shall, upon the filing of such
petition, collect the fees specified in paragraph eleven of
section one hundred and fourteen of Act Numbered Four
hundred and ninety-six, as amended by Act Numbered Twenty-
eight hundred and sixty-six, and the court shall, upon approval
of the bond, order that a writ of possession issue, addressed to
the sheriff of the province in which the property is situated,
who shall execute said order immediately.
The rule under Section 7 of Act No. 3135 was restated in
Nagtalon v. United Coconut Planters Bank:435
During the one-year redemption period, as contemplated by
Section 7 of the above-mentioned law, a purchaser may apply
for a writ of possession by filing an ex parte motion under oath
in the registration or cadastral proceedings if the property is
registered, or in special proceedings in case the property is
registered under the Mortgage Law. In this case, a bond is
required before the court may issue a writ of possession.436
On the other hand, a writ of possession may be issued as a
matter of right when the title has been consolidated in the
buyer's name due to nonredemption by the mortgagor. Under
this situation, the basis for the writ of possession is ownership
of the property.437
The Sheriffs Provisional Certificate of Sale should be deemed
registered. However, Philippine National Bank must still file a
bond before the writ of possession may be issued.
VI
To fully dispose of all the issues in these consolidated cases,
this court shall also rule on one of the issues raised in G.R. No.
158622.
In G.R. No. 158622, Spouses Limso and Davao Sunrise allege
that the Sheriffs Provisional Certificate of Sale does not state
the appropriate redemption period; thus, they filed a Petition
for Declaratory Relief, which was docketed as Civil Case No.
29,036-2002.438
In the loan agreement, natural and juridical persons are co-
debtors, while the properties mortgaged to secure the loan are
owned by Davao Sunrise.
Act No. 3135 provides that the period of redemption is one (1)
year after the sale.439 On the other hand, Republic Act No.
8791 provides a shorter period of three (3) months to redeem
in cases involving juridical persons.440
We rule that the period of redemption for this case should be
not more than three (3) months in accordance with Section 47
of Republic Act No. 8791. The mortgaged properties are all
owned by Davao Sunrise. Section 47 of Republic Act No. 8791
states: "the mortgagor or debtor whose real property has been
sold" and "juridical persons whose property is being sold[.]"
Clearly, the law itself provides that the right to redeem belongs
to the owner of the property mortgaged. As the mortgaged
properties all belong to Davao Sunrise, the shorter period of
three (3) months is the applicable redemption period.
The policy behind the shorter redemption period was explained
in Goldenway Merchandising Corporation v. Equitable PCI
Bank:441
The difference in the treatment of juridical persons and natural
persons was based on the nature of the properties foreclosed
— whether these are used as residence, for which the more
liberal one-year redemption period is retained, or used for
industrial or commercial purposes, in which case a shorter term
is deemed necessary to reduce the period of uncertainty in the
ownership of property and enable mortgagee-banks to dispose
sooner of these acquired assets. It must be underscored that
the General Banking Law of 2000, crafted in the aftermath of
the 1997 Southeast Asian financial crisis, sought to reform the
General Banking Act of 1949 by fashioning a legal framework
for maintaining a safe and sound banking system. In this
context, the amendment introduced by Section 47 embodied
one of such safe and sound practices aimed at ensuring the
solvency and liquidity of our banks.442 (Citation omitted)
To grant a longer period of redemption on the ground that a
co-debtor is a natural person defeats the purpose of Republic
Act No. 8791. In addition, the real properties mortgaged by
Davao Sunrise appear to be used for commercial purposes.443
WHEREFORE, the Petition for Review on Certiorari in G.R. No.
173194 is DENIED.

The Petition docketed as G.R. No. 196958 is PARTIALLY

GRANTED, while the Petition docketed as G.R. No. 197120 is
DENIED. The Decision of the Court of Appeals in CA-G.R. CV No.
79732-MIN is AFFIRMED with MODIFICATION.

The Conversion, Restructuring and Extension Agreement

executed in 1999 is deemed to have novated the Credit
Agreement and Loan Agreement executed in 1993. Thus, the
principal loan obligation of Davao Sunrise Investment and
Development Corporation and Spouses Robert Alan and Nancy
Limso shall be computed on the basis of the amounts indicated
in the Conversion, Restructuring and Extension Agreement.

Interest on the principal loan obligation shall be at the rate of

12% per annum and computed from January 28, 1999, the date
of the execution of the Conversion, Restructuring and
Extension Agreement. Interest rate on the conventional
interest shall be at the rate of 12% per annum from August 21,
2000, the date of judicial demand, to June 30, 2013. From July
1, 2013 until full satisfaction, the interest rate on the
conventional interest shall be computed at 6% per annum in
view of this court's ruling in Nacar v. Gallery Frames.444

This case is ordered REMANDED to Branch 17 of the Regional

Trial Court of Davao City for the computation of the total
amount of Davao Sunrise Investment and Development
Corporation and Spouses Robert Alan and Nancy Limso's
remaining obligation.

The Petition docketed as G.R. No. 205463 is PARTIALLY

GRANTED. The Sheriffs Provisional Certificate of Sale is deemed
to have been registered. In view of the facts of this case, the
applicable period of redemption shall be three (3) months as
provided under Republic Act No. 8791.

In case the final computation shows that Davao Sunrise

Investment and Development Corporation and Spouses Robert
Alan and Nancy Limso overpaid Philippine National Bank,
Philippine National Bank must return the excess amount.

The writ of possession prayed for by Philippine National Bank

may only be issued after all the requirements for the issuance
of a writ of possession are complied with.

SO ORDERED.cralawlawlibrary