WATERCRAFT VENTURE CORPORATION v.

ALFRED RAYMOND WOLFE

G.R. No. 181721, September 09, 2015
Topic: Issuance of Writ of Preliminary Attachment

FACTS:
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 Wolfe, a British national and resident of Subic Bay
Freeport Zone, Zambales, as its Shipyard Manager.

During his employment, Wolfe stored the sailboat, Knotty Gull, within Watercraft’s boat
storage facilities, but never paid for the storage fees.

On March 7, 2002, Watercraft terminated the employment of Wolfe.

Sometime in June 2002, Wolfe pulled out his sailboat from Watercraft's storage facilities
after signing a Boat Pull-Out Clearance where he allegedly acknowledged the outstanding
obligation of 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.

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 raffled to Branch 170 of the Regional Trial Court (RTC) of Malabon City.

PETITIONER’S ARGUMENTS RESPONDENT’S ARGUMENTS

1. For failing to pay for the use of facilities 1. He was hired as Service and Repair
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.
Manager, instead of Shipyard Manager.
2. The sailboat was purchased in
February 1998 as part of an
agreement between him and
Watercraft’s then General Manager,
Barry Bailey, and its President,
Ricky Sandoval, for it to be repaired
and used as training or fill-in
project for the staff, and to be sold
later on.

2. Lawful factual and legal grounds exist 3. Nowhere in the agreement was
 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.
there a stipulation that berthing
and storage fees will be charged
during the entire time that the
sailboat was in Watercraft's
dockyard.

4. Complaint was an offshoot of an illegal

dismissal case he filed against
Watercraft which had been decided in
his favor by the Labor Arbiter

Ruling of the RTC:

Granted the writ of preliminary attachment filed by Watercraft.

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.

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.

Ruling of the Court of Appeals:

Declared the Writ of Attachment issued by RTC as NULL and VOID.

Dissatisfied with the CA Decision and Resolution, Watercraft filed a petition for review on
certiorari to the Supreme Court.

ISSUE:
1. Whether or not ex-parte issuance of the preliminary attachment by the trial court in
favor of the petitioner is valid.

2. Whether or not 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.

HELD:
1. No, the ex-parte issuance of the preliminary attachment by the trial court in favor of
the petitioner is invalid. 
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.

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. However, it should be resorted to only when
necessary and as a last remedy because it exposes the debtor to humiliation and
annoyance. It must be granted only on concrete and specific grounds and not merely on
general averments quoting the words of the rules.12 Since attachment is harsh,
extraordinary, and summary in nature,13 the rules on the application of a writ of
attachment must be strictly construed in favor of the defendant.

For the issuance of an ex-parte issuance of the preliminary attachment to be valid, an

affidavit of merit and an applicant's bond must be filed with the court 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. As to the requisite affidavit of merit, Section 3, 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;
 that the case is one of those mentioned in Section 117 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.

2. No, the allegations in the affidavit of merit concerning fraud were not sufficient to
warrant the issuance of a preliminary writ of attachment by the trial court in favor
of the petitioner.

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. "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."

Fraudulent intent is not a physical entity, but a condition of the mind beyond the reach
of the senses, usually kept secret, very unlikely to be confessed, and therefore, can only
be proved by unguarded expressions, conduct and circumstances. Thus, the applicant
for a writ of 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. The particulars
of such circumstances necessarily include the time, persons, places and specific acts of
fraud committed. 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.

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." It is not an allegation of essential facts
constituting Watercraft's causes of action, but a mere conclusion of law.

DISPOSITIVE PORTION:

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.